HIGH TECH, HIGH RISK, AND HIGH LIFE IN Silicon Valley (Oct, 1982)
Yes, that is Steve Jobs on a motorcycle.
Also be sure to check out the other great computer article from this issue: “The Chip”
HIGH TECH, HIGH RISK, AND HIGH LIFE IN Silicon Valley
By MOIRA JOHNSTON
Photographs by CHARLES O’REAR
SILICON VALLEY appears on no map, but this former California prune patch, an hour’s drive south of San Francisco, is the heartland of an electronics revolution that may prove as far-reaching as the industrial revolution of the 19th century.
It is a place where fast fortunes are made, corporate head-hunting is profitable sport, and seven-day workweeks send cutting-edge technology tumbling over itself in its competitive rush to the marketplace.
Not surprisingly, flying—fast, challenging, and risky—is a sport that appeals powerfully to Silicon Valley men such as Bob Noyce, who snatches every chance to fly his twin-engine Turbo Commander to Aspen to ski, to his Intel plant in Phoenix, or just to wheel in the sky around Silicon Valley.
At age 54, he is one of the grand old men of an industry so young that its pioneers are scarcely in their 50s, yet so powerful that it is fast becoming known as the oil business of the eighties. Noyce had a key role in inventing the integrated circuit, the tiny computer chip that is the brains and basic building block of virtually all of today’s electronic equipment, providing the quantum leap that created much of the wealth that spreads below his wings in a golden tide of purring Mercedes-Benzes and half-million-dollar homes in the hills. From the air the valley itself, with its grid of roads and rectangular buildings, has taken on the look of an integrated circuit.
Fifty years ago it was a landscape of orchards supplying half of the world’s dried prunes. Even through the sixties, it bloomed with plums, pears, apricots, and cherries, one of the nation’s most bountiful agricultural regions. Today only 13,000 acres of orchards survive out of an original 100,000. By the late 1960s, as industry surpassed agriculture as Santa Clara County’s economic base, buildings of the valley’s many semiconductor companies were beginning to fill the region from Palo Alto to San Jose, named in 1980 as the nation’s fastest growing city.
Yet this dynamic growth happens behind a deceptively sedate facade. Driving through Silicon Valley, I am flanked by a monotone sprawl of low rectangular buildings, on which corporate nameplates display fusions of high-technology words that give few clues as to what goes on inside: Siltec, Avantek, Intersil, Signetics, Intel, Synertek. Inside, an intense concentration of brains, innovation, and enterprising zeal creates products that have captured one-fifth of the estimated 16-billion-dollar worldwide semiconductor market. And, despite recession, more of the aggressive little start-up companies that are the valley’s backbone are constantly being born.
Befriending the computer, and putting it to work and play in daily life a decade before most of us found the courage to touch a keyboard, Silicon Valley and its families may well be a glimpse of a computer-and-communications culture that is the prototype of the future.
The freewheeling egalitarianism that has replaced the rural pace is nowhere more visible than at Intel, one of the valley’s most innovative semiconductor companies. Leisure-time pilot Bob Noyce, a physicist, and Gordon Moore, a chemist, run Intel from modest cubicles separated from a surrounding sea of cubicles only by head-high movable partitions. Here, at the highest executive level, sport shirts and accessibility have replaced corporate pinstripes and wood-paneled boardrooms. Noyce says of his Spartan habitat, “It makes you feel as if you’re in touch with what’s going on.”
The “Intel culture,” as they call it, fanned with messianic zeal by co-founder Andy Grove, has produced the microprocessor, an all-purpose “computer on a chip” that can be adapted to infinite uses, the chip that opened the era of personal computers.
This innovative spirit not only is the life-blood of Silicon Valley but also may be the key to its survival in an increasingly intense trade war with Japan, the competitor it perceives as a mortal threat in the international marketplace. Maintaining Silicon Valley’s creative lead as chips grow so complex that computers increasingly help design them is one of Noyce’s principal challenges. With a certain wistfulness for the days of the individual breakthrough, he says, “Now it’s a team effort. In 1970 Federico Faggin designed the 4004 microprocessor chip by himself at Intel in nine months; our 32-bit microprocessor took 100 man-years!”
