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This article by Barbara Fox was prepared for the September 7, 2005
issue of U.S. 1 Newspaper. All rights reserved.
Einstein Alley breakfast meetings are generally rah rah affairs that start with the speaker congratulating the attendees on locating their businesses in this technology-rich area and end with pleas for (or promises of) more government funding.
But not the most recent meeting, on September 28 at the Sarnoff Center, when Ed Zschau spoke to those assembled by the Greater Princeton Chamber of Commerce and Synnestvedt Lechner & Woodbridge. Zschau, a former Republican Congressman in the Silicon Valley, now teaches high tech entrepreneurism at Princeton University and has his own skunk works where he incubates small companies.
Having lived and worked for 30 years in Silicon Valley, Zschau has less-than-reverent views about the technology corridor now being called Einstein Alley.
First off, unlike nearly every other supporter of Einstein Alley, Zschau is not a big fan of branding. He pointed out, with some asperity, that Silicon Valley’s reputation had preceded its name. "Silicon Valley was happening as it was named. It was not named in hopes of it happening."
Zschau has a singular view about what fueled Silicon Valley’s growth. He suggests it grew "prairie fire" style for more than a century and acquired its name only in the 1970s. It could as well have been named Disk Drive Valley or received a label that represented its other industries – biotech, the Internet, (Google, Yahoo, E-bay), and networking (Cisco). "When the story of Silicon Valley is told," said Zschau, "it’s not about companies and it’s not about technology. It’s about people – entrepreneurs, innovators, and dreamers."
Zschau (whose name rhymes with "how" but starts with the "sh" sound) was raised in Omaha, Nebraska, majored in physics and the philosophy of science at Princeton University, Class of 1961, and earned an MBA and PhD in business administration at Stanford. In 1968 he founded a computer products company in Silicon Valley.
Working against an oppressive tax code that placed a prohibitive 50 percent capital-gains tax on investment earnings, he helped draft the Investment Incentive Act of 1978 which reduced capital-gains to 28 percent, paving the way for billions of venture capital investment dollars for high-tech firms. It also paved the way for him to go to Washington in 1982 as a representative from California’s 12th District, the heart of Silicon Valley.
Zschau was re-elected two years later but narrowly lost a Senate bid in 1986 to incumbent Alan Cranston. In succeeding jobs he was a venture capitalist, a CEO of a hardware company, and general manager of IBM’s storage-systems division before going to teach at Harvard Business School. Now he teaches a senior-level high tech entrepreneurship at Princeton University.
Zschau made four points:
1. Silicon Valley resulted from a unique confluence of events and individuals that cannot be replicated and cannot be sustained.
When the Stanfords wanted to build a memorial to their son, and were turned down by Harvard, they built Stanford University on their property. William Shockley, a Nobel prize winner who co-invented the transistor, left Bell Labs and moved to Palo Alto to start his new company because his mother lived there. Other contributing factors were the cold war defense contracts that funded technology research and what Zschau describes as "the wild west culture" of California, where anything is considered possible.
Such confluences have happened before, he pointed out, in Vienna (in the age of Mozart, Beethoven, Haydn, and Brahms) and Milan, (in the time of Verdi and Puccini). Similarly, Silicon Valley will have its heyday but will eventually lose its dominant position, Zschau believes.
2. Success is based on people. "It’s not about slogans, buildings, incubators, programs, or money. Especially not about the money. Hewlett and Packard didn’t live in McMansions," said Zschau. "Hewlett Packard and Apple Computers started in garages."
Zschau’s favorite anecdote on the importance of finding the right people is to tell how Shockley combed the country for the best and the brightest young scientists and brought them to Palo Alto. Then some of these scientists, aggravated by Shockley’s management style, spun out a company that became Fairchild Semiconductors, and from that came Intel.
Similarly, Zschau looks for bright young people to start companies. He has one tenth of the seniors at Princeton University, 60 each semester, in his entrepreneurship class. A favored few get to stay on in Zschau’s incubator at the Forrestal Campus to hatch their firms. Among the most successful is Princeton Power Systems, headed by Darren Hammell, which develops electric power conversion technology. "I am trying to make things happen by building the key resource – people," says Zschau.
3. Zschau opposes too much government regulation and too many government programs. "The proper role of government is to make life better. Targeted programs are not as effective as creating a place where the best people want to work, live, and raise their children, where the environment stimulates the growth of new enterprise."
Nevertheless, New Jersey must offer incentives. "I would take the George Steinbrenner approach. I would identify the best and the brightest and find ways to attract them to my area," says Zschau, who recently watched a New Jersey company being lured to Texas.
4. "New Jersey was the technological leader in so many fields. It can regain that leadership, but it has to overcome some man-made disadvantages."
Zschau startled the Einstein Alley audience by proclaiming the first disadvantage, that New Jersey is too close to Wall Street. "Wall Street is not about creating value but about reallocating value. It is about the money. The difference between Wall Street and California is night and day."
New Jersey is also currently at a disadvantage when it comes to its politics, he believes, "but that can be changed."
"What really excites me," said Zschau, "is what the Einstein Alley, the Chamber, the New Jersey Technology Council, and others have done to stimulate technology and build real growth."
"I believe that life is about making a lasting difference in the world, about leaving footprints."
"I don’t start companies to make money (as my wife can tell you). I start companies to make a difference."
"Life is also about dreams. I believe in the power of a dream. A dream can lift you above the ordinary. A dream can inspire you to achieve your full potential."
Zschau ended by quoting the Rodgers & Hammerstein song, "’If you don’t have a dream, how you gonna’ make a dream come true.’ Dream and do. It can happen to you." – Barbara Fox
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