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Everything Everywhere Daily: History, Science, Geography & More
The Traitorous Eight and The Birth of Silicon Valley
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In 1957, eight young engineers walked away from one of the most important laboratories in America and in doing so helped create the modern technology industry. Their break with a Nobel Prize winning physicist set off a chain reaction of innovation, investment and entrepreneurship that transformed a quiet region of California into Silicon Valley. The companies they founded and the people they inspired would shape everything from computers to smartphones and and their influence can still be felt today. Learn more about the Traitorous Eight and the birth of Silicon Valley on this episode of Everything Everywhere Daily. This episode is sponsored by TrueWerk. If you ever had to work outside in the spring, you know how unpredictable it can be. Cold, cold in the morning, warm by lunch, muddy by afternoon, and maybe raining before dinner. That's why TrueWerk stands out. 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This episode is sponsored by Newspapers.com as a history buff, you know that while textbooks record the dates of our nation's conflicts, they often lose the voices of the individuals who served. This Memorial Day, as we honor those who made the ultimate sacrifice, Newspapers.com invites you to go beyond the monument and discover the personal stories of the people we remember. Think of it as a bridge to the past, giving you access to over a billion pages of primary source history. This is your chance to move past the generalities of war and find the specific local heartbeat of that era. Newspapers.com provides a vibrant, unfiltered view of the past, letting you see the nuance, the sacrifice, and the everyday lives that shape the world that we live in today. It's more than an archive, it's a way to ensure these stories are never forgotten. This Memorial Day give A voice to the names in your family tree. Visit newspapers.com today and use promo code everything everywhere at checkout for 20% off your subscription. Newspapers.com honor the past by uncovering its stories. Silicon Valley is normally defined as the region south of San Francisco, which usually coincides with the Santa Clara Valley. It includes such cities as Mountain View, Sunnyvale, Palo Alto, Cupertino, and Santa Clara, California. It's become the global center of the technology industry, and it's created companies that have created many trillions of dollars of value. I'm sure you're all aware of the companies that are located in Silicon Valley. However, have you ever wondered why the tech industry is located there and not somewhere else? Silicon Valley isn't based where it is because of any natural resource, and it isn't named as such because that's where they mine silicon. The reason why Silicon Valley is where it is is because of a series of decisions made by several early technology pioneers. If we go all the way back, we can probably trace the origin of Silicon Valley to a single individual. William Shockley William Shockley was a physicist and inventor best known for co inventing the transistor at bell Labs in 1940. Along with John Bardeen and Walter Bratton, the Trio won the 1956 Nobel Prize in Physics for their work. In 1956, the same year he won the Nobel Prize, he founded Shockley Semiconductor Laboratory in Mountain View, California. The selection of Mountain View was pretty simple. His mother lived in nearby Palo Alto, and he wanted to be close to her after returning from the East Coast. At the same time, he also recognized that the area had important advantages for electronics research, including proximity to Stanford University. Shockley Semiconductor Laboratory attracted some of the sharpest young minds in the country. Among them were Robert Noyce, Gordon Moore, Julius Blank, Victor Greenwich, Gene Horni, Eugene Kleiner, Jay Last, and Sheldon Roberts. These eight men were talented, ambitious, and eager to do serious work in the emerging semiconductor industry. While Shockley was unquestionably a brilliant engineer, he was by all accounts an absolutely horrible person to work for. He was a boss who was paranoid, dismissive, and erratic. Shockley second guessed his employees, constantly insisting on lie detector tests when he suspected internal sabotage and pivoted the company's research direction in ways that made little technical sense to his employees. In particular, he wanted to pursue a device called the four layer Diode, while his employees wanted to focus on silicon transistors, which they believed had much greater commercial potential. Within a year of joining the company, the eight had had enough. In 1957, they made a decision that was almost unheard of at the time. They all quit the company together. Corporate loyalty was a deeply held value in post war America, and leaving an employer, let alone orchestrating a group departure carried real social stigma. Shockley famously called them the Traitorous Eight, and the name stuck. However, walking out on Shockley turned out to be one of the most consequential decisions in the history of American business. Leaving was one thing. Starting a new company was quite another. In the 1950s, the idea of venture capital barely existed in the form people know today. Banks were reluctant to lend young engineers with no product and no proven business experience. Eugene Kleiner wrote a letter to his father's investment banker in New York, Hayden Stone. That letter landed on Arthur Rock's desk. A young associate who immediately recognized what he was looking at. Rock flew out to California, met the eight men and became convinced that they were worth backing. The challenge was finding an established company willing to fund an independent research unit, something that had essentially never been done before. Rock and his colleague Bud Coyle approached around 30 companies before Sherman Fairchild of Fairchild Camera and Instrument Corporation agreed to put up $1.5 million. In exchange, Fairchild got the option to buy the new company outright if he wanted to. The deal was structured so that the eight founders received equity, a novel arrangement for that time. The result was Fairchild Semiconductor, which was founded in 1957. Fairchild Semiconductor moved fast. Within its first year, the company had developed a commercially viable silicon transistor. Robert Noyce and Gene Horney then made a breakthrough that changed everything. The planar process, and building on that, the integrated circuit. The integrated circuit placed multiple transistors on a single piece of silicon connected by thin metallic pathways. Instead of wiring together dozens of individual components by hand, engineers could now manufacture complexity directly onto a chip. This became the foundational technology of the entire modern electronics industry. Everything that followed, personal