More on politics & society from The Atlantic Monthly.
More on the economy from The Atlantic Monthly.
From the archives:
"The Market as God" (March 1999)
Living in the new dispensation. By Harvey Cox
From Atlantic Unbound:
Flashbacks: "Taking Stock" (November 7, 1997)
A bit of Wall St. wisdom from J. K. Galbraith—and a dash of levity from "Brutus."
The Atlantic Monthly | January 1933
HE typewriter which records these lines is the last relic of my brilliant business career. I bought it a week ago for $15—from the receivers of a $400,000,000 holding company which had once given me an exalted title and a handsome salary.
The Royal Road to Bankruptcy
by One Who Took the Ride
At the present moment, the company is in bankruptcy. Its assets have disappeared. Its executives are scattered with the winds. And I sit here, at my $15 typewriter, trying to recall the old days, and the old people. Where are they all now—the Presidents and Assistants to the Presidents, the Vice Presidents and Assistants to the Vice Presidents, the Controllers, Publicity Managers, and Public Relations Directors? They were super-executives, 'men of wide experience and acknowledged ability.' The bond circulars said so.
But where are they now? Like Prospero's players—melted into thin air. In their place sit the receivers in bankruptcy, a handful of stenographers, and a row of elegant, empty walnut desks.
It was from the academic groves that I first plunged into Big Business. This was in the fabulous summer of 1929. Big Business was in the air. In those days Giants of Industry stalked the earth, and power and plenty followed in their train.
So I made the plunge. In August 1929, I left my cramped office in an ancient college building. It was a relic of academic unworldliness, that little office. Its battered desk was of painful golden oak. My filing cabinet was a wooden grocery box, with the trademark still apparent in black and red upon the end. On the wall was a jumble of exposed pipes and wires—symbols of the machine civilization which had arisen since the ancient bricks had first been laid.
That was in August. I departed as a humble college worker to seek my fortune in the City of Big Business.
Two months later found me installed behind one of the elegant walnut desks in a skyscraper office on Wall Street. On top of the desk was a telephone box with a dozen keys. Beneath it was a large and shiny brass spittoon. I had become a super-executive.
Those 1929 days were Happy Days for everyone. But, even in terms of 1929, I was considered lucky. My college classmates regarded me with a mixture of awe and envy. They had come to think of me as a shabby teacher fellow in a shabby office. Suddenly they found me sitting masterfully at a walnut desk in the office of a holding company whose consolidated balance sheet showed total assets of $400,000,000. When they telephoned, their calls were relayed through a pair of secretaries. When they called, a suave receptionist met them in the spacious hall and deposited them in cushioned chairs until I was free to see them.
For three years I sat at that desk. I dictated letters. I sent telegrams. I wrote memoranda. I sat in on conferences in a paneled Board Room. I attended luncheons in private dining rooms. By train and airplane, I whisked about the country at lightning speed.
What was it all about? What was the purpose of the meetings and the memoranda? For the life of me, I cannot remember. It is like trying to recall the shadow of a dream. In an effort to reconstruct the picture, I have beside me a pile of expense accounts from those palmy days. Those are the real and intimate entries in the Diary of Big Business. In them I observe these random items:—
January 2. Trip to Jamesville to discuss radio advertising
February 10. Advance, trip to Chicago, organization meeting
National private management league
February 15. Conference and entertainment, Jones, Smith, and Brown
March 6. Incidental expense, Havana Convention
March 15. Telephone and telegraph expense, Dansburg situation
March 24. Jamesville Convention, Incidental expense
March 30. Trip to Harrisville. Municipal Situation
Behind these scurryings to and fro there was, it must be said, a certain purpose, though it is hard to recognize, now that the company lies smouldering in its ashes. I was a Public Relations Director for a holding company which can be called Amalgamated International Corporation. It stood at the peak of a mountain of intermediate holding companies. Down in the foot-hills were the operating subsidiaries, a wide range of companies performing various sorts of utility service. To our stockholders, we announced in bold sweep that 'the subsidiary companies in your Company's system provide electric, gas, water, ice and/or steam heat service to a total of 1900 communities in 23 states.'
