——-

We’re all in this together – The Chips are Down
in 1962 Walker’s Wagon Wheel Bar/Restaurant in Mountain View became the lunch hangout for employees at Fairchild Semiconductor. When the first spinouts began to leave Fairchild, they discovered that fabricating semiconductors reliably was a black art. At times you’d have the recipe and turn out chips, and the next week something would go wrong, and your fab couldn’t make anything that would work. Engineers in the very small world of silicon and semiconductors would meet at the Wagon Wheel and swap technical problems and solutions with co-workers and competitors.

We’re all in this together – A Computer in every Home
In 1975 a local set of hobbyists with the then crazy idea of a computer in every home formed the Homebrew Computer Club and met in Menlo Park at the Peninsula School then later at the Stanford AI Lab. The goal of the club was: “Give to help others.” Each meeting would begin with people sharing information, getting advice and discussing the latest innovation (one of which was the first computer from Apple.) The club became the center of the emerging personal computer industry.

We’re all in this together – Helping Our Own
Until the 1980’s Chinese and Indian engineers ran into a glass ceiling in large technology companies held back by the belief that “they make great engineers but can’t be the CEO.”  Looking for a chance to run their own show, many of them left and founded startups. They also set up ethnic-centric networks like TIE (The Indus Entrepreneur) and the Chinese Software Professionals Association where they shared information about how the valley worked as well as job and investment opportunities. Over the next two decades, other groups — Russian, Israeli, etc. — followed with their own networks. (Anna Lee Saxenian has written extensively about this.)

We’re all in this together – Mentoring The Next Generation
While the idea of groups (chips, computers, ethnics) helping each other grew, something else happened. The first generation of executives who grew up getting help from others began to offer their advice to younger entrepreneurs. These experienced valley CEOs would take time out of their hectic schedule to have coffee or dinner with young entrepreneurs and asking for nothing in return.

They were the beginning of the Pay-It-Forward culture, the unspoken Valley culture that believes “I was helped when I started out and now it’s my turn to help others.”

By the early 1970’s, even the CEOs of the largest valley companies would take phone calls and meetings with interesting and passionate entrepreneurs. In 1975, a young unknown, wannabe entrepreneur called the Founder/CEO of Intel, Bob Noyce and asked for advice. Noyce liked the kid, and for the next few years, Noyce met with him and coached him as he founded his first company and went through the highs and lows of a startup that caught fire.

Steve Jobs and Robert Noyce

The entrepreneur was Steve Jobs.  “Bob Noyce took me under his wing, I was young, in my twenties. He was in his early fifties. He tried to give me the lay of the land, give me a perspective that I could only partially understand,” Jobs said, “You can’t really understand what is going on now unless you understand what came before.”

What Are You Waiting For?
Last week in Helsinki Finland at a dinner with a roomful of large company CEO’s, one of them asked, ”What can we do to help build an ecosystem that will foster entrepreneurship?” My guess is they were expecting me talk about investing in startups or corporate partnerships. Instead, I told the Noyce/Jobs story and noted that, as a group, they had a body of knowledge that entrepreneurs and business angels would pay anything to learn. The best investment they could make to help a startup culture in Finland would be to share what they know with the next generation. Even more, this culture could be created by a handful of CEO’s and board members who led by example. I suggested they ought to be the ones to do it.

We’ll see if they do.

——

Over the last half a century in Silicon Valley, the short life cycle of startups reinforced the idea that - the long term relationships that lasted was with a network of people - much larger than those in your current company. Today, in spite of the fact that the valley is crawling with IP lawyers, the tradition of helping and sharing continues. The restaurants and locations may have changed, moving from Rickey’s Garden Cafe, Chez Yvonne, Lion and Compass and Hsi-Nan to Bucks, Coupa Café and Café Borrone, but the notion of competitors getting together and helping each other and experienced business execs offering contacts and advice has continued for the last 50 years.

It’s the “Pay-It-Forward” culture.

Lessons Learned

• Entrepreneurs in successful clusters build support networks outside of existing companies
• These networks can be around any area of interest (technology, ethnic groups, etc.)
• These were mutually beneficial –  you learned and contributed to help others
• Over time experienced executives “pay-back” the help they got by mentoring others
• The Pay-It-Forward culture makes the ecosystem smarter

—————————————————
It’s been fun debating the question, “Are we in a tech bubble?” with my colleague Ben Horowitz. Ben and his partner Marc Andreessen (the founder of Netscape and author of the first commercial web browser on the Internet) are the definition of Smart Money. Their firm, Andreessen/Horowtiz, has been prescient enough to invest in social networks, consumer and mobile applications and the cloud long before others. They understood the ubiquity, pervasiveness and ultimate profitability of these startups and doubled-down on their investments.

My closing arguments are below. I’ve followed them with a few observations about the Internet that may help frame the scope of the debate.

Are we in the beginnings of a tech bubble – yes.
Prices for both private and public tech valuations exceed any rational valuation to their current worth. In 5 to 10 years most of them will be worth a fraction of their IPO price.  A few will be worth much, much more.

Is this tech bubble as broad as the 1995-2000 dot.com bubble – no.
While labeled the “dot.com” bubble, valuations went crazy across a wide range of technology sectors including telecommunications, enterprise software and biotech, not just the Internet.

Are tech bubbles necessarily bad – no.
A bubble is simply the redistribution of wealth from Marks to the Smart Money and Promoters. I hypothesize that unlike bubbles in other sectors  – tulips, Florida land prices, housing, financial – tech bubbles create lasting value. They finance companies that invest in new technologies, new ideas and new products. And it appears that at least in Silicon Valley, a larger percentage of money made in the last tech bubble is recirculated back into investments into the next generation of tech startups.

While most of the social networks, cloud computing, web and mobile app companies we see today will fail, a few will literally remake our lives.

Here are two views how.

The Internet May Liberate Us
In the last year, we’ve seen Social Networks enable new forms of peaceful revolution. To date, the results of Twitter and Facebook are more visible on the Arab Street than Wall Street.

One of the most effective weapons in the Cold War was the mimeograph machine and the VCR. The ability to copy and disseminate banned ideas undermined repressive regimes from Poland to Iran to the Soviet Union.

In the 21^st century, authoritarian governments still fear their own people talking to each other and asking questions. When governments shut down Google, Twitter, Facebook, et al, they are building the 21^st century equivalent of the Berlin Wall. They are admitting to the world that the forces of oppression can’t stand up to 140 characters of the truth.

When these governments build “homegrown” versions of these apps, the Orwellian prophecy of the Ministry of the Truth lives in each distorted or missing search result. Absent war, these regimes eventually collapse under their own weight. We can help accelerate their demise by building tools which allow people in these denied areas access to the truth.

Yet the same set of tools that will free hundreds of millions of people may end their lives in minutes.

The Internet May Kill Us
The next war will more than likely occur via the Internet. It may be over in minutes. We may be watching the first skirmishes.

In the 20^th century, the economies of first-world countries became dependent on a reliable supply of food, water, electricity, transportation and telephone. Part of waging war was destroying that physical infrastructure. (The Combined Bomber Offensive of Germany and occupied Europe during WWII was designed to do just that.)

In the last few years, most first world countries have become dependent on the Internet as one of those critical parts of our infrastructure. We use the net in four different ways: 1) to control the physical infrastructure we built in the 20^th century (food, water, electricity, transportation and communications); 2) as the network for our military interconnecting all our warfighting assets, from the mundane of logistics to command and control systems, weapons systems and targeting systems; 3) as commercial assets that exist or can operate only if the net exists including communication tools (email, Facebook, Twitter, etc.) and corporate infrastructure (Cloud storage and apps); 4) for our banking and financial systems.

Every day hackers demonstrate how weak the security of our corporate and government resources are. Stealing millions of credit cards occurs on a regular basis. Yet all of these are simply crimes not acts of war.

The ultimate in asymmetric warfare
In the 20^th century, the United States was continually unprepared for an adversary using asymmetric warfare — the Japanese attack on Pearl Harbor, Soviet Anthrax warheads on their ICBMs during the cold war, Vietnam and guerilla warfare, and the 9/11 attacks.

While hacker attacks against banks and commercial institutions make good press, the most troubling portents of the next war were the Stuxnet attack on the Iranian centrifuge facilities, the compromise of the RSA security system and the penetration of American defense contractors. These weren’t Lulz or Anonymous hackers, these were attacks by government military projects with thousands of programmers coordinating their efforts. All had a single goal in mind: to prepare to use the internet to destroy a country without physically killing its people.

Our financial systems (banks, stock market, credit cards, mortgages, etc.) exist as bits.  Your net worth and mine exists because there are financial records that tell us how many “dollars” (or Euros, Yen, etc.) we own. We don’t physically have all that money. It’s simply the sum of the bits in a variety of institutions.

An attack on the United States could begin with the destruction of all those financial records. (A financial institution that can’t stop criminal hackers would have no chance against a military attack to destroy the customer data in their systems. Because security is expensive, hard, and at times not user friendly, the financial services companies have fought any attempt to mandate hardened systems.) Logic bombs planted on those systems will delete all the backups once they’re brought on-line. All of it gone.  Forever.

At the same time, all cloud-based assets, all companies applications and customer data will be attacked and deleted. All of it gone.  Forever.

Major power generating turbines will be attacked the same way Stuxnet worked– over and under-speeding the turbines and rapidly cycling the switching systems until they burn out.  A major portion of our electrical generation capacity will be off-line until replacements can be built. (They are currently built in China.)

Our transportation infrastructure– air traffic control systems, airline reservations, package delivery companies– will be hacked and our GPS infrastructure will be taken down (hacked, jammed or physically attacked.)

While some of our own military systems are hardened, attackers will shut down the soft parts of the military logistics and communications systems. Since our defense contractors have been the targets of some of the latest hacks, our newest weapons systems may not work, or worse if used, may have been reprogrammed to destroy our own assets.

An attacker may try to mask its identity by making the attack appear to come from a different source. With our nation in an unprecedented economic collapse, our ability to retaliate militarily against a nuclear-armed opponent claiming innocence and threatening a response while we face them with unreliable weapons systems could make for a bad day. Our attacker might even offer economic assistance as part of the surrender terms.

These scenarios make the question, “Are we in a tech bubble?” seem a bit ironic.

It Doesn’t Have to Happen
During the Cold War the United States and the Soviet Union faced off with an arsenal of strategic and tactical nuclear weapons large enough to directly kill hundreds of millions of people and plunge the planet in a “Nuclear Winter,” which could have killed billions more. But we didn’t do it. Instead, today the McDonalds in plazas labeled “Revolutionary Square” has been the victory parade for democracy and capitalism.

It may be that we will survive the threat of a Net War like we did the Cold War and that the Internet turns out to be the birth of a new spring for us all.

Fairchild
As I was reading a history of the startup years of Fairchild Semiconductor, I realized that a problem I thought was new – sales as an obstacle to Pivots – had occurred 50 years ago at the dawn of what would become Silicon Valley.

Fairchild, the first successful semiconductor company in the valley, was founded on two technical innovations: manufacturing transistors out of Silicon instead of the then conventional Germanium, and using a diffusion manufacturing process which enabled the production of silicon mesa transistors in batches on assembly line. (While this might sound like Greek to you, it was a revolution.)

Early on, the young company made a dramatic technical pivot when it discovered a way to build silicon planar transistors that dramatically improved reliability. (This was an even bigger revolution.) This increased reliability qualified Fairchild’s transistors for military weapons systems (airborne electronics, missile guidance systems, etc.) With orders from military subcontractors arming the cold war, Fairchild’s sales skyrocketed from $500K in 1958  to $7M in 1959 to $21M in 1960.

By the end of 1960, Fairchild was at the top of its game. In less than three years from the day it started, the company had pivoted its technology process, sales had done a masterful job of Customer Discovery and had found a sweet spot in the market and its fabrication plants were busy turning out as many transistors and diodes as they could make.

What could go wrong?

It was when engineering Pivoted again. And this time sales revolted.

The Revolution Will Not Be Televised
When Fairchild engineers realized that its planar process of manufacturing individual transistors could now be connected together on a single piece of silicon, the Integrated Circuit was born. Engineering thought this could dramatically change the way electronic systems were built, but the head of sales tried to kill the Integrated Circuit program, loudly and vociferously. Engineering was confused, why didn’t the Fairchild salesforce want a revolutionary new product line?

Over My Dead Body
From the point of view of the sales organization this new family of integrated circuits were a major distraction. The Fairchild sales team was on a roll executing a known business model – selling planar diodes and transistors into an existing market. In the transistor market, the problem was known, the customer was known and the basis of competition was known (technical features, price and delivery schedule.)

Integrated circuits were different. Unlike transistors, no one in 1960 was clamoring for the new technology. Integrated circuits were a new market. It wasn’t clear exactly what problem the product would solve, or who the customer was. In fact, the most likely customers, computer designers were openly hostile as they saw integrated circuits doing what they were supposed to be doing – designing circuits.  So selling integrated circuits meant a search for a business model.

This meant that a high testosterone sales team that was busy “executing” as order takers and deal makers had to put on a different hat and become educators and consultative engineers.  No way.

You Get What You Incent
What the engineers also didn’t know is that the head of Sales of Fairchild had cut a great deal on his compensation package. He was paid 1% of gross sales. While this made sense in the first few years when Fairchild was a startup, now it had unintended consequences. His salesmen were also compensated on a commission basis. Why would they want a product they had to force customers to take when they had existing products that were making them rich?

The VP of sales’ incentives led him to stifle any innovation that got in the way of selling as much of the current technology as he could – even if it meant killing the future of the company. Luckily for Fairchild and the future of the semiconductor and computer business, he quit when his compensation plan was changed.

The Land of the Living Dead
I see this same pattern in early stage startups. Early sales look fine, but often plateau. Engineering comes into a staff meeting with several innovative ideas and the head of sales and/or marketing shoot them down with the cry of “It will kill our current sales.”

The irony is that “killing our current sales” is often what you need to do. Most startups don’t fail outright, they end up in “the land of living dead” where sales are consistently just OK but never breakout into a profitable and scalable company. This is usually due to a failure of the CEO and board in forcing the entire organization to Pivot. The goal of a scalable startup isn’t optimizing the comp plan for the sales team but optimizing the long-term outcome of the company. At times they will conflict. And startup CEO’s need a way to move everyone out of their comfort zone to the bigger prize.

Burn The Boats
In 1519 Hernando Cortes landed in the Yucatan peninsula to conquer the Aztec Empire and bring their treasure back to Spain. His small army arrived in 11 boats. As they landed Cortes solved the problem of getting his team focused on what was ahead of them – he ordered them to burn the boats they came in. Now the only way home was to succeed in their new venture or die.

Pivots that involve radical changes to the business model may at times require burning the boats at the shore.

——

Every chip company in Silicon Valley is descended from Fairchild.

Lessons Learned

Sales organizations may get too comfortable to early.

Sales execs execute to their compensation plans.

Pivots are not subject to a vote in the exec staff meeting.

CEO’s and their boards make the Pivot decisions.

To force a Pivot burn the boats at the shore.

————

By the early 1960’s Lockheed Missiles Division in Sunnyvale was quickly becoming the largest employer in what would be later called Silicon Valley.  Along with its publically acknowledged contract to build the Polaris Submarine Launched Ballistic Missile (SLBM,) Lockheed was also secretly building the first photo reconnaissance satellites (codenamed CORONA) for the CIA in a factory in East Palo Alto.

It was only a matter of time before Stanford’s Applied Electronics Lab research on Electronic and Signals Intelligence and Lockheed’s missiles and spy satellites intersected. Here’s how.

