The Very, Very Rich and How They Got That Way (19 page)

The most serious crisis came in June 1964. An FAA inspector, test-flying the airplane, set the controls improperly and cracked up Lear’s first plane on takeoff. The two pilots crawled out safely, but the plane was totally destroyed by fire. “We didn’t have another plane instrumented,” says Lear, “so we lost valuable time.” Had he not already been in production and thus another plane ready to be fitted out with instruments, the delay could have been fatal.

Even with the second plane already built, it was a tight squeeze for a while. Since Lear, despite his reputation in electronics, had never built airplanes before and since the design he had chosen was offbeat, banks refused to lend him money. He poured his entire personal fortune – some $11 million– into the project, borrowed against family trusts and even hocked his personal airplane. Finally he worked out a financing plan to keep operating.

Despite the financial problems, Lear performed the impossible. He stunned his competitors and critics by winning FAA certification an incredible 18 months after he set up shop in Wichita.

Today, with Lear Jet production moderately well in hand, Lear has begun to look around for other things to occupy his time. He decided to build stereo-tape playback units for automobiles and set up a factory in Detroit. “With the Lear Jet coming along OK,” he said, “I had to find something to do on the second shift.” Mrs. Lear smiled. “The real trouble,“ she said, “was that he was getting to the point where he had a little spare time.”

Whatever the reason, the amazing Lear confidence came into view again when he ordered the plant into production on 100,000 of the new tape units without having received a single order for them. “Tape playback in automobiles is going to be the next big thing,” says Lear. “I’m going to be in the position of a man with a boat full of life jackets following a ship he knows is going to sink. He won’t have any trouble selling them.”

Business, to Lear, is life and breath. He goes at it with great zest. Not fully occupied with his jet, his tape player and his oil wells, he recently bought half interest in New York’s fledgling community TV antenna system.

Lear is one of the last of the swashbuckling 100% entrepreneurs, a vanishing breed in today’s team-play corporate life. “Lear’s a loner,” says a friend. “He’s a screwball, an inventive genius.” He’s also, and this is pointed out less often, a happy man. Lear has his life arranged precisely as he wants it. “There’s nothing I’d rather be doing than exactly what I’m doing now,” he says contentedly. “If someone offered me $160 million for my company – about what it’s worth now – with the provision that I would have to retire, I’d spit in his eye. For me the best of life is the exercise of ingenuity – in design, in finance, in flying, in business. And that’s what I’m doing.”

He’s doing it successfully, too. Despite the opinions of the aircraft industry that he was going about it all wrong, the Lear Jet is now clearly the front-runner in the highly competitive executive-jet field.

Paradoxically, though, as the financial and other troubles that once threatened to swamp Lear’s young company recede and his operation seems certain to become a gold-plated success, Lear shows the old, familiar signs of restlessness. For him the game is in the playing. When it’s won, he’s bored.

As soon as his original executive jet was firmly established, Lear decided that it was time to design a new one. Which he did. The new plane, called Model 40, was . . . a real “royal scow” in its executive versions, but the plane is also designed for airline use. It will compete with the Douglas DC-9, the Boeing 737 and similar small jets. Lear’s new jet is designed to seat 28 in the airline version and sell for $1,500,000 completely equipped, about half the price his competition is charging.

So Lear has a new project, plenty of headaches and no spare time. He’s happy again. The money piles up but Lear couldn’t be less interested. “Hell,” he says, “I can only use one coffin.”

***

Not long after reporter C.P. Gilmore turned in the lively account you’ve just read, the mercurial and unpredictable Lear was off on a new tack: steam-powered cars.

It seemed to him that steam power, which had once looked highly promising but had lost its place to gasoline in the early 1900s, might help solve the air-pollution problem that arose to plague auto makers it the late 1960s. So he put ten million dollars or so into a new venture named Lear Motors and gave a small group of engineers the assignment of developing a cheap, efficient, powerful, lightweight, pollution-free steam engine for automobiles.

