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protection in the world! You can come pretty
close to looking like that [he points to a picture of a
red 1964 Mustang hanging nearby] and not violate a design
patent. It's continued to look pretty much likethat to this
day. In terms of normal patents on physical, mechanical, electrical
inventions . . . there was nothing. We just produced
a car with different proportions -- it looked different
-- but it was just traditional, conventional design underneath
-- deliberately! -- because we didn't want to spend a lot
of time on the inside. We made it in 18 months, by the way,
and in that time you can't fool around much on the design
alternatives!
CastingTrade: And if somebody
knocked you off, a consumer would say " -- ? Why would I want
to buy knock-off of a Mustang? I want a real
Mustang!"
Frey: Right - there's brand
equity there. Big time. On two bases: At that time,
Ford had a service and distribution network nobody could take
on, and consumers were very conscious of that. And, you're
right, people can't be fooled.
You know, a long time ago an engineering school classmate
of mine, when he became an editor of Time magazine, showed
me the Time writer's manual -- the manual they put together
to teach young people coming into the business how to write
"Time-style." And the lead heading, across the top of the
first page, said, "Never overestimate what people know. Or
underestimate what they'll do once they do know
it." I have never forgotten that! A lot of people fail
to realize that. You can't fool the public for very
long.
CastingTrade: That's beautiful.
Frey: I think it's just
a wonderful way to remind you to keep your head on your shoulders
-- about a lot of things. There was an article in the
paper the other day about luxury goods knockoffs -- Louis
Vuitton, Rolex watches, and so forth. They say they're losing
billions of dollars. What struck me, though, if you took the
numbers and worked them backwards, is that 90% of, say, the
Rolexes -- are real Rolexes! Ten percent aren't, and
they look a lot alike, but you can't fool people. They say,
"I don't want a cheap watch, I want a Rolex -- for real."
And they know the difference.
CastingTrade:
Speaking of young engineering school classmates
going out into the wider world: You're in a unique position
because you see all of these young, smart people here at Northwestern.
Do they strike you as being similar to the kids you saw back
when you were going to school?
Frey: (He ponders.)
I would summarize the situation along these lines: there are
two major aspects. In terms of deterministic or even probablistic
education, they're probably far better educated than we ever
were. That's one side. The other side is: they're not very
world-smart!
CastingTrade: What do you
mean by that?
Frey: In my day -- I can
still remember it (vaguely!) -- the average engineering student
had hopped up his car. He had a Model A which he'd bought
for fifty bucks, shaved the heads, changed the rings on it,
etc. etc. . . . Or he built a radio. Or, in
my day, you'd go and see if you could find an old gasoline-powered
washing machine made by Maytag -- it had a one-cylinder engine;
they'd sit out on the porch -- and you'd go and see if you
could scrounge one and make a go-cart out of it. My brother
and I did.
Some of those students would have worked, by the way -- that's
an important issue. The most common form of work was bagging
groceries, or delivering papers. I'm not suggesting this is
rocket science, but they had experienced things.
And keep in mind, the young people I'm talking about had been
through the Depression and a war. Do you know Tom Brokaw's
book, The Golden Generation? Well, that's me. We were
a product of that. And of course we're talking about before
the war -- I served in the Army for four years.
That's not today. They've not experienced the Depression.
They've not experienced military service. Now: do I
want them to have to do that? No! But I do say
that we have to assume in teaching today -- and I'm thinking
as a professor now -- that people are coming in with less
practical background, and that has to be addressed in the
teaching function. It seems there isn't a day that goes by
that you don't have something that someone's modeled mathematically
in an OR class, on a computer, and you have to say, "Well
it doesn't work that way." And they say, "What?" and
you say, "Well, I've just never seen a factory work
that way." And the young professors, by the way, write these
marvelous mathematical treatises, they can get tenure, and
it all bears no necessary relationship to reality. Academia
needs such theorists, but as a whole the faculty is out of
balance -- It needs both theorists and practitioners.
CastingTrade: And what's
the solution?
Frey: Very simple: more
like me!
CastingTrade: ??
Frey: And that's not ego!
The reason they don't have more like me is they can't
get in.
CastingTrade: What do you
mean, "more like me"?
Frey: Experienced . . .
