Part IThe Story
The banker's name has not come down in the versions of the story that survive, but his sentence has. It was 1952. The office was in Boston. Across the desk sat Royal Little, in his mid-fifties, principal owner and chairman of a Providence textile company called Textron. He had spent nearly thirty years in yarn, rayon, and parachute cloth, and he now wanted to borrow money to buy a company that made cushioning for car seats. The company was Burkart Manufacturing. It had nothing to do with textiles except that you sat on it. The banker listened, and then he said the thing that Little would repeat for the rest of his life, with what seems to have been genuine pleasure:
— A Boston banker to Royal Little, 1952, as recounted by the Rhode Island Heritage Hall of FameRoy, this idea won't work. But I'm going to back you. I'm going to let you make a mistake, and perhaps you'll learn from that mistake and get back to just running a textile business.
The line is generous and condescending in about equal parts, and it is very nearly right. Little did make mistakes, a great many of them. Twenty-seven years later he added them up, venture by venture, put a dollar figure on the total, and used the total as the title of a book. The banker was wrong about everything else. He was wrong that the idea would fail and wrong about which lesson Little would take from it, and above all he was wrong about which business Little would go back to. Within eleven years of that meeting, Textron would sell its last textile division and leave the industry for good. The company would keep the syllable Tex in its name, the way a family keeps a surname after it has moved away from the town it came from.
Little did not walk into the banker's office with a hunch. He had prepared the ground, the way he usually did. He had taken the largest tax-loss carryback he could to build up cash and pay down debt. He had brought in an experienced executive to replace him as president of Textron, which moved him up to chairman with nothing to do but hunt. And he had found a target that suited the plan almost too well. The Burkart brothers had run their company competently and were, by every account, more than ready to retire. They were selling an exit, and Little was buying a hedge. Neither side had to pretend the deal was about anything else.
So the banker's loan was less a bet on Little's judgment than a tuition payment, made on the assumption that Little would fail and return to yarn chastened. In a sense Little did spend the rest of his career enrolled in the course the banker had paid for. He just never went back to the old school. He kept tallying the lessons, and in 1979, at eighty-three, he published the transcript as How to Lose $100,000,000 and Other Valuable Advice. It is a business memoir organized as a list of errors, and each chapter ends, like one of Aesop's fables, with a moral.
"People ask me, 'How did you ever lose so much money?'" he told a reporter the following year. "Well I tell 'em, I didn't lose it, the stockholders lost it." Then came the accountant's honesty, and the punch line: "I went through and added up the exact amount my mistakes cost the company and it came out well over $100,000,000, but why spoil a good title?"
What follows tries to explain how a man came to treat his failures as an asset class. That habit started well before 1952. It began with a borrowed household, a borrowed $10,000, and a career-long talent for using losses, his own and other people's, as raw material.
By the Numbers
Royal Little and the First Conglomerate
$10,000Borrowed capital that founded Special Yarns Corporation in 1923
~4%Share of all U.S. rayon sold by Little's company by 1930
$99M → $383MTextron sales, 1952 to 1960, the diversification years
40+Smaller companies absorbed by Textron in the 1950s
29,000Textron employees across 90 plants by 1960
$100M+Little's own tally of what his mistakes cost shareholders
$13.7BTextron revenue in 2024, more than a century after founding
A Borrowed Household
Royal Little was born on March 1, 1896, in Wakefield, Massachusetts. He did not stay long. His stepfather was a printer, and the family followed the work, wandering across the country from job to job until the boy ended up in a one-room schoolhouse in rural California, about as far from Boston as you could get without a boat. A printer's stepson, sitting at a shared desk at the far edge of the continent, did not obviously have a future in finance.
The rescue came from a relative with no children of his own. Arthur Dehon Little was Royal's uncle and the founder of the Boston management consulting firm that bore his name. He was wealthy and childless, and in 1910 he suggested that Royal come back east, live in his household, and eventually join the business. The family agreed. It is worth pausing on that agreement, because it means a mother and stepfather decided their son would do better as someone else's heir. In January 1911, the boy was enrolled at Noble & Greenough, a private school in the Boston area. He graduated in 1915 and went on to Harvard to study engineering.
He was not, at first, a credit to the investment. Harvard put him on academic probation. The First World War interrupted his studies anyway: Little went to France as an infantry lieutenant and, by one account, served with distinction in the trenches. He came back, finished his degree, and took it in 1919.
Then he did something that, in a lesser biography, would be called ingratitude. He did not join Arthur D. Little. A man had pulled him out of a California schoolhouse, paid for his prep school and his Harvard degree, and offered him a place in a firm that carried their shared surname, and Little turned it down to work as an unpaid apprentice in a textile mill. The mill belonged to Cheney Brothers Silk Co., a Connecticut firm. From there he moved through a series of textile companies, including the Franklin Rayon Yarn Dyeing Corporation, where, the company's own history suggests, he first noticed the problem that would organize his life. A business that makes one product in one market is a hostage to that market's moods.
He also spent time at a Wall Street brokerage, where he learned finance. This detail is easy to skip and should not be skipped. An engineer who has worked a mill floor and then learned to read a balance sheet the way a broker reads one ends up holding two vocabularies that rarely share a head. Little would spend his career translating between them.
The pattern was set early and never really changed. Little took what was offered — the household, the schooling, the name — and then used it to go somewhere else. Decades later, when his son was born, Little named him Arthur.
