Investment Program's Beginnings

Frank Graner

Delivered Friday, October 15, 1999, at the UW-ASAP Conference - Madison, Wisconsin
Prepared by William B. Blankenburg

Let's talk about great ideas in business education. Here's a brand-new one from the Drucker School of Management at Claremont Colleges in southern California. Last month eighty incoming MBA students were told to jump off a 30-foot pole and then catch a trapeze. The director of the MBA program said the purpose was to instill "sheer unadulterated terror" in the new students. The director said the terror would promote teamwork and resilience.

Here's another idea, one that goes back about 40 years, and it happened at the University of Wisconsin: If you want students to learn about investments, have them invest real money. Behind this idea was Frank Maxwell Graner, a smart, complex man who, with some crucial help from his friends, conceived the applied security analysis program at the UW School of Business. The success of his vision is manifest in this room.

Frank Graner joined the UW faculty in the fall of 1948, just a few months after completing his Ph.D. here, and after a summer on Wall Street as the first Fellow of the Joint Committee on Education of the New York stock exchanges.

He came to the graduate program in the School of Commerce after three years in the Navy and three years as chief economist with the Paper Branch of the U.S. Office of Price Administration. Before the war he received a bachelor's degree from Ohio Wesleyan and a master's from Kent State.

As a new faculty member, Graner was cast opposite Harold Fraine, an eminent scholar and devotee of the bond market. Fraine and Graner were of different times and different styles. Fraine was pedantic in the classroom while Graner was inspirational. Fraine regarded bonds as investments and stocks as speculation. Graner believed that stocks, wisely chosen, were investments of the best kind.

In his investment philosophy, Graner was influenced by his friend Tom Brittingham Jr. In the 1930s, Tom Jr. had embraced the somewhat unconventional idea of investing for growth, and he published articles in Barron's arguing this point of view. Tom Jr. managed his family's considerable fortune, which derived from timber ventures in northern Wisconsin. Tom Jr. found an intellectual soul mate in Frank Graner, whose experience as an economist and industry analyst made him a believer in growth investment.

After the war, Tom Jr. and his colleague Pete Johnson put their strategy to good use by investing for the Wisconsin Alumni Research Foundation. The Foundation had received ample royalties from patents on Vitamin D and Warfarin, and Brittingham and Johnson made those royalties grow into substantial research funds for UW faculty and scientists.

In his classroom, Graner increasingly melded theory and practice, probably to the horror of his colleague Harold Fraine but certainly to the delight of his students.

As a teacher, Graner was not an imposing figure. He was well under five and one-half feet tall, and he seldom arrived on time. He dressed well, he smoked constantly, and he lectured conversationally. His instruction set off sparks in his students' minds. Ted Kellner, an undergraduate advisee, recalls his deep knowledge of companies and his way of looking at them. He had a gift for seeing what others missed. He was brilliantly intuitive, yet always in tune with the realities of industry and marketplace. He brought company officers and investors to class. He himself served on the State of Wisconsin Investment Board. He collaborated with W. Bayard Taylor on the definitive textbook, Financial Policies of Business Enterprise.

Graner became, in effect, an evangelist for security analysis. Ab Nicholas recalls him as spellbinding. Steve Hawk came to the UW to study chemical engineering, then switched to Business, where he began in accounting. He happened to take a course in investing from Graner, and became so fascinated he switched his focus to finance.

In the late 1950s, encouraged by Tom Jr., Graner pursued the idea of making finance education even more real for his students. He took the idea of a student-managed fund to the campus administration, which was interested, and then to the regents. Though sympathetic, the regents were hampered by state regulation, so the idea went on the back burner.

Meanwhile, Graner developed a loyal circle of friends and students. He played poker once a week with campus cronies, not winning big, but winning consistently. He stayed in touch with Tom Jr. and other money managers, including former students who began making names for themselves. Three of them will speak to you in a moment: Irwin Smith, Ab Nicholas and Ted Kellner.

So successful were his students, and so loyal to Wisconsin, that by 1990 Milwaukee had become a national money-management center, with estimates that the city had more money managers than any other location outside of Boston.

In 1969, Graner's idea was revived by Baird Brittingham, Tom Jr.'s son, who recalled his father's interest in a student-managed fund. The Brittingham family's generosity toward the UW was legendary, and Baird consulted with two of his associates, Foster Friess and Ted Kellner, both of whom knew Graner quite well. Out of their discussions came a determination to build a new program. To avoid bureaucratic problems, they approached the UW Foundation, which cooperated enthusiastically, making special accommodations to receive a startup grant of $100,000 from the Brittingham Trust.

But who should run the new applied security analysis program? Kellner and Friess suggested Steve Hawk, an assistant professor of business at the UW, just finishing his Ph.D. Baird soon interviewed Hawk about how the idea might work. They hit it off, and Hawk began designing the program and recruiting students.

The first classes of ASAP were held in fall 1970, but Graner was not on hand to see them. A year earlier he took early retirement for reasons of health, and moved to Mexico, where he continued to oversee some investments and conduct a small consulting practice. He died in 1980 in Key West, Florida.

Frank Graner never married and had no family, but he left a bountiful legacy of students who serve their profession and their university with great distinction. Many of them are here today.

As we gather to dedicate the Steven L. Hawk Center for Applied Security Analysis, we proudly salute Frank Graner, his great students, and his great idea.