Lasting Lessons from the Corner Office

Todd G. Buchholz

• Publisher: HarperCollins e-books
• Year: 2009
• ISBN:
  9780061874758
• Topic: Crescita personale
• Subtopic: Finanza a livello personale

New Ideas from Dead CEOs uncovers the secrets of success of great CEOs by giving readers an intimate look at their professional and personal lives. Why did Ray Kroc's plan for McDonald's thrive when many burger joints failed? And how, decades later, did Krispy Kreme fail to heed Kroc's hard-won lessons? How did Walt Disney's most dismal day as a young cartoonist radically change his career? When Estée Lauder was a child in Queens, New York, the average American spent $8 a year on toiletries. Why did she spot an opportunity in selling high-priced cosmetics, and why did she pound on Saks's doors? How did Thomas Watson Jr. decide to roll the dice and put all of IBM's chips on computing, when his father thought it could be a losing idea? We learn about these CEOs' greatest challenges and failures, and how they successfully rode the waves of demographic and technological change.

New Ideas from Dead CEOs not only gives us fascinating insights into these CEOs' lives, but also shows how we can apply their ideas to the present-day triumphs and struggles of Sony, Dell, Costco, Carnival Cruises, Time Warner, and numerous other companies trying to figure out how to stay on top or climb back up.

The featured CEOs in this book were not candidates for sainthood. Many of them knew "god" only as a prefix to "dammit." But they were devoted to their businesses, not just to their egos and their personal bank accounts and yachts. Extraordinarily fresh and deeply thoughtful, Todd G. Buchholz's New Ideas from Dead CEOs is a truly enjoyable and fun—yet serious and realistic—look at what we still have to learn and absorb from these decomposing CEOs.

1

A. P. Giannini: Bank of America

The Gladiator of Banking

He was a big man, but he was terrified. At 5:18 a.m., his wooden house shook and bucked like an insane bronco, tossing his pregnant wife out of bed. She clung to him; he was over six feet two, with massive shoulders and a chin they could have used on Mount Rushmore. But even he could not hold on as the floor beneath their feet turned to waves of sloshing sand and soil. Amadeo and Clorinda Giannini looked up at the writhing ceiling and then tore across the hallway to the bedrooms of their seven children, throwing their bodies over them, as continual jolts battered the walls for twenty-eight of the longest seconds of their lives. For their son Mario, a hemophiliac, a splintered post could be fatal.

And then silence. The walls shimmied but finally rested as the small children shrieked. They were among the lucky ones, for their house was in San Mateo, seventeen miles from the epicenter of the San Francisco earthquake on April 18, 1906. We still do not know exactly how many died—more than three thousand for sure—in the tightly packed city, where gas lines ripped open and the relentless flames tossed penniless wharf dwellers into the streets alongside the moneyed dowagers of Nob Hill. The fleeing and looting would soon begin. Amid the chaos and lawlessness, any sane person would fear for his life and his pocketbook.

Amadeo Peter, known as A.P., knew what he had to do next. He had to open his bank to the public. He had to defy the blocked roads, the roaming thugs, the jealous competitors. On this day when San Francisco turned into a flaming crucible, the postman stayed home. Herodotus’s ancient promise about “Neither snow nor rain nor heat nor gloom of night” did not cover seismic eruptions. But the thirty-five-year-old A.P. held himself to a higher standard. He launched himself on a grueling trip just to cross the seventeen miles to his bank. The trains were jammed with mobs. Fearing damaged tracks, the engineers slowed the pace to a crawl. A.P. jumped off. He could thumb a ride or even walk faster, despite his lumbering gait. Five hours later, he trudged into the heart of the city, a city he could barely recognize through black smoke, pluming flames, and an endless series of explosions as firefighters dynamited buildings, hoping to rob the fires of kindling wood.

Was he insane? Hungry for power? For glory? Or just blindly devoted to the “little guy” who would need cash in a moment of despair? Not even A.P. himself knew, but by the time he reached his bank, he realized he had made a terrible mistake. Despite his size, his determination, and his fame, not even he could protect the bank’s bags of silver and gold from the marauding gangs.

