Pod Insights The Founders Podcast #4 The Remarkable Life and Turbulent Times of Joseph P. Kennedy About this episode What I learned from reading The Patriarch: The Remarkable Life and Turbulent Times of Joseph P. Kennedy by David Nasaw
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 David Senra? So the source material for most of what I'll talk to you about today comes from the book, The Patriarch: The Remarkable Life and Turbulent Times of Joseph P. Kennedy. This book was a New York Times bestseller and a finalist for the Pulitzer Prize. And it is a monster. It's almost 800 pages long. And it took me about 20 hours to read the book. So I'm not going to cover everything. For today, I want to focus on Kennedy's life from approximately age 20 to 40 years old. From when he was just starting out to when he actually achieved his life goal. Most of the people that listen to this podcast are aspiring to do something with their lives.
0:46 David Senra? And I think learning how other people were able to start in similar circumstances to your own, and then achieve their life's work can be motivating. I know it is for me, and I hope it will be for you. So I don't want to waste any of your time. Let's get right into the book. Here's the intro that I want to highlight.
1:05 David Senra? "Joseph P. Kennedy was a man of boundless talents, magnetic charm, relentless energy, and unbridled ambition. His life was punctuated by meteoric rises, catastrophic falls, and numerous rebirths, by cascading joys and blinding sorrows, and by a tragic ending near Shakespearean in its pathos.
1:29 David Senra? As an Irish Catholic from East Boston, he was proud of his heritage but refused to be defined by it. He fought to open doors that were closed to him, then having forced his way inside, he refused to play by the rules. He spoke his mind when he should not have. Too often, he let his fears speak for him. He was distrustful, often contemptuous of those in power, and did not disguise it. Had Joseph P. Kennedy not been the patriarch of America's first family, his story would be worth telling. That he was only adds to its drama and historical significance. His primary goal," and this is a really important part, "his primary goal as a younger man was to make so much money his children would not have to make any,
2:13 David Senra? and then they could devote their lives to public service. He accomplished that before he was 40."
2:21 David Senra? So we're gonna jump into a head in his life. He's around 20 years old. He's studying, he's in college at Harvard. And like many of the people that we talk about on this podcast, they don't start out, like their first business idea is not what usually makes them famous or historical figures. They have, like most people, like Thomas Edison started his first business at 12, and it was just a printing press. So you're gonna see Joseph Kennedy, we're gonna talk about his first college job, or his first college business that he created himself. So Joe bought a decrepit-looking bus for $600 to be paid on the installment plan. He painted it cream and blue with "Mayflower" written in bold, black letters on the side.
3:06 David Senra? And then he went into the sightseeing business. His partner Donovan drove the bus while Joe handled the megaphone. This is a quote from Kennedy. "Passengers didn't take the ride just for fresh air or for the thrill of motor driving. They were interested in history, and I let them have it. I made special studies of Paul Revere and dug up every record I could find in the Boston libraries." So, as you're gonna see throughout the story, he winds up becoming one of the most successful entrepreneurs that's ever existed, amassing a wealth which today would be worth billions upon billions of dollars. But again, he didn't start that way. His first business is a $600 bus and giving sightseeing tours while he's studying in college.
3:49 David Senra? So I wanna jump to, he graduates from Harvard, and he's gotta figure out what he wants to do with his life. And a lot of people, young people in particular, right out of college, they don't normally have an answer for this, especially in today's day and age. And you'll see, he doesn't either. He constantly jumps around from idea to idea, where I think a lot of people feel they need to, that other people have it figured out, and that they know what they're doing, and that's just not true. So let's go back to the book.
4:18 David Senra? Why Joe decided to go into banking and finance after Harvard was a bit of a mystery. The only answer to Kennedy's choice of vocation is that he was always, that he always aimed high and almost always succeeded. He was good with numbers, had a Harvard degree, and had made some contacts at Harvard with proper Bostonians whose families controlled Boston's financial institutions. This is him speaking. "Banking ranked as high as any commercial profession," he would explain to a reporter in 1928. "It was the basic business profession, and it offered a career ladder with more than one rung. Banking could lead a man anywhere as it played an important part in every business." Regrettably for Joseph P.
5:01 David Senra? Kennedy of East Boston, Boston's banks and financial institutions were tightly controlled by the scions of old established families, none of which had any interest in offering a decent position to any Irish Catholic from East Boston. So he runs into this threat of life where there's very much a strain of tribalism throughout human nature, and they separate into groups that are like them, usually around religious or ethnic lines. So with, with no entry level position at hand, he decided to take a different route into the Boston banking establishment. He would sit for the civil service examination for Assistant State Bank Examiner. So this is actually a really smart lateral move.
5:44 David Senra? He was trying to break through in an industry, he had no openings, so he thought, okay, well, how can I get to my goal? Instead of going straight down the path of what most people do, I have to find a different way in and kind of sneak my way in. So he decided, hey, I can meet a lot of bankers if I'm a bank examiner, if I'm part of the people regulating them. At the end of the summer, he took and passed the examination and secured an appointment. The job paid little, $1,500 annually, which is less than $35,000 in purchasing power today, but offered an invaluable hands-on banking education from the inside and the opportunity for Kenny, Kennedy to introduce himself to the trustees and directors of the state's larger banks.
