Founders - #66 Henry Kaiser: Builder in the Modern American West

Episode Date: April 7, 2019

What I learned from reading Henry J. Kaiser: Builder in the Modern American West by Mark Foster. He built giant businesses in roads, bridges, dams, housing, cement, aluminum, chemicals, steel, health care, and tourism. (0:01) starting a joint venture with Howard Hughes (6:40)learning how not to run a business (12:00)how Kaiser was able to start his own business with no money (18:00)I decided to pick one fellow I wanted most to work for and concentrate on him. (23:15)how Henry Kaiser used passion and enthusiasm to start a construction company in Vancouver (30:00)using the leverage that technology provides or how to make big jobs small (44:00)very difficult work + fewer people willing to do it = opportunity (50:40) how Kaiser goes from never building ships to having 200,000 employees building ships (1:00:00), Kaiser promoted himself as an industrialist populist (1:13:00)Kaiser's managerial style (1:15:00) ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

In the 1940s, Henry J. Kaiser was a household name, as familiar then as Warren Buffett and Donald Trump are now. Kaiser rose from lower middle class origins to become an enormously wealthy entrepreneur, building roads, bridges, dams, and housing. He established giant businesses in cement, aluminum, chemicals, steel, healthcare, and tourism. During World War II, his companies built cargo planes and liberty ships. After the war, he manufactured the Kaiser-Fraser automobile.

Along the way, he became a major force in the development of the western United States, including Hawaii. Henry J. Kaiser, builder in the modern American West, is the first biography of this remarkable man. Drawing on a wealth of archival material never before utilized, Mark Foster paints an even-handed portrait of a man of driving ambition and integrity. Perhaps the ultimate can-do capitalist. Okay, so that's from the back cover of the book that I'm going to talk to you about today, which is Henry J. Kaiser, Builder in the Modern American West by Mark S. Foster. So this book was actually printed in 1989. So I found the references to Warren Buffett and

Donald Trump interesting since those are both very well-known people today for vastly different reasons. But before I jump into the book, I want to tell you, I want to read the footnote from another book that led me to discover Henry Kaiser. Even though he was one of the most famous people in the 1930s and 1940s, I had personally never heard of him before. So I was reading the Howard Hughes book, the one I did a podcast on a few weeks ago. It's Howard Hughes, The Private Diaries, Memos, and Letters. And they have this giant footnote on page 136. And it's describing who Henry Kaiser is because he goes to meet Howard Hughes because they went to do a project together.

And let me just read this to you so you understand. I mean, it was just hard for me to fathom how somebody can create over 100 companies like Kaiser did. So it says, Henry Kaiser organized construction companies to build the Hoover Dam, Grand Coulee, and Bonneville Dams, as well as the San Francisco-Oakland Bridge. Okay, that's insane. Just think about the infrastructure that is widely known that his company is responsible for.

It says, during World War II, he ran seven shipyards that used assembly line production to build 1,490 ships for the U.S. By his death in 1967, he had founded over 100 companies. And what I love about the way he names his companies. So he probably created one of the most complex organization structures I've ever seen for any of the entrepreneurs that I've covered on the podcast so far. But his naming of companies was extremely simple. It's his last name followed by what it does. So it's Kaiser Aluminum, Kaiser Gypsum, Kaiser Fraser Automobiles, Kaiser Permanente Hospitals, and the Hawaiian Village Resort, which he sold in 1961 to the Hilton Corporation for $21 million. So he also had, and we'll talk a little bit about some of these companies.

Obviously, I'm not going to cover all 100, but he had Kaiser Broadcasting, Kaiser Construction, Kaiser Paving Company. So let me go ahead and jump into the book because I think it's one of, it is the most informationally dense book that I've covered so far. And it has to be because he had his hands in so many different varying aspects of commerce that it's almost, I would say it's almost unbelievable to me that one person was able to operate companies like this. So we're going to learn about how, you know, how is he able to start so many of these over 100 companies. So I just want to read from the introduction of the book. It says, just who was Henry J. Kaiser, this agonomatic public figure who achieved prominence so suddenly and dramatically that reporters dubbed him the miracle man. To admirers, Kaiser's achievements seemed unprecedented. His business practices, audacious and bold. His relations with others direct and magnanimous. You know the word

I'm trying to pronounce. To critics, Kaiser's triumphs were costly boondoggles. His ethics suspect and his interpersonal dealings furtive and self-serving. The first enterprises bearing Kaiser's names, photography studios, isn't that surprising, appeared on the east coast. When he died in 1967, he controlled a large multinational organization, but his most important works were concentrated in the American West. When Kaiser arrived in Spokane, Washington in 1907, the West was unquestionably ripe for industrialization. Had he not stepped in to play a leading role in this development, others would have. partners helped set the stage for an increased pace of economic development by constructing hundreds of miles of paved roads and pipelines, dozens of bridges and tunnels, and several of the huge dams authorized by the federal government during the depression. From 1939 on, Kaiser entered an ever-widening circle of industries, including cement, magnesium, shipbuilding, steel,

aluminum, housing, building materials, and nuclear power plants. And he's got even more than that. Kaiser achieved his greatest successes later. And this is a really important point, actually, because a lot of people, I feel, like a lot of people that want to start their own companies, you have this like myth of like, you know, if you don't do it when you're young, it's never going to happen for you. Or like, even if you started out young, it's, you're usually you're successful right away. And if not, you're never going to be successful. We obviously know that, you know, that's not true. There's been dozens or more examples on the podcast of people achieving success later in

life. Kaiser is one of these people. It says Kaiser achieved his greatest successes later in life, after his 60th birthday. His ascent was slow and steady for nearly half a century. Okay. So one of the things that made Kaiser extremely, well, the one thing that made Kaiser extremely famous in America was his efforts during World War II to build all these ships. And I'll get into that in a little bit. But another thing that made him, that increased his notoriety is the fact that he did this joint venture with Howard Hughes. And Howard Hughes was probably, arguably, the most famous American at the time. So I just want to read some of the, like the author's basically comparing

and contrasting these two. He says, two of his most remarkable qualities were enthusiasm and perseverance. Now they're talking about Kaiser. Kaiser demonstrated these qualities by working his magic on Howard Hughes. The movie mogul and aircraft designer was only beginning to gain a reputation as an eccentric. And this is a story directly from

the Howard Hughes book I read, which I found fascinating, that Kaiser was, if not anything else, he definitely was relentless and would pursue you. Well, for lack of a better word, he'd pursue you relentlessly. So once he got this idea that, hey, we're going to build the world's, the largest airplanes ever, and I'm going to do it with Howard Hughes because at the time Germans, so Kaiser's building all these boats,

but when they go from the East Coast to help like the British and the Eastern Front of World War II, they're getting sunk by all the german submarines so he's like okay well instead of losing all the ships in the water let's put them on these giant cargo planes and fly them over the atlantic and so he decided to team up with howard to do this so this is he tracks howard down he says hughes was recuperating from an illness at the fairmont hotel in san francisco kaiser bounced into into Hughes' suite and laid out a complete program.

If Hughes designed the prototypes, Kaiser would build the planes. Even Hughes' biographers were impressed by how Kaiser won him over. Kaiser turned on all his considerable charm and powers of persuasion. Against his better judgment and swept up by Kaiser's appeal, Hughes agreed to the collaboration. The episode was vintage Kaiser. Once he made up his mind, he moved quickly and forcefully. Throughout his life, Kaiser dominated men who usually dominated others. Okay, so let me tell you a little bit about his personality and then he has this great quote that I love. He repeatedly stated

that he would best serve mankind by producing more things for more people. Part of one of the reasons he would never stay on one business at a time. Throughout his career, Kaiser stressed that his success was due to his ability to hire men smarter than he was and give them opportunities to grow. Together, they tackled thousands of problems, and this is my favorite Henry Kaiser quote, which Kaiser renamed opportunities in work clothes. That's a great perspective. Okay, so I'm going to tell you a little bit about his early life. So it says, his parents were German immigrants who arrived in central New York

a century after pioneers settled the region. The Kaisers were not risk-takers. They seemed determined to recreate as much of their former lives in Germany as possible. Henry's father bequeathed to his son little beyond good genes. The elder Kaiser lived to be 87, and Henry reached 85. So there's going to be a lot of things in this book that, I mean, it's a shock to me that this guy survived until he was 85. So I think nowadays people understand the importance of taking care of yourself, of trying to eat healthy, make sure you get rest, take care of your body because that affects like the energy levels you have and how you're able to, like

the time and energy you can dedicate to your craft or whatever it is that you're doing. Henry Kaiser didn't abide by that at all. He, for most of his life, he was massively obese. He was six foot. At one time, he weighed 300 pounds. He didn't start losing weight. So he had a series of heart attacks and then he went down to 225, but his doctor still told him he needed to lose more weight. He would chain smoke cigars.

