#371 James J. Hill: The Empire Builder
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I found out about James j. Hill from charlie monger. Monger said that hill was a great Operator like john rock filler and Andrew carney.

And I thought those very high praise. And what will jumps out when you read a biography on James shahin was just how difficult hill was to compete with. And in this biography, they are constantly comparing the way hill run his business to his main competitors.

And here's one example, says many with later compare hill with Henry villa. The comparison was inevitable, while hill was building carefully and checking his costs by village, built in ignorance of its costs amid mounting deficits. Village resent forced to resign the presidency.

He'll knew that the best defense against invading their roads with a Better built system that could Operate at lower rates. Well, just how sound was a system that James j. Hill built all the great northern railway last year for eighteen eighty nine to nineteen seventy? Hill died in one thousand and sixteen.

That's over fifty years after he died. And you will think that you'll find this interesting. The great ern railway in one thousand hundred and seventy is merged into the burning to northern railway, which then the burning to northern railway merged in one thousand ninety to the B N S.

F. railway. And in two thousand and ten, warn buffett bought the B N, S, F railway.

Buffet still owns IT to this day. And this all started with James j. hill. James j.

Hill knew that you could find a competitive vantage if you controlled your cost Better than your competition. In fact, sam walton said exactly that. Sam walton said, control your expenses Better than your competition.

This is where you can always find the competitive advantage. For twenty five years running, long before warmer was known as the nation's largest retailer. Er, we rank number one in our industry for the lowest ratio of expenses to sales.

Anyone who committed to being great building their business is obsessed with watching their cost. Think about last week, the founder I said, we pushed cost awareness at all levels with almost manic frenzy, warm up and is a great quote about this. He says a good manager must be a demand on costs.

Sawali inbar camper a James j. hill. Every person runs a to her own business, countless of issues. S greatest founders all have one thing in common. They made cost control and obsession.

That is exactly why ramp is now a partner of this pilgrim, because all the founders of rap listen to the podcast they picked up on the main theme from the park is over, over again. The importance of watching your cost and controlling your spend and how doing so gives you a massive competitive advantage. That is the reason that rap exist.

Rap exists to give you everything you need to control. Your rap exists to give you everything you need to make cost control an obsession. Ramp gives you easy use, corporate cards, spier entire team, automated expense reporting and cost control.

As you're about to hear this episode, ames j. Hill was obsessed with efficiency. Rap helps you run an efficient organization. I read a rap custom review. I think sums is up perfectly.

He says, ramp is like having a teammate who you never need to check in on because they have IT handled ramps. Website is incredible. Make history to be sunflowers proud by going to ramp.

Talk to learn how they can help you your business control cost, that is rap dot com. In the dead of winter in eighteen seventy, a Young James j. Hill was on a five hundred mile track from canada to send poll meteo ta.

He had travelled by dogsled horse back, and he was now on foot. IT was dark. He was exhausted in covering snow.

He ride in in the town of kalau, ia. In the decoder territory. The in keeper took one look at hill and refused to rent him a room.

Hill then had a backtrack on foot and trudging through snow fifteen miles to a farm house where a widow allowed him to stay for the night. James j. Hill would never forget the windows kindness.

He would not forget the cruelty of the in keeper in kalona who refused him shelter either. Ten years later, hill was building his road and intentionally built his line to avoid california, and instead pointed his road past the town of the window who had taken up in. As a result, kala Donna disappeared from the map.

The windows town became the capital of county. That town was renamed hills burgh in hills honor, and still exist to this day. That was a story that I found while watching four part documentary called the empire builder, James j.

Hill, in the great northern way that I was watching. At the same time, I was rereading this great biography on James hill called James j. Hill, empire builder of the northwest, which is written by Michael pem alone in the late eighteen hundred years.

In the early eighteen hundred ds, when James shahr was alive, he was one of the most famous entrepreneurs in america. His nickname was the empire builder. Hill had unlimited energy.

He was stubbing, he had a temper, he was supremely arrogant, and he did more to transform the northern front and nine states than any other single individual. So I want to talk about his early life. There's a few things that jump out when you are reading about James j.

Hills childhood, he grows up. Any poor family in canada said that family LED a frontier existence. Later in life, James talks about knowing what I was like to be poor and that his father was not very prosperous.

One of his most vivid childhood memories is the fact that he would lay awake at night staring at the moonlight that would beam through the holes in the roof. And that was back when he had two good eyes. When he was nine years old, he was out hunting with a bone ara.

The bow that he had hand made had snapped, and the area flies backwards, hitting his right eye and trying IT out of its socket. They were able to reattach the eye, but he was permanently blind out of that eye. And even with one eye, he read everything all the time.

There a handful treats that James j. Hill has, even when Young, that he Carries with him throughout his entire life. One is this for racial reading habit that left I proved to be very strong and would serve him faithful ly through a long lifetime of intensely close reading and reckoning hill would often tell the people about the inadequacies of his education.

He says he never went to school a day after he was fourteen, but he could read, write and reckon. And more importantly, he loved to learn. And this was surprised with one of the subject matter he love with history and biography.

Now, this is something he learned from reading a microblog. phy. He learned the power of one dynamic individual. This is what the books says. Like so many other nineteen century use, Young jim hill fell under the spell of napoli.

He came to believe in the strength of will, the power of one dynamic individual to change the world. He believed in the conquer hero. In fact, lyon, he says that the railroad entrepreneurs conquer.

That's the word he uses. He said that the road road entrepreneurs conquer the distance between remote communities in the american west. And so this is the way I thought about hill right before his father died, because his father's actually in the died suddenly on Christmas day when James is fourteen.

That's why he said, and never went to school. Day after a fall years old, he couldn't. He had to quit school and go to work right before his father's death.

He had a poor father of frontier existence, one eye, and he was a very racist reader. And so now he has no father. He, still living on the frontier, has to go to work to support his family, still has one ee, still reading everything he get his hands on.

But then we start to see something that another trade he cares for his entire life. He customer himself to a large workload. If you were able to ask James j.