6:25 David Senra? Kennedy traveled across the state, poring over books and records of savings banks and trust companies, compiling reports on their liabilities and their assets, and learning about bonds and stocks, mortgages, demand loans, time loans with collateral, overdrafts, foreclosed real estate and currency. Dressed impeccably in his three-piece suit, starched white shirt, rounded collar, and shiny shoes, with his red hair carefully slicked down, he already looked the part of the prosperous young banker. He had anticipated that after a short time as assistant examiner, he would be offered a position by one of the bank's officers, whom he had impressed with his newly-acquired knowledge on the banking business.
7:09 David Senra? But no such offer was forthcoming. He lived cheaply in his parents' house. Keeping his options open, he invested his profits from his tour bus company and whatever earnings he could put aside, in a real estate company, Old Colony Realty, with his friend Harry. Harry ran the day-to-day business, Kennedy watched over the books, and they had some successes and a few failures. Kennedy did not put much energy or time into the business. Real estate was not a profession worthy of his full-time attention. So I want to stop there, there's two interesting things. Something that I'm going to constantly say throughout today's podcast is, Kennedy constantly
7:50 David Senra? had side businesses, side hustles going on, at the same time he was doing other things. He was never dedicated just solely to one thing. He let opportunities come as they may, and then tried to pounce on them and took advantage of them. And then the second thing is, it's really funny that the book says here, when he's, you know, in his twenties, that real estate was not a profession worthy of his full-time attention. One of the most successful transactions the Kennedy family ever does, is Kennedy purchases what is the largest retail building in the world, in Chicago, called Merchandise Mart, and this is after, he already makes enough money to last generations, and he does that by the time he's 40.
8:32 David Senra? But the reason it's funny that they say that real estate was not a profession worthy of his attention, the Kennedy family held on to the Merchandise Mart for 50 years, and sold it in 1993 for $625 million. And that was just one of Kennedy's many multi-multi-million dollar businesses.
8:57 David Senra? Okay, so now we're gonna see him shifting gears again, which he does a lot. In the first week of December 1913, Joseph Kennedy resigned his position as assistant bank examiner, but not because he had been offered a position at any of the major banks or investment houses in the city or state. He returned home instead to East Boston and the Columbia Trust Company, which his father had helped found decades earlier and which was now threatened with takeover, with a takeover by several large Boston banks. So this is a trade you're gonna see Kennedy do. He'll have an idea, he'll test that idea. In this case, he said, "Hey, I wanna work for a big Boston bank. They're not hiring me, let me become a bank examiner. That's not still working out, so I'm gonna reduce the scope of my ambition,
9:42 David Senra? go back to East Boston where he didn't wanna go, and start working for a tiny, tiny bank." But again, he just wanted to break into the industry. So he, through trial and error, he realized, "Okay, this is the route I have to go."
9:55 David Senra? On January 21st, Joe Kennedy's photograph appeared in the Boston papers over the caption, "Youngest in the state, Joseph P. Kennedy elected President of Columbia Trust Company at age 25." This was the goal Kennedy had set for himself on resigning as assistant bank examiner. Kennedy proved himself a more-than-able bank president. Almost immediately upon taking office, he injected new life into a trust company that in the last 12 months had lost 1% of its assets, while Boston's other trust companies had increased theirs by 3%.
10:31 David Senra? Commuting from his parents' house, he arrived early and stayed late. By June 1914, after six months on the job, he had increased Columbia's trust holdings by some 27% to $920,204.16. So admittedly, not a very large bank, but he turned them around from a 1% decrease to a 27% increase. And part of that's due to, he was a... His stamina and his work ethic throughout his entire life is overwhelming.
11:07 David Senra? So I want to jump ahead to the financial panic. Though Columbia Trust was very much a local bank, not even Joe Kennedy could protect it from the financial panic that set in motion by the declaration of war. So this is the beginning of World War I. The British announcement that they would no longer exchange pound sterling for gold, and the decision of European banking houses to cash in their American stocks and bonds of gold started a panic. To prevent wholesale disaster, the New York Stock Exchange closed its doors on July 31, 1914, and did not resume bond trading until late November, and did not resume equity trading until mid-December.
11:50 David Senra? The nation's financial problems were compounded by a virtual cessation of international trade. For port cities such as Boston, the economic hardship was considerable. Citizens and businesses alike hoarded their capital and put off taking out new loans or mortgages. In the six weeks between September 12 and October 31, 1914, Columbia Trust assets fell more than 5%.
12:18 David Senra? Joe had spent everything he had on the purchase of the outstanding stock in Columbia Trust a year before, and was now left with only $500.
12:28 David Senra? So this is just one of the first ups and downs that you're going to see that he has to deal with throughout his entire career. Fortunately, by late 1914, the economic situation in Boston and the nation had begun to brighten. The Wilson administration had, a bit reluctantly, accepted and adjusted to the inescapable reality that the British were going to retain control of the seas. In concrete terms, this meant that while bowing in the direction of neutrality, Americans would renew trading with the British and the French, protected by the British fleet, while allowing that same fleet to blockade trade with Germany. American loans and credits flowed freely towards the British Isles, financing purchases of homegrown raw materials and non-military commodities.
13:13 David Senra? European gold crossed the Atlantic in the opposite direction. As the domestic money supply expanded, so did credit and investment opportunities for American banks and businesses. Columbia Trust rode high on this new wave of prosperity. Between October 31, 1914 and May 1, 1915, its assets rose by almost $46,000, an increase of more than 5% in six months. Joseph Kennedy's personal fortune increased as well. He continued his association with Old Colony Realty, which was now billed itself as the largest operator in Boston's suburban residential properties.
