Has Silicon Valley Lost its Mojo?

My colleague Steve Hamm just wrote a provocative cover story in this week’s issue of BusinessWeek called: “What’s Wrong with Silicon Valley?

I don’t agree with Steve that Silicon Valley has lost its mojo. If you look at the history of the Valley (which I did extensively in my book), it has always generated game-changing innovations. Every ten years or so, for the last 40 years, the Valley has cranked out a world-changing innovation (Video games and biotech in the 70s, the PC revolution in the early 1980s, and the Internet in the mid to late 90s). And quite often, those innovations are impossible or very hard to see until they are unleashed on the world.

Think Netscape. Hardly anyone knew what the Internet was until the Web brower was created. And then boom! The Internet revolution was launched during the summer of 1994.

Given the large amount of capital and smart people continuing to work on technology issues, and America’s world-class universities, I think this historical trend will continue. Even in a flat world, the Valley continues to hold a regional advantage.

Looking ahead, investments in green technology hold the most promise to change our world for the better and create enormous wealth. But there are a lot of other powerful technologies being developed.

Despite our differences, I do think Steve did a great job at pointing out several very important areas of concern–problems that could fester into more serious issues if they don’t receive the proper attention. And I couldn’t agree more with his call for entrepreneurs and financiers to think more boldly.

Among the areas of concern are, says Steve:

“Federal funding of advanced computer science and electrical engineering research has dropped off sharply since the late 1990s, as has the number of Americans pursuing computer science degrees. And large technology companies are putting less emphasis on basic research in favor of development work with quicker payoffs. “We’re off-balance. Everybody is thinking short-term,” warns Judy Estrin, former chief technology officer at networking giant Cisco Systems (CSCO). She just came out with a book, Closing the Innovation Gap, that’s a call to arms for the U.S. technology sector.”

What do you think? Has the Valley lost its mojo?