How The Sun Rose On Silicon Valley: Bob Noyce (Founder of Intel)

1. 0:00 – 2:41

   Introducing Tom Wolfe's 1983 Essay on Bob Noyce

   1. DSDavid Senra0:00

      So the book that I want to talk to you about today is not a book. It is a long-form article, long-form piece written for Esquire magazine all the way back in 1983. It is very well-known long-form piece for those that study the history of the technology industry, specifically the history of Silicon Valley. It is called The Tinkerings of Robert Noyce: How the Sun Rose on the Silicon Valley, and it was written by Tom Wolfe. And I was reading it and rereading it in anticipation for another book, another biography on Bob Noyce that I'm going to, at the end of this, encourage you to read along with me. But as I was reading this to serve as supplemental research for the other book, I realized, like, this piece is so good that it could stand on its own, and it should be an episode on its own. So I want to read to you, and it gives you an idea of why this is so important. Because even though the technology has changed, like if you strip away what new technology is being invented in this article, you could easily replace it with the technology that is being created today, and yet humans' reaction is almost identical. But let me give you the intro to this article because I think it sets it up perfectly. Remember, this is written in 1983, okay? "America is today in the midst of a great technological revolution. With the advent of the silicon chip, information processing, and communications, the national economy has been strikingly altered. The new technology is changing how we live, how we work, how we think." People say the exact same thing today. It's remarkable. "The revolution didn't just happen. It was engineered by a small number of people. Collectively, they engineered tomorrow. Foremost among them is Robert Noyce." And so before I jump into the beginning of this piece, I want to read this quote that comes from Steve Jobs because a little background on Bob Noyce in case it's the first time you come across him. He was the founder of Fairchild Semiconductor, the Founder of Intel. He's known as like the godfather, the grandfather of Silicon Valley. He was also one of Steve Jobs' mentors. I've read in a bunch of Steve Jobs biographies hilarious stories about like a young Steve Jobs in his twenties. Bob Noyce was probably in his fifties by then, would come over and, you know, Bob is just kind of like smacking him on the back of the head, telling him, "Hey, you need to learn how to act." It's just kind of funny because you think of Steve Jobs as, you know, one of the greatest entrepreneurs to ever do it, this very formidable individual who seemed in complete control in any environment he was in. He's like, yeah, but he wasn't like that when he was in his twenties and he needed the guidance. But this is what Steve Jobs said about Bob Noyce after s- uh, after Bob died. He said, "He was one of the giants in this valley who provided the model and inspiration for everything we wanted to become. He was the ultimate inventor, the ultimate rebel, the ultimate entrepreneur."

2. 2:41 – 7:03

   Grinnell, Iowa and Grant Gale's Transistors

   1. DSDavid Senra2:41

      So this story starts in 1948 in this tiny town of seven thousand people called Grinnell, Iowa. And so Tom Wolfe writes, "Grinnell, Iowa, was one of the last towns in America that people would have figured to become the starting point of a bolt into the future that would create the very substructure, the electronic grid of life in the year 2000 and beyond. It was in the summer of 1948 that Grant Gale, a forty-five-year-old physics professor at Grinnell College, ran across an item in a newspaper concerning a former classmate of his, John Bardeen." Bardeen was now working at Bell Laboratories, and Bardeen and another engineer at Bell, Walter Brattain, had invented a novel little device they called a transistor. Many years later, the transistor is gonna be called one of the most important inventions of the twentieth century. But at the time, in 1948 in the newspaper, it certainly didn't register as that. "This was only a, a small news item, however. The invention of the transistor in 1948 did not create headlines. The transistor performed the same function as the vacuum tube," which is an essential component of telephone relay systems and radios at the time. But the transistor was fifty times smaller than a vacuum tube. And so I'm gonna pause right in the middle of this before I tell you what Grant Gale does next, which changes the trajectory of Bob Noyce's life. He just doesn't know it yet. So there's a great line that Paul Graham, uh, had when he wrote this phenomenal essay. It's ep- episode three fourteen. It's called How to Do Great Work. And I'm just gonna read a paragraph for you because we're about to see a, a great illustration of this in the life of Grant Gale and Bob Noyce now. So Paul Graham talks about the importance of making yourself a big target for luck. He says, "When you read biographies of people who've done great work, it's remarkable how much luck is involved. They discover what to work on as a result of a chance meeting," or by reading a book or a newspaper in this case, "that they happen to pick up. So you need to make yourself a big target for luck, and the way to do that is to be curious. Try lots of things, meet lots of people, read lots of books, and ask a lot of questions." And so Grant Gale, who is the mentor and the professor of Bob Noyce, reading the newspaper is like, "Oh, this is interesting." And he says, "He thought it would be terrific to get some transistors for his physics department at Grinnell. So he wrote to Bardeen at Ba- Bell Laboratories just to make sure his request didn't get lost in the shuffle. He also wrote to the president of Bell Laboratories, this guy named Oliver Buckley. Buckley was from Iowa as well and happened to be a Grinnell graduate." It's incredible how important Grinnell, this tiny little college in a town of seven thousand people in Iowa in the 1940s winds up being. In fact, there's a s- uh, there's a... I'll, I'll just tell you now, there's a, a great story about this, how important Grinnell is, uh, later on, where they actually invest in the founding of Intel, and I think it doubles their entire-- That one investment just doubled their entire endowment. But back to this, you have this, this Iowa, this small town Iowa connection between all these really influential people. So by the fall of 1948, Gale had obtained two of the first transistors ever made, and he presented the first academic instruction in solid state electronics available anywhere in the world for the benefit of the eighteen students majoring in physics at Grinnell College. You already know where this is going. One of those eighteen students is Bob Noyce. And Bob, like most entrepreneurs, is a misfit, a rebel, a juvenile delinquent. In fact, Grant Gale had done more of his share of agonizing over Bob Noyce. Bob was a very bright student, but he'd just been thrown out of school for a semester, and it had taken every favor that Gale had to keep the boy from being expelled and charged with a felony. Just like Bob Noyce played a very influential and impactful role in the lives of Steve Jobs, we see that Grant Gale played that same role for a young Bob Noyce. And the reason he knew that he was special, that I'll get into it. He essentially steals a pig, [laughs] and I will get to in a minute, uh, about, you know, saving this kid. He's a good kid. He's very smart. You know, he's a little rebellious, doesn't really, like, follow the rules, typical entrepreneur behavior. But he knew from the time that he was-- that Bob Noyce was in high school. He's like, "Oh, this, this guy's brilliant." And in fact, Bob had done so well in science at Grinnell High School that Grant Gale had invited him to take the freshman's physics course at college during his high school senior year. And Bob Noyce very quickly became one of Gale's star students, said he had a fierce work ethic, and he had a passion for the scientific grind.

