"The Very, Very Rich and How They Got That Way" feels like reading a late night self-help informercial but redeems itself with a few gems. Great literature, this is not. Occasionally entertaining and mostly tedious, this is. Profiling 15 men who made over $100 million (before the 1970's!), Gunther Max tries to answer the question of "how to get rich?" Some of the stories are actually quite surprising and funny. I particularly enjoyed the sketches of Getty, Hughes, Lear, Land, and Paulucci. But at the end of his survey, Gunther leaves us with a not particularly novel "insight":
Character is the king-pin of self-made wealth. To get rich, you need a pinch of prediction and a dash of luck and perhaps little bits of many other things. But the one thing you need in great quantity is internal strength. In a word: guts.
It's probably true, but I didn't need to read a book to appreciate standard Midwestern values!
My highlights below:
1. The Golden Gallery
With a few exceptions, which will be justified when the time comes, all the ventures you’ll meet here started from the bottom. We have categorically excluded all holders of great inherited wealth: Rockefellers, Mellons, Fords.
Every one of these rich men – every one – had to start by turning his back on safety and security. It is patently impossible to get rich by sticking with a salaried job.
2. From Croesus to Crassus to Cornfeld
Each took the economic environment as it existed in his day and instead of letting it walk on him as most of us do, he grabbed it by the neck and beat it into submission. The supremely wealthy have always done that and always will. No matter what the environment was like, some men have figured out how to beat it. There is, it turns out, always a way.
Where did all this muscle come from? Money. Without actually planning it in advance, the Dutch had set up an outrageously successful new economic system in which the common man, by enriching himself, enriched his nation.
Some three centuries later an American named Bernard Cornfeld (chapter 7) was to remark that the best way to make money is to deal directly with money itself, rather than approach it obliquely by dealing with goods and services.
The Morgans loved railroads. At one time they controlled the New York Central, the New Haven, the Lehigh Valley, the Erie, the Reading, the Chesapeake and Ohio, the Northern Pacific and a bundle of others – simultaneously. They organized U.S. Steel. They engineered trusts that came to own most of the anthracite and soft-coal production in the country. The story is told of John Pierpont, Jr., that when he attended a banquet in Europe around 1900, an aged countess came up to him and said in all seriousness, “I understand, Mr. Morgan, that you’re the controlling stockholder of America.”
3. How to Get Rich Without Really Trying
(You’ll note as we go through the gallery that many of the very, very rich lost a parent at an early age. This fact gives rise to some odd psychiatric speculations, which we’ll consider in a later chapter.)
Benton went to Yale University with scholarship aid and was graduated in 1921.
Early in 1925 he hired a young assistant, a newly graduated Yale man named Chester Bowles.
One temporary post that attracted him was offered by Robert Maynard Hutchins, a Yale classmate who had become president of the University of Chicago.
Britannica grew spectacularly. In the years since Benton took it over in 1943, its sales have increased more than fiftyfold and it has paid the University of Chicago some $35 million in dividends and royalties.
4. The Salesmanship Route
The interesting thing about sales ability is that, if you believe you have it or can acquire it, you need nothing else to make you rich.
In later years he enunciated a principle about this early growth of a business. The principle, stripped of its PMA trappings, is a simple and apparently sound one: Don’t try to make a business grow too rapidly at first. Get it solidly established in the beginning, doing all or most of the work yourself.
Another principle had to do with salesmanship specifically: “Sales are contingent on the attitude of the salesman, not the prospect.”
He then cooked up a deal in which he and Lavin both used OPM. Instead of directly putting up his own money, Stone guaranteed a bank loan of $450,000 to Lavin. In return Stone got a one-fourth interest in Lavin’s new company. The company Lavin formed was Alberto-Culver, one of the more impressive growth companies of the 1960s. Stone’s share of the stock, which he had acquired without actually spending a dime of his own, reached a value of roughly $30 million by the end of that decade.
For a while he helped finance the ESP studies of Dr. Joseph Banks Rhine at Duke University.
5. Can Fortune Building be Taught?
One thing, at least, seems reasonably certain: Whether or not the accumulation of capital can be taught, standard schools and colleges don’t teach it.
Optimism is undeniably a necessary ingredient in any kind of fortune-building formula and may be the main ingredient.
Ah, but what you have really bought is optimism. This is the main thing that fortune teachers – some of them rather cleverly – teach.