But the individual can still star as an entrepreneur. Competitive energy vibrated from Sandy Kurtzig as she told me, “I have taken a bet that ASK Computer Systems will be doing 100 million dollars in annual sales in four years. We will.” Sharing a quiet brunch after tennis with her husband, Arie, a research manager at Hewlett-Packard, and their two young sons, this lively brunette in slacks and sweater is president of ASK, which she founded with $2,000 in the back bedroom of her apartment in 1972. Since ASK went public last year, the worth of the company’s stock has soared to more than 75 million dollars.
Sandy, 35, entered the industry with a mathematics-and-chemistry degree as well as a master’s in aeronautical engineering. Aware of the nation’s productivity crisis, she shrewdly saw that “the technology of the chip had far outstripped our capacity to put all that potential to work.” Sandy targeted software, the programs that tell computers what to do. She developed software systems for minicomputers and sold them as easy-to-use packages to accomplish tasks such as inventory control and accounting in manufacturers’ factories and offices. Her strategies have been so successful that, while chip stocks plunged in 1981, ASK’s rose to make the firm perhaps the nation’s fastest growing public software company.
Yet Sandy, like most of Silicon Valley’s successes, does not wallow in hedonistic excess. True, she recently purchased a baronial Tudor-style home, but says, “We didn’t buy the house to show off. It was mainly to be on the flats where the kids could ride their bicycles.”
But in a valley characterized by venture capitalist Don Valentine as “a pocket of entrepreneuring that attracts a breed of buccaneer capitalists and high-risk takers—an area barely big enough to contain the egos,” there are some Silicon Valley winners who revel in flamboyant display.
“Money is life’s report card,” says a laughing Jerry Sanders, a street-wise kid from Chicago who parlayed an engineering degree and intuitive salesmanship to the presidency of Advanced Micro Devices (AMD) and to a reputation as the valley’s highest flying businessman. Exuding brio and self-confidence, he measures his success in a string of homes, hand-tailored suits, a Rolls-Royce, and a Bentley. In good years he makes grand gestures to employees: a $350,000 Christmas party in San Francisco’s Civic Auditorium; in a lean year he served hot dogs and sauerkraut with panache that won cheers.
But for Sanders, as for Silicon Valley, work is the thing. The valley was born in 1955. Dr. William Shockley, Nobel Prize-winning co-inventor of the transistor at Bell Telephone Laboratories, sent out a call to a dozen handpicked young Ph.D.’s in physics and chemistry to join him in a warehouse in Mountain View, at Shockley Semiconductor Laboratory.
Noyce and Moore answered the call. There they would exploit the properties of silicon, a semiconductor of electricity whose conductivity could be modified by the addition of minute amounts of chemicals, allowing on-off electric signals—the very basis of computers—to occur at mind-boggling speeds. As transistors replaced vacuum tubes, the computing power of an unwieldy roomful of metal boxes ultimately could be contained in a hand-held calculator.
Ironically, Shockley’s pioneering laboratory failed. “His ideas were too far ahead of the still primitive silicon technology, and he never produced a manufacturable product. What he did was to spawn Silicon Valley,” says Shockley alumnus Harry Sello. Believing they had something—a better transistor—Noyce, Moore, and six others got financial backing from Fairchild Camera and Instrument to develop it. Since the founding of Fairchild Semiconductor in 195 7, the valley’s first viable semiconductor company, no fewer than two dozen companies have spun off from it, including the present leading triumvirate: Intel, Advanced Micro Devices, and National Semiconductor, all started by former Fairchild men.
The start-ups and spin-offs could never have flourished without infrastructure, the valley’s vital support system that has built up south of Stanford University. Born before Silicon Valley, it began in 1939 with Hewlett-Packard, granddaddy of the area’s electronics firms. Today it is an incestuous network of suppliers, customers, venture capitalists, brains, research institutes, computer and software companies, schools, and headhunters, the executive recruiters who move men around the valley at a dizzying rate in a tradition of musical jobs that is a key to the valley’s contagious vitality.
With the convergence of infrastructure, innovative minds, and venture capital in the sixties, dramatic improvements in integrated circuitry (which basically masses many transistors on a single chip) brought prices plummeting. Noyce and Moore sold their first transistors to IBM for $150 apiece; today the price would be a fraction of a penny.
Toward a More “Personal” Computer
Steve Jobs is pleased with the falling prices. He hopes that his computer will become the Volkswagen of the industry, the computer every family can own. The 27-year-old co-founder of Apple Computer, whose typewriter-size instrument is pioneering the incorporation of the computer into daily life, bristles a little, too, as he reminds, “We’d rather call the Apple a personal than a home computer.” Although 1981 and 1982 have been the “years of the personal computer,” with giants like IBM jumping into the market and about two million now in use in the United States, predictions that computers would be the nerve centers of our homes by the early 1980s have proved premature.