3. 7:03 – 10:04

   A Young Noyce: Tinkerer, Rebel and the Luau Pig

   1. DSDavid Senra7:03

      Now Bob is gonna be one of the greatest inventors and entrepreneurs, but he's also very well-rounded. He was very trim, muscular. He was on the college swimming team. He, he won a bunch of, uh, awards in, uh, diving. He sang in the choir. He was an actor in the College Dramatic Society. He was even the leading man in a soap opera that was broadcast in radio during college. And we see this later on when-- even when he's running Fairchild Semiconductor and Intel, he has all these hobbies. He's, you know, hang gliding and scuba diving and skiing. But he had a passion for tinkering. Remember, the, the title of this, of this essay is called The Tinkerings of Robert Noyce, and we see that even when he was a young boy. When he was thirteen, he had come across some plans for building a box kite, which is a kite that a person could ride in, and he found the plans in the magazine Popular Science. And so Bob Noyce had this innate gift from a very young age of getting people to collaborate. He has an idea, then he'll gather people together and say, "Hey, let's make this idea real." He almost winds up killing himself doing this because they try to launch the kite off of a, off of a, the, the roof of a house. Then they convince a neighbor to, to tie the kite to the back of their car, which he agrees. Noyce is this, like, master salesman, very charismatic person as well, and it says Bob rode the kite and managed to get about twelve feet off the ground and glide for thirty seconds. And as you can imagine, if you have kids, you wouldn't be too happy with your, you know, thirteen-year-old boy being, being pulled behind a car in a kite. Uh, but he, he had this rebellious streak, and this is what got him in trouble, and this is where Gale Grant saves his behind. So the major capital asset in Grinnell, Iowa, at the time is livestock. And Bob's in college, and they have this idea to do a luau, and you can't do a luau without a roasted suckling pig. And so Bob convinces two other boys to go with him, and they wind up going on to-- they sneak onto a farm, and they wind up wrestling a twenty-five-pound pig to the ground out of the livestock, or out of the, the pigpen, rather, and then bring him back to college so they could roast that pig over a fire. Here's the problem. What they thought was, like, a silly little prank was actually a larceny. It was a felony. Stealing livestock in Iowa was a felony, so the farmer didn't think it was funny at all. He called the sheriff, and he insisted on bringing criminal charges against Bob and his friends. This is one of the benefits of a small town. Everybody knows each other, so Grant Gale is obviously respected in the community, and he goes to bat for him, winds up not only having the charges, uh, dropped, but also convinces the school, "You don't wanna expel. This, this kid is gifted. Don't expel him. Just give him a one ses- uh, one semester suspension." And that was fine for Bob because he had such a fierce work ethic. Remember, he was addicted to the scientific grind. He loved it. Then in his first three years in college, he had accumulated so many extra credits, he just needed one more semester. He didn't need the full year to graduate anyways. He was so far ahead. But it did-- It talks about the fact that even though he went through this, you know, communities trying to ostracize him, they're, they're telling him how, how bad he is and what he did was so wrong, he's just got this innate confidence and charisma that no matter what period of Bob's life, whether he's a young boy or one of the, the best entrepreneurs in Silicon Valley, it-- they just bring it up over and over again.

4. 10:04 – 12:11

   Noyce's Confidence, the Halo Effect and a Fortuitous Chain

   1. DSDavid Senra10:04

      It says this never broke his confidence. He had a profound and baffling self-confidence. When he looked at you, he never blinked. He absorbed everything you said and then answered in a soft voice with a smile. This is something his employees will talk about later, the fact that they just could not believe how engaging he was, that when he was with you, when he was meeting with you, when you were speaking, he looked at you. You thought-- He made you feel special. He made you feel you were the most important person in his life at that moment, that he was fully engaged with what you were saying. This is more about his charisma. Bob Noyce projected what psychologists call the halo effect. People with the halo effect seem to know exactly what they're doing, and moreover, they make you want to admire them for it. They make you see the halos over their head. And so when Bob gets back to school, he becomes involved with this new experimental device that Grant Gale had procured for him and the other seventeen physics students, the transistor, and that changes the trajectory of Bob Noyce's life forever. And the author does a fantastic job describing the series of events that had to occur for this change in the trajectory of Bob Noyce's life. What if Grant Gale hadn't gone to school with John Bardeen, and what if Oliver Buckley hadn't been a Grinnell alumnus? And what if Gale hadn't bothered to get in touch with the two of them after he read about the transistor in the newspaper? And what if he hadn't gone to bat for Bob Noyce after the night of the luau pig and the boy had been thrown out of college? After all, if Bob hadn't been able to finish at Grinnell, he would have never been introduced to the transistor, and he certainly wouldn't have attended MIT in nineteen forty-eight. Given what Bob Noyce did over the next twenty years, one couldn't help but wonder about the fortuitous chain of events. And so there's gonna be another person that plays an important role in Bob Noyce's life, and that's gonna be William Shockley. Grant Gale was the first important physicist in Bob Noyce's career. The second was William Shockley. Shockley is going to win the Nobel Prize in Physics. He's gonna share it with John Bardeen and Walter Brattain, and it's for their research on semiconductors and discovery of the transistor effect. He is also going to be the person that recruits Bob Noyce to move from the East Coast and come out to Silicon Valley. We'll, we'll get there in one second.

