Mining the Silicon Valley Mind – A Perspective

What makes Silicon Valley[1] unique? Does the Valley’s success lie in its geography or in the mindset of the people who live there? While many of my posts focus on the Valley as a model to be replicated, today’s post provides historical perspective. In this post, I share the ten attributes, established over the past 165 years, that helps to explain this region’s dynamism. Other countries, particularly those South-of-the-Border, should take note.

I don’t believe its Silicon Valley’s water or air that makes its people more creative, innovative or entrepreneurial than others. Instead, I’d like to share my perspective that the Valley’s entrepreneurial mindset has been 165 years in the making. In fact, this mindset has roots in Northern California’s infamous Gold Rush in the mid-19th century.

The West Coast of the United States was largely inaccessible to the rest of the world. It was a harsh continental landscape away from the established East Coast, vast oceans away from Asia and Europe, deserts and mountains away from its even closer neighbors in Latin America. As a result, Northern California remained sparsely populated and isolated from the rest of the world for a long time, and people did not consider it worth the trouble to “Go West.” However, all this changed when gold was discovered in 1848. 

Sailing to Northern California at the start of the Gold Rush

Northern California’s Gold Rush started in 1848. Among the first to hear news of gold were people in East Asia and South America, and many chose to immigrate. Interestingly, these migrants’ motivations were very different from that of migrants who had arrived from Europe to the Northeast two centuries prior. While the Mayflower Pilgrims came to the New World seeking the political or religious freedoms denied to them in Europe, migrants to Northern California fundamentally sought economic rewards.

The personality profile of Gold Rush migrants consisted of two key attributes: (a) a natural self-selection of risk-takers willing to migrate over vast and harsh terrains, and (b) a no-nonsense desire for economic rewards. As a result, the region’s DNA was self-selecting: people who chose to “Go West” were overwhelmingly risk-taking, adaptive, flexible, tolerant of discomfort, and even ready to die in their pursuit of economic prosperity. Seen through another lens, these migrants in fact were quintessential entrepreneurs.

These gold-seekers, called “forty-niners” (in reference to the year 1849, when immigrants arrived in large numbers), often faced substantial hardships on their journeys to get here. Once they arrived, they faced mining accidents, diseases, and in many cases, death.[1] 

Gold worth tens of billions of dollars in today’s dollars was recovered, leading to great prosperity. The effects of the Gold Rush were substantial: San Francisco grew from a small settlement of about 200 residents in 1846 to a boomtown of about 36,000 by 1852. Roads, churches, schools and other towns were built seemingly overnight throughout Northern California. Fortune-seekers and immigrants ultimately decided to lay their roots in the Bay Area and were critical to the formation of the region’s character.

The unique characteristic of this rugged, dangerous and isolated terrain had an enormous influence on the early settlers of the “Wild West.” I have concluded that the key attributes of the Gold Rush mindset can be summarized with 10 key characteristics that capture the spirit of the early settlers. Interestingly, these characteristics are not in isolation.  They have much in common with the enabling characteristics of the 21st century’s Silicon Valley mind.[2] 

Northern California Dreaming: Key Enabling Mindsets Then (mid-19th Century) & Now (2012)[3]

 

Gold Rush Settler-Entrepreneurs in the mid-19th Century[4]

Silicon Valley Entrepreneurs in 2012[5]

1

An independent and individualist mindset, evidenced by their willingness to defy the naysayers in their home countries.[6] This is an essential characteristic of entrepreneurs attracted to Silicon Valley today.[7]

2

Risk taking mentality and tolerance of failures — the adversity was such that failing was often the norm and accepted, as leaving was not an option. A climate that rewards risk-taking and tolerates failure – no stigma is attached to failure.

3

Diversity reinforced by opennesssettlers were heterogeneous, arriving from across the world to begin their lives anew. A high-quality and mobile work force – the Valley is a global magnet for talented engineers, scientists and entrepreneurs.

4

Friendliness with an open mind — as a consequence of diversity and isolation. Open business environment – win-win exchanges of knowledge. Rapid circulation of ideas enabling free exchange of knowledge and experiences.

5

Natural cluster formation in the mining sector — by necessity to specialize to increase overall efficiencies. Distinctive features of Gold Rush towns included bankers, goldsmiths, miners and traders. Collaborations among stakeholders – business, government and nonprofits develop a coherent infrastructure of information sharing.

Specialized business infrastructure — Financial, Legal, Investors, Headhunters, Accounting, Consultants, etc. The most distinctive feature of the Valley’s ecosystem is its array of support services for new high-tech businesses, including over 30% concentration of US-based VCs and angel investors.

6

Trial and error consciousness — the problems encountered had to be resolved locally with practical results. Knowledge intensity – pro new ideas for new products, services, markets, and business models. The Valley generates the highest flow rate of ideas about information technology globally.

7

Passion for success it was more than economic success, Gold Rush settlers loved the chase! Passion for success that is paired with a results-oriented meritocracy – Talent and skills are king.  Age, ethnicity and seniority do not dictate opportunity or level of responsibility.

8

Creation of wealth — not just money but creation of a community. Universities and research institutes that interact with industry – rich sources of well-trained, experienced scientists and engineers willing to transform their knowledge into entrepreneurial ventures.

9

Pitching as a way of life!each Gold Rush settler was his/her best salesperson. This is an essential skill of an Entrepreneur[8] as he/she attempts to obtain the initial customers, employees, funding, etc.

