Corporations: An Appetite for the Future

(See Cover) The husky, ruddy-faced man looked like a tough trail boss in a TV western as he mounted his palomino and set off across the rugged mountain country north of Los Angeles. He wore thread bare khaki trousers over his riding boots, a red Western shirt and a modified stetson, and packed an automatic pistol to deal with any rattlesnakes, bobcats or mountain lions he might encounter.

For several hours he rode, traversing mountain and valley, following deer trails and nudging his horse skillfully along rocky paths. Occasionally, he crunched out a cigarette on a heavy leather glove worn as a horseback ashtray, or reined his mount to a halt and gazed out over the green valleys below.

This was no performer re-creating the Old West, but the boss of a huge and exciting corporation that is dedicated to a relentless pursuit of the future. He is Charles Bates Thornton, 50, the chairman of California-based Litton Industries—and he was busy on horseback at the most important facet of his job: thinking. When “Tex” (he came from a small Texas town) Thornton has a problem to mull over, he finds that he does his best thinking on a solitary 30-or 40-mile ride through the mountains, where he can “look at the world down there, and the world beyond. It is my way of getting away from it all, getting out where I can clear my head of the traffic of everyday business.”

Thornton has plenty of traffic to clear. Since he took over Litton just ten years ago next month, when it was only a tiny microwave-tube company, it has developed into one of the most remarkable growth companies of the age. In that decade, Litton has increased its sales 18,570% and its earnings 10,175%. It has never had a quarter in the red. In one of the greatest acquisition sprees of all time, it has absorbed some 40 other corporations, now has 71 plants in the U.S. and twelve other countries.

Litton now ranks as the nation’s 100th biggest corporation, with sales that have already passed the half-billion-dollar mark and will probably reach $750 million this fiscal year. By next year, if this growth continues, its sales should lift through the billion-dollar mark and put it among the top 50 U.S. companies. As for Thornton, the organizer of Ford’s celebrated Whiz Kids and onetime boss of such talent as Defense Secretary Robert McNamara and present Ford President Arjay Miller, Litton’s success has made him a millionaire 40 times over. It has also made millionaires out of 20 other Litton executives.

Broad & Ambitious. For want of a better description, this remarkable company is formally classified as an electronics firm. That is a bit like calling Albert Schweitzer an organist. Litton is really an amorphous giant with interests and appetites as broad as the universe. Its 200 products range from hulking nuclear submarines to tiny electronic tubes that can send radio and TV signals back to earth from millions of miles out in space. Its plants turn out the electronic brains that have transformed business methods and the trading stamps that have conquered the housewife. Litton makes guidance systems that fly planes virtually without human help, devices that generate light beams to burn holes in thick steel plates and gyroscopes that smooth the sickening roll of a Queen Elizabeth caught in an ocean storm.

Litton’s Monroe division is one of the leaders in sales of calculating machines. Its Westrex division ranks first in sales of sound-recording systems, and its Western Geophysical division first in seismic explorations. Litton is the nation’s third biggest private shipbuilder. Its systems division sells more inertial-guidance systems than anyone else, and its Sweden-based Svenska is the world’s second largest maker of cash registers. Across the world, Litton men are mapping underground volcanic activity in Hawaii, searching for oil beneath the North Sea, scouring the jungles of Surinam for precious minerals.

To many businessmen used to working within well-defined industry lines, all this seems more like a potpourri than a company. Almost every time that Litton announces a new product or acquisition—which is almost every week—there is a new flurry of predictions that at last the fast-stepping Texan has gone too far. If Tex Thornton’s business philosophy often confuses his critics, it is perhaps because it is so breathtakingly broad and ambitious. He is interested in change, and pursues it wherever he can. Litton’s present and future are tied together by a commitment to capitalize on the products, projects and processes that are growing out of a great new technological revolution.