Less Than a Shoestring
In 1923, at twenty-seven, Royal Little borrowed $10,000 and started a company called Special Yarns Corporation in Boston. He described the capitalization, with characteristic understatement, as "less than a shoestring." Asked about the first year's results, he said: "We almost broke even."
The records do not agree on much else about these years, and it seems right to say so. Most sources date the founding to 1923, and one has Little starting the company in 1928 at thirty-seven, which cannot be true for a man born in 1896. Another gives 1928 as the founding date and $75,000 as the first year's revenue. The name change to Textron is placed in 1943 by some accounts and 1944 by others. A man who wrote a whole book about his errors left a historical record with plenty of small ones in it, and that seems fitting.
What is clear is that Special Yarns was a niche business. It processed synthetic yarns at a time when synthetics were themselves a novelty, and it grew by acquisition almost from the start. In 1928 it bought the Franklin Process Company, a cotton-yarn processor in Rhode Island, which was the first merger in what would become a very long line of them. By 1930 the company was selling roughly 4 percent of all the rayon used in the United States, and it had changed its name to Atlantic Rayon. In 1939 it added the Lawrence Manufacturing Company. The pattern of the next three decades was already visible: acquire, rename, and acquire again.
The interwar textile industry was a selling business, and Little was by all accounts one of the best salesmen in it. The best single detail from these years concerns how he got to his customers. Other salesmen drove between accounts. Little flew his own light plane and navigated by roads and utility poles, following the wires from town to town at low altitude, reading the landscape the way a broker reads a tape.
Think about the sight of it: a rayon salesman in a small aircraft, following the telephone lines across New England, trusting that the infrastructure would lead him where he needed to go. Little was always willing to borrow someone else's structure to get where he was going. It was the same willingness that would later lead him to borrow the tax position of a pneumatic-tool company in Cleveland.
He had been through the bad years too. The Depression was hard on the business, and the interwar textile trade swung between boom and bust. Little stayed in the field through all of it. That stubbornness matters to the story. The man who later became the theorist of escaping cyclical industries first spent two decades refusing to leave one.
The Man Who Jumped
In 1942 the board of Atlantic Rayon authorized $100,000 to form the Atlantic Parachute Corporation and make parachutes for the United States government. The decision changed what kind of company it was. Until then it had been a small business that dyed and twisted yarn. Now it was a major manufacturer of finished, sewn products, and it grew quickly. Sales tripled in the first two years. The workforce went from 900 to 3,000.
The Army needed to trust the parachutes, so Little gave it a reason to. At forty-six, an age when most executives send a vice president to the demonstration, he went to jump school. Then he personally demonstrated the quality and reliability of his rayon parachutes to the Army, which in practice meant stepping out of an aircraft with his own product on his back and letting gravity decide whether it worked.
It is hard to think of a cleaner act of salesmanship. It is also hard not to read it as a preview of his later thinking. A parachute is a hedge you can wear. You carry it in case the thing holding you up stops working. Ten years after the jump, Little would build an entire corporate theory around the idea that no single business should be the only thing between a company and the ground.
The war rearranged the textile market in ways a novelist would hesitate to invent. Silk, which had kept American women in stockings, was no longer available in enough quantity. The industry turned to the synthetics it was already using for parachutes, but rayon made a baggy stocking, and American women, rather than wear sagging hose, simply went bare-legged. The fashion changed overnight and took a market with it.
Little was not discouraged. He put the same machines to work on blouses, men's underwear, bedspreads, and draperies. The new products needed a new name, and here the story turns briefly comic. The advertising agency's first suggestion, which the company did seriously consider, was Señorita Creations. One company history notes, quite correctly, that it is hard to picture a global conglomerate called Señorita Creations.
The name Little chose instead was Textron: Tex for textiles and -tron taken from the names of synthetic fabrics such as Lustron. It sounded engineered and modern, and the second half was borrowed from a fiber the company did not own. In 1947 the company listed on the New York Stock Exchange under the ticker TXT. That name would go on to outlast every product the company made at the time it was chosen.
A Textile Giant, for About a Year
Every company can grow in only two ways: it can build from within, or it can buy what others have built. Little wanted to grow, and he wanted to grow fast, so in the years after the war he went shopping. He bought Manville-Jenckes. He bought the Lonsdale Company. He bought Nashua Manufacturing. He bought several factories from Gossett Mills and Hoskins Inc. and combined them into an operation called Textron Southern. All of this happened within about three years. In 1947 Textron reported sales of more than $125 million. The printer's stepson, who had started with $10,000 he did not have, appeared to own the textile empire he had been building toward since Cheney Brothers.
It lasted about a year.
Textiles were cyclical, and they had always been cyclical. Little knew this better than almost anyone, having lived through the interwar slumps. The postwar boom gave way to a recession in 1948 and 1949, and Textron, which had just made itself very large in a single industry, took the full force of the downturn. By 1949, revenue had fallen to $67.8 million, roughly half of the 1947 peak. By 1952 the company was losing money, and Little had begun to worry about something more structural than any one bad year: the meager return Textron was earning on the large amount of capital tied up in its mills.
The lesson he drew from this was more precise than "textiles are a bad business." He concluded that growth through acquisition was fine, but he had been buying the wrong kind of company. The mechanism worked. He had been feeding it the wrong material. Textron would keep buying textile operations for a while, but it would also start looking for companies in other industries, especially companies that better management or more investment could improve, and companies whose particular tax position could add to Textron's earnings.