13:54 David Senra? As president of Columbia Trust, he had immediate access to capital and credit, which he used not only to finance his mortgage and real estate dealings, but also to purchase stocks. His former Harvard classmate and friend, Tom Campbell, remembered Joe telling him that every stock he bought zoomed. "It was such an easy way to make money that I wondered why more people did not know about it. I was afraid the market would close before I had all I wanted." Then came May 7, 1915, the German seeking of the Lusitania and the deaths of more than 100 American civilians. In the war scare that followed, the spectacular four-month stock market rise was halted, then
14:34 David Senra? reversed, wiping out all of his profits and, according to Tom Campbell, knocking his dreams of easy money into a cocked hat. Again, up and down, up and down, here we go. Fortunately for the nation and the Kennedys, fears that the Lusitania tragedy would lead to war were unfounded. The Germans pledged that there would be no more tax on passenger liners and no more American civilian deaths. And with that, the economic boom generated by the Allies' need for American foodstuffs, commodities, and credit to pay for them shifted into higher gear. The stock market pushed forward again, climbing in almost a straight line from a low of 65 in June 1915 to 110 in November 1916.
15:17 David Senra? Joseph P. Kennedy jumped back in, wiser now and a bit more cautious, but convinced that having made a killing once, he could do it again. On November 2, 1915, short of capital to invest, he borrowed $55,000 from National Bank. It was a short-term, six-month loan backed by some stock certificates, life insurance policies, and real estate. In the months and years to come, there would be other sizable loans, some of them secured by notes backed by real estate, and a few backed by Columbia Trust stock.
15:52 David Senra? He never borrowed more than he thought he could repay and only at preferential rates, and he never defaulted, though occasionally he was forced to take on a new loan to pay off an older one. His ability to juggle numbers and accounts was remarkable, so too his capacity to profit from a booming market. Later in life, Kennedy would confess to being a bear in all things, including the market, and take great pride in the money he had made betting on stocks to go down. But that was certainly not the case in his twenties, when he was convinced that no matter how violent the short-term swings, the American economy was strong and would only grow stronger. Joseph P. Kennedy, still in his middle twenties, was well on his way to becoming a wealthy man, but only on the way.
16:41 David Senra? So, I want to jump ahead a little bit. I want to tell you about his schedule, and then I want to tell you about how, why he has to leave the Columbia Trust Company during World War I. So, he rose early seven days a week, did calisthenic exercises with his Indian clubs, ate breakfast, and set off to work. On those nights he came home after work, he and Rose had dinner, after which he retired to his big red lounge chair to read the Boston Transcript, then his detective novel, and listen to classical music. He worked day and night, six days a week, fifty-two weeks a year.
17:19 David Senra? So, during this time, in World War I, he was of age for military service. He was already supporting his wife and two children, one of those children being the future president, JFK. And so, he did not want to go to war. He wanted to stay stateside and support his family. Because he had experience in banking and was already a president of a bank, he was recruited by a local company in Boston that was, that had a multimillion-dollar contract with US government to build ships and other supplies that the troops needed. And it was called Four River.
17:59 David Senra? So he accepts a position at Fort River and gets a deferment since he is, uh, he's not going to be enlisted in the military. He's going to spend the duration of the war, working day and night at Fort River. So I want to touch on a few things that he does while he's at Fort River. Again, this is a theme we're going to see throughout Kennedy's life. His propensity to have all these side jobs doesn't cease and we'll see what he does here. Kennedy quickly became a victim of his own competency and exceptional stamina. His workload increased exponentially as new duties were added to old ones. When it became apparent that the government would have to construct temporary housing
18:41 David Senra? for shipyard workers, he was assigned to negotiate with government officials on how to spend the funds quickly and efficiently. He was also asked to oversee the feeding of tens of thousands of men who now worked at the shipyards. He bought, he brought in an outside contractor to set up a self-serve cafeteria that could serve 1,380 meals in 15 minutes. Seeing the opportunity to make a handsome profit for himself, he organized a privately held company, the Fort River Lunch Company, and contracted out to it the task of feeding the Fort River's employees. Though not in uniform, he believed he was doing his part for the nation, working 65
19:22 David Senra? to 70 hours a week and occasionally spending the night in his office. All these, the stuff he does is in addition to his full-time job. He's still trading stocks, he's still investing in real estate, he's working 65 and 70 hours as a manager at Fort River, and now he just started a lunch company. Kennedy's final assignment at Fort River was to manage as best he could the influenza epidemic that hit Boston with sudden and deadly effect in the fall of 1918. On September 6th, the Boston Daily Globe reported that the epidemic had begun to spread from sailors and soldiers to the civilian population. Eleven days later, it declared that the city was in the vortex of an epidemic.
20:05 David Senra? City officials closed the theater and dance halls, forbade public gatherings, and advised churchgoers to remain home on Sundays. By September 21st, more than 2,000 cases of influenza had been reported at Four River. Kennedy was given the task of converting shipyard dormitories into infirmaries, in the hope that isolating the sick might help stop the spread of further contagion. He spent days at a time at Four River, unable and perhaps, given the fear of spreading the contagion, unwilling to return to his wife and three children. Kennedy and his family would survive the epidemic intact, though according to Rose — that's her, that's his wife — the pressure on her husband was so great that he developed
20:50 David Senra? an ulcer, the first manifestation of the stress-induced stomach problems that would plague him all his life. In late October, the epidemic crested, and that was good news. A month later, the war was over. The coming of peace was marked by a parade of 15,000 workmen, marching behind the Four River Band from the plant to the city square. Kennedy was not among them. He had collapsed earlier from overwork, lack of sleep, and stomach pains. So now he's sent away to recuperate, and he's gone for a few weeks. He's suffering from exhaustion, he has stomach issues, and he's just trying to rest up to get back to normal.
