source-codesource codeauthorDavid PierceNoneWant your finger on the pulse of everything that's happening in tech? Sign up to get David Pierce's daily newsletter.64fd3cbe9f
×

Get access to Protocol

I’ve already subscribed

Will be used in accordance with our Privacy Policy

Podcasts

What made Silicon Valley special (and where might be next)

Margaret O'Mara comes on the Source Code Podcast.

Margaret O'Mara

Silicon Valley's history is both a top-down and bottom-up story, and the next tech centers will be the same.

Photo: Jim Garner

It seems like just about everyone in Silicon Valley is thinking about leaving, talking about leaving or has actually left this year, and the number one destination is, predictably, Austin. Elon Musk announced his relocation in his usual grand fashion, HPE and Oracle relocated their headquarters there, and loads of tech workers have also made the move.

Amid all this talk about whether Silicon Valley is "over," Margaret O'Mara is probably the person most-suited to pick out the signal from all the noise about the future of the place and the ethos. She's a historian at the University of Washington who researches the history of technology development in the United States, and her most recent research took her to the beginnings of Silicon Valley. Her book, "The Code: Silicon Valley and the Remaking of America" explains how Silicon Valley became the tech capital of the world.

So she came on the Source Code podcast to walk us through how the fortuitous combination of geography, government spending, ambition and networks created the Silicon Valley we know today, and what the region can learn from its past. She explained why Austin seems to be winning the race for the next tech capital, and why many of the tech-focused cities of the future could be outside of the United States.

The following excerpts from our interview have been lightly edited for length and clarity.

Anna Kramer: Let's start with the beginning of your book, which talks about the formation of Silicon Valley. What are the big takeaways that people really need to know to understand how Silicon Valley came to be as unique and possibly irreplicable as it is now?

If you dial back 100 years, Silicon Valley was just another agricultural valley in California. At that time in American history, there were little clusters of entrepreneurial startup activity going on everywhere. It wasn't like this was an extraordinary place. But what happens during World War II and after is that there's this tsunami of military spending that comes in the westward direction into the Bay Area, and particularly, takes these kind of core competencies, these things that are growing, this specialization in small electronics and communication devices, and suddenly creates a patron, a kind of sponsor of research in the form of the federal government, and a big customer in a huge demand for very sophisticated military equipment, not just during the war, but especially after the war. And by the 1950s, there is a small but mighty concentration of electrical engineering going on in the valley, even while the big computer companies, IBM, et cetera, were all on the East Coast.

David Pierce: There was very much a story of two coasts, where you had Boston on one coast and Silicon Valley on the other coast warring to be the center of these things. And then even more specifically, Harvard and Stanford, which had two different ways of thinking about things. And it feels like what Stanford decided to be, instead of what Harvard decided to be, wound up being really instructive in all of this. Can you explain the difference between the two approaches?

I talk a lot about Boston in this book, even though it's a book about Silicon Valley. And we often frame the whole Silicon Valley story as a race with Boston, a steel-cage death match. And actually, what really happened was this symbiotic relationship of people and ideas and firms kind of bopping back and forth between the coasts and usually going from Boston to the Bay Area. And then once they kind of get some sunshine in February, they're like, "Oh, I'm not leaving."

Stanford does play a really distinctive role, and it is unlike any other university. Stanford comes into this period as good but not great, but wanting to be great. And a guy who's really at the center of this whole story is someone I write about quite a bit in the book, named Fred Terman, who's born and raised in Palo Alto. He becomes provost, the chief academic officer of Stanford during the '50s to '60s period, and persuades the other leaders of Stanford that the way Stanford is going to reach the big time and truly become the Harvard of the West is to not be like Harvard, but to really focus on building up its scientific capacity, particularly around the types of things that the Cold War military industrial complex was looking for.

AK: Can you unpack the things that make Silicon Valley utterly unique? If you had to prioritize for yourself, what's the list of the things that are really special and seen nowhere else?

