Haim Saban is a Billionaire and it all started with a trip to Japan and only one thing on TV. Way to Go Go Power Rangers.

Dave Young:

Welcome to The Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[OG Law Ad]

Dave Young:

Welcome back to The Empire Builders Podcast, and we’re talking empires today. Stephen Semple’s there. I’m here. I’m Dave. Gosh, if anybody that ever thought I was reading the intros like that, it’s not okay.

Stephen Semple:

Mystery solved.

Dave Young:

Mystery solved. Never the same twice. So Stephen, you told me that we’re going to talk about Power Rangers today, and I think of that like an entertainment franchise sort of thing, but also what also toys.

Stephen Semple:

They are also toys, yes.

Dave Young:

Was it one of those things where it’s like, oh, we’re going to invent this toy and then we’re going to have an entertainment program to go along with it? Because these things seem to go hand in hand these days.

Stephen Semple:

Yeah, and they very much was hand in hand. The two came about very much together. And it’s got an interesting history to it because it was launched in 1993 and it was created by Haim Saban, who is now a billionaire. He’s gone on to do a bunch of things.

Not just making a ton of money from this, but if you look him up on Wikipedia, it’s estimated he’s worth a couple of billion dollars. So he’s done well in the entertainment industry. And Hasbro acquired the company back in 2019 for $522 million. So it certainly has contributed to his wealth. And he was a cartoon theme songwriter is where he got his start.

Dave Young:

Really? Okay.

Stephen Semple:

He worked on things like Professor Gadget and Masters of the Universe. Those were the things that he was writing theme songs for.

Dave Young:

Oh, cool.

Stephen Semple:

But he wanted to create his own property. He always wanted to have his own thing. And at the time, he’s on a business trip in Japan, and the only thing you can get on the TV is this Japanese animated series called Choudenshi Bioman, which is part of what they call a Super Sentai series. And Saban was fascinated by this concept of five masked people in spandex fighting monsters. So it’s in 1985, and he produces a pilot of Bioman.

And the idea of adapting Japanese productions to the US market started basically in 1970 with Marvel. Marvel did a deal with Toei Company to exchange ideas, and Toei created a Japanese version of Spider-Man that did actually really well. And what Marvel tried to bring to the US, not so much. So it sort of worked. Initially, America to Japan was working, but Japan back to America was not working as well.

But that didn’t stop Saban. So what he decided to do was create a show where they could keep the original action scenes, because the action scenes are complex and hard to film, and then just replace the other scenes with good-looking American actors. So basically when there was the action scenes, it was actually the original Japanese content. And then they would put in…

Dave Young:

Oh, wow.

Stephen Semple:

Yeah, he just basically said, okay, here’s this Japanese thing. I’ll keep the original story. I’ll keep the Japanese content. And then where any of the acting is, I’ll put in good-looking American actors. Basically that footage is already shot and the toys already existed. So it was also economical to import it to the United States.

This was his idea. So he gets a meeting with Toei and Bandai, and they agree. What the heck? Sure. Take our content. Take it to the United States. So he gets agreement from them. They already got the toys. They already got the expensive action scenes. All they got to do is splice in the other stuff.

Dave Young:

So on the Power Rangers, I mean, I had little kids at that time. Anytime they’re in their helmets and they’re fighting and it’s the bam, bam, bam stuff, that’s all from original Japanese shows.

Stephen Semple:

Original Japanese content. At least that’s how it started. I don’t know as it progressed whether they changed that, but initially, yes, that’s what it was.

Dave Young:

And so then when they take their helmets off and they’re just sitting around the Power Ranger den or whatever it is.

Stephen Semple:

Yeah.

Dave Young:

Yeah, okay. Wow, what a cool idea. I mean, an interesting way to mash up content.

Stephen Semple:

And so they’ve got nothing to lose on it. They agree to license the US rights of all of this to Saban. So it’s in 1987 and Saban’s ready to pitch it to US networks. It has this kind of campy feeling, right? They say, “Yeah, no, we’ll pass.” He talks to everyone and no one wants it. And the problem is for him to keep the licensing alive, he’s continuing to pay the license. There’s a minimum licensing fee. It’s draining him. He’s continuing to pay this licensing fee to keep this alive.

Now, it’s 1990 and people are now looking… Remember, 1990, Teenage Mutant Ninja Turtles happens. So now there’s a little bit of an appetite for these things, and there’s a new president at Fox Kids, Margaret Loesch. Now, here’s the interesting thing. Margaret Loesch knew the series because she had been at Marvel and had done these ideas with Stan Lee in the 1970s. So Marvel was doing these cross-pitchings, she was part of all of that. She was actually running that.

And so she loves the idea. She was immediately on board, and she takes it to her bosses. But the upper management hate it. Live action targeting at kids. It’s too new. Not going to happen. And she puts her job on the line. She says, “I’m going to do this.” So it’s 1992, she puts her job on the line. Saban gets a green light, but he needs a new name. They want a little bit more than Power Rangers. So it becomes the Mighty Morphin Power Rangers.

Dave Young:

Mighty Morphin Power Rangers. Yup.

Stephen Semple:

Mighty Morphin Power Rangers. Now, Bandai is small in the US at this time, like $4 million in sales. Hasbro’s doing like $2 billion, but they’re going to save all this money because the toys already exist. And not only that, all the characters are from the same mold. They just do a different color.

Now, the size is a little bit off standard because the Japanese market’s a little different standard size than the US, and they want to do something to really make it stand out. So here’s the interesting packaging thing that they do with the toy. Toys at the time were like there was the toy would sit in the middle and you’d see it, right?

Dave Young:

Yeah, the action hero in the… Not the shrink grip, but the…

Stephen Semple:

So the window would be in the middle of the packaging cardboard…

Dave Young:

Plastic formed thing. Yeah.

Stephen Semple:

Yeah. Well, what they decided to do is put the character in the corner of the packaging. So now the window wrapped around the character. So you could see the front of the character and the side of the character, and it would also make it unique. Stand out on the shelves. They created this corner packaging. So now the show comes out and it’s a hit.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Stephen Semple:

So now the show comes out and it’s a hit. It’s such a hit that when the Nielsen ratings come out, people don’t believe the numbers.

Dave Young:

Really?

Stephen Semple:

There’s no way it was this popular. It was so popular that they moved it from the mornings to the afternoon and put it up against Oprah.

Dave Young:

Wow! Okay.

Stephen Semple:

And by October, Power Rangers are surpassing Oprah.

Dave Young:

That’s crazy.

Stephen Semple:

Isn’t that crazy? And the toy explodes. You can’t get your hands on it. In 1993, the demand is so high, it’s now becoming the story that’s out there. Bandai makes 4 million of these toys. It’s not enough. They’ve got 11 factories. It’s not enough. Christmas 1994, they can’t keep up. Literally in Christmas in 1994, Power Rangers represents 40% of all action figure sales.

Dave Young:

That’s amazing. That’s amazing.

Stephen Semple:

In the first three years, they do a billion dollars in sales.

Dave Young:

Outstanding.

Stephen Semple:

Is that crazy?

Dave Young:

I had a niece that was really into the Power Rangers. My kids really weren’t, but yeah, what a cool thing. That’s a lot of plastic.

Stephen Semple:

Yeah. What I really liked was Saban, he saw this idea in Japan. And again, it wasn’t all that new thing of trying to bring something from Japan, but what I really loved was the way he looked at it was it became almost a slam dunk for people to license it to him. Because it’s like, we’re going to reuse your toys, even though the US market’s a different standard size.

We’re going to reuse your content, all the expensive stuff. We’re just going to reuse it. And here’s how we’re going to make it an American feeling is we’re just going to splice this stuff in. When I heard that, I was like, wow, that is brilliant. What a brilliant way of reusing content.

Dave Young:

Well, on a microscale, it’s what’s happening all over TikTok and Instagram, everything.

Stephen Semple:

Today?

Dave Young:

Yeah, you mash it up. You take somebody else’s something and do something else with it.

Stephen Semple:

Yeah. I thought this was really clever. And then fortunately, the change that happened over at Fox Kids is what gave him the roll forward. And again, it’s that usual protest of, well, no one’s done this. This is too new. And yet, how many times is that too new thing always the thing that explodes? It drives me crazy. We’ve got to stop using the excuse of, well, no one’s done this before, so I’m not going to do it. Get some guts. Be innovative. Don’t fear it.

Dave Young:

Well, it’s a recurring theme in creativity that the corporate gate holders are the ones that keep movies from being greenlit and shows like this from being made. We watched The Story of Late Night TV. I don’t remember if that’s the name of the show, but it had six or eight episodes. And the amount of decision making by corporate executives running entertainment companies is astounding, how poor decision makers.

The thing is, when you’re working with talented people that are committed that aren’t going to say no for any reason, you’re going to be successful despite these corporate naysayers. And then they take the credit for being brilliant. I don’t think they’re playing four dimensional chess where they’re just like, okay, I’m going to say no. And only the ones that are the most committed are the ones that are going to buck the system, and they’re just going to go on and make me a lot of money. I don’t think they’re doing that.

Stephen Semple:

No.

Dave Young:

I think they’re trying to analyze and think that they know exactly what the market wants.

Stephen Semple:

Absolutely. And it’s interesting, go back to HBO, right? And The Empire Builders Podcast. What made HBO so successful? They basically said, if we hire the best screenwriters and the best producers, just let them do it. They gave them complete free rein. And look at how many amazing, unbelievable, incredible shows come out of HBO, and they do not have the biggest budgets.

Dave Young:

Yeah. There’s a documentary on Paul Reubens that I watched yesterday as well. He was Pee-wee Herman. And it was one of those HBO things. Once they saw his show that he did, they gave him free rein to create Pee-wee’s Playhouse. And they didn’t mess with him.

Stephen Semple:

They didn’t mess with him.

Dave Young:

Now, it was a complicated story. It’s really cool. It was actually a pretty cool documentary, and it was him setting the record straight before he died in 2023.

Stephen Semple:

Well, and I suggest on this whole idea of creativity, I’m going to suggest people go back and listen to HBO. Do you want to know what? I just looked it up. Do you want to know why I couldn’t remember what episode number it was? Guess what number it was? Two. Yes, episode number two. Like, holy crap, it was a long time ago. But here’s the other interesting thing. We see this in advertising all the time. There’s certain sectors where I’ve been out speaking to people and they’ll say, “Well, hey, have you done much work in that space?” And it’s like, no.

Dave Young:

Pray that I haven’t.

Stephen Semple:

Right. And then all of a sudden we’ll do a couple and get some real traction on. Then all of a sudden, everybody wants to hire us. And here’s the trick, those later people are paying way more to hire us. It’s like I work with a private jet company and they asked me, they said, “Have you ever done anything with aviation?” No. “Have you ever done anything in transportation?” No. And they said, “Why do you think you can be successful with us?” I said, “I know how to get people to buy a Rolex watch.”

Dave Young:

Yeah. What difference is that?

Stephen Semple:

A Rolex watch is a necessary luxury and I know how to get people to buy a Rolex watch, so I know how to get people to buy your planes. Anyway, it’s just interesting.

Dave Young:

It’s funny, here’s a blanket suggestion to anybody that’s in an industry, dental client years ago that didn’t go anywhere because, oh gee, Dave, you’ve never done websites and marketing for dental companies before. It’s like, well, why do you think your website looks like all the other dentist websites? Because that’s your criteria.

Stephen Semple:

The criteria is… Right. What you should be doing… Look, this is the theme of this podcast. Look elsewhere. Look elsewhere and find things. Be inspired by other industries and other cities and other places. Starbucks was inspired by Italy. Saban was inspired by Japan. Or solve a problem. Empires come from either inspiration from somewhere else or a problem that the person is suffering with himself like Dyson. I couldn’t get the vacuum cleaner to freaking work, so I’m going to make a better vacuum cleaner. That’s it. Don’t look inside your industry because then you’re just a follower.

Dave Young:

Here’s a simple piece of advice. If you’re in a big city, pay attention to what conventions are coming to town. And if it’s a convention that’s in just a totally different industry than yours, buy a ticket.

Stephen Semple:

Go to it.

Dave Young:

Buy a ticket. Go sit in on some sessions, walk around the exhibit hall and meet some people. And you’re going to come away from that thinking differently about your own business.

Stephen Semple:

Absolutely are.

Dave Young:

And once you figure that out, then travel to Las Vegas. Go to a big convention that’s not in your wheelhouse.

Stephen Semple:

Absolutely. And I’ll give one other Vegas tip. If you’re wanting to figure out how to display things, freaking go to Vegas. The stores in Vegas got that completely figured out how to display things. But this is cool. Wow, we went down interesting paths.

Dave Young:

What was the topic?

Stephen Semple:

Power Rangers. Well, we morphed.

Dave Young:

Yeah, we did. We mightily morphed into a different kind of conversation. But it’s exactly what they did, right?

Stephen Semple:

It’s exactly what they did.

Dave Young:

Cross-pollinate your ideas and steal like an artist.

Stephen Semple:

There you are. All right. Awesome.

Dave Young:

Thanks, Stephen.

Stephen Semple:

Thanks, David.

Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.

Chris Ricobono walked into garment makers all over the fashion district in New York and no one would make an off spec shirt for him.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick in business partner Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[Pinpoint Payments Ad]

Dave Young:

Welcome back to the Empire Builders Podcast, Dave Young here alongside Stephen Semple. And we’re talking about empires being built and fortunes being made and brands being established and something different happening. And you mentioned the theme for today’s show. The topic is a shirt brand called Untuck it.

Stephen Semple:

Untuck it,

Dave Young:

And I am a little familiar with them. Number one,

Stephen Semple:

Oh my God, a fashion brand that Dave’s a little bit familiar with.

Dave Young:

Oh, I own two of them. I have two shirts. And I feel like I’m responsible for the brand.

Stephen Semple:

Okay.

Dave Young:

I’m just that kind of guy that my torso is the weird length and I cannot for the life of me keep a shirt tucked in. So years ago, I quit trying, unless I’m going to be in a tuxedo with a cummerbund that tightens that up. I’m like, you’re not going to find me in a tucked in shirt because it’ll untuck itself. So I’ve always embraced the idea of buy shirts that look good, whether they’re tucked in or not, and Untuck It actually created dress shirts.

Stephen Semple:

Yes, sir.

Dave Young:

That you don’t tuck in. You’ve got quite enough tail to be tucked in. So I’m interested in how they got their start. And I bought my two shirts from an actual Untuck store in a mall in Portland, Oregon.

Stephen Semple:

There you go. Yeah.

Dave Young:

So I think I know where you’re headed with this, the experience.

Stephen Semple:

Yeah. Today they have, I think they’re approaching 90 stores now today, and they also now have got a women’s line and of course a major strong online presence. But it was founded by Chris Ricobono and Aaron Sendez in Hoboken, New Jersey in 2010. And they are, as you said, a shirt designed to be worn untucked. And in fact, their early ads featured Chris basically walking down the road talking about how this is what he wanted to create.

And they’re kind of funny actually. If you go look at them, they’re a great origin story. And he’s walking down the street in New Jersey and he has this unbelievably serious tone to him about how he wanted to fix this whole shirt problem. And that actually in the early days, David Letterman and Colbert and whatnot were making fun of these ads, which he loved. Like, “Hey, I’m getting some free press here.” But yeah, go and check them out on YouTube. Kind of great. I can really understand why those ads work.

So Chris grew up in New Jersey and he took finance and college, and he was actually always really nervous about corporate America. He was worried about his career. And so his whole idea was he was going to get a job, but while he got the job, he was going to look for what the next thing was going to be. So he was always looking for the next idea. And he was nervous in corporate America because he wasn’t good in crowds, and he wasn’t good with spreadsheets and he wasn’t good with socializing. So he always sort of felt like he was an outsider there

And eventually got a job being a salesperson and medical devices for GE. And he was there for about 10 years, but he knew he was never going to be long-term. And while he was at GE, he did an MBA at Columbia and it stimulated a lot of ideas for him, and he knew he needed to get an idea. And the early one that he did actually was a wine blog. He did this wine blog called Pardon That Vine.

Dave Young:

Oh wow.

Stephen Semple:

It was the only idea he had at the time, and he did it. It was his passion. He loved collecting and drinking wine. And in fact, how that all started was he was invited to a dinner from a cousin of his and his cousin was a wine guy, and his cousin would say, “Go down and grab a bottle of wine, grab any bottle of wine.” And he’d bring up the wine. And this is going to speak to you, Dave. He would bring up the wine and they would tell a story about the wine, about the region, about the grapes, about the winemaker. And all of a sudden Chris fell in love with wines through the stories, which is what you guys teach at the whiskey marketing school, right?

Dave Young:

Absolutely. Yeah.

Stephen Semple:

And he became obsessed with it. And so he decided to do this blog and he thought it would lead to some consulting and presenting, and social media wasn’t around yet. There was only Facebook, and it was kind of limited. And wine was very snobby then, and he wanted to make it accessible and mainstream. Now, turned out this helped him at his career at GE because his customers would want to go out for dinner with him. He wouldn’t sell them anything. He would take him out to dinner. They’d have this great dinner. He would tell the story of this wine, and then they would end up buying product from him, power of that story. But he hated the shirts, so they would always feel uncomfortable and whatnot. And what ended up happening one day as he bought a shirt that was off spec, a J. Crew shirt that was off spec. So in other words, it was a medium shirt, but it wasn’t the right length. And he loved it. He wore it all the time.

To the degree that when he would go into stores, he would try to find off spec shirts. He would specifically look for ones that were improperly made. In other words, they were too short. And he started sharing this idea with his friends of, “I think I’m going to do this as a company.” And his buddy, Aaron, who was a partner at one of the big accounting firms, forget which one.

Dave Young:

Fives.

Stephen Semple:

Yeah. He shared that idea with Aaron. And Aaron was like, “Let’s do it. Let’s do it. We’re going to do this idea.” Now, here’s the fun part. Neither one of them had any background in fashion. Have we heard this theme before?

Dave Young:

Sure.

Stephen Semple:

New idea coming from someone with no background in the industry, but lived in New York. He was outside of New York in New Jersey, and as we know there’s a huge garment district in New York. So he grabbed this J. Crew shirt and he would walk into places going, can you make this.

Dave Young:

Okay?

Stephen Semple:

He would go through the pitch with the garment makers and they all go, “You can’t make a shirt like that. It’s off spec. You can’t make a shirt like that. It’s off spec. You can’t make a shirt like that. It’s off spec.”

Dave Young:

Yeah. This is the new spec.

Stephen Semple:

He went door to door. It took him two years to find somebody who’d be willing to make the shirt.

Dave Young:

Wow. Two years.

