Walt Disney is justly famous as an animator, a builder of theme parks, and a creative genius. He was also a businessman, even though he disliked business. In this definitive and extensively researched book, you'll meet a lesser-known side of Walt Disney—his business side.
From his paper routes as a kid growing up in Kansas City, to his films and his theme parks, Walt Disney has always been a businessman. But he's seldom seen as one. Most people believe that Walt's unique genius, coupled with a limitless supply of "pixie dust", led to his many effortless triumphs. Of course that's wrong.
Walt always struggled with business and financial issues. He wasn't good at solving those issues, but he was able to transcend them. Walt didn't care about corporate hierarchy, about safe investments, or even about turning a profit for the sake of turning a profit—in fact, he turned his back on the conventional wisdom of how to run and expand a business. And yet he became one of the most successful businessmen of the 20th century.
How did he manage it? Barry Linetsky spent several years penetrating the pixie dust. His magisterial history of Walt Disney, the businessman, starts with the first dollar Walt ever earned and examines in detail how he built his empire, and how Walt overcame disasters that should have shuttered his dreams for good. In addition, Linetsky identifies the nine principles that guided Walt throughout his life, and that together formed a blueprint for his success.
You've read all there is to read about Mickey, about Disneyland, and about all the cute animated films. Now dive into the dollars and cents that made those things possible.
Part One: The Business of Walt Disney
Chapter 1: Growing Up Walt
Chapter 2: Starting a Career in Kansas City, Missouri: Learning Animation
Chapter 3: Laugh-O-gram Films, Inc., 1922–1923, and the Challenges of Corporate Leadership
Chapter 4: Hollywood Dreaming: Building the Disney Brothers Studio
Chapter 5: From Alice to Oswald
Chapter 6: The Oswald Conspiracy of 1928
Chapter 7: Third Time Lucky: Mickey the Lucky Mouse
Chapter 8: The Merchandising of Mickey Mouse
Chapter 9: Finding a Ratchet to Secure a Stronger Foundation
Chapter 10: Innovation, Training, and Three Precious Pigs
Chapter 11: Mirror, Mirror on the Wall: Surviving “Disney’s Folly”
Chapter 12: Building a Better Mouse House and Reflecting on Halcyon Days
Chapter 13: The Crash of 1940: Reality Eats Fantasy for Breakfast
Chapter 14: Riding the Perfect Storm and Taming the Wounded Bear: The Studio in Crisis
Chapter 15: Coping with the World at War
Chapter 16: Reorienting and Rebuilding Business Capabilities
Chapter 17: Mickey Mouse Park and the Roots of Disneyland
Chapter 18: The Financing and Construction of Disneyland
Chapter 19: From Mickey Mouse to Mickey’s House
Chapter 20: Ending the Decade with Gusto
Chapter 21: The Foundations for Building the Future
Chapter 22: The Wide World of Disney
Chapter 23: Designing a Prototype City of Tomorrow
Chapter 24: EPCOT as Walt’s Biggest Dream and Final Frontier
Part Two: The Nine Principles of Walt Disney’s Success
Principle 1: Know What You Value and Why
Principle 2: Demonstrate the Courage of Leadership
Principle 3: Money Is a Means, Not an End
Principle 4: Strive for Perfection and Don’t Compromise Quality
Principle 5: Anticipate and Exceed Customer Expectations
Principle 6: Create Valued Experiences Through Business Design and Innovation
Principle 7: Minds Create Value, So Treat Them with Respect
Principle 8: Let Creativity Work for You
Principle 9: Think Deeply from All Directions
Appendix: Roy O. Disney's Advice for Executives
It has been my challenge in writing this book to bring together information from diverse sources to describe, in appropriate detail, the challenges and issues that Walt Disney faced as a businessman in doing his work of growing and leading a major film studio in the mid-twentieth century. With a solid foundational understanding of Walt Disney’s career challenges and achievements as presented in Part 1, I then set out in Part 2 to identify inductively a number of business-related principles that could account for Walt’s success, and that may serve as instructive lessons for other entrepreneurs and entrepreneurial executives and managers.
The information and stories contained herein rests on an immense amount of research and work done by previous Disney historians and authors over the past 75 or so years, to whom I am grateful for providing the depth of resource material as the backbone for this book. It is from this material that leaders, students, and general readers can draw the appropriate lessons from this entrepreneurial maverick; lessons that worked for Walt given his particular temperament, capabilities, and circumstances.
