EP8 Cognex Corp Founder and Mega-Philanthropist Dr. Bob Shillman Unpacks His Journey - Part 2

I think 14 billion. Fourteen billion dollars.

3,000 people. 3,000 people make their living because you had an idea in 1980. Pay their bills, send their kids to school. Exactly. This is a miracle, and it's called America. We'll get to that after a while, but I want to talk about that moment when you hired Bill Silver. We talked about that, and then the first people you hired. What was the transition? How did you go from professor to business person?

When I faced the life decision—and it is a decision in the road—to stay as a professor, which I was at Tufts University. I didn't go into detail about that, but while I was a post-doc at MIT, I was an assistant professor and saving my money. I was considering starting a company, and I needed some help to think through that. I have no problem seeking help from other people when I have a problem to discuss. I decided I should go to a psychiatrist for this because it's a life decision. I found this wonderful psychiatrist at the base of Beacon Hill. The setting was perfect. He was an analyst, and you entered through his garden in this beautiful townhouse in Beacon Hill, small but beautiful. You sat in his rather dark office and talked. I found that therapy, psychotherapy, is very helpful if you can go in and define the problem. You have to tell the problem; you can't say 'I'm unhappy.' I mean, you can say it, but it's not going to find you an answer. So my question was, 'Who am I?' I went in with two different articles to show him. I said, 'Here's an article published in a technical journal about machine vision, written by Dr. Bob. And here is an article in the local newspaper, the Boston Herald, talking about Professor Pickle, who is Dr. Bob.' It turns out that about a week or two before that, Claus and Pickle Company had a contest to decide who was going to write their commercials or their jokes. I said that's perfect for me. I entered the contest as Professor Pickle. I had the complete regalia: the hat, the gown, and some visual aids. I hired an artist to do various drawings, and I gave a lecture about the history of pickles—for example, wild dill Hickok. I told the audience jokes about 'I have a dog that likes arf sours,' and I went on and on. I came in second in the contest. It turns out they had already hired someone who was going to win, but nevertheless, there was a great article about me being Professor Pickle. I went to my psychiatrist and said, 'Which one am I? Am I Professor Robert Shillman, or am I Professor Pickle?' Through that experience, I discovered that I am both. As one of my employees recently said, 'Dr. Bob is 50% Mel Brooks and 50% Albert Einstein.' Wow, what a great combination. I got the brains, but I got a sense of humor. Once I realized that, I decided that I had to be both. I couldn't just be a college professor; that's not going to work for my personality. I've been a professor, and I enjoyed presenting things. I was already good at it. Students loved the way I could present and talk about complex things in simple ways, but I didn't like all the other stuff that goes along with being a professor—lots of bureaucracy. So when I realized that, I gave up the professorship I had, against my father's advice. Of course, I realized that he wanted to be the professor, but that didn't mean that I should be the professor. I'm conscious of that with my own children now. I want them to be certain things, and I'm saying, 'Are you sure? Isn't it you might want to be that?' So that's a good lesson in itself. Through that analysis, I suggest that anyone who is going through a transition period in their life seek therapy. It doesn't mean you're crazy; it means you recognize that this is complex, very important, and you should seek some assistance. It's life-changing. I've told my kids this; they pooh-pooh it so far, but I think they would benefit from psychotherapy too. At any rate, I came to the conclusion that I have to be both. It turns out that running a company, being a CEO of a company, uses both skills. You have to be smart and analytic technically if you're going to run a technical company, and you have to have the ability to lead people, which means you have to have some amount of charisma, personality, and sense of humor. That's when I decided and told my parents, 'I'm leaving. I'm giving up the professorship.'

Not the same person, but you know, my father again grew up during the Depression. Security was very important to him, and being a professor is very secure. You get tenure, you can stay forever. Starting a company is very risky. Most people don't realize, and I didn't realize then, probably 90% of people who start a company fail. Most companies fail, whether it's a pizza shop or a restaurant or a sign-making shop. Most companies fail. I didn't know about that because I hadn't been to business school.

Step by step. The most important thing is start. I tell my kids the same thing: start doing something. Do something, and then if you hit a roadblock, you'll go around it, you'll change. But doing things is the most important. Action-oriented. Don't overanalyze things. A lot of people want to do everything 100% and then get nothing done. So I started this company with the goal of building a better reading machine for law offices. That's not how it turned out. Someone mentioned to me that I should apply to the Small Business Innovation Research organization in the government, called the SBIR. I think they still have it. It's a way of the government helping finance new ventures. So I said okay, I'll apply for an SBIR grant. The first grant is $50,000, and if you're successful, then $250,000. I knew I was going to need more money. My $86,000 was not going to be enough to build a company. You're going to burn through that. So I got the application for the SBIR grant, and I was looking through it. There was nothing about office automation, which is what I was planning to build a machine for, but there was something about factory automation. I said, 'Okay, I'll twist my proposal about factory automation. I'll talk about robots and the ability to read, but really I'm going to use the money to build an office automation machine.' So I filled that out, but the more I read about it and researched, I said, 'Well, this might be a better idea after all.' I was writing a proposal for factory automation, and I had to justify it, so I did more research. Fortunately, I was rejected. I say fortunately, fortunately, fortunately I lost the contest because if you did that, the government is the government. They're going to make you file reports and this and that. But I got the best out of it that could ever be gotten by changing the focus of the company from office automation to factory automation. In the process of applying, I realized that factory automation was a much better market for what I wanted to do than office automation. That's a key element of success too: realizing when to change the road, change the plan. If this isn't quite right, don't be wedded to a particular thing. You're new, you're just starting. If another road looks better, go down that road. You're not going to change your personality or the technology; you're just going to steer the technology towards something that's a better idea. That made all the difference in the world.

Another thing that's important for success is get your name out there. PR. I was very good at that. I don't know why or how, but various newspapers and trade magazines were writing articles about Cognex and its ability to read letters and numbers. So we got our name out there with DataMan. Exactly. I had a photograph of the product, which really was a mock-up of cardboard. It didn't even exist. But you have to, it's like an architect's drawing. The architect draws the building before it exists. I drew pictures in Photoshop of things that didn't quite exist but that I was committed to making happen. The phone started ringing, and we got a call from IBM. That's a big call. Because then, there was no such thing as Microsoft, no Google. It was IBM. If you wanted to name the most prestigious company in the world, it was IBM. This is 1981. They called, and this engineer had a particular issue. He said, 'I'd like to visit with you.' He came to the company and said, 'We have a need to read these very tiny letters that are written by laser on semiconductor wafers.' Most people don't know, but all the chips that are in your phone come from this thing that looks like a mirror, could be 12 inches in diameter. To keep track of these very valuable mirrors, so to speak, at semiconductors, there are little codes written on the bottom. At that time, the only thing you could do is people had to read the code. It was 21 digits long, letters and numbers, and they would make mistakes in writing it. They tried magnifying glass, but all day long you're reading these tiny little numbers. Too many mistakes. That means that wafer, which was worth tens of thousands of dollars, would go to the wrong process and be screwed up. So they were very intent on getting a machine that could read those numbers. I said, 'I think we can read those numbers.' We had it. So we demonstrated. It's an interesting story about Bill Silver here. The guy said, 'We'd like to see. Can you demonstrate this?' Bill Silver said, 'Buy him some coffee. Give me 10 minutes.' I came back, we could do it. Then the guy came back again, 'Can you do this? What if it's upside down?' Then finally the third or fourth time, because we had to go to lunch and build, we need an hour. Then he looked at Bill, 'Can you do this?' Bill looked at him and said, 'We can do just about anything. How many units are you talking?' He's a salesman. That's unbelievable for an engineer to say, to understand that if there's enough units, we can do it, but if you're just talking one unit, we... So you know, this Jewish kid who grew up, his father was a small businessman, he had it in his genes. Not only was he brilliant in technology, or he is still, but he understood business. That really helped Cognex succeed. Our first sale was to that IBM plant, and it was $30,000. I remember typing up a little plate for the serial number on it and everything, and delivering it to IBM. That enabled me to then raise a million dollars of venture capital from the Rockefeller family.

That was a stamp of approval that led to us being able to raise more money from other companies and ultimately to become a public company on the NASDAQ. At one point, the company was quite successful. We were doing well, making money. I thought back about what was important in helping make the company successful. The National Science Foundation was helpful because it recognized me when I was a graduate student as something special and put me through college. It paid all my expenses through college. I said, 'I want to help the National Science Foundation. I want to help them. It's a government, but I want to help them because they know what they're doing. They helped me.' So this is a strange story. I spent a day or two looking it up again; the web wasn't available then, but I figured out who to call. I spoke to some guy and introduced myself. I said, 'This is Dr. Bob Shillman. I want to help the National Science Foundation. I'm prepared to give you back a million dollars to help this country, so you can continue doing what you're doing. More than the million dollars, I want to help you when you go to Congress. I want to help you get more money because you can use me as an example. My company is an example of how that scholarship paid dividends for the country. You paid $20,000 a year for three years, $60,000, and now we have 200 employees who are paying income taxes. I want to help you make the case. I feel that strongly about this country that has given me this opportunity. I want to help it continue.' Well, this person said, 'I don't know how to help you.' I went four levels above, and the answer I got was, 'We have no mechanism of taking your money.' Can you imagine? Somebody's on the phone going to give you a million dollars. 'No, we can't take it. There's no mechanism. And we're not going to take you up on your offer to stand before Congress as an example of why the National Science Foundation should continue to be funded.' This is a problem with our government, probably every government. People who go into government generally are not as capable as the people who go into business.

Well, you know, the label conservative or liberal or leftist doesn't describe a person. You can't describe a person in one adjective. That's a problem in our society today because everyone wants to label everyone else. How would you describe yourself then? I can't describe it in an adjective. I will tell you what I believe in. I believe in the free enterprise system. I believe in meritocracy. When you hire people, it shouldn't depend—and this is the way it used to be before three years ago—it was illegal to make a decision based on anything other than merit. You couldn't make a decision based on race, color, sexual orientation. Now you're supposed to make decisions based on that. This makes no sense to me. Decisions should be based on who can do the job best. That's who you hire. I've been asked by my employees a couple years ago. We used to hold something called 'Ask the President.' It was after hours, beer and pizza, and people would show up. You could ask anonymously if you want or raise your hand. One question was, 'When are we going to have more diversity?' I looked at my employees. We have people from all over the world: from India, Pakistan, Israel, Bangladesh, America, Tennessee. I said, 'Well, right now what my customers are asking for are the finest products at fair prices. That's what I focus on. That means we have to hire the smartest people we can find, irrespective of that. So diversity doesn't rate. My customers never ask me for diversity. As soon as they do, I'll figure out how to deliver on that.'

Shocked. Yeah. They should have common sense. The way to be successful in business is to focus on customers. That's it. Every company has five constituencies. I call them constituencies, or there's another term for it that people use. I forget what the term is, but there are five different groups of people that you have to worry about: customers, employees, vendors, shareholders, and neighbors. They call them stakeholders. I always recognize that there are five sets of stakeholders. Which one's more important? It's like saying what part of the car is more important. Some people will say the engine's the most important. I say, 'Try to run without the lug nuts on the wheels or the steering wheel.' You need every pieceable part. Some parts are more complex and cost more, but when you say which part is most important, there's no... The radio isn't important; you could drive a car without a radio, but most of the other parts of a car you can't drive without. So when people say which is the most important of the five constituencies, they're all important. But if you don't take care of your customers, then you won't be able to take care of your employees, shareholders, vendors, or neighbors, because it all comes from customers.

But I know if I'm satisfying my customers, and if I'm pricing the product so that they're willing to pay for it and I can still make money, there's nothing wrong with that.

Culture means the elements that we all hold in common, that the members of that group hold in common. It's the glue that holds it all together. At Cognex, our culture is best described by a number of sayings that we have in the company. One is 'Work hard, play hard, move fast'—in that order. My kids, of course, want to play hard before they work hard. So it's work hard, play hard, and move fast. It takes all three because if you're not moving fast, someone's going to overtake you. That's very important. But playing hard is part of our culture. In most companies, that's not part of their culture. We believe... What did you mean by playing hard? It has to do with the 10 corporate core values, which I'm going to tell you about now. I have to refer to my notes to get them exactly straight. I established these values when I started the company. It's very important first of all to understand why people start a company. I can't speak for other people, but I know myself and for the other friends I have that have started companies, it wasn't to make money. That was not why we started a company. I started a company because I had been an employee, a student, a co-op student at various companies, and I decided that I can't work for anybody else because their rules I may not agree with. I worked at a company called Sylvania a long time ago as a co-op student, and they noted that I wasn't checking in at 8 o'clock in the morning. I wasn't making the 'A' correctly. I wasn't showing up at 8; I was consistently coming in at 9. I asked my boss, because he was reviewing me, 'How's my work?' He said, 'Oh fine.' I said, 'The quality is fine, and the quantity is fine.' I said, 'So what the hell do you care if I come in at 8 or 8:30?' So I soon realized that I had to work for myself. I created a company where I was in charge of the rules. Not many rules, but I'm in charge of the rules. It's important to me because I realized that in life, you are going to spend more time at work than anything else. Forget about sleeping; that doesn't matter. But your waking hours, you're going to spend on average 70 or 80 percent of your waking hours at work, not with your wife, not with your kids, not with your dog, not with hobbies. So you better like your work. Key element of deciding what to do with your life is the work you choose, because you're going to spend most of your life doing that. I couldn't see working for other people because I figured their rules I'm just not going to go along with, like how to make the letter 'A'. That is, I think, common for all entrepreneurs. They cannot work under anybody else's rules. So I started this company to be able to go to work with people that I liked, people who are smart, people who are motivated to work, who like work, who aren't just going there to make money but they like what they're doing. At the end of the day, the week, the month, we can look back and see what we accomplished. I wanted to control the physical environment too. It has to be attractive, comfortable. I want everybody to have the right kind of chairs. I'm into every detail about making it a pleasant place to be. It's from the heart. I want you to be happy. If it's a pleasant place to be, you'll show up more often and you'll stay more at work. So it's a good thing for business too. The mission of the company—every company has to have a mission statement or should have one. Ours has two parts. The first mission statement is to be the largest and most successful machine vision company in the world. Largest isn't enough because you can be large but not make a lot of money, not be very successful. Largest and most successful machine vision company. You've succeeded; we are that now. Most companies want to be the best at their business, but maybe not all of them. Avis used to say, 'We try harder. We're second best.' So the first part is probably common. Anybody who starts a company wants it to be the biggest and most successful. The second part is unique, and most companies don't have this. We want to be an example for other companies to follow with respect to how we treat all of these stakeholders. We want to be an example that shows you can treat them all correctly and still make a lot of money. That's hard because if you want to treat your customers right, if you want to treat your shareholders right, you have to have the highest profits and don't pay your employees enough. There are these five constituencies or stakeholders pulling on the rope in different directions. So to keep them all happy is a trick, but Cognex has been able to do that. How? Because of our 10 core values, which I'm going to have to relate to my sheet here and my glasses because it's small print. I established this when we started the company. I said, 'What are we going to run the company based on? What are the values?' Here they are. We make sure that every employee understands these. We have them posted on the walls in various artistic ways. It's not just boring. Every employee gets a plastic and a beautiful plaque with little drawings that represent these values. We really talk about these values, and we live by them. A lot of companies have values; they don't live by them. So here are the values. Customer first: customer satisfaction is our top priority. We listen to our customers, and we do what they need whenever and wherever they need it. Not only is it top priority, but we will do whatever they want. Cognex has this philosophy of saying yes to customers. But there's always going to be a 'but.' If somebody wants to buy a product that has a list price of $3,000 but they only want to pay $2,000, you can't just say yes. We say 'yes... but you have to buy 10,000 of them,' or 'you have to buy them without the power supply, you provide something.' But it's a different philosophy than most companies. You go into a company and ask them for something that isn't on their menu, so to speak, they'll say no. We have customers asking us for very complex things that the product doesn't yet do. Let's say we can measure things down to a thousandth of an inch. They want a product that will measure to ten thousandth of an inch. How do we say yes to that? We say yes, but you'll have to pay for the R&D, and you'll have to buy 5,000 units. We'll give you the R&D back if you buy these 5,000 units, but otherwise we don't give it back. We keep the R&D. So it's a philosophy of saying yes, of making the customer happy. A lot of restaurants in America are very different. You can go into restaurants and say, 'I want this but I don't want the toast.' They'll say yes. Japan: absolutely not. You have to point to the menu or to the plastic food that's shown in the lobby of that restaurant, and that's what you're going to get. I could tell you a story. I went to an Italian restaurant near my office in Tokyo. A nice Italian restaurant. I didn't see what I wanted: spaghetti with marinara sauce. Oddly enough, they didn't have that. They had marinara sauce on the pizza, they had marin... but they clearly had the ingredients. You couldn't make it. I said, 'I want spaghetti with marinara sauce.' My local sales guy translated into Japanese, and they said, 'No, no, no, because it's not on the menu.' So it's very rigid. Some companies in America are very rigid. We're not. We're very flexible. Customer first, because if you don't take care of your customers, you're not going to be able to take care of your employees. There's no money. You can't pay your vendors, the shareholders aren't going to make a profit or a dividend, and you're not going to be able to pay your real estate taxes for your neighbors or whatever. So the customers are the king. It really comes from focusing on the customer. Not all public companies are that way. Many public companies put shareholders first. Shareholder return comes first. If you put that first, you're not going to be fully successful. Milton Friedman used to teach that the Chicago School says the corporation exists to make the shareholders happy. I could accept that by saying the only way to make the shareholders happy is to first make the customers happy and get the revenue. How else are the shareholders going to be happy? The next of the 10 values is excellence. Good is not good enough. We strive for excellence in everything we do. That doesn't mean we always get excellence; it just says we're not going to be satisfied with good. We want to be great. That's the goal. Perseverance: we take on the most difficult challenges, and we don't stop until we get it right. This is something that Americans lack, I think: the focus on long term. Nothing good happens quickly. Bad things happen quickly—an explosion, your business fails, it burns down. Good things take time. It's the recognition that you're going to have to spend time and overcome those obstacles. That's who wins. Enthusiasm: we enjoy what we do. We approach each day's challenges with energy and excitement. That doesn't mean you have to be a goody two-shoes every minute smiling, but you gotta be enthusiastic about things. If you're a downer, 'This sucks,' that spreads. I can't handle people who are always critical. I don't mind creative criticism—'We can do it better this way'—but enthusiasm is important. Creativity: we delight in being different from the rest and taking creative approaches to solving problems. Creativity extends at Cognex not only to the products we design, but you look at the other things we do: the way we design the building, the building layout, the colors we use, the annual reports. You'll never see a public company with annual reports like Cognex produces, which are sort of parodies of other magazines. They're fun. Opening up creativity, people can feel great about creating something new. Pride: we derive great satisfaction through our individual accomplishments and those of our company. We put the name Cognex on every computer terminal. We put the name Cognex on... we have Cogware. That's an interesting question I'll go into now.

Many years ago, my CFO came to me and said, 'Dr. Bob, I think we should have casual Friday.' He said, 'We just were on the road and we visited some investment bankers, and they have casual day, casual Friday, in which case you're not wearing a suit.' In business you wore a suit or something. I said, 'Oh, that's interesting.' I thought about it. I dressed casually, and I said, 'It's much more comfortable.' The problem comes about: there are two problems with casual. If it's only one day, then that day is a special day. You're going to leave early or arrive late. If you say it's casual Friday, your attitude is different. I don't want it to be one day. The other thing is, what is casual? Who defines casual? If I let my engineers define casual, it might be bare feet and an undershirt. So I said, 'Here's the problem. If casual is better on Friday, it should be every day. Why just Friday? Now we have to define casual.' We define casual as Cogware. Cognex wear. We went online and found companies that design clothing. It's casual, whatever you want it to be, but it says Cognex on it. So if you want to be casual, you gotta wear Cogware. That defines what casual means, and it could be any day of the week. That's what we did. Everybody thought that was a great solution because they still came to work early. It's not a special day, not an off day. So pride: you take pride in your company. Integrity: we adhere to the highest ethical standards in our relationships with customers, fellow employees, vendors, neighbors, and shareholders. Very key. We don't tolerate anything but the highest integrity. Got to be honest. Nobody gets cheated. We might charge a lot for our product, but if the customer pays it, no gun to their head. Recognition: our success is due to the hard work and dedication of our employees and vendors, and we acknowledge their contributions in both tangible and intangible ways. We have a lot of parties at the company to recognize success or recognize individuals. Recognition is very interesting. Bonus time comes, you can just wire it into people's account, and you know what? It's fungible. They have no idea. They'll look at their check and yes, there was a little bit more money in it. I'll tell you how Cognex used to do it. When the company was smaller, 100, 200 employees, we recognized there's going to be a bonus. I forget what it was; it ranged from maybe a thousand to five thousand dollars per person. I arranged for a Brinks truck to bring cash into the building. We held a company meeting. It was a cover story about why we're having the meeting. We had tables set up with green lamps and eye shades. The Brinks drivers came in with bags of cash and shotguns because it was hundreds of thousands of dollars. We sat there and counted out money and gave it to each employee. That made an impression. They will never forget that. It's so important to try to make a change, a memorable event in people's life. What do you have at the end of it all? You have memories. It doesn't matter how many distortions, stories, and memories. Another thing we did earlier, a different year: I said, 'I can't make you rich, but I can make you feel rich.' We gave each employee a night out on the town, all expenses paid at certain restaurants, and we arranged for a stretch limousine to pick them up with their house or their spouse and take them out for a great dinner. Instead of giving somebody $500, which they're going to spend on toilet paper, this is something they'll remember. That's recognition of the employees.

I don't know the number, but I know our retention is very high. That's something we're very proud of. How many people stay when it was supposed to be a one-year job, a two-year job, or a summer job. Sharing: when Cognex wins, we all win. We share our success with everyone who contributes to it. Fun: we work hard, play hard, move fast. We celebrate often to recognize our accomplishments and to motivate ourselves to achieve even higher levels in the future. That's what we live by. This culture of the company has been instrumental. Not because I'm just saying it, but the investors in the company are always curious about the culture of the company and are we maintaining the culture.

I think there are 45 offices, probably in 20 countries. Because wherever those countries are doing manufacturing or Amazon-like things, they're obviously going to need your product. So we sell the product worldwide. Again, business now. You started with a couple of people, an idea, you get IBM, but now it's a lot. So how did the product grow? A lot of years between nowadays. It wouldn't only be reading letters and numbers. This is a very important lesson about flexibility, letting the customer lead the way on marketing. It's called, I think the current term is the voice of the customer. You want to listen to customers because they'll tell you what they need if you ask them correctly.

No, we have targeted probably 5,000 customers around the world. Many manufacturing plants around the world, every automotive manufacturing plant and the suppliers. So I think we have 5,000 or 10,000 customers. The largest are the ones you've mentioned, but the others are substantial also. It's being close to the customer. I was at a trade show a long time ago, visiting this trade show where our customers were displaying their products. Their products are automation machines that use vision inside. It could be a machine that drills holes in a printed circuit board, a machine that assembles cell phones, or makes cookies. Automation machinery. So there's a show in automation machinery, and I'm going there to meet my customers who are the people who make this automation machinery. They're displaying their products for people who want to make cookies, for bakeries, or for car companies, or for cell phone companies. I went up to one of the booths, and the president was there. I introduced myself; I hadn't met him before. I said, 'Oh, Jim, thank you very much. I can see you're busy, but...' He said, 'Oh, thank you for your product. We really couldn't do what we do without your product.' I said, 'Well, how is everything going? Is my company treating you right? How's everything going?' He said, 'Really fine, Bob. I really want to thank you for everything.' In a short conversation, I walked away. I thought about it. I said, 'I asked the wrong question.' It's like asking somebody, 'How do you feel today?' 'This is fine.' I mean, you could be in hospice. I said, 'I asked the wrong question.' I went back and said, 'Thank you for spending your time with me. What could we do better?' He spent 20 minutes with me telling me—I forget what the details were—the packaging wasn't right, and the support was shitty. You got to ask the right question. You got to be willing to listen. This comes to personal life too. My son Barney, as I mentioned, was having some problems in the fourth or fifth grade at this private school. At the parent-teacher meeting, I was meeting with his teachers. My wife was traveling. I sat down. They said, 'Oh, how are you doing? We want to tell you, Barney is such a sweetheart. We love him.' I said, 'Excuse me, I'm not here to listen to the good things about Barney because I think I already know those. Tell me what he's doing wrong. Why he's getting C's in particular. Is he stupid or just not trying? That's what I want to know. I got to know this. Or is he just rambunctious like I was? Not trying. Is he stupid or just not trying?' They were shocked. They've never... They sat back on their chair, looked at each other, and one lady said, 'We've never heard that from a parent.' Because today, if the kid isn't doing well, it's the teacher's fault. 'Why did he get a C? What did you do? What aren't you doing right?' Teacher's fault. I came in with a straightforward viewpoint, an analytic viewpoint as a scientist would. Is he stupid or just not trying? Because if I can deal with either one, you deal with it differently. If he's stupid, I gotta lower my expectations. If he's not trying, I didn't try either. So what? Remember, it worked out okay. If he gets an F in French, it's okay. So the same thing in business. You got to be willing to ask the right question. Most people are afraid to ask the right question. 'Are we doing good?' 'Oh yeah, you're doing great.'

When people congratulate me or Bill or whatever, I say, 'Congratulate America.' This happens. Success happens. Yes, you have to work hard, you have to be smart, a lot of things have to happen, but you need an environment, a set of rules to operate in that let you do that. That's called the free enterprise system. The freedom to take your money, rent a space, hire people without getting okay from anybody, without anybody's approval. It's your money. Pay people and give them stock options, doing what you want to do and not bothering anybody. That's the free enterprise system. You pay them as much or as little as you want. It's up to you to determine what's right. It's not up to the Department of Labor to tell you what you have to pay people. It shouldn't be up to some bureaucrat to tell you anything. It's up to you.

One reason why I'm no longer chairman and not associated in the senior way with the company is because I didn't want to deal with that anymore. It's too difficult. It's not fun anymore. When large investors tell you, 'You have to worry about the environment and social justice issues,' what? I have to worry about the environment? First of all, I'm not growing trees. I'm not drilling oil on fertile land. I'm not dumping pollution. What do you mean I have to worry about the environment? My products allow companies to make things with zero scrap. That's worrying about the environment without me worrying about the environment. I get to worry about my business. But now we have shareholders, large shareholders, who insist on this. They insist on social responsibility about how many females or how many minorities are on your board. What is that? Since when does that matter? What's important is you hire the best and most competent people irrespective of those other things, so you can get the greatest return to your shareholders. That's what it's about. Take care of your customers, return for your shareholders, take care of your employees. But as soon as the government gets involved, it becomes less efficient. That's where America is headed, unfortunately.

The first place we expanded to was Japan. This is another interesting lesson. At that time, every article I read, everyone I spoke to said, 'Oh, don't bother going to Japan. It's impossible for Americans to do business.' I remember that. They were basing that on the fact that the Japanese wouldn't buy American cars. Well, all you have to do is go to Tokyo and measure the width of the streets, and you'll see an American car won't fit down the street. It's not that they're anti-American; American cars were designed for America. They weren't designed to run in Japan. Plus, there were quality issues. But the common wisdom was you can't do business in Japan. I'm always skeptical when people tell me anything. That doesn't mean I'm cynical. There's a difference. A skeptic listens and says, 'I don't know if it's true or not. I'll think about it or I'll look into it.' A cynic assumes everything's negative. So I'm not a cynic, but I'm a skeptic. When somebody says you can't do business in Japan, it doesn't sound logical to me. If I have a product that's better, the best in the world, at a fair price, why wouldn't they buy it? So I went to Japan, and I found they will buy it. They had all sorts of different standards than Americans have, and I didn't object to that. But I'll tell you a great story. Our product at that time was a computer board about this big, and it fit into what's called a pizza box because it looks like a pizza box. It has foam around it and everything. Then these pizza boxes, and also there's an electrostatic shield so static electricity won't... So you put it in this plastic shield into the pizza box, they seal the pizza box, and then hundreds or 200 pizza boxes are put in a wooden crate very carefully made and shipped off overseas. I went to my customer, a company called Shikawa at the time that made assembly equipment for semiconductors. The president greeted me. We had tea together. He said, 'You know, there's a problem with your product.' I said, 'What do you mean? Does it work well?' He flapped his hands, and in came a rolling cart with pizza boxes from Cognex on it, and they were damaged. They had dents in them. I looked inside and said, 'But was the product okay?' He said, 'Yes, of course, but this is unacceptable.' Now, from an American to an American, 'What the... I mean, the purpose of the box is to protect the product. It did that. You throw the friggin' box away and you're all set.' I thought of luggage. You give luggage to American Airlines, and it comes back all battered, but the inside is fine, and you're happy. Not in Japan. I was about to lecture—I was 30 years old, he was 65 years old—to lecture him on the purpose of a box. I was about to open my mouth, and then I recollected the prior week when I landed. I bought some souvenirs, some very nice chopsticks to give back to people. When I went into the department store in downtown Tokyo, the girl brought the chopsticks out. She cleaned and polished them. Then she brought out a box, examined the box, put the chopsticks in carefully, wrapped the box. I realized that in Japan, the box is a statement about the quality of the product and the company. The box has to be perfect. So I didn't argue. I got on the phone that night to my head of manufacturing and said, 'Here's the problem.' He said, 'Why do you think you're talking about that?' I said, 'Listen, this is Japan. This is what's required in Japan. All you have to do—and I don't happen to have it with me—is look at toothpicks in Japan. You open a container of toothpicks. They are all identical, the exact same height, and beautifully turned somehow. A toothpick.' I brought these back and framed them. During this intermission, I'm going to get it and show it to you because I use this as an example to my company of the culture that we're selling into. A toothpick has to be perfect. What do you think a $3,000 vision system has to be?