1. Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program, Stanford University 3 August 2015

2. My Game Plan 1.A primer on Silicon Valley What is it? How does it work? Why have we been so successful? 2.Silicon Valley today Current patterns of growth Current strengths Current challenges 3.Silicon Valley tomorrow Important trends future projections

3. Part One What is Silicon Valley?

4. Common misperceptions NOT a place you can point to on a map NOT a place with a defined identity NOT a planned phenomenon No Silicon!

5. So, what is Silicon Valley ？

6. So what is Silicon Valley? A remarkably enduring hotbed of innovation and entrepreneurship

7. Our most important characteristic: We keep re-inventing ourself Silicon Valley’s Waves of Innovation

8. Milestone Silicon Valley Innovations 1940s Vacuum Tube 1950s Transistors 1960s Semiconductors, Defense Technology 1970s Integrated Circuit, Graphical User Interface 1980s Personal Computers, Workstations, Relational Databases, Biotechnology 1990s Network Computing, Packet switching, Internet Search 2000s Social media, Web 2.0, sharing economy, clean tech

9. However, the Valley’s edge doesn’t stem from innovation alone …

10. 1950s Defense Electronics Hewlett-Packard, Varian 1960s Semiconductors National Semiconductor, Fairchild, Intel, AMD 1970s Biotechnology Genentech, Genencor 1980s Personal Computers, Workstations Apple, Silicon Graphics, Sun 1990s Network Computing, Packet Switching Cisco Systems, Sun Internet Netscape, Yahoo, eBay, Google 2000s Social Media Facebook, YouTube Sharing Economy Uber, Lyft, Air Bnb … but also from entrepreneurship

11. Internet-based commerce (Netscape) Free search, supported by advertising (Google, Yahoo) Music downloads, streaming (Apple itunes) Social networking (Facebook, MySpace) A la carte television (Netflix) On-demand delivery (Door Dash, Uber, Google Express) The Valley also generates new business models

12. A permanent feature of Silicon Valley: CHURN

13. 19822002 1. Hewlett-Packard 2. National Semiconductor 2. Intel 3. Intel 3. Cisco* 4. Memorex 4. Sun* 5. Varian 5. Solectron 6. Environtech* 6. Oracle 7. Ampex 7. Agilent* 8. Raychem* 8. Applied Materials 9. Amdahl* 9. Apple 10. Tymshare*10. Seagate Technology 11. Palm,* Google,* Cadence,* Adobe,* Yahoo* Largest Silicon Valley Employers *no longer existed in 2002*didn’t exist in 1982 Source: Stanford Project on Regions of Innovation & Entrepreneurship

14. So what’s the secret?

15. A Habitat for Innovation Results-oriented meritocracy. Climate that rewards risks, tolerates failure Strong markets (capital, labor) Mobile, fluid workforce Favorable government policies University-industry collaboration Specialized infrastructure (venture funding, lawyers, executive search, accountancies) Quality of life

16. Part Two Silicon Valley today

17. Silicon Valley was the last region to succumb to the Great Recession The region was adding jobs through Q4 2008

18. Today Silicon Valley is the first to emerge from the Recession

19. JOB GROWTH Annual change in Total Number of Jobs, 2008-2014

20. JOB GROWTH Annual change in Total Number of Jobs, 2008-2014

21. JOB GROWTH Annual change in Total Number of Jobs, 2008-2014

22. JOB GROWTH Annual change in Total Number of Jobs, 2008-2014

23. +119,576 +3.5% TOTAL NUMBER OF JOBS 9-County Bay Area

24. MAJOR AREAS OF ECONOMIC ACTIVITY +40,096 +18,445 +12,294 -491 +57,951 2013-2014

25. AVERAGE ANNUAL EARNINGS

26. MEDIAN HOUSEHOLD INCOME

27. Innovation is thriving.

28. PATENT REGISTRATIONS

29. VENTURE CAPITAL

30. VENTURE CAPITAL BY INDUSTRY

31. INITIAL PUBLIC OFFERINGS

32. Rapid job growth Young, well-educated workforce Accelerating patent registrations Thriving startup community Mega venture capital deals

33. San Francisco and Silicon Valley together: $20.2 billion in venture capital $2.8 billion in Angel investments 16,055 startups 76,000 new jobs

34. Is this a bubble? We don’t think so.

35. Why not a bubble? Five years of incremental growth Profitable companies, serving proven customer bases Venture community enforcing a high bar Region’s portfolio extremely diverse Economy still moving into promising new areas Valuations are level-headed

36. VALUATIONS ARE LEVEL-HEADED Price-earnings ratio of top-ten NASDAQ companies, by market cap Source: Barrons

37. Part Three Silicon Valley tomorrow

38. So what’s not to like? It would appear that Silicon Valley is the world’s most prodigious regional economy.

39. Despite our strengths, Silicon Valley faces many challenges and has some structural flaws

40. One challenge: Tech is no longer a tide that lifts all boats

41. DISTRIBUTION OF HOUSEHOLDS BY INCOME RANGES

42. HOME AFFORDABILITY

43. POVERTY & SELF-SUFFICIENCY

44. Growth is putting a strain on the region.

45. COMMUTE PATTERNS

46. Train travel in other parts of the world

47. Train Travel in Silicon Valley

48. Built in 1863

49. Another challenge: Fiscal instability, failure of our government institutions

50. Our tax system doesn’t track with the 21st century economy; no political will to fix it City Revenues in Silicon Valley

51. Other challenges: Loss of federal funding Reversal of immigration trends Sagging infrastructure Poor K-12 education

52. Yet we expect Silicon Valley will continue its dynamism and move into promising new areas

53. One vital trend: convergence

54. Tech Convergence: Major Research Centers

55. Convergence firms in the Valley

56. Another major trend: We are building new clusters in renewable energy and clean technology

57. CLEANTECH VENTURE CAPITAL

59. Summary: Silicon Valley’s leadership will continue unabated Silicon Valley is now joined in its leadership by other global regions The region will have to face down internal challenges to stay competitive The private sector will lead the way

60. Thank you for the honor of your invitation. Russell Hancock President & Chief Executive Officer Joint Venture Silicon Valley Institute for Regional Studies 100 West San Fernando Street, Suite 310 San Jose, California 95113 (408) 298-9330 Lecturer in Public Policy Stanford University rhancock@stanford.edu www.jointventure.org