Silicon Valley today is home to less than 0.25% of America’s 18m businesses, yet the valley hosts one third of the net new business formation in the United States.1 Further, 39 of the world’s 100 largest tech companies have their headquarters there, including four of the five most valuable companies in the world by market cap. Unsurprisingly, Silicon Valley is also home to the highest concentration of millionaires and billionaires in the country. More importantly, it is the birthplace of the semiconductor, the personal computer, e-commerce, the biotech industry and countless other innovations that have changed our lives over the past two generations. The success of the region has been driven by an unprecedented concentration of resources; Silicon Valley’s dense web of education, talent, ideas, capital, and infrastructure churns out a continuous stream of innovation and new companies that create and dominate new industries. While Silicon Valley is inextricably linked to the modern technology industry it gave birth to, the idea of concentrating resources (with an alignment of purpose) has created similar hubs across a wide range of industries, the world over. What is true for tech is true for any other industry: the concentration of resources in a cluster or hub ensures efficient utilisation of these resources and creates a network-multiplier effect in terms of the quality and amount of output. A look at the map below of some of the prominent global hubs shows the impact that hubs have made across multiple themes and sectors in the world today
For many sectors and regions, hubs have been critical drivers of development. India’s emergence as a technology powerhouse with over US$100bn in annual exports was driven initially by Bangalore and more recently from a number of secondary hubs across the country (Chennai, Mangalore, Gurgaon). In a bid to copy the success of the model, taking a cue from India and the US, China quickly followed suit (with Zhangjiang in Shanghai and Zhongguancun in Beijing among others). Similarly, Taiwan’s semiconductor hub was a key driver of its jump to a modern industrialised nation, crossing a GDP/capita of US$15,000. In the multi-track world of today, with the internet showcasing exemplary development Silicon Valley is a pressure cooker of education, talent, ideas, capital, and infrastructure that churns out a continuous stream of innovation and new companies that create and dominate new industries. Silicon Valley is a pressure cooker of education, talent, ideas, capital, and infrastructure that churns out a continuous stream of innovation and new companies that create and dominate new industries. models and simultaneously providing the platform to punish leaders that do not act, nations face the imperative of development. Rapidly industrialising countries today are aspiring to repeat China’s development success of the past decades. Other, mainly middle-income countries and “rentier” states are seeking to diversify their economies by creating new sectors. And the most developed countries (e.g. OECD countries) are seeking to transition to post-industrial economies, despite large pockets of popular resistance. Other countries, such as India, are looking to make all three of these transitions at the same time. Interestingly, there is one common solution across nations: the development of hubs, or more fundamentally a development strategy based on hubs, makes sense since hubs concentrate resources, speed development and create network effects to drive value. Beyond their industrial logical however, hubs potentially have a much broader role to play in our changing world.
The Political, Economic and Social Imperative for Hubs
The world order today is current in transition, politically, socially, and economically. Major global forces are reshaping the world, both figuratively and physically, with increasing globalisation and technology driving massive changes in how we live, work and interact with our environments. These forces demand one think differently around how to organise economic activities, environments, industries and habitats. The major forces include the following:
Urbanisation. The percentage of the world’s population living in urban areas has passed 50%, and nearly all the global population growth from 2017 to 2030 will be absorbed by cities, adding 1.1bn urbanites over the next 13 years. This flow of humanity will transform our urban habitats and place significant strain on our infrastructure and environment, requiring the development of new urban blueprints to adequately house, feed and employ the majority of the world’s population. The concentration of human resources will also geographically focus previously dispersed economic activities, facilitating the sharing of physical resources, improving supply chains and reducing (regulatory and legal) transaction costs, all of which should facilitate the ordering of activity into hubs.
