Silicon Valley Past Present Future Russell Hancock Joint

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Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Institute for Regional

Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Institute for Regional Studies Public Policy Program, Stanford University 3 August 2015

My Game Plan 1. A primer on Silicon Valley • • • What is

My Game Plan 1. A primer on Silicon Valley • • • What is it? How does it work? Why have we been so successful? 2. Silicon Valley today • • • Current patterns of growth Current strengths Current challenges 3. Silicon Valley tomorrow • • Important trends future projections

Part One What is Silicon Valley?

Part One What is Silicon Valley?

Common misperceptions NOT a place you can point to on a map NOT a

Common misperceptions NOT a place you can point to on a map NOT a place with a defined identity NOT a planned phenomenon No Silicon!

So, what is Silicon Valley?

So, what is Silicon Valley?

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

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

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

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

Milestone Silicon Valley Innovations 1940 s 1950 s 1960 s Vacuum Tube 1970 s

Milestone Silicon Valley Innovations 1940 s 1950 s 1960 s Vacuum Tube 1970 s Integrated Circuit, Graphical User Interface Personal Computers, Workstations, Relational Databases, Biotechnology 1980 s 1990 s 2000 s Transistors Semiconductors, Defense Technology Network Computing, Packet switching, Internet Search Social media, Web 2. 0, sharing economy, clean tech

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

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

… but also from entrepreneurship 1950 s 1960 s Defense Electronics Hewlett-Packard, Varian Semiconductors

… but also from entrepreneurship 1950 s 1960 s Defense Electronics Hewlett-Packard, Varian Semiconductors National Semiconductor, Fairchild, Intel, AMD 1970 s Biotechnology 1980 s Personal Computers, Workstations Genentech, Genencor Apple, Silicon Graphics, Sun Network Computing, Packet Switching 1990 s Cisco Systems, Sun Internet Netscape, Yahoo, e. Bay, Google Social Media 2000 s Facebook, You. Tube Sharing Economy Uber, Lyft, Air Bnb

The Valley also generates new business models Internet-based commerce (Netscape) Free search, supported by

The Valley also generates new business models Internet-based commerce (Netscape) Free search, supported by advertising (Google, Yahoo) Music downloads, streaming (Apple itunes) Social networking (Facebook, My. Space) A la carte television (Netflix) On-demand delivery (Door Dash, Uber, Google Express)

A permanent feature of Silicon Valley: CHURN

A permanent feature of Silicon Valley: CHURN

Largest Silicon Valley Employers 1982 2002 1. Hewlett-Packard 2. National Semiconductor 2. Intel 3.

Largest Silicon Valley Employers 1982 2002 1. Hewlett-Packard 2. National Semiconductor 2. 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

So what’s the secret?

So what’s the secret?

A Habitat for Innovation Results-oriented meritocracy. Climate that rewards risks, tolerates failure Strong markets

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

Part Two Silicon Valley today

Part Two Silicon Valley today

Silicon Valley was the last region to succumb to the Great Recession The region

Silicon Valley was the last region to succumb to the Great Recession The region was adding jobs through Q 4 2008

Today Silicon Valley is the first to emerge from the Recession

Today Silicon Valley is the first to emerge from the Recession

JOB GROWTH Annual change in Total Number of Jobs, 2008 -2014

JOB GROWTH Annual change in Total Number of Jobs, 2008 -2014

JOB GROWTH Annual change in Total Number of Jobs, 2008 -2014

JOB GROWTH Annual change in Total Number of Jobs, 2008 -2014

JOB GROWTH Annual change in Total Number of Jobs, 2008 -2014

JOB GROWTH Annual change in Total Number of Jobs, 2008 -2014

JOB GROWTH Annual change in Total Number of Jobs, 2008 -2014

JOB GROWTH Annual change in Total Number of Jobs, 2008 -2014

TOTAL NUMBER OF JOBS 9 -County Bay Area +119, 576 +3. 5%

TOTAL NUMBER OF JOBS 9 -County Bay Area +119, 576 +3. 5%

MAJOR AREAS OF ECONOMIC ACTIVITY 2013 -2014 +40, 096 +18, 445 +12, 294 -491

MAJOR AREAS OF ECONOMIC ACTIVITY 2013 -2014 +40, 096 +18, 445 +12, 294 -491 +57, 951

AVERAGE ANNUAL EARNINGS

AVERAGE ANNUAL EARNINGS

MEDIAN HOUSEHOLD INCOME

MEDIAN HOUSEHOLD INCOME

Innovation is thriving.

