Speaking Of America

Silicon Valley's allure for top leaders

A trip to the home of technology is now a must for global leaders, as the worlds of tech and politics cosy up to each other

WASHINGTON • It is a match decidedly not made in heaven.

The loose hierarchy, jeans and T-shirt corporate culture of Silicon Valley could not be more distant from the fussy, protocol-driven world of foreign diplomacy.

In fact, until a few months ago, the Mineta San Jose International Airport in California - the main gateway to the region - did not even have its own red carpet.

Yet, somehow, the two worlds are coming together more than ever.

While world leaders coming to the United States with business on their minds traditionally dropped in on places like financial centre Wall Street and manufacturing hub Detroit, the US technology region has suddenly become every global leader's go-to destination.


ST ILLUSTRATION: CHNG CHOON HIONG

Japanese Prime Minister Shinzo Abe visited the area last year, as did French President Francois Hollande, Israeli Prime Minister Benjamin Netanyahu and Italian Prime Minister Matteo Renzi.

This year, within the space of a few weeks, tech giants on the US West Coast played host to Indian Prime Minister Narendra Modi and Chinese President Xi Jinping. Mr Xi went to Seattle instead of Silicon Valley but filled his days there with meetings with the heads of Microsoft, Google and Facebook. The region would also have added President Joko Widodo as a visitor last week if the Indonesian leader had not decided to shorten his maiden US visit to attend to haze-inducing forest fires at home.

Silicon Valley has had such a flood of high-level visitors of late that, last year, it opened the non-profit Silicon Valley Office of Protocol to advise tech leaders on how to deal with their important visitors.

Part of the brief for the office was to help companies avoid the kind of faux pas that had become legendary in the halls of Silicon Valley firms: A young tech leader is said to have put his feet up on a table during a meeting with a dignitary.

When looked at from the lens of foreign direct investment, tech and diplomacy don't always gel. Leaders seeking investments aren't going to get a big bang for their buck in Silicon Valley. Tech start-ups are generally lean operations. Getting one to set up shop in your country isn't going to create the same sort of jobs and infrastructure investment as having a factory or oil rig.

All this begs the question - why are world leaders flocking to Silicon Valley, especially given the apparent incompatibility? And if the region has been a hotbed of innovation for decades - Intel produced the first microprocessor there in the 1970s - why are foreign leaders only now starting to stop by?

MAKING ITSELF HEARD

For a region best known for a culture of innovation and rapid growth, it took a while for Silicon Valley to develop the political clout to match its economic role.

And it wasn't just failing to make its influence felt abroad. For the longest time, Silicon Valley giants weren't even getting heard in Washington. As Dr Ernest Wilson, a University of Southern California academic who has written broadly about the tech industry, noted in a 2012 essay, the offices of the major tech firms in the US capital tend to be dwarfed by lobbying operations run by industries like auto manufacturing, oil and pharmaceuticals.

There are many reasons for that.

Silicon Valley is, for one thing, just really far away from Washington, DC. While heads of big banks think nothing of a 31/2-hour train ride from New York to Washington, DC to hobnob with lawmakers, a tech chief executive officer would have to consider an eight-hour cross-continent flight.

Not that tech CEOs really wanted to make the trip, anyway. While leaders of other big industries have long learnt the value of getting in bed with the government, that never caught on in big tech.

As Dr Wilson writes: "The start-up culture in the Valley is disproportionately libertarian in its emphasis on individual choice and a mistrust of collective - read: federal - action."

Then there is also the problem of youth. Tech CEOs tend to be younger, more focused on working on their products and less savvy about political lobbying.

But that has changed in recent years. As the giants - such as Apple, Microsoft, Amazon, Facebook and Google - matured, they also became more politically savvy.

They've also been pushed along by proposed legislation like the Stop Online Piracy Act (Sopa). A protest against the Act - which was considered by many in Silicon Valley to represent an unreasonable attempt to control free speech online - marked the first time tech companies got together in a big way to make their presence felt. Some 115,000 websites were said to have joined a formal protest against Sopa in 2012, displaying messages against it on their sites. Sopa was ultimately dropped.

Today, the presence of Silicon Valley in Washington has grown substantially.

According to figures from the Centre for Responsive Politics, Internet companies spent US$18 million (about S$25 million) on lobbying in 2010. So far this year, that has more than doubled to US$42 million. In comparison, the total spending on lobbying for sectors like car manufacturing, finance and insurance, and oil and gas all shrank in the same five-year period.

WHERE THE AMERICAN DREAM LIVES ON

Of course, the growing political clout of Silicon Valley isn't the only thing making world leaders sit up and take notice.

There is a growing sense in the US these days that the epicentre of the American economy has moved from the east coast to the west.

It is Silicon Valley, not Wall Street, that is now attracting the brightest talent from US universities, and some banks are even losing their leaders to the west coast. In July, there were many raised eyebrows when private equity firm Blackstone Group lost its chief financial officer Laurence Tosi to Airbnb. He isn't the first to make the leap. Google (or rather, parent company Alphabet) chief financial officer Ruth Porat used to hold the same job at Morgan Stanley, and Twitter finance chief Anthony Noto was formerly from Goldman Sachs. To top it off, word in the market is that Silicon Valley pay is on a par with or better than that in the financial world.

Tech CEOs are now the movers and shakers of the US economy. And perhaps that 4,000km separating Silicon Valley from Washington also distances the former from all the gridlock in the capital. This is, after all, the part of the US that clearly still works.

Said Ms Deanna Tryon, chief of protocol at the Silicon Valley Office of Protocol: "I think in Silicon Valley, people still feel like the American Dream is alive and anything can happen. People here are really open to ideas and always on the lookout for the next big thing, and there are venture capitalists willing to fund it. I think there isn't that same pressure surrounding money."

And despite the comparatively small amount of foreign direct investment the Valley offers, economics is certainly part of the draw. Silicon Valley has a total annual gross domestic product (GDP) of around US$535 billion, more than that of many countries. The region also has the third-highest GDP per capita in the world, behind only Zurich and Oslo.

Many nations are thus trying to bottle the magic that gives Silicon Valley its buzz, in a bid to develop a similar industry at home. Getting tech giants to set up shop in your home country could help create the right atmosphere to produce a home-grown tech giant.

Tech is seen as the next big thing and it should be no surprise that everyone wants a piece of it. Singapore has, for years, tried to develop its local start-up scene. France, Israel, Ireland and Germany are sponsoring incubators in Silicon Valley to try and open the door for their start-ups to investors in the US.

There is also a special interest for Asian leaders in Silicon Valley. Around one-third of the people living in the region are Asian and many rose up the ranks to become leaders. This is especially true for India. During his visit earlier this year, Mr Modi met three India-born tech chiefs: Google CEO Sundar Pichai, Microsoft CEO Satya Nadella and Adobe CEO Shantanu Narayen.

And there is one more reason why so many are visiting Silicon Valley. On any given day, tourists still gather outside the headquarters of Google and Facebook and take photographs. There remains a celebrity-like aura around the likes of Facebook's Mark Zuckerberg and Apple's Tim Cook.

A political figure trying to burnish his social media credentials can do worse than hanging out in the home of Twitter and Instagram.

While the global financial crisis wreaked havoc on the reputation of Wall Street banks and American manufacturing, tech has emerged relatively unscathed. At a time when the sheen has been taken off many other institutions, Silicon Valley is still sort of cool.

A version of this article appeared in the print edition of The Straits Times on November 06, 2015, with the headline 'Silicon Valley's allure for top leaders'. Print Edition | Subscribe