Interview with Regis McKenna
August 22, 1995
Los Altos Hills, California
RW: Well, today we're interviewing Regis McKenna, the marketing guru of Silicon Valley, the fellow that put Intel and Apple on the map.
We're here today with Regis McKenna, who is a pioneer in the semiconductor business in terms of the marketing side of things. So Regis, tell me about the early days and your first few jobs.
RM: All right, well I came to silicon valley in the early sixties. My first job in the semiconductor industry was with a company called General Microelectronics which, like all the other semiconductor companies, was a spin, off of Fairchild. The first products that I happened to get involved with, or the first attempted products, was MOS technology. The company had gone through a number of issues and problems. They had actually spun out by a guy named Howard Bob who was director of marketing at Fairchild for government systems. They were going to develop RTL (which is Resistor, Transistor Logic) devices to meet some military contract but somehow or other that contract fell through and they were without a strategy and a product. So what they did was they started developing MOS technology because they had people like Don Farina, who came out of the research labs at Fairchild, and Phil Ferguson who had been at TI, and then Fairchild and again came out of research, a fellow by the name of Jim Imai, all of these had done research at Fairchild on MOS technology and it was a budding technology, it had been around a long time. Its benefits, of course, were many. First of all, it was very low power.
The other aspect was the nature of the way the transistors were formed it allowed you to pack a lot more density of a chip, so you create smaller devices and you could also create lower power devices. But, the technology was very unstable. GME began really developing more or less custom like devices for various military applications. I can remember Wright, Patterson Air Force Base was one of the places we wrote a lot of proposals for. And they would develop the technology but, as I said, 90% of the time these devices took a lot of development and didn't quite work and most of the process technology was in the various engineers' heads, rather than in any kind of database, as you would have today, where you could look systematically at look deviations and variations in the process.
Again, another issue which was kind of interesting back in the early sixties, was the fact that companies, when they were formed, were highly vertically, integrated. The smallest of companies would attempt to do everything. General Microelectronics, you know, they made the ingots, in fact, I still have one of their ingots... [Holding ingot.] This is... I don't know probably about a half inch ingot...
RW: Of silicon...
RM: Of silicon. Again, they grew these ingots in molten silicon, you could go down and watch them growing the ingots, slice them into the wafers, polish them... Do the whole process all the way through and GME also made the systems and the subsystems. After the MOS technology began to evolve by about 1965, they won a contract with Victor Comptometer Corporation to do a calculator that contained 29 MOS chips. It was a revolution in its day. It hit the front pages of all the trade journals. The news media hadn't discovered electronics in those days. But 29 circuits was to make this the lightest weight, the most portable, the most reliable because, again, less parts, and so forth.
Unfortunately, the MOS technology wasn't reliable and I think they only made 100 machines or something of that nature. Unfortunately, I had one but I gave it away to somebody at that time and, to this day, wish I could get it back.
We had talked to people at various places around the country. We met with Henry Ford in those days to talk to him about MOS technology in cars and in computerized intersections. In fact, that's where I got this [holding up silicon ingot]. I had actually gone to get an ingot to give one to Henry Ford, Jr. and I asked for two and I kept one and gave him one. GME had struggled to survive because they had tried to do everything. Everything from the sand, all the way through to the systems. A relatively small company trying to do that complex a business just didn't have the cash and they ended up being bought by Philco at the time which was in the semiconductor business. And, of course, the minute they were acquired, all of the talent left the company and dispersed throughout the valley.
RW: Well, they said they were going to move everybody back to the Philadelphia area.
RM: They had the major operation in Philadelphia, the major semiconductor operation and they had done the Apollo chip, that was their claim to fame. The Apollo chip was really the first mass, produced semiconductor that went into the Apollo moonshot that really... you know if you talk about total quality management and systematic manufacturing technologies, this line, the Apollo line, was something to see. It was really a beautiful operation and it was dedicated to that project. So they were riding on top of the world at the time and what they did, was of course, try to put their overbearing management style on top of these renegade Silicon Valley types and no one at GME at that time was willing to accept that sort of eastern dominance All of us, the minute it was acquired and they started descending upon us, started looking for other pastures.
In fact, I was recruited by National Semiconductor which opened doors across the street, so I used to say that when I went to work in the morning, instead of making a left turn, I made a right turn and went into another parking lot, but it was on the same street. National had opened its doors in 1967. When Sporck, again, it was a spin, off of Fairchild. It wasn't quite a spin, off. What it was... National Semiconductor had been around, again, as an eastern company and they had bought a little company out in Santa Clara called Molectro. Molectro had recruited Bob Widlar and Dave Talbert, who was the process genius behind all of the linear devices at Fairchild, and Bob Widlar who was the design genius behind... most of the linear devices that were probably built and marketed for the period of the sixties and seventies were based on Widlar and Talbert's technology. I mean they created, in many ways, this industry. Most people don't even know who they are but, in effect, they were the Steve Jobs and the Bill Gates, and whatever fame you want to give to anybody, they were famous people of those days. And the journals... you couldn't find a journal without their picture in it, conferences in which they were recruited to be the key speakers and so forth and so on.
Since Molectro was out here and Widlar and Talbert were recruited into there. Talbert was the president there... Now Dave Talbert... Just an anecdotal story about Dave Talbert is that once I went over to see him at National. I went into his office and we sat back and chatted for about a half an hour or so and I came back over and met Don Valentine. I was late for a meeting and Valentine said to me, "Where were you," and I said, "Well, I was over chatting with Dave Talbert." He said, "For the last half hour?" I said, "Yeah, for the last half hour.'' And he says, "You've probably talked to him more than his wife does..."
You know, Talbert was a very closed boss. He did his work, but he was a very tall, very strict, very stern sort of person who did his work but didn't talk a lot about it... in fact, didn't talk to anybody very much. Talbert, though... imagine him being president of this operation.
Sporck, then at Fairchild, was... and I think like a lot of people at the old Fairchild, were dissatisfied with the fact that much of the profits were being drained off by the people back in New York. There was not a lot of interest or concern about what was going on out here. If anything, the key management people at the early Fairchild really had a lot of dedicated faith and belief in the technology. It wasn't just a matter of... a question of "Oh, I'm going to get rich,", none of them thought that—but they really were very much dedicated to the fact that they wanted to develop the next new wave of technology and they wanted to really invest in the technology their time and efforts. Somehow or other, Fairchild Camera and Instrument didn't see it that way and were largely draining off much of the investments, much of the profits of the company, so they couldn't reinvest them.
