Most of the modern technology that we hold dear today–from laptops to ATMs to iPhones–probably wouldn’t exist if in 1957 a group of eight young geniuses hadn’t banded together and left their brilliant but maniacal boss, William Shockley, to form the first venture-backed startup. Dubbed the “Traitorous Eight” by Shockley, the colleagues, who included future Intel cofounders Gordon Moore and Robert Noyce, would go on to build the first practical integrated circuit and the first wave of Valley companies. One of the eight, Jay Last, now 83, recalls how it happened.
Shockley was a brilliant scientist but a terrible manager. He’d won the Nobel Prize for inventing the transistor and started trying to make an impossible device that didn’t work. So he took it out on us. We complained to Arnold Beckman, who funded Shockley Labs. At first he sided with us, but when we confronted Shockley, Beckman left us adrift. We knew we couldn’t keep working there.
One evening we met at the house of Vic Grinich [another member of the Traitorous Eight] to talk about our next move. We were all downhearted, sitting in this dark-paneled room. We could get jobs easily, but we liked working together. That night, we made the decision to find some way that we could work as a group. But we were asking, How can we get a company to hire a group of eight people?
We sent a letter to Hayden, Stone & Co., a firm that the father of Eugene Kleiner [another member of the group] knew, telling them what we had to offer. Art Rock was a young guy working there, and he had the wit not to throw our letter in the wastebasket. He and his boss, Bud Coyle, flew out to meet us and told us about this novel idea that was really the start of venture capital. Art said, ‘The way you do this is you start your own company.’ We were blown away. There was no concept of funding a group back then. Hayden, Stone agreed to find us a backer.
After being turned down by 30 people, we met with Sherman Fairchild, whose father was one of the first IBM investors. He invested $1.5 million in our group to create Fairchild Semiconductor. The eight of us, plus Hayden, Stone, owned the company, and we had a buyout option after a five-year period. We didn’t realize at the time the legacy we’d leave. If you trace the family tree, several hundred companies came out of Fairchild. I helped start Silicon Valley. Thank God Shockley was so paranoid or we’d still be sitting there.
In 2003, Harvard sophomore Mark Zuckerberg took on a project for the now-famous Winklevoss twins while also developing “TheFacebook.” An instant-messsaging conversation with Adam D’Angelo, a high school friend, helped clarify his priorities.
Zuck: So you know how I’m making that dating site
Zuck: I wonder how similar that is to the Facebook thing
Zuck: Because they’re probably going to be released around the same time
Zuck: Unless I fuck the dating site people over and quit on them right before I told them I’d have it done
Zuck: Like I don’t think people would sign up for the facebook thing if they knew it was for dating
Zuck: and I think people are skeptical about joining dating things too
Zuck: But the guy doing the dating thing is going to promote it pretty well
Zuck: I wonder what the ideal solution is
Zuck: I think the Facebook thing by itself would draw many people, unless it were released at the same time as the dating thing
Zuck: In which case both things would cancel each other out and nothing would win. Any ideas? Like is there a good way to consolidate the two
D’Angelo: We could make it into a whole network like a friendster. haha. Stanford has something like that internally
Zuck: Well I was thinking of doing that for the facebook. The only thing that’s different about theirs is that you like request dates with people or connections with the facebook. you don’t do that via the system
Zuck: I also hate the fact that I’m doing it for other people. haha. Like I hate working under other people. I feel like the right thing to do is finish the facebook and wait until the last day before I’m supposed to have their thing ready and then be like “look yours isn’t as good as this so if you want to join mine you can… otherwise I can help you with yours later.” Or do you think that’s too dick?
D’Angelo: I think you should just ditch them
Before the iPod, iPhone, and iPad, there was the first sleek, thin, well-designed consumer device: the Palm V. Dennis Boyle, an Ideo partner, recalls the conversations that led to its design.
“In 1995, Palm came out with the original Pilot. It was a little gray handheld. I thought, We could do better than this. It was a bit of intuition. I called Palm and asked to meet [founder] Jeff Hawkins. He had us in, and we talked about possibilities. The Palm team said, ‘The people buying our Pilots are mostly thirtysomething computer geeks. We want people of all ages, and especially women.’
We started making models and would show them to women at the Stanford Shopping Center to get feedback. Nothing came of it. One day, Jeff came in with the Motorola StarTac phone. People would ooh and aah over it. ‘I want the feeling you get when you pull this out of your pocket,’ he said. ‘I love the way it looks. It’s so thin.’
We made these plastic prototypes and once we had them thin, they felt cheap. I like to carry a lot of small products around with me, like cameras and calculators and glasses cases, and many were made out of metal. Jeff would say, ‘Yeah, why can’t we do that?’ He was so committed to making this thing thin and elegant.”
