The Very, Very Rich and How They Got That Way (6 page)
Read The Very, Very Rich and How They Got That Way Online
Authors: Max Gunther
Clement Stone’s philosophy of Positive Mental Attitude is partly derived from, and would without doubt be wholeheartedly approved by, the old master Horatio Alger. Stone’s books counsel the aspiring tycoon to observe all the usual Alger-type and biblical virtues. Stone doesn’t explain clearly just what these virtues have to do with PMA, but he leaves no doubt that he considers them absolutely necessary for business success.
In
The Success System That Never Fails
he lists what he calls the “four basic causes of failure.” These are “illicit sex, alcohol, deception and stealing.” Certain highly successful entrepreneurs whom you’ll meet later in this book – men with a well-developed appreciation of good booze and bad girls – would be interested to learn they have been nurturing the seeds of failure all their adult lives. But Stone states his beliefs as though stating plain, demonstrable facts. He
knows
illicit sex will bring your business tumbling down upon your sinful head. Clem Stone is nothing if not positive.
“If you want results,” he says in another part of the book, “try a prayer.” Again he fails to explain the relevance of piety to PMA, but he manifestly
knows
he’s right.
This is the nature of Stone’s books and articles and speeches and sales-meeting pep talks. They are a peculiar and often confusing mixture of folksy platitudes, sanctimonious warnings and chamber-of-commerce exhortations. God and money are somehow equated. The tone is always one of total assurance. Theories and suppositions are stated as facts. Surmises that could be argued with are presented in such a way that argument is clearly discouraged. No questions are invited.
And yet, in the midst of all this, like a diamond in a bowl of cold oatmeal, lies the gem of PMA. You have to eat the damned oatmeal before you find the gem, and even then it requires considerable cleaning off before you can see precisely what it is. But it may be a real gem after all. Many of Stone’s star salesmen, while admitting they sometimes gag on the platitudes with which they are daily force-fed, insist PMA is a genuine, workable formula for success.
What is it? Basically it is a type of autosuggestion. It is somewhat similar to psychotherapist Emile Coue’s formula for getting rid of psychosomatic illness: You endlessly repeat the statement “Every day, in every way, I am getting better and better.” After repeating it for weeks, months or years, with luck you come to believe it. Your body then (so the theory goes) responds to your mind, and the end result is that you actually do get better.
Thus PMA. You start your success course by repeating slogans to yourself – “self-motivators,” as Stone calls them. You recite them every morning and night and at odd hours through the day. They float about on the surface of your mind for a while. Then, after sufficient repetition, they begin to sink like waterlogged seeds. They sink to the depths, settle into the muck at the bottom, take root and become integral components of your psyche. From then on you barely need to think about them. In the midst of any business situation, the correct self-motivator will assert itself and will automatically guide you in the direction of success.
Among the slogans:
“Do it now!”
“Success is achieved and maintained by those who keep trying.”
“Go where you fear to go.”
“When there is much to gain and nothing to lose by trying...”
And so on. Corny? Of course. Thunderingly obvious? Indeed. Yet it must be admitted that successful men do in fact obey these little rules, whether or not the rules are articulated thus, in the form of slogans. Illicit sex may not necessarily lead to entrepreneurial failure, but an unwillingness to try a business venture certainly does. So does procrastination – withdrawing from action, failing to “do it now”. So does fear of the unknown, of rejection, of necessary risk.
Stone’s point is that many or most people fail to develop all the useful self-motivators naturally as they grow to adulthood. They fail to develop the “do it now” habit, for example. Confronted with a scary opportunity, they tend to back off. They diddle around. The opportunity evaporates before their eyes. They then blame a malicious fate for their bad luck. This kind of experience, repeated over and over again throughout their lives, confirms them in the belief that they are born losers. They may cry over the situation or laugh at it good-humoredly, but the fact remains that they believe themselves destined not to succeed.
