The Very, Very Rich and How They Got That Way (28 page)

“Personally I like him,” said another. “Only thing is, he’s mad.”

Jeno Paulucci, the promoter from Minnesota, affects people that way and is absolutely delighted to know it. His feeling is that a man who creeps about the earth without making any waves, without stirring anybody up, cannot be living a very interesting life. This is not only his personal philosophy; it could almost be called the main thrust of his business strategy. “I’m a maverick,” he says cheerfully. “I believe that’s probably the main reason why I’ve succeeded. I’ve done things that everybody said couldn’t be done, and I’ve done them in what everybody said was a crazy way. If any young man comes to me and asks how he’s to make his fortune, I tell him to do the same. Don’t follow everybody else. Get off the beaten track. Be a little mad.”

Paulucci believes this so strongly that in the late 1960s he went so far as to write a book,
How It Was to Make $100,000,000 in a Hurry
, in which he explains and justifies his maverick’s philosophy and urges it upon the new young crop of business venturers now starting the long climb. There can be no doubt that the philosophy has worked in Paulucci’s case.

Paulucci is a short man (five feet five), solidly built, with a balding head, a loud voice and an engaging smile. Like some others in this gallery, he started with nothing and came from nowhere – in fact, from conditions close to poverty. He ended as chief executive and sole owner of the Chun King Corporation, by all measures the most successful mass merchandiser of Chinese foods ever to arise in this country (or, as far as it known, anywhere in the world – including China). And today, in his early 50s, he is worth more than $100 million.

It took a certain amount of audacity for a man named Luigino Paulucci to start a Chinese food company in the first place – especially to start it in Minnesota. It took more audacity to make the mad venture succeed. Let’s see how the Minnesota promoter came to be.

Luigino Paulucci (he later changed his first name to Jeno) was born in 1918 in a small iron-mining town of northern Minnesota. His father worked as a miner when he could find work – which, Paulucci recalls, in some years was only one week out of four. Young Luigino helped earn the family’s bleak living by going down in the pits and bringing up ore samples, which he sold to tourists. When he was in his early teens, with his father’s health failing and most of the mines closed because of the Great Depression, the family decided to seek income by going into the retail grocery business. Young Jeno helped build a combination store and home, making the foundation out of used cedar poles that he wheedled from the telephone company. The store was set up in a front room. It was small, but by working long hours the family managed to squeeze enough profit out of it to stay alive.

At the age of 14 Jeno began working after school for a large store near his home – part of a supermarket chain headquartered in Duluth. He began simply as a clerk and muscle boy, assigned to move crates around and unload trucks and mop the floors and generally sweat for his pay. But when customers asked him questions about the food, he found himself actively selling it instead of giving the curt, surly replies that are traditional with food-market muscle boys. “I couldn’t help selling,” he recalls. “The food business was beginning to fascinate me, and I wanted to be part of it.”

To put it another way, he was beginning to find his medium as a promoter. Looking back on his boyhood later, he realized that the promoter’s instinct had probably been lurking inside him for a long time before he began selling food. When he had sold mine-ore samples to tourists, for instance, he had been able to increase the price by arranging ores of various colors in glass bottles or vials. The layered strata of ore inside the glass made a pretty little gewgaw that could be sold for a dollar or more – as much as four times the going rate for the same ore less cleverly packaged. This was a classic promoter’s approach: the act of multiplying the value of a thing simply by presenting it in a slightly different way adding a little extra something, going a half step farther than the competition. But young Jeno didn’t realize back then, as he scrabbled around in the iron pits, that he was learning the techniques that were going to make him a hundred-millionaire.

The food-store manager soon became aware of Jeno’s qualities as a salesman and shifted his duties so as to bring him into contact with the public more often. In the summer of his senior year in high school he was invited to go to work as a fruit-stand barker outside the market chain’s headquarters store in Duluth. The offer included a pay arrangement that was part wage, part commission. The idea of working for a commission delighted the fledgling salesman, and he took the job.

