Interview of Joseph J. Jacobs

1.1. TAPE NUMBER: I, SIDE ONE SEPTEMBER 18, 1998

ERANKI:

I was thinking perhaps what we'd do is cover some of the basic information-- And some of it is background and education. Perhaps today, since we don't have that much time, maybe we can just stop short of your first business kind of thing. So cover things like when you were born and where and speak about your family, your father and your mother--some of the information that's in your book.

JACOBS:

I'm the youngest of seven children of immigrant parents who came from Lebanon. My father [Joseph J. Jacobs] came in 1886 and my mother [Afiffi Forzley] a few years later. My father was sixteen years old and hardly educated even in Arabic, but learned English after he came. My mother was quite a bit younger than my father. She came as a nine-year-old child and had no education whatsoever. Indeed, my mother was illiterate, but an amazing person and an amazing personality. In any case, my father came, as I said, in 1886, and had a reference to a friend of the family from Lebanon who had come prior to his coming here and he went to see him. My father was virtually penniless at that point, and the friend gave him a suitcase with what were called in those days notions-- you know them as needle and thread and scissors and razors and things of that type--and taught him how to go out and knock on doors and become a peddler. That was a very common thing for a Lebanese who came to this country: to become peddlers. Somehow it was the easiest way to enter the mainstream of the American life. And my father told many stories of walking from town to town, at times not having enough to eat, but always managing to sell a gadget here or a [pair of] scissors there and so on. And he learned how to ask the lady of the house whether they were interested in any of the stuff that he had. And later on he became fairly fluent in English and could read and write English, as well as Arabic. He used to joke that his formula was a 1 percent profit on the things that he sold, which means he bought it for one dollar and sold it for two dollars. He would say jokingly that's a 1 percent profit. My mother, on the other hand-- In traveling around as a peddler from town to town he would look up Lebanese names of people or had a reference of Lebanese names, and he often boarded with Lebanese families in different towns. And by the way, "Lebanese" and "Lebanon" are relatively recent terms. When we were children we were referred to as "Syrians," and my father and mother were as well, because Lebanon was a province of Greater Syria, which in the 1800s was a part of the Ottoman Empire. And as a matter of fact, the reason for the emigration from Lebanon was the oppressive rule of the Ottoman Turks on the Syrians or Lebanese--especially of Christian origin. My father's family was a member of the Maronite Church, which is now under the Pope and is a Roman Catholic sect--a rather special one--and Christians were treated abominably by the Ottoman rulers of Lebanon. I tell in my book the story that was related to me by a cousin, of a journal written by a great-grandfather, talking about life under the Ottomans. And the Christians, when they bought a new aba--which is the robe that the Arab people wear--had to put a right-angled tear in the sleeve because no Christian was worthy of wearing a new garment. And when a Christian died it was announced in the newspaper in Arabic that the Christian had strangled when he died, the basis being that a Christian was not worthy of a peaceful death but always had to be violent. These are a few examples of man's inhumanity to man that's occurred and reoccurred over history. And that's what drove my father away. He didn't want to serve in the Turkish army and-- I heard some rumors that he actually had killed a Turkish soldier, but I'm not sure that that was true. In any case, he came here, became a peddler, traveled around the country a lot and stayed with a lot of different families. And one of the families he stayed with was the Forzley family in Worcester, Massachusetts. And he met my mother there when she was very young. She would help around the house, while her older brothers and sisters would be working in the cotton mills in New England. And from all accounts, my mother was a very serious person when she was young, but a good hostess and so on. In any case, she was fourteen years old when she married my father, who was some fifteen years older than she.

ERANKI:

What were their names? Your parents' names?

JACOBS:

Well, my father was Joseph J. Jacobs, and her name was Afiffie Forzley. Now, the origin of the name Jacobs, which does not appear to be Lebanese or Arabic, is very interesting. I found out fifteen years later, by talking to someone who traced the history of my father's family, that the name was derived from the first name of a great-great-grandparent. Apparently, in these small towns in Lebanon there were usually only two or three family lines and they would identify which of six or seven brothers' lines would come by using the term Ibn, which in Arabic means "son of." And apparently, one of my forebear's first name was Yakoub or Jacob, the biblical name. So my father's family line was Ibn-Yakoub. When he came to this country he spoke only Arabic and the translator just chopped off the name of the family and just called him Joseph Jacobs. And that's how the name was derived. It's not uncommon. Scandinavians do it all the time with the S-O-N ending and the Armenians do it with the I-A-N ending. It's the same kind of thing. That's where the name derived. My mother's family name was Forzley, and the derivation of that name is a small town in Lebanon called Forzel. And it meant that her forebears came from this small town. It's usually a town that identifies a name, [or] the name of a forebear or a profession. Like haddad is a steelworker, and it's a common Arabic name. So those are usually the three derivations of names.

ERANKI:

I was going to mention as an aside that my last name is also the name of a village.

JACOBS:

Yeah. Very common, very common. Where you came from, what line you have, and usually a craft or something like that: if you're a bricklayer or a carpenter--names of that type, sometimes facial characteristics. So, you know, the derivations of names are very interesting. And actually, just as an aside, I found out that the real family name was-- This was a romantic story I found out, which is jumping fast-forward, but I met a Lebanese in Qatar, which is one of the Arab kingdoms. He recognized that my family name was not Jacobs, and I told him the story, and he confirmed it, and I met a distant cousin. Our real family name was Nakouzi, and it goes back to refugees from the island of Cyprus who had landed in Lebanon in the twelfth century, thirteenth century, and gone up into the mountains and had become Christians--because the mountain village had Christians in it--and those people up there were known as El Nakouzi, the people who came from Nicosia in Cyprus. So the derivation of that family name was where they came from. So that's a side story.

ERANKI:

You were at the point where you were talking about when your parents got married.

JACOBS:

They got married and they lived in a number of towns in New England where there were other Syrians or Lebanese, and finally settled in Brooklyn. And my father continued to be a peddler and would leave for long periods of time, traveling by horseback, walking and so on, and made a good living as a peddler. But finally, before World War I, he became the exclusive agent for and a part owner of a factory that made straight razors. Those were the days before the razor blades were invented. Almost all straight razors used by men came from a little town of Solingen in Germany. And this company in Geneva, New York had imported a number of German craftsmen who knew how to make straight razors--the tempering of the steel and the sharpening was quite a technology I think. And the Geneva Cutlery Company was established, and my father became their exclusive sales agent and part owner of that factory, because he had carried these razors as part of his pack in the suitcase. And he settled then with an office in New York and we lived in Brooklyn. He then sold to other peddlers who would come to him. He was the wholesaler that would provide them with razors and they would go out and sell. Actually, during World War I, when the supply of razors from Germany was cut off, my father became very wealthy for a short period of time there, because he controlled the only domestic-made razors in the country. He used to tell stories of people who would come down and unpack these crates of razors just for the privilege of buying a dozen razors wholesale, and they would resell them at exorbitant prices. And my father became quite wealthy during World War I. We lived in a grand, four-story house and-- I remember it only vaguely because I was the youngest, but I remember grand balls and entertainment, and my mother, who always had a regal bearing about her, presiding over these parties. As I say it in the book, despite her lack of education and being illiterate, my mother was a classy lady. She had a sense of style. She was a wonderful cook and did needlework very well. I had three sisters and three brothers and she made all of the dresses for my sisters, sewed them by hand--ball gowns and everything else. So that's just a vague memory in my mind because after World War I my father made some unfortunate investments-- He still had money left and then in the late twenties he established a brand-new business of manufacturing women's lingerie based upon one of my sisters' outstanding talent as a designer. It was called Helene Lingerie. Helene was the frenchification of my sister Helen's name, and she was a designer. She was a young girl, but she was the designer of the lingerie, and my father set up a factory to design and manufacture this lingerie.

ERANKI:

How old were you at this point?

JACOBS:

Well, let's see, I was born in 1916, so in '26 I was maybe ten years old when that business was established.

ERANKI:

Where were you born?

JACOBS:

I was born in Brooklyn, in this nice home that we had, large home. But shortly after the war we moved to an apartment, a smaller apartment, because my father's financial wherewithal was reduced substantially. We lived well, but when the Depression came in '29 my father lost his business and went bankrupt, and the family was consequently quite poor at the time. So that in my adolescence, I was raised as a poor kid, and in order to help keep the family together my sisters went out to work. One brother [Theodore P. Jacobs] was older than me; my mother insisted he go to medical school--he ultimately became a well-known surgeon-- And I was kept in school. Another brother went off and got married-- But essentially my sisters supported the family because my father had a heart attack about this time and became an invalid. And my mother worked as well. We always had enough food in the house because Mother was a good cook and she managed well, but she ruled the house with an iron hand. When I started working at the age of twelve-- On Sundays at first and then I worked after school, from there on through college and had full-time jobs in college.

ERANKI:

What did you do?

JACOBS:

First I worked up in Prospect Park selling Cracker Jacks and things of that type as a youngster. Then I learned to cook and was actually a cook in various spots around the East Coast.

ERANKI:

Really? What was your specialty?

JACOBS:

Well, I had no specialty at all. I started out as a short-order cook, which means you fried eggs and things of that type and you made sandwiches and so on. I worked behind soda fountains. But I ultimately graduated to be like a third cook in some good clubs and so on. So I've been working since I was twelve years old and almost full-time through high school and college while going to school. My mother was so strong that we would--my sisters included--all give her the money and then she would dole it out to us as she saw fit. She was the commanding general. Going on-- Do you want to ask any questions at all?

ERANKI:

Maybe you could elaborate a little bit about these jobs. I found it interesting that you started working at such a young age.

JACOBS:

Well, the progression was that first I worked on weekends--when I was in grade school--in Prospect Park. And there was a concessionaire that had a concession on all food stands, and I worked for him. We would set up stands and sell cold sodas to people playing tennis and Cracker Jacks and peanuts and so forth. I learned a lot of things working for that man--amusing things that I recount in my book, that things are not always what they seem. During the wintertime, when there were no people out, he would still employ me, along with a couple of other young kids, to fill bags of peanuts--these are peanuts in a shell. We would put them in small bags out of a hundred-pound bag of peanuts that he would buy. And we were taught meticulously to fold the corners underneath upward to fatten the bag out and yet not fill it with too many peanuts. It looked like a heck of a lot more than it was because the bottom of the bag was turned inward. And we were taught how to do that and to fill the bags with a small cupful of the peanuts in the shells, and we would pack those away in Cracker Jack cartons for the times when the weather was good and we'd sell bags of peanuts. The other thing was that he had a soda fountain. I'll never forget when I took a scoop of ice cream to make a cone and--this guy that ran this place was a very interesting character--he came over and said, "Joe, let me show you how to really make a cone." And he taught me how to scoop the ice cream in a very thin layer that would roll around in the scoop, and you would actually have a ball of ice cream that was hollow in the middle and the hollowness would not show.

ERANKI:

That's amazing.

JACOBS:

Form versus substance. And I remember feeling very guilty about that because my family had a very strict code of morals, and that was against everything that my father and mother taught me. You know, you give full value; you work a little extra hard and so forth. But it shows the kinds of things one could get corrupted by very easily and think that that's the right way to do business. I was never convinced of it, and I still think my family's values of morality and honesty are the only way. Because the people who cheat that way, no matter how clever it appears, eventually get caught, and their customers feel cheated. If you believe in the free market system, then the customer is king, and he'll find you out eventually. You'll get away with it for a while-- But that's moralizing on my part. Well, from that I started working in drugstores behind the soda fountain. In those days many drugstores had little sandwich shops attached to them. So I learned to make salads and to make sandwiches and soups and so forth.

ERANKI:

When was this?

JACOBS:

In the same period when I was in high school. By the time I got into college I would get a job every summer, by the way--a full-time job--and then while going to school I'd work after school and weekends at these places. After I got into college-- By that time I had good references as a kitchen staff, so I worked at various restaurants and clubs--especially clubs--in the kitchen. I was what you might call a third cook. I would prepare salads, prepare vegetables to make sandwiches, be there for breakfast and serve breakfast and so on. I guess the best job I had was as second cook at a club in Westchester. Westchester Yacht Club or something--I've forgotten it. I spent a whole summer at that while I was in college. But I also had a job from four until twelve at night during the school year, while I was attending school full-time. I used to fall asleep in classes. As a matter of fact, I'd make excuses for myself. My grades in undergraduate school were not very distinguished. I got by, but I did very little studying. I just didn't have time. I had to absorb things in the lectures, if I didn't fall asleep. I had to count on my memory, not on studying and so forth. So usually I had undistinguished grades as an undergraduate. In 1937, when I graduated with a degree in chemical engineering, I was offered a teaching fellowship at Poly--Polytechnic Institute of [New York], at that time.

ERANKI:

That's where you got your undergraduate degree?

JACOBS:

Yeah. Now, Polytechnic University-- I couldn't get a job in 1937. I was offered one job for $12.50 a week as a chemist, and I could make more money than that being a cook, you know. So I was offered a teaching fellowship at Polytechnic, and that allowed me-- I didn't have to work in the food business anymore because I got a small stipend as a graduate fellow, but I taught evening classes and got paid for that and helped in consulting work and so forth. So I got by. In graduate school my grades went right up and I had no problem getting excellent grades. When I realized that I'd been carrying a full-time job and a full-time school at one time-- I didn't feel sorry for myself; I just did it and accepted the mediocre grades.

ERANKI:

Was that common among your peers, among your classmates? Did a lot of them--?

JACOBS:

Yes, it was very common. I probably worked more hours than most, but almost everybody was suffering from the Depression and had to work at something, but usually to supplement income. By that time my father-- In 1933 my father died--that was the year I entered college--from a heart attack. But he had been an invalid for five years before that, so we had no income other than what my sisters were making. And I subsisted, but I gave the money I earned to my mother. I had this older brother who went through medical school, and it was my mother's determination that the both of us should be educated. I tried to quit school a couple of times to help out with the family, and she wouldn't hear of it.

ERANKI:

And why was that? Why did you consider that?

JACOBS:

Well, because I could see that we were struggling in order to put food on the table and [I] felt guilty about not-- While I was carrying some of my weight, I'm sure that I could not have subsisted all alone if I wasn't living at home, even working as hard as I did. I guess I would say I was probably no net burden on the family, but that's about it. But I would not have been able to pay for room and board and everything else from what I was earning. And you know, salaries were pretty meager in those days.

ERANKI:

So what do you think of that insistence of your mother's on your education, and how do you think that has affected you?

JACOBS:

Oh well, I trace that very exhaustively in my autobiography. My mother was a very strong woman. My father was a wonderful man, very intelligent, but less demanding than my mother, but somebody I admired tremendously. My mother was virtually the head of the family from the time my father became an invalid and she had very, very strict standards. Where she learned it, I don't know, but it came from our culture. I point out that there's a word in Arabic that any Arab would understand, and the word is 'ayb, which, translated, means "shame." From my mother saying that to me, shame became a thunder from heaven, and she would use it most when it came to disgracing the family name or doing anything that would imply that our family was not of the greatest moral rectitude and so on. Her standards of honesty and of attitude and so on were very, very high and unyielding. I mean, she was a martinet about it. No matter what happened, you can't bring any shame on the family name. I relate it in the book that there's a lot that comes out of my Lebanese culture that influenced my becoming a businessman. One of the chapter titles is, "What Business Are You In?" and I recite the fact that when I was a youngster we would get lots of visitors--Lebanese people, new people that we hadn't met before--because the Lebanese are notoriously a very hospitable people. You may be starving, but if somebody comes to your house, you put together some food to give them and deprive yourself. So hospitality, in all of the Arab countries, is part of the culture. You read a lot of romantic tales about it, and it's true. I mean, your worst enemy-- If he's in your house, he's your guest and you treat him with respect, and you take food out of your mouth to give it to him. And my mother was an excellent cook, and whenever new Lebanese would come to town we'd invariably invite them over to our house. And it just burned in my mind as a kid, a youngster, that every time a new Lebanese would come to our house my father and all his friends would say to him: "What business are you in?" And never "What's your profession?" or "What's your trade?" or "Who do you work for--?" "What business are you in?" It was sort of assumed that if you were Lebanese--or Syrian in those days--you would be in business for yourself, whether you had a little candy stand or a shop or are a peddler and so forth. That made a profound impression on me: "What business are you in?" And I'm sure had a lot to do with my entrepreneurship--fulfilling, being able to answer that question: "What business are you in?"

ERANKI:

Could you speak for a moment about these friends of your father that you mentioned? Perhaps, were there any of them that stood out in your mind? Were there any of them with influences for you?

JACOBS:

Oh, yes. They were very influential. My father had very many business friends--people who were also successful in business--and some of them became a lot wealthier than my father in traditional businesses that they were in--linens, Persian carpets, and things of that type. But also he had many intellectual friends. One of our close friends edited a newspaper, and as a matter of fact, wrote books in English. His name was Salim Makarzel. I happen to know his great-grandson quite well. He was quite a famous newspaper editor and writer. Another friend was a poet--[he] sold insurance on the side to live, but he was a poet, and he was a good friend of Kahlil Gibran.

ERANKI:

Oh, so he was a poet in which language? In Arabic?

JACOBS:

His poetry was all in Arabic. Kahlil Gibran wrote poetry both in Arabic and in English. My father was a good friend of his as a matter of fact, so I know lots of stories about him. But primarily our friends were business people, and they usually had their own business. And it was sort of a tradition that if a young Lebanese came along, they would give him a job. It was sort of understood that after five or six years, when he'd gotten a stake together, if he wanted to start his own business, that was okay, and lots of businesses grew out of that. Today, for instance, one of my good friends is Victor Atiyeh--the former governor of Oregon; he was governor of Oregon for two terms--who is the nephew of a good friend of my father's. His uncle, Aziz Atiyeh, was in the oriental rug business. They would import rugs of this type from Persia, and the Atiyeh family was well-known as importers of rugs. As a matter of fact, when I got married, my wife's father bought us an oriental rug from the Atiyeh people. Well, his nephew-- His father, brother of my father's friend in New York, stayed in Portland, Oregon and had a retail store selling Persian rugs. And his son is Victor Atiyeh, who was the governor of Oregon. It shows you how the Lebanese adapted to this country. They did very well. Yeah, but, actually, business and stories about business, stories about salesmanship, stories about chicanery on the part of one or two rascally Lebanese--that everyone would laugh at but sort of deride at the same time--and stories about peddling and taking out cloths and selling at high prices or so on-- The salesmanship and then the devices they used--and also the hardships. I can't even imagine the hardships my father went through, being a peddler. I discovered very much later on-- Well, my sister got them--his citizenship papers-- He came in 1886 and he became a citizen in Denver, Colorado in 1890. How the hell he ever got to Denver, Colorado, I don't know. I mean, you have to travel through Indian territory. I'm sure he went by horseback or something. Railroads didn't get out that far or very few of them did. It was not uncommon for my father to go to the end of the railroad and then get a horse and go out visiting the farmers' wives and trying to sell them goods. He told many, many stories about that.

ERANKI:

Were there any teachers either in school or in college that were particularly influential?

JACOBS:

On me?

ERANKI:

Yeah.

