The Businessman at Bay

I remember, when I was still very much of a business tyro, learning an invaluable lesson from a man who even then had extensive business holdings and who later became one of America's wealthiest industrialists. Although I knew him fairly well, I hadn't seen him for several months before bumping into him one day in the lobby of a Chicago hotel.

"How are things going?" I asked him after we'd exchanged the customary greetings.

"Not good -- terrible, in fact," he replied with a placid smile. "One of my companies has been shoved into a tight corner by the competition. Another is operating in the red -- and a third hasn't the cash to meet its short-term debts that fall due this month."

"You certainly don't act as though any of it worries you very much," I remarked in considerable surprise. I found it hard to believe that any businessman who was in so much apparent trouble could be so casual about his problems.

"Hell, Paul, I'm not in the least bit worried," he answered. "To tell you the truth, I needed something like this to get me up on my toes; everything had been going entirely too smoothly for far too long. An occasional crisis is good for a businessman. There's no better exercise for him than to have a few messes to clean up every now and then."

Later, I learned that it had taken my friend less than six months to clean up all his messes. Despite the fact that he owned or controlled many other business enterprises, he plunged enthusiastically into the task of personally reorganizing and revitalizing the three faltering companies.

He quickly pulled the first one out of the corner into which it had been driven by its competitors. He began improving old products, developing new ones and launching an imaginative, aggressive sales campaign that turned the tables on competing firms.

He then put the second firm back on its feet by initiating new policies and programs, reducing production costs and increasing output. As for the third company, he arranged refinancing of its obligations, made needed changes in management personnel and soon had the firm on a sound financial footing and operating at a comfortable profit.

"I had quite a workout getting things in order," he told me sometime later. "But I sure enjoyed it -- it's always more fun to win a hard fight than an easy one."

"Adversity is the first path to truth," Lord Byron said more than a hundred years ago.

"Calamity is man's true touchstone," Francis Beaumont and John Fletcher wrote in the early 17th Century.

Now, Byron and Beaumont and Fletcher were not businessmen, and they did not concern themselves with business in their writings. Yet, the basic truths implicit in their lines are applicable to every present-day businessman and to anyone who hopes to make a success of a business career.

A machine that is functioning perfectly needs only nominal care. By the same token, a highly prosperous business that operates year after year without problems requires little more than caretaker management. No exceptional ability is needed to run such an enterprise.

Unfortunately, the "perfect business" does not exist. Snags, difficulties and crises crop up in every business. For the businessman -- as for any individual -- the true test of his mettle comes at the time when he is faced with adversity.

How does a particular executive or businessman act and react when he is at bay? The answer to this question separates the men from the boys in the business world.

I have seen many men in many situations in which they were, to all intents and purposes, "at bay," and I've come to the conclusion that most businessmen can be classified as falling into one or another of five broad categories.

First, there are those who sit by helplessly, allowing whatever adversity they face to overwhelm them completely. They are like rabbits which, transfixed by the headlights of an automobile rushing toward them on a highway, make no move to save themselves and are consequently crushed under the vehicle's wheels. Such men take no action to change the course of events and prevent disaster because they are incapable of comprehending what could or might be done. Then, when they have been finally overwhelmed, they are stunned, totally unable to understand what went wrong and why.

Then, there are those who surrender meekly or flee in fear as soon as things start to go wrong. Such men have little or no sense of proportion; they are likely to panic and view even minor slumps and setbacks as unavoidable major catastrophes. While individuals in the first category fail to fight back because they do not know how to fight, businessmen who can be classed in this second group fail to fight back because they are afraid to do so.

Next come those men who react to adversity in an unreasonable, almost hysterical fashion. Terror-stricken, they snarl and snap, striking back blindly and ineffectually, squandering their energies in the wrong directions. These men invariably rail and curse against the "impossible odds" and "rotten breaks" they claim defeated them. Just as invariably, they seek to lay the blame for the predicaments in which they find themselves on shoulders other than their own.

