High Finance: Texas on Wall Street

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According to Texas lore, the reason Dallas has one of the nation’s busiest airports is that outbound jets are loaded with Texas businessmen heading for Wall Street to borrow money. The two most notable jet passengers from Dallas to New York last week—flying on separate planes to increase the odds that at least one of them would survive the trip—were bound on a different mission. John Dabney Murchison, 39, and his brother Clinton Williams Murchison Jr., 37, flew to Manhattan not as suppliants but as conquerors. In a coup that outdealt even the feats of their wheeler-dealer father, oil-rich Clint Murchison Sr. (TIME cover, May 24, 1954), the Murchison brothers of Texas had won, almost in spite of themselves, a commanding position in the very citadel of U.S. finance.

They did it by taking control of Alleghany Corp., the vast Manhattan holding company whose direct assets ($122 million) by no means reflect the power it exercises over the U.S. economy. Besides having a controlling interest in the New York Central and substantial chunks of the Baltimore & Ohio and Missouri Pacific railroads, Alleghany controls Minneapolis’ Investors Diversified Services, a $3.4 billion investment giant that includes the world’s largest mutual fund. In the biggest and bitterest proxy fight in U.S. history, the Murchisons snatched Alleghany out of the hands of Woolworth Heir Allan P. Kirby, 68, a Wall Street titan with a fortune far bigger than theirs. More impressive yet, they won by rallying more Wall Street support than Kirby himself. “All of us here in Texas were pulling for them,” says Dallas Insurance Millionaire Jimmy Collins. “We like big deals in Texas, and this is the biggest kind you can make. We admire it because the Murchisons won it the hard way—on the home grounds of the other guy.”

The Bird Dogs. The Murchisons’ victory on Allan Kirby’s home grounds was dramatic notice of the changing role of Texas in the U.S. economy. Easterners still like to think of Texans as illiterate oil millionaires who wear ten-gallon hats—and, when they are in Wall Street looking for money, some Texans shrewdly play the expected part. Says Dallas Millionaire Trammell Crow: “I know I can get in to see people in New York more easily because it says I’m from Texas on my business card. They want to see what a Texan looks like.” But at home in Dallas or Houston, today’s Texas tycoon is more apt to wear a Brooks Brothers suit than Texas boots; though his poke may have started in oil (and gained by the 27½% depletion allowance), much of it now comes from electronics, real estate, insurance or shipping. And for the new Texan, Texas is no longer big enough. Ranging across the nation like eager bird dogs, Texas businessmen are supplying capital, entrepreneurial vigor and acumen in nearly every area of the U.S. economy.

Vice & Versa. None of the new Texans have ranged wider than John and Clint Murchison (pronounced Murr-kiss-son). While they were still in their twenties, the brothers were given a Texas-sized chunk of their father’s immense interests. Buying, selling, borrowing and investing all across the U.S., the brothers have doubled their original stake (to an estimated $150 million), now have interests in at least 100 companies, including one of the nation’s biggest residential builders, insurance firms, banks, hotels, country clubs, a major publishing house and oil and gas companies. Even without Alleghany, they owned or directed enterprises worth more than $1 billion. With Alleghany and all its subdivisions, says John, things have got so complicated that “we may find out we’re suing ourselves if we’re not careful.”

The brothers are a formidable team. “We’ve got vice and versa,” old Clint once said of them. “One of my boys won’t make up his mind at all. The other makes it up too fast.” If that were ever true, it is no longer so. Lean, hawk-faced John Murchison is quiet and reflective, quick to charm friend and foe with his affable reasonableness. Before making up his mind, he likes to walk around a proposition and look over and under it—but acts with steely decision once he has set his course. Clint Jr., brush-haired and fierce-eyed behind his glasses, is the more aggressive of the pair, often intimidates people with his acerbic wit and brusqueness. (“You have all the characteristics of a dog but loyalty,” he once informed an old business foe.) Quicker to shoot from the hip in a business deal, Clint often snaps, “I’ll take it,” where John would have drawled, “I’ll think it over.”

Lethal Combination. In typical Texas fashion, the brothers have no written partnership agreement, work out of unmarked and Spartan offices in a two-story building in downtown Dallas. They spend about a third of their time on the road, searching out new deals and consolidating old ones. While John is running down a lead in Colorado, Clint Jr. is back in Dallas, restlessly pacing the corridors and barking into the telephone. Though each specializes in certain areas of business (John in finance, insurance and publishing; Clint Jr. in real estate and construction), they consult each other about every big deal and keep in constant touch by telephone, sometimes using an electronic scrambler to discourage wiretapping. This makes them a lethal combination: not only can each brother work on the deal from a different angle, but each can avoid or postpone entanglements by stressing the absent brother’s disapproval.

