This points toward the ninth habit, which might be described as one of p. 210 generous opportunity. For all the howls of fury about Microsoft, there are plenty of people making money on software and a seemingly endless supply of people prepared to take a commercial slug at Bill Gates. Once again, this has much to do with attitude. In Britain you hear talk about ambitious young people being too big for their boots and being brought down to earth. In Silicon Valley, where in 1999 several hundred millionaires were being created each week, jealousy is rare because most people believe that they, too, have a chance of becoming rich.[7] As many do in Hollywood, anyone who lives in Silicon Valley for any length of time will have at least one friend “who makes it big.” There are not only a lot of winners but an enormous number of people who think that they can become one.
The tenth habit is a strong inclination toward sharing wealth, at least within companies. When Kingston Technology was sold to Softbank for $1.5 billion in 1996, its founders set aside $100 million to be shared among the firm’s workers.[8] A surprising number of other software companies still offer complete health care, free lunches, and generous pensions. With AlphaBlox having grown to one hundred people by 1999 and bankers encouraging him to go public, Michael Skok still says that he spends much of his day “working out how to reward people.” Once again, this altruism has a selfish ingredient: In a knowledge industry, companies need to keep good staff. But it seems to go a little deeper than that. None of Intel’s founders has a private office; one of them, Gordon Moore, complains about spending twenty minutes every morning looking for a parking space. It would not occur to him to demand one.
Put these things together, and the idea that Silicon Valley is a winner-take-all place seems true only if you include hundreds of thousands of people as winners. People do not keep coming to Silicon Valley just because it is the only place where you can steal your billionaire boss’s parking space, or even because the median wage is relatively high. They keep coming because there are lots of chances to make it really big and because the penalty for failing is relatively light. In other words, if you want to find the classic, pyramid-shaped, winner-take-all societies, you are much more likely to find them in those places trying to imitate Silicon Valley than in the real thing.
Make Me Anywhere
Listening to many of its inhabitants, you can soon jump to the conclusion that Silicon Valley is the only place to be. As Michael Skok puts it, “You are either one of the people at the middle spinning the wheel or one of those on the p. 211 outside being spun.” But that leads to another worry: Even if the Valley is reasonably good at sharing the technological spoils among its inhabitants, you still have to live there to be a winner, so it is fulfilling the winner-take-all formula by being the winner itself. You can hear similar triumphant noises coming out of Hollywood and Wall Street.
This is wrong, too. Geography may not be dead (see chapter 6), but it is not everything either. Consider, just to begin with, the awkward fact that the three richest individuals in each of America’s three main clusters live and work far away from them. Bill Gates is based in Washington State, not Silicon Valley. America’s most successful investor, Warren Buffett, lives in Omaha, Nebraska, not on Wall Street. And George Lucas lives near San Francisco, not in Hollywood. In each case, the winner has certainly lost a little by putting a distance between himself and the gossip factory. (Gates’s relative lateness to spot the importance of the Internet is one example.) But that distance has also given them perspective. Buffett has made his billions by making long-term bets that Wall Streeters would have found difficult to leave alone. Unlike his more frenetic peers, Lucas makes films only when he wants to. Gates has been through several revolutions in the software industry without losing his head in any. He may have been late on the Internet, but he was not too late.
Besides, Gates has been busy creating a cluster of his own. Washington State has more than two thousand other software and Internet companies, including Amazon.com. The pool of talent may not be as deep as it is in Silicon Valley, but it is still fairly wide. The same can be said for an increasing number of other places in the United States—notably Boston, New York City, Utah, and Austin. Austin is particularly interesting because, despite being barely a quarter of Silicon Valley’s size, it still feels distinctly Siliconesque. The University of Texas acts as its Stanford, pumping out technology-trained students. (Dell Computer was founded in a UT dorm room in 1984.) Austin is just as rich, liberal, and hip as northern California, but it is a lot easier to live in, with cheaper houses and better schools. Despite complaints about Austin’s infrastructure (“the traffic lights aren’t even synchronized,” moans one Motorola man), it is far easier to get around than Silicon Valley, and the air is noticeably cleaner. “Every time I go to Silicon Valley,” says Michael Dell, “I thank God that we are based in Texas.”
