My Perspectives On What Makes Silicon Valley Work

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Rose Walters
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1 My Perspectives On What Makes Silicon Valley Work Liz Kniss,Mayor Of Palo Alto,Califonia,USA Thank you,. I am delighted to be here today to share my perspective on what makes Silicon Valleywork. As you heard in the introduction, I have spent 15 years in public office.both at the local level as a City Council member and two-term mayor of Palo Alto.and now as a Santa Clara County official for the 4th largest county in California.where Silicon Valley is located. At the same time, I have been part of the Valley's high-tech world as it has grown and prospered over the last decades. I worked at Sun Microsystems for many years, in the communications area giving me a unique perspective of the workplace in our Valley Today I want to bring those experiences together.in order to focus on the four areas where I believe government can have the greatest impact on technology hubs. And from the outset, I want to acknowledge that the impact of government can be either positive or negative. There is great potential to promote success.and there is equally great potential to impose barriers or simply foster inertia. We are fortunate in Silicon Valley to have a history on the positive side and many believe it has made a huge difference. The four areas I want to comment on are education, land use, housing and transportation. I will talk about each one individually, but it will quickly be apparent that they are inter-related and, in fact, interdependent. Let me begin with education. The seeds of Silicon Valley's

2 success were planted over 100 years ago when Stanford University was established adjacent to Palo Alto, part of the district I now represent. No doubt most of you are familiar with Stanford, but you may not know that since its founding in 1885, this university was meant to be different. On the East Coast at the end of the 19th century, famous schools such as Harvard, Yale and Princeton were producing graduates who were well versed in the classics and liberal arts. But these students were not necessarily well prepared for the pioneering and adventurous spirit of life in California. Former California governor Leland Stanford said, "Of all the young men who come to me with letters of introduction from friends in the East, the most helpless are college young men." So when Jane and Leland Stanford decided to found a new university on their farm land south of San Francisco, their concept was to produce "cultured and useful citizens who were especially prepared for success in their chosen professions." That practical emphasis imbued the university with a culture that welcomed, and actively sought, interaction with industry. In the post-world War II era, it also meant that Stanford eagerly sought government funding for research. Its growth as a private institution was to a large degree fueled with public investment. Today, 40 percent of the university's $1.6 billion in annual revenue comes from sponsored research, most of it government-funded. Technology transfer became a way of life among Stanford faculty and graduates.starting with people like David Packard and William Hewlett, the founders of Hewlett

3 Packard.continuing into the 1980s with the founding of Sun Microsystems (the company I worked for). and on into the Internet Age with the founders of Yahoo. Stanford encouraged what its former president Gerhard Casper called "permeable boundaries," in which professors frequently spend as much time in industry as they do in classrooms and laboratories. The university's faculty and graduates have spawned so many companies that various studies have attempted to quantify their impact on the Valley. A 1995 report estimated that of the 85 billion dollars generated by high-tech companies in Silicon Valley that year, 62% of those earnings could be traced to companies founded by people with connections to Stanford. The university also actively seeks to license technology its faculty develops and has benefited significantly from these efforts, generating as much as $43 million in annual licensing revenue. But in order for universities like Stanford and the host of other educational institutions that exist in Silicon Valley to continue as engines of the economy, they need to grow-and growth requires land. You cannot create more land, so you must have the kind of zoning that supports educational institutions and businesses while assuring that the quality of your communities is maintained. Finding that balance is a critical role of government and is something I spend time on almost every single day. For example, the research park Stanford established in the 1950s adjacent to the main campus has a 50-foot height limitation, effectively limiting buildings to no more than four stories. There are over 150 companies and 160 buildings in the

