Why Startups Condense in America

May 2006

(This essay is derived from a keynote at Xtech.)

Startups happen in clusters. There are a lot of them in Silicon
Valley and Boston, and few in Chicago or Miami. A country that
wants startups will probably also have to reproduce whatever makes
these clusters form.

I've claimed that the recipe is a
great university near a town smart
people like. If you set up those conditions within the US, startups
will form as inevitably as water droplets condense on a cold piece
of metal. But when I consider what it would take to reproduce
Silicon Valley in another country, it's clear the US is a particularly
humid environment. Startups condense more easily here.

It is by no means a lost cause to try to create a silicon valley
in another country. There's room not merely to equal Silicon Valley,
but to surpass it. But if you want to do that, you have to
understand the advantages startups get from being in America.

1. The US Allows Immigration.

For example, I doubt it would be possible to reproduce Silicon
Valley in Japan, because one of Silicon Valley's most distinctive
features is immigration. Half the people there speak with accents.
And the Japanese don't like immigration. When they think about how
to make a Japanese silicon valley, I suspect they unconsciously
frame it as how to make one consisting only of Japanese people.
This way of framing the question probably guarantees failure.

A silicon valley has to be a mecca for the smart and the ambitious,
and you can't have a mecca if you don't let people into it.

Of course, it's not saying much that America is more open to
immigration than Japan. Immigration policy is one area where a
competitor could do better.

2. The US Is a Rich Country.

I could see India one day producing a rival to Silicon Valley.
Obviously they have the right people: you can tell that by the
number of Indians in the current Silicon Valley. The problem with
India itself is that it's still so poor.

In poor countries, things we take for granted are missing. A friend
of mine visiting India sprained her ankle falling down the steps
in a railway station. When she turned to see what had happened,
she found the steps were all different heights. In industrialized
countries we walk down steps our whole lives and never think about
this, because there's an infrastructure that prevents such a staircase
from being built.

The US has never been so poor as some countries are now. There
have never been swarms of beggars in the streets of American cities.
So we have no data about what it takes to get from the swarms-of-beggars
stage to the silicon-valley stage. Could you have both at once,
or does there have to be some baseline prosperity before you get a
silicon valley?

I suspect there is some speed limit to the evolution
of an economy. Economies are made out of people, and attitudes can
only change a certain amount per generation.
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