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SILICON VALLEY A Primer Russell Hancock President & Chief Executive Officer Joint Venture: Silicon Valley Network 8

SILICON VALLEY A Primer Russell Hancock President & Chief Executive Officer Joint Venture: Silicon Valley Network 8 November 2006. What is Silicon Valley?. 1,500 square miles 35 Cities, 4 counties 2.4 million people, 40 percent foreign born 1.2 million workers

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SILICON VALLEY A Primer Russell Hancock President & Chief Executive Officer Joint Venture: Silicon Valley Network 8

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  1. SILICON VALLEY A Primer Russell Hancock President & Chief Executive Officer Joint Venture: Silicon Valley Network 8 November 2006

  2. What is Silicon Valley? 1,500 square miles 35 Cities, 4 counties 2.4 million people, 40 percent foreign born 1.2 million workers 81 percent high school diploma; 40 percent college degree 25 percent of workforce in high-skill occupations Income average 60 percent higher than US 5 percent US GNP, 10 percent of US patents Productivity rate 50% higher than US average

  3. MOST IMPORTANT CHARACTERISTIC: Region Continually Re-Invents Itself

  4. MILESTONE SILICON VALLEY INNOVATIONS • Vacuum tube (Varian) • Transistor and Integrated Circuit (Fairchild) • Microprocessor (Intel) • Microcomputer (Apple) • Graphical User Interface (Xerox PARC) • Relational Databases (IBM Almaden) • Internet Search (Google) However, the Valley’s edge does not stem from innovation alone ...

  5. … but also from entrepreneurship Silicon Valley has a remarkable capacity to create and grow new companies New Companies New Technologies (Entrepreneurship) (Innovation) Endogenous Growth New Wealth Creation + 

  6. Valley spawns the leading companies in every technology generation

  7. 1982 Hewlett-Packard National Semiconductor Intel Memorex Varian Environtech* Ampex Raychem* Amdahl* Tymshare* *no longer existed in 2002 2002 Hewlett-Packard Intel Cisco* Sun* Solectron Oracle Agilent* Applied Materials Apple Seagate Technology Also: Maxtor*, Palm*, Google*,Cadence*, Adobe*, Yahoo* *didn’t exist in 1982 LARGEST SILICON VALLEY FIRMS

  8. 1982 Ford General Motors Chrysler 2002 Ford General Motors Daimler-Chrysler LARGEST DETROIT FIRMS

  9. Technology Regions Will Always be Driven by Waves of Innovation • New technologies drive dynamic waves • Entrepreneurs take advantage of new opportunities • Swarms of new firms cluster around new technologies creating short term bubbles • New products eventually become commodities and investment leads to breaking of bubbles. • New technologies emerge from the convergence of old technologies and the process of “creative destruction” begins again

  10. “SILICON VALLEY LOSING IT’S EDGE.” Cover Story, Business Week. “DREAMS OF STRIKING IT RICH FADING IN SILICON VALLEY.” Front page, Los Angeles Times “THIS IS THE END OF SILICON VALLEY AS WE KNOW IT.” Larry Ellison, CEO of Oracle.

  11. “SILICON VALLEY LOSING IT’S EDGE.” Cover Story, Business Week, 1985. “DREAMS OF STRIKING IT RICH FADING IN SILICON VALLEY.” Los Angeles Times, 1991. “THIS IS THE END OF SILICON VALLEY AS WE KNOW IT.” Larry Ellison, 2003.