Like a Jigsaw Puzzle. That revolution is reshaping the comfortable contours of the world’s industries. The age of science has not only had a vast impact on society, but has also transformed the world of business more thoroughly than anything since the Industrial Revolution. Business has always been faced with changing situations, but never has the change been so constant, powerful and full of hazards. “The flowering of technology goes on faster and faster,” says George R. Harrison, M.I.T.’s dean of sciences, “because man’s understanding of science is like working out a jigsaw puzzle—the more pieces fit together the easier it is to fit more pieces together.”

A proliferation of new materials has threatened such well-rooted industries as steel and textiles. Companies searching in their laboratories for new products can hardly get the products to market before someone else has duplicated them—or produced better ones. The whole new space-military complex is devoted to the idea of constant change and advance. Scientists have discovered so many basic new ways of doing and making things that one bright scientist in a lab can sometimes render obsolete the basis of a whole industry. Many companies, particularly those that have long concentrated on a few products, find it increasingly hard to come up with the management know-how and the funds to finance the advanced research needed just to keep up.

Tex Thornton has thought about this revolution perhaps more than any other man. “We are experiencing technological change at by far the fastest rate man has ever known,” he says. “In the past 20 years we have seen more technological change than in all recorded history. It took 112 years for photography to go from being discovered to a commercial product, 56 years for the telephone, 35 years for radio, 15 years for radar, twelve years for television. But it took only six years for the atom bomb to become an operational reality, and five years for transistors to find their way from the laboratory to the market. You might say we are in danger of being engulfed by change.”

In a Low Key. Change brings its hazards, of course, but it also brings many unprecedented opportunities—and it is Thornton’s job to see that Litton takes advantage of the opportunities. Many men in both business and Government consider Thornton to be the best executive in the U.S. today. Yet his gifts are not always on display, and in many ways the low-key Texan does not fit the usual conception of a dynamic manager at work in an exciting industry.

Deeply involved in technology, Thornton is neither a professionally trained engineer nor a technician, and, though he is a great believer in running things under tight statistical control, he places little reliance on electronic logic in making management decisions. In a field where speed is a motto, he snaps out no instant decisions, likes to take his time about making up his mind. He overcomes a problem by attacking it with dogged tenacity, painstakingly learning all the facts, then turning them over slowly in his mind many times until they fit together into a decision—a decision that often comes to him on horseback or in his Cessna, which he sometimes uses (with a hired pilot) to get up into the clouds to think.

Thornton is a dreamer and a vision ary who talks constantly about the way-out future, yet he is also an intensely practical man who has made realities out of many of his early dreams. Immensely wealthy and forever faced with decisions about spending millions, he is nonetheless a penny pincher who makes waiters and taxi drivers scowl at his meager tips, is indifferent to carrying cash (his secretary presses pocket money on him just before he goes on every trip) and always takes a single room rather than a suite when he is staying in a hotel. He is often shy and inarticulate among strangers, yet he has managed to dazzle some of the nation’s top businessmen with his knowledge and versatility. “Everybody loves Tex,” says Buff Chandler, wife of Los Angeles Times President Norman Chandler, “but nobody really knows him.”

No Safe Niche. Far from being a lonely decision maker in an isolated executive suite, Thornton shows his true executive quality in the ability to pick good men and give them free rein. He has surrounded himself with an intensely loyal group of managers, who are independent thinkers not afraid to question his judgment or to lunge at opportunities without waiting for his nod. More often than not, Thornton’s decision merely sets off a spirited debate that produces a compromise solution that the company finally follows.

To keep the exchange of ideas from bogging down in bureaucracy, Thornton and Litton President Roy Ash, 44, who helped to found the company, have held the staff in their modest Beverly Hills headquarters down to a manageable (and somewhat overworked) group of 114—despite the fact that the firm’s total work force has swelled to 43,000. This way, no one has time to write lengthy memos, which Thornton does not like to read. In fact, if Litton’s experience is any guide, one of the happiest aspects of the technological revolution may be the death of the kind of organization man who tries to burrow into a safe, obscure niche, far from the dangers of difficult decisions. There are no such niches at Litton.

