#292 Daniel Ludwig (The Invisible Billionaire)

0:00 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

0:10 ever taken of the richest man in the world. The strange thing was that most Americans had never even heard of Daniel Keith Warren. Ludwig It was hard to figure. How could a man

0:21 Any man. In these days of mass media coverage and public obsession with world records. Managed to accumulate a three billion dollar fortune. With hardly anyone becoming aware of it.

0:33 If it takes a forty three inch stack of a hundred dollar bills to make a million dollars. Then a stack equaling a billion. Would tower over the Empire State Building. Ludwig's riches. Would be three times as tall.

0:46 Obsessed with privacy. Ludwig reportedly pays a major public relations firm Fat fees to keep his name. Ow. Of the papers.

0:55 The New York magazine photographer had learned that the world's richest man was a living. Almost anonymously 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 of

1:10 From his Penthouse apartment. Just as the photographer was starting to think something had gone wrong and Ludwood wasn't coming. He spied a grey haired figure in a black overcoat. Walking briskly. As the old man drew close,

1:22 The photography camera and aimed. Ludwig. Surprised Turned his head and looked up. The shutter clicked.

1:30 The next instant, the world's richest man Eighty years old, but still fit and trim. charged the photographer and grabbed him in a half Nelson. He tried to wrestle into the sidewalk and take the camera. But the photographer twisted out of Ludwig's grasp.

1:44 And ran down the street. New York magazine ran the photo. With an accompanying article. The richest man in America Walks to work.

1:54 That was an excerpt from the book that I'm gonna talk to you about today, which is The Invisible Billionaire, Daniel Ludwig. And is written by Jerry Shields. So this is the second time that I've read this book. The first time was four years ago. All the way back on episode number sixty eight. It's one of my favorite books that I've read for the podcast because Daniel Ludwig is not only a mysterious character

2:10 But the sheer size and scale of what he was able to accomplish is unbelievable. And I'm gonna give you a description of why it's so unbelievable in a few pages. I wanna jump into the introduction real quick. At the beginning there's an overview of the one time That Ludwig consented to be interviewed. It happened in nineteen fifty seven when he was sixty years old.

2:28 And this interview happens about twenty five years before Forbes puts Ludwig as the richest person in the world. When the book was published in nineteen eighty six Ludwig was estimated to be worth about three billion dollars. And so it's going to this description of Ludwig. With Ludwig work is almost an obsession. A non smoker

2:43 Only a moderate drinker. Spartan and personal habits. Business gets a hundred percent of his attention. On a project, his greatest gift is seeing the big picture. Once a project begins, Ludwig does not rest easy until completion date.

2:55 There's no lack of projects. An associate speaks of his unlimited ingenuity in dreaming up new ways of doing things. Remember that sentence for when I get to description of how large. His businesses at this point. He willingly gambles on an idea that looks good, but his formula is to add a large dose of hard work to that gamble. The description of Ludwig continues Ludwig's most notable characteristics.

3:16 Besides his imagination, he and pertinacity is a lifelong penchant for keeping his mouth shut. Saunders, that's the name of the interviewer. Uh, Sanders attributed this to the shipbuilder's single minded absorption with getting things done. He is interested in achievement. Not fame.

3:32 I'm in this business because I like it. Ludwig said. I have no hobbies. DK, so his nickname for people who 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.

3:48 Before moving on, 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 Ludwig if you read this book. Holding strongly to an opinion purpose. or course of action.

4:05 Stubbornly or annoyingly persistent. And so then this article gives an overview of his career. We're gonna go into more detail on this later, but this is really important to know. So says the narrative revealed 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 twenty. He starts his first business at nineteen. He is in his nineties when the book is published and he is still working.

4:27 And so it says after struggling through several lean years during the shipping slump that followed World War One Ludwig. had just started making money as an oil hauler when the depression hit. Wiping out nearly everything that he had. And this may be the most important idea he ever had in his career. He's gonna start. So his this is how he's gonna make his first fortune. He's he makes his first fortune.

