How the Valley was won: The birth of technology in Silicon Valley

Robert Metcalfe is an intriguing character. He holds several university degrees, writes a nationally syndicated tech column, has for several years run a 400-acre farm in Maine, and in 1979 cofounded a little Silicon Valley business called 3Com. And one other thing – along with good buddy David Boggs, he invented Ethernet. That’s right. Invented. Ethernet.

But Metcalfe is also responsible for some of the more notable tech-centric quotes and forecasts of our time. In 1995 he prognosticated a full-blown Internet collapse for the following year. Soon thereafter, he predicted the downfall of wireless networking. Yet as wrong as he was on both counts, Metcalfe was just as right when he famously said of his long-time stomping grounds, “Silicon Valley is the only place on Earth not trying to figure out how to become Silicon Valley.

Silicon Valley is the world’s high-tech hub. It’s been called the Hollywood for startups, the Florence of the information age, ground zero of the technological revolution, and, simply, “a state of mind.” It’s the home of rivals like Intel and AMD, Yahoo and Google, LinkedIn and Facebook. Among many, many more.

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Funny thing about the “Valley,” or at least its pioneering days as a tech epicenter: There’s a popular perception out there that Apple and Microsoft and microcomputers were there to witness its birth, in effect to cause its birth. But such a notion couldn’t be further from the truth. Fact is that long before Gates and Allen and Jobs and Wozniak were even gleams in their nerd daddies’ eyes, the Valley ultimately known as Silicon was on the move.

The ivory tower that put down roots

Once upon a time, the region south of San Francisco Bay, north of the town of Gilroy, and bordered by the Santa Cruz Mountains and the Coast Range on the west and east, was known as Santa Clara Valley, so named by missionaries. A century later it was unofficially dubbed “The Valley of Heart’s Delight.” And for good reason. It was a valley, and it was filled with delights – flowers, orchards, and plants literally as far as the eye could see. An agricultural paradise, blessed with perfect growing weather and farmers more than willing to tend the fields. And a summer vacation spot for affluent Californians whose fancy mansions stood amongst the beauty.

But along with agriculture came the governor of the state of California, a well-to-do fellow by the name of Leland Stanford. Stanford bought 650 acres of land in 1876, 8,000 additional acres a few years later, and when the typhoid-induced death of his only son triggered a wildly noble plan to assist the children of California, in 1891 opened Stanford University in the heart of what would one day be Silicon Valley. Leland Stanford would pass away just two years later, and his wife Jane in 1905, but the university that proudly bore their name soldiered onward.

Stanford, of course, has gone on to become one of the world’s premier universities. But in retrospect, it must also be considered the engine that drove the area’s eventual ascendency as a technological mecca. And the reasons were many.

First, there was Stanford’s location. Nearby San Francisco found much of its early electrical needs through hydroelectric dams, and a great deal of the research into long-distance power transmission would ultimately take place at Stanford. San Francisco was also a maritime hub at a time when interest in ship-to-shore radio communication had exploded, and again Stanford was a beneficiary.

That Stanford had an intense regional bias, borne for the most part by its relative isolation from the far more populous eastern US, certainly didn’t hurt. Nor did the fact that in 1951, many years in the future but long before the term “Silicon Valley” had even been coined, the university opted to lease large portions of its huge tract of land to technology firms. But we’re getting ahead of ourselves.

Breaking away from the land

To find what is arguably the seminal event in the metamorphosis from Valley of Heart’s Delight to world tech nucleus, we spoke with a fellow by the name of David Laws. Laws knows Silicon Valley. He’s a curator at the Valley’s multi-million-dollar Computer History Museum. He’s the author of “Silicon Valley: Exploring the Communities Behind the Digital Revolution,” and he spent forty years working in the region with such prominent tech concerns as Advanced Micro Devices and Fairchild Semiconductor (more on Fairchild in a moment). And he’s recently developed an iPhone app dubbed “Silicon Valley Roots and Shoots,” an “insider’s guide to the companies, people, and products that created this vibrant center of high-tech innovation.”

