Kirkus Review of The Rainforest

Hooray! We received a wonderful Kirkus Review of The Rainforest book today! Kirkus is one of the most respected book reviewers, and it feels like they genuinely “got” the Rainforest concepts. We’re thrilled.

In their debut business title, two venture capitalists offer an insightful, forward-thinking assessment of what makes Silicon Valley tick.

If Silicon Valley can be held up as a living, breathing example of American ingenuity, why haven’t we been able to recreate it elsewhere? Hwang and Horowitt suggest that Silicon Valley is an innovation ecosystem they liken to a rainforest—hence, the book’s title. Thinking of Silicon Valley as a living biological system “helps innovators ‘tinker’ together in the same way that atoms ‘tinker’ together in natural biological systems … [to] discover more valuable recipes for combining and recombining ideas, talent, and capital together.” The authors proceed to offer an engaging, highly creative analysis of the workings of a “rainforest,” using Silicon Valley as the prototype. They present 14 compelling “Rainforest Axioms,” for example, “Axiom #2: Rainforests are built from the bottom up, where irrational behavior reigns,” along with the “Rules of the Rainforest,” “Rule #4: Thou shalt experiment and iterate together.” The authors also explain how to build and measure a rainforest. The text is enhanced by well-designed graphic illustrations and explanatory charts. Hwang and Horowitt write with authority and wit, carefully backing up their theory with substantive examples. Readers get the feeling that the authors have unveiled a very big, important concept, one that could serve as the basis for intentionally, methodically developing other “rainforests” similar to Silicon Valley. However, they acknowledge that following the Valley’s winning formula is challenging, suggesting that “The Rainforest concept does not come naturally to many leaders” and that it requires “a new active capitalism” to create a rainforest. While Silicon Valley may not be entirely unique, replicating its ecosystem is no easy task.

A provocative study of innovation.

Introduction to the Rainforest (from Telecom Italia)

Lorenzo Tondi, who writes the Working Capital blog for Telecom Italia, has written a great overview of the Rainforest model for building innovation ecosystems.  He analyzes the model from the perspective of neoclassical economics, so he brings a useful lens to the challenge of building innovation ecosystems.  Greg Horowitt will be visiting Italy soon, to discuss these ideas further.

Part I.  Introduction to the Rainforest Model. 

• Original Italian: http://www.workingcapital.telecomitalia.it/2012/05/come-esportare-la-silicon-valley-rainforest-unintroduzione/ 
• English translation: http://bit.ly/KYF1Dt 

A “Dorm Room” Conversation between T2VC’s Victor Hwang and Rohit Shukla, CEO of Larta Institute

Rohit:  Around the world, regions, governments, entrepreneurial support groups, all look to Silicon Valley not just for inspiration, but to see HOW they can emulate it.  We’ve had all these silly Silicon monikers that people have adopted, and you almost get the feeling that by adopting them, they believe that the goddess of Silicon Valley will infuse them with her bounty. SO, my question is, do you think this works?  The title of your book suggests that they may be able to “build the next Silicon Valley.”!

Victor:  Yes, the number of Silicon Somethings out there is amazing, but not nearly as amazing as their widespread failure to generate decent results!  The title of my book is somewhat ironic, in that the answer is not about building “another” Silicon Valley at all.  The answer is in finding the underlying DNA of social networks like Silicon Valley, and then reconstructing that DNA in new places where it can blossom into its own life forms.  If we examine where Silicon Valley came from rather than what it is today – by looking at the entire historical context, the formation of sociological systems, the role of normative behavior – we see the phenomenon from an entirely different angle.  Silicon Valley is just a manifestation, not an exception.  So my question back to you is, in your work over the past several decades, how would you define that underlying “magical” DNA?

