Editor’s note: In 1972, Murray Pasternack founded Pasternack Enterprises in a 140-square-foot bedroom with $600. In an RF and microwave business built on custom work and weeks-long lead times, he did something no one else would: stocked standard components and sold them from a catalog listing a price and next-day delivery.
Q: Before we get started, can you give me a little background on yourself?
Pasternack: I was born in lower Manhattan, and during World War II I spent my early childhood in the South. My father was an immigrant from Romania, so he wasn’t draftable, and he took a job with the Navy as a plumber at bomb and torpedo factories all over the South. They built those plants where there weren’t a lot of people, but they had to have a railroad and a highway. One of the places that met that requirement was Orlando, Florida — long before Disney. So, I lived in a trailer in Orlando. A little later we moved to Church Hill, Tennessee, a small town in the Appalachian Mountains, where they built the largest explosive plant in the world.
I came back to Manhattan around age five. At 14, in 1954, while in junior high school, I built a semiconductor oscillator and turned it into a keyboard for music. I entered the New York City School Science Fair. I did nothing with it except take it apart again and use the parts for something else. Only two people in Manhattan won first prize; I got a very nice letter from the Assistant Superintendent of the Board of Education and a $50 check. Coffee was a nickel back then.
I went on to high school in Manhattan, but my family moved out of the city to Long Island, so I finished at a public high school there and then went to what is now known as SUNY Farmingdale State College — which, by the way, is now the Murray Pasternack School of Engineering Technology. I am the largest single individual contributor to the school.
Q: So when did you make the transition to work?
Pasternack: After I graduated in 1960, I went to work for Grumman Aircraft, testing the electronic equipment that went into aircraft. I left after 11 months and went to a company called Servo Corporation of America. Their claim to fame was an infrared detector for the railroad industry — it was placed on the side of the tracks, and if a train came by and the sensor detected a lot of heat from a wheel bearing, it would alert someone so the problem could be repaired before the wheel came off. They also had a contract for a radio direction finder for the Marine Corps called the GRD-11, that I worked on. It weighed 1,700 pounds — not exactly a light piece of equipment to carry into battle — but I learned a lot more about electronics on that job.
Q: Where did you go from there?
Pasternack: I had a professor who told me to change jobs whenever you stop learning and getting educated, which made a lot of sense. So, I left Servo, started night school at Hofstra College, and went to work for a little company on Long Island called LEL — Linear Equipment Laboratories — which made IF amplifiers and mixer-preamplifiers for the growing microwave field, mostly for the military. It was my first job as an engineer rather than a technician.
LEL was acquired by Varian Associates, and I was in the fortunate position where several of the people above me left to form a company. That put me in charge of a small project for the Gemini radar receiver, which was used for the first rendezvous in space. I spent the next six years with Varian, and the company kept moving me into higher positions until, in 1969, I topped out the pay scale. I was told I couldn’t expect anything more than a cost-of-living raise, so I told my wife I was quitting to start a company.
Q: And that became your first company?
Pasternack: That company was Southwest Microwave (not to be confused with the current company of the same name — Ed.), which I started in January 1970. We made IF and RF amplifiers and mixer-preamps, very similar to those the LEL division of Varian had been making. Another business owner suggested we merge, and that became Environmental Communications, making RF amplifiers, log amplifiers, mixer-preamplifiers, and some early cable assemblies. We eventually broke up and I had to sue him. I acted as my own attorney and won the case.
Around that time, I decided to go to law school at night, which took four years, while also starting a little operation in a 140-square-foot bedroom in my house, making products like those I’d made at Varian, Southwest Microwave, and Environmental Communications. I knew the vendors, I had the drawings, and I knew how to design these things. I called it Pasternack Enterprises, and I started it with a total investment of $600.
Q: Tell me how the catalog business evolved.
Pasternack: When I was at Varian, I tried to sell IF amplifiers off the shelf by mailing out catalogs, and I was happy with the results. The LEL division was happy too, but corporate didn’t think it was the way to do business — they wanted an applications engineer or salesperson calling on customers to sell product.
So I started mailing catalogs at Southwest Microwave, then at Environmental Communications, and we were getting pretty good results. I built up the mailing list by going to public libraries and college catalogs, finding the physics and engineering departments, and adding the professors and their mailing addresses to my list. I was essentially spamming by mail — sending out a lot of catalogs four times a year to everybody on the list. The list started at a couple hundred names and grew to more than 120,000. Eventually we were mailing three million catalogs, using lists from Microwave Journal and other sources, even QST magazine.
The secret to that business was having the parts on hand, with price and delivery information right there in the catalog. People were less interested in price than in fast availability. At that time, if you called a sales rep or the factory, you’d hear back in a week or so, with a price and a delivery of six to 12 weeks. My approach was different: I bought hardware in large quantities, sold it in small quantities at reasonable prices, and made delivery the same day or the next day. Nobody else was even publishing a catalog with a price, so I was doing something nobody else did. People told me I shouldn’t, but I never understood why, because I thought it was a great idea. I looked at the Sears catalog — almost everyone had one — and figured that if Sears could put out a catalog two inches thick, full of products, each with a stock number, a price, and delivery from stock, I could do the same thing. Why couldn’t you sell electronics that way?
