Tag: Xerox PARC

Archie McCardell: Worst CEO Ever

Image result for archie mccardell
Archie McCardell

Archie McCardell is the worst CEO in history.

Sure, there are CEO’s who committed crimes, CEO’s who bankrupt their businesses, and CEO’s who looted their businesses. There are crooks, those who hire cronies, people who paid bribes, plenty who demanded sex or servitude, and countless sociopaths.

In fairness to him, Archie did none of these things. Which makes winning his place as the worst CEO of all time all the more remarkable.

Background

McCardell is a University of Michigan MBA who started his career at Ford focused on finance. At Ford, Archie trained under Robert McNamara, the future US Secretary of Defense. McNamara is a key person who fabricated the Gulf of Tonkin invasion by North Vietnam to justify a massive escalation in the Vietnam War. Eventually, by the time the US effectively surrendered on March 29, 1973, 57,939 Americans and about a quarter-million South Vietnamese died in the conflict. Vietnam remained communist for about a decade then eventually transformed to capitalism, proving the entire war pointless in hindsight. McNamara trained his prodigy, McCardell, well.

Xerox

After Ford, Archie started at Xerox in 1966. They promoted him to president in 1971. For three years, Xerox continued to announce record profits, just as they had for the prior two decades. Xerox had two research centers, one in New York and the then-new Xerox Palo Alto Research Center, Xerox PARC, in California. Significantly, McCardell pushed the Rochester center for profits but largely ignored the quirkier California group. Later, Archie’s executives were ready to cancel a New York-based project led by Gary Starkweather to image a copier drum by lasers, the laser printer. However, Starkweather negotiated a last-minute relocation to Palo Alto and saved his project.

Other interesting projects happening in Palo Alto, a center set up before McCardell’s time, included computer work building on Douglas Engelbart’s work at the Stanford Research Institute (SRI). Engelbart demonstrated video teleconferencing, intuitive interactive interfaces for computers, editable lists on computers, windows, dynamic file linking, and a new input device, the mouse. Subsequently, Xerox PARC hired many of Engelbart’s researchers and supplemented them with others led by the legendary Robert Taylor.

Archie Blows the Future

During McCardell’s reign, Xerox PARC created the modern computer interface, building on and perfecting windows, the mouse, icons, visual files, and intuitive interactive computing. Eventually, they created the idea of the personal computer, internally called the “Dynabook.” Object-oriented programming, the building block of all modern computer systems, came from Xerox PARC. Ethernet networking, which is how virtually all computers connect (WiFi is wireless Ethernet) is from there and so are spline fonts and What You See is What You Get on-screen displays and printing. And, of course, Starkweather perfected his laser printer that also came from PARC.

McCardell purposefully threw it all away. The Xerox Alto, developed at Xerox PARC, was the first modern personal computer. The Alto is the Mac before the Mac. “At Xerox, McCardell and [Ford alum head of engineering Jim] O’Neill created a numbers culture where decisions were put through the NPV test. Not surprisingly, the Alto failed,” reads an analysis.

After he left Xerox, they’d eventually commercialize an enterprise laser printer but the executive team he put in place – and the toxic environment Archie left behind – ignored the most valuable technology since the invention of the internal combustion engine and the car.

Simultaneously, while ignoring all the PARC technology, McCardell also ceded Xerox’s core copier business to the Japanese.

Blowing the third industrial revolution should be enough to secure McCardell’s position as the worst CEO ever. However, most historical records barely mention Archie’s disastrous Reign of Error at Xerox. He was just getting started.

International Harvester

In 1977, Archie took over as CEO of International Harvester. At this time, International Harvester was the third most valuable American business. McCardell’s starting salary was $460,000, making him one of the highest-paid CEO’s in the world. He also accepted a $1.5 million signing bonus and a $1.8 million loan at 8 percent (an interest rate which, at that time, was considered low).

