More Students Meeting Math and Language Arts Standards, But Many Fall Short

By John Melville

In 2016, 1,140 more Silicon Valley 8th graders met or exceeded state standards in mathematics.  That meant 53% of all local 8th graders now meet the Smarter Balanced math standards (see below), up from 49% in 2015. On this measure, Silicon Valley outpaces California by a wide margin.  In 2016, just 36% of California 8th graders met the math standard compared to 53% of Silicon Valley 8th graders.  And, the gap is widening:  California’s percentage of students meeting or exceeding the state standard rose from 33% in 2015 to 36% in 2016 while the Valley’s increased from 49% to 53%, respectively.time-series

This is good news to a point.  Certainly, more local 8th graders increased their chances of becoming part of the Valley’s STEM workforce.  However, in 2016 the achievement gap in mathematics by ethnicity in Silicon Valley remained striking:  only 24 percent of African American and 25 percent of Hispanic or Latino 8th graders met or exceeded the state standards on the Smarter Balanced mathematics exam.  At the same time, 82 percent of Asian students and 68 percent of Caucasian students met or exceeded the standard.

The 8th grade math achievement gap didn’t change much between 2015 and 2016.  In 2015, 20% of African American and 21% of Hispanic or Latino students met or exceeded the state standard, while 79% of Asian and 66% of Caucasian students met or exceeded the standard.  This means the largest gap was 59% in 2015 compared to 58% in 2016.math-8th-grade

It’s a similar story when it comes to the performance on Silicon Valley 3rd graders in language arts.  The overall percentage of local 3rd graders meeting or exceeding the Smarter Balanced standard rose from 52% in 2015 to 55% in 2016.  While California’s rate rose too, the gap between Silicon Valley (55% in 2016, up 3% from 2015) and the State (42%, up 4% from 2015) remains large.

In 2016, higher proportions of Silicon Valley 3rd grade students across all ethnicities met or exceeded the state Smarter Balanced standard for English Language Arts compared to the previous year. Notably, the proportion of Hispanic and Latino students (accounting for 38 percent of 3rd grade test takers) that met or exceeded the state standard rose by 4.6 percent in 2016.  The achievement gap by ethnicity was slightly less pronounced in Silicon Valley in 2016 than 2015, though remained large (46 percentage points) between Asian students (which as a group had the highest proportion of students meeting and exceeding the standard) and African American students (which as a group had the lowest proportion).english-3rd-grade

Bottom line?  There has been a lot of attention on math and reading in the early grades—and there appears to be progress overall.  Smarter Balanced is aligned to the Common Core state standards, and educators have had time to adapt and students have had 3 years of instruction based on those standards.  But, large numbers of local students are still falling short of statewide standards, and are not on a path to participate in high-skill jobs created by Silicon Valley’s innovation economy.  What more can we do to close these achievement gaps?  Share your experience about what works and what you think needs to be done.

Smarter Balanced is an assessment system developed to align with the Common Core standards, which are “challenging students to understand subject matter more deeply, think more critically, and apply their learning to the real world. To measure these new state standards, educators from Smarter Balanced states worked together to develop new, high-quality assessments in English and math for grades 3–8 and high school. These Smarter Balanced assessments provide more accurate and meaningful information about what students are learning by adapting to each student’s ability, giving teachers and parents better information to help students succeed in school and after.” (see www.smarterbalanced.org).

 

John Melville is Co-CEO of Collaborative Economics.


The STEM Core: Moving Silicon Valley’s Existing Students onto Engineering and Computer Science Degree Pathways

By Dave Gruber, Gabe Hanzel-Sello and Caz Pereira

In his October 3rd blog post, John Melville of Collaborative Economics makes the point that Silicon Valley is not producing enough STEM Degree candidates.

