#371

James J. Hill's Early Life and Entrepreneurial Spirit

• In 1870, James J Hill, a young man, traveled from Canada to St Paul, Minnesota, by dog sled, horseback, and on foot, facing harsh winter conditions, exhaustion, and eventually being refused shelter at an inn in Calonia, Dakota Territory, but was taken in by a widow at a nearby farmhouse (0s).
• Ten years later, Hill built his railroad line, intentionally avoiding Calonia and instead passing through the town of the widow who had taken him in, resulting in the town of Calonia disappearing from the map, while the widow's town became the county capital and was renamed Hillsboro in Hill's honor (43s).
• James J Hill was one of the most famous entrepreneurs in America in the late 1800s and early 1900s, known as the "Empire Builder" for his role in transforming the northern frontier of the United States (1m23s).
• Hill grew up in a poor family in Canada, leading a frontier existence, and experienced poverty firsthand, with one of his most vivid childhood memories being the moonlight shining through the holes in their roof (1m41s).
• At the age of 9, Hill lost the use of one eye in a hunting accident, but continued to read extensively, developing a strong left eye that served him well throughout his life (2m6s).
• Hill's traits, including his love of reading and learning, particularly history and biography, stayed with him throughout his life, and he was heavily influenced by the power of dynamic individuals, including Napoleon (2m51s).
• Hill believed in the strength of will and the power of one individual to change the world, which guided his approach to building his railroad empire (3m7s).
• James Hill quit school at 14 years old to work and support his family after his father's death, and he accustomed himself to a large workload, often working long hours throughout his life (3m30s).
• Hill's father was a poor man with one eye, but he was a voracious reader, and James inherited his love for reading, continuing to read everything he could get his hands on despite his difficult circumstances (3m41s).
• At 14, Hill got a job at a general store in Canada, where he kept books, did clerical work, milked cows, and cut wood, and a few years later, he met a trader from St. Paul, Minnesota, who gave him a copy of an American newspaper with a headline about opportunities in the West (4m8s).
• The newspaper inspired Hill to seek adventure and profit in America, and at 17, he made the decision to leave Canada and move to the United States (4m38s).
• Hill was an engineering and financial genius who saved all his money, believing that the ability to save money was a key indicator of success in life (4m53s).
• When Hill left Canada, he took with him $600 in cash, his life savings, as well as the tools he needed to succeed in America, including a quick intelligence, self-sufficiency, genuine courage, and a remarkable work ethic (5m15s).
• Hill was extremely charismatic, a natural salesman and promoter, with a high energy level, which would serve him well in his future career in the railroad industry (5m29s).
• Hill got a job in St. Paul, working for a company that served a fleet of steamboats, where he worked as a shipping clerk, maintained books, and did manual labor, gaining experience in logistics and forwarding (6m10s).
• Hill also worked for wholesalers who shipped commodities by rail and steamboat, further gaining experience that would be advantageous when he moved into railroading about 20 years later (6m25s).
• James J Hill worked incredibly hard, often laboring late into the night, and learned valuable skills such as extracting favorable rates from shippers, beating back their attempts to inflate rates artificially, purchasing commodities cheaply, undercutting competitors, delivering efficiently, and cultivating customer loyalty (6m40s).
• These skills would serve him well when he transitioned to the world of transportation, and his experience is similar to that of John D Rockefeller, who also learned the importance of rebates and negotiating rates in his early career (7m20s).
• Rockefeller worked for Huet and Tuttle, forwarding groceries and other commodities by rail, and discovered that posted rates could be negotiated, with favored shippers receiving rebates at the end of the month (7m42s).
• Rebates played a huge role in Rockefeller's empire, and he applied this concept to the oil industry, highlighting the importance of early career experiences in shaping future success (8m2s).
• James J Hill's experiences, including his jobs and businesses that interacted with the railroad for two decades, were crucial in preparing him to take control of his own railway, the Great Northern Railway Empire (8m30s).
• Hill was a born entrepreneur, highly intelligent, motivated, and acquisitive, and it was only a matter of time before he went into business on his own (8m40s).

