Women in tech: The forgotten story of Vector Graphic

I frequently hear lamentations about the number of women in the technology field–or the lack of them. Although there have been a number of successful women in the field, such as Meg Whitman, CEO of HP and formerly Ebay; Marissa Meyer, CEO of Yahoo; and Carly Fiorina, former CEO of HP, men outnumber women in the field and often by a large margin.

That perhaps makes it even more sad that Vector Graphic is largely forgotten today. Last week Fast Company profiled this pioneering computer company that time forgot.

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The Ferguson race riots: An outsider’s perspective from not far outside

A Ferguson police officer shot and killed Michael Brown, an unarmed 18-year-old African-American man, on August 9, 2014. The night after, riots broke out.

Ferguson is an inner-ring suburb in north St. Louis County. As such, Ferguson is now approximately 67% African-American, although the power structure remains mostly white.

I am a native of Kansas City who has lived in suburban St. Louis for a little more than 20 years. As a quasi-outsider, St. Louis has some quirks that I recognize and understand. It helps to understand that St. Louis is very divided, both along the lines of race but also along the lines of class. One of the first questions many St. Louisans will ask you is what high school you went to. This conveniently tells people how much money you grew up with. If you went to a private school, you’re good. If you went to a public school in an affluent area, you’re good. If you went to a public school in a poor area, I hope you’re living in a more affluent area now because there are people who will look down on you.

Sometimes the lines are fuzzy but sometimes they’re very stark. In north St. Louis, there’s an east-west street called Delmar. On the south side of the street are expensive houses. I won’t say they’re all millionaires on that side of the street, but many undoubtedly are. On the north side of the street, the houses that aren’t vacant are occupied by people who have minimum-wage jobs. The haves and have-nots can stare at each other from their windows, separated by five lanes of traffic. This oddity has even caught the attention of the BBC.

Ferguson is a step up from the wrong side of Delmar, but many St. Louisans would have jumped to conclusions about Michael Brown and his Normandy High School diploma for the rest of his life, regardless of how long that might have been. Read more

Deconstructing the healthcare.gov website fiasco

By reader request, I’m going to grab onto the third rail and talk about the Affordable Care Act/Obamacare/healthcare.gov website fiasco.

As someone who has been involved in a large number of IT projects, inside and outside the government, successful and failed, I can speak to that. I know the burning question in everyone’s mind is how can three guys banging away at a keyboard for three days build a better web site than the United States Government?

The snarky answer is that the best projects I’ve ever worked on have been when someone asked for something, then one or two other guys sat down with me and we banged away at a keyboard for a little while and didn’t tell anyone what we were doing until we were done.

But it’s probably more complicated than that. Read more

Redemption in Kansas City

When I was a young kid, my dad’s favorite baseball player was George Brett. Anyone who saw Brett play knows why. Dad’s second-favorite player was debatable, but it was probably Willie Aikens.

Well, until the scandal.

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How to go bankrupt and/or lose your house

I have a Saturday ritual. On Saturday mornings, about 49 times a year, I go to estate sales. On numerous occasions, I’ve been to estate sales of millionaires who, for one reason or another, were downsizing.

And on Saturday afternoons, I’ve been known to go look at foreclosure houses. Or, now that my wife and I have bought one, working on the foreclosure house.

I see a pattern.It’s unusual for the last owner of a foreclosure house to be in the house for very long. And almost invariably, I see a lot of home improvement projects. Often there’s at least one unfinished project still sitting there.

Often the projects are pointless–tearing out plaster walls to put in drywall, only because that’s what the stupid shows on HGTV say you should do.

But it’s always pretty clear from looking at the house and the information available in public records what happened. They bought the house, they made some payments, the house increased in value during the real estate boom, they took out a home equity loan and started changing things, then eventually they got in over their head.