This chapter tells the story of a man who could stare into the eyes of ruthless outlaws, yet still trust his fellow man. A. P. Giannini invented modern banking because he, not the Morgans of New York, the Rothschilds of London, nor the Riggs of Washington, realized that small-business owners, family men, and yes, even housewives could be entrusted with money. Before A.P. came to San Francisco, banks were only for rich people, and the bars on the teller cages kept everyone in their cells. A.P. took a hacksaw to the bars and liberated the American economy from the past. Most countries around the world are still learning his lessons.

THE EARLY YEARS

Before there was a Bank of America, there was a Bank of Italy, and before there was a Bank of Italy, there was a young Italian couple running the Swiss Hotel in San Jose, California. A.P.’s father, Luigi, was the son of a vineyard owner in Genoa, and his mother, a very young beauty named Virginia from the walled city of Lucca in Tuscany. In 1871, after making money on the bustling hotel, Luigi bought a forty-acre orchard that could make his relatives in the old country envious with its bright red strawberries and cherries. A.P. was born in 1870 and quickly learned to help with farmwork and to play games with friends in the fields.

The Gianninis provided just one story of the thousands of Italian immigrant tales that were created at the turn of the century in Northern California. The Most Happy Fella, a 1956 Broadway hit, with songs such as “Abbondanza” (“Abundance”) and “She Gonna Come Home Wit’ Me,” featured Italian American orchard hands of this era. The number of Italians soared in the 1890s, and by the 1930s, second-and third-generation Italians made up one-fifth of the population, which included a youngster named Giuseppe Paolo DiMaggio, who in the streets of San Francisco would learn to hit a curveball as well as anyone ever would. While San Francisco bulged with gold rush speculators in the 1850s, by 1870 there was only one way to make money in the Bay Area: hard work. People rode the new transcontinental railroad not with sieves, seeking a glimmer of gold specks, but with shovels and rakes. The money was in the land, but you had to coax it out using a strong back. Between 1870 and 1890, the number of farms in the United States jumped by nearly 80 percent, to 4.5 million, as did the value of farm property.

Even as a boy A.P. witnessed the rich harvests and saw wagons and crates loaded onto steamers and trains bound for New York, Boston, and abroad. Though A.P. attended school in a one-room schoolhouse in Alviso, he did not grow up in some isolated rural outpost. He attended school with French, German, Armenian, and Greek children. Not even his teachers could pronounce his Italian name correctly, so they called him “Amador Jenning.” A.P. lived on the edge of a new globalized world. All he lacked was the patience to watch it go by.

He grew up faster than he should have. On August 13, 1876, young A.P. was standing in front of his house when his father drove up in a horse-drawn wagon filled with produce. Suddenly, a field worker popped up, infuriated with Luigi. It was a money dispute. A dollar bill was in question. As A.P. stood by, the laborer reached down to his waistband aimed a gun, and fired a murderous shot at Luigi. Luigi died quickly.

A.P.’s twenty-two-year-old mother was made of strong stuff. Of course Virginia mourned, but soon after Luigi’s death, she threw all her energy and her shrewd mind into vital tasks: keeping the orchard going and her three children fed. She did not shirk and, with A.P. alongside, would manage the fields and ride with the crops on a boat to the market in San Francisco. Along the way, she would meet a young man named Lorenzo Scatena, who would drive her produce to an agriculture dealer in the city. They married in 1880, though it was hardly an even trade. She showed up at the altar owning a teeming orchard; he showed up with a horse. A caring man, Lorenzo moved to the Giannini orchard and proved to be a wonderful stepfather for A.P. and his brothers, who forever called him “Pop.” Though Lorenzo had charm to spare, Virginia quickly found out why he drove a truck. Lorenzo simply did not have the green thumb needed to produce bumper crops in the Santa Clara Valley.

Virginia was too ambitious to preside over a farm that was not living up to its potential. She gazed up at the mansions of Nob Hill and figured that the Giannini-Scatena clan was clever enough to climb up that slope. She organized the family to move to the big city when A.P. was twelve. It was probably the smartest and the most frustrating decision she would ever make.

A.P. was a math whiz at school, though he cringed when called “teacher’s pet.” But school could not keep him in his seat. He did not suffer from attention deficit disorder. He simply heard the call of the docks, the merchants haggling, and the ships’ horns blaring. He needed to be in the mix, like Pop Scatena, who got a job with Galli and Company brokering fruits and vegetables. The produce business was a nighttime affair. When the exhausted day workers slept, the merchants would rifle through crates of apples and artichokes, assessing their quality and bargaining on price: “How many ya got? What’s your freight? Someone gettin’ a vig?” It was clatter, it was boisterous, and it was macho. To A.P., it was Verdi.

