Steve Hilton's social network

The policy wonk renowned for his outlandish ideas has left No 10 for the mecca of tech, Palo Alto

In a small and outwardly-unremarkable city called Palo Alto, which boasts roughly 65,000 residents and sits on the southern shores of San Francisco Bay, two intriguing news stories were being played out yesterday.

One revolved around Facebook, the modish internet company whose sprawling headquarters lie on a road called Hacker Way, to the north of town. A long-awaited stock market flotation elevated this one-time local start-up to the status of $100 billion corporate behemoth and in the space of a few breathless hours, turned thousands of lucky Palo Altons into multi-millionaires.

The other involved Steve Hilton, David Cameron's official "blue sky" thinker, who is famed for his free-wheeling ideas, idiosyncratic taste in clothes, and dislike for footwear. After reportedly growing tired of life as the Prime Minister's official strategist, this influential member of the Notting Hill and Chipping Norton sets this week cleared his desk at Downing Street to begin a year's "sabbatical" at Stanford, the city's prestigious University.

Compared to Facebook's blistering stock-market debut, Hilton's arrival in town was relatively low key. His farewell message to Cameron, a robust memo advocating deep cuts to Britain's civil service and welfare state, certainly piqued the interest of Fleet Street, but it understandably made few waves on this side of the pond.

Yet both Hilton and Facebook's busy Fridays bear witness to a singular, quite remarkable phenomenon: at this point in the history of capitalism, with the internet revolution in full swing, there are few more exciting, lucrative, or dynamic places in the world, for an upwardly-mobile person in possession of a creative mind and burning ambition, than this small city on the western coast of California.

You only have to drive through Palo Alto and its neighbouring towns and cities, which are together known as Silicon Valley, to appreciate the region's future place in our civilisation. Sandwiched in between smart residential neighbourhoods, and retail districts packed with organic coffee shops and macrobiotic restaurants (one of the hottest, LYFE, is a vegan joint run by Google's former in-house chef), are vast "campuses" where today's tech giants plot world domination.

The town isn't pretty. But it's certainly buzzing. Within 20 minutes of Stanford, the nearest thing Palo Alto has to a historic institution, is the "Googleplex," Apple's "infinite loop", and the home of such long-established tech giants as HP, Oracle, Intel, and IBM. Ebay is next to the nearest airport, San Jose, Twitter lives in southern San Francisco, and the venture capital firms which help them tick are on Sandhill Road, one of the city's main thoroughfares.

The huge, glass and steel homes for these hungry businesses have built make for a breathtaking monument to creative and commercial might. As London was to Victorian industrialists, and New York to the wealth creators of the 1900s, Palo Alto is fast becoming the modern-day Mecca for bright young pioneers who hope to make the 21st century tick.

"Everyone is so full of energy here. It's where all the brightest minds come, attracted to new ideas. I just feel blessed to be part of it," says Kirsten Keith, mayor of booming Menlo Park, a stone's throw from Facebook HQ. Per capita the region has more billionaires, and more residents in possession of a PHD, than anywhere else on Earth.

"It's one of those places where people really are under the impression that they're at the centre of the world," adds Jamis MacNiven, owner of the coffee shop Bucks of Woodside, a Silicon Valley institution where countless start-ups have been born, "We are where the modern world is emerging from."

Hilton, who is 42, will find this music to his ears. He is taking up residence with his wife Rachel Whetstone, a former spokesperson for Michael Howard turned PR supremo at Google, and their two young children.

His decision to give up a seat at the table of power in London has been put down variously to frustration at an apparent inability to effect seismic change, disagreements with civil servants and coalition ministers, and a straightforward desire to spend more time with his family. Every factor no doubt came into play. But in truth, Palo Alto and Steve Hilton are so naturally compatible that they might have been purpose built for one another.

Hilton's freewheeling personality, which was honed in the world of advertising and marketing, seems perfectly suited for Californian academia. His disdain for sartorial protocol, which saw him walk barefoot through Downing Street, taking meetings with be-suited Sir Humphrey types while wearing shorts and a t-shirt puts him in right at home in a world where every office boasts bean bags and ping pong tables, and where people like Mark Zuckerberg are never seen without a hoodie.