Cokes & Smokes. Thornton and Ash have come to work together as smoothly as if they were held on course by one of Litton’s inertial-guidance systems. Thornton is the man with the intuition and the flair for the right deal at the right time; Ash is the lively and witty coordinator who keeps a day-to-day watch on Litton’s ever-expanding activities. Chain smoking (at least two packs a day) and sipping Cokes, Thornton spends at least four hours a day on the telephone talking with managers, investigating mergers, gathering facts and keeping up with the work of Litton’s five main divisions. He talks in cellolike tones, never raising his voice.

Vice presidents and executives from out of town are urged to pop in on Thornton and Ash at any time, and headquarters has a freewheeling quality. Thornton and Ash feel that keeping their men well-informed and making their responsibilities clear is the best way to get the most effort from them. “Our system works,” says Roy Ash, “only because the individuals and the system work together. If we had a highly institutionalized system, our people would be frustrated; if we had institutional-type people, we as a company would be frustrated.” Litton is not noted for paying its executives high salaries but gives them a powerful incentive in a stock-option plan whose value can best be seen in the rise of Litton stock from 81 to 851 in the past five years (allowing for a 2-for-l stock split).

No Useless Leisure. Tex Thornton himself has few broad interests outside of work. “I can’t stand useless leisure,” he says. Thornton and Ash take vacations only in alternate years, but after a few days Thornton usually finds himself hankering to get back to work. Thornton lives in a Spanish-style ranch house in the fashionable Holmby Hills section of Los Angeles, among such Hollywood names as Walt Disney, Bing Crosby and Claudette Colbert (he bought the house for $250,000 from Frank Sinatra’s first wife Nancy). He and his tall, graceful wife Flora live there during the week but usually move on weekends to Thornton’s 200-acre ranch 40 minutes away, where he raises a string of prize horses. They have two sons: Charles B. Jr., 21, a Stanford senior, and William Laney, 18, a Harvard freshman.

On workdays, Thornton bounds out of bed at dawn without the aid of an alarm clock, after a glass of orange juice (and occasionally a swim in his pool) begins making phone calls to the East Coast, which is three hours ahead of California. Before 8 he is off in his 300-h.p. black Ford Galaxie to the office, ten minutes away. Even on his frequent trips to Washington to consult with Pentagon brass or Government procurement officers, he keeps the same farm-boy hours, sometimes showing up at fellow Whiz Kid McNamara’s office as early as 6 a.m. “I often find them there just finishing breakfast when I get in at 7:20 a.m.,” says Deputy Defense Secretary Roswell L. Gilpatric.

48-Hour Lieutenant. Though it often is only retrospect that sees in childhood the signs of future accomplishment, Tex Thornton certainly got early lessons in responsibility. Born in the tiny north-central Texas farm town of Haskell, he never enjoyed a normal family life. His restless, adventurous father, Word Augustus Thornton, ran off soon after Tex was born and built a small fortune (which he lost in the 1929 crash) blowing out oil-well fires with nitroglycerin. Tex grew up as the man of the family. He seldom saw his father, who was later murdered by a hitchhiking couple he befriended. Tex’s firm mother, determined that he would not travel the same road as his father, stressed the need for responsibility until it enveloped him like a Sunday suit.

When he was twelve, his mother encouraged him to buy land and pay for it with money he earned doing odd jobs.

He accumulated nearly 40 acres, and by the time he was 14 every store in town would accept his personal check. At 19, he and a chum set up a successful gasoline station and dealership for Plymouth and Chrysler, but Tex left it after a few months to go to Texas Technological College in Lubbock. He switched from engineering to business administration, quitimpatiently in his junior year and borrowed $50 to go to Washington, where in 1934 he landed a $1,440-a-year clerk’s job at the Department of the Interior and continued his studies at night.

