THE DREYFUS CASE

Conservative Wall Streefers still boggle when they think of how multimillionaire Jack Dreyfus enlivened investing's image by using a lion in his mutual fund ads. Now their awe is rivaled by that of horsemen who have watched him parlay $7,000 and his keen eye for bloodlines into a highly successful racing stable
March 30, 1964

A man who picks a winner the very first time he bets on a horse race often becomes a victim of the same kind of pleasurable confusion that overwhelms a young man when he kisses his first maiden: he is convinced he has stumbled on a secret unknown to ordinary mortals. This is, of course, a snare and more often than not also proves to be a heartbreaking delusion. There are some few men who are fortunate enough never to discover this awful truth, and for anyone who demands proof there is the remarkable case of Jack Dreyfus Jr., a trim and unusually well-kept gentleman of 50 who is an authentic Wall Street tycoon, though he happens to have the good judgment not to look or act at all like one.

During his working hours, which are long and exacting, Dreyfus is president of the Dreyfus Fund Inc., a mutual investment firm which he took control of 13 years ago when it was practically moribund, and through skill, catchy advertising and devotion nursed into a financial colossus with some 215,000 investors and assets close to $530 million. During his leisure hours, which are rare and blissful, he could once be found at the Cavendish Club playing masterful bridge with the likes of Oswald Jacoby and the late P. Hal Sims ("I was a bridge bum"), or cutthroat gin rummy that was even sharper than his bridge, or golf at the Metropolis Country Club, where he once won the club championship seven straight times. But he is now more likely to be located at a racetrack or puttering happily around Hobeau Farm, his 1,100-acre Thoroughbred racing establishment near Ocala, Fla. He is a man who is crazy about horses and, more noteworthy, horses have a way of returning his love in full.

Dreyfus is by no means the commanding figure in racing that he is in Wall Street, but he has been amazingly successful in both the running and breeding of horses. His personal definition of happiness is putting on old clothes, clutching a scratch sheet and joining the ordinary horseplayers in the grandstand, that pleasant place where a man can turn a few dollars with a wise wager. Unlike some turfmen, who seem to take pride in relating how much they lose on their racing operations, Dreyfus could if he wished, only half a dozen years after acquiring it, dispose of Hobeau Farm for a hefty profit, and it pleases him to say so. This makes Dreyfus both an oddity and an enigma, for it is almost a hallowed tradition of the sport that when a millionaire takes up horse racing he should pay through the nose like a man. When asked how he happens to be so different, Dreyfus says modestly, "I've been 110% lucky. The rest has been brains."

Since no known combination of money and brains has ever produced good horses without the addition of some elusive and undefinable quality that might as well be described as luck, most horsemen accept this explanation. They usually point out in passing, however, that when it comes to horses Dreyfus seems to be lucky in the same way a fox is lucky. This has been true from the day Dreyfus discovered horses. That was back in the '40s when Dreyfus visited a racetrack for the first time with a group of bridge-playing cronies, including Hal Sims, who was renowned for risking a bit of his bridge winnings at a mutuel window. The entire experience must have left Dreyfus in a happy daze, because to this day he cannot recall much about the track, except that it was in the New York area. What he can remember with tingling clarity is that while Sims and his other friends dropped bundle after bundle on successive races, he sat down and tried to unravel the intricacies of a form chart. When he finally decided he had a glimmering as to what it was all about, he began to bet. He picked a winner in each of three races.

From that day to this, Dreyfus has been a devout horseplayer, and he has never lost his touch. He is not a plunger, for he takes more pleasure in the game than in the money, but he impresses everybody who knows him with his knack for being on the right horse at the right time. Sometimes Dreyfus will admit that if things came down to it, he probably could make a fine living as a handicapper. But if he has a secret he has difficulty in expressing it, except in the broadest and most elementary way. "The important thing, I suppose," he says, "is not to be emotional about it. You have to study a horse's chances in the same calm and detached way you study a stock investment or a business deal. This isn't a problem for some people. But I am an emotional man and, in racing just as in business, I've had to train myself to keep my emotions under control, to always depend on my head instead of my heart. You cannot eliminate risk, but you can be sure the risk you are taking is worthwhile. Some good horses run at odds that make them not worth the gamble: some not-so-good horses run at odds that make them worth taking a chance on. And the kind of luck you have does not change the odds in the long run. Trying to get even in the eighth race when you have had a bad day, for instance, is foolish. In fact, the time when you should really watch yourself is when you are losing."