In Manhattan last week the brothers, as usual, worked both sides of the Street. While Clint Jr. breakfasted with business partners to talk over details of a real estate enterprise, John left his $17,000-3-year suite at the Carlyle hotel and rode the subway downtown to the green-carpeted headquarters of Alleghany Corp. to begin making “a lot of critical decisions” about Allegheny’s future. After his business breakfast, Clint Jr., too, showed up at Alleghany to listen in on the intricate briefings on company affairs. Then the brothers headed off for separate tables at “21”—Clint to explore another land deal, John to meet with the president of a Murchison-owned insurance company. In the afternoon, Clint Jr. headed back to Dallas to cover home base; John still had a week’s work to do in New York.

A Calf on Credit. The Murchisons have been rich all their lives, began early to get their education in high finance. While they were still toddlers, Father Clint Sr. switched from buying oil leases, in partnership with the late Sid Richardson, into oil drilling. A brilliant trader, old Clint Murchison built his original holdings almost entirely by credit, swapping a share of one oil lease for money to start a second. In 1925, after his fortune had reached $5,000,000, Clint took a brief fling at retirement. But after his wife’s death in 1927 he went back to wheeling and dealing and, in a series of ingenious parlays, built up an intricate, multimillion-dollar empire that eventually embraced everything from ranching to chemicals. “What else is a fellow going to do but work?” said old Clint. “I can’t play the piano.”

Even while he made his millions, Clint Sr. was never too busy for his boys. They lived in a lively, colorful and noisy household, populated by Clint Sr.’s business cronies, learned to play poker and to hunt squirrel, duck and quail in the best Texas style. When John was only ten, Clint began teaching him the basic lessons in financial gain: you can buy something, and make a profit on it, without using your own money. He sold John a calf on credit for $25, took his signed note to pay the price plus interest. Young John later sold the calf at a profit and paid off the note. Said Clint Sr.: “I figure a man is worth about twice what he owes.”

Descending Ax. After this lively upbringing. Eastern prep schools—Hotchkiss for John and Lawrenceville for Clint Jr. —had something to teach, but seemed rather tame. “It’s a great shock for a Texas boy to go to an Eastern school,” says John. “The Eastern boys were more formal, more rigid in their habits. Down in Texas you start driving a car earlier, running around with girls earlier.” John went on to Yale, Clint Jr. to M.I.T. John admits that, except for bistros and girls, his freshman year at New Haven was “pretty much of a loss.” The day after Pearl Harbor, he joined the Army Air Forces—partly, he says wryly, “to escape the dean’s descending ax.” A year later, Clint joined the Marines.

While John flew P-39s in the Mediterranean and P-40s in South China, the Marines sent Clint Jr. through Duke University, where he graduated top man in his engineering class. The war over, John went back to Yale for some serious studying, then headed out to Santa Fe where Clint Sr. had lined him up a $175-3-month job in a bank. Meanwhile Clint Jr. was getting a master’s in math at M.I.T. In 1950 they joined forces in Dallas.

Calvinistic Compulsion. The Texas to which the Murchison boys returned was changing fast, was no longer just a cornucopia shaped like an oil well. Among the Dallas millionaires, Trammell Crow made his fortune by building and operating warehouses in a dozen states, and Carr P. Collins and his sons got their multimillion-dollar stake in the insurance business. Texas Instruments Chairman Erik Jonsson was busy piling up what eventually became $100 million in electronics, and Leo Corrigan was rapidly multiplying his wealth by building a hotel combine that now stretches from the Bahamas to Hong Kong.

Many of the adventurers belonged to a new generation, were just back from a war that had taken them to the ends of the earth and filled them with determination to “make a mark on the wall” that would be visible outside Texas. They had new and ambitious ideas, and their fathers had the money and confidence to act on them. Things began to move fast. Dallas’ Republic National Bank took to financing Texans who were building in San Diego, and wound up so savvy about the market that even San Diego builders began to come to it for financing. Dallas builders, claim the wide-ranging Texans, did more to develop Atlanta than did Georgians. In Texas itself, the deals flew hard and fast under the hands of second or third-generation millionaires such as Angus Wynne Jr., who sparked the Great Southwest Corp., a development company now constructing a huge industrial park between Dallas and Forth Worth.

