The biggest reason -- the elephant in the room reason -- is the money. Angel capital won't touch you if you live farther than a two hour drive. VC's are similar. And so it's just a self-referential loop that spirals upwards.
The only problem is that 90% of Silicon Valley startups are that kind of meringue and marshmallow that VC love. The record companies love Britney Spears and VC's love Twitter. It's all a big get-rich-quick scheme and a waste of time. Sadly, as a native of Silicon Valley, it means that true innovation, when it is happening, is occurring everywhere.
What's interesting to look at is the distribution of where open source software is produced. That, IMO, is a reasonable proxy for where hackers are doing interesting things, and it is very definitely not SV centric. Perhaps they would be founding companies if they were in SV, but maybe not. I'm glad that people like Linus and Guido van Rossum stuck to doing what the really know best, which is pure tech. There are definitely some opportunity costs for a hacker who chooses to go into business over sticking to pure tech.
I like open source as much as the next guy, but I don't know that I agree - is open source the cause of concentrations of 'interesting' things, or is it the other way around? Silicon valley wasn't built on open source....
Besides, plenty of hackers do interesting stuff outside outside the open source world (and that's not even considering hardware...).
I think open source has very little to do with being a 'cause' for concentration. What's interesting about it is it shows, to some degree, the natural distribution of high quality hackers throughout the world. And yes, of course people do interesting things outside of OS, I was just suggesting that it's a good proxy to see some areas where innovation is happening that don't have some of the other ingredients of SV.
If SV investors habitually invested in crap companies, they'd have run out of money by now. Instead they are richer than ever.
Nor are their investment choices what you think they are. For every frothy social app SV investors fund, they fund two boring b2b companies that you don't hear about because you are not the target market.
I lived there for 15 years and didn't see all that many. But I lived in Parkland, which is a bit north of the drug dealers and a bit south of the retired businessmen.
Parkland is at the southern edge of the first Bentley Belt, which extends from West Palm Beach to Boca. I've seen at least six Bentleys in Boca. The only other place I've ever seen one was curbside at LAX. I've never seen a Bentley anywhere in the Bay Area.
Fareed's comment is weird. Where is there a parking garage on Sand Hill Road?
I work on Sand Hill and there's very very few garages around here. Just lots of open parking lots all over the place.
Also the culture here is to leave the fancy cars at home and drive a high-end (but not exotic) german car to work. In fact, tons of guys drive Priuses. Not too many bentleys - it'd be considered too crass.
From where I am (Europe), it looks like SV is mostly turning into an advertising industry. They're just making the web the new TV and it's really depressing.
Why is it depressing? It would be nice if SV was a give-guys-millions-to-make-cool-free-stuff industry, but that's not much of an industry. Revenue has to come from somewhere. Apparently, people are more willing to see ads than pay to use the product. If that's what's depressing, then your problem is not with SV but with what people want.
Agreed. That's actually the best analysis. Instead of Television taking up 4 hours a day of family time, you have the same amount of computer time (though not always video, it's the same exact principle.)
The only problem is that 90% of Silicon Valley startups are that kind of meringue and marshmallow that VC love. The record companies love Britney Spears and VC's love Twitter. It's all a big get-rich-quick scheme and a waste of time. Sadly, as a native of Silicon Valley, it means that true innovation, when it is happening, is occurring everywhere.