Part IThe Story
The envelope was white, and it held less money than the company's own founder had already raised and decided not to spend.
That fact deserves a moment. On the morning of June 21, 1932, in a United States district courtroom in Los Angeles, the assets of the bankrupt Lockheed Aircraft Corporation came up for sale. The judge asked whether there were any bidders. One man stepped forward. He was neatly dressed and Harvard-educated, an investment banker by training, and by every available account he had no practical experience as an engineer, a designer, or a pilot. He slid an envelope onto the bench. Inside was an offer of $40,000, put together from a small consortium of investors that included his younger brother. Absent from the moment was Allan Loughead, the man whose surname, respelled "Lockheed" so that people would stop mispronouncing it, was painted on the airplanes in question. Loughead had been trying to build an aircraft company since 1912. He had planned to bid for his own firm. He had raised $50,000, decided the sum was too small to be taken seriously, and kept it to himself.
So ten thousand dollars more than the winning bid stayed home out of embarrassment.
The judge looked at the young man and his envelope and said what anyone might have said in the third winter of the Depression. The aircraft market was gutted. The company's parent, Detroit Aircraft Corporation, had already gone under, and the airplanes that had carried Amelia Earhart and Wiley Post across the record books were now line items in a receivership.
— The presiding judge, U.S. District Court, Los Angeles, June 21, 1932I hope, young man, you know what you're doing.
"I do," said Robert E. Gross.
He spent the remaining twenty-eight years of his life proving it, or something close to it. In that time the company built the Electra, the Hudson, the P-38 Lightning, the Constellation, the C-130, the U-2, the F-104, and the first Polaris missiles. During the Second World War it hid a factory under a painted burlap suburb, and at its peak it employed something like 94,000 people working around the clock. Nine years after the courtroom, by the company's own reckoning, it was the top-ranked airplane manufacturer in the world. Almost everything that followed can be traced to that envelope and the two-word answer that went with it. What the envelope actually contained was money, and something else that money doesn't measure: the confidence of a man who could not build the product and bought it anyway. It is still hard to be sure which of the two did the work.
By the Numbers
Robert E. Gross and Lockheed, 1932–1961
$40,000Winning bid for Lockheed's assets out of receivership, June 21, 1932
$50,000Sum Allan Loughead raised to bid for his own company, then never offered
$139,400Cost to develop the Model 10 Electra, Gross's first big bet
~4,000Electra-family aircraft sold worldwide in the decade that followed
19,278Aircraft built by Lockheed and its Vega subsidiary in World War II
~94,000Peak wartime employees, working around the clock
28Years Gross ran the company, from the courtroom until his death in 1961
The founder who would not bid
The man who wasn't in the courtroom had spent twenty years being right about airplanes and wrong about timing.
Allan Loughead and his brother Malcolm started the Alco Hydro-Aeroplane Company in San Francisco in 1912. Their first aircraft, the Model G seaplane, debuted on June 15, 1913, and was the largest seaplane yet built in the United States. Nobody bought it. The brothers made a little money flying paying passengers around in it, which set a pattern for the Loughead enterprises: wonderful machines, and a living earned at the margins of them. In the summer of 1916 they moved to Santa Barbara and, with backing from Burton Rodman and other investors, formed the Loughead Aircraft Manufacturing Company. Their F-1 was a ten-passenger twin-engine seaplane with a 74-foot upper wing, twin booms, and a triple tail. Keep that triple tail in mind; it comes back. The F-1 first flew on March 29, 1918. On April 12 it covered the 211 miles from Santa Barbara to San Diego in 181 minutes, a record, and the Navy took delivery.
Seven months later the war ended, and so did the Navy's orders. The brothers tried to sell a small sport plane, the S-1, which was cheap to run and easy to fly, into a market already flooded with surplus warplanes selling at scrap prices. The S-1 never went into production. The company survived for a while building a pair of Curtiss HS-2L flying boats and doing subcontract work, then went into liquidation. The sources disagree on whether that was 1920 or 1921, and the brothers would have cared more about the fact than the date. Allan went into real estate. Malcolm built a successful business selling automobile brakes, and there is a dry joke in the fact that one of the pioneers of California flight made his money in stopping things.
Allan came back. On December 13, 1926, he joined John K. "Jack" Northrop, Kenneth Kay, and a financier named Fred Keeler to form the Lockheed Aircraft Company in Hollywood, under the phonetic spelling. Northrop had designed the F-1's hull and wings years earlier, left to work for Donald Douglas, and returned. He would later found his own company and give his own name to an airplane-maker, and his drift between employers and back again is close to a biography of the early West Coast aircraft industry. For Lockheed he designed the Vega: a high-wing wooden monoplane whose streamlined fuselage was made from two plywood half-shells pressed in a concrete mold, like a cast. The Vega 1 first flew on July 4, 1927. George Hearst bought it to fly in the Oakland-to-Hawaii Dole Race and named it the Golden Eagle. Its two pilots disappeared over the Pacific without a trace.
That didn't hurt sales. Lockheed built 141 Vegas, the first of its airplanes produced in any real number. Earhart flew them, Wiley Post flew them, and Hubert Wilkins took one across the Arctic in April 1928. The company moved to Burbank in March 1928 and reported more than a million dollars in sales by the end of that year. By April 1929 more than 300 workers were turning out five airplanes a week. Charles and Anne Lindbergh set a transcontinental speed record in April 1930 in a Lockheed Sirius.
