How to Kick Silicon Valley’s Butt

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From the fjords of Norway to the sands of Israel to the ice of Alberta to the waves of Honolulu, many regions of the world have Silicon Valley Envy. They look at the Valley as a place where people start cool companies that generate billions of dollars of wealth (and tax revenue), create thousands of jobs, and yet does not pollute the environment (at least compared with a smokestack). The question I hear over and over is, “How can we create our own Silicon Valley?”

First, a little background. It’s taken more than seventy years to create Silicon Valley. Any politician who thinks she can create another Silicon Valley in one or two terms is overly optimistic—perhaps one has to be very optimistic, if not delusional, to be a politician, but I digress.

Second, to my knowledge, there has never been any “master plan” for the creation of Silicon Valley. What stands before you is an amalgamation of hard work, luck, greed, and serendipity but not planning. Indeed, Silicon Valley has probably worked because there was no plan.

Third, my father was a state senator in Hawaii, so I understand how politics work. I have zero interest in a political career. Just to make sure I‘m never tempted, I penned this posting to burn down any bridge to a political career. (Sometimes it’s a good thing that the Internet archives everything you ever said.)


Stuff You Can’t Do Jack About

  • Beautiful, but not gorgeous, surroundings. California is beautiful. The weather is good. It’s fun to live here. No matter how great an entrepreneurial environment Cleveland creates, it’s always going to have people wanting to move away. If a place is gorgeous, like Hawaii, then the distractions are sometimes too great. Some place in the middle is what’s ideal. At the very least, it would be good to have a lousy season so that the company can be extremely productive part of the year.

  • High housing prices. If houses are cheap, it means that young people can buy housing sooner and have kids. When they have kids, they can’t take as much risk and don’t have as much energy to start companies. (I have four kids—I barely have the time and energy to blog, much less start a company.) Also, if houses are cheap, it’s easier to “make it big,” and you want it to be hard to make it big.

  • Cities, crowds, and high- if not over- population. The pressure of these conditions make people jealous of each other; this in turn makes them compete. Cities also bring people together to work. People can’t telecommute to a startup. People need to get together to bounce ideas off one another, argue, and cajole. Also, over-crowding gives people something to shoot for: that is, achieving success so they can get out of there.

  • Absence of multi-national companies—especially the finance industry. If your companies have to compete with conglomerates or banks like Goldman, Sachs throwing money at people, it’s going to be hard to get anyone for a startup. Pity the startups in New York, London, and Singapore. Come to think of it, how many tech success stories have come from these cities? There is intense competition for employees in Silicon Valley too, but we’re using the same currency: the upside of equity, not high starting salaries.

  • Life-threatening enemies. Israel is a speck of dust that has few natural resources, and it’s surrounded by real enemies. And yet the country has produced some of the world’s best technology companies. There’s nothing like a life-threatening environment to get the entrepreneurial juices flowing, I guess. If a region has to do nothing more than stick a pipe in the ground, throw a net in the ocean, clean beaches, or manage a natural seaport, it’s going to be tough to be the next Silicon Valley.


Stuff You Can Do Jack About

  • Focus on educating engineers. The most important thing you can do is establish a world-class school of engineering. Engineering schools beget engineers. Engineers beget ideas. And ideas beget companies. End of discussion.

    If I had to point to the single biggest reason for Silicon Valley’s existence, it would be Stanford University—specifically, the School of Engineering. Business schools are not of primary importance because MBAs seldom sit around discussing how to change the world with great products. Mostly they care about how to get interviews at multi-nationals and consulting firms. As my mother used to say, “Best case, engineers give buildings. Best case, MBAs endow chairs.”

    On a tactical level, this means that aspiring regions should raid the best engineering schools. What do associate professors at Stanford, MIT, and Carnegie Mellon make? Whatever it is, offer them double the amount to move. Be clever: how hard could it be to recruit top flight faculty to move to your beautiful (but not gorgeous) region if you conduct interviews at MIT in the winter? This is a trivial expense compared to the various incubator, tax treatment, and venture capital fund formation schemes that are the usual solutions to the challenge.

  • Encourage immigration. I am a third-generation Japanese American. My family moved here to drive a taxi and clean white people’s homes. If I had a choice between funding someone from a family who moved here from Vietnam whose father and mother run a 7-Eleven versus a descendant of a Mayflower passenger with “IV” in his name, I’ll give you half a guess as to my preference. You need to encourage smart, hungry, and aggressive people to immigrate from around the world. And to do that, you need good schools. To mix several metaphors, if you want to cover your ass, you need to open your kimono because trust-fund kids don’t make good entrepreneurs.

  • Send the best and brightest to Silicon Valley. I can hear the complaints already: “This will lead to a brain drain which is exactly what we are trying to prevent.” This attitude misses the essence of entrepreneurship: it’s not about preventing bad things, but fostering good things. Would it have been better for Hawaii if Steve Case had become a lawyer at his father’s Hawaii law firm instead of moving to the mainland and creating AOL? I don’t think so.

    The goal is to infect them with the disease called entrepreneurship and show them that there can be more to life than “a job;” that two guys/gals in a garage can change the world; and that a lot of money = millions of dollars. Sure, some people will never return—like me. But those who do return come back with a much broader perspective on what life and a career can be. Maybe they will build another Silicon Valley because they’ve seen it done before. Here’s a dirty little secret: Silicon Valley is more a state of mind than a physical location, and you can’t alter a state of mind by staying a home.

