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the photographer from New York Magazine was excited and more than a little nervous in a matter of moments he would enjoy a unique opportunity the chance to snap the first unposed picture ever taken of the richest man in the world
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the strange thing was that most Americans had never even heard of Daniel Keith Ludwig it was hard to figure how could a man any man in these days of mass media coverage and public obsession with World Records managed to accumulate
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a $3 billion Fortune with hardly anyone becoming aware of it if it takes a 43in stack of $100 bills to make a million dollar then a stack equaling a billion would Tower over the Empire State Building Ludwig's riches would be three
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times as tall obsessed with privacy lwig reportedly pays a major public relations firm fat fees to keep his name out of the papers the New York Magazine photographer had learned that the world's richest man was living almost anonymously
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right in the middle of Manhattan and that he was in the habit of walking to work every day the photographer waited for the billionaire to walk the few blocks from his Penthouse apartment just as the photographer was starting to
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think something had gone wrong and lwood wasn't coming he spied a grayhair figure in a black overcoat walking briskly as the old man Drew close the photographer raised his camera and aimed Ludwig surprised turned his head and looked up
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the shudder clicked the next instant the world's richest man 80 years old but still fit in trim charged the photographer and grabbed him in a half Nelson he tried to wrestle him to the sidewalk and take the camera but the
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photographer Twisted out of ludwick's grasp and ran down the street New York Magazine ran the photo with an accompanying article the richest man in America walks to work that was an excerpt from the book I'm going to talk to you about today which is the
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invisible billionaire Daniel Ludwig and is written by Jerry Shields so this is the second time that I read this book the first time was four years ago all the way back on episode number 68 it's one of my favorite books that I read for
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the podcast because Daniel lwig is not only a mysterious character but the sheer size and scale of what he was able to accomplish is unbelievable and I'm going to give you a description of why it's so unbelievable in a few pages I
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want to jump into the introduction real quick at the beginning there's an overview of the one time that lwig consented to be interviewed it happened in 1957 when he was 60 years old and this interview happens about 25 years
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years before Forbes puts lwig as the richest person in the world when the book was published in 1986 lwig was estimated to be worth about $3 billion and so let's go into this description of lwig with lwig work is almost an obsession a non-smoker only a moderate
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Drinker Spartan in personal habits business gets 100% of his attention on a project his greatest gift is seeing the big picture once a project begins lwig does not rest easy until completion date there's no lack of projects an associate
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speaks of his unlimited engine genuity in dreaming up new ways of doing things remember that sentence for when I get to a description of how large his business is at this point he willingly gambles on an idea that looks good but his formula
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is to add a large dose of hard work to that gamble the description of lwig continues Ludwig's most notable characteristics besides his imagination and pertinacity is a lifelong pension for keeping his mouth shut Saunders that's the name of the interviewer uh Saunders attributed this to the ship Builder's single-minded absorption with getting things done he is interested in achievement not fame I'm in this business because I like it lwig said I
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have no Hobbies DK so his nickname for people knew him was his initials DK DK was strictly a solo act his zest for these operations is that of a lone wolf he shares neither the rewards nor the risks with anyone else before moving on
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let's go back to what the interviewer said that his most notable characteristics were his imagination and pertinacity let's define that word I love the Webster definition of pertinacity it says holding strong because it's a perfect description of
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lwig if you read this book holding strongly to an opinion purpose or course of action stubbornly or annoyingly persistent and so then this article gives an overview of his career we're going to go into more detail on this
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later but this is really important to know so it says the narrative Reeve a boy interested in boats and a young man who struck out on his own as a ship owner and operator before the age of 20 he starts his first business at 19 he is
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in his '90s when the book is published and he is still working and so it says after struggling through several lean years during the shipping slump that followed World War I lwig had just started making money as an oil hauler when the Depression hit wiping out
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nearly everything that he had and this may be the most important idea he ever had in his career he's going to start so his this is how he's going to make his first Fortune he's he makes his first Fortune transporting oil in ships and I
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don't mean the first time we just said the depression almost wiped him out I'm talking about he runs a very similar Playbook after World War II actually during uh World War II but it's this idea of how he started this business
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with limited money it's called the two- name paper idea this will come up again later but this is an overview I think is helpful at the very beginning uh he had persevered and during the mid1 1930s had developed an ingenious ship financing
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scheme that would make his first Fortune the idea was to use other people's Credit First he'd go to an oil company and and persuade it to Grant him a long-term Charter to haul its petroleum this done he would go to a bank where
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using the charter as collateral he would take out a loan to obtain a ship to haul the petroleum instead of paying lwig each Oil Company would make the Charter payments directly to the bank which would then deduct the loan payment and
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put whatever was left into Ludwig's account this allowed lwig to build or renovate tankers without having to put up collateral or use his own credit as long as he would fulfill his Charter contracts he had a small but steady income and more importantly by the time
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the contract expired he was the owner of paid up of a paid up ship without having invested any of his own money and so one trait that Ludwig shares with another billionaire uh this is Francis greenberger who I covered all the way
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back on episode number 243 Francis greenberger made became a billionaire investing in co-ops so his real estate Empire I think in the 1970s in New York City but what Francis greenberger did and he says because he he's actually
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writing the autography he's like listen once something starts working you immediately scale it do not dilly dally don't wait around and that's exactly what lwig did with his two two- name paper idea once he got things rolling in
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the late 1930s it was simply a matter of hard work and efficiency plus a genius for Innovative ship design to become one of the world world's largest ship owners and then he going to mention something else lwig has very much like an
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engineer's mind he it's almost like he gets off on efficiency he's obsessed with out competing his competitors and making sure that he has the lowest cost structure and that he can actually haul more oil so he's going to compete with
