An Orphan Turned a Nickel Pie Into Profit, Then Sold His Company to His Drivers on Credit

At night during the Depression, a boy slipped out of the Hebrew Orphan Asylum in New York City and bought a whole pie for a nickel. He brought it back to the orphanage, sliced it into eight pieces, and sold each piece for a penny, pocketing three cents more than he had spent.

Mitch Rales, the co-founder of the industrial conglomerate Danaher, tells that story about his father, Norman Rales. In Mitch Rales's account, his father would say, "Now, Mitch, that's pretty good margin."

Norman entered the orphanage around age 11 or 12 and left at 16 with, as the family story goes, a toothbrush and five bucks. Decades later he sold a business worth about $10 million or $12 million to his employees, financing the sale himself.

Norman's mother had died giving birth to his youngest sister. His father sold fruit on the street and could not care for the children, so Norman and several siblings were placed in the orphanage. Norman probably never finished high school, his son says, and cycled through rough jobs as a ditch digger, a carnival worker, and a hand on a boat.

He eventually settled in Pittsburgh with his wife and built a successful home improvement contracting business. Tired of managing salesmen, he decided he would rather supply them. When Mitch was 10, he moved the family to the area around Washington, D.C. and started from scratch a distributor that sold construction materials in bulk to contractors.

That company became his second pie. Norman sold it to his employees in what his family was told was the first employee stock ownership plan in America. His son, Mitch Rales, said his father wanted "to be a champion of the underdog," so even the truck drivers got equity. The workers had no cash to buy him out, so he financed the entire price himself and let them pay him over time.

That distributor, Mid-South Building Supply, remains in operation today. Mitch Rales said he is told it is now a $150 million business, "and the truck drivers are millionaires." "How great is that?" he said. It was the schooling he credits most, what he calls his MBA "from the Norman R. Rales School of Hard Knocks."

Mitch Rales said his father lived with a sense of abandonment from being placed in the orphanage until he died at 89. The boy who once cut a nickel pie into penny slices later sold his company to his drivers on credit, a business Mitch Rales is told made those drivers millionaires.