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It's a jungle out there...

...and this book might be the way out. Silicon Valley is roughly thirty years old, and while the region's success has been lasting, replicating similar technology hubs elsewhere has proven especially challenging. Considerable resources have been applied to understanding Silicon Valley, but what was hoped to be a model still seems more like a mystery.

Two respected Silicon Valley insiders, Victor W. Hwang and Greg Horowitt, now claim to have solved the mystery by proposing a radical new understanding of Silicon Valley's innovation system in their book, The Rainforest: The Secret to Building the Next Silicon Valley.

Using clear language and concrete examples, Hwang and Horowitt upend conventional wisdom by demonstrating that "free markets" are actually constrained by invisible transactional costs created by social barriers, such as the perceived differences between people in class, status, culture, and language. These social barriers reduce trust, the authors argue, impeding the flow of information and the circulation of resources throughout the system, thus limiting the ability of entrepreneurs and innovators to access the means they need to succeed.

In productive innovation systems like Silicon Valley - what Hwang and Horowitt call "Rainforests" - people are encouraged to trust each other regardless of cultural background, status, or social group. Individuals are willing to share resources without expecting something of equal value immediately in return. Thus, transactional costs are reduced, speeding the movement of talent, ideas, and capital. A young entrepreneur in Silicon Valley, for example, can therefore more easily access the assistance of a seasoned business professional than they could in a traditional social environment.

"To explain the difference between highly productive systems like Silicon Valley and most other places in the world, what is most important are not the ingredients of economic production, but the recipe - the way in which the ingredients are combined together," the authors write. "Human systems become more productive the faster that the key ingredients of innovation - talent, ideas, and capital - are allowed to flow throughout the system."

Hwang and Horowitt also challenge the fundamental notion that economic productivity is highest when the rational pursuit of selfish motives is greatest. When it comes to the culture of Silicon Valley, and to innovation systems in general, they claim individuals must rise above short-term selfishness and focus on long-term mutual gain in order to produce the greatest overall economic benefits.
Describing how a rainforest works requires a host of scientific disciplines. Similarly, the authors draw from a range of natural and social sciences to detail the human ecosystem of Silicon Valley - including sociobiology, economics, political science, psychology, chemistry, neuroscience, physics, and mathematics. Their emphasis on practical observation and application, however, is what enables them to combine ideas from disparate studies into an accurate depiction of the ways innovation hubs work in real life, with all the complexity, dynamism and symbiotic interdependence of real-world ecosystems.

The book also provides specific tools that incubator professionals and others can use to improve their innovation systems. These tools include the underlying rules of behaviour that cause people to come together in successful innovation communities, and an actual recipe for fostering the environmental conditions that cause an innovation Rainforest to flourish.

The authors' perspective is informed by their experience as entrepreneurs, venture capitalists, and consultants in Silicon Valley and around the world. Their firm, T2 Venture Capital, combines a venture capital fund with an international technology development consultancy specializing in regional innovation hubs.

Whether you're an incubator professional, venture capitalist, entrepreneur, economic development expert, or whatever your field, the book has a wealth of ideas and tools you can apply to foster innovation in your work.
Published on 27-02-2013 13:09 by David Tee. 822 page views

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