“It is hard to fail, but it is worse never to have tried to succeed. In this life we get nothing save by effort.”
—Theodore Roosevelt
If we had a caste system in the United States, I would have ended up in the clothing business like my great-grandfather, grandfather, father, mother, and even stepfather. My maternal great-grandfather, Louis B. Heil, immigrated from Dieburg, Germany, made his way west, and opened a store to outfit silver miners in Montrose, Colorado. When the mines began to dry up, he moved his family, including my Grandmother Cleve, to El Paso, Texas, and opened the Union Shoe and Clothing Company. When my grandmother married Charles Hirsch, he joined my great-grandfather in the business. And as I described in chapter 2, my father and mother kept the tradition going by becoming State-O-Maine western region sales representatives.
Maybe it isn’t surprising, then, that when I was well into the MBA program at the University of California, Berkeley, and looking for work, a family friend offered me a job as a sales representative for Van Heusen shirts. The job came with a guaranteed income of at least $1,100 a month, a sizable amount in that day. It would have been easy enough to accept. But I had been around the garment business enough to know that it was not for me.
By the time I was a teenager in the early 1950s, I had seen enough of life to know that one day I would have to make money for myself and probably support a family. Although there never was any question in my mind that I wanted to major in business, I studied as widely as possible in other fields. Your college experience should open you up to the world and challenge your thinking, beliefs, and assumptions. Your classes and activities should suggest an array of possibilities in the contemporary world for a life well lived—a life by which you make important contributions to society. My years at Berkeley did all this for me.
My time at Berkeley and the rising arc of my business career—into the world of investment and finance—helped me develop a strong capacity for analyzing facts, assessing risk, and identifying emerging trends or opportunities. These skills have certainly benefited me personally, but they also have shaped how I approach any global development work I play a role in, whether it’s philanthropy, public policy, education, or something else. The American Himalayan Foundation would not have had the impact it has without these disciplines baked into our core processes. When I’ve seen initiatives from other nonprofit groups fail or end in disappointment, it’s often because one or more of these management competencies—fact-based analysis, risk assessment, or knowledge of local and global trends—was missing from the start.
Of course, all this focus on gathering knowledge, developing insight, and taking action has to be framed by both a passion to make a positive impact in the world and an inspiration that flows naturally from the values of empathy and altruism. Life is simply a series of decisions that lead to action. The risks and the rewards are sometimes obvious—and oftentimes not.
One day when I was a sophomore, I happened to pick up The Daily Cal, the campus newspaper, and noticed an article about a foreign study program at the University of Vienna, organized by the Institute of European Studies.1
The only time I had traveled abroad was during a weekend assignment with the Navy Reserve in San Diego, when a few of us from the reserve unit drove down to Tijuana. Unlike today, in the 1950s study abroad programs were few and far between, even at major universities. The Vienna program sounded ideal and certainly appealed to my instinct for adventure. I applied for the program while studying for what was the equivalent of junior-year credits and was accepted for the spring semester of 1957. I would study in Vienna after a few weeks of touring with a group of college students across Western Europe. In the summer, I would be able to travel wherever I wanted.
I learned somewhat late in the process, though, about academic requirements I had to meet before leaving campus for Europe—a mistake. The registrar’s office informed me that I would have to take six classes for the next two semesters in order to fulfill my degree requirements and graduate on time following my return from Vienna. These classes also happened to be some of the most difficult ones I would need to take.
I hadn’t been a great student in my first few semesters at Berkeley—procrastination and cramming for a class like I did in high school didn’t work so well anymore—and I might not have made it through those two semesters if I hadn’t met an attractive young woman named Andrea Schwartz. She was studying to be a physician and had never, ever gotten a grade worse than an A. It didn’t take me long to realize that the only way I could see her during the week was to study with her. We were taking the same art history course, and when I came in second to her top marks, a light bulb finally went on. I became a much better student. A few years later, Andrea would become my first wife and the mother of my three wonderful daughters—Annette, Heidi, and Eileen.
During those two rough semesters before my planned travels abroad, it seemed that I was nearly killing myself trying to get it all done—the endless reading, the papers, the tests. But I certainly learned a lot. Once I had run that gauntlet and my grades were in good shape, I was tremendously relieved.
Well, not so fast. Two weeks before I was scheduled to leave for Vienna, an official in the registrar’s office told me, “We made a mistake. You can’t spend your last year off campus and get credit for any courses you take. That would violate a residency requirement. Your senior year has to be at Berkeley.”
I was not happy. “I’m going anyway,” I told them. I figured I would have any backing I needed from my professors in the business school if I had to arm wrestle with these bureaucrats when I got back. It never came to that.
It was a risk, but sticking to my plan was absolutely the right decision. I would learn more in the next several months in Europe about life and what the world was like than I did growing up in San Francisco and those first years at Berkeley. Most important, I came to understand for the first time how much poverty there was in the world.