Hill, starting at fourteen when he goes to work, and then all, eventually he dies. Ed, when he in the seventies, how many hours week do you work? His response would be all of them.

So at fourteen, he gets a job at a general store. He keeps the books, does clerical work, milk cows and cuts wood. He is still in canada.

A few years later, a trader from same park, minnesota, is at the store, and James is helping him with his horse. The trader hands James, a copy of an american newspaper with the headlines, says, splendid chances for Young men in the west. And the trader tells him, go out their Young man, that's the place for you.

Hill Carries the copy of the newspaper around, and he reads and read s. IT until he falls to pieces. And it's at seventeen. Many makes the most important decision of his life. And that's when he decides to seek adventure and profit and go to america.

Now there's something that we're going to talk a lot about, the fact that he was an engineering and of financial genius and something that opened up future opportunities for him as the fact that he saved all of his money. In fact, there's a quote they says, if you want to know whether you are destined to be a successful failure in life, you can easily find out the test is simple and IT is invaluable. Are you able to save money? If not drop out, you will lose.

You may think not, but you will lose as sure as you live. The seed of success is not in you. And so this is what the book says about this part of his life.

He left with six hundred dollars in cash, his life savings he took with him all the tls who would need to succeed in america, a quick intelligence, self sufficiency, genuine courage and engaging personality, a fierce ambition and a remarkable work ethics. So actually, we need to get into his personality. He was extremely charismatic.

He was natural salesman. He was a natural promoter. He held people's attention as he engage them in characteristic rapid fire, highly animated conversation, gestern expensively, and driving home his point with driving motions of his hands, he was the embodiment of high energy.

So keep that in mind because that's onna serve him well when he winds up starting to work in the role in industry, he doesn't start working the row in industry to his forty, so more than twenty years in the future. But at the time, road entrepreneurs actually called promoters James j. Hill was a natural borne promoter.

So he goes to the town that the trader was from, which is same pool, and he gets a job in sample, working for a company that serves a fleet of steamboats. His job title was technically shipping clerk, and he did maintain the books, but he also did a ton of manual labor, so he would have to handle incoming and outgoing fate. He'd work on the docks and in the warehouse.

He also gets a job working for whole sellers who are shipping commodities by both rail and by steam boat, which gives him a ton of experience in logistics and fording. This is going to another advantage that he's gonna any moves into railroad ding about twenty years. And so this is how hills burg ropy described this part of hills life.

He worked incredibly heart, sometimes laboring late into the night, falling asleep at his desk, then getting off for swiming the river and a cup of black coffee, then going back to work. These years formed his apprentice, and he learned much more than bookeen ping. He learned how to extract favorable rates from shippers, how to beat back their attempts to inflate their rates artificially, how to purchase commodities cheaply and undercut competitors, how to deliver efficiently, and how to cultivate and maintain the loyalty of customers by anticipating and looking after their every wish.

These lessons would serve him well when he switched over to the world of transportation. So in i'm sitting here reading about the work that hill is doing for these wholesale. This reminded me of a very similar experience that rocket fella had early in his career and so on.

To resume my note and highlight from what is my favorite rockfeller biography of all time is the book that I covered back on episode before. The book is called john d, the founding father of the rock fellers, and it's describing a Young rockfeller having a similar work experience as a Young James j. And at the time, rockefellers working for fuel in total, which are fording, groceries and other commodities by rail.

And the book says rockpier saw that posted rates, suppose bly fixed, could also be negotiated always, not as IT seemed on the outside favorite shipper at the end of the month would receive a rebate on that rate that could amount to a substantial sum. And so the note myself, when I read that is there is no standard oil monopoly out this happening. First, rebates played a huge role in rockvilles empire.

He says rebates existed in other industries. I just applied them to oil. And so when you read about the early crew s. Hill, john recover, I realized that the sequence that experience is happening is very important.

There is no standard oil empire without the experience of rock feller as a huge in total, and there is no great northern railway empire without James J. L. Having all these businesses and jobs that all interacted with the railroad for two decades before he gets control of his own railway.

And so hill is a great employee, but he doesn't want to stay an employee for ever. So if there's ever born out for ur. IT was jim hill.

Highly intelligent, highly motivated, highly IT is only a matter of time before he went into business on his own. There is a great line from max levchin, one of the cofounder of paypal. IT is from this book called the founders, read by my Jimmy SONY, which tells the history of paper.

And in that book, he says levchin added an unexpected qualification for paypal employees that he felt contributed to the company of success and the later achievements of of its alumni, of its earliest employees. Simply hated being employees, the very best employee at any job, at any level. Responsibility is the person who generally believes this is their last job.

Working for someone, the next single start will be their own. And one thing that James j. Hill understood is that relationships from around the world in a great way to transition from employee to entrepreneur is by partnering with an older, more established, wealthy businessman.

So he works very hard at preventing this guy name. Norman kitson is about a generation older than hill. He's one the most successful for in sample.

He had made money in the fur trade and as a steamboat Operator, eventually he's also going to a partner with hill on the roads as well. Norman kitson is going to be so important to hill that hill names his first born son, James Norman and kitsune honor. And so hill partners with Norman kitchin and helps kids in with his existing fur trading business.

And one of things that kids in everybody around jme shareholder just realized how focus he was says he'll drink little, work hard and confined his socializing to respectable settings. As always, he read incessantly. He permitted himself few distractions in his relentless drive to achieve wealth and status.

And so in addition to working with kids, and he's going to found his very first company, this is going to be the James j. Hill company. Now, this is very fascinating.

And again, another trade that he has for his entire life, inefficiency, disturbed him greatly. Okay, so he is watching. He's on the river bank. He saying that dockworkers are unloading cargo from steamboats on to horse carts. Then they would hold the cargo, use the horses records to hold the cargo up the hill to then be reloaded under railroad cars.