Widlar and Talbert left and went to Molectro. Charlie was looking around, Charlie Sporck , when he was, I guess he was General Manager of Fairchild, at least of a major portion of the operations at the time, and he began looking for an opportunity where he didn't have a lot of money to invest, so he wanted the greatest leverage opportunity he could find.
It turned out that National Semiconductor had gotten into deep financial troubles as an east coast company and literally had closed the doors when a friend of Peter Sprague's, his investment advisor, told him about this semiconductor operation that they felt they could acquire very cheaply and, once acquired, they could probably fix it up financially and then sell it off.
So, they got the padlock off the doors and at the same time Sporck was looking for something where he could come in with a team of people and leverage his talent to make money. And this is, there's ... in fact, I have, the article that appeared in Business Week at the time which was that these six or seven people had joined including Pierre LaMond, who is a well, known venture capitalist today. Oh, who else...? Don Valentine, Floyd Kwamie, Charlie, and probably two or three other people that had joined this National Semiconductor..
I didn't join them at that time... I was recruited probably three or four months after they had initially started the operation out here and I was the third person in marketing. There was Don Valentine, Floyd, and then myself. It's where, you know, I really got my marketing education. At GME I got my technical education because the devices at GME were literally cut on light tables... large sheets of mylar where you cut out the circuit patterns and you could walk into a fab. You simply put on a white coat and walked into any fab any time. It was a very... it certainly wasn't what we've learned over the years in terms of cleanroom environments and so forth, but the ability to actually track the processes... to go in and walk into the large camera room and to watch people in action and talk to them while you're processing the technology and building it.
And, in fact, because I had some talent in...I often helped cut the mylar masks back at GME when they were short, handed. You know, you just follow patterns so it was noting really difficult. But then to watch that [sic] patterns go off into the camera rooms and to see them be reduced, and see them go into the fabs and watch the actual process and ask questions... so you get your technical education back in those days it was similar... to Bob Noyce once told me when he was a kid he opened up the hood of his car, he could see the pistons moving and he could understand how it worked and he said today, you know, you open up the hood of a car and you wonder where the engine is... it's that complex.
But National moved very, very quickly. They grew to 30, 40, or 50 million [dollars] within the first three years. And, again, it was very, very fast hard, driving business. No nonsense. You know, there was a lot of stories about the fun and games at Fairchild and how their sales conferences ...good times... National wasn't anything like that. It was, you know... the GME's and the Fairchild's , you go out for long lunches... there were lots of military people out here, and lots of evenings in San Francisco, and wining and dining was the rule. But National set a different kind of spectrum. It was "no nonsense"... you went to work there early in the morning and you left there late at night. If you had a lunch, it was a 20 minute lunch at your desk. You went out with customers but the deal was not to entertain, it was to close an order.
I spent, probably, in my first couple of years at National, half of my time on the road... in Europe and other places around the world... helping set up operations in Scotland. So, again, because it was a small company, it was entrepreneurial and, not that I had any great talent or knowledge of the marketing business of semiconductors, but there wasn't anybody else and you were thrown into it and you learned, you learned on the road.
RW: Everyone was so young then.
RM: There wasn't a lot of experience. There wasn't a tremendous amount of people who were... "Old timers" were like "old timers" in software today, if you were in the business ten years, you were an "old timer." But it was as exciting, I think, as any time ever in the industry was, whenever it was in that formative stages. Again, if you look at that late sixties, early seventies period of time... American Microsystems was formed, Intel was formed, National was formed, AMD started shortly around that time. It was a real startup of the silicon valley, you know dubbed that by Don Hoeffler, who was the journalist from Electronic News, and later his own newsletter, who played the sort of maven of the semiconductor industry. It was a highly knowledged, network of people who knew one another. You knew all your competitors, you knew exactly who was doing what at what company. You saw each other constantly. You always worried, because I can remember going over to lunch over at the ... somewhere on the... over at one of the hotels, Hilton, or whatever over there off of Bayshore... looking around and there was somebody from National, there was somebody from Fairchild, there was somebody from AMD, every table had somebody from one of the companies around in the area. And you had to be very careful, you'd say, "Well, we'll talk when we get back."
RW: But, in fact, that kind of contributed to the spread of the technology. It may not have been good for a single company but as an industry, it was probably a good idea that there were always communications.
RM: Oh, it was fantastic. It was, in fact, we now are talking about the Infonet, or the Internet... giving it all kinds of names... I mean, it was sort of really the "Bar, net," because where you really met was, you know, after work, and you met at lunches with people, and you literally did sit down and write on tabletops and napkins and so forth and design... many a company...was done that way and I had many folders you'd open up and the napkins were the key bits of information. Still have that...
RW: When Hogan and his people came... He told me, I interviewed Les Hogan, he was just shocked by what was going on. Here's Jerry Sanders wearing his white suit and here's all these competitors talking . The guys from Motorola, they were just... 'cause you don't do that down there.
RM: Well, see I hadn't been at Fairchild, so I hadn't met Jerry Sanders. I went to National in 1967 and Don Valentine and I were going to have dinner one night over at the Velvet Turtle in Sunnyvale. And, so we go into the velvet turtle and this fellow in a green plaid suit with big plaid, like Black Watch plaid, big square plaid suit. From head to toe, all you could see was this big square plaid, comes over with the flaming, you know, white hair... and it was Jerry. And it's the first time... I can still picture him today, and he came over and starting talking to Don because he worked for Don. But this suit, I mean, it was almost like something you'd see at a Barnum and Bailey's circus.
I don't know if you have a chance to talk to Jerry... he wasn't always that way. Most of these people that came to this—I think it's fascinating about their history, because, you know, Charlie Sporck was from New York, upstate New York and his father drove a cab and had a grocery store. He drove across the country in an old Chevy with his family to get a job at Fairchild only to find that the job wasn't... that the offer wasn't there when he got there because of some mix, up and finally talked himself into a job there.
Jerry Sanders was from the south side of Chicago, raised by his maternal grandparents and... very poor upbringing. The first job, he told me, he ever went to he had a dark blue suit on and the suit was so worn that the white lining, the threads, were showing through and he went into the men's room with a black pen and he covered over the white so he looked presentable on his first sales call.
