Founders - #75 Henry Clay Frick: Andrew Carnegie's Partner

Episode Date: June 9, 2019

What I learned from reading Henry Clay Frick: The Life of the Perfect Capitalist by Quentin Skrabec Jr. ----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

Charles Schwab summarized Frick to an interviewer in the 1930s. No man on earth could get close to him or fathom him. He seemed more like a machine, without emotion or impulses, absolutely cold-blooded. He had good foresight and was an excellent bargainer. His assets were that he was a thinking machine I'm going to talk to you about today, which is Henry Clay Frick, The Life of the Perfect Capitalist. And it's written by Quentin R. Skrabek, Jr. There's actually a word in that intro that I was not familiar with, and I had to look it up, and that's that word comptometer.

So in case you don't know what it is, it says the Comptometer was the first commercially successful key-driven mechanical calculator patented in the United States by Dor E. Felt in 1887. And it says although the Comptometer was primarily an adding machine, it could also do subtractions, multiplications, and division. And I didn't know the definition of that word until after I'd already finished reading the book. And I love this description of Frick because that's kind of how he comes off to me. They're saying he was a thinking machine, methodical as a comptometer, accurate, cutting straight to the point, the most methodical thinking machine I'd ever known. Now, before I found that excerpt, I actually was thinking about starting the podcast reading the back cover of the book. Then I realized they're both really good excerpts to get an introduction to what this podcast is going to be about. So let me read that to you as well. It says, Henry Clay Frick,

reviled in his own time, infamous in ours, was blamed for the Johnstown flood as well as the violent Homestead strike of 1892. He survived an assassination attempt, yet at the same time he was an ardent philanthropist, giving away more than a hundred million dollars during his lifetime and in his will, while insisting on anonymity. This biography explores the contradictions in this great industrialist nature and avoids the extremes of both haggography and denunciation. And that was another word I had to look up, so I just want to read that definition to you because I think it's extremely important. And so haggography means adulatory writing about another person,

a biography that idolizes Its subject And I really appreciate that the author put that on the back cover Because that's a point that I try to make all the time The point of this podcast is for us to learn From people that have built companies in the past But definitely not to idolize them And realizing that there's no human that's ever existed

That deserves our idolization That we're all flawed and we're going to make a lot of mistakes And we do good We do both simultaneous good and bad things flawed and we're going to make a lot of mistakes and we do good. We do both simultaneous good and bad things. And so today's going to be no different. We're going to learn a lot from the career and the life of Henry Clay Frick, and we're going to learn a lot of what to do in our own lives and what to avoid. So I'm just going to start with a preface.

So just a bunch of random quotes that are going to kind of illustrate this point. Oh, and before I begin too, this is the part three. This is the last part in this Andrew Carnegie, this impromptu Andrew Carnegie, Henry Clay Frick series that I stumbled upon when I read the book, Meet You in Hell. So if you haven't listened to that, you don't have to listen to them in order, but I think you should definitely listen to all three of them because I started with the combination of their relationship.

Then I did Andrew Carnegie's autobiography last week. And then now we're doing the biography of Henry Clay Frick. And their careers and lives are interwoven. They're constantly mentioned in the same sentences over and over again. And now after reading these three books, I have an understanding of why that happened, although Andrew Carnegie is way better well-known than Frick was. But Frick was, even if he never interacted with Andrew Carnegie is way better well-known than Frick was. But Frick was, even if he never interacted with Andrew Carnegie, he was an unbelievably gifted entrepreneur. And there's

a lot we can learn from him. So first, it says, Frick was human, not evil, and his life demonstrates many shortcomings found in us all. He says, Frick had both saintly and evil attributes. While labeled a robber baron, he believed in playing fair to his mass's millions. Contemporaries admired Frick for his ethical and straightforward business dealings. Enemies and friends preferred to deal with Frick because he was trustworthy. So that's something the book talks about a lot, that he was an introvert. He only communicated what was absolutely necessary, and he just focused on his work. And that contrast with Andrew Carnegie, who was very much, it was very important to him to be liked,

even though he liked to run his company as an autocrat. Frick didn't really care. He just had a goal and an objective, and all his interests were kind of aligned around that objective. Now, the weird thing about that is the outcome of people interacting that knew both Carnegie and Frick, what that author was saying is even though people liked Carnegie better, they said they preferred dealing with Frick because with Frick, it was kind of black and white. You knew where you stood.

Where Andrew Carnegie would be able to charm you, he's very much a salesperson. I think that's key to understanding some of his success. He was very good at motivating and putting together organizations and getting them to follow him. But they're saying that you never know which Carnegie you're going to get. You don't know how he actually feels about you. So that was kind of counterintuitive to me. And it says, Frick's personal and business lives were in many ways a dichotomy.

I wanted to see Frick through my eyes as an operations manager in the steel industry. So this is also a unique book because the author, Quentin, worked in the steel industry, which we're about to get to in a minute. He played in Frick Park, which was a park that Frick donated right next to his house that he built in Pennsylvania. And he's also a scholar and a researcher. He's written like 20 books, a lot about like the explosion of capitalism and industry in this area, among others. He has one about henry flagler that i ordered i might actually turn into a founder's podcast in the future so this is this when i finished i was like you know what this is very much this is a biography but it's very much like a history book because quentin does a really

good job of laying a foundation about why certain decisions were important in the overall um like if you take it into context of the industry at that time period. And he happens to know that because he worked in the industry. Okay. So it says, I want to see Frick through my eyes as an operations manager in the steel industry. I knew the struggles of good people on both sides of strikes resulting in civil breakdown. I had experienced the tension at the mill during a strike and understood how easy it is to get backed into strong stands. I have experienced violence during a strike

where I saw rational men lose their temper. As a Pittsburgh youth, I learned the impact of strikes on workers and their families. Later, I came to understand the view of a steel manager. I knew and made some of the same mistakes as Frick. I could relate to Frick, the manager and executive. And it is in this view I could offer a different look at Frick. I knew well the pain and struggle of managing a steel mill and going home from that environment. I knew the challenges of managing an operation that runs 24-7 and demands much of its managers.

Frick had managed family and mill better than i had now as a business professor i can also see the organizational genius of frick as well there were also many surprises in this research such as his anonymous generosity his love of children and his patriotism frick pr this is the most important sentence of this entire section to me, Frick proved to be as complex and as average as all of us. And those few paragraphs were especially important to me

because the author's doing the same stuff, the same thing that we're doing here. We're trying to study the lives of people that had similar experiences of us in the past, learn from their lives and their struggles, and adapt that to our own life. I was actually taking notes. This is a tangent I wasn't expecting to go on, but if you want to see, I have like 5,000 plus individual notes on entrepreneurship from podcasts and talks. I still do my weekly email newsletter, but if you want to search all of them and I'm

slowly adding them, they're not all there, but I put them on my website. If you just go to David Senra dot com, you can see I probably added, I don't know, like. A hundred of a hundred different notes on a hundred different talks so much all centered around entrepreneurship. But I was just taking notes. Mark Andreessen, the founder of A16Z, this venture capital firm in San Francisco, but also probably well known as the co-founder of Netscape. And one of my favorite thinkers, he gave a talk to Stanford, I think it was the Stanford MBA.

