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>> Niall Ferguson: Hello,
my name is Neil Ferguson.
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I'm the Milbank family senior fellow
here at the Hoover Institution, and
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the chair of
the Hoover History Working Group.
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And today we've heard a terrific
presentation by my guest,
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Margaret O'mara, who is the Scott and
Dorothy Bullock professor of American
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history at the University of
Washington and the author of The Code,
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Silicon Valley and
the Remaking of America.
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Margaret, welcome to Hoover.
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You argue in the book that there's
a kind of symbiotic relationship between
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the dynamic private sector that flourishes
in California after World War II and
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the US government over in Washington DC,
the other Washington.
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Talk a bit about that, and why did
that symbiotic relationship produce
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Silicon Valley as opposed to, I don't
know, Chicago Valley or some other valley?
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>> Margaret O'Mara: [LAUGH] ,yeah, yeah,
yeah, funnily enough, Dwight Eisenhower
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never said, I shall build a silicon,
a science city in northern California.
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>> Niall Ferguson: There was never a plan.
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>> Margaret O'Mara: There was
never a plan, which of course,
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is the glorious part of history when
it's all just messy and unplanned.
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But nonetheless, it is this
combination of top down spending for
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geopolitical reasons.
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The beginning of the Cold War is a hinge
of history for this place, which was
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mostly agricultural and distinguished by
its university, Stanford, in the middle.
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But it is this flood of spending
comes into the military sector and
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for specifically for electronics and
small communication devices.
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Which happen to be the thing that
this region does already have
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a subspecialty in.
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Radio communication, long distance
wireless communication, miniature
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electronics companies like Hewlett
Packard, founded right before the war.
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And so
this combination of core competencies,
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sort of regional conditions here, and
then this influx of resources changes it.
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And so the first 20 years of the valley,
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it is chiefly almost entirely
a defense economy, and
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then it changes as the Vietnam war
drawdown and military spending.
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There was a bit of crescendo in the 80's,
during the Reagan years and
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reinvestment in the military.
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But then this is not
just a military story.
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It's a story of investment in research and
in higher education and also in, and
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in creating conditions for
entrepreneurship.
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So I think that's the other part
of it that's very important.
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>> Niall Ferguson: Well, I'm glad you said
higher education, because we are sitting
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here at the Hoover institution at
the heart of the Stanford campus, and
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it's pretty hard to imagine
Silicon Valley without Stanford.
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So what's the role that
the university plays?
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MIT was already, in a way,
the place that epitomized
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the link from defense
contracts to academia.
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And one might have expected it to
have dominated in the Cold War, but
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Stanford comes along.
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How come, and
is it Stanford that just gets lucky or
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does Stanford have a game plan?
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>> Margaret O'Mara: [LAUGH] ,yeah, coming
out of the second world war, MIT and
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Harvard were the leading
research institutions and
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the leaders of those institutions were the
ones designing post war federal research.
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I mean, they were the architects of it.
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And so Stanford was not a logical player,
but it had a very important connection
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in the person of Fred Terman, who was
the dean of Engineering and then provost.
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Who had trained as a graduate student
at MIT under one of those architects,
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Vannevar Bush, and understood that
there was a real change coming.
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And he and
other leaders of the university,
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the then president Wallace Sterling,
a historian, and others,
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decided to profoundly
reorganize what Stanford did.
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To build up what Terman famously called
steeples of excellence in the Sciences and
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Engineering to make it more like MIT,
quite frankly.
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It already had a scientific and
technological bent from the very
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beginning, but
it really doubled down on it.
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And to develop Stanford lands,
the nearly 9000 acres that the university
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received in its founding
grant from the Stanford's.
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That the Stanford said, you may not
sell it, you can develop it, but
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don't sell it, quite the albatross for
some decades for them.
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And then it's developed not only
into the faculty housing and
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the Stanford shopping center, [LAUGH], but
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also the Stanford Research park and
a very deliberate economic development
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strategy directed at electronics
industries and high tech industries.
