The city of San Jose sprawls through California's Silicon Valley.
The city of San Jose sprawls through California's Silicon Valley. - 
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Silicon Valley was born out of crises.

“In Silicon Valley, a geo-political crises has always represented opportunity,” says Stephen Adams is a business historian at Salisbury University.

One of those crises was the launch of Sputnik in 1957 near the height of the Cold War. In a few decades, the satellite would have its moment as the ultimate spying machine. But to get there, the military needed microchips, which meant big business, and it put Silicon Valley on the map.

Since then, the Valley has found a consumer market, which has given rise to companies like Apple, Google and Facebook, says Steve Blank, a tech entrepreneur in the Valley.

It’s always been two Silicon Valleys,” Blank says. “Weapons systems suppliers and the commercial companies in Silicon Valley.”

But Blank says the relationship has become more complicated, especially on the business side, since 9/11. After the attacks, the CIA realized collecting data wasn’t enough. It needed to know how to connect the dots. So it poured millions into start-ups all over the Valley.   

One of the companies that has benefited is Palantir, which makes software that analyzes data, says Ashlee Vance, who wrote about the company for Bloomberg Businessweek magazine.

“Palantir solves the 9/11 problem,” Vance says. “It basically makes it possible to be able to search and correlate information across all these databases.” And, he says, it could be the technology being used to connect the dots on us or the data the National Security Agency is collecting from Google, Facebook, Apple and other tech giants.

For the long run of Silicon Valley, this is business wise a very, very dangerous development,” says Martin Kenney, a professor at UC Davis.

He says the reality, or even the perception that the Valley is helping the government spy on people is bad for big business. Kenney points to China, which has resisted doing significant business with U.S. telecom and tech companies overs suspicions that its being spied on.

The Snowden revelations actually show that the Chinese were right!” Kenney says.

And a recent study by the Cloud Security Alliance, an industry group, found nearly half the companies surveyed after the Snowden revelations -- said they were less likely to use an American data storage companies.

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