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Speaker 1

00:00

1 of my favorite things about making this podcast is that I get to talk to so many founders. A lot of those founders are dead, so I have one-sided conversations in the form of reading their autobiographies or their biographies, but in addition to that, because so many different entrepreneurs and founders listen to

Speaker 2

00:14

the podcast, I get to meet and talk to founders still building companies today. And a reoccurring theme on

Speaker 1

00:20

these conversations, a lot of these conversations I have with founders, is that a large part of your life is actually searching for your life's work. There are a lot of them are looking for something that is uniquely them that they can do forever.

Speaker 2

00:31

And in almost every single case, that means starting more than 1 company. And this is so common that today's sponsor, Tiny, has built an entire business around buying other businesses. And Tiny's doing something that's really smart.

Speaker 2

00:44

They know There's a

Speaker 1

00:45

ton of entrepreneurs and founders

Speaker 2

00:46

that listen to this podcast that are building businesses, some of which have a business they wanna sell today, some of which will have a business that they wanna sell in the future. And what I like about them is the way they differentiate their offering compared to other people that buy businesses, and that's just, they're No bullshit. And so when a founder goes to tiny.com and says, hey, I wanna sell my business, they get a response within 48 hours.

Speaker 2

01:06

There's an offer made within 7 days and they close within a month. The founder gets a bag full of cash up front. If you're a founder that wants to sell their business now or in the future, go to tiny.com. This episode is brought to you by Capital.

Speaker 2

01:19

Capital makes it easy to raise, hold, spend, and send funds all in 1 place. When I talked to the founder, Jordy, he had the best way to describe Capital. He said it's banking built for founders. And you can tell the difference when a founder is actually building for other founders because they take something that's normally complex and a headache and they make it simple and automated.

Speaker 2

01:38

So what do I mean? To get started, you can transfer funds from another bank account, but you can also start a fundraising round directly from your capital account. Instead of the back and the forth and the headache from the founders perspective that's usually involved in raising money, Capital helps you automate everything from open to close. You can set the details of your round, you can choose to raise in either fiat or crypto or both, you can invite investors to agree to your terms and then sign all of the documents and receive your funds in 1 click.

Speaker 2

02:04

Every founder that uses Capital gets a business checking account that will enable you to keep unlimited deposit funds for free. It is a business checking account for the modern founder. You also get a virtual debit card, which means with just a tap, you can spend your funds anywhere. And then when you need to pay your vendors or your partners, they make it easy to send money.

Speaker 2

02:22

This is what I mean that you can always tell a founders building for other founders because capital makes it extremely easy to pay contractors and vendors. And you can either do it with ACH or a wire transfer. And the wires are free. Capital is the first and only business checking account that a founder will need.

Speaker 2

02:38

You can get started for free by going to capital.xyz. And I want to tell you about 1 more sponsor before we jump into today's episode. It is Tegas. Tegas has a very special relationship with all the shows on the Colossus Podcast Network, which founders joined a few months ago.

Speaker 2

02:53

Patrick from Invest Like the Best is also the founder of the Colossus Network, and he's a giant Tegus fan, so much so that his investment firm, Positive Sum, just put $20 million into Tegus. And so I called Patrick the other day, I was like, hey, how do you describe what Tegas does? He's like, listen, it's a search engine for business knowledge. It is a hub for where you do research on companies.

Speaker 2

03:12

He says, investors and founders go to Tegas, they say, hey, I have a question. Tegas routes that question to the best person in the world to answer it. That part is really important because the difference in the answer from the first best person in the world is way more valuable than an answer from the tenth best person. That is why he describes it as a search engine for business knowledge, because you get the knowledge that you seek, it's higher quality, and you get it way faster.

Speaker 2

03:34

And what I think is also interesting to you and I is how he describes the founders. He called them ultra competitive, ultra hardworking nutcases. They go so fast and they think about the company they're building as a work of art. So if you're building a company, or you're a venture capitalist, or you work in public equities or private equity and you wanna see what Tegas Platform can do, the best thing to do is to go to tegas.com and start a free trial.

