#359 The Russian Rockefellers

The podcast delves into the remarkable industrial odyssey of the Nobel family, focusing on the pivotal father-son dynamic and their entrepreneurial journey. Emmanuel Nobel, the patriarch, was a brilliant inventor but financially inept, leading to bankruptcy. His sons, Ludwig and Alfred, learned from his mistakes, becoming world-class entrepreneurs who built enduring businesses by obsessively controlling costs. Ludwig, an engineering genius, created the Russian oil industry, while Alfred, the inventor of dynamite, established a global dynamite empire. The episode underscores the importance of financial prudence, innovation, and the lasting impact of entrepreneurial legacies.

• The history of the Nobel family is marked by a transition from invention to entrepreneurship, with significant contributions to various industries.
• Emmanuel Nobel, the patriarch, was an inventive genius but struggled with the financial aspects of business, leading to bankruptcy.
• His sons, Ludwig and Alfred, learned from his mistakes and became successful entrepreneurs, emphasizing cost control and financial management.
• The family's journey from poverty to building an industrial empire demonstrates resilience and the importance of combining innovation with business acumen.

"The founder of this family dynasty was a great inventor, but he wasn't a great entrepreneur. He knew how to build great products, but he didn't pay enough attention to the financial side of his business, and as a result, he goes bankrupt."

• Emmanuel Nobel's lack of financial oversight led to bankruptcy, a mistake avoided by his sons.

"Ludwig and Alfred were both world-class entrepreneurs and some of the wealthiest people on earth when they were alive. They never went bankrupt like their father, and they were both obsessed with watching their costs."

• Ludwig and Alfred's success was attributed to their focus on cost control and financial management.

• Cost control is a recurring theme in successful entrepreneurship, as emphasized by various historical figures and modern entrepreneurs.
• Andrew Carnegie's mantra on the permanence of cost savings highlights the strategic importance of managing expenses.
• Modern businesses, like Ramp, continue to emphasize cost control as a competitive advantage.

"Profits and prices are cyclical, subject to any number of transient forces on the marketplace. Costs, however, could be strictly controlled, and in Carnegie's view, any savings achieved in the cost were permanent."

• Andrew Carnegie's philosophy underscores the lasting impact of cost savings.

"The main theme from the podcast is the importance of watching your costs and controlling your spend, and how doing so gives you a massive competitive advantage."

• Emphasizing cost control as a key strategy for business success.

• The Nobel family made significant contributions to various industries, including explosives, oil, and transportation.
• Emmanuel Nobel pioneered underwater mines, while his sons expanded into oil and other sectors.
• Ludwig Nobel, in particular, was instrumental in creating the Russian oil industry and developing innovative infrastructure.

"The Nobel family's fascination with explosives began with Emmanuel Nobel's experiments with subsurface charges of gunpowder to destroy an enemy under on land or on sea."

• Emmanuel Nobel's early work in explosives laid the foundation for the family's future endeavors.

"Ludwig Nobel, Alfred's brother, literally created the Russian oil industry. He designed the world's first oil tanker, installed Europe's first pipelines, and built the world's first full-scale continuous distillation refinery."

• Ludwig Nobel's pioneering efforts in the oil industry and infrastructure development.

• The Nobel family's success was shaped by historical events and their ability to adapt to changing circumstances.
• The family's move to Russia was influenced by the opportunities available in the Russian market compared to Sweden.
• Political upheavals, such as the Bolshevik Revolution, had significant impacts on the family's fortunes.

"In Sweden of the 1830s, Emanuel was alone in recognizing the value of this new weapon. Financial security continued to elude him. Creditors continued to hound him."

• The challenges Emmanuel Nobel faced in Sweden before moving to Russia.

"When the Bolsheviks came to power, Immanuel had to flee the country disguised as a peasant, a reminder of how fast things can change."

• The dramatic impact of political changes on the Nobel family's fortunes.

• The support of family members, particularly spouses, played a crucial role in the Nobel family's success.
• Emmanuel Nobel's wife provided emotional and practical support during difficult times, enabling him to continue his work.
• The importance of a supportive home environment for entrepreneurs is highlighted through the experiences of the Nobel family and other successful entrepreneurs.