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So the university plays this
critical role and it's not just,
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oftentimes we think of universities
as invention spins off and
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then gets commercialized,
and that's the contribution.
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The real thing, and it's very clear
in the case of Stanford is people.
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It's the people in the university and
it's the people who are educated here and
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then go off and start companies.
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And the entrepreneurial culture that
is fostered here that allows this
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movement back and
forth between industry and
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the university in a way that
horrified many academics, [LAUGH].
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I think our fellow humanists
were not happy about it, but
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it was a strategy that only Stanford
as a private university could do and
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it proved extraordinarily generative.
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And also I think this place being
what it is, agricultural valley with
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a few small towns, there isn't a big city,
a downtown, a center.
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Stanford has become
the de facto town square.
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It is the center of the action in a way
that's unlike any other university
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in the United States.
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>> Niall Ferguson: Why do you think
it's so hard to replicate this?
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You've given talks about this
book all over the world.
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And I should imagine that
pretty much everywhere you go,
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somebody's got a silicon fen or
a silicon glen or silicon piazza.
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And yet somehow none of these
imitations ever quite catch fire.
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Why do you think that is?
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>> Margaret O'Mara: Yeah, I mean,
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imitation is the easiest type
of economic development, right?
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You say, they build this,
we're gonna build one of those.
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>> Niall Ferguson: And
sometimes that works.
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>> Margaret O'Mara: And
sometimes that works.
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It does not, and it's so historically
specific and contingent and the product
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of not just simply this wave of Cold War
spending and the military industrial
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complex, but also the US space program,
which, of course, is part of the Cold War.
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Let's be clear that the Americans
wanna land on the moon,
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to get there before the Soviets do,
[LAUGH].
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But that spending on small electronics and
communication devices,
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all of the money that
puts into the system,
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the federal money that puts into
the system for military uses.
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I mean, look, war is the one
thing that the United States
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has been willing to spend copiously on,
[LAUGH].
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There's a lot of, it kind of,
with a geopolitical justification,
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kind of gave this urgency and gave a lot
of political leeway to spend a lot of
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money on things that didn't
have an immediate application.
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That was incredibly useful, not only
in terms of being a customer to small
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startups in the silicon chip business
in the 1960s, but also in fostering
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basic research in science education in
universities and research institutes.
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>> Niall Ferguson: Give the example
of a child semiconductor.
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1957, it's founded the year of Sputnik,
where the challenge from
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the Soviet Union seems a mortal
threat to the United States.
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The Soviets had the science,
they certainly had the scientists.
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They had universities,
they had defense spending, but
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there's a complete failure to
replicate the semiconductor industry.
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And that means that the Soviets
lose the computer race.
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They've been able to compete on atomic
weapons in space, but they can't compete
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when it comes to silicon, and
that's a remarkable thing in itself.
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I've been thinking a lot about this,
because it seems to be at the heart of
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another very interesting book on
a similar topic, Chris Miller's chip war.
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And part of the story there is
this obvious just can't do this.
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There's nothing they can do,
they know they can't do it.
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They can steal the chips, but
they can't replicate them.
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And yet something seems to
kinda go wrong in the story,
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namely that outsourcing
offshoring happens.
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And without anybody quite noticing in
Washington DC, a really significant
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part of the semiconductor industry
ends up outside the United States and
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indeed ends up in the strategically
rather vulnerable location of Taiwan.
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Was this a case of nobody
quite paying attention?
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Or are there other reasons why
Silicon Valley does get replicated,
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in a way, in TSMC's fabs in Taiwan?
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>> Margaret O'Mara: Yeah, well, the
offshoring of semiconductor manufacturing,
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like offshoring of other goods,
is both a push and a pull, right?
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So the chipmakers here are some of
the very earliest to outsource.
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In 1963, Fairchild National are going
to East Asia just incredibly early.