Often the changes weren’t worth it. They’d start out with a $60,000 house in a questionable neighborhood, sink tens of thousands into modernizing the kitchen and bathroom and finishing the basement, and if everything had gone well, they would have a modernized house, still in a questionable neighborhood, and contrary to the promises they saw on TV, the house didn’t increase in value at all. Someone ends up buying what’s left of it for $35,000 or $40,000, fixing whatever is wrong or unfinished, and renting it out to someone for $700 a month. A rather inglorious end to those TV-inspired dreams.

I see another pattern on Saturday mornings at estate sales.

More often than not, the family stayed in the same house for decades. The kitchen appliances are usually dated. Sometimes they’re from the 1990s, sometimes the 1970s, and on rare occasions, you even see a range from the 1940s or 1950s. And generally most everything about the house gives the impression of age. Sometimes you see kitschy trends that have come and gone, like shag carpets and dark wood paneling. Sometimes you see timeless craftsmanship. The latter is particularly common in the homes of the wealthy–when they did buy things, they bought things that wouldn’t go out of style, so they’d only have to buy once in a lifetime.

None of these houses will show up on HGTV or any other TV, and for good reason: Houses like that don’t make you run out to Lowe’s or Home Depot and buy their crap.

But at the end of the career or life, there’s something to show for it. A paid-off house with things in it that have to be liquidated, which then goes into the estate. The money from all of it then helps pay for retirement, end-of-life expenses, or goes to the heirs.

The foreclosed houses look a lot more like what you see on TV, even if you have to wipe some grime away to see it. The appliances are certainly newer, the kitchen cabinets are usually newer, and somewhere there’s at least one TV-inspired project, maybe still brewing.

But what’s left to show for it? Years of payments, lost. A wrecked credit score. Possibly some other maladies. Nothing anyone would want.

Clearly it’s much better to just live within one’s means, even if it means sacrificing coolness points in the short term.

In the long term, I’m pretty sure the people who chased the newest trends, overextended themselves and ultimately lost their houses ended up with about the same number of coolness points. Maybe a little less.

What to the rich do with their money?

Charlie brought up the question of what the rich do with their money in response to the theory of trickle-down economics. This seems timely, as one of my coworkers and I talked trickle-down just yesterday.The theory is often maligned, and usually by people who don’t understand it very well. But frankly its proponents don’t always understand it either.

The classic justification is that if you tax the rich less, they’ll use that savings to buy things like boats and luxury cars, creating jobs for people who build and sell things like boats and luxury cars, and for the suppliers of those companies. And the argument is that this economic activity spreads the wealth better than the government taxing and redistributing wealth, due to government overhead.

At least that’s the simple, back-of-a-napkin explanation you’re likely to hear from a conservative activist when you ask the question. It’s the one I’ve always heard.

The theory is more complicated than that. For most of the 20th century, the fabulously rich were taxed at extremely high rates–70 or even 90 percent. The economist Arthur Laffer argued that if one taxed the rich at a lower rate, then tax revenue would actually increase–the reason being that someone who had the ability to make $10 million probably also had the ability to make more than that, but would probably be more willing to try to make more if the government weren’t taking 90% of the spoils.

Ronald Reagan lowered that upper tax rate to 50%. And sure enough, revenue went up, because 50% of $20 million is more than 90% of $10 million. So both the entrepreneur and the government won.

But contrary to what the modern Republican party seems to think, Laffer didn’t argue that the less you taxed, the more revenue would increase. Tax revenue is a more like a bell curve–tax at 0%, and revenue will be $0. Likewise, take 100%, and revenue will be $0, because nobody will work (or they’ll hide it if they do). The question is what percentage puts tax revenue at the top of the bell curve. I believe that history says it’s somewhere around 38%. Ironically, it was a Democrat who demonstrated that rate. (Hint: it wasn’t Jimmy Carter.)

And when Democrats malign trickle-down economics, they ignore one important fact: When Reagan cut taxes, revenue did rise–a lot. And when Bush I cut them further, it rose even more. The problem was that spending in Washington outpaced revenue growth during the 1980s and most of the 1990s. In the waning years of Clinton’s presidency, revenue finally caught up with spending, and for two years in a row there was actually a small surplus.

