As the political and economic scene changed, so did the military-industrial complex. The Vietnam War had placed intense strain on the U.S. military budget. The successful moon landing had ended the bonanza of space-age contracts; NASA’s 1971 budget was half of what it was in 1966. Budget anxieties and environmental concerns had contributed to Congressional “no” votes on big-ticket projects like the Supersonic Transport (or SST), America’s answer to the Atlantic-hopping Concorde jet produced by an Anglo-French consortium in 1969.
The cancellation of the SST in early 1971 threw its designated contractor, Boeing, into an economic tailspin, and set off a deep, years-long recession in the aerospace giant’s hometown of Seattle. The only people in town who seemed happy about the decision, The Wall Street Journal reported with a scowl, were members of Seattle’s radical Left. “It means more disgruntled people out of work,” remarked one organizer cheerfully as he sat amid a bustling socialist food bank, a poster of Che Guevara glaring down from above. By 1971, Boeing-related job losses had so crushed the regional manufacturing economy that two commercial real estate agents erected a sardonic billboard along a major highway reading, “Will the last person leaving Seattle turn out the lights?”8
The political and economic changes slammed into a Santa Clara Valley that had enjoyed unchecked growth through the boom times of the military-industrial complex and the bull market of the 1960s. Defense cuts contributed to a loss of ten thousand manufacturing jobs in the San Jose metropolitan area between 1969 and 1971. And it wasn’t just assembly line workers: as big contracts for missiles and satellites wound down and weren’t replaced, the Valley’s largest employers laid off scores of engineers.9
On top of this, Wall Street deals slowed to a trickle. The mania for tech IPOs that had seized the market in 1968 was completely over by 1971. It turned out that Burt McMurtry had become a venture capitalist just in time for the VC industry’s lean years to begin. The first fund that he and Jack Melchor operated out of their offices above the pizzeria looked like a bust (although it later became wildly successful). “The most common exit strategy,” he remembered ruefully, “was that we lost all our money.”10
COMPUTER INTELLIGENCE
Yet change also brought new opportunity. As contracts for military R&D slowed down, new ones rose up. As Richard Nixon declared war on cancer, Stanford and Berkeley became leaders in the growing fields of medical and biotechnological research. Stanford’s computer science department started its own industrial affiliate program, where researchers and local computer companies could do regular “show and tells.” It was a great way to raise money for Stanford too. Soon, the “Computer Forum” was pulling in a million dollars a year in corporate support.
If electrical engineering defined Stanford’s Terman years, computer science increasingly defined its new era. Federal funding for computer science once had been minuscule compared to other fields; now it was rising fast, funding graduate fellowships and faculty research activities to the tune of $250 million per year nationally by the middle of the 1970s. On the Farm, faculty member Bill Miller, an originator of the affiliate program and a co-founder of that new Stanford-focused VC, the Mayfield Fund, became the world’s first “Associate Provost for Computing” and embarked on digitizing the university’s administrative operations. In 1971, he became Stanford’s provost.11
The Valley also was catching up with MIT in the fields of robotics and artificial intelligence, thanks to the AI lab helmed by John McCarthy and the work happening down the road at SRI International, a think tank recently spun off from Stanford in response to student protests about the classified military research conducted there. SRI still did plenty of military work, but it now was grabbing national attention for what it was doing to make machines think. In November 1970, Life magazine invited its millions of readers to “Meet Shaky,” a robot that rolled the linoleum halls of SRI, capable of point-to-point navigation, “seeing” objects in its way, and rudimentary speech recognition. The mainframe-powered Shaky was a smartphone and a driverless car, fifty years before its time.12
Down the hall at SRI lay another future-tense lab, the Augmentation Research Center, led by a soft-spoken engineer in his forties named Douglas C. Engelbart. As academics and policymakers worried over the question of automation—the replacement of human workers with robotic machines, and human brains with artificially intelligent computers—Engelbart was one of a small and growing group of researchers interested in augmentation of human effort via technology. Semiconductor companies might have been laboring to crowd more and more technology on smaller and smaller chips, but Engelbart wasn’t terribly interested in shrinking the size of computers. The real potential lay in the computer networks that could allow human beings to connect and communicate with one another.
In December 1968, five months after Intel’s incorporation, two months after Smith and Carlos raised their fists on the Olympic podium, and one month after Richard Nixon’s first presidential victory, Engelbart and his team had delivered a comparably future-altering presentation at a San Francisco computer conference. Quietly sitting down at a keyboard onstage, Engelbart proceeded to use the devices before him to send commands back to a computer at his lab thirty miles away. The results flashed up on the screens behind him in the San Francisco auditorium. And the words appearing overhead weren’t inscrutable computer language, either. He typed simple commands. He edited a grocery list. He jumped his cursor from place to place on the screen by moving a square wooden box that fit under his palm, with wheels on its bottom and a cord trailing from its rear. Engelbart called it a “mouse.”
