My 51 Years (and counting) at Fortune
She has stood toe-to-toe with imperial CEOs, exposed major frauds, and played some serious bridge with Buffett. Now our intrepid reporter takes on her toughest subject yet.
(FORTUNE Magazine) – "A poet writes one haiku in a lifetime," the 17th-century Japanese poet Basho said. "A master writes ten." A similar rule prevails in journalism, where even the best reporters are lucky to produce a handful of truly classic tales. How, then, to categorize Carol Junge Loomis? In her half-century career at FORTUNE, Carol has written so many critically important articles that her peers have honored her with not one, but three "lifetime achievement awards." If you press Carol on the secret of her success, she will allow that it has something to do with "hard work." There isn't a document she won't read, a footnote she won't explore, a call she won't make to get a story right. (For a recent feature on the bankrupt Bethlehem Steel, she read 50 years' worth of annual reports.) But her colleagues know where these business-changing, Congress-stirring stories really come from: her conscience. Carol is the soul of this magazine--and the extraordinary tale that follows shows why. Here, then, are a reporter's notes. -- The Editors
The date was March 21, 1975, an anchoring, if incidental, fact I have unearthed from a half-century of files. My afternoon task that day was to interview the vaunted chairman of International Telephone & Telegraph, Harold Geneen, then 65, about the tumbling, embarrassing fortunes of his company's subsidiary Hartford Fire Insurance. That morning, though, I was huddled for the umpteenth time over Hartford's thick annual report to the state of Connecticut, a document nicknamed, because of its statistical density and the color of its cover, the "Yellow Peril." Then came a phone call, from an ITT public relations man I knew. "I have a favor to ask," he said. "Geneen figures you know all about him, but he knows almost nothing about you. So I've been told to dig up some information." He slid to the point: "I decided the easiest way to get what I need--but don't give me away--is just to ask you."
I laughed and recited the details of my uncomplicated life: I'd grown up in a rural Missouri town called Cole Camp, population 1,000; earned a journalism degree at the University of Missouri; worked for two years at Maytag in Newton, Iowa, editing a magazine sent to the company's dealers; and come to FORTUNE 21 years earlier, rising from an entry-level job to interviewing men like Geneen. The PR man went away happy, while I fell to wondering how Geneen, a lightning rod for controversy then but still widely acclaimed as a manager, would use his new knowledge. He'd go at it in a sophisticated way, I thought, finding some spot along the line to coolly drop in a reference to my background.
A few hours later, keyed up for the occasion, I walked with a FORTUNE reporter into Geneen's Park Avenue office. The boss rose from a deep couch, wearing a too-large suit meant to disguise the fact that he was a small man. He shook hands jovially, and then kerboom! "Well, how are things in Cole Camp?" So much for sophistication, subtlety, nuance.
As we moved into the interview, with two PR men in tight formation around Geneen, I began to feel that another part of his image wasn't standing up well. He was famous for knowing every detail of ITT's businesses. But on the subject of Hartford, he warned that he might come up short: "Don't get too technical," he said, "or you'll get me on the phone."
Nonetheless, you can't begin to comprehend property and casualty insurance without knowing how "reserves" for claims are booked and the managerial dangers of underestimating them. So I pushed Geneen about Hartford's persistently poor reserving, as revealed in "Schedule P" in the Yellow Peril. He'd never heard of Schedule P; he didn't know much about Hartford's reserve insufficiencies at all. I left the interview knowing I had some news. Our story, "ITT's Disaster in Hartford" (May 1975), laid out the intricacies of the insurer's problems. An ITT auditor claimed that investors understood the complexities of reserves. Hardly, I thought, and wrote, in italics: "Harold Geneen does not really understand these matters himself."
The road to FORTUNE
How I got to a confidence level where I could say that--how I attained "a sufficient lack of humility," as one of my editors said of himself--is of course the story of my getting from Cole Camp to more than 50 years at this magazine. Maytag, I'd say, set the stage. I took that job, with its accompanying paycheck, as a second choice; I really wanted to somehow work for Time Inc., whose big magazines, Time and Life, I'd learned to admire in journalism school. But Maytag, to my everlasting gratitude, got me interested in business. It didn't hurt that among Newton's few single guys ("There are not too many legible young men here," said a malaprop artist in my office), I dated one who avidly read FORTUNE. It didn't hurt, either, that I read a transcript of a marvelous speech by a FORTUNE editor. So I expanded my Time and Life ambitions to include FORTUNE.
By late 1953, going to New York on vacation, I had lined up several Time Inc. interviews--and what they did was give me a lifelong appreciation of the importance of luck in getting a job. I was seeking to be a "research associate," the company's name then for reporters, but the women who saw me at Time and Life politely sent me packing. I think the head of research at FORTUNE might well have done the same. (At least, when I ultimately met her, she looked me over as if I didn't quite fit.) But she was on leave when I showed up, and the person who greeted me was her assistant, Mary Johnston. We hit it off.
A month later, with me back in Newton, Mary wrote, saying that she now had an opening. "The next time you're in New York," she said----that was a hoot!----she hoped I'd come by. I got the letter when I came home from work on a Thursday, called her on Friday morning, and was at FORTUNE when its office opened on Monday. And, at 24, I was hired.
The mathematically inclined among you will not be surprised to hear that, almost 52 years having passed, I am now 76. Perhaps you will think also that you don't know many 50-year lifers. Well, most college grads go to work in their early 20s and retire no later than 65, which does not get you to 50 years. Me----I hit 65 and kept working. As that may suggest, I like it here. My daughter, however, says that when people ask her why I stay at FORTUNE, she has a ready reply: "Has it occurred to you she might not be able to get another job?"
The FORTUNE I came to work for on Jan. 25, 1954, was a monthly, with pages significantly larger than what you're reading; "art" covers that did not relate to stories inside; and a newsstand price of $1.25. (We'd be at $9 today if we'd matched the CPI; instead we're a bargain $4.99.) We had an editorial staff, counting secretaries and typists, of about 80 people.
Those of fame on the masthead included managing editor Hedley Donovan, who a decade later succeeded Henry Luce as Time Inc.'s editor-in-chief ("It must be like being elected Moses," wrote a friend to Donovan); William H. (Holly) Whyte, author of the FORTUNE series about corporate life that became a bestseller, The Organization Man; labor writer and, later, prominent sociologist Daniel Bell; and Charles J.V. Murphy, who wrote the Duke of Windsor's memoirs and would have done the Duchess's as well had she not fired him for lacking a "young enough mind."
