the _Big Sara_ for the cruise home. The admiral had just been
selected for the highest naval command, Chief of Naval Operations,
in Washington. En route north he brought up the problem of the “home
yard” for the _Lexington_. Norfolk was the _Lexington’s_ home yard.
Admiral Pratt, proposed to return her to the Atlantic in order to
balance the work load—in other words keep the yard workmen employed.
Wagner and I took issue with him and I must have pressed too hard on
the need for keeping the squadrons together for training, for Admiral
Pratt turned on me in some annoyance and barked, “You always see the
ultimate objective and want to take it on the first assault. You’ve
got to learn to take minor objectives one at a time, and to hold them
till the big one falls in your lap. Otherwise,” he added, shaking a
finger in my face, “you’ll never get anywhere in this man’s Navy.”
Shortly after we arrived in San Diego, and even before the admiral’s
relief had reported, Bull Reeves was detached from his command. The
day he shoved off, all his squadron commanders and staff accompanied
him to the Santa Fe railway station. Overhead FLEET AIR paraded for
him in a last formation flight. The Old Man put up a cheerful front
until Harry Bogusch shook his hand.
“Admiral,” said Harry, “we used to hate your guts for making us fly
those tight formations, but that night off Panama we blessed you for
the air discipline you had forced on us.” With that, two big tears
welled up in Bull Reeves’s eyes and ran down his nose onto his gray
whiskers.
After Admiral Nulton had hoisted his flag on the fleet flagship
_California_, I found myself once again on a battleship. Time was
when I would have thrilled at the thought. Now it left me numb. To
have served with two great leaders in succession and to have lived
through the creative period of naval aviation ashore and afloat and
then go back to battle wagons cheerfully was too much to expect. I
couldn’t get into the spirit of it.
When later the _California_ spent the summer at the navy yard
in Bremerton, Washington, I was completely cut off from aircraft
operations except by correspondence. Admiral Nulton and his battle
fleet staff tried hard to absorb some of the new ideas, but it was
too much to expect them to think and act intuitively, along lines
that crisscrossed every preconceived idea.
The end of the summer found us back behind the breakwater at San
Pedro, when one day a message came that Fred Rentschler and Bill
Boeing had flown down from Seattle in their Ford Trimotor and were at
the Los Angeles Biltmore where they would like me to have dinner with
them. I knew from the newspapers and from letters that great things
had been going on in the aircraft industry. Not only had some of
the companies made money on operations, but some of the leaders had
become rich as a result of the increased values of their stocks. This
was the beginning of the end of that mad period of speculation in
which all sorts of mergers and consolidations had prompted the public
to get into the market and make a killing. In the aircraft industry,
Curtiss and Wright had led off with a merger that had brought
together two of the greatest names in aviation and had put two of the
biggest operations under the same tent.
In reply Boeing, Rentschler, Chance Vought, and others, fearing the
giant thus created, had consolidated in a merger of their own. Unlike
the Curtiss-Wright consolidation, which, to them, smacked of Wall
Street, the new one was to comprise only sound companies, those which
had already proved profitable or seemed likely to continue to do so.
The big idea was to bring together, under one leadership, the best
in airplanes, engines, propellers, and transport systems in order to
coordinate engineering experience in a way that would speed progress.
For passenger air transport still seemed to hang on a dead center: it
was impossible to reduce rates unless volume could be stepped up, and
volume refused to step up until costs came down.
The new outfit, which had taken the name of the United Aircraft and
Transport Corporation, planned to get its engineering heads together
and create improved aircraft designed to break that log jam. Fred
Rentschler and Bill Boeing had come to Los Angeles to look over some
of the western companies like Northrup, which had already joined up,
and Menasco, which would like to. Reading about the Curtiss-Wright
consolidation, I had to smile at the idea I had once had of depending
upon those two for air-cooled engine competition. Save for Fred
Rentschler and Pratt and Whitney, they would now have us by the neck.
