David (0:00)

Leon Hess could recite the margins of every gasoline station on the East Coast. John Mackey, the founder of Whole Foods, could do the same for every Whole Foods store. I actually spent a few days with John Mackey and he told me one of the craziest things that anyone has ever said about the podcast. He had listened to over a hundred episodes before we met and he told me that if founders existed when he was younger, Whole Foods would still be an independent company. That since the podcast and all of history's greatest entrepreneurs constantly emphasized the importance of controlling expenses, he would have put more of a priority on it. Especially during good times, during boom times. It's very natural for a company and for human nature to just not watch your costs as closely because everything is going so well. This is something that history's greatest founders would warn against. In fact, Andrew Carnegie would repeat this mantra time and time again. He would say profits and prices recyclical subject to any number of transient forces of the marketplace. Costs, however, could be strictly controlled and any savings achieved in cost were permanent. This is something that I was talking about with my friend Eric who's the co founder and CEO of Ramp. Ramp is now the presenting sponsor of this podcast. I've gotten to know all the co founders of Ramp. I've spent a bunch of time with them over the last year or two. They all listen to the podcast and they've all picked up on the fact that the main theme from the podcast is on the importance of watching your costs and controlling your spend while and how doing so can give you a massive competitive advantage. That is a main theme for Ramp. The reason that Ramp exists is to give you everything you need to control your spend. Ramp gives you everything you need to control your cost. Ramp gives you easy to use corporate cards for your entire team. Automated expense reporting and cost control. Cost control is a very important line in Andrew Carnegie's biography where it says cost control became nearly an obsession. Ramp helps you do the same. Ramp helps you run an efficient organization. Ramp is everything you need to control your spend and optimize all of your financial operations on a single platform. Ramp's website is incredible. Make history greatest entrepreneurs proud by going to ramp.com to learn how they can help your business control costs. That is ramp.com one more tool that I want to tell you about is Vesto. A lot of my friends are using Vesto to see all of their company accounts in one view. Vesto helps you connect and control all of your business bank accounts from one dashboard. I know the founder Ben, we spent a bunch of time together and I've offered to help him by introducing him to some of my friends that I feel could benefit from Vesto. So I call one of my friends and he told me, david, I will meet with anyone that you want me to, but I have to tell you that we say no to over 90% of the software that we are pitched. And yet a week later I hear back from my friend and he says Ben and Vesto are great and that they signed up. So I asked my friend, I go, can you ask your team to explain the benefit they get from Vesto in their own words? So I'm going to read you this text message exchange. This is the response back. This is his team explaining the benefit they get from Vesto in their own words. It provides us the ability to view all of our bank accounts and loan accounts on one platform with a single sign on. It makes it much easier to grant access to users in one place as opposed to 20 different banks. ITextback what did they do before Vesto? We have 20 plus different bank logins across, like five accountants. We literally use 21 banks. So every bank has an account and a loan that multiple people need access and views to. Just to log in and see everything would take hours and be in different tabs. So if you have multiple accounts and multiple businesses, go to Vesto and schedule a demo with the founder, Ben, tell him David sent you. That is Vesto with a v. So vesto.com the link will also be down in the show notes. I hope you enjoyed this episode. Leon Hess was a remarkable person who led a remarkable life. The book that I want to talk to you about today is called Hess the Last Oil Baron and is written by Tina Davis and Jessica Resnik Ault. I actually want to start at the very end of the book. At the end of the book, the two authors actually talk about why they decided they spent so much time studying the life of Leon Hess and why they thought writing the book was really important. He said, we think this extraordinary man lived an extraordinary life. The reason we call Hess the last oil baron is that we believe him to be the last of his kind. The last man who could create a multi billion dollar, multinational, vertically integrated energy behemoth that could do everything from finding oil in far flung fields off the coast of Indonesia to selling you a tank of gas and a pack of gum at the local station on the corner. Sixteen years after his death, Leon's legacy is starting to be erased from popular memory. This book is an attempt to capture his life, the company he created, the man he was, and the ways in which his life and industry changed the nation. He should not disappear from public view. After reading the book, after spending the last several days rereading all of my notes and all of my highlights and really just thinking about the outline and the conversation I wanted to have with you, I couldn't agree more. He should not disappear from public view. I want to start the story of Leon Hess. I think the best way to start the story of Leon Hess is actually talking about his father and really the failures of his fathers or of his father that led to. In. In large part that led to the success of his son. I always think of this maxim that repeats throughout the history of entrepreneurship that you can always understand the son by the story of his father. The story of the father is embedded in the son. So Leon's dad was a failed entrepreneur. Said Leon's dad dabbled in. In many things, but never had great success at any of them. He had strong entrepreneurial energy and he tried his hand on a lot of things. He tried to sell produce and he opened a bunch of butcher shops. Then he tried in real estate, and finally he tried to deliver coal. So Leon's dad begins a small coal distribution business in New Jersey. This is very important. Without his dad doing this and then Leon realizing that they were in the wrong business, there would be no Hess Oil Corporation. So during the Great Depression, Leon's dad actually goes bankrupt. And as a result of this, Leon's family is unable to send him to college. He's the youngest son. The three older children all get to go to school. So even though Leon never went to college, he later succeeds in a cutthroat and highly technical business. Despite lacking a quote, unquote, formal education. There's a series of odd jobs that Leon does and Leon and his brothers do to try to help the family survive the Great Depression. One of them is they would go down to the Jersey Shore and actually dig up clams and then sell the clams to local restaurants. So they would