He would work 20 hours a day. He suffered from insomnia. All the descriptions in this book, it's just a miracle that this guy was able to accomplish as much as he did. And not only that, but he didn't really, he was never really incapacitated until only a few months before he died. So I'm definitely not recommending you take that path. But he clearly had some great genetics to be able to, I mean, they were saying like how long, after he died, his friends were like, how long would this guy have lived if he actually didn't abuse his body like this? Okay, so back to his early life. Henry's mother, Mary, provided attention and love, and she helped channel his restless, striving spirit. His mother fueled his driving ambition.

This is a little bit about his father. And his father's name was Frank. He was not much of a businessman, and we're going to see how this affected Henry and maybe influenced him to work extremely, extremely hard. But Frank Kaiser seemed destined for failure. Consciously or otherwise, he tried to recreate his backward-looking German lifestyle in the industrializing region in the United States. And I want to bring up, well, let me read this part first, and you see that Henry basically does the exact opposite of what Frank is doing.

His business methods reflected his peasant roots. Frank made leather boots by hand for local customers. He frequently loaded a large leather bag and hiked eight miles to make deliveries. Even a century ago, such business methods may have appeared primitive to neighbors, let alone to Kaiser's competitors operating large shops and factories nearby. By the 1870s, American shoe manufacturers sold and distributed goods through far more sophisticated delivery networks. Frank Kaiser's lack of success indirectly provided valuable lessons for his son. The laborious hand craftsmanship and the time-consuming deliveries of Frank Kaiser's goods may have unconsciously so strongly impressed young Kaiser that it made him naturally turn to the easier, quicker,

greater measures which have made him America's number one production miracle man. So Frank wanted to reproduce the industry that was of his past, maybe 100 years, even going back further. One thing that really impressed me about Kaiser and something that I think we can all adopt to our own life is Kaiser was fascinated with technology. Now, we're living in the information age, the age of the internet. So this kind of comes naturally to us, right? Technology is just an easier, simple way for us to do more, like a way for us to to to enact leverage in our own lives. That's something that was that was at the core of how Henry Kaiser organized his businesses.

He was obsessed with technology and obsessed with machinery, wearing out machinery and not wearing out workers, which is kind of the opposite. Opposite of what you might think, considering that after his photography business, his first major construction business was paving roads. Okay, but we're not there yet. We're still in his life, his early life. He drops out at 13 and he starts looking for work. And then he's going to learn some early lessons in business here that I think he carries with him throughout his career. A persistent mystery was why he quit looking for work. And then he's going to learn some early lessons in business here that I think he carries with him throughout his career.

A persistent mystery was why he quit school at 13. One well-worn version was that the family income was so low that his mother had to work. His decision to leave school was entirely his own. And this is a direct quote from him. I thought I was ready to lick the world single-handed, so I dropped out. Henry vividly recalled the trauma of his first job search.

He paced up and down a commercial street for hours before summoning the courage to peddle his own services. In later years, he made thousands of sales calls. In all likelihood, none was as difficult as his first. Henry lost count of his inquiries, but recalled that it took three weeks to find a job. His first employer was the J.B. Wells Dry Goods Store. For full-time work, he earned $1.50 per week. Henry's work for J.B. Wells was not glamorous. He was a stockroom and delivery boy.

Other duties, including straightening up the store after harry salesman strewed samples of goods about the counters and showing their wares to extracting and capricious patrons so basically they're pulling all these goods people are going through it they're rifling through it to see if they want if they want it or not and um he this is a really good lesson that that i don't know is it jb wells nope it's a business owner. His name's Ed Wells at the time. So he says, more than 50 years later, Kaiser remembered an early business lesson from the owner, Ed Wells. On one occasion, Henry neglected to return curtains to a shelf after a salesman displayed them. Wells asked why he hadn't put them back. The young clerk replied that there was no need.

Another customer would want to see them and they'd be unfolded again. Wells kindly suggested that he ask his mother not to make his bed because he'd just mess it up again. Henry remembered that the older man taught an unforgettable lesson in orderliness. Despite Henry's contramps with Edwell over the care of curtains, he was soon promoted to sales clerk. Signing up for a correspondence course on salesmanship, Kaiser studied his craft after regular business hours. So this is actually a very common theme before he turns entrepreneur. He's always dedicated to going further above and beyond than anybody else in his position and he's always trying to learn and so he's routinely promoted rather quickly and part of this because he would

take like he just never stood still he always wanted to get better so it says kaiser studied his craft after regular business hours evidently he learned rapidly by 16 he was a traveling salesman for jb wells. Wells. The young man had already learned a good deal about the world of business and had demonstrated persistence by remaining at one job for three years. However, he began to feel restless in his search of bigger things. That trait also never leaves him. So this is him finding his first passion. By 16, Henry was clearly tiring of the dry goods business. He had been fascinated by photography from the age of 12, so he began moonlighting.

He took photographs by flashlight at parties and then developed them at home. Photography became Henry's consuming passion. He quit his job at Wells and worked briefly at two photography stores. By 1899, Henry was deeply involved in what he then believed would be his life's work. So it continues, Henry was not quite ready to become an independent entrepreneur. For about a year, he worked at the Hyatt Photography Studio. Henry quickly mastered the photography business. As a salesman for Hyatt, he traveled extensively, meeting others in the business. In the spring of 1901, he learned of an opportunity to obtain a share of a photography studio. Henry, this is just the beginning of his first business, and it kind of tells you, like, again, he's young. He's 19 years old, and he's like, I'm just going to go up there. I don't have

much to offer, but I'm going to see if I can get a piece of that business. Henry ventured there to look up the owner. He had little to offer except energy and a passion for work. Certainly, he had no capital. Eager to become self-employed, to have a direct financial stake in the business he loved, Kaiser made an irresistible offer to the owner. By 20, Kaiser was launched as a photographic entrepreneur and his break from home was final. So when they talk about that he made, that Henry made an irresistible offer, he said, hey, I'm going to work for no salary, but if I double or triple the business, then I come in

as a full partner. So if your revenue stays the same, you pay me nothing. If I'm able to actually increase and bring in more business and market to more customers, then they bring me on as a partner. So he did that. He was rather successful at it. And so here's a little bit about him expanding the business and then more examples of his extreme levels of resourcefulness. So he said a year after he acquired half of the business, he bought out the other half. With full control, he promptly expanded the scope of his operations. Business may have been good in the north, remember this is Lake Placid, New York, but it was strictly seasonal. So Kaiser followed tourists. Kaiser attempted to establish a chain of retail sales and service stores. He had worked for others, then purchased

his own business and owning several stores and hiring others to run them offer the potential of multiplying profits. So this is another example of something that he's doing at a young age that he continues for his entire life, which is he hires the best people. He delegates to them and then he just moves on and keeps expanding. And he just trusts that I hired you. You're smart enough to know what you're doing. So just make the right decision and only contact me if it's absolutely necessary. Raised in central New York state, he had witnessed firsthand the phenomenally rapid rise of Eastman Kodak and he intended to get in on the ground floor. So I'm eventually going to do a biography on Eastman. I actually have it in my queue.

But what they're talking about here is these stores that he's opening, they're basically like licensed dealers. It's like because Eastman Kodak is becoming extremely popular and people need help developing the film or servicing the cameras. And so when you go back and look at the pictures of Henry's first photography stores, they say like, you know, I don't know if it says Eastman Kodak Service Center, but basically they're co-branding with a much brighter brand, the Eastman Kodak name. So despite its promise, Kaiser discovered that the photography business was no easy road to instant riches.