One of my first impressions drove home for me a glimmer of what it must be like to live your life on the edge of poverty. I had traveled from New York to Liverpool, England, on a passenger ship with about twenty-five other college students. We’d had five days of high seas, late nights, and good times before coming into port and boarding a bus. Now, we were riding through a tunnel that was dark and filthy with coal soot that had been accumulating from chimneys and smokestacks across Liverpool for a hundred years. Our bus suddenly passed very close to a guy who was working in the tunnel, trying to scrub the soot off the inner walls with just a rag. I was appalled. The air must have been full of deadly contaminants, unbreathable and stinging his eyes. I couldn’t imagine how anyone could work under those conditions, and I never forgot it.
As we traveled by bus through England, Belgium, France, Germany, and Austria, we saw people still trying, more than ten years later, to recover from World War II. Housing was old and cramped, because so much of what had once stood in these towns and cities had collapsed to rubble. There wasn’t enough food because the food and agricultural industries had been so hard hit. When we arrived in Vienna, it was less than three months after the Soviets had brutally ended the Hungarian Uprising of 1956. The city was full of refugees who had escaped Hungary. People were queued up in lines that went on for blocks, hoping to get visas at the US embassy to go to America.
I rented a room from a family who lived on the sixth floor of an apartment building with no stair lights. The elevator didn’t work because the Nazis had stolen the elevator cables during the war. Many steps were broken. Just getting up to my room was dangerous—good training for years later when I was climbing mountains in Nepal.
I wasn’t going to get academic credits for any classes I registered for at the University of Vienna, so although I was taking some interesting courses, I stopped attending lectures by early spring and for most of my remaining four months hitchhiked through more of Europe and a little of North Africa. Many towns and cities I saw there were impoverished too, especially in Yugoslavia, Greece, and Spain. Spain was dreadfully poor.
In Morocco, both France and Spain had been imperialist colonizers off and on for more than a century. You could see in the eyes of people on the streets in Casablanca a distrust, even hatred, for Europeans, especially the French and Spanish. Unfortunately, Moroccans I encountered in shops and on the streets appeared to assume I was French, not American.2 They were not very friendly. One day I got into a scuffle with a guy in Casablanca who was trying to pick my pocket and wouldn’t take his hand out. I was much bigger physically, and I grabbed him by the throat and slammed him against a wall. He yelled out. Suddenly I was being chased by guys in turbans who seemed to be coming from everywhere. It was like a scene in a movie: I dashed away down a narrow alley, ducked behind a wall, and hid there as they all ran past, my heart pounding. I’m thankful they never found me. I decided to get out of Casablanca fast and took the next train to Marrakech.
After quickly crossing northward from Morocco back into Europe, I soon had several more interesting trips, including hitchhiking into Soviet-occupied East Germany and sleeping on a wooden bench for three nights in Berlin’s expansive Tiergarten Park, and eventually returned to Vienna and then Berkeley. Back on my home campus, I felt a new sense of purpose.
After completing my undergraduate degree, about six months after I returned, I enrolled right away in the Berkeley MBA program, finished in a year, and continued on with PhD studies in economics. I wanted to travel and see more of the world while making a living, but I needed a job in the meantime to pay the bills while in graduate school.
In these first years after World War II, large American firms sold their goods abroad through international trading groups. These groups provided a better understanding of local marketing conventions and practices, and they oversaw each step of in-country sales transactions. A family acquaintance got me in the door at a trading company on California Street in downtown San Francisco, and I met with the managing partner. I’ll never forget the scene. Only two people were within sight—the managing partner and another partner—and in front of them were forty desks, all of them empty. It looked like these two guys might be the only ones left.
The managing partner promised me a position, but after he returned from a business trip two weeks later, he called and said, “I’m going to do you the biggest favor of your life. I’m not going to give you a job,” he said. “Don’t go into this business. If I were a young man, I wouldn’t.” These trading companies, it turned out, were fossilizing, in their dying days. Improvements in shipping and communications had made it possible for major companies to work directly with foreign buyers.
I abandoned my idea of working with a trading company. Not long after, a few friends from an investment club I had belonged to while an undergrad at Berkeley introduced me to people in some of San Francisco’s top investment firms. The club, with the grandiose name of The Midas Investors, turned out to be a valuable learning and networking experience; I went in not knowing the first thing about how to choose stocks. I quickly realized the atmosphere in these investment firms was completely different from the trading company. Instead of pessimism, I saw optimism. I heard of one broker in his twenties who was making $30,000 a year, a phenomenal sum then. That could be me, I thought.
I signed on as a junior analyst and trainee at Sutro & Co., a traditional brokerage firm that made most of its money on commissions from its clients’ stock trades, not on profits from investments or trading in its own accounts. This was 1958—seventeen years before the old system of fixed commission rates would be abolished by the Securities and Exchange Commission (SEC), and the year Sutro marked its one hundredth anniversary.
