Over the Rainbow In Silicon Valley

Paul Saffo, a technology consultant who teaches at Stanford, says the valley owes much of its success to the remnants of a "frontier culture that disrespects elders, values risk-taking and honors failure" in a way that is simply inconceivable in a government or financial center.

Only in Washington, for example, could you have a conference on the "creative economy," as Fairfax County did this week, featuring a session on "Creativity in the Department of Homeland Security."

And, as Khosla sees it, in places like Boston and New York, the venture capitalists tend to focus too much on business plans. "Big leaps of faith are not amenable to financial analysis," he said. "The way we look at things, if you have a belief in an idea, you can figure out the financials later."

This almost dismissive attitude toward financials crops up frequently, whenever the subject of a bubble or inflated valuations is raised.

Sequoia's Michael Moritz, an early Google investor, notes that because the valley's orientation is hard-wired toward the future, valuations there are always "too high" -- it's just that nobody remembers when they grow into those valuations, like an eBay or a Google.

But at some point -- and there is disagreement here on whether that point has been reached -- the amounts of money thrown around get so large that they become "corrosive," in the words of Google chief executive Eric Schmidt, and overpower the idealism that runs deep in valley culture.

"The little secret that few people on the outside realize is that people here aren't in it primarily for the money," explained Thiel, sitting in jeans and sweatshirt in the sleek offices of Clarium Capital, the hedge fund he runs. "For a lot of them -- for a lot of us -- it's always been about changing the world. And you know things have gone too far when you see people doing things just to make a quick buck. . . . I'm not seeing that yet."

Maybe not. It's worth noting, however, that his $500,000 Facebook investment is now valued at $1.5 billion.

Steven Pearlstein can be reached at pearlsteins@washpost.com.