That extra step of adding the horse tron Carries up the hill disturbed him so much that he finds the a company to fix and to remove that steps. So at this is goes back to why he kept saying, if he can save money, you know, see, the success is not in new. And he was always very financially conservative, so much so, I guess I should tell this now, James j.

Hill reasoning he is saw remark who I guess I should tell I found him. I didn't know who James j. Hill was until many, many years ago, five, six years ago.

I'm reading poor charlie ec. And charlie monger James j. Holes mentioned twice in there. And so mongers talking about how great gym sina a found of costco is, he says, jim cinna is a fabulous business Operator like a carnegy rock feller or James j. hill.

And so uni ve talked about this is a bunch of times, but I think is really important when you find somebody you admire, like I admire charly mug, go find who they admire and read about them too. And so that's what maybe pick up a by few of James j half for the first time five or six years ago. But then when you read about, and we realized why monger and other people admire him so much, James j.

Hill was the only american railroad entrepreneur in history to build a railroad and never go bankrupt. And one of the things that meet him so hard to compete with his efficient, he was consulting, refining the efficiency of his robot. He was always obsessed with watching his costs, and there's multiple examples in his body where they compare how he managed the expense cide other world compared to his other competitors.

And he was costly, preaching the importance of being financially conservative in building for the long term. So at twenty seven years old, he went to withdrawing his lifesaving ings, which at the time was twenty five hundred dollars, and he uses that money to start the James j. Hill company.

This company is going to be a forwarding agent for the same paul and pacific railroad. That is the role he's eventually cut to buy out of bankrupcy many years in the future, kay. So his company is time they get hired to transfer goods from the riverboats and load them on the trains.

And so his first innovation was, hey, i'm just gonna build a two story warehouse on the river bank. The first floor is gna be level with the dock. The second story was level with the road.

Road, make IT much easy to transfer from boat to road road, and eliminated the need to unload and reload onto horses. I would say, from reading a lot about him, and then spent four years in the document too, he loved James j. Hill, loved a limiting steps.

A limiting that one step drastically reduced the cost of transfer. There's a maxim that I have about this, I think about all the time, says genius has the fewest moving parts. This will be a occurring thing for everything that held us if you study.

What he does is an unbelievably clear thinker. He limits the number of details, and then he makes every detail perfect. And so his verse business is founded on an observation that, hey, I could do that a Better way.

His second business is founded on an observation, the railroad Operators are spending a lot of money on fuel at the time, as mostly would I should start a business that sells fuel to the railroads. And so there's a ton of things going on his life. So right now he started more businesses.

He's learning mobile world roads. You'll see immediately he has this bias toward vertical integration, where we call vertical instagram. He has a great line for IT.

He called the rational integration. And then we also see that he is uncompromising standards. He is a very difficult person to deal with. So he wants up ordering with this guy. In grigs, they start hill grigs in company, and it's a fuel company, and IT started selling wood full fuel to the railroads.

And so at the exciting time, because hiles various are and he notices that coco is starting to be used in place of wood that had many more benefit that call had many more benefits as a fuel source wood. And so there's a line in the biography that again is another trade that I need to put into your brain about James j. hill.

He always quickly gets out in front of an emerging trend. He immediately goes all in on the cost basis of graphical hills rise, the top of the business. Interesting, not only because he formed a cornerstone of his career and generated venture capital for later investments, but also because he revealed the first time his instincts toward vertical integration and ruthless monopolization.

He purchased mass tones of high quality coal. Then, as the size of his shipments and his bargaining power grew, he were more celesc leverage railroads to deliver the coal I preferred rates. He formed a purchasing pool with other large coal businesses.

His partners controlled a third of all the free traveling on this railway road. Now, about his uncompromising standard, he applied this not only to his employees to for the rest of his life, but also to his partners. As time past, he felt his partner grigs wasn't cutting IT.

And so he forces a break up of the partnership. Greg gets mad, is going to set up his own fuel business and then compete directly with hill. And that leads us to another lifelong trade of hill, the fact he was very pragmatic, a great description of how his motive Operandi, how he, he had Operate thousand and career ever, the pragmatist, as well as a top competitor.

He'll also eventually previewed another future characteristic when he promptly changed course and paralyzed chief competitors to bring peace to the coal industry by joining together any market sharing consortium. Hill had an entirely pragmatic business personality. When competition suited him in the market, he competed fiercely, but when competition became wasteful to me, he did not hesitate to ended, even if a man joining with old enemies to create a monopoly.

Now, surely after this, he is going to leave the fuel business to go full time into your roads, because he thinks is the opportunity of life time. Before I get there, I need to tell you two other stories. I think we will give you a good idea of who hill was in, just how difficult that would be to have to compete with this guy.

So at the time, there is a violent dispute between two different groups on land owned by canada. Hill was worried this potential war with with his trade business, so he travels to canada to meet with a member of the house of comments of canada and a powerful businessman who he thought would help resolve the disasters. Te, this is a trip that happens in the dead of winter.

He leaves minnesota by rail. Then he has to transfer to stage coach, which is in a horse stage coach for the next hundred miles. Multiple times.

The stage coach gets stuck in the snow. They have to get out, actually just large, the stage coach from the snow. Then at the end of that route, he has to travel the next two hundred miles on force back into canada.

Then he has to hire a dogsled team through territory with all the americans that could potentially kill him. He has the meeting, and that has to do the entire trip in reverse. The whole thing takes seven weeks hell then get back and right to report to the canadian prime minister.

And as a result of this experience on the report, the prime minister is able to resolve the dispute and avoid a war that would interfere with J. J. Hills business.

That is a great description of being high agency. Hill was high agency. He also read everything, looking for an advantage.

So at the time, hill was begin a bunch of money taking people on goods on steamboats. He was the only Operator in this area. Then a competitor from canada starts running the same road, and they get into a rate war.

And as a result of the rate war, the profits that hill had was started to dwindle. So hill reads all the regulations of maritime law. He discovers an neglected maritime law that prohibited foreign ships from Operating an american waters.

He'll then persuades the U. S. Treasure department to enforce the law against his competitor that forces his competitor transfer ownership all of their steamboat to somebody else.