Rohit: I believe the whole “DNA” thing is too deterministic for my blood.  I agree about the magic, though. I love magic. The sheer surprise and wonder.  The many gems that are buried in the “dark unfathomed caves of ocean.”  Yes, the Valley certainly was the product of magic and burst of creativity when humble men of lofty dreams came together.  It has morphed, though, hasn’t it?  The magic born from sheer exuberance is there, yes, but mostly now it is in some ways a metaphor – for the great combination of mad money and good brains.  I would say, Victor, that the magic you speak about can likely be repeated many times over, from region to region, by looking outside the region as much as focusing on what is referred to as “regional assets.”  I’m just not sure that deconstructing and then reconstructing – taking apart the ribbons of the “DNA”  you refer to – works as well as one might think. It also gives hope that adopting certain “ingredients” will have certain results.  That said, there’s a lot to what you say – its just darned hard for most people to do, and do well.

Victor:  I agree with you that regionalism is a false god.  Cluster theory, while useful as a description, has totally failed as a prescription.  A new company, even before it is born, is a contestant in the global marketplace, fighting to create value, scrounging to sell customers, scraping for cash, wherever in the world it must.  While Silicon Valley was born as a regional phenomenon — along with Detroit’s Motor City, Wall Street, Hollywood, and countless other examples — the playing field has transformed.  The interactions that once depended on geographical proximity are now available to people far apart from each other.  The underlying DNA, however, is still about human relationships, as it has always been, and how relationships form, evolve, morph, get strained, and get reconstituted, over and over again.  That’s what I mean by DNA — not assets, but behaviors.  Culture matters.  Economists were fooled into thinking it was primarily about regionalism; all along, it was actually about the social behaviors that happened to evolve in certain places.  AnnaLee Saxenian at Berkeley nailed this back in 1994.

Rohit:  Absolutely, Victor, culture matters, immensely.  But we are now thick in the middle of a multi-polar world (without any comment on the issue of the endurance of American power), where the norms of “behavior” are changing rapidly, where there is no clear one way of achieving relevance and revenue in the marketplace, where relationships between buyers and sellers, creators and customers is morphing and evolving, that the lessons of the most successful place in history are no longer as relevant, frankly.  To your good point, that morphing, that re-formation, those changes, create a continuous asynchronous, non-linear path, something that creative people have understood well for a long time.  Hollywood, for example, is a state of mind, not necessarily of place, but it is bolstered by relationships, new, old, continuing. And we both agree that this realization has neither come into full flower in economic development, nor in the language of sociologists and economists. Too many people, too many regions, countries and practitioners believe in their own complete solutions, a danger that even those places touched by the accident of magic are guilty of indulging.  Yet, Schumpeter, for one, did have it right, before economics degenerated into a boastful mathematical maze.  To end this turgid and dense point of mine, social behaviors are important, but the norms governing those behaviors are morphing.  That is why we at Larta have developed, and sought to codify, the network centric approach to commercialization and to entrepreneurial assistance.  I liked your book’s endorsement of this approach with the identification of qualities that can and will drive transactional excellence.

What about your take on the great buzzword, “innovation?”  I know you’ve looked at it closely.  It should remind us of the blind men and the elephant. When it is used as widely and loosely as clearly is the case, it’s time for us to come up with a new name!  Any suggestions?

Victor: This is so much fun!  It reminds me of the best college dorm discussions, where good ideas flowed as easily as the bad wine!  Schumpeter was only half right.  Creative destruction is easy: a bankruptcy lawyer could disassemble a company for you in a few weeks.  The hard part is creative reassembly, putting the building blocks of a company in place, person by person.  Yes, vigorous networks are key, but it is also true that the greater the differences between people, the harder it is to forge real working relationships.  Thus, you can put a scientist and a businessperson in the same room, but that is a far cry from getting them to build an enterprise together. If networks are like arteries, then the flow of ideas, talent, and capital in those arteries is the real value. Behaviors that lower the transaction costs of company-building are what open the arteries and accelerate the flow.  Those behaviors are manifested in myriad ways, but there is a core set of basic principles that govern how people throughout history have transformed zero-sum interactions into positive-sum interactions.  The term “innovation,” therefore, is actually a distraction, because it confuses the manifestation with the underlying value of the system.  It is like counting the flowers in a field, when what really matters is the quality of the soil.  Perhaps there’s a better word in that metaphor somewhere.  Let’s call it “earthiness.”  Let’s scrap the word innovation.  Earthiness is what we want.

