Business History Sam the Banana Man: Gunboats, Coups, and United Fruit

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Today, Robert Smith, we are doing a story about the great forces of history. Capitalism, communism, imperialism. 00:08 Speaker 2 All the isms. 00:08 Speaker 1 Every ism. We got coups, we got revolutions, we got presidents, bankers, gunboats, secret meetings. 00:17 Speaker 2 So good. 00:18 Speaker 1 It's a story about bananas. B-A-N-A-N-A-S. I'm Jacob Goldstein. 00:22 Speaker 2 I'm Robert Smith, and this is Business History, a show about the history of bananas. and the banana business. 00:30 Speaker 1 Yeah, and we're basically going to be focusing on late 1800s, first half of the 1900s, which is a story of the U.S., of Latin America, really of international business in the Western Hemisphere in the 20th century. And, you know, the arc of this story is largely for decades. You have U.S. companies battling in Central America for banana supremacy. But then by the middle of the 20th century, you really start to see the people of Central America fight back. The protagonist of our show, I'm not quite going to call him a hero, is one Sam Zimury. Arguably the most important man in the history of bananas in the United States of America. And there is an extremely entertaining book about Sam Zimury called The Fish That Ate the Whale by Rich Cohen. 01:29 Speaker 2 Which you encouraged me to read long before we did this show. I remember listening to it on a trip to Vermont. It was fantastic. 01:35 Speaker 1 Sam Zimury was born... Shmiel Zmarie in the Russian Empire in 1877. Was it Russia? Kind of. It was Bessarabia, I believe. This is a time and place where there are no bananas. Sam moved to Selma, Alabama when he was 15 or so. His uncle ran a shop there. It's a long way from the Pale of Settlement. And Sam grew up into a big man. He was 6'2, or so, 185, big guy, especially for the time. He worked for his uncle at his shop, also did odd jobs, which apparently included chasing pigs and turning a lathe for a carpenter. Really? 02:18 Speaker 2 They didn't have motors at the time? You just hired the biggest guy you could to rotate the table leg? 02:24 Speaker 1 Well, I was thinking about this. So today, right, so he's an immigrant doing what he can, a very young man, a teenager. So today, you know, you can imagine he would be a delivery driver or maybe a day laborer, right? This is still a thing that happens. People come to this country and they do whatever work they can get. And they save up their money, which is what Sam did. And by the time he's 18 years old, he's got $ 150. There's all this money in the world. And one day in Selma, he runs into a banana jobber. Ooh, a jobber. 02:56 Speaker 2 You don't hear that very much anymore. The jobber. You want to say what it is? It's a wholesaler. It's someone who buys something low and sells it high to someone else. A middleman. A middleman, yeah. 03:05 Speaker 1 Buys bulk and sells to retailers. And Sam's like, oh, this is an interesting play. So he goes down to Mobile, Alabama, port town on the Gulf of Mexico. And this is where the banana action is in his sort of part of the world. 03:22 Speaker 2 I imagine them coming in on nets off the ships and driving the docks. 03:26 Speaker 1 Do they even have nets at this time? 03:27 Speaker 2 I guess so. 03:28 Speaker 1 They definitely... It's not containers yet. We know that. The ships are coming in from Central America, from the Caribbean, and the banana jobbers are buying the bananas and putting them on trains. And almost entirely, the jobbers want green bananas. 03:46 Speaker 2 Because they are hard and you can ship them hundreds of miles away and they'll be fine. 03:52 Speaker 1 They're not going to go bad before they get to market. As a result of this... yellow bananas, ripe bananas are dirt cheap. They are virtually garbage. Nobody wants them. 04:05 Speaker 2 If they're speckled or even a little bit brown, they're probably garbage. 04:08 Speaker 1 They're probably garbage. So Sam decides this is going to be his play. And so Sam bought a bunch, a bunch of bunches of ripe bananas, took a risk, got a deal because nobody else wanted them. And that took most of his money with some of the money he had left. He rented space on a boxcar. He rented a boxcar to go back to Selma to sell the bananas. And, you know, he basically didn't have any money. So he got in the boxcar and, you know, it was like more than a day, I guess, to get to Selma at this point on the train. And so he's going to sleep in the boxcar with the bananas. And I don't know this for a fact, but I imagine it's hot. 04:50 Speaker 2 Imagine the smell. 04:52 Speaker 1 The smell? I like the smell. I like the smell. But it's almost all of his money in the world. And there's this ticking clock, right? Like if he can get there in time, he's going to make money. And if not, he's basically going to lose all the money he saved. 05:06 Speaker 2 This is before you could save them for banana bread or something like that. 05:09 Speaker 1 You could not peel and freeze because you did not have a freezer. And I love this story because, you know, he is trying this move. that we have come across before on the show. Specifically, I thought of the Ice King, right? This guy in Boston, also in the 1800s, who took this thing that had no value. 05:30 Speaker 2 Ice on the lakes of Massachusetts. 05:31 Speaker 1 In the winter. And put it on a ship and sent it to Calcutta. Amazingly, he figured out how to get it to not melt or not all melt. And of course, in Calcutta, it had a huge amount of value. So he's taking this thing nobody wanted that was valueless and giving it value and turning that into a business, which is what Sam is trying to do here. 05:52 Speaker 2 We also talked about it in our Henry Ford show, about how they would have scrap lumber and they turned scrap lumber into charcoal, something valuable. 06:00 Speaker 1 Yes, and in fact, Kingsford Charcoal is the descendant of the brand that Ford started long ago. So Sam has almost all of his money in the world sunk in these bananas. 06:11 Speaker 2 He's up against the clock. He's up against bananas. He's literally in the boxcar with the bananas. 06:16 Speaker 1 And it's taking a long time to get there. And at one point, the train stopped in Meridian, Mississippi, which was surprising to me when I read it because it's going from Alabama to Alabama. But apparently the train went through Mississippi to get there. And this guy who ran the train yard in this town was sympathizing with Sam. Sam's talking to the guy about his problem. And the guy at the train yard is like, it's too bad you can't figure out how to let the people up the line know that you're coming. 