The presentation went down in Silicon Valley history as “the mother of all demos.” The inventions unveiled by Engelbart were a preview of a world still two and three decades in the future: the mouse, interactive computing, hyperlinks, networked video and audio. But for all its envelope-pushing vision, the demo also was important in showing how these futuristic devices could work in an ordinary office or household. It made the fearsome, HAL-like computer into an ordinary, accessible, even rather friendly kind of machine. Engelbart’s demo resonated deeply with a new generation of technologists who were just emerging from the classrooms and labs of Berkeley and Stanford and MIT during the Vietnam era and its agonizing aftermath. They wanted nothing to do with the military-industrial complex. They didn’t want to build the real-life HAL 9000. Instead, they wanted to make technology personal, and set information free.
* * *
—
Sure, some people were declaring that the defense drawdown meant tech’s boom times were finished. Maybe it looked that way if you saw the lights flickering out in the Cold War boomtown of Seattle. You certainly could feel the economic pain if you were sitting inside Lockheed’s sprawling campus on the east side of 101.
But travel just a few miles up and down that highway, and you’d find other companies—ones that were younger, that were smaller, that might have started out doing some federal business but didn’t do much of it anymore. You’d also find lots of interesting opportunities in the academic labs of Stanford or at research institutes around town. You’d find a new generation of the young and technical, ready to redefine what the computer might be. Maybe you could be part of these labs. Or jump into those venture-backed companies.
Better yet, you could start one yourself.
ACT TWO
PRODUCT LAUNCH
Silicon Valley created the Rust Belt. All the things they did became obsolete almost overnight.
FLOYD KVAMME1
Arrivals
PALO ALTO, 1969
Being a teenage figure skating champion had taught Ed Zschau the value of hard work and careful, repetitive practice. It also had gotten him comfortable with performing in front of a crowd, attuned to their desires, eager to meet expectations. Perhaps it was all that time calibrating the rasp of ice along metal blade, the arc of a perfect loop jump, that had made him interested in physics, too
—its technical particulars, and the way it worked in the world.
Or maybe it was simply a sign of the times: born and raised in Omaha, he had set off for Princeton the same fall of 1957 that Sputnik soared into space. Science was on everyone’s mind; technology became an American preoccupation. Four years later, a degree in the philosophy of science in hand, Zschau joined the exodus west, to Stanford’s business school. He complemented his PhD in business administration with an MS in statistics, completing both so swiftly that he was offered a Stanford teaching position by the time he hit his mid-twenties.
Ed Zschau loved being in front of a classroom, and the students adored him back. He’d ham it up, sing corny folk songs, and leaven the dreariness of management science with philosophy and humor. He bought a motorcycle; he got married. He heard hot tips about new industry trends while playing pinball down at The Oasis on El Camino. It was the late 1960s, and the friendly young professor in blue jeans was a breath of fresh air in an academic world of tweed and pipe smoke. But places like Stanford didn’t care whether someone was a good teacher. Professional success meant publishing papers, and Zschau didn’t do enough of that to merit tenure. So before he hit thirty, the extroverted professor embarked on the first of several bouts of “self-renewal” and switched gears—into high-tech entrepreneurship.
The timing was perfect. Now it was 1969, and new start-ups were growing all over the Santa Clara Valley, helped along by new venture capital funds and specialist law firms and marketing operations, many of them started by young guys like him. With his charm and connections, Zschau knew he could start something up. But what was the something? He’d mull the possibilities during his morning shower. Finally, he found it.
The raft of new environmental measures just signed into law by Richard Nixon—the Clean Water Act, Clean Air Act, the creation of the EPA—created a big demand for pollution-measuring instruments. And now there were these minicomputers, selling by the thousands. Why not build a computer system that used a mini to automate and analyze all this environmental data?
It turned out to be not just a million-dollar idea, but ultimately a $100 million one—a company called System Industries that started off measuring water quality and the composition of moon rocks and then graduated to providing data storage. System Industries wasn’t very large, nor did it ever have a breakthrough product, but the former figure skating champ was brilliant at making friends and navigating the cozy professional networks of the local tech community. It all came naturally to Ed Zschau, as did his overflowing optimism about where life might lead. “Do what you enjoy doing,” he’d tell advice-seeking students. “Do it the best you know how, and good things will happen.”1
PALO ALTO, 1970
When the engineer brought a sheep to work, Regis McKenna knew he wasn’t in Pittsburgh anymore.
McKenna had come of age in the city of steel and smoke at a time when its mills were grinding to a halt and there were few jobs to be had. Nearly the only job offer he got was for a publishing company that wrote about the electronics industry, work that eventually brought him out to the Santa Clara Valley in 1963. The surroundings were wildly different from anything he’d known—the acres of orchards, the squat tilt-ups dotting the terrain between El Camino and Highway 101, the sweeping views of the mountains to the east and west—and the things those companies were doing were fascinating. Instrumentation and tube companies still ruled the roost when he first arrived, and he spent as much time making sales calls on aerospace companies up in Seattle as he did down in the Valley. But, soon enough, all these little semiconductor outfits started sprouting up, most of them started by guys coming out of Fairchild.
