Q) Given that Bell Labs invented the transistor, why did the East Coast not become the seat of technology instead of Silicon Valley?


A) Rupert Baines



Anna Saxenian wrote about this.

Or, more specifically, she wrote about why Silicon Valley (the home of apricots & pruneyards) overtook Route 128 (the home of WANG, DEC and Data General, amongst others). But I think her explanation is East Coast generic.

The two reasons she gives are: Co-operation, Competition, Autaky

On the west coast there was a network or ecosystem: firms co-operated, and if you left an employer there was a possibility of future co-operation.

This mindset was exemplified by HP, although 'The Fairchildren' is perhaps the best case-study.

In contrast, the East coast paradigm was IBM-esque. A job for life, and if you left you were a traitor. The mindset was vertically-integrated/self-contained, not ecosystem. That was maintained through DEC etc.

UPDATE. Many thanks to John Phileas for this.

The Tyranny of the Noncompete Clause


“In “Regional Advantage,” her classic 1994 explanation of why Silicon Valley became the center of the tech universe and Route 128 outside Boston did not, AnnaLee Saxenian of the University of California at Berkeley argued that a key difference was that in Silicon Valley people jumped from company to company, while along Route 128 they stayed put”


One important aspect of that flexibility was noncompete clauses


Saxenian wrote that in Silicon Valley, “Early efforts to take legal action against departed employees proved inconclusive or protracted, and most firms came to accept high turnover as a cost of business in the region.” Along Route 128, which rivaled Silicon Valley in the 1960s and 1970s before falling behind in the 1980s, it was a different story. One leading firm, Data General, “repeatedly sued competitors and former employees to prevent the loss of proprietary corporate information.”

Saxenian, a political scientist who’s now dean of Berkeley’s School of Information, depicted this difference in litigiousness as the product of broader cultural differences between Massachusetts and California. Writing a few years later, Stanford Law School’s Ronald J. Gilson suggested that maybe the legal differences came first. In Massachusetts, as in 46 other states, it’s possible for employers to enforce post-employment covenants not to compete -- aka noncompete clauses. In California it generally isn’t.

Immigration

Second was immigration. When I heard her lecture she summarized this as 'San Francisco INS would grant you a visa if you were smart'.

Why was Silicon Valley more successful than Route 128 and Bell labs?

ChatGPT said:

The success of Silicon Valley over other prominent tech hubs like Route 128 (in the Boston area) and Bell Labs can be attributed to a combination of cultural, economic, and strategic factors. Here are some key reasons why Silicon Valley emerged as the dominant tech ecosystem:

1. Cultural and Entrepreneurial Mindset

• Risk-Taking and Innovation: Silicon Valley cultivated a culture that celebrated risk-taking, entrepreneurship, and failure as part of the learning process. Entrepreneurs were willing to take risks to start new ventures, knowing that there was a community and infrastructure that would support them even if they failed. In contrast, regions like Route 128 were more risk-averse, often relying on larger, more established companies and focusing on incremental innovations rather than disruptive ones.
• Networking and Collaboration: Silicon Valley fostered a collaborative environment where engineers, entrepreneurs, investors, and academics all interacted regularly. This informal exchange of ideas and resources helped accelerate innovation. In contrast, places like Route 128 had more segmented industries, and Bell Labs, while incredibly innovative, operated in a more siloed, corporate environment.

2. Access to Venture Capital

• Early and Robust Investment: Silicon Valley became the global hub for venture capital, especially after the 1970s, when funds like Sequoia Capital, Kleiner Perkins, and others started investing heavily in technology startups. These investors were not just financiers but also active partners, helping to grow and guide the companies they funded. This access to capital allowed entrepreneurs to scale up quickly.
• Route 128's Conservative Investment: On the other hand, Route 128 in Massachusetts had a more conservative investment climate for technology startups. Venture capital was less available, and companies in the area were often more focused on government contracts or servicing larger corporations, which limited the ability for small firms to grow quickly or innovate at the same pace as those in Silicon Valley.