"Her patience, endurance, even her faith in her husband were sorely tested during those first years of marriage. As one after another, of Emmanuel's dreams turned into nightmares."

• The critical role of Emmanuel Nobel's wife in supporting his endeavors.

"Entrepreneurs are going to get enough doubt from the external world. They can't have it when they come home. They can't have it with the most important relationship they have in their life."

• The necessity of a supportive home environment for entrepreneurial success.

• The Nobel family's legacy extends beyond their individual achievements to their lasting impact on various industries.
• The establishment of the Nobel Prizes by Alfred Nobel is one of the most well-known aspects of their legacy.
• The family's contributions to industry and innovation continue to be recognized and studied.

"Alfred Nobel was only one member of history's most inventive family. And the story has never been told of his father, Emmanuel, and his brothers, Ludwig and Robert and his nephew, Emmanuel, and their own individual entrepreneurial, technological and financial achievements."

• The broader contributions of the Nobel family beyond Alfred Nobel.

"An empire which had taken the family 80 years to design and build was destroyed, bringing to a sudden and bitter end one of the most remarkable industrial odysseys in world history."

• The dramatic rise and fall of the Nobel family's industrial empire.

• The Nobel family began with young children selling matches on street corners in Stockholm.
• Emmanuel Nobel provided a unique education for his sons through private tutors.
• Each son specialized in different fields: Robert and Ludwig in engineering, Alfred in chemistry.
• The boys learned multiple languages and gained practical business experience by working in their father's factory.

"They were instructed solely by tutors, Robert and Ludwig, primarily in engineering, Alfred in chemistry, and all three in Swedish, Russian, German, French, and English."

• Emmanuel's lack of financial discipline and reliance on a single customer led to his eventual bankruptcy.
• His inventive skills did not translate into sustainable business practices.

"He's much more of an inventor, not an entrepreneur. He has two really big mistakes. One, he's got one customer, and two, he doesn't have the financial discipline that his son Alfred will have."

• Emmanuel's business depended heavily on contracts from the Russian czar, which were not honored after a change in leadership.

"His entire business depended on the contracts that he was getting from Nicholas, the czar at the time. Nicholas is going to die. The new czar takes over. This is Alexander II, and suddenly those contracts, those promises, mean nothing."

• Ludwig took advantage of beneficial government policies and industrial growth in Russia.
• He diversified his business to avoid the pitfalls his father faced, such as over-reliance on military contracts.

"Ludwig was careful to avoid total dependence on such contracts and to rely on the spoken or even written word of government ministries."

• Ludwig's factory became Russia's largest manufacturer of gun carriages and rifles.
• He imported Swedish talent to meet the demands of his expanding business.

"The task of finding talent was just as difficult for Ludwig as it had been for his father. And the solution for both men was to recruit as many Swedes and Finns as were willing to work in Petersburg."

• Ludwig's success was also due to his ability to secure financing through personal relationships.

"Carl had loaned Ludwig his securities to use as collateral for bank loans to expand the factory. Such support, relationship, and encouragement was a most valuable asset for Ludwig's industrial enterprises."

• Ludwig was ahead of his time in caring for his employees, which led to increased productivity.
• He built housing, established savings banks, reduced work hours, and started profit-sharing plans.

"Ludwig made certain that his workers' accommodations were adequate and well maintained. He built new housing, encouraged them to save a portion of their wages, and established savings banks for his employees."

• Ludwig's approach to employee welfare was revolutionary and significantly different from the norm of the time.

"Decades before the business world discovered that overall efficiency and productivity are promoted by a generous and concerned attitude towards employees, Ludwig Nobel was doing it."

• Alfred Nobel's success in dynamite was inspired by his former chemistry tutor.
• He was not the first to experiment with nitroglycerin but was the first to combine it with a strong business model.

"Alfred was not the first to experiment with nitroglycerin, but he was the first to combine successful experimentation with a genius for business organization and financial management."

• Alfred's dynamite business expanded globally, with factories around the world.

"By the time that Ludwig is going to start building in the oil industry, by that time, Alfred already had a dozen dynamite factories all over the globe."