There was another reason to look outside textiles, and it came from Washington. In those years the Justice Department and the courts were enforcing the antitrust laws aggressively, and a large company that dominated one industry was a natural target. A textile giant could draw a federal lawsuit. A company with interests in radar antennas, plywood, plastic clotheslines, and leather would be very hard to accuse of monopolizing anything. Little saw that the government was effectively penalizing concentration and rewarding sprawl, and he decided to sprawl.
Two men figure in the official chronology of these years. One was Eliot Farley, born in 1885, a businessman listed among Textron's cofounders. The other was Lawrence E. Green, born in 1897, a lawyer and businessman who served as a trustee of the Textron Pension Trust. Both died in 1952, the same year Little walked into the Boston banker's office. The surviving record says little more about them. They are names in a list of key figures, men who were present at the beginning and gone just before the company became something none of them had planned.
Buying Other People's Losses
The first non-textile acquisition was more an accounting move than a strategy. On July 8, 1948, according to one detailed chronology (another source places it in 1949), Textron acquired the Cleveland Pneumatic Tool Company. Cleveland Pneumatic had made large profits during the war, and those profits came with a large tax bill attached. It had no losses elsewhere in its business to offset them. Textron, sinking through the textile recession, had plenty of losses and no profits to use them against. Putting the two together solved both problems. As one encyclopedia entry describes the arithmetic, a Textron loss of one dollar would be offset by a Cleveland Pneumatic profit of one dollar.
There is something almost poetic in this, if your taste in poetry runs to the Internal Revenue Code. Neither company's misfortune was useful by itself. Combined, they canceled out. Little had found a way to make his own bad luck pay a return.
The deal is usually cited as the starting point of the conglomerate era. One historian dates the whole movement to that July day in 1948, when a major producer of synthetic fabrics bought a company that was not in the textile industry and so became, by definition, a participant in several unrelated ones. Little next bought Pathe Industries, which owned real estate and produced newsreels. A textile company now owned part of the machinery that showed Americans the news before the feature began.
Then came the deal that tested the theory hardest and, in some ways, ended Little's patience with the industry he had come from. American Woolen was a giant of the textile business, considerably larger than Textron. At the time of the acquisition it was losing about $2 million a month. To a conventional buyer that number would have ended the conversation. Little saw what sat underneath the losses: large cash reserves, substantial working capital, and a tax-loss carryover of roughly $30 million. The losses were the attraction. The carryover could shelter the profits of whatever Textron bought next, and the cash could pay for it.
The fight that followed involved a complicated series of negotiations. Fortune called it "the stormiest merger yet." Textron won, in 1955 by most counts, though at least one source puts it a year earlier. Little later offered a rule for winning these contests that sounds less like a business principle than a remark made over a second drink: be sure to pick a company "whose board of directors isn't smart enough" to fight back with a counter-takeover.
That line deserves to be set beside another fact. The same encyclopedia that credits Little with founding the conglomerate movement also says he was firmly opposed to "raiding," meaning takeovers the target's management did not want. It adds that Textron often played the "white knight," invited in by besieged companies looking for a friendlier buyer. Both things appear to be true. The man who made his name rescuing companies from unwanted suitors had once, at least, been the unwanted suitor himself. He fought a hostile battle for a larger rival, and he chose his opponent partly because he thought its board too slow to defend itself. People are rarely consistent, and the interesting ones are inconsistent in revealing ways.
The war over American Woolen cost Little something besides money. The encyclopedia says the battle ended in a Textron victory but that "in the process Little lost his taste for that business." After it he got out of textiles altogether, and he became, in the encyclopedia's phrase, "a conglomerator with a vengeance."
The Spider and His Webs
Business historian Robert Sobel titled his chapter on Little "Royal Little: The Spider and His Webs." It is apt for a man whose fortune began with yarn. A spider spins thread from its own body and then waits for things to land in what it has built. Little's web in the 1950s was made of tax positions, cash reserves, and retiring founders, and the things that landed in it were unrelated to one another.
To read the list of what Textron acquired in that decade is to read the inventory of mid-century America. There was Dalmo Victor, which made airborne radar antennas; the New York Times reported on January 12, 1954, that Textron had acquired all its stock. There was MB Manufacturing, which made vibration eliminators and aircraft parts, and which the Times described in a headline as Textron's "Hedge on Depression." There was Kordite, which made plastic clotheslines and film. There were Camcar Screw & Manufacturing, Coquille Plywood, Myrtle Point Veneer, Benada Aluminum, and Federal Leather. There was Homelite, which made chain saws, and CWC. And there was, in an entry that reads like a misprint, an old troop carrier, which Little turned into a tourist ship.
In total, Textron absorbed more than forty smaller companies during the decade. The bankers and financial associates who watched it happen were unanimous in their skepticism. "They'd say, 'Roy, this idea cannot possibly work. How can any one person run 20 or 30 different businesses?'" Little recalled at eighty-four.
He had an answer, though it took a while to put into words. By the early 1960s he could state it plainly. Diversification removed the risk of the business cycle, because at any given moment some of a company's businesses would be growing while others were shrinking. Textron would never again suffer anything like the collapse of 1948 and 1949. And a capable management team at the top could move capital around as needed. The steady earnings of mature subsidiaries, which those subsidiaries did not need for their own growth, could go to fast-growing divisions that were short of cash.
— Royal Little, on the purpose of diversification, as quoted in the Los Angeles TimesEliminate the effect of business cycles on the parent company by having many divisions in unrelated fields.