Rohit:  Another word I like: “earthiness”.  But no matter how many “earthy” people  one finds (and here I am recalling my earthy days in the VW bus careening through Europe with a pipe, guitar and little else!), the issue we at Larta have hit on in all the work we’ve done across the world, with innovators in different cultures, often suffering through stultifying intolerance of risk and of entrepreneurship in general, is that networks are indeed key.   Forging those “real relationships” that you speak about is now more easily done through the operation of those “vigorous networks”.  We have seen the building of a large number of such relationships, and have also seen an increase in transactional and sustainable results.  I’m not convinced that one should or codify a set of rules about human relationships, apart from the obvious and necessary codes one follows in navigating a complex global marketplace.  The norms they are a-changing, and today’s entrepreneur needs to cast a wide net, then constantly check what he  or she has in the catch, and pursue it across multiple geographies.   That said, the quality of the soil is fundamental to the creation of a good crop.  Thereby hangs a cautionary tale for policymakers in the U.S.  We take for granted the richness of our talent while we slam the door to talent from elsewhere that could enrich that soil.  We crow about the richness of our research regimes and by and large do commercialization badly, with a few startling exceptions, because we nickle and dime the activity to death.  Our scientific innovators are secure in the knowledge that they’re the world’s best, but they don’t know what IS going on elsewhere, except to bask in the glory of peer reviewed research.  All this while talent, markets, applications of technology are available in greater numbers across the world than at any time since our ascendancy, and it will make our insularity a noose around our necks. Indeed, we vigorously agree: those behaviors you speak about that cause the flow of ideas, talent, capital, are now key, and will continue to dominate our work for a while to come.

Victor:  The remote corners of the world are indeed less remote today than ever.  You are in Kazakhstan now, of all places!  It seems so quaint now to recall a time when everyone was basically “off the grid.” Now, people say that phrase when they are going on vacation, with the implication that being “on the grid” is the norm.  I remember sitting at one of the only backpacker Internet cafes in London in 1996 when Hotmail went down, and the whole café emptied out because there was really nothing else to do.  Looking back now, that moment marked the silent closing of an era, at the transition point when being “off the grid” went from being the default to the exception.  Today, of course, we measure the passing of our months in gigabytes of wireless data.  (Raise your hand if you check your email before breakfast in the morning!)  Today, the same forces that are connecting remote corners of the planet are the same forces that are lapping on the economic shores of Fortress America.  You are absolutely right: America has no monopoly on smart people, ideas, and money – not even close.  The fortress model will simply not work anymore.  Yet America has been wired since its founding to avoid “entangling alliances”, an isolationist sentiment that still echoes on the Presidential campaign trail today.  The better model for America, I believe, is a modern version of the Netherlands during the Dutch Golden Age.  In a highly interconnected world, when you cannot control markets and resources with military might, the best strategy is to serve as the central hub for flows of information, relationships, and capital.  I know this has been your vision at Larta Institute for years, and the world is finally catching up to you!  This is a testament to your leadership.  It is an exciting time to be alive.  I think our descendants will look back on us with envy to have seen what we have seen.

Forbes Q&A: The Most Valuable Startup Asset: Your Meta-Tribe

A Q&A article with me in Forbes just came out (http://lnkd.in/nYmtVU), in which I discuss a critical difference between human social systems and those of other biological systems.  Here is an excerpt:

Innovation is biology, in a very particular way.  When a bee colony is attacked by a predator, that colony has to fend for its own survival.  However, when a startup company is attacked by a large corporate competitor, it can recruit people from anywhere in the world to join that effort.  Human beings have the unique ability, among all creatures, to custom-create our own tribes, in order to solve problems in real-time.  It is not just creative destruction; it is what I call creative reassembly — how people self-organize to solve pragmatic, temporary problems, then recirculate in the system before reorganizing into other tribes in the future to solve other problems.

This fundamental notion about the human tribal dynamic builds upon the work of biologist Edward O. Wilson, a former college professor of mine, who has described the evolutionary basis for the social behavior of animals. His ideas are prominent throughout my book, as they have shaped my thinking profoundly for decades.  I exchanged emails with Professor Wilson recently.  He was extremely gracious and says that he plans to read The Rainforest soon!  A humbling thought.

