Silicon Valley vs. New York — a silly comparison

It hap­pens every few years. At some point or another in the tech cycle, some­one asks or claims that New York is not keep­ing up in tech­nol­ogy space, point­ing to the valley’s out­stand­ing growth (here’s the lat­est iter­a­tion, which pro­voked this response). And yet, the com­par­i­son is wrong. Dead wrong.

The Val­ley: Detroit for Technology

The claim cen­ter around the fact that New York is not keep­ing up with tech­nol­ogy because the tech­nol­ogy indus­try in New York is not mov­ing as fast as it is in the sil­i­con val­ley. And so, I’d fully grant that it’s true. In fact, New York is also not keep­ing up with the car indus­try because Detroit seems to be doing a bet­ter job of that and has been since the 1940s. Sure, it has a tower named the Chrysler build­ing but let’s face it, Detroit is pro­duc­ing many more cars than New York. In fact, Detroit’s impact on the car indus­try is much larger than that of New York.

Read­ing the pre­vi­ous para­graph, you might be think­ing that it’s a very silly anal­ogy. And it is there not only for effect but also to point out that any com­par­i­son of New York to the Val­ley is based on a flawed assump­tion. The assump­tion is that such com­par­i­son can have merit. For the last 40 years, Sil­i­con Val­ley has been a sin­gle indus­try area: the tech­nol­ogy indus­try. Most major tech­nol­ogy inno­va­tions have come from the val­ley (with the excep­tion of soft­ware licens­ing, which came from a place a bit north of that: Seattle).

So, as New York is not and will never be the leader in the car indus­try, nor will it ever be a leader in the tech­nol­ogy field. I’m just hop­ing that the val­ley will never suf­fer the same fate as the epi­cen­ter of the car indus­try is feel­ing right now. Being based on a sin­gle indus­try, in the long, is a pretty scary con­cept and the lack of diver­sity can some­times be fatal.

New York: Diverse by choice?

Inter­est­ingly, it is New York’s diver­sity is part of what has made it more resilient than most cities in the United States and the increase of one indus­try over another is what gen­er­ally hurts it. The rise of the finan­cial world as a sub­stan­tial employer in New York has hurt the tax base and low­ered the employ­ment oppor­tu­ni­ties in the city. The bub­ble and sub­se­quent explo­sion of the real estate mar­ket in the late 1980s and early 1990s did the same thing to the city, low­er­ing prop­erty val­ues to the point where real estate was cheap enough for 20somethings like myself and oth­ers to think about start­ing new com­pa­nies, giv­ing rise to what came to be known as Sil­i­con Alley.

Embed­ded in New York’s suc­cess is the aban­don­ment of indus­tries: New York could have been the nation’s cap­i­tal but Madi­son, a quin­tes­sen­tial New Yorker sent the US gov­ern­ment fur­ther south in exchange for con­trol of the econ­omy. New York could have been the cen­ter of the movie indus­try (most of the early movies were made in New York) but that title went to Los Ange­les, where real estate was cheap. New York was, for a few decade, the cen­ter of the adver­tis­ing world but the title ended up get­ting shared with Chicago and London.

The truth is that New York cre­ates indus­tries, takes a por­tion of them, and lets oth­ers become sin­gle indus­try towns:

• US Gov­ern­ment: Started in New York, now in DC
• Oil: Con­sol­i­dated in New York (Rock­e­feller), now cen­tered around Houston
• Steel: Con­sol­i­dated in New York (Carnegie), now cen­tered around Pittsburgh
• Media: Started in New York, Movies (and some TV) now in Los Ange­les, Radio dif­fused, print
• Adver­tis­ing: Started in New York, now shared with Chicago and others

The result is that each brings some­thing new, includ­ing new ten­sions and con­flicts as one indus­try tries to dom­i­nate the oth­ers or estab­lish a place of promi­nence for the heart of New York­ers. How­ever, in each case, they end up being put back in their place and shown that diver­sity is what makes New York what it is and that rule from a sin­gle indus­try would hurt the very fab­ric of what made it one of the truly global centers.