Thornton might have disappeared from sight and fame right there except for a single assignment: the job of writing a report on the financing of low-cost federal housing. He showed his ability for boiling down a massive amount of statistics and information into its bas ic essentials. The report he turned out was a minor masterpiece of clarity and vision that somehow got to the desk of Robert Lovett, Assistant Secretary of War for Air. Deeply impressed, Lovett talked Thornton, then 28, into joining the pre-Pearl Harbor Army as a second lieutenant charged with the unusually heavy responsibility of finding a way to put the Army’s air arm on a businesslike basis.

Thornton set some sort of record by remaining a second lieutenant for only 48 hours. After a series of whirlwind weekly promotions, he became one of the youngest full colonels in the Army Air Forces. With the war now on, Thornton got to work with a determination that the Pentagon still remembers. He not only established training programs for 1,700 different kinds of specialists, but also devised the first system of “statistical control” the armed forces had ever seen. Thornton calls that “a fancy name for finding out what the hell we had by way of resources and when and where it was going to be required.”

At one point, Colonel Thornton had 2,800 officers all over the world under his command. Among them were nine who became particularly expert at Thornton’s new concept of statistical control. After V-J day, he talked them into offering themselves as a team—with him as the captain—to apply the knowledge they had acquired to the business world. This was the beginning of the famous Whiz Kids, who then ranged in age from 26 to 34.

Dream Project. Hearing that Ford Motor Co. was struggling with the task of resurrecting itself into a modern corporation, Thornton fired off a cocky telegram to Henry Ford II, offering to use the ten’s ability to bring the sprawling, money-losing company under control. Ford checked with Lovett, invited Thornton to Detroit. There Thornton negotiated salaries ranging from $8,000 a year for the least experienced of the group up to $16,000 for himself. It was quite a deal for Ford; in one package, it got two future presidents and four divisional bosses.

Ford was a dream project for the hot-shot young Air Forces team, bent on applying its service-learned management-control methods to industry. The ten began a department-by-department survey of the company, asked so many questions that they were dubbed the “Quiz Kids” by resentful Ford oldtimers. When they swung into action, the name was derisively changed to Whiz Kids. They switched Ford’s capital, long left fallow, into interest-bearing accounts that promptly began earning Ford $4,500,000 a year, analyzed everything from assembly lines to suppliers’ carburetors to learn how to trim costs, and set up the modern management techniques that are still used at Ford today.

Thornton liked being the top man, and he chafed at being held back by Executive Vice President Ernest R.

Breech, who had come to Ford from G.M. after the Whiz Kids arrived. In 1948, after two busy years with Ford, Thornton quit to take a job with eccentric Industrialist Howard Hughes, who made him vice president and general manager of Hughes Aircraft. Thornton convinced Hughes that not enough companies were working full time on developing the advanced weapons technology the nation was sure to need. He re organized Hughes Aircraft, building its sales from $1,500,000 to $200 million in five years, and prepared it to be practically the first company to get into missile work. But Hughes’s cost-conscious advisers balked at spending the extra money needed to keep up the pace. Thornton decided to quit to form his own company.

A Package of Wealth. Roy Ash, whom Thornton had lured to Hughes from a post as top statistician at the Bank of America, and Hughes Engineer Hugh W. Jamieson agreed to join Thornton in his new venture. Thornton at one point approached Joe Kennedy about the project, but finally turned for capital to Lehman Bros., Wall Street’s prestigious investment house. “I told them,” he says, “that I wanted to start a company that would become a strong blue chip in the scientific and technological environment of the future. It would be a balanced company—not just engineering, not just manufacturing, not just financial. You can’t win a ball game with only a pitcher and a catcher, and you can’t have a strong company unless it’s balanced.”

Thornton wound up his sales pitch by brashly outlining how he would achieve $100 million in sales in five years. The Lehman partners gasped; his ideas were good, but the sales projec tion made him sound like a windy promoter. Nonetheless, they agreed to back a $1,500,000 financing to be raised by selling investors a package of stocks and bonds worth $29,200 each. Thornton made his sales boast good in only three years—and each package is now worth $3,200,000. Any prescient investor who put $1,000 into Litton at the start would have an investment worth $85,000 today. Coming full circle, Thornton earlier this year was elected a member of Lehman’s board of directors.

