Royal Little

Royal Little did not set out to remake American capitalism. He set out, again and again, to win at textiles, and lost so often that he finally concluded the business itself was the problem ^[1][6]. Out of that disgust came the modern conglomerate: a corporation deliberately spread across unrelated industries so that no single market cycle could sink it. By the time he retired in 1960, his company, Textron, owned some forty businesses turning out everything from helicopters and radar antennas to chain saws, golf carts, watchbands, and silverware, and Wall Street had a new word for the species he had spawned ^[2][4][5].

He started small. In 1923 the twenty-seven-year-old Little borrowed about $10,000 and founded the Special Yarns Corporation in Boston to process synthetic yarn, a then-exotic material; first-year sales were $75,000 ^[3][6]. Over the next two decades he chased a dream of vertical integration in textiles, owning the whole chain from fiber to finished, branded garment, renaming the firm Atlantic Rayon, pivoting to parachute manufacturing in World War II, and in 1944 christening it Textron, a coinage welding "textiles" to the "-tron" of the new synthetics ^[1][4][5]. By 1947 sales topped $125 million and Little had, on paper, his integrated textile giant ^[6]. Then the postwar textile slump of 1948–49 gutted it, and the whole laboriously assembled empire of New England mills began bleeding ^[1][6].

The turn came from an accountant's insight, not a manufacturer's. In 1948 Little bought the Cleveland Pneumatic Tool Company for $6.8 million, Textron's first nontextile firm, and discovered how the losses of one division could shelter the profits of another from tax ^[4][5]. In late 1951 he reorganized around a doctrine he called "unrelated diversification": buy leaders in small industries, demand a hard return on equity from each, and let the portfolio ride out cycles that would have broken any single line ^[1][7]. In 1952 he won shareholder approval to amend the charter and operate nontextile businesses, and the buying spree began, Dalmo Victor, MB Manufacturing, Homelite, Camcar, plywood and aluminum and leather concerns, two dozen of them by 1958 ^[4][5].

The defining brawl was the American Woolen Company. In 1954 Little went after the world's largest woolen-fabric maker, not for its mills, which were losing roughly a million dollars a month, but for its cash hoard and a tax-loss carryover worth tens of millions that he could use to finance still more diversification ^[4][7]. The proxy and tender battle was so vicious that Fortune called it "the stormiest merger yet"; Textron won in 1955, and the experience finished off whatever affection Little still had for the textile trade ^[4][7]. Sales climbed from $99 million in 1952 to $383 million in 1960, and in 1960 he capped the transformation by acquiring Bell Aircraft, bringing the Bell helicopter line into the fold ^[2][4].

Little stepped down as chairman in 1960 and severed all ties with Textron by 1962, then refused to actually retire ^[2][3]. He founded Narragansett Capital, an early small-business investment company, and a consulting outfit to teach others the acquisition game, insisting that in venture finance the only thing that mattered was "people! people! people!" ^[1][6]. In 1979, at eighty-three, he published a gleefully self-deprecating memoir, "How to Lose $100,000,000 and Other Valuable Advice," cataloguing his costliest blunders, and remarking that he hadn't lost the money, the stockholders had ^[1][8].

He was, in the end, a financier wearing a manufacturer's overalls: less interested in any product than in the return on the capital tied up making it. That coldly numerical view of the corporation, the firm as a portfolio of cash flows to be optimized rather than a craft to be perfected, was his real invention, and it spread from Textron through Litton, LTV, Gulf and Western, and ITT to define an entire era of American business ^[2][6].

Royal Little was born March 1, 1896, in Wakefield, Massachusetts, into an unsettled family that drifted around the country as his stepfather chased printing work ^[2][6]. His connection to business came through his uncle, Arthur D. Little, the founder of the famous Cambridge consulting and chemical-research firm that bore his name. The uncle was childless, and around 1910 he invited the boy to come back to Boston, live in his household, and eventually enter the business world ^[2][6].

Little was educated at the Noble and Greenough School, graduating in 1915, and then at Harvard, where he studied and emerged with the class of 1919 despite, by his own cheerful admission, time on academic probation ^[2][6]. His schooling was interrupted by World War I, in which he served as an Army lieutenant ^[6]. The Harvard years left him with a lifelong network and a taste for the deal, but no romance about industry for its own sake.

After graduation he went to work learning the textile trade from the bottom, an apprenticeship at Cheney Brothers, the Connecticut silk house, jobs at a string of textile firms, and a stint at a Wall Street brokerage to learn finance, the combination that would later make him so dangerous ^[2][6]. In 1923, at twenty-seven, he scraped together roughly $10,000 in borrowed money and opened the Special Yarns Corporation in Boston, betting on the unproven synthetic fibers that more cautious men avoided, the first move in a fifty-year career ^[3][6].

Royal Little's invention outlasted his company's textile roots and his own life. The conglomerate he pioneered at Textron, a diversified holding company knitting together unrelated businesses under tight financial control, became the dominant corporate fashion of the 1960s, copied by Tex Thornton at Litton, James Ling at LTV, Charles Bluhdorn at Gulf and Western, and Harold Geneen at ITT ^[2][6]. Robert Sobel's history of the movement opens its account of these "conglomerate kings" with Little, the man who started it all and, characteristically, walked away before the bubble burst ^[2].

Historians render a mixed verdict. Little was a genuine financial innovator who showed that a corporation could be engineered against the business cycle and that capital, not sentiment, should govern what a company makes ^[6][7]. He was also a buccaneer whose haphazard bargain-hunting earned him the nickname the "junk man" of the textile industry, and whose model, pushed to excess by imitators with more debt and less discipline, helped inflate a merger mania that collapsed in the early 1970s and gave "conglomerate" its later whiff of overreach ^[5][6].

Textron itself endured, shedding its last textile holdings by 1963 and surviving as a multibillion-dollar industrial company built on Little's blueprint ^[4][5]. In retirement he turned to philanthropy and venture capital, endowing trusts for the Rhode Island School of Design and the United Way and seeding small businesses through Narragansett Capital ^[3]. He had asked for no funeral, calling them "a barbaric institution" and hoping friends would simply think he had "taken a long trip" ^[8].