Hubris
There were a few warnings about the hubris associated with RJR’s lavish spending. The occasional comment, mostly from outsiders, went mostly unnoticed. My former boss at DuPont, William Ryan, toured the World Headquarters. He mentioned in passing, “This cannot last.” He was a physicist by training and had worked on the Manhattan Project, developing the atomic bomb. He knew a thing or two about the ebb and flow of giant organizations. He had remarked to me at DuPont in 1964, “Textile fibers is 40% of our sales and 60% of our profit. Our best days are behind us. We will never have another Nylon.” His point was that DuPont’s next innovation could not give a large percentage growth the way Nylon had in 1939 when DuPont was much smaller. His opinion carried weight with me. I mentally filed away his comment but had no real concern. I should have. We all should have.
Others with outside experience reacted to the extravagance which we took for granted. Keith Wilkins, who commented previously on acquisitions, had this to say:
“In my first year, 1979, I became more involved with RJR Archer, the packaging division, and in particular with an ongoing problem at a “Filmco” plant in the U.K. So, I found myself visiting my home country quite frequently. Looking back, it seems bizarre that the company had a policy of flying even relatively junior staff in First Class around the world. On one trip back from the U.K. I found myself sitting next to John Denver on the Concorde! What kind of company pays for things like this? A company with more money than sense?
These were years of working in a gleaming glass and chromium palace, where somehow everything was serene, and the company was sovereign. The company was one of the two major US Tobacco companies and the Tobacco Division produced a huge cash flow that covered all needs. People walked slowly and talked slowly. I used to joke that it was not possible to walk down the length of the building without having to stop for a chat with somebody about something. Time and money were in plentiful supply.
Once I was back visiting World Headquarters with the local Swiss general manager and he made a very telling comment when looking around at the abundant overhead costs in that building: ‘One day somebody is going to throw a shoe at this lot’. His prediction, of course, came true in 1988.”
The building boasted an art collection and a curator, an executive dining room, and a board room with a futuristic directors’ table that cost over $100 thousand. (I always felt like it belonged on the flight deck of the Starship Enterprise, given its electronic gadgetry and size.)
The very concept of a “world headquarters” should have raised a warning to all of us at the company. A running joke in corporate America is that a Taj Mahal–like headquarters is the final step of management hubris before its fall. In RJR’s case, the fall was not sudden, it would take another eleven years, but still, the headquarters and its attendant overhead should have been a signal.