By April 1930, though, the company no longer belonged to the man whose name it carried. In July 1929 Fred Keeler, the majority shareholder, sold 87 percent of the stock to the Detroit Aircraft Corporation (the filings show 107,915 of 138,233 shares). In August Allan Loughead resigned. In October the market broke. Detroit Aircraft went bankrupt, and its Burbank subsidiary went into the courts with it.
The pattern is easy to read. Allan Loughead lost his first company to an armistice and his second to his own investors. When the third chance came, a bankruptcy auction of a firm he had founded, at a price within his reach, he had the money and not the nerve. Too small a sum for a serious bid. Few people in American business history have been so exactly wrong. His $50,000 was a quarter more than what won.
He was right that it was a small sum. He was wrong in thinking that mattered.
Two sets of brothers
What is known about Robert Ellsworth Gross before the courtroom fits on an index card, and the card has an error on it.
The encyclopedias give his dates as 1897 to 1961. A Burbank local historian, writing affectionately about the man whose name is on her city's park, put his birth in 1887, in an upscale suburb of Boston. Nobody seems to have needed to settle the ten-year discrepancy, which says something about how fully the company absorbed him. People called him Bob. He went to Harvard and then into investment banking. He was close to his younger brother, Courtlandt Sherrington Gross, called Cort, who followed him to Harvard and then into business with him. "Just his name sounds wealthy, doesn't it?" the Burbank historian wrote of Courtlandt Sherrington. Later in life the brothers lived a few doors apart in Bel-Air.
So the bankruptcy produced two sets of brothers. The Lougheads were engine men, builders and fliers who made wonderful aircraft and lost one company after another. When their partnership ended, one went into real estate and the other into brakes, and they went separate ways. The Grosses were money men who had never built an airplane, and they kept the company they bought for the rest of their lives. They ended up living on the same street. Robert ran Lockheed from 1932 until his death in 1961. Courtlandt became president in 1956 and succeeded Robert as chairman in 1961, holding that post until 1967. If a family firm can be defined by two brothers taking turns at the top for thirty-five years, Lockheed under the Grosses was one, though its shares traded publicly.
The Grosses did not take every title at once. The syndicate that bought the company was described as being headed by the two brothers and Walter Varney, a name that recurs in airline histories of the period and appears here only briefly. For the first two years the presidency went to Lloyd Stearman, from 1932 to 1934, before Robert took it himself. The records date Robert's chairmanship to 1933 or 1934 depending on which you read. Either way, the banker put an aviation man in front at first and moved into the front office only once he had seen enough. The company was reorganized under a board of directors and renamed the Lockheed Aircraft Corporation, headquartered at the Burbank airfield.
His own company's later history says Gross "had no practical experience as an engineer, designer or pilot." It presents this as a point in his favor, which is typical of corporate hagiography, and on the evidence the point may be fair. A banker approaches an airplane company differently from an engineer. The engineer asks whether the airplane is good. The banker asks whether it can be sold, to whom, at what price, how many times, and what happens to the factory when the war ends. The Lougheads had answered the first question beautifully over and over and still gone bankrupt. Gross started with the second.
An airplane made of metal and arithmetic
Gross's first decision was an airplane, and he chose it the way a banker would.
The Vega had been a wooden airplane for pilots chasing records: individual, heroic, built for flights that ended in newspaper headlines or in the ocean. Gross wanted the opposite. In the words of Lockheed's later account, his idea was a "fast, affordable, all-metal civilian aircraft," a small twin-engine transport that airlines could buy in quantity and operate profitably, with retractable landing gear and none of the romance of plywood. He assigned it to one of his first hires, the engineer Hall Hibbard, and to Hibbard's young protégé, Clarence "Kelly" Johnson.
Little survives in the record about Hibbard beyond his role. He is the senior engineer standing at the start of the story, the man who brought the protégé. Johnson became, by general agreement, one of the best-known aircraft designers America produced. He would lead the company's most secret work for decades, and in 1964 he dated the beginning of that work to an airplane Gross had approved almost thirty years earlier. Gross's first big hiring decision brought in the man who would define the company long after Gross was gone.
The Model 10 Electra cost $139,400 to develop. For a company bought for $40,000 two or three years earlier, that was more than three times the purchase price, spent on one airframe during the worst economy in the nation's history. Lockheed sold forty in the first year. The Model 12 Electra Junior and the Model 14 Super Electra followed and widened the market. By Lockheed's later count, the Electra and its derivatives sold nearly 4,000 aircraft worldwide in the following decade. The Burbank historian wrote that the Electra "dominated the market and set records."
And one disappeared. In 1937 Amelia Earhart and her navigator, Fred Noonan, set out to fly around the world in an Electra and never came back. The company's two most famous early airplanes are each linked to a vanishing: the Golden Eagle lost over the Pacific in a Vega, and Earhart lost over the Pacific in an Electra. Lockheed outlived both losses without visible damage. The airplanes were good and the market was large, and the ocean does not affect order books.
