by Robin Gerber
If applicants did not have what Ruth called “the entrepreneurial personality,” she classified them as NMM, or “not Mattel material.” Those few who made it through the gauntlet of tests and questions and competition were hired. Ruth ended up with a brilliant bunch of combatants. “She hired people for their attitude of ‘nothing can stand in our way,’” remembered Fred Held, who was hired into Mattel management in 1962. “She wanted young people who could take over a hundred-million-dollar division in five years. The Mattel way was to believe nothing is impossible and creativity is king.” In interviews nearly fifty years later, these employees were strikingly creative and energetic. Many were still inventing and starting businesses. They were full of the curiosity and entrepreneurial excitement that had made them good Mattel material in their youth.
Management employees were always on the hot seat. Ruth was always asking opinions and challenging assumptions. She liked to work off hard data using scientific tools. She created measurement instruments that became the standard in the industry. According to Joe Whittaker, Mattel invented “an entire language for the industry, which soon learned of A prices and EBDs and Magics and W reports and TLPs. It was not merely the gospel, it was practically the alphabet according to St. Mattel.”
The Toy Line Projection (TLP) listed every product with its stock-keeping unit number, or SKU, and information on sales revenue, product experience, gross margins, tooling, and advertising. “Ruth was the master of the TLP,” Tom Kalinske said. As Mattel executives moved on to other companies, the TLP concept moved with them.
Ruth also worked with her top executives to create the W report, or weekly sales and shipping report, a demand-and-supply document that was two to three inches thick, written by hand, and copied on old-style copy machines. The W report listed every product, with its detailed production and sales history. Ruth would flip through it with her thumb and say, “That’s not right,” catching errors that were sometimes as small as pennies on the dollar. “She had an unerring ability to find one mistake in this document. She had a sixth sense to zero in on the mistake. If one number was suspect, what about the others? She would find minor but critical mistakes. Her mind worked by finding the flaw in the plan,” Joe Whittaker remembered. “She’d go to Palm Springs,” said Fred Held, who helped create the report, “and mark the W report up with her lipstick, then the first person she saw when she got back really got it if she found a mistake. She would ask questions the executives couldn’t answer. She really understood the numbers.” Boyd Browne said, “If there was a phony number, she’d catch it.” Her facility with numbers made it ironic when, years later, after Ruth had left the company, a talking Barbie was programmed to say, “Math class is tough.”
To be successful, Mattel had to come up with fresh designs every year. Developing and producing each new design usually took three years. Production schedules were tight, because products needed to be out in time for seasonal buying. Most products were on a one-year production cycle, which meant that it was crucial to get the initial pricing right. Ruth instituted strict product planning and controls, and stayed in close touch with managers as the product moved toward distribution. “I was good at controlling how many of a product was made against what the product would generate in sales,” she said. And she had a genius for taking her experience from one product and applying it to the next.
“We’re a company that’s just man killers,” Ruth said to Frank Sesto early in the 1960s as she discussed the stock options she was giving him. “This is something you’ve earned,” she told him. “I hope you make money on it.” Her hopes were being more than realized. The Los Angeles Times’s headlines from the early 1960s tell the story. In December 1960: “Toymaking Business Booms in Southland, Sales Now Holding Up Year-round.” In August 1961: “Toy Company Plans $900,000 Addition, Second Major Expansion Since Moving to Hawthorne 18 Months Ago.” February 1962: “Mattel Hikes Dividend Rate.” October 1962: “Mattel Named Outstanding Growth Company in Nation.”
In 1962 Ruth’s advertising budget was $5.7 million dollars. Sixty million toys would carry the little crank music box that had gone into the jack-in-the-box a decade earlier. Business was so strong that a second stock offering was planned for April. Ruth and Elliot decided to go to New York for the event, and Harry and Doris Paul, now wealthy partners, came along.
The two couples were at the Waldorf-Astoria hotel when they received a call from their brokers, who wanted to see them right away. They were told that there was no way the offering could take place. The stock market had dropped precipitously and was expected to keep going down in a Wall Street catastrophe later dubbed Blue Monday. “You wouldn’t want what you could get for your stock,” they were told.
