#66 Henry Kaiser: Builder in the Modern American West

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

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

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

• 0:39David Senra?

  Henry J. Kaiser, Builder in the Modern American West, is the first biography of this remarkable man. Drawing on a wealth of archival material never before utilized, Mark Foster paints an even-handed portrait of a man of driving ambition and integrity, perhaps the ultimate can-do capitalist. Okay, so that's from the back cover of the book that I'm going to talk to you about today, which is Henry J. Kaiser: Builder in the Modern American West, by Mark S. Foster. So this book was actually printed in 1989. So I found the references to Warren Buffett and Donald Trump interesting, since those are both very well-known people today for vastly different reasons.

• 1:24David Senra?

  But before I jump into the book, I want to tell you, I want to read the footnote from another book that led me to discover Henry Kaiser. Even though he was one of the most famous people in the 1930s and 1940s, I had personally never heard of him before. So I was reading the Howard Hughes book, the one I did a podcast on a few weeks ago. It's Howard Hughes, The Private Diaries, Memos and Letters. And they have this giant footnote on page 136. And it's describing who Henry Kaiser is, because he goes to meet Howard Hughes, because they wanted to do a project together. And let me just read this to you, so you understand. I mean, it was just...

• 2:05David Senra?

  Hard for me to fathom how somebody can create over 100 companies like Kaiser did. So it says, "Henry Kaiser organized construction companies to build the Hoover Dam, Grand Cooley, and Bonneville Dams, as well as the San Francisco Oakland Bridge." Okay, that's insane. Just think about the infrastructure that is widely known that his companies are responsible for. He says, "During World War II, he ran seven shipyards that used assembly line production to build 1,490 ships for the US. By his death in 1967, he had founded over 100 companies." And what I love about the way he names his companies. So, he probably created one of the most complex organization structures I've ever seen, for any of the entrepreneurs that I've covered on the podcast so far.

• 2:49David Senra?

  But, his naming of companies was extremely simple. It's his last name, followed by what it does. So it's Kaiser Aluminum, Kaiser Gypsum, Kaiser Fraser Automobiles, Kaiser Permanente Hospitals, and this one, and the Hawaiian Village Resort, which he sold in 1961 to the Hilton Corporation for $21 million. So he also had, and we'll talk a little bit about some of these companies. Obviously, I'm not going to cover all 100, but he had Kaiser Broadcasting, Kaiser Construction, Kaiser Paving Company. So, let me go ahead and jump into the book because I think it's one of, it is the most informationally dense book that I've covered so far.

• 3:30David Senra?

  And it has to be because he had his hands in so many different varying aspects of commerce that it's almost, I would say it's almost unbelievable to me that one person was able to operate companies like this. So we're going to learn about how, you know, how is he able to start so many of these over 100 companies? So I just want to read from the introduction of the book. It says, "Just who was Henry J. Kaiser? This egonimatic public figure who achieved prominence so suddenly and dramatically that reporters dubbed him 'The Miracle Man.' To admirers, Kaiser's achievements seemed unprecedented, his business practices audacious and bold, his relations with others direct and magnamious." Magnamous, you know the word I'm trying to pronounce.

• 4:15David Senra?

  "To critics, Kaiser's triumphs were costly boondoggles, his ethics suspect, and his interpersonal dealings furtive and self-serving."

• 4:27David Senra?

  The first enterprises bearing Kaiser's names, photography studios, isn't that surprising? Appeared on the east coast. When he died in 1967, he controlled a large multinational organization. But his most important works were concentrated in the American West. When Kaiser arrived in Spokane, Washington in 1907, the West was unquestionably ripe for industrialization. Had he not stepped in to play a leading role in this development, others would have. He and various partners helped set the stage for an increased pace of economic development by constructing hundreds of miles of paved roads and pipelines, dozens of bridges and

• 5:08David Senra?

  tunnels, and several of the huge dams authorized by the federal government during the Depression. From 1939 on, Kaiser entered an ever widening circle of industries, including cement, magnesium, shipbuilding, steel, aluminum, housing, building materials, and nuclear power plants. And he's got even more than that. Kaiser achieved his greatest successes later, and this is a really important point, actually, because a lot of people, I feel, like a lot of people that want to start their own companies, you have this myth of like, you know, if you don't do it when you're young, it's never going to happen for you, or like even if you started out young, it's, usually you're successful right away, and if not, you're never going to be successful. We obviously know, you know, that's not true.

• 5:52David Senra?

  There's been dozens or more examples on the podcast of people achieving success later in life. Kaiser was one of these people. It says Kaiser achieved his greatest successes later in life, after his 60th birthday. His ascent was slow and steady for nearly half a century. Okay. So I want to, one of the things that made Kaiser extremely, well, the one thing that made Kaiser extremely famous in America was, was his efforts during World War II to build all these ships. And we're going to get in, I'll get into that in a little bit. But another thing that made him, that increased his notoriety is the fact that he did this joint venture with Howard Hughes.

• 6:37David Senra?

  And Howard Hughes was probably, arguably, the most famous American at the time. So I just want to read some of the, like, their...

• 6:49David Senra?

  The author is basically comparing and contrasting these two. He says, "Two of his most remarkable qualities were enthusiasm and perseverance." Now they're talking about Kaiser. "Kaiser demonstrated these qualities by working his magic on Howard Hughes. The movie mogul and aircraft designer was only beginning to gain a reputation as an eccentric." And this is a story directly from the Howard Hughes book I read, which I found fascinating. That Kaiser was, if not anything else, he definitely was relentless and would pursue you. Well, for lack of a better word, he'd pursue you relentlessly. So, once he got this idea that, "Hey, we're going to build the world's largest airplanes ever, and I'm going to do it with Howard Hughes."

• 7:32David Senra?

  Because at the time, Germans, so Kaiser's building all these boats, but when they go from the East Coast to help the British and the Eastern Front of World War II, they're getting sunk by all the German submarines. So he's like, "Okay, well, instead of losing all the ships in the water, let's put them on these giant cargo planes and fly them over the Atlantic." And so, he decided to team up with Howard to do this. So, he tracks Howard down. He says, "Hughes was recuperating from an illness at the Fairmont Hotel in San Francisco. Kaiser bounced into Hughes' suite and laid out a complete program. If Hughes designed the prototypes, Kaiser would build the planes." Even Hughes' biographers were impressed by how Kaiser won them over.

• 8:17David Senra?

  Kaiser turned on all his considerable charm and powers of persuasion. Against his better judgment and swept up by Kaiser's appeal, Hughes agreed to the collaboration. The episode was vintage Kaiser. Once he made up his mind, he moved quickly and forcefully. Throughout his life, this is an interesting sentence. "Throughout his life, Kaiser dominated men who usually dominated others."

• 8:46David Senra?

  Okay, so let me tell you a little bit about his personality and then he has this great quote that I love. He repeatedly stated that he would best serve mankind by producing more things for more people. Part of one of the reasons he would never stay on one business at a time. Throughout his career, Kaiser stressed that his success was due to his ability to hire men smarter than he was and give them opportunities to grow. Together, they tackled thousands of problems, and then this is my favorite Henry Kaiser quote, which Kaiser renamed "Opportunities in Work Close."

• 9:21David Senra?

  That's a great perspective.

• 9:24David Senra?

  Okay, so I'm gonna tell you a little bit about his early life. So it says, "His parents were German immigrants who arrived in central New York a century after pioneers settled the region. The Kaisers were not risk takers. They seemed determined to recreate as much of their former lives in Germany as possible. Henry's father bequeathed to his son little beyond good genes. The elder Kaiser lived to be 87, and Henry reached 85." So there's gonna be a lot of things in this book that, I mean, it's a shock to me that this guy survived till he's 85. So I think nowadays, people understand the importance of taking care of yourself, of trying to eat healthy, make sure you get rest, take care of your body, because that affects like the energy levels you have and how you're able to,

• 10:08David Senra?

  like the time and energy you can dedicate to your craft, or whatever it is that you're doing. Henry Kaiser didn't abide by that at all. He, for most of his life, he was massively obese, he was six foot, at one time he weighed 300 pounds. He didn't start losing weight, so he had a series of heart attacks, and then he went down to 225, but his doctor still told him he needed to lose more weight. He would chain smoke cigars, he would work 20 hours a day, he suffered from insomnia. All the descriptions in this book, it's just a miracle that this guy was able to accomplish as much as he did. And not only that, but he didn't really, he was never really incapacitated until only a few months before he died. So I'm definitely not recommending you take that path,

• 10:50David Senra?

  but he clearly had some great genetics to be able to, I mean, they were saying like how long, after he died, his friends were like, "How long would this guy have lived if he actually didn't abuse his body like this?" Okay, so back to his early life. Henry's mother, Mary, provided attention and love, and she helped channel his restless, striving spirit. His mother fueled his driving ambition.

