Photography / Travel

  President Johnson and Secretary of Defense McNamara (1965)

The Whiz Kids: How 10 Men Saved America
(and Then Almost Destroyed It)

by Tim Darling (email) - July, 2008.


In 2008, I read John Byrne’s wonderful book, The Whiz Kids: Ten Founding Fathers of American Business - and the Legacy They Left Us. (John is perhaps best known for his later biography of Jack Welch, Jack: Straight from the Gut.) This is basically just a brief summary of the book with a few original thoughts and some notes from other sources added.

I wrote this synopsis of the book for three reasons:
  1. The book is currently out of print.
  2. It’s very detailed for the average weekend reader (at 550 pages).
  3. I became so enamored with the characters - Robert McNamara, Tex Thornton, J. Edward Lundy, Arjay Miller, and the others - that I didn’t want to forget their story and the lessons to be learned from them.
The Whiz Kids invented a world where all decisions could be made based on numbers - an ideal that is still skirted on by many MBA programs and consulting firms today. They found power and comfort in assigning values to what could be quantified and deliberately ignoring everything else. In 1969, when Beirne Lay, Jr. talked to Tex and McNamara about writing Tex’s biography, both of them asked exactly the same single numerical question on independent occassions: “How many copies do you anticipate selling?” 1

Perhaps it’s a hyperbole to say that they saved and then almost destroyed the US. But the Kids’ approach would ultimately cause the drop in quality and innovativeness of American cars, opening the door to the Japanese invasion from which the Big 3 have yet to recover. The Whiz Kids’ doctrine is also arguably responsible for America’s continued involvement in the Vietnam War after 1965 which led to the vast majority of the war’s 58,209 US casualties and the millions of Vietnamese military and civilian deaths. They had many of the right ideas. They brought analytical discipline to the military and American business that desperately needed it, but they inadvertantly swung the pendulum too far.


The Whiz Kids

On one side of the Atlantic in 1939, Robert McNamara was celebrating his Harvard MBA graduation by backpacking around Europe when Hitler invaded Poland. He stopped at a train station in Berlin and asked for a ticket to Italy. “Don’t you know there’s a war on?” he was asked. He didn’t. He would later joke that a future Secretary of Defense was in the middle of the enemy’s capitol at the start of the greatest war of the 20th century without even knowing it! 1a

Meanwhile on the other side of the ocean, Charles “Tex” Thornton was a lowly 26-year old statistician in one of FDR’s New Deal agencies taking undergraduate classes at night to earn his bachelor’s degree in business. One of his studies on low-cost housing was circulated among government departments as a model of succinct analysis and having seen it, Robert Lovett, the Assistant Secretary of War, asked a mutual friend to introduce them. Lovett and Tex shared a desire to bring facts and statistical rigor to the disorganized military and Tex impressed Lovett with his confidence and ambition. “I liked the way he showed no awe of authority...” Lovett said. Tex didn’t invent statistical methods and the Air Force and its personnel were already aware of the need for them; they just hadn’t found a way to institutionalize better accountability in decision making. Lovett was also very capable of organizing large numbers of troops; he just wasn’t prepared for the tremendous growth and change that the military was experiencing at the start of World War II. 2

With Lovett (also a future Secretary of Defense) as a mentor, Tex became head of Statistical Control, a small group that he revolutionized. He recruited a dozen junior faculty from the then-struggling Harvard Business School, including Robert McNamara, who had returned to Harvard as an accounting professor. They were all enamored with Tex’s promise to teach new lieutenants how to run the Air Force. Unbeknownst to them, there were no classrooms or even students and much of what Tex promised was still a dream in his head. But his salesmanship and the professors’ low draft numbers were enough to bring them to Washington for the duration of the war. Tex would soon make arrangements allowing him to pull selected officers from the top 10% of their class, offering them unique positions of power and a first class education. 3

Before Tex took over Stat Control, numbers were guessed at and assumptions were rarely questioned in the Air Force. No one even knew how many personnel were serving. Stat Control sent men out to count the number of planes in each hangar and the number of spare parts available at each airfield. The number of bombs that could be delivered to a target per gallon of fuel per plane type were calculated and contrasted. Knowledge is power and Tex’s team quickly earned the power: they were able to enforce high-level decisions based on facts and analyses that no one else had.

