Every year San Francisco plays host to the International Solid State Circuits Conference (ISSCC), one of the big events in the world of chip design. And every year, someone asks me why a conference on the West Coast is sponsored by the University of Pennsylvania.
It's because the conference started in the late 1940s when the computer industry was centered in Philadelphia. The supercomputer ENIAC came out of Penn while Sperry-Rand was an early pioneer. TV was concentrated there too – hence the name Philco.
If "first mover advantage" held true, Philadelphia today would be like a cross between Palo Alto and Seoul. However, it didn't, so now you don't get bombarded with articles about Tastykake Chic or multimillionaires driving up home prices in King of Prussia.
The ISSCC example underscores an important point. Namely, technology centers don't occur or stay where they're supposed to. In the 1980s and early '90s, Israel, Taiwan and South Korea all became technology powerhouses. During the same time, all three topped Foreign Affair's annual "Top Five Countries to Most Likely Overrun in Wartime" poll. I remember once being on a call with someone in Haifa. He asked me to wait for a second. When he returned I asked him where he went. "The missile alarm went off. As I was saying..." he calmly continued.
The same will be true in greentech. In fact, to some degree it's already happening. VCs, among others, predict that Silicon Valley will become the epicenter of the U.S. industry because their friends live there and they're just fabulously talented people. But look at the four big U.S. clean IPOs: SunPower, First Solar, Comverge and EnerNoc. Only SunPower came from California.
So what are the secret ingredients?
1. Government Incentives: Tech companies have a bifurcated view of governments. On one day, they are meddling know-nothings trying to crimp entrepreneurs. The next, they're forward-looking partners who need to provide more in grants and tax breaks. History shows that tech corridors grow where incentives thrive. Incentives won't guarantee success – Dubai offers chip companies 50-year income tax holidays and discounts on real estate, but its chip industry remains dead (yet still a crucial element). Fred Terman, Stanford's provost back in the '50s, essentially created Silicon Valley by first observing and then exploiting the connection between government research grants and private enterprise.
2. Universities With Well-Honed Tech-Transfer Policies: Tech transfer is often derided. At some schools the office of technology licensing (OFL), is called the office of tired losers. But, again, nothing proceeds without it. Moreover, foreign universities are finally starting to replicate how the successful ones in the U.S. do it. In Denmark, the technology transfer offices only charge a nominal royalty, instead of the double-digit rates that some schools tried in the past. Ireland has created a national network of labs that combine university researchers and successful businesspeople from the private sector. At another school, a professor said they want to hire fewer professors schooled in the "German method" where commercialization is frowned upon.
And where they can't copy American methods, foreign companies buy the expertise. Singapore has a medical school that's essentially run by Duke University. Qatar has branches of Carnegie Mellon, Northwestern, Georgetown and Cornell Med. Meanwhile NYU is building an undergrad school in Abu Dhabi, while MIT is building a graduate school in energy. Go team.
3. A Disloyal Workforce: In Japan, Germany, France and Spain, employees often remain at a job for decades. In Taiwan, Israel and the U.S., if you stay at a job for ten years, people begin to look at you as if you were related to the Elephant Man. And it's no coincidence that those last three are hotbeds for startups. Put another way, having a boss that doesn't know what he is doing is good for the economy.
4. A Weak Services Industry: If you go to a country where the adults complain that college students only want to go to work in sales or on the local equivalent of Wall Street, you're seeing the first part of the decline of a civilization. We're sort of living through that now. In a nutshell, if the best and brightest of the youth are drawn to consulting firms, law firms or finance, that country will stop producing things. In China and South Korea, engineering remains the easiest, most coherent and surest way to upper-middle-class nirvana.
5. Access to Capital: This factor, frankly, is way overrated. Investors are willing to travel. I'm just mentioning it because people with money get miffed if they are ignored.
6. A Good "Old Boys" Club: Sacramento and Austin are rapidly spawning cleantech companies. The technology is coming out of the universities and the companies are being run by ex-Intel and HP execs who know how to run things.
7. A Transparent Legal and Accounting System: Again, another waaay overrated factor. The libertarians love to harp on this one, but it's mostly irrelevant. Japan's economy soared in the '70s and so did bribery. In South Korea, publishers routinely give expensive gifts to advertisers and large companies pay reporters to appear at their press conferences. In India, a friend (and high-tech exec) told me how he won what he felt was a trumped-up lawsuit: He bribed his way into the evidence room of the court and took the crucial documents home.
The crucial factor here is something I call the gun rule. Basically, if criminals and bureaucrats need to use guns to convince you it's necessary to bribe them, more transparency is needed. A VC that does deals in Russia told me a policeman showed him a gun to get a bribe. Later the cop just sort of walked up and gestured with his shoulder. So progress is possible.
So where will greentech thrive?
1. The Usual Characters: The U.S., but with a greater emphasis on regional development instead of a Silicon Valley-centric view – Israel, Finland, Singapore, Denmark, India, China. The techniques are fairly well understood. The U.S., India and China have huge local markets while Finland and Denmark have extensive clean expertise and easy access to Europe. Japan will also do well but mostly because its conglomerates already effectively make it a greentech center.
2. Up and Coming: Abu Dhabi, Singapore, Ireland and (longshot) Argentina. Most of the pieces are in place. The problem is the universities. Abu Dhabi, Singapore and Ireland are all fairly small and a somewhat small percentage of graduates go into the sciences, but that could change.
3. Maybe: Brazil, Mexico, South Africa, Germany, Jordan and Spain. Germany? Isn't it the world'ssolarcenter? And a big automotive engineering center? Yes, for now. But Germany was also a big computing center in the '70s. A conservative business environment, however, hampers growth. (Besides, who wants to listen to the lecture about how fat and stupid Americans are. It can really dent an expat's fun.) A person I know that opened a branch in Brazil had to buy new laptops to replace the ones taken by the gunmen.
4. Never Happen: Dubai, Russia and Romania. This is the flipside of the disloyal workforce. Dubai depends on imported talent who will leave whenever anyone else offers a raise. Russia and Romania, meanwhile, have great local talent, but it's easier to export them than try to start companies there.