JACOBS:

Oh yes. I tell this story: In the days when I was in grade school we used to have what they call an autograph book. I don't think the young kids do this these days-- But in eighth grade we had this book with a soft cover on it where we would write messages to all of our classmates because we were now going off into high school. And I still have the book--in my dresser right now--that I had in, let's see, about 1929. They had a sort of a printed page of-- "My favorite song is--" "My favorite book is--" And so on. And one of the lines was "What I intend to be." And I put "engineer." Now, I really didn't know what engineering was all about, but one of the subjects that I was good at in grade school-- I was always good in arithmetic. And I knew there was a connection between engineering and arithmetic, so I indicated I wanted to become an engineer. I know the origin of it. It's very interesting because when I wrote my autobiography, a lot of things came back to me, and I remember distinctly that one of my oldest brother's friends was married to a woman who came to visit us. She brought along her sister and her sister's husband. Her sister's husband was an engineer, and he had pictures with him of being in Brazil in puttees and high boots, surveying for a railroad. He regaled us for hours with stories about tramping through the Brazilian jungles and laying out this railroad and so forth. I was, you know, eight or nine years old, and I sat there with my mouth open at the romance of this, and the adventure of engineering. I'm certain that that memory, that session, made an impression on me, and so I wanted to be like that. That was adventurous as far as I was concerned. I was a very, very shy young man--very shy, very withdrawn. I was very bookish; I would read until all hours of the night. I read--just consumed reading. I loved to read, and I was shy and not very social and so on. And I guess that idea of being an adventurous guy out in the world was a vision that I sort of imagined for myself. So I think that's what made me decide to do that. Then, in high school, I took courses in math and did quite well, even though I was working. But I took a course in chemistry. I even remember the chemistry teacher's name; it was Mr. Soroto. I fell in love with chemistry, because he gave me the opportunity to come into his laboratory after hours or at odd hours--when I had study hours--and fiddle with little experiments. Somebody gave me a chemistry set at home, and the idea of turning something from blue to red with chemicals and so forth fascinated me. So I got very interested in chemistry; that was the first influence. Then when I went to Polytechnic-- The first year is just general engineering courses, and there was a kindly old gentleman who ran the chemical engineering department. I got to know him, liked him, and I decided to become a chemical engineer, marrying the engineer with the chemistry interest. There were two teachers that had a profound effect on me in college. The first was Professor [John C.] Olsen--

1.2. TAPE NUMBER: I, SIDE TWO SEPTEMBER 18, 1998

JACOBS:

The first was Professor Olsen, who was head of the Department of Chemical Engineering, and he was about ready to retire. He was a portly old guy--a handsome guy with a mustache and white hair--and he had been, essentially, the founder of the chemical engineering profession. He was what was known as an industrial chemist. He taught industrial chemistry, and that gradually evolved into a separate discipline which was called chemical engineering. He started the American Institute of Chemical Engineers, and for twenty-five years was the secretary and guiding light of it. So he was a very well known man in the field of chemical engineering. While I was at Poly, he retired as head of the department but continued to teach. The man who came in to replace him as head of the department was a man by the name of Donald F. Othmer, and these are the two that had the greatest influence on me. Professor Olsen--I called him Dr. Olsen at the time; never called him by his first name--affected me profoundly, because the first chemical engineering course I took with him, he gave us an assignment or something like that-- I don't know whether I was a sophomore or a junior--I've forgotten when--but the first course I took with him, he asked me a question. And I answered it very confidently, and he said, "Oh well, what about this question?" He asked me another question, and went on, and I would answer each with great confidence. Within about ten minutes of just relentless questioning, he asked me a question, and I suddenly realized that my answer to that question, which had progressed through these other ten, contradicted the first answer that I gave. He had so tied me up, with going from one to the other, that I was trying to reason my way through it, and would give him answers that were dependent on the previous one. And he finally got me to the point where I said something that was just the opposite of my original answer. And I was so embarrassed--I was just flushed, I was so embarrassed--because-- Here was my mother's training; I mean, you didn't want to bring shame on your name or be shown to be a booby or a dummy and so forth, and he had made a fool of me. I got very angry, and I said, "Well, tell me, which answer is right?" You know, "You lead me through all of this, and I contradicted myself; tell me which answer is right!" He said, "You find out," and went on to the next student. It was my first exposure to the Socratic method of teaching--the Socratic method of questioning all the time, questioning, making sure that your facts are right and that they fit together and so forth. I mean, I was angry, but by God, I was going to master this technique of the Socratic method. To this day, I use it to some extent. What I found out-- Subsequently I went to graduate school and I was teaching undergraduate and graduate classes. And I used the Socratic method in a relentless way, and I got more complaints--or my head, of the department, got more complaints--about how cruel I was, and how I badgered people and so forth. I overdid it very badly, but to this day the Socratic method is my primary method of teaching. Just questioning, questioning, and making people come to their own conclusions, by raising questions about their conclusions, to the point where they often change their mind. So there's where I learned the Socratic method, and that's been very valuable to me. It's made a cynic out of me in a sense-- I'm a man of many, many, many ideas. I've learned-- As you know from my sign, Babe Ruth struck out 13,030 times. I've learned that because an idea sounds good doesn't necessarily mean that in practice it will be good, so I'm very suspicious of new ideas. I keep spouting them, but I put them to the test of not only reason but experiment. So the Socratic method has been a very, very important part of my growth.

ERANKI:

How has that influenced your approach to business and entrepreneurship? You just alluded to it, but I was hoping you could elaborate.

JACOBS:

That's absolutely right. I'm sure that that method has helped, number one, avoid my making more mistakes than I would have otherwise because-- My people around here know me very well. So they say, "Joe Jacobs can come up with more ideas in an hour than most people do in a week." But they have learned--and I have taught them--to question those ideas. So I will charge ahead on an idea that I think is good like I'm going to go right over the cliff, but when I come to the end of the cliff, I'm very conservative in carrying that idea out, because I know how many of them are based upon faulty reasoning that I could not discern. So my people that work in this company, and that have worked for me, have learned to question me all the time. So it's worked in reverse. I question them all the time: "Are you sure this conclusion is right? What about this? What about that?" I use the Socratic method, but they also use it on me--in order to identify those of my ideas that are really good, and those that are really not very good, you know. So it's been very important to the success of this business. There's a subtle, tangential value of the Socratic method. Because if you are questioning all of the time, you take nothing as a given, and that leads to one of the real characteristics of our company, and that is a great openness. There is no closed-mindedness in this company. I mean, we argue with each other, we fight, we get into arguments about whether things will work in the way that you want, but we have this openness of questioning each other all the time. And it's never done for downgrading or for denigrating; it's recognized as being helpful. So we'd get into knock-down-drag-out fights with each other--or did--but that was part of our culture. As a consequence-- You cannot eliminate politics, you cannot eliminate people wanting to protect their ass or not admitting that they did things wrong. We probably have less of that in this company than almost any company I know. We're a very open and honest company. You see how that blends together with the Socratic method, the standard of morals that my mother insisted was so important. Absolute honesty. Because after all, the Socratic method exposes dishonesty, it exposes warped thinking. They mesh together very well--the Socratic method. And the willingness to accept--the way I was frustrated with Professor Olsen, because he exposed my ignorance--is part of our culture in this company. And some people can't take it. We've had people of quite, you know, good biography and so forth come to our company who are unable to cope with the honesty and the openness that we have. I mean, we'll disagree with each other strongly, but it won't be in order to expose somebody else's ignorance. It's trying to get at the truth. So therefore, one of the other special characteristics of our culture--and we have-- You know, the company has been in existence for fifty years, and there is a Jacobs Engineering [Group] culture that we all know exists. Noel Watson, bless him, who is our CEO, has articulated this very well. We run Jacobs College, in which we train our young people coming up, and he gives a two-hour lecture on what the culture of this company is--and their openness, their honesty, their willingness to admit when you screwed up, to ask for help, provide help to people and ask for help when you need it and so on-- All those things come out of the Socratic method and the rigid standards of integrity that I was taught as a child, and that the people that have been attracted to this company were taught. I mean, this doesn't come from me totally, but naturally the people that have survived and have built this company are people who have compatible moral values.

ERANKI:

I definitely wanted to explore that more. I was thinking, perhaps, the next time or the time after that. But I just wanted to step back for a minute. I was thinking about-- You said-- One of the questions they say is, "What did you do for fun when you were a young man?" You indicated that you read a lot. Perhaps you could talk about that and maybe other things, when you were in high school and college. I'm stepping back a bit but--

JACOBS:

Yeah, sure. No, that's all right. You know, you get off on a tangent and so forth. Well, believe it or not, because I had this job in Prospect Park on weekends while I was--in the summertime-- I worked there all day long. I put in twelve-hour days, but I worked in a little stand that was near the tennis courts. They had quite a few tennis courts, and I learned to play tennis. One of my brothers was a good football player and so forth, so there was some athletic ability in our family. I'm modestly endowed with athletic ability. These are things that are hereditary. Some people have good hand-eye coordination, other people don't. I'm modestly good at it, I'm no-- But I became very interested in tennis and I actually was on the tennis team and the captain of the tennis team in high school. Those were my best years. I competed in one of the national tournaments as a junior. Now, I was also captain of the tennis team in college, which I didn't have very much time for, but by the time I reached college level I was not good enough to be-- You know, I could compete, but I was not good enough to be in national tournaments. So tennis was about the only athletic by-product. I'm sort of a dilettante. I used to swim and dive and participate in other sports as well, but tennis was my primary sport. The other thing that-- In order to overcome my shyness-- And I was terribly shy when I was young and as I became an adolescent-- Since I wasn't "good-looking," sort of gawky and so on, I was very, very shy. I joined a group called the Public Speaking Society in high school. And there I learned to get up and give speeches. One of the best things I ever did.

ERANKI:

How did it feel the first time?

JACOBS:

Oh, terrible. I mean, I was deathly afraid and so on, but I knew I had a good command of language because I'd been reading so well and so much and so on. But presenting things-- Anyway, that was my first sort of intellectually arrived at methodology of battling out of my shyness. I should mention, because that brings to mind, one other professor at Polytech, whose name--very interesting name--was S. Marion Tucker. He was this courtly southerner, and he was the most fascinating public speaker you ever saw in your life. He would stand up for two hours and just run out these beautifully constructed sentences with emotion and bring tears to your eyes. I worshiped at his feet, because to express myself verbally was very important--again, to get out of my shyness. And when I tell people that I was very shy when I was young, they are hysterical about it because, today, I'm considered quite aggressive, verbally, and so on. I'm a hell of a salesman and an aggressive salesman and so on, but it's all learned technique with me. So S. Marion Tucker was a very powerful influence on me--taught me public speaking. I learned how to tell stories and to be relaxed on a stage. So today I can literally do an ad-lib speech for twenty minutes without much trouble. Very often I prepare something, you know, when it's a more formal speech, but-- It's had another great effect on me, too. I'm going off into sidelines here but-- As you know, I've written two books. People have remarked about this, and I think it's true, that I write very understandable writing because I write like I speak. You know, very many people who write write entirely differently than they speak. They feel as though literature ought to be different, and I don't feel that way. So my writings are almost like my speaking. So it's been a very great asset to me.

ERANKI:

I think I know what you mean from your book, at least the one that I have read.

JACOBS:

Did you find when you read my book that the writing flowed?

ERANKI:

Yes, very conversational and narrative--

JACOBS:

Yeah, conversational. And that's my style.

ERANKI:

And narrative.

JACOBS:

And when I write business letters, they're written as though I were talking to the person, not as though I were writing a letter to him. So it's been a great tool for me, communicating. And now, you know, I'm giving you sort of the punch line, but we will come back to this, and I'll come back to the reasons why I say this now in my reflective years, of eighty-two years old. I had a lot of attributes that helped this business to get established and become what it's become. I was a pretty good engineer--I would say an exceptionally good engineer. I was a good salesman. I was a good money manager. I had an instinctive methodology for handling money, making the right buys in real estate, investments, and so on. A lot of other things. And I've tried to decide which of those were the most important contributions. And what I finally concluded, which we'll come to as we talk more about, is that my primary value in establishing this business has been as a teacher. These people that run this company now, so much better than I can--and that's not false modesty, that's the truth--are my guys. The proudest boast of a teacher is that "My pupils have surpassed me," and they have. They're so good it's scary to me. I made important contributions to the growth of this company. Obviously, I was a risk taker; I got all the other things. But if I were put in now as CEO of this company, I could not run it as well as these guys do. I know it, and as I say, it's not false modesty, it's the truth. There are lots of things that I don't do well that they do much better than I do.

ERANKI:

That's definitely something I'd like to explore more.

JACOBS:

Yes, obviously. That's the summation of a lot of my retrospection and self-musing. You can't get to my age and-- [I] see the wonderful growth of this company and have the fiftieth anniversary of a company that I started as a one-man operation. We're now at $2 billion a year in annual revenue. You can't have been part of that without trying to have a retrospective look at it and say, "What did I do well; what did I do badly?" You know, "Why is it up to this point?"

ERANKI:

Yes, definitely. Next time perhaps we can talk more about the early stages and what you--

JACOBS:

Yes, cases where I could have gone this way instead of that way and so on--and there are many of those. I can recall lots of them.

ERANKI:

Yes, definitely. Thank you, Dr. Jacobs.

JACOBS:

Not at all.

1.3. TAPE NUMBER: II, SIDE ONE SEPTEMBER 23, 1998

ERANKI:

I reviewed the tape and I found it really fascinating, especially your descriptions of the scene with all your father's friends and also your early work experience in your junior high school and high school. One thing I was wondering is, do you remember the names of the junior high and high schools?

JACOBS:

No, we had numbers. I remember the high school. The grade schools in Brooklyn were by numbers, and I remember they were usually a PS, meaning "public school." [PS] 154 is where I went.

ERANKI:

That was grade school?

JACOBS:

Yeah, up to eighth grade. Then I went to Brooklyn Technical High School. That was quite an innovation in those days--to have a high school that had an unusual curriculum that was high in mathematics and manual skills and things of that type. It was called Brooklyn Technical High School--the first technical high school, I think, ever established in New York City at least and probably anywhere.

ERANKI:

That's interesting. Then, of course, after that you went to Polytechnic [Institute of New York].

JACOBS:

Right.

ERANKI:

The building there is actually named after you, isn't it [Joseph H. and Violet J. Jacobs College of Engineering and Science]?

JACOBS:

At Polytechnic? Yeah, one of the buildings. That's right.

ERANKI:

After finishing college, you went to grad school. Perhaps we could start talking today about grad school--

JACOBS:

Well, I think I discussed the last time the fact that I was working such heavy hours that I really spent very little time studying. I learned to absorb knowledge by hearing it rather than reading it, even though I am an omnivorous reader. You know, people learn in three ways: either by hearing things, by writing things down, or by reading them. Those are the three methods by which we remember things and each of us has a predilection towards one or the other. I was an omnivorous reader when I was a youngster. That was a fantasyland for me and I read all kinds of books and so forth; I was reading all the time. I remember being scolded by my mother for not putting out the light and going to sleep. I would--a lot of kids do this--read under the covers with a flashlight.

ERANKI:

I did that.

JACOBS:

All of us did. But because of the heavy workload I had in college, I developed my ability to learn by listening. And whatever grades I got were those of what I was able to learn by listening to lectures rather than studying. As a consequence of the long hours I spent working, my undergraduate grades were just modest. But in 1937, when I graduated, I was very anxious to get out into the industry and work for a living. But only one fellow from our chemical engineering class, which was pretty small--I think there were about ten of us--was offered a job. The rest of us could not find jobs. I searched and searched and searched, and I was offered a job as an analytical chemist for $12 a week, and--I think I said this before--I could make more than that being a soda jerk or a cook. Then the head of the department-- Donald [F.] Othmer--I may have used this name before--who became a lifelong friend, was the new head of the department about this time. He offered me a graduate fellowship, as it was called, with a stipend of $300 a year and free tuition on the courses I took. Well, obviously, even though I was living at home I couldn't live on $300 a year. But it induced me to stay. What he offered me, in addition, was the opportunity to teach undergraduate classes in the night school. At that time Polytechnic had a larger night school than it had a day school because it's in metropolitan New York. And in those days if a guy had a job he wasn't going to quit the job to go to school, so he'd come and take two or three or four courses at night. I taught elementary courses in thermodynamics and other subjects. I, obviously, taught the laboratory classes in chemical engineering and so on-- In addition to that there was a government program called-- I'm trying to remember the initials-- I think of NRA and it wasn't-- It was some initial program like that, where the school could hire graduate students or students at fifty cents an hour to do work. It was government sponsored. So I had income from the $300 a month, plus the nighttime teaching, plus working weekends in a soda fountain or in my restaurant type of things. And then in the summer, of course, I had a full-time job again in the restaurant or allied businesses. Living at home I was able to make ends meet. A metamorphosis took place: number one, I learned to teach, and I found I loved it, but I also discovered that teaching courses is probably the best educational program you can have. You really learn your subject matter when you try to teach it.

ERANKI:

That's true.

JACOBS:

Not only because you must explain it to people, and therefore understand it, but also because of the questions that come back and so on. Did I mention my experience with Professor Olson with the Socratic method?

ERANKI:

Yes, you did.

JACOBS:

This is where I took up the Socratic method in teaching and heard complaints to the head of the department that I was too tough a teacher.

ERANKI:

You mentioned that, yes.

JACOBS:

But I also discovered something else: I just loved teaching. You can understand it; every professor knows this. The possibility of shaping minds and having younger people asking you questions and the feeling [that] you're teaching them-- But teaching in the night school, I was often teaching people who were a lot older than I was, and having them pay deference to me and asking me questions was a great ego booster. I had a rather fragile ego with a very retiring, shy personality, and it brought me out of my shell because I would get positive feedback from people, and therefore I loved teaching. It was wonderful to be able to impress people with your knowledge. When I used the Socratic method, it was especially rewarding to be able to tie students up in knots. It was obviously an overreaction for me-- As bad as I say-- I loved teaching. I did that for a couple of years, and Dr. Othmer, who was the head of the department, became my mentor. In addition to the other sources of income, Dr. Othmer did an enormous amount of consulting work. He got a little annoyed with me in the book-- I repeated the speculation that he didn't really want to be a professor, but he wanted a free office and the reputation of one so he could be a consultant. He had an enormous number of consulting clients, and he would pay me very small wages--fifty cents to a dollar an hour--to work on projects that he was getting paid ten times that. But I got wonderful experience with this independent research work, where he was serving a real industrial client. And I got a wonderful bird's-eye view of what the real world of chemical engineering was, compared to the academic work.

ERANKI:

What were these projects like?

