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ROOM AT THE TOP:
THE NEW RICH
Were it not for the miscellaneous batch of hard-bitten, shirt-sleevedTexas oil-lease speculators and wildcatters that since World War I has risen on atide of special tax privileges like science-fiction dinosaurs, it could well be saidthat the day of accumulating gargantuan new personal fortunes in the United Statesis just about ended; this leaves the tubbed, scrubbed, and public-relations-anointedinheritors of the nineteenth-century money scramble holding most of the chips. Asit is, fortune-building continues--albeit at a greatly subdued pace outside the lushlyflowing oil industry. For just about everything else of marketable value is tightlyvaulted down, much of it resting comfortably in trust. But even in the oil industry,magnitudes are exaggerated, Texas-style, by writers who desire to bedazzle readerswith a modern if oil-soaked Arabian Nights tale.
New personal wealth is dealt with in this chapter-that is, greatindividual wealth that has shown itself since World War I and, more particularly,since World War II. For the most part it is wealth not known to Gustavus Myers, historianof the first waves of American fortunes and, partly because of the give-away oildepletion allowance, it postdates America's Sixty Families (1937). Classificationof these new fortunes with respect to wealth and super-wealth and their comparisonwith the old fortunes are deferred until Chapter IV.
Actually, before larger sums are bandied about in these pages,let it be noted that a person worth only $10 million (insignificant though $10 millionis compared with many modern fortunes) is very, very wealthy indeed. If a prudent,hardworking, God-fearing, home-loving 100 per cent American saved $100,000 a yearafter taxes and expenses it would take him a full century to accumulate such a sum.A self-incorporated film star who earned 81 million a year and paid a 10 per centagent's fee, 10 per cent in business expenses, a rounded 50 per cent corporationtax on the net and then withdrew $100,000 for his own use (on which he also paidabout 50 per cent tax) would need to be a box-office rage for thirty-four unbrokenyears before he could save $10 million. Yet some men do acquire such sums--and muchmore. But never by offering mere talent, whatever it is, in a free market. Even themost talented bank robbers or kidnappers have never approached such an accumulationbefore being laid low by the eager gendarmerie.
The incandescent Marilyn Monroe, as big as they come in filmdomand a veritable box office Golconda, died broke-an old story with the mothlike entertainersand professional athletes. She bequeathed 81 million to friends but, despite posthumousearnings of $800,000 accruing to her estate, nothing was left after taxes and creditors'claims. Clearly she was in need of a tax lawyer. There was even nothing left to establisha trust fund to generate a paltry $5,000 a year for her invalid mother. Yet MissMonroe, obviously a true-blue American, reportedly drew $200 million to the box officefrom 1950 to 1963.1 More recent reports indicate that something was salvagedfor her mother.
Hard to get, $10 million shows its power in another way. Ifinvested in tax-exempt securities it can generate about $250,000 a year. Now if theowner exercises initial frugality and invests this income similarly each year,it will produce $6,250 the first year and (disregarding compound interest all along)$12,500 the second year, $18, 750 the third year, $25,000 the fourth year and soon, In the tenth year the income of the accumulated income of the original $10 millionWill be $62,500 on a new capital sum of $2.5 million, which automatically doublesitself every ten years. The owner might even do a bit better by investing in taxablesecurities and paying taxes, particularly on the second accumulation, but I havefocused on tax-exempt securities in order to keep to the simplest terms. Yet theordinary man on his 4 or 5 per cent in the savings bank must pay full taxes. Thissort of accumulating on the income of the income, thus generating new capitalsums, has long been the investment style of old Boston and Philadelphia families.Careful to a fault, they own only small yachts, drive only old (butwell-maintained) cars and are accustomed to wear old but expensive clothesof the first class so that they look quaintly dowdy. And they intermarry with oldfamilies, unfailingly. They are people who would rather study the fine engravingon a stock certificate than the brush strokes of an old master. They are, in short,respectably, unobtrusively rich.
How the sizes of new fortunes were obtained will appear in thetext. The Most conservative available figures are used throughout and are criticallyevaluated. For precise figures it would be necessary to get certified copies of networth, which (not being voluntarily proffered ) could be obtained only in the unlikelyevent of a congressional subpoena with the acquiescence of the Supreme Court.The sacred right to privacy is used to screen the dimensions of great wealth, althoughprivacy becomes expendable when young men are summoned into the armed forces for"police" duty at coolie pay and are unceremoniously ordered to strip nakedfor minute scrutiny and examination. And if subpoenaed the figures might not be evenmomentarily accurate because, owing to the undeveloped state of a part of many largeholdings, the owners themselves honestly don't know how much, at going market prices,they are worth. Seeking such accuracy in the figures amounts to committing the fallacyof misplaced precision.2
The Fortune Study
Fortune, stepping into the data vacuum decreed by a delicatelysensitive Congress, has given us the latest précis on the largest individualcontemporary fortunes.3 Beginning our exposition with it and selectingonly the relative newcomers, we find that with few exceptions the newer fortunesrose on the basis of oil and its generous depletion allowances, and upper executiveposition in General Motors Corporation.
Fortune assumed, reasonably enough, that an income of$1 million or more per year (some incomes range much higher--up to perhaps $25 to$50 million) might suggest asset-holdings of at least $50 million. But some largeincomes are nonrepetitive, derive from unloading assets (which might have been procuredvery cheaply) at a large profit; they are not the same as continuing incomes frominvestments. The incomes swollen by relieving oneself of assets at higher prices(capital gains) are reflected in boom times in the sharp rise in million-dollar incomes--from 49 in 1940 to 398 in 1961. But no steady million-dollar incomes at all blossomfrom the sale of services or talent; not even the most extravagantly rewarded executivesor film stars pick up that much in straight across-the-board pay.
The point of departure for Fortune was a Treasury official'sestimate that in 1957 there were between 150 and 500 $50-million-plus asset-holders;there were actually 223 incomes of $1 million-plus, according to the Treasury's subsequentlypublished Statistics of Income: 1957 (p. 20). Fortune to its own satisfactionidentified 155 of them by name. Of this group it published the names of half, theones thought to possess assets of $75 million upward, and gave estimates of theirnet worth in broad ranges. Fortune also named a few other steady big-income beneficiariesat random in its text, outside its list, giving no reason for this deviation. Thelist, confined to then living people, did not name all the big post-1918 fortunes,although here and there some persons who had recently died were mentioned. Some suchfortunes omitted from the Fortune list will be mentioned further along.
Before scanning the Fortune list and then noting qualificationsof it, the reader will be better prepared if he ponders over the tables in AppendixA that provide a broad statistical background since 1940 on the larger incomes andlay the ground for some incisive observations. In the upper brackets at least, theseincome recipients abstractly impaled like skeletal insects in the tables are unquestionablyincluded among Lampman's 1.6 per cent of adults that compose American wealth-holders.No doubt the Fortune list in its entirety, with some additions to be supplied,represents a part of the moneyed elite of the Lampman higher strata. But in the groupof Appendix A incomes below $100,000 or so, many are only those of potential wealth-holders--forthe simple reason that they are from salaries.
Property and Politics
Nonetheless the varying totals shown in Appendix A of incomesin excess of $25,000--numbering 49,806 in 1940 and 626,997 in 1961--certainly representthe cream of the take in the American svstem. This is not a large group and, in relationto a population of nearly 260 million, of which more than half are adults, it isnot any different in relative size from the small group of tight-fisted landownersfound in Latin American countries or from the Communist Party of Soviet Russia.
In order to participate in politics in the Soviet Union onemust be a member of the Communist Party. This is a formal condition. Similarly, inorder to participate meanirtgfully in politics in the United States one must be aproperty owner. This is not a formal requirement; formally anyone may participate.But, informally, participation beyond voting for alternate preselected candidatesis so difficult for the nonpropertied as to be, in effect, impossible. The nonpropertiedperson in the United States who wishes to attain and hold a position of leveragein politics must quickly become a property owner. And this is one reason why unendowedbudding American politicians, not being property owners, must find or create opportunities(legal or illegal) for themselves to acquire property. Without it they are nakedto the first wind of partisan adversity and gratuitous public spitefulness.
Politically the nonpropertied carry little efficient influencein the United States--that is, they have at best only marginal individual leverage--whichis not the same as saying that all property owners participate in politics. But,when all the chips are down, these latter rule or significantly modify the situationin committee rooms and cloakrooms, directly or through amply rewarded intermediaries,In the United States the ownership of property, often evidenced by possession ofa credit card, gives the same personal amplitude that possession of a party, cardconfers in Soviet Russia.
Although different, the political systems of Soviet Russia andthe United States are not basically so different as widely supposed. The United Statescan be looked upon as having, in effect, a single party: the Property Party. Thisparty can be looked upon as having two subdivisions: the Republican Party, hostileto accommodating adjustments (hence dubbed "Conservative"), and the DemocraticParty, of recent decades favoring such adjustments (hence dubbed "Liberal").The big reason third parties have come to naught--a puzzle to some political scientists--issimiply that no substantial group of property owners has seen fit to underwrite one.There is no Anti-Property Party.
BIG NEW WEALTH-HOLDERS
Stated Net Financial Age Worth Activity in Name (millions) 1957 Schooling1. J. Paul Getty $700-$1,000 Integrated oil 65 Oxford (A.B.) (Los Angeles) companies2. H. L. Hunt $400-$700 Oil operator 67 Fifth grade (Dallas)3. Arthur Vining Davis ditto Alcoa executive 90 Amherst (A.B.) (deceased 1962)4. Joseph P. Kennedy $200-$400 Market operator 69 Harvard (A.B.) (Boston)5. Daniel K. Ludwig ditto Ship operator 60 Public school (New York)6. Sid Richardson* ditto Oil operator 60+ Some college (deceased 1959)7. Alfred P. Sloan, Jr. ditto General Motors executive 82 M.I.T. (New York)8. James Abercrombie* $100-$200 Oil operator (Houston)9. Stephen Bechtel ditto Public construction 57 Some college (San Francisco)10. William Blakley* ditto Railway Express and airlines (Dallas)11. Jacob Blaustein ditto Integrated oil companies 65 Some college (Baltimore)12. Clarence Dillon ditto Investment banker 75 Harvard (A.B.) (New York)13. William Keck* ditto Oil operator (Los Angeles)14. Charles Kettering ditto General Motors executive 81 Ohio State (deceased 1959)15. William L. McKnight ditto Minnesota Mining and 70 Public school (St. Paul) Manufacturing Co.16. John Mecom ditto Oil operator 45 Some college (Houston)17. C. W. Murchison ditto Oil operator 62 Some college (Dallas)18. John L. Pratt* ditto General Motors executive (Fredericksburg)19. R. E. Smith* ditto Oil operator (Houston)20. Michael Benedum $75-$100 Oil operator 88 Public school (deceased 1961)21. Donaldson Brown ditto General Motors 72 Virginia (Baltimore) and Du Pont executive Polytechnic Institute22. George R. Brown ditto Public construction 59 Some college (Houston)23. Herman Brown ditto Public construction 65 Some college (deceased 1962)24. James A. Chapman* ditto Oil operator (Tulsa)25. Leo Corrigan ditto Real estate and 63 Public school (Dallas) hotel operation26. Erle F. Halliburton* Oil well equipment (Duncan, Oklahoma)27. Henry J. Kaiser ditto Public construction 75 Public school (Oakland)28. John W. Kicckhefer ditto Paper, containers (Milwaukee)29. John E. Mabee* ditto Oil operations (Tulsa)30. John D. MacArthur ditto Insurance promotion 60 Public school (Chicago)31. H. H. Meadows ditto Oil operator 58 Law school (Dallas)32. Charles S. Mott ditto General Motors exec. 82 Stevens Institute (Flint) of Technology33. James Sottile, Jr. ditto Banking 44 Public school (Miami)34. George W. Strake* ditto Oil operations (Texas)35. Louis Wolfson ditto Financial operator 45 Some college New York) *Not listed in Who's Who 1956-57, 1964-65.
In general, American politics are not nearly so brusque, arbitraryand doctrinaire as Russian politics. But those carried away by the lullaby of Americandemocracy should consult the harsh experience of the Negro and other repressed groupsin the American system. There matters begin to take on a distinctly Russian complexion.
As to the sources of the big incomes (those above $500,000 andover $1 million), Appendix A shows that the aggregate received in this category includescomparatively little in salaries or partnership profits. Receipts in the form ofdividends and capital gains, interest and other forms of property return, were comparativelycolossal. The 398 persons in the $1 million-plus income class in 1961, for example,took only $18,607,000 in salaries, an average of $46,753, and $10,503,000 in partnershipprofits but took $259,574,000 in dividends, $434,272,000 in capital gains, $8,754,000in interest, $3,163,000 from trust funds (not including capital gains from such)and $2,371,000 from rents and royalties. The group as a whole also absorbed $7,915,000of business loss, more than offset by the interest it received. This, in brief, isnot a group of workers even of the upper executive class, and the same holds trueof the $500,000-$1,000,000 group of income recipients.
Fortune differentiated between inherited and personallyassembled wealth. We will leave the inheritors for Chapter IV; examined above isthe Fortune list of the new big wealth-holders, thirty-five in number.
Left off the Fortune list but referred to in its textwere Dr. Martin Miller, New Orleans surgeon, with a reported annual income of $7-$8million from oil royalties; E. V. Richards, New Orleans real estate operator estimatedby Fortune to be worth $50-$100 million; and Matilda Geddings Gray of NewOrleans, who inherited an oil fortune of unstated present value from her father.Fortune also mentioned a sprinkling of new names in the $50-million bracket,but these persons need not detain us here.
Revision of the List
Under critical analysis, this list requires some pruning andrearranging, both with respect to the number of inclusions among the new big richand to estimated size of holdings.
Only the probates of estates of those who have died since 1957can give .us a clue to the value of the fortune, although even they cannot be decisive.But Michael Benedum, "King of the Wild-Catters," died in 1961 at the ageof ninety-two and the probate of his will in Pittsburgh showed a net estate of $68,199,539,putting him only some 10 per cent below Fortune's $75-$100 million range in whichbe appears.4 I count this estimate a direct "hit," as holdingsof this size can easily vary in value by 10 to 25 per cent from year to year, upor down.
Benedum left half his estate to the inevitable tax-evading foundationand after a number of specific bequests to relatives be left the residue to a nephew,Paul G. Benedum, who now ranks as a wealthy man of the lower ranks and directs theBenedum oil properties through his own holdings and those of the Benedum foundation.In passing, it may be noted that Benedum, as Fortune relates, had the amiableand rare habit of cutting younger and even menial employees in on some of his lucrativeventures; thus, a chauffeur who looked for no more than a steady $50 per week wasso favored and predeceased his benefactor worth some $17 million.
Arthur Vining Davis, former head of the Mellons' Aluminum Corporationof America, died in 1962. The press report of his will played back the Fortune estimateof $400 million on his wealth,5 but the probate showed that Fortune hadmissed wildly on this one; it was too high by about 370 per cent.6 Theactual size of the Davis estate was $86,629,282.83, not including $5 million of Cubanproperty. As there is no record of early Davis gifts large enough to have ever puthim in the $400- to $700-million class of wealth-holder, on this one Fortunemust be debited with a very bad miss.
There is no public evidence to justify such a high estimateby Fortune. As of December 11, 1939, according to a Securities and ExchangeCommission study (TNEC study, Monograph No. 29, to be cited later), Mr. Davis owned11.4 per cent of Aluminum Company of America common and a brother owned .96 per cent.Mr. Davis also owned 5.41 per cent of the cumulative preferred. At-the 54-3/4 closefor 1962 a block of 12 per cent of Aluminum common then outstanding was worth $140,397,615;5.5 per cent of the preferred was worth $3,128,547 at the year's high. At the recordhigh of 133-1/2 in 1956, 12 per cent of Aluminum was worth $329,262,364.
This block of stock never could have put Davis into the $400-to $700-million class even in a momentary market flurry. As it was, he had obviouslysold much of it at lower levels or transferred it to others off the record. He couldnot have sold at or anywhere near its high point because then the proceeds exceeding$300 million would have been in his estate; he was too old at the time to divesthimself of any by gift under the provisions of the tax code.
The Davis will, after assigning $1 million and his home to hissecretary, divided the estate into 100 shares. Of these, 50 were put into a publictrust with the First National Bank of Miami, a nephew among the co-trustees; 25 wereput into a public trust with the Mellon National Bank and Trust Company of Pittsburgh,the nephew and a son-in-law among the trustees. Ten shares went to the heirs of adeceased brother, 10 shares to a stepdaughter and 5 shares were set aside for inheritancetaxes. Thus, 75 per cent of the estate escaped taxes. The tax-free income of thetrusts was broadly designated for the usual charities and scientific, educationaland religious work But the trustees, like those of many similar establishments, willcontinue to exercise the corporate voting power of the Davis holdings, which is whatcounts. Davis thus passed his financial power, diminished only by an overall taxof 5 per cent, on to his relatives.
In 1952 Davis had established another foundation, the ArthurVining Davis Foundation, which, according to the Foundation Directory, 1964,at the end of 1961 had assets of only $1,379,672. So no earlier Davis wealth of substantialproportions appears to have escaped notice.
A report is not yet available on the estate of Herman Brownof the construction firm of Brown and Root, Inc., of Dallas, who died in 1962.
Charles F. Kettering, research director of General Motors, diedin 1958 and left an estate "conservatively" estimated at a little morethan $200 million but no inventory was cited." The bulk went to the CharlesF. Kettering Foundation and a trust. At the end of 1962 the Foundation had assetsof $72,020,128, according to the Foundation Directory; and as Kettering inhis lifetime placed large sums for medical research, there seems no reason to questionseriously the Fortune rating of the $200-million range. (One of the surerways of spotting truly big wealth is that it shows itself in huge public transfersof assets during the lifetime of the owner.)
