1. Silicon Valley
America’s Pathbreaking Cluster Economy
Russell Hancock
President & Chief Executive Officer
Joint Venture Silicon Valley
10 October 2011

2. What is
Silicon Valley?

3. Some things Silicon
Valley is NOT:
•NOT a place you can point to on a
map
•NOT a place with a defined identity
•NOT a planned phenomenon
•NOT characterized by silicon or
semiconductors

4. So, what is
Silicon Valley?

5. What is Silicon
Valley?
1,500 square miles
35 Cities, 4 counties
2.4 million people, 41 percent
foreign born
1.2 million workers
81 percent high school
diploma; 40 percent college
degree
25 percent of workforce in
high-skill occupations
Income average 60 percent
higher than US
6 percent US GNP, 11
percent of US patents
Productivity rate growing
50% higher than US average

6. So what is Silicon Valley?
A remarkably
enduring hotbed of
innovation and
entrepreneurship

7. Our most important characteristic:
We keep re-inventing ourself
Silicon Valley’s Waves of Innovation

8. America’s Top Patent Generating Cities
RANK CITY REGISTERED
PATENTS
1 SAN JOSE 1,960
2 Austin 1,221
3 Boise 1,028
4 San Diego 900
5 SUNNYVALE 842
6 PALO ALTO 766
7 FREMONT 698
8 Houston 661
9 CUPERTINO 633
10 MOUNTAIN VIEW 522
Source: Silicon Valley Index, 2010

9. Milestone Silicon Valley Innovations
Vacuum Tube
1940s
Transistors
1950s
Semiconductors, Defense
1960s Technology
Integrated Circuit, Graphical User
1970s Interface
Personal Computers, Workstations,
1980s Relational Databases,
Biotechnology
Network Computing, Packet
1990s switching, Internet Search
Social media, Web 2.0
2000s

10. However, the
Valley’s edge
doesn’t stem from
innovation alone
…

11. … but also from entrepreneurship
Defense Electronics
1950s Hewlett-Packard, Varian
Semiconductors
1960s National Semiconductor, Fairchild, Intel,
AMD
Biotechnology
1970s Genentech, Genencor
Personal Computers, Workstations
1980s Apple, Silicon Graphics, Sun
Network Computing, Packet Switching
Cisco Systems, Sun
1990s Internet
Netscape, Yahoo, eBay, Google
Social Media
2000s Facebook, YouTube

12. The Valley also generates
new business models
Internet-based commerce (Netscape)
Free search, supported by advertising
(Google, Yahoo)
Music downloads (Apple itunes)
Social networking (Facebook,
MySpace)
Consumer as producer (You Tube)

13. Largest Silicon Valley Employers
1982 2002
1. Hewlett-Packard 1. Hewlett-Packard
2. National Semiconductor 2. Intel
3. Intel 3. Cisco*
4. Memorex 4. Sun*
5. Varian 5. Solectron
6. Environtech* 6. Oracle
7. Ampex 7. Agilent*
8. Raychem* 8. Applied Materials
9. Amdahl* 9. Apple
10. Tymshare* 10. Seagate Technology
11. Palm,* Google,* Cadence,*
Adobe,* Yahoo*
*no longer existed in 2002 *didn’t exist in 1982
Source: Stanford Project on Regions of Innovation & Entrepreneurship

14. Largest Detroit Employers
1982 2002
1. General Motors 1. General Motors
2. Ford 2. Ford
3. Chrysler 3. Daimler-Chrysler
Source: I made it up!

15. But the other story is Silicon Valley’s small companies
Source: Joint Venture: Silicon Valley Network, Silicon Valley Index (2005)

16. Technology Regions Will Always
Experience “Boom-Bust” Cycle
• New technologies drive dynamic waves
• Entrepreneurs take advantage of new opportunities
• Swarms of new firms cluster around new technologies creating
short term bubbles
• New products eventually become commodities, bubbles
burst.
• New technologies emerge
from the convergence of old
technologies and the process
of “creative destruction”
begins again

17. “SILICON VALLEY LOSING ITS EDGE.”
Cover Story, Business Week.
“DREAMS OF STRIKING IT RICH FADING
IN SILICON VALLEY.” Front page, Los
Angeles Times
“SILICON VALLEY WILL NO LONGER BE
AN ICON.” Po Bronson, Wired

18. “SILICON VALLEY LOSING ITS EDGE.”
Cover Story, Business Week, 1985.
“DREAMS OF STRIKING IT RICH FADING
IN SILICON VALLEY.”
Los Angeles Times, 1991.
“SILICON VALLEY WILL NO LONGER BE
AN ICON.”
Po Bronson, 2003.