• 11:15David Senra?

  This is a little bit about his father. And his father's name was Frank. He was not much of a businessman. And we're going to see how this affected Henry and maybe influenced him to work extremely, extremely hard. But Frank Kaiser seemed destined for failure. Consciously or otherwise, he tried to recreate his backward-looking German lifestyle in the industrializing region in the United States. And I want to bring up, well, let me read this part first. And you see that Henry basically does the exact opposite of what Frank is doing. His business methods reflected his peasant roots. Frank made leather boots by hand for local customers. He frequently loaded a large leather bag and hiked eight miles to make deliveries. Even a century ago, such business methods

• 11:59David Senra?

  may have appeared primitive to neighbors, let alone to Kaiser's competitors operating large shops and factories nearby. By the 1870s, American shoe manufacturers sold and distributed goods through far more sophisticated delivery networks. Frank Kaiser's lack of success indirectly provided valuable lessons for his son. The laborious hand craftsmanship and the time-consuming deliveries of Frank Kaiser's goods may have unconsciously so strongly impressed young Kaiser that it made him naturally turn to the easier, quicker, greater measures, which have made him America's number-one production miracle man. So Frank wanted to reproduce the industry that was of his past,

• 12:43David Senra?

  maybe 100 years, even going back further. One thing that really impressed me about Kaiser, and something that I think we can all adopt to our own life, is Kaiser was fascinated with technology. Now, we're living in the information age, the age of the Internet. So this kind of comes naturally to us, right? Technology is just an easier, simple way for us to do more, like a way for us to enact leverage in our own lives. That's something that was at the core of how Henry Kaiser organized his businesses. He was obsessed with technology and obsessed with machinery, wearing out machinery and not wearing out workers, which is kind of the opposite, opposite of what you might think,

• 13:26David Senra?

  considering that after his photography business, his first major construction business was paving roads.

• 13:34David Senra?

  Okay, so, but we're not there yet, we're still in his life, his early life. He drops out at 13 and he starts looking for work. And then he's gonna learn some early lessons in business here that I think he carries with him throughout his career. "A persistent mystery was why he quit school at 13. One well-worn version was that the family income was so low that his mother had to work. His decision to leave school was entirely his own." And this is a direct quote from him. "I thought I was ready to lick the world single-handed, so I dropped out." "Henry vividly recalled the trauma of his first job search. He paced up and down a commercial street for hours before summoning the courage to peddle his own services. In later years, he made thousands of sales calls.

• 14:18David Senra?

  In all likelihood, none was as difficult as his first." "Henry lost count of his inquiries, but recalled that it took three weeks to find a job. His first employer was the J.B. Wells Dry Goods Store. For full-time work, he earned $1.50 per week." "Henry's work for J.B. Wells was not glamorous. He was a stockroom and delivery boy. Other duties including straightening up the store after harried salesmen strewed samples of goods about the counters and showing their wares to extracting and capricious patrons." So basically, they're pulling all these goods, people are going through it, they're rifling through it to see if they want, if they want it or not, and this is a really good lesson that, that, I don't know, is it J.B. Wells?

• 15:03David Senra?

  Nope, it's a business owner, his name's Ed Wells at the time. So, he says, "More than 50 years later, Kaiser remembered an early business lesson from the owner Ed Wells. On one occasion, Henry neglected to return curtains to a shelf after a salesman displayed them. Wells asked why he hadn't put them back. The young clerk replied that there was no need. Another customer would want to see them and they'd be unfolded again. Wells kindly suggested that he ask his mother not to make his bed because he'd just mess it up again. Henry remembered that the older man taught an unforgettable lesson in orderliness."

• 15:42David Senra?

  Despite Henry's contrumps with Edwell over the care of curtains, he was soon promoted to sales clerk. Signing up for a correspondence course on salesmanship, Kaiser studied his craft after regular business hours. So, this is actually a very common theme before he turns entrepreneur. He's always dedicated to going further, above and beyond than anybody else in his position, and he's always trying to learn. And so, he's routinely promoted rather quickly. And part of this is because he would take, like, he just never stood still. He always wanted to get better. So, it says Kaiser studied his craft after regular business hours. Evidently, he learned rapidly. By 16, he was a traveling salesman for J.B. Wells.

• 16:25David Senra?

  The young man had already learned a good deal about the world of business and had demonstrated persistence by remaining at one job for three years. However, he began to feel restless in his search of bigger things. That trade also never leaves him. So, this is him finding his first passion. By 16, Henry was clearly tiring of the dry goods business. He had been fascinated by photography from the age of 12. So, he began moonlighting. He took photographs by flashlight at parties and then developed them at home. Photography became Henry's consuming passion. He quit his job at Wells and worked briefly at two photography stores.

• 17:04David Senra?

  By 1899, Henry was deeply involved in what he then believed would be his life's work. So, it continues. Henry was not quite ready to become an independent entrepreneur. For about a year, he worked at the Hyatt Photography Studio. Henry quickly mastered the photography business. As a salesman for Hyatt, he traveled extensively, meeting others in the business. In the spring of 1901, he learned of an opportunity to obtain a share of a photography studio. Henry, this is just the beginning of his first business, and it kind of tells you, like, again, he's young. He's 19 years old. And he's like, "Oh, I'm just gonna go up there. I don't have much to offer. Let me see if I can get a piece of that business." Henry ventured there to look up the owner.

• 17:46David Senra?

  He had little to offer except energy and a passion for work. Certainly, he had no capital. Eager to become self-employed, to have a direct financial stake in the business he loved, Kaiser made an irresistible offer to the owner. By 20, Kaiser was launched as a photographic entrepreneur, and his break from home was final.

• 18:10David Senra?

  So when they talk about that he made, that Henry made an irresistible offer, he said, "Hey, I'm gonna work for no salary, but if I double or triple the business, then I come in as a, as a full partner." So if I, if, if your, if your revenue stays the same, you pay me nothing. If I'm able to actually increase and bring in more business and market to more customers, then they bring me in as a partner. So he did that. He was rather successful at it. And so here's a little bit about his, him expanding the business and then more examples of, of his, his extreme levels of resourcefulness. So he said, "A year after he acquired half the business, he bought out the other half. With full control, he promptly expanded the scope of his operations. Business may have been good in the north," remember this is Lake Placid, New York,

• 18:54David Senra?

  "but it was strictly seasonal, so Kaiser followed the tourists." Kaiser attempted to establish a chain of retail, sales and service stores. He had worked for others, then purchased his own business, and owning several stores and hiring others to run them offered the potential of multiplying profits. So this is another example of something that he's doing at a young age that he continues for his entire life, which is, he hires the best people, he, he delegates to them, and then he just moves on and keeps expanding. And he just trusts that, "I hired you, you're smart enough to know what you're doing, so just make the right decision and only contact me if you absolutely, if it's absolutely necessary." Raised in Central New York State,

• 19:35David Senra?

  he had witnessed firsthand the phenomenally rapid rise of Eastman Kodak, and he intended to get in on the ground floor. So I'm eventually going to do a biography on Eastman. I actually have it in my queue. But what they're talking about here is, he, these stores that he's opening, they're basically like, like licensed dealers. It's like, because Eastman Kodak is, is becoming extremely popular and people need help developing the film or servicing the cameras. And so when you go back and look at the pictures of Henry's first photography stores, they say like, you know, I don't know if it says the Eastman Kodak Service Center, but basically they're, they're co-branding with, with a much better brand, the Eastman Kodak name. Says, "Despite his promise,

• 20:20David Senra?

  Kaiser discovered that the photography business was no easy road to instant riches."

• 20:27David Senra?

