Travels & Traditions: Connecting the Dots in America Part 1 - #1108

BURT WOLF: For over 30 years, I have been traveling around the world looking at the history and traditions of different cultures. I discovered what different societies eat and drink. I came to understand the central characteristics of various religions. I took part in hundreds of gatherings and celebrations. I even investigated the history of shopping.

But I never really looked at a nation’s economy. What made a country or a city wealthy or poor? What did people do to earn a living and how did that affect their society?

Having lived through a half-dozen recessions, I began wondering about business in the United States. I wanted to know, from an economic viewpoint, what made us stronger and what made us weaker.

I spent time with Steve Chen who invented YouTube, Daniel Pink who wrote two bestselling books on what America needs to do to stay competitive in the 21st Century. And Gideon Gartner who invented a new type of company that deals with information technology.

BURT WOLF (ON CAMERA): And I learned some interesting things. Since 1980 almost every new job created in the United States was created by a start-up company that was under 5 years old. 40 million new jobs and our old traditional corporations, including some that got bailed out with taxpayer money, they created almost nothing.

BURT WOLF: I came to realize that the real backbone of our economy, the people who created good-paying jobs were the creative entrepreneurs with great imagination, smart enthusiastic risk-takers. People who started businesses based on their innovative ideas and technology. People that most of us never head of. Albert Einstein once said that imagination was considerably more important than knowledge. And I think he was right.

One of the creative entrepreneurs I interviewed for this program was a man named Bob Howard. Bob Howard was an associate and shareholder in Wang Labs with An Wang, created the cable television business, and invented the dot matrix and laser printers. Along the way he partnered with Howard Hughes and Rupert Murdoch. Bob's inventions affect all of us and in many ways and the industries he started employ hundreds of thousands of people. He’ written a book about it, titled Connecting the Dots. He’s a perfect example of the kind of person that makes a significant contribution to the strength of America’s economy.

BOB HOWARD (ON CAMERA): Since about 1960, a couple of engineers with a bright idea were able to get some financing and develop a product that would created industries and create a lot of jobs. That lasted until about 1980 or there abouts. When this financing for those kind of ventures almost disappeared. It did disappear during that period from time to time when there were stock market crashes, but that quickly came back and the entrepreneur was about the get his idea, put something under his arm and get some financing, and be able to create a product or an industry.

BOB HOWARD: It created new jobs, new industries, and for the most part higher paying jobs. More skilled special jobs. Such as everything that’s involved in the computer industry. That started around 1960, and look at what has become in the meantime. 

BOB HOWARD (ON CAMERA): That was just the idea of a couple of guys that developed the microprocessor. And then other people expanded upon the use of it. A lot of people came in and developed software for those cheap computers. And as a result millions of jobs were created.

UNCLE RILEY AND THE BIRTH OF CABLE TV

BURT WOLF: In 1947, Bob Howard was hand making high quality television sets on his dining room table in Queens, New York and he gave one to his Uncle Riley who owned a motel in Virginia Beach.

Nice gesture. Only problem was the nearest television station was 110 miles away in Richmond and Virginia Beach couldn’t pick up the signal. So Howard and his pal Milt Shapp, who later became the Governor of Pennsylvania, drove to Uncle Riley’s motel to see what they could do.

Howard brought an antenna he made from the aluminum tubing of a beach chair and Shapp brought a bunch of amplifiers.

BOB HOWARD (ON CAMERA): We went down and right adjacent to the motel was a parking lot that had a light tower that was 30 feet high. And we decided we're gonna put the antenna and the amplifier up there, only I weighed 276 pounds, and couldn't climb up the pole. Milt was with me, and he was slim and trim and in good shape, so he climbed up and he installed the antenna and the amplifier and we ran down from there a coaxial cable for the signal and a zip cord, electrical supply from the motel up the pole, which was absolutely illegal. 

And lo and behold, and we knew the direction to aim the antenna, by way of a compass. And we tried it out, and the reception was near perfect. Which was amazing to us and everyone else. My Uncle Riley was delighted because it was a big attraction for his motel. But he had a friend who was the mayor of Virginia Beach. 

