DURING Franklin D. Roosevelt’s Presidency, when Wall Street and Washington tended to be on cat-and-dog terms, perhaps no New Dealer other than That Man himself better typified the New Deal in the eyes of Wall Street than David Eli Lilienthal. The explanation of this estimate of him in southern Manhattan lay not in any specific anti-Wall Street acts of Lilienthal’s—indeed, the scattering of financiers, among them Wendell L. Willkie, who had personal dealings with him generally found him to be a reasonable sort of fellow—but in what he had come to symbolize through his association with the Tennessee Valley Authority, which, as a government-owned electric-power concern far larger than any private power corporation in the country, embodied Wall Street’s notion of galloping Socialism. Because Lilienthal was a conspicuous and vigorous member of the T.V.A.’s three-man board of directors from 1933 until 1941, and was its chairman from 1941 until 1946, the business community of that period, in his phrase, thought he “wore horns.” In 1946, he became the first chairman of the United States Atomic Energy Commission, and when he gave up that position, in February, 1950, at the age of fifty, the Times said in a news story that he had been “perhaps the most controversial figure in Washington since the end of the war.”
What has Lilienthal been up to in the years since he left the government? As a matter of public record, he has been up to a number of things, all of them, surprisingly, centered on Wall Street or on private business, or both. For one thing, Lilienthal is listed in any number of business compendiums as the co-founder and the chairman of the board of the Development & Resources Corporation. Several years ago, I phoned D. & R.’s offices, then at 50 Broadway, New York City, and discovered it to be a private firm—Wall Street-backed as well as, give or take a block, Wall Street-based—that provides managerial, technical, business, and planning services toward the development of natural resources abroad. That is to say, D. & R.—whose other co-founder, the late Gordon R. Clapp, was Lilienthal’s successor as T.V.A. chairman—is in the business of helping governments set up programs more or less similar to the T.V.A. Since its formation, in 1955, I learned, D. & R. had, at moderate but gratifying profit to itself, planned and managed the beginnings of a vast scheme for the reclamation of Khuzistan, an arid and poverty-stricken, though oil-rich, region of western Iran; advised the government of Italy on the development of its backward southern provinces; helped the Republic of Colombia set up a T.V.A.-like authority for its potentially fertile but flood-plagued Cauca Valley; and offered advice to Ghana on water supply, to the Ivory Coast on mineral development, and to Puerto Rico on electric power and atomic energy.
For another thing—and when I found out about this, it struck me as considerably more astonishing, on form, than D. & R.—Lilienthal has made an authentic fortune as a corporate officer and entrepreneur. In a proxy statement of the Minerals & Chemicals Corporation of America, dated June 24, 1960, that fell into my hands, I found Lilienthal listed as a director of the firm and the holder of 41,366 shares of its common stock. These shares at the time of my investigation were being traded on the New York Stock Exchange at something over twenty-five dollars each, and simple multiplication revealed that they represented a thumping sum by most men’s standards, certainly including those of a man who had spent most of his life on government wages, without the help of private resources.
And, for still another thing, in 1953 Harper & Brothers brought out Lilienthal’s third book, “Big Business: A New Era.” (His previous books were “T.V.A.: Democracy on the March” and “This I Do Believe,” which appeared in 1944 and 1949, respectively.) In “Big Business,” Lilienthal argues that not only the productive and distributive superiority of the United States but also its national security depends on industrial bigness; that we now have adequate public safeguards against abuses of big business, or know well enough how to fashion them as required; that big business does not tend to destroy small business, as is often supposed, but, rather, tends to promote it; and, finally, that a big-business society does not suppress individualism, as most intellectuals believe, but actually tends to encourage it by reducing poverty, disease, and physical insecurity and increasing the opportunities for leisure and travel. Fighting words, in short, from an old New Dealer.
Lilienthal is a man whose government career I, as a newspaper reader, had followed fairly closely. My interest in him as a government official had reached its peak in February, 1947, when, in answer to a fierce attack on him by his old enemy Senator Kenneth D. McKellar, of Tennessee, during Congressional hearings on his fitness for the A.E.C. job, he uttered a spontaneous statement of personal democratic faith that for many people still ranks as one of the most stirring attacks on what later came to be known as McCarthyism. (“One of the tenets of democracy that grow out of this central core of a belief that the individual comes first, that all men are the children of God and their personalities are therefore sacred,” Lilienthal said, among other things, “is a deep belief in civil liberties and their protection; and a repugnance to anyone who would steal from a human being that which is most precious to him, his good name, by imputing things to him, by innuendo, or by insinuation.”) The fragments of information I picked up about his new, private career left me confused. Wondering how Wall Street and business life had affected Lilienthal, and vice versa, in their belated rapprochement , I got in touch with him, and a day or so later, at his invitation, drove out to New Jersey to spend the afternoon with him.
LILIENTHAL and his wife, Helen Lamb Lilienthal, lived on Battle Road, in Princeton, where they had settled in 1957, after six years in New York City, at first in a house on Beekman Place and later in an apartment on Sutton Place. The Princeton house, which stands in a plot of less than an acre, is of Georgian brick with green shutters. Surrounded by other houses of its kind, the place is capacious yet anything but pretentious. Lilienthal, wearing gray slacks and a plaid sports shirt, met me at the front door. At just past sixty, he was a tall, trim man with a receding hairline, a slightly hawklike profile, and candid, piercing eyes. He led me into the living room, where he introduced Mrs. Lilienthal and then pointed out a couple of household treasures—a large Oriental rug in front of the fireplace, which he said was a gift from the Shah of Iran, and, hanging on the wall opposite the fireplace, a Chinese scroll of the late nineteenth century showing four rather roguish men, who, he told me, have a special meaning for him, since they are upper-middle-rank civil servants. Pointing to a particularly enigmatic-looking fellow, he added, with a smile, that he always thought of that one as his Oriental counterpart.