Many of these early pioneers in this industry, Bob Noyce came from, you know, Iowa, the son of a preacher, they were truly pioneers. They truly moved across the country to a land where they were more independent, where they were on their own. They were truly discovering new things and it was an era that... these people were never raised as wealthy people, they weren't raised as successful people, I mean in our sense of success today. They came from good solid backgrounds or from backgrounds that they had struggle with all their life and they brought that with them. And they innovated not only in technology, they innovated in styles of doing business.
When National started, Charlie Sporck, every single Friday afternoon, he called everybody together and he would stand up on a chair. I can still see him. You know Charlie's 6'5" now, but he would stand up on his chair, and he tell you what happened that week , how the production was going. How the, you know, the new orders that were coming in, what new people were added to the company. I can remember every week till it got to the point where we couldn't do it... we couldn't do without it. And also every single morning, you know it strikes me today, you know that people have made a lot of money about this "walk, around management"... every single day that Charlie Sporck came to work at National, he would go into his office—he had a white smock on the back of his door, he put the white smock on, he would go get his cup of coffee and he would walk to the manufacturing line and walk up and down it for an hour talking to everybody.
People would hug him on the manufacturing line, you know, people adored him in manufacturing and in operations. Today we call that "walk, around" and we say this is... we got to get to know the manufacturing and really work on quality and so forth. He fired somebody once because they took a wastebasket and dumped it on the floor because they needed, or it was an empty box that was sitting in the corner, had some junk in it, and he just went over there, they needed the box, so they took it and dumped the junk on the floor and took the box back out so he went and fired him. He said, "This place is to be clean, it is to be absolute," and he fired the person.
Now, you may think that's a little harsh but, in effect, the whole idea, of, you now, disciplined manufacturing, personable environment, which is a lot of the management ideas that have been incorporated and certainly you know, evolved, but the technical people, the Bob Noyces and the Charlie Sporcks and the Jerry Sanders and others, innovated not just in technology, but in lots of the management styles, the beer bus and the Friday afternoons, and the camaraderie and the distribut... the egalitarian environment of bringing people together to work together, that was all revolutionary and new.
RW: And, uh, you would go back to the East coast and you'd have "mahogany row" with all the executives in one building, guarded by the secretaries, they had their own private dining room, they had no, no, no interface with the employees. It was terrible.
RM: It was terrible and we had... I had a very brief encounter of that in the short period of time at GME when Philco... and I didn't fit in too well...
RW: Let's break.
[Pause. Approximately 0.5s]
RW: Let's get into, ah, starting your own company. Why did you leave National?
RM: Well, in 1969, toward 1969, we, the industry, hit its periodic recession and... and, you know, things were really tough that year and I was spending a lot of time traveling around, but I was learning a lot. And, of course, my options had dropped below... far below what I had gotten them as I joined... not that that was a significant factor, but again the semiconductor industry was very responsible for my starting this business.
And this is just sort of an interesting story I guess... maybe an anecdotal story. Howard Bob, who I had worked for at GME and always wanted me to go to work for him, and he started American Microsystems, AMI I guess it was called. And there was fellow there who had been a long, long time sales manager, regional sales manager, and then sales manager at Fairchild by the name of Walt Andrews who was sort of one of these just...people that everybody in the industry loved and knew.
He was a New Englander, smoked a pipe, knew the industry inside, out, didn't know the technology that well, but was a great sales manager. And he worked for AMD [AMI?] and every once in a while Walt and I, who were good friends, Howard would send him over and we'd have lunch or dinner, and he'd try to recruit me to come work for him. And I suppose, at the end of '69, when things were still very tough, somehow or other the idea popped into my head, "Well, I don't want to work for Howard," who I thought was also a bizarre character and who's also, unfortunately, also passed on a few years ago..."but I will do it for you as a freelancer."
I gave them, I think, a number like $2000 a month fee, and I'll do it for you outside of the company. And I thought they wouldn't accept that but they did. And so I said, "I got a client, and so I had a business." It turned out, however, when I told Don Valentine and Sporck that I was going to leave, this is something that's always... I gave them three months' notice and I replaced myself. I literally went out and did all the recruiting, found someone, brought them in, trained them, and had gone through this process. And near the time when I was about ready to spin, out, I got a call from Walt Andrews and Walt said, "You know, Howard didn't tell the rest of his people, his other managers, that he was going to do this. And so what he'd like you to do is have you come over and meet with his managers to discuss, you know, what this is going to look like."
Well, OK. So one night after work, I went over to AMD [AMI], and I guess you have to know these characters—Howard was a ... there was a lot of real interesting characters in the business. These are all really unique personalities and Howard was one of these unique people. He knew everybody in the military, he was, again, a better salesman than he was technical but he... he helped build Fairchild in the early days, and in particular its government practices.
And so, I went in to Walt's office and in the next conference room I hear these people arguing and fighting and shouting at one another and I got up and left, and went home. Later that evening, Walt Andrews called me and he said, "Where did you go?" And I said, "Walter, I'm not gonna get in the middle of that. You know, I don't want to go out and start my business with something like that." Well, here I was with, you know, roughly $500 in the bank and I had already hired my replacement at National and I think I hired an office... or, rented an office in Palo Alto. So, ah, I was in business without a client then. The next three weeks, I just went out and started pounding on doors and ran around to lots of people that I knew and another person that I worked with at GME, Earl Gregory, was vice, president of marketing at Exar, ah no, yeah... was it Exar... can't remember the name of the company now... but he was involved in a little semiconductor startup and they had just invested in another company called "Monolithic Memories" that was just starting up.
And so by going and working, I got both of them as my first clients to work with, both of whom were trying to set up their marketing operations at the time. And so when I started, I really did a lot of different things. I would help them with everything from research to training, you know hiring reps and distributors and training them and doing the advertising and their PR and their product planning and, I mean, it was a wide range of things. And then I would farm out much of the develop... like the advertising. I think you and I talked about this, one of the things I did was to farm out the advertising to Dick Steinheimer and Larry Bender, who did most of the advertising for me. And I would hire out the writing and I would hire out... so I would sort of be a resource manager for these various start, up companies.