When ambitious Virginia prodded Pop to demand a raise, Galli said no. So Pop quit, and the next day, he launched L. Scatena & Company. In his first month, he cleared $1,500 in profits, not a bad raise from the $250 the Gallis paid him. Pop had a secret weapon, of course: A.P., who shadowed him through the night.

Pop did not mind his quick-witted stepson by his side. “We left home at midnight; 1:00 a.m. was a late hour—often too late—to show up on the docks,” Scatena recalled.¹ When dawn broke and all the tomatoes and artichokes had been crated away, Pop Scatena counted the profits and met his accountant, a crusty Irishman named Tim Delay. Delay noticed right away that A.P. was a triple threat: he worked hard, loved the brokering business, and could keep an eye on a balance sheet. The kid had a future. After an early breakfast, A.P. would hurry to beat the school bell. This dual life would not last long. At age fifteen, against his mother’s advice, he chose to work full-time for Pop. To placate her and sharpen his analytical skills, he took a three-month accounting course at a local business school. He breezed through it in six weeks and hardly missed a moment on the docks.

At fifteen A.P. had piercing, hooded eyes, thick black hair, and a muscular body that had passed six feet in height. He towered over most Italian men, who stood on average just five feet four inches.² His size came in handy on occasion when a left hook to the chin of an unscrupulous competitor helped to seal a deal on fresh cantaloupe. With his powerful build, confident manner, and farm-raised expertise in crops, A.P. made a devastating impression among the brokers, shippers, and buyers on the docks. Like the rare politician who actually likes kissing babies, A.P. loved schmoozing, haggling, and jostling with the myriad ethnic characters who made up the produce trade. Pop’s business involved brokering, buying, and speculating on future crops. At first Pop and A.P. traveled together up and down the Sacramento River, bidding for the best produce. Eventually the young teen would make the trips alone. He would do anything for a deal. Once he spotted a competitor riding a buggy to make an offer to a farmer. Seeing a shortcut, A.P. stripped off his clothes and swam across a swampy pond while holding his clothes above water in order to beat the buggy rider to the farmer’s house.³

During one season, A.P. sensed that peaches would be in short supply. He bought up as many as he could, well before the price doubled. “It was a big gamble but I guessed right. I made $50,000 for the Scatena firm with the deal.”⁴ One of his admirers, a competitor named George Webster, observed, “I’ve seen men go against him, after having rehearsed themselves [to] buy beans…at three cents a pound under his price; but before the story ever stumbled from their lips, they would be signing their names to an order at his figure.”⁵ When A.P. hit age twenty-one, Pop granted him half the firm of L. Scatena & Company, which flourished, bringing in hundreds of thousands of dollars each year.

When A.P. was not wading through muck, speculating on peach crops, or hoisting crates onto carriages, he cleaned up quite nicely. Like the Stephen Sondheim character who says this “bum’ll be Beau Brummell,” A.P. would stroll on New Year’s Day adorned with a top hat, gloves, and a gold-tipped walking stick. At twenty-one, he ran into a young woman named Clorinda Cuneo, daughter of one of the wealthiest Italian immigrants in the city. That she wore an engagement ring from a fiancé in Europe made little difference to A.P., who wooed her and won. The poor guy in the old country did not stand a chance. Soon, the children started coming; meanwhile, the money kept flowing into A.P. and Pop’s bulging pockets. Following his father-in-law’s lead, A.P. put the money in real estate. After about fifteen years with Pop, A.P. decided to “retire” from the fruits-and-vegetable business. He was just thirty-one but now felt too restless to manage a mature business like L. Scatena & Company. Pop bought him out for $100,000, and A.P. had already socked away $300,000 more. In today’s dollars, this would be a hefty $9.6 million nest egg.

INTO THE BREACH WITH BANKING

Retire at thirty-one? Hardly. A.P. was just looking for a new challenge. He found it in real estate, investing, and then in banking. Before A.P. retired from L. Scatena & Company, he and Pop were already drifting toward banking, as farmers began asking for advances to help pay for seeds, tools, and labor as they planted the next season’s crops. Instead of asking for interest on the loans, the Scatena company paid a lower price at harvesttime. Because Pop and A.P. were keen judges of character and farming skills, they could provide credit without jeopardizing their own profit-and-loss statements.

