The Forbes Mystique
Malcolm created it and exploited it to the hilt. Now that he's gone, how well will son Steve market the family name? The answer will guide one of America's most conspicuous emblems of capitalism.
With the death of his father last winter, Malcolm Stevenson "Steve" Forbes Jr., 42, inherited control of the elegant yacht, the Highlander; properties from Fiji to France; hot-air balloons; motorcycles; collections of Victorian art; early American artifacts; toy soldiers — and, oh yes, lest we forget, the magazine that all these playthings were meant to promote: Forbes. Elizabeth Taylor, Malcolm's main squeeze in recent years, is not part of the package.
Steve also was not bequeathed the eccentricity and sense of adventure that Malcolm parlayed into a constant publicity blitz, a large and loyal readership, and, of course, big-time ad sales that not even the current publishing industry recession, one of the worst ever, has dampened. While ad sales for business magazines are down drastically so far this year, sales at Forbes are up slightly. It was under Malcolm's leadership, not Steve's, that the magazine moved against industry tides.
Given the dramatic differences in personality and temperament between father and son, can the family business continue to prosper through the third generation? Just how important was Malcolm's marketing of the family name to the success of the business? Senior Editor Jayne Pearl, who was a reporter for Forbes for four years and had a firsthand view of both father and son, recently paid Steve a visit in his New York City office. Although he was surprisingly upbeat so soon after his father's funeral, an unsettled air was present in the Greenwich Village headquarters, heightened by partially unpacked boxes in Steve's new office. Gone are the photos of Liz and Malcolm, but some of his father's toys, such as a large crystal ball, remain. We thought we should begin by asking him how he is adjusting to sitting in Malcolm's chair. -The Editors
FB: When problems come up, do you find yourself wondering what your father would have done in the same situation?
Steve: Not really. That would put me in a straitjacket. And it wouldn't work because he didn't have a formula. If I face a problem, I don't wonder, "Gee, he would have done it this way, or he wouldn't have done it that way." I don't know what way he would have done it. So what I miss is the imagination, the unpredictability.
FB: How do you plan to make your own mark?
Steve: If you start out by asking yourself that question, it's a sure sign you're going to trip up. Making your mark comes from enjoying what you're doing and doing what you do well — and when opportunities come along, exploiting them aggressively.
FB: That was certainly true of your father and probably your grandfather, too. Let's go back for a minute and talk about that first important decision your grandfather, B.C., made — to start the magazine, and to hang the family name on the door.
Steve: My grandfather started as a writer for Hearst publications. As many journalists do, he wrote far more than he could use in his column. He wanted to run his own show, so he started Forbes. By 1928, the magazine did very well and Hearst offered to buy it for $1 million cash, a huge sum in those days. My grandfather turned it down. Within four years the magazine was virtually bankrupt because of the Depression.
The only way my grandfather kept the publication alive during those years was through his earnings as a Hearst columnist, from freelancing, and by not cashing one out of every four paychecks from Forbes. He put the checks in a safe. One of his greatest achievements, years later, was being able to cash every one of those checks.
FB: Why did B.C. decide to use the family name on the magazine?
Steve: B.C. was originally going to call it something like Doers and Doings. Others pointed out he had a franchise on his name because of the Hearst column, so why not use it?
The magazine was making a slow comeback after World War 11, and after the war, my grandfather offered my father $100 a week to work for Forbes Inc. My father grabbed it. And he became very active on the magazine, and started the first investment newsletter, which sold in those days for $36 a year. The newsletter provided some of the capital that revived the magazine after the Depression.
One of my father's other early endeavors, during the late forties, was the launch of Nation's Heritage magazine. It was large, like a big picture book, and the subscription price was $125 a year — that would be like charging $700 or $800 today. It was very lavishly done, but he spent so much money on the production, he didn't have any left over for promotion, and the magazine folded. He never made that mistake again.
FB: Was this about the time he launched his political career?
