When I became obsessed with investing as a child, convinced it offered me the greatest probability of escaping what I saw as an economic dead end due to the community in which I lived, I spent years reading everything I could about any and every event tied to the financial markets and those who shaped them. Biographies, old newspapers, archived magazines; if it played a role in this country’s economic history, I wanted to know about it because these men and women were, in a very real sense, my teachers from beyond the grave. I learned what to do – and just as importantly, what not to do – by reflecting on their successes, failures, strengths, and shortcomings.
The first time I went to New York City as a teenager, I found the pot-marked walls in the financial district by the J.P. Morgan building. Everyone passed by them and few seemed to know, or care, why they had never been repaired. They were left there as a memorial, caused by the shrapnel that burst forth from a carriage bomb that killed 38 people shortly after noon on September 16th, 1920 when a group of anti-capitalist anarchists decided to carry out a terrorist attack. I ran my hand over the damage, thinking about the people who had died on that very spot, with no warning, because of misguided monsters who were largely forgotten in the pages of history, having utterly failed at their objectives. One of the chaperones agreed to help me break off from the group and sneak into the old Standard Oil building so I could see the names of John D. Rockefeller and his co-founders etched into the top of the lobby, knowing he had walked through that same space every morning on his way to becoming the richest man in the world despite being born into nothing, the son of a deadbeat bigamist who left his family.
In my own hometown, I knew the building where the saltine cracker was invented. I could pass by old houses and tell you which German immigrant had constructed it from his printing profits, and how much he paid for the materials. From time to time, I’ve even shared some of my old case studies on the blog; e.g., four or five years ago when I wrote about the Tootle-Lemon bank that is now part of U.S. Bancorp.
Being aware of how the things around me came into being makes me feel connected to the past. It gives me an appreciation for the sheer luck of being born in the United States where such things were possible and the hope that I can occasionally avoid a misstep by letting someone else pay the price for me. As the the writer of Ecclesiastes put it, “Vanity of vanities, all is vanity”. There is nothing new under the sun so I might as well take the shortcut, by-passing errors that I know won’t end well as I’ve studied them playing out in others’ lives.
These stories stick with me and, in a very real way, inform my behavior and investment policies even today. Of all of the case studies I did in my youth, there is one that stands out as particularly devastating. The injustice of it angers me in a way few other events do because it violates every single moral value I hold dear; that there is an inherent fairness in a system like ours, that those who live below their means and invest wisely will prosper, that you should have recourse in the event your property is taken by thugs; that if you do good work, and behave in a good way, you’ll be rewarded by society. This event was the exception. This event was pure evil as those who had done everything right, and amassed self-made fortunes through hard work and determination, were systematically targeted for decimation.
It was the night Black Wall Street burned.
A Story of Entrepreneurial Success: How Greenwood Became the Richest Black Community in the United States
Almost one hundred years ago, the United States was experiencing an oil boom. John D. Rockefeller’s empire was being broken up by the United States Supreme Court, it’s subsidiaries ultimately finding their way into such modern day firms as Exxon Mobil, Chevron, BP, Unilever, Buckeye Partners, and Berkshire Hathaway. From railroad and rig jobs to dividends and capital gains, the crude and kerosene coming out of the Standard Oil wells and refineries drowned almost all stakeholders in prosperity the likes of which few other historical events compare.
This flow of abundance had resulted in mana from heaven in a lot of places far from the mahogany-paneled walls of New York’s moneyed elite. With cash in their pocket, and slavery ended a generation prior, entrepreneurial black men and women began to amass their fortunes by selling everything from flap jacks to beauty cream. Though segregation laws were still on the books, and they were forbidden from true free market exchanges in the form of artificial restraints based on race, some of these business-minded Americans amassed multi-million dollar empires by supplying the goods and services needed by markets overlooked by the white establishment. The very first self-made female millionaire in the United States was Sarah Breedlove, more commonly known as Madam C.J. Walker, who launched Madam C. J. Walker Manufacturing Company, a maker of cosmetics and hair products. One of my childhood heroes, Breedlove refused to allow others to hold her back, overcoming an entire society that was antagonistic to her. She had an idea, decided to launch a joint-stock corporation, and tried to raise funds to get started, willing even to chase down pastors and preachers if she thought they’d write her a check in exchange for freshly printed stock certificates. Facing difficulty but refusing to be deterred, she ended up being the sole owner of the company. When she died, she gifted roughly 67% of her estate to charitable causes.
These black investors, owners, and professionals served their communities, generating dividends, interest, rents, and salaries despite starting with nothing. Those communities blossomed, nourished by the streams of money that were gushing in from unleashing freedom on a population that, though still repressed, had been previously denied any agency at all. Like began to attract like. The successful, affluent and educated black families that were watching their net worths grow to the sky began to congregate, setting down roots in certain areas throughout the United States.
