In 1933, The Washington Post was in a death spiral. As a writer for Fortune put it 11 years later, “its playboy owner … had milked the paper of its assets until it could no longer pay the newsprint bill for its scraggly circulation of 52,000.” The bankrupt newspaper was auctioned off, and went for $825,000 to an anonymous bidder who after a few days revealed himself be Eugene Meyer.
Meyer was a hugely wealthy former Wall Street tycoon who had just spent a frustrating three years as the Herbert-Hoover-appointed Governor (analogous to today’s chairman, but with less power) of the Federal Reserve Board. He had tried to buy the paper before — in 1929, for $5 million — but was turned down. And a few years before that, he had offered to buy the Washington Herald from William Randolph Hearst.
As Merlo J. Pusey tells it in his 1971 biography of Meyer, the conversation went something like this:
“What,” [Hearst] had asked, “makes you think it would be a good idea to sell one of my Washington newspapers?”
“You are reported to be losing about a million and a half a year,” Meyer had replied.
Money-losing newspapers, then, are nothing new. The reason they lost money in the 1920s and 1930s was in some ways similar to why they are struggling today — because there were so many alternatives. The big difference was that back then, the main competitors for readers and advertisers were other newspapers. In Washington, at the time a city of fewer than 500,000 inhabitants without a lot of suburbs, there was only one really successful paper in 1933, the Evening Star. But there were five dailies in all. Scripps-Howard’s afternoon tabloid Daily News likely turned a profit, given the Scripps-Howard penchant for keeping costs low. But Hearst’s morning Herald and afternoon Times and the morning Post all found it hard to make money even in good times, and gushed red ink in the depths of the Depression.
Nowadays, of course, the newspaper business can be tough even if you’re far and away the leading newspaper in a big, news-addicted metropolitan area, which is why the company controlled by Meyer’s descendants sold the Post last year to Amazon founder Jeff Bezos. That marked the beginning of another saga of an enormously successful businessman from a different industry buying the struggling Post for non-financial reasons, and attempting to set it aright. In Meyer’s case, things turned out spectacularly well — the money-losing Post became the basis of a new family fortune that appears to have grown even bigger than the one he amassed in his Wall Street days. It seems pretty unlikely that things will turn out that way at the Post for future Bezoses (Bezii?). But hey, you never know.
I started studying Meyer for an Atlantic column on the pre-monopoly-era economics of the newspaper business. His story didn’t end up fitting in, but I felt compelled to tell it somewhere. The man was impressive.
Eugene Meyer was born in 1875, the son of a businessman and banker who had emigrated from Strasbourg to Los Angeles 15 years before. Marc Eugene Meyer (the father) moved the family north to the Bay area when his eldest son was a young boy, then moved East after the Panic of 1893 to become a partner in the New York office of the investment bank Lazard Frères. Young Eugene, who had just finished his freshman year at UC Berkeley, transferred to Yale.
After graduating, the younger Meyer went to work with his father at Lazard, but didn’t stay there long. His father had promised him $600 if he hadn’t taken up smoking by age 21. Meyer earned that reward, and quickly built it into $5,000 by investing in the common stock of the Northern Pacific Railroad. Then he made a big bet on the 1900 elections. Meyer expected Republican William McKinley to win, and expected this victory to unleash a stock market boom. As insurance he bought some gold bonds, which he figured would soar in value if easy-money Democrat William Jennings Bryan prevailed, but put most of his $5,000 into options to buy railroad stocks at specified prices after the election.
McKinley won, easily. Meyer held onto his options, cashed in his gold bonds the morning after the election, and bought more options. Then, the January after the election, he sold them all — for $50,000. With that he quit Lazard, bought his own seat on the New York Stock Exchange, and embarked on a remarkable career as an investor and sometime investment banker. His most lasting accomplishment was bringing five companies together in 1921 to create the hugely successful Allied Chemical and Dye Company (which later became Allied Signal, which merged with Honeywell in 1999), but he also was a big investor in Fisher Body (maker of most of the bodies for GM cars) and the Anaconda Mine. He wasn’t as iconic a figure as Bezos today, and wasn’t quite as rich either. But he was in the same general territory.
