Millionaires: How They Do It

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As a land passionately devoted to free enterprise, the U.S. has always been the best place for a man to make his million. Throughout its history—from the days of the earliest Virginia planters to the postwar bloom of electronics millionaires—the drive for fortune has been a shaping influence and a productive force. The fabled 19th century millionaires—John D. Rockefeller, Edward H. Harriman and Andrew Carnegie—all began poor. Despite their often controversial actions, they, like most American millionaires, basically enriched themselves by enriching a growing nation.

Lately, the belief has grown that it is no longer possible to become a millionaire, that debilitating taxes, savage competition from big corporations and the sating of consumer appetites have slammed the door to great wealth. Wrong on all counts. The U.S. still offers countless opportunities for the man who wants to accumulate a personal net worth of $1,000,000 or more—and thousands seize them every year. The number of U.S. millionaires, reports the Federal Reserve Board, has swelled from 40,000 in 1958 to nearly 100,000 at present. How do they do it? In a variety of individual ways, but their common denominator is that they find an economic need and fill it.

Insatiable Craving. Today’s prospering capitalism creates enormous needs and endless challenges. Economically and socially, the U.S. is the world’s most mobile nation: capital flows freely from lenders to borrowers, workers shift from job to job, and venturesome entrepreneurs jump quickly up the economic ladder. The changing trends of business, science and demography provide the risktaker with ever fresh chances. Technology’s quantum leaps are opening new industries almost every year—transistors, computers, lasers, masers, color TV. The shift of the economy’s vast weight from traditional heavy manufacturing into the growth area of services is producing limitless openings for men with ideas. So is the movement of the population: young marrieds are going out to the suburbs, oldsters are coming back to the cities, Negroes are moving North.

As the population grows and shifts, its wants speed ahead. Americans have an insatiable craving for improved goods and services, more eagerly embrace new products than any other people. Their willingness to buy almost anything that will amuse, uplift, beautify or offer convenience is demonstrated by the marketplace successes of such things as textured stockings, the electric carving knife, skate boards, diet cola, shoe-shining machines and speed-reading courses. Getting backers for a sound idea is no real problem; credit is cheaper (average interest rate: 5%) and bankers more eager to lend in the U.S. than in any other major nation.

Compulsively Driven. In this dynamic and changing environment, the new millionaires are quite unlike anything the nation has ever seen. Compared with the gilded-age millionaires of a century ago, they are harder-working, less flamboyant and more anonymous. They have not made their fortunes in steel, oil, railroads and the other basic industries, but in the frontier technologies, the newest services and even the arts. They are an uncommonly talented lot: bright but not brilliant, pragmatic, somewhat egotistical, compulsively driven to achievement.

Archetypical of this take-charge generation are the six men on the cover. All of them are under 40. All began with little or no capital. All have built productive wealth by creating jobs, purchasing power and useful ideas. They are not only men of considerable imagination but able managers and administrators who realize that even a million-dollar idea is useless unless the man who has it knows how to put it to work and has the courage to take risks. The case histories of these six—and of their self-made compatriots—add up to a primer on the art of becoming wealthy.

Mobile Manufacturer

Arthur Julius Decio, 35, of Elkhart, Ind., is a millionaire because he early recognized and exploited the billion-dollar-a-year market for low-cost mobile homes. As president of Skyline Homes, the industry’s biggest producer, he is worth just over $5,000,000. Skyline’s sales in the past four years have jumped 500% to $59 million, and Decio expects to race along with the fast expansion of the two population groups that buy the most mobile homes: young marrieds and retired oldsters.

Decio started in the garage behind his childhood home in Elkhart, which is next to—and on the wrong side of—the New York Central Railroad tracks. His father, an Italian immigrant grocer, sank some savings into mobile homes in 1951, but did poorly and begged son Art to try either to rescue or liquidate the small company. Decio, then a steel salesman, put in $3,200 of his own, recruited three friends and started to work.

