#96 James J. Hill Empire Builder of the Northwest

Summary Notes


In this episode, the host delves into the life and legacy of James J. Hill, a titan of industry known as the "Empire Builder" for his seminal role in shaping the regional economy and social order of the Northwest through transportation, agriculture, mining, lumbering, maritime trade, and urban development. Hill's character exhibited a "lunar dualism," with positive traits such as intelligence, analytical prowess, and a formidable work ethic, counterbalanced by a propensity for rage, ruthlessness, and tunnel vision. Through diligent research and a relentless drive, Hill built the only successful privately funded transcontinental railroad in U.S. history, the Great Northern Railway, without federal subsidies, demonstrating the profound impact an individual can have on history. Michael P. Malone's book "James J. Hill: Empire Builder of the Northwest" offers insights into Hill's philosophy, including his emphasis on frugality, hard work, and the concept of business as an adventure. The host reflects on Hill's strategic and focused approach to building his empire, contrasting it with contemporaries who rushed expansion, ultimately underscoring that a well-crafted, slowly built business can endure the test of time.

Summary Notes

James J. Hill's Personality and Achievements

  • James J. Hill was a dynamic individual with both positive and negative traits.
  • His positive traits included intelligence, analytical skills, strong will, personality, work ethic, and commitment.
  • His negative traits were mirrored versions of the positives: harassability, ruthlessness, and sometimes a narrow focus.
  • Hill's impact on the regional economy and social order was significant, touching various sectors like transportation, agriculture, mining, lumbering, maritime trade, and urban development.
  • His legacy is long-lasting, with his name being used for the Empire Builder train from Chicago to Seattle.

"Like most dynamic individuals of any generation, James J. Hill displayed what Alan Nevins once called a sort of lunar dualism. His positive traits were quite remarkable, a quick intelligence, a power of analysis, an incredible power of will and personality, and an unparalleled work ethic and commitment."

This quote highlights the dual nature of Hill's character, emphasizing his remarkable positive traits that contributed to his success.

"His negative attributes were mirror images of the positive, an extreme harassability that sometimes exploded into rage, a willfulness that could turn into outright ruthlessness, and such a preoccupation with the purpose at hand that he sometimes lost sight of the broader perspective."

This quote describes the flip side of Hill's positive attributes, showing how they could also lead to negative behavior.

James J. Hill's Influence and Legacy

  • Hill is recognized for his contributions to building the regional economy and social order.
  • He is considered a testament to the idea that individuals can have a significant impact on history.
  • Hill's life and legacy continue to fascinate successive generations.

"But the life of James J. Hill certainly demonstrates the impact one willful individual can have on the course of history."

This quote reflects on the significant influence Hill had on history, emphasizing the power of individual agency.

James J. Hill's Recognition and Wealth

  • Hill was listed as a respected business operator by Charlie Munger.
  • He is considered one of the 50th richest entrepreneurs in America after adjusting for inflation.

"And James J. Hill was on that list."

This quote indicates Hill's inclusion in a list of admired business operators, highlighting his recognition among respected entrepreneurs.

"Hill would be one of the 50th richest entrepreneurs to ever live in America."

This quote establishes Hill's wealth and success in the context of American history.

James J. Hill's Philosophy and Insights

  • Hill's quotes provide insight into his personality and business philosophy.
  • His emphasis on hard work and the importance of saving money are key to his perspective on success.
  • Hill viewed life as an adventure and running a business as a tool in that adventure.

"Give me snuff, whiskey and Swedes, and I will build a railroad to hell."

This quote showcases Hill's confidence and determination in his ability to achieve ambitious goals.

"Work, hard work, intelligent work, and then more work."

Hill's formula for success is articulated in this quote, emphasizing the centrality of hard work.

"Most men who have really lived have had in some share their great adventure. This railway is mine."

This quote reflects Hill's view of his work on the railway as his life's great adventure.

"If you want to know whether you're destined to be a success or failure in life, you can easily find out. The test is simple and it is infallible. Are you able to save money? If not, drop out, you will lose... The seed of success is not in you."

Hill's belief in frugality and saving as indicators of potential success is encapsulated in this quote.

James J. Hill's Business Strategy

  • Hill's approach to building the Great Northern Railway was methodical and incremental.
  • His strategy was to create profitable lines before expanding into undeveloped territories.
  • The Great Northern Railway was the only privately funded transcontinental railroad in US history built without federal subsidies.

"The Great Northern was built in stages, slowly to create profitable lines before extending the road further into the undeveloped western territories."

This quote outlines Hill's strategic approach to building the Great Northern Railway, emphasizing patience and profitability.

