Author: Mai Pham
Graphics: Nathan Nyaung
As the world’s technological epicenter, Silicon Valley has an almost mythical allure to it. Yet as we trace back its history, clear parallels to our modern day reveal that we must rethink Silicon Valley as not just a place of technological progress, but as a stronghold for democracy and a driving force for good.
The Future is Being Built in the Bay
There are few places in the world creating this much economic output per square mile. If it were its own economy, the San Francisco Bay Area would rank among the richest countries. The region’s technology sector accounts for around 25-30% of all local employment and economic output — but more importantly, the innovative force and entrepreneurial spirit define the very way of life. Being in the Bay, one can feel the gravitas of the decisions which will impact billions of people far beyond the borders of one unassuming city on the West Coast.
However captivating, the promise of the valley is not the full story. Revisiting Silicon Valley’s origins in a modern context reveals not just the forces that lead to its rise, but more importantly, point to where it ought to go from here.
How It All Began
At first glance it may seem inexplicable how one city managed to become the birthplace to so many billion-dollar ideas. But what’s behind it is an unexpected story of the right people meeting at the right moment to create a network of innovation that would define technological progress until this day.
The Man Behind Silicon Valley’s Birth
After World War II, the U.S. government was eager to channel big federal budgets towards research and development to gain a technological edge in the Cold War. Large parts of this funding ended up being directed towards California’s universities and defense contractors.
The man at the center of it was Frederick Terman, a Stanford professor, now credited as the “Father of Silicon Valley”, who played a pivotal role in positioning Stanford as a hub for innovation by initiating a mutually beneficial relationship where academia, industry, and government would join forces. Washington provided large amounts of funding, Stanford in turn its breakthrough technologies.
In 1939, Hewlett-Packard (HP) was founded by Terman’s former students and mentees Bill Hewlett and David Packard in a garage now widely considered as the birthplace of Silicon Valley. And thus, the mythos of the garage founders was born — scrappy, resourceful, and driven — an archetype which pulls in aspiring founders to this day.
The Secret Behind the Valley
However, it was never simply about access to federal funding. Instead, Terman’s most significant contribution came as a “social and institutional innovator” and visionary. With Stanford Research Park, he wanted to bring together academics, technologists, and industry to build clusters of technological talent, where knowledge transfer and tight collaboration would form the soil where generational ideas can sprout.
What nowadays may simply appear like a bunch of tech companies clustered in one place, is much more than the sum of its parts: Silicon Valley is a breathing ecosystem which lives and thrives off of networks alongside a free and open exchange of ideas. The culture of the Valley tolerates risk, embraces failure, and celebrates bold visions and global ambitions.
In the Valley, fierce competition and collaboration — both formally and informally — coexist to form a finely-tuned system which benefits from large network effects. This creates a self-reinforcing cycle where global top talent, world class universities, and dense professional networks continuously feed off of one another.
Ushering in a Golden Age
Its unexpected beginnings, rooted in militarization and state funding during the Cold War, stand in stark juxtaposition to the collective perception of Silicon Valley as home for visionaries and dreamers. Yet it was the combination of those very conditions that gave birth to the world’s greatest innovation powerhouse and the beginning of what could only be described as a golden age for the Valley — one of both continuous invention and reinvention:
The 1950s brought semiconductors. In the 1970s, personal computers set the groundwork for the internet in the 1990s, which enabled an explosion of billion-dollar companies: Yahoo and Amazon pioneered e-commerce while Google generationally transformed the search engine., Facebook, Twitter, and Apple brought about the mobile-social era, and right now, OpenAI and its peers are chasing the next step forward — one of unprecedented magnitude whose full implications we can’t yet even comprehend.
However, this is not simply a triumphant tale of innovation: Over time, a handful of companies have amassed significant control over digital infrastructures, user data, and public attention. Today, these tech companies are no longer just simple corporations. Instead, they are global actors who through their stronghold on consumers and their sheer size can exert their influence over markets, geopolitics, and society as a whole. In the realm of social media, where algorithms dictate who is given a voice and misinformation is running rampant, these giants have the power to undermine the very foundations of democracy.
A Turning Point
Until today, Silicon Valley has remained at the top unchallenged securing an era of “American unipolarity”. For better or worse, its creations have upended everything we’ve come to know and brought about the fall of longstanding systems and norms by reweaving the very fabric of society and, in turn, reality itself. As a system reliably churning out innovation, the sheer prowess of Silicon Valley makes it too big to fail — or at least it seems that way.
Having brought forth major companies such as Alibaba or Bytedance, parent to TikTok, and achieving technological leadership in key future areas such as renewables, Beijing is vying to overtake its American counterpart in what is said to be the most disruptive innovation since the steam engine.
The Wars of the Future are Fought Digitally
For the longest time, has Silicon Valley and the U.S. been leading the way in terms of AI development. However, the release of DeepSeek-R1 caught Silicon Valley completely unprepared and served as a wake-up call reminiscent of when the USSR launched the Sputnik back in 1957: China had somehow managed to produce a high-performing open-source model at only a fraction of the cost in spite of the export restrictions on Nvidia’s powerful GPUs imposed by the Biden administration.
This only further poured gasoline on a narrative that had been brewing for quite some time: U.S. and China — two global superpowers battling it out in a technological arms race — whoever wins, gets to rule over the new world imprinting their values on it. The story rhymes. And once more, the stakes couldn’t be higher…supposedly.