5. 12:11 – 14:40

   From Philco to Shockley Semiconductor

   1. DSDavid Senra12:11

      So Bob Noyce graduates, uh, MIT in nineteen fifty-three. It says in nineteen fifty-three, the MIT faculty was just beginning to understand the implications of the transistor. But electronics firms were already eager to have graduate electrical engineers who could do research and development in the new field. So Noyce is offered jobs by all these different people. He chooses to work at Philco, which is interesting because he turned down jobs from Bell Laboratories, which, you know, probably had this, the, the highest density collection of, like, brilliant people, which is surprising. IBM, which is a bigger company. And the reason he does this says a lot about the kind of environments that he wants to work in. So he chooses Philco, which is in Philadelphia, and because Philco was starting from near zero in semiconductor research and chances for rapid advancement seemed good for him. This is also something he talks about later on, 'cause I've read multiple biographies of Bob Noyce, the fact that he doesn't-- He, he always said he didn't like building-- he didn't like working in large companies, but he built two gigantic companies. But he was obsessed with, like, the early days of the startup, like small teams. He just was so successful in these two companies that these startups cha-tra-ha-transformed ra-rather rapidly to very successful companies. But I need to hone on that point because, again, he's, he's not ignorant. He knew that Noyce... It says Noyce was well aware that the most important work was still being done at Bell Laboratories, and that was thanks in no small part to William Shockley, but he still chose to go to the smaller, less advanced company. But he's not gonna stay there for too long. So by 1955, Shockley leaves Bell Labs, goes to Palo Alto, California, where he had grown up, and he's going there to start his own company, which is Shockley Semiconductor Laboratory. He sets up his new company in a glorified shed in Mountain View, California, and practically every single one of the early employees were electrical engineers with doctorates, which Shockley began referring to as his PhD production line. And so a year later, Bob Noyce is gonna join him, and we just see this, this personality that Bob has. He's, he's all in. He is risk on. So in 1956, he decides to move from Pennsylvania to California to join So- Shockley. Listen to how he does it. The way he went about it was a classic example of the Noyce brand of confidence. By now, he and his wife Betty had two children. After a couple telephone conversations with Shockley, Noyce put himself and Betty on a flight from Philadelphia to San Francisco. They arrived in Palo Alto at six AM. By noon, Noyce had signed a contract to buy a house. That afternoon, he went to Mountain View to see Shockley and ask for a job, and he got it. So then they get into

6. 14:40 – 19:11

   William Shockley: Brilliant Physicist, Terrible Boss

   1. DSDavid Senra14:40

      a description of William Shockley. I have to share something with you. I read, I read Shockley's biography. It's episode one sixty-five of Founders. The name of the biography, for God's sake, is Broken Genius: The Rise and Fall of William Shockley. To prepare also for this episode, I reread my highlights from that book in Founders Notes. And I, I had remembered this too. Shockley is the worst person I have ever covered on Founders. He-- I don't even know how to describe him. He's the smartest dumb person you'll ever meet. He's the most intelligent yet idiotic person you will ever come across. Unbelievably brilliant and brilliant inventor, brilliant physicist. Zero people skills at all in the way he treated people around him. They called his personality reverse charisma. If you plot Bob Noyce's personality and William Shockley's on a spectrum, they're almost at opposite ends. And this is the danger of being, I think, for especially for entrepreneurs, almost too introspective. They are too lost in their own mind. So I'm just gonna give you some highlights about, like, how he viewed other humans, the way he-- some of the stuff he did, and it just-- And his, a-and his, his life is just tragic. It's very sad. And so he says, "Just another warning that the deepest pesin-pessimism and general lack of admiration for the human race and myself are probably with me for keeps." These are all quotes from his biography. The thought that another person might be seen as smart as him seemed to frighten him. Listen to how he describes his own children and his first wife. "In terms of my own capacities, my children represent a very significant regression. My first wife, their mother, had not as high an academic achievement standing as I had." One of the worst traits that Shockley has is he was threatened by the achievements of other people. He lies-- Charlie Munger said that envy has no-- envy and self-pity have no utility. Like, you have to cure yourself of self-pity and envy, according to Charlie Munger, and this guy just couldn't get over it. It's such a sad state of affairs if the achievements of other people or the recognition of other people cause you to be depressed. This happened in Shockley's life so much he tried to kill himself. He's got a, a, a revolver, which obviously ha- can hold six, six bullets. He puts one bullet, uh, in there, and he's just gonna essentially leave, uh, almost like, uh, playing Russian roulette, right? But he writes a letter to his wife, and this is what he says before he does this. He says, "Dear Jean, I am sorry that I feel I can no longer go on. Most of my life I have felt that the world was not a pleasant place and that people were not very, not a very admirable form of life. I find that I am particularly dissatisfied with myself and that most of my actions are the consequences of motives of which I am ashamed." He then takes out a revolver, puts w- a bullet in one of the six chambers, puts the gun to his head, and presses the trigger. Nothing happened. He put the gun away and then wrote another note. "Dear Jean, there was just one chance in six that the loaded chamber would f- uh, would be under the firing pin. There was some chance of a misfire even then. I am sorry that I'm not sufficiently ingenious or painstakingly, and painstaking enough and find a more practical and suitable means of solving our problems." He's got no soul. He's got no humanity to him. And at the very end of the book, it talks about the fact, I think this is his second, his second wife, that she didn't even have a memorial service for her husband when he died because she said it's not clear who would have come. And the note I left myself on that is, "This is what losing at life looks like." And so the reason I bring that up is not to try to criticize, you know, somebody that's passed on. It's because he very likely had some, one of the largest collections of scientific and entrepreneurial talent in his company. And because of his inability to learn people skills, it was squandered. And these people went on to literally build Silicon Valley. And so this essay talks about this. Shockley had received a telephone call that morning informing him that he had won the Nobel Prize for Physics for the invention of the transistor. Uh, he was the co-winner along with John Bardeen and Walter Brattain. They go out and they have this great, like, celebration, and it says, "That had been a great day at Shockley Semiconductor Laboratory. There weren't many more great days. Shockley was gifted. His forte was breaking a problem down to first principles. With a few words and a few lines on a piece of paper, he aimed any experiment in the right direction. When it came to comprehending the young engineers on his PhD production line, however, he was not so terrific. He was obsessed with getting all the credit for everything that everybody was doing inside the company. It seemed, it never seemed to occur to Shockley that these highly educated people working for him just might happen to view themselves the same way he had always viewed himself, which is to say, as young geniuses capable of the sort of inventions Nobel Prizes were, were given for."