The celebrated photographer Walker Evans was also on the staff. But his collaborator on Let Us Now Praise Famous Men, James Agee, had by then left, as had noted writers Archibald MacLeish, Dwight Macdonald, and John Kenneth Galbraith. Still another alum was Alfred Winslow Jones, who did not become a star as a FORTUNE writer but, as A.W. Jones, later established a hedge fund that kick-started an industry now up to $1 trillion in assets. An article I wrote about Jones in the 1960s, when he was largely unknown, helped make him famous.
These editors and writers shared one distinction: They were men. It was assumed throughout the Luce empire that men wrote, and women, paid less of course, assisted them as reporters and fact checkers. There were rare exceptions: When I came, FORTUNE had Katharine Hamill, white-haired then, who was turning out excellent stories that often dealt with what I'd call "soft" subjects, like "women as investors." About the general division of duties, meanwhile, there was no rebellion then among the women of Time Inc. and, as I recall, not even much chatter. Things were the way they were.
Certainly I was in no mood to revolt. From the minute I got to FORTUNE, I loved my job. I knew myself to be a virtual dunce about business, and I was wide-eyed about how much I was learning. The people I worked with were terrific, certainly including our impressive, engaging managing editor, Donovan.
Indeed, everything about the paternalistic magazine emporium that was Time Inc. thrilled me. On my first day, I toured the Morgue. That was the apt name for the library, which housed the vast collection of beige expandable folders--organized by subject, person, and company--into which millions of press clippings and files from correspondents had been stuffed. Everything dated from the early 1920s, when Luce and Briton Hadden had founded Time Inc. So when you wanted to know about Wall Streeter Charlie Merrill, for example, you'd call for his bio file and Merrill Lynch's company file. Or if you happened, as I did, to have a relative who had a bio folder--mine was my mother's brother, Brigadier General Homer Case--you'd steal a look when you visited the Morgue. I'd periodically hear, in fact, that the Morgue was being weeded of useless files. And then I'd check on Uncle Homer, and there he'd be.
In my first eight years at the magazine, from 1954 to 1962, I had three different jobs. The first was working on departments (now expunged) in what we called the back of the book. Reporting an item about the heads of air-conditioning companies for one of these departments, Businessmen in the News, I learned from an editor that profits were more important than sales. Wow! Short pieces we did about entrepreneurs introduced me to such characters as Howard Head, a stubborn engineer who'd financed his Head Ski Co. with poker winnings and who kept trying to tell us what to write. Occasionally I'd also work on a "superface": a full-page picture of a CEO (though that acronym was not then in use) facing one page of text.
There was also Products and Processes. My first assignment at FORTUNE, in fact, was to attend a press luncheon about a new germicide made of chlorine. Writing my parents on my first day of work about that imminent event, I said, "With my extensive background in germicides, I know I will be a big hit at the luncheon." (It turns out that my mother, perhaps even more awed than I was about the adventures of her only child, saved every one of my letters.)
In those early days, the importance of accuracy was burned into me. I wrote home about being "worried sick" about a possible error in a picture caption: "They impress you so with accuracy here," I said, "that you get almost physically ill when something like this comes up." Thankfully, that dreaded error did not creep in. But I have never recovered from error anxiety. I think I remember every mistake I have made in an article----and will mention one later that was particularly embarrassing.
A "pretty shrewd deal"
Another milestone of my first days at FORTUNE was my entry into the stock market. I don't recall that in Cole Camp we exactly knew about stocks. On the rare occasions when my family talked about business, the subject was Kansas City's Boss Pendergast and his potential for muscling my dad's small gravel-and-sand operation. But at Maytag I learned a little about the market, and I came to FORTUNE in 1954 determined both to become an investor and to pursue a theory I had that the stocks of companies we wrote up went on to do well. My first day, though, I found out that we were not permitted to invest in a company until one month after an article about it had reached subscribers. I cooled my heels.
Precisely one month after we'd published a piece about the real estate company Webb & Knapp, I went into a Merrill Lynch office and announced to a startled registered rep that I wanted to buy 200 shares of the stock, then trading at a princely 13/16ths of $1. The company was so speculative that the RR had to get the office manager's okay. I tucked this treasure away for two months, then sold at 1¼, making a profit after commissions of $62 on an investment of $162.50. I congratulated myself in a letter home, calling this roundtrip a "pretty shrewd deal."
After two years of working on short items, I was promoted in 1956 to the bigs: middle-of-the-book articles. That meant I was assigned, with a writer, to spend up to two months, or even longer, on a single story--traveling if necessary, which was often the case. Most of all, this work required each researcher to adapt to each writer's style of working. One writer, a gentle soul named Bob Sheehan, liked to have his researcher sit by him (sometimes into the night, while your plans for dinner evaporated) as he literally wrung his hands trying to come up with the next sentence.
Another writer, John McDonald, who authored Alfred P. Sloan's My Years With General Motors and such famous stories as "Strategy in Poker, Business, and War," rarely came to the office in the daytime. Instead, he now and then took researchers to the racetrack, and in fact turned one close friend of mine, Nancy Bryan, into an excellent handicapper. Meanwhile, our celebrated chief economist, Sandy Parker, never came to the office, at any hour, because he suffered from agoraphobia and seldom left his East Side apartment except to frequent the excellent restaurants nearby. If you worked with Sandy, you made the trip to his apartment or perhaps got a high-priced lunch.
FORTUNE's practice of having writers and researchers travel together--which lasted until the early 1980s, when the magazine got serious about cutting costs and sent the writers out solo----produced at least one marriage and who knows what other romancing. When I joined the magazine, the term "sexual harassment" was decades away from invention. Still, we had one writer (married) who was notorious among the researchers for having a style of work that drove him, so it seemed, to make a pass at every researcher he traveled with. We researchers discussed among ourselves how to deal with this. My response, when my turn came, was to slap him. Somehow he managed to get past that trauma and write a first-class story, whose title I will omit.