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They are looking for lower cost labor,
they are looking for
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to maximize efficiency and speed,
to be able to produce things as quickly.
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And they're also going up against
this dual threat of their other
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competitors and just being able
to get a minimum viable product
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that can have a commercial market,
not just a defense one.
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And also the growth of these East Asian
economies that are doing capitalist
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develop mentalism very aggressively
starting in the 60's, and 70's, and
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80's, right?
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So you have Singapore and Japan who
are kind of creating the conditions to
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encourage American firms to come over.
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And the eye is not on, the focus is on
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the Soviets as a competitor and a threat.
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Certainly in the 1960s into the 1970s,
and by the 80's, it's all about Japan.
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And so anything that is going to
increase the competitive advantage of
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Americana firms in the global marketplace,
even if that means the building,
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this has to become an outsourced and
offshore industry.
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There was just no, yeah, I think no
one was really paying attention.
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And there also, I think the other
thing that's a factor here is you're
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coming into the 1970s at the moment
that the chip makers are kind of
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really becoming enterprise,
the commodity chip business is happening.
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This Richard Nixon and his,
in the Nixon White House are saying,
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how can we get, we have all of
our technological world is so
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dominated by defense, and
we need to get the private.
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We need to privatize it some more,
we need to find commercial applications.
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We need to encourage the private
sector to really be central to this,
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not have it all ruled by the government.
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And so that too is really going to prevent
the Nixon administration, or successive
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administrations, for that matter, to kinda
come in and tell chip makers what to do.
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Particularly when they're getting more and
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more challenged by much more
agile competitors overseas.
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>> Niall Ferguson: Fast forward
to 2022 and we have the Chips and
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Science act, which feels a little bit like
your story coming full circle once again.
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And the federal government is going
to bring out its checkbook and
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try to reignite the hardware
side of the US economy.
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Can it work, or is this an attempt
to resuscitate a patient
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that's already DOA, dead on arrival?
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>> Margaret O'Mara: I'm impressed
by the amount of money.
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It's gonna do something.
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It's a lot of money, and it's money
that is being structured in a way
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that is designed to geographically
deconcentrate the industry and
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bring it to bring high tech
manufacturing into new places,
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into economically depressed places.
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That doesn't necessarily mean those
places are going to be revived, but
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it is going to have an interesting way,
working with the existing growth
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of tech clusters in other parts of
the country that are small but growing.
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Look, every company is
a technology enabled company.
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Everyone needs really good software
engineers, [LAUGH], on staff.
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So tech has become kind of
a much larger field, and
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it's also structured as
a public private partnership.
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So it's going to kind of,
it's incentivizing private markets and
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private companies, private capital
to behave in certain ways and
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also making big bets
a little more feasible.
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And the way that the Apollo program made
the integrated circuit a more feasible bet
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because you had someone who's going
to buy the things, [LAUGH], and
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you had kind of, you weren't just blue
skying it with no way to apply it.
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The same goes with these,
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when you have money kind
of subsidizing something,
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that is going to allow you as
a company to invest in R and
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D at a greater scale,
green energy, for example.
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And quite honestly, I think because it
is framed rightly as a geopolitical,
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addressing a geopolitical problem
as a threat to national security,
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it gives it political support
on a broader scale than if it
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were simply framed as
a domestic economic program.
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>> Niall Ferguson: So almost as if the US
needs a Cold War to get this kind of
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symbiosis, [LAUGH], between government and
private sector to work.
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Well, one of the consequences of
Stanford's involvement in all of this
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has been, I suppose, for history to
recede as a force on this campus.
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But you are reminding all those people in
engineering and computer science that,
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yes, they too have a history.
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The book, once again, is The Code Silicon
Valley and The Remaking of America.
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We've been enormously lucky to
have Margaret O'mara here with us
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to tell the story.
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Thank you so much for listening.
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And Margaret,
thank you very much for joining us.
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>> Margaret O'Mara: Thank you for
having me, it's a pleasure.
