A History of Silicon Valley

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These are excerpts from Piero Scaruffi's book
"A History of Silicon Valley"

(Copyright © 2010 Piero Scaruffi)

6. The Geniuses (1968-71)

by Piero Scaruffi

The Boom of the Semiconductor Industry

The booming sales of smaller computers and the Bay Area's experiments in semiconductors came together in july 1968 when Robert Noyce and Gordon Moore started Intel (originally Integrated Electronics Corporation) in Mountain View to build memory chips, funded with money collected by Arthur Rock. The price of magnetic core memories had been declining steadily for years. The founders of Intel, however, believed that semiconductor computer memory could fit a lot more information (bits) and therefore become a cheaper method to hold large amounts of data. Intel was not alone in believing it. It was in fact an IBM researcher, Robert Dennard, who achieved the first breakthrough in 1966, when he built the first DRAM. His DRAM, or dynamic RAM, needed only one transistor and one capacitor to hold a bit of information, thus enabling very high densities. It was called "dynamic" because it needed to be refreshed continuously. The combination of Kilby's integrated circuit and Dennard's dynamic RAM was capable of triggering a major revolution in computer engineering, because together the microchip and the micromemory made it possible to build much smaller computers. Lee Boysel at Fairchild Semiconductor achieved a 256-bit dynamic RAM in 1968. Then he founded Four Phase Systems in 1969 to build 1024-bit and 2048-bit DRAMs (kilobits of memory on a single chip). Advanced Memory Systems, founded in 1968 not far from Intel by engineers from IBM, Motorola and Fairchild Semiconductor, introduced one of the first 1K DRAMs in 1969. Intel introduced its own in 1970, the 1103. Before DRAMs, the semiconductor firms mainly made money by building custom-designed integrated circuits. Like all customized solutions, they did not have a huge market (often just one customer) but were lucrative and safe. DRAMs, instead, were general-purpose and rapidly became a commodity. The advantage was that they could be sold by the thousands. The disadvantage is that the semiconductor firms had to learn to live with competition, i.e. with a constant downward pressure on prices. By 1972 Intel had more than 1,000 employees and posted revenues of $23 million. Intel pioneered what would become a well-honored Silicon Valley tradition: all employees were made shareholders through "stock options" from the moment they joined the company.

The new business model meant that the entry point was lower. Many other firms opened store. In 1969 Advanced Micro Devices (AMD) was founded by Jerry Sanders, the marketing guru of Fairchild Semiconductor. AMD invented a sort of parasitic business plan: let others invent and then improve over their original design. While it was less "creative," this approach required sophisticated engineering skills to reverse engineer the products of other companies (typically, Intel) and then tweak it to obtain a better product.