06:47 Speaker 2 Right. 06:48 Speaker 1 Because they could just come meet you at the train station. You could sell them your cheap bananas kind of as you're passing through town and you wouldn't have to wait till you get back to Selma. So your bananas wouldn't go bad. And Sam actually told this story to Life magazine later in his life. Here's how he told it. 07:04 Speaker 2 It was about 5 a.m. and the train was almost ready to pull out. Then I saw Western Union office. Remember at the time, telegraph lines ran along railroad lines. So there would have been a telegraph office at every station. So the train's almost ready to pull out. I saw Western Union office. I went in and I asked the man to wire all the other telegraph operators along the line. that if they spread the word I was coming through with bananas, I'd give each one a free bunch. Those messages took my last cent. 07:35 Speaker 1 It worked. Woo! People started coming to the train stations along the way to buy Sam's bananas. I imagine him selling them out of the boxcar. 07:43 Speaker 2 I don't know if that... The bananas are coming! The bananas are coming! 07:47 Speaker 1 And by the time he got back to Selma, according to that Life magazine article, he had... $ 185. Remember, he'd started with $ 150, so $ 35 on $ 150 is a nice turn. 08:00 Speaker 2 Good investment. 08:02 Speaker 1 And so now Sam has an angle. He has a play. And he keeps doing this now. He keeps going, buying the ripe bananas nobody wants, hustling, selling them at a profit. And, you know, we were talking about this before, And there is actually a business in our neighborhood or this little chain of fruit stores in Brooklyn. There's one in my neighborhood and one in yours. The one in my neighborhood is called Mr. 08:30 Speaker 2 Kiwi. 08:31 Speaker 1 They are all Mr. Fruit something, right? What is yours? 08:33 Speaker 2 Mr. Lime. 08:34 Speaker 1 There's a Mr. 08:34 Speaker 2 Cocoa, Mr. Mango, of course. And kind of their business model is out front of the store, they have... good, I should say, good fruits and vegetables that probably have just a few days left in them. 08:47 Speaker 1 A few days is pushing it. They're very cheap, though. You can get like a carton of strawberries for a dollar. And, like, maybe there's one of them in there that's already gone bad, and the others, if you eat them in the next hour, they're amazing. But it's a dollar. 09:02 Speaker 2 But it's the same business model, which is if you're squeezing out the last bit of value from the product, and you're doing it at a bargain for the buyer, and you're doing it at a profit for the seller, it's fantastic. 09:12 Speaker 1 Yeah, no big grocery store wants to buy these strawberries because they're not going to last. So they're cheap. 09:18 Speaker 2 I buy them. 09:20 Speaker 1 Because I'm cheap. So Sam now has his niche. He moves to Mobile, makes this play again and again. Turn and write bananas, turn and write bananas. 09:29 Speaker 2 I can imagine the moment you smell a banana going off, you're like, you got to call Sam. 09:34 Speaker 1 And it works. He turns his $ 150 into $ 100, 000. Big at the time. Yeah, multimillionaire in today's money. And comes to be known as Sam the Banana Man, which I love. Not because of the obvious rhyme between Sam and man, because of the subtler rhyme of banana, the off rhyme of banana. 09:59 Speaker 2 With both Sam and man. It's poetic. Sam the Banana Man. Sam the Banana Man. 10:04 Speaker 1 Now, Sam the Banana Man starts to vertically integrate. He buys some old ships along with a partner that bring bananas from Central America to Mobile and New Orleans. And then, uh, In 1910, he takes the next step in the value chain. So he's gone from buying the bananas at the dock to owning the ships that bring them from Central America. In 1910, he buys the Cuyamel Fruit Company, a failing banana company with 5,000 acres on the Cuyamel River in Honduras. So now Sam the Banana Man is no longer some hustler on the docks buying ripes that nobody else wants. He is in the banana business for real. 10:48 Speaker 2 He's a banana kingpin. 10:49 Speaker 1 Not yet. He's a small player, and he's competing against the real kingpin, the giant. In Central America, they called it el pulpo. 11:01 Speaker 2 Because of the pulp of the banana. 11:02 Speaker 1 It means the octopus in Spanish. It was really big. Its tentacles were everywhere. Was the U.S. Steel or the National Biscuit or the General Electric of bananas? Ladies and gentlemen... let's give a warm capitalist, imperialist, colonialist welcome to the United Fruit Company of Boston, Massachusetts. 11:26 Speaker 2 So funny that it's of Boston. 11:28 Speaker 1 It is funny that it's of Boston, and that will come into play in the story. Sam was very much not of Boston, and the United Fruit Company very much was of Boston. The people running the company were legit. They had basically created the banana business in the United States. It was a new product. 11:46 Speaker 2 I mean, essentially, it was technology. 11:48 Speaker 1 It was technology to get it to the U.S. in time. If you go back, say, to the mid-1800s, almost nobody in the U.S. would have ever seen a banana before. And what happened, the sort of origin story, part of the origin story of United Fruit is, in 1870, one of the guys who started what ultimately became United Fruit was in Jamaica. This guy's name was Lorenzo Dow Baker. He was a ship's captain from Wellfleet, Massachusetts, lovely town on Cape Cod. And in Jamaica, somebody gave him a banana. 12:28 Speaker 2 Ooh, and Lorenzo pulled out his knife and fork and cut it into pieces and said,- Do I eat the outside part? 12:33 Speaker 1 The outside part is a bit chewy.- Not so flavorful. 12:36 Speaker 2 But the inside, I could do something with this. 12:39 Speaker 1 In any case, he ate his first banana. Unlikely he'd ever seen a banana before. And imagine this. Imagine never having seen a banana before and eating it. It's great! 12:49 Speaker 2 It's amazing. 12:50 Speaker 1 I love a banana. It's sealed. 