The four had been having a great time in New York and were full of anticipation about the big event. Their previously high spirits made the cancellation of the offering even more disappointing. They walked down the street from the Waldorf to a restaurant for dinner, but no one had much to say. Harry had bought Doris an expensive wristwatch that day, and she asked if she would have to give it back.
As they were walking back to the hotel, a homeless man came up to Elliot and asked for a quarter. Elliot, normally so kind and gentle, told the man to go away, saying, “I’ve got troubles of my own.” When they heard his response, Ruth, Harry, and Doris broke out laughing. “We rolled all over the sidewalk,” Ruth remembered. “We knew we had lost all perspective.”
Ruth and Elliot did not have to worry. By 1964 their total personal assets were worth more than forty million dollars, with thirty-seven million in stock. They had made generous stock transfers between 1962 and 1967 to relatives, the City of Hope, the United Jewish Welfare Fund, Temple Isaiah, UCLA, and other charities.
Ruth considered public service a way of life. “That was our training, our background,” she said, “the Jewish ethic.” When the war in Israel began in 1967, Ruth was president of Mattel, but despite her overwhelming schedule she called the head of the local United Jewish Appeal, to which she had been a generous donor, and asked what she could do to help. He invited her to come down to their offices on Vermont Street as soon as possible. When Ruth got there he told her that the telephones were ringing incessantly, and they were overwhelmed with questions and offers of aid. He asked Ruth if she could take over the telephone operations and manage the requests. “Do something,” he said, “so we can get it off our backs and function.” He arranged a place for Ruth to work and she plunged into the job. “It was major, but I was accustomed to doing things like that,” she said. She set standards for what donations would be accepted, set up a team to answer and screen calls, and within a few days was able to leave a well-functioning operation in someone else’s hands. “That’s what I call public service. I felt very good about it,” she said.
In August 1963, Elliot opened trading on the floor of the New York Stock Exchange. Mattel was being listed on both the New York and Pacific Coast exchanges, and as part of the ceremony Elliot bought the first hundred shares at $48.50 each. Three years earlier, at the initial offering, shares had sold for $10 each. “We just sat there,” Ruth told a reporter, laughing, “and we couldn’t believe that anyone would pay that much for our stock.”
All around, life was good. That same year Barbara gave birth to their first grandchild, Cheryl Segal. Ken, like his sister, had also married shortly after leaving high school the previous year. In retrospect, Ken’s out-of-character rush toward convention may have masked the raging conflict that would mark the tragedy of his life. At the time, however, Ruth’s children seemed settled and happy. She was free to build on her success.
At one lunch Ruth and Eliot were having with their brokers in late 1963, the group kept getting interrupted. A young runner repeatedly rushed into the dining room to whisper to a broker. Finally Ruth asked what was going on. Mattel stock was on the rise. The Handlers’ shares had gone up twenty million dollars while they were sitting there. At the time, Elliot earned a salary of $67,500 an
d Ruth $52,000. They controlled 54.5 percent of Mattel’s stock, then worth about forty-four million dollars.
Success had grown alongside the Barbie franchise. The 1960s saw a series of milestones for the doll, all carefully considered in terms of play value and protecting the brand.
Barbie was joined by a growing group of friends. First came her boyfriend, Ken; then Barbie’s friend Midge and Ken’s friend Allan, then Barbie’s little sister, Skipper; soon followed by Barbie’s sister and brother, the twins Tutti and Todd. Francie, Barbie’s cousin, was introduced as an adult doll with a slimmer and less shapely and voluptuous body. Francie’s smaller size had brought about a debate inside Mattel. She required different-size clothes, meaning the creation of a whole new wardrobe line. All the other female friends of Barbie could wear Barbie’s clothes. Ruth worried that stores would not stock enough clothes for Francie or display them as well as they did the Barbie line. She also worried that consumers might have a negative reaction when they discovered that Francie could not wear Barbie’s clothes. The difficult decision to bring out Francie, however, did pay off and showed Mattel that there were new ways to expand on the Barbie franchise. This held true in design as well. Jack Ryan invented and patented bendable legs, which appeared on Barbie in 1965, and swivel hips for Barbie. Bendable arms, however, could not be successfully engineered.
