The shorter edited version of this article was first published in Singapore’s Straits Times as Cover Story on 28th January 1997 under the caption, Why Silicon Valley will continue to hold its lead. The following is the original longer version of the same article with a different caption.
Two aspects of American creative genius that have achieved worldwide preeminence concern movie-making and information technology. Both have global adherents, but employ different communication techniques and strategies to reach out to them. Their leading lights are Hollywood and Silicon Valley – both in California, known as the nation’s Golden State.
While Hollywood has captured the imagination of millions of cinema audiences worldwide, its products, and the unabashed American commercialism reflected in them, are not universally admired.
The impact of Silicon Valley, which epitomises the cutting edge of American information technology, is likely to be more enduring. It has already started a process that experts say will revolutionise the way we think, communicate, do business and even our lifestyle.
Mankind needs easy access to information in order to progress and develop. One’s ability to exploit it confers a sense of power and accomplishment.
The inventions of paper (2nd century BC) and printing (8th century AD) by the ancient Chinese, and their subsequent refinements, enabled literacy and knowledge to spread rapidly. They also contributed to the European Renaissance (1350-1600 AD), which rekindled the flame of learning and led to new scientific breakthroughs that eventually changed the balance of world power.
J. R. Mclaughin, author of “The Making of the Silicon Valley”, believes that the technology of Silicon Valley has had a greater impact than any other occurrences since the Renaissance. This sentiment is echoed by W. J. Perry, United States Secretary of Defence, who hails it as “perhaps the most significant renaissance that has occurred in the history of science”.
Its phenomenal success is enhanced by its ability to attract thousands of foreign talents from all over the world to make their innovative contributions there. More than one-third of the engineers, scientists and a significant number of entrepreneurs and senior administrative and marketing personnel came from overseas. Of these, more than half are Asians. It is estimated that there are more than one hundred Singaporeans in various jobs there. They gravitated to the Valley because of its magnetic appeal, coupled with enlightened corporate culture, stimulating work climate and abundance of opportunities to make their contributions not found elsewhere.
Among the Asians who have made it to the top echelon include Vinod Khosla (co-founder, Sun Microsystems), David Lam (founder, Lam Research and Expert Edge Corporation), Suhas Patil (co-founder, Cirrus Logic), John S. Chen (CEO, Pyramid Technology), Dr Tu Chen (co-founder, Komag) and Young Sohn (President, Quantum Corporation), and more recently Jerry Yang of Yahoo, to name a few.
The Valley has been relentlessly pushing the boundaries of science and technology. Its numerous important and diverse inventions and innovations include: the first commercial radio broadcast, programmable handheld calculator, videotape and VCR, laser, semiconductor large-scale integrated memory, microprocessor, personal computer, robotics, genetic engineering, open-heart surgery, satellite technology and 3-D computing.
Coined by a newspaperman, the name “Silicon Valley” first came into usage in 1971. Situated in the Bay Area and within one hour’s drive from San Francisco, its core areas encompass places like Redwood City, Menlo Park, Palo Alto, Mountain View, Sunnyvale, Cupertino, Santa Clara, San Jose and Milpitas.
Its thriving offshoots include Hayward, Emerville, Berkeley, San Rafael, San Ramon, San Francisco and Scotts Valley.
Among the computer firms, both hardware and software, of world repute operating there are: Hewlett-Packard, IBM, Apple, Netscape, Silicon Graphics, Oracle, Yahoo, Intuit, Adobe Systems, among many others.
San Jose is now the centre of the computer industry, with Palo Alto its mecca and the breeding ground for would-be computer geniuses and successful entrepreneurs.
How did Silicon Valley come about and evolve? The story began with the founding of Stanford University, at Palo Alto, in 1893 by Leland Stanford, a millionaire industrialist.
It aimed to be a leading institution for sciences and engineering, working closely with industries in the area. From the outset, Stanford played a crucial role in providing the necessary research and trained manpower for the long-term growth of the science-based industry. It also granted seed money to promising new ventures to help them succeed.
