Booknotes

Mr. JOHN STEELE GORDON (Author, "The Business of America"): Well, I think, you know, this sort of tragedy, not in this scale perhaps, has--has happened before. I mean, the country has been attacked before, and business got back to business quite quickly. And I'm sure it will again.

Mr. GORDON: Well, certainly Pearl Harbor. I mean, the--the--the stock market dropped--What?--4.5 percent immediately after Pearl Harbor, but within six months it was--it was higher than before. And business has a great deal to contribute to whatever effort we--we make here, and I'm sure it'll--it is more than willing to do so.

Mr. GORDON: It was arranged by subjects in large groups of--you know, about agriculture and about banking and--and government and interaction with business and--and stuff like that. It was--we just sort of sat there and arranged the stories.

Mr. GORDON: I think there are 47.

Mr. GORDON: I began writing them for American Heritage in 1989.

Mr. GORDON: Right.

Mr. GORDON: Yes.

Mr. GORDON: It's about the World Trade Center, about the building of the World Trade Center, and how it came to be and comparing it to the Erie Railway, which was built by the state of New York in the 1830s and '40s. And, I mean, the World Trade Center was--was not built by private business. It was built by the Port Authority of the state of New York and New Jersey. And it was largely at the instigation of David Rockefeller, who was at that time chairman of the Chase Manhattan Bank, who wanted to give a boost to the downtown New York business district, where the Chase Manhattan Bank had its headquarters, which had been finished in 1960.

And, fortunately for David Rockefeller, his brother, Nelson Rockefeller, happened to be governor of--of New York, and--and Nelson Rockefeller never saw a large project he didn't want to build. And so they managed to work through the politics and then get the Port Authority to build what was then, I guess, the largest office building in the world.

Mr. GORDON: They borrowed it in bonds and, for a long while, didn't make any money because it was an enormous building, and it wa--enormous increase in the amount of office space for rent in downtown New York. And the--the New York state government moved a lot of offices in there, but otherwise it would have been rather embarrassingly empty.

Mr. GORDON: I think it started making money in the--in the '80s, late '80s. And when the--when the boom really hit New York and the demand for office space went up, well, then the--it began to--to fill up.

Mr. GORDON: Oh, well, the Erie Canal was a--was a huge hit from the very beginning. The Erie Canal was probably the most successful public works project in the history of the world. I mean, it was making money even before it finished.

The Erie Railway, which was a political promise made by De Witt Clinton to--in order to secure the support of the s--what's called the Southern Tier, the counties along the border of--with Massachus--or with Pennsylvania, and so he promised them a highway of their own in--in the 1830s. That became a railway. And the Erie Railway never made the faintest economic sense. For one thing, the state of New York required it to run entirely within the state of New York, and--which meant it couldn't come to New York City because they would have to go through New Jersey.

And the Erie Canal people didn't want it coming to Buffalo because then it might compete with the Erie Canal. So it ended up running--when it was finished in 1851, it was the longest railroad in the world, 451 miles, and it ran between absolute no place called Dunkirk, New York, and an absolute no place called Piermont, New York. And this railroad--it went broke in its entire history seven times, I believe. It was a huge football on Wall Street for years. It was called `the scarlet woman of Wall Street' because it broke so many hearts, and it was just, I mean, a--a great example of why government should, for the most part, stay out of business, because they make political decisions, not financial ones.

Mr. GORDON: I live in Westchester County in a town called North Salem.

Mr. GORDON: I came down this morning.

Mr. GORDON: I took a very crowded Metroliner.

Mr. GORDON: Well, it's--I thought the train was very crowded. I as--I don't take the Metroliner all that often, but I assume it was--it was crowded because the shuttle isn't running, and maybe a lot of people are reluctant to take it even if it were. But I know a lot of people were talking about it and still full in the newspapers. And I talked with a guy sitting next to me--we talked the whole way down--about--about it.

Mr. GORDON: I'm not sure I've completely absorbed it. I mean, it was just such an unbelievable thing. I mean, I watched it on television. I was not in the city. I was about to go to the city when a friend called me up and said, `Turn on the television set. You're not going.' And so I just sat there all day watching it, and it was like some Hollywood movie. It was--I mean, with particularly spectacular special effects. It's--I still don't think I've really quite absorbed it.

Mr. GORDON: I don't have an office in Manhattan. American Heritage is--is at 14th Street and Fifth Avenue, way above the World Trade Center.

Mr. GORDON: Yes.

Mr. GORDON: Since 1989, so it's 12 years now.

Mr. GORDON: I call myself more a writer than an historian because I don't have anything beyond a BA degree. I've never been in a college. I don't do original research. I mean, what I do is I piggyback on other people's original research and--and then write stories about it. You know, a librarian friend of mine, when she handed me a stack of books that obviously hadn't been read in 100 years, she said, `I finally figured out what you do. You read dull books so other people don't have to.'

Mr. GORDON: Oh, there's a lot of--ones that I like. I think probably the one I like the best is the--about the Racquet Club managing to manipulate the real estate market in New York and--and the rules of--the--the laws about what you could build and where you could build it and ending up turning the empty space above their clubhouse into $5 million.

Mr. GORDON: It was in the 1970s when--the Racquet Club was on Fifth Avenue, and it was built in the--about 1920, I believe, and--on--on Park Avenue, I'm sorry. And the Fisher Brothers, a very large real estate firm, bought land right behind the Racquet Club on the side street, and they wanted a Park Avenue address because you can get much more rent money for a Park Avenue address than you can for a--a side street address, which doesn't make much sense, but that's the way the world works.

And so they tried to do a deal with the Racquet Club to use their Park Avenue address,, and the Racquet Club tried to get too much money from them, and so the Fisher Brothers went to Andy Stein, the borough president of Manhattan, and Andy Stein promptly gave them an address like, you know, 1 Park Avenue Plaza or something like that. And so suddenly they didn't need the--the Racquet Club anymore, and so they thought they'd--they'd won this game, set and match.

And then the Racquet Club suddenly announced that they were building a hotel over their clubhouse, which was not then a landmark that it is today. And they could do it. I mean, the engineering was there. The--the rules were there. It was perfectly possible to do it. And, of course, it would have ruined the Fisher Brothers' view over Park Avenue. They would have--the tenants would have looked at a brick wall instead of the--the Seagram Building and St. Bartholomew's and what have you. And so when all was said and done, the Fisher Brothers wrote the Racquet Club a check for $5 million to buy the air rights over their club.

Mr. GORDON: Right now?

Mr. GORDON: Oh, sure.

Mr. GORDON: I mean, if I were--if I were a businessman, which I'm not. I mean, I--it would be a very poor investment for me to go into business anywhere. But I think New York City is a--a wonderful place to do business.

Mr. GORDON: Because it's New York, and New York is--is the last great city-state. It's like Venice writ large. The only thing it's not--it's not sovereign. I mean, that's what's really remarkable bout--about New York, is that it--it made itself. It's not a s--a capital. It's never been a capital, I mean, except briefly in the 1790s. And so while the glories of London and Paris were paid for by the taxpayers of--of great nation-states, the glories of New York were almost entirely paid for by the taxpayers of New York, and even then, most of them were--was privately built. I mean, the only really great building in New York that was--that was publicly built is the--is City Hall; I mean architecturally great. And they--the--the city did build the New York Public Library, which is a spectacular building, but the books are owned by a private corporation.

Mr. GORDON: Wall Street started as--well, it was built in the--in the 15--or 1650s when they built a wall to protect New York City against invasion from New England, and then, of course, the British came up by sea instead of by land, so the wall didn't do any good. But it became a financial market starting in the--in the 1780s, and it became a--it became a synonym for the American financial market in the 1830s. I mean, it became a metonym for the--for the whole apparatus.

Mr. GORDON: Right.

Mr. GORDON: Well, the history is after a shock like this, the market tends to take a--a terrible beating, and then within six months to a year, it's higher than it was before. I mean, that's been the history; that's what happened after the Kennedy assassination, what happened after the Cuban missile crisis, what happened after Nixon's resignation, after Pearl Harbor.

