Regardless of the natural tension between two very different people of two very different generations, Hillblom and Dalsey ultimately understood that they needed one another in order to make a go of it. Hillblom was overflowing with ideas and energy; he was willing to work twenty-hour days and could do a lot of the legal legwork. Plus, he had $6,000, which would become the company’s seed capital. Dalsey had credit cards and client connections. They incorporated in September, using the initials of their last names and adding that of Robert Lynn, a real estate–investor friend of Dalsey’s who had promised to help them raise capital. Lynn, however, dropped out of DHL almost immediately. He told them that the company could not succeed.
Dalsey quickly signed DHL’s first client—the shipping giant Seatrain Lines, which needed to courier bills of lading between Los Angeles and Honolulu. Then he hit a wall. Hillblom and Dalsey had hoped that Lynn’s financing would carry them through the lean months, but now they were forced to rely on a trickle of cash to survive. Marge, Dalsey’s wife, became the corporate secretary and did the books on her dining room table. Hillblom was forced not only to travel with DHL’s bags but also to pick them up at Seatrain before boarding the plane and drop them off after he arrived. During the few hours he was not working, he slept or studied for the bar exam. And waited for his supersalesman to sign one of their dream clients. But Dalsey, scouring the Bay Area in an old Plymouth Duster whose unmatched doors were salvaged from a junkyard, had stumbled on the first in a long line of catch-22s: DHL needed banking clients in order to become profitable, but they could not afford the expensive insurance that banks demanded. While the value of the checks that the banks were sending was, on its face, negligible—nothing more than paper and ink—if even a single large check became lost or delayed for more than a few days, the interest lost could be substantial. Nearly a year would pass before an insurance agent offered up a solution. In the meantime, Hillblom nearly starved to death in paradise.
“I was hired as an operator in 1969 at American Telephone Answering Service,” she begins, sizing me up from behind a pair of square-framed schoolteacher’s glasses. Her name is Marilyn Corral. Until her retirement two weeks before Hillblom’s presumed death, Corral was the longest-serving employee in DHL history. Her last title was vice president of human resources. A woman with a cherubic face that belies a suspicious nature, Corral has retired to the tiny town of Mariposa, in the shadow of the great Sierra Nevada, not far from where the young Hillblom and his two brothers used to fish.
American Telephone Answering Service happens to be the company that Adrian Dalsey hired to answer DHL’s phone calls—usually clients calling to schedule a pickup. Corral, then a new military wife, was in command of a turret wired with ten phone lines, each marked with a particular customer’s name so that she would know how to answer the phone. This personalized “executive” service cost more, but Dalsey had decided it was worth paying for because callers were duped into believing that they were calling an actual DHL office. When Dalsey returned to San Francisco, Hillblom suddenly began to appear in Corral’s office to pick up DHL’s messages. “He’d always show up at mealtime”—Corral smiles—“and we felt guilty because he looked like he was starving to death and never had anything to eat. So we bought more than we normally did—Chinese food or whatever—and he would eat lunch with us.”
Back then, women like Corral were “girlie” or “honey,” and silver foxes like Dalsey were allowed to let their eyes wander and linger wherever they wished. But whereas Dalsey came across like a dirty old man—“sleazy,” says Corral—Hillblom was charming. He would loiter around the office for a couple of hours, teasing Corral about everything from her constant dieting to the fact that American Telephone’s office was on Hotel Street, where the hookers had solicited navy boys during the war. Not long after Hillblom started showing up, he hired her as DHL’s first employee—albeit part-time.
Number 911 Alakea Street still stands, a narrow two-story colonial squeezed between two much taller office buildings in downtown Honolulu, only a few blocks from the ocean and two miles from the Honolulu International Airport. In 1970, it was occupied by two tenants: on the first floor, a Hawaiian restaurant with a rat problem; and, above it, the law offices of Curtis Carlsmith, a classmate of Kroll and Hillblom’s. Larry had sublet the inside office from his friend Carlsmith; it was just large enough for a few desks. He’d hired a handyman to build a small loft space, where he eventually laid a mattress. Corral kept her day job at the answering service. But at night, she would drive over to 911 Alakea to schedule the courier calendars. And on the weekends, she would climb up into the loft, gather Hillblom’s underwear, T-shirts, and bedsheets, and take them home to launder them because she knew that he never would.