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people like Aris nasis and like the fabulous Greeks they're all over this book this book is wild you'll see there's like unbelievable like stories in this book of these covert Wars and competitions between nations companies
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and individuals because they're in the the oil business business well we'll get there so anyways this is the first uh mention of the fact that he's just obsessed with this idea of constant Improvement and efficiency he very much
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has an engineer's mind so he says he he has been responsible for several major changes in ship building some were designed in structural modifications to eliminate non-essentials while increasing a ship's cargo carrying capacity there's a great line from Bruce
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Lee that I love says hack away the unessential that is something I don't think Daniel was a fan of Bruce Lee but he was defin he is definitely a fan of hacking away the unessential you see it as the way he runs business and on like
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a miniature level how he builds his ships by the time he had stopped renovating old ships and started building his own he had figured out that the one large ship could haul oil at lot more cheaply than two small ones therefore it made sense to build bigger and bigger tankers so that he could cut his own hauling costs and underbid his competitors which he was obsessed with who uh who were still using smaller ships and this is where it gets really
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fascinating this one this is his main business again he made his first fortune and I'll go into more detail of where like the role standard oil has to play in this uh later but this is really important to get across he made his
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first Fortune transporting oil and ships he made so much money doing that that he then goes out and starts buying and starting other businesses at his Peak he owned over 200 companies in 50 countries so it says to help provide cargo for his
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ships he divers Diversified into other activities mining ranching Timber growing oil refining and salt production what's crazy is first of all this this book is almost impossible to find um I was lucky enough to get a copy back in 2019 for only $43 but there's a
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website that I use to find hard to find books it's called bookfinder.com I just looked it up there's only nine copies available on bookfinder and they start anywhere from $350 all the way up to almost $2,000 and I wish this book was
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more widely available because the just the front and back cover you open it up and it it's a picture from one of Daniel's own brochures when he was trying to solicit customers so there's a line in the book that's accurate it says
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uh the Sun never set on his Empire so what the what's in the book is three Globes each showing a different part of the world right and then it would just highlight all the different companies not the name of the companies with what
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they do and the the country it's in right I'm going to skip over like you know France Bermuda Venezuela Bahamas T Taiwan you'll get all that I just want to read off like what he's going to again he takes the money from hauling
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oil and buys and builds hundreds of other companies and these are the industries that he's operating in financial services mining hotels office Towers housing shipping agriculture uh I'm going to go across some of these are going to be repeated agriculture
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dredging Financial Services shipping real estate Financial Services shipping Financial Services shipping shipping shipping uh these are all different countries obviously he's in he's in refining and petroleum and gas
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exploration again in mining again in agriculture again in mining and housing and more shipping and housing and hotels and housing and more office Towers more mining more real estate more shipping and more financial services and then the
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overview of this one interview that he consented to continues just want to pull out a couple other things this is hilarious cuz describes him they called him monu his they describe one habit of his his Monumental stinginess it says
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lwigs organization is Staff with competent men but not one man too many lwig is Frugal despite his great wealth loving his work to the ultimate degree lwig is unable to take much pleasure from anything else he counts calories
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religiously uh he does not drink much he doesn't smoke at all and he doesn't entertain lavishly his only one his only bad habit is work and that he cannot stop okay so I want to jump into his early age I want to fast forward right
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up until the point he's 15 I think something really important in his life happens his parents wind up getting divorced and his dad takes him and moves him from where he was growing up in Michigan to this oil Port uh in Texas and so it says as soon as their marriage
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broke up uh he took his son and headed to Port Arthur Texas once in Texas DK found himself more or less on his own he's 15 years old by the way uh his father had other things to do and could spend little time with the boy a th000
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miles from Home taken away from his family from school from Friends the 15-year-old must have felt miserable and frightened and so he gets a bunch of jobs so this is what he actually learns working on and around ships and this is
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going to lead him to starting to starting his first business at a young age says he was a runner uh for a dealer in Marine equipment going out in small boats to sell supplies to sailing ships and Steamers that anchored in the port
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at the same time he went to night school to get the math he needed for a marine engineers degree the boy was learning much that he was to use later and so about a year later he goes back to Michigan gets a job working for 20 cents
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an hour at a marine engine plant the job at the engine plant was another educational experience it gave DK a thorough knowledge of marine mechanics and helped him to complete the work requirements for his engineer certificate this is these are skills
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he's going to use for his entire life he was a fast learner and a good worker after a little more than a year he was considered competent Enough by company officials to be sent to the Pacific Northwest and then Alaska to do
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installation work so he's installing ship engines and he's doing it for the company but then he starts doing it on his own he's like oh I can just run my own business uh shortly after his arrival he started Moon lighting
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installing ship engines on his own time as well as for the company he found the work so profitable that he soon drew his last wages and at 19 went permanently into business for himself it was a profitable time to do so the year was
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1916 and the shipping industry was booming much of Europe was engaged in a world war and so because he had exposure to all these jobs at a young age he knew ships he knew how to salvage them he knew how to improve them this is where
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his first business something he does is really smart that's something he's going to do even when he's really rich and so he's always looking for a deal and he finds really smart ways to buy assets for a lot less than they're worth this
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is just one example he's going to have much more sophisticated examples later on but he needs a boat and so he goes to this Detroit bank that had foreclosed a bunch of boats and he finds one for just $5,000 and so he's able to get a loan
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and he's able to recoup most of that $5,000 just just because he knew the value of the parts individually contained in the boat and he transforms the boat from something that was taking passengers to a barge so it says he almost immediately recovered the