As authors write about the events in Walt Disney’s career that played out along a temporal path, there are only so many ways to convey much of the same factual information, originating from the same historical sources. Sometimes the most appropriate and just thing to do is to let other Disney historians and experts speak for themselves. Where they have done an exemplary job conveying the same information I needed to convey, I rely on their telling of the story. I think of it as my way of honoring their work. The sources I cite are the same sources I would recommend to readers who wish to delve deeper into the colorful history of Walt Disney and his illustrious career. They can be found throughout the text and in a bibliography.
While the book of necessity follows the narration of events in Walt Disney’s career, my primary focus is on relating some of the business challenges Walt faced and decisions he made at key points in his career to drive these events.
Events exist in a social context, but are driven by the choices of individual actors based on their own knowledge, values, philosophies, and psychologies. As always with people, including when acting within organizations, things happen because people make them happen. They don’t happen on their own. They don’t happen inevitably. Actions are purposeful, and are taken in pursuit of goals to achieve a defined end. Whether they are the right actions, or only actions, or best actions, to achieve any given end are always open to debate.
A business is a specific kind of organization with a specific purpose and function to produce goods and services in exchange for profit. To function effectively, a business requires leaders who are accountable for driving success. The focus here is on Walt Disney’s story: the creation and leadership of his business rather than the artistic or esthetic aspects of animation, or his and other Disney artists’ growth.
Even though at times Walt Disney Productions had more than 1,000 employees, it can still be said that as an entity it was Walt’s business in the sense that he was the prime architect of events—he was the prime mover that generated and sustained a forward vector. It was his imagination, his vision, his courage, his thinking, his values, his will to achieve specific ends, that focused and guided the thinking and work of those he employed to help him create a successful business.
Walt Disney wasn’t the only leader. Many people Walt employed were visionaries in their creative fields and engaged in pioneering work, but their creative work and their tasks as managerial leaders were by necessity subordinate to Walt’s leadership, applying themselves as independent agents to serve the needs and ends defined by the organization’s top executive.
In retelling a story that has been told many times before, I have tried to highlight Walt Disney’s progression as an entrepreneur and managerial leader of a business, who was engaged as a businessman, a manager of people and performance, a builder of organizations, and a strategist. I have tried to selectively focus on those aspects that should be of interest to those with a desire to understand Walt Disney as one of the world’s leading businessmen, as well as an artist. To do so I have of necessity selectively chosen some events in Walt’s biography while ignoring others, focusing heavily on some things while quickly passing over or not mentioning others.
I have also tried to be meticulous in setting out a proper chronology in order to understand Walt Disney and his capabilities for managing complex challenges and processing information over long periods of time and throughout his career. The narratives of too many Disney histories are focused around individual events such as the creation of Snow White and the Seven Dwarfs, or the studio strike, or the 1964–1965 World’s Fair in New York City, among others, as if they occur in isolation. In fact, these events all occur in a dynamic context, while Walt and the studio have to simultaneously manage all of their other business commitments. One has to understand this if one is to attempt to understand Walt Disney. I have tried to tell the story in a way that the reader has some semblance of the context and weight of responsibility felt by Walt and Roy Disney as they encounter new challenges and figure out how best to overcome them.
In too many Disney histories, information is overly compressed such that events occurring months or years apart occur in the same sentence, leaving the reader with the impression that these events just happen by themselves rather than that they are made to happen by means of the purposeful thinking and choices of actors. In many books, it is impossible to follow the chronology, which jumps forwards and backwards, as if chronology plays no role in the telling of history or the understanding of the subject matter, in this case, Walt Disney. In this regard, I tried to follow the advice of the great contemporary historian Paul Johnson, who said: “I think it is terribly, terribly important to get chronology right. Remember the dates. Fix people with the dates. I think a weakness in chronology [makes it] impossible to write good history.” I have endeavored to untangle the various threads and to present the key business elements of the Walt Disney story chronologically, wherever possible, although there are a few exceptions.
There is one final note of personal historic interest. This book began as an extended essay I wrote and published in 2006. A client and friend of mine, Chuck Hawley, had the pleasure of knowing and working with Roy E. Disney. Both were avid sailors, and for many years worked together as board members of the Transpacific Yacht Club. Chuck had agreed to assist Roy in the capacity of a marine safety expert to train a group of teenage rookie sailors as they prepared to sail Roy’s boat Morning Light and participate in the 2,225 mile Transpacific Yacht Race from Los Angeles to Hawaii. Without my knowledge, Chuck was kind enough to forward my roughly fifty-page essay to Roy E. Disney. In a personal correspondence to Chuck on January 9, 2007, Roy thanked him for his tremendous work and dedication to teaching and preparing his crew for their journey, and contributing in his small way to the making of the Disney documentary Morning Light. Roy also wrote: “And thanks, too, for the Disney piece. Very interesting, and informative…and pretty accurate, too!”