JACOBS:

Oh, well, one of his specialties was the production of acetic acid by the distillation of wood. It's a very old process and no longer in use, but there was a traditional process--they call it wood distillation-- where they would cut hardwood and put them in these big reactors, and heat them without the presence of oxygen. In other words, they didn't burn the wood--they would heat them and drive off the oils and the materials in there. The products that came off in the vapor were methanol--or methyl alcohol--and acetic acid. He developed processes for the companies that did this to recover the acetic acid and methanol cheaply and economically. And I did a lot of experiments on the ideas that he had. That was one field that he was in, but he was in plastics and all kinds of different things. I don't remember them all, but I remember a succession of them. I learned a lot. By the way, even though I was being relatively underpaid by a substantial amount, I never really resented it. I just felt I was learning so much that I was quite willing to be taken advantage of, if you want to put it that way. And I acknowledge that in the book, because I learned a lot. He was a very, very interesting man and a big, gawky midwesterner. You might almost say like a farm boy, but with an intense ambition: smart, but a workaholic of the worst order. I mean, he lived within walking distance of the college, and he was in his office every morning at seven thirty or eight o'clock, and worked till eight or ten o'clock at night, every day, seven days a week. He had no children. Sure, he neglected his wife, but he was just a workaholic--published papers and-- It almost got to be a scandal in the journals, that he published so many papers, always with sub-authors, such as me. I coauthored maybe thirty different papers with him, work that I did in the lab, and he would make a paper out of it. A lot of the people in chemical engineering would deride him for writing papers of no consequence. It was purely jealousy; he was a good chemical engineer. Sometimes there were trivial subjects, but most had a lot of substance to them. But he was resented by other chemical engineers as a factory for papers, more of a consultant than a teacher or an academic--all of which are true, but nevertheless I admired him tremendously. And I was associated with him for many years thereafter because-- At the end of getting my master's degree, I was finally offered a job.

ERANKI:

So you mean while you were pursuing your master's degree?

JACOBS:

Yes. The fellowship was for the pursuit of the master's degree. So I got my master's degree in '39, which was two years to get a master's. In those days at Polytechnic we had to do a thesis, both in the bachelor's degree, in the master's, and also in the doctorate--unusual [at] the bachelor's and master's levels. I'm trying to remember what my bachelor's thesis was about-- Yeah, I know, both my bachelor's and master's theses were on the reaction of sawdust with caustic soda--the common name is lye. It would produce, upon heating, oxalic acid--which was a chemical of some use. And I helped design a continuous retort to put these chemicals in there and rotate them and heat them from the outside to produce this reaction. So that was my bachelor's degree. Now, that was an interest that he had through one of the wood companies that he-- He was getting consulting fees for that. My master's thesis was on a novel method of producing solid caustic soda--sodium hydroxide. This was a result of a consulting assignment he had from a small start-up laboratory that had an Indian as the chief scientist. His name was Dr. Kokatnur. Don Othmer had a consulting assignment to investigate this process that Dr. Kokatnur had done in the laboratory. So I was given that as a master's thesis project, and I built a large piece of equipment to do this commercially. It involved the use of kerosene to help drive off the water from the caustic soda. This was built in the chemical engineering laboratory. Again, the result of his consulting assignment, and I published a paper on it, and so on--wrote a thesis. There was an incident that occurred and that is-- This was a very dangerous process--which I didn't realize-- because you were volatilizing kerosene. One night I was working there at about eleven o'clock at night, by myself, and Don Othmer came by and just then the whole thing went up in flames. We had a very dangerous situation on our hands, and he and I just ran around and found every fire extinguisher we could, and we finally put the fire out. But it could have been a very devastating fire, but anyway-- As a result of that work I was offered a job by this little company called Autoxygen headed by this Dr. Kokatnur. It was a small lab, and Dr. Kokatnur was a Ph.D. from Cornell [University] in chemistry. He also had a tremendous influence on me--both positive and negative. He was the ultimate idea man. He would sit and read through all of the chemical engineering and chemical journals. And then, as he read things, he would conjure up a new process. [The] most prolific thinker that I ever saw in my life. I don't think he ever ran a laboratory experiment--he didn't have any dexterity at all. But he could sit and visualize: "Well, I found this fact here and this fact there. Can I put them all together and have a process that will do this?" In his mind he developed literally thousands of processes. He had a partner, who was essentially a salesman, and they had this small start-up business. But remember, this was during the Depression, '39. It was just before the war started. I was brought in. He had a chemist working in the lab that would do these things in glass and I was brought in to look at these processes and decide how you would do them commercially. I learned to be very discriminating about ideas. Now, I happened to be a very inventive mind myself, and it's one of my great strengths and one of my weaknesses--and that is, I can spew out ideas. The people around me in this company are constantly amazed how many ideas I have of new ways of doing things--sort of part of my personality. But I learned the need for self-discipline and self-criticism by watching Dr. Kokatnur. Every idea he had was a wonderful idea in his opinion. But they weren't-- Many of them were flawed and so on. I learned to discriminate and criticize these ideas and to find the flaws in them. On the other hand, I found out that sometimes what you figured out logically wasn't necessarily right, and that for some intuitive reason, he was right. But most of the time his ideas were not very good. But he had enough of them so that when he came up with good ideas, they were wonderful ideas. I learned a lot working for this little company. Just to compress it, I worked for them for about two years. During that time, from '39 to '41 I was--

ERANKI:

You were still at the university then?

JACOBS:

I was teaching at night and taking classes as well. So I had a full-time job and I was taking additional classes, with the idea that eventually I'd earn a doctor's degree. Because now I had gotten bitten by the bug of teaching, and the job with Autoxygen was very tenuous. They lived from hand to mouth and there were weeks when I didn't get my salary. That'll compress, as I say that-- But there were a lot of things I learned. The business partner of Dr. Kokatnur was a superb salesman. Tall Englishman with a very gracious manner, walked with a cane and wore a homburg hat. We would always peddle Dr. Kokatnur as that funny little man with all these brilliant ideas, that was, you know, one of the world's smartest people. He would go to companies that might show some interest in this and get option money, make agreements with them, and go through long procedures of what kind of royalties and so forth. And these ideas were just sort of very rudimentary ideas, but he was a good enough salesman to get these companies to put up money to sponsor the research work. And we would do the research work. As far as I know, there, I don't think any of the processes ever got to the point of development that produced any real royalties. As a matter of fact they began skipping paychecks and so forth, and he would go out and scramble and find people. That went on for two years. So I learned there the necessity for being discriminating about ideas. I used the Socratic method to question the ideas. I taught school at night, took classes, polished my presentation skills, watched Mr. [Cyril] Asmus in selling the ideas of Dr. Kokatnur--who was portrayed as this funny little man who had this brilliant mind. [I] watched Dr. Othmer sell ideas similarly. Othmer, on the other hand, was meticulous about denying the process-- He would not deny; he would never make any unfounded claims--but would always present it in very optimistic terms and say, "If this works, then this would happen," and so on. So he would construct you a picture--and Othmer was a real master at this in his consulting work--and say, "Well, let's investigate it. Here's the reasons why." And Asmus had that same quality without being a technical man, whereas Othmer was. But I could see that this was probably not going to be a good long-range business. Meanwhile, I was teaching school and also taking courses, and Don Othmer came and said, "Well, I have just been retained to be a consultant by a company called the American Lecithin Company." This was a company that sold a soybean product called lecithin. It's a natural phosphatide that's extracted from soybeans and was used commercially in chocolates and in margarine, because it was a natural emulsifying agent and would prevent the butter or margarine from spattering. And also with chocolate it would prevent the separation of the fat from the chocolate--where chocolate would turn white in heat. It was sold in fairly large quantities. The guy who ran that company was getting orders for substantial amounts of this from one of the oil companies--I've forgotten which one. He discovered that they were testing it as an antioxidant in lubricating oils. He didn't know anything about that chemistry, but became very interested in saying, "Is this really a commercial product?" It would sell a lot of-- If it was an additive to lubricating oils to prevent the breakdown-- He had come to Dr. Othmer and said, "Can you investigate this?" So Othmer came to me and said, "Joe, do you want to work on this in the nighttime, when you're not teaching, when you're not taking classes?" I said, "Sure, I'll work on it." So I started to work on it. I said to Don Othmer, "You know, in order to really test this thing, there's a lot of work that needs to be done." He said, "Well, why don't you go and talk to"--whatever his name was--he was the president of the American Lecithin Company-- And I went and talked to him, and it was the first technical sort of sales presentation I've made in my life. I talked to him at quite some length, found out what his interest was and what the potential was, and I said: "Well, I think this needs real, in-depth research, and I'd like to do that for you with Dr. Othmer's help. I'm thinking about going back to school and getting a doctor's degree." This was in '41.

ERANKI:

Where were you planning to get your doctorate degree?

JACOBS:

At Poly.

ERANKI:

Okay.

JACOBS:

I was taking my courses and-- As a matter of fact, to show you how intensely I worked-- In those two years I'd taken all of the pre-doctoral courses, and all I needed to do was a thesis, essentially.

ERANKI:

That's amazing.

JACOBS:

So I talked this guy into sponsoring my thesis work. I convinced him to put up $2,000 of scholarship money, which was by far the largest grant ever made for a doctoral thesis at that time-- Don't forget this is in '41. He agreed to put it up for me to build an experimental system to test this out. I remember going back to Dr. Othmer, proud as could be, because I had negotiated this contract to get my doctoral work sponsored-- So that I could quit my job at Autoxygen and come back to Poly, still teach at night and do my doctoral thesis and get paid for it. Two thousand dollars a year was big. He said, "Oh, that's great, Joe. Now I really got to go talk to this guy, because as your thesis adviser I ought to get paid x dollars a month." I remember getting very angry, and I said, "Don, if you screw this up, I'll never talk to you again." It was obvious that he was amazed that I had been able to convince this guy to put up that much money for the doctor's degree. He said, "Don't worry about it. Don't worry about it." I said, "I swear, if you get too greedy, I'll never talk to you again," or something like that. Well, you know, I had no-- But it was just an angry reaction. Well, sure enough, he negotiated a very nice consulting arrangement with that company to be my doctoral sponsor and so on. So I quit my job and went back to Poly full-time, and I did my doctoral thesis in one year. So actually, from my bachelor's degree to my doctor's degree was only five years, which is a pretty short time, considering I spent '37 to '42--

ERANKI:

That's an incredibly short amount of time even for today's standards. Without working a job--

JACOBS:

I was teaching and everything else. But I was a workaholic--not as bad as Othmer but, you know, he was there every weekend and so was I.

ERANKI:

So how long had you worked at Autoxygen then?

JACOBS:

Two years.

ERANKI:

What was your position or title there?

JACOBS:

Oh, I don't remember. I was the only chemical engineer there. There was a chemist. It was a very small laboratory: there were two chemists and me, plus Dr. Kokatnur and this fellow, Asmus.

ERANKI:

One thing that I was wondering about when you were talking was what were your experiences at Autoxygen in terms of entrepreneurial decision making?

JACOBS:

Oh, yes. A lot, a lot. First of all, I found that words were very important. Presentation was very important. Spinning optimistic projections without lying and putting enough qualifying words in there. To say, "You know, I don't know whether this will happen, but it is possible that such and such would happen." So I learned to phrase optimistic appraisals in-- But this happened both with Othmer and Asmus, the guy at Autoxygen. I'd learned how to present a project in terms of what it might do--without making any guarantees or anything. Always saying: "I don't know whether this will work or not, but if it does, this and this will happen. But it may not work." I learned that very well. I learned the importance of verbal presentations. I learned the importance of discrimination, in having to screen Kokatnur's ideas. And this is sort of mixed between Autoxygen and Don Othmer. Remember, I was interacting with him all the time, doing extra work on his projects and teaching school there at night. By this time I'm teaching not only undergraduate but graduate courses as well. I became sort of a part of the faculty-- I was around there so long. Anyway, by example, or by instinct--either one--I became a very hardworking guy. I put in lots of hours. I had to. You know, it was no special virtue, but in order to live, there was-- Now I look back and I keep saying, "I worked my way through school." In credit to my mother and my sisters, if I wasn't living at home, I don't think I could have made enough to--even working full-time-- And go to school and then pay room and board and so on-- Although I did give my mother all the money I earned--because she ran that house like a commune-- I mean, everybody chipped in their money and she doled it out for whatever she decided was necessary. There have been lots of things that have come out of that experience-- The teaching experience was outstanding. So I quit the job at Autoxygen and I went back to school full-time, working on my doctor's degree.

ERANKI:

One thing I was also thinking about--and this is something I think about when I think of start-ups--is the level of stress. I mean in a start-up like that, when you know they're not able to make payroll, when you can see-- You're seeing that, well, it might not make it. You said at one point you decided it's not worth it. Was the level of stress there different from what it was at school?

JACOBS:

You know, I find it hard to separate that out.

ERANKI:

Not to you personally-- But the atmosphere of the company.

JACOBS:

Oh, of course. You know, Asmus would come back from a presentation and say, "Well, I asked this guy for $35,000. I sure hope we can do it." I'd see him and then he'd say, "Well, we've got it" and then he'd start writing checks for payroll. And as I said, sometimes he would come to me and say, "Joe, I can't pay you this week. I'm waiting for this thing to come through." And we were always waiting for something. I was paid most of the time, but towards the end it was getting more difficult, and I had also become a little wiser about evaluating Dr. Kokatnur's real worth. He was a lovable guy and very nice, and, as I say, he spewed out these ideas-- And they were good ideas and novel ideas, but they were not spectacular. I mean they were synthesized--there wasn't any spectacular breakthrough of a completely novel idea. They were just a combination--using a combination of things that he'd read in the literature in a novel way.

1.4. TAPE NUMBER: II, SIDE TWO SEPTEMBER 23, 1998

ERANKI:

You went back and you got your doctoral--

JACOBS:

I designed and built this myself. So I found that I had some creative abilities myself, constantly being reinforced. I constructed a pilot plant to test the oxidation resistance of adding lecithin to lubricating oil, which consisted of a bunch of cylinders in which I would put lubricating oil and heat it to very high temperatures, as it would be in an engine. And I would bubble air through it and then measure the amount of oxidation with varying quantities of lecithin. Indeed, we found that it did prevent oxidation of the oil. Jumping fast-forward, for a few years, American Lecithin did sell some lecithin, and it was added to lubricating oils by one of the big oil companies. But very quickly, synthetic additives came in that were much better. So that never became a big market. But my doctoral thesis was on the antioxidant properties of lecithin and lubricating oils. So I presumably became an expert in petroleum, but never worked in the petroleum industry.

ERANKI:

So what happened, then, after you finished your doctoral thesis?

JACOBS:

I was interviewed by a number of people, and I was offered a job by Merck and Company--the pharmaceutical company in Rallway, New Jersey. There's an amusing incident about my doctor's degree. I had gone long and taken all of the required courses, but while I was doing my thesis I discovered that it was a requirement of a doctor's degree in those days that you have a reading and writing knowledge of two foreign languages.

ERANKI:

That's true.

JACOBS:

Is it still true?

ERANKI:

It's still true in a lot of a places.

JACOBS:

Yeah, and I was appalled. I had taken a couple of years of German in high school--never studied French or German otherwise-- And I was going with my now wife [Violet Jabara], at the time. We had met when she had come back from a visit to Beirut, and we knew the family--she's Lebanese as well. She was a language major at Wellesley [College] and has had--and still has--great facility in languages. So I asked her to teach me enough French and German in a very short time. I crammed French in two weeks and German in another couple of weeks, which she taught me. But [by] this time I was part of the faculty and so on, so my language advisers really took it easy on me. They asked me to translate articles in French and in German that were in my field of study--in oxidation of petroleum and so forth--so I could guess a lot of the words, and I passed it. It's a running joke between my wife and me that she taught me enough French and German in two weeks each to pass me through. And the other thing, by the way, was that--we still talk about it--I was still operating close to the vest. And she was the typist, because, you know, women in those days--even though she was a college graduate--were taught to type, because a secretary's job was about the only thing that was available. So she actually typed my thesis, which was 180 pages--and this was before Xerox or anything. This is when you had carbon paper in between eight copies, and if you made a mistake you had to erase eight copies-- She still talks about it, and I tell everybody jokingly that I had to marry her because she typed my thesis and I couldn't pay her. And she taught me enough French and German. We've now been married fifty-six years.

ERANKI:

That's amazing. That's great.

JACOBS:

Yeah. She was wonderful.

ERANKI:

When did you get married?

JACOBS:

Well, that's very interesting. I was offered this job at Merck and Company at $225 a month--which was a good salary in those days--in June of '42. So I had a job, so I asked her to marry me. I had $800--that was my total assets that I had, in cash. I spent $300 for a ring. I got my doctor's degree on June 10, 1942. My twenty-sixth birthday was June 13, and we were married on June 14. So everything happened in four days.

ERANKI:

That was an eventful week.

JACOBS:

Yeah, it was indeed. [We married] at her home. I went to work for Merck.

ERANKI:

Where was the location?

JACOBS:

In Rallway, New Jersey. My family and her family both lived in Brooklyn, and we decided to live in Brooklyn Heights, which is just across the river from Manhattan. The commute was about an hour a day on the combination of subway, ferry, railroad to Rallway, New Jersey--where I was offered a job as principal chemical engineer in the pilot plant division of Merck and Company. Interestingly enough, our company today is doing hundreds of--millions of--dollars' worth of work for Merck and Company.

ERANKI:

That's interesting.

JACOBS:

Yeah.

ERANKI:

You had worked with this small company--I mean a start-up--and then here you are looking at this big company. What were your feelings at that time?

JACOBS:

Well, very interesting. First of all, I was impressed, because Merck had a wonderful operation there that was very campus-like--in Rallway, New Jersey. They had lawns and so on. One of the first companies built campus-like. But it was also interesting to watch the jockeying that went on and the political subtleties existing in a very big company. But it was an exciting time because it was during the war now--World War II. Somewhere in there I either volunteered or my draft number came up, but anyway-- I had an essential job and could have asked for an exemption--which I didn't do--but I went to be examined physically. My eyes were so bad--I had very bad myopia--that I was rejected for that, plus the fact that-- I found that I had what they call scoliosis; I had curvature of the spine. But it was primarily on the eyesight. And since they knew I had an essential job, they declared me 4F, so I never served in the war. But the war was on, and it was very exciting times in a company like that. I worked on a couple of very exciting projects. Now this gets very involved. I don't know how much time we want to spend, because some of the things I did were almost historic. I think I'd rather backtrack and talk about some little personal problems that arose.

ERANKI:

Okay. We can revisit this if you want--if we have time later.

JACOBS:

Yeah, I think now I'd like to describe a couple of things. First of all, my father's religion was Maronite, and the Maronites are a division of the Roman Catholic Church. As a youngster I went to the local Roman Catholic church, and occasionally would go to the Maronite church, which was in downtown Brooklyn. Now, that was my father's religion. My mother's religion was Orthodox, which is the Eastern rite Christian religion. But we were all raised as Catholics, because there's a tradition in the Lebanese culture that the wife always takes the religion of the husband. That's sort of a false, patriarchal system. Actually, the women in the Lebanese culture are very, very dominant. I mean, very strong, while looking retiring. Anyway, my mother was a very strong woman and, as I indicated before, illiterate. Never could read or write any language--not Arabic, not English or anything. She came over at nine years old and had never gone to school--but she was a very strong-willed woman. My wife Vi came from a Lebanese family that were Eastern rite Orthodox. And my mother said, "Of course you're going to get married in the Catholic Church," and I said that to Vi and she said, "I don't want to become a Catholic." That became a real point of contention with my mother. She went through histrionics and cried and said 'ayb many times. "It will not look good in the community" and so on. So Vi and I came to a compromise because I didn't want to force her. By that time, I had lost any interest in religion. After my confirmation at thirteen or fourteen I never really went to church except occasionally. My mother was only interested-- It wasn't a question of Catholicism versus Eastern rite or anything--It was, "What was the proper thing to do?" So histrionics and so forth-- And poor Vi was in the middle, but she has enough character to say, "Look, let's do something, but I don't want to become a Catholic. I've been raised as an Eastern Orthodox--" But actually she went to Protestant churches most of the time. Her family was more liberal about it. So finally-- There was a very kindly minister that was a friend of the family's in the Maronite Church. He agreed to marry us without her converting. He tried to convert her, and she refused, but he agreed to marry us--but not in the church. We were married in Vi's home.