He strained his limited investment capital. So he's expanding and then when all the people leave Lake Placid, a lot of them go south for the winter. So he goes down and he starts opening these service centers in Florida, in Daytona Beach. And so the problem is, though, they were cyclical. So there would be sometimes it's like if the weather wasn't good, there would be no tourist business. So he had to become more resourceful to stay alive.

So he gets other jobs. So check this idea. I think this is a really good idea. So he gets a job down in Florida during the summer, or excuse me, during the winter as a tour guide. So he says he worked as a guide on a sightseeing boat on the Tomoka River near Daytona Beach. He sold film to the few tourists who showed up and encouraged them to use up at least one roll during the boat ride. As they departed, he collected their film, and at night he developed pictures and placed their prints in their hotel room mailboxes before breakfast the next morning. It was hard work, and Kaiser put in long hours.

So the business was not going to come to him. He had no problem just coming up with unique ideas to drum up the business. Okay. So around this time, he meets the woman that he wants to marry. And so he goes to her father to ask him for permission. And her father's like, I don't know how her father was in the construction business. Okay. And he's like, listen, I don't think photography is very like a lucrative profession. Like you can't marry my daughter. You need to go. If you want my permission to't marry my daughter you need to go if you if you want my permission uh to marry my daughter you need to save a thousand dollars you need to be making 125 per month and you need to have a home for her and and your eventual children so he uh and at the

same time kaiser wasn't really enjoying the photography business anymore because he he looked at it like an artistic endeavor and he didn't like taking direction from people. When they like. He would take unique pictures of them. And they'd ask him to like change it. Or to edit them. So he says you know what. I'm just going to.

I know there's an opportunity in the West. He saved up a little bit of money. And he just takes off West. You know because he grew up his entire life in New York. In New York State. And so he takes off to Spokane, Washington to try to, to like, basically to start his, his path to wealth. Cause that was extremely important to him. Like he wanted to be an entrepreneur. He wanted to run businesses and he wanted to have, like, he wanted

to be wealthy. So he starts over in Spokane, Washington. He arrived, he takes a train out there and he needs to look for a job. And so this is the story of how that happened. Kaiser had trouble getting started. He recounted one of the low points in his own life. A vivid memory was calling on over 100 businesses in Spokane before being hired. This is another good idea that he has. Kaiser recalled changing his thinking from negative to positive. Prospects looked as bleak as possible. One day I stood on a street corner and I decided to pick one fellow I most wanted to work for and concentrate on him. So instead of just doing these half-hearted, like half-assed attempts at getting hired from 100 people, he's going to put his full effort into one job.

And it works. It says his target was McGowan Brothers Hardware. Having chosen his objective, Kaiser gave the owner no rest. Four decades later, James McGowan recalled that the persistent Easterner called on him repeatedly, only to be refused each time. He's very much like the Terminator. He just keeps going and going and going his whole life. His store had just suffered a serious fire, and he had no intention of increasing the payroll. But Kaiser perceived opportunity in the ashes. Several thousand dollars worth of hardware had seemingly been destroyed.

Even if insurance covered the loss, recovery would take months. Kaiser finally persuaded McGowan to let him try to salvage something from the mess. He hired about two dozen women who polished the damaged goods until they looked new or at least sellable. Kaiser proudly told McGowan the job was finished and asked him what he should do next. McGowan promptly hired Kaiser as a clerk at a base salary of $7 per week. He was determined, this is Kaiser, Kaiser was determined to move up quickly. Within weeks, and this is another example of him going above and beyond in the job so he could accelerate his rise.

He says, within weeks, he had memorized the price of every item in the store. Clerks who had worked there for years soon started calling out, Henry, what's the price of this? What's the price of that? McGowan was so impressed that within a couple of months, Henry received a promotion. McGowan stated years later, this is such an interesting. If you think about how far Kaiser came from here, remember he's working, he's making $7 a week to being, you know, unbelievably wealthy in his later life. And this is what McGowan had to say about the young Kaiser. He said, Mr. Kaiser

speedily showed at that time that he was not a $7 a week man man something else that story tells us too is like um okay so he worked really hard um he was relentlessly resourceful he had high levels of perseverance but i think another trait that of his that we can um adapt and use that's very um valuable is speed um he moved and he was able he was willing to identify opportunities, and he moved unbelievably fast. I mean, think about that one story where it's like these guys have been working there for years. What stopped them from memorizing all the prices?

How was he able to do it in just a few months for everything in the hardware store? There's a story later on where he's trying to do this joint venture for an automobile company, which actually winds up failing spectacularly. But the guy that he does a joint venture with, Frazier, was like a lifelong executive in automobile companies

and used to like that slower pace. And so within like eight days of them saying, hey, we want to do this, like the paperwork was filed. Kaiser raised all the money. He was out buying the production facilities. He just moved it spectacularly fast. And here's another example of that. But at the time, he's still working at the hardware store and he's still a young man. It says, one of Kaiser's renowned strengths was an ability to sense opportunities and move quickly. When a large school building project opened south of the city, Kaiser wanted to go after the business. McGowan demurred, telling Kaiser, if they want our hardware, they'll come in. Nobody goes out after orders. There's no way that Kaiser would abide by

that. So Kaiser would not be swayed. He insisted on seeking the order. McGowan told him that he'd have to pay his own expenses, that he was off on a wild goose chase. The admonition fell on deaf ears. As Kaiser was out the door, as soon as he heard something sounding like okay. Two days later, Henry bounced back in with orders for all the hardware equipment for that big job.

And this is an example. So this is how, what I found interesting is like there was no wasted effort uh with kaiser so he would use like one opportunity to like swing to the next opportunity and this is how he learns the construction trade which is you know how he makes a living for the rest of his life and one of the um so he's meeting all these construction companies because he works in a hardware store and they need the wares that he's selling. And so they sell, the McGowan Hardware Company sells a bunch of tools and equipment to this company called Hawkeye. And they were having problems with them.

So McGowan loans Kaiser to Hawkeye for a couple of weeks. And he works so hard that Hawkeye recruits him. So Kaiser never goes back. And then, so he gets an introduction to the construction trained by Hawkeye. And then one of Hawkeye's customers in turn is this JF Hill company, which is a paving company. Remember what I said at the beginning of the podcast that his first construction business was the Kaiser paving company. And so in his work with Hawkeye, he starts dealing with JF Company, and then they recruit him as well. So it says, JF Hill Company, a paving and road contractor with extensive operations in and near Spokane, recruited him. So Kaiser joined Hill in 1911. With Hill, he acquired what he most desired, a wealth of useful experience with the opportunities and hazards challenging general

contractors. So he's basically learning on the job. Kaiser's years with Hills provided critical learning experience. I just want to pause here because remember Kaiser's career, even though he moved quickly, was just a slow, steady progress over a long time to the point where he's fabulously successful by the time he's 60 years old when we start out it's 1899 and he has his first business right he's a young still a young man the what i've just read to you we just covered 12 years excuse me yeah 12 years because now we're in 1911 um okay so the kaiser's years with hill provided a critical learning experience. We know that. Kaiser possessed experience, boundless energy, and optimism.

There were some jobs opening up in British Columbia, and the 32-year-old salesman was ready to strike out on his own. So I just skipped over two parts here that's important to go back for a second. One, he's making $8,000 a year at this time. So keep that in mind. He's about 30 years old, 32 years old, making $8,000 a year. But the Hill Company is doing well, but there's two competing management factions. They have a lot of business in Washington. They also have business in Canada. So he was up in Canada gathering additional contracts for the Hill Company. So they have this war. He winds up getting, basically the company

collapses because of these two warring factions. And since Kaiser was up in British Columbia, he knew there was opportunity for construction. So this is the chance that he's like, okay, well, why don't I use the resources of the company that's closing down and I know like how to do the job like let me just do the job. So this is how Henry Kaiser started a construction company in Vancouver. The year 1914 marked the outbreak of World War I. That same year in Vancouver, British Columbia, Henry Kaiser launched a career in general construction that profoundly changed the Pacific Coast region. Over the next 30 years he constructed dams, laid pipelines, built sand and gravel facilities, dug tunnels, erected jetties, and participated in many other projects. He spent

most of the years between 1914 and 1931 building roads. Again, it's really hard to fathom how this guy, I mean, he did work till he died at 85, but he's already in his 30s. He spends the next, what is that, close to 25 years just doing smaller construction jobs that are paving. I guess I'm making this point because it's always important to continue to develop skills because you never know what those skills are going to take in the future. And more importantly, those skills compound. So he couldn't have gone from, you know, building the Hoover Dam or building Liberty Ships without going through and working this process. Started on a hardware store, then worked for a construction company, then worked for a road paving company, then started his own road paving company, then kind of spread out from there.

