Silicon Insider: The Valley Returns With Vigor

Failure is often success, and success failure -- Silicon Valley is justly celebrated for its success stories: the men and women who start out with little more than a great idea and a lot of pluck and end up as tycoons running great corporate empires. But those stories, thrilling as they are, really mean little to the overall health of Silicon Valley (or to the tycoons themselves: Too few have happy endings). Rather, the real strength of the valley lies in its embrace of failure. Not stupid failure but noble failure -- the mistake that teaches you something about the business, the market, the technology or, most of all, about yourself. The simple fact is that 90 percent of all Valley startups die. Thus, were failure stigmatized here, the valley would disappear almost overnight. Instead, remarkably, we've learned to make failure if not a friend then a teacher and ally.

Risk-taking is risk aversion -- Outsiders tend to look upon valley entrepreneurs as wild mavericks willing to risk everything on a shot at success. But entrepreneurs see it as just the opposite. In a town where mature companies are forever dying, the real risk is in trying to stay at one job for more than a few years. The conservative course is, actually, to take command of your own career, wherever it leads, rather than put your fate in the hands of someone else. Thus, true entrepreneurs see wage earners as the real risk takers.

Bad times are often good times, and good times bad -- Boom times in Silicon Valley are almost always bad for people and companies. Sure, good times can make you rich, but they can also make you stupid. In good times, everybody thinks he or she is a genius, and every decision is brilliant because it always succeeds. Companies grow fat, employees grow lazy, and everybody rushes off in the wrong direction. Good times kill as many companies as bad times. By comparison, bad times discipline companies, force them to think smart and clear out the dross. At the same time, and most important, bad times offer a window of opportunity for entrepreneurs (often newly laid-off employees) to start companies and build their first products under the radar screen while their big future competitors are distracted.

It's good to be big, except when you're small -- There are only two kinds of mid-size companies in Silicon Valley: those racing to become big companies and those that are about to die. The fact is that in the ecology of Silicon Valley, there is no room for mid-size companies. Small startups provide the innovation, the opportunity and exploration of new markets. Big companies offer industry standards, R&D investment and (little discussed) sanctuary during hard times. In this town, you are either the big winner or preparing to become one. Everything else is just cannon fodder, a talent pool for headhunters and acquisitions.

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