He quickly saw that many small, regional producers were competing in the crowded field, and that Skyline would have to build a unique model and carve out a distinct market to survive. To do that, he designed a 20-ft., smaller-than-usual mobile home that had the advantage of being cheaper and more easily transportable than competing models. Once Skyline was on its feet, Decio got the idea of imitating the automakers’ methods of frequent model changes and nationwide distribution. He introduced a “research and development” department to design new styles of mobile homes, started building a network of 2,300 dealers that now covers the entire U.S. He brought out four lines of mobile homes, each competing with the others. “That way,” he says, “we can get our products in the hands of four different dealers in the same market. Such a system works for General Motors, and it works for us.”

Man of Many Parts

Charles Bluhdorn, 39, Manhattan-based chairman of Gulf & Western Industries, a widely diversified company specializing in auto parts, began as a penniless immigrant. Now he is worth more than $15 million.

A wartime refugee, Vienna-born Bluhdorn came to Manhattan at 16, immediately went to work as a $15-a-week clerk in a cotton brokerage house. Later he rose to a $60-a-week job in a commodities house, where he learned the intricacies of that gyrating business and discovered the secret that got him going: fortunes can be made on a meager stake in international trade. At 23, he invested $3,000 and started his own export-import business in a small Manhattan office. Within eight years he had bagged his first million by buying an awful lot of coffee from Brazil.

Bluhdorn then decided on a strategically wise maneuver. He used his profits to buy into a more secure and promising business: auto replacement parts. In a Balkanized industry that has thousands of small suppliers, he figured that the best goal was to knit together a nationwide network of manufacturing plants, warehouses and distributors. First he bought and merged a small-parts manufacturer and a parts distributor, then gradually parlayed profits and loans to add more companies.

Today, Bluhdorn’s $182 million-a-year Gulf & Western makes and sells auto parts throughout the U.S., controls 57 subsidiary companies, and has branched into the manufacture of jet-engine parts, guitars, and survival equipment for spacemen. Through his own outside investments, Bluhdorn also controls the East’s 197-store Bohack supermarket chain, and is the third largest shareholder in Ward Foods, Inc.

Businessman-Showman

Harold Smith Prince, 37, has struck his bonanza in one of the roughest, toughest, least tractable businesses: the Broadway theater. A combination businessman-showman, he has produced or co-produced ten hit musicals— including Damn Yankees, West Side Story, Fiorello! and Fiddler On The Roof —that have earned $5,300,000 and brought him a personal worth of just over $1,000,000. Hal Prince has precisely the right balance of creativity, charm and salesmanship that makes a successful producer. “It’s a terrible shame if you’re born the brightest guy in your class,” he says. “If you’re not, then you learn to hustle—and that’s good.”

The son of a middle-income stockbroker, Prince entered the theater at 20 as an odd-job boy for Director George Abbott, got a lot of tips and contacts from him. When he was 25, Prince and another Abbott aide, the late Robert Griffith, bought an option on a book called 7½¢, hired writers and composers, then went out to raise cash in backers’ auditions staged in the living rooms of friends. While four chorus girls warbled songs, Prince recited the story line and passed around a fifth of Scotch, a bag of potato chips and a ballpoint pen for prospective angels. From 164 investors, he raised $250,000 for the show—The Pajama Game. It is still playing on the road, so far has earned $1,850,000. Prince has never since had to worry about backers.

Prince’s principle of success is that he has brought sensible business management and cost accounting to an erratic field in which producers too often think that budgets are for breaking. He knows what every item in every scene costs—”including how much I’ll need to simulate icicles.” When casting his shows, he scouts for little-known talent because “stars tend to take the cream off the top of the profits.” Broadway musicals commonly cost $500,000 to produce, but none of Prince’s shows has topped $400,000.

Land Speculator

Arthur Carlsberg, 32, of Los Angeles, has earned $5,000,000 in the business in which fortunes have traditionally been made fastest: real estate. He is chairman of Rammco Investment Corp., a Southern California land-investment firm that has shown a canny ability to pick farmland plots that later boom into building sites. Exuberant demand for choice land—which has helped send the price of housing sites in the U.S. up 15% annually during the 1960s—enables a land speculator to multiply his money in a hurry.