Buying Time. To get a base to build on, Thornton, Ash and Jamieson had selected a microwave-tube company (annual sales: $3,000,000) bearing the name of its engineer-owner, Charles Litton. Litton suspiciously refused to take stock in the new company, instead demanded $1,000,000 in cash; the stock, of course, would now be worth $85 million. With stock, cash, credit and persuasive argument, Thornton and his friends began buying up a series of little-known outfits that made printed circuits, computers, servomechanisms, communications and navigation equipment. Thornton felt that Litton had to grow big and muscular in a hurry to survive the jolt of changing technology —but he had a reason behind every move. “We have never acquired companies as such,” he says. “We have bought time, a market, a product line, a plant, a research team, a sales force. It would take us years to duplicate all this from scratch.”

Litton’s biggest acquisition came in 1958, when it took over Monroe Calculating Machine (sales: $40 million a year) after a fervent courtship of many months. The business-machine field was changing rapidly, but Litton needed a well-known name and ready facilities to take advantage of the change. To tie in with Monroe, it then picked up a succession of outfits: a Swedish cashregister maker, a maker of tickets and labels, a company that now prints more trading stamps than the U.S. Government does postage stamps. When Ingalls

Shipbuilding Corp. of Pascagoula, Miss., was first offered for sale in 1961, Thornton was totally uninterested. But he brooded over the possibilities for weeks, finally concluded that the nuclear submarines that Ingalls was building were really just a collection of electronic machines and devices packed into a hull, and therefore an excellent destination for the products of Litton’s expanding electronics complex. He bought Ingalls.

Dead Reckoning. While collecting a spate of companies and a crack managing team, Thornton and Ash (Jamieson left in 1958 to found his own elec tronics company) have made surprisingly few mistakes. Nowadays Litton gets an average of ten merger offers a week and turns most of them down.

But once it does acquire a company, it usually lets the old management function freely. Ingalls Boss Fred Mayo had the shipyard in the black within 90 days after Litton took over and untied his hands to make necessary changes. Fred R. Sullivan runs Monroe Calculating as if it were his own company.

Despite numerous acquisitions, more than half of Litton’s sales growth has been generated from inside by a scramble for new business and new products. The growth has been so fast that profits have not kept up; Litton’s after-tax profit on sales is only 4% . “That is hardly a terrific achievement,” says Thornton, “but we hope to do better.” He believes strongly in plowing back profits into the company to finance growth, and Litton has never paid a cash dividend, though it has paid five stock dividends.

Perhaps Thornton’s greatest contribution to the company is his superb sense of timing—an intuitive dead reckoning that tells him when to move with a product and when to hold back. While other defense companies were vying for contracts to produce whole missile systems, Litton backed off and concentrated on providing the highly complex components for the space vehicles. This gave the company more customers to sell to and the opportunity to get financing for invaluable research in a wide range of products. When transistors were industry’s glamour product, Thornton held back and saved Litton the agony of the shake-out period that transistor makers are now going through.

Other firms rushed into making in-ertial-guidance systems for missiles, but Litton devised lightweight models for airplanes—correctly guessing that planes would need more machine guidance as speeds went farther over the sound barrier. Litton now has more than 90% of this market. Rather than join other computer makers in challenging IBM with big models, Thornton went after small models; recently Monroe introduced the Monrobot XI, which is the smallest business computer on the market (price: $25,000).