“It’s no more difficult than learning to cook, but people are afraid they can’t handle it,” says Jobs’s Silicon Valley neighbor Dan Fylstra, whose VisiCorp software packages are simple enough for use in the home. The machines are just not yet “user friendly” enough. Though research labs all over the valley are struggling to solve the elusive problem of speech recognition, we are a long way from marketing a computer that can respond to ordinary conversation—the ultimate friendliness.
So Jobs and his growing host of competitors have directed their sales efforts to office uses. But the Apple has inspired a dedicated cult of hard-core enthusiasts who trade new uses for the computer in the columns of Apple magazines; one engineer has programmed his Apple to activate a small motor that rocks the crib when his colicky baby cries or wriggles. And Jobs has become a potent role model for a new breed of bright kids who are writing and selling software programs and, with their arcane computer skills, gaining the prestige formerly tasted only by the high-school football team.
Over herb tea in a vegetarian restaurant, Jobs explained to me, “For us, computers have always been around. That’s what separates us guys from you guys. You were born B.C.—Before Computers. And it’s because of this place. I was born here. When I was 14,1 was asking famous computer engineers here questions. Apple came out of the microprocessor, created in this valley just five miles from here.”
Jobs’s passion has paid off handsomely. With Steve Wozniak he built his first Apple in 1976 in his parents’ Los Altos garage because they couldn’t afford to buy a computer; now he owns Apple Computer stock worth 100 million dollars. While the chip companies suffered this spring, Apple’s revenues soared 81 percent over last year’s. Apple now occupies 22 buildings in Silicon Valley and plants in Texas, Singapore, and Ireland, which is bidding to become Europe’s Silicon Valley.
Although Jobs drives the requisite Mercedes, success seems not to have spoiled the first folk hero of the computer age. In plaid shirt and jeans, he still prefers, as a friend said, “to drive his motorcycle to my place, sit around and drink wine, and talk about what we’re going to do when we grow up.”
The excitement of Apple’s presence in Cupertino has touched the district school system. Here children are introduced to computers as early as the first grade.
Bobby Goodson, the school district’s computer specialist, believes computer literacy is going to be the next great crisis in education. “If kids don’t understand computers, how can they handle the future?” she asked, as she restrained a class of seven-year-olds eager to get their hands on a computer for the first time.
A little girl with pigtails hunches over the keyboard, fiercely concentrating on following Mrs. Goodson’s instructions. “Type in ’10 PRINT “BARBARA.” ‘ Now type ‘RUN.’” Her name pops up on the screen. Bouncing with delight, she rushes ahead to execute the next instruction. Barbara fills the screen and begins repeating in relentless rows. Barbara looks up, awed by her own power. She has entered the computer age with the ease of skipping rope.
“The broad integration into society, though, is going to be a 10- or 15-year process,” says Jobs. “But I believe we are already making a little ding in the universe.”
Not All Share the Good Life The social impact and the profits, Jobs notes, scarcely touch the lives of the 120,000 people who work on Silicon Valley’s assembly lines. Most of those who live in ethnically mixed east San Jose—black, Hispanic, and about 18,000 Vietnamese and other Asian refugees—cannot afford to own a home.
But the opportunity that lures entrepreneurs gives some workers, too, a crack at the California dream. Secure in a comfortable home in Cupertino with her husband —Thanh, a computer engineer—Tien Nguyen, a gentle beauty with lush black hair pulled into a topknot, relives her escape from Vietnam in 1975.
“We left with nothing. I had just the slacks and blouse I had on. My father feared that when the Communists came, they would kill the whole family. The police put us—my parents, my three sisters, my younger brother—on a barge in the Saigon River with no shelter, no food, no drink. A tugboat pulled us to the open sea to an American ship we shared with 20,000 people. We slept on deck. My older sister, Dao, almost died of flu.”
Brought to Silicon Valley by the pastor of a suburban church, Tien and Dao had assembly jobs within ten days. They found the route to upward mobility, the valley’s electronics schools, and soon moved up to better jobs at Tandem Computer.
“We delivered papers after work and put our father through electronics school, and he has a job now with a valley electronics company,” Tien says with pride.