One of those areas happened to be in Tulsa, Oklahoma, springing up at the corner of Archer Avenue and Greenwood Street. As successful black doctors, accountants, and attorneys moved into the neighborhood, setup shop, and constructed well-appointed homes that began lining the surrounding streets, the hub of commerce did so well, it became known as “The Negro Wall Street”. Black owners and investors came together to expand their portfolios, dream up new enterprises, put their savings to work, and build a better life brick by brick, share by share, job by job. By sheer effort of will, they managed to build an alternate financial system that isolated and protected them from white racism. The stories of the people who made up the community were a marvel.
By the end of the decade, Greenwood would became the richest black neighborhood in the entire United States.
It was a miracle of capitalism that could trace its roots twenty years prior to a handful of men who cast their eyes into the future, convinced others to pool their resources, and risked everything to start businesses for which there was little historical precedent. Chief among these was J.B. Stradford, who was born a slave but constructed the largest black-owned hotel in the country and which he eponymously christened with his surname, while O.W. Gurley began acquiring acreage which he famously – and completely unheard of at the time – intended to be sold “only … to colored” families, providing an offset to the discriminatory real estate practices in white-only neighborhoods.
The Tulsa Race Riots of 1921 and the Destruction of Greenwood
In a span that is estimated between 16 and 18 hours, occurring between May 31st and June 1st, 1921, Greenwood was destroyed in an act of racial war that was so horrific, it was wiped from the history books for several generations so that children in Oklahoma wouldn’t learn about it. As with many events that change society, it started with something small; a chance encounter in an elevator located in the Drexel Building.
Nobody knows what happened for certain but on May 30th, 1921, a black shoe shiner named Dick Rowland found himself in the lift with a white elevator operator named Sarah Page. According to one source, the general theory is that Rowland stepped on Page’s foot, causing her to scream in surprise or pain, which then led to his arrest. Within a day, rumors that he had tried to rape her spread and white racists within Tulsa were talking about having a public lynching, an editorial even appearing in the newspaper. At 7:30 p.m., on May 31st, a group of white people attempted to storm the Tulsa County Courthouse. The sheriff turned them away, learning from a mistake the year before when a similar mob had caused a state-wide scandal after it convinced law enforcement to release a white murderer named Roy Belton to them. Belton had shot an innocent tax driver, who later died after identifying the perpetrator. The mob leaders drove him in his victim’s taxi to an isolated road roughly nine miles outside of Tulsa and strung him up. Terrified, leaders in the black community wrote about their concern over the revenge killing because they rightly understood they stood no chance if falsely accused given things had gotten so bad even a white man couldn’t get a fair trial.
Upon hearing that a white mob was attempting to drag Rowland out of jail, where he had been detained during the investigation, a group of black World War I veterans armed themselves and went to the sheriff to offer their services in protecting the courthouse. The sheriff said it wasn’t necessary so they went home. A rumor spread that the whites were taking the court house by force, so the veterans returned, law enforcement again telling them their protection wasn’t needed. At some point during the second offer to assist, it is thought that a white man in the crowd tried to grab a gun out of the hands of one of the black World War I veterans. Someone, somewhere fired a shot – whether it was purposeful or accidental, no one knows – and all hell broke lose.
The white residents of Tulsa took to their cars, creating ad hoc lynch mobs. They shot blacks they came across on sight in drive-by murders. The sheriff’s department named “special deputies” to enforce law, reportedly encouraging them to “grab a gun and get a nigger”, providing what amounted to effective carte blanche license to murder whomever they wanted, without consequence, provided the victim was black. In an instant, the whites set their sight on the economic miracle that had provided upward mobility for these black families and made their way toward Greenwood, determined to destroy Black Wall Street. They were held off at the railroad tracks by a group of black men who tried to protect their property but managed to buy time for others to escape. When the final line of defense was broken, the white mob descended in rage, torching, destroying, and bombing everything they could find of value.
Roughly 10,000 black men, women, and children were left homeless. One of the best surgeons in the United States was shot in front of his home. Hospitals were razed. Schools, factories, an estimated 191 businesses, and banks were wiped off the face of the Earth. Old bomber planes from World War I took off from the nearby Curtiss-Southwest Field, patrolling the skies and shooting blacks on sight while simultaneously dropping explosives on any buildings that remained. It was all-out, unrestrained, brutal, demonic warfare.
The white lynch mobs went from home to home, looting like animals, killing and terrorizing those who remained to fight or were unable to flee. According to the Oklahoma Historical Society, one elderly black couple was executed at point-blank range as they knelt in their home, praying. White families were targeted, too, if they employed blacks or were thought to be sympathetic to their cause. Many lives were spared thanks to the bravery of other white business owners like the Zarrow family, who risked total ruination and death by deciding to hide black citizens in their grocery store during those sixteen hours of hell.
Martial law was declared and Tulsa became militarized as the Oklahoma National Guard secured the area, mass arresting blacks and detaining them in a handful of locations across the city. By the time it was all over, less than a day later, Black Wall Street was no more. Greenwood was destroyed, scores laid dead, entire self-made fortunes gone, never to be rebuilt, unjustly taken in one of the worst events in U.S. history.