4:45 Transporting oil in ships. And I don't mean the first time we just said the depression almost wiped him out. I'm talking about He runs a a very similar playbook. after World War Two, actually during Uh, World War Two.

4:56 But it's this idea of how he started this business 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 mid nineteen thirties had developed an ingenious ship financing 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 s and persuade it to grant him a long term charter to haul its petroleum. This done, he would go to a bank where using the charter as collateral.

5:23 He would take out a loan to obtain a ship to haul the petroleum. Instead of paying Ludwig, each oil company would make the charter payments directly to the bank. which would then deduct the loan payment and put whatever was left into Ludwig's account. This allowed Ludwig 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,

5:48 By the time the contract expired, he was the owner Of paid up of a paid up ship. without having investe 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 uh back on episode number two forty three. Francis Greenberger made

6:05 I became a billionaire. uh investing in co ops so his real estate empire, I think, in the nineteen seventies in New York City. But what Francis Greenberger did And he says'cause he he's actually writing the autobiography. 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 Ludwig did with his two pa two name paper idea. Once he got things rolling in the late nineteen thirties, it was simply a matter of hard work and efficiency.

6:26 Plus a genius for innovative ship design to become one of the world's largest ship owners. And then he's gonna mention something else. Ludwig has very much like the an 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 gonna compete with people like Aristotle and Nassis 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.

6:53 of these covert wars and competitions between nations, companies, and individuals because they're in the the oil business. Well we'll get there. So anyways, th 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 has an injured mind. So he says he w he uh has been responsible for several major changes in shipbuilding. Some were designed in structural modifications to eliminate non essentials.

7:16 While increasing a ship's Cargo carrying capacity. There's a great line from Bruce League 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 definitely he is definitely a fan of hacking away the unessential. You see it as the way he runs his business and uh on a like 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

7:38 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. Uh who were still using smaller ships.

7:52 And this is where it gets really 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 the really important thing across. He made his first fortune transporting oil and ships.

8:07 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 two hundred companies in fifty countries.

8:19 So it says to help provide cargo for ships, he diversified 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 two thousand nineteen for only forty three dollars. But there's a website that I use to find hard to find books. It's called bookfinder dot com. I just looked it up. There's only nine copies available in Bookfinder.

8:40 And they start anywhere from three hundred and fifty dollars all the way up to almost two thousand dollars. And I wish this book was more widely available because Though just the front and back cover. You open it up. And it it's a picture from one of Daniels own brochures when he was trying to solicit customers. So there's a line in the book that's accurate. It says uh the sun never set on his empire.

8:59 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, but what they do and the the country it's in, right? I'm gonna skip over like, you know, France, Bermuda, V Venezuela, Bahamas, Tai Taiwan, you'll you'll get all that. I just wanna read off like what he's gonna again, he's takes the money from hauling oil.

9:20 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 that I'm gonna go across some of these are gonna be repeated. Agriculture, dredging, financial services, shipping, real estate, financial services, shipping, financial services, shipping, shipping, shipping.

9:38 Uh, these are all different countries obviously he's in. He's in refining and petroleum and gas 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 overview of this one interview that he consented to continues. I just want to pull out a couple of other things. This is hilarious because this describes him. They called him Mon his he described one habit of his

10:03 is monumental stinginess. It says Ludwig's organization is staffed with competent men, but not one man too many. Ludwig is frugal despite his great wealth. Loving his work to the ultimate degree, Ludwig is unable to take much pleasure from anything else. He counts calories Religiously.

10:20 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 wanna fast forward right up until the point he's fifteen. 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 uh oil port.

10:41 Uh in Texas. And so it says as soon as their marriage 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 fifteen years old, by the way. Uh his father had other things to do and could spend little time with the boy, a thousand miles from home, taken away from his family, from school, from friends.

10:58 The fifteen 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 gonna 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.

11:17 At the same time he went to night school to get the math he needed for a marine engineer's 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 twenty cents 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

11:36 and helped him to complete the work requirements for his engineer certificate. This is these are skills he's gonna 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 installation work. So he's installing ship engines.

