#353 How To Be Rich by J. Paul Getty

The podcast episode delves into the life and business philosophies of J. Paul Getty, emphasizing the importance of relationship-building, strategic thinking, and long-term investment. Getty's practices, such as his use of a "liaison center" for networking and his emphasis on thrift, adaptability, and direct management, are highlighted as key components of his success. The episode also underscores Getty's disdain for bureaucracy and conformity, advocating for individuality, practical knowledge, and hands-on leadership. Getty's lessons, drawn from his own experiences and historical figures like Rockefeller and Carnegie, stress the significance of continuous learning, optimism, and the rejection of defeatist attitudes.

• Getty invested significant resources into fostering relationships with entrepreneurs, investors, and executives.
• He created a liaison center specifically for building these connections.
• The podcast host organizes similar events for listeners to network and build relationships.

"He knew that relationships run the world. So much so that he bought a 72-room estate that served as what he called a liaison center, essentially a place specifically created to build relationships."

• Getty recognized the non-linear returns from relationships between influential individuals.

• The book originated from a series of essays Getty wrote for Playboy magazine in the 1960s.
• Getty aimed to pass on his business knowledge and experience to the younger generation.
• The essays were written when Getty was 73 years old, reflecting his extensive experience in business.

"The book that I want to talk to you about today is 'How to Be Rich' and is written by J. Paul Getty. It did not start out as a book... Hugh Hefner approached J. Paul Getty in the 1960s, and he asked him to write a series of columns."

• Getty emphasized that there are no quick and easy formulas for success in business.

• Getty was concerned that many young businessmen lacked sufficient grounding and preparation.
• He wanted to convey the importance of understanding the fundamentals, philosophies, and responsibilities of business.

"I and so many other successful businessmen have so frequently noted that many young people today enter upon their business careers without sufficient grounding and preparation."

• Getty repeatedly emphasized that there are no surefire, quick, and easy formulas for success.

• Getty held his father in high regard and credited much of his success to him.
• His father exposed him to the oil business at a young age, which significantly influenced his career.

"His father was his hero. His father was the best man he ever knew... He credits a lot of his success to his father."

• Getty's father was a self-made man who had a talent for finding oil and worked extremely hard.

• Getty was exposed to the oil industry from a young age, visiting oil fields and learning about the business.
• His father had a talent for finding oil, similar to William Randolph Hearst's father, who had a talent for finding gold.

"As the son of a successful oil man, I had been exposed to the virus of oil fever ever since childhood."

• Getty's early exposure to the business stretched his understanding and helped him pick up ideas gradually.

• Getty started his own oil company after college, financed by his father on a 70-30% profit-sharing basis.
• Unlike his father, Getty initially faced challenges and had to develop resilience and adaptability.

"My father did finance some of my early operations, but it was solely on a 70-30% basis."

• Getty believed in the science of petroleum geology and applied it to his operations, unlike many other oilmen at the time.

• Getty faced heavy competition and opposition from major oil companies, which often employed unfair tactics.
• This opposition forced Getty to develop traits and techniques to survive, such as flexibility, adaptability, and innovation.

"We all faced heavy competition and opposition from major oil firms... Some of these huge companies did not always abide by the rules."

• Getty relied on hard-bitten veteran oil field workers and kept administrative and paperwork to a minimum.

• Getty faced a situation where major oil companies tried to squeeze him by refusing to buy his crude oil.
• He leased storage tanks to store the oil and aimed high by directly approaching the president of Shell Oil for help.

"In desperation, I aimed high... I asked for an interview with the shell's company president, Sir George Lay Jones."

• The president of Shell Oil agreed to buy Getty's oil and construct a pipeline to link his wells with Shell's network.

• During the Great Depression, Getty envisioned a completely integrated and self-contained oil business.
• He rejected advice to liquidate his assets and instead aimed to build a vertically integrated company to gain complete control over his operations.