And he wanted a certain insulation of whatever he lived about two blocks away. So what we did was take the signal from the antenna, run it along the light poles and telephone poles on the street, just holding a wire on each pole, with electrical tape. And we gave him reception also. And that was the beginning of about, I think, six or more people that hooked onto that antenna in the vicinity of the motel. 

BURT TO CAMERA: Eventually Howard turned his technological innovations into a business and New York awarded him the first city wide cable franchise. However they insisted he only charge three dollars and fifty cents per subscriber, per month. Clearly things have changed.

Next, I talked to Daniel Pink who reinforced Bob Howard’s belief in the importance of the creative entrepreneur.

DANIEL PINK (ON CAMERA): Well it’s really the whole set of right brain abilities. And I think all of us are right brain people in some way. We lean one way or another but all of us have all these kinds of artistic empathic inventive qualities. It’s a part of what it is to be human. The thing that’s changed is that those kinds of abilities, abilities that have we’ve often over looked and undervalued in this country are now the ones that matter most in business. 

BURT WOLF: He also has some clear ideas on how to motivate creative people. 

DANIEL PINK (ON CAMERA): I think that the most important thing is not to offer that person a carrot or threaten them with a stick. We tend to think that those are the best motivators for everything. And those are actually pretty good motivators for simple routine rule based algorithmic kind of work, whether you’re turning the same screw the same way on an assembly line or whether you’re just adding up columns of figures over and over again. But for creative conceptual work those kinds of motivators, those if then motivators, there’s forty years of science that says they don’t work.

DANIEL PINK: Don’t do the carrot motivators for creative tasks. Instead offer people enormous amounts of autonomy. Management is just a technology. It’s a technology for organizing people into productive capacities. Well it’s a technology from the 1850’s. There are very very few technologies from the 1850’s that we still use today. And yet we keep using it. We are basically using an 1850’s technology to operate our businesses and think there is nothing wrong with that. 

DANIEL PINK (ON CAMERA): If you want people to do what you want them to do they way you want them to do it, it is your technology of choice. But if you want engagement, and that’s what we want if we want inventors. That’s what we want if we want entrepreneurs. That’s what we want if we want right brain thinkers. If you want engagement management is the wrong technology. The pathway to engagement is self direction.

DANIEL PINK: Self direction leads to engagement almost in explicatively as management leads to compliance. And if you want engagement then you’ve got to relinquish control. Give people autonomy over their time, when they come into work, how long they work, what days they work.

DANIEL PINK (ON CAMERA): You got to give them control at least partially over what they actually do. Very important is giving them some amount of autonomy and sovereignty over how they do it. Rather than you know breath down their necks or suggest there is only one way to do it, in the way there is often only one way to turn a screw on an assembly line. And also and this is important, some kind of autonomy over who they do it with. Because one of the things that makes work good or bad, exhilarating or deadening, is often the people that you do it with.

BURT WOLF: He also believes there is a screwed up motivational system that keeps getting our country in trouble.

DANIEL PINK: If you give people high stakes rewards for short term achievements some people are gonna take the low road there. And if you give people high stakes rewards and they are not at all accountable for the long term consequences or the broader consequences for the system, then people are just gonna get what they want and the whole system as we learned can come tumbling down.

DANIEL PINK (ON CAMERA): So there are many executives, corporate executives, CEOs, who if they are in charge of a company and the company does really well they make a huge amount of money. But if the company doesn’t do well they make a huge amount of money. Ok, so the executive compensation system is rigged. I mean it’s a heads I win tails you lose kind of situation for a lot of the top executives. Stock options. There’s nothing necessarily wrong with stock options. The problem is if they become so salient within a company that if that’s what people are focused on rather than on actually doing great work. Then I think what happens is you get a short term pop and a long term disaster. 

BURT WOLF: But creative entrepreneurs are usually not the problem.

DANIEL PINK: Entrepreneurs and inventors are very very much systems thinkers. 

DANIEL PINK (ON CAMERA): They understand that if you press a lever here or if you drop a seed there that the effects aren’t going to be merely where you did it, but the effects are going to cascade throughout the system.