Stat Control saved the US billions of dollars in bombs, ammunition, supplies, and fuel. By creating an inventory of spare parts at each base, they could easily match the demand for spare parts with the nearest supply, saving $3.6 billion in 1943 alone. Tex’s team also likely helped bring a close to World War II faster and with less Allied lives lost, as many military leaders attested to. In one major success at the end of the war, they proved that the newer B-29 bombers could drop as many bombs over Japan in a quarter of the flying hours than the B-17s and B-24s that were being deployed from Europe. The Air Force listened and adjusted its bomber deployments. 4

After the war ended in 1945, the ten Air Force officers who ran Stat Control sold themselves as a group to Henry Ford II. They met with Henry and promised to bring statistical rigor to Ford using the techniques they had developed. They had a huge impact at Ford in the 1950s and 1960s, creating a dynasty and legacy that has influenced almost every American corporation and MBA student ever since.

At the time they joined Ford, it was in an awkward transition following Henry Ford’s death. The young Henry Ford II was actively looking for a way to make his mark on the company that had become overrun with his grandfather’s “strong men” with no defined responsibilities who ran the place by sheer force of intimidation. Ford lost $60 million in the first eight months of 1946 and they didn’t have the financial or accounting structures in place to even know it. 5

In many ways, Tex’s group were among the first management consultants. They made decisions based on facts instead of intuition (as they didn’t have any intuition or industry knowledge). They didn’t really care about the product that Ford was making; to them, Ford was a collection of statistics. They could just as easily have been working for a firm that manufactured soap or televisions. Additionally, the original agreement among the ten of them was that no one would leave the group for at least the first one and a half to two years to allow the group to become maximally productive. The average MBA who goes to work for a management consultant firm today stays for that exact amount of time. 6

Tex was networker. His skill set was in building relationships with other people and convincing them to follow his lead. Intelligence test results from the group’s early days at Ford also show that, while all ten of the Whiz Kids scored exceptionally well, Tex scored last among the group. Bob McNamara scored in the top 100th percentile. Almost all of them were off the charts relative to most of Ford’s employees. 7

Until the Whiz Kids, the only financial statement available at Ford was their cash statement which was provided by their bank. The Kids delivered the first cash forecast, production schedules, capital budgets, and organization chart. When he was managing a small company, founder Henry Ford despised organization charts, but as Ford grew they became a necessity. 8

The Kids pushed Ford too far in the direction of management-by-numbers. If an investment couldn’t be proven to add immediate profits to the bottom line, it was voted against. Unfortunately, sophisticated models for quantifying customer loyalty and the value of new equipment and quality were not available to them. McNamara tried to quantify quality for a short time, but gave up when the factory workers easily found ways to rig the system. 8a So Ford cars would leave the lot and break down quickly. The paint jobs were low quality because the painting equipment hadn’t been replaced in years. The Whiz Kids didn’t look far enough ahead with their cost-cutting calculations: would they lose customers and their engineering innovation edge in the long run?


Tex Thornton

After only a couple of years, Henry Ford II fired Tex after Tex’s clashes with his boss Lewis Crusoe, a lifelong auto-man who occupied a top executive position at Ford. Tex went to work for Howard Hughes in 1948 where he immediately saw potential in Hughes’ small aircraft division. The group invested heavily in research to build air-to-air missile technologies and grew rapidly as the Air Force placed hundreds of orders in the early days of the Cold War. The group went from being $1.9 million in the red in 1948 to recording profits of $12 million in 1952. 9 Tex was still bitter about being kicked out of Ford, quipping that Ford only made money in its early days when its only competitor was a horse. 10

Tex resigned in 1953 and dazzled and then dismayed Wall Street as the head of Litton Industries in the 1960s and 1970s. Litton Industries started as a collection of small technology firms; if the Whiz Kids had paved new ground by making a science out of business in the previous ten years, Tex was now paving new ground by making a business out of science.

At Litton, he coined the term “synergy” while building one of the first conglomerates in American history, but he used the term too loosely. As Litton grew by acquisitions, there were very few synergies realized. 11 Litton was briefly a Wall Street darling, trading at 50 times earnings, primarily on the basis of shady accounting reports 12 and in their belief in Tex’s promises of synergies and diversification. But as any current MBA student can tell you, synergies can be very elusive and are usually only realized when costs, such as an HR department, can be shared across two companies when each had their own previously. In exchange for synergies, you often receive a larger share of cultural and other problems; Litton was not well-equipped to handle these problems in the long-term. And diversification within a single company is not valuable. Any given stockholder can buy whatever shares they want to diversify their own portfolio; they don’t need a conglomerate to do that for them.

