Silicon Valley’s Gold Rush Roots

One of California’s most eloquent observers, Joan Didion, wrote about a great divide between the “Old” California families, the early settlers of the 19th century who endured the hardships of the frontier, and the “New” Californians, the migrants who arrived during and after World War II to populate aerospace and other blue-sky industries and who knew only good times. But Didion also noted that Old and New in fact were not so different: Both came to California to make a buck. That buck often came through technology.  

The sense of innovation embodied in modern technological marvels such as personal computers, supersonic aircraft, and genetic engineering can seem to sever Californians from their past. But while the enterprises of the 19th century may seem low-tech to 21st-century eyes, they were the high-tech industries of their day, what we would now call “knowledge economies” — that is, economic sectors based on communities of advanced science and engineering knowledge. 

These industries were more than just a prototype for Silicon Valley. They are the reason it exists at all. The extractive industries of Old California — mining, agriculture, oil — laid the intellectual, institutional, financial, and technological foundations for the industrial sectors of New California: aerospace, electronics, computing, and biotech. In short, New and Old are fundamentally connected.  

The popular image of the Gold Rush is the grizzled 49er, equipped with little more than a pick and a pan. This romantic picture — the individual entrepreneur venturing into a new frontier at substantial risk who, by dint of gumption, grit, and genius, strikes paydirt — resonates in California’s mythology today. This approach may have characterized the initial Gold Rush, but as the easy pickings disappeared, it quickly gave way to a modern, industrialized, technology-centered enterprise. The pan yielded to the rocker, followed by the long tom and soon the sluice, with each technique requiring more workers and more capital. 

In just a few years the process culminated in hydraulic mining: huge amounts of water shot through high-pressure nozzles called monitors, which washed away entire mountainsides to get at the gold. A big hydraulic monitor — with a cylindrical iron barrel 16 feet long and nine inches in diameter — resembled nothing as much as it did an artillery piece. It fired water at 125 miles per hour, allowing water jets to range hundreds of feet across canyons and hillsides. The force of the water could kill men 200 feet away. ¹

The engineering ambition of the hydraulic miners boggles the mind. They eventually built a system of dams that impounded eight billion cubic feet of water and a six thousand mile network of flumes and canals that crisscrossed the rugged flanks of the western Sierra, with grades precisely engineered to ensure steady water flow. A parallel approach was quartz mining, in which miners tunneled deep underground to get at the gold veins still embedded in the hard rock of the Mother Lode. The collected ore was crushed in elaborate stamp mills, essentially a series of massive drop hammers driven by steam engines or water wheels. The pulverized ore was then run through a series of amalgamating and settling pans, screens, and sluices. Massive steam engines meanwhile drove the pumps that drained the deep mines and the hoists to lift the ore. Quartz mines multiplied the number, size, and complexity of machines in the Gold Rush and gave mining sites the air of a factory — literally, owing to the smoke and fumes they emitted. 

Manufacturing all this machinery also required engineering expertise, which came from foundries in San Francisco. By the mid-1860s, San Francisco boasted a bustling Iron District near the waterfront in the area now known as South of Market. The Iron District had close to 50 foundries and machine shops, many of them working day and night, turning out almost $5 million of goods each year (~$100 million today). One of the biggest was Union Iron Works, located on the site now occupied by Salesforce Tower: tech industry coming full circle. Iron by this time was the largest industry in San Francisco by number of workers — it would soon have around 3,000 total — and by 1880 it was the largest industry in all of California, whether measured by dollars or by employment. ²

Gold mining, in short, was a knowledge economy before the term existed. The industry depended on — and encouraged the further development of — communities of expert knowledge. Before putting down the substantial capital required for a hydraulic or quartz mine, mining firms consulted geologists to ensure there were sufficient gold deposits underground to justify the investment. Mining engineers planned the elaborate water works or stamp mills, and skilled mechanical engineers populated the flourishing foundries in San Francisco. Chemistry also played a role: As medieval alchemists knew, mercury amalgamates with gold, and by late 1849, California miners were coating the floors of their sluices with mercury to help catch gold grains; heating the amalgam vaporized the mercury and left behind the gold. Over time, they refined the technique, using copper sheets precisely coated with a mercury film to more efficiently collect gold. Adding salt and copper sulfate helped to increase yields, nitric acid cleaned the copper sheets, and a chlorination process extracted gold that had been captured by metallic sulfides. ³

The knowledge economy drew on a growing network of experts connected through new institutions. In 1855 miners in Grass Valley began a discussion club to exchange the latest ideas, and the first mining journal in the American West, the California Mining Journal, began publication there the following year. ⁴ Another community emerged around the San Francisco iron works. In 1855 miners and engineers organized a “Mechanics’ Institute” to encourage the development and diffusion of technical skills. It grew to almost 700 members by 1860; by then it had a library of 4,000 volumes and had organized three industrial exhibitions. ⁵ In 1860 this budding community gained a journal, The Scientific Press, published weekly by the appropriately named Julius Silversmith “and edited by an association of scientific men.” ⁶  