It was said of Gross, his company's history notes, that he always "knew what kind of airplane to build." The phrase reads like a tribute, and it is also an accurate description of the job. He did not build the airplanes. He knew which ones to build. Separating the knowing from the building, so that a man who could not design an airframe could decide which airframes the company would stake itself on, was arguably the most important design work Gross ever did.
Everyone was a customer
The airliner turned into a warplane almost by itself.
The Model 14 Super Electra became the basis for the Hudson bomber, supplied to Britain's Royal Air Force and to the United States military before and during the Second World War. Its main job was hunting submarines. The same Model 14 was sold elsewhere, too. More than a hundred were license-built in Japan for the Imperial Japanese Army, and Lockheed was still delivering airplanes to Japan until May 1939. In the late 1930s the same airframe was being built for the navy of one future Allied power and the army of a future Axis power, and in Burbank, at least for a while, this seems to have been treated as ordinary business. The record says nothing of any qualms, and I won't invent any.
What the record does say is that in the mid-1930s, as the company's history puts it, "daring blueprints for a new military fighter and bomber came across his desk," and Gross funded them, "even though his company had little experience in military aviation." The bomber was the Hudson. The fighter was the P-38 Lightning, a twin-engine, twin-boom design that Johnson submitted in response to an Army specification for an interceptor. With its two engines and two booms it looked like nothing else in the sky.
The P-38 was the only American fighter in production for the entire period of American involvement in the war, from Pearl Harbor to V-J Day. It flew ground attack, air-to-air combat, and even tactical bombing in every theater where the United States fought. It shot down more Japanese aircraft than any other Army Air Forces type. Its most famous kill was the plane carrying Admiral Isoroku Yamamoto. The company that had been building airframes for the Japanese army in May 1939 produced the fighter that killed the architect of Pearl Harbor four years later. No moral needs drawing from this. The facts are enough, and Gross's balance sheet would have recorded both as revenue.
Arthur Herman's Freedom's Forge: How American Business Produced Victory in World War II treats Lockheed as one of the engines of that production miracle. The Lockheed sections fit the book's broader argument: much of what won the war was built by businessmen who had prepared, often out of commercial instinct rather than foresight, for a war they could not have planned for. Gross put money into military aviation before Washington wanted much of it, because the blueprints were good and the commercial market had shown how quickly it could disappear. The Lougheads had been ruined by a war ending. Gross was positioned for a war starting.
Nine years after the courtroom, Lockheed was by its own account the top-ranked airplane manufacturer in the world. About a decade after the purchase, the Burbank historian reports, annual sales had risen to nearly $150 million. The young man had known what he was doing, or else he had known exactly enough and been lucky about the rest, and at that scale the two are hard to tell apart.
A factory dressed as a suburb
The company was founded in Hollywood, and during the war it became a film set.
In 1940 Lockheed bought Burbank's Union Airport, and its Vega subsidiary's factory stood beside it. When war came, the whole site was camouflaged against enemy reconnaissance. The factory disappeared under an enormous burlap tarpaulin painted to look like a quiet, semi-rural neighborhood, complete with rubber automobiles. Hundreds of fake trees and shrubs, fake buildings, and fake fire hydrants were set out to give it depth. The trees were chicken wire coated with adhesive and covered in feathers so the foliage would have texture from the air.
The scale is the striking part: a plant that produced bombers, hidden by people who had grown up a few miles from the studios and knew what a backlot could do. Under the feathered chicken wire, the company was operating at full war tempo. Lockheed's workforce reached nearly 94,000 at its wartime peak, working around the clock, and many of them were women who had never riveted anything before.
In June 1943 the P-38 assembly line in Burbank was converted to a mechanized line, which more than doubled the production rate. The conversion took eight days. Production never stopped during those eight days. It moved outdoors. Fighters were assembled under the California sky while the indoor line was torn out and rebuilt, presumably with the fake suburb providing some cover.
The totals are close to unbelievable. Lockheed and Vega built 19,278 aircraft during the war, about six percent of all American war production: 2,600 Venturas, 2,900 Hudsons, 9,000 Lightnings, and 2,750 Boeing B-17 Flying Fortresses, built under license from a competitor because the country needed bombers more than it needed Lockheed's pride. Lockheed ranked tenth among American corporations by value of wartime production contracts.
On January 14, 1946, Robert E. Gross was on the cover of Time, in a portrait credited to an artist named Giro. For a single week the banker who could not fly was the face of American aviation. Then the war was over, the camouflage came down, and the question that had wrecked the Lougheads in 1918, what an airplane company does when peace arrives, came back.
The distillery
Before the camouflage, before Pearl Harbor, while Lockheed was expanding fast on war orders, the company bought a distillery.
In 1939 the P-38 prototype project was moved into the newly purchased building. Only a core group of engineers were allowed inside. That group, led by Kelly Johnson, worked on its own initiative to put advanced technology into the YP-38 prototype, and the result was the first fighter to fly 400 miles per hour. The building reportedly smelled bad. Many of the same engineers followed Johnson from it to the next secret project.
— Look magazine, on Kelly Johnson, October 6, 1964He calls his development plants 'skunk works'. There have been five of them – the first, an abandoned distillery.