It is a real estate story. You had these developers going in and offering big money to guys who had orchards. Stanford is another key ingredient, I think, the institution and the people made it this magnet. Something else that gets lost in the noise is that not only did the Valley have this concentration of engineering talent, but you also had these specialized service firms that grow. Law firms like Wilson Sonsini, which started off as this small-town law firm that grew to be this whole empire that's focused on a very narrow, important band of industry. You have marketing firms and PR firms that are specializing in consumer-focused tech.

This shows you that the success of Silicon Valley is not just engineers, but it's also people with other skill sets, and also brings in other people that may not be as famous as the ones we all know about. There are women in Silicon Valley's history throughout.

DP: Is that kind of stuff only obvious in retrospect? The tech industry is trying to figure out where these things are happening again, and what's the next place. Could someone have theoretically walked into a store in Palo Alto 50 years ago and sensed the magic in the air?

I think people in it at the time understood that there was something distinctive. And Silicon Valley tends to oversell its rebel image — parts of the secret of success are some business fundamentals. Apple was successful among the personal computer companies because it had smart management. But all that being said, the culture was just willing to be more open to different ideas. Part of that was out of necessity. This was a place that was so far off to the side of the main action for so long. It became very hard for outsiders to see and understand what was going on.

AK: So then, if we think about all these things that you're pointing out that made Silicon Valley so special, are those things possible to replicate at all? And should we be trying to replicate it?

There is a really useful and essential handbook if you are thinking about building a new tech region. Part of it is by learning what Silicon Valley didn't do, where it's failed. Building a huge industrial capital on top of a little string of postwar suburbs turns out to not be a very good way to create a healthy, sustainable, equitable housing market. In a way, it's a disadvantage that the Valley didn't grow in a city. Now you have the double bind of a lot of young, talented people who prefer to live in San Francisco as opposed to Mountain View. And as you grow large, there's a reason that you have infrastructure and a certain degree of density. And that's been a disadvantage. So I think other places can learn from that.

And I think the big lesson of taking this broader look at the history is, you see that Silicon Valley was lucky enough to have the conditions that allowed the little green shoots to flourish. Another really big factor is this ocean of money that is flowing from the Pentagon to private sector defense contractors. And so the biggest employer in Silicon Valley from 1954, when it established its missiles and space division in Sunnyvale, all the way through the 1980s, is Lockheed. It was a huge factor in bringing people in, and it's all military business.

I think that history creates opportunities for other places around the world to say, "We would like to create an entrepreneurial economy. What do we have here that we can build on? And what kind of place do we want to create? How can we create a place that is more equitable? How is there a market opportunity here in building things that Silicon Valley is not thinking to build?"

DP: Was there much of that sort of intentional thinking in the early days of Silicon Valley?

Ike Eisenhower never sat in the Oval Office and said, "We shall build a science city there." But they effectively did. It's this wonderful "only in America" story of happy accidents and serendipity. But I do think Fred Terman was someone who was very deliberate about what was being built, and in fact developed part of Stanford's land. So Stanford had another strong advantage in that it had this 9,000-acre property around its campus. Terman was like, "We're going to build a research park."

AK: Tech today is really rejecting this suburban office park world. Physically speaking, if someone was interested in helping create a tech capital, what kind of structure should they be thinking about?

There has been a really sharp trend towards more urbanized investing. So back in the day, Silicon Valley was a hardware place. Now tech is a software business. And so that has changed the geography. What it takes to start a startup now versus 20 years ago has also changed. Twenty years ago, you needed a $5 million round just to hire people, but also get space. There's all these upfront capital costs that now don't come into play. It frees up the geography.

The other thing is, this is the year of COVID. What's really interesting now is this forced experiment en masse for everyone to be remote working. So that's a big, huge sea change. And then the other thing is that business is still being done, deals are still being made.

DP: But a lot of the trends you're describing had been true, at least for a few years, and in some cases longer. Meanwhile, all the things that have always sucked about Silicon Valley just keep getting worse. So you would think it at some point, it feels sort of surprising that nothing else has really come to take over this mantle as the place people want to be more than Silicon Valley. What is the sticking power?

Part of this are just the laws of conglomeration and path dependency. The Valley's obituary has been prematurely written a number of times. It's a boom and bust place. You have these cycles. The defense economy contracted significantly at the end of the '60s. And everyone's like, that's it, that was fun, time to go. And, of course, that didn't happen.

