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The Spirit Of Independence; The Valley

"The man with a new idea is a crank -- until the idea succeeds." -- Mark Twain
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They call it merely "the Valley," as if geography were destiny. As if there were no other place in the world quite like it.

Which, of course, there isn't.

Silicon Valley, the capital of the high-technology revolution. Where the gossip at lunch at Nolan Bushnell's Lion and Compass Restaurant is about who's going public, or going under. Where the classified ads read, "Used Mac for sale" and "Hard-charging company founder, f., 30s, seeks m., same." Where the chief of police is a Harvard-educated mystery novelist who talks like a management consultant.

The world has watched in wonder, and envy, as its future has seemed to come out of these 1,350 square miles. There are other high-tech centers, too, of course: hopeful upstarts with nicknames like Silicon Gulch and Silicon Rain Forest. But the brass ring shines brightest in California. The Valley has gone from pastoral to postindustrial in less than a generation, turning hackers into millionaires, then into hackers again. Nowhere else is the success -- or the excess -- of the entrepreneur more dramatic.

But the new technologies, as dazzling as they are, are only part of the story. The critical accomplishment is not simply in creating five generations of computers in less than a human life-time, but in binding people together into companies to make it happen. And the critical weakness may be the Valley's single-minded devotion to that goal.

"We decided to make a computing machine that would be all electronic." -- J. Presper Eckert

Today, J. Presper Eckert's title is vice-president and technical adviser at Sperry Corp. Forty-two years ago, as a 24-year-old graduate student, Eckert and John W. Mauchly began work on ENIAC, the world's first electronic digital computer. In 1947, the two set up their own business, Eckert-Mauchly Computer Corp., and shortly therafter developed UNIVAC, the first commercial computer.

I was at the University of Pennsylvania, in the Moore School of Electrical Engineering, one of three places in the world that had a differential analyzer -- an impressive-looking bunch of gears and motors and wheels for calculating differential equations. When World War II came along, the government took over the machine to work on gun-firing tables. There was tremendous pressure to get the computing done.

Professor Weygant and I had some ideas about improving the differential analyzer. He and I and another student managed to get it to go 10 times as fast and to be 10 times as accurate. This was about as far as you could go without a full redesign and reconstruction.

Ultimately, Dr. Mauchly and I decided to make a computing machine that would be all electronic and all digital. A group of us went down to Aberdeen, Md., to the Ballistics Research Laboratory, and this set the wheels in motion. Since it was considered urgent, we actually started work in Philadelphia the next day, getting people together and assembling equipment.

The work went on for about 3 years before the machine was finally finished. It ran for about 10 years at Aberdeen before it was retired. This was pretty good for a prototype experimental machine. It wasn't like the Wright brothers' first airplane -- which, though it demonstrated new principles, didn't establish any passenger or freight service. Our machine not only demonstrated new principles, it did important work.

Originally, Mauchly and I wanted to stay at the university. But some professors tried to get us to give our patent rights back to the university, essentially for free. These same professors fired us when we did not agree. We left the university and didn't do much research work for a couple of months, until we got the Census Bureau interested in building a machine.

Later, though, we had to sell our business. There was an airplane crash, where the people who were raising our money were killed. We sold out to Remington Rand, which later merged with Sperry.

Unfortunately, in the early computer days, people weren't ready to put much money into our ideas. Banks could see putting money into steel or locomotive manufacturing, things made of iron, the so-called smokestack industries. But our kind of stuff looked like a pipe dream to them. Of course now the smokestack industries are going up the chimney, and the pipe dreams have come true.

"The key entrepreneurial act has been creating an organization." -- Alfred D. Chandler

Alfred D. Chandler, Straus professor of business history at the Harvard Business School, is widely considered the dean of business historians.

There have been two earlier entrepreneurial periods. The first was the second Industrial Revolution of the 1880s and '90s. The second was in the 1920s, when the great entrepreneurs, the Sloans and the Fords, put together their giant enterprises. In those industries, in order to stay in business, you not only had to exploit the technology, you had to build up your organization.

