Contents
- 1. Transcript
- 1.1. TAPE NUMBER: I, SIDE ONE SEPTEMBER 18, 1998
- 1.2. TAPE NUMBER: I, SIDE TWO SEPTEMBER 18, 1998
- 1.3. TAPE NUMBER: II, SIDE ONE SEPTEMBER 23, 1998
- 1.4. TAPE NUMBER: II, SIDE TWO SEPTEMBER 23, 1998
- 1.5. TAPE NUMBER: III, SIDE ONE SEPTEMBER 30, 1998
- 1.6. TAPE NUMBER: III, SIDE TWO SEPTEMBER 30, 1998
- 1.7. TAPE NUMBER: IV, SIDE ONE OCTOBER 2, 1998
- 1.8. TAPE NUMBER: IV, SIDE TWO OCTOBER 2, 1998
1. Transcript
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.