Silicon Valley – How Success Built Success in the Technology Hub
Silicon Valley hasn’t always been a software hub, but started to grow as the mainframe era of IT rose.
Russia launched Sputnik 1 in 1957 and America lost the space race and were more ready than ever to fund the resources to beat them. NASA was established in 1958, and one of the three research facilities set up was Ames Research Center, which is still located in Mountain View, California. As NASA was in need of different high-tech components, the innovation in the area was growing and a company named Bell Laboratories were doing research on transistors and semiconductors at this time.
At Bell Labs in 1947, a man named William Shockley co-invented the first transistor that could be commercially practical. And together with his two colleagues, he would in 1956 be awarded the Nobel Prize in physics for this invention. Shockley later left Bell Labs to start his own semiconductor company, located in Mountain View, called Shockley Semiconductor Labs. Shockley Semiconductor Labs was the first company to manufacture semiconductors by silicon instead of germanium, which inspired the name Silicon Valley. But Shockley Semiconductor Labs is more widely known for employing the “Traitorous Eight” (image on top).
The “Traitorous Eight” were a group of eight engineers; Julius Blank, Victor Grinich, Jean Hoerni, Eugene Kleiner, Jay Last, Gordon Moore, Robert Noyce and Sheldon Roberts, tired of Shockley, who wrote a letter to an investment bank in New York where a man named Arthur Rock worked as an investment banker. The Traitorous Eight knew they would be more valuable to an employer as a group and so they looked for a job together. Rock realized these men would be able to create even more value by starting their own business, and introduced them to Sherman Fairchild, and Fairchild Semiconductor was founded.
These eight engineers later quit Fairchild and founded companies that became the foundation for Silicon Valley, such as Intel (Moore & Noyce), Kleiner Perkins (Kleiner), Teledyne (Last & Hoerni) and XICOR (Blank).
A study published in 2013 by the research organization The Ewing Marion Kauffman Foundation, explains that the success of the Valley today is largely thanks to the companies that came before. Clifford (Entrepreneur, 2013) says that this paper shows “that a high density of technology startups is most directly sourced back to the number of existing companies in that region. Universities help, to be sure, but they are not the leading indicator.”
Today, we look up to the entrepreneurs of the century, such as Mark Zuckerberg and Jack Dorsey but we easily forget that we have a lot to thank Shockley, Fairchild and especially The Traitorous Eight for the ecosystem that we have today. Without the high concentration of high technology companies in Silicon Valley, it wouldn’t be as successful as it is today.
If you want to learn more about Silicon Valley and its history, I recommend watching the documentary Something Ventured (2011).
Sources:
Protin, C., Stuart, M. and Weinberger, M. (2017) Animated timeline shows how Silicon Valley became a $2.8 trillion neighborhood. Business Insider, http://www.businessinsider.com/silicon-valley-history-technology-industry-animated-timeline-video-2017-5
Haroun, C. (2014) A Brief History of Silicon Valley, the Region That Revolutionizes How We Do Everything. Entrepreneur.com, https://www.entrepreneur.com/article/240534
Clifford, C. (2013) What Makes Silicon Valley Successful? Not What You Think. Entrepreneur.com, https://www.entrepreneur.com/article/228190
Nichols, S. (2015) Remember Fairchild? It’s still around, and worth $2.4bn in takeover cash. The Register, https://www.theregister.co.uk/2015/11/19/fairchild_sells_for_2bn/
Something Ventured, 2011. [DVD] Daniel Geller, Dayna Goldfine, USA: Miralan Productions, Geller/Goldfine Productions.
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10 comments on “Silicon Valley – How Success Built Success in the Technology Hub”
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Great post!
Indeed we forget to thank the pioneers that made Silicon Valley become what it is nowadays. We tend to think only about the huge companies, such as Facebook, Twitter, as you mentioned.
However, we must remember that without the previous work of Shockley, Fairchild and The Traitorous we probably wouldn’t have the Silicon Valley that we know.
Thanks for sharing the history about how Silicon Valley became what it is today.
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Thanks for the comment Carolina, glad you liked the post!
Great post and references, thank you for sharing. As part of our final project me and my team are looking into the history of the Silicon Valley and the possibility to replicate and recreate silicon valley like ecosystem in other regions. I read recently quite a lot of information and opinions about the role of different players. I still personally believe that university play a big role. as well as frequently overlooked government support of the research. The great article about this topic https://www.kauffmanfellows.org/journal_posts/universities-and-entrepreneurial-ecosystems-stanford-silicon-valley-success/
I like the statement made by the authors of the article “Stanford is a unique campus, but it should be viewed not just as a campus but as a community—one built on a successful relationship between the university, government, and industry.” Community and relationships are in my opinion the key words!
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Thanks for the interesting link, Natasha!
Yes, I do agree that universities play a big role in building a great entrepreneurial ecosystem, mostly because of the talent it attracts but also because of the research being done and the innovative culture that, in turn, creates. However, there are so many factors that weighs into building a great ecosystem for innovation, and I think both universities and legacy are a part of that, but there are so so many more.
Would be great if someone found the recipe for creating a great innovation hub though! 🙂
Thank you for sharing this post!