Alger went on to write well over 100 books, and some 20 million copies were sold during his lifetime.
The rest of the money simply vanished in plain, old-fashioned profligacy. Alger savored wine and women in New York, Paris, San Francisco and other scarlet places where a man’s money could be drained away rapidly. Finally, old and tired, he crept back to the green tranquillity of rural Massachusetts and moved in with his sister. He died there in 1899, flat broke.
In The Success System That Never Fails he lists what he calls the “four basic causes of failure.” These are “illicit sex, alcohol, deception and stealing.”
Many of Stone’s star salesmen, while admitting they sometimes gag on the platitudes with which they are daily force-fed, insist PMA is a genuine, workable formula for success. What is it? Basically it is a type of autosuggestion. It is somewhat similar to psychotherapist Emile Coue’s formula for getting rid of psychosomatic illness: You endlessly repeat the statement “Every day, in every way, I am getting better and better.” After repeating it for weeks, months or years, with luck you come to believe it. Your body then (so the theory goes) responds to your mind, and the end result is that you actually do get better. Thus PMA.
Among the slogans: “Do it now!” “Success is achieved and maintained by those who keep trying.” “Go where you fear to go.” “When there is much to gain and nothing to lose by trying...” And so on. Corny? Of course. Thunderingly obvious? Indeed. Yet it must be admitted that successful men do in fact obey these little rules, whether or not the rules are articulated thus, in the form of slogans.
The basic SMI principle, if it can be put in a nutshell, is that everybody is locked into the world of his own imagination. Your imagination, in other words, describes the limits of what you can do or become.
6. The Stock Market: Playing It
As a speculator he preaches only a couple of axioms that he has practiced. One: “Don’t tell me how much I may win, but how much can I lose.”
He likes simplicity, and when he thinks of the rich or great whom he admires, he thinks of them in some homely phrase: “What a wonderful mother those Ford boys must have – they’re great people. Really nice. Simple.”
8. The Scatterseeds Approach
It is an illuminating fact about Howard Hughes that, throughout most of his life, he lacked anything resembling a headquarters office. He conducted his business from public telephone booths, hotel rooms, wherever he happened to be. Most of the information he needed to run his bewilderingly diverse enterprises – information that the average systematic businessman would store in file cabinets – he stored in his head.
“He was the kind of man,” says a Hollywood press agent who knew him in his moviemaking days, “who broke every rule taught by the Harvard Business School. Every rule except the one that says you should make money.”
But suddenly, at the age of 18, for reasons that neither Hughes nor anyone else has ever explained satisfactorily, the quiet kid caught fire.
At the end of 1930 Hughes reached his 25th birthday. He had inherited half a million dollars at the age of 18. His net worth now was conservatively guessed at around $20 million.
Following the smash success of Hell’s Angels in the early 1930s, Hughes produced an equally successful gangster film called Scarface.
For reasons that psychiatrists are still arguing about today, these changing attitudes found overt expression in a thunderous, nationwide obsession with the female breast. The Outlaw was by no means a pornographic film – certainly not by today’s standards and not even by those of the 1940s. The only element to which bluenoses of the time could object was the camera’s tendency to linger for what seemed like unnecessarily long periods of time on Miss Russell’s magnificent cleavage. Hughes carefully and cleverly capitalized on this minority objection. He instructed his publicity agents to pose as offended bluenoses. They phoned the police and other authorities in cities where the film was being shown, demanded that the theatres be closed in the name of public decency, raised so loud a hue and cry that the film became famous around the world. It was really just a run-of-the-mill western. Hughes, through his expert handling of it, made it into perhaps the biggest box-office success in all the history of movies up to that time. His profit on it over the years is reputed to have added up to something like $15 million.
9. Diggers and Drillers
When the senior Getty died, he left his son just half a million dollars. That amount had little effect on the young man’s subsequent fortunes. J. Paul Getty had already made millions of dollars by himself.
Most old-timers resented the implication that they had to be bribed with frills to do an honest day’s work. They preferred to sign on with wildcatting operators who offered no fancy extras but who spoke their language and worked side by side with them on the drilling sites.
