J. Paul Getty’s Changed Plans

December 1, 1967, 10:00 AM UTC
Fortune: Dec 1967: J Paul Getty feature: hero crop
Sculpture by Robert Berks; chart by Fortune Art Department

For all his celebrity as a playful billionaire, J. Paul Getty has retained an aura of mystery as a businessman. His moves to reshape his oil empire—manifested most recently in last September’s merger of two of his companies, Tidewater Oil Co. and Getty Oil Co.—have been accompanied by considerable puzzlement in the oil industry and the financial community. “Everybody around here,” a New York financial analyst recently remarked, “has been philosophizing to death over this thing.” Where Getty is going, says an oilman, “only Getty knows.”

The puzzlement has to do with the visible configuration of the Getty empire. In the eyes of oilmen, it has a certain lack of tidiness. The companies he controls don’t seem to add up to an entity that can readily be labeled. Since Getty has had a spectacular career as one of the oil industry’s great entrepreneurs, it is only natural to suppose that things have gone according to plan, and that behind the configuration lies some inscrutable design.

Plausible as it seems, this supposition is mistaken. The Getty empire has been shaped not only by J. Paul Getty‘s plans, but also by events and forces—some of them quite frustrating for him—that he could not control. If it is impossible to discern the concept of his present empire, that is because things did not work out the way he planned. It is understandably difficult for oilmen, or anybody, to grasp that the Getty story is in a major aspect a story of defeat—though that word “defeat” inevitably has a bizarre quality in this context, attached to a man sometimes said to be the richest living American.

Some very good business reasons

The September merger itself made a certain obvious sense. Tidewater, primarily a domestic producer, was an integrated company with a tanker fleet, a refinery in the U.S., and marketing organizations both at home and in sixty countries abroad. Getty Oil, primarily a foreign producer, was partly integrated, but lacked transportation and retail marketing outlets of its own. Getty had production and a refinery in the Neutral Zone between Saudi Arabia and Kuwait, another refinery in Italy, a wholesale marketing organization in Europe, and crude-oil markets, notably in Japan. It was the smaller company even though it ended up swallowing the larger one: Getty Oil’s sales last year came to $78 million (revenue figures in this article are exclusive of excise taxes), Tidewater’s to $696 million; Getty‘s employees numbered 975, Tidewater’s 5,500.

Getty Oil and Tidewater Oil, of course, were public companies with their own boards of directors and a great many stockholders, and were subject to the laws and conventions of control that apply to such companies. J. Paul Getty himself was not even a director of Tidewater, much less an officer. Yet people in the industry naturally think of the merger in terms of the man and his empire, and one is inclined to speak of the big decisions as his decisions. There is no doubt that he had, and has, effective control. In a recent interview with FORTUNE, Getty explained, at some length, the decision to merge Tidewater into Getty Oil:

“There are very good business reasons for the merger. It simplifies the business structure, the operations. It rounds out the business into a more logical unit. It should be a better rounded company, a stronger company. Tidewater and Getty can easily be integrated. There are other things in a merger besides just the economies of operation that will come out of it. And there is now greater financial strength. It’s one of the theories of modern business, isn’t it, to get a better balanced company? Tidewater will have a better position abroad, Getty a better position in the U.S. There’s a minimum size now for being in the international oil business, and that’s about the size that the merged company will be. The international oil business is a free-for-all, marked by intense competition. And in an old-fashioned free-for-all the lightest guy is going to be thrown out first.

“There are economies of scale in the new organization. You’re running one bigger operation instead of two smaller operations. You have one set of officers and directors; in effect, you’re keeping one set of books instead of two. An international oil company is something like a steel company—size has its advantages. In the oil business, the free world is a pretty big place—and if you’re going to cover the free world you need pretty big size.

“Tidewater does business in sixty countries in lubricating oils and greases. But, with the exception of one or two countries, it hasn’t been in a position to deliver a full line of products. Now Tidewater is acquiring two refineries in the Eastern Hemisphere as well as large production overseas. Furthermore, the operation of the Tidewater sales force and the Getty sales force can be pulled together. Tidewater had an international marketing force and so did Getty and now the two are tied together. I don’t think that the merger will change the picture so much as far as the U.S. is concerned, but it certainly is going to strengthen the two companies in the Eastern Hemisphere.”

