The Economic Tragedy of Ed Toman and the McDonald’s Fortune That Could Have Been
The biggest mistakes are often not seizing the huge opportunities that are right in front of you. One of my least favorite stories of this economic tragedy involve a man named Ed Toman, who lived in Southern California back in the 1940s and 1950s and played an important role in the early days of the McDonald’s restaurant empire.
He was a local machinist and craftsman. The original McDonald’s brothers came to him to design some of the restaurant equipment they needed to run their hamburger stand more efficiently. They would pay him to come up with designs, and buy the products he manufactured. He did very well. One of his inventions was a “hand-held stainless pump dispenser that required but one squeeze on a trigger to squirt the required amount of ketchup and mustard evenly onto the bun.” [Love, Page 17]
In fact, that one, individual invention generated sales of $500,000 for him. Adjusted for inflation, that is a lot of money today. However, Toman never filed a patent on his product. The same basic idea is still used in the 33,000 McDonald’s restaurants around the planet. Had he setup a business named Toman Restaurant Supply, Inc., and used it to sell the exclusive design, he would have been worth perhaps many hundreds of millions of dollars.
He did all of the work. He didn’t cash it in for the reward that should have, rightfully, belonged to him. That was mistake number one.
Mistake number two was being around during the early years in which he saw, first hand, the enormous success of this business. He saw how much money his friends were making. He understood the product. He was behind the scenes in seeing how it was prepared and delivered to the customer. Yet, later, when McDonald’s were rolling out across the country and had an IPO in 1965, he was never listed among the early large investors in the business.
He had two opportunities – one through creating his own firm as a vendor and one through investing in the hamburger chain as an owner – to take advantage of something he saw right in front of him, that was simple, that had nothing ambiguous about it. He had two opportunities to build a fortune of astronomical heights that would have left his great grandchildren sitting with trust funds stuffed with blue chip stocks, gilt-edged bonds, and top shelf real estate, collecting dividends, interest, and rents. He had two opportunities to cash in from his experience and knowledge. But he didn’t. Toman left all of the money on the table and other people got to enjoy the fruits of his labor.
When something is plainly obvious, do something about it. By the mid-1950’s, McDonald’s single hamburger stand generated sales of $350,000, which is almost $3,000,000 today. It was producing net profits of $100,000 per year, which is almost $850,000 today.
Everyone who pays attention will be presented with a few good ideas in life. I told you about my own extended family, who watched first hand the rise of some of the greatest consumer stories in United States history, but never did a thing a about it. When you see something that is plainly in your sights, and you understand it, do something. Don’t just sit around passing the time. Life will go on without you. You will be left behind. And, unlike Walter White, who seems to blame others, you have only yourself to thank for the situation.
Be like Miller Gorrie. Avoid the sad fate of Ed Toman. If you are going to do the work, anyway, you may as well go for the richest reward.