As of this writing they’re still at work. They have an old Dodge sedan with a boiler in the trunk, plus a number of other experimental conversions. They’re also working on a still newer automobile power system that, in some respects, looks still more promising. This is the so-called vapour-turbine drive, in which a special fluid is heated to produce gas at high pressure and the gas spurts through jet nozzles to spin a turbine wheel. This type of engine, like the steam engine, has the inherent advantage of producing fewer noxious exhaust gases and other emissions than a standard gasoline-powered piston engine.

Today, in his late 60s, Bill Lear shows no more signs of slowing down than he did when reporter Gilmore visited him. He still presses for perfection. He still barks at people who move too slowly for his liking. He still shows the inclination to build a thing today and try it out tomorrow, rather than spending half a year sending blueprints up and down the engineering chain of command.

“I wouldn’t be surprised,” a Detroit executive remarked not long ago, “if Lear Motors grew up one day to rival General Motors.”

4 Originally published in
True
magazine under the title “Hard-Nosed Gambler in the Plane Game”. Copyright © 1966 by Fawcett Publications, Inc., and C.P. Gilmore. Reprinted with permission.
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If you had bought the stock of Polaroid Corporation at the right time in the late 1930s and sold it at the right time in the late 1960s, you would have multiplied your money by more than 2000. To put it another way, every $100 you invested would have grown in some 30 years to over $200,000.

That is the kind of company Wall Street’s dreams are made on. Speculators continually comb the new-issues market to find a company that will repeat that monumental performance. They hunt eternally for a scruffy little company somewhere out in the boondocks, a company nobody loves today but everybody will love in the 1990s. Some highly knowledgeable hunters who have been engaged in this search over the years say the way to go about it is to look for a man, not a company. Look for a technical innovator, a man with an idea. Then invest in him, no matter how uninviting his company’s balance sheet may look at the moment.

The first wave of investors who put their money into Polaroid were doing just that. The infant company had little to offer in the way of immediate cash returns. But it did have Edwin H. Land.

Unlike Bill Lear, Land is a specialist. He has spent his adult life studying light, how it affects materials, how they affect it, how the eye reacts to it, how these effects can be put to use. This has been his absorbing passion ever since he left college. It was so large a passion, in fact, that he left college without graduating. Like Bill Lear (and like many other men in our gallery), he was so impatient to get started that he couldn’t bear to spend any more time in formal education. The thought-provoking result is that Edwin Land, acknowledged the world over to be among its most brilliant living scientists, doesn’t even have a college diploma.

One of the most comprehensive studies of this brilliant, complex and enormously rich man was written a little more than a decade ago by
Fortune
reporter Francis Bello. Bello’s story covers the most interesting parts of Land’s life, from Polaroid’s infancy in 1937 to its glorious adulthood as one of the hottest growth companies in Wall Street’s history. After Bello has finished, we’ll briefly update Land’s fortunes to the present time.

Such a man, as it happens, does exist. He is Edwin H. Land; his company is Polaroid Corporation of Cambridge, Massachusetts, which makes the famous 60-second camera.

First,
the man
: A superbly gifted inventor and scientist, holder of 240 patents (at last count), Land has been Polaroid’s president, chairman and research director since he created the company, in 1937. The company was founded on Land’s invention of the world’s first polarizing sheet material – a type of light filter – soon familiar to almost everyone in the form of sunglasses. On polarizers and their applications, Land has been awarded 96 patents, and in the polarizing business Polaroid still has no substantial competitors. Land’s broad scholarship, his iconoclastic and provocative theories of education and his wide-ranging scientific competence have earned him an appointment as institute professor (visiting) at MIT’s School for Advanced Study.

The product
: Polaroid has built most of its present reputation, and 96.6% of its sales, around the 60-second camera that Land invented and announced in 1947. No one has yet devised a competitive instrument or process. Evidently Polaroid’s 238 U.S. patents in “one-step” photography – 122 of them the work of Land himself – have blanketed not only the process commercialized by Polaroid but all other practical embodiments as well.