In February 1949 my company obtained a 60-year concession on a half interest in the so-called Neutral Zone, an arid, virtually uninhabited and barely explored desert region lying between Saudi Arabia and Kuwait on the Persian Gulf. The concession was granted by His Majesty, Ibn Saud, king of Saudi Arabia. In immediate consideration for the right to explore and drill for oil in the Neutral Zone, I paid the Saudi Arabian government $12,500,000. It was a gargantuan risk, and many people in the petroleum industry once again openly predicted I would bankrupt my firms and myself. Four years and $40 million were needed before we brought in our first producing well in the Neutral Zone. But by 1954 I could relax and enjoy a private last laugh at the expense of those who had prophesied my ruin. The Neutral Zone had proved to be one of the world’s most valuable oil properties. Well after well had come in, and petroleum geologists conservatively estimate proven reserves in places in the region covered by my concession to exceed 13 billion barrels!
10. Do You Need Luck to Make a Million?
Heraclitus remarked some 25 centuries ago that character is destiny, and philosophers and novelists and moviemakers since then have made the point over and over again.
Luck. It blunders in and out of our lives, unbidden, unexpected, sometimes welcome and sometimes not. It is the supreme insult to human reason: You can’t ignore it; yet you can’t plan for it.
The next day he was back. The situation hadn’t changed. All the news about Union Pacific was still overwhelmingly bullish. The vast majority of professional trades, far from selling it short, were greedily buying it on margin. But Livermore, still with that vaguely puzzled air yet oddly serene, sold more thousands of shares short. On the next day, April 18, San Francisco was smashed by an earthquake. Millions of dollars in Union Pacific track and other property, and uncountable millions in potential earnings, vanished beneath the rubble. The company’s stock fell like a stone. Livermore covered his short sales and came out of the deal more than $300,000 richer. “Where did you get the hunch?” they asked him later. He could only shrug helplessly.
“When a man has lived by luck,” he remarked once to a Swiss banker friend, “he lives with fear. If luck departs, where do you go for a new supply?”
11. The Technology Route: The Jack-of-All-Trades Approach
Lear, in fact, definitely seems to prefer a relatively simple life. When he and his family were living in Europe a few years ago, he got fed up with the baronial splendor of the mansion outside of Geneva he had rented. He bought a piece of property and had a modest American-type house, which he named Le Ranch, built on it.
Lear is served first in his household, other men next, women last
A short time later Lear figured out a way to build radio coils a fraction of the size they had been before and formed the Radio Coil and Wire Company to turn them out. As a by-product, he built a compact, for its day, radio to run on an automobile battery and installed it in a car. He took the idea to Paul Galvin, president of a small Chicago firm. After expressing doubt as to whether radios in cars would ever be practical, Galvin decided to manufacture a trial batch of the units. A short time later the company’s name was changed to Motorola.
The FAA, incidentally, has never approved any blind-landing system, including Lear’s, for use on U.S. airliners. Military pilots have been using the Lear blind-landing system for 15 years.
“The FAA,” says Lear with characteristic bluntness, “is a scourge on the progress of aviation.”
Lear is one of the last of the swashbuckling 100% entrepreneurs, a vanishing breed in today’s team-play corporate life. “Lear’s a loner,” says a friend. “He’s a screwball, an inventive genius.” He’s also, and this is pointed out less often, a happy man. Lear has his life arranged precisely as he wants it. “There’s nothing I’d rather be doing than exactly what I’m doing now,” he says contentedly. “If someone offered me $160 million for my company – about what it’s worth now – with the provision that I would have to retire, I’d spit in his eye. For me the best of life is the exercise of ingenuity – in design, in finance, in flying, in business. And that’s what I’m doing.”
12. The Technology Route: The Specialist’s Approach
If a man of the Renaissance were alive today, he might find running an American corporation the most rewarding outlet of his prodigious and manifold talents. In it he could be scientist, artist, inventor, builder and statesman, and through it he might gain the ear of the princes of the state.
Land’s associates cannot recall his ever having given an order. He guides his company sensitively, thoughtfully – and with immense and obvious enjoyment of what he is doing. He manages by persuasion and delegation, believing that men perform best the jobs they created for themselves. His deepest concern is that all Polaroid employees do not yet have such jobs, and he has promised them that this will be changed as swiftly as possible.
Land is acutely aware that his role as Polaroid’s creator, head and research director is a difficult one – and it would be easy for his brilliance to dazzle, outshine and discourage his associates. Instead, he has a rare gift for inspiring them to high achievements of their own. He is careful, moreover, not to spoil anyone else’s joy in creating. “Any intelligent man,” says Land, “can finish another man’s sentence. We are all careful never to do that.” He is convinced that the ability to create and invent is not rare; in his opinion it is common but generally uncultivated.