“I would have all the filing done on Friday evening, and Monday morning the files would be all over the floor”—Corral sighs—“because he was looking for one document and couldn’t find it. I wanted to kill him. He lived on the telephone. He looked like he was always nervous, and he was blind as a bat. Most people didn’t like riding in the car with him.”
Demand for DHL’s service mushroomed. Although, on average, Dalsey was signing only two new accounts every month, existing customers wanted DHL to expand in order to service more offices. Growth was exponential and, considering the size of a few of DHL’s early clients, such as Bank of America, limitless. Hillblom and Dalsey had tapped a vast well of demand that was just beginning to gush; their only obstacle was that they did their job too well for some. “People wouldn’t believe that we could have their material on the mainland before the office opened,” Corral recalls. “We had to give a lot of free service to get people to try us out. And once they tried it, they were sold.”
DHL wasn’t just faster and more reliable than the post office. It was far more elegant in its simplicity. Clients paid a flat rate for a nylon pouch that traveled between two destinations every business day. The smallest pouch was rated at four pounds, but customers were charged the same rate whether it carried nothing or whether they managed to stuff twelve pounds of documents in it. That the pouches expanded was, in fact, an unintended selling point. Mailroom workers who managed to “overstuff” their pouch thought they were getting the deal of a lifetime.
As DHL expanded to more destinations, the pouches were color-coded by city, then stuffed into bright green weatherproof duffel bags in a sorting area—sometimes a grocery store parking lot where the drivers would meet after finishing their rounds. The bags were then driven to the airport and loaded directly onto the airplane from the tarmac—last, so that they would be the first to arrive. A DHL representative would then meet the courier at the counter, hand him (or her) a plane ticket and a small pile of baggage claim receipts. Hillblom often drove to the airport to help load the planes, goofing off with the drivers as he had with Corral and her fellow operators at the answering service. Meanwhile, Corral scoured Honolulu for anyone willing to give up their baggage rights for a free ticket to the mainland or to Guam. She called schools and churches first. A few of Hillblom’s old Boalt Hall professors became couriers, as did Steven Kroll and both of his parents. So did a good portion of the Mormon congregation in Honolulu. Hillblom and Dalsey both had a tendency to offer pretty young women jobs. And at one point, two FBI agents showed up at Alakea to investigate reports that DHL was giving people airline tickets for free, as long as they were willing to take only carry-on baggage. The fact that would-be couriers were instructed to meet a Mr. Monty Hall at 11:00 p.m. underneath a digital clock beside the Pan Am ticket counter did not help assuage suspicions that there was something nefarious going on. But by the time the FBI agents finished their investigation, Corral had convinced them to become couriers themselves.
So it was with DHL’s customers. Once they understood the company, their trust seemed absolute. DHL’s couriers accumulated large rings of keys that permitted them entry into banks, law offices, insurance companies, and the mailrooms of large shipping firms. Corral was ama
zed that anyone would give Hillblom and his minions, who were often even younger and more questionable-looking than himself, access to their inner sanctums.