It grew and I started bringing those resources in, house . And actually, Larry and Dick worked for it for a very brief period of period of time but wanted to go off and become, you know, stay more independent. So, we began developing our own in, house advertising, our own in, house research, our own PR. We had a publications group, and so we had a variety of what we call "marketing services," all of which we would then bring to bear on start, up companies and provide them with whatever they needed.
RM: Well, the... we had actually set out in what was really a marketing plan and listed, I think, the top ten companies that we wanted in silicon valley and Intel was on that list. We got all ten of them, by the way. We had originally set out for the top ten companies... included companies like Spectra Physics and Teledyne and, I mean, lots of the names that aren't even around anymore, you know Systron, Donner and companies of that nature.
The fellow... one of the fellows who joined me very early on in my business was another fellow who had worked at National Semiconductor as sort of an assistant to Charlie Sporck. His name was Don Kobrin. Don had worked at Fairchild and Don had worked at National and one of Don's expertise, among other things, he was one of these general purpose research people, you know, bright, smart, could do anything, was to do plant location work. He's the one who helped set up Fairchild's plant in Shiprock, New Mexico... identify the area and set it up. He helped set up the one in, I think, in Maine that they had at the time, the assembly... some of their far east operations. And Don had joined me as a researcher to help us do our planning and research operations. There was only four of five of us, but he was one of the first people. Noyce called him to do a plant search and Don said, "No," that he wasn't going to do that because he wasn't in that business anymore. So he hung up the phone and he came back and said to me, "You now, Bob Noyce had called me and said that... wanted me to do this and I turned it down. " And I said, "You call him back and you tell him you'll do it."
And, but, if we do a successful search, what we want is... we want the ability to sit down and give him a presentation. And so that... the work that was done by Don was in Portland, so that was the basic research work that was done by Don to locate the Portland operations for Intel. And, during the process of that, Bob Noyce and Don and myself and Ed Gelbach met at the wine cellar at... this restaurant in San Jose that I can't recall the name of right now, but it was a very nice wine cellar. And we spent the whole evening talking, and the next day I had a call from Bob. He asked me to come down and he said, "We're going to start doing work with you."
RM: Yeah, you know, one of the things that was interesting... to get into that... part of our methodologies, even though we did advertising, and we did their PR., we did other things, was always to spend a lot of time talking to customers, going out and doing a lot of our research and gathering information. So there was a whole network of people... I can remember developing a lot friendships with people at Cincinnati, Milacron, and at GE Microelectronics Lab, and places like that that I got to know, and would call and talk to about the... how they were using the technology, what kind of applications, what kind of competitive situations they were involved in, or deals that they wanted to look for and so forth and so on... so I could use that information, and then going back into clients... I developed a lot of those relationships, particularly with Intel's customers and some of whom I still am friends with today.
And the, you know, working through those early years at Intel there were a lot of failures. Many, many failures. You know, they were in the memory business and, of course, the memory business was very successful. The "1103" which was really the first successful 1K semiconductor DRAM, that was enormously successful. The first EPROM, the first CCD device... lots of devices that they had developed. You know, in the early days people don't realize, I think maybe as important as the microprocessor was the EPROM... and most people don't recognize that...we really worked very closely... I used to get up in the morning and go to Intel to work rather than go to my office. I would literally work there all day and come up to my office late in the day and spend hours here and then go home. But I would simply go there because it was also a very dynamic environment... an exciting environment. Lots of new stuff happening there.
I can remember Mike Markula, who has product marketing manager of memory products, telling me that he thought that they had something that was just going to really set the world on fire. I can remember sitting in his office. I'm not sure what date this was, but it had to be very early seventies, and it was, of course, the microprocessor, and he saw it as a way to sell lots of memory. That was what I think everybody in the company saw it as, as an opportunity to sell additional semiconductor memory.
We went through the 4004 and 8008. The 4004 was actually introduced before we got involved, but we were in the 8008, and then we helped them really launch the 8080 which was, again, a very successful product. But then the follow, on product, the 8088 took a long time to establish as a standard and worked through many, many... and the 8085, all of these devices that in between, people don't realize what the struggle was to create an industry standard.
RW: There was the 432 that was a total disaster...
RM: The 432 which, again, was a... we spent, I spent so much time... That was developed in Portland and... but on the other hand, that's where I learned a lot about object, oriented code. Dave Best and Bill... can't think of his name now... who was the general manager of that operation...
RM: No, it was the technical guy they had hired out of Motorola.
RW: I know who you mean and I don't remember his last name either...
RM: It's terrible to not have these names... but they... we spent, you know, days and days and weeks and weeks really developing educational materials, because the fundamental thing that we did, I think, that we did through Intel's whole history of development, was education. I didn't see it as ... because you couldn't promote things that people didn't know what they were. The first semiconductor memory, the first EPROM, first whatever so... you know, this is why I carry these materials, why we... and I have, you know, boxes of EPROMs and I have... I didn't bring them all in...
RW: You have a MICROMA watch there...
RM: I have a MICROMA watch...
RW: Talking about the failures...
RM: You know, I have the [vacuum] tube and the chip. I have boxes of devices that we would take along and began to educate people about you know, what are these, and what are they good for, and how are they gonna be used, and why do they save people money, and how do they get people to design better products, and all of those kinds of things. And we put on seminars and workshops all over the world constantly. Not just for the media and the press and analysts, but also for customers and distributors and anybody who would listen.
In 19... One of the other interesting things is the media. Today it's commonplace to pick up the Wall Street Journal and, in fact, you can pick the Wall Street Journal and most technology makes the front page at least once a day or once a week...
RW: Or the Mercury [San Jose Mercury News.]...
RM: Or the Mercury. It's every... in fact, in the Journal it's every day, not once a week, it's every day. Every newspaper in the country has a section in computers. Technology is like the automobile industry was in the 1950's, except mostly then it was on strikes and here it's on technology that's affecting it. But up till probably the early 80's, the Wall Street Journal would not do any articles on Intel. I can remember talking to an industry analyst out of Morgan Stanley at the time, and he told me that the only company worth talking about at all in the computer industry was IBM, not these little companies on the west coast. And the Journal had a rule that literally was only changed in probably the very early 80's, maybe around '80 or '82, in that time frame, that was that they would not write about any company that was not listed on the New York Stock Exchange. And so, of course, Intel being over, the, counter, they wouldn't write anything about them. So you never saw anything about the first semiconductor memory, the first EPROM, or any of these major devices that were building the infrastructure for the processor world.