Historically, the key entrepreneurial act has been creating an organization. Any high school student will tell you a bureaucracy is not going to be as efficient as two or three guys; neverthelss, you can't run most enterprises without a team. Sloan of General Motors wiped Henry Ford off the map by giving a lot of attention to motivating people and keeping incentives going instead of worrying about keeping his finger on the numbers.

Technological innovations are no good until you exploit them organizationally. That doesn't mean a big organization, it means understanding how to get people to work together and making very clear what the team should do and what each member of the team should do. Organization innovation is really important in all of these.Historically, the person who really cleaned up was the one who picked up the innovation and then created a team.

"We started out baking our panels in Lu's oven." -- William Hewlett

To some, Hewlett and Packard may sound like Procter and Gamble, legendary names whose company has long since outlived them. In fact, the $6-billion electronics giant -- one of the first companies in what is now Silicon Valley -- was started only 46 years ago. Its founders, William Hewlett and David Packard, now both in their seventies, remember the beginnings very well.

Packard [to Hewlett]: You found a house that had a garage that was adequate for a shop; my wife, Lu, and I had the lower flat, and our landlady had the upper flat. I had put together a few tools in the basement, and I brought the drill press in the back of the car. Then we scratched around trying to find jobs. I remember a friend of ours was involved in a bowling alley and wanted a signaling device for the alley . . . that was up in San Mateo. And then T. I. Moseley, one of the great pioneers in the early days . . .

Hewlett [Interrupts]: Promoters.

Packard: Promoters. This was before World War II, and his theory was that all harmonicas are made in Germany, so there would be a great opportunity for someone to have a non-German made harmonica. The question was, How do you tune a harmonica?

Hewlett: At some point, we decided that we were going to try and form a company.

Packard: Well, I think it was a sequence of things. As I recall, it was around Christmastime, because I think we took pictures of this oscillator in the living room sitting there, and we put together a set of specifications and a little sales pitch that Lu typed out for us. Then we got a list of potential customers and right about Christmas or the beginning of 1939, we sent those letters out. In a couple of weeks, we got some orders back. . . . One order I remember had a check enclosed. I think that's what convinced us this was going to go.

Hewlett: Do you remember how we priced it?

Packard: Yes. [Laughter] We didn't have any idea about the pricing in those days, and I guess we started out with $54.50, wasn't it?

Hewlett: $54.40 or fight.

Packard: And then we found out that we really hadn't understood the economics very well, and we raised the price again, and fortunately, I think we learned very quickly that we could raise the price. It was a good value, and that was a lesson that was very important, because it made it possible for us to finance the company as we went along.

Hewlett: Because at that time, as you remember, electronics wasn't quite called that yet. It was limited to just a few fields: communications; entertainment, which really meant radio and phonographs; the motion pictures; and geophysical work.

I also remember we started out baking our panels in Lu's oven. Then we decided we wanted our own oven, so we bought an old refrigerator unit because it had good insulation. What we did not realize, though, was that it was kapok insulation. So when we heated this thing one night, it got so hot that it caught fire. Someone driving down El Camino saw these flames coming up in the back of the building, and the fire department came and put it out. Otherwise, we would have lost the whole works.

"The Valley was still greenhouses and onion fields." -- Larry Kaplan

A child of the '60s, 36-year-old Larry Kaplan helped found Activision Inc., and made a $3.6-million fortune -- on paper -- when the company went public in 1983. Then he retired -- and lost most of the money five months later when the stock plummeted before he could sell out. Since last February, he has worked as a programmer at Silicon Graphics Inc., in Mountain View.There, he gleefully spent at least an hour of our time together demonstrating the marvels of his new color monitor. He still wears jeans and has a beard, but he no longer throws the I Ching to foretell the future.

My career history runs parallel to the history of Silicon Valley: There hasn't been foresight, planning, or thought. It was even an accident that I became a programmer. I started off in Berkeley the spring quarter [of 1968], but all the courses I wanted started in the fall. I had some adviser who said, There's this new computer science course that just started, and they need students to fill up the courses. So I took beginning FORTRAN, CS 1 -- Computer Science 1 -- the first time it'd been taught.