Substantial as it is, the new post-merger Getty Oil Co. by no means constitutes all of the Getty empire (see the diagram on the opposite page). Getty Oil owns about 65 percent of Mission Corp., a holding company that, in turn, owns 71 percent of the common stock of Skelly Oil Co. This structure of ownership gives Getty Oil a net 46 percent in Skelly, and, of course, effective control. Skelly is an integrated and diversified midcontinent producer that had 1966 sales of $332,369,000. Although Skelly has its own board of directors and management and is separately operated, its financial statement was fully consolidated, along with Tidewater’s, in Getty Oil’s last annual report. Of this procedure, Getty says: “Since Getty Oil owns so much of Skelly, the Getty Oil stockholder wouldn’t get the real picture of the company’s operations unless the percent in Skelly were set forth. If there were just a footnote, they wouldn’t get the picture.” In that consolidated report the whole Getty complex showed 1966 assets of about $1.7 billion and sales of $1.1 billion.

The trend in the oil industry has long been toward integration: from exploration through production, transportation, refining, and marketing down to the retail level. In fact, most companies regarded as “major” are so integrated. The Getty complex has all these elements in one degree or another, and at one time Getty was on the way to putting them all together in a balanced system. In recent years, however, Tidewater cut back sharply on retail marketing, a move that has contributed to the puzzlement about the empire. But if one looks back at Getty‘s original plans, the way he put his oil complex together, and the events that overtook him and deflected him from his aims, one can see why he has decisively changed the course he followed for many years.

Fortune: Dec 1967: J Paul Getty feature: hero
Sculpture by Robert Berks; chart by Fortune Art Department
Sculpture by Robert Berks; chart by Fortune Art Department

“This was the goal”

J. Paul Getty, now seventy-five, made his first million as a wildcatter in 1916 at the age of twenty-three, working in partnership with his father, George F. Getty, a Minneapolis attorney who had gone into the oil business in what is now Oklahoma. The elder Getty died in 1930, leaving an estate valued at about $15 million. Part of the estate was established in 1934 as the Sarah C. Getty Trust, which as of the date of the merger was worth well over $700 million. It is the largest single shareholder by far in the present Getty Oil Co.

Both J. Paul Getty and the Getty companies were able to raise cash in the years after the 1929 crash, and for them the depression provided some remarkable buying opportunities. Getty was then keeping a diary from which he later wrote his autobiography (My Life and Fortunes, Duell, Sloan & Pearce, 1963). In it he states the objective that he was to pursue for thirty years. “In 1932,” he says, “many oil stocks were selling at all-time lows. They were spectacular bargains … The more I thought about the matter, the more convinced I became of the feasibility of putting together a completely integrated and self-contained oil business, one which engaged not only in oil exploration and production, but also transportation, refining and even retail marketing … This was the goal.”

Getty studied the seven integrated oil companies in California, and picked No. 7, then called Tide Water Associated Oil Co., as the one he would try to gain control of. The company had what he regarded as a good marketing organization, and it produced only about 50 percent of its crude requirements, which meant to him that he could integrate Getty production into its operations. He bought his first shares of Tidewater in March, 1932, at $2.50 a share. (One 1932 share would, by the time of the merger last September, have become 2.81 shares, worth $307.80.) Throughout 1932 and 1933 he and the Getty interests acquired 743,154 shares of bargain-priced Tidewater common.

The long road to control

Getty then collided with Jersey Standard, which in 1930 had divested itself of working control of Tidewater by selling its approximately one million shares to a holding company, Mission Securities, Ltd., on a time-payment plan. In 1934, after Getty had his campaign for control under way, Mission failed in its payments and Jersey Standard took back the stock and, with it, control of Tidewater. Getty says that the Tidewater management, backed by Jersey Standard, then tried to block his campaign for control. Getty wrote a letter to Jersey Standard. “My contention,” he said afterward, speaking of that letter, “was that a large corporation such as Standard should not have a controlling interest in a smaller competing company such as Tidewater.” Subsequently, Jersey put its Tidewater stock in a new company, Mission Corp. Jersey also put its controlling interest in Skelly into Mission Corp. Getty Oil (called Pacific Western before 1956) then went after control of Mission Corp. by buying its stock and seeking stockholder support.