Alfred P. Sloan, Jr., also appears to be justifiably rated.By the end of 1962 Sloan had conveyed to the Alfred P. Sloan Foundation assets thenworth $222,715,014 at the market. Charles Stewart Mott, also of General Motors, hadat the end of 1960 put assets worth $76,754,317 into a foundation bearing his name.The John L. Pratt Foundation of Fredericksburg, Virginia, however, at the end of1962 had assets of only $88,753. But this structure can be looked upon as a preparedfinancial tomb to receive a large portion of the Pratt fortune, ,which can be tentativelyaccepted as close to or in the range laid out by Fortune.
It is evident that the Fortune estimates as checked againstavailable probates show extremely wide variations, approximately correct at timesbut at other times far off the mark. It would, in fact, be remarkable if Fortunehad found an unofficial way to being even approximately correct in all cases.
Ambiguity of the New Wealth
Additionally, one must notice that much of this "new money"is concentrated in real estate, promotional effort and uncertain oil prospecting.The owner of real estate or of oil-producing land holds something not readily translatedinto dollars. The independent oil prospector is subject to price fluctations, curtailmentof politically arranged tax privileges and, in many parts of the world, confiscation.In any event, his wealth consists largely of estimated below-ground reserves, whichmay be erroneous. The real estate operator, in order to cash in, must find for hisproperties buyers, who are relatively scarce; and often the big realty operator issitting on a slippery cushion of bank loans and mortgages. His own equity is seldomas imposing as the facades of his properties.
Few men on the list are in manufacturing or banking, where thereis not only solid evidence of what an enterprise is worth but where the heavy moneyis found. And even big oil operators fall on evil days. Glenn McCarthy, who in 1949threw open the Shamrock Hotel of Houston to a less-than-astounded world and who ismore recently financially in an ambiguous position, is a case in point. Hence I wouldplace a question mark after the name of nearly every independent oil prospector onthis list with respect to the rated extent of his wealth. I do this for two reasons:Most of them own purely private companies and few publish balance sheets and incomestatements. Those that do, such as Murchison's Delhi-Taylor Oil Corporation, haveyears of deficit operations alternating with profitable years. What nonfinancialobservers do is to look at a heap of assets, usually no more than leases and landconcessions, and put some figure on the heap. They do not take into considerationoffsetting liabilities--cost of leases, drilling equipment, political contributionsand the like. This is not to deny that the oil men mentioned are wealthy in varyingdegrees.
Nor is this a point made in passing. The issue underlying myremarks is this: Are large fortunes, solidly comparable in size to the inheritedfortunes, still being made in profusion by free-as-air rugged entrepreneurs in theAmerican economy? Fortune, the Wall Street Journal and most newspapersthat follow the "party line" laid down by these over-arching publicationssay "Yes." I say, most respectfully, "No." In the upshot, thereader can make his own choice.
We have already seen that Arthur Vining Davis drops like theproverbial plummet from Fortune's $400-million class to the $86-million classin probate autopsy and I venture to say that most of the independent oil operatorswill, when they throw in their final hands, show similar downward variations fromebullient outside estimates. But I incline to keep Jacob Blaustein pretty much inthe position Fortune assigned him because be is a full-scale operator, ishigh in national political councils and is a known big stockholder of the muscularStandard Oil Company of Indiana--a solid, old-line Rockefeller enterprise.
The J. Paul Getty Story
J. Paul Getty may be worth less than Fortune rates him,but Getty does not belong to the list of new wealth. Getty himself provides thisinformation as well as his own comments on the Fortune estimate. As wealthypeople seldom contribute to the discussion of their affairs, Getty's action was mostunusual.
Getty, incidentally, was scarcely known except to business associatesuntil the Fortune article appeared, crowning him the world's richest man."Illustrative of the extent to which I had been able to maintain my anonymitythrough the years," Getty writes in his memoirs, "was a chance encounterwith a former classmate I had not seen since my undergraduate days at the Universityof California at Berkeley. Meeting accidentally on a Los Angeles street in 1950,we recognized each other and stopped to reminisce for a few moments. 'By the way,Paul,' my former schoolmate asked me at one point in our conversation, 'who are youworking for these days?'"8
Right after the article appeared, Getty relates, he became asitting duck for a parade of interviewers, cranks, money-seekers and spongers.
As to the source of his wealth, Getty writes, his father diedin 1930, worth $15,478,137. As early as 1916 the elder Getty was a millionaire oilprospector. He left the bulk of his estate to his wife but by 1916 he had enteredinto a 70-30 partnership with his son, allotting the latter, gratis, 300 of 1,000newly issued shares of the Getty Oil Company. By the terms of his father's will Gettygot only $500,000; "but I had no real need for more money; I had several millionsof my own."9 He owned, in fact, more than 30 per cent of Getty Oil.
Getty, in brief, is an inheritor. The son of a wealthy oil operator,he completed his formal education at Oxford University before World War I and wasbrought in on the ground floor as a junior partner of a going business where he didwell.
In 1930 Getty was elected vice president and general managerof George F. Getty, Inc., but the controlling interest remained with his mother andformer associates of the elder Getty. Young Getty, in order to protect the company'sposition, urged the acquisition of additional shares of companies in which the Gettysalready had interests, but his elderly associates held back and young Getty wentahead on his own account. He first bought 160,000 shares of Pacific Western Oil Companyat $7 a share: $1,120,000. He next started buying Tidewater Associated Oil Companyin the open market at $2.50 a share, depression-low prices, and acquired 285,004shares for $923,285.30 or an average price of $3.59.10
Getty, schooled by his father to reach only for aces, was outto get control of Tidewater. He found himself blocked by the powerful Standard OilCompany of New Jersey but, with some unexpected luck, delicately outfenced this giantand finally got control of Tidewater and the Mission Corporation, which the New Jerseycompany had formed to hold its own Tidewater stock. He also picked up at bargainprices the Hotel Pierre in New York, and the Skelly Oil Company, which owned theSpartan Aircraft Company. In the meantime his mother had assigned her Getty sharesto a trust for her grandchildren, with J. Paul Getty as sole trustee.
In 1963 Getty, after accepting Getty oil stock for his variousindependent holdings, held 12,570,939 shares of the Getty Oil Company, which nowowns all or nearly all of Tidewater, Mission, Mexican Seaboard, Skelly and a goodmany others.11 These shares in the same year, by the company's auditedcomputation had a net tangible underlying value of $31.21. This single holdingalone, then, was solidly worth $392,339,006.19 and is only part of the family holding.By late 1967 the market value of J. Paul Getty's Getty Oil holding's had advancedto around $1 billion $200 million.
As Getty personally has always liked to stand free and clearof banks, one may suppose none of it is up for collateral against hidden loans. Addhere and there any stray properties Getty may own, consider that he has made. provisionsfor his sons and grandchildren going beyond those of his mother's trust fund, andone sees looming before one an authentic very large fortune, new in its latter-daymagnitude at least, although not in its origin. Aside from the Sloan, Kettering,Pratt and Mott General Motors fortunes, all post-1918 jobs, it is one of the fewso-called new big ones we can accept without demur (other than denying it is new)from the Fortune list. Had Getty not had money and insight provided by hisfather he could not have picked up these companies.
Getty, commenting on his elevation to hyperbolic billionairestatus, said "there is no such thing as a billionaire among active businessmen,not in the sense that most people would understand the term, An individual may ownor control business enterprises worth a billion dollars or even more, but littleof his rated wealth is available to him in cash. A millionaire or billionaire doesnot have his millions on deposit in his personal checking account. The money is investedin his businesses.
"It is impossible for him to know what his investmentsare really worth at any given time. The values of a businessman's holdings fluctuategreatly. The price of stocks may rise or fall, corporations may show major increasesor decreases in their net worth, innumerable variables may multiply the value ofan investment or wipe it out completely."12
Getty's entire life has been subdued in pitch. He went to schoolquietly--first to the University of Southern California, later to the Universityof California and then to Oxford. He traveled the world quietly, went into businesswith his father quietly and later bought large amounts of stock very cheaply--andquietly. He was married quietly seven times and as quietly divorced, with no hintof scandal. In his memoirs he quietly takes the blame for his marital failures andspeaks with quiet commendation of his various wives. He appears to have quietly evadedpolitics and politicians at all times. In more recent years he has lived quietlyin the baronial halls of Sutton Place, his English manor house, and will one dayno doubt die quietly and quietly leave his swollen fortune to foundations and tohis four sons and many grandchildren. Getty, beyond doubt, has been the all-timeghostly atypical presence in the procession of American wealth. When he speaks--andhe has been interviewed on TV--he speaks, yes, very quietly.
H. L. Hunt and the Politics of Oil
Haroldson L. Hunt, No. 2 on Fortune's list, has beenvariously estimated as worth $250 million to $3 billion.13 Forced to choose,I'd incline toward the lower figure; Fortune pegged him at $400-$700 million,leaving a good deal of leeway, But Hunt's fortune, like that of all the oil prospectors,rests literally in the sands and in money-inflamed politics, domestic and foreign.He no doubt holds a good hand, but one may doubt that it harbors a royal flush.
Hunt, a small-town cracker-barrel philosopher (in this aspectvery much resembling the late Andrew Carnegie and Henry Ford) and overburdened withwildcatted possessions beyond his own wildest, wildcatting dreams, first came tonational political notice during the 1950's (much as Henry Ford did in the early1920's) as a rabble-rousing propagandist for hard-nosed right-wing political pointsof view. For Hunt takes seriously what he has heard around the town cracker-barrel.The violence of the diatribes in his subsidized radio programs--carried to 331 cracker-barrelstations--led many observers to see them as having at least helped nurture the moodfor the assassination of President Kennedy. The programs, seeming overtures to schrecklichkeit,are prepared and taped by a stable of about twenty-five henchmen Hunt maintains inWashington, D.C. In general, views blandishing to the Ku Klux mentality are broadcast.14
On the very morning of President Kennedy's assassination--inTexas--the Hunt radio program in Dallas and other areas predicted pessimisticallythat a day was soon coming when American citizens would not be allowed to own firearmswith which they could oppose their rulers, an important function of red-blooded freecitizens in the cracker-barrel point of view. Of a communist society (thought bycracker-barrel pundits to be imminent in the United States) the Hunt commentatorsaid forebodingly: "No firearms are permitted the people because they wouldthen have the weapons with which to rise up against their oppressors."
Hunt staged his alarmist programs through a series of incestuousfoundations--Facts Forum, Inc., the Life Line Foundation and Bright Star Foundation,none of which is listed in the very complete Foundation Directory, 1964, issuedby the Russell Sage Foundation. Until early 1965 (after the assassination of PresidentKennedy: that is), despite many strongly sponsored protests, Hunt seemed to havemysterious and powerful friends in or behind the Internal Revenue Service, whichgranted these propaganda foundations complete tax exemption. The Life Line Foundationoriginally got tax exemption as a religious organization! To his fingertips the pecuniaryman as well as cracker-barrel philosopher, Hunt further improved his position bysoliciting business donations for his foundations and giving his own food and patent-medicinecompanies reduced advertising rates on his radio programs. For H. L. Hunt believesin killing whole flocks of birds with a single stone.
One of Hunt's many immortal quoted sayings is: "EverythingI do, I do for a profit."
There is also the H. L. Hunt Foundation, founded in 1954, afinancially anemic affair with assets at the end of 1961 of only $799,553, accordingto the Foundation Directory, and which in that year made charitable grantsof a stupendous $17,500. No doubt it is this lithe creation that is destined to receiveand immortalize any portion of Hunt holdings in flight from inheritance taxes.
Although Hunt--silver haired, soft-spoken, frugal, a food faddist-isvery rich, few people are able to say they have ever seen the color of his money.He has never been known to contribute in the presence of witnesses more than $250to $500 to any single political candidate; and in 1956 he gave the Republican Party,over the counter, a mere $38,000. In 1952 the Republicans tried to entice $300,000from him, but Hunt came up with only $5,000--this, at least, is according to thepublic role of penny-pincher that he plays.
But owing to the vastness of his landholdings, sprawling overthe Southwest and the Middle East, and his seemingly uncanny ability to obtain high-levelpolitical chaperonage at crucial moments, realistic observers surmise that Hunt ispassing out large sums under the table. "He must have a front man he spreadshis money through," hostile Senator Ralph Yarborough of Texas has said. "Aman with that kind of bank roll is bound to have."
It is rumored in Texas, according to the New York Times(August 17, 1964), that Hunt put up $150,000 to get General Douglas MacArthur theRepublican presidential nomination in 1952 and that he put up $100,000 for the Kennedy-Johnsonticket in 1960 owing to his longstanding friendship with Lyndon B. Johnson. BoothMooney, the Hunt public relations man in Washington, wrote the authorized TheLyndon Johnson Story in 1956, updated in 1964; and Lyndon Johnson is an old friendof the oil depletion allowance as well as of Hunt. Although Senator Barry Goldwaterin 1964 stood forthrightly for straight Hunt political wisdom, Hunt testily deniedthat he was supporting Goldwater against the old Huntsman, L. B. J.
One must agree with Senator Yarborough that Hunt and other Texasoil men are passing money (or some equivalent) to political figures. If they didn't,they wouldn't have the depletion allowance, ostensibly passed as a defense measureto stimulate the search for oil but also serving the useful function of providinga politician's entering siphon into the oil Golconda. There might instead be a specialhigh tax on oil!
Here we touch the edge of a problem: Why, if the independentoil men are so favored by nature and politicians, do they show this political rancor?True, not all the oil men are so perturbed as Hunt and some others, who apparentlyfeel that their easy-come wealth could as easily be whisked away; many of the morerealistic, less anxiety-prone Texas oil crowd speak of themselves as just plain luckyand see no need for making the world safe for future wildcatters.
But H. L. Hunt is an expression in exaggerated form of the irritationand resulting apparent meanness of many oil independents, even though most oil menappear to regard him as more than a little kooky. What produces this irritation?There is, first, the annual tax bill. Some of the successful oil men write annualchecks for the Internal Revenue Service in amounts that would stagger the ordinaryman. And most of the oil men are ordinary men who early in their lives worked longhours for small wages. The men who write these checks still think in terms of theoriginal $20-a-week roustabout. And while it is frequently said that one wouldn'tmind writing big tax checks if one had the big incomes, to have worked in one's earlylife on the supposition that what one acquired one could keep and then to learn afterhitting it big that one must share to some extent with the government--or politicians--ismore than some persons can swallow gracefully. Some of the oil men, Hunt included,feel very much the way a man earning $60 a week would feel if he was told the withholdingtax was to be $50. They just aren't psychically attuned to their new positions. Ontop of the tax bite, very much softened by the depletion allowance and drilling write-off,the oil men find they must share what is no doubt a good part of the depletion benefitswith hungry politicians in the form of "campaign contributions." And forthese political contributions they feel the politicians ought to deliver more. Thepoliticians, to extenuate their less than totalitarian success, no doubt report thatthere are various obstacles in the form of Liberalism, Communism, Socialism, EasternCapitalists, Labor Unions, Welfarism and a world full of Wrong-Thinking People allthe way from college professors and journalists to Supreme Court justices. The enormityof it all, the injustice of all these misguided people stirring a witch's brew withwhich to annoy Horatio Alger's own darling boys out on the oil frontier, finallybecomes more than human flesh--or at least H. L. Hunt's flesh--can stand.
Hunt has seen it all at first-hand, indeed. He has regularlyattended the national conventions of both parties, keeping his ears close to theground, his eyes sharp and his nose clean for any whiff of Godless un-Americanism.And there is, as God only knows, much of it around, in the very Constitution itself!
There is, too, the milieu of Texas as a force shaping Texasconsciousness. For Texas has very much the economic and political status of a colony,as also have many far less bustling western states. In the words of Senator Wilbert(Pappy) Lee O'Daniel, Texas is "New York's most valuable foreign possession."
The widely traveled John Gunther in 1947 found that "Texasreminded me a good deal of Argentina . . . cattle culture, absentee ownership, vastland holdings by semifeudal barons, a great preoccupation with weather, an under-developedmiddle class, interminable flatness and open spaces, and fierce political partisanshipand nationalism. And . . . reaction closely paralleling that of Argentina."15
Most of the state is in fact absentee-owned by big eastern capital.The largest enterprise in the state is the Humble Oil and Refining Company, subsidiaryof the global Standard Oil Company of New Jersey, the annual gross revenue of whichexceeds the combined revenues of thirty state governments--$11.471 billionversus $11.375 billion in 19,65. The operations of the huge eastern enterprises--DuPont, U.S. Steel, General Motors, Dow Chemical and various others--are splatteredright and left. And many of the prominent men in the state, Hunt included, originateelsewhere, are in effect colonial concessionaires. Many Texas oil men are not nativeTexans at all.
With a thin layer of native wealthy and imported representativesof big corporations at the top, bellowing the glories of Texas in history and contemporaryculture, most Texans find themselves somewhat dazedly in the low-income classes,dirt poor--in fact, colons. Gunther was told in Texas that twenty corporationsran the state, but he thought this exaggerated. I don't think so. At least, the rankand file colons, many close to peons, do not run it--and they know it.
Texas boastfulness, free-swinging behavior and loud talk aboutindependence of spirit are all a compensatory reflex to the feeling, deep in manyTexans, that they are dusty puppets manipulated from outside. Some informed Texansamuse themselves sardonically by giving visitors the home addresses in New York,Boston, Philadelphia, even Amsterdam, of the owners of prominent items of Texas property.
One word fits the general Texas political consciousness fromhigh to low: resentment. And some of Hunt's outpourings have awkwardly expressedsimply this.
As to colonialism, it shows itself everywhere in this way: Onecan see a great deal going out--cattle, cotton, oil, minerals, chemicals--but littleor nothing coming in. The dividends go out, too. Texas, like Pittsburgh seventy-fiveyears ago, is being bled grey, if not white.
