Julius Rosenwald

Introduction

In 1932, Julius Rosenwald’s (born: August 12, 1862, in Springfield, IL; died: January 6, 1932, in Ravinia, IL) death was reported above the fold on the front page of the New York Times under the headline “Rosenwald Dead; Nation Mourns Him.” While the man himself has since faded from memory, the company with which he made his fortune – Sears, Roebuck – remains virtually synonymous with America itself. For much of the twentieth century, Sears supplied the American public with almost every kind of merchandise, whether through its enormous catalog, which was so replete with enticing items that it was widely called the “wish book,” or through the hundreds of retail stores that dotted cities and towns all over the country. In 1973, the company’s new corporate headquarters, the Sears Tower in Chicago, was the world’s tallest building. Today, Sears remains one of the most recognized corporate names in the country and, indeed, the world. In the twenty-first century, the extraordinary proliferation of internet retailers has more than validated Rosenwald’s faith in the future of mail order. Increasingly, though, this son of German immigrants is remembered not for his commercial success, per se, but rather for the visionary philanthropy that this success enabled and for his interest in improving race relations in America.

Ethnic and Family Background

Julius Rosenwald’s parents, Samuel Rosenwald and Augusta Hammerslough, came to the United States as part of the extraordinary wave of immigration that followed in the wake of the Revolution of 1848. At the time, poverty, social immobility, and military service were significant push factors in the migration of people out of the principalities that would later become Germany. Pulling many to America were the lure of cheap and plentiful land, low taxes, and the need for workers. To this constellation of factors, Rosenwald’s parents, as Jews, could add Europe’s traditional hostility towards them, a hatred that went back for hundreds of years and expressed itself in special taxes, legal restrictions on where they could live, when they could marry, and the professions they could practice.

Augusta Hammerslough was born on July 20, 1833, in Bederkesa, a village near Bremerhaven. Like many Jews (who were legally prohibited from practicing law or medicine or working in the civil service), her parents were shopkeepers. The Hammersloughs must have been discouraged about their children’s prospects for success in their own country. When each of their sons – Julius, Edward, Louis, and Simon – turned thirteen, they sent them to join distant relatives in Baltimore, Maryland. They kept Augusta at home until she was twenty, at which point they sent her to America to join her four brothers. In 1853, Augusta made the Atlantic crossing in a sailing ship and her seventy-seven day journey was an adventure that she often recounted to her children.[1]

Samuel Rosenwald, who reached Baltimore the following year, had a similar family background. He was born on June 18, 1828, in Bünde, a small town in the Kingdom of Hanover, where his widowed mother, Vogel Frankfurter Rosenwald, ran a general store. Samuel was the second of four children; his father had died when he was a child. Trade was what he knew, so when he arrived in America, he followed the same path taken by many newcomers, especially Jewish ones – he became a peddler. In Europe, many people looked down on traveling salesmen, but in America, with its far-flung farmhouses and settlements, peddlers were often welcomed. “Peddlers were an indispensable part of early America’s market revolution,” Walter Friedman wrote in his study of the American salesman. “They not only brought manufactured goods to farmers and townspeople; they also introduced a market culture. They carried buttons, cloth, brooms, chairs, clocks, books, paintings, and decorative objects – all of which served as ‘emblems of affluence.’”[2] Many men who later achieved great wealth began this way, including Levi Strauss, who made a fortune manufacturing blue jeans, and Adam Gimbel, whose chain of department stores was once the country’s largest. Samuel Rosenwald had arrived in the United States with little money, but Baltimore’s Jewish community was well established and welcoming. Just two years after Rosenwald’s arrival, the Baltimore American newspaper wrote “as far as we know no Jew has ever asked for assistance from the general charity fund. The Jews take care of their own poor and contribute to the poor of all religions.”[3] With credit from Jewish shopkeepers and lots of energy and initiative, a peddler could set himself up and start earning money very quickly. Years later, Julius Rosenwald would reminisce about his father’s experiences as a peddler along Virginia’s Winchester Trail.

Augusta Hammerslough and Samuel Rosenwald met in Baltimore and married there in August 1857. By that time, Augusta’s brothers had already established a successful dry goods business in Baltimore and were expanding into the Midwest. A month after the wedding, the Hammersloughs sent their new brother-in-law to Peoria, Illinois, to manage their fledgling venture, the Baltimore Clothing House. In 1860, the Hammersloughs sold the Peoria store, and Samuel and Augusta Rosenwald moved to Talladega, Alabama. They stayed there only briefly. By the end of the year, they had already relocated to Evansville, Illinois. The couple’s peripatetic existence finally came to an end in the spring of 1861, when they settled in Springfield, Illinois. The Hammersloughs had opened the Capitol Clothing House in Springfield some years earlier, and by that time business was booming, mostly because the store was busy outfitting the men and boys who had responded to President Lincoln’s call for recruits to put down the southern rebellion. The couple would make Springfield their home for the next twenty-five years. It was there, on August 12, 1862, that their second child and second son, Julius, was born. Four more children would follow.

