How Silicon Valley Came to be

It all started when Bell Labs hired William Shockley to come up with a replacement for the vacuum tube. Following lots of trial and error, blind alleys and false hopes, in 1947, his team of Brattain and Bardeen invented the transistor. Impressive it was, but not quite the transistor we know of today. While Shockley had been part of many attempts and ideas, he wasn’t part of the concept of the Brattain-Bardeen transistor. He was torn by the fact:

“My elation with the group’s success was tempered by not being one of the inventors.”

Angry and insecure that he hadn’t been part of the idea that worked, he worked secretly trying to improve it. His secretive efforts yielded an improvement to the Brattain-Bardeen transistor resulting in the modern-day transistor.

The team had no doubt been successful, but trust had been destroyed. Shockley, the team supervisor, became impossible to work with. The team dissolved. Shockley himself was passed over for promotions given all the bad blood. So much so that Bell Labs was even willing to let Shockley go. Shockley went on to get funding to form a new semiconductor company, Shockley Semiconductor. In Palo Alto, California. A weird location back then! But, as Walter Isaacson wrote in his book, Innovators:

“Silicon had come to the valley.”

Shockley hired several great guys, including Robert Noyce and Gordon Moore (the man who would go on to frame Moore’s Law). Continues Isaacson:

“Some leaders are able to be willful and demanding while still inspiring loyalty… Shockley did not have this talent… Shockley crossed the line from being visionary to hallucinatory, turning him into a case study of bad leadership.”

And then Shockley, along with Brattain and Bardeen, won the Nobel Prize:

“When Shockley returned from Stockholm, his head was swelled but his insecurities were undiminished.”

It was the last straw: he became impossible to work for. The top staff soon complained to the man who had funded Shockley Semiconductor. It’s either him or us, they warned. The outcome, says Moore, wasn’t what they had hoped for:

“We discovered a group of young PhD’s couldn’t push aside a new Nobel Prize winner very easily.”

Moore and six of the top staff decided to quit and form a new company. Noyce was not yet ready to quit. Unlike today, getting funding for a new company was very hard. Even in Silicon Valley. Eventually, an investment banker agreed to meet them but said they needed a leader. And that’s when Noyce came on-board to form what came to be called “the traitorous eight”. It was a different era back then: resigning to form new companies, and finding funding in such cases are par for the course now in Silicon Valley today. Eventually, Sherman Fairchild agreed to fund them and thus was born… Fairchild Semiconductor.

Around the same time, both Fairchild Semiconductor and Texas Instruments (TI) invented the microchip aka the integrated circuit. “Massive and predictable demand from the government” for missiles guidance and NASA drove prices down, which then led to the creation of a new set of products starting with the pocket calculator. It set off the now familiar cycle of all things electronic:

“Every year things got smaller, cheaper, faster, more powerful.”

By now, Fairchild Semiconductor was so big and successful that the parent company (on the East Coast) wanted to decide where and how to invest profits. The East Coast folks didn’t approve of Noyce wanting to give stock options to “new and valued engineers” either. Nor did the California folks like the hierarchical structure of a big company. And so:

“Engineers began defecting, thus seeding the valley with what became known as Fairchildren: companies that sprouted from spores emanating from Fairchild.”

Eventually, Noyce and Moore too decided to form their own company. This time, funding was easier since the idea of venture capital, especially in the valley, was appealing to more and more investors. And thus was formed Integrated Electronics, famously abbreviated to Intel:

“By the 1970s – thanks to Hewlett-Packard, Fred Terman’s Stanford Industrial Park, William Shockley, Fairchild and its Fairchildren - … the region got a new moniker… Silicon Valley… and the name stuck.”