On another memorable occasion, in 1956, I worked with Bob Sheehan on a big feature about IBM. At its outset, we met with the company's head PR man, Ted Rowe, at Manhattan's Laurent restaurant to plan interviews with the Thomas Watsons, senior and junior, and other executives. Discussing the senior Watson, then 82, Rowe seemed on edge. Then he was suddenly called away to the phone. Returning, he said, "Mr. Watson has died." He added, "I imagine this will mean you do not want to go ahead with the story." On the contrary, said Bob, it made him want to speed ahead.
Weeks later, as we reviewed our pictures of Watson Jr., then 42, we saw that his handsome, patrician features were drawn. I recall managing editor Duncan Norton-Taylor saying, "This is not the face of a businessman; it is the face of a poet." Bob Sheehan's piece, "Tom Jr.'s IBM" (September 1956), began with Bob's firsthand report on the funeral and closed with a saying of Watson Sr.'s I had spotted in an IBM office: "It is harder to keep a business great than it is to build it."
Four IBM regimes later, I wrote several stories about this corporate icon's descent from greatness. One of them ("IBM's Big Blues," Jan. 19, 1987) began with a quote from its then-newish CEO that came to seem deeply poignant: "There have been only six chief executives of IBM," said John Akers, the sixth. "I hope that when my tour is over, people will look back and say, 'He deserved to be among them.'" That was a dashed ambition. As 1992 ended, I was bluntly writing, "He hasn't done the job. For eight years, which by now seem an eternity, he hasn't remotely done it" ("King John Wears an Uneasy Crown," Jan. 11, 1993). On Jan. 26, Akers was pushed out by his board.
In 1958, after two happy years in the middle of the book, I was promoted to another job: assistant to Mary Johnston, who had been made chief of research. Less interested in numbers than I was, Mary gave me the responsibility for supervising the data collection for our new and wildly popular FORTUNE 500. We had begun to publish our list in 1955, and I had actually played a cameo role in compiling some of its data. But we had no clue then that we were establishing one of the great brand names in the world. We caught on fast--and by 1957, when I became closely involved with the list, we were treating it like the gold it was. For me, the 500 was a crash course in accounting, a subject I liked immediately.
One of my other duties as assistant chief of research included reading copies of unending notes that had been typed up for the writers. I have a distinct memory of only one thing I read in them, this item being the product of reporting going on in 1961 for a Wall Street series. Interviewing a Kidder Peabody vice president named Bill Ruane (a much-admired money manager today and also a friend of mine), our writer asked whether a securities analyst, to be good, must be based in New York. "I don't think so," said Ruane. "The best analyst I know lives in Omaha." The notes did not indicate whether our reporting team thought to ask who this paragon was. But I stuck Ruane's remark away in my mind, thinking that maybe someday I'd find out.
A break in the wall
In the middle of our Wall Street series, something stunning happened to me. I was called into the corner office of managing editor Norton-Taylor and told that he wished to promote me to the writing staff. My first assignment, he said, would be a piece for the series (which ran as "You May Be Missing a Bet in Bonds," September 1962). After the series ended, Dunc went on, we would be starting an investment column, and I would be one of its regular writers.
Katharine Hamill, still our only woman writer, was near retirement then. To promote someone from the research staff would break the Henry Luce mold: Men wrote, women did other jobs. Moreover, Norton-Taylor, a conservative who deplored newfangled things like airplanes and telephone area codes, was an improbable revolutionist. But I had once filled in as a Businessmen in the News writer and done okay. Dunc also knew of my interest in the stock market (though he probably didn't know about Webb & Knapp). Was there also some political correctness at work? Maybe a little: Years later I saw the memo in which he told Donovan, then Luce's deputy, that I would become one of the writers of the new Investing column. It said I wrote clearly, could learn style, and by the way, it wouldn't hurt to have a woman's name on the column.
Personal Investing began in January 1963 and was a challenge for me, since I had to get up to speed simultaneously on writing and the market. About some subjects, I was memorably naive. Interviewing expert Franz Pick about gold stocks, I expressed astonishment upon learning that U.S. citizens, legally barred from buying the metal itself, found ways to do it anyway. "What are you?" asked Pick. "A mental virgin?"
Personal Investing also required me to write now and then about futures. I didn't think I should opine about something I had no experience with, so I opened a commodities account at Merrill. I at first made small amounts of money--the worst thing that could have happened to me, because it made me think I knew what I was doing. And then, in 1967, I flamed out selling silver short. My loss, gulp, was $13,176--a cruel 75% of my annual salary!
There was a silver lining. When Hillary Clinton's winning adventures in commodities became famous 27 years later, I was able to write a piece, "Confessions of a Female Commodities Speculator" (May 2, 1994), that poked fun at her and me. I reported also that after my debacle I had joined Commodities Anonymous, and indeed, I have never since gone near a commodities contract.
The investing piece I wrote that probably had the greatest impact was "The Jones Nobody Keeps Up With" (April 1966), describing the hedge fund run by our onetime writer A.W. Jones. A Wall Street friend had told me about Jones, a scholarly, sometimes pompous sort who had largely, to his satisfaction, escaped press attention. But I went to my first interview, with Jones's lawyer, Lester Kissel, not really understanding hedging. Kissel gave me a breezy explanation, and I pulled out a line that has long served me well as a journalist: "I'm sorry, I know I should have understood that, but I didn't. Could you please explain that once more?" Later Kissel told a friend of mine that he suspected, at that moment, that Jones's hedging and leveraging techniques were about to be thoroughly described in print. In fact, after our story appeared, all manner of Wall Streeters wanting to imitate Jones used our piece as an unofficial prospectus. Even today we get many requests for copies of the article.
In another postscript to the story, Jones offered me a job. I said no to the offer----making the judgment that I was cut out to be a business journalist, not a Wall Streeter. Still later, after I had taken a break from the Investing column to do two major stories about the Securities and Exchange Commission, I had another call about a job, from Manny Cohen, chairman of the SEC. He asked if he could submit my name to the White House as a candidate for commissioner. I told him I had a husband and two small children in New York and couldn't even consider such a proposition--appealing though it was. Today, of course, many young women, presented with such a chance, would try to grab it. In the 1960s most women (or at least this one) just weren't there yet.
