Sol Price, Capitalist Hero

In the pantheon of contemporary American capitalism, there are few living heroes. Now there is one fewer. Sol Price, the legendary retailer, unprecedented philanthropist, counselor to people and presidents alike, died last month at the age of 93. He was a mentor and a friend to many including myself, a modest man whose straightforward approach to his business and the nation’s could be epitomized by the question to which this web site is dedicated: “where’s our money?”

On Friday, more than a thousand friends of Sol Price packed a San Diego ballroom to mark his passing.

One of them was Jim Sinegal, who was just a kid when he met Sol while unloading a bunch of mattresses at FedMart, Sol’s first venture into retailing, back in the nineteen fifties in San Diego. Sinegal was there in 1976, when Sol and his son Robert pioneered the “big box” membership store. Its features are commonplace now, but back then, they were a revolution in retailing: the stores relied on word of mouth rather than paid advertising. Expenses were cut to the bone by building concrete warehouses and locating them where real estate was less costly. Hours were limited. Instead of tens of thousands of stocked items, you’d find only thousands. But they’d be top quality, and, because they were bought in bulk and overhead was so low, much cheaper for the consumer. And for a long time, the stores refused to accept credit cards – because Sol did not like the idea of his customers going into debt.

Sol always considered himself an agent of the consumer. “We tried to look at everything from the standpoint of, Is it really being honest with the customer?” Sol told Fortune Magazine in 2003. “If you recognize you’re really a fiduciary for the customer, you shouldn’t make too much money.”

They called the company the Price Club. I always found it fascinating that he was born with a last name so nearly eponymous with the savings ethic that marked his retail philosophy. Today, after a 1993 merger, the $71 billion company is known as Costco. It has 566 stores, with over 56 million members. Sinegal is its President.

(A note for those who consider invention the province of the young: Sol was 60 years old when he started the Price Club.)

Sam Walton, the founder of WalMart and later Sam’s Club (names he acknowledged cribbing from FedMart and Price Club), said, “I guess I’ve stolen – I actually prefer the word ‘borrowed’ - as many ideas from Sol Price as from anybody else in the business.” But in contrast to the WalMart approach, Price offered employees high wages, employment stability, full health care coverage and invited unions to represent store workers.

Sol’s honesty and integrity were the core of his being, and guided his conduct as a businessman. Sinegal told the story of how Price refused to set up restrooms separated by race in Texas. How he once persuaded a hosiery supplier to cut his wholesale price deeply upon the promise of volume sales, but when the volume failed to materialize, Sol repaid the wholesaler the difference, a gesture unheard of then – or now.  Or how he refused to lowball the owners of a bankrupt company forced to sell their assets. “Never kick a man when he is down,” Sol said.

“It is impossible to make him bigger in death than he was in life,” Sinegal said Friday.

Sol became famous around the world for his business acumen, but it was his philanthropy that distinguishes him from so many other ultra-rich.  “Sol told me, ‘we make money so we can give it away,’” recalled Sherry Bahrambeygui, a young, super-smart lawyer he recruited to help manage the Price family’s business and charitable endeavors.

Sol lived the quintessentially American rags to riches story, and I saw that background reflected both in his demeanor – he was direct, to the point, and would not tolerate flattery or prevarication – and in his careful, frugal approach to everything he did, from how he lived to his businesses and philanthropy.

The son of a labor organizer, Sol grew up during the Great Depression and decided to study law, graduating from University of Southern California Law School in 1938. During World War II, he practiced law by day, but spent his nights training maintenance workers to service engines at a San Diego airfield. Unlike most businessmen, who often whine about lawsuits and support efforts to roll back consumer protection laws, Sol was a strong supporter of the right to go to court. All of his actions were guided by his strong sense of what was just and fair.

Though his personal wealth was estimated at $500 million, he lived in a modest home, drove himself to work until he no longer could, used pencils rather than pens, and, I’m pretty sure, wore a Timex watch.

Sol instituted his most ambitious philanthropic project close to home. Working with local officials, Sol, his son Robert and a small staff operating out of his office in LaJolla revitalized the dilapidated City Heights section of San Diego. He, his family and their charities donated over $150 million to build schools, housing, a library, recreational facilities, a police station, and provide a host of family services to City Heights residents. No detail was too small to escape his attention; he was known to insist on the particular kind of shrubbery to be included in the landscaping. His work at City Heights confirmed his belief that the most efficient and effective way to provide health care to kids was through the school system – an approach that was briefly contained in the health care legislation now before Congress.