Hill's Early Business Ventures and Focus on Efficiency

• Max Levchin, co-founder of PayPal, believed that the best employees are those who hate being employees and are planning to start their own business, which was true for Hill (9m9s).
• Hill understood the importance of relationships and partnering with established businessmen, which is why he befriended Norman Kitson, a successful entrepreneur who would later partner with Hill on railroads (9m31s).
• Norman Kitson was a generation older than Hill and had made money in the fur trade and as a steamboat operator, and Hill would eventually name his firstborn son James Norman in Kitson's honor (9m37s).
• James J Hill helped Kitson with his fur trading business and was known for his focus, hard work, and limited socializing, which allowed him to read incessantly and achieve his goals of wealth and status (9m55s).
• Hill's drive for efficiency led him to found his first company, the James J Hill company, which aimed to eliminate unnecessary steps in the cargo transfer process (10m18s).
• Hill observed dock workers unloading cargo from steamboats onto horse carts, which were then reloaded onto railroad cars, and was disturbed by the inefficiency of this process (10m31s).
• To address this issue, Hill's company was hired to transfer goods from riverboats to trains, and he built a two-story warehouse on the riverbank to streamline the process (12m30s).
• The warehouse had its first floor level with the dock and its second floor level with the railroad, eliminating the need to unload and reload cargo onto horses (12m41s).
• This innovation drastically reduced the cost of transfer and reflected Hill's love of eliminating unnecessary steps (13m0s).
• Hill's emphasis on efficiency and financial conservatism earned him admiration from notable figures like Charlie Munger, who compared him to great business operators like Carnegie and Rockefeller (11m22s).
• Hill was the only American railroad entrepreneur in history to build a railroad without going bankrupt, and his focus on efficiency and cost management was a key factor in his success (11m47s).
• At 27 years old, Hill withdrew his life savings of $2,500 to start the James J Hill company, which would eventually become a key player in the railroad industry (12m11s).
• Hill's approach to business was characterized by his emphasis on long-term thinking, financial conservatism, and a relentless drive to eliminate inefficiencies (12m8s).

Hill's Entry into the Fuel Business and Vertical Integration

• James J. Hill is a clear thinker who limits the number of details and makes every detail perfect, as seen in his business ventures (13m13s).
• Hill's first business was founded on the observation that he could do something better, and his second business was founded on the observation that railroad operators were spending a lot of money on fuel, mostly wood (13m23s).
• Hill has a bias towards vertical integration, which he calls "rational integration," and he has uncompromising standards, making him a difficult person to deal with (13m45s).
• Hill partnered with Griggs to start a fuel company, Hill-Griggs and Company, which initially sold wood for fuel to railroads but later shifted to coal due to its benefits (14m0s).
• Hill quickly gets out in front of emerging trends, as seen in his decision to go all-in on the coal business when he noticed it was replacing wood as a fuel source (14m22s).
• Hill's rise to the top of the coal business revealed his instincts towards vertical integration and ruthless monopolization, as he purchased large amounts of high-quality coal and leveraged railroads to deliver it at preferred rates (14m28s).
• Hill applied his uncompromising standards to his employees and partners, eventually forcing a breakup with Griggs when he felt his partner wasn't meeting his expectations (15m6s).
• Hill is a pragmatic businessman who will compete fiercely when it suits him but will also join with competitors to create a monopoly when competition becomes wasteful (15m26s).
• Hill's pragmatic business personality is evident in his decision to join a market-sharing consortium with his competitors to bring peace to the coal industry (15m44s).
• Hill eventually left the fuel business to focus on railroads, which he believed was the opportunity of a lifetime (16m4s).

