Silicon Insider: Techno Roundup

April 16, 2004 -- Did you happen to notice the recent news that at least 14.6 million American workers — that's one in eight — held stock options in 2002? Not only that, but the majority of these workers were not in Silicon Valley, nor employees of high-tech start-ups. Ninety-four percent aren't even in top management.

In fact, there were more option holders in the South than in the West, and a surprising percentage worked in old-line manufacturing companies and banks, and many were union members. Just as important, the number of U.S. workers holding stock options — and researchers aren't sure we've got the full number even now — was twice the estimate.

In other words, a fundamental transformation has taken place in the U.S. economy. And it has happened beneath the radar screens of economists, statisticians and government officials.

Stock options have always been the game for high tech. Indeed, even now you are most likely to get options if you work in the computer industry. But these new numbers suggest that, like profit-sharing, flexi-time and telecommuting before it, once again as goes the technology industry so eventually goes the rest of the U.S. economy.

This part at least isn't entirely surprising. A high-tech start-up, by being able to hand out considerable numbers of options, with their attendant potential for immense financial reward if the company is a success, can recruit the brightest and most adventurous talent in its industry. Its more established competitors, bleeding talent, can only fight back by offering options as well.

The public companies in that market now must either respond with higher salaries, better benefits and facilities, or ersatz options of their own. Most can't pull that off, and so they begin to die, creating the revitalizing turnover in companies that propels the tech industry forward.

What's interesting is that this structure now seems to be moving out into non-tech industries in the U.S., and will no doubt change the competitive environment in them. This is both good (because it will make those industries more dynamic, creative and competitive) and bad (because it will likely increase the volatility of those markets as well).

But I'll take it, because it's a helluva lot better than the old model of 30 years and a gold watch, and corporate inertia against innovation and change.

I think a growing number of Americans are starting to feel the way I do. Those incredible figures on option ownership suggests that this country is becoming more entrepreneurial, more willing to take risks, and best of all, taking a deeper stake in the long-term success of the companies they work for.

And that is how, in the face of outsourcing and growing economic rivalry from other nations around the world, that the U.S. will remain the competitive leader.

Recent research supports this good news: A survey by the National Opinion Research Center at the University of Chicago found that option holders are more optimistic about their finances, and are more likely to vote, than their non-optioned counterparts. You can't ask for much better news.

So, that leaves only one question: Given this fundamental change for the better in the American economy, why now, of all times, is the federal government screwing around with stock option reporting?

Why is the Financial Accounting Standards Board, which reports to the SEC, picking this moment to force companies to adopt an option reporting model, based upon a shaky (at least for this purpose) statistical model, that almost everyone agrees will have a chilling effect upon the awarding of options in the future?

Most of all, why is the government, just as we are coming out of a recession, when our fragile economy runs in fear of the next terrorist strike, and when other nations are gearing up to take us on in the marketplace, picking now to impede the most liberating and important socio-economic trend of our time?

Commemorating a Silicon Valley Original

There's a movement afoot here in Silicon Valley to put Robert Noyce's face on a commemorative postage stamp. I can't think of anyone more deserving.

There is a tragedy in Noyce's life that goes beyond his untimely death at the comparatively young age of 62. It is that he is almost unknown to a generation of young people in high technology. They rarely hear his name, they know little about him, and they have no idea what he did.

That's a pity, because there is a lot they can learn from the life of Bob Noyce. And, speaking for the moment as an historian, it seems more and more to me — especially as the legacy of Hewlett and Packard begins to fade — that Noyce is the pre-eminent figure of the electronics age.

It was Noyce after all, who despite being Bill Shockley's golden boy, led the "Traitorous Eight" out of Shockley's miserably run company, and started Fairchild Semiconductor. And it was Noyce who led that singular young company through its Golden Age, setting the model for every high-tech start-up that followed.

More than anyone else, Noyce invented Silicon Valley.

Meanwhile, even as he was doing that, Noyce also managed to find the time to invent the integrated circuit. He shared that credit with Jack Kilby at Texas Instruments — Kilby got the Nobel Prize, but by then Noyce was already dead.

Having built Fairchild, populating it with some of the greatest young executives of the century, and somehow managing to control all of these immense egos, Noyce then walked out over stock options. As the above shows, he was 30 years ahead of his time.

Along with the greatest technical genius of the age, Gordon Moore, and a fiery first employee named Andy Grove, Noyce then founded Intel — arguably the most important company in America during the second half of the 20th century.

Noyce died suddenly of a heart attack in 1990, while busy directing the creation of Sematech, the first major joint venture between high tech and Washington. He was a role model to manager and engineer in the world of technology. He was a mentor to the generation of men who founded both the semiconductor and personal computer industries.

And, speaking as someone who both knew him and wrote his obituary, Bob Noyce was brilliant, tough, gracious, and a man of great integrity and sense of duty.

It is very possible — if there is any justice — that 500 years from now our descendants will know Noyce's name better than we do today. Noyce deserves a lot more from us. It may not be the Nobel for Physics, but a postage stamp would be a good start.

Google’s Goof-up

Finally, just what is Google thinking?

I've spent a lot of time at Google over the last year, talking with people and writing stories (like the recent Wired cover), and if there is one thing I know about those folks it is that, above all, they zealously defend and protect the integrity of the Google name.

And rightly so: the key to Google's incredible success is not its powerful search engine, but the trust engendered by the scrupulous objectivity of the engine — a purity that extends to its Spartan home page. When we Google, we don't have to worry that the answers we receive are biased towards some advertiser or interest. Other search companies tried that trick — and that is why they lie in the ash heap and "to Google" has become part of the language.

That helps explain the tremendous outpouring of support the company enjoyed earlier this month when it announced the creation of "GMail," a free e-mail service for anyone who wanted it.

Like most people, I though it was a brilliant stroke: in one fell swoop, Google had punched a hole in AOL, Yahoo! and Microsoft, tied millions of users even closer to the Google brand, and put its already stratospheric consumer goodwill ratings into outer space. CEO Eric Schmidt had been looking for ways to use Google's excess server bandwidth, and now he'd found a solution of pure genius.

Then came the bad news. It turns out that Google plans to also use its computers to search individual GMails for keywords … and then post related advertising nearby.

Consumer groups are already up in arms about the apparent invasion of privacy. Google claims that only computers will do the snooping, but the company should know as much as anybody about the power of image over reality in cyberspace. Few of us are any more comfortable knowing that Big Brother is a computer, rather than a person.

This revelation becomes all the more shocking precisely because it is Google. It smacks of a company that is leaving its start-up days behind and has yet to get its new bureaucracy under control. GMail snooping is what you get when you start listening to bankers.

All of this reminds me of the early days of eBay. That company also tried to impose clever new revenue schemes from the top down onto its customers — and only got a general revolt in the process. It took eBay five years to learn to listen to, and trust, its users. Let's hope Google learns this lesson quicker.

For more information on the conference: www.socialedge.org

Michael S. Malone, once called “the Boswell of Silicon Valley,” most recently was editor-at-large of Forbes ASAP magazine. His work as the nation’s first daily high-tech reporter at the San Jose Mercury-News sparked the writing of his critically acclaimed The Big Score: The Billion Dollar Story of Silicon Valley, which went on to become a public TV series. He has written several other highly praised business books and a novel about Silicon Valley, where he was raised.