Is Military Spending the Key to the Next Silicon Valley?

from the sources-say-no dept

At the end of an interesting post about the changes in the American economy during the latter half of the 20th century, Dane Stangler has an interesting aside about the role of the military in the early development of Silicon Valley. He notes that the Silicon Valley started out as a hub for defense contractors and only later became a center for the private semiconductor industry and (still later) for the software and Internet industries. Stangler suggests that a city looking to become the next Silicon Valley might want to view military spending as a key driver for regional growth. He’s right that the military was crucial to Silicon Valley’s early growth, and of course it never hurts to have the military creating jobs in your city, but I’m not sure a city today could repeat Silicon Valley’s route to high-tech prominence. A big reason the military was so important to Silicon Valley’s early development was that a lot of the technologies pioneered there were so expensive that only the military could afford them. Silicon Valley firms were building radars, guidance systems, communications systems, and other stuff that was totally out of reach for ordinary consumers. And the Internet, of course, started its life as a military research network because each connection cost tens of thousands of dollars. But prices dropped steadily, and eventually, Silicon Valley firms created commercial spin-offs that became cheap enough that ordinary consumers could afford them, and the rest is history.

Today, private capital markets are a lot deeper and the consumer market for high-tech products is a lot larger than it was 50 years ago. As a consequence, the military just isn’t as important to the semiconductor and communications industries as it was a few decades ago. The military still spends a ton of money on high-tech toys, but private firms also spend billions of dollars on R&D, and their spending is more squarely focused on consumer and business markets. Smart technologists don’t have to chase military contracts, they can raise capital and go straight for the consumer market. Of course, it’s entirely possible that the military is currently incubating some other category of technology that will become an important private industry in the coming decades. But if you want your city to become an important center for the IT sector, luring military contractors to your area is probably not going to do it.

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Comments on “Is Military Spending the Key to the Next Silicon Valley?”

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Anonymous Coward says:

The Valley always a little behind . . .

It was pretty clear in investment circles circ 2000 that defense and oil would be the new growth industries (a republican adminsitration was coming in). Remember the early BUSH obsession with china (they shifting from Clintons “silly” focus on terrorism) and all the “tech” based solutions we would need to protect ourselves from invading asian hordes (missle defense anyone?).

The biggest problem Silicon Valley has, is its isolated belief that its somehow alot more important then it really is.

Jon (profile) says:

The next thing

The next “big thing” is the convergence of the trio. Computing, Genetics, and Nano Tech. As they each mature, they will enable further advancement for the others becoming cyclical. Computing has made the other two possible and there are already implementations of living and nano size computers. It is just a matter of time before we have living, nano sized super-computers!

So.. wherever the center of nano research and genetic research is, that will be the next “silicon” valley. Maybe it will be silica valley. (Sorry.. bad pun, I know.)

Tony says:

Don't be so sure

As military technology advances, the requirements for portable, high density energy sources will continue to grow. The very same technology has important ramifications for private sector products as well. In light of the current perceived/looming energy crisis the acceleration of this development will be very expensive, the very criteria described in the article.

Ajax 4Hire (profile) says:

"military still spends a ton of money on high-tech toys"

Those who forget the price of freedom are doomed to loose that freedom.

Remember it is directly the result of those military “high-tech toys” that gives you the ability to bitch and moan about those “high-tech toys”

As an engineer who helped design and build those “high-tech toys, I am seriously offended Timothy Lee.

And by the way, dream on if you think VC funding is anywhere near the depth of Military spending; dream on.

DCX2 (user link) says:

Re: "military still spends a ton of money on high-tech toys"

You do know that a lot of the problems we have today are blowback from previous military operations “that gave us the ability to bitch and moan”…right?

We funded regime change in Iran in the 50s that was so terrible the Iranians revolted in the 70s. We then armed Iraq with precursors for chemical weapons, knowing they were using them on Iran, because why do the dirty work when someone else will do it for you? Funny how we blocked a UN Security Council vote against Iraq, just like how China blocks a vote against, say, Burma or Darfur. We also funded foreigners (possibly even the precursors to al-Qaeda!) to fight the Russians for us in Afghanistan; we even called it “Russia’s Vietnam war”.

