Guest Post by Brock Hinzmann, Chairman, Silicon Valley Node, The Millennium Project
The Silicon Valley ecosystem for innovation, new company startup, and investment is the envy of the world and the subject of frequent analysis and attempts to duplicate its success. Two recent authors, Leslie Berlin, a historian with Stanford University (Troublemakers: Silicon Valley Coming of Age) and Adam Fisher, a well-travelled writer, who grew up in Silicon Valley (Valley of Genius: The Uncensored History of Silicon Valley), have taken slightly different, but equally in-depth looks at the people and circumstances underlying Silicon Valley’s history and often overlooked by previous authors. Two Silicon Vikings board members, Richard Horning and Eilif Trondsen interviewed the authors and moderated questions and discussions around the past, present, and possible futures for Silicon Valley.
Berlin, who manages Stanford’s Silicon Valley archives, conducted her research there and interviewed almost a hundred people over an 6-year period to write Troublemakers. Fisher, who wrote for Wired Magazine during the dot-com boom and bust, likewise took 4-to-5 years to collect interviews with a wide range of Silicon Valley’s inhabitants. Horning started the questions by asking, what distinguished the southern end of the San Francisco Bay Area from the many other centers of research and defense department spending in the United States, including nearby Berkeley. Fisher answered that he thinks it was the counterculture of the region, including Berkeley, and the “Think Different” attitude that Apple expressed years later in its advertising. The hippie culture and the ‘back to the land’ notion that writers like Stewart Brand were able to capture encourage people to make their own ‘tools’ and to ‘do it themselves.’ Berlin agreed, but added that the academic computer culture, where computers were made available to people at night, made wearing jeans instead of suits, for instance, come naturally, rather than being ‘counterculture.’ William Shockley found the fruit orchards of the Santa Clara Valley a perfect environment for an educated workforce, already working at companies like aerospace company Lockheed and electronics maker Hewlett-Packard, and for connecting with people from around the world. There was no legacy of a New York, East Coast culture to clear away, literally or figuratively, in order to introduce something new. Real estate was cheap and new businesses could create their own, “bespoke” culture. Fisher added that Stanford also promoted an unusual combination of an academic culture that actually encouraged and worked with business. Trondsen agreed, pointing out that academic and business cultures in Scandinavia (and in other European countries) are still not that close, even today. He noted that Stanford University, in particular, has long been very open and inviting to outside/community participation, and that seminars at Stanford very often have one-third or more of the seminar participants from the local community (including, especially, large and small companies).
Fisher points out that, although Stanford has gotten most of the press for encouraging this collaborative business culture, many of the founders of Silicon Valley companies, such as Allan Alcorn and Steve Wozniak, went to UC Berkeley. Berlin agreed, saying that Shockley came to Palo Alto only because his mother already lived there. And Fred Terman gets credit for promoting the Stanford industrial park, but Stanford came to the game relatively late. Berlin says it was another kind of innovator within Stanford, Niels Reimers (founder and a former director of Stanford University's Office of Technology Licensing), who pushed Stanford to begin selling its intellectual property and investing in startup companies, which went against the grain of the academic culture, which found it distasteful to capitalize on the discoveries of other academics built up over time. As a private university, Stanford had more freedom to change the investment culture than a public university like Berkeley did.
Doug Engelbart and Neils Reimers were two of the ‘Nordics’ that had an early influence on Silicon Valley and Trondsen asked what more we should know about them. Berlin noted that Reimers did not seek attention and did not like to be in the limelight. But Reimers had a strong conviction (which he was willing to fight for, even as many at Stanford opposed his strong commercialization ideas), feeling that, as Berlin put it, “corporations were the best vector for transferring academic ideas to the broader public, and was willing to fight anyone—the university, the patent office, government officials—who disagreed with him.” Berlin also added that Mike Markkula, as the person at Apple who really knew how to build a company, and Bob Taylor, who was vital in the creation of the Internet and Xerox PARC, as other individuals who were willing to be in the background supporting others. It was Reimers who convinced Stan Cohen to file Stanford’s patents on recombinant DNA (even though the resultant academic shunning might have cost Cohen a Nobel Prize) and who convinced Stanford to invest in startup companies, which turns out to be a much bigger source of return to Stanford than licensing has been. According to Stanford president John Hennessy (President of the university during 2000-2016) the $2B Stanford has received in licensing fees is small compared to the returns on equity investment and money donated to Stanford by successful company founders.
Horning asked about the importance of networking in Silicon Valley, as reported by Annalee Saxenian (now professor and the current Dean of the UC Berkeley School of Information) and other analysts. Fisher responded that New York writers mostly have a basic misunderstanding about the Silicon Valley networking effect and they have always looked for “The King” of Silicon Valley. New York is a “hub and spoke” culture, in which all roads lead to Midtown or Wall Street and to some king, like a Bob Noyce or a Steve Jobs. Silicon Valley is not even a city and the world’s biggest machine is the Internet and not a physical structure. Silicon Valley is a very competitive place, but large groups of people can move seamlessly from one place to another within a kind of one giant company. Berlin added that East Coast thinking has a prescribed way of taking an idea to a prototyping shop to market. Silicon Valley is, itself, one giant prototyping shop and, while there are specialized providers, everyone uses the same system.
