Building Home. Eric John Abrahamson
mind if I didn't myself. . . . You have their unqualified endorsement from your picture,” which was placed on the mantel of the family home on California Street.24
Howard's letters to Dottie that summer and during the course of his travels for family and business over the next several years evidence the family dynamic that influenced his entrepreneurial career as well as his continuing affection for his hometown. He noted that Florence was wrapped up in Hayden and Aimee's two children: William, who was nearly two, and Robert, who was just five months old. According to Howard, they were “probably the two ‘swellest’ boys in the United States, if not the world.”25 Back among family and old friends, he revealed his continuing attachment to the Midwest and Omaha. It was good “to know the butcher and baker and candlestick maker and all that,” he wrote to Dottie. “What a change from Los Angeles. It does seem after all like home.” In Omaha, he socialized with girls from his past and visited his fraternity brothers in Lincoln. In his letters to Dottie, he described these outings as obligations to old friends. Over and over he wrote that she was the only girl for him.
Dottie could understand Howard's Omaha nightlife, even if it made her nervous about his loyalty. She was high-strung, needed the attention of men, and craved the banter and drink of society to avoid what Howard would call “the gremlins” in her head. While he was away, she kept up an active social life, going to parties and nightclubs with friends from college and planning charity events with her sorority sisters. Yet despite the social distractions, Howard and Dottie increasingly depended on each other.
Howard also kept her informed of his efforts to redeem his father's dream. “Whenever he came to call,” she said, “the first thing he'd tell me was that he'd picked up a couple more shares of National American.”26
AN IDEA AS SIMPLE AS A SAFETY PIN
The memory of how his family had been treated following his father's death energized Ahmanson's entrepreneurial initiatives, yet it did not turn him against the company his father had founded and lost. Howard had begun selling fire insurance for National American while he was still at USC. Despite his youth, he knew the business and the institutional players. He knew that big insurance companies on the East Coast and in Britain were sitting on great piles of money. He believed he could persuade these companies to make him their agent.
Some in the industry warned that he was swimming against the tide. Seeking greater operational control over their far-flung businesses, many large fire insurance companies were replacing independent general agents with salaried managers. In January 1926, Pacific Underwriter and Banker predicted that general agents would soon disappear.27
The youthful Ahmanson ignored these warnings. He launched H. F. Ahmanson & Company as a managing general insurance agency in 1927, while he was still enrolled at USC. For working capital, he cashed a check for $588.21 that he had received from selling several insurance policies.28 Renting an office downtown at 315 West Ninth Street, in the Pacific National Bank building, he hired a secretary and recruited his fraternity brother Gould Eddy to join him.29 After receiving permission from the State of California, he issued one thousand shares of stock in the company. With his father in mind, he kept all of the shares to himself.
In Omaha after graduation, Howard tried to convince National American's two senior executives, James Foster and Roy Wilcox, to dump their existing agency and name him as the company's exclusive agent in Los Angeles.30 Wilcox supported him, but Foster was reticent, no doubt disinclined to promote the precocious, if not pushy, twenty-one-year-old spoiled son of his former boss. Nevertheless, Howard was confident. He wrote Dottie that he was “on my way to putting across my ‘big deal.’” Before he left Omaha, National American had agreed to make him the company's general agent in California.
NEVER SIT DOWN
With the National American logo on his stationery, Ahmanson began traveling to San Francisco, San Diego, and other California cities to build his clientele. He went to New York and Massachusetts to establish business relationships with big East Coast insurance companies. His brightest prospects were the brokers who arranged mortgage loans on behalf of the life insurance companies. Howard liked working with these agents. They were the most sophisticated risk managers, so they minimized his own risks of insuring a property.31
Nevertheless, the first couple of years in business were challenging. He was spending his own capital, and the volume of business didn't keep pace with expenses. Agents for the old-line fire insurance companies in San Francisco characterized him as a maverick.32 Though he was able to get in the door with the big mortgage lenders, many were already locked into business relationships with other underwriters. As a newcomer to Los Angeles, he tried to recreate the social networks that his father had exploited in Omaha. He joined the Junior Division of the Los Angeles Chamber of Commerce and got himself nominated to the elite and sumptuous downtown Jonathan Club on South Figueroa.33 But business relationships took time to mature.
He developed a selling strategy. Visit ten potential customers a day. Make sure each is a decision maker, a vice president at least. “When you visit, stand up, never sit down, and never pass the time of day,” he later coached his salesmen. “Always leave them something they can use, and then get out.” Building a relationship was the key to Ahmanson's strategy. He said, “Never ‘point’ a new prospect.” In other words, never make a sales pitch “until you've called on him for at least a year.”34
Ahmanson proved remarkably competent at selling and controlling risk. He reported to National American that premiums earned by his California agency in the first six months of 1929 were double what they had been for the same period in 1928. More astonishing to his former mentors in Omaha, his loss ratio was barely 2 percent in 1928 and 3 percent in 1929, far below the industry average. These numbers suggested that the policies he wrote were far more profitable for the underwriter, as well as the insurance agency.35
Ahmanson also made mistakes. Realizing that his youth was a disadvantage in working with older, more experienced insurance agents, Howard hired a veteran California insurance man in the fall of 1927 to manage his network of agents. Fred Garrigue had worked in insurance in Chicago and then moved to San Francisco to be a fire insurance adjustor. After serving in the Royal Canadian Air Force in World War I, he returned to insurance.36 He worked for Ahmanson for only a short time, but four years later, after he and Howard had parted ways, Garrigue was arrested as the mastermind of a fire and earthquake insurance fraud ring engaged in attempted murder and grand theft.37 Fortunately, H. F. Ahmanson & Co. was not drawn into the conspiracy.
The close call with Garrigue underscored Ahmanson's frustration with his efforts to build his company via head-to-head competition in well-established insurance markets. Searching for greater competitive advantage, Howard focused on residential property insurance. This market was “chicken feed” to most insurance agents. Howard believed he could make it profitable if he kept his expenses low.
Howard also came up with an idea that he later said was “as simple as a safety pin, only no one had ever thought of it before.”38 When lenders foreclosed on a property in the late 1920s, the fire insurance became null and void because insurance companies feared empty houses would become targets for arson. The lenders, however, were still exposed to the risk of fire until they could find a new buyer. Ahmanson believed the insurance companies’ fears were unfounded. He reasoned that lenders, anxious to sell these foreclosed properties, would actually take good care of the buildings and that potential insurance losses would be minimal. He proposed to offer a new product—insurance on foreclosed properties.
To sell this new insurance policy, Ahmanson looked for a partner. Howard went to see Morgan Adams, the president of Mortgage Guarantee, which was the largest mortgage lender in Los Angeles. Curious about both the plan and the salesman's character, Adams said: “You seem like a bright young man. Who are you?"39
Howard explained that his father was president of National American Fire Insurance in Omaha. He may have left the impression that Will was still alive and in that position. Or he may have emphasized the substantial equity the family held in the business, his brother