Speaker 2

03:58

That's T-E-G-U-S.com. As I walked past the Plaza Hotel on a glorious May morning in

Speaker 1

04:04

1994,

Speaker 2

04:04

I heard someone call out, Warren Buffett. Turning in the direction of the voice, I saw a woman stop Buffett on the sidewalk and start a friendly conversation with him. Buffett listened patiently to the woman who, as it turned out, was a shareholder of Berkshire Hathaway.

Speaker 2

04:20

At the time, the legendary investor was the second richest man in the United States. As it happened, I was in New York that day to meet with our financial advisors at Morgan Stanley to talk about our company, which at the time operated 143 jewelry stores nationwide. Personally, I felt uncomfortable expanding the company beyond my ability to know every single manager on a first-name basis. We had grown well beyond that point and we were still growing.

Speaker 2

04:50

We had no interest in going public. And we certainly didn't want some financial butcher carving up this jewel and selling it piecemeal. As the woman said her goodbyes and turned to go, and as Buffett prepared to cross the street, I saw my own opportunity. Stepping forward, I thrust out my hand.

Speaker 2

05:08

Hello, Mr. Buffett, I said. I'm Barnett Helzberg of Helzberg Diamonds in Kansas City. I didn't sense any recognition in his face, but he politely shook my hand and said hello, willing to hear me out.

Speaker 2

05:21

Then, right there on the sidewalk, I told 1 of the most astute businessmen in America why he ought to consider buying our family's 79-year-old jewelry business. I believe that our company matches your criteria for investment I said to which he replied simply send me the information it will be confidential. My conversation with Buffett lasted no more than half a minute. My idea of course was to grab his attention.

Speaker 2

05:48

How often do you encounter Warren Buffett on a sidewalk and pique his curiosity in your family company? As I walked away, I wondered whether my approach might have seemed abrupt, if not downright presumptuous. Yet I felt certain that our successful three-generation family business made a perfect fit with Buffett's Berkshire Hathaway, which Fortune magazine had repeatedly named as 1 of the 10 most respected companies in America. In

Speaker 1

06:15

1994,

Speaker 2

06:16

Berkshire's $11.9 billion net worth was greater than Coca-Cola and PepsiCo combined. It was at the time a collection of 30 businesses, including such signature names as See's Candies, World Book, and Nebraska furniture mart. It was the largest shareholder in Gillette, Coca-Cola, and American Express.

Speaker 2

06:38

Imagine our gut-busting pride when as the third generation owners of Helzberg, Buffett later explained why he decided to buy our business. We associate ourselves with some real jewels of the American business world, he said. And I think it's quite fitting that Helzberg joins this collection of jewels. It's just exactly the kind of company that we like to invest in.

Speaker 2

06:58

It's got outstanding management. I would hate to compete with you fellows. I'd rather be on your side of the fence and that's the side we're going to be on." My dream buyer for the family business all along was Warren Buffett. I knew we could trust him to keep the headquarters in Kansas City, resist changing the company's character, and retain the jobs of all of our associates.

Speaker 2

07:20

It might have been simpler to sell to the highest bidder, but that notion seemed as sensible as choosing a brain surgeon based on the lowest price rather than on talent and reputation. That sounds like something Buffett would say himself. But that notion seemed as sensible as choosing a brain surgeon based on the lowest price rather than on talent and reputation. That sounds like something Buffett would say himself.

Speaker 2

07:38

But that notion seemed as sensible as choosing a brain surgeon based on the lowest price rather than on talent and reputation. I had purchased 4 shares of Berkshire Hathaway stock in 1989 just so I could attend Berkshire's annual meetings and pick up some of Buffett's wisdom. So that is 4, 5 years before he randomly runs into him on the sidewalk in New York City. She said I'd push it, purchase the shares so I could attend Berkshire's annual meeting and pick up some of Buffett's wisdom.

Speaker 2

08:01

His presentations are warm and unpretentious. He genuinely enjoys people. He's often quoted saying, great people do great things. He also likes to say, we only buy companies that we trust.

Speaker 2

08:15

My first visit to a Berkshire Hathaway annual meeting was quite a revelation and taught me a great deal about Warren Buffett and his philosophies. My notes included, hire 7 footers, that is hire people with incredible abilities. Another very, very strong impression was obtained through an answer he gave a Kellogg Business School student who asked him, how do I determine which job to take? Warren's answer was simply, get a job you love at a company you respect.

