J.R.’S MONEY
It used to seem to the Rosenwald children that they belonged to two different families, that they had two different sets of parents, even though they had only one. This was partly because of the difference in their ages. The first three children born to Julius and Augusta Nusbaum Rosenwald were Lessing, Adele, and Edith. There followed a hiatus of seven years. Then came two more, Marion and Bill. When the two younger ones were growing up, the older three were all in their teens or beyond, and seemed more like aunts and an uncle than sisters and a brother.
But more important than the generation gap between the two sets of children was the fact that in the space of those seven years, their father had become an enormously rich man. The older children had grown up in an unpretentious house at 4239 Grand Boulevard in Chicago. The younger ones, on the other hand, knew nothing but the luxury of the great family mansion at Forty-ninth Street and Ellis Avenue and the huge wooded country estate at Ravinia, where there were servants, governesses, private tutors, tennis courts, bodyguards, and chauffeur-driven limousines.
Augusta Rosenwald, a simple woman from Plattsburg, New York, could never quite adjust to the changes that her husband’s sudden change of fortune had brought, to all that had happened to her in those seven years. The idea of being invited to dinners at the Teddy Roosevelt White House terrified her, and she was always “nervous” when, as she was required to do, she entertained captains of industry and their poised, bejeweled wives in her suddenly enormous Chicago house. The idea of employing an English butler frightened her too—the English were so condescending and intimidating. She hired a Japanese butler. Who, after all, could be intimidated by a diminutive Japanese? Years later, Marion Rosenwald’s son would come home from a visit with his Aunt Edith. “Aunt Edith talks about your mother a lot,” he said. “Why don’t you ever talk about her?” “We didn’t have the same mother,” was Marion’s reply. The older children had had a mother who fixed dinner for the family and a father who came home at six o’clock to tell the children stories. The younger children had a mother and father who were hardly ever there, so caught up were they in the exigencies of money—millions and millions of dollars, perhaps as much as $250,000,000, and it all happened in those seven years.
The Rosenwald children could have provided a clinical psychologist with a case study of how two sets of children fared with the same parents under dramatically different circumstances, and the hypothetical doctor would no doubt have concluded that the older children, who had had a taste of simple living, emerged the better for it. “We inherited, in addition to a lot of money, an enormous sense of guilt,” says Marion of the younger “generation.” Her younger brother, William, was both miserable and sexually impotent by the time he was twenty-seven. It was then that he began psychoanalysis, which continued for the next fifty years of his life. He was convinced, among other things, that he had been given his commonplace first name because his parents had been too busy to think of anything else (his older brother had the distinctive name of Lessing), and was sure he had been named after an old vaudeville routine called “Hello, Bill.” Both younger children were embarrassed by their socially insecure mother, and by her maiden name, Nusbaum, German for “nut tree”—there was a comic character on the old Fred Allen radio show called Mrs. Nusbaum. So, apparently, were a number of Gussie Nusbaum Rosenwald’s relatives, who changed the name to Norman. Both younger children were married more than once, and psychoanalysis figured importantly in Marion’s life, too.
Julius Rosenwald’s rise from meager means to enormous riches reads like a Horatio Alger tale, with its full share of funny coincidences and unlikely twists of fate and luck. In 1891 the United States Post Office had begun work on a system called Rural Free Delivery. Up to that point, rural farmers had had to hitch up a horse and wagon and drive to the nearest village post office to collect their mail, often to be disappointed when they found there wasn’t any. Now the mail came directly to their houses. Coincidentally, the Post Office had declared that advertising circulars and catalogues fell into the category of “educational materials,” along with books, newspapers, and magazines, and could be mailed at a cheaper rate. One of the first to see the money-making possibilities inherent in this twin set of developments was a Chicagoan named Aaron Montgomery Ward. Soon Ward was followed in the mail-order business by two other midwesterners, Richard Sears, a former watch salesman, and Alvah Curtis Roebuck, who repaired watches.
The mail-order catalogues were an immediate shopping boon to rural farmers and their wives, who were cut off from big-city department stores and who, up to then, had relied on itinerant peddlers—often Jewish immigrants—who toured remote communities with horse-drawn carts or with heavy packs of merchandise on their backs. The catalogues would spell the end to that sort of enterprise. Now the peddler came to the door via Rural Free Delivery.