In 1914, the--when World War I suddenly broke out, to everybody's surprise, Wall Street closed for three months, and it really had no choice because every other stock market in the world had already closed, and--and there was no way the New York stock market could have functioned under those conditions. And it closed for three months. And then when it finally reopened fully by April of 1915, 1915 turned out to be the best year in the history of the Dow Jones industrial average in--in percentage terms.

Mr. GORDON: Well, of course, what's different this time is that Wall Street itself was attacked. I mean, we think of all the great Wall Street names that were associated with the World Trade Center: Morgan Stanley, Cantor Fitzgerald, dozens of others. They were devastated, quite literally, and so that's--you know, a lot of these firms are now operating out of temporary office space in New Jersey, and--and the phones still are kind of shaky and--and stuff like that. And--and the financial market lives on communications. So that's--that's one big difference.

But I have no doubt that--that Wall Street will come back. I mean, it--I mean, the last time it was seriously bombed, in 1920, it was open for business the next day with the windows boarded up, but the stock market was functioning; the Morgan Bank was functioning.

Mr. GORDON: Right.

Mr. GORDON: Well, war is a very expensive proposition, and so it always--you know, there's a--there's a Chinese saying that wars are fought with silver bullets, and the nation with the most money and the most ability to convert its wealth into military strength is the--the country that ends up winning the war, almost always. So, you know, there have been lots of times when the effects of war--I mean, the--the Civil War transformed the financial system of the United States, for instance. I mean, the IRS was born in the Civil War, by no means the least of the effects of that war. And the modern paper money system was born in the--in the Civil War, for instance.

World War II--what--much of the technology that transformed the world after World War II came about because of World War II. I mean, radar, large airframes, without which the modern airplane industry couldn't exist or the airline industry couldn't exist. And the computer, of course, was originally meant to--in order to calculate artillery trajectories, and it turned out to be good for all kinds of things.

Mr. GORDON: Right. Oh, this was the USS Pennsylvania, and it started out as a good idea, but, you know, government projects often take on a life of their own because they--they build up constituents around them, who are--who are benefited by it. And what happened was in the War of 1812, while we had some wonderful single-ship successes against the British navy, the--the Royal Navy was so much larger than the US Navy that eventually we were bottled up, and--and our commerce was on a standstill and what have you. And Congress wanted to build, ma--have a navy so that we could, if not defeat the Royal Navy in a--in a future war, at least we could hold our own and--and greatly complicate their strategic planning.

And so they ordered six ships …And all they did was order that it be not less than 74 guns, and so the Navy saw this opening and--and ordered up a leviathan called the USS Pennsylvania, which had 136 guns. It was, by some measures, the largest wooden warship ever constructed, and it took 17 years to build in the Philadelphia Navy Yard. Most of the time, th--the construction only took place around elections. For a few months before each election, there--suddenly there'd be carpenters all over the USS Pennsylvania.

And, finally, it was finished, and it sailed down to the Norfolk Naval Base down in southern Virginia from Philadelphia, and never set sail again. I mean, it was obsolete the minute it was finished, and it was finally burned at the--when the Navy evacuated the Norfolk Navy Base in the beginning of the Civil War. The Pennsylvania was burned to the--to the water line and never--was never rebuilt by the Confederates or anybody else.

Mr. GORDON: Well, we're not entirely sure. It showed up in the--in the Roosevelt era, in the first--Teddy Roosevelt era, and it probably had to do with the fact that pork barrels--I mean, slaves in the South used to be fed--they would be handed out joints of pork from a barrel, and this was s--so handing out goodies to--to everybody. And so it's probably a Democratic coinage because the South was solidly Democratic, and, of course, the Democrats were out of office during the early part of the 20th century. And so, I mean, one man's pork barrel, of course, is another man's vital national project. It depends on whose constituents are benefited by it.

Mr. GORDON: Yes. Well, that apparently was coined by now out-of-office Republicans, who use it--I mean, basically, the same thing. It's a government project designed to win votes, not for any real economic utility.

Mr. GORDON: He invented the bond drive.

Mr. GORDON: I don't know. It depends on what kind of war this turns out to be. I mean, it's going to be--I mean, if it turns into what--I'd be very surprised if it turned into what we recognize as a war in a conventional sense of armies clashing on--on open ground. So if it--if it turns into a major war, yes, indeed, we will be having bond drives again.

Mr. GORDON: Jay Cooke was a Philadelphia banker born in Sandusky, Ohio. And in the beginning of the Civil War, the--the United States was spending about--I--I think it was $140,000 a day was the--the daily expenses of the federal government in 1860. They were spending $1 million a day by the time Bull Run came in the--in the summer of 1861. And the money was just--`Where are we going to get the money?' They--Salmon Chase, the secretary of the Treasury, went up to Wall Street and managed to borrow $50 million, which at the time was a very, very large underwriting for Wall Street, and they just needed to find a way to--to raise incredible amounts of money.

The--the--the federal debt in 1860 was $65 million. By the end of the Civil War, it was $2.4 billion. And Jay Cooke found a way to do this by selling bonds at--you could buy them as--as small as $50, and he sold them to everybody. I mean, before the Civil War, far fewer than 1 percent of the American population had owned any kind of securities at all. By the end of the war, Jay Cooke had sold bonds to about 5 percent of the--of the population, which is really a remarkable achievement. And ever since, I mean, everybo--every country in the world said, `Boy, is this a good idea.'

Mr. GORDON: I don't have the figures. I know it was a colossal amount. I mean, most wars are usually financed on borrowed money, not on taxes, because you--you can't raise enough through taxes to--to fight a war.

Mr. GORDON: Well, the armor-plate scandal was--took place in the late 19th century when the government was beginning to rebuild the Navy. And we--at the beginning of the 20th century, we had the second-largest Navy in the world, after the Royal Navy, but we needed armor plate. And armor plate is--is very tricky stuff to manufacture, and steel companies never liked manufacturing it much to begin with because, by its nature, it is what we called a monopsony; there's only one buyer in the market, and that's the United States Navy. So if you didn't sell your armor plate to them, you didn't sell it to anybody.

And so Can Do Carnegie and other steel manufacturers weren't too keen about doing it, but they got talked into it for patriotic reasons, and then for various political reasons, they essentially got shafted. They--I mean, a lot of politicians made hay out of a phony scandal and about blow holes, which are a normal part of--of good armor plate, but the--the Navy had written all these specifications. I mean, bureaucrats who knew nothing whatever about the manufacture of steel wrote all these specifications.

And the head of the Homestead Works, the part of Carnegie steel empire named Charlie Schwab, he just went ahead and made the armor plate, and he was very much given to, you know, doing the job now and, you know, worrying about the details later. And there was a lot of labor unrest at that time, and--and the unions, in effect, turned them in. And they--then they had this kangaroo court. I mean, they didn't--they didn't bother to call Carnegie. They just held hearings based on the evidence presented by the--by the labor unions and then found them guilty. This was not exactly justice, but they paid the fine anyway.

And then they--in World War I, they--the government tried to build an armor-plate factory of its own, and it came in over 1,000 percent over budget, and it took--it wasn't finished till the war was over, and it did one run of armor plate costing three times as much as the steel companies were perfectly willing to sell it for. And it closed and never worked again. I mean, it was a complete, total loss of money.

Mr. GORDON: Oh, well, there--there--there are quite a few of them. Visit any--almost any college campus in the country, and you--and you--you can have lunch with half a dozen of them. And it goes back to the turn of the century. I mean, Ida Tarbell, the Muckrakers, Gustaf--I forget his last name, I'm afraid--who wrote a--a three-volume economic history of the United States, and--and he knew just where to place the blame. I mean, the same place Ralph Nader places the blame for absolutely everything: the corporations. And this is tendentious history at its worst. Often--I mean, Ida Tarbell, she was a great propagandist, but not a good historian.

