Paul Graham on Why Boston Should Worry About Its Future as a Tech Hub—Says Region Focuses On Ideas, Not Startups

3/10/09Follow @bbuderi

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and investors are conservative is the same reason Chicago ones are. It’s not Yankee prudence. It’s just that they’re less confident.

That was certainly the case with us during Viaweb [a Graham-founded software company that was acquired by Yahoo in 1998 for approximately $49 million in stock]. We had no idea how anything to do with startups worked. I was so naive that I independently invented the concept of a price to earnings ratio. I remember thinking that for a startup it might be as high as 10.

The one advantage a Boston startup would have is the universities. If someone started a big startup in Boston, they could catch the local graduates before they thought of leaving. But how many grow to that size?

X: Do you see a difference in students or young entrepreneurs between the two areas as well, and if so, what?

PG: There is a big difference in students. Stanford students are all thinking about startups. MIT students mostly think of getting jobs at Microsoft or Google.

There’s not so much difference among entrepreneurs, because they, by definition, have already crossed the line into thinking a lot about startups. But founders in the Valley are probably more confident.

X: Finally, if you were to be a psychotherapist for the Boston investment/entrepreneurial community, what advice would you give: try to be more like Silicon Valley, or focus on your strengths and being the best you can be? Or what?

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PG: I’d say, first of all, it’s a good sign that people who care about Boston’s future as a tech hub are worried. At least they’re not in denial.

But how many people really need to care about Boston’s future as a tech hub? I suppose the City Fathers should be worried about it. But the average person can solve the problem by moving.

For people who do decide they have to care, I think this idea of focusing on “individual strengths” is a dangerous road to follow. There aren’t really a lot of individual strengths in the startup business. The only solution is to swallow your pride, admit you’re losing, and then figure out why.

I don’t understand why people don’t spend more time trying to understand precisely why Silicon Valley has won so far. That’s the real question. I spend a lot of time thinking about that. My best guess so far is that the elaborate theories about cultural differences are wrong. I think it’s a combination of the weather and historical accidents, specifically Shockley Semiconductor. And probably also the fact that the Valley didn’t already have something else that was the big thing in town, the way LA has movies and NY has finance and Boston has ideas.

The first two imply a lot of hope for Boston. You can’t change the weather, but you can improve quality of life, which is a superset of it. And historical accidents can be arranged. Boston was only one timid VC away from being the home of Facebook. It’s the third one that might be the hardest to beat—that Boston already has something they care about more than startups.

X: I ask this because there seems to be this constant comparison to and envy of Silicon Valley here. And, for instance, you wouldn’t tell your new child to try and be more like someone else—you would try to focus him on being happy and fulfilling his potential. Maybe the two areas are so different in so many ways it is pointless to compare…

PG: There are cases where I’d tell him to be like someone else. If he wanted to learn how to ride a bike, I’d tell him to watch how other kids did it, not that he should cultivate his unique potential as a pedestrian.

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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  • Joe Munculus

    Please. Who defined this “competition” between Boston and Silicon Valley? I bet if someone did an objective survey they’d find that most of the IT folks in Boston could give a rats behind about “competing” with Silicon Valley. If Silicon Valley were such a great place it, with all that open land, would never have let the traffic problems they have evolve to be just like Boston’s and worse. The best yet though is who in their right mind develops such a vital business in a place with a super high probability of having a major earthquake?

  • Joe Web Surfer

    In the early days Boston’s Route 128 had many successful mini-computer, super computer, and workstation startups. DEC of course, but also many others like Prime, Apollo, LMI, Symbolics. They all died out, mostly due to poor technical and business decisions.

    Silicon Valley growth started around the same time as Route 128 did. The valley benefited from cheap land, good weather, the pro-business administration of Stanford University, and the pro-business local governments. And once there was an installed base of talent and knowledge it just kept growing.

