The driving forces behind Mr. Price's next investment emphasis on small growth stocks would be the accelerating growth of government spending for defense research and development, particularly for manned space exploration. Just as the strong growth in the consumer‐led economy of the 1950s drove many of the large growth companies in the Growth Stock Fund, defense spending and the new space program would propel the stocks of these small technology companies.

The year 1960 was a good one for Mr. Price, the firm, and much of the country. The earliest members of the Baby Boom generation were no longer babies. They were beginning to enter their teenage years with all of its questions and questioning, seeking answers from an older generation that had survived the Depression and a world war.

In the last years of his term in office, President Eisenhower had begun to seem to some a bit grandfatherly. The communist threat was very real. To a great extent, the Cold War had become a war of technologies. In 1945 America was the only owner of an atomic bomb. Just as the Russians caught up with an atomic bomb of their own, the U.S. exploded the hydrogen bomb on November 1, 1952, vaporizing a portion of the Enewetak Atoll. This new weapon had a force of more than 10 megatons, almost 500 times more powerful than the atomic bomb dropped on Nagasaki. By the 1970s, the U.S. would know how to miniaturize these huge bombs so that they could be placed on the nose of an intercontinental missile. The Russians would continue to match U.S. developments in the science of mass destruction throughout these 10 years, lagging only a few years behind.

In 1957, the Russians leapfrogged ahead of the U.S. in a different sphere of this technology competition by launching Sputnik. A 23‐inch polished sphere that rotated around the world in an elliptical orbit, it broadcast ominous radio pulses, which sounded like loud clicks to the global audience that listened on radios, eyes turned skyward.

All of a sudden, America was no longer the technology leader of the world. Its Cold War archenemy had beat it to the next scientific level. The military potential could be easily imagined as Sputnik clicked its way overhead. Historically, the advantage in battle had always gone to the army higher up on the hill. Not only did the first two U.S. launches in response fail completely, but on November 21, 1960, after John F. Kennedy's election as president, the National Aeronautics and Space Administration (NASA), established in 1958, attempted to celebrate the new young, forward‐looking administration by launching a satellite before a large crowd of reporters. It ended up sitting awkwardly on its launch pad after its launch rocket had fizzed out all of its fuel. To add to the picture, its rescue parachute had deployed ingloriously around its lifeless form. On April 12, 1961, only a few months after Kennedy and his family had moved into the White House, the president watched as Russia launched the first manned spaceship into orbit.

A month later, America seemed to catch up by sending astronaut Alan Shepard into space in the Freedom 7 capsule. It was nowhere near as big or as complex as the Russian rocket, but America felt like it was back into the new space race, with their new president at the controls. The technology race of the 1950s was back in full force, as both nations pointed toward the moon, with Kennedy's 1961 challenge to have the U.S. be the first to the moon.

The production of consumer goods still dominated the economy in 1962, but continued spending on defense and the rapid escalation of outlays for space assured that there would be a strong scientific overlay to the economy in coming decades. The nation's GDP had risen 51 percent in the 1950s and, due to increased government spending, would rise slightly faster in the 1960s at 56 percent.

The publicity for T. Rowe Price and Associates was in effect taken over by the reporters at many financial newspapers and magazines, who were impressed by the firm's performance. In contrast to its relative lack of publicity in the 1950s, the firm and the T. Rowe Price Growth Stock Fund got full credit in the press for outperforming all other U.S. equity mutual funds, according to Wiesenberger, with an objective of capital growth and, secondarily, income for its first ten years, as discussed earlier.

There was no need for Mr. Price to write in Barron's about the performance of his model accounts; favorable performance was more believable when publicized by others. It is one thing to have an excellent record of performance based on a family account, even though it was externally audited. It is quite another when this record is printed daily and discussed in the financial pages. Although the Growth Stock Fund began as a way to economically manage the accounts of the children of the firm's clients, its real value became obvious as the publicity surrounding its extraordinary record began to bring in large new investment counsel clients, as well as shareholders.

By early 1961, at the age of 62, Mr. Price had achieved his life's ambition. After twenty‐four years of financial struggle and occasional disappointments, he was now recognized as the country's best investor. Winning such respect was very important for him. Whereas few knew his name when he first published his articles on the Growth Stock Theory in Barron's in 1939, in 1961 every serious investor knew it.