By 1979, Motorola had come into the processor business with the 68000 which had an architecture that most design engineers felt much more comfortable with in terms of its structure. Intel wasn't exactly the greatest architectural design firm in the world, they were much more a process company.
RM: And where Motorola was much more of a design company and less of a process company. We began hearing, and I was even getting feedback... for example my "mole" at General Electric who was ran the microelectronics lab... I can remember talking to him, and he said to me once, "Those little companies in silicon valley are capturing our imagination." And what he was referring to was companies like Apple that had adopted the 68000. And he kept referring to all these little companies that were adopting the 68000 whereas the 8088 and the... which had an internal 16, bit and an external pin 8, bit, and so you had this sort of hybrid to go to the next one, and Intel was really behind in technology by at least a couple years but was forced to think, "How can we maintain our lead, even with our technology that is not as sophisticated or as proven as their competitors?"
The person who really instigated the CRUSH program was Casey Powell. Casey Powell was the sales manger of the New England region for Intel, and he wrote a long, long letter about customer feedback, and how we were gonna have to get out of this business too, like we did... or no, they hadn't been out of memories... but we were gonna lose this business if we continue down the path we're going down.
He had met with a number of people and, in fact, he even brought in some customers to help convince Grove and others that this was a real major serious issue. There had been a lot of people talking to them prior to that and feeding this back to them but it was like all companies, you know, it was sort of... they were in love with the technology. But it was really Casey who created this.
Grove called a meeting and the meeting had probably thirty or forty people at it down at Intel to discuss what action should be taken. The outcome of that meeting was, and, in fact, I know, I said, "You can't do anything with forty people in the room." And the decision was to get a small group of people to go away as a sub, group to devise a strategy for dealing with the issue. That sub, group was, and I don't think, I'm going unfortunately to remember everybody's name, but it was... it had to have executive staff representation and that was Bill Davidow. Jim Lalley, myself, Casey Powell, I'm not sure who all... Richie Bader...it was really an interesting group because it was not hierarchical. It was who would be the right resources to get together to think about this issue? And to address it?
It was also, I think, one of the really interesting things about Intel. They didn't say, "Gee, you had to have, you know, such and such, or somebody would be offended by not being part of this group or whatever." It was "OK, you know, you, group, go away and figure it out, and we'll see what you come up with."
We spent three days at Rickey's Hyatt House. It might have been longer but it was, I believe it was really Wednesday through Friday of a week. Locked ourselves from, you know, eight o'clock in the morning through till late at night. It was Jim Lalley who named it "CRUSH." He said, "We gotta have a name," and Jim was the one who said "let's call it CRUSH." Well, of course, the lawyers hated that name and so, you know, we were never able to use that name in any kind of external... nor was it put on anything other than it became even known within Intel as CRUSH. And it was "CRUSH Motorola," that was the...
RW: Well, I remember it slightly differently. Because there was the Z8000 that was also technically sufficient, so I think the argument was that "if we can take Motorola, then Zilog will be "CRUSHed" in between these two.
RM: Yeah, but quite frankly, I actually have notes on all this, I mean the meetings, and I'm quite certain, because I've written about it and I've gone back and reviewed my notes... it was a... we went through this "let's name it" and went through different names and threw them up on the table and it was Jim Lalley who really said, "Let's go with CRUSH."
And the real worry, although there was a certain amount of technical arrogance about Zilog in that you know, "They'll never do it anyway." Even though it was a better chip, there was a certain amount of technical arrogance saying, "They're the little guys, it's Motorola we really gotta worry about." They always worried about TI, Motorola, later on we'll talk about Apple, but Apple was worried about IBM and TI, they never worried about...actually they worried about TI more than they did IBM.
But the three days were spent in looking at all of the issues and the conclusion was that you couldn't beat them with a better processor, but you could beat them with a better system. And so we raised the whole thing to a "systems" level. Remember the AIPX [iAPX], that became identification and we actually got into renaming the product line, and everything else, because we wanted to represent that at the board or systems level, you could build better performance applications. And so, we went through a whole series of things: building a war room, building a master proposal presentation that had a corporate pitch, a management pitch, and so forth and so on, down through engineering, and even down a purchasing pitch. That was done in slides, it was a big wooden case, that was about half the size of this table, that contained the presentations.
The first presentation that was designed was for Olivetti. And the Olivetti presentation, as it was known as at the time, that became the master presentation that you took out to every other place. We did that Wednesday through Friday and on Saturday and Sunday and Monday...ah, Friday, Saturday and Sunday we called various people, called field sales people, called some customers, and we bounced the ideas that we had developed off of them. Tuesday was the executive staff session and we went in and presented it to the executive staff session.
And I forget we had a budget on it... was something like $10 million, I mean it wasn't to today's standards, it was $10 or $15 million, It was not a huge amount but...
RW: It was a lot of money in those days.
RM: It was a lot of money in those days and the executive staff said, "Go." By the end of that week, there were 100 people from Intel assembled at the Rickey's in San Jose and there were teams of people. There was a software team, hardware team, applications team, customer team, promotion team, and we broke off into small teams to develop individual strategy plans for attacking this after first getting the umbrella program.
And then, every single Wednesday... we met every Wednesday morning, and as far as I know that went on for years and years and years, in which you came in and you would deliver, each member of the group would come in and deliver—their action items and their progress report. You didn't come in there without having your progress done, you know, the task you were gonna do or you were pretty well beat up by everybody else. So you worked very hard from Wednesday to Wednesday to get what you had to get done accomplished.
RW: My recollection was the most effective was the "futures," laying out the plan of the 186, the 286, the 386...
RM: That ... you're absolutely right.
RW: And Bob Noyce took that over the Olivetti and they reversed their decision.
RM: Yeah. The futures, and this was part of the analysis... was, again... and I will tell you, I really give a lot of credit to Jim Lalley for this. Because he stood up at Rickey's at this board and we analyzed the strengths and weaknesses of Motorola. Financially, management, wise, corporate, wise, customer, wise, application, wise, chip, wise, process, wise, everywhere you could think of, we analyzed their strengths and weaknesses. And, just parenthetically, next month I have a company that's launching a CD, ROM that is gonna to take people through the whole CRUSH process. You will be able to do your own CRUSH for your own competitors and it's the process that was laid out in 1979.