Mr. GORDON: Well, I--it's more so now than it used to be, I believe. It's been the fate of--of capitalism--I mean, the very word `capitalism' was coined by Karl Marx, and the history of capitalism has been, to a very large extent, written by its enemies, historians who look down at business. I mean, they regard it as, at best, a grubby affair, unlike their own high-flown profession. And so I--you know, they're out to prove a point, many of them. I mean, there are many great academic historians, and there are--I mean, people like Alfred Chandler of Harvard, who was a great business historian, who was certainly not guilty of this, but there are others who are--they have an agenda, and they're going to push it.

Mr. GORDON: Well, I...

Mr. GORDON: Well, I--I've tried to stay away from ideology. I think ideologies are--are used by people as a substitute for thought. I'm--I believe in free markets, in to the--to the extent that they are possible. I mean, there are times when you cannot have a free market. I mean, the 18th century, they had, you know, the--the cure--the way to handle famine was the rich ate and the poor starved. That is not acceptable in the modern era, but we haven't had a famine lately either.

And free markets need to be regulated. They are not self-sustaining. They will self-destruct if there aren't regulators 'cause--I forget who it was who said that, `The trouble with socialism is socialism, but the trouble with capitalism is capitalists.' And they will always seek their short-term advantage in the market rather than--for themselves rather than seek to sustain the market as a whole. To--sustaining the market as a whole is the function of society as a whole, because society as a whole is--benefits for it--from it. And--and, therefore, I mean, you need referees in the market, just the same way as you need the referees at the Super Bowl, because when there's a lot at stake, people are willing to cheat.

Mr. GORDON: Right.

Mr. GORDON: Well, I think--in this particular instance, because of what has happened, I think the airlines--either they get assistance from the federal government, or a lot of them are simply going to go out of business. I mean, there's--there's going to be a blood bath. I would hope that it was structured in such a way as that the government can recoup in times of prosperity.

The airline business is a very peculiar business, just like the railroad business in the 19th century was. It's extremely capital-intensive. And the expenses tend to go on whether the airplanes are full or empty, and it--and it--it costs just as much to send an empty airplane across the country as it does to send a full one. And so once you get above a certain passenger load, every s--passenger after that is pure gravy; it doesn't cost any more money. But any passenger below that break-even point is pure loss. And so it's the feast and famine business. In--in good times, they tend to make a lot of money, but in--in poor times, they tend to hemorrhage money. And I'm not sure that there's a solution to that.

In this case, it's because it's--the impact was so enormous that I think, you know, there--there has to be some sort of help now. And once you help out one group, you always find a line stretching from Washington to the Mississippi River saying, `Me, too. I mean, gee, look how I was injured in the, you know, gardening business,' or whatever. I mean, this happened in 1929 when Herbert Hoover promised the farmers relief--tariff relief by raising tariffs on agricultural products in order to protect the American market for American farmers, who were having a terrible time in 1929. And when they got through, the--they had an absolute feeding frenzy in--in Washington. And w--the result was the Smoot-Hawley Tariff, which was a--one of the primary causes for the Great Depression, what turned an ordinary recession into the great economic calamity of American history.

Mr. GORDON: Well, what happened was they--they--it was the highest tariffs in American history, the Smoot-Hawley Tariff, and what it did was just simply destroyed world trade, I mean, all over the world, I mean, because other countries had no choice but to raise tariff walls of their own. They couldn't--you know, they couldn't sell their goods to America. They weren't about to let Americans sell their goods to Switzerland or--or wherever.

And so everybody's tariffs walls went up to meet our tariff walls, and world trade simply collapsed. And in the United States, we were doing about $5 billion a year in--in world trade in 1929, and by 1934, we were doing about $1 billion or--I forget the exact figures, but it was something like that. And it wasn't until World War II that trade recovered.

Mr. GORDON: Well, I don't know. I--I mean, I--I can't s--speak specifically to the travel agency business because I don't know that much about it. I know that they have been--they've been having a bad time for--long before this happened because the Internet is, in a sense, eliminating middlemen, and travel agents are middlemen. And all of a sudden, you don't need the travel agent anymore. You can go on the Internet and make your own reservations and find out all you need to know. And so travel agents are having a very bad time. And I think, you know, we can't help out everybody because, you know, then we turn into a socialist country, and that's guaranteed to be a failure.

Mr. GORDON: Well, 'cause I think, in this case, the blow was so extraordinary and so sudden that there's no time to adjust, and I think you--there'll be a--an awful lot of damage would be done that would take years to recover from. I mean, I think--you know, I certainly don't want the government simply to write them a check saying, `OK, you guys have had a bad time. Here's $1 billion.' I mean, there's got to be some way that they have to pay it back in--in--you know, like the Chrysler bailout, which, in--in that particular case, I don't think I would have--have been in favor of. But Chrysler did pay back the money when good times returned …

Mr. GORDON: I would hope so. I mean, I don't know what the legislation is. I haven't read the legislation, but I would hope it would be structured in some such way that the government gets it back.

Mr. GORDON: Oh, we're in very good shape. We're in much better shape now than we were 10 years ago. I mean, 10 years ago the government was running deeply, deeply in the red, and now we're--we're in surplus. I mean, even this year, which has not been a banner year for the American economy, the--the surplus is going to be about $150 billion, which is--you know, that's a lot of money. And we ha--yeah, we've have paid down a lot of the debt that we had borrowed before, for very bad reasons in the '70s and '80s, and so that money is now available to borrow again if we need it. I mean, that's--you know, you can't borrow $1 twice. I mean, we paid back a lot of it, so now it's--it's there to--if we need to dip into the till.

Mr. GORDON: The Vietnam War was because I think Lyndon Johnson tried to give us both guns and butter, both the Great Society and the Vietnam War, and it led to the worst inflation we've had since the Civil War. And so, I mean, the Vietnam War gave the--us the economic malaise of the--of the '70s with high inflation, high unemployment, which was, under Keynesian terms, supposed to be impossible.

Mr. GORDON: That was a man named Donald Nelson, who had worked for Sears Roebuck, and he became head of the War Production Board after Pearl Harbor in--in which the United States turned itself temporarily into a command economy. And it was an astonishing performance in that the civilian economy, at the end of the Second World War, was about the same size it had been at the beginning of the--of the Second World War, and we'd added on top of that a war economy of virtually the same size. The American economy doubled in the war years, and almost all of that was war production. And Donald Nelson was the man who organized this and--and commanded it.

I mean, he was--you know, he would get what the armed services needed. He'd find out where the--the stuff could be manufactured. He'd find out where the industrial materials needed were, and he'd assign priorities to them. I mean, some things that were in very short supply, notably rubber because most of the rubber had come from Malaya, which was in Japanese hands--and so we started a synthetic rubber industry virtually from scratch, and by the end of the war we were producing about 800,000 tons a year. But the military was absorbing all of that, I mean, so World War II, for those who lived through it, remember it as the golden age of flat tires because you simply couldn't get new tires unless you were at least a four-star general.

Mr. GORDON: Well, because we were fighting a Cold War, which was--I mean, by the grace of God, it didn't get hot, or it would have been even more expensive.

Mr. GORDON: Of the federal budget was--because, remember, that time the--the federal budget did not have--I mean, it didn't have Medicare or Medicaid and other social costs like that. I mean, the--the military budget is still very large, but it's a much smaller percentage of the--of the federal budget. It's also now a much smaller percentage of--of GNP. It's now, I think, about 5 percent or something like that.

Mr. GORDON: Engine Charlie Wilson was the president of General Motors. He was called Engine Charlie Wilson because one of the great coincidences in American history that--when the--the president of--of General Motors was Charles E. Wilson and the president of General Electric was Charles E. Wilson. They were not related to each other, and so one was called Engine Charlie and the other was Electric Charlie.

And Engine Charlie had started out as--he actually came from a fairly socialist background. His father claimed to work for Eugene V. Debs and what have you, and he was--had a union card--Charlie Wilson had a union card, which he had on his desk he was very proud of. And he--he was the one who first thought up the idea of guaranteed wages for industrial workers, I mean, so that if they were laid off, they would still got a percentage of their--of their wages to see them through the bad times. And he, more or less, arranged for the United Auto Workers to demand this and then gave it to them.

And he also was instrumental in developing pension funds for industrial workers, and Peter Drucker, the great business guru, said to him, `Well, you know that the American workers will end up owning the stock and the corporations in a--in a few generations if you--if you have this,' and Charlie Wilson said, `That's just the way it should be.'