And then, like I said, he had no wasted energy. So then once you learn construction, you realize, oh, there's all these materials that people in construction need, like cement and aluminum. So he starts these massive companies. And the aluminum company actually winds up being the most profitable for all his endeavors. So I just think that what I took away from the story is, like, it's so important to realize that all these experiences you're having in your life, if you don't quit, they'll compound. And that's why I think perseverance is so important for entrepreneurship.

Okay, so it says, Kaiser demonstrated his enormous drive and energy in earlier endeavors. His experience in road building provided many basic business lessons which served him well when he created an industrial empire. So that's kind of what I was just saying. He earned a reputation for completing contracts with remarkable speed. He developed an uncanny skill at coordinating the flow of workers and materials. He also adopted new technology to his construction techniques,

pioneered several inventions, this is his love of technology again, and formed important professional associations. Kaiser always considered the road-building years the bedrock of his maturation as a businessman. I love that. Kaiser was hardly so philosophical after being fired by Hill. He was without income, a wife, and a six-year-old son depended on him. He needed immediate income, but he confronted the dilemma facing all contractors. To make money, one had to spend money first. He confronted three major obstacles. Two of them he could easily surmount.

He had neither an organization nor machinery, but he knew how to acquire them. In Vancouver, he had formed a high regard for a young construction supervisor named Alonzo Ordway. This is important because they wanted to work together for a long time. Henry quickly hired Ord, that's his nickname, and several of his best men. When Hill's subsidiary, Canadian Mineral Rubber Company, went bankrupt following the management shakeup at the parent company, Kaiser knew where to buy cheap equipment.

So he gets started on the cheap, right? He didn't need much machinery. All he needed was shovels, wheelbarrows, and a few horse-drawn scrapers. Now keep in mind, this is 1914. That's how they used to build roads back then. The big hurdle, of course, was capital. By 1914, Kaiser had been negotiating bids for two years.

His skills were highly developed. His problem was gaining access to sufficient funds to accept contracts he won. So he could get the contracts, but he needs to finance them, right? So he's got to solve that problem. And what is his opinion on problems? Problems are just opportunities and work clothes. All right. So he says he possessed little collateral other than three years of construction experience, a willingness to work 20 hour days and unbounded enthusiasm. So I do think there is something, I've talked about this before, but I do think like there is like these human elements that we can't really put a price on, but are extremely valuable. And I think enthusiasm and passion are easily understood by everybody because it's like a fundamental human trait. And I think even though they're an abstraction, they have very real concrete value and especially for somebody like a young henry kaiser like it

leads him to being able to start his company the fact that you can speak to this guy and he clearly is enthusiastic about what he's doing and passionate and that passion um leads him to getting the money he needs and it comes from one meeting with the bank president so i think this is extremely important part he gained an interview with the branch president. This is some bank in Vancouver. He outlined, so he meets, sorry, this is a summary of the meeting. He outlined his plans and asked for $25,000. The astonished banker sat silently for a few moments, then leaned over his desk and said, you mean to sit there and inform me, young man You want me to loan you $25,000 And you don't even have a company

You don't have any equipment You don't even have any men All you have is a contract and an idea that you think might work And it might make a profit And you want me, on that sort of a basis, to loan you this sum of money Kaiser looked the president straight in the eye and replied Yes, that's what I'm here for. The banker said nothing for several more moments, then reached for a pad of paper and wrote a brief

note. He told Kaiser, go down and hand this to the head cashier. The contractor stumbled out of the room thinking the note might instruct the cashier to throw him out of the building. Instead, it stated, honor Henry J. Kaiser's signature for $25,000. This may have been the most important loan he ever received. Kaiser was in business. And that's just another fundamental aspect of human nature that we're not rational creatures. We're rationalizing creatures. We rationalize our behavior and our decisions after the fact. And so I don't know if it's in your personality or not, but I think it's in everybody's personality. If you're interested in what you're working on,

but if you can develop a way to express your passion and enthusiasm to other humans that can help you in your endeavor, I think it's critical skills we just saw in Kaiser's own life story. Okay, so this is just two more good ideas. This guy has tons of them, but here's two of them. Kaiser went to unusual lengths to develop a reputation for quality work. When bidding on a contract, he persuaded city council members to visit a previous job. To their amazement, he revealed sections that had washed into the gutter and asked for their suggestion for improving work

on future contracts. Kaiser's actions impressed the politicians. So he just fundamentally understood humans that, hey, I need these guys. These are the people that decide if I get my money or not, right? And I could just go there and say, hey, I'm the best road paver in British Columbia. I could say I have 10 years of experience, et cetera, et cetera. Or he could say, hey, this is some of my work. This is the parts of my work that I think could be better. You have a lot of experience with this because you approve all these bids. What can you teach me that can make me better? You're involving that person in, like you're showing to that

person, one, that you want to improve, but two, you're involving that person in the actual outcome saying, hey, I value your opinion. People love when you say that to them. And so it increases their likelihood that they're going to approve you for their job. And when you compare and contrast that to the dozens or hundreds of other bids that they get, most people are not going to do that. So that's one good idea. The second was something we talk about a lot, like the importance of being frugal. And I don't think Kaiser was frugal, but he did watch costs because he had to.

He says Kaiser was fascinated with new methods and searched tirelessly for ways to trim costs. That's just another way to say that he was a technologist. Okay, so this is an example of, you know, Kaiser just wouldn't quit ever. And an example of the power of long-term thinking, even in hard times. And when I read this section, it made me think of one of my favorite Steve Jobs quotes was, I'm just going to read this quote from Steve Jobs to you. I'm convinced that about half of what separates the successful entrepreneurs from the unsuccessful ones is pure perseverance. So here's an example of that.

The World War I years and those immediately following were rough financially. Kaiser did a large volume of business, but earnings were low. So there's not that much money in paving roads. World War I brought rampant inflation. Costs doubled between 1914 and 1920. He remembered, this is a quote from him, although I raised my bids trying to anticipate the costs, the constantly increasing wages and the prices of materials, I never quite caught up with the soaring costs. The result was that for five years, I made no money. Even in slack periods, Kaiser demonstrated loyalty to key associates by retaining them when jobs were scarce. In return, he attracted men who reciprocated his loyalty and stayed with him for decades. So it's extremely easy to think for

the long term when you're making a ton of money, when things are going well. But Kaiser understood that, hey, these people are valuable, that it costs a lot of money to find talent and to train them, and it takes a lot of time. So if I keep turning over my labor force, it's actually going to cost me longer. It's going to cost me more in the long run. He's saying, no, no, I'm going to take care of you guys. Even if I don't make any money or if I'm not making a lot, no, I'm going to take care of you guys. I'm going to, even if I don't make any money or if I'm not like making a lot of money, I'm going to keep you around. Even though, you know, most construction jobs are cyclical. They go up and down, up and down. And as a result, like he's demonstrating the, like he knew that his troubles, the trials and tribulations he's going through right now, it's temporary. He had a fundamental belief in Henry

J. Kaiser. So so he knew i was like i'll figure this out well this will lead to bigger and better opportunities just like it always has throughout my life i just need to get through this rough patch that trait is really really rare and if we can adapt that um extremely extremely valuable um oh my goodness look at all these notes that i left on the next page. Okay, so he gets through this rough period, because remember, World War I, eventually is going to end, it's going to end in 1918. And there's going to be a boom in road building. And it's caused by one of, it's amazing to me how the deeper we go into these podcasts, how all these stories kind of link together. So this is because of the innovation of Henry Ford, the fortunes of Henry Kaiser are lifted.

