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The pressure of the work in Guatemala did not allow him to accept Prof. Sáenz's invitation at that time. Thereafter, Townsend became ill with tuberculosis and was forced to return to California. But as his health improved, he made plans for further work in Latin America. He went to Mexico to survey the possibilities for undertaking the program that Prof. Sáenz had proposed. He was convinced, however, that one man by himself could make little headway among Mexico's 50 minority language groups. (It is now known that the 20 language families of Mexico may actually include 150–200 language variants.) Despite the Great Depression in the United States Townsend dared start a training school to recruit and prepare young men and women to work with him. Accordingly, the summer of 1934 found him, along with a Cakchiquel lad and three students, in an abandoned farmhouse near Sulphur Springs, Arkansas: this was the first session of the Summer Institute of Linguistics! The students received experience in primitive living and learned to survive in the outback of the Ozarks. They sat on donated nail kegs. Their linguistic theory was derived from Townsend's work on the Cakchiquel language and the Cakchiquel young man was an invaluable asset for putting theory into practice.
As noted, three students attended the first session; the next year five came. That year there were classes in phonetics to teach techniques for recognizing and writing previously unknown sounds and for devising alphabets that would accurately reflect the sound system of the language being studied and as far as possible resemble the national orthography. American Indian language structures were contrasted with those of Indo-European languages. Townsend's Psychophonemic Method of teaching reading was formalized. A sympathetic understanding of minority peoples and cultures was stressed.