    I spent 4 years in Boston, and 20 in the Valley, and for sure I’d rather live and work in the valley. (But 10 years ago I moved to Seattle, to work for Microsoft. I totally miss the Silicon Valley though. Seattle’s wonderful in the sumer, but gloomy in the winter.)

  • http://www.tourfilter.com chris m

    beginning in 1997, i’ve lived 4 years in SF, 8 years in Cambridge – virtually all of that time spent working for/founding web startups.

    first i’ll say that i can never figure out if SF is considered part of ‘the valley’ in conversations like these.

    that said, first thing i’ll say is i didn’t really notice that there were a ton more technology/software startups happening in SF than in Cambridge/Boston. I was a contractor in both cities on and off, so i was constantly on the job market. in both places there seemed to be an infinite, ever-changing number of new companies being formed – way too many to keep track off, with a large workforce floating from firm to firm.

    i’m sure if you did the math SF was bigger, but they both seem plenty big when you’re inside them hiring, networking, getting hired, doing deals, etc.

    basically the point i’m making is that if you have a good idea you can find tons of people to make it happen in either city.

    as far as “quality of life” … SF certainly compares favorably IMHO to Cambridge. However if you’re talking about the Valley per se – which it seems like Paul is – Mountain View, Palo Alto, San Mateo, San José, etc. are just drab, anonymous suburbs. You have to drive everywhere, there is very little culture (live music venues, good cinemas, underground scene, student street energy, etc.) as we understand it in Cambridge. For me, it would be a major sacrifice to live there. As for raising kids … i respect Paul’s decision but i will say that i’m glad I wasn’t raised in the burbs!

  • Anna Graham

    It would seem that Paul Graham is merely justifying an excuse to raise a kid. It seems childish to blame the regional environment as he has. If the Boston area is such a fertile idea zone, he would focus his activity in the region to capitalize on it appropriately, rather than complain that he can’t do the same thing there as he is doing in the Valley. And if he cannot see a way to do that, then he should simply state that he cannot figure out how to benefit from the strengths the Boston area has to offer. Too bad for him, it seems.

  • http://siliconANGLE.com John Furrier

    I have to agree with Paul. I left Boston (an area that I love, grew up in, and went to school in) to Silicon Valley.

    He hits the points. Boston just isn’t friendly to internet investments. Even back when I did my first paid search startup in 1996-97 I was ridiculed for thinking differently – paid search worked out well.

    I would love to see Boston change to be more open and rewarding toward entrepreneurs specifically early stage. There is a ton of activity there but their is a serious “out migration” issue when it comes to the big leagues in Internet startups. They all go to Silicon Valley for validation and community. The fact is that entrepreneurs want to be with peers and colleagues and Silicon Valley is where they go.

    I do miss Boston but the early stage swagger needs to be there – it just isn’t.

    I’d love to hear feedback to the contrary but in this case I believe that Paul G is correct in his candid assessment.

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  • http://thenoisychannel.com/ Daniel Tunkelang

    I’m a city slicker who can’t imagine living in the suburbs of Silicon Valley, let alone raising my child there, but to each his own. And I’ve been fortunate to be part of a highly successful Boston startup.

    Nonetheless, I actually think Paul Graham is right that Silicon Valley has a much stronger startup culture than Boston. However, I think it’s a two-edged sword. My entrepreneur friends in the Valley have told me that the culture there is very impatient and trend-seeking, with many people more interested in looking for the next new thing than finishing the one they started. Perhaps the current economy–which seems to be hitting the Valley especially hard–has tempered that impatience.

    While I was PhD student at CMU, I learned about an analysis of markets based on the rate at which the market prices of the industry’s outputs change. The three classes of markets, slow-cycle, standard-cycle, and fast-cycle, offer different pros and cons.

    Perhaps because I was the only computer scientist in a business school class–and a theory-addled one at that–I looked at this market ecology as an optimization problem and realized the three classes roughly corresponded to stable local optima.

    In short, I suggest we think of the Silicon Valley and Boston scenes as incomparable Pareto-optimal states. It’s silly to ask whether the speed of innovation is more important that the quality of ideas generated. You can’t simultaneously optimize for both.