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purchase price price by gutting and selling off her machinery and her boilers and turning in her into an iron hold barge so that's the first smart move the second smart move he goes where the opportunity is then he boldly advertised in a New York paper that he
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was available for as a charterer and why is that important because that's where the opportunity is in the shipping industry at this point in Manhattan beat the heart of the world of Commerce goods and money flowed in and out of New York
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Harbor like the lifeblood for the rest of the globe earlier in the book it mentioned that Daniel was later in his life as a lone wolf that happens he's going to have a series of Partnerships uh none of them you know work out that
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great he clearly prefers to work alone but he does get what he considers a postgraduate course in shrew trading by a partner that is going to respond to this ad that Daniels just put in the paper and so it's this guy named Kaplan
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Kaplan was a New Yorker who had virtually cornered the market in black strap molasses and so they become partners and Kaplan sends lwig north of the Border this is around the time of prohibition so the Molasses is actually turned into bootleg liquor okay so it
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says the Molasses DK was hauling uh with was turned into rum and brought back across the border into those states which had already outlawed the importation and sale of liquor since he was merely hauling molasses to Canada DK
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was doing nothing illegal but he was an important part of the process and stood to make money from it and so their partnership only lasts two years but this is what DK said about it he credits Kaplan with giving him a sort of
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postgraduate course in shrewd trading and so the book goes into a lot of detail about the early years of his career which I think is really important for you and I to go over I'm going to spend some time here this really this
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whole section is something that you see over and over again it's not what you do but how you do it and so lwig is constantly identifying is this a good use of my time or is there a way I can do the same work but for more money and
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in this case he's like okay I'm going to I'm hauling he breaks up with uh Kaplan and he does a general hauling so just like moving still shipping and moving stuff around and it says most of his cargo was Lumber but he has a good idea
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and he's like I should switch to hauling oil and why did he come up with that I'd been getting 10 or 15 cents to haul cargo to haul cargo of lumber I saw the tanker boys getting three or four times as much for oil so he's like okay how do
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I do that first I need some kind of oil tanker I need a vessel to to haul oil I need somebody they'll pay me more importantly to haul the oil he goes to a small Refinery this is something he's going to use over and over again gets
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the contract first then goes and looks for a vessel this is after World War I he's going to run the same Playbook on a much much larger scale at the end of World War II which is kind of really fascinating so what happens you know
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they have this huge everybody's building ships cuz the war now the war stops and now you have an excess supply of ships and he's able to get a good deal on them because there's no contract from the government anymore so he finds a ship
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that was 98% complete when the arm assist was declared so now he has a charter and a vessel and we see his legendary or what do they called Monumental stinginess he wasn't even sure how to pronounce the name of the vessel but because it would have cost
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him $50 to paint out the name and put on a new one he decided to leave it as it was and remember I said earlier just like Francis greenberger once something works he immediately starts scaling it up she like okay this thing's you know
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400 tons how do I get a bigger I want a bigger ship I want to make more money and so he's going to go through a series of Partnerships and he's constantly finding ways to level and trade up I think of him very much as a Founder
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because he started the company but when you get realize like he how much money his business makes it's like oh he's kind of like a Trader he's constantly wheeling and dealing he does not have to keep a company forever if he gets a
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better deal he'll just sell it off for like you know there's multiple times in the uh book he's like oh I'll just sell it for 400 million business I had for 40 million he just he's constantly trading things up and looking for better
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opportunities until he dies and so he does this for a few times but then he gets to the point where the ship is so large he's like I don't have enough money to buy this thing but I know it's a good opportunity so what do I do I go
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and take on a partner and so don't worry about remembering these names because he's going to go through a bunch of people but this one guy named William they had met during the war offered to put up the rest of the money in exchange
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for 51% share of the Venture that lasts for a little bit and then William decides hey actually I'm going to I want to buy you out so what's the price for the other 49% lewick had put up $5,000 and his time for this one transaction
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and he winds up getting $40,000 for his 49% share and so this is what I mean he's just constantly trading up he accepted uh this buyout then he used that money to go into another partnership with a group up in New England that owned a chain of filling
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stations together the three guys formed a new company called am tankers and their idea is just to buy a bunch of tankers and haul and continue to haul oil now this is why this is important DK is a very young man at this time he's in
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let's see this would be around 19 1920 1924 so he's mid 20s mid to late 20s he's gonna wind up making a partnership with older richer Partners right so lwig at this point in his career has time and energy and his new partners have money
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and that's a tale's oldest time you'll constantly be able to find older richer guys that are willing to partner with you if you'll do all the work uh DK for practical purpos was the chief executive officer of the company it was his job of
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keeping things going and that that job of keeping things going fell squarely on the shoulders of lwig I mentioned his constant desire to trade you see this even early age they are technically operating ships right right they are
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hauling oil but he's making during the mid to late 20s he was actually made more money buying and selling ships than he did in operating them long term there's more money in hauling oil but he needed the money right now so he's like
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well if I can buy ships better than anybody else can I can do this service for other people and just keep buying good deal I know a good deal when I see it I'll just keep buying it instead of keeping it for myself I'll just sell it
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so I can get the money right now and this is really important uh to understand later on he does this with very little amount of money down he's buying ships from the government after the war after World War I with only 10% down so it says the sale of sh Surplus
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ships at bargain prices much less than it would have cost to build the vessels from scratch started almost as soon as the armist was declared the result was that hundreds of government-owned vessels built at taxpayer expense were
