Paul Graham explains Why Startups Condense in America:
1. The US Allows Immigration.
2. The US Is a Rich Country.
3. The US Is Not (Yet) a Police State.
4. American Universities Are Better.
5. You Can Fire People in America.
6. In America Work Is Less Identified with Employment.
7. America Is Not Too Fussy.
8. America Has a Large Domestic Market.
9. America Has Venture Funding.
10. America Has Dynamic Typing for Careers.
He then looks at how to do better, starting with a better urban (or New Urbanist) environment:
To start with, Silicon Valley is too far from San Francisco. Palo Alto, the original ground zero, is about thirty miles away, and the present center more like forty. So people who come to work in Silicon Valley face an unpleasant choice: either live in the boring sprawl of the valley proper, or live in San Francisco and endure an hour commute each way.The best thing would be if the silicon valley were not merely closer to the interesting city, but interesting itself. And there is a lot of room for improvement here. Palo Alto is not so bad, but everything built since is the worst sort of strip development. You can measure how demoralizing it is by the number of people who will sacrifice two hours a day commuting rather than live there.
Another area in which you could easily surpass Silicon Valley is public transportation. There is a train running the length of it, and by American standards it’s not bad. Which is to say that to Japanese or Europeans it would seem like something out of the third world.
The kind of people you want to attract to your silicon valley like to get around by train, bicyle, and on foot. So if you want to beat America, design a town that puts cars last. It will be a while before any American city can bring itself to do that.
Another potential improvement is in capital gains taxes:
There are also a couple things you could do to beat America at the national level. One would be to have lower capital gains taxes. It doesn’t seem critical to have the lowest income taxes, because to take advantage of those, people have to move. But if capital gains rates vary, you move assets, not yourself, so changes are reflected at market speeds. The lower the rate, the cheaper it is to buy stock in growing companies as opposed to real estate, or bonds, or stocks bought for the dividends they pay.
He makes an interesting point about immigration:
If you don’t have a college degree you can’t get an H1B visa, the type usually issued to programmers. But a test that excludes Steve Jobs, Bill Gates, and Michael Dell can’t be a good one. Plus you can’t get a visa for working on your own company, only for working as an employee of someone else’s. And if you want to apply for citizenship you daren’t work for a startup at all, because if your sponsor goes out of business, you have to start over.American immigration policy keeps out most smart people, and channels the rest into unproductive jobs.