3. University-Industry Collaboration

• Stanford and UC Berkeley: Silicon Valley's proximity to top universities like Stanford and UC Berkeley played a critical role in its success. These universities were not only sources of cutting-edge research but also fostered a culture of entrepreneurship, with professors and researchers often starting companies based on their work. The technology transfer process at these institutions became highly effective, leading to a continuous flow of innovation and talent into the private sector.
• Route 128's Academic Disconnect: While Massachusetts has strong universities, such as MIT and Harvard, the region did not have the same level of seamless collaboration between academia and industry. MIT had a reputation for producing groundbreaking research, but the connection between that research and entrepreneurial ventures was not as direct or frequent as in Silicon Valley.

4. Industrial Focus

• Consumer-Focused Technology: Silicon Valley's early focus on consumer technology (especially computers, software, and later the internet and mobile devices) aligned with larger market opportunities. The region’s entrepreneurs and companies were able to tap into massive, global markets. This was a significant factor in Silicon Valley’s explosive growth, as consumer technology quickly scaled across industries.
• Route 128's Legacy in Industrial and Military Tech: Route 128 companies, such as Digital Equipment Corporation (DEC), focused more on enterprise and military contracts. These businesses tended to be more conservative and slow-moving, often focused on incremental improvements to established technologies, which made it harder to disrupt industries. The military-industrial complex played a large role in Route 128’s success, but it also created a more insular environment.

5. Talent Pool and Mobility

• Free Movement of Talent: Silicon Valley became known for its highly mobile labor market. Engineers, scientists, and entrepreneurs frequently moved between companies, bringing with them knowledge and new ideas. The concentration of firms also meant that workers could easily find new opportunities, encouraging innovation and the free exchange of talent.
• Route 128’s Talent Pool: While Route 128 had excellent educational institutions producing talented engineers, the region was less known for its ability to attract and retain a diverse workforce of tech talent. The more hierarchical, less entrepreneurial structure of companies in Route 128 also did not foster the same level of mobility or idea-sharing that Silicon Valley did.

6. Government Policy and Infrastructure

• Favorable Policy Environment: California's policies during the mid-20th century were more conducive to entrepreneurial activity. The state offered tax incentives, relatively low regulations for startups, and a general ethos of supporting new industries. This contrasted with Massachusetts, where the regulatory environment was often more conservative, especially in the early years of the tech boom.
• Government Contracts in Route 128: Route 128's reliance on defense and government contracts limited its flexibility and speed in commercializing new technologies. The focus on military technology also created a more top-down, bureaucratic atmosphere that stifled the risk-taking spirit that fueled Silicon Valley's growth.

7. The Role of Key Institutions: Bell Labs

• Bell Labs’ Focus on Research: Bell Labs was a world leader in research and development, creating key technologies such as the transistor and information theory. However, its focus was primarily on fundamental research and long-term development, and much of the innovation happened within AT&T's corporate structure, rather than as part of a broader, fast-moving entrepreneurial ecosystem. Bell Labs was less focused on rapid commercialization compared to Silicon Valley, where new ideas were quickly turned into products.
• Decentralization in Silicon Valley: In Silicon Valley, smaller companies were encouraged to take the risks of commercialization, and the region’s decentralized nature allowed for quicker decision-making and product development, which was less common at Bell Labs, where corporate structures often slowed down the process.

8. Global Networks and Expansion

• Global Reach: Silicon Valley companies quickly went global. Firms like Intel, Apple, and Google expanded their reach beyond the U.S., tapping into global markets and benefiting from the global demand for technology products. This helped drive further investment and growth.
• Bell Labs and Route 128's Regional Focus: While Bell Labs and companies in Route 128 were influential in their own right, their markets were more regionally focused, and they did not scale in the same way that Silicon Valley companies did.

Conclusion

Silicon Valley's success was driven by a combination of factors, including a culture of innovation and risk-taking, access to venture capital, strong academic-industry links, a focus on consumer technology, and a supportive regulatory environment. While Route 128 and Bell Labs were highly innovative and successful in their own ways, they lacked the same combination of factors that allowed Silicon Valley to explode into a global technology leader. Silicon Valley’s ability to rapidly commercialize cutting-edge ideas, attract talent, and embrace risk and competition helped it surpass these other centers of innovation.