But he was still a relatively young man with other investment theories to put to work. His thoughts began to turn to his next project. The firm was beginning to get too large, and at heart he was a loner. Walter Kidd recalled, “Mr. Price hosted parties basically to satisfy his wife, Eleanor, and he only gave the minimum number that was socially acceptable.” He was never one for much small talk and certainly did not suffer fools kindly. We at the firm noticed that the social interaction that he seemed to enjoy the most was the stimulation of investment ideas, particularly when it was from the junior members of the firm.

Despite being an old‐style gentleman to the core, almost always dressed in a coat and tie, and with a generally smiling exterior, he was known to let a careless waiter know just where he had erred in thirty seconds or less. He gave his best to his work and expected others, in any job, to do the same. The same could occasionally happen to an associate who had spoken badly out of turn. As Walter Kidd said, “We were all just a little bit afraid of him.”

In 1960, Mr. Price formed the Rowe Price Management Company. His initial plan was that this would be a small mutual fund management company designed for his retirement. Managing individual accounts for clients had lost much of its allure. There was too much client interaction involved, with a lot of stress when the market took one of its periodic nosedives. He also grew increasingly uncomfortable as the firm's rapid growth began to cause him to lose control of the company. He intended to pack his own files for Rowe Price Management into several big leather expandable briefcases and take them with him wherever he went. His office would become the Hillsboro Club in Florida for six months in the winter, Eagles Mere in the mountains of Pennsylvania in the summer, and, perhaps, a cruise ship or his garden at other times. For research at Rowe Price Management, he initially expected to use input from analysts on Wall Street, who would be rewarded by commission dollars resulting from stock trades. He also planned to continue to get reports and information from the firm's research analysts, with access to specific analysts as needed.

In 1960, Mr. Price officially started the New Horizons Fund, the first fund launched by his new company. The New Horizons Fund would follow the Growth Stock Theory of Investing, but it would target smaller companies. Size in the investment world is most often described either in terms of sales or the “total market capitalization,” determined by multiplying all of the shares outstanding by the current market price. Smaller companies are typically in the early growth phase of their life cycle, which means they are often growing faster. It is far easier to add $2 million in sales with a new product for a 20‐percent gain when a company's total sales are only $10 million, than to add $10 million for the same percentage growth when sales are $50 million. In addition, just as the risk of death for humans is greatest at the beginning and at the end of life, so it is with corporations. At that time, before the emergence of the venture capital industry, small companies, early in their life cycles, were often run by managements that were untrained and untried, with little access to capital. Their balance sheets were often quite weak.

Based largely on the Growth Stock Fund's well‐advertised performance, money began to pour into the new fund. By year's end, its asset value was more than $6 million. It became rapidly apparent that the New Horizons Fund was not going to remain the small fund that Mr. Price could bundle up and take with him. Nor, he found, could he depend on Wall Street for the quality research in these small companies that he required. Small capitalizations meant fewer dollars of trading volume, with lower commissions, and far fewer interested Wall Street analysts.

I joined the firm in October 1960 as a 27‐year‐old technology analyst. Although I was born in Baltimore, I had grown up in eastern Tennessee and had graduated with a degree from Princeton in electrical engineering in 1956. I had worked in a number of engineering positions at Westinghouse, ultimately as manager of the manufacturing engineering laboratory at the Air Arm Division at the Friendship National Airport (now known as the Baltimore/Washington International Thurgood Marshall Airport). Westinghouse produced advanced airborne avionics. I became a night student, working on a certificate in business management at Johns Hopkins. (The university's part‐time and night programs were then offered by what was known at the time as McCoy College.) I took a course in corporate finance taught by Walter Kidd.

Similar to Mr. Price's experience during his days at DuPont, I had begun to believe that investing in companies was a far more interesting subject than electrical engineering or manufacturing. This was despite the fact that both my father and grandfather had successful careers in manufacturing proprietary products and did not think highly of the financial field as an occupation. Walter Kidd and I had long conversations about the investing business after class. His low‐key sales pitch ultimately developed an interest in me to leave Westinghouse and work for T. Rowe Price and Associates. Walter, conservative by nature, waited until after he had graded my final exam to make an offer. Like Mr. Price, I learned that following your passion created the most satisfying work experiences. Fun and the job become combined, but you have to jump when the opportunity presents itself. I never looked back.