12:51 Speaker 2 It's a sealed product. You can eat it without touching the fruit. I don't know if he peeled from the top or the bottom or broke it in half. I saw someone break a banana in half the other day. What? 13:00 Speaker 1 I know. 13:00 Speaker 2 You squeeze it? Why do you break it in half? 13:04 Speaker 1 He loves it. He's on his way home anyways, on his way back up the Atlantic. So he buys a bunch of bunches of bananas. He says, let's see if this works. And he races north, makes it to Jersey City, New Jersey. And people go wild for his bananas. It's like he's bringing fruit from the moon. He has bought his bananas for 24 cents a bunch. And in New Jersey, this wild exotic delicacy sells for $ 2 a bunch. 13:40 Speaker 2 A beautiful margin. I mean, a novelty product. And again, the color, you could see the yellow from across the Hudson River. 13:47 Speaker 1 Yeah, did anything look that yellow in New Jersey in 1870? Probably not. Probably not. Only the water. Yeah, maybe the daffodils in spring. Robert, let's talk about the banana for a moment. 14:02 Speaker 2 All day long. 14:03 Speaker 1 It is a wild fruit. It is at the center of today's story. Fun fact, number one, bananas don't grow on trees. Technically, a banana tree is not a tree. It's an herbaceous perennial because it doesn't technically have a trunk. It has a giant stem. 14:19 Speaker 2 It's like a bush or more like a flower. 14:22 Speaker 1 Well, it's called an herbaceous perennial, so I think of an herb. I think of mint. Yeah, rosemary. Rosemary. 14:31 Speaker 2 But big. 14:33 Speaker 1 Side note, bananas are technically berries. I'm not even going to get into that one, but it's a fact. 14:39 Speaker 2 Good to know. 14:41 Speaker 1 More interesting and quite relevant for the banana business is bananas are not cultivated by planting seeds. They're cultivated by taking cuttings from existing plants and replanting them. 14:54 Speaker 2 I guess I've always wondered about banana seeds. You see sometimes the little. 14:58 Speaker 1 Dots in there. I don't know what's going on with that. 15:00 Speaker 2 If somebody tries to sell you banana seeds, do not let them. 15:03 Speaker 1 Do not trade your cow for three banana seeds. This is important, though. This is important for the business of bananas and for our story because what winds up happening is big companies like United Fruit end up planting essentially vast crops of genetic clones, a cutting when you take cutting after cutting of the same plant. 15:31 Speaker 2 It is the same plant. 15:32 Speaker 1 It is the same plant. It is the same genetic structure. And that creates this interesting business scenario that we have talked about before, where you are optimizing in a certain way. You are taking cuttings of this one plant because it's efficient, because it grows fast. At this time, the banana they're growing is called the Grand Michel. the Big Mike. And it's good for a bunch of reasons, no pun intended. Namely, largely, it grows dense, so you get a lot of bananas in a bunch of bunches, and it travels well. You can just throw a bunch of bunches into a ship and send it across the Gulf of Mexico, and they don't get too bruised, and they don't ripen too fast, so they travel well. A classic reason to industrialize a particular strain of fruit. 16:25 Speaker 2 Anyone who's watched a cartoon in the last hundred years knows that if there is a banana peel in the cartoon, your character is going to slip on the banana peel. Something that never seems to happen in real life. But I did read that when the Gros Michel, that first banana came, and there was a banana craze, and people were eating bananas on the street and throwing the peel out, what are you gonna do with them? But apparently, the peel for the Gros Michel was very, very, very slippery. It was notably slippery. and that people would actually injure themselves. 16:53 Speaker 1 I tried to get to the bottom of that one on this, when I was working on this show. I couldn't quite figure it out, but I have heard that story. It is plausible, this story, for one reason that is germane to the bigger idea here. And that is, when you go all in on one thing, you might be optimizing for some set of criteria, but you're also not that resilient. If something goes wrong with your one thing, you're potentially screwed. And in fact, In the 20th century, this disease started destroying the Gros Michel. And it probably wouldn't have been so bad if there was more genetic diversity, but this one clone was really at risk. And so, the banana industry shifted to the Cavendish. The Cavendish banana, which is what we eat today. 17:38 Speaker 2 And we've also talked about this before, this danger of having one product in our Southwest Airlines show. They were brilliant. They bought one kind of airplane, the Boeing 737, which was super efficient. It meant you could swap parts. It means you only had to train your pilots on one kind of airplane. And that's great until there's a problem with the Boeing 737. Yes. 18:00 Speaker 1 It's a really interesting optimization problem. So what it means for the fruit industry at this time, you know, early 1900s, is they are aware of the risk and they respond by diversifying. Diversifying into other crops, like if we're thinking about United Fruit here, which basically is the banana business to a significant degree in the United States, they diversify into, you know, pineapples and sugar cane, but also crucially, they diversify geographically because this disease spreads, you know, from spot to spot over land. And so they don't want to be all in one place. And so by the time Sam Zimuri is getting into the banana farming business, the banana growing business around 1910, United Fruit is growing in Colombia, Cuba, Jamaica, the Dominican Republic, Honduras, Nicaragua, Costa Rica, and Guatemala. 18:57 Speaker 2 And it's really hard to compete with them because they have put the infrastructure into these countries. 19:02 Speaker 1 A wild amount of infrastructure. They have built their own railroads. They have built radio transmission systems. They have bribed and controlled many government officials. You're saying they have. 19:14 Speaker 2 Their tentacles in many places. El pulpo. 