Multi-Disciplinary Reading – Book Reviews

The Fish that ate the Whale, Rich Cohen, 2012 – How relevant can a banana business from 100 odd years back be in the current day? That’s what I wondered when buying this book. Started it with reluctance and then found myself sucked in and transported in time and space to the isthmus (strip of land that connect North and South America) of the late 19th century. It is amazing that Banana was unheard of in the US, couldn’t be grown there either, but became a staple in such a short time, a triumph of trade, farming, politics, marketing and of course colonialism and America’s foreign policy. This is a story of the comeuppance and dominance of Sam Zemurray and United Fruit, his competition which he later took over in a genius hostile takeover. Part biography, part history, it includes colorful characters like Lee Christmas and Che Guevara.

My notes –

• You drink with a man, you learn what he knows (Sam learnt about the banana business this way)

• Jews fled to America having been persecuted in Europe and own a lot of the businesses in the US – most started as small town department stores that stocked everything but later some of them became big like Lehman brothers

• The Boston Fruit company (later became United Fruit) dominated the trade and carried fruit from Jamaica to Boston

• At Boston, bananas were sorted into good (no freckles), turnings (1 freckle) and ripes (> 1 freckle). Ripes would soften in less than a week and stink and were useless so were dumped at the docks and never went further

• If you squeeze a green banana, it will turn in days instead of weeks. Nicks, dents and bangs were equally harmful. A ripe banana will cause those around them to ripen and a whole boxcar can be ruined quickly

• Ripes were considered trash only because Boston Fruit was too slow-footed to cover ground. Zemurray thought he could be swift and bought ripes at throwaway prices and turned his $150 into $190 with a $40 profit in his first run selling ripes from the boxcar (Sam came to be known as Sam, the banana man)

• Ripes were a niche – overlooked at the bottom of the trade. It was logistics – could you move the product faster than it can rot?

• Banana business had settled into a hierarchy – at the top were owners and men who sat in the boardrooms and traded stock. Boston Fruit was dominated by old New England families. There were 50 small and midsized importers and beneath them sea captains who rented cargo space. Then the bureaucrats: dock agents, purchasers, inspectors, overseers who worked the wharves and spoke only of bananas and at the bottom the stevedores, loaders and unloaders – mostly African Americans and Sicilians – always present, never seen and under them all, the banana peddler (United Fruit say Sam as one)

• In 1899 Sam sold 20,000 bananas, in 1903 he sold 574,000 and within a decade, more than a million a year. The niche was like a previously untilled fertile ground. From a fool buying ripes, he now had $100k in his bank by the age of 21

• Sam took a partner, Hubbard and Hubbard-Zemurray company (1903) started with a capital of $30k contracted Central American farmers and paid a percentage of each harvest

• United Fruit was popularly called El Pulpo (the Octopus) as it wrapped its tentacles around every start-up in the banana industry – it either owned a piece of you or destroyed you. United Fruit owned 25% of Sam’s company as a silent partner

• A banana plant under best conditions can grow 20 inches in 24 hours. It bore fruit 3 times in a year for 20 yrs. You dig up the rhizome, hack it to pieces and plant each piece and they would all grow into plants that last another 20 years.

• Banana required sandy soil (loam), high humidity, high temperatures and at least 180 inches of rain a year. A frost will wipe out entire crop and felled easily by strong winds being top-heavy

• Big Mike was a hybrid created in 1836 in Jamaica had thick skin and slow ripening time and was hardy and didn’t need delicate handling

• Banana plant is not a tree, its technically a herb – world’s tallest grass (technically banana is a berry)

• All banana plants are clones, replica of the entire species – so a parasite or disease that mutates to kill one banana kills entire species (Big Mike was destroyed this way)

• Bananas were brought to the isthmus in 16th century by a bishop but for 350 years only consumed within a mile

• Successful Banana businesses had to 1. Be big and have enough capital to weather the storm of bad years 2. Grow its own fruit to have better control in down season 3. Diversify across geographies so one disaster doesn’t wipe out entire supply

• Boston Fruit changed the model of banana from being high price, low volume to low price and high volume. By 1899, it controlled 75% of the US market

• Boston fruit had all its supply coming from Jamaica and in 1899, year without bananas almost went bankrupt. While banks thought Boston Fruit had grown too big, it pitched to the banks that the problem was that they were too small. They wanted to be so big, growing fruit in several geographies that nothing would kill them. Thus was born, United Fruit

• People stopped slipping on banana peels when Big Mike went extinct

• The early banana traders did not fear competition, their worry was that there wouldn’t be sufficient bananas

• 1899 (year without bananas) led to consolidation in the banana business. Most small players were willing to swap independence for security. United Fruit merged with 27 banana companies

• Sherman Anti-Trust act was passed in 1890. So UF wanted to control no more than 49% of the business in any market – big enough to dominate but small enough to avoid prosecution – so rivals existed so UF could prosper

• By 1905, UF owned most ships, planted most fields, had the most money and controlled both supply (controlling plantation) and demand (increasing market penetration)