But if their horizons were broader, the new Texans had some of their fathers’ narrow wisdom about them. They knew how to make credit work and work again. For them, the real joy of business was the excitement of the risk and the satisfaction of pulling off a deal. And with an almost Calvinistic compulsion, they all drove themselves to work, work, work—even after they had made more money than they could ever personally use. “We are obligated to do something useful,” says Clint Murchison Jr., “and the most useful thing I can do is be in business. The most important thing about money is as a measure of your value in the economy.”

Once, That’s All. John and Clint Murchison had some early trouble establishing their value. John got stuck in an unprofitable timber investment in the Northwest, lost millions in mining uranium. Clint Jr. plunged into a residential deal in Dallas on which old Clint figured a smart operator could have made a million. Clint Jr. lost half a million. Said old Clint: “You can afford to go broke once, but that’s all.”

The warning stuck. By using credit as their father had taught them, the boys recouped their losses and began to expand their holdings. Perhaps the most spectacular performance was Clint Jr.’s purchase of the City Construction Co., a Dallas road-paving outfit. He put up only $20,000 in cash to buy the company, met the rest of the price with an $80,000 promissory note. Then he borrowed to buy up other companies, moved into highway construction, dam building, land development and heavy construction by using his growing combines as collateral against each new acquisition. Gradually his original $20,000 investment pyramided into Tecon Corp., a general construction company that now has assets of $10 million. With it Clint Jr. even took on the ambitious job of removing a hill that threatened to fall into the Panama Canal, despite skepticism by other big companies whether it could be done at a profit. He made a handsome profit.

Coming & Going. In the early 1950s, now confident of the boys’ business abilities. Clint Sr. gradually turned over to them a loose entity called Murchison Brothers, which he had set up in 1942. In one shrewd deal after another, the brothers proceeded to acquire or build up housing projects from Florida to Los Angeles, construction-material companies in a dozen cities, land developments all across the U.S., two water systems, several insurance companies and a corralful of other properties. Not content with making the building supplies for the houses they construct, they build the roads and the streets over which the supplies are transported. Says Clint Jr. with a grin: “We like to get our payoff coming and going.”

There is nothing myopic about their business vision. Two years ago, the brothers bought one-third of the land within the city limits of New Orleans—a tract of 32,000 acres. Because nearly all the land was swamp, they paid only $300 an acre. Now they are drying out the swamp by draining off the water, eventually plan a huge development of industry, homes, highways and commercial projects. They have already recovered their original investment by taking in additional partners, and have attracted one of the world’s largest and most modern coffee-processing plants, operated by J. A. Folger & Co., as their first tenant. Within five years, they figure, the land should be worth between $10,000 and $50,000 an acre.

Fast Situations. Unlike most of the oldtime Texas tycoons, the Murchisons run a team operation, delegate authority freely, and depend heavily on a stream of advisers. “Dad is a real financial genius,” says John. “My brother and I don’t consider ourselves financial geniuses.” From all over the U.S., college friends, family friends, business acquaintances—and a spate of crackpots—tip them off about investment opportunities. Unlike their father, who disliked selling any of his properties, they are on the lookout for fast situations that they can get in and out of while the profits are ripe. Above all, they prize good executives (“Management is everything”), like to leave a company’s operation completely in the hands of hired managers, keeping for themselves only an advisory role.

In their Dallas headquarters, six executives known as “associates” keep a close watch over assigned portions of the Murchison empire, deciding the right time to buy, to sell, or to exert more control. The associates do not get large salaries, but they benefit from a friendly Murchison—and Texan—custom: helping friends to get rich by letting them in on deals. “We want our boys to make money,” says John. “If one of them makes a million, we’ve made 10 million. Naturally, they need very little encouragement.”

The Murchisons have enough money to live as they choose—and they choose to live well. John lives with his wife and four children in an immense English Tudor house on 200 acres outside Dallas, attended by squads of help and surrounded by a collection of abstract art. He drives to work in a Porsche 1600 (one of three family cars), but prefers to travel in a Beechcraft Twin Bonanza that he pilots himself. To house it, he built a private airport two miles from his home —and, finding enough plane-owning neighbors around him, inevitably turned the airstrip into a profitable investment. Clint Jr. lives more modestly for the moment. He, his wife and four children have a three-bedroom house in an upper-middle-class Dallas neighborhood—but that is only because it has taken him seven years (and another to go) to finish his dream house. A huge ranch house set on 25 acres, it is equipped with an electronic bar that mixes drinks to order (“I don’t care for tending bar”), an elaborate intercom system (designed by Clint Jr.), and a swimming pool that could float the Queen Mary. He also owns Spanish Cay, an island in the Bahamas complete with private airstrip. A physical-culture faddist, Clint Jr. does 50 pushups, 50 knee bends and 50 situps every other day. He is too busy to do them daily.