It was an interesting circumstance that the particular group should
have joined up in the new outfit. For I had put the bee on Chance
Vought that had produced the prescription for the Pratt and Whitney
Wasp, and had later sent Bill Boeing to Fred Rentschler for the
engines for his mail planes, the very engines that had made possible
a tidy profit out of a venture that Bill’s competition had called
impossible. And save for the Martin torpedo bombers, this group had
supplied all the equipment for our carriers, including the engines
for the Martins. And the marriage seemed natural from another point
of view: the parties at interest were all pioneers with a zeal for
aviation and they had all played the game according to Hoyle.
On arrival at the Biltmore I found another old-timer in their
company. Thomas Hamilton, like Bill Boeing, had grown up in
Seattle, but unlike Bill Boeing he had not had money to spend on
airplanes. Instead he had taught himself to fly in a crate of his own
construction and had then built his own business. On the outbreak
of World War I, Tom had rushed to Washington to get a contract to
build airplanes but had been diverted to Milwaukee, Wisconsin, the
home of furniture manufacture, to make propellers. He had, however,
established his own Metalplane Company and built a high-wing metal
monoplane that, he claimed, antedated the Ford. And when the new
United Aircraft and Transport Corporation had looked around for a
propeller company to round out their line, they had taken over Tom
Hamilton, his Hamilton Aero Manufacturing Company, and his Hamilton
Metalplane Company. Tom, like every other Tom, Dick, and Harry of
that time, had been in the stock market but, unlike some of them, had
done well.
At dinner that evening, I noted the changes that had come over these
men. The time had been when they had scratched gravel for the last
trace of “color” that might lie close to bedrock. Now they flew
high, wide, and handsome on the crest of the current boom. They had
flown in aboard their own Ford Trimotor; they had taken a suite at
the Biltmore and now they ordered the exotic foods on the menu. One
advantage of the naval service was that much of this had passed us
by; we had security, but no wealth. These men had wealth but little
security, and even at the height of the great boom of the late
’twenties, Fred Rentschler, at least, clearly foresaw the ultimate
outcome. To him the whole thing was crazy—a house of cards built on a
foundation of sand, foredoomed to collapse at the first real tremor.
Meanwhile they shop-talked back and forth, discussing their current
management problems, one of which seemed to concern Tom Hamilton and
his propeller company.
It seemed that after I had taken the decision, away back there in
BUAERO, that we would use the new metal propellers in place of the
wooden ones, two companies had competed for the business—the Hamilton
Aero Manufacturing Company, of Milwaukee, and the Standard Steel
Propeller Company, of Pittsburgh. In the middle had sat the Reed
Propeller Company, owners of the patents taken out by Dr. Sylvanus
Reed. These patents, covering metal propeller blades made of “light
alloys, solid throughout the outer half of their length,” had been
discounted by both Hamilton Aero and Standard Steel, who had declared
them invalid. However, the new Curtiss-Wright Corporation had
absorbed the Reed Company to put the power of Curtiss-Wright dollars
behind the patents.
Meanwhile, Tom Hamilton, of Hamilton Aero, and Harry Kraeling, of
Standard Steel, fought their conflict on other grounds. To match
Tom Hamilton’s propeller-design savvy, Harry Kraeling hired Frank
Caldwell, the Army’s civilian propeller expert, away from the Army.
Frank Caldwell had a few inventions himself and was one of the
best informed men in the industry. Both companies sold “two-piece”
propellers—that is, duralumin blades mounted in steel hubs that
permitted blade-angle adjustment on the ground. The Reed Company held
to single-piece, fixed-pitch props made of solid duralumin. It was
one of these that had dumped me into the dirt at Anacostia, back
in 1926, when a blade had broken off close to the hub. I still kept
a section of that blade as a souvenir. Now after United Aircraft
and Transport Corporation had acquired Hamilton Aero, of Milwaukee,
Standard Steel, of Pittsburgh, had countered by recognizing the
Reed patents and taking a license from Curtiss-Wright. Standard
paid Curtiss royalties, and in exchange Curtiss agreed to sue all
infringers of the patents—including Hamilton.