And in all fairness to Bush II, that’s been the biggest problem with his economic policy the past 8 years. Revenue went down slightly when he cut the highest tax bracket. But the bigger problem is that Washington spending increased beyond Reagan levels. Had spending stayed in check, we might still be talking about small deficits and occasional surpluses. Instead, he kept taxes low while signing budgets that made Clinton look like a fiscal conservative.

But that’s enough about trickle-down economics. Let’s talk about the rich.

A little over three years ago, I was walking out to my car after work when a couple of well-dressed men approached me and asked for a jump start. I pulled my Honda up to their rental luxury car, we hooked up the cables, got the car started, and they went on their way.

I now believe one of the men that day was the man who soon became the CEO of that company. I won’t name him or the company. Perhaps he was interviewing for the job that day. Not long afterward, he got the job, and as a result of one of his earliest decisions, I lost mine.

So I did a favor for a guy who made $4.81 million last year, and the thanks I got was unemployment.

The soak-the-rich attitude comes from stories like that. When we think of the rich, we think of CEOs who take over large, failing companies, get rid of lots of people, bring in their people, and in the end the companies don’t really get much better, but in the meantime they pocket a few million dollars every year. And when they lose their jobs, they get a golden parachute of a few million more.

But the majority of the rich aren’t like that. They’re more like the owner of the next company I worked for. It was a small consulting company, but it was smaller when he bought it. He bought it during a dark time in its history, brought in some good people, and together they worked hard to make the company profitable again.

In 2006, not long after I met him, he sold the company to a much larger competitor and turned a nice profit for himself. They only retained him for a short time, but he’s not hurting for money. Shrewdly, he didn’t sell them the building, so the company is still paying him rent every month.

Nobody knows what his future plans are, but some people who know him better than I do believe he’ll start another company at some point.

Read books like The Millionaire Next Door, and you’ll find the majority of millionaires are unassuming people who park their Ford Crown Victorias in front of ranch-style houses every night. They’re often self-employed, and usually made their first million by saving a lot and investing in themselves.

I have little respect for the first CEO I talked about, because he has his job mostly because he looks and acts the part. He dresses well, looks like a movie star, and when he talks, he can convince you he cares. But let’s talk qualifications. During his first year on the job, his company’s shares were worth about $1.20 apiece. Now they’re worth 42 cents per share and the company is $1 billion deeper in debt. That’s not all his fault, but it’s hard to argue that he’s done much to turn the company around, and it’s even harder to argue that those results are worth $4.81 million a year. I would think they could outsource his job to India and get comparable results for $100,000 a year and bank the savings.

At least they’d save more than they saved by outsourcing people like me.

I have a lot of respect for my other former employer, because he took a bad situation and turned it around, and he got the job because he bought a company with his own money. He invested his time, energy, and money in it, and besides making himself wealthier, he also created jobs–about 200 of them at his company’s peak–including one for a 31-year-old newlywed who was down on his luck and had worked for two other employers that same year.

The problem with trying to use tax policy to soak people like the first guy I mentioned is that it’s very difficult to do without also hurting the second one I mentioned. And if tax policy hurts him, he might as well just stay retired and play golf or whatever he enjoys doing, rather than starting a new company and making some new jobs for people.

And frankly I’m not sure what we gain when we make people like the first guy pay. I guess we feel better for a while. But the main thing we do is motivate him to hire the very best accountants and lawyers to find and exploit every loophole they can. So he still keeps most of his money, the government gets less than it projected, and the masses are blissfully ignorant, thinking they got some fat cat to finally give up his fair share, whatever that means, but they never see any tangible benefit.

Outlandish CEO pay and incestuous boards of directors loaded with conflicts of interest that perpetuate these outlandish compensation packages really are a separate issue, and the tax code isn’t the appropriate place to try to fix it.

But back to that tax code, and the second guy–the one worth worrying about. For what it’s worth, neither of the two major presidential candidates is likely to do anything that would singlehandedly persuade the second guy to stay retired. A return to Reagan’s or Carter’s income tax levels might, but neither candidate is proposing something like that. The difference between the two is much narrower than either of them want the rest of us to think, and their political rhetoric reflects that.