Of the two big catalogues, Ward’s and Sears’s, the Sears, Roebuck catalogue was easily the fatter, the more colorful, the more daring and the more outrageous. One of the secrets of the Sears catalogue’s allure was its surprising sexiness. Countless rural youths enlivened their masturbatory fantasies by thumbing through the illustrations of the ads for ladies’ undergarments, and young women could also obtain a sex education of sorts from the ads for union suits, which revealed the general outlines of the male anatomy. The Sears catalogue also opened up a world of consumer goods such as most country folk had never dreamed existed. Never would so much merchandise be displayed through a single medium until the advent of television. The catalogues provided hours of happy reading, viewing, and dreaming, and in themselves they were considered works of art. The work of a popular illustrator usually adorned the cover of a Sears catalogue, or sometimes the lines of a popular poet such as Edgar Guest.
Richard Sears—Roebuck dropped out of the partnership fairly early—was clearly some sort of advertising genius. It was he who wrote all the copy for the catalogues and, like many an advertising genius after him, he was only marginally concerned with telling the truth. An “upholstered parlor set” for the incredible price of 95 cents, which looked like a sofa and two chairs in the picture, might turn out to be a set of doll furniture. His favorite words were “astonishing” and “amazing.” His “amazing bust developer” machine, for instance, looked, in the illustration, suspiciously like an ordinary plumber’s helper. His catalogue was full of amazing and astonishing potions and elixirs and lixiviums. He offered cures and remedies for baldness, drunkenness, sterility, frigidity, indigestion, bed-wetting, headache, backache, general indisposition, constipation, “female complaint,” cancer, and the common cold. He also advertised a great many things he didn’t have. A “fine men’s suit of black wool” might be advertised for $11. Then, when the orders came in, he would scurry around town to try to find a manufacturer who would run up garments, more or less like the article described, overnight. Also, one had to read the very small print in a Sears ad to learn that the luxurious ladies’ fur coats of “Baltic Seal” or “Electric Seal” were actually made of rabbit.
Mr. Sears’s motto, “Satisfaction Guaranteed or Your Money Returned,” seemed almost too good to be true, and Sears operated on the theory that most not-fully-satisfied customers would not go to the trouble and expense of rewrapping their purchases and mailing them back. This was probably true. But many dissatisfied customers, whose bald spots had not disappeared or whose bosoms had not increased in size, did return their merchandise and ask for refunds. This meant that, though Mr. Sears’s business was booming, he was perennially short of cash.
It was at this point that a young man named Aaron Nusbaum entered Richard Sears’s life. Nusbaum was a poor peddler from upstate New York who made his way to Chicago, where he tried his hand at various endeavors with little success. Then one day in the early 1890s, Nusbaum read in the newspaper that Marshall Field, the city’s largest department store, had somehow managed to lose, or misplace, an entire trainload of merchandise. A train struck Nusbaum as an easy thing to find, and find it he did, parked on a siding, and reported his discovery to the store. He was called into Mr. Field’s office and personally thanked by the great merchant, who asked Nusbaum what he could do for him in return. Nusbaum replied that he would think about it and let Field know if anything came to mind.
This did not occur until a few years later, when Chicago was preparing for its 1893 Columbian Exposition, of which Marshall Field was one of the sponsors. Going back to collect his favor, Nusbaum asked if he could have the ice-cream concession at the fair. Field was as good as his word, and in a few months of selling ice cream, Aaron Nusbaum cleared a profit of $150,000, a princely sum in those days.
Nusbaum now looked for a way to invest his windfall. He had heard about Richard Sears’s expanding mail-order business, and also about his cash-flow problem. He approached Sears and, in 1895, the deal was struck. In return for $75,000, Sears gave Nusbaum a half-interest in the business. Next, Nusbaum tried to recoup some of his Sears investment, and offered Sears shares to various relatives, who, to their later deep regret, turned him down. Five years earlier, Aaron Nusbaum’s sister Gussie had married Julius Rosenwald. When Nusbaum came to his brother-in-law, Rosenwald agreed to purchase half of Nusbaum’s one-half interest in Sears, Roebuck & Company. Though no one realized it at the time, Julius Rosenwald was on his way.
