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Focus on a Career Engineer

chapter eleven
The California Years [1959-1964]

Varian Associates was started after World War II by two brothers, Russell and Sigurd Varian; Russell died shortly before I came, and Sigurd, semi-retired, died in an accident not long thereafter. The company was actually run by Dr. Ed Ginzton, who was Chairman and Chief Executive Officer. As Vice President, Research, I was asked to direct and build up a strong Central Research Laboratory, and also to oversee all other Varian research and development carried on at its half-dozen operating divisions. When I started in 1959, Varian had about $70 million in sales and I was told to plan a research facility for a $200 million company, which was anticipated for five years later. Varian was located on Stanford University property in Palo Alto, and the Varian brothers, Ginzton, and most other executives had very close connections with Stanford. The two largest divisions were the electron tube operation and the instrument division whose major product was nuclear magnetic resonance analytic spectrometers, Expansion was the rule, new buildings were under way, and I was told to design a separate new research building to house my own group and the main technical library. I attended the Board of Directors’ meetings and began to see first hand how U.S. industry was run, at the top.

Before I started at Varian, a General Electric executive, Henry Brundage, who had much experience in smaller companies as well, had told me it was relatively easy for aggressive management in a growing field to expand and increase sales up to somewhere around $100 million. At that point, he said, competition began to pay attention, problems of size arose, and the road to further growth became very difficult. His words were prophetic because, as the next few years passed, Varian never achieved its growth objectives, and it, boded ill (p. 56) for me because research is seldom a quick pay-back investment. There were other difficulties in store for me which I did not foresee. As an outsider, brought in as a corporate officer, I was resented by several managers who felt I had closed an opportunity which they might well have hoped for. This was particularly true at Varian where so many of the division and department managers were Ph.D.s whose research records may not have equaled mine, but whose qualifications were superficially equal. Finally, the Varian Board, and Ed Ginzton as well, saw the rapid growth of Litton Industries, IT&T, and many other conglomerates, and it appeared that growth by acquisition was faster and easier than growth from within. Before I arrived, Varian had already acquired Bomac, a Boston area company, and a New Jersey company, SFD. There wasn’t a year after I joined Varian that we weren’t heavily involved in studying one or another potential acquisition, some of which were consummated, others nearly so. My experience at RCA did not prepare me for any of this because, up to 1959, RCA was large, stable, accustomed to growth from within and able to wait for research to mature and, with the exception of Ewing, I had no enemies.

I didn’t see all of this in 1959 and started my new job with great enthusiasm. I was very careful to support the development budgets and programs of the operating division and to see that we, in Central Research, did not infringe on their territory. As I saw it, our job was to get into new fields, and the job of the divisions was to maintain leadership and to expand in the old fields. One new field I elected to exploit was application of electronics to education, and I employed a behavioral psychologist, Bob Mager, to head this work. He was an expert in programmed learning using individualized instruction and, by 1963, we had developed a teaching machine which was self-contained, but provided the learner with the feedback and branching of a computer. All this was (p. 57) ahead of the integrated circuit; the hand wiring of the thousands of transistors we needed for the logic didn’t promise to be low in cost. However, I could foresee that this would be solved but that the “software,” i.e., the proper application of the stored knowledge to the student, would require a large investment. I proposed to Varian that we limit our approach to industrial training so as to avoid conflict with the existing educational establishment. I was not able to persuade the corporation that the field was a proper one for Varian, even though Bob Mager contributed some valuable assistance to Varian’s own factory training and quality inspection programs. Mager saw this lack of support and left Varian, eventually to start his own consulting company in industrial training. He has been very successful in this, although he did it all with software and avoided any electronic manufacture. Today, 1982, one finds that the personal computer is providing the necessary hardware, and software to use it for teaching is gradually being developed. In retrospect, I see our Varian experience as an example of being too far ahead of our time for a small company. At RCA, I believe it could have been done under the leadership of someone like David Sarnoff, who was willing to invest for 10 or 20 years before seeing the returns.

Other research on which my group pioneered was a less radical departure from Varian’s interests. We had a solid-state activity, particularly aimed at microwave applications and new materials technology. After the first announcement of the laser, we were quick to start research on it and to demonstrate this remarkable device to our management. Central research also operated Varian’s computer activity and the main library, as services for all the technical groups in the operating divisions. (p. 58)

By early 1964, we had designed and nearly completed a new Central Research building, a great improvement over the original Varian building in which Central Research had been operating. However, Varian was by that time losing money; the only objective of our management was to cut cost. Our financial people helped me out by suggesting that we hold the new building just short of completion; there would then be no taxes or amortization charges for 1964, which would save me from the increased research costs that would have resulted if we moved in. I was also asked to cut my research costs by an additional 30%, which meant laying off research scientists. I considered such action as disastrous and couldn’t see how any outstanding Ph.D. in the future would accept a job with a company whose support was cyclical, while Bell Laboratories, GE, RCA, and others could offer stability as well as other inducements. I was very firm in my resistance to the cut, but the operating division managers did not support me. Some of the resentment remaining from my initial appointment became evident. By September, Ginzton and I had a friendly but unsolvable confrontation which led to my resignation. Because of my various commitments, he suggested that I stay on as a consultant for an extended period, but immediately wrote Elmer Engstrom, who was then President of RCA; Ewing had long since, departed and had been replaced by Dr. George H. Brown, a much more competent and suitable choice. On October 9, I received RCA’s formal offer to join Brown’s staff, which I accepted to be effective January 1, 1965.

To sum up my Varian experience, it was valuable to me in providing better understanding of business management and financial matters. Above all, I could now appreciate that the kind of advanced research in which I had the greatest competence could not be supported by small companies subject to cyclical ups and downs. I (p. 59) started with Varian when it was a $70 million dollar profitable company which fully expected a 20% per year growth. In fact, when I left in 1964, sales were still about the same as at the start, operations were running at a loss, and the stock, which was $35 per share when I started, was down to $12. Even so, I don’t have regrets over a very interesting time, in a very different environment. (p. 60)

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