From the fjords of Norway to the sands of Israel to the ice ofAlberta to the waves of Honolulu, many regions of the world haveSilicon Valley Envy. They look at the Valley as a place where peoplestart cool companies that generate billions of dollars of wealth (andtax revenue), create thousands of jobs, and yet does not pollute theenvironment (at least compared with a smokestack). The question I hearover and over is, “How can we create our own Silicon Valley?”

First, a little background. It’s taken more than seventy years tocreate Silicon Valley. Any politician who thinks she can createanother Silicon Valley in one or two terms is overly optimistic—perhaps one has to be very optimistic, if notdelusional, to be a politician, but I digress.

Second, to my knowledge, there has never been any “master plan” for thecreation of Silicon Valley. What stands before you is an amalgamationof hard work, luck, greed, and serendipity but not planning. Indeed,Silicon Valley has probably worked because there was no plan.

Third, my father was a state senator in Hawaii, so I understand howpolitics work. I have zero interest in a political career. Just to makesure I‘m never tempted, I penned this posting to burn down anybridge to a political career. (Sometimes it’s a good thing that theInternet archives everything you ever said.)

• Beautiful, but not gorgeous, surroundings. California isbeautiful. The weather is good. It’s fun to live here. No matter howgreat an entrepreneurial environment Cleveland creates, it’s alwaysgoing to have people wanting to move away. If a place is gorgeous, likeHawaii, then the distractions are sometimes too great. Some place inthe middle is what’s ideal. At the very least, it would be good to havea lousy season so that the company can be extremely productive part ofthe year.

• High housing prices. If houses are cheap, it means that youngpeople can buy housing sooner and have kids. When they have kids, theycan’t take as much risk and don’t have as much energy to startcompanies. (I have four kids—I barely have the time and energy to blog,much less start a company.) Also, if houses are cheap, it’s easier to“make it big,” and you want it to be hard to make it big.

• Cities, crowds, and high- if not over- population. The pressureof these conditions make people jealous of each other; this in turnmakes them compete. Cities also bring people together to work. Peoplecan’t telecommute to a startup. People need to get together to bounceideas off one another, argue, and cajole. Also, over-crowding givespeople something to shoot for: that is, achieving success so they canget out of there.

• Absence of multi-national companies—especially the finance industry.If your companies have to compete with conglomerates or banks likeGoldman, Sachs throwing money at people, it’s going to be hard to getanyone for a startup. Pity the startups in New York, London, andSingapore. Come to think of it, how many tech success stories have comefrom these cities? There is intense competition for employees inSilicon Valley too, but we’re using the same currency: the upside ofequity, not high starting salaries.

• Life-threatening enemies. Israel is a speck of dust that hasfew natural resources, and it’s surrounded by real enemies. And yetthe country has produced some of the world’s best technology companies.There’s nothing like a life-threatening environment to get theentrepreneurial juices flowing, I guess. If a region has to do nothingmore than stick a pipe in the ground, throw a net in the ocean, cleanbeaches, or manage a natural seaport, it’s going to be tough to be thenext Silicon Valley.

Stuff You Can Do Jack About

• Focus on educating engineers. The most important thing you cando is establish a world-class school of engineering. Engineeringschools beget engineers. Engineers beget ideas. And ideas begetcompanies. End of discussion.

  If I had to point to the single biggestreason for Silicon Valley’s existence, it would be StanfordUniversity—specifically, the School of Engineering. Business schoolsare not of primary importance because MBAs seldom sit around discussinghow to change the world with great products. Mostly they care about howto get interviews at multi-nationals and consulting firms. Asmy mother used to say, “Best case, engineers give buildings. Best case,MBAs endow chairs.”

  On a tactical level, this means that aspiring regions should raid thebest engineering schools. What do associate professors at Stanford,MIT, and Carnegie Mellon make? Whatever it is, offer them double theamount to move. Be clever: how hard could it be to recruit top flightfaculty to move to your beautiful (but not gorgeous) region if youconduct interviews at MIT in the winter? This is a trivial expensecompared to the various incubator, tax treatment, and venture capitalfund formation schemes that are the usual solutions to the challenge.

• Encourage immigration. I am a third-generation JapaneseAmerican. My family moved here to drive a taxi and clean white people’shomes. If I had a choice between funding someone from a family whomoved here from Vietnam whose father and mother run a 7-Eleven versus adescendant of a Mayflower passenger with “IV” in his name, I’ll giveyou half a guess as to my preference. You need to encourage smart,hungry, and aggressive people to immigrate from around the world. Andto do that, you need good schools. To mix several metaphors, if youwant to cover your ass, you need to open your kimono because trust-fundkids don’t make good entrepreneurs.

• Send the best and brightest to Silicon Valley. I can hear thecomplaints already: “This will lead to a brain drain which is exactlywhat we are trying to prevent.” This attitude misses the essence ofentrepreneurship: it’s not about preventing bad things, but fosteringgood things. Would it have been better for Hawaii if Steve Case hadbecome a lawyer at his father’s Hawaii law firm instead of moving tothe mainland and creating AOL? I don’t think so.