The niggardliness of Hunt's known political handoutsis thought to derive from the position that, although Hunt may like a man's politicalstance, he does not like to back losers. His political contributions, like thoseof the oldline magnates, are not made to support or propagate principles so muchas to purchase instant influence in government. In this respect he seems, if reportsare true, cut from the same bolt as the late Henry J. Havemever, the sugar magnate,who testified before the United States Industrial Commission that he habitually contributedto both political parties (as do the oil men) and explained: "We get a gooddeal of protection for our contributions."
Hunt, lamentable to relate, has had some hard times with cruelpoliticians. When he bid $17 an acre on offshore oil tracts that the government ordinarilyleased at $406 an acre he was unsympathetically rebuffed by Secretary of the InteriorFrederick Seaton. Hunt thereupon procured Senator Everett M. Dirksen and RepresentativeCharles A. Halleck, statesmen of the purest Republican strain, to convoy him to aprotest interview with Seaton. This eyeball to eyeball confrontation came to naught,But after the tidelands were transferred under Eisenhower to state jurisdiction--forwhich the well-heeled oil lobby had worked every bit as hard as wildcatters on ahot tin roof--Hunt found Texas Governor Allan Shivers, a board member of Hunt's FactsForum, far more accommodating. In this matter Shivers's land commissioner, BascomGiles (before he was bundled off to the state penitentiary for getting caught cheatingthe state in another quarter), approved all of Hunt's bids for more than 100,000acres of tidelands leases, even though Hunt bid an average of $6 an acre while theaverage over-all bid was $78. As I remarked, Hunt is frugal and this frugality--aidedby his knowledge of governors--has helped make him wealthy in a nation where peopleare so foolish as to pay whatever it says on the price tag.
The last president of whom Hunt fully approves was Calvin Coolidge;even Herbert Hoover he finds too soft. Both Eisenhower and Kennedy he regards asdisasters of virtually Rooseveltian proportions. Although backing haughty DouglasMacArthur for the presidency, Hunt literally doted on Senator Joseph McCarthy, withwhom he zestfully played cards and exchanged fraternal favors. For governor of Texashe backed morose General Edwin Walker, whose right-wing propagandizing forced himout of the Army, to the regret of a considerable congressional bloc. The politicalideology of William Buckley, Jr., himself a scion of a small-bore Texas oil fortune,makes a strong appeal to Hunt although he believes the volubly rhetorical Buckleyuses too many big words. Hunt, unlike Buckley, sees nothing to be gained by repackaginga muted kluxishness in fancy language as a tortured endeavor in high moral aspiration.Hunt deeply admires Candyman Robert Welch, founder of the John Birch Society, George(Stand-in-the-doorway) Wallace of Alabama and others who stand forthrightly for thetrammeling of common equity. According to the New York Times, Hunt's idealDemocratic ticket of 1964 would have been Harry F. Byrd of Virginia for presidentand Frank J. Lausche of Ohio for vice president with a Republican ticket consistingof Bourke B. Hickenlooper of Iowa and Roman L. Hruska of Nebraska.
Showing the earnestness of his beliefs, Hunt spends a good dealof priceless wildcatting time bombarding newspaper editors with cracker-barrel messages.For he believes that if the American people would only remove the scales from theireyes they would see that the nation is being subverted right and left. Among thesubverters, as he sees it, are the governesses, nurses, tutors and teachers of thechildren of the established rich who grow up to become extreme leftists like W. AverellHarriman, Nelson Rockefeller, John Lindsay, G. Mennen Williams and John F. Kennedy--allalien to the cracker-barrel. One can see what they did even to language-frenziedWilliam Buckley, Jr. It is very insidious. But although he almost from the firstunpatriotic rejection of his cheap bid for valuable tidelands disliked Eisenhower,Hunt has not yet turned on his close friend Lyndon B. Johnson, of whom he said earlyin 1964:
"Johnson is the kind of President who can lead Congressaround by its nose. I wouldn't mind seeing him in there for three terms."
Hunt was born in Vandalia, Illinois, in 1890. He could readat age three and early displayed a phenomenal memory, which he has retained throughoutthe years. Like Henry Ford basically an intelligent but very partially informed man,he quit school in the fifth grade and became a drifter at thirteen. After wanderingthrough the West as a barber, cowhand, lumberjack and gambler (Hunt still likes togamble and claims to trounce the racetrack bookies) he settled in Arkansas, wherehe became a moderately prosperous cotton farmer. Ruined by the collapse of cottonprices in 1921, he turned for lack of anything better to oil, and was literally sweptoff his feet toward riches. According to the Hunt legend, he struck oil on the firsttry with a drilling rig he bought with a $50 loan. Another version is that he wonthe money, or the rig itself, in a card game.
A wildcatter with little or no money must strike oil right awaybecause, as Hunt himself testifies, only one in thirty attempts to get oil succeedsand the average cost of each attempt now is about $250,000. Hunt attributes his continuedsuccess to following the law of averages: If one keeps trying, one will eventuallystrike oil. He claims he has drilled as many as 100 dry holes in succession, whichat $250,000 average per hole is $25 million.
After much successful drilling in Arkansas, Hunt shifted toEast Texas, not then considered likely territory. But there aging C. M. (Dad) Joinerbrought in the world's largest producing field. Hunt bought Joiner's discovery well,took a lease on 4,000 nearby acres and wound up with most of the Joiner land in adeal that many chroniclers profess to find mysterious. Hunt says he paid $1 millionfor the lands, money he had made in Arkansas. But Joiner, like most wildcatters,died broke, while the bubbling East Texas field swirled Hunt upward to oildom's Pantheon.He now, like most of the Texas oil men, operates all over the world, hobnobs withthe Arab sheiks and plays oil politics wherein the white chips cost anything from$1 million to $10 million.
Suspected of being the financial angel of various far-out right-wingagitational groups, Hunt is regarded by some observers as dangerous. And in a sufficientlyintense atmosphere he might be. But all of the various right-wing groups to whichsome politically unsophisticated wealthy people contribute as yet show no signs ofbeing more than money-cadging rackets set up to squeeze a profit out of the fearsof rich neurotics, No doubt they stir passions but their leaders couldn't stage acracker-barrel putsch, much less set fire to the Capitol wastebasket. If Hunt isgiving any of them money, it can only be his version of a share-the-wealth movement.
Hunt has been overheard introducing himself to strangers bychirping: "Hello, I am H. L. Hunt, the world's richest man. . . .
Clint Murchison and Sid Richardson
Joseph P. Kennedy is sufficiently recognizable as the sire ofthe late president to need no further identification. His career has been exhaustivelyinvestigated by Richard J. Whalen in The Founding Father, which is almostclinical in its penetration. Fortune seems to me to rate him on the high side.Many of the people on the Fortune list deliberately avoid public notice, attemptingto blend, chameleonlike, into the background. One who confesses to this sort of shynessis Daniel K. Ludwig. The General Motors fortune-hunters and Henry J. Kaiser are ratherfulsomely known to the public through newspaper reports and need not detain us.
Two oil men of a cut somewhat different from H. L. Hunt perhapsshould be noticed. They are Clint Murchison and Sid Richardson, who often made ateam with the Murchison sons. In some ways more ambitious than Hunt, they have alsobeen more realistic. Although rightists politically, they have never showed a desireto play the role of a Fritz Thyssen in the American system."
Murchison is the plain man as a multimillionaire, shirtsleeves,unassuming manner and all. His grandfather and father owned the First National Bankof Athens, Texas, which Clint now owns, and Clint had a short stay at Trinity University,Texas, before entering the bank. Upon his demobilization from the Army in 1919 heencountered his boyhood friend Sid Richardson, who had also tried college and whowas now dealing in oil leases. Because he liked trading for the sake of trading hejoined Richardson. After a period of buying, selling and exchanging leases throughoutthe Southwest, barely keeping ahead of the game, Murchison pulled Richardson outof a poker game in Wichita Falls one night to investigate the rumor of a wildcatwell near the Oklahoma border. They sneaked past guards close enough to smell oil,and the next morning they spent $50,000 buying regional leases. The following daythey unloaded the leases for more than $200,000 and were off and running in a businessway.
During the depression Murchison built up the Southern UnionGas Company and the American Liberty Oil Company, both later sold. Then he formedthe Delhi-Taylor Oil Corporation, always rising higher on a flood of new oil.
Murchison is distinguished from most of the other Texas oilmen by the breadth of his diversified non-oil interests and by his participationin a number of national financial coups with the alert Allen Kirby and the late RobertR. Young of the Alleghany Corporation.
As to his diversified interests, fie is virtually the sole ownerof the Atlantic Life Insurance Company of Richmond, Martha Washington Candy Companyof Chicago and Dallas, Waco and Austin taxi, bus and transit lines among varioussmaller interests. He is or was the dominant owner of the American Mail Line, Ltd.,of Seattle; Delhi-Taylor Oil Company; Holt, Rinehart and Winston, New York publishers;Diebold, Inc., office equipment; and a chain of small Texas banks as well as miscellaneousother goodies. He has a substantial interest in the Transcontinental Bus System;American Window Glass of Pittsburgh; and Southeastern Michigan Gas Company. Of course,even as this is being written, his holdings and those of his sons may shift in theunending succession of deals for which he is noted. His general strategy appearsto be to pick up cheaply properties that do not appear to be living up to their potentialand to make them into good earners by installing skilled managers. He gets wind ofthese properties, as do most wealthy men, through professional investment locators.
He was approached by the late Robert R. Young, a fellow Texanand the financial mentor of Woolworth's Allen Kirby in the Alleghany Corporation,and was asked to join the Young-Kirby forces in the 1950's in seeking control ofthe Morgan-Vanderbilt New York Central Railroad, the Piéta of railroad cognoseenti.Alleghany already controlled the Chesapeake and Ohio Railroad, a lush earner. Murchisonjoined Young and brought Richardson with him. Between them Murchison and Richardsonput $20 million on the line.
Clint, after talking with Young over long-distance, told Sidabout the transaction on the telephone. "When the calls were over," saysCleveland Amory, who researched the Texans in their native habitat, "Richardsonthought the deal was for only $10,000,000. Informed it was twice that, he calledhis partner back. 'Say, Clint,' he said, 'What is the name of that railroad?'"
The capture of the prize New York Central by this group madefinancial history, as they say.
Murchison and his sons also followed Alleghany Corporation andtook a position in the stock of Investors Diversified Services, which controls atangle of investment trusts with aggregate assets of more than $1 billion.
Richardson, Amory informs us, was a bachelor and lived aroundin various hotels and clubs. Amory assigned him a wealth exceeding a billion dollars,a figure few others agree with. But he owned an island in the Gulf of Mexico wherehe hunted and fished. He declined to write letters and had no secretary; his officewas in his hat. He owned a fleet of Cadillacs in Dallas and one each in every cityhe regularly visited.
In 1947 Richardson established the Sid W. Richardson Foundationof Fort Worth, Texas, which for the end of 1962 reported to the Foundation Directorynet worth of $69,554,801. Benevolent grants for the year totaled $14,500, whichhardly spread much sunshine among the heathen. In the meantime the income on thisbig accumulation most of the time since the fund was started would have been subjectto maximum tax rates up to 91 per cent, more recently 77 per cent. The foundation,however, in a neat stroke, preserved all this income intact and saw to it that noneof it went to paying for the costs of sacred national defense.
Murchison, widowed and remarried, owns a 75,000-acre ranch inMexico's Sierra Madre Range. Here he has entertained the Duke and Duchess of Windsorand other ultra-magnificoes. In fact, he owns several homes; one has a room witheight beds "so a group of us boys can talk oil all night."17
The Wolfson Story, in Brief
The only other person of special interest on the Fortunelist is Louis Wolfson, assiduous wheeler-dealer of Miami Beach who has engaged inmuch shuffling about with New York Shipbuilding Corporation and the construction-dredgingfirm of Merritt-Chapman & Scott among others. Wolfson is one of the standardRoman-candle phenomena of American society, one of hundreds that come and go acrossthe financial horizon like fireflies, and Fortune itself demoted him fromthe list of heavyweights in 1961.18 Having no reason to gainsay Fortunehere, I accept its last judgment on Wolfson.
Wolfson and an associate were convicted on September 29, 1967,in federal court on nineteen counts of criminal conspiracy and illegal stock sales.Gaudily overdramatizing, newspapers pointed out that Wolfson faced a possible ninety-fiveyears in jail. When it came to sentencing the judge meted out sentences of one yearon each of the nineteen counts, with the sentences to run concurrently. If over-ruledon appeal, Wolfson will then serve one year with the customary time off for goodbehavior
Nominees of the Satevepost
Thus far I have confined myself to the Fortune list ofalleged new builders of alleged big fortunes; but others, too, have their candidates.
Accepting and endorsing Fortune's nominations of JohnD. MacArthur, John Mecom, Daniel K. Ludwig, Leo Corrigan, William Keck, R. E. Smithand James Abercrombie as financial big-shots and dispensing a bit of scuttlebuttabout them, the Saturday Evening Post in 1965 put forward six additional candidates:Dr. Edwin Land, inventor of the Polaroid camera, whom the Post credits with$185 million, a doubtful figure despite the soaring market prices of Polaroid stock;Henry Crown, head of the General Dynamics Corporation (government contracts) anddabbler around in building supplies, real estate and railroads, whom the Postsays is worth $250 million; Howard Ahmanson, California insurance and savings-and-loanwizard, worth $300 million according to the Post; and W. Clement Stone, insurancepromoter, worth $160 million on the Post's nimble abacus. The Postdid not turn up any new information on ultra-shy Ludwig (who it averred had madea round billion dollars since World War II); none on Charles Allen, Jr., Of the investmentbanking firm of Allen and Company, other than that he is a "financier."And no more on John Erik Jonsson than that he is the major stockholder in market-zoomingTexas Instruments Company and the possessor of a "huge fortune." 19
All these figures, even those bearing on Land, are little morethan curbstone estimates. Land's could be about right, for he owned 51 per cent ofthe Polaroid Corporation stock at the inception of its productive phase. But onedoes not know yet to what extent he may have revised his holdings. As Land is a technicalman, an inventor who sticks closely to his work and has ready access to all the capitalhe thinks he needs (he was bankrolled to the tune of $375,000 by the old-line heavymoney of W. Averell Harriman, James P. Warburg and Lewis Strauss, all vastly enrichedby their Polaroid stock) he retains a large interest. Precisely how much we shallsee later.
Of all the persons named thus far in this chapter, Land is theonly one who has created a ground-up new free enterprise. All the others jumped aboardexisting merry-go-rounds or hung onto government coat-tails, although Kettering andDonaldson Brown did significantly creative jobs at General Motors.
Land did far more than invent the Polaroid camera, which developsits own pictures. He has more than 100 inventions to his name in the field of opticsand was inventing while still a student at Harvard, which he quit. He is not a bitinterested in money and resents being categorized primarily as a rich man. He livesin moderate middle-class style in Cambridge, Massachusetts, and has a small farmin New Hampshire. Like Pasteur, Edison and other creators, he lives mainly in orderto work.
His impact on the world has been far more than adding to itsmarketable gadgetry, for he played the chief role in developing cameras (such asthose used in the famous U-2 espionage plane) that would take detailed pictures atmore than 70,000 feet of altitude. It was his cameras that exploded the idea of a"missile gap" and detected the Soviet missiles in Cuba. He is currentlyinterested in ways of humanizing machine society, eliminating the "problem ofmass boredom and mental stagnation" in American life, particularly among industrialworkers. Whether he cracks this nut or not, his mind is soaring in an empyrean farabove that of Hunt, the wildcatters and the wheeler-dealers.
Most of the men mentioned on both the Fortune and thePost lists are obviously of wheeler-dealer stripe, the kind that can wellbe, financially speaking, here today and gone tomorrow. In a steadily continuinginflation they will all no doubt come through with burgees flying; in the event ofa substantial recession, some could find themselves in disturbed relations with theirbanks if not on the streets selling apples.
The New York Times, September 13, 1963, offered a fewadditional names of supposedly new rich: Thomas J., Jr., Arthur K. and Mrs. ThomasJ. Watson, their mother, collectively then worth $108 million in International BusinessMachines stock; Sherman M. Fairchild, son of a founder of IBM and dominant ownerof Fairchild Camera and Instrument and Fairchild Stratos; Archibald G. Bush, witha $103 million holding in Minnesota Mining and Manufacturing; Cyrus Eaton, Clevelandbanker; and a variety of others.
But very few of the names mentioned by the Times additionalto those named by Fortune and the Post are of men who made their ownfortunes. Like the Watsons and Fairchild, they are mostly inheritors: Howard HeinzII, the pickle king; Joseph Frederick Cullman III of Philip Morris, Inc.; J. PeterGrace of W. R. Grace & Co.; Lewis S. Rosenstiel of Schenley Industries; NormanW. Harris of the Harris Trust and Savings Bank (Chicago); and others.
More Entries for the Pantheon of Wealth
These are by no means the only names of possible new big-moneynabobs that could be mentioned. And while there can be no guarantee that some sleepingprince has not been missed--a super-solvent wraith like J. Paul Getty--the law ofdiminishing returns sets in after these listings. We are not, of course, stoopingto mention the ignoble wretches, the proletariat of Dun & Bradstreet, evaluatedat less than $75 million by wealth-watchers, even though some of them are interestingcharacters and are given compensatorily reverent treatment by Fortune fromtime to time.20 We'll run into a few occasionally further along, resolutelyplowing their golden ruts.
But, to consider one of a number of rejected nominations andthe reasons for banishing him from the financial Pantheon (lest the reader supposeI am being arbitrary in those I flunk out), let us consider the late William F. Buckley,Sr., publicly saluted as having been worth $110 million on his death in 1958. 21Money of this specific gravity should have put him high in the Fortune hierarchy;but Fortune did not so much as mention him, with what to me seems ample justification.