My interviewer in the Forbes article is Kevin Ready, an insightful entrepreneur who has written a book on the startup experience, called Startup: An Insider’s Guide to Launching and Running a Business.  Check it out at http://www.startup-insider.net/.

Silicon Valley: Why has Silicon Valley proved difficult to copy? – Quora

Victor chimes in on a Quora question on the difficulty of replicating Silicon Valley. Check out the full response here.

To understand Silicon Valley, we need to change our normal viewing perspective. Ordinarily, we think of economics in either macro terms inputs of land, labor, capital, and maybe technology or micro terms how individual companies are built. But there is a third perspective – the behavior of economic systems. How systems work has been a big mystery, because it requires bridging the macro and the micro. This is particularly hard because few macroeconomists want to build companies, and few entrepreneurs want to be macroeconomists.

via 6 Victor Hwang’s answer to Silicon Valley: Why has Silicon Valley proved difficult to copy? – Quora.

Why do you think that Silicon Valley has proved difficult to copy?

ANNOUNCING THE GLOBAL INNOVATION SUMMIT

WORLD GATHERING ON BUILDING INNOVATION ECOSYSTEMS,

IN PARTNERSHIP WITH MAJOR DEVELOPMENT INSTITUTIONS

April 16, 2012

Dear Friends:

We are extremely pleased and honored to announce the Global Innovation Summit!

This invitation-only event is a gathering of hundreds of “thoughtful, iconoclastic doers” from around the world who share a common interest in practical solutions for sustainable development through global innovation.  We will focus exclusively on one of the biggest development challenges of our time: how do we create innovation ecosystems worldwide?  Our vision is ambitious, which is nothing less than to reshape the entire way we think about economic development and growth.  The event will take place in the heart of Silicon Valley on July 16-18.  You can read more at www.innosummit.com.

The Global Innovation Summit will be the first major event in Silicon Valley produced in collaboration with the world’s leading development institutions.  Our partners include the World Bank, the OECD, the African Development Bank, the Inter-American Development Bank, and many other organizations.  We expect several hundred people from emerging markets to participate, including ministers, entrepreneurs, scientists, and other innovators.  Additionally, the event will feature leading companies, venture capital firms, academic institutions, NGOs, and startups from Africa, Asia, Latin America, and the OECD.

Participation is by invitation only, but prospective attendees may apply for an invitation.  Here is what attendees should expect at the Summit:

• Active participation.  Attendees will be actively engaged as full participants throughout the entire event.  Unlike typical events where most attendees are passive listeners, each individual’s active participation at the GIS actually matters to the overall outcome.
• Join a family.  All invitees to the GIS are like-minded individuals with similar goals, who believe that dynamic innovation ecosystems are the key to generating jobs, income, and economic development sustainably around the world.  Each attendee will be assigned to a House of 12-15 people at the GIS.  The House becomes a close working group throughout the course of the Summit.  Each House will be assigned a student Guide, who will facilitate the event experience for attendees.
• Open new vistas.  Expand networks, meet partners, open markets, and learn from people with a wide range of backgrounds and experiences.  Attendees will learn about more effective programs to cultivate dynamic innovation ecosystems, based on real-life examples of how others have succeeded and/or failed in other places.
• Solve real problems.  Attendees will participate in hands-on, interactive case study sessions to design real-world solutions to real-world innovation and entrepreneurship challenges in sectors, such as food, health, water, energy, and information technologies.  Attendees will gain insights into why traditional innovation programs usually fail to achieve their desired results and how to design more effective programs to foster systemic innovation.
• Have fun.  Attendees will participate in the world’s first Ecosystem Pitch Contest, where selected Summit attendees will present their proposed ecosystem solutions to the entire audience, with a live feedback panel comprised of leading global development funders.  Plus, there will be numerous surprises during the event.

Please visit our website as soon as possible at www.innosummit.com/register to apply for an invitation and/or register your attendance.  Event capacity is limited, so sign up soon.

Please register early, as early bird pricing provides a 50% discount by May 15.  This means that general registration is available for $995 instead of the normal registration rate of $1990. Students, small nonprofits, and small startups can register for $250 instead of the normal registration rate of $500.

