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VIDEORags to Riches CEOs: Ken Langone
By
Scott Reeves Nov 17, 2009 7:50 am
The "unpromising" student of working class parents went on to launch Home Depot
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In 1978, the legendary investor got into a tiff with the top dog at Handy Dan, a small Southern California-based home-improvement company in which he held a small stake. The dispute was resolved by members of Handy Dan’s parent company, who bought Langone out, then fired its Chief Executive Officer, Bernard Marcus, and Chief Financial Officer, Arthur Blank.
The trio went to work immediately, launching Home Depot (HD) later that same year. It has since become the world’s largest home-improvement chain, with about 2,200 stores in North America, Puerto Rico, and China. It’s also the second largest retailer after Walmart (WMT).
Langone’s stunning success stories (and Home Depot is just one of them) must have come as a shock to at least one person in his hometown of Roslyn Heights, New York: his high-school principal. The school head had advised Langone’s parents not to burn money by sending the unpromising student to college. His father, a plumber, and his mother, a cafeteria worker, disagreed. Instead they mortgaged their house to send their son to Bucknell University in Pennsylvania.
As a college student, Langone worked as a caddy, butcher, and ditch digger to stay afloat. His parents’ faith in him and his hard work paid off: He earned a bachelor’s degree in economics in about 3.5 years.
After graduation, Langone took a full-time job in the investment department at Equitable Life Assurance company and went to New York University’s School of Business four nights a week, earning an MBA in 1960. He also served two years in the US Army.
With his newly minted MBA in hand, Langone next took a job with a small Wall Street company, R.W. Pressprich. As executive vice president, he teamed up with Ross Perot, then an ambitious but unknown Texan
on the make and years away from his presidential run as an independent. Langone took Perot’s start-up, Electronic Data Systems, public in 1968 at $16.50 a share, or about 118 times earnings. In 2008, Hewlett-Packard (HPQ) acquired Electronic Data Systems for about $13.9 billion to better compete with International Business Machines (IBM) in the lucrative computer-services field.In 1974, Langone launched Invemed Associates, a small investment bank, focusing on start-ups in the medical field. The Wall Street firm soon raised $5 million for a medical-electronics company, Ivac. Langone later took over the company and sold it to Eli Lilly (LLY) in a stock transaction in 1977. Ivac became the drug company’s multi-billion-dollar medical-instruments division.
The same year that he launched Invemed, Langone bought a seat on the New York Stock Exchange (NYX) for $60,000. He later sold the seat for $1.5 million. In 2005, he led a bid to buy the entire exchange. The move was unsuccessful, but Langone had the right idea: He wanted to rely more heavily on electronic trading to speed execution of buy and sell orders, a tack now followed by the world’s largest exchange.
These days, Langone, cognizant of his roots, supports many charitable organizations, including the New York Philharmonic, Ronald McDonald House, and the Damon Runyon Cancer Research Foundation. He's also donated to Bucknell University and New York University and supports Ken’s Kids, a Home Depot-affiliated not-for-profit organization that provides jobs for young adults with disabilities.
For aspiring entrepreneurs, Langone’s message is simple: work, work, work. After he donated $10 million to New York University, the college named its night business school the Langone Program. The investor has also donated $200 million to the school for its medical center, since renamed The NYU Langone Medical Center.
Seen as a model Italian-American citizen, and "a virtuous man of good character,” by the head of Columbus Citizens Foundation, an Italian community group, Langone was named the grand marshal in this year’s Italian Day parade in New York City.
"Mr. Langone is living proof that the American dream continues," said Louis Tallarini, president of the Foundation.
And whatever happened to Handy Dan? The short answer: Langone, the unpromising student from Long Island, killed it with a better idea.
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