May 29, 2008--Mr. Spud

A couple of years back I was checking Forbes magazine’s list of American billionaires. Not just out of curiosity—though I admit I wanted to see if I had personally ever encountered any—but because I was trying to raise money for an education project with which I was involved and thought the people on the list might be willing to help fund it.

I had in fact met a few but not one J. R. Simplot, who was listed with a net worth of $3.6 billion. Though his name was familiar to me. I remembered that he was somehow involved with potatoes. That in the 1960s he had met McDonald’s founder Ray Kroc and with a handshake made a deal to become the sole provider of potatoes for their signature French fries. The details escaped me until yesterday when the New York Times reported that Simplot had died at his home in Boise, Idaho (where else) at the age of 99. (Obituary linked below.)

But he wasn’t always in the potato business. In fact it took a while for him to indirectly find his way to them. Like quite a few great American entrepreneurs of his era, he began to amass his billions at a very early age. In his case at 14 after he decided to leave school and home because his father refused to allow him to attend a basketball game. Obviously, he was eager to set out on his own.

His mother staked him to $20 in gold coins and he moved into a dollar-a-night hotel, which also was the home for a number of local teachers. It was hard times and they were paid in interest-bearing scrip. Little Jack used his mother’s coins to buy some for 50 cents on the dollar which in turn he sold to a bank for 90 cents on the dollar. Then, with the profit, for a buck a head he bought a few hundred hogs and a rifle.

He clearly had a vision and a plan.

With the gun he shot wild horses, skinned them—saving their hides which he later sold for $2 each—cooked their meat on sagebrush fires, mixed this with potatoes, and fed the result to his hogs, which, after they fattened, he sold and made $7,000 in profit. A fortune at the time.

He set himself up as a potato farmer by parlaying this capital. He used it to buy some land, farm machinery, six horses, and a potato sorter. He had a partner but when they had a dispute they flipped a coin to settle who would become the sole owner. J.R. won and within a decade was the largest shipper of potatoes in the West. He owned 33 warehouses in Oregon and Idaho. During World War II, he supplied the army with most of their dehydrated potatoes.

From dehydrating he became interested in seeing if potatoes could be satisfactorily frozen. He was skeptical at first, saying that “Hell, you freeze spuds and they’ll go to mush.” But one of his researchers figured out how to do it and so when he approached Ray Kroc he had a good product to offer. The rest is history.

But J.R. was about more than potatoes. You don’t get to $3.6 billion on just spuds, even if you supply McDonald’s. He also was involved in fertilizer, oil, animal feed, beef cattle, and ski resorts in Chile and China!

And he had other interests. Changing with the times he invested $1.0 million in two engineers working in a Boise dentist’s basement and they came up with a new kind of computer memory chip, which eventually evolved into Micron Technology. J.R. Simplot, for that million, became their largest shareholder.

But like Warren Buffett he lived a relatively simple life—though he liked to hobnob in Sun Valley with the likes of W. Averell Harriman and Ernest Hemmingway—and until late in life drove himself around in a Lincoln Town Car (he owned a dealership) with the license plate Mr. Spud, often stopping at the local Macdonald’s for an Egg McMuffin. Of course with hash browns.

So don’t you just hope that somewhere some little kid has just left home to set out on his own and is doing fine living in a small hotel where he is hatching big ideas?