Julius Rosenwald’s father was not wealthy, but Julius did have rich uncles, the Hammersloughs, who were men’s-clothing retailers and manufacturers in New York, and who were well connected—through marriage, through business, and through common worship at Temple Emanu-El—with New York’s retailing and investment-banking German Jewish upper crust. The Hammersloughs had tried, at various times, to set young Julius up in the clothing business in New York, but he had been a disappointment. He appeared to have little business acumen and had become that familiar family problem, the young man who couldn’t seem to “find himself.” As much to be rid of him as anything else, the Hammersloughs had lent him some more money and sent him to Chicago for another stab at the menswear business. In Chicago, he had prospered modestly.
At Sears, Roebuck, however, it quickly began to seem that if Julius’s talent was not merchandising it was organization. He looked around at the Sears organization and saw that it was a model of inefficiency. Orders were sloppily taken and sloppily filled. Among other things, Julius installed a letter-opening system, whereby envelopes containing orders were slit open by machines, sorted, and passed along on conveyor belts to the clerks whose job it was to fill them. Sears’s service was now much speedier. (When the young Henry Ford was experimenting with assembly-line production of automobiles in Detroit, he visited the Sears operation in Chicago and took home a number of Sears ideas.) Rosenwald was also able to curb Mr. Sears’s strong streak of charlatanism, and insisted that merchandise be actually in the warehouse before it was advertised in the catalogue. The advertisements for amazing cure-alls were also discontinued, along with other misleading or deceptive practices. All this meant many more satisfied customers, and far fewer returns of merchandise for cash refunds.
One thing that wisely was not changed about the Sears catalogue was its sexiness. In fact, as photography gradually replaced drawing—with live male and female models posing in the underwear—the catalogue got even sexier.
The Rosenwald approach was so successful that, by 1901, Julius Rosenwald was able to buy out his brother-in-law for $1,250,000—not a bad return, in six years’ time, on Nusbaum’s original investment. A few years later, to be sure, realizing that what he had sold to Rosenwald was now worth perhaps thirty times that price, Aaron Nusbaum reappeared with a claim that he and Julius had entered into some sort of buy-back agreement, and that Julius had cheated him. But since Nusbaum could never produce any evidence to document this claim, the result was simply an unhappy family money feud in which Gussie Rosenwald became permanently estranged from her only brother.
In 1908, Richard Sears wanted to increase the company’s sales promotion budget—sales promotion, after all, was his forte. Rosenwald and the other directors were opposed, but Sears would not budge. To break the deadlock, a vote was taken, and Sears was unanimously voted down. He submitted his resignation. Now Julius Rosenwald—J.R., as he was called—controlled Sears, Roebuck, one of the largest corporations in the world.
Edith Rosenwald, the younger of J.R.’s daughters from the first—or “poor”—set of his children, would display many of her father’s characteristics. Effie was her nickname. It stood, they said, for Efficiency.
One remarkable thing about J.R. as he became a rich man was his personal penuriousness. Though Ravinia, his big wooded estate on the shore of Lake Michigan, had tennis courts, he refused to buy tennis balls for his children. Their weekly allowances were the meagerest of any of their friends’. When they complained of a lack of spending money, J.R. suggested that they open a lemonade stand in front of the house. The lemonade stand was a brief success, as far as the children were concerned, but high overhead forced it out of business. A table was set up at the foot of the drive and spread with a white damask cloth. Crystal goblets were set out, along with silver pitchers filled with fresh lemonade. The white-coated Japanese butler was deployed to the roadside to help serve cars coming down the opposite lane, because the children were not permitted to cross the highway. The high-overhead problem ruined the business when J.R. learned that most of the motorists, after paying a nickel for their lemonade, simply drove off with the goblets.