This was our empire, and we regarded it as such. We executives in the New York office spoke casually of the subsidiaries as 'the properties.' And from our eminence we looked down upon them like satraps in the days of Darius the Great. A trip to the properties was like a triumphal procession. It was on that subject that I received my first words of advice as I stood at the threshold of Big Business. My predecessor in office was showing me the routine of the new work. In his hand he held a request for information from one of the properties. 'Take a telegram, Miss Pendleton,' he shouted, turning to one of the secretaries; 'a straight telegram, please.'
'Wouldn't a letter do just as well?' I ventured, mindful of our old college economies.
'Not on your life,' he replied. 'Let'em have telegrams. The boys on the properties love it. It makes them feel important. Besides,' he added, as an afterthought, 'we send 'em collect. The properties charge it to operating expense.'
As soon as a long-winded telegram had been dictated and dispatched, he embarked on a general discussion of the subject.
'One thing I want you to get straight before you start in. Don't be afraid to spend money. That's what expense accounts are for. Remember, you're in the New York office. You're a big executive, and when you go out on the properties you're expected to spend money. You've got to keep up the prestige of the New York office. Ride in the best trains; take a compartment. Stay at the best hotels; get yourself a good suite of rooms. Taxis and telegrams are all to the good, too, and don't be afraid to buy the boys a drink once in a while.'
'But is all that really necessary?' I queried.
He looked at me with an air akin to pity. 'Sure it is. This is a big company. You're a big executive. We've got to hold up our end in the industry. As for the cash outlay, it's a drop in the bucket. Amalgamated International has a gross of $80,000,000 a year. What's a few dollars more or less?'
My misgivings were subdued a little. But now, in retrospect, I wonder if the dollars which were spent for those drinks, and a thousand more,—not to mention the taxis, trips, and telegrams,—might not have been used more profitably to meet the interest on Amalgamated International 5 percent Secured Gold Debentures, defaulted just a few months ago.
It is easy now to indulge in sour morality. Three years ago it was a different story. Then it seemed that there could be no limit and no end. Our industry was 'depression-proof.' All the financial journals said so, and we believed it. 'It always gets dark at night,' we caroled. 'People must have light at night!' And with that as a slogan we went forth to sell more stock and build more power plants.
In these latter days, since the downfall, I know that there will be much talk of corruption and dishonesty. But I can testify that our trouble was not that. Rather, we were undone by our own extravagant folly, and our delusions of grandeur. The gods were waiting to destroy us, and first they infected us with a peculiar and virulent sort of madness.
Already, as I try to recall those times, I cannot quite shake off the feel that they were pages torn from the Arabian Nights. But they were not. The tinseled scenes through which I moved were real. The madcap events actually happened—not once, but every day. And at the moment nobody thought them in the least extraordinary. For that was the New Era. In it we felt ourselves the gods and the demigods. The old laws of economics were for mortals, but not for us. With us, anything was possible. The sky was the limit.
Looking back now, I see how naive were our godlike airs. Most of us were really simple folk, of humble origin. Going the circuit of our walnut desks, one would hardly have found a single executive who had not worked his way up from the ranks. They had begun in small towns as owners or operators of little companies. The companies had been bought up by Amalgamated International, and the owners annexed as super-executives. To maintain the power and glory of their new estate, they felt that it was their duty to carry on like Oriental princes.
At no time was the spectacle more imposing than at the annual conventions. Ah, those conventions! They were a Papal Mass, a Court Ball, and a Bacchanalian Revel rolled into one. Each year they were scheduled for some expensive resort. From the four corners of the country, special trains rolled in, laden with super-executives, super-executives' wives, and innumerable wardrobe trunks. The first day I stood behind a grove of potted palms in a hotel lobby and watched them register. A friend beside me pointed out the celebrities. Board Chairmen and Presidents without limit filed past, and the names of their companies read like the pages of Poor's Manual.