Gordon Moore's story is emblematic of how Silicon Valley was started, and useful to demystify some legends about what stimulates people to work in Silicon Valley. He was a fifth-generation Californian who studied at San Jose State College and then at UC Berkeley before graduating as a chemist at the California Institute for Technology (Caltech) in Pasadena, where his research was founded by the Office of Naval Research, like many scientific projects of the time: in the 1950s the Cold War was raging. Jobs for scientists were not easy to find in California, so he and his wife (also a Bay Area native) moved to Johns Hopkins University's Applied Physics Laboratory (APL). Shockley, another California-raised man, had moved back to the Bay Area because of his mother, and was looking for talents to jump-start his laboratory (located a few blocks away from his mother's house). Moore intended to move back to the Bay Area for a similar reason: to be near his folks (and to his in-laws). So two of the founding fathers of Silicon Valley defy the stereotype of the immigrant: they were family men, looking for a stereotypical family life. Shockley offered Moore that opportunity, and he joined his lab; not to change the world or to become a millionaire, but simply to live a normal bourgeois life. Luckily for Moore, none of Shockley's East Coast friends wanted to move to the Bay Area: the East Coast was the high-tech place to be, the Bay Area was, by comparison, a third-world country. So much for the much vaunted appeal of the California weather. When Moore joined Shockley, interest in transistors mainly came from the government, that needed to build more reliable rockets. Again, the Cold War helped Moore get a start. When the eight "traitors" were plotting against Shockley, One man whom Shockley had convinced to move west was Robert Noyce, an engineer of the Philco Corporation in Philadelphia. Shockley had attended a semiconductor symposium on the East Coast specifically to unearth young talents. Noyce got convinced because he loved the prospect of working on state-of-the-art transistor technology, but also because his brother had moved to the Bay Area and housing was much more affordable in the Bay Area than in Philadelphia (he already had a wife and two children). Noyce and Moore led the rebellion of the eight "traitors" that founded Fairchild and then Moore became Fairchild's director of Research and Development. The reason they left Shockley and started Fairchild was not the money: it was the love of science (and Shockley's impossible attitude). Moore, as a teenager, had played with explosives, and he came from a family that had witnessed the explosive growth of the Bay Area; last but not least, he married a sociologist. These factors may account for the fact that, ultimately, the so-called "Moore's Law" describes an exponential growth, and is actually a social meditation on (technological and social) change. Moore was a visionary about the future of electronics working inside that industry, a rarity at the time. In fact, the famous (and very brief) paper of April 1965 titled "Cramming More Components onto Integrated Circuits" (in the anniversary issue of Electronics) had been preceded in 1963 by a longer essay, titled "Semiconductor Integrated Circuits", that appeared in "Microelectronics - Theory, Design, and Fabrication" (McGraw-Hill, 1963). His prediction was actually a bold prediction, based on rather scant data: Fairchild's chip of 1959 had hosted only 1 transistor, whereas Intels' chip of 1965 had 50. He extrapolated and decided that the chip of 1975 would contain 65,000. To some extent this was a self-fulfilling prophecy, because Moore at Intel set out to prove his "law" right, and he did. Moore went one to become the longest-serving CEO of Intel and the richest man in California (in the 2000s).

By then IBM had shot far ahead of the competition. The competition relied on the anti-trust laws to manufacture "clones" of IBM mainframes. They were called the "bunch" from the initials of their names: Burroughs, Univac (that in 1971 bought RCA's computer business), NCR, Control Data Corporation (that had acquired Bendix), and Honeywell (that in 1970 bought General Electric's computing business). Honeywell had jumped late into computers but had made some bold acquisitions and hired bright engineers. Bill Regitz was one of them, a specialist in core memory systems from the Bell Labs. He became a specialist in MOS (Metal Oxide Semiconductor) technology and came up with an idea for a better DRAM (using only three transistors per bit instead of the four or more used by the previous mass-market DRAM chips). He shared that idea with Intel (and eventually joined Intel) and the result was the Intel i1103, a 1,024-bit DRAM chip, introduced in the fall of 1970. It wasn't the first one, but it was the first one that could be easily used to build computers. Hewlett-Packard selected it for its 9800 series, and IBM chose it for its System 370/158. It became the first bestseller in the semiconductor business. Within two years Intel was dominating the market for DRAMs. By the end of the year not only Intel but the whole Santa Clara Valley had become the place to go and buy semiconductor technology: five of the seven largest USA semiconductor manufacturers were based here. However, core memory was still the memory of choice among large computer manufacturers, still accounting for more than 95% of all computers in the mid 1970s. In 1971 a Silicon Valley firm, Calma, launched GDS, a CAD system for designing integrated circuits, an idea also pioneered in Boston by Computervision, founded in 1969 by Marty Allen and Philippe Villers (acquired by Parametric in 1998).