"I began to envision a completely integrated and self-contained oil business, just like John D. Rockefeller."

• Getty's experiences with relying on other companies influenced his desire for vertical integration.

• Getty's life and business philosophy were heavily influenced by his early exposure to the oil industry and his father's teachings.
• He believed in the importance of relationships, adaptability, and a deep understanding of business fundamentals.
• His vision for a vertically integrated oil company was shaped by his experiences and challenges in the industry.

• Getty's pivotal decision in 1930 to invest more in his oil wells despite widespread pessimism.
• Comparison to Steve Jobs' philosophy of connecting the dots looking backward.
• The importance of trusting one's gut, destiny, life, or karma in making significant life decisions.
• The challenge of going against the prevailing opinion and facing skepticism from friends and family.

"In business, it is never easy to go against the beliefs and attitudes held by the majority."

• Emphasizes the difficulty of counteracting majority beliefs and attitudes.

"My friends and acquaintances felt my buying spree would prove a fatal mistake."

• Highlights the personal skepticism Getty faced from his close circle.

• Getty's long-term vision leading to the acquisition of the Saudi Arabia neutral zone concession.
• The significance of patience and persistence in achieving monumental success.

"He gets this concession from the king of Saudi Arabia."

• Demonstrates the reward of long-term vision and patience.

"Getty's going to wind up producing 13 billion barrels of oil."

• Illustrates the massive scale of success resulting from Getty's decision.

• The essay emphasizes the importance of optimism for young businessmen.
• The erroneous belief among young people in 1965 that opportunities to make millions no longer existed.
• Richard Branson's definition of a business as an idea that improves someone's life, supporting the notion of endless opportunities.

"There will always be room for the man with energy and imagination."

• Encourages young businessmen to remain optimistic and innovative.

"I never cease to be astounded by the prevalence of this negative and totally erroneous attitude among supposedly intelligent people."

• Criticizes the pessimistic attitude prevalent among young people.

• The belief that opportunities in business are limitless due to the infinite ways to improve people's lives.
• The historical repetition of pessimistic attitudes and the importance of recognizing and seizing opportunities.

"Anyone who has achieved success is frequently asked the same question by the people he meets. How can I do this, too?"

• Reflects the common curiosity about the path to success.

"There are always opportunities through which businessmen can profit if they will only recognize and seize them."

• Emphasizes the importance of recognizing and seizing opportunities.

• Getty's belief that optimism is essential for business success and that pessimism hinders opportunities.
• The need for young businessmen to take on progressive, vigorous leadership roles.
• The rejection of excuses and defeatist philosophies.

"The last things that American business needs are complaints, alibis, and defeatist philosophies."

• Stresses the importance of a positive, proactive mindset in business.

"The rewards awaiting such men are practically limitless."

• Highlights the potential for immense rewards for optimistic and proactive businessmen.

• Getty's ten fundamental rules for achieving success in business.
• Emphasis on understanding one's field, practicing thrift, avoiding overexpansion, maintaining supervision, and seeking new markets.
• The importance of honoring guarantees and using wealth to improve living conditions.

"Choose a field which he knows and understands."

• Advises businessmen to operate within their circle of competence.

"A sense of thrift is essential for success in business."

• Highlights the importance of practicing economy in business operations.

"Forced growth can be fatal to any business, new or old."

• Warns against the dangers of overexpansion.

• The concept of the millionaire mentality, which involves taking ownership and responsibility for business outcomes.
• The importance of incentives in motivating employees to think like owners.
• The categorization of employees and the focus on cultivating talent with a millionaire mentality.

"Successful people listen. Those who don't listen don't last long."

• Stresses the importance of listening and adapting based on feedback.

"Many a man who is supposed to have ten years experience really has only one year's experience repeated ten times."

• Critiques the lack of growth and learning in some individuals.

• The story of George Miller and the implementation of profit-sharing to align incentives.
• The identification of different categories of employees and the recommendation to focus on those with a millionaire mentality.
• The dismissal of unmotivated employees who do not contribute to the business's growth.