On the first day, the cards went out—for luncheons, dinners, and cocktail parties. London in season was as nothing compared to our convention. Each super-executive and wife had tried to get a suite of rooms more elegant than any their rivals had, to make their entertaining just a bit more splendid. In imagination I could see half a hundred wives plotting and planning weeks in advance with their super-executive husbands. 'We must not mind the expense, John, dear. We owe it to the company to make a better appearance than those Ackersons from Tulsa when he was chairman of your committee last year.' To such a proposition there could be only one answer. Advance reservations were wired to the hotel. New gowns were ordered for the wardrobe trunk. Conferences were held with head waiters and maitres d'hotel. And on the first day of the convention the cards went out.
Small wonder, then, that my head reeled with room numbers as I staggered around to pay court to the kings and queens of our industry. And, for that matter, small wonder that I staggered. When half a hundred Joneses set out to keep up with each other, the result is bound to be a Roman Holiday.
Conventions were the high point, but their spirit continued throughout the year. In New York, meetings of executives, from our own companies or corresponding groups, were held against a background of paneled walls. And trips to the properties were like triumphs. A visit of an executive from the New York office was always the signal for a turnout. As the limited train drew in, the General Manager's car and chauffeur were waiting at the station. The deluxe suite was in readiness at the best hotel. That evening a meeting was scheduled in the grand ballroom, where the employees could assemble and pay court. After the meeting there would be dancing, with the company orchestra in full blast. Cracked ice was to be had upstairs.
This was the normal program fantastic but true. Beside me, as I write, is a thick pile of expense accounts to document each item of our carryings-on.
Amalgamated International Corporation had more than 10,000 employees. They were the rank and file—linemen, meter readers, cashiers, and clerks; motormen, conductors, trackmen, and bill collectors. To keep the revenues flowing up the line, they worked hard, for long hours and meager pay. Slaves they were to Olympus, but willing slaves. From a distance they marveled at our splendor, and gloried in it. Down in their hearts was the feeling that some day they might draw a winning ticket, and ride in club cars and attend conventions. Meanwhile we satisfied their craving for pomp and glamour to relieve the daily grind. To them we were the equivalent of King George, Queen Mary, and the House of Peers. Our subjects were well content to stand on the curbstones and cheer.
There is no underestimating the strength of this emotion. When the President of Amalgamated International set out for a convention, our house organ carried a picture of him posing on the observation platform of the 'Convention Special.' Ten thousand employees from Maine to Michigan gazed at it and gloated. When a New York executive came to a division office,—employees for miles around perked up with a new interest in life.
A friendly smile or a word of recognition to a cashier or a company clerk would be an event remembered and gloried in for months.
It was the old principle of Stars and Garters. Employees would work their hearts out for some simple little sign of recognition from on high. Sales drives and promotional campaigns were constantly in progress. We found that cash prizes and commissions produced only nominal results. But let the word go out that the winning employee would go to a convention 'with the executives,' or be given a trip to New York for a handshake with the President, and the employees would go sleepless for weeks to make unfortunate customers 'Invest with Safety' in the company's preferred stock, or 'Put a New Lamp in Every Socket,' or buy one of our 'New Automatic, Electric, Self-Singeing Toasters.'
It was an age-old principle put to new purpose. We were glorified, beatified, canonized, and deified— and the employees bent the knee and made willing offerings before our shrines.
All this may have been good for the employees. But certainly it was very bad for us. It was a fairy-tale world, and it was bound to end. Sooner or later the clock would strike twelve, and leave us sitting among cold ashes on the hearth.
Sooner, rather than later, it did. Down in the valleys, business began to slow up. Factories curtailed production. Families of unemployed began to double up. Consumption of gas and electricity dropped. Operating revenues fell off only by 5 or 10 percent, but when that change had been relayed up the line through intermediate holding companies A, B, C, and D, it meant that Amalgamated International Corporation's earnings had been cut in half. Margins behind dividends and bond interest dropped to alarming levels. The creditors started to close in, and, almost before we realized what was happening, it was over.
