Silicon Valley’s Original Sin: The Traitorous Eight

Silicon Valley’s original sin was an act of betrayal. Eight employees left Shockley Semiconductor to found their own company, and William Shockley named them the Traitorous Eight. 
 
The newly formed company, Fairchild Semiconductor, was as successful as we can only hope our own ventures are. But it had its own challenges. For one thing, it was funded and owned by corporate East Coast capital. Fairchild Camera and Instrument had provided the initial capital in exchange for an option to outright acquire Fairchild Semiconductor, in what would end up being a short-term bargain for the parent company but severely limited the upside of its subsidiary’s talented team.
 
And so the Traitorous Eight would scatter to form and join their own new ventures, and sow the Valley. Eugene Kleiner founded Kleiner Perkins. Gordon Moore and Robert Noyce founded Intel. Other alum of Fairchild Semiconductor would go on to start their own companies. Jerry Sanders, Edwin Turney, and others founded AMD. Don Valentine founded National Semiconductor and later Sequoia Capital.
 
In the Traitorous Eight, we find the Silicon of Silicon Valley. But we also find the birth of a unique culture, supported by California’s generous employment law, that allowed skills and culture to be spread, absorbed, and reborn, transmitted in the heads of its people.

In the Valley, skills and techniques are borrowed and cross-pollinated, creating fierce competition for any individual company, but a far richer ecosystem and higher ceilings for the winners. There are three benefits to this cross-pollination.

The first benefit is that each replanting creates a slightly different context. These re-appropriated cultural contexts allow new types of ideas to flourish, for culture defines what is rewarded and what is possible.

To take one modern example, the stark differences between Facebook, Google, and Apple’s cultures allow different kinds of products to be built, startups (like Snap) are vehicles for new cultural norms to flourish. At Google, those who ship things that scale are revered. At Facebook, shipping quickly is critical. At Apple, it’s important to take the time to ship the right thing. Doing any of these at another too much and you’ll get fired.

The second benefit is pure information transfer. It is a legal way to allow technical and process knowledge to seep out, which as the long as the original R&D is rewarded, is a boon to the ecosystem and to its consumers.

The third benefit is that when high growth companies occur repeatedly, the same kinds of things need to happen over and over again. When the market is less liquid for “inflection point” employees, it is far more costly to find the VP of Engineering who knows how to scale an engineering team from 10 to 50, or the VP of marketing who can stand up the first mass market plan. If the legal and cultural norms reward 10 year tenures, the market is deprived of those career “five to fifty” contributors and executives who make the difference. And of course, there are fewer companies started, period.
 
This talent fluidity is core to ecosystem of the Valley. If the legal or reputation costs of switching firms is high, the ecosystem suffers and the incumbents benefit. Amazingly, the Valley’s Original Sin is still sinful elsewhere in the world.