The Rosenwald children (one son died at five leaving three boys and two girls) grew up in a comfortable wooden house on Eighth Street, across from the home that had once been Abraham Lincoln’s. They attended the local public schools and, along with a dozen or so other Jewish children in town, received religious education above Salter’s grocery store. Samuel Rosenwald was active not only in the business community but in the Jewish community as well. He served as president of the B’rith Sholem Congregation and led the effort to raise funds for a new temple. In March 1876, the temple was consecrated to Reform (rather than Orthodox) worship. The family attended Friday night services together. Julius later wrote that he was “barmitzvahed” at thirteen and confirmed a year later.[4]

In later years, Julius’s childhood memories included chasing pioneer wagons around Springfield’s streets and working in a variety of jobs. He worked briefly as an organ grinder at the Congregational church and helped out on Saturdays at the family store (one of the attractions of Reform, as opposed to Orthodox Judaism, was that it allowed Jewish merchants, like their neighbors, to do business on Saturdays). In October 1874, Springfield witnessed a memorable event, the dedication of a monument to Abraham Lincoln. Rosenwald, then twelve, responded to an advertisement calling for “live, active, energetic boys” to sell brochures describing the memorial. Julius spent the day “peddling,” as he described it, the brochure, and made $2.50 doing it. He never forgot the sight of President Grant, who sat in an open carriage that day and wore yellow kid gloves. The merchant’s son was already developing the eye of a clothier and the energetic ways of a salesman.

Business Development

Family relationships played an important role both in Julius Rosenwald’s personal life and in his business career. Just as Samuel Rosenwald had benefited from his ties to the Hammerslough brothers, so too did Julius, who was offered a chance to apprentice with his uncles in New York City. In 1868, Julius and Edward Hammerslough had sold the Capitol Clothing House to Samuel, who reopened it as “S. Rosenwald, the C.O.D. one price clothier” (one price meaning that it was a modern business where there was no bargaining or bartering). Julius and Edward Hammerslough then moved to New York, where they worked as manufacturers and retailers of men’s clothing. In the spring of 1879, Julius quit school and left the familiar surroundings of Springfield for the first time. At first, he lived in his uncle Edward’s luxurious home on East 58^th Street; later, he lived at a boarding house for young men where he made several lifelong friends, among them Henry (always called Harry) Goldman, who went on to become a founding partner of Goldman Sachs. In his later years, Rosenwald expressed regrets about his lack of formal education and declined honorary degrees on the ground that he was not a university man. His time in New York, however, provided him with some of the advantages of a college experience. He explored an exciting new place, met interesting people, and, as an apprentice in the “rag trade,” as it was often called, learned one of the most dynamic businesses of the day.

A variety of factors contributed to the development of the “rag trade” in the latter part of the nineteenth century: first, the production of Civil War uniforms had led to the standardization of sizes, a necessary precursor to the bulk sale of clothing; second, the invention of the sewing machine had opened the way for mass production; and third, immigration ensured that large numbers of people were willing to work long hours for low wages in crowded city sweatshops. Additionally, there was also a growing market for mass produced clothing. As the population grew, and as individuals from disparate backgrounds sought to become part of the emerging middle class, many people started preferring the look of store-bought clothing to the homemade garments worn by their parents. Moreover, people seemed to enjoy the experience of selecting mass produced garments, which was less intimate than visiting a tailor. And then there was the greater variety of merchandise – so much, in fact, that people began using a new word to describe the process of looking around stores and deciding what to buy. They called this “shopping.”[5]

By working as a stock clerk for his uncles, taking samples of their clothes to out-of-town retailers, and, eventually, opening his own small shop, Julius learned the ups and downs of the trade. His younger brother, Morris, joined him, and they opened Rosenwald and Brother, a small men’s clothing store just off Broadway on Broome Street in Greenwich Village. But in a letter to relatives in Germany at about this time, Samuel Rosenwald wrote that there was a great deal of competition and that his sons were doing “only fairly well.”[6]

A casual conversation with another clothing merchant changed that. One of the partners in a firm that sold summer clothes showed Julius sixty telegrams he had received asking for goods that he could not find. The desired merchandise, especially lightweight summer clothing for men, was not available; there was simply not enough of it being produced. This prompted Julius to suggest to his brother that the two of them should start a company for that purpose. With their uncles’ encouragement, they decided to start a new manufacturing business and to do so in Chicago – far enough from New York to keep them out of direct competition with their uncles but closer to their parents. At the time, Chicago was also a rapidly growing and dynamic city.

In 1886, Julius and Morris Rosenwald and their cousin, Julius Weil, launched Rosenwald & Weil for the manufacture of men’s clothing. They benefited from a loan of $2,000 (approximately $47,800 in 2010 U.S. dollars[7]) from Julius Weil’s father and a comparable amount from Samuel Rosenwald, who had liquidated his Springfield business and moved to Chicago with his wife and two younger children, Selma and Sophie. The elder Rosenwalds purchased a house on Wabash Avenue, on the city’s south side, and their sons moved in with them.

The work was demanding. Julius was on the road a great deal, taking samples of clothing to stores as far away as New Mexico, Colorado, and Texas. He also had to travel to New York, where he consulted regularly with his uncles and purchased fabrics and other merchandise. After Julius Rosenwald married Augusta Nusbaum in April 1890, these travels put a great strain on his young wife, who had moved in with his parents. She wrote to him frequently, complained about missing him, and signed her letters “your frau.” Julius had married a woman from a background very similar to his own, and his new wife even shared his mother’s first name. Augusta Nusbaum’s father, Emanuel Nusbaum, had come to the United States from Germany and had settled in Plattsburg, in upstate New York, where Augusta was born on December 27, 1868. Emanuel Nusbaum was Jewish, had worked as a peddler, and was in the clothing trade. After his wife died, leaving him with seven daughters and one son, Nusbaum sought wider opportunities in Chicago. Julius’s marriage to Augusta, always called “Gussie,” was a long and happy one. And it was her brother, Aaron, who eventually offered him the business opportunity that would change his life.