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>> Niall Ferguson: Hello,
my name is Neil Ferguson.
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I'm the Milbank family senior fellow
here at the Hoover Institution, and
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the chair of
the Hoover History Working Group.
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And today we've heard a terrific
presentation by my guest,
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Margaret O'mara, who is the Scott and
Dorothy Bullock professor of American
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history at the University of
Washington and the author of The Code,
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Silicon Valley and
the Remaking of America.
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Margaret, welcome to Hoover.
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You argue in the book that there's
a kind of symbiotic relationship between
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the dynamic private sector that flourishes
in California after World War II and
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the US government over in Washington DC,
the other Washington.
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Talk a bit about that, and why did
that symbiotic relationship produce
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Silicon Valley as opposed to, I don't
know, Chicago Valley or some other valley?
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>> Margaret O'Mara: [LAUGH] ,yeah, yeah,
yeah, funnily enough, Dwight Eisenhower
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never said, I shall build a silicon,
a science city in northern California.
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>> Niall Ferguson: There was never a plan.
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>> Margaret O'Mara: There was
never a plan, which of course,
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is the glorious part of history when
it's all just messy and unplanned.
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But nonetheless, it is this
combination of top down spending for
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geopolitical reasons.
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The beginning of the Cold War is a hinge
of history for this place, which was
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mostly agricultural and distinguished by
its university, Stanford, in the middle.
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But it is this flood of spending
comes into the military sector and
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for specifically for electronics and
small communication devices.
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Which happen to be the thing that
this region does already have
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a subspecialty in.
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Radio communication, long distance
wireless communication, miniature
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electronics companies like Hewlett
Packard, founded right before the war.
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And so
this combination of core competencies,
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sort of regional conditions here, and
then this influx of resources changes it.
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And so the first 20 years of the valley,
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it is chiefly almost entirely
a defense economy, and
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then it changes as the Vietnam war
drawdown and military spending.
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There was a bit of crescendo in the 80's,
during the Reagan years and
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reinvestment in the military.
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But then this is not
just a military story.
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It's a story of investment in research and
in higher education and also in, and
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in creating conditions for
entrepreneurship.
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So I think that's the other part
of it that's very important.
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>> Niall Ferguson: Well, I'm glad you said
higher education, because we are sitting
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here at the Hoover institution at
the heart of the Stanford campus, and
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it's pretty hard to imagine
Silicon Valley without Stanford.
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So what's the role that
the university plays?
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MIT was already, in a way,
the place that epitomized
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the link from defense
contracts to academia.
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And one might have expected it to
have dominated in the Cold War, but
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Stanford comes along.
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How come, and
is it Stanford that just gets lucky or
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does Stanford have a game plan?
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>> Margaret O'Mara: [LAUGH] ,yeah, coming
out of the second world war, MIT and
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Harvard were the leading
research institutions and
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the leaders of those institutions were the
ones designing post war federal research.
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I mean, they were the architects of it.
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And so Stanford was not a logical player,
but it had a very important connection
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in the person of Fred Terman, who was
the dean of Engineering and then provost.
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Who had trained as a graduate student
at MIT under one of those architects,
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Vannevar Bush, and understood that
there was a real change coming.
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And he and
other leaders of the university,
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the then president Wallace Sterling,
a historian, and others,
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decided to profoundly
reorganize what Stanford did.
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To build up what Terman famously called
steeples of excellence in the Sciences and
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Engineering to make it more like MIT,
quite frankly.
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It already had a scientific and
technological bent from the very
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beginning, but
it really doubled down on it.
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And to develop Stanford lands,
the nearly 9000 acres that the university
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received in its founding
grant from the Stanford's.
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That the Stanford said, you may not
sell it, you can develop it, but
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don't sell it, quite the albatross for
some decades for them.
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And then it's developed not only
into the faculty housing and
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the Stanford shopping center, [LAUGH], but
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also the Stanford Research park and
a very deliberate economic development
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strategy directed at electronics
industries and high tech industries.
