The book is an ambitious effort to explain the economic rise and prominence of the Silicon Valley. For the most part the effort pays off. The importance of the Valley to California and to the nation should not be underestimated. California’s personal income tax relies on about 400 taxpayers most of whom live in the area o’Mara is writing about, so this is a story about more than technology. O’Mara’s attempt is to chronicle the history.
At the outset let me make two minuscule gripes - I am big on fact checking in books. O’Mara makes at least two errors - first Clifford Hansen, the co-author of the 1978 Capital Gains tax cut, was a Republican not a Democrat from Wyoming. Second, Stanford’s campus is 8180 acres not 2000. I know that is picky but both points suggest some sloppy research assistants.
But let’s get to the heart of a very good book. The author does a great job of developing a narrative about how this small area of California became the Silicon Valley. But she also weaves in national trends and even international ones to put the growth of this patch of land in context. I believe that she could have done a bit more on why Route 128 firms (including Wang, DEC, and Data General) were not successful in innovating as technology began to advance rapidly. Culture and government funding had a large part of that story. The Silicon Valley part is an exciting and complex story and the author winds together a great many strings.
O’Mara does a mostly chronological exposition of how the Valley grew by describing the many players who made it happen. She also weaves in why Seattle should really be considered a part of the Valley infrastructure. For example, why would Amazon locate in Washington when most of its early customers were in California(sales tax). There are some places where I would have liked to have a bit more detail - but had all those rabbit holes been explored - the book would be twice its 511 pages.
Her discussions of the transition from WEB 1.0 to 2.0 are thorough as are the descriptions of the growth of Google and Facebook. The chronological approach helps describe what was a very dynamic period of about a decade.
Where I have a dispute with her narrative is the role of the government in developing the technologies that drive the valley. Clearly, Vannevar Bush’s open letter had a profound effect on the growth of universities - but it should be balanced more with the entrepreneurial efforts of people like Fred Terman the legendary dean of the Stanford Engineering school; who was there from 1926 thought the 1970s and developed Stanford’s unique approach to the integration of university work and commerce. While she discuses Terman in depth she credits most of the developments in technology to government interventions. That may be more true for aerospace - which was part of the Valley’s early allure - but I believe the electronics area development was much more complex. California’s style, which was based in part on climate and part on remoteness from East Coast traditions, may have had as much to do with the growth of the Valley as government policy. Terman’s vision, to integrate basic and applied research and to encourage companies to come close to the campus, was unique.
She argues that ARPA (Later DARPA) was the catalyst for the internet, But there are many other explanations. In the Valley there were time sharing computer systems which basically exploited the cycling of early machines. Their problem was scalability (they were limited in range and how many machines could be paired) and incompatibility of these systems to talk to each other. But there are numerous instances where those types problems are solved by entrepreneurs. There are a lot of writers who claim that government founded the internet - but the internet did not begin to bloom until the Netscape IPO.
A second example is her limited discussion of SEMATECH. I believe SEMATECH (which was the bastard stepchild of the furor over industrial policy) should be a short story. A lot of new democrats, when our semiconductor companies were being competed against by Japanese companies, asked the government to set up a public-private consortium to help do industrial planning on the model of MITI in Japan. At the time that Sematech was being debated, T.J. Rogers, the founder of Cypress Semiconductor, wrote a wonderful piece poking fun a both the notion and the reality of centralized planning efforts. Sematech was set up and I think continues today but the big promise of centralized planning was never realized. It was an absurd idea. MITI, after a rush of authors had sung it praises, soon got exposed as a bungling entity that actually slowed the ability of Japanese companies to innovate. The supporters of the government as seedling developer should read Hayek’s “The Uses of Knowledge in Society.” I remember in the late seventies reading a couple of books on the Japanese Miracle and then finding a guy named Joel Kotkin - wrote a book pointing out all the flaws in the model. The Valley grew because its participants were much better prepared to accept that innovation involves failure(my first computer was an Osborne 1).
One of the key issues here is whether industrial policy, which O’Mara seems favorably inclined to, is good for the rest of us. Sematech is a good example of where it was not. But government interventions are also negative in other areas. In the 1990s some in the security community proposed that every computer install “clipper chips” in new computers (proposed in 1993 and disposed in 1996). Luckily the proposal was stopped. The government’s two attempts to use anti-trust (with IBM and with Microsoft twice - which admittedly came from rivals who were whining about “unfair” competition) against tech in the modern age demonstrate that a) government is incompetent to judge issues like fair competition and b) has only limited understanding fo the interactions of technology which is advancing quickly. Microsoft was a big ugly bear in its two grapples with the feds but I would contend that consumers did not benefit from either decision. One could also look at the government’s attempt to hack the San Bernardino terrorist’s iPhone - and the subsequent decision by Apple to tell the FBI to stuff it (a decision which I agree with!).
There are a couple of final points here. First, the entrepreneurs of Silicon Valley are no less prone to use government interventions in terms of tax breaks, and regulatory interventions than any other industry. They are a modern day example of what Adam Smith described as the natural propensity of business people to collude. Second, just as in other industries, the technology industry has been a disruptive force to normal government activity. Third, the pat description of government as benign nurturer in the development of technology is not dispositive.
One thing which O’Mara points out very well is that the Valley is no less prone to making naive assumptions about the positive and negative effects of governmental interventions. And that asking government to help on issues of competition often leads to unexpected results. Maybe T.J. Rogers was right.
I realize this is a long review. But the book is well worth the time.