  • Celebrate your heroes. Every region needs its heroes. These folks take role modeling to an extreme; they have names like Steve Jobs, Bill Gates, Ted Turner, Steve Case, Anita Roddick, and Oprah Winfrey. Kids need heroes, so that they can say, “When I grow up, I am going to be the next Steve Jobs.” In many places, a successful person is pulled back down because of jealousy. Sure, there’s jealousy in Silicon Valley, but our way of dealing with it is to try to outdo the person, not pull her back down.

  • Forgive your failures. There is no better place to fail in the world than in Silicon Valley. (Where else can you get your clock cleaned by Microsoft and become a venture capitalist and top-ranked blogger?) Indeed, some people here have made a career of failing. Some of this is cultural—failing in Europe or Asia casts a cloud over one’s family for generations. Not in Silicon Valley. Here, it doesn’t matter (within reason) how many times you fail as long as you eventually succeed. So many entrepreneurs who failed went on to create massive successes that we’ve learned that failure is a poor predictor of future results.

  • Be logical. Make the challenge to create a Silicon Valley as easy as possible. Thus, a region should use it’s natural, God-given advantages. For example, aquaculture in Hawaii, security technology in Israel, alternative fuels in the Midwest, and solar power in the Sun Belt. There’s a reason why the best woolen sweaters come from Norway and the best Aloha shirts come from Hawaii. It’s not because people tried to buck the trend.

  • Don’t pat yourself on the back too soon. Many regions declare victory because Microsoft, Sun, or Google opened a branch office. These branch offices don’t hurt but don’t kid yourself into thinking that the existence of a branch office means that you are now a tech center. Truly, a region is a tech center when its companies open branch offices elsewhere, not when tax incentives and kowtowing got a company to open up a branch office in it.

  • Be patient. There is nothing short-term in these recommendations. I estimate that creating something that begins to look like Silicon Valley is at least a twenty-year process. This is certainly longer than most politician’s reign—mdash;hence the challenge of doing the right things for the long run.


Stuff You Shouldn’t Do Jack About

The short answer is that the government should not do much except provide more funding to the engineering schools. Unfortunately, that probably won’t seem like enough to most people.

  • Don’t focus on “creating jobs.” When a region adds the second bottom line of creating jobs, things get whacky. Such a goal perverts the objective of a startup because the primary, perhaps the sole, goal of a startup is to kick ass. If it also has to create jobs for the sake of creating jobs, then you defocus it. The thinking should be: “If this company kicks ass, then it will survive and grow. If it survives and grows then it will create jobs.” So let startups focus on kicking ass and the jobs will come naturally-or not.

  • Don’t pass a special tax exemption. There’s an assumption that tax benefits for investing in startups encourages entrepreneurship. I disagree; I think it mostly creates sloppy decisions by unsophisticated investors and crooked ones by others. Indeed, the unstated (and perhaps unrealized) goal of a sophisticated investor is to create, not avoid, tax liabilities. Nothing would make me happier than having to pay $100 million in income taxes. I would hand deliver that income tax return to the White House.

  • Don’t create a venture capital fund. The thinking here is that a government created venture capital fund would kickstart entrepreneurship because of the influx of money. However, if there’s one thing you can depend on in venture capitalists, it’s greed. If you show them good engineers with good ideas for good companies, they will appear by (private) plane, canoe, dogsled, and camel. Such a region doesn’t need to create a fund. A supply of capital does not create demand from entrepreneurs—mdash;at least not the kind of entrepreneurs that you want.

    (There is one notable exception to this: the government of Israel created a seed fund that launched its venture capital industry. However, my interpretation is that the fund was successful because there were already entrepreneurs there; the fund didn’t cause entrepreneurs to suddenly appear out of the desert.)

  • Don’t provide cheap office space and infrastructure. The rationale is that if entrepreneurs had office space, photocopying machines, T1 lines, and adult supervision, they would be successful. I can’t think of a case where cheap space, incubation, whatever caused success. This isn’t to say that there haven’t been successful companies from incubators (eBay is arguably one), but the key point is to determine the actual causes of success. Cheap space, etc, can’t hurt, but I’d buy engineering professors, not crappy buildings. Just because there’s a cheap building doesn’t mean you should create an incubator out of it.

There’s one more thing you need to do: Aim higher than merely trying to re-create Silicon Valley. You should try to kick our butt instead. That’s true entrepreneurship.

Acknowledgement: Thanks to Glenn Kelman of Redfin for a huge contribution to this posting.

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By | 2016-10-24T14:26:30+00:00 June 6th, 2006|Categories: Entrepreneurship|Tags: |64 Comments

About the Author:

Guy Kawasaki is the chief evangelist of Canva, an online graphic design tool. Formerly, he was an advisor to the Motorola business unit of Google and chief evangelist of Apple. He is also the author of The Art of Social Media, The Art of the Start, APE: Author, Publisher, Entrepreneur, Enchantment, and nine other books. Kawasaki has a BA from Stanford University and an MBA from UCLA as well as an honorary doctorate from Babson College.

64 Comments

  1. Shashi Menon June 6, 2006 at 11:18 pm - Reply

    Wonderful post. There is a definite reason why Silicon Valley has fostered such innovation over the past years, and as you mention, that type of environment is not easily transferrable or re-createable.
    “Aim higher than merely trying to re-create Silicon Valley. You should try to kick our butt instead. That’s true entrepreneurship.”
    Truer words I could not have spoken.

  2. Maria Palma June 6, 2006 at 11:23 pm - Reply

    I echo the previous comment on this one….and Audi’s slogan: “Never Follow”. What people should be really asking themselves is “How can I make myself better and make a difference in other people’s lives?”