Aiding the Legend. The brothers keep in touch with their father, who at 66 spends much of his time in a wheelchair as a result of two recent strokes, but they rarely consult him about business deals any longer. To B. H. Majors, an old Murchison family friend, the boys are motivated above all by a desire “to do right by their father and the legend he has created.” They certainly live by a principle inculcated in them by old Clint. Says Clint Jr.: “There isn’t any sense in having $40 million in the bank or even in securities if you aren’t doing something to enhance the value of those securities. Dad once gave me a great piece of advice. He said: ‘Money is like manure. If you spread it around, it does a lot of good. But if you pile it up in one place, it stinks like hell.’ ”

The Murchisons consider themselves “speculative businessmen” who justify their business existence by spreading money around. “Some people say we are gamblers,” complains Clint Jr., “but that isn’t true. In gambling, you are betting on Lady Luck; in speculating, you have your mind to help you, and you are betting on yourself.” Whatever “speculator” may mean to most Americans, no one needs to smile, podner, when he says it to a Murchison.

They are purists about it, allow no room for complicating motives. As speculators, they regard profit as their goal. They not only take little personal interest in the quality of the books their firms publish or the design of the houses they build, but even hold that it would be improper for them to do so. As the Murchisons see it, an entrepreneur would be exceeding his function and misusing his power if he indulged in the enthusiast’s notion of losing money on respectable authors for the glory of literature, or making less money on a building so that it would be a work of art. The quality of products, as far as they are concerned, is the proper concern of hired managements. They seem to ignore—or at least to underestimate—the risk that hired managers will not bother to put major emphasis on excellence as well as profit if the people who employ them do not.

Being men without a moralizing mission, the Murchison brothers are at least free of that Texas big-rich practice—the buying up of publishing houses, newspapers and radio programs to propagandize for favorite political precepts, usually somewhere to the right of the John Birch Society. As venture capitalists, entrepreneurs or promoters—all terms they can lay claim to—the Murchisons and men like them fill a function by taking risks that others will not, by acting as catalysts, and, in the words of Jules Bogen, professor of finance at New York University, “by channeling funds and resources to areas where demand is expanding and away from areas where it is contracting. The Murchisons anticipate what the demands for a product will be, and then seek to ensure that the facilities will be available to ensure sufficient production of it.” They are optimists by instinct, and ready to take a chance on American growth.

Rival Philosophies. In the battle for control of Alleghany, two opposing business philosophies clashed. Though both Allan P. Kirby and the Murchisons hold inherited wealth, Kirby is a somewhat straitlaced Easterner who has more than quintupled his legacy through the most conservative of investments. Stubborn and secretive, he presided over the holding company that he and the late Robert Young built up with a closefisted super-caution that left no room for the plunging venture capitalism espoused by the freewheeling Texas brothers.

“The Murchisons are wheelers and dealers,” says Kirby, “taking chances and looking for a quick profit. I make a careful study of a situation and then invest and stay in, hoping the situation will get even better. I can speculate with my own money and still sleep at night, but I can’t speculate with shareholders’ money and sleep. I don’t think the Murchison boys feel that way.”

The Murchisons claim that they do. Says John: “When we take a wild shot at something, it’s with our own money and at our own risk; any of our companies where there is public ownership we run much more conservatively.” For that reason, the Murchisons tend to prefer private deals, were dragged into the battle for Alleghany almost despite themselves. When they launched the proxy fight against Kirby last fall, the Murchisons’ motive was to protect a $40 million investment in the Alleghany-controlled Investors Diversified Services, which manages five mutual funds (with assets of $2.6 billion), two certificate companies and a life insurance firm. On the I.D.S. board since 1954 and a strong influence on I.D.S. management, the brothers were kicked off last year after a Kirby-appointed investigator accused them of using I.D.S.’s vast investment power to get favored financing for their private deals (the charges, though since turned over to the SEC for investigation, were dismissed as groundless by a special I.D.S. committee).

Once the proxy fight began, the Murchisons turned it into a massive indictment of Allan Kirby’s conservative operation of Alleghany. They insisted that new management was needed to get the company moving again. They cannily signed up both of the nation’s two outstanding proxy-soliciting companies, surrounded themselves with expert legal advice, and in the very shadows of Wall Street set up a shrewd and able team of infighters the like of which the Street had rarely seen. Though at one point they theoretically had more shares of Alleghany common than Kirby, the brothers recognized that their personal wealth could not vie with Kirby’s fortune—estimated at up to $300 million—in a bid to buy outright stock control. “Our strategy,” says John, who ran the proxy battle, “was to have enough stock to be strong enough to attract the independent Alleghany stockholders.”

