This is a picture of a bypass on a heater. This particular setup has three valves. Your vintage probably only has one valve on the bottom (if so, it has a check valve on the upper end), but there also may be two valves. But this will give you an idea of what to look for.
Basically, when bypassed the water goes through the short piece of pipe instead of the heater. You'll still get water out of the hot taps, it just isn't going through the heater.
BTW - DO NOT run it on ELECTRIC if there is no water in the tank, it will burn out the element almost instantaneously!!
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