  • http://SiliconANGLE.com John Furrier

    Daniel,
    Silicon Valley has a similar problem when it comes to growth (post successful early stage) in that Silicon Valley has an “out migration” issue when companies out grow the valley culture – cost of living, talent, space,..etc quite frankly is more attractive in other regions..hello benefits of the web this includes international markets.

    That being said for zero and early stage formation and ideation then funding Silicon Valley is the best – QED.

    note: i’m seeing austin and colorado as coming on strong in early stage – the investors there are “making the market”

  • http://thenoisychannel.com/ Daniel Tunkelang

    What does surprise me is that New York hasn’t done better. I know it’s expensive here, but the Valley and even Boston are comparable on that score. No Stanford, Berkeley, or MIT–the good schools here are few and not very tech-centric (other than Cooper Union). Still, I would have expected that the appeal of New York, especially to recent graduates, would compensate. Perhaps I’m just biased because I grew up here.

    And yes, before the Silicon Alley folks pile on, I know there are start-ups here. But it’s nowhere near as thriving a scene as Boston, let alone Silicon Valley.

  • http://500hats.typepad.com Dave McClure

    interesting discussion.

    @anna: to be honest, i don’t think Paul is justifying not being in Boston because of having a child in California — if anything, it might be the other way around. as a father of two, for me Silicon Valley has the best of both worlds — great for my profession (geeks / startups) and great for my kids (weather / diversity / education). i’m sure boston is great for the latter as well, tho perhaps i’d give NorCal the edge on weather & diversity over Boston (however i have good friends in Boston who would beg to differ, being part of a large Indian community & also ski-lovers).

    however all the above aside, fact of the matter is it’s not really much of a contest anymore. Silicon Valley is ground zero for startups, people, money, other tech companies, and a lot of supporting infrastructure. boston is great for MIT/Harvard & other access to great education, and probably ok when it comes to people & students, but it really pales in comparison to the valley.

    in fact, i’d even suggest that Seattle is giving Boston a good run for its money as the #2 spot in the US, with decent competition also coming from Boulder, NYC, DC/Balt, Austin, LA, and a few other tech metros. Boston probably needs to be more concerned with hanging onto decent position compared to those other 5-6 metros, and making sure it gets its fair share of the startups coming from its own backyard instead of losing them to Silicon Valley (ex: Facebook as prime case in point).

    i hate to sound like too much of an elitist, but paul is right that boston isn’t on the same level as the valley. i do agree that local municipal govt, university, and financial backers should try to figure out a plan to put the region back on the map for startups. there’s such an amazing tradition of education & engineering coming out of MIT & business out of Harvard & other local universities, there are tremendous assets to draw from. but without a supportive ecosystem, invariably people will go where there is more activity & interest… namely, California.

    - dave mcclure

    (ps – born in WV, raised in MD, went to Johns Hopkins.. then headed West after college. briefly enticed by MIT, but never quite made the leap)

  • http://www.cictr.com Tim Rowe

    I think Paul is right that we should learn from people who do things well, and the West Coast in general has done a very good job building the current generation of technology leaders. What can we learn?

    One of the things we hear is that tight networking is a plus. We’re getting better at doing more of that, and I would point to orgs locally like Tech Tuesdays, Mobile Mondays, WebInno, the Boston Ruby Group and so forth that are making that happen.

    Another thing we can learn from California is the value of getting rid of non-compete agreements. As a businessman, I use them, because others will and because they are there, but if I wasn’t permitted to, I’d be OK with that. Lets get rid of non-competes.

    There is much more we can learn. I look forward to concrete suggestions from other commentators on this article.

    Don’t blame the weather. If occasional bad weather blocks business progress, you wouldn’t see some of the world’s most successful companies, like Amazon, Microsoft, and Starbucks, coming out of Seattle.

    The Cambridge/Boston area has had many huge successes in its past, including Data General, DEC, Wang, Computervision, Polaroid, Lotus, to name a few. And it will again.

