How could West Michigan become the next Silicon Valley?
This was the core question probed by Greg Horowitt, co-author of “The Rainforest: The Secret to Building the Next Silicon Valley,” during a recent appearance at Grand Valley State University.
Horowitt, managing director of T2 Venture Capital and co-founder of University of California San Diego Global CONNECT, spoke as part of the Huntington Breakfast Lecture Series. His curiosity — “the secret sauce to innovation,” as he called it — played a strong role in his work with the book.
It is the same “secret sauce” that leads to the planting of agrarian and resource-based societies, which led to the industrialization of the world, he said.
“Humans can specialize and create market. Through these two things, we have prosperity,” Horowitt said. “For years we’ve looked at economics this way — that we’ve had a set of inputs and outputs. … This has forced us into a linear way of thinking. But what we find is we are biology, not buildings.”
Horowitt presented two formulas for looking at business: plantation and rainforest.
In the plantation model, business must compete for a scarcity of goods, leading to a shutdown of anything unique or different from the norm. He compared this mentality to looking at business like a vineyard, where orderly rows are lined with grapevines, and any weeds must be destroyed because they compete for resources.
Horowitt instead proposed viewing business like a rainforest. In this option, innovation, abundance and diversity are celebrated, meaning not all “weeds” are destroyed but rather mentored and given the opportunity to thrive.
“The most disrupting businesses and entrepreneurs, like a Steve Jobs or a Mark Zuckerberg, are never recognized immediately,” he said.
“You cannot build systems to pick the winners. You can only build systems to support the winners when they grow. If you create the right environment, you create the right outcomes. … Matt Ridley said, ‘Innovation is ideas having sex.’ … In many ways, we’re trying to build the brothels of innovation.”
A good business should be measured on how well capital flows through the system, Horowitt said. Flexibility and building for evolution are the mentalities of the rainforest paradigm.
This means embracing ambiguity and discomfort at the same, he said. It means allowing the uncomfortable to open up new options. And it means making mistakes and creating a system where mistakes are not eliminated but managed.
“Mistakes don’t define us, they refine us,” he said. “How do you conquer fear? You create intimacy with it.”
Horowitt offered a list of 14 steps to build a rainforest business ecosystem:
- Enlightened government;
- Dismantling hierarchies;
- An informed and engaged private sector;
- Responsive and responsible work force development;
- Industry interface;
- Youth engagement;
- Flexible intellectual property frameworks;
- Supportive infrastructure;
- Smart capital;
- Active mentorship and entrepreneurial/enterprise support;
- Proactive leadership development (role models);
- Social mechanisms to actively build and distribute trust and foster collaboration;
- Venues to support risk sharing;
- Celebrating success.
During his second session, Horowitt explored the history of San Diego’s development into a rainforest model, much of which he admitted was unintentional.
He presented the model of San Diego’s success as a triangle of innovation, built on the intermediary relationships between money, research and talent. Industry clusters grew out of these, he said, and the way to attract larger businesses is to develop a large number of quality independents.
Power is all about having options, he said.
“The food chain works in reverse,” Horowitt said. “If you create an ecosystem that works for the small companies, the big companies come in to feed on the smaller companies.”
Grand Rapids should not try to “copy” San Diego’s model but embrace a similar rainforest business mindset, Horowitt advised. It’s the difference between changing software and hardware, he said, adding that organizational innovation is the most underrated asset in economic growth.
“Behave like a small town with a lot of people in it,” he said. “You want to become the best West Michigan you can, and in order to do that, you need to figure out where you need to be and what you want to do, rather than mimic old models.”