Stephen Semple:

Two years. So he went door to door two years, and I finally found somebody who’d make the shirt. So he had to raise some money, they had to build a website, and they had to come up with a name. He came up with the name Untuck It. Now, the interesting thing is anybody he shared the name with, they all hated it, but he decided not to listen to it. And I think Untuck it is an awesome name. It’s a verb.

Dave Young:

Sure. Yeah.

Stephen Semple:

It’s a verb. And right away it describes what his product is. The Untuck it dress shirt. Do I need to say anything more?

Dave Young:

No.

Stephen Semple:

Shirt designed to be worn. Untucked.

Dave Young:

Right? You don’t tuck it in and you don’t wear a tie.

Stephen Semple:

Right?

Dave Young:

Damn It. I’m in. Take My Money.

Stephen Semple:

They pull together 150k. They found this guy from Poland who had an office in New York City. They’re going to make the shirt in Poland. Now, it’s interesting, Chris believes that today it would be far easier of all of these fashion brands that are springing up to do this today. And he actually feels, because of the challenges, it actually created an advantage for him. So the first shirts were terrible. They didn’t know that they had to be pre-washed, so you have to pre-wash stuff before you make it. The shirts were wrong and they started getting back this terrible feedback, but they had to still sell the shirts.

And here’s one of the decisions they made. We’re still going to sell the shirts. We’re going to keep these people’s names. And when we eventually get it right, we’re going to give them a free shirt, but we need the money. Next one, buttons were wrong. You could just pull the buttons off because the machine, something was wrong with the button machine. And so they sent everybody an apology letter and a five-dollar coupon, take it to your laundromat, have them fix the buttons. So initial quality was, they struggled a long time with it, but they remained positive. When people first got the shirts, they would get this big long letters from folks about how much they loved it.

And the problem was they didn’t understand this idea that there’s this tech pack that you have to send when you do a shirt. It has to be laundered this way. It has to be done this way. It has to be done. They were figuring all that out because the problem is cotton both grows and shrinks.

And length really would vary because even when you pre-washed it, you’re pre-washing 15,000 shirts together, one would shrink a little bit more. It turned out to be a very imperfect process, and it took them a long time to figure out how to make the length exactly the same. And it took them like three years. For three years, they were actually selling shirts that were not that great a quality. And Chris talks about today they would be killed because today the social media postings and whatnot would kill them. But they eventually got it right. And they’re also happy that in the early days they grew slowly because again, they weren’t putting out a great product. Now, they eventually fixed all of that. They eventually reached out back to all of those people and gave them a new shirt. But-

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Stephen Semple:

Now, they eventually fixed all of that. They eventually reached out back to all those people and gave them a new shirt. Right? But took a long time. So not knowing fashion was a disadvantage because of all these production problems, but it was also an advantage. They kept soldiering through it. They’re like, “No, we’re going to get this right.” So then they’re growing along nicely and they finally realize they finally get shirt working rights 2014, and they decide we want to kick growth. We now got a good product. And they got $21,000 to put it into marketing.

Dave Young:

$21,000?

Stephen Semple:

Yeah, $21,000. And they did exactly what we would tell people not to do. They bought a three-week flight on a sports radio show in New York.

Dave Young:

Oh man.

Stephen Semple:

But you know what? It worked.

Dave Young:

Okay.

Stephen Semple:

It exploded. Now, I think part of the reason why it worked is first of all, it was so unique and there was a built-in demand for it, and they kept their message super simple. It’s a dress shirt designed to be worn untucked. UntuckIt.com.

Dave Young:

I mean, I can see it working. It’s also not a big decision to make, right?

Stephen Semple:

Correct.

Dave Young:

It’s not a long product purchase cycle thing. It’s like, oh, it’s a new shirt.

Stephen Semple:

And I think it was unique enough that somebody will go, “Yeah, I’ll try it. I’ll buy one.”

Dave Young:

Most of the new shirts I’ve purchased in the last couple of years have either been a weird Facebook ad or just like, oh, that’s a different colored fishing shirt.

Stephen Semple:

Yeah. Yeah.

Dave Young:

Than I currently have.

Stephen Semple:

So the next thing that they did is they did airline magazines was the next place that they went.

Dave Young:

Back when those were big.

Stephen Semple:

Right. And what they found was the only people advertising in airline magazine was high-end watches and fragrances. And so they discovered a halo effect ,that these guys must be doing well. And this shirt must be awesome because who you’re beside. Now, if you don’t think there’s a halo effect, there absolutely is. And I can prove it. If you are doing billboards, if you’re working with a jeweler, a co-oping advertising with Rolex, and you want to go on an electronic rotating billboard, Rolex will only allow you to go on that billboard if these advertisers are on it. In other words, Rolex knows that if my billboard comes up and then it’s a dog food ad next, it actually impacts my brand. They’re really picky about who else is on that. And Rolex will only approve it if they can look at who all the other advertisers are.

Dave Young:

The power of association.

Stephen Semple:

Power of association. It is real. Now, when they first started marketing this, they thought their buyers would be young fashion forward people. Turns out evenly distributed across the board. They do. So here’s the things get interesting. So remember I said they started doing airline magazines? They even did billboards while a competition. Fashion companies are doing all the social media, these guys did billboards, and they even did a billboard where they didn’t show the shirt. Untuck it, a dress shirt designed to be worn untucked. People didn’t need to see it. They love the idea.

Dave Young:

Yes.

Stephen Semple:

It’s the idea that they liked. So five years in still working at GE, he’s scared to leave his job. Chris is scared to leave his job. But remember, they’re advertising in airline magazines. It’s 2015 and he’s on a flight to a sales meeting. Okay. Guess what? There’s a big picture of him in the magazine with the ad, because his picture and his story is in the ad. His boss kind of goes to him and says, “I think it’s time for you to move on.”

Dave Young:

Oh, that’s funny.

Stephen Semple:

He ends up leaving GE and doing this full time. In his 2017, they started opening stores because one of the pieces of feedback that they got from people is, I need to touch it and feel it. That’s the resistance point, because they’re also pricing at a bit of a premium price. So they have 25 stores at this point. So they’ve grown no outside investment, 25 stores. So they do their first fundraise, they raise $30 million, and other brands start to notice, and they start making an untucked shirt. Now it’s 2019. 2019. They really get this feeling of accomplishment because in 2019, all their competitors, all their big competitors have an untucked version of their dress shirts. And in fact, almost lead with that in their advertising.

Also, in 2019, they decide, you know what? We’re going to cash out. We’ve grown it to the size. We’ve grown it. It’s time to cash out. Now, remember I said to you when the countdown was happening, there’s a crazy twist in this story. Here’s where the twist happens. So 2019, they’re growing so fast, they’re entering England, they’re launching other things. They decide to shop the business. They get 15 letters of intent with really big numbers,

Really big numbers. They’re pretty confident they can sell this thing for 750 million bucks based upon these letters of intent. It was there and they were weeks away from closing.

Dave Young:

And then I’m guessing pandemic.

Stephen Semple:

Pandemic happens.

Dave Young:

Yeah. Nobody wears a dress shirt at all.

Stephen Semple:

Everyone pulls out. Well, remember everything was put on pause.

Dave Young:

Yeah. Well, you put on pause and now you’re only going to be seeing people from the shoulders up anyway.

Stephen Semple:

They were about to sell for 750 million, and they had had a business that was, remember, they took no very little outside investment. They were very lean. So guess what this also meant? They did not have much in the way of cash. They had also bought a whole pile of inventory expecting this to be a great year. They now have brick and mortar stores that are closed. Rent till needs to be paid. Suppliers still needs to be paid. They have a 50% sales decline because while clothing was being sold online, it was casual clothing. And they get the advice from their lawyer, “Dudes, we’re going to have to declare bankruptcy.”

Dave Young:

Wow.

Stephen Semple:

So in a 90 day period of time, they go from, we’re selling this business for 750 million to we need to declare bankruptcy. Could you imagine that? Going through that?

Dave Young:

That’s sad.

Stephen Semple:

What a swing. Now they figure out they don’t need to declare bankruptcy. What they decide to, they call every landlord that they have who decides to hang in with them. They call all their suppliers, most hang in with them. They were able to raise a little bit of money to take themselves through it because the people who invested in them before saw this as an opportunity to invest more at a really great rate.

And they got through it. They managed to get through it. And in 2023, they started to emerge. Because again, people are now returning back to work, all this other stuff. In 2024, they recover completely financially, and in 2025, they’re back on the wagon and they’re back on track. But when I was listening to the interview with Chris and he talked about going from that, I thought to myself, “How do you get through that?” I’m like, “Dude, I admire that you worked your way through it.” Because the go through, we all have stories from the pandemic in terms of, oh, it really affected me. These guys take the cake. Like, wow, holy crap. Like crazy town. Right?

Dave Young:

Yeah. Go ahead.

Stephen Semple:

I was just going to say, and this is part of what I wanted to share, is sometimes these things happen out of your control and you just got to figure out a way to get through it. But what I love was, this is an example of he’s from outside the fashion industry. And the fashion industry could not see that people actually wanted a dress shirt that you would wear untucked, and yeah, took him a long time to figure out how to do it. But it was right there. And yet, even when he pointed out to people in the fashion industry, it took him two years to find someone who was willing to make it. How nuts is that? You would think that you would show somebody and they would go, “Oh, that’s a really good idea. People would want to wear it untucked.” It’s like, “No, that’s not the specs. You don’t make shirts that way.”

Dave Young:

Yep. I love it. I love it. As you’re talking, I’m looking at their website. On the very front of the website, there’s a dude with shirt tucked in. I don’t understand that. So of their, it’s a golf shirt. They sell way more than just dress shirts,

Stephen Semple:

Oh, they do now.

Dave Young:

You don’t tuck in now. Yeah. There’s jackets, there’s pants.

Stephen Semple:

They do do jackets and pants. And they have a women’s line.

Dave Young:

Shoes.

Stephen Semple:

Oh yeah. Yeah, they do. They’ve expanded and expanded. It’s a whole bunch of other things, but I just love how this all started with him because he would hunt for off-spec shirts purposefully.

Dave Young:

Yeah. Yeah. I love it. I love this story. Well, thank you for sharing the Untuck It brand.

Stephen Semple:

All right, awesome. Thanks David.

Dave Young:

Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute empire building session, you can do it at Empirebuildingprogram.com.

Avis found a loophole for selling used cars at whatever price he wanted. This became the norm for all rental companies.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young.

Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[ECO Office Ad]

Dave Young:

Welcome to the Empire Builders Podcast, Dave Young, here alongside Stephen Semple. And again, breaking from tradition, if you listen to the episode just before this, which is the Hertz Rental Car, you realize that we have a spoiler. Stephen told me the topic of this podcast, gosh, a whole podcast ago.

Stephen Semple:

That’s it.

Dave Young:

We talked about Hertz Rental cars, and now we’re going to tell the story of Avis, number two, but they try harder.

Stephen Semple:

If you haven’t listened to Hertz, I recommend go back and listen to it because these two stories kind of tie together. And it is interesting. We think about Avis as number two. They’re not number two any longer. They’re now number three. It’s now Enterprise, Hertz, Avis. But that’s a whole different thing.

Avis is still… Look, it’s a massive business. They have 5,500 locations. They do 5 billion in sales. They’re a big deal. And they were founded by Warren Avis in Detroit in 1946. So just shortly after the end of World War II.

Dave Young:

Okay.

Stephen Semple:

So the war’s over. Troops are returning home. Cars are now being produced for the domestic market. Because, if you remember, one of the things we talked about in the last episode was you could not sell a car domestically. All car production was going into the war effort. We’ve got people returning home. Roads are being built. The suburbs are the place to be. Cars are now being produced for the domestic market, and sales are exploding for cars. It’s going crazy.

And so Warren decides to open a Ford dealership. He sinks 10 grand of his own money in. He gets a $75,000 loan. But there’s one problem with being a new car dealer at this time. The federal government puts a cap on what you can charge for a car. So there’s price controls on cars. So it’s actually hard to make a living selling new cars because the margin is really thin, even though lots of people want to buy it.

Dave Young:

If you’re renting cars, you’re selling them over and over and over almost.

Stephen Semple:

Well, you’re really close. Warren finds a loophole that you can hold onto a car for six months, and then sell it as a used car, no restriction. So this is what he starts doing. However, this creates an expensive inventory problem. So it’s hard to do and hard to grow because he’s holding onto the cars for six months.

Around this time, Warren Avis rents a car from Hertz. Now, if you remember in the Hertz episode, while Hertz did amazingly well during the war because you couldn’t get a car and they had cars for rent, at the same time they couldn’t replace their cars. So the cars by this time were pretty rough.

Dave Young:

Yeah. Oh, I bet. I mean, usually rental cars now, you don’t have to have very many miles on them to have them be a little rough.

Stephen Semple:

And Hertz was also in what was now becoming poor locations because Hertz had located in downtown locations, and now people are moving out to the suburbs. So it was out of the way, kind of a crappy car. So Avis decides to take his new cars that he has on the lot, rent them, and then sell them as used at the six-month mark, which means he would always have new cars for rent.

Dave Young:

Yeah, this is the business model they’re all in now.

Stephen Semple:

Yes. This is the business model they’re all in.

Dave Young:

So Avis started this.

Stephen Semple:

Right. Now, also, if you remember, GM bought Hertz.

Dave Young:

Right.

Stephen Semple:

So Avis goes to Ford, and makes them a deal because these could then also act as a demo for Ford, just like what GM was doing with Hertz.

Dave Young:

Absolutely.

Stephen Semple:

So all the Hertz vehicles were GM, all the Avis vehicles were Ford.

Now, when he decides to grow beyond his dealership, so he starts doing it at his dealership, he looks at the market and Hertz has a lock on basically train stops and downtown locations. But there’s a new untapped market.

Dave Young:

Airplanes.

Stephen Semple:

Bingo, as air travel was growing. Because keep in mind, in the 1950s, this is a staggering number… In the 1950s, air travel increased 1500% in a decade. But airports are outside the cities, so why not bring the car rental agency to the airports?

Dave Young:

Sure.

Stephen Semple:

So it’s 1946, and he opens at Willow Run Airport in Detroit, which is about 30 minutes from downtown. Now remember, in the late 40s, early 50s, how important Detroit was at that time. Detroit was the fourth-largest city. It was booming. It was the heart of the automotive industry, which was just massive. So Detroit was a big deal.

What Avis did is set up a rental counter at the airport baggage claim. Cheap location, and turned out to be the best location, because while waiting for bags, people are being pitched on renting a car. The car’s right there, and the test works. So he decides on opening at other airport locations.

Dave Young:

All right.

Stephen Semple:

Now here’s where things get really interesting. The next location he decides to do is Miami.

Dave Young:

Okay.

Stephen Semple:

Miami’s a big hub, huge airport, opens with 11 cars. So he’s anticipating sales are going to be amazing because it’s this much bigger market.

Dave Young:

11 cars.

Stephen Semple:

Sales are slow. Cars don’t move. Here’s what he discovers. At a large airport, it’s hard to get the word out. It’s bigger. It’s noisier. Things are spread out. But we see this with our clients as well, where they have an idea that works in the small market that’s built on small promotion and word of mouth, and they move to a large market and it doesn’t work, and they blame the idea. Where what it usually is is that share of voice. The bigger the market is, the noisier it is, the harder it is to stand out, the harder you have to work to get noticed.

So Avis doesn’t abandon the idea; he realizes he needs to promote it better, and he needs to find a better way to promote. And here’s what he notices.

Dave Young:

Stay tuned. We’re going to wrap up this story, and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Stephen Semple:

So Avis doesn’t abandon the idea. He realizes he needs to promote it better, and he needs to find a better way to promote. And here’s what he notices. No one’s advertising on airplanes.

Dave Young:

On airplanes. So yeah.

Stephen Semple:

He makes a deal with American Airlines to put brochures on the planes for the car rental in Miami. And he’s the first to advertise on airplanes.

Dave Young:

I bet that worked.

Stephen Semple:

Worked huge. Worked huge, especially where you’re the only one advertising. So he’s the first to do that. Business starts to soar, and he does lots more airports. He’s like, okay, I’m going to do as many airports as I can, advertising on the planes. This is how we go. By 1953, Avis is number two with 75 airport locations, including now, Chicago, Hertz’s hometown. And in 1953, Avis starts opening actually locations in Hertz’s stronghold, the city centers. At this point, this whole idea of car rental starts to catch on. The market starts to get flooded, and Avis decides, you know what? I want to get out of this. And he sells for $8 million to a competitor and basically takes his money and runs and decides to retire and do other things.

Dave Young:

8 million and Avis is out.

Stephen Semple:

8 million, and Avis is out. But 8 million in 1953, that’s some walking around money.

Dave Young:

He left their name, yeah.

Stephen Semple:

Now, the part that I loved about all of this was, again, he saw a problem, and the problem was he couldn’t make money selling cars new. So he found the loophole, held onto the cars, but he had this unleveraged asset. And the unleveraged asset was, he had cars for six months, and that unleveraged asset now ended up becoming this differentiator that allowed him to move into the car rental business. My cars will always be new, and I’ll be at more convenient locations, I’ll be at the airports. And I just thought that that was really, really brilliant. But the other part is when he went from a small market to a large market and it didn’t work, he didn’t go, oh, the idea doesn’t work. It was the promotion doesn’t work.

Dave Young:

In Miami, you couldn’t open a booth across from the baggage department, baggage carousels because there were bunches of them. It was just too big a space. So you didn’t have that focused attention.

Stephen Semple:

Right, right.

Dave Young:

Not everybody that picked up their bag would be walking past you.

Stephen Semple:

Right. So he went to, where can I get their attention? I can get their attention on the plane. I thought it was just a really interesting that, here’s one problem. If you actually look through it, here’s one problem. Can’t make money selling them new, going to hold onto them, they’re used. Problem number two is I’m holding inventory for six months.

So then why don’t I, oh, there’s this gap in the marketplace where inconvenient locations, poor quality cars, so therefore I’m always going to have the car being new, which is now the model today. Next thing, GM has bought Hertz. So I’m going to do a deal with Ford, opens the door with Ford. Next thing, Hertz has got the train stations in downtown locations sewn up. Oh, there’s this new thing, air travel, I’m going to go there. The pieces of the puzzle that he put together, this guy is clearly very observant, very smart, very determined because any one of those roadblocks could have made you go, stop, stop, stop, stop. Right? I can’t think of one where there’s been that many pieces of the puzzle that was put together.

Dave Young:

And here’s something. I would bet you that Avis was also just the kind of guy that would say, well, here’s something I see. Let’s try this. I’ll bet you there’s a dozen things that he tried that we don’t even know about probably, right? Who did I hear say this? The riskiest thing is in not taking a risk. Not taking a risk is the riskiest thing you can do. So he had some big hits and some great ideas, but I bet he had some others because nobody just comes out of the gate with one thing, and that’s the thing that does it. They try and try again.