Dreyfus, fortunately, is not altogether quite so cold-bloodedly cautious as this makes him sound. He did not, for example, sit back coolly and wait until he amassed a fortune before buying a horse of his own but, like many a good man before and since, he fell in love with a particular horse. "I went crazy about this Beau Pere mare, Bellesoeur," he admits. "She won the Astarita and Spinaway at 2, the only year she raced, and was placed second to Bewitch among the fillies in the Experimental in 1947, at a weight of 117 pounds. Only 26 fillies have been weighted at 117 or better in the Experimental's history."

Bellesoeur was far beyond Dreyfus' financial reach at the time, but he knew her from afar, and he was particularly pleased when she was mated to Count Fleet, another of his favorite horses. The colt produced by this union was Beau Gar, and Dreyfus bought a quarter of him for $7,000, and later he bought another two quarters. Beau Gar had all the qualifications of a great horse but never amounted to much as a runner because he was plagued by injuries and bad luck. At this point a less astute man might have lost interest, but Dreyfus was still impressed by Beau Gar's obvious potential as well as his bloodlines. When Beau Gar was sent to stud in 1956, Dreyfus' instincts told him that this was his chance finally to acquire a good horse all for himself.

There are many wild and wonderful versions of what happened next, but the commonest one is that Dreyfus persuaded Laudy Lawrence, who owned the remaining quarter of Beau Gar, to sell his interest for 150 shares of Polaroid stock. What actually happened is that Lawrence agreed to sell Dreyfus the quarter interest for $7,000, and Dreyfus accepted. He then advised Lawrence to invest the money in Polaroid, a stock on which Dreyfus was particularly keen at the time. Lawrence thought this was a good idea, so Dreyfus bought 150 shares of Polaroid and sent them to Lawrence instead of cash. The details of this transaction deserve some attention, because at the time Polaroid was selling for a fraction more than $46 a share. Since that time it has been split six for one, and at one point each share soared to a peak of $260—which meant that Lawrence received around $234,000 for a quarter interest in this unproved stallion. Dreyfus takes this into account when he sometimes jokingly says that Beau Gar was a decently expensive young stallion, worth $936,000.

As things have turned out, even this price might not have been fantastically excessive for Beau Gar. He has proved to be a marvel in producing good horses out of not-too-fashionable mares, which were about the only kind of mares Dreyfus could afford before his own holdings of Polaroid, and other investments, turned him from a mere fair-to-do into an immensely rich man. Beau Gar now stands at Hobeau Farm, insured for $1 million and available only to a few select non-Hobeau mares at a $10,000 stud fee. Actually, Beau Gar richly repaid the money and faith Dreyfus invested in him with the first horse he sired. This was Hobeau Farm's famed Beau Purple, the erratic but fabulous bay stallion who won five $100,000 races, set many track records and was the only horse ever to show his heels to the great Kelso in three different races. Beau Purple went to stud this year and there is no reason to think he will not shape up even more brilliantly than his sire.

The odds against a man getting two such horses as Beau Gar and Beau Purple for a comparative pittance when he first starts putting a stable together are astronomical, and this is what some people mean when they say Dreyfus is plain lucky. Other people are convinced that Dreyfus proved to be one of the craftiest operators to enter racing in a long time when he had the good judgment to make a solid investment in an outstanding stallion, for—in retrospect, of course—almost everybody can see that the unproved and injury-prone Beau Gar was a veritable gold mine. All arguments aside, it is a fact that Dreyfus showed much more judgment and restraint than most newcomers to racing, who usually splurge on flashy runners if they have unlimited means or, if they have limited funds, collect a stableful of mediocre horses and hope for a miracle. Perhaps the fairest evaluation of Dreyfus' success was made by Elmer Heubeck, a seasoned and shrewd owner-breeder in his own right, who is Dreyfus' manager at Hobeau Farm: "Jack is lucky, all right, but he is the kind of man who makes his luck."

