Episode Transcript
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>> Niall Ferguson (00:07):
Hello,
my name is Neil Ferguson.
I'm the Milbank family senior fellowhere at the Hoover Institution, and
the chair ofthe Hoover History Working Group.
And today we've heard a terrificpresentation by my guest,
Margaret O'mara, who is the Scott andDorothy Bullock professor of American
history at the University ofWashington and the author of The Code,
(00:29):
Silicon Valley andthe Remaking of America.
Margaret, welcome to Hoover.
You argue in the book that there'sa kind of symbiotic relationship between
the dynamic private sector that flourishesin California after World War II and
the US government over in Washington DC,the other Washington.
(00:49):
Talk a bit about that, and why didthat symbiotic relationship produce
Silicon Valley as opposed to, I don'tknow, Chicago Valley or some other valley?
>> Margaret O'Mara (00:59):
[LAUGH] ,yeah, yeah,
yeah, funnily enough, Dwight Eisenhower
never said, I shall build a silicon,a science city in northern California.
>> Niall Ferguson (01:08):
There was never a plan.
>> Margaret O'Mara (01:09):
There was
never a plan, which of course,
is the glorious part of history whenit's all just messy and unplanned.
But nonetheless, it is thiscombination of top down spending for
geopolitical reasons.
The beginning of the Cold War is a hingeof history for this place, which was
mostly agricultural and distinguished byits university, Stanford, in the middle.
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But it is this flood of spendingcomes into the military sector and
for specifically for electronics andsmall communication devices.
Which happen to be the thing thatthis region does already have
a subspecialty in.
Radio communication, long distancewireless communication, miniature
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electronics companies like HewlettPackard, founded right before the war.
And sothis combination of core competencies,
sort of regional conditions here, andthen this influx of resources changes it.
And so the first 20 years of the valley,
it is chiefly almost entirelya defense economy, and
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then it changes as the Vietnam wardrawdown and military spending.
There was a bit of crescendo in the 80's,during the Reagan years and
reinvestment in the military.
But then this is notjust a military story.
It's a story of investment in research andin higher education and also in, and
in creating conditions forentrepreneurship.
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So I think that's the other partof it that's very important.
>> Niall Ferguson (02:38):
Well, I'm glad you said
higher education, because we are sitting
here at the Hoover institution atthe heart of the Stanford campus, and
it's pretty hard to imagineSilicon Valley without Stanford.
So what's the role thatthe university plays?
MIT was already, in a way,the place that epitomized
the link from defensecontracts to academia.
(02:59):
And one might have expected it tohave dominated in the Cold War, but
Stanford comes along.
How come, andis it Stanford that just gets lucky or
does Stanford have a game plan?
>> Margaret O'Mara (03:10):
[LAUGH] ,yeah, coming
out of the second world war, MIT and
Harvard were the leadingresearch institutions and
the leaders of those institutions were theones designing post war federal research.
I mean, they were the architects of it.
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 wasthe dean of Engineering and then provost.
Who had trained as a graduate studentat MIT under one of those architects,
Vannevar Bush, and understood thatthere was a real change coming.
And he andother leaders of the university,
the then president Wallace Sterling,a historian, and others,
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decided to profoundlyreorganize what Stanford did.
To build up what Terman famously calledsteeples of excellence in the Sciences and
Engineering to make it more like MIT,quite frankly.
It already had a scientific andtechnological bent from the very
beginning, butit really doubled down on it.
And to develop Stanford lands,the nearly 9000 acres that the university
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received in its foundinggrant from the Stanford's.
That the Stanford said, you may notsell it, you can develop it, but
don't sell it, quite the albatross forsome decades for them.
And then it's developed not onlyinto the faculty housing and
the Stanford shopping center, [LAUGH], but
also the Stanford Research park anda very deliberate economic development
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strategy directed at electronicsindustries and high tech industries.
So the university plays thiscritical role and it's not just,
oftentimes we think of universitiesas invention spins off and
then gets commercialized,and that's the contribution.
The real thing, and it's very clearin the case of Stanford is people.
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It's the people in the university andit's the people who are educated here and
then go off and start companies.
And the entrepreneurial culture thatis fostered here that allows this
movement back andforth between industry and
the university in a way thathorrified many academics, [LAUGH].
I think our fellow humanistswere not happy about it, but
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it was a strategy that only Stanfordas a private university could do and
it proved extraordinarily generative.
And also I think this place beingwhat it is, agricultural valley with
a few small towns, there isn't a big city,a downtown, a center.
Stanford has becomethe de facto town square.
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It is the center of the action in a waythat's unlike any other university
in the United States.
>> Niall Ferguson (05:50):
Why do you think
it's so hard to replicate this?
You've given talks about thisbook all over the world.
And I should imagine thatpretty much everywhere you go,
somebody's got a silicon fen ora silicon glen or silicon piazza.
And yet somehow none of theseimitations ever quite catch fire.
Why do you think that is?
>> Margaret O'Mara (06:10):
Yeah, I mean,
imitation is the easiest typeof economic development, right?
You say, they build this,we're gonna build one of those.
>> Niall Ferguson (06:16):
And
sometimes that works.
>> Margaret O'Mara (06:17):
And
sometimes that works.
It does not, and it's so historicallyspecific and contingent and the product
of not just simply this wave of Cold Warspending and the military industrial
complex, but also the US space program,which, of course, is part of the Cold War.
Let's be clear that the Americanswanna land on the moon,
to get there before the Soviets do,[LAUGH].
(06:39):
But that spending on small electronics andcommunication devices,
all of the money thatputs into the system,
the federal money that puts intothe system for military uses.