Lockheed Agena

Thor/AgenaD w/Corona

In addition to the CORONA CIA reconnaissance satellites, Lockheed was building another assembly line, this one for the Agena – a space truck.  The Agena sat on top of a booster rocket (first the Thor, then the Altas and finally the Titan) and had its own rocket engine that would help haul the secret satellites into space. The engine (made by Bell Aerosystems) used storable hypergolic propellants so it could be restarted in space to change the satellite’s orbit.  Unlike other second stage rockets, once in orbit, the CORONA reconnaissance satellite would stay attached to the Agena which stabilized the satellite, pointed it in the right location, and oriented it in the right direction to send its recovery capsule on its way back to earth.

The Agena would be the companion to almost all U.S. intelligence satellites for the next decade.  Three different models were built and for over a decade nearly four hundred of them (at the rate of three a month) would be produced on an assembly line in Sunnyvale, and tested in Lockheed’s missile test base in the Santa Cruz mountains.

Agena Ferrets – Program 11
As Lockheed engineers gained experience with the Agena and the CORONA photo reconnaissance satellite, they realized that they had room on a rack in the back of the Agena to carry another payload (as well as the extra thrust to lift it into space.) By the summer of 1962, Lockheed proposed a smaller satellite that could be deployed from the rear of the Agena. This subsatellite was called Program 11, or P-11 for short.  The P-11 subsatellite weighed up to 350lbs, had its own solid rockets to boost it into different orbits, solar arrays for power and was stabilized by either deploying long booms or by spinning 60-80 times a second.

Agena Internals

And they had a customer who couldn’t wait to use the space.  While the CORONA reconnaissance satellites were designed to take photographs from space, putting a radar receiver on a satellite would be enable it to receive, record and locate Soviet radars deep
inside the Soviet Union. For the first time, the National Security Agency (working through the National Reconnaissance Office) and the U.S. Air Force could locate radars which would threaten our manned bombers as well as those that might be part of an anti-ballistic missile system.  Most people thought the idea was crazy. How could you pick up a signal so faint while the satellite was moving so rapidly? Could you sort out one radar signal from all the other noise? There was one way to find out. Build the instruments and have them piggyback on the Agena/CORONA photo reconnaissance satellites.

But who could quickly build these satellites to test this idea?

Stanford and Ferrets
Just across the freeway from Lockheed’s secret CORONA assembly plant in Palo Alto, James de Broekert was at Stanford Applied Electronics Laboratory. This was the Lab founded by Fred Terman from his WWII work in Electronic Warfare.

“This was an exciting opportunity for us,” de Broekert remembered. “Instead of flying at 10,000 or 30,000 feet, we could be up at 100 to 300 miles and have a larger field of view and cover much greater geographical area more rapidly. The challenges were establishing geolocation and intercepting the desired signals from such a great distance. Another challenge was ensuring that the design was adapted to handle the large number of signals that would be intercepted by the satellite. We created a model to determine the probability of intercept on the desired and the interference environment from the other radar signals that might be in the field of view, de Broekert explained.

“My function was to develop the system concept and to establish the system parameters. I was the team leader, but the payloads were usually built as a one-man project with one technician and perhaps a second support engineer. Everything we built at Stanford was essentially built with stockroom parts. We built the flight-ready items in the laboratory, and then put them through the shake and shock fall test and temperature cycling…”

Agena and Ferret Subsatellite credit: USAF

Like the cover story for the CORONA (which called them Discoverer scientific research satellites,) the first three P-11 satellites were described as “science” missions with results published in the Journal of Geophysical Research.

Just fifteen years after Fred Terman had built Electronic Intelligence and Electronic Warfare systems for bombers over Nazi Germany, Electronic Intelligence satellites were being launched in space to spy on the Soviet Union.

Close to 50 Ferret subsatellites were launched as secondary payloads aboard Agena photo reconnaissance satellites.

Ferret Entrepreneur
After student riots in April 1969 at Stanford shut down the Applied Electronics Laboratory, James de Broekert left Stanford. He was a co-founder of three Silicon Valley military intelligence companies: Argo Systems, Signal Science, and Advent Systems,

In 2000 the National Reconnaissance Office recognized James de Broekert as a “pioneer” for his role in the “establishment of the discipline of national space reconnaissance.”

Why Balloons?
Balloons had attributes that airplanes couldn’t match – they could stay aloft for a long time (days or even weeks,) they could reach altitudes where airplanes couldn’t fly (100,000 feet,) and they could go places that were too dangerous for manned aircraft (flying over the Soviet Union.)

The Search for Soviet Nuclear Weapons
Project MOGUL was an Air Force balloon program to detect Soviet nuclear tests by listening to sound waves traveling through the upper atmosphere. During World War II, scientists had discovered the existence of an ocean layer that conducted underwater sound for thousands of miles. They thought that a similar sound channel might exist in the upper atmosphere. If they could put microphones in the upper atmosphere, the U.S. thought they might be able to hear Soviet nuclear tests and even detect ballistic missiles launches heading toward their targets. Designed to test this theory, Project Mogul balloons carried microphones up to the sound channel to “listen” and radio transmitters to send the sound to the ground. At first, project MOGUL flights involved trains of small weather balloons up to 600 feet in length. Later MOGUL flights used the large polyethylene balloons developed for the Navy’s SKYHOOK.

Flying Sandwich Bags – SKYHOOK
SKYHOOK balloons, funded by the Office of Naval Research, were designed to stay at a fixed altitude (~100,000 feet) and carry a payload of thousands of pounds. They were huge, 400 feet high, made possible because the then new material called polyethylene.  These “flying sandwich bags” were built by a company that had experience using this material in packaging – General Mills (the same company that makes Cheerios.)

Sniffing for a Reactor – Nuclear Air Sampling – ASHCAN
In 1957 the Air Force started Project ASHCAN (using SKYHOOK class balloons at 100,0000 feet) to take high altitude air samples and search for nuclear particles and trace gases in fallout from tests in the Soviet Union. For the first time, U.S. intelligence could estimate the amount of plutonium being produced by Soviet weapons production reactors. These balloons were secretly launched from Brazil and the Panama Canal Zone, and from air force bases in the U.S.  Over time, U.S. intelligence also used reconnaissance planes like the U-2, RB-57’s, and C-130 aircraft to collect air samples.

Genetrix Launched from the U.S.S. Valley Forge

Ballooning Over the Soviet Union – GENETRIX
While the nuclear detection balloons did their spying while flying above the U.S. or allied countries, the next series of balloons flew over the Soviet Union.

In the 1950’s, while U.S. reconnaissance aircraft flew around the periphery of the Soviet Union, U.S. military planners still had virtually no information about what was going on in vast areas of the Soviet territory. While there were a few overflights of the Soviet interior in the early 1950’s these missions were extremely risky and couldn’t provide enough information to assess Soviet military strength. Spy satellites and the
U-2 spy planes were still far in the future so the U.S. military became big fans of reconnaissance balloons as a solution to this problem.

In 1950 the Air Force thought that high-altitude balloons might be used to perform photo and ELINT spyflights over the Soviet Union.  They placed aerial reconnaissance cameras on the balloons and ran a series of test programs (code names of GOPHER, MOBY DICK, GRANDSON and GRAYBACK) launching 640 balloons from New Mexico, Montana, the West Coast, Missouri and Georgia. With the tests completed, the program name changed to GENETRIX and was given the designation of Weapons System 119L.

In late 1955 President Eisenhower gave the ok to launch the GENETRIX balloons over the Soviet Union. Hundreds of these balloons took off from secret sites in Norway, Scotland, West Germany, and Turkey carrying a gondola with two reconnaissance cameras.

The United States launched 516 of the GENETRIX balloons but only 44 or so made it out of the Soviet Union.  The rest landed on Soviet farms dumping 600-pound cameras in hayfields. We did get coverage of about 8 percent of the Soviet Union, but politically it created a lot of tension as cameras were popping up on Khrushchev’s desk.  “Oh, another balloon Mr. Premier.”  The Soviets put on a public exhibition of the equipment.

Bigger and Better- MELTING POT
Never one to give up, the military suggested a bigger and better balloon program. Since the GENETRIX balloons flying at 55,000 feet were relatively easy for Soviet fighters to intercept, the new balloons would be built around the Navy SKYHOOK design and fly at 100,000 feet for up to a month. These balloons would carry a new reconnaissance camera, built by the Boston University Physical Research Lab. Three of these balloons were launched in July 1958 from an aircraft carrier off the east coast of Japan (in those months the jet stream at the altitude went west to east.) All three accidentally dropped their gondolas over Communist territory.  President Eisenhower cancelled all the balloon overflights.

Unexpected Consequences – UFO’s in the 1950’s
All these balloon flights had an unexpected consequence on a jittery and paranoid nation in the Cold War. Before sunrise and after sunset, while the Earth below was dark, high altitude balloons were still lit by sunlight, and their plastic skin glowed and appeared to change color with the change in sun angle. Some of the Project Mogul balloon flights were launched from Alamogordo Air Base in New Mexico in 1947, and a few crashed nearby – one near a town called Roswell. The start of the Mogul balloon flights coincided with the first reports of UFO’s. To someone on the ground, these balloons may have looked like UFOs.

While the U.S. launched thousands of balloons through the 1950′s, MOGUL, ASHCAN and GENETRIX were the CIA/military’s most closely guarded secret projects. Balloon sightings were dismissed with cover story: they were just weather balloons. Even as one part of the military tried to investigate these sightings, the other kept them away from the true purpose of the balloon missions.The reason for the denials – 1) the Soviets could have masked their nuclear tests and filtered their reactor emissions if they knew what we were sampling and 2) GENETRIX balloon flights over the Soviet Union were a violation of international law.

The thousands of classified balloon flights are a possible explanation of of UFO sightings in the 1950′s and the claim of military cover-ups.

————

The Soviet Union’s detonation of an atomic weapon in 1949 and the start of the Korean War in 1950 fed cold war paranoia in the military and political leadership of the United States. The U.S. intelligence community was determined to find out what was going on inside the Soviet Union. But Soviet secrecy had the country locked down tightly. Desperate for intelligence, the CIA would fly the Lockheed built U-2 spy plane into and over the Soviet Union on 24 missions from 1956-1960 taking photos of its military installations.

But even as the U-2 was beginning its overflights, the U.S. military had concluded that the future of intelligence over the Soviet Union would no longer be with airplanes, but would rely instead on spy satellites orbiting hundreds of miles above in space.

One company in what is today Silicon Valley would build most of them.

Weapons System 117L
In 1956 Lockheed Missiles had just won the contract to build the Polaris Submarine Launched Ballistic Missile (SLBM) for the U.S. Navy in Sunnyvale California, and down in Los Angeles, the U.S. Air Force was on a “crash program” to build land-based Intercontinental Ballistic Missiles (ICBM’s) – the Atlas, Titan and Minuteman.

In 1954, three years before the U.S. or the Soviet Union ever orbited a single satellite, the Air Force asked the RAND corporation to study what satellites could do for the military. Their answer: satellites would enable us to peer over the closed border and inside the Soviet Union.  In 1956, the Air Force organization building our ICBMs was assigned to build a family of satellites to spy on the Soviet Union from space. These satellites would be configured to carry out different reconnaissance missions, including photo reconnaissance, infrared missile warning, and Electronic Intelligence.

This military spy satellite program was called Weapons System 117L.

Spies in Sunnyvale
In 1956 the Air Force gave Lockheed Missiles Division in Sunnyvale the contract to build Weapons System 117L.

Over the next two years Weapons System 117L evolved into a large ambitious program with multiple satellites:

• The Satellite and Missile Observation System (SAMOS) would take low resolution pictures of the Soviet Union from space and transmit the photos electronically to earth.
• Another SAMOS version (called Ferrets) would collect electronic intelligence on Soviet radars and transmit the location and radar details electronically to earth.
• The Missile Detection Alarm System (MIDAS) would provide early warning of the launch of Soviet missiles heading to the U.S. by looking for the hot exhaust (the infrared plume) of rocket engines and transmit the location of the launch electronically to earth.

Crisis
In 1957, a year after Lockheed got the contract to start building WS-117L, the Soviet Union tested an ICBM – one that could carry a nuclear warhead to the United States. They quickly followed with the launch of Sputnik, the first earth-orbiting satellite.

These two events jolted the U.S. intelligence agencies into crisis mode. The Soviet Union claimed they could turn out ICBMs like sausages, and the CIA desperately needed to know how many missiles the Soviets really had and where they were.

Not Good Enough
The photo reconnaissance satellite designed for Weapons System-117 would have let the U.S. military see objects larger than 100-feet from space.  This 100-foot resolution was sufficient for its original mission – to assess how effective the first wave of nuclear attacks on the Soviet Union had been. This “post-strike bomb damage assessment” would allow targets that had been missed by the nuclear armed SAC bombers to be retargeted for follow-on attacks. Because of the immediacy of the information, it required real-time electronic read-out of film developed on orbit.

The problem was that while 100-foot resolution was good enough to locate craters left in cities from space, it wasn’t sufficient for the new mission; to locate the new Soviet ICBM silos and bombers. In addition, the electronic read-out of film developed on orbit was nowhere near ready; it was too complex for its time and technology.

The CIA and Corona
The CIA convinced the Secretary of Defense that the best bet was to build a separate photo reconnaissance satellite carrying a camera that took pictures from space as it passed over the Soviet Union. Film from the camera would be de-orbited in a capsule that could survive the heat of re-entry from space. A parachute would slow the descent of the capsule, which would be snatched in mid-air over the Pacific Ocean by a recovery plane hooking its parachute.  The idea was that this film-based spy satellite would be a short-term project until the Lockheed electronic readout version was in better shape.

This Project was code-named Corona.

The Flamingo Motel
In March 1958 a few unassuming guests checked into the Flamingo Motel in San Mateo, California, near the San Francisco airport.  The CIA, and their primary contractors Lockheed, Kodak, Fairchild and GE, met to hash out their roles and the schedule. The CIA was the customer. Lockheed would integrate and assemble the satellites, Itek (which replaced Fairchild) would provide the camera, Kodak the film, and GE would provide the recovery system that would bring the exposed film through the fiery re-entry back to earth.

After the meeting, the Lockheed manager for Corona rented his own hotel room in Rickey’s Hyatt House in Palo Alto to start to plan the program. He needed to find a factory, separate from the already secret Polaris factory in Sunnyvale. He found an unused facility at the Hiller Helicopter factory on Willow Road in East Palo Alto which became the Lockheed “Advanced Projects” facility.

Deception
To hide the fact that we were launching high-resolution photo reconnaissance satellites over the Soviet Union, the CIA had the Air Force publically cancel the SAMOS photo reconnaissance portion of WS-117L. The program then was resurrected as a “deep black” “compartmentalized” CIA program. When the Corona satellites were launched the CIA used a “cover” story. They called the Corona satellites the  “Discoverer” program and claimed it was an experimental program to develop and test satellite subsystems and explore environmental conditions in space. The film recovery capsule was described as a “biomedical capsule” for the recovery of biological specimens sent into space as an early test of how humans would react to manned spaceflight.

East Palo Alto – Lockheed’s Satellite Factory
The Corona project was run like a startup – a small team, minimum bureaucracy, focussed on a goal and tightly integrated with customer needs. Starting in February 1959, only 12 months after the program began the Air Force launched the first  Corona reconnaissance satellite from the military’s secret spaceport on the California coast at Vandenberg Air Force Base. But the first 13 missions were failures. Yet the program was deemed so important to national security the CIA and the Air Force persevered. And when the first images were received they transformed technical intelligence forever. At first, objects as small as 35-50 feet could be seen from space, with later versions improving to be able to see 6-10 feet objects, over millions of miles of a formally closed country.