Tex died in 1981, shortly after receiving the Medal of Freedom from President Reagan. He was also awarded the Distinguished Service Medal in 1946 for his work in Stat Control and is buried at Arlington Cemetery.


Jack Reith

Whiz Kid Jack Reith was offered the presidency of Ford in France, which he accepted and proceeded to turn around the struggling company by spending time directly on the factory floor and financially incentivizing workers to meet production and quality targets. 13 He returned to Ford in the US a hero and headed the Mercury division where he designed one of the most over-stylized cars in Ford’s history, the Turnpike Cruiser. It hit the market in late 1957 when a recession started. 14 McNamara’s Ford division released the simple and cheap Ford Falcon which sold well; the Turnpike Cruiser was a disaster. Jack could never recover from the failure and shot himself to death in bed on July 6, 1960, the morning of his son’s birthday. 15

All of the Whiz Kids attended his funeral. Bob McNamara worked during the ceremony. Years later he would ask an interviewer how Jack was doing, having completely forgotten that he’d attended his friend’s funeral. 16


Robert McNamara

Robert McNamara was the head of the Ford vehicle division and was one of the earliest proponents of safety in automobiles. Bob believed that Ford had a responsibility to its customers in 1955 that was years ahead of its time. Ralph Nader would not take up this battle until 1965. He put seatbelts in his cars and advertised safety features, which ostracized him from the Detroit community that didn’t want to scare its customers. 17

He was named President of Ford Motor Company in November 1960, just as JFK was elected. A few weeks later, he would leave the position to serve as the Secretary of Defense for JFK and later Lyndon Johnson.

When he first met JFK to discuss the Secretary appointment, he asked the President-elect only one question: “Did you write Profiles in Courage?” The book had impressed McNamara. It adeptly dealt with the conflict between principles and expediency but Bob had heard rumors that it was ghost-written and wanted to make sure he was working for an honest man. JFK was surprised by the question but answered in the affirmative. 18

As a side note, Jack did write the book. The idea for it came to him when, as an early term senator, he was stuck in bed recovering from an outbreak of one of his many health problems. He recalled Eleanor Roosevelt’s quote about how polio had strengthened her husband’s resolve and gave him courage and strength that he didn’t have when he was healthy. Still, he relied on the research and drafts of a number of assistants, who he acknowledges debts to on the book’s first page. Today, we might ascribe the title “editor” or “lead author” to his role. 18a

What went wrong with Vietnam? McNamara has since stated that he knew by 1965 that the war in Vietnam was unwinnable militarily. 19 This was an impressive insight at such an early date; the numbers and analyses had served him well. The problem was that he believed that by simply treading water in Vietnam - ie neither winning nor losing the war - we were preventing the fall of all of southeast Asia to communism. He believed that once the dominos started to fall in Asia, the Soviet Union could move their missiles and influence closer and closer to Europe and the US, thus risking a much larger nuclear war. However, as he realized twenty years later, Southeast Asia didn’t want to fall to the communists. In Vietnam we were caught in a nationalistic civil war; we were not defending the world against a larger war.

McNamara never questioned the assumption of the domino theory. He never asked, “Do we know that Indonesia, Thailand, Japan, and even Australia would fall to the communists if Vietnam does?” He likely didn’t rigorously question the assumption because it could not be answered quantitatively: to answer it meant to understand and empathize with the leaders and people of that area of the world. Had he insisted on answering it, the entire argument for our involvement in Vietnam after 1965 would have fallen apart.

His focus on “kill ratios” (which was one American or Vietnamese soldier for every 2.6 Viet Cong or North Vietnamese killed) and “People flows” abstracted the war into simple numbers that defied the true story. 20

In McNamara’s defense, the 1960s was a very complex and precarious time. He claims that very few people appreciate how close we came to nuclear war with the Soviet Union, especially during the Cuban Missile Crisis. The wonderful documentary Fog of War captures his thoughts, memories, and lessons learned from his time at Ford and during the Cuban Missile Crisis.