The company
: From sales of $1,500,000 in 1948, the year Land’s camera was introduced, Polaroid vaulted to $65 million [in 1958 (and to nearly $400 million in 1968). In 1956] Polaroid stock sold for $12 a share (adjusted for stock distributions). [By 1959 it cost] about $100 – or some 50 times 1958 earnings – to buy a piece of the revolution that Polaroid created in photography. [By the end of the 1960s that same stock, adjusting for splits, was worth over $600.]

Polaroid has moved up with amazing speed in the photographic industry. It has overtaken Bell and Howell, which had 1958 sales of $59 million. Eastman Kodak, of course, is in first place, with sales of a little over $800 million (67% photographic), and General Aniline and Film (Ansco) is in second place with about $140 million. If General Aniline’s non-photographic sales were to be excluded – and they can only be estimated – Polaroid would almost certainly emerge as second in the industry. [These rankings have undergone several changes since this article was written.]

Land’s revolution was at first derided by all the experts, the people who always know why a revolution cannot succeed. These experts included virtually every camera dealer in the country, every “advanced” amateur photographer and nearly everyone on Wall Street. What the experts – and the industry itself – failed to appreciate in 1948 was the fact that photography was far from realizing its full market potential. At that time approximately a third of all American families did not own a camera: many more did not use the one they had. The reason should have been obvious. All other modern technical products – from automobiles to television sets – are essentially self-sufficient once they have been supplied with energy or a signal to run on. And they produce their results immediately. But when people used a camera, they had to wait anywhere from a few hours to a few days to see the results. This was a serious postponement of gratification. As a result, photography was actively pursued by only a few million hobbyists, who very often derived more pleasure from the mechanical elegance of their instruments than from the results they could produce.

The satisfaction of getting results quickly makes Land camera owners heavy buyers of film. The typical owner of an ordinary camera may buy three or four rolls of film per year. It is not uncommon for owners of the Land camera to buy ten rolls or more. Thus, Polaroid probably sold 15 million to 18 million rolls of film [in 1958], worth $20 million to $25 million to the company. [By the late 1960s Polaroid’s film sales were running to more than $200 million a year.]

Land’s associates cannot recall his ever having given an order. He guides his company sensitively, thoughtfully – and with immense and obvious enjoyment of what he is doing. He manages by persuasion and delegation, believing that men perform best the jobs they created for themselves. His deepest concern is that all Polaroid employees do not yet have such jobs, and he has promised them that this will be changed as swiftly as possible.

While Land has a pervasive knowledge of every aspect of Polaroid’s business, from research and production through marketing and finance, he has no hesitation in seeking counsel wherever he can find it. He counts as friends and advisors some of the country’s leading academic scientists and some of the most perspicacious minds on Wall Street (several are on Polaroid’s board). It is characteristic of him that when he began working on one-step photography, he turned to Ansel Adams, both a great photographer and a great technician, for help in selecting the qualities that would make Polaroid film outstanding.

Land works in a cheerful book-lined room on the ground floor of a drab three-story building – one of nine scattered around Cambridge that Polaroid occupies in whole or part. (It owns only one of them, plus three new manufacturing buildings in Waltham.) One door of Land’s office leads to a room containing rows of tables piled with neat stacks of current periodicals, business records and correspondence; on the walls are charts showing Polaroid’s production, sales and profit figures. Another door leads directly to Land’s own laboratory.

Throughout the day Land’s research associates stream in and out to bring him results of experiments, to discuss a problem or to delight him with the report of an unexpected finding. Frequently Land slips back to a large project room behind the laboratory, where he is carrying on experiments designed to show how the eye sees color. (This work has thrown astonishing new light on color vision, which seems to overturn many of the fundamental concepts dating back to Newton.)

Land is acutely aware that his role as Polaroid’s creator, head and research director is a difficult one – and it would be easy for his brilliance to dazzle, outshine and discourage his associates. Instead, he has a rare gift for inspiring them to high achievements of their own. He is careful, moreover, not to spoil anyone else’s joy in creating. “Any intelligent man,” says Land, “can finish another man’s sentence. We are all careful never to do that.” He is convinced that the ability to create and invent is not rare; in his opinion it is common but generally uncultivated.