Late in 1961, I introduced Curran (Cub) W. Harvey, Jr., to Mr. Price, with the idea of Cub becoming Rowe Price Management's first full‐time analyst. Cub, born in Baltimore, was then 32, and had earned an engineering degree from Yale. Most of his work experience had been in sales and sales administration at small technology companies. Cub said that during the first part of his employment interview, Mr. Price was a bit stiff and distant. Maybe he was thinking about the New Horizon Fund's poor performance over the past year. Finally, there was a long pause in the somewhat banal conversation about Cub's past responsibilities and ambitions for the future. Cub decided to take the bull by the horns and asked, “Tell me, Mr. Price, what do YOU do?” According to Cub, that stopped him cold. Mr. Price looked at Cub, got a small grin on his face, and they had a fine, open discussion, after which Cub was hired.

John Hannon and a few other T. Rowe Price and Associates analysts were in regular attendance at the investment committee meetings of the New Horizons Fund, along with Cub and Mr. Price. I was honored to be invited to join the committee later in 1961, and ultimately became a vice president of Rowe Price Management. Cub soon became the fund's administrator, as well as its principal analyst; he would later become president. When Mr. Price left for the Hillsboro Club that winter, the fund stayed in Baltimore, although the briefcases flowed back and forth, keeping the express mail service busy.

Today, the national computer exchange known as Nasdaq, maintained by the National Association of Securities Dealers, offers price quotes by market makers trading thousands of stocks. Most trades are now done directly, computer‐to‐computer, without human intervention. In 1960, trading in small companies was much more difficult than in the stocks of large corporations, which were often listed on stock exchanges. The prime source of trading information for small companies was the so‐called “pink sheets” – a listing of market makers on pink‐colored paper, and their respective offers to buy and sell specific stocks was available only to registered brokers, but not to their clients. Small investors could buy and sell, through brokers, small quantities of shares fairly easily with this system, but large institutional investors could not. Transactions involving a large number of shares that weren't done carefully could easily greatly distort these thin markets. To perform the larger trades required an individual who knew his or her way around these markets.

Good research was even more critical in such a world. If a major problem developed in a small company, with such thin trading, it was difficult to extricate oneself without large losses. This type of investing, however, fit well with Mr. Price's long‐term approach of buying slowly at carefully predetermined prices and taking profits in the same manner – very gradually. The success of T. Rowe Price and Associates in the early 1960s was not limited to the Growth Stock Fund and New Horizons. The firm's counseling accounts also performed very well. Soon, managers of some of the largest pension funds in the country were making their way to Baltimore.

Hiring the next generation of professionals at T. Rowe Price and Associates began in earnest with six key hires in counseling and research, made in the first three years of the decade. In order to better serve other new and existing accounts based in New York, in 1962 the firm established an office in Rockefeller Center in the heart of Manhattan. This marked the beginning of the transition of the firm from a local Baltimore company to one with a national and, ultimately, an international footprint.

The firm was also running out of space at 10 Light Street. In 1937, it had begun operations on part of one floor. By 1962, it was occupying three full floors, with additional space on two others. It was getting difficult to operate efficiently with all the necessary “vertical communication,” as everyone began to spend an inordinate amount of time on the elevators. In 1963, the firm moved to One Charles Center, where all the employees once more fit on one floor, at least initially. Mr. Price had to give up his large office, the view of Baltimore's historic Harbor District, and the working fireplace for comfort on cold winter days. It had been his office for twenty‐six years.

One Charles Center's architecture was the opposite of 10 Light Street. A twenty‐three‐story aluminum and glass building designed by Ludwig Mies van der Rohe, it was constructed in 1962, and was the first postwar modern office tower in Baltimore. At the center of the city's nationally acclaimed urban renewal program, the project was spearheaded by Mr. Price's long‐time friend Jeff Miller – also a member of the Growth Stock Fund board and the Greater Baltimore Committee.

