San Diego became one of the three California biotech centers because of talent developed by universities and biomedical institutions.
  • San Diego became one of the three California biotech centers because of talent developed by universities and biomedical institutions.
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What makes the Silicon Valley economy tick and other California metro areas — San Diego, Los Angeles, and San Francisco — lag behind? One factor is that Silicon Valley recruited engineering talent as a result of a historical accident. In a sense, the bad bile and choleric personality of a famous physicist launched Silicon Valley.

Silicon Valley seems to be running away from the rest of the state in economic productivity.

San Diego should have been so lucky. But San Diego became one of the three biotech centers for nonaccidental reasons: talent developed by universities and biomedical institutions.

The big reason for the valley’s prosperity is that 30 percent of the workers are in technology.

The good economic news for Silicon Valley — and the not-so-good news for the rest of the state — comes from the California State Board of Equalization. It has come out with economic statistics that show how Silicon Valley seems to be running away from the rest of the state in economic productivity.

Almost 60 percent of software workers in Silicon Valley are Asian.

The most disquieting statistic is real (inflation-adjusted) total economic output per person in 2015 (the most recent data available). The per-person economic output for Silicon Valley (or the San Jose–Sunnyvale–Santa Clara metro area) is a whopping 199 percent of the California average. The San Francisco–Oakland metro area is second at 144 percent, Los Angeles metro is third at 110 percent, and San Diego fourth at 106 percent. (San Diego’s neighbor El Centro is far down the list at 49 percent.)

Since 2010, Silicon Valley economic output has grown by 37.6 percent — in first place in the state. Economic growth of the San Diego metro area (the county) over the same years was 23.2 percent.

Other economic statistics show Silicon Valley well ahead of San Diego. Median household income in the valley is $102,340 — whipping San Diego’s $67,320. The median price of San Diego homes is around $500,000. Silicon Valley’s is double that — about $1 million, highest in the nation. Monthly rents in the valley are a stunning $3449, according to Zillow.com. That’s higher than San Francisco’s ($3354), Los Angeles’s ($2642), and San Diego’s ($2452).

The overall cost of living in Silicon Valley is 40 percent above the nation’s; San Diego’s is 29.1 percent higher. The valley’s higher incomes are not wiped out by living costs.

The big reason for the valley’s prosperity is that 30 percent of the workers are in technology, which features higher incomes. In San Diego, 10 percent are in tech and also enjoy significantly higher incomes than employees of other industries.

Silicon Valley has an ethnic advantage. In Santa Clara County (the heart of Silicon Valley) Asians are almost as populous as whites: 32.6 percent Asian and 34.7 percent white. In San Diego County, only 11.1 percent of the population is Asian.

Almost 60 percent of software workers in Silicon Valley are Asian. By 2012, half of the tech workforce in the combined areas of Silicon Valley and San Francisco were Asian. One reason for that is the presence of H-1B visa holders, who are brought in by tech companies and account for a significant number of tech workers. However, they average only $75,000 a year in pay and are almost entirely under 35 years old, so they actually bring down the average salaries of Asian tech workers.

In both Santa Clara and San Diego counties, median household income for Asians is about 8 or 9 percent higher than that enjoyed by whites. Asians tend to have a greater dedication to hard work and education than whites do and may have a greater aptitude for the skills that are so important in technology.

The Pew Research Center conducted four surveys in 2015. Conclusion: “English-speaking Asian Americans adopt a number of common technologies at rates that exceed the rest of the population, including whites,” said Pew.

Two years ago, 95 percent of English-speaking Asians used the internet, versus 87 percent of whites, according to Pew data. Similarly, 84 percent of English-speaking Asians had broadband at home, versus 72 percent of whites. And 91 percent of English-speaking Asians owned a smartphone then, compared with 66 percent of whites.

“One reason English-speaking Asian Americans are adopting these technologies at higher rates may be their high levels of educational attainment and household income,” said Pew. According to the U.S. Bureau of Labor Statistics, in 2014 a full 60 percent of Asians had a bachelor’s degree or higher, versus 38 percent of whites.

