Jesse Jones, Capitalism and the Common Good

By Steven Fenberg

Jesse Jones, who grew up on his father’s prosperous tobacco farm in rural Tennessee, later claimed, “I got my first business training and business principles from my father in the tobacco business, and his standards and principles have been my guiding influence in all my business and public life.” Jones left school after the eighth grade, and his father put him in charge of one of his tobacco processing factories. Young Jones questioned his ability, and his father assured him he could do the job. Jones recalled, “When he told me I could do it, I felt I could.” In addition to transmitting business skills and principles, his father instilled enduring confidence in the struggling teen.

 

Jesse Jones
Woodrow Wilson and Jesse Jones: (left to right) Jesse Jones, Admiral Cary T. Grayson,
Joseph Tumulty and President Woodrow Wilson marching down Fifth Avenue
during the immense American Red Cross fundraising parade on May 18, 1918
 


Jones outgrew the farm, and in 1894 at the age of 20, he moved to Texas to work at one of his Uncle M.T. Jones’s large lumberyards. M.T. Jones owned thousands of acres of East Texas timberland, sawmills to process the timber and lumberyards throughout the state to sell the finished products. He was known as a “double-ender.” Today he would be called vertically integrated. When M.T. died in 1898, Jones moved from Dallas to Houston to manage his estate.

Around 40,000 people lived in Houston then, the city covered nine square miles and everything, including the banks, newspapers and insurance companies, was locally owned. The businessmen knew they would prosper only if their community thrived, and they simultaneously nurtured their businesses and their city.

Jones quickly embraced their approach, which echoed his father’s, and it infused everything he did in business and public service for the rest of his life.
 

  Hotel
Rice Hotel: Although it was a bold
and risky venture in the then small city,
Jesse Jones built the luxurious
eighteen-story Rice Hotel in 1913,
just before the opening of the
Houston Ship Channel
 

Jones also saw government as a partner, not as an opponent. In 1906, after he had started his own lumber business, he extended M.T.’s double-ender status by adding construction to the mix and convinced the City of Houston to pay half the cost of “grading and graveling” streets just south of downtown (in today’s Midtown). Jones paid for the other half, then built small houses on what had once been muddy streets and sold them on long-term installment plans so those with modest incomes could afford to buy a home. The judicious use of credit supercharged his efforts from then on, and the steady secure mortgage payments provided him with the means to begin building Houston’s first skyscrapers. His first three, built between 1907 and 1908, were ten stories tall.

The Houston Chronicle Building brought Jones a half-interest in the paper and a platform from which to express his views. (He would buy the other half in 1926 from publisher M.E. Foster after Foster continued to endorse “Ma” Ferguson for governor against Jones’s and the editorial board’s directives.) The Texas Company Building helped make Texaco and the petroleum industry a permanent part of the city’s business community.

And the luxurious Bristol Hotel, with its rooftop garden that caught Gulf Coast breezes while patrons danced and dined, elevated Houston’s stature.

Just as Jones had convinced the city government to pay half the cost of improving streets, in one of the first partnerships between the federal government and a municipality, a local delegation went to Washington, D.C., and convinced the U.S. Congress to pay half the cost of developing the Houston Ship Channel. Jones raised Houston’s half of the funds, became the first chairman of the Houston Harbor Board and oversaw the construction of the wharves and piers that welcomed ships from around the world. The success of that early partnership, known as the Houston Plan, reverberates today. Now the Port of Houston is the second largest in the nation and sixth largest in the world, and it accounts directly and indirectly for more than 800,000 jobs in Texas.

In 1914, the port’s opening internationalized Houston almost overnight, spurred the South’s still struggling post-Civil War economy and filled up all of Jones’s buildings, including several more ten-story office buildings and his new Rice Hotel. The latter was financed in large part by Rice Institute (now Rice University) and built on a block of land leased by Jones from Rice for 99 years. Captain James A. Baker, president of Rice’s board of trustees, agreed to Jones’s request that both men’s signatures be on all of the hotel’s work orders, changes and contracts.

During his first 16 years in Houston, Jones had nurtured a reciprocal relationship with his community, intent on both building his business and improving his city. To Jones, the intentions were connected—only if the city prospered, would he succeed. The nearly concurrent openings of his lavish Rice Hotel and the expansive Houston Ship Channel epitomized the best of Jones’s diligent efforts to use capitalism to improve the common good and increase his wealth. Thousands found employment, the community flourished, and Jones’s wealth grew.

Seeing these positive outcomes, Jones would later use this same approach in public service to benefit the people of the United States and other parts of the world. The only difference was that the tangible and intangible wealth that resulted from his efforts to improve communities belonged to each nation’s citizens.

Jones’s successful development of a once small southern city and the Houston Ship Channel, his urge to simultaneously build his businesses and his community and his embrace of government as a partner appealed to President Woodrow Wilson, who offered Jones ambassadorships and a cabinet position. Jones continuously turned down the president until Wilson asked him to organize and manage battlefield and home front medical aid as director general of military relief for the American Red Cross during World War I. Jones accepted the call to duty, assigned his power of attorney to Fred Heyne, whom he called his “other self,” financed his venture by selling the stock he held as an original owner in Humble Oil Company, and headed for Washington, D.C., and the national stage.   

 



Jesse Jones’s unique contributions during both World Wars and the Great Depression will be covered in the fall edition of the Jones Journal. Jones became the most powerful person in the nation, next to President Franklin Roosevelt, during FDR’s administration.

Steven Fenberg is the author of “Unprecedented Power: Jesse Jones, Capitalism and the Common Good,” a biography recently published by Texas A&M University Press. Fenberg was the executive producer and writer of PBS’s Emmy Award-winning film “Brother, Can You Spare a Billion? The Story of Jesse H. Jones,” which was narrated by Walter Cronkite. He produces Houston Endowment’s annual report and makes frequent presentations about the foundation and Jesse Jones.


Jones Journal Spring 2012