Human Migration Patterns. Beyond the flow of humanity into cities, the scale of migration between regions has reached an unprecedented scale, with nearly 60m people globally currently forcefully displaced from their homes, exceeding the 50m refugees created by the Second World War. The mass migration of people dissolves borders and leads to the levelling of opportunity between the “have’s” and the “have nots”. Until global inequality between countries and regions can be fully addressed, this migration can be slowed down perhaps but cannot be avoided, creating the need for the destination countries and cities to integrate waves of diverse immigrants, with varied skill sets and education levels. This in turn will require the creation of appropriate jobs across a range of sectors.
Emergence of City States and Regions. The top ten cities represent 11% of global GDP. Within countries, major cities such as London, New York, Paris, Tokyo, represent between c.10-35% of the GDP of their nations. The rise of cities as a focal point for attracting national and global talent and financial and natural resources is leading to a dependence on them at a regional and national level and sometimes beyond. With this economic dependency Beyond their industrial logical, hubs potentially have a much broader role to play in our changing world addressing political, economic and social imperativescomes political power. These are the “natural” hubs that rise in any nation based on their political, economic and military history. Further, there are a number of long-term trends that are strengthening the position of smaller sovereign entities and city states relative to their larger neighbours. Firstly, the decline in the use of force as a means to settle disputes in favour of a rules-based international order, levels the playing field for smaller countries. Secondly, the reduced importance of larger geographic size as a driver of political power, in turn reduces cross-border expansionary pressure, increasing the security of city states and allowing these to focus on economic development leveraging local resources and advantages independently or larger powers.
Global Roads. China’s One Belt-One Road Strategy (OBOR) seeks to re-link the Eurasian landmass through a network of land and sea-routes across over 7,000 miles, which will drive the concentration of resources at key points across the network. In a world in which trade is one of the most important drivers of economic activity, trade routes are clearly vital, and the nodes that form along the network of routes even more so. These nodes, or hubs, in addition to regulating the flow of goods and services along the routes and serving as finance and banking hubs, become important centers of economic activity in the own right. The Silk Road between China and Europe fostered the growth of cities, such as Merv and Urgench in modern day Turkmenistan that during the 12th and 13th century briefly became the largest in the world. Today, the major cities along the OBOR and other global roads will therefore also see a concentration of economic activity that will give rise to new trading hubs.
Shifting Competitive Advantages. In 2005, the average hourly manufacturing wage in the US was $16.50, or 22x that in China. Over the course of the next decade, China wages grew at 17% annually while the US wages appreciated a mere 2% p.a., closing the wage gap to 5x by 2015 and substantially reducing the China cost advantage. As this example shows, competitive and comparative advantages will continue to shift between regions, driven by different levels of development, the availability of factor inputs and the macro-economic policy choices of leaders. Globalisation both accelerates and amplifies this trend by reducing communication and transportation costs, allowing e.g. services that were previously fully local to be delivered remotely, thereby enabling the concentration and economies of scale for service providers. In a world where activity is constantly shifting from high to lower cost locations, the creation of scaled hubs provides stickiness to a given economic activity by creating scale, reducing transaction costs, and driving the creation of intellectual property. As regions lose their ‘natural’ advantages, e.g. the Middle East’s oil reserves or China’s low-cost structure, they will increasingly need to reinvent themselves to create new advantages.
The Rise of Social Networks, Platforms and Hubs. Facebook is a social hub with 2bn users, eBay is a trading hub with 170m traders and Amazon is one with over 2m merchants. Increasingly dense and pervasive communications and computing networks are pushing at physical boundaries and challenging the notion that proximity drives efficiency. With broadband wires communications and cloud technology enabling the global processing of data, technology makes location less important. However, networks still need nodes, nodes still need people who can operate the network and innovate new ideas, and people still need a social environment, culture, values, and team behaviours to flourish in. Despite the progress of the past 20 years we are still not yet living in a post-human era.