21:35 David Senra? And then he comes back. So it was a different Four River that Kennedy returned to. The months of feverish activity, the ceaseless construction of new roads, bridges, and dormitories, the nonstop expansion of plant and workforce, all of this was over. Kennedy remained at Four River through the winter and spring of 1919, waiting for a new assignment, but none was forthcoming. The boom in shipbuilding did not survive the coming of peace. Bowing to the inevitable and no doubt, both restless and anxious to move on after 20 months in the same place, Joseph P. Kennedy tendered his resignation.
22:15 David Senra? Okay, so the war is over. His time at Four Rivers is over. Now he's got to figure out what he wants to do. Surprisingly, or maybe not surprisingly, after you read the book, you'll understand this is not in his nature. He doesn't return to what he was doing at Columbia Trust, like many would expect him to do. I want to jump ahead into the section of the book called "Making a Million." And after his really successful run of trading stocks individually, he decides to seek out a job at a brokerage house.
22:49 David Senra? Kennedy accepted a position as manager of the brokerage department at Hayden Stone. Though a newcomer to the business, Kennedy had been investing in stocks on a fairly large scale since graduating from Harvard. While employed by Hayden Stone, he continued, as he had since graduation, to make money on the side by buying and selling real estate through Old Colony Realty and now a new entity, Fenway Building Trust, which he had set up with Eddie Moore. So now he has two real estate companies in addition to a full-time job. And he's still trading stocks on his own as well. Eddie Moore was the perfect complement to Joe. He respected him, followed his instructions, kept his mouth shut,
23:33 David Senra? appeared to enjoy playing second fiddle, and got the job done. The two would work together in Boston, Hollywood, New York, Washington, and London for the next 30 years. Wherever Kennedy would set up headquarters, there was an office for Moore. Their relationship was so close that Senator Joseph P. Kennedy's last son, Edward Moore Kennedy, which is the future senator, who just passed away a few years ago, is actually named after Eddie Moore. Joseph Kennedy's appointment at Hayden Stone solidified his identification with the Boston business community. He lived in a suburb, dressed in tailored suits, wore custom-made shirts,
24:17 David Senra? and drove to the office instead of taking the streetcar. So now, just to give you a little background, this is in his late twenties. And now he's finally in a position where he feels he can make at least a million dollars.
24:34 David Senra? Joseph P. Kennedy was a good father and a caring one, but he had seen little of his family during his years at Fort River. That pattern did not change significantly with the end of the war and with his first year at Hayden Stone. This is a really important part too. He had taken the position at Hayden Stone, not because he wanted to spend his life trading stocks, but because it was the only one offered to him.
24:58 David Senra? The big money he knew, this is the important part, the big money he knew was not in brokerage per se, but in assisting businessmen in financing startups, expansions, and mergers, then managing their stock and/or their companies from the inside. The reason I wanted to point this out is because in a few years, I would say about seven years later from the time we're in his life, this is exactly how he winds up making, like I said, generational money. And he does it in three years in Hollywood. He realizes in his late twenties, hey, there's a lot more money in assisting businesses and teaching them, not only raising money for them,
25:43 David Senra? managing their expansions, their mergers, and all like the complexity that large businesses have. So he doesn't have the opportunity to do this yet, but this idea stays with him until he finds the right opportunity, which comes almost a decade later.
25:57 David Senra? Back to the book. This was the path Charles Hayden and Galen Stone had taken to becoming millionaires. These are the namesakes of the firm he's working for, Hayden Stone. In Kennedy's first 12 months at the firm, they and their associates had organized financing and floated new issues of stocks or bonds for sugar refiners, mining and petroleum corporations, and a few utilities. Kennedy had not been invited to take part in any of these deals for the simple reason that he neither knew the corporate executives nor the industries involved.
26:30 David Senra? If he was to succeed at Hayden Stone or elsewhere, he would have to demonstrate a thorough understanding of an emerging business sector that none of the officers in the Boston banks or brokerage houses were paying attention to. Another really important part, point. It's very hard, once somebody has success in one area, to just try to duplicate that their success by following the exact same path. You can use those same lessons and characteristics, but apply them into a different field. Kennedy, again, being in his late twenties, understood that. And so this is what he, what he figures out. It's like, okay, I'm gonna take what I learned from Stone and Hayden, and I'm gonna apply it to a different sector altogether. Back to the book. Fortunately, there was such a sector, and it was thriving.
27:15 David Senra? Kennedy had found the perfect vehicle for his ambitions as a banker and financier, the picture business. And what they mean about the picture business is Hollywood movies.
27:27 David Senra? So, he realizes this while he's working at Hayden Stone. He's still trading stocks of his own. He still has the two real estate companies. And then he starts yet another side business. And this time, he starts producing films. So he uses his position at Hayden Stone to meet people in the, in Hollywood that are trying to raise money because Hollywood's going through a, a massive technological change. And it's going from silent films to what they call talkies, which is just a term for the movies we know now, where there's actually sound and you can hear what the, what the people are saying. And it sounds interesting or funny to us a hundred years later. But this was a huge technical achievement that they had overcome.
28:12 David Senra? And usually huge technical achievements cost a lot of money. So, he's using his position at, at this brokerage house to make these contacts. And then he takes some of, some of his money and, and raising money from other people, and he starts producing films.
