The King of the Forest
If you inherited a family tradition, a million-acre forest, and a business, how would you decide which one to preserve? Meet Arthur Temple…
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Temple was in his fifties when he acquired Pineland and embarked on building an empire. He wanted his oldest son to succeed him, but Tom Junior was a gambler and womanizer. The only other son among five children, Arthur, reluctantly came back from the East to join the business in 1916 as the bookkeeper. The second generation was in place. Arthur Temple, Jr., was born in 1920. By that time timber companies were cutting out all over the Piney Woods. But in the twenties the Temple companies expanded even more rapidly, purchasing another sawmill, opening retail lumberyards in dozens of small towns across East Texas, and almost doubling in acreage. Tom Temple had to borrow heavily to finance the expansion—at a time when lumber production was declining in Texas every year—and some members of the family, including the bookkeeper, weren’t sure it was the right thing to do. “What does it profit a man to own the whole world if he has no money?” Arthur Senior asked L.D. Gilbert, Tom Temple’s general manager.
“We’re not building for this generation,” Gilbert said. “It’s not even for your generation. It’s for Little Arthur.”
Little Arthur almost didn’t get the chance. The Depression dealt the lumber industry—always among the first to suffer in an economic crisis because of its dependence on homebuilding—a devastating blow. Production in Texas dropped 70 per cent in three years. John Henry Kirby defaulted on a debt he owed the Santa Fe railroad, declared bankruptcy, and lost his company. Things were so bad that the fledgling state forestry nursery had to shut down because no company could afford to buy the seedlings.
Tom Temple was seventy years old and millions of dollars in debt when the crash came. To make matters worse, the obligations were short term. Within a year, as Gilbert put it in a letter to a family stockholder, “the sheriff was stepping on our coattails.” Tom Junior’s estranged wife asked a Baltimore bank to investigate the company, it reported that the timberland had a negative value: it was worth less than the taxes owed. Tom Temple went to the First National Bank in Dallas to plead for an extension; he sat in a waiting room all day, an old man with his hat literally in his hand, but no one in the bank would even talk to him.
He did not live to see the company he had founded return to solvency. Toward the end, when he was very sick, the old man saw Arthur Senior entering the room and said, “Tom, is it really you?” He died in 1934, still hoping that the wayward Tom Junior would renounce wine, women, and song to come back to the business. But the rest of the family entertained no such illusions; they elected Arthur as the new president. He inherited $2 million in debts.
Arthur Temple, Sr., had little of his father’s entrepreneurial drive. He had no interest in new ventures, and in future years he would try to dissuade Arthur Junior from them—in one letter to his son, he wrote, using a favorite phrase, “What does it profit a man to gain the whole world if he deprive himself of the full enjoyment of his family and friends and have no time for the higher things?” He loved opera, especially Verdi, and spent hours listening to Rigoletto and Aida on an old Victrola. But he had an almost aristocratic sense of family, and to save his family he had to save his company.
Southern Pine and Temple Lumber had assets galore, but they were cash poor. With other lumber companies in trouble as well, the federal government, responding to a plea from the Texas Legislature, agreed to purchase cut-over lands in East Texas. Shortly after Arthur Senior took over the company, the government acquired 629,000 acres from eleven lumber companies; that land became the four national forests in Texas. But it was hardly a Chrysler-type bailout. Government negotiators played hardball, knowing that the companies were desperate and that there was no other market for the land. Temple Lumber sought $3 an acre for 80,000 acres around Pineland, but the government held out for $2.75—the lowest price paid any of the eleven companies—and finally the Temples capitulated. There was no alternative: even the commissary’s flour supplier would no longer do business without money in hand.
The low purchase price meant the company had no money left over to pay its major creditors: First National and Republic National banks in Dallas, South Texas National (a forerunner of Texas Commerce) in Houston, and Boatmen’s in St. Louis. The creditors met in St. Louis to decide what to do about the Temples. First National and especially the Boatmen’s wanted to foreclose; Arthur Senior wanted more time. Finally, Fred Florence, who was in the process of building Republic National into the largest bank in the Southwest, got up to speak. He pointed his finger at the man from Boatmen’s. “Do you know how to run a sawmill?” Florence asked. Silence. He pointed at First National. “Do you?” At South Texas. “Do you?” More silence. “If we foreclose, we don’t know a thing about their business. I know this family. They’re good people, and if the country comes out of this, they’ll pay their debts.” Arthur Senior got his extension, and in two years the company was out of debt.
