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  The exit became Valley legend and inspired hundreds of high-tech ventures to come. Tiring of a cantankerous boss who refused to hear their ideas, the men of Shockley Semiconductor wrote a letter to Wall Street investment bank Hayden, Stone, & Company where Gene Kleiner’s father had some business dealings. It was the ultimate shot in the dark: eight scientists who’d never run anything more than a few laboratory experiments, writing someone they barely knew, asking for help finding someone who’d hire them all as a group, to start a new venture making high-tech devices that nearly no one outside the scientific community had heard of. And they wanted to stay in California to do it. The banker who received the letter didn’t know a thing about semiconductors, so he passed it along to the firm’s junior high-tech analyst: Arthur Rock.

  Rock wasn’t your typical white-shoe banker. He was from Rochester, New York, the son of Jewish immigrants who owned a candy store. From there, he had made it to Harvard Business School and then to Wall Street, taking a short detour in between to run the New York Young Republicans’ campaign for Eisenhower-Nixon ’52. Rock wasn’t an engineer by training, so his investment instincts were people-driven. “Good ideas and good products are a dime a dozen,” he later explained. “Good execution and good management—in a word, good people—are rare.”

  Rock looked at the Shockley Eight and saw people much like him: family men in their early thirties, strivers with first-rate credentials, willing to buck the system just a little bit to get things done. In short, good people. Enough for Rock to branch out from his day job and go on the hunt for an angel investor—someone comfortably rich, but quirky enough to take a willing gamble on a new technology and a pack of unknowns. He found Sherman Fairchild, an eclectic high-tech enthusiast who had become a multimillionaire thanks to his inheritance of a massive amount of IBM stock. The eight scientists of Shockley became the founding employees—and shareholders—of a new company called Fairchild Semiconductor.24

  Modern Silicon Valley started with Fairchild and the “Traitorous Eight” who founded it. Financed by an eccentric trust-funder in a deal brokered by an East Coast financier, the firm’s origins underscored how tightly wedded the Valley was to outside, old-economy interests from the very start. But this was a new take on the relationship—not a company that was merely a Californian outpost of an Eastern electronics giant, but a wholly new enterprise founded by the engineers themselves. Noyce and Moore went on to cofound Intel, bringing a Fairchild colleague named Andy Grove along. (Grove, like Gene Kleiner, had been a teenage refugee, escaping war-torn Hungary for a new start in opportunity-rich postwar America.) Kleiner became the founder of one of tech’s most influential venture capital firms, funding and shaping generation-defining companies from the PC era to the age of social media. Rock moved West in 1961, partnering with a young money manager named Tommy Davis to form Davis & Rock, leading to later investments in Intel and Apple. Other Fairchild founders and early employees founded other semiconductor companies that made billions and replaced the mechanical innards of nearly every consumer product with tiny microchips.

  The company founded with IBM money didn’t make computers, but it was the spark for the technologies that ultimately upended the mainframe market Big Blue had dominated for so long. Most important, the men of Fairchild established a blueprint that thousands followed in the decades to come: find outside investors willing to put in capital, give employees stock ownership, disrupt existing markets, and create new ones.25

  The Fairchild founders took a huge gamble in abandoning a Nobel Prize–winning legend to set out on their own. But it turned out that their timing could not have been better. A mere three days after the Traitorous Eight officially incorporated their company, the Soviet Union launched the Sputnik satellite.

  CHAPTER 3

  Shoot the Moon

  Eighteen thousand miles per hour. That was the orbiting speed of the beach ball–sized hunk of metal the Soviets shot into space that Friday evening in early October 1957. By the time news of the launch hit America’s Saturday morning papers, the satellite was on its tenth orbit, soaring more than five hundred miles above the Hudson River Valley as Ann Hardy was having breakfast at her kitchen table in Poughkeepsie. Seconds later, it flashed over Boston as Vannevar Bush puffed on his pipe in his book-lined study. By its eleventh loop, it was well past Cleveland, where thirty-seven-year-old David Morgenthaler was raking early autumn leaves and thinking about the big new job he would start in a few days—after a decade moving up the management chain, he was a company president at last, running the American branch of a British chemical operation. The satellite sailed southward over the military bases of Alabama and Texas, past the sun-bleached expanse of the nuclear test sites of New Mexico and Nevada, above California’s and Washington’s vast airplane factories and the great dams whose hydropower fueled them.