Enter Buffett [stage west]
Earlier I mentioned a particularly embarrassing mistake I had made----and there it was, in the A.W. Jones article. Referring to the few other hedge funds and investment partnerships that then existed, I named Omaha's "Buffet Partnership" as one. Oops, it's Buffett--with two "t's." My chagrin was particularly great because my husband, John Loomis, had only shortly before, in 1965, met Warren Buffett, then not famous at all. They met because John, an institutional salesman in those days for a Wall Street boutique, Faulkner Dawkins & Sullivan, had seen a reference to Buffett in the press and had concluded he should pay him a sales call. My amazement has always been that Warren, who has never derived his investment ideas from securities salesmen, saw John. But he did, and they got along. John mentioned that I worked for FORTUNE, and Buffett (who has said he might have been a journalist had he not chosen investing) found that interesting.
John came back from Omaha saying, "I think I just met the smartest investor in the country." Right away, I recalled those old interview notes remarking that the best analyst in the country lived in Omaha, and said, "Oh, that must be the fellow Bill Ruane was talking about." Next, just as 1966 was ending, Warren asked John and me to have lunch in New York with him and his wife, Susie. I got my first look then at the phenomenon that the Buffetts were--Susie (who died last year) because of her beautiful, caring spirit and Warren because of his brilliance. I realized he knew everything about business I'd like to, and he sized me up as someone unusually interested in learning. John and I were so impressed by Warren that we soon bought shares in his company, Berkshire Hathaway (our lowest cost basis per share is $173), and have therefore benefited from its tremendous rise in price (to $83,000 recently). Leaving aside one trade that John made in 1965, we have never sold a share.
Since those 1960s days, Warren and I have shared many business, journalistic, and social experiences. We regularly play bridge (mostly on the Internet), and I am on the board of the Susan Thompson Buffett Foundation. I have edited his chairman's letter in the Berkshire annual report for nearly 30 years. We also talked for eons about collaborating on a book--with me editing what he wrote--but abandoned that plan because he didn't want to put in the work. And as a writer about business, I have gained beyond measuring because of all I have learned from him--including a knowledge of insurance accounting that allowed me to realize that Harold Geneen didn't exactly understand it. (I have also learned some absurdly useless facts. "Did you know," Warren once asked me, "that 'abracadabra' is the only 11-letter word that you can type out on the left-hand side of the keyboard?")
What sets Warren apart are two complementary aspects of his character. First, he is fascinated by everything having to do with business and investing, which means his mind is a storehouse of consequential facts (not including "abracadabra"). Second, when he brings this knowledge to bear on a question, he is supremely rational--unencumbered by the emotional baggage that so many businesspeople and investors bring to their decisions. That means, for example, that he has the patience to sit indefinitely with multibillions in cash ($45 billion now) until the right opportunity comes along.
Since this magazine can recognize a valuable contributor when it sees one, Warren has written (or we have adapted from his letters and speeches) six FORTUNE articles. One, published in late 1999 (Nov. 22), just months before the bubble burst, argued that investors should lower their expectations, which by now everybody has. Warren's last FORTUNE article, "America's Growing Trade Deficit Is Selling the Nation Out From Under Us" (Nov. 10, 2003), worried presciently about an economic problem that only today is causing general alarm.
In the meantime, I have dealt with the sticky challenge of writing about a famous friend whose stock I also happen to own. How do you do that? On the other hand, if you're the business writer who knows more about this fellow than any of your competitors, how do you not do it?
I have answered these questions by staying away from doing major articles about Warren and Berkshire except on occasions when it made unarguable sense for the magazine--which has been the case four times. In those instances, I determined that (a) there was indeed a story that hadn't been told (unusual, given how much has been written about Warren), and (b) I could probably, because of knowing the ground so well, tell it better than another FORTUNE writer could. The last of these four articles, a part of our Most Admired Companies package in 2001, was "The Value Machine" (Feb. 19, 2001), which centered on how Buffett was vigorously buying companies, not stocks. Naturally, in all the pieces, I have conspicuously included the fact that I am a friend of Warren's and a shareholder in Berkshire.
"Frivolous little Smith girls"
At FORTUNE in the late 1960s and early 1970s, I progressed from the Investing column to feature stories--and generally grew up as a writer, particularly one who specialized in financial and often "Oh, the pity of it!" stories. (The opposite variety is "Oh, the wonder of it!") As a feature writer, though, I was hardly an instant success. I took a break from the Investment column in 1965 to do "Should Companies Promote Their Own Stocks?" (December), and it was lame.
I came out of that story, though, realizing that I had not done nearly enough reporting, and I turned into an information junkie, bent on extracting every fact I could from interviews and documents. I have never met a document I don't like--wills, privately published books, "yellow perils," SEC filings of all kinds--which is why one of my managing editors has referred to "that toxic-waste dump she calls an office." Inevitably, I finish my reporting with way too much information to use. But then, how do you know what you don't need to know until you know it?
Although in these early days there were very few women business writers, I experienced little discrimination. There was one corker of an exception. In late 1970, a young FORTUNE staffer called the Economic Club of New York to say I would be FORTUNE's representative at an upcoming dinner at the Waldorf. She was summarily told, "Women are not allowed." That got me on the phone with the club's executive director, Dwight Eckerman. He said the club wanted to stay clear of "any frivolous little Smith girls who are looking for a free dinner and the chance to spend an evening with 1,200 men in black tie." My joke is, I then told him I didn't go to Smith, and he let me come. But in truth I began a lengthy campaign against the club--writing indignant letters for two years and ultimately waging an unsuccessful lawsuit--that contributed to its eventual decision to open its doors to women: reporters, guests, and members.
If I generally escaped discrimination, I was deeply familiar with another kind of pressure: trying to balance career and family. By 1967, I had a husband of seven years, a 3-year-old daughter, a new son, a suburban house--and a job that often kept me working past midnight. I used to say that nothing seemed quite finished: My stories weren't finished (I have trouble with deadlines), my kids weren't quite finished, and certainly my house wasn't finished. But I'll give FORTUNE great credit for being an early adopter: In 1968, long before anyone was talking about flextime work for mothers, my managing editor, Lou Banks, allowed me to begin taking off summers to be at home. My kids have grown up, of course--and seem quite "finished," by the way--but I still take that extra time off.
