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MANAGEMENT GIANT
James Jerome Hill
Timeline
1838 1852 1856 1872 1878 1895 1893 1901 1915 1916 Born. Father dies. Forced to leave school. Arrives in St. Paul, Minnesota in July. Secures steamboat monopoly on Red River. Buys bankrupt St. Paul & Pacific Railroad. Hill worth $9.6 million. Transcontinental route completed to Seattle, Washington. Net worth $19.4 million. Named State of Minnesotas greatest living citizen. Dies.

Summary
For a partially-sighted, ill-educated boy from a poor family, James Jerome Hill did very well for himself. Born in 1838, he took after his hero Napoleon. He built an empire from nothing but, unlike Napoleon, managed to hold onto it. Leaving Canada at 18, he set out to work as a trapper. He ended up in business as a railroad agent in St. Paul, Minnesota. Soon he had his own business. Then businesses. Steamboats, transport, produce, fuel Hill was interested in any business that made money. The logical progression was the railway, and in 1878 Hill bought the bankrupt St. Paul & Pacific Railroad and turned it around. By 1885 he was building Hills Folly, the first private transcontinental railway, completed in 1893. When Hill died in 1916, he had built and sustained a transcontinental railway as a private enterprise and almost single-handedly opened up the Pacific Northwest of the United States as a viable economic region.

Background and Rise

Some boys admire athletes, some admire film stars. James Jerome Hill admired the great French general, Napoleon. Born plain James Hill on September 16, 1838 in Rockwood, Ontario, Canada, Hill adopted the middle name Jerome after Napoleons brother. At age nine he lost the sight in one eye when he was accidentally shot with an arrow. The doctor managed to restore the eyeball to the socket, but was unable to save his sight. The injury had the unfortunate effect of preventing him from pursuing his intended career as a doctor. On the plus side, it precluded him from fighting in the Civil War. When he was 18, Hill left Canada with a head full of ideas about a life of adventure. He headed west hoping to take a job as a trapper, arriving in St. Paul, Minnesota, on July 21,

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1856, a few weeks after the last trappers had left for the wilds. The trappers wouldnt be back until the following year, so Hill looked for work. He found a job with a wholesaling operation handling freight transfers between the warehouse and the trains and steamboats. When the Mississippi river was frozen in the winter, he worked for himself supplying wood to the local railways and steamboats. Buoyed by his experience of working on his own, Hill started his own business in 1866, as an independent freight agent for the First Division of the St. Paul & Pacific Railroad. To save on transportation costs, Hill built a large warehouse by the river and ran the train tracks right through it, an idea that showed a presence of mind beyond his years.

Defining Moments
Throughout his career Hill correctly predicted economic trends. He anticipated the demise of the independent freight agent, understanding that in a conflict of interest between the agent and the railroad, the railroad would always win. Hill diversified into the steamboat business. In 1872 he merged his small business on the Red River with that of another businessman, Norman Kittson, thereby securing a monopoly. At the same time he moved into the coal business. This was based on a hunch that in the long run, wood wasnt going to be a viable fuel in such a thinly forested region. After reading up on the subject Hill started in a small way, transporting coal to the local gas plant. By 1874 he was dealing in coal extensively. Hill used the synergies in his business to his advantage. He brought coal into the area by steamer and stored vast quantities of it in his yards. In 1877 he founded Northwestern Fuel Co., an organization that combined rival coal merchants in an alliance. Before long, Hill was one of the most important coal merchants in the United States and the twin cities of St. Paul and Minneapolis were main distribution points for fuel. By the late 1870s, Hill had expanded his business interests to include transportation, fuel, and banking. Loath to pass up an opportunity, he even became a cider dealer for a time. In his usual style, Hill approached his foray into the railways with caution. His modus operandi was to first study everything he could lay his hands on about his intended business, and then bide his time for an opportunity. The opportunity first presented itself in 1873 when the St. Paul & Pacific Railroad went into receivership. Following three years of examining the business and all the options, Hill put together a complex deal to buy the railroad. The deal was predicated on the fact that, although it would cost over $250,000, land rights worth many millions were available as a potential reward. Hill figured he could increase operating profits. He formed a syndicate, bought the railway in 1878 and, in 1879 with three partners, formed the St. Paul, Minneapolis, & Manitoba Railway Co. with himself as manager. The way Hill turned a bankrupt line into a profitable one is a lesson to all businessmen. He upgraded infrastructure, by selling old iron rails when the scrap price was right and replacing them with steel rails, and he upgraded rolling stock by switching to coalpowered engines. He created a need for the railways by encouraging people to settle alongside them. He instigated low fares for the immigrant population and even imported hardy varieties of wheat to help them farm. He built a bridge over the Mississippi River

