What I learned from reading Last Train to Paradise: Henry Flagler and the Spectacular Rise and Fall of the Railroad that Crossed an Ocean by Les Standiford.

When Henry Flagler, co-founder of Standard Oil and 1 of the world's most famous and powerful men, announced that he would extend his far-flung empire by building a railroad across the ocean, few could have anticipated how things would ultimately turn out.

Many immediately dismissed Flagler's intentions as impossible.

They were hard-headed scientists, engineers, and businessmen who thought what Flagler proposed – to build a railroad 153 miles from Miami to Key West, much of it over open water – was a crackpot notion on the face of it.

Flagler's Folly, the press dubbed the project, though the man who proposed it was undeterred.

The story behind the very being of this railroad may be its most amazing aspect.

It is a story that concerns 1 of the world's richest men, 1 of the most difficult engineering feats ever conceived, and the most powerful storm ever to strike American shores.

In a sense, this railway is what remains of 1 of the last great gasps of the era of manifest destiny and an undertaking that marked the true closing of the American frontier.

The building of the railroad across the ocean was a colossal piece of work, born of the same impulse that made individuals believe that pyramids could be raised, cathedrals erected and continents tamed.

The highway is a ghost really, All that remains of an era where men still lived who believed that with enough will and energy and money that anything could be accomplished.

That is an excerpt from the book I'm going to talk to you about today which is Last Train to Paradise Henry Flagler and the Spectacular Rise and Fall of the Railroad that Crossed an Ocean and it was written by Les Standiford.

Okay before I jump back into the book I just want

to tell you how this fits into everything else that you and I have been talking about.

I've had this book for a very long time I haven't got around to reading it and I think now is the perfect opportunity to do so because I'm rereading the very next podcast I'm working on is I'm rereading the fantastic biography of John D Rockefeller called Titan I read it for all

the way back on podcast number 16 but I didn't really know how to make

a podcast back then and that book is way too important.

And so I figured before I reread that biography, let me go ahead and find a biography on Rockefeller's partner.

And I'm glad I did because this book is absolutely incredible and I should have known It was good because I had read 1 of Les' books in the past.

In fact, 1 of my favorite books I've ever read for the podcast was all the way back on Founders number 73.

It's called Meet You in Hell, Andrew Carnegie, Henry Clay Frick, and the Bitter Partnership that Transformed America.

That was part of a three-part series I did on Andrew Carnegie and his partner Henry Clay Frick and that was my favorite book.

So what this book is about is exactly what that excerpt said.

It's about 1 of the world's richest men at the time, so that's Henry Flagler, 1 of the most difficult engineering feats, which

is the second career that he does after Standard Oil, where he becomes a developer and builds essentially like most of the state of Florida, and then the most powerful hurricane to ever strike the American shores.

So I'm going to focus mainly on Henry Flagler and the work he's doing, but it's an absolute fantastic book.

So if you like the podcast, make sure you pick up the book.

So at the very beginning, the author is doing the drive from Miami down to Key West.

I've done this drive myself about probably at least 10 times in my life.

And so this is fantastic because it gives

you an idea of how insane Flagler's undertaking was.

And so this is 2 people talking in modern day, because you can still see some of the remnants of the railway.

It's going to wind up being destroyed by a hurricane in 1935.

This is many years after Flagler died, though.

So it says, much of the original railroad bridge was left standing.

Massive stretches jutting out from the water, pilings, and arches, which are as mystifying to the modern traveler as Stonehenge.

And so now you have a conversation between 2 people.

So it says, what's that over there anyway?

Who would build a railroad across the ocean?

And that is where I want to start because the author does an incredible job describing who exactly Henry Flagler was.

He was an incredible formidable individual.

In early 1904 when Henry Flagler made his fateful decision to begin the building of the Overseas Railroad He was already

The drive to make money had little to do with his decisions in those days, even if money or the lack of it had been the central force in the first part of his life.

A million ideas came to my mind when I got to this section.

So it says, Flagler had grown up poor, the son of a minister.

Henry was only 14 when the family's Spartan existence prompted him to leave home in 1844 and join his half-brother Dan in northern Ohio.

And he does this because he's going to want to be a salesman in a general store that his uncle owns.

And says Flagler, who arrived with a few pennies in his pocket, was determined to make the most of his opportunity, working long hours to save his money and often refusing invitations to join friends on weekend getaways.

His hard-working, sober-sided ways would persist through much of his life, earning him the trust of employers and later of influential investors and partners who would change his life beyond his dream.

So that's the first thing that pops to mind.

This is the importance of not only being industrious and hard-working but also appearing industrious and hard-working intentionally.