  3. Jeroen Heijmans June 6, 2006 at 11:50 pm - Reply

    There are several interesting parallels between this posting and two recent essays by Paul Graham: How to be Silicon Valley (http://paulgraham.com/siliconvalley.html) and Why startups condense in America (http://paulgraham.com/america.html).

  4. andraz June 7, 2006 at 1:52 am - Reply

    Well, isnt that the case with everything exeptional? I mean, you cant expect people to create fantastic things if the enviroment, culture and social status is just too confortable for them to run that extra kilometre? Totaly the same thing with art, science, cultural revolutions and social revolutions. Extraodrinary things happen in extraordinary enviroments. Thats been the case since the beginning of the human rase.

  5. Manoj Khanna June 7, 2006 at 1:58 am - Reply

    Very interesting and intuitive post. Guy you rock! This reminds me of my meeting earlier this year with CTP in my home city Calgary, Alberta where the provincial, city and local efforts have been underway from past year and more to create a Silicon Valley sort of environment and attract companies to setup their respective shops.
    Well, no one can beat California that’s for sure. But with rising prices in every aspect; sustainability of resources could be a challenge in future. After all, we need to acount for inflation and the trend of economy as well, which is, right now is showing a slowing trend and is focused on quite a couple of dual-effect factors and is going to affect the Ideal-Silicon-Valley.

  6. Tim June 7, 2006 at 2:35 am - Reply

    Only a minor point, verging on pedantry in fact, but I think ‘begat’ is the past tense of the verb ‘to beget’, so the ‘Educating Engineers’ paragraph should read ‘Engineering schools beget engineers. Engineers beget ideas. And ideas beget companies.’
    *******************************
    Got it. I made the changes. I’ve never really figured out thy vs thine either if you understand the difference.
    Thanks!
    Guy

  7. Bernard Leong June 7, 2006 at 2:44 am - Reply

    Well, thanks for saying this and I feel pretty good being validated by you here. This is an excerpt from what I have said earlier on whether can Singapore be a Silicon Valley.
    Here is my answer to the question:
    “I want to answer the question in the beginning, by taking an example how Steve Jobs, the CEO of Apple, brand the IPod product and the products made by his rivals. In his famous MacWorld keynote, he labelled all the other mp3 players to be “IPod Wannabes”, contrasting with his opponents constantly competing for the title of “IPod Killers”.
    If you understand what I am saying now, the aim is not push Singapore to become a Silicon Valley, but to grow Singapore towards achieving an identity of a technology cluster that made its own mark. The future will be brighter for Singapore, if we start thinking of how to transform this new entrepreneurial movement and local infrastructure to a different and branded place compare to the one in California.”

  8. skillMeter June 7, 2006 at 3:28 am - Reply

    Guy,
    Best.. as always !.
    Thanks,
    Team @ www.SkillMeter.com

  9. Laura Bennett June 7, 2006 at 5:53 am - Reply

    Cleveland – what is it about using Cleveland as an example of undesirableness? Yes, the weather could be more desirable to some (but then I’m from Canada so I don’t see anything wrong with it – go Edmonton!) Why don’t you come over here and see what’s going on. Things do change.
    On your comment about not creating a venture fund, I agree with you that if the fund creates the entrepreneurs, then that’s bad, but how many places don’t have entrepreneurs beneath the scene just waiting for money?
    North-East Ohio pulled together funds for an organization called Jumpstart (www.jumpstartinc.org) and thought that there wouldn’t be very much interest in the fund until people decided to become entrepreneurs. Well, they were flooded from the start. The entrepreneurs were already here but had little access to start-up funding. There’s so much demand from great entrepreneurs, Jumpstart can’t keep up and extremely fund worthy businesses are getting turned away.
    Sounds like Israel a bit…

  10. Arno June 7, 2006 at 5:56 am - Reply

    Manual trackback:
    Zeigt dem Silicon Valley wo der Hammer hängt! (in German)
    http://arno-klein.de/weblog/2006/06/07/zeigt-dem-silicon-valley-wo-der-hammer-hangt/

  11. Colin Bohanna June 7, 2006 at 6:02 am - Reply

    Guy,
    I have always looked up to you and enjoyed your thoughts. This post has excellent advice, not just for those trying to re-create Silicon Valley but for entreprenuers in establishing their mindset for success.
    Cheers

  12. ann michael June 7, 2006 at 7:39 am - Reply

    Guy – great post (as usual). I have just one comment about the “focus on educating engineers” point.
    While I think you’re right, there are a lot of engineering schools out there that aren’t Stanford! We need to create engineers that are in touch with consumers (like IDEO). We need engineers that build the things people want/need (or will want/need) and not just things that incorporate the latest technology because it’s there! The soley left-brain approach to engineering isn’t enough anymore. That’s one of the thing that makes Stanford so amazing!

  13. Geof Aucinleck June 7, 2006 at 8:08 am - Reply

    For years I’ve heard the ‘new Silicon Valley’ chant here in Vancouver. My response has always been “our garages are just as good as theirs, and some are even heated!” As you say – they key is ‘kick butt’ not copy – which we are already doing in some areas (Hollywood North anyone?) Personally I think Vancouver has all the ‘can’t do Jack about’ charateristics – even the ‘common enemy’, which in our case is our good friends to the south – thanks to the occasional trade battle.
    In my own business, I knew we were getting there when one of competitors starting referring to us as ‘two guys in an igloo in Canada’.
    Great post as usual.