At the University of Southern California (’53), Carlsberg ran a profitable entertainment magazine, then began renovating old houses and investing his savings in land. He was fascinated by the fast spiral in prices, but astounded to discover that few experts thoroughly researched the factors that made values soar. Says he: “Ninetynine percent of the real estate agents didn’t know what they were talking about.”

He decided to remedy that. To analyze potential investment land, he began compiling a store of 14 statistics about undeveloped areas, including such basics as the value of industrial payrolls and proximity to railroads, airports, highways and utilities. By applying his techniques to a business that is usually short on facts and long on rumors, Carlsberg collected his first million well before reaching 30.

Last year he joined with two other millionaire land investors, Bernard Selwyn and Herbert Edwards, both 42, to form Rammco. The company’s aim: to make money by letting other investors in on the land boom. The partners buy up huge plots in Southern California, then sell chunks to investors and manage the land for them until its value rises and the owners sell out to other investors. Rammco earns its profit by charging a 10% commission on each transaction, now manages $50 million worth of land.

Memory Man

Merlyn Francis Mickelson, 38, of Minneapolis, a high school dropout and former disk jockey, has exploited a high degree of ability in a specialized technical field. He is president and 75% owner of Fabri-Tek Inc., a $16 million-a-year company that is the nation’s largest manufacturer of memory cores for computers. His stock holdings in the firm are worth $47 million.

Born on a drought-stricken Minnesota farm, Mickelson quit high school in 1943, joined the merchant marine—and was sent into radio training. That led to a succession of postwar jobs as radio-station engineer, broadcaster, electronics technician. In 1953 he joined Remington Rand and was put to work designing memory cores for Univac. Computers were in their infancy, and a skilled designer could quickly make a mark in the field.

Authorities at the federally subsidized Argonne National Laboratories outside Chicago heard of Mickelson’s expertise in this narrow specialty, invited him in 1955 to start building experimental computer parts, offered to supply the raw materials. Mickelson figured that the demand for memory cores would be so great that even a small firm could cash in on it. He set up Fabri-Tek in his basement, working nights and weekends while he held his daytime job at Remington Rand. His total investment in the new company was for “some wire, solder, tweezers, and a little pair of nippers—altogether $7.21.”

As his Argonne contracts multiplied, Mickelson taught friends and neighborhood housewives how to make the tiny (one-twelfth inch wide) cores, and private companies began buying them.

Then he financed expansion by selling stock to the public. Today he owns four plants, employs 2,200 people and turns out sophisticated memory systems that sell for $35,000 to $180,000 each. The Government gave him a lot of help, but he had the good business sense and the raw courage to seize an opportunity.

Advice Seller

John Diebold, 39, a self-professed “management philosopher,” has made the most of blending technology with management consulting. From his office above Manhattan’s Park Avenue, he tells companies and even governments how they can use advanced technology, notably computers, to be more efficient. The Diebold Group of Companies spans 13 offices from San Francisco to Milan, and Diebold is worth “well over a million.” He is by no means the biggest

U.S. management consultant or the first to concentrate on data processing, but his blend of vision and personal push has made him the best-known and most debated personality in a generally anonymous field.

All this began with a graduate-school thesis. At Harvard Business School in the early 1950s, Diebold helped prepare a report on the new science of automating factories. He used it as the basis for a book, Automation, which helped popularize both the word and the author. Then he set up a firm in the attic of his father’s house in Weehawken, NJ. Ultimately Engineer Diebold hired businessmen and technicians to work for him while he supervised his firm’s growth and actively promoted his ideas and himself. He is currently selling advice to Lockheed, Du Pont, Agfa, Xerox, IBM, Allstate Insurance, Philips Lamp, Westinghouse and 250 other companies.

Recently he made a deal with the French Rothschild bankers, who are partners in his Paris consulting branch, to set up a company that will offer computer services to French firms. He is also conducting a course for executives of 90 major U.S. and European companies in the long-range impact of information technology on business (his total fee: $1,000,000), and is negotiating with the government of an East European satellite to teach its managers U.S. business techniques. That project has been approved by the U.S. Government, which has often engaged Diebold as an adviser to the Labor Department, the Peace Corps, and the U.S. delegation to the United Nations Science Conference. Says Diebold: “I’m not interested in being heard by everyone, but I want to function in the mainstream, where the action is.”

