We Need to See Some Heroic Entrepreneurs in the Movies

The 86th Oscar nominations come out next week, and the early buzz is that “The Wolf of Wall Street” will be among the favorites for best picture, best director (Martin Scorsese) and best actor (Leonardo DiCaprio in the title role). Businessmen are usually villains in a Hollywood script. Rarely do we see entrepreneurs glorified in film. But as I look over my extensive data base of market history (as you may have noticed, I use history as a hook in GrowthMail), I visualize three movie script ideas from a century ago this week:

Three Movie Script Ideas from 100 Years Ago This Week

On Monday morning, January 5, 1914, an army of assembly line workers walked to their posts in Henry Ford’s Model T factory and found out that their pay envelope has doubled overnight, to $5 per day. What’s more, their day had been shortened to eight hours. Pinch me! I’m dreaming! A classic “robber baron” figured out that it was good business to treat his workers well. This way, he could insure that his best workers would not run to the competition with their best new ideas.

On Tuesday, January 6, 1914, Charles E. Merrill hung out a shingle on 7 Wall Street, “Charles E. Merrill & Co: Operations Department.” The sign lied: There was no company, only him, and no money, or Operations. His dream was to bring stock market investing to the masses, not just the well-heeled patricians of established wealth. Six months later, Edmund Lynch joined him, only to be told that the stock market would be closed “indefinitely” (for five months, as it turned out).

On Wednesday, January 7, 1914, the first steamboat passed through the new Panama Canal. It was a French crane boat called the Alexandre La Valley. For the previous 50 years, visionaries had dreamed of a route linking the Atlantic and Pacific, but it took a few bold men with grit – President Theodore Roosevelt, Army engineer George Washington Goethals and Army Doctor Walter Reed – to make this massive project possible, linking the world’s oceans for commerce.

Alas, none of these movies have been made, or will likely ever be made. When it comes to movies about making cars, “Tucker: A Man and His Dream” (1988), my favorite pro-business film, lost $4.3 million, while Oliver Stone’s assault on corruption in “Wall Street” (1987) tripled its costs in box office receipts.

As for the Panama Canal, I wonder if Dreamworks has enough special effects to make the danger and daring of that project as impressive as it was in fact. Read David McCullough’s 1977 award-winning book, “The Path between the Seas: The Creation of the Panama Canal, 1870-1914” to see what I mean. This year, the big dig continues, as the Canal widens to 180 feet (from 110) and deepens to 60 feet (from 42 feet) in depth, all in order to accommodate ships of up to 1200 feet in length, up from today’s 964 feet.

This leaves us with Charlie Merrill – the ideal hero for a populist movie about Wall Street’s marriage with Main Street. Mr. Merrill brought investing to the masses, starting 100 years ago, but it was a rocky road. Fortunately, a new book could serve as a guide for scriptwriters. It’s called “Catching Lightning in a Bottle: How Merrill Lynch Revolutionized the Financial World,” by Winthrop H. Smith, Jr., son of the last-named partner in the firm’s eventual name: “Merrill, Lynch, Pierce, Fenner and Smith.” The book has a sad ending, since Merrill lost its way in recent years, but its first 85 years deliver an inspiring tale.

Charlie Merrill’s Passion Can Still Work for the Average Investor

Charlie Merrill brought several innovations to Wall Street. One was to be customer-centered, by paying associates a salary instead of a commission; another was to broaden the reach of stock market investing to the common man; and a third goal was to reflect core values, etched into concrete in their headquarters building: “Client focus. Respect for the individual. Teamwork. Responsible citizenship. Integrity.”

The firm grew large, but its beginnings could not have been smaller. Charles E. Merrill, born October 19, 1885, in the suburbs of Jacksonville, Florida, arrived in Manhattan just as the Panic of 1907 began. He found and lost a number of jobs before 1914, when he set up shop on Wall Street. It was an uphill battle from the beginning. First, he borrowed $10 to take a businessman to lunch in order to offer 20% of his new (then worthless) company, in exchange for a $2 million capital loan. Along the way, Merrill always had a keen eye for value. For instance, he launched and ran the grocery chain, Safeway, in 1928, since he thought stocks had become too overvalued. In effect, he sat out the disastrous 1930s. He only returned to the brokerage business when Winthrop Smith, Sr., persuaded him to return in 1940. Merrill would only do so if the company committed to an advertising campaign to bring stock market investing to the masses.

