It is often said, with reason, that the world of technology is overwhelmingly dominated by men. Although female figures such as Mary Meeker, Sheryl Sandberg, Kara Swisher, Connie Chan, Jennifer Pahlka, Arlan Hamilton and Kim-Mai Cutler are emerging as key Silicon Valley personalities, we’re still a very long way from correcting the gender imbalance in the new digital order. And yet three women, over the course of the past 25 years, have already provided us with key works that make it easier to understand the current Entrepreneurial Age.
Carlota Perez, a Venezuelan economist who teaches at several European universities, is the author of Technological Revolutions and Financial Capital. Published in 2002, the book has become a must-read in the venture capital world and should be one in every tech community.
In Perez’s model, every technological revolution since the Industrial Revolution has been divided into two very different phases. The first, called the installation phase, is when entrepreneurs and financiers call the shots as they’re the ones investing in a new technology that has barely emerged and that very few people understand yet. Then comes the deployment phase, in which society as a whole is shaped by the new paradigm. This is when governments, in particular, must take charge and build the institutions that can render the new way of living more sustainable and inclusive.
Apart from the strength of the argument and the breadth of the historical narrative, the fact that Perez’s book was published in 2002 explains a large part of its success. That year, after all, was just 18 months after the bursting of the dotcom bubble. Most people thought that it was all over and that things would settle back to normal. But those who read the book at the time realized that a bubble bursting, in Perez’s breathtaking history of technological revolutions, doesn’t mean that the revolution is over. Instead, the burst always marks the inflection point between installation and deployment.
What Carlota Perez’s work doesn’t explain, however, is why exactly Silicon Valley emerged as the core of the new age of computing and networks and became for today’s economy what Detroit was to the age of the automobile and Pittsburgh was to the age of steel.
The key contribution in that regard is AnnaLee Saxenian’s diptych Regional Advantage and The New Argonauts. The former, published in 1994, discusses what made Silicon Valley so successful as compared with the Route 128 cluster in Boston. The latter, published in 2006, details the relationship that was built between Silicon Valley and other regions of the world by way of constant immigration flows.
And so while Perez provides us with a historical perspective on the rise of computing and networks, Saxenian, of the University of California in Berkeley, offers a qualitative discussion of what exactly makes a region prosper in the new age. According to her, the key to succeeding in the age of computing and networks is to have a dense ecosystem in which the circulation of resources—talent, capital, ideas—between firms is encouraged rather than repressed.
That may sound obvious now, but before Silicon Valley emerged as the core of the new age, most parts of the economy weren’t organized like that at all. The Boston area, as discussed in Regional Advantage, was all about big, vertically-integrated minicomputer companies that had very few interactions with each other. Likewise, Detroit had been dominated by three giant industrial powers—GM, Ford, Chrysler—that made it impossible, by way of non-compete clauses, for their most talented engineers to hop from one car company to the other.
Nothing of the sort existed in Silicon Valley, where the spirit of the frontier led to people ignoring the status quo, and where the state of California made it illegal to enforce non-compete clauses. Thus talented employees were effectively encouraged to leave their employers and start their own firm—in which their former bosses, rather than suing them in court, would gladly invest as angel investors. And this approach to doing business, history tells us, is what makes an ecosystem thrives in today’s economy.
Mariana Mazzucato, finally, is here to rectify the false impression that we could derive from reading all those extraordinary tales about great entrepreneurs and their financiers.
In her landmark book The Entrepreneurial State (2013), Mazzucato, now the head of the Institute for Innovation and Public Purpose at UCL London, reminds us that innovation is not just about the private sector developing new technologies and creating vibrant regional ecosystem. Rather it involves the state building up the infrastructures and core technologies that entrepreneurs need to succeed, and then staying involved with its unique capacity to shape markets and impose a direction for innovation. Only the state, because of its size and extraordinary resources, is able to tackle the large-scale missions that are winning a war, developing a lagging economy, and solving wicked problems that cross various fields.
And so what we need to rediscover, as Mazzucato argues in her latest book The Value of Everything (2018), is the value that the state creates. When the private sector is left alone to explore the frontier, it ends up favoring short-term financial results rather than tackling difficult missions. And when the state goes missing in times of radical change, problems such as unaffordable housing and climate change can become mortal threats for the economy as a whole.
Knowing the history of technology, understanding innovation clusters, and remembering the critical role played by the state: this is what we owe to these three great authors and thinkers that every policymaker, as well as every member of the tech community, should be reading with the utmost attention.