ERANKI:

What's her name?

JACOBS:

Her maiden name was [Violet] Jabara, and her father was fairly well-to-do, in relative terms. He had a big house. So we had the wedding at her house, and Father Stephen--as we called him; [he] became Monsignor Stephen--came and married us there. The liturgy of the Maronite Church is very elaborate. They use incense and they put crowns on your head and cross the crowns and so forth. It's a very, very interesting ceremony.

ERANKI:

I know. We have Syrian Christians in India, too.

JACOBS:

You do?

ERANKI:

Yes. So they have incense in the southwest.

JACOBS:

Yeah, in the southwest. That's right. They're Eastern rite Christians, yeah. Anyway, it's sort of very ceremonious-- And we were married. My mother was persistent about it, and so our oldest daughter was actually baptized as a Catholic--never practiced it. And thereafter my mother had died, so it was not necessary to have any fiction and I didn't-- You know, I was essentially nonreligious. But I thought that's a very interesting incident that took place. The fact that we were married by a Maronite priest satisfied my mother. So then we had a little apartment in Brooklyn Heights--a walk-up, four stories up--and we started to keep house. I continued teaching at Poly--because I loved it so much-- after I got my doctor's degree. So I've had regular classes there three or four nights a week in addition to my job at Merck. And while at Merck, I got involved in many interesting projects, and two of them are historically important. The first one, let's see-- I don't know whether I have them in order, but I'll mention three projects that I've worked on. One was-- I was called in to meet a Dr. [Howard Walter] Florey and a Dr. [Ernst Boris] Chain from England and I had to sign a secrecy agreement. I was told by the director of research, for whom I worked-- I worked for the director of research [for Merck], Dr. [Randolph] Majors. The pilot plant division was run by chemical engineers, but we worked for Dr. Majors. And Dr. Majors introduced me to these two Brits and he said, "We've been asked by the Army Medical Corps-- These gentlemen have come over here and they have discovered an agent that is produced microbiologically by the fermentation method from a fungus. We called it Penicillium notatum. For short we call it penicillin. We have been growing this in one-liter flasks in the bottom of the research building. Joe, it's off ground [off limits], but you can go down and look at it now. But the government has asked us to build a large plant to produce this in quantity, because there are indications that it will kill bacteria, and it's very important for the army." So I was given the assignment of designing what turned out to be the first production plant for penicillin ever built in the world.

ERANKI:

That's amazing.

JACOBS:

They were doing it in one-liter flasks. So I took a five-liter reactor--glass-lined--and I tried to simulate what they did. This was an aerobic mold-- Namely, you had to bubble oxygen or air through it in order to get it to grow--this Penicillium notatum. So I did that in a five-gallon, glass-lined vessel first, and I found out that I had to sterilize the air because if I didn't it would contaminate-- I learned a lot of things. The seals on the vessel had to be drowned in disinfectants and so on. And I gradually went to five- to fifty- to five-hundred gallon, and then I built a ten-thousand-gallon reactor-- The first large reactor that was ever built which had an agitator, which mixed the stuff up, and a sparger--as it's called--blowing sterile air through it. Then I had to devise a process for refining this, filtering out what they called--this is a technical term--the mycelium, which was just the growth of the mold. [It] had to be filtered out and then the liquid had to be evaporated. But what we found in doing this is that the heat degraded the active ingredient in there. So we could only evaporate it a certain way to a certain level, and we had to do it under vacuum so that the boiling temperature of the water was not that high. And then, when we had the concentrated broth--as it was called--what they did in the laboratory was put it in dry ice and freeze it. I helped the manufacturer develop freeze drying as a method of doing it commercially, and I worked with a manufacturer of equipment. They developed the equipment to put this concentrated liquid in there, freeze it, and then keep it under vacuum for a long time, and essentially evaporate the water at freezing temperatures. It was called "freeze-drying," and it became an article of commerce later on. They do it with coffee and lots of other things. And I produced the first granular penicillin by this method in commercial quantity. I had the chance to meet Florey and Chain--who ultimately got the Nobel Prize for this, along with [Alexander] Fleming, who had first noticed this. So it was a historic meeting and very, very interesting. Then-- I'll tell you this story and then we'll have to quit. A little more than a year after I married--actually in April of 1943, in less than a year--I came down with a terrible fever. My brother--next oldest to me--was a physician, a surgeon, and he was in the army at the time. I had a local doctor, and I ran this very high fever. The antibiotic of choice in those days--which had just recently been developed--were called sulfa drugs. [He] tried them on me. That didn't work, and I said to him one time when I was getting discouraged-- I said--I've forgotten the doctor's name--"Did you ever hear of penicillin?" And he said, "No, I never heard of it." He said, "I'll go look it up in the library." And there was nothing. It was dead secret. So the family was getting desperate, so I asked Vi to get in touch with my boss at Merck--the guy I was working for--and she did. She was getting desperate at this point because my temperature was running very high. He arranged for the consultant to Merck on the use of penicillin--his name was Dr. D. W. Richards--and he asked me to be moved up to the Columbia University hospital, where he taught. It turned out that he was in charge of the experimental use of penicillin and in charge of the government allocation committee. By this time my fever was raging and-- I've forgotten this--[for] a couple of weeks-- My temperature spiked, while I was at the hospital, at 106.8, for just a short while. They were bathing me in cold towels and so forth to keep my temperature down. My brother was convinced I was going to die. He came out of my room at the hospital crying, and my wife--bless her--said, "He's not going to die," you know, a lot of determination. And D. W. Richards, who had taken over, for some reason--and I'll never fathom--said, "This guy is worth saving, and I'm going to give him penicillin even though I'm not supposed to--it's all for the army." And he injected me with penicillin--this story's in the book--fifty thousand units, which today is way too little, but in those days the bugs were not resistant to it. Fifty thousand units, four times a day. Within four days my temperature was down to normal. So it was a miracle cure. They never did find out what the bug was that was causing the septicemia. So that's a dramatic story. I think I better quit soon--I'll just tell one more.

ERANKI:

Okay.

JACOBS:

One of the other projects that I had--also a secret project-- I was brought in to Dr. Major's assistant-- He said, "There's a reference in the journals to the manufacturer of a chemical back in 1865, and I'd like you to repeat that experiment. The government has asked us to make this chemical. Repeat that experiment and try to discover how you would make it in large quantities." The chemical was dichloro-diphenyl-trichloro-ethane. I'd have to look it up. We got tired of using that and I coined the name DDT. And I made some in the laboratory and then made it in a small vessel and so on. Finally the order came down, "The army would like you to make five hundred pounds of this." And I worked forty-eight hours around the clock producing this DDT. It was a fairly complicated process--I won't get into the chemistry of it. During the manufacture of this, I had the DDT dissolved in a solvent, and it was in a big five-hundred-gallon vessel, and the valve broke and spilled all over me. I had a two-inch-thick coating of DDT all over me, and it was hot and so on-- I jumped out of the way and closed the emergency valve, and I took off my clothes and went into a shower and washed out my hair--I'm sure I inhaled a lot of it--put another jumpsuit on and went back. And I worked forty-eight hours around the clock, without sleeping--I took a nap upstairs--and produced this five hundred pounds of DDT. We put it in drums and gave it to the Army Medical Corps--still not knowing what it was for-- And a month later or four weeks, three weeks later--I've forgotten--we got a telegram addressed to the director of research saying, "Would you thank all of the people who produced this five hundred pounds of DDT? We flew it to Italy, where a typhus epidemic was roaring in our soldiers, and we used it to dust their uniforms to kill the body lice that carried typhus. And we estimated we saved five thousand lives by the timely use of this DDT." So I'm the guy that--

ERANKI:

That's amazing.

JACOBS:

So when I read Rachel Carson's very flawed book I was pretty angry about her condemnation of DDT. It wasn't justified at all.

ERANKI:

Which book was this?

JACOBS:

It was called Silent Spring. That was the start of the environmental movement. She romanticized and stated that DDT was destroying beneficial insects and was carcinogenic and so on--none of which is true. As a matter of fact, the UN [United Nations] World Health Organization said that probably a million lives had been saved by the use of DDT, because it was found that it was deadly to the anopheles mosquito, which carries malaria. For eight or nine years it was sprayed on all swampy land and killed off the carrier of malaria--I have some statistics in the book. But it was a perfect example-- That DDT is considered a very dangerous material--sort of part of the folklore-- It's not. None of the soldiers that had it dusted on their uniforms all day long ever developed cancer. No human beings that I know of have ever had cancer from DDT--and it was taken off the market. I think that's enough for now.

ERANKI:

Okay.

JACOBS:

Is that all right?

ERANKI:

Yeah, definitely.

1.5. TAPE NUMBER: III, SIDE ONE SEPTEMBER 30, 1998

ERANKI:

We left off last time at the point where you were telling me about your experiences at Merck [and Company]. And I'd like to explore that, talk a little bit about that. But I also wanted to speak to you about your early days, when you first started out and where you went from Merck, and then maybe your early days at Jacobs [Engineering Group], that whole process.

JACOBS:

Yes. You want me to pick up from there?

ERANKI:

Yeah. I think we spoke about your experiences there with penicillin and DDT and so on.

JACOBS:

Did we speak of the evidences of an ambition that I had at that time? I was a new employee there for two years, or two and a half years, and I went to see the director of research, told him I was very unhappy with my progress with the company, and he looked at me in amazement. He said, "Well, what do you mean by that? You want to become a vice president?" And I said, "Well, if I am capable of it, yes!" Which was sort of brash and uncalled for. But, nevertheless, it was a kind of thing that was eating at me: to advance very rapidly and to be accepted as worthwhile. So that's part of my inner drive or inner nature that was shown up in that.

ERANKI:

Was it the fact that you felt that you could do better than your peers?

JACOBS:

Yeah. Well, it was the fact that I had a desire to advance very rapidly. I was ambitious and that turned a little bit into a frustration. Here I am at a big company and I am doing well and everybody is liking what I do and so on. Well, then why can't I advance quickly? Well, the answer, which was much more mature than my viewpoint, from the director of research said, "You know, you're a great guy. We value you and so forth, but there's a certain rate at which we can go and you're asking to go at a rate that is not practical." And it was said very affectionately, but it's sort of as a manifestation of the kind of a drive that I had. What its source was or anything, I don't know. It may have been insecurity, may have been not being very certain that I was as good as I had hoped and wanted demonstrations. I won't try to psychoanalyze it, but that's the way it manifested itself. And after I had this near-death experience, which I think I've described already that was cured by penicillin, I got a much more carefree or-- Yeah, I guess that's the word, carefree attitude or a willingness to take risk, more so than ordinary, because I had almost died and so I was undaunted by fears that other people might have.

ERANKI:

That's interesting because that's-- I mean, I'd imagine that some people would possibly react to that in a sense of, you know, sort of being more--

JACOBS:

Exactly--turn into an invalid-- The opposite, yes. And I'll describe that later on when I tell you about having a heart attack. And I'll describe that kind of reaction. And I remember telling my boss that I now had less fears about failing or so forth and he sort of laughed at me and said, "Well, you know, you just got over a very serious illness. That will last a while, but then it will go away."

ERANKI:

What was your boss's name?

JACOBS:

His name was Dr. Stevens, a very interesting guy. As a matter of fact, now that we talk about it, I don't know whether I brought this up before--this may be repetitious--but I was doing an experiment in the lab and he came by and he said, "Why don't you try this?" And I spent a half an hour convincing him that that wouldn't work, because I had all the theoretical reasons. He said, "Well, I know it, but try it anyway." And I tried it and it worked. And I went back to him--he was a man I respected very much; I've forgotten his first name, but I think I addressed him as "Dr. Stevens"--and I said, "You know, I'll be darned. How did you know that this would work?" He said, "Well, frankly, I didn't, Joe, but I've been around a long time and done a lot of experiments and I had an instinct about it. And I can't tell you how the neurons in my brain went through this and rationalized completely." He said, "It was just a hunch." And he said, "It isn't always right, but when I have a hunch about something, I pursue it. And [if] it turns out it was wrong, so it is. And what I've decided"--this is Dr. Stevens talking--"is that our brain is such that we collect a lot of data and we can't always rationalize it, so hunches I respect a lot. I don't overreact to them, but to me it's sort of subconscious-level synthesizing of a whole bunch of facts." And that has made quite an impression on me. And I used it during my life, all the time. And that's why I'm known as a guy who has an idea a minute, a prolific idea man. And as with most things, the percentage of them that are right is fairly small, but there are enough of them that make it valuable to let that kind of instinctive "belly" feeling about how to solve problems--to respect it. That's a side issue, but anyway, I was becoming discontent at not moving ahead as rapidly as possible, and I had a sense of adventure. So I wrote to the head of the research department, [and] said, "I have an idea. Now, why doesn't Merck have a West Coast operation? That's the coming frontier and population growth" and so on. And I wrote a very logical letter to him implying that I would like to be part of such a venture. And I don't know what attracted me to the West Coast; it was just the idea--this was still during the war--that this was going to be a growing area. And he called me in and said, "Joe, it's a very good idea but the company has no plans and there's a lot of other things that are involved in making a decision" and so forth and so on. And that was it. Then the coincidence happened. I went to visit my in-laws for dinner one evening and they had a neighbor over that they had seen infrequently, but he was over and he-- I'm sorry. I wasn't at dinner, it was my wife [Violet Jabara Jacobs] that was at dinner--and he said to her, "What does your husband do?" And she said, "Well, he's a chemical engineer and he works for Merck and Company," and so on. He said, "Oh, that's very interesting." He said, "I have a very close friend out on the West Coast that has a chemical company and he's always looking for bright young men. Would he be interested in meeting this man?" And my wife said, "I don't know. I'll ask him." So she asked me and I said, "Yeah, I would be interested." I met the friend and [then] received a call from a man called E. E. Luther and he said, "My friend so-and-so"--whose name I've now forgotten--"has suggested I meet with you. I'm staying at the Waldorf. Would you come up and talk to me?" So I went up to visit with him and he said that he had started an agricultural chemical business many years before which he had sold out to Standard Oil of California and that he was very unhappy with this arrangement and quit Standard of California--the brand name was Ortho, which is a well-known garden products-- Anyway, so he had decided to start his own company to compete and to make agricultural chemicals. Then the war came along and they had to adapt and at this time they had a number of war contracts to produce various chemical products for the armed forces. And he said, "We're doing very well at it, but I would like a chemical engineer to come back there and maybe prepare us and get us back in the chemical business." And he was struck by my knowledge of DDT, which had a potential as an agricultural insecticide. He said, "Well, couldn't you help us make that?" And I said, "Sure." He said, "Well, my son is running the business. Let me talk to him." So a couple of days later he called me, and he said, "I've talked to my son, and we'd like you to come back and work for us in California as our chief technical man."

ERANKI:

Which year was this?

JACOBS:

This was in 1944.

ERANKI:

How long had you been at Merck?

JACOBS:

Two and a half years.

ERANKI:

Two and a half years, okay.

JACOBS:

Don't forget, we were in the middle of the war--

ERANKI:

I understand.

JACOBS:

So he said, "We'd like to have you come to work for us." And we had discussed salary and so forth and it was a substantial increase over what I was getting and he would pay moving. So I got that call on the telephone and I turned to my wife, who was sitting there, and I said, "Well, Mr. Luther has just offered me a job in California. Will you go?" And, without hesitation, she said, "Sure. I'll go anywhere you go." And that may seem sort of a trivial incident but remember that both of us were born and raised in Brooklyn, our families were there, we knew nobody in California. That was very courageous of her to do that, and I've always appreciated that. So I called him back and said, "Yeah, what's the arrangement?" And he said, "Well, why don't you come out yourself first and get to know all the people and start looking for a place to live" and so on.

ERANKI:

Which area? Was this here?

JACOBS:

No, in the San Francisco Bay Area. They had built a plant in Richmond, California, so I went back there in the middle of the war in a train full of GI's and soldiers and took four or five days. I think I went out by train--yeah--

ERANKI:

What was the name of the company?

JACOBS:

Called Chemurgic [Corporation]. That's a word that was very popular at that time. It was originally meant to be the manufacture of chemicals from farm products. The chemurgic movement. And he had adopted that name, although he was thinking in terms of making insecticides to sell to farmers. So I came back there and I stayed in the hotel for a month or so--two months.

ERANKI:

This was in San Francisco?

JACOBS:

In San Francisco. I was living in Berkeley, actually.

ERANKI:

I see.

JACOBS:

And I stayed at the Shattuck Hotel in Berkeley and desperately looking for an apartment--very difficult to find. And finally, after a couple of months of looking, found a small one-bedroom apartment that was converted from a residence. A young couple had built themselves an apartment on the third floor and a small apartment on the second floor, one bedroom, and no separate-- They had a little dinette in the kitchen, and that was it. And I considered myself very lucky to get it. And it had--I couldn't buy a refrigerator--we had an old icebox that Mrs. Luther had had in the basement and we would get delivery of ice every day--that's before your time. But later on, we bought a refrigerator. But anyway, I called my wife, and said, "Look, I finally found a place in Berkeley. It's small, but it's a place to live." And she said, "Fine. I thought you ought to know I'm pregnant"--with our first child--and then I said, "Oh, wonderful." So I flew back--no, I went back by train--and I bought a car and we took off and came across the country to Berkeley. That was still during the war--1944. And I went to work for Chemurgic Corporation.

ERANKI:

How large was the company? How many people?

JACOBS:

Well, I can't-- I don't know whether I can characterize it or not. Not very large. He had two of his sons-- Mr. Luther had two of his sons [that] were in the army. The oldest son ran the company. And I learned a lot of lessons there. I would say that they had maybe five hundred employees, something like that.

ERANKI:

How old was the firm?

JACOBS:

The company was very new.

ERANKI:

Okay.

JACOBS:

It had just been started before the war and had never been able to get into the insecticide business, and in order to survive they had taken on contracts to build pyrotechnic devices. They were making practice ammunition that were made like pyrotechnics, like the pyrotechnics at the Fourth of July. We hired those kinds of people that mix chemicals, and we wrapped them in paper, and they would simulate a hand grenade or simulate a land mine and so on that was used for training.

ERANKI:

I see.