Yeah, it was. Let's see. It says at the bottom, Stanford Graduate School of Business. And he said something that is important because I've come across it a lot in not only my note taking, but also reading all these biographies. And that is that Mark says that he spends a lot of time thinking about his making his own decisions, whether it's investment decision into a new company. He views it through the prism of history. And to me, I feel like if he knew about Founders Podcast, like what I'm about to read to you from my notes, is him encouraging you to listen to and support this podcast. And he says, there are thousands of years of history in which lots and lots of very smart people worked very hard

and ran all types of experiments on how to create new businesses, invent new technology, or new ways to manage. They ran these experiments throughout their entire lives. At some point, somebody put them down in a book. For very little money and a few hours of time, you can learn from someone's accumulated experience. There is so much more to learn from the past than we often realize. You could productively spend your time reading experiences of great

people who have come before you and you will learn every time. And I just want to couple that quote with another quote that I have saved on my phone in that folder I always tell you about where I just have these things I run across that I want to like constantly go back and forth. And it's talking about lessons from history. And this person's saying, the dead outnumber the living 14 to 1. And we ignore the accumulated experience of such a huge majority of mankind at our peril. So I just want to use that as a way to kind of encourage you to support and sign up for the Misfit Feed at the same time. You're seeing all these different perspectives from different people saying that, hey, it's really actually a good use of your time if you can learn from history so you don't have to

keep redoing the mistakes and relearn the lessons that people have already done so. So if you're interested in learning more, keep in mind, half my podcasts are always going to be free and none of them have ads. The other half I create just for people that have subscribed to the Misfit Feed. It's only $5 a month. You can pay more if you want to, but you don't have ads. The other half I create just for people that have subscribed to the Misfit feed. It's only $5 a month. You can pay more if you want to, but you don't have to. And it takes about 10 to 15 seconds, or 10 to 20 seconds. So if you tap the link that's in the

show notes on your podcast player, it's glow.fm forward slash founders. I think that's what it is, actually. Just look at the link. And especially if you're doing an Apple device, you don't have to enter a credit card. It does Apple Pay. They generate it and put the feed into your favorite podcast player, so you can listen to it just like any other podcast.

But if you are the kind of person that has already listened to a bunch of my podcasts, sees the value in it, has learned from it, and has not yet upgraded to become a Misfit, please do so now because the faster this project grows, the more support I get, the more I'm sure that I can keep it going. My goal is I don't want to keep restarting things. And I think this experiment that we're doing where we're learning for, let's say, 50 to 52, if I'm doing one every week, like 50 something founders of the past every year, like that, the accumulated knowledge, that's interesting for one year, right?

But like, what does it look like if we can keep this going for 10 years or 20 years? Like, I'm not gonna run out of books. I wish you could see like my house now. My wife's going crazy. Cause she's like, can you buy the Kindle version? Like we don't have a place in any of these books. So anyways, what I'm saying is like the faster I can get to the point where I know that this project is going to last for a long time,

like the better I would feel and I think the better you would feel as well. So I guess before I get into the book, I was going to talk to you about this then since I'm already rambling. There is some – there's a lot of things that I have coming up that are going to be interesting. Like if you remember a few weeks ago, I did this – I read every single one of Jeff Bezos' shareholder letters, and I did a podcast about that. I got a lot of good feedback on that. A lot of people really like that podcast. Well, I don't know why I've tortured myself,

but I'm going through 50 years of Berkshire Hathaway, the shareholder letters that Warren Buffett has written. And he compiled them into a book, and I ordered the book. I think, oh, this is going to be easy. The book that arrived is the size of a college, Oh, this is going to be easy. The book that arrived is the size of a college textbook. It's 700 plus pages. It's huge that when I'm finished, I don't know how long it's going to take me.

That'll eventually be just for misfits only. So further, like I'm going to keep doing stuff like this to encourage you and to kind of incentivize you to, to support the podcast with your dollars every month. And again, if you're not in a place to spend $5 a month, this is not for you. It's just for people that, hey, that would have no problem spending $5 every month. And that's a vast majority of the audience. So I have that coming. I'm doing after this week, excuse me, I have two very old books about Steve Jobs. So the next, I'm doing another two-part series in addition to the other two podcasts I've done on Steve Jobs. That's coming up. I have another additional two books on Henry Ford.

I have, I mean, there's just so much stuff coming up. So, again, I'm just asking for your support for this podcast. I say support me, but honestly, also, you're investing in yourself and you're supporting yourself. Because if you listen, if you're able to, if all you have to do is pay $5 a month and then press play on a podcast player, and you're constantly exposing yourself to ideas from some of, you know, the most unique, and I would argue smartest entrepreneurs that have ever lived, like, I just think that gives you an unfair advantage over people that are not doing that. All right. So let me get back into the book. I didn't expect to talk about that now, but I, you know, I have to go where my mind leads me. All right. So this guy's, Quentin's saying this is basically the same

thing. Hey, look, I've gone through these experiences and now doing all this research and writing this book on Frick, I've come to understand and relate to him a little bit more than otherwise. And if I had not done this, okay, so let's skip ahead. He's got a lot of stuff. Okay. So this is really interesting way to think about Like how to view your craft because I assume that everybody like, you know You're gonna spend a lot of the majority of your waking hours working Even if it's not the majority, maybe it's 50% Maybe you sleep eight hours a day you work eight hours a day and you have eight hours to yourself like it's still 50%

of your life if you think of life in terms of when you're actually awake and conscious and I just think like the idea of trying to get it to be as great at what you're doing like to me That should be like everybody's default mode Frick had an interesting perspective. He says he viewed himself as a type of financial gladiator Going to the arena each day in that arena victory was the only goal and it dominated his focus Frick was a cold and calculating fighter. So he's just going to go over some of, you know, he mentions the word dichotomy a lot. Like this guy is just a, he's a hard nut to crack.

Like he's just an interesting person. It says in December of 1915, when the bankruptcy of Pittsburgh Savings caused 40,000 school children to lose 130,000, which is about 1.5 million at the time of this writing. The book is about 10 years old, so it might be a little different today. So they lost $130,000, which today would be about, let's say, $1.5 million of their school's dime saving plan. Frick repaid them all in time for Christmas. Frick was not the Nero of the Gilded Age, promoting wild parties of excess,

but a good father and family man. The fact is Frick was neither a saint nor a devil, Remember, most of his career is taking place in the last part of the 1800s. By the time he gets to 1900, he's already very rich. Struggling America. In the end, Frick gave much to the city that disowned him. He's not well-liked even today, the author was saying, in that area because the ramifications of the Homestead Strike, which if you want to learn more about the Homestead Strike, it's in both Carnegie's autobiography, this book, but Meet You in Hell. And that book, I would say a third, maybe half of the book is about that.

All right, so Frick also gave much to the children of the very workers who vilified him. It is that side of the man that is lost to history. Frick's dislike of unions was also shared by the best capitalists and even many laborers. His error was in his approach to the issue. And so now Quentin's going to tell us about how he approached his job. He says, in many ways, making money was an intellectual game for him. Having money was simply a result of playing the game well. Stealing money or winning the lottery would be without meaning for him. Inherited money had no meaning to him. Money earned without effort, skill, and gamenesship had no value to him. He was a private man who lived by a strict rule of confidentiality in his

private and business dealings. And there's a historian who i read i did a podcast on his book his name is david mccullough he did this fantastic book on the wright brothers if you have not read it i would order it immediately and if you are going to order it please do go to amazon.com for shop for founders podcast to do so um it's like 250 pages the paperback version you could probably you could easily read it in a in a um in a weekend but it's just such a i think the wright brothers – I think anybody trying to run their own company should first read that book. Like it's a very important book because you understand the resourcefulness. But anyways, David McCullough has this quote about Frick and specifically his approach to press.

Carnegie very much invested a lot of time in his – like in the idea of him like he was very good at marketing himself frick didn't really care about that david's going to tell us about more about that here and so this is a quote from david mccullough he said uh speaking about frick he simply did not talk to the press ever at any time it was his standing policy he was a highly uncommunicative sort anyway and by nature abhorred forms of notoriety that's why he gave so much of his money away without he gave a lot of it under the condition of anonymity he had no trust in newspapers no liking for reporters and talking to them he was convinced was bad for business only once in his life did he break his this rule and speak freely to a reporter but it was it was

with the understanding that he could edit the copy, which he did, reducing a full column to exactly 10 lines. It's actually an interesting idea. I think most newspaper columns would be more interesting if you edited it to just 10 lines. So one of the huge influences in Frick's life was his great-grandfather who started – I'm not much of a drinkerer but i guess it's a really popular whiskey to this day it's called like over holt i think is how you um it's how you pronounce it um but i found this this one paragraph really fascinating about how changes uh and that happened in previous generations still like resonate to the present day so they were farmers and they realized they were also resourceful entrepreneurs, though. And so they realized how profitable turning grain into whiskey was. So it says, to a farmer, grain sold for a few cents a bushel, but whiskey sold for a dollar a gallon, which made turning grain into whiskey very profitable.