4 research park, but little undeveloped land remains and vacancy is almost non-existent.so the key to any future growth will have to be trade-offs in building height and density. Although Stanford is among the largest landholders in Santa Clara County, less than one-third of its 8,100 acres are developed. The remaining two-thirds are the subject of continual controversy, as surrounding communities, environmentalists and other special interest groups raise concerns about open space, traffic, endangered species and other issues whenever the university seeks to expand. A week does not go by in which I do not spend many hours, and sometimes days, on issues related to Stanford's growth and use of its land. In other circumstances, we may have the land. but the question becomes whether it is in a location that is accessible. Part of what makes Silicon Valley work is the synergy between people and organizations that comes from a continual cross-pollination of ideas and individuals. People move from campus to corporation. and from company to company. with relative ease. Businesses and their employees do not want to move to a location that will take them away from that interactivity and its benefits. Increasingly what does get them to move, however, is housing. The shortage of land in Silicon Valley, combined with years of strong job growth, has created a shortage of housing, driving prices up beyond the reach of even many professionals. Last year, the median price of a single-family home in Santa Clara County was $682,000, up 35% from the previous year. Just last week, new figures for the year 2000 were released indicating that 54,000 additional jobs were created in the Valley last year, more than in any single previous year. 15,000 of those

5 jobs were in software. Even with a slower economy predicted for this year, the unemployment rate in the Valley is expected to stay at an astonishingly low 2 percent. That kind of job market, coupled with some of the highest housing prices in the entire United States, have created a willingness to drive to work.in many cases, as much as an hour or more. Traffic congestion has become a major issue as the sheer number of people on the roads has grown exponentially. Government has a crucial role to play in the area of transportation because it is part of the infrastructure and will never be provided by the private sector. Roads and freeways, as well as mass transit, are a key responsibility of governmental agencies.one that can significantly help or hinder the area's economy. Increasingly in Silicon Valley, the role of government is also to promote and fund alternative forms of transportation that will help reduce congestion and gridlock. We are actively doing that with light rail, bike lanes and even bike trains.as well as community shuttle services. We also are using our regulatory powers to provide businesses and other developers with incentives to reduce traffic. Privately supported shuttle systems and other types of "people movers" are becoming part of the Valley's transportation network, thanks to these efforts. Ultimately, we must locate mass transit with housing. The key issues in that arena are building height and density.once again, areas where government has control through use of zoning. Historically, in the United States government has not been a developer of housing, except in building multi-family projects for low-income populations. What we are beginning to see in the

6 Valley now, however, is that government may have to become more actively involved. I doubt that we will follow the example of Singapore. in which government-constructed housing was a key contributor to creation of a technology hub. but I do expect to see a more direct approach to determining what kind of housing is built. and where. When I began, I said that I would focus on education, land use, transportation and housing.but I would be remiss in not adding a final note about another issue that is becoming a critical one for the Valley.and indeed for all of California. That issue is the availability and price of energy. The current crisis has sent energy prices sky-rocketing and threatens to make power outages a regular event, something we have never experienced before. We do not yet have a solution to the problems de-regulation has created in this industry and until we do, it will occupy a very high place on our list of priorities. In recent weeks, I voted to approve development of a new power plant in Santa Clara County. I have also been appointed to a newly created Energy Task Force, which will explore ways to develop our area's energy supply. All of the governmental efforts I have touched on today really have but one goal-to support the extraordinary people who have made Silicon Valley a model for technology hubs around the world. Those highly educated, creative and dynamic people cannot be replicated. However, as I consider the opportunities here in Bangalore, I am struck by how much we have in common. Not long ago, we read in Silicon Valley's daily newspaper that venture capital

7 investments in India are likely to nearly triple this year, reaching $2 billion.a strong indicator that this is a nation where technology innovation is thriving. We greatly admire India's technology education system that has produced so many talented graduates who are creating and working in Silicon Valley companies. And, of course, it is not unusual these days to hear that an American technology company is utilizing the highly skilled workers in Bangalore as part of their fundamental business strategy. I hope that the brief glimpse I have offered today into the role of government in promoting Silicon Valley's development. and in addressing issues created by its success. will generate more dialogue about other areas of common interest and concern. Thank you for the opportunity to be part of this very interesting.and very thought-provoking.program.

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