The early 1970s also witnessed the birth of a new lucrative industry, semiconductor microlithography. Until then the large semiconductor manufacturers, such as IBM and Texas Instruments, had been both designing the chips and the equipment to manufacture them. The notable exception had been National Semiconductor, where Charlie Sporck had decided to separate the two jobs and acquire from third parties the equipment. Fred Kulicke and Albert Soffa, two former Proctor Electric engineers, founders in 1951 of Kulicke & Soffa in Philadelphia, were lucky to be contracted by Western Electric to build the equipment to put together transistors in chips, and their firm would remain among the leaders. The first revolution in microlithography was driven by Boston-based GCA (formerly Geophysical Corporation of America), which in 1959 bought David Mann's company, a maker of high-precision measuring instruments, and which in 1961 introduced Mann's new invention, the photorepeater, the predecessor to the wafer stepper (and in 1978 would introduce the direct-step-on-wafer technology that would be used for three decades). These East Coast firms got a headstart but soon there were some on the West Coast too, such as Gerry Henriksen's Electromask, that started building equipment in 1964 in Los Angeles (notably one for General Microelectronics); Kasper Instruments, founded in 1968 by George Kasper in Sunnyvale and acquired by Eaton Semiconductor; and Cobilt, founded in Silicon Valley in 1970 by Gerd Schlieman, Fred Schultz and Allan Fleming (two Germans and one Briton who had quit Kasper), and acquired in 1972 by Computervision. While the bigger Perkin-Elmer (whose highly-successful lithography division would be spun off in 1990 as Etec) and Philips (who would spunoff its lithography business as ASML) entered the market in the 1970s with impressive technology, GCA revolutionized the market again in 1978 with the first wafer stepper, the DSW 4800. Meanwhile, in 1976 Computervision veteran Ken Levy and Bob Anderson had founded KLA Instruments (later renamed KLA Tencor) in Silicon Valley, a firm which would become a dominant player in the market of mask inspection. The other future giant of nanomanufacturing technology, Applied Materials, had been founded in 1967 by Michael McNeilly in Mountain View, and in 1975 established a joint venture with Fairchild named Great Western Silicon.

Bay Area High-tech Creativity

Besides the semiconductor industry, the Bay Area was now producing all sorts of high-tech ideas. In december 1968 Doug Engelbart of the Stanford Research Institute publicly demonstrated the NLS ("oN-Line System"), one of the most celebrated "demos" of all times: a project started in 1962 and financed by NASA and ARPA, NLS featured a graphical user interface and a hypertext system running on the first computer to employ the mouse. Engelbart in front of the audience in San Francisco interacted live with a computer in Menlo Park (at the SRI's offices). When the Apollo program ended and ARPA and NASA ended funding to Engelbart's team at the SRI, SRI sold the team and its NLS to Tymshare. In 1969 the Stanford Research Institute's Artificial Intelligence group, led by Charlie Rosen, demonstrated "Shakey the Robot", a mobile robot that employed artificial intelligence techniques. In 1970 Stanford University's Ed Feigenbaum, capitalizing on Dendral, launched the Heuristic Programming Project to create "expert systems" that could match the behavior of human experts in specific domains.

In 1971 the Shakey project at SRI made the leap to a more powerful machine (a PDP-10) with a hard-disk of almost 1 megabyte (which in does days cost about a million dollar) and made some valuable contributions to the field: the STRIPs planner, developed by Richard Fikes and Nils Nilsson, and the A* heuristic search algorithm (that would remain the most used algorithm in its class for half a century).

In 1969, the New York-based photocopier giant Xerox decided to get into computers and acquired Scientific Data Systems (SDS) for $900 million. That division went on to produce the Sigma line of 32-bit mainframe computers. Xerox's venture into computers would be so unsuccessful that the division would be closed in 1975. However, in order to support its venture into computers, in 1970 Xerox also set up the Palo Alto Research Center (PARC) in the Stanford Research Park to conduct research in computers far away from the company's headquarters. Xerox PARC hired Bob Taylor, the former director of ARPA's IPTO, to lead the Computer Science Laboratory (CSL). A year earlier Xerox's scientist Gary Starkweather had invented the laser printer. The first working laser printing system was developed at the PARC. Among the center's many promising talents was Alan Kay, hired in 1971, a pupil of computer-graphic pioneer Ivan Sutherland in Utah and a lecturer at Stanford's AI Lab (SAIL) in 1970. Kay had the vision of a mobile computer that he named Dynabook, and of "object-oriented" (a term that he invented) educational software. He designed a completely new software environment to develop software applications, Smalltalk, inspired by Simula 67, a programming language for simulations that had been defined in Norway by Ole-Johan Dahl and Kristen Nygaard, and a GUI with children in mind (overlapping windows and then the "desktop" metaphor). Alan Kay had a completely different view of what a computer is and what it should do, and that vision came from his passion for education. In a sense, he envisioned children as the ultimate users of computers, and therefore computers as tools for children. Once framed this way, the problem becomes one not of faster processing but of better interaction. It's not humans who have to learn the language of computers but computers who have to learn the "language" (or at least the way) of humans. Alan Kay's team included Adele Goldberg and Dan Ingalls (the man who developed most of the programming language in 1972). PARC also hired most of the gurus behind the Berkeley Computer Corporation (BCC) that had tried to commercialize Berkeley's Project Genie, notably Charles Thacker. Perhaps equally important as the technology was the work ethics at Xerox PARC, an ethics that basically consisted in not having a work ethics at all. Xerox funded the center, and let the scientists free to do what they wanted with the money. Unlikely as it may sound for someone coming from government agencies, Taylor fostered an environment that was casual, informal and egalitarian, with no dress code and no work hours. Xerox PARC came to symbolize for research centers the equivalent of the alternative lifestyle preached by the hippies (if not a premonition of the punks).

