The Mafia Companies
How Pioneering Companies Spawn Generations of Innovation
In early 1955, William Shockley, the co-inventor of the transistor at Bell Labs and later a Nobel Prize winner in Physics, established a company with Shockley Diodes and Semiconductors. Following his fame, the company welcomed some intelligent people, growing to 32 employees by September 1956, comprised of many Ph. D.s and physicists.
However, Shockley was a terrible person to work with due to his intense paranoia about his employees breaking confidentiality or betraying him altogether (which later proved to be a self-fulfilling prophecy). He recorded all phone calls and limited staff conversations outside his supervision, circled research to Bell Labs, and demanded that his employees undergo a lie detector test.
Subsequently, a few employees surreptitiously organized a coup and later ultimatumed the investor Arnold Beckman to evict Shockley. Beckman rejected upfront. Although Beckman had placed a manager before Shockley later on, the eight renegades defected in September 1957 and formed the company Fairchild Semiconductor under the investment of Sherman Fairchild.
These eight, later known as the Traitorous Eight, built an impressive portfolio. Continuing the momentum, Fairchild Semiconductor became the first well-documented Mafia Company.
Intel— Gordon Moore (T8), Robert Noyce (T8)
AMD— Jerry Sanders
Sequoia Capital— Don Valentine
Fairchild— Jean Hoerni (T8), Julius Blank (T8), Sheldon Roberts (T8), Victor Grinich (T8)
developed the planar process for transistor manufacturing
Amelco— Jay Last (T8)
developed the first commercially available LED
Kleiner Perkins— Eugene Kleiner (T8)
early investor in Amazon, EA, Square, Google, Nest, Snap, Twitter
A more recent example occurred in the late 1990s. A group of entrepreneurs and tech enthusiasts created an online payment system, initially named Confinity, later known as PayPal. As the company grew, it attracted diverse individuals, including Elon Musk, who joined the team in 2000 after Confinity merged with his online banking company, X.com. The company's user-friendly platform gained traction among online auction users and small businesses. As PayPal's popularity soared, it caught the attention of tech giant eBay, which acquired the company for $1.5 billion in 2002. Following the acquisition, many of PayPal's key figures, now known as the PayPal Mafia, went on to establish or play crucial roles in some of the most influential companies in the tech industry.
Tesla— Elon Musk
SpaceX— Elon Musk
LinkedIn— Reid Hoffman
YouTube— Chad Hurley, Steve Chen, Jawed Karim
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