Special Economic and Tax Zones and Tax Wars. The Trump administration has cut US corporation taxes from 35% to 20% and income taxes by 2.4% for the rich and 3% for the poorer in America. This could well be the beginning of a battle for investment, talent and resources between developed nations. Special economic zones and free trade or tax-free zones are a modern tool for nations to attract businesses without altering the fundamental economics of the rest of their society. Such zones provide incentives in the form of land, tax concessions, reduced bureaucracy, favourable laws and rules. The Shanghai Free Trade Zone aimed to provide an environment of laws and rules that foreign businesses would find easier to operate in compared to what had been seen as “the Wild West” in the rest of China. There are an estimated 3,000 such zones in the world.
These major shifts describe how the world is re-organising by both concentrating and interlinking and signal the rise of hubs as both a natural phenomenon and as a created solution. In the global reordering of economics, politics and Beyond their industrial logical, hubs potentially have a much broader role to play in our changing world addressing political, economic and social imperatives societies underway, hubs provide the means to effectively focus industries in places where they are both most needed and best placed to succeed. Indeed, while the relative level of development of the host region and the politics that govern them might well sabotage their success, given that hubs are set to be an indispensable priority for the creation of wealth,development and stability in the world to come, regardless of the sector or level of development of the host region, they will develop both spontaneously and deterministically as a product of government policy. Leaders will therefore need to clearly understand the critical success factors required to build and ensure the success of hubs.
What it Takes to Build Hubs: Seven Key Inputs and Drivers of Success
Regardless of the sector or location of a hub there are a number of critical success factors that emerge from the analysis and stories of the rise and fall of hubs across the world. Policymakers seeking to adopt a hub-based development model will need to develop an execution strategy that fully addresses each of the seven factors below, (in addition to any local or industry specific issues as well).
Access to Talent. Access to human capital is perhaps the most important factor determining the success of a hub, as every industry needs appropriately skilled labour. For all hubs this means being located near urban centres, where large workforces generally are more concentrated. For hubs focusing on high value and more IP drive sectors though it also means access to highly educated and creative people. In practice, this requires close access to higher education and universities, which not only attract such people but also provide steady stream of new graduate talent. For example, Silicon Valley’s relationship with Stanford University is long and deep but a more recent hub like Bangalore also provides a good example of the importance of proximity to higher learning and the output of graduates. The city has 15 universities, 12 science colleges and no less than 27 graduate engineering schools. Partially as a result of this proximity, Bangalore’s IT hub manages to attract 72% of India’s engineering graduates for their first jobs.
Access to Financing and Funding. Access to a range of capital sources with varying appetites for risk, return and time horizon is clearly critical for any new hub. For industrial hubs this involves significant investments by corporations and/or government. For innovation hubs this requires access to risk and venture capital, which despite globalisation remains an overwhelmingly local business (with the majority of venture funds being invested in close proximity to the investor’s offices, where their relationship networks are densest). Equally important for technology and innovation hubs though is the ability for companies to access equity capital markets as an exit route for venture investors and entrepreneurs. While major equity markets are global, a vibrant local market provides additional flexibility in terms of access to capital and is essential for liquidity. In China’s case, major IT and pharma innovation hubs kick-started venture investing by creating matching funds that provide government capital to invest alongside private funds, increasing the pool of capital available within the hub and reducing the risk of investments for traditional venture investors.
Government Policy Support and Coordination. Almost all successful hubs have benefitted from some level of government support. In some instances, this has been top down and planned (such as China’s many industry hubs) while in others it has evolved over time. Even supposedly libertarian Silicon Valley has benefitted from massive government support over its lifetime: In 1992, Santa Clara County (the heart of Silicon Valley) received more defence contract dollars per capita, mostly for R&D, than any other county in the nation. Oracle got started doing work for the CIA, and much of Intel’s early output went to the Pentagon. And not to forget that the internet itself evolved from a US Department of Defense project. Modern hubs however, unlike Silicon Valley, will not likely have the luxury of decades to evolve, which implies a more focused and coordinated government policy of support including grants, tax breaks, public-private partnerships, preferred access to resources, building supporting infrastructure and others.