Getting it wrong about Reed
In any case, I guess I was juggling things okay in the 1960s, because late in the decade I was elected to the Board of Editors, a FORTUNE-peculiar institution (defunct today) formed mainly to salute deserving writers who didn't care to be editors by giving them a grandee title. I was helped to mine by the fact that Wall Street was reeling under back-office problems, and I had become the designated hitter on that subject. In "Big Board, Big Volume, Big Trouble" (May 1968), I described the New York Stock Exchange's insuperable difficulties in handling trading volume that had skyrocketed--to an amazing average of 12 million shares a day! The daily average this year, so far, has been 1.6 billion shares.
Doing another Wall Street story, "The Unbelievable Last Months of Hayden, Stone" (January 1971), I met Sandy Weill for the first time. He was thin then--see his picture for proof--and I have since followed him closely, through thick and thin. By my count, I have done 15 articles, long and short, in which Weill has been the principal, or a main, character. And as a lead actor, he has never really changed: He is unconstrained by convention--ready to do, as we once said on a cover, "whatever it takes."
My articles about Sandy included one written when he was out of work, "SANFORD WEILL, 53, EXP'D MGR, GD REFS" (May 12, 1986)----my all-time favorite headline, which I remember my editor, Geoffrey Colvin, and me composing at 1 A.M. That piece about Weill led to his taking over Commercial Credit, which then morphed into Travelers, which in turn morphed into Citigroup.
Suddenly--as if we'd all climbed up a tower by separate steps--I was covering the odd couple of co-CEOs, Weill and Citi's John Reed, another man I'd written about for years. Not that I had been too perceptive there: I said in a 1980 cover article ("Citicorp's Rocky Affair With the Consumer," March 24) that he had little chance of becoming CEO. I also said that Reed, when he took over a big job at age 35, "looked, as he possibly always will, about 12." Reed didn't relish that comment. Even so, he kept me on his interview list, such as it was (his Puritan ethic told him it wasn't seemly to play the PR game). Any interview was to be treasured, though, because he is a journalist's delight: both intellectually interesting and constitutionally unable to be anything but candid.
Well, that's a slight overstatement. When I reluctantly asked Reed in 1991 whether the rumors that he was involved with a flight attendant on Citi's payroll were true, he chose not to answer. He and the flight attendant were married three years later. On the business side, meanwhile, Reed had great strengths as a visionary but many failings as a manager. When it came to the 2000 showdown between him and the street-smart Weill, it was Sandy who won.
If we go back to the early 1970s, I wrote two articles that attracted particular attention. One was "How the Terrible Two-Tier Market Came to Wall Street" (July 1973), which suggested--not as forcefully as I came to wish--that the Nifty Fifty stocks could not continue to soar above the market. The other article was "An Annual Report for the Federal Government" (May 1973), which wrenched Washington's fairyland figures into a corporate-reporting format. Two years later, as a result of the article, Treasury Secretary Bill Simon and the head of Arthur Andersen, Harvey Kapnick, formed an advisory committee, on which I served, and launched a U.S. annual report that is still published. In number of readers, it no doubt ranks well below the Department of Agriculture's crop statistics. But for the record, at the end of September 2004, the U.S. had assets of $237 billion and liabilities of $4.4 trillion.
Another 1970s article, "The Three-Year Deadline at 'David's Bank' " (July 1977), gave me a tale to tell about Chase's then-CEO, David Rockefeller, who was struggling to improve the company's rotten record before his scheduled retirement in 1980. Interviewing him at Chase's downtown Manhattan offices was a bit overwhelming: Here was John D.'s grandson sitting across from me and a virtual wing of the Museum of Modern Art hanging on the wall. During my interviews, some of Chase's executives allowed that their boss, though always courteous, was indeed intimidating--just enough to keep them from speaking up about needed changes. Omitting names, I repeated those observations to Rockefeller, who found them mystifying. "Do I scare you?" he asked. And I replied, "Yes, a little." I wrote this exchange into my first draft. My longtime favorite editor, Dan Seligman, immediately told me he'd found an error in my manuscript. I may have paled. Said Dan: "I don't think you were scared at all." The story we published includes Rockefeller's "Do I scare you?" but not my answer.
The women rise up
As these stories were trundling out in the 1970s, there were also immense changes going on at FORTUNE. One of them concerned the role of women on the staff. Our managing editor at the time, Lou Banks, had worked at depicting progress on this front: In words he surely came to regret, he wrote in late 1968 that in the previous 12 months we had increased the number of women editor-writers "by 200%"--that is, from one (me) to three. But the fact is that the great bulk of the women journalists of Time Inc. knew themselves to be second-class citizens and were reaching the point of mutiny. They were then pushed over the edge by the uprising of Newsweek's women, who in early 1970 filed a discrimination complaint with the federal Equal Employment Opportunity Commission.
A friend on the FORTUNE staff, Marion Buhagiar, soon came into my office, closed the door, and as I sat in surprised amazement, told me that legal action was also brewing at Time Inc. She asked for my support. But as we talked, I began to question whether more effort shouldn't be put into negotiating with management--I learned from Marion there'd been little of that--before things got as serious as a lawsuit. That night, at a Greenwich Village meeting of the women, I made the same case. I got cold looks. This train was set to leave the station. In May 1970 the attorney general of New York State, working with a complaint drafted by women at Time Inc., sued the company's magazines for sex discrimination.
Shocked and angry, but also detesting the idea of hearings, Time Inc.'s management ultimately made a formal commitment to refrain from discriminatory acts and to open up all jobs to women. Each magazine also made specific changes aimed at leveling the playing field. FORTUNE began a program to train women as writers and promoted some senior researchers to "associate editor," previously a writer's title. In a change I thought of particular economic value, researchers who made a "material contribution" to an article (and almost always, researchers did) were given a credit line. If you look at the bottoms of columns in this issue's articles, you will see many credit lines--and you can know that they are a result of the rebellion of women in 1970.
The men move in
But of course if the job of writer was unequivocally to be made available to women, then the job of researcher must be equally open to men. So Mary Johnston began to add bright young men to what came to be called the reporting staff. One of them, Alex Stack, worked with me on "One Story the Wall Street Journal Won't Print" (August 1971), a piece about the paper itself. Later, a friend at the Journal, a publication whose record of promoting women was even worse than Time Inc.'s, told me that heads turned as Alex and I walked through the newsroom and people realized I was--not merely in age--the senior member of the team.
