Within Reach is a series that outlies the achievements and opportunities of select individuals to display the perseverance that is required to achieve your goals in life. Nothing is presented to you directly, but opportunities are. If you are able to embellish those opportunities you’re able to further your success to ultimately become what it is you have envisioned.
I’m going to start this series with a prominent New York attorney Joseph Flom. Joseph Flom didn’t grow up rich, or even ‘privileged,’ he grew up poor. He didn’t have all the technological advancements that we have today, and even if he did, he wouldn’t have had access to them. Flom grew up in the Depression, in Brooklyn. He was raised in Borough Park by his parents whom were Jewish immigrants from Eastern Europe. His father’s job was to sew shoulder pads for woman’s dresses, and his mother did appliqué at home. His family was so poor that they had to move every year, due to the custom of first months free rent at the time, otherwise they couldn’t afford housing.
Flom took the entrance exam for the Townsend Harris public high school on Lexington Avenue in Manhattan. Known for it’s elite graduates, producing several influential people such as Nobel Prize winners, Pulitzer Prize winners, etc. He was accepted and that was his leading opportunity to become what it is that he wanted, an attorney. After school, he would work, as many young adults do, he pushed a hand truck in the garment district. After graduation he worked during the day, struggling to get by, and attended night school at City College in upper Manhattan for 2 years, before enlisting in the Army.
After the he served his time in the Army, Flom, with no college degree, applied for and was accepted to Harvard Law School. “I wanted to get into the law since I was six years old,” Flom says, why Harvard accept him, “Why? I wrote them a letter on why I was the answer to sliced bread.” Flom never took notes when he attended Harvard, in the 1940s, Charles Haar, a classmate of Flom’s noted, “He had that quality which we always vaguely subsumed under ‘thinking like a lawyer.’ He had the great capacity for judgement.” Flom was named to the Law Review, an honor reserved for the top of the class.
During the “hiring season,” the Christmas break of his second year, Flom interviewed with all big New York corporate law firms. At the end of the day he wasn’t hired, it wasn’t because he was capable, it was because of who he was, what he was, and where he was from. If you were not from the right background, the right social class, or the right religion, you weren’t going to be hired by any of Wall Street’s top firms. At that time Wall Street firms were like private clubs all consisting of people that grew up together, or had similar backgrounds and beliefs. Due to this, coming out of law school at that time, you were obligated to join a second-rate, no-name law firm.
“I was one of two kids in my class at the end of hiring season who didn’t have a job. Then one day, one of my professors said that there are these guys starting a firm. I had a visit with them, and the entire time I met with them, they were telling me what the risks were of going with a firm that didn’t have a client. The more they talked, the more I liked them. So I said, what the hell, I’ll take a chance. They had to scrape together the thirty-six hundred a year, which was the starting salary,” Flom remembered. The firm was started by Marshall Skadden and Leslie Arps, both of which were recently turned down for partner at major Wall Street firms, and John Slate, who worked for Pan Am Airlines. Skadden, Arps, and Slate was started in a small suite atop the Lehman Brothers Building on Wall Street, where Flom was simply an associate. They accepted any work that came in the door.
At this time, corporate law firms, which were the primary firms on wall street, handled the books behind the top corporations. During this time the major corporate firms didn’t handle litigation, they were solely dedicated to maintaining stocks and keeping corporations compliant with federal regulations. The firms believed that disputes were to be settled in the conference room, not the courtroom. “Among my classmates at Harvard, the thing that bright young guys did was securities work or tax,” a prestigious firm partner remembers. “Those were the distinguished fields. Litigation was for hams, not for serious people. Corporations just didn’t sue each other in those days.”
The old firms also didn’t want to handle hostile corporate takeovers. It was deemed unethical and scandalous, up until the 1970s, for one company to buy another company with out the agreement of the company being purchased. Most large, prestigious firms on Wall Street wouldn’t touch those deals. This is where Joseph Flom was given his opportunity, the opportunity that will lead to the success of his small firm.
“The Problem with hostile takeovers is that they were hostile,” says Steven Brill, who founded the trade magazine American Lawyser. “It wasn’t gentlemanly. If your buddy from Princeton is the CEO of Company X, and he’s been coasting for a long time, and some corporate raider shows up and says this company sucks, it makes you uncomfortable. You think, if he goes, then maybe I go too. It’s this whole notion of not upsetting the basic calm and stable order of things.”