In a 2006 Disney earnings call, just after the company had acquired Pixar, Steve Jobs recalled how he first discovered (and later became CEO of) what would become the renowned computer-animated film studio. At that point, Pixar was a graphics division at Lucasfilm, run by a guy named Ed Catmull. “Ed shared with me a dream that he’d had since graduate school to make the world’s first computer-animated feature film,” Jobs said. “I bought into it both spiritually and financially… It took us 10 years, but we actually did it.” Catmull’s version goes like this:
“We were showing a special-purpose graphics computer called the Pixar Image Computer at SIGGRAPH, a computer graphics convention. I was at our booth when Steve happened by, and we took a walk around the floor. What I went over was that, back when I graduated from the University of Utah, I believed that it was going to be possible to make a full-length feature film with computer animation. And I had spent the last 10 years working on that, first back at New York Tech on Long Island, and then in 1979, George [Lucas] hired me to bring high technology into the film industry. We had brought in John [Lasseter, who would write and direct Toy Story]. Now it was time to take the next step. Jobs recognized that we had a greater capability in graphics than he’d seen anywhere else. This was actually a fairly dire time for Pixar because we were having difficulty getting an investor at the terms we wanted. [Jobs] was trying to get something going for NeXT Computer, but he was, I think, enthralled by this rather unusual group, and he decided to buy into us. I believe the reason we resonated with each other was that he saw in us a group that was really deep in technology, but everything we were about was the presentation and the storytelling. We were speaking the same language.”
Wendy Kopp proposed Teach for America in 1989 as her senior thesis at Princeton. By the spring of the following year, she had lined up 500 recruits and job placements for them. But Kopp still needed more than $2 million to launch. So she wrote billionaire industrialist Ross Perot.
“I thought, He’s from Dallas; I’m from Dallas. And he’s really into education reform. I had no connection to him at all. I just thought, He’s going to love this! I wrote him–as I recall, although he disputes this–numerous letters, one of which he actually read, and he called me and said, ‘When do you want to get together?’ And I told him I was going to be there in a week. I needed about $2 million, and I was asking him for half of it. Before I walked into his office, I just knew this was my last stop. I told myself, I am going to be glued to his chair until he says yes. I don’t think I’ve ever been as determined. I met with him for almost two hours. It probably took me an hour to inspire him to believe that this actually had some chance of happening and would be a good thing. I think he just realized that I wasn’t going anywhere. ‘I’ll tell you what,’ he said. ‘I will give you $500,000 if you can raise the other $1.5 million.’ And I just knew that was all I needed.
All the funding came together shortly thereafter. I’d met a lot of potential supporters, but they were all sitting on the fence, trying to figure out if this was really going to happen or not. The credibility of Perot’s commitment did a lot to inspire the confidence of everyone else.”
When Target first contacted architect Michael Graves, in 1997, it wanted to enlist him to design scaffolding for the Washington Monument during its restoration. But their ultimate collaboration ended up being so much more, leading to a generation of fashion and design partnerships that have given countless retailers (and designers) a boost.
“I had just gotten back from Europe, where I had seen Michael’s products from Alessi,” says Ron Johnson, the current JCPenney CEO who was then a Target exec, “and I asked him, ‘Would you like to do some products for Target?'”
“I was delighted,” Graves remembers. “I taught at Princeton, but my students couldn’t afford my products. I told Ron I would love to bring design to people at better value. To democratize it.”
“Our first step was to walk through a big trade show in Europe with all the buyers,” Johnson says. “I thought we’d identify trends.” Johnson confesses that he loves trade shows. “I could do this all day!” he enthuses.
Trade shows make Graves grumpy, and at the end of the day, he asked Johnson, “If you want to follow trends, why did you buy me? Who made these trends? Designers!”
“Michael said, ‘I don’t copy; I create,’ ” Johnson recalls. “My lights went on, like, D’oh! I’ve just bored this guy for a day.”
The two recovered from that stumble. “We drew up a list,” Johnson says of the planned kitchenware and home decorative product lines. “Toaster, teakettle, kitchen tools, and gadgets. If we could hit a price point somewhere between Bloomingdale’s and Walmart with a well-marketed, well-designed product, we thought people would respond.”
“I was worried that the press and my colleagues would think we were outside our limits,” Graves says. “I thought we’d get killed by some nasty critics.” They needn’t have worried.
Absolut Vodka’s bottle-centric ad campaign, which launched in 1981, is one of the most iconic and longest-running ever. It ushered in premium vodka’s boom times and put the campaign’s creator, TBWA\Chiat\Day, on the map as an on-the-vanguard agency.
Bill Tragos, TBWA’s founder: The strength of the product was this goddamned bottle, so we knew that had to be the focus. But back then, every alcohol ad was bottle-focused. We needed to be different.
Graham Turner, copywriter: Geoff [Hayes, Turner’s creative partner] came in one morning with a doodle of the bottle with a halo over it, and there was some long glorious line about angels that just didn’t work. I said, “It’s a nice visual, but what if we just make the headline, Absolut Perfection?” That was it. For the next half-hour, we churned out a dozen ads.
Tragos: It was too easy! Have you guys done any work here? What’s so creative about that? We were worried that it would be viewed as one big pun. We argued with Geoff about it, and he was adamant that it was the very fact of its simplicity that would make this thing take off. And Geoff was right.
