It’s not that economics has nothing to say about the situation, it’s just that simplistic versions of it would seem to make projections that aren’t quite fulfilled in reality. (Even something like Krugman’s New Economic Geography would seem to predict that Boston’s Route 128, because of its initial lead in technology, go from strength to strength while Silicon Valley would remain an unformed nothing.)
What I found striking about Saxenian’s portrayal of Silicon Valley was that everyone operated in a high-trust environment characterized by cooperation rather than paranoid competition. Some practical examples.
The book is full of tales about how bigger companies would liberally cross-license patents to their competitors, reverse engineer, share information that would otherwise be called trade secrets, encourage employees to move where their hearts takes them, and so on. There’s a great story about how HP, needing a fast chip design, collaborates with a smaller chip maker to make its chips faster—in the full expectation that the chip maker would make its faster chips and supply its competitors with them, thereby negating any speed-based advantage HP might have gained. And while it’s great for everyone when such cooperation works out, it’s even better for individual firms when everyone else cooperates (and you free-ride). (Obviously this state of affairs degenerates into a Hobbesian state of paranoia, which is part of the reason that “culture” is an explanation that does such heavy lifting here.)
There are two cultural factors I think are important. The one that everyone celebrates, and correctly so, is the Silicon Valley ethos of celebrating the risk-taker. There’s a great anecdote in the book where an executive quits his firm to found a start-up and suddenly everyone is congratulating him—his bosses, his co-workers, even his mailman start praising him for his boldness and vision. That’s the stuff that usually gets praised, and it’s noteworthy, especially so in these straightened times.
But there’s another pair of quotations early in the book that I think is just as important:
”Here in Silicon Valley there’s a far greater loalty to one’s craft than to one’s company. A company is just a vehicle which allows you to work…”
Or in the words of Wilf Corrigan, founder of LSI Logic: “There are a lot of people who come to work in the morning believing that they work for Silicon Valley.”
If you’re devoted to a craft, you are devoted to ideals and ideology in a way that the self-interested person of Econ models don’t quite capture cleanly, and your behavior tends to conform to conform more to the incentives set out by your community than your strict economic self-interest (because it’s a little crazy to go out and start a company, isn’t it? Unless you’re serving the greater good, in which case you’re doing something highly admirable, almost charitable in its own way.) Put it this way: if you’re working for Silicon Valley, you have an attitude of trust and connection to everyone there and you want everything to work out there, which is what motivates you to stick to that “cooperation” part of the prisoner’s dilemma game theory matrix.
I posted a BusinessWeek profile of Marc Andreessen, the Netscape founder, yesterday, and an analogy that frames the article might initially seem strange but becomes totally reasonable if you view Silicon Valley as a community devoted to craft: Andreessen, it turns out, is a huge admirer of Michael Ovitz, a high-powered Hollywood agent of yore. Hollywood has long been portrayed as a community fueled by cynicism and greed triumphing over idealism, but what is every actor but someone who was once a very small startup, keeping costs low and making ends meet (probably by being a waiter or waitress) until the big break comes? And in the end, then, Hollywood is a community devoted to a certain kind of craft—making entertainment, sometimes smart and sometimes crass. So it makes perfect sense that Hollywood and Silicon Valley would have something of a mutual admiration society; the real question is, why aren’t more communities devoted to a craft?