Leon Hess

Train your successor from childhood by exposing them to all levels of the business. Build the next generation through trenches experience, not classroom learning.

From age seven, John Hess was being groomed to take over. He pumped gas at stations, did accounting for refineries, participated in operations in St. Croix and Oklahoma, studied Arabic and Farsi in college, and attended Harvard and business school. This hands-on, multi-level exposure prepared him better than any executive training program.

Run a publicly traded company with the mindset and personal touch of a family business. Personal attention and loyalty can coexist with public ownership.

Despite going public through a merger with ClearTrack in 1962, Leon continued to run Hess with family-business values. He ate dinner with employees, shook their hands nightly, knew people by name, and fostered loyalty that made employees not want to disappoint him. This family-business culture within a large public company created competitive advantage.

Balance ambition with family. Integrate family into your work and work into your family time, rather than treating them as separate domains.

Leon learned from David Willens, his father-in-law and mentor, to balance work with family dinner at home each evening. He would return to the office for long hours after spending time with wife and children. He brought his daughters to the office in their pajamas after dinner, shared summer swim meets with his son, and integrated family into his business culture.

Obsess over controlling costs and maintaining operational efficiency. Costs can be strictly controlled and permanent savings achieved through cost discipline are more reliable than chasing price increases.

Andrew Carnegie's principle that costs could be strictly controlled became a central tenet of Hess operations. Leon ran facilities with 400 people where competitors used 800. This cost discipline gave him lasting competitive advantage because while prices are cyclical and subject to market forces, costs remain under management control.

Build relationships based on personal knowledge, not just business transactions. Know your counterparties' families, their lives outside business, and invest time in relationships.

Leon would take time to know people's wives, children, and lives outside the office. He knew employees by name, even the person who fixed his air conditioning. He built strong relationships globally by taking trouble to understand counterparties personally, not just their business propositions. This relationship depth gave him access to opportunities others missed.

Maintain obsessive attention to operational detail at every level. Know the specific metrics of every location, asset, and operation in your company.

Leon could recite the profit margins of every gasoline station on the East Coast from memory. At budget meetings, he would quiz the trucking division head on tire life remaining. He flew to his St. Croix refinery every Friday to inspect operations and would show up at 2 a.m. to check units. This encyclopedic knowledge mirrored John Mackey's knowledge of every Whole Foods store.

Honor your commitments and operate on handshake agreements between gentlemen. A man of your word is your most valuable asset.

Leon came from a school where a handshake was sufficient for a deal. He expected loyalty and gave it in return. Even when bribing foreign officials, he did it with his own money, sought no reimbursement, and disclosed it to shareholders. This code of honor was central to how he built trust and lasting relationships.

Maintain standards of cleanliness and appearance as a business advantage. Customers respond to clean facilities and this creates competitive differentiation.

Leon was obsessed with cleanliness from 1933 through 1987. He inspected bilges for cleanliness, insisted trucks be kept clean, and had employees constantly paint and repaint everything. Hess gas stations had the cleanest bathrooms, which appealed to families taking car trips and gave Hess an advantage over rivals who neglected appearances.

“The first thing I look at in an oil tanker is the engine room bilge. Clean bilges mean good housekeeping.”

Use military and logistics experience as an accelerant for business success. Wartime supply chain mastery translates directly to peacetime competitive advantage.

Leon served as fuel supply officer for General Patton during WWII, working on the Red Ball Express logistics operation that moved 412,000 tons of supplies in 81 days using 6,000 trucks and 23,000 personnel. When he returned to civilian business, he possessed world-class expertise in moving fuel efficiently that competitors lacked.

Start by serving the unwanted, the discarded, the rejected. Build your business by finding value in what competitors throw away.

Leon's breakthrough was realizing he could collect residual oil, number six fuel oil, that refineries were discarding as waste. He would collect this black, molasses-thick oil, perform light refining or boiling, and resell it to manufacturers and power plants. This created a 80% market share in fuel oil distribution.

Simplify your offering and focus on what competitors neglect. Success often comes from doing one thing exceptionally well rather than trying to do everything.

Unlike competitors, Hess gas station attendants did not change oil, carry batteries, tires, windshield wipers, or have mechanics on site. For a long time they would not even accept credit cards because Leon felt this slowed the refueling process. This simplification gave Hess a competitive edge: clean bathrooms and quick service appealed to families.

Invest for control, not just returns. When you need a supplier or need to de-risk your business, buy a stake and gain a seat at the table.

Leon invested $100 million for a 9.7% stake in Amerida to join the board, ensuring he could eventually merge the companies. He did not want his company held captive to oil producers like Shell, which was his largest supplier. This strategic investment for control led to a transformative merger.

Work backwards from the customer to the source. Control more of the value chain by progressively integrating upstream and downstream operations.

Leon started with fuel delivery, then added storage terminals, then built refineries in New Jersey and Texas, then merged with Amerida to gain oil exploration and production. He progressed from middleman to vertically integrated energy company controlling every stage from discovery to gas tank.

Study regulations and laws to identify legal but unconventional advantages. A minute reading of regulations that impact your business can yield massive competitive moats.

Leon built the largest refinery in the Western Hemisphere in the US Virgin Islands by identifying a unique regulatory advantage: the location allowed foreign refiner status while also receiving domestic subsidies. He even found a loophole on oil classification, taking apart ships and converting them to technically qualify as barges to avoid import taxes.

Seek opportunity actively rather than waiting for it to find you. Be a tireless traveler and encourage your team to search relentlessly for new prospects.

Leon traveled constantly and encouraged his employees to do the same. This contrasted with larger oil companies that waited for opportunities to come to them. His active prospecting and risk-taking mindset, combined with startup mentality, allowed him to find opportunities in far-flung locations like Indonesia, Libya, and the Caribbean.

Be unpredictable and use that unpredictability as a negotiating advantage. Counterparties cannot easily predict or prepare against your moves.

Leon's unpredictability was noted as a characteristic he used to advantage in negotiations. Combined with his knowledge of counterparties and willingness to take risks, this made him an effective dealmaker. He could see regulatory angles others missed and move where competitors were slow.