In 1893, Chicago hosted the World’s Columbian Exposition in honor of the four hundredth anniversary of Columbus’s arrival in America. For the extraordinary, summer-long celebration a swampy lakefront area close to the Rosenwalds’ neighborhood was transformed into a glittering city of elegant, white, classically-inspired buildings on miles of artificially engineered canals, lagoons, and ponds. There were exhibits from foreign countries, pavilions hosting speakers on a wide range of subjects, and amusement park rides, including an enormous wheel designed by a bridge engineer named Ferris. By the time the summer was over, twenty-seven million people had toured these sights, and the person who had been awarded the contract to sell soda-water drinks to them was Aaron Nusbaum. (He had won the contract by doing a favor for Marshall Field, a member of the fair’s planning commission). The opportunity made Nusbaum a small fortune; his profit for the summer was $150,000 dollars ($3,750,000 in 2010).

Two years later, after investing a portion of his money in the Bastedo Tube Company, which manufactured tubes to send messages and change between floors in department stores, Nusbaum met Richard Sears. A Minnesota native, Sears had begun his career as a teenaged railroad agent. His business career began one day when he found a box of watches unclaimed at the station. After contacting the manufacturer and buying them cheaply, he advertised the watches in a local newspaper and then resold them by mail at a profit. He surmised that people would buy other things through the mail as well, and he experimented with a variety of products, including baking soda. By the time Nusbaum met him, Sears was publishing a small, well-written catalog that offered clothes, jewelry, watches, and sewing machines through the mail at very low prices. The response was tremendous, so much so that Sears and his partner, Alvah Roebuck, a watch repairman, were overwhelmed. Orders poured into their small, chaotic downtown office. Sears’s understanding of business finance was minimal. His staff was disorganized, and he often didn’t even have the merchandize he advertised. When Sears met Aaron Nusbaum he was not interested in buying a Bastedo tube system, but he did need a business partner. In August 1895, Sears asked Nusbaum to become that partner, a half owner of Sears, Roebuck for an investment of $75,000 (approximately $2,010,000 in 2010).

Nusbaum accepted the deal but got cold feet almost immediately. He only wanted to put in half of the cash himself, and he started canvassing his family, looking for someone to put up the other half. Two other brothers-in-law turned him down before he approached his sister Gussie’s husband, Julius Rosenwald, in late August. In later accounts, Rosenwald said that his decision to accept the offer to buy into Sears was based on an instinctive confidence in the future of mail order and on the practical reality that Richard Sears had purchased a large number of suits from him to sell through his catalog. He could accept Aaron’s deal without coming up with the full $37,500 himself. The decision, he later said, was “made and acted on in five minutes.” That it proved to be such a spectacularly sound one was, in his words, “a lucky chance.”[8]

In fact, the tremendous success of Sears, Roebuck in the years following this impulsive purchase can be attributed at least in part to a perfect storm of circumstances that benefited the business. At the turn of the twentieth century, most Americans still lived in rural or small-town settings, meaning that many people did not have easy access to the new products that were becoming available as manufacturing flourished. Having grown up in a rural area, Richard Sears knew how it felt to be hungry for merchandise that was either unavailable in the small stores where country people shopped or was extremely expensive. Sears quickly branched out from watches and began offering hundreds of other items. A few years after Rosenwald joined Sears, Roebuck, the company catalog offered seven pages of watches as well as jewelry, fountain pens, musical instruments from organs to autoharps and everything needed for a brass band, books, groceries, hair brushes, dolls, corsets, shoes, farm machinery, sewing machines, and sixteen pages of guns and ammunition. You could order a pair of boxing gloves or an engraved wedding ring. Veterinary supplies, ploughs, buggies, bicycles, gravestones – by 1900 there was almost nothing that could not be ordered from Sears.

Richard Sears himself wrote much of the catalog copy himself, and his prose was folksy, reassuring, and enticing. “We aim to illustrate and describe every article with the strictest accuracy,” the 1900 catalog explains. On account of the volume of business he conducted, Sears could assure the extraordinarily low prices listed in his catalog, and he explained to his customers that it was not “in accordance with modern business methods for the farmer, the clerk, the mechanic or the laborer, to pay one half the price of any article in excessive profits of the manufacturers, the jobber, the wholesaler and the retailer.”[9] In other words, since Sears manufactured many of the products it sold, there was no middleman to push the prices up by making excessive profits. All of the items for sale in the catalog were pictured and described in painstaking detail. Likewise, the catalog included detailed instructions on how to place orders – and how to return merchandize if it was faulty or incorrect. And thanks to the inspiration of Richard Sears, the Sears catalog was slightly smaller than the Montgomery Ward catalog, its nearest competitor. This meant that people tended to put the Sears catalog at the top of the piles of catalogs that rested on the kitchen counters of farmhouses across the country.

