A Book with Legs: Episode Summary – John Oller on "White Shoe"

Release Date: December 16, 2024
Host: Cole Smead, CEO and Portfolio Manager at Smead Capital Management
Guest: John Auler, Retired Lawyer and Author of "White Shoe: How a New Breed of Wall Street Lawyers Changed Big Business in the American Century"

Introduction

In this compelling episode of A Book with Legs, hosted by Cole Smead of Smead Capital Management, the discussion delves into John Auler’s insightful book, White Shoe: How a New Breed of Wall Street Lawyers Changed Big Business in the American Century. Auler, a retired lawyer and journalist with a rich academic background from Georgetown University and Ohio State University, explores the profound influence of corporate lawyers on American big business from the late 19th to the early 20th century.

Origins and Inspiration

John Auler traces the inspiration for White Shoe back over a decade, initially stemming from his own work on a history of the law firm Wilkie Farr & Gallagher. This internal project expanded into a broader examination of major Wall Street law firms and their pivotal figures during a transformative period in American business.

Notable Quote:
“The modern mega law firm was born between roughly 1880 or 1890 to about 1915 or 1920.” [04:00]

Key Figures and Firm Dynamics

Paul Cravath and the Cravath System

Auler highlights Paul Cravath’s role in shaping modern law firms. Cravath, though not from the elite educational background he later sought in his hires, instituted the Cravath System—a meritocratic approach emphasizing hiring from top law schools and fostering a structured, hierarchical firm environment. This contrasted with contemporaries like William Guthrie, who preferred a more traditional, small-firm approach.

Notable Quote:
“Cravath was more of an organization man. He saw the limits of small proprietorship and systematized the big law firm practice.” [09:03]

William Nelson Cromwell: The Physician of Wall Street

Cromwell emerges as a particularly influential figure, known for his creativity and ability to rehabilitate ailing companies. His innovative approaches to corporate restructuring and bankruptcy proceedings laid groundwork for what Auler terms “modern-day stakeholder proceedings.”

Notable Quote:
“He was incredibly creative for his time, filing bankruptcy papers simultaneously in 50 different jurisdictions to streamline proceedings.” [21:53]

Northern Securities Case and Antitrust Implications

A significant portion of the discussion centers on the Northern Securities Case, a landmark antitrust lawsuit initiated by President Theodore Roosevelt. The case targeted the Northern Securities Corporation, a holding company formed by J.P. Morgan, James J. Hill, and E.H. Harriman, aiming to monopolize the transcontinental railroad industry.

Notable Quote:
“The Supreme Court ruled that Northern Securities was an illegal combination in restraint of trade, regardless of the holding company structure.” [19:06]

Auler explains how the legal strategies employed by lawyers like Francis Stetson and William Nelson Cromwell shaped the corporate landscape, ultimately leading to more stringent antitrust regulations.

Influence on Foreign Policy: The Panama Canal

Cromwell’s role extended beyond corporate law into significant foreign policy maneuvers, most notably the acquisition and construction of the Panama Canal. His efforts in shifting U.S. preference from Nicaragua to Panama, including orchestrating public opinion and supporting the Panamanian revolution, were pivotal in realizing this monumental infrastructure project.

Notable Quote:
“Without Cromwell, we would probably be talking today about the Nicaragua Canal, not the Panama Canal.” [23:34]

Roosevelt, Taft, and the Trust Buster Era

The episode delves into the political ramifications of antitrust actions, particularly the split between Presidents Theodore Roosevelt and William Howard Taft. Roosevelt’s progressive stance on regulating big corporations contrasted with Taft’s more aggressive antitrust prosecutions under Attorney General George Wickersham.

Notable Quote:
“Roosevelt feared a revolution from below and believed that restrained capitalism was necessary to prevent social unrest.” [30:32]

This ideological rift influenced the Republican Party and set precedents for future antitrust policies, illustrating the delicate balance between corporate power and regulatory oversight.

Legacy and Modern Parallels

Auler draws parallels between the monopolistic giants of the early 20th century—like J.P. Morgan and John D. Rockefeller—and today's tech behemoths such as Amazon and Google. He discusses the evolving nature of antitrust considerations, emphasizing how modern regulatory challenges echo past struggles with corporate concentration and influence.

Notable Quote:
“The Googles and Amazons of today were the Standard Oils and American Tobaccos of yesterday.” [49:48]

Evolution of Legal Ethics and Corporate Responsibility

The conversation touches on the development of legal ethics, particularly the contention between Louis Brandeis’s view that lawyers have a duty to the public versus the prevailing notion that a lawyer's primary responsibility is to their client.

Notable Quote:
“The lawyer's primary duty has always been to the client, not the public, which is why Brandeis’s view did not prevail.” [40:18]

Decline of the White Shoe Era

Auler reflects on the decline of the dominant influence wielded by Wall Street lawyers, attributing it to increased regulatory frameworks, ethical constraints, and shifts in political landscapes. He suggests that contemporary legal professionals operate under stricter rules that limit the kind of unchecked influence seen in the past.

Notable Quote:
“There’s not as much room for that kind of power and creativity today.” [66:31]

Conclusion

White Shoe offers a profound exploration of how a cadre of influential lawyers shaped the trajectory of American business and regulatory practices. John Auler’s insights provide a nuanced understanding of the interplay between law, politics, and corporate power, drawing lessons that resonate with today’s economic and legal challenges.

Notable Quote:
“They were making up the rules as they went along, determining the framework within which modern big business operated.” [66:31]

Further Information

For those interested in exploring John Auler’s work further, visit his author website and follow him on social media platforms such as Facebook and Instagram. Auler continues to contribute to discussions on American history, biography, and true crime, offering valuable perspectives on the intricacies of corporate law and its lasting impact.

This summary encapsulates the key discussions and insights from the episode featuring John Oller’s White Shoe. For a deeper dive into the complexities of early Wall Street law firms and their enduring legacy, listening to the full podcast episode is highly recommended.