RW: All right, let's break.
RM: Now, about CRUSH, and I think this plays a big role, and still plays a big role today. When we went through our strengths and weaknesses comparison, one of the comparisons in strengths and weaknesses between Motorola and Intel was that Intel had Noyce and Moore. That was an enormous strength. We had that up on the board as one of our strengths. They could open doors. They had such high degree of credibility. They could go in and deliver messages, they could go in and represent the company and the technology. They were looked at not, not... don't mean to be used in a negative sense... but if you sort of look at the evolution of the technology, you know, sort of the scientists are held up here and the engineers a step below. They were looked at more like scientists than engineers. They were looked at the people who really did project the technology off into the future.
Enormous credibility. They'd never lie to you. They would never turn you away. You'd have to... Gordon would be perfectly honest with you, as you know, but if you came up with a good, sound strategy that he believed in, he could deliver that. I think those two are one of the reasons Intel has sustained itself. Grove was there to drive it and to make sure, you know, implementation was done, but there was an enormous amount of respect...
RM: ... you know, that was given by users, by competitors, by the whole industry to those two people.
RW: Well, even in financial meetings, when there'd be meetings with the analysts and they'd get up there and give these projections and all the analysts would be laughing, you know, saying, "You guys are too conservative. You're gonna do far better than that. Right?"
RM: Well, I'll tell you another funny story about CRUSH is that I got to know the fella who was the general manager of Motorola's semiconductor operations.
RM: No, no, no. He's off here running VLSI Technology... ah...
RM: Yeah, Al Stein. Al Stein was our competitor and I got to know Al pretty well and, after the CRUSH thing, and we were talking one day and I told him about... he asked me, "Well, how did this all get going?" And I told him the story of the three days off, site, you know, and the pulling everybody together and in a two, week period of time, getting the whole company mobilized. That... pretty phenomenal to get the whole company really mobilized in two weeks and make a major commitment. He said, "You know, it would have taken me that long at Motorola to get an airplane ticket approved for me to travel to go visit a customer."
RW: And I think you were the first to, one of the first, to say that, you know, IBM is susceptible to competition and IBM never had an Operation CRUSH. I mean, they could have, they could have done wonders...
RW: ...but they didn't.
RM: Sure. Well the... I think the thing... the reason I wrote this book, you know, back in the mid, eighties... it was actually when IBM was doing quite well, but it was looking at all the start, ups. I mean, I worked with Microsoft as a start, up, I worked with Apple as a start, up, I worked with Intel as a start, up, I worked with, you know, Lotus as a start, up, and Compaq and all these small start, up companies, and you see the speed with which they act and implement. The ability to, when they make a mistake, to turn around quickly, because the management team comes together and says, "How are we going to solve this?"
And not only that, but the community helps them. People out there in this community will come together. It's almost like a wound, where, you know, all the blood comes rushing, not to bleed you, but to come to cure it, and antibodies in your system start working. I mean, small companies, it's amazing how the financial resources, the technical resources come together to make them survive. That's really what that was about, was to say that IBM is not going to be beat by big companies, it's going to beat by these little companies who come and eat them from below. They're going to be... I use the comment that it wasn't the... remember "The Bunch," Burroughs, UNIVAC, NCR and Honeywell, it was... they were big companies. They didn't do it. It was a bunch of pigeons nibbling them to death, you know, it was all of these little companies, and so today IBM probably has 20,000 competitors around the world. Whereas back in .. you know, twenty years ago, they had seven, and that's saying if you work with these small companies, you can see what they can do. And you see how they can go in and slice a piece of the market, and slice it and slice it and slice it...
RM: Yeah. It was the Olivetti pitch, it was the Olivetti presentation that was then given to IBM.
RW: Because I had heard that they wanted the 68000, but it was too powerful, and it would have made their minicomputers look bad, so they wanted something wounded like the 8088.
RM: No, I don't think it was that because it was a much more independent operation down in Boca [Boca Raton, FL]. You know, they had formed this... they were much more independent and, in fact, if anything, were set on their own course. It really was the thing you had mentioned before that it was the chart that said 8080, 8086, you know, x8080, x8080xx, 80 [80x86]... all the way out and talking about the fact that the thing you can do is to move to the next generation of computers with a great deal of... they were... it was an extensible system and you were able to upgrade with a minimal amount of time invested and stay ahead in the competition.
RW: No software...
RM: That presentation... and that came out of Rickey's, when they looked at Motorola and said, "What Motorola looks is that Motorola is in the chip business. We have to be in the systems business."
RM: And that was a fundamental basis of CRUSH: we're a systems company, they're a chip company. And they're gonna go in and try to sell the 68000. We're gonna go in and try to say "Look, if you're a systems company, you gotta be able to take this system, invest in it and then move it to the next level and the next level... but take your invested technology and your invested learning skills and bring them into the next generations."
RW: Right, software.
RM: ...and evolve it. And that is really what convinced IBM to move to Intel.
RW: Well, just think of Intel today had that gone differently.
RM: Well, it's Microsoft too. I mean IBM, you know,... the bones of IBM have built a whole other industry that they are no longer in control of, because not only did IBM select Intel, but then they invested in Intel and they actually did a lot of technology transfer at Intel in chip processing. The same is true of Microsoft. IBM selected Microsoft and it was up until just the last few years it was you're being "IBM compatible" and today you're either "Microsoft or Intel compatible."
RW: Or Windows or something.
RM: Or yeah whatever.
RM: Well, Steve Jobs called Intel and asked them for some help, and who would they recommend, and they recommended me and I'm not sure who at Intel...
RW: And yet, he didn't use an Intel microprocessor.
RM: No, but, again, I think at the time it was largely because the Intel microprocessor was not looked on as being the advanced processor. You know, if you went to... in fact we did this... we did some research... we went to the venture capital community, and the venture capital community would not invest in a new start, up, up that was using an Intel processor, simply because they said "You're starting out with old technology." And so we actually had to do a whole marketing campaign aimed at those early adopters and educating the venture community about the new processors and the new systems orientation. We had a whole marketing campaign addressing that.