Corona Image of Stepnogorsk Bioweapons Facility

Over the life of the program there were 145 Corona launches – 120 were complete or partial successes. During that same decade the Corona program evolved into six different satellite models (the KH-1 thru KH-6) with three different intelligence objectives.

Lockheed turned the Hiller Helicopter plant in East Palo Alto into the control facility for all spy satellites and the Corona spy satellite assembly line – building about one a month and delivering ~145 Corona satellites over the life of the program.

Stanford, Jasons, WS-117L and Corona
In addition to Lockheed, Stanford University also had a hand in Corona. Sidney Drell, then a professor in the Stanford Physics department, was one of the dozen of young scientists who were founding members of the Jason Group (scientists working on national security problems.) His first project was understanding whether a Soviet nuclear burst in space could blind the infrared sensors on the Midas portion of WS-117L.  This research got him invited to be part of the President’s Scientific Advisory Council (PSAC). But it was when the CIA asked him to solve some technical problems with the film on the Corona spacecraft that his career became intertwined with photo reconnaissance. His studies convinced the CIA that photo interpreters needed an order of magnitude improvement in resolution, and Corona had been pushed to its limits. In the late 1960′s Drell, as a member of the Land Panel convinced the CIA that the next generation of photo reconnaissance satellites should transmit their images back to earth in real-time, and use CCD’s rather than film.

For his work, Drell, still at Stanford, was recognized as one of the ten founders of National Reconnaissance by the NRO.

Corona Firsts
While Corona had a number of technological breakthroughs, including the first photoreconnaissance satellite, the first recovery of an object from space, etc. it was Corona imagery in 1961 that told the intelligence community and the new Kennedy administration that the “missile gap” (the supposed Soviet lead in ICBMs) was illusory. By fall of 1961 Soviet Union had a total of six deployed ICBMs – we had ten times as many. In truth, it was the U.S. that had the lead in missiles.

Corona was just the beginning. Overhead reconnaissance would become an integral part of the U.S. intelligence community. Hidden in plain sight, Lockheed and the U.S. intelligence community were just getting started in Silicon Valley.

Next – Agena, Midas, Ferrets and the NRO.

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The Future is Clear – Microwave Valley Forever
In 1956 Hewlett Packard, back then a maker of test equipment was the valley’s largest electronics employer with 900 employees. But startups were rapidly spinning out of Stanford’s Applied Electronics Lab delivering microwave tubes, components and complete electronic intelligence and electronic warfare systems for the U.S. military and intelligence agencies. The future of the valley was clear – microwaves.

1956 – Change Everything
In 1956 two events would change everything.  At the time neither appeared earthshaking or momentous. Shockley Semiconductor Laboratory, the first semiconductor company in the valley, set up shop in Mountain View. And down the street, Lockheed Missiles Systems Division which would become the valley’s most important startup for the next 20 years, moves its new missile division from Burbank to 275 acres next to the Moffett Naval Air Station in Sunnyvale.

Lockheed – Building Nuclear Missiles in Sunnyvale
Lockheed, an airplane manufacturer, was getting into the missile business by becoming the prime contractor to build the Polaris, a submarine launched ballistic missile (SLBM) developed by the Navy. The Polaris was unique: it would be the first solid-fuel ballistic missile used by the U.S.  Solid fuel solved the safety problem of carrying missiles at sea and underwater and also allowed for instant launch capability. Polaris launched SLBM’s would become the third part of the nuclear triad the U.S. built in the cold war –  the Polaris, the B-52 manned bomber, and the Minuteman, and Titan land-based Intercontinental Ballistic Missiles (ICBMs.)

Each Polaris missile carried a 600 kT nuclear warhead, (later Polaris versions carried three) and each ballistic missile submarine carried 16 of these missiles. 10 years after the program started the United States had built and put to sea 41 ballistic missile submarines carrying 656 Lockheed missiles (28.5 ft high, and weighing 29,000 lbs.) The company acquired a 5,000 acre missile test facility near Santa Cruz, and for years would test it’s missiles in the mountains above the valley.

One can assume that with spares, Lockheed built close to 1000 of these missiles in those ten years.  That’s 100 missiles a year, 8/month or 2 a week flying out of Moffett Field.

You Can Be Sure if It’s Westinghouse
Polaris submarines carried each missile in a separate launch tube. Down the street from Lockheed in Sunnyvale, another American corporate icon, Westinghouse became the developer of the launch tube for the Polaris missile.  To launch missiles from a submarine under water, Westinghouse had to solve several problems. The launch tube had to keep the missile snug in its tube until firing.  It had to eject the missile with sufficient velocity so it would head to the surface for a 100’ feet under water, and it had to protect the submarine when ocean water came rushing in to the now empty launch tube.  Oil-filled shock absorbers solved the cushioning problem and compressed air launched the missile out of the tube through a thin diaphragm that separated the missile from the ocean once the missile launch covers were opened.

Zero to 28,000 people – We Become “Defense Valley”
By 1965 Hewlett Packard, the test and instrumentation company, had grown ten-fold.  From 900 people in 1956 it now employed 9,000. Clearly it must have been the dominant company in the valley? Or perhaps it was Fairchild, the direct descendant of Shockley Semiconductor, now the dominant semiconductor supplier in the valley (80% of its first years business coming from military systems) with ~10,000 people?

Nope, it was the Lockheed Missiles Division, which had zero employees in 1956, now in 1965 had 28,000 employees in Sunnyvale.  The best and the brightest were coming from across the country to the valley south of San Francisco.

And they were not only building Polaris missiles.

By 1965 Lockheed factories in Sunnyvale, Stanford and East Palo Alto were building the most secret spy satellites and rockets you never heard of. While the 1950′s had made us “Microwave Valley,” the growth of Lockheed, Westinghouse and their suppliers had turned us into “Defense Valley.”

In the next post; Spy Satellites in East Palo Alto and Stanford – Corona, WS-117, Samos, Ferret’s and Agena.

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In March I was the keynote at the In-Q-Tel Venture Capital Conference, giving a talk on the Secret History of Silicon Valley. (In-Q-Tel is the Central Intelligence Agency’s Venture Capital firm in Silicon Valley.)
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The gist of the talk was that the needs of electronic intelligence in the midst of the Cold War and a single Stanford Professor was a key catalyst for entrepreneurship in Silicon Valley.

There were about 300 people in the audience, about 150 from the U.S. intelligence community.

Irony
Last week I was the keynote at the American Business Association of Russian Speaking Professionals.

There were about 300 people in the audience, almost all from the old Soviet Union.

I presented the same Secret History talk, pointing out that the launch of the first Soviet satellite (Sputnik) galvanized the U.S. government to accidentally contribute to the start the Venture Capital industry as we know it.

Afterwards a few of the audience came up and told me stories about Soviet weapons systems that could have won someone an intelligence medal 30 years earlier.

I would have loved to have given the talk to both audiences at the same time.

Close enough.
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This is the second of three posts about the rise of “risk capital” and how it came to be associated with what became Silicon Valley.

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The First Valley IPO’s
Silicon Valley first caught the eyes of east coast investors in the late 1950’s when the valleys first three IPO’s happened: Varian in 1956, Hewlett Packard in 1957, and Ampex in 1958.  These IPOs meant that technology companies didn’t have to get acquired to raise money or get their founders and investors liquid. Interestingly enough, Fred Terman, Dean of Stanford Engineering was tied to all three companies.

Varian made a high power microwave tube called the Klystron, invented by Terman’s students Russell and Sigurd Varian and William Hansen. In 1948 the Varian brothers along with Stanford professors Edward Ginzton and Marvin Chodorow founded Varian Corporation in Palo Alto to produce klystrons for military applications. Fred Terman and David Packard of HP joined Varian’s board.

Terman was also on the board of HP. Terman arranged for a research assistantship to bring his former student, David Packard, back from a job at General Electric in New York to collaborate with William Hewlett, another of Terman’s graduate students. Terman sat on the HP board from 1957-1973.

Ampex made the first tape recorders in the U.S (copied from captured German models,) and Terman was on its board as well. Ampex’s first customer was Bing Crosby who wanted to record his radio programs for rebroadcast (and had exclusive distribution rights.) Ampex business took off when Terman introduced Ampex founder Alex Poniatoff to Joseph and Henry McMicking. The McMicking’s bought 50% of Ampex for $365,000 (some liken this to the first VC investment in the valley.) McMicking and Terman introduced Ampex to the National Security Agency, and Ampex sales boomed when their audio and video recorders became the standard for Electronic Intelligence and telemetry signal collection recorders.

Meanwhile on the West Coast – “The Group”  1950’s
When Ampex was raising its money, in 1952, an employee of Fireman’s Fund in San Francisco, Reid Dennis, managed to put $20,000 in the deal. Five years later Dennis and a small group of angel investors who called themselves “The Group” started investing in new electronics companies being formed in the valley south of San Francisco. These angels who were all working in their day jobs at various financial institutions, would invite startup electronics companies up to San Francisco to pitch their deals and they would invest an average of $75 -$300K per deal.

The Group is worth noting for:

1. Investing their own private money,
2. Reid Dennis would found Institutional Venture Partners in 1974
3. First group specifically investing in the valley’s electronics industry

SBIC Act of 1958
During the cold war the launch of Sputnik-1 by the Soviet Union in 1957 both traumatized and galvanized the United States. Having the first earth satellite launched by a country that been portrayed as a third-world backwater with a bellicose foreign policy shocked the U.S. into believing it was behind the Soviet Union in innovation. In response, one of the many U.S. national initiatives (DARPA, NASA, Space Race, etc.) to spur innovation was a new government agency to fund new companies.  The Small Business Investment Company (SBIC) Act in 1958 guaranteed that for every dollar a bank or financial institution invested in a new company, the U.S. government would invest three (up to $300,000.) So for every dollar that a fund invested, it would have four dollars to invest.

While SBIC’s were set up around the country, companies in Northern California including Bank of America, Firemans Fund and American Express (Reid Dennis of the Group ran theirs), began to set up SBIC funds to tap the emerging microwave and new semiconductor startups setting up shop south of San Francisco. And for the first time, private companies like Continental Capital, Pitch Johnson & Bill Draper and Sutter Hill were formed to take advantage of the government largesse from the SBA. Like all government programs, the SBIC was fond of paperwork, but it began to formalize, professionalize and standardize the way investors evaluated risk.

SBIC’s were worth noting for:

1. The good news – government money for startups encouraged a “risk capital” culture at large financial institutions.
2. The better news – government money encouraged private companies to form to invest in new startups
3. The bad news – the government was more interested in rules, regulations and accounting then startups (because some SBIC’s saw the government funds as a license to steal)
4. By 1968 over 600 SBIC funds provided 75% of all venture funding in the U.S.
5. In 1988 after the rise of the limited partnership that number would be 7%.

Limited Partnerships
By the end of the 1950’s there was still no clear consensus about how to best organize an investment company for risky ventures. Was it like George Doriot’s ARD venture fund – a publicly traded closed end mutual fund? Was it using government money as a private SBIC firm?  Or was it some other form of organization? Many investors weren’t interested in working for a large company for a salary and bonus, and most hated the paperwork and salary limitations that the SBIC imposed. Was there some other structure?

The limited partnership offered one way to structure an investment company. The fund would have limited life. It would charge its investors annual “management fees” to pay for the firm’s salaries, building, etc. In a typical venture fund, the partners receive a 2% management fee.

But the biggest innovation was the “carried interest” (called the “carry”.) This is where the partners would make their money. They would get a share of the profits of the fund (typically 20%.) For the first time venture investors would have a very strong performance incentive.

In 1958 General William Draper, Rowan Gaither (founder of the RAND corporation) and Fred Anderson (a retired Air Force general) founded Draper, Gaither and Anderson, Silicon Valley’s (and possible the worlds) first limited partnership. The venture firm was funded by Laurance Rockefeller and Lazard Freres, but after some dispute lost to the sands of time, Rockefeller pulled his financing, and the firm was dissolved after the first fund.

The first limited partnership that lasted for a while was formed by Davis and Rock in 1961. Arthur Rock, an investment banker at Hayden Stone in New York (who helped broker the financing of Fairchild) moved out to San Francisco in 1961 and partnered with Tommy Davis. Davis (an ex-WWII OSS agent) then a VP at the Kern Land Company got involved with investing in technology companies through Fred Terman. Davis’s first investment in 1957 was Watkins-Johnson (the maker of microwave Traveling Wave Tubes for electronic intelligence systems) where he sat on its board with Fred Terman. Rock and Davis would raise a $5M fund from east coast institutions and while they invested only $3.4 million of it by the time they dissolved their partnership in 1968 – they returned $90 million to their limited partners – a 54% compound growth rate.

Limited partnerships are worth noting for:

1. By the 1970’s the limited partnership would become the preferred organizational form for venture investors
2. The “carried interest” (the “carry”) assured that the venture partners would only make real money if their investments were successful. Aligning their interests with their limited investors and the entrepreneurs they were investing in.
3. The limited life of each fund; 7-10 years of which 3-5 years would be spent actively investing, focused the firms on investments that could reasonably expect to have “exits” during the life of the fund.
4. The limited life of each fund allowed venture firms to be flexible. They could change the split of the carry in follow on funds, add partners with carry in subsequent funds, change investing strategy and focus in follow-on funds, etc.

Silicon Innovation Collides with Risk Capital
Lacking a “risk capital” infrastructure in the 1950′s military contracts and traditional bank loans were the only options microwave startups had for capital. The first semiconductor companies couldn’t even get that – Shockley and Fairchild could only be funded through corporate partners. But by the 1960′s the tidal wave of semiconductor startups would find a valley with a growing number of SBIC backed venture firms and limited partnerships.

A wave of silicon innovation was about to meet a pile of risk capital.

More on this in the next post.

This is the first of two posts about the rise of “risk capital” and how it came to be associated with what became Silicon Valley.
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Building Blocks of Entrepreneurship
By the mid 1950’s the groundwork for a culture and environment of entrepreneurship were taking shape on the east and west coasts of the United States. Stanford and MIT were building on the technology breakthroughs of World War II and graduating a generation of engineers into a consumer and cold war economy that seemed limitless. Communication between scientists, engineers and corporations were relatively open, and ideas flowed freely. There was an emerging culture of cooperation and entrepreneurial spirit.

At Stanford, Dean of Engineering Fred Terman wanted companies outside of the university to take Stanford’s prototype microwave tubes and electronic intelligence systems and build production volumes for the military. While existing companies took some of the business, often it was a graduate student or professor who started a new company. The motivation in the mid 1950’s for these new startups was a crisis – we were in the midst of the cold war and the United States military and intelligence agencies were rearming as fast as they could.

Yet one of the most remarkable things about the boom in microwave and silicon startups occurring in the 1950’s and 60’s was that it was done without venture capital. There was none.  Funding for the companies spinning out of Stanford’s engineering department in the 1950’s benefited from the tight integration and web of relationships between Fred Terman, Stanford, the U.S. military and intelligence agencies and defense contractors.

These technology startups had no risk capital – just customers/purchase orders from government/military/intelligence agencies.

This post is about the rise of “risk capital” and how it came to be associated with what became Silicon Valley.

Risk Capital via Family Money   1940’s
During the 1930’s, the heirs to U.S. family fortunes made in the late 19^th century – Rockefeller, Whitney, Bessemer -  started to dabble in personal investments in new, risky ventures. Post World War II this generation recognized that:

1. Technology spin-offs coming out of WWII military research and development could lead to new, profitable companies
2. Entrepreneurs attempting to commercialize these new technologies could not get funding; (commercial and investment banks didn’t fund new companies, just the expansion of existing firms,) and existing companies would buy up entrepreneurs and their ideas, not fund them
3. There was no organized company to seek out and evaluate new venture ventures, manage investments in them and nurture their growth.