The next project, started in secrecy at Burbank in 1943, was a jet fighter, the P-80 Shooting Star. It became the first American jet fighter to score a kill, and later recorded the first jet-versus-jet victory, over a MiG-15 in Korea, though by then the airplane, redesignated the F-80 in June 1948, was already considered obsolete. From the P-80 on, Lockheed's secret development work belonged to the Advanced Development Division. Everyone called it the Skunk Works, after the moonshine operation in Al Capp's Li'l Abner comic strip. The name came from a comic strip and the first building had been a distillery, so the most secret engineering organization in the free world started out with a joke about bootleg liquor attached to it.
After the war, in the company's later phrasing, "Kelly Johnson got his secretive new division." The verb is worth noticing. It implies that someone had to give it to him, and that someone was the man who signed the checks. The division produced the U-2, which first flew in 1955 and gathered intelligence over the Soviet bloc, then the SR-71 Blackbird and the F-117 Nighthawk. As the Burbank historian put it, "Only the best of the best got in, and none were allowed to speak of what they worked on — ever. Not even to your spouse."
Seen as a whole, Gross's Lockheed was a set of nested concealments. There was a factory hidden under a painted suburb, a design bureau hidden inside a distillery, and engineers hiding their work from their own families. At the center was a chairman who, by his own company's account, could not have done the work being hidden. A man who couldn't draw the airplane built the room where it could be drawn, kept everyone else out of it, and left it alone. Lockheed's later histories name the ethos he cultivated as "trust, integrity and passion." The trust part, at least, is borne out by the distillery.
Hangars too short for the future
The Constellation was designed around other people's buildings.
During the war Lockheed and Trans World Airlines developed the L-049 Constellation, an airliner meant to carry 43 passengers from New York to London at 300 miles per hour in 13 hours. Its most recognizable feature, the triple tail of three vertical fins, was not a styling choice. Many of its first customers had hangars too short for a single tail of the needed height, so the height was split three ways. The F-1 seaplane of 1918, built by the brothers who lost the company, had also had a triple tail. Whether the echo meant anything to anyone at Lockheed in the 1940s is unknown. For anyone reading the record it is hard to miss.
The Constellation's timing was well judged, even if nobody planned it. When it went into production, the military took the first units. After the war the airlines received the aircraft they had originally ordered. The result was that Lockheed entered the postwar civil market more than a year ahead of every other manufacturer, at the moment when, as everyone could see, civilian air travel was about to be rebuilt. War production paid for the development, and peace brought the customers. The Constellation set new standards and changed the commercial market, and its descendants, the Super Constellation and finally the L-1649 Starliner, kept it in service into the jet age.
Not everything worked. Lockheed built a bigger transport, the double-decked R6V Constitution, intended to make the Constellation obsolete, a deliberate attempt to beat its own best product before a rival could. The Constitution was underpowered. The Constellation outlasted the airplane designed to replace it.
In 1946 Gross tried something more characteristic of a banker. Lockheed moved to buy Convair, which would have created what Aviation News called a new aircraft giant. The Securities and Exchange Commission blocked the deal. The man who had built his company out of a single bankruptcy purchase was told in peacetime that he could not do it a second time at scale. He turned back to building things: the C-130, the jets, the missiles.
There is a fair account of these years in Walter J. Boyne's Beyond the Horizons: The Lockheed Story. The title comes from Gross's own favorite saying, which the company remembers in two versions.
Past the edge of the airplane
"Look ahead where the horizons are absolutely unlimited," he always said, according to Lockheed's official history. The Burbank historian recalled his motto as "The horizons are absolutely limitless." The difference is small but real. Unlimited sounds like an instruction and limitless sounds like a belief. That two sources who admired him remember it differently suggests he repeated it so often that people stopped hearing the exact words and kept the meaning.
In the 1950s he applied it literally, moving the company past aircraft.
The C-130 Hercules, a durable four-engine transport, first flew in 1954. It is still in production, which may make it the most durable thing Gross ever approved. The U-2 followed in 1955. In 1956 Lockheed won the contract to develop the Polaris submarine-launched ballistic missile, and Polaris led to Poseidon and then Trident, so that the company bought for $40,000 in a Depression courtroom became one of the builders of America's sea-based nuclear deterrent. A new Missile Systems Division, as the company's history puts it, would "help America win the space race." Late in the decade came the F-104 Starfighter, the world's first Mach 2 fighter, nicknamed "the missile with a man in it," which suits a company that was itself turning into a missile maker.
In 1956 Robert gave the presidency to Courtlandt and kept the chairmanship. The brothers who lived a few doors apart in Bel-Air shared the top of the company for five years. In 1961 Lockheed bought the Grand Central Rocket Company and renamed it the Lockheed Propulsion Company. That same year Robert E. Gross died. The sources give no date and no cause. His brother became chairman.
One more date belongs here. The record of what became the Lockheed bribery scandals, illegal payments by company officials to foreign officials, mostly to secure military aircraft sales, starts in the late 1950s. That is during Robert Gross's chairmanship. Nothing in the sources available to me puts his hand on any payment, and I won't suggest otherwise. But the chronology is what it is. The worst things Lockheed later admitted to began while the man whose ethos was remembered as "trust, integrity and passion" was still in the chairman's office. In 1962, the year after his death, Lockheed sold West Germany 350 F-104 Starfighters in what became known as the "Deal of the Century." It became famous later for reasons he did not live to see.
Privatize the profits
In 1932 a judge asked a room whether anyone would bid. In 1971 a Vice President broke a tie in the Senate. The second scene answers the first, one generation later.