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

• 21:12David Senra?

  as a tour guide. So he says, he worked as a guide on a sightseeing boat on the, on the Timoco River near Daytona Beach. He sold film to the few tourists who showed up and encouraged them to use up at least one roll during the boat ride. As they departed, he collected their film. And at night, he developed pictures and placed their prints in their hotel room mailboxes before breakfast the next morning. It was hard work and Kaiser put in long hours. So the business was not going to come to him. He had no problem just drum, coming up with unique ideas to drum up the business. Okay, so around this time, he meets the woman that he wants to marry. And so he goes to her father to ask him for permission. And her father's like, I don't know how,

• 21:56David Senra?

  her father was in the construction business, okay? And he's like, listen, I don't, I don't think photography is very lucrative profession. Like you can't marry my daughter. You need to go, if you, if you want my permission to marry my daughter, you need to save a thousand dollars. You need to be making a hundred and twenty-five dollars per month. And you need to have a home for her and, and your eventual children. So he, and at the same time Kaiser wasn't really enjoying the photography business anymore because he, he looked at it like an artistic endeavor. And he didn't like taking direction from people when they like, he would take unique pictures of them and they'd ask him to like, change it or to edit them. So he says, you know what? I'm just gonna, I know there's an opportunity in the West. He saved up a little bit of money and he just takes off west. You know, because he grew up his entire life in, in New York, in New York State.

• 22:41David Senra?

  And so he, he takes off to Spokane, Washington to try to, to like, basically.

• 22:48David Senra?

  To start his, his path to wealth because that was extremely important to him. Like he wanted to be an entrepreneur, he wanted to run businesses. And he wanted to have like, he wanted to be wealthy. So he starts over in Spokane, Washington. He arrived, he takes a train out there and he needs to look for a job. And so this is, this is the story of how that happened. Kaiser had trouble getting started. He recounted one of the low points in his own life. A vivid memory was calling on over 100 businesses in Spokane before being hired. Kaiser recalled, this is another good idea that he has. Kaiser recalled challenging, recalled changing his thinking from negative to positive. Prospects looked as bleak as possible.

• 23:29David Senra?

  One day I stood on a street corner and I decided to pick one fellow I most wanted to work for and concentrate on him. So instead of just doing these half-hearted, like half-assed attempts at getting hired from a hundred people, he's going to put his full effort into one job. And it works. It says, "His target was McGowan Brothers Hardware. Having chosen his objective, Kaiser gave the owner no rest. Four decades later, James McGowan recalled that the persistent Easterner called on him repeatedly, only to be refused each time." He is, he's very much like the Terminator. He just keeps going, going, and going his whole life. "His store had just suffered a serious fire and he had no intention of increasing the payroll.

• 24:12David Senra?

  But Kaiser perceived opportunity in the ashes. Several thousand dollars worth of hardware had seemingly been destroyed. Even if insurance covered the loss, recovery would take months. Kaiser finally persuaded McGowan to let him try to salvage something from the mess. He hired about two dozen women who polished the damaged goods until they looked new or at least sellable. Kaiser proudly told McGowan the job was finished and asked him what he should do next. McGowan promptly hired Kaiser as a clerk at a base salary of $7 per week."

• 24:47David Senra?

  He was determined, this is Kaiser, Kaiser was determined to move up quickly. Within weeks, and this is another example of him like going above and beyond in the job. So he could accelerate like his rise. He says, within weeks, he had memorized the price of every item in the store. Clerks who had worked there for years soon started calling out, Henry, what's the price of this? What's the price of that? McGowan was so impressed that within a couple of months, Henry received a promotion. McGowan stated years later, this is such a, this is such a, an interesting quote. If you think about how far Kaiser came from here, remember he's working, he's making $7 a week

• 25:29David Senra?

  to being, you know, unbelievably wealthy in his later life. And this is what McGowan had to say about the young Kaiser. He said, Mr. Kaiser speedily showed at that time that he was not a $7 a week man. Something else that story tells us too is like, um, okay, so he worked really hard. Um, he was relentlessly resourceful. He had high levels of perseverance, but I think another trait that of his that we can adapt and use that's very valuable is speed. Um, he moved and he was able, he was willing to identify opportunities and he moved unbelievably fast. Um, I mean, think about that, that one story where it's like, these guys have been working there for years, like what stopped them from memorizing all the prices?

• 26:14David Senra?

  How was he able to do it in just a few months? For everything in the hardware store. There's a story later on where, um, he's trying to do this joint venture for an automobile company, which actually winds up failing spectacularly, but, um, the guy that he, he does a joint venture with, uh, Frazier, um, was like a lifelong executive in automobile companies and used to like that, that slower pace. And so within like eight days of them saying, hey, we want to do this, like the paperwork was filed, they were, Kaiser was raised all the money, he was out buying like, uh, uh, the production facilities, like he just moved spectacularly fast. And here's another example of that, but he's, uh, at the time he's still working at the hardware store and he's still a young man.

• 26:57David Senra?

  It says, "One of Kaiser's renowned strengths was an ability to sense opportunities and move quickly. When a large school building project opened south of the city, Kaiser wanted to go after the business. McGowan demurred, telling Kaiser, "If they want our hardware, they'll come in. Nobody goes out after orders." There's no way that Kaiser would abide by that, so Kaiser would not be swayed. He insisted on seeking the order. McGowan told him that he'd have to pay his own expenses, that he was off on a wild, good goose chase. The admonition fell on deaf ears. As Kaiser was out the door, as soon as he heard something sounding like, "Okay." Two days later, Henry bounced back in with orders for all the hardware equipment for that big job.

• 27:41David Senra?

  And this is an example of, uh, so this is how, what I found interesting is like, there was no wasted effort with Kaiser. So he would use like one opportunity to like swing to the next opportunity. And this is how he learns the construction trade, which is, you know, how he makes a living for the rest of his life. And one of the, um, so he's meeting all these construction companies because he works at a hardware store and they need the wares that he's selling. And so they sell, uh, the McGowan Hardware Company sells a bunch of tools and equipment to this company called Hawkeye. And they were having problems with them, so McGowan loans Kaiser to Hawkeye for a couple of weeks. And he worked so hard that Hawkeye recruits him, so Kaiser never goes back.

• 28:25David Senra?

  And then, so he gets an introduction to the construction trade by Hawkeye. And then one of Hawkeye's customers in turn is this J.F. Hill Company, which is a paving company. Remember what I said at the beginning of the podcast, that his first construction business was the Kaiser Paving Company? And, uh, so in his work with Hawkeye, he starts dealing with J.F. Company, and then they recruit him as well. So it says, "J.F. Hill Company, a paving and road contractor with extensive operations in and near Spokane, uh, recruited him." So Kaiser joined Hill in 1911. With Hill, he acquired what he most desired. A wealth of useful experience with the opportunities and hazards challenging general contractors. So he's basically learning on the job.

• 29:10David Senra?

  Kaiser's years with Hills provided critical learning experience. I just want to pause here because- Remember Kaiser's career, even though he moved quickly, was just a slow, steady progress over a long time to the point where he's fabulously successful by the time he's 60 years old. When we start out, it's 1899 and he has his first business, right? He's a young, still a young man. What I've just read to you, we just covered 12 years. Excuse me. Yeah, 12 years, because now we're in 1911. Okay. So Kaiser's years with Hill provided a critical learning experience, we know that. Kaiser possessed boundless, possessed experience, boundless energy and optimism. There were some jobs opening up in British Columbia and the 32-year-old salesman was

• 29:55David Senra?

  ready to strike out on his own. So I just skipped over two parts and it's important to go back for a second. One, he's making $8,000 a year at this time, so keep that in mind. He's about 30 years old, 32 years old, making $8,000 a year. But the Hill company's doing well, but there's two competing management factions. They have a lot of business in Washington, they also have business in Canada. So he was up in Canada selling, gathering additional contracts for the Hill company. So they have this war. He winds up getting, basically the company collapses because of these two warring factions. And since Kaiser was up in British Columbia, he knew there was opportunity for construction.

• 30:36David Senra?

  So this is the chance that he's like, okay, well, why don't I use the resources of the company that's closing down? And I know like how to do the job, like let me just do the job. So this is how Henry Kaiser started a construction company in Vancouver. The year 1914 marked the outbreak of World War I. That same year in Vancouver, British Columbia, Henry Kaiser launched a career in general construction that profoundly changed the Pacific Coast region. Over the next 30 years, he constructed dams, laid pipelines, built sand and gravel facilities, dug tunnels, erected jetties, and participated in many other projects. He spent most of the years between 1914 and 1931 building roads.

• 31:18David Senra?

