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The Game. Amerada is his one-man show, tailored to fit his tastes. Unlike the major oil companies, which have pipelines, refineries and service stations, Amerada has never done anything but hunt, find and sell crude oil. Consequently, while the majors can budget only so much each year for drilling, Jacobsen can spend as little or as much as he pleases. Last year he spent $19 million, this year boosted it to $24 million because of the need for fast development in the Williston Basin. In the same way, Jacobsen can virtually control Amerada's tax bite.*
From its inception, Amerada has plowed every possible penny of income back into the ground in exploration and new drilling. As a result, people are apt to get the wrong idea when looking at Amerada's annual statements; it stands only 28th among U.S. oil companies in income, but it ranks 19th in production, and is the biggest independent company doing nothing but producing oil. Amerada pours so much of its profit back into drilling that last year it paid no excess-profits tax at all. It allocates only a small amount for regular corporate taxes. But the knowledge of Amerada's buried wealth makes investors pay prices for its stock far out of proportion to its modest dividends ($3 this year). They know that its growth in the past has always justified the high price of its stock. ($26 invested in the stock in 1926 would have grown to $940, counting stock splits, at 1952's high.)
The rest of Jacobsen's management is just as flexible as his drilling program. He has no table of organization, no committees, no departments for employee relations, public relations or advertising. Amerada has only nine rooms and a handful of aides in Manhattan. From the main office in Tulsa, Amerada's 1,800 employees are bossed by Executive Vice President E. H. McCollough, a trained geologist. Jacobsen is no geologist, engineer or physicist. Says he: "I'm nothing. I hire men who are specialists in those fields, and it is silly to mess with them. I don't meddle much. I keep in touch."
On his desk every morning are reports from Tulsa, covering Amerada's entire operations the previous day. Jacobsen is on the phone with McCollough at least once a day, spends $750 a month on his own calls alone. He regards the chief role of an executive as the exercise of judgment, "the one thing you can't learn at college. You either have it or you don't have it." In his own case, he applies it chiefly to "the knowledge of when to take your chances, avoiding getting tied up in a series of large gambling ventures so big that you couldn't take it in your stride if you lost."
Amerada has few fixed policies. "Policies," says Jacobsen, "are merely a damn convenient excuse for avoiding a difficult decision. Take a company that has all kinds of policies, and a difficult decision arises. If the policy does not call for taking a risk, then the risk isn't taken. If it turns out that the risk would have been a bad one, then it only proves that the policy is O.K. If the risk would have been a good one, it's O.K. too, because having the policy prevents them from having any regrets."