A score of the splashier restaurants have become fabulously successful as a result of their patronage; their private planes, as many as two hundred at a time, fly in for the bigger Texas football games; and their
dexterity
with an expense account since pleasures and business are bard to sort out in wholly owned enterprises, gives them a spending power far above others making the same amounts in straight salary.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
Raskob's big coup some years later was to suggest General Motors as a likely investment for surplus Du Pont money, and he thereafter alternated risingly lucrative employment with General Motors and E.
I.
du Pont de Nemours and Company.
The leading figure in trying to make Al Smith president in 1928 and the Democratic Party a replica of the Republican, he was made Private Chamberlain to the Pope.
He founded the tax-shy Raskob Foundation for Catholic Activities in 1945; it had assets of $29,281,060 in 1960 and four Raskob sons among its officers.
On his death he left his wife and each of ten surviving children trust funds of unspecified amounts.
44 One presumes they were generously proportioned.
As Raskob was a pecuniary man to his fingertips with no other apparent interest in his life, his fortune before he started redeploying it may well have exceeded $75 or $100 million.
William S. Knudsen
William S. Knudsen (1879-1948), former president of the General Motors Corporation and Director General of the Office of Production Management during the war, had one of the "ten biggest incomes in the country"45 but the expanse of his holdings at the end is fogged. Standard reference media, including the New York Times, give no accounting of his estate, which was presumably disposed of before his death; he established no foundation, left three daughters and one son, all presumably financially soigne? .
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 or other endowments (which usually show on the record) or he might make regular low-tax distributions 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 every year 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 to bequeath $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 the other half of the money into a tax-free foundation (which his heirs could play with as 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 over the 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 he can make the original transfer of $125 million solely to individuals at only double the cost of 4 per cent, paying a little more than $12 million, under special provisions for estate division written into the law in 1948. His saving here over the first direct transfer is $28-plus million, which he can slam into a foundation for so much extra gravy. Whoever said we didn't have a thoughtful Congress to write such thoughtful laws? In the meantime, newspapers and "spokesmen"--that is, paid propagandists--go about talking loosely about high taxes on the big estates. When one gets down to the fine print, those high taxes just aren't there.
A man might, indeed, die stony broke and still have ruled over a large fortune if he had concentrated a goodly sum in a foundation. As head of the foundation 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 disposition of its income. Until he drew his last breath, even though he was only on straight salary, he'd have corporate, political and other power through his foundation as well as the satisfaction of knowing that he hadn't helped the rustics in Congress with their eternal problem of budget balancing. So the mere fact that a man dies without leaving traces of large assets really proves nothing.
Jesse H. Jones
Jesse H. Jones (1874-1956) was for many years a power in the land and a top-level, hard-bitten wheeler-dealer. A banker and politician based in Houston where he owned the Chronicle, banks, buildings and other properties as well as properties in Dallas and Fort Worth. Jones became chairman of the Reconstruction Finance Corporation and Secretary of Commerce under Roosevelt II. As chairman of the RFC he is said to have made the decisions to lend more money than any other man in history, getting himself involved, too, with some of the borrowers. His father was a Tennessee tobacco planter, and young Jones came to Dallas at age twenty to find 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 children and a foundation, The Houston Endowment (1937), which in 1962 had assets of $43,939,169 and 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 work at age twelve selling newspapers a? la Horatio Alger, graduated into selling photographs and then, in 1904, into the not-so-great game of advertising. In 1906 he became advertising manager for the Fort Worth Star and by 1923 was president and publisher of the merged Star- Telegram. He also weaseled into radio and television but made his biggest money in oil wildcatting. Under his ownership was drilled the discovery well of the big pool in the Wasson lease in Gaines and Yoakum counties, Texas. He sold out there for $16. 5 million and put the money into the Amon G. Carter Foundation, which at the end of 1962 had total assets of $32,519,275 (Foundation Directory, 1964). An aviation enthusiast, he was a founder of American Airlines and a major political influence in bringing various military aviation installations, bomber plants and missile enterprises to Texas. He is credited with using his influence to make Texas second only to California as an aviation center. He was a noisy Fort Worth and Texas booster and was said hyperbolically to own all of Fort Worth. He left two daughters, a son, the Star- Telegram, various pregnant properties and the foundation. No probate of his will was published in standard reference media available to this inquirer but if one assumes only
half his wealth was left in the foundation he was worth more than $65 million at some time in his later life, probably a bit more. 47
William H. Danforth: Apostle of Purina
William H. Danforth (1870-1955) of all American millionaires probably most deserves the much-abused characterization of philanthropist. For Danforth genuinely liked people in general and was obviously stimulated by them.
Born in the backlands of Missouri, Danforth went to St. Louis at 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 two men in 1894: the Robinson-Danforth Commission Company. A natural salesman, Danforth traveled through the Middle West selling Purina Horse Feed in a folksy way ("Purina Feed 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 to Danforth in 1896, the business already booming, a tornado blew down their sizeable plant. With an unsecured bank loan of $25,000 he rebuilt, and the business extended into all varieties of farm feeds Under the Purina label. It also went into the production of whole-wheat cereals for human consumption (the new health fad) under the familiar checkerboard label. This latter was adopted from a farmer's shirt design and for some reason had such an hypnotic effect on customers that it was widely infringed but successfully defended in the courts.
Danforth was quite spontaneously an enthusiastic extroverted Christian, a YMCA man (he served in France as a YMCA secretary in World War I), a believer in the social gospel and a true, corn-ball do-gooder. He seemed to feel that good will, good humor, enthusiasm and energy were all that were needed to put the world to rights. A Congregationalist Sunday School teacher and superintendent, he believed in helping young people help themselves. He gave thousands to finance camping trips and outings in the woods and on the shores for the young. He was a pioneer in helping finance mostly somewhat bucolic college educations, for which in 1927 he established the Danforth Foundation (assets in 1962: $125,694,089, mainly in Ralston Purina stock). Danforth believed in college as much as he believed in the Bible.
Danforth ran his business pretty much like a folksy husking bee with plenty of homespun high jinks. He required his employees to exercise together and sing together, and was the originator of widely copied employee welfare programs such as contests, office messages and personal items, employee theatricals, awards, parties, picnics, square dances and general one-big-happy-family stuff. He produced mottoes 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 holy grail of Purina. Somehow, money filtered artlessly through the whole like molasses in a bran mash. Danforth unquestionably believed in everything he did. There was probably not an insincere bone in his body. And the good Lord just made that cash register ring, ring, ring.
Danforth was extremely wealthy by 1929, when Jehovah suddenly signaled that he was unaccountably displeased. All of Danforth's holdings were wiped out 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 stock market and stick to healthy, whole-wheat food.