His interest in green issues (he was the architect of Cameron's "hug a husky" campaign) are meanwhile in line with

Those of a community populated by some of the world's most left wing billionaires), while Hilton's use of cycles as a preferred mode of transport sits naturally with Palo Alto's status as the most bike friendly city in America.

It is, however, the sheer possibilities of life in the Valley that seem most likely to appeal. The son of Hungarian immigrants, who always disdained the British class system, Hilton fits naturally into an environment where social backgrounds count for nothing, no idea is too outrageous, and the only measure of a man's potential is the size of his ambition. Even if he feels impoverished (not to mention old) by comparison with his new neighbours, he is unlikely to feel overshadowed by them.

"It's just not about the money here," adds MacNiven. "There's a real modesty. This place is about winning the future, not about making a tonne of money. If all you want is cash, you'll just go to Wall Street and work for a hedge fund. This town is for people who want to change the world."

Modesty is also in vogue on the local streets of the region. Notwithstanding awful traffic jams (the curse of every boom town), cars tend to be modest and low profile. Zuckerberg, for example, drives an entry level Accura. “Sure, we sell the $400k supercars. But the area we're seeing huge surge is in hybrids,” says Brendan Harrington, who runs the city’s Lexus dealership, suddenly one of the largest in the US. “People here don’t want bling, they want to make the smart choice. In some places, you’d make a million bucks and go out and buy a Merc with 20 inch wheels. Here there’s no appetite to look like you have more money than you do.”

Local house prices are breathtaking, naturally. Palo Alto has been a property hotspot since the 1930s, when NASA and Lockheed Martin moved to Moffat Airfield, and they began heading into the stratosphere in the 1980s, when resident firms such as HP began cashing-in on the microchip boom. Today, a decent family home will set you back between $3 and $6m. But, as with their cars, Silicon Valley set like their McMansions understated. Zuckerberg, for example, has an outwardly-modest $7m pile in Palo Alto's College Terrace neighbourhood. His former deputy Owen Van Natta owns a $8m one in the same area.

Penelope Huang, a Re/Max broker in the area, where house prices rose by roughly 30 percent last year, says that - even at their current market value - local piles tend to sell themselves: "People are driven but very balanced. They are fit, they eat well, there's a farmer's market in every community, and we all shop at Whole Foods. It's like living in a bubble, and when you go anywhere else, you just want to come right home." After the bubble of Downing Street, what more could Hilton want?

Palo Alto: Meet the neighbours

1. Owen Van Natta

Was Facebook's chief operating officer between 2005 and 2008, and then MySpace's CEO. Last year he stepped down from social gaming group Zynga.

2. Larry Page

The 39-year-old founded Google in 1998 with Sergey Brin. In 2011, he was appointed CEO Eric Schmidt. Born into a family of computer scientists, his father, Carl Page, is acknowledged as a pioneer of computer science and artificial intelligence.

3. Marissa Mayer

Vice President of 'Search Products and User Experience' at Google, Ms Mayer is originally from Wausau, Wisconsin, and earned a masters in computer science at Stanford. Was first female engineer hired by Google in 1999 and the youngest person on Forbes' "50 most powerful women in the world" list in 2008.

4. Mark Zuckerberg

Harvard University drop-out is the founder of Facebook. The social networking giant floated its shares in New York yesterday, netting the 28-year-old more than $19bn – making him one of the world's top 20 richest people.

5. Jawed Karim

Launched YouTube in 2005 together with Steven Chen and Chad Hurley, whom he met while working at PayPal. Jawed, 33, left the company early in order to pursue a masters degree at Stanford University. He recently launched "Youniversity ventures" a platform to encourage internet entrepreneurships.

6. Harry J Saal

Founder and CEO of Network General Corporation, the first company wholly dedicated to network diagnostics. In 1978 he founded Nestar Systems Inc, a pioneer in local area network systems for personal computers.