Hill's Pursuit of the Railroad Opportunity and Strategic Partnerships

• Hill was willing to take risks and travel to resolve disputes that could interfere with his business, as seen in his trip to Canada to meet with a member of the House of Commons and a powerful businessman (16m18s).
• James J. Hill took a 7-week trip in the dead of winter to resolve a dispute, traveling by rail, stagecoach, and dog sled team through Native American territory, and his report to the Canadian Prime Minister helped resolve the dispute and avoid a war (16m35s).
• Hill was a high-agency individual who read everything to gain an advantage, which helped him in his business ventures, including his steamboat operations (17m26s).
• Hill discovered a neglected maritime law that prohibited foreign ships from operating in American waters and used it to his advantage by persuading the US Treasury Department to enforce the law against his competitor (17m45s).
• Hill's competitor was forced to transfer ownership of their steamboats, and Hill eventually merged with them, creating a monopoly (17m58s).
• James J. Hill is considered one of the best business operators, alongside Andrew Carnegie and John D. Rockefeller (18m12s).
• Hill's life's work was building the railroad, which he started in his 40s and worked on until his death (18m23s).
• Hill believed that railroading was crucial to the development of civilization, as evident from his quotes, "Some people build great monuments, this railroad is my monument" and "Building his railroad will be the most important work of his life" (18m33s).
• The railroad industry was the most important industry of Hill's time, with railroads bringing in twice the revenue of the federal government by 1885 and employing the largest workforce in the nation (19m16s).
• Hill's railroad enabled the creation of other gigantic industries, including agriculture, timber, and mining in the American West (19m32s).
• Hill's businesses, including his warehouse and steamboat operations, were strategically located on either side of the St. Paul and Pacific Railroad (19m52s).
• James J Hill found an opportunity in the St Paul and Pacific railroad, which others viewed as near worthless, but he saw it as a potentially wondrous enterprise lacking competent leadership (20m3s).
• Hill had a vastly different view on the potential of the St Paul and Pacific than others in his day, and he studied the road constantly, reading every scrap of information he could find about it (20m4s).
• Hill's two decades of experience before entering railroading was an asset that his competitors lacked, and he possessed a priceless advantage compared to other 19th-century rail titans (20m45s).
• Unlike most rail titans who came from the outside world of finance, Hill arose from the inside world of freighting and transportation, and he knew this world in all its complexities (20m57s).
• Hill was willing to go all in on the opportunity of a lifetime, risking everything, despite being rich and prosperous in his late 30s with a growing family and a diversified set of businesses (21m22s).
• Hill's actions were reminiscent of Andrew Carnegie, who also sold off his other businesses to devote all his time to building his steel company (21m48s).
• Hill staked everything he had on the gamble for the railway, cutting back on new commitments and moving out of his other businesses to devote his full attention to acquiring the road (22m4s).
• Hill was completely fixated on the project, constantly arguing to his friends that the potential prize defied description, and he seemed obsessed with completing the bankrupt St Paul and Pacific (22m25s).
• Hill's obsession with the project was an edge, and he spent years researching the opportunity before gaining control of the rail line (22m38s).
• Hill viewed the opportunity as a once-in-a-lifetime chance, and he was determined to learn everything he could about it, reading everything and gaining all the knowledge he could (22m52s).
• Hill summarized his approach as a feverish hunt for whatever knowledge he could gain, and he commenced to get all the information he could find, including copies of mortgages and complaints (23m7s).
• James J. Hill found an opportunity in the bankrupt St. Paul, Minneapolis and Manitoba Railway line, which others deemed impossible due to poor management and high agency costs (23m17s).
• Hill gathered information on the mortgages, complaints, lawsuits, and records related to the railway line to understand the situation and the Dutch investors involved (23m21s).
• He discussed the merits of the lawsuits and the position of the bondholders with council, realizing that he needed to get the Dutch shareholders to settle with him to get the railway out of bankruptcy (23m47s).
• Hill ran the numbers and estimated that a $5 million investment would yield a $19 million gain, but he didn't have the funds, so he partnered with three other businessmen who were richer and older than him (24m32s).
• However, Hill underestimated the cost, which turned out to be around $55 million, but the potential gain was much higher than initially estimated (24m55s).
• Hill convinced the Dutch investors to accept a 10% down payment and financed the rest with bonds paying 7% interest (25m7s).