After the crash, business for Purina slacked off so badly that Danforth, depressed, had to lay off old employees. As grain prices continued to tumble Danforth found that he was constantly having to sell for less than he paid for the raw materials and labor. He was, in short, going broke in a big way. Satan was in command.
But the Lord had not forsaken His earnest worker. In 1932 Danforth relinquished control of the business to his son Donald, recently out of sleek Princeton University and in his father's estimation not much of a businessman. But the boy's mother spoke up staunchly on his behalf, Donald took hold and, giving the business the old college try, he made good in such a way as to amaze the elder. In the general inflation, sales were whirled tip from $19 million in 1932 under Donald's shrewd Ivy League ministrations to $400 million in 1956, when Ralston Purina chugged into eighty-seventh place on Fortune's list of the mightiest corporations. In the distance such giants as AT&T, General Motors and Standard Oil of New Jersey could dimly 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 nai? ve and perhaps just lucky never to fall into the sights of the financial sharpshooters all 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 as builders of the nation, Daniel Boones of the dollar. He longed to emulate them. He always 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 Christian layman. (In Danforth's view "businessman" was just about synonymous with "Christian. " Jesus was after all, as it has been said, a salesman. Danforth would 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 he was graciously given answers. Danforth also sought out Henry Ford for prayerful discussions about philanthropy.
As far as the record shows, Danforth (unlike many of his prominent business contemporaries) never engaged in any shady practices, was never involved in any swindles, was never the defendant on criminal charges and was never accused of 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 American capitalist as an extremely good, wholesome, honestly Christian earnest outgoing do-gooder one must turn to William H. Danforth,
The name of Ralston got into the Ralston Purina label in a curious way. Early in this century there was a Dr. Ralston who established health-food clubs around the country. Danforth, in order to get into the human food market with his whole-wheat cereals made a money-for-name tie-in with the good doctor and Ralston Purina 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
New-Old Fortunes
Although all these noninherited fortunes have been treated as new, they are new only in a relative sense. Almost all the big individual noninherited fortunes mentioned in this inquiry date back before World War II and, indeed, the bulk of them date before 1929. Most of the Texas oil fortunes were founded between 1910 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 were rich in 1929.
Many clearly date from before World War I--Danforth, Moody, Jones, Getty.
Unless processes are going on inaccessible to inquiry it can be said that big new individual property accumulations are now taking place, if at all, at a decidedly diminished pace. And this is understandable in view of the entrenched position established by hereditary wealth. No man, however puissant, can come along and 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 such a 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 or nonhereditary wealth on the American scene, and just about every likely candidate appears 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 public are those of men who are little more than speculative entrepreneurs backed by banks or some syndicate. As long as these whirling dervishes stand upright they receive rapt attention. But most of them vanish in a cloud of debt and tears to become skeletons in the Death Valley of newspaper files.
Newspapers are interested in such worthies for at least two reasons:
1. They want new names and faces to present to the public, and many people as well as editors seem to find it thrilling to read of some immigrant who 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 the greatest real-estate tycoon of all time. Or so they say until the banks start calling loans.
2. They cite these putative geniuses of pecuniary derring-do in order to prove that anyone who is willing to work hard, live right and tend to business can make at least a million and probably more in the United States--the American dream. A curious feature of this thesis is that the money-cult editors and writers who expound it are themselves not notably pecunious, are apparently unable to apply their own profound insight.
In the 1920's, in the aftermath of World War I, names to conjure with in the press were William C. Durant, founder of General Motors and possessor of 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; Michael J. 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 operators are usually vastly exaggerated, thus attracting more suckers), had tax liens against it 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 finally had perhaps a few million drably to his credit and drably came to New York in 1925 at the age of fifty-four in search of drab new puddles to conquer, He engaged in buying and bulling stocks, assisted by hordes of even drabber men and women who bought anything they heard Bookkeeper Cutten was buying. Distributing to the suckers as the top he had set was approached, Cutten pocketed the profits. This process was endlessly 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 picadors and bandilleros whom the
dying bull managed to gore fatally before expiring. His career may be summarized as a transit from bookkeeper to gambler to nothing. There is no hard evidence that I can find that Cutten was ever worth $100 million, $50 million or even $10 million net; he was carried by the banks.
There were, too, in those salad days, high-flying dervishes like 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 all speculative flat tires, personally as undistinguished as any pushcart peddler. But in their day the newspapers ecstasized over them as proof positive that under the great American system of godly democracy any right-thinking, right-living man who had faith in the United States should, could and would acquire a fortune.
The biggest flops of all, as one would expect, were those men widely regarded as the soundest. The superlatively sound men of the time were Oris P. and Mantis J. Van Sweringen of Cleveland, presented in the press as masters of railroading (although they were actually two obscure provincial real estate brokers). With the backing of the J. P. Morgan bloc the Van Sweringens busily floated vast railroad holding companies, busily issued watery securities, busily merged, unmerged and submerged railroads and busily carried on general financial wildcatting in search of profit. Their bubble burst in the depression, removing two geniuses of bank-press creation from the scene.
Just how big the Van Sweringens were considered in the 1920's may be seen in the fact that they were listed in 1930 by James W. Gerard, former ambassador to Germany, as one of the sixty-four shoguns who "ruled the United States. " President Herbert C. Hoover was, correctly, not on this list, which was 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 doubt included by the diplomatic Gerard to be complimentary: William Green, Matthew Woll, Roy W. Howard, William Randolph Hearst and, of all people, Adolph Zukor and Harry F. Warner, the film moguls.
But although one might quarrel with the catholicity of Gerard's choices, he did adhere to the theory, bitterly denied by all party-liners of the American myth, that some sort of dimly visible shogunate lies behind major trends in American policy. The country was not being run from Washington by duly elected representatives 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, signaling their own freedom from want.
One could go on for many pages reviewing the lists of the financial also-rans, a fevered crowd-all duly celebrated in their day. In order to bring things down to date, we may notice in parting the name of William J. Zeckendorf, the big builder, operator and general juggler of office buildings and hotel properties, since World War II given much press attention as an authentic coast-to-coast tycoon. The Zeckendorf 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, a process irreverently known as "pulling the plug. "51
Fallacious Logic in Media Celebrations
The notion that new fortunes are being made right and left in the United States, selectively documented from time to time by Fortune and the Wall Street Journal, may now be looked at briefly. In general, these publications perpetrate several fallacies in logic in supporting this thesis, notably those of untypical instances and of neglected aspect.