By fall 1851, barely three years into the Gold Rush, a visiting Englishman reported that “the miners of California are a highly intelligent and determined race, possessed of a degree of mechanical genius that surprises me.” He continued, “The popular opinion respecting gold-miners, is that of a body of rough, vagabond, long-haired men, who work one day with a tin-pan and get drunk the next.” In fact, he wrote, the miners were “engineers, excavators, mechanics, and cunning inventors.” ⁷ A San Francisco newspaper around the same time lauded “the added science and skill which has been brought to bear upon the auriferous region … the miners are beginning to discover that they are engaged in a science and profession, and not in a mere adventure.” ⁸

Not everyone welcomed the experts. Then as now, scientists and experts were sometimes viewed with suspicion. One Berkeley professor recalled the “‘odium geologium,’ the prejudice which has existed in many mining camps against the geologist. In many cases the geologist is ridiculed rather than respected.” ⁹ After the mining industry helped drive the creation of the University of California, one letter to a gold-country newspaper declared, “We suppose we are to have a ‘regular green-goggled-mining mill’ at Berkeley. Well, we can only say, we have an overplus of mining experts now, and we want to stop this Berkeley mill before it turns out too many of the same dangerous kind.” But the resistance to expertise quickly abated as charlatans proliferated. As one prominent mining engineer put it, only expertise could offset “the sharpers and dishonest men” who misled investors, and thus “redeem the character of our young State from the charge of humbuggery.” ¹⁰  

The Gold Rush established a pattern that would recur in later high-tech enterprises in California. For starters, the high-tech mining economy led to the concentration of capital. As mines grew in scale and complexity, outside speculators, mostly in San Francisco, New York, and London, stepped in with the money — and stepped away with the profits. An observer in 1871 remarked, “Mining is no longer generally prosecuted by those having a will to work, but is conducted by the few having capital to invest.” ¹¹ Thus Karl Marx himself declared, “California is very important for me because nowhere else has the upheaval most shamelessly caused by capitalist centralization taken place with such speed.” ¹²

And much of the concentration of wealth was enabled by the beneficence of the federal government. The federal government tolerated (if not encouraged) the privatization of public resources by allowing mining on public lands with no leases or royalties. ¹³ It also supported the new knowledge economy through institutions. The federal Morrill Act of 1862 granted vast tracts of land (much of it appropriated from Indigenous peoples) to individual states to create universities. California got 150,000 acres, most of which it gradually sold off in ensuing decades to fund an endowment for the University of California created in 1868 — which would soon become an important source of mining engineers. The land grants amounted to a giant federal subsidy of higher education in California. In 1886 a third of UC’s operating expenses came from the land-grant endowment. ¹⁴  

The Gold Rush also introduced California’s tech industry to lawyers. In 1862 a visitor to San José, at the time “a neat and pleasant agricultural city, with … a brisk business activity,” commented, “One thing may impress us unfavorably here, viz.: the large number of members of the legal profession (thirty-seven, we believe) in so small a city.” ¹⁵ A visitor 150 years later might make the same observation, though with a bigger number. Like today’s Silicon Valley lawyers, many Gold Rush era lawyers specialized in property rights. In this case, that meant not intellectual but rather real property — namely, the long-running lawsuits over who owned underground deposits in the nearby mines that supplied most of the mercury to the gold country.   

Another Gold Rush theme: the role of immigrants bearing technical expertise. Prospectors flocked to California from around the world: Europe, Russia, India, Australia, Mexico, Chile, Peru. A visitor to San Francisco in February 1849 “found the place crowded with miners” and commented, “A more motley crowd, or one composed of such divers[sic] nationalities was, perhaps, never before collected in one place.” ¹⁶ Newly minted place names in the Sierra foothills reflected the mélange: Italian Gulch, Kanaka Bar, Spanish Diggings, Norwegian Mine, and Chinee Camp. 

The first wave of prospectors included several thousand Chileans and Mexicans, many of them gambusinos, professional miners who brought their techniques to California. Mexican miners settled especially in the southern part of the Mother Lode; thus a leading San Francisco newspaper in August 1850 judged, “American energy and assiduity, and Mexican skill and experience have together developed the riches of the Southern Placer.” ¹⁷ The federal mining commissioner in 1867 observed, “The first quartz miners in California were Mexicans, who knew how gold-bearing rocks were reduced in their native country.” ¹⁸ And it was Cornish miners who probably introduced the stamp mill to quartz mining. 