Of course, expansion required more than just couriers. Every station, particularly one like Honolulu, where pouches were being forwarded east or west, needed a manager. Hillblom and Dalsey naturally turned to a couple of their former coworkers at MPA, Bill Robinson and Jack Atwood. To foster an entrepreneurial spirit—and to save cash—Hillblom decided that each station should be owned by its own managers under contract with DHL. Robinson ended up with Los Angeles. Atwood quickly left to open an office in Seattle. That freed up Dalsey and Hillblom to focus on Asia, where their big shipping clients already were and where their banking clients wanted to be. Dalsey did most of the traveling, making sales calls and chatting up potential station managers, often in hotel bars. Hillblom stayed in Honolulu, devising a network that could grow exponentially but still be controlled. In theory, moving documents around the globe was not unlike moving crates of peaches from a farmer’s truck to a loading bay. The real challenge was building the network, which involved a number of thorny legal and logistical issues. Legally, for example, most countries required that a shipment’s actual owner (or an employee of an owner) clear customs. DHL was a third party. If DHL was using a subcontractor in another country, its client was twice removed from the shipment’s original owner. Then there was the question of payment. If the shipper was a DHL customer, and a DHL courier shipped the pouch from Hawaii to Guam, for example, but another company shipped it onward to Singapore or Tokyo, how much did each company get paid? And whose customer were they? Then there were technical issues. If you loaded a shipment at point A and picked it up at point B, the courier business was pretty straightforward. But the hub-and-spoke system envisioned by Hillblom meant that shipments could become delayed—or lost—at several points along the way to point D or E or F. How did you keep track of thousands of important documents that could be in dozens of places at any given time?
While Larry grappled with these issues at Honolulu’s law library and his office, his partner, Dalsey, was jet-setting the Far East in gleaming new Pan Am 747s. The older man usually stopped in Honolulu just long enough to see his girlfriend there and have dinner and an argument with Hillblom. “I was never very impressed with him,” Corral says. “Of course, I was probably biased because Larry didn’t like him at all. He admired his sales ability and Dalsey could really talk the talk. But they were always fighting about stuff. They differed about how everything should be done. We eventually decided it was really because Adrian was fifty-five and Larry was twenty-six. Larry wanted to try it and see what worked; Dalsey wanted to do it the way it had always been done. They would have yelling matches on the phone. In front of the rest of us, they would be civil, but I knew what was going on. Larry always won, because he would convince all of us that he was right.”
Alakea was far too small and too messy for company meetings, which were held a mile down the road at a diner called the Tasty Broiler—Hillblom’s favorite restaurant because of its $5.99 prime rib special that included soup, salad, and a drink. Money was very tight. If Dalsey joined them for dinner, he and Hillblom would try to outsit each other at the end of the meal, waiting to see who would eventually pick up the bill. Once or twice, an unsuspecting employee was left picking up the tab when both men abruptly left. Corral was forced to take money out of her own savings account to make sure that her paycheck cleared, while Dalsey and his wife maxed out credit cards and took out a second mortgage to pay the bills. Corral remembers having to comfort her young boss frequently. “We’re doomed!” was a favorite refrain of Hillblom’s, she recalls. But at the same time he was playing Chicken Little at the office, he dialed up his old college roommate Dave Crass and bragged about how much money his company was losing.
“That’s crazy,” Crass told him. “You’d better get out while you can.”
“Nope,” Larry replied. “Pretty soon, we’re gonna be making money. A lot of money.”
Three
Unwelcome Attention
Russ Sands will never forget his first visit to DHL’s new offices at the dawn of the 1970s. The young insurance agent had circled the Honolulu airport parking lot five times in his steaming rental car before Larry Hillblom finally jumped out from behind a concrete column waving a stopwatch.
“What the fuck are you doing?” Sands growled as Hillblom, dressed in board shorts, led him into an oversized Quonset hut adjacent to Pan Am’s giant hangar.
“I was timing how long it would take government agents to find this place,” Hillblom replied matter-of-factly. Sands did not ask him to elaborate. He was drenched in sweat and fuming.
Once inside, the two men negotiated a maze of hallways and small rooms previously occupied by the U.S. Customs Service that appeared less corporate office than bunker (outside) and commune (within). There were no placards announcing DHL’s corporate headquarters and the doors had been stripped bare of names and titles. They passed a huge floor where piles of color-coded pouches were being sorted by hand, finally reaching a large room filled with desks and office equipment where a dozen young employees dressed in jeans and T-shirts milled around in barely contained chaos. None seemed tethered to any particular desk or piece of equipment, maybe because none had a title. Sandy Brant, an ebullient young air force wife whom Hillblom had just recruited to fill the courier schedules, had burrowed into a tiny space underneath a staircase and was happily banging away at an IBM Selectric typewriter. “If you can find this room,” Hillblom quipped to Sands, “you’re hired.”