11:54 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 moonlighting 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 nineteen went permanently into business for himself. Uh it was a proper time to do so. The year was nineteen sixteen. And the shipping industry was booming.

12:13 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 he his first business. See something he does is really smart. There's something he's gonna 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 is just one example. He's gonna have much more sophisticated examples later on. But he needs a boat.

12:37 And so he goes to his Detroit bank that had foreclosed a bunch of boats and he finds one for just five thousand dollars. And so he's able to get a loan and he's able to recoup most of that five thousand dollars 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 purchase price.

12:57 Price by gutting. And selling off her machinery and her boilers and turning in her into an iron hold barch. 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 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 be the heart of the world of commerce. Goods and money flowed in and out of New York Harbor.

13:19 Like the lifeblood for the rest of the globe. earlier in the book it mentioned that Daniel was later in his life was a lone wolf. that happens, he's gonna have a series of partnerships. Uh none of them, you know, work out that great. He clearly prefers to work alone, but he does get what he considers a postgraduate course in true trading. by a partner that is going to respond to this ad that Daniel just put in the paper.

13:40 And so it's this guy named Kaplan. Kaplan was a New Yorker who had virtually cornered the market. In black strap molasses. And so they become partners and Kaplan sends Ludwig north of the border. This is around the time of prohibition. So the molasses is actually turned into bootleg liquor, okay? So it says the molasses DK was hauling. Uh 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.

14:07 DK 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 postgraduate course in shrewd trading.

14:23 And so the book goes into a lot of detail about the early years of his career, which I think is really in important for you and I to go over. I'm gonna spend some time here. This really this whole section is something that you see over and over again. It's not what you do, but how you do it. And so Ludwig is constantly identifying

14:38 Is this a good use of my time or is there a way I can do the same work but for more money? And in this case He's like, Okay, I'm gonna w I'm hauling he breaks up with uh Kaplan. And he does a general hauling. So he's just like moving still shipping and moving stuff around. And says most of his cargo was lumber. But he has a good idea and he's like, I should switch to h hauling oil and why did he come up with that?

14:56 I'd been getting ten or fifteen cents to haul cargo uh to haul a cargo of lumber. I saw the tanker boys getting three or four times as much for oil. So it's like okay, how do I do that first? I need some kind of oil tanker, I need a vessel to t to Paul Oil.

15:09 I need somebody to pay me. More importantly, to haul the oil, he goes to a small refinery. This is something he's gonna use over and over again. Gets the contract first. Then goes and looks for a vessel. This is after

15:20 World War One, he's gonna run the same playbook on a much, much larger scale at the end of World War Two, which is gonna really fascinating. So what happens, you know, they have this huge everybody's building ships'cause 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 that was ninety eight percent complete. when the armistice was declared.

15:41 So now he has a charter and a vessel and we see his legendary st or what do they call monumental stinginess. He wasn't even sure how to pronounce the name of the vessel, but because it would have cost him fifty dollars 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 up. So it's like okay. This thing's, you know, four hundred tons. How do I get a big ship? I want a bigger ship. I want to make more money. And so he's gonna go through a series of partnerships and he's constantly finding ways to level and trade up.

16:08 I think of him very much as the founder'cause he started the company. But when you g realize like he how much money his business makes, it's like oh he's kinda like a traitor. He's constantly wheeling and dealing. He does not ha have to keep a company forever. If he gets a better deal, he'll just sell it off for like you know, there's multiple times in the uh book, it's like oh I'll just sell it for four hundred million, business I had for forty million. It just he's constantly trading things up and looking for better 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 and take on a partner.

16:38 And so don't worry about remembering these names because you're gonna 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 for fifty one percent share of the venture. That lasts for a little bit and then William decides, Hey, actually I'm gonna I wanna buy you out. So uh what's the price for the other forty nine percent? Ludwig had put up five thousand dollars and his time. for this one transaction and he winds up getting forty thousand dollars for his forty nine percent 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.

17:06 with a group uh up in New England that owned a chain of filling 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 let's see, this would be around nineteen tw Nineteen twenty, nineteen twenty four.

