Unmasking the Myths of Silicon Valley Innovation

Silicon ValleyAlerted to the work of the economist Mariana Mazzucato by an intriguing Lunch with the FT article I took a look at her blog.

She debunks the myth that innovation in Silicon Valley is a result of brilliant young minds (Jobs & Wozniak; Page & Brin) unfettered by regulations thriving in garages in a California where failure is rewarded and the streets are awash with VC funding.

While some of those myths have a basis in reality (garages were often the incubation environment from the get-go) the overlooked fact is that innovation in Silicon Valley is driven by public funding.

Entrepreneurs, as well as the venture capital funds that finance them, have often “surfed” massive waves of innovation that were essentially created by public money.

For example:

  • The internet grew out of DARPA
  • The GPS on your phone was funded by the U.S. government’s Navistar Satellite Program
  • Siri, the iPhone’s voice-activated personal assistant, and touch screen displays were both funded by the U.S. government
  • The Tesla electric car benefited from a $465 million government-sponsored guaranteed loan
  • One of the main flavors of UNIX was developed by Bill Joy and others at the University of California at Berkeley
  • Likewise, the algorithms that Google was based on were developed by Brin and Page while at Stanford on an NSF grant

Mazzucato concludes by saying

…you sometimes hear about the state as Leviathan, almost like a big monster getting in the way of innovation. The real task ahead of all of us is to make this debate less ideological. That requires us to understand the market as an outcome of public and private interactions. Rethinking a new relationship and deal between the state and the business, which will lead to the next big wave for future surfers to benefit from.

Understanding the history of innovation in Silicon Valley helps put the often heated debates about the role of ‘big government’ in perspective.

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