I’m very appreciative that Roy E. Disney took time out of his busy schedule to read and comment on an early version of what has now been transformed into this book. It is my hope that if he was still with us today to read it, he would respond with the very same kind words.
Barry Linetsky has had a long-time interest in Walt Disney and his innovative business practices which, after years of painstaking research and writing, has resulted in the book you now hold in your hands.
For more than two decades, Barry has been an entrepreneur and Partner with the Toronto-based advisory firm The Strategic Planning Group, working with business and government executives across a wide-range of industries throughout North America to develop customized products and solutions that address the strategic, marketing, and organizational-related business challenges they face.
Barry holds an MBA from the Rotman School of Management, University of Toronto, and an MA in Philosophy and BA in Sociology from York University. He has had a number of business articles published in Rotman Magazine and the Ivey Business Journal, including “The Project Management Paradox,” which was republished as an Executive Briefing by the Economic Intelligence Unit in partnership with Harvard Business School Publishing.
Walt's successful leap into live-action films was not entirely the result of careful consideration and analysis, but rather a clever way to make use of profits quarantined in England following the Second World War.
Walt had expected foreign markets to re-open after the war, but post-war opportunities for American studios in the lucrative markets of England and France faced new political challenges. Both countries, as well as others in Europe, imposed restrictive barriers to limit the showing of American films in an attempt to revive their own film industries. To increase the cost to British movie theatres of showing American films, Britain imposed a 75 percent import tax and set a quota that 45 percent of films shown be made in England. In negotiations with the American State Department, France restricted the number of imported American movies to 110, to be provided by the major Hollywood studios, of which Disney was excluded.
In addition to restricting audience access to American films and thereby the potential to sell their products in the British marketplace, the British legislature passed a law prohibiting American film studios from repatriating receipts earned in their country as part of a larger effort to promote the stimulation of its war-torn economy. As a result, what had been earned in Britain was legally bound to remain there.
By the end of 1948, Walt was faced with the difficult challenge of what to do with about $850,000 of blocked funds in foreign countries, including England. This was money that, if it was made available to him, he could put to use to complete current projects and fund new ones.
Walt’s first consideration was to set up a cartoon studio, but decided that he already had what he needed in Burbank and would not be able to reproduce the talent and capabilities he already had. Disney film distributor RKO also had funds frozen in England, and suggested to Walt that he invest his frozen funds in creating live-action adventure films, with RKO agreeing to share the production costs of the first effort, Treasure Island.
Walt approved the establishment of Walt Disney British Films Ltd., and began making live-action films in England, starting with Treasure Island and followed by The Story of Robin Hood, The Sword and the Rose, and Rob Roy the Highland Rogue. The success of Song of the South had demonstrated that audiences were accepting of Disney live-action productions, even though it was combined with a number of highly entertaining animated sequences.
Walt was initially directed toward live-action films as a practical strategic solution to the studio’s unique financial circumstances. But when he traveled to England to observe the production of Treasure Island, he’d thoroughly enjoyed the challenges and the immediacy of live-action filming. When he returned to Burbank, he teased his animators: “Those actors over there in England, they’re great. You give ’em the lines, and they rehearse it a couple of times, and you’ve got it on film—it’s finished. You guys take six months to draw a scene.”
Walt was only half kidding. The high costs, long production times, and complications in creating feature-length cartoons made them a much riskier class of investments than live-action movies. Such talk made Disney animators nervous that Walt was going to abandon animation altogether. Walt saw it as a way to maintain his core business, which he still considered to be animation. When elite animator Milt Kahl questioned Walt as to why he was spending so much time away from animation, Walt allegedly quipped, “Well, I’ll tell you, Milt. I have to make a whore of myself to pay your salary. It’s as simple as that.”
Roy stated the studio’s interest in more business-like terms, noting: “We are not going into these things because we are feeling our oats or getting ambitious. We are doing it for common-sense business reasons, realizing the hazards of our basic cartoon business.”
