In Business Not Just Silicon

Listen to Not Just Silicon (16/05/2010)

I keep coming back to Silicon Valley, California. No matter how many other places in many other parts of the world seek to emulate its success in spawning ideas and businesses, there really is nowhere else quite like it ... not for the balmy climate, not for the energy, not for the confluence of really bright people, money, advice, marketing nous and successes that everybody knows about (off by heart). Also failures, but I'll come to them in a minute.

So for a reporter on the hunt for stories that illuminate the creative drive behind entrepreneurs who build businesses, the Valley is still unsurpassed, though many other global hubs are catching up fast.

I was there the other month on a simple errand: to find a few good start-ups and let the people who created them tell their stories. The videotaped results will be up on the BBC website very soon. Radio eavesdropped on what we heard and the result is this In Business, with another one coming up later in the summer.

Two of the stories in this programme are retrospective. I'll annotate succinctly the lessons one of them may hold for other would be entrepreneurs. Max Levchin talks about the invention of what became the Internet payments system PayPal, sold for $1.5billion to the auction site eBay in 2002.

Max Levchin emigrated with his parents from Ukraine in 1991. Immigrants supply much of the creative energy in places such as Silicon Valley, many of them Indians and Chinese. They are hungry, clever, and determined to leave behind their limited prospects at home and start news lives in a new country.


Max Levchin studied at the University of Illinois in Urbana-Champaign. Fellow students were even then inventing the Internet browser system Mosaic. Inspiration was in the air on the beautiful campus of Urbana-Champaign. Max Levchin started several businesses, but failure (see below) drove him west ... to Silicon Valley.

Fleeing his sweltering rented apartment without air conditioning, Max Levchin sheltered from the heat by attending public lectures at nearby Stanford University. At one of them he met by accident his future business partner and funder, the serial investor Peter Thiel. Max wanted to create a new world currency. Thiel backed him. In a place so buzzing with ideas and ambitions, companies are created by happenstance.

What became PayPal burned money. It was originally designed for mobile phone transactions. The business almost turned its back on the idea it could be used on the full-out Internet. An importunate outsider changed Paypal's mind. Businesses evolve not out of a single vision, but by iterating over and over again ... particularly by being shaped and responding to the way customers use their goods or services.

Security became a prime concern, as Internet criminals turned their attention to cracking the PayPal system. The original intention of a business is often subverted and defined by knock-on consequences which determine the long term viability of the original idea.

PayPal was a corporate business movement, not just a company. After the sale to eBay, the now wealthy members of the eBay company charged off in all directions round the Valley, starting billions of dollars worth of new businesses. One of PayPal co-founders, Elon Musk, not only runs the Tesla electric car company (listen to this episode of In Business to find out more about Tesla Motors) but is making cheap and maybe revolutionary space rockets at his SpaceEx company in Los Angeles.

There are many others. For many entrepreneurs once is not enough. The thrill of the chase has impelled Max Levchin into founding another influential Internet social network business called Slide. Entrepreneurial successes create their own potent networks.

There are many more start up lessons in this programme ... from Nick Swinmurn who founded the huge online shoe store that became because he couldn't find the shoes he wanted in the shops he was looking in one day back in 1998.

Already wealthy, Nick Swinmurn left Zappos before it was sold last year to no less an Internet retailer than for $1.2billion.


And after years of starting high technology software and hardware companies in the Valley, Kevin Surace has now followed the lure of green tech and moved back into the physical, touchable world, with his start up Serious Materials. He explains how he is trying to revolutionise the huge but conservative construction industry with new windows and walls.

Serious Materials has just started on a contract to replace all the windows in the Empire State Building one by one, overnight, and give the owners energy cost savings worth (it is said) millions a year.

After all this head turning success, let me add an observation vital to the understanding of why Silicon Valley remains so powerful a place even as all around it the state of California is hard hit by the credit crunch recession and close to bankruptcy.

My friend Paul Saffo is a celebrated futurologist who has been watching and participating in the Valley for decades. Here is what he tells me in the programme, in words so potent we actually run them twice, which is not something we often feel moved to do.