Stephen Semple:

True enough.

Dave Young:

And I don’t know what those stories are. I’m just saying that I’ll bet you they’re there.

Stephen Semple:

No doubt. No doubt. Because especially when this many pieces came together, going into Miami didn’t work right away and could have easily have become the, okay, well, for whatever reason, it only works in Detroit. So we know even that one, the initial foray didn’t work and you had to do another pivot on it. So I’m sure there were a whole bunch of other ones. There’s no doubt in my mind. Yeah, you’re very right.

Dave Young:

It’s probably true of so many of the empires that we’ve talked about. You never hear the stories of all the things they tried. So I think that one of the lessons is, man, you just keep looking, keep looking for opportunities and keep trying things.

Stephen Semple:

Yes. And it’s amazing how many times these businesses come from the solving of a problem, right? The problem was this problem, and then the problem was this problem, and the problem was this problem. And it’s either a business problem that needs to be solved like I always love M.M. LaFleur where they had an inventory problem. They’re like, I’m drowning in these dresses. What are we going to do? I can’t make money selling these cars new. What am I going to do? So sometimes it’s solving of a business problem. And other times, like an earlier episode we did on Sesame Street, it’s solving of a different problem. But these empires almost always come out of solving of a problem. A problem the consumer’s feeling, a problem the business has. It’s always one of those two things.

Dave Young:

Yeah, you find a solution to the problem.

Stephen Semple:

And then there’s those rare times that it’s the seizing of a new opportunity that’s created by technology, one of those three. But more often than not, those are almost the rarity ones. Most of them it’s the solving of a problem that’s right there in front of us.

Dave Young:

Yeah. Well, cool story. I’m glad to hear it. Somewhere, I don’t have it handy because I didn’t have a chance to. If you’re listening to this as a podcast, you know that we talked about Hertz a week ago, but we recorded them back to back. So I didn’t have a chance.

Stephen Semple:

Oh, you’ve giving away all the secrets.

Dave Young:

Somewhere, I have a little button. It’s just a little promotional, like a button that you’d wear in your shirt and it’s an Avis button.

Stephen Semple:

Right.

Dave Young:

It says we try harder. We’re number two, so we try. But it’s in Spanish.

Stephen Semple:

Oh, okay.

Dave Young:

So at some point, maybe it’s from the Miami spot. I don’t know.

Stephen Semple:

It could be.

Dave Young:

But I don’t have many little advertising collectible things, but that’s one of them that I have somewhere. I wish I had it on while we were recording this.

Stephen Semple:

That would’ve been fun.

Dave Young:

Well, thanks for bringing us the story of Avis and Hertz. And I feel like traveling somewhere now.

Stephen Semple:

All right, that’s awesome. Thanks, David.

Dave Young:

Thank you. Thanks for listening to the podcast, please share us. Subscribe on your favorite podcast app, and leave us a big fat juicy five-star rating and review at Apple Podcasts. If you’d like to schedule your own 90-minute Empire building session, you can do it at Empirebuildingprogram.com.

Walter Jacobs was an automotive geek. From the assembly line to owning a Ford dealership to Rental Car King. Walter built and Empire.

Dave Young:

Welcome to the Empire Builders Podcast. Teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Simple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is … Well, it’s us. But we’re highlighting ads we’ve written and produced for our clients, so here’s one of those.

[Travis Crawford Ad]

Dave Young:

Welcome back to the Empire Builders Podcast. Dave Young here alongside Stephen Semple, and we’re talking about empires. We’re talking about big businesses that started out as usually smaller businesses. None of them ever start big, Stephen, when are we going to talk about businesses that just started huge?

Stephen Semple:

I don’t know that they’re as interesting,

Dave Young:

But today we’re talking about Hertz Rental Car.

Stephen Semple:

Yes. Hertz Rental Car.

Dave Young:

And in my mind, they’ve always been the big one. They’re the big guy. They’re the top dog.

Stephen Semple:

Well, actually in the market today they’re number two. Enterprise is the largest one, and they’re number two, and then Avis is number three.

Dave Young:

But the Enterprise combined … They conglomerated a bunch of them, right?

Stephen Semple:

Yeah. And there’s even a few that are under Hertz as well these days. None of them are just one banner anymore.

Dave Young:

Yeah. Everything’s becoming one brand.

Stephen Semple:

They’re big. They do over nine billion in revenues in 160 countries, and they’re part of the S&P 600. So they’re a big deal.

Dave Young:

They’ve been big for a while.

Stephen Semple:

They’ve been big for a long time.

Dave Young:

I remember when Avis started, this was back in the Mad Men era. The big idea, the big advertising slogan for Avis was, “We’re number two, but we try harder.” So at that point, Hertz was number one.

Stephen Semple:

Yeah. We’ll find out as we go into the story, Hertz was the first national brand as well.

Dave Young:

Okay.

Stephen Semple:

So they really, and in many ways, kind of created the car rental business as we know it today.

Dave Young:

Awesome.

Stephen Semple:

They were founded by Walter Jacobs in 1918 in Chicago. And as I was saying, today they do like nine billion in revenue. So it’s 1918 in Chicago, and the Model T Ford has been out for 10 years. There’s about six million cars on the road, which is about 60 cars per 1000 people in the United States at that time. So they’re pretty new, but you’ll see a car. They’re not foreign, but they’re not new. It’s kind of at that stage where you’ll see them.

Dave Young:

Sure.

Stephen Semple:

So now back to Walter Jacobs. Walter’s this real car junkie, and he had started out actually working on an assembly line, and now he owns a Ford car dealership. He really sees cars as the future. And when he opens the dealership, he has some sales success, but he runs into a problem. Lots of people are coming in to test drive a car, but they really still see them as a novelty. So if you think about it, there’s no driver’s license. Vehicles are standard, they’re not automatic. And he would take people out for this test drive and it’s kind of exciting, and it’s a thrill, but what he’s finding is that people are coming to do these test drives for the thrill. They’re not really buying, to the stage where people come back and offer him money to take the test drive.

Dave Young:

Do another test drive.

Stephen Semple:

It was almost like an amusement ride for them. So lots of people want to drive, they don’t want to buy it. And Walter looks at it and goes, well, people like the idea of a car. At that point people were still used to getting around other ways, and most really did not need a car for every day. There might be specific need that they have for the car, plus there’s this amusement factor, but they want to experience the car.

Dave Young:

Well, the big box stores had not driven out all the local neighborhood markets yet.

Stephen Semple:

Well, the suburbs hadn’t sprung up. Everything was in walking distance. All of that.

Dave Young:

You could still walk to the store.

Stephen Semple:

He looked and said, “Well, what if I let them rent a car? What if I do that instead?” And there’s a precedent for this because Walter’s dad was a traveling salesman, and when he was on the road, he would rent a horse and buggy. So why-

Dave Young:

I didn’t know you could do that.

Stephen Semple:

I didn’t know that either, but it makes sense.

Dave Young:

Sure it does.

Stephen Semple:

So why not cars?

Dave Young:

My mind is blown just by realizing that back in the day, you could rent a horse and buggy.

Stephen Semple:

Yeah. So why not cars?

Dave Young:

Yeah.

Stephen Semple:

And I thought about it because we would always hear about these traveling salesmen. So of course, how did they get around?

Dave Young:

Yeah.

Stephen Semple:

Right.

Dave Young:

Okay.

Stephen Semple:

So it’s now this new market with new customers, and Walter decides to take all of his money, plus borrows 2,500 bucks and turns the dealership into a rental office. He goes 100% in.

Dave Young:

Not selling him anymore, just renting them.

Stephen Semple:

100%. People thought he was nuts. “People will steal the car, they’ll wreck the car.” Auto insurance didn’t exist.

Dave Young:

Airplanes didn’t exist.

Stephen Semple:

Right.

Dave Young:

He wasn’t near the airport.

Stephen Semple:

So he went all in with a fleet of 12.

Dave Young:

I mean he might’ve been.

Stephen Semple:

Well, hold onto that airport thought for the next one. So he went all in with a fleet of 12 cars and even had an extra fee for self-starting cars. So it was an extra fee for that, so he already was figuring out the upgrade thing, and it was a slow start because people didn’t think of it. And the most common question he had was, did it come with a driver? He decided to call the company Drive Yourself Car Rental.

Dave Young:

Drive Yourself, yeah.

Stephen Semple:

Drive yourself. And he did a marketing blitz. He did posters, he put things in the phone directory. He put billboards on the side of the cars. Word started to spread and sales started to take off. So with this advertising campaign of becoming known, how many months did it take for it to take off, Dave?

Dave Young:

Gosh, I don’t-

Stephen Semple:

What would we tell a customer today if they’re doing mass media advertising on something?

Dave Young:

Anywhere from four to eight, nine months, something like that.

Stephen Semple:

Yeah, the eight-month mark.

Dave Young:

Okay.

Stephen Semple:

The eight-month mark it starts to take off. Now how quickly does it take off? He started with 12 cars, at the eight-month mark started to take off, by the end of the year he has 30 cars and he can’t keep up.

Dave Young:

Okay.

Stephen Semple:

So when it took off, it just like boom out the gate, right?

Dave Young:

Yeah. People have to get used to the idea.

Stephen Semple:

Yeah. So it’s five years in the business, and he gets noticed by a prominent Chicago businessman. John-

Dave Young:

Sorry, I got a question. I got a question first.

Stephen Semple:

Yeah.

Dave Young:

What time of year did he start and when was the eight months?

Stephen Semple:

Oh, that’s interesting. Do I have-

Dave Young:

I’m guessing there’s a change of season. You’d advertise it starting in the spring, and then by the time fall hit and it got a little cold …

Stephen Semple:

I don’t know, because I don’t have the-

Dave Young:

That’s okay. That’s just what’s going on in my head.

Stephen Semple:

That’s a great question, though. That’s a great question. So it’s five years in the business, he’s growing, he gets noticed by prominent Chicago businessman. Guy by the name of John Hertz.

Dave Young:

Okay.

Stephen Semple:

Recognize the last name?

Dave Young:

Rings a bell. Yeah.

Stephen Semple:

So John Hertz had started actually as a car salesman, like Walter. Then he went into taxis and he now has the largest taxi service in the world. Yellow Cab. So John had started Yellow Cab.

Dave Young:

That explains Hertz’s color scheme.

Stephen Semple:

There you go. Bingo. Bingo, bingo. That’s totally it.

Now, the cab business is a hard business. It’s cutthroat, drivers are hard to find, and there’s literally taxi wars going on in some cities. People are actually getting killed in these taxi wars, and the business was successful, but Walter’s kind of a little fed up with it. And so Hertz offers to buy the business from Walter. And the thing that John learns how to do was replicate the cab business in other cities. And this is what Hertz wanted to do with car rental.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Stephen Semple:

And the thing that John learns had to do was replicate the cab business of other cities, and this is what Hertz wanted to do with car rental. He knew how to do that. So Jacobs agrees to sell the business and stays on running the business. And the goal is to become the first national car rental company. And they used franchising, which is also pretty new, and they used what’s called the conversion model. And the conversion model is what was used in the oil industry. So the oil industry would go to an existing mom and pop gas station and say, “Hey, do you want to be a Texaco?”

Dave Young:

Okay.

Stephen Semple:

So what they started doing was going to existing mom and pop car rental businesses and saying, “Do you want to be a Hertz?”

Dave Young:

Gotcha.

Stephen Semple:

And converting them into Hertz. And the new name is Hertz Drive Yourself.

Dave Young:

Hertz Drive Yourself. Okay.

Stephen Semple:

Along comes 1925 and they’re the first to be coast to coast with 1000 locations. So a big deal.

Now, two years after buying the business from Walter Jacobs, Hertz is approached by GM. Because GM’s looking at it going, “This is a great way to actually move automobiles.”

Dave Young:

Sure.

Stephen Semple:

And they offer Hertz $30 million, and he sells. Now, Walter … Now remember these terms because this will become interesting later. Because Walter’s like now, “Holy crap, what am I going to do?” Part of the negotiation was Walter stays on as president. Now Walter really wants to make his mark because he’s now part of GM. He creates a system to connect dealerships and allowing people to rent a car in one location and return it to a different location. So in 1933 he launches this one way rental, and it’s a huge success. The highway system is being introduced, navigation’s becoming easier, travel is increasing, and he notices also a surge in train travel as well. And so he creates another innovation. Car rentals waiting for you at the train station, called Rail Drive.

Dave Young:

That makes sense.

Stephen Semple:

1938, moves into Canada, they become the first international car company. 1941, they’re eyeing Europe, but then war breaks out. And in 1942, all sales of domestic cars in the United States are frozen. So there’s no cars for sale, but he has cars for rent. So demand goes nuts.

Dave Young:

I’ll bet.

Stephen Semple:

But a problem happens that the quality of these cars start becoming poorer, because they start falling apart and you could not get new ones. Now, keep this idea in mind, because our next podcast is on Avis. So I want you to keep this in mind. So it’s 1953, and GM decides to spin off a number of their businesses and just really focus back on the car industry, including Hertz. So once again, Walter’s wondering about his future. But guess who buys it? John Hertz.

Dave Young:

Wow, okay.

Stephen Semple:

For $10.8 million. Remember what he sold it for? 30 million.

Dave Young:

He’s timing the market right there. That’s amazing.

Stephen Semple:

Yeah. And John Hertz plans this huge expansion in Europe, and within five years they’ve got 1000 locations worldwide.

Dave Young:

Wow.

Stephen Semple:

That’s kind of the story of Hertz. But what I found interesting was this whole thing of I’m having a hard time selling cars, but all these people want to drive it. And he was probably smart enough to also, because he connected another thing, the reason why people didn’t want to buy is they couldn’t see themselves using the car on a daily basis. So he connected those dots and went, “I got cars. They don’t want them on a daily basis. Why don’t I rent them? Why don’t I rent them to people?”

Dave Young:

So how did you go get your car if you’re … I guess you rode your horse over and …

Stephen Semple:

Wandered over, walked over.

Dave Young:

And it was before sprawl. Yeah.

Stephen Semple:

Yeah, it was before sprawl and they were in downtown locations. What I found interesting, it would be really easy for business to go, “I’m really frustrated. I get all these people coming in doing this, and they don’t want to buy a car because they don’t see a need.” How can I convince them of the need? How do I educate them, convince them of the need? And instead he went, why don’t I just fill the need? Why don’t I figure out, just fill the need out. I’ll figure it out. And again, what most businesses will go, “Well, people will wreck the car or they’ll steal the car,” and I’m sure what he just did was factor some of that into his numbers as we tell people to do. Most people won’t. Most people won’t.

Dave Young:

We actually call it the knucklehead factor, right? So you say, look, how many people do you think are going to steal the car or wreck the car or damage it? And most business owners will, in their mind, wildly exaggerate that number. Oh my God, I bet half the people wreck the car. It turns out that half the people aren’t wrecking the car, they’re bringing it back because they don’t want to pay for the wrecked car. So you build that knucklehead factor in and plan for it.

Stephen Semple:

You sort of go, okay, if it’s 10% of the cars or 15% of the cars or whatever it is, and if this is what the cost is, you factor that into your rental fee. Yep.

Dave Young:

We’re going to have to replace this many cars that our customers just wreck. And the surprise will be that they won’t, and now your profit is that much higher.

Stephen Semple:

And the other thing is, and that’s called self-insuring. It wasn’t like he was the only one facing this challenge, but he was the only one who went, “Here’s the solution.” And I found that fascinating about the origin of Hertz is that it grew out of people coming and doing test drives.

Dave Young:

Well, I think about it this way too. Look, the old story, marketing story, nobody wants to buy a drill. They need a hole. And they actually don’t need a hole. They need a hook in the wall to hang their coat. So people didn’t know they needed a car. At first, like you said, they knew it was fun to ride in a car. “Oh my God, that was …” Because nobody had done it. There’s something about going faster than you’ve ever gone before, even if it’s 20 miles an hour. That is a thrill.

Stephen Semple:

Thrill. And they would like to have a car once a month to go out and visit Aunt May.

Dave Young:

Or when they do the one way. Oh, you mean I could drive to visit Aunt May and then catch the train home. Or vice versa. Then I don’t have to stare at the same scenery through the train windows the whole time.

Stephen Semple:

Or I’m bringing something back from Aunt May’s, so I’ll take the train there, but it’s easier to bring the stuff back in a car than haul it around on a train.

Dave Young:

And I don’t have to follow the train schedule.

Stephen Semple:

Yes.

Dave Young:

I can stop and dawdle along the way.

Stephen Semple:

Yeah. So to me it was a great observing of the problem. And instead of sort of going, “I need to change consumer behavior,” which is always really hard because he instead changed his business model to fit the need of the consumer, and I thought that was brilliant. And look, it led to the biggest car rental company of its time, and still one of the biggest out there.

Dave Young:

When you’re going into territory that’s unexplored, you cannot rely on asking people things that they … Like, “Would you do this? Would you rent a car?” Why would I rent a car?

Stephen Semple:

And not only that, recognize that you do need to promote it, because you had to put it out there. You had to put it out there.

Now, he was also attaching … The interesting thing. He was also attaching the unfamiliar to the familiar, because you could say, “Rent a car,” and people would get it because they were used to renting horse and buggies.

Dave Young:

Yeah, yeah. Cool story. I love just the problems that he solved with this. That was great.

Stephen Semple:

Yeah. Isn’t it cool? So the next one, so this is rare that we announced what the next one’s going to be. The next one is Avis, because part of the Avis story is attached to the Hertz story. So this is what we’re going to do next. So that’ll be fun.

Dave Young:

All right, I’ll see you … Hit the fast forward button and we’ll see you in the next episode.

Stephen Semple:

All right. Awesome. Thanks David.

Dave Young:

Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90 minute empire building session, you can do it at Empirebuildingprogram.com.

LeNoble has prided itself, since generation #1, that because it is hard to do, it has to get done. Then mastered the how…

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Simple is a marketing consultant, story collector and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[Tapper’s Jewelers Ad]

Rick:

Told you, Brian.

Brian:

Told me what?

Rick:

This is part two of last week’s episode.

Brian:

Oh, yeah. And it was getting good.

Rick:

If you missed it, go back and listen to part one first. Take it away, fellas.

Stephen Semple:

There’s got to be some really interesting, unique challenges to delivering your products and whatnot in Manhattan.

Dan LeNoble:

Yeah, Manhattan, it’s just tough dealing with the congestion, the amount of people and everything like that. It is not an easy place to do it. If it was easy, everyone would do it. But what we’ve spent a lot of time and resources doing are hiring the right people to do the job. And Ben does a lot of our hiring as well as a few other key people in our organization and finding people that want to do it the right way, don’t want to cut corners, don’t want to, I’m going to park the truck on the corner here and they can come find me. Getting good drivers, good yard guys, that’s the world of difference. It’s simple to say no, but how do we get to yes.