Further, it is not the Secretary of Defense’s role to determine who we are at war with and when to withdraw or deploy troops; it is the Commander-in-Chief’s. McNamara states that he believes, had Kennedy lived, JFK would have pulled our troops from Vietnam and accepted whatever losses were then incurred because the cost of the war was too great and the plausible outcomes of our involvement versus withdrawal would likely have been similar. Lyndon Baines Johnson, on the other hand, with his eye on being elected [for the first time] for a second term in 1964, wanted least of all to be the first American president to give up on, or lose, a war. At the time, the Joint Chiefs acquiesed to political pressure, though luckily there is evidence that they would be less likely to do so today. 21

President Lyndon Johnson fired McNamara in 1968, offering him the Presidency of the World Bank. McNamara never spoke out against the Vietnam War until the late 1980s when he admitted to be wrong in his assumptions; he has been heavily criticized for not publicly denouncing the war earlier when it may have helped to bring an earlier end to it.


The others

Arjay Miller became President of Ford and then the dean of Stanford’s Business School. J. Edward Lundy recruited and trained thousands of MBAs as Ford’s CFO from 1967 to 1979. Lundy’s relentless perfectionism in presentations foreshadowed today’s polished PowerPoints. One young man once put a slide in to the presentation projector upside down and it largely ended his career at Ford.21a


What was wrong with their methodology? What are the lessons learned?

The Whiz Kids were more right than wrong in hindsight, at least by our current standards of analysis and management. And since they were largely inventing their methodology as they went along, the value of their contributions far outweigh the price of their faults. But they made three fundamental errors which future generations of analytically-minded managers should heed:

  1. We should be aware of our limits to quantify certain key drivers, such as product quality, customer loyalty, the value of investments in R&D and innovation, and what our competitors or enemies are thinking.

    Just because we can’t quantify some of these elements doesn’t make them any less important. In his memoirs, In Retrospect: The Tragedy and Lessons of Vietnam (which the film Fog of War was based on), McNamara’s first lesson is to empathize with your enemy. 22 Ho Chi Minh was primarily trying to reunite his country and expel foreigners; he was not, as was believed at the time, a Marx-like champion of communism with ambitions to propagate it throughout the world.

    Additionally, it was Tommy Thompson’s intimate knowledge of Khrushchev from years working with him at the Kremlin that provided the context for JFK to interpret his messages during the Cuban Missile Crisis. Had it not been for Thompson’s ability to empathize with Khrushchev and convince JFK that he did not want war but simply needed an “out”, we might have escalated the crisis inadvertantly. 23

  2. When we can quantify key drivers, we have to make sure we are looking at the ones which give us the most insight into the overall problem.

    McNamara’s focus on kill ratios during Vietnam is an obvious violation of this rule. While those values had some meaning, they did not offer sufficient insight into the overall issue at hand: how to protect South Vietnam from the North with the least American and South Vietnamese casualties. Kill ratios, for example, overlook the availability of one side to replenish its lost forces (which was much higher for the North Vietnamese than it was for the US despite the countries' total population difference). They also overlook the magnitude of the causualties on both sides. And finally, they don’t offer any insight into ways to win over the enemy by methods other than raw guerilla combat.

  3. Finally, when we can quantify key drivers and we know that they are the most meaningful ones, we have to include in our calculations forecasts of their effects well into the future.

    The Whiz Kids were hesitant to invest in new equipment needed to improve the quality of Ford’s cars because they calculated that doing so would have no positive impact on the next years’ sales. But consistent investment in equipment, research, and knowledge is often needed to keep a company innovative and in a quality-leadership position. The returns on such investments may not be realized for many years, but forecasts have to account for the long-term positive effects on such investments.

    During the early years of the Whiz Kids’ reign, factory workers would joke that Ford must be liquidating itself: that was the only explanation for the lack of investment in new equipment and R&D.


