On “Mad Men” and mad money
For those of you who watch or have heard of the hit series “Mad Men,” you’ll know that the show provides an interesting story line, some fascinating characters, and great commentary on the social mores and gender differences of the late ’50s and early ’60s.
I’ve been watching lately with an eye toward the financial side of life in that era. There are no credit cards to speak of—Don Draper, the main character, peels off cold cash when he asks his secretary to buy Christmas presents for his children. This is pre-401(k)s and IRAs, and Don and his band of not-so-merry marketers left behind whatever pensions they had coming to them when they broke with their old advertising agency to go out on their own. There is little if any dialogue concerning personal investing at all.
The first 60,000 “BankAmericard” credit cards appeared in Fresno, California, in 1958, and as Joseph Nocera writes in A Piece of the Action, that event marked the start of the money revolution. It was a sign of the middle class moving from passbook savings to more sophisticated financial relationships, and of consumers changing financial relationships—in other words, switching banks because of services offered, including credit cards.
Where were mutual funds at this time? Just starting to become interesting. At the end of World War II, total assets held in mutual funds amounted to less than $900 million. At the beginning of 1965, the Dow Jones Industrial Average topped 900 for the first time. For all of 1965, the Federal Reserve reported that cash flow into funds totaled $2.2 billion. Things started heating up from there.
Turning back to credit cards, from those small beginnings in the late ’50s, revolving debt has climbed to a breathtaking $852.6 billion, all but a very small portion of which is credit card debt. (I’m expecting Don to pull out his first credit card by the close of the current season.)
The late ’60s were a volatile time for the financial markets, and I keep wondering if messaging around balanced investing, asset allocation, and risk tolerance might have stemmed or helped prevent some of the excesses of that era. I’d like to think some people would have heeded the message and mitigated their losses. Looking to our own time, those messages certainly should have helped investors during this last—and probably continuing—roller coaster of market volatility.
Did they help you?
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I’m reminded that Warren Buffett started his own Buffett Partnership Ltd in Omaha in 1956, after Benjamin Graham closed his partnership that year. Buffett convinced people to buy in to his investing philosophy with an initial $50K investment. The story always goes, if you had invested $50K then, it would be worth $X Millions (or Billions) today.
What commentators who use that line of thinking always forget is that $50K in 1956 was a huge amount of money! The average house in America sold for $11,700 that year. Gas cost 22 cents per gallon. And the average price of a new car was only $2,050.
Needless to say, that initial $50K investment was out of reach for most Americans, even in the broad economic boom that was the 1950s. Something to keep in perspective. As you point out above, most Americans did not invest in stocks or the stock market until the late ’70s or ’80s, if then.
You have to wonder if we would be better off today if credit cards had never been introduced. On one hand, Americans today are saddled with enormous debt. On the other hand, credit cards have enabled an incredible expansion in consumer spending, which is undoubtedly responsible for a significant part of our economic growth over the last 40 years.
The credit cards that most of us had, if any, were for gasoline stations only. For the most part, bank cards were unheard of. That was a mixed bag. I recall being on vacation and starting to run short of cash while several hundred miles from home. ATM”s weren’t around then either. This was a very uncomfortable position except to know I could get home because I could buy gas for my car. Our mortgages topped out at 20 years and many people thought in terms of 5 or 10 years! The expansion of credit freedom made things more comfortable, but it also shifted our whole thinking about debt.
The best thing about the 50′s is that the income tax was steeply graduated so you did not see obscene executive pay and bonuses.
Enjoyed it.
spend baby spend $$$$$$$$$$$$$$$$$.
Regarding the use of credit cards, certainly American Express, Carte Blanche and Diner’s Club were all around in the 1950s and early 1960s. As an avid Mad Men viewer, I am a bit surprised that the execs at Sterling Cooper Draper Price don’t ever pay for dinner and/or drinks with one of those cards–their use was fairly common then as a means of controlling corporate expenses. Perhaps series creator Matthew Weiner didn’t want to raise the specter of product placement. (Of course, I am not sure if Carte Blanche or Diner’s Club are even still extant.)
I enjoy the freedom and flexibility to manage my money the way I see fit. I like the many options I have for handling my money, to manage my risk/return (as much as I can), to invest instead of saving. I recall having to spend my lunchtime waiting on line at my local bank to get enough cash to pay my expenses: rent, groceries, utilities, gas, unexpected expenses. It’s great to be able to pay for so many things with a credit card, without worrying if I have enough cash, and to have an automatic record of the transaction.
As far as the comment above about credit cards: you can’t fix stupid. People have always gotten in trouble with debt. At least your bank won’t break your legs when you don’t pay up.
I would say that plastic cards consist of an identifying card which one uses to conduct deposit and withdrawal transactions at an ATM, and of debit cards which one uses to transfer funds to merchants in exchange for goods and services. Thus, for many of us who are dedicated non-revolvers, the “credit” card is an irrelevant beast. The other revolutionary change is that my checkbook record consists almost entirely of a series of electronic transfers in and out, with only the occasional “check” to be seen.
The gentlemen on “Mad Men” likely use another payment method that was also popular at that time: Buying or charging items on account. When entertaining or “woo-ing” clients, no visible money or cards were exchanged at the moment—but would be settled later. (Maybe it wasn’t good etiquette to take out cash or a credit card in front of a prospective client!). And speaking of credit cards, they have certainly helped our economy in ways. But they have also festered a lack of personal responsibility in many people. I’ve seen people run up charges on items they really don’t need, or wouldn’t normally be able to afford outright. Credit card companies have also been irresponsible, and I’m not just talking about their “loan shark-like” interests rates. I know someone who years ago had tremendous debt, and eventually filed for bankruptcy…while continuing to receive regular applications in the mail for pre-approved credit cards! Unbelievable!!
Yes, I agree about the alternative form of payment back in the day. In fact, it was all part of the facade. It helped show that the presentation was more sincerely creditable and that the presenter was so trusted by a restaurant to return to compensate.