Radio Valley

Before silicon, the industry of the Valley was radio. Stanford University opened in 1891 on a horse farm in Palo Alto. In 1909, a Stanford graduate, Cyril Elwell, started to make arc transmitters in Palo Alto. His company later sold long-distance radio systems to the Navy. In the laboratory of that company, Lee de Forest and his team found a new use for the audion tube. The tube could make a signal stronger, and it could also make a new signal.

The Navy came to the region next. It opened an airship base at Sunnyvale in 1933. In 1939, the federal aviation research agency started to build a laboratory next to the base. At Stanford, Frederick Terman told his students to start companies near the campus. Two of his students, Bill Hewlett and David Packard, started a company in a Palo Alto garage in 1939. When the war started, the region had tube makers, laboratories, and trained engineers.

The war showed the government that laboratories can help to win wars. After the war, the government continued to pay for research. During the war, Terman managed a secret laboratory at Harvard that made radar-jamming equipment. After the war, he became the head of engineering at Stanford. His plan was to bring federal contracts and excellent researchers to a small number of fields. Companies could then grow near the university.

Navy contracts paid for microwave tubes. Stanford could not sell its land, so in 1951 it started the Stanford Industrial Park and leased the land to companies. Varian Associates was its first tenant. IBM opened a laboratory in San Jose and made the first hard disk drive. Ampex made the first practical videotape recorder, and Lockheed moved its missile division to Sunnyvale. In 1956, William Shockley came back to Palo Alto, where he lived as a child, to make silicon transistors.

Shockley hired excellent engineers, but he was a bad manager. In 1957, eight of his engineers left the company together. A New York banker, Arthur Rock, helped them to find an investor. They started Fairchild Semiconductor a few miles away. At Fairchild, Jean Hoerni invented the planar process, which made transistors flat and reliable. Robert Noyce saw that the same process could put a full circuit on one piece of silicon.

The first large customers were IBM and the military. The Minuteman missile and the Apollo program bought many of the first integrated circuits. Then many Fairchild engineers left to start dozens of new companies, which people called the Fairchildren. Noyce and Gordon Moore started one of them, Intel, in 1968. California did not enforce noncompete agreements, so the law did not stop the engineers. Engineers moved freely between companies, and the industry grew fast.

The chip companies made circuits smaller. At the same time, some researchers studied how computers can help the people who use them. At SRI, Douglas Engelbart made tools to increase human intellect. His tools included a wooden mouse, linked documents, and shared screens. In 1968, he showed these tools live to an audience in San Francisco. In 1969, SRI became the second site on the ARPANET.

In 1970, Xerox opened a research center in Palo Alto. Its researchers made the Alto, a personal computer with a mouse, windows, a network, and a laser printer. Xerox never sold the Alto as a product. In 1971, Intel put a full processor on one chip. In 1972, Atari put its Pong game in a bar in Sunnyvale. In the same year, Kleiner Perkins opened an office on Sand Hill Road, and Don Valentine started Sequoia Capital.

In the middle of the 1970s, chips became cheap enough for individuals to buy. Hobbyists started to build computers at home. They shared designs at the Homebrew Computer Club. Two members, Steve Wozniak and Steve Jobs, used one circuit board to start Apple. In the next 10 years, Valley companies made complete computers for homes, schools, and offices. They also made the software, networks, and printers for these computers.

Stanford projects became Sun, Silicon Graphics, and Cisco. Researchers left Xerox PARC and started companies. Bob Metcalfe started 3Com to sell Ethernet, and John Warnock and Charles Geschke started Adobe. In 1984, the Macintosh gave the graphical interface to ordinary users. When Japanese companies took control of the market for memory chips, Intel left that business and made processors. By 1990, the next problem was how to connect all these computers.

In 1994, Jim Clark and the programmers of the Mosaic browser started Netscape in Mountain View. In 1995, Netscape sold its stock to the public. The company had little profit, but on the first day its value was billions of dollars. After that, investors tried to find the next company like it. Stanford graduate students started Yahoo and Google. Pierre Omidyar started an auction site on his personal web page, and it later became eBay.

From 1995 to 2000, venture investment increased more than 10 times. Many companies, such as Webvan and Pets.com, sold stock to the public before their businesses made a profit. On March 10, 2000, the Nasdaq index reached its highest value. In the next two and a half years, it lost almost 80 percent of its value. Many companies closed. The engineers, the unused fiber-optic cable, and the companies that survived became the base of the next era.

After the crash, many offices along Highway 101 were empty. Servers, office space, and engineers became cheap. PayPal sold its stock to the public in 2002, and eBay bought the company a few months later. Former PayPal employees then started or funded YouTube, LinkedIn, Yelp, and Tesla. Google earned most of its revenue from advertisements next to its search results. In 2004, Google sold its stock to the public through an auction.

A second web started on top of the first web. It had videos that anyone could upload, social networks, feeds, and servers that people could rent by the hour. In 2007, Apple released the iPhone. In 2008, the first Android phone went on sale. The two phones let millions of people use the web at any location. In the same year, a new financial crisis started.

In 2005, Paul Graham, Jessica Livingston, Robert Morris, and Trevor Blackwell started Y Combinator. They gave a few thousand dollars to each founder in a group of young founders. At the end of the summer, the founders presented their companies to investors. Y Combinator later moved this program to Mountain View. Reddit, Dropbox, Airbnb, and Stripe all came from its groups. Many young people started companies immediately after university.

Smartphones and cheap cloud servers made it cheap to start a company. The returns became very large. Facebook paid approximately $1 billion for Instagram, which had fewer than 15 employees, and later $19 billion for WhatsApp. In 2012, Facebook sold its stock to the public at a value of approximately $104 billion. In 2013, the investor Aileen Lee used the word unicorn for a private startup with a value of $1 billion or more. At the end of the era, reports showed that Theranos could not do the tests that it sold.

In December 2015, OpenAI started in San Francisco as a nonprofit. Its goal was artificial general intelligence that helps all people. In 2017, a team of researchers at Google published a new network design, the Transformer. Nvidia graphics processors gave these networks the computing power that they needed. The result was a new industry, which companies measured in parameters, GPUs, and gigawatts.

ChatGPT became available at the end of 2022 and had approximately 100 million users two months later. Then investment became larger than in the dot-com years, with funding rounds of tens of billions of dollars. Nvidia became worth more than $5 trillion. Silicon Valley Bank failed in two days. In November 2023, the board of OpenAI dismissed its chief executive, and he returned to the position later that month. Cars without drivers became normal in San Francisco.