The Gold Rush reaped the fruits of diversity, but commingling often reinforced rather than diluted discrimination. In 1849 the State Assembly voted to ban “foreigners” — meaning especially Spanish-speaking immigrants — from working as miners. The bill did not become law, but the following year the legislature passed a Foreign Miners’ License Tax, which took aim at the same group. Not satisfied with official discrimination, miners in some towns incited race riots against Mexicans. 

As discrimination deterred Mexican immigrants, white miners quickly pivoted their hostility to the Chinese, whom they accused of undercutting the labor market. Mining firms were indeed happy to pay Chinese workers about a third the wage of white workers. The state similarly aimed the Foreign Miners Tax at Chinese miners, who by 1870 supplied somewhere between a quarter and a half of state tax revenue. They also built many of the ditches, dams, and flumes in the gold country, and much else. As one observer wrote at the time, “Let us now look at the kind of work the Chinese perform in California. A simple word describes it accurately: everything.” ¹⁹

Unbridled technological enthusiasm exacted deep costs on the environment. Hydraulic mining eroded thousands of tons of earth in a day. John Muir described the devastation in 1876: “The hills have been cut and scalped and every gorge and gulch and broad valley have been fairly torn to pieces and disemboweled.” Much of this earth washed downstream — an estimated 1.6 billion cubic yards of it, six times the amount of dirt dug for the Panama Canal. Dozens of feet of sediment accumulated in river basins, destroying half the salmon habitat in the state, and mud from the mines buried farms and killed crops in the Central Valley. In San Francisco, meanwhile, foundry furnaces and smelters spewed carbon monoxide, hydrocarbons, sulfur dioxide, methane, and lead into the air. ²⁰

The Gold Rush provided the blueprint for California knowledge economies: the wellspring of the Golden State’s economic bounty, driver of technological innovation, and magnet for immigrants bearing expertise. But it may also be California’s original sin: The concentration of wealth in finance capitalists, environmental despoliation in pursuit of profit, and racial discrimination would be visited upon subsequent generations. ²¹        

The Gold Rush not only set the pattern for later high-tech endeavors in California; it also begat a line of technology leading directly to Silicon Valley. The line ran through water, the quintessential California concern. It started with hydraulic mining, which turned water into a commodity — and spawned water companies who could capture and sell it. Hydraulic mining also taught California engineers how to build big water projects and how to control huge volumes of water at high pressures. A prime example was Hamilton Smith, the chief engineer of one of the biggest mines, North Bloomfield. Smith conducted extensive research on the flow of water: through ditches, pipes, orifices, and nozzles of various sizes, shapes, and materials at high pressure. (Among other things, determining the price of water turned on the crucial problem of measuring flow rate.) He published his results in what became a standard textbook, Hydraulics, that remains in print to this day. ²²  

As electricity for lighting and power emerged in the late 19th century, steam-driven generators were a poor option in California. The state had few coal deposits. Shipping coal cross-country from northeastern mines was prohibitive, and the Gold Rush had stripped the timber from much of the landscape. What California did have was lots of water in the Sierras. Hydraulic mining and water companies quickly realized they could turn their high-head water nozzles toward dynamos as well as hillsides, and they began generating hydroelectric power. In 1879 the Excelsior Water & Mining Co. began using a dynamo to power arc lamps at the mining site, thus doubling production by enabling work around the clock. Other mines soon followed suit, and by 1900 many had electric lights and several used hydropower to run their stamp mills, hoists, and pumps.

A new rush was underway, this one to turn water into electricity — and thence into money. A San Francisco newspaper in 1895 announced that “a new kind of ‘hustler’ has arisen… He is the promoter of new electrical enterprises, and especially just now the promoter of schemes for the long-distance transmission of electric power. The air of California, and the the whole Pacific Coast for that matter, has all at once become filled with talk about setting up water-wheels in lonely mountain places and making them give light and cheaply turn other wheels in towns miles away.” ²³

The problem was the miles-away part and the lonely mountain places. The water was in the Sierras, well more than a hundred miles from the homes and shops and factories in the cities that needed electricity. Transmission lines over such distances had to operate at very high voltage to reduce losses due to resistive heating. At such voltages, insulators broke down and power lines arced. In 1885 a local electrical engineer named E. J. Molera declared in a paper to the Technical Society of the Pacific Coast, “The most important problem now presented to electricians is the question of the transmission of power to great distances.” ²⁴  