After that, then he'll merges with that competitor hand forces and forces another monopoly. I think now you're starting to see why mongers said, hey, this James ja hogue was one of the best business Operators. He's up there with a Carter geek.

He's up there with a rock feler. So I want to get into what is truly his life's work and that is working on the road he's going to start to afford in work on until he dies. And is a few quotes from James j.

Hill that are collected that I think give an idea of how important he just understood, how important road to the first quote, some people build great monuments. This railroad is my monument. And the second quote is, in the dawn of civilization, the trail gave way to the beaten path, and that gave way to the caravan.

An road as man emerged into history, he became a roadmaker. The Better the road, the more advanced. His development in his rural will be the most important work of his life, and he is Better at IT than anyone else.

And I know he told us, I just think this a lot of parallels between the railroad industry and the early internet industry. This is by far the most the rules time they buy for the most important industry of James jay hills day. Some of these stats about the robot in the sure, just minding.

So by a eighty five where roads brought in twice the revenue than the federal government did, roads were the nation's largest employer. Railroads were the largest private landholders in the country. They owned more than ten percent of the land in the united states.

Hills railroad will end the creation of other dragani industries, industries not just dragged antic companies, entire industries. As a result of his world, he helped launched the agricultural, timber and mining industry of the american west. And IT all started because he saw opportunity hiding in plane site. All of his businesses at time racket each side of the same on psychic road road, his warehouse business on one side, and his team boo busses on the other. In addition to selling fuel to the robotics.

And the reason I say he found an opportunity ding in plain site because he had a vasily different view on the potential, the same point pacific than anybody else stood in his day said, unlike most who view the same point pacific as a near worthless, he'll view IT as a miracle waiting to happen, a potentially wonders enterprise simply lacking competent leadership. He studied the rope, constantly reading every scrap of information he could find about IT, and boring anyone who would listen with in less detail as to what I could be one day. And the reason why to spend a unch of time telling you about the two decades of experience had before I entered a roading, because roydon is his life to work, is what we should focus on, right? But this previous experience on the other side was an asset that his role competitors lack.

This is what the books is. He posted a Prices advantage compared with most other sixteen century rail tightens, rather than coming from the outside world of finance, as more than did, he arose from the inside world of reading and transportation. And he knew this world in all its complexities.

He was about to demonstrate how certain well established regional capitals on the frontier could chAllenge, and even best larger eastern interest. Warn buffet has a great quote where he says, writing a check, separate conviction from conversation. And that is one of the things I admire about James j.

Hill, who is willing to go on in on the opportunity of a life time. So, you know, like this point in his life, he is in his late birdies. He's rich.

He's prosperous. He's got a growing family. He's got a great lifestyle. He's one of his cyr leading. He has a diversified set of businesses from fuel and transportation to warehousing and brokers. And yet he's so believes in this opportunity.

He's willing to risk everything and go all in on the roads is a very reminiscent look at the early of he had a diversified that of businesses already rich, but then he sees the opportunity and steel, and he sells off everything else and devotes all his time to building his steel company, is exactly what change the hole is going to do in building his role. And so he says, hill, now stick everything, had his entire career on the gamble for the railway. This is the same point, pacific, he being cutting back on any new commitments and moving out of his other businesses to devote his full attention to acquire the road.

This is why hill, who knew the road Better than anyone else, constantly argue to his friends. The potential prize defied description. He seemed completely fixated on the project.

Many years later, his banker friend recalled the gym. Md, spoken of IT to him probably several hundred times during the mid eighteen seventies. Time and time again, you and I see that being obsessed is an edge.

Hill was obsessed with completing the bankrupt same pm. pacific. He had been researching this for years before. He had the ability to gain control of the rail line. And this is how we thought about the opportunity.

Here is still the kind of opportunity came only with the opening of a new frontier once in a lifetime, once in many lifetimes. And so we see his same. M. O.

What's he going to do? He's going to read everything. He's going to learn everything.

This is another example, that maxim, the good ones no more, he summarized well his rush hunt, for whatever knowledge he could gain. I commence to get all the information. I could find copies of the mortgage of the complaints. Keep in mind, the role line is in bankrupcy. This is the way talking about I comments to get all the information I could find copies, the mortgages of the complaints of any books, publishing connection with the lawsuits of the records in the court, and such information as I could gather from parties who are likely to have information as to the situation in holland, that there's A A A controlling party.

Here is a uh, a collection of dutch investors as what talking about, as the situation with the bondholders, as the relation to the dutch committee, the position of the several lawsuits, the grounds upon which the lawsuits were brought and with council discuss the merits of our probable merits of those cases. And one of the most remarkable parts about this is the reason I I kept in, hey, he found an opportunity in hiding in plain side. First I thought, know, this is a crap line.

It's going, it's scrub, as the reasons scrub he has poor if this opportunity seems so impossible to other people that most people didn't even try. But remember, we just went over the fact that hill, James j. Hill, was excessively extremely high agency. So IT may have seemed impossible to them.

IT didn't seem impossible to him and so what he realized is like, I need to get the duck shares shareholders to settle with me so I can get this railway out of bankrupcy and the numbers that he is running, he is like OK. He's doing all the math and he's like, okay, I think we're going to need to invest five million dollars. And if we invest five million dollars, we get a nineteen million doll again.

Number one, he does not have five million dollars. He's going to go in with three other businessmen. All of them are richer and a little older than James shi.

Hou was at this point. They also combine, do not have five years. Number two, he underestimated how much money is going to be.

A much is a much larger of return, is going to cost five and half million or somewhere around there to get control of the the rail line. But the gain is going be a lot more than one thousand million. And so hill convinces the dutch investors to accept about a ten percent down payment on the purchase Price.

And then the rest is financed with bonds that that they pay them seven percent interest. So now we have gotten what I feels the most interesting part to me is how he built, Operated and managed his robot. This is one of the most important ideas that have been sharing in private conversations with founder friends.