work all day and they'd be lucky to make 50 to 75 cents a day from digging up clams. One of the benefits that Leon gets from being a kid and working for his father in a coal yard, delivering coal, is that he got used. He. He was accustomed to handling a large workload. It says the hard labor at the coal yard helped shape Leon's ethic of working long hours. He worked every weekend. You'll see, even when he has this giant you know, vertically integrated oil company, he would still work tirelessly all the time. There's stories of, you know, him popping up at plants at 2 in the morning to check on things to make sure everything's going well. Now, there's something that's. I think this is one of the most important parts of the book is he's gonna start this company at 19 years old, right? He's gonna get into the fuel delivery business. So the reason I think this is one of the most important parts of Leon's life story is because Leon realizes that his dad picked the wrong business. This also shows how shrewd and smart Leon was from a young age. Cause he's like, wait, the coal business is a dead end. We're hauling these hundred pound bags of coal and the profit margin is tiny. And with what might be one of the most important ideas Leon ever has, arguably the most important day ever has, he decides he's going to switch from delivering coal to delivering fuel oil. So I get to this part of this book. Leon reminded me of Sam Bronfman. So Sam Bronfman and Leon Hess both started multibillion dollar family dynasties, and both started by fixing the mistakes of their father. So I did not know who Sam Bronfin was. I didn't know about the Bronfin family many, many years ago. I'm actually reading this is all the way back on episode 53. I was reading Mike Ovitz's excellent autobiography, which is called who is Mike Ovitz? And in that book it talks about Mike is. Mike Ovitz is brokering a deal between Seagram, which is the Bronfman's family company. Seagram buys DMCA Universal for $5.7 billion. And so that led me to start researching the Bronfin family. I find out the patriarch of the Bronfin family is this guy named Sam Bronfman. I find his biography, I read it, and then I'd make an episode. This is episode 116, I think it was six, seven years ago. And in that episode is the very first time that I used the phrase generational inflection point, which is this idea that a single individual can change the trajectory of his entire family for generations to come. Sam Bronfin was that in the Bronfin family dynasty. Leon Hess is that for the. Leon is for the Hess family. So in that. The reason I thought of this when I was reading about Leon Hess and I got to this section of the book is because Sam's a young kid working in the family business. And he realizes that his dad is doing it wrong. His dad has the wrong idea. So Sam's dad sold horses. And every time. And Sam's like a little kid when this is happening. And so. And Sam's, you know, following his dad around and working the family business very similar to what Leon's trying to do with his father. Father when he was really young. And so every time Sam's dad would sell a horse, he would take the customer to a bar for a celebratory drink. And young Sam realizes, hey, dad, we're on the wrong side of this transaction. We're in the wrong business, that the guy selling us the drink is making more money than the guy selling the horse. And that observation, that single observation, that single idea that the young Sam Brahman has changes the Bronfin family forever. Sam proceeds to create, goes on and creates, you know, the world's largest liquor distilling firm. They. They branch out into all kinds of different businesses. To this day, the family, you know, a hundred, 150 years later, 120 years later, however long it's been, is still, you know, one of the wealthiest families in the world. So Leon realizes, dad, we're in the wrong business, and proceeds to switch the product, too. So Leon sees an opportunity, and he's like, I'm going to bet on oil, specifically fuel oil instead of coal, as a more economical way to get energy. So in his own words, later on, there's only a few quotes from Leon. He's a very quiet person. He says he started a quote, unquote, little oil company. So he starts his little oil Company in 1933. Leon is 19 years old. And as Leon describes this, you couldn't start from more humble beginnings. His. His entire oil company, his fuel company's fuel delivery service. He says, I bought a secondhand truck and I started selling heating oil, and I built this company up over a number of years. So 1933, 19 years old, one used truck. That is going to be the beginning of the Hess family dynasty. So he is going to find buyers for residual oil that refiners didn't want. What is residual oil coming that refiners didn't want? This is going to remind you, or reminded me at least of Sam Zimuri in the book the Fish that eat the World. You could think of the same business. The same way that Sam Zamura built his business is the same way that Leon Hess built his business, in the sense that they discovered opportunity hiding in plain sight. Literally, the product that both of both Sam's Murray and Leon Hess are going to sell was just being thrown away. This is one of the most important parts of the book and of Leon's life. So Leon realizes that he could sell what was called number six fuel oil. It's called residual oil, it's called black oil. Essentially it's this heavy, almost like molasses thick oil that other refiners are just throwing away. So Leon's plan is, hey, I'm going to take this seven year old secondhand used truck, right? It holds 615 gallons of oil. I'm going to go collect this fuel that you're throwing away anyway. So he gets a good deal on it from area refineries in New Jersey and then repurpose it as a cleaner alternative to coal. So what he realizes is that they call it light refining. It's really like essentially boiling, just boiling this black oil, this fuel oil. You could actually then go and resell it. So he sells it to businesses and manufacturers, use it to as heating oil. So he sells it to, for large ships can use it power plants. So a lot of like early electricity plants would use it. And then if you have like a giant factory and you need to heat in the winter, if you could use fuel oil for industrial heating as well. And so when I got to this section of the book, I went and pulled out my notes and highlights for the book on Sam's Murray, which is called the Fish that Eat the whale. It's episode 255. You haven't listened to it yet. The parallels between Sam and Leon are remarkable because they're both 19 at this exact same time when they find what will turn out to be their life's greatest opportunity. So I want to read some quotes here that sounds exactly like what's happening in Leon Hess's life. Sam spotted an opportunity where others saw nothing. The other refiners are literally throwing this in the trash. Is exactly what Sam Zamuri did when he got, when he started in the banana trade. He, he started with this thing, these things called ripes where they're, they would come into the port and they would just throw them away because they're like, hey, these things, you have to eat them in like the next two