Diamonds are a girl’s best friend
By Dr. John F. Sase, Ph.D.
Gerard J. Senick, general editor
Julie G. Sase, copyeditor
William A. Gross, researcher
“A kiss on the hand /
May be quite continental /
But diamonds are a girl’s best friend”
—“Diamonds Are a Girl’s Best Friend,” Lyrics by Leo Robin and Music by Jule Styne (1949), Performed by Marilyn Monroe in the film “Gentlemen Prefer Blondes” (20th Century Fox, 1953)
In this Episode, we return to our ongoing series about the economic development of Detroit and beyond. Specifically, we will discuss the growth and protection of our major industries.
Apart from being a fun watch during the current Pandemic, “Gentlemen Prefer Blondes,” with its notion of “besties,” carries some relevance to our column. On the surface, the opening quote may appear slightly sexist.
However, the preservation of family wealth through female lineage underscores the oral and written histories of both Europe and America.
Coming to America
Oral histories communicated directly by elders have endured over the past century and a half through many families. I (Dr. Sase) gathered the oral history of my family directly from my paternal grandparents, who were born in the 1870s. My respective great-grandparents brought them to Michigan during the mid-1880s when they were eight years old. From them, I learned that many families migrated at gunpoint supplied by Chancellor Otto von Bismarck during the year before Ludwig II mysteriously turned up dead along a Bavarian lakeshore. At that time, many families had the majority of their wealth invested in farmland and in forestland. Therefore, these families took only what they could carry safely in steerage accommodations across the Atlantic. Most family members spoke quietly in respect to preceding life events while preserving even less in writing.
Nevertheless, some written histories exist due to failed attempts to escape. The most famous account that offers some light on the topic surrounds the Romanov family, who were trapped in old Russia. Revolutionary troops took their family members into custody before they could leave the country in 1917. Nevertheless, the Romanovs remained hopeful of being released and of living out their lives in exile. Written accounts of their lengthy, terrifying captivity as political prisoners exiled to one of their smaller homes reveals that the Romanov women managed to conceal many of their diamonds and other rare gems by sewing them directly into their undergarments and dress seams.
The Romanovs wrote of their intention to sell these valuables for survival outside of Russia. However, the royals were executed before they could migrate to safety with their cousins in England, the family of George V. If the Romanovs were able to sell their jewels, where could they have sold them? A network of conduits from around the world centered at Sotheby’s of London, which was established by rare-book seller Samuel Baker in 1744. Throughout the 18th, 19th, and 20th Centuries, Sotheby’s remained the world’s largest, most trusted, and most dynamic auction house for art and luxury items. Since its founding, many families have relied upon the ability of Sotheby’s to link sellers from around the world with prospective buyers in private communication if those sellers do not wish exposure at a public auction. A local connection: a group of investors, including Pontiac-born millionaire Alfred Taubman, purchased and privatized Sotheby’s and initially incorporated it as Sotheby’s Holdings in Michigan in August 1983.
Oral and written histories tell us that some individuals dispensed with their jewels upon arriving at a safe haven and lived out the remainder of their lives in comfort. Other refugee women lived simply while sitting on their precious holdings in order to help their families, friends, and extended network of more-distant relatives to establish themselves later in the New World. Unfortunately, questions about more detailed history often went unanswered. Therefore, for our present purposes, let us keep this second group of refugees in the back of our minds as the women who helped to build Industrial America. Most likely, they converted their glimmering pieces of wealth into industrial-investment capital a century ago. Let us remember their fragments of oral history that have come down to us as a vague knowledge that hovers in between legend and documented history.
Building for the Future
Following early experimentation and the development of ideas and plans, modern industry blossomed in the last quarter of the Nineteenth Century through the first quarter of the Twentieth Century. During that time, the steel and locomotive industries developed in Pittsburgh, PA, while the railroad and automotive industries were established in and around Detroit, MI. In these and other cities, newcomers and earlier settlers struggled to join together to build a new future. The War Between the States, the Spanish-American War, World War—Part One (i.e., put on hold by the Armistice because of the Global Pandemic of 1918) and World War—Part Two spurred the growing demand for industrial production. In the wake of the late 1940s and early 1950s, plans developed in Detroit, Pittsburgh, and elsewhere to stabilize the new industrial wealth.
Some interested parties believed that the stock holdings of a number of the larger firms had grown too concentrated among a few shareholders and their families. Conversely, these significant groups of shareholders expanded throughout three or four generations, resulting in a pool of hundreds of potential heirs. Some key players believed that such a diversity of interests might prove challenging to consolidate. Therefore, this would make the holdings of half a dozen or more large companies ripe for takeover by outside interests.
From what I can recall from my own observations as a child, the significant holders of each corporation had grouped to form a few controlling blocks. Focusing on the study of the Economic Industrial Organization of these combined entities, common interests of two or three blocks that held a narrow majority of 51% appeared optimal. Of course, each large group developed visions of what seemed best for the more specific interests of their corporations.
For the sake of relative simplicity, let us consider the model that I remember best. We will illustrate the development of this vision using an example with rounded values. This approach will allow us to navigate the complexity while avoiding a fall into advanced mathematics. Simple is good.
Specifically, this plan, which was augmented in the early 1950s, entails the tailoring of a pair of blocks. The smaller of the two, which had closer financial and familial ties to a significant supplier, would hold 23% of the common stock. The larger of the two, reflecting closer familial ties to local interests and employees of the firm at all levels, would hold 28% of the common stock. I recall that some adults at the time referred to this second group as the “Dowager Trust” (though some of the husbands from the group were still alive.)
With help from multiple sides and specialties, these women were instrumental in creating a selection process for identifying and grouping representative young men of about five years of age at the time. When this selection was finalized, the selected minor boys signed detailed agreements through the proxy of their parent(s). In order to simplify the following walkthrough of the increasing investment, we will use 23 minor males for the 23% block and 28 for the 28% block of corporate stock. Therefore, we can measure equal holdings of 1% for each individual boy. For simplicity of discussion and some anonymity, let us refer to the primary corporation as Corporation A.
The Rules of the Game
1) We consider this non-revocable trust as one from which none of the 23 or 28 participants could earn a salary or receive a profit. Essentially, selection to participate remained an honor and not a source of direct income. Thus, we might consider the participants as unpaid watchdogs. Arf!
2) The trustees would not reinvest any of the dividends earned into Corporation A stock unless action was necessary to restore holdings in case of the bankruptcy of this corporation. Furthermore, the practice of diversification allowed trustees to invest corporate dividends in the bonds or common stock of other corporations, subject to government regulations and overall financial market conditions.
(Continued) ...