In my fourth category are those businessmen who fight good, tenacious -- and, very frequently, entirely successful -- defensive actions whenever things start to go wrong. They are courageous, reliable individuals who unflinchingly meet threats and solve problems as they arise, acting to the best of their not-inconsiderable abilities. But there they stop. Their minds are geared to thinking solely in terms of plugging the holes in the dike as, if and when they appear. The men in this group do not have the imagination and initiative -- or lack the experience -- to think and plan in terms of building entirely new and much stronger dikes in which holes will be far less likely to develop.

Finally, in the fifth and last category are those businessmen who are the real leaders. These are the imaginative, aggressive individuals who base their business philosophy on the ancient military axiom that attack -- or, at the very least, energetic counterattack -- is invariably the best defense. Obviously, they can't -- and don't -- always win, but then no general in the world's history has ever won every battle he fought.

On the other hand -- to carry the analogy between business affairs and military campaigns a bit further -- the generals who win the wars and have the highest percentage of victories to their credit are those who can mastermind defensive strategy as well as an offense.

The truly great general views reverses calmly and coolly; he is fully aware that they are bound to occur occasionally and refuses to be unnerved by them. When driven back, he prevents retreat from turning into rout and then adroitly transforms the retreat into an orderly retrograde movement.

By so doing, he disengages his forces from those of the enemy with a minimum of additional loss, saving the bulk of his manpower and material resources so that they can be regrouped and made ready for a counterattack. Naturally, he leaves behind rear guards to protect the withdrawal. He accepts the losses these covering forces must inevitably suffer with philosophical stoicism, realizing that it is sometimes necessary to sacrifice a part in order to save the whole.

When his troops have been rested and reinforced and his supplies replenished, the successful general launches his carefully planned counterattack. Having studied the situation with great care and having learned much about the enemy's capabilities and habits from an analysis of what has gone before, he employs a combination of every resource at his command. He makes feinting and diversionary assaults, aims his major blows at the weakest points in the enemy line and holds back his reserves until he can commit them at the right -- at the decisive -- times and places.

Like the successful military leader, the successful, veteran businessman understands that he cannot master every business situation, that he cannot emerge victorious from every business "battle." He knows that, sooner or later, he will encounter problems which cannot be solved quickly or easily, that he will find his progress blocked by obstacles which will require much time and effort to overcome or which will even force him to retrace his steps and take a new route. He knows that reverses and losses are sometimes inevitable.

The seasoned business campaigner is well-aware that the line charting the course of any company's history or any businessman's career on a graph would be a jagged one. The graph would reflect a series of alternating peaks and lows. But such ups and downs do not bother the seasoned businessman unduly. He recognizes that the significant and telling proof lies in whether the line at the right edge of the chart terminates at a point that is higher or lower than the point at which it begins on the left.

True business leaders -- the men in my fifth category -- often give their most impressive demonstrations of leadership and brilliance at the very times when they are temporarily forced to go over to the defensive, at the times when they are at bay. And this is precisely what sets them apart and raises them above the level of other, less-successful businessmen.

Take, for example, the case of my friend who found himself in three serious business predicaments simultaneously. There were several courses of action this businessman might have followed. He could have done nothing, allowing matters to take their own course. He could have closed or sold one or more of the companies, utilizing whatever money he realized from any sale or sales to shore up whatever remained. He might have been content merely to plug the holes.

But he neither surrendered nor panicked. Nor was he satisfied with doing a hasty patch job. A good general, he surveyed the situation thoroughly, reorganized his forces, brought up replacements and reinforcements and made his plans. Then, marshaling all his resources, he launched successful counterattacks on all three fronts.

The history of American business and industry is replete with examples of how the great business leaders of the nation handily turned serious reverses into major triumphs.

It was in 1903 that Henry Ford began manufacturing automobiles of his own. In 1908, he produced the first famous Model T -- and soon captured a very large share of the burgeoning U. S. automobile market.