Mrs. Lilienthal went to get coffee, and while she was gone, I asked Lilienthal to tell me something of his post-government life, starting at the beginning. “All right,” he said. “The beginning: I left the A.E.C. for a number of reasons. In that kind of work, I feel, a fellow is highly expendable. If you stayed too long, you might find yourself placating industry or the military, or both—building up what would amount to an atomic pork barrel. Another thing—I wanted to be allowed to speak my mind more freely than I could as a government official. I felt I’d served my term. So I turned in my resignation in November, 1949, and it went into effect three months later. As for the timing, I resigned then because, for once, I wasn’t under fire. Originally, I’d planned to do it earlier in 1949, but then came the last Congressional attack on me—the time Hickenlooper, of Iowa, accused me of ‘incredible mismanagement.’” I noticed that Lilienthal did not smile in referring to the Hickenlooper affair. “I entered private life with both trepidation and relief,” he went on. “The trepidation was about my ability to make a living, and it was very real. Oh, I’d been a practicing lawyer as a young man, in Chicago, before going into government work, and made quite a lot of money at it, too. But now I didn’t want to practice law. And I was worried about what else I could do. I was so obsessed with the subject that I harped on it all the time, and my wife and my friends began to kid me. That Christmas of 1949, my wife gave me a beggar’s tin cup, and one of my friends gave me a guitar to go with it. The feeling of relief—well, that was a matter of personal privacy and freedom. As a private citizen, I wouldn’t have to be trailed around by hordes of security officers as I had been at the A.E.C. I wouldn’t have to answer the charges of Congressional committees. And, above all, I’d be able to talk freely to my wife again.”
Mrs. Lilienthal had returned with the coffee as her husband was talking, and now she sat down with us. She comes, I knew, from a family of pioneers who, over several generations, moved westward from New England to Ohio to Indiana to Oklahoma, where she was born. She seemed to me to look the part—that of a woman of dignity, patience, practicality, and gentle strength. “I can tell you that my husband’s resignation was a relief to me ,” she said. “Before he went with the A.E.C., we’d always talked over all aspects of his work. When he took that job, we agreed between us that although we’d indulge in the discussion of personalities as freely as we pleased, he would never tell me anything about the work of the A.E.C. that I couldn’t read in the newspapers. It was a terrible constraint to be under.”
Lilienthal nodded. “I’d come home at night with some frightful experience in me,” he said. “No one who so much as touches the atom is ever quite the same again. Perhaps I’d have been in a series of conferences and listened to the kind of talk that many military and scientific men go in for—cities full of human beings referred to as ‘targets,’ and that sort of thing. I never got used to that impersonal jargon. I’d come home sick at heart. But I couldn’t talk about it to Helen. I wasn’t allowed to get it off my chest.”
“And now there wouldn’t be any more hearings,” Mrs. Lilienthal said. “Those terrible hearings! I’ll never forget one Washington cocktail party we went to, for our sins. My husband had been going through one of the endless series of Congressional hearings. A woman in a funny hat came gushing up to him and said something like ‘Oh, Mr. Lilienthal, I was so anxious to come to your hearings, but I just couldn’t make it. I’m so sorry. I just love hearings, don’t you?’”
Husband and wife looked at each other, and this time Lilienthal managed a grin.
LILIENTHAL seemed glad to get on to what happened next. At about the time his resignation became effective, he told me, he was approached by various men from Harvard representing the fields of history, public administration, and law, who asked him to accept an appointment to the faculty. But he decided he didn’t want to become a professor any more than he wanted to practice law. Within the next few weeks came offers from numerous law firms in New York and Washington, and from some industrial companies. Reassured by these that he was not going to need the tin cup and guitar after all, Lilienthal, after mulling over the offers, finally turned them all down and settled, in May, 1950, for a part-time job as a consultant to the celebrated banking firm of Lazard Frères & Co., whose senior partner, André Meyer, he had met through Albert Lasker, a mutual friend. Lazard gave him an office in its headquarters at 44 Wall, but before he could do much consulting, he was off on a lecture tour across the United States, followed by a trip to Europe that summer, with his wife, on behalf of the late Collier’s magazine. The trip did not result in any articles, though, and on returning home in the fall he found it necessary to get back on a full-time income-producing basis; this he did by becoming a consultant to various other companies, among them the Carrier Corporation and the Radio Corporation of America. To Carrier he offered advice on managerial problems. For R.C.A., he worked on the question of color television, ultimately advising his client to concentrate on technical research rather than on law-court squabbles over patents; he also helped persuade the company to press its computer program and to stay out of the construction of atomic reactors. Early in 1951, he took another trip abroad for Collier’s —to India, Pakistan, Thailand, and Japan. This trip produced an article—published in Collier’s that August—in which he proposed a solution to the dispute between India and Pakistan over Kashmir and the headwaters of the Indus River. Lilienthal’s idea was that the tension between the two countries could best be lessened by a coöperative program to improve living conditions in the whole disputed area through economic development of the Indus Basin. Nine years later, largely through the financial backing and moral support of Eugene R. Black and the World Bank, the Lilienthal plan was essentially adopted, and an Indus treaty signed between India and Pakistan. But the immediate reaction to his article was general indifference, and Lilienthal, temporarily stymied and considerably disillusioned, once more settled down to the humbler problems of private business.
At this point in Lilienthal’s narrative, the doorbell rang. Mrs. Lilienthal went to answer it, and I could hear her talking to someone—a gardener, evidently—about the pruning of some roses. After listening restlessly for a minute or two, Lilienthal called to his wife, “Helen, please tell Domenic to prune those roses farther back than he did last year!” Mrs. Lilienthal went outside with Domenic, and Lilienthal remarked, “Domenic always prunes too gently, to my way of thinking. It’s a case of our backgrounds —Italy versus the Middle West.” Then, resuming where he had left off, he said that his association with Lazard Frères, and more particularly with Meyer, had led him into an association, first as a consultant and later as an executive, with a small company called the Minerals Separation North American Corporation, in which Lazard Frères had a large interest. It was in this undertaking that, unexpectedly, he made his fortune. The company was in trouble, and Meyer’s notion was that Lilienthal might be the man to do something about it. Subsequently, in the course of a series of mergers, acquisitions, and other maneuvers, the company’s name was changed to, successively, the Attapulgus Minerals & Chemicals Corporation, the Minerals & Chemicals Corporation of America, and, in 1960, the Minerals & Chemicals Philipp Corporation; meanwhile, its annual receipts rose from about seven hundred and fifty thousand dollars, for 1952, to something over two hundred and seventy-four million, for 1960. For Lilienthal, the acceptance of Meyer’s commission to look into the company’s affairs was the beginning of a four-year immersion in the day-to-day problems of managing a business; the experience, he said decisively, turned out to be one of his life’s richest, and by no means only in the literal sense of that word.
I HAVE reconstructed the corporate facts behind Lilienthal’s experience partly from what he told me in Princeton, partly from a subsequent study of some of the company’s published documents, and partly from talks with other persons interested in the firm. Minerals Separation North American, which was founded in 1916 as an offshoot of a British firm, was a patent company, deriving its chief income from royalties on patents for processes used in refining copper ore and the ores of other nonferrous minerals. Its activities were twofold—attempting to develop new patents in its research laboratory, and offering technical services to the mining and manufacturing companies that leased its old ones. By 1950, although it was still netting a nice annual profit, it was in a bad way. Under the direction of its long-time president, Dr. Seth Gregory—who was then over ninety but still ruled the company with an iron hand, commuting daily between his midtown apartment hotel and his office, at 11 Broadway, in a regally purple Rolls-Royce—it had cut down its research activities to almost nothing and was living on half a dozen old patents, all of which were scheduled to go into the public domain in from five to eight years. In effect, it was a still healthy company living under a death sentence. Lazard Frères, as a large stockholder, was understandably concerned. Dr. Gregory was persuaded to retire on a handsome pension, and in February, 1952, after working with Minerals Separation for some time as a consultant, Lilienthal was installed as the company’s president and a member of its board of directors. His first task was to find a new source of income to replace the fast-expiring patents, and he and the other directors agreed that the way to accomplish this was through a merger; it fell to Lilienthal to participate in arranging one between Minerals Separation and another company in which Lazard Frères—along with the Wall Street firm of F. Eberstadt & Co.—had large holdings: the Attapulgus Clay Company, of Attapulgus, Georgia, which produced a very rare kind of clay that is useful in purifying petroleum products, and which manufactured various household products, among them a floor cleaner called Speedi-Dri.
As a marriage broker between Minerals Separation and Attapulgus, Lilienthal had the touchy job of persuading the executives of the Southern company that they were not being used as pawns by a bunch of rapacious Wall Street bankers. Being an agent of the bankers was an unaccustomed role for Lilienthal, but he evidently carried it off with aplomb, despite the fact that his presence complicated the emotional problems still further by introducing into the situation a whiff of galloping Socialism. “Dave was very effective in building up the Attapulgus people’s morale and confidence,” another Wall Streeter has told me. “He reconciled them to the merger, and showed them its advantages for them.” Lilienthal himself told me, “I felt at home in the administrative and technical parts of the job, but the financial part had to be done by the people from Lazard and Eberstadt. Every time they began talking about spinoffs and exchanges of shares, I was lost. I didn’t even know what a spinoff was .” (As Lilienthal knows now, it is, not to get too technical about it, a division of a company into two or more companies—the opposite of a merger.) The merger took place in December, 1952, and neither the Attapulgus people nor the Minerals Separation people had any reason to regret it, because both the profits and the stock price of the newly formed company—the Attapulgus Minerals & Chemicals Corporation—soon began to rise. At the time of the merger, Lilienthal was made chairman of the board of directors, at an annual salary of eighteen thousand dollars. Over the next three years, while serving first in this position and later as chairman of the executive committee, he had a large part not only in the conduct of the company’s routine affairs but also in its further growth through a series of new mergers—one in 1954, with Edgar Brothers, a leading producer of kaolin for paper coating, and two in 1955, with a pair of limestone concerns in Ohio and Virginia. The mergers and the increased efficiency that went with them were not long in paying off; between 1952 and 1955 the company’s net profit per share more than quintupled.
The mechanics of Lilienthal’s own rise from the comparative rags of a public servant to the riches of a successful entrepreneur are baldly outlined in the company’s proxy statements for its annual and special stockholders’ meetings. (There are few public documents more indiscreet than proxy statements, in which the precise private stockholdings of directors must be listed.) In November, 1952, Minerals Separation North American granted Lilienthal, as a supplement to his annual salary, a stock option.* His option entitled him to buy as many as fifty thousand shares of the firm’s stock from its treasury at $4.87½ per share, then the going rate, any time before the end of 1955, and in exchange he signed a contract agreeing to serve the company as an active executive throughout 1953, 1954, and 1955. The potential financial advantage to him, of course, as to all other recipients of stock options, lay in the fact that if the price of the stock rose substantially, he could buy shares at the option price and thus have a holding that would immediately be worth much more than he paid for it. Furthermore, and more important, if he should later decide to sell his shares, the proceeds would be a capital gain, taxable at a maximum rate of 25%. Of course, if the stock failed to go up, the option would be worthless. But, like so many stocks of the mid-fifties, Lilienthal’s did go up, fantastically. By the end of 1954, according to the proxy statements, Lilienthal had exercised his option to the extent of buying twelve thousand seven hundred and fifty shares, which were then worth not $4.87½ each but about $20. In February, 1955, he sold off four thousand shares at $22.75 each, bringing in ninety-one thousand dollars. This sum, less capital-gains tax, was then applied against further purchases under the option, and in August, 1955, the proxy statements show, Lilienthal raised his holdings to almost forty thousand shares, or close to the number he held at the time of my visit to him. By that time, the stock, which had at first been sold over the counter, not only had achieved a listing on the New York Stock Exchange but had become one of the Exchange’s highflying speculative favorites; its price had skyrocketed to about forty dollars a share, and Lilienthal, obviously, was solidly in the millionaire class. Moreover, the company was now on a sound long-term basis, paying an annual cash dividend of fifty cents a share, and the Lilienthal family’s financial worries were permanently over.
Fiscally speaking, Lilienthal told me, his symbolic moment of triumph was the day, in June of 1955, when the shares of Minerals & Chemicals graduated to a listing on the New York Stock Exchange. In accordance with custom, Lilienthal, as a top officer, was invited onto the floor to shake hands with the president of the Exchange and be shown around generally. “I went through it in a daze,” Lilienthal told me. “Until then, I’d never been inside any stock exchange in my life. It was all mysterious and fascinating. No zoo could have seemed more strange to me.” How the Stock Exchange felt at this stage about having the former wearer of horns on its floor is not recorded.