Besides HP, IBM had to face a new competitor that was based in the Bay Area: the chief architect of its mainframes, Gene Amdahl, started his own business in 1970 in Sunnyvale to build IBM-compatible mainframes, less expensive and faster than IBM's models. Amdahl's first machine would come out in 1975.

Meanwhile, the hippy anti-military ideology indirectly affected the SRI: student protests against SRI's reliance on military projects caused Stanford to spin off the SRI as an independent non-profit entity, which later (1977) renamed itself SRI International.

The Age of the Minicomputer

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IBM's San Jose laboratories were assigned the task to develop a cheap storage medium to load the 370 mainframe's microcode and replace the cumbersome tape units. Previous IBM mainframes had used non-volatile read-only memory to store the microcode, but the 370 instead used a read and write semiconductor memory that had become affordable and reliable, besides solving many engineering problems. However, semiconductor memory was volatile (it was erased whenever the power was switched off), and therefore IBM had to provide a medium to reload the microcode. In 1971 David Noble came up with a cheap read-only 80-kilobyte diskette: it was nicknamed the "floppy disk". It made it easy to load the control program and to change it whenever needed.

It was originally designed to be written once and read many times, but just one year later a team at Memorex led by Alan Shugart built the first read-write floppy-disk drive, the Memorex 650, that obviously could serve more than the purpose of loading control programs into a mainframe.

Even more important, perhaps, was the product introduced in November 1973: the 3040 hard-disk drive, the so-called "Winchester drive", with a total capacity of 60 megabytes. It was developed at the same San Jose laboratories by Kenneth Haughton's team for the low-end System/370 models. This was the drive that truly enabled transactional systems.

IBM had opened another laboratory in the Bay Area, in Palo Alto. Ben Riggins was relocated here after conceiving CICS (Customer Information Control System) in Chicago. Riggins had realized that many corporations (especially utilities) needed a simple way to access information online and in real time. CICS, developed in Palo Alto, was released in 1969. The Winchester hard disk and CICS bootstrapped the market for online transaction systems. CICS would remain one of software's all-time bestsellers, licensed by virtually all of IBM's top customers and used daily (if unconsciously) by millions of people for bank operations, utility payments, credit-card transactions, etc.

The Videogame

Someone also began to realize that advanced computer technology could be used for purposes totally unrelated to computing. Inspired by Steve Russell's ten-year old but still popular "Spacewar", in 1971 Ampex employees Nolan Bushnell and Ted Dabney quit their jobs and created the first arcade videogame, "Computer Space": a free-standing terminal powered by a computer and devoted to an electronic game that anyone could use. When, in may 1972, Magnavox introduced the first videogame console, the transistor-based "Odyssey" (developed by the inventor Ralph Baer in New Hampshire), Bushnell was inspired again, this time by an electronic ping-pong game. He founded Atari in Santa Clara (mainly with Ampex engineers) and asked his engineer Allan Alcorn to create a similar game, which became "Pong" in november 1972, a runaway success.