The word that matters in that sentence is unrelated. Little did not want what later strategists would call synergy. He wanted the opposite. If the businesses were connected, a downturn in one would spread to the others, so they had to be disconnected enough that one division's bad year could not drag down the rest. It was the parachute logic again, applied to a balance sheet.
Little was also honest about his own weakness, which was that he liked buying things too much. In 1956 he hired Rupert Thompson, a Providence banker, essentially to restrain his own appetite for acquisitions. It is an unusual hiring decision, and one that more founders should consider: Little hired someone whose job was to say no to him. Thompson's role was to make sure Textron's purchases were "balanced," spread across enough different markets that a slump in any one could not seriously damage the whole. With Thompson in place, the spree became a portfolio.
The numbers suggest it worked. Textron's sales rose from $99 million in 1952 to $383 million in 1960. By 1960 the company had 29,000 employees in ninety plants. The Los Angeles Times put it at 124th on the Fortune 500 list of the largest industrial companies; another account puts it among the country's top hundred companies, with $550 million in revenue by the time Little fully left a couple of years later. The figures differ, but the direction is the same in every source.
Little's own habits did not grow along with the company. His personal fortune was estimated at more than $20 million. He nonetheless listed his annual savings as zero, and he was known to borrow train fare from friends for the trip from his home in Narragansett, Rhode Island, to Textron's headquarters in Providence. The founder of what would become one of the largest companies in the country rode to work on borrowed money. He had started the company on borrowed money too.
Things That Hover
The biggest acquisition of Little's career, and the one that would define Textron for the next sixty years, came at the very end of it.
Lawrence Dale Bell founded Bell Aircraft Corporation in Buffalo, New York, on July 10, 1935, and spent its first years building fighter planes. The XFM-1 Airacuda was a twin-engine bomber-killer. The P-39 Airacobra followed, then the P-59 Airacomet, the first American jet fighter, and then the X-1. Bell had the same worry Little would later have about textiles, though he never phrased it in a way that survives. His company depended on government contracts, and government contracts end when wars end. In 1941 he hired Arthur M. Young, a talented inventor, to research helicopters, in the hope of building a broader economic base that did not depend on the military.
Young's work led to the Bell 30, which first flew on December 29, 1942. The Bell 47 came next, and it became the first helicopter in the world certified by a civil aviation authority. It succeeded in both civilian and military markets, and one now sits in the Museum of Modern Art. The helicopter division grew enough that in 1951 it moved, as a separate unit, to Hurst, Texas.
So in 1960, when Textron bought Bell Aerospace (three divisions of the old Bell Aircraft, including the helicopter operation, which by then was the only one still producing complete aircraft), Little was buying a business that its own founder had built as a hedge. Two men, each trying to escape dependence on a single cyclical market, met in the same transaction.
The timing was extraordinary, though it is hard to say whether it reflected foresight or luck. The renamed Bell Helicopter Company built the UH-1, the "Huey," and the Vietnam War made the Huey famous. Within a few years Bell was Textron's largest division. In January 1976 its name was changed to Bell Helicopter Textron, and in 2018 to simply Bell. Textron still owns it, and it still builds military rotorcraft in Fort Worth and Amarillo and commercial helicopters in Mirabel, Quebec, where it delivered its five-thousandth civil helicopter on December 12, 2017.
Little left a remark about inventors that is hard not to connect, at least obliquely, with a company built on an inventor's helicopter:
— Royal LittleNever let an inventor run a company. You can never get him to stop tinkering and bring something to market.
It is a salesman's view of an engineer, from a man who had trained as an engineer and made his living as a salesman. Young invented the helicopter, and Bell ran the company that made it fly. Textron, in turn, ran the company that sold it by the thousand.
Textron bought something else in 1960 as well: E-Z-GO, a maker of golf carts. The same year brought the helicopter and the golf cart, which is about as compact a summary of the conglomerate idea as you will find.
Then Little stepped back. He retired as chairman and chief executive in 1960 (one chronology puts his formal departure in July 1961) and left the corporation entirely two years later. He was about sixty-four. In April 1963, Textron sold its remaining textile division to Deering Milliken. The New York Times headline was blunt: "TEXTRON LEAVES TEXTILE BUSINESS." The banker in Boston had said Little would learn his lesson and go back to running a textile company. Eleven years later, the company Little built no longer ran any textile business at all.
Little's early detail now finds its place. The salesman who flew a light plane between customers, following utility poles for lack of better instruments, founded a company that would eventually own Cessna. Textron Aviation says the Cessna 172, the most common light plane in the world, has been built about 43,000 times. In 2014, Textron paid $1.4 billion for Beechcraft. The company that began by twisting rayon now describes itself as making things that "fly, hover, zoom, launch." None of that was in the plan. The parachute was the only part of it Little ever wore.
The Kings Who Came After
Little called himself, or at least let others call him, the father of the conglomerate. "That's how the so-called conglomerate trend got started in the United States," he said of his program, and the Los Angeles Times obituary used the phrase "the man who started the whole conglomerate movement." He enjoyed the title. One historian notes that Little "relished the title and basked in the glory" while freely admitting that the description was "not entirely accurate." Both reactions fit him. He took real pride in the achievement and stayed honest about its limits.
The children turned out differently from the father. Sobel's 1984 book The Rise and Fall of the Conglomerate Kings covers the generation that followed: Tex Thornton of Litton Industries, James Ling of LTV, Charles Bluhdorn of Gulf + Western, and Harold Geneen of ITT. The publisher's description calls them "imaginative, bold, and often ruthless entrepreneurs who took advantage of a buoyant stock market to create giant enterprises, often through the exchange of overvalued paper for real assets."