JACOBS:

Ultimately we got other contracts. We built the-- napalm is not a new invention, by the way--it was used during World War II. We built napalm bomb casings and there were a few other products that we made for the armed forces. And I helped organize that when we built the separate factory down in the San Joaquin Valley.

ERANKI:

So what was your position or title on the job?

JACOBS:

Well, I was given a vice president's title and "chief technologist" or something like that. And they had a so-called chief engineer. And that was my first exposure to the jealousy and competition, which appalled me but, nevertheless, is very common. He resented me like anything because he had been with the company and I was brought in and [it] wasn't quite clear whether I was his boss or he was my boss. I think I was supposed to be his boss but he would do all kinds of things to discredit what I was trying to do. But it was sort of trivial. And at the same time, on the side, Mr. Luther was having me make little batches of DDT and sort of preparing to go back in the insecticide business and the fertilizer business. And while I was there the war was over and we had to convert back to civilian products and we started to make some DDT, and most importantly we built a fertilizer factory. I came and complained to Mr. Luther that the things that I was doing were good, but we didn't have a decent sales department. Nobody was selling it. So his son said, "All right, well, you become our sales manager, then," which is good management on his part. If you're complaining and so forth, well, you do it. And I got a lot of experience there. We did wholesale manufactured stuff, but we tried to make consumer goods as well. I invented a little thing--it was nothing, no brilliant thing-- But it was--I've forgotten the name of it-- It was a device for polishing silver. I took a foil package and put sodium carbonate in it, or soda ash, and the instruction was to tear the foil and throw it and the sodium bicarbonate into water and then just dip the silver and the tarnish would go away. It's a well-known process; it's an oxidation process. But what I did was make a simple package out of it, so you buy this thing-- You want to clean your silver-- You just tore it, put it in a pot of boiling water and then put the tarnished silver in and it would clean it. But I learned a lot about the retail business, and it's a tough racket. You may have the best product in the world, but getting shelf space and so on-- But the main lesson I got from there was a confirmation of something I had observed, and that is the difficulties of running a family business. Mr. Luther made an ostentatious display of the fact that he wasn't going to interfere with his son running the business, but he would come out to my desk and he would grouse and complain. He'd say, you know, "Everett is doing this, and Everett is doing that. I wouldn't do it that way, and I think he's making a mistake." And I'd say, "Well, why don't you tell him?" And he'd say, "No, no, it's a point of honor. I'm not going to be one of those fathers that dictates to his son. I'm going to let him make his own mistakes." And I had observed in my culture--in the Lebanese American culture--that the desire to have a family business was a very strong desire, and I'd seen many, many tragic cases, and I was beginning to form my ideas against trying to establish a family business. And at this time we had daughters only, but we didn't know whether we were going to have sons or not, but I saw another facet of a family business. Where usually the undesirable parts were where the father dominated the son and told him what to do and those frictions, this went the other way, completely. And I saw this company literally being ruined because the father, patriarch, refused to impose his ideas on the son. It was the opposite side of the coin, just as bad. And the company was literally going broke.

ERANKI:

That's interesting. So that, in a sense, was something that led you to sort of move away from any idea of having a family business, but you started one eventually.

JACOBS:

It was a further confirmation of the sort of things that I'd observed, and it was tragic. I mean, I can go fast-forward. I'd left there and they, later-- And they went through several phases and tried to recover the business, but that business eventually went bankrupt--or they had to close it down. And Everett became a preacher-- the son. He didn't want to be in business; he was a nice man, very imposing--the son--and quite intelligent, but never capable of making a tough decision, didn't want to and so on. And an example of his personality was that he chose as his life work, when this thing failed, to be a preacher.

ERANKI:

When did it fail, the business?

JACOBS:

Well, now, let's see. I left there in '47. I went there in '44, but left in 47, and it was a couple, three years later. Meanwhile the two other sons had come back into the business and tried to rescue it, but it eventually failed. But he became a preacher. So he was--personality-- He was ill-fitted to run this business. But the force of wanting to have a family business-- Mr. Luther had two major motives in starting a new business. Because he had come out, relatively speaking, as a wealthy man by selling his business to Standard Oil of California. He had two motives: one was to establish a business for his sons, and the other was hatred and the desire to get back at Standard Oil of California.

ERANKI:

For--?

JACOBS:

For treating him so badly. See, he was given to believe that, if they bought his company, that he would become a responsible executive in Standard [Oil] of California, and he would have a great career. Well, actually, after they bought his company they made him a vice president; they put him in an office at a desk, and gave him nothing to do.

ERANKI:

Ah, that's terrible.

JACOBS:

Yeah, and he was absolutely-- I mean, he was almost psychotic about his hatred of those people at Standard Oil.

ERANKI:

So what led you to leave the company?

JACOBS:

Well, I saw that the company was badly managed, that there was no place for me because I wasn't a member of the family--

ERANKI:

Especially if it was a company set up for the sons.

JACOBS:

Yeah, exactly right. It was very clear. And poor Mr. Luther was--whom I was very fond of--but he was so upset with what was happening and the, sort of, destruction of his dreams, he had a nervous breakdown, whatever that means. But, you know, he just-- He became an invalid, and so forth, and it almost destroyed the man, physically. But I could see there was no future for me. The business was not really doing that well and there was no place for me. I was on the board of directors, but it was family dominated and so forth. But there was-- I wasn't a member of the family, so what was going to happen? And by this time I had made friends on the West Coast and had interaction with other companies and so on, and I had this sales experience, which is unusual for an engineer, especially one with a doctor's degree. In those days, a doctor's degree in engineering was a lot less common than it is today.

ERANKI:

Oh, certainly. I was-- That was interesting, I thought, when you took up a sales career, because you mentioned that at least until the point that you were in graduate school you were a very shy man, and-- I mean, in terms of your personality, how was it getting into a sales career and what was that sort of challenge like?

JACOBS:

I wish I knew the answer to that; it's not that easy to answer. But I enjoyed the sales job and the challenge of the sales job, and I had been working since high school to overcome the shyness. And I found that I had good language skills and I honed those and polished them, and when I got into a sales position with Chemurgic Corporation I found I was able to persuade people and so on. And it was a new skill that I had developed.

ERANKI:

You had actually prepared yourself, through your teaching experience and the public speaking and so on--

JACOBS:

Exactly, exactly, exactly.

ERANKI:

--so you were prepared for it, but--

JACOBS:

In a sense, that's right, I was. In order to drive myself out of this shyness I had done all these little things to overcome that and what I got without realizing was an extra skill, and that was an unusual skill for an engineer.

ERANKI:

Yes.

JACOBS:

Because engineers are not usually good communicators. And I had a-- I didn't do it deliberately, to become a unique engineer with good communication skills. The communication skills was my--if I can psychoanalyze--attempt to overcome my inferiority feelings and my shyness and so on. It was a device there, but I found out later that it became an unusually valuable skill in my engineering career. Does that describe it?

ERANKI:

Yes. And I was also thinking that the sales--your job there, your position--this was now sort of a different world from what you had done in the past.

JACOBS:

Research and-- Exactly right.

ERANKI:

And obviously-- I mean, [we] can only see it as augmenting your skills.

JACOBS:

Yes. And I found I had a certain amount of skill at it. I learned management skills out of it; I learned presentation skills and so forth, because I had worked very assiduously on the language part--that's the psychological drive behind it. But, also, I come from a culture that reveres or appreciates language skills. I mean, the Lebanese are generally outgoing and they're very sales oriented. My father was a peddler, a salesman, and so forth. There was some good instinctual background there. So that's when I faced the crisis, in year, let's see, in 1947. I was thirty-one years old. And I decided to set myself up as a consulting engineer, which was insufferable arrogance on my part because I didn't have any gray hairs and so on, and most consultants are people who have had a full career, and-- But I was careful enough. I had gotten to know people in the fertilizer business, and there was one guy just starting a business, had no technical knowledge at all, so I said, "Well, if I leave, would you hire me as a consultant?" And he said, "Sure." And so I had a consulting arrangement with him at $600 a month, which was very substantial. Subsequently, after I started in business for myself, he got into financial trouble and within eight months I no longer had that $600 a month which I'd thought was my grounding, support. But anyway, I went through this process of deciding to become a consultant, but I recognized that building up a reputation as a consultant I might starve in the meantime. And I had--both my wife and I were pretty thrifty--accumulated enough money that I felt we could live off it for a year and so took the chance. Again, talked to my wife, and she said, "Anything you want to do." Now, she had family living in Southern California--Lebanese people--and I liked Southern California. I like the warmth and so on. And I felt--I don't know whether this is a rationalization or not--but I said, "If I'm going to be a consultant, I ought to be in a dynamic area where small companies who can't afford their own staff would use consultants." The San Francisco Bay Area was much more established--big companies--not as many small chemical companies as here. And, so then, on top of that, a company that I knew--that I had become friends with--was a fabricator of chemical equipment up in the Bay Area. And I said, "Well, if I move to Southern California can I represent you in sales?" And they said, "We'd love to have you do that on a commission basis and a minimum" and so forth. So all of those things motivated us to move to Southern California in 1947. And for about six months I commuted, again, to establish a home down here and office and so on. And I went about and I got three to four sales representative accounts. And it was a very unusual approach, and I didn't give myself credit at the time, but to recognize how hit-or-miss the consulting business is, I knew that if I wanted a regular income, I needed to carry lines of equipment, and just be a plain, ordinary salesman.

ERANKI:

It's interesting, because now you're doing something similar to what your father had done.

JACOBS:

Exactly right. Exactly right. And I-- I mean, I would drive 150 or 200 miles a day visiting people and so on. But the interesting thing is that I felt-- I did not feel demeaned at all by being a manufacturer's representative. Maybe I was rationalizing to myself, but what I concluded was, "I have outstanding technical qualifications. I have it so far above the ordinary "peddler." Now, the image in industry is that a salesman is a sort of lower form of life, and it's hard to reconcile that with my doctor's degree. But I felt that I had quite an advantage over the ordinary salesman because I could go in and explain technically to the engineer how these things worked and why they should use it. And more often than not, I would do a little engineering study of why it would save them money, and so forth, which ordinary salesmen-- So I was quite successful at being a manufacturer's representative, and almost from day one--even though I'd lost that $600-a-month account--almost from day one, I never had to dip into my savings. It was a little tough going once in a while and so on-- And meanwhile, I was doing little odd consulting jobs at the same time.

ERANKI:

What sort of work was that?

JACOBS:

The consulting work?

ERANKI:

Yeah.

JACOBS:

Well, my principal client was Kaiser Engineers, which was a very big engineering company, and they had very few chemical engineers working for them. And so they hired me on a retainer basis to come and ask me questions about chemical plants that they were building for other clients. And that was a modest monthly retainer but it ultimately grew to be an important contact. I started out alone as a consultant, and alone as a manufacturer's rep[resentative], and the part of my business which grew more rapidly than the consulting was the manufacturer's rep because I got a good reputation as a manufacturer's rep, and the first person I hired was to help me with the representation. And actually, before I hired my first consulting assistants, which was five years later, or four years later, I had three or four people working for me as manufacturer's reps. They were engineers, but I had good lines of equipment and we were living on that.

ERANKI:

How did it feel to hire this first person? This is a-- I'm sure you hired and fired people at your previous jobs, but this is for yourself this time.

JACOBS:

Yeah, exactly right. The first guy I hired, and I'll never forget it--see if I can remember the numbers--he was an engineer working for another engineering company, had a nice personality. I said to him, "Well, you're making x"--I've forgotten what it was. "I can't afford to pay you that much, but I'll pay you two-thirds of that, and I will give you a share of the commissions that you earn." Seemed to me admirably fair. And this guy came to work for me and was my first employee--

1.6. TAPE NUMBER: III, SIDE TWO SEPTEMBER 30, 1998

JACOBS:

Okay, where were we? We had hired this one guy and two years later he didn't work out. He wasn't making enough in extra commissions to-- He was doing all right, but it didn't work out. And I had a frank talk with him, and he was very angry, and he was angry because he had come and taken less salary, and even though he acknowledged that he'd thought he could make enough in commissions, he said, "Well, you know, it takes a long time to develop a relationship," and so forth, "and meanwhile, I've been living on less than I should." And he had a point. And I determined never in the future to make anybody come to work for me and to be obligated--I felt very guilty about it--to be obligated to somebody who sacrifices to come and work, even though it's a free choice. That I, in the future, the most I would do, or the least I would do, is give the guy the same salary he would get elsewhere, and then give him an incentive to make more, but never put yourself in the position where you feel guilty and can't fire the guy, to be very blunt about it. And it was a good lesson.

ERANKI:

But beyond that, how was his work? Were you satisfied with what he was doing?

JACOBS:

Well, no. I mean, it was all right, but it wasn't getting me anywhere. I should tell you that when I hired my first employee, I was making enough--I was a cautious enough operator--so that I could just, out of my work, pay a man a salary and still have enough left that I could live on. So in the sense I didn't go into hock or increase my overhead on the chance that it didn't work, I had the backing. And, in fact, I got some benefit of what he did, because the contacts over a period of time-- Eventually they became customers and so on, but he wasn't producing it fast enough to justify-- And he had a lot of personality problems in addition--he was a short man, had short man's complex, a low ignition point on his fuse, and so on. Those are just generalizations, but we had problems in personality as well. But, meanwhile, I went and hired somebody else, and before you know it, at the end of five years I had three people working for me in sales representation only. Meanwhile I was doing more and more consulting work.

ERANKI:

Just with Kaiser [Aluminum and Chemical Corporation], or with others?

JACOBS:

Well, no. Eventually came to Kaiser as a result-- I've forgotten the reason for it-- Let me see-- My memory is beginning to fade on me here. I had known in the Bay Area the director of research for Kaiser Aluminum and Chemical, which was one of the Kaiser companies, and Kaiser Engineers had been asked to plan a plant for Kaiser Aluminum. And this guy was the Kaiser Aluminum guy. And he recognized that they had no chemical engineering talent, or very little. So when it came time for them to do the work, he said, "Look, I'm not going to give you the work--you've got to get somebody who knows chemical engineering. And I know this Joe Jacobs, and he's got a good reputation. Why don't you get in touch with him?" And so they did. And I went on a retainer with Kaiser Aluminum and Chemical.

ERANKI:

Did they try to hire you--?

JACOBS:

With Kaiser Engineers I had a monthly retainer, and then they would pay me extra. And the first job that I did for them was not connected--I think it was connected with Kaiser Aluminum--but they wanted to build a plant to recover a chemical called bromine from brine in Ohio. And they said, "We want to do this, and we need an economic study of whether this will work. Could you do that?" And I said, "Sure." My knowledge about bromine from brine came from my sales contacts when I was selling equipment to a company called American Potash and Chemical Company up on Searle's Lake who were recovering bromine from brine. So I had wandered around that plant and knew their process and so forth and did a little library research and said, "Okay, I'll do it." And for $300 I produced a short economic study which said, "Don't go into the business. This is not a strong enough brine, and if you do, here's the way you go into it." They told me then later that they had hired Arthur D. Little [Worldwide Consulting Services] to do a study previous to this which cost them $3,000 and they said they learned more from my $300 report than from the $3,000, which was lucky and fortuitous and flattering. So that was my-- I became a consultant to them. Now, through my same friend at Kaiser Aluminum-- A company by the name of Southwest Potash Company, in New Mexico, who had a mine to recover potash, which is a fertilizer ingredient, was thinking about building a chemical plant. And my friend at Kaiser Aluminum and Chemical met with the chief technologist for them and the guy said, "You know, I need somebody to help me out." And he said, "Well, Joe Jacob's done a good job for us." So I got a reference and I went to work for--as a consultant--Southwest Potash Company.

ERANKI:

Do you recall the name of your friend at Kaiser Aluminum?

JACOBS:

Yeah, his name was Burns, Dr.-- See if I can remember his first name--it'll come to me. Nice man, good friend. But anyway, so those were the two, and they were beginning to take most of my time, and I wasn't doing much selling, but I had meanwhile built an organization of three or four people out selling who were making good salaries for themselves and making a profit for me. And it was about five years later that I hired my first consulting assistant, because the workload at both had increased so that I could use a full-time guy. Now, who did I choose? Well, one of the companies I was calling on regularly as a sales representative was a company called C.F. Braun and Company, which was one of the original major engineering construction companies down here in Alhambra. I could go on for hours about old C.F. [Carl Franklin] Braun, the man who established it, a guy I admired tremendously. And it was a company I admired tremendously; they had wonderful ethics; they had very bright people working for them. And I had met a young man when he came out here from the East Coast who had been working for Merck, and then he was offered a job at C.F. Braun, and when he came out here he came and said hello to me, and we became sort of friends. My wife and I invited him and his wife out to dinner and so on. And so we became friends. He was a newcomer to this area. His name was Stan Krugman and I said, "Stan, you want to take a chance and come to work for me? I'll pay you the same salary you get." And we talked about it, and he did. And Stan was a chemical engineer and he had worked at Merck, so we had a lot of mutual friends, and he was a very bright man, very accomplished, hard worker, good thinker and so on. So I hired him on a full-time basis, and put him on the Southwest Potash job, which was growing quite well, and so that went on for a year or two, and then Kaiser Engineers called me and they said, "Come on up to Oakland." And so I took Stan with me and went up there and they said, "Kaiser Aluminum wants to build a caustic chlorine plant in Louisiana and we want the job, and they don't want to give it to us--even though they're a sister company--because we don't have any knowledge of caustic chlorine. Do you know anything about it?" And I said, "Oh, yeah, we know something about it." And he said, "Would you be prepared to help design--or actually design --this caustic chlorine plant? We're building a $200 million"--which was a lot--"complex down there," of which the caustic chlorine was maybe a $10 million piece-- "Would you take on the design of that?" So I said, "Yeah, I think we could do that." Stan and I went out, and I said, "Stan, what do you know about caustic chlorine?" And he said, "Not very much." And I said, "Well, I've visited a couple of caustic chlorine plants; I studied it in college, and I think I know what they do. Should we take this on?" And Stan said, "Yeah, hell, yes." So we went and hit the books, went to the library and studied it, and found out that we thought we could design such a plant. So we came back and said, "Yeah, we'll take on the responsibility of designing this." And that was the start of the growth of our company. We worked out the financial arrangements--they paid us so much per hour, including overhead, and everything--and we went about recruiting people to come to work for us that were skilled in plant design. And obviously we stole a lot of good men from C.F. Braun, because Stan knew them and said, "I'll take this guy as a piping guy" and so on. And our first fifteen people, 75 percent of them came from C.F. Braun. And the Braun brothers have been angry at me ever since. They feel as though we stole their people. Well, we did, but my answer to them was "Slavery was abolished in 1865, so people are free to go." And I use that all the time when people leave us-- I mean, if they're good people, we try to persuade them; if we can't, we wish them good luck, always. We never recriminate. And we've had raids on our company. But anyway, we built up a staff of about thirty people and the key ones came from Braun, but we hired people from Fluor [Engineers and Construction] and other companies, too, with experience. An amazing thing happened. We thought we could bull our way through the design of this plant, and I'm sure we could have, but we were using cells to make caustic chlorine--they had decided already that they would use Hooker cells; Hooker Chemical Company designed them, which was one of the biggest caustic chlorine manufacturing companies in the country--and we found out that the chief engineer of that company had retired just the year before. And we went and hired him for $100 a day to be our consultant on this job. And that guy knew so much about caustic chlorine that it was absolutely encyclopedic. And we had this wonderful source of technical brains--I mean, he would look at drawings and say, "No, you've got to put this bolt in in a different way, because this is what happened--" I mean, he had spent his whole life designing, building, and operating caustic chlorine plants. And that became a revelation to me: technical brains are the cheapest commodity on the market. What we had done was found this guy, and we profited mightily from his knowledge. And he was happy--$100 a day was a good consulting fee in those days. And so we went through and we designed that plant and that was the first big job we had. And Kaiser Engineers built it and it started up just great. And it's still amazing to me that we didn't make a lot of mistakes, because it's an extremely complicated plant; it's got corrosive materials in it and very dangerous materials and so on. But the plant started up. Kaiser built it within budget and on schedule, and we produced the drawings, and it started up very well, and Kaiser Aluminum was very happy with it. And nine years later they wanted to triple the size of it, and they came back to us to triple the size of it. So that was the start of the engineering-construction business.