Seeing that none of the top firms would consider these forms of litigation, you can imagine the work that “came in the door” for firms such as Skadden, which Flom worked for. Litigation and “proxy fights,” the legal maneuvers at the center of any hostile takeover. If you have ever seen the movie wall street then you know exactly what it is that proxy fights are. It is where an investor takes interest in a company and tries to get the share holders to grant the investor a “proxy” to vote out the firm’s executives. At this time the only lawyers an investor could find to run the proxy fight is a small firm like Skadden.
Through out the prestigious firms, it was well known, there was no one better at winning proxy battles than Joseph Flom. After all, when these are the only clients that your firm is capable of obtaining, your experience will prevail. The prestigious firms would call in Flom whenever a corporate raider would target one of their clients. “Flom’s early specialty was proxy fights, and that was not what we did, just like we don’t do matrimonial work,” said Robert Rifkind, a longtime partner at Cravath, Swain and Moore. “And therefore we purported not to know about it. I remember once we had an issue involving a proxy fight, and one of my senior corporate partners said, Well, let’s get Joe in. And he came to a conference room, and we all sat around and described the problem and he told us what to do and he left. And I said, ‘We can do that too, you know.’ And the partner said, ‘No, no, no, you can’t. We’re not going to do that.’ It was just that we didn’t do it.”
When the next decade came, the tables had turned. It was no longer scandalous to strike, corporate take overs were essentially the wave of the future. In the 1970s it was easier to borrow money, federal regulations were lax, and markets became internationalized. Due to this investors became more aggressive and hostile take-overs became all but common.
“In 1980, if you went to the Business Roundtable [the association of major American corporate executives] and took surveys about whether hostile takeovers should be allowed, two-thirds would have said no,” Flom said. “Now, the vote would be almost unanimously yes.” This is the time when companies needed to be defended, investors needed legal strategy, and share holders needed formal representation. The amount of money involved with mergers and acquisitions every year on Wall Street increased 2,000 percent, peaking at almost a quarter of a trillion dollars, from the mid-1970s to the end of the 1980s.
What does this mean for Joseph Flom? It means that his firm will now become the prestigious firm, the firm all the Fortune 500 companies will come to. They need protection, and not only protection, but also someone to lead their strategy to acquire competitors. All the cases that were sent to him by the prestigious firms of his time, because they refused to practice litigation, are now his primary clients. It wasn’t unfortunate that he was refused a position with said firms, it was a blessing.
“[Prestigious firms] thought the hostile takeovers were beneath contempt until relatively late in the game, and until they decided that, hey, maybe we ought to be in that business, they left me alone,” Flom said. “And once you get the reputation for doing that kind of work, the business comes to you first.”
Flom took over as managing partner of the Firm in 1954, catapulting the firm into the exponential growth that has made it what it is today. Today Skadden earns over $1 billion in revenue a year with 2,000 attorneys in 23 offices world wide, making it one of the most powerful law firms in the world. For over 30 years Skadden has been the go to firm for Fortune 500 companies for corporate take overs, Joseph Flom is the attorney you want on your side. Flom now lives in a luxurious apartment on Manhattan’s Upper East Side.
“It’s not that those guys were smarter lawyers than anyone else,” Rifkind says. “It’s that they had a skill that they had been working on for years that was suddenly very valuable.”
As you can see, from this journey of success, you’re downturns can be your strongest points in your success. Did he frown upon not being accepted at a prestigious firm because of who he was, where he was from, or his religious beliefs? No, he didn’t, he in turn accepted a position at a smaller, new to open firm that in the end sits atop all the prestigious firms of their time.
Think back to my ‘Only the Adaptive Survive’ post. You can see here where it’s highly applicable. Joseph Flom was able to conform to the times and learn practices that generally weren’t becoming. But after the times changed his knowledge and experience in hostile take overs is what ultimately lead to his success and the exponential growth of his law firm. Your burdens aren’t necessarily burdens, rather open doors to a greater success.
Source: Outliers by Malcolm Gladwell