And Many Others

Other men find their fortunes in many-other fields, some of them surprising. Though the average age of the U.S. millionaire is about 60, a remarkable number of the men who create productive wealth—the doers, drivers and achievers—become millionaires before they reach 40, then go on during their 40s to build their businesses even bigger. The most imaginative innovator in discount retailing, Korvette’s Eugene Ferkauf, became a millionaire in his early 30s and now, at 44, is worth $55 million. The young owners of National Football League franchises—notably the Philadelphia Eagles’ Jerry Wolman, 38, and the Cleveland Browns’ Art Modell, 41—have seen the value of their investments rise by more than $1,000,000 annually for the past several years. Even the typical Caterpillar Tractor dealer is a millionaire.

The most promising area for making money is still real estate, which offers larger returns for less effort than any other endeavor. The biggest key to wealth in real estate—and many other businesses—is “leverage,” the ability to magnify the power and impact of a small initial investment by operating mostly on borrowed capital. A speculative builder can erect a building for 10% down, then get financing for the rest and boost his after-tax profits by deducting both his interest costs and heavy depreciation.

Land developers also do handsomely. In 1956 a former cotton picker named Michael Mungo began studying population trends in and around Columbia, S.C., saw that all signs pointed to rising growth in suburban areas. He bought up outlying land for $282.50 an acre, put in water lines and some other improvements; the land now sells for $11,000 an acre. Result: Mungo, at 37, is worth $2,000,000.

Fudge & Toys. Wall Street’s world of investment and brokerage offers an unbounded potential for young men who are willing to put up with low pay and long hours at the start. Most of the senior partners in the nation’s top investment banking houses are millionaires; their salaries run about three times as high as those of officers in competing commercial banks. Hundreds of young men have ridden to riches in the long postwar bull market. John F. Donahue, 41, a West Pointer and former SAC pilot, did so well selling mutual funds door-to-door that in 1955 he decided to form his own fund, Federated Plans. He is now worth $1,500,000.

Despite stiffening competition from large manufacturers, many small and nimble entrepreneurs have outmaneuvered the lumbering giants by marketing simple or highly specialized products. Atlanta’s Alvin Weeks, 41, started out by whipping up divinity fudge on his mother-in-law’s stove, got the idea of producing pastries in easy-to-heat foil pans; this year his Aunt Fanny’s Baking Co. will sell $6,000,000 worth of sweet rolls. Cincinnati’s Joseph McVicker, 35, who took a lump of wallpaper cleaner and made it into one of the nation’s most popular toys, Play-Doh, is a millionaire. Recently he sold out his business and started a second career by entering the Harvard Divinity School.

Bouncing Back. However they make their money, the self-made millionaires have many traits in common. Almost all of them decided early in life to be their own bosses. Most of them started earning money while still children: by the time he was 13, Arthur Carlsberg had been a caddy, gardener, seed salesman and fruit trader. Many of them, like Merlyn Mickelson, never went to college; others, like Arthur Decio and Charles Bluhdorn, impatiently dropped out of college in order to study in the marketplace. At the beginning of their careers, they lived lean, often taking shoestring salaries in order to pump profits back into their enterprises. In his first plant, Mickelson doubled as a floor-sweeping janitor. Many of them suffered at least one jarring failure in business, but showed a capacity to bound back unfazed.

Now that they have climbed high, the newly rich are sensitive about the “millionaire” title and seldom brag about it. But they respect the power of money, like what it can buy. Great wealth seems to produce a security and mobility that usually enables the rich to grow richer. By putting $1,000,000 into municipal bonds, an investor can get an annual income of $35,000 tax free. Most of today’s newly rich entrepreneurs use their money in a more venturesome way, but few of them live on as grand a scale as the ostentatious millionaires of the Gilded Age. In an affluent nation where almost every middle-class wage earner can own a house and a car, take a holiday abroad and educate his children well, the F. Scott Fitzgerald aphorism—”The very rich, they are different from you and me”—is not nearly as true as it once was.

