A defining difference between Silicon Valley and the Old World is that Silicon Valley is intensely focused on outputs as opposed to inputs. While the shift to an outcome-based economy remains a work in progress, the high-tech world tends to focus on tangible results, not ingredients. It’s not just about a different way of thinking about business – it’s a matter of different societies and what they value.
One of the original inputs is ancestry. No one in Silicon Valley will ask you who your parents were or what they did, whereas people absolutely will in the Old World and East Coast. At some point in American history, having ancestors who came over on the Mayflower became an indicator of New England aristocracy – funny when you consider that the Pilgrims themselves were people of no social standing, building something from scratch.
Input bias is easy to observe in classically process-oriented companies (and societies). Fixation on research and development is a prime example: the value of the final product is judged by the input (“it cost us $500million to develop this”) more so than the results. Spending in general is frequently touted as an absolute good or evil ipso facto, but it’s actually one of the least relevant data points on its own. When we talk about confusing cost with value, we’re really talking about confusing inputs with outputs.
Wall Street is extremely focused on inputs, even though their efforts are ostensibly measured by outputs, and fairly straightforward ones at that. On Wall Street, input doesn’t just refer to assets under management – it’s about name-brand firm experience, having an MBA from the right school, who designed your suit, even your business cards. Ironically, Goldman Sachs, the biggest name on Wall Street, transformed itself from a struggling, undistinguished firm to the world’s top investment bank under the leadership of Sidney Weinberg, a junior high school dropout. Weinberg was originally hired at Goldman as a janitor’s assistant making three dollars a week – an anonymous and menial job, certainly, but a job at the firm judged solely on output.
Where you went to school is an obvious input, but outputs matter for the endurance and success of the school itself, especially young schools. How did Stanford, founded in 1891, achieve equal footing with the Ivies? Money certainly helped, but intermingling with Silicon Valley and entrepreneurial culture played a much greater role than simply having wealthy donors. From legendary engineering dean Frederick Terman, who mentored (and invested in) Hewlett and Packard, to the founding of Yahoo! and Google by Stanford grad students, to Peter Thiel’s recent course on entrepreneurship, Stanford and Silicon Valley have enjoyed a unique symbiosis. In terms of clear outputs, a recent study found that companies founded by Stanford alumni create $2.7 trillion in annual revenue. Beyond pure productivity, Stanford arguably introduced the concept of great entrepreneurs as a tangible output of a university, mentioned in the same sentence as Nobel laureates and world leaders. The willingness of many of these great entrepreneurs to reinvest not only their money but also their wisdom and mentorship into the university is one of the great virtuous cycles in education.
Perhaps the ultimate input is age, and when a society values something simply for being old, it speaks volumes – especially when that something is itself. The output that matters is enduring impact and relevance. For the Old World, the danger is that reverence for the merely old is so deeply ingrained that by the time a society realizes it’s stagnating, it is exponentially harder to reverse the tide – witness the number of once-great empires of Europe struggling to stay afloat. The United States is an obvious counterpoint (not that we can take that for granted), and I’ve often reflected that Silicon Valley values are really American values writ large, but there are new revolutions happening all the time, even in very old societies. China and India were home to ancient and storied cultures, though neither was a world power as recently as the mid-20th century. Today, in a post-imperial, post-Soviet world, they are major players, buoyed by high-tech explosions that would have been unimaginable fifty years ago. Yet I would argue that such transformation only became possible when China and India collectively decided that only outputs, not the systems that produce them, are truly sacred.