28:29 David Senra? So he's doing three or four jobs at one time. And this is again, something that he continues to do throughout his whole life.
28:36 David Senra? Now, here's the problem. He didn't know anything about producing films. He had to learn a lesson the hard way and he realized that producing films, all he did, everything he put in there, he lost. He'd lose money. It was not like the early success he had with stocks. So we're going to jump ahead a little bit after he started producing films and now he comes to realization. And this is what he, what he figures out. Kennedy learned quickly from his misadventures as a producer, that for aspiring businessmen with large ambitions but limited capital, and I think that speaks for a lot of people that listen to this podcast, it made more sense to distribute and exhibit moving pictures than to make them.
29:15 David Senra? In November 1919, he organized his own film distribution company, Columbia Films, and secured the franchise to distribute Universal's films in New England. He paid himself an annual salary of $4,000 to manage the company. He worked both independently and as a representative of Hayden Stone. So now he's just started a new company. He realized, hey, I lost all the money in producing. You know what? There's not money in producing, but there's a lot of money in distribution. So let me see if I can work my way into this business. And this is a business, like I said before, this is the very beginning of him actually figuring out how he's going to be able to amass so much wealth. Cause remember his stated goals, we talked about in the introduction was,
30:00 David Senra? he wanted to make enough money that his kids, and he has nine kids when he's all said and done, and his, all his grandkids never have to work and they can only dedicate their lives to public service. That is his life goal and that's why he's doing everything he's doing.
30:19 David Senra? Going back to the book, another common theme that, that you've probably picked up on by now. Kennedy had never intended to stay at Hayden Stone forever, but the lackluster performance of the stock market through the winter and spring of 1920, reinforced his wish to move on sooner rather than later. Kennedy remained in place of Haydn Stone as the stock market declined further, buffeted that summer of 1920 by the spectacular fall of Charles Ponzi, the dapper young man in the straw hat, who had been jailed for bilking thousands of investors of millions of dollars. I just included that part because most of us know, we all know what a Ponzi scheme is, but maybe you don't know where that term actually came from.
31:04 David Senra? So unfortunately, he's caught up in this mess. Ponzi takes down the whole market temporarily. The juggling of his own accounts was enough to keep any ordinary investor occupied full-time, but Kennedy was also trading stocks, evaluating and overseeing investments, buying and selling real estate, and securing and monitoring mortgages and loans for friends, families, and business associates.
31:28 David Senra? Okay, so now I want to jump ahead in part of the book. It's called "My Own Master and My Own Business", and this is where things really start to accelerate for Joseph P. Kennedy. Galen Stone announced that he was retiring from the company that bore his name. Kennedy, having lost his mentor and chief advocate in the firm, left soon afterward. Here's a direct quote from Kennedy. "I knew the time had arrived for me to do at 34, what I had been determined to do at 24, be my own master in my own business. So I took a bold step and announced that I had launched my own private banking business."
32:03 David Senra? So his first big score came in the spring of 1924. His friend Walter Howey, was the Hearst newspaper editor who had moved from Chicago to Boston, visited Kennedy in his offices and asked him to go to New York to rescue his friend John Hertz. Walter claimed that Hertz, who had just listed his companies on the stock exchange, was being attacked by bears who were selling his stocks short and driving down the price. Short sellers operated by borrowing shares of high-priced stocks from brokers, dumping them on the market and spreading rumors that shareholders, which were actually the short sellers themselves, were getting rid of the stock because it was near worthless.
32:44 David Senra? When the share price fell low enough, the stock sellers paid back what they owed in shares that cost less than the ones they had borrowed and sold. They pocketed this difference, which could be considerable. Their mission was to use money Hertz had borrowed in Chicago to buy as many shares of his Yellow Cab Company and its subsidiaries as necessary to push the price back up and frighten away the bears. Although he tried his best and made use of the considerable resources behind him, Kennedy was not able to significantly raise the share price, though he might have stabilized it somewhat. He was paid $20,000 for his efforts.
33:27 David Senra? In mid-June, he invested $25,000 in Hertz's new "Drive Yourself" system, the precursor for Hertz Rent-A-Car. This experiment had yielded him a $20,000 paycheck, the equivalent of more than a quarter of a million dollars today, and a story that he would tell again and again.
33:48 David Senra? Okay, so at this point, he has his own company, he's on his own, he's taking these contracts. He just made about, would be equivalent of $250,000 today. But yet, at age 36, Joseph Kennedy was still not yet a millionaire.
34:02 David Senra? That's gonna change very soon here.
34:06 David Senra? Kennedy had been on his own for two and a half years now, and was making money from his various enterprises. But nothing had worked out quite as he had hoped in banking, at Four River, at Hayden Stone, or as a private banker. He was nibbling at the edges, still on the outside, with no chance, he knew, of ever being invited into one of the major financial firms in the city. He had gone about as far as he could in Boston. It was time to look beyond the city and focus his considerable talents on an industry the proper Bostonians had ignored: moving pictures. Remember, he was involved in this about six years ago. Now he feels it's the right opportunity to jump back in, and so he's gonna try to buy a company that produces motion pictures.
34:53 David Senra? In the spring of 1925, Kennedy decided to bid on FBO, the film company he had been instrumental in founding and then walked away from. So while at Hayden Stone, he was able to raise money, he was helping them out, and they recapitalized and created a new company. So now, years later, he's gonna try to buy it. Kennedy guessed that the long-suffering British bankers might now be willing to sell the company at a bargain price, and he prepared an offer for them. He had no intention of spending his own money, he never did, but he had friends and business associates who might be willing to. So before he makes his bid, he pays off several of his outstanding loans, and then takes all the stock that he was holding collateral for those loans, and decides to put it in a safe deposit vault.