When I got to that section the very the person that popped my mind was the autobiography of Benjamin Franklin I covered this all the way back on founders number 62 and in his autobiography Ben talks about this he was obviously 1 of the greatest marketers to ever live as well and he's this has been writing this Benjamin Franklin writing in his autobiography

he says I took care not only to be in reality industrious and frugal, but to avoid all appearances to the contrary.

I was seen at no places of idle diversion.

And to show that I was not above my business, I sometimes bought home the paper I purchased at the stores, through the streets, in a wheelbarrow.

to switch to, that is Franklin's autobiography.

Now let's go to Isaacson's, Walter Isaacson's biography of Benjamin Franklin.

And he's going to describe why is Franklin doing this or he's going to elaborate on why Franklin is doing this.

Franklin became an apostle of being and just as important of appearing to be industrious.

Even after he became successful he made a show of personally carting the rolls of paper he bought in a wheelbarrow down the street to his shop rather than having a hired hand do it.

The industry visible to our neighbors began to give us character and credit.

So he's saying that's an interesting way to say, hey, I'm working hard and other people are noticing that I'm working hard and that opens up opportunities for you.

And so he says, 1 of the town's most prominent merchants said of Franklin, the industry of that Franklin is superior to anything I ever saw of the kind.

I see him still at work when I go home from the club, and he is

at work again before his neighbors are out of bed.

And so at that point in Franklin's life, when he's still coming up as an entrepreneur, all the people that

have more money, they open up all these opportunities because they see, oh, Franklin is 1 of us.

That's exactly what happens to Flagler and part of his the fact that he was always about his business, always focused on the task at hand, is what is going to have him link up with John D Rockefeller later on And obviously the creation of Standard Oil changes his life forever and it's the reason that we know his name to this day and that I'm holding this book about his life in my hand.

is he working hard, he studies intentionally.

Part of the ambitious young Flagler's duties came to involve the brokering of corn to shipping agents in nearby Cleveland.

Though he knew nothing of the grain business at the outset, he threw himself into its study with his characteristic devotion to the job at hand.

His single-minded approach was so successful that he was able to buy into the Harkness that's his half-brother's family into the Harkness family's business within a few years and shortly afterward made the acquaintance of 1 of his of 1 of his Cleveland counterparts in the grain brokerage business.

to that section, this paragraph that I read a long time ago, written by David Ogilvie in the book Ogilvie and Advertising, that's Founders No.

You can just simply collect more information than other people.

He's already built this gigantic advertising empire and he's giving advice to younger people on the way up.

And this is what Ogilvy said, set yourself to becoming the best informed person in the agency on the account to which you are assigned.

If for example, it is a gasoline account, Read books on oil geology and the production of petroleum products.

Visit your clients' refineries and research laboratories.

At the end of your first year, you will know more about the oil business than your boss.

And so a combination of those ideas is what produces Henry Flagler's first fortune.

Remember he arrived in town with pennies in his pocket.

And so he's going to also be in a right place at the right time This is gonna be the beginning of the Civil War and it says the onset of the Civil War proved to be a boon to Flagler why is that he's a grain merchant, right?

He's in the merchandising of corn a grain merchant began Flagler a grain merchant began to realize the truth of the maxim that an army travels on its stomach Business boomed and Flagler was soon rich by his own standards rich, but bored he had $50, 000

in his bank account and it was 19 shooting

And this is where he makes his first catastrophic mistake as a young man.

I love the way that Warren Buffett writes about this in his shareholder letters.

And he says, over the years, a number of very smart people have learned the hard way that a long string of impressive numbers multiplied

That is not an equation whose effects I would like to experience personally.

That is exactly what Flagler is about to feel right here.

Casting about for something more interesting to do, Flagler hit upon the idea of salt.

Intrigued by a discovery of vast deposits of salt in nearby Michigan and an act on that state's legislator that made the business tax exempt, Flagler sank every penny he had into the venture along with an equal amount that he borrowed.

But the great salt rush had drawn a horde of competitors, some of who actually knew a few things about the business, unlike Flagler, right?

When the end of the Civil War brought a collapse in prices, Flagler's operation fell apart.

He found himself not only penniless, but now $50, 000 in debt.

It was a lesson the ambitious young man would never forget.

He does not compound 1 bad mistake with another.

He might have been beaten, but he would not move backwards.

So now he's negative 50, 000 his bank account.

He's got to borrow a few hundred dollars to try to get back on his feet with a few hundred dollars in his pocket, advanced to him by his father-in-law.

He moved in with Mary, his wife of 11 years,

to Cleveland and renewed his old acquaintances in the grain dealing world, right?

