How Stanford Helped Build the American Economy

On this day in economic and business history...

Stanford University welcomed its first 555 students to their first classes on Oct. 1, 1891. Next to Harvard, no American institution of higher learning has had the same outsized impact on the nation's culture and commerce. Its name and reputation are intimately connected to Silicon Valley. You might say that Stanford is Silicon Valley, considering how linked the university is to the region's high-tech leaders.

Hewlett-Packard (NYSE: HPQ  ) was the first real connection between Stanford and Silicon Valley. In fact, HP was the first "tech" company in what would later become known as Silicon Valley; it was founded in Palo Alto by two Stanford alums in 1939. Bill Hewlett and Dave Packard's garage is considered the unofficial birthplace of Silicon Valley and has long been a prototype for later "garage-founded" tech start-ups. In fact, Cisco (NASDAQ: CSCO  ) was also a garage-founded Silicon Valley start-up with Stanford-associated founders: Sandy Lerner and Len Bosack had been part of the university's computer support staff when they developed the first commercial router.

Since HP sells 48 million PCs, more than 52 million printers, and one out of every three servers used each year, you're almost certain to have used or benefited from an HP product in the last few days -- and if you haven't accessed the Internet through HP's servers recently, you probably did so through Cisco's. The networking kingpin entered the server market and was fourth in global sales four years later, but its real strength remains in routing and switching: Its market share in both categories remains above 60%. 

Nike (NYSE: NKE  ) founder Phil Knight is also a graduate of the Stanford Graduate School of Business. His great breakthrough, bringing technological innovation (and a whole lot of marketing savvy) to athletic wear, is emblematic of Stanford's culture of high-tech entrepreneurship. The global athletic-wear market, virtually nonexistent as a distinct category before Nike's founding, is now expected to reach $180 billion in worldwide sales by 2018.

These three current and former components of the Dow Jones Industrial Average (DJINDICES: ^DJI  ) represent the most concentrated collegiate pedigree in the index -- no other two components founded in the past 100 years can claim that their founders attended the same university.

Stanford University professors Charles Eesley and William F. Miller estimated in 2012 that the total impact of Stanford University's entrepreneurial alumni is worth $2.7 trillion in annual worldwide revenue and has created roughly 5.4 million jobs. Since the approximate time of HP's creation, Stanford alumni and faculty have created 39,900 companies, and the fruits of their labor would be larger than the GDP of all but nine countries in the world. California alone is hugely indebted to Stanford, which has produced some 18,000 alumni-created companies that account for $1.3 trillion in annual worldwide revenue. No matter what you do with a computer today, you're all but certain to encounter the work of more than a few Stanford alumni.

Computers of the ancients
In October 1900, while sheltering from a storm on the Greek island of Antikythera, a team of sponge divers discovered a 2,000-year-old computer that had been lost beneath the sea. The wreck of a Roman ship with Athenian plunder and scattered bones was such an unexpected find that its discoverer was initially thought to have gone insane from being underwater too long -- until the captain of the expedition went down as well and returned with the bronze arm of a broken statue.

Over the following year, the divers and Greek authorities retrieved many artifacts of fantastic archaeological and artistic value, including the Antikythera mechanism, the world's oldest known mechanical computer. The Greek artifact, dated to the first century BC, was so complex and so advanced that the quality of its construction would not be approached until 14 centuries after it was lost. Stony Brook University mathematics professor Tony Phillips expressed the awe felt by those who were lucky enough to examine the mechanism in detail:

It is hard to exaggerate the singularity of this device, or its importance in forcing a complete reevaluation of what had been believed about technology in the ancient world. For this box contained some 32 gears, assembled into a mechanism that accurately reproduced the motion of the sun and the moon against the background of fixed stars, with a differential giving their relative position and hence the phases of the moon. It is enough to know that there is no trace of anything like it until around 1000 A.D., and that when it was first published there were serious suggestions that it had been dropped into the wreck at a much later date or even that it was the work of alien astronauts.

The mechanism, which is barely larger in area than a sheet of paper, is now kept at the National Archaeological Museum in Athens. Its existence raises a number of interesting questions. When did humans really begin to use computing machines? How and why was this knowledge lost? And, perhaps more importantly, how can we ensure that it is not lost again to future generations?

To the stars
The National Aeronautics and Space Administration, or NASA, began operations on Oct. 1, 1958, a year after Russia shocked the world with the first beeps beamed to Earth from outer space. Its accomplishments speak for themselves: 11 years after NASA's founding, men set foot on the Moon, which is a shockingly short time frame for such an ambitious effort. NASA has yet to surpass this ambition, but it's far too early to count the organization -- or the world -- out of the race for deep space. After all, if the timeline of human history, all 5 million years of it, were compressed down into the space of a century, NASA's existence would only begin on that century's next-to-last day.

The tablet time forgot
Who built the first "tablet"? Apple loyalists will claim that the Newton MessagePad, launched in 1993, was the first. That argument holds some water, as the Newton was one of the most publicized and most popular of this small subset of portable computers, and its innovations -- flawed though they were -- set the stage for the eventual rise of the iPhone and iPad. However, it was not the first tablet, but merely the first well-known example. The GRiDPad, considered the first true tablet computer, hit the market on Oct. 1, 1989.

The GRidPad, built by Samsung and marketed by GRiD Systems parent company Tandy (the former corporate identity of RadioShack prior to a 2000 name change, and also the creator of the most successful first-generation PC), resembled a flattened laptop as much as it did the sleek tablets that came later. The 4.5-pound machine ran MS-DOS and accepted user input via an electronic stylus on a 10-inch monochrome screen.

The system, which required purchase of an additional memory card to function properly, cost $2,795 in total, equivalent to about $5,300 today. About 10,000 GRiDPads were sold in 1990, its first full year on the market. The U.S. Army was prone notable early customer. Annual sales peaked in the $30 million range during the product's relatively brief life span. GRiDPad designer Jeff Hawkins left the company in 1992 to form Palm, which helped pioneer the personal data assistant, a forerunner to modern smartphones. A year later, Apple's Newton hit the market, changing the conversation over tablet computing -- but not in a good way.

Investing in Stanford's Legacy
The tech world might have been built by Stanford graduates, but no one can say for sure whether their companies will control its future. One of the five largest tech stocks is Stanford-founded, but it has a ferocious battle on its hands in the mobile space as all contenders throw their weight into next-generation systems. To find out which of these giants is set to rule the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!


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