The American technology industry loves to tell stories of entrepreneurs who operated in garages despite the government. But Silicon Valley grew out of military orders, the space race, grants to Stanford University, immigration policy, and government aid to the chip industry – and even after it became rich, it didn’t stop relying on the state.
America in Test Tube | Chapter 5 of 8
This article is part of the "America in Test Tube" series to mark the 250th anniversary of the United States, which examines how the world's greatest scientific and technological power was built and the relationships between science, state, industry, and democracy.
Previous episode: From Edison's invention factory to the startup economy – who will bridge the gap between science and industry? | for all episodes of the series
In the previous installment of the “America in Test Tube” series, we saw how the research labs of companies like AT&T, IBM, General Electric, and DuPont bridged the gap between science and industrial production for decades. Since the 1980s, much of this role has shifted to universities and startups.
But the startup system did not grow in a vacuum. Behind the familiar story of young entrepreneurs, garages, Venture capital and personal computers are a huge public system. The US military was an early customer of the new electronics; The Space Race It created a market for chips that were still too expensive to be integrated into civilian products; the government funded the universities that trained the engineers; and immigration policies allowed scientists and entrepreneurs from around the world to join the system.
In other words, The country that built the silicon Valley It sometimes did this indirectly, in a way that allowed entrepreneurs to believe that their success was created solely thanks to the private market.
The revolution presented as a rebellion against the establishment
Few places have embraced the image of revolution as enthusiastically as Silicon Valley. Computer companies presented the personal computer as a tool that would free people from large institutions, bureaucracy, and the mainframe computers that were controlled by governments and corporations.
By the late 1970s, personal computers were being presented as a means to start a personal revolution. Early Apple advertisements used the figures of Benjamin Franklin and Thomas Jefferson to present the computer as a new embodiment of American independence: a tool that would allow an individual to think, create, and act without the need for powerful institutions.
This image had some basis. The personal computer industry did attract entrepreneurs who did not fit into the conservative business culture of large corporations. The counterculture of the 1960s saw computers as tools for self-expression, information sharing, and personal liberation. Investors and entrepreneurs created a business culture that allowed unusual, stubborn, and sometimes eccentric people to try out ideas that established companies rejected.
But historian Margaret O'Mara mentions in an article inScience Because this rebellious industry was also a product of the establishment against which it claimed to be rebelling.
Before the garages, there were military contracts.
In the 1950s, the San Francisco Bay Area was not yet covered in a succession of office buildings, data centers, and chip factories. Much of the Santa Clara Valley was covered in plantations, and the region was known primarily for its agriculture.
The electronics industry that grew up among the plantations did not initially rely on consumer demand for home computers. The most important customers were the United States defense agencies. The military needed radar, communications, navigation, missile guidance, and electronic equipment that would be small, light, fast, and reliable.
Defense orders gave companies a market even before a broad civilian market emerged. The state was willing to pay for new technologies that were still expensive and immature, because their military value was more important than their price.
This allowed companies to learn how to produce advanced components, improve their reliability, shrink them, and make them cheaper. As the price dropped and production improved, those components could also be used in computers, communications systems, and civilian products.
O'Mara argues that the electronics industry that grew on the San Francisco Peninsula in the 1950s owed its very existence largely to American military spending.
The space race created a market for the chip
The integrated circuit is now taken for granted. Billions of transistors are packed into chips that appear in phones, cars, medical devices and data centers. In the early 1960s, however, chips were a new technology, expensive and risky from a business perspective.
Commercial companies were reluctant to pay a high price for a component that had not yet proven itself. The military and the space program were different: they needed electronics that would take up less space, weigh less, and consume less power.
The space race of the 1960s thus created a real market for the silicon chips that gave the valley its name. Space and rocket programs provided large orders, and public funding helped manufacturers improve production processes and lower costs.