RM: So, Steve Jobs called me and he came over and we sat down, both he and Wozniak, and they began talking about, you know... Steve was really pretty good. He's one of the few people... I really think that Steve Jobs and Bob Noyce were two of the people that I've met in my life who really did envision, sort of, the future. Not too many do. It's not they knew how great it would be but, sort of, what they wanted it to be. Noyce back in the, you know, in the seventies talking about the fact that he was at a WESCON, I think, conference which no longer exists and he mentioned the fact that chips will be so inexpensive, and things will be packed on to a piece of silicon so small that you're gonna have to... you know, that they'll be thrown away, given away. And somebody on the panel said, "Yeah, well you better be careful if they fall on the floor you'll lose all your information." And Noyce said, "It won't make any difference. They'll be so cheap you'll just get another one.
You know, he made comments of this nature back in those days, and Steve Jobs is one similar sort of person. Steve came in and I can remember him sitting in our little conference room and him talking about children using computers and teachers computers, and business people using computers...
RM: ...which, you know, had to be, you know, in 1976, 1977, in that time frame. Now the reason, quite frankly, that I wasn't real surprised over this is because of working with Intel. Back in the early eighties, John Dewar was working at Intel and he was putting... he was gonna a single, board personal computer. And, in fact, we ran ads on the back of Scientific American that said, "Ricki Kowaguchi does something with his home computer," or hobby computer, I think, is what we called them and these were... we bubble packed small single, board computers and sold them through hobby stores. I remember going out and going and trying to sign up some of the hobby stores around and selling these things.
So there was a whole effort at Intel in the early days to really get into this sort of packaged computer and probably the early pioneer was Heathkit, where you could buy and assemble your own computer. The thing that Apple did was nothing revolutionary, they packaged it. You didn't go have to build it yourself, they put it all in a box for you. And put it all together, you know and... the other thing they did was to put lots of slots in the back of the Apple II so you could make it very flexible, and the market could take it and adapt it to different uses. And they gobbled up all of the first miniature disk drives that were possible. Before disk drives, you used to have a tape recorder, as you probably remember...
RM: ...and you record your data and it was just horrible... and I always say my repairman on my computer in those days was Steve Jobs, because anytime I had a problem, I'd call him up and he'd come over to my house and he would... it was usually a dirty recorder.
RM: Well, I had people who worked for me... in our design group...
RW: Yeah, why don't you show that? How you recycled... the colors from Philco.
RM: Well, I think that one of the most interesting things about this is... is sort of the semiconductor influence on the whole valley even today. You know, Steve Jobs idolized Intel even in those days and Bob Noyce. He became very close friends with Bob Noyce. One of the first people he went to see... he went to see Jerry Sanders, he went to see Bob Noyce and he talked to them about how you build your business and so forth. And those people had a big impact on his life and on his... on Apple.
But, when Philco acquired General Microelectronics, they wanted to do a big splash about this because they, again, saw that they were buying this microelectronics company with MOS technology that was going to revolutionize every business. It was a great future, you know, there was a lot of future... futuristic articles on MOS technology because it was the coming thing and the new technology and you could really pack a lot on a chip. I remember the first 96, bit shift, register, if you will, that was, in a sense, one of the first memory, type devices right?
So, Philco wanted us to do this, and we took our ad agency and developed this campaign. This just happens to be a poster—I don't think I even have the ads left, but we made some posters out of it... which was a seven or eight color representation of a chip and we had a whole series of these... different styles of chips... this is... I think there were six of them, different posters like this and at the time, if you remember, in the sixties was of course the psychedelic revolution and the fella who did the "7, UP" commercials was a fella by the name of Tom Kamafuji and Tom was an illustrator that resided in San Francisco and he had done all of these psychedelic colors and so he is the one who designed this multi, color device.
Tom became a good friend of mine, and when I started my company years later and I was working down here in Palo Alto, Tom wanted to move his studio down the peninsula to be closer to his home, so I leased him some office space in my building. We were then developing the Apple work and asked to help them design their new logo. The artist who, at the time, a fellow by the name of Rob Janoff, pretty much came up with the apple with the little bite out of it. And Tom was famous for doing these kinds of colors so ... they took it over to Tom and Tom stripped, in all these colors. And the interesting thing is that these ads were done in the semiconductor industry, as I said, in 1965. The Apple logo was done in 1977, so we're talking about twelve years later using a reference from old semiconductor work.
RW: Well, it is probably in the top ten logos recognized... in the world.
RM: of all time... Right.
RW: Don't you think?
RM: Yup. Apple didn't like it, by the way, at first. Steve wasn't real excited about it largely because he said that we'd never be able to hold the registration on the colors. Steve was, you know... a very, very strict on quality and...
RW: Right, looks...
RM: Looks and exact representation and so forth. So what we had to do... we had it printed on metal and presented to them. Steve came over to my house, and I remember he'd come over on his motorcycle and I'd argue with him about these things, and I finally convinced him that they should do it.
And one of the things, also in those days, people don't realize, is that Apple, you know, Apple wasn't happy with the name Apple after they got going and growing. They actually looked at IBM and said, "We don't look like IBM. We're not, you know, dignified. We're not... we don't look like a stable, large business organization." And we had a big meeting at De Anza college, in which I made a couple of hour presentation to all the employees at Apple saying, "That's exactly what you do what. You want to be different from IBM. You don't want to be the same. You don't want to emulate them. You want to do all of the things that distinguish you from them." And they decided to continue with the name.
RW: That was good. I just was reading Newsweek and there's an editorial, "How Apple Became Avis." It talks about the key errors made by Scully in not licensing out the operating system.
RM: I think that what one the issues at Apple, this happens a lot to technical companies is that they always sort of look at the grass is greener and to be a consumer company is where... is sort of Nirvana.
You know, they don't go back and trust to being technology oriented and they move to this consumer world which has its own problems and its own difficulties. But if you don't understand the technology, I don't believe you can really run and build a business in this competitive world. You gotta make decisions too quick, you gotta rely a lot on your history, you gotta reach back and grab experiences out of your past and apply them, you gotta know who to call to pull together... to get decisions made. And with all due respect to John, you know, coming out of a world, which may be equally complex, when he reached back he didn't have that experience because he came out of a different world.
Now, he gained some of his knowledge later on but, you know, it took about five years and it was too late by the time he started really learning about the industry. So, you know, Apple went through a series of marketing managers, one from Pepsi, one from Coke, one from Proctor and Gamble, they even had a guy, marketing manager from Maidenform Bras.