50 or older . . . still want to be active . . . been in business,
or whatever the appropriate profession is, medicine if it's
medical school; a practitioner . . . had some accomplishment,
got to a high enough position in it to have some perspective
. . . I'm not talking about a guy who's spent his life designing
door handles in Detroit . . . You see, you have a skewed age
group, particularly in engineering, and in business and in
medicine -- perhaps law, too. They start out in life as an
assistant professor, write their papers in their proper peer-reviewed
journals, get to the tenure hearing, get tenure, and go on
from there. But they've never had to deal with the practitioner's
side! It's not the same! I can well remember the hot
June day, when I was an assistant professor at Michigan --
it was 1950, I guess. I had handed out an exam and I was sitting
there, proctoring the class, and I thought to myself "Here,
I'm teaching engineering, and I've never practiced a day of
it in my damn life!" So I took the summer off, went to work
for a steel company in Beaver Falls, Pennsylvania, because
I felt I needed to get some practical experience. I guess
no professor today ever feels that way, because it's a self-reinforcing,
internal reward system. It's a separate world. Paid for by
tax dollars, or tuition dollars from parents, in the early
years, it eventually includes tenure -- which is unique to
academia.
CastingTrade:
Before you came here, or course, you had a career
at Ford and then ran Bell+Howell. What were some of the challenges
at B+H?
Frey: Well, when I arrived
there, I could see -- with the aid of some serendipitous prior
experience -- that the company was doomed! You see,
at Ford, I had put in a system -- a system to train salesmen
about new car introductions and mechanics -- using videotape
-- very early! -- instead of chemically developed film. So
I was familiar with the advantages. But when I got to Bell+Howell?
There was nothing going on! They were a camera company
-- still using Eastman Kodak's film . . .3M's overhead projectors
and acetates . . . .Well, as I told my friends, I stood looking
west out of my office window and I could see the Japanese
"video wave" coming at me -- a tsunami! (He laughs.)
So I went to Japan, together with a guy named Bob Pfannkuch.
The Japanese knew me: at one time I had bought their whole
production of reel-to-reel tape recorders, in the late '60s,
and we had gotten to know each other well. I even met Matsushita,
the old man; he was still alive then. We saw in their back
rooms what became the Beta, the VHS, all in laboratory level.
I remember we didn't sleep all the way back from Tokyo --
that's a long flight! -- thinking, "Holy ----! What are
we gonna do now??"
So we took two avenues. Since we were a precision electromechancial
shop anyway -- a very good one; we also made lasers and all
that stuff -- we'd go into the tape recorder business. That's
one. It failed big time! Secondly, at that time I was serving
on the board of 20th Century Fox -- since we had
such a long history in Hollywood, there was always a Bell+Howell
seat on the board, and in fact we had won an Oscar for our
efforts -- we realized, Bob and I, that in Japan, Matsushita
looked upon video as a time shift device, whereas we concluded
that it was more of a movie device -- of course, being
associated with 20th Century Fox. So we made two
sub-decisions. First of all, since I was a director, we got
four movies from Fox. We dubbed them and distributed them
through what was at that time a crude, undeveloped distribution
system. And then we had to choose between the two formats;
we didn't want both, because it would complicate manufacturing
and everything else. Matsushita had a two hour format and
Sony had a one-hour one. The one hour one was determined by
the length of TV shows, and the two hour one is because the
length of the average movie is 110 minutes or something like
that. So we got started. Sheer dumb luck! Dumb luck,
by the way, is a big piece of this! (We both laugh.)
One of the movies was called "The Towering Inferno." It was
a smash hit; we couldn't make it fast enough.
One reason it worked right off the bat was that the medical
profession had already taken it up, buying the tape players
for medical updates. Then the next thing that grew up was
-- porno! Porno built the video industry, for a long
time --
CastingTrade: It's building
the Internet!
Frey: -- as well as Polaroid,
for that matter. Well, we were a public company, we didn't
want to get involved with porno, so we did the movies,
and the first market was the doctors. They'd take the player
home -- they'd written it off as a business expense -- they
didn't want to play porno for their families, so they'd buy
a movie. So we sold the movies in their journals -- JAMA,
The Lancet, whatever -- for $79.95 or something, and we sold
them by direct mail!
So the next thing that happens -- I 'm telling you about
the video because that was sort of the core of the new company
-- was how we supplied them. We started out with some used
Ampex quad 4s for mastermaking, and that kind of stuff, in
a warehouse over at the corner of Howard-and-something. We
bought what are called "slaves" -- in other words, you buy
a player, put a signal into it from a master signal source,
put in a blank cassette, and it would record the copy. We
called it "master/slave." The machines were made for us by
Matsushita, to very tight tolerances, but otherwise it was
just like if you were copying a videocassette on any home
VCR.