Fortune (January, 1952) presented a survey titled "The New Rich," cueing it in with the substatement that "A lot of enterprisers you probably never heard of are proving you can still strike it rich in America. "
"Since 1945," said Fortune, "a brand-new crop of rich men has risen in the U. S. Mostly shirt-sleeved enterprisers who started from 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 makes them 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 whole country a pleasant golden hue. "
(I find it difficult to believe that any responsible writer of such a line is not being exaggeratedly ironic. )
"They are the core of that fast-growing group whose 15,000-odd members report incomes between $100,000 and $300,000 a year; their affluence is neither freakish nor unstable. Right behind them, ready to step into their shoes, are roughly 50,000 individuals who in 1948 reported incomes of $50,000 to $100,000 a year, and 175,000 who reported $25,000 to $50,000. " Fortune takes no account of the 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 Cadillacs sold since 1945, the 37,000 pleasure craft registered since 1946, the doubling of Chris-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 score of the splashier restaurants have become fabulously successful as a result of their patronage; their private planes, as many as two hundred at a time, fly in for the bigger Texas football games; and their dexterity with an expense account since pleasures and business are bard to sort out in wholly owned enterprises, gives them a spending power 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 (frozen chop 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 evidence cited); 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); Herman Delmos (Breezy) Wynn (sporting goods, Georgia); Fred Hervey (supermarkets; restaurants; bog farms; mayor of El Paso, Texas).
All these are instances, says Fortune, of "individual success. " 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 listing of bank loans. How many will emerge with a substantial net worth is not shown, nor how many will go the way of Zeckendorf and thousands of others.
In many cases, especially where annual sales are cited, one can make certain hard deductions. The baby-bed makers, said Fortune, had run their 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 figure even if sometimes exceeded. If we gratuitously give this superb percentage to the baby-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 his 236,000 shares of common stock and realized $118,000 through sale of the purchase rights of a new issue. 'Smiling Jim' Moran has set up a $1,450,000 trust fund for the children. " Not too bad but, really, chicken feed.
But these simple annals of the merely well-to-do, whom we always have with us, hardly prove that new fortunes are in the offing. Successful business entrepreneurs though all these men may be, one can scarcely regard them as "the new rich. " They are small fish in a pond full of large fish. And the odds against any of them becoming big fish--authentic barracudas--are enormous.
As instances of the ability to make new fortunes on the American scene, we must pronounce a Scotch verdict: not proven.
Where the reportorial fallacy enters in is the citation only of these minor winners, no losers. But of the many who answer the siren call to riches few are chosen, as the record of bankruptcies shows. Business failures in the United States, 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 1950 and 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 of a largish super-corporation. For every businessman in a given year who makes enough of a splash to come to the attention of Fortune's editors, about 10,000 split a got trying and cough blood in the bankruptcy court. If it weren't committed to dispensing sunshine, Fortune could write a melancholy article every year on business failures and issue a thick supplementary directory merely giving names and addresses.
Nor do these figures show the panorama in its full sweep. The special monograph on small business of the Temporary National Economic Committee, a joint Senate and Securities and Exchange Commission operation, in 1939 revealed that "in the first thirty-nine years of this century, 19 million enterprises opened their doors and 16 million closed them. " This was a four-decade failure rate of 85 per cent.
Henry Thoreau, writing in Walden in the mid-nineteenth century, 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 failures exceed the new successes by a very, very, very wide margin. In business, under the American 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 individual successes over failures or vice versa, then the American system, businesswise, is a record of steady, almost unrelieved failure. It has failure literally built into it. It is indeed a near-miracle, front page news, when anyone really makes it. This judicious observation sounds paradoxical only because it contradicts conventional propaganda.
As it is observed by Professor Paul A. Samuelson of M. I. T. in his 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 anyone for the high rate of small business mortality, blame can be leveled for the misleading propaganda about the business system. By the one-sided stressing by propaganda organs of the few successes, many are led to lose their hard-earned savings in establishing new businesses. Sound advice to 85 to 95 per cent of Americans contemplating opening their own businesses would, in the light of the facts, simply be: "Don't. "
The belief of a wide public that it can succeed in business supplies a lucrative crop of suckers for established equipment suppliers, usually big corporations. Banks, too, participate in this merry game by making loans against resalable equipment. The same fixtures are sold and resold to a long string of losers incited 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 individual consumer, does not realize that all the possibilities in almost every situation have been determined down to decimal places by batteries of computers and the results have been evaluated by staffs of exceedingly acute experts. In pitting himself against these computers and highly paid experts, the ordinary man is very much like an amateur chess player who elects to pit his skill against a consulting collection of chess masters. His doom is virtually sealed with his very first move.
Fortune's valedictory for its inspiring group of minor successes 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 that money in the hands of millions at the base will keep them at the summit and in the decade ahead swell their number by the thousands. "
More Fuel from theWall Street Journal
The editors of the Wall Street Journal in 1962 put somewhat similar findings about
thirteen men and one woman into the form of a book. 52
The foreword by Warren H. Phillips, managing editor, makes it clear that the presentation is designed to prove something: that it is as easy as it ever was to make a fortune in the American economy, that it is desirable to do so and that fortunes are being made right and left. Like the Fortune group of 1952 the Journal's group of 1962 embraced only modest fortunes, men who might be called the "poor man's millionaires. " They did not pretend to be like the all-time heavyweights of the Fortune 1957 list.
As Mr. Phillips observed, "It is often said that today it is infinitely more difficult to amass great wealth than during earlier periods in the nation's history; that the nation's economy has matured, and the rags-to-riches legend belongs to its period of youthful growth; that business opportunity today is highly limited, not only by high taxes, but by stiffer competition from large corporations and by pronounced restrictions based on education, race, religion, sex and age.
"The evidence sharply contradicts this impression. " 53
The only "evidence" Mr. Phillips cites is the number of postwar million-dollar incomes that we have already examined, incomes from established assets.
"All such statistics suggest that the opportunities for making fortunes in this country are as wide today as in any earlier period of history. " 54
The statistics on large incomes provide no evidence whatever for concluding that new fortunes are being made or that there are opportunities for making fortunes. Without the identities of such large income receivers one cannot tell whether the income is from an old or a new fortune, from asset-wealth or from earnings in the form of salaries or commissions. In view of the fact that, despite pertinacious work by Fortune, the
Saturday Evening Post, the New York 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, as business conditions boom and dividends rise, increase its income to more than $1 million. It is then a new million-dollar income but not indicative of a new fortune. 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 has been 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 European societies, 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 business system at all or one so rudimentary--as in Spain, Portugal, Greece--as to afford few trading opportunities. If one adds Russia, Poland, Hungary, Czechoslovakia, Bulgaria and Yugoslavia--all under statist regimes--and looks at small places like Finland, Austria, Switzerland, Lichtenstein and Denmark, there isn't much of a playground left for "material success. " The United States could outdistance this combination with one new millionaire a decade.
