November 15, 2016
The San Francisco Bay Area: Innovation Capital of the World
By Samuel Klein
Trends in Federal Funding. Silicon Valley’s story cannot be told without recognizing the fundamental role the federal government played in the region’s initial development and growth. Against the backdrop of the Cold War, the US Department of Defense helped jumpstart the region’s economy by providing significant funding for research and development. These investments, combined with Stanford University’s faculty and experts, contributed to several technological breakthroughs, from the silicon transistor to computer networking. However, despite this important history, federal funding for research and development has slowly declined over the past few decades. While venture capitalists and angel investors continue to provide funding, they are increasingly chasing short-term gains at the expense of longer-term investments, which are often riskier. The federal government is better positioned to take on these risker, longer-term investments, unlike venture capitalists, but federal spending on research and development continues to decline or stay flat. Given that federal funding has previously been the bedrock of technological innovation, this emerging trend is quite worrisome for the future of American leadership in tech innovation. Especially when it’s juxtaposed with increased spending on R&D by other countries.
Failure is an Option. Many in the Bay Area discussed how its culture contributed to the region’s edge. Silicon Valley is a place that only has a few rules for success. First, everyone gets a hearing. If you have an idea, it is easy to come to Silicon Valley to try and make it a reality. But at the same time, it is hard to stay. You need to prove yourself. Second, failure is acceptable, and even required. People are encouraged to be unconventional, regardless of whether they might succeed or not. Third, acceptance of everyone is crucial. If one person can’t help you, they will pass you along to someone else who can. Everyone shares an entrepreneurial spirit. These unwritten yet well-known rules come together to form a unique culture that has greatly contributed to the success of the region as a tech and innovation hub.
Building an Inclusive Ecosystem. A significant portion of SFI’s discussions in the Bay Area revolved around diversity in the tech sector, and how to make the ecosystem more inclusive. From increasing the diversity of those who receive science and engineering educations, to expanding companies’ recruitment and hiring practices to reach a wider audience of potential talent, business leaders expressed a need to focus on all aspects of the economy and ecosystem. Many expressed increasing concern that the tech sector was creating an economy that only a select group of people could join and enjoy the rewards. Intelligent and talented people from diverse backgrounds are being left on the table, rather than having their skills recognized and put to use. Several roundtable participants warned about the economic consequences to the US’ innovative edge if companies fail to expand their hiring to reach minority groups. Building an inclusive economy for all will be vital to ensuring the country remains competitive and prosperous.
The 21st Century Workforce. Throughout SFI’s meetings in the Bay Area, several individuals made the point that the US’ existing educational systems may not be structured to produce the workers the country will need in the future. Currently, there are many workers who need to be retrained, or upskilled, to be prepared for the new jobs emerging in the tech sector. As a result, there is a growing need for new organizations that can provide this sort of training, which often occurs outside of the traditional primary and secondary education system. One example is coding bootcamps, which provide fast-paced learning over the course of 9-12 week semesters. Other organizations are working to reinvent the education model entirely to accelerate how engineers are educated, trained, and placed into jobs in the United States. How the US educates and trains its labor force for both existing and future tech jobs is a key component of the equation for the US to remain a leader in tech and innovation.
After completing four, successful fact-finding trips to tech hubs around the country, SFI will now work to identify the key trends that make the US a world leader in tech and innovation, and develop policy recommendations for how to ensure continued US leadership in an increasingly competitive world. These trends and recommendations will feed into a report that will serve as an innovation blueprint for the next administration, helping them to understand the situation on the ground in these tech hubs and providing them with options to strengthen the US’ technological edge.