Ford continued to mass-produce the Model T until 1927, making few drastic changes in the comparatively primitive model during that entire time. But, by 1926, Chevrolet -- Ford's biggest and most dangerous competitor in the low-priced field -- was turning out more-powerful, comfortable and stylish cars. Ford still used the foot-pedal-controlled, planetary transmission; Chevrolet had a geared transmission. Chevrolet was producing models in attractive colors; the Model T was still available only in black.

The automobile-buying public had grown more sophisticated. It wanted more speed, comfort and style. Ford rapidly began to lose ground to Chevrolet. Ford sales fell off alarmingly, while Chevy sales skyrocketed. The trend was well-defined -- and many experts predicted that it was irreversible. They prophesied that Ford would never be able to catch up again; the company was well on the downhill road to becoming just another of the scores of automobile-manufacturing firms that had enjoyed a period of success only to fail subsequently.

These experts failed to estimate the aggressive genius of Henry Ford correctly. He was losing ground to the competition. He was at bay. But he was far from defeated -- and even further from admitting defeat.

In the spring of 1927, Henry Ford shut down his Gargantuan factory. Although it had been announced that he would bring out a new model, there were many rumors that the Ford plant would never reopen, or that when it did, the new Ford would be a dud, nothing more than just another obsolescent Model T with a superficial face lifting.

Then, in December 1927, the Ford Motor Company introduced its Model A to the market. Henry Ford marshaled all his forces -- engineering, styling, production and sales -- and launched a counter-attack that pulverized all competition.

A somewhat similar and more recent example in the automotive industry was provided by American Motors and its energetic head, George Romney. Faced with falling sales and mounting losses, American Motors and Romney staged a spectacular comeback with their Rambler models.

In 1952, the Chicago meat-packing firm of Wilson & Co. lost $763,000. James D. Cooney became the company's president the following year and, according to some of his associates, "turned the company inside out and around so that it was pointed in the right direction." Wilson & Co.'s 1959 earnings exceeded $9,500,000.

In 1933, the outlook for banks and bankers was bleak, indeed. The Depression had reached its lowest point. The Federal Government had ordered the memorable "Bank Holiday" on March 6th of that year. More than 4000 banks throughout the country failed, suspended (continued on page 189)Businessman at Bay(continued from page 130) operations or were placed in receivership during 1933.

One banker who ignored the widespread cries of impending calamity and went ahead to build his banking business was Carl A. Bimson of the Arizona Valley National Bank. Instead of running for cover and tightening up on loan policy, Bimson went out to "sell" loans to Arizonans in need of money. That his imagination and aggressive, courageous policies paid off is proven by the fact that though, in 1933, Valley National had deposits of less than $8,000,000, today, the Arizona bank and its president, Carl Bimson -- who most certainly belongs in my fifth category -- can boast that deposits have swollen phenomenally to nearly $600,000,000.

In 1959, Thomas E. Sunderland moved out of the oil business -- and into the fruit business. He took over the presidency of the giant United Fruit Company, accepting a job that many lesser men would have feared -- or even refused to touch. The outlook for the future at United Fruit was hardly a glowing one when he stepped into the top executive position. Eight years earlier, in 1951, the company had made a profit of more than $50,000,000. In the years that followed, profits skidded -- dropping to $12,000,000 in 1959 and dipping even lower to less than $3,000,000 in 1960.

Thomas Sunderland soon proved that he deserves to be ranked high among the elite of the business world. Sunderland gave the huge company a thorough, top-to-bottom overhaul. Confident and enthusiastic, he launched a massive counterattack against all the factors which were causing United Fruit's profits to fade. He shifted personnel, revised policy, modernized methods, reduced costs and increased efficiency. He achieved remarkable results in record time.

In 1961, United Fruit reported that second-quarter profits alone exceeded $6,500,000. The company's stock, which had slumped as low as 171/4, had risen to 273/8 by January 1962.

Anyone having knowledge of the American business scene could cite countless other examples paralleling these random few that I have mentioned. All would further help to prove that when the really topflight businessman is at bay, he very often turns adversity and even impending calamity into victory.

