Silicon Valley started in the 1950s when there was a lot of government involvement. It didn't become the private sector's innovation center until the 1980s or so, and even then, government played a massive but unaccredited role. Defense contractors rarely innovate-- at least, not intentionally-- but the competition against them for top talent requires startups to compete on interesting work, autonomy, et cetera, which makes better startups. Silicon Valley's era of innovation (ca. 1957-2001) existed in a time (now sadly ended) during which labor had unprecedented leverage. To support Simon's thesis, you don't get innovation if labor or capital has all the cards; you need a balance between the two.