The promoter in him now burst forth in full bloom. One day a shipment of bananas – 18 crates of them – got damaged in a refrigeration-plant accident. The bananas were still tasty and perfectly edible, but their skins had turned an unusual and somewhat repellent shade of speckled brown. Young Jeno’s boss instructed him to get rid of them at any price.

Bananas back then – undamaged ones, that is – generally sold at around 25 cents for four pounds. Jeno’s boss suggested he start selling the damaged shipment at four pounds for 19 cents, then go lower if nobody bought.

But Jeno Paulucci was coming of age as a promoter. A delightfully wicked idea stole into his head. Without telling his boss, he piled the brown bananas outdoors in a huge display. Then he began shouting, “Argentine bananas!”

There is no such thing as an Argentine banana. But the name had an exotic lilt to it, a sound of value. A crowd gathered to look at Paulucci’s speckled-brown pile. He convinced his listeners that these loathsome-looking objects were a new type of fruit, never before imported into the United States. Being of generous heart, he was prepared to let them go at the astonishingly low price of ten cents a pound (nearly twice what they would have cost as ordinary, undamaged, non-Argentine bananas). He sold all 18 crates in three hours.

There was now no doubt in his employer’s mind that this short young Italian from the Iron Range was a born food merchandiser and promoter. But there was still a doubt in Paulucci’s mind. He was earning enough at the fruit stand to put himself through college, and he enrolled in a law course. High-status professions such as law and medicine often strongly magnetize those who are born in lowly circumstances, and this may have been one reason why a law course seemed good to this youngster whose father had worked himself sick in the iron mines. But after a year and a half Paulucci looked himself in the eye and admitted that what he really wanted was not status but, quite frankly, money.

As he recalls the episode in his book, he drove back to the college campus when it was time to re-enroll for his fourth semester. He drove around the campus for three hours trying to decide what to do.

“A good lawyer, I’d heard, might make $50,000 a year or even a 100,000. But a marketing man might, j
ust might
, make the world his oyster. . .”

He was at a major fork in the road of his life, and he knew it. The choice was not simply between law and merchandising. It was between safety and risk. One road led to a settled, comfortable profession in which young men moved up established pipelines toward known destinations. The other road led – who could say where?

Paulucci could not know then, of course, that he was going to make a $100 million. But he sensed somehow what all other men in our golden gallery have sensed: that you can’t get rich on a salary. Not really rich. You can be safe in a salaried job, but if you want to be rich, you must quit the world of salaried men and step into a world of high, sometimes fearfully high, risk.

Paulucci drove away from the campus without re-enrolling. He went to work as a traveling salesman for a wholesale grocery firm. Compensation: straight commission, young Paulucci’s favourite deal. Soon he was much more than a run-of-the-road travelling salesman. He rapidly rose to the status of big-time promoter. Instead of selling groceries to one store owner at a time in ten-case lots – a setup that would have satisfied most young salesmen – he developed a technique by which he rounded up whole groups of merchants in various localities, convinced them they’d save money by buying cooperatively in volume, ended by selling them the groceries in carload lots.

He increased his sales still more by convincing the merchants they should buy this or that vegetable in volume
now
, not next month, for the price was sure to go up next month. To make this pitch believable, he sent himself telegrams, ostensibly from his employers. Each telegram said something like WARN CUSTOMERS PRICE OF PEAS WILL RISE. By waving the urgent-sounding message at his customers, he was able to make them place much bigger orders than they would have otherwise.

He became so good at doing all this that his employers finally gave him a choice: Go on straight salary or just plain go. Jeno Paulucci, this brash young fellow in his 20s, was making more money than the president of the company.

Salary? The idea was ridiculous. Paulucci walked off the job and went back to Duluth. He had a moderately heavy wad of money in the bank. He was ready to go into his own food business.