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being sold off at well below cost to the legitimate shippers and to speculators who did the minimum required renovation work and then sold the ships for a quick profit that's what lwig is doing right now in this during his career uh what
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made the deal attractive was the shipping board required investors to put up only 10% of the purchase price and the rest could be paid over time and so this is what him and his partners are doing that would mean by investing less
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than $50,000 right because the total purchase price is 500,000 they could buy three ships Remodel and sell them if they managed to sell the three vessels for a million dollars they would reap over half a million dollar profit on an
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investment of over only $50,000 and so almost 40 years later when he's giving this interview he's talking about this time when in his early career and he says he was always in Hawk at the of his career with that me he's always owed the government money
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and he's constantly this whole book at this stage of his career especially the doesn't help he's got a bunch of like he's got this large Fleet and then the depression comes essentially like no one wants to haul oil like his ships his
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Charters aren't as valuable he has a real hard time um making payments so it says during the the fortune interview in 1957 lwig said that in early business years he was quote always in Hawk there may have been a good reason as long as
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you're in Hawk it's hard for a creditor to collect the money from you so there's so many times where where the government's like okay the payment's due let's you know making this day up January 1st and and Li's like no give me
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like a six-month extension and then June comes he like I need another nine-month extension it's just constant back and forth and he constantly gets them to extend time but what's amazing is how fast his fortune is going to change I do
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want to pull out these things because you know the book starts he's 80y old man richest man in the world at this point started in the business when he's 19 but you go when he's 34 I'm going to hold I'm going to pull out two things
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here like 34 he's in debt and he's barely making his interest payment this is now into the depression uh lwig wrote another begging letter to the shipping board saying that he was doing his best that he could but that am tankers needed
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more time to make the payment 3 years later 37 and he's almost going broke during the Great Depression 10 years from now he's going to be unbelievably wealthy that's why I'm telling you this uh a shipping board auditor reviewing
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the company's situation came to an unavoidable conclusion am takers was for all practical purposes insolvent The Firm had no Securities left to borrow on and virtually no chance remained that the massive liabilities could be paid
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off from the ship's small earnings but there's an important Point here like we have to pause because this is all about the change right it's like oh they have massive liabilities they have all these ships but the ship is not making any
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money why is it making any money because the demand for shipping during the Great Depression has plummeted but the asset that he owns the ship is still valuable you just need something to cause demand to Skyrocket and that is exactly what
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happens in the late 1930s when Europe breaks out in war war makes the demand for Ludwig's products and services Skyrocket it's almost the exact opposite of what was happening to him and his business the previous decade wars and rumors of wars preag an upturn in
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international Commerce which for cargo haulers meant greater demand and higher revenues a tanker that had been sitting idle at the Docks since the start of the depression could now be hired out on a long-term basis at high rates or sold
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for a handsome price he's going to make money both ways in some cases now something that was just sitting there uh not only there was no no Charter on it if you had to sell the ship to try to pay off your loan maybe you'd get 50,000
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100,000 those now those sh same ships are selling for $800,000 or more and so this is the most important part in the book this is what I referenced earlier the two- name paper idea plus the fact that he's going to be shipping oil for
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Rockefeller equals Ludwig's wealth which then in turn causes him to go out and buy and start you know the hundreds of these businesses let's go into this lwig needed a way to obtain ready money without either taking Partners or
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assuming heavy mortgages his early experiences with Partnerships had been costly and barring to finance ship Renovations was no better it was at this time that lwood came up with the two- name paper Arrangement that he said was
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the chief reason for his wealth he would go to an oil company get it to sign a long-term Charter to ship so much oil on a regular basis take the charter to a bank and using it as collateral obtain a loan to build or renovate a ship to haul
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the oil to fill the charter the plan was legal logical and ingenious he was able to start his climb towards being the world's biggest shipper mainly because he was now hauling oil for the Rockefeller Empire keep in mind he
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started his business when he was 19 he is now 40 it took him 21 years to get to this point okay he was able to start his climb towards being the world's biggest shipper mainly because he was now hauling oil for the Rockefeller Empire
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we're going to get into why the hell would a vertically integrated Oil Company let some Outsider haul their oil it's going to be very similar to the to what we just went over with Bill Gates I think on episode 290 I'll get there in
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one second so it says up until now before doing this deal with Standard Oil lwig had been chartering his ships to smaller refineries and so about a decade before we were in the story there winds up being a secret oil cartel compact uh it
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was not known at this time came out later it's called the ACN car or Redline agreement in effect it froze each major oil company's fractional share of the petroleum Market at 1928 levels to create a cartel and eliminate
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competition and so now all the major oil producers are in our cartel together so they can control prices and so now this is what I was mentioned earlier it's like why would a vertically integrated Oil Company hire an outside company to
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ship its oil it's the same reason that IBM let Microsoft create the operating system for the IBM PC if you haven't gone back and listened to episode 290 I would highly recommend doing that after uh this episode in that book which was
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published way before Microsoft or not way before like a couple years before Microsoft gets gets into its own antitrust trouble they're interviewing this guy from IBM in the book and they're like why the hell did you give this super valuable opportunity to
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Microsoft and he gave some historical context he says for the last three presidential administrations they are all trying to break up IBM so much so that they the IBM had to start its own Law Firm I forgot there was like I
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forgot how many people like thousands of people just working to to fight off the United States government for the these anti trust and like monopolistic uh charges and there's a very similar line of reasoning taking place in Daniel
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ludwick's career at this point why would an oil company such an advantage position Charter ships from an outsider rather than operating ships of its own the illusion of competition and de centralization has to be maintained the