Also creating favorable conditions for Sears were changes that greatly expanded the postal service, reduced the cost and increased the convenience of ordering by mail. Even before the introduction of Rural Free Delivery in 1896, Sears had benefited from a postal rate scheme that allowed his catalogs to be categorized as “educational” materials, which qualified for delivery at low, third class, rates. Rural Free Delivery, introduced gradually over a period of years, brought Sears catalogs to mailboxes on country roads and in small towns all over the country. In 1913, Parcel Post was introduced, which meant that packages from Sears no longer had to be shipped by freight and picked up at the train depot; rather, they were now delivered directly to farmhouses and homes. Immediately, Sears, Roebuck became the largest single user of the new service. Like the proliferation of affordable merchandise, improved mail service was a tremendous boon to the mail order business (as the internet would be a hundred years later).

To Richard Sears’s flamboyant personality and marketing genius (Rosenwald’s friend Harry Goldman said that Sears “could sell a breath of air”) Rosenwald brought a valuable set of complementary skills.[10] Having worked in retail, he knew the importance of building trust between merchant and customer. This trust was a major factor in the success of a company that had not always been able to deliver on its “guarantee” of customer satisfaction. During his early days at Sears, Rosenwald apparently took note of the copious amount of mail sent by dissatisfied customers who had received the wrong items or no items at all. One such letter came from a customer who explained that he had received a heavy winter suit instead of the summer-weight item he had ordered. When questioned, the clerk who filled the order said that there had been no lightweight suit in stock, to which Rosenwald responded sarcastically, “Why didn’t you send him a watch?” [11] Whereas Sears was usually on the road negotiating with suppliers or closeted in his office writing catalog copy, Rosenwald was more focused on daily operations and customer service.

Early on, Rosenwald demonstrated his unshakeable personal commitment to the future of the company. Richard Sears had realized soon enough that Aaron Nusbaum was a difficult and demanding partner, unpopular with the staff, and hard to get along with on a personal level. By 1900, Sears had concluded that he could not work with Nusbaum, and he offered Rosenwald two options: he could either buy Nusbaum out or the two of them could get rid of him. Since Nusbaum was his brother-in-law, Rosenwald was in an awkward position. But he came down on the side of business considerations rather than family ties, just as he would later in the question of succession in the Sears leadership.[12] He and Sears told Nusbaum they wanted him out and offered him a million dollars. When the time came to sign the sales agreement, Nusbaum reneged on this agreement and insisted on a million and a quarter, adding the stipulation that no Sears employee would receive a raise until he had been paid in full. Sears and Rosenwald were so eager to be rid of him that they agreed to what they considered an outrageous demand. Fortunately, their business’s profits increased so rapidly that they were able to pay Nusbaum off in full in three years. From a business perspective, the decision was sound, but it was personally painful for Rosenwald. Despite Gussie’s repeated attempts at reconciliation, Aaron Nusbaum never spoke to his sister or brother-in-law again.

Having weathered this crisis in leadership, Sears, Roebuck confronted an equally demanding challenge in the need for more space for merchandise and operations. In 1904, the company purchased forty acres of undeveloped prairie land on the west side of Chicago, conveniently close to railroad lines, for a spacious, new, modern plant. Despite the fact that his only previous construction experience was contracting for his own home, Julius Rosenwald took charge of this enormous project. Remarkably, work was completed in just a year. Not surprisingly, the cost was more than the young company could immediately bear, so, in the spring of 1906, Sears and Rosenwald met with Harry Goldman to negotiate a loan of five million dollars (approximately $125,000,000 in 2010) from the young company, Goldman Sachs. But Goldman suggested something other than a loan. He recommended that Sears, Roebuck become a publicly owned company by issuing ten million dollars’ worth of preferred stock and thirty million dollars’ worth of common stock. Sears and Rosenwald took Goldman’s advice and went ahead with what would become the second IPO in American business history (the first had been orchestrated by Goldman Sachs earlier that year for the General Cigar Company). The IPO gave Sears the capital it needed to pay for the new plant and made instant millionaires of Richard Sears and Julius Rosenwald. According to Rosenwald’s biographer (and grandson) Peter Ascoli, Rosenwald’s efforts at the time to advance funds to a small group of long-time Sears employees, thereby allowing them to be among the first to purchase stock, may have been the germ of the idea that later became Sears’s innovative and widely imitated employee profit-sharing plan.[13]

The state of the art plant made rapid expansion possible by successfully addressing a problem that had long bedeviled the company – namely, the timely and accurate filling of orders. The man who had been the operations superintendent, Otto Doering, designed an ingenious system of conveyor belts and chutes to bring various items from separate departments together into a single order. As Ascoli explains it, “the processing and shipping systems were so efficient that, according to legend, Henry Ford visited the plant and obtained ideas for his assembly line. And Ford was not the only visitor. The new Sears, Roebuck plant became a showplace. In his catalog copy, Richard Sears invited any reader who so desired to visit the facility, and many took advantage of this offer.”[14]

By 1906, the new plant was complete and business was robust, but fissures were appearing in the heretofore solid relationship between Rosenwald and Sears. One historian described the difference between the two as follows: “Sears was a star and Rosenwald a team player. Sears overshadowed others. Rosenwald developed them.”[15] In 1906, the two men disagreed on the question of expanding the company through the addition of a branch in Dallas. Rosenwald opposed the move as premature and excessively costly but Sears went ahead with it anyway. In the end, the Dallas branch did well and other branches were subsequently opened elsewhere, but the relationship between the two men had been damaged. Another difference in approach emerged on the subject of marketing. The ever-inventive Sears was constantly looking for new ways to advertise, encourage sales, and build their customer base, even if it meant offering costly incentive programs to good customers. In 1907, when Sears experienced a downturn for the first time, Rosenwald seriously questioned the wisdom of these programs. His approach to the slowdown was more traditional – to cut costs, including payroll, and to focus on the most successful product lines and on the efficient service that people had come to expect from Sears. He was confident that the nationwide recession would pass.

