The inspirational story of Feldstein, the stealthy billionaire who started with nothing
As the founder of Crestron, a maker of many home-automation devices, Feldstein, now 70, is as healthy and energetic as anyone half his age. He's also a tireless tinkerer with small appliances and inventions, with 14 patents to his name. Feldstein wholly owns Crestron, which likely makes him a billionaire (he would not comment on his personal wealth). Based on the sales of similar companies over the past few years, Crestron, which has no debt and has annual revenue of $500 million, is probably worth at least $1 billion (and would be on Forbes' list of the nation's largest unlisted companies). Yet somehow, outside of trade publications, Feldstein hasn't garnered much media attention, even though he has provided hundreds of new jobs during a prolonged U.S. employment downturn.
He said, "When the U.S. economy deteriorated, we moved everything in-house and paid more as a result rather than laying people off. People don't realize the importance of workforce continuity."
The implication is that this is not patriotism, but strategy. Crestron makes a total of 1,500 products, and by manufacturing 80 percent of them in the U.S., he is able to build technically complex devices in small batches with fewer mistakes, Feldstein said. Hiring employees in the U.S. also allows him to cultivate a long-term, loyal workforce that he needs to continue expanding the business. Even with the company's recent spurt in business, Feldstein estimates that about 15 percent of his entire workforce has been on the job for at least a decade. "We extend employees and then give them a career," he says, "and that's one of the most important things that the workplace gives to its employees: it should give that opportunity to those who want a lifelong career." And by keeping Crestron privately held rather than publicly traded, Feldstein doesn't have to pander to the demands of pesky analysts and shareholders who might ask him to move production of his products overseas to cut costs.
Oh, and in case you're wondering: Crestron is not for sale at the moment. Said Feldstein out loud, "My answer to anyone who asks that is no, not to ask what the offer is."
Crestron's success story is little known outside of northern New Jersey, but its electronic control systems are ubiquitous: automated light, sound, and temperature controls for luxury homes; digital screens and speakers for upscale conference rooms; surgical camera controls and displays; classroom projectors; digital signage and retail displays; even remote controls for hot tubs on luxury yachts. The company's equipment is meticulously installed at Microsoft's headquarters building in Redmond, Wash. Seven of the eight Ivy League schools have installed their devices, as well as inside the `penthouse suite at Trump World Tower in New York City and inside the intelligence room at the Pentagon.
Crestron sells its products through a smaller channel force of 15,000 independent partners and distributors, ranging from miniature home theater manufacturers to large home builders, supplemented by inside sales, customer support and marketing staff in 57 offices in 45 countries. Feldstein's core operations are scattered throughout Bergen County, New Jersey, a 30-minute drive from New York City. The company's Rockleigh, NJ campus houses corporate administration and manufacturing, training facilities, and a 100,000 square foot research center. The former headquarters building in nearby Cresskill has become an automated pilot production facility where Crestron assembles the circuit boards used in its products.
That's a lot of infrastructure for a company that started out as Crestron in a room above a Cresskill deli.
Feldstein grew up on the Lower East Side of Manhattan, where his father was a sewing machine operator. George showed his engineering credentials at a young age, winning a citywide physics competition at the age of 15 before earning a master's degree in electrical engineering from New York University.
After graduation, he joined a company that manufactured industrial control and test equipment, later serving as its chief engineer. In 1969, he got into an argument with his boss, who then fired him. (Feldstein recalls, "That company went out of business a year after I left.") The ups and downs convinced him to never work for anyone else again. "I came to realize that I couldn't work for someone else, that I could never get along with another boss," he adds, "so I started my own company."
In the beginning, Feldstein made phone calls to reach out to potential corporate clients, offering to build or repair what they needed. Crestron's first customer was Colgate Palmolive, tasked with building a laser leveling device to help automated assembly lines put just the right amount of powder into a single detergent box. By 1973, the company's business began to stabilize enough to hire an employee. Two years later, the company relocated to a commercial garage, where Feldstein made everything from bank deposit machines to human neurostimulators. He says, "I'll do anything as long as it makes money."
Business really started to take a turn for the better after Feldstein developed a wireless remote control for commercial audiovisual systems. Then the company developed audio switches, video projectors, and lighting control panels. By 1990, Crestron had 100 employees and was generating almost $5 million in annual revenue, most of which came from selling integrated audiovisual systems to major corporations, universities and casinos. When Clinton was president, the White House installed Crestron's SmarTouch line of touchscreen remote controllers.
As the company grew, Feldstein faced a different type of challenge: letting go. "A lot of people take full control as they gradually grow their company," he says, "and then, when they let go, they face all these problems." Feldstein relies on what he calls the "black marble" theory: If you don't know what's in the jar, but you put your hand in 20 times and 20 times you come up with black marble, it's a pretty safe bet that the jar is full of black marble. The same is true for employees: if they do a good job every time you check on them, then they're likely to continue to do a good job - whether you check on them or not. Still, says Feldstein, "If I find something wrong, I'm going to spend a lot of time focusing on fixing it."
This coordinated use of vigilance and trust drove the company's operating income up to $25 million by 1997. Betting on customers-specifically, high-end homeowners-also helped the company's growth. When the Internet bubble burst, Feldstein's core customers still had money to spend. By 2004, Crestron had 500 employees and $170 million in sales. Today, 40 percent of Crestron's revenue comes from customers who wouldn't blink at spending $50,000 to install a home theater.