17:25 So he's mid twenties, mid to late twenties. He's gonna wind up Making a partnership. With older, richer partners. Right? So

17:33 Ludwig at this point in his career has time and energy and his new partners have money. And that's a tale as old as 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.

17:43 Uh DK for practical purposes was the chief executive officer of the company. It was his job of keeping things going, and that that job of keeping things going fell squarely on the shoulders of Ludwig. I mentioned his constant desire to trade. You see this even at an early age. They are technically operating ships, right? They are hauling oil. But he's making during the mid to late twenties. 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, 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.

18:16 I'll just keep buying it and instead of keeping it for myself, I'll just sell it 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 One. With only ten percent down. So it says the sale of shirp surplus ships at bargain prices.

18:32 Much less than it would have cost to build the vessels from scratch started almost as soon as the armistice was declared. The result was that hundreds of government owned vessels built at taxpayer expense were 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 Ludwig is doing right now in this in during his career. Uh, what made the deal attractive was the shipping board required investors to put up only ten percent of the purchase price and the rest could be paid over time. And so this is what him and his partners are doing.

19:03 That would mean by investing less than fifty thousand dollars, right? Cause the total purchase price is five hundred thousand. 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 investment of o only fifty thousand dollars. And so almost forty years later. When he's giving this interview, he's talking about

19:24 This time when in his early career. And he says he was always in Hawk at the beginning of his career. And what that means is he's always owed the government money and he's constantly this whole book. At this stage of his career, especially with the pr doesn't 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, d like his ships sh his charters aren't as valuable. He's has a real hard time um making payments.

19:46 So it says during the the fortune interview in nineteen fifty seven, Ludwig said that in early business years he was quote, always in Hawk. There may have been a good reason. As long as you're in Hawk, it's hard for a creditor to collect the money from you. So there's so many times where the government's like, Okay The payments due, let's you know, making this day up, January first. And it and Library's like, Oh, give me like a six month exception.

20:05 And then June comes, like I need another nine month extension. It's this constant back and forth. And he constantly gets them to extend time. But what's amazing is how fast his fortune's gonna change. I do want to pull out these things because you know, it we s the book starts, he's eighty year old man. Richest man in the world at at this point.

20:21 start in the business when he's nineteen, but you go when he's thirty four. I'm gonna to hold up I'm gonna pull out two things here. See thirty four. He's in debt and he's barely making his interest payment. This is now into the depression. Uh Ludwig wrote

20:33 Another begging letter to the shipping board saying that he was doing his best that he could, but that Am Tankers needed more time to make the payment. Three years later. Thirty seven and he's almost going broke during the Great Depression. Ten years from now, he's gonna be unbelievably wealthy, is what I'm telling you this. Uh a shipping board auditor reviewing the company's situation came to an unavoidable conclusion. Am Takers was, for all practical purposes, insolvent.

20:55 The firm had no securities left to borrow on, and virtually no chance remained that the massive liabilities could be paid off from the ship's small earnings. But there's an important point here. Like we have to pause'cause 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 money. Why isn't 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.

21:19 You just need something to cause demand to skyrocket. And that is exactly what happens in the late nineteen thirties when Europe breaks out in war. War makes the demand For Ludwig's products and services skyrocket. It's almost the exact opposite. What was happening to him and his business the previous decade.

21:37 Wars and rumors of wars pre stage an upturn in 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 are sold for a handsome price, he's gonna make money both ways. In some cases Now something that was just sitting there. Uh, not only would there w there was no charter on it, if you had to sell the ship to try to pay off your loan, maybe you'd get fifty thousand, a hundred thousand. Those now sh those shi same ships are selling for eight hundred thousand dollars or more. And so this is the most important part in the book. This is what I referenced earlier.

22:12 The two name paper idea. Plus the fact that he's going to be shipping oil for 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. Ludwig needed a way to obtain ready money without either taking partners or assuming heavy mortgages. His early experiences with partnerships had been costly.

22:31 And barring to finance ship renovations was no better. It was at this time that Ludwig came up with the two name paper arrangement. That he said was 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 as collateral obtain a loan to build or renovate a ship to haul the oil to fulfill the charter.

