Caltech's Ronald and Maxine Linde Institute of Economic and Management Sciences was established in 2011 with the support of a multimillion-dollar gift from Caltech alumnus and vice chair of Caltech's Board of Trustees Ronald Linde (MS '62, Ph.D. '64) and his wife, Maxine. In creating this new hub for interdisciplinary research and education, the couple and Caltech aim to foster scientific activities and discussions that will deepen understanding of business and economic interactions, while also preparing students for future careers in economics, management, and entrepreneurship.
Linde, who earned Caltech's first doctorate in materials science, spent most of his professional career in business management and leadership. After holding several research and executive positions at Stanford Research Institute (now SRI International), including director of physical sciences and chief executive of SRI's Poulter Laboratories, he went on to found and head Envirodyne Industries. Maxine, a mathematician who worked as a scientific programmer at JPL in the early days of the U.S. space program, served as Envirodyne's general counsel and chief administrative officer.
After 20 years of leading Envirodyne Industries, which employed thousands of people and became a Fortune 500 international conglomerate whose products were being used in nearly every country of the world, the Lindes sold the company in 1989. Since then they have been involved in a variety of financial and philanthropic enterprises.
Recently, and more than four years after the Lindes helped create the Linde Institute, Caltech professor of economics and political science Erik Snowberg sat down with Linde to discuss insights and lessons from his career in business, and to reflect on Caltech's educational environment and the future role of the Linde Institute.
Snowberg: How did you get from doing a Ph.D. here at Caltech to building a career in business?
Linde: When I finished at Caltech, I didn't envision doing anything but research for most of the rest of my life. I joined Stanford Research Institute to do just that, but I started getting promoted to research management positions. First I was in charge of a small group in a department, and then before long I was leading a division. It happened much faster than I would have expected. They were roles that I thought might be decades out; and when I got there, I realized two things.
First, I really liked the leverage I could get on my efforts by directing and guiding the efforts and productivity of a lot of scientists. The end result was more than I could have accomplished doing just my own research full-time. I liked what that meant in terms of having a greater ultimate impact.
Second, I realized I wanted as much as possible to ensure that the discoveries we made would be implemented correctly and have some real impact on the world.
It was later, during a period of transition for SRI, that I was asked by a group that reported to me whether I would consider approaching SRI about spinning out the division that I headed. I hadn't thought about it before then. As I started to explore the idea, I realized that the spin-out would not make sense as a stand-alone company. However, starting a new company in a different field could potentially result in the opportunity to do something very interesting and fulfill the second realization that I just mentioned.
In making that move, I fell back on one of my great strengths at the time: my naïveté. I didn't know what it took to start a company, particularly without any in-house technology or people, but I had the notion that the field of environmental technology was rife with opportunities. Had I known more, I wouldn't have done what I did. But I didn't know more; so I did it.
Snowberg: Some of our alumni worry that Caltech teaches too much naïveté about the "real world." Now I can tell them that this might be an asset.
Linde: Don't be too quick to do that! To turn it into an asset requires a lot of good luck. It does help in some ways, however, not knowing enough to be constrained by indoctrination with too much "conventional wisdom."
Snowberg: Can you tell us a bit about what it was like to run Envirodyne? It seems as if you went from managing individual scientists to managing companies—buying companies, bringing them in, and then trying to make them more effective before spinning them out again.
Linde: Running a whole stand-alone company definitely was different from running an operation within SRI. In my naïveté, I didn't understand what it would take to be responsible for everything from building infrastructure, to hiring certain types of personnel, to financing, to thinking about the right mix of trying to buy other companies versus building internally, and all the other things that go into developing a sustainable entity.
When I first started the company, it was without much money. Maxine and I put in $1,800 to start. We struggled for the first few years. About three years after the company's founding, Maxine quit her job as a lawyer and joined Envirodyne as its general counsel to curtail external legal fees. She got no salary at that point, because the company couldn't afford to pay one.
As for the businesses we acquired, candidly, some of them were chosen because they were the only businesses we were able to acquire, rather than being ideal additions. You can make your strategic plan: "I want a business that does this and a business that does that." On the other hand, the reality is that you're trying to move forward and you have to be opportunistic, particularly if you are operating from a position of weakness. The businesses that we did acquire, though, all did have a somewhat sophisticated technology aspect to them—even in sausage casings. There's a lot of technology that goes into making cellulosic sausage casings!
Snowberg: I know that several faculty have told me that they have had the unexpected pleasure of sitting next to you on a Southwest Airlines flight.
Linde: The pleasure was mine! I fly in frequently for Caltech meetings. Some very productive conversations have come out of those serendipitous encounters. It's humbling to realize how many important developments in life have their roots in serendipitous occurrences.
Snowberg: It sounds like there are some recurring themes in the skill sets and tools that helped you transition from Caltech to business and finance. Can you tell us what you think was most important to you in making this progress?
Linde: Well, first of all, developing the courage to start with a blank slate, as opposed to tackling well-defined problems. Another is pragmatism, which I didn't actually get from my training at Caltech, but I had to learn on the job.