I'm gonna jump into some other business I don't know that well.

And then that obviously didn't work out well.

Because he takes a post in a firm that had just been vacated by his old friend Rockefeller, who had just left grain for an intriguing new substance called oil.

to find themselves at the right place at the right time with the right set of skills because of its position on Lake Erie and its proximity to the newly discovered oil fields in western Pennsylvania, Cleveland where they are, had developed over the past dozen or so years into a shipping and refining center for oil which at the time was still competing with whale oil and lard for supremacy as a fuel and lubricant.

And so that is where Rockefeller was going to set up his business.

This is the business that Flagler's eventually going to be invited into.

Rockefeller had invested in a refining business during the Civil War and by the time of Flagler's arrival in Cleveland he had decided to devote all of his energies to the business of making and shipping oil.

Rockefeller did not believe in diversification.

He said they had no outside interest that is an immense task.

go out and diversify into other lines or to make other investments.

If Rockefeller, later in his life, he had a ton of other investments, right?

But if he never had a single investment, other than his own company, he still would have been 1 of the richest people alive.

Because Flagler had rented a house on the same street as Rockefeller and kept his offices in the same building.

The 2 often walk to and from work together, comparing notes and sharing their chief binding passion, the desire to make large sums of money around this time.

Rockefeller's going to be about 25 and I think Flagler's either 32 or 34.

He's about 7 or 9 years older than Rockefeller.

But when I got to that part, I read Rockefeller's autobiography too a while back.

I think it's like Founders 155 or something like that.

But the reason that came to mind when I was reading this section is because when Rockefeller wrote that autobiography when he was a very old man, well after Flagler died, and as he's writing the autobiography, he says that this, right here, walking back and forth, working every day with Flagler, he says this was some of the best times of his life.

And so when I got to that section I left a note to myself, reminder you are in the prime of your life now.

The older version of you is going to look back on what you are experiencing right now fondly, which means that you must go after what you want in life like your life depends on it.

I don't want to get to the end of my life and look back at this precious time and be like wow you played it safe and now I'm about to go to my grave never achieving what I wanted in life.

That is why I think autobiographies especially are such gifts to humanity because you see they're just further down the path than you and I are, usually by a few decades.

It's foolish to think all these smart and formidable people, like we're gonna avoid their fates.

They're not writing about how great it is to be 75.

They're writing about, man, I wish I could go back in time in my 20s, my 30s, and my 40s as I was building this business.

So I try to wake up every day with gratitude.

The older version of me, the happiness I should say, of the older version of me depends on my decisions and what I do right now.

So that's exactly where we are in this story.

oh this is so this is part 2, I'll tell you what I was thinking about when

Rockefeller was convinced that oil was the conduit to success and had joined forces with a chemist by

the name of Andrews who possessed technical expertise upon which the refining process was founded.

So this again what Rockefeller does is really smart, that you need to find partners that have skills that you lack.

you are doing the same thing, 1 of you isn't necessary, right?

Rockefeller himself was the consummate manager, but he was well aware of his own shortcomings as a marketer, and that is where Flagler came in.

So it's like, I'm not technical, and I'm not a marketer, So let me go find people that are right flagler was 1 of the most successful grain brokers Rockefeller had known before the war so that goes back to where the section started the importance of him a flagler being hard-working single-minded learning as much as he could and Not only being industrious but appearing to be industrious because now Rockefeller's remember that's like hey, I need help I'm about to but

he's about to build maybe the most profitable company that ever existed.

Imagine the difference in Flagler's life if he had messed up that opportunity when he was a young man.

If he was lazy, if he was drinking all the time, if he wasn't studying.

He's just basically an average human being.

That opportunity that Rockefeller's gonna offer him, let's say 5 years into the future thereabouts, that would have been foreclosed.

It's so crazy how these things connect together.

So Rockefeller's going to recruit them and really think about Standard Oil.

I know it's funny from our perspective, what is it, 120 years later, something like that, maybe even more, 150, I try not to

But it's really funny from our perspective, they're building the most valuable technology company of the day, of their day.

Rockefeller valued Flagler's undying optimism and drive as well as his relative maturity, which would come in handy for a fledgling business founded upon a new technology and seeking to attract investment from others.

And so it says, for the next 15 years, Flagler and Rockefeller worked side by side, walking to the office together in the mornings, passing drafts of letters and detailed business documents between their desk during the day and walking home together at night, always planning and calculating.

these are 2 of the most calculated humans I've ever read about.

The result of their efforts was Standard Oil, the largest, most powerful, most profitable and perhaps most notorious corporation ever created.

