The Code

by Margaret O'Mara

  This was especially true at Stanford. Fred Terman’s university was no longer a dusty little outpost; it was now the center of a large and rich high-tech universe. It was the place to be if you wanted to push the edge of the scientific envelope, or if you wanted to build an entirely new kind of business. You had easy access to people and resources; you had the eyes of the world upon you. You were networked into the most tightly networked place on earth, perfectly poised for a brilliant career.

  And while a few of these perfectly poised young men and women took their Stanford experience and continued the political fight on the Left and the Right, many others took away a different lesson from the wars over libraries and canons. Politics was exhausting, messy, hurtful, inconclusive. Business, in contrast, had the power to change the world. Just look at all the companies that had spilled out of Stanford, out of Homebrew, out of the VC firms over on Sand Hill Road. Tech didn’t dictate a canon or tell you what to think; it created a neutral platform for creativity and free expression. Perhaps it was just easier to go heads down, focus on the code or the business plan in front of you, and get busy building the future.

  AMERICA GOES ONLINE

  As Reagan’s defense budgets swelled, local computer hardware and software companies became attractive targets for large defense contractors in search of a high-tech edge. One of those was Tymshare.

  Given how many time-sharing and networking companies had bitten the dust in the early 1970s, the company had enjoyed a remarkable run. Ann Hardy was still there, a company vice president at last. Tymnet became an early online platform for business applications that would later become ubiquitous: banking, bill paying, travel reservations. All of these online services were operating out of Hardy’s division, and she and her team became among the first to try out these new technologies. She traveled a lot for work, and she taught her elementary-age children how to use e-mail so they could communicate with her while she was on the road. By the early 1980s, other time-sharing companies like CompuServe and Prodigy were branching out into lucrative consumer markets—offering e-mail, electronic newspapers, even some early online catalogs—but Tymnet was still sticking to its corporate customers. CEO Tom O’Rourke was ready to retire, and he didn’t want to spend the money it would take to make Tymnet a competitor.21

  Hardy wished her boss would be a little more ambitious about building out the business, for she saw how the market was beginning to spike. Larger companies already were circling around Tymshare for a potential acquisition. They saw value in the venerable, well-designed system and appreciated its $300 million valuation. In 1984, one of the biggest—McDonnell Douglas—snapped up Tymshare.

  The acquisition made Hardy the big defense contractor’s only female VP, and it was something her new bosses didn’t quite know how to handle. At the first company meeting she attended, “every speaker started up his presentation with some kind of off-color joke,” she remembered. At executive meetings, company chief John McDonnell began following Hardy around anxiously to make sure no one said anything insulting. No one had imagined there’d be a woman in the room. After that, “they spent a whole year trying to figure out how to get rid of me without having me sue them.” Defense work wasn’t any fun at all. Yet she didn’t quite know what to do next. Go out on her own? “I didn’t know anything about starting a company,” she demurred. She was nice, not tough, and “nice women don’t do that.” But, boy oh boy, life at the new gig was awful.

  Out of desperation as much as gumption, Hardy at last did what so many men around her had been doing for years. She started her own business. Its name was KeyLogic, and it made transaction-processing security software for mainframes. It was based on the secure OS designed so long ago at Tymshare; something, it turned out, that would become increasingly important in the years to come. Two decades in the Valley had given her great connections; she secured venture financing, assembled a strong team, and won promising early customers.

  At long last, Ann Hardy had become an entrepreneur. She was a focused, unflashy one, a serious middle-aged executive in a time of computer-nerd cover boys. But her kind of business—big machines, big corporate clients, big government contracts—was still as much a part of the Valley’s high-tech 1980s as the personal computer had become. “There’s so much to Silicon Valley,” she reflected. Hardy had been around long enough to understand that success didn’t come from technical talent alone. “It’s timing. It’s luck.” And she’d gotten lucky once again.22

  * * *

  —

  Computer networking had been around nearly as long as computers themselves—Ann Hardy would be the first one to tell you that—but things that people were using the networks for began to change in the 1980s. If the fictional David Lightman’s near-brush with thermonuclear war reflected America’s Reagan-era reality, so did the mayhem he was able to cause via the modem hookup in his bedroom. For the explosion of the personal computer market had allowed computer networking to become personalized too.

  At first, the arrival of the microcomputer created a royal headache for the time-sharing companies. They were in the business of distributing computing power to companies that couldn’t afford their own machine; now, most could. CompuServe, the Ohio-based network founded in 1969, realized that survival would now depend on hooking the new personal computer users into the networked life. Also seeing a business opportunity were the makers of modems. The machines that made a phone handset into a portal for computer communication had been around since the start of the 1950s, too, but it was only in the post-Carterfone world that lots of different manufacturers could get in on the action. Modems were phone equipment, after all. As people started scooping up their Apple IIs and TRS-80s in the late 1970s, modem makers swooped in to make a sale.