The company that Bob Lynn declared would never succeed was now growing faster than any other start-up of its era. From 1969 to 1971, sales would increase nearly 1,000 percent—from $64,750 to $661,376. When Marge Dalsey tallied 1972’s sales from the huge ledger books that buried her dining room table, DHL would undoubtedly be a million-dollar company in only its third full year in business. (Microsoft would need another full year of operations to reach this milestone after its launch several years later.) DHL controlled 70 percent of the courier market between San Francisco and Hawaii and 80 percent of the market between Los Angeles and Hawaii. In a little more than twenty-four months, Adrian Dalsey had talked the talk from San Francisco to the Far East, adding the Federal Reserve, IBM, Standard Oil, and others to an ever-expanding client list of law firms and technology companies. DHL stations opened in Guam, Tokyo, Hong Kong, Manila, Sydney, and Singapore. It was poised to become the fastest-growing global corporation in history.
Moreover, the network was growing organically. Bank of America considered DHL so essential to the development of its overseas business that the company offered to prepay their invoices; like a number of DHL’s other clients, they were addicts. And Hillblom’s company simply could not keep up with the demand, though not for lack of trying. If a few clients demanded that DHL open an office in a new city, Hillblom obliged, even if the “office” was nothing more than a hotel room with a newly hired local working next to a jet-lagged American attorney. Steven Kroll would be called upon to perform the latter role many times. He would fly into an unknown city, meet with the station manager—a glorified driver in many instances—and file the necessary papers, then pray for the best before flying on to the next city. The station manager’s expenses were paid by DHL. Depending on the station’s size and importance, the manager was either an employee or worked on a cost-plus basis as a franchisee and signed an exclusive agency agreement. (Kroll received a suit as payment.) Hillblom’s elegant solution for maintaining control over an increasingly disparate empire did not always hold, but it did accomplish two important goals: it made the franchisee-owner work harder, and it kept DHL’s workforce from unionizing. The agency agreements also enabled the company to grow very fast with little cash, a constant issue. By the early 1970s, DHL was opening a new country every two months and a new city every eight days. Friends often worked for free, while Pan Am’s cargo manager in Honolulu held th
e company’s invoices until DHL was able to pay them.
Station managers had to possess a driver’s license, but they also had to know how to work on a shoestring budget and talk themselves out of sticky situations. Customs agents were not used to seeing a single passenger walk through with twenty or so green duffel bags. In some countries, they demanded a little something extra for their trouble. A station manager who figured out how to grease the wheels did very well irrespective of his résumé—if he had one. Hillblom was more interested in whether someone knew how to work. “Larry was pretty hard on those of us who were closely working with him,” Corral recalls. “He didn’t want any of us to drink. He wanted us to be aboveboard because of the potential of the reputation of DHL being harmed. He really demanded a lot of the managers. Before he pulled out, he would come to the corporate office and go through people’s expense reports because he thought we really should not be turning in expenses, and it irritated him that people would travel and turn in meals and things like that. He felt that people should be grateful.”
And ambitious. The chairman of DHL-Philippines was a sugar farmer and gas station owner who’d struck up a conversation with Adrian Dalsey at a bar on Guam. The top guy in Australia was a relentless taxi driver named David Allen, who had been hired on a rugby field in Melbourne. Allen and his young lieutenants would develop much of DHL’s overseas network over the next ten years; in Honolulu, they were known as the cowboys.
Stateside, Corral had hired more than fifty operations people to feed the beast—including Steve Kroll’s father, Max, and Hillblom’s half brother, Grant Anderson. At Hillblom’s insistence, they all worked full-time. Hundreds of couriers also had to be located and scheduled every month.
“There was a great compensation in knowing that me and my family could go anywhere,” Steven Kroll explains. “Knowing that I could fly anywhere in the world, for a poor kid, was like being rich for me. With the couriers, DHL got unpaid employees who felt rich. I think it’s almost a human characteristic that people like to think that they’ve gotten something for free—even people of dignity.”
King Larry Page 4
