In the end, once he had disposed of the remaining two hundred thousand shares for a profit of one dollar apiece, he did the math; 2.7 million dollars, in less than one month. It fit the pattern of profit that was building in the Brunswick Fund.
The fund economics exercise that began with the seven friends from Brunswick School in their junior year of Mr. Conetta’s Great Questions class had become a registered hedge fund. While it was generally known only to the seven partners, their banker, the SEC and the IRS until a year ago, it had now started taking on clients with the ability to invest at least five hundred thousand dollars for a three-year lock-up period. And what began as a fifty thousand dollar investment supported by the boys’ wealthy parents and supplemented with a second equal investment was now worth 28 million dollars. The total funds under the management of BF would soon grow to ten times that amount.
Kishenlal Moira was the managing director responsible for the trading operations and research. Edward March Wheelwright was the managing partner responsible for everything else, which mainly focused on oversight, administration and marketing.
As two of the original seven Brunswick boys in Brunswick Fund, they had left similar positions; Kish as a director at one of Bear, Stearns hedge funds before it went belly up in the mortgage backed securities crash that brought down the whole market and Edward at JP Morgan where he was a managing director in equity trading. Brunswick Fund would continue growing exponentially for the seven partners.
Chapter 24
The two Sebastian Balls took a trip to visit Ball-owned companies in Binghamton and Newburgh, New York, and two other non-owned companies with three plants near Pittsburgh. In Pittsburg, one company had two plants along the Monongahela River to the south and the other company had a plant along the Ohio River to the west and north. The younger Sebastian saw a world adrift. An old order had crumbled, the remnants of the industrial age strewn about, rusted hulks in idle by the rivers and streams that spawned an age. The new state had not yet emerged.
In Beaver Falls, Pennsylvania, on the Beaver River before it flows into the Ohio, on first entering the town he saw a home totally burned to the ground, just lying there. The fire was not recent. The house next door had lost its roof and part of its siding in the fire, but repairs were nearly complete. No repairs, no reconstruction was planned for the burned down house. After driving down the main street, a beautiful broad street, but with empty stores, for blocks and blocks, he thought of the old western movies and their false facades. Beaver Falls was now like that—a façade. No, that wasn’t it. A façade was false. This was not false. Once this was a thriving, important small town, like hundreds all across the Northeast and Mid-Atlantic. In this area all along the Ohio River sat the remnants of the steel, coke and coal industries. Giant shrouds cover the former plants—these roofs cover the emptiness of the industrial revolution. As America built up and out, the excess was no longer necessary. When the Japanese flooded the world with cheap steel, this area could not compete.
Carnegie and Frick were gone now, no titans were left. The steel beast lay dying; America had built one new plant in the last fifty years. As the Japanese built twelve new steel plants in that same time, the obituary was being written for a whole way of life—not just businesses, but towns where people made lives and friends, raised children, served their country and died. The grave yards of eastern Ohio and western Pennsylvania are well kept: rows and rows dedicated to servicemen, fresh flowers are still being brought to graves with American flags beside many of the graves. There are no ghosts there. The ghosts are in the towns among the living.
And when those plants closed their doors for good, when the last employees got their buyouts, separation pay, unemployment benefits, and what pensions remained, it was not that generation that was affected. They saw it coming, they heard it daily in work, at union halls—the end was near. For so long they heard it, when the end came it was a relief.
It was their children and their grand-children who wondered what happened. Where would they work, where were their friends moving to, why were the churches nearly empty or worse, closing. How do you close a church? How do you tell children God doesn’t live there anymore?
These giant dislocations had been happening for two generations. In the seventies they called the north the rust belt as plants began shutting and snow birds who only flew south in the winter were now migrating to lower cost of living areas in the south and west permanently. Here was an America that helped the world build itself out, and now, with city after city, town after town, was struggling to remain viable or teetering toward forfeiture.
Sebastian had seen these affects before when doing field work for his MBA when he visited shoe factories in Lynn and Brockton, Massachusetts. He saw it in the former All American City of Newburgh, New York, on this trip with his father. Newburg, a cold pitiless place that most Americans would be ashamed of if they saw it. Dickensian in the despair on the faces of the mixed races living there; children, street after street of children, in rags huddling in doorways, their only solace in this life: each other. When the shoe factories emptied out and the work moved to countries south of the equator, it was as if a neutron bomb had gone off in Lynn and Brockton: the structures remained, the people were gone.
These dislocations had always occurred since man first started paying for labor. When a cheaper labor source was found, the work moved there or the people moved to the work accepting the circumstances—Egypt, Greece, Rome, all the same.
England. When the states could produce textiles more cheaply, the manufacturing and design for the equipment moved to the states, bringing vast new wealth to the colonies, just as the world’s manufacturing center became China and was now bringing great wealth to that nation.