Speaker 2

08:44

His people orientation was obvious and since I had been taught from day 1 by my dad that business is people, this was most impressive. Buffett recounted the story of how he acquired our company to shareholders this way. Barnett said he had a business that we might be interested in. When people say that, it usually turns out that they have a lemonade stand with potential.

Speaker 2

09:06

Of course, to quickly grow into the next Microsoft. So I simply asked Barnett to send me the particulars. That, I thought to myself, will be the end of that. In fact, it almost did end there.

Speaker 2

09:17

I promptly went home and sent Buffett nothing, afflicted with hangups about confidentiality. But 1 night, I reread the chairman's letter in the Berkshire Annual Report. And I'm just gonna interrupt this real quick. This is another example of why I've repeated over and over again.

Speaker 2

09:33

I've said this many times to you. I think Berkshire's Warren Buffett shareholder letters may be the greatest example or the most successful example of content marketing in the history of business. The amount of opportunity, unique opportunity that flows to Buffett or that has flowed to Buffett as a result of this is just remarkable. This is another example of that.

Speaker 2

09:50

But 1 night I reread the chairman's letter in the Berkshire Annual Report. There was Buffett again, inviting companies that meet his acquisition criteria to send him information. And he would promise complete confidentiality. While shaving the next morning, I looked at the slow learner in the mirror and began to scold myself for procrastinating.

Speaker 2

10:11

He told you in person it would be confidential. He told you in writing. Do you want it set to music? Send him the information.

Speaker 2

10:19

So I finally did. Not long after we sent Buffett our financial information, so Buffett also talks about the fact that you'll get a response from him really rapidly. Not long after we sent, and this is another example of that, not long after we sent Buffett our financial information, He called us and told us he wanted to talk. Soon we were in his office in Omaha negotiating a sale.

Speaker 2

10:38

And this is more on the speed of the process. This can be the fastest deal in history, Buffett said. But what about due diligence, I asked. Surprised at how fast the negotiations were moving.

Speaker 2

10:47

Most suitors demand to see every scrap of paper you've ever generated and to interview every top manager. This wasn't Buffett's way. I can smell these things, he said, and this 1 smells good. That would not be my last surprise.

Speaker 2

11:00

I asked about a non-compete clause. You'll certainly want that, won't you? I said. Buffett shrugged.

Speaker 2

11:06

You wouldn't do anything to hurt this company, he said. When a guy says that to you, he has you on your honor for the rest of your life. When Buffett buys a company, he's not looking for a quick resale to make a buck. He told us, someone asked 1 time what my favorite holding period for securities is, and I said forever.

Speaker 2

11:25

And that's exactly the way we feel about our businesses. When we were ready to leave his office and asked if a cab could be called, he insisted on walking us to the elevator, riding it down with us, and standing on the street to wait with us for the cab. Typical Buffett treatment. Warren Buffett's approach to purchasing companies is very straightforward.

Speaker 2

11:44

He will give you an answer immediately if he has any interest, and he will immediately give you a non-negotiable price. Let me interrupt this real quick. I read another, I read an entire book called Jim Clayton First Dream. It's episode number 91 of Founders about this non-negotiable price.

Speaker 2

12:02

Buffett bought that guy's company as well. And in that book, it was hilarious. I think I talk about it in episode number 91, but they start out, Buffett's like, okay, I'll give you, you know, 1250 bid, if I remember correctly. And they're like, okay, what about 16?

Speaker 2

12:13

Buffett's like, 1250 bid. Okay, what about 15? 1250 bid. What about 13?

Speaker 2

12:17

1250 bid. And they're like, okay, fine, 1250 bid. So apparently, I'm curious if you have any other examples of him, of Buffett actually willing to negotiate a price, but this is something I've seen a few times, the fact that he will immediately give you a non-negotiable price. So back to this after buying Helzberg, Buffett explained to shareholders that our ownership structure enables sellers to know that when I say we are buying to keep the promise means something.

Speaker 2

12:45

Buffett continued, we like dealing with owners who care what happens to their companies and people. A buyer is likely to find fewer unpleasant surprises dealing with that type of seller than with 1 simply auctioning off his business. Explaining how he makes this hands-off approach work, Buffett said that it was because the managers operate with total autonomy and they do such a terrific job, we don't really need anyone to supervise them. Managers of Berkshire subsidiaries run their own shows.