THE VEGAS COMPUTER AND THE ELECTRONIC SLOT

BURT WOLF: Bob Howard had another story that illustrated the importance of creativity and self-direction.

In 1967, Bob was in Florida playing golf with a foursome that included Grant Sawyer, the ex-Governor of Nevada. Throughout the game Sawyer kept griping about all the money that was being skimmed in the casinos and how the government was being cheated out of its tax revenue and the government needed to find a way to stop it.

BOB HOWARD (ON CAMERA): And my answer was, "Well, what you need is a computer system, like they have in department stores that have thousands of items that they control. 

BOB HOWARD: And it would be a comparatively simple thing to do."

BURT WOLF: A few weeks later Sawyer asked Howard to come to Vegas and meet with the Gaming Commission.

BOB HOWARD: I had never been inside a casino in my life. So I decided to go a day earlier figuring that in a day I could learn to be an expert in casinos. And I wandered for twenty-four hours in and through the casinos. And the next morning I went to a place that made signs, or painted names on trucks. And I bought big pieces of manila paper and had them make a system outline, for my explanation at the meeting that afternoon at the Gaming Commission.

BOB HOWARD (ON CAMERA): I went to the meeting got up on the podium and had my big charts. It looked like a very professional presentation. And the Gaming Commission decided they'd like to try to go ahead, and they'd want to know how we'd do that. 

And I said, "It's very simple. I'd have to take about six months to learn all of the intricacies of cash flow and player habits and casino procedures to be able to properly do the software for the system. And have the absolute controls that they would require."

BOB HOWARD: That's more or less the beginning of the casino computer system, and a company called Centronics Data. 

BURT WOLF: And while Bob Howard was in Vegas he saw another opportunity.

BOB HOWARD: It became apparent to me that the mechanical slot machines that had been around for 100 years were still mechanical devices, and were very limited in the scope of substantial payouts, which they tried to accomplish. But it was near impossible with a mechanical machine.

HISTORY OF THE SLOTS

BURT WOLF: In 1895, Charles Fey, a San Francisco machinist built the first slot machine. It had three spinning wheels with images based on the suits in a deck of cards. Each wheel also had an illustration of the Liberty Bell. Three bells in a row produced the big payoff, fifty cents. He placed it in a local saloon as a test and it was an immediate success and he’d became the father or perhaps godfather of the slot machine business.

BURT WOLF (ON CAMERA): Today two-thirds of the income for a casino in the United States come from the slot machines.

BOB HOWARD: I felt that, if it were a computer-driven slot machine, an electronic slot machine, that they could have, ultimately, much more control than a mechanical machine, it could be random selection. But the amount of things that they choose from for the ultimate large win could be so far out, as far as the number that it would take to have a single winner, that the electronic slot machine would solve that payout problem.

And since then, virtually every slot machine in the world is electronic now. And they've expanded these payoffs to enormous numbers. And, reliability has gone up and cheatability has diminished.

BURT WOLF: The casino was also the place were Bob had the idea for a company called Centronics Data which developed the first dot matrix printer. 

BOB HOWARD (ON CAMERA): We found that we needed a printer to print the transactions and make multiple copies and do it very fast and very reliably. At that time in the mid 60’s the printers that were available were big line printers that were too expensive and took up too much room or teletypes that were inexpensive but very very unreliable. And that caused the development of the matrix printer, and with that we became a public company and gradually grew into what I believe is the largest printer company in the country at that time.

BURT WOLF: Bob Howard is a serial entrepreneur. He keeps developing new companies based on the challenges and opportunities that confront him. Another serial entrepreneur is Gideon Gartner who started in Operations Research

GIDEON GARTNER (ON CAMERA): Operations Research was using mathematics to solve business problems, or management problems, or military problems. It was used extensively in World War II. 

GIDEON GARTNER: For example, if there was an American jet going after a messerschmitt they were going at different angles. And you had your guns. You had machine guns. And you had to figure out, what am I aiming at? You actually often had to aim behind the messerschmitt depending on the relative speeds of the planes. So the science and the mathematics of developing equipment or even to train the pilots for how to use the equipment is an example of Operations Research.