And these cycles Ball was thinking of no longer took centuries to play out. Now decades would see a nation win an industry and before a generation passed, that same nation would lose out the same way it was won—to a lower cost of labor. Sebastian knew work always moves to the lowest common denominator—the cost of labor. It is how we reward management—hold costs down; it is why we have unions—hold the cost of labor down; it is the way our stockholders decide to invest or not invest in our stock—the cost of revenue—how much did it cost to make, what are the margins for gross profit, operating profit and net profit. It is why our accounting systems would not work properly if we couldn’t bean count every hour of labor. Thousands of consultants would be unemployed, for who is it that identifies for management where labor must be cut, where work needs to move off shore.
Ball started to have a vision. He would examine labor intensive industries and their locations. Was it possible to build a virtual environment to continue after the neutron bomb of labor cost took the industry and the work but left the infrastructure. If technology could intervene along with cooperative government, then the cost of labor could be mitigated.
In the months following their return from this trip, Sebastian discussed these ideas with his father and, getting quite a bit of encouragement, went to work. He made several additional trips to Ohio and Pennsylvania. When the time was right, he decided he would need to start talking with Winston Trout. He believed Trout was the s
martest person on the face of the earth. If Trout Solar were going to build solar panels, they needed to be built here in the states. If the separate elements that went into making a solar panel could all be harnessed in one place, in an entity, in a company, cost could be ameliorated. Scale would matter more than a shrinking labor cost. If power companies would embrace utility scale solar to meet their states laws for upwards of 20 percent of energy generated from clean energy, say within ten years, then a new industry could flourish in America.
Chapter 25
Some men have a time in the limelight that lasts far beyond them. They don’t come often and we remember their names; Einstein, Caesar, Hugo, Gandhi, and Tchaikovsky. But they are rare. Of the billions of people who have inhabited this planet, not many are remembered beyond their own generation. Fame is fleeting. Most men shine for no longer than that brief burst of enthusiasm they put behind their great ideas. Human nature conspires against them: the inability of the creators to present their enlightenments, an attention deficit by those who would be their audience, or an inability to persevere and see their ideas to fulfillment.
But the names we remember, the Churchills, Hemingways, Curies, Mandellas, and M.L. Kings, they were more persistent. Their ideas were them, their lives; the ideas burned in them.
Sebastian Ball Jr.’s passion to renew capitalism was the type of vision that could have his name on the minds and lips of future generations. But like all great visions there was possibly remembrance of folly. All together his concepts were utopian; looked at in segments, folly.
****************
Sebastian Ball was able to arrange for the monthly Brunswick Fund meeting to take place at Trout Solar’s headquarters at 425 Park Ave. This would give him time to meet with Winston Trout to discuss what he felt could be his purpose on the planet. The Fund meeting would take place at 6 p.m. Ball set his meeting with Winston for 4 p.m.
When the secretary showed Sebastian into Winston’s office, they hugged as brothers hugged. It was one of the endearing measures of friendship that went to their brotherhood. It was born of seven boys in preschool; seven only-children in a school teeming with the offspring from large rich families. The only child of a rich person is a lonely child; surrounded by maids, nannies, chauffeurs, butlers and gardeners, their parents are engaged in lives of business, social and sporting activities that relegate the life of the child to being reared by others. Out of that loneliness, the seven boys found themselves at four years old the only children in the Brunswick School’s preschool program. But then they were not “only,” they were seven. As they moved through the Brunswick School, while in different classes or in different sports, they tried as much as possible to arrange togetherness, by requesting specific teachers, specific sports or adding an elective that would guarantee them being in the same class. Other schools may have shied away from allowing this clinging; Brunswick allowed and encouraged the boys to do what they wanted. And when Greenwich Magazine’s section on weddings would announce the Winston Trout and Emily Albright marriage, there would be the seven boys, only-children who were never lonely, happily in the wedding party as best men for their lifelong friend.
“Let’s sit over here,” Winston gestured, and they moved to two chairs by the large picture window that overlooked Park Ave below with its center strip a garden of grass and flowers.
“And what’s so urgent?” Winston asked Sebastian.
For twenty minutes Ball went on, non-stop describing the trip he and his father had returned from. He described his horror at the wake of the industrial age. He talked about the cities and the people he saw. The wounds the people had, not the physical, but the emotional: the psychological strain he saw in the eyes of women in Homestead, PA, and “the pitiful condition of the children in the streets of Newburgh, NY.” He described the missing people in places like Steubenville, Ohio, and Beaver Falls, PA.
Trout jumped in, “Stop, Sebastian, God, you’re depressing me. This can’t be what we’re going to talk about, is it?”
“Yes,” Ball laughed. “How to fix it.”
“So now you’re a sociologist, out to solve the world’s problems,” Winston smiled.
