Forecasts & Strategies
by Mark Skousen
“The Chief didn’t believe in the Protestant ethic or trust in Poor Richard’s aphorisms. A penny saved might be a penny earned, but a penny borrowed was worth even more.”
– David Nasaw, author The Chief: The Life of William Randolph Hearst
In the past year, I’ve had the chance of visiting the two biggest mansions in the United States, the Biltmore in Asheville, North Carolina, erected by the Vanderbilts, and the Hearst Castle, built by William Randolph Hearst. Both are monuments of capitalist extravagance, and both bankrupted the owners. The Vanderbilts never recovered and not a single Vanderbilt appears on today’s list of the Forbes 400 Richest People in America. The Hearst family was luckier and somehow survived the excesses of the Chief. Several of the Hearst sons are listed today as billionaires on the Forbes list.
In reading his latest biography, The Chief (Houghton Mifflin), I was surprised to learn that William Randolph’s father, George Hearst, started out as a forty-niner prospector who made a fortune in Homestake Mining and Anaconda Copper. He bought the San Francisco Examiner to advance his political career as a U.S. Senator. His only son, William, was trained by his ambitious mother, Phoebe, who took him overseas and sent him to private schools, where he learned Greek, Latin, French and German. Learning business and finance at a course in “political economy” at Harvard, he took over the Examiner and made it profitable. He had the patience to wait on his investments, which paid off handsomely in the future after heavy initial outlays. He was an incurable optimist, a necessary characteristic to succeed in business. Gradually, Hearst built his media dynasty throughout the nation, and wielded influence like no other publisher in American politics. He was the baron of publishing, just as Carnegie was in steel, Rockefeller in oil, and Morgan in banking.
But, sadly, Hearst omitted a cardinal principle of finance: Live within your means! His newspapers were mostly profitable, but he could never retain the earnings. He was a man of insatiable appetites-in politics, high society and personal possessions. He spent all his profits and borrowed to the hilt to make movies, live the high life with his actress-mistress, and build his dream homes (at his peak, he held over 40 homes, beach houses, castles and other kinds of real estate around the world). During the Great Depression of the 1930s, it all came crashing down, and in many ways he died a broken and friendless man.
William Randolph Hearst was bigger than life, but he could have learned from Poor Richard’s Almanac: “Beware of little expenses, a small leak will sink a great ship.”