The phrase "overvalued paper for real assets" marks the difference between Little and his successors. The later conglomerates often bought companies with their own inflated stock and bet that the market would keep valuing the combination at a premium. Little's early deals were built on more concrete foundations: tax losses he could use, cash he could redeploy, and retiring founders who wanted out. The cleverness in a Little deal usually lay in the accounting rather than in the share price. When the stock market changed course, the paper-built conglomerates had much less to fall back on.
Then the movement declined. One modern summary calls the conglomerate era "a short-lived business movement of questionable consequences," and points to the difficulty of managing so many unrelated operations — the same objection Little's skeptical associates had raised in 1952. The later business literature generally concluded that you cannot, in fact, run twenty or thirty businesses well, or at least that most people cannot.
Textron lasted, which is notable in itself. It survived by doing something Little had not done: it narrowed. A company profile notes that Textron has "limited its areas of investment since the 1970s," and that it remained an important American aerospace manufacturer through Bell and Cessna. It still made big moves; in 1984 it borrowed heavily to buy Avco, a conglomerate almost its own size, for $1.4 billion. But its center of gravity moved steadily toward things that fly. It sold Greenlee, a tool company founded in 1862 by two brothers in Rockford, Illinois, to Emerson. It bought the snowmobile maker Arctic Cat for $247 million in 2017 and sold it in 2025. The portfolio kept changing. The name stayed the same.
The company also accumulated stories Little would have recognized as morals. In 2007, the Wall Street Journal reported that Textron's chief executive, Lewis Campbell, had received $494,700 in compensation in the form of personal use of the corporate jet to commute between his home and his office, which made him the most expensive CEO in the country by that measure. Shareholders asked whether they should be paying for an executive's choice to live in one state and work in another. Half a century earlier, the company's founder had borrowed train fare from friends to get from Narragansett to Providence.
In April 2022, federal prosecutors in Manhattan charged the former head of a defunct London company called Xcalibur Aerospace with making a fraudulent $13.8 billion bid for Textron, a tender offer that the Justice Department and the SEC said his company never had the money to complete. Little had once advised picking takeover targets whose boards were not smart enough to fight back. Seventy years later, someone tried to take over his company with money that did not exist.
An Impressive Record of Mistakes
Retirement, for Little, meant changing roles rather than stopping. He spent much of the following years building Narragansett Capital Corporation, which the Los Angeles Times described as the largest publicly held investment company in the country specializing in small businesses. In his sixties, the man who had assembled more than forty companies into one large one turned to funding small, promising companies at the beginning. He chaired the boards of Amtel Inc., Bevis Industries, and the American Television and Communications Corporation. With a former colleague he formed a consulting firm called Little and Casler.
At eighty-four, he was still at it. In 1980 he and a longtime associate named Jim Robison set up a firm that worked as a kind of brokerage for companies: corporate presidents called for advice, and small companies offered themselves for acquisition. They called it Lonsdale Enterprises. Lonsdale was also the name of one of the textile mills Little had bought in his postwar push toward a textile empire, the empire he later abandoned. Whether the choice of name was sentimental, ironic, or just practical, no source says.
In between deals he played golf. On trips to Scotland he would play ten courses in ten days. He went on camera safaris in East Africa, a hunter who brought back only photographs. Asked why a man who had founded a multibillion-dollar corporation was still working so hard, he gave an answer that was partly a diagnosis of his friends:
"I've seen so many friends, presidents of some great companies, who retire and go to Florida. They just give up. My concern has been, and always will be, for the future."
The book came out in 1979, from Little, Brown, priced at $12.95. A reviewer called it amusing and candid, free of technical financial language, and noted that Little "almost lets you forget what he's achieved." That was the point of the book. Little explained his reasons in the introduction:
"The personal histories of most businessmen are ego trips and of no real value to the business community. . . . I finally decided [that] by writing about my mistakes I might contribute something to our free-enterprise system."
And, with his usual mix of modesty and boasting: "No businessman has ever written such a book — possibly because no one else has compiled such an impressive record of mistakes."
The book found its readers slowly and kept them. Sir John Templeton, the founder of the Templeton mutual funds, recommended it to a German publisher named Norman Rentrop, who built a talk around its title and, in 1999, asked a conference audience in Washington to raise their hands if they thought "Royal Little" was a real name. Most of them guessed it was made up. It was not, although it does sound like something a novelist would hesitate to use: a name that suggests both royalty and smallness, for a man whose whole career was about combining small companies into something much bigger.
In 1978, Babson College held its first induction ceremony for its Academy of Distinguished Entrepreneurs. The five honorees were Soichiro Honda, Ray Kroc, Kenneth Olsen of Digital Equipment, Berry Gordy of Motown, and Royal Little. In the audience sat a nineteen-year-old finance student named Tim DeMello, who later admitted that his question that evening had been, "What's an entrepreneur?" Forty years later, having founded seven companies, he said that listening to those men had hooked him. Archival photographs from the same period, held in an Indiana collection of Junior Achievement records, show Little at a podium, onstage with a man named Richard Terrell, and talking with a young attendee. He spent a good part of his old age talking to young people about what it means to start something. In 1987, at ninety-one, he published an article called "Shoestring Financing of Great Enterprises," returning to the phrase he had used for his own $10,000 start.
