Silicon Valley Revisited: Series Overview

Series Overview

Silicon Valley remains one of the world’s key drivers of innovation and entrepreneurship. Even as recent U.S. popular discourse has shifted from celebrating the region’s economic ecosystem to urging caution toward and sometimes outright condemning it, international interest in Silicon Valley is still strong.

International talent continues to flow into the region, building companies that influence technological trajectories and transform industries worldwide. As a result, political leaders, government officials, businesspeople, and researchers from around the globe keep visiting. The motivations of these international audiences have remained much the same: they aim to better understand Silicon Valley’s startup and tech ecosystem with an eye toward building their own startup ecosystems that will drive economic dynamism and innovation, as well as to understand the latest technological trajectories that may disrupt their economies and firms.

In my two decades based in Silicon Valley—studying and participating in the ecosystem from positions at Stanford University, the University of California Berkeley, and now the new California office of the Carnegie Endowment for International Peace—I have experienced firsthand the interest in the ecosystem from places on the receiving end of business disruptions and industrial transformations. These transformations have included the advent of the internet as a global commercial platform; the rise of cloud computing, smartphones, and app platforms; and the current proliferation of electric vehicles and artificial intelligence (AI), to name a few.

Silicon Valley Revisited: Beyond Celebration and Condemnation, a series of articles written by me, introduces core aspects of the Silicon Valley economic model for policymakers, executives, entrepreneurs, and leaders worldwide. Much has been written about the region’s ecosystem in the past couple of decades,¹ but there are compelling reasons to examine it anew in the post-pandemic era. While many aspects of the economic ecosystem are no longer as opaque to visitors as they seemed a decade ago, demand for analyses and lessons remains high.

The economy and technology are changing, fast.

• Key aspects of the Silicon Valley ecosystem have shifted in significant ways since the mid-2010s. Shifts have included the rise of massive later-stage venture capital funds and extremely large IPOs and a focus on “unicorns,” followed by an abrupt contraction of venture capital funding in 2023.
• The frontier of technology drivers and transformative firms has shifted as the world enters a new era of generative AI, AI deployed extensively in industrial and consumer settings, and energy transformation. In recent years, OpenAI shocked the world with its generative AI, ChatGPT; Cruise introduced a fleet of driverless taxis in San Francisco; Tesla’s electric vehicles redirected the global auto industry’s trajectory; the Internet of Things reached an industrial deployment phase; and climate-related technologies started to drive a new wave of international collaboration between Silicon Valley startups and major multinational firms.

The policy landscape is also changing.

• Government regulation looms large over the tech industry, with anti-monopoly and competitive concerns about the dominance of Silicon Valley’s big tech firms from within and outside of the United States. Recent calls by numerous firms and individuals involved in frontier AI development for more government regulation of themselves and their creations represent a stark shift from the previous Silicon Valley ethos, which tended to eschew regulation as a barrier to innovation and entrepreneurship.

• At the same time, the U.S. government is entering a new era of explicit industrial policy that is reshaping some of Silicon Valley’s core industries, such as semiconductors and energy. Russia’s war in Ukraine and escalating U.S.-China tensions are forcing adjustments, while new possibilities have emerged in areas related to the energy transition and climate change.

• The role of mainland China in the ecosystem has also transformed over the past five years. Major flows of capital to and from China, enthusiasm about entry into the Chinese market, and movement of people between China and Silicon Valley have all quieted down considerably. Capital inflows continue, but they are not celebrated and focused upon, and many startups and investors consider capital from mainland China to be politically risky. The movement of people all but stopped during the pandemic, and continuing supply chain and business ties are now far more muted and consciously avoid the spotlight.

• Transformative policies at the subnational level—such as California’s pioneering mandate to phase out and ban the sale of gasoline vehicles by 2035, emulated by other states in various forms—are influencing technological trajectories and creating new opportunities for Silicon Valley companies, with direct implications for global competition.

These changes are being driven in part by geopolitical changes, shifting narratives, and variable public opinion.