Several wealthy families in the U.S. set up companies to do just that – find and formalize investments in new and emerging industries.

• In 1946 Jock Whitney started J.H. Whitney Company by writing a personal check for $5M and hiring Benno Schmidt as the first partner (Schmidt turned Whitney’s description of “private adventure capital” into the term “venture capital”).

Jock Whitney writes himself a check to fund J.H. Whitney Co.

• That same year Laurance Rockefeller founded Rockefeller Brothers, Inc., with a check for $1.5 million.  (23 years later they would rename the firm Venrock.)
• Bessemer Securities, set up to invest the Phipps family fortune (Phipps was Andrew Carnegie’s partner,)

These early family money efforts are worth noting for:

1. They were “risk capital,” investing where others feared
2. They invested in a wide variety of new industries – from orange juice to airplanes
3. They almost exclusively focused on the East Coast
4. They used family money as the source of their investment funds

East Coast Venture Capital Experiments
In 1946, George Doriot, founded what is considered the first “venture capital firm” – American Research & Development (ARD). A Harvard Business School professor and early evangelist for entrepreneurs and entrepreneurship, Doriot was the Fred Terman of the East Coast. Doroit had the right idea with ARD (funding startups out of MIT and Harvard and raising money from outsiders who weren’t part of a private family) but picked the wrong model for raising capital for his firm. ARD was a publicly traded venture capital firm (raising $3.5 Million in 1946 as a closed-end mutual fund) which meant ARD was regulated by the Securities and Exchange Commission (SEC.) For reasons too numerous to mention here, this turned out to be a very bad idea. (It would be another three decades of experimentation before the majority of venture firms organized as limited partnerships.)

The region around Boston’s Route 128 would boom in the 1950’s-70’s with technology startups, many of them funded by ARD. ARD’s most famous investment was the $70,000 they put into Digital Equipment Corporation (DEC) in 1957 for 77% of the company that was worth hundreds of millions by its 1968 IPO. It wasn’t until the rise of the semiconductor industry and a unique startup culture in Silicon Valley that entrepreneurship became associated with the West Coast.

Georges Doriot the first VC

Doriot and American Research and Development are worth noting for:

1. Some of the very early VC’s got their venture capital education at Harvard as Doriot’s students (Arthur Rock, Peter Crisp, Charles Waite.)
2. ARD was almost exclusively focused on the East Coast
3. ARD proved that institutional investors, not just family money had an appetite for investing into venture capital firms.

Corporate Finance
One of the ironies in Silicon Valley is that the two companies which gave birth to its entire semiconductor industry weren’t funded by venture capital. Since neither of these startups were yet doing any business with the military—and venture capital as we know it today did not exist, they had to look elsewhere for funding. Instead, in 1956/57, Shockley Semiconductor Laboratory and Fairchild Semiconductor were both funded by corporate partners –  Shockley by Beckman Instruments, Fairchild by Fairchild Camera and Instrument.

More on the rise of SBIC’s, Limited Partnerships and the venture capital industry as we know it today in the next post.

Discovering that your worldview is wrong or mistaken can be a life-changing event. It’s part of growing up but can happen at any age. What you do when it happens shapes who you’ll become.

Dinner in a Strange Land
When I was in my mid 20′s working at ESL, I was sent overseas to a customer site where the customers were our three-letter intelligence agencies. All of us knew who they were, understood how important this site was for our country, and proud of the work we were doing. (Their national technical means of verification made the world a safer place and hastened the end of the Soviet Union and the Cold War.)

As a single guy, I got to live in a motel-like room on the site while the married guys lived in town in houses and tried to blend in with the locals. When asked what they did, they said they worked at “the xxx research facility.”  (Of course the locals translated that to “oh do you work for the yyy or zzz intelligence agency?”)

One warm summer evening I got invited over to the house of a married couple from my company for a BBQ and after-dinner entertainment – drinking mass quantities of the local beer. The quintessential California couple, they stood out in our crowd as the engineer (in his late 20′s, respected by his peers and the customer) had hair down to his shoulders, sharply contrasting with the military crewcuts of the customers and most of the other contractors.

His wife, about my age, could have been a poster child for the stereotypical California hippie surfer, with politics that matched her style – antiwar, anti government, antiestablishment.

One of the rules in the business was that you didn’t tell your spouse, girlfriend, significant other who you worked for or what you worked on – ever. It was always a welcome change of pace to leave the brown of the unchanging desert and travel into town and have dinner with them and have a non-technical conversation about books, theater, politics, travel, etc. But it was a bit incongruous to hear her get wound up and rail against our government and the very people we were all working for. Her husband would look at me out the corner of his eyes and then we’d segue the conversation to some other topic.

That evening I was there with three other couples cooking over the barbie in their backyard. After night fell we reconvened in their living room as we continued to go through the local beer. The conversation happened to hit on politics and culture and my friend’s’ wife innocently offered up she had lived in a commune in California. Well that created a bit of alcohol-fueled cross-cultural disconnect and heated discussion.

Until one of the other wives changed a few lives forever with a slip of the tongue.

Tell Me it Isn’t True
One of the other wives asked, “Well what would your friends in the commune think of you now that your husband is working for intelligence agencies x and y?”

As soon as the words came out of her mouth, I felt time slow down. The other couples laughed for about half a second expecting my friend’s wife to do so as well. But instead the look on her face went from puzzlement in processing the question, to concentration, as she was thinking and correlating past questions she had about who exactly her husband had been working for. It seemed like forever before she asked with a look of confusion, “What do you mean agencies x and y?”

The laughter in the room stopped way too soon, and the room got deathly quiet. Her face slowly went from a look of puzzlement to betrayal to horror as she realized that that the drunken silence, the dirty looks from other husbands to the wife who made the agency comment, and the wives now staring at their shoes was an answer.

She had married someone who never told her who he was really working for. She was living in a lie with people she hated. In less than a minute her entire worldview had shattered and coming apart in front of us, she started screaming.

This probably took no more than 10 seconds, but watching her face, it felt like hours.

I don’t remember how we all got out of the house or how I got back to the site, but to this day I still remember standing on her lawn staring at strange constellations in the night sky as she was screaming to her husband, “Tell me it isn’t true!”

The next day the site supervisor told me that my friend and his wife had been put on the next plane out of country and sent home (sedated) along with the other couple that made the comment. By the time I came back to the United States, he was gone from the company.

It’s been thirty years, but every once an awhile I still wonder what happened to the rest of their lives.

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The End of Innocence
In much smaller ways I’ve watched my children and now my students discover that their worldview is wrong, mistaken or naive. I’ve watched as they realize there’s no Santa Claus and Tooth Fairy; the world has injustice, hypocrisy and inequality; capitalism and politics don’t work like the textbooks and money moves the system; you can’t opt out of dying, and without regulation people will try to “game” whatever system you put in place.

Learning to accept the things you can’t change, finding the courage to change the things you can and acquiring the common sense to know the difference, is part of growing up.

While I love TechCrunch, the post and the quote about the PR agency (“one PR firm has discovered a dynamite strategy, throw ethics out the window”) left me wondering; how do PR agencies interact with TechCrunch and other blog and review sites? Is this behavior an outlier or is it the norm in the PR industry?

Or is it just someones end of innocence?

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Swords Into Plowshares
After the end of World War II, returning veterans were happy to beat swords into plowshares (and microwave tubes) on the Stanford campus. From 1946 until 1950, Stanford’s Electronic Research Lab conducted basic research in microwave tubes.  Although this reseearch would lead to the development of the Backward Wave Oscillator and Traveling Wave Tube for military applications, Stanford was building tubes and circuits not entire systems.  The labs basic research was done by graduate students or Ph.Ds doing postdoctoral internships, supervised by faculty members or hired staff (many from Fred Terman’s WWII Electronic Warfare lab.)

In 1949, with the detection of the first Soviet nuclear weapons test, the Iron Curtain falling across Europe and the fall of China to the Communists, Cold War paranoia drove the U.S. military to rearm and mobilize.

Source: Center for Arms Control and Non-Proliferation (in constant 2009 $’s)

We’ll Do Great in the Next War
Early in 1950, just months before the outbreak of the Korean War the Office of Naval Research asked Fred Terman to build an Applied electronics program for electronic warfare. All branches of the military (the Air Force and Army would fund the program as well) wanted Stanford to build prototypes of electronic intelligence and electronic warfare systems that could be put into production by partners in industry. The Navy informs Terman that, “money was not a problem but time was.”

Pitching the idea to the President of Stanford, Terman enthusiastically said, “In the event of all-out war, Stanford would become one of the giant electronic research centers…”  (A bit optimistic about the outcome perhaps, given that both the U.S. and the Soviet Union had nuclear weapons at this point.)

Crossing the Rubicon – The Applied Electronics Lab
Setting up a separate Applied Electronics Lab for military funded programs doubled the size of the electronics program at Stanford. The new Applied Electronics Laboratory was built with Navy money and a gift from Hewlett-Packard. With the memories of WWII only five years old, and the Cold War now a shooting war in Korea, there was very little discussion (or dissension) about turning a university into a center for the production of military intelligence and electronic warfare systems.

The work in the applied program focused in fields in which faculty members or senior research associates specialized.  Many of the other staff in the applied program were full-time employees hired to work solely on these military programs.

ELINT, Jammers and OTH
The Applied Electronics Lab used the ideas and discoveries (on microwave tubes and receiver circuits) from Terman’s basic research program in the Electronic Research Lab. The Applied Lab would build prototypes of complete systems such as Electronic Intelligence systems, Electronic Warfare Jammers, and Over the Horizon Radar. The Applied Electronics Lab also continued work on the Klystron, pushing the tube to produce megawatts in transmitted power. (Stanford designed Klystrons producing 2½ Megawatts were manufactured by Varian and Litton would power the radar in the BMEWS (Ballistic Missile Early Warning System) built at the height of the cold war.) The close tie between the two labs was a unique aspect of the Stanford Lab. Stanford had a Customer Development loop going on inside their own lab. The discoveries in tube and circuit research suggested new electronic intelligence and countermeasure techniques and systems; in turn the needs of the Applied Lab pushed tube and circuit development.  With the Applied Electronics Lab Stanford was becoming something akin to a federal or corporate lab run under university contract.  The university found government contracts profitable as the government reimbursed their overhead charges (their indirect costs.) This means they could fund other non-military academic programs from this overhead.

The Stanford Applied Electronics Lab built prototypes which were handed off to the military labs for their evaluation. Subsequently military labs would contract with companies to build the devices in volume. In some cases, branches of the military contracted directly with Stanford which worked with local contractors in Silicon Valley to build these components or systems for the military. The prototype ELINT receivers built by the Applied Electronics Lab used the Stanford Traveling Wave Tubes. They quickly went into production at Sylvania Electronic Defense Labs down the street in Mountain View and Hallicrafters in Chicago. Later versions would be built by numerous industry contractors and installed on the fleet of ELINT planes orbiting the Soviet Union. These traveling wave tubes would also become the heart of the panoramic receiver used on the B-52 by the electronic warfare officer to get the bomber through the Soviet Air Defense system.

Jammers built by the Stanford Applied Electronics Lab used the Stanford Backward Wave Oscillators to produce high power microwaves. Unlike the simple noise jammers used in World War II, Soviet radars were becoming more sophisticated and newer designs were fairly immune to noise. Instead the jamming signal needed to be much smarter and have a deep understanding of how the targeted radar worked. Taking the information gleaned from our ELINT aircraft, Stanford built prototypes of jammers modulated with two new deception jamming techniques – angle jamming and range-gate pull-off. Some form of these deception jammers would eventually find their way into most electronic warfare defense systems used in the Cold War; first in the U-2, A-12 and SR-71. (Ironically the B-52 bomber, which would become the airborne leg of our nuclear triad, would use dumb noise jammers for two more decades – the Air Force opting to put the smart jammers on the B-58 and B-70, high altitude supersonic bombers – one soon obsolete and other never made it into production.)

The last major area of research that the Applied Electronics Lab group investigated was how radio signals propagated within the earth’s ionosphere. Over the next fifteen years this Radio Science Laboratory would receive the most funding of all departments in the lab (from the CIA) to build a ground based ELINT system. They would build and deploy two Over The Horizon Radar (OTHR) systems to detect Soviet and Chinese ballistic missile tests using ground based radars.

Guards at the Door – Stanford Joins the Cold War
In 1953 the Office of Naval Research told Terman that all military-funded projects (basic or applied, classified or not) needed to be in their own separate physical building. As a result Stanford moved the Applied work from the Electronics Research Lab into its own building.

In 1955, the pretense of keeping unclassified and classified work separate imposed too much of an administrative overhead and Stanford merged the Applied Electronics Lab and the Electronics Research Laboratory into the Systems Engineering Lab. The Applied Electronics portion of the lab was now the size of a small company.  It had 100 people, 18 of them full time faculty, 33 research associates and assistants and 33 other tube technicians, draftsman, machinists, etc. Over half this lab would hold clearances for military secrets. (Top Secret: Terman, Harris, McGhie, Secret: 44 others, Confidential: 8 others. Terman, Harris and Rambo also had Atomic Energy Commission “Q” clearances.)  Some students who were getting their engineering graduate degrees wrote masters and PhD thesis that were classified. Unless you had the proper clearances you couldn’t read them.  Terman and Stanford had just made a major bet on the cold war, and Stanford ranked sixth among university defense contractors.

A security guard was stationed at the door of the Applied Electronics Lab to ensure that only those with proper security clearance could enter. The law of unintended consequences meant that this most casual addition in front of a university building would result in the occupation and destruction of the lab (and its twin at MIT) and the end of the program 14 years later.  (More on this in a later post.)

Show and Tell – The Stanford ELINT and Electronic Warfare Contractors Meeting
During a typical year, the Applied Electronics Lab would host classified visits from military labs and defense contractors. By early 1950’s Stanford started holding a two day meeting for contractors and the military.

1955 Stanford Contractors Meeting

The 1955 attendee list gives you a feeling of the “who’s who” of the military/industrial establishment: RCA, GE, Motorola, AIL, Bendix, Convair, Mepar, Crosley, Westinghouse, McDonnell Aircraft, Douglas Aircraft, Boeing, Lockheed, Hughes Aircraft, North American, Bell Aircraft, Glen Martin, Ryan Aeronautics, Farnsworth, Sperry, Litton, Polarad, Hallicrafters, Varian, Emerson, Dumont, Maxson, Collins Radio.  Other universities doing classified ELINT and Electronic Warfare work attended including University of Michigan, Georgia Institute of Technology and Cornell. Over a hundred government contractors reviewed Stanford’s work on tubes and systems.

Stanford Contractors Meeting 1955 Attendees

This was a classified conference at a university, the contractors not only got to hear the conference lectures, but also visited exhibits on the devices and systems the lab had built. The lab would repeat the conference the following week for government agencies doing military work.

Barely noticed at the 1955 conference, a year before the first transistor company opened in Silicon Valley, one of the sessions described how to use a new device called a“transistor” to build wide-band amplifiers. (Terman had sent faculty and graduate students to the University of Illinois in 1953 to learn transistor physics.)

The World Turned Upside Down
The Applied Electronics Lab solidified Stanford’s lead as one of, if not the place in the U.S. military for advanced thinking in ELINT and Electronic Warfare.  It would turn on its head the relationship of universities and corporations.