During the 1960s, under the Grosses' successors, Lockheed took on two very large aircraft: the C-5 Galaxy military transport and the L-1011 TriStar widebody airliner. Both ran late and over budget. The C-5 was built to vague requirements and had structural weaknesses that Lockheed had to fix at its own cost. The TriStar competed with McDonnell Douglas's DC-10, and delays in Rolls-Royce's engines left it behind. Add the canceled Army AH-56 Cheyenne helicopter and a set of troubled shipbuilding contracts, and by 1971 Lockheed, then the largest defense contractor in the United States, was close to insolvency. It asked Washington for a loan guarantee on the grounds that its survival mattered to national security.
On May 13, 1971, the Nixon administration sent Congress the Emergency Loan Guarantee Act, asking for a $250 million guarantee. The chief opponent was Senator William Proxmire of Wisconsin, long an antagonist of Lockheed and of its chairman, Daniel J. Haughton. Haughton had been president from 1961, when Courtlandt moved up, and chairman from 1967. He was the first man to run the company who was not named Gross, and he presided over its greatest public humiliation. Senator Alan Cranston wanted management removed as a condition. Others pointed out that Penn Central had recently been allowed to go bankrupt, and that the TriStar was a commercial airplane, not a weapon. McDonnell Douglas and General Electric, who built the DC-10 together, opposed the bill out of fear that the government would steer contracts to Lockheed to make sure the loans got repaid. Treasury Secretary John Connally, testifying about unemployment and a weak economy, said: "Free enterprise is just not all that free."
Admiral Hyman Rickover, never inclined to understatement, put the objection most sharply.
— Admiral Hyman G. Rickover, on the Lockheed loan guarantee, 1971A new philosophy where we privatize profits and socialize losses.
On August 2, 1971, Vice President Spiro Agnew cast the deciding vote. Nixon signed the bill on August 9. Lockheed repaid the guaranteed borrowing in 1977, along with about $112 million in guarantee fees, and the precedent came up again almost at once when New York City sought federal help during its fiscal crisis in 1975.
The bribery story broke at about the same time. In late 1975 and early 1976 a Senate subcommittee under Frank Church found that Lockheed officials had paid members of friendly governments to secure military aircraft contracts. The total publicly revealed in 1976 was $22 million. The scandal caused upheaval in West Germany, the Netherlands, Italy, and Japan. Japan, once again, appears in the company's history at the worst possible moment. In the United States the scandal led to the Foreign Corrupt Practices Act. Haughton resigned.
The company kept going. In 1977 it dropped "Aircraft" from its name and became the Lockheed Corporation to reflect its non-aviation businesses. In 1978 it sold the Burbank airport, which had once been hidden under a painted suburb, to the surrounding cities; in 2003 it was renamed Bob Hope Airport. In the late 1980s the corporate raider Harold Simmons built up almost 20 percent of Lockheed's stock and tried to take control. Analysts said his interest came largely from a pension plan overfunded by more than $1.4 billion. He failed. The firm Gross bought for $40,000 now had a pension surplus large enough to attract a raider. In 1992 all aerospace work at Burbank ended. In 1995 Lockheed merged with Martin Marietta in a $10 billion deal, headquartered not in Burbank but in North Bethesda, Maryland.
The newest fighter from the combined company is the F-35 Lightning II, named after the P-38 Gross funded in the 1930s. The name on it is Lockheed, the founder's respelled name, the name of the man who didn't bid.
A common name
Researching Robert E. Gross mostly turns up other Robert E. Grosses.
The first, and the most persistent, is Robert Edward Gross, born in Baltimore on July 2, 1905. His father managed the Stieff Piano Company. As a boy he was described as shy and sensitive, a tinkerer and a careful observer. He nearly dropped out of Carleton College to make time to read Harvey Cushing's biography of William Osler. On August 26, 1938, at Children's Hospital in Boston, he tied off a patent ductus arteriosus in a child, the first successful major surgery on the great vessels near the heart. A file labeled with the aviation executive's name in a national biographical archive turns out, when opened, to contain the surgeon. In 1938 both men were doing things for the first time: one was operating near a child's heart, and the other had the Hudson in production for Britain. Neither, as far as anyone knows, ever heard of the other.
Then there is a violinist and composer, a historian, a physicist, and a professional basketball player called Bob. A Robert E. Gross was listed as an officer of a review-detection startup called Fakespot around 2018. Another, in an SEC filing, received a warrant for 52,000 shares at fifteen cents, expiring September 30, 2017. A Robert E. Gross co-wrote a paper on stimulating the temporal cortex to restore memory. Yet another wrote a memoir about the misadventures of a mad inventor.
The aviation Gross has some lasting markers. Harvard Business School includes him among its Great American Business Leaders of the 20th Century. UCLA's Anderson School holds the Robert E. Gross Collection of Rare Books in Business and Economics, which fits a banker better than an aviator. There was the Time cover in January 1946. Every airplane he paid for, though, carried someone else's name. Robert Gross bought a name, built a large institution under it, and as the institution grew, his own name became one of many shared by strangers.