  The morning dew was still burning off the Bay Area hills when the metal orb passed overhead on its twelfth trip around the earth, far above Palo Alto’s oak-lined streets and the modest apartment where Burt and Deedee McMurtry had only just cleared out the cardboard boxes left over from their cross-country move. McMurtry was only two weeks into his new life as a Stanford graduate student. He’d been at Sylvania barely longer than that. As Northern California’s young newcomers like the McMurtrys sipped morning coffee on their back patios, squinting up into the sky in wonderment at the tiny machine soaring up beyond their sight, they had little inkling of how much Sputnik was going to change everything.1

  SPACE RACE

  The Sputnik I launch came as an utter surprise to the U.S. political establishment and upended contented assumptions about American scientific supremacy. “The Russians could no longer be regarded as ‘backward’ and ‘beaten,’” remembered then President Dwight D. Eisenhower some years later. “There was no point in trying to minimize the accomplishment or the warning it gave.” Washington, D.C., had barely recovered from the shock when another gut punch arrived: the early November launch of a second Soviet “moon,” this time an 1,100-pound air-conditioned spaceship bearing a stray dog from the streets of Moscow named Laika. (America’s horrified dog lovers protested the cruelty of sending an animal into orbit with no hope of returning alive. Reporters, desperate to inject some humor into the grim situation, dubbed the pooch “Muttnik.”)2

  Then, landing with a thunk on the president’s desk a matter of days later, came the report of a civilian panel commissioned by Eisenhower earlier in the year to assess the nation’s ability to withstand a Soviet nuclear attack. The committee, chaired by San Francisco attorney and RAND Corporation co-founder H. Rowan Gaither, had very bad news.

  Despite the billions spent by the Americans on ballistic missile development since the start of the 1950s, despite the money poured into Eisenhower’s “New Look” military, they’d been outpaced. Despite having a far smaller economy, the Soviets had spent about as much. They had trained far more scientists, developed technology much more quickly, and were on a fast track to go even further. America’s Cold War enemy now had rockets powerful enough to put a dog in space, which meant they had the capacity to send nuclear warheads thousands of miles across the ocean—and could do so with such speed and force that U.S. civil defense systems would be utterly overwhelmed. All the schoolroom duck-and-cover drills and backyard fallout shelters would be for naught; the Soviets now possessed the ability to annihilate whole cities. The only way to counter this threat, this committee made up of defense industry executives and advisors informed the president, was to close “the missile gap.” The panel projected that would require a boost to defense R&D outlays of more than $40 billion.3

  In a matter of weeks, the top secret Gaither Report leaked to the press, and Sputnik’s autumn of anxiety ballooned into a full-blown political panic. Ike Eisenhower deeply disliked untrammeled government spending, but the combined pressure from his own advisors and a Democratic-led Congress was too strong to resist. The defense contracting spigot opened into
a firehose. Dollars flowed out of D.C. to propel ever-more-powerful missiles up into the heights of the atmosphere and down into the depths of the ocean. Further billions poured into the Strategic Air Command, the radar- and transistor-driven communications network on which American military survival now depended.