R&D Capabilities. In an increasingly IP-driven world, access to research and ideas (and the researchers who generate them) is critical to incorporating innovation into businesses and hubs, regardless of the underlying industry sector. While the majority of applied research focusing on short term commercialisation is driven by the private sector, c.76% of the basic research required for long-term innovation today comes from universities. Among the former category, even the very biggest non-university research groups place their institutes and researchers near universities to drawn on talent and ideas. The Max Planck Society, Europe’s largest research institute with 17,000 permanent staff and 33 Nobel Prizes, has placed each of its 83 research institutes near universities relevant to their field of study. Good universities, in other words, both create and attract R&D. Also, the wall between academia and business is becoming increasingly permeable too, particularly in the US, professors advise companies, and start businesses too, and universities license their IP to the private sector in exchange for royalties. Boston for example, has benefitted significantly from the transfer of IP from academia to the private sector: Boston’s eight research universities, including the world’s top ranked research university and the country’s best medical school for research, have enabled the build-up of a leading Med-Tech hub with the largest concentration of biotech companies in the world.
Integrating Supply Chains and Access to Factor Inputs. Access to factor inputs is critical for cost efficiency, speed and flexibility, particularly for industrial and manufacturing hubs. This includes not only natural resource and energy inputs, but also locally integrated supply chains, with first second and third tier suppliers located in near proximity. In manufacturing-driven hubs, scale is important so getting established companies to settle in and ‘seed’ the hub, rather than just encouraging start-up activity, is critical to their success. Government policy has an important role to play in this, often through the creation of special economic zones that provide incentives and support for companies locating there. For example, Taiwan’s semiconductor industry was driven in its special economic zones, where Taiwanese companies deconstructed the integrated semiconductor manufacturing model into the now standard model of fabless design, foundries and packaging and testing specialists, all located in the same hub.
Urban Development and Creation of High Quality Habitats. Finally, hubs will need to not only attract talent, they will also need to retain it. Providing a high quality of life is essential to this, particularly for knowledge hubs where workers are highly educated, mobile and have attractive choices of where to live. Building a hub in the desert for example would also require building an environment that people want to work, live and play in, which in turn requires schools, recreational facilities, shopping, culture, entertainment, sports venues, dining and other offers associated with a high quality of life. Dubai is an example of a city that built this quality of life into the master plan of its own development: among the many hubs it has seeded over the past decade(s) has been a world class tourism hub, that satisfies the needs of not just visitors but locals and expats as well. Accordingly, the city has been able to attract international talent on an unprecedented scale; there are nearly twice as many British citizens living in Dubai (100,000) a city of 2.9m people, than there are Caucasians in Hong Kong, a city more than twice the size.
Differentiation through Investment Capital Allocation, Access and Cross-Hub Synergies. The growing number industry and trade hubs worldwide, including tax free and free trade zones, makes differentiation a key to success. In the absence of having cornered a key resource required for a hub’s core industry, differentiation will likely need to be driven by policy choices and initiatives. Potential policy driven differentiators could include using an investment fund (potentially associated with the country’s sovereign wealth fund) to invest in the best companies coming to the hub or free trade zone or providing companies with favourable and facilitated access to national local resources and domestic markets. Alternatively, rather than competing, leading hubs could link together with competitors into ‘meta-hubs’ that collaborate and thereby create synergies between businesses in their respective zones. Such a “hub and spoke” perspective, potentially driven by the leading hub as the first among equals, would require a clear vision of how hubs can work together and alignment on whether loose collaboration or more rigid hierarchies create more value to the meta-hub’s constituents.
This is a formidable list and one that will stretch the resources and execution capabilities of many polities seeking to establish a hub. However, in the absence of these conditions being in place, creating a hub will take a level of effort that most countries cannot hope to sustain. Indeed, for every success story in terms of industry hubs, each of which would have gotten the above core success factors ‘right’ there is a cautionary tale of failure, either from hubs that failed to take off entirely or from initially successful hubs that were unable to maintain their positions and faded over time. Beyond the critical success factors common to all hubs, the lessons of those that are at risk of declining or have already failed, highlight the execution risks facing policy makers and the companies that form any hub’s lifeblood.
