Why Silicon Valley is the Capital of the World

Wednesday Mar 28th 2012 by Mike Elgan
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New York. Beijing. Berlin. London. Palo Alto. Wait, what?

Ever since the invention of beer, humans societies have coalesced into civilizations, always defined by outlying towns, villages and cities with all roads leading to one all-powerful uber city that drives innovation, drains the outlying areas of talent and dictates cultural innovation.

We live in a transitional age, with the waning power of states and the rising dominance of transnational corporations. In this new “globalized world” (as idiotic as that phrase is), culture is manufactured by software designers, product managers, marketers and tech visionaries.

It has become clear in recent years that the new capital of this world is Silicon Valley -- that urban sprawl circling the San Francisco Bay in California.

Like some massive black hole from which nothing can escape, Silicon Valley has been increasingly sucking the life out of former power centers of information from New York City, entertainment from Hollywood, industrial design from Europe, and politics from Washington, D.C.

New York City, an industrial city built on the information industries of publishing, Wall Street and trade is being challenged on all fronts by information revolutions coming from Silicon Valley. The eBook revolution, driven by Amazon (based in Seattle, but definitely part of the extended Silicon Valley cultural universe), Google, Apple and dozens of killer startups is in the process of totally replacing the book and magazine industries.

Robber barons and industrial giants like Andrew Carnegie, John D. Rockefeller and Cornelius Vanderbilt could not have even imagined the wealth generated by Steve Jobs and Apple. The company closed yesterday with a stock price of $614.48 per share, giving it a market capitalization of $573 billion.

Hollywood has dominated global popular culture entertainment for a century, leading the way in movies, television and music. In recent years, tech giants in Northern California have been wresting control of these media from companies in Southern California.

While Hollywood studios still churn out the lion’s share of actual movies and TV shows in terms of box office revenues and global distribution, Silicon Valley companies like Apple, Google, Netflix and others are quickly growing the power to dictate pricing, distribution and revenue models. And as entertainment becomes more digital and technology-driven, even the creative side of entertainment is moving to Silicon Valley. Pixar, Industrial Light & Magic and many other producers of popular culture are based in Silicon Valley.

Global design of all kinds has been increasingly influenced by industrial design -- design applied to products. And for a century, the industrial design leaders have been found in London, Germany, Tokyo and in several cities in the United States.

Increasingly, Apple’s industrial design has come to utterly dominate design sensibilities worldwide. Obviously, Apple designs influence the direction of consumer electronics products like phones, tablets and computers. But the company’s designers also influence web sites, furniture, architecture, fashion and more.

Silicon Valley companies don’t exert much influence over politics. But their products are major drivers of political change. The so-called “Arab Spring” may not have been possible without Silicon Valley-based social sites Facebook and Twitter.

The recent SOPA and PIPA bills introduced to strong and broad bipartisan support in the US congress were killed against the wishes of the American government by the power of public opposition organized and enabled by Silicon Valley giants like Google, Reddit, Mozilla, WIRED, Wikipedia and others.

And although Silicon Valley companies don’t exert much direct political pressure on Washington, it’s only because they choose not to do so. The total amount of money spent by all companies, organizations and foreign governments to influence the US government adds up to about $3.5 billion for Washington, and about $30 billion nationally, including all federal, state, county and city governments.

Meanwhile, the top 20 tech companies in the United States are collectively sitting on more than $300 billion in cash -- enough to buy influence over every level of government in the country ten times over.

Like the major historic capitals, Silicon Valley drains talent from all over the world. At all levels in these companies, you’ll find brilliant and hard-working Indians, Chinese, Japanese, Brazilians, Israelis, English, Germans and a lot of Americans, as well as immigrants from all corners of the globe.

The kind of people who end up here tend to be fish out of water in their own countries, but find common cause among their international coworkers. They come here, often intending to work temporarily. But they meet people, get married, raise children and put down roots.

Whenever there’s an economic downturn, some head home to start new ventures, and everyone talks about the inevitable decline of the valley. But it never happens. It can’t happen. There is just too high a concentration of talent, energy and money here.

In the boom times -- forget it. This place is completely out of control. The energy level reaches and maintains a fever pitch of creation and deal making.

The innovation that happens here isn’t directed or controlled centrally, not by governments or private companies. It just happens. It feeds on itself, and constantly grows organically. It’s not about education or politics, but culture. The fervent, broadly applied passion to burn down the old and invent the new conquers all.

Ten years ago, the growing handset market was dominated by two companies in Canada and Finland. Now RIM and Nokia are becoming mere collateral damage in a bloody war between Apple and Google -- two companies within walking distance of each other in the center of Silicon Valley.

The mobile wars are just a microcosm of things to come.

Silicon Valley companies are transforming politics, culture, entertainment, commerce, education, environmental technology, medicine, science and so much more.

Everybody likes to talk about the rise of China. But the real power is in Silicon Valley, with companies like Apple, Google and Facebook. And if you disagree with that, name your top three favorite Chinese brands. No? OK, name the top three Chinese companies of any kind that have transformed your life. Nothing?

There’s no question that China’s rise has brought millions out of poverty, and that innovation and growth in China is incredibly impressive. But transformation is limited largely to China itself. The main drivers of global change are in California.

I don’t think there’s any question at all that a new global culture is forming, and its capital is Silicon Valley.

The urban sprawl between San Francisco and San Jose is becoming the new Rome, shaping our world and serving as the central gathering place for some of the world’s greatest minds. And what a world it is.

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