Silicon Valley

Start Up capital of the world?

Steve Blank's "Secret History" video tech-talk

  • and some written notes
  • By 1947 the U.S. military was funding half of Stanford's engineering school budget. Fred Terman proudly pointed out that only Stanford, MIT and Harvard had a military sponsored electronics program.

Key apparent factors in its early growth/success (see Jane Jacobs City Region concept?)

Frederick Terman, dean of the engineering school at Stanford University, kick-started a process of encouraging students to stay in the area and create companies.

His students started Hewlett Packard in 1939.

During the early years of World War II, Vannevar Bush recruited Terman to head the Harvard Radio Research Laboratory, back at Cambridge Ma... During this period Terman both added to his already far-flung network of powerful people in industry and government and lobbied for the government to devote much more funding for science and ... This approach was instrumental in nursing back to financial health a Stanford that World War II had threatened. Not only did Stanford lose a lot of tuition-paying students to the war, it got virtually no research money from the federal government, which did, in fact, pour money into Harvard, Yale, and other Eastern schools. As dean, Terman was happy and anxious to take on Government Contract-s that would later fuel the Cold War arms race. He also offered his network of contacts, and his students' research and labor, to local companies such as Lock Heed that were engaged in the same pursuit. The war brought to the Silicon Valley area "the beginnings of a great new era of industrialization," he wrote.

Over the next few years this pattern (the 1957 creation of Fairchild Semiconductor by people leaving Shockley Semiconductor) would repeat itself several times, as engineers lost control of their own startups to outside management, and then left to form new companies. AMD, Signetics, National Semiconductor, and Intel all started as offshoots from Fairchild, or alternatively as offshoots of other offshoots.

Also during this time, Terman developed a notion for what he would later call his "modern community of technical scholars." The well-read engineer wanted to recreate the ancient centers of learning in Bologna or Oxford, where intellectual discourse was common and freewheeling, and information flowed easily between the real world and the university. His model was the Boston Ma area, but he reinvented the notion in the West with several critical twists. For one thing, he allowed and encouraged employees of local companies to take courses at Stanford Part-Time (Honors Cooperative Program). He also promoted the building of an industrial park near Stanford. (Stanford Research Park/Stanford Industrial Park, started in 1951 as the first Incubator.)

After retiring from Stanford, Terman spent years traveling the country, advising other universities and other regions on how to try to replicate the near-miracle he had worked in Silicon Valley. Terman wanted to see other centers of academic/industrial progress flower, and during his tenure as dean and provost, he'd encourage interactions between Stanford and companies from all over the U.S. Indeed, in regional planner Anna LeeSaxenian's book "RegionalAdvantage," she notes that even East Coast companies such as Digital Equipment (DEC) felt for many years that they enjoyed better and more open relationships with Stanford and Berkeley than they did with their own neighboring MIT.

But Terman's success in exporting his model was decidedly mixed. Michael Spence, the current dean of the Stanford Graduate School of Business, points out a key reason why Silicon Valley wasn't so easy to replicate: "Physical geography matters" he notes. The acres and acres of fruit orchards (cheap Real Estate) that once stood in the Valley where the Intels, Ciscos, and Hewlett-Packards stand today, not to mention the hundreds of startups shoehorned into myriad industrial parks, were all part of the recipe that made Terman's miracle. "The accident is that Stanford was built here and nearly went broke during the war," says Spence. "Then, an outstanding individual had a vision, and it began and grew, and there just wasn't anything in the way."

A principal force driving Stanford University's unending production of startups is this: So many people have started companies in the past that it just seems normal to get your degree (this step is optional), and take what you've learned and make a company out of it. One startup role model, or more accurately one bunch of startup role models, can be traced to a single engineering building in the early 1980s: Margaret Jacks Hall, then home of the computer science department. Three startups hatched from technology developed there now have a combined market value of more than $50 billion... It was an exciting time. A new chip technology called very large scale integration, or VLSI, had made possible huge advances in microprocessor design. Researchers often lent one another a hand... Happily for the Margaret Jacks crew, Stanford didn't seem to mind too much that technology developed on campus was to be spun off into companies... Faculty are not allowed to be full-time at outside companies, but they are encouraged to get out into industry Part-Time.

The loyalty and affection alumni show their alma maters is part of the Silicon Valley perpetual motion machine.

In (Anna Lee Saxenian's) book Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (1994), Saxenian proposes a hypothesis to explain why California's Silicon Valley was able to keep up with the fast pace of technological progress during the 1980s, while the vertically integrated firms of the Route 128 (Boston Ma) beltway fell behind. She argues that the key was Silicon Valley's decentralized organizational form, non-proprietary standards, and tradition of cooperative exchange (sharing information and outsourcing for component parts).

  • Paul Mackun agrees with the contrast. In direct opposition to the Silicon Valley's reliance on risk-taking and partnerships is eastern Massachusetts' emphasis upon convention, decorum, and self-reliance-reliance. The communities in which the high-tech enterprises sprung up, towns such as Burlington, Lexington, and Cambridge Ma have established roots in eastern Massachusetts (and American historical lore) going back centuries. Companies such as DEC and Lotus Development are in many ways just descendants of other industrial titans that have crowded this area for over 150 years... n short, Route 128 firms are much more staid and centralized affairs than the loose confederations of scientists and engineers in northern California. Their histories, attitudes, and strategies have created technological societies similar in products manufactured but very different in their economic and social manifestations.

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