For the first time in three years, the super-executives did some intensive thinking. Previously there had never been any time for that. Now expense accounts were things of the past, and there was plenty of leisure in which to ponder. During the weeks that the company was wavering between solvency, receivership, and bankruptcy, they wandered around from desk to desk like fallen angels, trying to comprehend what it was that had happened to them. It was a tragic thing to see it slowly dawn upon them that they had been trapped by the very gods they had been seeking to imitate.
There was B. J. McDarrow, for example. He was one of our most impressive executives, known the length and breadth of the properties as 'B. J.' In the middle of a dreary afternoon, he dropped into a chair beside my desk.
'Well, Bob,' he said, in an attempt at heartiness, 'who're you working for to-day?' (That had become a standard jest during those days while the creditors were struggling for possession. 'Who're you working for to-day?' we would ask each other as we met, and then smile wryly and pass on.)
I noticed that 'B. J.' looked haggard. 'It's a bad business, Bob,' he said. 'I took Junior out of school to-day. Couldn't stand the tuition.'
He hitched up his chair. 'You know, I did a little figuring this morning. Here I've been thinking all these years that I was a big shot in business. But do you know this, Bob - not one single year have I made as much money as I did before I sold my plant to Amalgamated.'
'But the cash isn't the main point. Back there in Martinstown I was the boss. It may have been a one-horse town; but I was somebody in it. I was on the school board, and governor of the country club. We had our own farm, with a saddle horse, and a couple of cows, and we raised our own hogs.'
He was in reminiscent mood. He told me how he had first come to the town, a kid out of engineering school, and borrowed enough money to buy the local light plant. There were only three employees then, and 'B. J.' had put on creepers many a time and climbed the poles in those early days. Gradually he had branched out, taking in neighboring towns, until he developed a little system in six towns with twenty-two employees.
'It just seemed as if we had to keep on growing,' he said. 'We didn't know when we were well off. When I couldn't swing the financing myself, I just naturally sold out to a big company. I thought I was fixed for life when I did it. Now look at me—a salaried man, hanging around and hoping that the receivers will give me a job to pay the rent.'
'B. J.' arose and returned to his office. An hour later a crisp little notice went the rounds. The trustees in bankruptcy had been appointed. Our services were no longer required.
That evening I had dinner alone at the University Club. It was hard to shake the memory of that talk with McDarrow. I realized that his story was the story of all of them. Move Martinstown to Kentucky, or Indiana, or Nebraska - and you had them all. Small, independent proprietors who had sold out for a title and a salary in a glittering hierarchy which was bound to crumble.
Their experience was not extraordinary. I thought of the others who had sold out because they thought they 'just naturally had to keep on growing.' I thought of Jo Morgan, account representative of our advertising agency, who had traded in his little business for a meaningless title in a big concern. And Adams, sales manager for our printers—now in fear of his job, and longing for the small-town weekly in Virginia which he had sold ten years ago.
It was the same story for us all. Like Icarus, we had flown too high. Now we were cast down, broken and bleeding. But the experience might not be in vain if it taught us true humility and the importance of simple things. Perhaps, when the pain was healed, we would return to our small enterprises and a way of life which would be simpler, more durable, and more sincere.
There was comfort in the thought. Already I could imagine McDarrow back in Martinstown, presiding at a meeting of the Chamber of Commerce.
I strolled into the library. On the table was a business journal, and I started reading.
'Experience of business after the depression of l92l,' it read, 'is of interest to all business men to-day. The large companies toppled under heavy overheads and high fixed charges. But the small companies without these burdens advanced and expanded to become the big companies of 1929. Now the giants have again fallen. It is a time when small companies with aggressive management might well begin to plan their programs of expansion....'
As I laid down the magazine, I could perceive another New Era waiting to begin. I had a feeling that, sometime, I was going to meet B. J. McDarrow again, in a club car, on his way to a convention.
What do you think? Discuss this article in the Politics & Society conference of Post & Riposte.
Copyright © 2003 by The Atlantic Monthly Group. All rights reserved.
The Atlantic Monthly; January 1933; TThe Royal Road to Bankruptcy; Volume CLI, No. I; page 49-54.