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Left an orphanage with five dollars
The orphanage years
His mother died in childbirth, and his father, a fruit vendor on the streets of New York, could not care for the children, so Norman and several siblings went into the Hebrew Orphan Asylum when he was 11 or 12. At night he would sneak out, buy a pie for a nickel, slice it into eight pieces, and sell each for a penny. That made three cents on a five-cent purchase, and he later told his son Mitch it was pretty good margin.
Building a business
After the orphanage he dug ditches, worked the carnival circuit, and spent time on a boat before settling in Pittsburgh. There he built a home improvement contracting business that did very well. Managing the salespeople wore on him, so when his son was ten he moved the family to the Washington, D.C., area and started a wholesale building products distributor.
Selling to employees
He eventually sold that company to its employees in what the family was told was the first employee stock ownership plan, or ESOP, in America. It was a $10 or $12 million business, and the employees could not afford it, so he took back a note for the full price and was paid out over time. Mid-South Building Supply still exists, reportedly as a $150 million business, and its truck drivers are millionaires.
Why did orphanages hold children with living parents?
Historians of American child welfare note that most children in early twentieth-century orphanages had at least one living parent. Widowed parents often had no income to keep a family together and no public assistance to lean on. Orphanages offered housing, food, and schooling, and parents sometimes hoped to reclaim their children when finances improved. Mothers' pension programs, begun in the 1910s, were created partly to let widowed mothers keep their children at home.
Why did Jewish communities run their own orphanages?
Immigrant communities in New York built their own charities so that children could be raised in their faith and language. The Hebrew Orphan Asylum of the City of New York was founded in 1860. It later occupied a large building on Amsterdam Avenue in Manhattan, which housed hundreds of children at a time. It closed in 1941.
How does an ESOP let employees own a company?
An employee stock ownership plan is a trust that holds company shares on behalf of the workers. It usually buys the shares with borrowed money or with a seller's note, and the company's future profits pay down that debt. Employees receive shares in their accounts over time as a retirement benefit, so they do not pay for them directly. Congress gave the structure a legal footing in the Employee Retirement Income Security Act of 1974.
Why do sellers take back a note?
When buyers cannot pay cash, the seller can finance part or all of the price through a promissory note. The buyer pays that note from the business's future earnings, with interest. This arrangement is called seller financing. It is common in sales of small and mid-sized companies, where banks may not lend against the value of the business itself.
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