Stephen Semple:

That’s interesting.

Dan LeNoble:

And getting those key people has really been, I think that’s what transforms us. I think our people are our single greatest asset that we have. Everyone around us it makes our life that much easier because of their skill and professionalism.

Jessica LeNoble:

Our dispatch team is incredible when it comes to navigating what truck goes where if there was a mistake, how to fix it. And there’s never… I shouldn’t say never, but there’s not a blame game. If I go downstairs and I’m like, “Hey, this happened.” The first thing out of the dispatcher’s mouth is, “All right, what do we have to do to fix it? How do we get this done so that way they’re happy?”

Stephen Semple:

Well, in this dispatch thing, I just want to give some background that people may not realize is in the construction space, in the home services space, I have lots of clients who are in the suburbs of a city, whether it’s Philadelphia or Toronto or Vancouver or Los Angeles, who will say, “Yeah, we do not go into the downtown core because it’s a pain in the neck. It’s too hard. It’s too difficult. There’s all these challenges.” I think both Jessica and Dan, you guys hit the nail in the head. What you’re recognizing is one of your competitive advantages is dispatch. And also people getting that parking around the corner and they’ll find us ain’t good enough. You’ve got, yes, the city’s challenging and you just have to overcome that challenge.

Jessica LeNoble:

We’ve never been outside of the city, so this is what we know.

Stephen Semple:

Right. Right.

Dan LeNoble:

I think also one of the things that is giving them the tools to use, and what I mean the tools in this case is just some of the logistics with trucks. It’s easier to just have these massive tractor trailers that you can load up with however many stops and it just goes on its run. But when you’re dealing with these narrow city streets and you have to make these sometimes, not huge deliveries, having a smaller truck that’s nimble and can actually maneuver gives you a little advantage.

So for a company our size, we’re operating 42 vehicles that range anywhere from little box trucks up to those big trailers and everything in between. So if you need two units of plywood into the city and you’re on a difficult street, we have an 18-foot flatbed that makes it much easier to maneuver than a 53-foot tractor trailer. And what Jess was talking about with the dispatch team is they understand those needs. They have the tools to do the job. We’re just there to support them, give them the tools they need to make the job easier.

Stephen Semple:

You’re like right in Manhattan, are you not?

Ben Bernstein:

We’re one mile outside of New York City in Long Island City, Queens.

Stephen Semple:

Oh, you’re in Long Island City, okay.

Ben Bernstein:

Yeah.

Stephen Semple:

But the fact that your history is New York City, and you guys really understand that, the fact that New York City is big, lots of opportunity, but all of these massive challenges that come with it that you guys know, right, from a DNA level because that’s the history of this business, how much do you think that that is your competitive advantage?

Dan LeNoble:

It’s definitely a huge advantage. Having just grown up in it. It’s what’s ingrained in us.

Stephen Semple:

Right.

Dan LeNoble:

And those challenges with the difficulty of just the logistics of New York City, we understand that well, how can we take those particular set of skills and bring that into other markets where no one else is kind of doing those things? What you were touching on with some of your other customers is we don’t go into the city, it’s too hard. They have a particular way they run their trucks and do everything, we do as well but it’s different. And we like to think that our service allows us to go into these other industries that haven’t been as accustomed to the high quality service that we provide, and that gives us that competitive advantage as well. So it’s taking that DNA of being in the city, being in that rough grind, and how can we take that and go into other sectors where people actually want that kind of service but aren’t accustomed to it from who’s currently servicing those markets.

Stephen Semple:

Right. So when you’re looking at other sectors, so going back to what Ben was saying, where there was a point where you knew you needed to diversify. Part of that diversification question wasn’t just like, oh, I need other services, but what are other services where this stuff that we figured out around the logistics and dispatch and size of truck and getting around and whatnot, what are other ones where that’s a competitive advantage that we can bring is probably kind of how you looked at it? Is that what I’m hearing?

Dan LeNoble:

Kind of. Yeah.

Ben Bernstein:

Yeah. Just to touch on that, I think that even though we’re in Long Island City because of how we are set up operationally, we deliver all the way up to Connecticut, Upstate New York, Eastern PA, Southern Jersey, and all the way out to the Hamptons every single day. And I would argue that we can do that at a more efficient clip sometimes than some of our competitors who are even closer because we’ve set ourselves up, we know what it takes to make these difficult deliveries around the city, and we take that same mindset and we’re able to efficiently get material even farther out, outside of our range.

Jessica LeNoble:

And I think there’s also that mentality of we just have to do it. It’s not, “Oh, this is a hard street to get down. Oh, we don’t want to go into the city. Our customer needs this and we’re going to get it to them.” Because one thing about us is, going back to my grandfather when it comes to one of his biggest actresses was loyalty, a customer calls and it’s not just a voice on the other line. A customer still calls Ben, still calls Dan, even though they’re running the business and we answer and we know them by first name. We know what they need. We know that if they say a certain item that they didn’t really mean that item. Oh, did you mean this? Oh, absolutely. So we want to get our people, not just customers, they’re our people, what they want. So even though logistics does play a role, we just got to get it done.

Stephen Semple:

Awesome. So looking to the future, looking to the future there’s definitely changes happening in the construction industry, changes happening in the future. What do you guys think is your biggest opportunity and your biggest challenge? You’re now the third generation, taking this out to generation number four, what do you guys see as being the big opportunities and big challenges for LeNoble?

Ben Bernstein:

Our biggest opportunity and our biggest challenge is scaling from where we’re at. I think that the way everything we’ve talked about with how we run our people, how the operations department runs, we’ve put a lot of time thought and effort into how the organization is structured, that we think that we’re ready to take that next step into scaling into other areas outside of the five boroughs and all the other areas I mentioned that I think is our biggest challenge going forwards as well as finding talent, finding that next generation to the next nucleus at this company to help bring ourselves to the next level. That’s going to be our biggest challenge going forwards.

Stephen Semple:

So you see the big challenge as being really the people and the talent? The opportunities are out there, if you have the right people and the right talent, you can seize those opportunities is what you’re seeing?

Ben Bernstein:

Yeah. I think that we are a great organization that offers a younger generation, that have been pulled into different industries away from the construction and blue collar industry. I think that it’s left a void here where there’s some real opportunity for those who are in this industry in our generation to really seize that and take this company to the next level.

Stephen Semple:

There’s no question there’s massive opportunities in the trades business. What I find amazing is how many of my customers who’ve got trades businesses that ultimately have realized that to grow, they’ve built their own plumbing school or electrical school or school for fixing heating and air conditioning units because that’s the only way they can find people. They find somebody who’s talented and say, okay, I’m going to train you on how to do this trade. Because I think the educational system is letting people down on that front, unfortunately. It’s also that opportunity. There is a great opportunity for people on that, and when you find them, you can grow them and groom them.

So Dan, what do you see as being the big opportunity and the biggest challenge facing LeNoble going forward?

Dan LeNoble:

I mean, I’ll kind of say exactly what Ben said where fortunately we seem to be very much on the same page for things, which is nice. But yeah, it’s finding that talent and talent doesn’t necessarily mean that they come with a world of knowledge in this business. Yeah, it’s nice, but finding the right person I think is even more important. We can teach the products. We can teach how we do things. But finding someone who in their core has those qualities that you want in your organization, those are few and far between. We’ve been fortunate that we have found some great people like that. Some people that have come in that wouldn’t know a two by four from a sheet of plywood and have now grown so much within the company that they are just integral parts of who we are. It’s our greatest asset and the hardest thing to find sometimes, finding those people.

Stephen Semple:

It’s almost like what I’m hearing you say is your best people are the people where it’s like, “Damn it, yes, the road’s blocked. Yes, this is going on, but this delivery is happening. I’m not giving up. I’m not calling in and going, ‘Oh, I can’t figure this out.’ This is happening. I’m going to figure this out. I’m just that determined.”

Ben Bernstein:

Yeah.

Dan LeNoble:

Yep.

Stephen Semple:

That strikes me as what you’re looking for.

Ben Bernstein:

The people that treat this place like their name is on the door, those are the people that we want in this organization.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Ben Bernstein:

The people that treat this place like their name is on the door. Those are the people that we want in this organization. We’ve been really fortunate to have people who have been with us for a long time. I’ll give an example of our VP of operations. His name is Sal. He’s been at the company for over 35 years. Started as a salesperson, has worn many different hats here, and he’s now the VP of our ops. And he’s in here every morning like it’s Sal Montoro lumber company. It makes no difference to him. He comes with the same passion every single day. He’s done it for 35 years. We’re looking for those types of people. And those are the people that when you get those people, you have to hang on to them and you have to have them grow the company.

Stephen Semple:

And the other thing I want to stress we haven’t talked about, but I know this to be true from the way you guys conduct yourselves, is that care and that determination and whatnot on a delivery because we’ve talked a lot about delivery. But let’s face it, that is also even a greater challenge when you’re delivering this highly milled specialized lumber because a dent doesn’t cut it, right? So it’s not just getting it to the site, it’s getting it to the site and getting it in, in this pristine condition. Because if I’m paying this premium price for this white oak paneling that has been beautifully milled, it’s a bit of a diva that you’re delivering. It’s got to be delivered beautifully and in the right manner at the right time. This is not a rough and tumble product that you’re throwing around here.

Ben Bernstein:

So even just to give another example… By the way, the word I was looking for before that I couldn’t think of was the fine art packing and creating industry that we service.

Stephen Semple:

There you go.

Ben Bernstein:

Great example of what we were talking about is we could be selling dimensional lumber to a fine art packer and to most industries, dimensional lumber, two by fours, one buys, if it has scuff marks on it or if it’s got a footprint on, it’s fine because they’re using it for construction purposes.

Stephen Semple:

Well, they’re using it for framing and it’s going to be hidden anyway.

Ben Bernstein:

Right. But with certain industries like this fine art packing that you might be putting a million dollar piece of artwork in this crate, and so that crate needs to be as pristine as the art.

Stephen Semple:

That’s really interesting.

Ben Bernstein:

We’ll send material to a customer who’s putting exorbitantly expensive artwork in these crates, and if the crate’s dirty, it’s scuffed, if anything is off, we’re getting that material right back. So the training, even our loaders have to be right on point that they know that this is the expectation for what we’re servicing.

Stephen Semple:

Because one could argue who cares if there’s a scuff mark on it, except if you’re putting a $5 million painting in there, presentation matters.

Ben Bernstein:

Exactly.

Stephen Semple:

That’s super interesting.

Dan LeNoble:

The crate has to be as nice as the artwork, as silly as it may sound, that’s the exact thing you were saying.

Stephen Semple:

Yeah. No, I get it. I get it. That’s super interesting. So Jessica, you had started, so we’re having you now anchor this whole thing. What do you see as being the biggest opportunity and the biggest challenge for LeNoble going forward?

Jessica LeNoble:

So for me, coming in and not having been here that long, but living this every day, I think that I agree with the scaling, but for the challenge for us is we pride ourselves on being this family business where we know everybody’s name, we care about everyone’s story. And as we continue to scale, it’s going to be interesting to see how we navigate growing and still being able to make it feel like a family company while also becoming more corporate and having multiple locations and multiple managers. I mean, if you come into this place, our offices, it is one big office. Dan and Ben do not have their own office. I can yell up to them just as easily as they can see me. That’s the way that this business runs, is everyone works together. And I think that the challenge for us is to not lose that while we continue to scale and grow. And I think that just being third generation and seeing how our fathers did it and how my grandfather did it, that that’s the baseline that we want to stick with while also becoming more successful.

Stephen Semple:

Yeah. It’s an interesting part that you bring up, Jessica, because there is a limit to how many people you can know the name of and actually feel this connection to. And different psychologists, sociologists have said, here’s the number limit, we can argue what it is, but there is a limit. And how do you manage and maintain that culture, as you said, when all of a sudden you’re 3 locations and you’re 500 people. But it’s that conscious thought to this is the challenge that helps people make sure that they maintain some of that core identity. So that’s a great observation on your part. It will be a challenge for you guys, that will be one of the challenges for you guys moving forward. And it’s the challenge of any businesses face. We wrap it in the word culture, but culture is kind of identity and core belief. And I always like to say culture is the thing that the employees do when the boss isn’t around. It’s this ingrained thing. And it can be, as a business grows, it can be a hard thing to defend.

Jessica LeNoble:

Yeah, I mean, as of now, the owners also do a lot of the managing. They see everything going on. And so it’ll be interesting to see who we hire, the type of people we hire, like the guys were saying before, when we can’t be at the other location. We do have two other warehouses. We have started that transition and that’s great, but we’re not done. We’re ready to keep going.

Stephen Semple:

That’s awesome. Ben, your perspective, if somebody was wanting to work with LeNoble and you’re speaking to a prospective customer about the benefits of LeNoble Lumber, what would you say to them? What’s the big benefit from your perspective?

Ben Bernstein:

We treat our customers like a partnership, meaning growing your business grows our business. So our goal is to make your job as easy as possible and to add value to your company. We have the products you’re looking for, and we have reliable service to get you them when you need them. If we don’t have products you’re looking for, we’re always willing to source and warehouse the product for you. And in that way, I think our biggest differentiator is we almost act as an extension of your team. And so at the end of the day, that’s how we bring value to our customers, and we really believe that your success is our success.

Stephen Semple:

Well, I think that’s a really interesting thing that you bring up is this whole idea of even if it’s a product you don’t have, so if there’s these 10 things I want to get, and there’s this one that you presently have, you’ll still go out and source that and warehouse that for me so that you can be my one-stop shop. That’s interesting.

Ben Bernstein:

Always. Yeah. We have the connections with vendors all across the world. If it’s a product that you need on a regular basis, we have the space in an indoor facility to warehouse that for you and get it to you the next day like all your other products.

Stephen Semple:

That’s awesome. That’s awesome. Yeah, I can certainly see how that would be a real key differentiator. Thanks for sharing that. How many people are you guys up to now? How many employees are you now?

Ben Bernstein:

We have 130 employees.

Stephen Semple:

So Jessica, yeah, you’re at that interesting point where it’s a large serious business. It’s going to be interesting to watch how you guys evolve and change over the years. Again, hats off to being in the third generation. And what I’m going to say that I’m hearing is you’re carrying forward a lot of the DNA that you inherited. So I am fully convinced that we’re going to be hearing great things about LeNoble in the future.

Dan LeNoble:

Thank you for that. We wake up every day and just try to just do a little bit better than the day before and take those principles that you just talked about and bring them with us in everything that we do. It’s definitely a challenge. But we have the people around us, we’ve had the teaching behind us, and we’re ready to take that next step forward as well.

Ben Bernstein:

Yeah.

Stephen Semple:

All right. Awesome.

Ben Bernstein:

Hopefully, we’ll be on the podcast in a few years and we’ll talk about how [inaudible 00:22:15]-

Stephen Semple:

Let’s do that. Let’s do that and do the update on how you’ve doubled the business in your more locations and you’re 300 people. Absolutely. Let’s do that. All right, I’m going to reach out to Jessica and set time in the calendar now.

Jessica LeNoble:

Sounds good.

Ben Bernstein:

Wonderful.

Stephen Semple:

All right. Awesome. Thanks for your time guys.

Ben Bernstein:

Thank you.

Dave Young:

Thanks for listening to the podcast. Please share us, Subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at Empirebuildingprogram.com.

Jessica, Dan and Ben took on the responsibility of the family business and are driving it into the future. Three more generations please.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is… Well, it’s us. But we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[No Bull RV Ad]

Stephen Semple:

Hey, it’s Stephen Semple here with the Empire Builders Podcast, and we’re giving Dave Young the day off. And in replacement of Dave, I’ve got three really fun people that I know you’re going to love hearing their story, three folks from LeNoble Lumber. And I’m going to let them introduce themselves and tell us a little bit about each one of them because we’ve got me plus three people. So this is a little bit different, but I know everyone’s going to find this an awesome story. So because we’re all really super polite people, it’s ladies first, which means Jessica, you’re up first.

Jessica LeNoble:

I’m Jessica LeNoble. I am the last one to join the business of the three. I’ve been here for almost a year now. Dan, who you’ll meet in a minute, is my older brother. And it’s just great to be here.

Stephen Semple:

All right, awesome. Thanks, Jessica. Well, Dan, you’ve been teed up here now. She teed you up.

Dan LeNoble:

Hi. So I’m Dan LeNoble. I’m vice president of LeNoble Lumber. As said before, Jessica is my younger sister. Ben is also my partner over here. I’ve been full-time with the company for over 15 years now. And just excited to be here as well.

Stephen Semple:

All right, awesome. And Ben.

Ben Bernstein:

Yep.

Stephen Semple:

Now, I know this is a podcast. We can’t see that Ben’s wearing his very special, bright, lime green, fluorescent tuxedo because he’s calling in today from the shop. So Ben, let us know a little bit about you.

Ben Bernstein:

Yeah, my name is Ben Bernstein. I am co-vice president with Dan. I have been with the company since 2013. All of us are just very happy to be here, excited to be on the podcast.

Stephen Semple:

And here’s the thing that I think is really special before we get into things is you guys are kind of in a pretty special place when it comes to businesses in America and the world. The business was established in, if I remember correctly, I think it was 1965.

Dan LeNoble:

Correct.

Stephen Semple:

By Paul, right? And you guys are generation number three, really, to be coming through the business. Isn’t that correct?

Jessica LeNoble:

Yep.

Dan LeNoble:

Yeah, to this company, we’re the third generation, but the three of us, in terms of the lumber industry, we go back even further than that. I know for a fact Jess and myself we’re at least fifth generation in the lumber and I believe Ben is also further along as well. So we’re third generation to this business, but we kind of joke that we don’t have blood, we have sawdust in our veins.

Stephen Semple:

But I don’t think a lot of people realize the success rate of a business still being successful and in the hands of the third generation is really rare. There is actually not many businesses that have managed to do that. It’s amazing how often either the business has rolled up or it’s been sold to somebody else or has been merged with something and has kind of disappeared. But for this to be around and still prosperous and happening in generation three is really, really special. And you guys should pat yourself on the back on that, that you’ve been able to do all of those transitions.

Ben Bernstein:

Well, I think the credit for that really goes to the generations before us that have seen the vision of seeing that, okay, we are in this spot towards the second half of our careers and how do we set up the success of this company for the next generation? A lot of our competitors in the industry, they have not had the setup that we have had with the previous generations really having the foresight to look and prepare us as next-generation owners, getting us intricately involved in the company as a whole and us being able to learn from them has really been what’s been able to have us drive to that next level.

Stephen Semple:

So even before we step back and go into the history of the company, can you tell me a little bit more about what did that look like? How did the involvement happen in terms of what do you think are the key factors that made it successful? So in other words, if somebody’s-

Ben Bernstein:

Right.

