Building a Great Enterprise with Gary Hoover

Source: GeniusDen archive transcript checked against the recording. Administrative opening and closing material is omitted; the presentation wording is otherwise preserved with light readability edits.

It's great to be here. I haven't been in Deep Ellum in a couple of years. I actually moved to Dallas 40 years ago this year to become a buyer for a department store here that was called Sanger Harris. How many of you have been around long enough to remember Sanger Harris? That's how the names die over time. We were the biggest department store in Dallas, dominated the market. If you subscribe to the Dallas Morning News or the Dallas Times Herald, we would have been the full-page ad on the back of Section A for about 50-60 years. The downtown store at Akard and Pacific, I believe, maybe city government took it over. Maybe the transportation authority here or something. But anyway, and the company was part of Federated Department Stores and was the number one store. Even though Neiman Marcus is better known globally. We were the biggest in Dallas. And it all became renamed Foley's and later renamed Macy's. So the company actually still continues on. But I was

just here two years. It was part of my graduate education of learning the retail business. So let me tell you a little about my background. I put this in context. Oh, before I forget, my card on the back of it are my key points I'm going to talk about tonight. And there are links to my new venture, to my website, to my video channel, everything else I can think of. But one of the things is once I talk to group, you get free lifetime 24-7 email support. I've spoken in like 44 countries, I don't know, 2,000, 2,500 times. I was in Grand Rapids, Michigan last week. I'll be in Bogotá, Colombia in two weeks on behalf of the University of Texas and the State Department. And so I talk about these ideas all over the globe. But anybody that needs anything, further thoughts, just email me. I answer all of them and all that and try to get to everybody. So my background, I grew up in a General Motors Factory town, Anderson, Indiana, a town of 60,000 people. And in the classroom, the teachers

were talking about leadership, management strategies. They were talking about kings and queens and presidents and generals and colonels and admirals. You know, in the Civil War and say, oh, this general did this strategy and this general did that strategy and which one worked and which one didn't work and all that. But also leadership styles made people want to follow or not follow a president. And I thought, well, this is all really interesting. What about General Motors? Can you tell me about them? Because a town of 60,000, 27,000 General Motors workers, so just enormous, 7 million square feet of factory buildings. And a teacher said, oh, General Motors, I make Chevrolet Pontiac, Buick Oldsmobile, Cadillac, GMC truck. I know that. I said, you know, who started it? Why did they start? Who runs it today? Are they smarter? Are they stupid? I mean, you know, we may tend to assume anybody runs a Fortune 500 company is smart. But, you know, the guys who ran Enron, you

know, they never understood business. I mean, you know, they got MBAs from Stanford and Harvard and the finest business schools on earth. But they clearly didn't understand business. I mean, they thought they were smart and thought they were doing the right things. But, you know, they ended up suicides and in prison and stuff. So it's not exactly the way they thought and thought it would turn out. And if you study Bank of America and Merrill Lynch and we have case after case of idiots running giant companies. And so I wanted to know, you know, General Motors, I mean, who started it? And why are they starting? All these teachers couldn't answer me. It was driving me nuts. So I was in a class in a newsstand with my big brother who was looking at the airplane in the car magazines. My big sister was looking at the horse and the dog magazines. And I discovered Fortune magazine. Every late spring, early summer

they do the list of the 500 biggest US companies, the Fortune 500. And that issue was on the newsstand. And number one was General Motors. It was 50 percent bigger than any other company on earth and the most profitable company. And there were not only did that magazine talk about General Motors and their leaders and how they thought and how they made decisions, but it talked about 499 other companies, most of which I hadn't heard of. And I went running to my parents and said, man, this is the coolest magazine I've ever seen. You've got to get me a subscription to this magazine. And they're like, oh, you weird kid. You know, why don't you go play basketball like a normal Indiana kid? Anyway, I got my subscription and two months later I entered the seventh grade. So I started subscribing to Fortune when I was 12. I now live in a 8,500 square foot one bedroom house with 56,000 books.

And among those books are almost every issue of Fortune back to its beginning in February of 1930. When a new Fortune 500 came out several weeks ago, it was a 52nd year in a row that I've grabbed it out of the mailbox or off the newsstand and gone through all 500 companies to see how my buddies are doing, which ones have died and which ones have come back to life. So I became a business junkie at the age of 12. And then, well, eighth grade term paper was the life story of Marshall Field, the great Chicago merchant. So by 13 or 14, I'd become a retail junkie and decided I wanted to spend my life in retailing. I thought it was a way you could have the most impact on the most people to make their lives better.

And so that's continued. I'm 64 now. I started a list of business ideas when I was 12. It now has about 320 ideas. This is tablet number 246. I've just been doing this system for 16 years. I'm a piker, though, compared to Richard Branson. He has 3,000 tablets, all numbered and in order, and apparently all full of ideas. But I've only got about 320 ideas. So I'll keep working on them. And so I became fascinated by business and by retailing. But I also, over the years, what I define it as is enterprise. And when I say enterprise, I mean, any time you've got a group of people who have a shared vision or common goals. And I actually believe, so I was on my ninth startup if you count them once in the three in college. And I worked for three Fortune 500 companies and Hoover's, that became Hoovers.com. One of the companies I started now, I saw it online the other day, now covers 18 million companies. So I've studied a lot

of industries and a lot of companies. But the most successful corporation that I've ever been involved with, whether the giant ones or the little smaller ones, some of them got big that I started, is the University of Chicago, where I was blessed to go to college. And that was created by a radical entrepreneur, a guy named William Rainey Harper, an education entrepreneur. And he said, I want to build a great university overnight. And everybody thought he was nuts, the venture capitalists of the era, I guess. Because, well, first of all, he wanted to go to Chicago, and everybody knew, well, nobody's ever going to go to college way out west like that. And it's a swamp town, it's a bunch of bad news and prostitutes and minors and whatever. But he convinced a fellow Midwesterner, or a Midwesterner, a guy named John Rockefeller, who was from Cleveland, to put up the money. And in the 1890s, they

created this university and pretty much created a great one overnight. They raided other campuses for faculty. And as of today, the University of Chicago is one of the top two or three universities in the world, in terms of how many Nobel prize winners it's had. Depending on how you measure, by some list, it's first. So four of my teachers I had in this undergraduate later won Nobel prizes, Milton Friedman and three other economists. But it's a place that's been true to its goals and visions. So it's a great corporation, which is legally what a big university is. 501(c)(3) in its case. But my bottom line is, because I know a lot of you are involved in your universities and churches and nonprofits, and we have the Deep Ellum Association office here, it doesn't matter whether it's for profit or not for profit. I believe the same principles apply and the same ideas and what makes for

greatness in any industry and any size company from tiny to giant and for profit and nonprofit, they're the same things. And so in large part, my life has been pursuit of what are those things that really make for a great lasting company. And I've come a list of the eight things that are on the card. So I'm just going to blow through those as fast as I can and we can discuss it or Q&A or whatever works for you guys. So the first thing you'll see on the list is curiosity. And that's the key, man. I believe that's the key to everything. And where I discovered this was, well, along with retailing, I didn't know what kind of store or chain of stores I wanted to start. And as a startup entrepreneur, I have to be looking 15 to 20 years in the future because to build anything is going to take five to 10 years to get it off the ground and really cooking. I mean, once in a while you've got an Instagram that was flipped in like a year or whatever, but even if you study

Google and Facebook and everything, they were five, six, seven years old when they went to their IPO. And you can't build something and at year seven, it's really cooking and at year eight, it goes broke. I mean, if you do that, it ain't going to work out happy. I mean, you've got to, it's got to have legs. So if you build it to year seven, then if you're ever going to sell it or take it public or keep it for the grandkids or dividend to your investors or all the different ways that people can monetize as they say these days, it has to have legs. So I got to look 15 to 20 years out in the future. And I'm sitting there in the 1970s, trying to foresee the 80s and the 90s. And I know I want to start a retail chain. So the first thing I ask is what's the latest technology in retailing.

And when I say technology, I mean any better way of doing things. Milton Friedman in class used to talk about maybe the most impressive technology of the late 20th century was the way that chickens are raised. I was on the Whole Foods Board of Directors for like five years, four and a half years, so I know that factory farming is kind of out now. But the reality is what Pilgrim's Pride and Tyson's and all those people did dramatically lower the cost of protein globally and increase the welfare of people around the globe. And so any better way of doing things is a technology. It's not just hardware and software. And in retailing, the new technology, I'm sitting there in the 1970s, was the super store sometimes called the Category Killer invented by Charles Lazarus in Washington, D.C. with Toys “R” Us in the late 50s. And what Lazarus did is he said, I'm not going to be a general merchandise

store like Walmart or Sears or Macy's. I'm going to be a special store. He picked toys and games and wheel goods, bicycles and all that, but toys. And in that category I'm going to carry a huge selection of goods and have low prices. Well, that, the idea of a super store, the biggest super store chain ever built is called Home Depot and Lowe's and Best Buy, the next two biggest, last I checked. And they're all around us, you know. And always, all these ideas always look great in retrospect, but they don't on the front end. One of the rules I teach my students and I, of course, is an entrepreneurial thinking is if everybody comes to you and says, oh, that's the best idea I've ever heard. I wish I thought of it. You probably don't have a good idea. 90% plus of all the good ideas are laughed out of the room when they first come up. So why would you have laughed at Charles Lazarus back in the early 70s? Well, when it first dreamed up the idea, the

idea of a super store, big selection low prices in a single category of goods. Well, if you're going to carry a huge selection of goods, and there was a bookstore in North Dallas called Taylor's that was one of the best and biggest selection bookstores on earth, actually. There was a sporting-goods store on the north side of Chicago, Maury Mages, huge selection of sporting stores, and several floors. There were art supplies stores, actually, in Tokyo and stuff that are multi-level. A photo of camera supply stores in Tokyo and New York. But back in those days, if you carried a big selection, well, two things. One, you had to finance the inventory, and that takes more capital. And you'd need more square footage, so higher rent. So those guys to use the retail price didn't give anything away. If you carried a huge selection of goods, you sold everything at list price, full price, as did the Taylor's outfit here in town. And on the other hand, if you're going to discount, a key premise

of discounting is you carry fewer items. You cherry pick. You just carry the high velocity, high turnover items. So the example there, I use my little tablet here, is so it's like, you know, Best Buy carries 40 different laptops. Walmart would carry 10, and Costco would carry two, or whatever. And so if you're going to discount, you carry fewer. And they're a great comparison. If we take Costco, and we compare it with Walmart, ticker symbol, WMT. I don't know if everybody's going to be able to see it, but I'll see the numbers as I go. So the average Walmart carries about 120,000 different items. They're called stock-keeping units, SKUs, and retailing, and consumer products, industries. 120,000 items in regular Walmart, super center. Costco on an average store carries 3,500 different items. And Walmart, average Walmart store does 70 million a year in revenue. Average Costco store does around 135 million a year in revenue. It's the highest revenue per store retailer in America.

