Joe: Everyone knows the story: a couple of geniuses in a garage invent the future. But what if the most important co-founder of Silicon Valley wasn't Steve Jobs or Bill Gates, but the Pentagon? That's the explosive idea we're unpacking today. Lewis: The Pentagon? That sounds like the complete opposite of the Silicon Valley ethos. The whole brand is built on being anti-establishment, libertarian, outside the system. Joe: Exactly. And that's the central argument in Margaret O’Mara’s incredible book, The Code: Silicon Valley and the Remaking of America. It’s a history that turns the popular myth on its head. Lewis: Right, and O'Mara is the perfect person to write this. She's not just a historian; she actually worked in the Clinton White House on tech policy. She saw the intersection of government and the Valley firsthand. Joe: Precisely. That unique perspective is why the book has been so widely acclaimed—it completely reframes a story we all thought we knew. It challenges that core myth of the self-made tech rebel by "bringing the state back in," as the critics say. Lewis: Okay, I'm hooked. Where does this story of government intervention even begin? I always picture the 1950s as being all about these big, stuffy, East Coast corporations. Joe: Well, to understand it, you have to go back to a time before silicon, when the valley was still filled with prune orchards and one very ambitious university: Stanford.

Lewis: Stanford. I know it's a huge part of the story, but I always assumed it was just a pipeline for smart kids who then went off to do their own thing. Joe: That's the myth. The reality, as O'Mara details, is that Stanford actively, almost aggressively, engineered the Valley's creation. And the key figure was a man named Frederick Terman, the Dean of Engineering. Lewis: Frederick Terman. Not a household name like Jobs or Gates. Joe: Not at all, but he might be more important. Terman had this vision for Stanford. He didn't want it to be just another ivory tower. He wanted to build what he called "steeples of excellence" in fields like electronics and physics. And he realized the way to fund this was to tap into the biggest source of cash in post-World War II America: Cold War defense spending. Lewis: Ah, so the money trail begins. This is where the Pentagon comes in. Joe: Directly. Especially after 1957, when the Soviets launched Sputnik. America collectively panicked, thinking we were falling behind technologically. Congress opened the floodgates for defense and research funding, and Terman made sure Stanford's bucket was right under the spigot. He encouraged his professors and students to start companies right there, next to the university, in what became the Stanford Industrial Park. Lewis: So he was basically creating an ecosystem on purpose. Joe: Exactly. And the most famous example to come out of this is the one everyone knows, but they only know half the story: Hewlett-Packard. Lewis: The ultimate garage startup! Bill Hewlett and Dave Packard, right? Joe: The very same. They were Terman's star pupils. He mentored them, encouraged them to start their company right there in Palo Alto instead of heading back East. The garage part is true. But what often gets left out is how HP grew. Their early, crucial contracts weren't from selling gadgets to consumers; they were from building electronic instruments for defense contractors and government projects, all funded by that post-Sputnik boom. Lewis: Wow. So the famous HP garage story is true, but the subtext is that their growth was fueled by government spending. That part definitely gets left out of the inspirational posters. Joe: It's the hidden foundation. O'Mara shows that this wasn't just a one-off. This model—university research, funded by federal dollars, spinning off into private companies that then sell back to the government—was the blueprint. It was Vannevar Bush's post-WWII vision of an "endless frontier" of scientific discovery, paid for by the taxpayer, that created this incredibly fertile ground. Lewis: That's fascinating. The government money created the hub of talent and opportunity. But that still doesn't explain the culture. The hyper-competitive, risk-it-all, change-the-world attitude. That doesn't sound like it comes from a government contract. Joe: You're absolutely right. For that, you need a different kind of story. A story of betrayal.

Lewis: Betrayal? Now this sounds like a movie. Joe: It practically is. The story starts with a man named William Shockley. He was a brilliant physicist, a Nobel Prize winner for co-inventing the transistor. In the mid-50s, he decides to start his own company, Shockley Semiconductor, to build the next generation of silicon transistors. And he moves to Mountain View, California, to be closer to his aging mother. Lewis: So he's the guy who brings silicon to the Valley, literally. Joe: He is. And because he's a Nobel laureate, he gets his pick of the brightest young minds in the country. He assembles this dream team of physicists and engineers. But there's a problem. Shockley is brilliant, but he's also a terrible manager. He's paranoid, erratic, and micromanaging. He even subjected his employees to lie detector tests. Lewis: Oh, that sounds like a fantastic work environment. I can see where this is going. Joe: It gets worse. He decides to abandon the promising silicon transistor research his team is working on to pursue a different, less viable technology. His star employees are furious. So, eight of them, led by Robert Noyce and Gordon Moore, do something that was unheard of at the time. Lewis: They quit? Joe: They did more than quit. They left as a group. They secretly contacted a Wall Street banker, found an investor named Sherman Fairchild, and started their own competing company, Fairchild Semiconductor, just a few miles down the road. Shockley was enraged. He called them "the traitorous eight." Lewis: The Traitorous Eight! That's an amazing name. Okay, so this is the origin of the 'move fast and break things' mentality? Joe: This is the moment the cultural DNA of Silicon Valley is forged. Before this, you worked for a big company for life. You were a salaried employee. What the "Fairchildren," as they became known, did was revolutionary. Their new company, Fairchild, wasn't like the hierarchical corporations back East. It was flat, intense, and meritocratic. Lewis: And I'm guessing there was a financial incentive too? Joe: That's the absolute key. O'Mara points out that Fairchild gave its key employees something transformative: stock options. Suddenly, they weren't just employees; they were owners. They had a direct stake in the company's success. If the company won, they won, big time. Lewis: Ah, so that's the secret sauce! It's not just a job anymore; it's a mission. It's a lottery ticket. It’s like they were all co-founders. Joe: Precisely. And this model became the standard. Fairchild itself became a launchpad. Its employees, flush with cash from their stock options, would leave to start their own companies. This created what O'Mara calls "talent churn." People moved from company to company, idea to idea. Noyce and Moore left Fairchild to found Intel. Another Fairchild alum started AMD. It's been said that you can trace the lineage of almost every major Silicon Valley company back to those "Traitorous Eight." Lewis: It's like the 'PayPal Mafia' of its day, but for the entire semiconductor industry. Everyone who left went on to start something huge. So we have government money creating the playground, and this hyper-competitive, stock-option-fueled culture creating the game. But how does that get us from building chips for missiles to the iPhone in my pocket? It still feels very hardware and defense-focused. Joe: That's the final piece of the puzzle. The Valley had to find a new soul. It had to shift its mission from serving the establishment to empowering the individual.