Two decades later, Arthur Temple, Jr., went to Fred Florence to borrow money to complete the first fiberboard plant to use southern pine. The two men had met only once, at a social gathering several years before, when Temple had introduced himself and told the banker, “I just want you to know that I remember what you did for us. We’re not the kind of people who forget a favor.” At the bank Temple laid out his plans, and after the presentation Florence turned to a loan officer and said, “You let this boy”—Temple was then 36—“have the money, and you let him have it at the prime rate, or below if he wants it. This boy is going to be important to this bank.”
The first time Arthur Junior went to a bank to borrow money, he was not so successful. He was only nineteen at the time, but the episode is a landmark because it was his first clash with the Kurth interests—a clash that in time would become a battle of philosophies, old against new, past against future. He was working as a bookkeeper in the Temple retail lumberyard in Lufkin. From the beginning he was on the lookout for his own deals, and when he heard there was money to be made by wrecking an old sawmill shed, he went to the Kurth bank, Lufkin National, where his family had always done business, to borrow $3000. Arthur was still a minor and not liable for his debts; the bank wanted his father to guarantee the loan. Arthur said that wasn’t what he had in mind, but the banker contacted Arthur Senior anyway. When Arthur Junior found out, he promptly went to the other bank in Lufkin, a small institution called First State Bank and Trust. He didn’t go into any long explanation; he just asked the president if he’d lend him $3000. “You can sign your name, can’t you?” was the reply, and First State was on its way to becoming the Temple bank.
The sawmill shed venture made money, and soon—even though his father promoted Arthur to head of the Lufkin yard—there were more deals: developing a filling station, a locker plant, a grocery store. Arthur Senior wasn’t very happy about the sidelines, expressing frequent fears that they took time and thought away from the job at the lumberyard, and he might have been unhappier still except that under Arthur Junior Lufkin grew into the most profitable yard in the company, performing on a par with Houston. “I realize that I am conservative by nature and haven’t much of the venturesome spirit,” he wrote his son, but “I do not want you to get overextended, or too much involved, and my ambition for you is to have you develop in the retail division until you are at the top.”
It is an old generational story: the father wanting the son to go slowly and follow the path laid out for him, the son chafing at the restraint, wanting to run the show. At 18, Arthur was so impatient to get on with business that he stayed less than a week at Williams College in Massachusetts, his father’s alma mater; he walked eight miles through a fierce hurricane to catch a train home. As a youth, Arthur Senior had wanted to go his own way too, but as he pointedly wrote his son, “I felt an obligation, however, to return to Texas to engage in the business my father had built up.” He had chosen family over fortune, and he was finding it hard to understand why his son didn’t feel the same way.
Instead, Arthur’s projects became even more ambitious. When a federal program was changed to let developers get low-interest loans to build rent houses, he applied for—and got—the money even before the regulations were written. The 142 units he built at Texarkana, where a new munitions plant was going in, constituted the first FHA housing project in the country. By the time Arthur was 22, he had already built close to 500 houses.
The father was fighting a losing battle, and he knew it. He was, he told his son, “proud of what you have done, proud of the initiative, aggressiveness, and good business sense you have shown.” But he also knew that these very qualities would inevitably lead Arthur away from the company. The responsible jobs were few—Arthur Senior’s, his cousin Henry Temple’s position as general manager at Diboll, the same position at Pineland, and the top job in the retail division—and were held by family or old and loyal friends. For the time being, there was nowhere to go. “I’ve felt on a dead end,” Arthur Junior told his father in 1946, and Arthur Senior confided to a close friend in the company, “Arthur is too hard to hold down.”
Later that year Arthur told his father that he was determined to branch out and do things that would make or break him. “It is only a short time before it will be necessary for me to sever my contact with the company,” Arthur wrote his father. “I simply cannot afford to pay about $50,000 a year for the privilege of working with Temple Lumber Company.” On February 6, 1948, he mailed in his resignation to the head of the retail division, saying that he had to oversee $1 million worth of work he had under construction.
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