I've encountered my share of adversity and reverses. As a wildcatter, I've spent fortunes drilling many thousands of feet into the ground at one time or another -- to strike nothing but sand. I've had other wells that cost other fortunes run dry or blow up and burn.

I soon learned to accept such misfortunes philosophically and to take them in my stride, for I realized that I would not be able to stay in business very long if I permitted them to discourage me. In fact, each setback seemed to serve as a special incentive and stimulus to try again -- but even harder the next time.

There were many other, more-complex trials and blows, too. I recall, for example, the sharp break in crude-oil prices that occurred in 1921, when oil, which had been selling at $3.50 per barrel, dropped to $1.75 per barrel in less than 10 days -- and the price continued to spiral down in the days that followed. At least one of the companies in which I held a substantial interest became hard-pressed for cash as a result of the price crisis.

When I met with other directors of the company, there were those among them who verged on panic. Fortunately, the majority remained calm and objective. Any suggestions that the company close its doors were immediately voted down. Instead, it was agreed to retrench, and the directors agreed to obtain the money needed to keep the company going. They also agreed to slash their compensation to the bone and reduce management salaries until the crisis was past. In time, the petroleum market became stabilized once more -- and as soon as conditions returned to normal, the directors and management implemented an ambitious program which greatly increased the company's sales and profits within a very short period.

I also have vivid recollections of a memorable campaign my associates and I conducted to obtain control of a large company. The incumbent -- and well-entrenched -- directors of the company fought us fiercely at every step. However, although the financial resources at our disposal were far less than those of the opposition, we managed to do a bit more than merely hold our own, and the battle seesawed for a considerable time.

Then, at one point, the opposition sensed that I had almost exhausted my financial resources by buying the company's stock -- and that for a time I would be unable to purchase any more. As I was still far short of having a controlling interest in the company, the incumbent directors believed that they now had the upper hand. Swiftly changing their tactics, they decided to allow the issue to be decided by all the stockholders.

This, of course, meant a proxy contest. In a burst of chivalrous magnanimity, the opposition entered into a sort of "gentleman's agreement" with our side. To prevent the proxy contest from degenerating into a rough-and-tumble fight that could injure the company's reputation, solicitation of proxies would be limited to one reasonably worded letter from each side. The two letters -- one urging the stockholders to give their proxies to our side, the other asking them to give their proxies to the incumbent board -- would be mailed in the same envelope to each stockholder. Thus, the individual stockholder would have both sides of the story before him -- and he could make his own decision as to which of the two groups best deserved to control the company.

My associates and I unhesitatingly accepted what we considered to be a gentlemanly agreement. Our letter was duly composed, reproduced and sent off together with the one prepared by the opposition. When that had been done, I assumed that the die was cast and that nothing further would be -- or could be -- done to influence the outcome of the contest.

Then, only a few days before the scheduled stockholders meeting, one of my aides burst into my office. His face was livid with anger, and he clutched a piece of paper in his hand.

"Read this!" he exclaimed, thrusting the paper at me. I took it and found that it was a letter -- a second letter -- which the opposition had sent out to the stockholders only a day or two earlier. And what a letter it was!

The gist of the no-holds-barred missive was a virulent personal attack on me and a highly objectionable -- and entirely baseless -- implication that my motives for seeking control of the company were, at best, dubious. I called my associates and held a hasty council of war. What could be done at that late stage of the game? Not much, some of my associates declared dispiritedly. There wasn't enough time.

"I'm afraid this licks us, Paul," one man said, shaking his head in resignation. "Nothing in this letter is true -- but it's going to have a tremendous impact on the stockholders. Not having any way of checking up on the charges that have been made, they'll play it safe and give their proxies to the other side."

"You really think we're licked?" I asked, glancing around at the men in the room with me. Some heads nodded assent. The faces of some other men showed that they weren't entirely convinced that all was lost. A few of my associates indicated that they refused to accept defeat that easily.