It says, remember, America's a British colony at this time. This is in the 1790s, what I'm describing to you. As a British colony, the whiskey production had been controlled and taxed, but the remoteness of the, oh goodness, Magahala Valley, this place, I guess, is what present-day Pennsylvania, maybe, made it almost inaccessible to British tax collectors. President Washington, George, and Secretary of Treasury Alexander Hamilton imposed an excise task on whiskey in 1794. As a tax collector in Western Pennsylvania, Scotch-Irish General Neville was chosen, even though he had initially opposed the tax, right? So they're levying this tax. Now this

guy that was against it has to go and collect the tax. Now, you're not going to be surprised if you've listened to my podcast for a long time, what happens next? The Valley Scotch Irish mustered a militia and burnt the estate of General Neville. A few days later, the federal leader, General James McFarlane, was killed. Think about how crazy our species are. Like they're're killing each other over attacks on whiskey. For weeks, Scotch-Irish militia roamed the area. Hamilton, Alexander Hamilton, persuaded George Washington to send 13,000 troops to western Pennsylvania to put down the rebellion. Now, this is the point I was making, like, how it's interesting. Like, you know, you had this scuffle in the late 1790s that still affects us to this day.

And it says, the Scotch-Irish, however, moved into Kentucky and Tennessee to produce their whiskey. The new frontier was out of the reach of the federal tax collectors, and these Pennsylvania emigrants would form the Kentucky and Tennessee bourbon and whiskey families of today. That's wild to me. That was surprising. So it really has nothing to do with Frick, but I thought it was interesting. I want to share that with you. So as much as he kind of idolized his great-grandfather and his grandfather,

he had a good relationship with his father, but he was kind of – he thought his father was unambitious and Frick was anything but that. So they talked about – this is one historian describing Frick's parents, John and Elizabeth. And this one sentence is a hell of an indictment. He says, John and Elizabeth, one historian described John and Elizabeth as trying to make the least possible amount of money by doing the greatest possible amount of work. So I definitely think the lack of ambition that his father displayed Was a motivating factor in Frick's kind of like Terminator-like approach to accumulating wealth Okay, so let's get into his early life, his personality, some of his first jobs, and so on and so forth He gets scarlet fever when he's young. This is actually really important because he deals with the ramifications for a long time.

He says, scarlet fever at the time was a major killer of young children. Henry Clay survived, but with long-term consequences, which would plague him for all of his life. It took Henry over a year to recover, and he was unable to walk the mile necessary to go to school. Later in life, after a long day of work, he was forced to take a nap or take medication for the muscle pain and headaches. His lack of physical strength—now, this is interesting. He takes a negative and turns it into a positive. His lack of physical strength restricted him from playing in popular sports, but this only made him more determined to succeed. Limited in physical ability, Henry Clay developed his mental skills to advance.

Remember how I opened the podcast, he talked about he was kind of like a machine with numbers. This is the genesis of that. Whatever the endeavor, Henry would be overly competitive. Early on, he developed a dream to achieve the wealth and riches of his grandfather. Henry excelled in mathematics and he developed a love for reading early in his life. Okay, so now this is his first job, or one of his first jobs, and he's starting to work with his uncle. It says, Henry started working with his uncle Martin at his general emporium. He was making a wage of $6 a week, and then he also moved in with his uncle.

He seemed extremely proud of being the grandson of Abraham Overholt and dreamed of accomplishing similar achievements in life. So he had that kind of North Star. He's like, well, look at the great wealth that my grandfather has. My father had none of that because he refused to work for it. He briefly attended a college known as the Classical and Scientific Institute and again excelled in math and took over bookkeeping at his uncle's store. This is important. Bookkeeping opened the world of cost accounting to Henry,

which would be his strength throughout his career. He saw, this is a really interesting perspective he has, he saw the accounting book as the very symbol of capitalism. It is in these entries that one learns the economy of acquisition. And then other people he looked up to, it's funny, as different as Frick and Carnegie were personality-wise, they both had the same hero, and that was Napoleon. He was introduced to Napoleon, which led him to read a borrowed copy of The Life of Napoleon Bonaparte. So he's reading the biography of him. He would share his love of Napoleon with many capitalists of this period, such as Andrew Carnegie and Charles Schwab. So he works at a

bunch of, let's, let's, today, I guess what we call retail, I guess they're dry goods stores back in the day. But he realized, well, he had an idea. He's like, listen, sales is a better path to riches, right? Because he was always looking for a better opportunity. So he starts out at one store making six bucks an hour or six bucks a week. And then he finds one that will pay him eight. And he just keeps going on and on and on. And then he realized, well, why don't I get a commission job? This is actually something that I stumbled upon when I was really young.

Because like my, other than letting me live there until they kicked me out at 18, my parents couldn't give me any money after I started working at 15. And what I would do is I would go year round to electively to summer school, because it's like, well, why don't I if I can take a six week geometry class instead of taking a whole semester, like I can get ahead. And what I was able to do is my last two years of high school, I effectively only had four classes a day. And I had I was in this program called OJT, which is on-the-job training, so you could leave and go to work. So I worked at a car wash for three years and three days in the hot Florida sun. And effectively, I was working full-time.

I'd work like 35 hours a week, 35 to 38 hours a week, plus go to high school. And I loved it because it was really hard, but I also had my own money for the first time. And at that job, I was able to work on commission and tips. So most of my friends, you know, you go, what's your first job when you're 15 or 16? Like you go work at like Chick-fil-A or something or McDonald's or whatever. Well, so anytime I talk to a younger person now, I'm like, listen, anytime you can have a job where you're, it's not set, it's not capped. Like if you go work at McDonald's, there's nothing wrong with that. If you have, you can't find another opportunity, but like, you know what you're going to not set it's not capped like if you go work at mcdonald's there's nothing wrong with that if you have you can't find another opportunity but like you know

what you're going to make it's never going to go higher but if i get better at sales or i get really good at washing and detailing cars then my tips could go through the roof then i can cultivate my own customer base which i did back then and you know i was making good money and then like think about in high school this is like what 15 years ago. I was making close to like $400 a week, which is pretty crazy back then. I mean at the time minimum wage was like $4.75 or $5.15. It was really, really low. So that's what you would get at McDonald's. So anyways, Frick realizes that too here.

So he winds up getting into what i would consider like high-end retail for lack of a better word in the 1800 late the middle 1800s version of that and he starts getting jobs where he sells like suits and stuff and he gets um a higher he gets a percentage of the sale which allows him to accumulate a lot of money he's extremely young when he's doing this he might even still be a teenager so within like a year or two he goes from like $6 a week to $12 and $20 a week. So he's constantly going through. But the reason I bring this up is because not only was he ambitious, but his schedule was ambitious.

And he understood like, this is a quick little anecdote about his ambitious schedule and then the value of time and realizing like how much you can get done if you don't waste any time. So it says his schedule was as ambitious as his dreams. He rose and dressed for breakfast at seven at the boarding house. He had over a mile to walk to reach the store at eight. He worked at the store until six. So he's working from eight to six and then crossed the river back home to have dinner at the boarding house. He then crossed back to attend night school at the Iron City Commercial College

to study accounting until 9.30, filing returning home around 10. So what they're describing here, I had this almost exact same schedule in college. I'd take one class from 7 to 8 in the morning. I'd go work 9 to 5, and then I'd take one class from 7 to 8 in the morning. I'd go work 9 to 5, and then I'd take another class. You have these classes where you meet once a week for three hours, and that's three credit hours. That would go from 6 to 9.30. I'd get home at 10, and then I'd do it all over again. I didn't have much of a social life, as you can imagine, at least not until I got towards the end end of graduation but it was probably the single most productive um time in my life and something i will never be able to replicate um since obviously i have child like i have a child now like i'm not you know i it'd be

irresponsible for me to do that but i guess this this message is to people that are still in the situation where you don't have a family or other obligations, you might as well use the time. I just think it's a really, really good idea. Oh, so this is really interesting too. So his family is really successful with the whiskey company, and they have a bunch of other – they're farmers. They have real estate. They have all these other – their hands on other stuff. But like we've seen many times in these stories, it's inevitable.