Laws tells us the tale of an Australian named Cyril Elwell. Elwell, not only a graduate but also an instructor at Stanford, had a profound interest in radio technology, and in 1909 purchased the US rights to a radio transmission technology invented in Europe by one Valdemar Poulsen. Poulsen’s amazing invention, called an “arc converter” or “Poulsen Arc,” was one of the first-ever gadgets to transmit sound via radio waves.

The large-scale potential of the device was not fully understood by many, though it certainly was by Elwell, who, along with a consortium of fellow radio enthusiasts and Stanford instructors, developed and refined the technology. He soon formed the Poulsen Wireless Telephone & Telegraph Company, enlisted the assistance of noted American inventor Lee DeForest, and began pitching the concept of arc transmitters to the US Navy.

Elwell’s business was ultimately renamed Federal Telegraph Company, and the Poulsen Arc found its way aboard numerous World War I battleships. Interestingly, it would be one of Lee DeForest’s other key research projects, the three-element vacuum tube called the “DeForest Audion,” that eventually supplanted Federal Telegraph’s Poulsen Arc as the ship-to-shore radio device of choice a decade later. But not before Elwell and his businesses had established themselves as what is today considered by many as the first prominent non-agricultural commercial industry in the region.

The tale of Bill and Dave

Like much of the United States, the Valley of Heart’s Delight would see little progress or development through the years of the First World War and the Great Depression. But the stage was set for the next leap forward when a young man by the name of Fred Terman returned to his graduate school to teach his passion: electrical engineering. The year was 1925, and the “Father of Silicon Valley,” in the midst of a serious bout of tuberculosis, had come home.

It didn’t take long for Terman to move up the ranks after his recovery, and by the mid-1930s he was professor and chair of Stanford’s Electrical Engineering Department – a perfect perch from which to enact his plan. As David Laws tells us, “Many Stanford graduates had to go back east for jobs, and Terman didn’t like it one bit.” In short, Terman wanted desperately to keep the original Stanford vision alive by creating local jobs for the graduates of his program. And he was willing to get unconventional to do it.

He did just that in 1938 when he helped two such graduates, we’ll call them Bill and Dave, turn a concept into reality. Seems Terman had recently learned of a device called a “resistance-tuned oscillator,” a promising but seemingly incomplete gadget Terman felt could be worked into a tangible product. He explained his idea to Bill, who in turn told Dave and then set about devising the necessary modifications. Soon, the “audio oscillator” was born.

It was clear to all three men that Bill’s prototype was a winner. Within months, Terman had secured a $1,000 grant and Bill and Dave had returned to the Valley to build more versions of their concoction. Granted, their first “shop” was but a simple garage in back of Bill and Dave’s rented Palo Alto home, but when the Walt Disney Company purchased eight audio oscillators as sound-testing equipment for its groundbreaking film Fantasia, and when more orders thereafter arrived, their meager surroundings seemed positively palatial.

Whatever became of Bill and Dave? They stuck their last names together and formed Hewlett-Packard.

Incubating the dream

But by no means was Stanford done. Even before Disney had debuted Fantasia, another Stanford prof, William Hansen, was doing his bit to build the Valley via mergers of private interests and academia. Seems that two brothers, Sigurd and Russell Varian, the latter holding a physics master’s degree from – you guessed it – Stanford, were trying to come up with a better way of detecting airplanes in situations of limited visibility. The winds of potential war were blowing heavily in Europe, and the Varian brothers were as patriotic as they come.

Hansen liked what he saw and found them space at Stanford to toil on their project. According to Laws, Stanford also invested $500 with an agreement it would share equally in future royalties of any future Varian inventions. Long story short – in 1937 the Varian brothers formulated the klystron, which quickly became an essential component in radar technology.

The brothers Varian went on to invent a whole bunch of cool stuff, and Laws tells us the financial returns, for Stanford, have been in the multimillions of dollars. That the Varians ultimately established Varian Associates, one of Silicon Valley’s first important high-tech companies and a Valley staple until 1999, is a fitting conclusion to this typically symbiotic Valley tale.