Ruth felt that Barbie should not have a specific personality. “Barbie should be used for every little girl’s personality,” she said, “and through Barbie each little girl could project her own personality.” She said Mattel was not trying to make a beautiful doll, because she believed that would limit its play appeal. As new Barbies were developed, however, Ruth’s concern was increasingly ignored. Barbie grew more model-beautiful with age.
Ruth and Elliot’s life seemed to grow more beautiful as well. On paper, since most of their stock could not be sold, they were wildly rich. In 1965 they moved into a double-size penthouse apartment that they designed in the new Century Towers East in Century City. The next year Elliot bought his first Silver Shadow Rolls-Royce. From the balcony of their penthouse, Ruth and Elliot looked down at the sprawling city of Los Angeles and the Hollywood Hills beyond. Ruth could imagine that in every house where there was a child, there was also a toy from Mattel.
Chapter 11
Toys, Money, and Power
Once we got the taste of growth, we felt we could do no wrong.
At Mattel, Elliot was still coming up with new ideas, but he had a top-notch research and design team of nearly two hundred people to work on them. They had expertise not only in engineering, but in chemistry, sculpture, music, and fine arts. With a $1.5 million budget that kept growing, they jumped on every challenge. Part of their industry could be attributed to Ruth’s hiring process, but the unusual personality at the head of research and design also set the tone.
Jack Ryan had not been an easy catch for Mattel. He graduated from Yale with a degree in electrical engineering, and the Handlers met him when he was thirty years old. Ryan had a randy, eccentric, and flamboyant side that found full expression after he pushed for a royalty-based deal with Mattel that made him a millionaire in short order. Ryan was schooled to work on the complexities of telecommunications systems, power stations, and missiles. Elliot and Ruth convinced him to apply his knowledge of math and physics to toys. While his counterparts were inventing the integrated circuit, Ryan was engineering Barbie’s appendages.
Ryan’s personal indiscretions were legion and well-known. He held parties at his five-acre Tudor estate in Bel-Air, which he had had raised off the ground in order to dig a moat and put in a drawbridge. He carried the castle motif into his bedroom, which he decorated from a King Arthur movie set. The toilet was a throne with a pull cord for flushing. He liked to show off his tree house, complete with crystal chandelier; his mansion’s thirteen bathrooms; and the grottos, pool, waterfalls, and lagoons that graced the property. At least one employee thought that when guests came over, Ryan hid his ex-wife in a black-painted dungeonlike room with shackles on the wall, but she actually lived in a separate wing of the house. He did not try to hide his coterie of mistresses and UCLA student assistants or his proclivity for all kinds of debauchery.
Ryan was on the short side—one employee called him “gnome-like”—but he had piercing, squinty eyes. Possessed of an outsize ego, he had a fanatical need both to be in charge of everything and to take all the credit. Ryan also had a mean streak. One employee referred to the R & D department as a “sadistic” place, where Ryan never missed an opportunity to belittle an underling. His brother, whom he hired, often took the brunt of his brutishness. Ryan would order him to get coffee or harangue him in front of others in the department.
Marvin Barab, who worked under Ryan, endured numerous humiliations, the most memorable being at a party at Ryan’s palatial house. “I was there with my wife, wearing a business suit. Ryan said, ‘Jump in the pool and race me.’ I said, ‘You’ve got to be kidding,’ and Ryan shot back, ‘I’m not kidding at all. Get in.’ I handed my wife my wallet and jumped in. He was wearing a bathing suit, and he won, of course.” Barab quit the day after another humiliating episode with Ryan, and although he had a good relationship with Ruth and Elliot, neither tried to stop him.