Every single economy forever will have booms and bus cycles, and you'll have times of great prosperity and then depression like times. And most of the time when people that don't actually know how to manage businesses can look really, really wealthy in good times. And then I think that the, the, the, the quote is like, when the tide goes out, you see who's swimming naked, I think is the axiom I've heard to describe this. So it turns out the Overholts were swimming naked. And this is the effect that his family's bankruptcy would have on Frick's career. So it says, on January 15, 1870, Frick's world would again be turned upside down by the death of his grandfather, Abraham Overholts.

More problematic was the condition and distribution of his estate. Abraham proved not to be a master of personal finance. So his estate was worth about $7 million, but he had a lot of debt and account. So it says Overholtz's businesses were near bankruptcy. Both West Overton Distillery and another distillery called Broadford were already bankrupt. Abraham's sons were personally near bankruptcy. So this is a fate that Frick is able to avoid for all of his life. And it's because he was so frugal and obsessed with tracking.

They called him a computer, for lack of a better word. If the computer existed then, they they called him a computer or for lack of a better word like what if the computer existed then they'd call him a computer but he knew everything about his business down to the penny um and this gives him a huge advantage over his life because he's got a lot of competitors in the same industry when he starts hc freaking coke um that that that are not like that they don't like they're, they're terrible at running businesses. They saw, oh, this huge, like, for lack of a better word, gold rush. I'm gonna get into this too.

And while the industry is growing and the economy is growing, they look like geniuses, right? And then what happens is the tide goes out, the depression happens, the panic, the inevitable financial panics happen. And then we realize, oh, they weren't that smart all along. It's a quote. I keep telling you about Steve Eisman, the guy that made a billion dollars off of the sub, the U S subprime

crisis in the 2007, 2009 era. Like we were confusing leverage for genius. So I definitely think this, this, this idea that somebody you idolize your whole life, that has this huge estate that has this huge business and then he dies and you realize oh like he died he just happened you know obviously bad time you can't control that but he's he winds up actually being bankrupt it's not actually successful frick actually works with them and and gets them back on solid footing but it also made me think of if you remember that podcast i did on danny meyer the founder of shake shack and a bunch of other restaurants where in that book like he had shake shack now has you know hundreds of uh restaurants all over the country now but for um even before he started shake shack i think

it took like five years before he expanded to the next one or three years something like that same thing with his first high-end restaurant. And the reason I bring that up is because Danny Meyer wouldn't expand due to his dad's financial failures, right? So he saw like his dad was a relatively successful travel entrepreneur and he'd have one business that's doing well. But then he started opening two, three, four, and then inevitably he'd over-leverage himself. And then when his family went to – when his dad went to the bankruptcy, he saw what it did to his family. And so these fears, these, these, I guess my point here is like, we cannot underestimate the trauma that you have early on in your life and how it can affect you. You know, some people let it like stop them and tear them down. Danny didn't, he might've done that for a little bit, but he eventually overcame that and realized it was irrational. And Frick, his answer was, hey,

let me not be sloppy. Let me make sure I know what my costs are. Let me make sure that I'm not over leveraged. Let me make sure I'm doing, like I'm taking care of the business that should be taken care of because I think Danny and Henry and a bunch of other people understand that. Listen, financial panics are inevitable

and they're not predictable. So the idea that you're setting yourself up where you're only successful when things are going well and you're going to be wiped out when things are going bad, why would you do that? I understand that's probably the default modus operandi of most humans, but that's not smart. That's not a good way to go around things you have you have to i was just listening i've been taking notes on charlie munger a lot too and he made this point where people think like he's like i've always worried about ruin or i forgot the word he used i'm gonna use the word ruin that's not the word he used but it means the same thing and people think it's ridiculous like because he always incurred charlie

munger's talking about like you know, you should be saving your income, like living below your means is something him and Warren Buffett talk about all the time. And he's like, I'm, he's giving a commencement speech. I think at the time he's like 85, 90 years old, how real he is. And he's like, people think, oh, it's, it's silly to worry about ruin throughout your life. You're going to like, you're going to like be stressed or depressed about it. He's like, no, I've worried about it my whole life. And it's not that like, I let it sit in my mind and bother me. It's just like, I've planned for the inevitable downturns and therefore have been able to survive them. And because of able to survive them, allowed my wealth to accumulate for much longer periods than other people.

It's like, damn, that's a really good point. Okay. So I'm just going to skip over. There's some, there's, there's, so I think if you listen to the podcast I did two weeks ago, you already know he makes most of his money from this. It's called coke. It's not what we think of like cocaine. It's the raw material, one of the raw materials including ore, iron ore maybe. I don't know if it's iron ore or not, but it's ore that is needed for the production of steel. So that's how he winds up being involved with all the railroads and steelmakers like Carnegie. But what Frick does that's really smart is he learns from entrepreneurs that came before him.

And then my other favorite idea is – well, let me read this to you first. So he learns from these guys named Jones and Laughlin. So I'm not going to go into as much detail there because I don't want to sidetrack this, but I do think it's important because he basically steals this idea, which, again, we should all be shameless about stealing good ideas. It says, Vertical integration allowed Jones and Laughlin to become the low-cost producer of Coke, a lesson that young Andrew Carnegie and later a young Frick would note and study. The basic layout of their operations at Jones and Laughlin would remain intact until 1980.

So you're talking about they got started somewhere in 1855. And their operations last, what is that, 100 and, don't make me do math, 125 years. And one of my, the most important ideas to remember, especially because we live in a complex, we're just dropped, humans were just dropped into this complex environment that we call life that's far beyond our understanding, is that anything that survives a long time is useful. And so this idea, at this time they're studying them, you know, they've only been around maybe 20 years. They didn't know they were going to last for 150 years, but was wind up being a good use of their time to to study how they ran their business and then take those ideas which both carnegie and frick did um okay so this is another interesting point like you know we're studying the hc frick and coke company went to i think being at one time valued at like 70 or 80 million dollars in 1900

dollars so it's a hugely successful company that Frick starts you know it'd be over a billion dollars in today's money but what I've also noticed about reading these books and then taking a lot of notes on talks or podcasts about entrepreneurship

is like there's a lot of people that repeat the same thing that listen many people will tell you that the mark that the market your company is in is the single most important factor in your company's success and i wasn't part of me when i started hearing i was like oh that that can't be true and but the more i'm exposed to this the more i think they're actually probably right and here's an example of like why how can you build a company in 1900 that's worth 70 million dollars selling coke and um well this is a little bit about the market it says the post war iron and steel boom would make conisville that's where um they're they're they initially set up the coke business uh make conisville the coke capital of the world the railroad expansion

of the post-war era was creating millionaires and new companies. Railroad track grew from 22,000 miles in 1860 to basically triple that by 1870. By the 1890s, check this blew my mind. By the 1890s, Connorsville would have more millionaires per capita than any other place in the country and maybe the world. I had never even heard of this place before I read this book. Okay, so we need to get into, I got a little ahead of myself. I need to get into how did Frick get started in Coke? So he says, after the death of their grandfather, Abraham Overholt, 37-year-old Tinsman. So there's this guy named, he's his cousin.

I don't know his first name, unfortunately. I didn't write it down. Apologies. We're just going to call him Tinsman. So there's this guy named, he's his cousin. I don't know his first name, unfortunately. I didn't write it down. Apologies. We're just going to call him tinsman. So they're on opposite sides of the family, but Abraham overholts their grandfather. And they happen to be friendly. They hang out, freaking tinsman. And overholt had lent pre i need to give you some more background i'm rambling here come on pay attention um okay so tinsman is abraham overholt before he dies lends money to his grandson tinsman to invest in this thing called morgan mines and that's important um so we just need to remember that it was their first major major like commercial mining operation in the area this is after the death of their grandfather, Abraham Overholt, in 1871, 37-year-old Tinsman and Henry Clay Frick played chess late one night,

discussing the boom market for coke. Frick had seen the boom of the iron and steel mills firsthand, and Tinsman's main source of income was from his small coke operations and his investment in Morgan Mines. Frick had also done business as a clerk at his grandfather's sawmill and uh with this guy named little john cochran who was a farmer and carpenter carpenter who turned miner who had made a fortune selling coal and coke and as an aside that's also a good sign of like a boom market when you have other people that had previous