Dreyfus is enormously pleased with his success, but it embarrasses him acutely when he is expected to explain it. If pressed, he usually gives all the credit to his horses, especially Beau Purple, who is the apple of his eye. "Beau Purple is an interesting personality, you know," he says, seriously. "He's a great horse and he's nice, very nice. He's had me by the heartstrings for a long time, and he's more than rewarded me, no matter what happens from now on. Believe me, I'm so thankful and feel so fortunate to have had anything to do with such a wonderful horse."

This is the kind of monologue one of Dreyfus' friends had in mind when he said, not unkindly, "You have to watch Jack, or he'll sincere you to death." Dreyfus is a sincerely sincere man, for a fact. He also is a highly conspicuous example of what people mean when they describe a man as being smart. He is unfailingly polite and unpretentious, and over the years some notably hardbitten turf writers and sports columnists have testified that he is likable and charming. When he relaxes he can be witty and even whimsical, and he frequently complains that he does not relax enough. "I'm just learning not to take things too seriously," he says. But Dreyfus' pleasant manner never quite disguises the impression that he would be a stern man to take on in a business deal, a card game or, perhaps, even a catch-as-catch-can scrap, for though he is of medium height and slightly built, he also is tanned, fit and quick.

This impression is valid. Dreyfus is, to start with, something of a mathematical wizard, and he can calculate the cost of a load of hay, the profit on a complicated stock deal or the odds on a horse race in a flash. He also is a fierce competitor, with a compulsion to excel in everything he undertakes, a trait attested to by his bridge and golf opponents.

Dreyfus' own rise in Wall Street has been so steady and so completely expected by everyone who knew him that even his biggest admirers seem more or less to take it for granted. One asked: "What is there to say, except Jack worked like hell, worried a lot and never put his foot wrong?" Dreyfus sometimes sounds as if his life was, and is, one long uphill struggle, but it is a fact that from the time he first landed in Wall Street he has had no major setbacks and has encountered relatively few rough spots. Except for a couple of years of youthful floundering, he has always been headed upward. Because he has not retained a hint of a southern accent, most people are surprised to learn he was born and reared in Montgomery, Ala., where his father was in the candy business. After graduating from Sidney Lanier High School and winning two city golf championships, he went off to Lehigh University, where he majored in economics and captained the golf team. On his graduation from Lehigh in 1934, Dreyfus, almost automatically, went into candy. "I honestly had no firm idea about what I wanted to do or become," he says. "I do know that I had never had a single thought about Wall Street." After lifting sugar bags and emptying them into a mixing vat for a short time—$15 a week and all the candy he could eat—Dreyfus decided he was not that fond of candy. He then tried his hand at selling insurance, and he still winces somewhat when he recalls it. "The first time I tried to sell a policy I was so completely bad and miserable that I left the man's office and cried," he says. In 1936, after a short stint in a New York industrial design firm, he drifted into Wall Street as a junior customer's man for E. A. Pierce & Co.—which later became Merrill Lynch & All the Rest.

Dreyfus still insists, to the amusement of everybody who knows him, that he was a poor customer's man, because he has no knack for selling. ("Jack could sell Living Bras in Bali," says a onetime associate.) Except for a brief hitch in the Coast Guard during World War II, Dreyfus remained with the Pierce firm until 1945. Not long afterward he and three partners took over Lewisohn & Co. and, at 34, he was the youngest senior partner of a Stock Exchange firm. From there it was only a short, bold step to the organization of Dreyfus & Co., Dreyfus' own business. When he discusses this comparatively brief period of rocketing success, Dreyfus always recalls that he "made all the mistakes in the world." It also is true that he made a great deal of money.

