The Great War had ended, New York was alive with the spirit of the new times, and the streets were thronged with streetcars, automobiles, carts and horses and people moving at a much faster pace than they did in Chicago. It was a great, tall city and I was enchanted. While my father went about his business, I investigated the reputation of New York as the most sinful city in the world. On my first outing alone, I walked down one avenue for three or four blocks, expecting to be accosted by New York women who, I had been told in Chicago, fell into the arms of any young attractive man. When I was not accosted, I felt discouraged. It never occurred to me that my information might be wrong. I tried a Broadway hotel which, according to my information, was known as a gathering place for the most glamorous people of all. There were indeed glamorous women present but no one saw fit to send me a note or even a seductive glance. At seventeen years of age, it was depressing. Youth was not to be served anything but lunch. I tasted none of the city’s pleasures. Most of the time I followed my father around or waited for him while he investigated the possibilities of opening a new factory on the East Coast.
I indulged in another fantasy which was to stay with me longer than my youthful naïveté regarding women. My hard-working father had often spoken of eventually retiring to an orange grove in California. “As soon as I have $25,000, we’re going to move to California,” he would say, “and we’re going to buy an orange grove and have a little house and we’re going to have a marvelous time.” I, too, dreamed about that orange grove as the ultimate goal in life. I could really visualize myself picking an orange off the tree and sitting under the tree and eating the orange. It would be a lovely, lazy life. When I wasn’t eating oranges, I would be a beachcomber on a nearby beach. So, every once in a while in Chicago I would ask my father, “Dad, how much money do you have?”
“Why?” he would reply.
“Have you got the $25,000?”
“No, I haven’t,” he would say.
One day, however, I said, “You must have $25,000 by now.”
“Yes, I have.”
“How about the orange grove?” I asked.
“Well,” he replied, “you know . . . it isn’t convenient for me to go out and buy that orange grove now.”
In New York, approaching my eighteenth birthday, I made plans for the future and my orange grove. My horizon for aging was thirty-five, which was nine years younger than my father was at that time. It came over me then as a firm conviction that I was going to be rich when I was thirty-five. And I decided that at thirty-five I would retire and spend the rest of my life as a beachcomber, with or without an orange grove. But I would have complete freedom. I thought quite a bit about it and recognized that my father and men like him got caught up in the web of business and constantly postponed retirement and the pleasures of leisure. In order not to get caught that way myself, I made an oath to myself and a solemn vow that I would retire, no matter what, at age thirty-five. Having made that vow, I imagined it a personal deal that I had made with God, or some superior being, which meant, logically, that if I did not live up to my oath, I would be punished.
My father found a site for his new cigar factory in Philadelphia rather than in New York, and no sooner had he taken the space, ordered equipment, and engaged a foreman than he received word from Chicago that my grandfather Isaac had died. He rushed back to Chicago, leaving me to supervise the Philadelphia factory for what he expected would be a few days. Business and family affairs kept him in Chicago for almost a month. While he was away, I took charge in Philadelphia. After all, I had been my father’s protégé. I had absorbed his business philosophy at the dinner table, worked summers in the Chicago plant, and understood the cigar business as much if not better than any well-taught young apprentice.
My first task was to hire cigar makers for the new plant, mostly women, as was the custom in Philadelphia, but no sooner had I begun than the entire cigar industry in Philadelphia was struck over working conditions. However, I went out and argued with the union leaders and workers that it was unfair to strike our new plant over working conditions since no one had yet ever worked for us. I promised the workers higher wages and better working conditions than any other cigar factory in the area because we were producing a better-grade and more expensive cigar. I also gave bonuses to girls who would find other girls to work in the new plant, provided picnics, boat trips and free entertainment, and succeeded in hiring all the workers we needed to start. Then, the first sign of real trouble came not from the union but from the president of the local association of cigar manufacturers. He charged into Father’s office, intending to demand that we stop our operation. But he stopped short when he found sitting behind the boss’s desk a teenager. Nevertheless, when our identities were straightened out, he said in a threatening voice, “You can’t run your factory while we are having a strike. You must close down. We don’t want to give those girls an outlet to work anywhere else.” I became as angry as he was, for I knew where my loyalties belonged. I was adamant in telling him that we would not be influenced by threats and intended to go about our business of making and selling cigars. By the time my father returned with the family, we had the Philadelphia plant running full force.
The responsibility thrust upon me by my father and my ability to stand up to that irate cigar manufacturer marked a turning point: I became conscious of the fact that my boyhood had ended and that there were things in the world I could do and do well.
I returned to college that fall, at the Wharton School of the University of Pennsylvania, where the curriculum was divided between business and liberal arts courses. (I continued working for my father during the summers.) My factory experience had propelled me into adulthood and at college this time I took my studies seriously enough to get by. But I had no drive to excel in the classroom as I had in earlier years. In another little revolution, I became half student, half playboy. I threw myself into the heady life of the Roaring Twenties and began to enjoy college life enormously.
While I was at college, my father gave me a moderate but quite adequate allowance, and yet when a good business proposition came my way one year, I grabbed it. It was a new-style shirt with an attached collar and it buttoned down. An alumnus fraternity brother who had become a wholesale shirt salesman showed the fraternity boys the new kind of shirt and I decided to go into business. I ordered a huge load of those shirts, because the more you bought the lower the unit price. I recruited football heroes, baseball players, track stars, and all kinds of people whose popularity, I thought, might make them supersalesmen on campus. I paid them a generous commission and made myself a healthy profit of about $1,000.
While my allowance was strict, my father was not stingy. He gave me an Essex automobile which helped make me become noticed on campus. In my senior year I became head of the fraternity.
In the late spring of 1922, after leaving college, I went to work full time for the Congress Cigar Company. My father gave me a salary of twenty-five dollars a week, no title, and one big assignment. He called me into his office one day and announced that the company had intended to build a combined factory and office building which he hoped would be the most up-to-date one in the industry. “You will be in charge of the whole project, the plans, construction and everything.” I was not surprised at his willingness to trust me with so great a responsibility. It was his style of management. He ran the production end of the business, and as his young lieutenant I was expected to learn all the other operations of his company.
After some investigation, I decided that the key to the new plant would be central air conditioning, and we put in what I believe was the first such system in the cigar manufacturing business. Natural weather was often either too dry and made the tobacco crack and crumble or too damp, which made the tobacco soggy and too closely packed in the cigar. The conditions increased the cost of the cigars. An important amount was saved once the factory was opened and operations went at full tilt. Our new factory at Third and Spruce was a beautiful building, eight stories high, and colonial in style.
My father’s investment in the new plant was a sign not only that his business was doing well but also that he expected it to expand even further. Samuel Paley was ready to ride the economic wave of the twenties: he had standardized his product years earlier, at about the time that Henry Ford standardized his, but of course the operation was on a much smaller scale. To facilitate economies in production, my father stopped making numerous varieties of cigars and concentrated on a single brand, La Palina (a play on the family name), which was a special blend of Puerto Rican and Cuban tobaccos for the filler, encased in a binder of Connecticut tobacco, with a Java wrapper. It appealed to the taste of a wide public. Designing the La Palina was a test of my father’s skill in the art of blending tobacco, and the triumph of his life. It was not a Model T type of cigar (a five-center) but a high-grade cigar (high grade meant a cigar that sold for ten cents or more) offered at a moderate price. La Palinas came in about twenty shapes and sizes, selling for from ten cents to three for a dollar.
For years my father’s business had been regional, with its principal markets centered in the Middle West but after moving east, we went national in marketing, advertising and all other aspects of the business. When I went to work for my father after college, he had expanded from one factory producing about 75,000 cigars a day to six factories in several eastern states producing about a half-million cigars a day. The new, modern factory was the seventh. Congress Cigar was soon producing and selling a million cigars a day, and we could advertise La Palina as “America’s largest selling high-grade cigar.” Sales later rose to close to 1.5 million cigars a day. Sales and profits more than doubled between 1922 and 1927.
The Paley family of course prospered accordingly. To me, my father was a genuine hero, the founder, president and prime mover of a growing, exciting business. But he was not alone in running it. There had always been, as far back as I could remember, Uncle Jay (who had changed his name from Jake), Uncle Ben and the sales manager, Willis Andruss, the only one in the top group who was not a Paley. If I learned anything about selling, it was from Andruss. I got to know Uncle Jay and Uncle Ben well only after I was admitted into the inner circle of the business.
Uncle Jay was taller and younger than my father, quite a handsome man with dark hair. He trained me in finance. Uncle Ben was different. He was the youngest, slouched a bit, had a kindly face and a wonderful smile. It was easy to want to hug him. He was not the best of businessmen. Tell Ben your hard luck story and he would empty his pockets for you. A quiet and slow-moving man, he lived a life separate from the family. He was a great man for the races. The combination of gambling and his happy-go-lucky style worried his two brothers, so they persuaded him to put a good deal of his money in trust. In the company he was a good buffer in many situations because he could reach anybody and had many friends who would do him a favor.
I lived a two-sided life, industrious and fun-loving. I seldom got to the office late and I always fulfilled my obligations, and, I think, made a positive contribution to the business. After hours, I plunged again into the joyous and hectic life of the 1920s. I took a one-room apartment in the Warwick Hotel (equipped with a little pantry and a fold-down Murphy bed) and I felt truly independent and free to dance, drink, and gamble and enjoy the night life—just as long as I got to the office on time the next morning. As a young man I drank, dated show girls and gambled in the fashion of the time. My friends and I wined, dined and danced our way through nightclubs, speakeasies and restaurants and somehow survived the bootleg booze.
I almost did not survive gambling. In Boo Boo Hoff’s well-known casino I ran $10 up into a small fortune of $40,000 over a series of spectacular evenings. I was possessed. I could not lose. I got to the point where I thought I had been put on this earth to break the gambling houses of the world. Monte Carlo was next in my vision. My winning streak lasted about a month. In the following months I lost $45,000—which left me $5,000 in debt to Boo Boo Hoff.
“Never mind,” he said, “just pay me as you go along, little by little and don’t let it worry you too much.” So shortly afterward I put together a hundred dollars and went to another gambling house in search of a new winning streak. I lost the hundred dollars. Worse, the next afternoon a couple of hoodlums came to my office and said that Boo Boo was very unhappy about my losing to other gambling houses: he was calling his debt and expected me to pay up by five o’clock the following Saturday.
Terrified, I imagined that I might be dumped to the bottom of the Delaware River. I could not go to my father; it would hurt and disappoint him terribly to learn that his son was a gambler and at such high stakes. So I went to Uncle Jay. Although very disapproving, he finally came through and gave me the five thousand dollars. I paid my debt to Boo Boo Hoff. But I wasn’t cured. For some time afterward I went back to gambling houses to try to repeat that miraculous winning month. It wasn’t until I went to New York to work in radio that I lost interest in going to gambling houses, and after that the urge never came back.
My favorite organization, of which I was a charter member, was a group called “The Hundred Club.” We occupied a small house on Locust Street near Broad Street in the center of town, where we would lunch every day. It was a close-knit and lively men’s group. We ate well and we played cards for small stakes. After lunch we hurried back to our offices and sometimes returned for dinner.
My friends and I met with the cry, “Let’s have some fun.” I was always ready to go. One of my favorite friends was Ben Gimbel of the famous department-store family. With all the money he ever needed, Ben never took life very seriously. He loved show business, show people and practical jokes. Some of his practical jokes were funny and others were very cruel. His cousin Nathan Hamburger once gave a dinner party at the family house while the parents were out of town and Ben put a sign up on the door, QUARANTINED: DIPHTHERIA. Poor Nathan waited long into the night for his guests to arrive. Ben and I, Larry Lowman, Henry Gerstley and a few other young men formed a group that made the rounds of many dances and parties. I worked hard but I didn’t have any sense of final responsibility; when I left the office I was able to throw off all my cares.
At the Congress Cigar Company, I advanced to the status of vice-president, with duties that consisted of buying tobacco, overseeing production and dabbling in advertising. In 1927 my salary rose to $20,000 a year. Much of the work was routine, but a few episodes stand out, doubtless because they redounded to my credit in the eyes of my father and uncle.
On one occasion, one of them asked me to audit the operations of a dealer who bought tobacco for us abroad. It was a big job, and checking the complex transactions took a long time. The dealer had a fine reputation, and my father and uncle found it hard to believe what I had uncovered. They made me prove my claim that the dealer had outrageously falsified our accounts. Then my father confronted the dealer with the proofs I provided and in an emotional scene the dealer collapsed, confessed and begged to be forgiven. My father, who thought he knew the dealer as a friend, promised not to take him to court if he would resubmit the accounts. When all the new bills were in, we found that we had saved a couple of million dollars in overcharges. It was a big moment for me.
One year my father sent me to Puerto Rico by myself to buy tobacco. I think we were the largest buyers of Puerto Rican tobacco, competing in that market with numerous dealers who bought for resale to smaller manufacturers. When I arrived I found that the tobacco crop was large and there was an oversupply in the market. The farmers were vulnerable to a terrible crash in prices, and the dealers were talking of making a killing. But the other buyers could not do so without reckoning with us. The farmers would wait to see what we did.
Our office manager and I went out into the field to visit the farmers and found them in a miserable state at the prospect of extremely low prices. One could argue in the abstract that low prices for a large crop is a natural economic law, and the farmers should take it as it came. But, the more I thought about it, a quick killing seemed wrong for them and foolish for us. I reasoned as follows: if prices fell too low, the farmers would go under and would have difficulty producing the next year’s crop, and we had a long-term interest in their financial health. We were not interested in a quick turn of profit but expected to come back year after year to buy tobacco in an ongoing relationship.
As the largest buyer, Congress Cigar could influence the market price, and the decision was mine to make. I spent a week in Puerto Rico deciding which lots we wanted to buy, and I concluded that, at thirty cents a pound, the farmers could get their money back with a profit. This price would fit satisfactorily into our cost structure. I gave the signal, and our buyers went out all over the island closing deals at thirty cents a pound for the tobacco lots I had selected. That night when I got back to the hotel, a delegation of dealers was waiting, ready to kill me. I explained my position to them, but they had sent a cablegram to my father telling him I had gone crazy paying ten or twelve cents a pound over that year’s expected price.
When I heard from my father, I cabled him an explanation, and back came his response: “You’re absolutely right.” The farmers responded with many gifts including a hundred-year-old bottle of brandy. When I returned to the office in Philadelphia, my father gave me a raise in salary.
While selling cigars so successfully we watched with interest the phenomenal growth in the sales of cigarettes throughout the country (from about 16 billion to about 82 billion a year in twelve years) and we were tempted to break into this related tobacco business. So we introduced a cigarette called “Palina” and advertised it as having “a dash of Java.” I was put in charge of sales and advertising. We put a tremendous effort into that new venture and it was a bust. People smoked a Palina once but not again. In Akron, Ohio, I tried to give a package of Palinas to a cab driver. He looked at it and passed it back, saying, “Thanks very much, buddy, but I’ve already tasted them.” I felt crushed. When we came to analyze the problem of taste, we found it was not the tobacco but the cigarette paper. The best cigarette paper was made in France and we just could not purchase this paper because the entire output had been taken up by other American manufacturers of cigarettes. We closed down the business and took our losses, which were quite substantial. As cigar makers, we had thought only about tobacco and overlooked the fact that cigarette smokers smoke paper too.
The high point of both my business and social life came in May of each year when my father took me to Europe with him to buy tobacco in Amsterdam. My father was training me to be a tobacco buyer. I went to Amsterdam to learn that art from him, and then to Paris to enjoy life. We went to Amsterdam for the Java wrapper, which was so important to the flavor of La Palina cigars. In fact, we advertised “Java Wrapped—the Secret of the Blend.” Since Java (along with Sumatra, another prime source of tobacco wrappers) was then a colony of the Netherlands and the tobacco from the area was brought to Amsterdam to be sold, that city became the center of international tobacco auctions.