IN telling me about his experience with the company, Lilienthal had spoken with zest and had made the whole thing sound mysterious and fascinating. I asked him what, apart from the obvious financial inducement, had led him to devote himself to the affairs of a small firm, and how it had felt for the former boss of T.V.A. and A.E.C. to be, in effect, peddling Attapulgite, kaolin, limestone, and Speedi-Dri. Lilienthal leaned back in his chair and stared at the ceiling. “I wanted an entrepreneurial experience,” he said. “I found a great appeal in the idea of taking a small and quite crippled company and trying to make something of it. Building. That kind of building, I thought, is the central thing in American free enterprise, and something I’d missed in all my government work. I wanted to try my hand at it. Now, about how it felt. Well, it felt plenty exciting. It was full of intellectual stimulation, and a lot of my old ideas changed. I conceived a great new respect for financiers—men like André Meyer. There’s a correctness about them, a certain high sense of honor, that I’d never had any conception of. I found that business life is full of creative, original minds—along with the usual number of second-guessers, of course. Furthermore, I found it seductive. In fact, I was in danger of becoming a slave. Business has its man-eating side, and part of the man-eating side is that it’s so absorbing. I found that the things you read—for instance, that acquiring money for its own sake can become an addiction if you’re not careful—are literally true. Certain good friends helped keep me on the track—men like Ferdinand Eberstadt, who became my fellow-director after the Attapulgus merger, and Nathan Greene, special counsel to Lazard Frères, who was on the board for a while. Greene was a kind of business father confessor to me. I remember his saying, ‘You think you’ll make your pile and then be independent. My friend, in Wall Street you don’t just win your independence at one stroke. To paraphrase Thomas Jefferson, you have to win your independence over again every day.’ I found that he was right about that. Oh, I had my problems. I questioned myself at every step. It was exhausting. You see, for so long I’d been associated with two pretty far-reaching things—institutions. I had a feeling of identity with them; in that kind of work you are able to lose your sense of self. Now, with myself to worry about—my personal standards as well as my financial future—I found myself wondering all the time whether I was making the right move. But that part’s all in my journal, and you can read it there, if you like.” *
I said I certainly would like to read it, and Lilienthal led me to his study, in the basement. It proved to be a good-sized room whose windows opened on window wells into which strands of ivy were trailing; light came in from outside, and even a little slanting sunshine, but the tops of the window wells were too high to permit a view of the garden or the neighborhood. Lilienthal remarked, “My neighbor Robert Oppenheimer complained about the enclosed feeling when he first saw this room. I told him that was just the feeling I wanted!” Then he showed me a filing cabinet, standing in a corner; it contained the journal, in rows and rows of loose-leaf notebooks, the earliest of them dating back to its author’s high-school days. Having invited me to make myself at home, Lilienthal left me alone in his study and went back upstairs.
Taking him at his word, I went for a turn or two around the room, looking at the pictures on the walls and finding about what might have been expected: inscribed photographs from Franklin D. Roosevelt, Harry S. Truman, Senator George Norris, Louis Brandeis; pictures of Lilienthal with Roosevelt, with Willkie, with Fiorello LaGuardia, with Nelson Rockefeller, with Nehru in India; a night view of the Fontana Dam, in the Tennessee Valley, being built under a blaze of electricity supplied by T.V.A. power plants. A man’s study reflects himself as he wishes to be seen publicly, but his journal, if he is honest, reflects something else. I had not browsed long in Lilienthal’s journal before I realized that it was an extraordinary document—not merely a historical source of unusual interest but a searching record of a public man’s thoughts and emotions. I leafed through the years of his association with Minerals & Chemicals, and, scattered amid much about family, Democratic politics, friends, trips abroad, reflections on national policies, and hopes and fears for the republic, I came upon the following entries having to do with business and life in New York:
May 24, 1951: Looks as if I am in the minerals business. In a small way, that could become a big way. [He goes on to explain that he has just had his first interview with Dr. Gregory, and is apparently acceptable to the old man as the new president of the company.]
May 31, 1951: [Starting in business] is like learning to walk after a long illness.… At first you have to think: move the right foot, move the left foot, etc. Then you are walking without thinking, and then walking is something one does with unconsciousness and utter confidence. This latter state, as to business, has yet to come, but I had the first touch of it today.
July 22, 1951: I recall Wendell Willkie saying to me years ago, “Living in New York is a great experience. I wouldn’t live anywhere else. It is the most exciting, stimulating, satisfying spot in the world,” etc. I think this was apropos of some remark I had made on a business visit to New York—that I was certainly glad I didn’t have to live in that madhouse of noise and dirt. [Last] Thursday was a day in which I shared some of Willkie’s feeling.… There was a grandeur about the place, and adventure, a sense of being in the center of a great achievement, New York City in the fifties.
October 28, 1951: What I am reaching for, perhaps, is to have my cake and eat it, too, but in a way this is not wholly senseless nor futile. That is, I can have enough actual contact with the affairs of business to keep a sense of reality, or develop one. How otherwise can I explain the pleasure I get in visiting a copper mine or talking to operators of an electric furnace, or a coal-research project, or watching how André Meyer works.… But along with that I want to be free enough to think about what these things mean, free enough to read outside the immediate field of interest. This requires keeping out of status (the absence of which I know makes me vaguely unhappy).
December 8, 1952: What is it that investment bankers do for their money? Well, I have certainly had my eyes opened, as to the amount of toil, sweat, frustrations, problems—yes, and tears—that has to be gone through.… If everyone who has something to sell in the market had to be as meticulous and detailed in his statements about what he is selling as those who offer stock in the market are now, under the Truth in Securities law, darn little would be sold, in time to be useful, at least.
December 20, 1952: My purpose in this Attapulgus venture is to make a good deal of money in a short time, in a way (i.e., old man capital gains) that enables me to keep three-fourths of it, instead of paying 80% or more in income taxes.… But there is another purpose: to have had the experience of business.… The real reason, or the chief reason, is a feeling that my life wouldn’t be complete, living in a business period—that is, a time dominated by the business of business—unless I had been active in that area. What I wanted was to be an observer of this fascinating activity that so colors and affects the world’s life, not … an observer from without (as a writer, teacher) but from the arena itself. I still have this feeling, and when I get low and glad to chuck the whole thing (as I have from time to time), the sustaining part is that even the bumps and sore spots are experiences, actual experiences within the business world.…
Then, too, [I wanted to be able to make] a comparison of the managers of business, the spirit, the tensions, the motivations, etc., with those of government (something I keep doing anyway)—and that needs doing to understand either government or business. This requires actual valid experience in the business world somewhat comparable to my long hiring out in government matters.