Around the world, plenty of young engineers are making similar decisions, comparing Silicon Valley to their local imitation and often choosing the latter, in the process ensuring that the largesse of the computer revolution is being scattered far and wide. American companies may control two p. 212 thirds of the world’s software market, but the United States is home to only a third of the world’s estimated six million software programmers.[9] Gates himself calculates that there are more than twenty countries with what he calls “concentrated programmer populations”—including the Holy See, Finland, and New Zealand—where “cool work is being done.”
Many people in Silicon Valley argue that southern England and Israel are the closest international competitors. But the Silicon Valley model is also being exported to much more distant cultures. One example is Hsinchu Science Park in Taiwan. On the face of it, Hsinchu’s main bond with Silicon Valley is that they are both irredeemably ugly. But once you get past the somewhat militarist outlook of some Taiwanese entrepreneurs, you discover more than a hint of Santa Clara. Around half the firms in Hsinchu were started by expatriates, mainly from Silicon Valley. In terms of profits and market capitalization, Hsinchu is about a fifth of the size of the Valley, and much of its work is in making high-tech widgets that Silicon Valley no longer does. The Taiwanese make nearly all the world’s handheld scanners, two thirds of the world’s computer mice, and around half of its monitors and modems.
To be sure, Hsinchu owes the Taiwanese government a lot: It provides cheap land and even some start-up capital. But unlike its peers in Japan and South Korea, the Taiwanese government has concentrated on attracting small firms and left decisions about products to the entrepreneurs. Perhaps most important of all, it has not rescued them when they go bust. As a result, it has fulfilled its main aim of providing an alternative destination for its young and technologically gifted. Rather than going to the Gold Mountain, as some Chinese speakers call San Francisco, engineers can go to the New Gold Mountain, as Hsinchu is known. At Taiwan Semiconductor, engineers have been known to earn $500,000 a year and janitors $50,000 a year.[10]
Hsinchu’s strongest competitor in Asia is Bangalore, in the southern Indian state of Karnataka. Visiting a software firm in Bangalore can be a little like uncovering Q’s workshop in a James Bond film. On one side of a wall you are in a busy street battling with hawkers and farm animals; on the other, you are in an air-conditioned room, watching rows of young Indian programmers rewrite software for large American companies. (Much of the work is transmitted across the Internet to customers.) Bangalore is arguably the only technological hub in the world with worse traffic than Silicon Valley. It also suffers from many of India’s vices—notably venal local politicians. But Indian universities are mass-producing software programmers in much the same way that they once mass-produced bureaucrats, and many of them end up in Bangalore. Three of India’s five wealthiest men are softp. 213ware bosses, and software engineers have now achieved unprecedented eligibility in newspaper matrimonial columns.[11]
Already, people in Bangalore are muttering about another place full of cheap programmers, Russia’s Silicon Taiga. Nikita K
hrushchev had begun sending mathematically gifted children to Akademgorodok, a specially built Siberian scientific city some two thousand miles from Moscow, rewarding them with good food, relatively comfortable houses, and dachas by the Ob Sea (where he even built a beach for them, too). Most of the work at Akademgorodok (literally “academics town”) was military, but it was also the site of Mikhail Gorbachev’s expensive attempt to build a Soviet Intel. At the end of the cold war, the city’s thirty-five institutes held forty thousand scientists; now many of them are unemployed, and the town is something of a hotbed of nasty conservative Russian movements. But the same harsh economics that has left some mathematicians living off homegrown potatoes also means that there is a supply of cheap software programmers, who can be hired for between $1,000 and $1,500 a month. Firms such as Sun, Nortel Networks, and Microsoft are keen hirers. But, just like Bangalore, Akademgorodok is also building its own software industry, with forty firms nestling in the empty university buildings and selling their products over the Internet, out of reach of Russia’s kleptocracy.[12]
