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Is Silicon Valley out of touch with the mainstream economy?

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Over-the-top valuations suggest a widening gap between Silicon Valley and the rest of the economic world. But technology created in the Valley may be helping other regions catch up.

Is Silicon Valley out of touch with the mainstream economy?  That's the question just raised by Dylan Tweney in VentureBeat. He cites the over-the-top valuations seen among companies in the valley (Facebook being the most over the top of all), as well as what is still seen as a male-dominated business culture.

Indeed, in some ways, Silicon Valley is different from the rest of America, and the rest of the world for that matter. It is a hotbed of entrepreneurial culture and tech savviness sprung out of the post-industrial ruins of early 1980s America, was the epicenter of the dot-com boom of the late 1990s, and has re-assumed that mantle in today's social/mobile/cloud/Big Data boom. As Dylan reminds us, some of the most disruptive, world-changing ideas came out of the Valley: the semiconductor, the integrated circuit, the PC, the Internet, and the search engine. "All this contributes to a climate where everyone thinks they should start a company and believes they have the ability to do so."

And, unlike many distressed regions with higher unemployment rates, companies in the Valley are struggling to find talent to help grow their ventures.

Silicon Valley may be unique, but the entrepreneurial energy that was first captured and bottled in the Valley is catching on in other parts of the United States and world. As just reported by SmartPlanet colleague Tyler Falk, New York is catching up, or may be surpassing the Valley in tech startup activity. Distressed cities in the interior, from New Orleans to Detroit, also are becoming hotbeds of startup activity. Plus, a more entrepreneurial, startup ethic is emerging in cities everywhere, as evidenced by the rise of co-working spaces.

Plus, the technologies that were created in the Valley are, ironically, making it unnecessary to be physically present in the Valley to connect with sources of financing, sources of talent, and customers. For example, crowdfunding may help startups get around the constraints of venture capital firms. Through telework and telepresence, talent can connect virtually from anywhere on the globe. IT resources are available to anyone on the globe through cloud. Add to that the increasing digitization of business of all types, which means location does not need to matter as much anymore -- an innovative, IT-savvy business can flourish in any part of of the world.

Silicon Valley is no longer just a swath of cities and office parks south of San Francisco. It's now a state of mind, a optimistic and disruptive way of doing business.

The male-dominated tech culture Dylan discusses is, unfortunately, not exclusive to the Valley either. For example, a recent survey by Harvey Nash concludes that womens' leadership in technology is slipping -- from 11% of CIO positions last year to 9% today.

The bottom line is that we need more Silicon Valley inspiration and culture everywhere. The Valley shows us that growth and opportunity cannot and should not be limited by pervasive gloom or moribund economic conditions. Optimism drives growth as much as innovation. But, still, the Valley needs greater diversity, and has to avoid being insulated as well. As Dylan puts it:

"The most successful companies to emerge from the region in the past decade have understood that they’re selling to Main Street, not El Camino Real, and have been willing to alienate their core audience of geeks if necessary to reach a wider market. Apple’s the classic example. Facebook, to its credit, understands this too, and is used by 900 million people, 57 percent of whom are women and most of whom are not in Silicon Valley. My advice to startups and investors? Get outside the Valley and talk to people. Come here for the funding but keep roots somewhere else in the world.... And keep it real: Hire people outside your peer group, because otherwise, you’ll have no chance of recognizing when you’ve got blinders on."

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure