It's a damn shame that Pearlman and Luczo shoved Shugart out the way they did. SEG shareholders have every right to expect that the benefits will be outsized and will clearly outweigh the costs because one just don't this sort of thing to a Shugart unless one has to.
Shugart is a member of the post-war generation of engineers and scientists who lost the entire consumer electronics industry, which they invented, to the Japanese because they allowed themselves to be deluded by the notion that they could enjoy most of the profits of their innovations without assuming the risks of mass manufacturing. The notion that the suppliers can absorb most of the risk of mass manufacturing while forgoing most of the profits of mass manufacturing is the snake oil that seems to capture the imagination of the herd of every generation despite the fact that the results have quite consistently proven otherwise.
Unlike many others of that generation and succeeding ones who persist in echoing the victim's refrain -- We wuz robbed -- Shugart was part of the elite who never forgot the lessons of that spectacular debacle: Innovation is not enough. Manufacturing is the best way to control the development of a technology.
The list of innovators who lost control over their technology because they did not, could not or would not invest in manufacturing is long and distinguished: Texas Instruments(transistor), Ampex(VCR and the camcorder), RCA (color TV), etc. IBM is probably the most spectacular example of an innovator that ceded control over the PC technology it developed with the way it allowed Intel and Microsoft to turn the microprocessor and the OS into franchises each more valuable than IBM itself.
Vertical integration is the reason why SEG, not QNTM (the basket case of the last down cycle) or WDC (the basket case of this down cycle so far), is the only indy drive maker assured of coming out of this down cycle bigger and stronger, if somewhat bloodied considering the kind of unprecedented changes happening on both sides of the supply and demand equation.
Time will tell if Shugart has taught Luczo well or if Luczo, the financial wunderkind, is even a decent student of history. He should keep in mind that the list of the people who have spat on Santayana's grave is very, very long and undistinguished. |