Buckley, an authentic on-the-spot imperialist concession-hunter,before his death stirred desultory attention by founding a private school in Sharon,Connecticut, dedicated to safeguarding small children "against contaminationby the theories of so-called 'liberalism.'"22 His son, William F.Buckley, Jr., carries his father's torch of anti-New Dealism in the oil-slick NationalReview and in books embarrassingly revelatory of elementary intellectual inadequaciessuch as God and Man at Yale, McCarthy and His Enemies and Up from Liberalism.A McCarthy-lover, the son has also collaborated on a rousing defense of the HouseUn-American Activities Committee. Education, to the son as to the father, is guidedindoctrination with ancient unwisdom.
Apart from the elder Buckley's authoritarian views on education(he decreed that his children be trilingual and study the piano whether musicallyinclined or not), he was reportedly an ardent admirer of Theodore Roosevelt, particularlyof Roosevelt's penchant for sending threatening battle cruisers to objectionable(small) countries.23
When he gave up the ghost, Buckley père was notwidely known. It is hardly an exaggeration to say that his death recalled him fromoblivion to obscurity. He was not immortalized in Who's Who, Current Biography1940-1960 or Poor's Register of Corporations, Officers and Directors.The New York Times carried no précis of the probate of his will,which it usually does on large estates. It seems fair to say that attention has focusedon him retrospectively only because of the verbal political posturings of his sonand namesake.
While there is no reason to doubt that the elder Buckley mayhave left his ten children and twenty-eight grandchildren (as of 1957) more moneythan might be good either for them or for the country, there is no external evidencejustifying his placement in the $110-million, the $50-million or even the $25-millionclass. Compared with grizzled Clint Murchison or old Sid Richardson, he simply doesnot rate. I omit any detailed analysis of the Buckley enterprises, all small. 24
Buckley's Pantepec Oil, of which John W. Buckley is now thefamily director, in 1962 had total assets of only $3,435,011 and working capitalof $35,544. It had three million shares outstanding, all valued on the market aslow as $600,000. But in 1956 it sold its Venezuelan concessions to the Phillips PetroleumCompany for $4.9 million, a respectable sum to which I genuflect. Priced a whileback in the $2.00 range, the stock of Pantepec slid down to 20 cents a share in 1963.25
Coastal Caribbean Oils, Inc., another Buckley company, in 1962had total assets of $3,632,216 and a deficit in working capital of $138,286. LikePantepec it was pretty much a hollow shell consisting of (1) stock issue and (2)arbitrarily valued exploring concessions. It boasted 3 employees and claimed 16,453stockholders, no doubt all praying madly for the blessed increment in the form ofgushers.26 Canada Southern Oils, Ltd., a holding company, in 1964 hadstated assets of $9,653,393, a working capital deficit of $469,704, 10 employeesand 15,000 stockholders.27
James L. Buckley is an officer and director of some Pantepecsubsidiaries but he is also vice president and a director of United Canso Oil andGas, Ltd. William F. Buckley, Jr., in person, is a director of Canso National GasCompany, a subsidiary. Moody's assigns United Canso assets in 1963 of $10,599,807,net working capital of $1,474,118, net loss for the year of $304,562 and an accumulateddeficit of $7,382,815, 45 employees and 10,400 stockholders.
To what extent other stockholders divide the clouded prospectswith the Buckleys the record does not show. But even if one concedes all these statedassets (less liabilities, such as accumulated deficits) to the Buckley family anddoubles the total for good measure one doesn't get within rocket-range of $110 million.Nor have the Buckleys established the usual wealthy-man's foundation nor made telltalelarge transfers to universities or hospitals.
This is not to deny that Buckley senior in his lifetime probablycollected more legal tender than 95 per cent of Americans have ever eyed wistfullythrough the bank teller's wicket. But he was just not rich of the order of $110 millionunless he held assets well concealed from public view. This is always possible butthere are considerations for holding it improbable.
That the elder Buckley was never a really large operator isstrongly suggested by the history of his son's National Review, which thefather admired as something of a time bomb under the pallid outlines of an AmericanWelfare State projected by the New Deal. I reason that a super-wealthy father, admiringthis curious publication so much, would have underwritten it completely, using anydeficits to charge a tax loss against real income, This wasn't done.
The National Review was founded in 1955. Capital of $290,000was importuned from 125 angels, not from Buckley alone, although this was a triflingsum to a man reputedly worth $110 million even if he did have a wife and ten children.By mid-1958 the Review had accumulated a deficit of $1,230,000. How this waspaid off or written off is not yet clear. But, in order to offset continuing deficits,in 1957 the parent company, National Weekly, Inc., bought a radio station in Omahafor $822,500 and in 1962 an Omaha FM station. These have reduced the deficits, itis said, although they continue--happily for liberalism, progressivism and plainreason.28
But a big fortune would hardly find it necessary to run aroundjuggling obscure radio stations with which to offset relatively small publicationlosses, which could be used to reduce taxes on any very large income. A wealthy manmight enjoy owning a minor money loser like National Review, with up to 77per cent of the loss a tax saving. My conclusion, then, is that there are no vastBuckley assets.
Buckley, Jr., has postured before the country in various guises,mainly as a neo-conservative with ill-concealed negative intentions toward the disconcessioned.But he has also made a public display of the fact that he is a particularly devoutCatholic. His supposedly profound Catholicism, however, did not prevent him fromteeing off on Pope John XXIII when that lamented pontiff, respected even by manyunreconstructed Protestants and atheists, issued the humane encyclical Mater etMagistra, which urged aid for the underdeveloped peoples of the world via welfareprograms. The encyclical, the Buckley concession-heir pronounced, was "a venturein triviality" and was not sufficiently alert to "the continuing demonicsuccesses of the Communists." If these latter and their dupes have successesin odd corners of the world, life will manifestly be difficult for Pantepec.
America, the Jesuit weekly, responded that to imply that"Catholic Conservative circles" accepted the Church as Mother but not asTeacher was "slanderous" and that "It takes an appalling amount ofself-assurance for a Catholic writer to brush off an encyclical. The NationalReview owes its Catholic readers and journalistic allies an apology."
Never at a loss for an unexpected word, Buckley stigmatizedthese comments as "impudent."
All of which reminds one of the remark of John F. Kennedy whenhe found that he was opposed by wealthy Catholics: "When the chips are down,money counts more than religion."29
Owing to the many bizarre positions taken by the NationalReview in projecting its oddly tailored version of "conservatism,"observers have wondered at odd moments about the Buckley motivations. Not only hashe been opposed to the New Deal at home, with accents here and there of McCarthyismand Birchism, but in the foreign field he has stood forth valiantly as the defenderof Moshe Tshombe of Katanga Province in his struggle with the United Nations (whichBuckley despises) and as the defender of the white coup d'etat in Rhodesia.Buckley himself in 1961 organized the American Committee for Aid to Katanga FreedomFighters, which had the ring in its name of an old-fashioned Communist front group.
Critics rightly disparage as "vulgar Marxism" attemptsto account for anyone's total personality in terms of direct economic motivation.But if anyone will read the National Review with the Buckley oil concessions in mind,the political mentality of William F. Buckley, Jr., will be at least partially explained.Whatever and whoever threatens the well-being and future of those concessions--Communism,liberalism, Socialism, New Dealism, the Supreme Court, Congress, the United Nations,the president, nay, even the pope--is going to feel the touch of the rhetorician'svenom. Young Buckley--he is now past forty, is referred to as an aging enfantterrible-- in his political stances is almost an automaton of Marxist motivationwho would have been clinically fascinating to Karl Marx himself. And this, in allsimplicity, is neo-conservatism in a nutshell.
The otherwise inexplicable Buckley infatuation for Moshe Tsbombeis readily understood the moment one recalls that Tshombe was the native proconsulin Katanga Province for the Union Minière du Haut Katanga, S.A., of Belgium,envied concession-holder to the rich mineral lands of the Congo. A blow at Tshombewas a blow at concession-holders everywhere, and Buckley brought the NationalReview phrase-crazy spears to bear on the United Nations as he did on the pope.
A Note on Neo-Conservatism
All the neo-conservatives from H. L. Hunt and Barry Goldwateron down resemble Buckley in that, whatever their rated wealth (which is usually small),they are insecure. Some feel subjectively more insecure than others; all are objectivelyinsecure in a changing world. They are caught between big corporations on the onehand and big government, Communist or liberal, on the other. But, envying the bigcorporations and wishing to be included among them, they direct most of their fireagainst the cost-raising social aspirations of the people from whom established capitaldoes not feel it has so much to fear. (If necessary, entrenched capital can standsocial reform as in Sweden, passing the costs on in price and taxes. It has, in anyevent, more room for maneuver and holds all the strong positions.)
But the Goldwaters and Buckleys, with their obscure departmentstores and oil concessions, are in a different boat. They have begun to suspect thatthey may never make it to the top, there to preen before the photographers. Sad,sad. . . . Hence, they cry, government should not be used to meet the needs of thepeople, despite the constitutional edict that it provide for the common welfare;government should merely preside over a free economic struggle in which the weaksubmit to the strong stomachs. As for the Big Wealthy in the Establishment, in thePower Structure, the Power Elite, they should not, say the neo-conservatives, allowthemselves to be deluded by infiltrating nurses, governesses, tutors, teachers, wanderingprofessors, swamis, university presidents and others bearing the spirochita pallidaof political accommodation. For accommodation has its own special word in the vocabularyof neo-conservatism. It is: Communism.
The neo-conservatives or radical rightists, like the radicalleftists, are discontented. There is, however, a different economic basis to thediscontent of each. The leftists own no property, therefore see no reason to embracea property system; the rightists still have some but feel their property claims slipping,feel they are being precipitated into the odious mass of the unpropertied. They foreseebeing thrown out of the Property Party; for many of them, in fact, are heavily indebtedto the banks. The illusion of the radical rightists is that they can yet save theirproperty claims, not by restoring free competition and subduing the rivalrous Rockefellers,Du Ponts, Fords and Mellons (whom they admire and fear as well as envy) but by inducingthese latter to join in an all-out assault on the sans-culottes and descamisados.
However, established wealth, seeing no good for itself in upsettinga smoothly running operation which it feels fully capable of controlling, is notinterested in this vexing prospect, Hence the outcries of the neo-conservatives against"the Eastern Establishment" and the "socialism" of Nelson AldrichRockefeller. In Buckley's National Review these self-dubbed conservativessound like inverted Marxists in yachting clothes.
Those interested in more on William F. Buckley, Jr., and hissuccess in selling his Pantepec-conservatism to a goodly number of unwary collegestudents as well as seven million buyers of cracker-barrel newspapers that carryhis weekly column should consult Forster and Epstein, Danger on the Right.
These writers say, however, "There is a unanimity as toBuckley's attractiveness, erudition, charm, intelligence and wit." On this,permit me to register a demurrer. As to erudition and intelligence, nobody wouldclaim it for him who had counted up his frequent logical fallacies, semantic confusions,apparent inability to distinguish between fact and value and his historical gaffes,such as tracing the political disequilibrium of the world to Wilsonian "idealism."Buckley is, in fact, a free-flowing wordsmith, a rhetorician, with a property fetish.
Other names that have been put forward here and there as newwealth-holders of the first magnitude, like that of the senior Buckley similarlydisintegrate under analysis.
Some Half-Forgotten Big Shots
Some new rich who died before Fortune staged its round-upought, in the interests of a fully rounded picture, to be noticed. There were a few,mainly Texas wildcatters and General Motors executives.
It will be recalled that the American political economy wentinto a severe decline in the 1930's and was brought out of its long coma only byWorld War II. What happened was reflected by the million-plus incomes. These numberedonly twenty-one in 1921, but under the expert ministrations of the Harding-CoolidgeAdministrations, installed by big wealth as the public list of campaign contributionsshows, millionaires-plus numbered 207 in 1925. They rose to 290 in 1927.
In Spanish bullfights there comes a moment when the bull, maddened,bleeding and covered by darts, feeling his last moment has come, stops rushing aboutand grimly turns to face the man with scarlet muleta and sword. It is knownto Spaniards as "The Moment of Truth."
It seemed for a while in 1928 that this was the Moment of Truthfor the American economy, when stocks in the bull market were pushed up to unprecedentedheights, discounting not only the future but the hereafter. In that year there were511 million-dollar incomes.
But this was a tough bull. Thousands of people, as they said,"believed in" the United States--by which they meant they thought therewas no limit to American expansion and, most importantly, free-and-easy money-making.
Gushing blood-money from every orifice, the bull market againin 1929 faced its tormenter, the big American money-maker. There was again the swift,profit-taking thrust that produced 513 million-dollar incomes for the year, a record.
But the sacred bull, though dying now, was not cleanly slain.In 1930, million-dollar incomes, as the blood drained from the bull, sank to 150;in 1931 to 77; and in 1932 to 20 (all figures from United States Statistics ofIncome). The market had come full circle since 1921; millions of dollars hadbeen made and put away in the final push (for not everybody lost money in 1929) andmillions were trudging the streets out of work in an extremely flexible labor market--thatis to say, employers could name their terms in a way delightful to all neo-conservatives.Put another way, alien to economists, millions of Americans were crying into theirpillows at night--that is, those who did not merely set their jaws and lose all feelingor give up the ghost.
What the Moment of Truth disclosed about the American economywas this: It can't take any and every kind of abuse, can't be left to the infinitelygreedy wheeler-dealers and over-reachers of the market place.
The 1930's were not good times for fortune-building. Million-dollar-a-yearincomes gradually rose to sixty-one in 1936 and then sank to a dull fifty-two in1940. But the vultures were still getting scraps from the old bull and would trytheir hands again with sword and cape after the war.
Against this background of economic carnage, few new fortunescould have been assembled, although we have seen how J. Paul Getty vastly reinforcedhis family holdings by picking up tidbits from the dying bull.
Largish new fortunes of recent contemporaries who died priorto 1957, similar to the living snared in the Fortune survey, stemmed mainlyfrom General Motors and from oil wildcatting and lease-trading. There were, of course,exceptions.
But Fortune, too, appears to have missed completely afew of the big onthe-surface post-1918 money-piles of interest to connoisseurs.
Neither the public record nor Fortune, for example, showedhow Henry R. Luce himself, late founder and head of the Time-Life-Fortune-SportsIllustrated complex of high-powered mass media, deployed his assets; but eventhough his enterprises were initially bank-financed, his reported net worth exceeded$100 million upon his death in 1967. Again, Mr. and Mrs. DeWitt Wallace, foundersand sole owners of the multilingual, globe-circulating Reader's Digest, deservemore than a pious thought in this connection; for they have already conveyed somesmall fortunes to various schools and colleges. The Wallaces have more giving-awaymoney than many well-heeled persons have spending money.
Just how far, if at all, the following stalwart entrepreneursfell below the $75-million mark at their peaks would be a quest to put a crew ofaccountants on their mettle:
Donald W. Douglas, chairman of the Douglas Aircraft Company,born in Brooklyn in 1892, M.I.T. graduate, an Episcopalian and a Republican. 30
Walter E. (Walt) Disney, motion picture producer, born in Chicagoin 1901, died in 1966; although he never attended college he was graced by honorarydegrees from Yale and Harvard.31
William S. Paley, born in Chicago in 1901, son of a successfulcigar manufacturer and an apprentice in that business. A graduate of the Universityof Pennsylvania, he joined the now opulent Columbia Broadcasting System at its modestinception and became president, chairman and chief stockholder as well as a powerin the land. He is president and director of the William S. Paley Foundation (assetsas yet nominal), trustee and director of numerous important educational boards, anofficer of the Legion of Honor, holder of the Legion of Merit, Croix de Guerre withPalm, Order Crown of Italy, etc., etc.32
Juan Terry Trippe, born in New Jersey in 1899. A Yale graduate,he became president, then chairman of the emerging Pan American World Airways; adirector and member of the finance committee of the Metropolitan Life Insurance Company;trustee of the Yale Corporation, the Carnegie Institution, the Phelps-Stokes Fund,etc., etc."33
All these men, like nearly all on the Fortune, Saturday EveningPost and New York Times lists and like most of the nineteenth-centuryacquisitors, were escalated financially by organizing readily available new technologywhich they did not create. This observation does not hold true of such rare birdsas Dr. Edwin H. Land nor the late George Westinghouse and George Eastman (Kodak),themselves skilled technologists and inventors. Nor would it apply to merchandiserslike the late Frank Woolworth, who simply took advantage of urbanization (based ontechnology). Steady population growth on a resource-rich continent was, of course,a necessary pre-condition to the organization of emerging technology. Few of thesepeople could have made their marks in such a noisesome way if they had been confinedto the limits--and laws--of Switzerland or Holland--or even England or Germany.
The Saga of A. P. Giannini
It is the general time-tested assumption that the chief of anenterprise is taking care of himself in rococo style. But this assumption would havebeen wrong if applied to Amadeo P. Giannini (1870-1949), the Italian Catholic fruitand vegetable peddler who built the colossal Bank of America of San Francisco, stillthe biggest in the world; the Transamerica Corporation, chain-bank super-holdingcompany; and beat the Morgan interests in their attempt to wangle into control.
Giannini, although he had plenty of opportunities at the handsof grateful directors who pressed upon him the customary slushy stock bonuses (whichhe refused), believed that $500,000 was a sufficient personal fortune for any man.And his estate at his death was under $600,000. He was succeeded at the helm of hisenterprises by his son Lawrence.34 From the outside looking in one wouldhave thought that Giannini, because he was in a position to do so, would have helpedhimself greedily to all sorts of fiscal bon bons. But Giannini, in his lordly disdainfor personal gain and his personal pride in the vast enterprise he had built, wasone of the few American moneymen with a truly aristocratic view of his role.
There were, too, a number of recently deceased men that Fortunedid not mention, although their accumulations by no means passed out of existencewith their deaths. They should be reckoned.
William L. Moody, Jr.