computers, mobile phones and the Internet all trace its lineage back to that innovation. Fairchild became the most important semiconductor company in the world in the late 1950s and the early 1960s, and the Santa Clara Valley was where it was all happening. The company also did something culturally significant. Fairchild operated in an informal, collaborative atmosphere as a direct response to Shockley's toxic management style. Ideas moved freely, engineers were respected, and there was a sense that the work itself mattered. That culture would later become the template for how Silicon Valley companies saw themselves. Fairchild's success, however, created a problem. It was so good at training talented people that those people kept leaving to start their own companies. The spin offs from Fairchild, eventually nicknamed Fair children were staggering in number and impact. But the most important spinoff came in 1968, when Robert Noyce and Gordon Moore left to start a new company, and they were shortly joined thereafter by Andy Grove. The name of the new company was called Intel. Intel's founding was in itself a landmark moment in venture capital history. Arthur Rock, who had helped put together the Fairchild deal a decade earlier, raised $2.5 million for intel in just two days. The speed and ease of that fundraiser reflected how mature the financing ecosystem for technology startups had now become. Intel started by making memory chips, but in 1971 it produced the 4004, widely regarded as the first commercially available model microprocessor, a complete CPU on a single chip. The implications were enormous. If the integrated circuit was the key to making electronics smaller and cheaper, the microprocessor was the key to making them programmable. It turned computers from room sized institutional machines into something that could eventually sit on a desk, fit in a pocket or run in a car. Gordon Moore had written in 1965, before intel even existed, that the number of transistors on a chip would roughly double every two years while costs fell. Moore's Law, as it came to be known, accurately described the trajectory of the semiconductor industry for decades. And it was a topic I covered in a previous episode. Advanced Micro Devices, better known as AMD, was founded in 1969 by Jerry Sanders and several colleagues who had previously worked at Fairchild Semiconductor. Sanders had been Fairchild's director of worldwide marketing. Eugene Kleiner moved into venture capital and co founded Kleiner Perkins, one of the most influential venture capital firms Silicon Valley history. The firm later funded companies such as Amazon, Electronic Arts, Netscape, Sun Microsystems, America Online and Google. In many ways, the modern startup investment model traces directly back to the environment created by the trader estate and Fairchild Semiconductor. Stanford University played a role too, particularly through Frederick Terman, the dean of engineering, who actively encouraged his students and faculty to start companies and who worked to build relationships between the university and and local industry. The culture Terman developed helped ensure that talent stayed in the Bay Area rather than gravitating to the east coast, thereby deepening the pool of engineers in the emerging cluster of companies. The physical geography of the region mattered as well. The Santa Clara Valley, which was farmland just as recently as the 1940s, became a place where spinoffs begat spinoffs, where engineers moved between companies carrying knowledge, and where proximity made informal collaboration possible. That geographic concentration fed on itself. Companies wanted to be there because the talent was there, and the talent went there because the companies Were there by some counts, more than 400 companies trace their lineage directly or indirectly to Fairchild Semiconductor. It's actually hard to track beyond a certain point because the cross pollination between Silicon Valley companies is so great. Even companies that didn't have founders that worked at Fairchild Semiconductor, such as Apple and Nvidia, only existed because they were created within the ecosystem that Fairchild built. As for Fairchild Semiconductor itself, it eventually lost relevance in the 1970s as more and more employees left to work for other companies. The remaining engineers felt management didn't fully understand the fast moving semiconductor business or the culture that was developing in California, even though they were the ones who largely created it. Bureaucracy grew, innovation slowed, and key people kept leaving. By the 1970s, competitors such as Intel, Texas Instrument, Motorola and AMD had all surpassed them. The company changed hands multiple times. In 1987, it was acquired by National Semiconductor. Then in 1997, national spun Fairchild back out as an independent company again under the Fairchild Semiconductor name. The final chapter came in 2016 when ON Semiconductor acquired Fairchild Semiconductor for about $2.4 billion. ON Semiconductor later rebranded itself as Onsemi. The last of the Traitorous Eight, Gordon Moore, passed away in 2023. Robert Noyce died in 1990, still celebrated as one of the fathers of the modern semiconductor industry. Their names are on university buildings, on awards given by engineering societies and and embedded in the technical history of nearly every device with a chip. One of the interesting things is that William Shockley, the man who arguably started everything, really had very little to do with the creation of Silicon Valley beyond inventing the transistor in the 1940s and being a bad boss. There is no precise official number for the total value of all the companies in Silicon Valley because the region includes thousands of public and private firms. But the combined value is is enormous and likely exceeds $20 trillion today. When you add together the market capitalizations and estimated private valuations of all its companies, the Traitorous Eight made a brave, somewhat scandalous decision to walk away from a difficult boss and try something on their own. What came from that decision, even though there's no way they could have known it at the time, reshaped the global economy. The chips in your phone, the processor in your laptop, and the architecture of the Internet all can be traced back to a group of young engineers who didn't like their boss. The executive producer of Everything Everywhere Daily is Charles Daniel. The associate producers are Austin Otkin and Cameron Kiefer. My big thanks go to everyone who supports the show over on Patreon. Your support helps make this podcast possible, and I also want to remind everyone about the community groups on Facebook and Discord. That's where everything happens that's outside the podcast, and links to those are available in the show Notes. As always, if you leave a review on any major podcast app or in the above community groups, you too can have it read on the show.