For decades, Sutro & Co. was the largest investment house west of the Mississippi. It was a conservative enterprise in every way. Over the course of a century, the firm had been led by only three senior partners. Each was so innately risk averse that the firm rented—and never bought—the property where it maintained offices—in the 400 block of Montgomery Street, near the heart of what is today’s thriving financial district—for more than 110 years.
I was assigned on my first day to the research department. There were five of us, all crowded into a single room with a long row of filing cabinets crammed with company reports. My first assignment was to throw out enough outdated documents to empty two filing cabinets, thereby creating space for my desk.
For weeks, I sat and read annual reports on hundreds of companies, most of which I knew nothing about. I took a lot of notes, though, and by the time I earned my little desk, I had absorbed information about scores of industries and their major players. Though I wouldn’t suggest this as a training program today, at the time I saw it as a great opportunity. I wanted to be in the research department.
I was comfortable with the intrinsic nature of the work because it flowed seamlessly from my MBA studies. A lot of research back then wasn’t all that hot, frankly. If you could do your own research and have your own company contacts, you would have more confidence in what a company was saying and how to assess the value of its shares for clients. I felt sure I could learn more that way, and I have believed ever since in getting as close as possible to the best source of relevant information in everything I do.
My breakthrough at Sutro came about a year later, after market research firm AC Nielsen went public. I wrote what probably was the first research report by any brokerage on AC Nielsen. I had studied the business in one of my MBA classes; I understood it and liked it. I gave Nielsen a strong “buy” recommendation, and in the following months, the stock did extremely well.
It wasn’t long before many of Sutro’s two hundred brokers discovered me. “What other companies can you recommend?” they would ask. Varian Associates was one I could suggest with confidence, again thanks to my MBA studies. I had finished the core course requirements for my MBA by the time I started at Sutro and had decided to take further advantage of Berkeley’s cornucopia of offerings to add some courses on finance. I had written about Varian Associates—one of the few providers of the klystron microwave tubes the National Aeronautics and Space Administration relied on for its satellite communications and radio astronomy programs—for one of those classes, and had interviewed Varian’s treasurer, Jim Donovan. He couldn’t have been nicer. We stayed in touch after I joined Sutro, and I occasionally would go see him to understand better what the company was doing. We recommended, and bought, Varian shares in the twenties. The price soon climbed into the seventies before falling back.
In addition to writing reports, I also analyzed investor portfolios and began working with my own clients. It was pretty basic stockbroker activity. I would call clients with a new idea I liked for a promising investment or just to check in with updates on their portfolios and the market. Ewald Grether, the dean of Berkeley’s business school for many years, who had taught a few of my courses, asked me to manage his investments. He didn’t have a large portfolio with us, but his was a huge vote of confidence for a young kid like me just getting started. He was a renowned expert in marketing and pricing, and I had often sought him out for academic and career guidance.
I continued to do my own company research and enjoyed it. The reports were benefiting clients, our firm, and me, and I knew that continuing to unearth good investment opportunities ahead of competitors was going to be my best opportunity for a rapid rise in the firm.
At first my goal at Sutro was to earn at least $1,000 a month as a broker. I knew that if I could push that to $2,500 a month, I would be on track to actually earn that $30,000 a year. I topped $1,000 in the first month, at $1,100—more than triple my initial salary in commissions alone—and was now making as much as if I had taken that job selling Van Heusen shirts. It was exciting.
I was earning money on my own terms, and that was important to me. I had watched my mother and grandmother struggle financially at various times. My grandmother had a penchant for falling for financial and investment schemers later in her life. And my mother had been forced to use up much of the money left to her by my late father, who was reasonably successful. She had quit her job with State-O-Maine after remarrying when I was twelve. My new stepfather, Morrie, was a men’s clothing manufacturer’s sales representative, but he gambled excessively. Bob and I were back home from the military boarding school we hated so much, and my mother had to pay all the household expenses whenever Morrie’s income was squandered to cover his gambling debts. As a young man, it had stuck in my mind that I needed to move beyond the prospect of diminishing resources and learn how to make money for myself. Now I felt I was making quantum leaps in that direction.
I gained the equivalent of ten years’ experience in my first five years at Sutro because I worked twice as hard as anybody else. I often was the first guy in the door in the morning and the last guy out at night and always wanted to be at my desk at least an hour before the opening bell rang on the New York Stock Exchange at seven a.m. Pacific time.3 After the market closed at twelve thirty p.m., I worked on either research or client calls. At home in the evenings, there were company reports and The Wall Street Journal to read to get ready for the next day.
One day, after three or four years at Sutro, one of the brokers said to me, “Well, you almost got there.”
I had no idea what he was talking about. “What do you mean, I almost got there?” I asked.
“You were almost our largest producer,” he replied, glancing back to a tally sheet for a period that had just ended.
