The grandson of slaves, born into poverty in 1892 in the Deep South, Arthur George Gaston died at the age of 103 with a fortune worth well over $130 million and a business empire spanning communications, real estate, and insurance. Gaston was, by any measure, a heroic figure whose wealth and influence bore comparison to that of J.P. Morgan and Andrew Carnegie. His first job, after serving in the celebrated all-black regiment during World War I, bound him to the near-slavery conditions of an Alabama coal mine—but even here Gaston saw hope and opportunity. This excerpt, taken from the book written by his niece and grandniece, chronicles that period when Gaston first took small steps into the role of entrepreneur that ultimately lead to the giant leap of BLACK ENTERPRISE naming him, on the eve of his 100th birthday, Entrepreneur of the Century. This February, we remember this legendary black titan.
After [World War I] many blacks were desperate for any employment. Even college graduates found themselves jobless. Arthur George Gaston didn’t even have a high school diploma. It was clear to him…that all that was left were the mines.
Shortly after 1920, A.G. Gaston moved his mother and grandmother [from Birmingham, Alabama] to Westfield, Alabama, to work in the mines at the Tennessee Coal and Iron Co., which was owned and operated by the U.S. Steel Corporation, the world’s first billion-dollar corporation, owned by millionaire financier J.P. Morgan. At the Westfield employment office he was automatically accepted into the mining corps and just as quickly approved for housing.
The endless parade of former soldiers he encountered who were unable to secure any other work was dispiriting. Every two weeks, he lined up along with them and watched as they opened their slender pay envelopes. Deductions were always made ahead of time for the milk, and the rent, and any other little thing charged at the [company] store, so that when payday finally came, often all that was left were a few nickels—which more often than not dissolved into a few drinks at the local bar. Something was wrong, Art[hur] thought, with a system that made it impossible for a man to get ahead. Though he was less of a spender than most men, he still found himself barely able to break even. His life was slipping away from him and he knew it. He tried to bolster his spirit by thinking of Booker T. Washington and how little he had suffered compared to this man. Arthur, at least, had been born free. He thought about [his maternal grandparents who had virtually raised him] and how they had liberated themselves from debt in a time when debt was the order of the day. Thinking of his grandparents and their industriousness made him realize that it was credit, no less than the mines themselves, that was killing him. The question was: How to escape it?
AN APPETITE FOR BUSINESS
The answer came in the form of a lunch box. Though [his mother] Rosie had left her freelance catering days behind her in Birmingham, she still made it her job to send Art off to work with a full lunch box every day. Baked sweet potatoes and large flaky biscuits were sent along to supplement a healthy serving of Rosie’s fried chicken. Art’s co-workers never failed to inspect his lunch box once the noon whistle rang. Many of the men had no families, according to Gaston, and the care that had been taken to provide Art with a meal impressed them almost as much as the food itself. Art felt no hesitation in sharing what he had, in part because he realized he was sharing his mother’s love in sharing her food. These men deserved that.
One particular day, Arthur found himself feeling especially lost. The morning had been spent painting railcars [that transported the iron out of the mines], and the fumes from the paint had nauseated him. When the noon whistle sounded, he sat with his co-workers but didn’t touch his food. It didn’t take long for someone to notice. A fellow named Junior who had stood not far down the line from him all day glanced in Art’s direction and asked after his lunch. Raising his head to answer the question, Arthur caught sight of a dark stripe of paint running from Junior’s cheek to his neck. The image chilled him. The paint, it seemed to Arthur, was a symbol, “the mark of a laborer who would always be a laborer.” For well over a year, Arthur had been plagued with doubt and confusion. He had, he wrote, vacillated between renewing my pledge to become somebody and thinking I should forget it.” What he realized, looking at Junior, was that nothing would change unless he took the initiative to change it. You didn’t get successful by thinking about whether you were going to be successful or not; you got successful by doing something to make yourself successful. What Arthur saw reflected in the other man’s face was the mark of his own future if he didn’t take action.
Arthur held his lunch box out before him and Junior reached for it, happily. He watched as the man tucked into the meal, sighing with satisfaction at the taste of Rosie’s food. He looked at Art and smiled. Art smiled right back, realizing he had found his business. Men would pay for these meals, he thought. He was right. Before long, Arthur and his mother—who was excited by the prospect of getting back to doing what she loved, cooking—had “drummed up a nice business.” Their boxed lunches brought in enough money that Arthur could begin saving again in earnest.