As for the rags-to-riches legend being still valid, none of the names presented by the Journal editors supports it. Nearly all were merely non-asset-holders before they started their modest climbs.
Although only one of the cases cited comes within hailing distance of heavy money-- $34 million, if this is his authentic net worth--it may be interesting to peep at some of these small operators briefly as a contrast with our coming glimpses at truly impressive super-wealth,
Thomas F. Bolack, says the Journal, was an oil-field laborer before he rose to become lieutenant governor of New Mexico and a gentleman farmer. 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, who was worth only $50,000 in 1946 but is now worth more than $3 million. 57 Schuler got a lift toward immortality when his father gave him and a brother a run-down restaurant. The upcoming entrepreneur sagely added a bowling alley and generally refurbished the place. It was a hit and began to boom. Schuler opened other restaurants and 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 each one necessarily paid corporation taxes (each getting the initial deduction) he would not 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 story to the, Journal editors. His father was a Greek barber and Pete started with a lowly saloon on borrowed money in 1947. He went into real estate on the side and in a decade had made $5 million, so they say. 58
A stalwart woman, Mrs. Catherine T. Clark, baked her way to new-found wealth. Finding a chink in the capitalist armor in the form of soggy corporate bread, 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 her she 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 seemed to 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 of an oilfield laborer. He learned electronics in the Navy, began business in 1947 and was worth around $14 million when the Journal editors got to him. He has since gone much higher, may become a terrific tycoon.
Robert Peterson, his father an immigrant mechanic, found himself in 1948 low man on the totem pole as a California press agent. But he started Hot Rod Magazine, which was such a success among teen-agers that it swept him up to a reported net worth of $3 million in short order. 60
Ralph E. Schneider, in the 1940's a lawyer from the Harvard Law School, '32, with at most a meager $15,000 a year income, started the Diner's Club credit-card system and was worth at least $7 million by 1960. 6< SIZE=4>1 The Journal editors also suspect that he has a string of other juicy investments.
Kell H. Qvale, born in Norway in 1919, his father a Norwegian sea captain, in 1947 found himself a California jeep salesman and rapidly getting nowhere in typical American style. But he became an M-G dealer, had vast success with a restless public and now owns British Motor Car Distributors, Ltd. His net worth: $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 highway freight haulers. His stated net worth: $7 million. 63
And now comes Sydney S. Baron, whose father owned but lost a shoe factory in the 1929 smash-up. Baron is a public relations man who in 1949 was worth only $25,000. He has since handled various accounts, but the most talked-about have been Tammany Hall and the Dominican dictator, Rafael Trujillo, whose points of rare excellence were put before the American people by Baron. By 1959 Baron had a net worth of at least $1 million, say the Journal editors, and wore $160 suits. And say what one will about Trujillo, and echo if one will the French saving that money has no odor, it isn't everyone who can wear $160 suits. But in the United States a successful moneyman wears them like a halo. 64
The most impressive of the Journal's meager bag appears to have been Samuel Rautbord, a lawyer who before World War II drew up some papers for a partner of the American Photocopy Equipment Company of Evanston, Illinois, Interested, Rautbord bought a share and in time became president, chairman and principal stockholder, 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 holdings at press time were worth $34 million . 65
'This is by no means all of the Rautbord saga. The former lawyer also had paternally conveyed to his two sons $35 million in securities in two trust funds 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, with similar consequences. As the Journal editors say, he has "the Midas touch. "
Rautbord found the taxes of the partnership running so high in 1953--91 per cent--that he reorganized as a corporation, which brought taxes down to the 52 per cent corporation bracket. Then be astutely formed the Clay-Bob Realty Company and exchanged much of his Apeco stock for its stock. The advantage here apparently was that Clay-Bob paid a lower tax than his personal tax would have been. The proceeds received by Clay-Bob, as the Journal tells the story, are not paid out to Rautbord, who
has plenty of other lucre, but are invested. That ends all nonsense about taxes and helps Rautbord keep his head above water.
The way this worked is as follows: Apeco as a partnership had roughly only $9 left after taxes out of every $100 of income. As a corporation it had $48 left (disregarding any other unstated circumstances). Now, as the Journal editors indicate, Clay-Bob received it and as a personal holding company, if it merely retained and reinvested it, was entitled to an 85 per cent tax credit. For under Section 243 of the Internal Revenue Code of 1954 personal corporations receiving dividends from qualified companies are entitled to such a tax credit. Any income Clay-Bob paid out would be taxed at the full rate to individuals, manifestly a self-penalizing process 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--much more retained value than if the owner had taken dividends direct from Apeco. In such a situation an owner gets richer and richer by declining to take cash income as an individual.
Naturally all this affluence has wrought some changes in Rautbord's life. He owns a Rolls-Royce, a big yacht and seventy pairs of cuff links. 66
Hans Fischer, born in Vienna, heads H. Fischer and Associates of 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 was practically an un- American but--such had been his success when the Journal editors looked him over--he, now fully American, was worth $1. 2 million, owned a Cadillac, a Jaguar and a forty- five-foot Chris-Craft, and lived in a big house in Shaker Heights, Ohio, near other true- blue Americans.
But J. W. Walters did somewhat better, possibly because he was American-born and therefore by nature anointed. A Navy veteran driving a truck in 1946, he was looking for a really cheap house, all he could afford. He saw an ad for a "shell" structure at $1,195 and went with borrowed money to buy from a 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 to Walters 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 1960 of $8,700,000. 67 Walters, who quit school after the twelfth grade, has acquired a 1,700-acre Florida hunting ranch as well as other dazzling properties. National Homes now makes prefabricated apartment buildings, shopping centers and schools as well as individual houses. It will build whole prefabricated towns, and has done so, at the drop of a nail.
But these people, though we salute them as true-blue American enterprisers, are all really small potatoes, hardly worth a feeble cheer from the House 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 scale of wealth even though its members may be having the time of their lives in their cruisers, jaguars, $50 bats and $160 suits.
The Sweetest-Smelling Real Estate Empire
The New York Times in 1965 introduced two formidable contenders into the arena of big new wealth, as if to replace the void left by the departure 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 pyramid of mortgage loans.
When the Times studied them in April, 1965, they quietly owned more than twenty office buildings, including the seventy-seven-story Chrysler Building; extensive harbor terminals; a growing flotilla of hotels; various "sprawling" industrial buildings; shopping centers; and large apartment houses. More than 20,000 persons were employed in keeping these properties operative.
Cruising under the firm name of Wellington Associates (presumably it would be unlucky to be Napoleon Associates), they have followed the technique of "mortgaging out"--that is, borrowing enough money with first and second mortgages 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 at lower rates to wipe out the high-interest mortgages, sometimes leaving a surplus above the original purchase price. This surplus is then invested in other properties and the process goes on like a rolling barrage. A neat feature is that the surplus is 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. Some four 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 the meantime by amortization out of rents they had reduced their original obligation by $3 million, so they had $8 million of technically borrowed nonrepayable tax-free money to play with, the best kind there is.
