Dealers of Lightning (10 page)

"It was a
great phrase," one
PARC
engineer said later, "because
nobody knew exactly what it meant. So there were quite a few interest­ing things you could do and simply cite
that
as the justification."

In May
the shareholders, accepting on faith McColough's hazy vision
of the future, approved the acquisition
of SDS
for a final price of $918
million in stock. Xerox owned its
computer
company.
Now
it needed to
figure out what to do with it.

That
is where Jack Goldman stepped in. Six weeks after the annual
meeting he delivered to McColough a twenty-one-page proposal, com­plete with staffing charts and pro-forma budgets looking ahead five
years, for a dynamic new scientific facility.

The SDS purchase had given him a peg on which to hang the proposal.
On the surface the rationale for the so-called "Xerox Advanced Scientific
& Systems Laboratory" was to fortify the new subsidiary's weak research
capability. But from that foundation Goldman was intent on building a
much larger edifice. Cannily recognizing that Xerox yearned to be ranked
alongside such paragons of industrial muscle as
IBM
and AT&T, he
sketched out a corporate research center engaged in basic science inde­pendent of any existing product group, exactly like
IBM's
fabled York-
town Heights research center and AT&T's Bell Laboratories. About half
the staff would be devoted to advanced physics and materials research,
and the rest to the new sciences of systems and computing.

"He was talking about a first-class research facility," one Webster
staff executive of the time recalled later. "Something that would
become known worldwide by attracting top scientists doing fundamen­tal research, and maybe winning a Nobel Prize or two."

Goldman therefore associated the lab not only with the immediate
needs of SDS but more vaguely with "Xerox's long-range interests." The
staff would be assigned "to establish scientific pre-eminence in those dis­ciplines that appear relevant or likely to become relevant." Even if com­puter science demanded the lion's share of attention, Goldman warned
that Xerox must learn to expect the unexpected. "The use of computers
has developed at least as fast as anticipated, but not in the manner antic­ipated by most prognosticators." Overall, while encouraging his superiors
to believe the new lab sprang logically from Xerox's existing business
strategy, he subtly built a case for using basic research to identify new,
unanticipated opportunities. Goldman had often been reproached at Ford for lacking a refined
sense of business or commerce.
(He
never tired of telling the story of
how Henry Ford II, witnessing a demonstration of some remarkable
but impractical new technology, remarked:
"Not
much of your stuff
gets on a car, does it, Jack?") He would later face the same criticism at
Xerox. Yet his memo glimpsed where computing might lead the com­pany. Among other things, Goldman recognized—significantly ahead
of many others in the field
—
that software would soon outstrip hard­ware as the driving force of innovation. More important, he saw that it
would be the key to Xerox's ability to profit from the computer's ability
to drive a high-tech printer.

"Xerox should be the one to revolutionize certain printing functions
with a machine which is half xerographic printer and half computing
machine," he wrote, thus anticipating by more than ten years the prod­uct with which Xerox would most profitably commercialize the work of
PARC: the laser printer. He also accurately forecast burgeoning oppor­tunities in education and graphics long before the hardware existed to
run anything even faintly resembling a commercial system.

Yet it is also evident that Goldman did not fully appreciate the haz­ards of creating a laboratory almost entirely divorced from the needs of
Xerox's existing businesses. Who could have foreseen the abyss that
would alienate one tiny group of sequestered and privileged theoreti­cians from the thousands of ordinary engineers who faced relentless
deadlines to get product out the door? Or perhaps he was merely
being disingenuous when he wrote of a systems science laboratory that
would "develop rapport with the entire company."

Goldman proposed an ambitious growth plan for the corporate lab.
It would open with twenty-five to thirty researchers and a budget of
less than $1 million, but equal Webster's size within about four years
with a staff of 300 housed in a seven-million-dollar facility. The operat­ing budget, he forecast, would plateau at about $6 million a year in
1969 dollars. (The figure turned out to be short by a factor of five.)

As for the new lab's location, he recommended New Haven, which
offered Yale University's "intellectual night life" as a lure for prospec­tive recruits as well as proximity to the new corporate seat in Stamford.
"If the new research center is too isolated from Xerox environment
and Xerox thinking, the chances of relevant coupling to Xerox's needs
and practices will be severely diminished," he wrote prophetically. "On
the other hand, a site near corporate headquarters has very much to
offer in terms of coupling to the full range of future as well as present
business interests of Xerox."

The liberal and enterprising Peter McColough was thoroughly
enchanted by the notion of a corporate research hermitage. His enthu­siasm, however, was not unanimously shared in the top reaches of the
company. At the board meeting at which Goldman presented his plans
for the new lab, strident opposition arose from an unexpected source:
the new board members from SDS.

