Sandor Herz was born in or near Vrutky, Austria-Hungary (now Slovakia) on April 10, 1879, the oldest of the six children of Jakob and Katie Herz. When he was three years old, the family emigrated to America, and by 1884, at the age of five, young Sandor (now renamed John Daniel Hertz) was living with his family in Chicago. John ran away from home by the time he was twelve and soon enough entered the boxing ring. Then, over the next forty years, John Hertz went on to revolutionize transportation in America. He then had an illustrious career on Wall Street and fame as a racehorse breeder, owning two winners of the Kentucky Derby. Here is the story of this most interesting, unsung man.
Beginnings
John Hertz ran away from home after “a sound beating” from his father, which John later said he “richly deserved.” He had finished the fifth grade, the end of his formal education. Yet he knew how to read and write and got a job as a copyboy with the Chicago Morning Herald newspaper. He earned $2.50 a week, of which $2 went for his weekly room and board at a boarding house. Working nights, he roamed the streets of the city in the daytime, and was, in his own words, “As wild and untamed as the grass on the prairie.”
Living in the streets, skimping on food, and an occasional street fight left him weak. The newspaper’s doctor found him unfit to continue working and he lost his job.
Nevertheless, he got a job driving a horse-drawn delivery wagon, at least twelve hours a day. In the remaining hours of his week, Hertz paid $10 for boxing lessons and spent time at the gym. He did a few fights himself, sometimes using the name Don Donnelly – seeming Irish was better than seeming Jewish.
Knowing boxers, their managers, fans, and spectators, Hertz began to provide tips to his Morning Herald friends at 25 cents per column inch. He began to write full stories for the paper, and soon earned enough ($3,000 a year) to quit his job as a teamster and focus on newspaper work. He rose through the ranks as a sportswriter and editor at the Morning Herald until that paper merged with the Chicago Record and he lost the job.
Turning to what he knew best, John Hertz started managing boxers, including the reasonably successful “Tipton Slasher,” Benny Yanger. By 1903, the twenty-four-year-old Hertz was managing several Chicago-based fighters, making a decent living.
About the same time, John Hertz fell in love with Frances “Fannie” Kesner, and the two were engaged to be married. But her parents were unimpressed by Hertz’s line of work. As Hertz said, “I was making fairly good money and getting lots of experience, but my girl vowed that she would not marry me until I gave up this kind of life. As I simply could not think of living long without her, I began looking around for other work.”
The Car Salesman
A friend who demonstrated cars for an automobile agency suggested John try selling automobiles, the latest rage. The friend thought John could sell cars given all the people he knew in the sporting and newspaper worlds. Hertz gave it a try but made less than a thousand dollars the first year. (He apparently had never even been in an automobile until he was twenty-six years old.) Hertz applied to be the manager of another dealership that rejected him, but he promised he’d sell more cars than anyone else. He got the job.
By his second year there, he was outselling the manager and several salesmen combined, making $13,000 a year (at least $350,000 in 2021 money). He was twenty-eight years old.
Hertz kept his old customers and attracted their friends by offering free roadside service at any hour to his customers. In those early days when few autos were reliable, he would go anywhere, anytime, to help get a customer’s car running.
One of John Hertz’s friends at the Chicago Athletic Association was Walden W. Shaw, the wealthy son of the owners of a big Chicago wholesale bakery. Shaw’s older brother had made a record-breaking twelve-day drive from New York to Chicago. Walden Shaw owned the Chicago dealership for the French Berliet cars, which sold for $4,500 each (about $100,000 today).
In late 1907, Shaw convinced Chicago’s top auto salesman, John Hertz, to come to work for his dealership. John invested $2,000 in the business and soon added Locomobile cars to the line. Under Hertz, The Walden Shaw Company swung from a $45,000 annual loss to a $15,000 profit the next year.
Almost every car buyer in 1907 was a first-time buyer, so the idea of “used cars” was new. Expensive car dealerships like the Shaw Company began to accept older cars in trade. Hertz said, “As my customers weren’t buyers of second-hand cars, I had to put on my thinking cap to find some way of disposing of them or making them earn their keep.”
Hertz saw an opportunity to earn money from his excess used cars. At this stage of the evolution of American urban transportation, most people moved by streetcars, either electric or horse-drawn. The affluent would sometimes hire a car and driver for an hour or for the day for a Sunday drive. A few city taxis had begun to appear, hired by clubs, hotels, theaters, and stores to serve their customers. Might the Shaw company rent out its excess cars (and a driver)? The Shaw family was reluctant to get into the lowly “livery trade” but John convinced them to give it a try.
The Liveryman
As members of the Chicago Athletic Association, Walden Shaw and John Hertz got the concession to provide ten cars and drivers to the club, picking up members at their offices and taking them back after their time at the club. By the end of 1908, the two men had incorporated a new company, the Walden W. Shaw Auto Livery Company.
