Historian Margaret O'Mara talks about her new book The code and how Silicon Valley has maintained its competitive edge in the high-tech field.
Like Detroit with automobiles or Pittsburgh with steel, Silicon Valley is synonymous with technology. In her new book The code: Silicon Valley and the Remaking of America. Margaret O'Mara casts a historical eye on the contradictions of this central place in modern American history.
Although O'Mara is well-known as a hotbed of entrepreneurship, O'Mara demonstrates the important role that state spending plays in Silicon Valley, flowing through research universities such as Stanford, or as federal contracts to technology companies. It records how the valley is constantly being rebuilt and creating one industry after another – from semiconductor chips to personal computers to biotechnology, mobile devices, the Internet and social media. It traces it from its origins in the military boom of the 1940s and in the Cold War over the rise of entrepreneurs who are in the counterculture of the 1960s and 1970s in the Bay Area, to the backlash against technology.
O'Mara, the Howard & Frances Keller history professor at the University of Washington, recently spoke with me about the book. Our conversation was about length, clarity and flow.
Let's start at the very beginning: How did Silicon Valley come about?
The true turning point for Silicon Valley was World War II and the Cold War. If you go back to the 1920s, it is the Santa Clara Valley, an agricultural valley in California best known for being the capital of plum production. During the Second World War and after that, this tsunami of military public spending begins to float across the Pacific Coast, investing directly in technology and science. It was part of the military industrial complex.
The thing that set the flywheel in motion is big government. It was not that the president said, "We're going to build a science city in Northern California," which was later explained by many world leaders. It was a big wave of government spending made by universities like Stanford and Berkeley, as well as by private industrial and defense companies like Lockheed.
They write: "The entire company relied on massive government investment … from space defense contracts, research grants for universities, to public schools, roads, and tax regimes." It's not just a big government, it's a big government incredible entrepreneurial spirit goes hand in hand with motor and universities.
There are certain things that only the government can do. It invests not only in military spending, but also in the exploration of the blue sky. It is also the space race – NASA. Up and down the Pacific West, you'll find these defense centers (like Seattle and LA) in the aerospace industry.
The Valley specializes in small electronics for the military and the space race. Fairchild Semiconductor is the forefather of venture-backed startups. Much of the business came from government contracts, from NASA for microchip technology. If the government buys something, it can increase production and lower the price for the private sector. So the government became the instigator of the market.
How important are universities in general for the high-tech industry and Stanford in particular for Silicon Valley?
What people like to overlook is the peculiarity of Stanford. First, its ability as a private university to completely transform itself and abolish certain departments – as a public university can not or should – and (secondly) its incredible, highly entrepreneurial approach from the 1950s. The attitude: "We will work with industry and build laboratories that will train exactly the type of people you need." This is not necessarily something that every college wants to strive for, but it is a key part of it.
Frederick Terman is the dean who built Stanford's engineering program in the 1950s. He grew up in Palo Alto, the son of a Stanford faculty member. He attended MIT as a graduate and worked with the architects of Cold War science and technology policy. He writes to a colleague in the 1940s and says: "We have a moment when Stanford could become a major world-class university like Harvard or MIT.
What about venture capital?
Early Venture Capital in the Valley is a wonderful example of how the old economy and the new economy are intertwined. His modern incarnation is created by humans Georges Doriot Harvard Business School – a professor who teamed up with a number of Brahmin bankers in Boston in the 1940s to raise funds for these young science ventures emerging from this university research. The Silicon Valley iteration comes from younger men who manage old family allowances. And it's also backed by the government in the form of the Small Business Investment Corporation, the weird little creation that emerges from the Small Business Act of 1958. It will be an extremely generous vehicle.
Then there are the networks of friends who help each other and allow each other to tap these sources of capital. One of Silicon Valley's original venture capitalists, Reid Dennis, made me understand that in the beginning it was like putting fish in the barrel, there were so many options.
So many of the venture capitalists came from successful companies and switched from entrepreneurs and technologists to investors?
