Silicon Valley or Demand Mountain?

BELLEVUE, WASHINGTON – Everyone wants to know how to build the next Silicon Valley: an innovation hub that draws talent and capital, and that creates jobs, companies, and whole new industries. Developed-country governments scramble to subsidize technology that could be the Next Big Thing. Emerging-market policymakers hope that incentives like tax breaks and free land will induce innovators to settle and prosper there. But most of these well-meaning schemes are missing an essential ingredient: demand.

Demand for innovation in specific areas of technology has been the common force behind all high-tech hot spots, as well as the most important inventions. Technological breakthroughs such as antibiotics and cars responded to a compelling need felt by a huge number of consumers. Government projects such as the United States’ Apollo program – intended to put a man on the moon – drove demand for more basic technologies (which are simply inventions that no one has asked for yet).

Silicon Valley itself was built on demand. The US Department of Defense put up tens of billions of dollars in contracts for microelectronics, a commitment that both paid down innovators’ risk and created an infrastructure that would support the growth of start-ups.