The state did not design all the chips alone, and not every company in the region lives in government districts. Innovation was born out of interactions: researchers and engineers developed components, companies learned to manufacture them, and the government created early demand that allowed the technology to survive the period when the civilian market was not yet capable of sustaining it.
The government didn't just "pick winners." It helped create a market where competition was even possible.
Stanford didn't become a powerhouse on its own.
is also Stanford University It plays a central role in Silicon Valley mythology. It is described as a place where researchers, entrepreneurs, and investors met and as a hub from which companies and technologies emerged.
But Stanford's rise wasn't just the result of an entrepreneurial spirit. Government grants and research budgets bolstered its engineering programs and transformed it into a nationally influential research university.
The funding made it possible to establish laboratories, purchase equipment, train research students, and attract faculty. The students and researchers did not stay on campus: they moved to companies, founded new companies, and maintained ties with the university.
Thus, a self-reinforcing cycle was created. The government funded research and training of personnel; the university created knowledge and engineers; the companies absorbed them and transformed the knowledge into technology; the companies' success attracted additional investors and talent to the region.
The difference between an investment in a university and a direct subsidy to society is important. Most public money was not given to entrepreneurs as a reward for their future success. It was invested in infrastructure that was available to a broad community of researchers, students, and companies – and only years later did it become clear which ventures would benefit the most from it.
Immigration was also an innovative policy
Silicon Valley is not just a product of money and technology. It was also built by people who came to the United States from other countries.
Refugee programs, immigration policies, and pathways for foreign students have attracted scientists, engineers, and entrepreneurs to universities and companies. Some have stayed in the United States after graduation, founding companies or running technology corporations.
Therefore, immigration was not just a humanitarian or demographic issue. In practice, it was a component of scientific and industrial policy, even when it was not defined as such.
the technology industry It benefited from the ability to select employees from a global talent pool. American universities served as an entry point: they trained researchers and engineers, connected them to professional networks, and enabled them to move from the laboratory to industry.
The story of an entrepreneur who came to America and founded a successful company seems like proof of the power of the individual. But it too relies on study and work visas, research institutions, absorption policies, and a market that is partly funded by the state.
Public money was taken in an indirect way
The American reluctance to big government influenced the way the science and technology system was built after World War II.
Instead of establishing a single government electronics industry, most of the money was transferred indirectly: to public and private universities, defense contractors, and young companies that developed components that did not yet have a stable commercial market.
This structure was efficient, but it also blurred the role of the state. Workers were employed by a private company, patents were sometimes registered in the company's name, and the product bore its trademark. The public budget remained in the background.
When a company was successful, its managers and investors could attribute the success to entrepreneurship, talent, and risk-taking—and rightly so. But it was easy to forget that the private risk was taken within a system in which the state had already funded the research, trained the workers, and sometimes pledged to be the first customer.
The state did not replace the entrepreneur. It created the conditions in which the entrepreneur could operate.
The rebellion in the establishment did not sever ties with Washington.
In the 1960s, many young people rebelled against the military-industrial establishment. They protested the Vietnam War, refused to work for defense industries, and rejected the career paths of their parents' generation.
Part of the culture from which personal computers emerged sought to transform the computer from a tool of the military and corporations to a tool in the hands of the individual. But even as the language changed, the ties between Silicon Valley and Washington did not disappear.
In the 1970s, venture capitalists worked to lower capital gains taxes. In the 1980s, chipmakers won trade protection from competitors outside the United States. In the 1990s, Internet entrepreneurs convinced the government and Congress that online platforms should be allowed to largely regulate themselves.
In other words, Silicon Valley didn't just ask the government to leave it alone. It worked to have the government shape taxes, trade, andRegulation in a way that suits his business model.
Less government – as long as it helps us
Here the central contradiction is exposed. The technology industry tends to present itself as a product of free markets, competition, and private initiative. But throughout history, it has turned to government when it needed a first-time customer, protection from imports, tax breaks, intellectual property protection, or a favorable regulatory framework.