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US government still had laws on the books dating from the turn of the century when public outcry led to trust busting and so lwig is doing what standard oil wants done it just appears it's an outside company what was in fact a tightly controlled situation must not
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look like one from the outside as much as DK had been betrayed as a lone wolf the fact remains that he could have never attained billionaire status by operating in a vacuum by allying himself with the biggest game in town he served
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as a useful Cog in a gantic machine that kept oil and money circulating all over the globe and so this is a great overview of something I referenced earlier the fact that his business was basically 180 degrees different during
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World War II than it was in the depression and a reminder that tough times don't last but tough people do during the depths of the Depression lewig was Meed deep in debt he was saddled with do nothing Partners desperately pressed to keep the shipping
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board and the banks from foreclosing on his few ships and and burden with an unhappy Mar marriage now 5 years later DK was in Good Financial shape the owner of a glow growing Fleet of ships and corporations out of debt and enjoying a
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profitable relationship with the government the banks and the oil companies moreover he was building a reliable staff and had a happier marriage and so even though he's getting a lot richer his legendary stinginess as the as the book references of many times
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is still intact uh Ludwig's stinginess would become legendary in the shipping industry did not mellow as he grew richer and older he earned the reputation of being the Scrooge of the shipping industry one of his employees
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on being asked to suggest a design for a fleet flag symbolizing the lwig Enterprises submitting a submitted a drawing of two hands stretching a dollar bill this is so extreme it made me laugh the captain of a Ludwig ship made the
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extravagant mistake of mailing in a report of several Pages held together by a paperclip he received a sharp rebuke from lwi we do not pay to send Iron Monger by air mail I had to look up what Iron Monger was it refers to
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Manufactured iron Goods I don't know if a paperclip fits that description but lwi was super pissed off about it Ludwig's tight fisted persisted after the Depression putting him in sharp contrast to such free Spenders these are
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his main competitors at this time aristot anasis and starvos Naros it was also largely responsible for many of his Innovations in the ship building industry this is actually the reason I'm reading all this to you but before I get to that part if you
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want to learn more about Aeros anasis in particular I just did a podcast on one of his biographies this episode 211 it's called Onasis and extravagant life but let's go to this idea that constraints breed uh Innovation I think that's
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actually a quote or a line from Sam Walton's autobiography says most of lwig ship building Innovations were aimed towards a single goal increasing payload without increase in cost he was ever on the lookout for a way to reduce tanker
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design to the Bare Bones minimum his ships had much thinner decks than the industry standard this modification meant less weight and a smaller fuel bill so this is actually really important it sounds like you know guys going a little crazy but if you really think about it like Ludwig's career is going to span over 50 years from here and small expenses compound so what is the cumulative Savings of Ludwig's cost management over half of a century
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Ludwig's ridding his ship of any feature that did not contribute to profits pleased his own obsessive sense of economy and kept him a step step ahead of his competition when someone asked why he didn't put a grand piano aboard
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his ships as starvos Naros did lwig snapped you can't carry oil in a grand piano and I think there's just one sentence here that really describes why this is so important like why is he doing all this why is he so obsessed about this is making money is is his
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passion not spending it lwig was concerned with the wealth itself not the trappings making money not spending it was his passion and so all throughout World War II he's making a ton of money and then at the end of World War II he's
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a lot richer than he was at the end of World War I so this is what the the difference between the end of World War I or World War II and World I you're talking about 25 27 years the entire time that 25 27 year period lwig has
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been in the same industry and so I think this is another example of this idea that you have to stay in the game long enough to get lucky and so just like at the end of World War I there's going to be a ton of this huge surplus of
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Warships the difference now is lwig has a lot more not only knowledge in a quarter Century right but a lot more money to take advantage of this opportunity so it says what was to become of all the tankers idled by the war's end he had started in the tanker
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business by by taking World War I Surplus vessels and renovating them now there would be more Surplus ships available and he was in a far better position to exploit the situation he stayed in the game long enough to get
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lucky and then we're going to see this personality trait he doesn't believe that anything is set he's like well I just got to find the human that's actually responsible for making the decision and then I could I could essentially like this is a reminder of
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one of my favorite quotes that uh markk andreon said that that uh the world is a very malleable place if you know what you want you go for it with maximum energy and drivve and passion the world will often reconfigure itself around you
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more quickly and easily than you would think Ludwig's version of that is find the ultimate decision maker figure out what their interests are and push on them and so I'm going to read the section to you but he does this not only
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he's doing this with the uh the maritime commission this is uh the US government he does it with foreign governments he does it with banks he does it with oil companies he does this over and over again this same idea many of the Surplus
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ships needed repair work before they could be put into service but there was also a clause in the purchase contracts stipulating that any materials removed from these ships during renovation had to be scrapped there is no way that lwig
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is going to take something that is valuable to somebody else and just throw it away that just he never does that so it says this condition was now standard in maritime ship sale contracts but DK did not want to abide by it if he can
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make some money by finding a buyer willing to pay more for removed Parts than a scrap dealer why shouldn't he be allowed to do so it was a shame shame to waste anything that could be turned into a profit so when he got a tempting offer
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he wrote The Maritime commission with a with a proposition this company is offering to pay $100,000 for a turbine that he had just removed let me sell this engine DK said and I'll split the proceeds with you 50/50 on its face the offer was in
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violation of the contract but the Commissioners accepted his proposition with a single modification they wanted 55,000 not 50,000 done and done on these terms the deal was made the commission got a nice piece of change and lwood got
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a lot more out of the engine than he would have by selling it for scrap he also got something else maritime's permission to violate contract terms and sell excess equipment and materials for whatever he could get as long as he was