Steve: My father wanted to be president of the United States. In the fifties he was in the New Jersey legislature. He ran for governor of the state twice. The first time, in 1953, he lost the Republican nomination. Four years later he got the nomination and in the election, as he put it, he was "nosed out by a landslide" by a very popular encumbant. Finally, he realized his political career was not going to succeed, and he turned his attention to the magazine.
FB: How did he assuage his self-esteem? After all, he could easily have felt that he had failed at what he really wanted to do and used the family business as a way to bail himself out.
Steve: One of his more remarkable features was his ability to put behind him something that went wrong and go on to the next thing. A lot of people his age would have had a hard time revving up elsewhere if their life's ambition had been thwarted. He never had that problem.
FB: One of his long-time employees claims your father's flair for marketing brought about the Forbes success.
Steve: My father recognized that although the magazine was very strong editorially, it wasn't going to sell unless he went out and brought it to people's attention. He pulled out all the stops.
His early marketing activities sound rather mundane today, but they worked for us for a number of years: an advertising campaign in major papers and trade press; luncheons with CEOs at the townhouse adjacent to our offices — that was something he perfected. He also entertained corporate and political chiefs and foreign dignitaries on our boat, the Highlander, much more than his father or brother had. In the mid-sixties, when he started collecting Fabergé eggs, he linked them with Forbes magazine in an ad campaign as a symbol of quality.
FB: Apart from his editorial influence on the magazine, Malcolm was masterful at marketing the family name. He was almost as much a celebrity as Liz Taylor, whom he dated during the past few years. Having taken the family name so far, is marketing as important any more?
Steve: If you think you've arrived, you're ready to be shown to the door. You have to work constantly to nurture the name, the company, the product — whatever it is you're selling. If you're not willing to sell, if you think you have the right formula, you are setting yourself up for a fall. That kind of complacency undoes many businesses.
Our name is well known today, but so is GM's. When I started working here 20 years ago, GM was worried about an antitrust suit because it had more than half the car market. Today it is more concerned that its share has slipped to 35 percent. It's easy to get lazy when things are going well.
FB: Far from lazy, your father got involved intimately with selling. It wouldn't have been anything special if he'd called the ad director. But he called top corporate CEOs and asked them directly to place ads. That's not something many publishers can get away with. Is that something you would do?
Steve: Sure, I've done that. When my father was my age, 42, you have to remember, a phone call from him probably didn't ring the same bells that it did when he was 70. He was very good at making the straight pitch. That's the best way to handle it, and that's what I do. If my calls weren't effective, I wouldn't make them. The first time I tried calling a CEO directly for advertising was four or five years ago. Initially it was hard.
FB: Part of your father's genius was turning his hobbies into marketing opportunities. What will it mean to the magazine not to have that?
Steve: In terms of promoting the magazine, we will continue to be very active with boat parties, functions in the office; at galleries. We're preparing now for the balloon meet in France and a trip to Moscow on the Highlander.
FB: And Liz?
Steve: Have Elizabeth Taylor around? No, my wife wouldn't approve. The point is that I think people enjoy the boat; they enjoy the cycles, the ranches, ballooning. As long as it brings in the business, that's the ultimate measure. But I don't imagine there will be as much publicity.
FB: Does that mean the Forbes name has peaked as a marketing tool?
Steve: Most businesses don't have a Malcolm Forbes and that doesn't stop them from doing well.
FB: Then what will continue to propel the Forbes name?
Steve: It's basic: paying attention to the product, the magazine. It's the only way I know how to do well, and a big part of the way my father did it.
FB: You're not alone in this; you have three younger brothers scattered around the company. Adjectives used by the press to describe them sound as though each had inherited a different aspect of your father's genes: Kip, the bon vivant, your father's flair; Timothy, the socialite, said to be more conventional, but creative; Robert, your father's sense of adventure. Will you use them to keep the Forbes name in the media?
