If you're at all interested in trying to understand how technology originates and evolves I couldn't recommend a better book than The Nature of Technology, by Brian Arthur. It's a fascinating read, and one which I expect to keep close by for years to come. More to the point, there is a section in the book where Arthur is describing how innovation and competitiveness evolves in specific fields over time. He argues that technical expertise in a given field tends to be concentrated in a specific geographic region. In making this argument he either knowingly or unknowingly perfectly summarizes why Silicon Valley is "Silicon Valley." The excerpt goes:
"Real advanced technology-on the edge sophisticated technology-issues not from knowledge but from something I will call deep craft. Deep craft is more than knowledge. It is a set of knowings. Knowing what is likely to work and what is not to work. Knowing what methods to use, what principles are likely to succeed, what parameter values to use in a given technique. Knowing who to talk to down the corridor to get things working, how to fix things that go wrong, what to ignore, what theories to look to. This sort of craft-knowing takes science for granted and mere knowledge for granted. And it derives collectively from a shared culture of beliefs, an unspoken culture of common experience."
"It follows that once a region-or country for that matter-gets ahead in an advanced body of technology, it tends to get further ahead. Success brings success, so that there are positive feedbacks or increasing returns to regional concentrations of technology."
If you think about entrepreneurship as a form of technology (which it is) Arthur's description of the concentration of technical expertise also perfectly describes how and why Silicon Valley is what it is today. The positive feedback loop is not limited to one specific form of technology but rather to the process/practices/shared knowledge of building great companies. To draw the analogy out even further, Arthur also makes a strong case for anyone who is long on Silicon Valley.