I came to Silicon Valley by pure luck, too. I saw ads in the paper, wrote a resume, and interviewed at a company called CSI, and I got my first job, $11,000 a year as a programmer in August of '74. The Valley was still greenhouses and onion fields. CSI was just a little company, 110 people maybe, down in Sunnyvale. They designed, engineered, and manufactured the hardware, wrote the software, everything. So I got to know all the facets of the company, all the stuff that school doesn't teach you.

The first personal computer, the Altair, was announced in January 1975 on the cover of Popular Electronics. I bought mine in the first Byte Shop as soon as they opened the doors Monday morning. I played around with it a lot. Meanwhile, my manager and I weren't getting along, because I was more interested in games than research work. I was doing research until five o'clock, and after that, I'd do the games. "No," he said. "If you're going to stay here, why don't you do more work?"

In mid-1976, Atari was advertising for a programmer. I knew they had a game room. We could play games for free. I never wanted anything more in my life than to work for this company. They wouldn't tell me what the job was. It was a secret division developing this secret product. They gave me the job because of the Altair. They said, "He's got a home computer. He must be good." And it turned out the job was writing games.

Then, of course, it just took off. Not right away. We struggled for a while. We wrote cartridges. We hired some people. We were having a great time just writing games. As soon as we finished one, it went into production. Everything we discovered was like a new trick, a new way of doing something. But there were management hassles. The company's growing too fast. It's gone from 200 people to 4,000 in a couple of years, all these new people are coming -- new marketing people, etc. -- not getting along. It's a classic Silicon Valley fight, a microcosm. Engineers versus marketing. Sales versus engineers. Manufacturers versus engineers.

Then the original four ringleader software-game builders decide we want royalties. Management said forget it. Work your hours and get your check. You artistic types think you're wonderful. I could replace you easily. So we decided to start our own company.

"People change jobs here like you change shoes." -- Ron Beach

Ron Beach is the director of classified advertising for the San Jose Mercury News.

The San Jose Mercury News ranked first in employment advertising linage in the United States in 1983 and 1984. That would equate to a world figure as well.

There are fewer low-level positions advertised, because of a trend toward robotization, a trend toward moving product assembly to Taiwan, Korea, the Sacramento Valley, and remote areas of the United States, where the labor costs are cheaper. But good programmers are always in short supply here because of the tremendous amount of programming needs. Service workers in the non-high tech sector are in high demand, too, because so many workers here have decided that they can't make money in these areas. A given weekday, we'll run hundreds of ads for anyone from maitre d's to dishwashers.

People here change jobs like you change shoes. You just go to the same industrial park that you went into yesterday and go into a new driveway and park in a new spot.

"For $100,000? Nine hundred square feet and a bath." -- Betty C. Van Valer

Betty Van Valer is a real estate broker in San Jose.

For $100,000 you can get 900 square feet and one bathroom, maybe a bath and a half. We are talking condo, not townhouse. A townhouse would normally have a garage and some small sort of yard. You would probably pop up a little ways to get that.

For a house, say a quarter of an acre within a half-hour commute to your job, you'd probably be looking at $275,000 up to $325,000. But we're talking about something nice.

"The bright young engineers didn't tell us that they buried the smokestacks." -- Ted Smith

Ted Smith, a San Jose lawyer, is chairman of the Silicon Valley Toxics Coalition, an organization founded three years ago to oppose industrial pollution.

People have started calling Silicon Valley, Paradise Lost. I talk to people who lived in residential areas literally directly across the street from some of these electronics plants. They remember being told, "This is a clean industry" when they expressed concern about seeing a big industrial plant go up across from their homes 20 years ago. But when the bright young engineers were trading on their clean image, they weren't telling us that they buried the smokestacks.

We've compiled a list of 100 or so chemicals that have been spilled into the groundwater: hydrochloric acid, hydrofluoric acid, lots of Freon, xylene, toluene, trichloroethylene, trichloroethane, methylene chloride, lots and lots of different solvents, different acids; also lots of poison gases like arsine, phosphine, and diborane. In south San Jose, an instrument plant had a storage tank that by convervative estimates leaked 60,000 gallons of waste solvent before it was detected. It got into the major water system that served the neighborhood. An epidemiological study just released showed that the rate of birth defects there was three times the expected rate, and the miscarriage rate was about two-and-a-half times normal.