Now the Chrysler Building alone is producing for them $1. 5 million a year, tax-free, for their investment in other properties.
Proceeding in this way, if nothing goes wrong (such as an interruption in rents or balkiness of the banks), Goldman and Di Lorenzo should in time own all of the United States, cost free.
William S. Knudsen
William S. Knudsen (1879-1948), former president of the General Motors Corporation and Director General of the Office of Production Management during the war, had one of the "ten biggest incomes in the country"45 but the expanse of his holdings at the end is fogged. Standard reference media, including the New York Times, give no accounting of his estate, which was presumably disposed of before his death; he established no foundation, left three daughters and one son, all presumably financially soigne? .
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 or other endowments (which usually show on the record) or he might make regular low-tax distributions 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 every year 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 to bequeath $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 the other half of the money into a tax-free foundation (which his heirs could play with as 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 over the 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 he can make the original transfer of $125 million solely to individuals at only double the cost of 4 per cent, paying a little more than $12 million, under special provisions for estate division written into the law in 1948. His saving here over the first direct transfer is $28-plus million, which he can slam into a foundation for so much extra gravy. Whoever said we didn't have a thoughtful Congress to write such thoughtful laws? In the meantime, newspapers and "spokesmen"--that is, paid propagandists--go about talking loosely about high taxes on the big estates. When one gets down to the fine print, those high taxes just aren't there.
A man might, indeed, die stony broke and still have ruled over a large fortune if he had concentrated a goodly sum in a foundation. As head of the foundation 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 disposition of its income. Until he drew his last breath, even though he was only on straight salary, he'd have corporate, political and other power through his foundation as well as the satisfaction of knowing that he hadn't helped the rustics in Congress with their eternal problem of budget balancing. So the mere fact that a man dies without leaving traces of large assets really proves nothing.
Jesse H. Jones
Jesse H. Jones (1874-1956) was for many years a power in the land and a top-level, hard-bitten wheeler-dealer. A banker and politician based in Houston where he owned the Chronicle, banks, buildings and other properties as well as properties in Dallas and Fort Worth. Jones became chairman of the Reconstruction Finance Corporation and Secretary of Commerce under Roosevelt II. As chairman of the RFC he is said to have made the decisions to lend more money than any other man in history, getting himself involved, too, with some of the borrowers. His father was a Tennessee tobacco planter, and young Jones came to Dallas at age twenty to find 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 children and a foundation, The Houston Endowment (1937), which in 1962 had assets of $43,939,169 and 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 work at age twelve selling newspapers a? la Horatio Alger, graduated into selling photographs and then, in 1904, into the not-so-great game of advertising. In 1906 he became advertising manager for the Fort Worth Star and by 1923 was president and publisher of the merged Star- Telegram. He also weaseled into radio and television but made his biggest money in oil wildcatting. Under his ownership was drilled the discovery well of the big pool in the Wasson lease in Gaines and Yoakum counties, Texas. He sold out there for $16. 5 million and put the money into the Amon G. Carter Foundation, which at the end of 1962 had total assets of $32,519,275 (Foundation Directory, 1964). An aviation enthusiast, he was a founder of American Airlines and a major political influence in bringing various military aviation installations, bomber plants and missile enterprises to Texas. He is credited with using his influence to make Texas second only to California as an aviation center. He was a noisy Fort Worth and Texas booster and was said hyperbolically to own all of Fort Worth. He left two daughters, a son, the Star- Telegram, various pregnant properties and the foundation. No probate of his will was published in standard reference media available to this inquirer but if one assumes only
half his wealth was left in the foundation he was worth more than $65 million at some time in his later life, probably a bit more. 47
William H. Danforth: Apostle of Purina
William H. Danforth (1870-1955) of all American millionaires probably most deserves the much-abused characterization of philanthropist. For Danforth genuinely liked people in general and was obviously stimulated by them.
Born in the backlands of Missouri, Danforth went to St. Louis at 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 two men in 1894: the Robinson-Danforth Commission Company. A natural salesman, Danforth traveled through the Middle West selling Purina Horse Feed in a folksy way ("Purina Feed 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 to Danforth in 1896, the business already booming, a tornado blew down their sizeable plant. With an unsecured bank loan of $25,000 he rebuilt, and the business extended into all varieties of farm feeds Under the Purina label. It also went into the production of whole-wheat cereals for human consumption (the new health fad) under the familiar checkerboard label. This latter was adopted from a farmer's shirt design and for some reason had such an hypnotic effect on customers that it was widely infringed but successfully defended in the courts.
Danforth was quite spontaneously an enthusiastic extroverted Christian, a YMCA man (he served in France as a YMCA secretary in World War I), a believer in the social gospel and a true, corn-ball do-gooder. He seemed to feel that good will, good humor, enthusiasm and energy were all that were needed to put the world to rights. A Congregationalist Sunday School teacher and superintendent, he believed in helping young people help themselves. He gave thousands to finance camping trips and outings in the woods and on the shores for the young. He was a pioneer in helping finance mostly somewhat bucolic college educations, for which in 1927 he established the Danforth Foundation (assets in 1962: $125,694,089, mainly in Ralston Purina stock). Danforth believed in college as much as he believed in the Bible.
Danforth ran his business pretty much like a folksy husking bee with plenty of homespun high jinks. He required his employees to exercise together and sing together, and was the originator of widely copied employee welfare programs such as contests, office messages and personal items, employee theatricals, awards, parties, picnics, square dances and general one-big-happy-family stuff. He produced mottoes 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 holy grail of Purina. Somehow, money filtered artlessly through the whole like molasses in a bran mash. Danforth unquestionably believed in everything he did. There was probably not an insincere bone in his body. And the good Lord just made that cash register ring, ring, ring.
Danforth was extremely wealthy by 1929, when Jehovah suddenly signaled that he was unaccountably displeased. All of Danforth's holdings were wiped out 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 stock market and stick to healthy, whole-wheat food.
After the crash, business for Purina slacked off so badly that Danforth, depressed, had to lay off old employees. As grain prices continued to tumble Danforth found that he was constantly having to sell for less than he paid for the raw materials and labor. He was, in short, going broke in a big way. Satan was in command.