7. 19:11 – 22:44

   The Traitorous Eight and the Founding of Fairchild Semiconductor

   1. DSDavid Senra19:11

      He becomes very, uh, paranoid, is the way to put this. So he has this weird way to, like, run a company. He was convinced that someone in, in the company was sabotaging the project, so he made them all take lie detector tests. At the very beginning of a company, you should have, like, a high-trust environment, right? I can't think of any... What's the opposite of a high-trust environment? Uh, I don't know, making all of your employees take lie detest, de- de- detector tests because you think somebody's sabotaging them? And then the end result was no saboteur was ever found. And so the response of his employees, I think, should be rather predictable. Like, they're obviously very high agency, they're, they're brilliant, they're smart, and they're like, "Wait. We could just do-- There's no way that we would do a worse job at Shockley of running a company. There's nothing starting us-- There's nothing stopping us, rather, from starting our own company besides capital. Let's go see if we can raise money and just leave and do our own thing." And so originally, there's seven defectors from Shockley's company. Bob Noyce is not one of the first seven defectors. There's going to be eight defectors. They're gonna be known, uh, throughout history as the Traitorous Eight, and these other seven are the ones that recruit Bob to join them, 'cause remember, go back to what they said, like, he had this, this halo effect about him. You know, people wanted to be around Bob. They wanted to follow him. They trusted him. So it says, "Seven defectors went to the Wall Street firm of Hayden Stone in search of startup money. It was at this point that they realized they had to so, had, had to have someone serve as an administrator, so they turned to Noyce. Noyce was the one with the halo, and he was just twenty-nine years old." Now, I absolutely love how so many things fit together, and they're kinda tied in this, like, unbroken chain, you know, over multiple decades, usually inside the same industry. And what I mean by that is they get a financing by this young guy named Ar- Arthur Rock. Arthur Rock's gonna be one of the first, one of the first, uh, venture capitalists, and he's at Hayden Stone. Eventually, he leaves. What connects, the reason I say is, like, I find Arthur Rock fascinating is so he's the one that, that gives them money or finds the deal to give them money to start Fairchild Semiconductor. Arthur Rock will also be an early investor in Intel. Arthur Rock would also be an early investor in Apple. Arthur Rock would also be an investor and almost like a partner and somebody to bounce ideas off of for Henry Singleton at Teledyne. So the deal that Arthur Rock puts together for the Traitorous Eight, he goes and contacts this company out back in New York called Fairchild Camera and Instrument Corporation, and it's being run by Sherman Fairchild. And so Sherman's like, "Yeah, I'll give you the money," and this is what he asked for. He gave the defectors the money to start up the new company, Fairchild Semiconductor, with the understanding that Fairchild Camera and Instrument would have the right to buy Fairchild Semiconductor for three million dollars at any time within the next eight years. And so Bob Noyce and the rest of the Traitorous Eight make a very important decision. They're like, they're not gonna go back east. They know exactly where they're going to start their new company, and they're going to start it... It's not even known as Silicon Valley yet. And it's funny, in this essay, you know, written in 1983, they, they don't call it Silicon Valley. They call it The Silicon Valley. But this is still, you know, twenty-five years before the essay is actually written. So it says, "A few well-known electronics firms were already here, General Electric and IBM, as well as a company that started up locally, Hewlett-Packard. Stanford University was encouraging engineering businesses to locate near Palo Alto and use the university's research facilities." The man who ran that program was a friend of Shockley's, and this guy named Fred Terman. What were they working on? Both IBM and Hewlett-Packard... Remember, this

