Fischer Black and the Revolutionary Idea of Finance

By Perry Mehrling

John Wiley & Sons

ISBN: 0-471-45732-9

Chapter One


The machine is useful, the system in terms of which the machines gain their use is efficient, but what is man?

The artist, the writer, and to a new degree the scientist seek an answer in the nature of their acts. They create or they seek to create, and this in itself endows the process with dignity. There is "creative" writing and "pure" science, each justifying the work of its producer in its own right. It is implied, I think, that the act of a man creating is the act of a whole man, that it is this rather than the product that makes it good and worthy. Jerome S. Bruner, On Knowing (1962, p. 17)

When his parents drove him up to visit Harvard College in the fall of 1954, young Fischer Black refused even to get out of the car. But once they were back home in Bronxville, New York, it was the only college to which he applied. There was never any question that Fischer would get in. He was a math and science geek, and the "number 1 candidate" from the elite Bronxville High School, according to the school's report. But he always liked to tell people that he chose Harvard because of the Freshman Glee Club.

It is true that he liked to sing. But what he wrote on his college application was that choral singing groups "provide social contacts." It was only one of many strategies that Fischer used to compensate for his awkwardness in social situations. At 17 years old, he already stood 6 feet 2 inches but weighed only 150 pounds, his outsized head perched atop an underdeveloped body. The high school's report put the best spin on it: "For one of his ability he is unusually well-balanced, although at times a little shy."

Growing up in Bronxville, young Fischer could not help but be acutely aware of his social deficits. One square mile in area and just north of New York City, Bronxville was populated mostly by people from somewhere else on their way up the corporate ladder. Parents kept busy with sports (golf and tennis) and cocktail parties, and children were expected to do their bit for the family cause, starting with the passing of hors d'oeuvres and drinks. Girls were expected to "come out" in elaborate debutante balls, and boys were assumed to be college bound, on their way to careers in business or one of the more remunerative professions. It goes without saying that the town was lily-white; thanks to an infamous so-called gentlemen's agreement, no Jews or blacks were allowed to own property. Casual racism and anti-Semitism were shared ground for a community whose principle anxiety was about class status.

Given his intellectual gifts, Fischer's parents thought he might become a doctor, and so were pleased when he won acceptance to the prestigious Precollegiate Research Training Program at the Jackson Memorial Laboratory in Bar Harbor, Maine, during the summer before his senior year in high school. But nine weeks of cutting open mice left him unsure whether a career in science was for him. A better clue to his future direction was the discussion group he organized with his high school friends "to try to work out effective methods of true discussion," as he would write on his college application.

He called the group the American Society of Creators, Apostles, and Prophets, and it had four members. George Amis was the Father. He went to Amherst College and became a professor of literature. Robert Helmreich was the Son. He went to Yale and became a professor of psychology. Fischer himself was the Holy Ghost, and Helmreich's girlfriend Eva Augenblick was Virgin Mary pro tempore. She went to Radcliffe and became a research medical doctor. Fischer's high school friends were not math and science geeks, but rather the intellectual leaders of the school, the backbone of the school's theatrical productions, and reliable producers of juvenile poetry for the student newspaper.

It was Amis, then in full flight from his stockbroker father's ambitions for him, who was the closest to being Fischer's best friend at the time. They built rockets together and blew them up in Fischer's backyard, and they traveled into New York to see the theater. In their junior year they were both in the school production of Lost Horizons, Amis as the second male lead and Fischer as the mysterious High Lama. According to the class yearbook, Fischer was "the personification of Oriental mystery." In the student newspaper, alongside a poem by Amis, is one by Fischer titled "Life or Death," which concludes with the stanza: "Death./All dies./Nothing is left./To be good?/No use./Death, death, death...."

Fischer signed Amis' yearbook with a passage from Samuel Taylor Coleridge's Rime of the Ancient Mariner: "With my crossbow I shot the albatross." For his own yearbook quotation, he chose a passage from William Falconer's famous poem "The Shipwreck": "Thou living ray of intellectual fire,/Whose voluntary gleams my verse inspire." The poet is invoking his muse, and asking how it can be that heroic sailors venture forth on such a shallow motive as material gain. The passage continues: "Can sons of Neptune, generous, brave and bold,/In pain and hazard toil for sordid gold?/They can...." The poet is preparing the reader to understand the eventual shipwreck as cosmic punishment for human greed. Fischer is signaling his own imminent rebellion against the values of Bronxville, and his determination to find another way.