One of the great sources for the next generation’s STEM Workforce are our regional community colleges.  The Bay Area has 23 community colleges, 11 in Silicon Valley alone.  State data suggests that 80% of students entering these colleges begin with remedial math and English courses.  Statewide experience suggests few of these students will pursue pathways needed to qualify for the kinds of jobs in engineering and computer science that are available now and in the near-future.  In fact, statewide data shows that of students entering community college at remedial levels, only 1% ever reach calculus proficiency- a foundation prerequisite for engineering and computer science degrees.  In addition to breaking through the calculus barrier, these students are faced with the same challenges of too many Silicon Valley residents; lack of STEM professional role models, lack of knowledge of STEM career and educational opportunities, and lack of the social, financial and academic support needed to complete a rigorous STEM education pathway. This pool of students, many of them the first in their family to go to college, reflects the diversity of California and, because they’re already living in Silicon Valley, represent an ideal solution to the regional need for a homegrown, diverse workforce.  Despite this current opportunity, few current efforts are aimed at encouraging and assisting these specific students to connect with the vast range of STEM job opportunities.

One exciting new initiative to realize the potential of this next generation local STEM workforce is the Silicon Valley Engineering Technology Pathways (SVETP); a $13 million initiative led by San Jose Evergreen Community College District and funded by the State of California Department of Education’s Career Pathways Trust.   SVETP supports a new strategy, “The STEM Core”, designed specifically to address the challenges of assisting remedial-level community colleges to pursue B.S. degree pathways in engineering, computer science, and related STEM fields.  In place of individual students pursuing remedial coursework, the STEM Core, now being implemented at 9 local community colleges, creates a cohort-based learning community of students with a common goal of achieving calculus readiness, workplace competency, and paid industry internships within one year. The STEM Core model differs from traditional community college education in the following critical ways; 1) Students are placed into a block-scheduled, cohort-based learning community, 2) In place of isolated, remedial math courses, students pursue an accelerated math sequence compressing 3-4 traditional math courses into one year. To engage students, coursework is contextualized to real-world engineering and computer science applications, 3)  Students gain access to engineering and computer science classes usually closed to them as well as industry speakers and field trips, 4) Students are assisted by a dedicated Student Support Specialist who helps them in adjusting to the rigors of community college education including development of study skills, career orientation, and dealing with the issues of transportation, family life, and health that so often derail community college students, and 5) In addition to the academic curriculum students have the opportunity for hands-on, paid summer internships at partner employer sites.

In pilot programs conducted at four colleges around California over the last four years, this approach has shown strong early promise in directing students on a STEM pathway.  65% of remedial students entering the program reached Calculus within one year (compared to 4% statewide over three years).  In addition, students have been successfully placed at over 200 internship opportunities provided by employers such as NASA Ames, Lawrence Livermore National Lab, NASA Jet Propulsion Laboratory, and Type A Machines.  A surprising number of students were able to convert their initial grant-funded internship into a company-sponsored part time job.   Most importantly, the STEM Core experience is leading a new pool of students to pursue the STEM degrees that are vital to their future and that of the larger Silicon Valley economy.

 

Dave Gruber, Gabe Hanzel-Sell and Caz Pereira are with Growth Sector.

 


Filling Our Talent Pool: Strong Record, But Missed Opportunity?

Silicon Valley has an enviable track record of filling (and sometimes refilling) our pool of tech workers year after year.  This is important because Science, Technology, Engineering, and Math (STEM) talent is a key competitive asset in innovation regions as STEM skills are critical in researching, developing, improving, and scaling innovative technologies, business and processes.  Today, our region has a large absolute number of STEM workers compared to other innovation regions.

Silicon Valley also has a much higher concentration of STEM talent than many other innovation regions—that is, the proportion of STEM workers in the overall workforce relative to the national average.  Absolute numbers are important, but high concentration is too—indicating a strong specialization in STEM talent-driven industries in the regional economy.  Some regions have large absolute numbers but low concentrations (e.g., Southern California, New York City region), while others have higher concentrations but lower absolute numbers (e.g., Seattle, Boston, Austin).  Silicon Valley actually ranks among the highest on both measures.

