Begin interview. Today is September 29, 2014 and the time is 5:30. This is Ryan Bean from the Kautz Family YMCA Archives interviewing Harold Smith. Mr. Smith, thank you for agreeing to share your story with me today. My first question for you is what was your first YMCA experience? 

Ryan Bean

My first YMCA experience was at Ursinus College, where I was a member of the student YMCA and then in due time, I became president of the student YMCA, YMYWCA of Ursinus College, Collegeville, Pennsylvania. 

 

Mr. Smith


When was that? 

Ryan Bean

That was 1952 through 1955. 

Mr. Smith


When did you first start working for the YMCA? 

Ryan Bean

I began working for the YMCA in the summer of 1953. I was looking for a summer job and applied to the national YMCA at 291 Broadway. They did not have anything and then I was interviewed. I received a telephone call from the YMCA Retirement Fund. I had already accepted another job at Manufacturers Trust Company for the summer but then I quit that job and joined the YMCA Retirement Fund for the summer. 

Mr. Smith


Okay. And what work did you do with them? 

Ryan Bean

I was really the office boy. I did everything that was required. It was the end of the fiscal year. They needed additional help to close the books on June 30th and we did all the closings with the old manual records and the old manual bookkeeping machines. 

Mr. Smith


Then where did your YMCA career go from there? 

Ryan Bean

I did so well in the summer, I was offered to come back to the Retirement Fund for succeeding summers. And when I graduated from Ursinus in 1955, the then president of the Retirement Fund, Earl Brandenburg, wrote a letter of recommendation for me to Union Theological Seminary, since he was a good friend of the president of the Union, Pit Van Dusen. They also made an arrangement with me that I could work at any hours at all. I was free, all the while I was going to Union Seminary. Which is very unusual and probably would be illegal today. And so I did. The result was I was working all that while and I concurrently began to take courses at NYU Graduate School of Business, so that in 1958, I secured both my MBA from NYU GBA and my then BD now M.Div from Union Theological Seminary. I was immediately hired by the YMCA Retirement Fund, which was unheard of. 

Mr. Smith


In what position did the Fund hire you for? 

Ryan Bean

They called it assistant secretary in those days, and really it was. You’ll do anything that was needed. The staff was relatively small in those days, only 18 all in all. And I did just about everything in the shop. I was rooted through the various jobs in the shop. I was also encouraged to do my PhD work at NYU GBA in investments, accounting, management, economic theory, and economic history. 

Mr. Smith


So was that a similar situation where they supported you and encouraged you to continue your education? 

Ryan Bean

Yes. I was very encouraged by Earl Brandenburg, the then president, and also Forrest Wharry who was the assistant, the number two person in the executive staff. It was unheard of for someone my age to go immediately to the national headquarters, especially on that basis, which was very nice from my point of view, because it enabled me to finance the advance degrees. 

Mr. Smith


Yes. And how many years were you with the Fund? 

Ryan Bean

From those years all through 2000 when I retired. 

Mr. Smith


Okay. And what was the final post you held at the Fund? 

Ryan Bean

President, Chief Executive Officer and Chief Investment Officer. I had the two major posts at the Fund. 

Mr. Smith


It sounds like mentoring and individual attention was a really core component of your career. Could you speak a little bit about the importance of that? 

Ryan Bean

Mr. Smith

My mentoring or the mentoring I gave to others? Because I did try to mentor others along the way. 


Yeah. Both the spirit of that.

Ryan Bean

I learned that from both Earl Brandenburg who had been a secretary and also he became regional executive on the national staff and the executive to Saint Louis YMCA then moved to be the second president of the Retirement Fund. I also learned that from Forrest Wharry, who was a very good mentor. I was also mentored by many of the active lay people and lay leaders of the Retirement Fund at the time including William Sword, who was then the managing partner of the old Morgan Stanley when it was a partnership, and was very active and also became a chairman of the board of the YMCA Retirement Fund. All of these people encouraged me and nurtured me. I was being nurtured and groomed and I wasn’t really conscious of the fact, but they made sure that I had a thorough understanding of the Fund and of the YMCA. 

Mr. Smith


Why do you think they took such an interest in you? 

Ryan Bean

First of all, I combined two things that they thought the YMCA stood for. That was a strong Christian emphasis coming out of the Union Theological Seminary and second, the fact that the Retirement Fund was a unique business operation and I was operating across disciplines. I could bring what I had learned, the practical theology of Reinhold Niebuhr and my other professors at Union Seminary, to the economics and business acumen I was getting at NYU GBA, and applying it to a very crucial function of the YMCA Movement, which the Retirement Fund is.

Mr. Smith


Could you speak a little bit more about that connection, the role of your Christian faith in this business investment side of your work? 