  Again, like it's really hard to fathom, how is this guy? I mean, he did work till he died at 85, but he's already in his 30s. He spends the next, what is that? Close to 25 years.

• 31:33David Senra?

  Just doing smaller construction jobs and that are paving. I guess I'm making this point because like it's always important to continue to develop skills because you never know whether those skills are going to take in the future. And more importantly, those skills compound. So he couldn't have gone from, you know, building the Hoover Dam or building Liberty ships without going through and working this process. Started out in a hardware store, then worked for a construction company, then worked for a road paving company, then started his own road paving company, then kind of spread out from there. And then, like I said, he had no wasted energy. So then, once you learn construction, you realize, oh, there's all these materials that people in construction need, like cement and aluminum. So he starts these massive companies. So the aluminum company actually winds up being the most profitable of all his endeavors.

• 32:16David Senra?

  So I just think that what I took away from the story is like, it's so important to realize that all these experiences you're having in your life, if you don't quit, they'll compound. And that's why I think perseverance is so important for entrepreneurship. Okay, so it says, "Kaiser demonstrated his enormous drive and energy in earlier endeavors. His experience in road building provided many basic business lessons which served him well when he created an industrial empire." So it's kind of what I was just saying. "He earned a reputation for completing contracts with remarkable speed. He developed an uncanny skill at coordinating the flow of workers and materials. He also adopted new technology to his construction techniques, pioneered several inventions," this is his love of technology again, "and formed important professional associations.

• 32:58David Senra?

  Kaiser always considered the road building years the bedrock of his maturation as a businessman." I love that. "Kaiser was hardly so philosophical after being fired by Hill. He was without income, a wife and a six-year-old son depended on him. He needed immediate income, but he confronted the dilemma facing all contractors. To make money, one had to spend money first. He confronted three major obstacles. Two of them he could easily surmount. He had neither an organization nor machinery, but he knew how to acquire them. In Vancouver, he had formed a high regard for a young construction supervisor named Alonso Ordway." This is important because they wound up working together for a long time.

• 33:41David Senra?

  "Henry quickly hired Ord," that's his nickname, "and several of his best men. When Hill's subsidiary, Canadian Mineral Rubber Company, went bankrupt following the management shakeup at the parent company, Kaiser knew where to buy cheap equipment." So he gets started on the cheap, right? He didn't need much machinery. All he needed was shovels, wheelbarrows, and a few horse-drawn scrapers. Now, keep in mind, this is 1914. That's how they used to build roads back then. The big hurdle, of course, was capital. By 1914, Kaiser had been negotiating bids for two years. His skills were highly developed. His problem was gaining access to sufficient funds to accept contracts he won. So he could get the contracts, but he needs to finance them, right? So he's got to solve that problem.

• 34:25David Senra?

  And what is his opinion on problems? Problems are just opportunities in work clothes. Alright, so he says, "He possessed little collateral, other than three years of construction experience, a willingness to work 20-hour days, and unbounded enthusiasm." So I do think there is something, I've talked about this before, but I do think like there is like these human elements that we can't really put a price on, but are extremely valuable. And I think enthusiasm and passion are easily understood by everybody, because it's like a fundamental human trait. And I think even though they're an abstraction, they have very real, concrete value. And especially for somebody like a young Henry Kaiser, like it leads him to being able to start his company.

• 35:09David Senra?

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

• 35:51David Senra?

  All you have is a contract and an idea that you think might work? And it might make a profit and you want me on that sort of a basis to loan you this sum of money? Kaiser looked the president straight in the eye and replied, "Yes, that's what I'm here for." The banker said nothing for several more moments, then reached for a pad of paper and wrote a brief note. He told Kaiser, "Go down and hand this to the head cashier." The contractor stumbled out of the room, thinking the note might instruct the cashier to throw him out of the building. Instead, it stated, "Honor Henry J. Kaiser's signature for $25,000." This may have been the most important loan he ever received. Kaiser was in business.

• 36:34David Senra?

  And that's just another fundamental aspect of human nature, that we're not rational creatures. We're rationalizing creatures. We rationalize our behavior and our decisions after the fact. And so I don't know if it's in your personality or not, but I think it's in everybody's personality. If you're interested in what you're working on, but if you can develop a way to express your passion and enthusiasm to other humans that can help you in your endeavor, I think it's a critical skills we just saw in Kaiser's own life story. Okay, so this is just two more good ideas. This guy has tons of them, but here's two of them. Kaiser went to unusual lengths to develop a reputation for quality work. When bidding on a contract, he persuaded city council members to visit a previous job. To their amazement, he revealed sections that had washed into the gutter

• 37:20David Senra?

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

• 37:59David Senra?

  but two, you're involving that person in the actual outcome, saying, "Hey, I value your opinion." People love when you say that to them. And so it increases their likelihood that they're going to approve you for their job. And when you compare and contrast that to dozens or hundreds of other bids that they get, that most people are not going to do that. So that's one good idea. The second was something we talk about a lot, like the importance of being frugal. And I don't think Kaiser was frugal, but he did watch costs because he had to. He says Kaiser was fascinated with new methods and searched tirelessly for ways to trim costs. That's just another way to say that he was, he was a technologist.

• 38:40David Senra?

  Okay, so this is, it's an example of, you know, Kaiser just wouldn't quit ever. And an example of the power of long-term thinking, even in hard times. And when I read this section, it made me think of one of my favorite Steve Jobs quotes was, I'm just going to read this quote from Steve Jobs to you. "I'm convinced that about half of what separates the successful entrepreneurs from, uh, from the unsuccessful ones is pure perseverance." So here's an example of that. "The World War I years and those immediately following were rough financially. Kaiser did a large volume of business, but earnings were low." So there's not that much money in paving roads.

• 39:23David Senra?

  "World War I brought rampant inflation. Costs doubled between 1914 and 1920. He remembered," this is a quote from him, "although I raised my bids trying to anticipate the costs, the constantly increasing wages and the prices of materials, I never quite caught up with the soaring costs. The result was that for five years, I made no money. Even in slack periods, Kaiser demonstrated loyalty to key associates by retaining them when jobs were scarce. In return, he attracted men who reciprocated his loyalty and stayed with him for decades." So it's extremely easy to think for the long-term when you're making a ton of money, when things are going well.

• 40:05David Senra?

  But Kaiser understood that, hey, these people are valuable, that it costs a lot of money to find talent and to train them and takes a lot of time. So if I keep turning over my labor force, I'm going, it's actually going to cost me longer in the, in the, in, it's going to cost me more in the long run. He's saying, no, no, I'm going to take care of you guys. I'm going to, even if I don't make any money, or if I'm not like making a lot of money. I'm going to keep you around, even though you know, most construction jobs are cyclical. They go up and down, up and down. And as a result, like, he's demonstrating that, like, he knew that his troubles, the trials and tribulations he's going through right now, it's temporary. He had a fundamental belief in Henry J. Kaiser. So he knew, it's like, I'll figure this out. Well, this will lead to bigger and better opportunities, just like it always has throughout my life.

• 40:50David Senra?

  I just need to get through this rough patch. That trait is really, really rare. And if we can adapt that, extremely, extremely valuable. Oh, my goodness. Look at all these notes that I left on the next page.

• 41:07David Senra?

  Okay, so he gets through this rough period, because remember, World War I, adventure's going to end, it's going to end in 1918. And there's going to be a boom in road building. And it's caused by one of, it's amazing to me how the deeper we go into these podcasts, how all these stories kind of link together. So this is because of the innovation of Henry Ford, the fortunes of Henry Kaiser are lifted. And I want to read you another quote in one second. But first, let me describe the opportunity for you. Says, "By 1920, opportunities in road building were virtually unlimited. Ever cheaper Model T Fords rolled off assembly lines in record numbers. The public developed an insatiable appetite for highway travel. Governments of various levels quickly increased funding for new and improved roads.

• 41:53David Senra?

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

• 42:35David Senra?

