by Tom Blair
“Sell too soon” is often the key to making money. If you have a stock and the price goes up, you may want to sell. You don’t realize a profit until you sell. Don’t worry about getting the highest price, worry about monetizing a gain. I decided to monetize my company. I engaged E.F. Hutton to send out feelers suggesting that my company might be available if the appropriate consideration was tendered. Attempting to make us seductive to a potential purchaser, I squeezed cash onto the balance sheet, bought a marble conference room table to host purchaser prospects, and was fitted for my first Italian suits.
Over a six-month period a dozen or so potential buyers knocked on our door, so to speak. A few of them sponsored TV programs; big names were prepared to acquire the company. We selected a company I had never heard of before, American International Group, known in the insurance industry as AIG. They weren’t a health-care company, rather, casualty and life. AIG was listed on the New York Stock Exchange, and my initial review of them was somewhat startling. Hank Greenberg, their chairman and chief executive officer, had been written up in many prestigious financial periodicals, all of which included the observation that Hank was the toughest of the tough. Cursing and yelling were hallmarks of his management style. Never a single off-color word had been uttered at Bankers Life … at least that I had heard.
On the other side of the scale, but the financials of AIG were staggeringly impressive. Not only was AIG’s balance sheet the financial equivalent of a Playboy centerfold, but the company also had a magnificent growth rate. Greenberg had started with a little more than nothing at AIG and soon had the company nibbling at the heels of Cigna and Travelers. In fifteen years he had built an insurance conglomerate larger than Bankers Life, which had been hawking its products for seventy-five years.
AIG had another stellar quality: They offered the highest purchase price. I pondered the notion of selling my soul to the devil. Then I pondered my net worth after a transaction with AIG. Hank Greenberg’s money machine got top billing in my mind’s billboard.
A few hundred thousand dollars’ worth of attorneys’ fees and we had an executed sale agreement with AIG. On the closing date Alice and I flew to New York and cabbed to the offices of Wayland Mead at 70 Pine Street, AIG’s corporate offices. Wayland was their corporate counsel. A platoon of attorneys from Epstein & Becker were there both to represent me and to demonstrate, by their sheer numbers, the validity of their multipage invoices for professional services. Across a large conference room table documents were dealt out and signed. Epstein & Becker attorneys, as mothers might gently lay down their babies in bassinets, secured the just-executed documents and gently placed them in their open briefcases. We all stood and shook hands. In the lobby I thanked my attorneys for their professional assistance, and Alice and I hijacked a cab back to La Guardia, where we darted onto an Eastern shuttle. Our net worth had just gone up exponentially, but it didn’t matter. I was squeezed between two business guys and Alice was relegated to a center seat several rows back: open seating with the masses.
My middle seat was a harbinger. My net worth had gone up by the third power and nothing changed. If I drank three martinis I continued to wake up with a headache. Plus, there was no doubt in my mind that David was still more impressed that his best friend’s father had shot a six-point buck and drove home with it strapped to the hood of his pickup than with the fact that I had made a killing for far bigger bucks that would feed us a lot longer.
Several corporate gurus included Hank Greenberg in their list of “Ten Best CEOs.” I could see why. What I admired most about Hank was that there was an absolute to his life. That absolute being his total commitment to building AIG and churning out profits. Like a Sherpa with a two-hundred-pound pack on his back, Hank carried AIG from $50 million in revenues to $9 billion. He drove the company with his uncompromising will to make AIG a financial behemoth. Institutions that held AIG stock spoke of Hank in reverent terms. Why shouldn’t they? With a 15% yearly growth rate, Hank could have had horns and a tail and most any major AIG shareholder would have welcomed him to a family baptism.