The Financial Infrastructure

The high-tech industry of the south bay began attracting serious capital in 1968 when ARDC's investment in DEC was valued at $355 million. It was the first well-publicized case of an investment in a computer company that paid off handsomely. The same model could be replicated on the West Coast. New investment companies were founded: Asset Management by Franklin Johnson (1965), Hambrecht & Quist by William Hambrecht and George Quist in San Francisco (1968), Bryan & Edwards by John Bryan and Bill Edwards (1968), Crosspoint Venture by John Mumford in Woodside (1970), etc. As the returns beat national stock index averages, New York firms such as Bessemer Securities opened branches in the Bay Area. At the same time a law firm located in the Stanford Industrial Park, evolved from a firm that Redwood City's attorney John Wilson had started in 1961 with customers such as Tymshare, ESL and Coherent Laser, and that had just added two Berkeley graduates (Larry Sonsini in 1966 and Mario Rosati in 1971), laid the foundations for the typical Silicon Valley law firm, specialized in setting up start-ups, writing contracts between founders and venture capitalists, taking start-ups public through IPOs, and, incidentally, accepting equity in its clients as a form of payment.

Biotech's First Steps

In 1959 the medical department of the University of the Pacific had moved to Stanford University's campus in a joint venture between the City of Palo Alto and Stanford University. In 1968 this medical center was purchased by Stanford University and renamed as Stanford University Hospital. Coupled with the success of Syntex, this event symbolized the coming of age of the area in pharmaceutical research. A few early biotech companies were created. Alza was founded in 1968 by former Syntex's President Alejandro Zaffaroni in Palo Alto and rapidly became the most successful of the new pharmaceutical companies. Cetus, the first biotech company of the Bay Area was founded (in 1971) by Donald Glaser, a Nobel-winning nuclear physicist at UC Berkeley who had switched to molecular biology, to develop methods to process DNA. In those days the composition of DNA was still largely a mystery, and the main business was to devise automated methods to carry out research on DNA.

The Arpanet

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The Unbundling

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The Software Industry in Perspective

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Case Study: the Bell Labs

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Labor Fluidity

Silicon Valley already exhibited a unique job dynamics that would only accelerate in the age of software. First of all, California was blessed with an almost unstoppable economy, which mostly outperformed the rest of the USA. Therefore there were plenty of jobs available; therefore it was an employee's market and not an employer's market. The job of the "head hunter" (employment agency) was more important than elsewhere: recruiting talents was not easy. Secondly, California code forbade any labor contract that limited what an employee could do after quitting (Section 16600 of the California Business and Professions Code), a clause that dated back to the 19th century. In the rest of the USA trade secrets were guarded jealously and employees were forbidden to join competitors of their company. Whatever the original reason, the job market in the Bay Area exhibited frenzied turnover. Silicon Valley engineers exhibited a preference for horizontal instead of vertical mobility, for hopping from job to job instead of following a career of promotion after promotion. Europe and the East Coast had an entrenched concept of vertical mobility (career within a company), sometimes even at the expense of skills (an engineer might be promoted to a role that had nothing to do with engineering simply because it was the only available higher-level position), whereas Silicon Valley was about horizontal mobility (changing jobs in order to maximize one's skills based on available opportunities across the industry). In fact, it became commonly understood by engineers that staying with the same company for more than a few years did not look "good" on a resume. This created a system that was an odd and involuntary model of cooperation. Job turnover and no protection for trade secrets were clearly not beneficial to the individual company, but they were to the entire ecosystem because they fostered an endless flow of knowledge throughout the community. No educational institution could spread knowledge as fast and efficiently as this pervasive job mobility did. This resulted in rapid dissemination of knowledge within an industry across companies, as well as in cross-fertilization of ideas across research groups.

Somewhat related to the high-speed job market was the status symbol of being an engineer. Probably no other region in the world held its engineers is such high esteem. The engineers represented a higher social class in Silicon Valley than, say, marketing executives. The status symbol of being an engineer was only second to the status symbol of being an entrepreneur.

Culture and Society

The effervescent cultural scene of San Francisco attracted artists whose eccentric visions were tamed in their native East Coast. In particular, George Kuchar, the prophet of lo-fi cinema, moved from New York to the San Francisco Art Institute in 1971.

