Understanding Silicon Valley: A Discovery Operating System

Source: Technology and Public Good | By Koh Shiyan and Karen Tay 

This article was published as part of the book “America: A Singapore Perspective” edited by Tommy Koh and Daljit Singh. The full book can be purchased here: https://www.amazon.com/America-Singapore-Perspective-29-Writers-ebook/dp/B09MTR2CDK

Chances are, you can access this article from a smartphone right now: a device that was unimaginable for most just twenty years ago. In milliseconds, it serves up real-time directions, messages, music, entertainment and distraction for six billion people around the globe. 

It would not be an exaggeration to credit the major technological innovations behind your smartphone — silicon chips, 5G, cloud computing, and iOS and Android operating systems — to Silicon Valley, the global hub for technology and entrepreneurship over the past few decades. 

Covering less than 130 square kilometres in the San Francisco Bay Area, it accounts for more than a fifth of all venture capital dollars invested in the United States, and is home to many of the world’s largest high-tech corporations, thousands of start-ups and three of the top five American companies by market capitalisation. 

DISCOVERY AND EFFICIENCY 

As Silicon Valley’s long-time residents, we are often asked what makes it work. On the surface, its biggest asset is like Singapore’s: talent. It thrives on a virtuous cycle of attracting the best from across the globe. 

However, its history and operating principles are vastly different from Singapore’s. 

Singapore’s initial operating system was designed for efficiency. As a survival imperative post-World War II, Singapore pursued a successful path of industrial efficiency, producing goods and services at competitive costs and becoming a trade hub for global business and talent. Educational paths were efficiently mapped out for different roles, sorting students into tracks which took them to jobs and sectors to support the economy. This relentless drive for efficiency has led Singapore “from Third World to First” within a generation. 

An operating system based on efficiency makes complete sense when you know what you are trying to optimise, such as reducing costs or educating labour for pre-planned industries; it is less relevant when you do not have a sense of the objective function you are trying to optimise. Efficiency works well when you are playing catch-up, but is less helpful when you are trying to chart new frontiers. 

In contrast, Silicon Valley’s operating system is designed for discovery. By definition, discovery means we do not know the answer. It acknowledges that predicting game-changing success is near impossible. Therefore, a system that optimises for discovery accepts that there will be failures and near-misses far more often than successes. The high rate of failure is a feature rather than a bug of the system. Silicon Valley’s discovery operating system can best be understood through four paradigms. 

Take Big Swings 

If the most likely outcome is failure, it makes sense to bear the high risk of entrepreneurship only when the pay-off is exceptionally large. As it turns out, the biggest pay-offs come when you are imagining what the world should be and innovating towards that ideal, rather than aiming for incremental change. 

In Silicon Valley, entrepreneurs take only big swings towards the ideal. An example is Netflix. In the 1990s when most people were renting DVDs and only a small proportion had home internet access, an incremental thinker would have focused on optimising the supply of DVDs across brick-and-mortar rental stores. 

Yet Netflix’s CEO, Reed Hastings, dreamed of creating a “global entertainment distribution service” on the internet. Based on advances in computing and internet technology, he knew that streaming on-demand video would be possible in the future. He did not know when, but that did not stop him from building towards that future, sending out DVDs in the mail and collecting data to build a catalogue and a recommendation engine which is now Netflix’s key competitive advantage. 

Similarly, lofty goals to organise all of the world’s information, connect everyone regardless of geography, and have anything you want delivered in a day fuelled Google, Facebook and Amazon. 

Don’t Punish Failure Prematurely 

Given that failure is the median outcome, a discovery operating system does not punish failure prematurely. 

Trying and failing are seen as valuable learning experiences rather than a judgement on someone’s competency. Tech giants view people with start-up experience (even if said start-up failed) as valuable employees because they have experience taking initiative and working with limited resources. Contrast this to the attitude of most Asian employers, who prefer candidates with credentials and experiences at other large companies. 

Investors also support experimentation by making early bets with limited information rather than waiting for greater certainty of success: early-stage funds, angel investors and early employees throw money and time behind companies that have rudimentary initial products, few if any customers, or founders who have previously failed. If a start-up shows strong market signals, additional funds are given. If not, companies are allowed to die with no further cost to the founder. 

This is not considered waste, but part of the game. In fact, in the Venture Capital asset class, just one in a hundred investments is expected to provide the lion’s share of returns. 

Work Fuelled by Curiosity and Play 

We use the word, “play”, deliberately because the idea of work as play is still relatively uncommon in much of the world. Technologists spend nights and weekends playing with immature new technologies, incubating and experimenting without immediate commercial intent. Talent leaves comfortable successful unicorns to help build and fund new ones: the “PayPal mafia” of the early 2000s were instrumental in founding a host of new companies such as YouTube, Yelp, Reddit, LinkedIn, Affirm and Palantir. 

We remember meeting a Singaporean in the Valley who was confused by why his colleagues invited him to hack on weekends; to him, his skills were a means to a high-paying job — when he was off the clock, he had little interest in exploring new technologies. In contrast, much of Silicon Valley’s ethos is fuelled by intrinsic motivation: the point of winning the game (for example, taking a company to an Initial Public Offering or an acquisition) is not to…

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