Not surprisingly, the Valley is almost three times more concentrated in STEM workers than the nation as a whole.  But, it is also almost 50% more concentrated than the Boston region, and close to 40% more than Seattle and Austin.  While Southern California and the New York City region both have larger absolute numbers of STEM workers, they have a much smaller concentration of such workers given their overall labor forces.

talentpool_svcip2016As important, Silicon Valley has grown its STEM advantage over the past decade.  Between 2005 and 2015, the region’s concentration of STEM talent grew 22%.  Of the comparison regions, only Seattle’s concentration increased at a faster rate.   Austin’s pool grew at half the rate of the Valley.  And, strikingly, Boston, Southern California, and the New York City region all lost ground, as their concentration of STEM workers actually declined.

Overall, a good news story, right?  Yes, Silicon Valley has a strong record of expanding its technical talent base.  So, what is the missed opportunity?

stem_svcip2016If we look at the local production of STEM degrees—preparing local residents for Silicon Valley STEM jobs—we find a different story.  Instead of leading the pack, the region ranks behind Boston and Austin, and just ahead of Southern California, Seattle, and the New York City region in the number of STEM degrees conferred per capita.  And, STEM degree production per capita in Southern California and the New York City region grew much faster than that of Silicon Valley between 2014 and 2015.  Boston’s STEM degrees conferred per capita also grew twice as fast as our region.

growthstem-svcipWhy is this important?  We are clearly able to fill our STEM talent pool better than most.  It is important because we have the opportunity to prepare local residents to join our technical talent pool and enjoy the benefits of our regional prosperity.  But, the ticket to play is a STEM degree.  While STEM degree production in Silicon Valley is growing, it is not growing as fast as many innovation regions.  We will need to do better if we are to capitalize on this “local sourcing” opportunity.

Let us know what you think—including your suggestions for how our region can help local residents attain STEM degrees and join our technical talent pool.

 

John Melville is Co-CEO of Collaborative Economics

 


Funding R&D at Local Universities: What is Our Commitment to the Innovation Pipeline?

Research and development expenditures at local universities is an indicator of our nation’s commitment to seeding the innovation pipeline.  New ideas—some with commercial applications—flow forth from U.S. academic centers, particularly in strong innovation regions like Silicon Valley.  So, how are we doing?  The latest numbers are in.  The story is mixed.

The long-term trend nationally has been positive.  Over the past decade, between 2005 and 2014 (the latest data available), R&D expenditures at U.S. universities grew an inflation-adjusted 17%.  However, between 2013 and 2014, the amount of total R&D funding at U.S. universities actually dropped from $68.1 billion to $67.2 billion.

R&D Growth Total August 2016

 

Some innovation regions have done much better than the nation as a whole over the past decade.  New York City metropolitan area substantially outperformed the national average over the past decade, increasing its university-based R&D expenditures by 68% between 2005 and 2014.  So too did Boston (+34%) and Seattle (+26%).

Silicon Valley, however, did not kept pace with the national average, increasing its R&D expenditures only 12% during the past decade.  Our region did outpace Austin (+10%) and Southern California (+9%).

Was the New York City metro area’s rapid rise really the result of a large percentage gain from a small base?  No, the region recorded a total of $3.6 billion in university-based R&D funding in 2014, larger than the totals in Boston and Silicon Valley, and well ahead of those in Seattle and Austin.

Taking a closer look at what happened in 2014, only Silicon Valley and New York City metro universities did better than the nation as a whole. Silicon Valley’s R&D expenditure rose one percent between 2013 and 2014 while the R&D fell one percent across all U.S. institutions. New York City experienced the fastest annual growth in R&D expenditures of the comparison regions (+7%) while levels in Boston, Seattle, and Austin dropped.

Certainly, a lot of R&D takes place outside universities and those figures are not included in these totals.  So, these numbers are an indicator of our commitment to idea generation in academic settings, which has been an important source of innovation in Silicon Valley over the decades.  Does that fact that we have lagged the national average in long-term R&D growth a cause for concern?