Competing with other emerging firms, the company got exclusive concessions for hotels and other organizations in Chicago’s downtown (“the Loop”). Each business had a “cab stand” at its front door, and only one company had the right to serve that stand. When the luxurious new LaSalle Hotel, the largest in the city, opened in 1909, the Shaw company provided thirty cabs for the concession. (The LaSalle, now demolished, was built by the same Stevens family that later constructed an even bigger hotel, the world’s largest at the time, today called the Hilton Chicago. Future U.S. Supreme Court Judge John Paul Stevens grew up running down the hallways of his family’s hotels.)
The taxicab business in Chicago began to grow, attracting many competitors. In 1910, the Shaw Livery company merged with the City Motor Cab Company, assuring Shaw’s position as Chicago’s largest cab company. Shaw Livery was owned and run by Shaw, Hertz, and the two founders of City Motor Cab. The company also started to order custom-made cars for its use, needing more durable and larger cars than most buyers required. Shaw Livery also extended its operations to St. Louis. The company continually expanded its fleet of cars and built new service garages around Chicago.
Cab Wars and Business Adventures
The growing taxicab industry was a rough-and-tumble business, which must have required all the skills John Hertz could muster. Cabbies were often tough characters who were discourteous to their customers (causing Hertz to hire the first women drivers). The drivers went on strike for higher wages and shorter hours (cutting from 83 hours a week to 72). The various cab companies charged different rates, usually based on the first half-mile at one rate, then lower rates for more miles. Over time, city government began to set these rates, sometimes below prices sufficient for the cab companies to make a profit. Companies battled over hotel and retail cab stand concessions and began to establish their own independent cab stands around the city. Some drivers would “jump the line” or invade another cab company’s stand, resulting in fistfights.
In 1913-14, John (and presumably Fannie) Hertz went to Europe for a few months’ rest. While there, he studied the taxi systems of the major cities. Particularly impressive was the well-organized Paris system, with its courteous drivers and easily recognizable taxis.
Taking what he learned in Paris, the ever-innovative John Hertz changed everything about Walden Shaw Livery’s operations. Reportedly based on a University of Chicago study (unverified by historians), he chose an orangish yellow for his cabs as the color that most stood out in the streets of Chicago. The company adopted the brand name “Yellow Cab.” Hertz paid more to his drivers, allowing him to hire only the best and friendliest ones. The drivers went through intense training, wore uniforms, shined their shoes, and cleaned their cars after every customer. Hertz gave them 20% of the profits of the company and provided the drivers a doctor, dentist, and nurse, as well as legal assistance.
Hertz was always trying new ideas. Unlike other cab companies, his drivers were not allowed to work on their cars. He hired the best people to fix the cars in the company-owned garages. In order to conserve capital, he reached an agreement to lease his tires from Firestone, an arrangement that lasted for decades, saving the cab company time, money, and labor costs.
By 1917, Shaw Livery was building its own cabs and operating Yellow Cabs. Profits that year were $176,000. A key competitor arose in Checker Cabs, a loose association of independent drivers formed in 1919. Both Yellow and Checker cabs were easily identified from a distance.
In 1921, Shaw and Hertz created a separate company, the Yellow Cab Manufacturing Company to make taxicabs, trucks, buses, and (unsuccessfully) passenger cars. As most cars were not durable enough for the hours and miles demanded by taxis, sales to other cab companies grew. The company also helped independent operators set up Yellow Cab companies in cities across America. The manufacturing company was an immediate success, its stock rising on the stock market. Public Service of New Jersey ordered 500 buses for $5 million, Philadelphia Rapid Transit bought 579 for $6.5 million, and another 590 were purchased by city bus lines in Chicago, New York, and St. Louis (which John Hertz acquired over time).
Yet another area where John Hertz led the way the idea of stoplights to speed city traffic. In 1923, he paid for a series of controlled lights along South Michigan Boulevard in Chicago. He let the city have the system for free for two years to test it, after which the city could either buy the system or stop using it.
Also in 1923, John Hertz saw yet another opportunity and bought the five-year-old Jacobs DriveUrSelf Company from founder Walter Jacobs. Hertz renamed the business Hertz DriveUrSelf. Fleets of cars were made available at railroad stations for customers to drive themselves. This company went on to become America’s leading car rental organizations for decades. (More on that business later.)
In the early 1920s, outright war broke out in the streets of Chicago. Checker cabs drove by the Yellow garages, firing guns into them. Yellow drivers responded in kind. Some drivers were members of the Teamsters Union, others were non-union. Cabs would drive “the enemy” off the road. A few drivers were killed by gunfire.
In 1925, the Yellow Cab Manufacturing Company merged with General Motors’ truck making operations, with GM in control of the company but sharing ownership with outside shareholders until 1943. The company was called Yellow Truck & Coach Company, developed the “GMC” brand, and became the nation’s largest maker of city and interurban (i.e., Greyhound) buses. General Motors also took over the Hertz car rental business. John Hertz reportedly received as much as $40,000,000 for his share of the company (about $600 million in 2021 dollars). From the proceeds, he gave out $250,000 in cash to long-time Yellow Cab employees.