I was stunned. Looking back, I shouldn’t have been so surprised. I always say, my inspiration comes from perspiration. That’s how you succeed. But many of my colleagues operated without detailed information about industries and companies. The longer-tenured Sutro brokers would fill their days simply charting price movements of their favorite stocks, never looking at research or developing fresh ideas. They thought every client should own some shares in General Motors, Bank of America, and Pacific Gas & Electric.
I was much more interested in finding and studying companies with promising business models and exciting growth prospects—similar to the philanthropic and global development opportunities I would later seek. Clearly, this was working well. I narrowed my sights even further: toward making my first $1 million.
One trait I’ve retained from my youth is a perpetual curiosity about virtually any subject. This has always driven some of my associates and family members a little crazy, but I am sure insatiable curiosity has helped set me apart from the crowd. It allows me to see opportunities where others see threats or obstacles. Curiosity inevitably tests your appetite for risk, because you are attracted to situations or circumstances most others avoid.
Risk is a great teacher. Sometimes you win and sometimes you lose, but the more frequently you take risks and are able to step back and learn the right lessons from those experiences, the better you are able to calculate the dangers and the rewards when each new opportunity arrives. Now that I’m older and presumably wiser, I am asked occasionally how our firm, Blum Capital, has been able to invest so successfully over the years. The answer is that my partners and I knew how to assess risk. We have been willing to make big investments despite keen competition and great uncertainties. Even at times when a situation might have looked bleak, we would hold fast to our plans and analyses. In order to do well, you need to have the courage of your convictions.
To reach that level of confidence, insight, and conviction about potential opportunities, you need to start taking risks in your career and in your investments when you are young, the stakes are relatively low, and there is plenty of time for you to change course if necessary and recover. Better to make mistakes while you are young and the numbers you are working with have fewer zeroes at the end. It’s far easier to recover, if you have to.
I had tested this theory twice by the time I was twenty-five. Mark Twain once wrote that a cat only sits on a hot stove once.4 If that’s true, I guess I wasn’t as smart as the average cat.
Not long before I joined Sutro, I had gone into business with a friend’s father. We opened San Francisco’s first—and last of its era—trampoline center. It was 1957. Trampoline centers were all the rage in Los Angeles, where 150 of them had sprung up and young people were queuing up by the hundreds at each location to experience the latest fad.
Soon after we opened up with new trampolines neatly spaced on a vacant lot that we had rented, however, a customer was seriously injured in a fall at one of the Los Angeles centers. Those centers all shut down as quickly as they had opened, and it wasn’t long before we cratered too. In business for about four months, we lost all the money we invested. For me, that was $3,000, or about half my net worth. I was pretty shaken up. I hadn’t realized you could lose so much money so quickly.
After I started at Sutro, I began putting money I saved into stocks. When I inherited $10,000 from my grandmother after she passed away in 1960, I invested all that money in high-tech electronics companies down the Peninsula. This was early days in the nascent Silicon Valley, before it was even called Silicon Valley. I figured I’d be really smart and buy even more on margin—that is, borrowing another $10,000 to double down on these stocks and use the shares as collateral.
It wasn’t long before my $10,000 in inherited cash had turned into $100,000—on paper. I was riding high. But then the market plunged. I came to work at eight o’clock one morning and was greeted with the shocking news that my losses had triggered a margin call: I had to deliver $11,000 in cash by eleven a.m. or all those tech stocks would be sold at prices drastically lower than what I had paid.
Asking me to come up with $11,000 in cash in a few hours then was like asking me to come up with tens of millions in cash in a few hours today. Oh, my God, I thought. Where am I going to get eleven thousand dollars?
One of our branch office managers had a brother who was a loan officer at the Mechanics Bank of Richmond, California. I knew him only slightly but called anyway and told him my predicament. Reluctantly, he agreed to see me. I drove as fast as I could over the Bay Bridge to Richmond and showed him my portfolio.
“You shouldn’t have bought these speculative stocks,” he said.
“Yes, I know,” I replied. “But I did, and it’s too late. Can you lend me the eleven thousand dollars?” I promised to repay the money as soon as I could.
With no security other than my pledge to pay him back, he handed me a cashier’s check for $11,000. I was relieved, but only for a moment. I raced back across the Bay Bridge to San Francisco. Ten minutes before the deadline, I ran up to the cashier’s window, delivered the check, and narrowly averted having all that stock dumped in a forced sale. That would have been a disaster: Those tech stocks rallied a week later, and I quickly sold enough of them to repay the bank.
I’ll never, ever put myself in that position again, I told myself. I was never going to leverage any stock holding to the point that it could be subject to a margin call. I was never going to risk money I didn’t have, in one form or another. And I never have. For more than fifty years, the only money I have borrowed from banks is through term loans backed by hard assets on real estate projects.
Taking risks is fundamental for investing in or supporting projects in underdeveloped countries and communities. You do your best to research and analyze the situation, but instability and change are rampant, and your best efforts to make wise decisions will never guarantee the best outcomes.
