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Advice from Silicon Valley: Businesses must work together

Maryland doesn’t need to spend so much money to encourage economic development; it just needs to persuade businesses to work better with each other and within their communities.

At least, that’s what Victor W. Hwang, a Silicon Valley venture capitalist and author, will tell the Eastern Shore business community along with Dorchester County and state economic development officials at a technology summit in Cambridge on Monday.

Victor Hwang

Victor Hwang

“I spent my life thinking about government, but I realized at some point that the way leaders … try to stimulate economic growth, it’s wrong,” Hwang, 41, said in a recent interview. “I can provide a new framework, a new model.”

That model is based on his experience in Silicon Valley, where Hwang said the culture of trust between businesses makes it easier for companies to reach mutually beneficial deals. Attitude, he said, is more important than spending millions of dollars on tax incentives for businesses.

In Maryland, tax breaks are awarded to some new companies in certain fields — such as biotechnology — and for such actions as hiring new employees.

The Daily Record found last year that of the more than 300 loopholes in the tax code, very few are actually monitored for effectiveness by the state. Hwang said that wasn’t surprising.

“I think all those things are nice,” Hwang said. “The results of them are still quite mixed. The lesson from this realization that I’m talking about is it’s not necessarily what programs you do, it’s how the programs are implemented. … Are they just throwing money into the system?

“You can do a lot more with a lot less. It’s about, ‘How do you optimize what you’ve got?’ We’re seeking nothing less than the reinvention of economic development.”

That’s what Keasha Haythe, director of the Dorchester County Economic Development Department, was hoping to hear. She sought Hwang for the two-day conference on economic development and technology in rural areas after reading his book, “The Rainforest: The Secret to Building the Next Silicon Valley.”

“The light bulb really went off,” said Haythe, director of the department since 2008. “That’s what it’s going to take for us to tap into that creative and innovative state of mind, looking at things totally different.”

What Hwang is talking about is, really, just good economics, said Richard Clinch, director of economic development at the University of Baltimore’s Jacob France Institute.

“What he’s saying is completely consistent with regional economics,” Clinch said. “Companies compete, but they also collaborate. That is a central tenet of regional economics. And we do have clusters here, in Maryland. We have the government-contracting cluster, to some extent biotech clusters.”

But Hwang says proximity is only a small component of building a successful cluster. He notes that Dorchester County has built a business incubator — a fine start — but that its ultimate success will depend on culture, not closeness.

“The Silicon Valley lesson is: ‘It’s not just that you have an incubator, it’s how does it function?’” Hwang said.

‘What does your Silicon Valley look like to you?’

The key, he said, is for there to be trust within those incubators. By avoiding complicated legal agreements often broached by mature businesses out of an abundance of caution, Hwang said the cost of businesses for early-stage companies decreases, creating a more thriving and cooperative entrepreneurial environment.

“We’re very tribal. The further back you go [in history], the more tribal you get,” Hwang said. “The East Coast of the United States is more tribal than the West Coast of the United States, [where the question is] ‘How do you work with a stranger today, to solve a problem today?’

“This is the ideal business attitude for the emergence of innovative ventures.”

And if there’s a bad actor in an otherwise positive business culture, Silicon Valley polices itself, he said.

“Social circles are pretty good,” Hwang said. “They can find out pretty quickly if it’s someone they can play with.”

In Dorchester County and on the Eastern Shore in particular, Hwang said it’s important for economic development leaders to develop such a culture and then take advantage of their raw resources, which Hwang called “tremendous.”

Haythe wasn’t about to correct him.

“I do believe we have resources,” she said. “I believe rural communities are poised for innovation. It’s just a matter of ‘What does your Silicon Valley look like to you?’ Dorchester Silicon Valley will look different than the Silicon Valley in California. … I believe we’re already there. We want people to collaborate and partner with us.”

That’s good, Hwang said, because without proper direction, a start-up community would never flourish.

“It requires profound leadership. It requires a profound transformation in how community functions,” he said. “The way people trust each other, ultimately, is by modeling the leaders that show them what’s OK.”