Some of the millionaires, of course, like to indulge expensive tastes. Walter Davis, 42, of Odessa, Texas, saw a need for a trucking business to haul oil from out-of-the-way wells to central pipelines, borrowed $5,000 and built a business that has earned him at least $7,000,000; now he lives in a $700,000 house and enjoys gambling $100,000 a weekend on college football games. Even those who are less flamboyant like to live well: John Diebold has a 16th century living room that was transported stick by stick from Sussex, England; Pittsburgh Theater Magnate Ernest Stern, 45, owns two dozen antique cars and a 53-ft. yacht.

More than Just Money. The motivation of the millionaire is seldom purely materialism. To him, the accumulation of a million is usually just a milestone on the road to a greater goal. Charles Bluhdorn seeks “the joy of putting something together and seeing it grow.” Says Arthur Carlsberg: “Accumulating money is a hobby, a game, a drive. I enjoy it.” Perhaps the best explanation comes from Manhattan’s Robert K. Lifton, 37, head of the widely .diversified Transcontinental Investing Corp., who has earned $4,750,000 through real estate and other ventures. Says he: “This is our form of creating. If artists give up the world’s pleasures to pursue their calling, people understand it. What they don’t understand is that many businessmen have the same creative drives and derive the same satisfactions as artists—but what they are doing is translated into dollars and cents. When I come up with a good deal, that’s creative. Successfully merchandising a product is creative. Taking a business idea and making it work is creative.”

Whatever their motivation, the millionaires frequently pay a high price for their wealth. They work like galley slaves, have little time for recreation or exercise (Arthur Carlsberg every morning does 15 minutes of pushups, sit-ups and squats—”while I listen to stock market reports on the radio”). Usually they put in ten or twelve hours at the office, then spend their nights and weekends pondering reports or burning up the long-distance lines. Practically everything that they do is somehow devoted to building the business. Says Fletcher Jones, 34, of Los Angeles, who in 1959 saw a need for a firm to analyze and program problems for computers to solve, started his Computer Sciences Co. and is now worth $20 million: “Money allows me to do some of the things I want to do. Still, I don’t have time to do most of them—travel, for example—so really the money doesn’t count that much.”

Typical Lament. Perhaps because they are so busy applying practical knowledge, few of the millionaires have any time for religion. Clergymen report that only the Catholics among the new millionaires remain close to their church. Says Hal Prince: “I gave up thinking about religion long ago—I couldn’t dope it out.” The millionaires also have an extremely high divorce rate. Typical is the lament of Del Coleman, 40, a tavernkeeper’s son who bought and sold a succession of sickly companies and gained control of Chicago’s Seeburg Corp. (jukeboxes and vending machines). Says Coleman, whose 14-year marriage cracked up recently: “Our worlds just grew apart. Work is a jealous mistress.”

The men at the top tend to have few trusted friends, feel most comfortable in mixing with people who, like themselves, have made it big. They also have little time for their families. Arthur Carlsberg, for example, is so busy that he rarely sees his three sons; he takes off one week a year to spend with them, also leaves the office to be with them on their birthdays—and that’s about it. Many millionaires say that they worry that all the money may soften their youngsters, rob them of incentive and aggressiveness. To fight that possibility, Boston Real Estate Millionaire Gerald Blakeley, 45, has a rigid rule: his four sons have to earn every penny that they spend from the time that they are twelve—”and that’s every penny.”

A Beginner’s Guide. For all the obvious sacrifices, countless more Americans aspire to become rich. They just do not know how to go about it. No formula is pat or certain, of course, but the millionaires lay down several guidelines for daring young men who would emulate them.

They all agree that an ambitious youngster should start planning early in life. A college education may be helpful, but it is not necessary. Says James Thomas, 37, a Los Angeles real estate and manufacturing millionaire: “College prepares you to work for someone else—and you can only make a million by working for yourself.” The big corporation is no place to get rich, the millionaires believe; competition for top positions is much more rugged among corporate executives than among self-bossed entrepreneurs. Hired executives rarely become millionaires; the few who do so make the grade through stock options, which they rarely get before 40.

