Video: Silicon Valley: The Enduring Power of American innovation
A look at innovation in Silicon Valley by Toronto Star’s Bill Schiller.
CUPERTINO, CALIF.—In the creative chaos that is Jeffrey Stout’s kitchen, pots clang, flames shoot forth and a barrel-chested man with a Michael Jackson headset barks orders to an infinite loop of waiters who come and go.
Chef Stout — who is both — smiles broadly.
“I’d say we’re looking at 180 covers tonight — about $30,000,” he says. “There’s a good amount of wine going out and the parking lot is filled with some pretty nice vehicles.
“So life in the Valley is good.”
Indeed it is. T-bones in his Alexander’s Steakhouse ring in at $56; a single ounce of Golden Oscetra caviar is $250. The main dining room is packed. And it’s a Monday night.
To produce this kind of clatter in any restaurant in any other city in America, it would likely be a weekend.
But this isn’t just any city.
This is Cupertino, home to Apple, the pulsing heart of Silicon Valley’s innovation economy whose engines are revving.
This is America as you remember it: young, ambitious, optimistic and getting rich while having fun.
Profits are up, wages are soaring — recently graduated engineers knock down more than $104,000 per year — and median incomes in the Valley, a region of 40 California cities anchored by San Jose, have passed $86,000 and are headed north.
“That’s among the highest of any region in America,” says Russell Hancock, whose Joint Venture: Silicon Valley group produces an annual State of the Valley report.
Last year the region generated 42,000 new jobs. Today, job postings are up 26 per cent over the same period in 2011 and there’s a hiring boom.
When the Dow Jones industrial average briefly crested above 13,000 on Feb. 28, much of America was in a tizzy. Not in the Valley. It was no big deal.
“So are you pumped up about the Dow closing above the 13,000 mark …?” smirked the San Jose Mercury’s Mike Cassidy in a front-page piece. “Yeah, me neither,” he wrote.
The reason, he argues, is that powerhouse innovator Apple isn’t part of the revered index that measures the U.S. market.
Neither is Internet giant Google.
“But you know what is?” Cassidy crowed. “Alcoa.”
That stinging observation underlines the differences in mindset between east and west in America, between the young, vibrant, hopeful, determined, risk-taking, mission-driven 20-somethings who drive this economy — and the Porsches that come with it — and the older, sclerotic, slow-moving, greying, retiring or about-to-retire, East Coast financial establishment.
Here, it is not “Halftime in America,” as Clint Eastwood told the nation as it watched the Super Bowl, a time for America to gird its loins, march onto the field and stage a comeback to win the game.
Instead there is a growing sense that if anyone should quarterback that march, it shouldn’t be the captains of old industry but the young champions of the information society.
And with good reason: the level of innovative power in the region defies imagination. With a concentration of 160,000 engineers, Valley companies file more than 10,000 patents annually. Creativity on that scale is difficult to grasp — more than 30 patents every day of the month.
“It’s in the water,” jokes Alberto Savoia, engineering director for Google Ads.
But it’s really all about a corporate culture that at Google, and throughout the Valley, seeks to create the circumstances in which creativity and risk-taking can flourish.
Top of the list is Google’s “20 per cent” maxim, which encourages employees to spend 20 per cent of their work week — essentially one day a week — on projects outside their area of responsibility, ideas they feel passionate about. Gmail, and Google News, both arose from “20 per cent” passions.
Second, employees are made to leave their fear of failure at the door.
“You’re not punished here for failing,” says Savoia. “If you fail with grace and you fail doing something really exciting, you’re actually rewarded.”
And third, there is the simple fact of critical mass: the work is happening in an environment supercharged with like-minded people bristling with ideas.
“You see someone next to you engaged in innovation and you really can’t help yourself. It’s what people talk about during lunch — the next great idea, what they want to go out and build next.”
Google encourages that by providing high-quality food on-site every day, free to employees along with laundry facilities, dry-cleaning, haircuts and so on.
It’s a creative cocoon in which Savoia, 51, has thrived.