Steve: Four of us together may not match my father's way of doing things, but at least we'll give him a good run for his money. Bobby does like motorcycling. We chuckle when we see Timmy described as a socialite. Socialite he's not. He works on selling Egg and American Heritage magazines. He does have flair; I don't know what it's going to do to his feet, but he does wear cowboy boots all the time. And he's getting his balloon license.
FB: Do you feel more vulnerable using your name, after seeing scathing rumors all over the tabloids after Malcolm died? Putting your name on the door has a dark side, if a family member gets negative publicity. Will that impact the business?
Steve: No. Not at all. What he meant to us and what he meant to others, I think, speaks for itself.
FB: A biography of your father coming out this summer is expected to explore some of the rumors about him. Does that concern you?
Steve: What do you do about it? The best thing to do is to run a good business. Doing well is the ultimate revenge.
FB: That sounds like something your father would have said. Can you reflect more on the differences between you and your father, in business and personality?
Steve: Most people would say he was more of a glad-hander, found entertaining easier. But most people don't know that he wasn't always that way. For years he used to eat lunch alone across the street, at Schrafts, where the drugstore is now. They used to make great sandwiches and cookies, especially those big lemon ones. He would send them to me when I was away at school.
When he took charge of the business, his modus operandi changed. I don't know what they'll be saying about me in 10 years. People ask if I will do motorcycling. I answer: I'm still too young. My father didn't start riding until he was in his late forties, or ballooning until his late fifties. I'm looking forward to seeing what my hormones do, what I turn into, in the next seven or eight years.
FB: How set is your style? And how comfortable are you with it?
Steve: I'm probably set insofar as I'm not going to do something just to prove that I have my father's flash. That would be foolish and self destructive. If it's natural, I'll try it; if it isn't, I won't. My father was always willing to try something once. But if he didn't like it he wasn't going to pursue it just to prove a point.
So don't hold your breath waiting for me to land at West Point in a parachute, go hang gliding, or invent a rocket ship. I have no desire to go on Outward Bound rafting trips or climb mountains. I'll leave that to somebody else.
FB: Okay, but to have a father like that can be overwhelming.
Steve: He wasn't a bully. I think there's a distinction between someone who tries to overwhelm for the sake of asserting authority, and someone who may have strong views on something.
Around age 13 or 14, even before that, I recognized that he was not like other kids' fathers. I'd be hard pressed to describe what made him different, because he was not a motorcyclist or a balloonist at the time. I had started reading the New York Times when I was 12 or 13 and following the stock market, but I found his views and outlook so much more original and insightful than the stuff I wasreading in the papers. I would ask him questions in a way that would get him going. I was also impressed with his ability to back off from a position, if you could present a convincing argument.
FB: Was he always like that at home?
Steve: Sometimes, when we were growing up, he was a very strict disciplinarian. Mother was the soft one; he was the tough guy. Given how uptight he was when we were younger, it's remarkable how loose he got later. But he wouldn't tell us to be home at a certain time when we wanted to stay out late, or be up waiting. He figured there are some things that should develop in our personalities without his interference. He certainly wanted a tight grip on things, but he knew when to back off.
FB: Did he introduce you at all to the business while you were growing up?
Steve: Ever since I was 13 or 14, he'd take me along on the Highlander every Saturday on these trips with CEOs and their wives to West Point football games, the whole time selling and working. At an early age we were expected to know, as he would put it, where our bread was buttered.
On Highlander trips, we would be expected to learn the names of everyone who was coming. On many trips, every lunch and every dinner was a function with 50 to 75 people. When we got up in the morning we'd sit at breakfast and go over the names for lunch, and after lunch we'd sit down and go over the names for dinner. To do a marathon like that eight days running, which we did about once a year, was exhausting.
FB: It doesn't sound like fun, but you must have learned that it wasn't vanity or the trappings, but your father's sureness of purpose that made those trips so successful. Is that a lesson he reinforced later, when you began working with him?