Clearly, decreasing federal funding for basic research is an important factor.  Still, some regions have fared better than others – and this may be because universities in these regions have diversified and expanded their sources of R&D funds as the federal pie has shrunk. Universities increasingly leverage other non-federal sources of R&D funding including funds from state and local government, business, nonprofit organizations, and the institution’s own funds.

R&D Expenditures 8.2016

 

In 2014, 54 percent of total R&D expenditures in Silicon Valley’s universities came from the Federal government, the lowest of the innovation regions. At the same time, a diversified set of funding sources is likely to be a more sustainable source of R&D funds.

Silicon Valley does match Boston in overall university-based R&D expenditures, even though Boston has a larger number of institutions.  But, what about the fact that Southern California and New York City both have substantially higher levels of university-based R&D investment than Silicon Valley?  Does it matter and should we care?  If so, what should we be doing about it?  Let us know what you think.

 

John Melville is Co-CEO of Collaborative Economics.


Unlike Many Top Innovation Regions, Silicon Valley’s Early Stage Investment is Up Since the End of 2015

By John Melville and Janine Kaiser

Boston, New York City, Seattle, Southern California—all experienced drops in early-stage investment (Angel, Seed, Seed VC, and Series A) in the first half of 2016.  Austin’s numbers rose modestly, but Silicon Valley’s rose faster.  And, the Valley’s overall level of early-stage investment remains well above all these comparison regions.

Q2 2016 did produce a quarterly drop in early-stage investment across all these innovation regions, including Silicon Valley, so we will have to see if this continues or reverses in the coming quarters, if it is a general trend or applicable to some regions and not others.

Regardless, even with this Q/Q dip, early stage investment into Silicon Valley companies remained above the historical average for the region.

Early State Investment

 

Initial Public Offerings is a measure on which Silicon Valley is not doing as well compared to some innovation regions.  The region’s number of IPOs and their total valuation dipped below that of New York City and Boston during the first half of 2016.

How significant is this trend?  The reality is that while valuations in each of these regions rose in the second quarter, they all remain below—or well below—their peaks of the last three years.  In fact, Renaissance Capital has reported that the U.S. IPO market in the first quarter of 2016 was its weakest since the 2008-2009 recession.

IPO Valuations

 

John Melville and Janine Kaiser are Co-CEO and Senior Consultant, respectively, at Collaborative Economics, a Silicon Valley-based consulting and research firm.


Halftime Report: Investment in Silicon Valley Has Rebounded From 2015’s Low

Halftime Report:  Investment in Silicon Valley Has Rebounded From 2015’s Low

By John Melville and Janine Kaiser

 Mid-year Venture Capital Levels Rise After 2015 Dropoff

After rising in the first half of 2015, venture capital investment dropped substantially over the remainder of the year in Silicon Valley.  However, this trend did not continue in the first half of 2016, as venture investments into Silicon Valley-based firms (including San Francisco) ended higher than their Q4 2015 level.

VC Funding

 

Tempering this news is the fact that the rebound was modest; Silicon Valley’s VC levels remained below last year’s high, and according to CB Insights data, Q2 2016 seems to have been lower than the Q1 2016 investment.  On this last point, not all the second quarter numbers have been recorded, as several late-stage investments did not publically disclose valuations, including Scoot Networks, August Home, Lob.com, Qnovo and Droom Technology.

So, we will know in the coming months if there really was a Q2 dip, whether it was the start of a downward trend or just a one-quarter hiccup in what otherwise is a rebound from 2015’s low point.  What we do know is that VC investment is currently well below the level recorded at this time last year—and that it would take substantial gains in the second half of 2016 to match 2015’s annual total.

Silicon Valley Well Ahead of and Not Losing Ground to Top Innovation Regions

At the same time, Silicon Valley performed better than most comparison regions.  Boston and New York City experienced declines in VC investment in the first half of 2016, while Austin and Seattle posted only small gains.  Southern California saw a sharp increase in venture investment in the second quarter of 2016, driven in part by a $200M investment in San Diego-based Human Longevity, the second largest VC investment in California in Q2 2016.  But let’s be clear:  Silicon Valley remains well ahead of these regions in overall VC investment.