His path to the Googleplex, the campus of buildings that comprise Google’s operations in Mountain View, Calif. is novel. He came from Rome the year he turned 17 and got a summer job at Stanford University that allowed him to “play with computers.”
“It dawned on me that I was a Silicon Valley person trapped in an Italian body,” he says. “In those days physicists drove Volkswagens. Computer scientist guys drove Porsches. So I thought, ‘I’d really like to have a Porsche.’ ”
He went to work at Sun Microsystems, then at Google, then on his own, and recently returned to Google.
Savoia is a Valley mentor who speaks from experience, having led three startups: new ideas or companies usually funded by venture capitalists. Two of them succeeded, one greatly. But the third failed — spectacularly.
“We ended up losing $25 million of venture capitalists’ money,” he explains. “But did the VCs chase me with knives and want their money back? No. What they said was: ‘Alberto, we paid for a very expensive education. If you have another idea, make sure you come back to us.’”
Success isn’t an abstract idea in the Valley. It’s everywhere.
“It’s right in front of your face, that 20-year-old driving the Ferrari because he started a dot.com. You know that it’s possible … You don’t think you’re crazy.”
That kind of opportunity has made the Valley a magnet for immigrants. It draws the talented and ambitious from around the world, but especially Chinese, Indians, Japanese, Koreans, and now — with economic turbulence sweeping Europe — more Europeans.
More than half of residents of Silicon Valley speak a language other than English at home, much like ethnically rich Toronto.
“Immigration is our ‘secret sauce,’ ” says Hancock of Joint Venture: Silicon Valley. “Two-thirds of our engineers, scientists and entrepreneurs are Indian or Chinese. And 40 per cent of our population wasn’t born in the U.S.”
They arrive believing this is a land of infinite possibility, where anyone who is bright and works hard has a shot at making money, and maybe even changing the world.
Perhaps no better example
of such daring exists than a venture that started just down the road in a modest bungalow at 2066 Crist Dr., where a kid named Steve Jobs and his friend Steve Wozniak created the first Apple computer in the mid-1970s.
“They all start with a crazy idea,” says Savoia. “And they don’t really need funding at the beginning.”
But when they do, the infrastructure is here. Innovators take their ideas and chutzpah to 3000 Sand Hill Rd., where more than 20 venture capital firms weigh the ideas of those crazy enough to follow Jobs’ instructions to “stay hungry, stay foolish.”
Those who win backing then drive Interstate 280 north to Woodside and do the deal at Buck’s, a restaurant decorated with flying horses on the ceiling, a bust of Ho Chi Minh at the cash, and cowboy hats for lampshades.
Next, many lease small offices in San Francisco’s South of Market area, a.k.a. SOMA, where those who thought up Twitter once landed space at 164 South Park.
It’s all part of the golden dream, a West Coast adrenalin rush. And as large numbers have shown, it can be done.
and millionaires aside, a key underlying question remains: Can the power of all this American innovation produce the kind of rising tide that will lift all boats in the American harbour?
“I think it absolutely is, can and will,” says Derek Slater, a 28-year-old Harvard graduate and policy manager for Google, whose job is to defend and advance the free and open Internet.
He’s an evangelist — and a persuasive one — who sees a bright future.
“And I believe that harnessing the full potential of technology and the Internet — and putting it at the centre of our innovation and technology policies — is the way we get there,” he says.
U.S. President Barack Obama, in his 2011 State of the Union address, issued a clarion call to innovators to push America forward.
He reminded the nation that a half-century ago, the Soviet Union launched a satellite called Sputnik that caught the U.S. off guard.
“But after investing in better research and education, we didn’t just surpass the Soviets; we unleashed a new wave of innovation that created new industries and millions of new jobs.
“This,” said the president, “is our generation’s Sputnik moment.”
People in the Valley, and at Google, are taking him at his word.
Google has been busy innovating, building and getting rich by doing so for 13 years, growing from zero to 32,000 employees worldwide.
Eric Schmidt, who handed his CEO reins over to co-founder Larry Page last year, is today worth $7 billion.
But this is about more than the money, says Slater.