Jimmy Carter, John Hardman, and I took a trip through West Africa a few years after I joined The Carter Center’s board in 2000, stopping in Mali, Ghana, and Togo. During a meeting at the American embassy in Bamako, the capital of Mali, the head of US Agency for International Development (USAID) programs told us he wanted to start a health care training program a little east of Timbuktu, in a town called Gao. He needed a financial partner. His plans and enthusiasm appealed to me, and I made a commitment to get started.
Within a year, though, that director had moved on, and his successor didn’t seem interested in that training program. I couldn’t get any status reports. Jimmy and I planned to visit the project in Gao for ourselves a few years later, but by 2012 the area was too dangerous.
The Tuareg rebellion in the north had displaced more than four hundred thousand people and driven government forces out of Timbuktu and Gao. Human Rights Watch reported horrible attacks centered in Gao that included “sexual abuse, looting and pillage, summary executions, child soldier recruitment, amputations, and other inhuman treatment.”5 I never heard from USAID what happened to the people in our nurses’ training program, or even if the program still existed in 2012.
None of what came later made me believe that supporting the program wasn’t the right decision at the time.
While it’s true that I’m comfortable taking measured risks, I never expect others to take undue risks only for my benefit. This principle applies in my personal life just as it does in business matters, and is why I find so inexcusable the grave dangers confronting Sherpas with expedition companies operating on Mount Everest. The situation has become, in a word, obscene.
It was late February 2014, and Norbu Tenzing was chatting with visitors in his American Himalayan Foundation office. “It’s just a matter of time until there is another big disaster on Everest,” he predicted. Within two months, as Everest’s spring climbing season was gathering momentum, Norbu was proven horribly correct. Tumbling, splintering blocks of ice high on Everest’s South Face crashed onto twenty-five Nepali men, each ferrying more than sixty pounds of food, oxygen tanks, cooking equipment, and other supplies on their backs for guided expeditions. Sixteen mountaineering workers were killed—thirteen Sherpas and three other Nepalis. It was the worst disaster in Everest history, adding to the carnage of three other Sherpa deaths earlier in the year, four in 2013, and three in 2012. The shock and anger that reverberated across Sherpa communities shut down the 2014 spring climbing season.
The avalanche struck in the most feared expanse along the route to the summit: the Khumbu Icefall, which Jon Krakauer in his 2014 New Yorker article described so well as “a jumbled maze of unstable ice towers.”6 The Icefall’s greatest risks by far fall upon the Sherpas. They must cross this danger zone as many as thirty to thirty-five times for each expedition, carrying heavy loads for people who often will cross it only twice or possibly four times.
The core issue here is this: Who is assuming the greatest risk, at what potential cost, and who is reaping the greatest rewards, with what potential benefits?
What Sir Ed and Tenzing Norgay accomplished together to the world’s amazement some sixty years ago was summiting the highest mountain on earth and returning safely to tell the story—something no men before them had ever done. “Even using oxygen, as we were, if we did get to the top, we weren’t sure whether we would drop dead or something of that nature,” Sir Ed said in a 2000 interview with NZEdge.7 It was the mid-century equivalent of the following generation’s quest to put a man on the moon. Seven major expeditions over the prior three decades had failed, including one mounted by Swiss climbers a year before in 1952.
The journey hundreds of people now complete each year—to the top of Everest and back to Base Camp—bears little comparison to the arduous challenges overcome by Sir Ed and Tenzing. Everest expeditions follow essentially the same route these pioneers climbed, but the comparison ends there. The majority of climbers on guided expeditions are tourists, really, who pay $60,000 or more with the full expectation they will reach the summit and return safely. Many have never before worn crampons before.
“There are fewer hard-core mountaineers,” Susmita Maskey, a Nepali who has climbed Everest and other major peaks, told The Wall Street Journal. “It’s a circus.”8 Almost every step is choreographed along miles of fixed ropes secured by Sherpas who routinely must work precariously within a few feet, or less, of what they know could be a fatal plunge. Most carry haunting personal memories of someone, perhaps even a family member, who died while laboring on Everest. Various sources cite different figures for fatalities on Everest, but all are ghastly. According to government statistics, around three hundred people perished there from 1953 through 2015.9
The idea that people expect others to continually risk their lives so that they can amuse themselves in a high-altitude adventure just seems wrong.
A Sherpa working above Base Camp is nearly ten times more likely to die than a US commercial fisherman (the job rated most dangerous by the US Centers for Disease Control and Prevention) and more than three and a half times as likely to die as a US Army infantryman was during the first four years of the Iraq War, according to the Himalayan Database.