A.P.’s real entry into banking came when his father-in-law, Joseph Cuneo, died in 1902, at age ninety-two. (A.P.’s daughter Claire would also live to ninety-two, having been the first woman to serve on the boards of Bank of America and Sears Roebuck.) Joseph was a sharp investor, but not much of a detail man, as it turned out: he left eleven children but no will. He did pencil in one important item; for executor of his assets, he wrote, “A.P. Giannini.” Aside from his real estate work, Cuneo had also served on the board of a local bank, the Columbus Savings & Loan Society.

Eager to serve, A.P. took Cuneo’s former seat at the boardroom table. He had ideas, networking contacts, and advertising slogans ready to share with the bank managers in order to expand the bank. But this was not the wharf, where the sharpest elbow and the loudest voice reigned. Even though the Columbus S&L was run by Italian immigrants, it had all the vigor of J. P. Morgan’s last cigar. In New York, Morgan had set the standard for banks. He had been a stodgy young man who grew up to be a stodgy old man and could hardly use the word “competition” without first uttering the adjective “ruinous.”⁶ Mimicking the Morgan banks, the Columbus S&L wanted very little to do with lending to people. Oh, developers, yes! Successful moguls, step right in! But the ma-and-pa owner of a deli? Or a hat shop? What was the point? They were either shiftless or too poor to pay back a loan. A.P. bristled at the tone and irritated his fellow board members. He had new ideas, and he could not be stopped. How could he put his new ideas into practice?

He charged into the office of a diminutive but spirited friend named James J. Fagan, who served as vice president of the American National Bank. He made Fagan, obviously an Irishman, into an honorary paisan and said, “Giacomo, I’m going to start a bank. Tell me how to do it!”

Fagan blinked and warned A.P. that San Francisco already had more than enough banks. But A.P. was not listening; he was ready to launch a totally new kind of bank.

NEW IDEAS FROM A. P. GIANNINI

From Rabble to Riches

A.P. was no fool. He realized that his best chance of success was not to challenge the big banks for their best customers. Instead he would go after the customers they sneered at. The haughty Columbus bank lent money to the mighty White Star shipping line, the people who would launch the Titanic. A.P. would gladly lend money to the makers of little lifeboats and dinghies.

Perhaps the best way to think about A.P.’s revolutionary idea is to consider that A.P.’s biggest fan in Hollywood turned out to be the director Frank Capra. Capra, a Sicilian immigrant, would later direct two films that recalled A.P. The first, American Madness (1932), starred Walter Huston as a folksy banker who fights off a bank run and loans money on the basis of character. The second, and far more famous, was the Christmas classic It’s a Wonderful Life, in which Jimmy Stewart’s character, Peter Bailey, argues with a nasty monopolist banker named Potter.

The crotchety and bitter Potter believes that Bailey’s flexible loan policies would only produce “a discontented, lazy rabble instead of a thrifty working class.”

In response, Peter Bailey delivers an inspired paean to Potter’s “rabble,” the working people: “They do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath? Anyway, my father didn’t think so. People were human beings to him but to you, a warped, frustrated old man, they’re cattle. Well, in my book, he died a much richer man than you’ll ever be.”⁷

To A. P. Giannini, lending to the little people was not charity. It was damn good business. He was willing to ride the wave of America’s wealth building and had the striking insight to see that small businesses might be just as creditworthy as big businesses. If you visit Manhattan today, you can search in vain for the trophy signs that used to mark the Pan Am Building and RCA Building. Those were dominant names that sparked the interest of traditional banks, which were absolutely delighted to cozy up to them. But those names have vanished. Now stroll over to Seventh Avenue, and you can still see the neon lights marking the Carnegie Deli, a landmark since 1937. Giannini realized that a multimillion-dollar behemoth might not have the staying power of a good pastrami sandwich.

Years later A.P. testified before Congress and explained, “The little fellow is the best customer that a bank can have…. He starts in with you and stays to the end. Whereas the big fellow is only with you so long as he can get something out of you.” And so in 1904, A.P. recruited Giacomo Fagan and opened up the Bank of Italy. The Bank of Italy not only aimed at a different kind of customer, but also revolutionized the economics of banking and the economy itself. The Morgan model spurned deposits. If you ambled into the lobby of a Morgan bank and asked to open an ...