Many people point to the prosperity of Silicon Valley and attribute it to some innate advantage in entrepreneurial culture or arrogantly believe that people in tech are simply better, smarter, or more innovative than everyone else. What else could explain our boom times while the rest of the country continues to suffer through painfully high unemployment? The real reason, however, is much more nuanced, largely having to do with how the Valley has avoided the economics of globalization.

At a rapidly increasing pace over the past 30 years, globalization has provided an outsized benefit to investors while generally hurting the working class due to the effects of capital mobility. In a nutshell, capital can be deployed around the world, seeking out the most beneficial or lowest cost labor, while labor is largely immobile.

Here’s an example, let’s say Nike wants to build a new factory. Since investment capital is globally mobile, Nike can build the factory in Bangladesh, while American designers and workers don’t really have the option to move or work at Bangladesh wages. The end result is that corporations and investors see higher returns, while the average worker feels the effects of job and wage competition from nations with lower cost structures. This is not a political argument as both Democrats and Republicans have embraced globalization. Capital mobility and labor immobility are simply part of the nature of global economics.

If capital is mobile and favors investors, shouldn’t that mean VCs would be investing overseas? One of the most curious things about Sand Hill Road is how unwilling most venture capitalists are to invest outside of a 30-mile radius of their office. I’ve met multi-exit entrepreneurs who are having trouble raising money simply because they moved away from Northern California, and I suspect the percentage of foreign investments made by Silicon Valley VCs, at least until recently, is in the low single digits.

Unlike manufacturing or Wall Street money, which has been deployed globally, venture capital has stayed geographically local. In the process, Silicon Valley has enjoyed a continuing stream of investment capital fueling industry renewal, while simultaneously shielding wages and employment from the downward pressures felt in the rest of the country.

It’s only a trickle now, but recently VCs have started to overcome their geographical fears. Dave McClure seems to live on an airplane as he travels the world looking for deals and Paul Bragiel just opened an Africa fund, not to mention the increasingly common investments in Europe, India, and Israel. For the moment, we’re still patting ourselves on the back for being generous enough to export our brand of entrepreneurship, but this was the same belief we had in the early 1980s when the first American companies made their investments in China.

If the ROI on investing outside of the Valley starts looking more attractive, the trickle will turn into the same kind of flood that we saw with overseas manufacturing investment. And in the same way that shift decimated domestic industries (affecting labor most), we may see a similar collapse in Silicon Valley. If a team in India can innovate for $10K and the investment patterns show promise, why give a team in San Francisco a million for the same thing? Eventually, both innovation and salaries in the Valley will begin to suffer.

I’m sure many of you think this scenario is absurd, and Silicon Valley is a special place that will stay ahead of global competition simply because we are just more talented. Perhaps you’re right. But remember that new trends often seem insignificant. 30 years ago anyone suggesting that Lenovo would eventually buy IBM’s PC business would have been similarly dismissed. Companies, industries, even empires have died because they believed they were “special” without recognizing the foundational advantages that fueled their growth.

I grew up in San Jose and I’ve been able to watch the Valley grow and transform into a truly unique place. Yes, I believe there is a wonderful culture of entrepreneurship here and clearly there is a high concentration of technical talent. But I don’t think that alone is what kept the Valley ahead of the game all of these years.

As much as anything else, the secret of Silicon Valley’s continuing success has been the result of VCs being afraid to invest in companies that they couldn’t reach by car. As venture capitalists overcome this fear and start investing globally, we may be facing real competition for our jobs and livelihoods for the first time, the same kind of competition that has already confronted American manufacturing. In the face of these looming challenges, I really hope we’re as special as we think we are, because it looks like venture capital won’t be immobile for very much longer.

[Illustration by Hallie Bateman]