And I want to read you another quote in one second. But first, let me describe the opportunity for you. It says, by 1920, opportunities in road building were virtually unlimited. Ever cheaper Model T Fords rolled off assembly lines in record numbers. The public developed an insatiable appetite for highway travel. Governments of various levels quickly increased funding for new and improved roads. This created a contractor's dream. So think about it.

He's toiling around in paving roads for a good six to seven years before this period happens. So it's perseverance paying, like paying off. But with that, I thought of something. So do you remember the founders I did, founders number 50 on Marc Andreessen? It was on Marc's blog that was turned into an ebook. And he said something about like, what is, what correlates, like, what is his opinion about what correlates most to entrepreneurial success? And I found it fascinating. So I'm going to read from that book. And this is him saying, he's like, what correlates the most to success, team, product, or market?

I'll assert that market is the most important. In a great market, the market pulls product out of the startup. The market needs to be fulfilled, and the market will be fulfilled by the first viable product that comes along. So that's kind of describing this phenomenon that's happening over 100 years ago or about 100 years ago. The roads were going to be built. People clearly wanted their own cars.

They didn't want to ride them on dirt roads or through grass. and it was whether or not you would be in the position to fulfill this giant government demand for increased funding for new and improved roads. Well, guess who's been in this industry for six or seven or eight years up until that point. So I really appreciate Mark Andreessen's point here that the market will be fulfilled. So fulfill it. And this is another example of more relentless resourcefulness. So this is Kaiser. Now he's traveling all over the country trying to win these bids to increase his paving company. And he's with that guy, Ord, that he hired back in the day. And there are two men are, I love this part. It says, the two men caught a train to San Francisco, which passed through Redding, California.

Once aboard, they learned that it did not stop at Redding, but it slowed down just enough for the engineer to grab a satchel of orders from a pole, but they needed to get to Redding. They're on a train, but it's not going to stop. So Kaiser decided that they'd jump off the train, which is still moving about 30 miles an hour. Kaiser leaped off, became a human bowling ball and wound up other under another clump of trees their suits were torn hands and knees badly skinned but the two men patched themselves up

visited the job site and figured their bid they submitted the bid and won a five hundred thousand dollar job oh man if you could see my face i just have a big smile and that's that's just hilarious and figured their bid. They submitted the bid and won a $500,000 job. Oh, man. If you could see my face, I just have a big smile on. That's just hilarious. And this is just an example of Kaiser using the leverage that technology provides, and I just absolutely love this thinking. Throughout his life, Kaiser was fascinated with new technology,

and he constantly tried to speed up work and make it less physically demanding. He had observed that pushing old-fashioned wheel barrels with iron trim wheels through muddy or rocky ground was very tiring he equipped wheel barrels with rubber tires and used ball bearings to lessen friction between the wheel and axle kaiser experimented with caterpillar tractors they pulled five scrapers while horses were limited to one remember he's still doing paving roads at this time. So instead of doing horses, they can only pull one scraper. He found, I can do five times the output with new technology.

Simple adjustments in equipment save much needless effort and reduce careless errors and accidents caused by fatigue. He learned quickly that wasted time was a big money eater in construction. Devices facilitating work and enhancing speed often made the difference between profit and loss. Kaiser was the first contractor I'd ever met who didn't look upon my machines as trick instruments to do small jobs faster.

This is the guy that invented the caterpillar that's talking. So he says, he was the first contractor I met who didn't look upon my machines as trick instruments to do small jobs faster. He saw them as instruments to make big jobs small. That is such an important distinction. So these are not trick machines to make small jobs faster, but big jobs smaller. That's amazing.

Oh, so I was just mentioning this, but I have a note on this page that says the benefit of not quitting future opportunities compound. Kaiser had no inkling then in the late 1920s that he was about to start his final road project, but it was to be a major challenge. From the time Kaiser began paving operations until 1927, his contracts totaled about $8 million.

So his entire, from 1914 to 1927, thereabouts, all of his work was $8 million. That would soon change. Warren Brothers, who he knew, landed a juicy contract for a 750-mile highway construction job in Cuba. The firm would build the central highway, which traverses the length of the island. In March 1927, Ralph Warren, one of the Warren Brothers, offered Kaiser a major subcontract for 200 miles of road and about 500 small bridges. The size of the job, almost $20 million, clearly represented Kaiser's greatest opportunity yet.

So this is just two really important points that I know I'm going to repeat myself, but they're really important for us to internalize. One, don't quit because future opportunities compound. Okay. He spent 14, was that a 13 years and he made $8 million in total contracts, right? And he's got that experience led him to one job that'll pay his firm 20 million. So more way, almost double than what he did in 13 or 14 years in one job. And the second part about persevering, Kaiser was 45 years old when this was happening. He had already been an entrepreneur for 13 years. So that's the benefit of not quitting.

And most humans quit. So just the act of not quitting gives you an advantage over other people. Okay, so this is how Kaiser, how the Great Depression affected companies like Kaiser's, and this is how he gets into dams, which again, the Hoover Dam is one of the most famous structures in the world. Kaiser being one of the people building it becomes extremely well-known, and this opens up other opportunities. So this is a very real concern before he gets there,

though. A very real concern was the survival of his companies. As the Cuba job near completion, So it says, one of the first casualties of these economic constrictions that happen all the time. It says, road-building contracts were canceled or reduced in size. Government agencies cut back wherever they could. They'd order cheaper materials, and they delayed payments. Private clients defaulted in frightening numbers. So did a few city and local governments. Contractors held large inventories of machines, materials, and other tangible assets. Bankers, desperate for cash themselves, hounded them for payments on loans.

So in this rough economic climate, it's going very bad for his company, they start doing, the United States does all these huge infrastructure projects, and one of them being the Hoover Dam. So Kaiser's like, damn, I need to, damn, pardon the pun, I need to get this damn job. And this is really important. So he says, nobody worked harder studying the Hoover Dam job than Kaiser. In the weeks before bids were submitted, his frantic dashes between company headquarters in Oakland and the remote dam site became the stuff of company lore. Kaiser would work a full day, then pile into his yellow automobile at 5 p.m. and drive all night at 70 miles an hour. Definitely don't recommend doing that. After an hour or two of napping in

the front seat of his car, he was a bright-eyed inquisitive visitor wanting to study every crack in the canyon walls. By the spring of 1931, Kaiser probably knew the canyon better than anyone else besides the superintendent on the job, this guy named Frank. So that one paragraph reminded me of, I watched this great, I took notes on this great talk by this guy named Bill Gurley,

and it's called Running Down a Dream. It's on YouTube. I'd recommend watching. It's amazing. But he says something in there. I'm just going to read you one of a Dream. It's on YouTube. I'd recommend watching. It's amazing. But he says something in there. I'm just going to read you one of my notes. It says, the good news.

If you're going to research something, the information is freely available on the internet. So he talks about like doing professional research, making sure you're the most knowledgeable in whatever field you're going into because that's different from skill and talent. You could just literally collect more information to other people and that gives you an advantage. You don't have to be more skilled and more talented. But he says the bad news,

you have zero excuse for not being the most knowledgeable person in any subject you want. And so Kaiser is kind of demonstrating that. It was so important to the viability of his company that I'm going to go there, I'm not going to sleep, I'm going to go there and I'm going to just outstudy you. And that improves my chances of getting the bid. And of course, he joins this joint venture called the Six Companies, and they get the bid. And then the next part, a few paragraphs later, is really important because the Northern Life myself is very difficult work,

plus less people willing to do it equals opportunity. It says few contractors ever began jobs under less favorable circumstances. The work site, this is where they're building the Hoover Dam, was one of the least hospitable locations on the planet. Daytime temperatures in the canyon often reached 120, even 130 degrees during summers, which stretched endlessly from May through September. Although winters were short, temperatures dropped to 20 degrees and winds created uncomfortably chilly conditions. Moderate weather was infrequent. Since the dam site was remote from transportation networks, urban areas, and sources of power, virtually all supplies for maintenance of a large workforce had to be hauled in over long distances at great expense. So a huge part of Kaiser's

career was dealing like he worked heavily with the government so this is not like a consumer product book that's not what we're learning about right so he had to develop a different set of skills and he was extremely adaptable to his situation and he really understood what actually people care about and this is a good quick story that illustrates both those traits as work began in the spring of 1931 six companies that's the the joint venture that he's that's building the hoover dam that he's part of named kaiser their point man in washington among many pivotal events in his career, this seemingly casual decision was one of the most critical.