And so what you got is Costco doing twice the revenue with one-fortieth as many items. So, you know, 80 times the sales per item. And it takes just as much paperwork to have another item in the system and the buyers and everything else. So this is just a classic case of, if you're going to discount, you carry very few items. And in fact, I could go off on a riff about why Walmart fails with Sam's on a relative basis because Sam's does half the revenue per store of Costco. Sam's is on maybe its 18th CEO. Costco just appointed their second one. Both of the first one and the second one started as baggers working their true retailers, much as Sam Walton was. But he copied this. And so Walmart has never really understood deep discount retailing. Because Costco's out there running a gross margin to 10 to 12% whereas Walmart's over there in the mid 20s. So, you know, twice the gross margin. So much

higher price. The Walmart's really more about convenience. Although good everyday value, people trusted. Any case. So the thing is, Toys “R” Us can't work, right? Because you can't have a huge selection and low prices. But it did work. He was in major metropolitan areas like Chicago and LA. And he was selling over half the toys in the market. And for a retailer to get a 50% plus market share is like to die for. Even Walmart would give their right arm to hit a 50 and a major metro in almost any category. They may hit it in selected categories like paper towels and things like that where Walmart is really their strongest. But no, to get 50 to roll into LA and take 50% of all the toy sales. And so I saw that technology and said, wow, that's what I want to do. I want to bring the super store to some category merchandise. So the next question, one category merchandise you go after. And, you know, all

business economics goes back to, all business economics goes back to demographics. Read Peter Drucker, he harps on and on about demographics as he should have, as he should gone now. But you can still read all his stuff. I try to read some everyday. And the thing is, when you look at a cohort, a group of people, I looked at it, I said demographics, the key is going to be the baby boom. I'm one of them. I should understand them. We were the biggest generation U.S. history at that point. We were the best educated generation. And it was real clear that we were the baby boom was going to drive consumer spending in the United States in the 80s and 90s. So if I wanted to do the right thing in the 80s and 90s, I needed to sell whatever the baby boom was going to be buying. Or at least it was a very clear and dominant strategy. There are always niches on the sides and opportunities everywhere. And so,

when you look at a cohort like that, the baby boom, you got to figure out what is age related and what is generation related. So an example, well, a story. I got to Wall Street in 1973. I'll talk more about this later. But my first job out of college picking stocks. And the common wisdom on Wall Street at that point was young people drink soft drinks and adults drink coffee. And so the logic would have been sell your Coca-Cola stock and buy general foods. That was the biggest coffee company with a Maxwell house brand. Well, that turned out to be wrong. U.S. coffee consumption crashed. It went from 75% of American people drank coffee to about 50%. So long, long term decline. And what happened is the baby boom didn't switch.

The baby boom kept drinking soft drinks. And so you want a Coca-Cola stock. General foods disappeared. I mean, Maxwell house is still out there selling, but it disappeared into the morass that Altria, Philip Morris, and Mondelēz and all that mess that they've made of things there. I mean, some of them are still pretty good companies and Warren Buffett just picked off with the Brazilians, picked off the Kraft Foods USA. He picks all the boring parts because he knows they'll outlast some of the shiny stuff. But the thing is, and so Wall Street was wrong. Now, coffee, I think, probably is turned up with Starbucks and all that turned up off the bottom. And soft drinks later ran into, I mean, whoever would have thought we'd be paying as much per gallon for bottled water as we do for gasoline, you know, so the Coca-Cola world changed too. But the thing is, a parallel would be on age and generation would be the video game generation. So if that's age related, then

when they're 60 years old, they'll have a closet full of video games they haven't looked at in four years because it was something they did in their 20s or whatever. If it's generation related when they're 60 years old, they'll have a $100,000 video game room in their house. So what I'm saying is it's tricky. It's not easy to differentiate what's generation driven and what's age driven. But there are things that happen at certain stages of your age, and they're pretty stable over time, and some of them are stable around the globe by country. So people get married at certain ages, they get divorced at certain ages, they have children at certain ages, they commit crimes at certain ages, they do drugs at certain ages, they vote. You know, the older you are, the more you vote. My mom died at 97 a few years ago, but I'm sure she will be voting straight ticket in 2016, though, you know, because she's the older you are, the more you vote. I don't think it matters if you're

alive or not. And so when I looked at the baby boom, aging baby boom, what are they going to be buying in the next 20 years? I said they're going to be buying books, they're the best-educated generation in history, and lifelong learners, I thought they'd be. I thought actually we'd be buying records, music. My parents' generation, they had one or two LPs of Frank Sinatra laying around, or Jimmy Dorsey or whatever, but they weren't in the record stores. My generation was, you know, Woodstock and Led Zeppelin, the Beatles and all that. And so I thought we'd be into that. I just are aging because we were then in our teens and twenties, and well, you're going to move to an apartment and then fall in love and get married and move to the house in the suburbs and have a yard over all, aggregate the U.S. population, obviously there are other transit work at times, and then have kids and

dogs and station wagons later, minivans. So my group of the kind of superstore I want to do is books, records, toys, sporting goods, auto parts and home improvement. Those were the categories on my list, and I want to build a superstore. And actually toys, some people say, well, you know, hey, we had the first mover advantage, you wouldn't want to do that. No, I don't believe in first mover advantage. The idea is to be best, not to be first. Most great companies were not first. I was on a panel at the bookstore convention, and it was about Amazon, and it turns out Amazon was the 30th company to sell books online. And these people, this panel, had a huge bias. There were 29 people beside me. They were the 29 who started online book selling before Amazon, all of whom had somehow missed the big opportunity or didn't have Bezos' vision. Most great companies aren't first. The one company was first and best as Federal Express, and I believe Fred Smith that created that enterprise and

still leads it as the greatest living active American entrepreneur. He doesn't get nearly the visibility of jobs and gates, but jobs and gates are no longer active as entrepreneurs in the full sense. And Fred Smith is 67 years old. They do over 35 billion a year in sales. He could read the whole story about how he couldn't cover payroll, so we went to Vegas and gambled it while his brother and sister sued him for investing their inheritance from their father. And this crazy idea of how he lost all the investors' money the first couple of years, but he persevered. And with this crazy idea that got a bad grade in his class at Yale, and he's still persevering. And as I think, I guess this second biggest transportation company on Earth, it probably is. UPS is the biggest and most valuable transportation company on Earth, and another great one. But the thing is, so I wouldn't have not done toys just because somebody else was doing it, but he was doing a good job,

and he loved the business and his people. Because I later saw it. They had like 12 clones, and now I'm broke. They all failed. A couple of them got bought out by Toys R Us, but none of them were really successful. And when you looked at it, well, the people that did the clones, there were a bunch of them here in Dallas. They had two goals in life. Copy Toys R Us, get rich. And Toys R Us only had two goals. We love toys and we love customers. And that's how you build a real great success or retail company, not the other way. The other guys missed it. Anyway, my thing was I didn't know how to build a house or fix a car and everything. I knew how to read books and hang out in bookstores, and I've been doing it since I had little kids. So I came up with the idea of the book superstore, and I spent, I dreamed it up actually here in Dallas. I was the book buyer at Sanger's and this great independent

store called Taylor's. And I met the founders of Half Price Books, the parents, kind of the woman who runs it today, $200 million plus company, wonderful company. And I came up with the idea, but I spent seven years researching the idea, trying to be, I always believe in trying to become the best expert I can in the industry I'm going into. Now, I never do. I mean, you know, there's always experts everywhere. It's going to be, people are no more than you do or smarter than you are. But, you know, I worked at it. I tried to, and I spent seven years on it. From the time I decided, I'd already spent seven or eight years studying retailing or more. And then seven years, saying I want to do the bookstore thing, six years into that seven year process, I went to the book seller's convention. And I now, I teach a course how to become an expert in any company or industry, and I now preach that you need to go to the industry convention really early in your research

of whatever industry you want to be in. But I hadn't figured that out yet. So six years, so I already knew. Hey, if I started this book superstore chain and failed, it would be because I screwed it up. Because the idea was going to happen. You could just read the World Almanac of the Statistical Abstract. It was in the cards. You study the baby boom. You study how much people spend on books as they age. You study how much they spend as their income goes up. You look at people and incomes peak in their 50s, and it was just in the cards. It was going to happen. There were going to be giant bookstores everywhere whether I did or somebody else did it. So for me, by then, it was a fact. And that's, obviously, self-confidence or it's probably better called self-efficacy if you study psychology is critical to entrepreneurial success. And I believe it. Certainly, in my case, where that comes from is research. You know, my mom said, you're going to quit your job as a younger

vice president, a major department store company and just got a raise and everything else. And quit your job and moved to Texas and start this silly thing. And I knew the department store industry had peaked and was going to go downhill from there, lose the market share and everything because I had become an expert on that and worked in it for years. And I also knew that this thing was going to happen for sure whether I did or not. So it was my internal, you know, confidence came from all this research. Anyway, six years into seven years of the research. So as far as I'm concerned, it's a done deal. The train's already left the station. I go to the bookstore convention. They're going to have a workshop on the bookstore in America. The future of the bookstore in America, I say, oh, that's where they're going to be talking about book superstores because it's just so obvious. And I go in and I sit in the back and they're like, oh, we got to worry about Book of the Month Club. Well,

that was a 1930s idea that was already post-peak on the cycle of things already over the hump. And then they're worried about Costco. Price Club was the original organization in Sam's and Costco and there are a bunch of clones of that industry too. And I'm like, no, that's the opposite of the super store. That's at least a horse. That's a totally opposite strategy from a book superstar. And I just, you know, it's like an hour into 55 minutes into a one-hour session and no mention of the coming of the book superstar. And I'm thinking, what are these people? Idiots? Well, no, they weren't idiots. I still love hanging out with booksellers. They're really smart. They read a lot. They have high IQs. I figured it well. They're just kind of parochial. They're caught up in their own little world of bookstores. They've never been to a hardware store convention. They've never read a Toys R Us annual report because

in that, in that time, Toys R Us was a hot, younger company was booming and it was a public company. So you could deconstruct, as the academics would say, their P&L. I found my notes here today where I completely pulled it apart. And, you know, and I'm like, what is going on here? You know, why does nobody see this? And all I figured was I was blessed to pick an industry to revolutionize where everybody was fast to sleep. Well, now, 200 or 300 business ideas later and several business startups, some worked, some didn't. You know, every industry, the so-called leaders, they've got their head in the sand. They're so caught up in their internal politics and their internal organization and their own jargon and language, which is clutters thinking that they just aren't looking around. People walk through life with their eyes and their ears closed. I remember flying home from somewhere and on the plane next to the senior

partner when they found there's a wonderful person of Austin Ventures, which historically was the number one funding source for a lot of Austin startups. They're post-peaking out. I'm into partners going off and doing new things. So I kind of cranking it down. But I was sitting doing it and I started saying, well, you know, that company's amazing. And they did 11 billion last year. He'd never heard of them. And I go to the next company and he'd never heard of them. And, you know, he's just so narrow. And one of the things I say is I'm amazed at how little business people know about business. And that was why I started the company became Hoover's.