  The goal is to infect them with the disease called entrepreneurship andshow them that there can be more to life than “a job;” that twoguys/gals in a garage can change the world; and that a lot of money =millions of dollars. Sure, some people will never return—like me. Butthose who do return come back with a much broader perspective on whatlife and a career can be. Maybe they will build another Silicon Valleybecause they’ve seen it done before. Here’s a dirty little secret:Silicon Valley is more a state of mind than a physical location, andyou can’t alter a state of mind by staying a home.

• Celebrate your heroes. Every region needs its heroes. These folkstake role modeling to an extreme; they have names like Steve Jobs, BillGates, Ted Turner, Steve Case, Anita Roddick, and Oprah Winfrey. Kidsneed heroes, so that they can say, “When I grow up, I am going to bethe next Steve Jobs.” In many places, a successful person is pulledback down because of jealousy. Sure, there’s jealousy in SiliconValley, but our way of dealing with it is to try to outdo the person,not pull her back down.

• Forgive your failures. There is no better place to fail in theworld than in Silicon Valley. (Where else can you get your clockcleaned by Microsoft and become a venture capitalist and top-rankedblogger?) Indeed, some people here have made a career of failing. Someof this is cultural—failing in Europe or Asia casts a cloud over one’sfamily for generations. Not in Silicon Valley. Here, it doesn’t matter(within reason) how many times you fail as long as you eventuallysucceed. So many entrepreneurs who failed went on to create massive successes that we’ve learned that failure is a poor predictor of future results.

• Be logical. Make the challenge to create a Silicon Valley aseasy as possible. Thus, a region should use it’s natural, God-givenadvantages. For example, aquaculture in Hawaii, security technology inIsrael, alternative fuels in the Midwest, and solar power in the SunBelt. There’s a reason why the best woolen sweaters come from Norwayand the best Aloha shirts come from Hawaii. It’s not because peopletried to buck the trend.

• Don’t pat yourself on the back too soon. Many regions declare victorybecause Microsoft, Sun, or Google opened a branch office. These branchoffices don’t hurt but don’t kid yourself into thinking that theexistence of a branch office means that you are now a tech center.Truly, a region is a tech center when its companies open branchoffices elsewhere, not when tax incentives and kowtowing got acompany to open up a branch office in it.

• Be patient. There is nothing short-term in theserecommendations. I estimate that creating something that beginsto look like Silicon Valley is at least a twenty-year process. This is certainlylonger than most politician’s reign--hence the challenge of doing the right thingsfor the long run.

Stuff You Shouldn’t Do Jack About

The short answer is that the government should not do much exceptprovide more funding to the engineering schools. Unfortunately, thatprobably won’t seem like enough to most people.

• Don’t focus on “creating jobs.” When a region adds the secondbottom line of creating jobs, things get whacky. Such a goal pervertsthe objective of a startup because the primary, perhaps the sole, goalof a startup is to kick ass. If it also has to create jobs for the sakeof creating jobs, then you defocus it. The thinking should be: “If thiscompany kicks ass, then it will survive and grow. If it survives andgrows then it will create jobs.” So let startups focus on kicking assand the jobs will come naturally-or not.

• Don’t pass a special tax exemption. There’s an assumption thattax benefits for investing in startups encourages entrepreneurship. Idisagree; I think it mostly creates sloppy decisions by unsophisticatedinvestors and crooked ones by others. Indeed, the unstated (and perhapsunrealized) goal of a sophisticated investor is to create, not avoid,tax liabilities. Nothing would make me happier than having to pay $100million in income taxes. I would hand deliver that income tax return tothe White House.

• Don’t create a venture capital fund. The thinking here is that agovernment created venture capital fund would kickstartentrepreneurship because of the influx of money. However, if there’sone thing you can depend on in venture capitalists, it’s greed. If youshow them good engineers with good ideas for good companies, they willappear by (private) plane, canoe, dogsled, and camel. Such a regiondoesn’t need to create a fund. A supply of capital does not createdemand from entrepreneurs--at least not the kind of entrepreneurs thatyou want.

  (There is one notable exception to this: the government of Israelcreated a seed fund that launched its venture capital industry.However, my interpretation is that the fund was successful becausethere were already entrepreneurs there; the fund didn’t causeentrepreneurs to suddenly appear out of the desert.)

• Don’t provide cheap office space and infrastructure. Therationale is that if entrepreneurs had office space, photocopyingmachines, T1 lines, and adult supervision, they would be successful. Ican’t think of a case where cheap space, incubation, whatever causedsuccess. This isn’t to say that there haven’t been successful companiesfrom incubators (eBay is arguably one), but the key point is todetermine the actual causes of success. Cheap space, etc, can’t hurt,but I’d buy engineering professors, not crappy buildings. Just becausethere’s a cheap building doesn’t mean you should create an incubatorout of it.

There’s one more thing you need to do: Aim higher than merely trying tore-create Silicon Valley. You should try to kick our butt instead. That’s trueentrepreneurship.

Acknowledgement: Thanks to Glenn Kelman of Redfin for a huge contribution to this posting.