Getty got control of Mission Corp. in 1937, but that did not give him control of Tidewater, since Mission’s holdings, combined with the Gettyholdings in Tidewater, still fell short of a majority interest. Getty‘s final success in getting control of Tidewater is a rather involved but also very interesting tale. In 1948, Mission Corp. transferred its Tidewater stock to a new corporation, Mission Development, created for that purpose. In return, Mission Corp. got Mission Development stock, which it distributed (as property dividends) to Mission Corp. shareholders, among whom the largest, of course, was Getty Oil. Over the next few years, Mission Corp. received substantial cash in the form of Skelly dividends and used it to buy additional shares of Tidewater stock. Mission Corp. put this stock, too, into Mission Development, took additional Mission Development stock in return, and distributed it to Mission Corp. shareholders. This arrangement gave Getty Oil leverage because, through control of Mission Development, it could control a large block of Tidewater stock owned in part by minority shareholders of Mission Development. With the directly held Tidewater stock and the increasing ownership in Mission Development, the Getty interests in 1951 finally obtained “clear-cut numerical control” of Tidewater, and in 1953 elected all of its directors. Later on, looking back on that time, Getty said: “I knew why I wanted to control the Tide Water Associated Oil Co. I had a program for the company’s operation and expansion clearly in mind.”

That same year, 1953, Getty struck oil in the Middle East. Getty Oil Co. had in 1949 obtained a sixty-year concession from the King of Saudi Arabia to extract and market Saudi Arabia’s 50 percent interest in the crude-oil products from the 2,100-square-mile Neutral Zone. (The Sheik of Kuwait awarded the concession for the other 50 percent to Aminoil, a company formed by Signal, Ashland, Phillips, and others; Aminoil and Getty Oil operate together in the area.) The first strike proved to be low-gravity, low-grade crude—i.e., heavy oil with high sulfur content. Such oil requires special refinery equipment to reduce the sulfur and to get high yields of gasoline. Although the quality of the oil was disappointing, Getty began developing what he hoped was a big field.

The year after that first strike in the Neutral Zone, Tidewater began to close down its old refinery at Bayonne, New Jersey, and to build a new and efficient one at Delaware City, Delaware, with a capability for efficient handling of Getty‘s Neutral Zone low-gravity, high-sulfur crude. It was completed late in 1957. Mainly to get funds to build the new refinery, Tidewater reversed an earlier antidebt policy and went more than $300 million into debt. To bring in foreign oil the company also assembled its own tanker fleet. All this gave Tidewater a much heavier debt load than is customary in the oil business. Nevertheless, the future looked promising.

In that same period Tidewater sold off its modest marketing organization in the midcontinent—where it was competing with Skelly—and expanded its marketing on both coasts. Between 1954 and 1960 its roster of service stations swelled from 1,918 to 3,885; the investment outlay for them came to $120 million. A substantial part of this expansion took place in California. To back it up, Tidewater spent $60 million modernizing its Avon refinery near San Francisco. In the San Francisco market, where Tidewater had choice sites, it was probably No.1. In California as a whole in 1961, Tidewater was No. 7.

With Tidewater expanding its refining and marketing in the eastern and western U.S., Skelly entrenched in the midcontinent, and Getty Oil Co. tapping the Middle East for crude, Getty‘s grand design, more or less as he had conceived it at the outset in 1932, began to take clear shape. The configuration suggested a great new integrated international oil company with nationwide retail marketing throughout the U.S. And indeed, early in 1959, two of the Getty companies, Tidewater and Skelly, began to negotiate a merger. It was not farfetched to imagine the name Getty Oil becoming a household word like Standard, Gulf, or Shell.

Then the grand design collapsed.