Rockefeller would come to freely attribute the secret of their firm success to his partner, for they were not long in

the business before Flagler realized that the negotiation of a lower freight rate was the key to the entire matter.

So there's a lot to admire about Flagler that we're gonna get to in the book, but 1 thing you have to know about him upfront, you would not wanna deal with him.

He was absolutely completely ruthless, business and personal wise.

I want to constantly remind them that these people are walking the earth today.

So this is a, they're like, okay, well we've figured, okay, the low freight rate.

So the actual transportation of their product, right?

If oil could be brought to their refineries at a rate below that offered to competitors, it would create an unassailable competitive advantage.

In the highly competitive oil market, no other factor in the process could differentiate 1 player from the next to such a degree.

And That's why you see over and over again throughout history, Sam Walton, Andrew Carnegie, Jeff Bezos, they all say, gentlemen, watch your costs.

He was obsessed and his partner Henry Kelly Frick.

them said it, but they said, gentlemen, watch your costs.

That's what they would tell up and down their entire business.

We will have an unassailable competitive advantage if we can produce, in their case, steel at a cheaper rate than anybody else.

As a result, Flagler soon became a master of the negotiation of rebates from the major rail carriers who served the oil fields.

This is just really in like 2 or 3 sentences.

This is a basic, very basic description of their future moat.

And so just in case you don't already know, that's a term from Warren Buffett.

When our long-term competitive position improves as a result of our almost unnoticeable actions, we describe the phenomenon as widening the moat.

And in doing that, it's essential if we are to have the kind of business we want a decade or 2 from now.

When short-term and long-term conflict, widening the moat must take precedence.

So this is just a fancy way of saying, why are you difficult to compete with?

That is the way I think about it, at least.

He's like, OK, Flagler's negotiating with all the major rail carriers who serve the oil fields.

And it says in return for lower rates, Flagler would guarantee massive shipments to the railroad.

So I'm giving you something in return to meet these goals.

Flagler would in turn have to acquire more crude and increase his refining capacity in order to make that happen.

He and Rockefeller would need money and a lot of it.

So that is when they incorporate Standard Oil.

They raise, it says Standard Oil went public in January of 1870 at a capitalization of $1 million.

Rockefeller took about 26% of the shares and Flagler had about half that.

Inside a dozen years, the worth of that company would grow to 82 million.

You're talking about 1882, that is insane.

82 million, a staggering rate of increase and 1 fueled largely by Flagler's remorseless goal to control completely

the production of refined oil in Cleveland.

We're going to get to this thing called the Cleveland massacre.

I'll talk more about this next week on in Rockefeller's biography.

But it says Flagler was a ferocious tactician at the office when in a few months he and Rockefeller had either bought out or scared off 20 of their 25 competitors.

The choice offered to their competitors was simple, except what they always insisted was a fair price for your company or go broke trying to compete with a powerhouse that's standard oil obviously with a powerhouse that could do business more cheaply and so again that's why they're obsessed with low cost they can make money at a lower price than their competitors They are willing to drive down that price to make you go bankrupt low cost can bankrupt your competitors and Rockefeller and Flagler are both ruthless enough to make sure that that happens.

And there's a great story in Titan where Rockefeller is told from the story of 1 of their competitors where Rockefeller shows them shows the guy he's trying to buy out that was competing with Rockefeller and Flagler at the time, shows him his books, shows him their cost structure.

And I forgot exactly what the guy said, but essentially he's like, oh no, these guys can make money at a prices that'll bankrupt me.

And so once they consolidated on the refinery aspect, they said, okay, how can we control oil prices?

to remember, when we're dealing with people like Rockefeller, Flagler, JP Morgan, Vanderbilt, they did not look at competition as something like in a similar vein that we might look of today.

Most people think, oh, businesses are competing.

Direct competition between businesses is usually good for the end consumer, right?

They thought of competition as something to get rid of.

1 of the funniest descriptions of their mindset that's very different, I think, from most people's is when JP Morgan was advising clients about they were having problems with, it might have been Moet and Hennessey, I can't remember, they were manufacturing champagne.

And so JP Morgan's like, well Have you thought about just buying up the whole Champaign region, not buying up your competitor, literally buying up the entire industry?

So it just gives you insight into how these people thought Flagler Flagler.

So now they're about to like, OK, let's we're going to control the price of oil.

Flagler's tactics were not limited to his fellow refiners.

in oil prices to persuade most of the Pennsylvania oil producers to join with him in a scheme directed at the entire railway industry.

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#247 Henry Flagler and the Spectacular Rise and Fall of the Railroad that Crossed an Ocean