8. 22:44 – 27:51

   Sputnik, Early Fabrication and the Integrated Circuit

   1. DSDavid Senra22:44

      is 1957, okay? Both IBM and Hewlett-Packard were trying to develop a highly esoteric and colossally expensive new device, the electronic computer. Let's go back to this idea of luck, being in the right place at the right time with the right set of skills that happened i- in Noyce's life over and over again. Fairchild's startup could not have come at a better time. In 1957, the Soviet Union launched Sputnik. In the electronics industry, the ensuing space race had the effect of coupling two new inventions, the transistor and the computer, and magnifying the importance of both. The first American electronic computer was known as the ENIAC, and it had been developed by the Army during the Second World War chiefly as a means of computing artillery and bomb trajectories. The machine, the ENIAC, was a monster. It was a hundred feet long, ten feet high, and required eighteen thousand vacuum tubes. The tubes generated so much heat that the temperature in the room reached a hundred and twenty degrees. Substituting," this is why I'm reading this entire section to you, this, for this sentence right here. "Substituting transistors for vacuum tubes was an obvious way to cut down on the size. If you're going to put things in space, they have to be small." This is so important. It's amazing how all this fits together. "After Sputnik, the glamorous words in the semiconductor business were computers and miniaturization." Now, this is what the beginning of a new industry sounds like. So it says, "If you visited Fairchild, you would, you would not have had the faintest notion that you were looking in on the leading edge of the most advanced of all industries, electronics. The work bays where the transistors were produced by PhDs," mostly, right? looked like slightly sunnier versions of garment sweatshops. You would see rows of people hunched over work tables squinting through microscopes doing the most tedious and frustrating sort of manual labor, cutting layers of silicon apart with diamond cutters, picking up the little rectangles on them with tweezers, trying to attach wires to them, dropping them, rummaging around on the floor to find them again, swearing, muttering, climbing back up to their chairs, rubbing their eyes, squinting back through the microscopes, and driving themselves crazy some more. Now, this is the crazy thing. This is the beginning of one of the most important initiatives to ever exist, and what they are producing had a fifty to ninety percent failure rate. That is bananas. Anywhere from fifty to ninety percent of the transistors produced would turn out to be defective. And so Noyce is examining what they're doing. He's like, "There has to be a way, a better way." Noyce had figured out a solution. There was something primitive about cutting individual transistors out of sheets of silicon and then wiring them back together in various series. Why not put them all on a single piece of silicon without wires? Noyce realized that he had n-- He was not the only engineer thinking along these lines, but he had never even heard of Jack Kilby. So Kilby, at the time, was a thirty-six-year-old engineer working for Texas Instruments in Dallas, Texas. Okay? In January 1959, Noyce made his first detailed notes about a complete solid-state circuit. A month later, Texas Instruments announced that Jack Kilby had invented one. Kilby's integrated circuit, as the invention was called. Six months later, Noyce creates a similar integrated circuit. Noyce's silicon device actually turned out to be much more efficient and more practical pr- to mass produce than Kilby's, and so Noyce actually gets to set the standard for the industry. And it was that way that Noyce became known as the co-inventor of the integrated circuit. Now, some people have heard this invention referred to as integrated circuit, but way more people have heard of what the invention would come to be known, which is the microchip. And it says Noyce knew exactly what he possessed in this microchip. Noyce knew that with it, he had discovered the road to El Dorado. And this is another fantastic description of what the beginning of an entire industry, an entire industry looks like. We just went through, you know, anybody coming to Fairchild is like these-- What am I... They don't even know what they're looking at. The idea that fifty to ninety percent of the things they were producing, you know, were defective, were failures, obviously they're gonna improve that, but listen to this. The integrated circuit was based on the transistor, but the integrated circuit opened up fields that the transistor did not even suggest. The integrated circuit made it possible to create miniature computers, to put all the functions of the mighty ENIAC on a panel the size of a playing card. Remember, they said the ENIAC. Let's go back to that a few pages ago. It was a hundred feet long, ten feet high, and required eighteen thousand vacuum tubes, and now they're able to produce the same level of technology and fit it on the size of a playing card. Thereby, the integrated circuit opened up every field of engineering imaginable, from voyages to the Moon, to robots, and many fields that had never been imagined. It opened up so many fields that no one could come up with a single name to include them all.

9. 27:51 – 30:46

   Sudden Wealth and Fairchild's Explosive Growth

   1. DSDavid Senra27:51

      And what happens next is fascinating because remember how they got the financing for the company to begin with. It is just a startup inside of a larger company, right? The importance of the integrated circuit was certainly not lost on Fairchild Camera back in New York. In 1959, they exercised their option to buy Fairchild Semiconductor for three million dollars. The next d- day, Bob Noyce, Gordon Moore, and all the ch- the, the, the Shockley traders, eight, right, woke up richer than they had ever dreamed of being. Now listen to this. This is gonna cause you to chuckle a little bit 'cause they, they were, they were not in it for the money. Now Noyce is gonna go on and build fabulous levels of wealth, but at this point he's like, "I'm... I can't believe I'm so rich." Each of the traders, eight, received two hundred and fifty thousand dollars worth of Fairchild stock. So I went back and put it into the inflation calculator. That would be the e- each of them equivalent of about two point six million dollars in stock today. And to place that into even more context, that was twenty times the amount of annual salary that he was getting. He was making about twelve thousand dollars a year at this point. Noyce did not know what to make of his new wealth. He was thirty-one years old. The semiconductor business had not seemed like a business at all. It just felt like an esoteric game in which young electrical engineers competed for the occasional round of applause. So even though they sold the company, Noyce still stays there. He's the general manager of the entire division, and this return on investment for this three-- them buying this company for three million dollars, I, I should see if I can find the total amount of money they made because the growth of Fairchild Semiconductor in the next few years is gonna blow you away. And I love this. NASA chose Noyce's integrated circuit for the first computers that astronauts would use on board their spacecraft. I don't know if they ever did this, but used by NASA had to be great ad for Fairchild Semiconductor. After that, orders poured in. In ten years, Fairchild sales rose from a few thousand dollars a year to a hundred and thirty million dollars a year for a company that you paid three million dollars for. I got tears in my eyes right now. I don't know why I'm laughing so much. The number of employees rose from the original twelve to twelve thousand. And so now Noyce has to learn how to run a giant company, which I-- he says multiple times in the future he didn't actually like doing it. During the startup phase of Fairchild Semiconductor, there had been no sense of bosses and employees. There had only been a common sense of struggle out on a frontier. Everyone had internalized the goals of the venture. They didn't need exhortations from superiors. As Fairchild expanded, expanded, Noyce didn't even bother trying to find experienced management personnel because in the s- in the semiconductor industry, that didn't exist because they're also inventing the industry at the same time. Instead, he recruited engineers right out of the colleges and graduate schools and gave them major responsibilities right off the bat.