How eBay is ruining itself

A thread on one of the train forums I frequent mentioned today that the number of listings for Marx trains on eBay is down about 50% over what it was a year or so ago. Not only that, the listings are by and large the common, less interesting stuff.

Meanwhile, a debate rages on another forum I read sometimes, frequented by eBay sellers. On one side are the eBay apologists, saying they’ll just change as eBay changes. On the other side, people struggling to make a profit in the ever-changing environment are finding other venues to sell their wares and finding themselves a lot happier.The problem is that eBay is trying to create a sterile, retail experience. The big shareholders and the executives seem to think that’s what the consumer wants.

Another seller’s theory is that the people who sell brand new merchandise in huge quantities are less troublesome, causing fewer headaches for eBay and for the customers.

The eBay business books I’ve read talk a lot about people who drop-ship pool tables and other merchandise in large quantities, never touching any of it, and supposedly becoming millionaires by doing it.

But the people who put eBay on the map are the people like the ones I see every Saturday morning. They study classified ads the way a devout monk would study Scripture, looking for clues and carefully plotting out their routes. They get up before dawn and drive to their carefully chosen site. Their prey: The estate sale. They line up in the driveway hours before the sale opens, like bargain hunters the day after Thanksgiving. When the sale finally opens, shoppers come in, 10, 20, or 50 at a time, depending on the size of the house, while those who arrived later wait their turn. Any time someone leaves, those in the driveway gawk, trying to see what he or she purchased.

It doesn’t matter what item you can name, I know someone who goes out every Saturday looking for it. Some of these people are collectors, but some of them hawk their finds on eBay. They buy on Saturday and Sunday, then they spend hours the following week figuring out what exactly they have, carefully photographing and describing each item, then listing it, hoping to attract bidders.

The typical eBay addict doesn’t go there to buy a pool table, or the kind of things they sell at a suburban mall. Certainly there are people who buy those sorts of things on eBay. But those tend to be occasional shoppers. The biggest eBay addicts are the fanatics–the serious collectors who spend hours every day scouring new eBay listings, looking for items they don’t have in their collections.

And guess what? These collectors don’t buy from drop-shippers who duplicate the retail experience. The drop-shippers can’t get those kinds of collectibles. It’s the people who get up at 5 a.m. each Saturday to be first in line to prowl around in someone’s attic or basement who get that stuff.

The problem is that the people who do get that stuff have a difficult time becoming (and remaining) Powersellers. A Powerseller has to sell 100 items or $1,000 worth of inventory per month. If I wanted to sell vintage trains on eBay, there’s no way I could locate 1,200 items each year. Not in St. Louis. The $1,000 mark wouldn’t be much easier to hit.

So eBay is driving away that kind of seller. And as a result, eBay is going to lose that type of buyer as well.

I know for a fact there are plenty of collectors in Europe and elsewhere who are eager to take advantage of the low value of the dollar and buy a bunch of collectible American trains at bargain prices due to the exchange rate. Unfortunately the timing is horrible. The new eBay policies have driven away a lot of the people who sell the best items. So the foreigners with money to spend end up spending a lot less than they would like. Sure, they’ll buy the $10 items that are listed, but they’d really rather buy the $100 and $1,000 items that were listed last year but are conspicuously absent today.

Ten years ago, eBay was flying high. They weren’t the first online auction, but they were the most successful, precisely because they allowed ordinary people to sell ordinary (and extraordinary) things. I bought a number of things from online auctions in the mid 1990s, including the Lexmark 4039 laser printer I still use every day. I don’t remember now the name of the auction house where I bought it. I do know it went out of business shortly after eBay became widely known.

