“The 1980s are going to be the Golden Age of Electronics.” So predicted Ben Rosen, an analyst Fortune called “personal computing’s greatest visionary power broker,” in 1979.^III “The Energetic, Exuberant, Exciting, Electronic Eighties,” Rosen averred, would bring a second industrial revolution, one based on technical breakthroughs that would increase productivity and raise living standards.¹ Another argument for the “smokeless” high-tech industries, persuasive at the time but later proven tragically false, was that the new industries were nonpolluting.

The promise of a bright electronics-based future offered a welcome contrast to the reality facing the United States in 1979. American hostages had been kidnapped, blindfolded, and paraded in front of television cameras in Iran. The United States was facing double-digit inflation. Some 1.5 million American manufacturing workers had lost their jobs in the past decade, and Japanese competition had decimated the US steel, automobile, and television industries.²

Electronics and Silicon Valley came to represent a new era in which Americans could once again dominate. Silicon Valley had added 50,000 new jobs in each of the past three years. The region now accounted for one out of every five new jobs in the United States.³ High-technology employment in the San Francisco Bay Area grew by 77 percent between 1974 and 1980, and per capita personal income growth in Santa Clara County outpaced that of the rest of California by more than 10 percent.⁴ With unemployment in the Valley hovering around 4 percent, the classified advertising section of the San Jose Mercury News swelled to ninety-three pages.⁵ The Wall Street Journal wrote of a “latter day Gold Rush.”⁶

New industry groups such as the National Venture Capital Association (founded in 1973) and the Semiconductor Industry Association (founded in 1977) sent some of Silicon Valley’s most recognizable entrepreneurs to Washington to testify about the importance of venture capital, microchips, biotechnology, personal computers, and software.^II The lobbying efforts paid off. In 1978, Congress slashed the capital gains rate from 49 percent to 28 percent and eased the “prudent man” rules that had restricted pension funds’ abilities to invest with venture capitalists.^I Within a year, venture capitalists had more than a half-billion new dollars to invest, and pension funds, universities, and other institutions across the country had begun experimenting with placing small amounts of money with venture capital firms.⁷

The Wall Street Journal editorial board wrote that a “counter-revolution taking place in American politics” was leaving big business “powerless.”⁸ California governor Jerry Brown established and chaired a California Commission on Industrial Innovation; members included David Packard, Steve Jobs, and Charlie Sporck of National Semiconductor, as well as the dean of the Stanford business school.⁹ California’s 1982 budget supported establishment of computer centers and a software clearinghouse, and also set aside $25 million for math, science, and technical education. In Washington, some Democrats, led by Gary Hart, Tim Wirth, and Michael Dukakis, were such outspoken advocates for entrepreneurial high-tech industry that they were collectively known as “Atari Democrats.” For the first time in decades, the White House hosted a conference on small business. President Reagan established a Commission on Industrial Competitiveness chaired by Hewlett-Packard chairman John Young.

The groundwork had been laid for today’s tight connections between Silicon Valley and Washington.¹⁰ The Silicon Valley story—a tale of risk-taking upstarts whose willingness to explore new territories brings progress and huge financial rewards—had updated a beloved American story for the high-tech era.

“Every time I drive down and think about what’s happening in this valley,” said one San Francisco venture capitalist in 1980, “I have an orgasm.”¹¹

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I. Key individuals who worked behind the scenes to promote the capital gains tax reduction and “prudent man” revisions included William F. Ballhaus of Beckman Instruments, Roger Kennedy of the Ford Foundation, and venture capitalists David Morgenthaler and Reid Dennis. Ed Zschau, an entrepreneur who led the capital gains lobbying efforts on behalf of the AEA, went on to serve in Congress as the Republican representative from California’s Twelfth District from 1983 to 1987. In 1986, Silicon Valley further proved its political influence as the United States imposed 100 percent tariffs on $300 million worth of imports from Japanese microchip firms.

II. The suggestion to send entrepreneurs, rather than paid lobbyists, came from Regis McKenna. Among those who went to Washington were Andy Grove, Steve Jobs, Robert Noyce, Tom Perkins, and Bob Swanson. The first electronics industry association was the American Electronics Association (originally known as the West Coast Electronic Manufacturers Association), founded by David Packard in 1943.

III. Rosen would soon act on his optimism. He cofounded Sevin Rosen Funds in 1981 and went on to invest in Citrix, Compaq Computer, Cypress Semiconductor, Electronic Arts, Lotus Development Corporation, and Silicon Graphics.