First, there was little noticed William L. Moody, Jr. (1865-1954),with a rated net worth of $400 million at his death." According to the FoundationDirectory, 1964, The Moody Foundation of Galveston, which he established, retainedtax-sheltered assets of about $188 million at the end of 1962. Among the trusteeswere two sons, William L. III and Robert L., chairman of the board. Moody III wasgrimly cut off with $1 in his father's will but through litigation was able to geta settlement of $3,640,898; most of the residual estate went to the tax-saving foundation.36
Moody was in banking, cotton-processing, real estate, insurance,printing and newspapers. With his father he founded W. L. Moody and Company, bankersof Galveston, later merged with the National Bank of Texas. He founded in 1920 theAmerican Printing Company, which he owned; bought the Galveston News and Tribune;founded and owned the American National Insurance Company, one of the biggest suchenterprises in the Southwest; and founded and owned the National Hotel Company. Hebuilt various skyscrapers here and there, and at his death owned thirty sizeablehotels--any one of which spelled Easy Street for the owner. What he did not put intohis foundation he left to two daughters and one son. As this big fortune had itsroots back in the nineteenth century it should probably not be considered new, althoughawareness of it is new. Like many others, Moody mushroomed with the region aroundhim. He was in the mainstream of American property acquisition.
Hugh Roy Cullen: A Texas Regular
Hugh Roy Cullen (1881-1957), Texas wildcatter, left more than$200 million, according to common report. He established the Cullen Foundation towhich be assigned $160 million, say standard sources; 37 but the Foundation Directory,1964, accords the foundation a net worth of only $2,434,610 at the end of 1961.Possibly the estate was still being processed. Cullen also allotted more than $30million to the University of Houston, specializing in vocational training, thereto establish a memorial for his only son, and at least $20 million more to hospitalsand the like.
Cullen, a man of little schooling, son of a cattleman, wentto work at age twelve and eventually emerged as a cotton broker. He went into oilin 1917 and at various times was closely associated with Rockefeller and Mellon companies.His personal instrument was the Quintana Petroleum Corporation, and with it be foundmany big new fields. But he followed the lead of someone else in applying scientificmethods to the discovery of oil.
Like H. L. Hunt he believed the American public needed instructionin political basics, and in 1951 be bought the Liberty Network of radio stationswith outlets in thirty-eight states, to facilitate the flow of cracker-barrel interpretationsof the Constitution.
Cullen was one of the earliest of the ultra-conservatives. Hewas against the New Deal from the beginning. Like Herbert Spencer, he was opposedto all government regulation, was opposed to the Marshall Plan, to the United Nations,to unionization and to the lowering of tariffs. In this latter respect an inner contradictionshows in his theory of self-effacing government, for tariffs are a government regulatorydevice in favor of domestic producers. Cullen's true position, like that of almostall the anti-regulation business people, is that he opposed government regulationthat in any way might conceivably sandpaper business profits but he joyfully favoredany sort of government regulation, interference, intrusion, intervention, supportor action if it was price-raising or promised to be directly profitable to business.This is the actual principle governing the pecuniary man, who is at bottom an unconsciousanarchist, hostile to all government not his personal instrument.
Back in the 1930's Cullen organized what was known as the TexasRegulars, still the hard core of the ultra-conservative movement. In 1948 he supportedthe Dixiecrats, but in 1952 he led the revolt in the Texas Republican delegationagainst Taft in order to get on the ground floor with Eisenhower. He gave money lavishlyin politics to any counter-clockwise movement.
Cullen, like H. L. Hunt, took his acquisition of wealth as asign from on high that he possessed unique virtue, that he was of the elect, a prophetto lead the boobs to the Promised Land. His sudden riches not only gave him an excessof confidence but a feeling of omniscience and clairvoyance in all human affairs.Although he had never studied these matters, was indeed like Hunt anti-intellectual,he thought he knew all about foreign affairs, world politics, history and, aboveall else, the needs of the domestic political economy. These were quite simple: Whatwas needed was a general application of the Horatio Alger philosophy within a simpleSpencerian setting, each individual striving upward toward the kindly light of moneywith no intervention from government either to block or assist (except establishedbusinessmen).
In seeing the businessman as omniscient, Cullen was simply echoingan early American point of view. It was often said by the bullying Major Henry LeeHigginson, founder of the Boston banking firm of Lee Higginson and Company, that"Any well-trained businessman is wiser than the Congress and the Executive."38 And, if one gives full value to the operative word "well-trained,"the major may have had an arguable point of view even though some fastidious mindsmight consider it faint praise to concede anyone more wisdom than Congress. But businessmenrarely limit omniscience to the well-trained and tend to feel that anyone who hasmade some money has given ample proof of his general wisdom.
Although a simple but forceful mentality such as Cullen's mayevoke uneasy smiles among the more knowledgeable, it must not be forgotten that suchmen, by reason of their ability to put up money, have much to say in politics. Arrogatingto themselves the role of supreme legislators, they use formal legislators, chosenin the catch-as-catch-can political process, as their cat's paws, mainly to blocksocially necessary measures. Cullen and his cracker-barrel colleagues placed theirdistinctive stamp on the internal colonialist politics of Texas, and they had morethan a little to do with returning the Republican Party to power in 1952-60. Theyare always working at it, with money and main, and will never be satisfied untilthey install the straight Coolidge-McKinley ticket. They keep the lambent glow ofthe horse-and-buggy age bright in the thermonuclear-missile-automation-computer age.
James A. Chapman
Still another oil baron whose fortune reached awesome dimensionswas James A. Chapman of Tulsa, Oklahoma. Chapman died in 1966, aged eighty-five,leaving about $100 million, most of it to the University of Tulsa, the balance toother educational and medical institutions.
Self-floated with $700 in 1907 on a tide of oil, Chapman wasrated by insiders as Oklahoma's most successful oil operator. During his lifetimeChapman, said his attorneys, had secretly "given away" more than $75 million.His will made no provision for his wife and conveyed only $1,000 to his forty-seven-year-oldson because, as it noted, "adequate provisions" had already been made forthem (New York Times, October 15, 1966; 1:1).
De Golyer: A Man for Most Seasons
But not all of the oil men are cracker-barrel fugitives fromtextbooks, it is gratifying to report. Some are impressive figures and would unquestionablyhave risen to prominence in any socio-political system. One such was Everette LeeDe Golyer (1886-1956), of remote French descent, who compares with most oil huntersas does a Stradivarius with a banjo.
De Golyer, a geologist and a geophysicist, was many times amillionaire, and is indeed credited with bringing applied geophysics to the UnitedStates. He is known in scientific circles, where he was very much at home, as "TheFather of American Geophysics." To De Golyer more than to any other one mangoes the credit for the discovery of so much underground oil since 1910. WithoutDe Golyer--or some counterpart--the world oil supply would unquestionably be muchlower than it is today. For the oil industry from the beginning was very wasteful,haphazard and slapdash, full of apprentice barbers performing as surgeons.
De Golyer's father was a mineral prospector and De Golyer, bornin a Kansas sod hut, initially took an interest along these lines. 'He joined theWyoming Geological Survey in 1906 and later worked with it in Colorado and Montana.But soon tiring of rule-of-thumb methods, he enrolled in the University of Oklahomawhere he was graduated in 1911 at the age of twenty-five. In the summers he workedas a field geologist and in 1909 joined the Mexican Eagle Oil Company, then ownedby British interests and later, sold to Royal Dutch Shell.
On his first trip out in the area near Tampico, later knownas "The Golden Lane," relocating the search in accordance with his knowledgeof structural trends, he brought in Potrero del Llano No. 4 well, one of the mostspectacular gushers of all time. This well produced 110,000 barrels daily and cumulativelyproduced more than 100 million barrels. De Golyer was promoted to chief geologistand then chief of the land department.
Some sources say he was a millionaire before finishing college;others relate that Mexican Eagle put him on a salary of $500 a month--fairly goodmoney in 1909--while he went to school. He continued with the company in a consultativecapacity until 1919, although he left it officially in 1914 to open his own officesas a consulting engineer to the petroleum industry.
Called to England in 1918 to participate in the sale of MexicanEagle to Royal Dutch Shell, he was then backed by Lord Cowdray of Mexican Eagle toform the Amerada Petroleum Corporation, of which he was made vice president and generalmanager, then president and finally chairman. He retired from highly successful Ameradain 1932. He continued, however, with the Geophysical Research Corporation, whichdiscovered oil fields by scientific methods for the big oil companies. He also formedCore Laboratories, Inc., and the Atlatl Royalty Corporation to carry on oil discoveryand ownership.
De Golyer's method was to apply the knowledge of a trained,scientific mind nourished widely in the theoretical literature about the causal processesof earth formations. He picked up some of his most valuable insights by applyingearly European theory to his work. The presence of underground salt domes is nowknown to predict the presence of oil. How are salt domes formed? Then prevalent theoryheld them to be of volcanic origin, the result of the expansion of growing salt crystalsor deposits from rising columns of brine from deep sources. De Golyer came to acceptthe European theory that they are formed by plastic flow, the salt having flowedowing to the weight of overhanging rocks. Once the salt dome has been found, theoil prospector must determine the formation of the underlying rocks in order to getthrough. All this careful inquiry was quite out of harmony with the practical, common-sense,feet-on-the-ground, down-to-earth, no-nonsense, rule-of-thumb guesswork in the fieldby the boys who had just recently left the cracker barrel.
De Golyer implemented his insights by introducing the use ofthe seismograph, gravimeter, torsion balance, electro-magnetic surveys and explosivesto send shock waves through the varieties of underground formations, thereby determiningtheir texture. Using these appliances he found field after rich field in Texas, Oklahomaand the Gulf region. Cullen and others, sweating for money, copied his methods, whichare now standard all over the world in oil prospecting.
Basically a scientist, a student and a scholar, De Golyer waswidely read, not only in his technical specialty but in the literature of the Southwest.He published a long, impressive list of original scientific papers and wrote aboutthe history and personalities of the Southwest. From a money-making point of viewhe wasted tens of millions of dollars of time reading and writing. He collected pricelessrare books--on the Southwest, on geology and geophysics and on scientific methodand the history of science--and left them, a treasure, to the University of Oklahoma,the University of Texas and other institutions. He established the De Golyer Foundationto add to these valuable collections of books.
In the late 1940's, hearing that the Saturday Review of Literaturewas in financial straits, he came forward to give it a lift and was made chairmanof the board. De Golyer served on literally scores of national and local culturaland scientific bodies and boards, lectured to serious audiences at M.I.T. and Princetonand served in 1940 as Distinguished Professor of Geology at the University of Texas.He held well-deserved honorary degrees from many American and foreign universitiesand was frequently decorated.
Although a moderate Republican, he served willingly under FranklinD. Roosevelt as oil adviser to the New Deal, later in the war, and as chief of thetechnical mission at the Teheran Conference. The number of his trusteeships, directorshipsand organization memberships was far too extensive to list here.
He is memorialized by the National Academy of Science (of whichhe was a Fellow) in Volume XXXIII of its Biographical Memoirs together withThomas Hunt Morgan, the biologist; Robert A. Millikan, the physicist; Lewis M. Terman,the psychologist; and Josiah Royce, the philosopher. He was clearly much more thanan oil prospector, businessman or capitalist. The Memoirs give a bibliographyof his writings from 1912 onward, encompassing fifteen pages of titles.
After an illness of six years De Golyer shot himself at theage of seventy.39
What De Golyer was worth is less interesting than what he couldhave been worth had he devoted himself solely to accumulating wealth. There is nodoubt be could have been worth billions had he been interested in nailing down forhimself every likely claim. As it was, his retained wealth was estimated at $10 millionto $100 million at his death, a wide range.40
Looking on his fellow oilmen with considerable reserve, De Golyer"frequently remarked that the talent for making money can imply a lack of talentfor leading a useful life."41 De Golyer certainly did not sufferfrom this deficiency.
But like some of the other oil men, De Golyer did believe inluck. "I hate to tell you," he once said, "how many times I've mademoney by going against my own judgment ."42 On this same theme realisticR. E. Smith, one of the Fortune listees, said, "My West Texas oil fieldwas solely luck. It has 38 million barrels in reserve and cost me $5 an acre. Itwas the same with Hugh Roy Cullen. The first money he made was on some land he didn'twant; the oil company kept the 'A' acreage. They gave him some 'D' property--thelowest grade--as consolation and he hit. The company never did hit anything on their'A' property. The lesson you learn as you get older is that it's luck." Again:"The fortune of Matilda Geddings Gray," explained a Louisianian, "camemostly from her father. He made it on a herd of cattle; found an oil well under everycow."43
Without some element of luck, no matter how hardworking, ingenious,greedy or unscrupulous the protagonist, nobody ever made much money. The generalluck of the nineteenth century entrepreneurs was to have a great deal of new technologythrust under their noses--steam engines, steel-making processes imported from abroad,internal combustion engines, new electrical apparatus and the like. Few of the entrepreneursparticipated in the creation of any of this but they did know how to convert it underlucky circumstances into titles of extravagant ownership--in their own names.
Raskob of Du Pont
John J. Raskob (1879-1950), one of the upper executives of theGeneral Motors Corporation, prepared with a knowledge of stenography, got his startby becoming secretary to wealthy Pierre S. du Pont. Raskob's big coup some yearslater was to suggest General Motors as a likely investment for surplus Du Pont money,and he thereafter alternated risingly lucrative employment with General Motors andE. I. du Pont de Nemours and Company. The leading figure in trying to make Al Smithpresident in 1928 and the Democratic Party a replica of the Republican, he was madePrivate Chamberlain to the Pope. He founded the tax-shy Raskob Foundation for CatholicActivities in 1945; it had assets of $29,281,060 in 1960 and four Raskob sons amongits officers. On his death he left his wife and each of ten surviving children trustfunds of unspecified amounts.44 One presumes they were generously proportioned.As Raskob was a pecuniary man to his fingertips with no other apparent interest inhis life, his fortune before he started redeploying it may well have exceeded $75or $100 million.
William S. Knudsen
William S. Knudsen (1879-1948), former president of the GeneralMotors Corporation and Director General of the Office of Production Management duringthe war, had one of the "ten biggest incomes in the country"45but the expanse of his holdings at the end is fogged. Standard reference media, includingthe New York Times, give no accounting of his estate, which was presumablydisposed of before his death; he established no foundation, left three daughtersand one son, all presumably financially soigné.
A Note on Probate
There is nothing conclusive about the probate of an estate,In his lifetime a wealthy man might make tax-free dispositions to foundations orother endowments (which usually show on the record) or he might make regular low-taxdistributions to members of his family. At a gift-tax cost of $325,700 as of 1965,an unmarried person could transfer $1 million to an individual. If he did this everyyear for twenty-five years to five persons, thus transferring $125 million cumulatively,he would have to pay $40,712,500 additional in taxes, a tidy sum. If he waited tobequeath $165 million at death to individuals, the tax bite would be $125,438,200,or about $85 million more than by the installment-transfer procedure.
But by halving his individual gifts each year and putting theother half of the money into a tax-free foundation (which his heirs could play withas it suited their tastes) he would pull his total transfer taxes down to a low,low $6,119,375 or a little less than 4 per cent on $165 million. His saving overthe first procedure, for the benefit of his heirs and their foundation, would be$34-plus million; over the second procedure, a little under $119 million.
Delightful though this prospect is, if the man is married hecan make the original transfer of $125 million solely to individuals at only doublethe cost of 4 per cent, paying a little more than $12 million, under special provisionsfor estate division written into the law in 1948. His saving here over the firstdirect transfer is $28-plus million, which he can slam into a foundation for so muchextra gravy. Whoever said we didn't have a thoughtful Congress to write such thoughtfullaws? In the meantime, newspapers and "spokesmen"--that is, paid propagandists--goabout talking loosely about high taxes on the big estates. When one gets down tothe fine print, those high taxes just aren't there.
A man might, indeed, die stony broke and still have ruled overa large fortune if he had concentrated a goodly sum in a foundation. As head of thefoundation he would naturally set himself a substantial salary. He would not, legally,own anything; he'd just control the assets of the foundation by charter and the dispositionof its income. Until he drew his last breath, even though he was only on straightsalary, he'd have corporate, political and other power through his foundation aswell as the satisfaction of knowing that he hadn't helped the rustics in Congresswith their eternal problem of budget balancing. So the mere fact that a man dieswithout leaving traces of large assets really proves nothing.
Jesse H. Jones
Jesse H. Jones (1874-1956) was for many years a power in theland and a top-level, hard-bitten wheeler-dealer. A banker and politician based inHouston where he owned the Chronicle, banks, buildings and other propertiesas well as properties in Dallas and Fort Worth. Jones became chairman of the ReconstructionFinance Corporation and Secretary of Commerce under Roosevelt II. As chairman ofthe RFC he is said to have made the decisions to lend more money than any other manin history, getting himself involved, too, with some of the borrowers. His fatherwas a Tennessee tobacco planter, and young Jones came to Dallas at age twenty tofind a place under an uncle in the lumber business. His estate at death was only$8,765,302,46 but he had earlier made large distributions to childrenand a foundation, The Houston Endowment (1937), which in 1962 had assets of $43,939,169and had just made grants of $7,249,765.
Amon G. Carter: Texas Ueber Alles
Amon G. Carter (1879-1955), son of a blacksmith, went to workat age twelve selling newspapers á la Horatio Alger, graduated into sellingphotographs and then, in 1904, into the not-so-great game of advertising. In 1906he became advertising manager for the Fort Worth Star and by 1923 was presidentand publisher of the merged Star-Telegram. He also weaseled into radio andtelevision but made his biggest money in oil wildcatting. Under his ownership wasdrilled the discovery well of the big pool in the Wasson lease in Gaines and Yoakumcounties, Texas. He sold out there for $16.5 million and put the money into the AmonG. Carter Foundation, which at the end of 1962 had total assets of $32,519,275 (FoundationDirectory, 1964). An aviation enthusiast, he was a founder of American Airlinesand a major political influence in bringing various military aviation installations,bomber plants and missile enterprises to Texas. He is credited with using his influenceto make Texas second only to California as an aviation center. He was a noisy FortWorth and Texas booster and was said hyperbolically to own all of Fort Worth. Heleft two daughters, a son, the Star-Telegram, various pregnant propertiesand the foundation. No probate of his will was published in standard reference mediaavailable to this inquirer but if one assumes only half his wealth was left in thefoundation he was worth more than $65 million at some time in his later life, probablya bit more.47
William H. Danforth: Apostle of Purina
William H. Danforth (1870-1955) of all American millionairesprobably most deserves the much-abused characterization of philanthropist. For Danforthgenuinely liked people in general and was obviously stimulated by them.