Many of Greenwood’s founders and leaders were indicted for starting the riot, blamed for the actions of the white mob. J.B. Stradford, who had lost his hotel, rental properties, and other investments, skipped bail and fled to Chicago. A graduate of Oberlin College and Indiana Law School, he setup practice in Illinois and worked to recreate a life for himself and his wife. It wasn’t until 1996 – or “Seventy-five years after the fact and six decades after his death”, as The New York Times put it – was he cleared of all wrongdoing. The reality that after a long life of good decisions, he was a fugitive with all of his work taken from him caused him to be despondent until his death in 1935 at the age of 75.
Perhaps just as bad, Oklahoma offered little more than words in the way of apology. A couple of decades ago, the state commissioned an official investigation to get an accurate historical account of the events that surrounded the night Greenwood burned. The findings were released in 2001 – you can read it in PDF format here or by clicking on any of the pictures – and the legislature refused to take up almost every single one of the proposed actions to make up for the events. Specific families had well-documented, clearly identifiable monetary losses that set them back decades. They weren’t compensated even though the grandchildren of those entrepreneurs would likely have been able to afford college with the present value of the investments they lost.
The official report released to the public includes images that had been provided by various sources, detailing the aftermath of what must have been unimaginable terror. Here are just a few of them:
I think it’s a useful exercise to try to work out what you would do if you lived in a hostile society where your business, home, and assets could be taken from you.
- How would you protect yourself, your family, and your net worth?
- How would you rebuild, if you had to rebuild?
- What would your response to the injustice be?
History has a way of repeating itself if you allow it. It can happen again. It was only 15 or 20 years later when Adolf Hitler and his regime began one of the largest systematic mass execution programs ever devised, targeting Jews, Romani, Slavs, the disabled, gays, and religious minorities as they were considered incompatible with Nazism. If I had been born in Germany, and I hadn’t had the foresight to flee, I’d have eventually lost all of my assets and been shipped off to a camp (and even if I managed to survive, people seem to forget that those who were branded with the Pink Triangle weren’t liberated in the same way other prisoners were as the Allies thought their imprisonment was justified, allowing the §175 convictions to stand. They generally agreed being gay was a criminal act but in a moment of “compassion”, allowed the years spent in the concentration camp to be deducted from the original Nazi prison sentence as time served. So deep was the prejudice, computer genius Alan Turing helped win the war against the Nazis and England rewarded him by convicting him for gross indecency upon discovering he was gay when investigating a burglary of his house. He was convicted, ordered to undergo hormone shots designed to destroy any physical desire he may feel while being subject to probation (the alternative was prison so he opted for the injections), and, as a result of the mistreatment, is largely believed to have committed suicide by eating a cyanide-laced apple.) This group handled it by going stealth, marrying a person of the opposite sex, and sacrificing personal happiness and fulfillment for the sake of never being discovered.
Asians were targeted in the United States at one point, rounded up and put in detention camps or prohibited from marrying outside of their race. When you look at the history of that civil rights movement, I think there’s a strong argument the turning point was the murder of Vincent Chin in 1982 when a plant superintendent for Chrysler, Ronald Ebens, along with his stepson, Michael Nitz, beat and killed the Chinese American. Chin was attending his bachelor party when the two men attacked him. They mistook him for Japanese, yelling, “It’s because of you little motherf*ckers that we’re out of work”. Despite their clear guilt – the murder was witnessed by two off-duty police officers – they were given a pathetic three year probation sentence as a symbolic slap-on-the-wrist. The resulting outrage is what caused political change. This group handled it by incredible levels of asset accumulation relative to income. At one point in the 1970’s or 1980’s, certain Asian American immigrants were something like 5x as likely to build a 7-figure net worth and it was far beyond stealth wealth; it was like Black Ops wealth. There were multiple generations of families living in tiny apartments over dry cleaners that looked broke from the outside but were among the most affluent people in town. Their defense was remaining totally hidden while accumulating resources. Other than economists and academics, nobody even knew this group had money.
Right now, it’s happening to Christians in North Korea. Some of the intelligence that is coming out of the country is heartbreaking. Merely professing faith is enough to get to you and your family sent off to a labor camp.
The thing that gets me when I reflect upon all of this is that it really wasn’t that long ago in the grand scheme of things. While Black Wall Street was burning, somewhere across the country in New York City, a 26-year-old named Benjamin Graham was learning the investment business. Unable to get a job on white Wall Street – the gentiles wouldn’t even hire Catholics so him being a Jew meant employment was out of the question at most of the partnerships – he ended up going into business for himself creating the Graham Newman Corporation. It was there that Warren Buffett got one of his first jobs, and learned the ins-and-outs of running what amounted to a hedge fund; that gave him the ability to go on and launch his own set of partnerships, which led him to taking over Berkshire Hathaway, which now ranks as one of the five most valuable corporations in the world. That’s how relatively recent these events are.
Graham is still my role model. You push through, outperform everyone, and go about your life as best you can. I think it’s the only intelligent way to behave unless you want to make yourself miserable all the time. He didn’t sit around and whine about the oppression, he just outsmarted everybody and gathered the resources to change it. Sometimes, though, like I told people almost two years ago before the trouble with Russia started, the most intelligent thing to do is emigrate. Move to greener pastures.