The stock markets continued irregularly upward. In December 1961, the New York Stock Exchange hit a new all‐time high of 735. Business was good and Mr. Price remained positive about the economy, but conscious that stocks were selling at very high prices relative to earnings. As prices rose, dividends for growth stocks dropped far under long‐term bonds, which had been a historic measure of overvaluation. In May 1962, this overvaluation was sharply corrected with a stock market decline of nearly 50 percent.

Such a drop may not look like much on a chart, particularly on the typical logarithmic charts, which tend to minimize swings in the market. It was, however, the sharpest decline since the war, and many younger, inexperienced associates, I among them, were caught off‐guard by its severity. It was made worse by the leverage of borrowed money, which many of us employed to leverage our gains. Banks, still remembering the Great Depression, were unforgiving when there was not a healthy cushion between the money the bank was owed and the underlying collateral. Many investors lost much of their capital when their collateral was liquidated near the bottom of the market by their bankers.

Like Mr. Price in 1939, I also nearly lost my house in the bear market. I had collateralized my loan to purchase a new home with stocks instead of paying for an expensive mortgage. Fortunately, I was saved by another bank who saw some possible future in me as a customer and realized that my home, although illiquid, actually also offered good collateral. A valuable learning experience. Even though the decline was over quickly, Mr. Price was seen roaming the halls daily, pausing outside my office and those of other recent hires for a few nervous moments, as if he were having buyer's remorse.

When Russian Premier Nikita Khrushchev felt threatened by ballistic missiles recently placed by the United States in Turkey and Italy, on his doorstep, he began to secretly ship medium‐ and intermediate‐range ballistic missiles to Cuba, which could deliver an atomic warhead anywhere on the East Coast of the United States without warning because of their proximity. When the missiles were detected on October 16, 1962, Kennedy ordered a blockade on October 22 and, in an accompanying speech to the nation, he said that the nation's policy would be “to regard any nuclear missile launched from Cuba against any nation in the Western Hemisphere as an attack on the United States, requiring a full retaliatory response upon the Soviet Union.” The U.S. Armed Forces (with the exception of United States Army Europe [USAREUR]) were ordered to DEFCON 3. On October 24, Strategic Air Command (SAC) was ordered to DEFCON 2, just short of nuclear strike. “I thought it was the last Saturday I would ever see,” recalled U.S. Secretary of Defense Robert McNamara, as quoted by Martin Walker in The Cold War. A similar sense of doom was felt by other key players on both sides. When Khrushchev backed down at the last minute and the missiles on both sides were taken off ready, the market moved up strongly on heavy volume, ending the bear market.

Shortly after what would come to be known as the Cuban Missile Crisis, Mr. Price turned 65 and began to experience health issues. As the firm continued to grow larger, he also began to have disagreements with his associates. He wanted the firm to continue to operate in the same way it had when it was much smaller, although he knew, according to his comments to his journal, that it was impossible for him “to continue working 60–65 weeks.” He was suspicious of many of the changes in the investment process that were being implemented by others. He knew, as well, that he no longer had the energy to run the whole firm. The time was approaching when he would have to yield some of his authority.

In fact, this was already happening. As it grew larger, the firm on its own began to evolve into a committee form of management, just as it had always managed its accounts. Walter moved into an overall administrative role, passing along his position of research head to younger associates. By mid‐1963 there were more than 150 professionals and Mr. Price found, to his dismay, that he didn't know the names of many of his own employees.

He decided that the time had come to take a second step, following the establishment of Rowe Price Management. At the March 29, 1963, board meeting of T. Rowe Price and Associates, Mr. Price stepped down as president of the firm to focus all of his attention on Rowe Price Management. Charlie Shaeffer took his place. He was the obvious choice given his tenure, stock ownership, and success in client management. His outgoing personality and the ease with which he delegated made him easy to work for in a larger company. Walter was not interested in running the firm, and Kirk had no desire to get involved in administration, being much more interested in the investment side of the business.

