Tuesday, November 18, 2008

The Geography of the Internet Industry - 1st Half

I actually found this book to be a surprisingly easy read. And before I get into the substance, I also want to point out that (for those of us who came in with know really geographic training), of all of the books we've read, this was the easiest to understand as geography. By which I mean it probably was the most cartographic book that we've read - I was pleasantly surprised how many maps there were in the book, and how well they explained the data, and how well the text utilized that information. I also thought the book did a good job of balancing the quantitative and qualitative research, but more on that later.


Mostly Zook defining his terms. He tells us what the Internet is, and a little bit about how it got there (more in the next chapter). He also tells us how he defines "Internet industry," a term that could mean a lot of things to a lot of different people. So, for our purposes, there are three criteria: 1) a business model that either is primarily Internet based, or that wouldn't work without the Internet; 2) expectation of extraordinarily fast growth (more on that in CHAPTER 4); and 3) financial backing from risk investors looking for big returns.

More important, though, is that he tells us up front that he doesn't buy into the notion that the Internet is placeless or that it renders space insignificant. "The development of the Internet industry is fundamentally embedded in geography and defies simple expectations of diffusion and the demise of cities and instead illustrates the continued importance of particular regional and urban nodes in an increasingly globalized economy" (p. 5).

He also misspells "Foosball" (fussball?).


A short historical background, from ARPANET to Mosaic and beyond. Zook uses this to lay the groundwork for the argument that some places had head starts, that other places quickly made up ground, and that the Internet really is made up of many connected places. He uses maps and tables to show us how use of the Internet grew, but also says that's not the best measure of what's going on in cyberspace. He also shows that peculiarities of place can be informative, sayig cultural factors in Japan may be responsible for the relative dearth of domains in an otherwise wired society.


Zook first argues that the Internet is largely an urban phenomenon, clustered around a few major (and key) cities. In particular, I liked how he connected to the previous chapter (something I thought he did well throughout the book), noting that Washington, D.C., began as the leading hub for domains, but was quickly surpassed by San Francisco, New York and LA when the Internet went commercial. By presenting and comparing data on domains, domains per host, and major Web sites, Zook establishes a sort of Internet heirarchy (San Francisco, good; Chicago, not so much). I also like how he demonstrates that some standard measures are less effective than they might seem, showing that while Internet use grew quickly throughout the U.S., the Internet industry remained concentrated in a few key cities.


Zook argues that most scholars get it wrong when they assume "the uniformity and perfect mobility of capital" (p. 40). While money may be invested anywhere with little effort, that doesn't mean venture capitalists don't think about location. He says that the Internet industry, like all industry, is influenced by factors such as government support, availablity of human capital, and infrastructure. However, Zook argues that what's more important than any (or even all) of those individual factors is whether people know how to best make use of them in concert 0 a sort of networking of resources (human, civil and governmental). Here, we get to his discussion of knowledge (I still don't really like that "tacit knowledge" thing) and its transfer. We also begin to meet venture capital, and to see how that system is set up. It, too, relies on networking - investors (from individuals to banks and pension funds) networking with "venture capitalists" and entrepreneurs, capital funds networking with each other so that each can supply a small amount of support for a project. He also notes that entrepreneurs often value venture capital for the contacts (networks) it provides ("[A] survey of 464 venture capital-funded entrepreneurs . . . found that "capital" was consistently the least important variable in an entrepreneur's decision. Entrepreneurs were primarily interested in establishing connections with venture capitalists wh could help recruit management, provide contacts with other key actors, lend credibility to their company, and contribute to overall firm strategy.") (p. 56) as much as for the money itself.


Here, Zook argues that the primary connection between the Internet industry and venture capital is the desire to get big fast - in the Wild West that is the Internet economy, estabishing a reputation is more important than having an actual product. And the capital recognized that, being willing to spend for something that might pay off big time. Here, again, he argues that there is a localism to the Internet, both from the side of capital ("Why should I even drive down to Redwood City [approximately 25 miles south of San Francisco] to see a company when I have more quality business plans that I can hope to review here?") and from the entrepreneurs ("A lot of people either come to [Silicon] Valley or spend a tremendous amount of time out here because this is . . . what did that guy say about robbing banks? . . . This is where the money is.") (p. 61). Here, too, is where I thought he did a good job of blending the qualitative (much of this chapter is essentially ethnography) with the quantitative - I have no idea what a "multivariate linear regression" is (maybe one of you quantoids can explain it to me over about 9 beers), but I know that Zook used one to show how things such as available tech jobs, an educated work force and available venture capital all combined to create the ideal environment in places where the Internet industry flourished most.

That's it. On to the second half . . .

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