ERANKI:

At this point did you have any managers working for you or were you making all the decisions yourself?

JACOBS:

No, Stan Krugman was very good and [did] detailed work, and he was a tough taskmaster and [had] very high standards of performance. And I could not have--even at that stage--designed and built that plant under my direct supervision as well as Stan could. I had no hesitation in acknowledging that, although we came to a parting of the ways later on. I've always said that this business could not have prospered the way it did if Stan Krugman wasn't there at that particular time, because he set standards for us that he'd learned at Braun. We wrote up standard specifications sheets and so on, a whole bunch of details to make these things work, which I could have gotten, but it came much easier to him. And I was the salesman; I was the cheerleader for the people. I had enough technical knowledge to make substantial technical contributions, but they were process ideas and how to save money in building the plant and so forth and so on. I shouldn't denigrate my engineering ability: I was a pretty damned good engineer in the broader sense of understanding the economic importance of the decisions you're making.

ERANKI:

I was thinking more in terms of your decision-- I mean at this point you had thirty people--and whether you were thinking in terms of having centralized decision making or more of a decentralized model?

JACOBS:

Well, I still had the manufacturer's rep business, which was bringing in good income, so I had to spend some time with that as well as this, and Stan was perfect to run that job full-time, but I was involved with him. I would go down to New Orleans, where the plant was, and visit and-- I don't want to underestimate my contribution to the management of it, but I had no clear-cut plan of being a one-man business or forming an organization. I mean, we just did what we had to do without formalizing. I mean, there was no-- I wasn't an M.B.A. and, as a matter of fact, I used to deride the M.B.A.s because I felt I could--

ERANKI:

You're not alone. [laughs]

JACOBS:

Yeah, well, I really think having an M.B.A. degree doesn't make a businessman out of you. Having an M.B.A. degree gives you some extra skills, but if you don't have it as a businessperson, you can't learn it by going to Harvard [University] or anyplace. So, no, I had no--Organizational things were not important to me at that time.

ERANKI:

I was just trying to understand how the organization was evolving. How many--? It was now, what, four or five years old--the company?

JACOBS:

About five years old, yeah.

ERANKI:

Five years old. And so what would you say was the next sort of phase--stage of growth--or where did it go from there?

JACOBS:

Well, the next thing was that we had started designing plants for other people in this area. Now we had a design staff, and with a bunch of little jobs, essentially, we grew to maybe a hundred people over the next few years, doing a little work here and a little work there and so on. The next critical thing was construction. I had the purest feeling that as an engineer, construction was not a desirable business, that you should separate engineering from construction. Engineering was professional, construction was nonprofessional and so forth. And we were doing a small job for a company called Kerr-McGee [Corporation] out of the Midwest. And it was a very modest-sized job and the chief engineer came to me and said, "Joe, can you arrange to build this plant for us that you're designing? It's not worth it for us to go out for bids." And I had a lot of soul searching, and talked to Stan about it, and here was a service that they wanted. And I said, "Yes." And the longer I thought about it I came to the conclusion that there wasn't any reason why construction couldn't be just as much a professional effort as engineering, that there were a lot of people--and an uneducated lot of people--who were essentially skilled craftsmen who went into business and so forth, so be it. That construction was engineering or required engineering discipline to use people efficiently and so forth. So that was our first construction job. So the next big step was with Southwest Potash Company. We had designed a large plant for them to build and they declined to build it. We'd looked at the economics of it; we weren't sure it was good. But meanwhile they had an expansion of their regular plant down there; it was about a $10 million expansion. And they'd had all of their work done by a company in Denver that no longer exists called Sterns Roger Company, who were experts in potash. Well, we started to work on this increased capacity plant in designating what goes in, writing the specs [specifications]. And I went to the vice president and I said, "Why don't you let us design and build this?" And he said, "Well, Joe, you've never had experience in doing the detailed design and building of a plant like this." And, boy, there's gaps in time in here, but I remember I'd had a heart attack in 1960. And I was lying in bed and I called my friend Fred Stewart, who was the vice president of the company in charge of that operation, and said, "Fred, I've been talking to our guys, and we can do this job for you, take my word for it. You're not taking a chance. I'll assure you that you'll get a good job." And we got the job as a result of his confidence in me. I did that from my sickbed after having recovered from my first heart attack.

ERANKI:

How old were you then?

JACOBS:

I was forty-four at the time.

ERANKI:

That is relatively early.

JACOBS:

Yes, yes. Cardiovascular disease is in my family. My father died of a heart attack in his sixties and I've had a lot of cardiovascular problems. But that stands out in my memory, because I had built up a sense of integrity and trust that he felt all right giving the job to Joe Jacobs rather than Jacobs Engineering, my saying that I would assure him that he'd get a good job. So I'm not sure I have this all historically correct--we had maybe 120 people at the time.

ERANKI:

This was in 1960?

JACOBS:

Nineteen sixty, yes.

ERANKI:

So how many--?

JACOBS:

That was the first turnkey--as they call it--job that we ever did, where we did the engineering, design, procurement and construction for that plant.

ERANKI:

And obviously it must have turned out well for you, to have decided to go into that line of business.

JACOBS:

Yes, yes. And we've grown from there. Had a lot of ups and down, as you can well imagine. So there are a lot of projects that we did after that that were exciting, very innovative things. We have been technical risk takers--an extraordinary amount of technical risk taking, which comes from me. I think representative is that caustic chlorine plant that I said we could design and build, and I'd never designed and built one in my life, but I found out how to do it.

ERANKI:

That and also the fact that you took on the plant--

JACOBS:

The former chief of the-- That's right.

ERANKI:

So how did--? What would you say was the next, sort of, stage in the growth of the firm and how you approached it? Are there distinct phases, or--?

JACOBS:

Well, we then started to become a small-to-modest-sized engineering-construction company, not competing with Braun and Fluor and Bechtel [Group]. We were doing the jobs that they didn't do well--$4, $5 million jobs, or $10 million jobs. And we got a whole series of those over the years, and we always managed to keep a staff, and we grew from 100 to 150 people to 200 people. And somewhere in there we started on our potash job, but that really ought to be left till later. Well, let me bring in the biggest, riskiest job that we did. We did it somewhat later, but in 1961, right after I'd had my heart attack and I was back at work, I saw an article that the Jordanian government was looking for somebody to build a potash recovery plant on the Dead Sea. Now, because of our experience with Southwest Potash, we considered ourselves at this point good experts in potash recovery. Now, there was the Dead Sea, the other was mined underground and so on, but, nevertheless, you had to know a lot about the chemistry and the physical chemistry of potash. And because of my Arab background--Lebanese background--I decided to take a trip over there to see whether I could do this study for them. And I went there and I met with the head of the potash company and I was tremendously naive about how business is done over there. I presented all the qualifications and I thought I had persuaded everybody that we were the most qualified. I came back home--I had met the chairman of the board, and everything, and he treated me-- We talked Arabic and so on-- And to my immense surprise the job was given to another company, larger than we were by a substantial amount. See--if I can remember the name of the company--the [Robert E.] McKee Company in Cleveland had nowhere near our qualifications. They were somewhat bigger in size, and I found out later that they had an agent that they paid a substantial amount, sum, and, you know, the way business is done in the Middle East-- I'm not making a moral judgment, but I didn't know how to do this, didn't know to select who had the influence or who didn't, and I thought, "You know, if I'm with the chairman, then I--" And we were disappointed to find this other company had gotten that project. Eventually, we built that plant.

ERANKI:

Oh, really?

JACOBS:

Eventually, we built that $500 million plant.

ERANKI:

How come? How did--?

JACOBS:

That's a long story; I don't think we have time for it now. The first job was done by the McKee Company, and they spent $700,000 doing a study of how to build this plant and justifying the economics. And I'll just give you this part of it. They were financed by the AID--the [U.S.] Agency for International Development--and one day I got a call from a guy at the AID and he said, "You know, we have this study that McKee has done and it's recommending that we go ahead and finance the building of this plant, but it doesn't seem to me that it's economically justified. I don't know anything about it, and I've asked around, and everybody says, 'Go to Joe Jacobs. Go to Jacobs Engineering. They know potash, they're good people.'" He said, "I can't pay you or anything but would you--just as a patriot--would you do me a favor when you're out here [and] come and look at this report, and tell me what to do? You know, give me some of your ideas." He said, "I can't pay you." I said, "Fine." So when I was through in Washington I went to meet this man. His name was Novak, and he was sort of a manager in the AID, and he gave me this report to look at. And I said, "This is horrible. First of all, there's a lot of technical problems in the way they've proposed to do this, but that's not the basic problem. The basic problem is that by their own estimate the thing will return 4 percent on capital, and how could they with a clear conscience recommend that you go ahead and spend--?" And he said, "Well, that's what I thought." I said, "Well, this is ridiculous--I wouldn't put a dime in it on the basis of this report." And they'd spent $700,000 on it. So he said, "Well, gee, how am I going to solve this problem?" And I said, "Well, I don't know. I'll be glad to do a re-study, or something." So he said, "Well, I think I can get about $40,000. Could you do a detailed evaluation of this report for $40,000?" And I said, "Sure, we'll do it." So we wrote a report for $40,000 that showed a lot of technical problems. But they were not-- The basic problem, what I said in the report, was that the chosen plant size was wrong, that this was a very capital-intensive business, that the capacity they had--it was two hundred fifty thousand tons a year--I said, "You'll never make this economic because the cost of capital per unit of production is too high and we ought to look at--" And we went through a market study, as part of the $40,000, and we said, "We think that this plant could sell five hundred thousand tons a year. And with these modifications to reduce capital costs and so forth, now it seems to become economic." So the great contribution we made to that was my instinctive business experience and ability to recognize it wasn't technology, it's simple economics of capacity versus capital cost. Recognizing that it was a highly capital-intensive project, very little operating costs, and that therefore capacity was the ultimate-- And on the basis of that, we convinced the AID to have us do a re-study of it, making all the technical modifications--I think there were a lot of technical problems put together-- but also talking in terms of a five hundred thousand ton-- And we also, as a result of our market study, thought we could actually justify a million tons a year, that there would be a market in that area, in India. And at a million tons a year, it's a damned good project. And we did that for $500,000. We had the benefit of all the mistakes they made and so forth. And we made a real hit with the AID and with the Arabs. So in 1967 they were ready to go ahead on the next step with us, and then we had the Israeli-Palestinian-Jordanian war that interrupted it and we didn't get back till 1975.

ERANKI:

Something occurred to me when you were speaking. You were talking about the economics, and then later on you were talking about sales and such. From your perspective, in the early stages of an entrepreneurial career, which sort of functional things are important? Or are there any that are particularly more important than others? You know, knowledge of, say, accounting or finance or sales or--

JACOBS:

Well, in my particular case, I had a unique combination of sales ability and engineering ability. Three things: I had good engineering ability, I had good salesmanship, and good economic common sense. So I was a good businessman. And then the fourth thing was that I was a risk taker. Those were the four elements that I brought to it. Now, on the engineering side, even though I boast about being a good engineer, there mainly I hired good people because I felt that my greatest contribution--I could have done it, probably, but it wasn't what I liked to do, it wasn't what I did well-- Salesmanship, yes; good economic sense, and the ability to judge whether to take a risk or not-- And you can see the risks, the technical risks we took with that first potash plant, that first--

ERANKI:

Caustic chlorine.

JACOBS:

Caustic chlorine and so on. And everybody said that when we took on the $500 million dollar plant for Arab Potash [Company] in the bottom of the Dead Sea in a desolate area that we were going to fail. This was actually done from 1978 to 1982. We started up and operated that plant, and it's the greatest foreign income source of Jordan right now.

ERANKI:

That's interesting.

JACOBS:

So it was a great economic success, but nobody in the business thought-- They thought we were just absolutely nuts, and that we shouldn't have been given the job because we didn't have the size. We not only designed it and built it, but we operated if for five years.

ERANKI:

That's great.

JACOBS:

I think that's about enough.

ERANKI:

Okay. Just to follow up on it briefly, I was thinking, do you think some of those same factors would be valid even today? I mean, in terms of if you were to characterize key success factors for budding entrepreneurs?

JACOBS:

Oh, absolutely. I mean, look at the entrepreneurs in Silicon Valley and the software writers, and look at the enormous wealth created by people who take risks, technical risks and business risks. There's one other factor--I gave you four--that I must add, and that is that I had instinctively a great money sense. I knew how to handle money. And let me give you an illustration, because most engineers are terrible at this. But when I did my first engineering contract with Kaiser Engineers, I said, "Look, I have trouble financing all the payroll. Can I give you an estimate in the beginning of the month of what I think I will spend, and you send it to me? You can borrow money cheaper than I can." So I started a system of advance funding that we carried on for a long time. Today we can't do that with our size and with the sophistication of our clients. But for years I operated by advance billing more than anybody else in the business that had the guts to try that. But I used the logic, "Look, I have to go borrow the money. I've got to add it onto the rate some way, and I can't borrow it as cheaply as you."

ERANKI:

And, presumably, your estimates must have been good enough for them to continue doing it.

JACOBS:

Yeah, exactly right. Now, today we can't do it that easily because when you use that argument they say, "Well, bull-- We don't want to-- We don't want you earning whatever interest on our money." So what we finally come down to is wire transfer the day we make a payment on salary or equipment and so forth; they'll send a wire transfer on that day so there's no lag in the system.

ERANKI:

Looks like you have to leave.

JACOBS:

Yes, I--

ERANKI:

I was thinking perhaps next time what we could do is talk about the rest of the growth stage and talk about issues of how do you manage growth, how do you manage change--

JACOBS:

Oh, sure. We'll talk about all the mistakes I made.

ERANKI:

Okay.

JACOBS:

And why we went public, and what the benefits were, what the disadvantages were.

ERANKI:

That's definitely an interesting topic for me.

JACOBS:

Yeah, sure.

ERANKI:

And then at the same time talk about how some of those things would perhaps affect budding firms today.

JACOBS:

Yeah, yeah. Absolutely.

ERANKI:

All right. Thank you, sir.

JACOBS:

Okay.

1.7. TAPE NUMBER: IV, SIDE ONE OCTOBER 2, 1998

ERANKI:

We were at the point where you, I think, last time when we left off, were talking about the Arab Potash Company and the project that you had done. And I think you were talking about some funding and such.

JACOBS:

Yes.

ERANKI:

I think we were talking about the development of the company and where you were at.

JACOBS:

Yes. That is a very important project, representing the essence of entrepreneurism. That was an enormous risk. Our company could have gone broke very easily if we hadn't performed that project properly.

ERANKI:

What was the scale of the liability?

JACOBS:

There was no profit liability-- I mean, there was no monetary liability. If we hadn't performed well, maybe they wouldn't have paid us and we'd have missed $2 million, $4 million, but that wasn't the liability. The liability was our reputation. We had a business. I mean, if we failed on a job of that size we'd be practically out of business because we would then have no reputation.

ERANKI:

So this is along the lines of the technical risk taking that you're talking about.

JACOBS:

Exactly right. A technical size of project--Could we organize to handle $500 million worth of work when we'd never done a job over $20 million?

ERANKI:

What did it take in terms of some of these resources? I mean, was it a question of having so many more people?

JACOBS:

Well, not only having more people but getting other companies involved to handle phases of it and keeping track of it and managing it and reporting and keeping the clients satisfied and making sure the design wasn't full of holes. And we designed some pretty revolutionary equipment. For instance, we designed a self-propelled harvester for this that had never been built before. Now, it wasn't rocket science in that sense but it was a very advanced design. And there was a plant on the Israeli side of the Dead Sea and their method of harvesting the crystals on the bottom was much more cumbersome than the one we devised. And we designed this self-propelled harvester to-- And if that hadn't worked the whole project might have failed.

ERANKI:

So how did you make that decision? I mean, did you go in and sit down and just think about it and say, "Okay, well, let's just do it," or did--?

JACOBS:

I'm very much an activist. People challenge me. I say I can do it and then I try to figure out how to do it. I don't always succeed. Usually, they're of limited liability but this one was a big one. But the prize was big, too. I mean, this would have gotten worldwide recognition if it failed. It also got worldwide recognition because it works. And that plant has since been doubled in capacity because it was so successful.

ERANKI:

Right. You mentioned that you had predicted a million tons or something and that it was originally for five hundred thousand.

JACOBS:

Yeah, now-- And actually, it was built for $1.1 million--the final design. And now we've helped them expand it to $1.8 million. So the demand has increased.

ERANKI:

What did that experience do in terms of changing your thinking?

JACOBS:

It gave us a lot of confidence. We then got international credentials. We brought in a British engineering company to be subcontractors to us. We brought in British contractors to build it. And we brought in a Taiwanese company to build the roads. We brought a Korean company to build the town and so forth. It was a logistical management problem and what we did successfully was manage the problem.

ERANKI:

Yes. And how did you pick the people, then, for this thing?

JACOBS:

Instinct. People I knew. People that worked for us. You know, we all pitched in. We had a couple of our young engineers that I put a lot of faith in--chemical engineers. They did the traveling, and so did I, so--

ERANKI:

So were there a lot of--? Was there sort of a core team that you had in terms of your managers?

JACOBS:

Of course. One of the persons on the team was a young guy I hired out of school. And he worked for us for many years through that project and the completion of that project, but left.

ERANKI:

I see.

JACOBS:

He was offered a better job--no, I'm sorry--he was offered a job at C.F. Braun with a better title and we had grown apart a little bit. I had lessened confidence in him because towards the end of that project it really wore him out. It was not his fault, but it was such a high visibility, intense job. The other person on it is now our CEO. Noel Watson worked on the project, too. And that's the team. And there are several other people in our top management that worked on that job.

ERANKI:

I was trying to figure out, obviously, how did you train the organization, essentially, to take this leap?

JACOBS:

We trained by doing. Well, we challenged them with something that was far from routine and they knew our existence depended on it, or I knew it. So we kept driving away until we did it.