A man with this crippling attitude rooted in his psyche, Stone points out, obviously will not succeed except by sheer blind luck. Since he has failed to develop the right self-motivators naturally while growing to manhood, it’s necessary to implant them in him artificially by the slogan-repeating technique. The slogans may be corny, but they represent useful habits that the man needs to swap for destructive ones. If the technique works, he will eventually reach a point where his immediate reaction to a situation will be, “Do it now,” instead of “Well, maybe next week...”
This is the basis of PMA. Is it valid? It will cost you only a few bucks to buy one of Stone’s books and find out.
You may feel sceptical even after studying what the man says. It is easy to poke fun at Clem Stone, at his folksy clichés, his Bible Belt moralisms, his flashy cuff links and archaic Ronald Colman moustache. On the other hand, it is rather hard to argue with a man who came from nowhere and made $400 million.
Paul J. Meyer is a multimillionaire from Waco, Texas, who runs a fortune school called the Success Motivation Institute. Meyer and his outfit are worth a brief look if for no other reason than that SMI is probably the most successful of all success academies. It is certainly the most successful of all those that are publicly owned (you can buy its stock on the over-the-counter market if you like) and that publish sales and earnings data. The value of the books, records and other course materials sold by SMI tops $20 million a year.
Paul Meyer is a tall, lean, athletic, urbane man in his middle 40s with a faint resemblance to Gregory Peck. He doesn’t look or act anything like W. Clement Stone, but at certain key points the two men’s careers have been remarkably alike.
Like Stone, Meyer cut his formal education short because he found it irrelevant to his personal goals and purposes. He started college but dropped out after three months, disappointed with what he called the “cookie-cutter” approach to education. He felt the system allowed too little room for students who heard a different drummer.
Like Stone, Meyer began his adult career as an insurance salesman. (Meyer was 20 at the time; Stone had started in his teens.) Also like Stone, he began with an empty wallet and no perceptible advantages over anybody else. In fact, the 20-year-old Meyer began with what seemed like a distinct disadvantage: he was afflicted with a stammer. The speech defect wasn’t severe, but it was noticeable enough to make prospective employers nervous. Meyer was repeatedly advised that selling insurance was probably not his dish.
Some native streak of stubbornness pushed him into the business anyway. Unlike Stone, Meyer didn’t try at that stage of the game to reduce life to a formula. He composed no codes of rules for himself, recited no slogans into his shaving mirror. It would be more accurate to say that, at first, Meyer simply felt his way along as most of us do – groped about in the dark, grabbed some ideas and rejected others without adherence to any formal plan or pattern. And suddenly he found himself succeeding wildly. He sold more insurance than seemed possible – sold it almost as fast as his company could print the policies. By 27, Paul Meyer was a millionaire.
Why? How had he done it?
These were the questions he asked himself. And when he thought he had the answers, he founded SMI, in 1959, to teach the secrets to other people.
The basic SMI principle, if it can be put in a nutshell, is that everybody is locked into the world of his own imagination. Your imagination, in other words, describes the limits of what you can do or become. Except by blind luck – unexpectedly winning a million-dollar lottery prize, for instance – you can never get out beyond the horizons that are severely and starkly outlined in your mind. If you see yourself as a middle-income salary earner, says Meyer, and if you find it ludicrous to think of yourself as anything else, the odds stack up to near certitude that you will not in fact become anything else.
The main thrust of SMI’s fortune courses is to expand the narrow inner horizons that thus, in the Meyer theory, may cramp men’s lives.
Expand
may be too tame a word. SMI attempts not merely to stretch its students’ horizons but to explode them.
Meyer believes success came to him when his own horizons detonated. At some point he stopped thinking of himself as an impecunious young fellow with a speech defect. He thought, “I
could
become a millionaire.” The more often he pondered this astounding option (as with Stone’s slogans), the less ridiculous it sounded. Eventually he was able to take himself perfectly seriously in the role of potential millionaire. He was then in a position to plan, with cool deliberation, just how he was going to get there. Because he took his self-image seriously, he was able to take the plan seriously. And, by golly...