I mean, Charlie Wilson was a great hero, and then unfortunately for him, he went to Washington and found out just how nasty a town this can be because he was asked in a closed session when he--the first confirmation as secretary of Defense, he was asked if he--if it was necessary, could he make a decision that was good for the United States, but adverse to the interests of General Motors. And he said he certainly could make such a decision, but he couldn't imagine such a situation coming about because what was good for the United States was good for General Motors and vice versa. And a lot of people leaked this and changed--turned the vice versa into what is good for General Motors is good for the United States, signed Charles E. Wilson. I mean, it was the most egregious intellectual dishonesty you can possibly imagine, but welcome to Washington.

Mr. GORDON: New York City. I was born on 17th Street and Second Avenue.

Mr. GORDON: No, they're--they're long since dead. My father was--was a writer at one point, a television producer. He then went into running rent-a-car franchises in the French West Indies, and my mother was Oscar Hammerstein's secretary.

Mr. GORDON: Indeed. My mother's second husband was his brother, so he was Uncle Oc.

Mr. GORDON: I, more or less, fell into it in a--I used--I--I've always loved books. Ever since I was, you know, old enough to read, I had my nose in a book. And I went to work for a publisher after I graduated from college, Harper--Harper & Row it was then; Harper Collins now. And then I went--I traveled for a while, and then I went to work for Herman Badillo, a congressman, as his New York press secretary, which was a wonderful job because I had absolutely nothing to do, because the press releases were all written in Washington. All I had to do occasionally was, you know, send them around.

And so I started going over to the public library and--and doing research and writing stories. And I wrote a story on the gold panic of 1869, mo--probably the most exciting single day in the history of Wall Street, and I wanted to see what had been done on the Erie Wars, which was about the--the Erie Wars of--the fight for control of the Erie Railway between Commodore Vanderbilt and Jay Gould and Jim Fisk and Daniel Drew. And I was astonished to discover that nobody had written a book about it since the 1870s, so it was written by the Adams brothers, Charles Francis Adams and--and Henry Adams, called "Chapters of Erie." And so I decided to write a book on the Erie Wars, which came out in 1988, called "The Scarlet Woman of Wall Street," and American Heritage called me up and asked me to write their business history column, and I said, `Thank you very much, I'd be delighted,' and so I've been in this business ever since.

Mr. GORDON: It's owned by Forbes.

Mr. GORDON: No, they've never asked me to do anything--I mean, like that. I mean--now I imagine if I started turning out essays, you know, demanding the--the means of production be owned by the people or something, I'm not sure how long I'd be working for Forbes, but no, they've never even suggested that I do anything like that.

Mr. GORDON: In every issue, and there are eight issues a year.

Mr. GORDON: Well, because an awful lot of people who woke up one morning and found themselves rich beyond the wildest dreams of avarice didn't lead very fulfilling lives. I mean, they--they end up, you know, running racehorses and sleeping till noon and going out to fancy restaurants every night and they never do anything. And you know, Noel Coward, who knew what he was talking about because he did both with great enthusiasm, once said that work is so much more fun than fun, and a lot of people who were--inherited vast wealth at an early age never find that out. They never work and all they had was fun and the fun doesn't turn out to be much fun after a while.

Mr. GORDON: I'm not sure that's true. I'm not sure how much they know about our lifestyle. I remember Franklin Roosevelt once said that the way to convince the Soviet Union of the superiority of--of the United States would be to bomb them with Sears Roebuck catalogs. I'm just not sure that they really know much about American life. I mean, Osama bin Laden himself is--is--comes from an extremely wealthy family.

I mean, so--in--you know, Will Rogers once said that `I've been rich and I've been poor and believe me, rich is better.' I think most of those people--I think they resent their own poverty. They don't resent American wealth, and they have often been manipulated as to deflect from their own governments, the--deflect their anger onto the United States as if we are somehow responsible for their poverty, which we're not. For the most part their own governments are responsible for their poverty.

Mr. GORDON: Well, the easiest way to explain it is these are stories of business history, and women's contributions to business are relatively recent. I mean...

Mr. GORDON: No.

Mr. GORDON: Well, for a long while it just--it was--it was thought that it was not a woman's place, and the--you know, the traditional division of--of labor was that women would run the home and men would go out and--and earn the livelihood, and that's--that's the way it was. I mean--and so women didn't have a chance to get into business, and they--in the rare occasions when they did get into business, they were either resented or--or made fun of.

I mean, Hetty Green was--made one of the great American fortunes. She's the only woman to have made her own fortune, although she started out rich, but she greatly multiplied that fortune. You know, of--of the top 40 richest Americans who ever lived, Hetty Green is the only woman, and she was a figure of fun. And she was--she was a genuine miser, which is a very rare psychological phenomenon. I mean, there are a lot of people who are cheapskates, but she w--she was obsessed with not having enough money. I mean, she was--she had the same attitude towards money as anorexics have toward fat. They always perceive themselves as being fat regardless of the fact, you know, that they're clearly not.

And Hetty Green always perceived herself to be poor, although she was one of the half-dozen richest people in the country, and she led a very sad life in many ways.

Mr. GORDON: Oh, indeed they would. In--in the last 50 years, which I don't have a great many stories, I mean, there have been lots of--of women who have achieved great things in business, and there'll be many more because, you know, they they--they haven't been in the pipeline, I mean, so they couldn't be CEO of a major corporation because they didn't start out soon enough. But no, I'm sure women will be--I mean, they're every bit as capable of making a buck as men are, and for the most part, much more capable at keeping it.

Mr. GORDON: A horse and a saddle.

Mr. GORDON: Yes, it's downtown Nashville. It's where Capitol Hill is, in the--in--just the heart of Nashville.

Mr. GORDON: The Gordons come from Tennessee. I mean, my grandfather came up from Tennessee in 1898 when he was 16.

Mr. GORDON: No.

Mr. GORDON: I'm sorry?

Mr. GORDON: Oh, the--the--right, the sewing machine. He was a--yeah, he was--he was a fascinating man who--a born tinkerer. He wanted to be an actor. He was a mediocre actor, but he was a great tinkerer, and he invented the sewing machine. I mean, ba--he--Elias Howe made a sewing machine and got a patent on it, but the trouble with Howe's sewing machine was it didn't work, and Singer made a sewing machine that worked, and so eventually they--in the first patent pool, they, you know, divided the--the spoils, and then Singer became extremely rich.

He was a--an odd man in some ways. I mean, he--he was married a couple of times, had endless numbers of mistress--had 20 or 24 illegitimate children, and when he died, he left them all about $200,000 each, and of course the newspapers had a field day with all of these children suddenly appearing like mushrooms. And he was--I don't think he was a very nice man, but he--he--he did a--a great service for the women of the 19th century. The sewing machine, I mean, not only greatly lowered the price of clothes, but it greatly improved the--the living standards of--of--of women.

Mr. GORDON: Of Cooper Union.

Mr. GORDON: Peter Cooper started off as a--as a poor boy. His father wasn't very successful. He only had a year or so of formal education. He always bitterly--well, not bitterly, but he--he regretted the lack of education, and when he became rich, which he did very soon--he was a born businessman; he bought a glue factory for $2,000 and in the first year made a $10,000 profit and was soon earning $100,000 a year from his glue factory, and went into steel. He built the first locomotive in the United States. He owned wire factories. He was a major player in the laying of the Atlantic cable and the organizing of the telegraph system of the United States, and in the 1850s he founded the Cooper Union.

And he also--he invented night school, because he had--he thought, you know, people like him starting off who had to work for a living, but they could study at night, and at that time there was--was no way to do that. And so he made the Cooper Union so that there were night classes, and he really invented the concept of--of night school. And he organized the Cooper Union, which is an engineering school, and had a free library. Anybody could use it, not just students. And the Cooper Union to this day does not charge tuition. It's--I believe it's the only private university in the--in the United States that does not, although some of them have plenty of money, but they still charge plenty of tuition.