I don’t kid myself that I will ever be accepted as a businessman, not after those long years when I wore horns, for all of them outside the Tennessee Valley at least. And I feel less defensive—usually shown by a belligerence—on this score than I did when I rarely saw a tycoon or a Wall Streeter, whereas now I live with them.…
January 18, 1953: I am now definitely committed [to Minerals & Chemicals] for not less than three more years … and morally committed to see the thing through. While I can’t conceive that this business will ever seem enough, an end of itself, to make up a satisfactory life, yet the busy-ness, the activity, the crises, the gambles, the management problems I must face, the judgment about people, all combine to make something far from dull. Add to this the good chance of making a good deal of money.… My decision to try business—that seemed to so many people a bit of romantic moonshine—makes more sense today than it did a year ago.
But there is something missing.…
December 2, 1953: Crawford Greenewalt [president of du Pont] … introduced me in a speech (in Philadelphia).… He noted that I had entered the chemical business; bearing in mind that I had previously headed the biggest things in America, bigger than [any] private corporations, he was naturally a little nervous about seeing me become a potential competitor. It was kidding, but it was good kidding. And it certainly gave little ole Attapulgus quite a notice.
June 30, 1954: I have found a new kind of satisfaction, and in a sense, fulfillment, in a business career. I really never felt that the “consultant” thing was being a businessman, or engaging in the realities of a life of business. Too remote from the actual thinking process, the exercise of judgment and decision.… In this company, as we are evolving it, there are so many of the elements of fun.… The starting with almost nothing … the company depending on patents alone … acquisition, mergers, stock issues, proxy statements, the methods of financing internally and by bank loans … also the way stock prices are made, the silly and almost childlike basis upon which grown men decide that a stock should be bought, and at what price … the merger with Edgar, the great [subsequent] rise in the price of their stock … the review of the price structure. The beginning of better costs. The catalyst idea. The drive and energy and imagination: the nights and days (in the lab until 2 A.M. night after night) and finally the beginning of a new business.… It is quite a story.
(Later I got a rather different perspective on Lilienthal’s reactions to the transition from government to business by talking to the man he had described as his “business father confessor,” Nathan Greene. “What happens to a man who leaves top-level government work and comes to Wall Street as a consultant?” Greene asked me rhetorically. “Well, usually it’s a big letdown. In the government, Dave was used to a sense of great authority and power—tremendous national and international responsibility. People wanted to be seen with him. Foreign dignitaries sought him out. He had all sorts of facilities—rows of buttons on his desk. He pushed them, and lawyers, technicians, accountants appeared to do his bidding. All right, now he comes to Wall Street. There’s a big welcoming reception, he meets all the partners of his new firm and their wives, he’s given a nice office with a carpet. But there’s nothing on his desk—only one button, and all it summons is a secretary. He doesn’t have perquisites like limousines. Furthermore, he really has no responsibility. He says to himself, ‘I’m an idea man, I’ve got to have some ideas.’ He has some, but they’re not given much attention by the partners. So the outward form of his new work is a letdown. The same with its content. In Washington, it had been development of natural resources, atomic energy, or the like—world-shaking things. Now it turns out to be some little business to make money. It all seems a bit petty.
“Then, there’s the matter of money itself. In the government, our hypothetical man didn’t need it so badly. He had all these services and the basic comforts supplied him at no personal cost, and besides he had a great sense of moral superiority. He was able to sneer at people who were out making money. He could think of somebody in his law-school class who was making a pile in the Street, and say, ‘He’s sold out.’ Then our man leaves government and goes to the Wall Street fleshpots himself, and he says, ‘Boy, am I going to make these guys pay for my services!’ They do pay, too. He gets big fees for consulting. Then he finds out about big income taxes, how he has to pay most of his income to the government now instead of getting his livelihood from it. The shoe is on the other foot. He may—sometimes he does—begin to scream ‘Confiscation!,’ just like any old Wall Streeter.
“How did Dave handle these problems? Well, he had his troubles—after all, he was starting a second sort of life—but he handled them just about as well as they can be handled. He was never bored, and he never screamed ‘Confiscation!’ He has a great capacity for sinking himself in something. The subject matter isn’t so important to him. It’s almost as if he were able to think that what he’s doing is important, whether it is or not, simply because he’s doing it. His ability was invaluable to Minerals & Chemicals, and not just as an administrator. Dave is a lawyer, after all; he knows more about corporate finances than he likes to admit. He enjoys playing the barefoot boy, but he’s hardly that. Dave is an almost perfect example of somebody who kept his independence while getting rich on Wall Street.”)
One way and another, then—reading through these ambivalent protestations in the journal, and later hearing Greene—I seemed to detect under the exuberance and the absorption a nagging sense of dissatisfaction, almost of compromise. For Lilienthal, the obviously genuine thrill of having a new kind of experience, and an almost unimaginably profitable one, had been, I sensed, a rose with a worm in it. I went back up to the living room. There I found Lilienthal fiat on his back on the Shah’s rug underneath a pile of pre-school-age children. At least, it looked at first glance like a pile; on closer inspection I found that it consisted of just two boys. Mrs. Lilienthal, who had returned from the garden, introduced them as Allen and Daniel Bromberger, sons of the Lilienthals’ daughter, Nancy, and Sylvain Bromberger, adding that the Brombergers were living nearby, since Sylvain was teaching philosophy at the university. (A few weeks later, Bromberger moved on to the University of Chicago.) The Lilienthals’ only other offspring, David, Jr., lived in Edgartown, Massachusetts, where he had settled down to become a writer, as he subsequently did. In response to the urging of the senior Lilienthals, the grandchildren climbed off their grandfather and disappeared from the room. When things were normal again, I told Lilienthal my reaction to the entries I had read in the journal, and he hesitated for a while before speaking. “Yes,” he said, finally. “Well, one thing—it wasn’t making all that money that worried me. That didn’t make me feel either good or bad, by itself. In the government years, we’d always paid our bills, and by scrimping we’d been able to save enough to send the kids to college. We’d never thought much about money. And then making a lot of it, making a million—I was surprised, of course. I’d never especially aimed at that or thought it might happen to me. It’s like when you’re a boy and you try to jump six feet. Then you find you can jump six feet, and you say, ‘Well, so what?’ It’s sort of irrelevant. Over the past few years, a lot of people have said to me, ‘How does it feel to be rich?’ At first, I was kind of offended—there seemed to be an implied criticism in the question—but I’m over that. I tell them it doesn’t feel any special way. The way I feel is—But this is going to sound stuffy.”