or three days. We can't deliver to the end customer fast enough. So let's just throw it away. So there's a quote from the Fish Ate the World that describes this opportunity that was hiding in plain sight. It says as far as he was concerned, ripes were considered trash only because Boston fruit And other large firms were too slow footed to cover ground. It was a calculation based on arrogance. I can be fast where others have been slow. I can hustle where others have been satisfied with the easy pickings of the trade. And I would say not only was the calculation based on arrogance, but in both of Leon's case and Sam's Amer's case, it was a calculation based on desperation. They had no other option but to succeed where others had failed. So five years later, okay, now we're 1938. Leon now has a fleet of about 10 trucks that are buying, you know, this, this previously disposed fuel oil from other refiners, doing this light boiling this light refinery and then transferring it and delivering it to other customers throughout the East Coast. He eventually is buying so much of this fuel oil that he has to buy a piece of land and he purchases some secondhand oil storage tanks and he starts an oil storage terminal on this river in New Jersey. Now, keep in mind, this is one of the fascinating things about this part of the book. Leon's 24 years old at this point and he's still living with his parents. And his dad is now working for Leon, helping him. In fact, Leon provides a job for his dad all the way until his dad was in his 90s. And so for the first few years of his oil business, this is what his business consists of. It says Leon cut his teeth on residual oil from refiners and built his business in the logistics around transporting oil to refineries as efficiently as possible and distributing the freshly produced fuel effectively. Now, he is very unusual. Leon is very unusual for most of the oil barons that you might read about because essentially he works backwards to the source. A lot of people, you know, they write a ton of books about the people actually discovering oil, right? He actually, Leon comes into the industry incrementally. So he starts with the sale of the end product before working his way backwards into fuel storage, refinery, and then finally oil exploration and actually discovery. So as a young Leon Hess is trying to build his oil business, World War II breaks out. This winds up becoming excessively important because he's going to go to Europe. Leon actually serves as the fuel supply officer for General Patton. This experience helps Leon develop a talent for logistics and moving fuel efficiently. They create this thing called the Red Ball Express. The Red Ball Express was a vital Allied logistics operation during World War II. It was established to rapidly transport supplies from Normandy to advancing troops following the D Day invasion. So if you've ever studied General Patton and I have a few Books on him, including his autobiography, which I'll probably do an episode on eventually. His. One of his main things was that he's just going to move faster than everybody else. He thought speed was one of the best weapons. In fact, he's got this great. If you haven't listened to Patton's speech to the 3rd army, it's one of the most famous speeches ever given. I've listened to it a bunch of times, but there's a couple lines in it that kind of give you what was important to Patton. And so when he says when a man is lying in a shell hole, if he just stays there all day, a German will get to him eventually. To hell with that. My men don't dig foxholes. Foxholes only slow up an offensive. Keep moving. Later in the speech he says, I don't want to get any messages saying I'm holding my position. We're not holding a goddamn thing. We're advancing constantly. And Patton wouldn't have been able to advance constantly. You know, he was a tanker without this, this the way to transport fuel rapidly and to follow him essentially as he just marches through France. And the way that he was able to have unearthed supplies was the Red Ball Express, which a young Leon Hess was working on. So the Red Ball Express was a marvel of logistics and helped ensure the Germans crumpled under the onslaught. Onslaught of a quick moving opposition. Said the Germans were still heavily reliant on moving things through by horses, moving fuel and supplies by horses, which blew my mind. The Red Ball Express lasted for 81 days. In its 81 days, it created a blueprint for how to move much needed supplies across the field of war. At its peak, 6,000 trucks were in operation, manned by 23,000 people, including drivers and mechanics. Red Ball trucks transported over 412. Wow, 412,000 tons of supplies in total in 81 days. So then we get to the part where post World War II he comes back to America and he's going to have this massive explosion in the size and success of his business. And so anytime there's an idea, I assume that you have Portrait. The book Portrait is Almack. If not, I'd order it immediately. And I would go to the index of that book and I would read about poor, about Charlie Munger's surfing model. And so what Munger does is essentially you can reverse engineer why somebody was successful. And so in that book there's a, there's a few pages where Munger is analyzing the outside success of Le Schwab. And Munger says anytime you have extreme success. It's usually, you know, this Lollapalooza effect. It's these multiple factors working together to create these exceptional results. And so he analyzes what were the multiple factors that were contributing to Les Schwab's success. He's like riding the Japanese tire wave. He had this brilliant incentive systems where he would share profits with 50% of the profits with each of the employees who worked in each store. He was a, you know, a talented fanatic. He was a gifted marketer and advertiser. He had this very systematic approach and how he executed and how he wanted all of his stores operating. And so over a few pages, you know, Munger is just analyzing this for us. And so I thought of this when I came back because there's, I feel the same exact thing is happening in Leon Hess's life where there's Leon's Post World War II wave, there's a series of events that were outside of his control that he surfed, that first of all interacted with each other to produce this Lollapalooza effect. But also he surfed magnificently. So first of all, he comes home and he comes back to New Jersey and he's just like, well, I just got essentially a world class education in logistics. How to use trucks to mu. To move fuel. That just so happens to be the best thing that could have happened to me, considering that is my business. Okay, so at this time, again, it goes back to, he's still moving fuel oil. This is that, you know, that has a consistency of molasses oil. Other oil men would call it the bottom of the barrel because it was so heavy. It was the heaviest of all the refined products. Okay, why is that important and why. At one point I think they said that. I think the book says that Leon has something like 80% of the market market share for fuel oil. Why? Because to move fuel oil successfully, right, you are required to move quickly and you