  In a great market, the market pulls product out of the startup. The market needs to be fulfilled, and the market will be fulfilled by the first viable product that comes along." So that's kind of describing this phenomenon that's happening over 100 years ago, or about 100 years ago. The roads were going to be built. People clearly wanted their own cars. They didn't want to ride them on dirt roads or through grass. And it was whether or not you would be in the position to fulfill this giant government demand for increased funding for new and improved roads. Well, guess who's been in this industry for six or seven or eight years up until that point? So I really appreciate Mark Andreessen's point here that, you know, the market will

• 43:19David Senra?

  be fulfilled. So fulfill it. And this is another example of more relentless resourcefulness. So this is Kaiser. Now he's traveling all over the country trying to win these bids to increase his paving company. And he's with that guy Orr that he hired back in the day. And their two men are, I love this part. It says, "The two men caught a train to San Francisco, which passed through Redding, California. Once aboard, they learned that it did not stop at Redding, but it slowed down just enough for the engineer to grab a satchel of orders from a pole." But they needed to get to Redding. They're on a train, but it's not going to stop. So Kaiser decided that they jump off the train, which is still moving about 30 miles

• 44:04David Senra?

  an hour. Kaiser leaped off, became a human bowling ball, and wound up under another clump of trees. Their suits were torn, hands and knees badly skinned, but the two men patched themselves up, visited the job site, and figured their bid. They submitted the bid in one of $500,000 job. Oh, man, if you could see my face, I just have a big smile on. That's just hilarious. And this is just an example of Kaiser using the leverage that technology provides. And I just absolutely love this thinking. Throughout his life, Kaiser was fascinated with new technology, and he constantly tried to speed up work and make it less physically demanding. He had observed that pushing old-fashioned wheelbarrows with iron-trimmed wheels through

• 44:47David Senra?

  muddy or rocky ground was very tiring. He equipped wheelbarrows with rubber tires and used ball bearings to lessen friction between the wheel and axle. Kaiser experimented with caterpillar tractors. They pulled five scrapers while horses were limited to one. Remember, he's still doing paving roads at this time. So instead of doing horses, they can only pull one scraper. He found, I can do five times the output with new technology. Simple adjustments in equipment save much needless effort and reduce careless errors and accidents caused by fatigue. He learned quickly that wasted time was a big money eater in construction. Devices facilitating work and enhancing speed often made the difference between profit and loss.

• 45:31David Senra?

  Kaiser was the first contractor I had ever met who didn't look upon my machines as trick instruments to do small jobs faster. This is the guy that invented the caterpillar that's talking. So he says, "He was the first contractor I met who didn't look upon my machines as trick instruments to do, instruments to do small jobs faster. He saw them as instruments to make big jobs small." That is such an important distinction. So these are not trick machines to make small jobs faster, but big jobs smaller. That is, that's amazing. Oh, so I was just mentioning this, but I have a note on this page.

• 46:12David Senra?

  It says, "The benefit of not quitting, future opportunities compound." Kaiser had no inkling then in late 1920s that he was about to start his final road project, but it was, but it was to be a major challenge. From the time Kaiser began paving operations until 1927, his contracts totaled about $8 million. So his entire from 19, was at 1914 to 1927, thereabouts, all of his work was $8 million. That would soon change. Warren Brothers, who he knew, landed a juicy contract for a 750 mile highway construction job in Cuba. The firm would build the central highway, which traverses the length of the island.

• 46:57David Senra?

  In March 1927, Ralph Warren, one of the Warren Brothers, offered Kaiser a major subcontract for 200 miles of road and about 500 small bridges. The size of the job, almost $20 million, clearly represented Kaiser's greatest opportunity yet. So this is just two really important points that I know I'm going to repeat myself, but they're really important for us to internalize. This one, don't quit because future opportunities compound. Okay, he spent 14, was it 13 years? He made $8 million in total contracts, right? And he's got, that experience led him to one job that'll pay his firm 20 million.

• 47:38David Senra?

  So more, way, almost double than what he did in 13 or 14 years in one job. And the second part about persevering, Kaiser was 45 years old when this is happening. He'd already been an entrepreneur for 13 years. So that's the benefit of not quitting. And most humans quit, so just the act of not quitting gives you an advantage over other people. Okay, so this is how Kaiser, how the Great Depression affected companies like Kaiser's. And this is how he gets into dams, which again, you know, the Hoover Dam is one of the most famous structures in the world. Kaiser being one of the people building it becomes, you know, extremely well-known and this opens up other opportunities. So this is a very real concern was, before he gets there though,

• 48:23David Senra?

  a very real concern was the survival of his companies. As the Cuba job near completion, the United States entered the Depression. Uh oh. Construction firms were among the first victims of the economic collapse. So that, that happened back in the Depression, happens now to this day. That construction firms are one of the first casualties of these economic constrictions that happen all the time. It says, "Road building contracts were canceled or reduced in size. Government agencies cut back wherever they could. They'd order cheaper materials and they delayed payments. Private clients defaulted in frightening numbers. So did a few city and local governments. Contractors held large inventories of machines, materials, and other tangible assets.

• 49:06David Senra?

  Bankers desperate for cash themselves hounded them for payments on loans."

• 49:13David Senra?

  So in this rough economic climate, it's going very bad for his company. They, uh, they, they start doing, um, the United States does all these huge infrastructure projects and one of them being the Hoover Dam. So Kaiser's like, damn, I need to, damn, pardon the pun, I need to get this dam job. And, um, this is really important. So it says, "Nobody worked harder studying the Hoover Dam job than Kaiser. In the weeks before bids were submitted, his frantic dashes between company headquarters in Oakland and the remote dam site became the stuff of company lore. Kaiser would work a full day, then pile into his yellow automobile at 5:00 PM and drive all night at 70 miles an hour." Definitely don't recommend doing that. "After an hour or two of napping in the front seat of his car, he was bright-eyed, he was

• 49:57David Senra?

  a bright-eyed, inquisitive visitor wanting to study every crack in the canyon walls." By the spring of 1931, Kaiser probably knew the canyon better than anyone, uh, than anyone else besides the superintendent on the job, this guy named Frank. So that, um, that one paragraph reminded me of, I watched this great, I took notes on this great talk by this guy named Bill Gurley. And it's called "Running Down a Dream." It's on YouTube, I'd recommend watching, it's amazing. But he says something in there, uh, I'm just gonna read you one of my notes. It says, "The good news: If you're gonna research something, the information is freely available on the internet." So he talks about like, doing professional research, making sure you're the most knowledgeable in whatever field you're going into. Cause that's not, that's different from skill and talent.

• 50:40David Senra?

  You could, you could just literally collect more information than other people and that gives you an advantage. You don't have to be more skilled and more talented. But he says, "The bad news: You have zero excuse for not being the most knowledgeable person in any subject you want." And so Kaiser's kind of demonstrating that. Like it was so important to, to, to the viability of his company, that I'm gonna go there, I'm not gonna sleep, I'm gonna go there and I'm gonna, I just outstudy you. And that, um, that improves my chances of getting the bid. And of course, he, him and, uh, he joins this joint venture called The Six Companies. And they, they get the bid. And then the next part, a few paragraphs later, is really important because the Noddy Life itself is very difficult work, plus less people willing to do it equals

• 51:25David Senra?

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

• 52:10David Senra?

  So a huge part of Kaiser's career was dealing, like, he worked heavily with the government. So this is not like a consumer product book. That's not what we're learning about, right? So he had to develop a different set of skills. And he was extremely adaptable to his situation, and he really understood what actually people care about. And this is a good, quick story that illustrates both those traits. "As work began in the spring of 1931, six companies," that's the joint venture that he's, that's building the Hoover Dam that he's part of, "named Kaiser their point man in Washington. Among many pivotal events in his career, this seemingly casual decision was one of the most critical. From that point forward, Kaiser became increasingly immersed in political and bureaucratic machinations in the nation's capital. His constant attention

• 52:55David Senra?

  to opportunities for government contracts and his intimate knowledge of operations of Congress and bureaucrats helped him initiate many important ventures." Okay, so that's fine. How did he apply that? This is his application to that. They were really slow on, like, they were, some of the bureaucrats were threatening to withhold funds after they had already started working on the dam. And he realizes like if I frame that in just what my company will lose, Congress doesn't give a damn. But if I say, "Hey, it's going to lead to massive unemployment by your constituents," they give a damn. So he says, "Kaiser claimed that if the $7 million was not immediately forthcoming, six companies would lose $6 million by failing to meet deadlines. To members of Congress unmoved by the prospect of business losses," meaning, "Why would they care?"

• 53:39David Senra?

  This is still true to this day. "Kaiser provided a more persuasive consideration." This is what I mean about him knowing people, he knows how to persuade them. "If six companies closed down, 3,000 workers would lose their jobs, and 7,000 dependents would be destitute." And the end result? They release the money.