  By the autumn of 1958, the nation had a new, considerably beefed-up space agency, the National Aeronautics and Space Administration, or NASA. And Congress agreed to fund a wholly new agency within the Department of Defense devoted to state-of-the-art space and satellite research, a place where researchers could, in the words of Secretary of Defense Neil McElroy, “follow these various will-of-the-wisps . . . and carry them through to a point where there can at least be a determination of their feasibility and what their probable cost might be.” The little operation became known as the Advanced Research Projects Agency, or ARPA.4

  Another huge beneficiary of the post-Sputnik boom: higher education, as the president’s reliance on the academics he called “my scientists” intensified. Responding to pressure from Congress, Eisenhower named MIT President James R. Killian Jr. the first presidential science advisor. While the different branches of the military fought over leadership of newly enlarged research programs, Killian and the other scientists advising Eisenhower pointed out that universities were a logical place to nest much of this activity. They already were important partners in the Cold War fight, and the race into space required basic research that only universities could perform. Plus, outsourcing to universities would keep an already big government from getting even bigger.5

  By the end of the following summer, the boost to universities spread far further with passage of the National Defense Education Act (NDEA) of 1958, which shoveled millions in public funds toward building classrooms and labs, hiring faculty and research staff, and boosting scholarships so that America could produce as many scientists and mathematicians as the Soviets. It was a new era. “With all their irritating faults,” the science advisors told Eisenhower, “universities are essential agencies of our national hopes, and they must be treated accordingly.”6

  The surge of new spending on missiles, strategic defense systems, and the brains who made them dwarfed all that had come before, including the Manhattan Project itself. Dwight Eisenhower was never entirely comfortable with the world that had grown on his watch, warning as he left office in January 1961 of the creeping influence of what he dubbed “the military-industrial complex” on American life. But he had set a seemingly unstoppable flywheel in motion.7

  Its speed accelerated further when Eisenhower’s successor, John F. Kennedy, proclaimed within months of taking office that American astronauts would reach the moon by the end of the 1960s. Bruised by the Bay of Pigs crisis and needing to burnish his foreign policy credentials, Kennedy saw the moon shot as the way to definitively prove American scientific prowess to the world—and to the American people, most of whom still worried that Russia would reach the moon first. “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard,” Kennedy declared in September 1962 in Houston, as the foreign policy stakes of the gambit shot higher in the wake of the Cuban Missile Crisis.

  Kennedy spoke these words on a blazingly hot South Texas day, before an enthusiastic crowd at Burt McMurtry’s alma mater, Rice University. NASA’s newly established Mission Control Center was just across town. “Those who came before us made certain that this country rode the first waves of the industrial revolution, the first waves of modern invention, and the first wave of nuclear power, and this generation does not intend to founder in the backwash of the coming age of space.” The goal was audacious, the costs stratospheric, but the challenge was “one which we intend to win.”8

  Propelled by missiles and the moon shot, R&D made up more than 10 percent of the entire U.S. federal budget for the first half of the 1960s, and further skewed the high-tech world’s emerging Sunbelt tilt. In the far West, already busy aerospace centers in Southern California and the Pacific Northwest revved up even further. The New York Times enthused in early 1963 that Los Angeles had become “the Detroit of the space industry.” While ex-President Eisenhower grumbled about the Kennedy Administration’s “fiscal recklessness” when it came to the space program, NASA transformed all the places it landed.9

  The Santa Clara Valley was no exception. Eisenhower’s missile program and Kennedy’s moon shot boosted demand for precisely the kinds of things the region’s electronics labs already developed and sold: microwaves and radar to track satellite trajectories, oscillators and transistors to provide lightweight and potent energy sources, and networks to communicate with spacecraft hurtling beyond the outer atmosphere. Stanford’s quads of sandstone and tile sprawled outward amid the bounty of post-Sputnik higher education spending; tenants paid top dollar to lease space in its research park.

  For nearly all of the 1950s, this dusty, blossom-bedecked slice of California was a place of industrious young engineers who mainly worked for very large electronics companies. In the post-1957 space age, start-ups began to grow—not only as a result of the technological breakthroughs born in the Valley during this period, but also because of the ways in which military and aerospace contracting changed—more money flowing, and flowing in ways that opened up significant commercial opportunity for new entrants. When it comes to explaining why Northern California eventually came to have such an outsized role in the high-tech universe, the missiles and rockets of America’s race into space shoot right through the center of the story.