References:

1 Lay, Beirne. Someone Has to Make It Happen. 1969. Page 198.
1a Byrne, John A. The Whiz Kids. 2003. Page 48.
2 Byrne. Pages 29-34. Also: Lay. Pages 51-57.
3 Byrne. Page 42.
4 Byrne. Pages 51 and 57. Also: Lay. Page 50.
5 Byrne. Page 127.
6 Ibid. Page 95.
7 Ibid. Pages 96-98.
8 Ibid. Page 126.
8a Halberstam, David. The Reckoning. 1986. Page 80.
9 Byrne. Page 237.
10 Ibid. Pages 155-163.
11 Ibid. Pages 380-390.
12 Ibid. Pages 486-487.
13 Ibid. Page 200-205.
14 Ibid. Pages 314-315.
15 Ibid. Pages 347-358.
16 Ibid. Page 356.
17 Ibid. Page 259.
18 Ibid. Page 371.
18a Dallek, Robert. An Unfinished Life: John F. Kennedy 1917-1963. 2003. pages 198-199.
19 Byrne. Page 442.
20 Ibid. Page 448-450.
21 McNamara, Robert. Retrospect: The Tragedy and Lessons of Vietnam. 1996. Page 96.
Also: McMaster, H.R. Dereliction of Duty: Lyndon Johnson, Robert McNamara, the Joint Chiefs of Staff, and the Lies that Led to Vietnam.
21a Halberstam. Page 252.
22 McNamara. Pages 321-322.
23 McNamara. Page 322. Also: Morris, Errol (Director). The Fog of War: Eleven Lessons from the Life of Robert S. McNamara. 2003.




Your Comments

As an alum of 30 years at Ford and a decade at GM, I am sure that the key flaw of whiz kid/MBA logic is failure to know and anticipate that "every yin has a yang"; eg there will always be secondary consequences of any action, human or product/process. Short form: "S**t happens"; technical version: always there are byproducts. Related scuttlebutt: McNamara was only apptd Pres. of FoMoCo to validate his credentials for Secy of Defense 6 weeks later. HFII detested McNamara's aloof manner, would have never had him as real Co. pres in place. Provenance avail if desired. My MBA was during Arjay reign at Stanford. My class included Susan Packard (now Orr); while her Dad was in Washington as the Dept. of Defense "do-er". Without him to actually make things happen McNamara's ethereal fraudulence would have been evident years & many lost lives earlier. Cheers.

-- Phil Smith, Feb 22, 2009
Hi. I had read about the whiz kids when I was studying for my MBA. Since then I have always wondered what it was like to be part of them....like a club I could only observe...but never be part of. This article revives memory's of that.

-- rahul shah, Aug 5, 2009
Giulio Douhet begat Airpower theory. The experience of applying airpower theory in WWII begat Joseph Heller s "Catch 22." At the same time that "Catch 22" was being published, McNamara and the "whiz kids" were formulating theories of the application of Statistical Process Control (SPC) to warfare and more specifically the counter insurgency campaign in Vietnam. The USAAF strategic air campaign had begotten the "whiz kids" during WWII where the group was part of a management science operation within the USAAF known as Statistical Control, organized to coordinate all the operational and logistical information required to manage the waging of war. McNamara's and the "whiz kids" focus was on kill ratios (which was one American or Vietnamese soldier for every 2.6 Viet Cong or North Vietnamese killed) and People flows abstracted the war into simple numbers that could be fed into the statistical process model and also gave us the "body count." The "whiz kids" and the air war doctrine that emerged from Vietnam begat Effects Based Operations (EBO). EBO was the warfighting theory used by the USA entering into the current conflicts in Iraq and Afghanistan. The theorists of EBO viewed the success of the First Gulf War and the political validation of the press as proof that the Millennium had arrived and the theories of Douhet, Trenchard, Mitchell, The "whiz kids" and those who walked in their footsteps were triumphant and air delivered bombs had become smarter than infantry soldiers. But what really hurts my head is that if the sequence number for the letter of the alphabet is used, "E" becomes 5, "B" becomes "2" and "O" becomes 15, so EBO = 22. I guess no one caught that EBO is equal to 22. So we entered the war in Iraq and Afghanistan caught on 22.

-- Chris Isgrig, Sept 7, 2009
While we may find all kinds of fault with the whiz kids, and thereis plentyy, it is evident that they knew more than Hnery Ford I did andd they saved Ford from failure. There is no doubt that hey couldd have done more. I was employed with Ford for 40 year and I livved through the reign of the whiz kids and I cannot frget hhow diverse they were in their talents and skills. Creating a cash mangement program and an accounting sstem earned mmy respect. Most employees thought Robert McNamarato be fish out of water and could see very little of his irrrit..

-- gerald adcock, Jun 4, 2012
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All text copyright © 2008 Tim Darling.