“As a workplace safety statistic, 1.2 percent mortality is outrageous,” said Outside magazine’s Grayson Schaffer in his cover story “The Disposable Man: A Western History of the Sherpas on Everest,” published nine months before the April 2014 catastrophe. “There is no other service industry in the world that so frequently kills and maims its workers for the benefit of paying clients.”10
In a country as poor as Nepal, Everest Inc. puts a lot of money into many pockets. It is the wellspring of Nepal’s $370 million trekking-and-tourism industry. Norbu’s home village, Thame, is one of the few where Sherpa tradition and culture remain strong. Some people still work the land and raise yaks. A three-hour trek from Namche Bazaar and twenty miles west of Mount Everest, Thame (pronounced Tha-mey) is home to several famous climbers—including Apa Sherpa, who has summited Everest a record 21 times. Dozens of young Thame men risk their lives to work as he did on Everest expeditions: their best potential source of income.
In the spring of 2014, we saw more than a thousand potential climbers at Base Camp. In 2013, more than 450 people made it to Everest’s peak, about double the number in 1990. The government issues too many permits for Everest because expedition companies, most based in the United States and Europe, keep the money flowing.
But how much of that money do the Sherpas see? The biggest issue for me, Norbu, editors at Outside and National Geographic, and others who despise the spectacle on Everest is that an abysmally low share of Everest Inc. money ever reaches the Sherpas and other local guides and porters who bear the heavy loads and biggest risks. Guides on the staff of Western expedition companies often make $50,000 in a climbing season, but top pay for Sherpas, who must make many more trips, is only $5,000 (roughly ten times the average per capita income in Nepal).11
Before the 2014 disaster, surviving families of Sherpas killed on Everest expeditions above Base Camp received only $4,600 in death payments from expedition operators. The Nepal government raised the death benefit to $11,000 after the catastrophe, but that amount still is far too meager. If the amount of life insurance paid by the government in 1971 had kept pace across more than four decades of inflation, payments to Sherpa families in 2014 would have been equal to $45,000 in today’s dollars. Making matters even more unconscionable, expedition companies rarely step in with contributions to cover much of that shortfall. “When a Sherpa dies, the family pays all that money for last rites and other religious activities, and then is just left to fend for itself,” Norbu has said. “Foreigners make promises. Most don’t keep them.”
Our American Himalayan Foundation and others raised a decent sum of money after the 2014 disaster for the sixteen families left behind. Working through Sir Ed’s Himalayan Trust, we committed to help educate the thirty-one children of those families from kindergarten through high school. The government provided some help to families directly for living expenses, but the Sherpas had hoped for more.
Apart from death benefits, actual incomes for Sherpas and others who work on the mountain don’t reflect the dangers they face. More Indians and Asians, riding the wave of expanding middle-class economies, want to climb Everest. They are looking for cheaper ways to get there, a demand some Sherpas have met by setting up their own operations. Sherpas today have more education and, with a clearer awareness of the exploitation, rightly believe they deserve a bigger share of the Everest money. Yet Norbu has witnessed how these new companies, often operating from Kathmandu, have aggravated price cutting that has lowered community income and increased risks by putting more young, poorly trained Sherpas on the mountain. “We’re going to see more deaths,” said Norbu. “It’s inevitable.”
As Norbu has written, anyone planning an Everest expedition through Western companies or local operations in the Khumbu should get the facts in advance on how Sherpas and other local support staff for the expedition companies are trained, paid, and insured. They should ask themselves: Is my conscience clear about how a climbing Sherpa’s family would be compensated and protected if a father, husband, uncle, or brother is killed during the expedition? Do I and the expedition leaders understand the ethics of our choices?12 And we believe Sherpas working on the mountains need to get more organized among themselves to push for better training, safety precautions, insurance, and pay from all expedition operators.
Everest Inc. is not going away. Nearly 300 Westerners converged for summiting expeditions in the 2016 climbing season. This was down by half from the average total before the deadly avalanche and earthquakes, but clearly the mountain will remain a primary source of income in eastern Nepal. There will always be some segment of the Sherpa community living along the Khumbu trails that makes a living off trekkers and climbers.
About a year after I joined Sutro & Co., the partners elected a new senior partner, a Scotsman named Alastair Hall. He was just the fourth senior partner in the firm’s century-long history and the first one who was not a member of the Sutro family. Alastair Hall stood six foot four. Everyone called him Shorty.
There are two things you need to know about Shorty. First, he was the epitome of integrity. Second, in many ways, he was the father of my business career, with more influence in my formative years than anyone else. He taught me the importance of being consistent and forming opinions that are firmly rooted in an abiding philosophy of life. We had very different personalities—he was reserved, methodical, and wise, and I was hard-charging, unpredictable, and passionate—but we developed a close relationship.
I was especially impressed by the many ways Shorty showed empathy for the problems of others yet never expressed any self-pity. He endured more than his share of personal tragedy before and after joining Sutro. He was imprisoned for most of World War II by the Japanese in the largest civilian prison camp in the Philippines, Santo Tomas. Before the war he had had his own commodities trading firm in the Philippines, with a seat on the Manila Stock Exchange. Most of the four thousand prisoners in the camp were American or British, and conditions were harsh. The average man lost fifty-three pounds, the life-threatening equivalent of one-third of his body weight.13 Shorty’s wife was among many Western women living outside the prison in Manila who were rounded up by Japanese soldiers to serve as hostages in the days before Americans liberated the prison in 1945. Tragically, many of the women were executed before the Americans could rescue them. Shorty’s wife was one of the victims.