22:52 The plan was legal, logical, and ingenious. He was able to start his climb towards being the world's biggest shiper. Mainly because he was now hauling oil For the Rockefeller Empire keep in mind he started his business when he was nineteen.

23:06 He is now forty. It took him twenty one 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. We're gonna get into Why the hell would a vertically integrated oil company. let some outsider haul their oil. It's gonna be very similar to the to what we just went over with Bill Gates, I think on episode two ninety.

23:26 I'll get there in one second. So it says up until now before doing this deal with Standard Oil. Ludwig 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 l it was not known at this time. Came out later. It's called the

23:42 Acne carry a red line agreement. In effect it froze each major oil company's fractional share of the petroleum market at nineteen twenty eight levels. to create a cartel and eliminate competition. And so now all the major oil producers are in a cartel together so they can control prices. And so now this is what I was mentioning earlier. It's like why would a vertically integrated oil company hire an outside company to ship its oil? It's the same reason that IBM

24:03 Let Microsoft create the operating system for the IBM PC. If you haven't gone back and listened to episode two ninety, I would highly recommend doing that after uh this episode. In that book, which was published way before Microsoft, or not way before, like a couple of years before Microsoft gets uh 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 Microsoft? And he gave some historical context. І се в last three presidential administrations

24:29 They are all trying to break up IBM. So much so that they I b the IBM had to start its own law firm. I forgot there was like I I forgot how many people, like thousands of people just working to to fight off the United States government for these these anti trust trust and like monopolistic Uh charges. And there's a very similar line of reasoning.

24:47 taking place in Daniel Ludwig's career at this point. Why would an oil company in such an advantageous position charter ships from an outsider? Rather than operating ships of its own. The illusion of competition and decentralization is Has to be maintained.

25:00 The US government still had laws on the books. dating from the turn of the century when public outcry led to trust busting. And so Ludwig is doing what Standard Oil once done. It just appears it's an outside company. What was in fact a tightly controlled situation must not look like one from the outside. As much as DK had been portrayed 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 as a useful cog in a gigantic machine.

25:29 That kept oil and money. circulating all over the globe. And so this is a great overview. His business was uh basically a hundred and eighty degrees different.

25:40 during World War Two 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, Ludwig was mired deep in debt. He was saddled with do nothing partners. Desperately pressed to keep the shipping board and the banks from foreclosing on his few ships.

25:56 And s and burdened with an unhappy marriage. Now five years later DK was in good financial shape. The owner growing fleet of ships.

26:05 out of debt and enjoying a 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 it many times. Is still intact.

26:24 Uh Ludwig's stinginess would become legendary in the shipping industry. He 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 on being asked to suggest a design for a fleet flag symbolizing the Ludwig Enterprises submitting a submitted a drawing of two hands stretching a dollar bill.

26:46 This is so extreme it made me laugh. The captain of a Ludwig ship made the extravagant mistake of mailing in a report. Of several pages held together by a paper clip. He received a sharp rebuke from Ludwig. We do not pay to send iron mongery by airmail. I had to look up what iron mongery was. It refers to manufactured iron goods. I don't know if a paper clip fits that description. But Ludwig was super pissed off about it.

27:10 Ludwig's tight fistness persisted after the depression, putting him in sharp contrast to such free spenders. These are his main competitors at this time. Uh Aristotle Onassus. And Starvos Narcos. Uh, it was also largely responsible for many of his innovations in the shipbuilding industry. This is actually the the reason I'm reading all this to you.

27:28 But before I get to that part, if you want to learn more about uh Aristotle and Asis In particular I just did a podcast on hi one of his biographies, it's episode two eleven. It's called Onassus, an extravagant life. But let's go to this idea that constraints breed uh innovation. I think that's actually a quote

27:44 or line from Sam Walton's autobiography. says most of Ludwig's ship building innovations were aimed towards a single goal, increasing payload Without increasing cost. He was ever on the lookout. For a way to reduce tanker design. to the bare bones minimum. His ships had much thinner decks

27:59 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 the guys going a little crazy. But if you really think about it, like Ludwig's career Is gonna span over fifty from here.