Quoting the Washington Post: “The company had been directed primarily by family members since its founding by American inventor Cyrus McCormick in 1831, but the board decided it was getting stodgy and turned to a high-powered executive from the outside.” Management consulting firm Booz Allen Hamilton advanced the perception an outsider was needed and recruited McCardell.

Archie cut spending by $640 million and invested $879 million, over three years, into modernization. The latter figure seems impressive except it was essentially just copying International Harvester’s competitors.

Eventually, in the fall of 1979, Archie tired of trying to grow the business or cut costs traditionally and opted for a different approach. He purposefully picked a fight with the United Auto Workers, the trade union virtually all plant workers belonged to. McCardell insisted on pay cuts and increasing the use of non-union labor.

An American Icon, Destroyed

Archie singlehandedly caused a 172-day strike that began November 1, 1979, the longest-ever strike at International Harvester.

By the time the strike ended, International Harvester lost $479.4 million then lost an additional $397.3 million in the next fiscal year directly due to fallout. In the end, the union conceded virtually nothing. International Harvester’s suppliers were devasted; the strike bankrupted Chicago’s Wisconsin Steel.

Besides the losses, International Harvester’s inability to deliver caused a loss of customer confidence. Sales slid by almost half. The business took on debt to keep the company afloat, eventually reaching a staggering $4.5 billion of early 1980s high-interest debt.

McCardell restructured the debt to $4.15 billion, cut $200 million, and demanded union concessions. At the same time, Archie paid out $6 million in executive bonuses. Seeing the dismal condition of the firm, the union agreed to $200 million in wage and benefit cuts.

The union agreed to contract concessions on May 2, 1982. Archie was fired the next day.

The firm’s stock, trading in the mid $40s when McCardell was hired, traded at $2 by the time he left. International Harvester was forced to sell off many business units, including the venerable farm machinery division. Eventually, 6,400 jobs were lost. What remained was renamed Navistar.

Epilogue

“I don’t think we made any one major mistake,” McCardell said in a 1986 UPI interview. “I feel very good about my years at Harvester.” Later, he adds, “I think I was underpaid.” In a different interview with the New York Times he said: “I think I rate myself superb.”

Pundits aren’t as enthusiastic. One speculated he might have been carrying out “an industrial sabotage operation.”

Archie didn’t do much after International Harvester. There was a land development project he labeled “a disaster.” He launched a turnaround business but refused to name his clients noting that knowledge of his involvement could “add to their problems.”

McCardell did have one insight that resonates: “I don’t know many CEOs who didn’t reach their positions without some good luck along the way. I had incredibly good luck as a young man. I also had ability, but luck plays a very important part,” he told UPI.

Archie McCardell died July 10, 2008, as the US was heading into the worst financial crisis since the Great Depression.

Image result for archie mccardell
Archie McCardell

Archie McCardell Award

We realized Archie’s management talents aren’t unique. Granted, nobody is likely to replicate his success decimating two businesses in entirely separate industries. Archie’s ability to destroy was positively Romanesque in scope, unlikely to be repeated anytime soon.

However, their failure to fail, and to flame-out spectacularly, won’t be for lack of ambition. In this spirit, we’ve decided to create an award, the Archie McCardell Award, for absolutely horrendous management.

We originally put Archie Award winners here but decided they needed their own category. To view the Archie Award Winners, click here.

Easy Credit

Background

Cyrus McCormick’s mechanical reaper revolutionalized agriculture. McCormick’s reaper enabled one man to harvest the same amount of grain in one day as he could in two weeks by hand. Since grain goes bad when not timely harvested, the reaper enabled farmers to plant far larger crops with commensurate profits. Additionally, the reaper lowered the price of grain, enabling the booming US population to cost-effectively eat.

His company, McCormick & Odgen (the major of Chicago), grew at a fast pace. Eventually, McCormick bought out Odgen and the McCormick Reaper Company thrived.

However, McCormick faced one major problem; his patent was expiring. In 1848, McCormick entered into an epic showdown with Obed Hussey, who invented and patented a similar reaper before his. After heated litigation, the judge did a Solomon and declared both patents invalid. Countless reaper manufacturers started selling low-cost knockoffs.