The leading art in San Francisco, however, was now an art that mixed fiction and painting: the comics. A number of eccentric cartoonists, most of whom had moved west during the "Summer of Love" and lived in the Haight-Ashbury neighborhood, repudiated Walt Disney's poor-heart ethics and adopted mocking tones and a vulgar language: the "underground comix" movement was born. The pioneer had probably been Joel Beck, one of the original contributors to the Berkeley Barb, with the full-length comic book "Lenny of Laredo" (1965; but the movement coalesced in 1968 when publisher Don Donahue opened "Apex Novelties", Robert Crumb penned the comic book "Zap Comix" (1968) for that very publisher, and Gary Arlington opened the first comics-only store in the USA (in the Mission District). Then came Bill Griffith's strip "Young Lust" (1970), that mocked sexual attitudes, Roger Brand's comic magazine "Real Pulp Comics" (1970), that promoted the whole burgeoning scene, Trina Robbins' "It Ain't Me Babe Comix" (1970), the first all-women comic book, Dan O'Neill's collective "Air Pirates" (1971), Gilbert Shelton's "The Fabulous Furry Freak Brothers" (1971), Justin Considine's "Binky Brown Meets the Holy Virgin Mary" (1972),

Meanwhile, Philip Dick marked the convergence of the drug culture and the science fiction culture with his masterpieces "Do Androids Dream of Electric Sheep" (1968) and "Ubik" (1969). He died in extreme poverty before his novels "Blade Runner" (based on "Do Androids..."), "Total Recall" (written in 1966), and "Minority Report" (written in 1956) were turned into Hollywood blockbusters

In 1969 George Harris founded a hippie theater group, the Cockettes, originating from a Haight-Ashbury commune, that began to perform at the Pagoda Palace Theatre as part of the Nocturnal Dream Show organized by Milton Miron, originally a midnight showcase of underground films,

The contradictions of the "hippy" era peaked with the election of a conservative governor who seemed to stand for everything that California was not. What ended with Ronald Reagan, who was governor from 1967 till 1975, was an enlightened age in which the state of California had been focused on creating an infrastructure. Reagan inaugurated the age in which citizens revolted against government and cared more about improving their economic conditions (for example, by lowering taxes) than investing in the future. The dreamland of idealistic immigrants was on its way to become a pragmatic state of greedy bourgeois.

The post-hippy era in California also witnessed the rapid political growth of the grass-roots environmentalist movement. It started with the article "Tragedy of the Commons" published in Science in 1968 by Garrett Hardin of U.C. Santa Barbara. The first victory of the movement came in 1969 when the Sierra Club managed to stop Walt Disney from building a tourist resort in the mountains of a national park. Anti-nuclear sentiment also increased, leading David Brower to split from the Sierra Club and start Friends of the Earth in Berkeley. In the fall the United Nations organized a conference titled "Man and his Environment" in San Francisco. One of the speakers, California-based peace activist John McConnell, the editor of the utopian "Mountain View" magazine, proposed an international holiday, and in march 1970 San Francisco allowed him to hold the first "Earth Day". In 1972 the United Nations held its first "Conference on the Environment" in Sweden. One of the people who traveled from the USA to attend it was Peter Berg, who in 1973 founded Planet Drum in Berkeley. The influence of the environmentalists would be felt for decades. At the same time that the Reagan-ite establishment was curbing public spending o on ideological grounds, a rising environmentalist movement pressed to curb the infrastructure boom of the previous decades on almost opposite ideological grounds. The effect of this "double whammy" was to be felt decades later.

In the arts it was notable that in 1971 Judy Chicago and Miriam Schapiro established a "Feminist Art Program" at the California Institute of the Arts specifically to train female artists. In 1970 the PARC also started an artist-in-residency program.

In 1969 the physicist Frank Oppenheimer opened the Exploratorium at the Palace of Fine Arts. Its first show was "Cybernetic Serendipity", an exhibition of computer art that Jasia Reichardt had organized the previous year at the Institute of Contemporary Arts in London.

Britain and Japan

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(Copyright © 2010 Piero Scaruffi)

Table of Contents | Timeline of Silicon Valley | A photographic tour
History pages | Editor | Correspondence