10. 30:46 – 35:22

    Noyce's Hands-Off Management and the Fair Children

    1. DSDavid Senra30:46

       So this is really about Noyce's management style or [laughs] almost lack thereof in, in some degree. The young engineers who came to work for Fairchild and Noyce could scarcely believe how much responsibility was suddenly thrust upon them. Some twenty-four-year-old just out of graduate school would find himself in charge of a major project with no one looking over his shoulder. A problem would come up, and he would go to Noyce, and he would ask him what to do. And Noyce would say, "Listen, here are your guidelines. You've gotta consider A, you've gotta consider B, and you've gotta consider C. But if you think I'm gonna make your decision for you, you're mistaken. Hey, it's your ass." And I think to some people this might be counterintuitive, but the, the, uh, for the response for that young twenty-four-year-old wasn't sadness or depression, it was joy and exhilaration. Said the spirit of the startup phase, "My God, who could forget the exhilaration of the past few years, to be young and free out here on the Silicon frontier?" Noyce was determined to maintain that spirit during the expansion phase. But as is the nature of these things, what's gonna happen? You go from twelve people to twelve thousand. The talented young people are going to now be like, "Hey, I can do this too," just like Noyce and the Traitorous Eight. Undershock, they're like, "Hey, I can do this too." So they call them defectors. Uh, th- th- they're not-- This is not a pejorative, but this is the term that the author uses, so this is the one I'm gonna stick with. Defectors from Fairchild started more than fifty companies, all making or supplying microchips. The defectors had a name. The defectors were called The Fair Children, and this is why this is so important. This is why I'm reading this entire essay to you. This is why I'm dedicating an entire episode to it. It was The Fair Children who turned the Santa Clara Valley into Silicon Valley. Acre by acre, their fruit trees were uprooted, and two-story silicon modern office buildings and factories went up. Everywhere The Fair Children went, they took the Noyce approach with them. The new breed of Silicon Valley were disciplined. They became absorbed in their companies the way men once had in the palmy days of the automobile industry. So they were drawing the parallels between, let's say, 1950s, 1960s Silicon Valley with, say, 1900s and 1910 Detroit, Michigan. It's the same person. I did, like, a twelve or thirteen-part series on the early automo-- the early founders of the-- early pioneers of the American automobile industry. It's the same person, same personality type. They were just taking advantage of the, the new frontier of their day, which, you know, if you were alive, and you were this personality type, and you were alive, and you were in America in 1900, you got your ass to Detroit, and you were working in the automobile industry. The same personality, if they were born fifty years later, they're in Silicon Valley with Bob Noyce and The Fair Children. And there's a line that Tom Wolfe uses in this piece that could describe Detroit, Michigan. It could describe Silicon Valley. It could describe a lot of the early industries that you and I talk about. Says the young engin- engineers were giving themselves over to a new technology as if it were a religious mission. And then the rapid improvement of the technology is incredible. Listen to what happens over the next seventeen years. In 1959, Noyce's invention had made it possible to put an entire electrical circuit on a chip of silicon the size of a fingernail. By 1964, so that'd be six years later, okay, you had to know how to put ten circuits on a chip the s- that size to enter the game, and the stakes kept rising. Another six years after that, the figure was one thousand circuits on a single chip. So Bob starts out with one circuit. Six years later, it's ten circuits. Six years after that, it's a thousand circuits. Six years after that, it would be thirty-two thousand circuits. By 1968, Bob Noyce had a dozen new integrated circuit and transistor patents, and the future potential of Noyce's invention far exceeded anything he could have possibly predicted. It says because as a direct result of Noyce's invention, the invention made the flight of the Apollo 8 possible. The Apollo 8 was the first crewed spacecraft to leave Earth's gravitational sphere and the first human space flight to reach the Moon. That crew orbited the Moon ten times without landing and then came back to Earth. And there would have been no miniature computer without the integrated circuits invented by Noyce and Kilby and refined by Noyce and the young semiconductor zealots of Silicon Valley. If you wanted to talk about the creators of the future, well, here they were in Silicon Valley. Just before Apollo 8 circled the Moon, Bob Noyce turned forty-one, and he was one of the oldest CEOs in the semiconductor business. He was the father of Silicon Valley. And so now we gotta get to Noyce's decision,

11. 35:22 – 40:26

    Leaving Fairchild: Founding Intel and the Hogan Raid

    1. DSDavid Senra35:22

       along with his co-founder and partner, Gordon Moore, to leave Fairchild Semiconductor and found Intel. And so when they start their own company, they go back to Arthur Rock for financing. He's like, "Well, you gu- you helped us out [chuckles] when we started Fairchild Semiconductor. We want to... We have obviously a tr- proven track record. We want to start Intel." And Arthur Rock was like, "This is the biggest no-brainer ever." And now Rock had his own venture capital company. They merely told Rock what they wanted to do, and then they said they're gonna put up five hundred thousand of their own money, so two hundred and fifty thousand each. Rock's like, "Cool." He winds up putting up two point five one million of additional startup money, and another three hundred thousand came from Grinnell College. Now, before I go into what they wanted to build at Intel, this was a hilarious part of, like, Silicon Valley history and lore. They say he was the magnet that held Fairchild Semiconductor. So when he leaves, it was obvious to the other com... Remember, all these-- [chuckles] there's dozens, maybe hundreds of other companies sprouting up in the valley at this point. So they're like, "Oh, the en-- Now that Noyce is gone, the entire workforce is gonna be up for grabs." And so there's a hilarious... This made me laugh. One person put what happened after Noyce left to the workforce of Fairchild Semiconductor, says, "People were practically driving trucks over to Fairchild Semiconductor and loading up the trucks with new employees." And so Fairchild responds by pulling off one of the best corporate raids, one of the best raids in corporate history. And so the remaining employees at Fairchild, one day they see this platoon of young men that are moving into the executive office cubicles. Now this is hilarious. So the young men were led by C. Lester Hogan. So Hogan was the chief executive officer of the motor-- of the semiconductor division for Motorola. And so Hogan shows up at Fairchild's semiconductor with all of his top engineers and administrators. And so what Fairchild had done was, you know, kind of simple brilliance, I guess. Fairchild had hired the whole bunch away from Motorola and installed them to take place of Noyce. So he didn't just say, "Hey, I want you, Hogan." He's like, "No, I want you and your entire staff." And Fairchild had lured them away in the most direct way imaginable. He had offered Hogan and his team an absolute fortune in money and stock. Now this is the funny part of Silicon Valley lore. Hogan received so much money that henceforth wealth in the valley would be measured in units called Hogans. So that's one way to solve the problem when, you know, Noyce leaves and everybody else is poaching your employees, is just gonna poach an entire division from a larger company. So Noyce and Moore then go set up Intel, and they do so in the exact same way they set up Fairchild. They just started with a dozen bright young electrical engineers, and they're gonna bet everything on research and product development. At the beginning of Intel, Noyce and Moore are actually putting on white coats, and they're working at lab tables. This is the part that Noyce loved the most. But their strategy and the product they're developing is a little different. They would not be competing with Fairchild or anyone else in the already established semiconductor market. They had decided to move into what was called the most backward area of computer technology at the time, which was data storage and memory. Within two years, Noyce and Moore had developed the 1103 memory chip. Each chip contained four thousand transistors and did the work of a thousand ceramic ringlets and did it faster. So before this invention, a computer's memory was stored in ceramic ringlets known as cores. And so Intel invents the memory chip that does the work of a thousand ceramic ringlets and does it faster. And so as the technology progresses, so does the environment in which that technology has to be produced. It says the work base-- Remember they said they used to look like a step above like sweatshops, and now it says the work base now look like something out of an intergalactic adventure movie. So they're in these giant suits that look like astronauts because it has to be a completely clean environment because a single speck of dust could ruin one of the miniature circuits. And we see what is this reoccurring theme in this life of Bob Noyce. He has another hit on his hands. Says at the end of Intel's first year in business, which had been devoted almost exclusively to research, sales totaled less than three thousand dollars and the workforce had forty-two people. In 1972, so four years after founding, sales were twenty-three million, and there was a thousand people working there. And the next year, sales went to sixty-six million, and they had twenty-five hundred employees. So four years after founding-- Remember the first year they're doing three thousand dollars, and they have forty-two people. Year four, twenty-three million people, or excuse me, twenty-three million dollars in sales, a thousand people. Year five, sixty-six. Five years after founding, sixty-six million dollars in sales and twenty-five hundred employees.