The sisters have been upgraded again to office jobs at Tandem. But their smiles and chic clothes screen a deep homesickness. “But I feel strong,” Tien says. “In my country I would stay home and cook. Over there I couldn’t interface with all these people”— the local buzz word that reveals how well she has, well, interfaced.
Even Light Industry Brings Pollution But the job growth that gives the Nguyen family a chance to prosper is compromising the sweetness of success. Straining from a small aircraft to see through the opaque veil of pink-brown smog that obscured the low mountains that flank Silicon Valley, county planner Eric Carruthers cracked to me, “On a clear day you can still see it’s a valley.”
Most of the smog is belched from automobiles. Below us, as rush hour began, rivers of red lights ran south, as Silicon Valley disgorged a quarter of a million people to housing tracts 10 and 20 miles away. “Jobs have grown faster than housing,” Carruthers said. In 30 years San Jose has grown from 95,000 to nearly 660,000.
To deal with such growth, Santa Clara County has embraced a new program for systematic regional planning that it hopes will replace wanton expansion. And the need is urgent. The county recoiled this past winter when it was revealed that hazardous chemicals from 11 of the valley’s major electronics firms had leaked from buried tanks and, in one instance, contaminated public water.
Voicing the shock shared by cities that had assumed the electronics industry was nonpolluting, San Jose’s mayor, Janet Gray Hayes, said, “I remember thinking about smokestacks in other industries. I didn’t expect this problem in my own backyard.”
The county has proposed to have the cities use their powers to limit new jobs as a means of curtailing housing expansion. As mayor of Sunnyvale, Dianne McKenna joined her city council in declaring a four-month moratorium on new industrial building, during which limits were voted on waste water and the number of employees per building for new plants.
Campaigning against the runaway growth that threatens the quality of life that once inspired the nickname Valley of Heart’s Delight, Pulitzer Prize-winning novelist and 37-year Santa Clara County resident Wallace Stegner cautions, “It happens slyly. You see an orchard go next to you, but there are still a lot of orchards. Then it becomes catastrophic.”
“The problems are the growing pains of any community that grew fast after World War II, plus the breakneck speed of change in Silicon Valley companies,” says Bob Kirkwood, Hewlett-Packard’s manager of government affairs. “The start-ups of the 1960s are just beginning to have the luxury of lifting their heads to look around.”
As they do, some have gained a special view of the universe. Cherry Lorenzini, whose husband Bob’s company, Siltec, produces the silicon wafers from which chips are made, says: “I can point out a satellite to my kids in the night sky and say, ‘You know, there might be some of our silicon up there.’ ” Proud of her role, she says, “For a man to reach his moon, he needs a support team. Bob designed his first crystal-growing furnace on our dining-room table. We were the little guys going in and eating up the competing companies. His dream was to take Siltec from scratch to SO million dollars; now the goal is ISO million. But for the men in this industry, it’s total dedication,” she adds. “I merged my dreams with his, but many women can’t accept their limited roles in their husbands’ lives.”
There are other problems. “It’s a tremendously striving, intellectually oriented population. They tend to be workaholics who can fall prey to alcoholism, divorce, and depression,” says Dr. Rudolph Grziwok, director of the county’s Fairoaks Mental Health Center in Sunnyvale. “Burn out” has become a common valley syndrome, for not all can maintain the winner profile.
In this environment, relationships can suffer. Driving home in his Mercedes-Benz from his weekly dance class, one of the valley’s brightest engineers said: “Stars are rewarded. There are stock options—you’re riding in one! And my house is another. But you’ve just seen my social life. The projects are incredibly interesting, but they’re on your mind seven days a week. Relationships get screwed up. Somebody who was very important to me met somebody who didn’t work every weekend, and that was it.”
Pressure Spawns Drug Abuse
For those on the assembly line, the stress shows in drug abuse. Marijane Esparza, an instructor at a San Jose drug rehabilitation center, described the vicious cycle that gripped her for several years as a board stuffer, soldering chips to the circuit boards that are inserted into computers.
“You start on drugs because the job’s so boring, hour after hour, and you don’t even know what the board is for. You take ‘crank’ [amethamphetamine] and you feel a flash of energy—zzt, zzt, zzt—and do you work!
You do twice as many boards! Then, the technician standing behind you says, ‘Hurry up, you did 100 boards last night.’” The pressure to maintain the drug-induced productivity rate, she and others fear, encourages the use of drugs.