Uh, this week is the fact that James j. Hill, he finds what he is best in the world, that what he is best at, at forty years old, in a field where he had no direct experience, he had been around the roads. He sold to roads.

He had business Jason, to roads. He had never Operated a road. There's a great quote by mark in reason, where mark says, I may firm believer that most people who do great things are doing them. For the first time, I.

Rather have someone all fired up to do something for the first time and someone who's done IT before and isn't that excited to do that again, you rarely go wrong giving someone who is high potential a shot. And so something is going to happen the very beginning when they take control the road road, we're going to see again this occurring trade. The James J.

O. Had, he had uncompromised standard. He only want to around increate incredibly talented people. And he was also the most comfortable doing the job himself.

So originally held in the four associates with gold had another guy name faring in charge, the actual construction, the road road. And like hill didn't the past. Even if you're his partner, if you, if he did not think you were good enough, he would cash to aside.

He is going to maintain his uncompromising standards and keep in like he has all of his money into the thing. If this thing fails, he'll lose everything. And so hill is going to cast aside, faring fairly is going to be ot reference.

Here is the old men. And this is the way the the bike phy describes IT. In patrice and impatient hill crowd, the old man were morceli's ly and began taking on more of the tasks of the managing himself, eventually removing farley completely. Hill now entered one of the most dynamic phases of his life for the first time, engaging in the work of railway construction. He would prove remarkably good at IT, demonstrating a rare ability to muster in command men and materials into control both a broad strategy and a murad of details.

Hill worked and worried by day and night he would be at his same pool office until after midnight, and then in the field, driving himself to the limit and seeing little of his family, he found IT imperative, he said, to be where the money was being spent. That is another maximum that James said he would repeat. He says, IT pays to be where the money is spent, staying close to the money's excEllent advice.

And here is a result. Hill soon had the worker's lane rails at a rate of more than two miles per day, over twice th Epace t hat f airly h ad m ade e arlier. And I think one of the most important things that hill did is he had a cradle in a philosophy which had a very, very easy interface with.

It's very clear and simple what he wants. He says, what we want is the best possible line, the shortest distance, the lowest grades and the least curator that we can build. And so remember, inefficiency of fence offence hill, the reason he talks about, the reason he wants the lowest grade and lead curtain.

So the grade is incline of the decline, where the track is. He wants to track to be as levels possible, because then the trains can maintain higher speeds and use less energy. Those advantages compound over the life of not only the local motor, but also very way, makes IT more few efficient and reduces the strain on all the moving parts.

So at the very beginning, he sets out to screw, this is gonna be our companies organization principle that we're going to build the company around the fact we want the best possible line, shortest distance, the lowest grades and the least curter. He also had another philosopher that to related to and enhances his crato. And that if you're going to do something, do IT.

So at last, a long time. And so hill is importing more expensive best mer rails from england. And so hills rails are technically more expensive, but they're more durable and thus more profitable in the long run because he doesn't have to rip up old, worn out rails and redo the track like his competitors do.

Another difference in the way he'd built his robot. Most of the people were financially on the east. He was out on the track. And so when he needs to figure out the best path for one of his rail trucks to take, he actually goes out in scout, sit himself personally on horseback, and so encounters, interviews and documentary and all to have the barter for talks about the fact that they come on micromanager. But the way I would put in something reappears in these bike phy over again.

And if it's something important, then you need to do yourself, and I think is biased, to be close to where the money is being spent, to do as much of the work is themselves as possible, to take the most important task and do himself, you have to. He talks over over again about the way he does in, like he manages his business in the way his competitors do. So his main competitors, this raw, called the northern vic.

And he says hill held the northern pacific group in utter contempt as a bunch of eastern speculators who did not have their act together. Many of them were not on site. They were back east.

And one thing to think, one thing to know about hill is that he had appreciation for those who had dirt underneath their fingernails. In this way, hill was very much, he reminded me of sam samra. Sam samurai is the main character in one of my favorite books that i've ever read.

The book is called the fish that ate the well, and IT is about these competing banana empire. So I want to to read a paragraphs that book that is technically describing sams MRI and how he approached building his banana business, but could also apply to James j. Hill and how he built his railway, and then how the muri and hills competitors were often some remote office somewhere.

So says the murray worked in the field besides his engineers, planters and macheda men. He was deep in the muck, sweat covered, swinging a blade. He helped map the plantations, plan the rines, clear the weeds, lay the track.

Unlike most of his competitors, he understood every part of his business. He was contemptuous. He was contemptuous of banana man who spent their lives in the north, far from plantations, those sacks, what do they know there? There were here.

And so one of the most important ways that he was different from his competence is that he insisted on the most direct and economical road. And you're like, okay, yeah, you're building a like, who wouldn't do that? okay.

Here's the problem. The northern pacific did not choose the most direct route. Why they were responding to terrible incentives.

Remember, charlie mongers says, always remember that incentives rule everything around you. So the U. S. Government at this time, this makes no sense to us.

Now I I guess is is, I mean, they're building rockets the same way and the defensive farms like this, I guess so I I guess this still uh, persist to this day. And borchers, so the government paid rural companies by the miles. Rural companies literally receive government issued bonds for every mile of track that they made.

They would also get land grants. So in additional bonds, s railroads are awarded land grants for every mile of track laid. This is holly. When of owning over ten percent, the country, when I mentioned earlier. So this meant that as the companies build more miles of track, they accuse more land on either side of the track, which then they could later sell and use that revenue.

So if you're the northern pacific and you're building a railroad across the state and you see these rules, these incentive that that guide the game that you're playing, you're not incentivize to take the most direct road. It's the opposite. You want as many miles as possible because the more miles of track let, the more twists and turns and everything else, the more money you get per mile and more than you get per mile.