Having completed filming of Song of the South and So Dear to My Heart, Walt had come to recognize that live-action features could be completed in less time and at lower cost than fully or partially animated features. The quicker a movie could be completed and released, the lower its production cost and the sooner a return on investment could be captured to repay lenders the money borrowed to fund the investment. Quick turnaround and lower costs was the key to improved cash flow and financial viability.
The year 1949 was a busy one for releases. The live-action So Dear to My Heart was released along with the first True-Life Adventures documentary, Seal Island, and the feature length animation compilation The Adventures of Ichabod and Mr. Toad. Of the fifteen shorts released, Donald Duck dominated, along with appearances from Pluto, Minnie, Goofy, and Chip ‘n’ Dale.
The mostly live-action feature So Dear to My Heart had its world premiere in Indianapolis on January 19, 1949. Walt began working with a screenwriter in 1945 with the intention of it being Walt’s first fully live-action feature. Production and filming occurred in 1946, but Walt was unhappy with the finished product, and made considerable changes by re-working some scenes in post-production. He was still not satisfied and struggled to improve its overall presentation. More than a year after filming was completed, Walt decided to add some animation sequences to add another dimension of imagination, as he had done previously on Song of the South.
Still, as the year drew to a close, the studio showed an increased loss of $93,899. Cinderella was now in production, and Walt was envisioning a return to elaborate state-of-the-art feature-length animation.
Bank of America was getting nervous about the continuing trend of increasing debt and the difficulty the studio was having in creating profits. Roy was once again pushing hard for austerity. To appease the bankers, Walt had no choice but to curtail his spendthrift tendencies and adopt a more rigorous disciplinary approach to cost management by defining and sticking to budgets. What he needed was another blockbuster box-office hit to throw off a lot of cash and relieve the financial pressure that was cramping his style.
Continued in "The Business of Walt Disney"!
For Walt, money wasn't the goal. He was glad to make money, but he wanted nothing to do with the financial end of his business, and what he knew about money boiled down to two ever-present realities: there was never enough to achieve all he wanted to accomplish, and there was always the need to involve others in order to get more. Making money was the unpleasant prerequisite to making magic.
Walt was the studio’s visionary and dreamer. He also understood and was involved in the financial aspects of the business, while leaving most of the operational business matters to Roy. Walt once said of Roy, “We started the business here in 1923, and if it hadn’t been for my big brother, I swear I’d have been in jail several times for check bouncing. I never knew what was in the bank. He kept me on the straight and narrow.” The role Roy played in Walt’s success and achievements is summarized nicely, if somewhat understated, by Merlin Jones: “Roy’s wisdom was to create a well-protected playpen for his younger brother—and then to stand back and watch him create.”
Roy was often frustrated by Walt’s dismissiveness about finances and his tendency to put the challenge to Roy to find the necessary funds. Walt just wanted to get things done based on his assessment that doing them would be worthwhile, and that somehow and at some point he would figure out a commercial angle, even if it couldn’t be seen right away.
In 1955, Disneyland was in the midst of construction, and Bank of America and ABC-Paramount were bearing down on Roy because of huge budget overruns and a growing lack of confidence in the project. Walt was well aware of the cost overruns, but he was determined to build the park the way he wanted it built. One day, designer Herb Ryman was driving with Walt from the studio to visit the park. Walt had asked Ryman to design a restaurant to be built at the end of Main Street, and Ryman was apologizing that after having worked on it for three weeks, he wasn’t getting anywhere. Walt seemed unconcerned. “Herb…you know the worst thing that can happen to you? You could go broke. I look at it this way. I’ve been broke five times in my life. One more time won’t hurt.”
Almost two months after Disneyland opened, Bruce McNeill, the general contractor for Disneyland, arrived in Roy’s office to announce the discovery of a drawer full of unpaid bills that totaled almost two million dollars. Roy was furious, and after an investigation, it was determined that the culprit was Walt, who had been going around ordering aesthetic changes to be made at the last minute without considering the costs. “Walt didn’t care about the cost at all,” said attorney Luther Marr. “It was a matter of what it looked like, the result. So Roy had to dig up some more money. I don’t know where he got it, because he had used up all the credit he could come by.”