have to have a mastery of logistics. Because if it's not kept at the right, first of all, it's not delivered fast enough. And if it's not kept warm enough, it will transform from liquid into like, it cools and it hardens. So the first part of Leon's Post World War II wave is the fact that now he is maybe has maybe the most advanced logistics training for any of his competitors, and he's able to transport this faster and more efficiently than anybody else. So number one, he's just able to get the job done. Number two, fuel oil is now going to have A massive increase in demand. Demand for fuel oil surged to unprecedented levels as its use for power generation, electricity plants used it and in shipping expanded. Hess called fuel oil the workhorse fuel of industrial America for its uses in utility boilers, fuel factory machinery and heating large buildings. Number three, you have this massive explosion in demand of driving. The industry grew to serve a burgeoning US Middle class that wanted and needed to drive more. And Hess metamorphosized from a small dealer into one of the largest gasoline retailers on the East Coast. This is part of Hess's constant march to go to the source. Memory starts at fuel delivery, then storage, then refineries, then retail gas stations, and then finally oil drilling and exploration. Number four, this is a massive increase. This is wild to me, the expansion of the industry that Hess is operating in in 45 years. Okay, so let's start the dawn of the 20th century when Rockefeller was at its peak, right? Production was 174,000 barrels a day. Even at that size, that can make Rockefeller probably the richest person on the planet. Right? You fast forward 45 years where we are in the story where a young Leon Hess is building his oil company. The production is now 4.6 million barrels a day. And then number five, Leon starts building relationships and contacts which are going to lead to greater sources of capital. So if you really think about what, what the Leon's Post World War II wave, number one, he's got the logistics expertise, right person, right set of skills, right time. Number two, the demand for fuel oil is exploding. Number three, the US Economy expands, drastically increasing the purchasing power of the middle class. And as a result, demand for gasoline skyrockets. Number four, America's insatiable appetite for all types of oil. And then number five, he finally unlocks relationships in capital, including going public, which I'll talk about in a minute, but I need to talk about what one of maybe the most important relationship that he ever builds is this relationship with this guy named David Willins. David is almost like essentially it's his, it's going to wind up being his father in law, but I would think of him as almost like the father that Leon chose. So David is actually the Attorney General of New Jersey. And the book says that Leon's connection to David was critical in helping shape his success. David would become his friend, his advisor, ultimately his father in law and helped support Leon's transformation from coal hauler to oil baron. Leon met David before the war. In fact, while he was fighting in the war, David oversaw Leon's business. So he comes back from the war. His business has growing demand, but he's in dire need of money. And so actually, David helps Leon build a relationship with Chase Manhattan Bank. That bank at the time is being run by David Rockefeller, which is an interesting connection here. And one of the most important traits for Leon was loyalty. He expected loyalty, and he gave it in return. And so because he says he gave all of his business to Chase because of the effort they put into building the relationship with him, he says they were the only ones who ever paid any attention to me. The rest of the banks never took me seriously. David saw a lot of potential in Leon. In fact, David is the one that introduced his daughter Norma to Leon. They're going to be married for the rest of their lives. At the time where he does this, Leon doesn't have a lot of money. All the money's going back into the business. So he actually has to borrow money to buy a suit. For their first date, the contrast between their classes was obvious. It says the daughter of the Attorney General, who had grown up with a great deal of privilege, was in a different class from the owner of a fledgling fuel business. And yet David and Leon continued to share a deep connection until David died in 1988. And after David died, someone else described David's view and relationship with Leon. Says David didn't mind rich people. He liked them. But the ones he really liked started out poor, like his son in law, Leon, whom he loved and is also from David, where Leon learned you have to balance work and family. So it says Hess was fully established as Leon's first child before he met Norma. And he spent long evenings and weekends dedicated to the company's birth and early upbringing. But just as David had balanced a demanding career with dinner at home each evening, Leon did the same, sometimes having to return to the office for long hours at night after spending time with his wife and children. So then Leon continues his march to getting closer and closer to the actual source. At this point, he's buying and selling and storing fuels. And Leon wasn't going to be content with just buying oil from refineries. He's going to start his own refineries. So he actually builds his first refinery in New Jersey in 1957. So now, as a result, the company would no longer just be a middleman between refiners and their customers. It can now make its own product at its own facility. And then he starts adding other refineries, builds one in Texas. But eventually, the reason I want to read this part to you, this entire section, which this Actually blew my mind because again, speaks to the size and the scope of his ambition. You know, he starts out as this 19 year old kid used truck. I'm just going to try to make my own way in this world. Now fast forward three decades later, he winds up building the largest refinery in the Western hemisphere and he does so in the US Virgin Islands. Why? Why US Virgin Islands? Because the US Virgin Islands hold a key advantage. So the location that he chooses for this refinery allowed Leon to take advantage of federal tax benefits. This may be the only place in the world he could have done this. So the refinery is able to secure foreign refiner status which allows it to circumvent federal rules that required the use of higher cost US flagged vessels when shipping oil to the east coast, while simultaneously at the same time also receiving subsidies from the United States Department of Energy as a domestic refinery. There is a line I read in the biography the Autobiography of Trader Joe, the guy that started, you know, the grocery store that I think about over and over again. And he says, as I learned time and time again, success in business often rests on a minute reading of the regulations that impact your business. That's exactly what Leon Hess did here. He picked the one place on the planet we had this combination of unfair, and I don't mean it's legal because it's completely legal of unfair advantages. And I want to