  14. Todd Garrison June 7, 2006 at 8:20 am - Reply

    Guy… I am a fan of yours, for sure. However, I don’t agree with one of your comments under the heading “Don’t create a venture capital fund.” Your comment was that VC’s will do just about anything to get into a deal anywhere if the “good engineers with good ideas for good companies” are the in the ingredients. Having been a provider of venture-debt to VC-funded companies for years and now living in Montana, I can tell you that there ARE all of those ingredients in companies here… unfortunately, they don’t even catch a glimpse from VC’s. With the exception of RightNow Technologies (RNOW) in Bozeman (one of my former clients), I can’t think of any companies here that have been funded by a formal VC firm. The State tried to start a VC fund (which I’m not sure is a good idea) because VC’s won’t come to Montana except to fly fish. The effort recently failed (CSFB was to partner with the State), but they were unable to generate almost any interest from investors. What alternative is there for states like Montana other than a State-started VC fund?

  15. Frank Walsh June 7, 2006 at 9:31 am - Reply

    Great post Guy.
    I can understand the intention of extreme statements like “Life threatening enemies”, but it is a little over the top and for some reason struck a bad note with me.
    The premise is on target, and I couldn’t agree more with the statement “If a region has to do nothing more than stick a pipe in the ground, throw a net in the ocean, clean beaches, or manage a natural seaport, it’s going to be tough to be the next Silicon Valley.”
    Adversity breeds ingenuity. ‘nuf said.

  16. Dimitar Vesselinov June 7, 2006 at 9:37 am - Reply

    MySpace, Skype, Facebook, Flickr, del.icio.us, Basecamp, Feedburner…What do these companies have in common? They are not built in the Silicon Valley…The internet is the new Silicon Valley. VCs (very clueless) just don’t get it.

  17. Candy Minx June 7, 2006 at 9:48 am - Reply

    That was brilliant! I loved this very cool. Um, I am putting your portrait for sale on eBay tomorrow. It should be interesting to see what pull a portrait of “Guy Kawasaki” gets and what it’s market value is…of ocourse including the idea that I am not a famous artist may be a drawback, but I’ve never shied away froma fight!
    Your fan base here are such wimps, they don’t even stop by my blog to look at your portrait. What jamtarts!
    Much love and best wishes,
    Your enemy in rankseeking,
    Candy

  18. Rich June 7, 2006 at 10:47 am - Reply

    I’ll give you the benefit of the doubt Guy, but this post is pretty close to a direct rip off of Paul Graham’s essays. You either didn’t read them, which would be pretty wacky seeing as how they were everywhere on digg, reddit, etc., or you did and didn’t mention Graham. Pretty strange.
    ********************************
    Always go with the simplest explanation:
    – I didn’t read his essay.
    – I don’t know who he is.
    – I seldom read other blogs except when people point me to specific postings.
    – I don’t use Digg or Reddit.
    – I don’t rip people off.
    Guy

  19. Candy Minx June 7, 2006 at 10:58 am - Reply

    I’ve got a great idea! Seeing as you have been such a good sport about my teasing you and your desire for top ten technorati ranking…I am going to offer half the sale of my portrait of you for the charity of your choice. I keep expecting you to delete my comments at your blog or maybe I sound like a stalker…but you have been a good sport. So when I put my painting with your portrait in it up for aution…just to make some fun…
    half the profit I dedicate to a charity of your choice Mr. Guy Kawasaki…
    myabe this gesture will inspire all these business groupies to look at some contemporary art…don’t forget to buy art when you make your millions you Kawasaki grouies!
    much love to all,
    extreme high priestess of buttkicking,
    Candy
    🙂

  20. Ethan June 7, 2006 at 11:05 am - Reply

    Expensive housing? Um… Guy, the Silicon Valley got going in the first place in part because of inexpensive housing, with plenty of room for big yards so that the engineers (nearly all family men) could raise their families happily.

  21. brian June 7, 2006 at 11:24 am - Reply

    Guy,
    Not funding a kid with a “III” in his name? I guess you wouldn’t have funded Bill Gates then. Oh, wait nevermind…Microsoft is the Dark Side.
    ******************************
    Maybe I’ll change it to “IV.” 🙂

  22. China Law Blog June 7, 2006 at 11:39 am - Reply

    If I were to single out one difference between American business culture and Asian business culture that makes a Silicon Valley less likely in Asia, it would be “Forgive your failures.” Americans boast of the guy who failed, failed and then suceeded, but in Asia, the loss of face can be overwhelming. The United States’ bankruptcy laws are (still) quite forgiving as well, much more so than any country in Asia of which I am aware.

  23. Rich June 7, 2006 at 11:46 am - Reply

    Fair enough Guy. I believe you. I guess as a blog reader you get this impression that you guys all know each other. I would have bet money that you knew who Paul Graham was since he is trying to put a new spin on VC funding with his Y-Combinator project.
    Anyway, the fact that what the two of your wrote on the same topic is virtually identical, means you would probably like his writings. He’s number 60 in the Technorati 100, by the way. Better get to know the competition! 🙂

  24. Paul Elosegui June 7, 2006 at 11:59 am - Reply

    Guy, you have definately burnt your bridges in Europe.
    Most European politicians know that you cannot delegate entrepreneurship and economic growth to the market and the masses. All you get is creative destruction, market disruption, and upset all the old encumbent monopolies. You bad boy !
    Jacques Chirac, the french president, is so upset with these Google upstarts his government is funding a French alternative. The state knows best.
    A case in point are the entrepreneurs that have been successful in continental Europe. Disrespectful, unpredictable, and chaotic. Why do these individuals always try to beat “The System”?. How is a career politician supposed to work with individuals so outside the established network. They don’t even wear suit and tie … I rest my case.
    Joking aside, the proportion of successful EU entrepreneurs that secure funding from US and UK sources is sadly high. Obviously, there is nothing like greedy money.
    You HAVE pulled your punches on labour laws. Mr Paul Graham seriously let rip on the need for labour flexibility in hiring and firing at the recent Amsterdam XTech conference. Not a popular view in France recently.
    If you are visiting Europe anytime, you have my vote for EU president…hum, you do have to wear a suit though.