BURT WOLF: Eventually Gideon went to work in the Commercial Analysis Department of IBM.

GIDEON GARTNER (ON CAMERA): Now, you should know that Commercial Analysis is actually a euphemism for Competitive Analysis. 

GIDEON GARTNER: It was a huge department, because IBM didn't like the fact that there was any competition out there in the market. 

BURT WOLF: The team was product-oriented and they analyzed in detail, every product that was announced by competition and that was out there in the marketplace.

THE WAR ROOM

BURT WOLF: Gideon told IBM they need a war room.

GIDEON GARTNER (ON CAMERA): What I was selling to IBM is that they should use their computer equipment and their display capabilities to create a new facility. within the ... start in the data processing division, for, Whenever they have meetings, would have to make their big decisions, they go there. And all the data that they need including, obviously, all the data from our department, and from the other departments, and it would all be visible. Instead of getting handouts and things, you'll see all the data.

BURT WOLF: IBM liked the idea but did nothing about it. Gideon, however, soon realized that other companies would like to have a system like this and it could be a business.

GIDEON GARTNER (ON CAMERA): Timing is everything in life. I then get a phone call, out of the blue, from somebody I never heard of, who is, one of the senior vice presidents of a brokerage firm called EF Hutton. 

BURT WOLF: Hutton made Gideon an offer to join them and he did.

GIDEON GARTNER (ON CAMERA): And now I have to learn how to be a security analyst, do something completely different. But, I know the computer industry. So and I'm taken around by a couple of the analysts when they visit companies, and when they visit clients, just to see how the interaction goes. And so I learn something about that process. And I eventually write my first report on Wall Street.

GIDEON GARTNER: Xerox, in those days, was one of the Nifty Fifty. 

GIDEON GARTNER (ON CAMERA): Like IBM. Which means that, there were 50 companies that every large institutional investor owned, and they bought and held. They never sold. Because, these were companies that had had a growth pattern that was predictable and continuous for decades. They were really real growth companies. And they were kind of monopolies in their industry. And IBM was that way in computers, and Xerox was that way in reprographics and copying machines.

I knew that Xerox had a price per copy pricing scheme, right? You paid for each copy in those days. Ten cents a copy or whatever it was, per page. Besides the cost of the paper. Whereas others need not do that. They could charge you by the month, or by time. That's the way IBM did it, right? 

IBM might announce, actually announce a copying machine. And go out against Xerox. It was weird. They would never do one copying machine. I'm sure they have a whole planned program, to go from one to two to bigger, and they're gonna be a force, and Xerox's multiple is up here. And, gee, in doing my research, the Japanese they're not a factor. Not considered a factor. But they're here already. Right? And, I was already very impressed with the Japanese from my experiences at IBM. And what they were doing.

GIDEON GARTNER: So, I wrote the first negative report on Xerox. 

GIDEON GARTNER (ON CAMERA): The salesmen would call every portfolio manager of every bank, insurance company, foundation in the country that was investing money. They said, "You gotta read this report." And, they said, "You oughta meet this guy." And they started to set up meetings for me all around the country, to meet with all these people face to face, to explain the story. 

I become well-known on Wall Street, instantaneously. With very little background. I started something new there that nobody else had ever done. 

BURT WOLF: One day he goes to a meeting in Monterey, California and a guy says to him, “Why don’t you do it yourself.”

GIDEON GARTNER (ON CAMERA): He introduced me to one of the senior partners at Eyer Morbic Pinkus.

GIDEON GARTNER: And that's the way Gartner got started.

BURT WOLF: Daniel Pink, Gideon Gartner, and Bob Howard. Three people with considerable knowledge of what it takes to strengthen our economy.

BURT WOLF (ON CAMERA): But that’s only half the chronicle. In part two of CONNECTING THE DOTS, I will continue traveling around the United States, learn more about Bob Howards story, interview Steve Chen who invented YouTube and discover more reasons we should be supporting creative entrepreneurs. For Travels & Traditions, I’m Burt Wolf