occupations and they jump into a different one um so it says so it says um frick was always eager to listen to coal miners like cochran and it was this informal education that frick learned about coal and cork now check this out this is insane remember i told you that the grandfather gave this guy named tinsman now i just found his name his name's a.o um a.o tinsman. Now I just found his name. His name's AO. AO Tinsman, money to invest in Morgan Mines. Well, now we're going to see what the result of that investment was. Morgan Mines was supplying AO Tinsman with the amazing sum of $110,000 per year. That's insane. What is that? Probably a couple million dollars in today's dollars? And that was the type of income that could fulfill Fr Frick's dreams Tinsman wanted to expand I was just going

to say I don't know if I was going to mention this but Tinsman winds up finding a way to screw this up Tinsman wanted to expand but he was personally overextended in numerous business endeavors so what does that mean he was over leveraged which we've talked about ad nauseum here he winds up going bankrupt i don't know if i talk about on the podcast but it's talked about in the book frank frick later on in life winds up being able to buy morgan mines because his cousin couldn't come up with the money because frick wasn't over leveraged he knew how to handle money and such he winds up buying you know this mine i think at the time they said it was like uh to build it would have been like

something again don't quote me on the numbers, but the ratio is similar. Let's say to build a brand new, it would cost you $70 million. Frick picks it up for $10 million because he picks it up in a panic when everybody is ruined and Frick has money. That was, I would say, what I learned from Frick. That's his method to expand his business. Wait for the downturn. Be prepared because you know human nature is we're not going to be prepared and then he has the upper hand um so it says tinsman was already highly leveraged and needed capital um so and this is how frick gets in there so he winds up tinsman needs money and frick has it

and he doesn't have a lot of money this time but he winds up making this like small collective of like five different partners and so now they're investing into coke operations now other people were working full-time frick wasn't so the it says the other partners were fully engaged in other operations and investments so as part of the agreement frick would manage the mine while remaining the chief bookkeeper with a $1,000 a year salary. So I'm sorry. He was working full time. He was working as a bookkeeper for the distillery.

But now he's going to manage the mine at the same time. And then why? Again, I think one of the best pieces of advice I've ever heard is, like, if you're not working on your best idea, you're doing it wrong. Like, why would Frick want to work on this? And he says because Frick believed Coke was the most profitable product. So he wants to expand. He's like, okay, I found my path to riches. Now I need to go all in. He says, Frick started to buy up coal lands from farmers using a skillful system of personal loans backed by the Overholt name. Okay. He realized, now this is interesting. He realized that in this old German community, the Frick and Overholt names

went back to the days of the Whiskey Rebellion of the 1790s. Remember, that was what I was sharing with you a few minutes ago. Frick realized the economic value of what today we call goodwill. Frick had also had proven financial skills. No matter what the organization, Frick became its treasurer and bookkeeper. Smart to keep his eye on the money here. He clearly made his brief education in accounting pay and his financial skills the cornerstone of his success. Next came the plan to build a battery of 50, they're called Beehive Coke Ovens. That's how the technology at the time winds up getting displaced later,

but that's the backbone, the main Coke Ovens. That's how the technology at the time. It winds up getting displaced later, but that's the backbone, the main Coke Ovens that he uses to create this massive company. So he sets up 50 Coke Ovens. It says Frick was the most aggressive of the partners, wanting to bring up capacity quickly. Frick needed an additional $10,000 to finance the Coke Ovens, and he approached Judge Thomas Mellon. This guy's really important to his life, too.

Mellon has this huge family and winds up being successful multi-generations. Mellon recognized Frick, this is his description, as determined, persuasive, excuse me, as a determined, persuasive,

and audacious entrepreneur. Those are great personality traits for us all. Determined, persuasive, and audacious Oh, I forgot to tell you Frick is 21 years old when he's doing all this So what raised the old judge's eyebrows Was when the 21-year-old Frick returned in a couple of months Asking for another $10,000 to build another 50 beehive ovens

So he was rapid, he moved quickly So they gave him the first $10,000 Now you're coming back and doing another $10,000 to build another 50 beehive ovens. So he was rapid. He moved quickly. So they give him the first $10,000. Now you're coming back and doing another $10,000. So Judge Mellon's like, wait a minute. He sends this guy, Corey, that works for him, out to check out Frick's operation before he gives him another 10 Gs. And he says, Corey went to look at Frick's operations.

Corey would give Mellon a glowing report. And this is a direct quote from Corey's report describing Frick's operation. Remember, he's 21, and this is how well he runs a business. Lands good, ovens well built, manager on the job all day. That's Frick. Keeps books in the evenings. That's Frick too. Maybe a little too enthusiastic about pictures. That's talking about art. He winds up being one of the most famous art collectors in the world In fact, you can go and see his

A friend of mine did I haven't seen it yet But it's the Frick Collection in New York City Which I think is in the same part of like What he used to be his personal home Maybe a little too enthusiastic about pictures But not enough to hurt And this is I think like the best

The best compliment you can give to an entrepreneur. Knows business down to the ground. I advise making the loan. So Frick got his loan. Frick was obsessed with work and reaching his goal of making a million dollars. He showed an amazing ability to work long hours

in difficult environments. In 1871, Frick had 200 out of the 550 coke ovens in Connorsville area and about 1,200 nationwide. And then this is how Frick's first intersection, like how does his life intersect with Carnegie? Carnegie studied other people like Rockefeller and Jones and everybody else, and he was obsessed with what we now call vertical integration. So it says, Carnegie was determined to control his own sources of coal and coke, which was part of his overall strategy of vertical integration. Carnegie's trip to Europe in the 1870s to study the steel industry convinced him.

And so there's a quote from Carnegie. He says, one vital lesson in iron and steel that I learned in Britain was the necessity of owning raw materials and finishing the completed article ready of ready for its purpose they expand this not only do they do this but when frick is running carnegie's company they they have they have their own like railroad too it's pretty crazy how uh i mean it kind of makes sense if they were able to sell the company for, what, $480 million in 1905, 19—something like that, early 1900s. Like, of course they're going to have this—they're going to be completely vertically integrated. All right, so still demand for Coke was growing faster than even the optimistic forecasts of Frick had suggested,

and Carnegie was in no position to control the supply of Coke. And that sentence there kind of lends a little bit of credence to those that feel that the number one contributor to your success is the market that you're choosing to operate in. Frick was at the right place at the right time. Carnegie was at the right place at the right time. And this is another few pages later. This is Frick's advantage. Unlike the other Coke producers, Frick was a hands-on manager with debt and credit training. Frick realized early on that the long-term winner would be the most cost-efficient operation. So he's expanding, and then he gets something that's extremely helpful to him,

but extremely detrimental to everybody else, and that's the financial panic of 1873. And this is just some smart moves that frick makes during this um so he realizes there's a fight in between between bno and pennsylvania and he winds up brokering this deal um that pennsylvania needs money bno needs tracks and bno winds up he convinces bO to buy some of the assets from Pennsylvania Railroad. And this is important. It says, the deal did not require a large capital outlay by Baltimore and Ohio, B&O Railroad. They purchased the 10-mile railroad at cost. Frick, for his part, received a $50,000 commission, which is over $750,000 in today money,

more money than Frick had ever had and over double what he had invested in his Coke partnership. Frick proved even more savvy, paying off his debts and landing coal lands at depressed prices. Frick was making a fortune in the panic that was toppling the rich of Wall Street. The price of Coke dropped to 90 cents a ton. Now, remember, we just got done saying Frick realized, hey, the person that's going to win in this industry is the people that has the best cost-efficient operation, right? Well, Coke prices is just like almost like any other commodity. They go up and down. You don't control that, right? That's outside of your control. So of course, it's advantageous to you to have the most cost-efficient operation because inevitably, you're going to have a bust and the

prices are going to go down. And do you control that price? No, you do not. So what are you going to do? You're just going to, oh, oh shit, the price went down. Oh, I guess I'm bankrupt. People like Frick, they're not going to leave that to chance. So what happens is the price of Coke drops to 90 cents a ton, a level that only Frick could actually make a profit on.

While Frick expanded, he kept a cash reserve to protect against any problems. Another smart move. He started to look to the future buying coal lands, which were being sold at depressed prices. He studied coal seam direction and purchased troubled farms needing cash. Frick developed deeper mine technology since the vast majority of the coal lay 60 feet or more below the surface. And again, developing new technology is expensive. Do you know when developing new technology is cheaper? When you're in a depression or a financial panic. I'm going to give you some examples of dumb stuff he does, but this guy, he really did have his stuff together. So here's a little bit about his personality. So Judge Mellon that lent him money, his son, Thomas, becomes one of Frick's closest friends.