35:38 David Senra? "It was at the time that he established the trust funds for the children," Rose later recalled, "because he did not know how his venture would turn out, and he did not know what would happen to his health, and he wanted the children to have some money laid aside in case anything happened to them." Of course, it was a very small amount of money that he put aside, but as the years went by, it gradually increased in values. The reason I included that into this section was, this is the beginning of Kennedy family money. And what I mean by Kennedy family money is, Joseph Kennedy made a lot of money, and sure, he lived an extravagant life, but he always spent way less than what he had access to. And something he did that was really, really smart is, throughout time, he kept, as he continued to have success,
36:23 David Senra? he kept making trusts for his wife and his children. And the stipulation of those trusts is, they could only, they could never withdraw the principal, okay? And they could only start withdrawing, like, the interest on that principal. In the case of the girls, it was at age 41, and in the case of the boys, it was at age 36. And then he stipulated in those trusts that the principal, which was never to be touched, would be passed on to their children upon their death. So basically, setting up his grandkids as well, which is extremely smart, because that money compounds over a long period of time. And people have a hard time understanding compound interest.
37:06 David Senra? To give you one example, if you had $10 million, and it only compounded at 2%, but for 200 years, that would be worth $3.5 trillion today. So that's the power of compound interest.
37:22 David Senra? Okay, so now we're gonna go into him trying to buy FBO. Kennedy tendered his offer for $1 million for FBO. His proposal was turned down, then months later, accepted. According to the story Kennedy later told, "He was on his way from the Harvard Club to catch the Havana Limited train to Palm Beach for a winter vacation with his friends, when a page boy dashed out as the taxi started. Phone call for Mr. Kennedy, they say it's important." Kennedy stopped the cab and went back into the club. "A few minutes later, he emerged and addressed his waiting companions." This is a direct quote from him. "Sorry, but you fellows will have to go on to Florida without me. I'm going to Boston tonight. I seem to have bought a motion picture company."
38:05 David Senra? On February 6, 1926, the deal was finalized and FBO sold to a consortium of investors organized and headed by Joseph P. Kennedy. The price was $1.1 million. "Congratulations and advice, solicited and unsolicited, flowed in from old friends and newer business acquaintances." Kennedy responded with his usual mixture of self-deprecation and self-confidence. "I am in a new game, and I will probably be tossed around a bit, but I may have some fun and may get away with it." So I just want to add a note here. Throughout the book, even when he was a young man, Kennedy had an unbelievably high amount of self-confidence and belief in his own abilities.
38:49 David Senra? This is something that is very common with the entrepreneurs that we've talked about in the past, and the ones that, some of the ones that we'll cover in the future.
38:58 David Senra? He was completely self-confident. He had what I call a little bit of the Tom Ford Syndrome, which I've actually observed in a lot of entrepreneurs and overachievers. And what I mean by the Tom Ford Syndrome was, there's this hilarious quote from a GQ interview with Tom Ford. And GQ asks Tom Ford the question, and they say, "Didn't you always feel like a freak growing up?" And Tom Ford replies, "I thought I was fabulous and everyone else was stupid." So he's obviously being a little tongue in cheek and it's, you know, it's a humorous thing, but there is a lot of truths that ingest and part of becoming extremely successful and in the case of Joseph B. Kennedy, a complete outlier, he wanted to be one of
39:41 David Senra? the top 10 richest people in America at the time, is a complete belief in themselves. They believe that they are just as qualified and they can figure it out and that they can do it. And I think that is the first step in achieving anything is the belief that you can learn and you'll figure it out and do it. And he understood that he may not have been born with this ability, but he could work hard and gain that ability, which I think is really motivating and part of the reason I wanted to create this podcast on entrepreneurs in the first place. So people realize that, that you can apply these lessons in your own life as well. So let's, let's jump in. So now he owns FBO and he discovers FBO, like a lot of other
40:24 David Senra? firms in Hollywood, and this is how he's going to make his money, the people running them don't, they don't know anything about business. And this is his opinion. So he had discovered that the cash flow problem was even worse than he had imagined, but that that could be remedied by cutting per picture production costs and studio expenses and reducing the price of borrowing money to finance new pictures, something he was extremely good at. In the old days, when pictures were shorter and cheaper, the studios had been able to raise money internally to finance new production. In recent years, they had borrowed that money. Kennedy found a better way. He organized a new company, the Cinema Credits Corporation, yet another side business.