Fred Rentschler, as president of United, had not relished a patent
suit with Curtiss and had therefore bought up Standard Steel of
Pittsburgh from its local stockholders. This had given him freedom
from the threat of suit because he had acquired the license in the
transaction, but it had opened up other problems. The two propeller
companies had been so highly competitive, it now seemed unlikely that
either Hamilton or Kraeling could consolidate the two outfits into a
single company; they needed new and neutral management. Furthermore,
since the consolidation had brought the two manufacturers into one
group, the action had deprived the Army and Navy of their cherished
competitive sources and had substituted instead a potential monopoly.
It was like old times to chin with these friends about their business
problems and to become, for an evening at least, a part of the world
I had once lived in. In that world, petty personal jealousies had
to be subordinated to business principles. Only in a semipolitical
organization, such as the Army or Navy, where there was no financial
statement to measure the quality of leadership, could men indulge
in such extravagances as personal politics. Of course in business,
personalities did exercise strong influences, but in the long run,
economics seemed to write the answer to the business equation.
After a visit in Los Angeles, Rentschler and Bill Boeing flew to San
Diego to call on the Navy. Taking off in my little Vought Corsair,
I went ahead to introduce them to the new command down there. Then
one evening as we sat together in a bedroom of the old Hotel del
Coronado, that relic of the lush boom days of Southern California,
Tom Hamilton and Bill Boeing turned in, leaving Fred and me to talk
shop. Fred was back on his propeller problem, wondering if I, by any
chance, could suggest a possible new president for the consolidated
company. He had, of course, kept in touch with the gossip in BUAERO
over the controversy with FLEET AIR, and was aware of its influence
on my personal situation. The talk drifted naturally to this subject,
and before I was aware of its drift, Fred had invited me to take over
the propeller job.
“Don’t be silly,” I laughed. “At forty-two, I’d be crazy to even
consider it. In the first place I am devoted to the service and, in
the second, there’s nothing in a naval officer’s training to qualify
him for business competition.”
“I haven’t suggested it,” Fred replied soberly, “without first
thinking the matter through. I’m sure you have the necessary
versatility and resourcefulness.”
“I appreciate your interest and thank you for the compliment,” I
replied, “but frankly I’m sorry you brought it up. If I accepted,
which, of course I have no intention of doing, the time would surely
come when I would regret it. And in passing it up, I open myself to
the certainty that every future setback will make me sorry I lacked
the guts to resign.”
“Is there no way for you to retire?” he asked.
“No, and if there were, that wouldn’t be the way to go about it.
Nothing but a complete separation would do, and for me, that is quite
out of the question. I’ve got twenty-five years in on my retirement.
Throwing that away would be stupid.”
“Well, think it over,” he persisted. “And when you’re ready, let me
know. You could start with the propeller company, and then, if things
work out, you could go on from there.” I laughed at the idea.
And, at the moment, I was serious about it, but after Fred and Bill
and Tom had left, I found I couldn’t turn off his voice by a flick of
the switch. This was no ordinary proposal to be dismissed forthwith:
These men had shown me their stuff on many occasions. They were deep
in the technical development of aviation, something close to my own
heart. They were getting big things done; I was bogged down in a maze
of politics with no clear objective before me, and frustrations
wearing me down. I began lying awake nights, analyzing the pros and
cons.
Trying to compare advantages and disadvantages like this got me
nowhere. The fundamental fact was that if I persisted in working at
aviation I must risk my chance for high command. If, however, I gave
up aviation and returned to line duty, I would be deserting technical
development at the very time it needed the attention of everyone who
had acquired experience in it. In private business I could continue
the engineering development and, far from impairing my future as an
executive, could actually enhance it. For in the new era which had
blossomed in the brief fifteen years since Dr. Charles Edward Lucke
and Columbia University, an executive with a fundamental engineering
training had a better chance to accomplish things in a manufacturing
business than one without such training.
The chances of a former naval officer succeeding in business were
slim, but the chance was there. The risk of failure was great, but
the opportunity to contribute importantly to the advance of aviation
was enough to warrant taking the chance. Admiral Reeves would have
judged it “an intelligent risk.” I submitted my resignation, and
received the acceptance in December, 1929.