In response, McCormick marketed heavily. One of his biggest challenges was a chicken-and-egg problem. Farmers using reapers will realize increased revenue and profit. But, with their smaller farms and crops, reapers were not affordable.

Easy Credit

In response, McCormick came up with a seldom-used strategic move: easy credit. Knowing that the reaper will increase revenue and profit, McCormick extended credit to virtually anybody who wanted a reaper. Since McCormick’s business was already profitable he could afford to do this. However, the myriad of me-too knockoff reaper companies did not have the capital to compete.

McCormick’s strategy was wildly successful. His business, later renamed International Harvester, went on to dominate the field for 150 years. Interestingly, in 1984, International Harvester sold the farming division after suffering enormous losses due to a months-long strike. The CEO responsible for the strike, Archie McCardell, is the same CEO who ignored the Xerox PARC inventions during his time as CEO of Xerox. The Board of Directors fired him the day after the strike finally settled. McCardell was also at the helm of Xerox when Japanese competitors took the bulk of the copier market.

Computer Assisted Design (Sketchpad)

“The cinema camera doesn’t make movies; it allows movies to be made. It’s the creative people who make it real to people.”

Ivan Sutherland

Computer Assisted Design (CAD) uses mathematics to do the geometry and calculations necessary to draw and design. CAD is faster and more accurate than hand drawing.

Sutherland’s “sketchpad” software, part of his doctoral thesis, was the first CAD program. Literally, decades ahead of its time, Sketchpad enabled a user to tell a computer how to draw, place, and move geometric shapes.

Explanation of Sketchpad

As a professor at various University’s Sutherland became a “Johnny Appleseed” of modern computer science. Eventually, he influenced and trained countless computer scientists who went on to make groundbreaking innovations.

A small number of notable Sutherland students include:

  • Alan Kay, inventor of object-oriented programming and the single-person modern computer (Xerox PARC).
  • Jim Clark (Silicon Graphics, Netscape).
  • John Warnock, inventor of PostScript, PDF, and co-inventor of spline fonts (Xerox PARC, Adobe).
  • Edwin Catmull, texture mapping and computer-animation pioneer (Pixar).
  • Bob Sproull, virtual reality.
  • Gordon Romney, 3D rendering.
  • Frank Crow, antialiasing.

No computer or business historian would argue that Sutherland is not one of, if not the most important, seminal scientists responsible for the modern computer.      

Eventually, in 1964, Sutherland stepped away from academia and replaced J.C.R. Licklider as head of DARPA, during the time that DARPA invented the internet.

Demonstration of Sketchpad

Wi-Fi

In 1941, Hollywood actress Hedy Lamarr devised a system and submitted a patent for radio signals that changed frequencies.

Background

Hedwig Eva Maria Kiesler (Heidi Lamar) was born in Vienna. She is most famous as the first woman to appear nude in a mainstream film. In the same movie, she was also the first woman to fake an orgasm. If that wasn’t enough, she wrote the patent for her spread spectrum technology with orchestra director George Antheil.

In an age where Tesla was still alive and Edison only recently died nobody took the Hollywood bombshell and her band director seriously. Nevertheless, their invention eventually proved as important as anything the Wizard of Menlo Park, Edison, or The Man Who Invented the 20th Century, Tesla, ever released.

Eventually, in 1985, the US Federal Communications Commission opened bandwidth for unlicensed use. Wireless phones followed as a common use case. Subsequently, bathroom was never the same.

More significantly, in 1991, NCR invented a wireless data standard named WaveLAN for use in retail. WaveLAN extended Ethernet, the wired standard invented by Robert Metcalfe at Xerox PARC, over radio waves.

Wireless Ethernet, Wi-Fi

Eventually, the Institute of Electrical and Electronics Engineers (IEEE) — the standards committee for everything electronic – realized the need to beam data over radio waves, not wires.

