Three reasons behind the success of San Francisco and Silicon Valley

The industry in Silicon Valley and San Francisco is experiencing a gold rush for the second time in history. 160 years ago it was precious metals that was the carrot on a stick. This time it is talent, information, technology and connections. Investors all over the world are flocking to this hub of innovation and…

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The industry in Silicon Valley and San Francisco is experiencing a gold rush for the second time in history. 160 years ago it was precious metals that was the carrot on a stick. This time it is talent, information, technology and connections. Investors all over the world are flocking to this hub of innovation and do not seem to be stopping any time soon. During my time in the San Francisco bay area, comprising San Francisco and Silicon Valley, I distinguished some key qualities that can be attributed to the success over the recent years.


  1. The Weather

Yeah, seriously. Professionals that I have spoken to all credit at least some part of the San Francisco area’s success to the fact that the weather is so pleasant. The combination of being situated in southern California while still so close to the coast and the cold Pacific Ocean makes the climate extremely friendly and rarely too hot. People are more likely to leave their homes and interact in a setting like this, and vitamin D is something that no one is deficient of. Compare this to Sweden where it is literal pain to leave your home in some parts of the winter and the sky can stay cloudy seemingly for weeks. People in the Bay Area go out in the nice weather with a positive mindset, to then seek rescue in a shady salad bar or café with a friend or colleague. This is where ideas are crafted…


  1. The mentality

There is a saying that goes: Silicon Valley is a mentality, not a place. And while that might sound like a cliché there certainly is a special mindset going on here. People really want to help you, and people really are interested in you. When I spoke to employees at Nordic Innovation House they highlighted the difference between how people handle their ideas in Silicon Valley versus in Sweden. In Sweden an idea is often seen as something secret, as someone’s intellectual property. To share one’s idea with someone else is the last thing one wants to do whereas the opposite holds true in Silicon Valley. Here, people share their ideas left and right, because they know that if a large group of people shares their ideas with each other they will come up with new, better ones. Also, people are not shy to introduce you to someone if they think you might be interested in each other. The mentality is often called pay-it-forward, which means that people will do you a favor without asking for anything in return. Instead, they expect you to do the same to someone else in the future, enabling a virtuous circle of companionship and progress.


  1. The infrastructure of the city.

Silicon Valley is not more than a few miles across, however you choose to define it. Still it is home to most of the best known technology companies in the world. How did that happen? The area benefits from being a so called external economy of scale. That means that business in the area becomes proportionally more profitable (the marginal cost of production decreases) the more business there is. We can relate to the classical “equation” of 1+1>2. The reasons for this are many. For once, the tech industry is in big innovational expansion. Normally when this is the case, a lot of valuable information can be attained by interacting with other companies in the same industry. Being that Silicon Valley is such a dense area, employees from different companies interact with each other constantly on lunches, conferences and various other events where they exchange ideas with each other. Of course the process is greatly helped by the already discussed idea-sharing mentality which enables bigger and more complex innovations to generate. This density also has a lot of advantages in areas such as personnel, supply and research. Specialized personnel is more likely to come to Silicon Valley, because it is connected to less risk than other areas to work in. If you are let go, there are tons of other companies in the same industry willing to employ you right away. If you are fired in the morning, chances are you have a new job in the afternoon the same day! Manufacturers of special equipment are also likely to be based in an area like this, where there is lots of demand for their product, cutting down shipping costs drastically. Even if they are based elsewhere, they usually have a tailor made shipping solution to this area making it way cheaper to order equipment to here than to any other remote place. Finally, the quest for knowledge is easier to pursue in the Bay Area, economically speaking. Geographical closeness to many information hungry businesses makes funding of research much easier for a university, since many of those businesses are willing to invest in it, hoping for it to pay off in the future, which it does for the whole economy. This is definitely a reality for Stanford University.

About Nådiga Lundtan

Founded in 1948 and has since been an important part of student life in the economics program at Lund University. Nådiga Lundtan covers a wide range of topics related to economics, society, and politics, as well as careers, entrepreneurship, and innovation. It is a platform for students to share their ideas and opinions on economics and related fields.

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