Another project arose from the loss of a grandson to cancer at age fifteen. The Aaron Price Fellows program enrolled promising high school students in a special curriculum that taught about government and civic involvement. One of its graduates, San Diego City Councilman Todd Gloria, joked on Friday that some might say a “ten pound bag of rice” was Sol’s legacy. Not so for the six hundred Price Fellows. “I would not be where I am today were it not for Sol Price,” Gloria said. When asked to identify themselves, dozens of Price Fellows in the audience stood up – a diverse group of young, smart, eager people who will be California’s next generation of leaders.

An unabashed Democrat and liberal, Sol supported many advocacy groups, from Public Citizen and the Urban Institute in Washington, D.C., to the Center for Public Interest Law at the University of San Diego, and the group I founded in 1985, Consumer Watchdog.

Asking Sol for money was nothing like anything I had ever experienced. At our first meeting, in the 1990s, I had barely said hello before he gruffly sent me away, with instructions to come back with an organization budget and a profit and loss statement. I was taken aback. “Non-profits aren’t supposed to make a profit,” I protested. He chuckled that chuckle that I quickly learned preceded a shaking of his head and then a short but tough lecture. “What happens if your expenses are greater than what you bring in?” he asked. “Why should I invest in something that might not be around?” I returned with the data, which we poured over, Sol all the while questioning my assumptions, my strategies, asking me where every penny went, forcing me to consider how we could do our work more effectively (even if it ended up costing more). Once he was satisfied with the plan, Sol became a major supporter.

After electricity deregulation turned into a costly scam in 2000 and Consumer Watchdog took a lead role in trying to protect Californians against a taxpayer bailout of the energy industry, Sol helped us raise money from people he knew all over the state. I recall one day asking for his views on various possible solutions to the crisis. He imparted some wisdom that clearly had served him well. “You don’t always have to have all the answers. Sometimes it’s important just to ask the right questions.”

Sol’s support for well-run non-profit groups was widely recognized. What was less well known is how he took care of the people he came in contact with. Sherry Bahrambeygui described Sol as having an ability to connect with individuals in a deeply personal way. I experienced it as an almost uncanny sixth sense. One day in the fall of 1997 I drove down to his office, intending to discuss a grant for Consumer Watchdog. But when I sat down, he said to me, “what about your own financial situation? What’s your plan for the future?” In truth I had been so absorbed in my work that I’d too often neglected those matters. What made him ask remains a mystery to me. But we then spent many hours together, me and the founder of Costco going through my own finances! I later learned that I was one of many to whom he had offered personal advice and assistance.

For years after that, I would visit him every month, sometimes with my family. The man who was brutally honest and laser-like when scrutinizing a balance sheet or a business proposal was also a witty storyteller who liked to talk politics and history with friends and family over dinner. His insights into human nature were entertaining and often eerily prescient. He knew everyone and enjoyed connecting people. Among those he introduced me to were his close friends Brian and Gerri Monaghan, who became my friends as well. On Friday, they whispered to me with a laugh that if Sol had been in attendance at his memorial he would have left after fifteen minutes – he was never comfortable being the center of public attention, much less adoration.

I saw Sol just a few weeks before he died. His wife Helen had passed the year before, and he seemed, for the first time, weary. He was distant and uncharacteristically quiet. Yet when I wondered aloud why people seemed to grow more conservative as they grow older, a twinkle came back into his eye and he said, “I think it’s because they sense their own mortality and become more fearful.” I saw no fear in his eyes. I will always be grateful that I had one last chance to thank him for all he had done.

There were many poignant moments at last Friday’s tribute – laughs, gasps at previously unheard anecdotes, and the occasional swiping away of tears as people recalled, publicly or privately, their own moments with Sol. But the time I choked up was at the very end, after Robert spoke about his mom and dad’s 78-year marriage, then thanked the crowd and left the podium. There was polite applause, and it seemed that it was time to go. But then something changed; the applause grew louder, and suddenly everyone was standing, and, facing the now-empty stage, clapping their hands together in a sustained thunder for many minutes – a last ovation for Sol.