The Yellow Cab operating company, with 2,700 cabs in Chicago in 1925, was the largest cab company in the world. The company employed as many as 6,000 drivers. It remained under Shaw and Hertz after the sale of the manufacturing business to General Motors.
John Hertz was thus a very rich man, able to indulge his and Fannie’s love of racehorses. John Hertz reportedly turned down a buyer who offered a million dollars for Reigh Count, winner of the 1928 Kentucky Derby.
By the late 1920s, drivers were bombing the garages of their competitors. The violence extended to the Hertz family. The Associated Press reported, “CHICAGO, Ill., Oct. 17, 1928 (AP)—John Hertz, president of the Yellow Cab Company, reported to police today that his life had been threatened and that he had been warned his grandchild would be kidnapped. Two weeks ago Yellow Cab garages were bombed and racing stables of Hertz were burned, destroying 31 thoroughbred racehorses at a loss of $200,000. The trouble was described as outgrowth of a taxi war after a Checker driver was shot and killed.”
New Horizons
John Hertz, now forty-nine-years old, had had enough of the cab business, selling out all his interests in the industry in 1929. Hertz sold the Chicago Yellow Cab company to entrepreneur Morris Markin, who owned the Checker Cab Company and merged the two operations. Markin went on to build large, sturdy Checker cabs and Checker Marathon passenger cars for many years in Kalamazoo, Michigan.
But John Hertz still liked the transportation business, having created the Omnibus Corporation to control major city bus operations in Chicago and New York (through the Fifth Avenue Coach Company in that city). Omnibus also bought the city bus system in St. Louis. More cities moved from building streetcar systems, with their expensive construction costs and inflexible routings, to motor coaches, which were cheaper and more flexible.
As the Great Depression hit, Wall Street firms struggled. The prestigious Lehman Brothers investment bank needed cash. “Bobbie” Lehman, who inherited control from his father, asked the cash-rich John Hertz, who he had met in the horse racing world, to join the firm. In 1933, Hertz bought 8% of Lehman Brothers, the largest share ever sold to anyone outside the Lehman family until that time.
In this new role, Hertz was a key player in many big investment deals. When Paramount Pictures went bankrupt due to too much debt, Hertz was briefly made finance chairman of the company, engineering its turnaround. He also played a key role when Transcontinental & Western Air (TWA) was sold by General Motors.
John and Fannie Hertz had three children. Their son John, Jr., was married to actress Myrna Loy from 1942 to 1944.
As they aged, John and Fannie Hertz continued to be important in the world of horse racing. In 1943, their horse Count Fleet had an undefeated season, winning the Kentucky Derby, Preakness Stakes, and Belmont Stakes, known as the Triple Crown of horse racing.
Even at seventy-four years of age, John Hertz did not tire of business. In 1953, his Omnibus Corporation repurchased Hertz Rentacar from General Motors for $10.8 million. Omnibus then sold its bus operating companies to local city governments in Chicago and New York. In 1954 Omnibus was renamed the Hertz Corporation and listed on the New York Stock Exchange.
John Hertz then finally retired. In 1957, he and Fannie set up the Hertz Foundation, which continues today. John Hertz died in 1961.
Hertz after Hertz
John Hertz’s rentacar company has had a history almost as complex as Hertz’s life itself. In 1967, the company was purchased by consumer electronics leader RCA when that company decided to become a conglomerate, consisting of unrelated businesses.
In 1985, the head of Westin hotels decided to put together a travel supercompany. Under the corporate name Allegis, he merged Westin Hotels, United Airlines, and Hertz. That entity did not last long, and in 1987 Hertz management and the Ford Motor Company acquired Hertz for $1.6 billion. Volvo also later invested in Hertz. Thus, Hertz had been owned by both General Motors and Ford, successively providing them with a captive customer for fleet sales.
In 1994, Ford bought out the other owners of Hertz, and in 1997 spun Hertz out as a separate, public company.
While Hertz maintained its leadership in airport car rentals, insurance-replacement-car renter Enterprise became the largest company in the overall car rental industry.
By 2005, Hertz had 7,400 agencies in 150 countries. A group of private equity firms acquired the business from Ford in a $15 billion deal, including the assumption of Hertz’s debt. The next year, Hertz again went public.
In 2012, Hertz acquired competitors Dollar and Thrifty. The company’s global car fleet reached 400,000 cars.
The Covid pandemic crushed the travel industry. In June 2020, Hertz declared bankruptcy, but was able to arrange new financing and again become a public company in 2021. In 2021, Hertz announced plans to buy 100,000 Tesla cars to keep up with changing times.
Final Words
John Hertz had a remarkable career. He literally started with nothing. He used his wits and connections to build successive major businesses. He innovated in cabs, in car rental, in manufacturing, even in stoplights. Never resting, he became one of the most respected breeders of thoroughbred horses. Today, Yellow cabs and Hertz rental cars are known in cities around the globe, both using the original orange-yellow color. Yet few know the story behind these interesting companies, and the man who created them.
Gary Hoover
Executive Director
American Business History Center