Lots of other companies wanted in on the action. Amazon, Yahoo, and others launched auction sites that looked and acted a lot like eBay. But they never went anywhere. The best sellers put their best stuff on eBay. The wannabes tended to just have second-rate stuff sold by second-rate sellers. Case point: I once tried to buy a lot of vintage train magazines from an Amazon auction. I won, paid my money, and waited. And waited. A week later I e-mailed the seller. No response. Finally after another week he responded, saying he’d been having computer trouble and asking if I still wanted the magazines. Well, since he offered me the refund, I took it. I spent the money on eBay instead.

Yahoo auctions are gone, closed about a year ago. If Amazon’s auctions are still open, they’re sure doing a good job of hiding them.

If another company wants to get a piece of eBay’s business, the time is right. There are lots of refugee eBay sellers looking for someplace a little cheaper, with a little more stable set of rules where they can sell. And if a large enough group of them take up shop somewhere, there are plenty of buyers more than willing to follow them there.

It may not happen this year. But I do think it’s only a matter of time.

Nickel and dime your way to prosperity

An old friend and I have been talking a lot about debt elimination these past few weeks. With any luck, both of us will be completely debt-free by age 45 at the very most, and probably sooner.

The trick is to dump as much money as possible into debt retirement. As recently as November, the interest on my Honda Civic was costing me $1.40 a day. Think what you could do with that $540 a year you’re paying in needless interest.

The challenge is finding the money to use to retire debt.Some of these tricks will only save you a few cents. You must get yourself over the it’s-only-25-cents mentality. That quarter can either work for you or against you. A quarter paid at the beginning of a 30-year mortgage saves you more than a dollar by the end of the loan. Can you find a safer way to quadruple your money? I doubt it.

If and when you have no debt, dump those pennies, nickels, dimes, and quarters into an index fund. An index fund just buys you the same stocks that are in the Dow Jones Industrial Average, or some other index. Historically, these funds double in value every seven years. Great Depression, Schmeat Schmepression. Dump a quarter into an index fund and don’t touch the investment, and in 28 years, it’s $4.

So let’s find some creative ways to get some quarters.

1. Pay your bills online. This potentially does more than save you the 37 cents in postage. My gas and electric companies both have arrangements with checkfree.com to allow online payments free of charge. I was invariably late in paying them, which subjected me to interest payments. The other nice thing about Checkfree is that it schedules the payment for the due date. So if by chance you have an interest-bearing checking account, that money can work for you until the last possible day. You probably won’t save more than a couple of bucks a month this way, but that’s $25 over the course of a year. If someone offered you $25 without any strings attached, I doubt you’d turn it down.

2. Make car and mortgage payments as soon as possible. I may be showing my ignorance here, but interest paid to me on most accounts I’ve had is calculated monthly. Interest on my car is calculated daily. So, making that payment as soon as my paycheck shows up in my checking account reduces the principle, thus reducing my interest payments by a few pennies a few days early. It’s only pennies? I’d rather they be my pennies than Honda’s.

3. Use credit wisely. I remember one day a few years ago, I was at the grocery store and instead of pulling out my debit card, I pulled out a credit card accidentally. I thought how awful it would be to have to pay for life’s necessities on credit.

But if you’re disciplined, and you have a credit card with rewards–and we should be talking cash here, not merchandise–then it makes sense to pay for life’s necessities on credit. Take a look at my Discover Card bill, and you’ll see the bulk of it is things like gasoline, groceries, my telephone bill, and $20 trips to Kmart, which means I was probably buying stuff like toothpaste and deodorant and other household necessities. I pay the balance in full every month, so the result is essentially some bank paying me to buy the things I’d need to buy anyway. This nets me about $80 a year. I never see a dime of it–I apply it directly to the card’s balance.

4. Buy a programmable thermostat. The cheapest programmable thermostats cost about $30. They can easily save you that much in a month. During my 8-hour workday, my thermostat only heats the house to 56 degrees in the winter time. It cools it to 82 in the summer. During waking hours and on weekends, it keeps the house at 70 degrees in the winter and 75 in the summer. During sleeping hours the temperature raises or lowers by 5 degrees depending on whether it’s summer or winter. I used to have $300 heating bills in the winter months. Now I have $175 bills. That’s still ridiculous, but it leaves me money to actually do something about it.