The Black family came originally from Illinois farming stock. In 1898, however, the farm was sold to pay off mounting debts, and the center of the family shifted to Bryson City in North Carolina, where Amy Black moved after marrying Thad Bryson, son of the town's founder. Amy's older brother Stanley soon joined her and, in partnership with Thad, he built a thriving law practice around the land transfers involved in the growing timber and hydroelectric industries. Stanley Black married Marianna Fischer, a college classmate of Amy's from back in Illinois, and they raised four children in the big house up on Black Hill. There were two girls and two boys, and the youngest of them all was Fischer Sheffey Black, Fischer's father, born January 26, 1911.

Notwithstanding its name, Bryson City was at that time a town of fewer than 500 people, buried deep in the Great Smoky Mountains in the far western part of North Carolina. It was an island of sorts in the sea of southern Appalachian hill culture, a sea populated by rugged but impoverished backwoodsmen, isolated, inbred, and suspicious of "furriners." Marianna was determined not to drown in that sea, and she set the standard for the rest of the family. Energetic, strong-willed, and optimistic, Marianna's advice to her children was always "Be good and you will be happy." But she also took concrete steps to ensure her children's education as the road to a better life, by founding the local library and teaching in the local school. Following her lead, Stanley became trustee of the Bryson City School District, and served as chairman of the county board of education.

The two girls followed the example that Marianna set, continuing their education at Converse College in South Carolina. The eldest, Ellen Engleman Black, went on for her PhD in Sociology at the University of Chicago, became Commissioner of Public Welfare for North Carolina in 1944, and subsequently served as the first U.S. Commissioner of Welfare in the Department of Health, Education, and Welfare from 1963 to 1969. The second daughter, Louise Bryson Black, known as the pioneer of the family, sought her fortune in New York City in the middle of the Depression, where she became a model, a dance partner of Fred Astaire, and chief buyer for a major department store. There she met and married Oscar Cox, an up-and-coming lawyer working for Mayor Fiorello LaGuardia. He would subsequently go on to the Treasury Department in Washington where, working under Henry Morgenthau Jr. during the war, he wrote the lend-lease agreement with Russia.

The two boys took more after their father. In addition to his law practice, Stanley was also involved in real estate dealings on his own account, and was a founder of the local Bryson City Bank, of which he became president in the singularly inauspicious year of 1929. (The bank survived the Depression thanks to an infusion of capital from Marianna's brother, Louis E. Fischer, an engineer and businessman in Chicago, and thanks to the stratagem of paying off depositors with preferred stock.) The eldest son, Stanley Warren Black Jr., carried on the Black banking tradition, rising in the ranks of the American Trust Company to become executive vice president of the successor North Carolina National Bank, which would become NationsBank in 1991, only to merge with Bank of America in 1998.

The youngest son, Fischer Sheffey Black, inherited his father's sense of the main chance, moving from one thing to another as the opportunity arose. An electrical engineer by training, Fischer got his start at the Potomac Electric Power Company, in Washington, D.C., through family connections (Uncle Louis again). But soon he migrated to the business side of the company, while acquiring a law degree on the side. After the war, when the opportunity arose to try his hand as editor of the trade journal Electrical World in New York City, he jumped at the chance and subsequently became publisher as well. When that position began to seem shaky, he moved back onto the business side as executive vice president of Tampa Electric in Florida, while acquiring a broker's license and starting a brokerage business on the side. The constant through all these career changes, he would say, is that he was "never out of top management." Like his father before him, Fischer Sheffey attributed much of his business success to his fortunate choice of a mate, Elizabeth Zemp, called Libby. She made all the big decisions, and that was fine with him.

On the Zemp side, the family home was in Camden, the oldest inland town in South Carolina. Libby's mother, Albertus "Bertie" Moore Lenoir Zemp, traced her ancestry to pre-Revolutionary War days, and even earlier to the minister who officiated at the marriage of Pocahontas to John Rolfe. Libby's father's family were more recent arrivals, but nonetheless Libby remembers her father, James Blakeney Zemp, as the "most loved man in Camden." Bertie ran a local private school, while James was a jack-of-all-trades, operating a trucking business and a small vegetable farm, but also dabbling in real estate and serving as partner in the local bank. In the latter capacity, he was obliged to put up money of his own to save the bank during the Depression. The parental models in the Zemp family were thus quite similar to those in the Black family.

