Chapter 29 - Habit of Labor: Lessons from a Life of Struggle and Success
Today’s Chapter is based on the book “Habit of Labor: Lessons from a Life of Struggle and Success”, an autobiography by Stef Wertheimer, the founder of ISCAR. Wertheimer was a school dropout who later sold his company to Warren Buffett for over $6.0 billion.
“There’s no better way to explain the miracle of Israel than to examine the life of Stef Wertheimer. It’s a life to be admired and a story to be read by everyone.”
— Warren E. Buffett
Buy it on Amazon here:
https://www.amazon.com/Habit-Labor-Lessons-Struggle-Success/dp/1468310860
Here’s what I have learned from the book:
Learning Through Reading
“As long as I have a book in my hand, I don’t feel like I’m wasting time.”
— Charlie Munger
As we have learned previously from James Dyson, “anyone can become an expert in anything in six months, whether it is hydrodynamics for boats or cyclonic systems for vacuum cleaners. After the idea, there is plenty of time to learn the technology.” What he meant is that anyone can learn any subjects through reading rather than having to go through a formal education. This approach of learning was also taken by Edwin Land, the founder of Polaroid who once took a leave of absence from Harvard University to move to New York to read all books available at the New York Public Library about polarization. As Mark Twain once said,“I have never let my schooling interfere with my education.”
Similarly, Stef Wertheimer, the founder of ISCAR, was also an eager learner through reading rather than through the formal education route. In fact, he took his lack of education as a motivation to learn more on his own through reading. This passion for learning definitely came from his father who was known as a man of integrity. Wertheimer says that his father “was intelligent, an autodidact, a lover of books, someone who was interested in all subjects, and a person of uncompromising principles.” As such, Wertheimer mentioned that he had the habit of reading a book a day, at the very least.
“I also continued to read voraciously. I was eager to learn, but in my own way. I always resisted conventional, banal classroom studies, with the teacher instructing the class and the pupil receiving instruction.”
— Stef Wertheimer
This ability to learn on his own through reading was definitely a useful ability that helped Wertheimer throughout his career. As a matter of fact, when he was enrolled in the army, Wertheimer was once assigned to repair air-conditioning systems. However, at the time, he had zero knowledge on the subject. By consequence, he had to learn on the subject through books and within a few days, he was able to fix anything that was in need of reparation!
“Oh no!” Captain Thompson groaned. “They made a mistake again. I asked for an expert on aircraft air-conditioning, so what did they send me? An optician.” I told him, “Captain, don’t worry. I’ll get my hands on a few instructional manuals and I’ll repair the air-conditioning systems for you too.” A pilot there named Breyer who flew to Palestine as part of his assignment brought me some books, and within a few days I could fix anything that was in need of repair.”
— Stef Wertheimer
“Ultimately they needed someone to repair optical sights, as well as air conditioners, which were not a common product then, and a technician for the diesel-powered generator used to supply electricity. So I had no shortage of work once I demonstrated that I was able to learn just about anything.”
— Stef Wertheimer
The story of Stef Wertheimer is a kind reminder of the importance of continuous learning in life through reading. As Charlie Munger once advised: “Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.” As a matter of fact, Munger genuinely believes that part of the reason why Berkshire Hathaway is so successful is because Warren and Charlie are avid readers.
“You’d be amazed at how much Warren reads – at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
— Charlie Munger
Teaching Others
“If you cannot explain something in simple terms, you don't understand it. The best way to learn is to teach.”
— Richard Feynman
While Wertheimer was never a fan of the way teachers taught students during his formal education, he later learned the educational value of the combination of a mentor and a pupil; an experienced employer who teaches his apprentices the secrets of the trade, makes demands of him, corrects him and guides and supports him. He mentions that “Though the joint mission of the two individuals is to create a final and flawless product, there is also another mission that is no less important: to bestow knowledge upon the apprentice. A good mentor is equipped with the skill for creating a good product, as well as the ability to pass on this know-how to others.”
As a matter of fact, when he first started running his company ISCAR, Wertheimer had two teenagers who worked at his workshop. He took them as apprentices and taught them by applying various educational principles that he had learned himself throughout the years:
“I taught Yossi and Ephraim Smooha, another teenager who came to the workshop, applying an educational principle I learned in the Palmach: take action when necessary and act in an unconventional way when there is no alternative. Just as I learned in the Palmach to be a soldier, I could also learn and teach how to be a worker in industry. “If I had gone in those days to a vocational high school,” Yossi told me, “this would have helped but also hindered me, because my thinking would have become rigid. The fact that I did not know solutions in advance led me to search for alternatives.””
— Stef Wertheimer
As Wertheimer himself have mostly learned through reading on his own, he would often encouraged his apprentices to do so as well. In the early days of ISCAR, Wertheimer was forced to travel often to sell products and he would delegate the operations to his employee Yossi who was forced to improvise more often than not. As such, while he was their mentor, Wertheimer made sure to make them understand that the real education is to solve problems using your own resourcefulness.