Also, I'm saying that we're talking about economics earlier. I'm amazed at how little economists understand business and how little business people understand economics. That's why Drucker stands apart because he understood sociology, understood society, he understood economics, understood business, he even understood politics. It's very rare to find people that cross, you know, aren't locked into a silo. Anyhow, the bottom line on all this is I was curious and nobody else was. And I'm marching life now and I find people my 300-some business ideas, half of them wouldn't be on there if I hadn't overheard conversations in restaurants. Because what I'm perpetually trolling for is people say, why don't they do this? Or why do they make it like that? And, you know, how can you do things better? We're going to find an opportunity, a real human need. And curiosity, in some sense, it's got to be relaxed. It kind of has to come to

you. To be great at it, you have to love learning for learning's sake. You go through life looking for answers where you expect to find them. You're never going to find an answer that's new with me. I mean, like all the colleges all over the world in Austin, the University of Texas, I was the first entrepreneur in residence there in the McCombs School of Business. And all these really bright young people are doing all this social media and online stuff and everything. Well, that means all these people are doing it and your odds of success are that much less. And I'm not saying don't that either. Hey, that could be the next Google in this room or the next Facebook. There's opportunity everywhere. But the way I get the young people to wake up sometimes is say, look, aging baby boom, enormous opportunities, most of them unmet. And if you really want to get in on where the action is, start a crematorium because that's where the action is going to be,

you know? Wake up. But yeah, so curiosity gets extra time because it is so critical. Second thing on my list, a sense of history. And there's really two sides to that. One is understanding trends. And one is learning from the past trends. You can't know where you're going if you don't know where you're coming from. If you'd go back to like 1999, give or take, say when Amazon went public and this guy's sticking together, so I may do it with my hands or in the mid-air just a second here. There we go. And you've got an analyst report on Amazon which, that was really a book, you know? A book retailer. A mail order book retelling really is what they are to an economist were then, now much broader. And, and that Wall Street did a report on Amazon and say, okay, here's our projection of book sales in the United States. And here's a data for this year, 99. And here's our history, 98, 97, you know, and do a chart. And then here's our projection,

2010, 2020, 2030, you know? Well, there's no way you can look out to 2030 if you aren't also looking back at 1990, 1980, 1970. You can only look as far forward as you look backward. That's a quote from Winston Churchill. But you're also finding one of Steve Jobs' famous speeches that I think Stanford campus maybe that's online that he talks about. The only way to see the future is by looking into the past and connecting those dots. So the first thing is to look at those trends. You know, the most important thing to happen to us retailers since, since in the 20th century was the women entering the workforce. We went from like 20% of American women had a day job back around World War I. We got about 60%. It's backed off a little bit since then last I looked at 59 and change. But that means people no longer shopped Monday through Friday 9 to 5. They shopped nights, they shopped weekends, they shopped lunch hour. Well, the travel agency industry, 62% women,

never noticed that women had gone to work. The banking industries hired hundreds of thousands of women, never noticed that women had gone to work. Not everybody missed it. You know, the big supermarket chains in Walmart and even Macy's and stuff stretched their hours. Museums, the industry I'm going into now, they totally missed it. They stay open until 5. They're like living in 1946. Most of them, not all of them. So looking at trends, how things change through time. And I find on the internet, it's very hard to find data. You know, it's like the whole world started in 1995. And when people think they're looking at trends and graphs, it's like 18 months or two years. And you can't tell jack shit from 18 months or two years in most things.

The other side of the history thing is learning the lessons of the past. So I keep a list of my computer. It's 30 questions. I call them lessons from Detroit. These are questions every tech company, every tech leader asked themselves, software, hardware, all that. So when we plan our future, do we listen to Wall Street and the analyst or do we listen to the engineers? Do we make one product and make a zillion of them or do we customize each, you know, order for each customer to have a whole diverse product line, a big catalog of product or whatever? Do we make something that's just ugly but does the job or do we care about how it looks? Does design matter? Well, all those questions with Jobs and Gates and all these people deal with, dealt with, Michael Dell, all the time, every single one of those questions was asked between 1910 and 1930 by Walter P. Chrysler on Henry Ford and Alfred P. Sloan, the greatest manager

who ever lived in the man who built General Motors. Bill Gates said if they're only going to read one book about business, read my years with General Motors. And I agree with that. I read it when I was 12. It's still in print, easy to find. It's the most important classic in the history of management. But all those questions were dealt with by those three guys way back then. And I'm not saying the answers will always be the same but often they are and there is always a great deal to be learned. So whatever industry you're in, whatever company you're working for, whatever company you're working with, because I know a lot of you sell B2B and deal with these giant companies, who started it? Why did they start it? Where did it go wrong? Where did it go right? You know, you've now got AT&T headquarters here, which is a new name for Southwestern Bell. Well, what's the history of Southwestern Bell and how did it come about? Both the big legal breakup a long

time ago that created those baby bells and made them independent companies. But really, the history of AT&T, which they later bought and adopted the name Theodore Vail, is the man there that really created that great company. A different trip, heavily regulated industry and so, or hey, airlines, Herb Kelleher. He's a Dallas enterprise southwest because at McCombs I was in the Herb Kelleher Center for Entrepreneurship, obviously one of the greats. So study history, study the past, study those trends. Third thing, geography. Knowing what's going on around us. People, and actually I had a couple of cases, let me see if I can think of them recently, where hey, Google Maps and MapQuest are really doing a lot of damage to our society. I love maps, I collect maps, and I use Google Maps and stuff for certain applications. But what they do is they eliminate our understanding of context, because I want to get from here to there and they tell me how to do it. They don't tell me that

I just went eight blocks from some museum I want to see all my life, or I just missed a jazz concert that I've been, you know, oh, I would have loved to have been there. They don't let you know all these roads are blocked. Well, here's the alternative. I know they're working on that with traffic and everything. But understanding your context, and it could be, I've been to 44 countries talking about all this and everything, and just traveling just to see them, what's going on. I took the bus from Austin to Mexico City a couple of years ago. I was driving around in Monterrey last year. I've been to 17 and 31 states in Mexico. The average American knows nothing about Mexico. That doesn't have a clue about how powerful that country is, how economically advantaged over the United States, it will be over the next 40 to 50 years, or even in our own country. I mean, this is Census Bureau projections, but they're pretty reasonable if you study their

methods and, no, no, they're certainly trying. We're going to add, and I'm just going to use their words so nobody can get insulted, we're going to add about 500,000 white people between 2010 and 2050. And we're going to add 70 million Hispanic people in this country, even with very low emigration rates. That assumes low emigration. This is going to become a Latin country. That trains left the station, you know, and business fortunes won't be lost because they don't understand that change, and fortunes will be created, and whole companies will collapse because they won't understand the evolution of our society. As Peter Drucker said, the future that matters is a future that is already here, which means the indicators are already here, the start is already here, and so understanding, you may need to understand China, Malaysia, all these places all over the world, but a lot of us understand what's right under our nose.

In fact, as I drove up today, I made a note that on the way home, I'm going to get off the highway at Temple and do a little investigation to better understand what's going on there, what the growth is, if there is any, you know, my friends that come up here at UT, Longhorns coming up to the Texas OU game and everything. All of us have been coming to go into Dallas for ages, and yet nobody ever thinks about Waco, about, well, why is it there, and why does anybody live there, and is it going to grow or shrink? And it's finding those things that other people don't know about is where the edge comes, where the opportunity comes. And I make the case that to come up with breakthrough ideas that the key entrepreneurs' key advantage is their understanding of where they're at in space and time. That sounds like Star Wars or something or Star Trek, but some sense of what's gone before me and what's coming after me,

time-wise, and what's going on around me, and getting out of the cocoon and getting, because with the college kids, you know, they got their headphones on, and I love gadgets, and I've got a bunch of gadgets with me now, but, you know, they don't hear or see anything. They're in a cocoon, and they walk through life, and they're not going to run into or see ideas or learn things through serendipity. I mean, you think when I was talking about the math question, think about the way I learned the English language was with a big old fat dictionary, and every time I went to look up a word, I would discover 20 other words that were next door to it, right, by serendipity. There were books that I didn't think I needed to know what they meant, you know, and maybe I didn't, you don't know till later. That's the thing. You can't go looking for what you think you need to know. You do that also, but all these accountants that just know accounting.

They're not doing the world, not as much good as a real leader, and now you just look up a word online, and there's the dictionary, and you lose out on that huge amount. So how do you build serendipity back into it? But if you can understand your context, if you're curious and curious about how things change your time, and what's going on around you, I believe that's where breakthrough ideas come from. I haven't said that, then I believe you have to have a vision or a mission. I use those words interchangeably that has four attributes that's clear, consistent, serving, and unique. That's four of my eight things. So clarity of vision, kill the buzzwords, kill the acronyms. I can't have big corporations, academia, consultants, and government are the worst at it. They are all trying to deaden our brains with all this stuff.

Take your PowerPoint, if you use a power point or whatever, the pitch deck, whatever, and look through it for terms people don't understand or might not understand. Take your business idea to your grandmother. If you can't explain it to her, don't show it to venture capitalists. I've never seen a venture capitalist get pissed off because they could understand what you're saying. Take it to any reasonably bright sixth grader. I was just on a museum tour. I've been because of my new project. I've been to over 600 museums all over the world, and I was reading the labels. It was an art museum on the wall and they were written by art critics and it's just this garbage language that nobody could understand. They're just writing for each other. And I said, look, I'm going to go through as I design my place. I'm going to look at everything I see through the eyes of a reasonably intelligent 12-year-old because that's my customer.