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willing to cut in the agency for a share of the money now while this is going on something interesting happens Danel lwi goes from being the best in the industry to behind both aerostop Onasis and starvos Nicos so Nicos and Onasis were
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friends then brother-in-laws and then enemies so think about this why was Onasis and nicros able to catch up and then pass Ludwick Onasis and nicros had lower cost structure than Ludwick how is that possible this guy's obsessed with
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with eliminating costs Ludwig's First Advantage was the fact that he did business with the US government he's able to buy these War Surplus ships right so that means his ships by law they have to fly under American flags he is doing business with the US government
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Onasis and the Aros fly under flag of convenience ships which means they are not regulated by the US government so this is what this is the advantage they have they had virtually cornered the mid East to Europe oil hauling trade taking
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business away from lwig and other American shippers by cutting their Charter rates flag of convenience ships which Onasis and Naros are using have no taxes and regulations and they also have inexpensive foreign Crews they could
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make money at rates that would bankrupt an American shipper who paid US taxes and wages and had to maintain his ships in an adequate state of repair lwig had been concentrating on becoming America's largest shipper Onasis and the Arcos had been using Panamanian registry and cheap rates to beat him where it counted getting Charters to haul oil eventually lwig is going to fall suit he's going to find ways to build flag of convenience ships as well
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another advantage that Onasis and yaros had that lwig had was forced to follow was lavishly entertaining or another way to think about this is bribing the people that make the decisions to give these oil Charters and this is what
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Onasis and his brother-in-law become world famous for they have like these floating essentially like you can't even call them Mansions like miniature floating cities like company headquarters you just happen to live there it's act absolutely insane in one
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of the I read two biographies of Onasis I think in both of them they talk about this but Churchill so Winston Churchill winds up becoming good friends with AOS anasis so anasis had maybe you know the the nicest yacht in the world at the
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time and this is before Churchill dies he's you know the hero of the West arguably the most famous one of the most famous people on the planet and he he can you know has access to unlimited opportunities and he chooses to
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constantly vacation and spend time aboard onassis's yacht and in one of the books Onasis describes Churchill's peculiar morning routine where he wouldn't get out of bed like he'd wake up he'd you know wake up normal hours 8:00 or whatever the case is but he
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would stay in bed reading and drinking till like noon but when I got to this section of the book which I'm going to read to you and it's going to it's going to seem uncharacteristic for lwig but I was having a breakfast with a few
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friends and one of them made the point that was very interesting this friend had been buying businesses and making Investments for like a decade and he actually made the point that he believed that yachts and private planes are
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actually undervalued assets and this section of the book would explain why someone would make a statement like that and so this is Onasis and his brother-in-law while they were lavishly entertaining the leaders of European and
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Arab aristocracy they were also winning contracts to haul oil to make enough money to keep the spending spree going and Ludwig watching these glamorous men steal contract after contract from him by dazzling those who had the power to
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Grant such such concessions had begun to realize that if he was going to compete with them successfully he would have to do more than build bigger and more economical tankers he would have to do a little dazzling of his own and so he
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builds this giant unbelievably luxury yacht called the Danon because he realizes how valuable this is as a business asset most this this uh yacht of his is going to travel like 40,000 miles a year on average and most of the
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time he's not even aboard over the next decade DK would use this yacht frequently in this way uh cruising the Mediterranean or the Atlantic with a boatload of wealthy guests usually ones from whom he needed a business favor for him the yacht was as much a business
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craft as any of his tankers and probably earned him more money than any of them that is a crazy sentence and probably earned him more money than any of them goes back to what my friend was telling me yachts and private planes are
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actually undervalued Assets in the case of the Greeks and in case of Lor these Giant floating Company headquarter Mansion things why up not only not costing them anything but making them a ton of money and so moving on even
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though he's losing some of the contracts to the Greeks he's still the third largest ship owner in the world and he's making so much money he's got to find something to do with all the cash this is where they call him a highly Diversified oneman multinational
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corporation so at this point in the story he's in his 50s he still has four decades ahead of him and so the book goes into great detail a bunch about a bunch of these projects I'm going to highlight a couple of them but I want to
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point out this because I thought this was fascinating his plans for his Venezuelan land was reflected in an amendment to National bulk carriers corporate charter so he's got a million different companies his main business is
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called National bult Carriers these are the that's becomes one of the largest uh shipping companies in the world and so he's updating the Charter about what he can do with uh the company's money the new section expands the company's
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allowable activities to include this is how varied his uh his interests were exploration and development of petroleum gas asphalt hydrocarbons Metals ores coals and other minerals operation of oil wells mines drilling equipment all
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kinds of oil gas and mineral development also Farm ranches and livestock from this time forward National bolt carriers would list itself not as an oil Transportation firm but as a holding company the DK was no longer just a simple
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shipper and ship Builder he was now a highly Diversified one-man multinational corporation and something you see in the history of Entrepreneurship over and over again is this idea of how can I keep paying myself he's in these
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businesses not necessarily because he's interested in because they're adjacent to shipping and he's like well instead of shipping other people's agriculture or other people's cattle or other people's Lumber why don't I just own everything and ship it myself there's
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just one line that happens earlier in the book that I really he studed studied the way Rockefeller set up his business he's like oh I should do this like the Rockefeller organization lwig had mastered the practice of keeping his
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money by transferring it from one pocket one company to another while appearing to spend it and then another reason I wish this book was more widely available and in print and affordable is because it's full of these crazy stories these
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covert Wars between nations companies individuals it's talking about the fact that these there's people in the United States government this is when Eisenhower is President you're going to see Richard Nixon a young Richard Nixon