“No, I don’t think it’s stuffy,” said Mrs. Lilienthal, anticipating what was coming.
“Yes, it is, but I’m going to say it anyway,” said Lilienthal. “I don’t think money makes much difference, as long as you have enough.”
“I don’t quite agree,” said Mrs. Lilienthal. “It doesn’t make much difference when you’re young. You don’t mind then, as long as you can struggle along. But as you get older, it is helpful.”
Lilienthal nodded in deference to that. Then he said that he thought the undertone of dissatisfaction I had noticed in the journal probably stemmed, at least in part, from the fact that his career in private business, absorbing though it was, did not bring with it the gratifications of public-service work. True, he had not been deprived of them entirely, because it was at the height of his Minerals & Chemicals operations, in 1954, that he first went to Colombia, at the request of that country’s government, and, serving as a peso-a-year consultant, started the Cauca Valley project that was later continued by the Development & Resources Corporation. But for the most part being a top officer of Minerals & Chemicals had kept him pretty well tied down, and he’d had to regard the Colombia work as a sideline, if not merely a hobby. I found it impossible to avoid seeing symbolic significance in the fact that the principal material with which Lilienthal the businessman had been engaged was—clay.
I thought of something else in Lilienthal’s life at that time that might have taken some of the kick out of the process of becoming a successful businessman. His “Big Business” book had come out when he was in the thick of the Minerals & Chemicals work. I wondered whether, since it is such an uncritical paean to free enterprise, it had been construed by some people as a rationalization of his new career, and I asked about this.
“Well, the ideas in the book were rather a shock to some of my husband’s New Deal friends, all right,” Mrs. Lilienthal said, a bit dryly.
“They needed shocking, damn it!” Lilienthal burst out. He spoke with some heat, and I thought of the phrase in his journal—used there in an entirely different context but still in reference to himself—about defensiveness shown by belligerence. After a moment, he went on, in a normal tone, “My wife and daughter thought I didn’t spend enough time working on the book, and they were right. I wrote it in too much of a hurry. My conclusions aren’t supported by enough argument. For one thing, I should have spelled out in more detail my opposition to the way the antitrust laws are administered. But the anti-trust part wasn’t the real trouble. The thing that really shook up some of my old friends was what I said about big industry in relation to individualism, and about the machine in relation to aesthetics. Morris Cooke, who used to be administrator of the Rural Electrification Administration—he was one who was shaken up. He took me apart over the book, and I took him apart back. The anti-bigness dogmatists stopped having anything to do with me. They simply wrote me off. I wasn’t hurt or disappointed. Those people are living on nostalgia; they look backward, and I try to look forward. Then, of course, there were the trust busters. They really went after me. But isn’t trust busting, in the sense of breaking up big companies simply because they’re big, pretty much a relic of a past era? Yes, I still think I was right in the main things I said—perhaps ahead of my time, but right.”
“The trouble was the timing,” Mrs. Lilienthal said. “The book came so close to coinciding with my husband’s leaving public service and going into private business. Some people thought it represented a change in point of view induced by expediency. Which it didn’t!”
“No,” Lilienthal said. “The book was written mostly in 1952, but all the ideas in it were hatched while I was still in public service. For example, my idea that bigness is essential for national security came in large part out of my experiences in the A.E.C. The company that had the research and manufacturing facilities to make the atomic bomb an operational weapon, so engineered that it wouldn’t require Ph.D.s to use it in the field—Bell Telephone, to be specific—was a big company. Because it was so big, the Anti-Trust Division of the Department of Justice was seeking to break the Bell System into several parts—unsuccessfully, as it turned out—at the very time we in the A.E.C. were calling on it to do a vital defense job that required unity. That seemed wrong. More generally, the whole point of view I expressed in the book goes way back to my quarrel with Arthur Morgan, the first T.V.A. chairman, in the early thirties. He had great faith in a handicraft economy, I was for large-scale industry. T.V.A., after all, was, and is, the biggest power system in the free world. In T.V.A. I always believed in bigness—along with decentralization. But, you know, the chapter I hoped would produce the most discussion was the one on bigness as a promoter of individualism. It did produce discussion, of a sort. I remember people—academic people, mostly—coming up to me with incredulous expressions and saying something that started with ‘Do you really believe …’ Well, my answer would start with ‘Yes, I really do believe …’”
One other touchy matter that Lilienthal may have questioned himself about in the process of making his Wall Street fortune was the fact that in making it he had not really needed to scream “Confiscation,” since he had made it through a tax loophole, the stock option. Possibly there have been liberal, reformist businessmen who have refused to accept stock options on principle, although I have never heard of one doing so, and I am not convinced that such a renunciation would be a sensible or useful form of protest. In any event, I didn’t ask Lilienthal about the matter; in the absence of any accepted code of journalism every journalist writes his own, and in mine, such a question would have come close to invasion of moral privacy. In retrospect, though, I almost wish I had violated my code that one time. Lilienthal, being Lilienthal, might have objected to the question strenuously, but I think he would have answered it equally strenuously, and without hedging. As things were, after discoursing on the critical reactions to his book, “Big Business,” he got up and walked to a window. “I see Domenic has been pretty cautious about his rose-pruning,” he said to his wife. “Maybe I’ll go out later and cut them back some more.” His jaw was set in a way that made me feel pretty sure I knew how the rose-pruning controversy was going to be resolved.