And that's the customer that's in the head of a Steve Jobs or Bill Gates, too. You know with me? I'm as far as all these garbage words and the acronyms and everything. We all get caught up in it. So clarity. Hey, Southwest Airlines, we fly one type of airplane, a Boeing 737, we land them in a hurry, we take off in a hurry, we tell you joke and throw peanuts at you, right? Hey, nobody could copy it. You know, all the people that truly copied it failed. I remember because America West and then there was Song and all that and they'd, oh, we're going to have four kinds of airplanes. Oh, we're going to have first class. It's like they couldn't even Xerox, right? You know, because it can't be that simple, but it is that simple and clear, consistent. I remember somebody came to me. It was probably when I was building book stuff and they were consultants. They wanted to teach us Kaizen, the Japanese concept of continuous

improvement. I absolutely believe in the continuous improvement, but these consultants were going to come in and teach our people a new language. And the thing is, we're doubling every year in size. So in any given day, half our people are new. And so if we didn't, I guess I was the idea invite the consultants back year and year and year after year and year after year. Because you're walking down the hall and somebody calls you a Kaizen or a Mucky Muck or a Kanban or whatever, you're going to, okay, do I slug them? Because they insult them and we do, I thank them because they compliment them. We're heaven forbid I'd ask them what it means because then I look stupid. You don't want language that divides people. You want language that brings people together.

The core skills of entrepreneurship, leadership are the ability to speak them, the ability to write. Psychology and sociology are far more important than accounting and marketing and all that. They all have their place and I actually enjoy almost all those things. So clarity, clear, crystal clear language. And a language that says something, I bought one book, it was like 100 great mission statements, a great corporations, 90% of them wouldn't be worth toilet paper. They're just nonsense and they don't do anything to inspire or connect with anyone. Clear, consistent, more enterprises have failed because they changed and because they didn't change. Now, I'm talking about what your core values, your core competency, what you're great at.

And I'll also say that in the early stages of a company, it may take a while to figure it out. Like Armstrong Cork Company, they made corks for wine bottles and then somebody must have stepped on them and said, well, you know, this makes pretty good flooring too. And they became the world's biggest maker of hard surface flooring. I don't think they make corks or wine bottles at all. So what is now called the pivot has been around for centuries. And so it may take you a while to, yes, figure out what you're what you're all about, what your soul is. In fact, Whole Foods Market, when I was on the board, man, it was maybe a C plus retailer, a B minus venture capitalist asked me that Alice venture capitalist, a back book stump said, well, we looked at investing. But do you think either it's a fad or it's going to get big and then the big guys have come and squash them? I said, neither one, it's not a fad, organic natural foods are going to

grow and grow. And then I said, the big guys aren't going to understand what they're doing and they won't squash them. But it was, I'm had some people, rich people in Austin and never been in a whole food store because they'd been in back in the 70s and 80s when it started and it was dirt in a bunch of hippies and, you know, they didn't comb their hair and all this. And, and, and it, but I knew, I knew that John Mackey and his crew were learners. And I knew that their heart was in John Mackey's a health food nut. I still, when I go to dinner with him, he's unchanged. He did 10 million a year in revenue. The year for I met him last year, they did 14 billion. He's unchanged.

He's still Gary. Why don't you stop drinking that Coca-Cola? Those are empty calories. I want you to stop, you know, right now. He's a nut, you know, but unchanged and true, but, but they, they've morphed because they really became a gourmet food store and a natural and organic food store, right? Without violating their principles and everything. But it's a very different Whole Foods. Today is a very different retail store for the customer than it was when I was on their board of directors. Now I was on the board when they first opened up here on Greenville and also up on Point Roads. I remember our Intranded Dallas and book stuff. My company are number two volume stores at Preston and Forest and our number three, our next volume store was on Mockingbird across from the Dr. Pepper plant. Anyway, so and, and consistency. So Boeing, America's great, you know, the world's greatest air frame, airline or maker, our biggest exporter. Well,

then idiot rented for a while. They said, oh, we're not a manufacturing company anymore. We're a services company. I guess it sounded better to Wall Street. And then they said, oh, well, I don't know if they said it or not, but they'd always been squeaky clean and high ethics and all of a sudden they're screwing up on some things and getting to investigate, get, investigate back Congress. Then they said, oh, we're not a Seattle company anymore. We're a bill Boeing put us. We are a Chicago company. They got in a pissing match over local taxes, moved two or three hundred people, the executives and their assistants to Chicago, left 50,000 workers in Seattle, you know, and, and, no, no, and, and their excuse at the time was, oh, our, our customers around the world, so we need to be in the center. But if you looked at their order book on the Jets, all those customers were in Asia. If they wanted to be in the center, they would have gone to Hawaii,

not Chicago. That company lost its way and, and became the second-biggest airliner maker in the world after Airbus, a consortium of European social Democrat countries. And if you would have told me a Boeing would be passed up by Airbus, I would have told you you're smoking dope. I mean, unbelievable. And they finally got rid of that guy, took him years. And now the new guy's, I call him new, he's been in there 10 years or something. He wrote a book, you can't order change, but, and it actually may now be the next person after him. But it's still, in a sense, struggling. They're back to number one, but the dreamliner hasn't, didn't come out on schedule, had issues if you followed it. I don't think they ever completely digested when they bought their, one of their key rivals, McDonnell Douglas, they ever really digested that. It's a great company.

They wasted billions of dollars of shareholder wealth and, and employees and everybody else, all the stakeholders, as they say these days, by, by forgetting where their bread was buttered, what mattered. Contrasting case: Caterpillar, Peoria, Illinois, every reason on earth to move to Chicago, easier to recruit talent, easier to fly in and out of O'Hare. No, they're in Peoria. They make big yellow equipment. If they, if nobody wants that anymore, fine, stick a fork in and close it up. We're going to go home because that's what we do. That's what we love to do. And I'm not saying they rest on their laurels because actually years ago, their machines would like email the factory and say, this part is about to break. I haven't told my owner yet but go ahead and federal express the part out because I'm going to need it. No, this is not a stupid company. It's a heavily unionized and an auto workers company. And if you look, I don't know,

I'm guessing over the last 30 years, probably 20, 25 of those years caterpillar has been among the best performing stocks in the Dow Jones average. Cyclical industry—has its ups and downs but it's an amazing company. I could have made the same story about John Deere. John Deere, founded 1837, 178 years old. They're on their ninth CEO, ninth CEO. This is many football coaches as Longhorns have in two weeks. We'll see. We'll see. But not Baylor, right? Baylor's going to hang in and T.C.U. The thing is, what do you believe in? And are you willing to stick to it through thick and thin? What are you good at? What is your enterprise all about? And once you do discover that, even if you have to pivot to get there, man, great companies, great companies tend to do one thing or a very short list of things incredibly well over and over and over again. You look at UPS, I can make a case they are the greatest American company today. And man, they, I know they do all

these logistics and consulting but they essentially run brown trucks all over the world. They do it very cost efficiently for all of us, especially Amazon prime members. And you know those drivers are making 90 grand a year and they have thousands and thousands of them. And they have fully paid health benefit. My driver told me one of my friends got 13 kids. All those kids have full paid health insurance until they are 25. You know those drivers don't leave. Because he said, I want to start a business. Give me, you know, let's talk ideas. And years later he is still wearing those brown shirts driving that truck. Amazing company what it achieves. And like I said, it is the biggest transportation company on earth and the most valuable and far more valuable than any railroad or airline. Clear, consistent, serving. Okay, here is where the rubber meets the road.

So I just tell a story. So I get out of college. I hadn't figured out the bookstore thing yet. My best friend says his all night late night in the vending machine room at the University of Chicago Hospital. So I was going to sandwich at 3am. He says, well, and I said, I'm tired of going to school. I don't want to stick around. I get graduate degree like the professor on me doing stuff. And I want to go into retail. He said, well go to Wall Street. Become a stock analyst. Pick retail stocks. He said, you've been going to visit retail company presidents and store managers since you were 12. Anyway, this way you'll keep doing that and you'll get paid for it.

Oh, cool. So in Milton Friedman's class, I don't teach you how to job interviews. So I think I had 13 interviews. I got one offer, but it wasn't a lucky one. It was with Citibank, which at that point was a great company. It's a man named Walter Wriston built one of the greatest financial institutions in history, which was then largely destroyed over the years by some of his, not his immediate successors, but down the pike. They're going to make it, I guess all that too big to fail crap and everything. But it's sad, but they were great when I was there. And old Pete Wetzel, he was a veteran retail analyst in the 1950s on Wall Street. He was called the prophet, P-R-O-P-H-E-T, because of his accuracy in predicting stocks. And he was this old grizzled guy, gray haired, and it seemed ancient. I looked it up later. When I went to work for him, he was 42 years old, you know. But he was actually, he was a curmudgeon. He had a navy

butch haircut. So he felt old. He felt older than 42. But that man knew retailing. And I learned as much about retailing from him as anybody else. And I was a young kid. And I was one of only two people on the whole floor of all the investment management group. We were one of the biggest stockholders on Wall Street investment, money management, union, pension funds, university endowments, and rich people's money. And I was one of only two people without an MBA on the whole floor. And he said, well, come on in. You've been studying retailing. We'll give you a chance. I took the only business course I took in my life because they made me one of me to make sure I understood accounting, which I did from studying annual reports since I was 12. But Pete covered the big investments. He's the same sheet here. Sears, Penney, and Kmart. Those were the three giant retailers of the day. And that's where our big investments were. I covered the side bets,

the smaller companies. So 7-Eleven and Radio Shack from here in the DFW area, and Bloomingdale's and Safeway, and Kroger, and on and on and on. Anyway, great way. All the department stores, Foley's and Neiman Marcus. And it was great. And I was learning a huge amount. Pete covered our big investments. He came to my office one day and says, Gary, the bosses have given us a budget to hire a summer intern. And so there's to be somebody between the two years of their MBA. And they'll come in and say, they'll work for you, Gary. So you'll get some management experience. We don't have to worry about the budgets. The bosses have allocated the money.

And he says, so it'd be good experience for you to manage him. He says, Gary, do you think we should bring a summer intern? Oh, and the industry they would look at would have to be so small and unimportant that not only is it not worth Pete's time to study it, it's not even worth a little old Gary. The new kid's time to look at it. But it might be some part of retailing where the company's in it will get big later and compete with Sears and Penny and Kmart, or when the company's here, I'm stocking. Or the company's get big enough. We could actually buy stock in it. There's a very big for a giant institution to buy into small capitalization, so-called small cap stocks. So anyway, Gary, do you think we should bring a summer intern in to look at these regional discount store chains? There was Alco Duckwall, Pomida, Coons Big Tay, More Value, Walmart, Bed, Mart, Tal door, 10 or 15 of these companies.