Mr. GORDON: Indeed. Yeah. He--Coo--Peter Cooper died around 1880, I believe, and I don't know if he was in the audience. I would be surprised if he was not, when he made his famous `house divided' speech at the Cooper Union.

Mr. GORDON: Well, Sylvester Graham was the first of the great health nuts in the United States. He was a clergyman. He was very sickly. A--a great many health nuts, they--he didn't live very long. There may be some connection there, I don't know. But he had no background in science whatsoever, and--and--but it was--he had a great gift for gab, he was a good preacher, and he started preaching about Graham diet and I forget exactly what the--the details of the diet were, but it was, you know, as somebody once said about--about health nuts is, if--if--if you like it, don't eat it. I mean they--they never tell you to eat steak and french fries. It's always eat twigs and sawdust pudding, as--as Ralph Waldo Emerson described it. And it--Sylvester Graham ascribed the spread of cholera to `excessive lewdness in chicken pie,' I remember. And he was--you know, his time passed and he was forgotten.

But he thought he was--he would be--you know, that people would make a pilgrimage to his--his house. In fact, his house turned into a tavern. But he is famous for one thing, because he invented the graham cracker.

Mr. GORDON: It happened because an--an Army captain, after World War I, thought it would be fun to join an Army expedition which was to cross the country by powered vehicles, by trucks and--and--they didn't have Jeeps then, but the equivalent. And they started off from Washington. There's apparently a monument outside of the White House somewhere--I forget exactly where--on the--on the Mall. But this is where this expedition started.

And they made their way slowly across the country and it took them two months. And they often--the--the roads were just nonexistent for the--to a large extent, and very slow, and they--they had to remake the bridges because they were too narrow to get trucks over them. And--and they finally got there and the Army put out a big report about how the need for a proper highway system to--for national defense purposes, and of course like most Army reports, it got put into the nearest file drawer and completely forgotten. But then the--that Army captain who thought it would be fun to spend the summer on this expedition in the 1950s, he became president of the United States, and he was able to push it through, and it was, of course, Dwight Eisenhower.

Mr. GORDON: Oh, Cadillac was a luxury car. I mean, it started as a luxury car, it was always a luxury car, and it nearly died in the Depression because it was--it never really made money. And the man who was--he was in charge of the maintenance of catalo--Cadillac, and he--he wondered why it was that so many of the customers at Cadillac dealers were black, whereas Cadillac had a policy of not selling to blacks because they wanted the cars to be prestige, and so they didn't want to have black customers, and yet all--half the customers for the maintenance were--were black. And so he found out what it was of course, that it was, you know, the Cadillac dealer wouldn't sell the car directly to the--to a black man. The black man would go out to find some white man who would buy it and, you know, give him $200 and take the car.

And it was--cars are one of the few prestige items that successful blacks in the '20s and '30s could indulge in. I mean, they couldn't go to fancy nightclubs, they couldn't live in--in fancy apartment buildings. But they could drive a fancy car. And so this man, whose name--I'm sorry, I just get--I cannot think of what his name is at the moment; he was a German. And he--he said `Let's try to sell the car to--to these customers who are anxious for it.' And then they did, and he made Cadillac profitable within a year, and then he revolutionized the manufacture of Cadillacs. He said that just because they are a prestige car doesn't mean they can't be manufactured according to mass production methods just like Chevrolet, just using better parts and--and more careful design and what have you. And so within a couple of years, Cadillac having been a--a money loser for General Motors, was General Motors' most successful car.

And then he--he became head of Chevrolet after the war, and--and unfortunately he--he came down with--with throat cancer and died when he was only about 46, otherwise he quite possibly would have replaced Charlie Wilson as--as president of General Motors.

Mr. GORDON: Oh, I'm always surprised. I mean, that's one of the things I love about this job is that, you know, you get to find out about these things, and you always find the most amazing coincidences and things you didn't know and--and you know, I was--I love to learn and--and this is a great way to learn.

Mr. GORDON: I went to St. Bernard's in--in New York and Millbrook School up in Dutchess County, a boarding school, and then I went to Vanderbilt University in Nashville, Tennessee.

Mr. GORDON: History.

Mr. GORDON: Well, exactly, because I mean, if bureaucracies solved the problem they were there to handle, well, then they'd be out of a job, I mean, so they're not about to solve it if they can possibly avoid doing so.

And you know, a self-enforcing law is a law that simply takes care of itself. I mean, the example I use was in the Roman army, they used to bake very large loaves of bread, and the loaves were enough for two soldiers for a day. And so the Roman army had a rule that one soldier would cut the loaf in half and the other soldier would choose which half he preferred to have. And so there was no cheating, no fights, you know because the same was true of the legions as it was, you know, true in every army--hurry up and wait--and so the soldiers had a bad habit of getting into fights and they couldn't fight over food because of this rule.

And the ICC came into existence because the railroads were gouging to a fare-thee-well. What happened was the railroads--on the trunk lines between, like, Chicago and New York, I mean, they competed fiercely on those trunk lines because, you know, if--you could ship from Chicago to New York on the New York Central, on the Erie Railway, on the Pennsylvania, and so they had to compete for the business. But on the branch lines off of these trunk lines, each railroad had a monopoly. I mean, so--if you were a manufacturer in Chicago and wanted to ship to New York, well, you could choose your railroad. If you were a manufacturer in Altoona and wanted to ship to New York, well, you shipped on the Pennsylvania or you didn't ship.

And so the--the railroads would really stick it to these customers where they had a monopoly, and the customers, not surprisingly, resented it. And so they went--the government--this is one of the causes of the rises of--of liberalism or of the left was the overweening power of the corporations at the end of the 19th century, and this--the railroads were the--the textbook example of this.

And so what finally happened was the Interstate Commerce Commission, which was eventually enabled to set prices and to control the industry, and actually before it came into existence, the Pennsylvania Railroad said, `We'd like nothing better than a government agency that allowed us to make a guaranteed profit,' a cartel, in a sense. And that's exactly what the ICC promptly turned into because they--the ICC had to be headed by people who understood the railroad business, well, they had to come from the railroads, and they thought like railroad men and they promptly conspired under the ICC to make a cartel.

And so the railroads became--as always happens in cartels, they became fat, dumb and lazy, uninnovative, and the railroads slowly declined. And then finally in the 1970s, the prices were finally deregulated, and the ICC had nothing to do, although it still stuck around for 20 years and was deregulated in, like, '77 and it went out of business in 1995, and for 18 years I have no idea what they did. They pushed stacks of paper from one side of the desk to another.

Mr. GORDON: Well, now, this is the kind of problem that governments are paid to manage. And I mean, how it'll turn out for business, I don't know. I mean, the--the trend now for the last 30 or 40 years has been deregulatory, you know, to let the free market work where the free market can work and allocating resources and setting prices because free markets are so much more efficient than the--the best bureaucracy in the world at doing exactly that. I mean, the Soviet Union tried to run their economy by a bureaucratic method, and of--and of course it was an utter disaster. It simply couldn't produce the goods and services.

Mr. GORDON: Thank you.

Mr. GORDON: Well, we--we'll find that out. I mean it just--you know, I was joking before the show that it's, you know, the--Amtrak is doing very well indeed thanks to this. Also flag manufacturers are doing very well at the moment. I mean, there's always--you know, it's an ill wind that blows nobody good, and--but it--in the long term what is gonna happen--because we don't know how this is gonna play out. We don't--you know, I hope this is the last disaster we have in the United States like this, but it might not be.

Mr. GORDON: Well, they certainly tried to make a profit. That's what--that's what they're there for. But I don't--there have been individual instances, of course, of gouging and trying to do all kinds of nasty--I mean, capitalists are often not nice people. But they've also done--I mean, that's how we've won all our previous wars was, you know, through the--the American economy.

Mr. GORDON: I di--I--I'm not enough of an expert on aircraft to know that. I mean, the 7--I mean, the Concorde could certainly be eliminated for the amount of fuel it uses per passenger. I mean, that's just obscene. It doesn't...