The stock market had crashed two months before; the world had entered
a protracted period of depression. I had bought a complete outfit of
brand new uniforms, for duty on the commander in chief’s staff. Now I
packed them away in a sea chest, along with the prize sword “awarded
by the Class of 1871 for proficiency in ordnance and gunnery,” and
turned my back on the sea. After twenty-five years of naval service,
I signed off for life.
Throughout this tortured period of indecision, my wife had taken
no other position than the traditional one of the Navy wife,
“Whither thou goest!” She had listened with her usual patience to
my reasoning, but reserved to herself the intuitive process that
proved in the end to be right. For it was only after we had been out
of the service some time that I learned a fact that would have made
the decision far easier, one that she had sensed all along. In civil
life we were free. No longer were we social and professional slaves
to every officer and his wife who happened, by accident of date of
appointment or scholastic standing at Annapolis, to outrank us on
the precedence list. But one basic fact was clear; the slipstream
that had sucked me into naval aviation had now blasted me out of the
service I had loved, and into civil life.
CHAPTER NINETEEN
Necessity, the Mother of Creation
When, shortly after the first of January, 1930, Tom Hamilton took me
up to Milwaukee to look over the Hamilton Aero plant there, the stock
market crash had already enveloped the country in a cold chill. Along
the Northwestern Railway’s right of way, cold smoke stacks pointed
dead fingers toward leaden skies and fear gripped the land. However,
we found Tom’s modern factory still bright and cheerful for it had
been well equipped and was now well run by Arvid Nelson, its manager.
While the civilian demand for propellers had collapsed with the boom,
military business had continued firm under the five-year Army and
Navy building programs.
It was when we went down to Pittsburgh to look over Standard Steel
that I got a jolt. The plant, located across the river in Homestead
in a former cap-pistol factory, was as drab and cheerless as
Pittsburgh itself. With many of the steel mills down as a result
of the market collapse, there was less smog than usual along the
Monongahela, but the grime of the past still clung to treeless
slopes. After a look over the situation there it was clear we must
cut the consolidated propeller company back to a size suited to the
reduced demand.
While the plant in Milwaukee appeared the better of the two, the
State of Wisconsin had a heavy corporation income tax that would
have to be included in costs; and besides, Milwaukee lay off the
main east-west line of rail communication. At Pittsburgh, Harry
Kraeling had just completed a new three-story loft building in which
we might concentrate the machinery of both companies, and the plant
had a siding to the main line of the Pennsylvania. Here, about
halfway between Washington, D.C., and Dayton, Ohio, was a situation
that offered such advantages that we decided to consolidate the
best equipment and the most skilled workmen there. We would then
abandon all excess facilities and endeavor to set up a plant with a
break-even point calculated to keep us in the black even with the
greatly reduced military production level.
In calculating this setup, I had help from the head office in New
York and in the person of Joseph F. McCarthy, controller of United
Aircraft. Mac, I found, was the sort of wizard who could glance at
columns of figures and read in them signs and portents such as could
be made clear to me only after I had reduced them to engineer’s
language of graphs and charts. From him I discovered that a financial
statement is not just the cold record of past mistakes or triumphs,
but also a weather map from which to forecast future trends and to
take decisions calculated to reap the abundant harvest.
Using the figures available, we calculated the size of the facility
with which we might expect to continue to break even during a period
of slow demand but still retain the flexibility essential to reaping
a profit when the tide turned. United Aircraft was frankly not in
business for its health; it was in business for a fair profit and
each of the subsidiaries was expected to stand on its own two feet.
By consolidating the financial resources of all its subsidiaries
in the parent company, it had in effect broadened the resources of
each. Any company in temporary need of funds might look to the parent
company without going outside to borrow, but over the long pull it
must contribute its share to the over-all income.