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So the university plays this
critical role and it's not just,
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oftentimes we think of universities
as invention spins off and
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then gets commercialized,
and that's the contribution.
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The real thing, and it's very clear
in the case of Stanford is people.
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It's the people in the university and
it's the people who are educated here and
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then go off and start companies.
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And the entrepreneurial culture that
is fostered here that allows this
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movement back and
forth between industry and
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the university in a way that
horrified many academics, [LAUGH].
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I think our fellow humanists
were not happy about it, but
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it was a strategy that only Stanford
as a private university could do and
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it proved extraordinarily generative.
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And also I think this place being
what it is, agricultural valley with
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a few small towns, there isn't a big city,
a downtown, a center.
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Stanford has become
the de facto town square.
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It is the center of the action in a way
that's unlike any other university
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in the United States.
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>> Niall Ferguson: Why do you think
it's so hard to replicate this?
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You've given talks about this
book all over the world.
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And I should imagine that
pretty much everywhere you go,
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somebody's got a silicon fen or
a silicon glen or silicon piazza.
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And yet somehow none of these
imitations ever quite catch fire.
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Why do you think that is?
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>> Margaret O'Mara: Yeah, I mean,
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imitation is the easiest type
of economic development, right?
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You say, they build this,
we're gonna build one of those.
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>> Niall Ferguson: And
sometimes that works.
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>> Margaret O'Mara: And
sometimes that works.
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It does not, and it's so historically
specific and contingent and the product
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of not just simply this wave of Cold War
spending and the military industrial
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complex, but also the US space program,
which, of course, is part of the Cold War.
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Let's be clear that the Americans
wanna land on the moon,
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to get there before the Soviets do,
[LAUGH].
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But that spending on small electronics and
communication devices,
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all of the money that
puts into the system,
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the federal money that puts into
the system for military uses.
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I mean, look, war is the one
thing that the United States
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has been willing to spend copiously on,
[LAUGH].
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There's a lot of, it kind of,
with a geopolitical justification,
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kind of gave this urgency and gave a lot
of political leeway to spend a lot of
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money on things that didn't
have an immediate application.
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That was incredibly useful, not only
in terms of being a customer to small
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startups in the silicon chip business
in the 1960s, but also in fostering
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basic research in science education in
universities and research institutes.
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>> Niall Ferguson: Give the example
of a child semiconductor.
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1957, it's founded the year of Sputnik,
where the challenge from
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the Soviet Union seems a mortal
threat to the United States.
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The Soviets had the science,
they certainly had the scientists.
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They had universities,
they had defense spending, but
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there's a complete failure to
replicate the semiconductor industry.
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And that means that the Soviets
lose the computer race.
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They've been able to compete on atomic
weapons in space, but they can't compete
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when it comes to silicon, and
that's a remarkable thing in itself.
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I've been thinking a lot about this,
because it seems to be at the heart of
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another very interesting book on
a similar topic, Chris Miller's chip war.
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And part of the story there is
this obvious just can't do this.
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There's nothing they can do,
they know they can't do it.
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They can steal the chips, but
they can't replicate them.
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And yet something seems to
kinda go wrong in the story,
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namely that outsourcing
offshoring happens.
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And without anybody quite noticing in
Washington DC, a really significant
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part of the semiconductor industry
ends up outside the United States and
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indeed ends up in the strategically
rather vulnerable location of Taiwan.
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Was this a case of nobody
quite paying attention?
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Or are there other reasons why
Silicon Valley does get replicated,
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in a way, in TSMC's fabs in Taiwan?
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>> Margaret O'Mara: Yeah, well, the
offshoring of semiconductor manufacturing,
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like offshoring of other goods,
is both a push and a pull, right?
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So the chipmakers here are some of
the very earliest to outsource.
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In 1963, Fairchild National are going
to East Asia just incredibly early.