Many of the prominent scientists and entrepreneurs in the Valley and elsewhere are alumni of Stanford. Their benefactions have made their alma mater one of the most famous and best endowed tertiary institutions in the world. I am glad to say that my second son, Lam Chih Chao, graduated from there with a Master’s degree in Artificial Intelligence.
The “birthplace of Silicon Valley” is a humble one-car garage in a suburban home in Palo Alto. Two young Stanford graduates, William Hewlett and David Packard, started Hewlett-Packard Company (HP) in 1938 with US$538. Initial experiments were carried out there to perfect an equipment for the broadcasting industry. Today, HP is a leading high technology company employing some 100,000 employees worldwide, with a business turnover of US$30 billion in 1995.
The accelerated expansion of the semiconductor and electronics industries during the ‘50s and ’60s was another milestone on its road to fame.
A watershed was the pioneering of personal computers by whiz kids Steve Wozniak and Steve Jobs, co-founders of Apple Computer, in the ‘70s. This paved the way for the vigorous and sustained computer revolution of the ‘80s and ‘90s.
The most palpable influence of the Valley was marked by the meteoric rise of the Internet since 1993. Its original purpose was to serve the needs of military and this was later spread to academic research. However, its high commercial potential led software companies to develop products that would make the Internet more user-friendly. They also expanded its scope and versatility to reach out to both services providers and personal computer enthusiasts.
Today, the Valley’s unsurpassed reputation as the high-tech centre of the world is further reinforced by the ever-growing number of computer and other high technology companies dotting the hitherto nondescript and non-urban rural landscape.
Despite its periodic “boom and bust” cycles, it has succeeded in maintaining its competitive edge with the help of R & D carried out in-house, and with the invaluable ongoing effort of Stanford and Berkeley campuses. Many of its successful products were first tested and perfected at the university labs there. The two institutions have produced more Nobel Laureates than any other universities.
The combined gross revenue generated by Silicon Valley scientific personnel and entrepreneurs amounted to a mind-boggling US$60 billion in 1994. This far exceeds the GNP of many developing countries.
What is the personal profile of top computer professionals and entrepreneurs who have made the place what it is today? It is a community dominated by young people, mostly male, of various nationalities who have a vision and are driven by a missionary zeal to succeed.
Many made their millions by the time they were in their twenties or thirties through unshakeable conviction in their vision and sheer sweat and toil. Notable among these enfant terrible are Wozniak and Jobs, Lawrence J. Ellison of Oracle Corporation, Vinod Khosla and Scott McNealy of Sun, David Lam of Lam Research and Charles W. Burger of Radius Incorporated.
Often working a 15-hour day and 7 days a week in spartan surroundings, especially during the start-up stage, they have hardly any social life and generally eschew the conventional mainstream cultural pursuits. Theirs is a predominantly jeans and T-shirt culture; and they would rather be whipped than to be seen in jacket and tie! However, some have changed to gold-rimmed spectacles and designer shirts, after they were seduced by material success!
What makes the Valley so unique? Can it be duplicated, or even improved upon, by other countries? The writer posed these questions to Stanford-educated Thi Thumasathit, a Thai-American and co-founder of ClickOver, of which my second son Lam Chih Chao is one of the two senior co-founders and his younger brother Lam Chih Ming is a software specialist. It is a new joint venture whose partners are Americans, Singaporeans and Malaysians. it is a computer software company in Palo Alto, and specialises in advertising solution.
“First of all, the Valley has the largest concentration of highly talented computer and other high-tech professionals in the world and they have access to top research institutions. This inevitably results in healthy competition and cross-fertilisation of ideas, culminating in the ability of its products to compete successfully against those from other high-tech centres.
Secondly, the corporate culture here is one of encouraging, or even exalting, risk taking. Consequently, failure holds no terror and there is no stigma attached to a failed effort. Such an enlightened climate is a sine qua non for the growth of entrepreneurship and the eventual success of technological innovation.
