Where Will the World's Next Green Tech Hub Be?

Every year San Francisco plays host to the International Solid State Circuits Conference (ISSCC), one of the big events in the world of chip design. And every year, someone asks me why a conference on the West Coast is sponsored by the University of Pennsylvania.

It's because the conference started in the late 1940s when the computer industry was centered in Philadelphia. The supercomputer ENIAC came out of Penn while Sperry-Rand was an early pioneer. TV was concentrated there too – hence the name Philco. If "first mover advantage" held true, Philadelphia today would be like a cross between Palo Alto and Seoul. However, it didn't, so now you don't get bombarded with articles about Tastycake Chic or multimillionaires driving up home prices in King of Prussia.

The ISSCC example underscores an important point. Namely, technology centers don't occur or stay where they're supposed to. In the 1980s and early '90s, Israel, Taiwan and South Korea all became technology powerhouses. During the same time, all three also topped Foreign Affair's annual "Top Five Countries to Most Likely Overrun in Wartime" poll.

The same will be true in greentech. In fact, to some degree it's already happening. VCs, among others, predict that Silicon Valley will become the epicenter of the U.S. industry because their friends live there and they're just fabulously talented people. But look at the six big U.S. clean IPOs: SunPower, First Solar, Comverge, EnerNoc, A123 Systems and Energy Recovery Only SunPower originated in California (Energy Recovery is in California, but by way of Norway.)

So what are the secret ingredients?

1.Government Incentives: History shows that tech corridors grow where incentives thrive. Incentives won't guarantee success – Dubai offers chip companies 50-year income tax holidays and discounts on real estate, but its chip industry remains. Fred Terman, Stanford's provost back in the '50s, essentially created Silicon Valley by first observing and then exploiting the connection between government research grants and private enterprise. And Taiwan's chip industry came from tax incentives.

2.Universities With Well-Honed Tech-Transfer Policies: Tech transfer is often derided. At some schools the office of technology licensing (OTL), is called the Office of Tired Losers. But, again, nothing proceeds without it. Moreover, foreign universities are finally starting to replicate how the successful ones in the U.S. do it. In Denmark, the technology transfer offices only charge a nominal royalty, instead of the double-digit rates that some schools tried in the past. Ireland has created a national network of labs that combine university researchers and successful businesspeople from the private sector. At another school, a professor said they want to hire fewer professors schooled in the "German method" where commercialization is frowned upon.

3.A Disloyal Workforce: In Japan, Germany, France and Spain, employees often remain at a job for decades. In Taiwan, Israel and the U.S., if you stay at a job for ten years, people begin to look at you as if you're Elephant Man. And it's no coincidence that those last three are hotbeds for startups. Put another way, having a boss that doesn't know what he is doing is good for the economy.

4. A Weak Services Industry: If you go to a country where the adults complain that college students only want to go to work in sales or on the local equivalent of Wall Street, you're seeing the first part of the decline of a civilization. We're sort of living through that now. In a nutshell, if the best and brightest of the youth are drawn to consulting firms, law firms or finance, that country will stop producing things. In China and South Korea, engineering remains the easiest, most coherent and surest way to upper-middle-class nirvana.

5. Access to Capital: This factor, frankly, is way overrated. Investors are willing to travel. I'm just mentioning it because people with money get miffed if they are ignored.

6. A Good "Old Boys" Club: Sacramento and Austin are rapidly spawning cleantech companies. The technology is coming out of the universities and the companies are being run by ex-Intel and HP execs who know how to run things.

7. A Transparent Legal and Accounting System: Again, another waaay overrated factor. The libertarians love to harp on this one, but it's mostly irrelevant. Japan's economy soared in the '70s and so did bribery. In South Korea, publishers routinely give expensive gifts to advertisers and large companies pay reporters to appear at their press conferences. In India, a friend told me how he won a lawsuit: He bribed his way into the evidence room of the court and took the crucial documents home.

The crucial factor here is something I call the gun rule. Basically, if criminals and bureaucrats need to use guns to convince you it's necessary to bribe them, more transparency is needed. A VC that does deals in Russia told me a policeman showed him a gun to get a bribe. Later the cop just sort of walked up and gestured with his shoulder. So progress is possible.

So where will greentech thrive?

1. The Usual Characters: The U.S., but with a greater emphasis on regional development instead of a Silicon Valley-centric view – Israel, Finland, Singapore, Denmark, India, China. The techniques are fairly well understood. The U.S., India and China have huge local markets while Finland and Denmark have extensive clean expertise and easy access to Europe. Japan will also do well but mostly because its conglomerates already effectively make it a greentech center.

2. Up and Coming: Singapore, Ireland and (longshot) Argentina. Most of the pieces are in place. The problem is the universities. Singapore and Ireland are all fairly small and a somewhat small percentage of graduates go into the sciences, but that could change.

3.Maybe: Brazil, Mexico, South Africa, Abu Dhabi, Germany, Jordan and Spain. Germany? Isn't it the world's solar center? And a big automotive engineering center? Yes, for now. But Germany was also a big computing center in the '70s. A conservative business environment, however, hampers growth. German solar execs, in the U.S., now regularly complain about competition from the Chinese.

4.Never Happen: Dubai, Russia and Romania. This is the flipside of the disloyal workforce. Dubai depends on imported talent who will leave whenever anyone else offers a raise. Russia and Romania, meanwhile, have great local talent, but it's easier to export them than try to start companies there.


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