Traditionally universities chased corporations for funding and patronage, but the military’s dependence on Stanford’s and Fred Terman’s judgment turned that relationship on its head.  Now the military was listening to Terman’s advice about which military contractors should get the order for to mass produce the Stanford systems.  The contractors were now dependent on Stanford.

Terman the Rainmaker
During the 1950’s Fred Terman was an advisor to every major branch of the U.S. military. He was on the Army Signal Corps R&D Advisory Council, the Air Force Electronic Countermeasures Scientific Advisory board, a Trustee of the Institute of Defense Analysis, the Naval Research Advisory Committee, the Defense Science Board, and a consultant to the President’s Science Advisory Committee. His commercial activities had him on the board of directors of HP, Watkins-Johnson, Ampex, and Director and Vice Chairman of SRI.  It’s amazing this guy ever slept.  Terman was the ultimate networking machine for Stanford and its military contracts.

Stanford Industrial Park – Microwave Valley Booms
By the early 1950’s many of the corporations that attended the yearly Stanford Electronic Warfare conferences would establish research labs centered around Stanford for just this reason – to learn from Stanford’s basic and applied research and get a piece of the ELINT and Electronic Warfare contracting pie.

Stanford Industrial Park was the first technology office park set up to house local and out of state microwave and electronics startups. First occupied in 1953 it would include Varian, Watkins Johnson, Admiral, HP, General Electric, Kodak, Lockheed.  Other east coast companies which established branches in Microwave valley in the 1950’s included IBM, Sylvania, Philco, Zenith and ITT.

The Future is Clear – Microwave Valley Forever
By 1956 Fred Terman had every right to be pleased with what he had helped build in the last ten years in and around Stanford.  The Stanford Electronics Lab was now the center of ELINT and Electronic Warfare.

Startups were sprouting all over Microwave Valley delivering microwave tubes and complete military systems, slowiy replacing the orchards and fruit trees. Granger Associates was a 1956 startup founded by Bill Ayer, a graduate student in the Applied Electronics Radioscience Lab, and John Granger, a former RRL researcher, building ELINT and Electronic Warfare systems (the Granger jammer was carried on the U-2.) Four years later Ayer and another Granger engineer would leave Granger and found one of the preeminent electronic warfare and ELINT companies: Applied Technologies.

The future of the valley was clear – microwaves.

1956 – Change Everything
Yet in 1956 two events would change everything.  At the time neither appeared earthshaking or momentous. First, a Bell Labs researcher who had grown up in Palo Alto, had his own interesting World War II career, and recently served as a military advisor on cold war weapons systems, decided to follow Fred Terman’s advice to locate his semiconductor company near Stanford.

The second was when a Southern Californian aircraft company decided to break into the missiles and space field by partnering with Stanford electronics expertise. It moved its electronics research group from Burbank to the new Stanford Industrial Park and built its manufacturing facility in Sunnyvale.

Shockley Semiconductor Laboratory and Lockheed Missiles Systems Division would change everything.

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In the 1950′s Stanford University’s Electronics Research Laboratory (ERL) continued to develop innovative microwave tubes for the U.S. military. This next product, the Traveling Wave Tube, would have a major impact on electronic intelligence. Stanford’s Dean of Engineering, Fred Terman, encouraged scientists and engineers to set up companies to build these microwave tubes for the military. Funded by military contracts, these 1950′s microwave tube startups would help build Silicon Valley’s entrepreneurial culture and environment.

Why Electronics Intelligence?
Starting in 1946 Electronic Intelligence aircraft (ELINT) had been probing and overflying the Soviet Union to understand their air defense system. During the 1950′s, the U.S. Air Force Strategic Air Command, U.S. Navy and the CIA were the primary collectors of tactical and operational ELINT on the Soviet PVO Strany Air Defense system. (The NSA owned COMINT collection.) They flew an alphabet soup of Air Force and Navy planes (Navy PB4Y-2′s, P2V’s, P4M’s and EA-3′s, Air Force B-17s, EC-47′s, RB-29s, RB-50′s, and the ultimate ELINT collector of the 1950′s – the RB-47H.) Common to all these planes (generically called Ferrets) is that they were loaded with ELINT receivers, manned by crews called Crows.

The Strategic Air Command needed this intelligence to understand the Soviet air defense system (early warning radars, Soviet fighter plane radar, Ground Control Intercept radar, Anti-Aircraft gun radar, and radars guiding Soviet Surface to Air Missiles.) We needed this data to build radar jammers that could make the Soviet air defense radars ineffective so our bombers with their nuclear payloads could reach their targets. The information we collected would be passed on to defense contractors who would build the jammers to confuse the Soviet air defense radars.

ELINT Tasking
The ELINT program sought answers to operational questions like: What was the Radar Order of Battle a penetrating bomber would face? Were there holes in their radar coverage our bombers could sneak through? What was the best altitude to avoid the Soviet defenses? ELINT operators on each flight were tasked to gather basic data about the characteristics of the radar: is this a new type of radar or an existing one? What is its frequency, power, pulse repetition interval, rotation rate, scan rate, polarization, carrier modulation characteristics, etc. Then they would use direction finding equipment on their aircraft to locate its position.

ELINT Receivers
Early ELINT receivers were not much different then the radios you had at home – someone had to manually turn a dial to tune them to the correct frequency. By the 1950’s these receivers could automatically “sweep” a frequency band, but this action was mechanical and slow. That was fine if the Soviet radar was operating continuously, but if it was just a brief radar transmission or burst communication (which Soviet submarines used), we would probably miss hearing it. (The Soviets kept their radars turned off to stop us from recording their signals. So at times multiple ELINT planes would fly on a mission – one to run at the Soviet border appearing to attack, the other to pick up the signals from the air defense network as it responded to the intrusion. Keep in mind that 32 of these planes were shot down in the Cold War.)

The ultimate dream of ELINT equipment designers was a “high-probability of intercept” receiver, one that would pick up a signal that came up on any frequency and capture even a single pulse, however brief.

This was a two-pronged challenge: the U.S. needed receivers that could tune much faster than any of the manual methods that existed, and it needed receivers that could tune a much broader range of frequencies along the electromagnetic spectrum. Again Stanford technology would solve these challenges.

Rapid Scan/High Probability of Intercept – Stanford’s contribution
In the last post we described Stanford’s high power, electronically tuned microwave tubes (the Backward Wave Oscillator) which made high power, frequency agile airborne jammers possible.

Now Stanford’s Electronics Research Laboratory delivered another tube which forever changed electronic intelligence receivers - the Traveling Wave Tube (TWT.) Invented in Britain and further developed at Bell Labs, this tube would deliver the “holy grail” for ELINT receivers - instantaneous scan speed and extremely broad frequency range. A Traveling Wave Tube (TWT) could electronically tune through microwave frequencies at 1000 times faster than any other device, and it could operate in a frequency range measured in gigahertz.  As a microwave preamp, it had high gain, low noise and extremely wide bandwidth. It was perfect for a new generation of ELINT receivers to be built into the Ferret planes searching for signals around the Soviet Union. Later on TWTs would be built that could not only be used in receivers, but also actually transmit broadband microwaves at high power.

Invention Versus Commercialization
While Stanford was doing its share of pure research, what’s interesting about the Electronics Research Laboratory (ERL) was its emphasis on delivery of useful products for its customers – the military – from inside a research university.  The military had specific intelligence requirements and that meant that a TWT needed to be rugged enough to withstand being put on airplanes. This military/university collaboration for deliverable products is where the Electronics Research Laboratory (ERL) would excel – and ultimately end up leading to its destruction.

Traveling Wave Tube - Source: Thales Electron Devices

The Rise of “Microwave Valley” – More Stanford Tube Startups
The Traveling Wave Tube generated another series of startups from Stanford’s Electronics Research Laboratory.  R. A. Huggins, a research associate at the Stanford’s Engineering Research Lab, left in 1948 to start Huggins Laboratories in Palo Alto and put the first commercially manufactured traveling wave tube on the market. With a boost from military R&D contracts, Huggins Labs continued to expand, diversifying into backward-wave oscillators, low-noise TWTs, and electrostatic focused tubes. (In the 1970′s Huggins Labs sold to an east coast company, Microwave Associates (which became M/A-COM.)

Stanley Kaisel, a research associate at the Stanford ERL tube laboratory, left to join Litton’s startup. He left Litton in 1959 and started Microwave Electronics Corporation (MEC) to make low power, low noise TWTs. He sold the company to Teledyne in 1965.

Venture Capital, Microwaves and the OSS
Dean Watkins the leader of TWT research at Stanford’s Electronic Laboratory, left Stanford in 1957 and co-founded Watkins-Johnson (with R.H. Johnson the head of Hughes Aircraft microwave tube department) to market advanced TWTs to the military. Unlike the other Stanford tube spinouts which were funded with military contracts, Watkins-Johnson would be one of the first venture capital funded companies in the valley. Its first round of funding came from Tommy Davis (an ex-WWII OSS agent) then at the Kern County Land Company who knew Fred Terman through his military contacts. Terman and Davis negotiated the Watkins-Johnson investment and would sit on the Watkins-Johnson board together.

Frustrated with Kern’s lack of interest in investing in more technology companies, Tommy Davis would go on to found one of Silicon Valley’s first VC firms with Arthur Rock, creating Davis and Rock, founded in 1961. They would be one the first venture firms to organize their firm as a partnership rather than an SBIC or public company. They would also set the standard for the 20% carry for general partners. Tommy Davis would go on to found the Mayfield Fund in 1969.

These Stanford tube spinoffs joined the growing list of other microwave tube manufacturers in the valley including Eitel-McCullough, Varian, Litton Industries and Stewart Industries. Others would soon join them. By the early 1960s, a third of the nation’s TWT business and a substantial share of the klystron and magnetron industry was located in the Santa Clara Valley– and almost all of these companies emerged from one engineering lab at Stanford.

But microwave tubes were just the beginning of Stanford’s relationship with the military. Fred Terman was just getting warmed up. Much more was to come.

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The Korean War catapulted Stanford University’s Electronics Research Laboratory (ERL) into a major player in electronic intelligence and electronic warfare systems. Encouraged by their Dean, Fred Terman, scientists and engineers left Stanford Electronics Research Laboratory to set up companies to build microwave tubes and systems for the military. Funded by military contracts these 1950′s startups would help build Silicon Valley’s entrepreneurial culture and environment.

The Beginnings – “Vacuum Tube Valley” Ecosystem circa 1950
From its founding in 1946 Stanford’s Electronics Research Laboratory (ERL) did basic research into vacuum tubes that could operate at microwave frequencies. The research was funded and paid for by the Office of Naval Research (ONR) and later by the Air Force and Army. Much of the basic research work was done by advanced students or by recent Ph.Ds doing postdoctoral internships, supervised by Stanford engineering faculty members or senior research associates (staff.)

In a 1950 proposal to the Navy Fred Terman noted that the work that Stanford proposed “correlates almost ideally with related industrial activities in this area.”  There were already “tube manufacturers in the area (Eitel-McCullough, Litton Industries, Varian Industries, Henitz and Kaufman and Lewis and Kaufman) that represented an integrated set of tube facilities for basic research, advanced development, engineering of new tubes, model shop and pilot and quantity production. And that circuit work is carried on by several organizations in the neighborhood, with Hewlett Packard Company being especially notable in this regard.” Terman was describing the valley’s already existing ecosystem for building vacuum tubes in 1950.

But unlike the majority of existing tube manufacturers in the valley who were making products for radios, Stanford Electronics Research Lab tube group had a special customer with very special needs – the U.S. Air Force and its Strategic Air Command.

So what exactly was the Electronics Research Lab designing? What were these microwave tubes? Why were they so important to the military? And what were these electronic intelligence and warfare systems used for?

Stanford Joins the Cold War - Microwave Power Tubes
Stanford’s work in microwave power tubes would solve two of the Strategic Air Command’s most important cold war problems.

During a nuclear war in the 1950′s the Strategic Air Command was going to fly its bombers with nuclear weapons into the Soviet Union. To protect their country, the Soviets were building an air defense network to warn, track and destroy these attacking bombers. Our bombers used jammers to confuse the Soviet air defense radars. But the jammers that we built in WWII were no longer sufficient to protect the planes we wanted to send into the Soviet Union.

These 1940′s jammers (built by the wartime lab headed up by Terman and his team now at Stanford) had been built around tubes originally designed for radio applications, put out 5 watts of power. This miniscule amount of jamming power was acceptable because each WWII bomber flew in formation with hundreds of other planes, together attacking just a single target each day. The combined jamming power of all the bombers on a mission was enough to saturate and confuse German radar. But in a potential cold war attack on the Soviet Union, our bombers were not going to fly in a massed formation to attack one target. Instead we would attack multiple targets in the Soviet Union at the same time.  And while a few bombers would penetrate the periphery of the Soviet Union together, each plane — now able to carry more explosive power than all the bombs dropped in WWII — would approach its target individually. As a result of this change in strategy (and explosive capacity), each bomber had to supply enough jamming power to defend itself.

B-47 - primary Strategic Air Command Bomber in the 1950's

As a result, to protect its bombers flying over the Soviet Union the U.S. Air Force needed power tubes that had hundreds of times more power than WWII devices.

The U.S. Air Force also needed improvements in frequency agility to protect its cold war bombers. Frequency agility can be best described by what happened over Germany in WWII. As the allies jammed Germany radar, the Germans tried to avoid the effect of jamming by changing the frequency on which their radars transmitted. This was possible since the jammers in U.S. planes’ could only transmit on a narrow band of frequencies (providing spot jamming) and could not be retuned in the air. To cover all the possible frequencies German radars might be operating on, allied technicians pretuned the jammers before each bomber raid so that each plane transmitted on a different frequency. The combined effect of hundreds of planes in the bomber stream was to cover a broader frequency range than one jammer could by itself.  (This technique of covering a broad range of frequencies was known as barrage jamming.)

(A good Radar tutorial is here, on the Radar Range equation here and Electronic Warfare tutorial is here. The links will download PowerPoint presentations.)

But nuclear warfare over the Soviet Union in the 1950′s meant that a single bomber needed jammers that could cover multiple frequencies, and could be tuned instantaneously. Not only did the US need more more powerful microwave power tubes, the power tubes had to be frequency agile, (able to be tuned in the air to different frequencies) to jam the Soviet radars. (For example, the Soviet P-20 Token was an early warning radar our bombers would encounter.  It transmitted on 5 different frequencies over a band 300mhz wide. To jam it, all five frequencies had to be jammed at the same time. Our WWII jammers couldn’t do the job.)

Terman’s Systems Engineering Research Lab at Stanford would develop microwave power tubes that offered a solution to both challenges and would be a a game changer for electronic warfare at the time.

High Power, Instant Tuning – Stanford’s contribution
Stanford’s Electronics Research Laboratory first contribution to high power microwave tubes for airborne electronic warfare in the 1950’s was the Backward Wave Oscillator (BWO). Stanford engineers realized that this tube, which had been invented in France, could electronically tune through microwave frequencies while producing almost a 1,000 watts of power – (equivalent to the output of 200 jammers over Germany in WWII.) Perfecting this tube for use as an airborne jammer became one of the labs primary objectives.

This was a critical development to support the new tactics of single bombers penetrating the Soviet Union. Equipping a bomber with several jammers built around Backward Wave Oscillator could give it enough power to use barrage jamming against multiple radars and get it through to its target.  Stanford gave its Backward Wave Oscillator design drawings to tube manufacturers throughout the U.S. By the 1960′s, the U.S. Air Force would ultimately equip its B-52 bombers with 6,000 jammers using these these oscillators.