Such stories were not uncommon in the formative years. Indeed, during World War II, Laws says that “many companies used skills honed in Silicon Valley for defense applications. There was a cluster of microwave companies (microwave frequencies are used in radar receivers) in the Valley.” But after the war, Stanford, like a lot of institutions, fell into semi-hard times. And once again, it was Fred Terman to the rescue in a move that set the stage for everything that’s happened since.

Says Laws, “When Leland Stanford passed away, his will stipulated that the land he left for Stanford was not permitted to be sold.” But he didn’t say it couldn’t be leased.

In 1951, Stanford opened the Stanford Industrial Park, a region the university initially envisioned for any type of business, but Terman saw it as a technology center. And he promoted it as such. The first key tenants included Varian Associates, Hewlett Packard, and General Electric. The die had been cast.

Drama in the Valley of Heart’s Delight

If Fred Terman was the Father of Silicon Valley, William Shockley was its brilliant, cranky, exceedingly controversial godfather. It has been said that Shockley is the man who brought the silicon to Silicon Valley (he’s also been deemed a heretic), and his role in not just the Valley but in all things high-tech cannot be understated.

Born in London but relocated to the heart of the Valley, Palo Alto, while still a child, Shockley purportedly became enamored with physics when his neighbor, a physics teacher at Stanford, spoke with him about the subject. As he matured, he voraciously tore into it, picking up degrees and a PhD along the way (curiously not at Stanford). His passion paid off in 1947 when he and two other scientists working with him at New Jersey’s Bell Telephone Lab, John Bardeen and Walter Brattain, invented the…wait for it…transistor.

A game-changing event to be sure – and one that won him a Nobel Prize – the breakthrough nevertheless exposed Shockley’s dark side, a side he would display regularly as the years went by. Not happy sharing the credit with his Bell Labs peers, he sought to prove that his place in history was more deserved. He ultimately failed in his mission, leaving Bell in the process, alienating coworkers, and spawning a reputation that would precede him everywhere he went.

Shockley would resurface soon enough, as head honcho in 1956 of Shockley Semiconductor Labs in the Valley town of Mountain View. In what Laws tells us was essentially a rented fruit stand, he set out to prove that silicon versus germanium transistors were the way of the future – a theory initiated at Texas Instruments two years prior.

Shockley initially tried to hire former colleagues to join his crusade, but feeling the sting of rejection one too many times he instead recruited a collection of young, bright, local engineers. Amongst Shockley’s hires were Philco’s physicist, the gifted Robert Noyce, and future Intel boss Gordon Moore.

But whereas Shockley clearly knew how to find talent, he just as clearly didn’t know how to deal with it once it arrived. The arrangement lasted all of one year, when eight of the engineers – now known as The Traitorous Eight – quit. Noyce (future Intel co-founder, nicknamed the “Mayor of Silicon Valley”) initially expressed reservations over leaving the company, but according to Laws, “though he still somehow got along with Shockley, he was convinced by the others to leave.”

Rumors of Shockley’s paranoia abounded. Indeed, Moore himself has openly discussed several of the more bizarre incidents. In one, he forced his employees to take lie detector tests. In another, he accused members of his staff of maliciously placing sharp objects where people could easily cut themselves. He intentionally withheld information from team members so they were never quite sure what they were working on, and it is said he ultimately curtailed research into silicon-based semiconductors.

Smaller and better things

Shockley would leave the electronics industry several years later, dabbling with genetics and eugenics (the study of racial differences in human intelligence) and making a variety of comments as he aged that could only be deemed xenophobic. The Traitorous Eight, meanwhile, went on to much bigger and better things. They met with Sherman Fairchild of Fairchild Camera and Instruments, based on the east coast, with a proposal to form a semiconductor company in Silicon Valley. The result was Fairchild Semiconductors.

Laws tells us Sherman Fairchild invested heavily in his new company, to the tune of two million dollars – far from chump change in 1957. But that investment was to pay off in spades. Says Laws, “Sputnik (the world’s first artificial satellite) was up within months, and there was tremendous pressure to lessen payloads of American satellites through the use of transistors. And the Fairchild guys had a better way to build transistors.” Within months, Fairchild Semiconductors had introduced the world’s first integrated circuits.