Venture Capital Fundraising

VC Fundraising Getting Stronger Nationally

What does the VC pipeline look like?  According to the National Venture Capital Association, in Q1 2016 fundraising among venture capital firms in the U.S. was the highest in a decade, at $14B.  Fundraising in the first half of 2016 was 24 percent higher than the first half of 2015.

So, what does this halftime report tell you?  Share with us what you think is happening in the Valley, and what is on the horizon.

 

John Melville and Janine Kaiser are Co-CEO and Senior Consultant, respectively, and Collaborative Economics.

 


Silicon Valley Competitiveness: A Mid-Year Policy Report

Now at the halfway point of 2016, there is sand in the gears of Washington, D.C. but we’ve seen some policy developments that bode well for Silicon Valley at the state and local level.

Here are some highlights – and some lowlights – on immigration reform, education and transportation:

Immigration:  The use of immigration as a galvanizing force in the Presidential campaign has reduced the already painfully small chances that Congress will find the bipartisan consensus needed to advance immigration reform in the short or medium term.   Meanwhile, the immigration status quo continues to hobble the innovation economy in this country.

Education:  It’s been a good month for early childhood education in California. The new state budget includes an additional $7.8 million to provide access to preschool for nearly 3,000 eligible children in the 2016-2017 year. Over the next four years, funding will increase to $100 million to serve an additional 8,877 children in full-day state preschool slots. In addition, efforts to do away with guaranteed transitional kindergarten statewide were turned aside.  That said, we’re still not back to pre-2008 funding levels, and the need for high-quality early education remains great.

Transportation: Santa Clara, San Francisco and Santa Cruz Counties are revving up to consider transportation relief measures on the November ballot. The Santa Clara County measure is the most ambitious of these: It would complete the extension of BART to downtown San Jose and Santa Clara as well as providing funds for Caltrain electrification, speeding up expressways and filling many, many potholes.

Coming soon, 2016 status reports on the housing and tax front….


Good questions about the lasting impact of Silicon Valley’s prosperity

In today’s San Jose Mercury News, long-time Silicon Valley reporter and columnist Michelle Quinn asks this question: What if this tech boom is, gulp, not a bubble after all, but a major, sustained period of growth?

It is a question surfacing more and more in Silicon Valley. Reverberations from the “prosperity bomb,” as Quinn calls it, undoubtedly will be long lasting. Most Silicon Valley veterans do not believe the area is in a “bubble,” but they do believe there will be an economic slow down. That won’t help the housing / jobs imbalance, however. Will all of Silicon Valley’s individual government parts be able to come together in a more regional way? Time will tell. In the meantime, here’s a part of Quinn’s column and a link to the full column if you’d like to read more.

-Steve Wright

Quinn: The housing crisis ahead of us

What if this tech boom is, gulp, not a bubble after all, but a major, sustained period of growth?

What if rather than tech corridors popping up all over the country, the need for a company to be here, of all places, only intensifies?

Where are the extra people going to live? Where are those 2 million additional people expected to flood the region over the next generation going to sleep?

These are some of the questions I’ve pondered as Apple gobbles up land in North San Jose, LinkedIn and Google tussle over swaths of real estate in Mountain View, Facebook’s workforce of 9,000 is predicted to grow as much as 20 percent annually and Toyota announced it is opening a $1 billion new innovation hub.

Global demand for tech products and services means a prosperity bomb is going off in the Bay Area that will reshape the region for decades to come.

In many ways, the impact is already being felt. Regional planners, in 2010, did their best, but they underestimated the five-year employment growth here by a whopping 90,000 jobs.

People grouse about the highway traffic, the crowded roads and inadequate public transportation. But that’s just a symptom of our current situation with jobs in one place and housing in another, says Steve Heminger, executive director of the Metropolitan Transportation Commission.