  It was a perfect target market. Lee Felsenstein helped build the Community Memory bulletin board before he was part of Homebrew, after all. This Whole Earth generation wanted “access to tools” so that they could communicate with one another. It was no fun to be at home with a computer without anyone to talk to. With early adopters settling micros on their desks, their modems awaiting the first screech of connection, the network companies built software to get new customers on line. By the summer of 1978 CompuServe had more than 1,000 users using its new service, MicroNET. By the summer of 1979, a new service called The Source launched out of Northern Virginia. Although it was a start-up, its spendthrift founders threw a launch event at New York’s Plaza Hotel, rolling out the sci-fi star power with a special appearance by Isaac Asimov. “The information utility the world’s been waiting for!” exclaimed the corporate press release. “This is the beginning of the Information Age!” Asimov chimed in.23

  The profit-seeking online companies weren’t the true children of Community Memory, though; nor were they like the ARPANET, which continued to purr away as the nerdy domain of academic computer scientists and government contractors. The thing that spread the anarchic, decentralized essence of these two original noncommercial networks was something entirely separate: Usenet. To enter this online world, you didn’t subscribe to a content-creating service but instead tapped into a newsgroup whose participants created the content: a discussion board geared to a particular topic—microcomputing, gaming, gardening—containing threaded discussion of posts and responses.

  Usenet’s “poor man’s ARPANET,” launched in North Carolina in 1980, allowed users to transfer files (at glacial dial-up speeds) and exchange e-mail. In the early days the exchange of information would be batch-processed at certain times of the day, a throwback to the Stone Age before time-sharing. You could send a message to Europe via Usenet, but it would take two days to get a reply. Nonetheless, access to a decentralized, user-driven, specialized communication network was a marvel to its thousands of users at a time when ARPANET use was highly restricted. And the different Usenet groups—over 900 by 1984—turned the alien world of computer communication into something personal, something that tapped i
nto the passions and enthusiasms people had in real life. Yet it went one better, providing anonymized connection through the veil of the username, making it a place for free expression that the dreamers and doers of Community Memory had always hoped the electronic bulletin board might be.

  The Usenet group was just one flavor of bulletin board service, or BBS, that proliferated in the pre-Internet online world of the 1980s. Most of the people going online were high-income men in their thirties—no surprise, given the fact that this was the demographic targeted by the micro makers—and discussion threads reflected their priorities. In 1985 came the most famous of the early BBSs: The WELL, or Whole Earth ’Lectronic Link, started by Stewart Brand and his merry band of hackers up in Marin County. The WELL’s fame came from the Silicon Valley celebrities who made it their first online hangout, including Grateful Dead lyricist John Perry Barlow, journalist Steven Levy, Lotus founder Mitch Kapor, and of course Brand himself. The bland Ohioans running CompuServe (now owned by even blander tax preparer H&R Block) couldn’t compete with The WELL’s glamour and dash.

  The WELL’s pedigree was decidedly countercultural, as it hired a clutch of its founding staff from the legendary Tennessee commune The Farm, and devoted considerable discussion-thread and file-swapping bandwidth to the Dead. But like the original countercultural computer guys, the 1980s WELL left 1960s debates over gender equity behind as it created its new frontier of online communication. Women on the WELL were few in number, and some early users split off to form more female-friendly boards of their own. The mostly white and male network that remained on the WELL would go on to play an immensely important role in the development and early evangelism of the World Wide Web; the boards for second-wave feminists and Gen X riot grrls didn’t have the same amplitude.24

  And for every BBS devoted to high-minded social causes—and there were quite a few—there were ones devoted to darker pursuits. A burgeoning white supremacist movement found BBSs to be fertile ground for recruitment and retention; Ku Klux Klan grand dragons and leaders of the “White Aryan resistance” became early movers in the BBS world, using its reach and quasi-anonymity to rally new followers. Less nefarious, but equally determined to operate in the shadows, were the Cypherpunks, a kind of punk anarchist collective in cyberspace, whose members employed the intricacies of cryptography—technologies all developed within the military-industrial complex—to wall out potential electronic eavesdropping by government snoops.25

  Tribalism set in early as the like-minded found one another online, an early signal of the immense power these networks would one day have as platforms for all kinds of political activism, propaganda, and rumor-mongering. By 1995, just before the spread of the Internet and its browsers would make the world of Usenet and CompuServe and BBSs fade into the sunset, more than 70,000 BBSs existed in the U.S. alone.26

  PERESTROIKA

  Ronald Reagan left office in the early days of 1989, less than a year after his first trip to Moscow and the speech where he rhapsodized about the glories of the microchip revolution before the computer science students of Moscow State, an event orchestrated by Stanford’s own hometown hero, Secretary of State George Shultz.