5. Cut out the sodas and snacks. I used to routinely spend $1.50-$2.00 a day at the vending machine and the cafeteria at work, buying coffee, soda, and snacks. Over a 240-workday year, well, do the math. The 34.5-ounce can of coffee in my fridge (it lasts longer when stored there) is marked 9-26, the date I bought it. I expect it will last me until the end of the month. So that can of coffee will last me five months. I buy the off brand, so I can sometimes get one of those cans for between $3 and $3.50. So my morning coffee costs me 2.3 cents. I quit drinking soda entirely and I pack a granola bar in my lunch. Over the course of the past year I am sure I’ve saved $300.

6. Pack your lunch. Lunch at a sit-down restaurant almost always costs you $7. Fast food usually costs at least $5. The cafeteria at work is usually $3-$4. Sometimes I pack leftovers that would otherwise get thrown away, so they’re essentially free. It’s fairly easy to pack a lunch for $2. Again, do the math over 240 days. Do you want to spend a house payment on lunch every year, or do you want to spend a car payment instead?

7. Eat out less. A couple of years ago I was dating a girl who had to eat out 3-4 times a week, at least. Usually it was places where I was lucky to get out for under $20. I always paid, of course. I couldn’t figure out why I didn’t have any money. But with a little creativity, it’s entirely possible to make dinner for two for $4. You can make a fairly impressive dinner for two for $10.

8. Shop the cheap stores. St. Louis has five different chains of grocery stores. At the top of the ladder is Dierbergs, followed by Schnucks. A third local chain, Shop ‘n’ Save, generally beats the Schnucks and Dierbergs prices by a few percent. But now I do most of my shopping at two stores that white-collar professionals rarely visit: Aldi and Save-a-Lot. In most cases the quality of the product is the same. But when I can get a loaf of bread for $.99 versus $1.59, the difference adds up quickly. For the things Aldi and Save-a-Lot don’t carry, I still go to Dierbergs, but I rarely spend more than $10 at Dierbergs now, unless they’re running a big sale on something.

8. Buy generics. A lot of people are afraid of generic products because they feel they might be getting ripped off. You’re actually a lot more likely to get taken with a costlier brand name. I’ve found the quality of most generics to be as good as the name brands. When it isn’t, I try a different generic the next time. Eventually I’ll find a generic that’s as good as the big name brand, and save a bundle. I’ll buy the name brands when they’re on sale, but aside from that, my pantry is full of generics and I don’t care who knows about it.

9. Don’t spend a dollar to get 14 cents. A common excuse for not paying down your house is that the interest is tax deductible. That may be, but you’re getting pennies on the dollar. My car payment was costing me $1.40 a day until I paid it way down.

It’s tax time. That means you have a piece of paper that tells you exactly how much interest you paid on your house last year. Are you paying $14 a day to inhabit a house you supposedly own? That tax deduction only reduces the net cost to $12. I can think of better things to do with $12, and I’ll bet you can too.

10. Don’t spend your windfall all at once. Are you getting a tax refund? Did you get a bonus? Have you been working a lot of overtime lately? It’s OK to reward yourself and/or your family. But don’t blow all of it indulging yourself. Spend 10 percent of it, tithe 10 percent of it, and use the rest to retire debt, and dream of the day when you have no mortgage payment and no car payment and every paycheck is a windfall.

11. Save your pennies. Coinstar, the makers of those change-converting machines in grocery stores, says the average household has $90 in loose change scattered about the house. A fairly painless way to save money is to dump your change into a jar at the end of the day, rather than spending it on frivolous things. At some point, convert the money into a more usable form, then apply the windfall rule to it.

12. Cascade your debt. I pay extra on my car every month. When the car is paid off, I’m going to start adding that amount to my mortgage payment every month, except in case of emergency. I estimate I can have my house paid off in about five years by doing this.