The crisis between Sears and Rosenwald came to a head in 1908. By that time, even the employees who were personally devoted to Richard Sears were siding with Rosenwald and his more conservative approach to the serious issues at hand. Sears himself had been distracted from the business by the illness of his wife and his own failing health. In late November 1908, he resigned, but agreed to remain chairman of the board. But his influence declined rapidly, and in September 1914, he died at the age of fifty.

From 1908 until his retirement from active company leadership in 1924, Julius Rosenwald was the undisputed head of Sears. During this time, the company maintained its position as the country’s premier mail order company. With sales of more than $245 million in 1920 (approximately $2,670,000,000 in 2010), Sears took in twice as much revenue as its nearest competitor, Montgomery Ward, and five times as much as the third-ranking U.S. mail order company, National Bellas Hess. Sears owned or had a major interest in twenty-five factories that produced its merchandise, and it worked constantly to improve and refine its product lines.

Assisting Rosenwald as his second-in-command was Albert Loeb, a lawyer who had drawn up the papers for the Nusbaum ouster and had then joined the company as its secretary. When Richard Sears left the company and Rosenwald took over as president, Loeb assumed the role of vice president. Loeb had purchased enough stock to make him a wealthy man. Loeb and Rosenwald, both of German-Jewish heritage, were personally close; they were neighbors in Chicago’s Hyde Park neighborhood, often played tennis, took long walks together, and rode to work together in Rosenwald’s car. Loeb brought tact and good interpersonal skills to his position, and Rosenwald came to rely on him for these qualities and for his institutional memory as one of the company’s senior employees. It was Loeb who worked out the details of the generous employee profit-sharing plan that Sears would introduce in 1916.

By 1910, Sears had 6,160 employees, a number that more than tripled in the decade that followed. The company’s wages were typical for the time, but Sears had always offered benefits that were somewhat above the norm. From 1902, the Sears Mutual Benefit Association, initially open to employees who had been with the company at least five years, provided compensation for absences due to illness. A week of paid vacation was offered to employees after five years, later after three. This may seem stingy by modern standards, but according to one history of the company, this policy was “well established long before it became a common feature in American industry.”[16] In 1912, the company introduced a system of anniversary checks that encouraged employee loyalty. Company policy encouraged service in the National Guard by offering employees full pay while they were absent from work on account of military service (a policy that was still in effect in 2003 when Sears announced that employees called for National Guard service in Iraq would be able to return to their jobs after their deployment).

In December 1916, the New York Times reported that Sears’s new employee profit-sharing scheme was attracting widespread attention as “the most liberal and comprehensive of its kind.” [17] Anyone who had been with the company for at least three years was eligible for the program, and according to a news report, the majority of those eligible to participate did so, contributing 5% of their salary each year. The company, in turn, invested 5% of its profits in the fund. The year the plan was unveiled those profits amounted to eleven million dollars. In an interview with the New York Times, Rosenwald said that the purpose of the plan was for employees “to share in the profits of this business and to encourage the habit of saving.” He later added that “the besetting sin of the American people is lack of thrift.” The article ended with the words of a secretary, who explained to the reporter that of course she and her fellow typists and accountants had joined the plan. “My dear sir,” she said, “we are now part of the firm.”

The following year, 1917, Rosenwald was distracted from his work at Sears by an unexpected call to serve the nation as a member of a commission charged with advising the Council of National Defense. He had been speaking out about the country’s need for military preparedness and, as a result, was invited to chair the Committee on Supplies, whose purpose was “to cooperate in an advisory capacity with the purchasing officers of the army and navy departments in working out problems of procurement and contracting.”[18] For the first half of 1917, Rosenwald shuttled back and forth between Chicago and Washington. The committee chairmanship was demanding and time consuming, and Rosenwald decided to forego his Sears salary for the duration of his service. In the late summer of 1917, amidst the reality of war, Rosenwald, his wife, and their two youngest children moved to a large rented house in the nation’s capital.

By mid-1918 it was apparent to Rosenwald that his efforts to trim waste in military procurements by contracting directly with manufacturers and eliminating middlemen were only succeeding in part and that his committee was gradually ceding responsibility to the newly established Quartermaster’s Department. When he was asked to recommend someone associated with Sears who might go to France to speak to American troops about business opportunities that would await them when they returned to the United States, he volunteered to go himself.

Rosenwald sailed for France in early August and returned two months later after touring the front and giving dozens of short speeches at hospitals, barracks, and YMCA recreation tents. His speeches went over well. The soldiers responded to his personal warmth, his lively style, and his optimism about the country’s economic future and the possibilities that would await them back home.