19:18 Speaker 1 Sam, on the other hand, had just bought 5,000 acres, a tiny fraction of what United Fruit had. He's deep in debt. He has to start selling bananas to get out. He's going to have to sell a lot of bananas. And so he goes to Honduras. He physically goes to Honduras, starts living there a lot of the time. And he follows what by this point is a relatively clear playbook for building your banana business. Step one, pay bribes and kickbacks to the government and in exchange basically pay no taxes. Which you had to do. He had to do that to compete with United Fruit because they were already doing this. And there is this interesting idea here of a corrupt equilibrium. It's a bad equilibrium in a way, but if The biggest company is corrupt, is already paying bribes. And you're not corrupt, you're going to lose. You're not going to be able to go into business. So that's step one. Step two is clear the jungle and plant banana trees. A lot of the workers who did this were immigrants from other parts of the Caribbean. So they were often badly treated both by the fruit companies and by the local authorities. And then step three, build a plantation town. for the workers, for the bosses. And step four, ship the bananas to the United States, dot, dot, dot, profit. So it's the summer of 1910. Sam is somewhere between steps two and three. 20:50 Speaker 2 Clearing the land and building the town. 20:52 Speaker 1 Building the town. He's getting going. And a problem arose. It was a big kind of international conflict of imperial powers kind of problem since 1910, you know, great era for conflicts of imperial powers. And what happened was this. Honduras earlier in the 1800s had sold bonds in London to borrow money to build a railroad. Now, they never got much of a railroad. But they still had that debt. By 1910, Honduras owed more than $ 100 million to bondholders in London. 21:31 Speaker 2 Ouch. 21:32 Speaker 1 And Honduras was not in a position to repay the debt. And you know what the British might do in 1910 if you were a small country and you said you couldn't pay them back? Send in the Royal Navy. They didn't want you to not pay them back. 21:49 Speaker 2 They skipped over the lawyers. They skipped over the court rulings. They went straight to the gunboat. 21:54 Speaker 1 I mean, potentially. 21:55 Speaker 2 Potentially. 21:56 Speaker 1 I bet they didn't skip over the lawyers or the court rulings. But they were not afraid of the gunboat. Now, the Hondurans obviously didn't want British gunboats coming to force them to pay. But interestingly, the United States also didn't want this to happen. Because, you know, yes, Britain was the global imperialist power of the day. But Central America is the United States' backyard. It's America's little imperialist play, frankly. You know, the Monroe Doctrine goes way back by this point. Robert Smith, the last time on our show when I did a pop quiz and asked you who was president in a given year, a listener wrote in and said, don't play dumb on the show. Surely you know who was president in 1877. And I did not know, to be honest, that it was Rutherford B. 22:46 Speaker 2 Hayes. 22:47 Speaker 1 Could I have guessed it? You gave me a few guesses, maybe, but I didn't know. So let me ask you now, honestly, who was the president of the United States in 1910? 22:58 Speaker 2 William Howard Taft. 22:58 Speaker 1 Very good. 22:59 Speaker 2 So. 23:01 Speaker 1 Thank you. William Howard Taft decides to do something about this British Navy Honduras debt problem. Taft had a policy he called dollar diplomacy. He called... substituting dollars for bullets. And it's specifically in this sort of Monroe Doctrine context. And so, to make dollar diplomacy work in Honduras, Taft brings in the king of the dollar, charter member of the business history all-stars, the banker, the tutti bankers. 23:39 Speaker 2 When you need some money in 1910, one man. You call up J.P. Morgan. 23:45 Speaker 1 You call up J.P. Morgan. William Howard Taft. 23:48 Speaker 2 You stand in line. The president stands in line with everyone else in the economy asking for five minutes with J.P. Morgan. 23:56 Speaker 1 And Morgan gives it to him. And they come up with a plan. And the plan is that Morgan will buy up those Honduran bonds that they're holding in London. Of course, they'll buy them for cents on the dollar because everybody knows they're not going to be redeemed at par. And Morgan will also lend millions of dollars to the Honduran government. That's Morgan's side of the deal. The Taft side of the deal is, okay, we will sign an international treaty between the United States and Honduras that says, as part of the deal, people who work for J.P. Morgan will go to Honduras and run the customs offices so that when the taxes on imports and exports are collected, J.P. Morgan's minions can make sure that Morgan and his people get their cut. And they will then remit the rest to the good people of Honduras. 24:48 Speaker 2 This is genius. The big question with bonds is always, like, how do I make sure they're going to pay me back? Well, if you're collecting tariffs from the country, if your people, if your bank employees are collecting tax money in Honduras, well, you know you're going to get paid back. Get paid first. The Hondurans don't like the looks of this. 25:10 Speaker 1 No. Uh... But also, also, Sam Zimuri doesn't like the looks of it because remember step one of setting up your banana business in Honduras, you bribe the local officials so that you don't have to pay taxes. 25:29 Speaker 2 And there's one man you can't bribe. 25:31 Speaker 1 No. JP Morgan. JP Morgan. No, it's not going to work. If he has to pay taxes... his bananas will be more expensive than United Fruit bananas, and he will go out of business. So this is an existential problem for him. And of course, he starts out by lobbying in the U.S. and lobbying in Honduras. And it gets to the point where the Secretary of State of the United States, one Philander Knox, summons Sam Zamore, this upstart, to Washington, D.C., And basically tells him to stay out of it. Mr. 26:10 Speaker 2 Banana Man. 26:11 Speaker 1 Well, here we have, so we have Sam telling the story to a reporter years later of what happened. 26:16 Speaker 2 I was doing a small business buying, oh, I'm just a small businessman from the South. I was doing a small business buying fruit from independent planters, but I wanted to expand. I wanted to build railroads and raise my own fruit. The duty on railroad equipment was prohibitive, a cent a pound. And so I had to have concessions that would enable me to import that stuff duty-free. I told him, Mr. Secretary, I'm no favorite grandson of Mr. 26:42 Speaker 1 Morgan's. 26:43 Speaker 2 Mr. Morgan has never heard of me. I just wanted to protect my little business. This is textbook how to approach the government. I'm just a small business. I had to avoid taxes. 26:56 Speaker 1 I had to bribe people. We had to have a cartel. We If we didn't work together, we would all have failed. 