41:09 David Senra? So he raised money to fund it from Boston investors who were investing in FBO and used this separate corporation to finance his films at better rates than were available elsewhere. The movie business, he was convinced, was rife with inefficiencies. He instituted new accounting procedures, shifted control over expenditures from studio executives in Hollywood to New York City, and fired overpaid studio executives in New York and Hollywood. So what he's doing right now for FBO is the same thing he realized 10 years ago at Hayden Stone, that there's a lot of money in organizing. So in this case, he's organizing his own company. He has such success with doing this, that several other Hollywood firms hire him to
41:50 David Senra? do the same thing. And this is where he's gonna make the Kennedy family money. Remember, we started this story, he's 36 years old, not yet a millionaire. If you remember the introduction, by 40, he makes more money than his family can spend in generations. This is gonna happen really fast, and this is the part that we're in right now. And here's a direct quote from him. "The trouble with many concerns like my own," he explained in 1928 to a journalist, "was that employees occupying positions parallel to positions in other lines were vastly overpaid. It was not an uncommon thing for accountants to receive $20,000 a year, when in other
42:29 David Senra? business, they graded from $5,000 to $10,000 a year. My first problem was to change that, which was easy." This goes back to Kennedy's self-confidence. Kennedy had never visited Hollywood, held any studio position, or produced any pictures, but he did not apologize for his lack of experience. He's running this company out of New York so far, even though they make movies in Hollywood. He has no experience, yet he already has so much self-confidence that he thinks he can do a better job. That's, can also be a dangerous thing, but in his case, it works out. On the contrary, he trumpeted his outsider status as a Harvard-educated banker, born
43:11 David Senra? of American-born parents, a Bostonian whose only language was English, a baseball-playing, suburban-house-owning, father of seven, and he made the case persistently and passionately that the picture industry needed someone like him. So in addition to being really good with numbers and business, he was a master salesman. So now, we're jumping ahead, he moves out to Hollywood, and he's full-on, completely committed to the motion picture business.
43:41 David Senra? And this is a direct quote from some of his observations, once he gets there. "Nobody in Hollywood," he declared, "knew how to make a balance sheet that gave a banker what he needed. Certainly, nobody knew how to depreciate, to amortize, to capitalize. Those very things," he said, "that spelled success or failure in any other business." So they're very good at making movies. The financial side, it's in disarray. That's why so many of them are having trouble making the transition from silent films and then raising money to the talkies, as they were called in the day.
44:14 David Senra? And here's some, here's a little bit more on that. "It was becoming clearer by the minute that picture audiences wanted and were willing to pay a bit extra to hear the stars talk and sing. Converting the studios and theaters to sound would require huge amounts of capital. Fortunately, Wall Street was in the midst of what appeared to be an unstoppable upward trend in stock prices and profits. With but a few minor dips along the way, the Dow Jones Industrial Average had doubled from 92 in May 1924 to over 200 in December 1927. In 1927 alone, 7.8 billion in stocks and
44:54 David Senra? bonds had been floated, a post-war record. Corporate bond debt had reached an all-time high of 35 billion."
45:04 David Senra? FBO, which is Kennedy's company, agreed to install RCA photophone equipment in its studios and produce sound pictures with it. RCA might sound familiar. It's the Radio Corporation of America. It was founded in the, I think, like 1915 and existed till the 1980s.
45:26 David Senra? "In turn, RCA would purchase $500,000 of FBO stock, enough to pay for the installation and provide Kennedy with a sizable profit. To maximize those profits, Kennedy cornered as much FBO stock as he could, then pooled his holdings in a newly organized corporate entity, the Gower Street Company."
45:47 David Senra? As Kennedy had predicted long before, the men in New York who had invested in and now controlled the picture business, had begun to merge, consolidate, and combine their studios into larger, and they hoped, more productive and profitable enterprises. To manage these new companies, and watch over the millions of dollars invested in them, they needed managers with the skillset Kennedy had brought with him into the picture business. Businessmen who cared only for the bottom line, and were not afraid to slash production costs to increase profits and boost stock and bond prices. This is exactly how he's gonna make all his money.
46:26 David Senra? So here's, we're gonna talk a little bit about this company called Path.
46:30 David Senra? A Path theater man who knew nothing about producing pictures, approached Kennedy about running the Hollywood side of the operation. Kennedy had been selling Path stocks short since the previous August, yet another side business. He now demanded and was given access to the company's financial records, which confirmed what he had guessed when he started selling the stock short. Path was badly in debt and desperately needed to cut operating costs at the studio. So now he's in a position of power. Here's a company that needs his services, if not, they're gonna, they're gonna go out of, uh, they're gonna go under. And so, he can extract an unbelievably high payday because of his services, and he's
47:13 David Senra? gonna do this multiple times, all simultaneously. So this part is called "big money."
47:20 David Senra? And we're gonna run through, uh, basically how he builds his empire right here.
47:28 David Senra? Though he had told the Los Angeles Times that he was working for Path without compensation, he had negotiated a healthy salary, $2,000 a week, equivalent to more than $1.3 million in purchasing power, plus out-of-pocket expenses and disbursements. The real reward for his new part-time job was 100,000 fully-paid shares of Path stock, which was to be delivered to him in four installments. The net profits from the sale of these shares, which Kennedy disposed of at or just before delivery, totaled a little over $579,000, worth more than $7 million in purchasing power today.
48:13 David Senra? There's one big hit, and the hits are gonna keep coming. "He was running two studios and being paid a huge amount to do so. $2,000 a week from FBO and $2,000 a week from PATH for a combined annual salary of $208,000." This is in the 1920s. "Simultaneously with running these studios, he was completing negotiations to take over yet another entertainment conglomerate, the KAO Chain of Theaters."
48:41 David Senra? And he succeeds. "The deal consummated. Kennedy was rewarded for his past and future services with a two-year option to buy 75,000 shares of KAO stock for $21. He gets another unlimited expense account, a five-year contract as chairman of the board, control of the executive committee, an exemption from the provision that directors should have no other financial interest in any other theatrical or motion picture company, and an explicit agreement that he would not be required to devote his entire time and attention to companies' affairs." So, he was right place, right time. These companies are desperate. They see the success he had on FBO and they want the same done for them.