Mr. GORDON: OK. Well, I think--I mean, entrepreneurs make their money by starting a company and in--investing in it and being right. I mean, many of them are wrong. Corporate executives are another matter. And I think there the compensation has widened enormously. And it's--it's come about because, I mean, theoretically the board of directors should con--should hire the management and the management should report to the board of directors. In recent years, it's--it's the other way around. I mean, the management often sits on the board of directors and chooses the other members of the board, who are not about to vote against them, so they've become their own boss. And whenever you become your own boss, you're likely to give yourself a very handsome salary. And I--I would like to see that changed, but unfortunately the state of Delaware, where most large corporations are incorporated, does not agree with me on that.

Mr. GORDON: Well, I--I'm afraid I don't know who coined the term socialism, but I think socialism has been discredited. I mean, we've--we've tried--since World War I, we've had socialist experiments running all the way from semi-capitalist Britain to the unspeakable tyrannies of, say, North Korea, and they've always been remarkably unproductive of wealth. I mean, so--socialism is--I think we have proved as well as can possibly be proved that socialism simply does not create wealth.

Mr. GORDON: I--I agree with you. Socialism is contrary to human nature and capitalism is what you get when you allow people to pursue their self-interests under the rule of law. I mean, that, I think, is a really good definition of--of capitalism, and--and in every instance it has produced far more wealth than any other system, for everybody.

Mr. GORDON: Well, I'm not sure they think the taxpayer cans make money, but I think they--what they're counting on is the taxpayers will lose less money through this than they otherwise would if we simply allowed the weak carriers and--and, apparently in this case, some of the strong carriers to simply self-destruct.

Mr. GORDON: I agree. I mean, the--globalization is an unstoppable development, and it's going to be one of the great political problems of the early 21st century is in finding how to regulate a--a global economy. At the moment, although we have an increasingly global economy, the regulatory authorities are all national. And so it's possible to play one off against the other, which sometimes is good, but--but sometimes is--is terrible. And--I mean, how do we--do we end up with one central bank and--and how do we achieve that? And this would--is gonna, of course, require the sacrifice of national sovereignty, which is the most difficult thing for a politician to secede. It's gonna be a--a messy and protracted discussion.

Mr. GORDON: I'm not sure it would be the Interstate Commerce Commission that would be in charge of that, but I'm really not sure. But, I mean, I wouldn't want garbage in--in my backdoor, but it's--it's--you have to--we have to do something with garbage.

Mr. GORDON: I'm not quite sure how the mechanism would work, but a lot of these airlines, at the moment, they have bills they have to pay this week, and they don't have the money in the bank to pay them, and so, I mean, what they need right now is--is cash. And I think it has to be a fairly direct infusion of cash.

Mr. GORDON: Well, I don't think--it's not likely--I--I don't think airline stocks are gonna be the golden boys of Wall Street for quite some time. I'm--I don't think it's gonna keep the stock price up, and--and whether the job loss is temporary or permanent, I don't know. I mean, sometimes--I mean, part of capitalism was what Schumpeter called the creative destruction. I mean, the steel industry, for instance, produces just about as much steel today as it did in 1975, but it uses less than--about one-fifth the number of workers to do that. And, I mean, if the airlines can fly as many passengers as they used to using fewer people to do it, well, that's in the long run a good thing. It's a terrible thing for the people who lose their jobs, but that's an artifact of capitalism and it's inescapable. We cannot protect jobs and have a capitalist market-based economy.

Mr. GORDON: I entirely agree that--that foreign trade and immigration are vital to this country. We--we are all either immigrants or the--or descendants from immigrants. I mean, immigrants made this country and they make it stronger. And foreign trade is--is also very important. It's a very large part of the American economy now. And I agree with you about foreign languages, although I might point out that English is rapidly becoming--it's already the--the language of science. It is rapidly becoming the language of business. And we are very lucky in that we speak English as a native tongue. It's sort of like being born able to do algebra. But it's--you learn a lot about English if you also learn a foreign language, and it's deplorable how few people do speak a foreign language in this country.

Mr. GORDON: Well, line of succession, I'm inclined to agree that it perhaps should be the majority leader rather than the president pro tempore of the Senate.

Mr. GORDON: Well, I think what--what they could have done was required the--the railroads to publish a schedule of fees for each commodity on a ton-mile basis and require the railroads to charge that fee throughout their system, and to have very large penalties against under-the-table rebates which, you know, John D. Rockefeller got the railroads to pay him to ship his oil, and he--he actually managed to get the railroads to pay him rebates on the oil of other people that they shipped which, of course, now is illegal and--and should be. I mean, so if you simply required the railroads to charge the same fee everywhere in their system, then the trunk line competition would have set the fee on the--on the branch lines, and you wouldn't have had to have a bunch of people in Washington sitting around deciding how much they should allow railroads to charge to ship butter.

Mr. GORDON: It came out in July.

Mr. GORDON: It was--it's a history of the national debt.

Mr. GORDON: Trinity Church.

Mr. GORDON: It's--it's right there. I saw an absolutely haunting picture of Trinity Churchyard just after the disaster taken about noon, and it is--it looks like something out of a war zone. I mean, it's just--it was this beautiful September day. I mean, it was the nicest weather as--as New York ever gets, and there was just this glowering dark, everything covered in--in paper and dust, and it was just--it was horrifying. And yes, Alexander Hamilton, and Albert Gallatin is also buried there. There are two secretaries of the Treasury.

Mr. GORDON: Well, human behavior--human nature never changes. Human behavior does change because people get--we learn from our past mistakes. It is--overbuilding of things like fiber-optic networks is--is very common. I mean, we overbuilt railroad networks in the 19th century because human beings tend to get enthusiastic and, `Boy, this is great. We gotta have it everywhere,' and they go charging in and--and build more than the--the market can absorb in the short term, and so then there's--then there's a bust. I mean, the business cycle comes straight out of--of human psychology and--and human nature. And this overbuilding of--of new technologies is very characteristic. I mean, it happens over and over and over again.

Mr. GORDON: Again, I'm--I'm sorry, I don't quite remember what the question was, but I mean, again, we were exa--this is so new, we're exploring it. We don't really know how to run a--how to run these businesses. I mean, just like--again, I mean, nobody knew how to run a railroad in the 1830s. I mean, for a while it was thought that people would build a railroad and you'd just pay a fee to run your own train on the tracks--I mean, like a--like a highway. It didn't take them long to figure out that that didn't work awfully well. And so it was--really it was basically the 1860s before people like Thomas Scott of the Pennsylvania Railroad and Commodore Vanderbilt of the New York Central really figured out how to run a railroad and make enormous profits out of it.

Mr. GORDON: It doesn't come out in July. It doesn't come out in--in January, and I--I forget. I mean, there's a May-June issue, then a July-August issue and a December-January. I--I forget. I'm sorry, but...

Mr. GORDON: Well, I did not know he was the first to actually write that alcohol was bad for you and, of course, I mean, alcohol--excessive alcohol is bad for you. I mean, there's an awful lot of Frenchmen who live to a happy old--old age. Also Sylvester Graham--he was by no means a scientist. I mean, he--he--he made pot shots and some of them were right. He also borrowed a good many--a good deal of his material without bothering to acknowledge having done so.

Mr. GORDON: I don't think it's a threat. I think it is--it is competition, but competition is good for the market in the long run, and it's--it's good for countries, 'cause under competition you have to work harder and innovate better and--and--and have new ideas. And so competition is--is a wonderful thing and it's--I'm all in favor it.

Mr. GORDON: Well, I think one reason we're not doing it--it might be--it might very quickly turn into a boondoggle. I mean, the--the airlines might like this so much that they would put enormous political pressure not to have the temporary aid stopped. I mean--I mean, for instance, high tariffs in the 19th century, which were supposed to protect the nascent American industrial base, well, the--by the end of the century, the American industrial base was by far the largest and most efficient in the world, and the industries were still screaming that they needed high tariffs for protection. And, you know, so once a system like this comes into existence, the beneficiaries of it immediately form a political guard around it and it becomes very difficult to repeal it.

Mr. GORDON: Well, perhaps they should. I'm n--I'm not aware that anybody has brought this up. But it would be interesting to try. I'm not sure how enthusiastic the airline pilots union would be about that.