That confidence was about to be severely tested. For the moment, business was good – net sales for 1919 were almost $239 million (approximately $3,010,000,000 in 2010), considerably higher than the previous year. Rosenwald approved the construction of a new Sears branch in Philadelphia and tapped his son Lessing to head it. However, in early 1920, the country entered a mild recession. Sales began to fall as incomes (particularly on farms) dropped. Sears had enormous outstanding orders with suppliers that could not be canceled. By 1921, Rosenwald was cutting staff and reducing prices in an effort to reverse the negative trend. But Sears’s stock prices dropped so dramatically that by the end of 1921 the company’s survival was in doubt. At the suggestion of Albert Loeb, Rosenwald decided on bold action to save the investment of Sears stockholders. After considerable hesitation, he agreed to personally donate 5 million dollars – a staggering $60,900,000 million in 2010 dollars – to the company and, in addition, to purchase the land on which the gigantic Sears plant stood. He made an initial payment of $4 million dollars on a purchase price of $16 million ($195 million in 2010) before the end of 1921. A day after the transaction was announced, one of the wire services quoted Harry Sachs as calling the action “one of the most generous acts of an individual that has ever come under my notice in the commercial work, illustrating, as it does, his remarkable attitude towards the company’s stockholders. In my opinion it is also an indication of his confidence in the stability and future of the business.”[19] By the following December, the situation had improved and Rosenwald was cheerfully writing to a friend that “our company received more orders during the last two weeks than in any two weeks in its history.”[20]

As the company regained its equilibrium, Rosenwald began to think about the need for new leadership. Although he remained active and vital for several years, Rosenwald experienced a permanent health decline after his trip to France, and his attention was increasingly focused on his philanthropic activities. In 1924, his trusted colleague Albert Loeb died of a heart attack, his death surely hastened by his son’s confession to the sensational murder of a boy abducted practically in front of the Rosenwalds’ house, an inexplicable, senseless crime he had committed with a friend, Nathan Leopold.[21]

In late 1924, Rosenwald selected Charles M. Kittle, a railroad executive with no mail order experience but strong administrative skills, to succeed him as president of Sears. As vice president, he chose Robert E. Wood, a West Point graduate who had been a brigadier general and acting quartermaster general during the war and was employed by Montgomery Ward at the time. Rosenwald retired from the presidency of Sears and became chairman of the board. For the next few years the company did well; it opened its first retail store in 1925 and twenty-six more in the following years. But Kittle was personally unpopular, and in early 1928 his brief tenure ended when he died unexpectedly. This time the issue of succession was more difficult for Rosenwald. His older son, Lessing, who had been skillfully tending the business in Philadelphia, was eager to be considered for the presidency, as were two long-time Sears executives, one of whom, Max Adler, was married to Julius Rosenwald’s sister. Despite these personal considerations, Rosenwald did what he thought was best for the company: he offered the post to General Wood, the youngest and least wealthy (and therefore, in Rosenwald’s eyes, most likely the boldest) of the candidates.[22] Max Adler promptly resigned, but Lessing Rosenwald stayed on, having been persuaded by his mother to see the advantages of remaining in Philadelphia, where he was far removed from his father’s overshadowing reputation and free to pursue the art collecting that had become his passion.

In 1929, Augusta Rosenwald died. Julius and Augusta’s marriage had been a long and loving one, but Rosenwald soon remarried. His second wife, Adelaide Goodkind, was his son Lessing’s widowed mother-in-law. The couple took an extended wedding trip and then spent several months in Hawaii. Unfortunately, Rosenwald had begun to suffer seriously from heart disease and had to content himself with limited activity during his final years. He died at home in January 1932.

Social Status, Personality, Family, and Philanthropy

Julius Rosenwald’s parents were poor immigrants who had achieved middle class status by the time he was born. Through his astute business sense and good fortune, he himself became tremendously wealthy. He was never one of the nation’s richest men – a 2006 ranking estimated his lifetime fortune at $80 million, putting him at number fifty-seven on a list topped by John D. Rockefeller with a fortune of $1.4 billion. The same list put Chicago department store mogul Marshall Field at number ten and automobile manufacturer Henry Ford at eleven.[23] Still, he was enormously wealthy by any measure. Despite his riches, Rosenwald retained the sense of thrift and moderation with which he had been raised, and his personal style remained unostentatious. In 1904, Rosenwald’s new home in Chicago was reviewed by Architectural Digest, which described it as “plain and even severe in treatment,” having “dignity without the slightest pretension.”[24] When his son Lessing was a student at Cornell, Rosenwald asked for detailed accounts of how he spent his money, sometimes criticizing his purchases “A baseball glove at $3.50 is a terrible extravagance,” he wrote in 1908.[25] In today’s dollars, this would be about $80.00, a typical price for a leather glove. As an old man, one of Rosenwald’s grandsons recalled bumping into his grandfather on the train from Chicago to New York and being berated for traveling in a luxurious sleeping car when he could have saved money by traveling coach. Julius Rosenwald had a strong sense of discipline and values, and he did not want wealth to corrupt his children or grandchildren.