This creates a pattern that continues today. They start identifying the next generation winners and bring their management know-how to the next generation. This is critical to understanding the recovery of Silicon Valley, its ability to shift from technology to technology. But it also helps to understand a blind spot – the narrowness of the vision of a company's goals, what makes a good technology entrepreneur, and what a founder should look like. These blind spots have become a major drain on the valley in recent years.
The central theory in AnnaLee Saxens book Regional advantage is that Silicon Valley is different than older industrial regions like Pittsburgh and Detroit. These regions were tied to a particular technology and industry and could not grow beyond that. While the valley is unique in that it leaps from technology to technology.
Although these different tech generations seem to be separate, they build on each other. You have the microchip that receives the microprocessor and the computer chip, which then enables the personal computer. The valley feels like it's being eaten alive by Microsoft in Seattle, but the internet is just in time. The Internet is once again showing the strengths of the valley and what it has done from the beginning: the construction of very small electronic and communication devices. These core competencies form the core of all these successive technology generations.
(The valley is) far away from the capital cities of finance and politics. I call it "Entrepreneurial Galapagos" – this cross-generational network of venture capitalists, law firms, investment firms and marketing companies.
They point out that the valley has generally evolved alongside popular culture, from the clean military types of the 1950s to the hippies and counterculture types of the 1960s and 1970s.
The first generation consists mainly of crew-cut, white shirt and narrow bindings. They are not particularly interested in formal politics. The next generation is the counterculture with one caveat. They are part of the antiwar protests in Berkeley and Stanford. They want to influence social change, with computers being the tool. Once everyone has a computer, we will eliminate all injustices.
This intense techno-optimism connects all generations. They share the belief that technology will be a way to make the world a better place. The politics and disorder of social activism are orthogonal to what they are trying to do. What we are now discovering is that these technological tools have helped to exacerbate some of the social divisions that their creators wanted to eliminate.
Seattle has spawned some of the largest and most important technology companies – Microsoft and Amazon, not to mention Boeing. Where does it fit as a high-tech center?
Seattle has always been more of a big business than the valley, in the sense of an economy dominated and defined by a single industry or firm: Boeing, then Microsoft and now Amazon. Boeing's technical capabilities remain an important economic factor. Seattle also has large outposts of major technology companies as well as many smaller and mid-sized startups. About a quarter of these startups were founded by Microsoft alums. Seattle's tech ecosystem is younger than the valley's. However, there were already long connections between the valley and Seattle. Some of Microsoft's earliest venture investments came from Silicon Valley. Amazon also got a good portion of his early money from Silicon Valley. Jeff Bezos, in turn, personally participated in Google early on.
One of the things we've been following is moving high tech from suburban nerdistans to urban centers like San Francisco and New York. What does that say about Silicon Valley?
My first book (Cities of knowledge, published by Princeton University Press in 2005) was all about high technology in the suburbs. It was quite a journey to see what had happened in the last few decades. It is a phenomenon that is partly sociological and partly technological.
(Is there) the broader return to the city: The city is the place for wealthy young people who can live where they want. In the 1960s, part of the attraction for the engineers bought a beautiful ranch house in Palo Alto and Menlo Park. And that's exactly what a 25-year-old would not want to do. This is part of the urban comeback and rise of these truly vital, exciting neighborhoods. Companies that hire and retain the best talent; It's an advantage if you have a cool room in a cool neighborhood in a cool city.
But the other thing that really interests me is how different the startup of a 1999 or 2000 startup is. At that time, you had to rent space in an office park and fill it with cabins and a server room. There were all these acquisition costs. In a place like New York City, you could never get commercial real estate on a grand scale. Now you can get your computing power and save your data in the cloud. Your startup can be a powerful laptop and coffee shop in Brooklyn, and you can become a WeWork area. Now you can afford to be in a cool neighborhood in New York, San Francisco or Seattle because your footprint is smaller.
What does that mean for other cities?
Geography is never static. In the 1910s and 20s Detroit was the most innovative city in the world. The glory days of a region do not last forever. When I talk to people in their twenties and thirties, the dominance of the biggest technology companies is often called into question. And I think they are also concerned about the quality of life: Do I want to give my life to this?