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They are looking for lower cost labor,
they are looking for
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to maximize efficiency and speed,
to be able to produce things as quickly.
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And they're also going up against
this dual threat of their other
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competitors and just being able
to get a minimum viable product
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that can have a commercial market,
not just a defense one.
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And also the growth of these East Asian
economies that are doing capitalist
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develop mentalism very aggressively
starting in the 60's, and 70's, and
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80's, right?
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So you have Singapore and Japan who
are kind of creating the conditions to
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encourage American firms to come over.
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And the eye is not on, the focus is on
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the Soviets as a competitor and a threat.
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Certainly in the 1960s into the 1970s,
and by the 80's, it's all about Japan.
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And so anything that is going to
increase the competitive advantage of
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Americana firms in the global marketplace,
even if that means the building,
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this has to become an outsourced and
offshore industry.
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There was just no, yeah, I think no
one was really paying attention.
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And there also, I think the other
thing that's a factor here is you're
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coming into the 1970s at the moment
that the chip makers are kind of
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really becoming enterprise,
the commodity chip business is happening.
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This Richard Nixon and his,
in the Nixon White House are saying,
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how can we get, we have all of
our technological world is so
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dominated by defense, and
we need to get the private.
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We need to privatize it some more,
we need to find commercial applications.
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We need to encourage the private
sector to really be central to this,
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not have it all ruled by the government.
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And so that too is really going to prevent
the Nixon administration, or successive
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administrations, for that matter, to kinda
come in and tell chip makers what to do.
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Particularly when they're getting more and
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more challenged by much more
agile competitors overseas.
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>> Niall Ferguson: Fast forward
to 2022 and we have the Chips and
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Science act, which feels a little bit like
your story coming full circle once again.
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And the federal government is going
to bring out its checkbook and
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try to reignite the hardware
side of the US economy.
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Can it work, or is this an attempt
to resuscitate a patient
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that's already DOA, dead on arrival?
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>> Margaret O'Mara: I'm impressed
by the amount of money.
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It's gonna do something.
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It's a lot of money, and it's money
that is being structured in a way
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that is designed to geographically
deconcentrate the industry and
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bring it to bring high tech
manufacturing into new places,
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into economically depressed places.
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That doesn't necessarily mean those
places are going to be revived, but
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it is going to have an interesting way,
working with the existing growth
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of tech clusters in other parts of
the country that are small but growing.
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Look, every company is
a technology enabled company.
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Everyone needs really good software
engineers, [LAUGH], on staff.
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So tech has become kind of
a much larger field, and
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it's also structured as
a public private partnership.
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So it's going to kind of,
it's incentivizing private markets and
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private companies, private capital
to behave in certain ways and
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also making big bets
a little more feasible.
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And the way that the Apollo program made
the integrated circuit a more feasible bet
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because you had someone who's going
to buy the things, [LAUGH], and
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you had kind of, you weren't just blue
skying it with no way to apply it.
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The same goes with these,
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when you have money kind
of subsidizing something,
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that is going to allow you as
a company to invest in R and
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D at a greater scale,
green energy, for example.
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And quite honestly, I think because it
is framed rightly as a geopolitical,
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addressing a geopolitical problem
as a threat to national security,
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it gives it political support
on a broader scale than if it
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were simply framed as
a domestic economic program.
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>> Niall Ferguson: So almost as if the US
needs a Cold War to get this kind of
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symbiosis, [LAUGH], between government and
private sector to work.
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Well, one of the consequences of
Stanford's involvement in all of this
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has been, I suppose, for history to
recede as a force on this campus.
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But you are reminding all those people in
engineering and computer science that,
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yes, they too have a history.
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The book, once again, is The Code Silicon
Valley and The Remaking of America.
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We've been enormously lucky to
have Margaret O'mara here with us
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to tell the story.
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Thank you so much for listening.
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And Margaret,
thank you very much for joining us.
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>> Margaret O'Mara: Thank you for
having me, it's a pleasure.
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