Day of Empire_ How Hyperpowers Rise to Global Dominance--And Why They Fall - Amy Chua [138]
It is well known that the United States won the race for the atomic bomb because of the contributions of Albert Einstein and other refugee physicists. Less well known is the similar role that immigrant scientists played in America's stunning triumph in the “information technology” race, which has transformed the world in the last quarter century. The boom America enjoyed during the 1980s and 1990s was directly fueled by two revolutionary developments, one technological and one financial: the discovery of the microchip and the creation of venture capitalism. The former gave birth to the computer age, and the latter to Silicon Valley, which in turn allowed new “information technology” to be exploited at lightning speed. The origins of these two developments are closely connected, and, once again, both were the fruit of American openness to immigrant talent and enterprise.
Eugene Kleiner arrived in the United States in 1941 at the age of eighteen, having fled Vienna just before the Nazi takeover. Although lacking a high school diploma, Kleiner later graduated from Brooklyn Polytechnic with an engineering degree. In the early 1950s, Kleiner was recruited to California by the controversial physicist William Shockley, who, a few years earlier at Bell Labs, had participated in an unexpected invention. Using a bent paper clip, strips of foil, and a small piece of semiconducting material, Shockley's team produced a tiny device that, to their astonishment, amplified electric current. They called the device a transistor.
Shockley left Bell Labs to start his own company with the idea of developing a multiple-transistor semiconductor. Shockley insisted on using germanium as the semiconducting material. Kleiner and others on the team believed silicon would be superior, but the difficult and increasingly paranoid Shockley brooked no disagreement. Soon, Kleiner and seven colleagues broke away, scraping together $3,500 of their own money to pursue their silicon-based research. But even in the 1950s, $3,500 was woefully inadequate, and it was virtually impossible to secure investment funding to back an untried scientific idea in its germinal stages. Nevertheless, after writing a now famous letter to a New York stockbroker, Kleiner managed to get his group funded. As a result, Kleiner and his colleagues became the officers of their own company, Fairchild Semiconductor.
Shockley won the 1956 Nobel Prize for his role in discovering the transistor. He also went on to gain considerable attention as a professor at Stanford, particularly for his racist eugenic beliefs. (He often publicly warned that “intellectually inferior” blacks were procreating at a dangerously high rate.) But his company, Shock-ley Semiconductor, was a commercial failure.
By contrast, Kleiner and his colleagues succeeded in producing the world's first commercially practical integrated circuit—out of silicon. Within a short time, Fairchild Semiconductor grew from twelve employees to 12,000, with revenues of $130 million a year. Santa Clara Valley, previously known mainly for its plums and walnuts, would never be the same again.
Now wealthy, Kleiner decided to try something new. No doubt reflecting on his own difficulties starting Fairchild Semiconductor, Kleiner had the idea of creating an investment fund for breakthrough scientific innovations. Although venture capital is a familiar concept today, it was not in the early 1970s. Virtually unique in its time, the investment firm that Kleiner cofounded—which eventually became the now legendary Kleiner, Perkins, Caufield & Byers—adopted the strategy of aggressively searching out and betting big on untried technology while allowing (indeed encouraging) the inventors to retain a large ownership stake in the new companies. The formula succeeded: The companies that Kleiner, Perkins