“When I would travel to sell products, Yossi would have to find answers on his own to questions that arose. In this way, he says, he taught himself to perform the most complex operations on our only lathe to manufacture products that would normally require the use of tools that we lacked. He was forced to improvise a lot when I was absent, and he says that he would imagine himself asking me questions and thinking how I would answer them, and would then act upon the imagined responses.”
— Stef Wertheimer
“When I was not traveling I would work at the grinding machine or the sharpening wheel and show Yossi and Ephraim the work. But the true instruction and real education were in the mutual understanding that there is, in fact, no teacher and that you need to solve problems using your own resourcefulness.”
— Stef Wertheimer
Finally, for Wertheimer, “there is nothing more gratifying than to teach someone a new skill that enables him to create something.” And this, not only did it applied to his own workers, but also applied to his customers. As we have learned previously from Akio Morita of Sony, educating customers about your product is essential, especially when you are trying to sell an innovative consumer product. As a matter of fact, Morita once said that it is Sony’s responsibility to explain to the customers the value they were getting in purchasing the product.
“I then realized that having unique technology and being able to make unique products are not enough to keep a business going. You have to sell the products, and to do that you have to show the potential buyer the real value of what you are selling. I was struck with the realization that I was going to have to be the merchandiser of our small company. We were fortunate in having a genius like Ibuka who could concentrate totally on innovative product design and production while I learned the merchandising end of the business.”
— Akio Morita
The Start of ISCAR
“I want to start my own industry.”
— Stef Wertheimer
It is fair to say that Wertheimer’s entrepreneurial spirit started at a young age. As a matter of fact, when he was twelve, Wertheimer had a discussion with his father about his mill’s lack of efficiency. During that conversation, he “told him that he should improve efficiency—for example, he should bring machines from the top floor down to the ground floor so workers would not have to haul sacks down the entire stairway from above. I advised him about his resources and objectives, and suggested ways to plan suitable housing for the workers—a twelve-year-old economic adviser.” Later, the young Wertheimer even had a sketch that he drew for his father to organise all the factors to improve the efficiency of his mill:
“Later I also sat and drew him a sketch, in which I tried to organize the essential factors: the mill building in the center, with paths branching out to all of the areas of know-how, production, and marketing. One path led to the Research Division at the Weizmann Institute, which I thought would be useful in upgrading some of my father’s grain products and introducing new ones, such as new baby foods that the institute was working on. A second path led to the AKA packaging plant, which handled the packaging of the products, and a third path led to the port of Tel Aviv, to the ships that transported the products overseas. I did not forget that credit lines and improved living conditions for the workers were a prerequisite for boosting efficiency. In the drawing, the smoke emerges from the factory’s chimney in the form of sterling banknotes, as a reward for enhancing production efficiency. Near the factory, I sketched living quarters and shopping centers for workers. Without realizing it, I was already developing plans as an industrialist; it was an early vision of what I would much later build in Tefen.”
— Stef Wertheimer
More importantly, not only did Wertheimer build his own successful company in ISCAR, he built his own industry.As a matter of fact, at the time of the creation of ISCAR, the prevailing idea of the time was to turn Israel into a country of tourism. However, Wertheimer had another idea in mind; he believed that the path to building Israel into a state with a strong economic foundation was through industry and agriculture. As such, after much deliberation, he created ISCAR with the idea of producing a small product that no one was yet producing in Israel. And even more impressively, Wertheimer did so without any initial capital:
“As I had no initial capital to start a factory, and since raw materials were expensive, I had to choose a product I could manufacture and sell by myself at low cost, a product that still had no other manufacturers in Israel. After much deliberation I decided to produce cutting tools. A cutting tool is made of hard metal, and it has a lot of applications for metal cutting, lathing, and milling, primarily with iron and steel, in all industries, from automobile manufacturing, shipbuilding, and the aircraft industry to the arms industry.”
— Stef Wertheimer
While ISCAR initial success was partly due to his love of the product, Wertheimer truly believed that his company would only be able to continue to grow if it could sell its products beyond Israel. As such, the company’s motto quickly became to produce products for exportation. In fact, back in the early days of the company, Wertheimer once famously said to his workers that “Now we are importers, we’re purchasing our raw materials from overseas suppliers, but the day will come when we will be exporters and sell them our products.”
“At the end of 1958 we reached the conclusion that production for export was not only an objective, but a raison d’être. A state like Israel has to be able to do business with the world. This simple truth became our first commandment: achieve a position of advantage in the markets—that is, develop outstanding products for which there is demand. From the outset, ISCAR developed innovative products that met the needs of the buyers throughout the world, and it continues to do so today. Exports are at the center of ISCAR’s activity.”