“Transportation is a servant, not the master,” he said. “There’s a massive imbalance; the transportation has to work that much harder to serve the pattern we’ve built.”

Feeling crowded now? Expect to feel more so. Looking ahead, one high-growth projection is that by 2040, jobs will grow 32 percent — an extra 1.2 million jobs — on top of the 3.7 million already here in the nine-county Bay Area, according to a new report out by the Bay Area Council Economic Institute.

The Bay Area population is projected to rise 30 percent to 9.4 milion by 2040, up from 7.2 million in 2010, according to updated projections from the Association of Bay Area Governments. This is a tsunami of people that the region, with its geographic constraints, will somehow have to absorb. Try 800,000 more housing units.

Of course, we need a strong regional response, as uncomfortable as that may be for those who eschew change. Cities that enjoy their roles as Bay Area job centers need to step up and allow housing projects. Residents in those cities need to vote in officials who support growth. Companies need to invest in offices that put jobs closer to where people live or near public transit. And homeowners like me who bought a while ago need to accept that things have changed and be open to accepting more neighbors and using public transportation to get around. Driving over the Bay Bridge in 20 minutes is not a birthright.

Read more here.

 

 


IPOs are down: What does this mean for Silicon Valley?

By Doug Henton, Collaborative Economics

Initial public offerings (IPOs) generate returns for investors that fuel the growth of Silicon Valley’s next generation of startup companies. The third quarter update of the Silicon Valley Competitiveness and Innovation Project (svcip.com) shows that IPO valuations are down, in Silicon Valley, the nation and the world. This is a new development, with uncertain ramifications for the region’s next generation of startup businesses and economic growth.

Nationally, Renaissance Capital, a leading source for research on pre-IPO and IPO investment, reported a 43 percent annual decline in U.S. IPOs in Q3 2015 (down to 34 IPOs), in response to global market conditions and concerns about the U.S. Federal Reserve Bank raising interest rates.  In addition, a significant number of IPOs were delayed or withdrawn.  According to Renaissance Capital’s U.S. IPO Markets Q3 2015 Quarterly Review, average IPO returns were negative (-4 percent) for the first time since 2011, and more than half of new IPOs ended the quarter below their offer price. Global IPOs mirrored this trend; compared to Q3 2014, quarterly proceeds in Q3 2015 were down 63 percent (excluding Alibaba’s $21.8 billion IPO from Q3 2014 figures). In Q3 2015, six Silicon Valley-based companies went public, compared to 11 in the prior quarter.

Growth in IPO valuations throughout 2015 have also eased from 2014. According to Reuters, five of the 12 U.S.-based tech companies that went public this year (or 42 percent), priced their shares at a valuation below or nearly the same as their private market value, compared to 24 percent that went public in 2014. This trend suggests that companies are less optimistic about leveraging IPOs as a means of raising capital and driving significant increases in valuation.

This fear appears to be justified. According to Pitchbook, a private equity and venture capital research firm, in 2014 the median increase in value between private market valuations and companies’ post-IPO valuations was 61 percent (among the companies that saw their valuation grow through an IPO). In 2015 through Q3, companies that went public have only gained a median of 32 percent. The smaller valuation gains are affecting companies’ decisions about going public, with many delaying or withdrawing their public offering plans.

What are the implications for Silicon Valley? The returns generated by the IPOs help to fuel early stage investment in future startups. At the same time, the success of startups that go public has created significant job growth in our region. The question is whether the slump in Q3 2015 is a temporary development due to short term market changes, or is this a longer term trend that may affect the future growth of the Valley?

The Silicon Valley Competitiveness and Innovation Project was created by the Silicon Valley Leadership Group and Silicon Valley Community Foundation to track trends and identify potential early warning signs for the health of Silicon Valley’s innovation ecosystem and regional competitiveness. Continued tracking of IPO activity will help us keep a finger on the pulse of the innovation economy as we move into 2016.


Can We Learn Anything from Silicon Valley?