13. What will I have to show for this purchase? This is key. Before you spend even a quarter, consider what you will have to show for it by buying it. Just because you walk past a candy store in the mall doesn’t mean you have to go in and buy something. If you’re lucky, all it’ll do is rot your teeth and make you fat. You could have paid that quarter into your mortgage and turned it into a dollar.

Some purchases are unavoidable. In a couple of months, I’m going to need new tires. I can think of a million things I’d rather do with that money, but I need it. That’s OK. I’ll have it.

The trick isn’t to live in total self-denial, but to exercise restraint. Most of us live like millionaires, but the problem is that we’re spending our million dollars instead of letting it work hard so we don’t have to work as much. And it’s killing us.

Lionel filed for Chapter 11 bankruptcy yesterday

It was all over the various news sites, but Lionel, the train maker, filed Chapter 11 yesterday.

A lot of the news stories got a lot of details wrong.This is the first time Lionel, LLC has filed for bankruptcy. The original Lionel Corporation, which is the company that made the trains your dad’s and grandfather’s friends had, if not the trains they had, in all likelihood, filed bankruptcy three times. The first time was in 1935, when the Great Depression had wiped out most of Lionel’s competitors and the aristocratic J. Lionel Cowen kept on making trains for millionaires’ kids when there weren’t any millionaires left.

Lionel emerged from bankruptcy with a two-pronged approach. On the low end, they started selling $1 windup handcars featuring cartoon characters like Mickey and Minnie Mouse. Today’s hirailers do everything they can to argue that Disney didn’t save their beloved Lionel, but at the very least it made a significant contribution.

Lionel also started paying more attention to hobbyists, making diecast trains that were modeled after real trains, rather than hiring Italian designers to design elaborate, ornate, and some would say gaudy toys that looked like trains. Hirailers say this was what saved Lionel. Whatever.

At any rate, Lionel emerged from bankruptcy and survived the Depression, something only one of its other competitors from the 1920s managed to do. That competitor was Hafner. Heard of it? Probably not. Hafner made cheap windups. Attractive windups, but basically forgotten today. The American Flyer brand name endured, but only because the Coleman family gave it to A.C. Gilbert, of Erector construction toy fame, in exchange for a royalty against future sales. There was also that upstart Louis Marx, who actually made money during the Depression and used some of that money to buy a toy train line, but that’s another story.

Toy production of almost all kinds stopped during World War II because the metal and the production capacity was needed for the war effort. Those who couldn’t make war munitions and other such things made things like bottlecaps. Lionel made nautical equipment. They sold a paper foldup train one Christmas because they were still allowed to do that, but it required the patience of a saint and the coordination of a surgeon to assemble, and once assembled, it served only as a reminder of what kids wanted in the ’30s but the parents couldn’t afford and now that the parents could afford it, it was next to impossible to get (unless you happened to live in New York City and knew about Madison Hardware, which, again, is another story).

So the pent-up demand for toys exploded after the war, and toy trains became a huge fad, giving Lionel, Gilbert, and Marx a license to print money until about 1956, after which the general public decided slot cars would be the next big fad and the people who really liked trains decided they wanted to go to HO scale because they were a lot cheaper, a lot more realistic, and in some cases took up less space.

J. Lionel Cowen decided to retire in 1959 and sold out his share of the company to his grand-nephew. He didn’t mention this to his son, who was only on board because Dad wanted him to be anyway, so he sold his shares too, while they were still worth something. Ray Cohn sought to diversify and make the trains less expensive by using more plastic and less metal, but at best he only slowed the bleeding. By 1967 A. C. Gilbert was being liquidated. Cohn bought the American Flyer brand name and tooling but didn’t have the money to do anything else with it. Later that year, Lionel Corporation filed bankruptcy itself.

Two years later, Lionel decided its chances were better selling toys rather than making them. It sold its train line to General Mills, the cereal people, who also had some toy companies. Lionel opened a chain of toy stores on the east coast, and for a time was the second largest toy store chain in the United States, behind the behemoth Toys R Us.