The Rise of “Microwave Valley” Stanford Tube Spinouts
A technician in Stanford’s ERL tube shop, Ray Stewart, thought he could build these Backward Wave Oscillators commercially, and left to start Stewart Engineering in Scotts Valley near Santa Cruz.  The company had more orders from the military than it could handle. (Stewart would sell his company to Watkins Johnson, one of the most financially successful of the Stanford microwave tube spinoffs. More about Watkins-Johnson in the next post.)  Stewart joined a growing list of other microwave startups beginning to populate the valley.

One of the early microwave spinouts from Stanford was built around a microwave power tube called the Klystron, invented by Terman’s students Russell and Sigurd Varian and William Hansen. In 1948 the Varian brothers along with Stanford professors Edward Ginzton and Marvin Chodorow founded Varian Corporation in Palo Alto to produce klystrons for military applications. (Fred Terman and David Packard of HP joined Varian’s board.) While the Klystrons of the 1950’s had too narrow and bandwidth and were too large for airborne use, they could be scaled up to generate megawatts of power and were used to power the U.S. ground-based Ballistic Missile Early Warning System (BMEWS) radars (and the Stanford Linear Accelerator.)

Another of Terman’s students, Charles Litton, would start several Silicon Valley companies, and in the 1950’s Litton Industries would become the leader in pulse and continuous wave magnetrons used in jammers and missiles. Magnetrons were the first high power microwave device invented in WWII. Used in radars systems and missiles, magnetrons could produce hundreds of watts of power.

More to Come
These first microwave tubes were just the beginning of a flood of innovative products for the military.  The next Stanford tubes and systems would revolutionize the Electronic Intelligence aircraft that were circling (and flying over) the Soviet Union.

More in the next post.

These posts cover two distinct periods – the first, the rise of “Microwave Valley” chronicles the decade of 1946-1956 as Stanford University became the hub of military/industry contracting in the Bay Area.

The second series of posts, the rise of  “Spy Satellite Valley,” starts in 1956 with two game changing events– one very public – the valley’s first semiconductor company and one very, very private – the valley as the home of the first optical and ELINT spy satellites and submarine-launched ballistic missiles.  The story ends in 1969 with campus riots at Stanford.

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These posts will make a lot more sense if you look at the earlier Secret History posts.  If you read only one previous post, read this one (or this one.)

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The Birth of Entrepreneurship in The Hot Cold War
Silicon Valley entrepreneurship was born in the middle of a secret war with the Soviet Union. It’s a war you probably never heard of since most of it was classified, and both parties never wanted it public lest it got out of hand.  Yet it was a war in which tens of thousands of Americans fought and hundreds died. Frederick Terman, Stanford’s Dean of Engineering, enlisted Stanford University as a major arms suppliers in this war. In doing so he accidentally launched entrepreneurship in Silicon Valley – with the help of the U.S. military, the CIA and the National Security Agency.

Stanford as a Center of Microwave and Electronics
In 1946 after running the military’s secret 800 person Electronic Warfare Lab at Harvard, Fred Terman returned to Stanford as the dean of the engineering school. Terman’s goal was to build Stanford’s electrical engineering department into a center of excellence focused on microwaves and electronics. Having already assembled one of most advanced electronic labs in World War II, Terman was one of the few academics who could do it.

Fred Terman

Terman’s first step was to recruit 11 former members of his staff from the Harvard Radio Research Lab — “Congratulations, you’re now Stanford faculty.”  Not only were they all great researchers, but they also had just spent three years building electronic warfare systems that were used in World War II. They would become the core of Stanford’s new Electronics Research Lab (ERL.)  While officially in the electrical engineering department, the lab reported directly to Terman.

Next, Terman used his military contacts to secure funding for the Lab from the Office of Naval Research, the Air Force and the Army Signal Corps. (Although the country had returned to peace, some in the military wanted to preserve our ability to fight the next war.) By 1947 the U.S. military was funding half of Stanford’s engineering school budget. Terman proudly pointed out that only Stanford, MIT and Harvard had a military sponsored electronics program.

Stanford Leads in Electronic Intelligence and Electronic Warfare
In the 1950’s Stanford Engineering Research Lab (ERL) made major contributions to electronic intelligence and electronic warfare.  Its basic research focused on three areas: microwave receiving and transmitting tubes, radar detection and deception techniques and understanding the earth’s ionosphere.

Stanford became one of the leading research centers in advancing the state of microwave tubes including the klystron which could provide high-power microwave in pulses, magnetrons which could provide continuous wave microwave power, and backward wave oscillators and traveling wave tubes – both electronically tunable microwave tubes.

Stanford’s research on the earth’s ionosphere would lead to meteor-burst communication systems and Over the Horizon Radar used by the NSA and CIA to detect Soviet and Chinese missile tests and ultimately to the research that made Stealth technologies possible.

Its studies in radar detection and deception techniques would lead Stanford to the applied part of it mission.  Stanford would build prototypes of electronic intelligence receivers (high probability of intercept/rapid scan receivers) for use by the military. These applied systems were prototypes of the jamming devices found on our bombers and receivers found in NSA ground stations and the fleet of ELINT aircraft flying around and in the Soviet Union and later on in the U-2, SR-71 and ELINT ferret subsatellites.

Later posts will talk about these technologies and the startups that spun out of Stanford to build them. But first, to understand what happened at Stanford and in Silicon Valley under Fred Terman, some context about the Cold War is helpful.  (Skip the next section if you’re a history major.)

The Cold War
After World War II ended, our wartime ally the Soviet Union kept its army in Eastern Europe and forcibly installed Communist governments in its occupied territories.  Meanwhile the U.S. demobilized its army, sent its troops home, scrapped most of its Air Force and mothballed almost all its Navy. As tensions rose, there was a growing fear that the Soviets could invade and occupy all of Western Europe.

In 1949, the Soviets exploded their first nuclear weapon and ended the U.S monopoly on atomic weaponry. That same year China fell to the communists under Mao Zedong, and the Nationalist government retreated to Taiwan.  A year later the Korean War turned the cold war hot, as communist North Koreans attacked and overran most of South Korea (except for a small defensive perimeter in the south.) American and United Nations troops entered the war fighting North Koreans and then Communist Chinese ground troops, and Soviet fighter pilots for three years.  34,000 U.S. soldiers died in battle.

To the U.S. the Soviet Union seemed bent on world conquest with Korea just a warm-up for an atomic war with massive casualties. (This was not an unreasonable supposition after a conventional world war which had left 50 million dead.)  Faced with the reality of the Korean War, the U.S. began to rebuild its military. But now the Soviet Union was its target enemy, and nuclear weapons had become the principal instrument of offense. Instead of rebuilding its WWII forces, the U.S. military embraced new technologies (jets, electronics, missiles, nuclear subs) and built entirely new weapon systems (bombers with nuclear weapons, ICBMs, SLBM’s) for a new era of international conflict.

Europe, completely outnumbered and outgunned by the Soviet Union, built the North Atlantic Treaty Organization (NATO) as a bulwark against ground Soviet attack.  And the U.S. planned strikes with nuclear armed bombers if war in Europe broke out.

Stanford’s Electronic Research Lab (ERL) which had focused on basic research on microwave tubes from 1946 was about to scale up for the Cold War.

Smarter Intelligence
One of the major differences between the war with Germany and the cold war confrontation with the Soviet Union had to do with access.  The Soviet Union was a closed country. Unlike Germany in World War II, the U.S. could not fly across the Soviet Union to learn how their defenses were set up. We did not have radar maps of their cities. The Soviet’s secrecy fed our cold war paranoia. The U.S. was determined to find out what was going on inside.  And the way we were going to do it was with electronic/signals intelligence.

But the technology that supported intelligence gathering against our WW II enemies was not sufficient to penetrate the Soviet Union. The U.S. military had to develop new ways to collect intelligence. The engineering department and labs that Fred Terman established at Stanford University would play a key role in advancing electronic intercept and jamming technology to support the more sophisticated intelligence systems that the Cold War required.

The Air Force Needs to Know
By the Korean War, U.S. policy held that the Air Force, carrying nuclear weapons into the Soviet Union, would be the means to fight World War III.

Through World War II, the U.S. Air Force had been a part of the U.S. Army. It split off into a separate service in 1947. By the 1950’s, the Strategic Air Command (SAC) had become the U.S. Air Force’s long range bombing arm and the designated instrument of Armageddon.

On the other side of the Iron Curtain, the defense of the Soviet Motherland lay with the Soviet Air Defense Forces, called PVO Strany, a separate branch of the Soviet military formed in 1948 designed to detect U.S. bomber raids, target and aim radar-guided weapons and destroy the U.S. bombers.

SAC needed intelligence to understand the components of the PVO Strany air defense system in order to shut them down and make them ineffective so our bombers with their nuclear payloads could reach their targets. (The information we collected would be passed on to contractors who would build jamming devices the bombers would carry.) It sought answers to tactical questions like: What was the Radar Order of Battle a penetrating bomber would face? (Were there holes in their radar coverage our bombers could sneak through? What was the best altitude to avoid the Soviet defenses?) What were the different types of Soviet fighter planes?  How many?  How effective? What about the anti-aircraft (AAA) gun defenses?  In addition the Soviets were adding a new type of defensive radar-guided weapon called the Surface to Air Missile (SAM).

Example of Jammer versus Radar Coverage - Allied Jammers over Germany in WW11

The Strategic Air Command also needed to know what the navigational waypoints and the target would look like on their air-to-ground bombing radars. (These radars painted a map-like picture of the ground and prior to GPS, this is how bombers navigated their way to the target.)

And on top of all this the Strategic Air Command needed to understand the current state of the Soviet Air Defense Force readiness and deployment updated on a daily basis.

The CIA Needs to Know
While the Air Force was working on collecting intelligence to execute their tactical missions, the CIA, founded in 1947, was responsible for providing U.S. political leadership with a much bigger picture. They developed the National Intelligence Estimate –  a  series of reports which summarized their judgment about the size of the Russian threat. Also seeking to learn more about the Soviet Union’s offensive weapon systems, the CIA wanted intelligence to help them understand: What type of strategic bombers did the Soviets have? How many did they have? How would they reach the U.S.?  How would we know if they were coming? (Have they moved to their forward operating bases in the Artic?) The same was true about the Soviet defensive systems – how many fighters would they build and of what type?  How many Surface to Air Missiles – what was their range and accuracy?

And by the mid 1950’s the Soviets were testing ballistic missiles, both intermediate range that could reach Europe and intercontinental range that could reach the U.S.  What was their range? What was their accuracy? How big of a nuclear warhead could they carry (throw weight and yield)?  The military needed to answer these same questions about the nuclear armed missiles the Soviets were putting on their submarine force.

To give our leadership an estimate of the Soviet’s nuclear production capacity, the CIA also had to estimate how many nuclear weapons could the Soviet Union make. Where were their production facilities? What was the yield of the weapons and their weight and size?

Throughout the 1950′s the CIA’s Office of Scientific Intelligence was heavily involved in the development of Electronics Intercept and Electronic Warfare Intelligence – and Stanford and the emerging startups around it would provide the systems and concepts to help.

The NSA and ELINT
In the 1950’s the Strategic Air Command and the U.S. Navy were the airborne ELINT assets for the U.S. Beginning in the mid/late 1950’s the National Security Agency (NSA) starting taking more and more responsibility for collection – first in communications intelligence, then in signals and telemetry intelligence. The NSA ultimately built up hundreds of ground stations, satellites and aircraft manned by tens of thousands servicemen (under the cover of the Air Force Security Service, Army Security Agency and the Naval Security Group.)

The “Hot” Cold War
Remember the Soviet Union was a closed country. To collect the intelligence to answer its questions about the Soviet threat, the U.S. military resurrected the signals Intelligence lessons and skills we invented in World War II. Starting in 1946 ELINT aircraft had been probing and overflying the Soviet Union. SAC, the CIA, the Navy and our British allies flew modified planes called Ferrets around the periphery of the Soviet Union to understand their air defense system (the crews were called Crows). (What isn’t well known is that the U.S. and Britain flew planes on deep penetration missions into and across the Soviet Union numerous times – well before a U-2 spy plane was shot down over the Soviet Union in 1960.)

British Canberra PR3 - Overflew Kapustin Yar 1953

The Air Force adopted a cover story that these were weather data gathering missions. These flights were no secret to the Soviets, (given the sheer number of surveillance flights around the Soviet Union it’s surprising they didn’t need their own air traffic control system,) and they started to protest diplomatically in 1948. When our flights continued, the Soviets took direct action. In 1950, two months before the Korean War started,  the Soviets shot down an ELINT plane over the Baltic. All ten crew members were killed. This was the beginning of a Soviet policy to stop ignoring incursions. They would attempt to force the ELINT planes to land in the Soviet Union or they would destroy them. Every year through the the 1950′s and the early ’60′s the Soviets attacked and shot down at least one of our ELINT ferret aircraft. This was a deadly game.

pb4y-2 Privateer Navy ELINT

We kept on probing their defenses convinced that it was in our national interest to continue. The low-level conflict continued until the height of the Cuban Missile Crisis when the local Soviet commander shot down a U-2 over Cuba. Both countries realized that a miscalculation could have been a catalyst for World War III and the Soviets stop attacks on U.S. spyplanes. (The Communist Chinese continued to shoot down U-2′s flown by Nationalist Chinese pilots until 1970, and the Soviet Union accidently attacked two Korean airline passenger planes in the Far East, one damaged in 1978 and one destroyed in 1983.)

During the Cold War 32 U.S. ELINT planes were shot down by Soviet pilots with 225 U.S. airmen killed. (The numbers vary depending on the sources you read.) Regardless of the number, this was a deadly shooting war.

Stanford and an emerging set of Silicon Valley startups would be deeply involved in designing the technologies, techniques and ELINT systems on these planes. Microwave Valley was about to take off.

Details in the next post.

————

The VENONA Project
One of the most interesting (declassified) stories of cryptography is the deciphering of Soviet communications to their diplomatic missions in the U.S during World War II.  What was amazing about these decrypts was the Soviets used one-time pads which were theoretically unbreakable. The National Security Agency has a great website on the subject.

I had dinner last week with someone involved in the VENONA project (now retired.) We talked about one of the spies unearthed in the decoded messages; Ted Hall, a 19-year scientist at Los Alamos working on the Manhattan Project.  For lots of complicated reasons Hall was never arrested nor charged with a crime. Hall’s interest in Communism came from literature his older brother Ed brought home from college.

When Ted Hall went to work on the Atomic Bomb during World War II his older brother Ed joined the Air Force.

My Brothers Keeper
During the Cold War, when Ted Hall was under suspicion of being a Soviet spy, his brother Ed Hall, stayed in the Air Force and worked on every U.S. military missile program in the 1950′s (Atlas, Thor, etc.)

Ed Hall eventually became the father of the Minuteman missile project, our land-based ICBM carrying nuclear weapons to destroy the Soviet Union.

Surely the KGB, who ran Ted Hall as a spy, knew about his brother?  Perhaps even first…?

A Wilderness of Mirrors
My dinner companion, (who had a hand in his agencies counterintelligence group,) “acted” surprised about the connection between the two…

Oh, what a wilderness of mirrors we live in.

—————-

The next piece of the Secret History of Silicon Valley puzzle came together when Tom Byers, Tina Selig and Mark Leslie invited me to teach entrepreneurship in the Stanford Technology Ventures Program (STVP) in Stanford’s School of Engineering.  My office is in the Terman Engineering Building.

