Founders - #171: Chuck Feeney (The Billionaire who gave all of his money away)

Episode Date: March 15, 2021

What I learned from reading The Billionaire Who Wasn't: How Chuck Feeney Secretly Made and Gave Away a Fortune by Conor O'Clery.----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----He celebrated having divested himself personally of the vast wealth with which fate and his genius for making money had burdened him. [0:01] Feeney was already showing a trait that would assert itself throughout his life: thinking big and aiming to achieve the best result, even if it seemed unattainable. [3:27]I all of a sudden realized, shit, you can sell this to anybody, anywhere. [12:45] Feeney believed that there could be more lucrative opportunities in the less  crowded Pacific. [21:53] Chuck lived out of his briefcase. Everything was connected with business. We did a lot of screwy things. I became part of what he called his ‘teen  age frontier’ approach to business, because he surrounded himself with smart college youngsters, mostly single and aggressive ‘conquerors of the world.’ I was the oldest, always the damper, saying to him, "Are you out of your mind?" [25:44]We hadn’t spent any time on corporate structuring or anything like that, we were just simply busy selling cars, duty — free liquor, making the cash, putting the cash in the bank, cash in, and cash out. [28:06]They were on the verge of going bankrupt, perhaps already were. Feeney and Miller were almost back where they started. They could perhaps boost the cash flow from the duty   free shops in Hong Kong and Hawaii to clear off the debts. Feeney had moments of despair. “Of course. It goes with the territory. But there wasn’t much we could do. It was something we had started, and we thought we were going to make a million dollars out of it. We had no choice but to salvage the company or go over the cliff.” [31:21] The duty   free shops began to make substantial profits, the owners agreed to take 90 percent of the dividends in cash, a practice that would continue for a quarter of a century. [44:54] Paradoxically, while Feeney became more frugal, he was pushing himself ever harder to build up the business that was making him even richer. [48:26] He brings a focus on business that I hadn’t experienced before. If something doesn’t work, he has four or so different thoughts. He has a multifaceted way of looking at business. He is detail oriented in his approach. [48:51] His definition of success was not having all the money one desired, but being able to raise a happy, healthy family. “There has to be a balance in life. A balance of business, family, and the opportunity to learn and teach." [49:41] They were offering to pay the State of Hawaii some $2 million every three days, for the next five years, just for the right to run a couple of stores. [58:38] What only the four owners knew was that during that period (1978–1988), they had received cash dividends of $867 million, of which Chuck Feeney had got $334 million. [1:00:53] A new divorce settlement was reached that gave Danielle an additional $60 million. Feeney insisted that Danielle get all the family homes, in Paris, London, the south of France, Connecticut, Hawaii, and New York. He took nothing himself from the family property. [1:03:33] Nobody ever put a penny in the business. We took out $ 8 billion or whatever it was. Nobody is that smart. You have just got to have a lot of things going your way. [1:07:56] ----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

Chuck Feeney felt a profound sense of relief. He had flown into the Bahamas that morning an extremely rich man. Now he was flying out with little more to his name than when he had started out on his various business ventures three decades earlier. He celebrated having divested himself personally of the vast wealth with which fate and his genius for making money had burdened him. It was all done with the utmost secrecy. Few outside the small group that gathered that day in the Bahamas

would know what had taken place for a long time to come. Four years later, Forbes magazine listed Feeney as the 23rd richest American alive, declaring him to be a billionaire with $1.3 billion. But Forbes had got it wrong, and would continue to repeat this mistake for many years afterward. Chuck Feeney had gotten rid of it all. He was the billionaire who wasn't. That was an excerpt from the book that I'm going to talk to you about today, which is The Billionaire Who Wasn't, How Chuck Feeney Secretly Made and Gave Away a Fortune, and it was written by Connor O'Cleary. This is another book that I did not, I wasn't aware of.

