The Very, Very Rich and How They Got That Way (4 page)
Read The Very, Very Rich and How They Got That Way Online
Authors: Max Gunther
Sears’s headquarters were in Chicago, and a general awareness of
Britannica’s
problems had seeped across the campus of the University of Chicago. Some professors and others thought it might be fun to work on
Britannica
revisions. Such a project would be a proper and scholarly undertaking for a university and might also (though nobody knew exactly how) bring the university some money. But this was just faculty-party talk. The practical problems involved were huge. Around the university the
Britannica
glimmered in people’s imagination like some great treasure known to have sunk somewhere beneath a mile or two of water. It was fun to dream about this treasure and speculate about its worth, but nobody was willing to go down and get it, and the consensus was that it couldn’t be had.
Then Bill Benton came around. After quitting Madison Avenue, he had been offered many part-time consultant jobs by businessmen and others who had watched his rise in the ad business. One temporary post that attracted him was offered by Robert Maynard Hutchins, a Yale classmate who had become president of the University of Chicago. Hutchins wanted to help jazz up the university’s public image so as to attract more students and more cash. Benton, magnetized by the idea of a new career in education, took on the job.
The
Britannica
situation grabbed him as soon as he learned about it. Like everybody else, he thought it would be a good idea for the university to get involved in a major encyclopedia project. Unlike everybody else, he came up with some practical suggestions on how the deal could be swung.
He began by making a suggestion to Sears. Since the company considered
Britannica
a damned headache, why not give this headache to the university and thereby reap a juicy harvest of both tax and public-relations benefits? Sears thought this was a dandy idea. Benton then went back to the university and presented the idea to the trustees. They were delighted at first. Then their smiles evaporated. Sure, they said, it would be great to own the world’s best-known encyclopedia. But the needed A-to-Z revisions and start-up costs would take working capital – lots of it, more money than the university had.
After months of debate Benton finally came up with a proposal that was consummated in 1943. He pulled $100,000 of working capital out of his own pocket. The encyclopedia company, donated lock, stock and pastepot by Sears, was reorganized as an independent corporation, with Benton holding two-thirds of its common stock. The remaining third was held by the university (but was sold to Benton in 1959). A complicated formula was worked out under which the university would perpetually receive income and royalties from the company, would give its prestige and imprimatur to the encyclopedia and would provide a pool of scholars to revise the volumes and keep them up-to-date.
Many businessmen find it hard to believe Benton went into this deal as a favor to the university, not as a money-making investment. Many reporters have questioned him about it over the years, and I questioned him all over again in 1971. Was it really true, I asked, that he saw
Britannica
as a gift to the university and that the huge wealth that subsequently piled up in his name was an accident? He said, “Wholly true.”
And so Bill Benton became one of the great rich without really trying.
Britannica
didn’t take off and fly right away. It went through some painful and nearly fatal financial illnesses in the 1940s. Benton, having started it up, had been attracted by a variety of public-service jobs and had left the encyclopedia operation in other men’s hands. He worked in Washington for two years as assistant secretary of state for public affairs. In 1949 he was appointed a U.S. senator for Connecticut, taking over the unexpired term of a man who was resigning. He stayed in the Senate three years, absorbed with his duties and projects – chief among which was a long, bitter fight with the notorious right-wing extremist of the early 1950s, Senator Joseph McCarthy. Only when Benton was defeated for reelection in 1952 did he turn his full attention back to the
Britannica
.
It was probably lucky for him that there were only two stockholders in the company at the time: himself and the university. If the stock had been publicly traded, its market price would have sunk to so low a level in the late 1940s that Benton might have been tempted to sell out in disgust. The cost of revising and shining up the old encyclopedia had been huge. The company had gone steeply into debt. Most of the encyclopedia sets were sold in instalments, and the machinery for collecting customers’ payments had fallen apart. Other, more aggressive encyclopedia companies were moving into the market with armies of door-to-door salesmen and a heavy artillery of buying inducements: free atlases, free research services, free sets of dinnerware.
Benton shook up his company’s management in the late 1940s and saw
Britannica
nursed back to fair health while he was in the Senate. Then, early in the 1950s, he set out to make the company grow. He introduced new book sets such as the 54-volume
Great Books of the Western World
. He had the
Britannica
translated into foreign languages. He bought other companies such as G. and C. Merriam, publisher of the original
Webster’s Dictionary
.
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.
William Benton, the name to whom one million dollars seemed like enough, is now conservatively estimated to be worth about 150 times that much.