"Now to this business of our sexual life." -- Jean Hollands

Jean Hollands is a therapist who practices in Mountain View. She has just changed the name of her business from The Good Life Clinic Inc. to Growth & Leadership Consultants Inc.

The typical couple that comes in for therapy includes a man who is very detached emotionally. He's never learned how to show his feelings. Ever since he was a little boy, he's been taught to keep things in. He is terrified of interpresonal relationships, afraid that you'll make him cry, or that you will confront him and he may have to confront you back.

The wife brings him in because the marriage is on the rocks, or it isn't now but it will be soon. Sometimes, he's all business. This one man even said, "Now to this business of our sexual life." He had been written up in Esquire as one of the big shots in the Valley.

Or take the man, a prominent engineer for many years, whose wife was leaving him.He felt just despondent. I said, "You've got to tell somebody. You've got to say the words, my wife is leaving me." He said, "Why?" It was Christmas, he was alone, and he didn't even know anyone to tell that his wife wasn't coming to the Christmas party. So I said, "Is there anybody you have ever known who you felt you could share anything with?" And he sat there a long time, and finally said, "Yeah, when my kid was on drugs, at a Christmas office party a man came up to me from another unit that I used to know, put his hands on the back of my neck, and said, 'I heard about your daughter, I'm really sorry."

Then his face lit up, and he said, "I'll tell him." And he went looking for that guy -- but he had died.

That's not the end of the story. About two-and-a-half years later he calls me, frantic, he's got to come in. He looks like a new guy, wearing a gold chain, blowdried hair, smiling. He had gotten the divorce, and he said, "I've met this wonderful woman." Now this man was about 55; he had met this 26-year-old pregnant woman at a restaurant. She doesn't have a husband. She needs someone desperately.

Eventually, she left him. Now he's back home, playing with his computer.

"A good contract is not sealed with a drink anymore, but with a line of coke." -- Joseph McNamara

A former New York City detective, Joseph McNamara holds a PhD from Harvard's Kennedy School of Government and is the author of The First Directive, a mystery thriller set in Silicon Valley, which was published last October by Crown Publishing Co. He has been the chief of the 1,300-employee police department in San Jose for eight-and-a-half years.

Cocains has become inherent in the electronics industry. We got into it through a sting operation in a bar and grill a half mile from police headquarters. Normally, we buy stolen VCRs, TV sets, stereos, jewelry, and firearms. This time, we bought $250,000 worth of stolen electronic components; the thief didn't even know what he had with him. But we traced the stolen goods back to different corporations, and we found that management people and security people were involved, and that the currency was cocaine. All of the thieves were heavy coke users.

People would steal either to barter cocaine for goods that they stole from the company directly, or to take the money that they would receive from the stolen goods and buy cocaine. And we saw lack of management awareness, or management indifference, or worse, management complicity. We had one company where there were 400 employees, and 95% of them were doing drugs. At another company, when we arrested the boss, he was sitting at his desk with a straw and a line of coke -- in a glass office with 20 employees around. We had another case where a top executive passed around a sugar jar full of cocaine at an office celebration. A good contract is not sealed with a drink anymore, but with a line of coke.

From a business perspective, the problem is that so many of these corporations grew so quickly; some genius took a brilliant idea to the venture capitalists, and two years later they had a multimillion-dollar business, but no real knowledge of basic management systems, personnel, and so on. I have said consistently that this isn't a security problem, it's a management problem. Management never sets the standards.

People never pay attention to cops like me, pounding the table and denouncing sin and that kind of stuff. But I think it is just good business sense that the industry has to wake up. We're particularly concerned because it spills over into our community. The young people see this negative role model. So much money. So much success. So much surface glamour. They're the new golden people.