When Polaroid was founded in 1937, it was one of the most exciting little venture-capital companies of its day, but it contained no hint of a camera. Polaroid’s original product was a transparent plastic sheet capable of polarizing light, that is, of blocking all light waves except those vibrating in a single plane. When two polarizing filters are placed against each other and rotated, they act as a light “valve,” controlling the amount of light passing through, from almost full transmission to virtual extinction.

Land’s interest in polarization began one night, he recalls, when he was walking along Broadway in New York City. The year was 1926; Land was 17 and a freshman at Harvard. It suddenly struck him that polarizing filters could eliminate headlight glare and thus decrease the hazard of night driving. Taking a leave of absence from college, he began spending eight to ten hours a day in the New York Public Library reading everything that seemed pertinent to his new interest. At night he carried out experiments in a small laboratory he had set up in a rented room on 55
^th
Street off Broadway. To further his work, he gained secret access – also at night, via a corridor and an unlocked window on the ninth floor – to a physics laboratory at Columbia University.

By 1928 Land has perfected his first polarizing sheets and sought advice on patents from a young attorney friend named Julius Silver. Silver referred Land to Donald Brown, then in a New York patent firm and now vice-president and patent counsel for Polaroid. Land had no difficulty obtaining a basic patent on his sheet polarizers (which was issued in 1934), but his idea of preventing headlight glare had been anticipated by at least four other inventors whose applications dated back as far as 1920. In 1928 the Patent Office still hadn’t decided which of the various applications to honor, and Land’s claim was added to the four others, pending final adjudication.

While natural crystals capable of polarizing light had been known since the early 1800s, the first practical polarizing materials, in sheet form, were announced by Land at a special Harvard physics colloquium in 1932.

Land’s relationship with Harvard has been unusual as well as fruitful. When the inspiration to work on polarizers came to him in 1926, he left college for three years. When he returned in 1929, he brought with him his rudimentary polarizer (patent pending) and also a wife, Terre. Harvard welcomed him by providing a large laboratory where he and Terre worked for about three years. (Mrs. Land subsequently gave up research, devoting herself to raising their two daughters.) At the end of the three years it seemed to Land so urgent to start making his new and much-improved polarizers that after giving the colloquium on his invention, he applied for another leave from Harvard, even though only a few courses stood between him and his B.A. He never did take his bachelor’s degree. In 1957, however, Harvard awarded him an honorary Sc.D.

In 1932 Land and a young Harvard physics instructor, George W. Wheelwright III, formed Land-Wheelwright Laboratories to make polarizers and to carry on research. In 1937 Land organized the present Polaroid Corporation. The financial arrangement he negotiated could be the envy of any young inventor – or old inventor, for that matter. Land was introduced to a number of influential Wall Streeters, including James P. Warburg, W. Averill Harriman, Lewis Strauss and his partners in Kuhn, Loeb, and members of Schroder Rockefeller. The 28-year-old Land made such an impression on this group that they provided an initial $375,000 in capital, left Land with a majority of the voting stock and placed him in complete control of the company for ten years.

Polaroid’s original board of directors included, among others, Harriman, Strauss, Warburg and Silver. Another of Polaroid’s original backers and board members, Carlton Fuller, took a leave of absence from his job as president of Schroder Rockefeller in 1941 to help out as financial officer. He never went back to banking. Investment analysts who have been busily “discovering” Polaroid in the last couple of years are often surprised to find such seasoned hands as Fuller and Silver in key positions.

In the pre-war period 1937-41, Polaroid sales climbed from $142,000 to one million dollars. Polaroid sunglasses became increasingly popular at $1.95 a pair; Polaroid filters enjoyed a steady sale to scientific laboratories and photographers; a glare-free Polaroid study lamp was marketed and sold well. In 1939, at the New York World’s Fair, Polaroid demonstrated full-color three-dimensional movies – viewed through Polaroid glasses.