James J. Hill's Early Life and Ambitions

  • Hill's early life was marked by humble beginnings and a tragic accident that cost him an eye.
  • He had a passion for learning and was influenced by historical figures like Napoleon.
  • Hill's ambition led him to seek opportunities in the American West.

"He was born in Canada... When he was nine, hunting led to a tragic incident. A bow that he had made snapped, lashing the arrow sharply back into his right eye and pried it from its socket."

This quote provides background on Hill's early life and the adversity he faced.

"He became a voracious reader even before school days... He loved to learn."

Hill's love for learning and his early education are highlighted in this quote.

James J. Hill's Entrepreneurial Journey

  • Hill's work ethic and intelligence were evident from his early employment.
  • He demonstrated entrepreneurial traits and learned valuable business skills through practical experience.
  • Hill's journey to St. Paul, Minnesota, marked the beginning of his significant business ventures.

"He found employment on the levees along the Mississippi river... he learned much more than bookkeeping."

This quote describes Hill's early work experiences and the skills he acquired that would later contribute to his success in business.

"If there ever was a born entrepreneur, it was Jim Hill."

The quote concludes that Hill's innate traits and experiences shaped him into a natural entrepreneur.

Conflict with Hudson Bay Company

  • Kitson's work for independents clashed with his duties at the Hudson Bay Company (HBC).
  • To resolve this, Kitson entered a partnership with Hill, who took over the conflicting business interests.

When the all powerful HBC began frowning on Kitson's work for other independents, he made an arrangement to turn this business over to Hill as a partner.

This quote explains how Kitson managed the conflict of interest by partnering with Hill, who took over the business that was causing the conflict.

Hill's Early Career and Ambitions

  • Hill befriended and impressed established figures like Kitson.
  • He became heavily involved in fur trade, brokering, and transportation in the frontier areas.
  • Hill planned to retire after amassing $100,000 to focus on study, philanthropy, and fatherhood but abandoned this dream.
  • Over 11 years, Hill slowly built his wealth, contrasting with the desire for quick riches.

He starts out with modest goals, and then, interesting enough, he rapidly exceeds them. I shouldn't say rapidly, he exceeds them. Actually, it's the opposite of rapidly. It takes a long time.

The quote highlights Hill's initial modest ambitions and the slow, gradual nature of his success, which took a long time to build.

Transition to Independent Entrepreneurship

  • Hill transitioned from employment to independent entrepreneurship.
  • He secured an agency for the Northwest Packet company, dominating the local steamboat trade.
  • Hill's firm acted as a forwarding agent for the St. Paul and Pacific Railroad, foreshadowing his future in railroading.

Jim Hill began a series of career thrusts that moved him decisively away from employment for others and towards independent entrepreneurship.

This quote describes Hill's strategic career moves towards becoming an independent entrepreneur, setting the stage for his future success.

Diversification and Learning

  • Hill expanded his fuel business, learning about the industry and its connection to railroads.
  • His coal business success demonstrated his ability to adapt to market trends, like shifting from fuelwood to coal.
  • Hill's business philosophy involved fierce competition or forming monopolies when beneficial.

He would immerse himself in details of the business that never changed.

The quote reflects Hill's dedication to understanding the minutiae of his business ventures, a constant in his approach to business.

Business Philosophy and Strategy

  • Hill's approach to business was characterized by vertical and rational integration, which some called monopolization.
  • He was a tough, relentless taskmaster, unafraid to end partnerships that didn't meet his standards.
  • Hill was pragmatic, willing to change course and collaborate with competitors when it made sense.

When competition became wasteful to him, he did not hesitate to end it, even if it meant joining with old enemies and creating an unblushing situation of monopoly.

The quote encapsulates Hill's business philosophy of ending wasteful competition by creating monopolies or market-sharing consortiums when necessary.

Prelude to Railroading

  • Hill's warehousing and steamboat businesses exposed him to the railroad industry.
  • He foresaw the decline of steamboat transportation and the rise of railroads, positioning himself accordingly.
  • Hill's unique perspective on the St. Paul and Pacific Railroad saw potential where others saw failure.

His enterprises now bracketed the stalled out St. Paul and Pacific Railroad on both ends.

This quote indicates how Hill's existing businesses strategically positioned him to take advantage of the underperforming St. Paul and Pacific Railroad.

Advantage from Experience

  • Hill's inside knowledge of freighting and transportation gave him an edge over other rail titans from finance backgrounds.
  • His experience allowed him to understand the complexities of the industry and solve problems effectively.

He possessed a priceless advantage compared with most other 19th century rail titans.

The quote underscores Hill's unique advantage in the railroad industry due to his comprehensive understanding of transportation and freighting, setting him apart from his contemporaries.