27:03 Speaker 2 I mean, we all love small business, and I'm a small businessman. 27:06 Speaker 1 Secretary of State doesn't buy it. Tells Sam to mind his business, to stick to bananas and stay out of international affairs. But of course, bananas are international affairs. 27:19 Speaker 2 At this point, they're using the term Banana Republic. 27:22 Speaker 1 Banana Republic is a term by this point, actually coined by O. Henry, the famous writer O. Henry, who fled to Honduras... around 1900, and coined the term Banana Republic. Yes, the core idea of this whole show is you cannot separate international affairs from the banana business. And so, in a minute, after the ad break, we will talk about how Sam Zimuri gets involved in international affairs. The ads are over. Unless you subscribe to Pushkin Plus, in which case you didn't hear an ad. If you want to subscribe to Pushkin Plus, you can go to pushkin.fm. 28:07 Speaker 2 It's like time travel. The year is 1910. 28:11 Speaker 1 Sam Zimri has a problem. The governments of Honduras and the United States are about to make a deal that will raise his taxes, leaving him unable to compete with the octopus, United Fruit. So Sam Zimri decides, okay, I can't get the government of to go along with me to do what I want? I'm gonna change the government of Honduras! 28:35 Speaker 2 It seems like a big leap, but I understand that he is a practical man who solves practical problems, and this is the only solution for his banana empire. 28:44 Speaker 1 And he's obviously wildly ambitious. And perhaps not moral in the way that we would think about being moral. 28:51 Speaker 2 So.... 28:53 Speaker 1 Conveniently for Sam, The president of Honduras had been deposed just a few years before. His name was General Manuel Bonilla. 29:06 Speaker 2 I feel like in many of these Central American countries, there is some deposed president waiting in Miami or New Orleans to take over again. 29:15 Speaker 1 And all of them, or substantially all of them, want to take power back, want to depose the deposers, to overthrow the overthrowers. And Bonilla definitely... to get back in power. And he has followers. You know, he was a real general. He was a real leader. There are people who would back him. But he needs money. 29:36 Speaker 2 Oh, if only there was someone with money who wanted to help to change the government in Honduras. 29:42 Speaker 1 Bonilla and Zemuri made a deal. Zemuri would put up the money and Bonilla would do the fighting, basically. And give Zemuri his tax-free arrangement back. 29:53 Speaker 2 It's just another contract to Zemuri. 29:54 Speaker 1 It's another deal. This is pretty clear from the historical record, although. 30:00 Speaker 1 There's this great detail, which is Bonilla's writing all these letters to various supporters and whatever at the time. As far as we can tell, he never puts Zimri's name in writing. He generally refers to Zimri as el amigo. 30:15 Speaker 2 Here's a little quote from Bonilla. Without the decided assistance of el amigo, I do not rise in arms against General Dávila. 30:23 Speaker 1 General Dávila was the president of Honduras at the time, the guy who Bonilla wanted to depose. And in the summer of 1910, Bonilla got the decided assistance of El Amigo. And he did rise in arms against General Davila. And he lost. According to one version that I read, one of Bonilla's generals got drunk and attacked too early and the Hondurans knew they were coming. But in any case, it seems like the, the or a, I think the Honduran Navy gunboat was chased Bonilla and his sort of core, you know, followers away. And Bonilla eventually, after this defeat, wound up in New Orleans and talked to Zimri. And when Zimri heard what had happened, basically his response to Bonilla was, you're going to need a bigger boat. So Zimri secretly funded the purchase of a 160-foot gunboat called the Hornet. originally built in 1890 for Henry Flagler, Rockefeller's partner at Standard Oil, and who famously built a train all the way to Key West, which, if you have ever been to Key West, is an absurd move because it's an island at the end of a chain of islands. The Hornet got bought by the Navy and served in the Spanish-American War, and now it was moored in New Orleans. And... This was not a secret. It was an open secret. 32:04 Speaker 2 I feel like at the time in New Orleans, there's probably lots of ships and lots of deposed presidents and lots of people raising armies at the time. 32:11 Speaker 1 And to be clear, it's illegal if you're an American citizen to buy a gunboat so that somebody can go invade a foreign country that the U.S. is not at war yet. You can't do that. But of course, at this point, it hasn't invaded yet. Still, federal agents actually go and like inspect the Hornet and try and figure out what's going on. But they don't find anything. And on December 22nd, the Hornet steamed out of New Orleans. His paper said it was bound for Nicaragua to pick up a shipment of iron ore. 32:45 Speaker 2 Perfectly legitimate. 32:47 Speaker 1 And the government was so skeptical that there was at least one federal agent on board the ship as it headed down the Mississippi. Then at the mouth of the Gulf, you know, nothing had happened, whatever. It was just a ship. The federal agent got off and the ship steamed away into the Gulf. Two days later, General Bonilla and some of the guys working with him met our man Sam Zimuri and on Zemuri's own yacht. To be clear, not the Hornet, just a yacht. 33:17 Speaker 2 Yeah, yeah. 33:18 Speaker 1 Back in New Orleans. And the yacht at this moment is stocked with rifles and ammunition and machine gun. One of the guys who was working with Bonilla's nickname was Machine Gun. good nickname guy to have with you. 33:30 Speaker 2 At any point, does Zemuri just say, wait a minute, I was in a boxcar with bananas, and now I'm in a yacht filled with machine guns? 33:38 Speaker 1 I feel like when he was in the boxcar full of bananas, he was already imagining the yacht full of machine guns somehow. One machine gun. And Zemuri and these guys and the weapons, they head down into the Gulf, and they meet up with the Hornet, and the men in the weapons get on the Hornet, and Sam, the banana man... goes back to New Orleans. I want to be clear here. It's not a secret what was going on. Literally, the New York Times reports that at the same time the Hornet left town, General Bonilla and several Americans who have seen service in Central American wars disappeared from this city. And indeed, the Hornet took Bonilla and his men to Honduras. And remember, he was the former president of the country. He had followers, so at the same time, Supporters brought other boats from Guatemala and other followers invaded from El Salvador. And Dávila, the current president, fought back. But the Dávila government lost this time. Bonilla won. It happened fairly quickly. There was a transition period that took a while, the interregnum, but new elections were held. General Bonilla once again became president of Honduras. I'm sure in his mind, the rightful president. And now it was time for the general to pay back el amigo. Sam Zimuri got his tax-free status back. And as a bonus, he got another 25,000 acres to grow bananas to be claimed later. 