Speaker 2

13:13

When we get somebody who is a 400 hitter, we don't start telling them how to swing. Now back to Barnett. I think if my dad, Barnett Sr., and my grandfather Morris had still been alive, they too would feel proud and comfortable that our family business, which started in 1915 from a single store in Kansas City, Kansas, had grown by 1994 into a group of 143 stores in 23 states, with total sales of $282 million. Our business was in capable hands.

Speaker 2

13:48

As Buffett himself finally described the deal that began on a New York sidewalk, we weren't talking lemonade stands. That is an excerpt from the book I'm gonna talk to you about today which is What I Learned before I sold to Warren Buffett, an entrepreneur's guide to developing a highly successful company and is written by Barnett C. Helzberg Jr. Okay so I want to jump to the very first page even before the introduction I just read you and he has a very unique I guess you almost consider it's like a preface It says a confession of plagiarism And he says I was always taught that many many people were out there developing ideas that I could use I have found that to be true throughout my life These thoughts and ideas have all been borrowed or stolen from many wise people.

Speaker 2

14:33

Therefore, this confession. I have always solicited other people's opinions and tried to listen intently when they were espousing things, even when I was in pretty violent disagreement. Therefore, I claim only 1 original idea in my entire life, and with this book, wish only to reveal myself as a plagiarist of wonderful ideas from a lot of great people through the years. Think of the world as your garden of marvelous people and ideas with unlimited picking rights for you.

Speaker 2

15:10

Enjoy the flowers. So it's obviously an idea I very much agree with. Obviously, I'm dedicating my life's work to uncovering the ideas from people in the past and hopefully like push those ideas and help push those ideas rather down the generations. But this idea of like we all use other people's ideas is something almost every single person you and I study on this podcast also did.

Speaker 2

15:31

I was telling a friend of mine, 1 of my favorite quotes, which comes from Poor Charlie's Almanac, which is that he... Obviously, Charlie Munger is an advocate for this idea. He calls himself a biography nut. He said he's read hundreds and hundreds of biographies.

Speaker 2

15:45

He says, if he ever had a chance to teach... I think he said teach finance, maybe teach business, but I'm pretty sure he said, if I ever had the chance to teach finance, my entire curriculum would just be studying a hundred different companies that did something right and did something incorrectly. But 1 of my favorite quotes from Munger is that Cicero is famous for saying that a man who doesn't know what happened before he's born goes through life like a child. Right.

Speaker 2

16:07

So you have now it's me quoting Munger who's quoting Cicero back to Munger. That is a very correct idea. Cicero is right to ridicule somebody so foolish as to not know history. And so Barnett Jr., 2 of the people that he constantly references learning from are his grandfather Morris, who started the company over 100 years ago, and his dad.

Speaker 2

16:28

And so I'm gonna tell you this right up front, because I discovered this as I went through the pages almost to the very end of the book he's constantly talking about what his father taught him. He's the third generation that has been trusted to manage this family business right. And what's crazy about this is that his dad had been dead for almost 30 years by the time that this book came out and the book is almost 20 years old itself and that is a main this is such an important part I'm getting like tears in my eyes I don't even know why This is such an important part to reading all these books over and over again. And you see this pattern, the fact that I had no idea, maybe it's just because I was younger, but I had no idea how it was possible that the decisions that you and I are making now are going to resonate through the generations and in many cases the people that we study are fixing poor decisions made by previous generations.

Speaker 2

17:25

Like some of them are positive. I was just recently thinking about this because when I read the book Cable Cowboy on episode 268, the founder of the cable company, TCI, that John Malone's going to come in and try to rescue, really. His name was Bob Magnus. It blew me away in that book, right?

Speaker 2

17:45

Bob didn't have a lot of money he goes to his father and his father loans him 2500 dollars on a very speculative. You know decisions like I'm gonna jump into this new industry called cable and you'll see what happens and it hit me later on in the book on my oh my god. That 2500 dollar loan that Bob's father gives him winds up because the business is so successful, obviously Malone plays a part in that, that $2, 500 loan turns into hundreds of millions of dollars for his grandsons. Imagine the difference in his grand that 1 decision had on the effect of the lives of people that weren't even born yet.

