As general manager, Noyce’s primary contribution to the microcircuits group was continuing to fund its research and to encourage its researchers. Several employees, including Isy Haas, who worked on the microcircuits team, felt that Noyce was instrumental in Fairchild’s decision to pursue work on the integrated circuit, even in the face of opposition from within the company. And there was stiff opposition. Tom Bay and the marketing department worried that integrated circuits would cannibalize transistor and diode sales. Last’s boss, Gordon Moore, expected the device would not be a significant product for many years. Most straightforward calculations would have predicted yields on integrated circuits so abysmal as to render it impossible to make money from the business.42
Moreover, the integrated circuit was almost prohibitively expensive. A simple gate made with an early integrated circuit would have cost about $150, while another device, identical in function but built with discrete components, might have been $3. Only customers with extreme constraints on size and weight and no limits on cost—in other words, the United States military—would willingly pay such prices. Every additional pound added to the weight of a rocket required an additional ton of fuel to launch it into space. Reducing the payload weight by even a few ounces in this scenario was thus easily worth thousands of dollars to the military.43
Despite opposition within the company, Noyce kept the integrated circuits group alive with the quiet support of Moore, who believed the integrated circuit was an “interesting and exciting” advanced research project. Noyce did not feel especially connected to the integrated circuit, but he did believe that creative laboratories were duty-bound to allow a researcher to “go ahead and pursue [ideas] until either he does get somewhere or he proves to himself that he can’t get anywhere.”44
Perhaps the singular experience of Noyce’s six-month trial run as general manager came in September, when Fairchild Camera and Instrument exercised its option to acquire all outstanding capital stock of Fairchild Semiconductor. In just the previous nine months, Fairchild Semiconductor had sold $6.5 million worth of its high-speed silicon devices, each of which cost 13 cents to build, for $1.50 apiece—an 87 percent profit margin. John Carter estimated that revenues would triple in the next year and wanted those profits for the Camera and Instrument balance sheet.45
On September 24, 1959, Noyce received a Western Union telegram informing him that in a tax-free stock swap, the shares of Fairchild Semiconductor had been exchanged for 19,901 shares of Camera and Instrument stock (with value equal to the $3 million purchase price agreed upon two years earlier). These roughly 20,000 shares were split among the eight founders and Hayden, Stone, the investment bank that had brokered the original deal.46
Noyce flipped over the telegram and did some quick math. He, like each of the other founders, now owned stock worth roughly $300,000. He could pay off his debts from school and reimburse his grandmother the $500 she loaned him to start Fairchild Semiconductor. He could replace the Chevy that had made the trek from Philadelphia and was now in such bad shape that his co-founders asked him to park it in the back lot “because it ruins the look of the building to have it parked in front.” He and Betty began talking about buying a new house, and they paid for Noyce’s parents to travel to Europe. Arthur Rock and Bud Coyle threw a party at Trader Vic’s for the founders and their wives. After dinner, Rock gave each of the men an 18-karat gold money clip festooned with a golden horseshoe.47
When he called his parents with the news, Noyce did not quite manage to contain his excitement, although he very much wanted to sound casual about his new wealth. Noyce had not originally thought Fairchild would make him rich—as Jay Last put it in a letter home to his parents shortly after the company was launched, “our motivation for going into this is the chance to be our own bosses and to do a job the way we think it should be done, rather than the financial aspects.” But the realization that he could indeed become wealthy dawned on Noyce quite early at Fairchild and was, of course, quite welcome. Once the money came, however, it also opened a tiny area of disquiet for him. To put in $500 and two years later emerge with $300,000 did not seem real. The reward seemed too much for the effort.48
The acquisition by Camera and Instrument gave Noyce the final confidence boost he needed to accept the general manager’s position permanently. At a press conference at the Waldorf Astoria in New York announcing the changes, he answered questions with ease despite being, at 32, the youngest man on the dais by at nearly a quarter century. He privately told Richard Hodgson that he enjoyed the power of the general manager’s position—“People used to do things I asked to be cooperative; now they do it because I tell them to do it”—and he reveled in the diverse work the job required: “It’s a very satisfying thing, particularly coming from a place [R&D] where you’re looking at a narrow field…. [S]uddenly you’re sitting in a balloon looking down from branch to branch and … for the first time you can see the whole.”49
Noyce had definite ideas about the type of company he wanted Fairchild Semiconductor to become. “We’re not ever going to screw a customer,” he warned a candidate for a marketing position. “We are going to run Fairchild in an honest way.” Noyce went on to explain, by way of example, that Fairchild planned to charge the same amount of money for two different transistor products, even though one was a significantly higher performance device than the other. His reasoning? The yields out of the manufacturing process were roughly equal for the two transistors, so the higher-performance device was no more costly for Fairchild to build than its lower-performance cousin. When the candidate pointed out that demand, not yield, should drive pricing, and that Fairchild could get more money for the higher-performance device, Noyce nearly growled in response: “That’s just the sort of shady practice we’re talking about [avoiding]!” Noyce’s yield-based pricing system prevailed only until large stockpiles of the lower-performance transistor began building up in the shipping area, at which point prices on the more desirable transistor were raised.50