It is one of those facts of life: People you like, tend to like you. I think Hank liked me. The reason being, I told him the truth. I could be frank; I had independence. AIG bought my company and I had a pile of AIG stock sitting in my safe deposit box. If he fired me, my net worth wouldn’t have gone down a nickel. I could have retired. Most of his senior managers had big salaries but no serious net worth. They lived in fear of being fired. If you live in fear of being fired, you never want to make a mistake. Everyone makes mistakes. So the only way not to make a mistake is to blame your mistakes on someone else. Hank was used to listening to senior executives explain why their problems were caused by someone else’s misdeeds. I just told him the truth.
A little over a year after he purchased my company, we had a morning meeting in the Big Apple to review our operations. Attending were Hank, his CFO, Ed Matthews, me, and my CFO. We had missed our numbers. I had projected that we would make X dollars in the first quarter, and we made less. Hank looked at me and said, and this is the way he talked, “Your staff that put together your quarterly projections, are they goddamn liars or are they goddamn incompetent?” A long silence as my CFO contemplated a career move to another planet. I responded, “Those two notions are not mutually exclusive. My staff could well be both incompetent and liars.” There was a stunned silence, and before Hank could speak, I added, “Mr. Greenberg, these projections are mine; these are the bad assumptions I made, and this is the action I’m taking to fix my mistakes.” He paused for a moment and jumped into the next subject. As we wrapped up the meeting Hank asked if I would be interested in joining him for doubles at his club. I passed, mumbling something about visiting an important client. Before leaving, his CFO, Matthews, told me that he’d figured I was a dead man after my first response to Hank.
I wish I could have accepted Hank’s offer to join him for a few sets of tennis, but I hadn’t ever picked up a tennis racket. There weren’t a lot of tennis courts in Des Moines. If he had asked me to pitch horseshoes or maybe roll some duckpins, I could have held my own. But Hank did have me up to his club. Actually it was AIG’s club. Morefar—yes, Morefar—in Brewster, New York. Only Hank’s friends were welcomed. The entrance feature was a large NO TRESPASSING sign. Morefar was your basic two hundred hundred acres of manicured grounds with a few million dollars of bronze artwork along the fairways. It’s one thing to own a set of great set of golf clubs, it is another to own a great golf resort.
Tennis or not, Hank wanted to see me at his club. I drove up on a Saturday, having taken the 6:30 a.m. shuttle to La Guardia. Joined Hank for lunch. Not more than fifteen seconds of pleasantries, then business. He commented on the $40 million that my company made pre-tax the previous year. Told me he expected me to generate $50 million the next year. I didn’t say no, just told him it would be a real stretch, but that I would commit to the challenge. Then he did something seductive. He explained that my annual bonus would be 20% of the difference between last year’s earnings and this year’s earnings. So if I could get the number up to $50 million, my bonus would be $2 million.
On the drive back to La Guardia I considered the impossibility of his challenge. It had taken ten years to grow my company from zero to $40 million in earnings; he wanted another $10 million in a year. But by the time I was on the shuttle flight back, I was thinking about the $2 million bonus. Pulling a million off the top for Uncle Sam, I’d net out a million. A million dollars corresponded nicely to the price tag of the homes Alice and I coveted. Another correction. I was coveting the homes. Alice was smiling and agreeing. Why not? Smiling and agreeing is cheap and keeps everyone happy. She probably never considered that I might actually spend a dump truck load of money for an estate to shelter my ego.
You have heard the term “burning the lifeboats”; meaning, one takes a nonreversible action, knowing the ship is either going to reach its destination or everyone pays the big price. I burned
the lifeboats: I put money at risk for an earnings destination. Alice and I had been conspiring with Pat for a couple of months and finally had our mega-house designed. Pat’s price for the 10,000-square-foot abode was just a smidgen under a million dollars. I don’t think he could bring himself to hand us a quote that had seven digits. To get myself motivated to hit Hank’s goal I gave Pat a nonrefundable $50,000 deposit to hold while he worked up the construction drawings. I figured that if I didn’t earn my $2 million bonus with Hank, I could walk away from the deposit. Somehow the fear of losing the $50,000 deposit was more of an incentive to me than the potential of getting another $2 million. The brain works in strange ways.