Fortune: Dec 1967: J Paul Getty feature: chart
Chart by Maurice Berson
Chart by Maurice Berson

Withdrawal from the war

One decisive event was an intervention by the U.S. Government. When Getty began his expansion in 1954, he gambled that foreign oil would be freely marketed in the U.S. He lost the gamble. The government in 1957 established voluntary oil import restrictions. These were a blow to Getty‘s plans but he was hopeful either that they would not be made mandatory or that he would get special consideration for Tidewater’s new refinery. But in 1959, Washington laid down rigid import quotas, which changed the direction of the oil industry. The quota system hit Getty in two ways, both by reducing the market for Getty Oil’s Middle Eastern crude, and by restricting the inflow of the oil that Tidewater’s new Delaware refinery was primarily designed for.

That year, too, the Tidewater-Skelly merger negotiations broke down because the companies could not agree on estimates of the relative value of the two stocks. The discussions about this matter were clouded by the contrast between Tidewater’s heavy debt and Skelly’s nearly debt-free position.

The next big setback came in the West. Tidewater continued to expand its West Coast marketing into 1961 and then ran into a series of price wars. Seven majors competed for that market. Shell, No. 2, had dropped from 12.4 percent of the West Coast market in 1958 to 11 percent in early 1961. To recoup, it adopted an aggressive new marketing policy and, by the end of 1963, had pushed its share up to 14.6 percent (now 16 percent).

One can only speculate on what Getty would have done in this situation if he had first completed the grand design with an integrated, nationwide oil company combining Getty Oil, Tidewater, and Skelly. Any such powerful enterprise would presumably have fought for the West Coast market, even at heavy cost. The reality, however, was that Tidewater was on its own, with its resources burdened by debt.

It chose not to fight, therefore, and relaxed its California marketing drive. Its share of retail automotive gasoline sales sank from 6.9 percent in January, 1960, to 5.7 percent in 1963, and to 4.7 percent in 1966. As early as November, 1963, Tidewater was actually ready to withdraw from the area. The company agreed to sell its West Coast marketing, together with the Avon refinery and five tankers, to Humble Oil (Jersey Standard). The Department of Justice blocked that deal, but in 1966 Tidewater sold essentially the same properties to Phillips Petroleum despite a challenge from Antitrust.

It is very tough to get a position in the California gasoline market (even Jersey Standard has had difficulty establishing itself there), and Tidewater, by selling its California marketing organization, virtually forfeited any chance to get back in the future. Moreover, Tidewater then began to contract its eastern retail network in an effort to get down to a profitable marketing core. This retreat from the national retail field clearly marks a decisive turn away from the old design that Getty had formed in the 1930’s.

The personal touch in management

Getty lives in England, near London, in a seventy-three-room manor house named Sutton Place. In personality as well as style, he is an old-fashioned entrepreneur rather than a modern executive. He has his own way of looking after the business. He refers to the house as the “liaison center” of his worldwide operations and has an office there, but he often works in a sitting room, where he conducts business in a leisurely manner. Getty lives quietly in that sitting room in Surrey. Relaxed in a deep chair, he speaks slowly, reflectively, and somewhat quizzically, in a low voice. He has a philosophical cast of mind and often speaks in generalities, but their relevance to business actualities is usually very clear. In recent interviews with FORTUNE he spoke at length about both his business philosophy and details of his companies’ operations. He is worth listening to at length.

“The Getty company,” he said, “is probably run differently from other oil companies: the personal touch, you might say. Most companies have had several presidents. I don’t see how much continuity there can be in top management if a man only serves a few years at the top. Our business since 1903 has been run by two men, my father and myself. We’ve had continuity in management.

“I got reports on Tidewater, but I didn’t attempt to participate in any of the operating decisions unless it was something major, involving a large expenditure of money, or where it was a question of policy. When Getty Oil was separate, it did report to me, but in the new organization, this will just remain a liaison center. I don’t do a great deal of phoning—I keep in touch every week by mail usually; the phone bills here aren’t terribly heavy. There will be new people reporting to me now. I believe in delegating work, but I’m president of the company and as president you have certain responsibilities you can’t delegate. You can delegate work, but you can’t delegate responsibility.”

Getty, we have seen, makes a strong case for the recent merger. He also makes a strong case for its timing: “The merger only became possible recently because Tidewater had had such a heavy debt load. They owed about $330 million a few years ago. They weren’t endangered at all by it; they were perfectly able to carry it; the money had been well invested. But Getty Oil was practically debt-free. The merger became feasible when Tidewater demonstrated its ability to substantially reduce its debt.”