The success of that business venture gave Arthur a taste for industry, and before long he was once again the boy who had taken so many jobs he could barely keep up with demand. He began selling peanuts and popcorn “on the side,” sometimes making as much as $20 on a given payday, when the men felt better about letting go of a few coins. Once he had secured a financial foundation, he began lending out money to his co-workers at a rate of $.25 (cents) on the dollar, as a way of, in his words, “occupy[ing] my spare time.” At 25% interest, Arthur’s loans were barely deals, but his was the only lending institution that would take a debt-ridden black miner as a client. With little competition for his services, Arthur’s wealth took on a snowball effect, compounding biweekly.
Another man might have felt squeamish about lending to the working poor at such exorbitant rates, but for Arthur the equation was a simple one. In the first place, he was poor, too, and this was merely a way of working to better his own situation. Second, while he had sympathy for the men who were trapped in the mine system, they were not, by and large, his friends. As in many of his other experiences, at Westfield Arthur had found little comaraderie among the men. As always, he was too square to fit in. He refused to spend his money on the luxuries they squandered their money on, and as a result they shunned him. He was, as always, bothered by his alienation, but he stuck to his plan. When that plan involved taking their money for his own gain, there was little to make him feel guilty. Besides, he was doing them a service.
Many of the men who borrowed from Arthur used that money to impress the ladies. Fancy clothes and long nights in the bars ate up any money they could have saved. It was behavior Arthur didn’t approve of, even if, for a time, he had tried it himself. For a brief period, Arthur had been willing to allot $5 of his earnings per month to pleasure activities in the hope of wooing a lady. He was quickly disabused of any notion that he would make the cut. There were too many men out there willing to spend every penny they had, and more, on a pretty face, and Arthur’s diminutive pleasure purse didn’t make the grade. While other men wore the latest clothes—”peg top pants, sporty knickers [and] handsome derby hats”—Arthur donned the same fashion year after year, his clothes meticulously tended to by his mother. While other men took their ladies to dances and on “outings,” Arthur refused, citing the expense. It didn’t take long for
his reputation for cheapness to spread. Eventually he gave up on trying to compete at all, and decided to put those dollars in the bank instead.
Saving became Arthur’s primary habit. As critical to his accumulation of wealth as the money coming in was the money that was not going out. To the day he died, Arthur Gaston was nothing if not frugal. During his early days of business operations at the mines, he was making an average of $75 to $100 per month. Of these earnings, $50 to $75 went straight into the bank, leaving him with $20 for the month. Of that, $15 went to rent. This left him with $10, $5 of which he would use for living expenses (essentially, food). The remaining $5 was what he would allow himself for pleasure activities. This means that Arthur was saving between 66% and 75% of his earnings on a monthly basis. Discounting the $20 that he used to pay his rent and feed himself, his budget allowed for him to spend approximately 5% of his earnings, per month, on anything that fell outside his most basic needs. Once the ladies rejected him, even that money began to earn interest.…
The high rate of interest that Arthur was charging for cash loans soon made his informal “bank” the best earner of all his many little companies. In fact, the interest was bringing in more money than all of the other businesses combined. Meanwhile, Arthur had continued his work in the mines, realizing that without his job there—and thus his access to the miners—none of his other businesses could operate. He had no desire to spend the rest of his life working night and day in Westfield, so he began to consider other business opportunities. Nothing seemed workable. Though he had created a nice nest egg for himself and for his mother, what he was searching for was the opportunity to create a self-sustaining business that would provide them with enough security to leave Westfield behind.
Gaston had begun his empire building with an eye to making money, his early businesses originating from the principles of self-benefit: He sold lunches to men not because the men would not eat otherwise, but because he determined that they would pay for a better product; he lent them money at high interest rates not because these men were starving, but because they wanted to participate in frivolities and were willing to pay a premium for an extra dollar here or there. In essence, then, little of his early moneymaking was about need—it was about fulfilling desires.
The scheme had served him well, and would have continued doing so, perhaps indefinitely.
And if Arthur Gaston had been a different man, he might have been satisfied to maintain his market in the mines and retire early. But he wasn’t that man, and his dream was not to achieve middlingsuccess, but actual greatness. The problem was, he seemed to have reached an impasse: No new markets were opening up. He racked his brain, trying to figure out what would work, what would sell—until he realized that it was his methodology that was tripping him up. Rather than figuring out what he could sell, he decided to step back and take a look at what the community he was living in actually needed. It was a turn away from self-interest and toward public service, and the change was one that would inform his business endeavors for the rest of his life.