There was a private life too, though the sources barely touch it. He married Augusta Ellis in 1932, and they divorced in 1959, the year before he left Textron. He had a son, Arthur, who lived in Boston, and a daughter, Augusta Bishop, who lived on Vashon Island in Washington State. There were four grandchildren. His son carried the name of the uncle who had rescued him, and his daughter carried her mother's.
Royal Little died on January 10, 1989, at his winter home in Nassau, in the Bahamas. He was ninety-two. He had left instructions, written into the memoir, that there should be no funeral and no memorial service. He called funerals "a barbaric institution." He wrote: "No funeral. Hope my friends will just think I've taken a long trip."
It was a salesman's exit. The company he left behind had sold every mill it ever owned, every bolt of rayon, and every bedspread, blouse, and parachute. In Providence, the name on the headquarters tower still begins with the syllable for cloth.
Part IIThe Playbook
Royal Little is often summed up as the man who invented the conglomerate, and that label hides most of what is useful about him. The conglomerate as a structure has mostly not aged well, while the methods Little used to build one have aged much better. He treated tax positions as assets and losses as raw material, and he insisted on proving competence in his core business before asking for permission to leave it. He hired someone to restrain his own appetite. He prepared exhaustively before every pitch. Above all, he kept an exact accounting of his own errors. The principles below are drawn from the record in Part I. They are not general business advice. They describe specific moves that a specific person made, often more than once, and that a careful operator can still use.
The principles
- 1.Diversify away from correlation, not toward synergy.
- 2.Read losses as assets.
- 3.Earn the license to leave your core.
- 4.Arrive at the pitch with the problem already solved.
- 5.Hire a governor for your own appetite.
- 6.Buy from people who want to leave.
- 7.Put your body behind the product.
- 8.Name for where you are going.
- 9.Keep the inventor away from the controls.
- 10.Live below your balance sheet.
- 11.Audit your mistakes in dollars.
Principle 1
Diversify away from correlation, not toward synergy
Most acquirers justify a deal by pointing to what the target shares with the buyer: overlapping customers, common distribution, combined procurement. Little's theory ran the other way. He wanted businesses that were unrelated, because relatedness is how trouble spreads. If every division sells to the same customer or follows the same economic cycle, a single bad year hits all of them at once. His stated goal was to "eliminate the effect of business cycles on the parent company by having many divisions in unrelated fields," and in 1956 he hired Rupert Thompson specifically to keep the portfolio "balanced" across markets that did not move together.
This is portfolio theory applied to operating companies, and Little arrived at it from experience before academic finance had fully worked it out. The 1948–49 textile recession cut Textron's revenue roughly in half, from more than $125 million to $67.8 million. That was the lesson. His answer to concentrated exposure was not to try harder within the same exposure but to remove the concentration.
There is a cost, and later conglomerates paid it: unrelated businesses are harder to manage than related ones. Textron's eventual narrowing toward aerospace suggests the ideal balance lies somewhere between Little's pure version and the single-industry focus he left behind. But anyone running a business today should ask the question he asked: if your largest customer or largest market has a bad year, what else do you own that is fine?
Tactic: Before your next expansion, list which of your revenue streams would fall together in a downturn, and give priority to lines of business that would not.
Principle 2
Read losses as assets
Little's most original move was seeing that a company's losses could be worth money to the right buyer. Cleveland Pneumatic Tool faced a large tax bill on its wartime profits, and Textron had piled up losses in the textile slump, so combining them meant, as one account puts it, that "a Textron loss of $1 would be offset by a Cleveland Pneumatic Tool profit of $1." American Woolen was losing about $2 million a month when Textron bought it, and Little bought it largely for that reason. It held large cash reserves and a tax-loss carryover of roughly $30 million, which Textron could then use to finance further diversification.
The general skill here is reading the full value of a business, including what ordinary analysis treats as a defect. A distressed company may hold trapped cash, tax attributes, a talented workforce, or real estate that the market prices at a discount because the operating business is failing. Little bought what was underneath the operating business.
This principle also has a limit. Tax rules change, and an advantage that depends on a quirk of the law lasts only as long as the quirk. Little treated tax positions as a source of financing, not as a reason to own a company forever. Once the American Woolen fight was over, he left textiles entirely.
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Anatomy of the Early Deals
What Little was actually buying, beneath the operating business.
| Deal | Surface business | What Little was really buying | Type |
|---|---|---|---|
| Cleveland Pneumatic Tool (1948) | Pneumatic tools | Wartime profits to absorb Textron's textile losses | Tax |
| Burkart Manufacturing (1953) | Automotive cushioning | A well-run company whose owners wanted to retire | Hedge |
| MB Manufacturing (1954) | Vibration eliminators, aircraft parts | What the New York Times called a "Hedge on Depression" | Hedge |
| American Woolen (c. 1955) | Textiles, losing ~$2M/month | Cash reserves, working capital, ~$30M tax-loss carryover | Tax |
| Bell Aerospace (1960) | Helicopters | A founder's own hedge against defense dependence, just before the Huey's rise | Growth |
| Textile division sale (1963) | Textron's original business | Final exit from the cyclical core, sold to Deering Milliken | Exit |
Tactic: When you look at a distressed target, write down separately what its losses, cash, and tax attributes are worth to you, apart from the operating business.
Principle 3
Earn the license to leave your core
Little's account, quoted in a later company history, says that a banker refused to back his acquisitions until Little proved he could run a textile business. Read that way, the Boston banker's line in 1952 ("I'm going to let you make a mistake") was skeptical but not dismissive. The banker was willing to back a bold move because Little had first shown competence in an ordinary one.