You should be ashamed if you built technology that was used to kill other human beings; you would be no engineer. Go read the IEEE Code of Ethics.

Those who made the weapons enabled warmongers to cause the problems we have in the Middle East today.

DCX2 says:

Re: Re: Re: "military still spends a ton of money on high-tech toys"

You claim I have a problem with ethics, but provide no evidence. Then you insinuate that I am somehow a baby, for what I can only assume is my moral standing against the idea of assisting in the suffering of other humans.

Do I help create the technology that kills people? No, the “toys” I build HELP humans, rather than HURT them.

Face it. We wouldn’t have a terroris, problem if people like you hadn’t enabled war-hungry Presidents to stir things up in the Middle East. You think you’re protecting us, but you’re doing the exact opposite – you’re inciting war with foreigners for generations to come. Sleep well, knowing that eventually innocent blood is shed and some of it is on your hands.

Anonymous of Course says:

Re: Re: Re:2 "military still spends a ton of money on high-tech toys"

I suppose there is a level of geeks with
toys and a wowie factor in the defense industry.
Though it’s a vanishing small component.
If you’d like a better understanding of what
the motivations are you’d be well served by
reading The Creative Ordeal (The Story of Raytheon)
by Otto J. Scott.

The problems in the mid east can be traced back
beyond the creation of the United States. Just
as the history of aggression is as old as that of

There has only been peace when the strongest desire
it. Even then it’s fleeting as the weaker are likely
turn upon one another. It’s hard wired in almost
every living creature to compete for resources, even
colonies of bacteria. Even a simple minded creature
like a garter snake will crawl over a worm to fight
for the worm his neighbor possess. No matter how
you divide people, race, religion, imaginary lines
on a piece of paper, it all comes down to one thing,
tribal warfare.

I sleep better at night knowing that I’ve contributed
to the safety of my nation. Even though my sincere
wish is that it wasn’t necessary.

Anonymous Coward says:

“Those who forget the price of freedom are doomed to loose that freedom.”

I think you mean lose?

Also I have a propaganda nugget for you too (these are always fun)

The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present and is gravely to be regarded – Eisenhower

Ajax4Hire (profile) says:

Re: domination by any group

domination by any group, whether it is by Military, Ecumenical, EcoTerrorist, Bureaucrats or Advertising Agencies should stay in the realm of fiction.

History is littered with examples of the underdog achieving dominance and then using that dominance to “set things right”.

There are two groups in the USA struggling to gain control of the largest, most pervasive, costly, powerful corporation in the world, the US Federal Government.

If one group achieves a enough control, they will be able to force their idea of “right” onto a larger and larger group of people. The US People have moved so far out to sea that they have forgotten who they are, what made them powerful. The avalanche has not started but the pressure is there.

The odd thing is Silicon Valley will not realize it is the center of technology development decades after the shift. The US people will wake up and realize that they are no longer the pre-eminent power in the world.

Because that power and control will slip away not to another country but to something else, today you would call it a corporation or TransNational Company. You will more strongly identify yourself as an employee, protected and supported by TransNational Corporations. It is already started.

Anonymous Coward says:

Re: Re: domination by any group

“Because that power and control will slip away not to another country but to something else, today you would call it a corporation or TransNational Company. You will more strongly identify yourself as an employee, protected and supported by TransNational Corporations. It is already started.”

Yeah weve all seen Network . . . were mad as hell and were not gonna take it anymore!

dorpus says:

Silicon Valley = India of Washington

Any respectable high-tech company hires lots of lobbyists in Washington to persuade the government to award them contracts. The federal government remains the most reliable and wealthiest consumer of high-tech products. Engineering specs are hammered out by engineers in Washington, who in turn outsource the work to the potheads in Silicon Valley who live in their fantasy world of “free market economics”.

Incidentally, health care will be the gold mine of the world economy in coming years, as the world population’s average age increases. Silicon Valley is a parochial place with very poor health care facilities (El Camino Medical Center, anyone?). California has been losing doctors and nurses for many years, since they are paid much better elsewhere. Stanford University has a second-rate medical center that does not perform as much useful science as your average state university medical center. There are already several hospital cities throughout North America, performing plenty of cutting-edge science in health care, biotech, nanotech, etc. that are poised to become the Silicon Valleys of the future.