Well, before we get too excited, it would be advisable to consider a couple of truths. First, what works for one man may not work for another. And second, just because a man can do a thing, it doesn’t necessarily follow that he can teach it.
The SMI approach may indeed work for some people. Just as Clement Stone can point proudly to the salesmen who became millionaires under his tutelage, so Meyer produces an alumni honor roll similarly sprinkled with millionaires. Impressive. Yet a question will always hang in the air: Might not these honor students have become millionaires in any case, without ever meeting PMA or SMI?
The question cannot be answered. In the end each man must decide for himself whether he can benefit from fortune schooling.
You may not become a multimillionaire, but at least you aren’t likely to be bored. The SMI courses (you get them by mail: tape recordings, printed material, self-needling forms to fill out) have something of the effect of mind-expanding drugs. The major object is to rev you up until your internal cogs and flywheels are screaming white-hot on their shafts. SMI’s copyrighted slogan states that it is in the business of “Motivating People to Their Full Potential.” Like an old car, you are oiled, greased and filled with high-octane gas; then your accelerator is bolted to the floor.
As one illustration of Meyer’s horizon-exploding technique, consider his concept of what he calls the Tenth Multiple. “People don’t realize,” he says, “that the distance from thinking very small to thinking very big is actually a minor distance – just a few steps.” He asks his listeners to think of $1000. It isn’t an enormous sum. Most middle-income Americans accumulate that much, in property if not cash, fairly early in life. To most of us it is a
conceivable
sum.
But to most of us the sum of a million dollars – a thousand thousand – isn’t conceivable. This is what Meyer means by cramped horizons. For he points out that you need only double $1000 ten times in order to have more than a million ($1,024,000, to be exact).
As a matter of fact, he adds, you can start by thinking even smaller if it makes you more comfortable. Start with a dime. If you began on the first day of a 31-day month and doubled the amount every day, you’d end the month with more than $100 million. (You want precision? Very well: $107,374,182.40.)
These are heady thoughts. SMI is that kind of place. As its sales figures indicate, its approach has attracted large numbers of eager students. There are obviously many who believe fortune making can be taught and SMI can teach it.
Students aren’t the only ones to hold this belief. It is apparently shared by large numbers of outside observers. When SMI went public, in 1969, its common shares jumped in three months from an offering price of $15 to $48 bid, $50 asked.
Even those who might be considered Meyer’s competitors seem convinced the SMI approach is workable. One of SMI’s stockholders, and once a member of its board of directors, is a man who has spent years preaching a different success gospel.
He is a man, however, whose main doctrine is that fortune making can be taught – and he is obviously a man who believes in putting his money where his mouth is. He is W. Clement Stone.
OF ALL THE MONEY DREAMS in the world, the one about making a killing on the stock market is without doubt the most common. This grand and intoxicating old dream is dreamed in every capitalist nation with a private equity trading system, and it is even dreamed in Communist nations that have no stock markets of their own. Visiting Russians seem fascinated by Wall Street, and, as a matter of fact, some wealthier Soviet citizens secretly play the market through intermediaries in Swiss and U.S. banks. Week-old
Wall Street Journals
appear to circulate in Moscow along with other underground publications. The stock market’s magnetism is so universal and so strong that a Russian will risk everything to get in on the action – will risk not only bankruptcy, as you and I might, but also arrest and a jail term.
What is the source of this magnetism? Obviously, part of it lies in the nearly irresistible lure of something for nothing – the market’s promise that you will be given a 50-50 chance to sell something for more than you’ve paid. But there is more to it than that. The stock market offers the further promise – or seems to offer the promise – that to pile up money by this route is ridiculously easy.
That is the real grabber.
It looks easy.