The local historian who wrote about him for her Burbank neighbors began with a place, not with the airplanes. There is a park in Burbank at 2800 West Empire Avenue, popular with families. "But how many of these families know who Robert E. Gross was?" she asked. She suspected her readers did, and she told the story anyway, from the courtroom onward, with the judge's line, the envelope, and the $40,000.
The name is on the park. The families come for the grass and the afternoon. The judge's question has been answered for ninety years in two words, and in Burbank those two words hang over a playground most people walk through without looking up.
Part IIThe Playbook
The principles below are drawn from the record of Gross's twenty-eight years at Lockheed. They cover what he did, what he allowed, and what he left to his successors. They are not a celebration. Some are lessons from things he got right, and a few are warnings from things that happened on his watch or soon after. Read together, they describe a particular kind of operator: a capital allocator who never pretended to be an engineer and turned that limitation into a method.
The principles
- 1.Buy what the founder has stopped believing in.
- 2.Own the judgment, not the drawing board.
- 3.Design the civilian product so it can be drafted.
- 4.Bet past your résumé when the blueprints are better than your history.
- 5.Quarantine the future from the factory.
- 6.Rebuild the line without stopping it.
- 7.Let the customer's hangar shape the tail.
- 8.Sequence your customers, not just your products.
- 9.Leave your category before it leaves you.
- 10.Your customer list is a moral document.
- 11.Succession is the last product you ship.
L
The Gross Years at a Glance
From receivership to the missile age, 1932–1961.
1932
June 21: Gross wins Lockheed's assets in a Los Angeles courtroom with a $40,000 bid. Allan Loughead, holding $50,000, does not bid.
1932–34
Lloyd Stearman serves as president. Gross takes the chairmanship (dated 1933 or 1934), then the presidency in 1934.
1930s
The Model 10 Electra is developed for $139,400. Forty sell in its first year.
Mid-1930s
Gross funds the fighter and bomber designs that become the P-38 and Hudson.
1939
The P-38 prototype moves into a distillery building. The YP-38 becomes the first fighter to fly 400 mph. Deliveries to Japan end in May.
1940
Lockheed buys Burbank's Union Airport.
1941
The P-38 enters service. Lockheed is by its own account the world's top-ranked airplane maker.
1943
The P-80 jet begins in secret. In June the P-38 line is mechanized in eight days without stopping.
1946
Gross appears on the cover of Time (January 14). The SEC blocks the Convair acquisition.
1954–56
C-130 first flight; U-2 first flight (1955); Polaris contract (1956). Courtlandt Gross becomes president (1956).
1961
Grand Central Rocket is acquired. Robert E. Gross dies, and Courtlandt becomes chairman.
Principle 1
Buy what the founder has stopped believing in
The most useful fact about the 1932 auction is not that Gross won. It is that Allan Loughead had more money than Gross offered and chose not to use it. The founder knew the company better than anyone alive. He knew the Vega, the Orion, the workforce, the Burbank site. He had also lived through two collapses, and they had taught him to discount his own conviction. He measured his $50,000 against what he thought the company was worth and decided a bid would look ridiculous. He was measuring against the wrong thing. In a bankruptcy auction with no other bidders, what matters is not the asset's value but whether anyone else will show up.
Founders are often the people least able to price their companies at the bottom, because they are pricing their own disappointment along with the assets. The founder's resignation is the outside buyer's opportunity. Gross arrived without that history. He did not remember the F-1 contract vanishing in 1918 or Fred Keeler selling 87 percent of the stock out from under him in 1929. He saw a design team, a product reputation that Earhart, Post, and Lindbergh had built for free, and a price lower than the founder's savings.
⚖
Same Asset, Two Readings
How the founder and the buyer valued Lockheed in June 1932.
| Question | Allan Loughead | Robert E. Gross |
|---|---|---|
| Capital in hand | $50,000 | $40,000 (consortium) |
| Frame of reference | What the company was once worth | What else was being bid that day |
| History carried into the room | Two prior collapses; ousted by own investors | None in aviation |
| Decision | Too small for a serious bid. Stayed home. | Stepped forward. "I do." |
Tactic: When a distressed asset comes up for sale, find out whether the people who know it best are bidding. If they aren't, ask whether they are reading the asset correctly or reading their own scars.
Principle 2
Own the judgment, not the drawing board
Lockheed's official history states plainly that Gross had "no practical experience as an engineer, designer or pilot," and that he was nonetheless said to always know "what kind of airplane to build." These two facts fit together. Gross split aircraft development into two jobs, deciding what should exist and making it exist, and took only the first. The Electra was his idea: fast, affordable, all-metal, civilian. Hibbard and Johnson made it real. The P-38 and Hudson blueprints came across his desk, and his contribution was the decision to fund them.
This is harder than it sounds. A non-technical leader of a technical company is constantly tempted either to pretend to expertise or to give up judgment entirely to the experts. Gross did neither. He made the commercial and strategic call, what market, what timing, what risk, and then stayed out of the engineering. His first hires show the method. He looked for talent, not a deputy who resembled him, and one of those hires, the young Kelly Johnson, would define the company for the next forty years.
Tactic: Write down the one decision in your business that only you can make well and the ten you are making only because you can. Keep the first and give away the rest to people better at them than you.