ERANKI:

Because, obviously, in terms of entrepreneurial companies--or I'd say, even larger companies--you've got to have that hunger. And how do you instill that hunger? How do you light that fire under people, and say "Hey"?

JACOBS:

Other people?

ERANKI:

Yeah, other people. Because, obviously, I know it comes from you, but how do you get these--?

JACOBS:

I don't know the answer to that. I don't know whether we-- I think we tended to attract people that had the hunger, and the fact that I was willing to take risks personally and was not a conservative, "do it by the numbers" type of person attracted people who wanted to take risks, when they knew that I wouldn't let them down and that if they failed in doing it, that I would somehow find a way to rescue it, but I would not say to them, "You failed. Get out." That was true of some people, but the kind of people that I tend to attract were people who had strong egos and who were willing to admit that they made a mistake or they didn't perform properly.

ERANKI:

Which year was this?

JACOBS:

Well, actually, we did the project from 1975 to 1982. Now, it was very slow in the beginning. The bulk of the work was done in '79, '80, and '81.

ERANKI:

At this point were you also taking on other things?

JACOBS:

Oh, yes. Yeah, we had other work as well.

ERANKI:

But this was the significant, major challenge?

JACOBS:

Right. Now, there was an intermediate point here that needs backtracking because we've skipped over something. In 1974 we did two things. Number one, we were attracted to Ireland. It's the first time our company had ever done or contemplated any work overseas. And what happened was that the Irish government came to us and to me and I took a trip to Ireland at their expense, among a lot of other business people. And they offered to give us financial help in setting up an engineering office in Ireland. And I was very interested in it; I liked Ireland and it would be sort of a financed expansion overseas for the first time. So I came back here and then I heard-- There was an IDA [Industrial Development Agency, Ireland], which was a government group to provide incentives for people to build plants. We heard that the Syntex company wanted to build a chemical plant over there, pharmaceuticals, and that's our field. So we went to Syntex company and we made an association with a small, local engineering company that didn't have our skills. We said, "We want to design and build this plant for you." And it was a tough battle, but we finally and this is where I excelled-- I convinced them that they should give us the responsibility for this plant, and on the back of that, once they gave us the project, we took advantage of the IDA. We got training grants; we hired local people; we sent four or five of our key people over there to run it, and we had this job from Syntex in the west of Ireland, so we opened an office.

ERANKI:

There are advantages in two ways, it sounds like, or more than two ways.

JACOBS:

Right. And you'll find that in our history, when we expanded out of the West Coast and had our first office on the East Coast, which was in the late sixties, I think-- I've forgotten now--we did it because we competed for a certain project. I don't remember what it was. It was on the East Coast, and we said to the client, "Well, we'll set up an office to do this job," and we persuaded him to do it. So our first office on the East Coast was set up, not blank. And then we went out and looked for business, [but] we had a job. We set up an office to do the job. And that's been common in our history. We don't gamble a lot and open an office and say, "We're open for business. Please give us work." We work the other way. We go to a company who is building a plant there and say to them, "Would you prefer we do that close to the plant site?" "Yeah, but you don't have an office there." "Don't worry about it. We'll put in an office. We'll send these two or three, four key guys that you'll have a lot of faith in, and we can hire the rest of the people." And we've done that quite a number of times in our career.

ERANKI:

That's interesting. So, this was in the Irish project, and concurrently--?

JACOBS:

In '74.

ERANKI:

So where would you say things went from there? How large was the company at this point?

JACOBS:

I don't remember at the time, but let me then tell you in that same year I decided we ought to expand to the Gulf Coast because a lot of our clients were there; it's the big oil industry, big chemical industry and so on. And there was a group down there that I know called the Pace Consultants. And they had just bought, three or four years before that, a construction company and had--they had started as consultants just as I did--decided to go into the construction business. And they bought a construction company and they had a disaster because they did fixed-price bidding and they had financial problems. But they had a good reputation. I knew the people, and they were good people, and they weren't broke or anything like that, but they had visions of going public but couldn't because their profit picture was very poor. And they were about half our size, fifty percent of our size. So I went to Houston and talked to the partners, especially the senior partner, and I convinced him to merge with us.

ERANKI:

So there is a sort of growth by acquisition.

JACOBS:

In that case. That was the first-- We had done small acquisitions in between, but that was the first significant one, a company fifty percent of our size.

ERANKI:

So what sort of issues faced you?

JACOBS:

Interesting. Very interesting. My right-hand man, as I told you, was Stan Krugman. And he was executive vice president of the company and I was the president and CEO. And I went down there with him. And it became an issue. They didn't say, "We like Stan Krugman." [They said] "We respect Stan Krugman, but we're not sure we want to work for him." And I said, "Well, I understand that." And I went to Stan and I said, "Stan, these people don't want to work for you. Apparently, you have a reputation of being a tough taskmaster. They also feel that they're fifty percent of our company, and the people down there won't feel comfortable unless they're represented in the top management." And I said, "The only way we'll get this acquisition to go ahead is if I offer for the senior partner--" A fellow by the name of Warren, Warren Askey, was the senior partner of this firm-- And I said, "Warren, your people want protection and in order to meld these two companies together they must feel as though they're represented in court and that we're just not gobbling them up. So I would be very happy if you would come and be president and chief operating officer of Jacobs Engineering [Group]." And that's what I told Stan. And I said to Stan, "Now, you're my guy, and I respect you tremendously, but you've got an image problem here and you've got a style problem. These are Texans and hail-fellow-well-met--" And he was a very intense-- I said, "In order to do this, I have to make this arrangement. But I have a lot of trust in you; you'll have an opportunity to sell yourself. So will you promise me that you will spend a week, a month, or two weeks a month--and you can get an apartment down there in Houston-- And you go down there--but you're under Askey--but you go down there, start operating with these people and get them to like you and get them to want to work for you." And he agreed to do that.

ERANKI:

Oh, that's good.

JACOBS:

It's good that he agreed to it, but he didn't do it.

ERANKI:

It must have been difficult for you to--

JACOBS:

Yes. Well, it was a fait accompli. I mean, I didn't-- That's the way I presented it to him, but he knew darn well that I could make it happen, but I treated him with-- And I honestly did respect him, and in fact, he was a better operator than Warren Askey or anybody in that company, but he had this personality defect of being very demanding and not always considerate of people's feelings and things of that type. There were subtle differences. Anybody has seen this. You have these intellectual, smart people who have not very great people skills. What they used to say about Stan Krugman is, "Boy, we respect that guy--he is smart and he's good--but we don't like him."

ERANKI:

That's interesting.

JACOBS:

You know? And it wasn't an act of dislike--they just didn't feel close to him emotionally in some way. Hey, he had a lot of problems himself, you know. And actually, he had three wives--he had troubled marriages along the way, too, because he had problems in his relationships with people.

ERANKI:

That was in--?

JACOBS:

That was in '75, '76.

ERANKI:

So how did the merger go forward after that?

JACOBS:

Well, it went reasonably well, but there was still a lot of friction. And Warren Askey wasn't a strong enough man to push our Jacobs Engineering people into more active cooperation. And Stan went down there to Houston and failed at selling himself to these people. I don't know whether it was Stan's fault or their fault, but it didn't happen. And he did a few things that-- He had a new wife then and she got everybody angry at her. She was rather arrogant and so on. Little personal stuff. You can't separate those from the business. I have a philosophy that one should not center one's social life around business associates. You ought to be friendly, visit each other occasionally, but don't have your whole life dependent during working hours and after working hours-- And people in Texas are different: they're more social, and so on, and he and his wife did not fit into that. They tended to be reclusive. And she was going through problems at the time, and so they got everybody pissed off at them, essentially. And it went on for a year or so, and finally, I said, I suggested, "Well, that's not working, Stan. You're unhappy. Come on back here as executive vice president, and you work for Warren Askey as promised." Well, at the end of two years there was this constant friction between Askey and Stan Krugman because Krugman did not respect Askey. He felt that he knew more about the business than Askey did, and he was right, but he couldn't stand not showing it. And I would counsel with him all the time and try to get him to understand that he had to sell Askey on this. I would say to Askey, "You know, he's a smart guy. You ought to take advantage of that and get him on your side and try to do it but, hey, like this--" And Askey wasn't strong enough to come and say, "It's either him or me." And I don't know what I would have done if he'd said that; I suspect that I would have said "him" because at this point Askey was not showing up--he was a nice man, don't misunderstand--but I noticed also that he was increasingly unhappy. And he missed Texas. So one day I called him in. I said, "Warren, you look awfully unhappy to me. Are you really happy in your job?" And he said, "Well, not really, Joe." He said, "I miss Texas--I miss the investment." He used to invest in real estate and all kinds of things; he was sort of a half-assed entrepreneur. Oh, that's not fair. He did entrepreneurial things with modest success. And I said to him, "Well, Warren, you did your duty to your people down there. You came up here against your will; you didn't want to move out of Texas, but you came up here to protect them, and you've been here two years, and they ought to fly on their own. If you want to go back to Texas, don't be unhappy." He said, "Yeah, I have some investment opportunities so I want to go back and live in Houston and invest in real estate, and do this and do that." Of course by that time, he was fairly well-to-do, with the stock he got in Jacobs Engineering. We had done well. We were public at the time. And he went back to Houston and this was where I faced a real crisis in our business. Should I now make Stan the president and chief operating officer and me chairman? And I--being the kind of guy I am--I talked to a lot of our troops, and got the uniform reaction, "Stan is the greatest guy in the world for doing projects and for intelligence, but I won't follow him as a leader. I'll accept him as a manager, but not as a leader." And I finally said to Stan, "Stan, I can't make you president yet. You haven't made it. You haven't gotten the loyalty of the people. You command their respect, but not necessarily their loyalty."

ERANKI:

That's an interesting tangent, and that's an issue that is much debated even in the business school. In your view, what's the difference between a manager and a leader? I mean, what is it that sets them apart?

JACOBS:

Yes, it's a subject for a lot of discussion. A leader is able to create a bond, a personal bond of identification where they can share in the victories and the failures. A manager has less humanity to it. The leader--it doesn't have to be warm, or a slap on the back or anything--but he's got to establish a feeling of, "This guy has our interests at heart." Now--and he must still be very technically competent, as a manager is--but on top of the manager, he's able to introduce an emotional connection with the people that work for him. Now, that is not necessarily good, because there are leaders who are cruel but establish an emotional connection, and he will get very competent people performing to high standards, who hate his guts, but who will stay because they're insecure and they respect his ability, but they stay from fear rather than affection, they stay for rigid boundaries, rather than freedom. So there's a whole bunch of psychological nuances to leadership--

ERANKI:

--that make a person a leader--

JACOBS:

Yes.

ERANKI:

--more than a competent or a good manager?

JACOBS:

It's very hard to define charisma and-- I don't know, that's a fancy word. There's a word in French-- Let's see, what the heck is it? Can't think of it. A sensitivity, a sort of sensitivity, person-to-person, that a good leader has as compared to a manager. A manager measures quantitatively and there is no humanity involved in his decision making. A leader has some humanity. It may be very severe--critical--but depending on the circumstances, or the personality of the individual-- He doesn't necessarily have to be a likeable guy. He doesn't--and shouldn't--be somebody who is making his decisions in order to be liked.

ERANKI:

But respected, perhaps?

JACOBS:

Yes. He's got to be respected, but also has to be respected in the sense that he is aware of your feelings and the emotional content of your participation with him, that he's aware of that, that you're just not a number, you're just not a guy on an org[anizational] chart, in a box. You're a person, your feelings are important. If they're feelings of anger and frustration, those are important to you, and you're willing to suffer the guy's anger and frustration because you want him to be--and he knows it--you want him to be a better person. I've used this line quite a bit in my career when I was bawling the hell out of somebody. And I would say to him, "Look, Jerry, if you were just a street sweeper or a custodian and you made this kind of a mistake I wouldn't bother to tell you about it or get mad and pissed off as I am right now at you for screwing up. But the reason I'm mad and angry is because I think a lot of you and I'm fond of you and it makes a difference to me whether you perform or not. And when you don't perform, I'm going to get goddamn mad. If necessary, I'll fire you, and still be fond of you, because you've disappointed me and haven't produced." And I've used that line a lot. And it's not bull, I really-- I mean, it comes across sincerely because it's true because getting angry at somebody is a way of demonstrating affection for them. And this is one part of leadership that many people don't understand. There are people who think that you've got to have the people working for you love you. And that's--as soon as you start currying their favor and doing things because if you do the tough things, they will dislike you, you've lost it.

ERANKI:

That seems to be an issue, certainly for managers who are starting out, and relatively early in their managerial careers. When do you start getting tough? And exactly when do you--?

JACOBS:

But not only when you start getting tough, but what's the springboard by which you get tough? It isn't a question of when, but what motivates you to get tough. And if you keep in the back of your mind that fundamentally you want that person to perform better, and honestly say that's because you care about that person and you want them to perform better, that's a hell of a lot better than saying, "I want you to perform better to get my approval," or "I want you to perform better because my standards are such and I want you to meet my standards." You see, that's different than saying, "I want you to perform better because I want you to have higher standards for yourself"--not self-centered; it's external centered. And that's not a very profound statement, but nevertheless it's a subtle but very important difference in the relationship with people.

ERANKI:

The other thing that also comes out of that, I think, is, as you as an entrepreneur are growing your company-- I mean, it's interesting that we're at this stage in your company and you mentioned leader versus manager. How important is it earlier on, when, let's say, you have fifty people, how important is it for you to have leaders versus managers at that point? I mean, do you need people to lead, and how do you groom them and make them--?

JACOBS:

It depends. You groom them by example. And if there's only fifty people, it's very easy to have a one-man business--and I'll get back to that in just a minute. So the influence that I had as a leader in the first twenty-five years of our existence was profound. That didn't mean that I didn't give other people opportunities. But my style was evident, it was there, they watched me do it, and some like it, and-- But there are a lot of people who worked for our company that quit and became successful elsewhere, so my style isn't necessarily the only style. But it was a kind that was comfortable for me. So over a period of time the people associated with this company--like Noel Watson, as an example--adopted many of the things that I did, or at least the style. But still, Noel is very different than I am. He has this intrinsic feeling but he is not able to project the warmth that I can--I mean, I'm being very honest with you--but after they get behind his gruffness, they find out that he is warm. And with Stan it was not that way. He was not able to-- He had a psychological problem in getting too close to people.

ERANKI:

That's interesting. So in a sense what you're also saying is that it's extremely critical for an entrepreneur to be a good leader.

JACOBS:

Yes.

ERANKI:

Because if you're not a good leader, it's not like you can find a good leader. You can perhaps find good managers--

JACOBS:

That's exactly right. And develop them into leaders. But look, a corollary of that is you're a good entrepreneur and if you can't develop good managers and leaders your growth is limited because you're then a one-man company. And that's what I faced--now to transition back to where we were talking about--that's what I faced when I convinced Warren Askey that he ought to give up the job of chief operating officer. I had a deep psychological problem at this point. I had seen in my personal life and the companies I worked for and the companies around the one-man business, where there's a strong, dominating leader of the business-- And I had seen them ruined. I had seen them produce people who were good workers, but had no inspiration, no warmth, and they were of limited growth because they were one-man businesses. And I said, "Not Joe Jacobs." My ego was such that I'm going to convince everybody that I'm going to groom my successor. Stan was not ready yet, he was not acceptable to the people. So I decided to go outside and get a new COO--a new chief operating officer as president, and I would stay as CEO. And I decided that I would-- ostentatiously, if you please--not interfere with him. I would give him his head to run the company. So there was a guy who was president of a division of Allied Chemical [Company] that I'd gotten to know over the years and really enjoyed him. He was a wonderful guy, good salesman. He and his wife became our friends and so on. And whenever I would see him, he'd say, "You know, I'm working with this damned big company and I've got ten thousand people working for me, but it's all a bureaucracy and so I'm just dying to have a small business like yours, Joe, and run it." So when this happened I went to my friend, Ed Korbel, and I said, "Would you like to be president of our company?" And he said, "Oh, boy, that's just what I've been dreaming about, Joe." And so I made a deal with him. And he moved out to California, out of this big company, and I put him in as president.

ERANKI:

When was that?

JACOBS:

Let's see--I have to figure this out--'78, maybe? I'd have to go back through the records--somewhere around then. And I brought him on as president. He seemed to have all of the characteristics that Stan Krugman didn't have: he was an outgoing personality, a good salesman, people liked him on short acquaintance. And I said to him, "Ed, Stan Krugman is a great force in this company, and he has a lot of people that dislike him, but everybody respects him. You can make a great success of yourself if you can get him to be your ally." And he understood that. But what happened was that Stan was so hurt at this time at being bypassed that unconsciously he started to undercut Ed Korbel, not overtly, but he wouldn't do things. Like he wouldn't say, "Ed, you shouldn't do that." He would let Ed make the mistake even though he saw it. And Stan became more and more morose about it, and I tried, and tried mightily to tell Stan, "Look, this guy doesn't have your knowledge of this business. Make yourself indispensable to him. Support him and cooperate with him." And Stan just was unable to do it. Normally Ed was a very personable guy, and a good salesman, but he had a quirk in character in social situations, when he could turn difficult towards people, and also he didn't have a consistency of purpose. Pretty soon, in a couple or three years, he was outwearing his welcome. I mean, he was welcome because I brought him in, and everybody liked me, but they essentially didn't want him to succeed, not just Stan, but the rest of them. And one of my directors at the time said a very, very cultured thing. He said, "Joe, the organism tends to reject a foreign body," which I thought was real good. You know, we'd all been together through the wars and through Arab--well, we weren't done with Arab Potash--and we had a certain style. And here was this new guy-- Obviously he didn't know anything about the engineering-construction business, or very little, and he was their new boss, and they let him fail. They had no bond of loyalty to him; their loyalty was to me. And so I would get little complaints here and there and I would try to ignore them. So at the end of two and a half or three years-- Oh, at one point, Ed came to me and said, "Joe, would you mind if I fired Stan Krugman?" And I said, "Yes, I'd mind, but you're the boss. If you want to fire him, you go ahead. It will be a great loss. You make your own decision." And he didn't have the guts to do it; he knew damn well that if he fired him that he had nobody that he could count on to-- So that went by the board. And finally I had to face up to it and say, "Ed, it's not working out," and "Sorry." And I gave him severance--long severance--and so on. But I was still insistent that I didn't want anybody to say it was a one-man business, but now it had been through two new CEOs, and I was pretty embarrassed. Here I was trying to prove to everybody that my ego was not such that I needed to have everybody say, "Joe Jacobs runs that company and that's his company," and that I was willing to hand it off it to somebody--

1.8. TAPE NUMBER: IV, SIDE TWO OCTOBER 2, 1998

ERANKI:

So you were saying that you didn't need to have people say that you needed to run the company.