Max Palevsky balked violently at the idea of dissipating five or six mil­lion dollars a year on pie-in-the-sky research. He thought McColough
and Goldman were approaching a serious financial commitment like
dilettantes and that their motives were irrelevant to real corporate goals.
"The memory I carried away was the number of times IBM came up in
the discussions about the research center," he recalled later. "It was cor­porate conspicuous consumption. I never got the feeling that the people
at Xerox understood that something like this didn't pay unless you really
did basic research like IBM—treat it as a big undertaking that would
need years to give you any return." If Xerox was serious about computer
research, he groused, why not simply give the money to SDS? Then the
computer division would be able to develop a new version of its Sigma
series computer, which had been brought out to supplant the aging 930.

Goldman was disgusted. He replied that the best way to serve SDS
interests was to mount an independent, far-reaching effort in basic
research, not by financing incremental upgrades for an aging product.
"They were the people who could best profit from the research lab,
and they were completely disinterested," he said later.

In any event, McColough had the necessary authority to green-light
the new lab on his own. He had brought Goldman into the meeting as
a courtesy to the board, not as a bid for votes. As for the SDS faction,
"Peter didn't pay too much attention to their objections, bless his soul,"
Goldman recalled. "But as a matter of record he did not require nor
did he ask for board approval."

To Goldman he gave his blessing to establish Xerox's second full-
scale research laboratory on a site to be determined, with the under­standing that it was not to outshine in manpower or budget the proud
Webster research park outside Rochester. Goldman shrugged at this
solitary caveat. According to his master plan, the two labs would be
pointed in entirely different directions. Still, there was no question
with which one his heart lay. With seed money in his pocket, he set off
to build Xerox a shrine to a new science.

In
May
1969, about the time Xerox shareholders voted to
approve the purchase of
SDS,
the provost of Washington
University in St. Louis was reaching the end of
his rope.

The
academic year just ending had been the most trying of
George
E. Pake's
career. The 1960s were not easy on anyone in a college
administration, but Pake felt that unrest on his own normally placid
liberal arts campus had reached a high-water mark during the previous
semester. A
group of protesting students had occupied the chancellor's
office. Someone tossed a Molotov cocktail into the
ROTC Quonset
hut
and
burned it to the ground.
Pake
spent the year contending with all
sorts
of reactionary trustees and alumni who, he
recalled, "wondered
why we
didn't just fire the students and keep the faculty."
As
spring
drew
to a close, he said,
"I
was a case of battle fatigue."

In a
more peaceful era Pake would have seemed
the
ideal college
administrator. Narrow-shouldered and retiring, he possessed
a
clipped
and
slightly distracted manner of speaking that reinforced
his
donnish air.
But
this diffidence was deceptive. When the faculty got fractious he
could dig in his heels and hold his ground, especially when called upon to
uphold his standards of academic propriety. Fairness, he insisted, was the
key. No administrator of a large academic institution could possibly know
enough to mediate every issue purely on academic or scholastic grounds.
The trick in refereeing among powerful faculty with their overdeveloped
intellects and underdeveloped social graces was to remain unyieldingly
impartial. When all else fails, split eveiything down the middle.

This was a skill he had tried to hone in the years since he had come to
St. Louis from Stanford, where he had held a physics professorship.
Washington University had installed a dynamic new chancellor deter­mined to enhance its reputation as a first-class academic institution, and
Pake had accepted his call to join the crusade as a senior administrator. At
first the change fed his idealism. He imagined himself promoting the
social benefits of higher education in ways that would be closed to him if
he remained merely a teacher and laboratory researcher. But by the
spring of 1969, when he was next in line to succeed that chancellor, he
had also become profoundly disillusioned.

"I hadn't visualized myself as running a command post in a military oper­ation," he said. "I knew I did not want to be a candidate for chancellor, not
to lead that goldfish-bowl kind of life. My wife would have hated
it."

So that fall he returned to teaching. On Thanksgiving weekend, just
as he was finally re-acclimating to the milieu of classroom and chalk­board, he got a phone call from his old friend Jack Goldman.

"George," Goldman said, "I got a proposition for you."

Jack Goldman's relationship with George Pake dated back twenty-
five years to when they had worked together on wartime projects at
Westinghouse Research Laboratory, Goldman as a senior fellow and
Pake as a Westinghouse undergraduate scholar.