The excep­tion: Money

But New York under­stands that two things make the world go round: Money and influ­ence. Ever since the polit­i­cal lead­er­ship was taken out of town, New York has defined itself as a city based on com­merce (one could argue that even before the rev­o­lu­tion, New York was always about com­merce, some­thing that becomes evi­dent when you real­ize that the dutch sided with the British when they real­ized that it could hurt their eco­nomic inter­est to not do so and did so again dur­ing the rev­o­lu­tion­ary war when it became clear that war could be prof­itable business).

Due to both geo­graph­i­cal advan­tage and the fore­sight of its admin­is­tra­tors, New York became the first port in the coun­try and, in the process, became the place where trad­ing and finan­cial man­age­ment were done. The coun­try came to New York for money and New York dis­pensed its money to the coun­try. Dur­ing the rob­ber barons era, this lead to New York help­ing con­sol­i­date indus­tries and cre­ate monop­o­lies. When those were dis­man­tled, New York held on to the financ­ing aspects of those indus­tries, even if the other por­tions went away. Through that, it gained control.

So while the val­ley is lead­ing in tech, the finan­cial aspects relat­ing to financ­ing all those tech­nol­ogy efforts are still based in New York. Yes, most of the tech VCs are sit­ting on Sand Hills but the truth is that their funds are gen­er­ally funded out­side the val­ley. Of course, it makes no more sense to argue that the val­ley is behind New York on fund­ing tech­nol­ogy than it does to argue that New York is behind the val­ley on tech inno­va­tion. Each has devel­oped a long his­tory and set of capa­bil­i­ties around one area so such com­par­isons are moot.

The crash and what next?

With the rise of increas­ingly com­plex finan­cial instru­ments in the last few years, it is true that a lot of pro­gram­mers ended up being hired by Wall Street. How­ever, the other thing that is true is that such phe­nom­e­non has been a hall­mark of Wall Street since the 1980s. Yet, a por­tion of the Inter­net indus­try did grow in New York in the 1990s. And to be hon­est, a sim­i­lar phe­nom­e­non hap­pened in the most cur­rent (aka Web 2.0) cycle.

The big dif­fer­ence is in the way Inter­net peo­ple in New York and Sil­i­con Val­ley com­port them­selves. Because New York is so diverse, our local media is not as focused on what hap­pens in the tech scene as the local media is when it comes to the val­ley. And because our tech scene is gen­er­ally qui­eter, it also tends to be more insu­lar than the val­ley scene: peo­ple who inno­vate on finan­cial appli­ca­tions in the Inter­net space may not nec­es­sar­ily rub shoul­ders with peo­ple who inno­vate in the media space relat­ing to the inter­net or peo­ple who inno­vate in the com­mer­cial space on the Internet.

In fact, the clos­est thing to a cen­ter, as far as the Inter­net crowd is con­cerned in New York, is the New York Tech Meetup, which meets once a month, as it has done for many years now. Each month, 5–10 local start-ups get  a chance to show­case their wares. Small com­pa­nies like Etsy, deli­cious, fotolog, kick­apps, or thumb­play (and many oth­ers) have all demoed at an event orga­nized using tech­nol­ogy pro­vided by local com­pany Meetup.

But truth be told, none of them really adver­tises their affil­i­a­tion with New York that much because, to a large extent, that affil­i­a­tion is insignif­i­cant. They do not define them­selves based on WHERE they are but rather based on WHAT they do.

And, almost more impor­tantly, none of those com­pa­nies were cre­ated by peo­ple from the finan­cial indus­try. The techies in the finan­cial world are happy in their sphere and few actu­ally cross path with those in the inter­net space. Dif­fer­ent groups, dif­fer­ent indus­tries, dif­fer­ent people.

So will the col­lapse of many Wall street firms mean the begin­ning of an exo­dus from the finan­cial tech com­mu­nity towards star­tups? I doubt it: there is lit­tle cul­tural fit, and there are still ample oppor­tu­ni­ties on either side. Peo­ple who are nat­u­rally drawn to finance-related type of com­put­ing will find posi­tions in that field, even if its remains more com­pet­i­tive; and peo­ple who are look­ing to launch start ups will con­tinue to do so.

New York will con­tinue to have a tech com­mu­nity that is smaller than Sil­i­con Valley’s and, truth be told, that’s just fine. Because each have advan­tages and dis­ad­van­tages but ulti­mately, each can serve as the host to the next big thing, no mat­ter whether they are based on El Camino Real or on the L line.