Fred Terman – the Cover Story
I’d heard of Terman but I didn’t really know what he did – his biography said that he was one of the preeminent radio engineers in the 1930′s literally writing the textbooks. He was the professor who helped his students Bill Hewlett and David Packard start a company in 1939.  In World War II he headed up something called the Harvard Radio Research Lab. There was plenty in his biography about his post WWII activities: chair of electrical engineering in 1937, dean of engineering in 1946, provost in 1955. He started the Stanford Honors Co-op in 1954 which allowed companies in the valley to send their engineers to Stanford graduate engineering programs.  74HGZA3MZ6SV

Since I was interested in the history of Silicon Valley, Entrepreneurship, and now Terman, I began to understand that Terman had a lot to do with the proliferation of microwave companies in Silicon Valley in the 1950′s and ’60′s. But how? And why? So I started to read all I could find on the development of microwaves. That led me back to the history of radar in World War II – and a story you may not know.

What Does WWII Have to Do with Silicon Valley?
Just a quick history refresher. In December 1941, the Japanese attack Pearl Harbor, and Germany declares war on the United States. And while the Soviets are fighting the Germans in massive land battles in eastern Europe, until the allies invade Western Europe in June 1944, the only way the U.S. and Britian can affect German war-fighting capability is by mounting a Strategic Bombing campaign, from England. Their goal was to destroy the German capability to wage war by aerial bombing the critical infrastructure of the German war machine. 

The allies bombed the German petroleum infrastructure, aircraft manufacturing infrastructure, chemical infrastructure, and transportation infrastructure. The Americans and British split up the air campaign: the British bombed at night, the Americans during the day.

The Odds Weren’t Good
These bombers flew for 7+ hours from England and over occupied Europe, through a gauntlet of intense antiaircraft fire and continuous attack by German fighter planes. And they got it coming and going to the target.

But what the bomber crews didn’t know was that the antiaircraft fire and German fighters they encountered were controlled via a sophisticated radar-guided electronic air defense system covering all of occupied Europe and Germany.

The German electronic air defense system was designed to detect the allied bomber raids, target and aim the German radar-guided weapons, and destroy the American and British bombers. The German air defense system had 100′s of early warning radars, and thousands of radar controlled anti-aircraft guns, and Ground Controlled Intercept radars to guide the fighters into the bombers.

And the German night fighters had their own on-board radar. In all the Germans had over 7,500 radars dedicated to tracking and killing the allied bombers.

Each allied bombing mission lost 2-20% of their planes. Bomber crews had to fly 25 missions to go home. The German objective was to make strategic bombing too costly for the Allies to continue.  

By 1942 the Allied Air Command recognized they needed to reduce allied losses to fighters and flak. We needed a way to shut down the German Air Defense system. (Bear with me as this history takes you from the skies of Europe to Fred Terman.)

The Electronic Shield
To shut it down we first needed to understand the German “Radar Order of Battle.” What radars did the Germans have and what were their technical characteristics? How effective they were? What weapons were they associated with? We needed to find out all this stuff and then we needed to figure out how to confuse it and make it ineffective. 

So the U.S. set up a top secret, 800-person lab to do just that, first, to gather signals intelligence to understand the ”Radar Order of Battle” and then, to wage “electronic warfare” by building mechanical and electronic devices to severely hamper the Germans’ ability to target and aim their weapons.

Ferrets and Crows – Signals Intelligence
The first job of the secret lab was to find and understand the German air defense system. So we invented the U.S. Signals Intelligence industry in about 12 months (with help from their British counterparts at the Telecommunications Research Establishment.) These mission of the planes called Ferrets, manned by crews called Crows, was to find and understand the German electronic air defense system.  We stripped out B-24 bombers, took out all the bomb racks, took out all the bombs and even took out all the guns.  And we filled it with racks of receivers and displays, wire and strip recorders and communications intercept equipment that could search the electromagnetic spectrum from 50 megahertz to 3 gigahertz, and this is 1943. 

We flew these unarmed planes in and out of Germany alongside our bombers and basically built up the “radar order of battle.” We now understood where the German radars were, their technical details and what weapons they controlled.

Tin Foil Rain – Chaff
We first decided to shut down the German radars that were directing the anti-aircraft guns and the fighter planes. And to do that we dropped tin foil on the Germans. No kidding. Radar engineers had observed if you cut a strip of aluminum foil to 1/2 the wavelength of a radar transmitter and throw it in front of the radars antenna, the radar signal would reflect perfectly. All the radar operator would see was noise, rather than airplanes. 

Well, you couldn’t stand in front of the German radars and throw out tin foil, but you could if you had a fleet of airplanes. Each plane threw out packets of aluminum foil (called “chaff”.) The raid on Hamburg in July, 1943 was the first use of chaff in World War II.  It completely shut down the German air defense system in and around Hamburg.  The British and then the Americans firebombed the city with minimal air losses.

Chaff used 3/4′s of all the aluminum foil in the U.S. in World War II, because by the end of the war, every bomber stream was dumping chaff on every mission.

Jam It and Shut it Down - Electronic Warfare
But this secret lab was focused on electronic warfare. So they systematically designed electronic devices called “jammers” to shut down each part of the German air defense system.  Think of a “jammer” as a radio transmitter broadcasting noise on the same frequency of the enemy radar set. The goal is to overwhelm the enemy radar with noise so they couldn’t see the bombers. We built electronic jammers to target each part of the German air defense system: their early warning radars, the short range radars, the antiaircraft gun radars, the Ground Control Intercept Radars, the air to ground radio links and even the radars onboard the German night fighters. By the end of the war we had put multiple jammers on every one of our bombers, and while their power output was ridiculously low, these jammers were flying in formation with 1,000 other planes with their jammers on, and the combined power was enough to confuse the radar operators.

Just to give you a sense of scale of how big this electronic warfare effort was, we built over 30,000 jammers, with entire factories running 24/7 in the U.S. making nothing but jammers to put on our bombers.

By the end of World War II, over Europe, a bomber stream no longer consisted of just planes with bombs.  Now the bombers were accompanied by electronics intelligence planes looking for new radar signals, escort bombers just full of jammers and others full of chaff, as well as P-51 fighter planes patrolling alongside our bomber stream.

Every WWII Movie and Book with a Bomber was Wrong
While there were lots of stories about how the British early warning radar system, called “Chain Home” saved England during the Battle of Britain by giving the Spitfire pilots time to scramble to intercept German bombers, there wasn’t a coherent story about American and British bombers encountering the German radar-guided air defense system.

This lack of information meant that every World War II movie or book that had airplanes on bombing missions in it was wrong.  Every one of them. (To someone who had grown up with reruns of WWII war movies on TV, this was a shock.) Every movie I had seen – 12 O’clock High, Memphis Belle, etc. –  assumed that there were no electronics other than radios on these bombers. Wrong. Not only didn’t the movie makers know, but the pilots and crews didn’t know about the German radar guided system trying to kill them. Nor did they know about the electronic shield being assembled to try to protect them.

But while this may be a great story what the does this have to do with the history of Silicon Valley?

The answer lies with who ran this lab and became the father of electronic warfare and Signals Intelligence in the Cold War for the next 20 years.

Who Ran the Most Secret Lab You Never Heard of?
It was Fred Terman of Stanford.  The Harvard Radio Research Lab was his creation. A Stanford professor was at Harvard in World War II because the head of the Office of Scientific Research and Development thought Terman was the best radio engineer in the country. (Why couldn’t he have set up a lab at Stanford?  Apparently, the Office of Scientific Research thought that Stanford’s engineering department was second rate.)

Finally, I had an answer to the question I had asked 35 years earlier when I was in Thailand: “How did electronic warfare get started?” Now I knew that it began in the early days of World War II as a crash program to reduce the losses of bombers to the German air defense network.  Electronic warfare and signals intelligence in the U.S. started with Fred Terman and the Harvard Radio Research Lab.

Spooky Music
Reading about Terman was like finding the missing link in my career.  Here was the guy who invented the field I had spent the first five years of my adult life working on. And 30 years later I was teaching in a building named after him and never knew a thing about him.  Play spooky music here.

I began to realize a few things: First, everything we had done in electronic warfare in the Vietnam War was just a slightly more modern version of what we had done over occupied Europe in World War II.  (And in hindsight, we seemed a bit more agile and innovative in WWII.)

Unbelievably, in less than two years, Terman’s Radio Research lab invented an industry and had turned out a flurry of new electronic devices the likes of which had never been seen.  Yet decades later the military lacked the agility to write a spec in two years, let alone get 10′s of thousands of new systems deployed on aircraft as Terman had done.  How was this possible?  In 21^st century terminology we’d say that Terman built the Radio Research lab into a customer-centric organization doing agile development.

Just the Beginning
The public history of Terman’s involvement with the military ends when he returns back to Stanford at the end of the war. Nothing in his biography or any Stanford history mentions anything as exciting as his work in World War II. The public story of his last 20 years at Stanford, in the 1950′s and ’60′s, seems to have him settle into the role of the kindly dean and innovative provost.

Nothing could be further from the truth.

The Secret Life of Fred Terman in the next post.

I always had been curious about how Silicon Valley, a place I had lived and worked in, came to be.  And throughout my career as an entrepreneur I kept asking questions of my VC investors and friends; Where did entrepreneurship come from?  How did Silicon Valley start? Why here?  Why now? How did this culture of “make it happen” emerge, etc.  And the answer came back much as it did in my past jobs; Who cares, get back to work.

After I retired, Jerry Engel, director of the Lester Center on Entrepreneurship, at U.C. Berkeley Haas Business School was courageous enough to give me a forum teach the Customer Development Methodology. As I was researching my class text, I thought it would be simple enough to read up on a few histories of the valley and finally get my questions about the genesis of entrepreneurship answered.

The Legend: HP, Intel and Apple
I read all the popular books about the valley and they all told a variant of the same story; entrepreneurs as heroes building the Semiconductor and Personal Computer companies: Bill Hewlett and David Packard at HP, Bob Taylor and the team at Xerox PARC, Steve Jobs and Wozniak at Apple, Gordon Moore and Bob Noyce at Intel, etc.  These were inspiring stories, but I realized that, no surprise, the popular press were writing books that had mass appeal.  They were all fun reads about plucky entrepreneurs who start from nothing and against all odds, build a successful company.  74HGZA3MZ6SV

But no one was writing about where the entrepreneurial culture had come from.  Where were the books explaining why were all these chip and computer companies started here?  Why not elsewhere in the country or the world?  With the exception of one great book, no one was writing about our regional advantage. Was it because entrepreneurs keep moving forward and rarely look back?  I needed to dig deeper.

The Facts: Vacuum Tube Valley – Our 100^th Anniversary
To my surprise, I discovered that yes, Silicon Valley did start in a garage in Palo Alto, but it didn’t start in the Hewlett Packard garage.  The first electronics company in Silicon Valley was Federal Telegraph, a tube company started in 1909 in Palo Alto as Poulsen Wireless.  (This October is the 100th anniversary of Silicon Valley, unnoticed and unmentioned by anyone.)  By 1912, Lee Deforest working at Federal Telegraph would invent the Triode, (a tube amplifier) and would go on to become the Steve Jobs of his day – visionary, charismatic and controversial.

* Federal Telegraph and Lee Deforest in Palo Alto are the first major events in what would become Silicon Valley.  We need to reset our Silicon Valley birthday calendars to here.

By 1937, when Bill Hewlett and David Packard left Stanford to start HP, the agricultural fields outside of Stanford had already become “Vacuum Tube Valley.” HP was a supplier of electronic test equipment and joined a small but  thriving valley electronics industry with companies like Litton and Eitel and McCollough.

* By the late 1930′s when HP started, a small group (measured in hundreds) of engineers who made radio tubes were building the valleys’ ecosystem for electronics manufacturing, product engineering and technology management.

Who would have known?

Microwave Valley – the 1950′s and ’60′s
There isn’t much written about Silicon Valley during and after World War II.  The story of the valley post war, through the 1950′s, is mostly about the growth of the tube companies and the rise of Hewlett Packard.  The popular literature has the valley springing to life in the 1960′s with the semiconductor revolution started by Shockley, Fairchild, Signetics, National and Intel, followed by the emergence of the personal computer in the mid 1970′s.

But the more I read, the more I realized that the public history’s of the valley in the 1950′s and ’60′s were incomplete and just plain wrong. The truth was that huge dollars were spent on a large number of companies that never made the press or into the history books. Companies specializing in components and systems that operated in the microwave portion of the electromagnetic spectrum sprouted faster than fruit trees in the valley orchards. In ten years, from the early 1950′s to the early 1960′s, the valley went through a hiring frenzy as jobs in microwave companies went from 700 to 7,000.

This wave of 1950′s/’60′s startups (Watkins-Johnson, Varian, Huggins Labs, MEC, Stewart Engineering, etc.) were making  dizzying array of new microwave components; power grid tubes, klystrons, magnetrons,  backward wave oscillators, traveling wave tubes (TWT’s), cross-field amplifiers, gyrotrons, and on, on…  And literally across the valley, these microwave devices were being built into complete systems for the U.S. military by other new startups;  Sylvania Electronics Defense Laboratory, Granger Associates, Philco, Dalmo Victor, ESL and Argosystems. In the 1950′s and ’60′s more money was pouring into these companies than on the fledgling chip and computer companies.

* The 10x expansion in the number of engineers in the valley in the 1950′s came from the military and microwaves – before the semiconductor boom. And these microwave engineers were working at startups – not large companies. You never heard of them because their work was secret.

When I read the funny names of these microwaves devices… Backward wave oscillators, TWT’s, Magnetrons…long silent memories came back. These components were the heart of the electronic warfare equipment I have worked on; including fighters in Thailand and on B-52 bombers.  After 20 years, the story started coming home for me.

The Revolution Wasn’t Televised
What the heck happened here to create this burst of innovation?  What created this microwave startup culture in the 1950′s? And since there was no Venture Capital in the 1950′s/’60′s where was the money coming from?  This startup boom seemed to come out of nowhere.  Why was it occurring here?  And why on earth the sudden military interest in microwaves?

Part of the answer was that these companies and the military had forged some type of relationship.  And it appeared that Stanford University’s engineering department was in middle of all this. The formation of the military/industrial/university relationships during the Cold War and the relationship between Stanford and the intelligence community in particular, went on untold and out of sight.

While nothing I read described the specific products being worked on, or what specifically was Stanford’s contribution, there were some really tantalizing pointers to who the real customers were (hint, it wasn’t just the “military,”) or why was this work was being done at Stanford.

No one knew that it all pointed to just one guy at the center of it all -  Fred Terman of Stanford University.

* Stanford, the military and our intelligence agencies started the wave of entrepreneurial culture that today’s Silicon Valley takes for granted.

The “Secret Life of Fred Terman” and “Stanford Fights the Cold War” on the next “Secret History” posts.

All You Can Read Without a Library Card

It was 1978. Here I was, a very junior employee of ESL, a company with its hands in the heart of our Cold War strategy. Clueless about the chess game being played in Washington, I was just a minion in a corporate halfway house in between my military career and entrepreneurship. 74HGZA3MZ6SV

ESL sent me overseas to a secret site run by one of the company’s “customers.”  It was so secret the entire site was could have qualified as one of Dick Cheney’s “undisclosed locations.” As a going away gift my roommates got me a joke disguise kit with a fake nose, glasses and mustache.

The ESL equipment were racks of the latest semiconductors designed into a system so complicated that the mean-time-between-failure was measured in days. Before leaving California, the engineers gave me a course in this specialized receiver design. Since I had spent the last four years working on advanced Air Force electronic intelligence receivers, I thought there wouldn’t be anything new.  The reality was pretty humbling. Here was a real-world example of the Cold War “offset strategy.” Taking concepts that had been only abstract Ph.D theses, ESL had built receivers so sensitive they seemed like science fiction.  For the first time we were able to process analog signals (think radio waves) and manipulate them in the digital domain. We were combining Stanford Engineering theory with ESL design engineers and implementing it with chips so new we were debugging the silicon as we were debugging the entire system.  And we were using thousands of chips in a configuration no rational commercial customer could imagine or afford.  The concepts were so radically different that I spent weeks dreaming about the system theory and waking up with headaches. Nothing I would work on in the next 30 years was as bleeding edge.