Years later, after Shorty moved to San Francisco with his four children and a new wife, one of his sons caught meningitis only a few weeks after graduating from Stanford and died. I couldn’t imagine the grief he was suffering, but this memory often calls to mind something Shorty once told me: “When you walk down the street and look into people’s faces, you never know what kind of sadness they may be enduring.”
Shorty regularly shared his wisdom in refined Scottish sayings. When I would tell him how some deal promoters were positioning an investment that looked promising, he would turn, look me in the eye, and say, “By their deeds, laddie. By their deeds.” His message was a crucial one: If you go ahead with the deal, be sure to watch what they do, not what they say. In those days, your word was your bond, particularly in trading. For me, it still is. About the worst thing someone can do in any kind of relationship, in my opinion, is lie.
Shorty’s guidance helped me develop an expectation of honesty and integrity in all my dealings—business and philanthropic. In well-managed organizations—including nonprofits, where there can be pressure from both inside and outside to bend the rules to court, mollify, and retain benefactors—hard-nosed accountability is essential. Our commitment over the decades at the American Himalayan Foundation to local, accountable partners has proven remarkably effective in avoiding or, when necessary, shutting down programs that weren’t legitimate. You won’t be surprised to learn, then, that although we were an early supporter of Greg Mortenson, the now infamous founder of the Central Asian Institute and author of Three Cups of Tea, we pulled our funding after a few years when we couldn’t get him to provide reports or even photographs on the schools supposedly built or the students supposedly attending. It wasn’t an easy decision for the board. He still had many supporters at the time, and we all put such a high value on education. A Jon Krakauer exposé years later confirmed that our halting fundraising in the mid-1990s was the right decision.14
The business world was less specialized in my first years at Sutro than it is now, so I was able to be a merger-and-acquisitions guy one day and an investment banker the next. I learned a lot about the different parts of the business and gravitated toward making deals.
My approach was to look for undervalued companies, work to persuade our partners to buy a stake and maybe get a seat on the board of directors, and then work with management to improve the business over a period of years. This style of investing is favored today by many fund managers and institutional investors, but it was virtually unheard of in the 1960s and ’70s. It was so effective for us that in 1964, when I was twenty-nine, I became the youngest partner in Sutro’s history.
I have embraced this approach—investing with big stakes, then nudging top executives toward success with advice both strategic and operational—for forty years now. We called it the Art of Friendly Persuasion. It allows me to take certain risks because I know I’ll be involved in such a way that I can help mitigate them. I get to do more of what I love, which is to add real value to an organization and create a positive impact on the people who work for or with that organization. Really, it’s much the same approach we take at AHF.
Possibly the most fascinating example of doing this at Sutro was the deal I developed to buy “The Greatest Show on Earth”—the Ringling Bros. and Barnum & Bailey Circus. An attorney in Washington, DC, with whom I had become close friends through a couple of investment deals, Lewis Jacobs, brought the idea to me. Sure, buying the country’s biggest circus was a proposal about as radical as you could invent for Sutro’s low-risk, by-the-book culture. I had to campaign hard. I persuaded, cajoled, and scrambled at every turn initially to raise the money. But in the end, it was how I made my first million dollars and achieved a spectacular return on a modest investment. Smart risks based on good opportunities to add value that others overlook can deliver the best rewards.
Over the years, the Ringling Bros. and Barnum & Bailey Circus had become rundown. Performers wore old costumes, train cars and other equipment needed to keep the circus acts rolling from city to city were poorly maintained, and morale was low. John Ringling North, nephew of the late impresario John Ringling and residing primarily on an Irish manor, led the family enterprise but had little interest in the operations. He never crossed the Atlantic to see his uncle’s circus and what was becoming of it.
Irvin Feld, a concert and theatrical promoter along the East Coast, wanted to buy the circus. A onetime record-shop owner, Feld was early in staging rock ’n’ roll concert tours, and his clients included big names such as Fats Domino, Bill Haley and the Comets, Paul Anka, Elvis Presley, and The Beatles. Feld knew Ringling Bros. was profitable (a virtual monopoly) and had healthy cash flow (due to advance ticket sales) because he had booked it into local arenas around the country for several years. But, as he explained in our first call, he didn’t have enough money to buy the circus outright. He needed partners and wanted to know if I would be interested in putting together a group to make the purchase.
I was ready to put up some of my own money and thought Sutro should invest, too, so I went to see Shorty Hall.
“Shorty,” I said, “you are going to think I am out of my mind, but let me tell you what we need to buy. By the way, the biggest assets have four legs, and they walk around and poop.”
I can still picture Shorty peering at me over spectacles for a long moment and wondered if he was going to throw me out of his office. Instead he said, “Maybe it’s interesting, laddie.”
