Can Africa replicate Silicon Valley? History shows not

Historians credit Frederick Terman, the former provost of Stanford University and dean of its engineering department, as one of the major founders of Silicon Valley in northern California. In the mid-1960s, a consortium of high-tech companies in the US state of New Jersey hired Terman to replicate this hugely successful strip of innovation and entrepreneurship. The attempt failed.

The culture of cooperation that Terman had established between the science and engineering departments at Stanford in California and the industries nearby simply did not happen in New Jersey. Companies wanted to keep their own research close to their chests. The only nearby university, Princeton, turned its nose up at applied, industry-oriented research.

Discouraged, Terman moved to Dallas, Texas, where he tried again. He failed again. The story is told in an academic paper published in the 1996 winter issue of Business History Review, written by Stuart Leslie and Robert Kargon, Johns Hopkins University professors in the history of science and technology. After discussing the emergence of the Stanford-Silicon Valley effort, their study examines in detail other disappointing efforts, some of which enlisted the aid of Terman and his protégés. Most flopped, too.

Last March, Scientific American ran yet another story on why it is so hard to replicate Silicon Valley. The magazine based its article on a 2012 study by Barry Jaruzelski, a partner at Booz & Company (which has since been renamed Strategy&), and Matthew Le Merle, of the same firm.

Silicon Valley succeeds because of the close cooperation between academia and industry, a rich venture capital ecosystem, a corporate culture that is particularly receptive to innovation and risk taking, and high institutional tolerance of failure, according to their study. What distinguishes it from many international efforts to copy it, however, is its relative freedom from state interference. This makes any attempt by governments to replicate it oxymoronic. The very attempt will likely ensure its failure.

If even the godfather of Silicon Valley cannot duplicate this California marvel in a country that can throw the most money, skill and education in the world at the problem, what hope do politicians in Africa have?

Free from government intervention

Instead of actively trying to stimulate particular industries, the true role of government is non-interference. “That government is best which governs least,” wrote Henry David Thoreau in Civil Disobedience, the 1849 essay that was perhaps his most influential. “Government never of itself furthered any enterprise, but by the alacrity with which it got out of its way.”

According to Elizabeth Charnock, a technology entrepreneur and author writing for Bloomberg in 2011, many countries have laws that inhibit entrepreneurship. “Whether it is taxation rules on stock options in Norway, the law in Germany that bars chief executive officers of companies that have gone bankrupt from ever making another attempt, or the giant amount of personal liability that founders have in most European countries, the potential upside is curbed and the downside almost draconian,” she wrote.

Politicians, like most businesspeople, follow the herd. They wrongly think that they are visionary thought leaders when, for example, preaching the virtues of “leap-frogging”, the ability of developing countries to adopt new technologies that remove the need for adopting older alternatives. History proves that they cannot foresee entrepreneurial successes, nor make them happen.

Mobile technology in South Africa

An example can be found in South Africa. Mobile technology can indeed be used to skip the need to bring wired telephony to every chicken shack in town. But the government’s policy never predicted this and enabled it unintentionally by getting out of the way.