THE triumphant solution to Lilienthal’s problem—the way that he eventually found to have his cake and eat it—was the Development & Resources Corporation. The corporation arose out of a series of conversations between Lilienthal and Meyer during the spring of 1955, in the course of which Lilienthal pointed out that he was well acquainted with dozens of foreign dignitaries and technical personnel who had come to visit the T.V.A., and said that their intense interest in that project seemed to indicate that at least some of their countries would be receptive to the idea of starting similar programs. “Our aim in forming D. & R. was not to try to remold the world, or any large part of it, but only to try to help accomplish some rather specific things, and, incidentally, make a profit,” Lilienthal told me. “André was not so sure about the profit—we both knew there would be a deficit at first—but he liked the idea of doing constructive things, and Lazard Frères decided to back us, in return for a half interest in the corporation.” Clapp, who was serving at the time as deputy New York City administrator, came in as co-founder of the venture, and the subsequent executive appointments made D. & R. virtually a T.V.A. alumni association: John Oliver, who became executive vice-president, had been with T.V.A. from 1942 to 1954, ending up as its general manager; W. L. Voorduin, who became director of engineering, had been with T.V.A. for a decade and had planned its whole system of dams; Walton Seymour, who became vice-president for industrial development, had been a T.V.A. consultant on electric-power marketing for thirteen years; and a dozen other former T.V.A. men were scattered on down through the ranks.
In July, 1955, D. & R. set up shop at 44 Wall, and set to work finding clients. What was to prove its most important one came to light during a World Bank meeting in Istanbul that Lilienthal and his wife attended in September of that year. At the meeting, Lilienthal fell in with Abolhassan Ebtehaj, then head of a seven-year development plan in Iran; as it happened, Iran was just about the ideal D. & R. client, since, for one thing, the royalties on its nationalized oil industry gave it considerable capital with which to pay for the development of its resources, and, for another, what it desperately needed was technical and professional guidance. The encounter with Ebtehaj led to an invitation to Lilienthal and Clapp to visit Iran as the guests of the Shah, and see what they thought could be done about Khuzistan. Lilienthal’s employment contract with Minerals & Chemicals ended that December; although he stayed on as a director, he was now free to devote all his time, or nearly all of it, to D. & R. In February, 1956, he and Clapp went to Iran. “Before then, I blush to say, I had never heard of Khuzistan,” Lilienthal told me. “I’ve learned a lot about it since then. It was the heart of the Old Testament Elamite kingdom and later of the Persian Empire. The ruins of Persepolis are not far away, and those of Susa, where King Darius had his winter palace, are in the very center of Khuzistan. In ancient times, the whole region had an extensive water-conservation system—you can still find the remains of canals that were probably built by Darius twenty-five hundred years ago—but after the decline of the Persian Empire the water system was ruined by invasion and neglect. Lord Curzon described what the Khuzistan uplands looked like a century ago—‘a desert over which the eye may roam unarrested for miles.’ It was that way when we got there. Nowadays, Khuzistan is one of the world’s richest oil fields—the famous Abadan refinery is at its southern tip—but the inhabitants, two and a half million of them, haven’t benefited from that. The rivers have flowed unused, the fabulously rich soil has lain fallow, and all but a tiny fraction of the people have continued to live in desperate poverty. When Clapp and I first saw the place, we were appalled. Still, for two old T.V.A. hands like us, it was a dream; it was simply crying out for development. We looked for sites for dams, likely spots to hunt for minerals and make soil-fertility studies, and so on. We saw flares of natural gas rising from oil fields. That was waste, and it suggested petrochemical plants, to use the gas for making fertilizer and plastics. In eight days we’d roughed out a plan, and in about two weeks D. & R. had signed a five-year contract with the Iranian government.
“That was only the beginning. Bill Voorduin, our chief engineer, flew out there and spotted a wonderful dam site at a place just a few miles from the ruins of Susa—a narrow canyon with walls that rise almost vertically from the bed of the Dez River. We found we were going to have to manage the project as well as advise on it, and so our next job was lining up our managerial group. To give you some idea of the size of the project, right now there are about seven hundred people working on it at the professional level—a hundred Americans, three hundred Iranians, and three hundred others, mostly Europeans, who work directly for firms under subcontracts. Besides that, there are about forty-seven hundred Iranian laborers. Over five thousand people, all told. The entire plan includes fourteen dams, on five different rivers, and will take many years to finish. D. & R. has just completed its first contract, for five years, and signed a new one, for a year and a half, with option to renew for another five years. Quite a bit has been accomplished already. Take the first dam—the Dez one. It’s to be six hundred and twenty feet high, or more than half again as high as the Aswan, in Egypt, and it will eventually irrigate three hundred and sixty thousand acres and generate five hundred and twenty thousand kilowatts of electricity. It should be finished early in 1963. Meanwhile, a sugar plantation—the first in Khuzistan in twenty-five centuries—has been started, with irrigation by pumped water; it should yield its first crop this summer, and a sugar refinery will be ready by the time the sugar is. Another thing: eventually the region will supply its own electric power from the dams, but for the interim period a high-tension line, the first anywhere in Iran, has been put in over the seventy-two miles from Abadan to Ahwaz—a city of a hundred and twenty thousand that previously had no power source except half a dozen little diesels, which seldom worked.”
While the Iranian project was proceeding, D. & R. was also busy lining up and carrying out its programs for Italy, Colombia, Ghana, the Ivory Coast, and Puerto Rico, as well as programs for private business groups in Chile and the Philippines. A job that D. & R. had just taken on for the United States Army Corps of Engineers excited Lilienthal enormously—an investigation of the economic impact of power from a proposed dam on the Alaskan sector of the Yukon, which he described as “the river with the greatest hydroelectric potential remaining on this continent.” Meanwhile, Lazard Frères retained its financial interest in the firm and now very happily collected its share of a substantial annual profit, and Lilienthal happily took to teasing Meyer about his former skepticism as to D. & R. financial prospects.
Lilienthal’s new career had meant a highly peripatetic life both for him and for Mrs. Lilienthal. He showed me his foreign-travel log for 1960, which he said was a fairly typical year, and it read as follows:
January 23-March 26: Honolulu, Tokyo, Manila; Iligan, Mindanao;
Manila, Bangkok, Siemreap, Bangkok; Tehran, Ahwaz, Andimeshk, Ahwaz, Tehran; Geneva, Brussels, Madrid; home.
