Margareta Pagano: The Cambridge phenomenon must be harnessed to inspire nation

Outside it was the usual grey Fenland sky but inside the Senate House in Cambridge yesterday it shone with some of the smartest brains in the world; 250 of them in total –a mix of chip experts, computer scientists, biologists, geneticists, physicists and mathematicians. As well as the geeks, there were angels and multi-millionaire entrepreneurs who have created what is known as the Cambridge Phenomenon. There were more companies represented here than people; for each of the 250 brains present are linked to hundreds of other companies spawned in Cambridge. It's this extraordinary network, or cluster, that has turned the city into such a phenomenon.

The brains were celebrating the launch of a new book – Cambridge Phenomenon; 50 years of Innovation and Enterprise – by Charles Cotton, who came to work with the "Micro-Men" of the early 1980s, Clive Sinclair of the eponymous car and computer and Hermann Hauser of Acorn Computers. Mr Cotton cottoned on to the Phenomenon tag and he, with co-writer Kate Kirk, has written about the people behind the 5,000 companies that have emerged from the Fens.

It was in Cambridge that Concorde's droop nose was designed, that ARM Holdings came up with the chips found in 90 per cent of all mobile phones, where Bluetooth was put on a single chip and Pipex became the world's first commercial internet service provider. The city is best known for being home to sequencing the human genome. Less well known is that the Clear Blue pregnancy test and the Strapless Wonderbra also came out of the Fens; but not by the same inventor. That would require more than magic.

To those who say the UK can't create a Microsoft or a Google, the Cambridge record is not bad; the list includes 11 $1bn dollar companies and two $10bn companies – Autonomy and ARM – as well as hundred of tiny highly specialised ones. Today there are around 1400 technology companies employing some 40,000 people.

Just imagine if one could replicate this phenomenon around the country. How could it be done? Mr Cotton puts the city's success down to what he calls the impact of "Brownian motion", combined with the stimulants flowing freely in the local pubs and coffee bars; pubs such as The Eagle where Francis Crick and James Watson announced they had discovered the secret of life in the structure of DNA or the pub where Mike Lynch of Autonomy met a stranger who lent him the first £2,000 after hearing about Mr Lynch's "meaning-based" computing concept.

As Mr Cotton says, the Brownian motion of the random jiggling around of particles suspended in a fluid or a gas has much to answer for. He adds: "Ideas are cheap. The difference in Cambridge is that there is an established ecosystem in which ideas get put into practice. Everyone learns from each other. There are only two degrees of separation from someone else you know who can help you. It's the intensity of the place that makes it work."

Warren East, Arm's chief executive, an Oxford graduate who has been in Cambridge for 29 years, has a similar view. For him it's the sharing of problems and of knowledge that gives the city its edge, and the many dinners and ballroom dancing classes where he met fellow-collaborators. Another entrepreneur, David Braben of Frontier Developments, is also co-founder of the new Raspberry Pi, an ARM-powered and low-cost education computer. He tells me Raspberry should help teach children write programmes as well as read them. Mr Braben came up with the Raspberry idea because of difficulties recruiting new computer scientists to write software for his computer game business, which he blames on declining numbers studying computer science and an exodus of talent abroad for tax reasons.

Mr Cotton says by far the biggest reason for the revolution taking off was when the university changed its attitude towards commerce. The university encouraged academics to start their own businesses, or combine both. Secondly, came a shift in attitude towards risk. Due to early successes, people stopped fearing failure. many failures have led to success with soft-starts coming out of failed companies such as ARM out of Acorn.

Thirdly, he says the Cambridge spirit – the willingness to share knowledge – has been a huge catalyst. Now Cambridge calls itself a multinational and global city and international companies such as Microsoft and Nokia are choosing to locate their research labs there to be close to other scientists. Success breeds success. It's time for the coalition to sequence the Cambridge Phenomenon; time to head to the Eagle pub for inspiration.