Stephen Semple:

… looking to do that transition themselves, what are some of the things that they should consider?

Ben Bernstein:

I think starting from the ground level within the company to really understand what it takes to run each job at the company. For many, many summers, Dan and myself and Jessica, we used to work various different jobs in the yard. And so starting in that yard position, understanding what those guys are going through. And then when we came on full time, we start at a counter job in the office and you learn the ins and outs of what it takes to run that position. And stacking the responsibilities on top of each other, as well as involving the next generation in larger scale planning so that they can start to understand, okay, these are the reasons why we do things, I think that was really what set us up to be successful in the position that we’re in.

And also the generation, they’re still here right now. We are intricately involved in the company, but my father still works at the company. We have another partner, Matt Dienstag, who is still at the company, although he is retiring at the end of the year. Dan’s father, Peter, he retired maybe two years ago, and so he instilled all the principles into Dan before he left and really taught him most of what he knows today.

Stephen Semple:

That’s a really interesting thing in terms of having all sorts of positions inside the business. I have a client of mine, Tapper’s Jewelry, and they’re in the second generation. And Mark, who now runs the company, has often talked about how his first job was sweeping the floors in the jewelry store and serving customers coffee. Right?

Dan LeNoble:

Yeah.

Stephen Semple:

That was his job. Can you get Mrs. Smith a cup of coffee, please?

Dan LeNoble:

Yeah.

Stephen Semple:

Right? But also understanding the importance of that, right?

Dan LeNoble:

I think it goes unnoticed by some other companies just how important it is to have actually done every job, and when you’re asking someone to do something, you know what it actually entails to do that job and be able to work with them and say, “I’ve actually been in your shoes before. I’ve done this work.” And I think that’s-

Stephen Semple:

Right.

Dan LeNoble:

… hugely important and kind of endears you to your employees as well.

Stephen Semple:

That’s awesome.

Jessica LeNoble:

When I first got here, I was really nervous to do anything because I was on the customer end before, I was one of their customers. And then I came in and all of a sudden, I had to do all these things that I had never done before, and I went to my brother and I said, “Dan, can you do this or can I ask someone to do this? Who normally does this?” And he is like, “Well, you do now. You can’t ask anyone to do anything that you can’t do.” And that really set me up for how I view everything in this job.

Stephen Semple:

That’s interesting. But here’s the other interesting perspective that you bring. For a while, you were the customer. But that’s even interesting being the customer for a little while and now being part of the business. Even that’s good, bringing that perspective of what are customers really looking for. That’s awesome.

Jessica LeNoble:

Definitely.

Stephen Semple:

Yeah. So what’s your role today, Jessica?

Jessica LeNoble:

I’m a little bit of customer service. I’m a little bit of learning what these guys are doing. But for the most part, I’m on the ground floor with the sales reps and taking orders.

Stephen Semple:

All right, that’s awesome.

Ben Bernstein:

Jessica’s also been… I think we are involving Jessica as much as we can, knowing what a huge part of this company she is and will continue to grow into that larger role that Dan and I have developed over the years. It’s always, we are involving her more and more so that she’s understanding. It’s not just us telling her something. It’s really, involving someone, it makes them understand everything that you’re trying to do a lot easier than just trying to tell someone something or show them something. When you involve them in the decisions, it allows them to understand. And that curve that Dan and I had to go through, hopefully it’ll be shortened for her if we can involve her more from the beginning.

Jessica LeNoble:

Fingers crossed.

Stephen Semple:

That’s awesome. Who wants to take the responsibility of talking about the early days? What is it that led Paul to starting this business and how did the business all start way back in 1965?

Dan LeNoble:

So I think I’ve been dubbed the historian of this group, so I’ll take that on.

Stephen Semple:

All right, over to you, Dan.

Dan LeNoble:

The short version of the history is Paul used to work for his grandfather and his uncle at another lumber yard. And after his grandfather’s passing and his uncle taking it over, they just weren’t seeing eye to eye and things became very contentious between them. And Paul said, “You know what? I’ve been running this business essentially by myself and I’m going to go out on my own and I’m going to start LeNoble.”

And the company that he once worked for disappeared and he flourished. He started as a one man, a desk, and a station wagon, and did everything himself, whether it was taking the order, loading the truck, driving it, the paperwork. Everything associated with, he had his hands involved in every aspect because he was a one-man show. And he took those kind of ideals and that hard work and started growing the company slowly and slowly from there and finding people of like mind that just wanted to put in an honest day’s work and do everything to try to improve the company.

So he had been in it for quite some time, knew all the ins and outs, but saw a lack of management and top-end skill and said, “I can do this better. I’m going to take this on myself,” and started from there.

Stephen Semple:

Cool. Now, one of the things I noticed looking at your guys’ history was when it started, it started in Hell’s Kitchen, which I think in 1965 New York was not a great neighborhood.

Dan LeNoble:

Yeah. Far from it.

Stephen Semple:

I think maybe the name gives that away a little bit.

Dan LeNoble:

Just a little bit.

Jessica LeNoble:

It was interesting.

Dan LeNoble:

I mean, even dating back into the ’90s, I remember our old place used to be spread out on 52nd Street amongst one building here and a building up the block and a garage here. And I’d be in work with my dad and he’d be in the office and goes, “Well, go up the block and help them pull this. But don’t go up there by yourself.”

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Dan LeNoble:

I’d be in work with my dad and he’d be in the office and goes, “Well, go up the block and help them pull this, but don’t go up there by yourself.” He’d [inaudible 00:13:02] at me standing at the door, watching me, and call someone, “Hey, make sure he makes it there,” and it’s a 200-yard walk. It was not a great neighborhood, but the area’s now completely changed. It’s actually really magnificent area, what they’ve transformed it into. But that kind of gave us our grit and grind at the same time. It wasn’t a great place to be. It gave you that drive to want to do better. So everything that we’ve been through in the past to get here kind of shaped who we are today on some level.

Stephen Semple:

So what do you think in the early days led to the success? And then I’m going to be asking you a little bit about the motion picture business. Before that, what do you think is the key that really made Paul successful? And I think there was also… I guess it was quite a bit later that Peter came into the business, but beyond the determination [inaudible 00:13:50], is there something that you can look at and say, wow, this is the thing that really set you guys apart from the competition?

Dan LeNoble:

So there’s a few ways I can touch on that. You touched on… I think his determination was one of his big factors and just frankly being a fairly decent person to be around. He always treated the person who was out there in the sun on a hundred degree day, loading that truck, covered in sweat, the same as the CEO of any other company. He just treated people well and expected what he’d expect to have himself, honest day’s work, and he’d get down there with them.

But there’s other things also, I would say. Just making smart moves amongst the people that he aligned himself with. So for instance, in the early ’90s is when Ben’s family’s business merged with LeNoble and we fell into the LeNoble name. And bringing in Ben’s father, Mark, into the fold definitely transformed who we were. It gave us a completely different revenue stream and the customers they serviced, different attitudes towards things, that willingness to listen to certain things, and just explore those options and see where we could go with those. I think those were some of his keys. And I think what he did was laid out just a great foundation. And everything starts from your foundation. You can’t build a successful business on rubble.

Ben Bernstein:

Right. Yeah. I’ll add to Dan’s point about that in regards to Paul. I think his number one attribute was his leadership, his lead by example mentality. He was not afraid to get his hands dirty at all. People could work for Paul for 20 years and they’d say, “I’ve never seen Paul sit at a desk,” to the point that I think in 52nd Street, he actually didn’t have a chair or he didn’t have a desk. I don’t know what the story was. He didn’t have a chair or he didn’t have a desk. He never sat. The guy was moving, involved in everything, and he led by example. And so when the top of your organization is leading by example, it shows everyone what the goal is and people follow that lead. It goes from there.

Jessica LeNoble:

And he still does, by the way.

Stephen Semple:

That’s awesome.

Jessica LeNoble:

He comes in once a week and does his rounds in the yard and the dispatch office. The man is 92 years old and it still feels like a family business where our grandfather comes in and greets everyone, knows everyone by name. He really did a number when it comes to loyalty. He’s loyal to his people and they’re loyal to him.

Stephen Semple:

That’s awesome.

Ben Bernstein:

People that have never worked for Paul, Paul had already been retired, they see him walking around. They have immense respect for him, never having technically worked under him. They understand where he comes from and they understand the mentality he brings and that his name was on the door first. And they respect that and they bring that mentality to their work.

Stephen Semple:

Especially today where we take a look at in the space of trades and construction work and whatnot, it’s harder and harder and harder to find people and retain people that, look, this is really important, that type of field, that type of culture, because what I’m going to guess is that what you’re telling me is there’s probably pretty high retention amongst your people.

Ben Bernstein:

Absolutely. We say we have hundreds of years of experience in this company and it’s a hundred percent true. We get people in this organization, they develop close relationships with their coworkers, and it facilitates a great work environment. And for that reason, we’re able to retain people for a long time and they just grow to be basically family members here to us.

Stephen Semple:

Well, and I think especially where you guys are also now doing some interesting work in some places that require a higher skill set, what I found interesting was in the ’70s, getting into doing some movies. I love the fact you’re in The Producers and the Godfather. Pretty cool projects. So how’d you guys end up becoming a supplier to the New York Motion Picture and television and I guess probably now Broadway industry?

Dan LeNoble:

So that dates back to originally when my grandfather was working for his uncle and grandfather, they dealt with those clients and he understood their needs. They are some of the best customers to have, and simultaneously the most demanding customers, but not in a bad way. In the sense that to produce a TV show, they have seven to 10 days to shoot each episode. That’s from building the set to scenicing the set, actually putting the actors on it, and shooting the whole thing. Seven to 10 days is not a lot of time. So when you get those drawings to build a set, you need material yesterday.

Stephen Semple:

Yeah.

Dan LeNoble:

And the way they run their budget sometimes doesn’t allow them to just have material lying around. So he’d get a call 7:00 in the morning, “Hey, we have to build this townhouse. I need a thousand sheets of plywood this afternoon or tomorrow morning.” And the only question that we would have is, “Well, do you have a forklift there or you need us to bring one for you?”

Stephen Semple:

Right. But there’s an interesting thing, even recognizing that that question needs to be asked. Right? It would be easy to go-

Dan LeNoble:

Yeah.

Stephen Semple:

… “Okay, I’ll show up with the lumber.” And then, surprise, there’s not a forklift. But yeah, those are tight timelines. Those are difficult things. It was interesting. I was listening recently to a Freakonomics podcast on the economics of Broadway plays. And holy smokes, it’s $30 million to produce a Broadway play today. I was like… I was flabbergasted on what they spend on sets. Like, holy crap.

Dan LeNoble:

It’s astounding what they pour into it and what they will do in a span of weeks. I mean, they will take an empty show of a stage and build everything from the Met Museum, to a townhouse, to tenements, and everywhere in between. Actually, Jess, you could probably speak a little bit more about this because you were on these sets, this was your former career.

Jessica LeNoble:

Yeah, I dressed movies and TV sets for 10 years before I decided to come to the family business.

Stephen Semple:

Oh, wow. Okay. So what am I talking about? You’re the expert in all of this stuff.

Jessica LeNoble:

Well, my job was to come in after all the sets were built, but I watched it happen. I was responsible for once these guys deliver the lumber, they set it up into a set. I came in and I basically decorated it. And one thing that’s interesting is when you hear LeNoble Lumber, you think, “Okay, wood.” But it’s not just wood. We go so beyond that, that we provide almost everything to create the set aside from the furniture. If you want a faux brick wall, we have the faux brick for that. Even though it’s not considered lumber, we provide that. And there’s a bunch of other things here, and we’re continuing to grow our product lines and figure out what the needs are to really make it that you can one-stop shop at our place.

Stephen Semple:

So your goal is that… Because the other thing I noticed is you do things like museums and department stores, and do you also still do residential or is it all in the commercial side of the business?

Jessica LeNoble:

So super interesting, and I think Ben can speak to this because the movie industry has had a tough time the past few years. We’ve expanded quite a bit. And Ben, do you want to go into that?

Ben Bernstein:

Yeah. When I started 11 years ago, and I’ll even go further back to before I came on board, the movie and TV industry made up roughly 30 to almost 50 or 60%, ranging by year, of our revenue. And what we quickly realized is it’s dangerous to have all of your eggs in one basket. As amazing as the movie and TV industry is in this area, and it’s growing every year and the benefits of that, we needed to diversify ourselves.

So my father, Mark, he went out and started try to find other industries for us to diversify ourselves into. For example, we weren’t doing much with high-end architectural panels; the walnut, the teak, the white oak panels that you would see in office buildings and in department stores. We didn’t really do any of that work. And we decided to hire some people with various histories in that industry and grow that business to a huge part of what we do today is high-end architectural panels. We’re probably one of the top distributors in New York City for that material.

And then a few years ago, we decided, aside from the fabrication companies and the carpenters and the various customer bases that we sell, we also were not really high in the new construction business. So we went out and made a big investment into new boom trucks, more space, and we started to diversify into new residential construction in New York City, which we previously had dabbled in, but just in a controlled way. And now we’ve really opened ourselves up to be a real player in that industry.

So we’re trying to pepper ourselves all over New York in various ways to have our hand a little bit in everything. And for that reason, we’re just trying to bring the customer added value.

Stephen Semple:

Yeah. And there’s got to be some really interesting, unique challenges to delivering your products and whatnot in Manhattan.

Bob:

Oh no, no.

Rick:

What?

Bob:

I was enjoying this episode.

Rick:

Don’t worry. Part two’s coming next week.

Bob:

It better.

Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big, fat, juicy, five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute empire building session, you can do it at empirebuildingprogram.com.

Starbucks was having a students going home issue and needed to keep selling coffee, so they copied and perfected as Seattle treat.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us. But we’re highlighting ads we’ve written and produced for our clients, so here’s one of those.

[Maven Roofing Ad]

Dave Young:

Welcome back to the Empire Builders Podcast. I’m Dave Young alongside Stephen Semple. And man, this topic takes me back. I feel like in the early days of the Empire Builders Podcast, we talked a lot about coffee and coffee products.

Stephen Semple:

We did. We did.

Dave Young:

And today, you told me we’re going to talk about Frappuccino.

Stephen Semple:

Yes.

Dave Young:

And my big question is is that a brand?

Stephen Semple:

No, it’s a name. It’s a product name. And it’s actually owned by Starbucks. And yep, Starbucks, I looked this up, Dave, guess what episode Starbucks was? Guess how far back we got to go?

Dave Young:

I don’t know, single digits?

Stephen Semple:

Yes, episode five. It’s like four years ago we talked about Starbucks.

Dave Young:

And they own the word Frappuccino?

Stephen Semple:

They own the word Frappuccino. No one else can use the name. They didn’t create it. And it’s funny, when I learned this, I went, “No, no, no.” Because Tim Hortons and things like that, they use Frappuccino. And then I noticed they don’t. It’s called things like frozen caps or frozen cappuccinos. No one actually uses the name Frappuccino, even though in my mind they did.

Dave Young:

I feel stupid. You don’t hear why?

Stephen Semple:

Why is that?

Dave Young:

It’s a portmanteau of frozen and cappuccino. I never figured that out before.

Stephen Semple:

Well, it’s actually not quite that.

Dave Young:

Isn’t it? Okay.

Stephen Semple:

No, it’s going to be something a little bit more interesting. You’re close, but it’s a little bit more interesting than that.

Dave Young:

Okay.

Stephen Semple:

So it’s kind of an interesting story, and it’s a huge category in Starbucks. And in fact, when the idea was first introduced to Howard Schultz, he hated it. He was like, “No, we’re not doing this. I’m a coffee purist. We’re not doing this frozen drink thing with the star and all this other crap.”

But our story actually starts with the relocation of George Howell from Berkeley to Boston in the early-1970s. Because George is a real coffee nerd. I mean real coffee nerd. There’s stories of George pulling into a diner and wanting to have a coffee and smelling the burnt coffee in the diner. And basically, he’ll ask for a pot of hot water and he’ll pull out his beans, pull out a coffee grinder, and his French press, and to start to make coffee. And people would gather around, like, “What the hell are you doing?”

Dave Young:

To show them how to make coffee.

Stephen Semple:

Yeah, exactly. Exactly. So it’s the 1970s, and there’s not much of a coffee culture yet in United States. But there was in Berkeley, which he just left. And Berkeley was kind of ground zero for the coffee culture in the United States.

Dave Young:

I see what you did there. Grounds, zero.

Stephen Semple:

I didn’t even think about that. And he’s moving to Boston. Now, ironically, Boston is kind of the starting point for coffee consumption in the United States, but it’s really still not good coffee. George wanders the Boston area visiting literally every cafe and ordering coffee, and it’s terrible. He tries all of them, and he’s continually disappointed. And George not only misses coffee, but the culture of coffee, hanging out to have a coffee. So he asked himself a question. What if I brought the West Coast coffee culture to the East Coast?

Dave Young:

Okay.

Stephen Semple:

Now here’s an interesting sidebar. So if you go back to episode five where we talked about Starbucks, Howard Schultz brought the Italian coffee culture to the West Coast. George now wants to take it to the East Coast. It’s interesting, right?

Now, Roy Williams, the founding partner of the Wizard of Ads, he often would talk about how in the United States, with the exception of Detroit, that culture happens on the coasts. It happened on the East Coast, and the West Coast, and Detroit. Typically in the middle of the United States, it’s not where you get cultural movements. Cultural movements in the United States happens on the coasts, which I thought was interesting when we took a look at this.

So Starbucks started as a wholesaler. It was later that Schultz added this concept of the third place, which actually happens in the early eighties. So in many ways, George is even ahead of this curve, which tells you just how specific it was to Berkeley. So George Howell is ahead of them. 1975, outside of Harvard, George opens a coffee shop called Coffee Connection. And it has art, and cushion benches, and all of those things that Howard Schultz brought to Starbucks, but Howard discovered the idea when he was in Italy. So it’s kind of interesting that there’s these parallel things going on.

And Howard plays around with pioneering single origin sourcing in the terre noire to coffee, and he’s mirroring the wine industry around this whole idea. And has higher prices and students become his top customer. And I always find this interesting because so often, Dave, you and I hear this, somebody will be coming out with a premium priced product and they immediately go, “Well, I have to market to the wealthy because this is premium priced.” And how often do we see premium priced things don’t have to be just sold to rich people? I get it. If it’s a Ferrari, yes. But you know what? If it’s a nicer vacuum cleaner, no. If it’s a nicer coffee, no. Students are his customers and they’re not wealthy dudes.

So it’s the mid-eighties and he starts opening other locations. He’s now up to 10 stores. But he’s got a problem. His number one customer are students. Students go away in the summer. Sales fall. He’s got a problem.

Dave Young:

And eventually they go away for good.