So there is the sticking power. One of the big things that is sticking is money. So the money men (and some women) are there. Some of these VC firms have been around for a really long time, like Sequoia Ventures and then some newer old-line firms like Andreessen Horowitz that are still just making bank. That's persistent. Some of those people are leaving, but it's not a mass exodus. And so that's what's interesting to me is you now have a startup geography that is truly global, but the venture, it's still just this giant bubble around the Bay Area.

AK: It's not that Silicon Valley will ever be over, but that other places will very slowly become increasingly important as tech expands? And we end up in this place where Silicon Valley never goes away? But you have this ethos of Silicon Valley in a ton of different places that are all as important.

Look, no region rules forever. Just ask Detroit. It's going to be interesting to see what the next decade brings regarding regulation and antitrust and what that does to the landscape and the market. 2020 is going to be a hinge of history, as we call it, for many reasons, for a lot of reasons.

You know, there is some control over what happens, we don't just sort of lie down and let the market or history roll over us. So Silicon Valley was great. How do we both take some of the things that are really vital about it and iterate it somewhere else in a way that makes it even better? Or maybe work on technologies that are more directly addressing some other big problems that the world is facing? What are the things that we're doing well, and what are the things that aren't working?

AK: What's your answer to that question? What do we take out of 2020?

I don't know yet. It's too soon to tell. The Valley is different, but it's not over. We're entering a new stage in its history. You just have so many companies that are being acquired rather than growing to maturity, and that isn't sustainable. There needs to be some intervention there. And it looks like the intervention is coming in the form of antitrust suits and regulation. And look, antitrust suits can have a significant effect on the market, even if they don't come to anything. Just because of their existence, Microsoft was a changed company. It did change them. My hope would be that this creates opportunity for people in different geographies, and people doing different kinds of things. And people who don't look like they are from the same backgrounds. The network of the Valley was part of its secret, but it's also its Achilles heel.

DP: If there's going to be a next 2021 hotspot of everybody moving in tech, it's going to be Austin. If you had to put on your 50-years-from-now cap, what is it about Austin that is so attractive at this moment?

Part of Austin's attraction is it actually has been working on this for about 30 or 40 years. It's not as mature in the lifecycle as Silicon Valley, but it has some maturity. You have UT Austin going all the way back.

The places that are really going to compete with Silicon Valley are the ones that are offering something that Silicon Valley no longer does. Austin is cheaper, relatively speaking, than Palo Alto, in terms of home prices and labor costs. The other advantage is no state income tax. Employers see that. It really affects the bottom line, because they get to pay less than they do in California, because the employee isn't paying state income tax. That's a big attraction.

Austin also has this quality of place. It's a city, it's got music, it's got stuff happening, it's got the urban vibe. It's not as big as the Bay Area, it's not as sprawling. It has these advantages also because it's been at the game long enough, and you have companies like Dell that have been there for a long time. There's human capital. There's a certain service firm specialization, though not to the same degree that you have in the Valley. The venture money can travel. Big, second-tier places like Austin are going to be thriving, particularly in this new era when geography is becoming much more flexible. It's no longer, "To make it, I have to go to the Bay Area or Seattle," that's no longer that case.

AK: Are there other places like Austin that are just further in the past but perhaps on the path?

I'm looking a lot outside the U.S. That's the other big trend. If you look at where the growing startups are, there are a lot in China, and they're in Canada. Both Toronto and Vancouver are places to watch. They're taking advantage of the higher education infrastructure, a few generations of companies and management expertise, the growing venture systems. Canada is also rightfully taking advantage of immigration, because the U.S. has been making it difficult for people to come here and stay here. The U.S. was the destination for the smart, young people who wanted to get a degree, start a company, and now we've really messed that up pretty fundamentally. U.S. immigration policy is a key ingredient of not just Silicon Valley's tech dominance, but the U.S. tech dominance, and we've messed that up badly and need to rectify it.

Big Tech benefits from Biden’s sweeping immigration actions

Tim Cook and Sundar Pichai praised President Biden's immigration actions, which read like a tech industry wishlist.