Dreyfus first became interested in the possibilities of mutual funds when he and his associates took over management of The Nesbett Fund, which had been organized in 1947 and had attained only lackadaisical success. Almost anything said about a mutual fund nowadays draws an angry rebuttal from some sector of the brokerage business, but it still is fairly safe to state that a mutual fund is designed for investors who prefer to pool their funds in a single kitty instead of playing the securities market themselves or having a regular broker do it for them. This kitty is then taken over by a management board, presumably skilled, which buys securities when they promise to go up, dumps them when they seem about to go down and, in simple terms, plays the market by taking what it considers reasonable risks. There are many arguments for and against mutual funds. The controversy has nothing to do with the fact that the more Dreyfus thought about mutual funds, the more convinced he was that they would have a wide appeal to the thousands of unskilled investors with limited means who had been rushing into the market in increasing numbers since the mid-'40s. Through newspaper and direct-mail advertising most progressive brokerage firms were trying to get a share of this tremendous new business.

In 1951 Dreyfus changed the name of the limping Nesbett Fund to the Dreyfus Fund Inc., and really went to work. Some brokers believe there would have been a boom in mutual funds even if Dreyfus had not entered the field. Nevertheless, they agree that Dreyfus opened up the business and pioneered the merchandising methods most mutual funds now use. Dreyfus was ideally suited for the job. Since the mid-'40s he had been attracting attention and building a reputation for nonconformity because of the ads he had been writing for his firms. Stringent SEC regulations limit the enthusiasm with which stockbrokers and funds can advertise. Until Dreyfus achieved a breakthrough, such advertising was almost always on the dull side. By paying no attention to the prevailing belief that brokerage advertising had to be dull to be dignified and by adding a little sporting zest to the message, he produced a series of advertisements that were sprightly and amusing.

Dreyfus hires a New York firm to handle the fund's advertising, but he closely supervises every detail. Out of this collaboration have come two memorable television commercials; one is considered by some experts to be the most intriguing and best ever produced. This is a one-minute film which shows a real lion stepping from a subway train at the Wall Street station. With the majestic and unhurried tread of a board chairman, the lion ascends the stairs, walks down the street past a newsstand and enters the Dreyfus building, where it leaps on a block bearing the name DREYFUS. Except for a single-sentence statement at the end, telling what the Dreyfus Fund is and what it does, there is no spoken message. The other commercial is a cartoon that shows two dignified old gaffers lazily batting a ping-pong ball back and forth while seated in immense easy chairs. One finally asks the other who his broker is, and he answers, "Why, Dreyfus, of course." That is all. This is Dreyfus' favorite, because he had the cartoonist put a small statue of a horse in the scene, which he labeled Beau Purple. Unfortunately for television viewers over most of the country, the commercials so far have been shown in only half a dozen large and investment-conscious cities.

Getting customers for his fund is, of course, only the first part of Dreyfus' job. His own chiseled words in countless brochures have explained his major objective: "In the Dreyfus Fund we hope to make your money grow, and we intend to take what we consider sensible risks in that direction." Any discussion about how well Dreyfus has succeeded in achieving this goal also opens up controversy. Not because the money in his fund has not grown: nobody contends that. The angry cries come from brokers who contend they could have done better. It is a matter of record that if an investor had put $1,000 in the fund on Jan. 1, 1954 and had reinvested all dividends and capital gain distributions he would have $5,824 today.