We could continue traversing the globe, finding other Silicon Valleys, but the underlying point is clear: You can now live a fairly passable imitation of the Silicon lifestyle just about anywhere. On the island of Orkney, John Ruscoe begins each day by looking after his flock of seven hundred Shetland sheep; then he begins his other job as a software developer for ICL. He visits the computer firm once every eighteen months; the rest of the time they talk by e-mail.[13]
The Not-So-Visible Threat
Does the existence of rival clusters actually threaten Silicon Valley? People in Silicon Valley like to boast that the Valley of Heart’s Delight is still “the mother lode.” Austin’s most important piece of infrastructure is arguably the “Nerd Bird,” a twice-daily flight to San Jose. (In one poll by Fast Company magazine, 35 percent of the passengers admitted to being nerds, and another 37 percent said that they were in denial about it; one replied, “I carry a differential-equations problem solver and a periodic table in my wallet. What do you think?”) Hsinchu also has a similar lifeline—a China Airlines red-eye to the Valley, the regulars on which are known as “astronauts.”
On the other hand, the growing significance of places such as Austin and p. 214 Akademgorok is changing the balance of power. It is no longer safe to assume that you can keep up with the high-tech world just by dropping into Il Fornaio in Palo Alto. You also need to know what is happening at watering holes in Austin and in New York. Linux, the upstart operating system that so unsettled Bill Gates, was invented by a student at the University of Helsinki in 1991.
Nobody has yet been able to explain why some dominant clusters, such as Sheffield for steelmaking, lose their way, while others, such as the City of London, have so far been able to renew themselves. A cluster can become too dominated by big companies (like Detroit before Toyota and Honda set to work on it), but it can also be too fragmented (like the Lancashire textile mills). All the same, as Richard Tedlow, a historian at the Harvard Business School, points out, three things clearly play important roles: self-absorption (two Chicago stores, Sears Roebuck and Montgomery Ward, competed so fiercely that they failed to spot the rise of Wal-Mart); forgetting what your customers want (Detroit offered buyers cars with tail fins instead of inexpensive, reliable ones); and major outside shocks, such as a political upheaval or a technological discontinuity.
Silicon Valley is not immune to these pressures. Even its most ardent defenders would have a hard time claiming that a place where people in the late 1990s boasted about having got their “two commas” (meaning that they had cashed in their options for more than $1,000,000) was not self-absorbed. It is also open to charges that it ignores customers, tending to opt instead for “field of dreams” business plans: If technologists come up with a cool new idea, customers will come. Yet many computer owners (like American car buyers thirty years ago) seem to want fewer frills, not more. They use only a fraction of the programs that come with their machines; all the rest is “bloatware” that merely slows everything down.
Technological discontinuities could be more brutal. Silicon Valley has survived one such discontinuity in the leap from the mainframe to the personal computer, and it seems to be doing pretty well so far out of the much larger discontinuity that the Internet presents. But it is still early days. Out of the three most prominent Internet firms, only Yahoo! is in Silicon Valley; Amazon.com and America Online are both outsiders. And technological changes are by their nature devilishly difficult to predict.
In fact, Silicon Valley’s inhabitants have been remarkably successful at dealing with the commercial implications of rapid technological change. The bigger, long-term problems for Silicon Valley in our view are not commercial but political and social. One final observation about previous clusp. 215ters that failed is that they simply stopped being nice places. Lancashire’s “dark Satanic mills” were places that you left as soon as you could. Detroit in the 1970s was a city that most people avoided going near in the first place. Silicon Valley will only stay ahead if it keeps attracting the best people. That is not just a question of promising them money. Again fulfilling its role of being like globalization only more so, Silicon Valley is often guilty of being an economic success but a social and political failure.