Given these challenges it clearly takes a lot of time and effort to create and sustain even one single hub. The US as the great superpower of our time can boast of at least three great established hubs: Silicon Valley for technology, New York for finance and L.A. for media and entertainment, while other G7 economies largely make due with one or none. Smaller nations will accordingly be stretched to make more than a single bet on a scaled industry hub, leading to potentially significant concentration risk, as the lessons from the at risk or failed hubs above demonstrate. Modern architects of hubs may accordingly need to consider ‘multi-hub’ approaches, either in the form of a scaled multi-industry hub or a series of distributed hubs, despite the exponential increases in difficulty and resource requirements such approaches would entail.
Finally, it is also important to remember that no hub, no matter how successful at its peak, is eternal. Ironically, the most innovative and successful hubs often sow the seeds of their own demise. Networking and communications technology No hub, no matter how successful at its peak, is eternal, and the most innovative and successful hubs often sow the seeds of their own demisefor example, is already reducing global transaction costs and allowing more and more tasks to be done remotely, thereby enabling more and more of a hub’s value to be created virtually, without the need for physical co- location While physical proximity is still important for most social environments, including hubs, today, its importance is certain to decline in the coming generation. Further, emerging technologies such as 3-D printing promise to fundamentally revolutionise manufacturing in resetting downward the level of scale needed to be economic, allowing for smaller and more distributed, local manufacturing. Over the long run, therefore not just the hubs themselves but the whole hubs model will need to innovate and reinvent itself to remain relevant.
Selected Future Themes for Hubs
Hubs have the potential to drive industry growth across a wide range of sectors and emerging themes, across technology, services, resources and manufacturing industries. Today, many emerging sectors, particularly those in early and development stages, suffer from sometimes global fragmentation and a lack of economies of scale to help drive innovation and growth. While Silicon Valley acts as a magnet for technology companies, the majority of electric vehicle or fintech companies remain dispersed or tied to the older industry hubs (automotive and financial services) from which they have emerged, rather than having a hub of their own to concentrate activity. The creation of hubs to channel development provides a significant opportunity for cities and regions to create employment, attract talent and generate long-term value. Potential future themes for hubs include the following:
Digital Technologies Hub. Digital technology is continuing to transform a wide range of industries and sectors, having already disrupted the IT sector itself. While the first generation of digital technologies have come out of information technology hubs, the next generation will be tied to a wider range of sectors, such as manufacturing (the Internet of Things) and media (digital content) among others. There is an opportunity to create new digital hubs focusing on the technologies that will disrupt specific industries. For example, Germany’s ‘Industrie 4.0’ blueprint for next generation manufacturing is clearly strategic to a country that still generates c.25% of its GDP from industry, yet still lacks a hub for the development and implementation of the technologies it envisages..
Electric Vehicle Hub. With multiple countries and cities mulling or having announced the end of selling gasoline powered cars as early as 2030, the electric vehicle space is set to undergo rapid transformation and growth. To date major automotive manufacturers have announced double digit billion-dollar investment programs in electric vehicles, yet no major hubs for the sectors have emerged thus far, with enabling technology coming from tech hubs, components from automotive clusters and manufacturing locations driven by legacy plant sites. With the majority of automotive investments currently focusing on R&D though, there is an opportunity to create a technology and research hub focusing on the future of electric cars and related vehicles including trucks, drones and the emerging space of light aircraft.
Digital Education Hub. Education continues to promise to be one of the key global issues of the 21st century. While in the past countries have built ‘physical’ education hubs focusing on attracting universities and facilities to provide education and training to regional populations, these physical hubs are unable to address many of the key global education issues. For example, 250m people worldwide still lack basic education and it is estimated that it will take the remainder of the century for education infrastructure in least developed countries to close the education gap to developed countries. And 16% of 25-34-year olds in OECD countries today are less skilled than their parents. Addressing these issues will require digital solutions for education, learning and skills development. With the applications of technology to solve key issues only beginning to be explored, there is an opportunity to create a hub focusing on technology driven platforms and content to deliver learning globally.