Diminishing unprofitable business

The merger of Tidewater and Getty Oil is not, for the moment at least, designed to generate growth. In terms of sales, in fact, the Gettyempire has been contracting. Before the merger, Getty Oil’s sales had been level for some years, moving only from $75,300,000 in 1962 to $78 million in 1966. Getty‘s hopes for a fabulous strike in the Neutral Zone did not materialize.

Though Tidewater’s profits more than doubled during those years, from $33 million in 1962 to $72 million in 1966 (exclusive of nonrecurring items), sales rose only from $656 million to $696 million, even with the economy booming. Furthermore, the sale of the California refinery and marketing organization to Phillips in the summer of 1966 has sharply reduced Tidewater’s revenues. The drop-off is evident from a comparison of the first half of 1967 with the first half of 1966: sales were down 22 percent, from $386 million to $300 million. For the first nine months of 1967 the combined sales of the merger partners, Tidewater and Getty Oil, came to $487 million, $87 million less than their combined sales in 1966.

In explaining Tidewater’s lack of sales growth for some years prior to the merger, Getty makes it clear that a deliberate policy was at work. “Tidewater’s volume rose more slowly than its profits in the last few years because it had a campaign to try to diminish its volume of unprofitable business and replace it with profitable business. For example, they had had many unprofitable contracts; these weren’t renewed when they expired. And it didn’t bid on some other large volume contracts—the kind you lose money on. What happens is that municipalities would advertise for gas, and Tidewater at one time and the other companies would make uneconomic bids—for prestige principally, for volume business—and they’d lose money on every gallon they sold. What Tidewater was looking for in the past few years was a boom in profitable volume. They couldn’t see any sense in doing business just for the sake of doing business. They couldn’t see any business point in selling $5 million worth of gasoline and losing $100,000 on it.”

Getty relates his policy of contraction in domestic marketing to the regulated economics of the oil industry in the U.S. In most oil-producing states, authorities limit production of crude oil on the basis of estimated consumption, and prorate the market among the existing producers. The price of domestic oil thereby is kept up. The U.S. Government imposed the present system of rigid import quotas in 1959 because domestic producers feared that substantial quantities of imported foreign oil would break down these arrangements. The quota system, of course, collided with Getty‘s concept of an integrated organization whose filling stations would provide an ultimate outlet for his Neutral Zone oil.

“What’s the particular virtue in a national marketing organization,” Getty asks, “as long as there is prorationing and regulated imports in the U.S.? Prior to the quotas the marketing prospects were more attractive. As long as there was no control over imports you had one picture, but when controls over imports were put in it became another picture.” Under the changed conditions, he turned against retail marketing as a losing proposition for all but a few top companies. He has some tangy views on the service-station business.

“It looks like the industry in the U.S. just evolved into a pattern of practically everybody except the market leaders losing money on downstream investments [i.e., refining and marketing]. I don’t think it’s hurt the market leaders. Marketing is one end of the business where they that have shall be given.

“The point I’m trying to make is this. You’ve got a well-run company. You buy oil land as efficiently as anyone, have surveys, drill wells, build tankers with maximum efficiency—you do all these things and you won’t feel handicapped because you’re smaller than other companies. But, when you want acceptance in the marketplace, you find there is a very definite handicap in being low man on the totem pole. And there isn’t much you can do about it because those companies fight desperately to maintain their position. You advertise, they advertise more; you build filling stations, they build filling stations. Everything the smaller fellow does the competition does double. So where do you go from there? It’s one of the things that’s a fact of business life that you’re more or less frozen in that situation. It’s not one of those deals that if you come out with a new invention you build up a large volume of business almost immediately. You’re not selling something that’s revolutionary. You’re selling gas—and the public apparently doesn’t think there’s too much difference in the various brands of gas. I don’t see particularly that it’s in the interest of the company or the industry to have four different brands of gas on practically every intersection. You’ll see Shell on the first corner, Mobil on the second, Standard on the third, Texaco on the fourth. There’s no doubt that from the standpoint of efficiency there’s too much duplication in filling stations in America.”