  No sooner had Reagan departed office for retirement on his Santa Barbara ranch than the George H. W. Bush Administration shifted toward a less costly, more agile SDI system that relied more heavily on miniaturized electronics and computerized control. Berkeley’s Edward Teller became as much of a booster for the new approach as he had been for the original Star Wars plan, spending nearly the entire final year of Reagan’s presidency lobbying the White House to go the miniaturized route. “For defense we do not need the big bang,” Teller declaimed to a gathering of defense contractors in early 1989, “what we need is accuracy and more accuracy.” Another bonus: each interceptor would now have the relatively modest price tag of $1 million each. Military planners dubbed the system Brilliant Pebbles. Although Lockheed got a prime contract, it was the first sign that the mighty boost that the Reagan years brought to Sunnyvale’s fortunes would soon fade away.27

  Yet the Valley did not leave the foreign-policy spotlight as the Reagan era came to a close. In the early summer of 1990, Soviet president Mikhail Gorbachev came to Stanford for an event that sounded like a call-and-response to Reagan’s speech in Moscow two years earlier. The Berlin Wall had fallen; the West had won the Cold War. But “let us not wrangle over who won it,” Gorbachev told the large campus crowd gathered in the cavernous Memorial Auditorium. Let us instead look toward the future, for “the ideas and technologies of tomorrow are born here in California.” Gorbachev was as smitten with the Bay Area as Charles de Gaulle had been thirty years before. “I always wanted to come here, and I never had the chance,” he told a clutch of waiting reporters. “Fantastic!”28

  But future-tense California had never been without the government’s invisible hand. The big money that flowed in via SCI and SDI contracts in the 1980s was a reminder that defense remained the big-government engine hidden under the hood of the Valley’s shiny new entrepreneurial sports car, flying largely under the radar screen of the saturation media coverage of hackers and capitalists. Contracts for missiles and lasers and interceptors didn’t get much airtime in the many studies considering the race to build “the next Silicon Valley.” When it did merit a mention, defense spending appeared as something past tense, something foundational, an opening act for the entrepreneurial headliners of the 1980s and beyond.

  New industries like microchips, personal computers, and video games won most of the press attention. But they also were buffeted by overseas competition, domestic challengers, and wrongheaded business decisions. In the hawkish, high-spending last days of the Cold War, the defense contracting business became insulated from much of that boom and bust. As they had before, these federal contracts subsidized the development of bleeding-edge projects that otherwise wouldn’t have seen the light of day, within and beyond academic research, seeding industries and companies that would keep the Valley a leader into the next generation.

  CHAPTER 18

  Built on Sand

  On the eve of Election Day 1988, Washington Post reporter Haynes Johnson made a return visit to the Valley to gauge the region’s temperature, checking in with now-pessimistic Democratic power broker Larry Stone. “This place has changed and with that comes the awareness that the community’s not near what it ought to be or [what] we thought it was,” Stone glumly observed.1

  Stone had plenty of data points for his dour assessment. The perpetually white-hot real estate sector had cooled, and people who had paid top dollar for ranch houses and bungalows a few years earlier now found themselves underwater on their mortgages. The maturation of the personal-computer market compounded the pain. No longer high-priced novelties, PCs were now an affordable mass commodity. With a computer on nearly every desk and in any tech-savvy household, sales had flattened and profits dipped. Engineers traded Maseratis for minivans, as worried locals wondered aloud if the boom times were gone for good. The Valley’s silicon mountain looked like it might just be a hill of sand after all.

  On top of all that, the tech guys had lost their congressman. Ed Zschau made a bid in 1986 to unseat incumbent U.S. Senator Alan Cranston, beating out a crowded primary field but losing by a heartbreakingly thin margin in the general election.

  The bitter loss had been given an extra shove by Regis McKenna, who had joined Cranston at a packed press event to declare that Zschau’s highly valued Silicon Valley business credentials were bunk. McKenna had taken a board seat at Zschau’s System Industries after the congressman left for Washington, and he announced that he had found it disastrously managed. “If it were not for the people who followed Ed,” McKenna said crisply, “it would not even be around today.” Zschau shot back: “I think Regis is wrong. Obviously, he is making a political statement, trying to cast aspersions on my company.” Revenues had doubled from 1980 to 1981, Zschau pointed out, and he had led a secon
d IPO to raise additional capital before he left for Congress. McKenna stood his ground. His comments were well supported by others in the company’s leadership, he noted. “It was not just my opinion.” Several members of System Industries’ board took out full-page ads in the local papers with the trumpeting headline, “Regis, you should be ashamed of yourself!” It was a political brawl unlike anything the convivial Valley had witnessed before.2

  Two years after that, the Reagan era ended, and the men who had brought a little bit of Stanford and the Hoover Institution to Washington were heading home. The semiconductor crowd finally had their next-generation chipmaking operation, Sematech, but it wasn’t even going to be in California. Instead, it was going to Austin, Texas. But the Valley got to leave its imprint in the end: after no one immediately stepped up to run the operation, Bob Noyce agreed with some reluctance to relocate to Texas to become its director.

  Texas was riding high, too, with the arrival of incoming President George H. W. Bush, and the Valley was unsure of what changes might result. While the Bushies were certainly business-friendly, the new president’s economic team approached the industry at an unfamiliar distance. “Potato chips, computer chips, what’s the difference?” one Bush advisor was rumored to have asked; the quote was apocryphal and never firmly sourced, but it confirmed everything the Valley chipmakers suspected about the new regime, and it drove them crazy.3