The Digital Divide
Many of the things that make the Valley such a successful commercial unit do also tend to make it a fairly admirable society. Meritocracy, for instance, is a civic virtue as well as an economic one. Even the Valley’s obsession with product arguably helps make it a nicer place. Certainly, its engineers’ tendency to celebrate function over form has at least partly restricted the winners’ propensity to be obnoxious. Of course, there are billionaires such as Larry Ellison who will happily buzz rivals in their MiG fighter planes. And as the 1990s wore on, the number of Ferraris increased exponentially. But the typical cybermillionaire still likes to drive an engineer’s car, such as a Lexus or a BMW, and the most ostentatious items in many houses tend to be things such as expensive stereos and high-tech stoves.
In a society where people worth half a billion dollars still sleep under their desks, it is relatively hard to have airs and graces.[14] Down south, Hollywood executives may engage in Machiavellian maneuvering to get the right table at Spago. But in Silicon Valley, the ideal food is like the ideal computer: fast and cheap. At Netscape, Marc Andreesen was so enamored of junk food that he gave meeting rooms names like Curly Fries, Jelly Donut, Pringles, Jolt, and Pork Rinds. In fact, there is something endearingly gauche about many of the new millionaires. Up in San Francisco, socialites snigger about a madam alleged to have made her fortune entirely by catering to rich young engineers. Accidental Empires, an amusing chronicle of Silicon Valley’s rise, is subtitled How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition, and Still Can’t Get a Date.
So what is wrong with Silicon Valley as a society? Two things: The first is the flip side of meritocracy. The test may be eminently fair, but those who cannot keep up get left behind. Silicon Valley is certainly not a pyramid-shaped winner-take-all society—rather, its shape is more like that of an egg timer, with fairly big groups of people at both ends—but that structure creates its own problems. The second problem is the flip side of the absorption in p. 216 the product: The winners have become disengaged from politics. That partly means that they do too little to help the losers, but it also means that they are ill equipped to defend the system from which they profit.
Silicon Valley is a hard place to live if you are either poor or uneducated. According to Joint Venture: Silicon Valley, the poorest fifth of the Valley’s households saw their real income fall by 8 percent in the boom years between 1991 and 1997. (By contrast, income for the richest fifth rose by 19 percent.) In a world where the average house price is half a million dollars, the people who clean those houses are being forced to live farther and farther away or in more and more desperate circumstances. When a storm ripped the roof off tw
o apartment buildings in East San Jose in 1996, it revealed three hundred people living in just forty-two apartments.
Meanwhile, jobs seem to require ever more qualifications. Until the early 1990s, manual dexterity was often enough to secure a job; now, one in three of Santa Clara’s adults has a degree (compared with one in five nationally). High-tech giants such as Hewlett-Packard once prided themselves on their ability to promote talented shop-floor workers. Now they have contracted out much of their manufacturing to specialists, many of them abroad. The tone of the Valley is being set by smaller companies that value speed and flexibility above all else: a marvelous development for educated job hoppers but a dismal one for people who start at the bottom.
The school system is hardly constructing a ladder of opportunity for its poorest citizens. Elite institutions such as Stanford and Berkeley continue to produce fine students, but below that level the system is cracking audibly. The high-school graduation rate for students in Santa Clara and San Mateo counties has declined from 80 percent in 1993 to 70 percent in 1998. Only about a quarter of teenagers study any math more demanding than elementary algebra. Despite the Internet’s importance to the local economy, by the end of 1998 nearly a third of the schools in Santa Clara and San Mateo still lacked high-speed connections, and roughly the same proportion of households with incomes of less than forty thousand dollars lacked any connection. In addition, the technology industry’s admirably global mind-set also works against the poor locals.
A Future Perfect: The Challenge and Promise of Globalization Page 31