— Stef Wertheimer
Finally, as we have learned from Isadore Sharp and the story of Four Seasons, it is extremely important for a business to find its niche in the market. In fact, in the case of Four Seasons, Isadore Sharp was able to create one of the largest hotel chain in history despite competing with various existing giants in the industry such as Holiday Inn and Marriott by specializing. As such, he decided to fully focus on midsize hotels of exceptional quality to offer a differentiated product compared to the rest of the industry.
“But my mind was made up. “We will no longer be all things to all people,” I said. “We will specialize. We will offer only midsize hotels of exceptional quality, hotels that wherever located will be recognized as the best.” I resolved to sell any hotel that didn’t meet our new standards.”
— Isadore Sharp
Similarly, ISCAR was able to find its niche in the metalworking tool industry. First, their products were primarily designed for industrialists and not your common individual. As such, their tools where not on the shelves of your normal hardware stores. ISCAR’s tools “are primarily designed for use as essential tools in metalworking. Automobile and aeronautic plants, factories producing electronic products with high metal content, and the shipping and arms industries—all these and many other industries that require extremely strong and durable tools capable of cutting steel with great precision.”
Second, the metalworking tool industry was the perfect market for them to release a new and innovative product. In fact, the industry rarely had any real inventions and, as such, ISCAR’s innovative product was able to compete with the giants of the industry who overlooked them initially.
“In the metalworking tool industry, there are very few real inventions. Most companies copy one other, producing identical products or making minor alterations. The invention we introduced to the international market in 1976 was brilliant in its simplicity. The other manufacturers in the world mumbled in amazement, “Why didn’t we think of this?” Giant companies, whose annual turnover was thirty times larger than ours and which had looked at us with derision, started to get nervous.”
— Stef Wertheimer
Finally, Wertheimer was a firm believer of concentrating ISCAR’s products selection to things they were excelling in rather than manufacturing a bunch of other products only at an average standard. As Wertheimer once said, “someone who wants to be a good musician cannot focus on string instruments in general; he must choose between a cello and a viola and reach the highest level of achievement with his chosen instrument.”
Lessons from an Entrepreneur
“An entrepreneur is one who takes total responsibility for creating something and selling it to people who are interested in buying it.”
— Stef Wertheimer
As mentioned above, Wertheimer loves to teach and he provides quite a few valuable lessons for future entrepreneurs in his book. He truly believes that there is an entrepreneurial spark present in every single person and that it simply needs to be awakened. Wertheimer, when asked what was his formula for success, often responded, “I don’t know. Perhaps it is simply to want something good and to get up in the morning and work to achieve it!”
Here are ten of his advices on how you can become a better entrepreneur:
Follow your heart and invest your time and resources in a product that you love. If you are excited about what you are making, it will hold your interest and you will be well equipped to interest your customers in it.
Be stubborn. You will probably not succeed in your initiative by the end of the first year, nor perhaps even by the end of the fifth year. If you believe in your product, you should continue, despite temporary setbacks. The proof of success is to make it to the stage where you have repeat customers.
Be frugal when you begin. Don’t invest in fancy offices or equipment at the start. Your funds should be used to improve your product and to hire the best people that you can. And don’t add staff members until you definitely have a need for them.
Don’t think you have to invent something entirely new. Most products (including my own) start out as a slight improvement over an existing item. Find something that interests you and make it a little bit better.
Once you have a good product, make sure that it is delivered when promised. This is a cardinal rule. Your customers are relying on you, and this is one important way that you can keep their orders coming.
Show up on time for meetings. This sounds obvious, but it is amazing how many people don’t follow this rule. You will lose customers if you do not respect their time.
Study your competition. You should know your competitors’ strengths and weaknesses by heart.
Listen well to your good customers. Find out if they are loyal because of the product itself or the way you present it; both are important bits of information. Listen even more carefully to your disgruntled customers; they will tell you ways that you can improve your product or your service. Then, be sure to follow their advice.
Take some risks, and in so doing recognize that you will have to endure some failures to really understand your business. It is not the mistakes you make that matter but what you learn from those mistakes.
Be honest in all your dealings—with your staff, with your clients, and with your subcontractors. As Warren Buffett would tell you, “It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Here’s an interesting extract from Wertheimer on how you may start your own soap business by implementing a few of his advices mentioned above:
“Let’s say that you decided that you want to manufacture and sell soap made from olive oil. You begin by studying the product, its components, and its different varieties. Perhaps you will discover that about two hundred different manufacturers of this product are active in the market and that ten of them are very successful in sales, and that of these ten there are two leading manufacturers. Perhaps subsequently you will learn more, by temporarily marketing the product of another manufacturer before starting to manufacture a product yourself. Perhaps you will later decide that you cannot manufacture a product that is better than those already on the market. Even then, do not give up, just as it is not prudent to immediately shoot for the stars. Almost any product will need to be tailored once you know more about your customers’ needs.”
— Stef Wertheimer
Beyond the Book
Read “ Henry Ford and the Actual Value of Education” by Farnam Street
Read “Retaining and Applying What You Read” by Farnam Street