Dreyfus is prone to brood on the cause and meaning of success, and he accepts utterly and devotedly the philosophy propounded by Mark Twain, who is his idol. He has a framed photograph of Twain in his office, and he is always passing out collections of Twain's writings to acquaintances. Twain deals with success in What Is Man, a Socratic essay that was published privately in 1906. It is not generally regarded as one of Twain's more important works, but it strikes a fervent response in Dreyfus. In the essay Twain held that everyone is the product of two things: his machine (body, brain, nervous system) and his environment. His main thesis is that human beings are the helpless victims of the kind of machines they receive at birth and the way these machines react to environmental conditioning. Dreyfus agrees wholeheartedly with Twain's contention. "Nobody can justly be proud of any achievement," he says, "nor can anybody justly claim credit for any misachievement, such as a crime. Given the environment and machine of a criminal, one would inevitably be led into a life of crime."

This seems to explain why Dreyfus is so modest. It also suggests why, when he tries to account for his success in business, he says very much the same thing Elmer Heubeck said about his success in racing: "I've been lucky, I guess. But some people throw luck away. Being in business is like playing in a card game. Certainly, there is an element of luck, but skill predominates. Skillful people take advantage of luck."

This is not exactly the kind of talk one normally expects from a Wall Street bigwig. But, as people in racing also are discovering, Dreyfus is a highly unorthodox man. One of the first things he did after buying Hobeau Farm, for example, was to enclose it with miles of new post-and-rail fences all painted a soft blue instead of the traditional white. (The fencing, it might be noted, was frugally constructed from trees knocked down during construction of the farm's facilities.) Some people have been upset by the blue fences, and others have wondered what Dreyfus had in mind. Actually, the only reason was that he likes the color blue—he always wears blue shirts—and he thought the blue looked nice against the green grass.

Dreyfus probably is the only owner of even middling status who does not have a clubhouse box at a single racetrack. "It is not that I have anything against clubhouse boxes," he says. "It is just that racing is my hobby, and if I sat in a clubhouse I would not be able to relax. I would always be dragged into conversations about Wall Street and investments."

As far as it goes, this explanation seems valid enough. But it also is obvious to anyone who knows him that Dreyfus enjoys the jostling, colorful, seamy side of racing that most rich owners do not appreciate or even know much about. Dreyfus has a tender regard for pious but poor horseplayers, and it always pleases him mightily when he is mistaken for one. One of his happiest memories is of the time a racetrack guard sized him up as he was standing around tieless and unpressed, and tried to eject him from the owners' enclosure at Gulf-stream Park. He also glows when he recalls the time a kind lady slipped a quarter in his pocket after he presented her with a program he had picked up off the floor.

Dreyfus prefers to go to the races in a sports shirt, but when he has a horse running that might win he usually puts on a jacket and tie. Sometimes he misjudges his horse. When one of his fillies, Red Belle, won a stakes race at Aqueduct last year, Dreyfus had to leave the cheap seats and walk down to the winner's circle, where he cut an unusual figure in his informal attire.

Dreyfus is not out to attract attention with his casual dress. It is just that he does not have much patience with customs or habits that he feels do not serve a useful purpose. Shortly after Beau Gar went to stud, for example, Dreyfus wanted to find some mares for him, but in Thoroughbred circles you just do not go out and rent mares. Dreyfus did. A man who was well aware of the power of advertising, he startled the staid turf world with a two-page ad in the Blood-Horse:

"We will pay up to $6,000 cash now for service to your mare [next year]. We keep the foal. If this seems like an unusual offer, let us explain. We have a horse (Beau Gar) who has had bad luck throughout his racing career. We won't bore you with the details. However, he showed us enough to make us believe he could have been a top race horse. Because of his breeding, disposition and the flashes of speed he showed, we believe he has as good a chance as any horse to be a top sire. Instead of asking others to gamble on his potentials as a sire, we are willing to do so ourselves. We will pay from $2,000 to $6,000 (depending on the mare) for a service to your mare. We will assume risk of live foal. The foal to be ours...."

Everyone predicted that Dreyfus would be swamped with letters from owners of moderate mares but, surprisingly, he received comparatively few. He did get a letter from a Mrs. Grayce Mar, who offered to sell him a mare called Water Queen. Water Queen's breeding was certainly respectable—by Johnstown out of a War Admiral mare—and she had been sound enough to start nine times but had not been able to win in $1,000 company.