SALESMANSHIP IS THE MOST purely personal of all routes to wealth. A salesman’s only tools are in his own psyche. He needs virtually nothing else – no seed capital, no college degree, no profound technical knowledge. The seed of his success, if it exists, is implanted somewhere deep inside his mind.
It is probably because of this that some of the most astounding gutter-to-mountaintop stories are to be found in the careers of salesmen. A boy born poor and a boy born rich have equal chances to make it as salesmen. A man can go all the way through college and spend years on graduate studies and spend still more years polishing himself like a diamond. No matter. The likelihood of his getting rich as a salesman is still no better, on the basis of these qualifications alone, than that of a kid who quit school after ninth grade.
“Nobody knows exactly what makes a good salesman,” says O. William Battalia, a New York executive recruiter who has tracked down many high-level sales executives for his client companies. “I mean, the qualifications can’t be put down on paper in a precise way. Salesmanship is a thing you sense – an approach, an attitude, a
feeling
about a man. Some men have it, some don’t. I know when a man has it and I know when he hasn’t. But if you ask me what he has or doesn’t have, I’m stumped.”
As we’ll see later, there are some students of sales psychology who believe they do know what this mysterious quality is. In fact, there are some who believe it can be taught – can be implanted in a man who previously lacked it and doubted he could ever acquire it. Others say that’s balderdash. Selling ability, they maintain, is either an innate quality or is produced by one’s character – forming emotional experiences in childhood. If you don’t have it by the time you reach adulthood, you won’t ever have it.
For the moment let’s sidestep this debate. 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.
The product or service you sell need not be new and startling. It can be old, familiar even to the point of boredom. Hundreds of other men may be out selling it and indeed may have been selling it for centuries. None of this counts. What counts is that, somehow, you sell it better than your competitors are selling it. That’s how you make your millions.
The story that follows is the story of a master salesman who sold something that was neither new nor startling – insurance – and ended with something like $400 million.
He is, among other things, chairman of the board and chief stockholder of the Combined Insurance Company of America, a board member and major stockholder of Alberto-Culver Company and board chairman of Hawthorn Books. It is entirely conceivable that the market value of his stocks will rise enough within a year or two to put him in the half-billion-dollar class.
W. Clement Stone. He is one of the richest men in America and one of the hardest to put down on paper.
It isn’t that he is deliberately elusive, in the manner of Howard Hughes and some other rich men. Stone doesn’t dodge the press. He is highly publicity-conscious in fact, and remarkably frank about his wealth and its sources. The difficulty is that he is a peculiar and maddening bundle of contradictions. A major magazine tried to put together a profile of him some years ago but gave up in despair. There were so many contradictory facets to his character that most of them seemed to cancel each other out. No clear picture of a man emerged. What emerged, instead, seemed to be a basket of ill-assorted fragments – not one man but several.
Stone seems insufferably pious to some; he reminds them of a small-town revivalist minister. Yet he reminds others of a big-city huckster or circus pitchman.
He is obviously a hardheaded pragmatist, a man who knows a lot about business and money and law. Yet on occasion he drifts into strange ethereal worlds: He supports studies of extrasensory perception, for instance.
He is among the biggest of big businessmen, financially well worthy of appearing on
Business Week’s
cover. Yet he has never appeared there, and it is extremely hard to imagine him there. He simply doesn’t look like a big businessman. He looks more like a bit player from a cops-and-robbers movie of the 1930s. He is a short man with a round face. He wears his hair slicked straight back over his scalp. He wears an archaic pencil-line moustache in the style of Ronald Colman, colorful bow ties, dazzling cuff links, great flashy rings on his fingers. He incessantly smokes four-dollar Havana cigars, which he hoarded in a warehouse before political events cut off the supply.
He sometimes talks and writes as though the acquisition of money is life’s only purpose. Yet he gives with unimpeachable generosity to boys’ clubs and treatment centers for drug addicts, and he does other good works. He gives not only money but time. His philanthropies must be counted as genuine, not simply tax gimmicks.
He says the secret of his success is something called Positive Mental Attitude (PMA), and he publishes books and a magazine to spread the word. Some say his publishing ventures are cynically designed for profits. Others say he sincerely believes in PMA and genuinely wants other men to succeed as he did.
He is an enigma, this Clement Stone. But let’s see what his life can teach us.
If his story were fiction, it would be too corny to take seriously. W. Clement Stone, born on May 4, 1902, helped support his impoverished family on Chicago’s south side by selling newspapers.