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to increase trade and communications between St. Paul and Minneapolis. The profitable running of the railway was so important to him that he personally checked out new railway routes on horseback. Such innovative and attentive management increased the value of his partnership from $278,000 in 1880 to $25 million in 1885. Instead of taking the money out to pursue an extravagant lifestyle, Hill plowed it back into the business. As Hill extended his railway to the north, he grew more ambitious. He decided that in order to control his own destiny and not have to rely on other railroad companies, he would extend his railway all the way to the Pacific Ocean. He would connect the Great Lakes with the sea, and thereby facilitate and control transcontinental freight in the north of the United States. It was an ambitious undertaking. Hills Great Northern Railway was a phenomenal achievement. It required finding the lost pass across the Rockies, building bridges, laying hundreds of miles of track in the most adverse conditions. It took 3,300 horse teams and 8,000 men to build it. The line reached Seattle, Washington in January 1893. But possibly the most prodigious achievement of all was the fact that it was completed without the assistance of any public money or land grantsunlike all the other transcontinental railways. Unencumbered by the burden of public money, Hill could run the railway as he saw fit. The line was finished, but Hill still faced threats to his business. In 1893, there was a financial panic followed by a depression. Hill survived by helping his customers survive. He intervened personally to ensure wages were paid and that farmers got good prices for their crops. At the same time he improved efficiency and cut costs. Between 1893 and 1895, all the other transcontinental railways went bankrupt. Hill and the Great Northern prospered. By 1901 his net worth had increased to $19.4 million from $9.6 million in 1895. The remaining years of Hills life were spent trying to secure his railroad, extending and protecting it from competitors and the government. He locked horns with rival Edward H. Harriman, financier and railroad man, over control of the Northern Pacific railway. He also incurred the wrath of President Theodore Roosevelt and his trustbusters, who dissolved one of his companies, the Northern Securities Company, in 1904. The last few years of his life were spent campaigning tirelessly to improve the lot of farmers through more scientific farming methods. He died in 1916.

Context and Conclusions

James Jerome Hill was known as the Empire builder. He succeeded where others failed by meticulous planning, coupled with long-term strategy. Other railway builders pursued a quick profit and went bust. Hill however, invested in his railways. He improved infrastructure and bought better trains. Further, he improved the lives of his customers. By encouraging development along his railway lines and supporting the settlers through hard times, he increased the longevity of his business. Hill wasnt the first to build a transcontinental railway in the United States, but he was the first to do it without public money. When he started, the idea became known as Hills Folly. But Hill had the last laugh when he finished the route in 1893, survived an

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economic panic, bought more railways, and emerged one of the most powerful railway men of his era.

Close But No Cigar

Edward H. Harriman Born in 1848, U.S. railroad magnate Harriman was one of James Hills great rivals. He was a Wall Street stockbroker, who seized control of the Union Pacific railroad in the 1890s and then became locked in a fight for the control of the Northern Pacific railroad with Hill. It was one of the most celebrated financial battles in Wall Streets history and ended in bitter stalemate. Throughout his life, Harriman was plagued by ill health. The stress of business problems and the United States governments anti-trust stance finally caught up with him, and he died in 1909, aged 62.

For More Information

Books: Bruchey, Stuart, ed. Memoirs of Three Railroad Pioneers. New York: Arno Press, 1987. Comfort, Mildred Houghton. James J. Hill: Young Empire Builder. Indianapolis: BobbsMerrill, 1968. Pyle, Joseph Gilpin. The Life of James J. Hill. Garden City: Doubleday, Page & Co., 1917.

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