Vic Hayes, chair of the IEEE, worked on the 802.11 standard released in 1997. Specifically, 802.11 is the wireless extension of wired Ethernet, invented by Metcalfe.

In 1997, a consortium of equipment makers created the Wi-Fi alliance and branded wireless ethernet (802.11), as Wi-Fi, trademarking the name.

Today, Wi-Fi is everywhere from individual homes to businesses. Walk into a coffee shop in Manhattan and they’ll offer Wi-Fi. Similarly, walk into a coffee shop in Hanoi and they’re also likely to offer Wi-Fi. Consumers expect water to be sold but there is a worldwide expectation for free wireless internet access.

Streaming Video

Early streaming video was more science experiment than entertainment. Video over the internet wouldn’t become common for almost 20 more years after the first stream.

Background

However, computer companies, thinking about the early Internet, were interested in using it for television. These early transmissions required expensive and complicated computers and extremely expensive Internet connections to receive the video.

Severe Tire Damage, a group of aspiring musicians from Xerox PARC, is the first video ever streamed over the internet. They served as the “surprise opening act” for The Rolling Stones, who broadcast a 20-minute concert over a system called “Multicast Backbone” or “M-Bone” in July 1993.

“In the Friday broadcast, the image filled only a fraction of the screen, about 1 1/2 by 1 1/2 inches, and the picture quality was poor. Though videos move at 24 frames a second, these images moved at only 1 to 10 frames a second, resulting in what looked like a high-speed slide show.”

Rolling Stones Live on Internet: Both a Big Deal and a Little Deal. The New York Times. Nov. 22, 1994.

The New York Times noted they couldn’t find anybody in Manhattan who had enough bandwidth to watch the show and ended up in Jersey City, at the office which organized the broadcast.

In 1995, Microsoft was ramping up an entire on-demand video service to compete with cable television. However, after an epiphany by Bill Gates that the internet would supersede on-demand video, the entire division pivoted.

Eventually, RealNetworks became the first to broadcast a baseball game over the Internet in 1995.

Because streaming was seen as “on-demand TV” there were many proprietary streaming video solutions, none of which were widely adopted.

Oops, They Did It Again

Staying true to their mission of inventing great things then botching commercialization, streaming video inventor Xerox PARC made no money.

In many ways, the surprise performance of Severe Tire Damage, which uses the URL std.org, was an indicator of the direction of internet video. As of 2019, the Rolling Stones have 1.6 million subscribers on YouTube. YouTube also features a live Severe Tire Damage concert, with 413 views.

The Internet’s First & Arguably Worst Band
News report about the broadcast
(sans Severe Tire Damage)

Portable Computer

Portable computers are more convenient than stationary computers. They increase productivity for people who travel, allow office workers to bring work home, and enable telecommuting.

Background

Portable computers were developed at (where else), Xerox PARC. The Xerox NoteTaker, released in 1978, was the first portable computer. Staying true to Xerox tradition, only about ten were built and the project abandoned.

In April 2981, Adam Osborne, a frequent visitor to the Homebrew Computer Club released the first production portable computer, the Osborne I. The Homebrew Computer is where Wozniak and Jobs dreamt up the Apple. The Osborne was clunky but functional, with a 5-inch screen, 64Kb memory, two floppy disk drives, and a full-size keyboard. It weighed 10.7kg (23.5 pounds), cost $1,795 (about $5,000 in 2019), and used the then-popular CP/M operating system.

Despite far less power and memory than what today is a throwaway flip-phone, the Osborne sold well, moving 125,000 units in 1982.

Storm clouds were on the horizon when IBM released its first portable computer, the IBM-PC, on August 12, 1981.

Osborne announced plans to build a portable PC. The promised new computer decimated sales of the prior unit. Startup Compaq, founded by three former Texas Instrument executives, released the first IBM-PC compatible driving Osborne into bankruptcy.

