Human Capital in Silicon Valley (first impressions)

by Rasmus Thomsen

Many people perceive Silicon Valley as the center of entrepreneurship and innovation. Nations around the  world are eager to understand what is special about Silicon Valley in order to copy some aspects and implement them elsewhere. For instance, Russia is trying to build a ”Science City” in many ways similar to Silicon Valley – at least that is their goal. Other countries such as Japan, Egypt and Malaysia have already attempted to do so but with little or no success. On the other hand, countries like Taiwan, Finland and India have successfully managed to build a technology industry, however, in another way than Silicon Valley.

This raises the question about what determines success and failure for clusters like Silicon Valley.  As part of  he Silicon Venture program, I and seven others have the opportunity to experience the pace of life in the Bay Area and gain insights into the anatomy of the ecosystem. In this blog post I will describe the importance of human capital in the Bay Area based on my – non-academic – impressions during my first week here.

Talent: a scarce resource
All the companies we visited during the first week emphasized the importance of human capital. Zendesk, a Danish start-up located in San Francisco, just recently set up a new development department in Copenhagen because the firm finds it hard to attract talent in the Bay Area due to keen competition from major companies like Google and Facebook. Scott Engler, founder of Longboard Media, pointed out that because the company was founded just after the financial crisis it was much easier to attract talented people. He was sure the company would have developed very differently had it been founded today due to the growing demand for human capital. Everywhere one goes in Silicon Valley one gets the impression that scarcity of human resources is a substantial problem despite the close proximity to world leading universities that supply a lot of talent like Standford and Berkeley.

Stanford Campus

The supply of entrepreneurial talent 
One aspect is the supply and demand for talented people. Another aspect is the “supply” of entrepreneurs. According to Michael Mose Biskjær, a Danish Ph.d. student at Standford, Stanford is the best place in the world for students who want to become entrepreneurs. I got the impression that is not only about professional competences – that the whole mentality is different compared to what you see at Danish universities. Stanford is a for-profit research institution with a strong relation to private companies. For instance, professors only get paid nine months a year meaning that they have to find funding elsewhere for the remaining three months. This means that professors at Stanford, to a larger extent than their Danish colleges, have to rely on market demand. This can be both positive and negative. Stanford also has a world renowned student organization for entrepreneurship called BASES, which is able to attract famous speakers and create events that go beyond what we see  n Denmark. Funding plays a crucial role in this regard. When we talk about the “supply” of entrepreneurs it is important to stress that 52% of Silicon Valley tech companieswere founded by immigrants in the period from 1995 to 2005 (see source). This indicates that Silicon Valley has been successful in attracting talent from around the globe.

Get your haircut at Google

Working culture

We visited the Google Campus and found it to be a pretty amazing experience. The employees have access to almost everything – for free. It was even possible to get a haircut on-site. Although this undoubtedly creates a good working environment, it also indicates that Google wants its employees to stay on campus for as much time as possible. It simply removes the incentive to go home. From a company perspective this may be profitable. The human benefits may be more questionable. On the other hand, from my observations it seems like working longer hours is incorporated in Bay Area mentality.

After my first week here it is definitely my impression that talent is the most critical success factor in Silicon Valley. Although this fact my not be surprising, it has been very interesting to observe the differences in the working mentality compared to Denmark. In general, people in the Valley are to a large extent willing to provide “sweat equity” and take the necessary risk in order to be successful