• 54:00David Senra?

  In addition to the Hoover Dam, he builds the Grand Cooley Dam. And this is some lessons from the Grand Cooley Dam that's going to be used in the future. "Even to experienced constructionmen, Grand Cooley represented one of the most challenging building tasks yet undertaken. It was larger than the Hoover Dam or any single structure ever built. The Grand Cooley job, began in 1938 and finished in 1942, marked a significant transition in Kaiser's career. It was his last major construction contract, before becoming heavily involved in manufacturing and the production of building materials." That's what I was mentioning earlier. Realizing, "Hey, like, I need cement, I need aluminum,

• 54:44David Senra?

  I need all these minerals and things, like, why don't I start producing them? Because other construction men need that too." "There were key developments within the Kaiser organization at Grand Cooley. Perhaps the most significant was experimentation with what became the Kaiser Health Plan, under Dr. Sidney Garfield." So Dr. Sidney Garfield is his co-founder for Kaiser Permanente, which still exists today. And I actually went and looked up, and last year, they had revenues of like $80 billion. So it's probably his most significant achievement, even though he's more well-known for like other, like, the infrastructure he built. And weirdly enough, the book only dedicates about 30 pages to it. I did find a biography of his co-founder, so I think in the future...

• 55:30David Senra?

  I think it's such an interesting and like, I know so little about healthcare that it may become a dedicated founders episode depending on the book. But anyways, it's like the beginning of what in the United States, we have these HMOs. Like one of the first ones was this Kaiser Health Plan, soon to be known as Kaiser Permanente. Okay, so it's a Henry and Edgar Kaiser, that's his son, also gained valuable experience with labor unions, which benefited them in later years. Another important development at Grand Cooley was that Kaiser and his top men established a highly successful strategy of cutting the dam in half with two crews competing for the lion's share of the work. This tactic was to yield spectacular results in shipbuilding and other corporate endeavors. See what I mean about he never wastes any opportunity?

• 56:14David Senra?

  It's like, oh, I learned something, let me apply it to a different domain. There might appear to be a cyclical pattern in the outcomes of job bids, each success followed by a failure and vice versa, but this would be highly misleading perception. Smaller jobs were extremely competitive and in some cases, a dozen or more bids might be submitted. Kaiser and his men by no means ignored smaller projects and they lost more bids than they won. Still, by the late 1930s, big jobs were their primary target. So the harder something is, the less competition you have for it.

• 56:48David Senra?

  That's, it's like a counterintuitive thing that like, the harder something is, the easier it is to do because you have no other people doing it. So think about like SpaceX, like it's just insane. In 2003, you're going to start a private rocket company. But, so yes, it's hard, it's insane, but what happens? You can, you have, you can accumulate the best talent in the world because those other, they have, there's no other private rocket company. So people that have been obsessed with rocket science their whole lives, engineers and otherwise, are going to flock to that opportunity. So that little paragraph I just read you is just like, yeah, it's not that they ignored the smaller bids, but they realized that if they just went after the bigger bids, one, it's much more money and two, much less competition because people didn't have the organizational

• 57:33David Senra?

  infrastructure to actually compete and actually do these jobs. Because in many cases, like the Cooley Dam is the largest structure ever built in the world at the time. So there's no experts in that domain if it's never been done before.

• 57:46David Senra?

  So he also loses bids, though. He loses his one bid for the Shasta Dam, which I've never even heard of. And this is an example of him turning a loss into an opportunity. "Fair to win the Shasta Dam contract indirectly led Kaiser into manufacturing durable goods. By 1939, Kaiser had spent a quarter of a century in construction. His men had used millions of barrels of cement. Never at ease, when subject to the whims of others," I feel the same way, "particularly delivery of a critical commodity, Kaiser had considered entering the cement business." So he's like, "Hey, I want to control. I want to have this. Like, if I'm going to do construction, like, I don't want..." And he had, you know, all kinds of issues with unions and all

• 58:30David Senra?

  kinds of monopolists in this day and age, where they would make, you know, procuring the necessary materials for the job, like, really hard, really expensive. And he just got sick of it. So he's like, "Why don't I just do this?" Okay, so now, like I said before, this is the most informational dense book I've ever come across so far for founders, because he's just, he's involved in so many things. So I want to skip a bunch of, I have to fast-forward ahead, because I need to get into how Kaiser got into shipbuilding. And it just boggles my mind how large his company's got. Like, what I'm about to tell you, this one company eventually grows to 200,000 employees alone. And that's just like one part of his, of his business empire. It says, "Testifying before

• 59:11David Senra?

  a Senate Subcommittee in the summer of 1942, Kaiser was asked by Senator Henry, Harry Truman, soon to be president, if he'd ever be involved in shipbuilding before 1940. Kaiser replied, 'No, I had never even seen a ship launched.' The magnitude of Kaiser's feats in shipbuilding after 1940 simply dwarfed what transpired earlier. By 1938, Kaiser was working closely with this guy, his name's Roscoe Jim Lamont." Who was organizing the Seattle Tacoma Shipbuilding Company. Kaiser's employees constructed shipways for Lamont's company and he sensed enormous opportunities. So remember, he would switch from, he went, was working in the, um, in hardware store.

• 59:55David Senra?

  Then the hardware store company hired him and then that company was working with another company and that company hired him. He kinda like, he, he always paid attention to opportunities. He's building stuff for shipbuilding companies. He's like, "I could do that too." I love the, the confidence this guy has, or had. Um, okay, so in the late 1930s, shipbuilding was still in the doldrums. After the World War I boom, many large shipyards had suspended all or most of their operations. However, the Merchant Marine Act of 1936 authorized adding, uh, 500 additional merchantmen over 10 years. So there's this, another like government funding here. Uh, six, six companies joined the Seattle Tacoma Shipbuilding Corporation on a 50/50 basis and won a $9 million contract.

• 1:00:37David Senra?

  So again, just like there was a road build, road paving boom that he rode 15 years earlier, 20 years earlier, whatever that timeframe was, now he's riding the ship, shipbuilding boom. Uh, and that's how you get from never being involved in the industry to a few years later having 200,000 employees in the industry. Um, okay, so this, what's this guy's name? Uh, it's called Todd Shipyards is what their, the joint venture is called. Um, Todd Personnel built C1 ships, six, six companies, people constructed the shipways. Uh, and they, so basically it's similar to the, to the pitch that he did for Howard Hughes. Like you design, I'll manufacture. So, um, but while they're working on this joint venture

• 1:01:17David Senra?

  with Todd Shipyards, they're watching shipbuilding and learning. Under normal circumstances, Kaiser and his partners would have had difficulty entering the business. In fact, they would have had no reason to do so. But the outbreak of war, now this is World War II, ended normal times. Orders poured in. By the summer of 1940, huge backlogs had piled up. By the end of 1940, government officials were hard pressed to find shipbuilders capable of filling, of filling their orders. It's the exact same thing that happened in the paving. It's the market demanding to be fulfilled and Henry Kaiser's just like, "I'm gonna fulfill it." U-boats were sinking British vessels three times faster than they could be replaced. The British consequently scratched or searched for ships anywhere they could be

• 1:02:02David Senra?

  found and they were not choosy. In December 1940, the British agreed to underwrite construction of the West Coast Yards, this is Kenyatta Kaiser's company, and to pay $160,000 over each cost, over the cost of each ship. So what a, what a hell of a contract. They, I mean, I guess they had little, little choice, right? You're involved in a literal life and death struggle. But they're saying, yeah, build the ships and we'll pay you 160 grand in profit for each one. This marked the beginning of Kaiser's direct participation in the shipbuilding. This is what makes him most famous, by the way. Kaiser approached this task with his customary enthusiasm. He hoped to become the biggest and the best, just like anything else. And just as he and his partners had confounded experts by building dams faster than was

• 1:02:43David Senra?

  thought possible, he dreamed of producing ships at unprecedented rates. So what makes him famous is they wind up being able to build these ships in like four days.

• 1:02:54David Senra?

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

• 1:03:40David Senra?

  actually like was what caused him to be able to produce so many of these ships so quickly.

• 1:03:47David Senra?

