Russia Hires Cisco to Build a Silicon Forest, Easier Said Than Done

Medvedev Twitter

Russian president Dmitry Medvedev wrapped up his whirlwind tour of Silicon Valley yesterday, and while it’s fun to imagine Steve Jobs giving him the five-cent tour of One Infinite Loop or Ev Williams and Biz Stone teaching him how to tweet, Medvedev’s mission was to round up investors for Skolkovo, his attempt to clone a Russian Silicon Valley and diversify its economy away from oil and minerals.

He succeeded, wrangling a $1 billion, decade-long commitment from Cisco, including promises to make Skolkovo a "smarter city" (or "Smart+Connected Community" in Cisco parlance), creating a second headquarters for its emerging technologies group (based in Bangalore) and teaching Russian startups the ropes. This has become a Cisco specialty. I wrote back in February about its plans to build instant smart cities in China, India, South Korea and Saudi Arabia (pdf), all of which have charged the networking company with creating a culture in addition to laying infrastructure. Wim Elfrink, Cisco’s chief globalization officer, described its smarter city business to me as a $10 billion opportunity, not to mention the chance to up-selling heads-of-state.

This raises the question of whether it’s even possible to build a Silicon Valley from scratch. Many have tried; all have failed. In hindsight, the conditions that created the Valley are obvious, but may be unrepeatable: the presence of Stanford University; the creation of its neighboring research park; the founding of Fairchild Semiconductor and Hewlett Packard; the alumni networks which arose from these and other seminal companies; the Valley's subsequent reinventions from microprocessors to PCs to Internet software, and the agglomeration economies which made it all possible. Cisco’s job is to help streamline this process and squeeze it into a decade or less.

"Through their practices and through their densities, Silicon Valley companies know how to get to the next great things." Saskia Sassen explained to me last fall. Sassen is a professor of sociology at Columbia University and an expert on the intersection of cities and globalization. She argues Cisco and other smarter city-builders have been hired to recreate the circumstances of their birth. "They’ve extracted a product from that: smart cities. First you extract it, and then you commodify it." "They originally tried it in Malaysia and Korea," she added, "but they were not successful. The results were more like office parks. They were the opposite of the global, fast-moving, powerful cities they were meant to be."

The list of failures is longer than that. The sociologists Manuel Castells and Peter Hall compiled a list of "technopoles" made in Silicon Valley’s image, including Japanese and Korean "science cities," research parks in Cambridge, Seville, Adelaide and Boston’s Route 128 (which, while certainly successful, never mounted a serious challenge to Silicon Valley) and Russia’s Soviet-era effort to plant a "Silicon Forest" —Akademgorodok, aka "Academy Town."

The brainchild of Nikita Khrushchev (sound familiar?) Akademgorodok was founded in 1957 on the shores of a man-made sea adjacent to Novosibirsk, the industrial capital of Siberia. The home of a new, elite university and institutes of the USSR Academy of Sciences, Akademgorodok boasted at its 1960s peak a population of 70,000 people, including 7,500 scientists, 3,500 students, and several thousand technicians and staff. But the failure to escape the long arms of the Communist Party and academic bureaucracies quickly eroded their enthusiasm. Scientists lured from Moscow and Leningrad moved back almost as quickly as they arrived, and the ones who stayed focused on basic research with few practical applications. From an urban planning standpoint, Akademgorodok wasn’t much better, with sharply delineated residential zones setting aside cottages for academics, "upper zone" zone apartment blocks for mid-level scientsists, and tenements for construction workers.

After the Wall fell, IBM and Intel moved in, leading then-prime minister Vladimir Putin to earmark $100 million in state funds for the construction of a $650 business park. "We simply mustn’t waste this chance," he declared in 2005, following a trip to India. At the time, Fortune declared the city – you guessed it – "The next Silicon Valley."