There are thousands of other types of enterprise that offer us poor old downtrodden, tax-bitten, inflation-riddled middle-income folks a chance to make it big. Take the retailing business. Any store owner does essentially what a stock speculator hopes to do: buy cheap, sell dear. Some retailers, like some equity speculators, get rich. But the retailing business looks a lot more difficult and complicated than the stock market. To set yourself up as a retailer, you need a store location, you need merchandise, you need a cash register and you need umpteen other things. Horse racing, by contrast, at first glance looks easier. But everybody knows horse racing is – whisper the dreadful word –
gambling
! And everybody knows the odds are stacked high against making money by gambling. Therefore, horse racing isn’t an easy route to riches anymore than retailing.
But the stock market – ah, the stock market is something else. As all the brokers and exchange executives constantly assure us, stock trading is
investing
, not gambling. That’s what they tell us, and that’s what nearly everybody seems to believe. What’s more, it is a plain and honest fact that putting your money into the market – getting in the action –
is
ridiculously easy, much easier than starting a retail store or even placing a track bet. Getting back out, or at least getting out whole, is another matter. But the process of starting, setting yourself up in the business of equity speculation, offers no difficulties at all. A quick phone call to a broker and you’re in. There are no barriers based on race, religion, national origin, age, sex, physical appearance, education, social status or intelligence. Anybody may play, provided he has the required cash stake.
The game itself, once you’re established in it, also looks easy. All you have to do is buy stocks when they’re cheap and sell them when they’re dear. Nothing to it. No lengthy education required, just an ability to do simple arithmetic. No textbooks to read. No examinations to take. Nothing to learn beyond that one simple rule: Buy low, sell high.
How easy, O Lord, how easy it looks.
The sad and baffling fact is that few people ever make much money on the stock market. The game isn’t one-tenth so easy as it looks. But this fact never seems to get out in public – or if it does drift out occasionally, is soon dismissed as mere hollow pessimism. The market’s outward appearance never changes. It continues to look like the sweetest something-for-nothing deal on earth, the easiest money game of all. And the dream lives on.
We will now look at some men who made the dream real. It must be emphasized that these are men of a rare, rare breed. To make a hundred million bucks on the stock market, you must be somebody quite unusual, and the men we’re about to meet are that, indeed. Yet perhaps we can afford a pinch of optimism after all. Rare though these men may be, they are still men. Not gods, not warlocks, not super-computers – simply men. And what one man can do, so can another. So can you or I ... perhaps.
There are basically three ways to get rich in and around the stock market. You can play it – that is, buy and sell stocks. This is the route most people take and is the basis of the common market-killing dream. Or you can sell it. Instead of trading in stocks themselves, you make your money as a broker or advisor or other intermediary, selling stocks and stock schemes and the something-for-nothing idea to the millions of easy marks who are always milling around. Or, third, you can use it. You do this by creating companies or phantoms that look like companies, getting people to buy stock in those companies and manipulating the resulting flow of money so that some of it ends in your own pocket.
The third method will be discussed more fully in another part of the book, where we’ll be studying the delightful trick of getting rich on other people’s money. The exhibit we’ll contemplate at that time (chapter 15) will be James Ling. As you’ll see, he is acknowledged to be among the grand masters of this third approach to the stock market.
Meanwhile, the first and second approaches will occupy our startled gaze in this chapter and the next: the approaches of the market player and the market seller.
One of the most successful market players living today, and perhaps the most downright likeable, is a man named Joseph Hirshhorn. He came out of the slums and made $100 million or so mainly by gambling in mining stocks. It is part of his charm that he himself admits it was gambling. There are many high-tones labels that he could apply to himself if he wanted to inflate his own importance and polish his image, as businessmen often like to do. He could call himself an investment banker or a natural-resource developer or any of several other grandiose-sounding things. But, no, Joe Hirshhorn could never be that stuffy. He stands there and looks you candidly in the eye, this preposterously rich man, and says he’s a speculator.