  Okay, so this is actually. So remember, they're doing this joint venture. And I just chuckled on my note that I left myself. Says the contrast between Kaiser and his partner. His partner was not a misfit. Kaiser was definitely a misfit. The Kaiser Yards turned over out, out over 15 million deadweight tons of shipping at a cost of just over $4 billion. So think about that's $4 billion in 1940 money. More than any other activity, shipbuilding made Henry Kaiser a national hero. Millions of Americans who followed public affairs heard the Kaiser shipbuilding saga repeatedly. He started out in the shadow of John D. Riley of Todd Shipyards, that's his partner. In some ways Riley's vision matched Kaiser's.

• 1:04:31David Senra?

  He anticipated the huge increase in shipping needs as World War II loomed. And sensed the absurdity of most yards being on the East Coast when control of the Pacific Ocean was so vital to the nation's security. But the men approached their tasks from different perspectives. Riley was a salaried employee in an old established firm. His company had achieved success with traditional shipbuilding techniques. Riley valued his position and did not challenge convention. By contrast, Kaiser was almost contemptuous of traditional methods. His partners had long since despaired of getting him to follow customary procedures. While other partners were used to Kaiser's propensity for tackling several jobs at once,

• 1:05:16David Senra?

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

• 1:06:00David Senra?

  hull only when they were to be attached to the keel and see other sections already in place.

• 1:06:07David Senra?

  As dam builders, they had experience with heavy cranes. The only limitation was the maximum lifting capacity of their tools. So I like how he's taking what he learned from other constructions. Like, "Listen, I built dams, I built roads. Like, I don't understand why, like, I can't apply some of the best practices in those industries to building a boat. Like, at the end of the day, it's all just building." And this is important, because, this part I'm going to now, it's important, because he eventually goes into the steel business, and I kind of hinted at this previously. On one issue, Kaiser experienced continued frustration. From the start of shipbuilding, he almost never had enough steel plate and other important supplies.

• 1:06:52David Senra?

  To keep vessels rolling down the ramps, Kaiser mastered evasion of bureaucratic regulations. Officials charged him with paying black-market prices for steel from a willing supplier in Cleveland. In the ensuing ruckus, columnist Raymond Clapper rose to Kaiser's defense. So he gets accused of, you know, buying things from not, like, approved channels by the Office of Price Administration, which I don't even know what that is. But this newspaper columnist's writing is like, "This makes no sense. Like, we're in the middle of a war, guys." He says, and this is the defense that Raymond Clapper said about Kaiser, he says, "If you have to be a scofflaw to get steel out of the arsenal of bureaucracy, then that's okay with me.

• 1:07:36David Senra?

  If that's the way old man Kaiser has to get his steel to build ship to carry American forces to the fighting fronts, then I hope the old fellow breaks every law in the books." And he ended this today, he started getting the steel approved faster, and then that leads him to just going into the steel business in general, because he thought it was a monopoly, and that they were artificially, in many ca... In a few different fields in his life, he would accuse other businesspeople of monopolistic practices, and would use that as a, like, a hedge or wedge, excuse me, I meant to say, to get into that industry.

• 1:08:16David Senra?

  So, remember, remember how at the beginning it said like he was, he would dominate men that would dominate others? He was also like cheeky, like would talk. He just would, he would like, he was just blunt and would like talk, like kinda like poke at other industrialists. So this is a little bit of his personality. He sent identical, this has to do with like the big steel, he's trying to make, make them enemies basically. He sent identical letters to the president of several large companies, lecturing them in patronizing tones, suggesting that if they, if they met the crisis, he would not enter their business. So he's like, "Listen, I just want steel. If you're not gonna give me this steel, if you're gonna bullshit me and lie about that

• 1:08:59David Senra?

  you can't do it, or like there's not enough, like you're at full capacity, because you just wanna keep your, your price artificially high, then I'm gonna come in. But if you will do this, I don't want to, then just give me this, give me what I want, if not, I'll do it myself." Is basically what he's saying. And this is what he says. "The government and its broader vision had not yet elected me to let, or had not let, not yet elected to let me to do this," meaning entering the business. "But it has elected to have the steel industry expand existing facilities. Therefore, it is now, it now becomes a greater responsibility of yours. Selfishly, I am happier with decreased responsibility, but sadly, I view the dire consequences

• 1:09:40David Senra?

  of shortage of steel for shipbuilding if it continues. Therefore, I can only sit and wait and hope that you will measure up to your responsibility. If Kaiser's letter was disingenuous and sarcastic, he was only responding in kind to the steel producers' patronizing assurances that they knew best. The emin- the eminimity between Kaiser and the Eastern Steelmen would only deepen. While he never overtly questioned their patriotism, Kaiser implied that they were, at best, overly cautious and somewhat dull-witted. In his view, he was simply trying to wake them up. For their part, Eastern Steelmen, reeling from a decade of depression and external attacks, were deeply annoyed when an upstart Westerner, who had made a fortune in lush

• 1:10:25David Senra?

  government contracts, a man with no experience in their field, instructed them how to run America's most basic enterprise." Kinda speaks to his like, his confidence or his arrogance, I would, I would say.

• 1:10:42David Senra?

  Okay, so he does get into, uh, I mean, he creates a company called Kaiser Steel. And he does something that's actually really smart. He, he support, this is just a smart move. So, this is after World War II now. And the government had funded all of these, he'd retrofitted all of these, um, these factories to make the steel they need for war, for war materials, right? And they, they built them for so much, like hundreds of millions of dollars. And then after that, they just sat there. So, he supports, um, he, there's another, um, plant called the Geneva Plant. And he, basically, he says, "Hey, US government, you should, you should",

• 1:11:25David Senra?

  even though US Steel was gonna be his, um, what was his competitor. He, he tells the, he petitioned the US government, saying, saying that, um, like, "Sell the Geneva Plant that's just sitting there to US Steel", even though like, they're getting it for a song, like, they're getting it for really cheap. Um, because he wants them to do it, so he can do the same thing for this, this, this plant called Fontana. So it says, "No other producer challenged the Geneva tenants. US Steel submitted the only purchase offer, and government officials accepted its $47 million bid. Since the plant had been built at government expense for nearly 200 million, US Steel acquired a modern plant for one-fourth of the cost of construction. Further, since the government financed Geneva,

• 1:12:07David Senra?

  US Steel owed no accumulated interest. Publicly, Kaiser expressed satisfaction. The West, the West needed steel output from both Geneva and Fontana. Kaiser's reasons for endorsing the sale were of no mystery. With this precedent established, simple justice suggested that Kaiser received similar consideration on Fontana." So he did that, because, "Hey, now you guys set the precedent, you're willing to sell a $200, $200 million facility for one-fourth the cost. Like, I want the same deal." And he winds up getting a very similar deal.

• 1:12:44David Senra?

  And this is an interesting, so once he's up and running, he's got to fight what he calls "Big Steel." And this is a strategy, it's interesting. Kaiser's basic strategy was to portray Big Steel as conspiring to limit supplies and maintain artificially high prices in the West. In a sense, Kaiser promoted himself as an industrial populist. It's so hilarious. In 1942, he had predicted the post-war supplies of many producer goods would fail to meet demand. Events proved him right, and a period of post-war economic adjustment was inevitable. Kaiser charged that Big Steel's shortsighted policy threatened the national economy. Kaiser had become very friendly with the New York mayor, Glaguardia. The mayor arranged for Kaiser to address the nation over the Mutual Radio Network on the need for more steel.

• 1:13:27David Senra?

  So he opens up, and now, remember, like, media back then was not as separated as it is now, so millions and millions of people are listening to this one radio. And so Kaiser basically gets on there and does like an infomercial. Kaiser ripped Big Steel, claiming that steel moguls had colluded to keep smaller producers from expanding production. Now, smaller producers, think about like, Kaiser was a massive industrialist at this time, that's why it's hilarious. He urged listeners to pressure Congress to investigate the persistent bottleneck in steel production. And another thing that he does that's smart is, before, all the steel would have to be, it's manufactured in the East and then shipped to the West, and that's really expensive. Well, he had a massive advantage.

• 1:14:12David Senra?

  He had the advantage of moving steel manufacturing west, and as, over time, like, his lower costs would compound. So this is by the mid-1950s, Kaiser Steel sold 65% of its output within 60 miles of its factory. In contrast, US Steel shipped more than 3/4 of its steel to the West Coast. That was why US Steel paid railroad, or pressed railroads so hard for lower rates. In the early 1950s, US Steel was paying almost $15 per ton for shipment. Kaiser was paying rates between $1.82 and $7. So way cheaper. And as that continued, he ran, Kaiser Steel becomes this massive company.