  25. Ryan Torma June 7, 2006 at 1:21 pm - Reply

    Richard Florida, an economist, has written two excellent books on this subject, “Rise of the Creative Class” and “The Flight of the Creative Class.” I highly recommend them both.

  26. Steven Kempton June 7, 2006 at 2:49 pm - Reply

    Guy, New Zealand is on the way! We have beautiful surroundings, house prices are getting higher, but we lack a life-threatening enemy and overpopulation (we are working on it though). All we need to do next is recruit some of Stanford’s Engineering faculty and pick a fight with Australia and we will be rocking all the way to global domination. Great post.

  27. Henry June 7, 2006 at 4:09 pm - Reply

    Hey, I grew up/live in Cleveland! I just moved back after living in NYC and DC and I hated Cleveland growing up, but after getting some perspective, its not THAT bad. Then again, if a good opportunity came up, I might move. Cleveland’s new motto should be, “Cleveland, its not THAT bad”.

  28. Jim Lyons June 7, 2006 at 4:28 pm - Reply

    Great post, Guy. I am forwarding to the local business leadership (Boise, ID) for their consideration.

  29. Wil Schroter June 7, 2006 at 4:49 pm - Reply

    We need another Silicon Valley about as much as we need another Wall Street or Hollywood or Vegas (ok, I could use another Vegas).
    Why re-create what’s already working? How about creating a definition of your city that no one else has?
    Originality. What a novel concept.

  30. keith ray June 7, 2006 at 5:45 pm - Reply

    I used to work for a start-up whose founder came to Silicon Valley from Japan. Why didn’t he create the start-up in Japan. Good question.
    He told me it was because it was VERY hard to create a new business there. Very hard to get a venture capital or a loan.
    I’ve heard the same thing about St. Louis, MO. USA (where my wife comes from) – also hard to get funding for a startup from the local VCs, there.
    There are SOME countries that we still consider “third world” that stay that way because it’s too hard to start a legitimate business – ambitious not-rich-yet people work in the underground economy instead of the legit one.

  31. Michael Urlocker June 7, 2006 at 6:00 pm - Reply

    I agree with your comments about a tax incentive as a corruptor of clear thinking: “It mostly creates sloppy decisions by unsophisticated investors.”
    In my finance work, every once in a while I would come across very shrewd tax planning, such as delaying or structuring a deal to be more tax efficient, which had the unintended effect of producing losses because events changed in unexpected ways.
    Maximizing cashflow today and just paying your taxes is often the simplest, best way to create high profits.
    Tax planners and cheapskates may disagree.

  32. Web 2.0 Asia June 7, 2006 at 6:06 pm - Reply

    On your note “Send the best and brightest to Silicon Valley,” I’m a bit dubious about its feasibility. How does a bright engineer from Korea land a job in Silicon Valley, given the current dearth of H1 Visa?
    ******************************
    The government of Korea and universities could sponsor programs that send kids to Silicon Valley. It would be a lot cheaper than tax incentives, incubators, and VC funds.
    Guy

  33. Brad Hutchings June 7, 2006 at 6:17 pm - Reply

    Great post Guy! I disagree about the telecommuting vs. office thing. There is a percentage of people who are effective remote workers. It’s not 95% and it’s probably not 50% or even 30%, but it might be 20%. Brought together with good, cheap tools (Skype, Bosco’s Screen Share, e-mail, $25 unlimited long distance) they can definitely work more effectively and will give you a lot more than making them move and commute to an office. Office culture is great for control games and for pertuating bureaucracies but not much else. I’m probably a combination of good and lucky, but I have not found any shortage of opportunities over the past 5 years that would accept me working from home or while traveling or whatever and had others doing the same. It may be outside the comfort zones of some VCs and some bosses, but it is becoming a significant portion of the talent pool. On the flip side, I have a couple suppliers that I have to have over to my home office to get them to accomplish anything — some people need structure. Gotta play each game as you see it.

  34. GregR June 7, 2006 at 6:29 pm - Reply

    Good points but I would add access to markets that can seed your product. Silicon valley is a good place to start. (but it doesnt explain Israeli success).

  35. Stiennon June 7, 2006 at 6:32 pm - Reply

    Hah! Your comment on “don’t do it to create jobs” strikes home here in Michigan. The Economic Development group focuses solely on job creation. We are also big on creating “corridors”. Detroit has Automation Ally, the High Tech Corridor, and dozens of tax free (which are not) development zones. So why is Michigan number 50 in job creation and number 1 in population flight?
    I am in the process of launching my 10th Michigan based startup. This one will work because I do not need any Michigan customers!