The biggest of them wasn't doing a hundred million dollars a year, which even then was small for a retailer. And do you think we should have somebody look at these? And he said, go and think about it a couple days. Let's get back together. We did the best and the brightest. I'm sure you I love retailing. I was driving in and if it wouldn't have made me a little late, I was dying to drop in the Aldi store because Aldi is rolling out there. They're just rolling over England and they've entered Texas and they're making a lot of noise. And I passed one down here off the lid better and down on the southeast side of Dallas as I curled around the town coming in to try see some neighborhoods I hadn't seen before. And we're not in a long time. So I loved retailing. He loved retailing. We got together and said, no, it's not worth our time to even have a summer intern into this. Come on, this wall, whatever it is, Bentonville, Arkansas,

if they ever go to a big city and try to compete with Kmart and Sears. They'll be blood all over the wall. They'll be all these unemployed Walmart people. Kmart stock will be going through the roof. Our bosses say, you had it. You bought that wall stock. You're out of here. Well, I don't have to tell you we were wrong. I don't have to tell you Walter F. Loeb, our friend, the only guy who even took the time to meet Sam Walton left Morgan Stanley and started his own firm because he was the guy who discovered Walmart. I'd like to think if we trained the intern right and they'd gone and met Sam, but they would have come back and said, well, you better come see this guy. He's got something special. And some of the others actually would have been pretty good investments, at least over maybe 10 or 15 year arc. And for what's worth, I just looked it up the other day. If you put, and this is 1973 when I'm telling this story.

And so Walmart had gone public in 1970. If you put $5,000 in Walmart stock at the IPO in 1970, how much do you think it would be worth today? Come on, some guesses. 5 million, 10 million, 10 X would be $50,000. Okay, 5 million, 10 million, 50, 85 million. And if you'd waited 10 years until 1980, when they did a billion in revenue and put 5,000 in, it would be worth 35 million today. If you'd waited 10 years. And as far as I can tell, I need to double check this, but I was going back to all their annual reports. How much capital did they take? Then when they went public, they raised 4.5 million at the IPO. How much additional capital do they raise to build the world's biggest company that does $450 billion in sales? Zero. As far as I can tell, they didn't put another penny of equity money into that company. Old-school way: built it out of cash flow. And landlords. That's one thing

on the museum thing is that all these museums want to own their own buildings. No, I'm a retail. I don't want to own anything. Sam Walton was happy to make all these people billionaires by leasing space from them. If you have a successful one, you want the ability to leave and build a bigger one. If you have a bad one, you want the ability to get out of it, you know, and you let someone, it's a different profession, real estate from retailing. And it's better left to somebody else. So Walmart, you know, they used other people's money to build all those stores. And once they proved that the model worked and that they could pay the rent. Okay, 1973, we're ignoring Walmart. We got all our money in Sears. What happened? Because here's what happened, mathematically. In 1973, Walmart did one 50th of the revenue of Kmart and one 100th of the revenue of Sears. As you may know, Sears and Kmart are today run by the same company,

run by this idiot who's destroying them both and running them into the ground. Eddie Lampert. But so in 1973, Walmart did one 150th of the revenue of Sears and Kmart combined. You with me? Last year, Walmart did over 13 times the revenue of Sears and Kmart combined. So it's a roughly a 2001 flip in fortunes, which if you want to predict for next year, the Longhorns playing Notre Dame again means we will beat them 6,000 to three, I believe, or 6,000 to zero, your choice. No, this is a 2001 change of fortunes, admittedly, over quite a period of years. So what happened? Go to any business book, any class, anything you can find. What makes a great company? And then compare, let's take Sears, which was the biggest, most powerful retailing world then in Walmart today. And so which company had more experienced executives, Sears, which company paid their executives better, Sears, which company had better information system, Sears, which company had

better supply chain management, Sears, which company had better real estate, Key factor in retail success, Sears, which company paid less for that real estate, Sears, which company had better consultants, Sears, which company had better lawyers, Sears, which company knew more about where to put stores, Sears, because that's a real estate, which company paid less for stuff, but I don't see a, can I borrow your paper cup? Thank you. Imagine this is an iced tea glass, use your imagination. I have to do that, my dad was a glassware salesman. In 1973, my dad's company and their competitors were selling box car loads of iced tea glasses, dishes, ice trees, all that, to Sears and Kmart, railroad box car loads, millions of dollars worth.

Sam Walton was buying case lots, 144 at a time. 1973, there wasn't a single thing in a Walmart store or a Walmart paid less for it than what Sears and Kmart people would have been impossible. They just weren't buying the quantity. And I'm talking about how Kmart, Walmart got to where it is today. And we have a whole other conversation about the company today. I'm still, I'm still a fan, but it's obviously gone a long way. It's much, much bigger. It was than even when Sam died. But the thing is, I could go on and on and on. I'm sure you believe I could, not a single thing on a Walmart side of the balance sheet. Nothing out of the textbooks about how could it be? So what happened? What went wrong? Sears took the tie off the customer.

Sears bought Coldwell Banker said, we're going to be a big player in real estate. They bought Dean Witter. We're going to be big on Wall Street. They created the Discover card. They had to been saying to themselves, we know how to run these restails stores with one hand tied behind our back. We can do this with our eyes closed. We are the greatest retail on earth, which was true at the time. We are the most profitable retail on earth. We are the highest return on investment retail on earth. I mean, they had all the, all the best, all the superlatives. They had all those lined up, but they stopped paying attention to the customer. And it was a long time to do it because Sam Walton was among the most customer obsessed business people of any industry in history and among the most curious all time, a great Sam Walton story. So he, there was a Brazilian chain of like dime store chains, variety store chains. And they had written all these disc counters in the U.S.

and we want to come visit you and learn how you do things. Nobody responded to him except Sam Walton. Sam sent him a letter and said, well, come on up. So he picks him up the airport, you know, pick up truck and all that. If you study, if you talk to him, I never met Sam. I had lunch with heads of Sears. I met all them. But I know several people that worked very closely with Sam and all these stories keep coming out. And they're all pretty consistent. You really begin to know you, you know the man or read his book made in America, which is just a wonderful book. So the Brazilians, and so they come up and they see his stories and everything. And, and they said by the, between the time he picked up the airport and he got to the store, they realized why he was the only guy that wanted to see him and why he wanted to see him. He said because he had sucked their brains dry. And he knew more about Brazilian retelling at the end of that half hour ride than

they did. You know, well, he returns a favor. He says, you know, a few years later, I want to go see your stores. So he's down in Brazil. And you know, these are not fancy stores and especially in a nation like Brazil. And, and, and they're, oh, the owners and they're showing off to the big gringo and all this crap, you know. And, and, but then they don't see him for a while. And the security guards come over and say, oh, there's this old gringo guy on his hands and knees measuring the distance between the racks in the women's apparel section. Should we arrest him? You know, no, no, no, that's Mr. Walton from Arkansas. No, driven curiosity obsessed with his customers.

Every decision they made started and ended with the customer. They come to us and we need an accounting system, 400 grand or whatever. He says, well, give me a reason. They say, well, the statements will be done sooner and we need fewer accounts. They'll be more accurate. He says, no, give me a reason. He said, we got a mother, single mother, two screaming kids, half hour before closing, Cape Girardeau store in Missouri, half hour before closing. She's buying three pairs of socks. She's going to save a buck and a half and use that money to take her kids to scoop her gas to take this kid's school. And I say, how is this decision going to affect her?

And every decision was driven back to that. I've used to study one of the few real corporate, successful corporate turnarounds in American history. Gordon Bethune's turned around a continental airline from his dark days of two bankruptcies. And the first thing it is, he went out on the parking lot and everybody burned their employee manuals, read his book from worst to first about his obsession with what's life like for the person in 20b. Not the frequent flyer, not the person with the upgrades, not the first class person. That person stuck in a middle seat in the back of the plane. How do all of our decisions affect that person? So the bottom line, hey, it's one place where I disagree with my old teacher, Milton Friedman. He, like many economists, believed the purpose of a company is to make a profit.

I don't believe that. I believe that's like saying your purpose is to carry your heart around. If your heart stops, then we're probably canceling the meeting and killing the video, it's very important. As is your brain and your lungs, they are absolutely required. Profit is absolutely required for survival. Profit is every bit as important for non-profit organizations as it is for profits. They just use different words for it. Find me a hospital, a university, a museum that spends more than they take in every year. I'm going to show you something that's closed up. And profit is innovation money. There'd be no Apple Watch and iPad if there hadn't been an iPhone. And there'd be no iPhone if there hadn't been an iPod.

And those hadn't been incredibly successful because it's when you have that extra money from profit that you can take a chance. You can experiment and try things. So I absolutely believe in profit. The profit is not the purpose. It is not the reason. And just as you're carrying around your heart, it's not the reason you exist. The only valid reason, the only valid purpose for any enterprise for profit or not for profit is to provide goods and services to people. To somehow make the world a better place through what you do. And these cases show it over and over again. And I go off on retelling as a story. I'm so close to, but I could have made a story here and said, GM against Toyota. I could have done US deal against Newport. I could have done IBM against the upstart. It came along later. And IBM, a biggest corporate loss in American history in 1993. There was amazing new Gersoner and again brought it back from the grave. Clear,

consistent serving, serve others, and then unique. Great enterprises marched to their own drummer there. When I was on the Whole Foods board, John's crazy. You know, he's in there first. So he's going to put everybody's pay in the company up on the wall once a year. And you know, a lot of companies, you get fired if you tell other people what you get paid. No, no. It wants to be open. And as before the word transparent came in, we called it open this one. I was when I was getting on. And he wants to be open and just let it out. And they still do that. And people just get pissed off or a week or so. And it blows over. And then they adjust it. People, teams, they're going to hire and fire people without telling their bosses to have a gain-sharing system where they know at the beginning of the year how much the payroll is going to be for say all the produce people in the store. And if you've got eight people working

and you never see your families and never get home, well then hire a ninth person and divide up the money that way. Or if one of the eight is a gold brick and sits on the John all day, we'll fire them and divide the money six ways, you know. And they have this freedom, you know, the rule about the top executives can only make a certain ratio to the average pay. They're very eccentric. Bazaarvoice, a great Austin company, a very interesting company, went public. They have no vacation policy. And they say, how can I know when you should take two weeks a year or six weeks a year off? How can I judge? They focus on a lot of results. And did you meet your goals? And did you achieve what you said you're going to achieve? And I guess Netflix has the same policy. As I asked my friend, the founder, I said, well, what about what they account to say about your reserves for vacation pay? Because that used to be a nightmare. You get

in the reserve and somebody didn't take their vacation. You'd have to do the debits and credits. Well, we don't have anybody doing that because we ain't got any vacation reserves and never will. Great enterprises. They march to their own drummer. A lot of it comes from the founder, the founding team, but that they're unique. You learn so much from studying other companies, but you can't precisely copy them. You take the best of the good ideas and skip the worst, but you've got to do your own thing. A great company, Southwest Airlines, or Whole Foods, are in many ways a cult. You know? C-U-L-T. They really are. And Netflix and everything else. Clear consistency and serving and unique. That's seven and eight things. The last thing is passion.