"It's a world I used to envy, but now I feel a part of it." -- Ann Eis

Ann Eis, age 46, left a job in a personnel office in St. Albens, England, about 12 years ago, to emigrate to America. After she married, she settled with her husband in Sunnyvale, where she worked as a drugstore clerk before taking a position at Apple Computer Inc.

When I worked in a drugstore, I had quite a few people from Apple that brought in their little cards for prescriptions. I'd say, "Oh, gosh, how wonderful, Apple. I wonder what kind of degree you have to have to get into there?"

One day, I was helping this little lady that I knew so well and she said, "Oh, my daughter works at Apple, and I'd love for you to have an interview there." I got the job. I love it, and I've been here ever since.

Apple moves very fast; they have to keep the wheels turning. I worked at the de Havilland Aircraft factory in England. After that, this is really exhilarating.

They recognize your abilities here. If you want to get on, they give you every chance. You've got classes you can attend. I take books home and study. And I have an Apple IIe at home; I write lots of letters on it, and my husband, who is very good with accounts and things like that, likes to use it, too.

I think everybody is equal at Apple. You don't have to say "Yes, sir" or "No, sir," and nobody tries to give you an inferiority complex. They make me feel super here. I work more or less on my own.

I think even in the 18 months I've been here, I've seen ideas become little departments that have grown into big departments. There are some very brilliant people here. And those people talk to me, they come up and say, "Hello, Ann, how are things?" I see people talking in the lobby that are just incredibly brilliant.It is a world I used to envy, but now I feel part of it.

"If the receptionist isn't pleasant, if people look like they're just dragging their feet, you know the company isn't going to make it." -- Kirsten Olsen

Kirsten Olsen is a Santa Clara-based stockbroker and investment banker specializing in emerging growth companies.

When I research a company, I look for people I really like, and I look for a certain atmosphere when I walk in. If it isn't there, I won't recommend it. If the receptionist is not pleasant and buoyant, if the rest of the people in the company look like they're just dragging their feet, you know that the company's not going to make it. That is especially true with new companies, because they can be made or broken on just a few people.

I also believe that you have to go around and talk to suppliers and customers and everybody else that deals with this company, even the shipping clerk. I've been a secretary, I've been a shipping clerk, I've been a telephone operator, all those things. I know how it feels to have worked in those kinds of positions, and I know they can make or break a company. If you don't have a nice atmosphere for people to work in, why should they work?

"There is a terrible California bigotry, a belief that technology only comes out of California, not from the Midwest, not from Kansas City, of all places." -- David Allen

David Allen, 37 years old, was a classic techno-kid. A born tinkerer, he was playing with crystal radio sets on the living room floor by the time he was 12 and working as a microcomputer engineer by the time he entered college. Born in Kansas City, Mo., he didn't head out to Silicon Valley. Instead, he stayed home to found Tallgrass Technologies Corp., which has grown to an industry leader with $60 million in sales and more than 400 employees over the past four-and-a-half years.

When I started Tallgrass, we originally missed the mark a little bit. We were going after a controller segment of the industry, but we wound up making complete subsystems. The controller was so unorthodox that nobody was willing to touch it, so we wound up becoming our own customer and using it in our own product. We talked to several companies, including Zenith, which had recently bought Heathkit, and the reaction we got was that we were nobodies out of nowhere. You know, Kansas City is not exactly the high-tech capital of the world, and Tallgrass was a complete unknown, and Dave Allen was a complete unknown. It was just not appreciated. It was not the conventional way of doing things. A lot of people said later that the design we came up with could only have been done in the Midwest, where there wasn't this surplus of conventional wisdom like in California, where everything is done pretty much the same way, over and over and over again.

The name Tallgrass was chosen to clearly distinguish us from the typical California company. There is a terrible California bigotry, a belief that technology only comes out of California, not from the Midwest, not from Kansas City, of all places. I resolved that if I ever started my own company, I didn't want to have one of these Computer Innovations Inc. or High Tech Inc., typical California names. It was going to be something more like Apple, something that had nothing to do with technology. Also, I wanted a name that sounded Midwest. For a while, the name was going to be Prairie Technologies. But at the last minute, I switched over to Tallgrass; you can get a better logo with that.

Last updated: Jul 1, 1985




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