And this is how he describes him. He says, that young man has great promise. He is very—oh, actually, maybe this is the dad. I think this is the dad actually describing him. The young man has great promise. He is very careful in making statements, always exact and wholly reliable. a dad i think it was a dad actually describing him uh the young man has great promise he's very careful in making statements always exact and wholly reliable he is also able energetic industrious resourceful self-confident somewhat impetuous and inclined to be daring on his own

account but so cautious in his dealings with others disposed to take chances that I doubt if he would make a successful banker. If he continues along, meaning he was so risk adverse dealing with other people that he wouldn't be able to succeed as a banker. If he continues along his own line as he has begun, meaning line of business, he will go far unless he overreaches. That is his only danger. Okay, so this is interesting because I talked about a little bit of this with the podcast I did with Goodyear

about the rubber, thinking about rubber as a technology. And steel, which is going to be the basis of both Carnegie and Frick's vast fortune, it really is like we take it for advantage of it, right? Because we were, everybody listening to this right now was born after the invention of steel.

But it really was a deep and fundamental technological development. And I think it's really helpful thinking in those terms. So it says, the panic of 1873 in many ways built Frick and company. The recession was deep, but many of the steel companies kept their eyes on the future. Steel was a marvelous material that was stronger than wrought iron and more flexible than cast iron. Steel railroad rails were better than those of wrought iron. Steel was replacing wrought iron in steam boilers. Steel was being looked at for structural application in bridges.

The world's greatest armament company, Krupp Steel, was producing large steel cannons to replace cast iron. Steel's strength changed the industrial world. So it's a fundamental technological development that changed the world. This company too, Krupp Steel, I had bought a book probably a few months ago. I haven't read it yet. It's like 900 pages, so it's going to be a while before i turn it into new founders but this company the world's greatest armament company is it will they winds up being like a family dynasty that lasts like 400 years um and they do some crazy stuff um but eventually i will do a podcast about krebs deal because i just think that's

i mean that's when you see family dynasties the last 400 years so it's extremely rare i mean that happened in real life i think about like that targaryen dynasty that's fake in in game of thrones and they like that lasted 300 years like um it's really interesting but anyways i i thought about this part about thinking about steels as a as a deep technological um development i have this book that i'm i've been like just grazing through and it's kind of outside the scope of a normal founders episode. But I think I'm going to turn into like a bonus episode for misfits. And it's called Nuts and Bolts of the Past, a history of American technology between 1776 and 1860. And to us, like, it's really hard for us to understand like we look back at their mode of living in it from

1776 to 1860 you know it's from the the founding of the country i guess to right before the civil war and we don't really think in terms of technology but like they did have technology their technology our technology might be bits right it might be information technology computers the internet things like that but their technology is like wood, coal, iron, railroads. And I think it's extremely helpful to like study how people develop technology, you know, 200 years ago. And then not only how did they did that, but like, how did people respond to it and then compare their reactions to how humans develop and respond to technology today. Um, so I'll let you know when that's out, but I think it's going to be a really weird,

interesting kind of bonus episode I'll do. All right. I got a lot of notes. I got to get through this. Come on, guys. So again, I'm going to skip over a lot of parts of the book because I don't want to repeat anything I did in any of the previous two podcasts because I assume that if you listen to this, you listen to everyone. Okay. so it says, this is Frick at age 30. Frick at age 30 achieved his goal of becoming a millionaire. Frick had worked hard to attain his goal of making a million dollars. He had lived in a shack, gone into the mines, sacrificed much of the social life he loved,

and breathed the smoke and dust of his Coke ovens. Frick's aggressive building and investment during the recession had made him an extremely wealthy man. His poor health had necessitated that he learn the science of organization, which would be key to his future success. Illness had forced Clay, they're talking about, remember, he has like rheumatoid arthritis, but that's not it.

It's like, it might be. I forgot what the disease is, but he has inflammation in his joints, so maybe that is what it is. And he's bedridden for weeks at a time. Illness had forced Clay to allow lieutenants to evolve into managers. Frick had learned the secret that Carnegie had found years earlier, that good managers could multiply his efforts many times. So even though they die the same year i

think carnegie was like 10 or 14 years older than frick something like that um so they wind up doing a deal i covered that in a previous podcast i'm not going to cover too much i'm just gonna uh it's a question like and there's a debate i don't think it's at all obvious like who actually got the better of this deal, the initial deal? And some people think Carnegie does. I'm not entirely sure. Carnegie may have been planning a full takeover of Frick in the long run. Carnegie seemed at the time to be driven by his belief in backward vertical integration.

At the time he was closing the deal with Frick, meaning to bring the Koch company into his steel company, he was already looking at purchasing railroads and ore supply. Carnegie had jumped ahead of the deal to pressure the railroads for lower prices. It had been accepted as corporate mythology that Andrew Carnegie's mother whispered to him at the time. That's a very good thing for Mr. Frick, but what do we get out of it? But Carnegie knew exactly what he was doing. At the time, Frick had no idea of Carnegie's long-run plans. In 1882, it looked as if Frick had gotten the best of the deal, and he trusted Carnegie as a new partner. Frick would soon realize that he had been outfoxed by the steelmaster.

So that is interesting because Carnegie, of course, winds up taking over and getting majority ownership of Frick's company. I think before Frick finally leaves at the very end he owns like four or eight percent like a tiny percentage of it but so yeah i understand why you say he was outfoxed by them but remember frick was a chess player and to me it seems like he at one point realized that the profits from steel that the market for steel is much larger and the potential profits then like the best run coke company in the world is not going to make more money than the best run steel company in the world so to me he kind of used that as a leverage to get a ownership of a partial ownership of the best run steel company in the world which he runs for

a long time and makes it even better and i'm going to get into the financial performance of that why people call frick an organizational genius and i think he definitely is um so yeah i don't know yeah carnegie winds up controlling the company but maybe frick didn't want the company because he kept talking about he wanted to get into steel um and if you think about it frick frick's companies at the very end just wound up being valued at $70 million of the $480 million, I think, that Carnegie Steel is sold for. So $70 million for the entire company. Frick makes more than that personally, though. So was he outfoxed? I don't know.

I don't think so. Oh, I shouldn't say I don't think so. I'm not – oh, I shouldn't say I don't think so. I'm not entirely sure because the end result for Frick was so beneficial and probably greater than if he just kept his own company. Okay. So this is more about him as a human being. It says, even with all his business, Frick would usually spend evenings with his family. Frick proved to be the ideal father, demonstrating an amazing love of children.

I think this is extremely important. Had the press and workers seen him, they would have been shocked. The picture of Frick carrying and burping his son would not seem to fit his demonic public image. His love of children and family would be part of Frick that the public never saw. Frick's love of children would be exhibited throughout his life, but usually inside the family home and by anonymous donations to many children's charities. It is part of what might appear as a paradox, but in reality, it's part of the complexities of everyone's life. Okay, so we're talking about he's great, donating all his money to children. So there's two things I'm going to talk to you about.

First is the complex situation after Carnegie gets majority control of H.C. Frick, and then a bad idea that Frick does. And my takeaway from this bad idea is just because you can do something doesn't mean you actually should. So first let's get to the situation. Frick had many coke and coal interests, but he was a master of none. Carnegie could not afford to allow Frick tactical freedom in the Coke market and started to draw him with more financial interest in Carnegie Brothers because Frick would go out and make these syndicates.

They would control prices at the time. There was no law against it, so a lot of companies engaged in this. But the problem was you're increasing the cost of Coke, and Carnegie wants it to go down. So he's all right well i need to offset this by giving him more of an interest in carnegie brothers again like isn't that what frick wanted though so it says frick started a personal quest to study and understand steel making frick might have been flanked but he was far from out of the fight carne Carnegie also needed Frick's knowledge in running H.C. Frick. Frick had also gained the respect of Carnegie's largest and oldest partner,

Henry Phipps. That's like Carnegie's one of his oldest friends. That's actually important that Henry Phipps supports Frick. More and more, Phipps turned to Frick for financial advice on his investments. Carnegie now had a managerial genius working for him. The new model of trade mining divided workers into specialized jobs. Frick was a leader in applying this hierarchical worker model, and then technology helped Frick facilitate the change. In Carnegie's view, Frick's cost-cutting had always put him in the category of a great manager.

