Denver industrialist Charles Gates Jr. was a risk-taking tycoon who failed in many endeavors but died a billionaire this week at age 84.
He was hands-on, down-to-earth, innovative and industrious, and considerate of other people trying to make a living. He developed those traits in a chicken coop.
Gates’ father – the fabulously wealthy founder of Gates Rubber Co. – demanded that his children be productive. So Gates Jr. went into the chicken business with two siblings when he was about 13, according to a privately published family history, “Growing Up Gates,” printed in 2002.
“We built four chicken houses, each bigger than the last one,” Gates said in the book. “We constructed these chicken houses with the money we made by selling eggs and the chickens. … We’d keep the hens for laying, and we’d sell the roosters to my mother for Sunday dinner. It took about half a dozen chickens to feed everybody and the guests.”
The Gates kids sold eggs on the roadside in front of the family chateau near Morrison. They expanded distribution to the company store at their father’s factory. Within a couple of years, they had more than 1,000 chickens.
Cleaning up chicken droppings was one of their biggest struggles. Gates’ brother, Harry, built a conveyor system using rollers and sheets of rubber so he could clean the coops with the turn of a crank. He even rigged an alarm clock to turn on a light early in the morning to boost egg production.
As the brothers grew older, they lost interest in the chicken business and spent their time building cars.
When Charles Gates Sr. died in 1961, he left his heirs a mature company that made hoses and fan belts. Growth was limited since the industry was flat. But the business generated lots of cash.
“My dad always plowed it back into the business,” Gates recalled. “I thought the business couldn’t effectively handle all the cash that we were generating.”
So he poured much of the company’s cash flow into other enterprises, often with mixed success.
He went into the oil business, ranching business, trucking business and aviation business. He became a pioneer in the mutual-fund industry when he bought Financial Programs Inc., the predecessor of Invesco, in 1964. He also went back into the chicken business.
In 1961, he formed Gates Cyclo Inc. to automate egg production. The chickens roosted in air-conditioned silos. Their cages rotated on huge carousels to simulate sunrise and sunset. Mechanical systems delivered precise amounts of food. Conveyor belts collected the eggs.
When ramped up to full production, nearly 1 million hens laid 680,000 eggs a day. Cyclo sold these eggs to Safeway stores throughout the region.
The company had setbacks. For one, a million chickens make a lot of manure, and government regulators increasingly demanded expensive disposal practices.
Gates hired microbiologists and organic chemists. From the manure, they produced uric acid, a chemical used in cosmetics, lubricants and pharmaceuticals. Sales of uric acid covered the research costs. Cyclo was a marvel of efficiency.
Local farmers complained that Gates was driving down the cost of eggs.
He recalled a conversation with an old farmer, who said, “I’ve worn out two sets of teeth hanging on to my egg business, and, by golly, I can wear out another set of teeth hanging on to it if you’re going to … start competing with me.”
“Gates had respect for that sort of talk,” family historian Randall Teeuwan told me. “He didn’t want to squeeze the small egg producers out of business.”
Gates could have dominated the regional egg market – but at what cost? Egg prices fell so quickly that his own operation was only breaking even.
Gates was a man with bold ideas and the luxury to pursue them. He also had the luxury not to pursue them.
He could have waged a bloody war for market dominance and the opportunity to profit from rising egg prices in the future, but he closed Cyclo to pursue more promising ideas.
“It was a lot of fun and a lot of sport proving a principle,” Gates said of his chicken operation. “But it was never going to replace the fan-belt business.”
Al Lewis’ column appears Sunday, Tuesday and Friday. Respond to Lewis at , 303-820-1967, or alewis@denverpost.com.
