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INC.: Has your study of economics changed the way you've run your company?
HATSOPOULOS: Yes, and in a very fundamental way. It became apparent that the only way you can obtain equity at a reasonable price in this country is to focus on the gambling and entrepreneurial inclination of investors. These people aren't interested in a huge conglomerate, because they can't get a feel for anything that it does. Thermo Electron was developing enough lines of business to have the same problem on a smaller scale.
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INC.: So what did you do?
HATSOPOULOS: We repackaged the equity so that investors got a piece of one promising technology that they could get excited about. I thought, why not split the company into small parts? As it turned out, that was a key to getting equity at prices more favorable to the company.
I have gone much further in trying to decentralize than any company I know. In an effort to try to do that and make people responsible, I have set up many of our divisions as publicly owned organizations. I think that structure has tremendous benefits. Managers of each subsidiary know that what they do gets scrutinized not only by corporate management but also by their own stockholders.
I really believe in small companies. But small companies have a big disadvantage. They don't have the support, the financial and management resources, that big companies have. So, you have to find a new structure for U.S. industry that combines the advantages of small companies and the support of large companies. My own answer is to have a bunch of small companies in a family, which gives them financial and management support and strategic direction. But at the same time they are acting as though they are independent companies with their own constituency or stockholders.
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INC.: So you have the best of both worlds?
HATSOPOULOS: Yes. I want Thermo Electron to grow to more than $10 billion, maybe in the year 2000, but it will be a company that consists of many smaller companies. Right now, we have 17 business units, and 5 of them have minority public ownership -- I hope that in 10 years most of them will.
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INC.: What else is going on now that grew out of your interests beyond the four walls of the company?
HATSOPOULOS: We're working now on detection devices for explosives and drugs. We'd had the capability for some time of developing something to find hidden explosives. Then, when the terrorist attacks increased a few years ago, it was evident that a market might be developing there. So, we started spending money and got in touch with the Federal Aviation Administration and with the State Department, which are giving us tremendous funding right now.
Then one of our people suggested that we develop an instrument to detect heroin and cocaine. Using dogs is quite expensive and unreliable. The instrument we're developing can smell drugs with a sensitivity about 1,000 times that of the best dog.
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INC.: Is there anything you're looking at that is completely speculative?
HATSOPOULOS: One of my interests is the greenhouse effect. I have an employee who is very much attuned to these long-term environmental issues, and he's been talking to me about it.
In fact, I've been invited by Senator Tim Wirth (D-Col.) to take part in a conference on the greenhouse effect. My first reaction was that I'm in over my head. Why do I need to spend a whole day in Washington talking about this? But my employee said, "George, this would be an opportunity for you. Find out what Congress thinks. You'll meet a lot of congressmen and senators there and see how they view it. It's an important program.'
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INC.: You sound pretty skeptical. But you'll go?
HATSOPOULOS: I'll go. Can you imagine two or three years from now if we need to cut down on the burning of hydrocarbons? I'm not saying it's going to happen -- all I'm saying is that there's a possibility that something will evolve there. Keeping on top of this problem is something that I feel the company should do.
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INC.: Your approach to market research is considerably more abstract than that of most companies. How does the CEO of a $5-million medical supply company in Akron, an executive who has maybe two or three products, go about adapting it? He doesn't have time to go trotting off to Washington.
HATSOPOULOS: No matter what stage he's in, there are ways for him to get broader exposure. He can go to medical meetings. He can get to know people at bigger companies. He can get involved in the problems his industry faces. He can get to know bankers. I found ways to broaden my understanding of the businesses we were in when the company had revenues of less than $1 million. We started getting to know our investment bankers five years before we went public.
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INC.: All right, so this CEO is interested in your approach. How does he get up his nerve to divert resources to long-term projects that won't be commercial for a few years at best?
HATSOPOULOS: You have to be very gutsy and adventuresome. I always liked taking risks -- but within limits. One way to limit your risks is the way you get financial support. The best example from my own experience is the gas-utility industry. It is not a manufacturer or a competitor, but as I mentioned before, it paid us to develop products that gave birth to a very successful division of the company. We're still getting $7 million in research funds from them this year, a large portion of our R&D budget. Another great source is the federal government, but you have to make sure you work out a deal that allows you to keep the commercial rights. We started a biomedical division on the strength of $2 million in contracts with the National Institutes of Health.
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INC.: Plenty of CEOs would like to pursue outside activities as you have, but they feel they can't get away from the office. On a practical basis, how do you do this?
HATSOPOULOS: There's no way to implement this strategy without having tremendous people around you. What I consider my major job is to get the right people and to convey to them a sense of responsibility. I try to create an environment in which people in the company feel that they are partners, regardless of the reporting hierarchy. I ask people their opinions and try to explain to them the problems we face. Not to just give an order and say, "Look, you do this." But you tell them, "This is what the company's problems are right now. This is what we are trying to accomplish. Do you have any thoughts on that?'