10

Eternal Optimismovercoming the challenges was the only available option. Favorable rules of the game – pro-business formation.

Bonus

An attractive place to settle with mild weather and abundant natural resources. Attracted initially by gold, but later most stayed. High quality of life – a beautiful place to work, live and play.

While the geography is impossible to transfer to other world regions, the mindset is. Are the emerging world regions ready for this challenge? Can Montevideo (Uruguay), Sao Paulo (Brazil) or Córdoba (my hometown, in Argentina) create this mindset supported by an entrepreneurship enabling infrastructure? Can the Silicon Valley mindset be effectively democratized to other world regions?

What do you think? Do you agree or disagree? Let me know, especially if you disagree.

Until my next posting – Carlos B.


[1] Levy, Joann (1992). They saw the elephant: Women in the California Gold Rush. Archon:N.p., pp. xxii, 92
[2]  Adapted from The Silicon Valley Edge, Edited by Chong-Moon Lee, William F. Miller, M. Gong Hancock, and Henry S. Rowen, Stanford University Press, 2000.
[3] This table is an early first draft.  Please feel free to send me any comments or suggestions.
[4] This is the personal perspective of the author.
[5] Adapted from The Silicon Valley Edge, Edited by Chong-Moon Lee, William F. Miller, M. Gong Hancock, and  Henry S. Rowen, Stanford University Press, 2000.
[6] In 1861, the telegraph connected San Francisco to the East Coast enabling cross-continental businesses and news-share; however, it had to wait until 1869 when the railroad connecting both coasts was completed to trigger the physical integration process to the USA. Still, the ten attributes described in the table below were so deeply rooted that continued to evolve becoming a distinguishing characteristic of this region.
[7] This is not part of today’s 10 key enabling characteristics shown in reference 2.
[8] This is not part of today’s 10 key enabling characteristics shown in reference 2.

[1] In my posts I often use three terms, Silicon Valley (SV), the Valley, and the San Francisco Bay Area (SFBA) interchangeably.

About Carlos S. Baradello

Investor, thought leader, and advisor in areas of corporate innovation, born global entrepreneurship and global scaling.
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10 Responses to Mining the Silicon Valley Mind – A Perspective

  1. Diana says:

    I enjoyed reading your post. As a Latina living in the United States, I have some criticisms. One of the major things you left out in your post is the exploitation and annihilation of ethnic minority communities in the history of the United States/ San Francisco. This is a major driving force for capitalism throughout the world. We continue to see these affects on several communities in the Bay Area. Personally, I wouldn’t want my hometown in South America (that base their economic decisions on collectivism) to appropriate the horrible individualistic mindsets of the Bay Area. I would really like to hear your thoughts about this…

    • Diana, thank you!
      There is nothing in my post that points my support of the maltreatment of ethnic minorities.
      However, everyone that emigrated (like you and I) likely belong to a class of self-selected risk takers.
      About governments, they should create a level playing field and get out of the way. Fair rules of the game for innovators and entrepreneurs freely explore their business ideas and launch their ventures. Many will fail (a recent study shows that about 1 in 12 succeeds).
      I would love to see hundreds of Valleys replicated south of the border and created great opportunities locally which will reduce the temptation to “walk-North” to seek economic opportunities.
      Thank you for reading and commenting my posts.
      Best — Carlos B.

  2. domingostern says:

    Great analysis Carlos that I like but I think it is a wishful utopic thinking. Independent individualist today is probably politically incorrect and such perception discourages open minds and risk taking.
    Protectionist policies smother diversity which is critical because the current world requires major investments that are hard to get from independent individuals.
    We are in a new world where people expect to get pampered by governments that promise things they are unable to deliver…

    • Dear Domingo, Diana in another comment make exactly the point you fear.
      Yes it is not politically correct to encourage individual risk taking and accountability.
      Often government policies keep artificially through subsidies small firms alive which would be better off dying quickly to “fertilize” the ecosystem.
      Entrepreneurship is at its root darwinian and requires the “creative destruction” to be always present.
      Best — Carlos B.

  3. domingostern says:

    Carlos ,

    To further illustrate my point please note examples of publicly traded entities that failed as a result of being “politically incorrect” including a gold mine in Nevada where the local Indian population imposed conditions demanding compensation that exceeded the gross profit generated by the project. Another one in Asturias, Spain ended up in a similar manner. Also, in Argentina Barrick Gold abandoned a gold mining project it planned in Famatina. Their decision was made hours after the House of Representatives of the Provincial Legislature, led by anti-mining Vice Governor Luis Beder Herrera, voted to ban open air mining using cyanide in all of the province.
    Seeing publicly traded entities having to face such unjustified demands, the small entrepreneurship is clearly discouraged.

    • Jonathan E-W says:

      Limits on cyanide? How dare they! Obviously, putting limits on how much pollution you can put into the ground water will just KILL any chance of innovation. /sarcasm

      Can we give the market some credit? There a places that do and don’t foster risk taking and innovation, but they have little to do with environmental regulations. For instance, California’s are in most cases the toughest in the US. Hasn’t slowed down the Valley much.

  4. Hello my loved one! I wish to say that this post is amazing, nice written and come with approximately all significant infos. I would like to look more posts like this.

  5. I’ve recently started a blog, the info you provide on this site has helped me greatly. Thanks for all of your time & work. “The word ‘genius’ isn’t applicable in football. A genius is a guy like Norman Einstein.” by Joe Theismann.

  6. Wow, nice read, thanks a lot for this.

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