I often find myself thinking, how do you replicate the success or even more the environment of Silicon Valley? How do you create a technological hub like Silicon Valley elsewhere in the world that will serve the challenges of different societies in the same fashion Silicon Valley approaches problems.
From your article it is evident that the right people and institutions at the right time helped a lot towards molding Silicon Valley as we know it today.
I think the world has so much to learn from this environment but it is important to understand that the structure of Silicon Valley will not work as is in other countries or environments. In Africa for example it is important that the social and cultural context is well understood to ensure sustainable innovation hubs.
At the end of the day I believe it all comes down to one thing: A community with a mindset of excellence, drive and innovative thinking.
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Hi Dewald,
Natasha commented something similar to yours above, and I agree that the topic of replicating the innovation hub that is Silicon Valley is an interesting topic!
All market and cultures are different so even if we would find out what the “perfect recipe” for an innovation hub, it wouldn’t be possible to apply to people thinking differently or a culture that isn’t already accepting of failure and so on. These kind of changes take time, as do government and regulatory changes to help foster innovation, but we should really try. It’s an exciting idea to recreate what has been successful in the Valley!
Great use of references and all in all great post!
From most of my technology oriented classes, the question always arises as to how to replicate Silicon Valley in other parts of the world. It is very fascinating how Wadhwa from MIT’s Technology Review (2013), argues that high tech companies in New Jersey in the mid 1960’s were trying to reciprocate the idea and concept in their home town. New Jersey was home to the laboratories of 725 companies, including RCA, Merck, and the inventor of the transistor, Bell Labs. A combination of 50,000 employees working in science and engineering. However, despite of that it failed due to the fact that there was no prestigious engineering university in the proximity. Companies were forced to employ from external areas outside of the town and they were fearful of forfeiting their expertise and innovative technologies to other regions. Moreover, despite Princeton University was around the area, its facility would steer away applied research and the rest of what would be included in the name of, ‘technology’).
The famous business model guru, Michael Porter, governments and top consultants proclaimed that the formula was simple, choose a booming industry, build a, “science park,” next to a research university and lastly, dispense subsidiaries and incentives for selected industries to be situated there and thus manufacture out a group of venture capitalists. Almost seems too simple. However, this formula has never turned into affect apart from the original Silicon Valley in Palo Alto.
The true gem of Silicon Valley was the relationships, trust, people and culture which originates from single locations that can not be reciprocated. It almost seems like they were trying to be someone they are not. Culture is not made, it is adopted from past generations and derives from the traits individuals come from.
In argument and comparison, China has adopted a similar variation of Silicon Valley. Located in Zhong Guan Cun, EHang’s co-founder Derrick Xiong mentions that the U.S market of Silicon Valley is more mature and people invest more time in fundamental technologies, whereas China focuses more on application level and or business models that create outcomes from in 5-6 years. Xiong further iterates that China is still playing catch up and will take years to be on the same level in Palo Alto. Additionally, the key factor that always seems to be critical is that in China, the collaboration between academics/universities and start-ups is not as closely linked.
Similarly, Xiong’s product to launch the worlds first flying taxi: EHang 184, is an autonomous passenger drone that has already passed test flights in the skies of Dubai. On the governmental, political and regulatory side, there is a significant trend of that governments and politicians are pushing and supporting the new kinds and waves of technology and innovation for new and upcoming start-ups, just like EHang.
As for the booming trend of Artificial Intelligence (AI), China will the most important contenders in the market of AI due to the fact that China has the largest population and database platforms to reach. At the end of the day, China believes and comes to the conclusion that the U.S. and China will be the powerhouses of AI in the field and ultimately China will become tied to America’s Silicon Valley.
Thanks Julia for sharing… Looking forward for next weeks blog post 🙂
References
https://www.technologyreview.com/s/516506/silicon-valley-cant-be-copied/
http://www.cnbc.com/2017/07/13/china-is-still-playing-catch-up-to-silicon-valley-says-drone-maker-co-founder.html
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Hi Isaac,
Thank you for your comment and your additions. It’s interesting indeed to see how innovation works in other market. Glad you liked the post 🙂
Julia,
Great post! I think that it’s often overlooked that although they’ve had a strenuous relationship these past few years, as highlighted by the tension between the FBI and Apple in the encryption debate, the Silicon Valley largely owes it’s development and initial success to the U.S. government and more specifically the military. You mentioned NASA Ames, but beyond Ames the military played a tremendously active role in investing in early ideas that became the foundation of many of the innovations within the Valley. For example, Fairchild semiconductor’s, often considered the pioneer start-up within the valley, won it’s first business through military contracts. Additionally, Lockheed Martin once employed 25,000 people in Sunnyvale (https://www.ft.com/content/8c0152d2-d0f2-11e2-be7b-00144feab7de?mhq5j=e3). To put that in perspective, Apple has about 25,000 people working in Cupertino (http://www.mercurynews.com/2015/11/03/apple-earns-wows-for-massive-office-expansion/). While the military retains a relationship, there is no question that the driving factors of investment are the private, as opposed to the public sector. This is why places like In-Q-Tel and the Defense Innovation Unit Experimental that continue to invest in new technologies for national defense applications are so important for the U.S. government.
Hi Tom,
Glad you liked the post, I really appreciate your comment and addition, I wasn’t aware of that. A very interesting read as well, the two articles you mentioned. Thank you for sharing that!