BUSINESS: The Ultimate Resource October 2006 Upgrade 49

MANAGEMENT GIANT Jean Paul Getty

Jean Paul Getty (18921976), son of an oil prospector, was born with a silver shovel in his mouth. Although his father was a multimillionaire, Getty inherited just $500,000 of the $15 million family fortune. Undaunted, he acquired control of his fathers company and spent 20 years amassing a collection of oil interests, including Western Oil, Tidewater Oil, and Skelly Oil. He also dabbled in the property market, buying prestigious hotels in Mexico and the United States. When the Navy declined his offer to enlist during World War II, he helped the war effort instead by running an aircraft company. In 1949 he struck the deal that gained him access to the oilfields of the Middle East. At the time there had been no major oil finds in the region, but, backing his instincts, Getty invested upwards of $10 million. Within three years of signing the contract Getty discovered a huge oilfield, securing his position as one of the worlds wealthiest men. He lived out the latter years of his life at Sutton Place near Guildford in England, writing his memoirs and indulging in his passion for collecting art.

1892 1914 1916

Born. Studies at Oxford University, England. Becomes a millionaire.

192339 Marries five times. 1930 1949 1953 1953 1960 1976 Father dies, leaving Getty $500,000 of his $15 million fortune. Acquires oil concession in Neutral Zone, Middle East. Major oil find in Neutral Zone. Founds J. Paul Getty Museum in Malibu, California. Moves to Sutton Place, England. Dies.

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Life and Career

The son of oil executive and lawyer George Franklin Getty, Jean Paul Getty was born in Minneapolis, Minnesota, on December 15, 1892. His father took him on a tour of his oilfields when he was 11, teaching the boy about the oil industry. In 1906 Getty moved with his family to California. A good scholar, Gettys studies took him through Harvard Military Academy and the Polytechnic High School, both in Los Angeles, and on to the University of Southern California and the University of California, Berkeley. In 1914 he completed his studies with two terms at Oxford University, England, where he took a diploma in politics and economics. Getty returned to the United States after Oxford determined to enter the diplomatic corps. His father had other ideas. By this time the senior Getty had built a multimillion dollar oil business; he had only one son, and he was desperate for him to commit to the family business. Jean Paul agreed to try his hand. He struck a deal with his father: he would have a free hand to purchase leases on land he suspected might hold oil. His father would finance the operation and the younger Getty could keep 30% of any profits.

Contribution
J. Paul Getty started in business by buying oil leases and prospecting for oil. By June 1916 the 24-year-old had made a million dollars. He might just as easily have been a casualty of World War Ihe volunteered to train as a pilot, but didnt receive a reply to his offer until 1919, after the end of the war. With his newly acquired riches Getty gave free rein to the impulses of youth and headed for Los Angeles, where he spent the next few years living the life of a wealthy playboy. He dated a number of attractive women, built-and crashedhis own sports car, and generally lived life to the full. But in 1919, tiring of his life of leisure, Getty returned to the oil business. He joined his fathers company, starting at the bottom as a roustabout working on the drilling operations, earning a meager $3 a day. It was tough manual labor, but Getty thrived on it. The experience taught him a valuable lesson: always supervise the drilling of wells in person. While his business life was extremely successful, his personal life was less so. Between 1923 and 1932 Getty married no less than four times (with a fifth in 1939). He blamed the failure of most of his marriages on his commitment to work, and in truth any woman who married the workaholic Getty early in his career was destined to see little of her husband. Although he had displayed a shrewd business mind while working with his father, it was his fathers death in 1930 that set Getty on the path toward the oil empire he would eventually accumulate. His father, who was not impressed by Gettys frequent marriages and was aware that his sons personal wealth was considerable, left him only $500,000 of his $15 million fortune. The bulk of the estate was left to Gettys mother.

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With less inheritance than he might have bargained for and with the control of the Getty oil empire vested with his mother, Getty was forced to start over. He set out to prove he had as much commercial acumen as his father. Through a series of shrewd deals Getty acquired Western Oil and, through a controlling interest in his fathers company, Mission Corporation, Tidewater Oil, and Skelly Oil. It took Getty 20 years to put in place the pieces that would eventually be controlled by the Getty Oil Company, of which he owned 80%. It was a long, protracted battle, and Getty admitted that had he known that it was Rockefellers Standard Oil that owned Tidewater Oil, he would never have set out to buy it. Oil wasnt the only industry Getty was interested in. In 1938 he expanded into the hotel business, buying the Pierre at Fifth Avenue and 60th Street in New York for $2,350,000. This was followed by other property deals such as the Pierre Marques Hotel near Acapulco, Mexico. He offered his services to the U.S. Navy during World War II, declaring, I am 49 but in good health, have owned three yachts, and am experienced in their care and maintenance. The Navy declined. Instead Getty was asked to assist with equipment production, and Spartan Aircraft, a subsidiary of Skelly Oil, turned out training planes and aircraft parts for the war effort under his personal guidance. After the war the company turned its energies to mobile home construction. Gettys approach to business is well illustrated by one of his most celebrated deals. Backing a hunch in 1949, Getty negotiated the rights to a 60-year drilling concession in an area of desert lying between Saudi Arabia and Kuwait known as the Neutral Zone. No oil had ever been found there; no surveys had suggested oil would be found there. Getty nonetheless agreed to pay King Saud $9.5 million in cash plus $1 million a year regardless of whether he struck oil or not. The year 1950 came and went, as did 1951, and no oil in commercial quantities was discovered. When 1952 drew to a close and there was still no strike, observers began to doubt Gettys legendary knack for finding oil. In 1953 the doubters were silenced when Getty finally struck oil. It was an enormous find, and soon the field was producing more than 16 million barrels a year. During the 1950s Getty moved to England, buying through his company one of the countrys most celebrated Tudor mansions, Sutton Place, near Guildford, Surrey. From there he orchestrated his business interests in Europe and the Middle East. He founded the J. Paul Getty Museum in Malibu, California, in 1953 to display his art collection. His later life was spent dealing with personal tragedythe premature death of two of his sons and the kidnapping of his grandsonwriting his memoirs, and building his collection of art masterpieces, antiquities, and carpets. He died in 1976.

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Context and Conclusions

J. Paul Getty had the confidence of a millionaires son and the understanding of money that comes with it. If you owe the bank $100, thats your problem. If you owe the bank $100 million, thats the banks problem, he once observed. His business instincts were invariably right, and he was resolute to the point of stubbornness in backing his hunches. He could have cut his losses in the Middle East when no oil was discovered. Instead he gritted his teeth and stuck it out, and in the end he was proved right. Gettys instincts made him exceedingly wealthy: in October 1957 Fortune named him the richest man in the world.

For More Information

J. Paul Getty Museum: www.getty.edu/museum

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