This time, the Russians themselves are more skeptical, calling Medvedev’s "innograd" and its tax breaks and half-billion dollar annual budget a black hole and a boondoggle. Without genuine reform, critics argue Skolkovo cannot possibly succeed – not when Russia ranks below Bangladesh in the World Bank’s Doing Business Index, and is tied with Kenya in the Corruption Perception Index.

Medvedev acknowledged as much at a Stanford appearance this week when a Russian in the audience asked him how he planned to protect promising startups from the Russian mafia, insane rivals (i.e. ("crazy Russians with crazy startups") and bureaucratic obstacles.

"Of course we have plans," Medvedev said. "In Russia, people hope the government will do something… but we must do it correctly. Russia has its own attitudes and says the task of the government is to create startup conditions, but that’s a very complicated point. Money can’t create it. We have money, but we don’t have Silicon Valley. It has to be money in the right hands, with the correct rules. If performed correctly, I’m sure the project will be a success, but everything depends on people and finally on you — if you’re ready to help."

If it’s rules Medvedev’s after, he may want to talk to Paul Romer, the former Stanford professors whose "charter cities" concept finally received the feature treatment in the current issue of The Atlantic. As writer Sebastian Mallaby puts it, Romer’s notion of "rules" includes "patent law, competition law, bankruptcy law, and so on, as well as the softer ‘norms’ that govern people’s behavior. Indeed, these rules could be even more important than technologies, however much the digerati of Silicon Valley might wish to believe otherwise. Without new technologies, an economy might grow slowly. But without decent rules, an economy cannot even make use of the technologies that already exist."

It’s a shame Medvedev didn’t arrange a meeting with Romer on his trip; it probably would have proved more useful than learning how to tweet.

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2 Comments

  • Cole Slaw

    The notion that "Stanford University spun off Silicon Valley" is apparently incorrect. The term "Silicon Valley" refers to the abundance of companies that make "silicon transistors" (the building blocks of modern electronics; silicon is a type of semiconductor). William Shockley (BS 1932 Caltech , PhD 1936 MIT ), co-inventor of the transistor, founded the first silicon company -- Shockley Semiconductor Laboratory, a division of Beckman Instruments (founded by Arnold Beckman, BS 1922 and MS 1923 University of Illinois, PhD 1928 Caltech)-- in Mountain View, California, so that he could live near his aging mother in the neighboring city of Palo Alto. Eight of Shockley's researchers quit in 1957 because they were unhappy with Shockley's management style, and established Fairchild Semiconductor. Disgruntled (or independent minded) employees from THAT company spawned other semiconductor and venture capital firms, and the pattern of companies spawning other companies in that region continues to this day. Companies such as Apple, EA, Intel, AMD, YouTube, and Google trace their lineage of funding and personnel directly back to Shockley. (Ira Flatow's NPR interview "Electronics Pioneer William Shockley's Legacy", July 21, 2006, at http://www.npr.org/templates/s... states that if Shockley had chosen the semiconductor "germanium" instead of silicon for his transistors, it would be known as "Germanium Valley") .

    In 1963 -- six years after the Fairchildren had left him to create Fairchild Semiconductor -- Shockley became professionally associated with Stanford, where he became notorious for his theories of eugenics. Shockley apparently never received a dime from his semiconductor ventures (read the NPR interview sourced above)

  • Chris Reich

    I don't like it. Russia is cash flush with oil rubles. Let them buy know-how from Cisco. Our companies always go for these deals thinking they'll one day own a huge, lucrative market. It never works out.

    Medvedev is Putin's puppet and Putin is no saint. Let Russia clean up the corruption issue and maybe they might attract investment. In the meantime, I'm not thrilled with advancing a country we shouldn't fully trust.

    When will we wake up? The U.S. needs money. The coffers are empty. We painfully depend on imported oil. Russia consistently sides with our adversaries. But as with China, we will now teach Russia to compete with us?

    We'd better stop greed in this country and start looking out for the home team.

    Chris Reich
    www.TeachU.com