Despite Lessing’s perceived extravagances, he and the other four Rosenwald children inherited their parents’ core values and were active in philanthropy and public service. After working his way up from stock boy to chairman of the board at Sears (a position he assumed upon his father’s death), Lessing retired at age forty-nine to devote himself to collecting rare books and prints. By the time of his death, he had donated approximately 22,000 drawings and prints to the National Gallery of Art. He also gave his collection of illustrated books and manuscripts to the Library of Congress, which named its rare book reading room in his honor. The giant Bible of Mainz, a priceless manuscript completed in the middle of the fifteenth century and now on display in the foyer of the library’s Jefferson Building, was a gift from Lessing Rosenwald. After her death in 1960, Adele Rosenwald Levy was eulogized as a philanthropist and social service leader and was remembered for her work with the Citizens’ Committee for Children of New York City and for numerous initiatives benefiting refugees and displaced persons. She was also an art collector who served on the executive committee of the Museum of Modern Art, to which she donated several significant works. Edith Rosenwald Stern was a “grande dame” of New Orleans. After her 1980 death, she was described as the city’s “foremost philanthropist.” Among other philanthropic endeavors, she helped found Dillard University, a predominantly black college, supported the New Orleans Philharmonic, and left her estate, Longue Vue, to the city as a museum and public garden.[26] Like her sister Adele, Marion Rosenwald Ascoli gave to and served on the boards of many organizations benefiting poor and underprivileged children. From 1948 to 1960, she served as president of the Northside Center for Child Development in Harlem. She also served as president of the New York Fund for Children, and, like Adele, was active in the Citizens’ Committee. She died in 1990 and left 150 acres of land in Croton, outside of New York City, to conservation. William Rosenwald was also well known for his philanthropic activities, which included leading a family effort in the 1930s to help 300 Rosenwald family members leave Nazi Germany and settle in the United States. William Rosenwald was also national chairman of the United Jewish Appeal, and he served on the board of trustees of Tuskegee University for forty years.

Julius Rosenwald’s own philanthropy began with the traditions and institutions of the Jewish community. From his earliest days in Chicago, he attended services at the Sinai Congregation, where he was deeply influenced by Rabbi Emil Hirsch (originally from Luxembourg and educated in Berlin), who preached a message of active engagement with the world and concern for the poor in one’s own community. In 1906, the year of the Sears IPO, Rosenwald became the largest Chicago donor to the Sinai Relief Fund. He accepted a position on the board of one of the relief fund’s charities, the Chicago Home for Jewish Orphans, and became what he called a “schnorrer,” someone who went to visit other members of the temple to encourage them to follow his lead by making large donations. He contributed to a new building for Michael Reese Hospital, which catered to Chicago’s well-established German-Jewish population, and joined the board of the Chicago Hebrew Institute, which offered assistance to Jews among the city’s large number of recent immigrants.

By 1910, Rosenwald’s attention had been drawn to the needs of African Americans. In the summer of 1908, one of the country’s first major race riots had occurred not in a southern city but in Rosenwald’s own hometown of Springfield, Illinois. Several people were killed in riots that destroyed the black part of town. It took the National Guard three days to quell the violence. About the same time, Rosenwald’s friend Paul Sachs (of the Goldman Sachs family) gave him two books that greatly impressed him. Up from Slavery was the autobiography of Booker T. Washington. Born a slave in Virginia, Washington was the founder of Tuskegee Institute (later University) in Alabama and was widely revered as an educator and public speaker. An American Citizen by John Graham Brooks was the biography of William Henry Baldwin, Jr., an executive of the Southern Railroad. Baldwin had dedicated his career to promoting good relations between workers and management, and he had a particular interest in the welfare of black Americans. After joining the board of Tuskegee Institute, he became a friend and supporter of Booker T. Washington. Rosenwald was inspired by what he learned from both books. In 1910, he made a generous offer of financial assistance to help build YMCAs for black Americans, first in Chicago and then in cities all across the country.[27] The following year, he jumped at a chance to meet Booker T. Washington.

The two men recognized that their goals and personalities were complementary. Both were pragmatic, drawn to action rather than ideas and talk. Rosenwald agreed to join the board of Tuskegee Institute and pressed Washington for advice on other ways he might use his wealth and influence to assist African Americans. As a result of their conversations, the two men created a plan to help rural southern communities build schoolhouses for black children and to ensure that these schools were adopted into their states’ public education systems. Originally administered by Tuskegee, the schoolhouse building program was transferred to the Rosenwald Fund after Washington’s death. By 1932, the fund had aided in the construction of five thousand schoolhouses in fifteen states across the American South. By the time segregation ended in the 1950s and 60s, these schools were educating one third of African American children in the South. Today, in many communities, the buildings, collectively known as “Rosenwald Schools,” are being preserved as a significant part of African American history.[28]