Speaker 2

18:27

And so the book that I'm holding my hand is an example of like a great dad that took time to teach his son by example and through action, all of the importance that he learned, the lessons he learned, most of which were how to build and run a successful business that generated unbelievable wealth for that family. And so when I read a book like this and I get to the end, it's not okay. Well, I learned all about Barnett, Helzberg Jr. And his dad and maybe his grandfather Morris and like, how do I do that?

Speaker 2

18:57

So that was playing through my mind As I worked my way through the book, I have a lot of highlights, so let me jump into, he gives us the background. He starts off, there's like

Speaker 1

19:07

70

Speaker 2

19:08

miniature chapters, just about lessons he learned, what he said, what did I learn before I sold to Warren Buffett, but he starts the book talking about what he learned as a young child growing up in this family business. My father was 14 when he took over the family business. My grandfather Morris had a stroke and there was no 1 else to run this little jewelry shop in Kansas City, Kansas.

Speaker 2

19:31

Because dad was in school, the family persuaded an uncle to watch the store each day until dad arrived from school. I don't believe my father ever questioned the family's decision. So the year that is happening, His dad is 14, has to take over the jewelry shop. That would mean this is the year

Speaker 1

19:49

1917.

Speaker 2

19:51

At 17, so now 3 years later, dad moved the business into a larger, grander building, and with high spirits of youth, proclaimed himself a diamond merchant. The shop sold the same mix of rings and watches as everyone else, but that label let the world know that he had big plans for himself and his family business. And so we see his dad through his actions saying, hey, I was forced.

Speaker 2

20:13

I was kind of like thrown in. You're going to teach me how to swim. He threw it threw me into the deep end of the pool as like a metaphor for that. He does the same exact thing to his son.

Speaker 2

20:21

So he says he nurtured and demanded that same positive drive to succeed, whatever the challenges in his 3 sons. He gave me summertime employment when I was 15. Dad knew the importance of learning by doing. So of course he started me off in selling.

Speaker 2

20:38

And so he immediately feels the thrill of making his own money. He starts making his first sale and he says I began to have confidence that I could do this. It wasn't work, it was fun. And another main theme of the book is like hey listen I didn't start this business I didn't found this business people might not even consider me an entrepreneur but he has founder mentality and that's the way he thought about himself he had he thought about even at such a young age like I'm gonna take ownership of this I was an entrepreneur a master of my own destiny I could do whatever I set my mind to.

Speaker 2

21:06

Anything was possible. Listen to, these are all lessons that he got from his dad. Like, I tried to do the same thing with my kids. I tried to hype them up.

Speaker 2

21:13

It's like, I don't care what you do, just know that if you really love to do it you can do whatever you want to do. I could do whatever I set my mind to anything was possible. I can't tell you where other entrepreneurs get their drive but I'll bet many catch the bug young like I did. That feeling that you're your own boss that your future is in your hands is a frightening and thrilling prospect.

Speaker 2

21:32

That's something you and I talk about euphoria and terror, right? Frightening and thrilling. We are addicted to the ones and the tens. We are not living how most people live lives of quiet desperation, right?

Speaker 2

21:43

That famous quote, the range bound between maybe 4 and sixes. So entrepreneurs, we get a lot of ones, but we also get a lot of tens. I became president of Helzberg Diamonds in 1962 at age

Speaker 1

21:55

29

Speaker 2

21:57

when my father became ill. So think about that. His dad's at 14, has to take over because his father had a stroke, got sick.

Speaker 2

22:04

Now we see that Barnett Jr., 29, his father's ill. So he's like, I need to jump in and do exactly what my dad did. I was nervous and definitely not ready. I made mistakes and had my share of failures.

Speaker 2

22:15

All successful people have failures. And the 1 thing I love about this guy, he's just super positive. I mean, maybe you could say, yeah, you'd be positive too. You sold your family business for a fat bag of cash to Buffett.

Speaker 2

22:26

But I do love his optimism, his positivity. 1 of my favorite lessons that his dad taught him, which is actually lesson number 1, which I'll get to, I think indicates the kind of family that his dad set out definitively to try to build. It's this idea that you're the master of your own destiny. Like everybody has bad shit that happens to them.