  36. vinnie mirchandani June 7, 2006 at 9:34 pm - Reply

    Guy, fanstastic…
    but I would say compared to 10 years ago, it is actually good
    to see some global variety – Korea with leading edge mobile apps, lots of Open source from Scandanavia, variety of BPO from India, obviously a bunch of manufactured stuff from China,
    it is good to see tech be so global. 40% of my humble blog readership is outside the US – yours is likely even higher…

  37. FutureTechWeb.com June 8, 2006 at 4:17 am - Reply

    There is another factor playing a central role in the formation of such tech conglomerates, the “economies of scale” and “economies of purpose” that are created. They affect the pool of talents, specialized suppliers and so on.
    Great post.
    www.futuretechweb.com

  38. Justin McHenry June 8, 2006 at 9:20 am - Reply

    Guy,
    The weather in Cleveland is awesome! Awesome, I tell you! Global warming is putting us in the catbird’s seat, baby!
    When you Californians have earthquaked out of existence or simply floated out to sea West of the fault lines, you’re going to be wishing you’d set up where the sun always shines, the birds always sing, and where the finest minds in science and technology are already plotting world domination–Cleveland, suckas!

  39. James Garnon June 8, 2006 at 1:16 pm - Reply

    Yes Thanks Guy for adding to the 06/06/06 “number of the beast” jollity that is circulating the web.
    (I am assuming that this post is an elaborate joke that has been misunderstood by the link-hungry lunatics of the business blogsphere.)
    To argue, as you pretend to do, for the economic benefits of a region where miserable weather forces people to work for the profit of others, where house prices prohibit ownership and prevent families raising children in favour of toil, but that nonetheless remains over-populated enough to stimulate greed and envy and encourage people to be”jealous of other people”, where there are few natural resources to promote security and also the added bonus of a genuinely life-threatening environment to quosh any hope of content, where labour is cheap, rootless and desperate, “hungry and aggresive”, but still aware that the best way to look after their asses is to open their kimono to those more powerful, where job creation and tax breaks are frowned open as enemies to desperation, where those violent and ruthless enough to clamber over the heads of others are lauded as heros, were people focus on “kicking ass” lest whacky perversion leads to them charity and love for their fellow man, that really would please Satan on his birthday if he existed, which of course he doesn’t. Any more than the baby Jesus.
    Christ, who needs satan anyway when so many are prepared to take your funny joke seriously.
    So which country do you favour? Iraq? Afganistan? Or (are you thinking long term) Iran? For my money I’d look to Africa. The secret war in Dafur on the edge of Sudan looks ideal. I don’t know if in its hysteric one-eyed rabidity the US media is even covering the genocidal hideousness of that particular conflict given the naughtiness of North Korea and Iran but I assure your gullible readers that there are no natural resources there at all, and awful dangers, tonnes of refugees, lots of people practiced in real ass kicking (and kimono lifting), and really no chance at all of surfing in what is a truely inhospitable climate.
    I’d put my Silicon Valley there. True the schools are awful but think of the aid money that will flood in once the media get bored of the middle east. Thats your long term bet. Mark my words.
    Thanks again for an uplifting post and all the best.
    (oh and if you fancy a giggle pop over to Rosa Say (your Hawaiian compatriot)’s blog entry for 666. She was telling people to hug strangers, pass jolly notes to their workmates, dance, play, turn of television, comment on other people’s blogs. She clearly didn’t know what day it was. Or else she just isn’t quite as funny.)

  40. Angela June 8, 2006 at 2:48 pm - Reply

    Guy, I really enjoyed this post. As an engineer, an MBA, and an entrepreneur myself, I especially like your suggestion to focus on educating engineers.
    “The most important thing you can do is establish a world-class school of engineering. Engineering schools beget engineers. Engineers beget ideas. And ideas beget companies. End of discussion.”
    I had the good fortune to attend a top engineering school where students are expected to constantly develop new and creative ideas. Most of our courses were hands on, so I learned more than just the concepts included in my text books. This isn’t a luxury afforded to every engineering student.
    I posted this portion of your article on my blog and linked to your post here: http://www.angiedawn.net/blog/2006/06/how-to-kick-silicon-valleys-butt.html

  41. MarkBruns June 8, 2006 at 8:36 pm - Reply

    I get the seeming irrefutability of the hypothesis that geography and that proximity matters…
    Some regions have an existing edge in terms of critical mass of entrepreneurs and a culture that has become self-replicating, the impossibility of telecommuting to a startup, etc, etc, etc.
    BUT … I still don’t completely buy that geography is the insurmountable barrier it is advertised to be … we humans are perhaps only two or three “revolutions” away from telling geography to f*** itself … the “revolutions” we can think about are the really big impactful ideas …stuff like LeanMfg + quality + JIT, cheap networkable PCs, widespread internet access, virtual prototyping / mfg, microcredit and protection for property rights …
    Perhaps we aren’t that far from the day when we can reserve our need to travel, transport people and stuff to those pathological special cases like sending peacekeepers to Darfur.

  42. Paul Cox June 8, 2006 at 10:11 pm - Reply

    Here in Calgary, home of the Clagary Flames National Hockey League franchise, with fans located around the world, we like to defer to other regions as to why we don’t want to build $10 billion super refineries.
    Dreaming of a high tech industrial heart land may be a hard sell in an area that refuses to show any leadership or courage.

