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posted by martyb on Friday January 14, @04:23PM   Printer-friendly

The Secret to Building the Next Silicon Valley:

POLITICAL LEADERS HAVE been trying to replicate Silicon Valley’s high-tech magic since the invention of the microchip. A tech-curious Charles de Gaulle, then president of France, toured Palo Alto in his convertible limousine in 1960. Russian Federation President Dmitri Medvedev dressed business casual to meet and tweet with Valley social media tycoons in 2010. Hundreds of eager delegations, foreign and domestic, visited in between. “Silicon Valley,” inventor and entrepreneur Robert Metcalfe once remarked, “is the only place on earth not trying to figure out how to become Silicon Valley.”

In the US, too, leaders have long tried to engineer another Silicon Valley. Yet billions of dollars of tax breaks and “Silicon Something” marketing campaigns later, no place has matched the original’s track record for firm creation and venture capital investment—and these efforts often ended up benefiting multinational corporations far more than the regions themselves. Wisconsin promised more than $4 billion in tax breaks and subsidies to Taiwanese electronics manufacturer Foxconn in 2017, only to see plans for a $10 billion factory and 13,000 jobs evaporate after hundreds of millions of taxpayer dollars had already been spent to prepare for Foxconn’s arrival. Amazon’s 2017 search for a second headquarters had 238 American cities falling over each other to woo one of the world’s richest corporations with tax-and-subsidy packages, only to see HQ2 go to two places Amazon likely would have chosen anyway because of their preexisting tech talent. One of the winners, Northern Virginia, promised Amazon up to $773 million in state and local tax subsidies—a public price tag for gleaming high-tech towers that seems especially steep as Amazon joins other tech giants in indefinitely pushing back post-pandemic plans to return to the office.

While the American tech industry is vastly larger than it used to be, the list of top tech clusters—the Bay Area, Seattle, Boston, Austin—has remained largely unchanged since the days of 64K desktop computers and floppy disks. Even the disruptions of the Covid-19 pandemic have done little to alter this remarkably static and highly imbalanced tech geography.

[...] It wasn’t just tech policy that made these regions what they are, however. Social spending mattered too. In the prosperous postwar years, the GI Bill sent millions of veterans to college and helped them buy homes. States like California enlarged public higher education systems, making it easy to obtain a low-cost, top-flight university education. Schools and local infrastructure were well-funded, especially in the growing suburbs that many tech people and companies called home.

[...] The US government had a transformative impact on high-tech development when its leaders were willing to spend big money on research, advanced technology, and higher education—and keep at it for quite some time.

[...] The next Silicon Valley will not come from a race to the bottom, from who can offer the most tax cuts, the leanest government, the loosest regulations. It will result from the kind of broad, sustained public investment that built the original Valley.


Why do you think "Silicon Valleys" elsewhere did not become as successful?

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  • (Score: 3, Interesting) by Anonymous Coward on Friday January 14, @07:46PM (1 child)

    by Anonymous Coward on Friday January 14, @07:46PM (#1212744)

    There are real limits to the possibility of "buying" a silicon valley. I'd say there is some possibility, but all of the recent attempts have gotten the strategy 100% wrong.

    Tax breaks for big corporations will absolutely never get you there. They can be a part of a strategy. But it's a real misguided idea that comes from the sorts of politicians who kinda-sorta paid attention in high school level remedial economics in college but never thought much about any of it. Silicon Valley doesn't really require that much manpower. And the manpower it does require is generally very smart, highly skilled, highly paid, etc., and consequently can be very selective about what they want to do and where they want to live. It's not like setting up T shirt factories of something where you just need some generic jobs in a place to attract some generic labor. The simple text book example of lowering taxes leading to investments in production from Chapter 1 doesn't map very well to the real world where you have more than two variables involved in the equations.

    So some high level senior programmer looking at places where they might want to live doesn't care that if he moves to Cousinfucker Florida, his employer will be paying less in taxes. The nature of the job market for those senior engineers that make or break tech is that you are in a highly competitive global labor market. People in San Francisco will pay that senior engineer just as much money. So the engineer starts looking at other things about that location like schools, infrastructure, weather, culture, and other job opportunities down the road. Some stuff like weather is out of a city's control. Other stuff like infrastructure is intentionally kneecapped if you try to structure your whole local economy around low taxes! So you are basically hoping that the low taxes are going to attract enough companies that you get some Network Effects, and the location will seem appealing because 5 years from now, you'll have lots of local job opportunities. That's a pretty Meh gamble for moving your family across the country.

    On the other hand, if you spend all of your money on the tech labor instead of the tech companies, the companies are more likely to follow. It's the exact opposite of the "low taxes solve everything" approach to business friendliness. Invest in great schools, have good infrastructure, grow a theater and arts scene, etc. Support little local startups that are waaaaay cheaper to make happy than big megacorporations to start developing some of the network effects on a smaller scale. IF you spend all of your money trying to buy Silicon Valley workers, you've got a shot at doing something. May work, may not. If you spend all of your money attracting Silicon Valley corporations, they are gone as soon as they get a better tax break offer from your rivals across the river. A community is a much stickier thing than a corporation. I might have sounded moderately eccentric a decade ago. But in an age of remote work, it's easier than ever to attract the engineers independently of the corporation.

    The "low taxes is good for business" mantra is stupid and narrow minded. In some cases, lowering taxes will be a good thing. But that's not always true. It's not always the case that reducing taxes is an optimal strategy for anything but reducing your tax revenue that is needed for useful services.

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  • (Score: 0) by Anonymous Coward on Friday January 14, @09:28PM

    by Anonymous Coward on Friday January 14, @09:28PM (#1212771)

    Have you seen the exodus from the SF/San Jose area? Those policies have been driven to their extreme conclusion, and companies are bailing for other (lower tax) states. Cheaper housing and less crime, too. High taxes also goes hand in glove with increasing govt control over how you do business and how you live. (That's what the tax money is for.) The entrepreneurial drive is crushed.