Having had no training whatever in accounting or finance, but having
been schooled by Dr. Lucke to search for fundamental principles, I
now began digging down to bedrock and in J. F. McCarthy, himself,
discovered a rich nugget. Profit, it seemed, was not just the excess
of receipts over expenditures, a sum to be divided among a few
insiders and squandered in riotous living. Profit was, among other
things, the great regulator and controller of trade, and trade was
the foundation of human existence. Under the free play of natural
competitive forces, the compelling need to make a profit or go out of
business and starve was what drove men to cut costs of production.
If they could reduce costs enough to make the product available to
more people they could increase the demand and expand the volume of
production. Out of their profits, or the anticipation of profits,
they could attract new money with which to buy new machinery designed
to cut costs further and expand volume further. All this was a
delicate, living process that required good judgment and great skill
to nurture.
Profit, it appeared, was like the governor on a steam generator.
Increased demand for power would slow down the engine and reduce the
voltage were it not for the fact that the governor, sensitive to
small changes in speed, now opened the throttle wider to admit the
extra steam required to meet the new demand. Contrariwise, when the
demand fell off the engine might overspeed and destroy itself, save
that the eversensitive governor now reacted quickly to close the
throttle, and save the machine.
Profit was therefore no devouring ogre, as some would have us
believe, nor was it just the regulator or controller of costs. Men,
in seeking to make a profit—and correspondingly to avoid a loss—were
ever on the alert to create new devices and new products. If one
of these turned out to be useful, or desirable, and if its price
proved reasonable, then the device would come into general use and
its production and use would become profitable for both its creator
and its user, to say nothing of the workmen who manufactured it. If,
however, the device or idea failed to measure up to the customer’s
expectations, or failed to satisfy his tastes, then it would just
fade out; nature, it appeared, was highly selective. She believed in
enterprise.
When natural law was permitted to function according to principle,
corrective forces maintained a degree of equilibrium. To each action
there was an opposite and equal reaction and the action contained
the germ of the reaction, to the end that the pendulum could not
swing too far. It was only when man-made law began hampering natural
law that the violent swings took place. No man could understand the
workings of the natural law well enough to anticipate the future nor,
were he able to do so, could he control the future. Least of all did
he have wisdom enough to incorporate the germ of a corrective action
in his plans.
As I studied this matter of profit and business cycles, I began
to get hold of a truth that seemed to be the answer to a lot of
questions about the place of the machine in the economy. Men were
beginning to argue that labor-saving machinery would bring about
technological unemployment, and as the world-wide depression
deepened, the facts seemed to confirm the opinion. However, there was
another side to this coin: in a technological age when some engineers
were engrossed with the task of cutting costs with machinery, other
engineers were busy creating new devices to sell. And when these new
devices clicked, they called for the creation of new enterprises, the
employment of new money—even the creation of new wealth—and best of
all the creation of new jobs for workmen. The automotive industry was
one of many brilliant examples of this fact.
Now no man or group of men could possibly have enough wisdom to
control the operations of this law. The free play of natural forces
was the only intelligent controller. Like the slipstream of an
airplane, this process might appear to be turbulent and wasteful,
but again, like the slipstream, it was one of the most efficient
processes in nature. The best men could do was try to maintain a
healthy climate in which the process could flourish, and since
the key lay in the incentive for the human spirit, men’s chief
contribution must come out of faith in the natural process.
All this was a revelation to me in more ways than one. Like most
naval officers I had absorbed something of the point of view of the
professional man who tends to look down his nose at the tradesman.
Overimpressed by the sins of a few profiteers, we considered
businessmen mere money grubbers inclined to wink at sharp practices,
if not downright dishonesty. To the professional man, especially one
in public service, whose compensation does not clearly reflect the
results of his own efforts, the real reward lies in his knowledge of
a job well done. To some, this provides all the incentive required,
but to most it furnishes an excuse to sit on the beach and watch the
ebb and flow of the tides. The military man is prone to forget that
some hard worker must create the wealth necessary to support him in
the honorable estate to which he has become accustomed and that if
comparable salaries make his appear modest, Uncle Sam is lavish with
the perquisites.