• By 1910 UF had 115 ships used for transporting bananas but also the largest private navy

• All migrants landing off the boats in the docks in USA were handed a banana (creating market)

• UF began selling baby food made of bananas to hook customers when they were tiny. They tried hot banana drink to replace coffee (failed), banana fluor and banana bread and a book of banana recipes to expand the market. The crucial breakthrough was banana and corn flakes as the quintessential American breakfast

• UF was the Ottoman empire of trust. Over time the crucial benefit of competitive trade: better product at lower price was lost. Justice Dept. prosecuted United Fruit but UF won since most of its action under review occurred overseas – greatest tax-saving, law-avoiding scheme of all time – later used as template for the global corp. that exists both inside and outside American law, that’s everywhere and nowhere, and never dies

• Banana republic was a term coined by ‘O Henry’ in ‘Cabbages and Kings’

• Sam crossed Honduras on mule back so he could learn the country, meet its people and scout for land

• Pan-American highway starts in Alaska and continues 30k miles to the bottom of the world – except for 65 mile stretch called ‘Darien Gap’ in Central America. If Russia is the Trans-Siberian railroad, Germany Autobahn and US Route 66 – Central America is the Darien gap (Gap still exists ‘22)

• Gabriel Garcia Marquez’s One hundred days of solitude has a ‘Mr. Herbert’ based on Sam Zemurray

• A great businessman is dumb enough to act even when he cannot afford to (Sam bought 5000 acres of land along Cuyamel river for $2000, all borrowed). He later went on to build wharves, bridges, railroads in Honduras, all privately owned so he could transport his bananas

• On a banana plantation, clearing weeds is breathing. Without it, the plantation dies

• Sam believed in the transcendent power of physical labor. He was deep in the muck, sweaty, swinging the blade – helping clear the plantations and plant the rhizomes. He understood every part of the business from the executive suite where the stock was manipulated to the ripening room where green fruit turned yellow

• A businessman can live with a certain amount of corruption – in NY they call it ‘honest graft’. (Corruption is only when a bought man doesn’t stay bought)

• When you pay an engineer by the mile, the track goes nowhere in the longest possible distance

• Honduras owed American banks (including JP Morgan) $100m. They wanted to collect this debt by taxing imports into Honduras (planned by JPM and Knox, the US secretary of state). This was trouble for Sam who imported all material from US for the infra. Sam overthrew the Honduras president and took on JPM and Knox, two of the most powerful men in the world. He put Manuel Bonilla as president and controlled Honduras (guts!)

• Sam financed the civil war, hiring mercenaries like Lee Christmas, buying warships – for Sam, every problem was looking for a solution

• Banana wars: The enemy wins a battle or two, then everyone switches uniforms

• Sam framed the war as an insurgency, people rising up against the govt. selling the nation to gringos and Yankee bankers. When won, he got a lot of concessions and around 25k acres of free land

• Every great victory carries the seed of ultimate defeat

• Sam disdained bureaucracy, hated paperwork, refrained from giving interviews, addressing shareholders, or attending functions that took him away from his work

• When Cuyamel (Sam’s company) was harvesting 8 million bananas, United Fruit was doing 40m. Cuyamel employed 10k workers and UF 150k. Efficiency, morale and skills of employees, Cuyamel was way ahead – Sam had built a better business by being on the ground

• Why was UF inefficient? It was a collection of businesses slapped together. Lot of redundancy, duplication of tasks, divisions working against divisions, rivalries, confusing chains of command

• Most people looking at a banana saw a delicious fruit while Sam saw room for improvement (Selective pruning, drainage, silting, staking, overhead irrigation were Sam’s innovations being present on the field)

• Sam never said much and considered small talk a weakness

• UF offered to buy Cuyamel but Sam refused. When United Fruit and Cuyamel’s business war spilled onto politics and threatened to destabilise the ithmus incl. Panama canal, US govt. intervened (when there’s too much competition, the govt. intervenes as it does when there’s too little with a monopoly). UF merged with Cuyamel after the stock market crash of 1929. Sam now owned UF stock but handed over operations

• Caesura – a pause between episodes of life

• Some of the most profound moments of life arrive between 3-4am, when you stare at the ceiling without sleep

• A child is a sphere of vulnerability, another place the world can hurt you (Tolstoy)

• Tzedakah – Jewish belief of charity. More than praying or trips to Jerusalem or professions of faith, giving was more important (Sam was Jewish). The highest form of it was to give anonymously – without newspaper pomp or ribbon-cutting

• Sam believed giving with display is not giving, its trading. Not even the rescued learns the name of the rescuer – giving anonymously in a way that doesn’t disgrace the one in need

• Great depression led to collapse in demand, labor unrest, deflation. 1928 UF made $45m in profit. In ‘32 it made $6m – 85% decline. Less you profit, less you produce, it was death spiral

• Sam merged Cuyamel with UF when UF shares were worth $100. Post depression, it was $10. Sam’s networth plummeted from $30m to $3m

• Sam took over UF through a hostile takeover (NYT headline ran ‘The fish that swallowed the whale’). He repurposed the boats, fallowed the fields, controlled supply and turned the business around in 60 days and gave it 20 more years!