Another crucial factor is the positive role of venture capital firms who are eager and willing to support fledgling start-up companies.This is absent or less developed in many other countries. Not infrequently, they are even keen to re-finance entrepreneurs who had failed if they are convinced that a fresh project has merits and therefore worthy of a second chance that could lead to ultimate success,” said Mr. Thumasathit.
He singled out two formidable obstacles facing all start-up companies: recruiting good people and the initial funding required. With a booming computer industry, especially in software, highly competent computer professionals are worth their weight in gold and much sought after by employers.
“Be that as it may, fortunately some bright young people would rather work for a new venture as it may eventually offer more scope for entrepreneurship and career advancement than more established companies. There is also a sense of great achievement if their effort contributes to its success,” he added.
According to him, only a small percentage of start-ups will obtain such funding. Thereafter some 10% of these may become a success, another 30 or 40% should operate moderately profitably, and the remainder is likely to end in failure.
Once a new company obtains a positive response from the venture capitalist, the latter will take up an equity and provide the capital needed on mutually agreed terms. This will include representation on the company board and, in some cases, the right to appoint the CEO.
Mr Thumasathit stressed that paper qualifications, while an advantage, are not as important as one’s demonstrated abilities and business acumen. Examples are Steve Jobs and Bill Gates, both college dropouts, who have become legends in their lifetime.
He concludes that it would be extremely difficult for other centres to replace the Valley as the world’s computer hub for a long time to come.
What will be the role of Silicon Valley in the new millennium? Mr Thumasathit and many in the Valley are confident that it would continue to flourish, perhaps well into the 21st century or even beyond, provided it continues to push the limits of science and technology and is able to compete successfully against the best high-tech centres elsewhere.
With the advent of Internet, and the comfortable head start the Valley has over others, it is well placed to reap the rich harvest of this technological wonder, which will increasingly affect our lives and whose impact has yet to reach its ultimate potential.
Silicon Valley’s greatest inherent strength lies in its awesome creative brainpower, state of the art research capability and unequalled high-tech know-how. These are complemented by experienced venture capitalists, legal and other expert professional services and a host of specialty services providers. Collectively, they will ensure that it will scale a new high in the new millennium.
Mr Thummasathit disclosed that his company is in the final stages of negotiations with a top-notch venture capitalist firm with regard to the terms of its participation in Clickover’s equity. All successful start-ups aspire for eventual public-listing or be acquired by a larger company on most favourable terms. Since the company started, he and his partners have struggled with little monetary resources of their own.
Illinois-trained Singaporean Ong Peng Tsin, who founded Interwoven and is its CEO, has close to ten years of working experience in the United States. His company’s speciality is source code-control management. He is quietly confident that his company will be a winner. He has no plans to come back to Singapore to further his contributions there yet, because its computer-software industry has not yet reached a stage where his specialisation will be readily marketable. This may come about in some future date. He concluded that one great advantage of being in the Valley is that one has the flexibility, and the choice to do what one really desires, and there is always a demand for a product that is right.
Then there is another Singaporean Chen Chi Kiong, who went to Cambridge and Wharton, and has considerable business experiences in Europe and the US. Based in Oakland in California, he is the Advisor (Business Development) to Singapore’s Sembawang Media, a subsidiary of Singapore’s Sembawang Holdings, and an IT company which he helped to launch in 1995. He goes back to Singapore every two months for consultations and does the daily company work via email. In addition, he is also an honorary consultant of two software companies in Silicon Valley, and has shareholdings in them.
Both Mr Ong and Mr Chen fully share Mr Thummasathit’s conviction that it is most unlikely that other centres will replace the Valley as the world’s computer hub provided it continues to maintain its cutting-edge in science and technology and is able to outperform the best high-tech centres elsewhere in the years to come.
Lam Pin Foo