Innovation is thriving.

PATENT REGISTRATIONS

PATENT REGISTRATIONS

VENTURE CAPITAL

VENTURE CAPITAL

VENTURE CAPITAL BY INDUSTRY

VENTURE CAPITAL BY INDUSTRY

INITIAL PUBLIC OFFERINGS

INITIAL PUBLIC OFFERINGS

 • • • Rapid job growth Young, well-educated workforce Accelerating patent registrations Thriving

• • • Rapid job growth Young, well-educated workforce Accelerating patent registrations Thriving startup community Mega venture capital deals

San Francisco and Silicon Valley together: • $20. 2 billion in venture capital •

San Francisco and Silicon Valley together: • $20. 2 billion in venture capital • $2. 8 billion in Angel investments • 16, 055 startups • 76, 000 new jobs

Is this a bubble? We don’t think so.

Is this a bubble? We don’t think so.

Why not a bubble? Five years of incremental growth Profitable companies, serving proven customer

Why not a bubble? Five years of incremental growth Profitable companies, serving proven customer bases Venture community enforcing a high bar Region’s portfolio extremely diverse Economy still moving into promising new areas Valuations are level-headed

VALUATIONS ARE LEVEL-HEADED Price-earnings ratio of top-ten NASDAQ companies, by market cap Source: Barrons

VALUATIONS ARE LEVEL-HEADED Price-earnings ratio of top-ten NASDAQ companies, by market cap Source: Barrons

Part Three Silicon Valley tomorrow

Part Three Silicon Valley tomorrow

It would appear that Silicon Valley is the world’s most prodigious regional economy. So

It would appear that Silicon Valley is the world’s most prodigious regional economy. So what’s not to like?

Despite our strengths, Silicon Valley faces many challenges and has some structural flaws

Despite our strengths, Silicon Valley faces many challenges and has some structural flaws

One challenge: Tech is no longer a tide that lifts all boats

One challenge: Tech is no longer a tide that lifts all boats

DISTRIBUTION OF HOUSEHOLDS BY INCOME RANGES

DISTRIBUTION OF HOUSEHOLDS BY INCOME RANGES

HOME AFFORDABILITY

HOME AFFORDABILITY

POVERTY & SELF-SUFFICIENCY

POVERTY & SELF-SUFFICIENCY

Growth is putting a strain on the region.

Growth is putting a strain on the region.

COMMUTE PATTERNS

COMMUTE PATTERNS

Train travel in other parts of the world

Train travel in other parts of the world

Train Travel in Silicon Valley

Train Travel in Silicon Valley

Built in 1863

Built in 1863

Another challenge: Fiscal instability, failure of our government institutions

Another challenge: Fiscal instability, failure of our government institutions

Our tax system doesn’t track with the 21 st century economy; no political will

Our tax system doesn’t track with the 21 st century economy; no political will to fix it City Revenues in Silicon Valley

Other challenges: • • Loss of federal funding Reversal of immigration trends Sagging infrastructure

Other challenges: • • Loss of federal funding Reversal of immigration trends Sagging infrastructure Poor K-12 education

Yet we expect Silicon Valley will continue its dynamism and move into promising new

Yet we expect Silicon Valley will continue its dynamism and move into promising new areas

One vital trend: convergence

One vital trend: convergence

Tech Convergence: Major Research Centers

Tech Convergence: Major Research Centers

Convergence firms in the Valley

Convergence firms in the Valley

Another major trend: We are building new clusters in renewable energy and clean technology

Another major trend: We are building new clusters in renewable energy and clean technology

CLEANTECH VENTURE CAPITAL

CLEANTECH VENTURE CAPITAL

CLEANTECH VENTURE CAPITAL

CLEANTECH VENTURE CAPITAL

Summary: Silicon Valley’s leadership will continue unabated Silicon Valley is now joined in its

Summary: Silicon Valley’s leadership will continue unabated Silicon Valley is now joined in its leadership by other global regions The region will have to face down internal challenges to stay competitive The private sector will lead the way

Thank you for the honor of your invitation. Russell Hancock President & Chief Executive

Thank you for the honor of your invitation. Russell Hancock President & Chief Executive Officer Joint Venture Silicon Valley Institute for Regional Studies 100 West San Fernando Street, Suite 310 San Jose, California 95113 (408) 298 -9330 Lecturer in Public Policy Stanford University rhancock@stanford. edu www. jointventure. org