Rosenwald had a long-standing conviction that charitable foundations should not exist in perpetuity. He believed that donors could not foresee the needs of future generations and, therefore, should not tie up funds in endowments that would exist long after they themselves were gone. The trustees administering such funds, he felt, would become an entrenched bureaucracy and would stop being intellectually bold and experimental. In 1928, he reorganized the Rosenwald Fund, donated an additional $20 million ($255 million in 2010), and hired a professional administrator, Edwin Embree of the Rockefeller Foundation, to run it with an appointed board of directors. He stipulated that the fund would complete its work and close its doors twenty-five years after his death. In fact, the Rosenwald Fund closed in 1948, sixteen years after Rosenwald’s death, having supported an extraordinary range of programs and individuals, most of them related in some way to promoting the well-being of African Americans and improving U.S. race relations. Besides the schoolhouse building program, the fund awarded fellowships to a number of men and women who went on to significant careers in the arts, education, and public service, including diplomat and Nobel Peace Laureate Ralph Bunche, writers Zora Neale Hurston, Langston Hughes, Ralph Ellison, Claude McKay, W.E.B. DuBois, James Weldon Johnson, and Robert Hayden, educator Horace Mann Bond (father of former NAACP president Julian Bond), photographer Gordon Parks, singer Marian Anderson, and many others. Howard University, Dillard University, and Meharry Medical School, institutions that educated black Americans, also received significant gifts.

In addition to these philanthropic initiatives, Julius Rosenwald is also remembered for two major donations. He was the driving force behind Chicago’s Museum of Science and Industry, which would not have been founded without his vision and financial support. In 1926, Rosenwald pledged $3 million for the creation of the museum ($37 million in 2010) and eventually supplemented this donation with $2 million more. The museum is now one of the gems of the city. And his million dollar matching grant to the American Jewish Committee for the welfare of Jews in Europe during and after the First World War became legendary within the American Jewish community. In April 1918, the Committee organized a banquet in his honor to thank him for his generosity. At the banquet, he was given an antique loving cup, which was inscribed: “To the honorable Julius Rosenwald – Patriotic American, Faithful Jew, Farsighted Philanthropist.”

Immigrant Entrepreneurship

Julius Rosenwald combined traditional old world values – both German and Jewish – with an unusual ability to respond to the opportunities and challenges of the new world. His German parents imparted the values of thrift, honest dealing, and hard work; his family network gave him professional training and business opportunities that he translated into extraordinary commercial success; and his Jewish faith taught him that he was under an obligation to use his wealth to benefit others, an obligation he passed on to his five children.

Rosenwald grew up speaking German as well as English, and as an adult he made frequent trips to Germany, often with his family. It was his son William’s enthusiasm for the Deutsches Museum in Munich that inspired his founding donation to the Museum of Science and Industry in Chicago. Julius and Gussie sent their daughters Adele and Edith to a finishing school in Dresden. They corresponded regularly with relatives in Germany and gave them generous gifts of Sears stock. Julius made donations to the Deutsches Museum, to Vienna’s Technisches Museum, and in 1918 he gave $100,000 (approximately $1,450,000 in 2010) to a fund to feed German children. President von Hindenburg thanked him for his aid to the German people with the gift of a porcelain vase in 1930.[29] Yet Gussie always traveled with an American flag in her suitcase, and Julius Rosenwald’s language was peppered not just with German expressions (he once wrote that a big dinner had left him feeling like a “gestopfe Gans,” a stuffed goose) but also with American slang (he referred to his business as “the shebang,” bad ideas were “bunk,” and he often described himself as feeling “bully”). Unlike many of his contemporaries in the Jewish community, he had no interest in Zionism, feeling that a homeland in Israel had nothing to offer American Jews, who had already found a land of opportunity in which to flourish and grow.

For fifty years after Julius Rosenwald’s death, Sears, Roebuck remained the largest retailer in the United States. The company weathered the stock market crash of 1929 and the Great Depression far better than it had the financial crisis of 1921, thanks in part to the lessons it had learned back then. It did not have the enormous inventory it had had in those days, and its rapidly expanding chain of retail outlets gave it greater flexibility in adjusting prices and responding to changes in the marketplace. The expansion of retail outlets continued steadily after the Second World War as suburban malls proliferated. By the early 1970s, Sears was the world’s largest retailer. In 1973, the 108-story Sears Tower in Chicago became the company’s new corporate headquarters. At the time, it was the world’s tallest building.

Over the next few years, though, continuing competition from other companies combined with the recession of the early 1980s to slow Sears’s growth. The company was sluggish in responding to changes in tastes and shopping trends. The Sears Tower remained half vacant, and by the end of the century it had been sold. The publication of Sears’s “Big Book” catalog ceased in 1993, and in 2005 the company merged with another major retailer, K-Mart. Today, while it is no longer the preeminent retailer it once was, Sears operates around 800 stores and remains well known for its Kenmore brand home appliances, Allstate automobile insurance, Diehard batteries, Craftsman tools, and other lines. It advertises itself as the nation’s largest provider of appliance repair services, claiming to make 14 million service calls annually.[30]

Conclusion

Because the commercial enterprise with which he made his fortune does not bear his name, and because his charitable foundation no longer exists, Julius Rosenwald is less well known today than he was at the time of his death. But that is changing, thanks to the vibrant movement to document and restore the Rosenwald schools that he helped build. Recent scholarship, especially a 2006 biography by his grandson, Peter Ascoli, has also shed new light on Rosenwald’s life and legacy, and contemporary philanthropists have become increasingly interested in the imaginative way in which he used his fortune to benefit others – particularly the underdogs of American society with whom he, as a Jew, identified. In 2006, Philanthropy magazine profiled Rosenwald, calling him “the greatest twentieth century donor you never heard of.” It seems likely that, in the years to come, his name and legacy will become more, rather than less, familiar.

Notes