To hit the $10 million incremental gain that would allow Hank to waterski behind my slave ship, I needed all my employees to row at double-time. My superstars were Rigby, Jackie, Merwin, Bob, and Bruce. There were another few hundred employees, but these were the Reggie Jacksons of the earnings playoffs. They hit revenue home runs. They got you from A to B by sheer force of will.
A quick story about one of my superstars. Bruce had a major report due on a Monday for a most demanding LA client. He worked at the office all weekend, not even stopping to go home Sunday night. From the office he dashed home on Monday morning, took a shower, hopped in his Datsun, and sped off to catch an early United flight to LA. Halfway down the Dulles access road, Bruce fell asleep at the wheel. His Datsun drifted off the road, then flipped over a couple of times. Crawling out with a bloody forehead, Bruce grabbed the client’s report, then asked a cab driver who had stopped to offer assistance to take him to Dulles so he could catch the United flight. The report got delivered.
Another observation. Money is like manure. If you spread it around, things grow. While all my key staff had some significant net worth because of the sale to AIG, they all had unique and unrealized personal goals that I used as stalking horses. Rigby coveted a Porsche 928, while Jackie was looking to take a two-month sabbatical to hike Taiwan. I crafted individual bonus awards that addressed each key employee’s fantasies/desires. All they had to do was make sure I didn’t lose my deposit with Pat.
Even though I had the “A Team” motivated to maximize earnings, we needed to pull a rabbit out of a hat to hit Hank’s target. In time a rabbit called. His name was Mike Miller, Vice President of Development for a large hospital chain in California. They were contemplating the purchase of an HMO, Health Plan of America, trading as HPA. Before they wrote a big check they wanted to sign up a company to manage HPA. Mike asked if we would be interested. After a few questions by me, designed only to suggest I was pondering my response, I replied in the affirmative. I was familiar with HPA; it was a modest-size health plan with fifty thousand members or so, but it could potentially generate a management fee of several million dollars a year, making Hank’s target possible. Mike’s call came on a Friday afternoon. I suggested to Mike that I could be in their offices on Monday. He called back a couple of hours later stating that his staff would meet me Sunday afternoon at the Doubletree Hotel in Orange. They were in a rush to close on HPA with a board meeting on Monday morning to approve the purchase. That weekend Alice and the kids and I had planned on going to the Shenandoah Mountains for a long-anticipated weekend of hiking and horseback riding. Sorry, Alice.
On Saturday I was in the office preparing for the HPA presentation, and that evening I was on a United flight to LA; then down 405 in my Hertz-mobile and into the Orange County Doubletree by midnight. Took a long walk the next morning to get some oxygen into my brain cells and then watched the Washington Redskins lose to the Cardinals. A bad harbinger; turned out it wasn’t. Later in the afternoon I met with six senior staff of the hospital chain. All sharp folks. They came at me with a machine-gun fire of technical questions. Would you subsidize the family rate with singles? Do we need federal qualification in the marketplace? Would you capitate the primary care doctors? Would you require pre-authorization for outpatient surgery? I was fortunate; I was on my game. I fired return volleys of unambiguous answers. After they caucused for a little over a half hour they smilingly announced that my firm would be selected if I could present to their board on Monday. I agreed.
That evening I called Alice and reported my victory. She packed a suitcase, took it to Dulles the next morning, and paid a skycap twenty bucks to sneak it on the United LA flight. I would have extra clothes for an extended California stay.
I probably should tell you more about Alice. She was pivotal to the success of our businesses. I was the fighter pilot; she was the crew chief on the ground. When I came home from missions she made sure that the family unit was a tranquil base for me. She sheltered me from day-to-day household frustrations and carried more than her share of family chores. Alice was much more than a great partner; as Debbie Boone sang, she was the light of my life. I knew I was blessed with Alice. I knew this because of what other guys said, or more correctly, what they didn’t say. If you ask a married man what was the best thing he ever did, and his answer is along the lines of “Got accepted to Notre Dame,” “Bought Microsoft stock early on,” or perhaps “Accepted a job at G.E.,” what they didn’t say tells you something. For me, the answer was unequivocally, “Married Alice.”