So this sentence, though, I think it's just one sentence that's really, really important to understand Frick. And it said, Frick started a personal quest to study and understand steelmaking. Remember, he was in Coke. He knew a lot about that and knew that, obviously, it's necessary in the production of steel. But now he's like, no, I'm all in on steelmaking. So if you go to davidsenner.com and you search Bill Gurley, I have notes on there that I think are extremely important. And it's this talk Bill Gurley gave, I think it was at University of Texas to a bunch of

college students. And in it, he talks about what he learned from three important people in his life. One of them is Danny Meyer, who I mentioned earlier. The other one is Bob Dylan, I think. And let me just pull it up while i'm talking to you so i don't sound dumb um bob dylan and then bobby knight which is like that famous um college basketball coach and he says something that um first of all i would read the notes that i wrote because i think they're interesting you could probably read them in five minutes but i'd watch the talk too because it's one of the most interesting talks i've ever come across um because it's talking about running down a dream.

Like how do you actually like have a career that – like how do you – let me tell you the title. Running Down a Dream, How to Succeed and Thrive in a Career You Love. You can just put that in YouTube too and you can watch the whole video. But I also linked to it from my site. So he said something that when I read that part about Frick, it made me think of what I learned from Bill. And he says, be obsessive about learning in your field. Hone your craft constantly. Understand everything you possibly can about your craft. Consider it an obligation. What an interesting use of words right there, right? Hold yourself

accountable. Keep learning over time. Study the history. Know the pioneers. Bill Gurley's telling you to not only listen to every episode of Founders, but tell your friends about it. It says strive to know more than anyone else about your particular craft. You should be the most knowledgeable person. So he talks about the difference of like not everybody is born with the same level of talents. But it is possible to gather more information than someone else. And then finally his point here, which I think Frick would also tell you if he was still alive today.

He's like, listen, the good news, if you're going to research something, this is your lucky day. Information is freely available on the internet. The bad news, you have zero excuse for not being the most knowledgeable person in any subject you want. The information is right there at your fingertips. I think that's just really good advice, and I think Frick was definitely an example of that. Okay, so let me get back to the book. Okay, Frick, don't do this.

Why did you do this? So a lot of these, you know, you have a lot of, it's a lot of physical labor. A lot of the laborers would live on company property or very close to it. They'd also set up like company stores, right? And Frick winds up building a nice side business on company stores. But I just think think the way he did this is just not right. It says, a mining industry study in 1884 showed how much the company stores were really a company abuse. The state survey of coal companies showed that around 20% of a coal company's profits were attributed to the company's store. That's crazy. One-fifth of every dollar in profit is coming from the company store. Frick had truly invented a major side business with over 15 general stores by 1884. And so then in the book, it has this

graph that shows like, okay, how much they sell coffee per pound and tea and flour and all the stuff that you need to survive. I'm not going to read it to you because the numbers are weird, but let's just say they compare what a company store would charge you it with an independent store the difference in price would be like if you went to your local convenience store right you're paying obviously a small premium versus if you were buying that same item after you got through security in an airport you see what i mean here like it's it's excessive and i just i don't think again just because you can do something doesn't mean you should. You're going to make enough money without gouging your employees.

It's just a way to get some of the wages that you're paying back to you. If it's necessary for your company to have a company store, like sell it to them at cost. I'm not saying give it away. You don't have to do like the crazy stuff that a lot of like tech companies like Google do now, but you don't have to nickel and dime them either. And, you know, nickel and dime is being nice. You're basically ripping them off.

So again, he doesn't always, smart people, and I'm sure like most people consider Frick smart, like they're capable of making dumb decisions just like all of us. And undoubtedly we would all do mistakes like this. So again, I just want to point that out. Like just because you can do something doesn't mean you should. And that's a good like model to think about like how you're making decisions. So like any book with Fricker Carnegie, there's a lot to do with unions and strikes and stuff. I'm skipping over a lot of that, but it just, I read this one paragraph. And so let me tell you a little about it. It says,

the aristocratic skill-oriented and crafts-based structure of the emagglutinated union, this is the union they went up fighting, no longer reflected the reality of unskilled immigrant labor of the mind. So what they're saying is a lot of these people came over from Europe. They had this craft-based structure. You had a master and you had a series of apprentices that had to learn the craft and the skill over a long period of time. But eventually what happened is there's an increase in technology and now you can do the same work with unskilled immigrant labor, right?

So you're saying like, hey, this union, it doesn't reflect the reality of unskilled immigrant labor to the minds and it says the unskilled um laborers had to be brought into the union to stand against management so before you'd only have like the the people they call like skilled labor uh they would be the only ones in union unskilled labor wouldn't be so, oh, now there's less and less skilled labor being used because of technology. And so we need to bring the unskilled labor to stand with us so we can actually be united and have a stance against management. But he says, even Frick didn't fully realize that technology was in reality beating the hated craft union approach. The amalgamated union itself failed to fully recognize the futility of a hierarchical craft system. So I read that and I'm like, oh my God.

Both sides didn't even realize what they were really fighting over. They both were approaching the same problem and blaming, one's blaming unions, one's blaming management, but it's not – it's neither. It's that technology has fundamentally changed this aspect of this trade, this work, and they're trying to hold on to a system, both sides, that no longer exists. So I found that to be rather interesting. Skipping ahead a little bit, there's some – this is a little quick about – a little quick paragraph about how different the personalities. To me, the personality types between Frick and Carnegie, they're so different that they were just destined for conflict.

And it said, Frick would never again, however, trust Carnegie fully. This is before they have a falling out. They have several ones before the final one. He says, I don't particularly – this is Bill Jones, which was a guy that worked for Carnegie and then eventually when Frick was running the company, worked for Frick. And this is what he's saying. He's saying, I don't particularly like Frick, nor do I admire him, but at least you always know where you stand, meaning he's the straight shooter,

what I was talking about earlier. With Carnegie, it's a different matter. He is a sidestepper. Carnegie in 1887 was a writer, philosopher, labor historian, patron of the arts, millionaire, corporate mogul, and philanthropist. No one was sure which Carnegie might show up. And then Frick, as you can imagine, just real simple and straightforward. Frick never envisioned himself as anything but as a businessman and a capitalist. And now I want to talk about, there's this great chapter, it's called An

Organizational Genius. And it gives us the results of Frick's organizational genius when he was the main partner, the person running Carnegie Steel. And, you know, has, deserves a great amount of credit with the end result. It winds up being, after it sold, the first billion-dollar corporation in world history. And it says, Frick's corporate view brought Carnegie's various plants and operations together as a corporate operating unit. Remember, this is the end result of Frick making, like that, what I mentioned before, like his desire. I'm going to study.