Fortune
reporter Emmet John Hughes visited the engaging Hirshhorn and wrote this fascinating and witty account of the great speculator’s beginnings and early triumphs.
[1]
by Emmet John Hughes
Joseph Herman Hirshhorn ... five feet, four inches high, stands at the glittering top of a world he made by and for himself. He looks a bit like Al Smith, walks a bit like Groucho Marx and thinks a bit (he hopes) like Bernard Baruch. He is bilingual: adequate English and fluent Brooklynese. He is an immigrant Jewish boy, a child of some of Brooklyn’s toughest slums who has grown into a scarred and supple veteran of New York’s Wall Street and Toronto’s Bay Street. Coincidentally with making himself rich, he has helped make the Western Hemisphere considerably more secure in that most vital of strategic minerals, uranium. “Uranium, ah uranium!” Joe was once heard to enthuse. “It’s got sex appeal!”
The twisting, turning career that Joseph Hirshhorn found to be the shortest distance between poverty and fortune zigzagged to a climax ... [in 1955]. The scene was Joe’s unpretentious 19th floor suite in Toronto’s Bank of Nova Scotia Building, on the walls of which hang landscapes, still lifes, abstracts (a part of his million-dollar collection of contemporary American art), a portrait of Lincoln and a framed aphorism: “IMAGINATION IS THE FIRST LAW OF CREATION”. For the occasion there perched on Joe’s desk a cake whose pink-and-green frosting proclaimed, “RIO TINTO-HIRSHHORN E PLURIBUS UNUM”.
Towering at Joe’s side stood the natty British figure of Roy William Wright, boss of the Rio Tinto Mining Company of Canada, a new offspring of Great Britain’s venerable 83-year-old Rio Tinto Company, in which the Rothschilds have large interests. As the cake was cut, Joe sighed and sang, “I’ll be loving you always and always.” He had just traded Rio Tinto his equity in a vast sweep of Canadian mining properties – uranium, gold, iron, copper, acquired over a period of two decades at a cost of some $4,800,000 – for about $31 million in Canadian Rio Tinto stocks and debentures and the chairmanship of the Canadian company’s board.
Behind the happy moment lay three years of work revolving about a stretch of land whose name seems destined to match the Klondike in fable: Blind River. The name properly belongs to a depressed little lumber town on the Canadian Pacific Railway along the northern shore of Lake Huron. But the name is now used to cover the whole southern part of the Algoma Basin, an expanse of little lakes and jack-pine bush, which, until Hirshhorn came along, had been a cemetery for the hopes of many hollow-eyed prospectors.
Early in 1952 Joe had listened patiently to Franc. R. Joubin, a lean and scholarly man who had recently become managing director of Joe’s Technical Mine Consultants. Joubin’s theory was that the many assay tests made on sample surface ore from the Algoma area (all of which had been discouraging) had been misleading and that deep diamond drilling would uncover vast uranium beds.
Finally, in 1953, Joe put up $30,000 for Joubin to start diamond drilling. Two months later Joubin and Joe had the greatest uranium find outside Africa, a discovery that took Joe on to the sweeping deal with Rio Tinto.
The full story behind these events goes back a good deal more than three years. It goes back half a century and to quite another world – to a village in Latvia, in fact, where Joseph Herman Hirshhorn was born in 1899, the 12th of 13 children. His father died in Joe’s infancy. Joe was six-years-old when by train and steerage, via Liverpool and Ellis Island, he landed to join his mother and the rest of her brood in a Brooklyn tenement. “I came out of a hell-hole,” Joe recalls. “And I was lucky – some of my playmates in that neighborhood found their way to the electric chair.”
It took Joe less than 24 hours after landing in America to get his first lesson in finance. Some neighborhood boys taught him to shoot craps. Joe, though he could speak no English, got the idea well enough to win, and his tutors had to beat him up to recover their losses. His mother, Amelia, bore with a more systematic kind of punishment in a sweatshop pocketbook factory, where she worked 12 hours a day, six days a week, for $12 weekly. With such resources, she moved her brood to a slightly more spacious slum on Humboldt Street.