Principle 3
Design the civilian product so it can be drafted
The Model 14 Super Electra was built as an airliner. It became the Hudson, the RAF's submarine hunter and one of the airplanes the company's history says changed the course of the war. The Constellation was developed with TWA for transatlantic passengers, and its first production units went to the military. Gross never had to choose between commercial and military aviation, because his best civilian aircraft had sound enough structures to be adapted to military use.
The lesson was learned from the Lougheads' failure. Their F-1 was a Navy aircraft that could not find a civilian life after the armistice. Their S-1 was a civilian aircraft that could not compete with surplus military planes. Each product served only one market, and when that market closed the company went with it. Gross built products that could serve either, so a shift between peace and war became a change of customer rather than a fatal blow.
Tactic: For every product you build for one market, identify the second market that could adopt it if the first one disappeared, and make sure nothing in the design rules that second market out.
Principle 4
Bet past your résumé when the blueprints are better than your history
In the mid-1930s Lockheed was a civil-aviation company with, in its own historians' words, "little experience in military aviation." Gross funded a twin-boom interceptor and a bomber anyway. The P-38 became the only American fighter produced for the whole of the American war. The usual objection, that you don't know that market, is a statement about the past. Gross was investing in a design, and he judged the design rather than his company's record.
◆
The Gross Portfolio of Bets
Major wagers of the Gross era and how they turned out.
| Bet | Experience going in | Outcome |
|---|---|---|
| Model 10 Electra ($139,400) | Wooden record-setters only | Win ~4,000 family aircraft in a decade |
| P-38 Lightning and Hudson | Little military experience | Win 9,000 Lightnings; 2,900 Hudsons |
| Constellation (with TWA) | Small transports | Win A year's postwar head start |
| R6V Constitution | Constellation in hand | Miss Underpowered |
| Convair acquisition (1946) | Built by acquisition in 1932 | Blocked SEC refused |
| Polaris and missile division | None in missiles | Durable Polaris, Poseidon, Trident |
The table has misses in it, and that matters. An operator who bets beyond his experience will sometimes be wrong. The Constitution was underpowered, and the Convair deal never closed. The approach works only if the wins are large enough to cover the losses, and in Gross's case they were far larger.
Tactic: Judge new-market opportunities on the strength of the specific proposal in front of you, not on your track record in that market, and size the bets so that one failure cannot sink the company.
Principle 5
Quarantine the future from the factory
The Skunk Works started because a growing war-production company needed to keep its most advanced project away from its own momentum. In 1939 the P-38 prototype was moved into a separate building, closed to everyone but a core group, and those engineers "acted on their own initiative," which produced the first 400-mph fighter. The P-80 jet followed in secret. Later the U-2 came out of the same arrangement: a small group, physically separate, sworn to silence even at home.
The insight is that the main factory and the experimental workshop are opposed. One runs on standard processes, the other on breaking them. A plant producing thousands of aircraft will smother an experimental project with procedures unless it is walled off. Gross did not run the Skunk Works. His role, as the company's account puts it, was that Johnson "got his secretive new division": he protected it from the rest of his own company.
Tactic: Put your most important experimental work in a separate space, with its own small team and its own rules, and make it your personal job to keep the rest of the organization from interfering.
Principle 6
Rebuild the line without stopping it
In June 1943 Lockheed converted its P-38 line to mechanized assembly, more than doubling output, in eight days, and production never stopped. It moved outdoors for the duration. The usual way to improve a process is to halt it, rebuild it, and restart, accepting a planned loss of output. Under wartime demand Lockheed couldn't accept that loss, so it ran both at once: the old method in the open air and the new one being built inside.
This sits at the center of the Gross-era operating culture. Change was not allowed to become an excuse for downtime. The camouflaged Vega plant made the same point another way: rather than move or shut the factory under the threat of air reconnaissance, the company disguised it and kept working.
Tactic: Before your next major process overhaul, find a temporary parallel arrangement, however makeshift, that keeps your core output going during the transition. Don't accept planned downtime as unavoidable.
Principle 7
Let the customer's hangar shape the tail
The Constellation's triple tail is now the airplane's signature, and it came from a mundane constraint. Many early customers had hangars too low for a conventional tail. Lockheed didn't ask them to rebuild their hangars. It changed the airplane. The resulting shape became so identified with the Constellation that the constraint now looks like a design choice.
Engineers tend to treat customer infrastructure as the customer's problem. The Gross approach treated it as a design requirement. Selling an airplane that doesn't fit the hangar means waiting for the customer to spend money on construction before spending money on you. Fitting the hangar removes that obstacle. That the solution turned out to be distinctive, and was used decades earlier on the Loughead F-1, shows how often good design starts from inconvenient facts.
Tactic: Find the physical, technical, or organizational limits on your customers' side that slow adoption, and treat them as fixed requirements your product has to meet rather than problems for the customer to solve.
Principle 8
Sequence your customers, not just your products
The Constellation's commercial success came from the order of its customers as much as from its engineering. The military took the first production units during the war, which funded the build-up and refined the design. The airlines got their aircraft after the war, and Lockheed gained "more than a year's head-start" over every rival in the obvious postwar boom in civil aviation. Competitors were still designing while Lockheed was delivering.
Most operators think hard about product sequencing and very little about which customer gets which version first. Gross's Lockheed sequenced by customer. The buyer with the most urgent need and the deepest pockets paid for development, and the larger, slower market got a proven aircraft. The military bore the early risk, and commercial customers got the result.