Hill thought this was short term thinking, but most people in the railroad industry were short term thinkers. So the guy running the northern pacific is a guy in Henry villa. There is a bunch of comparisons between Henry village, who they cause calculator, and James j.

hill. And here is one example. Many observers would later compare hill with village. The comparison was, well, hill was building carefully and checking his costs. My nut village, built in ignorance of castle village, is going to drive his line to interbank graph y and jp morning actually going to get control of this, but that happens in the future. So says villas built an ignorance of cost.

Like other trans continental plunges and speculators, villa ler did, in fact, built rapidly and poorly much of his line would later have to be torn up and rebuilt. He had rushed so he could get massive land grants amid mounting deficits. Villa would then be forced to resign in eighteen and eighty four, so going to go back to hill in the early days.

Buildings, first line, these are traits, idea of building for long term, unconference zing standards, using the best materials, investing technology. These are things that hill is going to do for the next, for the mainly thirty seven years, like, but at this point he's building his first line, says keeping work creese in the fields and keeping them working at capacity proved especially difficile. Hill could hold and chose his workers.

He learned many of the men's names and would walk around along the track calling out to them. On the other hand, he routinely fired shift bosses when they failed to perform his satisfaction. When one whole crew rebuilt, he faced them off and fired the entire onta.

So it's talked about mutio times that he had very strict rules of conduct, not only if you fast, if you get fired, but yes, you could imagine on the frontier there's a lot of, like drunkenness and violence. So if you violate these codes of contact, a conduct, he would just the line that the description of this is that he would fire employees and an alarming rate for his entire life, he is going to refuse to bend his standards to other people. Now this is also a result.

He winds up managing the railroad to profitably right away. Go back to among the set botot. He is one of the best Operators ever.

The line showed net profits by the end of the year. Well, about five hundred thousand dollars, that is an eighteen seventy eight dollars. So says I made, well, about five hundred thousand hours, indicating what a vast earning potential is truly had among the associate.

Only hill had fully anticipated the roads true strength member before the service. I go to derick, there's no opportunity there within a year he's got in making over a half a million dollars in eighteen seventy eight dollars. And so right away you see that hills like this is going to be my life's work.

Another thing, another idea in maxim that I learned from truly monger, I think about all the time monger, would say that you need to find what you're good, good at, and then pound away at IT forever. That is a great description of what James j. Hill does, starting at age forty, with his first line with each passing month as the attention is fellow associated wandered, hill became ever more focused, and his authority over and control became nearly absolute.

Matching incredibly long hours at his desk with frequent for rays into the field, he built up a remarkable command. Of the details of the railroad, its infrastructure, its Operations and its land. Indeed, his knowledge of the road, road and even the most.

My new detail quickly became a matter of legend, to the idea of micro managing, of paying attention to every last detail. You know, this is no different from Steve jobs, from what, disney, when and all you see this over and over again. So he's gone to change the name of his rayo to express his ambition.

He's going to change IT to the great northern railway. And when the most important thing to understand about the great northern was that the great northern was built in stages slowly, but the way great businesses built is soly. They slowly created profitable lines, got them profitable before extending the road further into undeveloped western territory.

His competitors did not do that. They threw butter money there. They created something fast, I was sloppy, that had to be ripped up, and an eventually would go bankrupt. When you think about this, says the great northern was built in stages. They would soly create a profile lines, and then they would do that before spent extending the road further.

That's exactly how invar camp ra, did I car, how uni talk about this last week? And just like invar, which up unannounced, and do all these site visits, like five thirty in the morning. Now he wanted to stay close to where the money was being spent to use that hill maxon hills, doing the exact same thing.

He is constantly writing his online, looking for defects s looking for weaknesses and his tracks. He wants to taking notes on anything, tiny things, things like all there's bad housekeeping at one of the role stops that need to be fixed. Uh, this engine is a need to repair than his refixed.

Hey, this just missing. Workers at there do not have the designated post. He was a micro manager for sure, and i'm not using that term as a majority of this was his life work, and he was all in.

He simply could not as great description of them, I think that the government and might be the book, but he said something along lines that he just simply could not delegate authority and live with the outcome. And you add a tendency with a likely photographic memory. He's standing on a rural stop.

He sees the engine with their old number. So the engine number ninety four from that number, just seeing the number of the the engine of coming in. He walks up to the engineer, addresses him by name, notes that the engine has just been in for repairs, and he is able to speak in detail about what needs to be done.

That obsession over detail for an individual train. He does exact same thing for the industry itself. He says he'll learn the industry itself. Its parameters, problems and potential is genus lay precisely, and is the ability to master detail by fashioning broad vision and strategy. Hell memories, the details of sixteen hundred miles a rao track.

One time he gets a letter that complaints about the dreaming and a ditch that runs along a part of the track from a farmer, he'll remember that ditch said the farmer was write to complain and immediate aid dispatched his employees to fix IT. In effect, by using his company's on product over, over, over again, he becomes like best credit, and he sees exactly when he to be fixed. And so he just riding the rail back and fourth back and forth.

And there is only one other thing that he would be doing when he's not noticing defects that he needed to improve. He was reading, he says, his real car, the one he his personal record that he was travelling IT was Sparking. There's almost nothing in IT.

And he was Sparking in every aspect except one. IT was loaded with books. And so this next sentence is a great description of hill and will not come as a surprise to you.

He says this same intensity and drive be made him a very difficult man to work for and with. As his responsibility is mounted, so did his persona as a demanding, raging autocrat. While writing one of his trains that was succeeding the posted speed limit, he went up, inquired the engineer about IT.

When the poor engineer did not recognize his boss and casually admitted to transgression, hill fired him. Hill was not a man to disappoint, anger or cross. And so he was asked, like, how you build a road, road? And his answer was, work, hard work, intelligent work, and then more work.

He was doing this to be the very best. Another more thing that he would do, that his competence were not, is that he would reinvest profits back into infrastructure improvements. So he's constantly wanting to improve the engineering of his a railroad. And he was costly, trying to eliminate curves and decreased rates. And so his bias would be to using the best technology of the day, if that technology of the day would help him become more efficient, eliminate curves and decrease rates.