Some older partners were more skeptical. This came as no surprise. The idea of buying into a circus was foreign to anything they had ever done. To address their doubts, I invited our correspondent firm in New York, the prominent, buttoned-down Loeb, Rhoades & Company, to have a look. This led to another round of nit-picking scrutiny that Feld detested. He found the Loeb, Rhoades accountants humorless, rigid, and overly cautious. At one point, Feld took his revenge. During a restroom break, he stood side by side at the urinal with one of the Loeb, Rhoades bean counters. He came out smiling and whispered to me, “I pissed on his shoe.” Feld was a character.
Eventually, we formed our investor group, including the bigger-than-life Texas entrepreneur Judge Roy Hofheinz, former mayor of Houston and builder of the Houston Astrodome. I was the primary investor from Sutro. With the money in play, the real deal-making began within a diverse ownership group: John Ringling North and the Ringling Family Trust, composed of his six siblings. After many months of negotiations and work to convince the family it was a good idea, we bought the circus in 1967 for $8 million.
As planned, we moved quickly after the closing to get the circus in better shape and build revenues and profits. All the performers got new costumes. We upgraded the rail and highway transportation equipment and facilities. With only a few clowns still working, and all of them over the age of fifty, Feld had to find a new pipeline for clown talent, so he opened the Ringling Bros. and Barnum & Bailey Clown College in Florida to train young recruits. We even doubled the circus capacity, adding another full touring company so we could bring the production to twice as many cities each year.
How about licensing circus toys? We did that, too. I introduced Feld and Hofheinz to Ruth Handler, creator of the Barbie doll and cofounder and mastermind of Mattel’s business, and her husband, Elliot. I had only licensing opportunities in mind, but it wasn’t long before the Handlers became determined to buy the whole circus. It was 1971. They were offering $50 million—more than six times what we had paid just four years before.
Feld was all for it, but I was against. After calling around to toy distributors, I was convinced the Handlers were overstating their financial strength. Feld didn’t want to hear it. So although I wasn’t happy about it, we sold the Ringling Bros. and Barnum & Bailey Circus for $50 million, netting a return of 600 percent in just four years. I had made my first million dollars, but even so, that sale was bittersweet for me.
The SEC determined a few years later that Mattel indeed had doctored its books, and it forced all directors, including the Handlers, to resign. Irvin Feld and his son, Kenneth, got an incredible bargain in 1982: reacquiring Ringling Bros. plus a few live touring shows the Handlers had added, all for $22.8 million. Feld Entertainment later diversified further into live concerts and touring shows, and expanded internationally,15 staging events attracting an estimated thirty million people annually in more than sixty countries.16 In 2014, Forbes magazine estimated Kenneth Feld’s net worth at more than $1 billion. It is just a hunch, but by my reckoning the Ringling Bros. and Barnum & Bailey Circus alone must be worth hundreds of millions of dollars. The greatest show, indeed.
In my days at Sutro, and in the early days at Blum Capital, I would look at anything where we thought we could do well. Exercising my expansive curiosity means I am never quite sure what I’m going to be interested in next. When I find something fascinating, I like to dig into it and figure out how we might want to capitalize on the opportunity. As some have said, I’m a deal junkie. I don’t exactly disagree. I have always enjoyed the adrenaline rush of putting a deal together. But it may be more accurate to say that I’m a value seeker who loves to find opportunities where other people can’t see past the downside.
On May 1, 1975, the SEC’s mandate ending fixed-price commissions went into effect, as I had long anticipated. It was a loud signal that the time had come for me to move on. I was approaching my fortieth birthday, bored with the situation at Sutro, and extremely restless.
Just a few years before, I had told the partners, “You have a model that’s served this firm well for a hundred years, but it’s not going to work anymore. We have a good name. We’ve been around a long time. But the core of our business will probably become unprofitable. The commission business will almost assuredly be a tool to sell other products.” I had then made the case for the firm to begin focusing on three themes for future growth: wealth management, real estate, and Asia. Most of the older partners weren’t paying attention, but the business world—and I do mean business world—was changing drastically. You could see first light in the dawning of globalization.
For three years I had pushed these strategies. And for three years my partners had either resisted or taken half measures that had no chance of succeeding. No matter what opportunities I pursued, it all seemed too risky for them.
It was time for me to leave, and in retrospect, it certainly was the right choice. Seven years after I left and put up my shingle as Richard C. Blum and Associates (RCBA), Sutro & Co. was acquired by John Hancock Financial. In 2001 the last vestiges of Sutro & Co. disappeared when the few remaining assets were bought by another investment firm.
When I left, I did so without rancor. The dividend was that I remained friends through the years with many of the firm’s partners. But before I left, I told them, “Deep down, you guys don’t really want to do what I want to do.” I said I respected their position, but I reiterated my concern that Sutro’s future would be in doubt if the business model did not change.
“You don’t really believe the world is going to change,” I added. “I do.”