In 2008, Steve Blank gave a keynote called the Secret History of Silicon Valley.  I highly (highly) recommend that you watch the video before you read this post; it is well worth one hour of your time. You'll get a good perspective on what makes this place so unique and how it came about. (But then, come back and read the rest of the post, please :-)

One of the rarest characteristics of this Valley is its culture of shameless experimentation.  You start a business, it fails, no problem: now you know what not to do the next time around.  There's nothing quite like it outside this particular piece of geography.  I've often wondered how it came to be so and I think I found a significant piece of that puzzle in Steve Blank's presentation.

The Valley of Heart's Delight

Most people here know that at the turn of the XX Century Santa Clara Valley was an agricultural paradise.  From there, the story usually jumps to the Valley's silicon roots.  But there's another stop in between that's very significant and that, according to Blank, gives the Valley its unique entrepreneurial culture.

Microwave Valley

Blank credits Fred Terman of Stanford with kicking off the Valley's culture of entrepreneurship.  In his effort to help the US during the Cold War, Terman aggressively encouraged cross-pollination between academia (Stanford) and business.  Stanford's IP licensing policy became very liberal and lightweight; students were encouraged to start companies to convert this IP into products (instead of getting PhDs).

This phase of the Valley's development was all driven by Defense and Military Grants.

Silicon Valley

Later, William Shockley, co-inventor of the transistor came back to the Valley and got the second wave going.  Shockley Semiconductor begat Fairchild which begat Intel and 65 other semiconductor companies in the next 20 years.

From component manufacturers, many of these eventually became system vendors.  In parallel with the hardware, software vendors sprung up all over the Valley and many of these eventually morphed into Enterprise software companies.

This phase was driven by Profit and Venture Capital.

The Valley of Irrational Exuberance

Steve's talk ended at this point.  But the story continues.

After a long transition from silicon to systems to Enterprise software we arrived at the Internet phase. Or what would later be called "the Dot Com Bubble" (which ended, dramatically, with the "Dot Com Bust").

This phase was driven by Raw Greed and Unbound Venture Capital.

BTW, if I had to put this transition on anybody, I would put it on Jim Clark who really kicked off the rush that created the infamous Bubble.  On the positive side, I think he helped to significantly accelerate mainstream adoption of the Internet.  Under other circumstances, it would have taken a lot longer to reach similar levels of adoption. 

The Green (Tech) Valley?

Steve closed his talk with a grand question, "is there another 'crisis' that will restart the Valley's cycle of innovation?"

The answer may well be Green Technology.  At least, a lot of (very smart) Venture Capital is going in that direction.

Let's hope that this next phase be driven by Environment and Enlightened Capital.

Stay tuned.  It will be interesting to watch.

This post started life as a Google Sikewiki post.