Compaq

Founded in 1982, Compaq captured the market with the first IBM-compatible mass-market portable computer, released in 1983, the Compaq Plus Portable. It featured a nine-inch screen, 128Kb RAM, shock-proof disk drives, and the newly released MS-DOS operating system. The price was $4,995 (about $12,850 in 2019). Apparently, buyers of portable computers were not especially price sensitive.

Compaq thrived selling high-end PC’s until they started to struggle, in 1998. In response, they purchased Digital Equipment Corp. (DEC). That made no difference and the “high-end” computer maker continued to stumble in a market where PC’s were commoditized. In 2002, HP acquired Compaq for $25 billion in 2002, a merger often cited as one of the worst in history.

Alta Vista

While focused on machines and mergers, Compaq/DEC executives ignored an offer from two Stanford students to sell groundbreaking search technology to Compaq/DEC wholly-owned search engine Alta Vista for $1 million. Yahoo also turned the students down, forcing them to forge ahead and build their own business. In 2019 that business, Google, is worth approximately $830 billion.

Interpress & PostScript

Interpress and PostScript enabled display technology, initially printers and eventually screens, to display output exactly as it would look between media. Printouts and screens, no matter the size, would look exactly the same. The technology is another from Xerox PARC.

Background

Warnock left Evans & Sutherland, a computer graphics company founded by Ivan Sutherland, to join Xerox PARC. His was a page description language for laser printers. There was a prior page description language, “Press,” but it was inadequate.

At Xerox PARC, Warnock created Interpress to describe printed material.

Xerox executives repeatedly refused to meaningfully commit to commercializing the technology. Eventually, in 1982, Warnock and his boss Chuck Geschke, quit. They formed a new company, Adobe, to create a programming language for page descriptions, PostScript. They wrote the entire language from scratch.

Before PostScript, every printer had a proprietary means of communication. This made programming output especially difficult.

Jobs Adopts PostScript

Steve Jobs liked PostScript and invested $2.5 million for Adobe to finish the technology. He adopted it for use in Apple’s personal laser printer, the LaserWriter.

PostScript eventually caught on for printers and spawned a similar general-purpose page description language for screens. That technology is branded the Portable Document Format, or PDF, and remains widely in use today.

Eventually, Jobs used a modified version of PDF at Next Computer, the company he founded after Apple fired him. When Apple rehired him, Jobs incorporated screen PDF into the Macintosh. To this day, pieces and parts of PDF exist in both the Macintosh and iOS operating systems.

To gain wide adoption, Adobe eventually open-sourced PDF.

Today, Adobe does no substantive ongoing work on PostScript but remains a large company thanks to other innovations it fostered, especially software for graphic artists. Warnock eventually retired a multibillionaire but Xerox made no money from his work.

Graphic User Interface

Computers “must be learnable in private… Kindness should be an integral part.”

Alan Kay

The Graphic User Interface (GUI) consists of windows, folders, icons, mice, etc… It enables ordinary people to use computers. Xerox PARC’s GUI vastly simplified computer use and increased productivity by making computers easy and fun to use.

Like the internet itself, it’s difficult to attach a single date on the elements of the Graphical User Interface (GUI).

Background

Engelbart demonstrated many elements of the GUI at the Mother of All Demos. However, Engelbart believed computers should be large and shared. Looking towards the burgeoning mini-computer market, pioneered by Digital Equipment Corp. (DEC), several computer scientists disagreed. Significantly, they thought computers should be personalized, easy-to-use, and fun.

Xerox had one innovation lab, in Rochester near headquarters, focused on copy machines. However, they wanted something far away both figuratively and literally. A lab that could peer into the paper of the future. Subsequently, with a big budget and a sprawling mandate, the Xerox Palo Alto Research Center (Xerox PARC) was created in 1970.

Xerox PARC hired some of the top researchers at the forefront of their field. No sooner did Xerox fund and set-up their experimental lab than several Engelbart researchers, already interested in this field, joined.

Besides the Engelbart staffers, computer scientist Bob Taylor joined Xerox to flesh out the work. Previously, Taylor saw Engelbart’s demo and believed it to be the future of computing. Taylor was a colleague to computer visionary Ivan Sutherland. Another Sutherland student, Alan Kay, also a proponent of an easy-to-use personal computer, joined Xerox PARC.