Q: Fast delivery requires keeping a lot of standard products in stock. How does that work?
Pasternack: That was easy, and I’ll tell you how it worked. We started with a basic catalog, and every time someone called asking for something slightly different from what I had, I’d say, “Give me a few hours and I’ll get back to you with a price and delivery.” I’d find the item, find a source, or find something close to it, offer it to them, add it to the catalog, and buy it in quantity. We built up the catalog based on what customers requested. Today they claim to have about 40,000 items.
Q: You can’t have 40,000 items in stock, can you?
Pasternack: Yes, I believe they can. I had several thousand items in the early years of the company. I had a very simple system. I bought what I anticipated would be a year’s worth of an item — which usually didn’t last that long, because the business was growing. I’d mark a certain percentage of the product separately from the rest, with a tag that said, “use last.” When someone pulled that “use last” label off, I reordered. So, we almost never ran out of inventory. It was a very simple system, and this was before computers. If we bought a thousand of something, we might take a hundred, put it in a separate bag with a separate label, and set it aside. Sometimes it went faster than I thought, sometimes it was a little slower. And there were some items I bought in very large quantities because the price was just too good to pass up.
For example, are you familiar with the GR-874 General Radio connectors? They were designed around 1935. General Radio went out of the RF connector business, and I asked if I could have their tooling. They wouldn’t give it to me, but they were kind enough to send me the drawings. I sent the drawings to China, and the Chinese could make that connector for about $1 in large quantities. They wanted a very large minimum order. We used them to make adapters to other connector series and sold them for about $100 each.
We would also contact suppliers who were making a large run for somebody else and say, “You’re making a 5,000-piece run, and I’m sure you’ll have extras, because when you machine parts you want to be sure you end up with enough good ones. We’ll buy the balance at the same price you’re charging your other customer.” It converted their excess into cash and gave us products and inventory. The original relationships were with U.S. suppliers, then Taiwan. I found a company in Taiwan in the early 1980s, and they turned out to be a great supplier. That relationship, I understand, continues. Their key people had been trained in Japan, and they had Japanese equipment, and their quality in the early 1980s was much better than the Chinese could deliver. The products they provided were almost as good as the Japanese and at prices very close to the Chinese prices. So, I was willing to pay a little more for a much better product.
Q: The microwave industry has largely been a custom business. How do you handle that while still promising fast delivery?
Pasternack: I found that most people can use something almost as good as what they think they want when they’re setting up a test or building a prototype. Most of the time we were selling small quantities to engineers and technicians building prototypes, and we might or might not get the production business afterward. But that small-quantity business, if you look at it worldwide, is a lot of volume. And sometimes time is so important that someone is willing to try something that isn’t quite up to the specs they think they need.
Q: At some point you stepped back from the company.
Pasternack: My son, Lawrence Pasternack, took over the company and he sold it 10 or 11 years later to private equity, and I went into practicing law full time. I have been a member of the State Bar of California for 50 years this year.
Q: So you haven’t had a whole lot to do with Pasternack for a while.
Pasternack: I have no current ownership and no real involvement in the company. But I get a great amount of pleasure watching what they’re doing.
Q: What have you been doing since?
Pasternack: I helped start a community bank in 2008. I was one of the founders, the principal stockholder, and a director. I got to the point where I was spending more time with the bank than in my law practice. So, I gave up the law. We merged that bank with another small bank that was based in San Diego. We then had more branches. Eventually we merged the combined bank into Enterprise Bank out of St. Louis, so we ended up with about 56 branches across seven states, from Florida to California.
People said 2008 was a terrible time to start a bank, but it wasn’t. We didn’t have any bad loans, even when other banks did. We were able to lend money to people who were in good shape but needed help at a bad time, and we became one of the largest Small Business Administration lenders on the West Coast.
Q: Are you still working these days?
Pasternack: When I was at Servo, the president of the company came into the lab one day and said we should buy their stock. I had no idea how you bought stock. I was 22 years old, and my family bought bonds and CDs, never stocks, so I had zero education in it. Someone said I should go over to Merrill Lynch, Pierce, Fenner & Smith and I did go and make my first stock purchase. I lost money on that “hot tip.” I decided I needed to learn about stock investing. I bought a book called The Intelligent Investor by a fellow named Benjamin Graham. It turns out he’s the man who taught Warren Buffett how to trade stocks. I read the book and started trading, and I’ve been a stock trader, for better or worse, for 62 or 63 years now. I do it full time, and that’s how I generate the money I’ve donated to the State University of New York and others.
Q: You’ve had a fantastic life.
Pasternack: I have enjoyed living a great life. I truly have lived the American dream. I would never have thought this would happen when I was a youngster. Earlier this year, my alma mater, the State University of New York (SUNY), Farmingdale State College (FSC), named the School of Engineering Technology the “Murray Pasternack School of Engineering Technology.” This past May, I was the keynote speaker at the SUNY FSC graduation. At that graduation, I was honored by the University with the granting of an honorary Doctor of Humane Letters degree.