What can I say? Hey, all these people go in and think they make the most money and they're going to work. And once in a million, it's so hard anyway. And think about how many unhappy lawyers there are in America. How many unhappy dentists there? All the people went into professions pursuing money and aren't happy. Now, it doesn't mean they aren't so happy lawyers and some happy dentists. I just spoke like a week or so ago to the veterinarians from all over the United States and their competitive business. They don't make as many as you think, even at their prices. But the thing is, all these people come into it because they love it. They love animals. And so there, that challenge is to teach them business and how to think creatively and how to differentiate themselves. But, you know, I think I already gave some cases a clones of Toys R Us and everything. Man, if your heart's not in it, if you don't love it, you know,

find something you do. And that means I have gotten through all eight of my points, and so I can take questions or discuss or, you know, whatever. You guys are in charge. So, yes, sir. It's interesting. Okay, so how do these people get people to buy in the vision? And it's interesting, you said, Dave Thomas at Wendy's and Sam Walton were hard drivers and pushing people to do more and more. I've met a whole lot of people who worked directly with Sam Walton. I've never heard anybody talk about him pushing. No, he led. You know, he's out there on the charging horse with this vision that's going to change America. I mean, he was just pissed off because you had to drive, anybody living in a small town had to drive an hour or two hours into a bigger city to get a decent deal because Kmart was everywhere.

Kmart Target, Walmart all started the same year in 1962. But there were already discount store chains. The big one was out of Seagoville, Texas, called Gibson's. That was much bigger than Kmart and far bigger than Walmart. So, discount stores are out there. We had to go to a city, and he's kind of rippin' off these people, takin' a bigger margin. And he couldn't convince his bosses to do it, right? He went to the Ben Franklin dime store. The guys that he worked with, he was in the dime store business and said, we should do small town and no, no, no, you're stupid, forget it. The same Home Depot guys got fired. Work at the company they worked for. So, I guess we got to start it on our own. I offered my bookstore idea to make company I worked for. I went to the CEO and said, here, this is gonna change book selling in the world. You guys want to back it, and I'll run it. You know, I wasn't like, oh, I got to start a company and do an exit. You know,

why would you get into something you wanted out of? But they said, no, forget it. No, no, people, people were loving Paul and Sam Walton. The one company that I do have the impression, but I'm less close to it, that is really tough and really difficult is Intel, and yet every person I've met who worked at most of them loved it. You know, people, people that want challenges and people who want excitement in their life and people want to change the world, they'll do an awful lot. They will do a whole lot more than anybody that's looking for options and cash. I'm not knocking all that. I mean, I had a fight with my venture cap, was it books up? I want to give options to every employee, which Charles Lazarus at Toys “R” Us did, and they wouldn't let, I could only get them down to assistant store manager.

No, no, the electric. I mean, why do people follow Herb Kelleher? And you know, they all talk, it's all fun and games. It is, and man, I forget, I was, gave a talk in one of the Southwest execs talk there, and it's something like, if you show up late for work twice and didn't call in advance, you just don't show up for work. You're no longer with them, because they can't run an airline if you're late. So I think it's all fun and partying. No, it's not all of them. At the same time, man, those people would have just followed Herb Kelleher over a cliff, you know. Steve Jobs, he's an asshole, and he's unethical. Hi? And yeah, people today, 100 years after he's dead, there may be people following him, like lemmings, you know? I'm just straight about that.

Yeah, no, and how you portray that vision. And the one thing, when I do a list of the things I see in every entrepreneur, one thing is an energy level, but that energy can be internal. So I was at, there was a group called Young Entrepreneurs Organization, YO, now it's EO, a global organization, great outfit. And I was speaking at a big university thing they had where they all get together in San Diego. And after the conference, and after the keynote talks, I mean, had a dying around. So groups at 10 or at 12 or whatever, we're told these different restaurants, and they mixed you up with people you didn't know. So I'm sitting there with like, you know, 10 entrepreneurs from all over the world.

And, you know, you always in a group of entrepreneurs, you always got the ones with the, I started saying to have the ego, but that's not right. Anybody built something great has an ego. It's what kind of ego, the people whose ego and the sleeves often really don't have an ego. It's insecurity that makes them great. But you're always going to have somebody there. Oh, I got the most beautiful husband, or I got the most beautiful wife, or I got the biggest boat, or I mean, I was at dinner the other night, and the guy's on the waiting list for this Ferrari, the normal Ferrari buyers can't get. But he's on the waiting list, and he's going to get one, you know. And hey, that's okay. I'm a free market capitalist. I believe and do what you want, it's your money. But so you got people are just talking, right? And oh, I got this and I got that.

And I'm okay, fine. Especially if you really deliver. If you created a whole lot of jobs and made the world better, I can put up with almost any amount of arrogance. One guy didn't say word, all dinner. And that's real rare. Almost everybody talks. Don't say word. And I figure he's a spouse. Up here is why for girlfriend is here for the conference. And he's long for the ride. But my curiosity got me. So we're walking out of the restaurant because it went to the whole restaurant. He didn't say word. And I said, so what's your story? And he's like, well, I started this little software company. And we sold it last year for 40 million. And now I'm building houses for people that can't afford houses on the south side of San Diego.

Dang it. That guy had as much fire burning in him as anybody. You with me? He had energy, and he had this huge fire. He just didn't express it the same way. The successful entrepreneur, there's a fire to do this, to change the world or whatever. I mean, the greatest. And obviously there's a huge range. But I see so many people. If you read, you go to Hoover's World on there, you'll see the article I wrote about concerns about the trends in tech and startup companies. And the whole, I've never put an exit plan, exit strategy and a business plan and never will, you know, I over my dead body. You know, I don't want to get into it. I'm having said that the minute you take outside capital, you have a commitment to get them a return on capital. And so my two most successful companies both sold out. And I was on the board and I voted for sell out. But that was only because we built great companies because we've been focused on doing a great job in serving our customers. And

that made them valuable. And then, yeah, okay, then you're going to have more people wanting to buy it. And you'll have all those choices. But that still is difficult decisions and the greatest long term companies are the ones that said no, no, no. Because I was, I've been on two public company boards and even a whole foods. There was board talk about talking, selling out to a competitor way back when we had like 10 stores. But no, Mackey and the gang said, no, we can be number one. And because you always hear, well, you know, big enough, unless you join with a big outfit, you can never make it. Well, I'm sure you could use that language at Walmart. And I'm sure Walmart had offers to buy the company when they were smaller. And when they were a billion dollar company came out at a bottom. And they probably tried or, you know, some of those guys. But somebody, Sam Walton and his colleagues said, no, no, I think, I think we can do okay doing it our way

and stay true. But, but still, when you have outside investors, another question, comment, anything. Yes, sir. A loyalty program. So, at Bookstop. I started the first loyalty program in the bookstore business. Our reader's choice card. We pioneered that. That was really just to capture the names and address of all our customers because Charles Tandy, who was one of the greatest merchants in the late 20th century, built Radio Shack. You know, they're post-peak now. But he collected everybody's name and address. And in 1973, he had 22 million names in his database. And he really, as far as I know, he was the only American retailer that really understood how to use a mailing list and really understood the impact with his weekly flyers and his Sunday newspaper inserts. But every time you went to a Radio Shack store, they asked you your name and address. And it typed it in. It took forever. And I said, no, I just want to ask him once. Give

him a card. Show us the card and we'll look it up. Right? And so it was free originally. I think, but what got me, so we put a lot of energy. My own team wanted me to kill it because it did take more time to even record it once. And we had a whole department like eight people just typing in the names of all the cards. And we later started charging for the card. And it was a keyway we financed the inventory of our new stores. Hey, keyway to the people that have the most to gain from your business are your employees, your customers, and your suppliers. So go to them for financing before the banks and the VCs and you can figure out how to do that. We did. But the thing is, so we had this membership card. Barnes and Noble bought us, killed it, and then later spent $25 million starting a new one. And then one of my buddies works at Comamp says, Gary, did you know that people on the card spend 60% more on average than people don't have a card? I said, yes, I

could have told you that 18 years ago, before your boss has killed it and restarted it. They did the same thing with distribution centers. We were the first chain that had big distribution centers, West Coast, Texas, California, Texas, and Florida. When Barnes and Noble bought us, they shut them all down. My buddy, the VP got laid off. And then a few years later, they created the biggest group of book distribution centers on earth. So it gets a little weird. The thing is, to add this membership thing, all the pain in the butt to make it happen, and then on down a whole foods. Their second store was in the same shopping centers as my first store. That's how I got to know.

I had written the inventory control system in dBASE II on a pre-PC-PC, and John Mackey, and I was there the night before figuring out how to put sales tax in, and John Mackey was out moving shopping carts in the parking lot. So we'd go way back, 33 years. So I'm going down, I'm hanging out whole foods and I'm watching, and they don't have a loyalty program. This is 1982. And those customers clearly at Whole Foods felt like they were members at maybe a five-time intensity to our people. You with me? We got through all this agony. You get a card in your hand and in your wallet, you know, as before, smartphones and everything. And here there's another jerk. He doesn't even have a card, and you can look in their eyes and tell that his customers think they're members.

They think they are part of Whole Foods. When the Tattered Cover, the great independent book store in Denver, moved. Her customers moved her 200,000-book inventory. They all came in with their bicycles and their red wagons, and they moved the entire company for no charge. So when Whole Foods recently announced a loyalty program, I actually emailed John and said, well, I know it's too late, and I know you probably aren't involved in all these details anymore. I said, but I'm not sure that's a good idea. Everybody has so many cards and so many membership things. The key to what you want is them emotionally to be members, emotionally to be loyal. And that doesn't require any paper anything else. Having said that, I'm an absolute believer. You can't know too much about your customers. And the more information you can gather and know about their shopping habits, and that's why I had the card. So I guess my answer is I'm kind of neutral. I'd want to study

each company and what they're doing and where they stand. But the thing is, you know, like CVS and Walgreens are doing it now, and they just, they all look like clones. It's like, you look at Kohl's. They, you know, we're a hot company. They're still a solid company, but they were really hot. And taking huge market shares. So all these poor guys like J.C. Penney and everybody was losing market share. Well, if they all do, they all went in and saw that they had those black carts with the fabric thing and saying, well, those work, I guess that's the secret to their success. And then all the other retailers in the country have these black carts with the fabric things.