California electricians solved the problem. In 1895 an 11,000-volt line ran 22 miles from Folsom in the Sierra foothills to Sacramento — a year earlier than the 20-mile, 11,000-volt line from Niagara Falls to Buffalo, which is often celebrated as the first long-distance transmission of hydropower. In 1901 Sierra hydropower from the Electra powerhouse on the Mokelumne River reached the Bay Area over a 142-mile line at 40,000 volts. Three years later in Southern California, Pacific Light and Power opened a line running 125 miles from the Kern River to Los Angeles, operating at 66,000 volts, followed in 1913 by the Big Creek power plant, which sent electricity at 150,000 volts over 243 miles to Los Angeles. By 1914 California had more long-distance, high-voltage transmission lines than anywhere in the world. ²⁵  

Local research universities helped realize these achievements. Berkeley, Stanford, and Throop (which would become Caltech) all began programs in electrical engineering in the early 1890s, each specializing in high-voltage transmission. Their faculty — led by Clarence Cory at Berkeley, the appropriately named Frederic A. C. Perrine and then Harris Ryan at Stanford, and Royal Sorensen at Throop — consulted regularly for power companies. Their laboratories undertook research on industry problems and tested insulators for utilities. ²⁶ By early in the 20th century, these electrical engineers had learned to merge science and engineering, theory and practice, and academia and industry. In the process, they turned the three schools into world centers for electrical engineering. Their graduates took jobs designing many of California’s power plants and transmission lines: The Electra project had several Stanford electrical engineering grads and two civil engineers from Berkeley. One of the Stanford men became chief of hydroelectric and transmission engineering for Pacific Gas and Electric, the main electrical utility in Northern California. Electrical utilities repaid the favor by supporting the universities, as PG&E did for Berkeley and Southern California Edison did for Caltech; the utility influence was evident on the university’s governing boards. ²⁷    

Like an arc jumping from high voltage to ground, California’s electrical engineers made the jump from macro to micro scales. Early radio systems used spark-gap transmitters, which produced a high voltage across a gap to generate a spark, which in turn produced radio waves. These systems were thus not far removed from the high-voltage research long underway at California universities. Federal Telegraph Company (FTC), which pioneered long-distance radio transmitters, was formed in Palo Alto in 1909 by a recent Stanford engineering graduate with financing from Stanford’s then-president, David Starr Jordan, and engineering professor C. D. Marx; it used the Stanford high-voltage lab for experiments and consulted with Stanford faculty, including Ryan. 

The line in electronics continued forward from FTC through Hewlett Packard, Litton, and Varian in the 1930s and 1940s to the postwar microelectronics of Shockley, Fairchild, Intel, and their successors. And the engineering programs at Berkeley, Stanford, and Caltech, developed to solve the hydropower transmission problem, continued to be crucial suppliers of research, faculty consultants, and skilled engineering graduates to Silicon Valley. ²⁸        

Many other places have since tried to replicate Silicon Valley, in the United States and abroad, from “Silicon Fen” (Great Britain) and “Silicon Wadi” (Israel) to “Silicon Taiga” (Russia), but it is not so simple as plopping down an industrial research park next to a university. ²⁹ Silicon Valley is embedded in a rich ecosystem. By the time the region acquired the “Silicon Valley” name in the early 1970s, California had, for over a hundred years, been developing the technologies, institutions, and infrastructures that enabled the electronics and computing industries to flourish. The history of this ecosystem shows that Silicon Valley — though it is often studied in isolation, reflecting a belief that it is unique — is just one in a long series of high-tech knowledge economies in California.  

So why California? How did this one state become the world leader in not one or two but a whole series of tech-centered industries, from mining and oil to aerospace, entertainment, biotech, and electronics and computing? One might say simply that California is big — but many other states or, for that matter, nation-states are big, and none has seen such high-tech concentration. One might also say it’s because California enjoyed an especially rich bounty of natural resources: gold, oil, timber, farmland, and fisheries, which set the state on the path of “resource capitalism.” ³⁰

But geography alone didn’t determine California’s future. California benefited also from immigrant communities with technical expertise, whether they were Cornish and Mexican miners in the Gold Rush or are Chinese and Indian programmers in Silicon Valley. A less tangible factor was a risk-tolerant culture, perhaps not surprising for a land populated by people who had traveled great distances in pursuit of uncertain prospects. As William Brewer, a scientist who ranged widely across the state as a member of the California Geological Survey, observed in early 1862, “No people can so stand calamity as this people. They are used to it. Everyone is familiar with the history of fortunes quickly made and as quickly lost.” ³¹  

Among many other factors, high-tech in California benefited from federal tolerance of the privatization of public resources, whether it was gold under public land for the mining industry or military R&D for electronics and computing. It derived also from federal and state support of institutions that merged theory and practice, science and engineering, and academia and industry, especially research universities such as Berkeley, Stanford, and Caltech. The Californian image of the lone entrepreneur, unfettered by government interference and untethered from communities of expertise — whether it’s a hardy 49er with pick and pan or young men with electronics in garages — is a myth.