Ryan Bean

Mr. Smith

When I went to Union, one of my professors was Reinhold Niebuhr and the thought was the Christian faith must influence the culture and the world at large. To do so effectively, we had to be able to move out of our theological disciplines and in effect, engage, confront, and attempt to shake the world or any little pieces of the world we might be able to influence, and that was my vocation, I felt, within the YMCA and within the YMCA Movement. I was impressed by the uniqueness of the YMCA as a vehicle of Christian expression, its openness, its flexibility, its true democratic nature, and the fact that it expressed itself in many, many cultures and many, many settings quite successfully and this was very, very impressive. And this aligned with my own value systems and the values that I developed and continue to develop in my life.


How would you summarize the role of the Fund or the impact of the Fund has had on the YMCA Movement? 

Ryan Bean

The YMCA Retirement Fund has been a tremendous stabilizing influence on the YMCA Movement. Now unfortunately, the nature of a person’s engagement occupationally has changed tremendously in my lifetime. A lifetime career was not unusual for people of my age and my setting. The Fund assumed the responsibility for, basically, we attempted to provide an economic package for our YMCA people, so that they were free to devote themselves to their task and to their lives and to free them up. They were not people who earned a lot of money.

They are not people who are skilled in these areas. It was our job to attempt to, now this sounds very paternalistic and it’s terribly out of date, but this was the basic thought and it was a very crucial aspect of getting and holding good people within the YMCA Movement. The Fund was so conceived in 1921 and that conception was underscored fortunately by the passage of ERISA, the Employee Retirement Income Security Act, which in effect mandated that as an employer, the Fund had a much broader band aid, and I just happened to become CEO when ERISA really began to take, so I had to manage huge amounts of growth in the numbers in the Fund.

As a matter of fact, in my administration, active membership went from about 17,000 to over 78,000 and we had to manage over five computerizations because we initially, the operation was pen and ink and manual records. We went from that to computerizing the entire operation. 

Mr. Smith


And when was the first computerization? 

Ryan Bean

The first computerization was still very late in the Wharry administration. Being groomed by the board. The board sent signals that I was the obvious successor. First, I was named the only vice president the Fund ever had in history. Then I was named the only executive vice president the Fund ever had in its entire history. And then all of a sudden, I had been kept as sort of a secret in house and I began to be sent out on speaking engagements to make everyone aware of who I was, what my capabilities were.

The ground was being very carefully set for a smooth transition. And when Forrest Wharry—in essence, Forrest began to step back gradually and I began to assume all of his functions very gradually. But by the time his retirement came, it was perfectly obvious I was going to be his successor. That’s not done often in nonprofit organizations but it was very smooth, it was very understood, and there was no upheaval. Some nonprofit transitions I’ve seen, and I’ve been on a lot of nonprofit boards, are so disruptive and so poorly handled, that I was fortunate in my transition. I tried to do the same thing. I had to groom the successor carefully. The board disagreed with my successor. They reached outside. And that was their prerogative. That was their prerogative. I did not control the Fund board. 

Mr. Smith


Do you think that during your grooming that the nature of the work added emphasis to have this smooth transition, the fact that it’s dealing with large amounts of money and people’s securities or?

Ryan Bean

Mr. Smith

I think it’s terribly important. The confidence of the Fund is terribly important. In any financial institution, you must have confidence in the institution especially since for some, this is one of the major assets of most people and why people’s salaries are not high range. And that was one of the things that appealed to me, that I was able to do, and work for, and bring very good results to a group of people who (a) would not have had the benefit of good professional money management and (b) that the system itself, which is a genius of a retirement system, was able to have in my day a built-in mechanism whereby excess returns could be returned proportionately to both actives and retirees.


You said it’s a genius of a system. Is that one of those examples of what was so unique about the arrangement of the Fund?

Ryan Bean

Mr. Smith

Yes. The initial foundation of the Fund was extremely well conceived. It was incorporated by a special act to the New York Legislature and has a sweet heart charter. The initial problem in founding any pension plan is what do you do about all the people who served, who never put any money in, or no money was ever put in? A campaign was undertaken to raise over $4 million, which in the 1920s was a lot of money. We were blessed by gifts from very large donors including a million dollars from the Rockefeller Foundation, a gift incidentally that was contested by the IRS for the Rockefellers, but which was confirmed by a test case and the IRS never forgot it. And the result was, we had regular IRS audits. Bureaucrats never forget a wrong. No, they thought it was a wrong until my successor, John Preis, who was here managed to secure an act of congress that nailed down the IRS exemption of the Fund, and in an act of congress passed unanimously.


Could you clarify a little bit about what was the IRS contesting? 

Ryan Bean

They contested the Rockefeller’s charitable donation to the Fund. 

Mr. Smith


That it was a tax exempt donation? 