I mean, Target's smart enough to make them red, you know, but now so often people are membership thing. B. Dalton, Waldenbooks all started a card after we did. And I met there, I knew there, you know, top people through the bookstore industry. They had no clue why they were doing it. They were doing it because they were losing dramatic market share to us. And we had it. And that's all they knew. And I could write a book about the pros and cons of it. Like, oh, all the school teachers think they ought to get a free one, even when other people are paying 10 bucks. And you can make a case they should because they sell a lot of books and buy a lot of books, you know, or the library should get one. And oh, a mommy and daddy aren't here. They got a card. And I have a stack of $60 worth of Harry Potter books. Can I use, can you look up daddy's card? I mean, hey, good store manager pulls around in their pockets. They shut up good. You got the discount,

you know, a lot of complexities that, but Dalton and Walden men, they just plunged, you know, look at our card system. They had no clue why they were doing it. And that's the thing, you know, great enterprise. If you're an innovator, if you believe in continuous improvement, you're always ahead of them. I mean, people ask, I'm one of my blog posts on Hoover's worlds about the six ways to build a great company, six simple steps to build a great company or whatever. The thing is, once you leave that station, they're all behind you. I heard the head of Kmart in their, well, before their dark, real dark days. And he gave a big speech at the shopping center convention in Las Vegas. And he was a potent guy. He was a lifer at Kmart, a real retailer, and the whole, and he talked about how they're going to invest $200 million in new information systems and bring Kmart up to speed. And the whole, at the end of his talk,

everybody in the room, of course, is a big standing ovation. He was very energetic, cool guy. And I turned to my buddy from Austin. I said, you know, he just described a formula for disaster. He said, why do you mean it was so exciting? I said, look, in 10 years, he is going to be where Walmart is today. And in 10 years, Walmart will be 20 years ahead of where they are today on his clock. You with me? They are always looking at your butt, right? I mean, hey, for 70 years, Ford was looking at General Motors asked, okay, after General Motors came from way behind and blew by him in 1927. I mean, things have evolved since then. We'll see who's looking at who's asked going forward. But, yeah, so, you know, how you keep moving. And that's why the learning company, the great business historian Alfred Chandler talks about at length, the learning organization.

And that's, you get the forgetting organization, a place like Citibank, you know, well, Circuit City when it went down, they fired all the older clerks who got higher pay and hired a bunch of young people that didn't know the merchandise. And so, well, it's going to be cheaper. We don't have to pay them so much. And then there's no continuity. There's no product knowledge. And that was one of many mistakes they made, which had been the dominant company and consumer electronics retail. And Best Buy did away with commissions and other things. Now, the question was something. I have a microphone. All right. Oh, that's dangerous. And Joe gets a microphone. If anyone here wants a microphone, wait at me. Since I have a microphone, I'll make it useful.

Mexico. Yeah. Latin America. Yeah. Amen, baby. Well, you know, the big demographic. Yeah, the biggest single thing is a dependency ratio. And that's a ratio of the people of working age to not working age. The U.S. has got a big problem. We could only solve it by having dramatically more babies or dramatically more immigrants. Neither of those appears to be in the cards. And the baby thing takes a long time to work, even if we started doing it tomorrow. In fact, this art festival in Grand Rapids, I was at, I think it was there or somewhere, I saw, oh, no, no, it was late-night TV. The Danish government is running ads and they're trying to get their population up because their economy is going to begin to shrink and it's going to hurt everybody because they're not Denmark, because they've got shrinking population, like most of Europe and everything. And so they're running ads and they're trying to figure out how do we get

more babies? So all the ads are all these grandmothers, you know, oh, you need a grandchild and buy a resort trip for your kids. And no, they're trying to get them to go to Sandals and get grandma to pay for it so they can create more babies. The thing is we've got an aging population, the baby boom, and we're going to suck all this money out of the social security system and all that, Medicare, Medicaid, and all that. And there's just not enough people younger to pay for it. And that's just an awful thing. And there's not much we can do about it. Babies and immigration and not going to do either one. Mexico's the opposite. Mexico has this big, young, working-age population. The baby boom is a smaller generation there. And so as we move forward over the next 20, 30 years, it's already a manufacturing powerhouse. In the last just few years, it's gone from ninth biggest automotive exporter in the world to fourth.

I believe it's about to pass up South Korea. It's, if you travel it, I mean, it's an amazing country. It has huge potential. And I'm not Pollyanna, I mean, hey, when I took the bus to Mexico City and I looked at where's the crime and what are the risks going to mean? But hey, go to Mexico City. Look at my blog post, 10 Reasons to Jump on the Next Flight to Mexico City. 81,000 people looked at that on LinkedIn Pulse 60 times my previous record high. And it's a safe city. How many of you have been to Mexico City? All right, good. And it's changed a lot. In '95, it got real dangerous. I've been going there since the 80s. It's certainly for me walking around incredibly safe. I mean, you know, at least the safe is Dallas, safer than Houston, much safer than St. Louis or New Orleans or Detroit or Washington, D.C., our capital, last I heard, if you just look at the crime data. And, but they're not looking for us. And you

have 72 degrees year-round, basically. The air is much cleaner. It used to be 20 years ago. And it's got more museums in the city in the world, more than New York, London, or Paris. It's dirt cheap. I stay in a really nice hotel, flat-screen TVs. It's next to their state department. I met their ambassador to Ireland. He said, oh, that's where my parents always stay when they visit me. Thirty-eight dollars a night, you know, in the same room in New York City's 350, in the same quality room, certainly in December. Mexico's the most artistic country on earth. There is more living active art there than even Italy. So I've gone on, but go to Hoover's world and scroll down and you'll see the one, 10 reasons to jump on the next flight to Mexico. They've just got colored pictures, trying to lead a group, a tour, a group of entrepreneurs. And I got a lot interested in squeezing it in. Talk to us about immigration, crime, birth rate, and Mexico.

Yeah. And let me top up, though, before I leave just the general thing is I'll be my third visit to Colombia, October 19th through the 21st. And that's the most exciting from an economic future viewpoint, the most exciting new country I visited since Thailand in 1989, where you can feel the economic energy and the boom in the air. And the oil prices have hurt them. They don't have a huge amount of oil, but it has hurt them. And their currency is way down because my buddies are looking for stocks down there and it's kind of tricky. But if you go to the city of Medellín, it's a Barcelona of South America. So we're all the Americans are moving. I met like 20 American programmers moving in right the week I was there. It's just the most exciting city much when I look at, say, Austin, we're so sleepy and we're so behind the times and not innovative on a scale when you compare it with a Medellin and Bogotá, which where I'll be this time and I've been there

before, the capital is just and a Latin America, you got to draw a line down the middle of it. The left half of it overall is really smart and doing the right things and the right half of it overall is really stupid and doing all the wrong things. But I'm not just making that up. You can get a map of FDI foreign direct investment. How much capital from Europe and America and Asia is pouring into those countries and there is nothing going into Venezuela and nothing going into Argentina and Brazil is off and on. Money is just pouring a fastest growing economy in Western Hemisphere, Chile, Peru and Colombia and I believe that's going to accelerate. Now it's going to be all up. They still have issues but actually Colombia, they just signed a peace treaty with the rebels in the woods after 20, 30 years of war and that just happened. So I urge you to visit those places. Immigration, I mean I'm a free market capitalist, a free market liberal

I call myself. So my gut, I believe that the world is better off if we have freedom of movement, of people, of capital, of ideas, of religion, of methods, of technologies and the freer it is the better. Now having said that there's a reality is stupid to have a border that people can go through easily and it's even stupider to have, you know, paying on the numbers you believe 60% of all the undocumented immigrants in the United States came across in a car, you know, through customs, you know, and they have a visa and we don't have a system for tracking the visas. Well, France and Germany have systems, you know, I mean this goes on every day and those two guys didn't get along that well over the years and they seem to have figured it out and so now I understand there's a difference in the economic difference there. The only way to really slow the number of people coming across that border is for their economy to be strong and to buy more stuff made

there and, you know, there are times when there's products we shouldn't make. I remember a guy on CNN crying in his beer he had a broom factory in southern Illinois and oh I'm driven out by the Asians and I mean we shouldn't be making brooms in southern Illinois. We need, those people need to find a higher and better use for their time, you know, and they don't have to be go to MIT all the way up in those 18 wheelers. You know how many companies are hiring? You can start tomorrow at $80,000 a year tomorrow if you have a commercial driver's license, listen to radio, trucker's radio and we shouldn't be doing that. So there are some things to say look I'm going to make it off sure. Well, you can make it in China or you can make it in Mexico and I love China. China is going to be great even without my help. The future of America in large part relates to the future of Mexico. Mexico is more important to the future of the United States than Iraq and Afghanistan than

Israel than China than India because it's our second and third biggest training you know one direction is our second biggest trading partner the other way is third and we're becoming a Mexican nation, a Latin nation, but a big chunk of it is Mexican for all these reasons. A cultural connection no and that's that's that trains left the station. There's nothing when Pat Buchanan you say oh I'm really worried we're all going to become Catholics and speak Spanish or whatever our culture is going to be lost. I'm like has you ever visited San Antonio? Man, you're 200 years too late. You know I'm in Texas as part of that before it was part of this you know and they're just no turning I mean and the thing and because you talk about tariffs and free train and all that so I go back to Indiana where I grew up. No and I didn't say General Motors left Anderson 27,000 jobs down to zero seven million square feet of empty factory buildings. Well in the 1880s

the people in Anderson, Indiana who made farm implements among other things people all over Indiana did. So don't buy from those Buckeyes. Those bucking Ohioans they're a bunch of crooks you can't trust them. Their stuff is shoddy by Hoosier by Indiana stuff. Okay 1880s come to 1950s I'm coming along oh they've taken the furniture factories in Michigan and they've taken the car factories and they're putting them in Alabama and Georgia and Tennessee. Those crackers they they don't know how to make a car and they're and we're union and they aren't and no don't don't buy them you know this is evil. Well now I go back and oh China oh China oh Mexico. All I know for sure is all the cry and never changed the outcome that they and that everyone who fought it ended up just if the most they ever did was delay how fast it changed and the people who prospered figured out ways to play a role in that new world. You know if I was in Indiana I'd be

figuring out how to become the biggest importer of Chinese stuff in the state. You know I would figure out how okay let's get rich in the new world. My mom she was in an assisted living and I came to say her one night at dinner well she was still around and I said I just came from seeing all the best entrepreneurs in town and she said I thought you said there weren't hardly any entrepreneurs here. I said I just came from Maplewood Cemetery because all the games in the 1890s made that a hop in town and that's where those 27,000 GM jobs came from was from entrepreneurs in in the end in the 1890s that GM later bought out and they're all buried there in that graveyard.