It's a personal quest to study the steelmaking industry. And they're saying even after the sale, there's a bunch of different steel companies that exist because Carnegie Steel winds up becoming United States Steel, which controls about 50% of the entire steel market in the country. And the reason they never went above 50% is because they also had, how can I put this politely? Let's just say they had very close relationships with the presidents and the Senate, or I guess the governing politicians in Washington. And they specifically said,

hey, if you stay 50% or below, you won't have to worry about antitrust. So they had some inside information going there. But anyways anyways even after that carney you know went out and he would go and like just focus on philanthropy and everything else but all the rest is basically everybody even if the he wasn't involved in your company people would solicit frick they thought he knew the industry better than anybody else which says a lot about it so here's the results of frick's quest and his his organizational genius

it says frick's corporate review brought cargie's various plans and operations together as a corporate operating unit he tied plants together via a corporate railroad that's what i was saying how they had their own railroad frick took vertical integration to its logical conclusion adding railroads limestone iron ore mines and shipping he coordinated management between operating divisions, taking the company to more productivity gains. From 1982, or excuse me, oh my God, what am I, dyslexic now? Okay, from 1892 to 1900, this is when FERC is running it, right? Carnegie Steel production went from 878,000 tons to 2.8 million tons. So let's just use round numbers. Went from 800,000 tons a year to 2.8 million tons

in eight years. Profits went from $4 million a year in 1982, that's, remember, that's, excuse me, 1892, that's in 1892 dollars, so way more than that, to 40 million in 1900. Their company was making $40 million a year in 1900. Never before had an organization achieved such results. And again, this is arguably the largest company in America,

so it's not like Frick is solely responsible, but a lot of the ideas came from him. Um, and he, oh, so this is, it was actually interesting. This is Frick, Frick's perspective on the differing roles of entrepreneurs and large corporations. Um, so it talks about, you know, he, um, he was very successful. Remember, they said his financial genius, his bookkeeping, his way he accounted for costs and kept an eye on everything

was like the cornerstone of success. It was interesting that by the time Frick and company sold, it had over 10,000 Coke ovens, but he had never built any, right? He bought them. So he said, Frick saw advancing technology

as the role of entrepreneurs, not large corporations. Now how different is that today? It's very similar. He would buy the technology once it was fully proven. Frick's view seems to have been proven over the years. That is, large corporations are inefficient at developing technology, and it is work best done by entrepreneurs. While the corporate

committee system lacked entrepreneurial drive, it made up for it in process enhancement. So he really picked up on if you combine the two, you can actually enhance the success of the corporation because you have to forego doing an activity that you know you're not good at. Like why would you do that? So the book continues. It says, Frick's role in the formation, structure, and growth of United States Steel is clearly understated by history. Henry Clay Frick was the linchpin that closed the deal between Morgan and Rockefeller in the formation of United States Steel. Interesting.

I don't know if John D. Rockefeller really held Henry Frick in high regard and did not hold Carnegie in high regard. Frick's meeting with Morgan in 1905 was a critical event that saved the corporation from internal and financial collapse. Frick, more than Morgan, Schwab, or others, left his signature on the infrastructure of America's first super corporation. Frick created a model for the corporate executives, production planning departments, committee management, and corporate cooperation. So what he's talking about there is Carnegie ran his business as a partnership, and he, as most founders do do is an autocrat and that's fine when you're smaller but to achieve like when you're building the world's first super corporation like none of this like this management philosophy existed so that what the author is telling us

like frick had a huge influence on even how today how companies are built and run it says frick's strongest belief oh i really like this idea too. I 100% believe in this and I'm worried that our modern education system is getting this fundamentally incorrect. So it says Frick's strongest belief after American capitalism was the need for education for all. Most of his giving was for education. With education, Frick believed it should be inspirational versus merely steeped in facts. In a letter to Princeton University in 1916, he stated, the fact that the college system is being called into question is an indication of some inherent weakness in it.

I have long felt myself in agreement with William George Jordan, the author of this book is called Mental Training, a Remedy for Education, who holds that the weakness of our whole system of education, including that given in colleges, is based on information, not inspiration. And I think what Frick is very astutely picking up there is he understands human nature. Like you can't – we're not machines. You can't just make us memorize a bunch of subjects that we're just not interested in. But if you make it inspiring, you don't have to make anybody do anything. They'll go as deep in their search for knowledge and for education without anybody need, like they'll go as deep as they want to go.

And no one has to tell them. Like you should be focused on inspiring. Think about your favorite teachers you've ever experienced in your lifetime. It's not the ones that are just merely like regurgitating information or facts at you. They're inspiring you. They take information and they make it like interesting,

almost entertaining, I would say. And I will close here with well this is his obituary I think they hit it right his hometown paper got it right I like how they describe him here so it says the name of Henry Clay Frick stands very near the top

of the list of builders of America. The difference between him and many thousands of other men was that he labored, excuse me, was as he labored, he dreamed. The humdrum years

of his modest toil were illuminated by the light that has led every great doer of the world's work. His dreams took the form and substance in vast structures of steel, in long lines of rails, in roaring furnaces fed by an improved fuel, in one of the most notable art collections the world has ever saw. There are some things that Frick did that other men would have done otherwise are left undone.

But as a great constructive personality, his name is destined to be perpetrated in the amazing annals of America's material development. And that is where I'll leave the story today. If you want to read the book, if you found this podcast interesting, you want to learn more about Henry Frick, I'd recommend buying the book. It is Henry Clay Frick, The Life of the Perfect Capitalist by Quentin Skarabek.

And if you want to do that and support the podcast at the same time, I leave a link in every podcast at the bottom of the show notes. You click on that, you can see every single book that I've done for the podcast in reverse chronological order. I've had a few people ask me if it's actually really important. They're like, I've bought a bunch of books, but I don't always use your link.

Does that matter? One, I just think reading is amazing. I think it's just a good use of your time. So it's more important to me that you read the book, any books that I happen to pique your interest about. Now, so just read them regardless. Now, it is actually important to use that link because I'm part of the Amazon affiliate program. So if you buy through that link because it's, I'm part of the Amazon affiliate program. So if I, if you buy through that link, Amazon sends me a small percentage of sale.

So what does that mean to you? So people have even asked me like, what, like, is it material to you? And Amazon does it on a sliding scale. So the more people that buy every month, the percentage goes up, right? So I think it starts like something like 4% and it goes up to like 8% or something like that. I don't, I had'd have to look at it. So it's a small percentage, but in aggregate, it's really not.

So this is the way I would really think about it, if you want to use that link or not. And again, it's amazon.com forward slash shop, forward slash founders podcast. And you don't have to remember the URL if you don't want to because it's everywhere. I think it's on every single podcast I've done. But this is the way I was like, is there like a story I could tell

that I could illustrate this differently? Like think about you go to any city and you have like these street performers and they're dancing or they're playing a guitar or like if you go to Subway in New York, like they're playing the saxophone and they have, you know, like people walk by and they throw them spare chains

or give them a dollar or something like that. So this is a digital medium. There's no way to do that. But picture if I was like a street performer sitting out there telling you about the stuff that I found interesting in these books. And you found that information valuable and you wanted to tip me a dollar. By you buying a book, not only do you support yourself because you're reading and you're building up your own knowledge, you're supporting the author who puts a ton of information like work into doing all this research for us and distilling the life of people so we can like instead of having to spend 70 years living maybe

we read their the results of that their life for eight eight to ten hours but you also support me but it's basically effectively tip me a dollar if you buy that book so you don't have to i'd much rather you just read i do appreciate if you do that and again it you don't have to, I'd much rather you just read. I do appreciate if you do that. And again, it's no additional cost to you. It's not like, you know, you go, you're going to buy it on Amazon, say the book's 10 bucks. Amazon's not going to charge you 11 so I can get a dollar. They just, they pay me out of their end. So I would think of thinking of it's like, you did a good job as a street performer here. I want to get the book and support myself, the author and you at the same time. So hopefully that makes it clear. Cause I, there's several people who've asked me

that question. So maybe I haven't done a good, good enough job. That makes when usually I get these same questions, like usually that's a telltale sign that I've done. Like I failed somewhere in, in, in communicating with you. Um, and I just think it's cool because it's kind of like a visual representation of the podcast, like see every single book that that has been covered so far um i don't know i think it just looks interesting anyways i've talked too much um i will be back next week with a podcast on steve jobs who again i don't think um you could i think we could there could be books written about him every year and i don't think we'd uh we'd ever stop being able to learn from just the way he developed products and ran businesses.

I've said this before. People think it's a cliche to admire or learn from Steve Jobs. I think it's the opposite. I believe it's the opposite. I believe people don't learn enough from him. And this is from somebody that's read two of his biographies and then two books on product design at Apple. So this next series that I'm doing will be a total of six books studying like kind of the – whether it's directly studying his life or studying the way he approached his company.

And I just never find that to be a waste of time ever. So anyways, hopefully you guys find that interesting. I will talk to you next week. If you like this podcast, sign up for the Misfit feed, please. That's the number one way to support. The second way is tell your friends, your families, text them, uh, the link to this episode or any other episode you do think is interesting, encourage them to sign up and spread to their friends as well. Thank you very much for your time. I consider it an absolute honor that you've made it this far, that you've listened to me.

And I will work very, very hard and diligently so I never abuse your attention. All right. Enjoy your week. I will be back. I'll talk to you next Sunday.