October 11–17: Buenos Aires; Patagonia; home.
November 18–December 5: London, Tehran, Rome, Milan, Paris, home.
Then he went and got the volume of his journal that relates to those trips. Turning to the pages on his stay in Iran early last spring, I was particularly struck by a few excerpts:
Ahwaz, March 5: The cry of the Arab women as the Shah’s big black Chrysler passed them, a solid row along the road from the airport, made me think of the rebel yell; then I recognized it: it was the Indian yelp, the kind we used to make as kids, moving our hand over our mouths to give that undulating wail.
Ahwaz, March 11: Our experience in the villagers’ huts on Wednesday threw me into a deep pit. I hovered between despair—which is an emotion I consider a sin—and anger, which doesn’t do much good, I suppose.
Andimeshk, March 9: … We have travelled many miles, through dust, mudholes where we got stuck fast, and some of the roughest “roads” I have ever known—and we also travelled back to the ninth century, and earlier, visiting villages and going into mud “homes” quite unbelievable—and unforgettable forever and ever. As the Biblical oath has it: Let my right hand wither if I ever forget how some of the most attractive of my fellow human beings live—are living tonight, only a few kilometres from here, where we visited them this afternoon.…
And yet I am as sure as I am writing these notes that the Ghebli area, of only 45,000 acres, swallowed in the vastness of the Khuzistan, will become as well known as, say, the community of Tupelo … became, or New Harmony or Salt Lake City when it was founded by a handful of dedicated men in a pass of the great Rockies.
The afternoon shadows were getting long on Battle Road, and it was time for me to be going. Lilienthal walked out to my car with me, and on the way I asked him whether he ever missed the rough-and-tumble, and the limelight, of being perhaps the most controversial man in Washington. He grinned, and said, “Sure.” When we reached the car, he went on, “I never intended to be especially combative, in Washington or in the Tennessee Valley. It was just that people kept disagreeing with me. But, all right, I wouldn’t have put myself in controversial situations so much if I hadn’t wanted to. I guess I was combative. When I was a kid, I was interested in boxing. At high school—in Michigan City, Indiana—I boxed a lot with a cousin of mine, and while I was in college, at DePauw, in central Indiana, I took to boxing during the summers with a man who had been a professional light-heavyweight. The Tacoma Tiger, he’d been called. Working out with him was a challenge. If I made a mistake, I’d be on the floor. I wanted just once to land on him good . It was my ambition. I never did, of course, but I got to be a fairly good boxer. I became boxing coach at DePauw while I was an undergraduate. Later on, at Harvard Law, I didn’t have time to keep it up, and I never boxed seriously again. But I don’t think that for me boxing was an expression of combativeness for its own sake. I think I considered competence at defending yourself a means of preserving your personal independence. I learned that from my father. ‘Be your own man,’ he used to say. He’d come from Austria-Hungary, the part that’s now eastern Czechoslovakia, in the eighteen-eighties, when he was about twenty, and he spent his adult life as a storekeeper in various Middle Western towns: Morton, Illinois, where I was born; Valparaiso, Indiana; Springfield, Missouri; Michigan City and, later, Winamac, Indiana. He had very pale-blue eyes that reflected the insides of him. You could tell by looking at him that he wouldn’t trade independence for security. He didn’t know how to dissemble, and wouldn’t have wanted to if he had known how. Well, to get back to my being controversial, or combative, or whatever you call it, in Washington—yes, there’s something missing when you don’t have a McKellar laying it on the line any more. The moral equivalent of that for me now is taking on challenges, different kinds of McKellars or Tacoma Tigers, maybe—the Minerals & Chemicals thing, the D. & R. thing—and trying to meet them.”
I revisited Lilienthal in early summer, 1968, this time at D. & R.’s third home office, a suite with a splendid harbor view at I Whitehall Street. Both D. & R. and he had moved along in the interim. In Khuzistan, the Dez Dam had been completed on schedule; water impounding had begun in November, 1962, the first power had been delivered in May, 1963, and the region was now not only supplying its own power but producing enough surplus to attract foreign industry. Meanwhile, agriculture in the once-barren region was flourishing as a result of irrigation made possible by the dam, and, as Lilienthal—sixty-eight now, and as combative as ever—put it, “The gloomy economists have to be gloomy about some other underdeveloped country.” D. & R. had just signed a new five-year contract with Iran to carry on the work. Otherwise, the firm had expanded its clientele to include fourteen countries; its most controversial undertaking was in Vietnam, where, under contract with the United States government, it was cooperating with a similar group of South Vietnamese in working up plans for the postwar development of the Mekong Valley. (This assignment had led to criticism of Lilienthal by those who took it to imply that he supported the war; in fact, he told me, he regarded the war as the disastrous outcome of a series of “horrible miscalculations,” and the planning of postwar resources development as a separate matter. It was clear enough, nevertheless, that the criticism hurt. At the same time, D. & R. was widening its horizons by beginning to move, unexpectedly, into domestic urban development, having been engaged by private foundation-sponsored groups in Queens County, New York and Oakland County, Michigan to see whether the T.V.A. approach might have some value in dealing with those modern deserts, the slums. “Just pretend this is Zambia and tell us what you would do,” these groups had said, in effect, to D. & R.—a wildly imaginative idea, surely, the usefulness of which remained to be proved.
As for D. & R. itself and its place in American business, Lilienthal recounted that since I had seen him it had expanded to the extent of opening a second permanent office on the West Coast, had considerably increased its profits, and become essentially employee-owned, with Lazard retaining only a token interest. Most encouraging of all, at a time when old-line business was having serious recruitment problems because its obsession with profit was repelling high-minded youth, D. & R. found that its idealistic objectives made it a magnet for the most promising new graduates. And as a result of all these things, Lillienthal could at last say what he had not been able to say on the earlier occasion—that private enterprise was now affording him more satisfaction than he had ever derived from public service.
Is D. & R., then, a prototype of the free enterprise of the future, accountable half to its stockholders and half to the rest of humanity? If so, then the irony is complete, and Lilienthal, of all people, ends up as the prototypical businessman.
* For a detailed discussion of stock options, see p. 101.
* This part of Lilienthal’s journal was eventually published, in 1966.