But the Lord had not forsaken His earnest worker. In 1932 Danforth relinquished control of the business to his son Donald, recently out of sleek Princeton University and in his father's estimation not much of a businessman. But the boy's mother spoke up staunchly on his behalf, Donald took hold and, giving the business the old college try, he made good in such a way as to amaze the elder. In the general inflation, sales were whirled tip from $19 million in 1932 under Donald's shrewd Ivy League ministrations to $400 million in 1956, when Ralston Purina chugged into eighty-seventh place on Fortune's list of the mightiest corporations. In the distance such giants as AT&T, General Motors and Standard Oil of New Jersey could dimly 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 nai? ve and perhaps just lucky never to fall into the sights of the financial sharpshooters all 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 as builders of the nation, Daniel Boones of the dollar. He longed to emulate them. He always 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 Christian layman. (In Danforth's view "businessman" was just about synonymous with "Christian. " Jesus was after all, as it has been said, a salesman. Danforth would 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 he was graciously given answers. Danforth also sought out Henry Ford for prayerful discussions about philanthropy.
As far as the record shows, Danforth (unlike many of his prominent business contemporaries) never engaged in any shady practices, was never involved in any swindles, was never the defendant on criminal charges and was never accused of 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 American capitalist as an extremely good, wholesome, honestly Christian earnest outgoing do-gooder one must turn to William H. Danforth,
The name of Ralston got into the Ralston Purina label in a curious way. Early in this century there was a Dr. Ralston who established health-food clubs around the country. Danforth, in order to get into the human food market with his whole-wheat cereals made a money-for-name tie-in with the good doctor and Ralston Purina 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
New-Old Fortunes
Although all these noninherited fortunes have been treated as new, they are new only in a relative sense. Almost all the big individual noninherited fortunes mentioned in this inquiry date back before World War II and, indeed, the bulk of them date before 1929. Most of the Texas oil fortunes were founded between 1910 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 were rich in 1929.
Many clearly date from before World War I--Danforth, Moody, Jones, Getty.
Unless processes are going on inaccessible to inquiry it can be said that big new individual property accumulations are now taking place, if at all, at a decidedly diminished pace. And this is understandable in view of the entrenched position established by hereditary wealth. No man, however puissant, can come along and 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 such a 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 or nonhereditary wealth on the American scene, and just about every likely candidate appears 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 public are those of men who are little more than speculative entrepreneurs backed by banks or some syndicate. As long as these whirling dervishes stand upright they receive rapt attention. But most of them vanish in a cloud of debt and tears to become skeletons in the Death Valley of newspaper files.
Newspapers are interested in such worthies for at least two reasons:
1. They want new names and faces to present to the public, and many people as well as editors seem to find it thrilling to read of some immigrant who 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 the greatest real-estate tycoon of all time. Or so they say until the banks start calling loans.
2. They cite these putative geniuses of pecuniary derring-do in order to prove that anyone who is willing to work hard, live right and tend to business can make at least a million and probably more in the United States--the American dream. A curious feature of this thesis is that the money-cult editors and writers who expound it are themselves not notably pecunious, are apparently unable to apply their own profound insight.
In the 1920's, in the aftermath of World War I, names to conjure with in the press were William C. Durant, founder of General Motors and possessor of 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; Michael J. 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 operators are usually vastly exaggerated, thus attracting more suckers), had tax liens against it 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 finally had perhaps a few million drably to his credit and drably came to New York in 1925 at the age of fifty-four in search of drab new puddles to conquer, He engaged in buying and bulling stocks, assisted by hordes of even drabber men and women who bought anything they heard Bookkeeper Cutten was buying. Distributing to the suckers as the top he had set was approached, Cutten pocketed the profits. This process was endlessly 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 picadors and bandilleros whom the
dying bull managed to gore fatally before expiring. His career may be summarized as a transit from bookkeeper to gambler to nothing. There is no hard evidence that I can find that Cutten was ever worth $100 million, $50 million or even $10 million net; he was carried by the banks.
There were, too, in those salad days, high-flying dervishes like 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 all speculative flat tires, personally as undistinguished as any pushcart peddler. But in their day the newspapers ecstasized over them as proof positive that under the great American system of godly democracy any right-thinking, right-living man who had faith in the United States should, could and would acquire a fortune.
The biggest flops of all, as one would expect, were those men widely regarded as the soundest. The superlatively sound men of the time were Oris P. and Mantis J. Van Sweringen of Cleveland, presented in the press as masters of railroading (although they were actually two obscure provincial real estate brokers). With the backing of the J. P. Morgan bloc the Van Sweringens busily floated vast railroad holding companies, busily issued watery securities, busily merged, unmerged and submerged railroads and busily carried on general financial wildcatting in search of profit. Their bubble burst in the depression, removing two geniuses of bank-press creation from the scene.
Just how big the Van Sweringens were considered in the 1920's may be seen in the fact that they were listed in 1930 by James W. Gerard, former ambassador to Germany, as one of the sixty-four shoguns who "ruled the United States. " President Herbert C. Hoover was, correctly, not on this list, which was 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 doubt included by the diplomatic Gerard to be complimentary: William Green, Matthew Woll, Roy W. Howard, William Randolph Hearst and, of all people, Adolph Zukor and Harry F. Warner, the film moguls.
But although one might quarrel with the catholicity of Gerard's choices, he did adhere to the theory, bitterly denied by all party-liners of the American myth, that some sort of dimly visible shogunate lies behind major trends in American policy. The country was not being run from Washington by duly elected representatives 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, signaling their own freedom from want.
One could go on for many pages reviewing the lists of the financial also-rans, a fevered crowd-all duly celebrated in their day. In order to bring things down to date, we may notice in parting the name of William J. Zeckendorf, the big builder, operator and general juggler of office buildings and hotel properties, since World War II given much press attention as an authentic coast-to-coast tycoon. The Zeckendorf 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, a process irreverently known as "pulling the plug. "51
Fallacious Logic in Media Celebrations
The notion that new fortunes are being made right and left in the United States, selectively documented from time to time by Fortune and the Wall Street Journal, may now be looked at briefly. In general, these publications perpetrate several fallacies in logic in supporting this thesis, notably those of untypical instances and of neglected aspect.
Fortune (January, 1952) presented a survey titled "The New Rich," cueing it in with the substatement that "A lot of enterprisers you probably never heard of are proving you can still strike it rich in America. "
"Since 1945," said Fortune, "a brand-new crop of rich men has risen in the U. S. Mostly shirt-sleeved enterprisers who started from 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 makes them 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 whole country a pleasant golden hue. "
(I find it difficult to believe that any responsible writer of such a line is not being exaggeratedly ironic. )
"They are the core of that fast-growing group whose 15,000-odd members report incomes between $100,000 and $300,000 a year; their affluence is neither freakish nor unstable. Right behind them, ready to step into their shoes, are roughly 50,000 individuals who in 1948 reported incomes of $50,000 to $100,000 a year, and 175,000 who reported $25,000 to $50,000. " Fortune takes no account of the 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 Cadillacs sold since 1945, the 37,000 pleasure craft registered since 1946, the doubling of Chris-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 score of the splashier restaurants have become fabulously successful as a result of their patronage; their private planes, as many as two hundred at a time, fly in for the bigger Texas football games; and their dexterity with an expense account since pleasures and business are bard to sort out in wholly owned enterprises, gives them a spending power 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 (frozen chop 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 evidence cited); 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); Herman Delmos (Breezy) Wynn (sporting goods, Georgia); Fred Hervey (supermarkets; restaurants; bog farms; mayor of El Paso, Texas).