Hill's Leadership and Management of the Great Northern Railway

• James J. Hill found his area of expertise in operating and managing railroads at the age of 40, despite having no direct experience in the field (25m28s).
• Hill's success can be attributed to his uncompromised standards, his ability to surround himself with incredibly talented people, and his willingness to do the job himself if needed (26m14s).
• Initially, Hill and his associates had another person in charge of construction, but Hill eventually took control, demonstrating his reoccurring trait of having high standards and being comfortable doing the job himself (26m27s).
• James J Hill had high standards and would cast aside anyone who didn't meet them, including Farley, who was referred to as "The Old Man" in Hill's biography, due to his impetuous and impatient nature (26m33s).
• Hill took on more tasks in the management of the railroad, eventually removing Farley completely, and entered a dynamic phase of his life, engaging in railroad construction for the first time (27m1s).
• Hill proved to be remarkably good at railroad construction, demonstrating his ability to muster and command men and materials, and control both broad strategy and details (27m8s).
• He worked tirelessly, often staying at his St Paul office until after midnight and then driving himself to the limit in the field, believing it was imperative to be where the money was being spent (27m18s).
• Hill's maxim was "it pays to be where the money is spent," and he stayed close to the money, which proved to be excellent advice (27m31s).
• Under Hill's management, workers laid rails at a rate of over 2 miles per day, more than twice the pace achieved by Farley earlier (27m45s).
• Hill had a clear and simple philosophy, which was to build the best possible line, with the shortest distance, lowest grades, and least curvature, as inefficiency offended him (27m54s).
• He wanted the track to be as level as possible to allow trains to maintain higher speeds and use less energy, making the railway more fuel-efficient and reducing strain on moving parts (28m17s).
• Hill's company organization principle was centered around this philosophy, and he also believed in doing things so that they would last a long time (28m35s).
• He imported more expensive, but more durable, rails from England, which proved to be more profitable in the long run (28m55s).
• Unlike most financiers, Hill was hands-on and would often scout out the best path for his rail tracks personally on horseback (29m21s).
• Hill was known for being a micromanager, but he believed in doing important tasks himself, and his bias was to be close to where the money was being spent and to take on the most important tasks personally (29m31s).

Hill's Operational Philosophy and Focus on Efficiency

• James J. Hill managed his business differently from his competitors, particularly the Northern Pacific railroad, which he held in contempt for being disorganized and having owners who were not on site, but rather back East (29m52s).
• Hill had an appreciation for those who worked hands-on and had "dirt underneath their fingernails," similar to Sam Z Murray, the main character in the book "The Fish That Ate the Whale" (30m9s).
• Hill worked closely with his engineers, planters, and machete men, understanding every part of his business, unlike his competitors who were often in remote offices (30m43s).
• Hill insisted on the most direct and economical route for his railroad, unlike the Northern Pacific, which was driven by incentives to build more miles of track to receive more government bonds and land grants (31m16s).
• The US government paid railroad companies by the mile, issuing bonds and awarding land grants for every mile of track laid, which led to companies owning over 10% of the country (31m52s).
• The Northern Pacific's approach, driven by these incentives, led to short-term thinking and ultimately drove the company into bankruptcy, with JP Morgan gaining control in the future (33m8s).
• Henry Villard, the head of the Northern Pacific, was compared to Hill, with Villard being described as a speculator who built without regard for cost, while Hill built carefully and checked his costs minutely (32m55s).
• Villard built his railroad rapidly and poorly, resulting in the need to tear up and rebuild much of the line, and he was forced to resign in 1884 due to massive land grants and mounting deficits (33m16s).
• James J Hill, on the other hand, built his railroad with long-term goals in mind, using the best materials, investing in technology, and maintaining uncompromising standards (33m41s).
• Hill had difficulty keeping work crews in the field and working at capacity, but he learned many of the men's names and would walk around the track, calling out to them, and he also fired shift bosses who failed to perform to his satisfaction (33m50s).
• Hill had strict rules of conduct, and employees who violated these codes or did not work fast enough were fired at an alarming rate throughout his life (34m14s).
• Despite the challenges, Hill managed the railroad to profitability right away, with net profits of over $500,000 by the end of the year, indicating the vast earning potential of the railroad (34m48s).
• Hill's success was due in part to his focus and authority, which became nearly absolute as the attention of his fellow associates wandered, and he built up a remarkable command of the details of the railroad (35m39s).
• Hill's approach to business, including his attention to detail and micromanaging, is similar to that of other successful business leaders, such as Steve Jobs and Walt Disney (36m4s).