Steve: I didn't work directly for him when I joined the company after college. He believed my brothers and I shouldn't report to him each day. He felt that was the only chance it would work. Otherwise, baggage from childhood complicates the process. My father was not going to try to micromanage or see how we were doing each day. He felt that would have been destructive, and it would have been.
I worked directly with the editor, Jim Michaels, who edited my copy. Even when I later worked in other departments, such as advertising and administration, my father kept a distance.
He was careful, too, about increasing our responsibilities. If he thought we were capable of trying something, he would let us do it. He practiced something that most CEOs find it very hard to practice, and that is letting people make mistakes, but in a way that they can learn, rather than be destroyed.
FB: How about a few examples?
Steve: This sounds minor now, but when I first became president in 1980 I had to make a decision on certain property-casualty insurance policies. The mistake was going for the cheapest price and not getting certain kinds of coverages he thought we should have. I was backed up by some of our people here, but my father thought it was a dumb thing to do.
And he was right. We bought the cheaper insurance, and then discovered we had a potential loss. We were lucky; it turned out that we were bailed out by events.
FB: Could that have been an expensive mistake if events hadn't bailed you out?
Steve: It would have been costly, but not catastrophic. That's how he knew how much leash to give you. Experience is a prudent teacher and sometimes, the only way you learn.
In business, if he thought a decision would have enormous consequences, he would want to have the final sign-off on it. But if it was something he didn't think would be catastrophic, he could be persuaded, if we could make a case for it.
FB: When you bring kids into the business, training them is only one problem. Many CEOs stumble badly when it comes to deciding how to divide ownership and control among the children.
Steve: My father took a lesson from his father in what not to do. My grandfather gave Pop and his brother, Bruce, equal shares in the magazine when he died. He saw Bruce on the sales and marketing side, my father more on the editorial side. I think when you have two strong personalities, they tend to fight and clash, to have major differences. My father learned that one person should have ultimate responsibility. Otherwise, he feared, it could fly apart. In his case it didn't.
FB: What would have happened, had your Uncle Bruce not died suddenly in 1964?
Steve: Who knows how they would have gotten along in the business. My father didn't want potential differences among family members to force this family business to go the way so many of them go — sell out or sink. So my father had two classes of stock: voting and nonvoting. After my father died, I got 51 percent of the voting stock. If things go wrong now, there will be one set of directions. He thought about it a lot. The ratios changed a little bit as Kip and I came in and then two years later when Bobby came on board. What happened with the Binghams in Kentucky confirmed in his mind that one person has to have control.
FB: Tell us more about how your 51 percent was decided upon.
Steve: There'd never been any major conflict. About 10 years ago, I got my first shares. We only had a voting class then. Shortly after that, he created the nonvoting class of stock, to get a fairer division of equity without diluting the voting shares. Just because I have 51 percent voting control doesn't mean I should own all of the equity. I have more than my brothers, but certainly not 51 percent. My sister Moira doesn't have any voting shares because she isn't in the business but she got a small block of nonvoting stock after my father died. She also received a chunk of cash after my father died, since she wasn't getting as much stock. We have a shareholders' agreement which spells out how the price would be determined, and to whom we can offer the shares. Only family members can own the company.
FB: One interesting thing about your brothers is that they were permitted to pursue outside interests: Timmy with film production and screenwriting, Kip with his art collecting and curating. Was that true of you? Or were you always the heir apparent?
Steve: There was no big day when the lightning hit. I became interested in publishing and worked on a school newspaper, or my version of it, at grade school and at boarding school. When I was in college, I started a magazine, Business Today, which is still distributed to about 200,000 college students around the country. So I always had a good idea of what I wanted to do. And when I got a good job offer I took it.
FB: Were you expected to work in the family business?
Steve: I don't think my father gave it much thought until well after he took over the magazine. It's hard to tell which of your kids will get interested in what. I remember I did so terribly in grade school, I was on the border of being held back. I think too, that because he worked with his dad, he knew not to be too overt on the pressure. But I think he would have been disappointed if I had told him I couldn't work for him by the time I finished college.
