Why is the tech industry in the SF Bay Area?

Is there a specific reason, or is there—were there specific events that occurred which has created this strength or grip that the Bay Area has when it comes to technology? I don't think it is a path dependent history. In other words, I don't think that Silicon Valley is Silicon Valley because a set of magic events happened in Silicon Valley at a particular place and a particular time. Rather, I think it's driven by geography. Believe it or not, geography is destiny.

Every major industry in the United States dominates a particular town, and the United States is the dominant empire of our age. So how does this capitalist empire divide up its cities? That's the question. The finance industry dominates New York. Yes, there are many other industries in New York, but New York is uniquely the financial capital of the United States, which is the capital of the world.

So if New York were to stop being the financial capital of the United States, it would be extremely felt within New York. The rest of the New York industries would collapse because everything you see there—from art and media and advertising to fashion, etc.—all of these require a healthy financial industry. So in New York, finance dominates, and finance is New York, and New York is finance.

So New York is taken. You cannot move the tech industry to New York. I know people are trying, but it just disappears. There are too many other things to do; there are too many distractions, and you'll always be number two. It's taken. Hollywood is older than the tech industry. So by the time the tech industry came along, Hollywood was taken.

Los Angeles was taken. Los Angeles is dominated by Hollywood, and it is a cultural capital of the United States. It is where all the media and the memes are produced, so it is taken as well. Too bad, because it's a great piece of land. You can't stick the tech industry in Hollywood; it would disappear into the greater mass of Hollywood, and tech would be second-class citizens. The whole town caters toward Hollywood, so it wouldn't cater towards the needs of tech, just like New York caters to finance, and it would not cater to the needs of the nerds in tech.

The tech industry, when it was first being formed, you could argue, was fairly mobile. There are many choices, so you could basically set up shop anywhere. You could set up shop in Seattle. You could set up shop in Portland. You could set up shop in Texas. You could set up shop in San Diego. You could set up shop in San Francisco. You could set up shop in Miami. You could set up shop in Chicago. You could set up shop in Boston.

Why Silicon Valley? You could argue that's because of universities and colleges and talent, but that's not true. The university college talent capital of the United States is actually in Boston—it's Massachusetts. Harvard is there; MIT is there. There are a number of universities there. The Ivy League is all up in the Northeast. It's only in the recent few decades that the talent has migrated west towards Berkeley, Stanford, and Caltech.

You could argue that it's because of government support and spending—all the money that the government sank into semiconductors in the Bay Area—but that begs a question: Why were the semiconductor companies in the Bay Area? I don't think it's as simple as government spending. San Diego is a huge beneficiary of government spending, and government spending tends to go where the talent is. It's not usually the other way around.

There are places like Los Alamos that never developed any significant tech talent after the Manhattan Project. There's also plenty of government spending and plenty of money in Texas—in Houston, in Dallas, in Austin—but you don't see the tech capital of the United States going there.

So again, why San Francisco? I argue it's because of the nature of the workforce. The tech workforce, like them or not, consists of the most wealthy and most creative individuals on the planet. They can earn from anywhere. Even though remote work is a more recent thing, nobody has been able to do remote work at all in the past. And to the extent that they ever have, it was because of tech.

So the tech people are the only ones who can be able to do remote work. They also can work in smaller teams, so they are more mobile. These are very creative, very intelligent people—the best engineers in the world. You would hire them no matter where they choose to live.

And I think this highly creative, highly paid workforce—highly talented, highly mobile—works in small teams and can work remote. They want to work in the best place in the world. Where is the best place in the world for them to work from that is not already taken?

So I think it's natural for them to choose the San Francisco Bay Area. The San Francisco Bay Area is absolutely beautiful. If you actually look at the physicality of it, it’s gorgeous; it has Mediterranean weather. Yes, people make fun of it for being cold, but it probably has the second best weather in the United States after Southern California.

It's still in California, so you have access to things like Napa, Los Angeles, San Diego, San Simeon, Big Sur, and all kinds of gorgeous places. The city itself is very beautiful if you're in one of the safer, cleaner parts. It's also on a coastline, which is important for all kinds of obvious reasons. It has a great food supply from Napa; it has great water from Hetch Hetchy Reservoir.

It's not so big of a city that it's already taken over by another industry, and you would just get lost in it. It requires you to be quite wealthy if you want to live there. It's also full of creative people. A lot of the creative movements in the past—everything from the 60s cultural movements to many art movements and poetry movements—started in San Francisco.

If you're in the South Bay, areas like Palo Alto, Los Altos, Saratoga, etc., these are some of the most beautiful places on Earth. Gorgeous Mediterranean climes, rolling hills near the water, incredibly safe, incredibly clean. What's the problem with them? They're very expensive.

And why are they expensive? Simply because they're in high demand; they're great places to live. So my thesis is that the reason why the tech industry is in the Bay Area is because at the time the tech industry was forming, the key people who were forming it were wealthy, creative, capable, worked in small teams, and were remote. So they looked around and they said, "What's the best part of the country to live in that isn't already taken over by somebody else?"

I'm not even sure they thought it through that explicitly, but they voted with their feet. And yes, once they got here, then path dependency took over, and of course, Stanford and Berkeley and Caltech helped. I'm not taking away from any of that, but I'm trying to explain why the Bay Area. I think at the time they had to make the move, these people picked the best piece of land that was available to them.

It's possible that if they had to make the move in the 1920s or 30s, they might have picked Los Angeles before it was taken over by Hollywood, but that ship had sailed. For those of you curious about Seattle, the reason why it's a runner-up and has two amazing companies there—Amazon and Microsoft—is because it is also naturally beautiful and wasn't taken over.

Unfortunately, the weather is just not up to par. If you're curious about Houston, Dallas, and Austin, Houston and Dallas are already taken, and Austin is landlocked. It does have a beautiful lake, but if you're going to pick the best place in the world to live, you want a coastline. If you're curious about Chicago, it's too cold and landlocked. If you're curious about Miami, it’s because it's not actually that pleasant in the summer.

The good weather months are only about four to six months, and it's dominated by, unfortunately, drug culture and obviously has a rich history as being the second city of Latin America, so it is already very, very culturally taken.

Also, keep in mind that highly creative people prefer to be in close proximity to each other, and believe it or not, San Francisco is the second densest city in the United States, second only to New York. So cities like Miami and Los Angeles that are spread out have a much harder time competing for talent.

Does this mean that the tech industry will always stay in San Francisco? No. San Francisco is busy playing pluck the golden goose’s feathers as far as we can go. However, if it were to disintegrate from here, my hope is that it would retreat to the internet and not to any single geographic location, although the technology isn't quite there yet, but we're getting closer every day.