From that point forward, Kaiser became increasingly immersed in political and bureaucratic machinations in the nation's capital. His constant attention to opportunities for government contracts and his intimate knowledge of operations of Congress and bureaucrats helped him initiate

many important ventures. Okay, so that's fine. How did he apply that? This is his application to that. They were really slow on, like some of the bureaucrats were threatening to withhold funds after they had already started working on the dam.

And he realizes like if I frame that in just what my company will lose, Congress doesn't give a damn. But if I say, hey, it's gonna lead to massive unemployment by your constituents, they give a damn. So he says, Kaiser claimed that if the $7 million was not immediately forthcoming, six companies would lose $6 million by failing to meet deadlines. To members of Congress, unmoved by the prospect of business losses, meaning why would they care? This is still true to this day. Kaiser provided a more persuasive consideration. This is what I mean about him knowing people.

He knows how to persuade them. If six companies closed down, 3,000 workers would lose their jobs, and 7,000 dependents would be destitute. And the end result, they release the money. In addition to the Hoover Dam, he builds the Grand Coulee Dam, and this is some lessons from the Grand Coulee Dam that's going to be used in the future. Even to experienced construction men, Grand Coulee represented one of the most challenging building tasks yet undertaken. It was larger than the Hoover Dam or any single structure ever built. The Grand Coulee job began in 1938 and finished in 1942,

marked a significant transition in Kaiser's career. It was his last major construction contract before becoming heavily involved in manufacturing and the production of building materials. That's what I was mentioning earlier, realizing, hey, like I need cement, I need aluminum, I need all these minerals and things. Why don't I start producing them?

Because other construction men need that too. There were key developments within the Kaiser organization at Grand Coulee. Perhaps the most significant was experimentation with what became the Kaiser Health Plan under Dr. Sidney Garfield. So Dr. Sidney Garfield is his co-founder for Kaiser Permanente, which still exists today. And I actually went and looked up. And last year, they had revenues of like $80 billion. So it's probably his most significant achievement, even though he's more well-known for the infrastructure he built. And weirdly enough, the book only dedicates about 30 pages to it.

I did find a biography of his co-founder so i think in the future i think it's it's such an interesting and like i know so little about health care that it may become a dedicated founders episode depending on um on the book um but anyways it's like the the beginning of what in the united states we have these hmos like one of the first ones was this kaiser health plan soon to be known as kaiser permanente okay says uh henry and edgar kaiser that's his son also gained valuable experience with labor unions which benefited them in later years another important development at grand coulee was that kaiser and his top men established a highly successful strategy of cutting the dam in half with two crews competing for the lion's share of the work.

This tactic was to yield spectacular results in shipbuilding and other corporate endeavors. See what I mean about he never wastes any opportunity? He's like, oh, I learned something. Let me apply it to a different domain. There might appear to be a cyclical pattern in the outcomes of job bids, each success followed by a failure and vice versa. But this would be highly misleading perception.

Smaller jobs were extremely competitive. In some cases, a dozen or more bids might be submitted. Kaiser and his men by no means ignored smaller projects, and they lost more bids than they won. Still, by the late 1930s, big jobs were their primary target. So the harder something is, the less competition you have for it. It's like a counterintuitive thing that the harder something is, the easier it is to do because you have no other people doing it. So think about like SpaceX.

It's just insane. In 2003, you're going to start a private rocket company. But so yes, it's hard. It's insane. But what happens, you can, you have, you can accumulate the best talent in the world because those other, they have, there's no other private rocket company. So people that have been obsessed with rocket science their whole lives, engineers and otherwise, are going to flock to that opportunity. So that little paragraph I just read you is just like, yeah, it's not that they ignored the smaller bids, but they realized that if they just went after the bigger bids, one, it's much more money, and two, much less competition because people didn't have the organizational infrastructure to actually compete and actually do these jobs. Because in many cases, the Cooley Dam is the largest structure ever built in the world at the time. So there's no experts in that domain if it's never been done before.

So he also loses bids though. He loses his one bid for the Shasta Dam, which I've never even heard of. And this is an example of him turning a loss into an opportunity. Failure to win the Shasta Dam contract

indirectly led Kaiser into manufacturing durable goods. By 1939, Kaiser had spent a quarter of a century in construction. His men had used millions of barrels of cement. Never at ease, when subject to the whims of others, I feel the same way, particularly delivery of a critical commodity, Kaiser had considered entering the cement business. So he's like, hey, I want to control, I want to have this, like if I'm going to do construction,

like I don't want, and he had all kinds of issues with unions and all kinds of, and monopolists in this day and age, where they would make procuring the necessary materials for the job like really hard or really expensive. And he just got sick of it. So I was like, why don't I just do this?

Okay, so now um like i said before this is the most informational dense book i've ever come across so far for founders because he's just he's involved in so many things so i'm going to skip a bunch of um i just fast forward ahead because i need to get into how kaiser got into shipbuilding and it just boggles my mind how large his companies got like what i'm about to you, this one company eventually grows to 200,000 employees alone. And that's just like one part of his business empire. It says, testifying before a Senate subcommittee in the summer of 1942,

Kaiser was asked by Senator Harry Truman, soon to be president, if he'd ever be involved in shipbuilding before 1940. Kaiser replied, no, I had never even seen a ship launched. The magnitude of Kaiser's feats in shipbuilding after 1940 Simply dwarfed what transpired earlier By 1938 Kaiser was working closely with this guy His name is Roscoe Jim Lamont

Who was organizing the Seattle Tacoma Shipbuilding Company Kaiser's employees constructed shipways for Lamont's company, and he sensed enormous opportunities. So remember, he was working in the hardware store. Then the hardware store company hired him, and then that company was working with another company, and that company hired him. He always paid attention to opportunities. He's building stuff for shipbuilding companies. i could do that too i love the the confidence this guy has or had um okay so in the late 1930s shipbuilding was still in the doldrums after the world war one boom many large shipyards had suspended all or most of their operations however the merchant marine act of 1936

authorized adding uh 500 additional merchant men over 10 years. So there's just another like government funding here. Six companies joined the Seattle Tacoma Shipbuilding Corporation on a 50-50 basis and won a $9 million contract. So again, just like there was a road paving boom that he rode 15 years earlier, 20 years earlier, whatever that time frame was, now he's riding the ship shipbuilding boom. And that's how you get from never being involved in the industry to few years later having 200,000 employees in the industry. Okay, so this, what's this guy's name? It's called Todd Shipyards is what they're the joint venture is called. Todd personnel built C1 ships, six companies, people constructed the shipways. And so basically it's similar to the pitch that he did for Howard Hughes, like you

design, I'll manufacture. But while they're working on this joint venture with Todd Shipyards, they're watching shipbuilding and learning. Under normal circumstances, Kaiser and his partners would have had difficulty entering the business, Kaiser and his partners would have had difficulty entering the business. In fact, they would have had no reason to do so. But the outbreak of war, now this is World War II, ended normal times. Orders poured in. By the summer of 1940, huge backlogs had piled up. By the end of 1940, government officials were hard-pressed to find shipbuilders capable of filling their orders. It's the exact same thing that happened in the paving.

It's the market demanding to be fulfilled, and Henry Kaiser's just like, I'm going to fulfill it. U-boats were sinking British vessels three times faster than they could be replaced. The British consequently searched for ships anywhere they could be found, and they were not choosy. In December 1940, the British agreed to underwrite construction of the West Coast Yards, this is Henry Kaiser's company, and to pay $160,000 over the cost of each ship. So what a hell of a contract. I mean, I guess they had a little choice, right? You're involved in a literal life and death struggle.

But they're saying, yeah, build the ships, and we'll pay you $160 160 grand in profit for each one this marked the beginning of kaiser's direct participation in the ship building this is what makes him most famous by the way kaiser approached this task with his customary enthusiasm he hoped to become the biggest and the best just like anything else and just as he and his partners had confounded experts by building dams faster than was thought possible he dreamed of producing ships at unprecedented rates. So what makes him famous is they wind up being able to build these ships in like four days. They were built with rivets. He pioneered the technology of using welding instead.