Gussie Rosenwald was just as penny-pinching as her husband. She kept trunkfuls of rags and old clothes, and from these her children’s wardrobes were painstakingly pieced together. The raggedly dressed Rosenwald children were the butt of all their classmates’ jokes. J.R. was equally stingy when it came to paying his Sears, Roebuck employees. Some of his shipping clerks, most of whom were young women, earned as little as $5 a week, though if they “worked out,” and lasted three months, the wage was raised to $5.50. In the early 1900s Chicago was smarting under its growing reputation as America’s capital of crime, and the newspapers were trying to do something about it. Prostitution, the papers decided, was the root of the problem. Prostitution supported the pimps, and bought them their guns, with which they committed their armed robberies and murders. And the cause of prostitution was the shockingly low wage paid to clerks in the big retailing operations like Sears. The Chicago Tribune published a blistering exposé, full of alarming statistics and all the elements of a story that would sell thousands of newspapers—sex, the exploitation of the innocent by the greedy, the slavery of the poor to the wealthy. How could a girl survive on $5 a week, the paper asked, if she did not turn to prostitution in her spare time? The newspaper’s stories led, in 1913, to an investigation of crime and prostitution in Chicago by the Illinois State Senate, and one of the first witnesses called was Julius Rosenwald. He admitted that some of his clerks got as little as $5 a week, though some were paid $6 and $7. He also admitted that Sears, Roebuck had had a profit of over $8,000,000 that year, but he refused to disclose his own income. As in the case of most Senate investigations, nothing much in the way of reform came from this one. Several years later, though, Sears did institute a profit-sharing plan for employees that was fairly generous.
Oddly, although J.R. hated spending money, he loved giving it away, and ironically, the recipients of his philanthropy were the poor. His particular concern was the plight of black schoolchildren in the South who were being educated under the “separate but equal” system, and he began building what became known as Rosenwald Schools. All told, 5,357 schools, shops, and teachers’ houses were built with Rosenwald money in 883 counties of fifteen southern states. In these black school-houses two portraits hung side by side, Abraham Lincoln’s and Julius Rosenwald’s. He established the Rosenwald Fellowships to aid blacks in higher education, and both Ralph Bunche and Marian Anderson were Rosenwald beneficiaries. All told, in his lifetime, J.R. gave away $65,000,000, but he still would not buy his children tennis balls.
His philanthropies, of course, fed his expanding ego. Unlike other Jewish philanthropists such as Jacob Schiff, Felix Warburg, and Otto Kahn, J.R. did not adhere to the Talmudic principle that “twice blessed is he who gives in secret.” He loved to see his name attached to his gifts. He argued that, if he were going to achieve some sort of immortality on earth, he wanted to be immortal for the right reasons. Too many famous and successful individuals went down in history with their names attached to objects unworthy of them. Count Karl Nesselrode, for example, was not known as a great statesman and diplomat but as a fruit custard pie. The singer Nellie Melba was immortalized as a peach dessert, and the coloratura soprano Luisa Tetrazzini ended up on a menu as a chicken casserole. The only thing J.R. refused to have his name attached to was an art museum. This was because he knew that other wealthy collectors were never eager to donate to a museum which already wore the name of an original benefactor—a Carnegie Museum, a Frick Museum, an Isabella Stewart Gardner Museum.
His daughter Edith, born in 1895 when her father was still a man of simple tastes and modest means—the year Uncle Aaron Nusbaum first drew the family into Sears, Roebuck—was now a young woman and had watched her father’s progress from the bottom of the ladder to the top, from a men’s clothier to a national philanthropist and tycoon. Of his five children Edith was temperamentally the most like him. She had certainly learned a lot from him, from the good side and the bad. When her little sister Marion complained to Edith that all the children in her school were teasing her and laughing at her because of her hand-me-down, patched-together clothes, Edith simply marched Marion off to Marshall Field’s and bought her a new wardrobe, charging everything to their father. For all her father’s tightfistedness, she knew that all Rosenwald bills were paid by one of the staff of secretaries, and that J.R. never even saw them. Edith was like that. She got things done in a quick, high-handed way. But it would not be until Edith Rosenwald married Edgar Bloom Stern of New Orleans that little Effie would begin to come into her own as her father’s daughter, and start to show her husband’s city a thing or two.