  12. So what’s the secret? A HABITATfor Innovation • Results oriented meritocracy • Climate that rewards risk and tolerates failure • Strong markets (capital, labor) • Mobile, fluid workforce • Favorable government policies • Open business environment • Universities and national research institutions that collaborate with industry • Specialized infrastructure: venture funding, lawyers, accountancies, executive search • Quality of life • Cluster effect

  13. So what’s happening right now in Silicon Valley?

  14. RIGHT NOW? It’s not the go-go 90s anymore • Thank goodness! • Region added 350,000 jobs. Sustainable? • Since 2001, we have lost 220,000 jobs. • Net gain of 130,000 Now, with retrospect, we understand the meaning • Internet search was another wave (Google, Yahoo) • Internet is a viable tool for commerce (eBay, Amazon) • Consolidation, boom-bust cycle is taking its predicted course

  15. Rip Van Winkle Theory If Rip Van Winkle fell asleep in 1998 … … and woke up again in 2006 …

  16. … He would actually be impressed!

  17. Even through the downturn, most key indicators continued to rise

  18. Value-Added per employee grows at twice the national rate

  19. Region’s share of Venture Funding Continues to Grow

  20. Average Pay Still Rising

  21. Income Distribution Narrowing

  22. High School Performance

  23. Housing Density Increases

  24. But disparities persist by race

  25. Housing still out of reach for too many

  26. But Rip Van Winkle would also be confused by something: Valley productivity is not translating into burgeoning job growth.

  27. In the future prodigious job growth in Silicon Valley is unlikely. We can most likely expect steady, incremental growth. The major opportunities will be in a few key clusters, and the industries that support those clusters. Those jobs will be hard to get, and require significant training.

  28. Why? What’s Happening? • Intense competition. Rise of competitor regions • Companies doing more with less. They have to. • Bay area workers doing it with productivity gains.

  29. Why? What’s Happening? • Offshoring and outsourcing. • Old story, except now higher-end functions going off shore • Design • R&D

  30. Why? What’s Happening? • Technologies we invented eliminated whole classes of jobs • Administrative class • Archivists, others

  31. Why? What’s Happening? 4. Many of the emerging clusters (web 2.0) aren’t big job generators to begin with.

  32. Why? What’s Happening? 5. Nature of capitalism itself is changing • Vertical integration a thing of the past • Companies down-sizing • Focus on key competencies • Groaning under weight of overhead • Health care, benefits • Reducing FTEs, using contractors

  33. To survive and thrive, Silicon Valley has to be innovative, productive, and RESILIENT.

  34. To survive and thrive, Silicon Valley workers must be innovative, productive, willing to re-invent themselves, and resilient

  35. SILICON VALLEY WORKER OF THE FUTURE? • Will work in numerous places over course of career • Will have to re-train and re-tool • Will have to distinguish self with a unique competency • Will shoulder a heavier burden for coverage and benefits • Will need high-end skills: language, writing, communication, technical expertise

  36. Jobs Leaving Silicon Valley

  37. Silicon Valley Job Strengths

  38. WAGE GROWTH IN KEY SECTORS, 2002-2005

  39. So what’s next for Silicon Valley?

  40. The Next Big Wave? • We’re not finished with information technology yet • Telecommunications, hand-held devices, entertainment • Ubiquitous internet, WIFI, WIMAX • Web 2.0

  41. The Next Big Wave? 2. Alternative Energy, Clean Technology, Green Buildings • VC activity starting a mini boom

  42. The Next Big Wave? • CONVERGENCE Nanotechnology, Biotechnology, and Information Technology

  43. Examples of Convergence

  44. Our OrganizationJoint Venture: Silicon Valley Network Business Government HigherEducation Labor Community-BasedOrganizations

  45. The Joint Venture Program • Tax and Fiscal Reform • Technology Convergence Consortium • Health Care • Electronic Medical Records • Wireless Infrastructure Initiative • Transportation and Housing • Unified Building Code • Cell phone coverage • Disaster Preparedness

  46. For more information … www.siliconvalleyonline.org

  47. And for more about Joint Venture … www.jointventure.org and the Index of Silicon Valley

  48. Thanks for inviting me! Russell Hancock President & Chief Executive Officer Joint Venture: Silicon Valley Network 84 West Santa Clara Street, Suite 440 San Jose, California 95113 (408) 271-7213 www.jointventure.org

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