Dreyfus bought Water Queen for his first broodmare. She was bred to Beau Gar and dropped Beau Purple early in 1957 at a farm in Kentucky where Dreyfus then boarded his horses. Beau Purple was turned over to G.P. (Maje) Odom, who was Dreyfus' trainer at the time.

Dreyfus has good cause to love Beau Purple now. He even had good cause to love him at the start, because he was his first colt. But it took a remarkably loyal man to love Beau Purple throughout much of his racing career. A dubious ankle kept the colt out of the races as a 2-year-old. At 3, Beau Purple won the Derby Trial, but came out lame. After apparently recovering, he made a try for the Withers, but emerged from that race with a lineal fracture of the pastern. Beau Purple raced four times as a 4-year-old but failed to score, so it was feared he had not completely recovered from his injuries and he was given the rest of the year off.

Early in 1962, now a 5-year-old, Beau Purple finally won an allowance race at Hialeah. Dreyfus and Maje Odom were so pleased that they decided their horse was ready for a chance at big money, and they entered him in the $100,000 Gulfstream Park Handicap. As a prep race, they entered him in the Apple-ton, and he won by four and a half lengths. But when Beau Purple ran at Gulfstream in the big one, he came in an indifferent sixth.

Next Beau Purple was entered in a one-mile allowance race at Aqueduct, and he won it easily, equaling a track record set by Bald Eagle two years before. This so impressed the handicapper that he gave Beau Purple 120 pounds in his next race. He finished ninth. It went this way through most of the early part of the year. Dreyfus was convinced he had a top horse. Other people were convinced he had a top horse. But Beau Purple was exasperatingly unconvinced. Somewhere around this time Dreyfus and Maje Odom parted amicably, but it was no secret that Dreyfus felt he needed a trainer who would devote more time to Beau Purple, and he hired Allen Jerkens.

When the Suburban rolled around, Beau Purple had not only a new trainer but also a new jockey, Bill Boland. The Suburban was a four-horse race. In addition to Beau Purple, Garwol was entered, yet it was clearly understood that it was a duel between Kelso, at 4 to 5, and Carry Back, 2 to 1. But from the time Beau Purple reached full stride the outcome was never seriously in doubt. He set an Aqueduct record of 2:00 3/5 for the mile and a quarter. Kelso came in second, and Garwol was third. Beau Purple paid $12.60, and if he had never run again, says Dreyfus, it all would have been worthwhile.

But Beau Purple continued his unpredictable ways, and sometimes they were joyously unpredictable. At the Hawthorne Gold Cup, for example, the track was sloppy and it was believed Beau Purple did not have a chance. He won handily. In the Man o' War at Belmont he had to run on grass for the first time, and the distance of a mile and a half also was new for him. Kelso and Carry Back were in the race, and Beau Purple went to the post at 20 to 1. But he took the lead and held it, grass and all, and set another track record: 2:28 3/5 for the 12 furlongs. In the Widener, Beau Purple stumbled coming out of the starting gate, yet he won anyway. In all, he has turned in $445,785 worth of unpredictability, which makes him an investment to rival Polaroid.

Jack Dreyfus, the master of Hobeau Farm, is a shrewd man. He can watch the hands played in a bridge game and keep a mental file of the cards that remain unplayed. He knows the probable earnings of scores of obscure stocks. He has a thorough grasp of the theory of probability. But he now admits that he still has not fathomed the mysterious ways of Beau Purple. "I never gave up on him," he often says. "Never once." And he can't explain why.

PHOTONEAL BARR PHOTOFamous commercial that shows two stuffy investors playing ping-pong at their club was embellished—at the delighted insistence of Dreyfus himself—with a Beau Purple statue.

HOLE YARDS PAR R1 R2 R3 R4
OUT
HOLE YARDS PAR R1 R2 R3 R4
IN
Eagle (-2)
Birdie (-1)
Bogey (+1)
Double Bogey (+2)