By 1958 the financial situation was better than it had ever been. Roy was eager to see the company free and clear of debt, and informed staff that the studio was now “getting out of the hole” and further expansion plans would have to wait two to three years. He then left for Europe. According to Jack Lindquist, who was the advertising manager at Disneyland and would later become president of the park, Walt met with WED staff to announce his decision and discuss plans to build a 150-foot-high replica of the Matterhorn with a bobsled ride inspired by their recent climbing adventure Third Man on the Mountain, a submarine underwater adventure ride inspired by 20,000 Leagues Under the Sea, and a futuristic monorail transportation system. When Walt was told of Roy’s instructions to steer away from debt, Walt responded, “Well, we’re going to build them. Roy can figure out how to pay for it when he gets back.”
The attractions were built at a cost of $5.5 million. They opened in June 1959 with the fanfare of an hour-and-a-half nationally televised special featuring Vice President Richard Nixon taking the inaugural monorail ride with Walt.
On one occasion during a staff meeting with Walt in attendance, Marc Davis presented the plans for a new attraction called Nature’s Wonderland. As told by Gabler in Walt Disney,
Davis opened by saying that there were two ways of executing the project—an inexpensive one and an expensive one. “And Walt got all the way up from his seat and walked around to the front of the room where I was,” Davis remembered, “and put his hand on my shoulder and he said, ‘Marc,’ he said, ‘you and I do not worry about whether anything is cheap or expensive. We only worry about if it’s good.’”
On another occasion, Walt was asked and accepted the honor of staging the ceremonies at the Winter Olympics in Squaw Valley, California, in 1960. The plans included a thousand-piece band for the grand opening and entertainment every night. When the Olympic organizers began to complain about the proposed costs, Walt declared: “Either we’re going to do it the right way, or Disney will pull out.”
Charles Shows was creating a film about the African lion, but was unable to locate the footage he wanted for the opening scene, a close-up looking down on the lion’s open mouth. Shows writes:
I told Walt that I hadn’t found the opening shot I wanted, but that I had thought of a way of getting it—easily. And I was sure he’d like the idea when he heard how little it would cost. “I’ll take a camera crew up to Griffith Park Zoo,” I told him, “back up a big lion against some bushes, move in tight, and get a close-up shot of the old boy’s tonsils.”
But Disney didn’t react as I had expected. “You do,” he growled, “and you won’t be here tomorrow.”
I thought he was kidding, but the stern look on his face told me he was not.
“We tell moviegoers that these nature films are shot in Africa,” Walt made clear, “and by God, not one foot of phony film is going into my nature pictures.”
I got the picture!—and I didn’t get the zoo lion’s picture.
Once more, I realized that it was honesty like this that makes Disney films worldwide favorites.
Walt clearly understood and appreciated the role of money and the need for business discipline and responsibility over time periods spanning decades to create value. What he loathed to do was accept the knee-jerk assessment of others, particularly of risk-averse accountants and bankers, as to where the lines should be drawn. Joe Potter recalled a meeting he attended to discuss the acquisition of corporate sponsors for EPCOT: “Once in a planning meeting Walt was mad because a finance guy was present. Walt said to the finance man, ‘What the hell are you doing here?’ He made him leave. He wanted creative people there only.”
Roy noted that Walt had good reason for his animosity toward finance guys:
Bankers, bookkeepers and lawyers frequently tried to put the brakes on his free-wheeling imagination and were the bane of Walt’s existence. As his business manager, I was no exception. “When I see you happy, that’s when I get nervous,” he used to say. Since Walt would spare no expense to make his pictures better, we used to have our battles. But he was always quick to shake hands and make up.
It wasn’t that Walt didn’t value financial insight but rather that there was a proper time and a place for it. Disney researcher Harrison “Buzz” Price, who began working with Walt and Roy in 1953, noted: “It is a fiction that Roy was only the numbers man and Walt was the artist. They were both bird dogs analytically. ‘Why?’ ‘Why?’ ‘What?’ ‘How much?’ Walt was just tenaciously interested in that stuff, along with Roy. Both of them were smart as hell.”
Roy’s son, Roy E. Disney, verified that his father and uncle had a different perspective on business matters when it came to money. His father’s attitude was that “if you don’t have the money, you can’t make the thing in the first place. Walt’s attitude about it,” he said, “which was very astute, was ‘if I make something that people want to see, we’re going to do fine.’ So his business sense was centered on creating, while Dad was sort of the flip side of that, which was one reason why the partnership worked so well.”
The real difference in approach was that Walt was focused on creating something unique and outstanding that people would want to experience and be a part of, which would draw revenue to pay back the investment in the creation and launch of the product. Roy’s more traditional approach was to create a budget from prior earnings and develop to the pre-established constraints established for the project, and hope for the best.
Continued in "The Business of Walt Disney"!