How Bad Leadership Helped Launch Intel, the Silicon Valley and Venture Capital

We spend a lot of time here at MSL covering great leadership – servant leadership. In fairness to all the terrible leaders out there, we do have some reasons to be thankful for their horrible treatment of people. For example, did you know bad leadership is partially to credit for the creation of Intel and the Silicon Valley?

Most companies would not mind having the genius behind Intel in their own organization. Let’s assume you’re fortunate enough to have such talent in your own company – how do you keep from losing them? Here’s how not one or two, but three different companies lost such talented individuals as a result of bad leadership:

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John Bardeen, William Shockley and Walter Brattain at Bell Labs
William Shockley (seated) at Bell Labs

1. William Shockley Unhappy at Bell

William Shockley contributes to the development of the first transistor while at Bell Labs in 1947. However, Shockley becomes increasingly frustrated with Bell Labs management team who passes him over for executive promotions, due to his abrasive leadership style. Shockley leaves Bell Labs in 1953 to eventually start his own company in Mountain View California.

2. Shockley Semiconductor Consolidates Great People

At the Shockley Semiconductor Laboratory, Dr. Shockley recruits a brilliant team of young scientists and engineers. Their work focuses on innovative developments with silicon.

3. Shockley Fails at People Leadership

As work progresses and theories turn into reality, the team finds Shockley increasingly paranoid and difficult to work with. In one case, Shockley orders lie detector tests on the team. A year after Shockley wins the Nobel Prize in physics, a group eventually known as the “Traitorous Eight” leaves Shockley Semiconductor Laboratory.

4. Traitorous Eight Becomes the Founding Eight

The Traitorous Eight sees themselves as most valuable as a team. Therefore, rather than leave one-by-one, they send a letter seeking support to be hired as a group. Arthur Rock, the man first known to use the term “Venture Capital”, receives this letter. Ultimately, Rock finds support and funding for the Traitorous Eight from Fairchild Camera and Instrument. They create a new company: Fairchild Semiconductor. Fairchild Semiconductor is generally known to be the first Venture Capital-backed company.

5. Fairchild Semiconductor Establishes Silicon Valley

Fairchild Semiconductor is the first semiconductor company in what is known today as the Silicon Valley. Without Fairchild, there is likely no Silicon Valley today.

6. Fairchild Semiconductor Leadership Fails

Unlike popular trends of the time, Fairchild Semiconductor fails to offer employees investment options. This failure to recognize and reward employees leaves them disgruntled at the lack of recognition for contributions. All of the “Traitorous Eight” eventually leave, but two. When the Faichild board seeks a new CEO from outside the company, the remaining two members of the original eight also leave, feeling slighted for not being placed in the role.

7. Intel Corporation is Born

The last two members of the Traitorous Eight to leave Fairchild form Intel Corporation.

The man who started it all was brilliant, but a terrible people leader. William Shockley died at age 79. He was estranged from almost everyone he knew but his wife. Apparently his own children learned of his death through the media. Yet, were it not for the bad leadership of Shockley, Bell Labs and Fairchild Semiconductor, one wonders if we’d ever have had Intel, the semiconductor as we know it today or even the information technology revolution?

The lesson in all this: If you want to retain the sort of top talent that establishes foundations like Silicon Valley and Intel, Inc. or returns massive investments (look at Intel Stock since IPO), what do you do? You serve your employees. You practice servant leadership.

Question: How do you think the world would be different today if there had been better leadership at these organizations?[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]


Picture of Ben Lichtenwalner

Ben Lichtenwalner

Ben Lichtenwalner is the founder and principal of Modern Servant Leader and Radiant Forest, LLC. He has studied and promoted servant leadership awareness and adoption for over 20 years. He is the author of 2 leadership books and has 2 decades of corporate management and leadership experience. His corporate experience spans CIO, VP, Director, and many management roles at Fortune 500, INC 500, and Nonprofits. Ben’s education includes a B.S. in Management Science & Information Systems from Penn State University and an MBA from Lehigh University. Ben's Full Profile Here: About Ben Lichtenwalner

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