Interview with John Rollwagen David Levy | Vice President Published December 1, 1987 | December 1987 issue TWEETSHAREPOSTEMAILPRINT In January 1986, John Rollwagen joined the board of directors of the Federal Reserve Bank of Minneapolis. It was the beginning of a three-year term as one of three "Class C" directors, meaning that he would represent users of banking services as opposed to some board members who are themselves professional bankers. As with all "Class C" directors Rollwagen's membership on the board required an official appointment by the Federal Reserve System's Board of Governors in Washington under he condition that he not be an officer, director, or employee of any bank, nor own stock in a bank. Rollwagen represents a balancing point of view on the board of directors. As a nonbanker, his direction, recommendations, and general observations are those of a consumer. It is the board's good fortune that Rollwagen also heads a corporation that markets its products internationally. Regional economies operate in a progressively more internationalized and difficult to understand environment. From his vantage point, Rollwagen is in a good position to see developing trends in the worldwide economy and report them at the board's monthly meetings. He provides a greatly appreciated dimension to the deliberations. John Rollwagen, 47, is chairman and chief executive officer of Cray Research, Inc., with headquarters in Minneapolis. He is responsible for the corporation's ongoing development as the world's leading supplier of supercomputers. Rollwagen has been a key figure at Cray Research since 1975, when he joined the company as vice president of finance. His initial assignment sent him searching for the necessary financing to allow the company to move into commercial production. These early efforts culminated in a successful public stock offering and the negotiation of a substantial bank credit line. In 1976, Rollwagen became vice president of marketing and in 1977 president of the company and a member of the board of directors. Several years later he was elected CEO and chairman of the board after Seymour Cray, the company's founder, stepped down. An MIT trained electrical engineer and a Harvard MBA, Rollwagen unites intellectual skills not typically found together. Cray Research boasts of a leader who is a top-flight businessman and a technical expert pioneering an entirely new industry. Rollwagen's personality manifests itself in what can be described as the "Cray Style" (an excerpt): We have a strong sense of quality—quality in our products and services, of course; but also quality in our working environment, in the people we work with, in the tools that we use to do our work, and in the components we choose to make what we make. Economy comes from high value, not from low cost. Aesthetics are part of quality. The effort to create quality extends to the communities in which we work and live as well. The Cray approach is informal and nonbureaucratic. Verbal communication is key, not memos. "Call, don't write" is the watchword. So, to interview Rollwagen for this issue of Region, we called. Region: John, you sit on several boards of directors as well as the Federal Reserve's board. How does the Fed compare? Is it similar to other boards or does it have a unique character? Rollwagen: It clearly has a unique character, sort of a dual personality compared to other boards. I'm on two other kinds of boards: boards of nonprofit or community service organizations. The Fed in some ways combines both. The Federal Reserve Bank runs a business providing services to banking institutions around the region. At the same time it serves a public function helping or participating in the regulation of the national, even the world, economy. In that regard, it's not motivated by strict profit objective or some normal business, but by concerns in a much broader view of the world. Region: The Federal Reserve goes to great lengths to have a mix of private and public sector control. You personally represent one of the key private sector board members who can influence the course of "things" at the Fed. In your estimation, how important is that private-public mix? Rollwagen: It is very important for the reasons I just said about the character of the board. It has a normal private business motivation in terms of providing its services efficiently and effectively, and it has very much of a public service aspect. Therefore, it needs both approaches. The Federal Reserve Bank serves a private industry, particularly in the form of the banking system, but also in the form of business in general. So it needs a down-to-earth, practical approach toward those responsibilities. Region: Yours is primarily the world of supercomputers and high technology. Yet as a board member, you deal mostly with issues of banking and economics. How do you make the leap from the one world to the other? Rollwagen: Well, I guess I don't. I think they are totally mixed together. The computers we make are used to create value, if I can put it that way, in lots of different products and services that are very down-to-earth, from the cars we drive to the buildings we use. So it's not out in left field someplace or in the ivory tower. Making supercomputers is a business and therefore is economics personified. We are a business, and the things the Federal Reserve is involved in or concerned about are exactly the same things that I'm concerned about in the supercomputer business. Region: Several other members of the board