ED GLAESER: Many of humanity's greatest hits have occurred in cities.
Penicillin in London, the telephone in Boston, Facebook in Cambridge, Mass.
But the technological breakthroughs of Silicon Valley had being a decidedly
suburban affair.
While Silicon Valley is certainly dense with talent and
its companies value face to face interactions.
Those interactions take place in a car oriented, moderate
density at most semi-urban cluster nestled between San Francisco and San Jose.
Only during this millenium have we seen a real trend where many tech related
startups have shown up in cities like San Francisco, Boston, and New York.
Timothy Sturgeon's work teaches us that the history of Silicon Valley
starts well before World War II.
One of the region's first tech start ups was the federal telegraph
which was founded because of a teenage radio genius, Francis McCarthy
of San Francisco, who died in a freak streetcar accident in that city.
The streetcar killed the radio star.
McCarthy's financial supporters decided that wireless telegraphy still had promise
and then he turned to a Stanford electrical engineer, Harris Ryan.
He recommended a star pupil of his, Cyril Elwell, to develop and
commercialize McCarthy's ideas.
Stanford University was founded by railroad builder and
California governor, Leland Stanford, as a deeply practical place of learning.
Business and science were woven together deep in Stanford's DNA from the beginning
and that helps explain why this played such a crucial role in the development of
Silicon Valley.
Elwell dropped McCarty's plans and
turned instead to Valdemar Poulsen's arc transmitter.
And Federal Telegraph began as an American Outpost of that Danish Technology.
From 1911 to 1913, Lee de Forest worked at Federal Telegraph,
where he developed revolutionary vacuum tube amplifiers and
oscillators that would dominate the radio industry for years.
Federal Telegraph inspired and then employed the young Fred Terman,
the son of a Stanford University psychologist who pioneered IQ tests.
Young Fred studied engineering at Stanford and MIT and
eventually returned to Stanford as Professor Dean and Provost.
Terman saw the advantage of industry university interactions just like Stanford
himself and the investors who contacted Harris Ryan.
And he planned an industrial park right near the campus.
Such commercialization was anathema to many older Eastern universities as late as
the 1980s.
For an anchor tenant he reached out to William Shockley,
the Nobel Prize winning co-inventor of the semi-conductor,
who was willing to come to Silicon Valley partly because he grew up in Palo Alto and
knew its charms, especially its mild Mediterrean climate.
Shockley proved to be the ideal
entrepreneur to jumpstart a regional innovation economy.
His genius attracted talent.
Shockley Semiconductors' early employees are now legendary.
Gordon Moore of Moore's Law, Eugene Kleiner of Kleiner-Perkins,
Robert Noyce of Intel.
Then his erratic management style repulsed that talent and
sent it out throughout the Valley to form their own firms.
Eight brilliant employees, "the traitorous eight," left Shockley Semiconductor
in 1957 to be part of a new company, Fairchild Semiconductor.
Fairchild Semiconductor then generated more spin offs,
the Fair Children and they came to be at the economic heart of Silicon Valley.
AnnaLee Saxenian's regional advantage compares the corporate cultures in Silicon Valley
and the tech district in Boston's route 128.
In her telling, Boston was hierarchical, corporate,
and dominated by a few big companies such as Raytheon.
Which had been founded Vannevar Bush, Termin's MIT mentor.
Those big companies didn't talk to each other.
By contrast, Silicon Valley's culture was entrepreneurial and interactive.
Saxenian describes how bars like Walkers Wagon Wheel became hubs for
idea exchange in the valley in the 1960s.
Silicon Valley ate route 128 for
lunch which reflects a more general fact of that post war economic growth.
Entrepreneurial places with lots of little firms have done much
better than places dominated by a few big companies.
There maybe a lesson in that for
city officials who try to woo mega employers with generous subsidies.
In a sense, Silicon Valley did benefit from a traditional
urban asset of face to face contact.
And it certainly benefited from the proximity to all that engineering
brilliance at Stanford.
But it did keep it's success at a suburban density level.
Clearly, you don't need density to be economically dynamic.
At least if you've got a great university, a great climate, and
you can attract many of the most innovative people on the planet.
One downside of the Silicon Valley model is
that it is a bit of an industrial monoculture.
Whereas technology in New York or
London exists in the midst of a diverse urban economy, Silicon Valley does not.
The great urbanist Jane Jacobs argued that industrial diversity
often allows new ideas to be created by combining old ideas.
Innovation occurs by cross industry leaps of imagination.
Michael Bloomberg's company, which is ultimately a tech firm itself,
was created in New York, not Silicon Valley,
precisely because Bloomberg knew what Wall Street traders wanted on their desks.
Gradually tech companies started rediscovering the virtues of dense, messy,
urban life.
Amazon relocated to the urban heart of Seattle.
Pinterest, Zynga, Trulia, and
Yelp are all in the city of San Francisco itself, not in Silicon Valley.
So is Uber.
Indeed, it's hard to imagine that car service company starting in a suburb.
It's success depended on having enough density of drivers and customers.
Wayfair and Akamai in Boston.
New York has a legion of tech companies and some of them like E*trade and Tumblr,
seem to draw on the city's traditional industries like finance and publishing.
Google's parent company, Alphabet, has an Invested heavily in New York,
both through Google itself and through its investment in Sidewalk Labs.
Why have tech companies started to like cities?
In many cases, the urban location reflects the preferences of the owners and
their employees.
For younger, hipper people, the suburbs, even Silicon Valley,
may not seem like that much fun.
Zappos's move to Los Vegas gave it access to a very special type of labor.
The highly theatrical, strongly outgoing people who answer its phone lines.
And try to bind customers to the company.
Biogen relocated its headquarters from the leafy Boston suburb where I usually sleep
to Kendall Square, which is closer to its academic partners at MIT.
In this case, the move reflects a recognition of the traditional
urban advantage in spreading knowledge.
In some cases, urbanization is a good fit for the product mix.
When a tech company provides services which are particularly valuable in cities
like Yelp or Uber, it probably makes sense to better understand urban life.
Certainly, knowledge of the difficulties of urban existence
can help give entrepreneurs good ideas, as it did for Robin Chase at Zipcar.
Silicon Valley is going great guns.
And I'm not predicting that this will change.
But it's worth noting that a century ago such a successful place would
have turned itself into a real city.
Unfettered by land use regulations, demand for
the area space would have lead to soaring densities.
Without zoning rules Silicon Valley streets would be lined with
skyscrapers just like New York City.
I'm sure many of the valley's residents are glad that that hasn't happened.
And that the region has retained its character.
But it's worth stressing that for
all the valley's creative strength, it has one great failure.
It is ridiculously expensive.
It just does not supply anywhere near the number of homes needed to keep
pace with demand.
If the region chooses to remain low density, its housing prices will stay high
and it will never provide welcoming space for middle income people.
The way that the growing cities of New York and Chicago did a century ago.
Silicon Valley's restrictiveness and high prices may make it a paradise for
some of the smartest Americans.
But by restricting the growth of density,
it fails to provide more widespread opportunity.