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INC.: Tell us about a problem that Thermo Electron had to solve in the very early stages.
HATSOPOULOS: Well, our first real involvement with public policy started with the concern about air pollution and emissions from automobiles. We were fully aware in the late 1960s that there was a lot of movement in Congress to introduce some pollution control. So, I got the sense that there was a market being created. I was trying to understand some possible solutions that our technology could provide.
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INC.: So it was the profit motive that sent you out there?
HATSOPOULOS: Absolutely. At that time it was very much a business motivation -- because I knew quite a bit about internal-combustion engines and why they produce oxides of nitrogen, among the most damaging pollutants. I tried to understand the mood of the legislators by being in touch with people in the Administration and in Congress.
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INC.: With the intent of following it with some commercial solutions?
HATSOPOULOS: Yes, something that would fit our technology, that we could provide. At that time, we were working with external-combustion engine technology. The auto industry was very concerned about this whole issue of emissions from automobiles. So, in the late '60s we formed a joint venture with Ford by which Ford would provide some research-and-development funds. We would try to develop that external-combustion technology for possible use in automobiles as well as possible use in other applications.
As a parallel effort to the engine work, we also developed an all-new type of instrument for quickly and accurately measuring oxides of nitrogen. This detector has become an industry standard and led to the formation of our instruments business -- the most profitable sector of Thermo Electron.
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INC.: There wasn't much of an existing market at the time. So you were really staying close to a particular problem.
HATSOPOULOS: Yes, and we did the same thing with energy in the 1970s. See, as a thermodynamicist, I understood that if we got a crunch on energy, the way to go would be to make industry more efficient. And energy-utilization efficiency was something I taught.
(continued)
INC.: But having this insight and creating a business that makes money out of it are two separate things. Tell us how you got going.
HATSOPOULOS: Our involvement with energy efficiency really began in 1966. One day, a group of gas utility executives came to us. They were concerned that they were losing ground because more and more industry was using electric equipment rather than gas-fired equipment. They asked us to help them build a new generation of equipment, and offered us a million dollars a year for five years, with no strings attached. We could pursue anything we wanted, provided that it burned gas. We would own the patents and the technology, but if we didn't commercialize them within a reasonable time, the gas utility would have the right to go to another company that could commercialize it.
We decided to work on industrial furnaces. After three years of work, we designed a generation of new, more efficient equipment. Then I decided to buy a furnace company so that we could manufacture it and not lose our rights. We bought Holcroft Furnace Co. in 1969.
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INC.: So now you had production capability. And, I presume, so did a lot of other companies. What did you do next?
HATSOPOULOS: We successfully introduced these new furnaces into the market. Then, in 1971 I started getting our people to study energy productivity in a broad range of industries.
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INC.: This was two years before the OPEC boycott.
HATSOPOULOS: That's right. Somehow an assistant to President Nixon found out that we had studied industrial energy efficiency. The aide called me in and I gave him some reports. About 1972 the Ford Foundation funded a study on energy. I didn't know about the initiation of that project, but I was at a cocktail party in Washington and I met David Freeman, who was heading it. I told him about our interest in energy efficiency in industry, and he enlisted our participation.
We wrote one of the chapters in the multivolume book that came out of that study just after the embargo, and also the volume that addressed industry. So now we had become, all of a sudden, the country's expert on energy efficiency in industry.
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INC.: But that was a research effort.
HATSOPOULOS: I was a researcher.
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INC.: Was there a product or market that came out as a result of that?
HATSOPOULOS: Of course. We found that industry in this country was about 50% less energy efficient than industry in Japan or West Germany in producing almost any product. We were using more energy because it was so much cheaper here. It was obvious to me that if major shortages occurred, American industry would be in trouble. I think I testified before Congress about 17 times on this issue.
Then there was the embargo. I called in the general manager of Holcroft and said, "Let's create a new generation of furnaces that will be 50% more efficient. We'll have the corporate lab support you, and I'll give you all the money." He said, "Well, none of the customers are asking for it yet. Should we spend money on something that the customers are not asking for?" I said, "The customers will ask for it. They are going to get into a bind. When they ask for a more efficient furnace, it will be too late for you to provide it. If you develop it now and your competition doesn't, you will have it when they need it.'