In an age defined by forgettable billionaires who built little but monuments to their own narcissistic folly, Sol Price left a remarkable and enduring legacy. He changed corporate America’s relationship with consumers and the lives of the many thousands of people who knew him.

Open Letters to Sens. Feinstein and Boxer

NO COMPROMISE TOP 10

As the debate over financial reform moves to the Senate I’ve written a couple of open letters to my senators. I’m not endorsing any particular legislative proposals but I do outline the items that shouldn’t be compromised.

Feel free to borrow my ideas for letters to your own senators, or to disagree. Whether you agree or disagree, I’d like to hear what you think.

What’s your bottom line on what financial reform should contain?

OPEN LETTER TO SEN. DIANNE FEINSTEIN

Dear Sen. Feinstein:

Throughout the economic crisis, you have continued to raise serious questions about whether the bailout was protecting the financial industry or the public. Now is the time to turn that skepticism into constructive action.

Sen. Feinstein, voters are counting on your continuing leadership to make sure Congress provides real financial reform to prevent future meltdowns and bailouts stemming from reckless practices and lack of government oversight.

Though you voted for the bailout, at the time, in September 2008, you compared the  preparations for the so-called financial rescue to the build-up to the war in Iraq. "There is a great deal of cynicism among those of us who have to live with having voted to go into Iraq based on misinformation and intelligence that later turned out not to be truthful," you said.

On March 23 of this year, you were among a group of senators who met with President Obama to express concern that his administration’s proposals didn’t go far enough, and that his economic advisers were many of the same people who oversaw the deregulatory fever that played such a key role in our financial crisis.

Unfortunately, Sen. Feinstein, your concerns have been borne out.

Financial reform as passed by the House of Representatives is filled with loopholes. Lobbyists from financial firms recently rescued from ruin by taxpayers have mounted a fierce campaign to maintain a system in which “too big to fail” institutions” can manipulate the regulatory system.

The good news is that Sen. Chris. Dodd has proposed much stronger legislation, the Restoring American Financial Stability Act of 2009.  By all accounts, his proposal faces a bruising battle as the financial industry gathers all its forces to protect its interests. Sen. Dodd has indicated that compromise is inevitable.

But Sen. Feinstein, the stakes are too high to compromise on the most important aspects of reform. Some of these are contained in Sen. Dodd’s proposal. Others are contained in other legislative proposals under consideration in the session about to begin.

Please help make sure that these key elements of reform are not the victims of compromise:

• Vote against the confirmation of Ben Bernanke to another term as Federal Reserve chair. He was at the center of the bubbles before the meltdown and also helped engineer a bailout that profited Wall Street while Main Street suffered.

•Reinstate a modern-day form of Glass-Steagal, as proposed by Sens. McCain and Cantwell.

•Audit the Federal Reserve, as proposed in legislation sponsored by Reps. Paul and Grayson, which would open up the operations of the institution to public scrutiny for the first time.

•Reconsider and approve judicial cram-downs, which would give bankruptcy judges the power to lower mortgage payments. This would put real teeth in the Obama Administration’s anti-foreclosure efforts.

In the Dodd bill:

• Support creation of a strong, independent Consumer Financial Protection Agency, with regulatory oversight of the Community Reinvestment Act (not provided in the House bill)

•Support creation of a an Agency for Financial Stability, responsible for identifying, monitoring and addressing systemic risks posed by large complex companies and their products, with the authority to break up firms if they pose a threat to the financial stability of the country

• Remove exemptions (contained in the House reform bill) for banks and credit unions with assets of less than $10 billion – about 98 percent of deposit-taking institutions in the country.

• Bar pre-emption (also allowed in the House bill), which would let states, if they choose, to pass tougher financial regulations for nationally chartered banks.

• Don’t exempt other consumer-financial businesses,  such as auto dealers from oversight by the Consumer Financial Protection Agency (as the House bill does.)

• Give two agencies, the Commodities Futures Trading Commission and the Securities and Exchange Commission broad authority to force derivatives markets onto exchanges where they pose less risk.

I’m urging you to put everything you’ve got behind this fight to protect consumers and homeowners. Voters put their trust and faith in you to see that their interests are protected, not compromised away. We’re relying on you to convince your colleagues to put the public’s interests ahead of the private profits and the power of the financial giants.