Anonymous Coward says:

The next silicon Valley

Has already started on its road, it is in New Mexico, paid for by Venture Funding and govt research grants, and has the expressed goal of making High Tech currently available only to the superwealthy common and easy enough to be cheaply available to the masses.

Do you need another clue?


Anonymous Coward says:

Re: The next silicon Valley

“Has already started on its road, it is in New Mexico, paid for by Venture Funding and govt research grants, and has the expressed goal of making High Tech currently available only to the superwealthy common and easy enough to be cheaply available to the masses.

Do you need another clue?


Ohh yeah, they call that town Eureka right?

Joe Smith says:


It is probably a mistake to think that the next tech revolution will simply be more IT.

A region trying to create a new silicon valley would have to compete with the old one. A region wanting a high tech future should probably simply focus on having universities which encourage technical excellence in all departments and entrepreneurism in all of its departments. That, plus avoiding laws which are overtly hostile to business.

Anonymous of Course says:

A misunderstanding

I think there are two principal forces at work.
On one extreme are people leaving universities,
or spinning off from existing companies, to start
their own businesses because they saw something
they got excited about and are looking to develop
it. Sometimes it’s a solution looking for a problem.
On the opposite end are the people with problems
looking for solutions like the military.

The DoD funds research that few if any VC’s would
dare touch. A VC wants to know that at the end of
a rather short time that there will be some pay back.
DARPA is just one military engine of innovation funded
by the tax payers and it’s a good investment.

The military also funds, though it’s contracts,
organizations like MITRE, SAIC… Then there are
the national labs who get a fair amount funding from
military research projects.

In private industry the bleeding edge projects are
often funded by military contract. I know this from
my own experiences. Like playing with 14GHz flip-flops
in 1976 from Huges Corp. At the time I pondered, if
they could build a flip-flop… why not a CPU!

Military spending though it’s various proxies was
one of the keys to both Rt128 and later Silicon Vally.
I expect it will continue to be an important factor in
the growth of the next center of technological excellence
whatever that technology may be.

My guess is the next technical revolution is well underway
already in the field of biology and the DoD has been there
every step of the way.

ryan says:

Slightly underestimating DOD's spending level

My point is tangential to the main one of this post, as the post seems more focused on development of consumer tech, but be aware that DOD spent $315b [74 cents of every federal contract dollar] in 2007 on contracts. Obviously not all of that is R&D, and not all of it is consumer technology, but the growth of the military-industrial complex has not slowed.

[For a comparison, the second biggest contract spender in the U.S. govt is DOE at less than $23b in 2007.]

FlipDeeDip says:

You are joking right?

This is absurd. I lived in the Binghamton/Johnson City/Endicott/Endwell/Vestal, New York area during the ’80s and when the military contracts (aerospace, military, etc.) contracts suddenly dried up, IBM moved over 700 employees out of the area and overnight the place went downhill. I moved away in 1990. It’s even worse now.

So, hitching your wagon to the military industrial complex is just plain stupid; at least from a worker/employee view; that is.

Anonymous Coward says:

This article contradicts all the indicators I’ve been seeing in commercial sector R&D spending, and what many academic researchers warned me about while finishing graduate school: that there is a strong trend toward research being done in the academic world, funded by companies but not conducted by them. That is, more and more companies are reducing their internal R&D group size and spending and relying on external research because of the very high cost of technology research today.

Military research will always be done by government contractors and the funding must be there. I don’t see the commercial sector funding for major new advancements in wide area networks and communications… those are still areas military spending is leading.

Dane Stangler (user link) says:

Military and Economy

Thanks for the comments about my Growthology post. I just wanted to point out that my suggestions for future economic developments involving the military had less to do with money, including research, and more to do with military personnel and veterans. We could do a better job of integrating veterans back into society. With the skills they are learning in all branches of the service these days, including technology, they have valuable skills. A few years ago the Navy explicitly said it would teach recruits to think “entrepreneurially.” The new emphasis on counter-insurgency includes a way of thinking that is likely quite simple to that of entrepreneurs. A city that wanted a comparative advantage could embark on a program of veteran’s entrepreneurship better than what we have now.

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