stack another unfair advantage on top of this. Or Leon stack another unfair advantage advantage on the top of this. It was going to be a local monopoly. There was only going to be one company allowed to build a refinery on the island. Leon had to win this. In fact, there's a funny interview with the governor of the Virgin Islands talking about how he negotiated, how, how Leon Hess negotiated. Says from the day Leon Hess entered my office, he did not leave the Virgin Islands until the deal was consummated. And then Leon also negotiated for another series of benefits. So he also gets 16 years tax free in St. Croix, partial government reimbursement for dredging a channel and free use of that channel for 16 years. Now this, this minute reading of regulations, it's not like this is a one off. This is not something that Leon did one time. He found another loophole and another like regulatory advantage. Leon figured out ways to make laws work to his advantage. In one instance, he found that oil would not be considered an importance and thus therefore taxed right as one if he bought it from St. Lucia to St. Croix by barge. So he took apart his large ships, had the engine propulsion cut in Two and the bulkheads welded on each side and then pinned them back together. The pins were huge. So technically the drive portion could be disconnected from the cargo portion. While it may not appear so to the untrained eye, legally these boats qualified as barges. So the massive quantities of oil they carried were exempted from the taxes that would otherwise be levied. So now he has the largest refinery in the Western Hemisphere. It's perfectly located because he's able to refine oil coming from the Middle east and South America. He refines it in the US Virgin Islands and then ships that fuel to customers on the east coast of America. Now there is an idea in here where if you're looking to do something in your business, I bet you if you study other industries or other companies in your same industry, they attempted something in the past that was similar and yet forgotten. He's building in this in, I think, 1960s. He wasn't the first to look in the Caribbean. He wasn't the first oil baron to build a refinery in the Caribbean. Shell built one in 1918 in Curacao, and Standard Oil had built a refinery in Aruba in 1929. And so there's all these stories in the book about how important this one refinery was for his business. And you see this with his actions. The refinery was incredibly important to Leon. So he would fly in every Friday to inspect his refinery to review its operations, finances and crude state. Across the refining industry, stories of Leon's persistence at the plant became legend. Leon would show up and check units at 2am to make sure they were running properly. At the same time, he's building his refineries, he's also starting to expand into gas stations. He opens his first gas station in 1960 in New Jersey. By the end of the decade, he had gas stations in 16 states. There was an interesting line here that I didn't realize. He purposely did the opposite and simplified what his gas station did compared to the existing competitors. Unlike his competitors, the head station attendants didn't change your oil. They didn't carry batteries, tires or windshield wipers or have car mechanics on site. And for a long time they wouldn't even take credit cards because Leon felt that slowed the refueling process down. And so two separate times, Hess merges with another company. This is very important. So the first time it reads to me that he merges with this company just to take Hess public. So in 1962, Hess merges with this company called Clear Track Corporation. They used to be a Cleveland based farm equipment maker, okay. But they just sold off most of its equipment business the year before. So I'm not at all, it's not at all obvious like what the company's actually doing, but this is what the book says. What Leon was getting with the purchase was a seat on the New York Stock Exchange. Hess would finally become a publicly traded company. And becoming a publicly traded company opened new sources of financing to Leon. Six years later, there's this oil exploration company called Amerida. The name comes from combining America and Canada together. So in December 1968, Hess merges with Amerita. This is by far the biggest deal in Hess's history. So it takes, you know, a company that originated as this small time distributor of residual oil. Now with the combination of emeritus, business looks like a miniature version of Exxon. So the deal makes Hess into a vertically integrated energy company with its hands in every single stage of oil's journey from discovery to gas tank. Leon had joined the board 11 months before the merger was announced. To get that seat, he had to make a massive investment. So Hess made a big investment two years earlier. They spent a hundred million dollars to buy 9.7% stake in the company. And so this is another example of Leon getting closer to the source, to the actual discovery of oil. Right, and having more control over his business. Because after he drastically expands his refining capability, which I just told you about, he's buying, having to buy more and more oil. In fact, he is Shell's biggest single customer. And one thing that Leon was worried about, he's like he didn't want his company to be held captive to producers anymore. And the reason the combination of Hess and Emerita was actually interesting. So Hess was an oil refining and marketing company with no significant production facilities. And Emerita was an oil producing company with no refining or marketing facilities at all. Look how close they were to like the, the, each other's production. So the year of the merger in 1968, Hess was refining an average of a quarter million barrels of crude oil a day. And Amerita is producing about 290,000 barrels a day. And there's a lot of stories of just how wild the oil business is. In the book, there's a great line, it says the oil business is not all beer and skittles. I was on my back last week, I had bronchitis. I was super sick for almost a week. And so I wound up watching a bunch of things that I normally wouldn't have time to do. And I actually binge watched the first season of this show called Landman. Which I thought was actually pretty good. And there's a great line in Landman where he said, you know, it's, it's a, it's a show about the oil business in Texas. And there's a great line from, you know, the billionaire head of the oil company, the. One of the main characters in Landman, he says, describing the oil business, which I thought was great, he says, our business is a constant state of crisis interrupted by periods of immense success. I thought that was a great way to put it. One of the crazy stories in the book is Leon's talking about, you know, he's going all over the world to source more oil. And in some cases, you know, these are, these are dictators. And so he's actually having to negotiate with like, a representative of Gaddafi in Libya. And right in the middle of a negotiation, the guy just pulls out a gun and puts his pistol on, on the table, on the table between them. I guess it's some kind of like, bargaining chip or