Manufacturers, wholesalers, brokers and speculators would gather in a great opera-house-like room called Frascati’s. On one side of the room was a platform occupied by the auctioneer and his attendants. The other three sides were formed of balconies in the shape of horseshoes, with each tier divided into boxes. The boxes were occupied by the important tobacco buyers. On the floor between them were congregated the professional traders or brokers. Tobacco was sold in lots, one lot at a time. The buyers sent in their bids to the auctioneer in sealed envelopes until a gong rang out, signaling the end of the bidding. The auctioneer then opened the envelopes in the presence of all assembled and would say something like, “Lot number 1234 sold to . . .” and announced the party who had bought it. Bedlam would break loose among the brokers on the floor below. Each lot was made up of tobaccos of various grades, and a winning bidder usually would want to keep only what he needed for his particular kind of tobacco business; a speculator might want to resell the whole lot in separate pieces. Thus a second round of trading would begin, not through the auctioneer, but openly among any or all present, mainly among the brokers on the floor, as in a commodity exchange.
Soon the gong would ring again, and silence would come over the crowd while the auctioneer opened the bids for the next lot. Then wild trading would resume as the lot or part of it was resold in pieces. I don’t know to this day how these people understood each other. Their piecemeal trading was done with fingers and hands and signs of one kind or another. Everyone made little notes and everything always went all right. At the end of the day, everyone knew what he’d bought or what he’d sold. It was very exciting, and profits could be substantial. A speculator might make or lose a million dollars on a single lot. Even a manufacturer had to take the risk of reselling what he didn’t need.
We did our important homework for days before this dramatic event. The auctions were held every Friday for six weeks. During the intervals, my father and I and our broker would prepare our sealed bids for certain of the large lots, each of which would run in the millions of dollars. We knew of course what our requirements were when we arrived in Amsterdam. We were, I believe, the largest buyers present, and it was no secret that we were interested in buying for our own account only Java tobacco for wrappers. We would be sellers of anything else that came to us in the auctioned lots. Since the lots were mixed we had to examine them in their entirety, not only for what we wanted to keep but also for what we would want to resell to the other manufacturers and the wholesalers and speculators.
Each morning we would get up about five o’clock, have breakfast and go to our broker’s office. Since the lots were too large to be examined in full, samples of each grade of tobacco in a given lot would be provided to the brokers for the potential bidders. The samples always truly represented what was in the lot; there was never any question of one’s being misled. When we looked at a handful, we knew that a thousand bales of that kind and grade of tobacco would average out the same.
It was in this appraisal phase that I saw my father’s talents most vividly at work. We arrived at work at daylight, for natural lighting is essential in judging the appearance and color of tobacco, especially wrapper tobacco. We discussed the grades—there might be as many as fifty in a single lot—with our broker and his staff of experts who would hand us the samples. We—I say we, but I just stood there watching and listening and trying to learn—would then judge which lots we wanted to bid on and how much we should bid. The art of the sealed bid is not simple. My father, though he took advice, would settle on the bid himself. Into it would go his calculations of what the lot was worth to him—that is the value to him of the portions of the lot he intended to keep for use in his business; the potential but uncertain value of the resale of the portions he did not want to keep; and in the end what to bid competitively against the other buyers who were valuing the tobacco and making similar calculations. One wanted to bid high enough to get the lot and yet no higher than was necessary. The bidding usually ran into the millions. It was scary.
Everyone took security measures to safeguard the amount they intended to bid. We put our evaluation of tobaccos and bidding prices down in code in little black books which we kept under lock and key. Since everyone knew his principal competitors and the nature of their interests, the mutual guesswork was quite sophisticated. If you lost a bid on what you needed, you would have to buy those portions of the lot at a higher price from the winner, typically a speculator, in the second resale auction. It was a coup to make a winning bid for a lot at a reasonable price that got you what you wanted. You couldn’t win them all of course and even when you did, you couldn’t be sure that you had not overbid for the lot. This led to a good deal of bluffing after the auction. Everyone lunched and dined together and it hurt deeply to hear someone say his losing bid was a very low amount. It was an old trick: if you were taken in by someone’s boast that he had bid far lower than your winning bid, you might be tempted to bid lower next time, and lose. You never really knew what had happened in the bidding—losing bids were not revealed by the auctioneer.