35:13 Speaker 2 The general's very generous. 35:15 Speaker 1 Sam is back in business, still smaller than United Fruit, but in the game. He's growing bananas. He's buying more boats, diversifying into pineapples and sugarcane. And now the next phase is this fight, this big, long-running fight between Sam and his company, Cuyamel, and United Fruit. They fight over land. They fight over control of governments. And just to give you a flavor, just to give you a flavor of this fight, I want to tell one story that Sam told to Life magazine later. In the 1920s, Sam's company bought some land in Honduras in a region in the northern part of the country that United Fruit thought of as their turf. To them, this is like an aggressive incursion. And to get the bananas to port from this land, Sam's company had to build a bridge across a river. Now, by this point, Bonilla, Zimri's man, is gone. He's not running the country anymore. And United Fruit has more influence in the government. So, United Fruit gets the government of Honduras to block construction of the bridge that Sam needs. So, now he has land to grow bananas on, but no way to get them to market. So, somebody's like, okay, okay, you wanna do that? Here's what he does. He has his engineers build, like, jetties or piers on either side of the river, kind of reaching out toward the middle of it. Nothing wrong with a pier. 36:48 Speaker 2 It's a very long pier, yeah, but sure. 36:50 Speaker 1 But it doesn't go all the way across. In the middle, to connect the jetties, he has the engineers build a removable bridge. And it's big, right? You can run a train full of bananas across it. But when the inspectors come to look at the river, you can take the bridge down and say, no, no, it's just a river with jetties on it. So this is like shenanigans. This is high level of shenanigans. But as the years go on, this conflict between United Fruit and Zimuri kind of ramps up. At some point, Zimuri gets in trouble for trying to ship weapons to Honduras again. And by the late 1920s, it looks like the tension between Zimuri and United Fruit could lead to a full-on border war between Guatemala and Honduras. And there were always border tensions between the countries. It wasn't just the fruit companies, but the fruit companies were making it worse. And so the United States State Department gets involved again. They're like, this is our backyard. You're making us look bad. We can't have fruit companies starting border wars in Central America. You guys got to get along. But of course, they can't get along. The fundamental DNA of Zimery and United Fruit is that they are competitors, that they fight together. And so they decide the only way to not start a war is to merge, is to combine. And they negotiated for a long time, back and forth. Eventually, Sam Zimri agrees to merge his company into the United Fruit Company. And in exchange, he will get around $ 30 million worth of stock in the United Fruit Company, making him one of the largest shareholders in the company, and one of the richest men in America. 38:48 Speaker 2 Probably still has the yacht. He can just sail around for the rest of his life. 38:52 Speaker 1 He buys a big mansion in New Orleans and he retires. Nobody ever retires on this show. 38:59 Speaker 2 No, no, not with one act left to go. 39:00 Speaker 1 In this case, what brings him back is the Great Depression. 39:06 Speaker 2 Great Depression. 39:08 Speaker 1 Classic turn in any business history story. The stock market collapses. Zimri's $ 30 million stake in United Fruit is now worth something like $ 3 million. 39:19 Speaker 2 Oh, he's going to have to sell bananas on the street for 10 cents. 39:23 Speaker 1 To Zimri, this collapse in the share price seems excessive. Yes, the market is down, but it's not like United Fruit is some go-go tech company. 39:32 Speaker 2 It wasn't RCA, Radio Corporation of America. 39:35 Speaker 1 No, it wasn't some bank that was leveraged up to its banana peels. It was a fruit company that was still selling fruit. Yeah. 39:42 Speaker 2 Good bananas, shipped, sold at a reasonable price. 39:46 Speaker 1 So Sam starts to figure out what's going on. He wants to know why has this company that I built, that is the source of my wealth, why has the stock collapsed? And he's talking to banana people. 39:58 Speaker 2 I love how he thinks about it as my company, even though it's still United Fruit in name. 40:03 Speaker 1 Yeah, it's understandable. 40:04 Speaker 2 He's that kind of guy. 40:05 Speaker 1 He is that kind of guy. And he did build, you know, he built his part of the company. It's been his life's work to this point. And so he decides he doesn't like the way United Fruit is running the company. You know, he was always down there in Central America, they're always way up there in Boston. 40:23 Speaker 2 He was in the boxcar, he was in the jungles, he was on the removable bridge. 40:28 Speaker 1 So he goes, I like the idea of him on the removable bridge when it's getting removed, he's kind of pinwheeling his arms. He goes up to Boston as a major shareholder to a director's meeting to tell them what he thinks. And at this meeting, he watches before he speaks, as they debate this particular request from a manager in Guatemala. The guy wants $ 10, 000 for some irrigation project. It's a lot of money. It's the Depression. So the directors are analyzing the request, trying to figure out whether to grant it. 41:03 Speaker 2 Seems like there's lots of water in Guatemala. I don't know if we should believe this guy. 41:06 Speaker 1 And Zemuri is there, and he speaks up. He says, you know, the manager is in the field. He knows what's going on. 41:15 Speaker 2 He says, if you trust him, the manager, if you trust him, trust him. If you don't trust him, fire him and get a man you do trust in the job. 41:24 Speaker 1 This is according to an interview that Zimri gave in 1933, by the way. Also at this meeting, Zimri said, let me help. I'm down there. I'm on the docks. I spent my life. Let me come be an advisor. And the people at United were like, no, thank you, Sam. Please go enjoy your money. 