06/02/2010 04:03 pm ET Updated May 25, 2011

The Death Note of Silicon Valley

Having grown up in Silicon valley, I've watched the tide of industrialism come in and fade away over the years. During its heyday in the early 70's and into the 80's, Silicon Valley could do no wrong. But now, that is all changing.

A product starts with innovation, which evolves into a concept. Throw in some material science and some process development, and you have a prototype. Mix the prototype in with functional testing and tweaking, combine that with user interface and reliability, tweak the design to capture a market, then you have a product. That's Product Design 101, and in many ways it has defined how Silicon Valley became Silicon Valley.

The innovation came from local universities, where students, motivated by the lack of enabling technology, began pushing the envelope of what would become ground breaking devices.
Transistors were born in garages, through masterful tweaking of new materials like silicon, and new processes which could create almost-microscopic wire traces that allowed circuits to be miniaturized.

Taking these newly developed devices, new and improved applications were developed which would eventually replace tube amplifiers in consumer and industrial electronics. The age of "smaller is better" was born.

As new applications for transistors were discovered, the devices themselves were improved. Transistors were smaller, faster, more powerful, had more density, and were becoming cheaper. In short order, the advent of huge electronics manufacturing companies had redefined the valley as the world center of the electronics age. Companies like National Semiconductor, Hewlett Packard, Intel, and thousands of others, littered the landscape that was once home to fruit orchards and farms just 20 years earlier.

So what has changed in Silicon Valley's lifecycle? It's easy to figure out if you look at nature.
Picture a food chain. One that starts with a guppy. That guppy is food for a larger fish, let's say a bluegill. The bluegill might be a food source for black bass, and black bass might feed the local population of coyotes. Seems simple enough, right? So what happens if the guppies all die, all at once? Then bluegill have nothing to eat, so they eat each other or just die. Then the black bass suffer the same fate, as do the coyotes. All of this starts with the death of the earliest link in the chain - the guppy.

Stay with me now...

Harken back to the product design cycle, and we find that innovation is the earliest link in that cycle. If innovation dies, then material science and process development die out. Witout material science or processes, prototyping, tweaking and functional development die. With no prototyping, there is no product to do market development with, and it dies. No market means no place for a product to exist, so the product dies. Now, replace each instance of the word "die" with the word "outsource", and you have just defined what has happened to Silicon Valley.

Innovation is dying in Silicon Valley - apparently because there is no longer a profit in innovation. And with today's economy - one which does not support large scale manufacturing who serve disappearing or underfunded markets - we see thousands of people losing their jobs, arguably jobs which were not really solid to begin with. One can only sell so many widgets, before they run out of people to sell those widgets to. The only way to avoid this - you got it - innovation. Hence innovation, the start of the chain, feeds the product market - the end of the chain, which then relies on innovation to create a new widget and start the cycle over again.

Innovation has become sexy yet expensive in today's "want it now, want it fast" society. The valley has effectively "eaten itself" when it allowed innovation to die. Looking through all of the valley startup companies, you will find inklings of innovation, struggling to find enough money to survive. It used to be "shiek" to be a startup, but nowdays its more "struggle". Volume and a quick dollar have replaced innovation as the holy grail in the valley. People who innovate are perceived more as "dreamers" than visionaries. Product designers are seen more as "folks who draw swoopy lines" than as people who develop tomorrow's ideas today.

The death note of Silicon Valley lies in its own decision to put profit over innovation. Seemingly gone are the good old days when companies had beer bashes in the parking lot, and profit sharing parties at quarters end. Consolidation has become the industrial equivalent of "dog eat dog", and what was "reaping the rewards" back in the 80's has evolved into "survive or die" today.

There is just one basic solution to saving Silicon Valley... The valley must reverse the outsource cycle, and, in effect, bring back the guppy from extinction. Without this, the valley's lifecycle may soon cease to exist.