19. Bubbles aren’t new
• Between 1846 and 1852 telegraph
miles in the US rose from 2,000 to
23,000. Three lines covered New York
and Boston, though there wasn’t
enough traffic for one.
• In 1894 the US had 192 railroads in
bankruptcy (41,000 miles of track)

20. Bubbles aren’t all bad
• Between 1846 and 1852 telegraph
miles in the US rose from 2,000 to
23,000. Three lines covered New York
and Boston, though there wasn’t
enough traffic for one. But the spread
of cheap telegraphy fostered other
key innovations: Associated Press,
national markets in stocks.
• In 1894 the US had 192 railroads in
bankruptcy (41,000 miles of track). But
railroads served as crucial platform
for new industries: Sears & Roeback

21. After the dot-com bubble:
• Prices plunged: servers, digital
cameras, domain-name registration,
web design, web hosting, office space
• System in place for transmitting data,
voice, documents; companies like
Vonage and Skype move up.
• Google prospered by lashing together
thousands of cheap servers and tapping
into an installed base of 172 million web
surfers, and hiring redundant engineers

22. So what’s the secret?

23. A Habitat for Innovation
Results-oriented meritocracy.
Climate that rewards risks, tolerates failure
Strong markets (capital, labor)
Mobile, fluid workforce
Favorable government policies
University-industry collaboration
Specialized infrastructure (venture funding,
lawyers, executive search, accountancies)
Quality of life
Cluster effect

24. INDUSTRY CLUSTERS:
geographic concentrations of related industries
Exporting Companies
Specialized Suppliers
Supporting Infrastructure

25. An example of the cluster effect:
SEMICONDUCTORS
AMD
INTEL
CYPRESS
chemicals, equipment,
software tools, clean room
design, toxics monitoring
research, workforce training, building
inspectors, electricity, airports, executive
search, accountancies, law firms

26. CLASSIC EXAMPLE OF CLUSTER EFFECT:
Kleiner Perkins Network, ca. 1998
Thin line: partnership between two KP companies
Dotted: exec from one KP company on the board of another
Thick: KP partner sits on board of more than one company

27. Cluster effect transcends national boundaries
Taiwan
Value-added IC design
Productization
EXAMPLE: Advanced IC manufacturing
Applied Materials, Inc.
Maximizing the
Semiconductor
Food Chain
Silicon Valley China
Systems and Chip Architecture Regional Distribution
Global Marketing Low Cost Manufacturing
Capital Investment
Three Regional Centers growing together, increasing
the overall size of the pie

28. So what’s
happening
right now in
Silicon
Valley?

29. We are building
new clusters in
renewable
energy
and clean
technology

30. VC investment in clean
technology nearly doubled …
Venture Capital Invested in Clean Tech
Millions of Dollars, Silicon Valley Region

31. Cleantech jobs are growing …
Jobs in the ‘Green’ Economy
Silicon Valley

32. The number of cleantech
establishments is growing …
Green Business Establishments
Silicon Valley

33. The mix is diverse …
Green Jobs by Segment
Silicon Valley

34. and so is the
investment mix …
VC Investment in Clean Technology
Silicon Valley

35. Silicon Valley holds the
lead in green patents …
Green Technology Patent Registrations
Silicon Valley as a percentage of the United States

36. Silicon Valley leads in the
production and use of
renewable energy …
Solar Installations
Capacity (kw) added through the CA Solar Initiative Silicon Valley

37. We lead in the use of alternative-
fuel vehicles …
Alternative Fuel Vehicles as a Percentage of
Newly (New & Used) Registered Vehicles
Silicon Valley and the Rest of California

38. However …

39. Silicon
Valley has
significant
challenges
to address.

40. Our Litany of Troubles:
Transportation
Affordable Housing
Infrastructure
Quality of Life
Health care, health insurance
Education
Workforce development
Environment
Dysfunction in Sacramento

41. Even more importantly, we
have some very serious
non-local issues:
Cleantech is not like IT
Federal Funding: we’re losing
Talent drain
Dysfunction in government

42. Yet Silicon
Valley has no
overarching
framework for
regional
decision
making.

43. Joint Venture:
Silicon Valley
Network was
established to fill
this void.

44. The Joint Venture Framework
Business
Community Labor
Organizations
Government Academia
“Joint Venture is like the United
Nations of Silicon Valley.”
Rob Kwasnik, Intel

45. The mission of Joint Venture is to:
1.Convene the region’s leaders, across
every major sector.
1.Provide data and analysis.
1.Launch initiatives that deliver
measurable results.

46. We are applying
the model to the
emergence of the
clean-tech sector

47. We issued a
“greenprint”
outlining our
strategy

48. Joint
Venture’s
Initiative
Structure

49. CLIMATE PROSPERITY COUNCIL
CHAIRS
Co-Chair: Chuck Reed, Mayor, San Jose
Co-Chair: Chris DiGiorgio, Accenture
COUNCIL MEMBERS
Better Place Electric Storage Institute
Cypress Semiconductor Applied Materials
UC Santa Cruz Akeena Solar
Optony McCalmont Engineers
NASA/Ames PG&E
Silicon Valley Leadership Group McKinsey & Company
City Managers (Dave Knapp) Sun Power
Google Wilson Sonsini
PG&E Adura Technologies
STAFF
Kelly Krpata, Applied Materials Director of Climate Prosperity
Rachel Massaro, Associate Director

50. Work Plan:
Power purchasing agreements
Smart Grid
Permitting
Electrical Vehicle Infrastructure
Federal Funding

51. San Jose Mayor touting the greenprint

52. Ribbon cutting at a solar installation

53. Thank you for the honor
of your invitation.
Russell Hancock
President & Chief Executive Officer
Joint Venture: Silicon Valley Network
100 West San Fernando Street, Suite 310
San Jose, California 95113
(408) 298-9330
www.jointventure.org