JACOBS:

Right, and by their not succeeding it appeared as though it really was a one-man business, and I dominated it. But, in fact, I damaged the business because in both cases I very ostentatiously stayed away from injecting my ideas. And a lot of decisions were made that I didn't agree with and I let them go ahead. I made the mistake that Mr. E. E. Luther did to some extent. Okay, now I faced the question of "What do I do now?" And one of our directors said, "Look, I know a guy--used to be a classmate of mine--who is the president of one of the major divisions of Rockwell [International]. He's an engineer, he's been a project manager, formerly under- secretary of the Department of Energy, and he's leaving the government." By that time we were beginning to get some government business, so I interviewed and hired Dale [P.] Myers. Dale Myers is a very celebrated engineering executive; he's got an excellent reputation. He was [associate administrator for manned space flight] at NASA [National Aeronautics and Space Administration]. And so, I mean, a very prominent guy. And he was well-known in government circles, and we were beginning to get government business, and so we hired him to be our third CEO. That was in '80. And we were coming past the end of the big boom in engineering when synthetic fuels were in. You wouldn't know this but at the time the price of oil shot way up because of the embargo, and the government embarked on a program of synthetic fuels and an enormous number of programs with enormous engineering hours--we had a tremendous engineering population--and all of us made money like mad in '80, '81, and '82. And we brought Dale Myers in at that time. And then all of a sudden they discovered oil on the North Sea and the oil embargo was broken and the price of oil dropped and the government stopped all of these synthetic oil programs. And there was a real drop-off in business. And Dale Myers helped us get into the government business--did a lot of good things--but he didn't know how to operate a company in times of stress at all. He'd always worked for large companies and so forth, and our very existence was at stake, because in '82 we made the highest profits that we'd ever made up to that time; in '83 we were down to almost break even; and in '84--I may have these dates, I'll have to go back through the records; it was '83, maybe--we lost money; and the next year we lost a lot of money, and it became very severe. During this time I had ostentatiously stayed away from the day-to-day operations and what I found was that he'd made a mistake that I would never have made: that he was convinced by the people working for us--we had twenty-four hundred people at that time, so we'd grown fairly substantially--he was convinced by them that the only way we could get business in this tough business climate was to bid fixed-price, competitively. And they used these arguments with him: "Well, Dale, all of our customers out there are asking for fixed-price because there's a depression in the engineering business and we've already laid off all of the marginal people. What we've got left are the best engineers around--a lot of experience--so we can afford to bid fixed-price because we can put the best people on it." And we went into a fixed-price bidding binge and we lost $9 million that year, which is a lot of money to us. Fortunately, I had--I'm an entrepreneur, and a real estate entrepreneur--I had bought the building in which we were occupied, and I'd bought it at a bargain in '74 for $10 million. So here I was sixty-eight years old and I had to jump back in. And I asked Dale to resign--put him on a consulting contract, kept him on the board and so forth--and I came back in as CEO.

ERANKI:

When was that?

JACOBS:

That was in '84. We made a slight profit the next year. The following year we made good profits. And what happened was I had two lieutenants, one relatively new, and one was Stan--I mean, was-- Oh, by this time Stan Krugman retired, and he had made enough in stock in Jacobs Engineering and so forth that he could retire, relatively speaking, a wealthy man. So he'd retired; he finally came to me and said, "Joe"--you know--"I can't do it anymore, I have no enthusiasm," and so forth, and I said I understood and we gave him good severance. So I had these two lieutenants, one of which was Noel Watson. And we got together, and I said, "Fellas, we've got to do the tough things. We can't go on like this. I'm going to sell this building, get us a profit out of it, which will give us the financial resources. But we've got to reduce overhead." And that was the critical period. And with the help of these three people--two other people and me as a triumvirate, and more, especially, with Noel than the other guy--we cut out a whole layer of management. We laid off or retired a lot of our old hands who had helped build the company. But by that time they were well enough off, from all their option stock and so forth, so it didn't hurt. And we reduced staff from twenty-four hundred people down to twelve hundred people. We laid off an enormous number of people and that was the most painful year in my life. And Noel and I talked about it a lot. We'd lay awake night after night--these were guys we knew, guys that had been part of the family, and so forth. But we'd have to keep reminding ourselves either the business goes broke--we'll be nice guys and the business will go broke to avoid the tough decisions--or we've got to make the tough decisions to preserve what there is for those people that are left. And we had to constantly remind ourselves. And we went through a restructuring before the rest of American industry did. We flattened our management; we cut out fourteen vice presidents--a whole layer of management--we laid off a lot of people at the working level and so forth. And we've been a thin, spare company ever since--low on overhead, cut out all fixed-price bidding. And we did that for a couple of years, and then I made Noel--or the board made Noel--president and CEO and I became founder and non-executive chairman of the board. And Noel's been running the company ever since.

ERANKI:

That's great.

JACOBS:

And looking back, the mistake I made was pushing too soon to make sure that people outside didn't say Jacobs Engineering was a one-man business.

ERANKI:

And what was the impetus for that? What is the reason why you think you might have pushed too soon? You mentioned--

JACOBS:

Oh, well, look at the problems we had. If I hadn't so ostentatiously delegated to Warren Askey and brought in two green men like Ed Korbel and Myers--green to our business, hadn't been associated with me--and said, "You know, business is tough. I'm going to run the business. That's it," and just go on, I don't think we would have made the mistakes that they made, just because I had the experience. Because when Noel was finally given that job, when I felt that he was mature enough, he didn't make any of the mistakes that these guys had made. I mean, he cut out all that crap; he cut out the overhead. And he's worse than I am, much worse than I am, on cutting on costs. I mean, he's so cost conscious I call him "cheap" all the time. It's sort of a running gag, but it's his way of doing things. For instance, everybody in our company travels coach, including him. And he makes a religion of it-- I mean, even though he's got upgraded miles he won't use them if somebody else is on the trip because he doesn't want to show them that he can relax therefore they can relax. And the growth of our company, very honestly, is-- The really exponential growth of our company has been during Noel's regime, because when he took over, in a couple of years we went back to two thousand people--now we have ten thousand. And our sales were $400 million at the time; it's now $2 billion. And I had no problem in saying that the major growth in this company came after my regime.

ERANKI:

Well, what were your motivations for pushing early, for getting Askey and others?

JACOBS:

Well, Askey was an expedient thing to make the merger work.

ERANKI:

I understand.

JACOBS:

But the other two-- But even Askey, when I brought him here, I was determined that he wasn't just going to be a figurehead, because I had watched Armand Hammer hire presidents one after the other and they were puppets. And I didn't want that. And I didn't want to have that reputation.

ERANKI:

That was the Occidental Petroleum [Corporation]?

JACOBS:

Yeah, yeah. I use that as an example, but there are lots of people around like that, where they hire people and give them titles to appear as though they're delegating, and they're not. They're in there every day and making decisions and they're usually pretty good at it and so on. But I wanted to prove that I was different. Joe Jacobs was smarter than that. Joe Jacobs was not so egotistical that he had to make every decision. You know, all of these myths. And they were myths. I didn't have a really balanced view of how to do this in an orderly manner. I was worried--if I can look, in reflection--too much about image. And I was looking at the reverse image is the problem. In other words, I did not delight in if people say, "Oh, that's Joe Jacobs's company." That would always bother me, even though I was proud to develop it and so forth. And as a matter of fact, I think if you look at our company, it is one of the most successful transitions from a single-entity, entrepreneurial company to a professionally managed company. And I'm very proud of that; I'm extremely proud of it, because that doesn't happen very often.

ERANKI:

That's true. I mean, that's essentially how you --the transition, you know, the growing-pains kind of thing-- And I think that's a whole entire discussion in itself.

JACOBS:

Right.

ERANKI:

How do you make all that happen? And when do you cross the threshold?

JACOBS:

Let me tell you. I wish I could find this reference, but some business school in the Midwest did this study of entrepreneurial businesses from the day they were established by the entrepreneur to the day when they went out of business--either failed or were sold or merged or the owner died or any one of these-- The average life of an entrepreneurial business was twenty-seven years. And the single most important reason that it transferred from being run by the entrepreneur into something else, either dead broke, either merged or dissolved, or so forth-- The single most important reason was the lack of development of a management team to take over. And I was, by God, not going to fall victim to that. And I pushed it too fast.

ERANKI:

Let me flip the question around a little bit. If you look at some of the situations today--and since you're an investor now-- At UCLA I work for the Venture Development Program, and one of the things-- We work with young entrepreneurs that come to us and say, "Well, we're building a company out of this." And sometimes we find that the appropriate advice for them is, "This is a great deal. This looks like a wonderful opportunity, and you will get funding, but I think you're more likely to get funding and really succeed as a business if you get somebody else as a CEO." And this is not an issue of succession--you know--many years down the road, but almost on an up-front, at the beginning stage.

JACOBS:

Oh, absolutely. Oh, yes.

ERANKI:

So what do you think about that?

JACOBS:

That's absolutely the case. As a venture capitalist I face this all the time: the scientist or the technician who has a novel way of doing things but who doesn't have the qualities of a CEO. And that's among the most difficult things to convince somebody: that they need this, that they understand this, but it must be done. It must be done. And so there is one other aspect of this that I've noticed over the years, because I've been approached by many entrepreneurs, every one of them has an idea that is worth a million dollars, and it's downhill--got it by the tail on downhill pull--and this optimism-- One of the things that they don't recognize--and I've fallen victim to as an investor--is that there are some people that are outstanding at conceptualizing and recognizing a market need and conceptualizing a way to fill that market need, and you invest money in them and you assume they know how to make that work. And they don't have it. I mean, one of the worst investments I made was in a-- I won't tell you what it is--I invested and lost a couple of million dollars on it. A guy came to me with a wonderful idea. There was a market need and he said, "You know, I've been in this business; I know how to do it. Let me do it." And I loaned him money and before I knew it he was out of money, and I found out later on I had to take over the business--and I didn't know anything about it--because he was the most awful manager. I mean, he knew how to sell, but he didn't get good contracts. I mean, he just spent money like water. And so one must be very careful that a very good idea conceptualized doesn't mean that the person who conceives of that and writes the business plan, tells you how he's going to do it, can execute that well. That's a real danger for venture capitalists, and therefore good venture capitalists have to have good access to management know-how to step in when it's necessary.

ERANKI:

That's interesting. That is kind of a tangent, but I thought that was interesting, the corollary of what you were saying earlier. The one thing that we can perhaps go back to--but I don't know if you want to do it now or later--is the whole IPO [initial public offering] process, and why you decided to go public and such.

JACOBS:

Yes, that's worth an hour in itself. So we'll go back to that.

ERANKI:

Okay. I think we were at the point you were talking about-- We'd finished talking about succession issues and that Noel Watson has obviously done a tremendous--

JACOBS:

Oh, yes, absolutely.

ERANKI:

So what is your role after the induction of Noel into the president's job? What role have you played during that period?

JACOBS:

Well, it's been a great psychological adjustment for me because I'm an activist and I tend to want to get involved, but they don't involve me for a number of reasons. Number one, I am now a little old-fashioned--not keeping up-- Number two, Noel has a different style than I do so we'd be conflicting if we were arguing about how to do things. He's been successful; he has full support of our board, and I don't need it to enhance my ego any more. I mean, I'm still the largest single stockholder in this company and every time the stock goes up in price he's made me wealthier, or they have made me wealthier. I've got other things to do. I've got my family foundation, which I spend a lot of time at. But I'm making things for myself to do. I'm writing a column every week for a newspaper and I'm thinking about putting together a $100 million venture capital fund. And most people look at me, and they say, "What are you, nuts? You're eighty-two years old. Why do you do this?" And I say "Well, why not? What the hell am I going to do?" I could easily feel sorry for myself and sit around saying, "Gee, don't you guys need me for something? I have all this experience and Jacobs Engineering ought to be using my experience." And they do use it, but I let them do it in their own way. If they're going to go after an acquisition or a merger I don't get involved, but at some point they'll say, "Come on and meet Joe," and I'll be the jovial old man and tell stories and so forth and I'll grease the way that way. But that's all I'm confined to doing. They're so much smarter than I am-- Well, that's almost false modesty. They're so much better equipped to run this company at its size than I would be. I wouldn't have the patience or the depth of knowledge, either because of my age and my impatience at the kind of detail that Noel takes care of or just because I'm behind the times or because my style is different than what is required for a company here.

ERANKI:

At this stage, though--at the beginning--how did it work? Because obviously you'd been through these two or three experiences where you've been very hands- off and deliberately so. When Noel came on did you feel like, well, this time around you'd keep a tighter rein and keep--?

JACOBS:

Well, no, it was mixed feelings. Number one, I had enormous confidence in him because he'd been working for me for thirty-five years, so I knew him inside and out. So I had a lot of confidence in his management ability. But I wasn't as confident in his ability to get people on his team.

ERANKI:

The leadership sort of skills.

JACOBS:

Yeah. And I found that we had conflicts. And I would say, "No, for Christ's sake, don't do it that way. Why don't you do this and do that?" And we had a couple of set-to's. And he said, properly, to me, "Joe, I'm not you. I'm different than you. Whether I'm better or not is beside the point," he said, "but you should not expect me to be a carbon copy of you." And, for instance, I entertain very easily. My wife [Violet Jabara Jacobs] and I entertain our customers all the time. My wife is very retiring but she's a very gracious lady. Well, Noel and his wife live a very isolated life. Vi, my wife, gets a little piqued at times. She said, "You know, we've never been in Noel's house." And we haven't. But to him that's sort of superfluous. And it's different than the way we live and have lived all our life and interacted with the business. That's just one minor, minor example. But Noel and I had a set-to, and at least we have an affection for each other and an understanding over the years, so that Noel said to me, "Joe, we'll get a referee in if you want, but what you're asking me to do works very effectively for you but I can't do it the way you do it, and I don't want to imitate you. I want to be my own guy. And if I can perform, fine, and if I can't perform, I'll take the consequences." And his style is way different than mine. He's a lot more critical of his people and he's more negative than I am; he's not as much of a risk taker. We have always looked for opportunities for acquisitions and he looks at them very carefully and he doesn't take on too big an acquisition or too many at the same time, where I'd be sitting back and I'd say, "Oh, what the hell, take a chance," and still, at my age, say, "Well, why don't you go after both of those, rather than one or the other?" He'd say "Well, I don't think our management team can stretch that far." You know, whatever. These are differences in style, and he's proved himself in performance, because you look at the record of our company, and as I say, the last ten years' growth comes from Noel, not from me as the operator. It comes from me as the fundamental wellspring of energy that started the thing, but in actual performance, it's Noel's. And I have no trouble admitting that because he's my pupil.

ERANKI:

Yeah, I understand. But it almost seems as though there has to be a rock upon which it's built, and that--

JACOBS:

Yeah, and that's adequate for me. And I've got plenty of things to stroke my ego. You know, I write columns in the paper, and just today at lunch somebody came up and said, "Joe, you don't remember me, but I want to tell you I read your column in the paper. It's the best thing." This is very satisfying to my ego. And it's satisfying to my ego to see this company become one of the three largest engineering-construction companies in the world. And I don't give a damn whether Noel did it or I did it or twenty other people did it, my name's on the top there. So as I tell the people all the time, this company does honor to my name.

ERANKI:

If you're thinking about the big project we started out with today, how do you think--? I mean, I'm just using it as a "for instance"--

JACOBS:

Noel would not take on that project.

ERANKI:

Right.

JACOBS:

I'm anticipating he would not and yet he was very responsible for that project being successful. And that's part of Noel's baptism of fire, and he today would not take on that project because he saw all the problems we had and doesn't give himself enough credit for our having solved those problems.

ERANKI:

But you almost needed to take on that kind of project to get to--

JACOBS:

It made Noel, as well as our company, in the barest sense. That and many similar things.

ERANKI:

So that, in a sense, is almost the crux of the entrepreneurial spirit, then.

JACOBS:

And let me say this: I'm not so sure that Noel isn't right. At the size our company is now, and the number of people we have, as good as they are--and they have a fair amount-- As compared to other companies our size, and smaller or larger, they have a fair amount of entrepreneurial spirit, anyway, but really, a company this size should not take the kind of risks that I took in 1975.

ERANKI:

Why's that?

JACOBS:

Because of the fact that we can't be that responsive and there's too many people's lives that are at stake and living. I mean, if this company went broke--with $2 billion a year as annual revenue--because Noel bid on the Alameda Corridor, a $700 million job, and lost $200 million-- This company is liable to go broke. And many companies our size in our business have gone broke. One that's a well-known case was run by this guy, Bill Agee, the Morrison Knudsen [Corporation]. That was a company bigger than we are now, at one time, and he rammed it right into the ground with his ego and with not being cautious enough, with taking fixed-price bids, trying to develop finance projects, etc. And he wanted to merge with our company. And I went up to see him and said, "Bill, you don't want to merge with our company. We're so different than you are." And the company went broke. Used to be a power in our industry. And lots of companies in our industry have gone broke.

ERANKI:

But when you say there's a risk-taking aspect, I understand that part, but in what sense does the company at that size still need to be entrepreneurial, and what does that mean in that context?

JACOBS:

Well, in the acquisitions that we make or mergers-- Let me give you an example. This is not an actual one, but-- We're not in the power business, that is, building power plants. Question is, should we acquire a company in the power business? Now, that's risky, because I don't know anything about power plants; Noel doesn't know about power plants and so on. Do we know what the key factors are in making a power plant engineering company be successful or not? Well, we don't really know that much about it, but Noel has enough confidence in our people to maybe take that kind of a risk if we were considering it. We're not, but there are other fields in which-- For instance, we started to--this is a positive example--we started to do government work when Dale Myers was here. Well, under Noel's leadership we've pounded ahead with that and now it's a very substantial part of our profit picture. And we're expanding. And that kind of risk is going on. We're hiring [enough] people who know that business with confidence that we can manage it. We just got a joint venture with Bechtel Corporation for a $2.5 billion project down in Tennessee, where we're not quite an equal partner with Bechtel. I mean, that was pretty risky. So they are risk takers, more so than people of equal size to us. And that's why we've grown so well. I mean, we've grown at over 15 percent a year for ten years.

ERANKI:

That's interesting. So you're almost saying that the type of entrepreneurial spirit that you've shown-- Or rather, how it manifests itself changes as the organization grows.

JACOBS:

That's right. For instance, we started with one office in Dublin. Well, now we have offices in Dublin, Cork--in Ireland--we have them in London, Manchester, Glasgow-- We acquired a company in England-- We just acquired a company in France with offices in France and Spain and Italy. So that's the kind of adventurism that we're doing. It's a different kind of risk taking because we could--if it isn't managed right--lose our ass expanding overseas or get cheated or whatever.

ERANKI:

So where do you see the next stage, then? Where does it go from now?

JACOBS:

Well, I don't want to tell you because the insider information-- But, obviously, we're cautiously moving into the international market. Five years ago, 90 percent of our business was here in the United States; today only 70 percent is here in the United States, so we're growing overseas. But Noel's a cautious enough operator that we didn't get stuck in Singapore; we didn't get stuck in Southeast Asia and so forth because-- We have never sent any marketing people to China. Noel said, "That'll swallow you up; you'll spend millions of dollars in sales dollars, and you'll never know whether it will get you anywhere." And he's turned out to be right, so-- Okay, time for me to go.

ERANKI:

Okay.

JACOBS:

I'm leaving on a trip tomorrow, so I have to go pack.

ERANKI:

Thank you. Thank you very much for your time.