Shortly after he became general manager, Noyce asked Jack Yelverton, an MBA whom Eugene Kleiner had hired to write job descriptions and establish salary guidelines, to help him clarify his thoughts about “what makes a good company” and codify them into policy. When Yelverton began talking to him about recruiting, or wage and salary administration, Noyce waved him away with a dismissive “you’re the guy who went to business school. You figure that out.” It soon became apparent to Yelverton that what Noyce wanted was not nitty-gritty detail on specific personnel issues, but a sweeping “anthropological approach” to company building, a conscious effort to develop what today is called “corporate culture.”51
Noyce’s top objective was to keep Fairchild from becoming Shockley Semiconductor Labs, a place he called “the model of what not to do.” Over the course of about three weeks, Noyce explained to Yelverton how he loathed Shockley’s mind games, his top-down approach to management, and his habit of playing one employee off another. Most pernicious of all, in Noyce’s opinion, was Shockley’s love of keeping secrets. Noyce wanted Fairchild to be as open as possible. He wanted “to tell the story as it really is,” rather than let rumors run rampant. He and Yelverton talked about one employee lunch room with “no class distinctions”—just a big space with rows of tables. They talked about orientation sessions where every new employee could meet Noyce and the heads of the various departments. Noyce urged Yelverton to devise ways to encourage “frank and earnest expression” because above all, Noyce wanted to lead not through command-and-control methods but by inspiring the “voluntary cooperation of motivated people.” Such philosophy echoed the egalitarian teaching of his Congregationalist boyhood.
Noyce’s was an unusual approach to management, particularly since the “girls” in the fab, whose work would be classed as “unskilled labor,” comprised the fastest-growing group of employees in the company. Noyce well understood that the success of Fairchild Semiconductor would depend in no small measure on the precision a
nd rigor of its manufacturing facility. He thought, however, that the best way to achieve the necessary level of discipline was not to clamp down on the lowest-paid workers but to open up as much as possible. Fab employees had to complete very specific tasks quickly and in a highly routinized manner, but Noyce wanted instructions for these workers to go beyond describing what to do to explaining how each job in the assembly process related to the others. He wanted Fairchild employees at every level to be able to eat with their bosses. He wanted the company to produce an employee newsletter with real data about performance and technology, and he wanted to organize small meetings in which he could personally tell each employee how his or her work contributed to the firm’s success.
Noyce and Yelverton felt that these “ethically right” actions would also improve the company’s bottom line by increasing employees’ identification with Fairchild and consequently reducing turnover, which posed enormous problems. Building a semiconductor device in the late 1950s and early 1960s was as much an art as a science. Even for well-paid and highly sought-after circuit designers and engineers, there were few formal courses and little knowledge that was not best gained directly through a process of trial and error, supervised, however informally, by someone who had already successfully built semiconductor devices. Operators would check a device’s “doneness” as they would a cake: looking at color and returning it to the furnace for a few more minutes if it seemed necessary. Work in the fab required dexterity and eye-hand coordination that invariably improved with practice. A single lead welder, for example, would weld more than 5,000 microscopic wires every week. An experienced workforce throughout the company meant lower production costs and better, more reliable products.52
Treating employees right—particularly in the manufacturing fab—also helped to keep workers out of unions and unions out of Fairchild. By the early 1960s, organized labor had begun casting covetous eyes towards the semiconductor industry’s lowest-paid workers, who seemed perfect candidates for unionization. They worked at highly repetitive tasks for little money and were subject to tight discipline. Recalls one woman who worked on the line at this time: “We could not wear pants to work. We had to wear skirts or dresses under the green nylon smocks Fairchild gave us. Other than two short breaks and one half-hour lunch break, we couldn’t stand up during the time [we were on the line] for any reason. You even had to raise your hand and get permission to use the bathroom. Sometimes girls would say they had a headache just to get a break.”53
But this same employee felt strongly that Fairchild had been a “good place to work.” She had health insurance and paid vacation days. When production began to ramp up, Fairchild offered its assemblers a deal: if they committed to reporting to the fab every Saturday, the company would guarantee them work—at time-and-a-half pay. The company had no problem finding people eager to participate in the program.
The Mountain View fab ran a series of breakfast meetings for production employees and managers. Foremen could participate in formal management-training classes taught by Fairchild executives. Another Fairchild plant held a weekly “coffee-conversation meeting” in which a manager invited six assembly-line workers for “cookies, coffee, and conversation.”54
Paid holidays and overtime, ongoing training sessions, medical care—such personnel practices matched or bettered those usually won through union negotiations. An hour spent chatting and sharing coffee with your boss’s boss humanized the white-collar workers and blurred the traditionally sharp line between “labor” and “management.” When in 1962 a union attempted to organize Fairchild production workers, it was voted down. The result must have pleased Noyce. The strikes he witnessed when he worked at Philco had left a bad taste in his mouth, and he also thought that collective bargaining by definition undermined individual striving. He believed that it was far better to let a person rise on the basis of talent rather than due to seniority or some other bureaucratic requirement.