FB: Late in his life your father expanded the company. He bought American Heritage magazine, launched Egg, and prepared to launch an executive lifestyle magazine, Forbes FYI. Was this his attempt to build an empire for each of your brothers?
Steve: He liked to say the biggest lie was a company's five-year plan. When American Heritage came along, it was in dire straits and the owners wanted out. We'd been fans of it for years, so we made an offer for it at a very small price because it was in such bad shape financially, And Timmy was in the entertainment business, so this was a great way to bring him into the business, not a way to keep him out of my hair.
Egg was my father's idea. After Andy Warhol died, my father wanted to buy Interview magazine from the Warhol estate. But they wanted such a high price that we realized we could start our own publication, taking big losses for four or five years, and still not spend as much as the $12 million asking price for a magazine that was losing money. So we started Egg. But again, this wasn't designed to keep anyone out of my way. These things just happened. They weren't some preordained plan. Believe me, we would flunk business school.
FB: Wouldn't it have made sense for Malcolm to allow his sons to own these other magazines, to ease eventual estate taxes?
Steve: He always wanted to be sure that while he was alive he had 51 percent. He used to joke about it. He'd read many stories where the children threw out the old man and he'd say, "That ain't going to happen to me. You may not like it, but I ain't retiring."
FB: Do you mean control was more important to him than tens of millions of dollars of tax liabilities?
Steve: I guess so.
FB: If anything were to happen to your real estate, which Bobby manages, or to the new magazines that Timmy is in charge of, would there still be room for them at Forbes? Could you work that closely with them?
Steve: This company is big enough so that there's plenty for us all to do. We're very lean at the top. There were three of us working here four years ago, and we're bigger today than we were then. And we hope to keep growing. My father, brothers, and I always worked closely together. None of us had veiled agendas or hidden yearnings. If there were ideas, notions, criticisms, or praise, it all came out.
FB: If that's true, yours was one of the few companies in which there was good communication between the generations. How did that work?
Steve: If my father didn't like something he would say so. When he didn't buy one of our ideas, we might try it another time or another way. When he did become angry, it would blow over very quickly. Ten minutes later he was on to the next thing.
FB: What about the next generation — do you think that at least one of your children, or both of your twins, who are now 16, will want to work here?
FB: Is that important to you?
Steve: It would be neat if they had the interest. A couple of them have expressed an interest. The twins have worked summers for a local newspaper and the other two have some interest, but so much can change over those years. I'm not going to push it because that's going to have an unhappy ending. I think they know my enthusiasm for it, the rest is letting them get exposed. If it bites it bites, if it doesn't it doesn't.
FB: Do you agree with your father that one person should run the show? If so, what will happen if both your twins want in, assuming they are equally capable?
Steve: That's all very hypothetical. It's not something you can plot in advance. You just have to see how these things shape up.
FB: This, too, is hypothetical, but would your nieces and nephews have an equal shot at running Forbes if they prove to be more capable than your children?
Steve: This is precisely why one person should be in control; to prevent rivalries like that from ripping the business apart.
FB: But that 51 percent doesn't guarantee that the family won't rip apart.
Steve: Well, one of the things you learn is that not everyone gets everything they want. I think everyone in this family realizes this is a business, not a charity ward. It would be nice to have the problem of many of them wanting to be in the business. I hope that comes to pass, rather than the other way, where they don't want to work, don't have any commitment, and only want to collect the dividend. That worries me more.
FB: When you became active six or seven years ago on the speaking circuit, rumors sprang up that perhaps, like your father, you had some political ambitions.
Steve: No. Because I grew up with a politician, I saw that to be serious about politics, you give up a lot of your privacy. Everyone is your boss, every holiday you're working the events. The phone is always ringing. In terms of impact, a magazine like Forbes has as much or more impact than most people in public life.
FB: So, unlike your father, you don't want to be president?
