The Lean Years

In 1893 Giuseppe Morello, New York’s future “boss of bosses”, was a poor immigrant just arrived from Corleone. His timing was bad. America was sliding into the worst crisis it had known up to then—the panic of 1893, which Dash compares in its consequences to the Great Depression. Gold was losing value, shares were falling, thousands of firms went under, at least five hundred banks collapsed. By December at least a quarter of those in New York who could work were out of a job.

Between them, Morello and his stepfather Terranova had two wives and seven children. None of them spoke English. Only one of the children was old enough to work. Their savings, and whatever they could get by selling everything they had, wouldn’t last long. When it became clear the economy wouldn’t recover any time soon, Morello went south, to Louisiana: the cotton fields and sugar plantations there were short of hands. New York’s future master of counterfeit money started out as a hired labourer on someone else’s plantation.

Lean years come to everyone. They don’t ask whether you’re ready. Whether they’ll come is not the question. The question is what you’ll have in your pocket when they knock.

The Big Score and Two Weeks of High Living

Pistone lived among thieves and mafiosi and chose a cover that raised no suspicion. He carried himself, he writes, like an ordinary thief who lived the same way as his new acquaintances: you make a score, you live high for two or three weeks, then you go back to stealing.

There’s no better description of life without a reserve. There’s income, sometimes a lot. But it goes straight on cars, suits, restaurants and debts, and you arrive at the next score with empty pockets. Lefty, Pistone’s mentor, made a lot of money. And he still owed his captain a hundred and sixty thousand. He handed over everything he took in against the debt and lived on whatever he managed to hold back. Pistone adds a caveat: in the Mafia everyone was forever pretending to be broke, and nobody knew how much Lefty really had. But the debt was real.

Whoever lives from score to score doesn’t know lean years. He knows lean weeks. One day they stretch into years.

How Long Bad Times Last

The most dangerous thing about lean years is that they last far longer than you think.

In September 1929 the American Dow Jones index stood at a record high, around three hundred and eighty. In July 1932—at forty-one. Down eighty-nine per cent. The index itself only got back to its old high in November 1954, twenty-five years later. Dividends and falling prices shortened that wait for anyone who sat tight and didn’t sell. But even with them, it was a long wait.

Japan’s Nikkei index peaked on the last trading day of 1989 and set its next record only in February 2024, thirty-four years later. A whole generation of Japanese savers worked their entire lives and never saw their money again.

Does that mean you shouldn’t buy shares? No. It means a reserve for the lean years isn’t counted in one year or two. And whoever borrows against future growth is betting that the lean years won’t come in his lifetime. They may.

Cut from the Top

What do you do when the lean years have come? I know an old piece of advice from Don Vincenzo, and later I came across it from all sorts of people: cut costs from the top, not the bottom.

We had a year like that. A lean one. A strike at the port tangled up all the deliveries, the restaurants cut their orders, and the money coming into the till halved. The Don first cut his own share by half. Then mine. Then he shortened the hours at one of the laundries. Fire anyone? Nobody.

At the time I thought: what nobility. Later I understood: what arithmetic. The pressers we kept on in the bad year stayed with us for twenty years. The laundries that let half their people go that year spent the next two years finding and training new ones. And above all, people saw that the Don cut himself first, and nobody grumbled when their hours were cut. When the captain eats what the sailors eat, there’s no mutiny on board.

Prepare in Advance

One last thing. You prepare for the lean years in the fat ones.

The Don had a sheet of paper he wrote in one very good year, when everything was going beautifully. It said what he would do if takings fell by a quarter, by half, by three quarters. What he would sell, what he would give up, whom he would ask for what, what he would not sacrifice for anything. The sheet lay in his desk drawer next to the envelope I told you about.

“When trouble comes,” he explained, “I’ll be stupider than I am now. Fear makes people stupid. Let the decisions be made for me by the clever man who wrote this sheet in a good year.” The lean year came. The Don took out the sheet and did almost everything on it; he crossed out only one line—“sell the second press”—because the press turned out to be more necessary than he had thought in the good year.

The Bottom Line

Count your reserve not by the shortest winter you remember, but by the longest one you’ve heard of. And don’t borrow against growth that simply has to come: growth doesn’t owe anybody anything.