Mr. GORDON: Well, I'm--I have not heard that, and if they cease to be an American corporation, where would they go? I mean, if they--if they want to be hamstrung with regulation, Europe is a wonderful place to find excess regulation. And, you know--or Third World countries? I don't think so. So, I mean, I have not heard that, but there's nowhere they can go, you know, where there'll be no regulation, and the American economy is one of the least regulated in the world.

Mr. GORDON: I've not done research on the construction business per se. I mean, I've--I've done a lot on railroads and--and--and canals, but in the early days of the 1820s and '30s mostly, and so I don't know--I'm afraid I'm not well know--don't know much about the modern construction business.

Mr. GORDON: I--that came out in 1999 and it's a history of Wall Street from its earliest days in--in the 1650s and up to the year 2000.

Mr. GORDON: Well, I think the--there are interesting parallels with--between Bill Gates and--and John D. Rockefeller. They both achieved superstar status at about the same age, roughly 40 years old, and it was also at that time that they began to be seen as--as monopolistic ogres and began to get very bad press. I th--in John D. Rockefeller's case, they were just inventing modern industrial capitalism. They didn't know what the rules should be, and John D. Rockefeller showed in many instances what rules were needed. I mean, for instance, forbidding under-the-table rebates and--and other monopolistic practices.

In Bill Gates' case, I mean, Microsoft is--has often been extremely aggressive, and I--personally, I mean, if Bill Gates were to ask my opinion, which I suspect he will not, I think his--a lot of his tie-ins and forcing other companies or--and, you know, the--the new XP, for instance, it has--makes it very easy to go right to a Microsoft site. I think that's--I personally think that's going to be a mistake. But he hasn't asked my opinion on that. I think Bill Gates has been extremely innovative and--and, you know, he has--because he has made this absolutely colossal fortune in the last 20 years, just like John D. Rockefeller, has--he'll have a major place in American history. And also, he--he's still only in his 40s. We haven't heard the--the last of Bill Gates by a long shot.

Mr. GORDON: Well, I--if--if you can make oil at a competitive price out of garbage, I promise you the world will beat a path to your door. So--I mean, if it works, don't worry, it's going to be a big success.

Mr. GORDON: Desi Arnaz was, of course, one of the--the founders or--I don't know if you want to call him a founder of "I Love Lucy," one of the earliest and most successful television sitcoms. In many ways, he invented the whole idea of a sitcom. And Desi Arnaz was also a--a very good businessman. And he convinced CBS--he--CBS wanted to do the show live out of New York because at that time there was no good way to--they--videotape wasn't invented for another 10 years. And the only way to record a television production was what's called a kinescope, which was--a movie camera sat in front of a--of a TV screen and produced very poor quality images.

And so CBS wanted to do the show live out of New York so that the East Coast market, the largest market, would--would see it. And Desi and Lucy wanted to live in Hollywood, so they said, `Let's film it,' and that would have cost more. The episodes were originally budgeted at--at $19,500 an episode, which by television standards today wouldn't pay for the weather report. But CBS agreed if they would agree to take a $1,000 cut in salary. And Desi said, well, they owned half the show--Desi and Lucy owned half the show, and CBS was going to own the other half. And they said, `Well, we'll take the $1,000-a-week cut in salary if you will give us the--give us all the ownership of the show after the first run. And CBS said, `Sure,' because they didn't think it was worth anything. I mean, it was--you know, yesterday's television show was like yesterday's newspaper. It was used to wrap fish.

And so they took a $39,000 salary cut, but b--since in those days it was a 90 percent tax on--on high incomes, they were actually only giving up about $5,000, and what they got for the $5,000 was half the ownership rights of "I Love Lucy." And to this day, I mean, if you watch "I Love Lucy" on Nickelodeon or whatever, they pay $100,000 for every half-hour episode.

Mr. GORDON: Well, they--they're coming into this country looking for work. That's a good thing. I mean, if they can find a job that nobody else wants and they're willing to do it, I think that's--that's wonderful. And--I mean, they make much more of a contribution, especially in the long run, than any expenses such as educating the children, because the children will become a part of the American economy and--and make their contributions. So I think it's extremely penny-wise and pound-foolish to try to exclude these people. Anyway, we're not succeeding doing it, so perhaps we should stop trying.

Mr. GORDON: Indeed, it was.

Unidentified Man #16: Harry Truman in World War II got prominence for undercunning--un--uncovering corruption, and I think in Vietnam. So I think a lot of that comes from a big bolus of money coming into the system with mismanagement or lack of management and really not much guidance.

Mr. GORDON: Yes, that is certainly true. I mean, in--the Civil War was in--in--especially in the early days before the government got its act together was a feeding frenzy of--of dishonest businessmen selling shoddy products at high prices. I mean, war is a very messy business because they--they need the products and they need it right then. I mean--and they haven't got time to sit down for extended negotiations. And so it's--I mean, that's going to happen with people who are willing to sacrifice their country for their own short-term interests. And I'm afraid there are always people willing to do that.

Mr. GORDON: Short-selling is when you sell a stock you don't own hoping that the price will go down so that you can buy it back and return it to the person you borrowed it from and--and keep the difference.

Mr. GORDON: By borrowing it from somebody else or by promising a future delivery. I mean, you sell the stock today and promise, `I'll give it to you in 10 days.' Then you go out on the ninth day and buy it. And as long as the price has gone down, you make money. If the price has gone up, you lose money.

Mr. GORDON: Well, in--in the short term, it--it--it'll cause prices to--to fall. The more selling, the--the lower prices go. And since 1929, the market has had a--a requirement that you can only sell short on an uptick; in other words, the price has to be at a higher level than it was at the previous sale. And this is to prevent snowballing, as it happened in 1929, when short sales drove down the price, which produced more short sales and more margin calls and--and the--the whole market rolled downhill. Short-selling, as--non-Wall Streeters always love to hate short selling, but it plays a vital part in the market and it's a perfectly honorable way to make money. It increases liquidity. It also--every short sale means there's a buy somewhere down the road because the short-seller has to fulfill his contract at some point.

Mr. GORDON: I would be opposed to that. I think there's nothing wrong with short-selling. I think these people who sold in the last couple of weeks, I mean, some of them had fiduciary responsibilities and, I mean, that's what they were paid to do. Other people were--I mean, I--I wished they hadn't perhaps, but this--this is part of--of free markets. I mean, you sometimes have ugly people willing to do ugly things and--and the cure is worse than the disease in many cases.

Mr. GORDON: Well, the GI Bill was one of the most successful pieces of social legislation in history. And I'm 100 percent in favor of it. I wouldn't exactly say that it was socialism. I mean, a lot of people had it help in--you know, as part of their compensation for having fought in World War II, given help with their education. And it had an enormous positive impact on the American economy and American society as a whole. I mean, before the war, something like 3 percent of the population had college degrees; today 25 percent or even more have college degrees. And that is all to the good; the greater intellectual capital we have, the richer a country we can become.

Mr. GORDON: I am--for the most part, again, the--the cure is more likely to be worse than the disease here. I mean, don't think--I mean, the corporations don't control the--the prices of these commodities. I mean, there are extremely free markets in Chicago handling the price of--of commodities. And if you ever visited the Chicago pits, this is--this is not a controlled situation going on. And this--these signals--the market sends signals--price signals and we--we--we're much better off leaving it alone than trying to fix it to--to ameliorate short-term pain.

Mr. GORDON: Well, I mean, I'm philosophically opposed to government subsidies in general. I mean, there--I--there are instances in which I'm--I'm willing to tolerate them, I suppose, not that anybody needs my toleration or not. But I would prefer agriculture to be a completely free market. And I think it is--p--peculiarity of the American political system that the--the farm states are disproportionately powerful on Capitol Hill because the farm states all have two senators and so they're able to get agricultural subsidies that they otherwise could not get. And I--I would prefer it if it was a completely free market.

