Friday, April 15, 2016

The art of knowing when not to say "I don't need you"

Asked whether he needs to mend fences with rival presidential candidate Sen. Ted Cruz in order to shore up the support of a unified Republican Party in the 2016 presidential race, Donald Trump declared recently that he doesn't need Cruz or his supporters to win the presidency in the Fall. Funny, I remember a story from business history that they probably didn't teach but should have at the Wharton School when Trump studied finance and commerce there.

In the early 1930s, there was a rivalry between the Radio Corporation of America (RCA, a spin off of General Electric [GE] that was later reabsorbed into the parent company) and inventor Philo Farnsworth over Farnsworth's invention, fully electronic television. RCA, headed by David Sarnoff, claimed that their employee, Vladimir Zworykin, was the real inventor of television. (Zworykin actually invented a mostly mechanical television system.)

When Sarnoff visited Farnsworth's laboratory in San Francisco, he first made an insultingly low offer for Farnsworth's patents and equipment, which Farnsworth turned down. Sarnoff angrily walked away, but not before taunting, "I don't need you!" meaning that he intended to proceed to develop electronic television as if he did own all of the rights to it. A notable aspect of this story is that Farnsworth was not really authorized to turn down Sarnoff's offer out of hand. He never had enough money to invent and develop television, so he had approached a group of businessmen to finance his research and production of a prototype television system. (Farnsworth invented both the TV camera and the TV set.) So he did go to his backers and told them how much Sarnoff had offered in case they wanted to overrule him and take the offer. They did not, because Sarnoff offered considerably less than what the investors had put into Farnsworth's television work. To take Sarnoff's offer, the investors would have lost money.

Years later, the Farnsworth Corporation met with RCA to negotiate in recognition of the fact that each side needed the rights to the others patents. RCA wound up paying Farnsworth millions of dollars more than Sarnoff's earlier low ball offer. Sarnoff's haughtiness and bad temper cost his company millions that could have been saved if Sarnoff had made Farnsworth's investors a more reasonable offer. Similarly, now Trump seems to have allowed his ego to get in the way of doing what he needs to do to get what he wants.

Meanwhile, Cruz has indicated his openness to mending fences with former rival candidate Sen. Marco Rubio, despite the fact that any deal between the two cannot be made at this early date. Cruz's willingness to bury the hatchet (and Rubio's expressed desire to do so, as well) means that unity or partial unity is a real future possibility.

Incidentally, there are other candidates who have been intriguingly floated as Cruz's vice-president, even though all such considerations amount to counting chickens before they have hatched. Possible choices that have been suggested include Gov. Scott Walker (R-Wis.) and Carly Fiorina, the business woman from California. Ideas for Trump's vice-presidential running mates have also included Rubio and Walker but not Fiorina and not Cruz. Curiously, Gov. Chris Christie (R-N.J.) seems not to be mentioned much despite his endorsement of Trump almost on the heels of Christie's suspension of his own campaign for the Republican presidential nomination.

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