We are delighted to welcome everyone to this community of doers.  We look forward to seeing you in Silicon Valley in July!

Alfred Watkins

Executive Chair, Global Innovation Summit

Victor W. Hwang

Executive Director, Global Innovation Summit

Greg Horowitt

Managing Director, T2 Venture Capital

How to Create the Next Silicon Valley – Forbes

Forbes just featured Victor and T2VC in a special report on How to Create the Next Silicon Valley. Check out the full article to see what Pixar and a kibbutz have in common, and what lessons we can learn from their success…

People everywhere keep trying to ­duplicate the success of Silicon Valley as an incubator for innovation and wealth. Victor W. Hwang, a Los Altos Hills, Calif., venture capitalist, has been studying what makes the Valley succeed and so many of its imitators fail, and he’s convinced he has found the answer. Not only that, but he’s putting his ideas to the test, trying to foster new versions of the place around the world. How? It’s about how people work together.

via How to Create the Next Silicon Valley – Forbes.

More Arizona startups taking root

Arizona has a burgeoning innovation ecosystem but are incubators the real source of this new-found start up dynamism?

While some applaud the incubators that are being created, others say there are too many and that they lack focus. They are popping up across the country “like weeds,” said Victor Hwang, co-author of the book “The Rainforest: The Secret to Building the Next Silicon Valley.”

“They (incubators) can work, but they don’t always,” Hwang said. “Historically, they have not, and the reason they haven’t is because most incubator (operators) treated them as real estate. They give them (entrepreneurs) space. They figure they gave them Internet broadband and they gave them cheap rent, and that was enough.”

Incubators are successful, he said, when the operators understand how to bring participants together to share ideas.

via More Arizona startups taking root.

Check out the article to learn more about the why and how entrepreneurship is taking root in the desert.

More attention/press on the Silicon Valley/New York innovation divide

Both NYConvergence and Capital New York have picked up stories featuring the cultural divide that forms the basis for Silicon Valleys consistent relative dominance in technological innovation over New York:

In today’s Daily News, Silicon Valley venture capitalist Victor Hwang argues that in order for New York to compete with Silicon Valley—something Mayor Michael Bloomberg would very much like to see happen—it needs to become less of a dog-eats-dog city.

via Venture capitalist says New York’s Alley culture keeps it behind Silicon Valley | Capital New York.

According to Hwang, Silicon Valley’s success comes from a spirit that is not yet ingrained in NY. The Valley’s culture encourages people with diverse skills and experiences to meet and trust each other, to take a risk together.  Though Hwang acknowledges that NY may be revered as the cultural capital of the world, establishing the next Silicon Valley requires a new culture to take shape, one that becomes a beacon of trust rather than suspect.  Ultimately he feels that the startup community in NY is working to build that culture, but it needs more of the city to join them in order truly to evolve.

via Can NY Replicate Silicon Valley’s Collaborative Culture?

What do you think, can New York replicate Silicon Valley’s success?

Can Entrepreneurship be Taught? The debate continues

Free Enterprise picked up the Wall Street Journal debate on whether or not entrepreneurship can be taught:

Victor W. Hwang, co-author of The Rainforest: The Secret to Building the Next Silicon Valley and managing director of T2 Venture Capital in Silicon Valley, firmly believes that entrepreneurship cannot be taught in a regular classroom. “Why? Entrepreneurship is messy. For an entrepreneur, there are rarely clear-cut right or wrong decisions day to day. Real life gives entrepreneurs the ability to better make those kinds of judgment calls,” he told Wall Street Journal.

Hwang believes comparisons to traditional business education don’t hold up because many critical entrepreneurial skills, like understanding people, can’t be fully developed in the span of a semester or even a few years. He is aware of the recent boom in entrepreneurship education, but says that teaching entrepreneurs to avoid failure may actually cause harm to them. Entrepreneurs hone their craft through experimentation and collaboration, and helping entrepreneurs teach themselves is a better idea than trying to teach them in a traditional sense.

via http://www.freeenterprise.com/entrepreneur/can-entrepreneurship-be-taught-classroom

What do you think? We’re looking forward to hearing your perspectives in the comments.