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The Valley and the “Swamp”: Big Government in the History of Silicon Valley

By Heidi Hackford | October 10, 2019

Silicon Valley tech workers benefit every day from multigenerational networks linking them with companies, funders, coworkers, mentors, and world-class research institutions that foster outstanding success. Given that the Valley prides itself on its independence, and its origin myths play up its distance, both geographically and culturally from the East, most probably don’t realize that they may owe much of their success to early investments by the federal government. 

Before Margaret O’Mara became a professor of history at Stanford and the University of Washington, she worked on economic policy in the Clinton White House, where Tom Kalil led tech initiatives in the early days of the commercial internet. John Markoff, writing for the New York Times, was one of the first journalists to cover tech. During a live event at CHM on July 17, 2019, the three discussed Silicon Valley’s long relationship with the federal government, which could be termed “it’s complicated,” in the context of O’Mara’s new book, The Code: Silicon Valley and the Remaking of America

An Entrepreneurial Galapagos

O’Mara describes post-WWII Silicon Valley as an “entrepreneurial Galapagos,” a region developing in some isolation on the West Coast with very distinctive species of entrepreneurs, venture capitalists, law firms, marketing firms, and research universities—Stanford and the University of California, Berkeley. What created the life spark for this ecosystem that has been a hotbed of innovation for generations? Her answer: government funding for the Cold War and the space race. It provided a platform for entrepreneurial startups to compete for lucrative contracts that unwittingly established a vibrant model for future innovation.

Margaret O’Mara and Tom Kalil discuss Silicon Valley’s relationship with Washington, DC.

The government, Tom Kalil notes, not only incubated research in its various federal agencies and labs, but also served as a stable and deep-pocketed customer for integrated circuits in the early years of the industry when chip technology was new. Though that support was critical, private companies still had to figure out how to transform innovations into effective products and efficient companies and invest their own resources to do so.

SV + DC = Success

The federal government also fostered the success of Silicon Valley through policies favorable to the growth and development of the entrepreneurial ecosystem. In 1965, the Immigration and Naturalization Act ended racist quotas from the 1920s, opening up the Valley to a global workforce that proved to have an outsize share of future entrepreneurs. Laws that did away with restrictions on investing and capital gains taxes in the 1970s made capital available to startups through new high-risk, high-rewards venture capital firms. 

The relationship between the Valley and Washington, DC, wasn’t one-sided. Local business leaders like HP cofounder David Packard served in Republican administrations and Intel cofounder Robert Noyce headed up the Semiconductor Industry Association, a bipartisan lobby group that touted the economic and national security benefits of the microchip. But, when Silicon Valley executives were unhappy with the attention—or lack of it—coming from Washington, they weren’t shy about courting the other party or being “aggressively bipartisan,” in the words of Tom Kalil. He describes a comment attributed to a George H. W. Bush economic official: “Computer chips, potato chips, what’s the difference?” that incensed Republican chip-makers. Starting with the Atari Democrats and then Bill Clinton, Democratic politicians began to take serious notice of what was going on in the Valley. Although those relationships shifted and changed over time, along with the political parties themselves, DC and Silicon Valley remained intertwined.

Margaret O’Mara and Tom Kalil discuss Silicon Valley’s relationship with Washington, DC.

Darksides and Blindspots

A tightly networked community with links between companies through mentors, employees, and funders fostered the multigenerational success of ecosystem. But the growth mentality and massive amounts of money involved is now so large and has such powerful effects that it creates a bubble. O’Mara notes "It's a work hard, play hard place" that’s extremely competitive, with everyone working and socializing together all the time, and it has been historically inhospitable for women. The case of Ann Hardy, who wrote the timesharing code for iconic company Tymshare, for example, illustrates how the idea that Silicon Valley is a meritocracy blinds it to the fact that opportunity is not equal. As a woman in the ’50s, Hardy was not even permitted to major in science in college.

Margaret O’Mara describes how Silicon Valley’s great success has created blindspots.

A Bridge to the Galapagos

Government can be a key factor in ensuring that the economic success of Silicon Valley can endure and be a positive force for the nation. Both O’Mara and Kalil emphasized the importance of government investing in education at all levels. From the ’50s–70s and even the  ’80s, when such investments were the norm, kids from modest means grew up to make significant contributions to the economic miracle of Silicon Valley. Kalil urged Silicon Valley tech entrepreneurs and workers, no matter what their politics, to stay connected to Washington and understand the Valley’s long history of defense contracting as, literally, a matter of national security. 

Tom Kalil makes a case for staying involved with government no matter your politics.

China intends to dominate tech and the Valley must respond, says Kalil. Unlike Japan in the ’70s, they are not an ally and there are real differences in national security interests. Keeping Silicon Valley and America healthy means that we must preserve the free movement of people and capital. Kalil warns that the world will look very different if Chinese tech companies gain the ascendance. This may be the next Cold War. Will it spark a boom of new tech in the Valley like that of the first? Or, will it lead to division and acrimony that puts employees at odds with employers?

History might have an answer. As O’Mara says, "History makes you empathize, or at least understand why people are doing what they're doing. And then if you understand that motivation, and you understand how we got there, then you figure out how to unwind something.” Her biography of a place whose products and power has an outsize impact on modern life, can perhaps help us unwind our own tech blindspots and create a better future.

Watch the Full Conversation

“The Code—Margaret O’Mara and Tom Kalil in Conversation with John Markoff,” July 17, 2019. This event is produced by the CHM Exponential Center.

About the Exponential Center

The CHM Exponential Center captures the legacy—and advances the future—of entrepreneurship and innovation in Silicon Valley and around the world. The center explores the people, companies, and communities that are transforming the human experience through technology innovation, economic value creation, and social impact. Our mission: to inform, influence, and inspire the next generation of innovators, entrepreneurs, and leaders changing the world.

About The Author

Heidi Hackford is the content and curriculum director for the Exponential Center at the Computer History Museum. She is responsible for leading the development of educational materials focused on innovation and entrepreneurship. Heidi previously worked at Monticello, where she edited Thomas Jefferson’s family letters. At the Woodrow Wilson Presidential Library, she established a digital archive and conducted teacher workshops on incorporating digital history resources in the classroom. After moving to Silicon Valley, Heidi directed the start-up of a new foundation promoting wilderness conservation through art.

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