"Nuts!" one of them snorted. "We still have a chance!"

"I think so, too," I announced. "Now, let's get to work and do something."

Working feverishly against a deadline that was far too close for comfort, we composed our own second letter. Instead of calumny, we stated facts and figures that completely demolished every argument and charge advanced by the opposition.

Then, working straight through the day and night and the day that followed, we -- secretaries, clerks, typists, executives, my associates and I -- reproduced the letters, addressed envelopes to thousands of stockholders, folded and inserted the letters, and sealed and stamped the envelopes. At last, we finished the staggering job -- and exhausted men and women carried bundles of the letters to the nearest post office for mailing.

Would the letters reach the stock-holders in time? We could only hope, and wait to see what happened at the stockholders meeting a few days later. But we didn't have to wait that long. The response to our second letter was astounding. Replies began to pour in from stock-holders two days before the meeting.

"We might make it yet," one of my aides remarked. And we did make it.

Cold facts, stated clearly and plainly, proved to be more convincing to the stockholders than were the heated, personal attacks and irresponsible charges that had been made by the opposition. To the shocked amazement of the incumbent directors -- and the delight of my associates and myself -- the voting at the stockholders meeting resulted in a clearcut victory for our side!

Just a few years ago, it appeared that I was facing another serious -- and potentially catastrophic -- impasse. Exploration and drilling operations conducted by one of my companies in the Middle East indicated that areas in which we held the drilling concession would soon be producing crude oil in fantastic quantities. Unfortunately, various factors and restrictions would prevent us from importing more than a fraction of our production into the United States.

On the face of things, the outlook was anything but bright. Before long, immense quantities of crude oil would be pouring up out of the ground -- but unless something was done, and quickly, most of it would be virtually worthless. Crude oil is, after all, only a raw material. It must be refined into other products which must then be distributed and marketed.

As time went on and we brought in more and more wells, there were those who openly predicted that I would soon find myself in a position from which I could not extricate myself. After spending staggering sums on obtaining the concession and on exploration and drilling, I would be left with oceans of crude oil which I could not market. There were even those who gleefully rumored that it wouldn't be long before Paul Getty would be in serious financial trouble.

I'll admit the corner was getting a bit uncomfortable -- but it was far from being so tight that I couldn't make my way out of it. To the chagrin of those who were predicting that the Getty interests would soon drown in their oceans of excess crude oil, we found -- in fact, we virtually created -- new outlets for our production.

If we couldn't ship all our crude to the United States for refining and sale, we would ship it elsewhere, even if we had to buy or build our own refineries in other countries. And that is precisely what we did, buying one almost-brand-new refinery in Italy, building another one in Denmark and finding other refinery capacity elsewhere. Now, of course, we are avidly searching for more crude oil in the Middle East and other areas around the globe.

Experiences such as these -- and there have been many of them -- have taught me that the time for the businessman to think and fight hardest is when the tide seems to be running against him and his prospects appear bleak. He can frequently turn even the worst of bad business situations to the advantage of his company, his stockholders and himself.

The successful businessman -- the true business leader -- is the individual who develops the ability to retain his composure in times of stress and in the face of setbacks.

The young businessman should strive to acquire and develop this and the related traits I have previously mentioned -- and he should try very early in his career, for it will not be long before he encounters his first reverses and adversities. The manner in which he meets the first few tight situations in which he finds himself will often set the pattern for the rest of his career.

Plainly, it is not possible for anyone to give a businessman specific, step-by-step advice on what he should -- or should not -- do when he suffers business reverses. There are far too many variables; each situation differs greatly from the next. On the other hand, there are certain fundamental principles which, if followed, will greatly aid any businessman in meeting adverse situations and transforming setbacks into successes:

The businessman -- young or old -- who guides himself according to these principles when he has suffered reverses will not remain at bay very long.

He will attain higher goals and achieve greater successes. He will demonstrate that he is not just another businessman -- but that he qualifies fully as a business leader.