Eyes on the Sea. Litton has its share of space projects: it made the first space chamber and spacesuit, is making a relief map of the moon so that astronauts will know what they are in for, has created a wind tunnel that simulates the problems of re-entry by speeding up gases. But Thornton is convinced that “there isn’t room in space for all the companies trying to get there,” has turned the company’s eyes downward into the sea. Ingalls has five contracts worth $145 million to build the Navy’s new nuclear-powered attack submarines, which may be the destroyers of the future. Litton’s Western Geophysical Co., with its fleet of 20 ships, is the world’s largest explorer of the ocean depths for minerals. It is currently searching the oceans for the best site for Project Mohole, a much-delayed attempt to bore deeper than ever before into the earth’s crust; Western won the contract to test at four sites after other companies made an initial boring off Lower California to test equipment. “Oceanography* is as challenging as space,” argues Thornton, “and it may have even greater potential.”

Litton is making plenty of other bets on the future. It is at least two years ahead of the field in making portable command and control systems that can be airlifted by helicopters to act as battlefield operations centers. It is working on a device to control the weather, on an electronic retrieval system for libraries, and on quick-cooking microwave ovens—Litton’s first real consumer product—for the potentially big electronic-cooking field. Though Litton is now selling thousands of electronic and computer projects individually, it is quietly gearing up for a massive entry into complete electronic systems that will make a business as fully automated as its owners want it to be.

Such technological changes worry many economists and sociologists. They fear that the unskilled worker, the artisan and the office worker will more and more find their jobs disappearing or changing radically. They see extra leisure for workers as at least a partial answer to the problem, but then they worry about how people will be able to use that extra leisure creatively. Almost everyone agrees that the U.S. is entering what University of California President Clark Kerr calls “the age of the knowledge industry,” when men and women of all ages will have to be continuously educated through their lifetimes to adjust to continued technological changes.

Science Fact. The men at Litton are aware of the problems, but they are optimistic about the long-range effects of technological revolution, believing that great new industries will arise to create even more employment. Thornton sees technology as eventually “freeing man’s intellect for decision making, and freeing his creative powers for the contemplation, theorizing and development of yet newer technologies that can put into use the great abundance of energy available to mankind.” For a man like Thornton, who wants to “build and keep building,” the exciting possibilities ahead far outweigh any possible hazards.

Thornton believes that atomic energy will be used to melt icecaps, explore space, turn the wheels of industry, and even change the weather so that citrus trees can grow in Central Park and the smog problem in Los Angeles can be solved. Newspapers and magazines will be transmitted by radio and either stored on tape or printed on receivers right in the living room. Pocket-sized communications devices will keep everyone in instant touch, and physical ailments will be diagnosed by computer and cured in many cases by replacing worn-out parts with factory-made ones. Money may be eliminated; customers will merely present their thumbs to an electronic scanner that will automatical ly deduct the purchase price from their distant bank accounts.

Many of these possibilities seem as far off as present technological advances did only a few years ago, but Litton is already working in many areas that could lead to them (the company is studying, for example, submarine cargo ships that could cruise serenely beneath the surface, ignoring the turbulent weather above). “These things are going to happen,” says Roy Ash. “We have already crossed the technical boundary. It is only the economic boundary that has to be crossed. So it is no longer science fiction, but science fact and economic fiction.”

“During the next ten years,” adds Tex Thornton, “there should be more scientific and technological advancement than in all history—more than double that of the past 20 years.” This means no letup for a company devoted to profiting by change. Litton’s confident executives do not expect growth to level off until the company reaches at least $2 billion in sales—a point that could be reached within four years at the company’s present growth rate, and that would rank it fifth among U.S. corporations. “There’s really no place to stop,” says Tex Thornton. “We will never reach our destination.”

The onrush of technology has caught up thousands of people in its path and given man mastery over areas that he never dreamed of conquering. It has also created a few problems that never existed before, of course, but Tex Thornton and Litton Industries are confident that man will be able to solve them. Recently, for example, the automatic garbage-disposal unit in Thornton’s home broke down. He called a repairman to fix the intricate device, but the man had no success. So Thornton did the job himself in a Thornton-like way. He gave the problem some thought, then simply got an empty Coke bottle and dropped it smack into the maw of the machine, which came to life immediately and chewed the bottle to bits.

* A word that the professionals in the field now consider inexact. With the in-deep set, the word is oceanology.