Speaker 2

22:48

So what, what are you gonna do about it? So he says, I made my mistakes and had my share of failures. All successful people have failures. Despite missteps, entrepreneurs are a special breed who do not give up on their larger goals.

Speaker 2

23:00

And then this is another example of him having positive role models. He finds role models through books. He finds role models through his family. He finds role models through mentors and talking to other entrepreneurs and business people.

Speaker 2

23:12

This is the first 1. I got to see if there's a book on this guy because this is remarkable. His name is Ewing Kaufman, who wound up being Barnett's mentor. He says, he was a founder of Marion Laboratories and a former owner of the Kansas City Royals baseball team.

Speaker 2

23:25

He became a pharmaceutical, this is why I want to read a book about him. He's giving us like a 1 paragraph description of his life. He became a pharmaceutical salesman in the 1950s and turned his love of people into a phenomenal success. He beat every quota and earned more than his boss.

Speaker 2

23:39

The next year, the boss reduced his territory up for the challenge. Kaufman sold even more, again, earning more than his boss. The next year, his boss cut his commission. His boss sounds like a terrible person.

Speaker 2

23:48

By then Kaufman had had enough. He quit and started his own pharmaceutical business, packaging his own products in his basement and selling them from the trunk of his car. That's exactly how Phil Knight and the story of Nike begins. He did the exact same thing.

Speaker 2

24:03

Sold shoes out of the trunk of his car How bad do you want it in? 1989 Kaufman sold Marian labs for 6500000000.0 dollars And so he's gonna bring up some lessons that he learned from Ewing Kaufman several times. That's the first time we hear his name, but that won't be the last. Back to Barnett.

Speaker 2

24:21

No 1 has an easy prescription to become a successful entrepreneur. If they say they do, they're fibbing. We just covered this last week in that book, when I reread 0 to 1, Peter Thiel says, there is no formula for entrepreneurship. No 1 can teach you how to innovate.

Speaker 2

24:35

The next paragraph is gonna echo, in Paul Graham's fantastic essay, Relentlessly Resourceful, he mentions the best metaphor to describe the best founders is just like the running backs. If you think about the running back has 1 goes I gotta get to the end zone but he's willing to cut to the left go forward go backwards go to the right he's very flexible and how he's going to get there we see the same idea here entrepreneurs possess an almost naive belief that nothing can stand in their way. They are mentally deaf to those who belittle their chances. They love to compete and they have the skills of broken field runners who take the bumps and bruises along the way, change course when necessary and stay focused on the goal.

Speaker 2

25:13

If this is not you, Do not try to fool yourself. It is not worth it. Thinking you could start your own business or wanting to be your own boss just because you hate your job when you really have no desire or stamina to go in on your own is courting disaster. Where there is no real will, there is no way.

Speaker 2

25:32

Some people are more enamored by the concept than by the reality they would rather contemplate the beauty of the mountain from the base the entrepreneur wants to climb the mountain first briefly appreciate the gorgeous vistas from the summit and then find the next mountain this is fantastic line here If you possess this obsession of seeing your own creative notions succeed and are willing to pay the price, then you have no choice but to pursue the life of an entrepreneur. I'm telling you right now, you already know this. Talk to all your founder friends. We don't have a choice.

Speaker 2

26:05

I've heard a variation of this statement. I think it was even Mark Cuban who made the point. He's like, I'd rather make $100, 000 with my own business than 10 million working for somebody else. That is irrational, but you just have this fire in your belly.

Speaker 2

26:18

You must have control over how you spend your time over the work that is doing and you want the independence. And as as you and I've talked about before, like those kind of people usually have also larger egos or more self-belief. So they feel, OK, if I have the control of the independence, I will get the money anyways. But I love what he said.

Speaker 2

26:33

This is like, listen, if you possess this obsession of seeing your own creative notion succeed and are willing to pay the price, you have no choice but to pursue the life of an entrepreneur. My own particular motivation included an obsession with proving wrong. This is really fascinating. Proving wrong the shirt sleeves to shirt sleeves in 3 generations myth.