  43. Deepak Shenoy June 9, 2006 at 12:07 am - Reply

    Interesting post. I live in Bangalore, India – known as the Indian version of Silicon valley, though neither “silicon” nor “valley” make any sense here.
    1. Bangalore is beautiful, fun, and overpopulated. The city has too much traffic and is polluted, but just an hour away south or west is a great countryside. Oh and the weather is just brilliant.
    2. Bangalore has high housing prices, one of the highest in India.
    3. There are very few finance companies (other than the call centers) that operate from Bangalore. India’s financial hub is Mumbai. But there are tons of MNCs. And the biggest threat to entrepreneurship is that these MNC’s – Accenture, IBM and the like – and LARGE Indian Software firms are offering ridiculously high salaries. Startups can’t hire good people with stock (pooh poohed) and cash is scarce.
    4. We have no known enemies other than our politicians. But they are more than a handful; who needs enemies when you have our politicians!
    5. Bangalore has great education – the state with the highest number of engineering colleges and high quality training institutes. The bad side of this is: We have a dearth of good teachers, because they’re swallowed by the higher paying industry. And most colleges don’t even have industry cells for sponsored programmes.
    6. Bangalore’s a great immigrant place: There’s more migrated population here than “locals”. Not just from India, but from the US and Europe as well!
    7. Bangalore’s had a huge “return from the silicon valley” reverse exodus, and entrepreneurial ambitions run high. And are infectious. (We have a club called eClub-Blr – at www.eclub-blr.com – got a few of the silicon valley “graduates”)
    8. Forgiving failures and celebrating heroes: Happening more now than earlier. Saying “I moved on” is no longer a bad thing, and would even land you an opportunity because “she wouldve learned what NOT to do”.
    9. Bad thing: The local government celebrates when a Microsoft or Google opens it’s branch office. And sulk when a Dell or a $1 billion fab goes to Hyderabad. Really stupid, this whole sulking/celebrating thing. What’s the big deal if you offer those people carrots you don’t give to local industry?
    10. The local govt. focusses on the wrong things; Job Creation, Tax Exemptions, VC Funds (the govt has like fifty of them) and cheap infrastructure. Tax exemptions are the worst – zero tax for software exporters.
    Guess what, I calculated that infosys, one of bangalore’s largest software companies, pays zero tax on its net income of nearly $600 million. It’s 50,000 employees pay a total of $50 million in tax. What a ridiculously dumb trade-off.
    Recently another city has built a “tech park” and offered lowered rents of Rs. 10 per sq. ft per month. And yet another offers cheap land, incubation space etc.
    But the biggest problem in Bangalore is the absense of “deal flow”. No one likes to trade capital – if you get in, the only way to get out is the IPO or an acquisition. No wonder VCs shy away from smaller aggressive companies, and that brand of entrepreneurs almost exclusively service US investors.
    In all, I think Bangalore is not any Silicon Valley. At best it’s an Outsourced Plateau, with mediocre entrepreneurship support. Startups survive not because but inspite of government initiatives.

  44. Ralf Haller June 9, 2006 at 12:39 am - Reply

    I think the overall message you give is that there is no such thing as Silicon Valley anywhere else, and actually noone should strive to build another one somewhere else because it would be best case a mere copy and therefore always second place at best.
    My comment to this is: there is already now not A Silicon Valley anymore if you see how many startups (having their headquarters still there) have roots or R&D operations in India, Israel or China. And these places are only now still low-cost engineering “shops” but will soon move up the food chain.
    I personally think this trend of global startups will only intensify and Silicon Valley will not be copied but sort of exported if you like. In Europe, in contrast, they are still waiting for Silicon Valley to come but that’s a different topic…

  45. steven June 9, 2006 at 12:43 am - Reply

    Through the internet it’s hard to tell if you’re dead serious, joking, or sarcastic on some of these points in the post but I seriously hope you don’t honestly believe this nonsense.
    **************************
    I’m completely serious and believe it. You won’t have to wonder if I’m not being serious when I’m not being serious. 🙂
    Guy

  46. Dirty Dingus June 9, 2006 at 1:08 am - Reply

    I don’t think you are 100% right there but maybe 90%. Anyway it’s close enough and it explains very clearly why Cambridge (UK) and Cambridge/Boston(MA) are also successful startup locations and not many other places are.
    I went down the list thinking of Cambridge (UK) and going check, check, check … I also went down the list thinking of Sophia Antipolis – one of the places France would like to have as “Silicon Valley” – and went No, no, no, …

  47. Steven June 9, 2006 at 9:59 am - Reply

    Thanks for the clarification 🙂
    I do agree with you in principle on most of the content here, in particular what you seem to be getting at is having the conditions for (among other things) opportunity, attracting “hungry” motivated/talented people, and invoking a “fight or flight” response in the business community.
    The part I disagreed with, and should have been more specific about is the implied causality (or perhaps it was my perception) of some of the conditions listed, since the post is titled “how to kick silicon valley’s butt”.
    By the way, I enjoy reading your blog greatly. You speak candidly and with conviction, and interact with the community. Your post “Hindsights” from Jan 12 was one of the most enjoyable posts I’ve come across and I can identify with, thanks for this gem of information.
    **************************
    I’m completely serious and believe it. You won’t have to wonder if I’m not being serious when I’m not being serious. 🙂
    Guy

  48. Dossy Shiobara June 9, 2006 at 12:27 pm - Reply

    Thanks for thoroughly answering a question I’ve been asking around for a long time now.

  49. Mert Hershberger June 9, 2006 at 1:45 pm - Reply

    Trust-fund kids are not the only non-entrepreneurs, those who
    -depend-on- welfare or “secure” income: i.e. “guaranteed” subsidies & “union” secured jobs are likewise sure targets for perpetual decline. Both of these abound in Michigan due to governmental policies.
    However, it should be noted that Michigan began with a heavy engineering emphasis. If you want money bad enough, you will always find a way to get it.
    The ultimate basis though for enduring prosperity does come from what God gives: life.
    Thus, pursuit of “prosperity” apart from or even equal to the pursuit for the presence of God will ultimately result in collapse. The missing “twins” in NYC testify to the terminal nature of human endeavor.