You can't turn the clock back you got to get with the future you got to create the future and and so you know Peter Drucker said I heard him speak in his 90s and went up and talked to him a little while he said look the biggest and so this would have been 10 12 years ago they said the biggest challenge facing all the so-called first world Japan, Europe, United States, Australia, Canada is immigration it's going to become the hottest political issue you've ever seen and it wasn't then. He saw that coming and he said only the United States among the major economies has proven its ability to assimilate other people. So you can debate about whether we still assimilate or what you need to do to assimilate is everybody have to learn English and all that you can debate all that but he was pointing out that Europeans don't have a clue in the Japanese don't have a clue and he was actually a huge fan of Japan in particular and of course he was European

you know he was Austrian and he really understood all that. I actually think if you look at it Canada and Australia are really in a sweet spot that when people when my travels around the world are 44 countries I don't know if I've ever met anybody hates America. I've met a lot of people hate the American government once I or another and the Canadians and Australians don't really in that fight. I mean there were some terrorist attacks in Australia but overall the world does not blame Australia for George W. Bush to the extent that there are people in the world that were pissed off in it. I'll leave out my own feelings about that him and that and all this but and Canada I mean that's a very diverse country with people from all over the world and now low against US dollar so it's a bargain. I am an optimist by nature I really believe in America and actually spent five days in Grand Rapids Michigan last week and seeing all the energy and even meeting

nine Uber drivers and what they're doing with their lives and they range from retired guys to young young people that have just changed their major and everything. Our country I mean innovation is in our blood, creativity is in our blood. I believe a lot of it comes from our diversity. If we were all if we were Switzerland and we all looked like each other and all had the same great grandparents we'd be about as innovative as Switzerland is you know or Sweden you know and and the same with Brazil. Brazil should have a lot of the good stuff and once they get the idiots out of the government and start doing more of the right things their potential will be much greater than Chile and Colombia and Peru and but I tell you if there is one thing that I that I get pessimistic about the United States and you wanted to go on those some of those issues kind of that direction is our K through 12 education system. I was in Colombia talking a

bunch of their like 12 to 16 year olds 200 of them in a room it was a science fair I helped judge and you know I'm going through a translator because I don't give my speeches in Spanish and you know little girl in the front row as oh should I have a partner go it alone you know 12 year old and and you know the kids are going to school six days a week and wearing uniforms and again you can debate all that but man they are serious about learning they're trying you know and then two weeks later I speak at my own home high school in Anderson, Indiana it's my friends that are the deans and the teachers they all you got to come speak the eighth grade class so two classes maybe ninth grade two classes economic classes and I can tell the story subscribing to Fortune the age of 12 and I say how many of you heard of Fortune magazine and I've spoken a lot of high school groups I do it in Austin 21 last 22 years one great group in Austin for the Austin Rotary.

I always get you know 20 percent hands 30 percent not one hand went up in Anderson, Indiana nobody heard of Fortune in economics class I mean they should be bringing fortune in for case studies and oh at minimum and then as it went on it was clear all these the people in my home public high school have checked out checked out years ago their curiosity has been beaten out of their heads by a system and it hey the teachers are my buddies and above my friend that she taught to class she said well I was going to retire last year but I didn't want to retire on a bad note that you know because it's all paperwork if the kid does something wrong you can't report him because you're getting trouble with the school board you know I've talked in classes where half the kids are on the cell phone the whole time I'm talking and I have a one time at Austin I turn the teacher and I'm like well can you do something or no no you know hey that doesn't happen in Colombia and

I'm not advocating slapping the kids around you know but and Anderson's not the kind of place that's private school it's about to have his religious back to schools everything and most of the kids that are really curious and learners no matter if their parents are atheist they're putting them in those schools but it's a tragedy because those kids are in Indiana, when I graduated 70 percent of my high school class went on to some form of a more education including fixing cars and everything because that's our country 70 percent last year it was 30 35 percent same school same town though there is no way those kids in the middle because it's important because it's in rich kids these are real regular kids there's no way they're going to be able to compete with those kids from Columbia going out 20 that concerns me and I and I think we need radical disruption breaking the system it's made a lot of progress with homeschooling everything we need vouchers

we need more change and experimentation and open up the system because if people want to learn every six-year-old is curious and it's been pounded out of them by 18. Kauffman Institute has done studies that people are like twice as entrepreneurial and first grade as they are sixth grade and twice as entrepreneurial sixth grade as they are 12th grade the Kauffman Foundation people yes ma'am yeah well no I believe I mean ultimately I believe in vouchers which would be whatever money the state whatever the money that we taxpayers spend per student you give that to the parents and let them pick and that's a voucher system Milton Friedman dreamed up the idea charter schools are a method of you know homeschooling was illegal and now it's legal everywhere so any step but vouchers would be the ultimate answer and I'm not that there aren't you know how do you pull it off and how do you structure it vouchers are trying a lot of places but they're

normally just given the poor kids and that defeats the whole thing I mean it's okay it's better than not at all but no that's the people in Anderson and Ann most of them wouldn't qualify you know it needs to be in but it's hey the teaching system has in large part become a jobs program and you know very difficult to fire teachers who don't do well and you know you can blame the union the unions are very active but there's plenty of blame to go around and and the other thing is a massive growth in administration because both at the university and K through 12 level the growth in a number of people hasn't been among teachers in both cases the dramatic growth has been in guidance counselors and assistant principals and assistant deans and staff members and I'm an entrepreneur in resident school of information at UT and I'm there all the time and even in universities they have not increased the teachers they've increased everything else and those people

when I testified in favor of vouchers Texas state legislature all day the people that testified on the other side was a president of the Texas State Association of Coaches president of the Texas Association of Guidance counselors to president of Texas Association of Special Needs Teachers it was all the lobbyists for those special interest groups and they're all on one side and and the other side was all the parents except the one and mainly parents of middle and lower middle income and people of color let's uh let's time check here oh no no I gotta go on and I'll stick around after hey I'm staying here I'm not going anywhere that's it's much I have one more question this guy's hand has been up we said 8 o'clock so uh let's wrap it up now what if you guys have other questions let's just meet up front one more he's been dying yes yeah I have no clue I you know I study none of those guys I believe macroeconomics which is what you're talking about

is still in large part hocus pocus there was something called the Phillips curve that was supposed to be a law when I came into graduate school I think graduate courses and in five years later so I know it isn't it said that either inflation goes up or unemployment goes up one or the other you can't have both good it later turns out they could both be awful which violated the law I don't think anybody knows for sure the one thing I would say is my dad had a grocery store and the old grocery saying is volume covers a multitude of sins I mean you know if you do an upper avenue all your screw-ups can be covered up well if the U.S. economy grew another 2 percent a year if our GDP grew 2 percent faster or one and a half faster we would be able to I worry about the debt I worry about the federal deficit I worry about all that we could hey we paid off world war two and that was a much bigger deal and own relative or you know it's huge it was huge and and

world war one so the key is a strong economy and and and among many things as I would subscribe to really cut back regulations in recent weeks the administration has been on a terror of new regulations trying to write as many in as they can in their last years and that will really slow us I know I know I actually I never understood international finance that takes much smarter people than I am let's do one more and I try to stick to fields I understand no I don't I don't let's do one more question then we'll take higher low us dollar is not going to make or break this country that's kind of my gut feeling I think that's what Milton Friedman would have said he would believe in a slow gradual growth of the money supply you know hey Alan Greenspan he later got a tarnish name but I still probably eighty nine percent what he believed was right read his book he's a real smart guy you know I mean and there's a lot of blame to go around

for the '08 crash yeah yeah and then O8 crash man there's plenty of blame to go around all the way around congress business people Wall Street yes sir log log log oh yes yes no hi Nick name and I didn't know anybody else called it that thank you Hoover's law which is your success is inversely proportional to the square of the number of projects you're working on but what I'm really talking about is if you're trying to do two startups and once you're gonna be one fourth is successful you try to do three at once you're gonna be one-ninth great people focus do one thing now as an entrepreneur you're multitasking when you're a HR chief for an hour and you're cleaning the bathroom for an hour and then you're marketing chief an hour so there's no question you do a lot of different things but if you're because I meet people all times they will want how many companies have you starting this week you know no no no one at a time you can do them

sequentially but I take several years so that's just my rough number of doing it yes sir the SKU count—the number of items I you know I can you repeat the question yeah the question is how with 3D printing and just-in-time manufacturing affect well all of retailing really because it will have effects throughout the system I haven't thought that through I will work on it and email me and and keep after me because that's a very interesting question I mean I'd really have to think hard about it I mean every retailer would love to carry less inventory if you could print on site fast enough and high quality there's a lot of merchandise categories that would go for that we have been doing that with house keys for years you know I haven't and they made it much better you know used to be the guy a woman had to run the machine and now you just stick it in there and it automatically does it so there's your and and a Levi's years ago was doing a thing

where you walk in and they measure and they make pair of jeans while you're there is demos in the San Francisco store and all that there's no question it's going to change stuff and then whether people want to print and make it home and how does that tie in or you know replacement parts for things download the CAD file and make it it's going to be very interesting and very exciting and my new project the first museum of innovation we're going to hey you're going to be able our store is going to be full of 3D printers because we're about innovation what's coming next so we're going to try to have a very futuristic cafe and a futuristic store but you'll be able to pick stuff and and make stuff right there um so no I haven't thought of doing I do believe that most of the the projections that retailing is going to die are way way off people in large part go to retail stores for the social effect they go hang out because one of my young friends

was saying oh all the all grocery is going to be delivered at home H.E.B. and that's the big operator down where I'm at this over 20 billion a year family biggest family owned supermarket chain America out of San Antonio and he said oh H.E.B. is going to lose half their business because he loves it he already had something delivered by Amazon in 20 minutes and their new Austin you know same day delivery and consumable items and he said oh grocery stores are going to have had it and I said well come hang out with me and H.E.B. and watch how many people want to be there because they want to get away from their crying baby because they want to get away from their in-laws because they want because they stand there in front of the mustard aisle and they look at four kinds of mustards and they take 15 minutes to pick a kind of mustard you know I mean there are a lot of reasons people go to retail stores and a lot of times people want to touch merchandise they want

to taste it they want to feel it we're probably never going to have our gasoline all bought online we'll probably have to go somewhere now obviously we'll be plugging into the wall so there's many many questions about the future of retailing I believe Whole Foods is pretty safe I think Walmart still has a lot of good years left in it but they won't stay on top forever nobody ever does A&P didn't Sears didn't but no let me think about it and email me thank you all very much for your time and attention and sticking around