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gets involved here where they're trying to make aristot anasis arado anasis has this exclusive contract to haul uh Saudi Arabian oil and the US government wants that out of his control but look at the length that they go to accomplish this
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without anybody knowing what they're doing so it mentions people like Richard Nixon and a bunch of other people that are inside the Eisenhower Administration I'm skip over the names to tell you what they were doing they're they pulled the
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lovers and kept the wheels turning the way that the corporate Powers wished just now these men were concerned with bringing aristot anasis down a few pegs they did not want to destroy him completely for that might expose the oil
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cartel a lot of that oil money is flowing into the coffers of these politicians the plot would involve phone taps this is so wild the plot would involve phone taps and the planning of stories some true some Hal true some false in Cooperative foreign and
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domestic newspapers all with the purpose of changing onassis's image from that of a glamorous celebrity to a cunning villain after he had been sufficiently smeared the US Department of Justice would start suits against him that it
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had hop would force him to relinquish his exclusive rights to Hall Saudi oil the money for funding the operation was to be passed to an emissary of starvos Naros so his main competitor nios had a vested interest in seeing this Sai
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contract scrapped so of course did Daniel Ludwick and so two of my favorite Ludwick stories are right next to each other in the book this is how he starts the largest salt company in the world and in the middle of the story is my
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favorite sentence in this entire book so it's this project that's going to happen it says it's on Mexico's Pacific Coast about halfway down the Baja Peninsula located there were huge underground deposits of brine concentration of salt
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in the water were around 30% nearly 10 times that of seawater by the simple process of pumping this brine to the surface and letting it stand in pools where the hot sun could evaporate the water one could produce millions of tons
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of salt this is what lwig is doing produce millions of tons of salt which could be gathered and exported the economy of the procedure appealed to Ludwig all he had to do was bring up the Brine and nature would do the processing
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the main problem was the labor this part of Mexico was nearly unpopulated and he would have to import workers and build places for them to live he has to build essentially a small town for this to happen the Baja Coast was so remote that
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he would have to build an entire town if he was going to develop the salt deposits this is my favorite sentence of the book but he had learned something by now opportunities exist on the Frontiers where most men dare not venture and it
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is often the case that the farther the frontier the greater the opportunity I love that line the majority of businessmen are tied to cities where the ingredients of development already exists labor energy supplies building
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transportation and so on competition also exists there and the way to escape it is to either do something no one else is doing or do it where no one else is doing it much of Ludwig's success was due to his willingness to venture where
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more timid entrepreneurs dared not go this business is unbelievably successful he winds up selling it a few years later but the output the salt output increased to as much as 4 million tons a year making the largest producer of solar
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salt in the world and that's just one of these giant projects that he takes on this is one of my favorite stories in the book too because sometimes you have to do it yourself he's already a billionaire at this point in the story
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when he's about to do what I'm going to describe to you now he was embarking on an ambitious project in Panama the building of a 55,000 Barrel day Refinery and an adjoining prochemical complex before starting construction however
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lwig had a little chore to perform one that he intended to do personally twice he had trusted the word of specialist and twice he had been burned he had believed them when they told him he could bring fully loaded 60,000 ton or
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carriers down the oronoko uh River this is in South America without running them around they were wrong by that by the way and his geologists had failed to discover until after considerable work was done that the Coral Rock underlying
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Grand Bahama Island was too too fragile to support giant super tanker so these are giant previous projects that he was working on he got bad information and that cost him a ton of money so he's not going to let that happen again these
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episodes had cost lwood considerable time and expense so before building a refinery in Pinal he decided to check out the site himself dressed in baggy work clothes he caught a nightlight out of New York to Panama City and arrived just Just Before Dawn he went into a
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little Village Store at the Bay's Edge and pulled out a quarter out of his pocket he paid for his purchases a heavy bolt and a 20 cent ball of string he unwed the string measured it out in 6ft lengths and tied a knot at each interval
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he went outside and rented a motorboat and spent the rest of the morning remember he is a already a billionaire when he is doing this and spent the rest of the morning and afternoon puttering around the bay checking with his
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weighted line the accuracy of every sounding marked on a nautical chart that he had brought along only when he had satisfied himself that the water was as deep as the chart said did he fly back to New York and give the signal to begin
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constru ruction and then his activities were not also relegated to buying businesses or starting new businesses he would also buy stock in the public markets if he thought it was a good deal this is an example he starts buying a ton of stock
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in this oil company and people are like oh my God he's going to try to take it over and his people release a statement they're like nope he's primarily interested in the appreciation of the value of stock he is not looking to take
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over the company and indeed lwig 19 months after buying the stock would sell it for $146 million reaping a handsome $46 million profit on his short-term investment and so when the book is published Daniel Ludwig is still alive
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and he's still working and so the author closes trying to make sense of this unusual person working on an incredible scale how then do we assess his career no matter what colors we use for his portrait we must paint him on a large
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scale much larger than life there can be no question that he has had a very powerful impact on his time far greater than the influence of many better known entrepreneurs because he has lived lived the world is a different place from what
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it would have been otherwise a study of his career turns up quite a number of close associations and friendships mostly with business acquaintances it is much more accurate to regard lwig not as reclusive but as exclusive he sees only
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those few people he wants to see and avoids everyone else he has long made it a point to socialize at least occasionally with people of wealth fame or power top Executives of major Bank Banks oil companies and other corporations celebrities and heads of