Founders who want to pivot often skip this step. They treat their restlessness as vision and ask the people with money to fund a new direction before the existing business shows that they can execute. Little built a textile company with more than $125 million in sales, survived a recession, and only then asked for permission to buy cushioning companies, radar firms, and helicopters. His credibility in the old business paid for his entry into new ones.
There is an irony in this. The proof of competence that earned the banker's backing was in an industry Little was about to leave. Investors fund a track record. They do not, as a rule, fund a track record in the thing they are being asked to fund.
Tactic: Before you pitch a pivot, identify the one metric in your current business that shows you can execute, and make sure it is excellent.
Principle 4
Arrive at the pitch with the problem already solved
The Burkart meeting is usually told as a story about the banker's skepticism. The more important part is what Little had done beforehand. He had strengthened Textron's balance sheet by taking the largest available tax-loss carryback, which raised cash and lowered debt. He had brought in an experienced executive to take over as president, which freed himself for acquisitions and answered the obvious question of who would run the core business. And he had found a target whose owners wanted to sell.
By the time he sat down across from the banker, there was nothing left to argue about except the idea itself, and the idea was the one part the banker could not easily refuse once everything else was settled. That is good pitch design. You remove every objection that does not concern the central thesis, so that the person across the table must either reject the thesis outright or fund it.
The same approach appears throughout Little's career. One profile describes his "meticulous preparations" as his style throughout his business life. The jump at forty-six was a demonstration prepared for an audience that would not have accepted anything less.
Tactic: Write down the three objections your investor or board will raise apart from the core idea, and resolve each one before the meeting.
Principle 5
Hire a governor for your own appetite
In 1956, while still very much in charge, Little hired Rupert Thompson, a Providence banker, to oversee what a company history describes as his "irrepressible impulses" to buy more companies. This was a founder recognizing his own compulsion and building a limit on it into the organization.
Most leaders fill their teams with people who share and amplify their strengths. Little brought in someone to counterbalance his weakness. A man who loved acquisitions had to answer to someone whose job was to ask whether the portfolio was balanced. It meant the spree had someone checking it, which made it something closer to a strategy.
The later conglomerate kings seem to have had no comparable check, and it is hard not to connect that with how their era ended. Bold strategies can collapse when nobody in the building is willing to say no.
Tactic: Name your most dangerous strength, then hire or appoint one person whose explicit job is to slow it down.
Principle 6
Buy from people who want to leave
The Burkart brothers were "more than ready to retire." Little's later reputation as a white knight, invited in by companies under attack from unwelcome buyers, rests on the same idea: the easiest acquisitions are those where the seller wants something you are already offering. A retiring founder wants an exit and respect for what they built. A besieged board wants a better buyer than the one at the door. When a buyer offers what the seller needs, price stops being the only thing that matters.
The American Woolen fight shows the other side of this. It was hostile, stormy, and bitter, and Little came out of it having lost his taste for the industry. His comment about choosing targets whose boards "aren't smart enough" to fight back is clever, but the fight itself cost him something he did not get back. A deal you have to win by force may be worth much less than its price suggests.
Willing sellers also bring continuity. A founder who sells to retire hands over an organization in working order, whereas a defeated target hands over an organization that has just lost a war.
Tactic: For each acquisition target, write one sentence describing what the seller personally wants, and build the offer around it.
Principle 7
Put your body behind the product
At forty-six, Little attended jump school and personally demonstrated his rayon parachutes to the Army. In the interwar years he flew his own light plane between customers, navigating by roads and utility poles. These are not the habits of someone who delegates trust. When the customer's question was whether the product would hold, Little's answer was to use it himself in front of them.
The general principle is that the founder's personal risk is a strong signal of quality, often stronger than any specification sheet. A buyer who sees the seller trust the product with his own life has less reason to doubt it. Today the same idea appears when founders use their own products in public, put their own money in, or stake their own reputations.
The jump also ties to Little's larger strategy. A parachute is a hedge you can wear, and the man who tested one in person went on to build a corporation designed around the same idea: having something to catch you if the main structure fails.
Tactic: Find the riskiest claim your product makes, and demonstrate it yourself, in person, to the customer who doubts it most.
Principle 8
Name for where you are going
The advertising agency's first suggestion was Señorita Creations, which would have tied the company permanently to blouses and bedspreads. Little chose Textron instead, a name half rooted in textiles and half borrowed from synthetic fibers such as Lustron, and modern-sounding enough to survive the company's departure from the cloth business. In 1963, when Textron sold its last textile division, the name kept working. Today it appears on Bell helicopters, Cessna aircraft, and a tower in Providence.
Names tend to last longer than strategies. A name tied to a specific product limits what the company can become, while a name that hints at a category leaves room to grow. The Tex in Textron keeps the company's origin. The -tron points toward technology the company had not yet built. Little picked a name that could hold both where the company came from and where it might go.
Tactic: Test your company or product name by asking whether it would still fit if your current product line disappeared tomorrow.
Principle 9
Keep the inventor away from the controls
"Never let an inventor run a company," Little said. "You can never get him to stop tinkering and bring something to market." The line is harsh, and it says something about Little, a trained engineer who chose selling over building. It also holds up when you look at the most important company he ever bought. Larry Bell founded Bell Aircraft and ran it as a business. He hired Arthur M. Young, the inventor, to develop the helicopter. The inventor produced the Bell 47, the company's management turned it into a product line, and Textron eventually turned it into the company's largest division.
