From the CEOs For Cities blog:

Paul Graham, essayist, programmer, and programming language designer, used his keynote address at Xtech to explain how to become Silicon Valley.

You need two kinds of people to create a technology hub, he contends: rich people and nerds. And that’s all you need. That’s the exciting thing. “If you could attract a critical mass of nerds and investors to live somewhere, you could reproduce Silicon Valley,” Graham says. “And both groups are highly mobile. They’ll go where life is good. So what makes a place good to them?”

Nerds like to be where there are other nerds. Great universities seem indispensible to attracting nerds (although Heike Meyer suggests that Kansas City and Portland, Oregon, may be the exceptions). Graham suggests a formula to get such a university might be to pay 200 professors hiring bonuses of $3 million apiece.

But a university is not enough, he says. It has to reside in a place people want to stay after they graduate. Nerds, Graham says, want to live in cities with personality that offer “quieter pleasures” like cafes, bookshops, hiking and sunlight.

Although Graham makes a good case on how to become the next Silicon Valley, his example of William Shockley (founder of Shockley Semiconductor that begat Fairchild Semiconductor to which Intel and Kleiner Perkins are directly linked) is not the best. Shockley located his firm in Palo Alto because that’s where he had grown up. Count Palo Alto part of the lucky hometown club that also claim Austin and Seattle (for that matter, Omaha) as members.

John Seely Brown has written with insight on this same topic.