When he bought the Post, Meyer, seemingly like Bezos, wasn’t in it to make money. In his case, buying the paper was conceived mainly as a hobby to keep him busy in retirement and give him a continuing voice in national affairs. Meyer was 57, and had seriously been considering following up his stint at the Fed by succeeding his friend Bill Ward as Republican county leader of Westchester County, New York, where he and his wife had a weekend house. But running a newspaper in the nation’s capital was more appealing.
More expensive, too. The Post didn’t break even until 1943, when the combination of a wartime economic boom and wartime newsprint rationing (which resulted in smaller, cheaper-to-produce newspapers with a higher ratio of ads to news) put lots of previously ailing newspapers in the black. Meyer had, however, brought his newspaper back to respectability well before then, mainly by putting Felix Morley, formerly a PR guy at the Brookings Institution and later the president of Haverford College, in charge of the editorial page. Morley won the Post’s first Pulitzer Prize, in 1936, and established the paper as a moderate, well-informed voice on national affairs. The paper’s reporting improved, too, but the Post didn’t really become famous for that until decades later when Meyer’s daughter was running the show.
In the meantime, the economic and demographic trends of the postwar era all played into the Post’s hands, and Meyer made all the right moves to take advantage of them. The huge increase in the size of the federal government during World War II, which was only partially ratcheted back after the war ended, left Washington much more important as both a news source and an economic force. The Post took federal government coverage more seriously than its competitors, and it also took advantage of the fact that most of the region’s growth was taking place in the burgeoning Maryland and Virginia suburbs (the District of Columbia’s population peaked in 1950). It was a lot easier to deliver a paper to those suburbs before the morning rush hour than in the middle of the evening one, and declining reliance on public transit meant declines in the single-copy sales so crucial to evening papers. It became ever more advantageous to be a morning paper, and after 1954 the Post was the only morning paper in Washington.
That was the year when Meyer, who was 78 years old and had already handed control of the Washington Post Co. over to his daughter Katharine and her husband Phil Graham, forked over $8.5 million to buy the Times Herald (the Times and Herald had combined in 1937) and merge it with the Post. The afternoon papers lived on for a couple decades after that (the Daily News shut down in 1972 and the Star in 1981), but posed ever less of a competitive threat to the Post. Under Phil Graham’s leadership, the Post Co. had also acquired a few TV stations and Newsweek magazine. Meyer’s retirement hobby had grown into a small media empire, the kind of business that, in 1973, struck investor Warren Buffett as just the thing to help him turn his small fortune into a gigantic one.
By then Katharine Graham was fully in charge — her husband Phil Graham, who suffered from manic depression, had killed himself in 1963 — and was beginning to establish herself as one of the great makers-of-big-decisions in business history. She had already plucked Ben Bradlee out of the Washington bureau at Newsweek and appointed him executive editor of the Post. When word came that a strange man in Omaha was buying a big stake in her company, she ignored the warnings of her board of directors, met with Buffett, and invited him to join the board. With Buffett as her adviser, Meyer’s daughter transformed the Post from a very good business into a juggernaut. “From the time of the company’s IPO in 1971 until she stepped down as chairman in 1993,” Will Thorndike writes in The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success, “the compound annual return to shareholders was a remarkable 22.3 percent, dwarfing both the S&P (7.4 percent) and her peers (12.4 percent).”
Then the Internets came along and, two decades after Katharine Graham retired as CEO, her descendants began looking for a way out of the newspaper business. Buffett, a major Post Co. shareholder for four decades, said he briefly considered buying the paper outright last year. But he decided he was too old for that kind of thing, and Bezos came through instead.
What can the proprietor of “The Everything Store” possibly learn from Eugene Meyer’s experience? Not all that much in the way of specifics, one would have to think. Still, there were two elements of Meyer’s success that Bezos will probably have no choice but to emulate: patience, and a willingness to spend lots of money. A brilliant daughter would help, too.