Speaker 2

26:52

He calls it a myth. It is something that's repeated over and over again because usually this plays out where you have somebody, I call them generational inflection points. Some people say it's like the family founder or the founder of the family, I think is probably a better line to use. Usually, they come from not doing too well financially.

Speaker 2

27:10

They're the ones that changed their financial trajectory of their family forever. Then you have usually passed on to the next person. But by their grandkids' time, people that did not have to work for the wealth usually are the ones that squander it. So that is a well-known idea through history that shirt sleeves to shirt sleeves in 3 generations.

Speaker 2

27:30

You start poor, that 1 family founder gets you rich, and then by the time you get to their 3 generations later, they're back to shirt sleeves. The other way I heard this was Dan Carlin talked about this in his fantastic podcast, Hardcore History. It's like wooden clogs, wooden shoes walking upstairs, glass slippers walking downstairs. It's the same exact idea, it's just a different way to describe it.

Speaker 2

27:53

And then I'm gonna finish this section with his mentality on this. You don't have to start a business in order to be an entrepreneur. I certainly did not. I think having founder mentality is more important than if you actually founded the actual company you're working with.

Speaker 2

28:05

I know a ton of CEOs that did not start their company, but they have founder mentality. So this is exactly what he's talking about here. You don't have to start a business in order to be an entrepreneur. I certainly did not.

Speaker 2

28:13

Some people inherit small businesses or are thrust into leadership in them like I was. Others run entrepreneurial departments within larger enterprises. There's a ton of people that listen to founders that this describes them completely. The ideas in this book will help those entrepreneurs too.

Speaker 2

28:26

I just think the idea of thinking of yourself like a founder, thinking of yourself like an entrepreneur is the important part there. It can be the greatest job in the world. Okay, so now we jump into all the different lessons that he learned before he sold to Warren Buffett. Starts out with 1 that he learned from his father.

Speaker 2

28:42

Says you should only concern yourself with things that you can control. When Growing up, I was intrigued that my father only concerned herself with those business elements that were controllable. He refused to acknowledge the depression and did quite well during that period. He was unwilling to talk about recessions or 20 inch snowfalls.

Speaker 2

29:00

He only thought about and talked about those conditions within his control. Dad was a great believer in not sweating the small stuff. He taught us to concern ourselves only with those things over which we have control. I thought he was unique in this until I realized this is 1 of the key common traits of highly successful people.

Speaker 2

29:19

Those folks are never victims. They take what comes and handle the situation. The rest is a waste of time. Then we jump ahead to another lesson.

Speaker 2

29:30

Remember, he started out the book saying, hey, I don't even have any unique ideas. I just listen when other smart people say things. And if it makes sense, I'm gonna use that for my business. We see this idea.

Speaker 2

29:40

So the note I left myself is upgrade the herd annually or what is the highest and best use of your time? I guess, you know what? I'm going to read you this Charlie Munger quote that popped my mind when I got to this section. Charlie says, intelligent people make decisions based on opportunity costs.

Speaker 2

29:55

So in other words, it's your alternatives that matter. That's how we make all of our decisions. He's saying that's how him and Warren make all their decisions. Let's jump into this lesson that Barnett learned from another founder.

Speaker 2

30:06

When you're operating a group of retail stores, there's always a usual bell curve of weak to great performing stores. At 1 point, we were struggling with the store doing $800, 000 in volume and through gargantuan efforts trying to get to 850, 000 in annual sales. So 1 store trying to increase it, they're struggling, they're trying to bump it up by another $50, 000 a year. Much conventional practice dictates committing great effort to the weakest segment.

Speaker 2

30:30

When I discussed this with my friend Steve Lieberman, he's a hot dog magnate who ran hundreds of carousel snack bars in shopping centers for many years. He said, you make more money closing bad stores than by opening new ones. His philosophy made sense. We decided we would rather spend time and effort on a $4.5 million store that could ultimately achieve 6 million in revenue than on lower volume store with less potential.

Speaker 2

30:54

So instead of trying to bump up 50, 000 and dedicating all these resources, let's focus on something that's already doing well and get an extra 1.5 million is what he's saying here. Did this mean we gave up immediately when things did not work? Absolutely not. If the store lacked great people, proper merchandising, or other controllable variables, there's that word control again, by all means, we fixed it.