The Right Note. Having studied Kirby’s possible courses of action and decided that he might adopt any one of twelve different strategies, the brothers were ready when Kirby plunged into the market, buying up $25 million worth of Alleghany stock. “It was like a crap game with twelve dice in it,” says John, “but the point is that we couldn’t be surprised.” To keep Kirby from buying up 51% of the stock, the Murchisons, who had themselves been acquiring stock quietly, publicly played the underdog. Kirby’s camp fell for the ruse, proclaimed victory, and slowed its purchases. By the time of the cutoff date on stock purchases, the Murchisons had 2,800,000 shares of common stock v. Kirby’s 3,200,000—leaving 3,800,000 shares held by independent voters to decide the battle.

At this point, Kirby declared a 5¢ dividend on Alleghany stock, the first in the company’s 32-year history. The brothers turned this move to advantage by branding it an attempt to buy stockholder support. Kirby apparently did not realize that Alleghany, basically a speculative issue, was held by speculators who were far more interested in capital gains than dividends. Kirby’s conservative philosophy was badly out of tune with the attitude of his stockholders. The Murchisons, by pledging themselves in effect to make the stock go up, struck the right note.

Out on a Limb? The Murchisons concentrated on the 50% of independent stock held on Wall Street for clients, and worked over brokers and customers’ men, using their widely scattered interests to win banks, businessmen and stockholders to their side. They divided the country into regions, devised a canvassing system by which recalcitrant pro-Kirby stockholders were referred progressively upward until they found themselves being charmed by the Murchisons themselves. When the votes were counted, the Murchisons had won 2,200,000 independent votes to Kirby’s 1,000,000—enough to give them an overall 800,000-vote edge. Wall Street, which loves a gambler, voted the stocks in the Street’s name 4 to 1 for the Murchisons.

Murchison control of Alleghany remains highly conditional. Kirby still owns 34% of Alleghany—and could buy outright control if he had a mind to. “The Murchison boys want me to sell out,” says Kirby, “but I won’t. That’s one thing I won’t do. I’d say the Murchison boys are way, way out on a limb.” Kirby does not intend to help them crawl in. “I have no confidence in the Murchison boys,” he says flatly. If the Murchisons fail to put on a spectacular performance in making Alleghany go up, the grudge-holding Kirby may well be tempted to try to regain control.

In a Fishbowl. The Kirby cloud over Alleghany may force the brothers to modify their business style. With their usual yen for good management, they are looking for a strong executive to take over Alleghany; one much-discussed possibility is Eisenhower’s Treasury Secretary, Robert Anderson, a Texan. But any topflight executive is apt to think twice before taking on a company that could change hands again within a year.

John Murchison is temporarily acting as Allegheny’s president, and is uncomfortably involved in deeper management decisions than he ever has been before. Right now his prime concern is Alleghany’s interest in the ailing New York Central, which he considers “just a lot of problems.” Says he hopefully: “The Eastern railroads are ready for a merger, and I think that the New York Central would be a splendid contribution to any merger.” But given the slow-freight mentality of the Interstate Commerce Commission in arriving at decisions, and the complex corporate intrigues at work among the Eastern railroads, getting rid of responsibility for the Central is not likely to be easy.

The Murchisons are reluctantly facing up to the prospect that they may not be able to wheel and deal as freely as before. They are currently considering such non-Alleghany deals as leasing a ranch in Hawaii for a major real estate and housing development, financing a monorail system, merging two insurance companies, and constructing two new cement plants. But, says John: “Our involvement in Alleghany is now so heavy that we are going to have to concentrate on that for some period of time. We may see ourselves shifting away from other investments to solidify our position there. There has been such a spotlight on Alleghany that we have to expect that whatever new venture the Murchison brothers go into, some Alleghany stockholders might complain: ‘Why didn’t you put that deal into Alleghany?’ We’re going to be operating in a fishbowl, and we have to be supercautious from now on.”

These were words that sounded more like Allan Kirby than the sons of Clint Murchison. But Wall Street puts its mark on a man. Perhaps it did not mean anything at all, but last week John Murchison, who ordinarily wears no hat, even went out and bought himself the current Wall Street fashion in summer headgear—a straw boater.