(Note: This article first appeared in “Innovation: America’s Journal of Technology Commercialization http://www.innovation-america.org/can-we-learn-anything-silicon-valley)

With the American economy still limping along seven years after the Great Recession, seemingly unable to make a complete comeback, it’s got to be hard for the rest of the country not to look at the current roaring boom in Silicon Valley…and dream of getting a little piece of that action. In fact, it’s even crazier here in the Valley than you might imagine.  This isn’t the everyone-is-now-rich bubble of dot.com era fifteen years ago.  It’s more like some people are getting crazy rich and that money is slopping over onto the rest of the community.  Thus, a lot of folks are still driving the same old car and living in the same old house, but they are sharing the freeways with Maseratis, S-Class Mercedes and endless Teslas.

Meanwhile, that same old house has now tripled in value since 2010.  In my neighborhood, filled with nice three bedroom/two bath ranch houses built in the late 1950s (and typically upgraded a couple of times), we were astonished when the original $12,000 price crossed $500,000.  That was in 2005.  Then, despite the Crash, they crossed $1 million in 2012.  Last week, the first house in the neighborhood was sold for $2 million.  We all know it’s crazy, but, as we tell each other when we meet walking our dogs, why not cash out and get a condo just outside the Valley, or even Oregon or Arizona, and enjoy a comfortable early retirement?

My house is the oldest in Silicon Valley (c.1852) on the biggest lot in Sunnyvale.  We’ve owned it for twenty years and my guess is that its market value is approaching 10X what we paid for it.  A few weeks ago a Hong Kong couple knocked on the door to inquire if we’d like to sell.  Standing there I realized that I could throw out any insane number in the high seven figures and they wouldn’t blink.  Indeed, they might just go for it.  And then what?

Why this madness?  And why now?

The answer is, I think, that instead of some new Silicon Valley rising elsewhere in the country, or in the world, those forces are instead just building a new Valley on top of the old one.  Or, more precisely,  Old New Valley, based in San Francisco, is building New New Valley in the South Bay on top of the Old Old original Silicon Valley of HP, Intel, Cisco, etc.  From where I live I can see that transformation everywhere around me, from the cranes over the giant new Apple headquarters in Cupertino, to Google’s progressive takeover of Moffett Naval Air Station in Mountain View, to LinkedIn’s takeover of downtown Sunnyvale.  The new SF 49ers stadium.  The giant new startups like Tesla and Theranos taking over old HP real estate in Palo Alto.

Recent studies bear out this revitalization.  One extensive report, created by the Silicon Valley Leadership Group last year, found that by almost every metric, after a half-century Silicon Valley was not still only holding its own against other regional tech contenders but was accelerating away.  In fact, in most of these metrics, Silicon Valley-San Francisco’s only real competition was Silicon Valley-San Jose.   And if the recent building is any indication, that combination will continue to stay on top, merely reversing their rankings as hardware once again begins to dominate software.

Meanwhile all of this growth and success is occurring in spite of growing regulation, a statewide drought, miserable traffic, a stratospheric cost of living and, of course, utterly insane real estate prices.  Usually, any one of these problems will bring down a community or at least open the door to other competing regional and national business centers.  Why not here?

It’s a question that has been asked at least since I was a cub reporter at the San Jose Mercury News in 1979.  Even then it was assumed that the Valley couldn’t go on forever.  That at least one of those new tech enclaves springing up around the nation— Silicon Mesa, Silicon Forest, Silicon Alley, etc.—would eventually rise up and take away the crown as the world’s Tech Capital.  And indeed, some of those centers, notably in New York City, Los Angeles and Austin, continue to thrive and grow.  But no one, not even in such faraway tech centers as Bangalore, Dublin and Tel Aviv, still believes that they are going to supplant the Valley.

Why is this so?  Why did those other communities, blessed as they are with talent, money, infrastructure and civic commitment, end up also-rans?  What is it about the Silicon Valley model, which seems easy to replicate, that turns out to be so elusive?  What’s in the Valley’s secret sauce that makes it so successful and enduring?