Newly-inaugurated President Joe Biden signed two immigration-related executive orders on Wednesday.

Photo: Chip Somodevilla/Getty Images

Immediately after being sworn in as president Wednesday, Joe Biden signed two pro-immigration executive orders and delivered an immigration bill to Congress that reads like a tech industry wishlist. The move drew enthusiastic praise from tech leaders, including Apple CEO Tim Cook and Alphabet CEO Sundar Pichai.

President Biden nullified several of former-President Trump's most hawkish immigration policies. His executive orders reversed the so-called "Muslim ban" and instructed the attorney general and the secretary of Homeland Security to preserve the Deferred Action for Childhood Arrivals, or DACA, program, which the Trump administration had sought to end. He also sent an expansive immigration reform bill to Congress that would provide a pathway to citizenship for undocumented individuals and make it easier for foreign U.S. graduates with STEM degrees to stay in the United States, among other provisions.

Keep Reading Show less
Emily Birnbaum

Emily Birnbaum ( @birnbaum_e) is a tech policy reporter with Protocol. Her coverage focuses on the U.S. government's attempts to regulate one of the most powerful industries in the world, with a focus on antitrust, privacy and politics. Previously, she worked as a tech policy reporter with The Hill after spending several months as a breaking news reporter. She is a Bethesda, Maryland native and proud Kenyon College alumna.

People

One man’s plan to build a new internet

Dfinity Chief Scientist Dominic Williams comes on the Source Code Podcast.

Dfinity's founder and chief scientist, Dominic Williams.

Photo: Dfinity

Much is wrong with the internet we have now. But what does better look like?

Dominic Williams, the founder and chief scientist at Dfinity, thinks he has an answer. It's called the Internet Computer, and it builds on top of the internet's most basic protocols to create a new generation of the web that doesn't exist on a bunch of private networks controlled by tech giants, but is run by the network itself. It's zero-trust and unhackable and yeah, you guessed it, it's blockchain. But blockchain that works "at web speed," Williams said.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

People

‘Everyone's in the space industry. They just don't know it yet.’

Dylan Taylor, CEO of Voyager Space Holdings, comes on the Source Code Podcast to talk about the big business of space travel.

Thanks to companies like SpaceX, the space business is heating up fast.

Photo: SpaceX

A few hundred people have been to space. Just shy of 250 have been to the International Space Station, and all of two dozen have been on the moon. Pretty soon, though, all of those numbers are about to get a lot bigger.

The space industry is booming, as companies and governments alike vie to create new ways to get people into orbit and new things to do once they get there. They're trying to figure out what space tourism might look like; how to design a space hotel; what life might look like on Mars; and how to train a whole lot of astronauts in a really short time. And, eventually, how to bring the cost of a ticket down to something more than a handful of people can afford.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

People

How to build a better Facebook

MeWe CEO Mark Weinstein comes on the Source Code Podcast to talk privacy, regulation and how to beat Facebook by being absolutely nothing like Facebook.

MeWe looks a little like Facebook — but it wants to act completely differently.

Image: MeWe

Many have tried to take on Facebook over the years, and none have succeeded. But Mark Weinstein thinks he might have a shot. Weinstein is the CEO of MeWe, and while he's not crazy enough to think he can completely take down the Big Blue app, he's pretty sure he can win over a few hundred million of its users.

MeWe has some things in common with Facebook — it has a news feed, you can post pictures and status updates, there are lots of groups — but its business model and view of the world couldn't be more different. It has no algorithmic timelines, no personalization and no ad business. It's up to 13 million users now, twice the number it had a year ago, and Weinstein thinks it's only just beginning to take off.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Tech fights the government. And itself.

On Facebook vs. Apple, the U.S. vs. Big Tech and Robinhood vs. its users.

Photo: Stefani Reynolds/Getty Images

This week on the Source Code podcast: Emily Birnbaum comes on the show to talk about the latest antitrust lawsuits, and which ones have an actual chance of succeeding. Then, Shakeel Hashim joins to talk about what's going on with Robinhood, and why regulation might hit fintech sooner than it hits the rest of tech.

For more on the topics in this episode:

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Latest Stories