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state much of Ludwig's reputation as a reuse stems from the fact that most of the people he sees socially or professionally don't talk about him to Outsiders this conspiracy of Silence has enabled him to retain his Aura of
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mystery all these years there has always been an economic motive behind his continual upscaling a desire to keep a jump ahead of competition but there has always been something else as well a compulsive one-upmanship driving him on
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to succeed at what lesser men consider impossible we can add to this portrait a clever mechanically inventive mind committed to the principle of getting the maximum utility and profit from the minimum expenditure of time space energy and money plus an ambition that seemingly Knows No Limits plus a decided preference for Deeds over words machines over men and a high degree of ruthlessness and that is where I'll leave it for the full story I highly
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recommend reading the book this is a book that I will definitely reread in the future but I will leave a link in the show notes and at Founders podcast.com if you buy the book through that link you'll be supporting the podcast at the same time you can also
46:17
support the podcast by signing up for the founders premium feed I just recorded my third AMA episode I'll be working on the fourth AMA episode in the next week or two that link is also in the show notes and if you want to sign
46:27
up for my free email newsletter I email my top 10 highlights from every book that link is down below and available at Founders podcast.com that is 292 books down 1,000 AO and I'll talk to you again soon okay so all the way back on episode
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227 I read this fantastic book called The essays of Warren Buffett so all the way back on episode 88 I read every single one of Warren shareholder letters but what this book that was put together by Lawrence Cunningham
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uh called the essays of Warren Buffett uh did that was so smart is that he took the shareholder letters and instead of organizing them by year which is standard he organized them by topic and so in the original podcast I did on this
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book which again is episode 227 1 hour and 28 minutes into the podcast or thereabouts I go over this letter that I'm about to read to you now it's under the heading titled on selling one's business and the reason I'm bringing this up is because one of the sponsors
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of this episode is Tiny and one way that tiny has been described is that they building the birkshire of the internet and you can go to tiny.com and read the testimonials and see all the founders that have sold their business to Tiny
47:33
and how their main differentiation just like Warren Buffett and Charlie merer is there's no BS we're going to make this transaction as simple and easy as possible where a lot of people that buy businesses make you jump through hoops
47:44
and it's just a headache and so if you think about what Warren is doing here in this letter is his business is buying businesses and so his customer are founders or managers of businesses and so he he is essentially writing a letter
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to a guy so he wrote this letter in uh 1991 to a guy who indicated he might want to sell his family business and so I'm just going to pull out a few highlights here and really think about what Warren's doing is he is differentiating his services from other
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people that also buy businesses he says if you if you should decide to sell I think birkshire hathway offers some advantages that most other buyers do not practically all of these buyers will fall into one or two categories and so
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now Warren is going to describe his competition if you go to tiny.com you'll see they described their compet in some ways their competition which is typically VCS or private Equity companies okay so Warren says number one
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a company located elsewhere but operating in your business or in a business someone Akin somewhat akin to yours such a buyer no matter what promises are made will usually have managers who feel they know how to run your business operations and sooner or
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later will want to apply some Hands-On and he puts the word help in quotation marks obviously Warren does not think that the managers are going to install in that business are actually going to be helpful at all the second other
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option a financial maneuverer invariably operating with large amounts of borrowed money who plan to resell either to the public or to another Corporation as soon as the time is favorable frequently this buyer's major contribution will be to
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change accounting methods so that earnings earnings can be presented in the most favorable light just prior to his bailing out and then listen to this persuasion technique that he uses because he's writing to somebody that he
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knows it's a family business which means they put a lot of their time and life energy into so he says if the sole motive of the present owner is to cash their chips and put their business behind them and plenty of sellers do
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fall into this category either type of the buyer that I just describe to you is satisfactory but if the seller's business represents the creative work work of a lifetime and forms an integral part of their personality and sense of
49:59
being buyers of either type have serious flaws so he's just described his competitive landscape he says listen there's option one there's option two but then there's a new Option something that's completely different and better
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and he's describing the services that he provides to Founders right so he says birkshire is another kind of buyer a rather unusual one we buy to keep tiny does too by the way all of the businesses we own or run autonomously to an extraordinary degree when we buy a
50:29
business the sellers go on running it just as they did before the sale we adapt to their methods rather than vice versa and in Tiny's case it's up to the founder if they want to stay or if they want to go Tiny's fine with either
50:41
solution and then Warren does something fantastic he's like listen you know who the P the past businesses we bought in fact I'm including in this letter a list of every single person we've ever bought a business from Tiny does something very
50:54
similar on their website which you can go see you know some of our past purchases I'm enclosing a list of everyone from whom we have ever bought a business and I invite you to check with them as to our performance versus our
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promises and then Warren says hey I'm going to keep it simple with you if you should decide to do a business do business with birkshire we would pay in cash tiny says the exact same thing on their website your business would not be
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used as collateral for any loan by birkshire there would be no Brokers involved Warren also says you deal with me and finally you would know exactly with whom you were dealing you would not have one executive negotiate the deal
51:29
only to have someone else in charge a few years later or have the president regretfully tell you that his board of directors required this change or that change and because Warren has hacked away at the unessential all that is left
51:40
is Simplicity and his pitch is simple do you want a great home for your business then call me and I will do a cash transaction really fast same thing that tiny does I will not pester you if you have any possible interest in selling I
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would appreciate your call I would be extraordinarily proud to have birkshire along with the key members of your family own blank so he took out any identifying information of who he's writing to okay I believe we would do
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very well financially and I believe you would have just as much fun running your business over the next 20 years as you have during the past 20 sincerely Warren Buffett I think reading the entire letter is worth your time if you buy the
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book it's on pages 230 through 233 and make sure you go back and listen to episode 227 the essays of Warren Buffett if you have not done so already and if you have a business that you're interested in selling now or in the future make sure you go to tiny.com