General Mills kept the Lionel train flame alive, selling O and HO trains branded with the Lionel name throughout the 1970s and early 1980s. In 1979, it even located the old American Flyer tooling and brought those trains back as well. But in the early 1980s it tried to move manufacturing the Mexico, which angered a lot of Lionel fans. It reversed the move, but started looking for a buyer, shuffling the company around within itself and then palming it off to Kenner Parker, and then, in 1986, a Lionel collector who had made his fortune selling real estate in Detroit bought the company and started operating it as Lionel Trains Inc.

Back to Lionel Corporation. Remember them? In 1991, Lionel Corporation found its toy store chain just couldn’t compete with Toys R Us’ economies of scale, and filed for bankruptcy. Starting in 1993, it liquidated. It sold the trademarks to Richard Kughn, the owner of Lionel Trains.

Kughn sold controlling interest in Lionel Trains in 1996 to Wellspring and Associates, a holding company. Rock star Neil Young also purchased a 20 percent share. The new company was called Lionel LLC.

In the late 1990s, Lionel LLC started using Asian subcontractors more and more. Its biggest competitor (and former partner) MTH Electric Trains had been doing the same thing, and undercutting Lionel in price. By 2001, Lionel was manufacturing none of its own trains, and even outsourcing the design of some of them.

In 2000, MTH sued Lionel for misappropriation of trade secrets. A designer who had worked for MTH’s subcontractor did work for Lionel’s subcontractor as well, and the result was what some call an uncanny similarity between some of Lionel’s and MTH’s locomotives. Not having seen them myself–just like many of the people who call the similarity uncanny, no doubt–I don’t know. What I do know is that MTH and Lionel have had bad blood since the early 1990s, and that Lionel’s executives and financial backers conduct themselves in a much more professional manner in public than their MTH counterparts. That may or may not say something.

At any rate, the jurors who saw the evidence agreed with MTH and awarded it $40.8 million, which was more than MTH had sought. Then, on November 1, a judge upheld the jury’s findings and ordered Lionel to stop production of certain locomotives. Lionel then filed bankruptcy two weeks later. Looking over the filing, it’s easy to see why. They have $43 million in assets. They have substantial debt–including $30 million to what appears to be a South Korean subcontractor, not a financial institution like some news reports are saying.

MTH owner Mike Wolf and his buddy, Washington D.C. trash hauling magnate Tony Lash are hopping mad and accusing Lionel of trying to dodge justice by hiding behind Chapter 11. Considering the amount essentially amounts to the corporate death penalty, one would expect them to do whatever they can to appeal. It’s silly to expect a company to not want to stay in business.

In case you haven’t figured it out, my sympathies lie with Lionel. But it’s more out of a dislike of MTH than a love for Lionel, which has basically reduced itself to an importer. It farms out design and manufacturing to the lowest bidder, slaps its name on it, prices it for trial lawyers and heart surgeons, and wonders why nobody buys its stuff.

But MTH is the Rambus of the train industry. Or SCO. Take your pick. Starting in the 1970s, train enthusiasts started using electronics to control them. Eventually these efforts got combined and led to the creation of an open industry standard called Digital Command Control (DCC). Every major maker of HO and N scale trains uses it, and has been using it for years. MTH came along, and while it was developing its own proprietary train control standard called Digital Command System (DCS), patented some elements of DCC. Then it started suing selected companies who made use of DCC.

J. Lionel Cowen was a ruthless businessman and made a lot of enemies, but he had ethics and was proud of them. Not that that’s relevant because the Lionel he founded went out of business in the 1990s and has no direct connection to Lionel, LLC, as much as Lionel, LLC tries to make it look otherwise.

I’d like to see Lionel, LLC survive but I won’t lose sleep over it. Anyone can contract with Asian firms to design and manufacture trains, and to slap the Lionel name on it, all you need is the trademark. If someone other than Lionel, LLC ends up owning that trademark, I don’t see that it makes one iota of difference.

Unless that person happens to be Mike Wolf.

But Mike Wolf isn’t going to steal my hobby away from me. I buy mostly old stuff anyway. Why should I let the Rambus of Trains ruin my fun?

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