Excerpt from New York Times: (date unknown)

Article by Pascal Zachary who teaches journalism at Stanford. 

Companies in Silicon Valley can generate and test new ideas faster than in any other city.  The entrenched tech culture there helps.

In our celebrity studded world, where we make a cult of genius and individual achievement, the mind rebels at the notion that geography trumps personality.

Yet the inescapable lesson of the iPod, Google, eBay, Netflix and Silicon Valley in general is that where you live often trumps who you are.

Just ask Sim Wong Hoo.  About seven years ago, I met Mr. Sim in Singapore, where he was born and then living.  He talked about the rising creativity of the Singaporeans and with a flourish, as if to dramatically make his point, he pulled out a prototype of a handheld music player that he insisted would replace Sony's famous Walkman.

Mr. Sim's device was breathtaking, possessing all the elements all of what we now know as the MP3 player.  Yet today, Silicon Valley icon, Apple, dominates the market for MP3 players with the iPod.

Some months after my Singapore encounter I visited thriving code writing communities in Tallinn, Estonia; Reykjavík, Iceland; and Helsinki, Finland, three Nordic cities that were being transformed by advances in cell phones, mobile computing, and the Internet.

Their tightknit network of engineers seemed poised to create the tools required to make good on the much-hyped prediction: the death of distance.

Yet these Nordic innovations were blindsided by two Silicon Valley engineers whose tools we experience whenever we use Google.  Their company, Google Inc., posted a quarterly profit of US one billion on January 31, 2006.

Google's astonishing rise and Apple's reinvention are reminders that when it comes to great ideas, location is critical.  "Face-to-face is still very important for the exchange of ideas, and nowhere is this exchange more valuable than in Silicon Valley," said Professor Paul M. Romer, a professor at the Graduate School of Business at Stanford, who is known for studying the economics of ideas.

In short, "geography matters", Professor Romer said.  Give birth to an information technology idea in Silicon Valley and the chance of success seem vastly higher than when it is done in any other region.

No wonder the venture capitalists, who finance bright ideas, remain obsessed with finding the next big thing in the 50 mile (80.5 km) corridor between San Jose and San Francisco.

Many times in the past, pundits have declared an end to Silicon Valley's hegemony, and even today there are prognosticators who see growing threats from innovation centers in India and China.

Certainly, great technology ideas can come from anywhere, but they keep coming from Silicon Valley because of two related factors: increasing returns and first mover advantages.

These twin principles essentially explain why am Intel maintains a lead in high-performance chips, why Apple sustains a large lead in music players and why Google's search engine remains a crowd pleaser.  On a gut level, we all understand how their two factors work.

Newcomers plug into an existing network of seasoned pros that "is unmatched anywhere else in the world", said Professor Annalee Saxenian in, dean of the school of information at the University of California, Berkeley, and author of Regional Advantage, a book about the competitive edge held by tech centers like Silicon Valley and Route 128 submersed near Boston.

"That allows people to recombine said they lied is much more quickly here than anywhere else," Professor Saxenian said.

Silicon Valley is not an invisible.  The logic of increasing returns and the first mover advantage can be overdrawn.  Other clusters in the United States and around the world will commercialize a great ideas, and the Valley will endure down cycles again, as it has in the past.

Rivals, notably in India and China, see Silicon Valley's preeminent position as a prize that they will inevitably take.  Yet they face in their elusive foe.  Every time the Silicon Valley recovers from a failure, it seems to grow more durable, almost in the same way a person becomes "immune" to a disease after a brush with it.

50 years ago, chips were the engines of Silicon Valley.  In the late 1970s came the personal computer and data storage drives, the software, and more recently the dynamic vortex all the Web, new media and online commerce.

These serial renewals are a marvel.  Sir Peter Hall, the British scholar of urban clusters, asks in Cities in Civilization, his history of geography and business innovation: "What makes a particular city, at a particular time, suddenly become immensely creative, exceptionally innovative?  Why should the spirit flower for a few years, and then disappear as suddenly as it came?"

Sir Peter's words highlight an enduring human mystery.  In the case of Silicon Valley, the world will rightly waits for the flame of creativity to burn out.  That's fair enough.  To each, a season (or maybe a few).  Living long and large, Silicon Valley surely will wither like a dead flower someday.  My advice, though, is: don't hold your breath.


Economic Vision

Silicon Valley