Selling newspapers.
Does it actually happen in real life?
Evidently it does. Clem Stone, true to the classic tradition, was a spunky kid who fought hard to win and keep his selling territories. He was thrown out of one restaurant several times but kept sneaking back with more papers to peddle. The customers were so amused by his gall that they finally prevailed on the owner to stop heaving the youngster out on the sidewalk. With a bruised bottom but a full pocket, Stone went away to ponder the meaning of this episode.
He was that kind of kid – and, later, that kind of man. He was fond of mulling over his experiences to see what could be milked out of them for future profit. “What did I do right?” he would ask himself. “What did I do wrong? How will I approach that kind of situation next time?” He badgered himself with such questions throughout this life. He tried, in fact, to reduce all of life to a formula. He wanted to write a kind of code by which to guide himself. A set of short, pithy instructions that would lead him safely and profitably through any thicket of personal or business problems.
He believes he has succeeded in that aim. He has arrived at just such a set of instructions. As we’ll note later (chapter 5), the instructions aren’t totally clear to everybody else. But they are obviously quite clear to Stone – and in his case, at least, they have worked magnificently.
Stone, an only child, was raised by his mother. His father died when the boy was very young. The books and articles Clem Stone wrote in later life indicated that his mother had a profound influence on his character. She managed somehow to combine a deeply felt piety with a tigerishly aggressive business instinct – a combination that shows up today in Stone himself. She and he alike seemed to see God as a kind of business partner or moral stockholder. They prayed for courage, guidance and luck in their business ventures. Rewarded, they felt obligated to pay their divine stockholder dividends in the form of personal virtue, good works and more prayer. In the success formulas that Stone wrote as an older man, he classified the Bible as a kind of self-help book.
Stone was also influenced, he says, by the works of Horatio Alger. He read some 50 Alger books as a boy and was impressed by Alger’s suggestion that God rewards the virtuous with cash.
Stone’s mother worked for several years as a seamstress. She managed to save a little money. When young Clem was in his teens, she invested her savings in a small insurance agency in Detroit.
It was a risky move. The investment actually bought nothing more than a business connection and a spoonful of goodwill. The agency was in business to sell health-and-accident policies of a single company, U.S. Casualty Company of Detroit. For each policy sold, the agency kept a commission – and that was its only income. The agency bore all expenses except those of printing the policies and paying the claims. Its only assets were a small, dusty rented office, a few items of office equipment and the abilities of its sales force.
The sales force – in fact, the entire staff – consisted of one woman, Stone’s mother. She sold nothing on her first day of business. That night, according to Stone’s own account, she prayed. She prayed some more the next morning. And then she went to Detroit’s biggest bank, sold a policy to one of its officers, got permission to roam about the building and ended the day with 44 sales. Horatio Alger would have loved her.
The agency prospered. And in the summer before his junior year of high school, young Clem went out to try his hand as a salesman.
His mother instructed him to go to a certain office building and cold-canvass it from top to bottom. He was frightened. But his days as a newsboy came back to him, and as he stood trembling on the sidewalk outside the office building he reviewed some of the pithy self-goads with which he had prodded himself back then. One went something like “When there’s nothing to lose and much to gain by trying, try.” Another went, “Do it now!”
So he did it. He marched into the building. Had he been thrown out he was prepared to go back in just as he had gone back into the restaurant years before to peddle papers. He wasn’t thrown out. He went from office to office. The phrase “Do it now!” kept thundering in his head. Each time he stepped out of one office without a sale to show for his efforts, he found himself scared to hit the next office and face the next rejection. But he forced himself to go to the next office without hesitating. In fact, before the day ended, he had developed the technique of
rushing
to the next office so as to allow no time for panic to arise and defeat him.
He sold two polices that day. It wasn’t a successful day in those terms, but it was highly successful in terms of what he was beginning to learn about himself and salesmanship.
A good salesman, as we’ve noted, has the mysterious ability to drive himself. In situations where most people would slow down and stop – indeed, situations many people wouldn’t care to enter at all – the salesman somehow keeps himself going at high speed. From some deep well of optimism or confidence or hope of just plain self-powering mental oomph, the salesman dredges up whatever it is that helps him overcome his fear of the hostility and rejection he may meet at the next office.
Young Clem Stone sat down at the end of that day, with a few dollars of commissions in his agency account, and decided it hadn’t been such a bad day after all. He knew he had the guts to overcome fear, and he had worked out a technique to help him do it. With luck, he thought, he might one day become a good salesman.