Tactic: Map who should get your product first, the customer who can fund and stress-test it, and who should get it second, the larger market that wants it proven, and plan your timeline so the first leads into the second.
Principle 9
Leave your category before it leaves you
In 1956 Lockheed won the Polaris contract and set up a missile division. It was an airplane company moving into submarine-launched ballistic missiles, a field with no pilots and no airframes in the usual sense. The F-104, the "missile with a man in it," arrived at the same time, and its nickname marks the shift. By 1961, the year Gross died, the company had bought Grand Central Rocket. In 1977 his successors acknowledged what had already happened by dropping "Aircraft" from the name.
Gross had watched one aviation company collapse when a war ended, and he wasn't sentimental about airplanes as such. His motto, the horizons are "absolutely unlimited" or "absolutely limitless," depending on who remembered it, was easy to dismiss as corporate cheerfulness. Taken literally, it was a strategy. Horizons recede as you approach them. A company that defines itself by its current product category has set itself a horizon it will eventually reach and fall off.
Tactic: Define your company by the problem it solves for its most important customer, not by the product it currently sells, and put real money into the version of that solution that would make your current product obsolete.
Principle 10
Your customer list is a moral document
This principle is a warning. Before the war, Lockheed's Model 14 was license-built in Japan for the Imperial Japanese Army, with deliveries continuing until May 1939. The record does not say Gross objected. Starting in the late 1950s, during his chairmanship, Lockheed officials began the pattern of foreign payments that the Church subcommittee later documented: $22 million revealed in 1976, upheaval in four allied countries, a new federal anti-corruption law, and the resignation of his eventual successor. No available source ties Gross personally to any payment. The timeline still runs through his tenure.
A company's ethos is defined by what its leaders tolerate, not by the adjectives later historians use. "Trust, integrity and passion" is how the company remembers Gross's culture. The customer list and the payment ledger record something less flattering. A leader who funds daring designs and gives his engineers wide latitude creates a culture of autonomy, and autonomy without clear limits can extend to the sales force in ways nobody intended.
Tactic: Every year, read your customer list and your sales practices as though they were going to be read aloud at a Senate hearing in fifteen years, and fix whatever you would not want to defend then.
Principle 11
Succession is the last product you ship
Gross handled succession in a way that looks careful on paper. In 1956 he made his brother president while keeping the chairmanship, so the two shared power for five years. When Robert died in 1961, Courtlandt moved up to chairman, and Daniel Haughton, the first non-Gross leader, became president. The transition was smooth. What came afterward was not. Under Haughton the company lost heavily on the C-5 and L-1011, needed a Senate tie-breaking vote to stay solvent in 1971, and was disgraced by the bribery revelations of 1976.
The difficult point is that an orderly transfer of the title is different from passing on judgment. Gross's talent was knowing "what kind of airplane to build" and when to commit, and that talent was not written into any procedure the company kept. The lineage of engineers, Hibbard to Johnson to the Skunk Works, carried on for decades because it was an actual system. The lineage of chairmen depended on one man's judgment and ended when he died.
↻
After the Envelope
The chairmen who followed, and what each inherited.
| Chairman | Years | Defining inheritance |
|---|---|---|
| Robert E. Gross | 1933/34–1961 | Build Receivership to missile age |
| Courtlandt S. Gross | 1961–1967 | Continuity Family hand on the tiller |
| Daniel J. Haughton | 1967–1976 | Crisis C-5, TriStar, loan, bribery |
| Daniel M. Tellep | 1989–1995 | Exit Fends off Simmons; merges with Martin Marietta |
Tactic: Separate the work of succession into handing over the office and passing on the judgment, and spend most of your effort on the second: write down how you make your hardest decisions, not just what you decided.
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Part IIIQuotes and Maxims
In their words
— Exchange in U.S. District Court, Los Angeles, June 21, 1932"I hope, young man, you know what you're doing." / "I do."
— Robert E. Gross, his oft-repeated maxim, as preserved by Lockheed MartinLook ahead where the horizons are absolutely unlimited.
— Robert E. Gross's motto, as remembered in BurbankThe horizons are absolutely limitless.
— Lockheed Martin, 'Pushing the Envelope: The Robert E. Gross Story,' 2020It was said—and proven time and again—that Robert Gross always "knew what kind of airplane to build."
Maxims
- The founder's hesitation is your price. The people who know an asset best are often too bruised by its history to bid on its future.
- Decide what exists; let others decide how. A leader who can't build the product can still be the best judge of which product to build.
- Build for two markets. A product that serves only peace or only war will be ruined by whichever comes next.
- Judge the blueprint, not the résumé. Lack of experience in a market says nothing about whether a given proposal is good.
- Wall off the future. Experimental work needs its own building, its own team, and a patron who protects it from the rest of the company.
- Change the line while it runs. Planned downtime is a choice, and a resourceful operator can usually avoid it.
- Fit the customer's hangar. Constraints on the customer's side are design requirements, and the solution sometimes becomes the product's signature.
- Sequence customers deliberately. Let the most urgent buyer pay for development so the larger market gets a proven product first.
- Outrun your category. A company defined by its current product will eventually reach the end of it.
- Watch what you tolerate. The adjectives historians use don't define a culture; what the company is willing to sell, and to whom, does.