Steve: If you want to give it to me, sure I'll take it. But how many make it to the Holy Grail? I'm not complaining. This presidency is fine for me. — F.B.
Marketing the Forbes name
"When we were on the Friendship Trip to China [in 1982], the night before he made his balloon flight over Beijing, [Pop] and I had one of our more animated discussions. You see, he didn't have permission to [fly the balloon]. It was denied by our Chinese hosts on the grounds of national security, no less. I was arguing, 'No, you can't!' And he was saying, 'Yes, I must!' I didn't understand then why it was so important to him.
"But the next morning, sure enough, he took off. And to the profound dismay of the gathered officials, the tether line fell to the ground and [the balloon] floated away, free. It landed about 20 minutes later — smack in the middle of a Red Army base. National security, indeed! That base was the reason permission had been denied in the first place.
"Pop and I spent a good hour or so together in a small room on that base while Chinese officials decided what to do about it — and of more immediate concern, what to do with us. Finally, with great wisdom and good grace, they apparently concluded that the whole thing never happened.
"But Pop couldn't and wouldn't let it go at that. There was a purpose to what he'd done, and he had to make sure everyone understood it. That night at the farewell banquet he explained, 'What we did today, it wasn't to be naughty or unfriendly. It was to demonstrate the sport of ballooning. A balloon is not meant to be tied down. It's meant, to be free, to float with the wind.'
"You see, for Pop, a balloon was and is the most apt symbol of the human spirit."
— Remarks made at Malcolm's memorial service by his son, Timothy C. Forbes, 37. Timmy is president of American Heritage and Egg magazines. Previously he was a screenwriter and documentary film producer.
For the kids, a lesson in capitalism
"Bagpipes were for us, as kids, perhaps the ultimate bonding experience. If you and your siblings had had to go to church every Sunday dressed in kilts with your friends snickering at the sight of you all in skirts — or spend your Saturday mornings under the exasperated gaze of a greying Pipe Major — you can begin to understand why all of us are so close. If you've survived that together, you can cope with anything...almost. The bagpipe lessons were also our first lesson in incentive — risk-reward-based capitalism. Our bagpipe teacher came in on Saturday mornings and we didn't receive our allowances until Saturday afternoon. The risks of not practicing were immediately felt in the pocketbook."
—Christopher (Kip) Forbes, 40, vice-chairman of Forbes magazine. Before, he was a curator of his father's collections of Fabergé eggs, toy soldiers, toy boats, and Victorian paintings. He related this anecdote at his father's memorial service.
Forbes on Forbes
Entry on Malcolm in the October 23, 1989 Forbes 400 "Rich List":
"Forbes magazine. Far Hills, N.J. 70. Divorced, 5 children, 4 in business. Father B.C., Scottish immigrant 1904, launched magazine 1917. His sons inherited 1954; Bruce died 1964, MSF sole stockholder. NJ. state senator, gubernatorial candidate 1957. Enormous growth from 1960s; now top business publication, unusually profitable.
"Bought American Heritage for reported $10 million 1986, headed by son Tim; ad revenues up 50% this year. Acquired Somerset Press (6 N.J. weeklies) 1987; added Cranford Chronicle 1988; Forbes Newspapers now 13 weeklies. Starting Egg, upscale magazine on what's hot.
"Owns 400-sq.-mile Colorado ranch, South Sea island, Tangier palace, French chateau, London mansion; several hundred Fabergé pieces including dozen Imperial eggs — 2 more than Kremlin; also presidential letters, toy soldiers, toy boats, etc., etc. Author 7 books (They Went That-a-Way on bestseller list 5 weeks). Just published More Than I Dreamed; 6 balloonist records; 13 private friendship balloon-motorcycle trips (Russia, China, Egypt, etc.). Scheduled successor; MSF Jr.
"Reputed net worth: N.Y. Daily News: billionaire; London Daily Mail: £400 million; New York Newsday: $400 million to $700 million. "MSF: 'I'm solvent."' — F.B.