Last year the Index of Silicon Valley reported a complex picture with indicators pointing upward, downward, and sideways. This year we can see a storyline emerging: our economy is restructuring, our pace is more measured, the jobs we’re creating are more demanding, and as a region, we have work to do in order to ensure broad levels of participation in the global marketplace.
The information presented here shows our region is no longer losing jobs at the dramatic pace ushered in by the dot-com collapse. In fact, we’ve managed to post our first, albeit modest, net increase in jobs in five years. But according to our analysis, the jobs we’re generating are different than before, a change wrought by industrial restructuring and the forces of globalization. Though we’ve posted continuous productivity gains, and though per capita income is on the rise, regional job growth remains sluggish. Moreover, not everyone is benefiting from the changes we’re experiencing, and too many of us are unprepared to participate in a more demanding economy. What does this mean for Silicon Valley’s long term development? What will be our unique competitive advantage in the new global landscape? If the world is becoming “flat,” as journalist Thomas Friedman has argued, how are we going to secure our place in that new world?
Fortunately, we have some core assets to build upon while we reposition. We continue to add to our talent base, which flows into the Valley from every part of the world. We host an extraordinary set of laboratories and research institutions which fuel local innovation. And with the world’s highest concentration of venture capital and a dense network of supporting industries, our innovation “habitat” is still uniquely positioned to nurture entrepreneurial activity.
Building on these assets, we see Silicon Valley becoming a world center for creativity. As you’ll read in our analysis section, we are increasing our regional advantage as creators of new products, services, companies, and new business models. But in a world where technology products quickly become mass commodities, and in a world where companies create complex global supply chains to make and sell these products, Silicon Valley must constantly find new ways to add value. This means we have to stay on the creative edge of design, marketing and production management.
The story for 2006, then, is how our region restructures as we continue a long-term macroeconomic shift out of the industrial economy and into the idea economy. This shift signals ongoing disruptions and dislocations, for companies and for the labor force. It also signals a critical need for our leaders to evaluate our state of readiness: how serious are we about holding center stage in the idea economy? Are we preparing our people with the tools they need? Do our institutions meet the needs of a transitioning workforce?
The answers to these questions—and the action we take—will determine our place in the global economy.