All these are instances, says Fortune, of "individual success. " 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 listing of bank loans. How many will emerge with a substantial net worth is not shown, nor how many will go the way of Zeckendorf and thousands of others.
In many cases, especially where annual sales are cited, one can make certain hard deductions. The baby-bed makers, said Fortune, had run their 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 figure even if sometimes exceeded. If we gratuitously give this superb percentage to the baby-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 his 236,000 shares of common stock and realized $118,000 through sale of the purchase rights of a new issue. 'Smiling Jim' Moran has set up a $1,450,000 trust fund for the children. " Not too bad but, really, chicken feed.
But these simple annals of the merely well-to-do, whom we always have with us, hardly prove that new fortunes are in the offing. Successful business entrepreneurs though all these men may be, one can scarcely regard them as "the new rich. " They are small fish in a pond full of large fish. And the odds against any of them becoming big fish--authentic barracudas--are enormous.
As instances of the ability to make new fortunes on the American scene, we must pronounce a Scotch verdict: not proven.
Where the reportorial fallacy enters in is the citation only of these minor winners, no losers. But of the many who answer the siren call to riches few are chosen, as the record of bankruptcies shows. Business failures in the United States, 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 1950 and 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 of a largish super-corporation. For every businessman in a given year who makes enough of a splash to come to the attention of Fortune's editors, about 10,000 split a got trying and cough blood in the bankruptcy court. If it weren't committed to dispensing sunshine, Fortune could write a melancholy article every year on business failures and issue a thick supplementary directory merely giving names and addresses.
Nor do these figures show the panorama in its full sweep. The special monograph on small business of the Temporary National Economic Committee, a joint Senate and Securities and Exchange Commission operation, in 1939 revealed that "in the first thirty-nine years of this century, 19 million enterprises opened their doors and 16 million closed them. " This was a four-decade failure rate of 85 per cent.
Henry Thoreau, writing in Walden in the mid-nineteenth century, 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 failures exceed the new successes by a very, very, very wide margin. In business, under the American 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 individual successes over failures or vice versa, then the American system, businesswise, is a record of steady, almost unrelieved failure. It has failure literally built into it. It is indeed a near-miracle, front page news, when anyone really makes it. This judicious observation sounds paradoxical only because it contradicts conventional propaganda.
As it is observed by Professor Paul A. Samuelson of M. I. T. in his 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 anyone for the high rate of small business mortality, blame can be leveled for the misleading propaganda about the business system. By the one-sided stressing by propaganda organs of the few successes, many are led to lose their hard-earned savings in establishing new businesses. Sound advice to 85 to 95 per cent of Americans contemplating opening their own businesses would, in the light of the facts, simply be: "Don't. "
The belief of a wide public that it can succeed in business supplies a lucrative crop of suckers for established equipment suppliers, usually big corporations. Banks, too, participate in this merry game by making loans against resalable equipment. The same fixtures are sold and resold to a long string of losers incited 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 individual consumer, does not realize that all the possibilities in almost every situation have been determined down to decimal places by batteries of computers and the results have been evaluated by staffs of exceedingly acute experts. In pitting himself against these computers and highly paid experts, the ordinary man is very much like an amateur chess player who elects to pit his skill against a consulting collection of chess masters. His doom is virtually sealed with his very first move.
Fortune's valedictory for its inspiring group of minor successes 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 that money in the hands of millions at the base will keep them at the summit and in the decade ahead swell their number by the thousands. "
More Fuel from theWall Street Journal
The editors of the Wall Street Journal in 1962 put somewhat similar findings about
thirteen men and one woman into the form of a book. 52
The foreword by Warren H. Phillips, managing editor, makes it clear that the presentation is designed to prove something: that it is as easy as it ever was to make a fortune in the American economy, that it is desirable to do so and that fortunes are being made right and left. Like the Fortune group of 1952 the Journal's group of 1962 embraced only modest fortunes, men who might be called the "poor man's millionaires. " They did not pretend to be like the all-time heavyweights of the Fortune 1957 list.
As Mr. Phillips observed, "It is often said that today it is infinitely more difficult to amass great wealth than during earlier periods in the nation's history; that the nation's economy has matured, and the rags-to-riches legend belongs to its period of youthful growth; that business opportunity today is highly limited, not only by high taxes, but by stiffer competition from large corporations and by pronounced restrictions based on education, race, religion, sex and age.
"The evidence sharply contradicts this impression. " 53
The only "evidence" Mr. Phillips cites is the number of postwar million-dollar incomes that we have already examined, incomes from established assets.
"All such statistics suggest that the opportunities for making fortunes in this country are as wide today as in any earlier period of history. " 54
The statistics on large incomes provide no evidence whatever for concluding that new fortunes are being made or that there are opportunities for making fortunes. Without the identities of such large income receivers one cannot tell whether the income is from an old or a new fortune, from asset-wealth or from earnings in the form of salaries or commissions. In view of the fact that, despite pertinacious work by Fortune, the
Saturday Evening Post, the New York 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, as business conditions boom and dividends rise, increase its income to more than $1 million. It is then a new million-dollar income but not indicative of a new fortune. 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 has been 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 European societies, 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 business system at all or one so rudimentary--as in Spain, Portugal, Greece--as to afford few trading opportunities. If one adds Russia, Poland, Hungary, Czechoslovakia, Bulgaria and Yugoslavia--all under statist regimes--and looks at small places like Finland, Austria, Switzerland, Lichtenstein and Denmark, there isn't much of a playground left for "material success. " The United States could outdistance this combination with one new millionaire a decade.
As for the rags-to-riches legend being still valid, none of the names presented by the Journal editors supports it. Nearly all were merely non-asset-holders before they started their modest climbs.