Speaker 2

31:11

However, our attitude became to upgrade the herd annually, closing the weakest stores each year. And then he goes into his reasoning behind this. Each activity you undertake exacts the price of not being able to pursue alternative activities. This is sometimes called opportunity cost.

Speaker 2

31:26

What is the actual cost of sending a highly talented person to create an average performance out of a dry well rather than sending him or her to a gusher that can be turned into a super gusher. Then he extends this idea by talking about something he learned from Warren Buffett. Perhaps 1 of the key reasons Warren Buffett has been the world's most successful investor, he does not buy turnaround opportunities, something that Buffett spends a lot of time discussing over many years in his shareholder letters. He doesn't believe turnarounds turn around.

Speaker 2

31:54

He does not buy turnaround opportunities, something that Buffett spends a lot of time discussing over many years in his shareholder letters. He doesn't believe turnarounds turn around. He does not buy turnaround opportunities, only successful companies. Focus is your lever to success.

Speaker 2

32:02

Do not underestimate the incredible amount of mental discipline it takes to focus yourself and your teammates. Wonderful alternatives and seductive opportunities abound and temptations to go in multiple directions are unlimited. That is, he's writing these words in

Speaker 1

32:14

2003.

Speaker 2

32:15

Now imagine how much temptation and distraction we're exposed to on a daily basis almost 20 years later way more than than the world in 2003 This thing's time This is the last thing I'm gonna read to you from the section But this sings to my soul Commit yourself to be the best Define what that means and focus on the head of that pin like no 1 in your industry. I got to read that again Commit yourself to be the best define what that means and focus on the head of that pin like no 1 in your industry. I gotta read that again.

Speaker 2

32:38

Commit yourself to be the best, define what that means, and focus on the head of that pin like no 1 in your industry. And he's got another great idea. I'll probably reference Estee Lauder several times, episode 217. If you haven't listened to it yet, I highly recommend you do.

Speaker 2

32:53

She was maybe the best practitioner of Paul Graham's idea that you should do things that don't scale. What Barnett says here is that just providing super service is actually a friend to the entrepreneur. It's something that you can do that giant companies can't. And so he talks about going to a locally owned grocery store.

Speaker 2

33:11

He says, I went to the grocery store to get a few items, unloading the groceries. I found that the home phone numbers of the owners, Mike and Libby, were listed right on the sack with the invitation to call if I was not happy with the store. It was clear that the owners took responsibility for good service. What I also liked about the book is at the end of every chapter, he's got all these quotes that he loved, usually from other founders or other interesting people throughout history.

Speaker 2

33:38

You know I'm a sucker for Maxim's. This 1, I actually read a biography on Thomas Watson. It's called The Maverick and the Machine, Thomas Watson, Sr. And the making of IBM.

Speaker 2

33:48

I did that a long time ago. I think it's episode 87. But he put this at the end of 1 of the chapters that I really loved, a quote from Thomas Watson, who said, to be successful, have your heart in your business and your business in your heart. Another lesson from his father, the importance of keeping your ego in check, that it could be used to drive you, but you should hide it.

Speaker 2

34:10

People do not like arrogance in other people. And his father, so his father is quoted a bunch in the book at the end of these chapters like a which is referencing of these maxims he puts in there And this is the way I could basically you could summarize the main Idea in the entire chapter in 1 sentence, and it's a quote from his father. It says big people grow little people swell So again the name of the chapters keeping your ego in check big people grow little people swell. So then he talks about another idea that he learned from his father is going to happen in mid 1960s.

Speaker 2

34:46

His father had this idea of, he calls it the 2 supplier principle. And then this is the first time he mentions this, or the first time I mentioned to you, but it's mentioned a lot in the book, that his father and everybody in the company is like, Don't burn a bridge. This is repeated. Do not burn a bridge is repeated over and over again in this book.

Speaker 2

35:04

And so this was the first introduction I heard about the 2 supplier principle. 1 bitterly cold January in the mid 1960s, I went to our bank, 1 of the banks actually, to the First National Bank of Kansas City to make our routine loan. We needed to cover the checks that we sent out the day before to our suppliers for the immense amount of merchandise we had bought for the Christmas season the month prior. We had a longstanding relationship with First National Bank going back 30 years.