It was actually recommended to me by a listener. Before I read the book, I actually watched a documentary. It's available on YouTube about Chuck Feeney. And there's a few notes that I wrote down that I just want to tell you before we jump into the book because I think watching the documentary helped me understand him. Watching the documentary before reading the book actually helped me understand who he was. He may be the most unique person I've ever studied on Founders. He's a very complex and confusing person.

Here's a few quotes from the documentary from people that knew him or know him. He's still alive to this day. So it says, I can't say I ever encountered such an extraordinary individual. One person described him in one word. Complex. Another description. He wanted to play fair, but he wanted to play rough. Or excuse me, tough.

Another one word description. Odd. This one was really great. A conversation with Chuck Feeney is unlike any conversation you'll have with anyone on earth. Another one word description, paradoxical, inspiring. Chuck Feeney is a totally one-off. He will know more about you in 20 minutes than you will ever know about him. He's a type A personality. He walked quickly, talked quickly, and worked incessantly. Okay, so let's jump into the book. The vast majority of my highlights, I would say 95% of the highlights I made in this book,

have to do with how he built his business. I found that the most interesting. This business is going to produce billions and billions and billions of dollars. It's a private company. Before he sells it to LVMH, it's going to produce billions and billions in cash for the partners. But there's a few stories or anecdotes from his early life that gives us an insight into how he thought, that I thought was interesting. So he comes from a very, like a working class New Jersey background.

He's very uncomfortable. The reason people describe him as a paradox is because he was very gifted in making money, but he was very uncomfortable with keeping money. And so at this point the story i'm about to tell you right now is he's just graduating high school he decides to to shoot to aim really high even though no one in his uh family has gone to college before he's like i want to go to cornell i want to go to the ivy league he didn't think what was interesting the reason i'm bringing this to your attention is because he didn't think he'd get into cornell but he tried

anyways so it says the letter of acceptance was a major event for the Feeneys. No one in the family had ever been to a university, but Feeney was already showing a trait that would assert itself throughout his life, thinking big and aiming to achieve the best result, even if it seemed unattainable. So that's very, very important. After he graduates college, he's with a group of friends. They're traveling in the United States. He has no idea what he's going to do in his life and it's this is just a short sentence but really the way to think about this is that he's always he was always looking for an edge while others slept and so this is a friend of his they were all living in like this little apartment at the time together and this is what his friend remembers he says the three of us would sleep in but chuck

would go off to summer school in the morning to take lessons in Russian. So he winds up serving in the military. He stays over in Europe. And at this time he's hitchhiking. This is another example of the way he just thinks very differently than most people. He's hitchhiking in France and he realizes the power of differentiation. So there's a ton of hitchhikers all over Europe at this time, you know, that they're holding up signs saying, hey, you know, I'm going to Paris, I'm going to Munich, I'm going, essentially advertising where they want you to take them. Now, if you haven't listened to last week's podcast,

I highly recommend you do because I can't stop thinking about all the lessons Claude Hopkins taught, but it's specifically his idea that you always have to start with service. I think that that book that he wrote was a masterclass in what incentivizes and what motivates humans. And so in his advertising, he always starts with service. We're going to see the same thing. Like we're going to see the same lessons that Claude Hopkins applied in his life, writing advertising for companies and everybody else that that chuck is is applying to get a ride okay so this is again a very short lesson on differentiation getting rides was difficult

as there were so many people on the roads holding up handwritten signs to show their destination so chuck does something different he displayed a notice in large letters saying English conversations offered. He had no trouble getting a lift after that. OK, so at this point in his life, he's 26 years old. He's living he's living in France. He's actually running a summer camp for American kids, has no idea what he wants to do with his life. And this is where an opportunity pops up. This is the opportunity, the kernel of the idea that is going to, over the course of about two decades, make him billions and billions of dollars. So it says, one night in a bar, he met Bob Edmonds, who was trying to start a business selling duty-free liquor to American sailors at ports around the Mediterranean. He asked Finney to help him. Navy did not allow the consumption of alcohol on board, but Edmonds had established that sailors could buy up to five bottles of liquor duty-free and have them shipped as unaccompanied baggage