41:42 Speaker 2 Totally understandable if you are an old director in a suit sitting in Boston and you don't want the guy who runs gunboats back in the company. 41:51 Speaker 1 Yeah, or if you're the president of the company. If you're any exec, you don't want this guy looking over your shoulder. You did this deal so you didn't have to think about Sam Zimmer anymore. Last thing you want is Sam Zimmer. 41:59 Speaker 2 That's what the money was for. 42:00 Speaker 1 That's what the money's for. So they say no to Zimmery. And his response is to go out into the world and start talking to other big United Fruit shareholders who presumably are disgruntled. Their share price is way down. And Sam, essentially, his pitch is, these guys in Boston don't know what they're doing. I know what I'm doing. I can fix the company. And these other shareholders back him. They say, okay, we will vote with you. And remember, you know, the way a publicly traded company works is, generally, unless there's some weird share structure, which there was not in this case, the shareholders vote. One share means one vote. It is a kind of capitalist democracy. And so with these other big shareholders and his own holdings, Sam now controls a majority of the shares. He controls the company. And so he goes back a few months later to another board of directors meeting in Boston and And he hasn't yet told the directors that he has a controlling interest now. He wants to convince them without that to run the company better in his mind. And so he makes his pitch to the directors again. He says basically, give the local managers more autonomy. Stop trying to pinch every penny. In one telling of the story after this, the chairman of the board takes a swipe at Zimri's accent. Remember, he was an immigrant. And this, you know, Boston Brahmin type says, unfortunately, Mr. Zimri, I can't understand a word you say. And then Zimri springs it on the board. He says, I'm in control now. I have enough votes to do whatever I want with this company. And he says to the board this. 43:53 Speaker 2 Famous line, explicit language warning, you gentlemen have been fucking up this business long enough I'm going to straighten it out. 44:03 Speaker 1 That quote, by the way, comes from a 1933 story in Fortune magazine. Ooh. 44:09 Speaker 2 Spicy. 44:11 Speaker 1 So, Zimri starts to straighten it out. He goes back to work, he gives himself the title Managing Director of Operations, gets rid of a bunch of board members, fires the guy who was running United Fruit, travels to Guatemala, Nicaragua, Costa Rica, Panama, Mexico, Cuba, fires a lot of people, hires other people, And the stock price comes back. Company recovers, starts growing, continues to be the octopus, dominating huge swaths of the Caribbean, of Central America. 44:42 Speaker 2 But now it's Sam's octopus. 44:44 Speaker 1 Now it's Sam's octopus. And the world is about to change in a way that's going to be important for Sam and United Fruit. Because up until this point... This has largely been the story of U.S. companies and, to some extent, even the British government. And we have not heard so much from the people who are actually living and working in the Caribbean and in Central America. But this is about to change in a profound way. We'll talk about that in a minute. As the 20th century goes on, The United Fruit Company goes from being this huge commercial and political force in Latin America to being a mythological force in Latin America. The poet Pablo Neruda writes a poem called The United Fruit Co. In Spanish, La United Fruit Co. And of course, Gabriel Garcia Marquez writes A Hundred Years of Solitude, one of the most famous novels of the 20th century in any language from any region. that is set in a town dominated by a fictionalized version of the United Fruit Company. Unsurprising because Garcia Marquez grew up in a town that had been dominated by the United Fruit Company. The novel includes this moment when workers striking for better conditions are massacred. That's actually based on a historical event. And you really see as this mythology is growing after World War II, a transformation. This is the moment when anti-colonialism is growing around the world. And in Latin America, anti-colonialism often means anti-United Fruit. And one place you see this particularly clearly is Guatemala. And so to close the show today, I want to talk about what happened in Guatemala in the years after World War II. What happened with United Fruit, and also with the Central Intelligence Agency because this event, it sets the tone for the end of Sam Zimri's career and in a broader way for the rest of the 20th century or most of the rest of the 20th century in Latin America. So in the 1930s and 40s, Guatemala was run by a violent right-wing dictator He banned unions, he forced landless peasants to go work for big landowners. And, you know, this was a guy Samson Marin United Fruit could work with and did work with. 47:35 Speaker 2 And the United States government. 47:37 Speaker 1 And the United States government. 47:38 Speaker 2 They wanted him there. 47:39 Speaker 1 They didn't mind. And United Fruit was growing lots of bananas in Guatemala in the 30s and 40s. The company was the biggest private landowner in the country at the time. And then in 1944, that dictator was overthrown. A new president was elected. He allowed the workers to unionize. This is definitely a shift. And then in 1950, another new president was elected, a guy we're going to be talking a lot about, Jacobo Arbenz. And Arbenz goes even further. He issues a decree, Decree 900, number 900. And the decree says, big. 48:20 Speaker 1 Uncultivated land holdings will be expropriated by the state and given to landless peasants to farm. It's land reform. The government would pay the landowners for the land in the form of 25-year Guatemalan bonds. Can I interest you in some 25-year Guatemalan bonds? You know who had a lot of big uncultivated land holdings and was absolutely not interested in exchanging them for 25-year Guatemalan bonds? United Fruit. 48:47 Speaker 2 United Fruit. 