Present at the Creation

It began, as legend has it—and, in this case, the legend is true—in a one-car garage at 367 Addison Avenue in Palo Alto, California, in 1938. There, William Hewlett, who died this winter at the age of 87, and David Packard flipped a coin to see whose name would come first and started the company that started Silicon Valley. They did it with a limited budget—$538—and limitless imagination. Packard was 26 years old; Hewlett was 25.

Packard, tall and good-looking, and Hewlett, short and stumpy and dyslexic, had met when they were freshmen at Stanford University and tried out for the football team. Packard made it; Hewlett didn’t. They had become fast friends two years later, when they discovered a mutual love of hiking and a mutual admiration for an electrical engineering professor named Frederick Terman.

Terman, the son of the psychologist Lewis Terman, who invented the Stanford-Binet I.Q. test, saw great things ahead for Stanford, a young school in the almost Pioneer West, a continent away from the nation’s centers of technological innovation. He wrote of making the university “the national research center of electrical engineering,” and he set out to do it by what he later came to call “steeple building.” Just as a cathedral in earlier centuries represented the spiritual center for the commercial community around it, so the university would become the heart of a growing local engineering community.

After Hewlett and Packard graduated, Hewlett went to do graduate work at MIT, earning a masters degree, and Packard went to work for General Electric. Terman, realizing that they had been his best students, talked them into coming back to Stanford for their advanced degrees and then tried to talk them into starting an electronics company in the area. The two made the decision to do it while climbing a mountain in Colorado.

The garage was next to the rented house where Packard and his new wife were living; Hewlett, soon to be married, was staying in a shed in back. “In the beginning, we did anything to bring in a nickel,” Hewlett later remembered.

“We had a bowling-lane foul indicator. We had a thing that would make a urinal flush automatically as soon as a guy came in front of it. We had a shock machine to make people lose weight.”

But the best thing they had was an audio oscillator for measuring sound waves, which Hewlett had developed as a student of Terman. They named it the HP200B, to make it sound as if it were coming from an established company, and they got their first big break when Bud Hawkins, who was the chief sound engineer for Walt Disney, came around and bought eight of the oscillators for $71.50 apiece to use making the soundtrack for the movie Fantasia.

Hewlett and Packard baked their transformers in Mrs. Packard’s oven, and Terman could tell when they had orders because “if the car was in the garage there was no backlog. But if the car was parked in the driveway, business was good.” Disney’s order got them established, and when the war came, Packard ran the company while Hewlett served in the Signal Corps. Hewlett-Packard produced radio, sonar, and radar-related devices for the military and prospered. After that, a pattern was set: Packard was the manager; Hewlett, the engineering genius. The company grew and grew, and by the 1950s it was a leading national maker of scientific test and measurement equipment.

The farmland around Palo Alto was still known as the Santa Clara Valley, but HP was pioneering ways of doing things that would be essential to the place when it turned into Silicon Valley. It introduced employee medical benefits before virtually anyone else in America, in 1942, when a worker’s wife was stricken with cancer. The company offered profit sharing and flextime when they were all but unheard of, and its enlightened attitude toward the employees who composed its intellectual capital became known as “the HP Way.”

Moreover, the two lifelong friends at the top—who shared an Idaho ranch where they and their families vacationed together—ran the company by what they called “management by walking around,” tirelessly exploring the work being done by their engineers. This often led to what was called the “Hewlett effect.” As Pat Barrett, a longtime patent attorney for HP, described it, “He had an uncanny knack of being able to sit down with an engineer and ask three questions—and with those three questions find the weaknesses of the project at hand.”

The key virtue was openness. Hewlett even said, “You show competitors what you are doing; they will learn soon enough. Just don’t tell them what you are thinking.” He once went to visit a new facility and found a storeroom padlocked. As Jim Gibbons, a former summer intern at HP and later dean of the Stanford Engineering School, recalled it, “He went out immediately to the hardware store, bought a bolt cutter, came back, cut the chain and left a note: ‘Please do not lock this storeroom again.’”

Gibbons also remembered that while he was an intern, in 1954, he shared a lab bench with someone he never saw but who always left the equipment wet. At the end of the summer he learned that the person was none other than William Hewlett, coming in nights to research the combustibility of haystacks for a friend who was a farmer.

The devotion to openness and creativity above all else paid off. In 1968, the company introduced the first desktop scientific calculator, which some historians consider the first personal computer, after Hewlett insisted on a machine that would fit on his typing stand. Then he asked for and got a version that would fit in his shirt pocket—the first handheld scientific calculator. The company was on a roll. It introduced the LaserJet printer in 1984, and its sales doubled between then and 1990 and again by 1995.

Hewlett never stopped walking around. In 1967, he even bothered to take a phone call from a 12-year-old boy who wanted some parts to build a frequency counter. “Bill gave me the components, and he gave me a summer job at HP’s factory,” Steve Jobs recalled after Hewlett’s death. “What I learned that summer at Bill and Dave’s company was the blueprint we used for Apple.” Steve Wozniak, the other founder of Apple, worked at HP as an engineer, and it was after the company refused to build a prototype of his computer that Wozniak and Jobs teamed up on their own. Still, today HP sells more computers than Apple does.

Silicon Valley grew up around Stanford and HP. A turning point came in 1956, when William Shockley, co-inventor of the transistor, returned to Palo Alto, his childhood home, to start the first semiconductor company there. Two years later his best engineers, fed up with his abrasive management style, broke off to form Fairchild Semiconductor, and by the early 1970s former Fairchild employees had founded 41 other semiconductor companies. As for Hewlett, Michael Malone, a Silicon Valley historian and the editor of Forbes ASAP magazine, writes, “He’s still with us. In Silicon Valley, more than ever, if you want to see William Hewlett’s legacy, you need only look out the window.”

The company the two college friends founded for $538 had sales last year of $60 billion (including the receipts of its 2000 spinoff, Agilent Technologies). The two spent much of their final years- Packard died in 1996—engaged in philanthropy, having become billionaires many times over, but the last thing William Hewlett was interested in was any monument to himself. In 1989 the garage where they started it all was designated a California state landmark and given a bronze plaque reading “Birthplace of Silicon Valley.” Last year HP bought it and the house with it for $1.7 million. Hewlett’s reaction? A regretful “Now they can’t tear it down.”

The Hewlett Foundation is the nation’s eighteenth largest, and Hewlett and Packard together donated more than $300 million to Stanford University, but Hewlett refused to have any building there named after him. He and Packard did, however, eagerly memorialize the man who had dreamed up Silicon Valley and pointed them in that direction. In 1994, they contributed $77.4 million to give the university a whole new science and engineering campus, and then they spent another $25 million to endow a Frederick E. Terman Fellowship. It gives more than a dozen young scientists a year up to $300,000 over three years. The funds are, of course, unrestricted.