Some of the skills and attitudes that Caltech did provide a lot of training in were important: analytical thinking, the ability to work in an interdisciplinary environment, fearlessness in tackling new areas, the need for perseverance, and the ability to anticipate that there will be some failed efforts and to learn from them.
I should emphasize that Caltech really helped to hone my analytical thinking ability. Irrespective of where it's applied, just the process of honest analytical thinking, where you're not fooling yourself and you're not relying on wishful thinking. It's the discipline of the scientist. That has been a real plus.
Caltech also had a big role in giving me the courage to go into areas I knew nothing about. That's part of the excitement in science. I loved interdisciplinary things, I loved getting into things I knew nothing about and applying something I had learned over here to something over there. Actually, that was part of the philosophy when founding Envirodyne. I had no previous experience or specific background in environmental technology; but it was a highly fragmented field at that time and looked like it was going to be very exciting and of great importance to the world.
Snowberg: When you talk about pragmatism, what do you mean?
Linde: My Caltech education was steeped in the purity of science and theory, but functioning in the world at large can be quite another thing. I got some of that training at SRI; but, again, SRI was somewhat of a sheltered environment, operating largely on government contracts, with my role not exposing me to many of the aspects of a business environment. For example, I knew nothing about finance, about raising money, how you go about it, what you need to do. I was lacking an understanding in many of the things that are important for making an independent company viable, because my whole background had been focused on research within a preexisting infrastructure.
Let me give you a couple of other examples. In science you strive to be the first to make a new discovery. In business it sometimes is better to be second or third, and let someone else do the high-risk trail blazing. In science you want to achieve the best scientific or technical results that you can. In business, other factors, such as customer bias and marketing, can sometimes be more important than making the "best" product.
Another thing I didn't have was the ability to identify the right people I needed to hire for some of the different roles. When I needed to hire someone at SRI, I was looking at "How smart is this person? What does he know? Can he think on his feet? Is he imaginative?" If you're running a business, those all are good things, but they are far from sufficient for a lot of the roles.
Rather than looking to hire people on the basis of how smart and imaginative they were, it would have served me better, in many cases, to hire somebody who was not quite as smart, not quite as imaginative, but had a better mastery of the tools of his or her trade, or had been around the block a few times and had learned more from experience, or had the right networking contacts. Because I had the analytical training, a few experiences taught me that quickly. So pragmatism emerged from a combination of analytical thinking coupled with real experiences.
Snowberg: I'm curious about how you get from analytics to practicality because for many people who are analytically trained it isn't obvious for them to say, "I can be analytical when I'm looking at the realm of business or finance." That analysis might look too grubby and nasty compared to my problem set, or elegant experiment.
Linde: That's very tricky, and some of it may just depend on something akin to personality, in terms of what you feel comfortable with. Being analytical is very important, I think.
As I see it, the goal is to be analytical but also to recognize the practical bounds of analysis, in terms of how far it can get you and what the trade-offs are, because there are so many fuzzy factors that come into play. This is an area where you have to recognize and give up part of what you learned in your scientific training because, in scientific training, you try to be as analytical, as detailed in the analyses as you can be. But in business, what you need to do is be analytical to an appropriate point, and you need to be able to define the proper balance. You never have enough information to come up with a truly pure solution; there always are uncertainties.
You also have to factor in as part of your analysis the realization that some of your own success is luck. You have to be able to recognize and pounce on the opportunities and to take advantage of the luck that comes your way. If you spend your time perfecting the analysis to the nth degree, often the opportunity will have passed you by while you were still analyzing. You have to adopt a very multidimensional type of thinking.
Learning to be analytical, or more analytical, is very helpful, as I said. But then you must have the discipline to say, "Technical analysis will only take me so far. This is where we are." Then you use your instincts, developed over time, and you use your assessment of risk versus reward—and their potential consequences—and make some decisions. That is the pragmatism part.
Snowberg: I also want to return to what you were talking about regarding understanding who the right person for the job is. How do you start to understand or learn the virtues of very different skill sets so that you make the right hires?
Linde: It's combination of things. You have to learn what attributes are most important for a given job. When I started out, I had insufficient recognition of these attributes with respect to certain positions. Seeking specific advice from professional people in different fields can help significantly, but usually gets you only so far. Along the way, I also learned a lot by hiring the wrong people. You need to assess more than just skill sets. For instance, you must learn to think, "This person is very bright and very creative, but isn't sufficiently practical, or doesn't have a sufficient sense of urgency, or doesn't know enough of the things that I don't know." Another factor to realize in assessing people to work with is that sometimes there is a surprisingly weak correlation between judgment and the other aspects of intelligence. And excellent (or at least very good) judgment often is hard to assess in advance, but is a vital attribute to strive for in the people you select.
It is very important to recognize what it means to be a leader. Most people want to be liked, but what's even more important as a leader (if you can't have both) is that your employees and colleagues respect you. One of the most difficult things I had to do was firing people that I really liked and that I think liked me, including people who were personal friends. Many of these people had very good attributes, but were not good enough in the roles that the company required. Recognizing your obligations to the company and its stakeholders (including the other employees) is paramount in making such decisions.