are professional bankers. Do you find that your background and experience complements theirs? Rollwagen: Well, we certainly can talk. We have a lot of the same interests. Also, you have to remember that I was on two different bank boards for a total of about eight or nine years—Norwest Bank in St. Paul and then Norwest Bank in Minneapolis. So I'm certainly aware of issues that bankers deal with on a day-to-day basis. Also, our company uses banks all the time; we're part of the same community. Region: As conversations in board meetings drift to questions of free trade vs. protectionism, I've noticed all members are not of one mind on the subject. Where do you stand? Rollwagen: I'm absolutely a free-trader because of my experience at Cray Research. We're dealing with an international marketplace that is not really dominated by any one country. Even though the United States is the largest single market, we have important markets all over the world. Secondly, our source of supply, parts and technology, is not just in the United States. It's from other parts of the world, particularly from Japan. It's inconceivable to me to think of operating our business in anything but a world economy. Anything that restricts that movement of goods and financial and intellectual resources around in that marketplace works against Cray Research. So I guess I'm very much a free-trader. I would add one other thing, though. There are practical limits and problems that do exist. For instance, there are security issues having to do with technology and its ability to be applied to weapons systems and intelligence, let's say, that make it necessary to restrict the access to that technology outside the Western bloc. That's clearly a barrier that exists and must exist in the system. Secondly, not all countries seem to have the same commitment to free trade and open markets; from time to time it's necessary to apply some pressure to get those countries to support the system. In the process of applying that pressure, restrictions can emerge which I would support, although reluctantly and for the specific purpose of really opening up the market. Region: What flows back to you personally or professionally from your involvement with the Fed? Rollwagen: I think it's at two levels: one intellectual and the other personal. On the intellectual level I get a good dose of what is going on economically in other parts of the country and other parts of the world. I see the trends, and that's important in planning my own business. But more than that, I really appreciate the contact with other directors and with the people in the Federal Reserve Bank itself. They are great people. They have interesting ideas. They all come from quite diverse backgrounds, much different from my own, especially the directors from areas away from the Twin Cities. I really like that; l enjoy it a lot. Region: While the Federal Reserve can't do much directly about the federal budget deficit, it nonetheless has been concerned about the impact on the economy of these ever-increasing negative numbers. Do you share that concern? (The question was asked after a minor stock market disturbance, but before the October collapse.) Rollwagen: Absolutely. think it's the number one economic problem we face. Personally, I think the recent events in the stock market are a reflection of that same concern, realizing that we have been accumulating an enormous debt to finance essentially consumption that we can't afford both at the federal and private levels. Sometime we will have to pay it back, and I hope we can do so in a fairly orderly way rather than with some dramatic collapse. l think we came awfully close this week, and we probably are not out of the woods yet. Region: In press accounts of your management style, reporters have connected you with Eastern, mystical style management approaches. What is it about you that is Zenlike? Rollwagen: Well, we're all connected to everything, right? That is sort of an Eastern thought in itself. It's true, I don't know if that direct connection with Eastern philosophy or with Zen Buddhism is that significant. I'm not a practicing Buddhist, that's for sure. But on the other hand, everything that I've read about Eastern religion and philosophies I find very attractive and very reinforcing in real life. People respond almost intuitively or automatically to the concepts. In that sense, I'm a believer. Region: What would be an example of your style where Zen manifests itself? Rollwagen: I'm not sure exactly. It's hard for me to think in those terms. I know my style, but I don't know if I can relate it intellectually to Zen. Basically, the way you can characterize my style is in the acceptance of people for who they are and what they are. It's a real appreciation of them and a firm belief that people have great unrealized talent and capabilities. People really come through if given the chance to exercise that talent. When people get in an environment that's demanding, where they are expected to perform with no backup plan, and they are allowed to operate on their own terms, then the adrenaline flows and they become very successful. When they're successful, you can't turn them off. They just want to get to the next project. In fact, the way it works at Cray Research, we're very project-oriented, and the greatest reward for completing a project successfully is another project twice as hard. Region: Could the Fed use Zen wisdom? Rollwagen: (chuckle) Sure, to set monetary policy. Region: Thank you, Mr. Rollwagen.