How has relatively young Stanford University (founded in 1891) come to rule the world?

To be fair, only MIT (founded in 1861) - whose alumni have created 30,200 active companies, employing roughly 4.6 million people, and generating roughly $1.9 trillion in annual revenues, according to a 2014 study -- comes close to the scale of wealth creation created by Stanford.

After all, a similar study produced by Stanford professor Chuck Eesley, found that companies formed by Stanford entrepreneurs generate worldwide revenues of $2.7 trillion annually and have created 5.4 million jobs since the 1930s - during which time Stanford alumni and faculty have created nearly 40,000 companies.

Adding up the value of 15 well-known public companies founded by Stanford alumni yields a whopping $1.39 trillion in value - Charles Schwab & Company ($53 billion market capitalization as of September 12, 2017, according to financial information site, Morningstar), Cisco Systems ($161 billion), Dolby Laboratories ($5 billion), eBay ($41 billion), E*Trade ($11 billion), Electronic Arts ($37 billion), Google ($651 billion), Hewlett-Packard Enterprise ($21 billion), HP ($33 billion), Intuitive Surgical ($39 billion), Netflix ($80 billion), Nike ($88 billion), NVIDIA ($101 billion), Tesla Motors ($61 billion), and Zillow ($8 billion).

If you include the price at which another nine have been acquired -- Instagram ($1 billion), LinkedIn ($26.2 billion), MIPS Technologies ($406 million), Odwalla ($181 million), Orbitz ($1.6 billion), Silicon Graphics ($275 million), StubHub ($310 million), Sun Microsystems ($7.4 billion), Yahoo ($4.5 billion) -- that adds nearly another $42 billion to that total. Then there are the well-known privately held companies -- Gap, Trader Joe's, and Whole Earth Catalog - of unknown value.

What's more, from its founding in 1970 to 2016, Stanford's Office of Technology Licensing has overseen the creation of more than 11,000 inventions and issued more than 3,600 licenses that have generated more than $1.7 billion in royalties, according to a September 7 email from Stanford spokesperson, Ernest Miranda.

Stanford also offers students programs that connect them with alumni, many entrepreneurship programs, and a variety of startup accelerators. For example, there is also the Stanford Technology Ventures Program in the School of Engineering; Start X, an educational, non-profit business incubator associated with Stanford which "helps entrepreneurs launch fledgling companies in a range of industries" while requiring neither fees nor equity in companies. Stanford also offers StartX Med for medical entrepreneurship, explained Miranda.

Stanford got to be such a huge economic engine due to three factors: great men, the right culture, and California's values. Great men spurred Silicon Valley's initial success. For example, as MIT Sloan School Lecturer Jorge Guzman pointed out in a July interview, Silicon Valley would still be peach orchards were it not for William Shockley -- the inventor of the transistor who moved west to found Fairchild Semiconductor. MIT Sloan School David Sarnoff Professor of Management of Technology Ed Roberts said in a July interview that Frederick Terman, an MIT professor, came to Stanford in 1925 and later helped two of his students, William Hewlett and David Packard to found HP. Terman helped HP succeed by connecting the company to Defense department contracts.

Another factor is Stanford's culture which Roberts believes is based in part on MIT's. As he pointed out, MIT was started in the 1861 with the motto Mens et Manus (Latin for mind and hand) -- meaning that its mission was to make cutting edge ideas useful to industry. What's more, MIT encouraged professors to do research for industry to supplement their low professor's pay. Thus there was a natural flow of talent between MIT and industry which in other universities is frowned on. Roberts believes that Terman took that same philosophy to Stanford and that has made much of the difference.

A third factor is California's pioneering spirit. This was well-explained in an April 30, 2012 New Yorker article, "Get Rich U." That's where Ken Auletta interviewed William F. Miller, a physicist, who was the last Stanford faculty member recruited by Terman who later became provost. Miller argued that the relationship between Stanford and Silicon Valley is related to Stanford's founding. "This was kind of the Wild West. The gold rush was still on. Custer's Last Stand was only nine years before. California had not been a state very long--roughly, thirty years. People who came here had to be pioneers. Pioneers had two qualities: one, they had to be adventurers, but they were also community builders. So the people who came here to build the university also intended to build the community, and that meant interacting with businesses and helping create businesses."

Stanford's tenth president, John Hennessy, told the New Yorker that California's relative lack of traditions to be protected mean that "people are willing to try things. At Stanford more than elsewhere, the university and business forge a borderless community in which making money is considered virtuous and where participants profess a [sometimes inflated] belief that their work is changing the world for the better."

While it never makes sense for a city to try to become the next Silicon Valley, the rest of the world can try to draw lessons from its history.

Published on: Sep 12, 2017
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