The 1940s marked the optimum decade for buying stocks, but most Americans avoided stocks like the plague. In 1949, the Dow was still mired below 200 (50% below its 1929 peak, 20 years earlier). A 1949 Federal Reserve Board survey found that 69% of U.S. families with incomes over $3,000 a year were opposed to investing in stocks. Another 1949 survey found that 90% of the richest residents of St. Paul Minnesota had never purchased a share of stock in their lifetime. When most Americans heard the word “stock,” they thought of Chicago’s stockyards, not Wall Street’s brokerage firms. Merrill changed that.

Merrill bemoaned the fact that Americans spent $9 billion a year on cars but just $540 million on stocks, so Merrill – more than anyone else – turned the tide of public sentiment. His 1949 newspaper ads targeted women who’d “like to know more about investments.” (Merrill always had a way with the ladies!) With that single ad, he lured 30,000 into an eight-week course, despite widespread fears over the dangers of stock market investing. Later, he invited both husbands and wives to the same forum, so that both would be involved with their family’s financial future. His seminars advocated dollar-cost averaging of as little as $40 per month. Merrill also set up tents at agricultural fairs and converted buses into “stock-mobiles.”

As a result of Merrill’s efforts, the number of individual shareholders began to soar in the 1950s, growing by 10% a year, reaching 8.6 million in 1956, when Merrill died, He was “bullish on America” to the end.

The theme of the movie I have in mind is captured in The Economist’s review of Smith’s new book: “When Finance was for the 99%.” Imagine a world in which only the stuffed-shirt rich invest in stocks. Along comes a kid with an “Occupy Wall Street” mentality. He sets up a kiosk in the middle of Grand Central Station, showing off a stream of stock price to passing commuters. (Yes, Charlie did that!) By luring working stiffs to his stock seminars, he lifted some of the 99% to the ranks of the top 10%.

Former SEC chairman Arthur Levitt has said that Merrill Lynch was the only Wall Street firm with a “soul,” by which he undoubtedly meant its 10-word credo. But Win Smith, Jr., said the company began to lose its soul in the late 1990s, particularly after 9/11, when the board and CEO Stanley O’Neal began investing heavily in risky subprime debt, closing international operations, and firing 24,000 associates.

There is a happy ending. Two of Winthrop Smith Jr’s nephews work at Bank of America Merrill Lynch and say they were taught the old ways of putting customers first. That would make for a great final reel.

Another Great Pro-Business Film Idea from 125 Years Ago This Week

Not all businesses succeed, of course. As 1889 dawned, world-famous author Mark Twain touted, and invested in, a revolutionary new automatic typewriter called the Paige Compositor, while a Census clerk, a former engineering professor, fiddled with some punched cards in order to streamline the 1890 Census.

Here are the facts: On Saturday, January 5, 1889, Mark Twain wrote in his diary: “EUREKA! I have seen a line of movable type, spaced and justified by machinery!” He invested his life savings in the Paige Compositor, a machine that he said would make older inventions – like the phone or locomotives – “mere toys, simplicities.” Twain invested $300,000 to take over full ownership of the firm, which was under the scientific direction of James W. Paige, whom Twain called “a Shakespeare of mechanical invention.”

Before we check on the success of the Paige Compositor, let us switch frames to the workshop of Herman Hollerith. On Tuesday, January 8, 1889 – 125 years ago tomorrow – Hollerith was granted a patent for his electric tabulating machine – something like a punched-card calculator. The Hollerith system was first used to count heads in the Census of 1890. Hollerith then formed the Tabulating Machine Co., which in 1911 became the Computing Tabulating Recording Company, which, starting in 1914, Thomas Watson turned into International Business Machines (IBM), one of the greatest corporations of the 20th Century.

Meanwhile, the Paige Compositor proved to be too temperamental to handle rough print shop work. The more rough-and-ready Linotype won the race to commercial dominance in type-setting. Mark Twain was driven into bankruptcy in 1894 after losing $300,000. The good news is that he had to go back to writing for a living. In 1894, he wrote “Pudd’nhead Wilson,” which includes these painful investment lessons:

“Behold, the fool saith, ‘Put not all thine eggs in the one basket’ – which is but a matter of saying, ‘Scatter your money and your attention’; but the wise man saith, ‘Put all your eggs in the one basket and – WATCH THAT BASKET.”

“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”

“The holy passion of Friendship is of so sweet and steady and loyal and enduring a nature that it will last through a whole lifetime, if not asked to lend money.” – All quotes are from “Pudd’nhead Wilson,” 1894.

- Gary Alexander
Navellier Marketmail

Posted by on January 9th, 2014 at 6:01 pm


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