Mary Johnston, a great judge of journalistic talent, proceeded in the 1970s to hire five researchers who would go on to become managing editors of FORTUNE or their chief lieutenants--and only one of them, Ann Morrison, was a woman. What about today? Is it harder for a woman to become a high-up editor of this magazine than it is for a man? Going by the statistics of who makes it, I'd say it is. But when it's writers up for discussion, I feel that women face no institutional roadblocks, either in getting hired or in succeeding. As Wyndham Robertson, a former FORTUNE assistant managing editor who was the first woman to hold that job, has said, "We'd hire an orangutan if it could write."
The other riveting drama at FORTUNE in the 1970s was top management's move to change the magazine from a monthly to a biweekly. That idea had been floated even before Luce died, in 1967. But as the 1970s wore on, the business side of FORTUNE began campaigning insistently for the change, believing that it would increase the magazine's profitability (respectable then, but volatile) and strengthen its competitive position.
Time Inc. editor-in-chief Hedley Donovan himself started to believe that in the hectic business world, the big, monthly FORTUNE, with its panoramic stories, came across as formidable and easy to put aside. To appear more approachable, we reduced the magazine's page size in 1972 and added more short articles to the mix. But Donovan continued to wonder if a more cosmic change wasn't essential, particularly because friends of his admitted that they didn't regularly read FORTUNE.
Most of our editors and senior writers, including me, opposed a biweekly. Journalists don't welcome massive change any more than do the businesspeople we write about. At a meeting of the Board of Editors in 1977, I said I had tried to think about the biweekly decision as a business problem. I called it "a risk-reward decision in which we are playing double or nothing." But what I was always thinking to myself is that at heart we were talking about the very sad event of killing a magazine. Yes, there would be a new FORTUNE, but no matter how good the biweekly was--and it became excellent--the magazine I went to work for in 1954, the one we call "the old FORTUNE," would have died.
This, though, was another train ready to leave the station. On the late 1977 evening at which Donovan, a hero of mine then and now, was to announce the biweekly at a party for the staff, I hung around my office to pack up for writing an International Paper story at home. When I finally got to the boardroom on the 34th floor, Hedley was just beginning to speak in his deep voice to a crowd that was spilling into the hallway. I realized then that I couldn't bear to listen, and I turned and left.
I obviously didn't quit. In fact, when I look at the stories I've written since the big change, in January 1978, some I like the most are three-pagers that were close to the news, such as "AT&T Has No Clothes" (Feb. 5, 1996). But the biweekly continued to run lengthy, deeply researched articles--if fewer of them--and for the most part that's what I kept on writing. There was, for example, "The Leaning Tower of Sears" (July 2, 1979). The reporter working with me on that story was a smart 28-year-old named Rik Kirkland, who later became my ninth managing editor. In writing "The Madness of Executive Compensation" for our July 12, 1982, issue--note that long-gone year, 1982--I hoped I might help turn the tide of greed. We all know how well that worked.
In 1982 I also wrote the first of my many stories--"Behind the Profits Glow at Aetna" (Nov. 15)--that exposed the machinations of companies working to show earnings they didn't really have. The Aetna article, which I'd tumbled to because of a footnote in the company's annual report, sparked an SEC investigation that forced the company to restate its earnings. Next were two pieces about American Express's insurance subsidiary: "How Fireman's Fund Stoked Its Profits" (Nov. 28, 1983) and "The Earnings Magic at American Express" (June 25, 1984). The second of those articles, which was the result of an anonymous letter sent me in a Fireman's Fund envelope, caused Jim Robinson, CEO of American Express, particular consternation. He and an army of people tried to convince me--unsuccessfully--that it was perfectly fine for Fireman's Fund to have reported handsome, rising earnings in the 1980--83 period when truly its profits were shriveling.
Among the emissaries Robinson sent was Willkie Farr & Gallagher lawyer Kenneth Bialkin, whom I'd known since his 2-year-old daughter and mine rode the swings together in a Manhattan playground. In the article, I quoted Ken as saying, "If you tell me that it's improper under all circumstances for management to want to smooth out their results, adjust the level of risk, or to smooth out reserves, or to move figures from one period to another--if you tell me that's under all circumstances illegitimate, I'll tell you you don't understand the way American business is conducted." (Today Ken, now with Skadden Arps Slate Meagher & Flom, is one of the three lead lawyers working for Hank Greenberg, ex-CEO of AIG, who has famously said that regulators have injudiciously been trying to turn "foot faults" into "a murder charge.")
The problem was that I did understand how American business was being conducted, and I didn't like it. So I kept on spotlighting whatever misbehavior I could find. "The $600 Million Cigarette Scam" (Dec. 4, 1989) told the story of trade-loading, also known as channel-stuffing--the practice of inducing your wholesalers to buy in this quarter what they would have naturally bought in the next--which RJR's tobacco division had covertly done for years to manufacture earnings. New management, though, in the person of CEO Lou Gerstner and tobacco chief Jim Johnston, had publicly sworn off the practice, which is how everybody learned of its previous existence.
A reporter, Mark Colodny, and I then interviewed each of the men, and Mark began to notice how feverishly Johnston was smoking. Mark counted nine cigarettes in two hours! That journalistically irresistible fact made it into the story. Later, RJR's PR head, Dave Kalis, who in his previous job, at American Express, had also endured my Fireman's Fund interviews, handed me what I think was intended as a compliment (and that he may even have meant): "Jim doesn't normally smoke that much. I think you probably don't realize how much pressure an interview of yours puts on people."
I remember a call I got not long after the RJR story from a friend of mine who'd recently retired from a high-up job at Bristol-Myers Squibb. "Everything you said in the article about the folly of trade-loading is true," he said. "It's uneconomic, it's a habit almost impossible to break, it's like smoking dope. But I'll tell you this--the next time some sales organization needs to stuff the channel to make its numbers, I bet it will do it." And as it happens ... 14 years later, in 2003, Bristol-Myers was revealed to have been channel-stuffing for years. For its sins the company has since been fined $150 million by the SEC and is paying $300 million to shareholders in connection with a Department of Justice deferred-prosecution agreement.
