Why Silicon Valley won The Tech War with Boston

Just a kid, that’s all I was in the early eighties in high school as I took a class in BASIC. I was always fascinated by all things electronic and whether it was video games or advanced scientific calculators, I couldn’t get enough. At Westhill high School, they had a Prime minicomputer and it was on this machine where I was instructed how to program. I also had a Commodore 64 at home and with it I wrote my own video games at night and on weekends.

In the early eighties, Route. 128 in Boston was the stuff of legend… It is where all the minicomputer companies lived – Wang, Prime Computer, DEC and many others. Prime was my link to this area and it seems like it was yesterday when I wrote a math quiz program on the schools’s minicomputer which I used to better prepare me for the math portion of the SAT. Today, Rt. 128 is a distant second to Silicon Valley in terms of technology and of course all the minicomputer companies missed the PC altogether and are gone.

If you are wondering why Silicon Valley took the lead over Boston, you may want to refer to this article from Vivek Wadhwa which discusses how the Valley follows a more open model where innovation is more readily shared with small companies and moreover spread through job hopping. In addition, he points out a book from AnnaLee Saxenian (which was published in 1994 predicting that Boston would be the loser in the tech race

Here is an excerpt from the article:

She noted that Silicon Valley had an amazing dynamism about it. There were extensive professional networks, job hopping was the norm, information was exchanged openly, and the culture encouraged risk taking. The Silicon Valley ecosystem supported entrepreneurial experimentation and collective learning. In other words, Silicon Valley was a very open network–a giant social networking site working in analog before the concept of such a thing even existed.

This organizational mechanism was in sharp contrast to that of Route 128. Dominated by large, vertically integrated, and secretive minicomputer producers such as DEC, Wang, Prime, and Data General. Technology, skill, and know-how were trapped within the boundaries of the large corporations.

The differences were evident at many levels: venture capitalists in Silicon Valley had deep roots in local networks and were far more nimble than their east coast counterparts; educational institutions and research labs in the West partnered with local startups as well as more established firms, while those in the East worked only with the largest corporations; and the meritocratic openness of Silicon Valley made it a magnet for non-traditional talent and immigrants.

By the mid-1990s the east had missed the shift from minicomputers to personal computers as the flexible Silicon Valley ecosystem sped ahead with innovation across a diversifying range of components and systems going from chips, routers, and application software to ecommerce and search engines. Today Silicon Valley is the leading location for cleantech venture activity, an area widely considered to be the next big value creation engine for the U.S. and the world.

Boston, however, is no slouch. The Route 128 community remains the second biggest in the U.S. in terms of venture funds committed. Boston has powerful research institutions, still, and lots of very strong companies. In some areas, such as biotech, Boston may even rival Silicon Valley. But overall, its pretty clear that the Valley has not only won but is racing further ahead.

Most entrepreneurs and engineers that come to Silicon Valley, come to experience this network and to embrace the culture it has created. That’s why I came, too. Network effects don’t just work for fax machines. But then again, most of them knew that intrinsically. University guys like me need to do a bunch of surveys to figure it out. They voted with their hearts and feet.

At this point the game is even tougher to win if you aren’t in Silicon Valley due to the propensity for exit strategies to present themselves more readily where the acquirers are. Yahoo, Google, Cisco and Oracle are just a few of the companies responsible for billions of dollars worth of M&A dollars. And as this these companies have grown, they  have made so many millionaires that they in turn go out and launch new companies and/or invest in others which are nearby.

If you are looking for a lesson here it is that a company which mirrors Silicon Valley and is more open, flexible and shares information more readily will likely always beat the company which is inflexible and contains many silos.

  • richardsprague
    November 1, 2009 at 3:52 am

    I think you have to look at the role of government policy as well. A state that elects very pro-government-intervention leaders like Barney Frank, Ted Kennedy or Tip O’Neill will not be very sympathetic to the importance of private enterprise. Contrast that with California (Ronald Reagan, Ed Zchau, Pete Wilson) in the 70’s and 80s — you can tell that the electorate in each state felt differently about business.
    It’s not over, by the way. Today’s Californians look a lot more like Massachusetts residents of the 70’s and 80s: sympathetic to high taxes and government services.

  • Rich Tehrani
    November 1, 2009 at 6:57 pm

    Very good point — sadly the same can be said about Obama’s policies versus past presidents. I wonder if people realize their ability to find a job has a great deal to do with who they vote for.

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