Hill's Strategic Approach to Railroad Expansion and Development

• The Great Northern Railway, which Hill renamed his railroad, was built in stages slowly, with a focus on creating profitable lines before extending the road further into undeveloped western territories (36m19s).
• The Great Northern railroad was built in stages, with the company first creating profitable lines before extending the road further, a strategy similar to how Ingvar Kamprad built IKEA (36m47s).
• James J. Hill was a micromanager who constantly rode his own line, looking for defects and weaknesses in the tracks, and taking notes on tiny things that needed to be fixed (37m7s).
• Hill had a tendency not to delegate authority and lived with the outcome, which, combined with his likely photographic memory, allowed him to recall details about his railroad, including engine numbers and repairs (37m40s).
• Hill's obsession with detail extended to the industry itself, and he learned its parameters, problems, and potential, mastering detail by fashioning broad vision and strategy (38m11s).
• Hill memorized the details of 1,600 miles of railroad track and would often recall specific details, such as a ditch that needed to be fixed, and would immediately dispatch employees to fix it (38m18s).
• Hill used his company's own product to identify areas for improvement, riding the rail back and forth, and was also an avid reader, with his personal rail car loaded with books (38m53s).
• Hill's intensity and drive made him a difficult man to work for and with, and he was known to be a demanding and raging autocrat, as evidenced by an incident where he fired an engineer for exceeding the speed limit (39m8s).
• Hill's approach to building a railroad was to work hard, work intelligently, and then work more, with the goal of being the very best (39m39s).
• Hill reinvested profits back into infrastructure improvements, constantly trying to improve the engineering of his railroad and eliminate curves (39m48s).
• James J. Hill's bias was to use the best technology of the day to become more efficient, eliminate curves, and decrease grades, which lowered his cost of carrying tons of freight (39m58s).
• Hill's organizing principle was to keep everybody in line with the goal of achieving the best possible line, which meant the shortest distance, lowest grade, and least curvature (40m15s).
• He managed the finances of the railroad in a highly conservative and prudent manner, unlike many of his competitors, and instead of being reckless speculators, he was in the business for the long run (40m38s).
• Hill practiced a policy of plowing large percentages of profits directly back into the property, knowing that the best defense against invading railroads was a better-built system that could operate at lower rates (40m59s).
• He had a commonality with Rockefeller in that he could make a profit at rates so low that the same rates would put his competitors out of business (41m14s).
• Hill worked incessantly to improve every aspect of the railroad structure and operation, traveling along the line to look for dips, bumps, and curves that could be straightened and grades that could be lessened (41m29s).
• He had an engineer's passion for minimizing curves and grades, knowing that these were the keys to lower rates that would vanquish any competition (41m42s).
• Hill's long-term bias was an advantage because he could think years into the future, whereas most of his competitors could barely see beyond their noses (42m7s).

Hill's Vision for Regional Development and Settler Recruitment

• He invested in attracting settlers to the region served by his railroad, knowing that the success of his line depended on it, and used unique marketing ideas such as sending out over 100,000 pamphlets and flyers advertising open settlements (42m15s).
• Hill targeted Northern Europeans to immigrate to the United States, believing they were the most talented and productive, and recruited farmers from Europe to settle in the region served by his railroad (43m0s).
• James J. Hill had a quote where he said he could build a railroad to hell if given Swedish snuff and whiskey, highlighting his ability to recruit settlers and entire villages to develop land serviced by his railroad (43m17s).
• Hill believed in the mutual interdependence between railroads and the regions they served, stating that the two must be rich or poor together, and that gouging customers with excessive rates would harm the railroad in the long run (43m45s).
• Hill's monopoly was put under political pressure, but he argued that it helped him push prices down, not up, and that it was beneficial for the development of the regions his railroad served (44m11s).
• Hill was a significant figure in American business history, and his extreme personality was evident in his threat to President Teddy Roosevelt and the Attorney General that they would have their hands full if they fought him (44m39s).
• Hill's strategy was to connect people and lands, promoting economic growth and developing population centers, which would ultimately benefit his railroad as more people and goods would travel on it (44m55s).
• Hill considered himself and the people along his railroad line as partners in the prosperity of the country, and believed that if the farmer was not prosperous, his railroad would be poor (45m21s).
• Hill's policy of aligning incentives was a long-term strategy that he was able to build and compound for decades, giving him an advantage over his competitors (45m38s).
• The Northern Pacific Railway, led by Henry Villard, was severely overextended and in need of rebuilding, while Hill's Great Northern Railway had a consistent policy and a well-built road, making it hard for competitors to keep up (45m45s).
• Hill's company had a wonderfully productive and well-built road, slowly and carefully constructed, which gave him a massive advantage over his competitors (46m19s).
• A poorly run company cannot compete with a well-run one, as seen in the case of James J. Hill, who was able to blunt the competitive thrust of his opposition by forcing rates below what they could bear, thanks to his well-built road that could haul high tons of freight more cheaply (46m33s).
• Hill's slow and deliberate approach to building his railroad, focusing on long-term goals, watching costs, and increasing efficiency, allowed him to avoid bankruptcy and reorganization, unlike many other railroad companies (47m24s).
• Hill's railroad, the Great Northern, became one of the most profitable in the Northwest, thanks to his deliberate thrift and brutal efficiency, and he did not need the help of JP Morgan, who was known for reorganizing bankrupt railroads (47m40s).
• Hill's financial strength was a key factor in his success, and he was able to adapt to changes in the industry over his 37-year career, often seeing trends before they happened (48m1s).

