14 May 2008
Not Just Semiconductors
Silicon Valley and the culture of innovation
By: Ashlee Vance
Ashlee Vance is the author of Geek Silicon Valley, a cultural and historical guide to the region. He is also editor of the online tech site The Register and a frequent contributor to the Economist and the New York Times.
Anyone familiar with the intricacies and historical oddities behind Silicon Valley’s rise to technological preeminence will understand the enormous task faced by those who seek to mimic its success elsewhere in the United States and abroad. A number of civic leaders and corporations appear to have decided that combining the “right” mix of capital, university support, talent, and business acumen will result in a competent Silicon Valley clone. This is understandable, but it undervalues the cultural forces that placed Silicon Valley at the epicenter of the world’s high-tech industry.
Travel back to 1950, and you would not likely have identified the set of interlocking suburbs about 65 kilometers south of San Francisco as the future capital of computer technology. Back then, locals called it the Valley of Heart’s Delight. Without a silicon wafer to be found, pear, cherry, peach, and other fruit orchards dominated the mid-peninsula area encased between the San Francisco Bay and the Santa Cruz Mountains.
Many historians point to William Shockley’s 1956 return from the East Coast as the trigger for this transformation from lush farmlands to business parks, strip malls, and corporate campuses. Shockley, credited as a co-inventor of the transistor in 1947 (he was then with Bell Labs), selected Mountain View, California, as the new home for his silicon-based semiconductor start-up. He could instead have picked Dallas, Texas, or Los Angeles, as his investor would have preferred, but Shockley was trying to recover from a difficult work environment and a divorce. He needed a change. He also needed to be close to his mother, who still lived in the family’s northern California home near Stanford University.
Silicon Valley veterans such as Gordon Moore — a Shockley employee and later a co-founder of both Fairchild Semiconductor and Intel Corporation — say that the semiconductor industry likely would have bubbled up somewhere else were it not for Shockley’s decision. He attracted some of the brightest minds in the country to Mountain View and made the then-risky move of picking silicon as the key substrate behind his semiconductor efforts. While Shockley’s move proved crucial to Silicon Valley’s development, a number of underlying business and cultural factors already had prepared the Valley for its new role and maximized the impact of Shockley’s arrival.
It Began With Radio
At the dawn of the 20th century, curious amateurs and entrepreneurs started working with radio and electronics technology. The San Francisco Bay area was a natural locus for this work due to the presence of the U.S. Navy in the area and its desire to use radio communications at sea.
In 1909, one of Stanford University’s best-known early graduates, Cyril Elwell, pushed the boundaries of radio communications by setting up what would become the Federal Telegraph Company. This firm built some of that era’s largest arc transmitters — devices capable of sending speech over the airwaves in a radius up to 240 kilometers. Within a couple of years of its founding, Federal had crafted for the Navy a chain of arc transmitters linking San Francisco with Hawaii. Meanwhile, the company’s laboratory in Palo Alto, California, funded groundbreaking work on the “audion” — a device capable of amplifying electrical signals in a vacuum tube. This technology and its derivatives would help power early computers.
Often plagued by a lack of investment, talent, and infrastructure, these early pioneers were forced to devise novel ways of competing with larger, more established East Coast rivals. Many early Bay Area inventors accordingly concentrated on making lower-cost, higher-quality products or on solving very specific problems. They often found it advantageous to share their ideas with peers and rivals. This openness and appreciation of ingenuity has manifested itself through all of Silicon Valley’s major periods of invention.
Companies such as Eitel and McCullough, Litton Engineering Laboratories, and Varian Associates carried on the electronics work in the mid-peninsula. By 1939, their efforts had created conditions sufficiently favorable to entice a pair of Stanford graduates — Bill Hewlett and Dave Packard — to start their own electronics testing equipment company in Palo Alto, at the northern end of the future Silicon Valley and the home of Stanford University.
Enter Fred Terman
Fred Terman, a strategic-minded Stanford professor and radio researcher, seized on this budding industry and worked to form close ties between his students and the local entrepreneurs. He would introduce the students to local businessmen and arrange internships for them. It was Terman who encouraged Hewlett and Packard to launch their business.
In many ways, Terman pioneered this model of linking a prominent university with local businesses. His efforts helped make it possible for brainy Stanford students to find jobs and a future in the area rather than scampering off to more established companies in the Midwest and on the East Coast. Terman similarly helped woo William Shockley to the Valley of Heart’s Delight, promising him a flow of top-notch students eager to work with, and learn from, a leading physicist.
Shockley’s ability to attract some of the nation’s brightest young scientists to Silicon Valley proved hugely important in shaping the region’s future development. Ultimately, however, his unorthodox if grating management style proved his most lasting contribution. Unwilling to deal with Shockley’s mood swings and lack of business acumen, eight of his top employees broke off from the lab to form a new company.