to their home port. It could be a big market. There were 50 ships in the Mediterranean and the crews were rotated three times a year. This is the value proposition for the customer. Why would, why, why does, can the business grow so quickly? Because the value that the customer gets is immediately apparent to them. And it says the savings for the military personnel were huge. A fat, a five pack bought duty-free in Europe costs $10 while the same five bottles in the United States would cost over 30. It's also important to note as we get going into the story, the reason that Feeney doesn't have a lot of money. Him and his partner, they might have a couple thousand dollars to their names at this point. But something to keep in mind about the business is there's no need for capital.

They did not have to pay for the merchandise in advance. Essentially, they're just drop shipping everything. So it says, let's go back to this conversation with Bob, though. We're not there yet. 40 ships are coming in, he told Feeney. I can only see 20. I'm looking for a guy that can see the other 20. What do you mean, asked Feeney. Go and talk to them about buying booze. So Feeney's successful almost immediately. He's not going to work with Bob for very long. He's going to wind up trying to do this on his own. He travels to Barcelona and he runs into somebody that also went to Cornell. And this is going to be his long-term partner. And this is Robert Warren Miller. Everybody calls him Bob Miller. And it says Miller recognized the wiry,

blue-eyed American immediately. Feeney, he said. What are you doing here? What are you doing here? Replied Chuck. That casual exchange marked the start of one of the most profitable partnerships in international business history. That is a hell of a sentence and it's probably true. When Miller finished his shift that day, he and Feeney went out to dinner. Miller was already bored working in the hotel. They decided to throw their lot in together and try to make money from doing business with the U.S. fleet. Miller had already gotten a glimpse of duty-free rackets that were common in post-war Europe. He told Feeney about a Hong Kong priest living in Barcelona who changed U.S. dollars at black market rates. So one of the most interesting parts, and I'd say the vast majority of the book, maybe 60% of the book is all about the charity work that he does later on. I don't have, I'm excluding most of that from what I want to talk to you about today, because I found the building of the business to be more interesting.

But what I do like about reading this book is it's like it's full of international intrigue. Like this business that they set up, it's all over the world. It's in tax havens. They're running across all, it's almost like it's borderline illegal. And so there's this idea that you're going to run into a priest from Hong Kong living in Barcelona, changing US dollars of black markets, which is funny to me. So anyways, they start on Barcelona and they don't stay there very long. They're going to travel all over the world. They do not stay in many places for very long. So this is the very beginning of their

business. Feeney and Miller started taking orders for liquor from U.S. naval personnel. They started driving or taking trains to ports all along the Mediterranean. So they're going after wherever the ships are, they're going to go there. They would not see each other for weeks. Then they would meet back up, agree on what to do next, and go off in different directions. They found, and now there's a lot of, you're going to see a lot of the playbook that he's running when his business is just relegated to selling liquor uh to ships he's going to use that this same a lot of these same ideas in different manifestations because he's eventually going to

build this gigantic global retail network and so one of that is like how do you get like how do you get distribution how do you get customers to know that you exist? And so they call the people that that give them information bird dogs. Okay, so there's a little bit about that. They found bird dogs on board the ships to whom they promised commission for getting sailors to sign up for five packs. gives an insight into Feeney's really unique mind. He's not, they say working with him, he did a lot by like instinct and just, he calls it mulling. He would just think about things and try to really go with whatever he felt bad, like felt the best opportunity was. And a lot of that was just making sure

that he had the flexibility to take the best path forward. Now he's going to need that because this is going to work for a while. They're going to make a good amount of money until others start seeing the same opportunity. Just like once Bob knew it, Bob Edmonds knew it. Well, then he told it to Chuck. Chuck tells it to Bob Miller. And so this is going to go on and on. So it says the booze business had become very competitive and the two look for other things to sell. They got ideas for expanding their inventory. They started adding items such as perfume, cameras, toy trains, and transistor radios. The orders and the money piled up. Feeney boasted