Land’s interest in polarization began one night, he recalls, when he was walking along Broadway in New York City. The year was 1926; Land was 17 and a freshman at Harvard. It suddenly struck him that polarizing filters could eliminate headlight glare and thus decrease the hazard of night driving. Taking a leave of absence from college, he began spending eight to ten hours a day in the New York Public Library reading everything that seemed pertinent to his new interest. At night he carried out experiments in a small laboratory he had set up in a rented room on 55th Street off Broadway. To further his work, he gained secret access – also at night, via a corridor and an unlocked window on the ninth floor – to a physics laboratory at Columbia University.
Then, in January 1949, Booth opened a dazzling promotion in Miami. He figured that cameras sold to well-heeled Miami vacationers would soon be scattered all over America, with every owner a Polaroid salesman. As part of his promotion, Booth supplied a squad of pretty girls and a batch of lifeguards with Land cameras to snap pictures at pools and beaches and give them away to gape-mouthed tourists. Within a few weeks most Miami stores had sold out their stock of Land cameras.
“A country without a mission cannot survive as a country. There may be many ways of creating that mission, and many groups will play their role, but I want to talk about the proper role of industry. Its proper role, I believe, is to make a new kind of product – something people have not thought of as a product at all. When you’ve reached a standard of living high enough for most people, where do you turn next? It seems to me there is only one place to turn. Industry should address itself now to the production of a worthwhile, highly rewarding, highly creative inspiring daily job for every one of a hundred million Americans.”
14. The Magic of “OPM”: 1. The Borrowing Route
The technique of using other people’s money is so common and so well thought of among the very rich that it has been dignified with capital initials: Other People’s Money – OPM for short.
15. The Magic of “OPM”: 2. The Equity Route
The book value of a company is essentially an accountant’s assessment of the company’s worth. It is naturally a very conservative assessment. Ling thought he saw room for improvement. In boom times, as Ling well knew, the stock market almost always values any sound company at more than its book value. That is, if you take the going market price of the company’s stock – the price investors are willing to pay for it – and then multiply that price by the total number of shares outstanding, the resulting figure is likely to be far higher than the book value calculated by company accountants. The reason is that the stock market usually pours a heady dose of hope into the calculations. The stock price is based not only on the current, perceptible, tangible worth of the company but also on what investors think or hope or pray it will be worth in the future. This element of hope is absent, of course, from the severe and somber book-value calculations. Mulling over these thoughts, Ling asked some questions that few conglomerate builders before had ever thought to ask. Why carry acquired companies at their mere book value? Why not set them up as independent equities, create stock for them, sell some of that stock to the public and let the market pump up their value? And that is what Ling did in 1965.
Wilson thus became part of LTV. But LTV was now in debt to the tune of $80 million, and Ling’s next problem was to get out from under that burden. His approach to the problem took Wall Street’s breath away. It was perhaps the cleverest of all Ling’s clever uses of OPM. He transferred the major portion of the debt into Wilson’s books. That is, he engineered the situation so that, technically speaking, the money was owed by Wilson rather than by the parent company. Then, as he had done before with LTV itself, he split Wilson into three separate corporations along the company’s natural product lines – Wilson and Company Meat Processors, Wilson Sporting Goods and Wilson Pharmaceuticals. (Wall Street promptly dubbed these three companies Meatball, Golfball and Goofball.) Each of the three new companies was authorized to issue its own stock. The bulk of the new stock became the property of the parent company, LTV, Inc., and the rest was sold to the public. The money brought in by the public sale was enough to pay off almost all the debt that had originally been transferred to Wilson’s books.
17. Real Estate: Building Small
His biggest dream – perhaps the biggest ever dreamed by any man, anywhere – is that of going out into the wilderness somewhere and building a complete, self-contained, perfectly organized city from the ground up.
As Fortune was later to remark, the building business in those days was “the shame of American capitalism.” It was the only major industry that hadn’t figured out how to gain the economies of mass production or big-scale corporate organization. All home builders in America were small builders, putting up one or two houses at a time.
18. The Psychology of the Rich
Not only are the psychological causes of wealth unknown; there is a strong suspicion that all attempts to elucidate them have been a solemn and scholarly waste of time.