An all-the-way scenario

Getty‘s remarks on the filling-station struggle make it pretty clear that he has no intention of trying to fight his way back into retail marketing on the West Coast. His remarks, indeed, could be interpreted as indicating further withdrawal from retailing in the U.S. Some men in the oil industry expect him to retreat all the way “upstream” and become an independent producer—back where he started, but on a greatly enlarged scale. “I guess what he wants,” one oilman says, “is the biggest independent producing outfit in the world.” Following this all-the-way scenario. Getty would sell off the Delaware refinery and what remains of Tidewater marketing in the eastern U.S. He would also, presumably, undertake to merge Skelly into Getty Oil and then sell off Skelly’s refining and marketing operations.

A reshaping along this line may lie ahead. Or it may not. Having abandoned his old design. Getty no longer seems so interested in neatly defined models. He may just proceed to work, in a pragmatic, flexible way, with what he’s got. What he’s got includes, in addition to his oil operations, extensive reserves of uranium, and of shale oil (which Getty calls “the oil of the future”). His empire today is a patchwork, but a patchwork that he knows how to run.

Managing so large and complex an empire, of course, will involve problems and disappointments along the way, whatever course Getty takes. In the Neutral Zone, where Getty once had such high hopes for a big discovery, the oil field is modest by comparison with the really big fields in that part of the world. The Ghawar field in Saudi Arabia produces over 900,000 barrels of crude a day, more than six times the entire onshore output of the Neutral Zone. Moreover, the average production per well of the 376 onshore wells operating in the zone is only about 400 barrels per day (and, as noted earlier, it is not high-quality oil); for the Middle East as a whole, average production per well comes to about 4,500 barrels per day. These figures suggest that the costs of onshore production in the Neutral Zone run relatively high.

The present price of oil is high enough to permit a moderate profit after payment of royalty and tax to the government of Saudi Arabia. But a sizable decline in the world price would squeeze Getty‘s profit on Neutral Zone oil—unless the government agreed to reduce its take. Some economists who follow the oil business closely, notably Professor M.A. Adelman of M.I.T., predict that the price trend will in fact be down. If so, the future of Getty‘s operation in the Neutral Zone will depend upon his relations with Saudi Arabia. Getty himself, however, believes the world price of ore will trend upward, not downward.

The two types in business

Getty looks at the future imperturbably. He is confident of the soundness and resilience of his international empire. “I buy only my own stocks,” he says. “I know that goes against one of the principles of good business, that you should be diversified—that you shouldn’t own 80 percent of one company, you should own 1 percent of eighty companies. Of course if your interest is in a company whose only business is one tree that people pay to come and look at you might better put your money elsewhere, because one strong wind could blow the company down. But if it’s a big company, you get diversification within the company. I’d rather have 80 percent of one company.”

Whatever route Getty takes in the future, it will be based on his personal concept of running a business. His approach, as he sees it, is quite different from that of the professional executives. “There are two types of men in business,” Getty says, “operating men and businessmen. Operating men can read a profit-and-loss statement; businessmen can read a profit-and-loss statement and then be able to conjure up the real situation. Operating men usually feel that they’re businessmen too, but they’re usually wrong.

“A tennis player is judged on the number of tournaments he’s won. If he’s never been in one you might reserve your opinion on how good a tennis player he is. If a man says he’s a businessman you should have the right to look at the score—what he’s done in business as an individual rather than what he’s done in business as an employee. Going to work for a large company is like getting on a train. Are you going sixty miles an hour, or is the train going sixty miles an hour and you’re just sitting still? Operating men may manage a company’s affairs very well—they manage the company’s affairs better than their own fortunes. We couldn’t do without them. But their choice wouldn’t be mine. If I were starting again I’d do it the same way—exploring, wildcatting. If you hit it you get rich, if you don’t you go broke.

“It seems to me that many operating managers are too keen to have an oak tree grow to full size in five years or ten years. They go in for rapid expansion. You can always get big volume for no profit. That is a tendency of purely professional management. I’ve thought many times about what is the difference between the owner manager and the professional manager, the stockholder and the professional manager.