48:48 Speaker 1 United Fruit. And in a truly delightful twist, United Fruit had undervalued their land holdings in their official filings for years so that they wouldn't have to pay property. 49:01 Speaker 2 Tax, essentially. 49:02 Speaker 1 So they could underpay their property tax. 49:03 Speaker 2 And so it's kind of genius if you are offering to bot offering. I'm putting that in quotes because you're the government. You're saying, we're going to take your land. We're going to pay you the value of the land. What is it you wrote down? Oh, that tiny number? That's what you think your land is worth? Well, I guess we'll see. give you the money. In 25-year quadribolodon. 49:24 Speaker 1 And kind of amazingly, Arbenz follows through, starts taking away uncultivated land from United Fruit, giving it to formerly landless peasants. And there's a pretty clear move here. If it is the 1950s and you are United Fruit and somebody is taking away your land and giving it to peasants, what do you scream? 49:50 Speaker 2 Communism. 49:50 Speaker 1 Communists! You blame it on the communists. This is United Fruit's move. Let me turn your attention first to an educational film called... Why the Kremlin Hates Bananas. I thought it wasn't real. There's a lot of lore. When I was putting this together, a lot of stories didn't make it because they were so clearly lore. This one is real. It was commissioned by United Fruit. And you can see it on YouTube. It's this guy sitting at a desk with a bowl of bananas next to him and a map of Central America behind him. And he's delivering a pretty straightforward message. First of all, Central America is the United States' backyard. Quote, a few minutes by guided missile from the U.S. 50:40 Speaker 2 And when the Kremlin comes first for the bananas, next, obviously, they're going to put missiles there and threaten the American homeland. 50:47 Speaker 1 And the fundamental message of this video, give us the quote. 50:52 Speaker 2 The agents of international communism have selected the United Fruit Company as a prime target of attack. 51:00 Speaker 1 The enemies of the United Fruit Company. 51:02 Speaker 2 First they come for United Fruit Company, then they come for Peoria. 51:07 Speaker 1 Zemuri had been working with a great PR guy for a while at this point, Edward Bernays, famous figure in the time. And he is out there cultivating this story that the communists were afoot in Guatemala. And maybe more important than that was the fact that United Fruit, by this point, was the establishment. This is the great era of the establishment. in America, you know, a small coterie of powerful people. And the U.S. government and United Fruit are very bound up. A former president of the company worked at the State Department at this time. Eisenhower's personal secretary was married to a senior executive at United Fruit. And so, with the encouragement of United Fruit, the United States government, the CIA, foments a coup against Jacobo Arbenz, the democratically elected leader of Guatemala. 52:06 Speaker 2 The verb foments really is a CIA term. 52:09 Speaker 1 Do you foment anything but. 52:13 Speaker 2 Revolutions? Yeah. 52:14 Speaker 1 You don't foment. 52:16 Speaker 2 Dinner. 52:17 Speaker 1 You don't foment dinner. You don't foment water. So the coup is going down, and who should be in Guatemala City at this moment but one Ernesto Che Guevara. Che, Che Guevara. 52:31 Speaker 2 He's got his beret. 52:32 Speaker 1 He's got his beret. He's already leaning left, and this only pushes him farther left. And in fact, a few years later, he will team up with Fidel Castro, whose own father worked for United Fruit in Cuba, the octopus. And of course, Castro, after the revolution, will nationalize United Fruit's land in Cuba. But we're in Guatemala now, where the CIA-backed coup happens. Arbenz is forced out. And the day he resigns, he gives this speech and he spells out exactly what is happening. Workers, peasants, patriots. 53:13 Speaker 2 Guatemala is going through a hard trial. A cruel war against Guatemala has been unleashed. The United Fruit Company and U.S. monopolies, together with U.S. ruling circles, are responsible. 53:26 Speaker 1 The United Fruit Company is responsible. He's saying it. 53:30 Speaker 2 He's saying that banana that you are eating in Jersey City is bringing down this country. 53:38 Speaker 1 Arbenz flees the country. And before too long, Guatemala has a new leader backed by the U.S. government. And that leader takes most of the land that had been taken from United Fruit and given to peasants to farm and gives it back to to United Fruit. When I think about this story more broadly, the story we've been telling for the whole show, you know, there's this idea that comes to mind, which is we often think, oh, the government's over here and private companies are over there, and maybe there's some, like, regulation linking them. But this is not the case. When you look at history, very, very often, the governments and companies are all bound up with each other. I mean, you see it in oil. You see it, obviously, in the early trading companies. You see it in all kinds of industry. 54:30 Speaker 2 Even in the most simple of commodities. Even a yellow fruit that grows on a tree. Sorry, not a tree. 54:36 Speaker 1 Also, we had gone the whole time without calling it a yellow fruit. The banana business and the U.S. government in the 20th century were all bound up with each other. And, you know, if you remember earlier in the show, The first time Sam Zimuri wanted to sell a coup so he could sell more bananas, the U.S. government tried to stop him, told him not to do it. By the end of his career, he helped convince the U.S. government to foment the coup. Sam Zimuri had arrived. I want to thank the listeners who suggested that we do a show about United Fruit, who included Patrick Bowman and Jacob Wolfson. Is there another fruit we should do a show about? 55:23 Speaker 2 Johnny Appleseed? Oranges in Florida? 55:26 Speaker 1 Email us at businesshistoryatpushkin.fm or find us on Twitter. It'll always be Twitter to me. I'm at Jacob Goldstein. 55:35 Speaker 2 I'm at Radio... What was that? 55:38 Speaker 1 You slowed down. We're on LinkedIn. Turn it up to 2x. 55:44 Speaker 2 And already down to. 5. You're screwed with people now. 55:50 Speaker 1 Today's show was produced by Gabriel Hunter-Cheng, who brought us a beautiful bunch of Chiquita bananas. Chiquita, by the way, is the descendant of United Fruit. Our editor and showrunner is Jake Harper. I'm Jacob Goldstein. 56:04 Speaker 2 I'm Robert Smith. Thanks for listening.