In an attempt to gain the upperhand, the U.S. is pushing aggressively towards rapid deregulation with President Donald Trump aligning himself with Silicon Valley asserting that the U.S. would do “whatever it takes to lead the world in AI”, even trying to pass a 10-year ban on any AI regulation. Increasingly, many researchers like Nobel-Laureate Geoffrey Hinton are however raising concerns about the speed at which Silicon Valley is surging ahead, urging for more focus on AI safety and alignment instead.
One cannot help but notice the irony: The very fear of falling behind is being used to justify recklessly accelerating AI development even further, under the pretext of protecting the free world. Meanwhile, China prioritizes AI safety more heavily, actually even calling for an international organization to oversee the responsible regulation of AI.
But where does this sense of urgency come from when the narrative’s evidence is lacking? Already, AI is driving large parts of the global economy. In the first half of 2025, investments in AI were responsible for 92% of the U.S. GDP growth. It must not be overlooked that the firms behind this innovation are profit-driven, even those that had initially claimed otherwise. And in a field like AI with only a few big players and high barriers to entry, first mover advantages are significant for achieving industry dominance, incentivizing the push for a regulatory landscape that favors rapid deployment over caution.
Why “Winning” Matters
However, it wouldn’t be fair to simply dismiss all this as fear-mongering motivated by corporate greed: Within the AI research community, there are genuine concerns about a rapid takeoff scenario where an Artificial General Intelligence (AGI) could quickly become capable of self-improving and accelerating its own progress beyond human control with detrimental consequences for civilization. In such a scenario, who gets there first would matter, both in terms of safety as well as in determining the norms that shape this technology’s global governance.
One should be under no illusion that a Chinese win would mark a shift in the geopolitical power structure, as China would get to set the terms for the next century to come — without guarantee for values of freedom, equality, and justice. As a powerful technology, the misuse of AI can have fatal consequences from its use in warfare to the destabilization of democracy through deepfakes or misinformation. Still, winning is not simply a matter of “beating China”. Perpetuating this narrative not only creates further global division, but actually distracts from the far bigger challenge facing AI development.
Beyond the Binary Narrative
Whenever a disruptive technology is introduced, there is a so-called cultural lag where society can’t keep up with the speed of innovation. During this time of uncertainty with no general consensus on values or ethics, societies without any safeguards are prone to conflicts and injustices, while corporations can amass influence until they are too big to fail and too powerful to regulate.
Already, we are witnessing how AI is increasing social disparities and negatively affecting parts of society in irreversible ways: from the impact of data centres on the environment and local communities to the emergence of AI psychosis and unknown repercussions on mental health.
That is not to say that this technology is outright evil, quite the opposite in fact. There is huge potential for it to drastically improve all our lives: If we are to believe the figures in Big AI, AGI will be able to cure cancer, solve climate change, and propel us into a new age of enlightenment. However, we must carefully assess the sacrifices we as a society are willing to make along the way.
What it Takes to Win
“Winning” isn’t simply a matter of economic or technological leadership over other nations. In order to uphold democracy, protect individual freedoms, and ensure that the wealth it creates is distributed evenly across all humans, AI must be rooted in democratic values and guided by transparency.
In “The Entrepreneurial State”, economist Mariana Mazzucato points to how the most defining innovation was born out of public investment and collaboration between public and private sectors rather than through the magical mechanisms of free markets alone. With the stakes this high, collaboration rather than isolation is crucial. Increased cooperation between AI labs, openness rather than privatization, and a renewed partnership with the state are pillars to rapid technological progress.
China is already embracing this: state, industry, and academia are tightly aligned. DeepSeek’s R1 model was released open-source which led to a ripple effect facilitating innovation and adaptation across China’s AI developer community. Understanding these dynamics, China’s rapid progress in AI no longer seems so surprising.
Even looking back at Silicon Valley’s very own history, this is nothing new: While competition has always been part of its DNA, its real strength has long stemmed from collaboration between government and companies, and the free exchange of ideas reaching back to Silicon Valley’s beginnings and the values instilled through Frederick Terman himself.
Building a Future for Humans, not Machines
The world is racing towards a future of AI. There’s really no way around it — there’s too much hype, too much potential for good (and bad!), and far too much money involved. However, these systems are yet to be designed and we must critically examine how this technology can coexist with humans in order to ensure that society flourishes. Now standing at a crossroads, Silicon Valley must reassess its trajectory and prove that it has the moral clarity to not abandon the very democratic values they had claimed to uphold. Policy makers and the public must hold Silicon Valley accountable.
It starts with outgrowing the myth of Silicon Valley as this magical place and recognizing it — and especially the figures within it — as human: driven by human interests (both altruistic and self-serving), capable of human mistakes. Rather than participating in reductionist narratives, we must instead acknowledge AI’s dangers, take on its responsible development, and not be misled by our hubris to believe that our “moral superiority” is enough to guide this technology without necessary safeguards.
Because history has seen empires both rise and fall, and past glories won’t win today’s battles in — what could very well be — a war for tomorrow.
Take-Home Points
- Silicon Valley’s rise began with Cold War-era defense funding and Frederick Terman’s vision at Stanford, which linked academia, government, and industry. Nowadays, Silicon Valley is the world’s technological epicenter.
- The U.S. and China are pitted against each other in a technological arms race that will shape technological norms, values, and political power worldwide. However, to ensure responsible and safe AI development, we must move past this narrative.
- The development of AI must be guided by democratic values, transparency, and accountability to protect human freedom.
- Collaboration between governments, companies, and society as well as AI governance and regulation are essential to ensure technology serves the public good.