Trondsen asked where Silicon Valley is heading next, especially given that established cultures tend to get rid of their ‘troublemakers?’ (Trondsen also noted that one theory of why the Nordics has long had such a cohesive culture is that the region’s ‘troublemakers’ emigrated—especially to America). Silicon Valley will survive only if it remains attractive to immigrants, says Berlin. Immigrant founders are responsible for more than half of all startups, and a high percentage of the engineers in Silicon Valley are foreign born, and 70 percent of unicorns have at least one foreign-born founder. So immigration laws will determine the future of Silicon Valley. Fisher says he is still bullish on the future of Silicon Valley. However, he points out that Silicon Valley is in a state of ‘reputation collapse’ and that the FANGs (Facebook, Apple, Netflix and Google) are becoming seen as villains. At the same time, young people around the world are drawn to the idea that they can become billionaires and can do something crazy and great. Fisher expects there will be many specialized ‘valleys,’ like the one in Shenzhen around manufacturing or other valleys for AI or Blockchain (and Waterloo for “all things Quantum”). In the US, policies could end up killing the ‘goose that laid the golden egg.’
Stanford professor Burton Lee asked about the role of students and, in particular, student clubs. Entrepreneur clubs in Europe seem to be weak by comparison—but exceptions exist, especially in Finland, where Aalto University student club has been a very fertile ground for innovation, including starting Slush, one of the largest tech and startup conferences in Europe). Berlin agrees that entrepreneur clubs are important and added that a lot of people don’t realize how many of the limited partners, who are investors in venture capital funds, are institutions, including universities and pension funds. Venture capitalists had to lobby the government to change the laws to make such investments possible. Horning points out that the home of the famous Home Brew Computer Club’ was at Stanford. Berlin said one factor the clubs add is the role of play, which Steve Jobs also talked about.
Berlin noted that during the evening’s discussion, little if anything had been said about the role of government. Trondsen added that in the US government has played a significant role both as a customer for many of the products coming out of Silicon Valley, especially semiconductors (for the defense industry), but also in funding much of the basic R&D that has been crucial for much of Silicon Valley’s technology work (an R&D at UC Berkeley, Stanford and other universities in the SF Bay Area). For those interested in better understanding the role of government, Trondsen recommended the book The Entrepreneurial State: Debunking Public vs Private Sector Myths (2013) by Marianne Mazzucato, professor in the Economics of Innovation and Public Value and the Director of the Institute for Innovation and Public Purpose at University College London. Berlin recommended reading “The Code,” by Margaret O’Meara to understand the decisions government made to not regulate or ‘paths not taken.’ For example, the Internet is not regulated as a utility, but is regulated by the Federal Communications Commission, instead. In 1989, Ronald Reagan described the microchip as the “David” that destroyed the Soviet Union “Goliath.”
Rob Shelton (Executive Fellow at Miller Center & Principal at ScaleUpNation) asked about how to govern the “brilliant jerks” that have led and lead some Silicon Valley companies. Berlin agreed that we venerate and extol behaviors that that are up to and sometimes over the line. In his own book, Nike founder Phil Knight admits to dishonest behavior. Fisher added, the line between con man and entrepreneur is a thin one. VCs need to exert more due diligence oversight. Andy Grove said it is an issue for board governance, according to Berlin, and she pointed out that, in the early days of Silicon Valley VCs typically had some operating experience. Today, however, not so many VCs have operating experience and have only financial experience and actually no company experience at all. Fisher says Silicon Valley has been attracting the wrong kind of people and that a need exists to get back to the original motivations, as envisioned by pioneers like Doug Engelbart, to build tools to make the world a better place. Berlin questions whether that many of the early entrepreneurs were really all that altruistic. Horning suggested maybe if a few MBA types, who are unable to exercise self control, were sent to jail that it would send a message. And it was noted that we perhaps sent a wrong message when very few, if any, of the financial executives who played major roles in the 2007-8 financial crisis, went to jail.
John Murray (former Program Manager at SRI International) asked how many of the people in these two books are women? Berlin said that, of the 6 or 7 main stories she tells in her book, two are women, including one who founded her own company, ASK Computer Systems (Sandra Kurtzig), but also Fawn Alvarez, who started out at a support position at Rolm, but ended up as the head of staff at IBM Rolm. Berlin had to fight to get Alvarez included in the book. Even in the early days, Silicon Valley behavior was terrible. One of Kurtzig’s bankers asked her to wear a T-shirt at an event for her company on which it was printed, “ASK Me If I Go Down.” Nolan Bushnell allowed a very sexist culture at Atari. On the other hand, Berlin says, many women were angry about negative reports about sexist behavior in Silicon Valley’s early days, because where they were previously limited to jobs as secretaries and schoolteachers, they got to ‘play like the boys’ at Silicon Valley companies, including parties. Fisher also countered that Atari also supported the Equal Rights Amendment with advertising and was one of the first companies to offer secretaries and other largely female support staff stock options. Books like Girltopia and Alpha Girls tell different stories.
A question from the audience implied that Alan Greenspan has been totally wrong about governance and now there is only a skeleton crew at the SEC (Securities and Exchange Commission). Is governance and regulation going to just continue to go downhill? Berlin has no inside info on that. Fisher says he stayed away from that arena.