"I had an awful lot to learn about business . . . I had the conglomerate mentality -- the view that, if you just build one product for one market, you weren't going to be too successful. After I got into five different businesses and almost went bankrupt several times, I learned that you have to focus on something."
Eventually Ed Zschau wants to run a diner in some college town, where he can serve up greasy hamburgers and talk philosophy with hirsute students. What is more likely, however, is that he will own the diner, maybe a whole chain of them, or that he will be teaching philosophy at the college, probably as head of the department. Zschau is a person -- we all know one or two of them -- whose biggest problem seems to be coping with an excess of success.
It is, in fact, a problem that has dogged him since his college days at Princeton University, where he managed to earn a degree with not one, but three undergraduate majors -- math, physics, and philosophy. He went to Stanford University to study business and got not only an MBA, but also a PhD. When he taught, it was at the graduate business schools at both Harvard University and Stanford. And, when he started his owr business, System Industries Inc., it soon became America's largest independent supplier of minicomputer memory systems. Last year, he won a California congressional seat in his first run for political office. He is young (43) and good-looking.
If he weren't so pleasant, Ed Zschau would be easy to dislike. Instead, he seems to win new admirers wherever he goes. According to Rep. James Leach of Iowa -- a fellow Republican and Princeton alumnus -- Ed Zschau is "the star of our freshman class." His constituents, too, give his sometimes maverick views a respect seldom accorded neophyte politicians.
"I'm one who's trying to throw cold water on the idea that high technology is the answer to all the country's problems," he tells a group of Silicon Valley executives, who nod their agreement.
"Of course government has a role to play in business," he tells some hard-nosed businessmen, who show no sign of wanting to argue.
The 1981 personal income tax cuts were a "big mistake," and Social Security payments should not be fully indexed to inflation, he says one evening before a town meeting of district voters prosperous enough to be paying income taxes and old enough to be drawing Social Security checks. None of them flinches.
Zschau may not be the only business-person, or even the only entrepreneur, in the U.S. House of Representatives, but he is hardly typical in a body dominated by lawyers and former state legislators. The founder and former chief executive officer of a highly successful high-tech company, he represents a congressional district -- California's 12th, which includes Santa Clara Valley -- with more technology-based companies and entrepreneurs than any other district in the country. To breast-beating, free-market Republicans and to Democrats who would turn the country's economic future over to a government planning board alike, he can say that he has lived in that part of the real world and that it doesn't work the way either one of them wishes it did.
Oddly enough, Zschau had no intention of becoming either a businessman or a politician when he started out. A Nebraskan by birth and a scholar by training, he appeared destined for a career in academe. After earning his PhD in business from Stanford in 1967, he taught for a year at Harvard Business School, then returned to Palo Alto, fully expecting to continue his studies. "Another professor and I were asked to head up the business-policy program at Stanford," he recalls, "which deals with strategic planning and how to be a CEO. We got started and, frankly, I guess I felt a need to get into business myself, to see whether I could run a business and how it all worked.
"The particular business that I decided to start was sort of an accident. I ran into a friend who had recently started a company in the scientific instrument business, and his firm needed a computer system to automate the instrument. So that was the first product that my company developed. It wasn't a very successful product, but successful enough to get us going.
"I had an awful lot to learn. For example, I learned about focus. When I was studying for my MBA and PhD, a lot of business professors and business leaders were enamored of the concept of conglomerates. I had a lot of that mentality -- the view that, if you just build one product for one market, you weren't going to be too successful. After I got into five different businesses and almost went bankrupt several times, I learned that you have to focus on something -- a product or a product line and a market -- and devote all of your attention to that. One by one, we began to sell [product lines] off, and the one business that a lot of people thought would never survive -- the storage systems business -- is now running at a $100 million [annual sales] rate."
As an entrepreneur, Zschau gave little thought to politics, but in 1977 he agreed to head a task force of the American Electronics Association that was seeking a reduction in the maximum capital-gains tax rate from 50% to 28%. Working with other organizations, he lobbied the legislation through Congress over the strong opposition of then-President Jimmy Carter, who wanted the tax rate increased.
"Having seen the impact that people who understood the issue could have on the legislative process," Zschau relates, "I got more interested in politics. When [Congressman] Pete McCloskey decided to run for the Senate, leaving his seat open, I thought about what I would do, and decided that I had a contribution to make. [The company] was reaching $70 million or $80 million in sales, about the right time to transfer to professional management from the raw entrepreneur. Everything just fell into place."