There is nothing wrong with that. Many companies and industries work to influence public policy. The problem arises when public benefits and infrastructure are left out of the story, while success is presented as evidence that the state is not needed at all.
This created a myth according to which Silicon Valley succeeded despite the government and not because of some of the things it did.
This myth also affects policy. When corporate executives believe that the market alone created the system, they may see research budgets, public universities, and government agencies as unnecessary burdens—even though these are the very institutions that provided the knowledge, workers, and markets on which companies were built.
Billionaires who continue to present themselves as underdogs
O'Mara uses history to explain a contemporary phenomenon: some leaders in the technology industry, even after amassing enormous wealth and influence, continue to present themselves as rebels fighting the establishment.
The image fits the days when a young company tried to compete with a communications corporation or a large computer manufacturer. It is less fitting for the companies that control communications infrastructure, the cloud, advertising, information, and artificial intelligence systems that affect billions of people.
According to O'Mara, the revolutionary mythology helps explain why tech billionaires can portray themselves as freedom fighters while simultaneously standing by as research budgets and federal agencies are slashed. They see their success as a personal product, rather than the result of a public-private system built over generations.
This doesn't mean that every entrepreneur must support every government agency or budget. But those who benefit from the system should at least recognize that innovation doesn't start the day the company is founded.
The artificial intelligence revolution also needs a state
In the age of artificial intelligence, the same question recurs. Private companies are developing models and products rapidly, but the infrastructure beneath them includes decades of university research, public investment in computer science, training of researchers, chip manufacturing, communications networks, and energy.
Even a wealthy society cannot alone train all the scientists, build all the electricity infrastructure, protect supply chains, and fund every basic research whose results are unpredictable.
The Cold War is over, but the building blocks have not changed: institutions, technology, and people. The question is whether the United States will continue to invest in them, or assume that the companies that have already grown can themselves create the ground on which the next generation will stand.
The success of Silicon Valley is not proof that the state is unnecessary. It is one of the strongest proofs that smart public investment can create industries that the government itself could not have planned in advance.
Don't choose between the government and the entrepreneur
The lesson is not that governments are better at inventing than companies, or that all Silicon Valley success belongs to taxpayers. Entrepreneurs took risks, engineers solved problems, investors funded ideas, and companies built products that changed the world.
But the opposite story – that the government was just interfering – is also not true.
The American model succeeded precisely because it divided the work. The government funded research and infrastructure, universities created knowledge and trained people, young companies tried out ideas, investors took risks, and corporations built global markets.
The problem is not the partnership itself, but the unwillingness to acknowledge its existence. When the partnership is forgotten, it is easy to cut back on its public components, assuming that innovation will continue on its own.
Silicon Valley grew out of plantations, but not from virgin soil. Beneath the garages, labs, and chip factories was an infrastructure of public policy. The revolution was real—but the state helped build the stage on which it happened.
For the scientific article: Opening the scientific article
More on the subject on the science website
- The Three Revolutions of Robert Noyce From Fairchild and the invention of the integrated circuit, through the founding of Intel, to the open management culture that has become one of the hallmarks of Silicon Valley.
- Gordon Moore, co-founder of Intel and author of "Moore's Law," has passed away — about the transition from Semiconductor to Fairchild and Intel, and the development of the semiconductor industry that gave Silicon Valley its name.
- Introduction to the Apollo Program — About the space race as a large-scale national enterprise, and about the American need for computing, electronics, and miniaturization that accelerated the development of technological industries.
- Between vampire drones and emotion-recognizing robots — A review of the DARPA model and the contribution of defense funding to technologies that later became civilian, including the Internet, GPS, the computer mouse, and speech recognition.
- Nobel Prize winner in Chemistry Prof. Michael Levitt in an interview with the Hidan website — Levitt specifically addresses the connection between Stanford, academic research, and the economic growth of Silicon Valley, as well as the contributions of researchers and immigrants to American science.