Before too long, McKenna had joined up with one of them, a small outfit called General Micro-electronics, which was notable for being the first to use the metal oxide semiconductor, or MOS, technology that later would be state of the art. That job got him in the door at National Semiconductor. The company was so new, and management was hands-on: CEO Charlie Sporck came in himself with a hammer and two-by-fours to build out a secure storeroom for newly fabricated chips. Working there also wasn’t for the faint of heart. A few days in, the man who’d hired him, Don Valentine, called McKenna into his office. He waved a computer punch card with names handwritten on it in green ink. “These are the fourteen people I considered hiring before I hired you,” Valentine declared.
“So why did you hire me?” McKenna wondered.
“Because you,” his boss smiled craftily, “were the only one I knew I couldn’t intimidate.”
The ethos of National wasn’t just about thick skin. It was about a conscious repudiation of the stuffy and the hierarchical, and about rewarding people for what they accomplished, not for their fancy degrees or Nobel Prizes. If you had technical brilliance, it didn’t matter where you came from or how you behaved. Arrogant jerks got a pass, as long as they built and delivered greatness.
That’s how you got to the engineer and the sheep. The engineer was Bob Widlar, National’s lead designer, the genius mind behind the elegant linearity of the Fairchild IC. A cult hero not only because of his creative output but also because of his extreme eccentricity, he drank to excess, kept an axe in his office, and flipped the bird at nearly any camera that dared take his picture. He’d get on a plane and disappear for weeks at a time. He didn’t believe anyone over thirty could design anything worthwhile. And when the thrifty Sporck decided to cut costs by not mowing the lawn in front of National’s tilt-up, Widlar brought in a sheep to do the job instead.
The low-key, scrupulously organized McKenna came off like a straight arrow amid the wild men around him, but it was an environment where he thrived. His lack of an engineering degree became an advantage as he acted as translator and mediator, explaining the tight little world of young chip companies to the broader universe beyond it. You needed to educate customers, building share in existing markets and discovering entirely new ones. You needed to tell compelling stories about the tech coming out of the tilt-ups, and about the personalities who made it.
Seven years after he first arrived in the Valley, Regis McKenna left the sharp-elbowed, middle-fingered life at National and went into business on his own, as a full-service marketing consultant. There were a number of these firms blooming in the Valley those days—those engineers needed all the spin doctors they could get—but only one with so many connections and insights into the microchip world. McKenna now understood that marketing tech products required a different approach than in any other industry. For years to come, his first slide in any pitch read, “The ad is the last thing we do.”
McKenna also had absorbed the chipmakers’ dislike of hierarchy. As he hung out his shingle in 1970, he felt that it would have been pretentious to assume the title “President” of a one-man operation with zero clients and a mere $500 in start-up capital. Instead, he printed business cards reading “Regis McKenna—Himself.” He never changed them.2
CHAPTER 7
The Olympics of Capitalism
Silicon Valley got its name because Don Hoefler needed a headline. A regular contributor to the industry trade paper Electronic News, Hoefler had just written up a multipart feature story on Northern California’s booming computer-chip industry. It was the dawn of the 1970s, and despite the growing economic gloom, Moore’s Law ruled the Valley. Its tiny and lightning-fast silicon semiconductors of complex circuitry continued to get smaller, cheaper, and more powerful by the month. Anything that had a spring, a transistor, a memory core, or a vacuum tube now could be powered by a silicon chip—from factory machinery to mainframe computers to wristwatches. Macro computer power was going micro. It was a revolution.
Northern California had plenty of competition—down in Dallas, electronics giants Texas Instruments and Motorola manufactured chips by the thousands—but the technological innovations emerging from the Valley were powering the largest and most sophisticated machines. IBM, king of the mainframes, made its own c
hips, but the rest of the American computer industry trekked out West.
“The guys back in New York and D.C. call this place ‘Silicon Valley,’” a couple of visiting sales managers informed Hoefler over lunch one day. Short, memorable, and a little jokey—silicon was built on sand, after all—the name was exactly what the reporter needed to describe this laid-back, entrepreneurial slice of Northern California to his readers. “Silicon Valley, U.S.A.,” blazed Hoefler’s header on the cover of Electronic News’ January 11, 1971, issue. The name turned out to be a keeper.1
AT THE WAGON WHEEL
The durability of the name had a lot to do with the durability of Don Hoefler, a journalistic army of one at a moment when national reporters only rarely looked away from the Northeast Corridor to consider this nerdy stretch of California suburbia. He gathered much of his intelligence from what he called his “field office” on a barstool at Walker’s Wagon Wheel, one of the semiconductor industry’s bars of choice in an area decidedly short on nightlife. As after-work happy hours devolved into boozy gossip sessions in the tavern’s overstuffed booths, Hoefler gathered scoops. He covered it all, from new product releases and big hires to recent weddings and raucous company parties. Hoefler knew which company was about to launch a new line, and which CEO just bought a flashy new sports car. “If it didn’t appear in Electronic News,” one industry insider declared, “it didn’t happen.”2
Having gotten his start in the industry as an in-house corporate publicist, Don Hoefler understood the technology as well as having a nose for colorful, personality-driven stories. Outsiders saw bafflingly complex technologies and bland ranks of shirtsleeved engineers. Hoefler saw the machines of the future, built by cowboy entrepreneurs and genius oddballs.
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