Noyce asked human resources chief Yelverton and a young man named Jerry Levine whom Noyce had hired to handle “special assignments,” to codify some of the ideas they had been discussing in a policy and procedures book. Much within this book was non-negotiable: the nitty-gritty around signature and approval requirements or reporting relationships, for example. Any work for the military was subject to its own special procedures, and every step in the fab was likewise spelled out in excruciating detail. For other areas, though, Yelverton and Levine consulted with all the department and section heads, hoping to devise “something that worked smoothly and that the people who were subject to it helped to create,” in Levine’s words. They also talked to managers from Hewlett-Packard, Eitel-McCullough, Varian, and a few other established and progressive-minded local technology companies about how to balance the tension between freedom and discipline.
NOYCE’S MANAGERIAL INSTINCTS might sound idealistic, but humanitarian values were deeply ingrained in all the Noyce boys. In the first years of the 1960s, Ralph was finishing college; Don was a chemistry professor at Berkeley; and Gaylord, now a professor at Wesleyan University (soon to move to Yale Divinity School), had joined the Freedom Rides against segregation, gotten himself arrested in the deep South with several other riders, and was in the process of appealing his case to the Supreme Court, which would later rule in the riders’ favor. Bob Noyce took great pride in Gaylord’s bravery and ideals, bragging about him to his children and eagerly introducing himself as “Gaylord’s brother” when he once happened to meet Martin Luther King, Jr., on an airplane.55
In general, the early 1960s were a decidedly heady time for Noyce. The company he managed was growing at a rate of 100 employees per month and selling millions of dollars worth of semiconductors each year. He had eight patent applications on their way to being granted. By the end of 1960, Fairchild had announced the earliest successful tests of a mass-producible integrated circuit, which would be sold under the name “Micrologic.” At 33, Noyce had more money than he or anyone else in his family had ever possessed, more money than he could ever imagine spending. And he had no real failures to make him cautious.
He began traveling the world as part of his work. In March, 1960, he spent two weeks in England and Central Europe exploring possibilities for penetrating the European transistor market. Betty joined him on this trip, but not on his three-week jaunt to Japan in June to discuss potential licensing agreements with Japanese firms. The Japanese trip was Noyce’s first encounter with a radically different culture, and he enjoyed everything about the country, from its “delicious raw fish” to its orderly streets. He left reassured that the Japanese semiconductor industry significantly trailed the American. Japanese germanium transistors were comparable to a midgrade American device, but he felt the island nation was years behind in silicon. Since he thought Japan was essentially a factory for churning out devices built on ideas licensed from American firms, Noyce saw no harm in licensing select Fairchild technology to a few Japanese companies.56
In September, life continued to smile on Noyce as he and Betty welcomed their fourth child, a girl named Margaret. Shortly thereafter, they bought a nice but not ostentatious French-style house in Los Altos Hills with lovely views, a bedroom for each child, and a backyard big enough for a horse. Noyce “felt a little guilty about buying the house” and imagined his parents would disapprove of such an “extravagant” purchase. In general, he thought, men of his age “financially outperformed their parents, which leaves them a little bit estranged from their parents.”57
Despite this miasma of intergenerational tension, Noyce enjoyed having a bit of money for the first time in his life. He could afford to send his older children to the private school Betty selected for them. On weekends, the family could drive to the mountains around Lake Tahoe, where he taught the children to ski, making his way down the hill with one of them wedged between his legs. Noyce bought a one-third share in a Ryan airplane. He could not legally fly it because he did not have a pilot’s license, but one of his co-owners, a
Fairchild employee and former Navy pilot, gave Noyce lessons on the sly until Betty told him she did not want to be left a widow with young children.58
A strict division of labor marked life in the Noyce home. Bob was responsible for income gathering and large fix-it projects. Betty had full charge of the children and the house. She maintained very high expectations of her children. Betty thought Bob’s family a bit crass—his mother dunked her bread in her soup, which appalled Betty—and she sought to counter this influence. The Noyce children had chores and music lessons and extremely good manners from very early ages. Betty wanted them to read well before kindergarten, and they did.
Bob’s most significant contribution to the children’s early upbringing was to pull them from all religious education when Billy, the oldest, was seven. Noyce thought that the Bible stories and miracles that the children learned about in Sunday School were “not the truth,” and that Billy and Penny were too young to appreciate metaphor, which was how Noyce tended to view religious teachings. The family never attended religious services after 1961 unless they were visiting Bob’s parents. Noyce did not talk much about religion, though he did on one occasion point out the entrepreneurial and motivational messages latent in the Christmas story, which he appreciated not as a miraculous tale of a virgin birth but as a reminder that “one event, or one man, can substantially change the course of history.” In general, he thought that religion kept people from achieving all they could in this life by focusing their attention on the rewards they could expect in the life to come.59
The Man Behind the Microchip Page 18