The “traitorous eight,” as Shockley described them, lucked out by attracting the attention of Arthur Rock, an East Coast investor. Rock arranged an unusual deal for the time. He convinced an established company, Fairchild Camera and Instrument, to take on the entire group of ex-Shockley employees to staff a new subsidiary known as Fairchild Semiconductor. Significantly, the employees were all given large ownership stakes in the new company. This model, combining venture capital and employee ownership, would prove to be a foundation of the Valley’s future development and growth.
The “Fairchildren”: Spreading the Culture of Innovation
Even as Fairchild Semiconductor strengthened Silicon Valley’s leading role in the semiconductor industry, the company soon fostered another Valley custom. When many Fairchild researchers decided the company did not move fast enough to make use of their ideas, they broke off to form their own semiconductor start-ups — often referred to as the “Fairchildren.”
The staggering number (and in many cases the success) of these start-ups gave rise to the notion that it was okay to jump ship from a company to pursue one’s own ideas. It was also acceptable to bounce from company to company in search of the next big thing. These concepts were new and unique; in other parts of the United States, employees were expected to stay with one firm throughout their careers.
Following this trend, two of the Fairchild Semiconductor co-founders, Robert Noyce and Gordon Moore, left the company in 1968 to form Intel. In just a few short years, Intel would produce the first true microprocessor.
Over time, the bustling semiconductor industry attracted people who wanted to make use of this new technology. Once again, local enthusiasts began experimenting with microprocessors to see what types of machines they could build. Silicon Valley turned into an unstoppable force of innovation.
Researchers at a pair of labs — Xerox PARC and Stanford Research Institute (SRI) — began developing many of the ideas that would form the basis of the computing revolution. Often these centers proved willing to share their innovations with others in the Silicon Valley community. Inventions such as the mouse, the graphical user interface, and Ethernet made their way into the hands of local entrepreneurs in this fashion. Apple, Cisco, and Sun Microsystems, for instance, all can all trace their roots to Xerox PARC.
Once again, the open exchange of ideas led to Silicon Valley’s business success. Apple Computer founder Steve Jobs, for example, hired away some of Xerox PARC’s personal computer designers for his company’s own projects, while Sun co-founder Andy Bechtolsheim used the same PARC machine and Ethernet networking technology as the inspiration for his company’s first server.
In the years to come, growing numbers of entrepreneurs would, in turn, build off this work. Stanford students, in particular, demonstrated a knack for tapping into technology trends, with the likes of Yahoo! and Google beginning as dorm room concepts.
The sheer volume of innovation and technology giants tied to Silicon Valley seems almost difficult to comprehend. San Francisco, for example, birthed television via the work of Philo Farnsworth, and the biotech industry through Genentech. The greater Silicon Valley region gave rise to giants such as Intel, HP, Cisco, Sun, Oracle, Electronic Arts, SGI, Yahoo!, eBay, Google, and AMD.
Ingredients for Success
These success stories were the result of the Valley’s peculiar character, which prizes innovation and the flow of information among entrepreneurs. Technology companies, like their counterparts in other areas, understandably wish to maintain the firmest possible grip over their intellectual property. They hope to control, market, and profit from their innovations.
But many in Silicon Valley also understand that one of their most important assets is the Valley’s long and deep roots as almost a massive club for sharing new ideas. Enthusiasts push each other to come up with something new and better. Employees shift from company to company bringing with them concepts that can be tweaked to create a fresh invention. These same employees travel down Silicon Valley’s Sand Hill Road, presenting their ideas to one venture capitalist after another, seeding the minds of the Valley’s influential players with notions around the directions in which technology is traveling.
Through all of this, people in the Valley accept that failure is part of the bargain. Rather than being ashamed of a string of busted start-ups, one wears those experiences as a badge of honor — and knows he or she is meant to keep on going until the “big ones” hit. And perhaps this spirit dates back to the California Gold Rush of 1849, that spasm of individual risk-taking and drive that similarly placed its unique stamp on the region’s psyche.
It’s this rich mix of intertwining forces that makes Silicon Valley so difficult to copy. People endure the high housing prices and demanding nature of their jobs because they feel that the same work cannot be accomplished anywhere else. There is almost a sense that one is living inside a trade show — a very sunny one at that — where everything you need to charge after an inspiration or an idea is at your fingertips: the technology, the funding, and, of course, the talent.
Silicon Valley certainly faces competitive pressures. Various regions around the world possess ample talent and capital and a determination to improve their technological acumen. But the interplay of cultural and business forces that helped shape Silicon Valley remains vibrant, and should continue to secure the region’s place as an unequaled technology powerhouse.