just saying, hey, realize who you're dealing with here. But there's one thing that I admired about Leon was he's, he's got a. He's got a bit of like an old school east coast, like, gangster to him. And I don't mean that as a pejorative. I mean, like, he believed in like a handshake, handshake agreement between gentlemen. He thought it was your duty to keep your mouth shut. He would talk about, don't write anything down. Even when he was like, bribing people, he did it in an honorable way. So he writes a, a letter to shareholders. Remember, this is a publicly traded company and he has to write a letter to shareholders because the regulations in the oil industry are changing. So I just want to read some excerpts from this letter to the shareholders. He goes, in the hope of obtaining a benefit for our corporation, I made a series of payments, substantial in the aggregate, to a foreign government official. The bribery was unsuccessful. He told shareholders the payments were made in the hope of promoting a project which never materialized. And the company received nothing as a result of the payments. The bribery money was his. It did not come from the company's coffers and had, and he hadn't sought any reimbursement and no deductions were taken from the payments. So again, even when he's, even when he's bribing, you know, he's, he's doing it in an honorable way. He's like I did with my own money. I didn't do like, I didn't ask to be. It didn't come from the company. I didn't ask for any reimbursements. But the reason he brought this up is because less than a year later, the payments that Leon was writing about would be illegal because Congress enacted a new source of regulation and it's called the Foreign Corrupt Practices act, to make overseas bribery and political contributions a crime in the United States. There's actually a pretty funny line in the book that came right after this. You know, it kind of talked about, essentially says a practice as old as cross border trade itself was now under scrutiny. And I think it just speaks to how wild the oil business is. Like he, you know, he's, he, in some cases he's negotiating with people and they're like, essentially one family runs the entire country. It's like, okay, yeah, it's not just, oh, you can buy oil and here's the money. It's like, here's the price for the oil. By the way. You have to use this company and my, my cousin happens to run that company and you have to use, if you need to build roads, then you have to use this road construction company. Oh yeah, that happens to be my brother in law. It's just, there's this just, just a wild life and industry that this guy that Leon, you know, built this, this massive company in. But I, I did think it was very fascinating that even though the company was publicly traded, like he really ram it, ran it like a family business. And one of the things I most admired about Leon was how close he was to not only his son, but his entire, his entire family. He ran essentially this was like a family venture for 80 years. It just so happened to be one of the, I think it was like the 14th most valuable oil company in the world. And I think this really speaks to this where his son John, who takes over as a seer role after Leon does at John's wedding. You know, Leon was the best man. And so the book talks about the family business at length. It says the Hesses were a close knit family. They spent time together not out of obligation, but out of general affinity. And they were fiercely loyal to one another. For Leon, his life's ventures were centered on the family. So there's a bunch of interviews and quotes from his daughters. Says he was an extraordinary father and role model. This is his daughter, Marlene Hess. His standards for himself and our family were high. He couldn't tolerate deadbeats or liars. He was a man of his word, so we had to be too. He expected the best of Himself and also all of us. He worked hard and so did we. He cared deeply for his fellow man and instilled that in us, too. His other daughter, Constance, made a list of other lessons that she remembered from her father. This is after her father passed away. Treasure a good name. Treasure a good name. Something he'd repeat over and over again. Hold your cards close to your chest. Love is unconditional. And this is. This is really funny. If you have to talk to the press, make sure that you're not the story. And so, as a young girl in the 1950s, his daughter Marlene said she would remember wearing her pajamas and her slippers and returning to Leon's office with him after dinner. So at this time, the company's headquarters were still a set of trailers. This part actually reminded me of Walt Disney. I read this 700 page biography of Walt Disney multiple times, and there's a great excerpt from that biography about Walt Disney and the way he was with his daughters that reminded me of the way Leon Hess was with his daughters. Says Walt Disney would chase the girls around the house, cackling like the witch from Snow White. Or he would troll them endlessly by their heels for hours and hours. Diane would say, that's one of Walt's daughters. Or he would stand in the swimming pool and let them climb onto his shoulders. I thought that my father was the strongest man in the world and the most fun, Dan recalled. At night, he would read to them, and on the weekends he would take them either to Griffin park or to ride the merry go round or to the studio where they would follow him as he snooped about and pedal their bikes around the empty grounds while he worked. This is what Walt said. They used to go. They used to love to go with me in those days. And that was some of the happiest days of my life. They were in love with their dad. If you did not listen to the episode that is episode 346. It's called How Walt Disney Built Himself. It's one of the most incredible books you can read about. One of the most incredible entrepreneurs to ever live outside of the office. Leon was there for his children while still running an increasingly major company. During the summer, his son would participate in swim meets. He would arrive just in time to see John swim and then get back into his car where a driver was waiting to whisk him away, back to the office. Something that the Hess family had in common with a lot of the people you and I have been discussing the past few weeks. If you look at The Wallenbergs or Hedy Green, they train them in business. Both the Green family, the Wallenberg family, and now the Hesses at a very, very young age is really smart. Something Estee Lauder's family did, something the Walton family did. This just this idea just reappears over again. Says the whole Hess's social life largely spun around Leon's growing business network as they entertained bankers and colleagues at home, indoctrinating their children, especially John, in the corporation's culture, and preparing John to run the rapidly expanding business. From the age of seven, John was being groomed to take over Hess. John spent time in the trenches. This is just like the Wallenbergs and the Greens again. John spent time in the trenches learning the business by pumping gas at a station in Jersey, doing accounting for a refinery, or taking part