One person with whom I argued in the mid-1990s about "managed earnings" was GE's Jack Welch, a man I admire in many ways. As we sat in a conference room near the top of the GE Building in Rockefeller Center, I told Jack that I thought GE's well-known practice of "smoothing" its earnings was terrible. He said, in that high raspy voice of his, that he couldn't disagree more. "What investor would want to buy a conglomerate like GE unless its earnings were predictable?" he asked. It was an argument about which neither of us would budge.
As a digression, I will report another, lighter argument I had with Jack. One day in 1999 while my husband and I were vacationing on Sea Island, I learned from then-managing editor John Huey that Welch was about to call me to protest a change we were planning to make in GE's industry listing in the FORTUNE 500. Up to then, we had categorized GE as an electrical equipment company; because its revenues had changed in composition, we were now planning to list it as a diversified financial services company. Huey, the coward, had told Jack we were just following "Carol's rules" and that only I could bend them, which was malarkey.
Jack called, nonetheless, and put up a fervent, how-can-you-possibly-do-this argument. "Why do you care so much?" I asked. Because, he replied, young engineers would no longer want to work for GE if they thought it a financial services company. A comical picture formed in my mind: A Purdue engineering student goes to the library, sees that FORTUNE has slotted GE in financial services, and shouts, "Never in a million years will I go to work for this company!" Truth is, Jack probably hated the change because he knew price/earnings ratios for financial services companies were lower than what GE was selling for. I told Jack that the rules were the rules. And we designated GE a diversified financial services company.
A "split" cover
So back to serious stuff, which is a pretty good way to describe my article "Lies, Damned Lies, and Managed Earnings," published in 1999 (Aug. 2). There had been plenty of big scandals by then--Cendant, Rite Aid, Waste Management, Sunbeam, McKesson HBOC--but no one connected with them had gone to jail. In fact, looking for CEO felons to list in a table, I had to settle for small-fry companies. But the first two sentences of my piece said, "Someplace right now, in the layers of a FORTUNE 500 company, an employee--probably high up and probably helped by people who work for him--is perpetrating an accounting fraud. Down the road that crime will come to light and cost the company's shareholders hundreds of millions of dollars." Plainly, I goofed on costs. I should have said "billions of dollars," since that was the toll of the scandals soon to surface: Enron, WorldCom, HealthSouth, Adelphia. Otherwise, I feel good about the soundness of those sentences (and the ones that followed). I felt satisfied also that this story was to be promoted by a strong cover created by our art and photo people. It showed a large, heavy pot of smoking, boiling water in which a gray bookkeeping ledger was perishing. The cover talked about "cooking the books," and said, "Cross the line, and you may do time." A rendition of that cover hangs on my office wall today, overlooking the toxic waste.
Come to think of it, some readers never saw that cover. Those were the days of the Internet bubble, and in FORTUNE's halls there was a competing cover, titled ".COM FEVER." This version showed a Harvard MBA striding purposefully along a railroad track--I never quite got that image; was he about to hop a freight train?--heading toward a job with a website. And what do you know? My editors decided that FORTUNE would for the second time ever do a "split" cover, in this case meaning that newsstand buyers would get the Internet image and subscribers would get the cooked books. For those of you who missed the cover the first time around, it's shown here at the top of the page.
Irrational exuberance, of course, wasn't limited to the dot-com world. Blue chips had their folly too. For some time I'd wanted to pursue a story attacking the notion that big companies could keep turning out 15% earnings increases year after year. To my puzzlement, I couldn't get managing editor Huey, a great journalist with a superb story sense, interested in the piece. The situation changed when John moved up to editor of the FORTUNE/Money group in early 2001 and Rik Kirkland became FORTUNE's managing editor. Rik quickly scheduled the story, which ran as "The 15% Delusion" (Feb. 5, 2001). A bit of immodesty here: Bob Eckert, CEO of Mattel, has called that piece "my all-time favorite business article ever." And Huey's reluctance? What I heard eventually is that he basically disagreed with my thesis, believing instead that really effective managers like Welch and Time Inc.'s own Don Logan could somehow keep the 15% going. Asked for his thinking now, editorial director Huey responded, "I have since gotten religion and conceded the error of my ways. Duh!"
One sad footnote to the bubble days, this one having to do with the Morgue: With the arrival of the Internet, and with the company's increasing determination to bear down on costs, Time Inc.'s vast collection of bio and company files were moved to storage in Pennsylvania. You could still get the folders (though Uncle Homer's file had by then finally bit the dust), except that it took time to retrieve them. Then, one day in 1998, I called for the company file on American International Group and was met by, first, silence and, second, "I'll get back to you," from the librarian on the line. The person who called next was the head of the library, who confessed in enormous embarrassment that all the company files--this priceless resource--had burned in their storage site and that she somehow hadn't gotten around to telling the FORTUNE staff of the loss. I may have shed a couple of tears that day (as I may be doing now, just from writing this). Luckily, the bio files did not burn, and to this day I use them.
If you will permit me to grossly stretch a point, I will say that the banishment of the Morgue's files to storage resembled what happened to Time Inc.'s magazines in 1989. That was when Gulf & Western's Marty Davis sought to take over Time Inc., and in defense, we hurtled ahead with our planned merger with Warner Communications, which was headed by the egregiously compensated Steve Ross. While that outcome was still in doubt, Jason McManus, then Time Inc.'s editor-in-chief, hosted a lunch for maybe a dozen of the company's senior writers, including me. He reported, with satisfaction, that it appeared Davis would be repelled. Getting mainly sour looks, he asked for our thinking. Expressing an opinion that I knew was shared by many others in the building, I said I did not want to see the magazines pushed down into the bowels of any big, sprawling company. I added a specific worry: "The situation is worse for FORTUNE than for the other magazines because we write about business and need to be free of conflicts about what we say. Any new business the company gets into creates problems for us."
Point noted, perhaps, but certainly not taken. With the creation of Time Warner in 1989, the magazines went from their premier spot in the old company to underground storage in the new. So today Carl Icahn wants to see the publishing operations--Time Inc., that is--spun off into a separate company. I certainly would not care to see such an enterprise be run by Icahn, whom I got to know while doing a TWA tale, "The Comeuppance of Carl Icahn" (Feb. 17, 1986). Any man who can turn standard airline food into substandard food is not someone you want running a magazine. But his idea of a separate publishing company? Gets my vote!