An only child, Libby led a charmed childhood full of afternoon horse rides with myriad cousins, Saturday tennis and picnics, parties, and even occasional circuses put on for self-amusement. It was a childhood without much money, but always there was enough for a cook and a maid. Great grandmother Elizabeth Peay Clark kept alive memories of pre-Civil War days when the family had owned a plantation, illustrating her stories about General William Tecumseh Sherman's march with a silver pitcher that had been punctured by a Union sword probing the ground where it was buried. As Libby put it, there were no famous people in her family, but they were people of strong character and self-discipline, with a reputation for honesty and loyalty, and that was plenty of which to be proud. She grew up identifying with Mary Chesnut, author of the famous Diary from Dixie about her life at Mulberry Plantation in Camden during the Civil War. Libby graduated as valedictorian from the local public school and went on to Converse College on scholarship with a major in mathematics and a minor in English. "Math is like a puzzle to me," she would say.

During the Depression, both Fischer and Libby came to Washington to find more economic opportunity, as well as a wider selection of potential mates. In September 1935, Libby was working for the Works Progress Administration (WPA) and the Federal Housing Administration (FHA), and Fischer was working for Potomac Electric, when they met at a party; they fell in love, and married in June 1936. Fischer recognized in Libby the qualities he had known and admired in his mother and his accomplished older sisters. And Libby recognized in Fischer the qualities she admired in her father, but also the opportunity to live out something of the life Mary Chesnut had led when she moved to Washington after her husband was elected to the Senate. Thanks to the social connections of Fischer's sister Louise, Fischer and Libby traveled in a "semifast set" on the edges of the Washington social scene. As newlyweds, they lived in Georgetown at 2530 Q Street.

The marriage was bound to succeed, Libby reflects, because she and Fischer had so much in common. "We were both Presbyterians, both bridge players, and both Southern." In fact, she was more genuinely Southern than he, and more genuinely Presbyterian as well since he was never very religious. But both were genuinely bridge players, and more generally both took pleasure in a rich social life filled with parties and dances, cocktails before dinner and sometimes after as well. Like her mother, Libby would always have a maid to take care of the house and the cooking. But she would also insist on putting aside at least $50 a week, which was half of their joint income at the time they married. As a consequence, there was always plenty of money in reserve. As children of the Depression, they always thought of themselves as savers even as they lived a country club life.

Fischer Sheffey Black Jr. was born January 11, 1938, the first of three children, "a love child if ever there was one" according to Libby-albeit a legitimate one. They called him Fish for short. Soon thereafter the family moved from the apartment in Georgetown to a small house on four acres of land on Old Dominion Drive in rural Falls Church outside the city.The first 10 years of young Fischer's life were thus spent in a kind of rural idyll, playing with his younger sister Janice Blakeney Black and brother Louis Engleman Black, tending the victory garden with his father, catching crawfish in the stream behind the house with his cousins Peter and Warren Cox, shooting squirrels while visiting his maternal grandmother in Camden, and fishing the mountain streams while visiting his paternal grandparents in Bryson City. The junior Fischer's early childhood was not so different from that of his parents.

The consequence was an abiding sense of security and acceptance that never left him. The simple country life built around loving family relations was a very good life, and always available in case other plans didn't work out. Later on, when sister Blakeney married a Jewish mathematician with two children of his own and moved to Quebec to raise goats, Fischer said he wanted to join her. He drove everyone up to see the farm and announced, "I think I'd like that." Probably he would not have lasted a week-he didn't even like exercise, much less actual physical labor-but that's not the important thing. His childhood life in the country was always a place he could go in his mind to find peace and calm.

From the beginning, it was clear that Fischer was special. His father taught him to read when he was only four years old, and his kindergarten teacher said he was the smartest student she ever had. He took obvious pleasure in learning new things, and also in teaching what he knew to his sister and brother. The move to Bronxville, when Fischer was 10 and already entering sixth grade-he had skipped a year-placed Fischer in one of the top public school systems in the country and confirmed his bookish nature. Schoolmates would come to the house at 46 Elm Rock Road and call for him to come out, but he wouldn't go despite his mother's encouragement. "They just want to hack around, and I don't like to hack around." He was always most comfortable at home, surrounded by his family, and his books and magazines.


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