After a half-century living here and forty years working in and reporting on the Valley, I think I have some answers but they probably aren’t the ones those other tech communities want to hear.  Here they are:
History. Silicon Valley was founded at a unique moment in history: the end of World War II, the return of GIs wanting to pursue technological fields, the invention of the transistor and the rise of digital computers, the Cold War and the Space Race.  All buoyed the young community with talent and money.

Leadership. Do the times make the man (or woman) or vice versa?  Either way, from David Packard to Bob Noyce to Steve Jobs, the early Valley was led by some extraordinary, larger-than-life figures who shaped the place, drove its greatest companies, spoke for it inside the Beltway and on a global stage, and defended the Valley from both political and competitive threats.

Money. Because it was the first entrepreneurial community, Silicon Valley also pioneered modern venture capital.  It started here, and because investing in startups is a communal activity, it has remained here.  Silicon Valley venture capital not only leads the world, it utterly dominates it.  And there’s a big difference between driving to Sand Hill Road to pitch your company, and flying in from Omaha.  And VCs like to be close to their portfolio companies to keep an eye on them.
Climate. It’s still true, and still underrated:  the San Francisco Bay Area has some of the best weather on the planet.  Everyone in the rest of the country talks about how much they love the “four seasons” and yet, funny how many visitors the Valley gets every January.

Culture. We’ve learned that a tech culture is not something that can be bolted on to an existing community—look at the troubles even San Francisco, a deep 150-year-old culture, is having between the hot tech company employees and long-time residents.  That didn’t happen in the original Silicon Valley because there was basically no here, here:  just endless orchards and cheap land with a handful of world-class universities nearby.  Where can that be done today?  The Valley grew its own culture, which is why it is so deeply embedded.  So deep, in fact, that most of the rest of the world doesn’t really understand it.  They work at entrepreneurship; we live it.  We breathe it, it is the talk of every conversation in every coffee joint and movie theater.  We don’t feel complete if we haven’t been part of at least one startup.  Our heroes, from Jobs to Zuckerberg, would be considered dysfunctional monsters anywhere else.  And this culture has been growing, marinating and evolving now for fifty years.  It can’t be planted and cultivated overnight.

So where does that leave the rest of the tech world that’s not Silicon Valley?  A good start would be to stop trying to be the next Silicon Anything.  The Valley has won; move on.  Most of all, find an exciting new paradigm.  Stop trying to convince Valley companies to move to your community, or worse, set up sales offices and manufacturing divisions.  The lesson of Portland, Oregon, over the last thirty years is that if your tech community is mostly small parts of big Valley companies, no matter how famous, then you are economically expendable. You’ll always be first for layoffs, first into downturns and last out.

In other words, there is no short-term solution.  You can’t become a great tech community by buying, enticing or stealing existing companies.  You can only do so by growing your own entrepreneurs in the hopes that over the upcoming decades one or two or ten of them will create great, world-beating corporations.

And how do you grow these entrepreneurs?  It takes a great university or two nearby to identify and train them.  It takes homegrown venture and angel money. Who are your local tycoons willing to seed these companies or assemble an investment fund?    It takes cheap facilities and a top-notch technology infrastructure (broadband, etc.)  And most of all, it takes a cultural commitment —an indigenous culture, not a borrowed one—that is committed to risk, and accepting of “good” failures.  That’s a whole lot tougher than it sounds, but you can make it easier by bundling this attitude with the uniquely appealing attributes of your region: the boho cowboy culture of Austin, the Big Apple life of Manhattan’s Flatiron District, the high culture world of Oxford.

Finally, you need patience.  The tech world may move at the pace of Moore’s Law, but human society doesn’t.  It will take at least one (human) generation to the see the results of your efforts, and to turn the germ of a unique tech community into a thriving one.

That’s a long time, at least five (tech) generations.  So you’d better start now.

Michael S. Malone, a veteran Silicon Valley observer, writes a column for Innovation.