This is not for everyone. There are still many people pouring into Silicon Valley. But I think there is an airspace for the "rest" in a way that maybe not even a few decades ago, just because of the way technology has grown as an industry. This can change as emerging tech hubs move away from these really high-priced housing markets. And one day there will be a bankruptcy: this is a roller coaster ride in an industry.
Most of my life was dominated by techno-optimism. Now there is a backlash. It went very fast.
When I started working on this book five years ago. Everyone, from Silicon Valley to the D.C., spoke ironically about how technology is changing the world. And now the mood has changed so dramatically. It's so bleak that I somehow protest: "We have supercomputers in our pockets. Let us appreciate some of the good things. "
The reality is somewhere in the middle. We should not be cheerleaders in Silicon Valley, nor should we break everything down. And so also in these cities. Will people stop living in San Francisco or Seattle? I do not believe that. They are beautiful places. They offer things that are not possible in many other places and that do not just evaporate. How do you find a balance?
Part of the appeal of a city like San Francisco comes from its unconventionality, the people who are not part of this rich technology world. How do you keep that up? How do you keep the texture and the things that make cities so great? I think it's great that technology in these cities is available in terms of density and sustainability. Let us think about how you can open it up and coexist.
San Francisco and Seattle have chronic diseases that have gotten worse. They already had big transportation problems. They had serious problems with the affordability of housing. And now, this rapid growth in technology has made all these problems worse. But it's not that the technology has caused these problems in the first place.
When the HQ2 search came along, the backlash against technology crystallized and this question of how much we – as in local governments – will do to attract these companies, and is it good to have them there? The answer lies somewhere between billions in tax credits and "stay away from my lawn".
The answer is to find a way to work together and move forward. Technology companies, especially large ones, must be aware of their social responsibility. It's easy to say, "Bill Gates should only give $ 1 billion to fix this or that." But governments have to tax people and businesses. After decades of austerity, it is not surprising that a very unequal and unbalanced system is the result.
There are not many differences in terms of gender and race in Silicon Valley. Is this endemic or are there any signs that could change?
It is endemic and also changes. In the 50s and 60s, many people who were pioneering figures and investors went to Harvard Business School, but women were not admitted at the time. Women were not allowed to study chemistry or engineering.
(There is) the close networking of the business – people hired people who knew them. The intense work-hard-hard ethic has been a hallmark of Silicon Valley technology from the beginning. They go to work together after work. It will be a very male dominated world. Overlay this with this incredibly competitive atmosphere of unvarnished criticism.
It's no surprise that the women who persevered were few. Many of them just say, "I will not settle for this BS," and then they keep going. The 1960s mad Men The era of corporate America was caught in amber.
But I see that things change and why. Because when the last-generation winners pick the next-generation winners, we now have a growing number of wives. You now have resources and are networked together. You create your own version of the group. Yes, that can have its own prejudices and exclusions. But I'm encouraged that the valley has spoken in recent years in a way about diversity or lack of technology, as it had never talked about before.
The whole idea that technology is a meritocracy has been somewhat compromised, as it should be because it is not meritocracy. Tech has become more and more a middle-class province that has not only been able to join an elite program at Stanford or MIT, but has also been able to start a start-up because its parents may help subsidize it. We do not talk enough about it when we celebrate entrepreneurs. This does not mean that you should not celebrate entrepreneurship and encourage people to realize their innovative dreams. But you have to realize that not everyone can do it that easy. How can a society help to promote and recognize bias?
Is the rapid rise of tech centers in China, Europe, and elsewhere a threat to America's primacy at Tech?
What was really crucial to the success of Silicon Valley was American immigration policy. The immigration reform of 1965 opens the door to this incredible wave of new Americans, including those who come down the valley and start a disproportionate number of businesses. The free movement of persons and capital is what has made the United States better than any other place. Therefore, all these "silicone somethings" around the world have not quite achieved what the original has done.
This does not mean that the US rules and everyone else does not belong. Silicon Valley is a global network. We are part of a global tech economy. Part of what makes the American tech industry so vital is the fact that it's connected to markets, technologists, and tech hubs around the world. To conclude and say, "We are number one and we are not interested in what others have to offer," is really self-sabotaging.
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