Saturday, August 08, 2015
John J. Raskob -- the emperor of the Empire State Building
John Jakob Raskob spent most of the 1920s as treasurer of both DuPont and General Motors, after DuPont rescued it by taking a large equity stake. He spent most of the 1930s building and then marketing the Empire State Building. He also gave much of his fortune away even as he acquired it, which earned him membership as a Knight Commander in the Pontifical Equestrian Order of St. Gregory the Great.
He came up with the idea for a 401-k decades before Ted Benna (the father of the 401-k) was born, for Raskob believed everyone could be rich by investing in stocks.
Born on March 19, 1879, in Lockport, New York, his father ran a cigar company. But when Raskob was 19, his father died, forcing him to leave business school and get a job. He worked as a personal secretary for executives, a job many aspiring business executives took in the days before academia replaced these apprenticeships with pedagogy. In 1901, he went to work for Pierre S. du Pont, The DuPont company was mainly in the gunpowder business at the time; du Pont and a cousin had developed the first smokeless power in 1892. As the 20th century began, the family regained control of the the company and began buying up competitors. Pierre S. du Pont became company president and Raskob became its treasurer.
Raskob invested in General Motors and when the company hit financial shoals, Raskob convinced DuPont to take a 43% equity stake in GM. This corporate bailout worked because Raskob had a plan to make it easier to sell cars by making it easier to buy them. He created the General Motors Acceptance Corporation, which financed car purchases.
A devout Catholic, Raskob became a strong supporter of Al Smith in the 1928 presidential election, which led to Raskob becoming the chairman of the Democratic National Committee. Alfred P. Sloan, chairman of GM, supported Herbert Hoover. He told Raskob he could work for GM or the DNC but not both. Raskob chose the DNC.
On Election Night 1928, Raskob and other Smith supporters decided to form a company to build the tallest building in New York City, the Empire State Building. Raskob took a jumbo pencil, put it on its end, and asked architect William Lamb, "Bill, how high can you make it so that it won't fall down?"
Construction took one year and 45 days to build -- and nearly 15 years to make a profit as the Depression set in New York City. People called it the Empty State Building. But just as with GMAC, Raskob's vision paid off.
Today, people remember Raskob for writing an article published in the August 1929 Ladies Home Journal, "Everybody Ought to be Rich," which advocated putting money in stocks not banks. Two months later came the stock market crash. Today people use this as an example of irrational exuberance in the stock market.
But his was sound advice. He lamented that ordinary people could not invest in stocks. If people invested $15 a month in stocks, rather than banks, after 30 years they could retire. His article came before Social Security or mutual funds came into existence.
Despite the crash, that was sound advice. The buy-and-hold strategy works. The crash made stocks cheaper for people. Eventually, stocks recovered.
Many banks did not. In the 1930s, more than 9,000 banks folded. In 1933 alone, bank failures cost the public $140 billion. Had those people put their $140 billion in stocks, they would have recovered their initial paper losses within a few years.
"Being rich is, of course, a comparative status. A man with a million dollars used to be considered rich, but so many people have at least that much these days, or are earning incomes in excess of a normal return from a million dollars, that a millionaire does not cause any comment," Raskob wrote in that infamous article.
"In my opinion the wealth of the country is bound to increase at a very rapid rate . . . Anyone who believes that opportunities are now closed and that from now on the country will get worse instead of better is welcome to the opinion — and whatever increment it will bring. I think that we have scarcely started . . . I am firm in my belief that anyone not only can be rich but ought to be rich . . . Prosperity is in the nature of an endless chain and we can break it only by refusing to see what it is."
Money did not define him. Charity did. Catholics recognized his philanthropy in 1921 with that title of Knight Commander in 1921, when he was 42.
He and his wife had 13 children. At their mansion he built a fountain that featured likenesses of all 13 children. In 1932, he turned his mansion over to the Archmere Academy, a private Catholic high school for 500 students in Claymont, Delaware.
Raskob's term as head of the DNC expired with the election of FDR as president, whose New Deal policies Raskob opposed. Raskob believed the socialistic policies prolonged the Depression, and history proved him right.
He died on October 15, 1950, at age 71. The Bill Raskob Foundation, named for his son who died in college, offers no interest loans to college students.
Raskob was a visionary -- and a capitalist, which means he used his own money instead of that of the taxpayer to do good deeds.
My first collection of "Exceptional Americans" is available here. And the Kindle version is here.