  50. Brian Sooy June 9, 2006 at 7:47 pm - Reply

    Nice to see that the west coast is noticing what’s going on in and around Cleveland.
    Even before Jumpstart, Lorain County Community College launched GLIDE (http://www.glideit.org) to help entrepreneurs get started, get cash, and get noticed.

  51. Gil Rosen June 11, 2006 at 6:56 am - Reply

    Liked the post but resented the “…to the sands of Israel” description. I think its about time you come down here :)…we have an abundance of many things, and sand is not one of them. Oh…maybe you meant SUN.. that I agree with!
    I gladly volunteer to be your tour guide 🙂

  52. Vanina June 12, 2006 at 12:04 pm - Reply

    Indeed Silicon Valley is the dream of a lot of people and it is also mine. By the way, do you have any advice or companies interested by my profile to get the chance to achieve my goals one day or simply faster:)

  53. Eddie Swat June 13, 2006 at 1:50 pm - Reply

    Guy,
    Great post Guy!
    I have recently started working at Australian Technology Park, in Sydney Australia. I am also doing a Masters in Urban Planning in which my major will focus on the relevance and contribution of tacit information exchange in technology clusters (how does it, and how can it contribute to the business). Can you point me to any current literature please?
    This is my first ever blog so i feel initiated….
    Regards
    Eddie

  54. Peter Cooper June 17, 2006 at 3:59 pm - Reply

    I don’t get the constant focus on ‘education’ in these sorts of articles. Good education != good entrepreneur != good engineer. Sure, many good engineers also went to college, but that’s probably less than half the reason they became a good engineer.
    Are even 50% of the greatest people working in Silicon Valley Stanford graduates? It’s a guess, but I’m thinking not.
    I’d say that universities foster local environments that smart people like to live in, but not necessarily that universities produce smart people who go on to create great companies, because those companies are the exceptions, not the rule.

  55. Hubert June 19, 2006 at 1:31 am - Reply

    Hallo Guy
    Great post, I blogged the link to it with some comment on my country’s political and technology situation. Thanks
    H.

  56. Al Bart June 20, 2006 at 4:51 am - Reply

    Actually I really shouldn’t be here since I don’t care a rat’s ass for most valleys (prefer beaches) but I am a bit of a writer and happened to notice the following in one of the comments:
    “Nice to see that the west coast is noticing what’s going on in and around Cleveland.
    Even before Jumpstart, Lorain County Community College launched GLIDE (http://www.glideit.org) to help entrepreneurs get started, get cash, and get noticed.”
    Is this person REALLY referencing the banned Harvard student’s (lifted) book title in daily conversations? Are things so bad? Aren;t cliche’s better than illegal paraphrasing? (Gasp) this truly is a spawn of the devil forum.

  57. Hannes Treichl July 16, 2006 at 9:02 am - Reply

    Manual Trackback
    Thanks for this nice post, Guy!
    http://www.hannestreichl.com/index.php/gute_zeitn_schlechte_zeiten/
    (language German)

  58. Brian Deagan July 28, 2006 at 1:36 pm - Reply

    Great post. I moved from Cleveland to Mountain View when our company got bought in 2000. I was in awe when I drove down 101 the first time. I realized something pretty quickly though, great companies can be built anywhere. It is a mindset. Agree 100%.

  59. Rachel August 22, 2006 at 3:58 am - Reply

    Wow real good information on silicon valley and its innovations.

  60. Cathy Horton-Panzica November 9, 2006 at 2:10 pm - Reply

    Guy,
    Thank you for your insight on this post, and thank you for visiting and inspiring us here in Cleveland. We needed to hear some new perspectives, and your presentation gave us a shot in the arm.
    Cathy Horton-Panzica

  61. Nicole Toomey Davis November 13, 2006 at 10:21 pm - Reply

    Guy:
    I think you know a lot about startups in Silicon valley, but as I posit in my blog, “What does Guy Kawasaki know about starting a company outside of Silicon Valley?” Have you ever done it? Have you noticed that VCs will come by camel, or canoe, but ONLY if they think that “everybody who is anybody” is also coming? Figuring out how to jumpstart that capital infusion is crucial in today’s tech environment, regardless of the # of engineers you graduate or whatever. No capital = crummy entrepreneurial environment.
    Still, I love your conclusion – how do those of us outside of Silicon Valley, figure out how to kick some SV butt?
    http://startupnotes.com/2006/10/18/what-does-guy-kawasaki-know-about-starting-a-company-outside-of-silicon-valley-part-1.aspx

  62. Joe Volpe November 21, 2006 at 7:12 am - Reply

    Guy Kawasaki has an intriguing post on How to kick Silicon Valley’s butt ; advice to all governments who set out with the objective of replicating Silicon Valley’s success.
    Some of these may be relevant to aspiring entrepreneurs, too – especially the bits about life-threatening enemies, being patient, and not patting yourself on the back too soon.
    And, of course – aiming high. Don’t plan to replicate. Plan to do better.

  63. carllys January 19, 2007 at 1:39 pm - Reply

    nice post you have here

  64. g_mcpaul April 29, 2007 at 10:59 am - Reply

    I’m trying to find a list of the cities that are officially or unofficially part of “Silicon Valley” for a project I am working on. I tried Ask.com and your article came up as the top item, however the list of cities in Silicon Valley hasn’t popped up yet. Please advise.
    g_mcpaul

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