These uncertainties made our weeks in Amsterdam a lively affair. We bought huge supplies of tobacco for the business, no matter at what level of prices, in order to have enough stock on hand to meet our needs for more than a year. It was the only way to guarantee the quality of La Palina cigars. Our mission was basic to the business at home.
We worked with great intensity and concentration and for long hours over the many details involved in judging, bidding and buying tobacco in Amsterdam. The Dutch were strict in the attention they paid to every little detail that went into those tobacco auctions. And I learned from their insistence on methodology that if you get the details right, the final work product will be correct.
After the auctions my father and mother would usually go to Vichy to appease his hypochondria with health-giving waters, and I would go directly to Paris for two or three weeks of play. My companions were known as “the smart set,” who followed a routine one spring season after another. There was a right place to have lunch every day, a right place to have dinner; after dinner there was another place, and then began the night life, ending up usually in Montmartre at a romantic bistro run by a black woman called Bricktop. I was an American in Paris in the twenties.
The larks of my own twenties life had no firm rationale. More often than not, the lark was inspired by whim or challenge or, on occasion, a feeling for the extravagant gesture. In the spring of 1928, when I was staying at the Ritz with my parents, a friend who was an automobile buff talked me into accompanying him to the factory of the most famous builders of auto bodies in the world, Hibbard and Darrin, just outside Paris. He wanted to buy a Hispano Suiza, a very fine car in its own right, for which Hibbard and Darrin had built a special convertible body.
The car was beautiful and unique. The top could be folded far back and the doors had an original shape, tapered in from each side, which gave them a high-style look. It was the only body design of its kind in existence. All in all, it was probably the most beautiful car I had ever seen. I was taken with it. My friend quailed at the price, $16,000, and said, “It’s too damn expensive.” I said, “I think you are a fool. If I had that kind of money, I’d buy it.”
At that time I did have money in my own name, but it came from the family business—and to me was sacrosanct. As a matter of family ethic, I would not use those funds without my father’s approval. So I did not consider myself—my free self—to be rich. However, I did own some stock in my own name, and later in the day, when I checked with my stockbroker, I found that my stock had risen to just about the price of that Hispano Suiza—some $17,000. I was amazed. It seemed that my wish had been fulfilled. I had said that if I had the money I would buy that car, and now I had the money. It was dazzling to have the car of cars within my grasp. So, I put in a sell order and in a few minutes received word that I had the cash to my credit in the Philadelphia broker’s office. I bought the car and had it delivered to the Ritz.
I was uneasy over how this extravagance would appear to my father or my mother. In the course of talk at the hotel, I casually commented, “By the way, I bought a car.” My mother was indifferent, but my father’s interest perked up. “Where is it?” he asked. “Downstairs,” I replied. We went out on to the Place Vendôme in front of the Ritz, and my parents looked around. The Hispano Suiza was sitting nearby, the prettiest picture on the street. But again my father said, “Where is it?” I pointed and my father said, “You’re crazy. I don’t see any car.” There was a pause, and he said, “You don’t mean that big thing over there, do you?” I said, “Yes, as a matter of fact I do.” His face got red, and he started to say something harsh to me, when my mother intervened and said, “Now, Sam, take it easy. Your son bought this, I guess, with money that was his to spend and that he had a right to spend, and he will probably get a lot of fun out of it. Don’t spoil the fun.”
My father quickly suppressed his disapproval. I engaged a chauffeur in Paris for a couple of weeks to drive me and my friends on our daily round of pleasure spots until the early hours of the morning. Later, in Philadelphia, I began to think my father might have been right in his first reaction to the car. I didn’t like driving it. It was so unusual that it drew crowds of people whenever it was parked on the street. It seems that one of the paradoxes of youth, at least of mine, was that I wanted an attention-getting object without the attention. It may be that I haven’t changed much in that respect in the last fifty years.