Shift toward ‘Silicon Nation’ promotes resilience — for American defense, society and the economy

Among systems powered by semiconductor chips are those used on battlefields.

Since World War II, Washington has mainly looked West for the latest innovations. The urgency to boost wartime production spurred R&D efforts outside the Pentagon. In particular, the Defense Department turned to universities like Stanford, which housed a wealth of untapped knowledge. 

Soon home to many of the world’s leading technology companies, a myriad of venture capital and private equity funds, countless startup companies, and easy access to highly-educated talent, Silicon Valley — the renowned strip of land straddling the peninsula between San Jose and San Francisco — became a model for pursuing opportunity. 

Although it has long embodied the vast power and reach of America’s innovation capacity, Silicon Valley’s dominance appears to have peaked. States such as Tennessee and Idaho, and cities including New York City, Boston, Miami, and Austin have become so attractive for entrepreneurs that major tech companies have decided to relocate their headquarters. The list is growing and includes Tesla and even early Silicon Valley pioneer Hewlett-Packard Enterprise. Prominent venture capital firm Andreessen-Horowitz went as far as announcing its move to “the cloud,” to reflect a broader trend of talent dispersion driven by remote work. 

This trend raises two key questions: What is driving Silicon Valley’s dispersal, and why is it happening now? 

Some factors are self-inflicted. For example, Silicon Valley’s excessive taxation and high cost of living make more business-friendly and affordable cities increasingly attractive, particularly as the pandemic normalized remote work. Other factors are government-driven, such as the recently passed CHIPS and Science Act, which further promotes geographic diversity in research, development, and innovation through provisions that support the development of regional technology hubs.

The dispersal of America’s innovation capacity should be celebrated and encouraged for three reasons.

First, while Silicon Valley’s successes made huge contributions to U.S. economic growth, they also led to a new form of consolidated thinking. This has created a significant gap between policymakers and technologists, who continuously seek to “bridge” the Washington – Silicon Valley divide. Even the more successful attempts by the federal government to address this divide — such as the Defense Innovation Unit, a Department of Defense office whose mission is to help the U.S. military speed up adoption of commercial technologies — faced headwinds, such that outgoing director Mike Brown has lamented the office’s “benign neglect” by Pentagon leadership. Another challenge along these lines has been Silicon Valley’s aversion to contributing to the defense industrial base, despite the Pentagon’s support of the early technologies that created Silicon Valley.

Second, the opportunities and benefits presented by the boom in technology will become more accessible. All regions of the country will see increases in well-paying jobs that bolster the tax bases of states and municipalities. To attract and retain the companies that provide these jobs, investments in education and infrastructure will be necessary, to the benefit of all. The eventual diffusion of prosperity will help to mitigate the stark and growing wealth gap in the United States.

Finally, dispersing Silicon Valley means entrenching innovation capacity across America such that more Americans will have skin in the game. With tech companies spread across Congressional districts and states, more D.C. policymakers will have a direct stake in shaping science and technology (S&T) policies that support the workforce, innovation, and long-term economic competitiveness. This should encourage smarter, more strategic legislation.

Better understanding by stakeholders of the national security and economic implications associated with robust S&T policies will drive additional incentives for pragmatic industrial policies like the CHIPS and Science Act.

A promising development that will further boost this new American industrial policy is the Department of Defense’s strategic pivot away from a consolidated industrial base built through mergers and acquisitions to emphasizing the importance of working with a large portfolio of small businesses. This creates more competition and opportunity for companies across the country and ultimately, better solutions from which the U.S. government can choose. 

As the United States did during World War II, America’s leaders must not only embrace this shift but also foster it. Harnessing Silicon Valley’s dispersion will fill critical gaps in America’s technology workforce and is key to ensuring America’s long-term technological competitiveness. Congress and the White House should seize the opportunity to spur levels of technological innovation to even greater heights.

Alexandra Seymour is an Associate Fellow for the Technology and National Security Program at the Center for a New American Security (CNAS). Martijn Rasser is CNAS Senior Fellow and director of the Technology and National Security Program.

Tags American competitiveness American innovation CHIPS and Science Act Defense Innovation Unit DOD geographical diversity headquarters Industrial policy Jobs Military technology Pentagon science and technology policy Silicon Valley small businesses tax base tech companies Technology Technology hubs United States Department of Defense Wealth gap

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