“But after six months,” continues Laws, “they got feedback that there were inconsistencies in their transistors. So they came up with the ‘planar process,’ the primary method by which all modern integrated circuits are built. Before this, you could fit three or four transistors on a chip with a great deal of agony, but with this process it became much easier.”

Indeed, says Laws, it was Traitorous Eight member and Fairchild founder Jean Hoerni who likely deserved the Novel Prize Shockley received. “He was brilliant. He had a PhD in math, a PhD in physics, and he’s the one who invented the planar process that allowed transistors to be created out of silicon instead of germanium. It changed the landscape.”

To say Fairchild Semiconductors was the springboard to modern-day Silicon Valley is not far off the mark. Many of its people moved on to man other tech enterprises, and its direct spinoffs include National Semiconductor and AMD. Even today, Fairchild is in the news – relocating its head office just a few months ago to Silicon Valley after a multi-year stint in the east.

Raking muck and making names

By the mid-60s, says Laws, the Valley was as vibrant a place as you could find. “People were bubbling with ideas. Lots of companies were spinning out. The most famous is Intel, of course, which Moore and Noyce formed (in 1968) after leaving Fairchild. But there were plenty more where Intel came from.”

And then there was Walker’s Wagon Wheel.

Opening in the 60s, the Wagon Wheel was the place for tech folk to meet and greet and chow down on a burger – said to be delicious – and of course get loose with a few cocktails. It’s gone now – closed in 2000 and bulldozed three years later – but back in the day, those cocktails and a few well-lubricated yarns were all a man by the name of Don Hoefler needed.

Hoefler, you see, was a journalist of sorts. We say “of sorts” because a journalist living in the Valley during what was arguably its most innovative time should have had plenty to write about without going all sensationalistic. But Hoefler had other ideas. Beginning in January of 1971, before Gates and Jobs had even graduated high school, he released the inaugural edition of his homebrew tab, Electronic News. And it was…juicy.

To be fair, the Electronic News wasn’t the Valley’s answer to the National Enquirer. Hoefler’s paper was, however, quite capable of going behind the scenes to the place where personalities and business meet, where insider information and rumors of corporate moves and trends form a big ball of intrigue. Laws tells us, “He was a gadfly. He’d sit at the bar and keep his ears open, and there was much trepidation amongst industry higher-ups of his newsletter.”

But Hoefler is notable for something else. There was a term making the rounds those days, a term that succinctly summarized what the Valley of Heart’s Delight had become in the days of the exploding technological revolution. It was borne from Fairchild and Shockley and Hoerni and everyone else intrinsically involved in the way man’s future with high-tech electronics would play out. That expression was “Silicon Valley,” and Hoefler, in the debut issue of his trade digest, was the first to coin it in a public forum. That he’d continue to use it would cement it into the lexicon. And as the Valley of Heart’s Delight faded into the background, its replacement achieved worldwide heights.

And then there was Moore

In 1965, future Intel boss and as revered a man as you’ll find in high-tech, Gordon Moore, postulated that the number of transistors on a chip will double approximately every two years. The magnitude of this theory, now famously known as Moore’s Law, cannot be underestimated, for it has since proven to be eerily prophetic. It tells the story of power and miniaturization, and it has set the stage for personal computers, notebooks, cell phones, iPods, space exploration, health advances, and everything else the industry has produced since.

But while Moore’s Law has certainly proven true, with staggering implications, it certainly doesn’t tell the whole story. It doesn’t tell that there’s no magical formula. Indeed, according to David Laws, keeping Moore’s Law alive takes tremendous dedication, serious research, and unending hard work. Says Laws, “Gordon Moore said it was possible and engineers were beaten up for years to make it so.”

By 1972, prototypes of the first standup video games had been auditioned in Sunnyvale, California’s Andy Capp’s Tavern. The first microcomputers had been designed, and the people responsible for the modern iteration of what was now officially known as Silicon Valley were taking their first steps to fame, fortune, and technological revolution.

They’d be nothing without all that came before.