One man with strong opinions on the subject was Joseph P. Kennedy, father of the noted political clan. He was worth something like a third of a billion dollars (main route: the stock market) when he died a few years ago. A Princeton University psychology student once sent him a questionnaire purporting to probe his psyche to its darkest depths. Kennedy shot the questionnaire back unanswered, along with a curt note: “Dear Mr. ––––: I am rich because I have a lot of money.”
The fact is, there are no women now living in the United States – at least none known to Fortune, to Ferdinand (Super-Rich) Lundberg or to me – who have started from scratch and amassed as much as $100 million on their own.
The type of man most likely to grow very, very rich is the type of man least likely to enjoy it.
“One of the things I still find hardest to believe,” says Gosswiller, “is that almost all these men were in their offices when I called. You’d think, with all that money, they’d be off somewhere relaxing and enjoying it. But, no, they were all hard at work. It occurred to me that maybe this was the real secret of getting rich, even though none of them mentioned it: Be compulsive.”
19. The Promoters: Of Ideas
William James, the father of American philosophy, said, ‘The greatest discovery of my generation is that we have learned we can alter our lives by altering our attitudes of mind.’
20. The Promoters: Of Things
But it is a characteristic of Paulucci, as of all promoters, that his embarrassment threshold is set very high – if, indeed, he has one at all.
Like some others in this gallery, he started with nothing and came from nowhere – in fact, from conditions close to poverty. He ended as chief executive and sole owner of the Chun King Corporation, by all measures the most successful mass merchandiser of Chinese foods ever to arise in this country (or, as far as it known, anywhere in the world – including China). And today, in his early 50s, he is worth more than $100 million. It took a certain amount of audacity for a man named Luigino Paulucci to start a Chinese food company in the first place – especially to start it in Minnesota. It took more audacity to make the mad venture succeed.
The Chun King image nearly disintegrated one day. Paulucci was in the office of Food Fair’s head buyer, trying to convince the buyer that the great supermarket chain should stock Chun King instead of competing products. The buyer was prepared to taste-test several oriental canned foods to see whether Chun King’s faint Italian spicing really made a difference. Paulucci pulled out a can opener and pried the lid off a can of chop-suey vegetables. Lying right on top of the vegetables, hidden from the buyer’s view by the raised can lid, was a cooked grasshopper. It was the kind of accident that can happen to any food-processing company once in a while, even the biggest. Chun King’s kitchens, though housed in a Quonset hut, were in fact as clean as anybody else’s. But Paulucci was strongly aware, as he gazed horrified at the grasshopper, that his company’s grand image was in mortal danger. He hesitated for half a second. Then he picked up a spoon, smiled broadly and said, “This looks so good that I’m going to eat the first mouthful myself.” He ate the spoonful, including the grasshopper, with apparent relish.
21. Other People’s Work
And was his crew getting free hamburgers and coffee out to the victims and rescue workers (standard operating procedure for a McDonald’s restaurant in a disaster area)?
Above many executives’ desks in McDonald’s sleek new headquarters at Oak Brook, Illinois, is an embossed scroll bearing Ray Kroc’s favorite homily, “Press On”: Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.
22. The Mostly Late Bloomers
Feldman, however, decided to pursue the matter a little further. He went through a bundle of back-issue yearbooks from several high schools and colleges, then tracked down the Most Likely students to find out what had actually become of them. It turned out that the Most Likely were, on average, among the least successful in actual post-school performance.
Dr. Feldman speculated that the Most Likely type may, in effect, burn himself out early, while the oddballs and weirdos and other misfits gather momentum slowly and explode to prominence later in life. Feldman also speculated that the school environment may be so unlike the adult world that it takes entirely different personality types to succeed in each. A personality that succeeds in one environment will not, for that very reason, find it easy to succeed in the other.
24. Fortune Makers of the Future
If our visit to this golden gallery has taught us any lessons, the most important one is surely this: Character is the king-pin of self-made wealth. To get rich, you need a pinch of prediction and a dash of luck and perhaps little bits of many other things. But the one thing you need in great quantity is internal strength. In a word: guts.
About the Author
BA from Princeton University in 1949. He served in the US Army in 1950 and 1951 and was a staff member of Business Week from 1951 to 1955. Mr Gunther then served as a contributing editor of Time for two years.