12. 40:26 – 46:17

    Intel's Culture: Stock Options, Flat Structure and Andy Grove

    1. DSDavid Senra40:26

       So then it goes into detail about some important ideas that Noyce had at the very beginning of Intel. From the beginning, Noyce gave all the engineers and most of the office workers stock options. He had learned at Fairchild that in a business so dependent upon research, stock options were a more powerful incentive than profit sharing. Talks about the incentives that go into this. Incentives rule everything around us. People sharing profits naturally wanted to concentrate on products that were already profitable rather than plunge into avant-garde research, which is what Noyce really was interested in, rather than plunge into avant-garde research that would not necessarily pay off in the short run. He also wanted the fewest layers of management as possible, and he wanted ideas to win out over hierarchy. Noyce's idea that-- was that every employee should feel that he could go as far and as fast in this industry as his talent would take him. He didn't want any employee to look at the structure of Intel and see a complex set of hurdles. At Intel, executives would not be walled off in offices. Everybody would be, be in one big room. Noyce worked at an old, scratched, secondhand metal desk. As the company expanded, Noyce kept the same desk, and new employees were given desks that were not only newer but bigger and better than his. Everybody noticed the old beat-up desk. Then it goes into more detail how he structured Intel. Noyce decided to eliminate the notion of levels of management altogether. He and Moore ran the show. But below them, there were only strategic business segments, as they called them. So a segment would be comparable to like a major department in an orthodox corporation, but they had far more autonomy. At Intel-- Here's an example of that. At Intel, if the marketing division had to make a major decision that would affect the engineering division, the problem was not routed up a hierarchy to a layer of executives who oversaw both departments. Instead, councils made up of people already working on the line in those divisions that were affected would meet and work out the problem themselves. Noyce was also a great believer in meetings. The people in each department or work unit were encouraged to convene meetings whenever the spirit moved them. If Noyce called a meeting, then he would set the agenda. But after that, everybody was equal. If you were a young engineer and you had an idea you wanted to get across, you were supposed to speak up and challenge Noyce or anybody else in the meeting. You were face to face with the inventor or the co-inventor, and he was only forty-one years old, and he was listening to you. So talk-- I mentioned this earlier. It talks about like the thrilling for like a young talented person. Imagine you're 24 years old, just out of graduate school, and you're in a meeting and Bob Noyce is paying attention and making you feel important. This was much more like a cult or like a religion than it was a company. This wasn't a corporation, it was a congregation. There were sermons. At Intel, everyone, Noyce included, was expected to attend sessions on the Intel culture. At these sessions, the principles by which the company were run were spelled out and discussed. And this was fun to me. Who's teaching these sessions? Andy Grove. The principles of Intel were explained via the Socratic method at management seminars by Intel's number three man, Andy Grove. And so there's an example in the essay or the article of the way Grove taught and then his personality. I'm just going to read the whole thing to you. It just made me laugh. So Grove would say, "How would you sum up the Intel approach?" Many hands would go up and Grove would choose one. And the employee would say, "At Intel, you don't wait for someone else to do it. You take the ball yourself and you run with it." And Grove would say, "Wrong. At Intel, you take the ball yourself and you let the air out of the ball and you fold up the ball and you put it in your pocket. Then you take another ball and you run with it. And when you've crossed the goal, you take the second ball out of your pocket and reinflate it and score 12 points instead of six." Grove was the most colorful person at Intel. He was in his mid-30s at the time. He was the epitome of the religious principle, the Intel religious principle, that the greater the freedom, the greater the obligation to exercise discipline. And then it goes into some of his managerial contributions to Intel. Grove was the inspiration for performance ratings. We're kind of like a report card. And so all the employees are graded. There's, let's see, five different ways you can be graded. Sounds a lot like A, B, C, D, and F. So it's superior, exceeds requirements, meets requirements, marginally meets requirements, and does not meet requirements. And Noyce loved this system. And the reason he loved it, this is very fascinating. He says, "If you're ambitious and hardworking," Noyce said, "you want to be told how you're doing." In Noyce's view, this is the very surprising part to me. In Noyce's view, most of the young hotshots who were coming to work at Intel had never had the benefit of honest grades in their lives. In the late 1960s and early 1970s, college faculties had been under pressure to give all the students passing marks so they would not have to go off to Vietnam. And they had caved in until the entire grading system was meaningless. At Intel, they would learn what measuring up meant. The person that put that idea in my mind the best and made it the most memorable for me, this idea that, hey, if you're ambitious and hardworking, you want to be told how you're doing. Nick Saban said this one time, and I've never forgot. I have it in like my notebook. I read it all the time. He says, "Average players want to be left alone. Good players really want to be coached. And great players want to be told the truth." What did Noyce say? Noyce said, "If you're ambitious and working, if you have the desire to be great, you want to be told how you're doing." And so then we revisit this reoccurring theme that Noyce is constantly innovating, constantly improving upon what he's already doing.