And you know, I mean when I was the senior technical guy in a meeting, you know that there was a problem there! So, you know, I don't think you can run a company, the solidity of the product , the Apple II and the Mac were, you know, a Volkswagen and a Polaroid in a row. They were two of these products that were rare in the history of products. Their life cycles lasted more than a decade, they built a multi, billion dollar company. But like Polaroid, and like Volkswagen, they don't last forever. The ability to sustain that growth and to really understand enough about not only the market but your competitors in that decision, I think you need really savvy management who are really engaged in what they do and I think you can go back to Intel again. You look at Grove and Moore, those two have grown. I mean, you know, they weren't just somebody who just came in and then left. I mean you look at the growth of Andy Grove from ...and I have some pictures out there on the wall of Andy you won't even recognize him...
RW: Well, when his hair was straight!
RM: You know, and he wore glasses...
RW: Oh yeah.
RM: ...and those things. But I mean Andy has just become, you know...he's grown over those years. He's forced himself to learn and ...about businesses. He's out there talking about multimedia and things of that nature. He didn't just stay in the fab area, you know, I mean he grew. Gordon grew. I mean all the... that's necessary and they do it by really engaging themselves in their business. This is why, you know, Jimmy Trava is still involved in his business, why Jerry Sanders is still involved in his business, and you look at these people, they're involved in their businesses. They could have retired years ago, but they're driven by this wonder of "What can I do next?" and "How can we unravel the secrets or the mysteries of what this technology is unfolding."
I think Apple lost that when they sort of lost the Wozniak and Jobs. Because those... despite all their failures and everything else, they did have that personal drive to unravel the technology and most of the successful companies in silicon valley, most of them, came with people with technical backgrounds.
RW: Absolutely, absolutely, and when taken over by other companies were destroyed almost universally.
RM: You know, for me, I don't have a technical education other than being, you know... osmosis of thirty years of being in the business but the... I absolutely still believe that if you don't have... from a technology, based company, if you don't have somebody with a technology background, you're gonna run into a lot of problems.
RM: Well, I've actually... I wrote a little pamphlet on that about ten years ago called "What makes silicon valley grow?" And there's four or five things I think, maybe a couple more, that I think are really fundamental. Number one is semiconductors. It is the, you know, it's the soil now, it's the oil. Jerry Sanders said it, you know, "We're the oil of the eighties." Well, it's the oil of probably the twenty, first century. And you know as well as I do, when you're involved in semiconductors, you get involved in every other business. You know, why it didn't surprise me, when I first met Apple, that these new technologies could create small computers is because working with Intel I spent a lot of time on the early processors over at Atari, and with several of the other of the hobby computer companies at that time because we were selling chips to them. So I would go in and I toured around and get tours and talk to them and... writing application stories. And so semiconductors take in everything. They take you into telecommunications, I went and I visited a refrigerator manufacturers, automobile companies, I visited Cincinnati, Milacron, a machine tool company, you visited white goods companies... I mean, on and on and on. You were engaged not just in semiconductors, but if you were in the marketing of this stuff, you got involved in all of these other industries and all of these other applications.
And, if you look at what's happened in this valley, is that semiconductor base has grown all of this other stuff on top of it. And all of this other stuff has sprung from its base. So the semiconductors is absolutely vital in why I think people were terrified in the seventies that we would lose our future to Japan in semiconductors. Because if we lost that, we'd probably lose everything.
RW: Yeah. Who was that, one of Reagan's appointees...
RW: He said, "Potato chips, computer chips... what does it matter?"
RM: I think it was Darwin. [?] I think he said that, "Potato chips and semiconductor chips, there's no big difference."
I think... the second thing is... I mean, the first thing is the semiconductor base, the second thing is the geography. Geography of the valley is... first of all, it's a nice place to live and so people were attracted here because of geography. The other aspect of geography is it's bounded. You've got the mountains to the west, you've got the bay to the east. Literally people did not want to go too far north as a peninsula, because San Francisco and Oakland and those places were highly unionized, and so there was in the sixties and early seventies there were attempts to unionize the industry... and so you wanted to stay away from sort of those "industrial" cities. And then, of course, to those south was sort of vast farmlands, so were forced to sort of stay in this area. For many, many years it was contained within about fifty square miles.
The third thing is the diversity. This is not just a semiconductor valley. It's not silicon valley anymore. I counted as many as forty different industries that exist now in this valley. There is, you know, things... biotechnology, medical electronics, microwaves, aerospace, education, software of all kinds, system software, applications software. Now there's all kind of internet services...
RW: Yeah, networking.
RM: Networking. Telecommunications, you could go on and on and name the various industries. There's no area in the world, no area in the world, that has the concentration and diversity of silicon valley. Now when you have all this diversity you have cross, fertilization of ideas. And one of the things we're seeing that is really interesting is that you're getting sort of telecommunications and computing and entertainment and all these things coming together. Well, the reason a lot of them come together is they're all sitting in the same petri dish called silicon valley.
The fertilizer for that petri dish, you might call, is the venture capitalist which, you know, sits... again, the highest concentration of venture capital in the world is here in silicon valley, and of all the money that placed in this country certainly, I mean, probably half of it goes into California and probably two, thirds to four, fifths of that go into northern California.
RW: I understand that Sand Hill Road... they have several billion dollars.
RM: I would estimate right now... there's a couple things to this. Right now, it is in excess of two billion, it's probably two and half billion and it varies, you know, depending upon the group... but, that's I think, a drop in the bucket. And the reason it's a drop in the bucket is that most of the people who have made money in silicon valley who are not professional venture capitalists are also investors and so those who have made... I mean, I've invested in many, many companies over the years, small start, ups and technical companies... so you will find that... I shouldn't get into names but they're names you and I both know... they also put money into many, many of these companies on a personal basis and many of them are worth many, many tens and hundreds of millions of dollars. As a result, you could take that two billion or two and half billion and I think you could a fairly significant amount of capital to that. So, the concentration of the technology on top of semiconductors.
The other thing is the examples. You can always look around you and see lots of examples of how other people have done it. I mean I find, people come in here and they're always saying, "Well so, and, so did this and so, and, so did that." And so they have this huge number of examples.
[Audio dropout approx. 3.5s.]
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RW: And liquid nitrogen, by the way, by the pipe... Thank you Regis.