Why Startup Hubs Work

One key element to debate is randomness - pg does a good job I think in describing the value of randomness in terms of random meetings, shower thoughts - etc - There are many other examples of this process at work - e.g., in management/strategy: http://www.management.wharton.upenn.edu/siggelkow/pdfs/SOart...

It bears the question - what is this valued randomness in terms of social interactions? And how can we get it in online? Definitely not chatrulette :)

But not "hackernews" type of places either - because in here we are interacting in a very structured manner - on specific topics one chooses, etc - so it's not random - we are directing our thoughts, so we are not randomly exploring things.

How can we find that great balance that physical hubs have? Going to pick up dry cleaning you find a random guy and you say hi - because you have nothing better to do you end up chatting with the guy and discovering he's Sean Parker. But that won't happen online. You just switch to another browser window that is more interesting - no need for randomness.

Is the internet killing randomness? - Or better yet: how can we come up with something that gives that value to people in a way that is not chatrullette?? It should be random but within your comfort zone, in a way that is casual and not sought after (which is uncool and weird).

I wonder what you guys think.

1) Huge risk tolerance, and of a different sort than Wall St. The risk model of the startup ecosystem is different than for the banking system., in fact it's the inverse. Wall St. tends to chase returns (especially in trading, which has become a huge part of their revenues), and quarterly performance evaluations are even structured around that. But chasing ever larger returns based on leverage and debt entails ever more risk, exposing you to the possibility of catastrophic, systemic loss. The higher the return, the more exposure to company-ending loss.

In the startup world, many small bets are spread across many companies, 90% fail, 9% succeed somewhat, and perhaps 1% hit it big. But the ROI from that 1% more than makes up for all the small losses of the 90%.

Graphing the startup ecosystem ROI on chart would look like a line with a negative slope, punctuated by positive spikes. Whereas graphing the banking system's revenue would be inverse - a positive slope, punctuated by negative loss spikes.

Silicon Valley seems more comfortable with and tolerant of the periods of negative ROI than any other culture I've observed, supremely confident that the positive spikes do happen, and that you don't even have to guess exactly where they'll come from as long as you play the odds and spread your bets. It's just an article of faith here.

2) Innovation pervades everything, from academia, tech, and business, to social, even spiritual. By way of example, one of the first people I met here was a guy studying to be a Shamman. Anywhere else in the US, especially the east coast, such a thing might raise eyebrows, but here it's just par for the course - unbounded experimentation with anything and everything. For another example, is there anywhere else in the US that something like Burning Man could have become what it has? Doubt it. Innovation is universal here, not applied in some domains (tech) but stymied in others (social, spiritual), it's applied everywhere.

Those two also seem to reinforce each other. Risk tolerance begets innovation begets success begets risk tolerance begets innovation begets ...

Plenty of places have some degree of innovation, but I'm not sure there's anywhere it pervades culture to the extent it does here. That's one more big thing other startup hubs are up against.