And the reason he did that is, one, it was faster, and two, you had thousands, thousands of unskilled laborers. And in many cases, they were like women that had never worked because their husbands are drafted. Now they have to work. Like this was a huge shift in like American society at the time. And so it was hard to learn how to rivet, but it was, but it was not hard. Sorry, that was my alarm, but it was not hard to, um, but it was not hard to teach them how to weld. So, so using learning, like taking their best practices and then improving on them

was, uh, actually like was what caused him to be able to produce so many of these ships so quickly. Okay, so this is actually... So remember, they're doing this joint venture, and I just chuckled on my note. I left myself. This is the contrast between Kaiser and his partner. His partner was not a misfit. Kaiser was definitely a misfit.

The Kaiser Yards turned out over 15 million deadweight tons of shipping at a cost of just over $4 billion. So think about that, that's $4 billion in 1940 money. More than any other activity, shipbuilding made Henry Kaiser a national hero. Millions of Americans who followed public affairs heard the Kaiser shipbuilding saga repeatedly. He started out in the shadow of John D. Riley of Todd Shipyards. That's his partner. In some ways, Riley's vision matched Kaiser's. He anticipated the huge increase in shipping needs as World War II loomed

and sensed the absurdity of most yards being on the East Coast when control of the Pacific Ocean was so vital to the nation's security. But the men approached their tasks from different perspectives. Riley was a salaried employee in an old established firm. His company had achieved success with traditional shipbuilding techniques. Riley valued his position and did not challenge convention. By contrast, Kaiser was almost contemptuous of traditional methods. His partners had long since despaired of getting him to follow customary procedures.

While other partners were used to Kaiser's propensity for tackling several jobs at once, Riley was not. And this is an example of that. A traditional challenge to shipbuilders was crowded workspace. The conventional method was to lay a ship's keel, then send hundreds of workers swarming into cramped quarters to perform many different functions. Workers handed heavy, dangerous tools, and some jobs were backbreaking. One of the most difficult tasks was riveting, particularly when the operator had to fight gravity. Avoiding accidents and maintaining high productivity was difficult. Kaiser's managers challenged the convention from the start. As builders, they were experts at coordinating workers and materials.

They decided to prefabricate large sections of a vessel, then bring them to the ship's hull only when they were to be attached to the keel and see other sections already in place as dam builders they had experience with heavy cranes the only limitation was the maximum lifting capacity of their tools so i i like how he's taking what he learned from other constructions like listen i built dams i built roads like i i don't understand why like i can't apply some of the the best practices in those industries to building a boat. At the end of the day, it's all just building.

And this is important because this part I'm going to now, it's important because he eventually goes into the steel business. And I kind of hinted at this previously. On one issue, Kaiser experienced continued frustration. From the start of shipbuilding, he almost never had enough steel plate and other important supplies. To keep vessels rolling down the ramps, Kaiser mastered evasion of bureaucratic regulations. Officials charged him with paying black market prices for steel from a willing supplier in Cleveland. In the ensuing ruckus, columnist Raymond Clapper rose to Kaiser's defense. So he gets accused of buying things from not approved channels by the Office of Price Administration, which I don't even know what that is.

But this newspaper columnist is writing, this makes no sense. We're in the middle of a war guys he says and this is the defense that Raymond Clapper said about Kaiser he says if you have to be a scofflaw to get steel out of the arsenal of bureaucracy then that's okay with me if that's the way old man Kaiser has to get his steel to build ship to carry

American forces to the fighting fronts then I hope the old fellow breaks every law in the books i mean this is today he he got he started getting the steel uh proved faster and then that leads him to just going into the steel business in general because he thought it was it was a monopoly and that they were artificially in many cases in a few different fields in his life he he would accuse accuse other business people of monopolistic practices and would use that as a hedge or wedge, excuse me, I meant to say, to get into that industry. So remember how at the beginning it said he he was he would dominate men that would dominate others he was also like cheeky like would talk he just would he would like he was just blunt and would like talk like kind of like poke at other industrialists so this is a little bit of his

personality he sent identical this is to have to do with like the big steel he's trying to make make them enemies basically he sent identical letters to the president of several large companies lecturing them in patronizing tones suggesting that if the if they met the crisis he would not enter their business so he's like listen i just want steel if you're not going to give me this deal if you're going to bullshit me and lie about that you can't do it or like there's not enough like you're at full capacity um because you just want to keep your your price your price artificially high then i'm going to come in but if you will do this i don't want to then just give me this give me what i want if not i'll do it myself it's basically what he's

saying and this is what he says the government in its broader vision had not yet elected me to let i had not let not yet elected to let me to do this, meaning entering the business, but it has elected to have the steel industry expand existing facilities. Therefore, it now becomes a greater responsibility of yours. Selfishly, I am happier with decreased responsibility, but sadly, I view the dire consequences of shortage of steel for shipbuilding if it continues. Therefore, I can only sit and wait and hope that you will measure up to your responsibility.

If Kaiser's letter was disingenuous and sarcastic, he was only responding in kind to the steel producer's patronizing assurances that they knew best. The anonymity between Kaiser and the Eastern steel men would only deepen. While he never overtly questioned their patriotism, Kaiser implied that they were, at best, overly cautious and somewhat dull-witted.

In his view, he was simply trying to wake them up. For their part, Eastern Steelmen, reeling from a decade of depression and external attacks, were deeply annoyed when an upstart Westernerner who had made a fortune in lush government contracts a man with no experience in their field instructed him how to run america's most basic enterprise kind of speaks to his like his confidence or arrogance i would you would i would say um okay so he does get into the, I mean, he creates a company called Kaiser Steel. And he does something that's actually really smart. He supports, this is just a smart move. So this is after World War II now.

And the government had funded all of these, he'd retrofitted all of these factories to make the steel they need for war materials, right? And they built them for so much, like hundreds of millions of dollars. And then after that, they just sat there. So he supports, there's another plant called the Geneva plant. And he basically says, hey, U.S. government, you should, even though U.S. Steel was going to be his, what was his competitor, he tells, he petitions the U.S. government saying that, like, sell the Geneva plant that's just sitting there to U.S. Steel, even though, like, they're getting it for a song, like, they're getting it for really cheap, because he wants them to do it so he can do the

same thing for this this this plant called fontana so it says no other producer challenged the geneva tenants u.s steel submitted the only purchase offer and government officials accepted its 47 million dollar bid since the plant had been built at government expense for nearly 200 million u.s steel acquired a modern plant for one-fourth of the cost of construction. Further, since the government financed Geneva, U.S. Steel owed no accumulated interest. Publicly, Kaiser expressed satisfaction. The West needed steel output from both Geneva and Fontana. Kaiser's reasons for endorsing the sale were of no mystery. With this precedent established, simple justice suggested that Kaiser received similar consideration on Fontana. So he did that because, hey, now you guys set the

precedent. You're willing to sell a $200 million facility for one-fourth the cost. Like, I want the same deal. And he winds up getting a very similar deal. And this is an interesting, so once he's up and running, he's got to fight what he calls big steel. And this is a strategy. It's interesting. Kaiser's basic strategy was to portray big steel as conspiring to limit supplies and maintain artificially high prices in the West. In a sense, Kaiser promoted himself as an industrial populist.