Paul Saffo says: "The absolute secret to Silicon Valley success is failure. This place reinvents itself because we know how to fail in the right way.

"Silicon Valley was not built on the spires of earlier successes but on the rubble of earlier failures ... the companies that grew large and then collapsed in a spectacular way and then a bunch of little start ups colonized their old offices.

"You see this again and again and again in the Valley. This place works because we know how to fail".

Another (big) lesson: They know how to fail.

Listen to Not Just Silicon (16/05/2010)

Previous Programmes

Watch Your Language - Peter Day joins a group of enthusiasts determined to improve the language of business.

Keep it Local - As pubs struggle to survive, Peter Day travels through villages in Yorkshire and Cumbria to talk to local activists.

Space - Peter Day asks what happens next on the USA's journey into space.

German Pencils - Peter Day asks Faber-Castell and Staedtler how they both stay sharp ...

Building BRICS - Peter Day finds out about the BRICS - Brazil, Russia, Indonesia and China

Over A Barrel - Peter Day contemplates the turmoil in the Middle East and fears it will affect the price of oil

Reconstructing Capitalism - Peter Day hears all about the challenges to the way capitalism works.

All at Sea - Peter Day hears all about sea transport.

China Dispossessed - Peter Day hears about some of the problems caused by China's rush for prosperity.

Back on the Road - Alan Mulally tells Peter Day how he changed the way Ford works and how it is now back in the business of selling cars.

Asia Bling! - Peter Day ponders how the rise of the Asian comsumer will change business.

Euro on the Rocks - Peter Day asks what is the future for the Euro?

Bitter Pills - Peter Day looks at changing face of drug development.

Operation Robot - would you allow a robot to operate on you? Peter Day looks at robot-assisted surgery.

Growing Pains - Peter Day asks, what is the main component of growth?

After the Crunch - Government funding and regional development: the view from Newcastle.

Chips off the Old Block - Computing in the UK, past, present and future.

Hidden Depths - Graham Hawkes, DeepFlight and exploring the oceans.

Sociability - How social technology makes new business models possible.

Are CEOs Up to the Job? - Two thirds aren't according to Xinfu's Steve Tappin. Peter Day investigates.

In at the Start - Saeed Amidi and Silicon Valley

Power Play - Is the 'smart grid' the start of something big?

Now Wash Your Hands Please - How a simple idea can transform lives in the developing world

Coming Soon - What can the experience of previous financial crises tell us about the current one?

Ticking Over - Can the Isle of Man rejuvenate the business of watchmaking?

Not Just Silicon - what can Silicon Valley teach us about innovation?

Press under Pressure - what lies ahead for the world of newspaper publishing?

Remembering CK Prahalad - in a world of change and multiple opportunities, how does a company keep up?

Rwanda Rising - building a clean safe state where business can flourish.

Life Cycles - building businesses around the idea of new kinds of bikes.

Who Sets Our Standards - the business and social benefits of standardisation.

Ready to wear - the ethical issues of the international clothing industry.

Doing It Wrong - what's wrong with the way business works?

New Age - the business of aging.

Project Alcatraz - rehabilitating offenders in Venezuela.

Selling Salvation - Peter Drucker and the Salvation Army.

Let Me Entertain You - office parties and away days.

Brazil's Sugar Rush - Brazil.

Small Wonder - microfinance.

Unlimited Company - organizational models.

Credit Crunch - cash and credit.

Student Startups - student entrepreneurs.

Media Mayhem - changes in the newspaper industry.

Squeaky Clean - branding.

Battery Power - Bolivia.

Women's Work - women in the city.

Hell For Leather - John Timpson and Timpson's Shoes.

Learning Curve - organisational culture.

Let's Start a Bank - banking.

Goodbye to Intel - Craig Barrett and Intel.

Location Location - So?

Iceland feels the Heat - the credit crunch in Iceland.

The Cisco Kid - Mike Lynch and John Chambers.

Grand Design - business schools.

Power Drive - the car industry.

All New - innovation.

Europe on the edge - What is this thing called "Europe"?

For more programmes visit the In Business programme archive.

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