Theft, an estimated third of it to support the drug habit, has been growing by leaps and bounds, according to Patrick Moore of the organized-crime section of the county sheriff’s office. Greed has created an illicit market for the chips, as well as for the tapes and masks from which they can also be copied (page 458). A stolen chip design can save a corporation or nation ambitious for advanced technology millions of dollars and man-years in research and development.
“Integrated circuits are small, extremely valuable products,” says Moore. “Someone can walk out with a fortune in his fist.”
The largest haul yet occurred over the 1981 Thanksgiving weekend—3.5 million dollars in chips from Monolithic Memories. “Truckloads!” said an astonished Doug Southard, Santa Clara County’s deputy district attorney, as he prepared his case against two men arrested. The spectacular recovery of the chips in South Lake Tahoe this past spring confirmed Southard’s suspicions of a connection with the 1980 theft of 11,000 memory chips from Synertek. “It’s organized crime—with a small ‘o.’ Not Mafia, but well-organized rings. The common thread is drugs and violence,” he says.
International Duel Heats Up Other thefts being investigated are increasingly casting the specter of international industrial espionage over Silicon Valley.
“The Japanese are coming awfully close to copying our chips,” said Roger Borovoy, Intel’s chief counsel. “They can buy them off the shelf and make detailed photographs of them without breaking any law. But if we get our hands on a copied chip, we’ll sue!”
It was computer software, not chips, however, that made headlines this year, when the FBI in San Jose and San Francisco arrested nine people, most of them employees of Japan’s Hitachi and Mitsubishi industrial giants. The nine and a dozen other Hitachi and Mitsubishi employees in Japan were charged with attempting to buy stolen data concerning IBM’s new superfast 3081 computer from undercover FBI agents.
The power of the Japanese electronics industry had already been reflected in the tear-soaked balance sheets of Silicon Valley. In 1981, before Silicon Valley had one on the market, the Japanese cornered 70 percent of the world market for the 64K random-access memory (RAM) chip—most of the other 30 percent going to non-valley competitors Texas Instruments and Motorola. The 64K RAM—four times as powerful as the 16K RAM it supplanted—can handle 65,536 bits of information (1,024 per K). Minuscule though it is, the 64K chip, and the early Japanese domination of its sales, will be remembered in Silicon Valley as the technological equivalent of Pearl Harbor.
A conjunction of events—the 64K RAM, the international recession, corporate price wars—sent the valley’s semiconductor profits plunging.
Frustrated but irrepressible, the valley responded with the esprit and determination of wartime.
Lobbying in Washington, Silicon Valley leaders bemoaned the lack in the United States of a national industrial policy similar to that of Japan, which throws its resources behind specific areas, such as chips.
AMD’s Jerry Sanders fumed, “I just don’t want to pretend I’m in a fair fight. I’m not. The Japanese pay 7 percent for capital; I pay 18 percent on a good day. They get hundreds of millions of dollars of free R and D [research and development] paid for by their government. Then their products arrive here in a flood.”
As the trade war escalated into a critical test of the two cultures, Silicon Valley became a metaphor for the American way. “We’ll outcompete the Japanese in the marketplace,” asserted Harry Sello. “After all, we Yankees invented competition. Against the Japanese companies, we offer superiority in infrastructure, software, and, above all, innovation.”
Carrying that confidence into the enemy camp, Intel aggressively launched an advanced new memory chip in Tokyo, breaching the Japanese market, and, this spring, fired its 64K RAM into the fray, announcing, “They’ve won the first skirmish, but we’ll win the war.”
The Valley’s Pulse Beats On But Silicon Valley’s power was being assaulted by other forces. The need for capital to sustain growth is forcing many of the smaller companies to sell out to major corporations, a move an industry financial specialist, Sal Accardo in New York City, believes may strip the valley of its “flair, drive, and creativity.”
And by fouling its own nest with pollution, congestion, and soaring housing and labor costs, Silicon Valley is forcing industry out. Charles Sporck, president of National Semiconductor, flies regularly to Malaysia and Arizona to visit his assembly plants. Apple’s Jobs flies to a June board meeting in Ireland.
Yet Apple and Intel are still headquartered here. Giants like IBM and Hewlett-Packard are committing themselves to expanded research facilities in Silicon Valley. And profit-driven investors are pouring capital into a buoyant new wave of chip, computer, and software companies, the definitive act of economic faith that, in the words of Sal Accardo: “Silicon Valley will continue to be the cerebrum, a magnet for creative minds.”