The principle is not that inventors are unimportant. Bell's helicopter business would not exist without Young. It is that invention and commercialization are different temperaments. Someone who finds every product unfinished is very valuable in a lab and costly in the corner office. Little's model separated the two roles: let the inventors invent, and let operators decide when the invention is ready to sell.
Tactic: Give your most inventive people ownership of what gets built, and give someone else the authority to decide when it ships.
Principle 10
Live below your balance sheet
By 1960 Little's personal fortune was estimated at more than $20 million. He listed his annual savings as zero and borrowed train fare from friends for his commute from Narragansett to Providence. Fifty years later, a Textron CEO received $494,700 worth of personal corporate-jet travel in a single year to commute between two states.
The comparison is not just about personal frugality. It is about what a leader's habits tell the organization. A founder who rides the train on borrowed fare shows that the company's capital is for the company, and that the shareholders' money, which Little later acknowledged was what his mistakes had actually cost, is not there to fund the chief executive's way of life. A leader who spends lavishly on himself teaches the opposite.
Little also started the company on $10,000 he had borrowed, and nearly sixty years later he published an article on "shoestring financing." He described his starting capital as "less than a shoestring" and seems to have kept that standard for the rest of his life.
Tactic: Pick one visible executive perk your company provides and remove it, and tell the organization why.
Principle 11
Audit your mistakes in dollars
Little's most unusual contribution to business writing was to count his failures. He "went through and added up the exact amount my mistakes cost the company," arrived at a figure "well over $100,000,000," and published the list with a moral at the end of each chapter. He dismissed most business memoirs as "ego trips and of no real value to the business community," and he wrote his own as their opposite.
Counting the mistakes precisely matters. A vague admission such as "we made some mistakes" teaches nothing. An entry like "this venture cost shareholders this many dollars, for this reason" can be studied, compared, and remembered. Little also kept the cost in perspective. "I didn't lose it, the stockholders lost it," he joked, and the joke works because it is true: an executive's mistakes are paid for with other people's money, and the person who made them owes those people an exact account.
The book's influence suggests the idea had a market. Templeton recommended it, Rentrop built a lecture around it, and a business commentator decades later called Little's acknowledgment of mistakes a gap in business literature that remained largely unfilled. Most executives still do not keep a record like this.
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The Arc of a Hedge
From $10,000 in borrowed money to an aerospace company that still carries the word for cloth.
1923
Little founds Special Yarns Corporation in Boston on $10,000 of borrowed money.
1928
Acquires Franklin Process Company, the first of many mergers.
1930
Sells about 4% of U.S. rayon; company renamed Atlantic Rayon.
1942
Board authorizes $100,000 for Atlantic Parachute; workforce grows from 900 to 3,000.
1947
Textron lists on NYSE as TXT; sales top $125 million.
1948
Textile recession; Cleveland Pneumatic Tool becomes the first non-textile acquisition.
1952
The Boston banker agrees to "let you make a mistake."
1955
American Woolen acquired in "the stormiest merger yet."
1956
Rupert Thompson hired to keep acquisitions balanced.
1960
Bell Aerospace and E-Z-GO acquired; Little retires as chairman. Sales reach $383 million.
1963
Textron sells its last textile division to Deering Milliken.
1979
Little publishes How to Lose $100,000,000 and Other Valuable Advice.
1989
Little dies in Nassau, age 92. No funeral, at his request.
2014
Textron buys Beechcraft for $1.4 billion and forms Textron Aviation.
Tactic: Once a year, list every major decision that lost money, put an exact dollar figure next to each, and write one sentence on what it taught you.
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Part IIIQuotes and Maxims
In their words
— Royal Little, How to Lose $100,000,000 and Other Valuable Advice (1979)The personal histories of most businessmen are ego trips and of no real value to the business community. . . . I finally decided [that] by writing about my mistakes I might contribute something to our free-enterprise system.
— Royal Little, to the Christian Science Monitor, October 1980No businessman has ever written such a book — possibly because no one else has compiled such an impressive record of mistakes.
— Royal Little, to the Christian Science Monitor, October 1980I've seen so many friends, presidents of some great companies, who retire and go to Florida. They just give up. My concern has been, and always will be, for the future.
— Royal Little, recalling the skeptics of 1952They'd say, "Roy, this idea cannot possibly work. How can any one person run 20 or 30 different businesses?"
— Royal Little, in his memoirsNo funeral. Hope my friends will just think I've taken a long trip.
Maxims
- Own businesses that fail at different times. A portfolio of correlated businesses is just one bet repeated several times.
- Read the losses on the balance sheet. A distressed company's tax attributes and trapped cash can be worth more than its operations.
- Prove the boring business first. Investors back a pivot only after you have shown you can run what you already have.
- Settle every side issue before the pitch. Leave the people across the table nothing to dispute except the core idea.
- Hire someone to restrain you. If you have an appetite you cannot control, make it someone else's job to say no.
- Buy from willing sellers. A deal won by force can cost far more than the price on the contract.
- Test the product on yourself. A founder willing to jump with his own parachute has made the most convincing argument available.
- Choose a name that outlasts the product. Strategies change faster than names do, so pick one that can travel.
- Separate the inventor from the person who decides when to ship. Both are essential, and they should not be the same person.
- Count your mistakes in dollars. The stockholders paid for them, so at minimum they deserve an exact figure.