    My organization, the Cambridge Innovation Center, which is a startup hotel next to MIT, has seen approximately $850M invested in mostly small chunks in startups here over the past 8 years. About 350 startups have come through here over that time. To my knowledge, we’re the largest organization of our type in the world. I see no shortage of startup culture around the halls here.

    Lets get to work, build great companies, and let historians opine as to why the center of gravity moved back east in 2009.

  • http://www.breckyunits.org Breck Yunits

    I think the only point PG is making is that Boston is far, far behind the Valley for web startups(but it is ahead of probably everywhere else in this vertical–with the exception of Seattle probably).

    Arguing against this is like arguing that Boston is a better place to make movies than LA. It’s not a fair fight.

    My own personal experience confirms this. I am from the Boston area and tried to do a number of web startups there up until 2008. I moved to SF in September and things became not a little better–but an order of magnitude better. I can’t walk down the street without bumping into a programmer who can teach me a new design pattern or a marketer who can tell me a new SEO technique or an investor who wants to hear an elevator pitch. If you are trying to do a web startup anywhere but the Valley, you’re doing yourself a great disservice (unless you really, really are happy where you are–there are always exceptions to every rule and if you think you’re the exception by all means don’t take my advice).

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  • http://www.startup-book.com Herve Lebret

    There is no doubt Paul is right (unfortunately). I do not care about Boston too much but about the ROW. The debate, I think, was definitely closed when AnnaLee Saxenian published Regional Advantage (I think in 94). She had predicted before that SV would suffer from too much activity: “In 1979, I was a graduate student at Berkeley and I was one of the first scholars to study Silicon Valley. I culminated my master’s program by writing a thesis in which I confidently predicted that Silicon Valley would stop growing.” She admits she was wrong at a conference in Stockholm in 1998! So what?

    SV is the only place on earth where the right environment for start-ups exists. Read again Paul’s essays on his web site http://www.paulgraham.com. One important element is that Fairchild gave birth to hundreds of start-ups and this is well documented. The start-up culture emerged at that time. I am so passionate about the subject that I have published my own book and blog (“Start-up, what we may still learn from Silicon Valley”). But if you do not like self-promotion, you may also want to read Junfu Zhang’s extremely detailed work: “High-Tech Start-Ups and Industry Dynamics in Silicon Valley” that you can find online I think and where you will discover the different dynamics at work there (vs. Boston again)…

    Boston is by far nb2, no doubt, but we, the nb3 and below, should be worried that even Boston does not manage to compete with SV…

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  • http://www.research2zero.com Kris Tuttle

    This is a virtuous circle for the Valley. Many people go there because it’s “where the action is” which means that it will continue to be the place where the most action is. There are plenty of startups in Boston, Cambridge, NYC, Paris, London and so on but people still aspire to be in “the show” which happens in the Valley.

    New York City is similar in terms of finance and banking. They have plenty of it in Boston, London, Paris, SF, Chicago and LA but none of them come close to the Big Apple.

    Naturally the best want to go to the one place that is on top.

    I agree that people should stop obsessing about it and get on with doing great things wherever they are. Lots of successful companies grow up outside the Valley. And if you want to be in the better place… go there and have fun!

  • Ted Smythe

    Check out http://www.stayinma.com/jobs – there are over 800 jobs for VC backed companies in MA.

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  • Biff

    One of the biggest cultural differences that I’ve seen between Boston and Silicon Valley is the role of government. While government sources of funding/incentives are present in both areas, you are much more likely to hear someone say, “I know someone in the Governor’s office,” or “I know someone in the legislature,” or “I can get you some time with Senator X,” or “I can help you to get a grant,” when you mention a startup idea in Boston than you when you do the same in Silicon Valley. Perhaps it’s because Boston is also the state capital, or perhaps it’s because of the academic/healthcare footprint, but that’s the way it seems to me, and it does help to shape the local entrepreneurial culture.

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