The Elusive Search for the Next Silicon Valley

Every business leader and public official in the world is hovering over a figurative cauldron of statistics and projections and random data attempting to coax meaning from the smoky stew that will hopefully reveal the magix elixir that will help them conjure the next Silicon Valley. In their backyard.

Jobs. Wealth. Fame. Wealth. Power. And did we mention wealth?

Yes, all are sure to follow. Or so it is believed.

But, as the following article explains, the formula is neither complicated nor particularly mysterious.

The presence of large, well-funded and highly respected research universities. Location in or proximity to a big urban area. A population with the requisite skills. Access to a global network via effective travel and logistical options. Oh, and a place sufficiently attractive climatically and geographically that lots of people want to live there.

Sounds easy enough. Plenty of places would appear to qualify. Though what is difficult about it is symptomatic about what makes the tech industry so challenging for so many to emulate. Because it requires combining - and recombining myriad elements whose eventual harmony results as much from serendipity as planning. The future is unlikely to produce 'the next Silicon Valley' per se. But if attention is paid to the elements necessary for success, it can create the conditions for similarly inspirational outcomes to emerge. JL

Josh Barro reports in the New York Times:

The intermix between the content hub and the tech hub turned out to create a lot of job gain. They provide not just the resources necessary to start a high-tech business, but also the impetus to keep it there once it succeeds.
“Nerds love Orlando,” according to public relations materials I received this week from the city of Orlando, Fla. But as Orlando seeks to rebrand itself as “a high tech hub for innovation,” it faces a lot of competition.

In 2010, Chicago proclaimed its intention to become “the top destination for technology business.” In December, Citibank joined with The Huffington Post to declare that “you might be living in the next Silicon Valley” if you live in Chicago — or Miami, or Cincinnati or Chattanooga. Slate tracked “next Silicon Valleys” in 2013 and profiled two dozen cities that had been described as such, including Las Vegas, which received the distinction from Slate itself.

For its part, Orlando brags it was named a “promising tech hub to watch” in 2014 by Techie.com. If you hadn’t heard of Techie.com, don’t worry, neither had I; the tech site, based in South Bend, Ind., folded a few months ago, but not before it awarded the “promising tech hub” distinction to Orlando along with Minneapolis, Detroit, Champaign-Urbana, Ill., and Sioux Falls, S.D.

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The Utah Data Center, completed in 2014 at a cost of $1.5 billion, is a data storage facility for United States government intelligence agencies located between Salt Lake City and Provo. Credit Ravell Call/Deseret News

The hard data does not bear out the proposition that nerds love Orlando. They do not love Las Vegas, and they are lukewarm about Chicago. Research from the Brookings Institution, based on figures from the Bureau of Labor Statistics, tells a rather more conventional story: Nerds love Silicon Valley. Among the 100 largest metropolitan areas in the United States, San Jose, Calif., ranks first in “advanced industry” employment as a share of total employment. Orlando ranks 73rd — and places 78th in advanced industry employment growth from 2010 to 2013.

The gap between San Jose and the No. 2 metro area is large. Seattle, no tech slouch with Microsoft, Amazon, Zillow and others, has 16 percent of its work force in advanced industry compared with 30 percent for San Jose.

The Progressive Policy Institute puts out its own “tech/info jobs index,” which uses a narrower definition of the high-tech sector, but it produces broadly similar results: The three large counties showing the strongest gain in tech jobs from 2009 to 2013 were San Francisco, Santa Clara and San Mateo — the three counties at the core of Northern California’s tech industry cluster. Orange County, Fla., which contains Orlando, scored 89th out of 214. (The index compares tech jobs added to the overall job base, so it doesn’t discriminate in favor of places with high total populations.)

But let’s look at the place that scored fourth on P.P.I.'s list: Utah County, Utah, whose largest city is Provo. In February, The New Yorker proclaimed that Utah is “the next Silicon Valley.” That’s hyperbole, but Provo (population: 116,288) does punch far above its weight; of 73 private venture-funded companies in the world with valuations over $2 billion, according to The Wall Street Journal, Provo is home to two. A large, new National Security Agency facility in the area is adding to the concentration of tech jobs and workers.

Provo provides an example of one of two models for competing with Silicon Valley. “There’s a group of people who really want to live there and there’s a really good research university,” says the urban theorist Richard Florida. He’s referring to Brigham Young University and the opportunity to live among a large Mormon community. But approximately the same formula describes the success of Boulder, Colo., which has the University of Colorado, proximity to great mountain sports and a disproportionate concentration of tech jobs and venture capital funding.

The other model for competing with Silicon Valley is about cross-industry collaboration. Michael Mandel, the chief economic strategist at P.P.I., notes that strong growth in New York’s tech industry has helped soften the blow from the financial crisis. Its numbers show New York gained almost 28,000 jobs, about what Santa Clara County, Calif., did.

“What you had was the intermix between the content hub and the tech hub that turned out to create a lot of job gain,” Mr. Mandel said. That is, New York is not a broad-spectrum competitor to Silicon Valley, but is seeing extensive growth in areas of the tech industry that benefit from exposure to other industries with a large concentration in New York, especially media, but also fashion and finance.

What New York and Provo have in common is they provide not just the resources necessary to start a high-tech business, but also the impetus to keep it there once it succeeds. In the Provo (or Boulder) example, the businesses stay local because the owners and the workers really want to live there. (This is something else Silicon Valley has always had going for it.) In the New York example, they stay local because the location provides an irreplaceable business advantage.

Mr. Florida pointed to Pittsburgh as a cautionary example. He used to teach at Carnegie Mellon, a top research university that produces a lot of graduates capable of starting and staffing great technology companies. But start-ups that spin out of Carnegie Mellon have neither a strong lifestyle reason nor a strong economic reason to stay in Pittsburgh once they succeed. “If there was a successful start-up, eventually it got sucked into the Silicon Valley vortex,” he said.

So, what lessons does this provide for someplace like Orlando, if it wants to shift its economy toward high tech?

“I think what Orlando has is a combination of the space stuff and the Disney stuff,” Mr. Florida said. “It’s not trivial, those things taken together, but it’s hard to see how you put them together.”

Local officials point to one way they might. Orlando is a center for modeling and simulation technology, because flight simulators and theme park rides can rely on a lot of the same technology. Tourism isn’t generally thought of as a tech-intensive field, but Disney recently developed its MyMagic Plus system (waterproof wristbands with RFID chips that give visitors access to rides and unlock their hotel room doors) in-house in Orlando.

Still, tourism is heavily dispersed geographically, and while there are a lot of tourism dollars in Orlando, even Disney is not headquartered there. Companies that produce technology for the hospitality industry do not need to cluster in Orlando.

“I would say, over all, this is a relatively thin backdrop,” said Mark Muro, the researcher behind the Brookings report, after examining his own figures about industry concentration in Orlando, which show few high-tech specialties. “But I would note it is possible to diversify, starting from nothing.”

It is also possible to set more modest goals. In 2013, my colleague Claire Cain Miller received a more-modest-than-usual pitch about a city’s technological surge: “While Chicago may never give Silicon Valley a run for its money, digital start-ups no longer have to leave Chicago to survive.”