Integrated Circuits (Microchips)

In early electronic computers, each circuit involved a vacuum tube. They were large, relatively slow, and consumed a lot of power.

Shockley, Brattain, and Bardeen created the semiconductor. Their circuits eliminated the need for vacuum tubes.

Kilby and Noyce discovered that semiconducting material held burned-in semiconductor circuits. Their printed circuits worked like the much larger metal counterparts. Furthermore, many circuits could be printed and tied together with a single piece of silicon.

These collections of circuits integrated on one chip are what we today refer to as microchips. You are reading this thanks to Kilby and Noyce’s invention.

Kilby worked for Texas Instruments. Noyce was one of the Traitorous Eight, the group who left the abusive, managerially incompetent Shockley. He was working at Fairchild Semiconductor, the firm funded by Doriot student Arthur Rock.

Kilby and Noyce never worked together but, at the same time, addressed the same problem. Kilby, tasked with shrinking the size of a semiconductor, thought of creating it from semiconducting material. He used geranium. Noyce realized that silicon worked better and that multiple circuits could be etched on one silicon wafer.

Their Integrated Circuit won the Nobel Prize in 2000 and went on to change the world. Noyce passed away in 1990 so only Kilby was eligible for the prize. Neither claimed sole credit nor disparaged the other.

Consequently, Kilby, a prolific innovator, was rewarded as an employee and led a comfortable life. Meanwhile, Noyce left Fairchild, co-founded Intel, and died a billionaire.


Computers were big. They were enormously expensive and physically giant machines. IBM’s nickname from this time was Big Blue on account of the size of the company and their computers.


Olsen developed, by current standards, small transistor-based computers at MIT. He left in ’57 to form a company, the Digital Computer Corporation. It was funded by Doriot’s ARD which renamed it Digital Equipment Corporation (DEC). Doriot was concerned that the word “computer” would confuse people and computer companies of that era suffered a high failure rate. Doriot invested $70,000 for 70 percent of the company.

DEC created a new type of computer, a minicomputer, small and inexpensive enough they could be used by just one person. These minicomputers were “interactive” – people could interact and change programs as they were running. In contrast, traditional IBM computers ran a program, took input (typically in the form of punch card data), and delivered a result. Interactive computing enabled word processing and, the killer app, games.

The company struggled at first because buyers, expecting computers to be large and clunky, did not understand the offering. Eventually, they found a buyer for their first system, the PDP-1. Their next release, the PDP-8, became a popular hit. Eventually, the PDP-11 became one of the highest-selling non-microcomputer computers of all time.

DEC Thrives

Besides the hardware, DEC also created the VAX memory management software that became a foundation for other computers, including later versions of Windows. DEC computers ran the VMS operating system.

Entrepreneurs would buy the DEC computers, program them, then sell them as single-purpose machines for games, word processors, etc… Additionally, DEC sold dedicated computers and also logic boards.

DEC grew 30-percent a year for 19 consecutive years. By the mid-1980s they were the second-largest computer maker, just behind IBM. Eventually, the trailblazer struggled by refusing to transition into microcomputers. In 1998, microcomputer maker Compaq purchased DEC for $9.6B.

Countless enterprise customers still use DEC equipment and run the VMS operating system, albeit usually on newer non-DEC hardware.

Venture Capital

“There have been many fine scientists desperately trying to become poor businessmen.”

Georges Doriot

Venture Capital pools resources and spreads risk and reward across multiple companies. This simplifies early-stage investing and makes early-stage investing more convenient for both investors and entrepreneurs.


General Georges Doriot is the “father of venture capital.” In 1946, he created the first modern venture capital firm, American Research & Development Corporation (ARD). Eventually, he listed it on the New York Stock Exchange.

Doriot is widely regarded as a founder of Silicon Valley despite that he never visited the region. Individual wealthy patrons typically funded startups before Doriot’s ARD.

Besides ARD, Doriot was a Professor and Dean at Harvard Business School for 50 years, from 1926-1966. Later in life, he also founded INSEAD. During WWII, Doriot took US citizenship, joined the army, and rose to the rank of General working in the military planning division.

Among ARD’s other VC investments, in 1957 Doriot purchased 70% of Digital Equipment Corporation (DEC) for $70,000. Eventually, in 1967, that investment alone was worth $183 million.

Doriot Struggles with Regulators

Regulators forced ARD to sell their DEC stock, arguing a VC firm could not hold founders’ stock for more than ten years. Oddly, they could buy and hold stock in companies they did not initially fund.

US Securities & Exchange Commission (SEC) regulations at the time forbid VC principles from holding stock options in their firms so Doriot, and other ARD principles, made little profit personally.

Finally, the SEC ruled no company that received investment from ARD could issue employee stock options. Since this meant no company would accept an investment from ARD the ruling effectively shuttered the firm and forced Doriot to sell it in Jan. 1972.

Venture Capital Flourishes

In 1959, Doriot student Gen. William Henry Draper started the first VC partnership, Draper, Gaither & Anderson, in Palo Alto, CA. Another notable student of Doriot’s is Thomas Perkins, co-found of Kleiner-Perkins. Arthur Rock, another student of Doriot’s, funded Fairchild Semiconductor and Apple.

Eventually, under President Carter, the SEC the rules to enable modern VC companies. Virtually all venture capital firms today remain privately held.

“Never go into venture capital if you want a peaceful life.”

Georges Doriot