We then moved out to Northbrook, into a research-park-like
setup out there, and we got a building, and more and more
slaves. Pfannkuch was with us, still running this division,
having a ball, his life's dreams fulfilled. One day he called
me up and said "I've got to see you about getting an air conditioning
unit. I need a big one, like about 500 tons --" I said,
"What're you talking about? I'm gonna come out and see you."
So I go out there and they've got row after row after row
of slaves, each producing, I don't know, 15 or 20 watts, so
they had to have the air conditioning to get the temperature
down, so the people could stand to work, changing these cassettes
every 110 minutes.
Well, it grew and it grew and it grew. But the way the industry
worked, it was on a highly seasonal basis! Fifty percent
of all the business we did was between October 15th
and November 15th for Christmas, another 15% was
in June (for some reason I never did understand!),
with the rest spread throughout the rest of the year. Very
peaky demands. Horrible factory utilitization. And
then the rental shops started to come in . . .
CastingTrade: What year
are we talking about now?
Frey: 1974. By 1977 we
had a movie called "E.T." --
CastingTrade: Sure!
Frey: Smash hit.
CastingTrade: Yeah!
Frey: I don't know whose
it was -- Disney or somebody -- but by this time we had lined
up enough of the majors to have an impact in Hollywood. Well,
Hollywood, being a distribution center, knew that inventory
cost money -- they got that far, anyway -- so they
wanted E.T., and they wanted it for Christmas. Two million
copies, and they wanted it between October 15th
and November 15th, and that's it! It might have
been less than four weeks, come to think of it. Well there's
no way in the world we could have done that with those slaves,
feeding them with college kids or high school kids. Well,
somehow we did it -- jobbed out parts of it to anybody who
could make a videotape -- and didn't make much money. So about
this time someone said, "You know, these guys from DuPont
keep calling us, and they've got a new form of videotape.
The funny thing is, it's chrome oxide based, not ferric oxide
based, and they think it's the greatest thing because you
can dub it better --
CastingTrade: Meaning you
could do it faster?
Frey: It was fast -- and
expensive --
CastingTrade: Well, you
said it was DuPont, so automatically . . .
Frey: (He laughs.)
Yes! So we went to Wilmington, and took a look at what they
were talking about, and the upshot was we made a joint contract,
50/50 -- they put in $10 million and so did we -- to develop
a high-speed recorder. It was something like 4 minutes per
dub. The tape would go through there at supersonic speeds.
CastingTrade: Really? You're
talking about to dub --
Frey: Yes!
CastingTrade: -- a whole
movie?
Frey: Yes! It was unbelievable.
In fact, the biggest problem with those machines was, at those
speeds, the mylar was like a knife. It would cut through
the guides, so we had to put diamonds in it . It
had diamond guides! So: we built a battery of those. (By
the way, we finally got a working machine at $60 million;
we put in our $10 million, and DuPont covered the rest, but
they said "a deal's a deal" . . ..) Well, it looked like Battleship
Row in our workshop in Northbrook! And it created a complete
change of dynamics in the industry. I remember the arguments
with Pfannkuch. He'd come in about once a quarter and complain
because I had told the finance department to write that capital
equipment off in the first year -- not from a tax point of
view, but from a book point of view. It kicked the hell out
of their bonuses at the division, but I said, "Look, you're
changing your technology so fast -- you're going to
end up with 90% of the thing unamortized -- and I'm not going
to take that hit!" Pfannkuch, if he were sitting here
today, would still complain about it, but he'd agree that
I'm right. We went through about nine generations of
equipment before we got done. High-speed recording of videocassettes
had never been done before. But it got to the point where
you could make a videocassette for a buck. To give you an
example, when we first sold the videocassettes to the doctors
through their journals, they retailed for $79.95 and I think
our first level manufacturing costs were something on the
order of thirty bucks. Today the cost is 90 cents. You invested
. . .
The other big start was the CD-ROM. The Bell+Howell company
dominated the market for CD-ROMs . . .
(NEXT WEEK: In the conclusion
of our interview with Don Frey, he tells about the crucial
role of the auto parts business in the commercialization of
the CD-ROM, recalls some big changes at the Ford foundry at
Rouge, and gives his perspective on where the auto business
is heading.)
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