Now half a world away on the customer site, my very small role was to keep our equipment running and train the “customer.” As complex as it was, our subsystem was only maybe one-twentieth of what was contained in that entire site. Since this was a location that worked 24/7, I was on the night shift (my favorite time of the day.) Because I could get through what I needed to do quickly, there wasn’t much else to do except to read.  As the sun came up, I’d step out of the chilled buildings and go for an early morning run outside the perimeter fence to beat the desert heat.  As I ran, if I looked at the base behind the fence I was staring at the most advanced technology of the 20th century.  Yet if turned my head the other way, I’d stare out at a landscape that was untouched by humans.  I was in between the two thinking of this movie scene.  (At the end of a run I used to lay out and relax on the rocks to rest – at least I did, until the guards asked if I knew that there were more poisonous things per square foot here than anywhere in the world.)

Before long I realized that down the hall sat all the manuals for all the equipment at the entire site. Twenty times more technical reading than just my equipment. Although all the manuals were in safes, the whole site was so secure that anybody who had access to that site had access to everything – including other compartmentalized systems that had nothing to do with me – and that I wasn’t cleared for.  Back home at ESL control of compartmentalized documents were incredibly strict. As a contractor handling the “customer’s” information, ESL went by the book with librarians inside the vaults and had strict document access and control procedures.  In contrast, this site belonged to the “customer.”  They set their own rules about how documents were handled, and the safes were open to everyone.

I was now inside the firewall with access to everything.  It never dawned on me that this might not be a good idea.

Starting on the safe on the left side, moving to the safe on the right side, I planned to read my way through every technical manual of every customer system.  We’re talking about a row of 20 or so safes each with five drawers, and each drawer full of manuals. Because I kept finding interesting connections and new facts, I kept notes, and since the whole place was classified, I thought, “Oh, I’ll keep the notes in one of these safes.” So I started a notebook, dutifully putting the classification on the top and bottom of each page.  As I ran into more systems I added the additional code words that on the classification headers.  Soon each page of my notes had a header and footer that read something like this:  Top Secret / codeword/ codeword / codeword / codeword / codeword / codeword / codeword.

I was in one of the most isolated places on earth yet here I was wired into everywhere on earth.  Coming to work I would walk down the very long, silent, empty corridors, open a non-descript door and enter the operations floor (which looked like a miniature NASA Mission Control), plug a headset into the networked audio that connected all the console operators — and hear the Rolling Stones “Sympathy for the Devil.”  (With no apparent irony.) But when the targets lit up, the music and chatter would stop, and the communications would get very professional.

Nine months into my year tour, and seven months into my reading program, I was learning something interesting every day. (We could do what!?  From where??)  Then one day I got a call from the head of security to say, “Hey, Steve can you stop into my office when you get a chance?”

Are These Yours?

Now this was a small site, about 100-200 people, and here was the head of security was asking me over for coffee.  Why how nice, I thought, he just wants to get to know me better. (Duh.)  When I got to his office, we made some small talk and then he opened up a small envelope, tapped it on a white sheet of paper, and low and behold, three or four long black curly hairs fall out.  “Are these yours?” he asked me.

This the one of the very few times I’ve been, really, really impressed.  I said, “Why yes they are, where did you get them?”  He replied, ‘They were found in the ‘name of system I should have absolutely no knowledge or access to’ manuals. Were you reading those?”  I said, “Absolutely.”  When he asked me, “Were you reading anything else?”  I explained, “Well I started on the safe on the left, and have been reading my way through and I’m about three quarters of the way done.”

Now it was his turn to be surprised. He just stared at me for awhile.  “Why on earth are you doing that?” he said in a real quiet voice. I blurted out, “Oh, it’s really interesting, I never knew all this stuff and I’ve been making all these notes, and …”  I never quite understood the word “startled” before this moment.  He did a double-take out of the movies and interrupted me, “You’ve been making notes?”  I said, “Yeah, it’s like a puzzle,” I explained.  ”I found out all this great stuff and kept notes and stored in the safe on the bottom right under all the…”  And he literally ran out of the office to the safes and got my notebook and started reading it in front of me.

And the joke (now) was that even though this was the secret, secret, secret, secret site, the document I had created was more secret than the site.

While the manuals described technical equipment, I was reading about all the equipment and making connections and seeing patterns across 20 systems. And when I wasn’t reading, I was also teaching operations which gave me a pretty good understanding of what we were looking for on the other side.  At times we got the end product reports from the “customer” back at the site, and these allowed me to understand how our system was cued by other sensors collecting other parts of the electromagnetic spectrum, and to start looking for them, then figuring out what their capabilities were.

Pattern Recognition

As I acquired a new piece of data, it would light up a new set of my neurons, and I would correlate it, write it down and go back through reams of manuals remembering that there was a mention elsewhere of something connected.  By the time the security chief and I were having our ‘curly hairs in the envelope’ conversation, not only did I know what every single part of our site did, but what scared the security guy is that I had also put together a pretty good guesstimate of what other systems we had in place worldwide.

For one small moment in time, I may have assembled a picture of the sum of the state of U.S. signals intelligence in 1978 − the breadth and depth of the integrated system of technical assets we had in space, air, land, and other places all focused on collection. (If you’re a techie, you’d be blown away even 30 years later.) And the document that the head of security had in his hand and was reading, as he told me later, he wasn’t cleared to read – and I wasn’t cleared to write or see.  I’m sure I knew just a very small fraction of what was going on, but still it was much more than I was cleared for.

At the time this seemed quite funny to me probably because I was completely clueless about what I had done, and thought that no one could believe there was another intent.  But in hindsight, rather than the career I did have, I could now just be getting out of federal prison. It still sends shivers up my back.  After what I assume were a few phone calls back to Washington, the rules said they couldn’t destroy my notebook, but they couldn’t keep it at the site either.  Instead my notebook was couriered to Washington – back to the “customer.”  (I picture it still sitting in some secure warehouse.)  The head of security and I agreed my library hours were over and I would take up another hobby until I went home.

Thank you to the security people who could tell the difference between an idiot and a spy.

When I got back to Sunnyvale, my biggest surprise was that I didn’t get into trouble. Instead someone realized that the knowledge I had accumulated could provide the big picture to brief new guys “read in” to this compartmentalized program.  Of course I had to work with the customer to scrub the information to get its classification back down to our compartmental clearance. (My officemate who would replace me on the site, Richard Farley, would go on to a more tragic career.)  I continued to give these briefings as a consultant to ESL even after I had joined my first chip startup; Zilog.

Two Roads Diverged in a Wood and I took the Road Less Traveled By,  And That Has Made All the Difference

Extraordinary times bring extraordinary people to the front. Bill Perry the founder of ESL, is now acknowledged as one of the founders of the entire field of National Reconnaissance, working the NSA and the CIA in programs to intercept and evaluate Soviet missile telemetry and communications intelligence.

ESL had no marketing people.  It had no PR agency.  It shunned publicity.  It was the model for almost every military startup that followed, and its alumni who lived through its engineering and customer-centric culture had a profound effect on the rest of the valley, the intelligence community and the country. And during the Cold War it sat side by side with commercial firms in Silicon Valley, with its nondescript sign on the front lawn. It had Hidden in Plain Sight.

As for me, after a few years I decided that into was time to turn swords into plowshares. I left ESL and the black world for a career in startups; semiconductors, supercomputers, consumer electronics, video games and enterprise software.

I never looked back.

It would be decades before I understood what an extraordinary company I had worked for.

Thank you Bill Perry for one hell of a start in Silicon Valley.

I was 24.

My first class of students at ESL: Guardrail V Training Class (note the long black curly hairs)

1978. Two years out of the Air Force, serendipity (which would be my lifelong form of career planning) found me in Silicon Valley working for my first company: ESL. If you’re an entrepreneur, ESL is the most important company you’ve never heard of. If you are a practitioner of Customer Development, ESL was doing it before most us were born. If you think the Cold War turned out the right side up (i.e. Communism being a bad science experiment) ESL’s founder Bill Perry was moving the chess pieces. And no one who really knew could tell you. 74HGZA3MZ6SV

Bill Perry’s public life as Secretary of Defense and his subsequent work in preventing nuclear proliferation and nuclear terrorism is public knowledge. But part of his life that that doesn’t even merit a Wikipedia entry is that Bill Perry used Silicon Valley to help end the cold war.

Fred Terman Sent Us

In 1953 the U.S. Army needed to build missile and proximity fuse jammers and Quick Reaction Capability (QRC) systems (translation: the other side just came up with something that’s killing us in a shooting war, get us a fix quick.) The Army offered Fred Terman, the Dean of Engineering at Stanford, a $5M contract to build an electronics countermeasures lab. When Terman said no, Sylvania, a tube company which built proximity fuse tubes in WWII, won the contract and set up its Electronic Defense Lab (EDL) in Mountain View California in the middle of an orchard. Terman became a consultant to the company.

In ten years Sylvania EDL grew to be one the largest companies in the valley − 1300 people were working on electronic countermeasures and electronic intelligence. By 1961 its customers now included our intelligence agencies. (BTW, when the customers were “three-letter” intelligence agencies, contractors used an oblique way of talking about who they were working for: they were all referred to as simply the “customer.”)

In 1964, Bill Perry, the head of the lab, frustrated with GTE’s management, quit (GTE, a phone company had bought Sylvania in 1959.) And in the tradition of great startups, on the way out Perry took 6 of his best managers with him.

At ESL Military Intelligence Was No Longer an Oxymoron

Perry not only took his best managers, but he also took his customers, and his desire to build a company culture that was the antithesis of working for a phone company. In building ESL Perry made a conscious choice to emulate Hewlett Packard (then considered the “gold standard” of a great technology company.) HP had an ethical culture, entrepreneurial spirit, and deep Stanford engineering department connections. One key difference: unlike HP, which had restricted stock ownership to the founders and top management, Perry made sure everyone at ESL had stock. There were no venture investors. The “customers’” contracts funded the company. Seven years later in 1971 ESL went public.

Not surprising with a CEO with a PhD in Math, at ESL the engineers ran the company, pursuing bleeding-edge designs in antennas, receivers and microwaves – at times hand in hand with Stanford’s engineering department. (Some of this stuff was so advanced that the rumors were that we got it from the alien spacecraft hidden at Wright-Patterson Air Force base.)

ESL was unique among the “we do microwaves” that the Valley specialized in before it was Silicon Valley. ESL was a systems company that used computers, and in the mid-1960’s using computers for electronic intelligence was considered revolutionary. ESL specialized in embedding minicomputers in electronic intelligence systems, turning a tedious manual process into one that looked like magic. The “customers” in Washington had never seen anything like it.

While those computer-based systems paid the bills, Perry’s even more profound insight would change the outcome of the Cold War.  Up until ESL, radio and radar signals had always been received by analog receivers.  ESL realized that by turning these radio waves into computer bits, ones and zeros, they could be processed in ways that had been considered theoretically impossible.  ESL’s systems allowed signal extraction and correlation against targets the Soviet Union thought were undetectable and impenetrable. But this digital world required new theories, and new devices – two items provided by Silicon Valley in the form of Stanford’s engineering department and the emerging/booming semiconductor business.

ESL and “the Customer” – No Such Agency

ESL kept getting business and growing mostly through unsolicited bids. Because they were extremely good at what they did, most of the contracts they won were “sole source.” However, it didn’t hurt that Perry several allies at the “customer.” One of them, Bud Wheelon, had been a classmate of Perry’s at Stanford and they both had worked on the electronic intelligence collection problem, Perry at Sylvania EDL and Wheelon at the Space Technology Lab at Ramo Woolridge. In 1962 Wheelon left for a new job as the first director of the CIA’s Directorate of Science and Technology where he was responsible for development of OXCART, the A-12 Spyplane, and three major satellite reconnaissance systems.  These would be the heart of ESL’s business.

A-12 OXCART CIA Spyplane

ESL found other ways to stay very close to its customers. Forty years before Agile Development methodologies became popular, ESL had analysts from its ”customer” sitting side-by-side with ESL engineers designing new equipment together. And in the 1960s ESL’s customers asked the company to analyze and interpret telemetry data even though this was a traditional function of the “customer.” In five years, ESL went from a plucky startup to the market leader in Sigint and telemetry intercepts. While it was a for-profit company, Perry believed ESL’s goal was to serve the national interest instead of just the stockholders. He identified with their customers, not shareholders. If there was a conflict between profits and doing the right thing, at ESL the goal was to “think of the country first.” Yet ESL was just act one for Bill Perry.

Yes We Can – Dumping Detente – Bill Perry and “the Revolution in Military Affairs”

After 20 years of an escalating arms race, the Nixon administration decided to take a new approach to dealing with the Soviet Union: Détente. Kissenger’s thinking was: history may be tilting to the Communists and we may not be able to win the struggle with the Soviet Union so let’s settle for parity. Yet while the U.S. had been engaged in the Vietnam War, and had agreed to parity in nuclear weapons, Soviet forces in Europe had built a 3 to 1 advantage in tanks, artillery, armored personnel carriers, and soldiers, all under Détente.

In response the U.S. dumped Détente and embraced a new strategy to counter the Warsaw Pact by not matching them tank for tank or solider to solider. The new insight was that we could change the game completely and take advantage of a lead we had that was getting longer every day – by using our computer and chip technology to aggressively build a new generation of weapons that the Soviet Union could not.

At the heart of this idea was something called “precision strike,” what we would today call smart bombs or precision guided munitions. But this new strategy was more than making the bombs smarter. It involved building stealth aircraft to deliver these precision weapons unseen by any enemy radar, and designing intelligence and reconnaissance systems that would target for them. Smart weapons, smart sensors, and stealth.  And the heart of all of this were microwaves, silicon chips, electronics and computers that only the U.S. could design and produce, and a good part of it was coming from Silicon Valley.

The Arms Factories that Won the Cold War Were Semiconductor Factories

Who was the government official pushing all of this? It was none other than Bill Perry, who had become the head of Research and Engineering for the Defense Department. From 1977 to 1981 Perry cranked up spending for research and development on a massive scale. The budget for the Defense Advanced Research Projects Agency (DARPA) doubled, and huge “smart weapons” defense programs like the F-117 stealth ground attack plane and the B-2 stealth bomber; precision guided munitions; JSTARS, a surveillance system; and the satellite Global Positioning System (GPS); MX missile; Trident submarine; and Tomahawk cruise missiles.

F-117 Nighthawk - 1st Stealth Ground Attack Plane

These changes in American defense policy spooked the Soviets. The Chief of Staff of the Red Army said that this “Offset Strategy” was revolutionizing contemporary warfare and posed a military threat that the Red Army could not match. “We cannot equal the quality of US arms for a generation or two. . . . We will never be able to catch up with you in modern arms until we have an economic revolution. And the question is whether we can have an economic revolution without a political revolution.”

The U.S. Cold War strategy had gone from a “let’s be friends” to a “yes we can win” strategy. By the mid 1980s Ronald Reagan was cranking U.S. defense spending even higher. Gorbachev, now the Soviet Premier, had to grapple with the spiraling cost of military systems that weren’t amortized by consumer purchases. Arms control with the U.S. and massive cuts in weapons and the military seemed like the only way out. And the rest is history.

Bill Perry put us on the path to use Silicon Valley as a weapon in the cold war.

My small part as a foot solider in this adventure is in the next post.