Smart Manufacturing Hub. Tied to the development of ‘Industrie 4.0’ digital technologies, including automation, sensors, the internet of things and cognitive computing is the smart, next-generation manufacturing that they will enable. The factories of the future will have very different requirements in terms of human capital, energy and resource inputs, logistics, and technical support than the semi-automated, assembly lines of mass production, creating an opportunity for the formation of a hub dedicated to smart manufacturing with a high degree of automation, close proximity to IT expertise, shorter supply chains, and access to advanced material sciences. With smart-manufacturing predicted to rebase downward economic scale, these hubs could be both smaller and further away from major urban areas than current manufacturing clusters, with initial smart manufacturing hubs likely to grow near the digital technology hubs that enable their creation.
Fintech Hub. Financial services technology, or fintech, promises to bring massive disruption to the financial services industry, fundamentally changing the way that services are delivered and consumed, including payments, lending and capital raising, and advisory services. With new business models and platforms such as a digital currencies and peer to peer lending and a heavy focus on data analytics, fintech presents a potentially significant challenge to established banks and existing financial services centres. A number of countries and states are therefore vying to attract start-ups, funding and talent to become fintech hubs in their own right. Though fintech, which attracted a mere $13bn in venture funding in 2016, remains tiny compared to the over $13trillion global financial services industry the size of the prize is significant and successful hubs will require close co-ordination between companies and industry regulators promoting the adoption of new technologies.
Environmental Technologies Hub. Renewable energy and cleantech have been two of the most globally recognised future themes, with an estimated US$16tn of investment committed by signatories of the Paris Climate Accords to meet their agreed upon climate plans. However, no country has thus far taken the lead in the creation of an environmental technologies hub to focus its R&D and investment in the space. Moreover, there is an opportunity to create potentially substantial synergies with the development of related industries such as water purification, sewage treatment, energy conservation and environmental remediation technologies. While many states have announced ambitious sustainable ‘cities of the future’ initiatives these have focused on the application of clean technologies and best practises, rather than on innovating and creating new companies in the space.
Healthcare Hub. With global healthcare costs at 10% of GDP and rising, new models are urgently needed, particularly given that the level of care provided to a majority of the world’s population still falls far short of developed country standards. Existing healthcare hub projects, such as the King Faisal Medical Center in Saudi Arabia, have focused on the provision of regional world class healthcare and increasingly on medical tourism. Solving the key issues facing healthcare in developed and developing countries will require moving beyond on-site treatment centers, incorporating med-tech and telemedicine to develop platform based solutions to deliver healthcare and wellness globally. An integrated hub that leverages on-site medical expertise and resources to development, test, and roll-out med-tech technology platforms has the potential to address key global healthcare issues.
Conclusion: Lessons from the Rise and Fall of Hubs for Today’s Leaders
Great powers rise and fall. Lesser powers, too. As do hubs. The demise of a world order creates massive disruptions to the systems that allowed less developed nations to ride on the waves created by pioneering ones. As the world transitions to a new order, leaders in autocracies and democracies alike will continue to feel the acute pain of creating prosperity. Not long ago, anti-globalisation was the movement of disenfranchised anarchists and since the 2016 US presidential election results and the Brexit referendum, this has moved to the mainstream. A whole wave of nations that previously looked at globalisation as a path to prosperity will need to think again. Hubs provide an important way for industries and nations to attract resources, transform them and use them to trade with the rest of the world. Hubs require huge investments in capital, marketing effort and time to launch. The potential prize is substantial and the risk of failure is accordingly significant too, particularly for those that lack the will, perseverance and the capital to make the required investments. In the early 2000s, it is estimated that China spent c.US$100bn in technology and creating c.50 hubs to catch up with global technology hubs. Its successes have been great but many of these hubs are already failing, relegated to just being employment schemes. Hubs that fail, especially in countries lacking the Chinese government’s commitment to stability, create slums. Indeed, without a vision that creates a differentiated vibrant centre of human activity that attracts the world, a hub is a centre for people to live without creating real value. From here it is only a short step to creating a slum.