  THE EYES OF THE WORLD

  By the time Sputnik burned out in orbit three months after its launch, the Valley already was feeling the change in atmosphere. At Lockheed Missiles and Space in Sunnyvale, which had been conducting space and satellite work since its inception, “suddenly ‘hurry up’ became ‘hurrier up,’” one employee remembered. Within a matter of months, the division became Lockheed’s biggest and most lucrative unit and the Valley’s largest and richest employer, its 300-acre campus along U.S. 101 employing 19,000 people and raking in close to $400 million in sales in 1959 alone.10

  It was Lockheed’s Sunnyvale command center that guided the first American satellites to make the round trip into space, beginning with the Discoverer series that took a capsule into orbit and brought it back safely late in the summer of 1959. The payload of that first successful mission wasn’t dog or man, but an American flag that traveled half a million miles during its 26½-hour journey. The capsule toured the country that fall, making stops in the U.S. Senate and at aerospace conventions before ending up on display back in Sunnyvale. For a facility built on secrets—nearly everything that happened at Lockheed was classified research, never to be shared with those without the right security clearances—it was a rare opportunity for employees’ families and curious neighbors to come visit the mysterious campus and see just a little bit of what it was about.11

  Down the road at Stanford, the combined boon of more science spending and a busier Lockheed meant that Fred Terman’s big bets on physics and applied technology paid off even more handsomely. A beefed-up Strategic Air Command and satellite surveillance program increased demand for the traveling-wave tubes and signal jammers of the Stanford Electronics Lab. Money pouring into Sunnyvale for aerospace work spilled over into the engineering labs on the Farm. Then, in 1959, the Eisenhower Administration endorsed Stanford’s bid for a federally sponsored particle accelerator for high-energy physics research. Built at a cost of more than $100 million, the giant Stanford Linear Accelerator soon sprawled out across rolling grasslands in the countryside a few miles west of campus.12

  With all this happening, the world began to take notice. At the 1958 World’s Fair in Brussels, a crisp diorama of Stanford Industrial Park was a standout feature of America’s industrial pavilion, a symbol of the clean and modern knowledge work being made possible by the United States’ commitment to applied technology. “Of the nine parks fe
atured in the display,” the Stanford University Bulletin proudly informed its readers, “the co-sponsors considered the Stanford Park the most photogenic.”13

  Then, in the fall of 1959, none other than Soviet Premier Nikita Khrushchev came to visit IBM San Jose as he made a swing through California on the heels of his “kitchen debate” in Moscow with Vice President Richard Nixon. IBM executives were apprehensive about the visit. Khrushchev had caused a stink in Los Angeles a day earlier after not being allowed to visit Disneyland. He showed up in San Jose wearing a longshoreman’s cap given to him by the firebrand San Francisco labor organizer Harry Bridges earlier that morning. Yet the premier genially allowed himself to be ushered around the facility by CEO Tom Watson Jr. He had a roaring good time at lunch in the employee cafeteria. While Khrushchev “was effusive in his praise and flattery” for America’s technical achievements, one reporter noted, he “promptly added that it would not last long.”14

  Six months later, another presidential visit to the Valley’s orchards and cul-de-sacs: Charles de Gaulle of France, on a visit to San Francisco, asked to see the marvelous research facilities down by Stanford in its industrial park before he left. The buzz from the Brussels exhibition had given the park a global reputation, and de Gaulle wanted to see what all the fuss was about. His motorcade trawled down Skyline Drive to Palo Alto, le General resplendent in a convertible limousine, the French tricolor flapping on its hood in the spring sunshine. The town’s quiet neighborhoods came alive with spectators. On tree-lined Waverly Street, down the way from the original garage of Hewlett and Packard, a teenage prankster dressed up as Napoleon and lay in the gutter as the presidential procession went by. Decades later, lifelong residents remembered the strange and exciting sight of de Gaulle’s convertible as it swept through the Town & Country Village shopping center, his familiar Gallic profile framed by the incongruous backdrop of Stickney’s Hick’ry House and the Village Sudsette.15