in operations in St. Croix and the oil fields in Oklahoma. In college, John studied Arabic and Farsi, preparing for a career leading a multinational oil company. After getting his undergraduate degree at Harvard, John attended business school, striking up connections that would help him guide the company. Leon would tell his son and his daughters, treasure a good name. He wanted the Hess name to be recognized and respected. And so throughout the book, his kids are talking about the way he ran his company. The people that are working inside of the Hess company for multiple decades talked about this. So I made a list of really just things that reappear over and over again. Leon was extremely focused on details and appearances. Details, details, details, over and over again. He was obsessed with the details of delivery. At budget meetings, he would quiz the head of the company's trucking division on the amount of life left in the tires. There's several quotes throughout the book on the importance of cleanliness. He was obsessed with things being clean. Says the first thing I look at in an oil tanker is the engine room bilge. Clean bilges denote good housekeeping. He said that in 1987. Remember, he starts his company in 1933. He dies in 1999. He was obsessed with cleanliness in 1933. He was still obsessed with cleanliness in 1987, right from the start, he made sure his trucks were kept clean. And employees learned that working at a Hess facility meant painting and repainting to make everything look like new, whether it was a huge storage tank or the white curb at the Hess gas stations. Again, the importance of cleanliness and order is repeated. Leon realized early on that having the cleanest, safest seeming gas stations was not only aesthetically pleasing, it could also provide a business advantage as the family Car and car trips were becoming more prevalent. Hess would be the easy choice for those looking for quick service and clean bathrooms, giving him a potential leg up on rivals who did not put as much emphasis on appearances. As a manager, Leon had been described as tough but fair. He had an exacting eye for detail, but he imposed the same standards on himself as he did on others. Work hard work. Know everything you could about your business. And if you made a mistake, learn from it and move on. He is often described as fatherly, and no one at either the Hess company or the New York Jets. He owns the New York jets for, like, three decades, which I'll get to in a minute, wanted to disappoint him. This is something his players talked about, people in the coaches staff, people that the executives and even people working in refineries for Hess talked about. They. They did not. They admired him so much. They worked hard, and they didn't want to disappoint him. Uh, he wasn't prone to emotional outbursts. He came from a school in which a handshake was sufficient for a deal. Leon was a gambler at heart. He wasn't afraid of risk. Leon ran his company with the ambition of a major oil company combined with the mindset of a startup. And one thing that he would do, he felt the fact that he was always on the road. He was a. He was a tireless traveler that he was able to seek out opportunity where other larger oil companies were kind of a little lazier, and they wanted opportunities to come to him, come to them. Leon traveled a lot for his job, and he encouraged those who work for him to travel as well, to find new opportunities. As an entrepreneur, Leon had the opposite mindset of some of the major oil companies that let opportunities find them. He was always hungry for new prospects. He was never averse to taking risks. He loved negotiating. He was unpredictable. And he used that unpredictability to his advantage. He would take a lot of trouble to get to know his counterparties and their families. He built very strong relationships. He had great connections all over the world. This is very similar to the Wallenbergs, if you listen to the last episode I just did. Leon knew each employee by name. He put effort to know everyone he worked with. He even knew the name of the guy who fixed the air conditioning in his office. He had both an exacting attention to detail and the type of outgoing, engaging personality that made him stop. Executives and industry acquaintances who were too eager to get into business talk at the start of a phone call. Instead, he wanted to Hear about their wives, their children, and their lives outside of the office. This is something that's repeated over and over again in the book. This was the type of family owned business touch that Leon favored. He also ran a more efficient business than his competitors. One competitor told how Leon showed them how to do more with less. He ran a facility with 400 people where other companies would have used twice as many workers. There's a great line in the book how to Make a Few Billion Dollars by Brad Jacobs that I covered all the way up on episode 335. About this, he says, brad wrote, I find that slightly understaffed teams are more focused and spend less time doing redundant, busy work. Be deliberately understaffed is a really interesting idea. The personal attention that Leon showed to his employees, something that's repeated over and over again as well. Every night. This is at one of the refineries. Every night he'd make a point of sitting down and eating dinner with the guys. He would walk around the room and shake everybody's hand. That kind of recognition brought loyalty from many employees, many of whom would describe themselves as being very devoted to him. Back to Leon's impressive attention to detail. He could recite the margin of every gasoline station on the East Coast. So actually spent seven hours over two days with John Mackey, the founder of Whole Foods. John Mackey can do the exact same thing. He. He could pass a Whole Foods and he could tell you what their revenue number was, what their operating income was, what their margins were. He had this like encyclopedic knowledge of the financial performance and all the numbers of all the Whole Foods and sounds exactly what. What Leon Hess had in his head for all of his gas stations. Leon Hess would also do things that other competitors were not doing. I remember this when I was a kid. It was Leon's idea. So you remember the Hess toy trucks. I actually had these toy trucks when I was a kid. And the idea to make them actually emerge from a conversation that Leon had with a friend who was also a toy manufacturer at a football game in the 1960s. So the idea initially was to create models of all the working Hess vehicles. And what I found most fascinating is Leon was personally involved. Again, goes speaks to his attention to detail. Leon was personally involved in designing each toy. So these toy trucks start out as a idea. The idea, the original idea was like, oh, these are great marketing tools. And they wind up becoming collector's items. There's people to this day, and they, they still collect them. And some of the prices are Incredible. I would have to imagine that took Leon by surprise. I'm sure he didn't think, hey, I'm going to make a marketing tool. I'm going to start. I'm an oil company manufacturing toys, and it's going to wind