28:12 And small expenses compound. So what is the cumulative savings of Ludwig's cost management over a half of a century? 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 his ships, As Star Bos and the Arcos did. Ludwig snapped.

28:34 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? It's making money his p is his passion, not spending it. Ludwig was concerned with the wealth itself.

28:49 Not the trappings making money, not spending it was his passion. And so all throughout World War Two he's making a ton of money. And then at the end of World War Two, he's a lot richer than he was at the end of World War One. So this is what the d the difference between the end of World War One or World War Two and World One, you're talking about twenty five, twenty seven years? The entire time. That twenty five, twenty seven year period, Ludwig has been in the same industry.

29:11 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 One, there's gonna be a ton of the this huge surplus of war ships. The difference now is Ludwig 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?

29:32 He had started in the tanker business by by taking World War One 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 lucky.

29:47 And then we're gonna see this personality trait. He doesn't believe that anything is set. He's like Well I just gotta find the human is actually responsible for making the decision and then I can I could Essentially, like this is a reminder of one of my favorite quotes that uh Mark and Dreeson 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 drive and passion. The world will often reconfigure itself around you more quickly.

30:08 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 gonna read the section to you, but he does this not only w he's doing this with the uh the Maritime Commission. This is uh the U S 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. The same idea. Many of the surplus ships needed repair work before they could be put into service, but there was also a claim in the purchase contracts stipulating that any materials removed from these ships during renovation had to be scrapped. There is no Way.

30:38 Valuable somebody else and just throw it away. That just he never does that. So says this condition was now standard in maritime ship sail contracts, but DK did not want to abide by it. If he can 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 to waste anything that could be turned into a profit.

30:59 So when he got A tempting offer. He wrote the Maritime Commission with a pro with a proposition. This company is offering to pay a hundred thousand dollars for a turbine that he had just removed. Let me sell this engine, DK said.

31:13 And I'll split the proceeds with you fifty fifty. On its face, the offer was in violation of the contract. But the commissioners accepted his proposition with a single modification. They wanted fifty five thousand. Not fifty thousand.

31:29 Done and done. On these terms, the deal was made. The commission got a nice piece of change. And Ludwig got 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.

31:43 And sell excess equipment and materials for whatever he could get, as long as he was willing to cut in the agency for a share of the money. Now while this is going on, something interesting happens. Daniel Ludwig goes from being the best in the industry to behind Both Aristotle Nassus and Starvos Nicros. So uh Nicaros and Onassus were friends, then brother in laws, and then enemies. So think about this. Why was Onassis and Necros

32:06 Able to catch up and then pass Ludwig. Oh, Nassis and Nicros had lower cost structure than Ludwig. How is that possible? This guy's obsessed with 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 sur surplus ships, right?

32:21 So that means his ships By law, they have to fly under American flags. He is doing business with the US government. Onassis and Niarchos. fly under flag of convenience ships, which means they are not regulated by the US government. So this what the w this is the advantage they have.

32:36 They had virtually cornered the Mid East to Europe oil hauling trade. Taking business away from Ludwig and other American shippers. By cutting their charter rates, flag of convenient ships which Onassus have no taxes and regulations and

32:52 They also have inexpensive foreign crews. They could 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. Ludwig had been concentrating on becoming America's largest shipper. Onassis and the Arcos. Had been using Panamanium registry and cheap rates to beat him where it counted.

33:14 Getting charters to haul oil. Eventually Ludwig is going to fall suit. He's gonna find ways to build flag of convenience ships as well. Another advantage. That Onassis.

33:26 and Yarchos had that Ludwig ha was forced to follow was lavishly entertaining, or another way to think about this is bribing the people that make the decisions to Uh oil charters.