And this constant attention to is, over time, lowered his cost of Carrying tones, afraid remember everything is gna serve hills credo is simple to remember organizing principle that he's keeping everybody in line with that we what we want is the best possible line, shortest distance, lowest grade and least coverture that we can build. And he does that because he's knows that the best defensive, this is a highly competitive industry. Almost all of the competitors have more money than he does, and yet he whips them.

So he says they manage the finances, the road route, in a highly conservative, improved manner. They were not reckless speculators, but were in the business for the long run. Unlike jay old or Henry vella, jim hill took the opposite tack from speculative practices such as milking a railroad of its land grants and its resources, and then dumping the stock to a global public.

Instead, he advocated and practice a policy of cloud large percentages of profits directly back into the property, knowing that the best defense against invading Rowan s was a Better built system that could Operate at lower rates. That is one of the things that hell had in common with rockfeller could make a profit at rates so low that the same rates would put his competitors out of business. The best offence against invading race ads was a about about system that can Operate lower rates.

He'll worked incessantly and improving every aspect of the rural structure Operation. He travel back and forth along the line looking for dips and bumps and spying out curves that could be straighten and grades that could be lessen. More than any other rural leader of the day.

He had an engineers passion for minimizing curves and grades, knowing that these were the keys to the lower rates that would vanquish any competition. That part, to me, really speaks to hill as a Christman. It's excEllens for the sake of excEllence, is the professional pride of just doing your absolute best of learning everything you can and then doing whatever you focus on doing as well as you.

And so this long term biased James j. He had was another advantage because he's able to think years in the future where most of his competence can barely see beyond their nose. And one of things that he invested in over the long term is that he knew that the success of his line depended on attracting settlers to the region that is served by his road.

This is vast swath of uninhabited territory. And he had a great way to describe why this is so important. He said, even a railway built to the garden would fail if I only had adam and eve to serve to a lot of unique marketing ideas, too, on ways to attract settings.

The region. He winds up sending out over a hundred thousand panfillen fires, advertising open settlements in the fact that they had all these land developer for no cheap that you can move your entire family too, that you can own, that you can develop. And so you have advertising pressure on that was served by his robot.

He spreads that all through america. But he also does IT for a europe. He recruit farmers from europe to immigrate to the united states, get a bias for northern europeans.

He thought that he specifically targeted northern europe to try to get in the communist states because he thought they were the most talented and productive. And they give you an idea of this and the extreme personalities they were dealing with. He has a great quote where he says, give me sweet, so, you know, people from sweden give me sweets, snuff and whisky, and i'll build a railroad to hell.

He was fine recruiting settings one by one, but he thought he was smarter to recruit an entire village. And in some cases he would, he would target an entire church. He would convince entire congregations of churches to move and developed the land that is served by his road road.

And this is a great description of why he thought, as the important one of James j. Hills favorite teams that he voice repeatedly over the years stress the community of interest, the mutual entered dependence between the railroads and the regions they served. The two, you must be rich or poor together, he said.

And any regional career, even one with a defect of monopoly, would only harm itself if IT gorgeous customers with excessive rates. In fact, later on, he is going to be put under political pressure for his monopoly, and he will continue to make the case that the result of his monopoly is the fact that helps him push the Prices down, not up. And hill was such an important figure in this time of american business, city city pops up in all kinds of books.

So this is a book I read a long time ago called the hour of fate. And IT talks about the the war and temporary partnership between teddy roseville and J. P. Morgan. And teddy roseville is the one that's pressuring to, like, break up these monopoly and these trust and to give an idea of how extreme a personality the hill was, I says, hill, threaten the president and the attack y general, that if they do fight, they will have their hands ful and they will wish they had never been born before they get through with me.

So definitely extreme person, if you're willing to say that had the president, international general, let's go back to this point of his point is that his product is gonna neck people lands and that this connection is going to promote economic growth and really develop in create population centers. So long term, this is a good strategy to have this mutual interdependence to make sure that they thrive and they developed the land as much as possible. Because the more developed, more land, the more they, these immigrants, the land, the more people and goods are going to travel on hills round.

And so here's another quote from hill about this. He says we consider ourselves in the people longer line as partners in the prosperity of the country we both occupy if the farmer is many demigods into the lands where hill late track or farmers. So he says, if the farmers is not prosperous.

We are poor, and I know what it's like to be poor. And that policy of a landing centers was a long term policy, something he was able to build that come on for decades. His computor, again could not do this.

Go back to the northern acidic and Henry villa village frontal trans continent buildings free had left the M, P, the northern acidic severely over extended and in need of rebuilding much of its actually constructed mainline. The N. P, unlike the grey northern way, had alteration management.

So there's cc different people running the company, which hill continue to despise as a crew of mindless speculators. And he said they seemed unable to hold a consistent policy that there was a massive advantage for him. That was a description of village company. Now let's get a description of hills. Hill held the advantage of a wonderfully productive and well bill road, one that was slowly and carefully constructed.

It's just really hard to compete with a well run company because many times they they can make money at rates a poorly run company cannot we see that the case hill, hill proved able to blunt their thrust, the competitive trust by the simple way of forcing rates below what the opposition could bear, bolstered by his own well built road, which could hall high tons of fate more cheaply. And it's clear that things should be done the way they held at them because there's other benefits that he that he enjoys later on. So the book, the hour of fate that mention earlier, they described the advantage of James j.

Hill head over all the other railroad people that were forcing the bankrupt because the so many of the lines were bankrupt, and I had to be reorganized. And J. P.

Morgan was the main person that could you doing this? And he was doing IT so often. They didn't call IT railroad reorganization.

They call IT more organization. And the book is the point that James j. Hold the only one to avoid fate.

And it's because of this slow, deliberate way building for the long term, watching his cost a limit, just being obsessed about increasing efficiency, removing any defect. And the the book says James j. Hill had built a great northern with deliberate thrift and brutal efficiency.

His rural will become among the most profitable. And northwest. He did not need J.

