The Code | Margaret O’Mara

Summary of: The Code: Silicon Valley and the Remaking of America
By: Margaret O’Mara


Embark on an enlightening journey through the history and evolution of Silicon Valley, embracing the subtle intricacies and game-changing innovations that have shaped today’s tech landscape. Delve into the world of pioneers, entrepreneurs, and brilliant creators as we explore the vast impact of key events, political developments, and cultural influences on Silicon Valley’s meteoric rise. Discover the significance of Stanford University, venture capitalists, early personal computers, and the invention of silicon chips, while examining the triumphs, pitfalls, and ongoing challenges faced by this revolutionary region.

Silicon Valley’s Myth

The book examines the Silicon Valley myth and shows how the political and social structures helped some tech entrepreneurs flourish. It challenges the popular belief of lone-wolf innovation and highlights the support and funding from the government and privileged opportunities. The valley emerged as a tech powerhouse where the revolutionary transformation of technology changed communication, organization, and politics. The book emphasizes on going beyond the romantic narratives peddled by the entrepreneurs and focusing on the institutional structures that transformed their ideas into a reality. It aims to provide a holistic understanding of the success of Silicon Valley beyond the mythology.

The Dark Origins of Silicon Valley

The development of electronic technology, including the internet, is linked to modern warfare, with vast resources and funding channels made available due to the needs of war. Silicon Valley, known for its innovative spirit, aided in the creation of weapons and advanced technology for war. The US government’s massive funding package during the Cold War played a significant role in the toppling of the Soviet Union, with a chunk of the funding channeled into universities, research labs, and munitions factories, including Silicon Valley. The same advanced technology is at the heart of our modern communication system and the birth of the internet, credited to anarchist inventors, which is far from their true roots. The underlying drive was a deep desire for technological dominance to cement the power of the United States in the world.

Stanford: The Catalyst of Silicon Valley

The success of Silicon Valley is largely attributed to Stanford University. Fred Terman, the dean of engineering, transformed the institution into a global leader in electronic communication fields. With the support of the university president, J.E. Sterling, Terman created a business park on campus that was open to tenants with access to Stanford’s labs. The traffic between academic and commercial realms was beneficial, and Stanford became one of the largest recipients of federal research funding. This blueprint has been adopted by many universities worldwide.

Tax Cuts and Silicon Valley

Silicon Valley startups owe their success to generous government sponsorship in the form of tax cuts. The Small Businesses Investment Act passed in 1958 provided enormous tax breaks and federal loan guarantees to investors, leading to the rise of venture capitalists who invested in tech. Though the market tightened in 1970 and tech investments became risky, determined lobbying by the tech industry led to the dropping of the capital gains tax to 28% by 1978 and even further in the 1980s. The tech industry has been a major recipient of government welfare, even though many companies have transitioned from fledgling startups to highly profitable enterprises.

The Story behind Silicon Valley

The invention of the silicon chip by Fairchild Semiconductors revolutionized computing, leading to the rise of personal computers.

Silicon Valley, the tech hub of the United States and the world, owes its name to the silicon chip – an invention that transformed computing. In the early days of computing, only major institutions and companies could afford computers, which were the size of a room and required keycards to input data. But Fairchild Semiconductors, founded by William Shockley and a group of brilliant engineers, changed the game.

Shockley realized that germanium, the material used for electronic circuits, was too weak and that silicon would perform better. However, he refused to listen to his employees’ suggestions, leading to the departure of the “Traitorous Eight,” who went on to launch Fairchild Semiconductors. Soon after, the Soviet Union launched the Sputnik missile, which ignited a space war. Governments and companies poured billions of dollars into R&D projects, and Fairchild Semiconductors secured its first federal contract to create 100 silicon chips.

The invention of the integrated circuit by Fairchild Semiconductors revolutionized computing. The integrated circuit, or IC, was made possible by linking multiple transistors together. ICs powered faster, smaller computers known as microcomputers, which were initially expensive and beyond the reach of the average person. But when NASA decided to use the chips to power the Apollo space mission, demand for ICs increased. Fairchild Semiconductors, with its lowered manufacturing costs, made the chips more affordable – from $1,000 to just $25 each.

Thanks to the silicon chip, personal computers became available for use in homes, transforming the industry forever. The Silicon Valley is named in honor of this remarkable invention, which sparked a technological revolution that continues to shape the world today.

The Impact of Radicalism on Silicon Valley

In the 1960s, social transformation affected the United States, leading to the civil rights movement and protests against the Vietnam War. The electronic communications industry was also subject to protests, with Stanford students opposing university research labs’ role in developing weapons. Despite not succeeding in shutting down the Stanford Applied Electronics Laboratory, the university cut ties with the lab as a result of these protests. The radicalism of the era influenced Silicon Valley, leading to a mixed reaction among activists towards technology. Some viewed it as a tool of surveillance and warfare, while others saw it as a means to achieve a technological utopia. This led to the founding of organizations like the People’s Computer Company and LO*OP, which aimed to teach people how to use computers for personal empowerment. The Homebrew Computer Club facilitated the creation and programming of personal computers, showing the endless potential of the technology, as long as it was accessible and affordable.

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