• 1:14:55David Senra?

  Started out with just one little, like, steel mill, steel factory, and winds up being a giant company in the last 25 years of his life. And this is just another reminder that that sales is entrepreneurship. And it says, "From the outset of his business career, Kaiser was a promoter. Ever aggressive in searching for new opportunities, he instinctively knew how to package his ability. Kaiser assiduously honed his skills in interpersonal communication. He was not a gifted public speaker, but few matched his dynamism in one-on-one situations. He was amazingly adept at selling himself to strangers. He specialized in convincing decision-makers that he could somehow perform difficult jobs ahead of extremely short deadlines."

• 1:15:36David Senra?

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

• 1:16:21David Senra?

  think is the word they used to, like, his organizational structure, where, like, other, when he would interface with other companies, they would be like, "Hey, can you send us, like, your, like, a flowchart of your organizational structure so, like, our executive vice president can match up with your executive vice president?" And so on and so forth. And they're like, "Uh, we don't have one. Just, there's, like, one guy in charge of everything in each project, so just go to him," kind of thing. So this is a little bit more on his managerial style. The perp, uh, this is now Kaiser writing a memo, which he fairly rarely did.

• 1:16:57David Senra?

  He said, "The purpose of this memo is to establish clearly responsibilities of everyone. Due to the fact that the allocation of my time is such that I do not believe it will be possible for me to follow the work outlined in any other way but through you." His meaning was clear. Run it yourself. Consult me only when absolutely necessary. And like, again, some people in that environment are gonna fall flat on their face and not gonna succeed, but I think the highest quality talent of employees that you could possibly get only thrive in environments like that, where it's like, "Here's your objective, go do it." And just come back to me for me to remove any roadblocks, but I'm not gonna micromanage you. And Kaiser definitely did micromanage. It'd be impossible for him to micromanage. Think about hundreds of thousands of employees, over 100 businesses, like, come on.

• 1:17:41David Senra?

  So it says, "He invested in expensive equipment to lighten tasks for Blue Collar employees, but there were very few labor-saving devices for managers. Kaiser boldly proclaimed his managerial philosophy. You find your key men by piling work on them. They say, 'I can't do anymore,' and you say, 'Sure you can.'" So you pile it on, and they're doing more and more. Pretty soon, you have men you can rely on absolutely. You have an organization that can really get things done." So, I'm just gonna read a couple parts from Kaiser Permanente, which, like I said, still exists today.

• 1:18:26David Senra?

  They're doing like, well, I think 80 billion in revenue last year. So it says, "Toward the end of his life, Kaiser claimed repeatedly that the Kaiser Permanente Medical Care Program, a prepaid healthcare system, would stand as his most significant achievement. He was right. Twenty years after his death, most of the companies in Kaiser's once dazzling industrial empire had either folded or been sold. However, Kaiser Permanente continued to thrive. At Kaiser's death in 1967, the health plan covered 1.6 million participants. In the next 20 years, membership more than tripled." So they're at almost 5 million. Now, I think they're at 12 to 13 million, so it kept going. By the late 19...

• 1:19:07David Senra?

  Remember, the author's writing these books, or writing these words in the late 1980s. "By the late 1980s, Kaiser Permanente was by far the nation's largest health maintenance organization," or HMO, which you've probably heard it. Just a little bit, like, it's basically fixed-fee medical care is what they're doing.

• 1:19:27David Senra?

  Let me just read this part two. It's so much, there's just so much more here to unpack. But like I said, I think it's gonna wind up being a separate episode because I think it's interesting and I don't think, I don't, um, I don't think, like, there's just too much going on here and I can't, like, there's not enough detail in thirty pages, you know? So it says, "The insurers agreed to pay," it started out by, you know, you need, these, these, "Workers are doing extremely dangerous jobs in extremely perilous conditions, and so they get injured all the time, so you need like onsite doctors." So, uh, they realized, like, you couldn't just, basically, they wanted to turn, it says, "To the private physician, a sick person is an asset. To Permanente, a sick person is a liability. We'd go bankrupt if we didn't keep most of our members and families well most of the time."

• 1:20:12David Senra?

  So that's the prepaid aspect of it. It says, "The insurers agreed to pay a fixed portion of the workers' compensation premium for all onsite services Garfield provided." That's the co-founder and the doctor. "For an additional nickel a day paid by workers, Garfield offered non-industrial coverage. This fixed fee arrangement inspired Garfield to promote safety and preventative checkups because he got paid whether or not workers suffered accidents and illness. Similar programs were used where employees guaranteed physicians extra income to keep them on remote or unattractive job sites." So kind of, like, you had to do this, if not, like, why is a doctor just gonna sit around and not get paid? If he only got paid when people got injured, and let's say you went a long stretch, uh, people getting injured, like, he's just sitting in miserable conditions not making any money. They're gonna leave. Um, let's see.

• 1:20:55David Senra?

  "They also helped persuade," so ninety-five percent of the employees signed up. "The prepaid health plan was a financial and medical success. For five years, Garfield tended patients in the desert," this is at one of the job sites for Kaiser. "And when the project was finished in nineteen thirty-eight, he sold the hospital for a profit," hospitals is being, um, like, it's basically a house, "and returned to Los Angeles to teach and practice medicine." And that's where they, they start, um, the Kaiser Permanente.

• 1:21:23David Senra?

  Um, let's see. And then I just want to tell you one more thing. And that's just, uh,

• 1:21:29David Senra?

  the decision by, this is one of his most important decisions, that most, his most brilliant decisions he ever made as far as from a financial aspect. Um, aluminum was his most spectacular long-term financial success. Kaiser Aluminum faced major hurdles. Acquiring and transporting millions of tons of raw materials, meeting huge energy requirements, energy requirements, and creating markets for many new products. Kaiser and his organization overcame those obstacles. Remember, uh, problems are just opportunities and workloads. To the surprise of industry analysts, the company netted more than $5 million in its first year. That's crazy. That's in 1946 money, by the way. 20 years later,

• 1:22:11David Senra?

  profits approached $59 million. And again, this is just an industry he got in. It was connected to the construction industry. He spent his whole life and he realized, hey, there's opportunity to build in this, in aluminum. Like, why aren't we using it? He made like this, this aluminum dome in Hawaii. Um, he, they, they wanted to build all aluminum, um, uh, skyscrapers. They started using aluminum for cars, like the, it's just, it was a spectacular financial success. Um, this is the financial results of Kaiser Aluminum and chemi, it's called the Kaiser Aluminum and Chemical Corporation. And I'll just close on this. The company thrived in Kaiser's last years. Between 1963 and 1966, net sales increased from 465 million to $781 million.

• 1:22:57David Senra?

  In 1966, net profits reached a record of $60 million. That's crazy. Aluminum was the organization's largest moneymaker by a wide margin. Jordan, that's his entire, remember, he's got 100 companies. It's saying aluminum was the large, was the organization's largest moneymaker by a wide margin. Dwarfing product, profits of other companies. Kaiser Steel, the next most profitable, earned 18 million. Why cement, uh, why Kaiser Cement and Kaiser Gypson, Gyp, Gypsum made 10 million. Now, think about that. What a year you're having. One of your companies makes 60 million, another makes 18 million. This is profit. Another one makes 10 million. It's in the 1960s. Like, that's insane.

• 1:23:40David Senra?

  The aging patriarch looked back on two decades in aluminum with satisfaction. Entering the field after World War II had been one of his most brilliant decisions.

• 1:23:52David Senra?

  Alright, so that's where I'm gonna leave this story for today. There is just so much more in this book. It is so unbelievably complex. I could do like 10 podcasts on this. I just gave you the highlights, the parts that, you know, the brief, the brief parts that stuck out to me, just because it's so complex. But if you want to finish the full story, I'd recommend reading the book. Like I said, tons and tons of information. Like, we cover like, the first like 60 pages, they cover like 40 years of his career. And it's just blazing speed. So anyways, book, Henry J. Kaiser, Builder in the Modern American West. I'll leave a link in the show notes below. If not, you can go to amazon.com/4sop, 4sopodcast. Buy this book, buy 10 books, buy whatever you want. It helps support the podcast.

• 1:24:37David Senra?

  Thank you very much, and I'll talk to you next week.