After the war Goldman remained in industry while Pake moved on to
Harvard for his doctorate. But they kept track of each other's careers
within the insular community of working physicists. Just as he was start­ing his search for a director for his new research center, Goldman heard
that Ford had offered his former job to Pake, and that Pake had turned it
down. Goldman guessed Pake's reasoning had something to do with Ford's
erratic commitment to basic research. "I figured I could make a better
case for Xerox than Ford could make
for
Ford," he recalled.
After a
speaking engagement in Chicago he
swung
down to St. Louis in
Xerox's
new Sabreliner corporate jet
(his favorite mode
of transportation).
"I
met
Pake at the airport, invited
him
aboard
the
company plane, gave him a
couple of drinks and proposed
that
he
join up."

In
truth, Goldman's pitch
was
more
focused
than this
breezy
descrip­
tion
suggests. From the airport the
two of
them repaired to a nearby
hotel, where Goldman spent
the
better
part of
a day spinning a seductive
vision of computer research conducted in
a
pristine setting with
Xerox's
copious cash. "We're talking
real
money, George," he said, showing him
the growth plan for a lab that would employ 300 professionals within four
years.

Pake hesitated, wondering
about
Xerox's resolve over the long haul.
"I
had a lot of friends at other industrial research establishments and the
usual thing they were worried
about was the
feast-or-famine effect," he
said later. "You know, in the
good business years
the company invests in
research, but in the bad years
they want to pull
out." That was
a
recipe for
wasting millions of dollars.
"Research is a
steady-state thing. You can't
just turn it on and off."

Goldman tried his best to
be reassuring. He
reminded Pake that in
1944 the Haloid Company had
offered Chester
Carlson research support
when no other corporation
would. Carlson
had scarcely anything to
demonstrate the potential of his invention other than a tiny scrap of
paper on which he had duplicated his
own
scrawled "10-22-38
Asto­
ria"—the date and place of his first successful xerographic copy. The
company that was now Xerox had
invested in
that improbable invention
for fifteen years before the first
Model 914
came off the production line
in 1959 and made its fortune. Long-range research? Was there an enter­
prise
anywhere in the land that
understood it
better than Xerox?

"Yes,
but it seems to me the corporation
has
got it backwards," Pake
replied. "If you're going into the computer business, you should have got
the researchers first to help you identify the right corporation to buy."

"Unfortunately," Goldman said, "it's too late for that."

Pake ended the meeting insisting how deeply he enjoyed the life of a
college professor in St. Louis, but he was beginning to crack. Before Jack Goldman reboarded his plane he extracted Pake's agreement to
visit Rochester and Stamford to meet Peter McColough and the chair­man, Joe Wilson. If anyone could charm his wavering quarry into join­ing the company, they could.

'When I went back I asked Peter McColough why he wanted to start a
new research center," Pake recalled later. "I said, 'You've got a research
center here that has developed xerography. To build a new one you'll
have to have a new research library and new research machine shop and
all the other things. Lot of fixed costs you have to duplicate. Wouldn't it
be easier to expand the laboratory in Rochester?'

"McColough turned to me—and I remember this conversation very
well, it's indelible in my memory. He said, 'George, I think these peo­ple here in Rochester have had a heady success with xerography. But
I'm not sure they're adaptable enough to take on new and different
technologies. If we're going to bring new technologies into Xerox it
would be better to do it in a whole new setting.'"

McColough's reply might have come directly from the Jack Goldman
playbook. Despite himself, Pake was utterly taken with McColough
and Wilson and deeply flattered by their apparent willingness to place
him in charge of a multimillion-dollar corporate asset after only one
interview, especially since he told them he would expect to be held to a
liberal standard of success.

"I said if you hire me you will get nothing of business value in five
years," he recalled. "But if you don't have something of value in ten
years, then you'll know you've hired the wrong guy."

Pake understood that managing a research center devoted to finding
a common ground between his first love, physics, and the intriguing
new field of digital computing was a once-in-a-lifetime opportunity. In
comparison, the charm of closing out one's teaching career in the Mid­west seemed meager indeed. Just after New Year's Day 1970, he tele­phoned Jack Goldman to accept the job.

The first order of business was to find a site.

Goldman's plan to locate the lab in New Haven had collapsed even
before Pake came aboard. Yale, as it turned out, was afflicted by a strain
of that old malady known as the town-gown syndrome more virulent than
Goldman had suspected. The university, it was true, was famous for the
snobbery of its faculty, but he was still shocked at its unfriendliness to
enterprises located outside the grimy stone campus walls. Faced with the
prospect of being shut off from the very resources for which he sought an
academic setting in the first place, Goldman decided to look elsewhere.