Turner: We certainly accomplished what we had crusaded to do, which was to brighten up the industry and make advertising worth looking at again.
In 2008, Howard Schultz returned as Starbucks’s CEO to turn around the company. Early on, he had to fend off investors’ requests to slash Starbucks’s benefits, which had made it the model of an enlightened, post-union era company.
“Our stock was in free fall. One day, I found myself on a phone call with one large institutional shareholder. He addressed the longstanding health coverage for our employees, which at the time cost $250 million. He said this would be the perfect time for Starbucks and me to cut health care. Many companies were doing this at the time, so I would be immune from any public outcry.
I tried to describe to him that the essence of the brand is humanity, and our culture is steeped in two primary benefits that have defined who we are: comprehensive health-insurance coverage for our people and equity in the form of stock options, which we give to anyone who works more than 20 hours a week. I told him, ‘This is a nonstarter at every level because you don’t understand the essence of our company.
After all these years, if you believe the financial crisis should change our principles and core purpose, perhaps you should sell your stock. I’m not building a stock. I’m trying to build a great, enduring company.’ We are a performance-driven organization, but we have to lead the company through the lens of humanity.”
Josh Abramson and Ricky Van Veen started CollegeHumor from behind the DJ booth at the Advertising.com Christmas party in 1999, when they were freshmen in college. A few years later, the two had to decide the fate of their humor video site.
Abramson: I was working at this little investment bank, but I was spending most of my time on CollegeHumor.
Van Veen: We would do these business calls, and he would be at a pay phone. I was in my parents’ house in Baltimore, and I would go in my childhood bedroom to make work calls.
Abramson: People often ask, Why didn’t you drop out? It wasn’t like that. It wasn’t like we were making millions of dollars.
Van Veen: We rode the dotcom boom for a little while and were making a lot of money–and then it just crashed. Luckily we were in college and had no overhead, so we could get by. Slowly, things started picking up again.
Abramson: Until then, I had this feeling like, Oh, this is a fun little college thing, but when I graduate, I need to work for Citibank or something. I was almost embarrassed at the idea of being an adult and running a business called “CollegeHumor.” In hindsight, it was that moment when it got hard that motivated me to actually work really hard. I was talking to Ricky on the phone and decided, This is going pretty well. Let’s not get real jobs and just do this.
Van Veen: The questions were, Can we afford to eat, and can we afford cable TV?
Abramson: I remember talking about ramen noodles a lot.
Van Veen: It was a big decision, but not a hard one. The alternative was to not be happy.
Abramson: I’d love to say I had this vision of changing how comedy worked. It was really, I don’t want to have a job that sucks.
In the first dotcom boom of the late 1990s, the only things that sold well online were books and CDs. The conventional wisdom was that other items, particularly apparel, wouldn’t work. And then Zappos founder Nick Swinmurn left entrepreneur turned investor Tony Hsieh a voice mail.
It was 1999, and 5% of sales in the $40 billion shoe industry happened through paper mail-order catalogs. Swinmurn had shared this statistic with countless venture capitalists already, who typically said, “Nobody is going to buy shoes online.”
“I’d think they maybe didn’t hear me,” Swinmurn recalls, “so I’d tell them again: 5% of shoes were sold through mail-order catalogs.” They still said, “Nah.”
Swinmurn’s lawyer suggested a last-ditch attempt. “There’s this company called Venture Frogs. They’re investing in anything right now. I’ve never done a deal with them, but if they won’t invest in this, I don’t know what to tell you.” Thus, Swinmurn’s voice mail on Hsieh’s machine.
Hsieh, who ran Venture Frogs, heard the message and did some quick math: “Five percent was equal to
$2 billion. It didn’t matter whether I would be willing to buy shoes without trying them on first. What mattered was that consumers were already doing it, and it seemed reasonable to assume that web sales would one day be at least as big as catalog sales.”
Swinmurn arrived at Hsieh’s apartment turned office clad in a T-shirt and board shorts. The place was empty, save two chairs. “We assume that for the foreseeable future, everyone will continue to wear shoes. You need to believe that first,” he told Hsieh. “It’s a big market, and it’s going to continue to be a big market.”
“I think it would be really cool to work on something consumer,” said Hsieh, who had recently sold his advertising company, LinkExchange. “Maybe you should find someone with footwear experience.” Swinmurn returned a few weeks later with Fred Mossler, who worked in the men’s shoe department at Nordstrom.
He asked Hsieh about using Zapos as the company name, rather than Shoesite.com. Zapos was derived from zapatos, the Spanish word for shoes. “Add another p to it so that people won’t mispronounce it and accidentally say zay-pos,” Hsieh said.
Zappos was in business.
Rick Friedman/Corbis (Zuckerberg); Wayne Miller/Magnum, Somethingventuredthemovie.com (Traitorous Eight); Courtesy of Ideo (Palm); Mario Tama/Getty Images (Schultz)