Stephen Semple:

That’s even another problem. But he really noticed this as whole issue where sales fall. And it’s funny, I experienced that when I was in university. When I was in university, myself and a couple of other guys had a DJ business. Now we grew this business so it did well north of a million in sales. We had 30 people working for us. And we did dances at high schools and universities. We didn’t do the wedding thing. And right when our staff were off for the summer, we had no sales. So what did we do? We would go in Canada, every small town has got a hockey arena. So we would go to these hockey arenas and you could rent them for nothing. And we would rent the arena, and we put up posters around town and we ran our own events through the summer.

Dave Young:

Just have a dance.

Stephen Semple:

We would run a dance. And it became popular enough that eventually Pepsi came along and sponsored us.

Dave Young:

Nice.

Stephen Semple:

So Pepsi ran it. But it’s that whole idea of students go away, what the heck do you do? So George is looking at this going, “I’ve got a problem. I need to look for an idea.” So he decides to travel to Seattle to see what’s going on in Seattle in the coffee business because Seattle is kind of the coffee crown in the United States. So George goes to Seattle to find inspiration. And when he’s there, he comes across a barista who’s making a frozen cappuccino in a slushy machine.

Dave Young:

In a slushy machine. Okay.

Stephen Semple:

In a slushy machine. George orders one. He’s like, “It’s cold, it’s refreshing, has this rich coffee taste.” He goes, “Wow, it’s just strong coffee, sugar, and ice.” He’s like, “This is amazing.” He tries to make it at home, and it keeps coming out as kind of this slushy mess. So he decides to figure out how to make this better and more scalable, and he spends a year making this right. And the problem was the machine. He found that if you used a frozen yogurt maker, it did a better job.

Dave Young:

Okay.

Stephen Semple:

But it needs a name. This is New England. In New England, guess what a milkshake is called?

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off, and trust me, you haven’t missed a thing.

Stephen Semple:

But it needs a name. This is New England. In New England, guess what a milkshake is called.

Dave Young:

Is it a frappé? A frappe?

Stephen Semple:

Well, not a frappé because it’s New England.

Dave Young:

Yeah, a frappe.

Stephen Semple:

A frappe. So blend cappuccino with milkshake. So you were so close, Frappuccino.

Dave Young:

Still the portmanteau, I think is how you pronounce that.

Stephen Semple:

Yeah, but you were so close on the combining, right? And it’s combining the familiar with the unfamiliar. Because people go, “Oh, it’s like a coffee milkshake.”

Dave Young:

And I’d like one of those in the summertime.

Stephen Semple:

Bingo. And so he hands out two-for-one vouchers because he wants sampling to happen, and it takes off. And not only that, it’s a hit with people that don’t normally drink coffee. It expands their business, and it broadens the base beyond these purists.

So back to Starbucks. So Starbucks at this time is focusing on building an empire. They now have coffee shops and they’re really starting to scale. When Howard Schultz started with Starbucks, there were five locations with only one serving coffee. And by 1992, they’re publicly traded with 165 stores.

And enter Greg Rogers at Starbucks, 1994, and he is a barista by day, comic by night. And business at Starbucks is slow in the summer as well. Starbucks runs into the same thing. And it’s not because of students being away, it’s just people drink less hot coffee in the summer. And Greg remembers working at a frozen yogurt place in the summer, and it’s super busy. So he asks his boss, “Can I get a machine to do some experiments?” And they start creating these frozen coffees and giving it away as free samples to get feedback, and starts to change, based upon the feedback. And manager gives him permission then to start selling it in the store. And it becomes 40% of their sales in August is this frozen coffee concoction.

And people start asking for it at other locations in Santa Monica. And Greg starts training other baristas. And the regional manager eventually comes across it, loves it, calls to Schultz and says, “Hey Howard, we should do this frozen coffee thing.” And Howard says, “Hell no.” It’s 1995, there’s 400 stores, this frozen drink is still being offered, and now is starting to be offered in LA just because of word of mouth on it, and it’s gaining popularity. And finally, Howard says, “You know what? We got to roll this out nationally. There’s something to this. But we need a name.”

At this time, George, who’s back in Boston, is struggling because he never wanted to be big, but he saw Starbucks coming. Remember, his whole thing is I just want to create this little coffee culture thing.

Dave Young:

Yeah, this space.

Stephen Semple:

And he saw Starbucks coming, and what he knew he needed to do is get big and established before Starbucks hits. So he got funding, he went from 12 stores to 20 stores, and he realizes his heart is not in running a coffee empire. It’s sampling beans and it’s really the beans that he loves. So when Starbucks comes knocking, he sells to Starbucks for $23 million. And George uses that money to start a wholesaling business, because that’s really where his love and his passion was, the beans and the wholesaling. So now Starbucks has an extra surprise in their hip pocket because when they bought George, what else did they get?

Dave Young:

Frappuccino.

Stephen Semple:

The name Frappuccino. Problem solved, Howard. We’ve got a name.

Dave Young:

That’s great.

Stephen Semple:

And so it was originally just two flavors. They changed a little bit of how to make it so it was more scalable, how to do it with a blender so it was easier to scale, easier to customize. And when they launch in the first week, they do 200,000 drinks the first week, 400,000 the next week, 800,000 the next week. After a year, they’re doing $52 million in sales of Frappuccino, which is 10% of the revenues.

Dave Young:

Wow.

Stephen Semple:

1996, they come up with a bottle version. 1999, they start adding flavors with the dome lid and the whipped cream, and it ends up becoming a major, major, major part of the Starbucks business is the Frappuccino.

Dave Young:

All because this guy couldn’t figure out how to sell some coffee in Harvard in the summertime.

Stephen Semple:

Bingo. And that’s what my favorite lesson was, was looking at this decline in the summer, and instead of going I have to convince people to buy more hot coffee in the summer, what can I come up with that actually somebody will want in the summer. He realized that to fix the problem, he needed to actually do something different. It wasn’t about educating the consumer that coffee’s still really enjoyable in the summer, it was create something different, create something that is more of a summer drink. Now the weird thing is Frappuccinos sell year round now, but it started off as being the solving of the summer problem.

Dave Young:

Yeah, cool story. It brings us back to the old Starbucks episode.

Stephen Semple:

Way back in episode five.

Dave Young:

Way back then. I probably edited that one back when I was doing that.

Stephen Semple:

You actually did. You actually did.

Dave Young:

I love telling people, “No, really all I do is show up.” That’s my role.

Stephen Semple:

Yeah, Dave, it was fun because I think it was the first, it was certainly the first ten, but I think it was the first dozen that you did because a lot of the format and how this was done was you and I working together to create that. And once that got locked down, it was like, “Yeah, Dave’s not doing any more editing. We’re going to outsource that.”

Dave Young:

Yeah. I’m an old radio guy, so it’s like I know how. I just don’t.

Stephen Semple:

Look, it’s not your passion. And this is an interesting thing. I’m going to go on a podcast sidebar here for a moment because I get lots of people asking me about podcasts and doing a podcast and things along that lines. And what I’m always saying to them is, “You got to think about this from the perspective of if I’m going to do this, I want to be doing this on a continual basis.”

So let’s say it’s three years, and let’s say you’re doing it weekly. Well, that’s 150 times. We’re north of 200 now. It’s got to be sustainable. And the only way it’s sustainable is it’s got to be enjoyable, which is the reason why, Dave, you don’t do production. You could, but you don’t enjoy that. There’s a certain point, no matter how dedicated you are and how much you care about it, there’s a certain point where you would’ve tapped out because it would’ve just been exhausting to you.

Dave Young:

Yeah.

Stephen Semple:

Like the thought of editing another podcast would’ve been like, “Man, I really don’t want to do that.” And that’s then when it becomes taxing, and that’s then when it falls off. The reason why you continue to have a passion for this is that what we’ve done is engineered this to keep you in your fun zone.

Dave Young:

Yes, yes.

Stephen Semple:

No research, show up, and just be Dave.

Dave Young:

I like doing that.

Stephen Semple:

Right.

Dave Young:

Yeah.

Stephen Semple:

So now instead of it being a taxing thing, it’s something where you go, “Oh, this is going to be fun. This is going to be fun. I get to just be me.” And I think when people launch these things, they don’t give that enough consideration.

Dave Young:

I agree. I agree. Creating content is not easy.

Stephen Semple:

No.

Dave Young:

There’s something that’s super easy about doing what I consider to be sort of live content, and that’s my role in this is show up. And so as far as I’m concerned, this is doing a morning show on the radio live. Because if you’re on the radio doing it live, you’ve got some prep to do, you need to plan a little bit. You don’t have to go back and edit it because it was live. And that was always the fun part to me.

Stephen Semple:

And here’s something that’s really interesting. This almost parallels our story of George Howell. Because if you think about it, George started his thing because he wanted that coffee culture and he had this love of beans. Then he saw Starbucks coming and he had to become bigger to defend his position from Starbucks. And then he just suddenly realized this is not what I want to do.

Dave Young:

This is not what I want to do.

Stephen Semple:

So sold to Starbucks and then went and followed his passion. But good for him in terms of following the passion and recognizing, no, this is the thing I actually want to do. I don’t want to actually run this coffee. I don’t really want a coffee empire. I want to just do my thing with beans. Cool.

Dave Young:

Good lesson. Good lesson. Well, thank you for the Frappuccino story, Stephen.

Stephen Semple:

There we are.

Dave Young:

We’ll talk to you next time.

Stephen Semple:

All right. Thanks, David.

Dave Young:

Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.

Using TV addiction to educate children. Sesame Street broke boundries and changed rules to bring education to every child.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is… Well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[Seaside Plumbing Ad]

Dave Young:

Welcome back to the Empire Builders Podcast, the podcast where Stephen Semple and Dave Young, that’s me, Stephen Semple is him, we talk about businesses and how they grew and what made them empires. And normally during our little countdown to the recording, Stephen hands me the topic. He whispers in my ear what we’re going to talk about today, and he didn’t do that. So I still have no idea, but my enthusiasm is high because before we started recording, he said, “I’ve got some really good ones that we’re going to record today.” I’m thinking, “Finally. Finally, some good…” No, I just, they’re all good. But you’ve got me on the edge of my seat, Stephen. You said I would be able to get this without the timer, without the countdown.

Stephen Semple:

That’s it. So it starts off this way, “Can you tell me how to get, how to get to…”

Dave Young:

Sesame Street? I can sing it.

Stephen Semple:

Yes, that’s it. Well, I could sing it as well, but no one wants to hear me sing.

Dave Young:

Sunny day, dah, dah, dah. Oh, yeah. Oh, Sesame Street.

Stephen Semple:

Yes.

Dave Young:

Cool.

Stephen Semple:

Yes. We’re going to talk about Sesame Street. Now-

Dave Young:

Are we going to do voices?

Stephen Semple:

You might be able to.

Dave Young:

Here’s the countdown, 5, 4… Four countdowns. Three. I don’t think The Count did countdowns, did he?

Stephen Semple:

No, he never did, I don’t think. But it’s a nonprofit. It’s owned by a nonprofit.

Dave Young:

[inaudible 00:02:59].

Stephen Semple:

But a 1996 survey found that 95% of all American preschoolers had watched it by the time they were three years old.

Dave Young:

Sure. I believe that.

Stephen Semple:

Ninety-five percent. Now, when you hit a number like that, holy crap. I started looking at some of these things and went, “This is a story that we’ve got to explore.” So Sesame Street first aired on November 10th, 1969 on Public Television. And put in perspective, that’s the year that a man landed on the moon. That’s what we’re going back to.

Dave Young:

So here’s the funny thing, I wasn’t even a preschooler. I was six. I’d watch it today if it was still on.

Stephen Semple:

It’s amazing.

Dave Young:

All the Spanish I know came from Sesame Street.

Stephen Semple:

There you go.

Dave Young:

I can count to 10.

Stephen Semple:

There you go. Amazing, eh?

Dave Young:

Yeah. So 1969…

Stephen Semple:

It changed television. And it’s estimated that it’s contributed to the education of over 150 million kids. It’s the home of Elmo, and Tickle Me Elmo is one of the best-selling toys of all time, and all this was created and owned by a nonprofit. And the creators were Joan Cooney, Lloyd Morrisett, and of course, Jim Henson was a big contributor in the early days. And Joan was a documentary TV producer for Public Television. And the story basically starts in 1966, and Joan Cooney had just completed a documentary on a school in Harlem that was trying to close the gap in results with white counterparts.

And if you think about it, in the mid-1960s, a lot is happening. The Civil Rights Movement is in full swing, but there’s still this big gap. And Black first-graders are scoring lower on tests than 85% of white kids. There’s this definite gap, and this leaves them a full grade level behind by age six in terms of education standards. So Lloyd is a friend of theirs, and he’s a child psychologist, and he’s also the VP of the Carnegie Corporation, which is a nonprofit dedicated to learning. And basically, he handles the foundation grant money to schools. And the challenge that he’s feeling is that each grant is just really reaching a small group. It’s not scaling and it’s not having the big impact that he would like. So it’s 1966 and more people have televisions than bathtubs or telephones. Kids are watching 55 hours a week, and Lloyd tells the story of his daughter getting up and watching the test pattern. There’s nothing on television. The television is on, and there’s the test pattern. Remember those days, Dave, of the test pattern?

Dave Young:

Oh, dude, you’re taking me back. I would watch the test pattern just wishing that there was something on. It was better than the snow that happens before the test pattern even comes on.

Stephen Semple:

That’s it. That’s it.

Dave Young:

Kids don’t know what we’re talking about.

Stephen Semple:

They have no idea. You’ll have to Google it. So kids from low income are not getting preschool, but they’re getting addicted to television. So here’s where it gets interesting. At a dinner party, Lloyd asked Joan this question, “What if the second problem, TV addiction, could be used to solve the first problem, the education problem? What if TV could be part of the solution? Can TV be used to educate children?” And they talk about this and they decide, “Yeah, it can.”

So they set up the Children’s Television Workshop and dedicate themselves to creating a new show. They want to create one-hour-long show that’s going to air on Public Television nationwide that’s geared towards all kids, but really geared towards all kids ages three to five. And because it’s aimed at kids of that age, it’s kind of got… The kids have a short attention span, right? So instead of modeling it after the television shows of the day, they decided to model it after popular magazines. So instead of it being one long arc like television, which tells a single story, it would be many short segments like a magazine.

Dave Young:

Honestly, I could trace a line that leads from this to Saturday Night Live.

Stephen Semple:

Well, that’s interesting.

Dave Young:

Because skit television, you said they didn’t model it after anything on TV, but I think plenty of things on TV saw the success of Sesame Street and modeled shows after it.

Stephen Semple:

That’s a very interesting observation.

Dave Young:

Recurring characters, probably as early as shows like Laugh-In, right?

Stephen Semple:

Yeah.

Dave Young:

That’d be a fun one to go down.

Stephen Semple:

That’s super interesting. But they went out there. Again, that’s one of these things of modeling something after something else. They didn’t look at television programs. They looked at popular magazines and they looked at, “Wow, there’s these many short segments, and that’s what we should be doing.” And it had not been done before on television. And they wanted to make it fun to watch with education. So the fact that they wanted to make it fun to watch with education meant Joan went out and hired academics to create the curriculum and TV folks to deliver the content in an entertaining manner.

And of course, the two groups did not get along. The academics were wondering, “Well, why are we worrying about all these jokes and all this entertainment? We’re just trying to get the kids to be able to count. Why are we spending so much time in the jokes?” Meanwhile, the creatives are going, “The jokes are the purpose to keep kids engaged. And what we really need to do is reduce the amount of curriculum so that we have room for the jokes.” And so there’s this constant tension between the two. So enter Jim Henson. Now, Jim Henson, as a kid, grew up obsessed with TV, and he wanted to get on television, but he couldn’t sing, he couldn’t dance. He had these acne scars. So he taught himself puppeteering because he wanted to get on TV. But he invented characters that were a mash-up of a puppet and a marionette. Hence, the name Muppet. Right?

Dave Young:

Yeah.

Stephen Semple:

So in 1955, while he’s still in college, he actually was making content for local television. He had national appearances on the Today Show and Ed Sullivan that predate Sesame Street, he also created Muppets for guess what? Guess what industry he did Muppets for before Sesame Street.

Dave Young:

Oh, gosh. I don’t know.

Stephen Semple:

Advertising.

Dave Young:

Oh, well, that makes sense. Sure.

Stephen Semple:

He had a dog named Rolf selling dog food. A monster of cookies eating snacks sold by General Foods.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Stephen Semple:

And before Jim, when there was puppets, you would see the human performer. With Jim, the operator was not seen, which made the puppet or Muppet become a real character. That’s what made them seem real, it’s because the human operator disappeared.

Dave Young:

Wasn’t there.

Stephen Semple:

So Joan brings on Jim because she feels he has the energy and the insight that can unite the creative and the educators. Because think about it, he dealt with it in advertising, uniting the bean counters on one side and the creatives on the other side in advertising. He knew how to skate that line. So it’s 1969, they’re getting ready to produce the first show, and it’s, “Where do you set it?” So they decided to set it on an urban street based on Harlem. That was the reality in New York. But how do you now make it relatable to rural kids as well? People greeting each other. Everyone knowing each other’s name. Again, skated this line to make it relatable to all kids and had characters that were a Black couple, a young white guy, an older white guy. So they tried to create as much of a mix as possible. And originally, on the original pilot, the Muppet segments were separated from the real people. So you saw real people-

Dave Young:

They weren’t interacting.

Stephen Semple:

You saw Muppets. They weren’t interacting. And what they found is, kids only cared when the Muppets were on. So they decided to change the format where there’s always a Muppet. And they created specific ones that interacted with humans. For example, Oscar the Grouch and Big Bird. The other thing that they discovered is, Big Bird originally was this big bumbling character, and they changed him slightly, where they basically made Big Bird a six-year-old. If you really look at Big Bird as a character, big Bird is a six-year-old. So while things are being explained to Big Bird, they’re being explained to the six-year-olds without speaking down to the six-year-olds by using Big Bird as a six-year-old. So the new segments work great, and after three years, they’re ready to go. Literally at the last minute, they still haven’t decided the name. The morning of the afternoon press conference, according to things I’ve read, they still had no name for it. And they’re bouncing around names.

Dave Young:

Really?

Stephen Semple:

And they finally realized that they wanted the name to sound like a magic word. And somebody said like, “Magic word like open sesame.” And they went, “Sesame Street.”

Dave Young:

I love it. I love it.

Stephen Semple:

Now, there’s no commercial sponsors because it’s a not-for-profit. There’s a cameo from Carol Burnett, and it first airs on the Boston Public Broadcasting Network, WGB, and they get 7,600 calls and 2,000 letters all praising the show. And kids are singing ABCs and learning to count. And according to studies, underserved kids are improving cognitive skills by over 60% learning from TV.

