why tech companies are in San Francisco when they could have cheap offices and fast internet pretty much anywhere?
In: Technology
Source: I’ve been in that business for almost 15 years, as a tech innovation worker, also as an executive, and also working closely with VCs.
Fasten your seat belt, I love to tell this story.
Two high level reasons:
* Because that’s where the private funding money is. Executive teams have to be there to stay close to the investors that continuously keep them accountable; and those executives often (not always) prefer to hire teams close to them to in turn keep them accountable.
* Because that’s where modern innovation culture was invented for this current industrial revolution, and keeps being best implemented.
But why are those two things happening there? It’s actually no coincidence.
There was that dude called William Shockley, who was a bit of a genius jerk. He invented the modern transistor, patented and commercialized it, and won the Nobel Prize for it. Back in the 50s and 60s, he continuously refused the pressure from his East Coast investors to move closer to Wall Street money, because he just wanted to live in the San Francisco Bay Area, and was generally hard to convince about anything.
He started accumulating a trove of more junior talents around him, who had moved there to work with him. All of his management style was unwittingly very anti-innovation (top-down disempowerment of the builders, encouraging people’s own goals over helping each other, opacity over transparency, …), which led 8 of his most senior employees (look them up as “The Traitorous Eight”) to leave on the same day and found the company Fairchild Semiconductor (“the first trillion-dollar startup”), whose success indirectly funded all of the tech companies you know of today. Those people were all already in California with their lives and families, so they still didn’t want to move; so investors now had to compose with that.
Fairchild successfully established modern innovation practices by intentionally keeping as far away from Shockley’s paranoid micromanagement as they could. Eventually, they each left Fairchild pretty wealthy to found or invest in other tech companies (Intel, Amazon, Google, AOL, PayPal, …), which some affectionally call “Fairchildren” companies. They still didn’t want to move East, so that’s when Wall Street money gradually took the hint that they were the ones who had to move for anything tech innovation related.
It’s a fascinating story, that I encourage people to look up more about. The serendipity of it all in particular, should help shed light on why many places in the world are trying to imitate the Bay Area’s success, but the birth of an industrial revolution out of thin air is not something you can easily manufacture. All about it is a beautiful accident, down to its geography.
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