P. Morgan the way other road road executives did. And this is the note of myself many years ago.

And I read the our feet is that financial strength was clipped tonight to J. P. mortgage. And when the most impressive things about James j hills, the that he's in this industry for thirty seven years, the industry is costly, changing and he's able to change in, adapt with the in fact, he should he seize the trends because he knows the business is he sees the trends change in happening before anybody else that so he's wonder at time, he's built up this fabulous regional, independent, regional right.

But he's on the first people to understand that the days of being able to have an independent regional rura was going to come to that to survive. He had to continue to extend and actually build a trans continue system. The regional railroads were going to be swallowed up by the bigger players.

He sees this as inevitable. And he's like, okay, this is the time right now, is the right time to get ahead of this, is the right time to build. And he thought he would work because at the time united states has ended into like this long period, deflation and interest strates are really love.

And so as a result, he'll saw this as I, oh, this may be the time in which I can build this for the lowest cost possible. And it's gonna need every advantage that he can muster, because he's gonna to build through the rocky mountains. And so the opposite of a low grade would be building over mountains.

And so he does what he always does. He reads everything. So he gets the set of mapps called the pacific survey. IT is a twelve volume set.

In the entire ital volume set, he finds one brief mention of a possible road that would give you a low passage through the rocky month. And so hill hire the best engineer. He can find this guy of john f.

Stevens. John f. Stevens is going to be the engineer that is going to build the great northern norway through the rockies about fifteen years later. Stevens will also be the chief engineer on building.

The panel can now, and I think this brief paragraphs lustration just how remote, dangerous and difficult this job is going to be in and how talented Stevens is. So IT says they're walking on snow shoes that they are just made. Stevens and his campaign climbed to the headwater in deep snow on the night of december eleven, when the third friend, indian guide, refused to go farther.

Stevens left him behind by a fire and went on a loan towards the tiring peaks. Suddenly, Stevens realized that he was astride and especially advantages pass. Unable to build a fire, he stunned around through the night in minus forty, recalled both to stay alive and to be sure that the western end of the passage really delay across the divide.

Stephen, talk about this later. The reason he had to keep walking, because if he stopped, he would have froze to death. This decision to build all the way to the pacific is going to lead to the hardest work of hills life.

IT is just struggle after struggle after struggle. This paragraph tus describes some of the problems he had dissolved, trying to manage a railroad while building a west hill work night and day, organizing our expenses. And the slow pace of construction workers in these remote mountains proved hard to get and to keep.

They often had to labor on steep slope with hand tls and to move dirt in hand. Carts and terrain, or even horses, proved difficult to use. Th Epace o f b uilding f ell t o m erely a f ew m iles p er w eek a nd h ill t hread a s h e s aw h is h ope o f c ompletion f ading a way.

And yet, even in the most difficult time of his life, you see one of his trades at the most pronounced at his life, is that he admires true excEllence, true talent, I think, a part of human natures, that competition is always respected. So keep on. His manager on the site is the cive engineer, john Stevens OK.

Stephen sends a report to him. He says, hey, we have to do a thirteen degree curve. And he will look at the reports that this is ridiculous.

Remember, he always wants to stay out possible. So he tells Stephen, hate, stop all construction until I get out there. And so hill travels out to this remote part.

He realizes, once he get there, realizes that Stevens did not obey orders, any kept construction going. So hill then tell Stevens, show me this curve. Stevens shows a tom.

And hill realizes that Stevens was right. IT had to be a thirteen degree curve. There was no other option. He'll also realized that Stevens was right to defy his direct order to stop construction, and so hill immediately raises Stephen salary by fifty percent. Stevens was the one that made IT possible for James j.

Hill to reach the gold hand for the great north railway, which was to get IT all the way to the pacific. And once he reached the, he didn't stop there. There is a great description of the way he will thought about this.

I think it's a great idea to think of your business as a living organism. Something is always adapting and improving. And he said to hill, the railroad trunk clients and their spreading branches form the living vital organism, which constantly needed to be replenished. Hills, life, passion, lay and straining curves, lowing grades, lane, high grade steel rails, raising tony ages, hold by ever larger cars and engines and lowing rates and extending over ever longer distances he cared most about fit, never fills.

There's a line in the butter of the founder of iker, the uni talked about last week that I think could also be a description of hill IT said the day he is free of ika, life for him will no longer be worth living. He loves IT, always wants to lie close as possible to IT and never tires of improving IT. James jay hill never stops improving his road road and works on IT until he dies.

And I think this is the perfect place to close, like most other robby bearings and captains of industry, and like dynamic individuals of any generation, James j. Hill displayed a doisy. His positive trades require remarkable, a quick intelligence in a power of analysis, an incredible power of will and personality, and an unparalleled ethic and commitment.

His negative attributes were myr images of the positive and extreme temper that sometimes exploded into rage, a willfulness that could turn into outrage, ruthlessness, a cold, manipulative veness that he used on advertising, and such a preoccupation with the purpose hand that he sometimes lost sight of the broader perspective. What does one conclude in the final analysis about the remarkable men? Surely the northwest will never again witness an individual with such sweeping power, simply because the unique opportunity provided by opening frontier and the transportation monopoly will never again appear.

IT is entirely appropriate that the passenger train from chicago to seattle is all the empire builder in his memory, for his hand reached every aspect of building the regional economy and social order, from transportation to agriculture, mining, lumbering, maritime trade and town and city building. His larger than life stature is well attested by the persistence, nearly eighty years after his death, of his memory and legend. The life of James j.

Hill certainly demonstrates the impact one willful individual can have on the course of history. As hill said, i've made my mark on the surface of the earth, and they can't wipe IT out. And that is where leave IT for the full story, highly recommended.

Reading the book, I will leave a link down below and shown notes in available will find a forecasts are calm. If you buy the book using the link, you'll be supporting pakia the same time, that is three hundred and seven, one books down one thousand ago. And antartica son, hey, can you do a favor? Can you get a David center 点 com and add your email to my personal email list？ And in return, I email you my top ten highlights and ideas for every books that I read.

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