What political, social and economic philosophies have shaped Silicon Valley today.
“Silicon Valley” by alifaan is licensed under CC BY-NC-SA 2.0.
Silicon Valley, synonymous with the knowledge economy, generates 13% of the nation’s patents with 1% of the nation’s population (Romburgh , 2020). Silicon Valley is a hub of entrepreneurship and innovation, and it receives About 27% of US venture capital funding investment (Azevedo, 2021). Silicon Valley is the habitat of great companies, with 20 of the world’s top 100 technology companies located there: Hewlett-Packard, Cisco, Intel, Apple, Oracle, Google, eBay, Facebook, Twitter (Ester & Maas, 2016). There is no other place in the world, apart from the San Francisco Bay Area’s Silicon Valley, has been able to convert technological achievements into products and commercial success so effectively. But since the establishment of the technology park known as Silicon Valley, the region has become synonymous with innovation and the new economy on a worldwide scale. This article examines the political, social and economic philosophies that have shaped the culture of Silicon Valley to become what it is today.
Firstly, human activity can create much greater value than the inputs, but how this surplus value is distributed is a problem. Whereas in traditional capitalist societies the capitalist gets most of the surplus value, Silicon Valley has created a relatively fair way of redistributing profits. Through shares and options each individual is given his fair share of the wealth (Ester & Maas, 2016). It is for this reason that Silicon Valley is the fastest place to create millionaires, and this attracts talent from all over the world to the area. Secondly, there is the relaxed entrepreneurial environment. In Silicon Valley, there is a respect for creativity and invention above all else. In most parts of the world, it seems natural that the ownership of a functional invention belongs to the company or entity without exception. But in California, no one actually cares if someone takes an invention and runs their own company to earn money. Although the employment contracts of many companies stipulate that employees are not allowed to use the company’s resources for their own purposes, this clause is very lenient in its implementation. Some of the original companies even become investors in their employees’ new start-ups. It is this extreme encouragement and tolerance of invention and entrepreneurship that makes it relatively easy to start a business in Silicon Valley. Secondly, there is the diverse cultural scene in Silicon Valley. The most creative places are those that are culturally diverse. Many American inventions come not from Americans born in the United States, but from immigrants. The diversity of cultures makes Silicon Valley companies international from a very young age, which is very different from companies in other countries of the world, which are often successful in their own country but struggle to internationalise because there is no multiculturalism in the company. Advanced production relations, a relaxed entrepreneurial environment and a diverse cultural scene are what make Silicon Valley look through the surface of talent, investment and university towns, and provide insight into the true essence of what makes it what it is. Silicon Valley did not come out of nowhere; its strong drive for innovation and entrepreneurship comes from its dynamic institutions, which have deep historical and cultural roots.
In many companies in Silicon Valley, it is a common practice that no matter how senior the leader is, if an employee has a thoughtful and mature idea or suggestion, he can just push open his door and express his thoughts. In some companies, employees don’t even have to push the door if they want to talk to their boss. The founder of Facebook, Zuckerberg works from the same kind of desk as everybody else (Gillett, 2015). In some companies, it may feel a bit unacceptable to have such a push-door culture. But this is an everyday occurrence in Silicon Valley companies. So why has this culture developed in Silicon Valley? Because Silicon Valley is a “small society” that has long nurtured a culture of equality. There is a contractual relationship of equality between employees at different levels in Silicon Valley companies, rather than the traditional leader-led relationship (Steiber & Alänge, 2015). Even when people are at different levels, or have reporting relationships, there is only a difference in pay or equity between them, not in personnel decisions. In Silicon Valley’s view, if a superior has the power of life and death over a subordinate, that subordinate will sacrifice the company’s interests to satisfy the wishes of the superior. This would make it difficult to implement the company’s strategic intentions. Everyone being equal, people would be far less interested in fighting for mere positions and instead focus their energies on the things themselves. So how does such an organisational model work when it comes to specific things? Usually, under the top vision of the whole company, they have many teams and divisions that run parallel to each other. The teams and divisions are set up with an emphasis on the creation of jobs for things rather than for people. In other words, the need for a particular team is based on the needs of the business itself, not on the preferences of a particular person. Moreover, these teams also have a certain life cycle and collaborative and competitive relationships with other teams (Steiber & Alänge, 2015).
“Mark Zuckerberg interviewed by Financial Times, Scobleizer, and Techcrunch” by Robert Scoble is licensed under CC BY 2.0.
There is the role and role of government. Silicon Valley was formed in a free-for-all of the market economy, but that is not to say that the government did not play a role in its development. When high-tech related businesses were just emerging, the government took advantage of the situation and created a set of market laws and regulations that included incentives for SME development and venture capital. In the United States, the government provides a $50,000 investment subsidy to start a high-tech business, regardless of its size, and has also established loan schemes and tax incentive schemes to provide beneficial assistance to businesses, including those in Silicon Valley (Wonglimpiyarat, 2006). The government also supports the development of Silicon Valley companies in the form of government procurement, and there are opportunities for slightly more mature companies, regardless of their size. The role of the US government in Silicon Valley is to set, enforce and referee the rules of an orderly game. It is not directly involved in the game itself, which ensures the orderly conduct of the game between companies in the market economy and provides a good environment for the development of companies.
Finally, Silicon Valley is the result of the interaction of many factors. The Silicon Valley miracle cannot be attributed to any single event. Opportunity and circumstance, geopolitics and macroeconomics, talent and leadership, and young people chasing the sun. Silicon Valley’s achievements are the result of a collective effort. The high-tech revolution is the result of a combination of collective effort and individual talent. Silicon Valley is the product of a combination of government and free market economics. To attribute the existence of Silicon Valley entirely to government is as much of a false proposition as to suggest that Silicon Valley is entirely the result of the workings of the free market. It is neither entirely a big government story nor simply a free market story, but a combination of both. The perfect storm of these factors mixed together is the source of Silicon Valley.
Romburgh , M. van. (2020, February 12). Sign language: Warning signals in the Silicon Valley economy. Silicon Valley Business Journal. https://www.bizjournals.com/sanjose/news/2020/02/12/joint-venture-2020-silicon-valley-index-report.html
Azevedo, M. A. (2021, December 8). Silicon Valley’s share of US VC funding falls to lowest level in more than a decade • TechCrunch. TechCrunch. https://techcrunch.com/2021/12/08/silicon-valleys-share-of-us-vc-funding-falls-to-lowest-level-in-more-than-a-decade/
Ester, P., & Maas, A. (2016). Silicon Valley: Planet startup: Disruptive innovation, passionate entrepreneurship & hightech startups. Amsterdam : Amsterdam University Press.
Gillett, R. (2015, September 15). Mark Zuckerberg shows that he works at the same kind of desk as everybody else. Insider. https://www.businessinsider.com/mark-zuckerberg-virtual-tour-frank-gehry-designed-building-2015-9
Steiber, A., & Alänge, S. (2015). The Silicon Valley model: Management for entrepreneurship. Springer.
Wonglimpiyarat, J. (2006). The dynamic economic engine at Silicon Valley and US Government programmes in financing innovations. Technovation, 26(9), 1081–1089. https://doi.org/10.1016/j.technovation.2005.09.005