Until after World War II, Silicon Valley was essentially a farming area. But Stanford University was devoted to providing local employment for its graduates and in 1946 set up Stanford Research Institute, which later became SRI International. In 1951, the university set up Stanford Industrial Park, which did a lot of military tech work. Still, the valley was hardly a tech center at the time.

Then the valley got a break. In 1956, William Shockley, a major creator of the transistor at New Jersey’s Bell Labs and a Nobel Prize winner, moved to Mountain View, California, to be near his ailing mother. He founded Shockley Semiconductor Laboratory and recruited young geniuses from the East to join his company. But Shockley was autocratic and paranoid, shouting at employees and forcing them to take lie-detector tests. One day, eight of his brainy recruits — whom he called the “traitorous eight” — walked out and formed Fairchild Semiconductor in Silicon Valley. Over the next two decades, Fairchild spawned more than 65 new companies. Two of the traitorous eight formed Intel, which in 1971 created the world’s first microprocessor. Silicon Valley could not be stopped. Boston, home of Harvard and the Massachusetts Institute of Technology, really should have been the tech hub, but Silicon Valley won the race.

Silicon Valley’s tech development is similar to San Diego’s success in biotech. San Diego is a biotech center, along with Boston and San Francisco, and other metro areas can’t crack or supplant the top three. The University of California San Diego and medical research institutions Scripps Research Institute, Salk Institute, Sanford Burnham Prebys Medical Discovery Institute, and the Torrey Pines Institute for Molecular Studies served as a talent breeding ground that propelled San Diego to the forefront. In recent years, Florida convinced three San Diego biomedical institutes to put campuses there, but the experiment flopped. That state didn’t have the scientists to get those institutes moving forward.

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Comments

Don Bauder May 4, 2017 @ 7:29 p.m.

Sarah Hoffmann: Yes, the headline is misleading. Stanford and UCSD are mentioned, but not prominently. The article probes the economic reasons why Silicon Valley is doing better than other big California metro areas, including San Diego. Best, Don Bauder

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Don Bauder May 4, 2017 @ 7:33 p.m.

Michael Cutler: The article does not say what you posit. Yes, Silicon Valley has very high home values (median is more than $1 million), but the salaries there are quite high, too. San Diego's home values are high -- around half those in Silicon Valley, but the salaries aren't so high. In Silicon Valley, the inordinately high salaries in part offset the high costs. That's not so true in San Diego. Best, Don Bauder

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SportsFan0000 May 7, 2017 @ 11:52 p.m.

Don Will you be doing a story(s) on Bonnie Dumanis and all her legal troubles for her campaign finance violations and taking dirty money in her failed race for Mayor?!

And, what about a story about Dumanis trying to Rig the DA's Election Race?!

Kind of a Slick "Insiders Move" to hand pick her interim successor by resigning as DA.. Then, Dumanis anoints her hand picked successor, Summer Stephen, with a "wink, wink" to the entirely Republican County Board of Supervisors (part of the Downtown Establishment running this Region)....Then, Dumanis's hand picked choice for DA goes to the TERMED OUT Republican County Board of Supervisors seeking a public "anointing/interim appointment" as DA by the Republican Establishment Board of Supervisors. So Summer Stephen can run as an incumbent DA?! Then, all the powers that be "Insiders" endorse Dumanis's "hand picked successor" AND DO AN END AROUND DEMOCRACY...NOT LETTING THE VOTERS PICK THE NEXT DA.

WHAT A COMPLETELY SHAMELESS POWER GRAB AND TACKY MOVE. Then, Dumanis wants to be "Elected to " The County Board of Supervisors?! Looks like Dumanis continues to carry the water for the Downtown Republican Business Establishment Community. They have turned this Region into their own political and economic Fiefdom... This is a complete mockery of the term limits initiative that was passed by the Voters for the Board of Supervisors to rid our local government of the same lifetime politicians.

They are just recycling the same Republican Retreads endorsed by the Downtown business establishment for all the important political jobs in San Diego County to keep their iron fisted political control of this region.

Good for the Downtown Business Establishment in San Diego. Bad for the other 3.2M people living in this Region... who are affected by their actions running this Region.

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Don Bauder May 8, 2017 @ 6:50 a.m.