While the HPA opportunity was rife with wondrous potential, it also shared aspects of having a mountain lion as a house pet. HPA’s owner was a serious hospital chain; they could have taken a big bite out of our ass if we didn’t deliver. But we did. I lived out of my room at the Doubletree for just under three months. While I was able to recruit a dozen or so key folks to direct traffic at HPA, I needed to be around to make sure all the animals were in their cages and the warthogs didn’t try to mate with the swans. But, New York also beckoned, also demanded.
Every quarter Hank had a “Presidents Meeting,” comprised of all the heads of the AIG divisions and subsidiaries. It brought back memories of my third grade teacher, Miss Forshay; she always collected the homework and never took prisoners. There were about twenty-five AIG presidents, their individual operations ranging from $100 million to $1 billion in revenues. Many had to fly in from remote locations, including China, so I couldn’t complain if I had to take the American LA/New York red-eye back to the Big Apple.
To accommodate the various presidents attending a “Presidents Meeting” at AIG’s offices on Pine Street, a dozen or so small tables would be put together to form one large square. Chairs were carefully placed around this table, each chair being identified for a specific president. I and the other presidents would stand behind our designated chairs, not unlike the Queen’s Guard waiting for the monarch’s review. In time Hank would stroll in with folders under his arm. He would sit; everyone else would follow his lead. Hank would randomly select an individual and start interrogating him—all were hims—about his operation. After verbally removing this president’s fingernails, Hank would move to the president to the right and begin an autopsy of his operation. This continued for two or three hours while Hank, in perfect order, challenged one by one the professional confidence of the entire group. Periodically a white-jacketed Asian gentleman would enter and quietly serve Hank tea. No one else was asked whether they would enjoy a refreshment, nor were any hygiene breaks taken.
During the length of the meeting there were no subsidiary conversations. The only words spoken were between Hank and the president he was dissecting. If someone walked into the room and took a still photograph of the meeting, and then made a large print of the photo, one could readily determine which individuals Hank had drawn and quartered. Those yet to be called upon were sitting erect at the table with their hands folded in front. Others were hunched over, pummeled and broken. High-paid executives were nothing more than a row of dominoes pushing one against the other, with some still standing. I was told that two presidents had resigned within the past few years because they couldn’t take the AIG pressure to hit their numbers; they walked away from big paydays. Not me, I was tough, mentally tough. I could handle any pressure sent my way.
; WARREN, 1943: Roland’s death occasioned no pause. Weeks more of flight ops followed. But there was a toll; a toll paid most every day. The empty bed—a bed where another of my squadron mates had slept the night before. It wasn’t the death of a human that took its toll, it was the death of a person, a young man who had laughed with me at dinner messes, who spoke of his mother, his sister, his dreams. Each of these deaths chipped away part of my hope, my humanity, and worst, my sanity.
After the meeting adjourned Hank would summon a few of the just-roasted presidents to join him for lunch in the corporate dining room. I was anointed twice. The dining room was on the uppermost floor of 70 Pine, with almost a 360-degree view of the city. As Hank sat, another white-jacketed Asian silently placed a small table beside his chair for his folders. I didn’t see this concept again until I was having dinner with Alice at the Hôtel de Crillon in Paris, where a waiter placed a similar table next to Alice’s chair for her purse. Then three courses, three courses served by a half-dozen white-coated waiters. During lunch, while I pretended to enjoy the scrod that was always served, Hank would provide a cutting critique of various presidents who were not his lunch guests. I knew that I was similarly critiqued when not breaking bread with Hank. But I didn’t care. I enjoyed corporate America. The traffic was exhilaratingly heavy, the limos big, and the destinations seductive.