Why Startups Condense in America - The Concentration of Startups in America and How Other Countries Can Emulate This Success

Yigit Konur's Curation

"This article written by Paul Graham in 2006 discusses why America is a global 'startup' hub and how other countries can achieve this success. Graham points out that America's success is due to a number of factors such as immigration policies, a wealthy domestic market, a dynamic career understanding, and the capacity to create a suitable environment for entrepreneurship. He also emphasizes that other countries need to find their own unique methods to create a successful 'startup' ecosystem, rather than following America's model. The article provides a very interesting and rich content for those interested in entrepreneurship and technology.

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# Why Startups Condense in America (The Concentration of Startups in America and How Other Countries Can Emulate This Success)

May 2006
_(This essay is derived from a keynote at Xtech.)_

Startups happen in clusters. There are a lot of them in Silicon Valley and Boston, and few in Chicago or Miami. A country that wants startups will probably also have to reproduce whatever makes these clusters form.

I've claimed that the [recipe](siliconvalley.html) is a great university near a town smart people like. If you set up those conditions within the US, startups will form as inevitably as water droplets condense on a cold piece of metal. But when I consider what it would take to reproduce Silicon Valley in another country, it's clear the US is a particularly humid environment. Startups condense more easily here.

It is by no means a lost cause to try to create a silicon valley in another country. There's room not merely to equal Silicon Valley, but to surpass it. But if you want to do that, you have to understand the advantages startups get from being in America.

**1. The US Allows Immigration.**

For example, I doubt it would be possible to reproduce Silicon Valley in Japan, because one of Silicon Valley's most distinctive features is immigration. Half the people there speak with accents. And the Japanese don't like immigration. When they think about how to make a Japanese silicon valley, I suspect they unconsciously frame it as how to make one consisting only of Japanese people. This way of framing the question probably guarantees failure.

A silicon valley has to be a mecca for the smart and the ambitious, and you can't have a mecca if you don't let people into it.

Of course, it's not saying much that America is more open to immigration than Japan. Immigration policy is one area where a competitor could do better.

**2. The US Is a Rich Country.**

I could see India one day producing a rival to Silicon Valley. Obviously they have the right people: you can tell that by the number of Indians in the current Silicon Valley. The problem with India itself is that it's still so poor.

In poor countries, things we take for granted are missing. A friend of mine visiting India sprained her ankle falling down the steps in a railway station. When she turned to see what had happened, she found the steps were all different heights. In industrialized countries we walk down steps our whole lives and never think about this, because there's an infrastructure that prevents such a staircase from being built.

The US has never been so poor as some countries are now. There have never been swarms of beggars in the streets of American cities. So we have no data about what it takes to get from the swarms-of-beggars stage to the silicon-valley stage. Could you have both at once, or does there have to be some baseline prosperity before you get a silicon valley?

I suspect there is some speed limit to the evolution of an economy. Economies are made out of people, and attitudes can only change a certain amount per generation. [1]

**3. The US Is Not (Yet) a Police State.**

Another country I could see wanting to have a silicon valley is China. But I doubt they could do it yet either. China still seems to be a police state, and although present rulers seem enlightened compared to the last, even enlightened despotism can probably only get you part way toward being a great economic power.

It can get you factories for building things designed elsewhere. Can it get you the designers, though? Can imagination flourish where people can't criticize the government? Imagination means having odd ideas, and it's hard to have odd ideas about technology without also having odd ideas about politics. And in any case, many technical ideas do have political implications. So if you squash dissent, the back pressure will propagate into technical fields. [2]

Singapore would face a similar problem. Singapore seems very aware of the importance of encouraging startups. But while energetic government intervention may be able to make a port run efficiently, it can't coax startups into existence. A state that bans chewing gum has a long way to go before it could create a San Francisco.

Do you need a San Francisco? Might there not be an alternate route to innovation that goes through obedience and cooperation instead of individualism? Possibly, but I'd bet not. Most imaginative people seem to share a certain prickly [independence](gba.html), whenever and wherever they lived. You see it in Diogenes telling Alexander to get out of his light and two thousand years later in Feynman breaking into safes at Los Alamos. [3] Imaginative people don't want to follow or lead. They're most productive when everyone gets to do what they want.

Ironically, of all rich countries the US has lost the most civil liberties recently. But I'm not too worried yet. I'm hoping once the present administration is out, the natural openness of American culture will reassert itself.

**4. American Universities Are Better.**

You need a great university to seed a silicon valley, and so far there are few outside the US. I asked a handful of American computer science professors which universities in Europe were most admired, and they all basically said ""Cambridge"" followed by a long pause while they tried to think of others. There don't seem to be many universities elsewhere that compare with the best in America, at least in technology.

In some countries this is the result of a deliberate policy. The German and Dutch governments, perhaps from fear of elitism, try to ensure that all universities are roughly equal in quality. The downside is that none are especially good. The best professors are spread out, instead of being concentrated as they are in the US. This probably makes them less productive, because they don't have good colleagues to inspire them. It also means no one university will be good enough to act as a mecca, attracting talent from abroad and causing startups to form around it.

The case of Germany is a strange one. The Germans invented the modern university, and up till the 1930s theirs were the best in the world. Now they have none that stand out. As I was mulling this over, I found myself thinking: ""I can understand why German universities declined in the 1930s, after they excluded Jews. But surely they should have bounced back by now."" Then I realized: maybe not. There are few Jews left in Germany and most Jews I know would not want to move there. And if you took any great American university and removed the Jews, you'd have some pretty big gaps. So maybe it would be a lost cause trying to create a silicon valley in Germany, because you couldn't establish the level of university you'd need as a seed. [4]

It's natural for US universities to compete with one another because so many are private. To reproduce the quality of American universities you probably also have to reproduce this. If universities are controlled by the central government, log-rolling will pull them all toward the mean: the new Institute of X will end up at the university in the district of a powerful politician, instead of where it shou...