Sen. Feinstein, your skeptical instincts have been right since the Bush administration tried ramrod through a 3-page $700 bailout. Now everyone in the country can plainly see how that bailout benefited the large financial institutions but did little for small business, consumers and  homeowners. Thank you for your raising the right questions in the past. Thank you for helping us get back on the right track now.

Sincerely,

Martin Berg

Editor

WheresOurMoney.org

AN OPEN LETTER TO SEN. BARBARA BOXER

Dear Sen. Boxer:

Voters are counting on your continuing leadership to make sure the promise of real fundamental financial reform becomes a reality.

In 1989, you were one of a handful of senators to vote against repeal of the Glass-Steagall Act, the Depression-era law that had kept banks’ traditional business separate from their riskier speculative business.

Though you were in the small minority opposing the deregulatory fever sweeping Washington, your vote showed tremendous leadership, courage and prescience.

You withstood the pressures from financial industry lobbyists and contributors as well as the demands of your own party. As you know, then-President Clinton and his economic advisers, after initially opposing the repeal, eventually made a deal to sign off on the dismantling of Glass-Steagall.

We all know what happened over the last decade – record profits for financial institutions while the economic foundation for American families has gotten increasingly shaky. Voters have watched with dismay as the massive federal bailout has helped create even fewer financial institutions, with even greater wealth and wielding even more political power.

Neither the Obama administration’s proposals nor the bill passed by the House of Representatives offer sweeping reform, nor do they do anything to break up the power of the “too big to fail” institutions. They also don’t do enough to ease the threat these banks continue to pose to the rest of the economy.

Now Sen. Christopher Dodd has proposed much stronger legislation, the Restoring American Financial Stability.  By all accounts, his proposal faces a bruising battle as the financial industry gathers all its forces to protect its interests. Sen. Dodd has indicated that compromise is inevitable.

But Sen. Boxer, the stakes are too high to compromise on the most important aspects of reform. Some of these are contained in Sen. Dodd’s proposal. Others are contained in other legislative proposals under consideration in the session about to begin.

Please help make sure that these key elements of reform are not the victims of compromise:

• Vote against the confirmation of Ben Bernanke to another term as Federal Reserve chair. He was at the center of the bubbles before the meltdown, helped engineer a bailout that profited Wall Street while Main Street suffered, and has fought increased transparency in the financial system.

• Reinstate a modern-day form of Glass-Steagall, proposed by Sens. McCain and Cantwell.

• Audit the Federal Reserve, as suggested in the proposal by Reps. Paul and Grayson, which would open up the operations of the institution to public scrutiny for the first time.

• Reconsider and approve judicial cram-downs, which would give bankruptcy judges the power to lower mortgage payments. This would put real teeth in the Obama Administration’s anti-foreclosure efforts.

In the Dodd bill:

• Support creation of a strong, independent Consumer Financial Protection Agency, with regulatory oversight of the Community Reinvestment Act (not provided in the House bill).

• Support creation of a an Agency for Financial Stability, responsible for identifying, monitoring and addressing systemic risks posed by large complex companies and their products, with the authority to break up firms if they pose a threat to the financial stability of the country.

• Remove exemptions (contained in the House reform bill) for banks and credit unions with assets of less than $10 billion – about 98 percent of deposit-taking institutions in the country.

• Bar pre-emption (also allowed in the House bill), which would let states, if they choose, to pass tougher financial regulations for nationally chartered banks.

• Don’t exempt other consumer-financial businesses,  such as auto dealers from oversight by the Consumer Financial Protection Agency (as the House bill does).

• Give two agencies, the Commodities Futures Trading Commission and the Securities and Exchange Commission broad authority to force derivatives markets onto exchanges where they pose less risk.

I’m urging you to put everything you’ve got behind this fight to protect consumers and homeowners. Voters put their trust and faith in you to see that their interests are protected, not compromised away. We’re relying on you to convince your colleagues to put the public’s interests ahead of the private profits and the power of the financial giants.

Sen. Boxer, you were right in 1989 when you were in the minority. Now everyone in the country can plainly see the wreckage from the great deregulatory experiment you opposed. Thank you for your vision. Thank you for helping us get back on the right track now.

Sincerely,

Martin Berg

Editor

WheresOurMoney.org