Dave Young:

I believe it. I believe it.

Stephen Semple:

A whole new concept, even gets praise from President Richard Nixon, who later tries to cut funding. But that’s a different whole other story. And they’re literally producing 130 episodes a year, but they’re also reaching seven million kids five days a week. And, by the way, Sesame Street is still on television, streams on Netflix, and it continues there on PBS.

Dave Young:

I’ve got to check it out on Netflix. I could be watching it still? Gosh darn it.

Stephen Semple:

You could be watching it still.

Dave Young:

Well, you’ve made my day. If this podcast ends right now, I’m a happy man.

Stephen Semple:

See, I wanted to give you some good news. I wanted to give you some good news.

Dave Young:

I’d go see my old friends.

Stephen Semple:

Now, my favorite part of all of this is this whole idea of the conversation starting looking at two problems. In the conversation, from what I’ve read in terms of interviews and things along that line, it literally was, “We’ve got these two problems. Kids are getting addicted to television. Problem. Underprivileged kids are falling behind. Problem.” And then Lloyd asking that question, “Can we use one to solve the other?” That framing of the problem totally changes the mindset of how you think about it. And I could just hear that conversation in my head of somebody, of a Dave Young going, well, “Could we do this?” And all of a sudden the whole energy around the conversation changing and people going, “Yeah, maybe we can use one to solve the other.”

Dave Young:

I think we probably could do that.

Stephen Semple:

It’s the reframing of the problem as an asset to be used, I thought was just like, “Wow, that was a magical, magical moment,” and was my favorite part of the whole thing. And then when I got actually looking at some of these studies, 95% of preschoolers, I’m like, “Jeez, nothing hits that number.”

Dave Young:

Well now, remember, this was back when there were only three TV networks plus public television.

Stephen Semple:

True.

Dave Young:

And so, it was a little easier to reach 95% because they didn’t have many other choices.

Stephen Semple:

Absolutely.

Dave Young:

If you were the only channel that had something for kids on, kids are going to watch that. But the town I lived in, we were the first town, I think, I remember hearing, we were one of the first towns in America to have cable TV because we sat in a little valley and we couldn’t get any over the air signals except for PBS.

Stephen Semple:

Oh, I see. So it was-

Dave Young:

Then they finally figured out a way to microwave signals from Denver in, and then we could get the other channels. So there was probably a time when that was about the only thing you could watch.

Stephen Semple:

So it’s really interesting. As I said, the whole, the impact, and I knew pretty much anybody, all you have to say is, “Can you tell me how to get…”

Dave Young:

“How to get to Sesame Street?”

Stephen Semple:

And everyone can finish that. When we think about building an empire, because empires don’t necessarily have to be businesses or for-profit organizations. Empires are something that’s had this massive impact. And then you even took it that step further and said, “Look, other shows took that idea and went, ‘Wow, wait a minute. We can do sketches and things like that on television.'”

Dave Young:

Prove to me that Saturday Night Live is not just Sesame Street for adults.

Stephen Semple:

Yeah, you know what-

Dave Young:

It’s not trying to teach us anything.

Stephen Semple:

But the model, I had not put those two things together. And I think that’s a brilliant, brilliant observation.

Dave Young:

As you mentioned that they model it after magazines, and my guess is that the magazine that they modeled after was Weekly Reader.

Stephen Semple:

I don’t know that one.

Dave Young:

You don’t know Weekly Reader?

Stephen Semple:

I was never a big magazine reader.

Dave Young:

So this Weekly Reader was a little classroom magazine that they distributed in the school and it had short stories and little games. It was almost like the menu at an IHOP or something. It had all these little lessons and it started…

Stephen Semple:

Cool.

Dave Young:

It would be another good one. It was acquired by Scholastic, still running, but it was started in 1902.

Stephen Semple:

Interesting. Interesting.

Dave Young:

Maybe it wasn’t a Canadian thing, but there was probably not an American kid that didn’t ever read a Weekly Reader.

Stephen Semple:

And the fact it was in schools, that’s probably the magazine that they use. Super interesting.

Dave Young:

It had a wide variety of things, like you’d read an article about an explorer, or you’d read an article about… There were little human interest, there were little educational bits, and then there were always some-

Stephen Semple:

Cool.

Dave Young:

Fill in the blanks or puzzles or games or things like that.

Stephen Semple:

Cool.

Dave Young:

As soon as you said that Sesame Street came from magazines, I’m like, “Oh, well, Weekly Reader. That’s exactly it.”

Stephen Semple:

So there’s lots of learning and modeling. They learned from the magazine, they reframed a problem as an asset. And then, when there’s this issue between the creatives, the academics, they use Jim Henson’s experience from dealing with advertising and bringing those two groups together. So I thought there was just lots of really cool modeling and learning that went on in Sesame Street.

Dave Young:

And we’re adults. We got to talk about Sesame Street for 15, 20 minutes.

Stephen Semple:

Made your morning, didn’t it?

Dave Young:

I love it. I love it. Thank you for bringing us the story of Sesame Street. Brought to you by the letter W or Wizard.

Stephen Semple:

There we are. All right, thanks David.

Dave Young:

Thank you. Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute empire building session, you can do it @empirebuildingprogram.com.

Zach Oliva truly understands commitment and dedication to growing something you believe in. He practices active recommitting to stay on goal.

Dave Young:

Welcome to The Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is… Well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[Oliva Gibbs Ad]

Rick:

Told you, Brian.

Brian:

Told me what?

Rick:

This is part two of last week’s episode.

Brian:

Oh yeah. And it was getting good.

Rick:

If you missed it, go back and listen to part one first. Take it away, fellas.

Stephen Semple:

Hey, it’s Stephen Semple here, and as the guys just alluded to, this is part two of an amazing podcast on Oliva Gibbs energy law. And not to give too much away, in case you don’t want to go back and listen to the first episode, although I think you should. Oliva Gibbs basically in about a 15-year period of time, went from three lawyers to now there are six offices and 60 people. And in this podcast, we are going to go down some really interesting rabbit holes. This has turned out to be one of my favorite podcasts, and I know you’re going to enjoy it.

Zach Oliva:

So I think probably for the five years before COVID, I would take these trips and it would be called a think week or weekend or whatever, and I would get a flip phone and I would go to a cabin in rural Texas.

Stephen Semple:

Well, you just dated yourself there. You got a flip phone.

Zach Oliva:

Yeah, I still have a flip phone. I have a flip phone. I use a flip phone every weekend. I’ve been using a flip phone every weekend for seven years. I would use my flip phone and I would go on these trips and I would take my dog and just hang out at this cabin. I would read a bunch of books about business strategy or investing or whatever, and I would think through issues. And I had really good ideas that would come up during those think weeks. And I think that where I failed in a lot of those was I would come back and I would try and implement those ideas completely on my own. And so I didn’t know yet the importance of getting buy-in from the team and all that stuff. And so it caused actually a lot of frustration. The great thing about Strategic Coach is now I have think weeks all the time because I just have free days where I’m taking time off. But I still use a flip phone every weekend since probably the last six or seven years. It’s amazing.

Stephen Semple:

So one of the things I wanted to ask you about, because it’s really easy to say the whole thing of, “Okay, I’m going to go and I’m going to hire some professionals, I’m going to hire some experts, but not everybody has success doing that and for a bunch of reasons.” And you’ve had great success doing it. So if you are going to give somebody advice saying, “Look, you’re going to grow your business, go out and hire some experts that are great at helping grow the business.” What advice would you have for folks in terms of, I guess, finding, selecting, and working with those professionals so that they have the type of success that you and Brad have had?

Zach Oliva:

I think where I’ve seen people fail and hiring things like advisors or coaches or things like that is they don’t understand the nature of commitment. And so when a few years ago I worked with an awesome performance coach named Christopher Doris, and he coaches professional golfers, NFL players, entrepreneurs, stuff like that. And his big thing is what does all in look like here? And why would you do anything if you’re not all in? And Stephen, do you know what the nature of commitment is?

Stephen Semple:

Well, the easy answer right now would be you have to be all in. But no, the nature of commitment is it is that all in but it is that it’s belief. I think it’s about you’ve got to have belief in the process and that the outcome is going to come.

Zach Oliva:

Can I share with you an additional maybe definition-

Stephen Semple:

Sure.

Zach Oliva:

… on the nature of commitment?

Stephen Semple:

I’d love to hear it.

Zach Oliva:

The nature of commitment is that it goes away. So you have to constantly be vigilant about when it’s going away and that is a reminder to recommit.

Stephen Semple:

What? Okay, tell me more about what you mean about that.

Zach Oliva:

I’m committed to this relationship.

Stephen Semple:

Yeah.

Zach Oliva:

Now I’m not feeling it. Then you get recommitted.

Stephen Semple:

Okay.

Zach Oliva:

Or we’re committed to this process, it’s not working out as we thought it was going to, you recommit to the process, or I’m committed to this goal of being the best oil and gas firm in the country. We have a bad year. We recommit to that goal. So it’s just a constant process of committing and recommitting because you can psych yourself out or you can feel like the world’s falling around you and, okay, I just got to call a quits with this vendor, this whatever. What does commitment mean to you? And so I would say that to be successful in a relationship with a goal, you have to understand the nature of commitment. If you understand that the nature of commitment is that it goes away. When that commitment goes away, that’s not creating permission for you to quit and a lot of times what I see is I have a lot of friends that are business owners, entrepreneurs, et cetera. I see them quitting at the part where they actually need to double down and recommit because they’re too early in the process.

Stephen Semple:

When it gets hard?

Zach Oliva:

Yeah, when it gets hard. Yeah.

Stephen Semple:

Well, and look, this is, as you know, one of the biggest conversations that I have with customers when I’m bringing on a client for doing their marketing is here’s the point in the process where things are going to get hard, and this is when I need you to soldier through to get through to the other side. This many months out, this is going to feel this way and you’re going to want to quit and I need you not to quit. But what I like better now, the language is instead of talking about them quitting, this is when I need you to recommit. I’m actually going to change how I talk to somebody on this because I really like this is when we need to sit down and recommit to what it is that we’re doing because it’s going to feel really hard at this point, and this is when we recommit. I like that. I really like that language.

Zach Oliva:

And it’s also like there’s so many emotions that come in with goals, especially business goals, and probably especially if you’re working with a founder of a company, right?

Stephen Semple:

Oh, yeah.

Zach Oliva:

Yeah. And so what I’m trying to reinforce here is like, all right, our goal of being the best law firm in the oil and gas industry is there’s no difference between that and having that goal. There’s no difference between that and my wife, who’s very pregnant right now. If she asked me to go to the grocery store and get chocolate milk, maybe when I’m driving to go get that chocolate milk, there are things that I have to remember to do like get my keys, look what I’m backing out of the driveway, whatever. Maybe I need to be alert a little bit because there’s a kid on a bike, maybe there’s a construction zone that I need to go a different way. Maybe I get off at the wrong exit and oh, I’m such an idiot. I got off at the wrong exit. I got to circle back around.

Oh God. Those are just things that happen and we are the ones who attach meaning to those things that happen, good or bad. But the more neutral you can be about everything in life, which is a constant practice, the more neutral you can be. Well, we hired this company, we expected to get this result, and it didn’t happen. Okay, well why does that have to be a bad thing? What opportunities can come out of this? And so the more neutral that you can get about everything, it’s so much easier to accomplish things and life gets a thousand times easier in my opinion.

Stephen Semple:

Yeah. Well, and there’s a lot of physiology to support that.

Zach Oliva:

So if you look at everything that happens as an opportunity to support your own learning and that’s the lens that you look at things through, then you really bring a level of enthusiasm to it that makes it much more likely to achieve your goals. And I’ll go back to your original question, what do I think is important for people? It’s just, it’s the nature of commitment, knowing that it goes away and also you got to put in the work. Sometimes you have to put in a lot of work. Sometimes that person that you hired is there because to pull something out of you or to give you a different perspective and you have to put in the work. If you hire a personal trainer, they’re not going to lift the weights for you.

Stephen Semple:

No. They’re just going to show you the weight to do it and give you the motivation and the schedule.

Zach Oliva:

They’re going to show you the way to do it, maybe provide a little bit of accountability. You got to put in the work though.

Stephen Semple:

So stepping back to this whole idea of how does this recommitment manifest itself in terms of how you work with professionals and how you’ve been able to get the results that you’ve gotten from those professional relationships. Can you give me an example of what that recommitment looks like?

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Stephen Semple:

So stepping back to this whole idea of how does this recommitment manifests itself in terms of how you work with professionals and how you’ve been able to get the results that you’ve gotten from those professional relationships. Can you give me an example of what that recommitment looks like?

Zach Oliva:

It’s hard. I think that is probably the hardest thing that I have realized over the years is part of my job keeping everyone committed and neutral.

Stephen Semple:

Committed and neutral.

Zach Oliva:

Because there are some situations where we’ve brought in folks from the outside and it got hard and there were a lot of emotions involved, and I was unable to get people neutral and I was unable to get them to understand the bigger picture and why commitment is important. I think you run into bad habits. So when I was growing up, I had amazing, amazing parents. They let me quit anything that I didn’t like to do whenever I wanted to. And I was also a bright kid. And so high school was an absolute breeze for me. Not top of the class, but pretty close, very easy for me and I got to college and it was an absolute nightmare. I got rocked in college the first two years because I just didn’t show up to stuff I didn’t care about or I didn’t like.

Maybe I was like, oh, this professor’s an asshole, whatever. And it was just an uphill battle for me to learn about committing to things. And I think that sometimes I worry that I could see how organizations can develop that habit of it gets a little bit too hard or this relationship isn’t perfect and so let’s just quit because of that. And so I think the nature of commitment is incredibly important for success. And I don’t know how to just impress upon people that I think it’s the most important thing and 50% commitment doesn’t work. It’s got to be a hundred percent.

Stephen Semple:

Right. And 98 doesn’t even work. It’s got to be a hundred.

Zach Oliva:

Right. Right. Imagine you telling your wife, I’m 50% committed to you. Good luck having a great marriage, right?

Stephen Semple:

Here’s the question I think is going to be going through people’s minds on this, and then this is the last tough question I’m going to ask of you and then we’ll wrap things up. But this has been awesome. There’s also got to be a certain point where it’s maybe not the right person. It’s maybe not the right strategy, it’s maybe not the right idea, it’s maybe not the right fit. So there’s always that it’s not working. I need to recommit. How do you determine whether it’s a recommit or whether it’s just a bad idea or a bad fit? How do you manage your weight to that?

Zach Oliva:

That’s [inaudible 00:14:06]-

Stephen Semple:

That’s where I bet you people’s brains are right now. But hold on a second. There’s also this whole idea of sometimes it’s just not working right?

Zach Oliva:

It’s a great question. Yeah, it’s a great question. I can only share my own personal experience on this.

Stephen Semple:

That’s what I want to hear is your personal experience on it.

Zach Oliva:

So there was another business that I started about four years ago, and I recently decided to shut down that business. And I looked at it and I said, “Look, it’s been four years.” So that’s my time now for what commitment means to me. I guess it’s four years, right? It’s been four years of working on this. It just isn’t working. It’s not objectively working the way that I envisioned. It’s not working how I thought it was going to be working. It’s not working in a way that’s serving me and it took me about a year to get neutral and by neutral, I mean emotionally detached, but not detached from it. Just like in a neutral, I’m not making this out of a place of fear. I’m not making this out of a place of what if I fail?

I’m not making this out of a place of what will people think, just like a pure neutrality. It took me about a year to get neutral on shutting down that business and then I decided that I was going to shut it down. And so I first started with how am I adding to the problem here and what can I do better, etc. And when I had exhausted all of the options, I talked to some people about it, but I think getting neutral on it was really important and really contemplating on ending it. Because when you kill something, you kill off all the potential fruits that could happen in the future. You kill off an alternative timeline for yourself.

Stephen Semple:

Yes.

Zach Oliva:

There is a future that if you follow that thing that you’re trying to kill, you kill off that thing’s life. Right?

Stephen Semple:

Interesting.

Zach Oliva:

And so there are relationships that I have with people that are decades old that are just now getting really interesting in a great way, in a very loving, great way. And there were hard times in those relationships. And for whatever reason, I had intuition and I decided to just keep it going and they’re getting really interesting. There’s projects that I’ve worked on for years that are just now getting really interesting. You got to have a little bit of intuition too.

Stephen Semple:

Yeah. But I think what I’m hearing from you, if I may, is that the error that’s more often made, the error is often not sticking with something too long. The error more likely that is made is, or to you use your word recommitting to things. It’s not that you go too long, it’s probably the mistake is usually too short. But I think the other thing that you discovered when we talk about intuition with this other business because we talked about it a little bit before we’re getting on, is something changed. It’s stopped being fun for you where you used to enjoy doing it, you stopped enjoying doing it, which is a major… That’s not a minor shift. That’s a major shift because now that takes more energy, takes more of this. That’s not a minor pivot for a business owner when all of a sudden something goes from this is not fun anymore. Right?

Zach Oliva:

Yeah, for sure.

Stephen Semple:

That’s not a minor shift. That’s a big deal.

Zach Oliva:

And I think when it comes to working with professionals, so you have an investing background, Stephen, and you know the role that everyone screws up all the time is they sell their winners, right? And I’ve made many investing mistakes where I’ve sold my winners and I’m like, “That was stupid.”

Stephen Semple:

But the weird flip side, they keep their winners too long. They actually commit to their winners and dump their losers. This is the weird part of it.

Zach Oliva:

So when I see people, I talk to other owners of companies, a lot of them, the first thing they ask about is price with, okay, who are you working with? What’s the price? And I think that that is such a short-sighted way of thinking because you’re making an investment in yourself and your business by hiring professionals. And so you want to get someone who’s the best at what they do because if you’re going to invest in yourself, would you only invest a little bit of money? And then people are shocked when I didn’t get the results that I thought I would, even though I went with the cheapest… The guy who was a hundred dollars cheaper or a thousand dollars cheaper or whatever. And so I would say that to your point earlier, just pick winners.

Just make it so that you’re working with people that are awesome at what they do. They know what they’re talking about. Show up and do the work and try and surround yourself with people that you want to build long-term relationships with. I mean, there’s people on our team and folks that we work with who are outside of the business that are in advisor roles that I truly hope that we work together for the next 40 years because I see such a strong future. They’re just constantly learning new stuff. They’re constantly helping us come up with great ideas. They’re constantly challenging us with stuff and I remember I was listening to this investor podcast one day and there was this guy who was talking about Warren Buffett, and he was like, Warren Buffett only surrounds himself with people who are really great at what they do because then you don’t really… Life is a breeze.