Mr. GORDON: I'm not really sure. I think many--many Americans perceive a lot of America through the movies and through television, and it certainly wouldn't be an objective or--or rounded portrait. But I'm not sure it's all that distorted. I mean, this--I mean, Arnold Schwarzenegger movies do not--and that sort of thing don't present a--a r--reality, but I don't think people regard them as being reality.

Mr. GORDON: Well, I think the--the poverty of Afghanistan is, to a large extent, owing to the--the political situation in Afghanistan. And if somehow we were to transfer Bill Gates' wealth to--to Afghanistan, it wouldn't make the lives of Afghans--the average Afghan in the street much better because the--the money would be stolen by the--its kleptocratic government. I mean, poverty in--in--national poverty is--is largely the--the result of bad government and b--and bad social structure and there's--very limited what we can do about it. But if they would, you know, adopt Western ideas such as the rule of law, of democratic government, the--the poverty would disappear very quickly.

If you look at South Korea, for instance, it was one of the poorest nations in the world in the 1950s, and--and today it is one of the Asian tigers, rapidly approaching First World status. And any--South Korea does not--is not particularly rich in resources, it doesn't have oil or anything like that. I mean, it--it pulled itself up by its own bootstraps and a good deal of American help, too, to be sure. But that's what you have to do in order to make yourself rich. We can't make a poor country rich by sending them a trunkload of money. That doesn't make them rich. That would--at--at best, it would temporarily relieve their suffering. But they have to--they have to change their--their governments and how--how we do that, I don't know. We cannot go in and--and order them to change their governments. But...

Mr. GORDON: Oscar Hammerstein.

Mr. GORDON: She was also his--his sister-in-law. She--her second husband was Oscar's brother.

Mr. GORDON: The last 10 years of his life, from "South Pacific" to "The Sound of Music."

Mr. GORDON: I've heard--I'm not familiar with the book. It--it sounds like a conspiracy theory, which often sells a lot of books but doesn't help much. I mean, if--if the conspiracy were true, it would be all over the newspapers. I mean, newspapers love conspiracy theories, or love conspiracies but they have to be--well, usually they have to be true conspiracies. And, I mean, a lot of books, they just--they're not true. I mean, they sound good, but it--I don't know--but this particular book, I don't--I'm not familiar with it.

Mr. GORDON: Well, I--I--I'm opposed to the estate tax. I think it's--it comes out of a socialist idea. I mean, there--there's one absolutely inescapable rule of finances, which is you can't take it with you. And so great fortunes get spread around. I mean, if you look at the Forbes 400 list today, it's very different from what would have been on it in--I mean, just 20 years ago because new fortunes have--have arisen that have surpassed the old ones, and the old ones are--dissipate. We don't have, as they used to have in--in England, they--these family fortunes that lasted for hundreds of years. We don't have perpetual trusts in this country. You can't entail, all that sort of thing. So the--the fortunes are rapidly spread around. And I just--I mean, once you--you--I think you should pay a tax on all income, and if you don't spend that income, if you--if you put it in the bank, in effect, and therefore create an estate, I don't see why you should be penalized for having done that.

Mr. GORDON: That is absolutely true. And whenever--this is--The Revenge of the Trust has to do with Butte, Montana, and the--and the copper kings, the--in the late-19th century when Butte, Montana, was producing an incredible percentage of the world's copper and there was a--a free-for-all. There wasn't a whole lot of--of law and order there, and people would tunnel into each other's mines and blow them up. And it--it was--it's a great story. But you find this in Hollywood; you find it in Wall Street; you find it in--in lots of places. Whenever there's a great deal of money, you're going to find a lot of people with less-than-adequate scruples going after it.

Mr. GORDON: Well, I think it's a question of it hasn't worked yet. It--I mean, a l--a lot of these countries have to change their culture, and that is not an easy thing to do. And it's o--it's often a generational thing. But--I mean, if you look at Chile, it is doing wonderfully in the capitalist system. It--it was hav--under terrible shape under Allende, and since then it's now, again, approaching First World status. I mean--so capitalism can work in Chile; I don't see why it cannot work in other Latin American countries, such as Peru, which is where de Soto comes from. And I think it will; it's a--it's a question of changing the culture. There's a lot of people who b--the beneficiaries of the status quo always want to maintain the status quo. And if they're in positions of power and power is not widely distributed through society, well, then they're in a much better position to prevent capitalism.

I mean, de Soto once did an experiment to see how long it would take to set up a legal clothing manufacturing outfit in Lima, and it took two people working full time six months to get all the permits and pieces of paper and s--and stuff to do it. And as a--as a control, he went up to Tampa, Florida, to see how long it would take him to set up exactly the same sort of business in Tampa, Florida, and they had all the bureaucratic stuff they needed done in--in--by noon of the first day. I mean--so a lot of the Peruvian laws and stuff are there to prevent capitalism from coming into existence, to prevent people from going into the marketplace and competing and setting up new businesses. And until you get rid of that culture, you can't have capitalism.

Mr. GORDON: To answer the--the second question first, no, I don't see it as dangerous. I think you don't--I mean, railroads, they don't compete in an--in an ordinary sense because the railroads are--you can't have them in the same territory, or at least not very often. I mean, unlike, say, the trucking business, where you can compete very easily and very quickly. So it--that doesn't bother me.

As for government research, I have no objections whatever to--to government research in areas like space exploration and stuff where the--the monetary return is not immediately apparent. In areas where business can carry on the research by itself, I would much rather see the business do it than the government do it. But there's a lot of cases where that's not the--not the case and I--and government research is--is very important.

Mr. GORDON: Well, I mean, I'd like to see where those statistics come from 'cause I'm not aware that an IQ test is given to immigrants. And so how do we know that their average IQ is 85? I just find that highly unlikely. I think it was cooked up by somebody who had an agenda.

Mr. GORDON: He was, indeed. He came from a farm family on Staten Island, and he was--I'm a great admirer of Commodore Vanderbilt. He was a man of few words, but when he--they were usually pithy words. When--he once wrote a famous letter to somebody saying, `You have undertaken to cheat me. I will not sue you, for the law takes too long. I will ruin you,' and proceeded to do exactly that. A--a Wall Street observer who was both a congregational minister and a lawyer, which is a slightly frightening combination, once said of Commodore Vanderbilt that, `His word is as good as his bond when it is freely given. He is equally exact in fulfilling his threats.'

Mr. GORDON: Yes. He was a fastidious man that way. He liked to know where his money went. And he built the Woolworth Building, which is one of the supreme triumphs of early skyscraper architecture, one of the most beautiful buildings in the world. And he paid for it in cash. It--up until very recently it had never had a mortgage, which is almost unheard of in New York skyscrapers.

Mr. GORDON: It's on the south end of City Hall Park, very close to the World Trade Center, as a matter of fact.

Mr. GORDON: Well, I think--I mean, I'm a capitalist to my fingertips, but society has an obligation to care for all those who cannot care for themselves and to ameliorate the conditions of people who cannot ameliorate their own conditions. And I would certainly hope that the government, where--that--at whatever level, would see to it that people who are unable to earn a--a decent living are--are provided with one. I have no trouble with that whatsoever.

Mr. GORDON: Well, the--that has the--the benefit of simplicity, a universal sales tax. The trouble with sales taxes is they are necessarily regressive in that the poor have to spend all of their income on necessities, I mean, that's the definition of poverty, is you have no disposable income. Whereas the rich will often bank 80, 90 percent of their income, and therefore they would be paying taxes only on 10 percent of their income. I mean, I would prefer a--a flat tax. I mean, I know Steve Forbes is the great advocate of the flat tax and I happen to work for Forbes Publications. But--and this is not a free plug for Steve. I happen to profoundly believe in the flat tax myself.

Mr. GORDON: Alexander Graham Bell.

Mr. GORDON: I'm afraid I forget the name of the artist. It was--it's a terrific picture. I'm--I'm very pleased with it, indeed. I--it's--I cannot remember his name. I'm sorry.

Mr. GORDON: Commodore Vanderbilt. I really like Commodore Vanderbilt. He--he used to play poker in a--in a game that still exists. It's the oldest established non-floating poker game in the city of New York. It's been going on for 150 years now. You can play every Monday night.

Mr. GORDON: Thank you for having me.