A few weekends ago my husband and I took a long weekend and attended the Bridgestone PGA golf tournament followed by a visit to Stan Hywet Hall & Gardens in Akron. The trip was a gift from our son for his dad’s birthday, and we enjoyed watching golf and touring the beautiful estate together.
Stan Hywet is a home of a bygone era, a 64,500 sq. ft. version of personal palaces like Vanderbilt’s Biltmore, Rockefeller’s Kykuit and Hearst’s San Simeon. Completed in 1915 and financed by the wealth generated from The Goodyear Tire & Rubber Company, the property contains priceless antiques and artwork collected by F. A. (Frank) Seiberling and his wife, Gertrude.
Frank took risks to create Goodyear, but he didn’t have much of a choice. His father was a successful entrepreneur and Frank had a job waiting for him after college, but the business failed when Frank was in his late 30’s, and with a wife and three kids he found himself unemployed. Finding a job was difficult in 1898 because many other companies had gone bankrupt during the panics of the 1890’s, so with a ‘what-have-I-got-to-lose?’ attitude he borrowed a down payment from his brother-in-law and purchased an empty factory in East Akron. He and his brother raised additional funds selling stock in their new company and named it Goodyear, after the inventor of vulcanized rubber.
Over the next decade they were very successful due to Frank’s inventions that mechanized tire building and increased efficiency to the point where one worker could produce 60 tires in one workday vs. the 2-3 that had been previously built by hand. The company profited by selling both tires and licenses for Frank’s patented tire-building machines. By 1913 over half the tires made in the U.S. were manufactured by Seiberling’s machines, and by 1916 the Goodyear Tire & Rubber Company was the largest tire producer in the world. With this level of market dominance, Frank probably felt like his company was printing money.
While Frank was growing his company, Gertrude was overseeing the building of Stan Hywet. The average price of a new home in 1915 was $3,200. Stan Hywet’s cost grew from $516,000 for the land and initial construction to over $2 million for the finished estate and gardens. Then the U.S economy shifted.
With the end of World War I in 1918, government demand for goods to fuel the war effort ended and the American economy deflated. Frank had assumed wartime government contracts would continue or peacetime demand for tires would replace them, and had committed the company to contracts for rubber and other goods at inflated prices. Goodyear Tire and Rubber Company went from a $51 million-dollar profit in 1920 to a $5 million-dollar loss by mid-1921. Goodyear’s board of directors voted Frank out, and he lost his job as well as the personal funds he had put into the company to keep it afloat. He was 62 years old, unemployed, broke and the owner of an extremely high-maintenance house.
Touring Stan Hywet and hearing its owner’s history reinforced a few lessons for me:
- Nothing lasts forever, but it’s easy to convince ourselves that it will, especially when it comes to our finances. When technology stocks climbed to lofty prices from 1995 to 2000 during the Dotcom stock bubble, very few people thought it would ever end because we were in a ‘new paradigm.’ When a business owner is making lots of money with a successful company, it’s hard to believe the cash flow will stop. And when you’re at the end of what we now call the Great Recession and the Dow has fallen over 50%, it’s difficult to believe that the market will do anything but continue to drop. Things can change quickly. Which brings me to the next lesson…
- Planning is more important than the Plan. This is something we say at TAAG quite a bit, and it refers to our philosophy of treating our clients’ financial plans as an evolving guide that adjusts for changes. Some people pay an advisor a lot of money for a paper-bound financial plan, but the moment it’s printed it can be obsolete. A couple buys a retirement home, then realizes it isn’t the part of the country they want to live in after all. An illness interrupts a career, someone inherits, a child needs financial help, and the list goes on. All these changes – some created by us and others forced on us – mean the plan needs to be adjusted and evolve for the new reality. Even without major changes, a small adjustment in spending or saving can make a major difference in the success of a plan, so we are proponents of regularly revisiting what you’re doing financially and making sure it still makes sense.
- Financial flexibility is golden. Frank painted himself into a corner when he built Stan Hywet. After spending millions to build it, he needed tens of thousands of dollars a year to pay the necessary staff to maintain it. When we build a financial plan that needs every, single thing to go right to make it work, we aren’t leaving ourselves any flexibility. If most of your expenses are fixed and must be paid no matter what the status of your cash flow, you set yourself up for high levels of stress that lead to bad decisions – like cashing out all your stocks when the market starts to fall. When you aren’t living life on the financial edge, you can be flexible and make temporary adjustments to keep your plan on track until things improve.
What happened to Frank? He never reached his prior level of wealth, but within a year of his ouster he convinced enough people to lend him money to start another business – the Seiberling Rubber Company, and by 1927 the company had become the 7th largest manufacturer of tires. His son, Penfield, took over as the company’s president in 1938, and Frank remained chairman of the board until his retirement in 1950 at the age of 90.
Which brings me to Frank’s final lessons. Believe in yourself and never give up.