“Yup, that’s us.”
“What do you mean us? Don’t go including me in on one of your crusades,” Trout said, mindful, that Sebastian Ball really needed more to do. He would spend hours over the course of their years together, regaling his “brothers” with his plans to improve life as they knew it. And to be fair he had made good progress in a number of his philanthropies. Thinking of that good, Winston, checked himself as he noticed Sebastian frowning at his lack of enthusiasm, “OK, what is it. Tell me, what you want to do?”
That brought Ball back, “Winny, here’s my idea. I want to solve the energy crisis.”
“Doesn’t everyone. I was doing it at MIT with the ‘vessel,’” Trout added.
“No, I have the full plan. Solve the energy crisis at the same time, put millions of Americans back to work. I’m talking about shining up the rust belt. I’m talking about restabilizing hundreds of cities and towns in middle America,” and now warming to his own ideas, “I’m talking about ending America’s dependence on foreign oil, on foreign energy sources, and ending our balance of payments deficits with the Middle East and part of those deficits with China.”
“You’re running for office?” Trout asked, “Congratulations, Sebastian. Which one?”
“No, no!” an excited Ball said, “Not public office you smart ass,” Ball chastised his friend. “You’re the one always telling us about the importance of solar and the need to solve the energy crisis, right? You have all these panels you need to build, well build them here. In Steubenville, in Newburgh, in Homestead.”
“Well, you know my hot buttons, but we can’t build the solar industry here. It would be too expensive. It couldn’t compete with what the gas and electric utilities offer today. And we couldn’t compete against the Chinese who make the panels today; their prices are too low. Right now, price is the only factor that will make solar energy real,” Trout said.
“You once told me that the solar industry was too inefficient. What did you mean by that?” Ball said, tossing in a set up.
“It’s new. All its elements are scattered around the world. When the steel industry first got going, I told you this before, Carnegie had all those big plants but it was Frick who had the coke processes and plants to produce it that made steel purer and stronger. Carnegie was smart. He bought much of Frick’s business then brought Frick himself in to manage it all. And that was a simple industry. Solar—much more complex—and too many special interests in old energy like oil, gas and coal that would fight it and lobby it every step of the way,” Trout said with a frustrated gasp.
“But suppose it was in America’s interest?” Ball persisted.
“It is in America’s interest. It doesn’t matter. Old energy’s self-interest is first, to them.”
“What if I were able to bring the scattered elements of solar together?”
“It would make economic sense.”
“What if these elements were all in one company, an American company, creating thousands of jobs in depressed areas?”
“Then you should be running for public office,” Trout laughed. “You’re such a dreamer, Sebastian.”
“But, hypothetically speaking.”
“Yes, it would allow everything to scale up and the economics would make sense,” Trout said, partly to placate his friend. “But you don’t understand all that goes into making a panel.”
“I’ve been enlightening myself.”
“Please,” Winston smiled, “enlighten me.”
“Let’s see, you’ve got sand. You put it in a reactor, add some magic stuff and turn up the heat and presto you’ve got polysilicon. Then you take that, put it in a furnace, add some more magic stuff, and you’ve got an ingot. OK so far.”
Trout laughed, “So far much easier than steel, huh?”
“Then we take the ingot
; slice it up with a “special” saw. Put in an oven, add some more stuff and you’ve got a wafer,” Ball said, adding smugly, “So far it does sound a lot like steel: take an abundant resource from the ground, boil it, bake it, and slice it up.”
“Pretty damn funny, Sebastian. It’s more complicated,” Trout said, sounding a bit defensive, like a person with great knowledge of an industry talking to a neophyte.
“How?” Sebastian said.
“The magic stuff, the technology in the reactors and furnaces, for one. Where it’s done, for another,” Trout shot back.
“Let’s try this, Winny. Suppose you had unlimited resources, here, draw this out,” Ball said, reaching and pulling a pad from his brief case. “Draw it. How? Where does it begin and where does it end?”
And taking a pen from his shirt pocket he wrote in process order: “Sand > Reactor > Polisilicon > Furnace/Technology > Ingot > Oven/Technology > Wafer > Technology > Panel > Technology > Module > Sales > Distribution > Customer > Installation,” and he said, “That’s it at a high level.”
“So how’s this so different than any other manufacturing and distribution process?” Ball said, rather than asking, as he leaned forward and looked the diagram over.
“It’s not particularly difficult that way—the process of a manufacturing business is common. It’s the scattered approach and the players. For example, right now at Trout Solar, we do nothing here except invent and design the technology, then we contract with the Chinese to build it according to our specs. They in turn buy the reactors, furnaces and ovens we specify from the US or Germany. We do the selling and contract with installers in different parts of the world. So you can see how fragmented it is. All the elements are scattered.”