Six Reasons Silicon Valley Will Continue to Thrive

I’ve noticed an increase in comments about the upcoming demise of Silicon Valley. Both in the popular press, but also in some of my recent conversations. The reasons people cite for its imminent death vary. Some are from other parts of the world, and some are simply disgruntled locals fed up with the skyrocketing cost of housing, increase in traffic, etc.

I’m a Silicon Valley transplant turned enthusiast. And while some global tech companies are looking to open new headquarters in the Midwest and East Coast, I believe that Silicon Valley is alive and well, and that’s not going to change anytime soon. Here are six reasons why:

1. Risk-embracing culture. Silicon Valley has a heritage in being risk-tolerant, and that’s not an easy cultural shift. The Valley’s risk-tolerant innovation is what has made the area the home for disruptive companies that have changed how people work with technology and interact with others. While many cities have very smart people and leading universities, few embrace the fail-fast and go-for-it culture that exists here. Failure can be a badge of honor and learning whereas in most of the world, it’s a black listing for future opportunities.
2. Unique ability to scale. Entrepreneurs are encouraged to start new businesses around  the world. But most businesses fail and very few tend to scale significantly. Growing a company to $10 million in sales vs. $10 billion requires a very specialized skill set. The Valley has unique cocktail of trained people who know how to grow a business rapidly and to great size. This consists of venture capitalists who tend to be more patient and not sell out too early plus founders who have a fundamental desire to disrupt an industry - getting rich quick may be a result of their actions, but it’s not necessarily the driving force.  
3. Openness. Everyday, people meet around the Valley area and share ideas, contacts, and favors freely. It’s a special culture of giving something of great value and not immediately expecting something back in return. When I lived and worked on the East Coast, I often found entrepreneurs would do the opposite - they might hoard contacts and favors, fearing that if they made an introduction to a powerful person, they would be giving up “ownership” of the special relationship rather than paying it forward and potentially creating a future chit to collect when needed.
4. Winner-take-all markets. As the world moves more to Internet and software-based business models, success becomes less evenly distributed. In a connected world, a true innovator may gain initially gain success in their local market, which sometimes leads to them dominating the global market. Think of Google, Facebook, and Amazon. These players not only own the North American market, they’re also global leaders, leaving smaller players to struggle and pick up the leftovers. China is a special case, where the combination of market focus and protectionism tend to help with local players, e.g. WeChat, Alibaba, Tencent and more. But as a general rule, Valley leaders often become global leaders.
5. Diversity. As mentioned, China is a formidable player in the global economy. But to truly be innovative, it’s a takes a diversity of thought. Silicon Valley attracts people from all over the world and the best and brightest want to be here, whereas Chinese companies tend to be less diverse. Research shows that diversity facilities better outcomes and this diversity and multiculturalism is a big strength compared with more homogeneous cultures.
6. Location, location, location. Let’s face it - location isn’t everything, but it sure does help. Silicon Valley offers easy (albeit sometimes traffic congested) access to San Francisco for urban amenities and culture, the Sierra Nevadas for outdoor enthusiasts, Napa and Sonoma for wine lovers, and the beautiful beaches of Santa Cruz and Monterey. And the with the weather we have here, it’s a hard place to beat.

I’m not suggesting that other cities can’t and won’t do well. Of course they will and many great companies will be created and developed around the world. Many cities will also thrive as Valley companies expand around the world, hiring the best and brightest wherever they can find them.

The model of old where the majority of people in a company serve in HQ with smaller numbers outside will be flipped on its head. Given the very high costs in Silicon Valley, I envision the headquarters will become relatively small with a lean but nimble core team. Just like most manufacturing is outsourced to Asia for favorable economics, so too will the rest of the functions including accounting, human resources, IT, and most others that don’t require some of the success factors that Silicon Valley hosts.

As the velocity of technology and business speeds up, this all plays to Silicon Valley’s key strengths, and for better or worse, an increasing concentration of success… which means I believe Silicon Valley’s best days are yet ahead.

What do you think? I’d love to hear where you stand on the future of Silicon Valley and what that means for other geographies.