Understanding the Subject: James Hill and Railroading

  • James Hill was deeply involved in the railroading industry, demonstrating a profound understanding of the business.
  • He was known for his hands-on approach, much like Samuel Z. Murray, being on the field with workers.
  • Hill was able to outcompete and succeed against more capitalized eastern interests, despite starting with a moderate six-figure net worth.
  • His strategy involved buying a bankrupt railroad, for which he gathered business partners, the "associates," to invest $5 million with an estimated return of $19 million.
  • Hill's obsession with completing the bankrupt SPMP rail line was driven by the land grants it held, which were crucial in the railroad industry.

"He knew all the world and all its complexities. He was about to demonstrate how certain well established regional capitalists on the frontier could challenge an even best larger eastern interest."

This quote emphasizes Hill's deep understanding of the complexities of the world and his ability to challenge more prominent, well-established capitalists.

The Importance of Land Grants in Railroading

  • Land grants were gifts of real estate from the government, enabling works or rewarding services.
  • In the context of railroads, land grants were given to operators as it was in the national interest to have a connected railroad system for shipping goods and people.
  • Hill's focus on acquiring the SPMP railroad was partly due to its valuable land grants.

"A land grant is basically a gift of real estate... they're giving anybody that operate a railroad because it's in the national interest to have a national railroad system."

This quote defines a land grant and explains its significance in the railroad industry, highlighting the strategic benefit of owning a railroad with such grants.

Obsession as an Edge

  • Being obsessed with a project is seen as an edge, a concept that applies to many successful founders.
  • Hill's obsession with the SPMP railroad is described as a once-in-a-lifetime opportunity.
  • His fixation on the project was so intense that he discussed it hundreds of times, demonstrating perseverance and focus.

"Here stood the kind of opportunity that came only with the opening of a new frontier. Once in a lifetime. Once in many lifetimes."

This quote captures Hill's view of the SPMP project as a unique and monumental opportunity, reflecting his obsession and dedication.

Self-Education and Diligence

  • Hill's obsession led him to self-educate, gathering all possible information about the SPMP railroad, including legal and financial documents.
  • His research included understanding the situation of the bondholders and the lawsuits surrounding the railroad.
  • Hill's thoroughness exemplifies the importance of self-education and attention to detail in business.

"I commenced to get all the information that I could find... Such information I could gather from all parties who are likely to have information as to the situation."

This quote illustrates Hill's meticulous approach to gathering information, which was crucial for his understanding and eventual success with the SPMP railroad.

The 'Burn the Boats' Philosophy

  • Hill's commitment to the SPMP railroad was absolute, with no plan B, embodying the 'burn the boats' philosophy.
  • He sold off his other business interests to invest everything into the railroad, demonstrating his willingness to risk it all on this venture.
  • Hill's actions show the extent of his dedication and the high stakes involved in his gamble.

"It is a fair measure of James Hill's grit and ambition that he now staked everything he had his entire career on the gamble for the SPMP."

This quote conveys the depth of Hill's commitment and the risks he took by investing all his resources into the SPMP railroad.

Managing Railroad Construction

  • Hill's hands-on approach to railroad construction involved being on-site and understanding the work deeply.
  • He was known for his ability to manage people and materials effectively, often working late and prioritizing being where the money was spent.
  • Hill's direct involvement in the construction process set him apart from other railroad owners and contributed to his success.

"Hill worked and worried by day and night... to be where the money was being spent."

This quote highlights Hill's dedication and strategic approach to managing the construction of the railroad, ensuring he was directly involved in the financial aspects.

Financial Success and Focus

  • Hill's detailed knowledge of the railroad's operations and finances led to significant profits.
  • He identified financial mismanagement in the railroad's books before taking over, which indicated a higher profit potential.
  • Hill's ability to maintain focus on the railroad was a key factor in his success, as he learned from past diversions that spreading his efforts was counterproductive.

"With each passing month, as the attention of his fellow associates wandered, Hill became ever more focused."

This quote underscores the importance of focus and the positive impact it had on Hill's management and success with the railroad.

Contrast with Villard

  • Hill's careful and cost-conscious approach to railroad construction was contrasted with Villard, who built rapidly but without regard to costs.
  • Villard's methods resulted in poor construction and financial difficulties, leading to his resignation.
  • The comparison between Hill and Villard highlights the benefits of Hill's meticulous and focused strategy.

"While Hill was building carefully and checking his costs minutely, Villard built in ignorance of costs."

This quote contrasts Hill's meticulous approach with Villard's lack of cost management, illustrating the long-term benefits of Hill's strategy.