Born in the backlands of Missouri, Danforth went to St. Louisat fourteen to go to school and remained to be graduated from Washington University.With $4,000 borrowed from his father he went into a horse-feed partnership with twomen in 1894: the Robinson-Danforth Commission Company. A natural salesman, Danforthtraveled through the Middle West selling Purina Horse Feed in a folksy way ("PurinaFeed will make your horse laugh," one of thousands of bucolic Danforth slogans)and buying ingredients from farmers. The day after one of the partners sold out toDanforth in 1896, the business already booming, a tornado blew down their sizeableplant. With an unsecured bank loan of $25,000 he rebuilt, and the business extendedinto all varieties of farm feeds Under the Purina label. It also went into the productionof whole-wheat cereals for human consumption (the new health fad) under the familiarcheckerboard label. This latter was adopted from a farmer's shirt design and forsome reason had such an hypnotic effect on customers that it was widely infringedbut successfully defended in the courts.
Danforth was quite spontaneously an enthusiastic extrovertedChristian, a YMCA man (he served in France as a YMCA secretary in World War I), abeliever in the social gospel and a true, corn-ball do-gooder. He seemed to feelthat good will, good humor, enthusiasm and energy were all that were needed to putthe world to rights. A Congregationalist Sunday School teacher and superintendent,he believed in helping young people help themselves. He gave thousands to financecamping trips and outings in the woods and on the shores for the young. He was apioneer in helping finance mostly somewhat bucolic college educations, for whichin 1927 he established the Danforth Foundation (assets in 1962: $125,694,089, mainlyin Ralston Purina stock). Danforth believed in college as much as he believed inthe Bible.
Danforth ran his business pretty much like a folksy huskingbee with plenty of homespun high jinks. He required his employees to exercise togetherand sing together, and was the originator of widely copied employee welfare programssuch as contests, office messages and personal items, employee theatricals, awards,parties, picnics, square dances and general one-big-happy-family stuff. He producedmottoes tirelessly and wrote inspirational books and pamphlets in the school of Dr.Frank Crane, Elbert Hubbard and Orison Swett Marden.
Everybody around Danforth was caught up in a blizzard of activity,all happy Christian soldiers marching onward and upward and holding forth the holygrail of Purina. Somehow, money filtered artlessly through the whole like molassesin a bran mash. Danforth unquestionably believed in everything he did. There wasprobably not an insincere bone in his body. And the good Lord just made that cashregister ring, ring, ring.
Danforth was extremely wealthy by 1929, when Jehovah suddenlysignaled that he was unaccountably displeased. All of Danforth's holdings were wipedout in the stock market crash with the exception of his ownership of Ralston Purina.The sign probably meant that the good Lord wanted him to stay out of the wicked stockmarket and stick to healthy, whole-wheat food.
After the crash, business for Purina slacked off so badly thatDanforth, depressed, had to lay off old employees. As grain prices continued to tumbleDanforth found that he was constantly having to sell for less than he paid for theraw materials and labor. He was, in short, going broke in a big way. Satan was incommand.
But the Lord had not forsaken His earnest worker. In 1932 Danforthrelinquished control of the business to his son Donald, recently out of sleek PrincetonUniversity and in his father's estimation not much of a businessman. But the boy'smother spoke up staunchly on his behalf, Donald took hold and, giving the businessthe old college try, he made good in such a way as to amaze the elder. In the generalinflation, sales were whirled tip from $19 million in 1932 under Donald's shrewdIvy League ministrations to $400 million in 1956, when Ralston Purina chugged intoeighty-seventh place on Fortune's list of the mightiest corporations. In thedistance such giants as AT&T, General Motors and Standard Oil of New Jersey coulddimly hear the corn-belt juggernaut slowly creeping up on them.
Danforth himself was a "natural" in a world of counterfeits.Personally likeable and uncomplicated in his views, he was simple-minded and naïveand perhaps just lucky never to fall into the sights of the financial sharpshootersall around him. He took no visible interest in politics. His early heroes were Hill,Harriman, Rockefeller, Astor, McCormick, Carnegie and their like, whom he saw asbuilders of the nation, Daniel Boones of the dollar. He longed to emulate them. Healways sought out the business great in an effort to learn their "secrets."He looked up John Wanamaker, whom he admired both as a businessman and as a Christianlayman. (In Danforth's view "businessman" was just about synonymous with"Christian." Jesus was after all, as it has been said, a salesman. Danforthwould gladly have given him a job selling Purina.) Once Danforth followed Henry M.Flagler, the Standard Oil tycoon and Florida promoter, around a golf course in Florida,pencil and notebook in hand, and asked the great man many questions, to which hewas graciously given answers. Danforth also sought out Henry Ford for prayerful discussionsabout philanthropy.
As far as the record shows, Danforth (unlike many of his prominentbusiness contemporaries) never engaged in any shady practices, was never involvedin any swindles, was never the defendant on criminal charges and was never accusedof exploiting his workers. Nor was he, it seems, ever seriously criticized, knocked,called to account or rebuffed in good times or bad. For a portrait of the Americancapitalist as an extremely good, wholesome, honestly Christian earnest outgoing do-gooderone must turn to William H. Danforth,
The name of Ralston got into the Ralston Purina label in a curiousway. Early in this century there was a Dr. Ralston who established health-food clubsaround the country. Danforth, in order to get into the human food market with hiswhole-wheat cereals made a money-for-name tie-in with the good doctor and RalstonPurina was off on the heels of Quaker Oats and Kellogg's Corn Flakes. Health foods,big money and religion all gathered at the shore of the mighty Mississippi river.48
Although all these noninherited fortunes have been treated asnew, they are new only in a relative sense. Almost all the big individual noninheritedfortunes mentioned in this inquiry date back before World War II and, indeed, thebulk of them date before 1929. Most of the Texas oil fortunes were founded between1910 and 1925. The General Motors fortunes were all in foetal existence in the 1920's.Although the names of the owners are less familiar than Rockefeller, Morgan and Vanderbilt,every single one was already rich on the eve of Pearl Harbor and nearly all wererich in 1929.
Many clearly date from before World War I--Danforth, Moody,Jones, Getty.
Unless processes are going on inaccessible to inquiry it canbe said that big new individual property accumulations are now taking place, if atall, at a decidedly diminished pace. And this is understandable in view of the entrenchedposition established by hereditary wealth. No man, however puissant, can come alongand simply say "move over" to the Standard Oil Company of New Jersey, E.1. du Pont de Nemours and Company or dozens of similar enterprises, Nor can sucha puissant man by any method yet disclosed take them over as his own.
Whirling Dervishes of the Mass Media
Although the barrel has been scraped in the search for new ornonhereditary wealth on the American scene, and just about every likely candidateappears to have been noticed, there can be no guarantee that some big "sleeper"has not been overlooked. We have ignored, for reasons of space, stuff ranging from$25 to $75 million.
Most of the names of new fortune-builders put before the publicare those of men who are little more than speculative entrepreneurs backed by banksor some syndicate. As long as these whirling dervishes stand upright they receiverapt attention. But most of them vanish in a cloud of debt and tears to become skeletonsin the Death Valley of newspaper files.
Newspapers are interested in such worthies for at least tworeasons:
1. They want new names and faces to present to the public, andmany people as well as editors seem to find it thrilling to read of some immigrantwho arrived in this country with five dollars and went to work as a rag picker ,quietly saved his pennies, gradually bought real estate and finally emerged as thegreatest real-estate tycoon of all time. Or so they say until the banks start callingloans.
2. They cite these putative geniuses of pecuniary derring-doin order to prove that anyone who is willing to work hard, live right and tend tobusiness can make at least a million and probably more in the United States--theAmerican dream. A curious feature of this thesis is that the money-cult editors andwriters who expound it are themselves not notably pecunious, are apparently unableto apply their own profound insight.
In the 1920's, in the aftermath of World War I, names to conjurewith in the press were William C. Durant, founder of General Motors and possessorof a fresh fortune several times in his life; Jesse L. Livermore; Arthur W. Cutten;Frank E. Bliss, "The Silver Fox of Wall Street"; Benjamin Block; MichaelJ. Meehan; Joseph E. Higgins; Louis W. Zimmerman; George Breen; and Harry Content.49 All went down the financial drain without a gurgle.
Arthur W. Cutten, as big as they used to be verbally blown up,died in 1936 while under indictment for income-tax evasion. His estate of $350,000,once reputed to be worth $100 million (press reports of the holdings of market operatorsare usually vastly exaggerated, thus attracting more suckers), had tax liens againstit of $644,000 and was confiscated.50 Rumors that he had funds in Canada,where he was born, were checked without affirmative result.
Cutten, for years a drab bookkeeper in a Chicago brokerage house,in the early 1920's became a speculator-manipulator in the grain pits. He finallyhad perhaps a few million drably to his credit and drably came to New York in 1925at the age of fifty-four in search of drab new puddles to conquer, He engaged inbuying and bulling stocks, assisted by hordes of even drabber men and women who boughtanything they heard Bookkeeper Cutten was buying. Distributing to the suckers asthe top he had set was approached, Cutten pocketed the profits. This process wasendlessly repeated and would no doubt still be going on if the "Moment of Truth"had not come in October, 1929. Cutten was, with poetic justice, one of the many picadorsand bandilleros whom the dying bull managed to gore fatally before expiring. Hiscareer may be summarized as a transit from bookkeeper to gambler to nothing. Thereis no hard evidence that I can find that Cutten was ever worth $100 million, $50million or even $10 million net; he was carried by the banks.
There were, too, in those salad days, high-flying dervisheslike Samuel Insull, Charles E. Mitchell, Ivar Kreuger, Albert Wiggin, Howard Hopson,Edward Doherty--all men with complex Rube Goldberg schemes afoot and in the end allspeculative flat tires, personally as undistinguished as any pushcart peddler. Butin their day the newspapers ecstasized over them as proof positive that under thegreat American system of godly democracy any right-thinking, right-living man whohad faith in the United States should, could and would acquire a fortune.
The biggest flops of all, as one would expect, were those menwidely regarded as the soundest. The superlatively sound men of the time were OrisP. and Mantis J. Van Sweringen of Cleveland, presented in the press as masters ofrailroading (although they were actually two obscure provincial real estate brokers).With the backing of the J. P. Morgan bloc the Van Sweringens busily floated vastrailroad holding companies, busily issued watery securities, busily merged, unmergedand submerged railroads and busily carried on general financial wildcatting in searchof profit. Their bubble burst in the depression, removing two geniuses of bank-presscreation from the scene.
Just how big the Van Sweringens were considered in the 1920'smay be seen in the fact that they were listed in 1930 by James W. Gerard, formerambassador to Germany, as one of the sixty-four shoguns who "ruled the UnitedStates." President Herbert C. Hoover was, correctly, not on this list, whichwas headed by John D. Rockefeller I, Andrew W. Mellon, J. P. Morgan II, George F.Baker, John D. Ryan (copper), Henry Ford I, seven Du Ponts of high dynastic numbering,the five Fisher brothers of Detroit ("Body by Fisher"), A. P. Giannini,Daniel Guggenheim, a few corporation executives and some dubious elements no doubtincluded by the diplomatic Gerard to be complimentary: William Green, Matthew Woll,Roy W. Howard, William Randolph Hearst and, of all people, Adolph Zukor and HarryF. Warner, the film moguls.
But although one might quarrel with the catholicity of Gerard'schoices, he did adhere to the theory, bitterly denied by all party-liners of theAmerican myth, that some sort of dimly visible shogunate lies behind major trendsin American policy. The country was not being run from Washington by duly electedrepresentatives of the people, Gerard sensed, but by a group of remote-control drivers,masters of the cash register. Its ringing was, to them, the Liberty Bell, signalingtheir own freedom from want.
One could go on for many pages reviewing the lists of the financialalso-rans, a fevered crowd-all duly celebrated in their day. In order to bring thingsdown to date, we may notice in parting the name of William J. Zeckendorf, the bigbuilder, operator and general juggler of office buildings and hotel properties, sinceWorld War II given much press attention as an authentic coast-to-coast tycoon. TheZeckendorf story, a reader's thriller for many years, may be now told very briefly:His enterprise went decisively bankrupt in 1965 as the banks called the loans, aprocess irreverently known as "pulling the plug."51
Fallacious Logic in Media Celebrations
The notion that new fortunes are being made right and left inthe United States, selectively documented from time to time by Fortune andthe Wall Street Journal, may now be looked at briefly. In general, these publicationsperpetrate several fallacies in logic in supporting this thesis, notably those ofuntypical instances and of neglected aspect.
Fortune (January, 1952) presented a survey titled "TheNew Rich," cueing it in with the substatement that "A lot of enterprisersyou probably never heard of are proving you can still strike it rich in America."
"Since 1945," said Fortune, "a brand-newcrop of rich men has risen in the U.S. Mostly shirt-sleeved enterprisers who startedfrom scratch, they are hardly more than well off compared to the 'Pittsburgh millionaires'of the nineteenth century or the 'Detroit millionaires' of the Twenties. What makesthem spectacular is their profusion. Every state in the Union has them by the hundreds,and their collective wealth, glittering from coast to coast, has given the wholecountry a pleasant golden hue."
(I find it difficult to believe that any responsible writerof such a line is not being exaggeratedly ironic.)
"They are the core of that fast-growing group whose 15,000-oddmembers report incomes between $100,000 and $300,000 a year; their affluence is neitherfreakish nor unstable. Right behind them, ready to step into their shoes, are roughly50,000 individuals who in 1948 reported incomes of $50,000 to $100,000 a year, and175,000 who reported $25,000 to $50,000." Fortune takes no account ofthe carefully established fact that most of these incomes are old-line asset-incomes,not the incomes of new men.
"Nationally their presence is recorded in the 400,000 Cadillacssold since 1945, the 37,000 pleasure craft registered since 1946, the doubling ofChris-Craft's 1951 big-boat sales (forty-two feet and up), and the introduction,under the pressure of demand, of a sixty-two-footer, priced at $125,000. A scoreof the splashier restaurants have become fabulously successful as a result of theirpatronage; their private planes, as many as two hundred at a time, fly in for thebigger Texas football games; and their dexterity with an expense account since pleasuresand business are bard to sort out in wholly owned enterprises, gives them a spendingpower far above others making the same amounts in straight salary."
Fortune soberly names some of the new paragons as follows:
William Mullis (frozen shrimp, Georgia); Jeno Paulucci (frozenchop suey, Minnesota); Sam Joachim (burlap bags, Texas); Boss Sams (church furniture,Texas); Abe Katz (plastic toys, New York); Ralph Stolkin (punchboards, oil, cattle,movies, TV, Chicago, valued by Fortune at $35 to $50 million with no source evidencecited); Vern Schield (power shovels, Iowa); Dr. Earl Carpenter and John C. Snyder(baby beds, Wisconsin); Winston Smillie (floor cleaners, Missouri); Malcolm Lee McLeod(timber, South Carolina); Milton Brucker (plastics, California); Harry E. Umphrey(French fried potatoes, Maine); Hugh B. Williams (earth-boring machines, Texas);"Smiling Jim" Moran, "The Courtesy Man" (auto dealer, Illinois);Sam Eig (real estate, Maryland); Kenneth Aldred Spencer (chemicals, Kansas); HermanDelmos (Breezy) Wynn (sporting goods, Georgia); Fred Hervey (supermarkets; restaurants;bog farms; mayor of El Paso, Texas).
All these are instances, says Fortune, of "individualsuccess." What they all are, in fact, are fairly run-of-the-mill marginal businessmen,hailed by Fortune as the new rich. No balance sheets are revealed, no listingof bank loans. How many will emerge with a substantial net worth is not shown, norhow many will go the way of Zeckendorf and thousands of others.
In many cases, especially where annual sales are cited, onecan make certain hard deductions. The baby-bed makers, said Fortune, had runtheir sales up to a million dollars a year. Now, some of the most successful U.S.enterprises regularly have around 14 per cent profits on sales, an envied figureeven if sometimes exceeded. If we gratuitously give this superb percentage to thebaby-bed makers they were making $140,000 a year. Split two ways this is $70,000,which after taxes leaves less. Allowing each entrepreneur to live very frugally,let us say he saves $50,000 a year. In ten years he will then be worth $500,000,in twenty years $1 million. The point is that few small businesses keep up this way.They run into competition and other vicissitudes, mostly from larger enterprises.
But Kenneth Aldred Spencer is doing well, says Fortune."Besides a 850,000 salary, in 1950 he received $377,000 in dividends on his236,000 shares of common stock and realized $118,000 through sale of the purchaserights of a new issue. 'Smiling Jim' Moran has set up a $1,450,000 trust fund forthe children." Not too bad but, really, chicken feed.
But these simple annals of the merely well-to-do, whom we alwayshave with us, hardly prove that new fortunes are in the offing. Successful businessentrepreneurs though all these men may be, one can scarcely regard them as "thenew rich." They are small fish in a pond full of large fish. And the odds againstany of them becoming big fish--authentic barracudas--are enormous.
As instances of the ability to make new fortunes on the Americanscene, we must pronounce a Scotch verdict: not proven.