I mean, look, war is the onething that the United States
has been willing to spend copiously on,[LAUGH].
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There's a lot of, it kind of,with a geopolitical justification,
kind of gave this urgency and gave a lotof political leeway to spend a lot of
money on things that didn'thave an immediate application.
That was incredibly useful, not onlyin terms of being a customer to small
startups in the silicon chip businessin the 1960s, but also in fostering
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basic research in science education inuniversities and research institutes.
>> Niall Ferguson (07:28):
Give the example
of a child semiconductor.
1957, it's founded the year of Sputnik,where the challenge from
the Soviet Union seems a mortalthreat to the United States.
The Soviets had the science,they certainly had the scientists.
They had universities,they had defense spending, but
there's a complete failure toreplicate the semiconductor industry.
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And that means that the Sovietslose the computer race.
They've been able to compete on atomicweapons in space, but they can't compete
when it comes to silicon, andthat's a remarkable thing in itself.
I've been thinking a lot about this,because it seems to be at the heart of
another very interesting book ona similar topic, Chris Miller's chip war.
And part of the story there isthis obvious just can't do this.
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There's nothing they can do,they know they can't do it.
They can steal the chips, butthey can't replicate them.
And yet something seems tokinda go wrong in the story,
namely that outsourcingoffshoring happens.
And without anybody quite noticing inWashington DC, a really significant
part of the semiconductor industryends up outside the United States and
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indeed ends up in the strategicallyrather vulnerable location of Taiwan.
Was this a case of nobodyquite paying attention?
Or are there other reasons whySilicon Valley does get replicated,
in a way, in TSMC's fabs in Taiwan?
>> Margaret O'Mara (08:53):
Yeah, well, the
offshoring of semiconductor manufacturing,
like offshoring of other goods,is both a push and a pull, right?
So the chipmakers here are some ofthe very earliest to outsource.
In 1963, Fairchild National are goingto East Asia just incredibly early.
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They are looking for lower cost labor,they are looking for
to maximize efficiency and speed,to be able to produce things as quickly.
And they're also going up againstthis dual threat of their other
competitors and just being ableto get a minimum viable product
that can have a commercial market,not just a defense one.
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And also the growth of these East Asianeconomies that are doing capitalist
develop mentalism very aggressivelystarting in the 60's, and 70's, and
80's, right?
So you have Singapore and Japan whoare kind of creating the conditions to
encourage American firms to come over.
And the eye is not on, the focus is on
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the Soviets as a competitor and a threat.
Certainly in the 1960s into the 1970s,and by the 80's, it's all about Japan.
And so anything that is going toincrease the competitive advantage of
Americana firms in the global marketplace,even if that means the building,
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this has to become an outsourced andoffshore industry.
There was just no, yeah, I think noone was really paying attention.
And there also, I think the otherthing that's a factor here is you're
coming into the 1970s at the momentthat the chip makers are kind of
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,
how can we get, we have all ofour technological world is so
dominated by defense, andwe need to get the private.
We need to privatize it some more,we need to find commercial applications.
We need to encourage the privatesector to really be central to this,
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not have it all ruled by the government.
And so that too is really going to preventthe Nixon administration, or successive
administrations, for that matter, to kindacome in and tell chip makers what to do.
Particularly when they're getting more and
more challenged by much moreagile competitors overseas.
>> Niall Ferguson (11:26):
Fast forward
to 2022 and we have the Chips and
Science act, which feels a little bit likeyour story coming full circle once again.
And the federal government is goingto bring out its checkbook and
try to reignite the hardwareside of the US economy.
Can it work, or is this an attemptto resuscitate a patient
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that's already DOA, dead on arrival?
>> Margaret O'Mara (11:52):
I'm impressed
by the amount of money.
It's gonna do something.
It's a lot of money, and it's moneythat is being structured in a way
that is designed to geographicallydeconcentrate the industry and
bring it to bring high techmanufacturing into new places,
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into economically depressed places.
That doesn't necessarily mean thoseplaces are going to be revived, but
it is going to have an interesting way,working with the existing growth
of tech clusters in other parts ofthe country that are small but growing.
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Look, every company isa technology enabled company.
Everyone needs really good softwareengineers, [LAUGH], on staff.
So tech has become kind ofa much larger field, and
it's also structured asa public private partnership.
So it's going to kind of,it's incentivizing private markets and
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private companies, private capitalto behave in certain ways and
also making big betsa little more feasible.
And the way that the Apollo program madethe integrated circuit a more feasible bet
because you had someone who's goingto buy the things, [LAUGH], and
you had kind of, you weren't just blueskying it with no way to apply it.
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The same goes with these,
when you have money kindof subsidizing something,
that is going to allow you asa company to invest in R and
D at a greater scale,green energy, for example.
And quite honestly, I think because itis framed rightly as a geopolitical,
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addressing a geopolitical problemas a threat to national security,
it gives it political supporton a broader scale than if it
were simply framed asa domestic economic program.
>> Niall Ferguson (13:56):
So almost as if the US
needs a Cold War to get this kind of
symbiosis, [LAUGH], between government andprivate sector to work.
Well, one of the consequences ofStanford's involvement in all of this
has been, I suppose, for history torecede as a force on this campus.
But you are reminding all those people inengineering and computer science that,
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yes, they too have a history.
The book, once again, is The Code SiliconValley and The Remaking of America.
We've been enormously lucky tohave Margaret O'mara here with us
to tell the story.
Thank you so much for listening.
And Margaret,thank you very much for joining us.
>> Margaret O'Mara (14:31):
Thank you for
having me, it's a pleasure.
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