• The Nobel family, particularly Ludwig and Alfred, built businesses that were authentic to their personalities and strengths.
• Their success was not just due to innovation but also due to their ability to learn from past mistakes and adapt.

"It's not the first person to invent something that gets rich. It's the first person to match that invention and build a phenomenal business around that invention."

• The Nobel name became synonymous with quality and high standards, creating a lasting legacy.

"The Nobel name meant something. In fact, later on, as they dominate the Russian oil industry, they talk about their employees were proud they wore the fact that they were Nobelites, that they worked for the Nobel family as a badge of honor, because that meant they were the best."

• Importance of conservative financial management and cautious expansion.
• Steve Jobs' perspective on survival and long-term success in the industry.
• Example of a business growing from a small store to a billion-dollar company over 60 years due to durability.

"Victory in our industry is spelled survival. All the money is in the future. Do not interrupt the compounding."

• Emphasizes the importance of long-term survival and compounding growth over immediate expansion.

• Introduction of Robert as the underachiever in the family.
• Robert's significant decision to invest in an oil refinery instead of walnut wood.
• The impact of this decision on the family's business trajectory.

"In all his travels, he had never seen anything like Baku. And in all his dreams for personal enrichment, he had never seen greater potential."

• Highlights Robert's realization of the potential in Baku and his decision to invest in the oil industry.

• Robert's past failures and skepticism from his brothers.
• The family's initial lack of enthusiasm for Robert's new venture.
• Robert's innate talent and the opportunity in a market with second-rate competition.

"His two brothers looked upon this scheme with as much enthusiasm as they had viewed Robert's other projects. First it was fireproof bricks, then kerosene, iron, glycerin, and now petroleum. What next?"

• Illustrates the skepticism and lack of confidence in Robert's new venture due to his past failures.

• Robert's skills as a chemist and his contributions to improving oil refining methods.
• The family's ability to combine talents and build sophisticated manufacturing facilities.
• Rapid success in producing high-quality kerosene and setting industry standards.

"In a short time, Robert was able to suggest improved methods of refining the crude oil that's coming out of this Baku region in Russia to produce higher grade kerosene than was the norm for his competitive refineries."

• Demonstrates Robert's technical expertise and the family's collaborative success in the oil industry.

• Ludwig's entry into the chaotic oil industry in Baku and his efforts to impose order and rationality.
• Comparison to Rockefeller's approach in the American oil industry.
• Ludwig's strategy of targeting a market with second-rate competition.

"When Ludwig Nobel entered Baku in the spring of 1876, a man with vision had arrived. It was the real beginning of the oil industry."

• Highlights Ludwig's vision and the transformative impact he had on the Russian oil industry.

• Ludwig's continuous innovation and leadership in the oil industry.
• Invention of the oil tanker and its significance in the petroleum industry.
• Ludwig's logical and persuasive arguments for transporting oil in bulk.

"If it could be transported in bulk, meaning oil carried from one harbor to another in large tanks, Ludwig believed that the product would compete with more traditional sources of fuel."

• Emphasizes Ludwig's innovative thinking and the practical approach to solving industry challenges.

• Ludwig's refusal to patent his designs and his desire to benefit the entire industry.
• The rapid growth and scaling of his oil tanker fleet and distribution system.

"Ludwig made no effort to keep secret any part of his designs, and he rejected the pleas of his associates and shareholders that he take out patents. He did not wish to profit in that manner."

• Illustrates Ludwig's open and collaborative approach to industry innovation.

• Ludwig's creation of a comprehensive transportation and distribution system for oil.
• The scale and complexity of Ludwig's operations, from drilling to retail distribution.

"Ludwig Nobel's tanker fleet was the most dramatic innovation in the Russian petroleum industry of the 1870s. But it was only part of the general transportation and distribution system, which he conceived and organized."

• Highlights the extensive and integrated nature of Ludwig's oil empire.

• Differences in personality, management style, and business approach between Ludwig and Alfred.
• Ludwig's hands-on, optimistic approach versus Alfred's delegation and financial focus.
• Both brothers' significant contributions to their respective industries.

"Alfred preferred to be aloof from his employees. Ludwig's home was in front of his factory. Ludwig spent many hours with his engineers and draftsmen, his factory foreman and his section chiefs."