up becoming a collector's item and, you know, something that people cherish and reminds them of, you know, the holiday season. Decades later. Another thing that I know for a fact had to take him by surprise is how successful his investment in the. In the New York jets was. So Leon actually acquires a 20% stake in the New York Jets. They weren't even called New York jets yet in 1963, for which he paid $250,000. And he said, I was one of five partners. The name of the team at the time was the New York Titans. They were in bankruptcy and we changed the name to New York Jets. Before the purchase, the Titans were the worst managed, most unprofessional professional team of the modern era. There were bounce checks, player strikes, coach shuffling, questionable player choices. It was hardly a sure investment. So as the years pass, Leon slowly, over many years, buys out the four other owners and eventually becomes the sole owner. This again speaks to how important family was to Leon Hess. It says, for a man who didn't have hobbies, Sunday football was something he could share with his family. There's a hilarious story that really, I think, speaks to Leon's personality as well. The famous coach Bill Parcells tells a story of calling Leon one day to inform him of yet another expensive player contract. I don't give a shit, Leon told him. If you run out of money, come over here to the oil company and we'll get you some more money this afternoon. So Leon actually owns the team until he dies in 1999. Now, this might surprise you. He insisted that the jets be sold after he died. The speculation is that he insisted on this because he did not want his family to be distracted from running the oil company. Says Leon insisted that no member of the Hess family would be part of the purchasing syndicate in any way. Any family member that did try to own a part of the team after his death would lose a third of their inheritance. Woody Johnson of the Johnson Johnson family fortune, bought the team for $635 million in 1999. The jets sold for almost as much as Leon's personal stake in Hess was worth at the time, or about 10 times less than what the jets would reportedly sell for today. As for The Hess Corporation, 90 years after Leon Hess starts, in his own words, a little oil company with just one used truck. When he was just 19 years old, Chevron announced that it would acquire Hess in an all stock deal for $53 billion. And that is where I'll leave it for the full story. Highly recommend buying the book. If you buy the book using the link that's in the show, notes on your podcast player are available@founders podcast.com you'll be supporting the podcast at the same time. That is 378 books down, 1,000 to go. And I'll talk to you again soon. Okay, so I want to give you a big update to Founders Notes. So I'm eight years into this podcast. At the end of the year, I will have read over 400 biographies. And what I'm trying to do is I want to organize and distill the collective knowledge of history's greatest founders. And I want to do that better than anybody else on the planet, which is why I work on the podcast seven days a week. So, as you can imagine by, you know, 360, 380 biographies read, or whatever I'm at right now, it's nearly impossible for me to remember and recall everything that I've read. So I built a tool that allows me to tap into the ideas from history's greatest founders on demand, when I need it. So I use this tool every day. I've told you about it in the past, for the past year. It's called Founder's Notes. You can subscribe and access the tool that I built. And I use what you see is the exact version that I use. I don't have a different version. Literally, the tool that you can subscribe to is the one that I use every day. So the update that I have for you is I've been working with the team at Readwise, which is the company, and the founders that have helped me build this tool. And so for the past few months, we've been working on a major redesign for Founder's Notes. That redesign is done. It's available now. The prehistory of this is that for the first six years of the podcast, I've been using this app that called Readwise, to store all my notes and highlights for every book that I read for the podcast. Right. It allows us this, like, giant database. I could search it and pull up information anytime I need it. So I partnered with Readwise over a year ago because a bunch of people listen to the podcast, say, hey, I'd love to be able to access and read all of your notes and highlights. So we built this tool called Founders Notes that allows you to do that. You can still do that. You can still read all my notes, my highlights. And I keep adding to them every week and will always do so because I can't make the podcast without this tool. But over time, we started adding other features. And what I realized is the AI assistant that we called Sage that sits inside of Founders Notes is the most valuable feature by far. So a few weeks ago, if you listen to the episode I did with on Jensen Huang in that book, Jensen says that in the future and right now, really, people will have a virtual assistant, almost like a brilliant intern with near perfect memory, capable of instantly recalling any piece of knowledge stored on any computer. And when I got to that section, the note I left myself was that Sage is going to be this, but for the collective knowledge of history's greatest entrepreneurs. So when I ask Sage a question, it reads all of my notes, all of my highlights, all of my transcrib transcripts, and provides a concise summary and answer to the information I'm looking for. And the reason I would heavily recommend that you subscribe and get access to this is because I think you should be using Sage to supplement the decisions that you make in your work. So it is spooky how when I ask Sage a question, it sounds like me, except with a much better memory. And so another cool thing that we added is when you log in, you can see all these like suggested questions, things that you could ask Sage. All of those suggested questions are things that I have asked Sage. And so now as I'm continuing to ask more and to use, to use it to ask more and to prompt Sage more, I continually to add, add to this suggested prompts or suggested questions list. So even when you don't have a question of your own, you can actually read and learn from what I'm asking Sage. So the way I would use the tool, though, the primary value is I think any question you have in your business, you should be asking Sage, because what happens is becomes like you can prompt all of history's greatest entrepreneurs to help solve the problem or to supplement your own thinking that you're dealing with inside of your business. So if you have not already subscribed to Founders Notes, I heavily recommend doing so. If you want to tap into the collective knowledge of history's greatest entrepreneurs on demand and use this as a supplement to the decisions that you're making in your work, highly recommend you go to foundersnotes. Com that is founders with an S, just like the podcast founders notes.com and sign up today. Thank you very much for the extra support. Thank you for listening, and I'll talk to you again soon.