Where the reportorial fallacy enters in is the citation onlyof these minor winners, no losers. But of the many who answer the siren call to richesfew are chosen, as the record of bankruptcies shows. Business failures in the UnitedStates, according to annual reports by Dun & Bradstreet, national credit raters,have in most years since 1950 exceeded 10,000 and in some years 15,000. Between 1950and 1953 they ranged between 7,611 and 9,162 and have not to date fallen below 10,000.In 1963 they totaled 14,374 with total liabilities of $1.3 billion, the value ofa largish super-corporation. For every businessman in a given year who makes enoughof a splash to come to the attention of Fortune's editors, about 10,000 splita got trying and cough blood in the bankruptcy court. If it weren't committed todispensing sunshine, Fortune could write a melancholy article every year onbusiness failures and issue a thick supplementary directory merely giving names andaddresses.
Nor do these figures show the panorama in its full sweep. Thespecial monograph on small business of the Temporary National Economic Committee,a joint Senate and Securities and Exchange Commission operation, in 1939 revealedthat "in the first thirty-nine years of this century, 19 million enterprisesopened their doors and 16 million closed them." This was a four-decade failurerate of 85 per cent.
Henry Thoreau, writing in Walden in the mid-nineteenthcentury, concluded that the failure rate of businesses in his day was 97 per cent.
The Failure System
In business, under the American system, each year the failuresexceed the new successes by a very, very, very wide margin. In business, under theAmerican system, hundreds of thousands more have failed, generation after generation,than the few who have succeeded. If we are to judge by the preponderance of individualsuccesses over failures or vice versa, then the American system, businesswise, isa record of steady, almost unrelieved failure. It has failure literally built intoit. It is indeed a near-miracle, front page news, when anyone really makes it. Thisjudicious observation sounds paradoxical only because it contradicts conventionalpropaganda.
As it is observed by Professor Paul A. Samuelson of M.I.T. inhis standard textbook, Economics (McGraw-Hill, N.Y., 7th edition, 1967, p.76), the average life expectancy of an American business is six (6) years!
While it is true that no particular blame attaches to anyonefor the high rate of small business mortality, blame can be leveled for the misleadingpropaganda about the business system. By the one-sided stressing by propaganda organsof the few successes, many are led to lose their hard-earned savings in establishingnew businesses. Sound advice to 85 to 95 per cent of Americans contemplating openingtheir own businesses would, in the light of the facts, simply be: "Don't."
The belief of a wide public that it can succeed in businesssupplies a lucrative crop of suckers for established equipment suppliers, usuallybig corporations. Banks, too, participate in this merry game by making loans againstresalable equipment. The same fixtures are sold and resold to a long string of losersincited into action by florid accounts of success in the Wall Street Journal,Fortune and other media.
Today, the new man going into business, like the individualconsumer, does not realize that all the possibilities in almost every situation havebeen determined down to decimal places by batteries of computers and the resultshave been evaluated by staffs of exceedingly acute experts. In pitting himself againstthese computers and highly paid experts, the ordinary man is very much like an amateurchess player who elects to pit his skill against a consulting collection of chessmasters. His doom is virtually sealed with his very first move.
Fortune's valedictory for its inspiring group of minorsuccesses was that "The new rich symbolize the abundant health of the U.S. economy,for they have been pushed up by a general prosperity below. A fair guess is thatmoney in the hands of millions at the base will keep them at the summit and in thedecade ahead swell their number by the thousands."
More Fuel from theWall Street Journal
The editors of the Wall Street Journal in 1962 put somewhatsimilar findings about thirteen men and one woman into the form of a book. 52
The foreword by Warren H. Phillips, managing editor, makes itclear that the presentation is designed to prove something: that it is as easy asit ever was to make a fortune in the American economy, that it is desirable to doso and that fortunes are being made right and left. Like the Fortune groupof 1952 the Journal's group of 1962 embraced only modest fortunes, men whomight be called the "poor man's millionaires." They did not pretend tobe like the all-time heavyweights of the Fortune 1957 list.
As Mr. Phillips observed, "It is often said that todayit is infinitely more difficult to amass great wealth than during earlier periodsin the nation's history; that the nation's economy has matured, and the rags-to-richeslegend belongs to its period of youthful growth; that business opportunity todayis highly limited, not only by high taxes, but by stiffer competition from largecorporations and by pronounced restrictions based on education, race, religion, sexand age.
"The evidence sharply contradicts this impression."53
The only "evidence" Mr. Phillips cites is the numberof postwar million-dollar incomes that we have already examined, incomes from establishedassets.
"All such statistics suggest that the opportunities formaking fortunes in this country are as wide today as in any earlier period of history."54
The statistics on large incomes provide no evidence whateverfor concluding that new fortunes are being made or that there are opportunities formaking fortunes. Without the identities of such large income receivers one cannottell whether the income is from an old or a new fortune, from asset-wealth or fromearnings in the form of salaries or commissions. In view of the fact that, despitepertinacious work by Fortune, the Saturday Evening Post, the NewYork Times and myself, so few authentic recent fortunes have been turned up,it is a practical certainty that nearly all the million-dollar incomes as well as$50,000 and $100,000 incomes come from old fortunes.
An individual fortune may bring in $500,000 one year and, asbusiness conditions boom and dividends rise, increase its income to more than $1million. It is then a new million-dollar income but not indicative of a newfortune. It may, too, have had a million-dollar income many times in earlier years.But it is always the same good old fortune, whatever the income. Nothing new hasbeen added.
In the United States, Mr. Phillips also wants us to believe,"Material success is more within the realm of the possible than in most Europeansocieties, with their cartelized business systems and more rigid social class structures."55 And with this statement it is easier to agree, but on other grounds;for "most European societies" takes in a group that either has no businesssystem at all or one so rudimentary--as in Spain, Portugal, Greece--as to affordfew trading opportunities. If one adds Russia, Poland, Hungary, Czechoslovakia, Bulgariaand Yugoslavia--all under statist regimes--and looks at small places like Finland,Austria, Switzerland, Lichtenstein and Denmark, there isn't much of a playgroundleft for "material success." The United States could outdistance this combinationwith one new millionaire a decade.
As for the rags-to-riches legend being still valid, none ofthe names presented by the Journal editors supports it. Nearly all were merelynon-asset-holders before they started their modest climbs.
Although only one of the cases cited comes within hailing distanceof heavy money--$34 million, if this is his authentic net worth--it may be interestingto peep at some of these small operators briefly as a contrast with our coming glimpsesat truly impressive super-wealth,
Thomas F. Bolack, says the Journal, was an oil-fieldlaborer before he rose to become lieutenant governor of New Mexico and a gentlemanfarmer. He did it by buying oil leases at 25 cents an acre in the San Juan Basin,which he sold for $5,000 an acre. He was worth $3 million in 1951, says the Journal,and possibly more later.56
Then there is Winston J. Schuler, Michigan restaurateur, whowas worth only $50,000 in 1946 but is now worth more than $3 million.57Schuler got a lift toward immortality when his father gave him and a brother a run-downrestaurant. The upcoming entrepreneur sagely added a bowling alley and generallyrefurbished the place. It was a hit and began to boom. Schuler opened other restaurantsand soon had a chain. A prudent man, he formed a separate corporation for each restaurant,say the Journal editors, thus avoiding any large cumulative taxable income.He also decreed that the corporations not pay out any dividends and although eachone necessarily paid corporation taxes (each getting the initial deduction) he wouldnot be taxed on any dividend income. Earnings were ploughed back into expansion,so that Winston J. Schuler is presumably getting richer and richer minute by minute.
Peter Kanavos of Dedham, Massachusetts, presents a simple storyto the, Journal editors. His father was a Greek barber and Pete started witha lowly saloon on borrowed money in 1947. He went into real estate on the side andin a decade had made $5 million, so they say.58
A stalwart woman, Mrs. Catherine T. Clark, baked her way tonew-found wealth. Finding a chink in the capitalist armor in the form of soggy corporatebread, she decided in Oconomowoc, Wisconsin, to bake a palatable whole-wheat loaf.She began in 1946 and by the time the Wall Street Journal got around to hershe was head of Brownberry Ovens, Inc., selling nonsoggy bread to an insatiable market,had moved to San Francisco and was now, the Journal editors guarantee, wearing$50 hats and Paris clothes. The account is vague about her net worth but it seemedto be biggish.59
Again, there is James J. Ling of Ling-Temco Electronics, Inc.,now Ling-Temco-Vought, of Dallas, Texas, who quit school at fourteen, the son ofan oilfield laborer. He learned electronics in the Navy, began business in 1947 andwas worth around $14 million when the Journal editors got to him. He has sincegone much higher, may become a terrific tycoon.
Robert Peterson, his father an immigrant mechanic, found himselfin 1948 low man on the totem pole as a California press agent. But he started HotRod Magazine, which was such a success among teen-agers that it swept him up to areported net worth of $3 million in short order.60
Ralph E. Schneider, in the 1940's a lawyer from the HarvardLaw School, '32, with at most a meager $15,000 a year income, started the Diner'sClub credit-card system and was worth at least $7 million by 1960.6< SIZE=4>1The Journal editors also suspect that he has a string of other juicy investments.
Kell H. Qvale, born in Norway in 1919, his father a Norwegiansea captain, in 1947 found himself a California jeep salesman and rapidly gettingnowhere in typical American style. But he became an M-G dealer, had vast successwith a restless public and now owns British Motor Car Distributors, Ltd. His networth: $3 million at least.62
James A. Ryder, a day laborer in 1935 and later a truck driver,now owns the Ryder System, Inc., of Miami, truck, car and equipment leasers and highwayfreight haulers. His stated net worth: $7 million.63
And now comes Sydney S. Baron, whose father owned but lost ashoe factory in the 1929 smash-up. Baron is a public relations man who in 1949 wasworth only $25,000. He has since handled various accounts, but the most talked-abouthave been Tammany Hall and the Dominican dictator, Rafael Trujillo, whose pointsof rare excellence were put before the American people by Baron. By 1959 Baron hada net worth of at least $1 million, say the Journal editors, and wore $160suits. And say what one will about Trujillo, and echo if one will the French savingthat money has no odor, it isn't everyone who can wear $160 suits. But in the UnitedStates a successful moneyman wears them like a halo.64
The most impressive of the Journal's meager bag appearsto have been Samuel Rautbord, a lawyer who before World War II drew up some papersfor a partner of the American Photocopy Equipment Company of Evanston, Illinois,Interested, Rautbord bought a share and in time became president, chairman and principalstockholder, with the company now listed on the New York Stock Exchange. Worth only$20 million the year before the Journal's editors spotted him, his holdingsat press time were worth $34 million .65
'This is by no means all of the Rautbord saga. The former lawyeralso had paternally conveyed to his two sons $35 million in securities in two trustfunds and had induced friends to invest and become rich. One, Edward Flann, invested$20,000 in 1944 and was at press time worth $3 million. A sister did likewise, withsimilar consequences. As the Journal editors say, he has "the Midas touch."
Rautbord found the taxes of the partnership running so highin 1953--91 per cent--that he reorganized as a corporation, which brought taxes downto the 52 per cent corporation bracket. Then be astutely formed the Clay-Bob RealtyCompany and exchanged much of his Apeco stock for its stock. The advantage here apparentlywas that Clay-Bob paid a lower tax than his personal tax would have been. The proceedsreceived by Clay-Bob, as the Journal tells the story, are not paid out toRautbord, who has plenty of other lucre, but are invested. That ends all nonsenseabout taxes and helps Rautbord keep his head above water.
The way this worked is as follows: Apeco as a partnership hadroughly only $9 left after taxes out of every $100 of income. As a corporation ithad $48 left (disregarding any other unstated circumstances). Now, as the Journaleditors indicate, Clay-Bob received it and as a personal holding company, if it merelyretained and reinvested it, was entitled to an 85 per cent tax credit. For underSection 243 of the Internal Revenue Code of 1954 personal corporations receivingdividends from qualified companies are entitled to such a tax credit. Any incomeClay-Bob paid out would be taxed at the full rate to individuals, manifestly a self-penalizingprocess that would not rationally be adopted for more than part of income at most.What remained taxable to Clay-Bob at 52 per cent was $7.20, leaving $44.26 for reinvestment--muchmore retained value than if the owner had taken dividends direct from Apeco. In sucha situation an owner gets richer and richer by declining to take cash income as anindividual.
Naturally all this affluence has wrought some changes in Rautbord'slife. He owns a Rolls-Royce, a big yacht and seventy pairs of cuff links.66
Hans Fischer, born in Vienna, heads H. Fischer and Associatesof Cleveland. A consulting engineer, he came to the, United States in 1939, as yet,alas, a non-American. Around 1950 he had only $4,000 and with only that much waspractically an un-American but--such had been his success when the Journaleditors looked him over--he, now fully American, was worth $1.2 million, owned aCadillac, a Jaguar and a forty-five-foot Chris-Craft, and lived in a big house inShaker Heights, Ohio, near other true-blue Americans.
But J. W. Walters did somewhat better, possibly because he wasAmerican-born and therefore by nature anointed. A Navy veteran driving a truck in1946, he was looking for a really cheap house, all he could afford. He saw an adfor a "shell" structure at $1,195 and went with borrowed money to buy froma man named Davenport. Instead, he went into partnership with this man. Davenport,evidently a person of little faith or having other worlds to conquer, sold out toWalters in 1948 for $48,000; Walters was then thirty-eight years old.
The lowly enterprise went on to become National Homes Corporation,producer of prefabricated homes, which the Journal men say has made more than$1 million for each of seven persons and left Mr. Walters with a net worth in 1960of $8,700,000.67 Walters, who quit school after the twelfth grade, hasacquired a 1,700-acre Florida hunting ranch as well as other dazzling properties.National Homes now makes prefabricated apartment buildings, shopping centers andschools as well as individual houses. It will build whole prefabricated towns, andhas done so, at the drop of a nail.
But these people, though we salute them as true-blue Americanenterprisers, are all really small potatoes, hardly worth a feeble cheer from theHouse Un-American Activities Committee. The new crop, either the one of Fortune,1952, or the Wall Street Journal, 1962, simply does not rate on the scaleof wealth even though its members may be having the time of their lives in theircruisers, jaguars, $50 bats and $160 suits.
The Sweetest-Smelling Real Estate Empire
The New York Times in 1965 introduced two formidablecontenders into the arena of big new wealth, as if to replace the void left by thedeparture of bulky William Zeckendorf.
These new tycoons, said the Times, are Sol Goldman, forty-seven,and Alex Di Lorenzo, Jr., forty-eight, who have built a real estate empire on a pyramidof mortgage loans.
When the Times studied them in April, 1965, they quietlyowned more than twenty office buildings, including the seventy-seven-story ChryslerBuilding; extensive harbor terminals; a growing flotilla of hotels; various "sprawling"industrial buildings; shopping centers; and large apartment houses. More than 20,000persons were employed in keeping these properties operative.
Cruising under the firm name of Wellington Associates (presumablyit would be unlucky to be Napoleon Associates), they have followed the techniqueof "mortgaging out"--that is, borrowing enough money with first and secondmortgages to cover the full purchase price of a property, literally nothing down."If, through improvements or other devices, the buyer can increase the rent rolls,he can go to a bank in a year or two and borrow enough money on a new mortgage atlower rates to wipe out the high-interest mortgages, sometimes leaving a surplusabove the original purchase price. This surplus is then invested in other propertiesand the process goes on like a rolling barrage. A neat feature is that the surplusis tax-free because it is technically borrowed money, on which one pays no tax, naturally.
Wellington Associates bought the Chrysler Building in 1942 for$42 million, mostly carried on first and second mortgages charged against them. Somefour years later they borrowed $47 million at 5-1/2 per cent from a Wall Street syndicate,which spread the paper around the country, and paid off on the old paper. In themeantime by amortization out of rents they had reduced their original obligationby $3 million, so they had $8 million of technically borrowed nonrepayable tax-freemoney to play with, the best kind there is.
Now the Chrysler Building alone is producing for them $1.5 milliona year, tax-free, for their investment in other properties.
Proceeding in this way, if nothing goes wrong (such as an interruptionin rents or balkiness of the banks), Goldman and Di Lorenzo should in time own allof the United States, cost free. They have already bought more than 250 pieces ofproperty in Manhattan and own more than 450 properties "conservatively estimated,"says the Times, to be worth more than $500 million. The equity of the twopartners in this chunk is set at about $150 million, a worthy figure. But it couldshrink--or expand.
The Times got wind of Wellington Associates because itsswift rise had set alarm bells ringing in nearly every investigative agency in thecountry, including the FBI. The latter was instantly fascinated because of the persistentrumor that underworld money is finding its way into American business, that "badguys" born in Sicily and other unhallowed places are infiltrating "goodguys" with names reminiscent of Astor, Vanderbilt and Rockefeller. No basiswhatever for these rumors was found in the Goldman-Di Lorenzo set-up, which emergedsmelling as sweet as any real estate empire ever smelled. It appeared, indeed, tobe the sweetest-smelling real estate empire that the investigators had ever encountered.68
The Rising Tide of Wealth
But wealth is apparently rising around us like a tidal waveeven as inquiry proceeds. Herman P. Miller, assistant to the Director of the CensusBureau, reports that "The rich among us are flourishing as never before. Andnot only millionaires, but multi-millionaires." The figure of 27,000 personsowning $1 million or more of property in 1953, according to the Lampman study, mustnow be raised to close to 90,000 in 1965, says Miller.
It is this increase in the wealth of wealth-holders thatis taken to prove that newcomers are making big money in droves.
"The 90,000 millionaires are a diverse lot," saysMiller. "They include men and women, young and old, creators and contrivers,new rich and established rich.
"Since their number is rapidly growing, it suggests thatthe new millions are largely earned [sic!] and not simply passed down through inheritance--thatis, they come from the creation of goods and services we can all enjoy. A large proportionof today's new millionaires derive their wealth from scientific inventions, homeconstruction, new products and other things that enrich our lives in many ways."69
There is nothing in the set of figures presented to justifythis disarmingly pleasant conclusion. The simple fact is this: In the general risein prices holdings previously valued below $1 million are now valued at $1 millionor more. No doubt some new earning properties have been created out of inventionsand the like but most of these million-dollar-plus properties are owned by the samepeople who in most cases inherited them. It is not the case, as far as these barestatistics show, that "the new millions are largely earned"; that remarkis thrown in from nowhere, with no evidential basis cited. A man worth $200,000 in1940 may now be worth $2 million and may in five or fifteen years be worth $800,000or $5 million, depending upon the swing in the economy and the nature of his property.