Although only one of the cases cited comes within hailing distance of heavy money-- $34 million, if this is his authentic net worth--it may be interesting to peep at some of these small operators briefly as a contrast with our coming glimpses at truly impressive super-wealth,
Thomas F. Bolack, says the Journal, was an oil-field laborer before he rose to become lieutenant governor of New Mexico and a gentleman farmer. 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, who was worth only $50,000 in 1946 but is now worth more than $3 million. 57 Schuler got a lift toward immortality when his father gave him and a brother a run-down restaurant. The upcoming entrepreneur sagely added a bowling alley and generally refurbished the place. It was a hit and began to boom. Schuler opened other restaurants and 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 each one necessarily paid corporation taxes (each getting the initial deduction) he would not 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 story to the, Journal editors. His father was a Greek barber and Pete started with a lowly saloon on borrowed money in 1947. He went into real estate on the side and in a decade had made $5 million, so they say. 58
A stalwart woman, Mrs. Catherine T. Clark, baked her way to new-found wealth. Finding a chink in the capitalist armor in the form of soggy corporate bread, 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 her she 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 seemed to 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 of an oilfield laborer. He learned electronics in the Navy, began business in 1947 and was worth around $14 million when the Journal editors got to him. He has since gone much higher, may become a terrific tycoon.
Robert Peterson, his father an immigrant mechanic, found himself in 1948 low man on the totem pole as a California press agent. But he started Hot Rod Magazine, which was such a success among teen-agers that it swept him up to a reported net worth of $3 million in short order. 60
Ralph E. Schneider, in the 1940's a lawyer from the Harvard Law School, '32, with at most a meager $15,000 a year income, started the Diner's Club credit-card system and was worth at least $7 million by 1960. 6< SIZE=4>1 The Journal editors also suspect that he has a string of other juicy investments.
Kell H. Qvale, born in Norway in 1919, his father a Norwegian sea captain, in 1947 found himself a California jeep salesman and rapidly getting nowhere in typical American style. But he became an M-G dealer, had vast success with a restless public and now owns British Motor Car Distributors, Ltd. His net worth: $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 highway freight haulers. His stated net worth: $7 million. 63
And now comes Sydney S. Baron, whose father owned but lost a shoe factory in the 1929 smash-up. Baron is a public relations man who in 1949 was worth only $25,000. He has since handled various accounts, but the most talked-about have been Tammany Hall and the Dominican dictator, Rafael Trujillo, whose points of rare excellence were put before the American people by Baron. By 1959 Baron had a net worth of at least $1 million, say the Journal editors, and wore $160 suits. And say what one will about Trujillo, and echo if one will the French saving that money has no odor, it isn't everyone who can wear $160 suits. But in the United States a successful moneyman wears them like a halo. 64
The most impressive of the Journal's meager bag appears to have been Samuel Rautbord, a lawyer who before World War II drew up some papers for a partner of the American Photocopy Equipment Company of Evanston, Illinois, Interested, Rautbord bought a share and in time became president, chairman and principal stockholder, 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 holdings at press time were worth $34 million . 65
'This is by no means all of the Rautbord saga. The former lawyer also had paternally conveyed to his two sons $35 million in securities in two trust funds 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, with similar consequences. As the Journal editors say, he has "the Midas touch. "
Rautbord found the taxes of the partnership running so high in 1953--91 per cent--that he reorganized as a corporation, which brought taxes down to the 52 per cent corporation bracket. Then be astutely formed the Clay-Bob Realty Company and exchanged much of his Apeco stock for its stock. The advantage here apparently was that Clay-Bob paid a lower tax than his personal tax would have been. The proceeds received by Clay-Bob, as the Journal tells the story, are not paid out to Rautbord, who
has plenty of other lucre, but are invested. That ends all nonsense about taxes and helps Rautbord keep his head above water.
The way this worked is as follows: Apeco as a partnership had roughly only $9 left after taxes out of every $100 of income. As a corporation it had $48 left (disregarding any other unstated circumstances). Now, as the Journal editors indicate, Clay-Bob received it and as a personal holding company, if it merely retained and reinvested it, was entitled to an 85 per cent tax credit. For under Section 243 of the Internal Revenue Code of 1954 personal corporations receiving dividends from qualified companies are entitled to such a tax credit. Any income Clay-Bob paid out would be taxed at the full rate to individuals, manifestly a self-penalizing process 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--much more retained value than if the owner had taken dividends direct from Apeco. In such a situation an owner gets richer and richer by declining to take cash income as an individual.
Naturally all this affluence has wrought some changes in Rautbord's life. He owns a Rolls-Royce, a big yacht and seventy pairs of cuff links. 66
Hans Fischer, born in Vienna, heads H. Fischer and Associates of 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 was practically an un- American but--such had been his success when the Journal editors looked him over--he, now fully American, was worth $1. 2 million, owned a Cadillac, a Jaguar and a forty- five-foot Chris-Craft, and lived in a big house in Shaker Heights, Ohio, near other true- blue Americans.
But J. W. Walters did somewhat better, possibly because he was American-born and therefore by nature anointed. A Navy veteran driving a truck in 1946, he was looking for a really cheap house, all he could afford. He saw an ad for a "shell" structure at $1,195 and went with borrowed money to buy from a 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 to Walters 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 1960 of $8,700,000. 67 Walters, who quit school after the twelfth grade, has acquired a 1,700-acre Florida hunting ranch as well as other dazzling properties. National Homes now makes prefabricated apartment buildings, shopping centers and schools as well as individual houses. It will build whole prefabricated towns, and has done so, at the drop of a nail.
But these people, though we salute them as true-blue American enterprisers, are all really small potatoes, hardly worth a feeble cheer from the House 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 scale of wealth even though its members may be having the time of their lives in their cruisers, jaguars, $50 bats and $160 suits.
The Sweetest-Smelling Real Estate Empire
The New York Times in 1965 introduced two formidable contenders into the arena of big new wealth, as if to replace the void left by the departure 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 pyramid of mortgage loans.
When the Times studied them in April, 1965, they quietly owned more than twenty office buildings, including the seventy-seven-story Chrysler Building; extensive harbor terminals; a growing flotilla of hotels; various "sprawling" industrial buildings; shopping centers; and large apartment houses. More than 20,000 persons were employed in keeping these properties operative.
Cruising under the firm name of Wellington Associates (presumably it would be unlucky to be Napoleon Associates), they have followed the technique of "mortgaging out"--that is, borrowing enough money with first and second mortgages 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 at lower rates to wipe out the high-interest mortgages, sometimes leaving a surplus above the original purchase price. This surplus is then invested in other properties and the process goes on like a rolling barrage. A neat feature is that the surplus is 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. Some four 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 the meantime by amortization out of rents they had reduced their original obligation by $3 million, so they had $8 million of technically borrowed nonrepayable tax-free money to play with, the best kind there is.
Now the Chrysler Building alone is producing for them $1. 5 million a year, tax-free, for their investment in other properties.
Proceeding in this way, if nothing goes wrong (such as an interruption in rents or balkiness of the banks), Goldman and Di Lorenzo should in time own all of the United States, cost free.