• Contrasts the different leadership styles and personal engagement of the two brothers.

• The emergence of Standard Oil and the Rothschilds as major competitors in the Russian oil industry.
• The ongoing struggle and competition between these major players.
• The impact of external success on attracting competition and the need for constant innovation.

"Rockefeller already controlled more than 90% of all American oil exports and was the domineering force in all world markets except Russia. But the price of monopoly is eternal aggression."

• Highlights the competitive pressures and the relentless nature of maintaining industry leadership.

• The Russian oil industry was massive and competitive, leading to intense rivalry with American companies like Standard Oil.
• Nobel oil wells were extraordinarily productive, sometimes producing more oil in a day than all wells in the United States combined.
• Oil gushers in Russia were so powerful that they could drench entire towns in oil.

"One Nobel oil well, a single one, gushed over 11,000 tons of oil a day. That is more than the total oil flowing from all 25,000 wells in the United States at that time."

• Highlights the unprecedented scale and productivity of Nobel oil wells compared to American wells.

"These gushers would come out sometimes so fast and unexpectedly that they would shoot a stream of oil that's 225ft straight up into the sky."

• Describes the intensity and unpredictability of the oil gushers in Russia.

• The oil industry attracted diverse and eccentric characters, from peasants who became wealthy to extravagant spenders.
• One notable figure was a peasant who discovered oil under his vineyard and became fabulously wealthy.

"By the turn of the century, that peasant, that giant peasant, became a man of fabulous wealth and fabulous extravagances."

• Illustrates the dramatic rise in wealth and status due to the oil industry.

"He would throw parties that look like from out of the pages of Arabian Nights."

• Emphasizes the lavish lifestyle adopted by some who struck it rich in oil.

• Ludwig Nobel was known for his commitment to honesty and integrity in business.
• He was proud of his reputation for fairness and transparency in the Baku oil industry.

"If you can find in Baku any man who can prove that we have been dishonest, that we cheat or refuse to redress any substantial grievances, we will face inquiry in your presence."

• Demonstrates Ludwig's dedication to maintaining ethical business practices.

• Emmanuel Nobel played a crucial role in preserving Alfred Nobel's will and establishing the Nobel Prize.
• Despite opposition from other family members and even the Swedish king, Emmanuel stood firm in honoring Alfred's wishes.

"He had made his position clear. He would not fight the will. He was interested in preservation of the family name and honor in strict adherence to the wishes of Alfred."

• Shows Emmanuel's determination to uphold Alfred Nobel's legacy and the ethical values of the family.

"The will was validated and the Nobel foundation was established."

• Marks the successful establishment of the Nobel Prize despite significant opposition.

• The Bolshevik Revolution drastically altered the political and economic landscape, leading to chaos and the nationalization of industries.
• The Nobel family's assets in Russia were seized, and they had to flee the country.

"Transport was nationalized. Factories were nationalized. Owners and managers dismissed. Bank deposits seized. Prices skyrocketed."

• Highlights the sweeping changes and economic turmoil caused by the revolution.

"The czar and his family were murdered. The petroleum industry was nationalized."

• Indicates the severe and violent shifts in power during the revolution.

• Despite losing everything, Emmanuel Nobel remained optimistic and refused to be consumed by bitterness.
• He found happiness even in exile and continued to embody the family's resilient spirit.

"Immanuel had found great pleasure in life. Even in exile. He refused to be consumed by anger and bitterness."

• Reflects Emmanuel's positive outlook and resilience in the face of adversity.

• The story emphasizes the importance of passing knowledge and values from one generation to the next.
• The Nobel family's experiences offer valuable lessons in resilience, ethics, and the impact of historical events on personal and business fortunes.

"That transfer of knowledge from one generation to the next has been going on for as long as we've had language, probably before we've had language."

• Underlines the enduring significance of intergenerational knowledge transfer.

"I think it's really important, because what happens as a result of this is that we all get to benefit and learn from, you know, in many cases, 4567 decade long careers that these entrepreneurs have."

• Stresses the value of learning from the experiences and wisdom of past generations to inform present and future endeavors.