• Sam spent 6 weeks in the fields post takeover. The greatest mistake UF management made was to think it could run operations from the 10th floor of a Boston building

• Ships were running half-empty or at half-speed to save on fuel (while losing bananas). Sam cut down fleet-size, sold boats, ran boats only when full, rented out space in boats.

• He decreased banana supply to control the price. In some fields replaced banana with Sugarcane, a staple that was always in demand and coconut, pineapples and quinine trees

• From Boston to Bogota, he weeded out superfluous employees until 1 in 4 was gone (so much like what Musk did with Twitter)

• In two weeks of Sam’s takeover, the share price of UF climbed from $10 to $26 (Its amazing what a single man can do to the fortunes of a business)

• By 1940, UF owned 50% of all private land in Honduras though it cultivated only 10% (As a hedge against disease)

• During WW-II, Hitler’s U-boats destroyed a lot of UF fleet and lot of bananas rotted in the field and profits tumbled

• Never complain, never explain – Maxim Sam lived by

• Sam’s a son, fighter pilot died in the second world war and it broke him. He took over the Zionist cause of Israel for the jews. He used his ability politik, sway Central American countries’ votes and even Nehru would later claim a jewish businessman offered him a bribe of millions to vote in favor of the partition

• FDR’s (Roosevelt) four freedoms – freedom of expression, freedom of worship, freedom from want, freedom from fear

• UF owned 70% of all land in Guatemala and controlled 75% of all trade and owned most of the roads, power stations and phone lines, seaport and railroad

• Jacobo Arbenz, listed FDR’s freedoms as the goal and FDR as his hero when he campaigned to overthrow the Guatamala govt. but Sam’s lobbying and PR. spun him as a communist to get the support of American people to overthrow him

• Pablo Neruda’s 42 lines of poetry on United Fruit co. riled up the entire nation towards revolution

• Sam aligned the UF’s interests with the interests of the US govt. UF executives took positions in the govt. and vice versa. so UFs interests were the US govts. interests (little has changed on this since)

• Edward Bernays was the man who invented modern PR. He found ways to govern the ungovernable masses by manipulating the few thousand that set the agenda

• People can be made to behave the way we want them to behave via the subconscious of the public mind (Bernays)

• If you want to advance a private interest, turn it into a public cause (Bernays)

• Bernays linked “getting women to smoke more” a private interest, with “women’s liberation” a public cause. Smoking was marketed as a symbol of empowerment (Bernays was a genius)

• Exploiting existing sentiment and “manufacturing consent” and “crystallising public opinion” were masterful innovation of Bernays (Even govt. of India employed him apparently)

• When a traditional marketer was given the job of selling more Thunderbirds to the American public by GE, he proceed by advertising the obvious – engine size and top speed. Bernays lobbied for higher speed limits, making it more fun to own a Thunderbird

• When Simon and Schuster wanted to sell more books, he talked to architects and contractors to build bookshelves in suburban homes (I thought Ogilvy was genius until I discovered Bernays)

• Fisherman worries about the size of the catch, the philosopher worries about the soul of the river – Bernays’ indirect approach to everything

• When Jacobo Arbenz was confiscating UF land in Guatemala. Bernays, hired by UF turned this into a problem for the US by spinning it as spread of Communism in Central America (Arbenz was inspired by FDR and not Stalin but that didn’t matter with Bernays’ powerful propaganda)

• Sam and Bernays’ strategy to overthrow the Honduran govt. is used till date by the CIA of turning American business interests into American govt. interests by spinning it into something it could push down the throats of its public and cattle-prod them towards a war or design military coups as revolution

• UF financed articles that appeared in The Atlantic, NYT and even made a propaganda movie “Why the Kremlin Hates Bananas” (This should make you question everything)

• Soon as Geppetto carved him a pair of hands, Pinocchio reached out and pinched the toymaker

• The seizure of UF’s land lit a fuse that burned through the continent and gave Che Guevara his cause

• UF was broken up by an anti-trust suit and sold its properties in Guatemala to Del Monte and never again regained dominance. 1950 profit $66m. 1955 $33m by 1960, UF earned just $2m

• If you don’t understand the viewpoint, you don’t understand the price (Arthur Miller, in The Price)

• When ideas and assumptions prevalent at the time of their founding go out of fashion, the company fades

• Fidel Castro nationalised all of UF property in Cuba. UF financed Bay of Pigs invasion in 1961, 114 died, 1200 were taken prisoner by Castro and it was a big failure. By 1970 UF owned no land on the isthmus

• Last Big Mike was sold in the US in 1965 and became extinct to the Panama disease. Cavendish, neither as tasty, nor as big or hardy was unaffected by disease and continues to be sold today

This is actually a very small book but was packed with so much knowledge and wisdom on finding a niche, building and running a business, on skin in the game, corporate politics, religion, lobbying and PR, Central American and world history, colonialism, wars and geopolitics that you almost get a history of modern western civilisation in just ~200 pages. Very, very highly recommended 11/10