Ryan Bean

That’s right. They claimed that this was, the Retirement Fund is religious, educational, charitable, and that puts us in a special situation with regard to ERISA. Because ERISA when it was written, unfortunately forgot that there were a whole bunch of religious pension funds and they didn’t do their research very well. And they passed the law in a hurry as they usually do and it was very sloppily drawn, so they had to be corrected. We had to join a coalition to clarify ERISA and we were quite active in that coalition.

Mr. Smith


Are you aware of how unique or not unique the creation of the Fund was during that period? 

Ryan Bean

It was unique but not, there was a huge nonprofit organizations went into a spate of creation of pension funds in the 1920s. The YMCA Retirement Fund was one product of that. The YW Fund followed. There were several other church funds that followed. Some of the church funds were older but many of them were nailed down at about the same time. Boy Scouts, I’m not sure when they were founded or Girl Scouts, but many nonprofits began to form their own pension funds at those times.

Mr. Smith


Is there anything that you think the YMCA Movement could learn from the YMCA Retirement Fund? 

Ryan Bean

Yes. I think there’s a great deal it could learn from the Fund, particularly the Fund as I knew it. First of all, you engaged in your board only people who truly believe in your mission and who believe in what is the YMCA, not just put people on the board because they are prominent in the community or hopefully, you’re going to get donations. I’ll never forget Bill Sword saying, “He’s a very wonderful person but does he believe?” I think that’s a very interesting test. It was initially, and this is terribly old fashioned, a concept that being Christian meant something and there was an attempt to express this in this organization.

It was a very broad Christianity, extremely “liberal” Christianity. But it was there, and it was terribly important. And I think one of the dangers that I see in the YMCA is washing that out or being afraid of it because one additional membership was so important. And we’ll sell our soul for one additional membership, especially when we’ve built up huge amounts of debt, which for nonprofits, again, I know debt. I analyzed debt for the Fund. I’ve traded bonds early on for the Fund.

We are one of the few organizations that traded our bond portfolio when no one else did. We did a lot of initiatives investment-wise, way before other people did. Again initiative, being creative, being on the cutting edge, not being boxed in. I was given a freedom of action that I don’t think any portfolio manager ever would have again in any organization I know of or I’m a part of. I had complete freedom of action but I was held totally responsible and that doesn’t, it will never, ever happen again because now, everything is so hedged in and the result is you have management by committee and you cannot have good money management by a committee.

Don’t forget, I was bringing together both the actuarial part, the business part, and the investment part, and that was united in me. I must say that at the end of my career, it was a lot easier when we were only $200 million than when we were nearly $4 billion. The Fund grew a great deal under my administration and also, the market’s changed tremendously in that period. The nature of the investment market’s changed tremendously. It was a new product. The modern portfolio theory came in. It was introduced. I was trained as a Graham and Dodd value investor like Berkshire Hathaway and Warren Buffett. That was my style. Modern portfolio theory, it’s not that way at all and it’s all the rage. 

Mr. Smith


What are a couple of the key differences as you see it between those two? 

Ryan Bean

Well, the key difference is the Graham and Dodd approach is first of all, to search for value in undervalued securities and to do it by analysis of each security, you must know them very, very well. Modern portfolio theory in essence surrenders to statistics and says, “You cannot beat this.” In other words, just use portfolios that mimic this market structure and you will have a similar result. The trouble is you have a similar result up and a similar result down. Now, you can modify that with all sorts of techniques and especially some of the new derivatives and so forth. I still think, just look at the success of Warren Buffett. What is he, the third wealthiest man in the United States, the second or third? He’s way up there, and the success with his strategy. Funny, I don’t find many people who follow modern portfolio theory who have amassed that kind of fortune. 

Mr. Smith


It would seem one of the key necessities of the Fund is stability. 

Ryan Bean

Yes. 

Mr. Smith


How has the modern marketplace impacted that notion of stability? 

Ryan Bean

It has impacted the mindsets of our trustees and the demands they make on staff. They want to conform to what everyone else is doing. That was not always so in the past, and that’s a huge difference. That has a major impact but that impact is general on institutions. 

Mr. Smith


Is there a tension between stability and growth? 

Ryan Bean

There can be. In a pension plan, you have to balance the needs of multiple generations because the investment horizon is perpetual if it’s well, there is no end to it ultimately, which gives you a wonderful investment opportunity with a perpetual horizon but it means that you have to be extremely sensitive to major trends and to major economic changes and hopefully anticipate them and position yourself accordingly. We did that quite successfully. We did that quite successfully. We were overseas before overseas was fashionable.