A major reason for the timing of the management change was Mr. Price's continued frustration with the New Horizons Fund. He felt that he had to devote all of his time to managing it. Although the stock market as a whole was rising, New Horizons was not. Within T. Rowe Price and Associates it became known as the “New Horizontal Fund.” Though the Growth Stock Fund had also gotten off to a slow start, with little or no advance in its first three years, New Horizons was moving even slower. During 1962 the Dow Jones declined 1 percent, but, as noted in its 1962 annual report, the New Horizons fund dropped 29 percent. In mid‐1962, Mr. Price wrote over a thousand words in his journal, recording his impassioned efforts to keep an important client from dropping not only his position in the New Horizons Fund, but in the counsel service as well. The client ultimately reconsidered and kept the firm as his investment counselor, as well as his position in the fund, but it was a close call.

By early 1964, with no progress in the fund's performance, Mr. Price was becoming truly concerned. In his March 31 journal entry, he wrote: “The New Horizons Fund is my greatest disappointment. It seems that everything is working against us. Not only are science and automatic merchandising stocks still in bear markets, but we are stuck with a number of special situations that continue to decline in price…. The research department is uninspiring. I lack confidence in most of the men. But I am unable to determine, now, how much of this pessimism and adverse criticism of associates is due to old age and frustration, and how much is justified. One thing I am sure of – there is too much work to do!” In another notation, he wrote in his journal – as he had earlier, with regard to the Growth Stock Fund – that if its performance did not improve, he would close it at $100 million and create a closed‐end fund.

Vindication finally came in 1965. New Horizons caught up in a hurry, exploding 44 percent for the year compared to a 10‐percent increase in the Dow Jones. The fund had suddenly become an outstanding performer. Many of the young technology stocks became extraordinarily successful. Some retailing and service companies did even better. The fund acquired a position in Wal‐Mart, Inc., when it went public, at an effective cost, after all subsequent stock splits to date, of 8.6 cents per share. After only two years, this holding had risen more than 12 times. It continued to climb many more times in the following decades. Ultimately, T. Rowe Price Associates became one of the largest holders of Walmart, outside of the Walton family. Early investments in Optical Scanning Corporation, Millipore Corporation, H&R Block, Inc., and Eckerd Corporation also helped build the fund's outstanding performance. Large growth stocks were doing well, and once more money began to flood into the firm. In 1965, total assets under management climbed over $1 billion, including Rowe Price Management.

The market for emerging growth stocks ultimately became so heated that on October 17, 1967, the New Horizons Fund suspended sales and remained closed to new investors for nearly three years. Management simply could not find suitable stocks to invest in at reasonable prices. Closing the fund was an unprecedented move in the mutual fund industry at that time. The fees that a mutual fund company receives are based on assets under management. Closing the fund to new sales slows the increase of income to the fund manager. This move, however, simply echoed Mr. Price's belief that if you remained focused on what is best for your client, you will ultimately be rewarded.

The economy continued to do well, as it recovered into the 1960s. President Kennedy in action was more conservative than in his words. He even proposed a tax cut, which would have dropped the top income tax rates from 91 to 65 percent. Many felt that he was beginning to improve America's image in the world. It could have indeed developed into the golden era that some had begun to forecast, with rising income for all, amid a stretching out the boom of the 1950s.

All of this ended with Kennedy's assassination in Dallas. His successor, Lyndon B. Johnson, swung hard to the left with his Great Society programs. This included a sharp boost in government spending for a variety of social causes, including education, welfare, old age, housing, and urban renewal. Mr. Price called it “a continuation of the New Deal.” Johnson also accelerated the NASA space program, further increasing spending on this already large government program.

After Johnson was elected president in 1964, he moved two destroyers into Vietnam's Gulf of Tonkin. The USS Maddox was attacked by three small torpedo‐equipped North Vietnamese patrol boats. It was undamaged but sank one of the North Vietnamese boats; a second controversial attack was reported August 4. These two attacks taken together, however, led to Congress to pass the Bay of Tonkin Resolution, which effectively allowed President Johnson to use military force in Southeast Asia without a formal declaration of war. U.S. military expenditures accelerated over the next three years to $210 billion ($1.57 trillion in 2018 dollars). Propelled by huge spending for both butter and guns, the budget deficit rose to $25 billion ($181 billion in 2018 dollars) in fiscal 1968, the highest peacetime deficit in the country's history at that time.