It's so hilarious. In 1942, he had predicted the post-war supplies of many producer goods would fail to meet demand events proved him right and a period of post-war economic adjustment was inevitable kaiser charged that big steel's short-sighted policy threatened the national economy kaiser had become very friendly with the new york mayor glaguardia the mayor arranged for kaiser to address the nation over the mutual radio network on the need for more steel. So he opens up and now remember like media back then was not as separated as now so millions and millions of people are listening to this one radio and so Kaiser basically gets on there and does

like an infomercial. Kaiser ripped big steel claiming that steel moguls had colluded to keep smaller producers from expanding production now smaller producers think about like kaiser's a massive industrialist at this time that's why it's hilarious he urged listeners to pressure congress to investigate the persistent bottleneck in steel production and another thing uh that he does is smart is before all the steel would have to be um it's manufactured in the east and then shipped to the west and that's really expensive well he had a massive advantage he had the advantage of moving steel manufacturing west and as over time like his lower cost would compound so this is by the mid-1950s kaiser

steel sold 65 of its output within 60 miles of its factory in contrast US Steel ship more than 3 4ths of its steel to the west coast That was why US Steel paid railroad or pressed railroad so hard for lower rates in the early 1950s US Steel was paying almost $15 per ton for shipment Kaiser was paying rates between $1.82 and $7. So way cheaper. And as that continued, he ran, Kaiser Steel becomes this massive company. Started out with just one little like steel mill, steel factory, and winds up being a giant company in the last

25 years of his life. And this is just another reminder that sales is entrepreneurship. And it says, from the outset of his business career, Kaiser was a promoter. Ever aggressive in searching for new opportunities, he instinctively knew how to package his ability. Kaiser assiduously honed his skills in interpersonal communication. He was not a gifted public speaker, but few matched his dynamism in one-on-one situations. He was not a gifted public speaker, but few matched his dynamism in one-on-one situations. He was amazingly adept at selling himself to strangers. He specialized in convincing decision-makers that he could, somehow, perform difficult jobs ahead of extremely short deadlines. This is a little bit to give you an idea of his managerial style.

From the day he hired his first employee in 1914 until his death in 1967, Kaiser's managerial style changed very little. Many growing enterprises created large, multi-layered managerial hierarchies and rational responses to the complexities of the modern business environment. Kaiser resisted this modernization. He followed his instincts in organizing and promoting his employees. But year after year, Kaiser and his organization outmaneuvered most rivals perceived opportunities where others did not and constantly set new standards for speed and efficiency and part of this was a lack of like a they they compared it like his like a ever flowing i think is the word

they used to like his organizational structure where like other, when he would interface with other companies, they would be like, Hey, can you send us like your, like a, like a flow chart of, uh, your organizational structure? So like our executive vice president can match up with your executive vice president and so on and so forth. And they're like, uh, we don't have one, just, just like one guy in charge of everything in each project. So just go to him kind of thing. Um this is a little bit more on his managerial style. This is now Kaiser writing a memo, which he very rarely did. He said, the purpose of this memo is to establish clearly responsibilities of everyone.

Due to the fact that the allocation of my time is such that I do not believe it will be possible for me to follow the work outlined in any other way but through you his meaning was clear run it yourself consult me only when absolute when absolutely necessary and like again some people in that environment are going to fall flat on their face and not going to succeed but i think the the highest quality talent of employees that you could possibly get get only thrive in in environments like that where it's like here's your objective go do it and just come back to me to for me for me to remove any roadblocks but i'm not going to micromanage you and kaiser definitely did micromanage it'd be impossible for him to micromanage think about hundreds of thousands of employees over 100 businesses like come on um so it says he invested in expensive equipment to lighten tasks for blue

collar employees, but there were very few labor-saving devices for managers. Kaiser baldly proclaimed his managerial philosophy. You find your key men by piling work on them. They say, I can't do anymore, and you say, sure you can. You pile it on and they're doing more and more pretty soon you have men you can rely on absolutely you have an organization that can really get things done so i'm just going to read a couple parts from kaiser permanente which like I said, still exists today. They're doing like, well, I think 80 billion in revenue last year. So it says, toward the end of his life, Kaiser claimed repeatedly

that the Kaiser Permanente medical care program, a prepaid healthcare system, would stand as his most significant achievement. He was right. 20 years after his death, most of the companies in Kaiser's once dazzling industrial empire had either folded or been sold. However, Kaiser Permanente continued to thrive. At Kaiser's death in 1967,

the health plan covered 1.6 million participants. In the next 20 years, membership more than tripled. So they're at almost 5 million. Now I think they're at 12 to 13 million. So it kept going. By the late 19... Remember, the author's writing these books or writing these words in the late 1980s.

By the late 1980s, Kaiser Permanente was by far the nation's largest health maintenance organization or HMO, as you probably heard it. Just a little bit like... It's basically fixed fee medical care is what they're doing. Let me just read this part too it's so much there's just so much more here to unpack but

like i said i think it's going to wind up being a separate episode because i think it's interesting and i don't think i don't um i don't think like it just there's just too much going on here and i can't like there's not enough detail in 30 pages, you know? So it says the insurers agreed to pay, it started out by, you know, you need these workers are doing extremely dangerous jobs in extremely perilous conditions, and so they get injured all the time, so you need, like, on-site doctors. So they realized, like, you couldn't just, basically they wanted to turn,

it says, to the private physician, a sick person is an asset. To Permanente, a sick person is a liability. We'd go bankrupt if we didn't keep most of our members and families well most of the time. So that's the prepaid aspect of it. So the insurers agreed to pay a fixed portion of the workers' compensation premium for all onsite services Garfield provided.

That's the co-founder and the doctor. For an additional nickel a day paid by workers, Garfield offered non-industrial coverage. This fixed fee arrangement inspired Garfield to promote safety and preventative checkups because he got paid whether or not workers suffered accidents and illness. Similar programs were used where employees guaranteed physicians extra income to keep them on remote or unattractive job sites. So kind of like you had to do this. If not, like why is a doctor just going to sit around and not get paid? If you only got paid when people got injured and let's say you

went a long stretch without people getting injured, like he's just sitting in miserable conditions, not making any money. They're going to leave. Let's see. They also helped persuade, so 95% of the employees signed up. The prepaid health plan was a financial and medical success. For five years, Garfield tended patients in the desert. This is at one of the job sites for Kaiser. And when the project was finished in 1938, he sold the hospital for a profit, hospitals is being, like it's basically a house, and returned to Los Angeles to teach and practice medicine. And that's where they start the Kaiser Permanente. Let's see. And then I just want to tell you one more thing.

And that's just the decision by, this is one of his most important decisions, his most brilliant decisions he ever made as far as from a financial aspect. Aluminum was his most spectacular long-term financial success. Kaiser Aluminum faced major hurdles. Acquiring and transporting millions of tons of raw materials, meeting huge energy requirements, and creating markets for many new products.

Kaiser and his organization overcame those obstacles. Remember, problems are just opportunities and workflows. To the surprise of industry analysts, the company netted more than $5 million in its first year. That's crazy. That's 1946 money, by the way. 20 years later, profits approached $59 million. And again, this is just an industry he got in. It was connected to the construction industry he spent his whole life in. And he realized, hey, there's opportunity to build in aluminum.

Why aren't we using it? He made this aluminum build in aluminum. Like, why aren't we using it? He made like this aluminum dome in Hawaii. They wanted to build all aluminum skyscrapers. They started using aluminum for cars. It was a spectacular financial success. This is the financial results of Kaiser Aluminum. It's called the Kaiser Aluminum and Chemical Corporation. And I'll just close on this.

The company thrived in Kaiser's last years. Between 1963 and 1966, net sales increased from $465 million to $781 million. In 1966, net profits reached a record of $60 million. That's crazy. Aluminum was the organization's largest moneymaker by a wide margin. That's his entire, remember, he's got 100 companies. It's saying aluminum was the organization's largest moneymaker by a wide margin, dwarfing profits of other companies.

Kaiser Steel, the next most profitable, earned $18 million. Why Kaiser Cement and Kaiser Gypsum made $10 million. Think about that. What a year you're having. One of your companies makes $60 million. Another makes $18 million. This is profit. Another one makes $10 million.

It was in the 1960s. Like, that's insane. The aging patriarch looked back on two decades in aluminum with satisfaction. Entering the field after World War II had been one of his most brilliant decisions. All right, so that's where I'm going to leave this story for today. There is just so much more in this book. It is so unbelievably complex. I could do like 10 podcasts on this.

I just gave you the highlights, the brief parts that stuck out to me, just because it's so complex. But if you want to finish the full story, I'd recommend reading the book. Like I said, tons and tons of information. We cover the first 60 pages. They cover 40 years of his career, and it's just blazing speed. So anyways, book, Henry J. Kaiser, Builder in the Modern American West. I'll leave a link in the show notes below. If not, you can go to amazon.com forward slash shop forward slash Founders Podcast. Buy this book, buy 10 books, buy whatever you want. It helps support the podcast. Thank you very much and I'll talk to you next week.