"I pay you to do a job."

• Reflects Getty's approach to aligning incentives with performance.

"They want to create their own security and build their own futures entirely on their own."

• Describes the entrepreneurial spirit of individuals who prefer independence.

"These are the ones who do the least and demand the most."

• Criticizes employees who contribute minimally but expect maximum benefits.

• The founder mentality is characterized by meticulous attention to detail and cost reduction.
• Even seemingly small savings can lead to significant economic benefits over time.
• Example from Rockefeller's biography: analyzing waste baskets for reusable items to save costs.
• Example from Getty: a junior executive saved $25,000 annually by reducing production costs by half a cent per unit.

"It's more important for the man with the millionaire mentality to be able to think small, in the sense that he gives meticulous attention to even the smallest details and misses no opportunity to reduce costs in his business."

• Emphasizes the importance of meticulous attention to detail in business.

"A bright junior executive...devised a shortcut in a production operation which saved half a cent per unit, but added up to a total yearly savings over $25,000."

• Illustrates how small operational changes can lead to substantial savings.

"After watching machine solder caps to the cans, he asked the expert, how many drops of solder do you use on each can? 40. The man replied, have you ever tried 38?"

• Demonstrates Rockefeller's approach to cost-saving by reducing the number of solder drops, leading to significant long-term savings.

• Ineffective executives exhibit poor treatment of subordinates and excessive flattery towards superiors.
• Effective executives think and act independently, take full responsibility, and lead by example.
• Getty's five lessons on leadership:
  1. Lead by example.
  2. Accept full responsibility for team actions.
  3. Never ask others to do what you wouldn't do yourself.
  4. Be fair but firm with subordinates.
  5. Praise publicly, criticize privately.

"The two terrible traits that they have is the way they speak to subordinates and the way they kiss ass to the bosses."

• Highlights the negative traits of ineffective executives.

"The very first thing you should look for in the executives that you're hiring...is the ability to think and act for themselves without constantly running to the superiors for advice."

• Stresses the importance of independent thinking in executives.

"A good executive accepts full responsibility for the actions of the people under him."

• Repeated emphasis on the importance of taking responsibility.

• Clear and quick communication is crucial for effective leadership.
• Misunderstandings in business communication can be costly.
• Napoleon's ability to issue concise orders is highlighted as an exemplary skill.

"The good executive is one who can explain things and tell people what needs to be done quickly and clearly."

• Emphasizes the need for clear and concise communication in leadership.

"Long orders, which require much time to prepare, to read and to understand, are the enemies of speed."

• Illustrates the efficiency of concise communication, using Napoleon as an example.

• Frugality is a key trait for success in business.
• Thrifty individuals are better at recognizing cost-saving opportunities and maintaining financial reserves.
• Historical examples from Warren Buffett and Sam Walton reinforce the value of efficiency and cost-consciousness.

"An individual who is naturally thrifty will have an infinitely greater chance for success than another of equal ability who does not possess this quality."

• Highlights the importance of frugality in achieving business success.

"You can make a lot of different mistakes and still recover if you run an efficient operation, or you can be brilliant and still go out of business if you're too inefficient."

• Sam Walton's quote underscores the critical role of efficiency in business survival.

• Maintaining composure during crises is essential for business success.
• Panic can lead to poor decision-making and failure.
• Getty and Buffett both advocate for a calm and controlled temperament.

"Always think of yourself as a man who has just fallen overboard in the middle of a lake. If you keep your wits about you, you can always swim to shore or at least float until someone fishes you out. But if you lose your head in panic, you're finished."

• Advises maintaining composure in stressful situations to ensure survival and success.

"What then you need to build a successful career in business is you need temperament to control the urges that actually get other people into trouble."

• Emphasizes the importance of emotional control in business.

