By Jeremy Coller and Christine Chamberlain

BETTE NESMITH GRAHAM
Born: March 23, 1924, Dallas, Texas
Died: May 12, 1980

In a discovery there must be an element of the accidental, while an invention is purely deductive. Thomas Edison

SCHOOL WAS NOT A GREAT SUCCESS FOR BETTE CLAIRE MCMURRAY. A fractious, strong-willed student, Bette’s teachers may well have breathed a sigh of relief when she finally dropped out of school at seventeen, in the midst of the Second World War.

In spite of the fact that she couldn’t type, Bette managed to land a job as a secretary at a law firm. On a wing and a prayer, they sent her to secretarial school, where she gained her high-school diploma. Within two years, Bette had married Warren Nesmith and they produced a son, Michael.

Warren went off to war and, when he returned, the couple divorced. For the next twenty years, Bette was a single working mother. Bette did quite well, working her way up to a position as executive secretary with Texas Bank & Trust, but her typing skills still left something to be desired. When IBM came out with the new electric typewriter, complete with carbon film ribbon, Bette and a lot of her co-workers found to their dismay that their erasers were leaving large dark smears. When Bette decided to earn a little extra money dressing the bank windows for the holiday, she noticed that when the display artist made a mistake in his lettering, he simply painted it over.

‘I put some tempera waterbased-paint in a bottle,’ she wrote later, ‘took my watercolor brush to the office and used that to correct my typing mistakes.’ Bette used her paint and paintbrush to correct typing mistakes for the next five years.

When Bette’s co-workers asked for bottles of their own, she realised that she might be on to a good thing and decided to take it further. One of her son’s chemistry teachers gave some advice and a local paint manufacturer taught her how to grind and mix pigment. Turning the kitchen into a laboratory and her garage into a factory, Bette scraped together $200 to pay a chemist to develop a fluid with a solvent base to replace her water-based product, thus perfecting a quick-drying solution that was virtually undetectable. Bette’s son Michael and his friends filled literally hundreds and then thousands of bottles with the magic fluid, using squeezable ketchup dispensers. The original name, ‘Mistake Out’, was replaced with ‘Liquid Paper’. In 1956, Bette applied for a trademark. In the ten years it took for Bette’s company to become profitable, she continued to work as a secretary at IBM to make ends meet. Her career came to an abrupt end when she inadvertently typed ‘The Mistake Out Company’ instead of IBM at the bottom of a business letter. She was fired on the spot.

In 1962 Bette married Bob Graham, a salesman who provided the marketing expertise that she needed to convert her invention into a money-making proposition. Soon they had built up a network of dealers and office supply stores. Articles and ads appearing in trade publications boosted sales until, in 1968, Bette’s company was grossing more than $1 million a year. By 1975, Bette employed two hundred people, produced twenty-five million bottles of Liquid Paper annually and distributed her product in thirty-one countries. When Bette Nesmith offered her company to IBM, however, they turned it down.

In 1979, the Gillette Corporation offered Bette $47.5 million for Liquid Paper, which had annual revenues of $38 million. In addition to a lump sum payment, she received royalties on every bottle sold through to the year 2000. Ironically, Gillette bought Liquid Paper primarily for the typewriter ribbon division, believing that correction fluid would cease to be important in the upcoming computer-driven market. What happened was exactly the opposite, and Gillette paid off its investment in three years.

When Bette died in 1980, she left half her fortune to her son, Michael, a member of the pop group The Monkees, and half to her favourite charities. Michael invested some of his inheritance in Pacific Arts Studio, a forerunner of the modern video music production studios.

Jeremy Coller is widely recognised as a pioneer and innovator in the world of private equity. When studying the management of innovation at university 30 years ago he became fascinated by the lives and personalities behind great inventions—which led to the creation of this book. In 2008, London Business School created the Coller Institute of Private Equity, and Manchester University named him its Alumnus of the Year.

Christine Chamberlain divides her time between Maine and London.

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