Hill's Mastery of Detail and Broad Vision

  • Hill studied past railroad ventures to learn from their mistakes and successes.
  • He understood the railroad industry's parameters, problems, and potential.
  • His ability to master detail while crafting a broad vision and strategy was key to his success.
  • Hill's investment strategy focused on his area of expertise, similar to John D. Rockefeller.

At the same time, Hill learned the industry itself, its parameters, problems, and potential. His genius lay precisely in his ability to master detail while fashioning broad vision and strategy.

The quote emphasizes Hill's dual focus on understanding granular details and developing overarching strategies, which contributed to his success in the railroad industry.

Conservative Financial Management

  • The railroad associates managed finances conservatively and prudently.
  • They focused on long-term business rather than short-term speculation.
  • This approach contrasted with contemporaries like Jay Gould and Henry Villard.

The railroad associates managed the finances of the railroad in a highly conservative and prudent manner.

This quote highlights the financial prudence of Hill's associates, which set them apart from more speculative contemporaries.

Strategic Investment in Infrastructure

  • Hill advocated for reinvesting profits back into improving the railroad.
  • A better-built system with lower operating costs offered a strong defense against competition.
  • Hill's constant optimization of the railroad was crucial to maintaining low rates and profitability.

Knowing that the best defense against invading railroads was a better built system that could operate at lower rates.

The quote explains Hill's strategy of reinvesting in the railroad to improve its infrastructure, thereby enabling it to operate more efficiently and outcompete rivals.

Continuous Improvement and Optimization

  • Hill was relentless in improving every aspect of the railroad.
  • He personally inspected the railroad to identify and correct inefficiencies.
  • His engineering passion for minimizing curvature and grades was key to maintaining low rates.

Jim Hill worked incessantly at improving every aspect of the railroad structure and operation.

This quote underscores Hill's dedication to continuous improvement, which was essential to the railroad's operational efficiency and competitive edge.

Expansion Strategy and Vision

  • Hill foresaw the end of profitable independent regional railroads.
  • He anticipated the need for integrated continental systems.
  • Hill's strategy involved either expanding his railroad or integrating with others to avoid being absorbed.

The days of prosperous, independent regional railroads must soon end, and the future lay in integrated continental systems that can move heavy tonnages rapidly and without interruption at uniform and falling rates.

The quote captures Hill's strategic foresight in predicting the evolution of the railroad industry and the necessity for expansion and integration.

Competitive Tactics

  • Hill was able to undercut competitors by operating at lower costs.
  • He used his well-built railroad to force rates below what competitors could bear, driving them out of business.

When the Milwaukee sought directly to invade the valley with another subsidiary, Hill proved to be able to blunt their thrust by the simple expedient of forcing rates below what the opposition could bear.

The quote illustrates Hill's competitive tactic of leveraging his efficient railroad to push rates lower than competitors could handle, effectively defending his market position.

The Great Northern Railway

  • Hill's prime years were marked by the construction of the Great Northern Railway.
  • Despite personal health issues, Hill's determination and work ethic were unwavering.
  • The Great Northern Railway became one of the most profitable major railroads.

The great adventure of James J. Hill's life came during his prime years with the epic westward construction of his midwestern railroad to the Pacific.

This quote summarizes the pinnacle of Hill's career in building the Great Northern Railway, highlighting the significance of this achievement.

Challenges in Expansion

  • Hill faced immense challenges in expanding westward, including difficult terrain and maintaining a workforce.
  • His health suffered due to the stress and demands of managing the expansion.
  • Hill's intense focus on the business was both a driving force and a detriment to his well-being.

Jim Hill worked night and day, ulcerating about expenditures and the agonizing, slow pace of construction.

The quote reflects the extreme dedication and stress Hill experienced while managing the railroad's expansion, which took a toll on his health.

Hill's Business Philosophy

  • Hill viewed the railroad as a living organism that required constant improvement.
  • He prioritized infrastructure over frills, focusing on freight efficiency.
  • Hill's approach to business emphasized slow, steady growth and attention to detail.

To Hill, the railroad trunk lines and their spreading branches formed a living, vital organism which constantly needed to be replenished.

This quote conveys Hill's philosophy of treating the railroad as an entity that continually needed care and improvement to thrive.

Hill's Legacy and the 1893 Panic

  • Hill's talents and vision were crucial to the Great Northern Railway's success.
  • The railroad's careful construction and capitalization allowed it to withstand the 1893 panic.
  • Hill's legacy includes his emphasis on detail, work ethic, and strategic growth.

It would always be a point of special pride to James J. Hill, and deservedly so, that this well built and tightly capitalized Great Northern Railway, unlike its federally subsidized competitors, did not fail during the 1893 panic.

The quote highlights Hill's pride in the Great Northern Railway's resilience during the economic downturn of 1893, a testament to his strategic and prudent management.

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