But it is not the case that there are 90,000 newly moneyed millionaires,9,000 or even 900. It is clearly incumbent upon anyone who contends this to showit, Some few persons have in the past twenty years come up from nothing to $1 millionor more; but they represent only a minor fraction of this phalanx of 90,000, whoare simply the old-line upper property holders.
A New String fromTime
But reports such as these are quickly followed by others, allwith the same message but a different cast of characters. Thus Time, December3, 1965, under the title "Millionaires" presented a new list of men whohad allegedly made a million or more before they were forty. Editors should noticethat there is still to be presented a list of women, like Lucille Ball, who havemade a million or more before forty and even of children who have become worth morethan $10 million before they are five years old.
"As a land passionately devoted to free enterprise, theU.S. has always been the best place for a man to make his million. The fabled 19thcentury millionaires . . . all began poor. Despite their often controversial actions,they, like most American millionaires, basically enriched themselves by enrichinga growing nation [a statement that might be seriously questioned.-- F.L.].
"The U.S. still offers countless opportunities for theman who wants to accumulate a personal net worth of $1,000,000 or more--and thousands[sic!] seize them every year. The number of U.S. millionaires, reports the FederalReserve Board, has swelled from 40,000 in 1958 to nearly 100,000 at present. Howdo they do it? In a variety of individual ways, but their common denominator is thatthey find an economic need and fill it."
My readers are aware, to the contrary, that nearly all of these90,000-plus do it by inheriting, with the increasing number of millionaires traceableto the rise in prices.
But Time goes on to present its own meager bottom-of-the-barrellist of new wealthy:
Net Worth*Arthur J. Decio, 35, Elkhart, Ind., Skyline Homes $5 millionCharles Bluhdorn, 39, N.Y.C., Gulf & Western Industries $15 millionHarold Smith Prince, 37, N.Y.C., Broadway producer $1 millionArthur Carlsberg, 32, Los Angeles, real estate $5 millionMerlyn Francis Mickelson, 38, Minneapolis, computer parts $47 millionJohn Diebold, 39, N.Y.C., management consultant $1 million +Eugene Ferkauf, 44, N.Y., Korvette, Inc., cut-price stores $55 millionJerry Wolman, 38, Philadelphia, football impresario "Millions"Art Modell, 41, Cleveland, football impresario "Millions"Michael Mungo, 37, South Carolina, ex-cottonpicker, real estate $2 millionJohn F. Donahue, 41, securities salesman $1.5 millionAlvin Weeks, 41, Atlanta, frozen pastries Not statedJoseph McVicker, 35, Cincinnati, toys "Millionaire"Walter Davis, 42, Texas, trucking $7 millionErnest Stern, 45, Pittsburgh, theater magnate Not statedRobert K. Lifton, 37, N.Y.C., real estate $4.75 millionFletcher Jones, 34, Los Angeles, computer programme $20 millionDel Coleman, 40, Chicago, jukeboxes Not statedJames Thomas, 37, Los Angeles, real estate "Millionaire"Michael Rafton, ?, Oakland, portable classrooms "Huge profit"Charles Stein, 37, Chicago, orange juice "Millionaire"Al Lapin, 38, Los Angeles, coffee vending, pancakes "Rich"Jerry Lapin, 36, Los Angeles, coffee vending, pancakes "Rich"Fred Bailey, 39, Los Angeles, ordnance parts $2 millionCharles Gelman, 33, Michigan, chemist, filter manufacturer $1.3 million * Time cites no public record for its figures.
Accepting all these valuations as authentic, what do they prove?Not , surely, that big wealth is new wealth or vice versa. Nobody denies that a fewscore or even a few hundred men in business ventures make a temporary million ormore. The point is that most of these sums mentioned are chicken feed and the largerfigures might require some further examination. Again, how many of these will surviveeconomic downdrafts? How many will follow William Zeckendorf into sterile impecuniosity?
A list of hundreds of names could be drawn up under the title"Men Once Worth a Million or More Who Went Broke." As Thomas Mellon remarked,it is harder to hold onto money than to make it.
The Big Winners in Review
What remains to be said about this heterogeneous collectionof names? Some have arrived, some are in the process of arriving (or departing),some are only pseudo-arrivistes.
To return to the Fortune list of thirty-four, takingit at face value and disregarding any of the qualifications offered, most of themen on it are neither builders, inventors, constructors of new-type industries norjob creators. The predominant oil crowd play an enlarged version of the childhoodgame of finders-keepers under a big tax shelter. They provide little employment,at most pour low-tax high-price oil into a pre-existent world pipeline.
Kaiser and the Browns of Brown and Root, Inc., are constructionmen, buoyed up a long part of the way by politically wangled government loans andcontracts. Kaiser has shouldered his way heavily into private enterprises of variouskinds--aluminum, plastics, cement, steel. Perhaps he has bulldozed a pattern forthe future in which government will finance new private enterprises via low-costloans, contracts, tax schemes and other aids, thereby providing jobs lower down forthe multitudes that the old-line monopolists allowed to spawn without reckoning onthe ability of the economic system to sustain them.
Stewart Alsop found that all on his Post list but Landhad made good in a big way mainly by taking advantage of special government sheltersover oil, insurance and real estate. All the oil men--Mecom, Keck, Smith and Abercrombie--getthe depletion allowance and are able to take large deductions for "intangibledrilling expenses." "Thus," as Alsop remarks, "an oilman witha good tax lawyer can pay little or no income tax on a real income of millions ofdollars." In real estate, depreciation plays the role of depletion in oil andthere is always "mortgaging out." In insurance, the key word is "reserves";for in order to build reserves generous tax allowances are made which apply as wellto the equity of the owners of insurance companies such as Stone, MacArthur and Ahmanson.The latter, doubling in the building and loan business, is propped up also by governmentinsurance up to $15,000 per individual depositor.
Kettering, as I have noted, was an inventor; Mott and Sloan,engineers; Kennedy, Wolfson and Getty are market operators who, like most of Alsop'slist, never made any weighty contribution to the gross national product. Getty becameking-size by buying underpriced shares in the Depression. Halliburton, Ludwig andMacKnigbt are company organizers and rationalizers, able to find chinks in an establishedmarket. MacArtbur simply offered through mass advertising as little insurance asanyone wished to buy, from $1 per month up, Like the Woolworth plan this one wasadmirably suited to an economy in which few people have money beyond immediate pressingneeds.
All the noninheritors on the Fortune list were born inthe United States. Of the twenty-three for whom the information is of record, thirteenwere born in small towns or semi-rural areas.
A few started as poor boys, notably H. L. Hunt, who was dirt-poor.But most had comfortable beginnings. Getty's father was rich, Richardson's and Murchison'swere well-to-do, Sloan's father was a successful small-businessman and Kennedy'sfather a prosperous-enough saloonkeeper-politician. In general, those who never enteredcollege appear to have had the more modest beginnings; but except for Hunt the rags-to-richestheme applies to none. At least one married well from a financial point of view,although he was also endowed with technical ability.
A notable pattern emerges in the large number of school dropoutson the list, from early grades to college. Stewart Alsop noticed the same thing inhis Saturday Evening Post list of thirteen, of which five are on the Fortunelist.
Most of the Fortune men identify themselves educationallyas having attended "public schools," which may mean anything from firstgrade to completing high school. And most of those I have added--Amon G. Carter,Jesse Jones, John J. Raskob, Hugh Roy Cullen, William L. Moody and even A. P. Giannini--hadscant schooling. With few exceptions, the fortune-builders of more recent date, liketheir nineteenth-century forerunners, had little interest in school even when itwas available to them. Not especially well-educated or well-read either, they areobviously truants from high culture. Many who weren't high school dropouts were grade-schooldropouts.
Educators, trying in desperation to rally popular support foreducation and mulling over statistics, like to point out to rugged philistines thaton the average educated people earn more than the meagerly educated. And this istrue when it comes to offering marketable skills and personalities at modest salariesin an existing Establishment that requires ever-increasing skilled personnel forits complex operations. But it has never been true where really big money is concerned.An education can be a severe handicap when it comes to making money.
The reason for this is that in the process of being educatedthere is always the danger that the individual will acquire scruples, a fact dimlysensed by some of the neo-conservatives who rail against the school system as "Communistic."These scruples, unless they are casuistically beveled around the edges with greatcare, are a distinct handicap to the full-fledged moneymaker, who must in every situationbe plastically opportunistic. But a person who has had it deeply impressed upon himthat he must make exact reports of careful laboratory experiments,must conduct exact computations in mathematics and logic, must produce exacttranslations and echoes of foreign languages, must write faithful reportsof correct readings and must be at least imaginatively aware of the worldin its diversity, and who has learned these lessons well, must invariably discoverthat some element of scrupulosity--even if he hasn't been subject to moral indoctrination--hasbeen impressed on his psyche. If he enters upon money-making in a world bazaar whereapproximate truths, vague deceptions, sneak maneuvers, half promises and even baldfalsehoods are the widely admired and heavily rewarded order of the day he must makecasuistic adjustments of his standards. The very process of laboriously making theadjustment, even if he succeeds, puts him at a disadvantage vis-a-vis theunschooled, who need waste no energy on such adjustments, who pick up anything lyingaround loose as easily as they breathe. Some educated people can't make even a partialadjustment to the market bazaar, and their disgraceful bank accounts show it. Theyare, as even their wives sometimes kindly inform them, failures, though they aredoing something conceded to be useful such as instructing children or enforcing thelaw. They can inscribe after their names a big "F" and go stand in a cornerunder a dunce cap as the propaganda dervishes scream about success.
But, so as not to alarm appropriations-conscious educators,mere schooling (which is not the same as an education) may prove no great handicapin the race for money, which is one reason some heavily schooled persons turn outto be pecuniary successes. For many persons dutifully put in the required numberof years in a national school system noted for its permissiveness without ever acquiringdangerous scruples. One could cite hundreds of names. Among other things, they learnto cheat handily in examinations--excellent training for the market, They learn tobluff overworked teachers with verbal balderdash. And they do well subsequently asloose-talking salesmen, jobbers, advertising men, promoters, agents, brokers, morticians,lobbyists, fixers, officeholders and smooth workers in the film and television industries.They all learn to be practical--that is, judiciously unscrupulous. After all, asany of them can testify truthfully, the world isn't perfect and they piously feelno obligation to alter its skewness. They may even become tycoons, and it is onlyother tycoons who stand in their way.
An education, it is widely and correctly thought, should preparethe individual for life. But the preparation is not for life as the philistines preconceiveit. Educators have prolixly explained what an education is so many thousands of timeswithout denting the popular notion that it is vocational preparation that it wouldbe piling prolixity on prolixity to attempt it again. Put most briefly perhaps, aneducation is designed solely to humanize the individual, and if it has done thatit is a "take." The idea of an education is to raise the individual abovethe level of mere animality, or at least to qualify his animality significantly.If such an individual makes out better-than-average financially it may be due torecognition of his worth. But thousands of thoroughly educated people have neverbeen appraised by their contemporaries as worth a living wage. T. S. Eliot, Harvard-schooledand widely hailed as the most significant poet writing in English in the past halfcentury, earned his living as a bank teller and, much later, as a publisher's reader.Financially speaking, Eliot as poet, teller or editor wasn't worth so much as a cussword. Yet it seems probable that his writings will be appreciatively read long afterevery single existing American corporation and bank, and the memory thereof, haspassed out of existence. Curious. . . .
An education, truth to say, has nothing whatever to do withmaking or not making money, except perhaps as a hindrance. The educators, in extollingthe money-rewarding features of education, are indulging in a benevolent deceit,trying to hornswoggle a public with a peasant view of life to support the schoolsand perhaps lift themselves by their bootstraps above simple animality. Vocationaltrainees sometimes get sidetracked into true educational paths.
There is no evidence that any of the men on our list who hada higher education, except the General Motors engineering group, ever made use intheir careers of what, if anything, they learned at college. There is little in thecareers or expressions of either Getty or Kennedy to reflect the influence of Oxfordor Harvard. Each could as well have finished off in a business college just as Raskobdid. Harvard never endorsed either stock market pools or the general conduct involvedin such pools. These were strictly extracurricular.
The General Motors men were all technicians and applied theirknowledge of technology strictly to making money, not to engineering the best possiblecars. Donaldson Brown, who married a Du Pont girl, is credited by Alfred P. Sloan,Jr., in his memoirs with developing a penetrating method of ascertaining rate ofreturn on investment by company subdivisions, a method taken over as well by Du Pont.70
Most of the men on the Fortune list, as on Stewart Alsop'slist, were unsuitable employees, a facet that Alsop takes note of. Few of these mencould fit into a pre-arranged job, except for the General Motors executives. As faras employment was concerned, they were maladjusts, nonorganization men. In whateverbrief employment some of them had early in their careers, they were like restlesspanthers, looking only for a chance to break out and track into the jungle. Againexcept for the General Motors crowd, who were team workers, nearly all the othersmentioned were "loners." And most of them remained "loners,"detached, nongregarious. Exceptions would be found among some of the Texas oil men,although Hunt is very much of a "loner."
Alsop found other peculiarities among those he interviewed,which apply, with some exceptions, to the Fortune listees. None played golf,supposedly the businessman's game. All were physically restless, standing up, movingabout, scratching themselves, drumming their fingers, chain-smoking cigarettes, twiddlingand twitching--all of which may merely have been restiveness at having to submitto an interview. Alsop takes it as a general character trait.
Some who have been in the armed forces made out poorly undermilitary discipline, couldn't take it. John D. MacArthur, Alsop reports, was dischargedfrom the Navy in World War 1, "unsuited to naval discipline." Despite themany big wars the United States has fought in the lifetime of all these men, nonestands forth as a major or minor military figure. Where a Who's Who recordis available it shows few in military service even when by age classification onewould have expected to find a man in uniform. But some perhaps common deviant characteristicappears to have led the military to pass them by. Money-making and military servicedo not appear to mix.
As to religion, few on the Fortune list make a pointof mentioning it. Two were Jews and one was a conspicuous Catholic, Mr. Kennedy.While a few of the others who do not give such information may be Catholics, theprobability is that all thirty-one are at least nominally Protestants or religiouslydisinterested. Catholics do not appear among money-makers proportional to their numbersin society probably for the same reason that they do not loom large in any departmentof upper-hierarchical American life except local politics and trade-union leadership:They have been self-segregated from the mainstreams of American life by a clergyapparently afraid that contact with non-Catholics will cause their submissivenessto the Church to diminish. With the history of Europe before us we cannot concludethat Catholics as such are not interested in money and power.
Many of these men, dead or alive, are saluted as philanthropistsby newspapers (that carry the advertising of their enterprises) because they have,before or at death, established foundations formally classified as charities underthe law. Of these Kennedy, Sloan, Kettering, Kaiser, Benedum, Richardson stand outthus far, although virtually all of them will in the normal course of operationsestablish foundations. Such action has now become standard procedure in reducingestate taxes and keeping controlling shares either in a family or a friendly group,at the same time previsioning considerable posthumous social influence through thefinancial patronage the foundation is able to bestow.
Who among the noninheritors has made the deepest national impress?This question is easy to answer and one must say Mr. Kennedy, at second remove, mainlythrough his children. Although John F. Kennedy was not trained by his father to becomewhat he became, not merely president of the United States but a president fantasticallyvisualizing the United States as something more than a pettifoggers' paradise, thefather did not impede him and in many ways must be conceded to have indirectly helpedhim, as the sire's biographer, Richard J. Whalen, skillfully brings to light. ThroughJFK, and possibly through his other sons, Mr. Kennedy (and his wife) enters History(that is, he comes under analytical individual consideration of the historians) insteadof merely being part of history like his financial contemporaries and the rest ofus. Between History and history there is a vast difference: The former invokes thecanons of aesthetics and morality; the latter is nonevaluative, shapeless. Mr. Kennedyalso made a signal contribution as the aggressive first chairman of the Securitiesand Exchange Commission.
If we continue beyond the Fortune list we find no significantalteration in these patterns although we do, here and there, run into odd variationsin the form of Land, De Golyer and Danforth. These are untypical cases, sports.
As to the general human type of American wealth-builder, newand old, it can be said that he is usually an extrovert, given to little reflectivenessuntil perhaps he approaches senility. He is more often unschooled than schooled,and unread, and has for the most part a naive view of the world and his role in it.A man of action, he is compulsive and repetitive in his single-minded acquisitiveness.He simply does not know what else to do. As De Golyer remarks, he substitutes money-makingfor living and often believes that he is engaged in a great crusade. He rarely, asfar as the record shows, has qualms or doubts about himself. He is almost invariablydevoid of a sense of humor. Color him grey.
"Beyond certain minima, economic gain is inevitably associatedwith prestige and status, self-validation called 'success,' opportunities for assertionagainst others, autonomy from disliked persons, tasks, or situations, and so forth.What gives economics its power to command such energy as is invested in the pursuitof gain is often its instrumental value as a means to some other objective. Moneybuys more than commodities; it buys psychic gratifications of all sorts-althoughnever so completely as the money-seeker thinks it will."71
The winner is consequently usually restive. For he evidentlyfeels that with all his wealth he ought to strike a blow for something tremendous.But what? And how? Christianity? Science? World peace? Progress? Education? Freeenterprise? Democracy? Health? In many cases he ends up feeling frustrated and moroselyretires to some House and Garden paradise to meditate on the freakishness of theworld and its people. In no case yet of record has he developed a sense of missionthat the world can identify itself with. By his position alone he is alienated. Forall he has, in fact (apart from deviants like De Golyer, Land and Danforth), is money.