13. 46:17 – 49:02

    The Microprocessor, Noyce's Retreat and Legacy

    1. DSDavid Senra46:17

       So Intel has a phenomenal second act that is bigger than their first act. So by the 1970s, the 1103 memory chip had given Intel an entire corner of the semiconductor market, right? But that was only a start. An Intel engineer named Ted Hoff came up with an invention as important as Noyce's integrated circuit had been a decade earlier. He invented the microprocessor, which was known as a computer on a chip. This invention leads to the possibilities for creating and using small computers. Computers so small they surpassed what most people thought imaginable, even people already working in the industry. And it's important to highlight that this was an illustration of one of Noyce's strongest held belief, that innovation is a young person's game. So in Ted Hoff, and always trying to nurture young talent and giving them, as this entire essay has talked about, he gave them a lot of latitude and freedom and a lot of responsibility and put them in a place with resources and structure, an environment that hopefully yields, turns their genius into a tangible product that makes the world better. In Ted Hoff, Noyce was looking at proof enough of his hypothesis that out here on the electrical frontier, the great flashes came to the young. Hoff was about the same age as Noyce had been when he invented his integrated circuit. And so this new invention caused an explosion in revenue. Obviously, the company's going to keep adding people and growing. And so Noyce does the same thing he did once the company gets too big. He wants to step away. So in 1974, Noyce turned over the actual running of Intel to Gordon Moore and Andy Grove and kicked himself upstairs to become chairman of the board. His major role was now to become the spokesman of Silicon Valley. He was awarded the National Medal of Science from the White House in 1980, and he was inducted into the National Inventors Hall of Fame in 1983. By then, Intel's sales had grown from 64 million in 1973 to almost a billion a year in 1983. Noyce's own fortune was incalculable. Grinnell College's 300,000 investment in Intel had multiplied in value more than 30 times and doubled the college's endowment. For those who followed the semiconductor industry, Noyce was a legend, a national treasure, the man that led the world into the 21st century across the electronic grid and into space. And so when this piece ends, Bob Noyce is 56 years old. He does not know, but he only has six years left to live. He dies at the relatively young age of 62 from a heart attack. I will leave a link down below in the Show Notes available on your podcast player and at po- at founderspodcast.com for you to read the entire essay. I think it's worth your time, but I also wanted to tell you what I was thinking

14. 49:02 – 52:07

    Educating the Market: The Intel Trinity and Akio Morita

    1. DSDavid Senra49:02

       about and what I was doing and how this came to be. So a long time ago, I read this book called The Intel Trinity: How Robert Noyce, Gordon Moore, and Andy Grove Built the World's Most Important Company. It was written by this guy named Michael Malone. I am going to read it in the next few weeks. I'm encouraging you to buy a copy and to read it with me. And so even though I read that book over seven years ago, there's still an idea in that book that I've never forgotten. I think it's really important, and it's the idea that you ha-- for a new product, you have to educate the market, and that's what Bob Noyce, Andy Grove, and Gordon Moore realized with the invention of the microprocessor. It says, "When you are trying to convince an audience to accept a radical innovation, almost by definition, the idea is so far from the status quo that many people simply cannot get their minds around it. They quickly discovered that the marketplace wasn't just confused by the concept of the microprocessor but was actually frightened by its implication. Many of my engineering friends scoffed at it as if it was a gimmick. Their solution? The market had to be educated." And this is what's so fascinating. The best founders know that they are the ones that have to take the lead on this. At one point, Intel was conducting more seminars and workshops on how to use the microprocessor than the local co- junior college's total catalog of courses. Bob Noyce, Gordon Moore, and Andy Grove became part of a traveling educational roadshow. They became educators, and it worked. Another founder who understood this at a fundamental level was the founder of Sony, Akio Morita. This is what he said in his autobiography. "One must prepare the groundwork among the customers before you can expect success in the marketplace. It is a time-honored Japanese gardening technique to prepare a tree for transplanting by slowly and carefully binding the roots over a period of time bit by bit to prepare the tree for the shock of the change it is about to experience. This process is called nemawashi, and it takes time and patience, but it rewards you if it is done properly with a healthy transplanted tree. Advertising and promotion for a brand-new, innovative product is just as important." The way Akio would educate customers about a new product was inspired by the Japanese tradition of nemawashi. The thing they both have in common is that they both require time. So that idea that we see at Sony, that we see at Intel, that idea that it's very important that when you're bringing a new product to market, that you realize you have to educate the customers about why the product exists and what it can do for them is really, really important. And so that was what led me on this tangent to read this excellent piece by Tom Wolfe, The Tinkerings of Robert Noyce and How the Sun Rose on Silicon Valley. I will leave a link down below for both this piece and The Intel Trinity book if you wanna read it with me. Links for both of those will be down below and available at founderspodcast.com. But that is three hundred and fifty-six books down, one thousand to go, and I'll talk to you again soon.

Episode duration: 52:07