Elliot and Ruth were willing to overlook Ryan’s excesses, and they generally acceded to their top staff in personnel matters. As long as Ryan did not embarrass the company, they did not seem to care what he did, even when he was an irritant. He precipitated a fierce rivalry with Seymour Adler, the head of production and engineering, that had the two men vying for Ruth and Elliot’s approval. Occasionally, Ruth would decide that Ryan’s department was underperforming, and she would lash out at his behavior.
Ryan liked to hire attractive women as office assistants and secretaries. One day Ruth attacked him, saying, “If you’d put more attention to your job than hiring pussy women to decorate the department, we might get something done.” Ryan shot back, “Well, I’ll worry about my department if you just worry about marketing.” Elliot, who heard the exchange, jumped out of his chair. “That’s no way to talk to her,” he admonished Ryan. But Ruth hardly needed a defender. Most employees were in awe of her. “I never saw her do it, but I heard she threw things and yelled,” remembered Fred Held. “She’d ask a question and lean in to someone and stare in their eyes. I was her darling and could do no wrong, but that was not true of everyone.” Ryan was one of the few who stood up to her, protected by his talent and Elliot’s approval of his work.
Even the lack of an ethical compass did not sink Ryan. Barab remembered going into the toy archives shortly after he transferred to Ryan’s department. He stumbled on a box with a doll in it that looked like Barbie. Scanning the notes, he saw that it was a German doll that predated Mattel’s creation. At that time, Barbie’s connection to Bild-Lilli was being officially denied because of a dispute with Greiner & Hausser (G & H), the successor to O & M Hausser, the German company that created Lilli.
In 1960 G & H filed a U.S. patent for the “doll hip joint” used in Lilli. They then licensed the rights exclusively to Louis Marx’s company for ten years. In 1961 Marx sued Mattel in the U.S. District Court for the Southern District of California, claiming that Mattel had infringed the hip joint copyright by using it for Barbie. Claims and counterclaims flew back and forth as Mattel denied that Barbie was a direct knockoff of Lilli.
It was around this time that Barab found the Lilli box. “I showed the doll to Jack Ryan,” said Barab, “and I said, ‘This looks like Barbie.’ He said, ‘So?’” Ruth had given the Lilli doll to Ryan to take to Japan years earlier. Then Ryan spoke as if reciting a nursery rhyme, “‘Plagiarize, plagiarize. That’s why God made your eyes. Now, put it back.’” Ryan’s words never made it into the court case. The suit was dismissed on all sides. The next year Mattel purchased G & H’s Bild-Lilli copyright and its German and U.S. patent rights for three lump-sum payments worth approximately $21,600. In exchange for an addition
al payment of $3,800, the agreements also provided that upon the expiration of Marx’s license in 1970, its marketing territories would transfer to Mattel. By the early 1980s, as Barbie continued to bring in millions of dollars for Mattel, both G & H and Marx went bankrupt.
In 1962 Ryan was juggling seventeen new engineering concepts that could be applied to a variety of toys. He worked behind the locked and restricted confines of his R & D department, where a special key card was needed for entry. Elliot had pioneered the idea of incubating new toy ideas rather than waiting for inventors to show up at Mattel’s door.
At the uniformed guard’s desk a sign read, “You must be signed in at the R & D turnstile and escorted by an R & D employee for entrance into the model shop with a striped badge.” Inside, Ryan had a supersecret section for preliminary design, which only Elliot and two other top executives could enter. Every paper, no matter how slight the marking, was sent to the company’s in-house Document Disintegration Service for shredding when it was no longer needed.
Inside R & D, staff competed to come up with the next big idea. Employees loved the pace and excitement in the creative space, but joy and resentment sometimes made a volatile mix. One Christmas, Ryan gave out rock-hard frozen turkeys. After a few rounds of spiked eggnog, employees started whacking one another with the birds in a zany but painful free-for-all. “Next Christmas,” said one of the engineers, “we got chits good for a turkey at the supermarket. It was safer that way, for them and us.”