President Obama visits Silicon Valley

President Obama recently made a two-day visit to Silicon Valley. The aim of the trip was to promote technological development with a view to supporting and improving the US economy. At a private dinner, President Obama met with the heads of some of the leading technology companies based in Silicon Valley.

According to White House Press Secretary Jay Carney, the conversation centred on ways to work to invest in innovaton and promote private sector job growth.

“The president specifically discussed his proposals to invest in research and development and expand incentives for companies to grow and hire, along with his goal of doubling exports over five years to support millions of American jobs.”

In addition, “The group also discussed the importance of new investments in education.”

President Obama has already promised to fund tax credits for research and development, and has plans to allocate $18 billion dollars for wireless broadband infrastructure across the country.

The Irish Innovation Center (IIC) has over 20 start-ups operating from its premises in San Jose, California. They support plans to give immigrants preferential visas if they bring in capital and start up a company that creates jobs for Americans.

They are referring to initiatives like the Startup Visa Act which was introduced by Senators John Kerry and Richard Lugar in February 2010 and is awaiting approval. In essence, it allows for a foreign national to obtain a visa that would allow them to reside and work in America if they can raise a certain amount of money from a venture capital firm owned by a US citizen.

John Hartnett, President and Founder of the Irish Technology Group (ITLG) says, “Our competition is every other city in the world, and leading in education and leading in supporting that young innovator that is coming to Silicon Valley to set up their company and be successful and become the next Google or the next Facebook is what we want to make happen.”

To increase the chances of making that happen, for Irish businesses in particular, the ITLG wants to get the US Government to create “start up incentives” for seed funding and the creation of employment grants to be made available for Irish startups in America. They would also like to see more support for the IIC.

In a previous interview with the Technology Voice, John explained why it was so important for entrepreneurs, especially Irish entrepreneurs, to have a presence in Silicon Valley, “Three reasons to come to Silicon Valley are access to customers, access to capital, access to talent. If you want to understand what is going to shape your company in the future, it is your people, your ability to get customers, and your ability to get funded, and that’s all sitting here.”

With the President of the United States taking a personal interest in technological innovation and growth, combined with upcoming changes in legislation like those proposed by Senator John Kerry and Senator Richard Luger, the future does seem to look more promising for those who are willing to make a go of it in Silicon Valley.

Craig Barrett: Technology Only Moves Forward

Craig Barrett joined Intel in 1974 and was its CEO from 1998 to 2005. As part of a trip organized by the International Technology Leadership Group (ITLG) he gave a short public talk in Dublin. The mission of the ITLG is to encourage young Irish entrepreneurs and bring the skills, experience and know-how of Silicon Valley back to the people of Ireland.

When Craig began at Intel the company was making forty million dollars a year. By the time he left it was making a hundred million dollars a day. He helped manage Intel through eleven recessions and in his talk he made some interesting comments and observations on the current state of economic affairs. He particularly addressed the relationship between research Universities and the private sector. His suggestions on how we can move forward are unconventional and run contrary to some widely held beliefs. We have abridged the speech and added our own comments where appropriate.

“There’s not much secret to any of this. It’s really hard work and implementation that takes things forward. We like wealth creation, we like the high paying jobs and we like a growing economy. The only way you can keep that is by the constant creation of new companies, new wealth, new products, new ideas. That requires a continuous stream of investment.

“That investment in new ideas comes in two parts; public sector and private sector. The public sector, for historic reasons, invested in basic research which usually takes place in research institutes. There is also a private sector in R&D but typically it is more development based. It is more about the development of existing ideas.

“You can for example look at a company like Intel which invests six or seven billion dollars a year in research but it is mostly in the development of next generation microprocessors or some extension of the current Intel business line. A company like Microsoft will invest eight billion dollars a year in basic development and extension of its existing product line. Whether it is the operating system, the application suite or maybe some of the other programs that Microsoft has.

“The interesting thing about major corporations’ research budgets is that they are not particularly entrepreneurial in their nature. They are extensions of existing product lines.”

If we look at a large company like Microsoft, it can be seen that it has had three main challenges over the years. All of which have been derived from University research projects made up of one or two researchers.

  • Netscape: An internet browser which came out of work done at the University of Illinois
  • Yahoo: An internet directory which came from work done at Stanford University
  • Google: An internet search engine which also came from work done at Stanford University

Craig says the question that needs to be asked is, “How did two graduate students with a research budget of a fifty or a hundred thousand dollars challenge a major corporation with a research budget of more than seven billion dollars? The only conclusion that you can arrive at is that the idea, the individual idea, is immensely powerful and immensely valuable.”

Another issue with startup ideas is that very often there is no apparent way of monetizing them and Chief Financial Officers in many companies prefer to see money being spent in a tangible manner on existing product lines.

“There’s a huge role here for research Universities to move forward, to bring new ideas into the marketplace, to feed the entrepreneurs of society and to create wealth and jobs. Frankly that is the only way that Ireland, the United States, Japan or Western Europe…will compete in the future.”

This implies a new way of doing things and Craig went on to lay out some fundamental principles that could help guide the way.

  • Substantial investment in new ideas: Ten years ago, 3% of Gross National Product devoted to R&D was considered ample. For investment to be considered substantial that figure should be 5%.
  • Sustainable investment: Competitive ideas can take longer to develop and bring to market than the electoral cycle in most democracies. Politicians have an inbuilt resistance to others, particularly opposing parties being seen to benefit from their ideas and the decisions they make.
  • Synergy. Bringing the private sector closer to Universities is absolutely key.
  • The acceptance of failure: In Silicon Valley you are not considered experienced unless you have had two or three failures. Without those sort of lessons learned first hand in the only way possible then what gives you the idea that you can be successful?

Craig sums this up, “If you look at those four general areas which are; the magnitude of the investment, the sustainability of the investment, the synergy of the investment between the public and private sector and then also the societal aspects, you get the basic fundamentals about what is important about entrepreneurial activity.”

Gordon Moore, one of the founders of Intel has a famous much cited law that implies that computing power doubles roughly every eighteen months or two years. He based this on his observation that the number of transistors that can be placed inexpensively on an integrated circuit had doubled approximately every two years.

Gordon Moore also has another much less famous law which Craig reminded us of, “Technology does not recognize recessions. It only moves forward.”

“If you are a corporation working in the tech sector your only option, to stay abreast with technology and to stay in a competitive position, is not to slow down investment in technology.

“The only way to get out of recession in a stronger fashion than when you entered recession is to invest your way out and not to save your way out. This is absolutely contrary to any advice you may receive from investment bankers, the press, or a Wall Street broker that deals in stocks.

“Those companies and those countries that invest their way out of recession will come out the other side in much better condition. Don’t try and save your way out of a recession – invest your way out.”