Throughout this tortured period of indecision, my wife had taken no other position than the traditional one of the Navy wife, “Whither thou goest!” She had listened with her usual patience to my reasoning, but reserved to herself the intuitive process that proved in the end to be right. For it was only after we had been out of the service some time that I learned a fact that would have made the decision far easier, one that she had sensed all along. In civil life we were free. No longer were we social and professional slaves to every officer and his wife who happened, by accident of date of appointment or scholastic standing at Annapolis, to outrank us on the precedence list. But one basic fact was clear; the slipstream that had sucked me into naval aviation had now blasted me out of the service I had loved, and into civil life.
CHAPTER NINETEEN
Necessity, the Mother of Creation
When, shortly after the first of January, 1930, Tom Hamilton took me up to Milwaukee to look over the Hamilton Aero plant there, the stock market crash had already enveloped the country in a cold chill. Along the Northwestern Railway’s right of way, cold smoke stacks pointed dead fingers toward leaden skies and fear gripped the land. However, we found Tom’s modern factory still bright and cheerful for it had been well equipped and was now well run by Arvid Nelson, its manager. While the civilian demand for propellers had collapsed with the boom, military business had continued firm under the five-year Army and Navy building programs.
It was when we went down to Pittsburgh to look over Standard Steel that I got a jolt. The plant, located across the river in Homestead in a former cap-pistol factory, was as drab and cheerless as Pittsburgh itself. With many of the steel mills down as a result of the market collapse, there was less smog than usual along the Monongahela, but the grime of the past still clung to treeless slopes. After a look over the situation there it was clear we must cut the consolidated propeller company back to a size suited to the reduced demand.
While the plant in Milwaukee appeared the better of the two, the State of Wisconsin had a heavy corporation income tax that would have to be included in costs; and besides, Milwaukee lay off the main east-west line of rail communication. At Pittsburgh, Harry Kraeling had just completed a new three-story loft building in which we might concentrate the machinery of both companies, and the plant had a siding to the main line of the Pennsylvania. Here, about halfway between Washington, D.C., and Dayton, Ohio, was a situation that offered such advantages that we decided to consolidate the best equipment and the most skilled workmen there. We would then abandon all excess facilities and endeavor to set up a plant with a break-even point calculated to keep us in the black even with the greatly reduced military production level.
In calculating this setup, I had help from the head office in New York and in the person of Joseph F. McCarthy, controller of United Aircraft. Mac, I found, was the sort of wizard who could glance at columns of figures and read in them signs and portents such as could be made clear to me only after I had reduced them to engineer’s language of graphs and charts. From him I discovered that a financial statement is not just the cold record of past mistakes or triumphs, but also a weather map from which to forecast future trends and to take decisions calculated to reap the abundant harvest.
Using the figures available, we calculated the size of the facility with which we might expect to continue to break even during a period of slow demand but still retain the flexibility essential to reaping a profit when the tide turned. United Aircraft was frankly not in business for its health; it was in business for a fair profit and each of the subsidiaries was expected to stand on its own two feet. By consolidating the financial resources of all its subsidiaries in the parent company, it had in effect broadened the resources of each. Any company in temporary need of funds might look to the parent company without going outside to borrow, but over the long pull it must contribute its share to the over-all income.
Having had no training whatever in accounting or finance, but having been schooled by Dr. Lucke to search for fundamental principles, I now began digging down to bedrock and in J. F. McCarthy, himself, discovered a rich nugget. Profit, it seemed, was not just the excess of receipts over expenditures, a sum to be divided among a few insiders and squandered in riotous living. Profit was, among other things, the great regulator and controller of trade, and trade was the foundation of human existence. Under the free play of natural competitive forces, the compelling need to make a profit or go out of business and starve was what drove men to cut costs of production. If they could reduce costs enough to make the product available to more people they could increase the demand and expand the volume of production. Out of their profits, or the anticipation of profits, they could attract new money with which to buy new machinery designed to cut costs further and expand volume further. All this was a delicate, living process that required good judgment and great skill to nurture.
Profit, it appeared, was like the governor on a steam generator. Increased demand for power would slow down the engine and reduce the voltage were it not for the fact that the governor, sensitive to small changes in speed, now opened the throttle wider to admit the extra steam required to meet the new demand. Contrariwise, when the demand fell off the engine might overspeed and destroy itself, save that the eversensitive governor now reacted quickly to close the throttle, and save the machine.
Profit was therefore no devouring ogre, as some would have us believe, nor was it just the regulator or controller of costs. Men, in seeking to make a profit—and correspondingly to avoid a loss—were ever on the alert to create new devices and new products. If one of these turned out to be useful, or desirable, and if its price proved reasonable, then the device would come into general use and its production and use would become profitable for both its creator and its user, to say nothing of the workmen who manufactured it. If, however, the device or idea failed to measure up to the customer’s expectations, or failed to satisfy his tastes, then it would just fade out; nature, it appeared, was highly selective. She believed in enterprise.