Lewis: A new soul. That sounds dramatic. What prompted the change? Joe: The 1960s and 70s. The counterculture. The Vietnam War protests. A new generation was emerging that was deeply suspicious of large institutions, whether it was the government or big corporations like IBM. To them, the mainframe computer, with its punch cards and centralized control, was a symbol of "The Man." You might remember the famous protest sign from Berkeley's Free Speech Movement: "I am a UC student. Please don’t bend, fold, spindle or mutilate me." Lewis: Right, riffing on the IBM punch card warning. They saw the computer as a tool of oppression, of dehumanization. Joe: Exactly. But a new breed of technologists, many of whom were part of that counterculture, started to see things differently. They saw the potential for smaller, personal computers to be tools of liberation. To give power to the people. This is where you get the Homebrew Computer Club, this legendary gathering in the mid-70s where hobbyists, engineers, and dreamers would get together to share ideas and show off their homemade machines. Lewis: This is where Wozniak and Jobs come in, right? Joe: This is their world. It was a melting pot of idealism and engineering. And two very different visions for the future of personal computing emerged from it. On one hand, you have Apple. Their iconic "1984" Super Bowl ad is the perfect encapsulation of this new ethos. It doesn't even show the computer. It shows a lone, athletic woman smashing a screen broadcasting the face of a Big Brother figure. Lewis: A direct shot at IBM. The message was clear: we're the rebels, the revolutionaries. We're here to set you free. Joe: It was a masterpiece of storytelling. Steve Jobs was selling a revolution, a lifestyle. But at the very same time, another figure was pushing a very different, and equally powerful, idea. That was Bill Gates. Lewis: Who was up in Seattle, not even in the Valley. Joe: Right. And while the Homebrew crowd was all about sharing code and building things for the love of it, Gates saw it differently. He saw hobbyists copying and distributing the BASIC software he and Paul Allen had written for the Altair computer for free. And he got angry. In 1976, he wrote a famous "Open Letter to Hobbyists." Lewis: What did it say? Joe: In essence, it said: "You are stealing from us." He argued that software wasn't just a hobby; it was a professional product. It took time and money to create, and developers deserved to be paid for it. He was making the case for proprietary, commercial software. Lewis: Wow. So you have two competing visions for the future of tech emerging at the exact same time. Jobs is selling an anti-corporate revolution. Gates is laying the groundwork for the corporate software industry. Joe: And in a way, they both won. That tension—between the open, collaborative, "information wants to be free" hacker ethic and the closed, proprietary, capitalist model—is a conflict that is still at the very heart of the tech world today. It's the battle between open-source and Microsoft, between Wikipedia and a paid subscription service.

Lewis: It's incredible. The whole story we've been told is just the surface layer. It's not just a few guys in a garage. Joe: Not at all. As O'Mara's book The Code makes so clear, the story of Silicon Valley is really a three-legged stool. First, you have the massive, decades-long government investment in defense and research that provided the stable foundation. Lewis: The hidden architect. Joe: Then you have the second leg: that unique, hyper-competitive culture born from the "betrayal" at Fairchild, fueled by stock options and a relentless drive to innovate. Lewis: The Fairchildren. Joe: And the third leg is the powerful, evolving story the Valley told about itself. It shifted from a mission of fighting communism to one of empowering the individual, and eventually, to one of changing the entire world. Lewis: That's a much more complex, and frankly, more interesting story. It makes you wonder, what is the story the Valley is telling itself today? And who is the 'hidden architect' funding the next revolution, whether it's AI or something else? Joe: That's a perfect question to leave with. The code is always being rewritten. We'd love to hear your thoughts. What part of this hidden history surprised you the most? Find us on our socials and let us know. Lewis: This is Aibrary, signing off.