33:37 And this is what Onassis and his brother in law become world famous for. They have like these floating essentially like Uh you can't even call'em mansions. Like miniature floating cities, like company headquarters, you just happen to live there. It's actually absolutely insane. Uh in one of the I read two biographies of Onassus. I think in both of them they talk about this, but

33:54 Churchill. So Winston Churchill winds up becoming good friends with Air Sarda and Nassa. So Nassas had maybe, you know, the the the nicest yacht in the world at the time. And this is before Churchill dies. He's, you know, the hero of the West. mm, arguably the most famous, one of the most famous people on the planet and he he can, you know, has uh access to unlimited opportunities and he chooses to Constantly vacation and spend time aboard Onassus's.

34:17 Yeah. And in one of the books, Onassis 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, eight o'clock or whatever the case is. But he would stay in bed reading and drinking until like noon. But when I got to this section of the book, which I'm gonna read to you and it's gonna it's gonna seem uncharacteristic for Ludwig. But I was having uh breakfast with a few friends and one of them made the point that

34:39 It 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 actually undervalued assets. And this section of the book would explain why someone would make a statement like that.

34:54 And so this is Onassus and his brother in law. While they were lavishly entertaining the leaders of European an Arab ar 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.

35:11 By dazzling those who had the power to 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 builds this giant unbelievably luxury yacht called the Danjan.

35:31 Because he realizes how valuable this is as a business asset. Most the this this uh yacht of his is gonna travel like forty thousand miles a year on average, and most of the time he's not even aboard. Over the next decade, DK would use this yacht frequently in this way, cr 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 craft as As any of his tankers. And probably earned him more money.

35:57 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. Yats and private plane. are actually undervalued assets. In the case of the Greeks and in case of Ludwood. These giant floating company headquarters mansion things wind up not only not costing them anything, but making them a ton of money.

36:17 And so moving on, even 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 gotta find something to do with all the cash. This is where they call him a highly diversified one man multinational corporation. So At this point in the story. He's in his fifties. He still has four decades ahead of him.

36:34 And so the book goes into great detail a bunch of about a bunch of these projects. I'm gonna highlight a couple of them, but I wanna point out this because I thought this was fascinating. His plans for his Venezuelan land was reflected in an amendment to National Bull Carrier's Corporate Charter. So He's got a million different companies. His main business is called National Bolt Carriers. These are the that's becomes one of the largest uh

36:54 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 allowable activities to include This is how varied his uh his interests were. Exploration and development of petroleum, gas. Asphalt.

37:08 Hydrocarbons, metals, ores, coals, Uh and other minerals, operation of oil wells, mines, drilling equipment, all kinds of oil, gas, and mineral development. Also farm ranches and livestock from this time forward. National boat carriers. With this itself.

37:23 Not as an oil transportation firm, but as a holding company. DK was no longer just a simple 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 is in these businesses not necessarily because he's interested in

37:45 'Cause 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 just one line that happens earlier in the book that I really he studied the way Rockefeller set up his business. He's like, Oh, I should do this. Like the Rockefeller organization, Ludwig had mastered the practice of keeping his money.

38:05 By transferring it from one pocket One company. While appearing to spend it. And then another reason I wish this book was more widely available and in print and affordable.

38:17 It's because it's full of these crazy stories, these covert wars. Between nations. Individuals. It's talking about the fact that these there's people in the United States government

38:27 This is when Eisenhower's president. You're gonna see Richard Nixon and young Richard Nixon gets involved here? Where They're trying to make Aristotle Nassis he Aristotle Nassis has this exclusive contract to haul uh Saudi Arabian oil.

38:39 And the US government wants that out of its control. But look at the length that they go to accomplish this without anybody knowing what they're doing. So n it it mentions people like Richard Nixon and a bunch of other people that are inside the Eisenhower administration would skip over the names, tell you what they were doing. They're they pulled the levers and kept the wheels turning the way that the corporate powers wished. Just now these men were concerned with bringing Aristotle and Asis down a few pegs. They did not want to destroy him completely.

39:01 For that might expose the oil cartel. A lot of that oil money's flowing into The conference 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 half true, some false.

39:16 foreign and domestic newspapers, all with the purpose Of changing Onassus's image. From that of a glamorous celebrity to a cunning villain. After he had been sufficiently smeared, The U S Department of Justice would start suits against him that it had hoped.