Hill's Transcontinental Expansion and Engineering Challenges

• Hill recognized that the days of independent regional railroads were coming to an end and that he needed to extend and build a transcontinental system to survive, which he did by building through the Rocky Mountains during a period of deflation and low interest rates (48m31s).
• To build through the Rocky Mountains, Hill hired the best engineer he could find, John F. Stevens, who would later become the chief engineer on the Panama Canal, and used a set of maps called the Pacific Survey to find a possible low passage through the mountains (49m20s).
• Stevens and his companion faced significant challenges and dangers while surveying the route, including walking on snowshoes in deep snow, but were able to complete the task (49m44s).
• On December 11th, a frightened Indian guide refused to go farther, so Stevens left him behind and continued alone towards the Towering Peaks, where he had to stomp around through the night in minus 40° cold to stay alive and ensure the Western end of the passage lay across the Divide (49m54s).
• Stevens had to keep walking to avoid freezing to death, and this decision would lead to the hardest work of Hill's life, with struggles in managing the railroad while building it West (50m26s).
• Hill worked night and day, agonizing over expenses and the slow pace of construction, with workers in remote mountains proving hard to get and keep, often laboring on steep slopes with hand tools (50m43s).
• The pace of building fell to merely a few miles per week, and Hill's hope of completion began to fade away, but he admired true excellence and talent, as seen in his manager, civil engineer John F Stevens (51m14s).
• Stevens sent a report to Hill about a 13° curve, which Hill initially thought was ridiculous, but after traveling to the site, he realized Stevens was right, and the curve was necessary (51m26s).
• Hill was impressed by Stevens' defiance of his direct order to stop construction and immediately raised his salary by 50%, as Stevens was crucial in helping Hill reach his goal of getting the Great Northern Railway to the Pacific (52m2s).
• Hill thought of his business as a living organism, always adapting and improving, and his life's passion lay in straightening curves, lowering grades, and improving the railroad (52m22s).

Hill's Legacy and Impact on the Region

• Hill cared most about freight and never stopped improving his railroad, working on it until he died, displaying a dualism with both positive and negative traits (53m10s).
• James J Hill was a remarkable man with quick intelligence, incredible power of analysis, strong will, and personality, as well as an unparalleled work ethic and commitment (53m28s).
• However, he also had negative attributes, including an extreme temper that sometimes exploded into rage, willfulness that could turn into ruthlessness, and cold manipulativeness (53m38s).
• Despite these flaws, Hill's impact on the region was immense, with his influence extending to various aspects of building the regional economy and social order, including transportation, agriculture, mining, lumbering, maritime trade, and town and city building (54m15s).
• The passenger train from Chicago to Seattle is called the Empire Builder in his memory, a testament to his significant contributions to the region's development (54m11s).
• Hill's larger-than-life stature is well-attested by the persistence of his memory and legend nearly 80 years after his death (54m31s).
• His life demonstrates the impact one willful individual can have on the course of history, as he himself said, "I've made my mark on the surface of the Earth and they can't wipe it out" (54m45s).