• Excessive administrative overhead and bureaucracy are detrimental to business efficiency.
• Effective leaders should engage directly with the operational aspects of their business.
• Historical entrepreneurs like Andrew Mellon, Andrew Carnegie, and Henry Ford exemplify this hands-on approach.

"The modern business mania is to build greater and ever greater paper shuffling empires. I still believe that the less overhead there is in a business, the better."

• Criticizes the trend of increasing administrative overhead and emphasizes the value of minimal bureaucracy.

"Any executive can do a much better job if he peels off his business suit once in a while, climbs into a set of overalls and gets his hands dirty down in the plant."

• Advocates for direct involvement in the operational aspects of the business.

• Studying the lives and strategies of historical entrepreneurs can provide valuable insights for modern business practices.
• Getty emphasizes the importance of historical knowledge in building a successful business.

"In Getty's mind is all the information that he learned from reading and studying the great entrepreneurs of the past. So then he could use it in building his own company."

• Highlights the value of learning from historical examples to inform contemporary business strategies.

• Effective management involves using common sense, psychology, and indirection to influence and build relationships with employees.
• Management’s primary function is to obtain results through people.
• Positive applied psychology can counter bad management psychology.

"The primary function of management is to obtain results through people."

• Emphasizes the importance of achieving results through effective management of people.

"I did not waste time issuing threats of disciplinary action. I simply announced that I would now be holding daily conferences at which I expected all management personnel to be present, and the conference would begin 45 minutes before the start of the regular working day."

• Demonstrates a strategic and indirect approach to addressing tardiness among executives.

"I sent the man a pleasantly worded memo asking for a detailed inventory of the material he'd taken and saying I would have it appraised. And the value charged against his salary."

• Highlights the use of positive applied psychology to address misuse of company property without severe disciplinary actions.

• Mentorship from older, successful businessmen is invaluable.
• Business is fundamentally about problem-solving, and crises should be viewed as opportunities for growth.

"The perfect business does not exist. Snags, difficulties, and crises crop up in every business. The truly great leader views reverses calmly and coolly."

• Stresses the inevitability of business challenges and the importance of maintaining composure.

• Emphasis on investing for the long term rather than engaging in short-term speculation.
• Building wealth requires resisting the impulse for quick gains and focusing on long-term ownership.

"All the money is in the long term. You want to own, not trade."

• Advocates for long-term ownership as the path to substantial wealth accumulation.

"Land down here ain't for owning. It's for trading."

• Illustrates the flawed mindset of short-term speculation during the 1920s real estate bubble.

• Nonconformity is essential for success in business.
• Conforming to the majority leads to mediocrity and missed opportunities.

"Resist the temptation to force yourself into the pattern of the structured man. One needs only to remember that a groove may be safe, but that as time wears away at it, the groove first becomes a rut and then finally a grave."

• Warns against the dangers of becoming standardized and losing individuality.

"You'll go much farther if you stop trying to look and act and think like everyone else. The conformist only demonstrates that he is unimaginative, unenterprising, and mediocre."

• Encourages individuality and nonconformity as keys to success.

• Successful businessmen are leaders, originators, and nonconformists.
• They rely on their own judgment and understand all aspects of their business.

"The successful businessman is a leader who solicits opinion and advice from his subordinates, but makes the final decisions, gives the orders, and assumes the responsibility for whatever happens."

• Defines the role of a successful businessman as a decisive leader who takes responsibility.

"To be truly rich, a man must live by his own values. It has always been my contention that an individual who can be relied upon to be himself and to not conform and to be honest unto himself can be relied upon in every other way."

• Emphasizes the importance of living by one’s own values and maintaining integrity.

• The book provides valuable advice on management, investment, and the importance of individuality.
• Recommended for its practical insights and historical lessons on business success.

"Highly recommend picking up this little book. You could read it all the way through. You could pick it up and read it essay by essay. But I do think he's got a ton of useful advice in here, and I think it's well worth reading."

• Endorsement of the book for its wealth of practical advice and insights.