“This is about what politicians used to call ‘moon shot’ goals, what they now call ‘Grand Challenges.’ ”
What Slater wants, and what many in the Googleplex want, is to use the Internet to bring economic benefit to the world, “to make the pie bigger.”
Slater calls the Internet’s potential for transformative change “awesome.”
There are 4.5 billion people who still don’t have access to the Internet, he notes — among them 75 million in America and 316 million in Europe.
“So what happens when 4.5 billion people come online? It’s not just 4.5 billion more voices,” he says, warming to his theme. “The power of the network is the square of the size of the network — that’s Metcalfe’s Law, in geek terms — to connect, communicate and create together.
“So what we really need to be thinking about now,” he says, “is how do we bring the power of the Internet to more people?”
As that power spreads, Google will benefit too, of course — bolstering the American company’s position as an Internet leader.
Slater is part of the generation that “grew up on the Internet.” He has been online since he was 7, eventually seeking math advice for his high-school assignments from PhD students. And why not?
In Slater’s view, the Internet is all about “community,” all about being “human.”
“The Silicon Valley I know is built on some fairly fundamental human qualities.” he says. “Going to your neighbour and saying, ‘Hey, you want to work with me on something? Do you know how to do this? Can you help me fix my car? Can you lend me a cup of sugar?’ That’s actually how fundraising gets done around the Valley.
“It’s going to people and saying, ‘I’m trying to do this thing. I’m mission-driven. I have a goal. It’s a big goal. Will you help me?’ ”
And it works, he says.
The crowd-sourcing fundraising site Kickstarter.com, where people can go online with a bright idea and seek free financial help from strangers, has been a clear success, underlining a growing sense of a global community.
Last month Kickstarter claimed it would raise more money in 2012, about $150 million, than the $146 million offered by National Endowment for the Arts in Washington.
“That’s the power of bottom-up fundraising,” says Slater.
But real challenges
lie ahead. Key among them is making sure that the benefits of the Internet are distributed more evenly, Slater stresses.
He wants to see the power of the Internet harnessed to bring better education to students around the world. He wants to see more collaboration between the information society and the industrial society.
He wants to see more jobs.
So does Russell Hancock. Times of technological advance can be disruptive, he says, and this period is no different.
“Something has changed here — something fundamental — because the technology that we’ve invented here in Silicon Valley has rendered a whole class of jobs obsolete.”
At least 2.8 million jobs have gone to China during the past decade, according to a study by the U.S.-based Economic Policy Institute.
Others have been filled by robots.
“While corporations are thriving … doing more with less … our success hasn’t translated into head count. And this is a problem,” Hancock says.
Thinkers like Paul Saffo, a forecaster and consulting professor at Stanford, have been watching with concern.
“For the last two decades of the information revolution, while technology eliminated jobs, on balance it was creating more than it was eliminating. The challenge was merely moving people to where the jobs were and training them.”
But that period is ending.
“We may be entering a period of cyber-structural unemployment,” he says. “I think the so-called ‘jobless recovery’ is the new normal.”
Facebook might generate $3.7 billion in revenues, he notes, but it still has just 3,500 employees.
Saffo says this period of profound transformation is “not necessarily a bleak period — just one of maddening uncertainty.”
Economist James Stock called the 20-year period that began in the mid-1980s the Great Moderation, during which economic factors occurred within a relatively narrow, predictable range.
Now, says Saffo, we are headed into the Great Turbulence.
“If the last period was one of sunny weather with an occasional storm, this period is one of stormy weather, with occasional breaks of sunshine.”
Is he optimistic? He says he is.
“I believe in the human spirit and in human ingenuity, and I believe that at the end of the day, it will solve these challenges.
“Some people respond to gales by slamming their doors, shutting their windows and climbing into bed. But,” says Saffo, thinking of the generation of youth at the helm of today’s information revolution, “there are others who grab their hang gliders and go out and lean into the wind to see where they can go.
“Silicon Valley is very much like that. This is a place very accustomed to and loving change, and fleeing into the future in order to seek new innovations.”
Article source: http://www.thestar.com/news/world/article/1147572--silicon-valley-don-t-worry-be-happy-america-s-future-is-here?bn=1