• American media narratives about Silicon Valley have shifted, inhibiting balanced analysis. Exuberantly celebratory narratives have morphed into over-politicized and ideological critiques. While uncovering problematic aspects of the ecosystem is important, constructive, and often overdue, Silicon Valley still holds valuable lessons for global and domestic regions seeking to benefit from the dynamics of startups and tech.
• The emergence of other dynamic, tech-focused startup ecosystems—including in Los Angeles and San Diego in California; in various places across the United States, such as Austin, Boston, and Miami; and around the world, such as in Bengaluru, Berlin, Paris, Seoul, Singapore, Tel Aviv, and Tokyo—has provided the opportunity for new connections between ecosystems and for fresh comparative analyses.
• The unbridled techno-optimism that pervaded Silicon Valley has been tempered by developments of the past decade. Earnest arguments in the early 2000s through mid-2010s posited that Silicon Valley’s entrepreneurial companies and their social goals could solve many of the world’s deepest social and political challenges. These narratives yielded to a general recognition that social media, and the concentration of economic power and technological expertise in a handful of actors, could pose threats to democracies by conferring more power on authoritarian regimes and subjecting people to more polarizing debates and mental health challenges. Spectacular instances of fraud and exposés of fast-growth startups with toxic work cultures and severe gender imbalances also rightly tempered some of the optimism.
• Yet Silicon Valley’s demise is much exaggerated by headlines suggesting the ecosystem’s imminent collapse based on various recent events. The dramatic insolvency of a regional bank with Silicon Valley in its name, downtown San Francisco’s loss of population during the pandemic, a slowdown of venture capital funding, and other news are often used to bolster a narrative of the ecosystem’s collapse. But this narrative is not supported by data. A proper overview of various data shows some real regional challenges and a relative decrease in the Silicon Valley ecosystem’s proportional overall weight as other startup ecosystems develop, but its continued growth is a far cry from decline or collapse. For industries and localities around the world, dismissal of the Silicon Valley ecosystem increases the risk of being disrupted by the next wave of innovation.

The distilled model of the Silicon Valley ecosystem provided in this series can be usefulto policymakersand other actors around the world inbuilding their own startup ecosystems. Such efforts must go beyond simple attempts to copy aspects of Silicon Valley given varying local conditions. On the other hand, the Silicon Valley economic ecosystem is often misconstrued to fit local narratives and prioritize political convenience over realistic considerations. The recommendations from this series can provide a relevant strategic guide.

This series consists of this overview and several articles covering one or more of the following components:

• the context of the Silicon Valley model and its technological trajectories;
• venture capital;
• global human talent and university-industry-government ties;
• the symbiosis between startups and large firms; and
• the actors that support the ecosystem.

The articles are meant not only to aid in policy formulation, but also to provide a lasting foundational reference about the Silicon Valley ecosystem. From an analytical vantage within the ecosystem, I will draw on frameworks for comparative analysis across countries, recent data, historical references, and new information. The articles will aim to link global and domestic regions outside Silicon Valley. 

Despite its limitations, and chastened by recent experience, the Silicon Valley ecosystem remains globally significant. Localities attempting to create or strengthen their startup ecosystems can use the understanding of Silicon Valley distilled in this series as a foundation for building their own strategies and going beyond efforts toward simple or partial replication. Localities’ technology strategies need to take into account how the Silicon Valley ecosystem functioned to produce tech giants. Many of the shortcomings or social challenges that Silicon Valley experienced over the years, even as the economy boomed, may even be opportunities for other localities to understand potential pitfalls. Preemptive solutions, such as social safety nets and strategies to avoid toxic work cultures or severe gender imbalances, can provide useful input for strategies elsewhere.

Silicon Valley is likely to remain a critical part of the global technology and U.S. economic landscape. Knowledge about how the ecosystem works will therefore be important for effective economic and technology policymaking by countries around the world.

Notes

¹ Excellent overviews include Martin Kenney, Understanding Silicon Valley: The Anatomy of an Entrepreneurial Region (Stanford, CA: Stanford University Press, 2000); Martin Kenney, “Explaining the Growth and Globalization of Silicon Valley: The Past and Today,” Berkeley Roundtable on the International Economy, January 12, 2017, https://brie.berkeley.edu/sites/default/files/brie-working-paper-2017-1.pdf; Christophe Lécuyer, Making Silicon Valley: Innovation and the Growth of High Tech, 1930-1970 (Cambridge, MA: MIT Press, 2006); AnnaLee Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (Cambridge, MA: Harvard University Press, 1994); Timothy Lenoir, “Inventing the Entrepreneurial University: Stanford and the Co-evolution of Silicon Valley,” in Building Technology Transfer Within Research Universities: An Entrepreneurial Approach, ed. Thomas J. Allen and Rory P. O’Shea (Cambridge, UK: Cambridge University Press, 2014), 88–128; Walter Isaacson, The Innovators (Simon & Schuster Audio, 2014); and Margaret O’Mara, The Code: Silicon Valley and the Remaking of America (Penguin Press, 2020).