“I think the owner manager is to be preferred, provided he has real business ability. I’d agree that many professional managers have business ability, but assuming the owner manager has reasonable business ability he’s to be preferred. I think a man will drive his own car more carefully than he’ll drive a rented car. If an owner manager has responsibility for major decisions, and he makes a wrong one and the company has a loss, he bears a large part of the loss. I think owner managers, in general, are more cautious. Of course they probably have more control too. Professional managers are sometimes here today, gone tomorrow. My impression has always been that when professional manager try to go into business for themselves they don’t do well.”

The Napoleon lesson

The art of the businessman, Getty thinks, has much in common with the art of the general. “I think business has to be guided by military history. You’ve got to plan campaigns and strategies. It’s just the same in business: you’ve got to plan for all the things that can go wrong. The only difference is there is good history on military situations. And I think most military history would show that the decisions in a military campaign can’t be made by committees. Of course, every general is bound and limited by the resources at his disposal, and his staff may lay out the details, but the most successful military campaigns have been made by one man. Look at the Civil War, for example. The general strategy was laid down by the government, but until they got Grant nobody could do anything.

“Napoleon suffered defeat because he never knew the difference between the possible and the impossible. The unlimited expanses of Russia defeated him. With Hitler it was the same thing. Both of them would win a victory and advance forty miles; win another victory, advance another forty miles; shove forward, regroup, shove forward again. When it’s a small country, in ten shoves you’re across. But in Russia forty miles is nothing. They had to make a hundred shoves, and got far away from their bases—and every mile away weakened them. It’s the same thing in any corporation. Don’t get too widely spread out. Don’t try to advance too rapidly. The thing in business is to distinguish between the possible and the impossible and stick to the possible.”

A note on the chart behind the Getty sculpture: J. Paul Getty and his oil companies stirred a lot of market action this year. The chart behind the sculpture of Getty shows market prices of the common stocks of the five companies in his group from the end of 1965 until the day Tidewater was merged into Getty Oil. The resulting increase in the value of stock held by J. Paul Getty as an individual and by the family trust he controls amounted to $704 million—more than almost anyone in the world has as his total fortune.

A note on “What Getty’s Got,” the diagram of the Getty empire: The diagram represents the Getty empire on the eve of the recent merger of Tidewater Oil into Getty Oil. For each of the large operating oil companies, Getty, Tidewater, and Skelly, figures are given showing (1) the market value of the total outstanding common stock as of September 29, 1967, the last day of trading before the merger (all figures here are of that date); and (2) interests in the major subsidiaries, and in joint ventures and other enterprises. The percentages on the arrows indicate the holdings of each entity in the other entities. Thus at the apex. J. Paul Getty, individually and as trustee for the Sarah C. Getty Trust, is shown representing 78.66 percent of the pre-merger Getty Oil (market value of this share: $1.18 billion). Getty individually owned 28.94 percent, the trust 49.72 percent. He is the income beneficiary of 79.3 percent of the trust—and is the sole trustee. (Getty personally owns very substantial assets in addition to what is represented here.)

Mission Development, which ceased to exist with the merger, was a pure holding company whose sole asset was a block of 6,942,957 shares of Tidewater, representing 57.64 percent of the outstanding stock. Getty Oil’s 82.71 percent ownership of Mission Development stock, together with its 22.82 percent direct ownership of Tidewater, gave it 70.49 percent of Tidewater. The assets of the other holding company. Mission Corp., consist mainly of 71.02 percent of Skelly Oil. Getty Oil’s share of Mission Corp. works out to 46 percent of Skelly.

In the merger the surviving company, Getty Oil, in effect took in all the assets of the other two companies. It issued new Getty Oil stock and exchanged it for the minority shares in Tidewater and Mission Development. Both Tidewater and Mission Development then disappeared as corporate entities. As a result of the issuance of new stock, the combined interest of J. Paul Getty and the family trust in Getty Oil Co. was reduced from 78.66 percent to 62.24 percent.

The three operating companies owned equal shares in two uranium entities, shown at the bottom of the diagram. Petrotomics is a partnership in uranium mining and milling in which the Getty operating companies together hold a 50 percent interest, with Kerr-McGee Corp. holding the other 50 percent. The other uranium property, consisting of land in Wyoming’s Shirley Basin, is owned entirely by Getty companies.

Read More

CryptocurrencyLeadershipInvestingClimate ChangeMost Powerful Women