The GUI is Born

Larry Tesler and Tim Mott wrote the first modern word processor, implementing Engelbart’s copy-and-paste but also adding fonts, what-you-see-is-what-you-get typing, and stateless interaction. The latter innovation markedly simplified typing. Significantly, users need not first tell the computer what you’re trying to do.

Borrowing from SRI’s and Engelbart, and building on Bravo (see above), Tesler wrote a modeless word processor, the Gypsy Word Processor. It implemented a more robust version of copy and paste/cut that looks like what we use today. Subsequently, Tesler left Xerox for Apple in 1980. Dan Ingalls created bit blit, the technology enabling on-screen graphics that has little changed to modern times. Likewise, he also invented pop-up menus. David Smith was an engineer at SRI with Douglas Engelbart. Eventually, at Xerox PARC, he invented user interface icons.

Eventually, Xerox rolled these innovations into the Alto personal computer but never entirely commercialized the Alto. In late 1979, Steve Jobs visited Xerox PARC and took the innovations, and several of the people, back to Apple. Subsequently, they commercialized the work first in the Lisa computer then, eventually, the Macintosh.

Undeniably, Xerox PARC is arguably responsible for more innovations in software than any other single firm in history. However, due to gross incompetence at the managerial level, Xerox made virtually no money.

Xerox Alto Advertisement, 1972
Larry Tesler explains Steve Jobs visit,
“Everything cool going on at Xerox PARC”

Electronic Paper

Electronic paper is an ultra-low-power display that requires electricity only to change. ePaper is useful for eBook readers, grocery store price tags, and other displays that need not rapidly change and cannot be plugged in.

Electronic paper is a lesser-known Xerox PARC invention. Helping cement their reputation as the Worst Managers of All Time, Xerox never realized any benefit.

ePaper does not require electricity to power the screen unless it is changing. Consequently, it is optimal for displaying information like written text or prices.

In 2002, aware of the other innovations they failed to commercialize, Xerox spun off ePaper to a wholly-owned subsidiary, Gyricon LLC. However, the business down in 2005 due to undercapitalization. Subsequently, Amazon launched the Kindle two years later, in 2007 with technology by Gyricon competitor E Ink. Xerox patents had presumably expired by then.

Ethernet Networking

Ethernet is a computer networking protocol. Before Ethernet, computers were connected using a hodgepodge of various systems, a digital Tower of Babel.

Background

Bob Metcalfe invented Ethernet at Xerox PARC. However, Xerox failed to commercialize the technology. Metcalfe left and worked on his own Digital (see minicomputers) and Intel to set Ethernet as a networking standard. Eventually, the industry adopted Ethernet as a standard labeling it IEEE 802.3.

Ethernet’s advantage is that it is radically simpler and cheaper than prior “better” methods.

Think of information flowing from one computer to another. Information is broken down into small pieces, called packets, then sent on their way. The receiving computer reassembles the packets. For example, this page is a series of packets. A server broke it into packets then your computer or phone reassembled it.

Other networking methods went to great lengths to avoid the packets from colliding. Ethernet simply allows them to occasionally collide, which means they disappear, then resends when that happens.

Think of Ethernet as an enormous highway with little traffic control where cars, carrying information, sometimes collide and destroy one another. When this happens, the sender simply generates and resents a new packet. This was vastly less complicated and less expensive than trying to avoid collisions.

Ethernet Thrives After Xerox PARC

After Xerox PARC, in 1979, Metcalfe founded 3Com and formulated Metcalfe’s law, that computer networks become exponentially more useful with more nodes.

Metcalfe lost 3Com in a boardroom fight though the company left him extremely wealthy. Xerox made little or no money from Ethernet, but Metcalfe’s 3Com grew into a Fortune 500 company making him extremely wealthy.

Today, Wifi remains a wireless version of Ethernet.