49:22 David Senra? And here's the result. "Kennedy was now running three large entertainment companies at the same time: two picture studios and a chain of several hundred theaters that were in the process of being converted to pictures. Even those who had worked with him in the past marvel at the energy he expended, the impossibly long hours he kept, his ability to concentrate on several matters at once, and his capacity for juggling numbers, accounts, personalities, staffs, employees, and contracts as he fitted back and forth from office to office, city to city, coast to coast." And what's most oppressive about all this is he's doing it his way. The book comments on that. "He never discusses his business with outsiders. His business, so he reflects when you ask him, is nobody's business.
50:07 David Senra? He was by now, or so he thought, bigger than any individual studio. There would be other studios bidding for his service, and he would oblige them, but only on his terms."
50:20 David Senra? He would cash in his options and walk away to start over somewhere, this time with millions of dollars in his bank accounts. And here's where his, his windfall comes right now. RCA purchases KAO and FBO. The new, larger company was destined to become the general motors of the entertainment field, predicted the Los Angeles Times. The film Daily highlighted its story with a front page headline, Kennedy quitting as RCA acquires KAO and FBO. Sarnoff, which is the founder of RCA, did not ask Kennedy to stay with the company. Had he, Kennedy would not have accepted.
51:02 David Senra? He had nothing but respect for Sarnoff as a businessman, and the two would remain friendly for the rest of their lives. But Sarnoff had his priorities and Kennedy had his. Sarnoff was committed to the future of RCA. Kennedy, to the future of Joseph P. Kennedy and his family.
51:21 David Senra? And the idea that Joseph Kennedy would ever work for somebody else is just a fundamental misunderstanding of, of the man he was. When a reporter from the Boston Daily Globe asked about his future plans, he responded honestly, that he had never had any intention of, in remaining forever in the picture business. And here's a direct quote from Kennedy. "I entered the amusement business with the viewpoint of a banker. If, after the organization of the new corporation, it is running smoothly, I look around and get a good offer for my holdings, I will make a trade. I have wanted to get out of this business for some time."
52:01 David Senra? And here's the trade that he's, that he makes.
52:05 David Senra? On October 16th, he sold the 5,500 shares of KAO he owned outright for a profit, profit of $63,800. Two days later, he exchanged his options for 75,000 shares of KAO common stock for an option to purchase 75,000 shares of RKO.
52:25 David Senra? He exercised the new RKO option and purchased 50,000 shares, which he then sold in several accounts. His profit was $786,988. He would exercise his option on the remaining 25,000 RKO shares over the next two years for an additional profit of $489,000. In the end, he would emerge with a total profit of 1.2 million on his KAO options, equivalent in today's currency to more than $15 million. This was for three months' part-time labor as chairman of the board, and this was only the beginning of his profit-taking.
53:07 David Senra? This is as he's making his move out of Hollywood. He then agrees to swap his 37,500 shares of FBO for 37,500 shares of RKO, which he then sold for $35 a share. His minimum profit on this transaction alone was $905,000, or more than $11 million in today's dollars. Although he remained employed by path, and he would for some time afterward, Kennedy sold short the options for the 50,000 shares he was to receive later that year, for a profit of another $310,000, worth almost $4 million in today's currency.
53:50 David Senra? He had entered the industry a rich man, but he departed a multimillionaire with more than enough money in his and Rose's accounts and in the children's trust funds to support them all comfortably for the rest of their lives. He had been a good baseball player, and a better-than-average shipping company executive, broker, banker, and studio executive. But when it came to making money, in up markets and down markets, good times and bad, Joseph P. Kennedy was in a league by himself. For more than a decade, wherever he might happen to be, he traded stocks, bonds, and options over the telephone. He made his money as a trader, not an investor.
54:32 David Senra? He bought on bad news and sold on good news, and he preferred getting out with generous profits to waiting for windfalls.
54:40 David Senra? On November 30th, 1926, after 10 months in the film business, his capital account held $373,000, and his real estate holdings were limited to his modest house. Less than three years later, on October 31st, 1929, after the stock market crash, his capital account held more than $1.7 million, which is equivalent to more than $22 million today, and he had bought two new houses for the family. His net worth was five times what it had been three years earlier, and that didn't take into account his real estate holdings. A fabulously wealthy man, he shifted his investment strategies, focusing more on,
55:22 David Senra? more attention on preserving his fortune than adding to it. He knew from the inside how easy it was to manipulate stock prices, that there was no necessary connection between the share prices and the value or viability of companies. He had never trusted the market, and now, having put away enough in trust funds to support his family, he began to diversify and invest in real estate. He had no desire to go back to Hollywood and reestablish himself as a studio head. His tenure as a picture man, more than three and a half years, had outlasted his previous stints as bank examiner, bank president, general manager at Fort River, broker at Hayden Stone, and private investor.
56:05 David Senra? It was time to move on to something new. In the booming 1920s, Joseph P. Kennedy had made his money investing in stocks. In the 1930s, he made more by selling them short. In the 1940s and early 1950s, he invested in real estate and oil, and the money kept rolling in. In 1957, Fortune magazine published its list of the richest Americans. Number one was J. Paul Getty, with an estimated fortune between 700 million and 1 billion. Next came several individuals worth between 400 million and 700 million. Kennedy was eighth, with a net worth between 200 million to 400 million dollars.
56:48 David Senra? The source of his income, the magazine reported, was altogether difficult to catalog. He says he does his best work floating around in his Florida pool. Thank you very much for your time. I appreciate your attention, and I'll talk to you soon.
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