I say that, even though I cannot complain that the 1989 merger affected my work in any way. Twice I wrote biting articles about cable TV's John Malone ("The Enrichment of John Malone," Nov. 15, 1993, and "High Noon for John Malone," Jan. 13, 1997). Those pieces not only took me into Time Warner's TV cable neighborhood but also left me shooting bullets at a man who controlled major amounts of Time Warner stock. To my knowledge, no one in top management interfered in the least with those stories.
Doing the AOL math
For FORTUNE, the world grew crazier still on Monday, Jan. 10, 2000, when Time Warner and AOL announced they would merge. We had exactly one cycle--ten working days--until an issue closed, and everyone knew we'd have to be dead-solid perfect in what we said. My assignment, unsurprisingly, was to look at the financial prospects for the merged companies. Starting off, I had no opinion about that matter. But I took the precaution of asking Huey to reassure me that no holds were barred in this project. He did so.
When we closed the story well after midnight on the Friday of our closing week, the title was simply "AOL + TWX=???" (Feb. 7, 2000). But the "deck" just below had the killer punch: "Do the math, and you might wonder if this company's long-term annual return to investors can beat a Treasury bond's." The last two sentences of the piece, for which my editor, Tim Smith, thought up exactly the right closing words, spoke of the colossal difficulty the merged company would have in making its $280 billion market cap grow: "It will be like pushing a boulder up an alp." If you need a reminder, the market cap in late August was $83 billion. (A ten-year Treasury bond extant at the merger date has been returning 6.5% annually and has vaulted in price besides, while a Time Warner share has lost 60%.)
Some people have asked me whether it wasn't tough to write that story. Tough, yes, in the sense of hard work. But not tough in the sense of my having any reservations about arguing my conclusion: that this merger was headed for trouble. I think the assignment might have been very difficult for a young writer looking forward to a career in the company. But I knew I was going to be able to say what I thought, and for sure I wasn't going to get fired. Think of the newspaper headline: TIME WARNER FIRES VETERAN FORTUNE WRITER FOR BASHING MERGER. No, that wasn't in the cards. What was, though, was widespread surprise that we'd be so unrestrained in what we wrote. Said Disney's Michael Eisner, in essence, to Huey: "I always thought all that talk about editorial independence at your company was a lot of baloney. I see now that it isn't."
I have since done two other articles about the merged company, and both have surely stung. The first, "AOL Time Warner's New Math" (Feb. 4, 2002), recapped the merger's terrible results for the company's shareholders. The story also included a box that reported my belief, based on good evidence, that our departing CEO, Jerry Levin, was being pushed out. Levin talked to me on that story, maintaining firmly that he was leaving of his own accord. But the conventional wisdom today, buttressed by a couple of books about the merger, is that he did not.
The other story, "Why AOL's Accounting Problems Keep Popping Up" (April 28, 2003), allowed me to do something I really like: explain a complicated subject in a way that makes it easy for the reader to understand. The complexity in this case was how AOL had fabricated $400 million in advertising revenues out of a deal it did with Bertelsmann. The SEC and the Department of Justice, fully on that case when I did the story, have since penalized Time Warner $450 million for what AOL did; Justice is still considering criminal prosecutions of individuals.
Reporting that story, I tried to interview Time Warner executives, CEO Dick Parsons included. Word came back that our people could talk only off the record. Now, I will happily do what we call not-for-attribution interviews when I am talking to some side party in a story. But over the years I have told a good many companies that were central to my articles that my interviews with them must be on the record. I certainly didn't think I could tell my own company anything but the same. So Time Warner stuck to its position, I stuck to my mine--and we did not talk.
In the wake of my Time Warner stories, the article of mine that gained the most attention was this year's piece on Hewlett-Packard. It was a relatively unusual assignment for me: I'm not a tech writer. But there are times in the affairs of tech companies (as there were when I wrote about IBM) when the story is business, not technology--and that's why Rik Kirkland asked me in August 2004 to look into HP. The impetus was the terrible quarter the company had just reported. But the real goal was to figure out what we should be saying about CEO Carly Fiorina and the famous 2002 merger she had engineered between HP and Compaq.
This story then proceeded to drive me a little batty. Despite weeks of research in the fall that included a long interview with Carly, I couldn't figure out what I had new and insightful to say. I told Rik that except for two cover stories on derivatives that I'd done in the 1990s, this HP story might be the hardest assignment I'd ever had. Then, suddenly, as I plowed through HP documents while flying again to the West Coast to interview Carly, I knew with conviction what should be said: The results that the company had just announced for its 2004 fiscal year were horrible in comparison with the detailed forecasts that the company had set forth in its February 2002 merger proxy. In other words, by HP's own standards, this merger had not worked. That was the message of "Why Carly's Big Bet Is Failing," which came out in the issue dated Feb. 7 but hit our website Jan. 22.
Carly was fired by her board two weeks later, on Feb. 8. The company's new chairman said "recent press coverage" had played no role in the ouster.
Ty Cobb--yes, Ty Cobb
That brings me up-to-date on my recollections. But I have reached this point without relating perhaps the most entertaining fact about my FORTUNE years: In 1957, I had two dates with Ty Cobb. I was 28 and he was 70. We met because he watched a quiz show, Tic Tac Dough, that I was on for four days and on which, out of years spent following the St. Louis Cardinals, I correctly answered some baseball questions. Cobb then asked me to have lunch at the "21" Club. A couple of my male friends thought that my accepting was not a good idea, perhaps believing that Cobb was somehow going to extend his base-stealing record in broad daylight at "21."
I went to lunch; I could not have made myself turn down that invitation. Cobb was smart--that fit his reputation on the diamond--and gentlemanly--that certainly didn't. At lunch he came forth with a second invitation, which was to go to the Old-Timers Game at Yankee Stadium. I couldn't turn that down either. But there was no third date. This was not a match made in heaven.
On the other hand, my joining FORTUNE may have been. Most people who work have not been as lucky as I. To have had an absorbing, worthwhile job, carried out in the company of talented, likable people bent on creating the best product possible, in a collegial environment that many a person who has come from another journalistic organization finds amazing--all that is not the average working experience. And that's why I'm still here. This is a hard place to leave.