Stephen Semple:

Yeah. And I think the part that I really like, and then we sort of need to wrap up here, and I’m just going to ask you one last thing. But I think the other part, what I like on the commitment, and I’ve learned this the hard way myself when I’ve hired professionals, if I look at that person and I think I might be hesitant to take their advice, I know I don’t have the right person. When I reach the stage where I go, you know what? I don’t need to hear any more explanation. I’m just going to do what you tell me to do. Then I know I have the right person and I’m just going to do what they tell me to do. I may have questions.

Okay, so why are we doing that? But those questions aren’t because of resistance. Those questions are because of curiosity. So when my questions then the source becomes curiosity, not resistance. I know I’ve now found the right person and I’m just going to do what they say. And when I’ve done that, it’s worked. When I make the mistake of hiring somebody and I’m not emotionally at that and I’m still actually resisting a little bit and what I’m learning here, I’m not a hundred percent committed. That’s when it hasn’t worked-

Zach Oliva:

You’re not committed.

Stephen Semple:

That’s when it hasn’t worked. I’m like 98%, but you got to get to that hundred.

Zach Oliva:

Because look at that energy that you’re putting out.

Stephen Semple:

Right.

Zach Oliva:

It’s not only going to be all in commitment, it’s got to be all in commitment with enthusiasm.

Stephen Semple:

Yes.

Zach Oliva:

Because when people win championships, when they win the World Series, when they win the NBA championship, when they win the Super Bowl, they never come out of that saying, “Hey, you just won the Super Bowl. How was it?” “Oh man, it was a grind. It was a grind.”

Stephen Semple:

No, right.

Zach Oliva:

It was fun. Fun and enthusiasm are the highest level of intelligence. So when you’re having fun and when you’re enthusiastic about things, you don’t shut down ideas when you’re enthusiastic about something and you’re completely pot committed. And so that’s the only way that you can make things work is if you’re completely committed. If you’re not completely committed, then you’re going to look at it and find all the cracks in the walls.

Stephen Semple:

But it’s that fun, enthusias, being completely committed. And look, there’s a certain degree that also means, I believe that you’re saying is that you also want to find professionals that you actually like spending some time with them too. Let’s not discount the importance of buying as well.

Zach Oliva:

Totally. Totally. And even if you call it quits after a period of time, it’s so much easier to do it when you say you went all in like, man, I left everything on the field and it didn’t work. I left everything out there and it just didn’t work. Then there’s no, you’re not losing sleep at night. What could have been, what should have been? What if we did this? What if we did that? And it doesn’t take time to be caught pot committed. It just takes courage.

Stephen Semple:

Yeah. You’re so right on that. For me, the most frustrating, even when I’m doing sort of with clients, some marketing experiments, and if we do a marketing experiment where we trim back on it a little bit and it doesn’t work, it drives me nuts because when you go all in and it doesn’t work, what you know definitively, well, that was a bad idea.

Zach Oliva:

Yeah, for sure.

Stephen Semple:

And there’s a value to that. There’s a value to actually being able, even though it costs more, it’s actually the answer is more valuable because you got a definitive answer to the question. The worst answer is maybe.

Zach Oliva:

Right. Right.

Stephen Semple:

Right. So Zach, this has been fun. I never thought this is the direction that we would end up going. This has been cool-

Zach Oliva:

Yeah. It’s been a great conversation.

Stephen Semple:

… and it’s been super insightful and I know what we’re going to do is in a couple years time, we’re going to get back on and we’re going to talk about the next stage of growth that has happened for you guys, because there’s a lot of interesting things that you and Brad are up to in terms of what you’re building and what you guys have committed to. It’s going to be a fun ride. If you’re going to leave people with one last thought, is it just commitment and the fun? Is there one last thought that you want to leave listeners with? And it’s okay, even if we want to just leave it at where it is.

Zach Oliva:

Just go all in.

Stephen Semple:

Go all in. Yeah.

Zach Oliva:

The all in life is a great life.

Stephen Semple:

Awesome. Awesome. That’s just a great thought to end on. Hey man, this has been great. Thanks. Look, thank you for taking the time.

Zach Oliva:

It’s been wonderful. Thanks for the invitation. This has been a great conversation.

Stephen Semple:

Perfect. Thanks man.

Zach Oliva:

All right, Stephen, have a good one.

Dave Young:

Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at Empirebuildingprogram.com.

Zach Oliva had just graduated from law school when Ohio discover a huge natural gas shale. Well, he went digging where no other lawyers were…

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. Here’s one of those.

[Oliva Gibbs Law Ad]

Stephen Semple:

Hey, it’s Stephen Semple with the Empire Builders Podcast. We’re doing something a little different this week. We’ve given Dave the day off, and I’ve got a really special guest with me, Zach Oliva. He’s the co-founder of the law firm Oliva Gibbs, in Texas. They’re an energy law firm. You guys, you’ve done something special in terms of what you’ve grown into. How many lawyers are you now, Zach?

Zach Oliva:

I think probably close to 60 attorneys across six offices in the U.S. It’s been a lot of fun.

Stephen Semple:

You always know you’ve grown to a size when it’s like, “I think it’s 60.”

Zach Oliva:

Yeah. Well, we’re always looking for rock stars. I know that there’s probably some offers that went out this week, not sure what the status of those are and things. We’re blessed with a really great team.

Stephen Semple:

How long have you guys been around for now? When was the firm established? How many years ago now?

Zach Oliva:

2013, actually.

Stephen Semple:

2013?

Zach Oliva:

12 years, yeah.

Stephen Semple:

Yeah, that’s phenomenal. In 12 years, it has grown from yourself and Brad to basically being now 60 odd lawyers, and being in that magic-

Zach Oliva:

Yeah. Well, we started the business with another partner who has since retired.

Stephen Semple:

Okay. All right, there was three.

Zach Oliva:

I think I was 26 years old. I was reflecting on that the other day. I think I was 26, which, I was pretty dumb then, so I didn’t know how stupid of an idea. I also didn’t have kids, which makes the decision a little bit different.

Stephen Semple:

Tell me about how all of this started, because the thing that’s also interesting is the area you’ve gone after, oil and gas. Look, it’s not the glamorous space. It would be a bit of an easy one to overlook and not get excited about, and you guys have built this amazing business. As we’ve worked together, I’ve learned more and more about how it’s actually a far more interesting and innovative industry than people give it credit for. How did it all get started?

Zach Oliva:

Well, I was in law school in Ohio, where I grew up, and Ohio got just destroyed by the Great Recession. I got out of law school around 2011, and there were no jobs. I was reading the paper, and I noticed that in the paper, they kept talking about this thing called the Utica Shale and the Marcellus Shale, which, they were calling it the most prolific natural gas discovery ever in the country. It was under Ohio, so under the land, under the state of Ohio and New York, and parts of Pennsylvania and West Virginia, and no law firms in Ohio at that time had an oil and gas practice. I was going to these firms, saying, “Hey, I think there’s going to be something here. I would love to come work for you, even for free, because I really think that this is going to be a big industry in Ohio. By the way, there are no big industries in Ohio anymore. If anything’s going to work, it’s going to be this one.”

None of them were interested in a kid fresh out of law school working for free, doing something that they had no idea how it worked, which, I don’t blame them at all. I had a professor who was a really bright guy, and he was really knowledgeable about the country. He was previously an advisor, I think, to the Clinton Administration, super connected in DC, and he was like, “Look, if you really want to do this, I don’t know if you know this, but Houston, Texas is the capital of oil and gas in the country, so you need to go there.”

I picked up the phone and I called about 50 law firms, and I found one in Houston that was looking for one Ohio oil and gas attorney. I flew down, met the owner of that firm at a barbecue joint, we had lunch. I flew back to Ohio and I had an offer. I moved down Thanksgiving Day, November 2011, and worked at that firm for about a year and a half, and then in 2013 started this firm. I didn’t really figure out how to grow the business until 2020, 2021, and really, most of the growth, I think, has been since 2020 and 2021.

Stephen Semple:

It was basically, you graduated from law school, and you had read about this opportunity in Ohio because of this big natural gas reserve that was just sitting there, which meant it was going to be Ohio law and whatnot that applied to all of that, and basically, tried to find a place that saw this opportunity as well. You had to go to Texas to find that, because that’s basically the capital of the oil and gas industry in the U.S., and managed to convince somebody to say, “We should hire this guy.” You were then essentially taking care of the Ohio section of the practice at that firm?

Zach Oliva:

Yeah, there were a few other attorneys there, I think one or two others who had been hired before me to work on Ohio work. And then, within a month I was back in Ohio recruiting 15 to 20 more attorneys to work at this firm, to come down and work there. That firm only had one client, so when natural gas prices in 2012 went from $14 an MCF to $2 an MCF.

Stephen Semple:

Ouch.

Zach Oliva:

That client, obviously, was not in the best financial shape. When we started this firm, the first thing that we decided to do was just diversify. Now we’ve got six offices, I think we work with clients in probably half a dozen states. I’m licensed in three states, Ohio, Texas and New Mexico. Most of the attorneys here are licensed in multiple states and are specialists in oil and gas law, and a lot of times, that carries over to other states. You have to be multi-jurisdictional to be an expert at this type of law, because you’ll work with a client in Louisiana, and their next asset might be in Texas, or their next asset might be in Mississippi or North Dakota or New Mexico or whatever. If you want to grow with your clients, you have to have that multi-jurisdictional characteristic.

Stephen Semple:

How did you and Brad meet and get started in this?

Zach Oliva:

Oh, man. He was our first hire. He came up to me at a talk that I was giving in 2012, I think, and we had a conversation. I did not think that we could afford to hire anybody at that point. I don’t know if you’ve ever been there before, but I didn’t think we could afford to hire anybody, and I was like, “Well, we should probably do this,” and that’s how we met. I was thinking the other day, that’s actually been my longest marriage.

Stephen Semple:

For background, because I love this about Brad, if I remember correctly, he was in a punk rock band when he was a kid. He did a stint in Japan.

Zach Oliva:

Not only when he was a kid, he was in a punk rock band recently, I think in the last decade, too.

Stephen Semple:

Oh, is that right? I didn’t realize that.

Zach Oliva:

Yeah, he’s got songs on Spotify. He was taught in English and Japan. A super interesting guy.

Stephen Semple:

What a geek when it comes to weird facts around law. Now, was he always that, or is that something that developed as you guys were growing the practice?

Zach Oliva:

That’s a great question. He has such a real interest in oil and gas law, and it’s almost like the energy behind that is almost infectious. He has a document that is basically a running list of every oil and gas case ever, and his comments on it.

Stephen Semple:

Which is crazy, right?

Zach Oliva:

It’s got to be thousands of pages by now. No, he’s a great oil and gas attorney, and it’s really interesting to him.

Stephen Semple:

Yeah. You’ve gone through this growth, let’s face it, having 60 attorneys period puts you in the top echelon of law firms in the country. Not many firms make it to that. Certainly, there’s not going to be many in the niche that you’re in. You’ve built this super successful firm, and it started from seeing this opportunity, going after the opportunity, growing in that space. What was the turning point where all of a sudden it went from being a few people to something where you really looked at it and went, “Wow, I think we can actually grow this into this bigger multi office thing?” Was there a moment where that happened, or did it just chug along?

Zach Oliva:

Yeah, there was definitely a moment where that happened.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Stephen Semple:

Was there a moment where that happened, or did it just chug along?

Zach Oliva:

Yeah, there was definitely a moment where that happened, and it only took a fraction of a second. It was just when we decided to do this. When we made the decision that we were going to be the best oil and gas law firm in the country, however long it took to make that decision is how long it took. It was just a fraction of time. And then, that decision changed everything. I think it was during COVID. I don’t know if it was like this for everybody. My experience during COVID is was that it was a pretty reflective time. I had downtime, a lot of solo time, and during that time just was really thinking about, what is holding us back? What is possible? What are the limiting beliefs that are holding us back, and things like that. It was just that wanting to do more, and just making the decision to grow it purposefully was really important.

Stephen Semple:

What do you think really changed? You didn’t change your focus.

Zach Oliva:

Right.

Stephen Semple:

Knowing you, you’re a driven person, it was going to happen. What was the change that happened when you had this… because it’s interesting, when you think about it. You had this opportunity to step back from the business a little bit, from the standpoint that, generally speaking, things were different, and we weren’t interacting as much. As you said, there’s this little bit more reflective time. Was it just that you wanted to become the best? What is it that really changed in that time?

Zach Oliva:

I started to be a little bit more aware of my own limitations, in that I started to look at the relationship between time and hard work. I was like, “Well, there’s not really a relationship between hard work and success,” because if that was true, my parents would’ve been billionaires, and so would I, because I really worked hard for the first half of the firm’s life up until COVID. I was really working myself and wearing myself down. I just was like, “There’s got to be a different way to do this where maybe it’s our decision-making process, or the hiring process, or the strategy or whatever.” We decided to bring in some people who are really good at growing businesses to advise us on what to do, and that turned out to be a really great plan.

Stephen Semple:

Basically, you looked at it and said, “We’re great lawyers, but what we’re not great at is growing a law firm into a big law firm. We need help on that front.”

Zach Oliva:

Yeah. I wanted to do something. I think I was thinking about the types of people that I wanted to work with every day. During this time, I had some personal events going on. My dad was really sick from Alzheimer’s, and my best friend was really sick from stage four cancer. I was very mindful of the people that I wanted to be around, because I was like, “These are the most important people in the world to me. If I’m going to spend any time with anybody else, it’s got to be meaningful time to me, because otherwise, what am I doing? I’m just wasting my time on this earth.” I started thinking about the types of people that I wanted to work with on a day-to-day basis. You spend most of your waking hours at work. If you’re a human in this society, you spend most of your waking hours at work. It’s where you hang out, right?

Stephen Semple:

It is kind of, yeah.

Zach Oliva:

I started thinking about the types of people that I wanted to hang out with on a day-to-day basis, and I knew that the business that we had at that point was not attracting those types of people.

Stephen Semple:

Interesting.

Zach Oliva:

I said, “What kind of business would we have to build where we would attract the types of people that I would want to hang out with?” People who are creative, people who take their job seriously, are professional, they want to be the best at what they do, those are the people that inspire me, and I can get inspired by working with those people. How do we build a business that attracts people like that?

Stephen Semple:

This is so interesting.

Zach Oliva:

I was looking for more meaning.

Stephen Semple:

This is so, so interesting.

Zach Oliva:

That would be best case scenario for me, is if I could have meaning in my personal life, meaning in my professional life. In my opinion, that’s a life well lived.

Stephen Semple:

That is a life well lived, but here’s what’s so interesting about it. Most people, if they’re sitting there saying, “I’m going to 10X my business, or I’m going to do this, or I’m going to become the largest and whatnot,” the first place they go to is, who are the customers I need to attract? That’s almost always where everybody goes.

Zach Oliva:

Oh.

Stephen Semple:

You put this model on its ear and said, “Who are the people I want to work with?” I know in your heart the belief was, if I work with these people and attract these people, we’re going to attract the customers.

Zach Oliva:

That’s a great point, and I did not think about that at all. I had never even realized that until this conversation. I probably should have thought about that. It may have been a bit of business owner malpractice. I just figured… and actually, I’ll add a little bit of nuance to that. A lot of our clients I had deep personal relationships with, and still do.

Stephen Semple:

Right?

Zach Oliva:

Relationships are really important to me, and I really wanted just to get them the best quality of service that we could get them. That makes it so much easier to bring new relationships into the firm. There’s no question that they’re going to be handled well.

Stephen Semple:

Right, they’re going to be handled the way you want them handled.

Zach Oliva:

It removes so much friction, because there is a little bit of friction. I remember in the early days of the firm, when some of the folks that we had here maybe aren’t what we today would call A players, there was a little bit of friction, where you’ve got to find work to feed everyone, and to have the firm continue, and you know that maybe the lawyers could be a little bit more responsive or whatever. It creates a little bit of friction during the sales process, because you’re like, “I’m building a relationship with this person, they might not have a great experience,” et cetera. It’s wonderful for me, because on a daily basis, I get to learn from people who are excellent at what they do. We’ve created a system here where I get to learn all the time, which is really what I love to do, and I get to learn from people who are really passionate about what they do, which is awesome, because it is just more fun for me.

Stephen Semple:

Well, and here’s the interesting thing. A lot of businesses that I’ve looked at over the four years that I’ve been doing this podcast, a lot of them have started not with, “I’m building a billion-dollar business.” Most don’t start that way. Most start with, either there’s this thing they want to do that’s going to make people’s lives better or whatnot. It’s just interesting to me that you started with the people. That’s a very interesting perspective, because also what you recognized is, if you start with the people, and the people treat the customer the way we want the customer to be treated, the money will come. Yes, you want to make money. Yes, you want it to be financially successful, but instead of going after the money, you went after this with the belief that the money will come if we do these things right. We do these things right… the money’s not the goal. The money’s an outcome of doing these things.

Zach Oliva:

Well, it’s a by-product of doing these. It’s a natural by-product of doing these other things.

Stephen Semple:

But I also find it interesting, this whole idea of how COVID gave you this mental space for thinking about this. Both you and I are in the Strategic Coach… and I don’t know whether you know this story from Dan Sullivan. Dan Sullivan created the Strategic Coach program, and the origin of that was, Dan had a different consulting practice. He had this different consulting practice that did a little bit in business, did a lot in government, and ran into a bunch of problems where he literally was on the verge of bankruptcy. What he and Babs, his wife, decided, “We’re going to go away for two weeks. We’re going to disconnect.” Think about it. The world is crumbling around you and your response is, “I’m going to go on a vacation.” When they were on the vacation, they dreamt up the idea of Strategic Coach. They came back from vacation and implemented that idea, and built this unbelievably successful business.

I think sometimes in these moments of crisis, we go into the firefighting mode, because that’s what we feel like we need to do. And yet, it’s amazing how many times I’ve heard these stories of when somebody took that time and said, “No, actually, I’m going to step back and get a little bit reflective,” that what they end up coming back with is that positive, life-changing moment that they’re able to implement. Look, life is long. There’s going to be another crisis happen. Life is full of them. I think we need to think about them, but we need to take this reflective time as really powerful.

Zach Oliva:

I think, probably for the five years before COVID, I would take these trips, and it would be called a think week, or weekend or whatever. I would get a flip phone and I would go to a cabin in rural Texas.

Stephen Semple:

You just dated yourself there. You get a flip phone.

Zach Oliva:

Yeah, I still have a flip phone. I use a flip phone every weekend. I’ve been using a flip phone every weekend for seven years.

Speaker 5:

Oh, no.

Speaker 9:

What?

Speaker 5:

I was enjoying this episode.

Speaker 9:

Don’t worry. Part two is coming next week.

Speaker 5:

It better.

Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big, fat juicy five star rating and review at Apple Podcasts. If you’d like to schedule your own 90-minute empire building session, you can do it at empirebuildingprogram.com.