He sold four policies the next day and six the day after. His career was launched.
He continued to sell health-and-accident insurance for his mother during that vacation and during subsequent time off from school. He boosted his sale average to ten policies a day, then fifteen, then twenty. And all the time he was analyzing himself. Why was he succeeding? He finally decided it was because he had something called Positive Mental Attitude. He spent the rest of his life trying to explain this PMA to other people. Sometimes he got it across and sometimes he didn’t.
There came a day in school when he was sent to the principal’s office to discuss some minor infraction of the rules. The principal grumbled that young Stone was wasting a lot of the taxpayers’ money by using up his, the principal’s, high-salaried time.
It suddenly occurred to Stone that he, a high-school junior, was making more money per day worked than the principal. And so Stone quit school on the spot. (Later in life he completed high school and began, but didn’t finish, a college law course.)
He roamed all over Michigan selling for his mother’s agency. His sales average edged past 30 policies a day and in some towns topped 40. His PMA, whatever it was, appeared to be working beautifully.
At the age of 20 he moved to Chicago and set up his own one-man insurance agency. He called it Combined Registry Company. He was determined to make it live up to its grandiose name. He prayed, recited self-needling phrases to himself, stoked up his PMA until it must nearly have blown the top of his head off. And on his first day of business he prospected up and down North Clark Street and sold 54 policies.
There could hardly have been much doubt in anyone’s mind after that first day that this new agency was going to grow. There was no doubt at all in Stone’s mind. He sold polices around Chicago and then in other Illinois cities, and he grew better at it all the time. In Joliet he averaged more than 70 sales a day and there was one magnificent day in which he reached the almost unbelievable total of 122 sales. On the basis of an eight-hour working day, that figures out to one sale every four minutes.
Stone was obviously doing something right. He had started by selling two policies on his first day as a salesman. After about four years of self-training and self-needling he had reached totals beyond which it hardly seemed humanly possible to go. Meanwhile, repeat business was flowing in at an ever-faster rate: People were renewing their policies, and the one-man agency was collecting commissions through no sales effort on Stone’s part.
The time had come, he felt, to hire an assistant salesman or two. 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. Stone feels today that if he had tried to multiply his agency by hiring a lot of salesmen before the enterprise was ready to absorb them, he might have gone down to defeat. The agency couldn’t have lived on its cut of their commissions. As it was, the agency had reached a state of radiant health by living on Stone’s personal commissions alone. It was now in a position to absorb other salesmen and support them, perhaps unprofitably at first, while they learned the business.
Stone placed a help-wanted ad in a Chicago newspaper: “Exceptional opportunity to earn ...” He received a bundle of replies from towns all over Illinois. He hired several men. Replies also came in from Indiana, Wisconsin and other states in which Stone’s agency was not then authorized to do business. He promptly wrote to the insurance company whose policies he was peddling and asked permission to sell in those other states. The company was happy with the volume of business he had been bringing in. Sure, said the company, go ahead.
Stone went ahead. He hired some men in Wisconsin and Indiana. Then he began advertising for help in still other states’ newspapers. He expanded his sales force eastward, southward and westward. Soon he was advertising for salesmen in national magazines and by the late 1920s he had more than 1000 men operating from coast to coast. He appointed state sales chiefs to help him manage the salesmen, then assistant national chiefs to help him administer the entire army from his Chicago headquarters.
He was not yet 30 years old.
The Stone agency seemed to be embarked on a course of eternal multiplication. But then the Great Depression settled its huge weight on the country. Many small and medium-size businesses were crushed flat. For a while it looked as though Stone’s business might be among them. The 1000-man army found sales resistance stiffening. People didn’t have the money to buy health-and-accident insurance, and those who did have money were inclined to save it for the still rainier days that seemed to lie ahead. The agency’s once-huge sales volume dwindled like ice melting on a summer day. The morale of the sales force sank in black despair.
Sitting in his Chicago office, W. Clement Stone puzzled over these problems and ended by adding a few new principles to his success code. One was a generalized statement about hard times. Its drift was that if you approach adversity in a determined and optimistic way, you can always find an advantage in it. Another principle had to do with salesmanship specifically: “Sales are contingent on the attitude of the salesman, not the prospect.”
And to prove to his dispirited sales chiefs that these weren’t just empty platitudes, Stone got up from his desk, put on his hat and went on a selling trip in New York State. In the depths of the depression, he sold as many policies per day as he had ever sold in the halcyon 1920s.