39:30 Would force him to relinquish his exclusive rights to haul Saudi oil. The money for funding the operation was to be passed to an emissary. Of Starvos Niarkos, so his main competitor. Nyarcos had a vested interest in seeing the Saudi contract scrapped. So of course did Daniel Ludwig.

39:47 And so two of my favorite Ludwig 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 favorite sentence in this entire book. So it's this project that's gonna happen, it says it's on Ms uh Mexico's Pacific coast, about halfway down the Baja Peninsula. Located there were huge underground deposits of brine.

40:07 Concentration of salt in the water. We're around thirty percent. Nearly ten times. That of sea water. By the simple process of pumping this brine to the surface.

40:17 And letting it stand in pools where the hot sun could evaporate the water. One could produce millions of tons of salt. This is what Ludwig 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. The main problem was the labor.

40:36 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 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. Оpportunтиз.

40:53 On the frontiers where most men dare not venture. And it is often the case That the farther the frontier The greater the opportunity. I love that line.

41:03 The majority of businessmen are tied to cities where the ingredients of development already exist labor, energy, supplies, building. Transportation, 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

41:19 was due to his willingness to venture Where 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 four million tons a year, making the largest producer of solar salt in the world.

41:37 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, when he's about to do what I'm gonna describe to you now. He was embarking on an ambitious project in Panama. The building of a fifty five thousand barrel day refinery

41:54 And an adjoining petrochemical complex. Before starting construction, however, Ludwig had a little chore to perform. One that he intended to do personally. Twice he had trusted the word of specialists. And twice he had been burned.

42:07 He had believed them. When they told him he could bring fully loaded sixty thousand ton or carriers. Down the Orinoco uh River. This is in South America. without running them aground. 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 Grand Bahama Island was too fragile to support giant supertankers. So these are giant previous projects that.

42:31 He was working on He got bad information and that cost him a ton of money. So he's not gonna let that happen again. These episodes had cost Ludwig considerable time and expense, so before building a refinery in Pine Mall, he decided to check out the site himself. Dressed in baggy work clothes, he caught a night flight out of New York to Panama City. And arrive just be just before dawn.

42:48 He went into a 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 twenty cent ball of string. He unwound the string, measured it out in six foot lengths, and tied a knot at each interval. He went outside and rented a motorboat and spent the rest of the morning. Remember, he is a already a billionaire when he's doing this. And spent the rest of the morning and afternoon puttering around the bay.

43:10 checking with his 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 construction?

43:28 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 in this oil company. And people are like, Oh my God, he's gonna try to take it over.

43:42 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 over the company and indeed Ludwig nineteen months after buying the stock. would sell it for$146 million, reaping a handsome forty six million dollar profit on his short term investment. And so when the book is published, Daniel Ludwig is still alive and he's still working.

44:03 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 colours we use for his portrait. We must paint him on a large scale.

44:15 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, the world is a different place.

44:28 From what 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 Ludwig На з реклюси.

44:41 But is exclusive. He sees only 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.

44:53 Fame or power. Top executives of major banks. oil companies and other corporations Celebrities and heads of state. Much of Ludwig's reputation.

45:03 As a recluse 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 mystery

45:17 All these years. There has always been an economic motive behind his continual u scaling. A desire to keep a jump ahead of competition. But there has always been something else as well. A compulsive

45:30 One Upmanship. Driving him on to succeed. at what lesser men consider impossible. We can add to this portrait. A clever

45:39 Mechanically inventive mind. Committed to the principle Of getting the maximum utility and profit From the minimum expenditure of time Space.

45:49 Energy and money. Plus an ambition. That seemingly knows no limits. Plus a decided preference for deeds over words. Machines over men.

46:01 And a high degree. Of ruthlessness. And that is where I'll leave it. For the full story, I highly 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 founderspodcast dot com if you buy the book. through that link, you'll be supporting the podcast at the same time. You can also support the podcast by signing up for the founders premium feed.

46:21 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 up for my free email newsletter, I email my top ten highlights from every book. That link is down below and available at founderspodcast.com. That is two hundred and ninety two books down, one thousand ago. And I'll talk to you again soon.

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