He probed various possibilities – among them the garlic business – and then finally stumbled into the venture that was to become the basis of his fortune. It was a strange and esoteric business, not one that most food merchandisers would have envisioned as promising high volume or large profit. In fact, to most Duluth businessmen, it seemed at first more like some obscure, faddist hobby than a business.

Oriental bean sprouts.

By chance, one day, Paulucci heard that a small community of Japanese in Minneapolis had set up some hydroponic gardens to grow this ancient oriental delicacy. World War Two was in progress (Paulucci hadn’t been drafted because of a knee disability), and the general disruption of markets and transportation left some regions short of vegetables. The Japanese, Paulucci learned, were able to sell their entire small output of bean sprouts without half trying.

Paulucci talked this over with an older man named David Persha, owner of the first food market for which the young promoter had worked. Old Persha, an immigrant from Austria, was ready to get out of the food-retailing business and put his money into some other venture. The idea of bean sprouts startled him at first, but he had watched young Jeno sell Argentine bananas and was inclined to believe Paulucci could promote anything. Persha agreed to go into partnership with the younger man.

Paulucci put up his savings and borrowed $2500 to round out his share of the capital. The partners converted the back of Persha’s Duluth store into a hydroponic garden with rows of water-filled troughs. They hired a few Japanese as consultants and gardeners. They bought the needed mung-bean seeds in Texas and Mexico. Paulucci got in touch with some food processors and cooked up deals under which the processors would buy the Paulucci-Persha output of bean sprouts, pack the sprouts in cans or jars and resell them to retail stores. And so a new business was born.

The betting around Duluth was that it would last six months. But the sprouts sold steadily. Soon it became apparent that more hydroponic troughs would be needed than could fit into the back of Persha’s old store. Paulucci, the deal maker, went out and made a new one. He had learned about a syndicate of businessmen who had a contract to dehydrate potatoes for the military services. He approached the syndicate shareholders and asked them if they’d be interested in a contract to grow bean sprouts.

“But we don’t know anything about bean sprouts,” they said. “We’ve never even
seen
a mung bean.”

“Never mind,” said Paulucci. “My partner and I have been watching how it’s done. We know the whole process. There’s nothing to it.”

So the syndicate rented two floors of a Duluth building and set up huge rows of gardens. The output increased enormously, and Paulucci hustled to push sales up in proportion. He had literature printed on the mung bean’s rather uninteresting history. He distributed bean-sprout recipes. He sold not only to food processors but also directly to restaurant and other retail outlets.

Then it occurred to him that the partnership could make more money by having its canning done on a contract basis instead of selling sprouts to the middlemen, the food processors. He phoned a Wisconsin food packer and made a deal under which the packer would can bean sprouts for a flat fee per case – provided Paulucci could find any cans. During the war all kinds of metals were pre-empted for military use, and the civilian supply was severely rationed.

Paulucci brashly went to Washington and talked his way into the War Production Board. He introduced himself with a rather grandiose name that he and Persha had chosen for their partnership: the Bean Sprout Growers Association. To Washington officials this must have sounded like some kind of farmers’ cooperative rather than a two-man speculation. WPB let the Minnesota promoter have several million slightly damaged tin cans.

Paulucci had his cans labeled with the oriental name Foo Young, though there was not at that time a single Oriental in the company. The business continued to grow. In time Paulucci and Persha bought an old pea-canning plant, converted it and began doing all their own canning.

Then Paulucci decided it would be a good idea to expand the Foo Young product line. By adding celery and other vegetables to the bean sprouts, he could produce a chop-suey mixture.

“What’s this Foo Young outfit?” a General Foods executive once asked his public-relations counsel. “Are they Chinese?”

“No,” said the PR man, “it’s run by an Italian and an Austrian, and most of the plant workers are Minnesota Swedes.”

“You’re kidding!” said the executive. “Why, even the goddamn cans are dented, like they were shipped all the way from Pong Ping. Somebody out there has got to be the world’s best promoter!”