SportsFan0000: I have written a lot about Dumanis, but not on the caper you allude to. I will bet Matt Potter, our star, has written or will be writing on this latest maneuver. Best, Don Bauder

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SportsFan0000 May 8, 2017 @ 12:33 a.m.

Interesting summary Don. However, Many of the people who started and built Silicon Valley and the major tech sector there had no college degrees: Some right out of high school, some had a few community college classes etc. Steve Wozniak who invented the modern Apple PC has only a few community college classes at De Anza College in Cupertino. (Later after Apple had become successful, he earned his degree at Cal Berkeley under an assumed name). Steve Jobs took a few college classes at Reed College in Oregon and dropped out rather than spend his working class parents life savings on his college degree. The Valley is full of such stories. Many Founders and Execs at High Tech companies never finished college and if they hadn't started the company (and others later) they would never get to 1st base with modern bureaucratic human resources departments.

The trend over the last few decades is to scam the H1B program to get as many Asian Engineers and Programmers from India, China, the Philippines etc as they can at cut rate bargain salaries and jam as many of them together into apartments and houses in the Valley., Tech companies hire legal firms to advise them how to get around hiring Americans with degrees from American universities and especially experienced Americans who command much higher salaries, stock and more.

The productivity and money you speak of is going to the lucky few who start these tech companies and/or are the chosen ones who are on the executive teams running them with high salaries and big stock options. As with Wall St., the "Real Money" in Silicon Valley is not filtering down/trickling down to a large segment of the population both inside these tech companies and in Silicon Valley and the Bay Area. They are driving up the prices and driving out families who have lived in those areas for generations. Many of the longtime locals are moving farther and farther out of Silicon Valley and to other Regions and States. Living Costs are pricing many out of living in those markets. People are commuting to work up to 2-3 hours each way. It is a jungle and only a certain smaller than you think percentage of the population gets to share in the fruits of "the hunt".

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Don Bauder May 8, 2017 @ 6:58 a.m.

SportsFan0000: H-1B is a scam I have written a lot about. Go to our search engine and put in bauder + h-1b and you will find all sorts of indignant columns and blog items on the topic. I believe the H-1Bs are effectively indentured servants and that American engineers see their pay levels drop because companies bring in H-1Bs so profits can rise and top level pay can be even more outrageous. Best, Don Bader

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SportsFan0000 May 8, 2017 @ 12:36 a.m.

As far as education goes, there are many feeder community colleges, State Universities, University of California Campuses, private Universities in the Bay Area and Outside of the State and Country that feed the always hungry for worker bees Silicon Valley monster. Many of those Silicon Valley shops are 12-18 hour day 21st century sweatshops with sleeping pods, gourmet lunchrooms, workout rooms pools etc....the work people as hard or harder than farmworkers and spit them out just as fast...Culturally, they look to import cheaper labor that will work long hours 6-7 days per week for below market pay. Many Americans with kids and families want a life and do not want to be complete slaves to their companies and jobs.. So, my point is that I question the methodology of those surveys regarding the productivity and money etc....

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Don Bauder May 8, 2017 @ 7 a.m.

SportsFan0000: Your analogy may be extreme as a generality but there are many examples of exactly what you say. Best, Don Bauder

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Ponzi May 8, 2017 @ 4:11 p.m.

From what I know, Silicon Valley as a tech center was started by Stanford alumni David Packard and William Hewlett. San Diego, thanks to General Dynamics, once had a thriving technology community. Two people that I knew, Andrew Kay (Non-Linear Systems and later Kaypro) and Bud Edelman (inventor of the first computerized cash register) were both alumni of MIT. I think Bill Gates (who dropped out of Harvard) and Steve Jobs were anomalies and succeeded due to the "first mover advantage."

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Don Bauder May 8, 2017 @ 4:52 p.m.

Ponzi; I know Gates dropped out of an Ivy League school. Hewlett and Packard we're important in the blossoming of Silicon Valley. but a column such as this can only hit on so many factors I considered including them. Andy Kay may have been a technological genius but he was no business executive. Best, Don Bauder

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SportsFan0000 May 23, 2017 @ 4:06 a.m.

Many came before Hewlett and Packard in the starting of Silicon Valley..
But, certainly, they are part of a much larger story of tech firms started in the founders' garages..

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