So, perhaps most importantly, after the initial euphoria of the launch is over, the success of any hub will depend upon creating continuous innovation. Without it, even the most basic industrial hub will become obsolete as technologies and processes mature and established products and services are replaced by newer alternatives. This make the question of how to drive innovation the most critical one for policy makers looking to create hubs to address. The two In innovation, the individual seems to be as important, if not more so, than the team in making disruptive breakthroughs; without attracting such individuals, hubs lack a key success ingredientlargest explosions of innovation in the 20th century provide some clues as to the answer of this question. The electronics revolution gave birth to Silicon Valley and created the modern digital world that we live in today. The space race put a man on the moon, inspired thousands of students to pursue careers in science, technology, and mathematics and saw over 2,000 NASA developed technologies transferred to the private sector. Interestingly, both occurred at roughly the same time and were driven by people with very similar backgrounds: engineers from the US Midwest who were overwhelmingly middle class and from protestant non-conformist backgrounds. These pioneers shared a number of traits that were critical to their success and to the innovation that they spurred. They were firstly practical, having chosen to study engineering at a time when this was considered closer to a trade than a ‘real’ academic pursuit such as physics or mathematics. Secondly, they were overwhelmingly dismissive of large established corporate systems with command and control structures, and created egalitarian working environments where every team member could share ideas and contribute based on merit. These traits, along with openness and transparency, a focus on hard work and a culture of personal responsibility enabled the unlocking of the massive innovation
While huge spend can lead to some successes, creating an eco-system that reinforces success is a necessity. And a culture that promotes innovation is one of the essential ingredients for long term. In addition, the individual seems to be as important, if not more so, than the team in making disruptive breakthroughs. The original heroes of Silicon Valley include names like Bill Hewlett, Dave Packard, Bob Noyce and Gordon Moore. More recently, the hero of America’s victory in mobile communications over Finland and Japan, speeding the demise of their consumer electronics industries, is Steve Jobs. In driving innovation, heroes matter, too. Silicon Valley flourished long after Bill and Dave retired and the company that bears their names, Hewlett-Packard, fell from greatness, just as Apple’s founder has left behind a culture that has survived his own untimely departure Japan’s success in creating the world’s leading consumer electronics hub was driven by innovative heroes such as Sony’s Akio Morita and was systematised and built into a global force by the Japanese government’s METI/MITI department in the 1980s and 1990s. Initially, excluding foreign competition created a fortress from which to assault the world and remain protected but as time went by, it created isolation, insular thinking, over-catering for an atypical domestic customer and missing out on the world’s big waves of innovation, including mobile and internet. It is a law of nature that applies to hubs too, those that refuse to change and adapt, die.
1. Source: Santa Clara County government, Business Insider. Net new business formation defined as new business formation less business closures
2. See the Sign of the Times Series: The Shape of the World to Come
3. Source: Government of Bangalore (Bangalore First)
4. Source: Stephan, Paula (2012). How Economics Shapes Science. Cambridge, MA: Harvard University Press
5. E.g. Daimler’s recent announcement that it would be spending US$1bn to upgrade its existing Alabama plant for the manufacturing of electric vehicles
6. Source: GPC Research: “Creating Hub: The Competition of Nations; Lessons for Creating Successful Hubs and Silicon Valleys” March 2008
7. Source: Tom Wolfe, “Two Young Men Who Went West” printed in “Hooking Up”, Farrar, Strauss and Giroux, 2000
8. Robert Noyce and Gordon Moore, founders of Fairchild Semiconductor and Intel
9. See appendix for definitions and sources
Creating Prosperity for a Billion People: Re-architecting the System of Wealth Creation