Our one greatest success was in fixed income and that is unusual. I ended up on the front page of the Pension and Investment Age because in one year, the Fund doubled and we did it when interest rates were going, government bonds looked as though they might hit 20 percent. They were at about 16, 17, 18. And I’ll never forget, I said to some members of my staff, we were in London, I said, “How many companies bring down 16, 17 percent to their bottom line?” And they said, “Not many.” I said, “What are our liabilities?” And the answer is US dollars. “What is our actuarial assumption?” Five percent. We sold everything and just bought government bonds long. And everyone said, “Oh, you’re so foolish. They going to go. They’re going to get even cheaper.” They never did. They changed policy. In one year, the change in government policy bringing down interest rates doubled the Fund. The Fund doubled, the principal doubled in one year in government bonds. And the headline in Pension and Investment Age was “Y wins with Conservatives.” This was not a conservative posture. It was actually an extremely risky posture but it met our internal needs. Even had it gone wrong, we would have been all right. 

Mr. Smith


You kind of spoke to this but it also seems to be in alignment with much of the DNA of the YMCA as being an innovator. 

Ryan Bean

Yes. 


Mr. Smith


And what would you credit this capacity for innovation within the Fund? 

Ryan Bean

We had unbelievable lay leadership and we had extremely talented executive leadership. And we were able to attract people who thought outside the box, and who enjoyed working with each other, and who were not afraid to work outside the box, and think outside the box, and act outside the box. 

Mr. Smith


It sounds like also being empowered to do that as well. 

Ryan Bean

Yes. We were trusted by our board and I could trust my board, too. They would back me. But they expected results and that was fair. I understood that. I understood that. 

Mr. Smith


I’d like to circle back to a thing that’s just come up throughout this conversion and that is what do you see as the role of Christianity in the YMCA? 

Ryan Bean

As it is now or as it should be? 


Mr. Smith


Both. 

Ryan Bean

Okay. I think the YMCA is almost traumatized from a Christian purpose point of view and it’s traumatized because again, don’t forget, I have an economics background and the economics are so important. They feel they must reflect the community and yet you’re in a diverse culture. So your dilemma is do you reflect the culture or do you reflect what you believe in? And that’s a real dilemma. And that’s not a dilemma for just the YMCA. I think it’s a dilemma for everyone.

My vote is to reflect your faith. No, you don’t do it perfectly, and you don’t do it arrogantly, and you don’t impose it with Jihad, but you do attempt. You struggle with it. It’s not easy. It’s not a given. And you’re always working on it. But you do the best you can and try and integrate this into your whole life and your whole approach in life. And hopefully, you’re able to pass this onto some other people or some other people might catch it. Some other people might catch it. And I think that’s the purpose, the Y can provide an open environment but Y’s genius has always been we’re going to live it, we’re not going to preach it. That’s much harder. That’s much harder. And we’re going to show it. We’re going to show it in the kind of atmosphere we attempt to create in our organization, in our people, in our facilities, and who we are. And I think that’s a great calling. That’s a great calling. It’s not easy. And I buy it. I buy it. And I think it’s terribly needed. I think it’s terribly needed. 

Mr. Smith


What does the YMCA mean to you? 

Ryan Bean

It means, let’s see. It means so many things. It means an attempt to express, what it means to be a Christian in a difficult world, what it means to be a Christian in a difficult world. 

Mr. Smith


What are some of the difficulties you see in this world that the YMCA is trying to tackle or should tackle? 

Ryan Bean

I think one of the most important is the lack of purpose and meaning in so many people’s lives and so many people live in despair rather than hope and so many people don’t really live. They go through emotions. They call that life. And unfortunately, they’re missing a great deal. They’re missing a great a deal. 

Mr. Smith


What is something that new staff in the YMCA should know? 

Ryan Bean

That this is a wonderful organization and it can be a wonderful organization. It can be wonderful for you and to you. It can bring out the very best that’s in you and help you find what the very best in you is. That’s what they should know.

Mr. Smith


How about YMCA leaders? What is something they should be aware of? 

Ryan Bean

Their own limitations. And we all have them. We all have them. And I think YMCA leaders, need a boldness and shouldn’t slip into the fact that this is just another thing to manage, that this is a very different organism. It is an organism at its best. It’s not just another organization. At its very best, it can be much more than that. Again, to realize its uniqueness. And as leaders, you have a special responsibility because you have to show it. People follow people who show things and who illustrate what they believe in. If you don’t show it, you’re not much of a leader and you usually don’t have very good results. 

Mr. Smith


You have a long career as a leader. What are a couple of the things that you’re particularly proud of? 

Ryan Bean

I’m proudest of the fact that we made life good for a lot of people financially in a world where that is not easily done and in a society where that’s getting harder and harder to have that, that we made life really good for a lot of people.

Mr. Smith


My final question for you is if there’s anything that I haven’t asked you about yet that you’d like to share? 

Ryan Bean

No. It’s a very interesting and comprehensive. I’m sorry to burden you.

Mr. Smith


No burden at all. Well, thank you for your time and thank you for sharing your story. 

Ryan Bean

Thank you. Well, thank you so much. Very, very interesting. Very interesting. It was nice.

Mr. Smith