Posts Tagged ‘MIT’

Part 7: Slouching Through the Great Depression

December 2, 2008



Chapter Five
“Slouching Through the Depression”
(1930—1940)

Read Part 1, Read Part 2, Read Part 3, Read Part 4, Read Part 5, Read Part 6

In 1938 and 1939, various groups of New England industrialists and financiers became obsessed with fixing the nation’s risk-less economy. One of the most prominent organizations was the New England Council, a group of politicians, businessmen, and educators, which formed in 1925 to “improve economic conditions for New England.”

Within this group, there was a growing awareness that New England’s universities and industrial research labs were a valuable asset distinguishing the region from the rest of the nation. The most impressive asset in the region was MIT.

Karl Compton
[MIT President Karl Compton]

In 1930, Karl Compton, then the head of the physics department of Princeton University, accepted an invitation to become the president of MIT. Under Compton, MIT redefined the relationship between science and society. When Compton took office during the Great Depression, science was attacked as a source of social ills.

Over the next twenty-four years, Compton worked tirelessly to strengthen basic scientific research at MIT and to promote the importance of science to a skeptical and hostile public. Compton advocated a broad education for scientists, one that responded to the needs of the time.

In 1934, Compton proposed an ambitious program he called “Put Science to Work.” The campaign called for the public financing of “scientific and engineering research looking toward better public works for the future.” Instead of blaming labor-saving technology for society’s ills, Compton proposed the bold idea that science gave birth to great new industries.

“New industries are like babies: they need shelter and nourishment, which they take in the form of patent protection, financing, and the chance of reasonable profits,” wrote Comptom in a long essay promoting his campaign. “But, before all, they need need to be born, and their parents are science and invention.”

The egalitarian ethos of the New Deal stymied Compton’s campaign to finance research at elite universities like MIT. So Compton turned his attention to the regional level. In 1939, responding to a suggestion by Compton, the New England Council formed a committee to examine how new products might help reverse the terminal decline of the region’s textile and garment industries.

The New Products Committee brought together eight of the most progressive minds in America, including Compton, Doriot, Ralph Flanders, a mechanical engineer who rose to become head of Vermont’s Jones & Lamson Machine Company, and Merrill Griswold, president of Massachusetts Investors Trust. Doriot was charged with heading up one of several subcommittees; his was called “Development Procedures and Venture Capital.”

Was this his new impossible mission?

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VC’s First Home Run: Digital Equipment Corp.

January 4, 2008

Before the blockbuster success of Google, Netscape and Apple, there was the first high-tech home run of Digital Equipment Corporation–a story that forms the heart of my book. Below I’ve posted two photos from the archives of Ken Olsen at Gordon College. I am the first person to gain access to these archives.

In 1957, ARD gave $70,000 to the two, young MIT engineers who co-founded Digital—Kenneth P. Olsen and Harlan Anderson—in exchange for 70% of the start-up’s equity. Olsen, who was Digital’s president and undisputed leader, wanted to build smaller, cheaper, and easier-to-use computers that would challenge the glass-encased mainframes of IBM, the dominant computer manufacturer and only one making money. In this sense, DEC was a pre-cursor to the user-friendly machines later pioneered by Apple.

Olsen at ARD
[Ken Olsen at the annual meeting of ARD, surrounded by promotional booths of the other ARD portfolio companies.]

It was a perfect match. In Olsen, Doriot found the archetypal engineer-cum-entrepreneur who was dedicated to making his company a success. “A creative man merely has ideas; a resourceful man makes them practical,” said Doriot. “I look for the resourceful man.” Olsen embodied that ideal. In Doriot, Olsen found a comforting father figure always ready to offer words of encouragement or some bit of wisdom. The fates of these two men would be forever intertwined.

When ARD liquidated its stake in Digital in 1972, the company was worth more than $400 million—yielding a return on their original investment of more than 70,000%! It was the young venture capital industry’s first home run, and it helped make the Route 128 area outside Boston a technological mecca

DEC Board
[The DEC board was stocked with ARD staffers: (left to right) Henry W. Hoagland VP, ARD; John Barnard Jr. general counsel, Massachusetts Investors Trust; Jay W. Forrester, professor, MIT and ARD advisor; William H. Congleton, VP, ARD; Harlan E. Anderson, VP, Co-founder DEC; Kenneth H. Olsen, President, Co-founder DEC; Ms. Dorothy E. Rowe treasurer, ARD; Vernon R. Alden president Ohio University; Arnaud de Vitry, European Enterprise Development; Wayne P. Brobeck, former ARD staffer who became director of consumer relations, Vitro Corp. of America]

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