What the entrepreneur should do, many millionaires advise, is “launch an enterprise in a market where either nobody is doing anything or the leaders are not very good.” As soon as his business begins growing sturdy and prosperous, the owner should either float a stock issue to expand it or sell it out to a bigger company that might be willing to pay generously for a well-established specialty business. With his profits, plus any borrowing he may need, the young entrepreneur can then buy control of a still more promising business.

One essential to success is a sure sense of timing. The right time to have broken into the computer industry or electronics or frozen food or Arizona real estate was in the 1950s; now those fields are crowded. Similarly, the bonanza days of mining and oil are probably gone. Other fields are invitingly open, however, and they can usually be spotted by keeping an eye on three things demographic changes, new legislation and the state of the U.S. and world economy.

Go Abroad. In a nation in which half the population is under 29, the future is unbounded for any business that caters to young people. The brightness of the youth market is reflected in the recent successes of surfboards, pancake houses, false eyelashes, and the Super-Ball, which can bounce for a full minute before stopping. At the other extreme, prospects are healthy for businesses that sell goods and services primarily to people over 65. The lengthening life span and the increase in social-security payments—plus the passage of medicare —will heighten demand for hospital supplies, medical equipment, nursing homes and retirement villages.

With the rise of the 35-hour week and four-week vacations, millionaires also detect tempting prospects in recreation. Among them: marinas and vacation homes. The growth of leisure and the youth market will also strengthen businesses involved with education, including secretarial schools and accounting schools. Oakland Lawyer Michael Rafton tapped that market: In 1960 he put up $31,000 to buy a struggling company that had been making big cargo boxes, switched it into the manufacture of portable classrooms, and last year sold out at a huge profit. The demand for time-saving conveniences can be turned into wealth. Chicago Millionaire Charles Stein, 37, got started by squeezing oranges into juice and selling it to hospitals and hotels. Los Angeles’ Al Lapin, 38, and his brother, Jerry, 36, became rich by brewing coffee that they sold from wagons in office buildings, later built and franchised a string of pancake houses.

Opportunities are also plentiful abroad. The Europeans, for example hanker for more and more U.S.-type goods and services. Recently, Americans abroad have begun to launch everything from “heel bars” for Europeans with worn-down shoes to recruiting firms for U.S. businesses seeking European managers for overseas. In many parts of Latin America, Asia and Africa, the risk-taking businessman will find waiting markets for housing and manufactured goods, can get attractive investment guarantees from the U.S. Agency for International Development.

Look for Problems. “Opportunities are usually found where the problems are found,” says Los Angeles’ Fred Bailey, 39, who founded a small microwave company on a $500 stake, foresaw a shortage of ordnance parts for brush-fire war, and started to make them, earning $2,000,000. His word to entrepreneurs: “Go into anything that will deal heavily in helping solve the problems of the population explosion—to help provide food and fresh water to provide transportation and communications systems, to clean the air.” Charles Gelman, 33, a Michigan chemist who was brought up in an orphanage, figured that he could build an improved air-pollution sampler. He put together a device from hardware-store parts, has since amassed a $1,300,000 fortune from a filter-manufacturing business that is growing along with the public clamor for air-pollution control.

California’s Fletcher Jones, the com puter programmer, believes that the fu ture belongs to “brokers in technology” —young men with the savvy in both business and technology to organize and manage the work of scientists. Say he: “Look for opportunities in the very newest technologies—oceanography, sub-miniaturization, information retrieval—where a man of 35 can have the experience of someone of 65. But stay away from law, medicine and architecture. Professional men almost always practice alone. To become a millionaire, you must get people behind you so that you can be multiplied.”

The Honorable Ambition. Seventy-five years ago, the Rev. Russell Herman Conwell, a Philadelphia Baptist minister, went about the nation delivering a popular speech in which he praised not only the virtues of hard work but its rewards as well. “To secure wealth is an honorable ambition,” he intoned, “and is one greattest of a person’s usefulness to others. Money is power. Every good man and woman ought to strive for power, to do good with it when obtained. I say, get rich, get rich!” Conwell repeated the speech before 6,000 audiences, earned $8,000,000 in fees. He should have lived to see the U.S. of 1965. In no other country of the world, at no other time in history, have the chances to make a fortune been better than right now.