I found the book I am currently reading based on a little detective work involving a promising young investor and Warren Buffett. The subject of the book seems to fit within a theme of successful wealth accumulators, so I thought I would share a little about both the book and the path which led me to discover it.
So one of the books I’m reading right now is The White Sharks of Wall Street: Thomas Mellon Evans and the Original Corporate Raiders. This book, by Diana Henriques, was out of print when I grabbed my copy, but it looks like the magic of kindle/ebooks have made it easy to get a copy again.
I’m about halfway through the book, and at this point I would compare it somewhat to Jeff Gramm’s Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism
They both cover a few of the same proxy contests (Lou Wolfson and Robert Young are covered in both…if memory serves), although The White Sharks is focused more on the 50’s era battles. This story is told primarily through the lens of the career of Thomas Mellon Evans and his companies H.K. Porter and Crane.
Tom Evans’ father was a Mellon, distantly related to the billionaires of Pittsburgh. He died when Tom was young. Tom’s mother changed his name to pay homage to his father and his Mellon lineage, but he was viewed by many of the wealthy Mellons as something of a pretender. So he did not grow up wealthy, but he did have an uncle, Will Mellon who supported and encouraged him early on.
He ended taking over the Crane Company and assembling a group of industrial companies using a decentralized operational management structure. He acquired many smaller private industrial companies, which were available at cheap prices. He brought on managers (or promoted from within) delegated authority to get stuff done and then held them accountable for performance.
I have not finished the book at this point so I will hold off on any conclusions about Evans or the book. I thought the way I found this book and how Evans seems to fits a pattern of conduct employed by others to build massive business enterprises (and attendant wealth) was worth a post for my readers and my future self.
The way I initially became aware of the book was by looking at a picture of Kevin Byun’s desk/office. I believe this was in an issue of Graham & Doddsville, which is the student run newsletter issued by the Heilbrunn Center at the Columbia School of Business. From the picture, I could only make out something about Wall Street sharks and I relied on google for the rest.
Byun is a very successful (by press and internet accounts) hedge fund manager. He was a student of Joel Greenblatt at Columbia and as I understand it, he employs the strategies set forth in You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits
Once I saw the full title of The Great Sharks, and the reference to Thomas Evans, I thought that I remembered reading something in The Snowball , concerning the early structure of Buffett and Munger’s investments. I thought Buffett said he emulated Evans in “pyramiding” his companies (whereby one controlled entity would be used to help effect control of another).
I went back and checked and Buffett actually stated that he patterned this structure after Gurdon Wattles, who was a prominent financier in Omaha. Wattles apparently also used sort of a holding company structure with a web of company ownership and decentralized operations (BTW, Wattles might be an interesting potential book subject, there is nothing available about him). In a footnote to Chapter 38 of the Snowball, however, Alice Schroeder also indicates that Wattles was a member of Evans’ Crane Company board and that Buffett (and perhaps Wattles) also emulated Evans in this regard.
Another thread is that Buffett has mentioned the Mellon family several times when discussing templates he studied. This leads me to a question (and some more books). Can anyone recommend some good Mellon biographies?
I have found a few on the initial founder of the fortune, Judge Thomas Mellon and some on Andrew Mellon, but any recommendations would be appreciated.
So this book and the links to Buffett to me are sort of another step along the path of trying to learn about what seems to be a common theme with these decentralized compounder types (Buffett, Evans, the Mellons, the Pritzkers, Wattles, Goldsmith, Singleton, etc… ). Maybe some of these would make good subjects for a sequel to The Outsiders.
I suppose maybe they are all just “playing a different game.” Rather than having to find a great business with a long runway, they can just target high return on capital (or at least high return on their initial capital, given a price) and then allocate the capital to other businesses as opportunities arise.
They also aren’t really interested in building the biggest business in a particular industry so they can fly a fleet of corporate jets or dominate the industry analyst meetings or whatever. So perhaps the biggest advantage is that their rationality gives them an advantage over “professional” management. If the business doesn’t perform they will either starve it of capital, sell it, or just liquidate it.
I’m not sure exactly what the true nature of the commonality is, but there does seems to be something there.