Something that provides some balance is recognizing that the devil you know can be a friend of the company, because you never know when you first hire somebody if he or she actually will be a good fit. Even with relevant experience, success in former jobs, all of that, it doesn't mean he or she will be successful in the circumstances of your company.
It is very important to communicate with people so that you can help them develop on the job. Providing employees with a good opportunity to develop can be very rewarding. You should be very candid with employees about their performance; don't just wait for an annual review, but have a candid dialogue about what someone's doing right or wrong, so there are no surprises and they can hone what they're doing well and, hopefully, improve what they aren't doing well. I can't overemphasize the importance of timely candid communications all along the way.
Snowberg: As our students prepare to embark on the next phase of their educational or professional careers, what are some tips that you can provide them on selecting the people to work with?
Linde: When looking for someone to hire or partner with in a role that goes beyond purely academic-like pursuits, you shouldn't look just for the most creative and brilliant person—although those are very desirable attributes. You want to work with people who can get the job done, and people who also can recognize their own limitations.
In hiring for a very young company, I've always felt the best people are going to be the ones who, after discussion and looking into what you're doing or trying to do, can tell you what they think the job really should be and teach you something about what you need that you didn't even know. If you're lucky enough to find that kind of person, that's optimal. Unless the door for that type of dialogue is opened by the interviewer, however, it can be quite dangerous for the interviewee.
As a leader, I've also always thought it was important to have your employees feel that, without in any way sticking their necks out, they can speak openly and tell you what they think you're doing wrong or what you could do better or what opportunities you're missing. Whether you wind up agreeing or disagreeing doesn't really matter because it's about having dialogue and being open to considering better options for moving forward and reaching your goals or even redefining your goals. It also is about seeking to better understand how you are being perceived and trying to correct any misperceptions.
Snowberg: Can we talk more specifically about the Linde Institute and what you and Maxine hope this center will be for people on campus?
Linde: Anything that Maxine and I currently envision is subject to modification over time because you can envision based only on the knowledge you currently have and the circumstances that currently exist. Our interest in starting the Linde Institute goes back a long time. We felt that Caltech was missing out on real forefront research opportunities in the areas of economic and business sciences. We thought Caltech also was missing out on providing as well-rounded an educational opportunity as it could. Most people don't realize that some of the most distinguished economists in the world and many extremely successful business leaders are former Caltech students.
Addressing this situation can have important ramifications for Caltech in many ways—everything from recruiting students and faculty, to the building of future financial support. For instance, by building strong programs in these areas, Caltech puts itself in a better position to attract those students who, when they decide whether they should apply to Caltech, already have an inkling that they might ultimately want to go into economics or business or technology management or start a company someday. These are students who, without such programs at Caltech, might choose an institution that already has established programs. Then there are students who, like me, come to Caltech for research in the physical or life sciences or engineering, but could benefit by being exposed to the other possibilities—what you can accomplish, for example, with Caltech rigor in economics or enterprise management or by starting a company.
Caltech recently has been making great progress and now can provide students with an awareness of, and education in, how to use management tools as they progress through their careers. Caltech is providing more people with the opportunity to find their successes in areas that they otherwise might not. This may lead to yet greater successes because somebody, despite Caltech credentials, might turn out to be a mediocre scientist but a terrific manager or a great entrepreneur.
How many more distinguished economists, business leaders, and entrepreneurs might we now have as alums if Caltech previously had been in a position to provide what we now are doing and seeking to do?
Snowberg: What do you think of the work that is being done in the Linde Institute now and how it's honed its focus on the areas of finance, entrepreneurship, and bridging economics and computer science? Is this the sort of thing that you had envisioned?
Linde: Yes, the progress I just mentioned is consistent with our vision, and we are encouraged by the results so far. The main thing we want is to make sure that whatever is done through the Linde Institute is a dedicated, focused effort, and that it has the support of Caltech as a whole. If it's something that Caltech isn't sure it wants to get into, the Linde Institute is itself in too early a stage to risk squandering resources on that. But if we can use Linde Institute sponsorship to build momentum, rally support and then develop yet more support in areas that Caltech will really be committed to—that's what it's all about.
Maxine and I are happy that the entrepreneurship program has gotten off to a good start, and we are enthusiastic about how we see the program developing.
The intersection of economics and computer science is a good example of a pioneering effort that we hope will grow with Linde Institute support.
We are very excited about the finance program because we feel that, finally, Caltech is coming together to build a financial science program that has the critical mass—the faculty and the students—to be both coherent and sustainable. It's a perfect example of being able to take Caltech's technical strengths from other disciplines, apply them in an area of great importance, and have some real impact.
Maxine and I also have a keen interest in behavioral economics and in the intersection of economics and public policy (including aspects of sustainability and global climate). We hope that the Linde Institute eventually can help to bolster Caltech's efforts in such areas, as well.