A bank executive, who wishes to remain anonymous, purchased a 4,500-square-foot home on the top floor of the Montage Hotel in Beverly Hills, California. The home had already been fitted with basic Crestron controls, but the buyer wanted the home to be "the ultimate bachelor pad." At a cost of about $245,000, the apartment home has the latest in lighting, temperature and ventilation controls and home entertainment equipment. In one room, a projector turns the 35-foot-diameter domed ceiling into a giant display. The client can also change the color of the fireplace, which is made of onyx and backlit with multicolored light-emitting diodes (LEDs), to suit his mood.
His clients may be extravagant, but Feldstein is not. He holds management lunches at a local restaurant; wears button-down collared shirts and baggy pants to work; and rides his bike 40 miles a day (weather and work schedule permitting) - up to the foot of Bear Mountain or along the Hudson River. He has a pilot's license, and as everyone knows, he often takes clients for a ride in his Extra 300L aerobatic monoplane, and sometimes he'll fly the company plane to provide customer service. "When I started this business, I used to sit by the phone all day waiting for it to ring," he says, "and I'm very thankful for my customers."
Crestron is a family business. Feldstein's son, Dan, 39, is the vice president in charge of the company's business operations, and his daughter, Wendy, 44, is the head of engineering services.
"Although my last name is not Feldstein, he has always been like a father to me," said Randy Klein, a 21-year veteran of the company who is now the company's executive vice president and chief operating officer (COO). " Technically, he was my 'boss' in the company's organizational chart, but he always treated me as an equal. We learned from each other." Klein said the biggest challenge of working under George Feldstein was "keeping up with him."
Feldstein made frequent rounds of that pilot production plant in Cresskill - partly to keep a watchful eye, but also because he couldn't be bothered. "I sit at my desk for maybe an hour a day and run around the rest of the time," he says, "and I can't fathom that the CEO in charge of the operations of a car company doesn't know how to build a car." At the factory, rows of workers in protective blue coveralls assemble circuit boards. Even the simplest task - inserting various components into the boards and soldering them in place - requires skill as well as precision. More delicate tasks, such as operating one of the two Panasonic high-speed chip placement lines, require a great deal of specialized knowledge.
During one of his inspections, Feldstein paused to give a small warning to assembly-line workers who didn't have their grounding wires attached to their overalls. It was a minor infraction, but one with potentially serious consequences: ungrounded workers risked damaging circuits in the event of an electrostatic discharge - in much the same way that you sometimes get a mild electric shock from touching a metal doorknob. (When his newly developed humidifiers are finished, Feldstein plans to install a few of these in the assembly area, because static electricity is a major factor in the development of humidifiers. humidifiers, since static electricity tends to be easily enhanced in the dry air of assembly areas).
Experienced assembly-line workers can earn $17 per hour, more than double the New Jersey minimum wage of $7.25 per hour, and more than the average wage for electronic equipment assembly-line workers in New Jersey, which is $14.90 per hour. -- which is $14.90 an hour -- is somewhat higher. Feldstein is proud to say that employees also have health insurance and a 401(k) pension plan, and have access to ground coffee made from real coffee beans. Most of the workers are Hispanic women from northern New Jersey, Brooklyn and the Bronx in New York City; many have two jobs. Says Feldstein, "We're trying to arrange a bus to bring employees from New York City to the plant. We're always hiring, so we don't have enough parking." Feldstein spends about $1 million a year on employee training, teaching them new assembly techniques and helping them get safety certifications. He added, "Most of our management started at the bottom, including some of our vice presidents."
A much larger portion of the company's budget -- about 15 percent of the budget -- is spent on developing new electronics. Energy management equipment (i.e., energy-saving controls) is particularly hot, given the rising price of electricity and natural gas. "Crestron's market positioning is still dominated by luxury products," says Konkana Khaund, an analyst at Frost & Sullivan, a leading global consulting firm, "but if they can capitalize on this energy theme, then it will open up a whole new area of sales."
Craig Foster, a senior analyst at market research firm ABI Research, believes the home automation trend is only going to accelerate -- and it's not limited to Hollywood executives. Foster estimates that worldwide shipments of everything related to everything from sensors to servers should grow rapidly to 12 million units by 2016, 20 times the current level.
Energy management is part of the investment theme of automation, but there are stronger trends at play. Apple has sold 150 million iPhones and 40 million iPad tablets, plus competing smartphones and tablets - and for Crestron and its competitors, all of their products will soon have an adapted built-in interface.
Even better, their distribution channels are about to be far larger than they are today. Telcos, cable companies, security companies, and energy utilities are starting to roll out new bundled automation package plans. In October, wireless carrier Verizon launched a home-monitoring service that is operated by controller maker and startup 4Home. Another home automation company, iControl Networks, signed a partnership with cable company Comcast and ADT Security Services.
Perhaps more critical to the future of Crestron is: what happens when Feldstein eventually runs out of energy? "Succession planning is essentially 'everybody keep doing what they're doing,'" he said." Klein, 59, will likely be named CEO of the company.
And until then, Feldstein will continue to tinker with his inventions: "I don't plan to retire. Even on weekends, I get anxious because I'm not at the office."
;