WHAT THE COMMUNITY NEEDED
Payday at Westfield was an occasion that brought everybody to the center of town. One of the most common pleas heard around the pay wagon was a solicitation for money to cover the burial costs of a recently deceased individual. The scheme was one run by missionaries and “slicksters” alike, and it was one with a high rate of return. In the black communities of the 1920s, funeral rites were both extremely important and rarely provided for financially. They were a person’s last link with the world and demanded a certain propriety. But funerals were also expensive, costing a minimum of a $100—far more than the average (or even above-average) black person made in a month. Almost no one had the financial wherewithal to pay for a proper burial, so the task of raising money fell to any individual who took it upon him- or herself to go out calling for funds.…
The widespread poverty of the area made blacks all the more susceptible to the ploys of those trying to hustle them out of their money for supposed burials. It was impossible to know who was telling the truth and was in need, and who was just filling their own purse with the proceeds. Furthermore, many of the miners were likely moved by the knowledge that they could just as easily be in a similar situation: With death a persistent threat, a mine worker had to wonder if it wouldn’t be his wife (or mother or sister) out there begging for money to bury him by the next payday.
Burial insurance was not unheard of at the time, but it was an unpopular option among blacks due to the bureaucracy involved in dealing with any white-owned corporation and difficulty blacks had in actually obtaining it. Few insurance companies were willing to cover black clients—not only because of outright racial discrimination, but because they were a bad business risk: Their mortality rate was appreciably higher, in every age group, than their white counterpart. And black miners died at an even higher rate than most.…
It occurred to him, as he watched yet another man part with his money to pay for a funeral of someone who was probably not even dead, that things didn’t have to be this way. Black people needed to have a way of burying their own and knowing where their money was going.… Here, finally, was something black people needed and Arthur was certain he could provide: a society that would take care of their burial costs.
In 1923 A.G. Gaston organized the Booker T. Washington Burial Society, but in 1932, he incorporated the Booker T. Washington Insurance Company with his father-in-law, Dad Smith, selling and collecting small premiums door-to-door. It would become the largest black-owned insurance company in Alabama.
Man of the Century
In the June 1992 issue of BLACK ENTERPRISE, we
On the eve of his 100th birthday, in January 1992, Gaston suffered a stroke, but it didn’t stop his drive “to be where the action” was. He was back at his desk four weeks later. This drive carried the son of a domestic worker (and the grandson of former slaves) from the poverty of rural Alabama to the top of a financial empire worth millions. It was his sheer determination that made A.G. Gaston BLACK ENTERPRISE’s Entrepreneur of the Century.
The A.G. Gaston Lifetime Achievement Award
Since our inaugural BLACK ENTERPRISE Entrepreneurs Awards, this magazine has honored seven outstanding entrepreneurs with the A.G. Gaston Lifetime Achievement Award. This award reco
gnizes the entrepreneurial spirit and the guiding light of an individual who has established an extended and consistently distinguished record of business success. And when we celebrated our 25th annual report on black businesses in 1997, BLACK ENTERPRISE took the unusual step of honoring six CEOs and founders of companies that had appeared on the BE 100s list for each of those 25 years. There have been seven recipients in total.
Over the past seven years since the inception of the Entrepreneurs Awards, many of the A.G. Gaston recipients have either retired or transformed their businesses, at the time of their award they were powerful leaders of some of BE’s largest black-owned companies. These recipients were:
- In 1996, Thomas J. Burrell, president & CEO of Burrell Communications Group
- In 1997, five distinguished entrepreneurs received the award: John H. Johnson, chairman & CEO of Johnson Publishing Co. Inc.; Herman J. Russell, chairman of H.J. Russell & Co.; Ed Lewis, CEO, and Clarence Smith, president, of Essence Communications Inc.; Nathan C. Conyers, president & CEO of Conyers Riverside Ford Inc.; and Earl G. Graves Sr., chairman & CEO of Earl G. Graves Ltd.
- In 1998, Percy E. Sutton, chairman emeritus, of Inner City Broadcasting
- In 1999, Comer J. Cottrell Jr., chairman & CEO of Pro-Line Corp.
- In 2000, Jesse Hill, retired president & CEO, Atlanta Life Insurance Co.
- In 2001, Berry Gordy, founder of Motown
- Times;”>In 2002, George & Joan Johnson, founders of Johnson Products Co. Inc.
- In 2003, John W. Barfield, chairman emeritus, The BartechGroup Inc.
From Black Titan by Carol Jenkins & Elizabeth Gardner Hines. Copyright © 2004 by Carol Jenkins& Elizabeth Gardner Hines. Published by arrangement with Ballantine Books, an imprintof The Random House Publishing Group, a division of Random House Inc.