Across the bleak scene flares one flaming memory: a three-alarm fire that in May 1908 gutted the Humboldt Street tenement. Some upper-floor tenants died in flames – or impaled on the fence below. The Hirshhorns survived, but Amelia was taken to the hospital while her children scattered around the neighborhood to get along as best they could. “I stayed alive on garbage,” Joe murmurs. “Poverty has a bitter taste. I swore I would never know it again.”
In the spring of 1911, P.S. 145’s fifth grade went on an excursion to Staten Island. Joe started out with his classmates, but he didn’t get to Staten Island. As the group meandered down Lower Manhattan’s Broad Street, heading for the ferry, Joe saw a sight – the fantastic, yammering New York Curb Market. He spent the day watching, bug-eyed. “It fascinated the hell outta me,” he remembers. “The wigwagging like deaf-and-dumb signals between sidewalks and windows, the brokers with their colored hats. I made up my mind to come back. Three years later I did – still not knowing what the hell it was all about.”
Joe was 14-years-old when he returned to the Curb. His timing seemed a little faulty. His mother certainly thought so, for it was one of the rare times when she slapped him – for brashly quitting a $20-a-week job in a jewelry store to head for Broad and Wall streets. It looked as if mother was right, Joe recalls, “It was 1914. Both exchanges were closed and when I wandered onto the Curb, there were all these guys sitting around playing cards, and when I told them what I wanted, they just laughed at me. ‘Hell, sonny, we’re lookin’ for jobs ourselves.’ ”
It was not to be the only time that Joe moved in on a situation at its lowest. Joe patiently plodded through the offices of lower Broadway until, working floor by floor through the Equitable Building at number 120, he found a job with the Emerson Phonograph Company as office boy and noon-hour switchboard operator (for which he breezily trained himself in 24 hours at the telephone company up the street).
Such a start was less than spectacular, but it sufficed. The gilded names on the doors of the Equitable Building – grand-sounding names like Guggenheim and American Smelting and Refining – signaled at least a proximity to the world he was looking for. He soon found out that Emerson’s general manager, one Richard D. Wyckoff, was also editor and publisher of the
Magazine of Wall Street
and had an office with a ticker in it. “So after six months,” Joe recalls, “I took my heart and my noodle in my hands and marched into Wyckoff one day and said I was no office boy, I wanted to be a broker.” His brashness paid off: A fortnight later Joe was charting stocks for Wyckoff at $12 a week.
The next three years meant education in everything from the important names in New York society to the tricky wriggles of his stock charts. All the while the Hirshhorn economy (ten cents a day for carfare, nine cents for lunch, six cents for splurging, the rest to his mother) was supplemented by an extra $12 weekly earned as a Western Union messenger, running daily from 6:00 P.M. to 2:00 A.M. Joe got his feet so badly blistered that, upon quitting, he never went back for his last fortnight’s pay. (Recently he reminded the president of Western Union that he was still owed $24.) To make up for his loss of income, Joe devoted spare time to drawing more stock charts for the old Wall Street firm of Cyrus J. Lawrence and Company.
At 17 Joe struck out on his own, headed fast for his first killing and his first rude lesson. He had, to start with, a sum of $255. Within a year, as a broker on the Curb, he was able to buy himself his first fine clothes and his mother a house on Long Island. But the armistice came, and Joe got too clever. He stubbornly bought Lackawanna Steel on the scale-down that followed the peace. “They took me to the cleaners, everything but $4,000.” But, as Joe is fond of saying, “Sure, I’ve made mistakes, plenty – only a liar would say he never did – but I’ve never made one I didn’t learn something from.” He learned on this occasion, “Never, but never, buy on a scale-down unless you’re an insider and know what’s really going on.”