to Miller that they were on their way to making a million dollars. They called themselves the Young Turks. And so that's one of the wild things to think about. Think about it. Right now, they're selling just to people in the military. They're just selling liquor. They're excited about having the opportunity to make a million dollars liquor. They're excited about having the opportunity to make a million dollars. This is a business that by the time, but if you take out all the dividends that they take out for the four partners, Miller and Feeney being the major partners, they owned almost 40% of the company each. And the sale to Louis Vuitton Moet Hennessy, they're going to pull out about $8 billion out of this company.

This is a wild, wild story. I think you're going to like it. Okay, so let me, we're not there yet. Let me go ahead and tell you what I found interesting. It's like, why is this all working? So in 1950s America, there's a boom going on. So Americans at the time had a lot of disposable income. They like to drink. So they're spending a lot of that on liquor. And this is where Chuck realizes that he doesn't have to only sell to the military. And there's a couple of different points in his life where he realizes, wait a minute, I am artificially constraining my market here. Like this market is a lot bigger than I think anybody actually knows. So this is where he comes up with an idea to expand his market. A lot of this is because he does, he's constantly

sourcing information. He reads, he talks to people and he realizes, okay, there's a loophole in the duty-free that applies to military, right? As just a benefit to being in the military and serving the country. But it also applies to people living in 15 specific states back in the United States. And a lot of these Americans from these 15 states and other states, obviously, are traveling to Europe at this time. And another thing that's helping him is their television advertising is in its infancy at this point. And there's a lot of ads for liquor, to cocktails, stuff like that. So it's really pushing up the demand for liquor. So it says, Chuck Feeney discovered one day that these vacationers could buy duty-free booze abroad and bring it home as long as they resided in one of 15 american states they were permitted

this is a loophole right they were permitted by u.s customs to import a five pack of liquor once every 31 days without paying any duty i all of a sudden realized shit you can sell this to anybody anywhere said feeney it didn't matter where you bought it or where you shipped it from that's also another important point he could ship it from any anywhere that was convenient for him it didn't have like let's say that the tourist was in Italy didn't have to come from Italy he could ship it from Geneva ship from Hong Kong ship it from Canada Mexico so he builds this gigantic network it's really really fascinating it didn't matter where you bought or where you shipped from as long as you declared it when you got back to the United States. Feeney printed up tens of thousands of brochures to tell American tourists traveling in Europe that they could buy duty free liquor from Tourist International. That is the name of the company, the very beginning of the incarnation of this company that Miller and Feeney are going to to operate. They are going to ditch this later on. and I'm going to tell you why and how that came about. So they could buy duty-free liquor from Tourist International and have it

shipped to their doorstep. And why are they doing it? Same reasons that the people on board are doing it. This is just one example. A five-pack of Seagram's VO would cost $47.75 in New York, but it could be bought from Tourist International for $22. So quite a bit of saving, over 50% there. At this time, Feeney feels like he's stumbled onto this great idea. Then one day he's shocked, right? He finds this beautifully printed brochure that is advertising, it's not selling liquor, but it's advertising a bunch of other duty-free merchandise to to american vacationers in europe so he's like oh wow i gotta go meet these guys maybe i can do a deal with them and this is what he says feeney believed this company was way ahead of the game

he thought now this is the the name of the company he this is the company he's gonna buy this company i'm not gonna i'm not gonna bury the lead here and this company is eventually gonna make him a billionaire but not in its present incarnation. They actually go bankrupt and make a series of mistakes. So let's get into that now. Feeney believed this company was way ahead of the game. He thought they might agree to insert his liquor brochures into the next catalog if they weren't selling booze themselves. So he calls him up. He says he was surprised when the manager answered the telephone himself and invited him to come over right away. Duty free shoppers. That's the name answered the telephone himself and invited him to come over right away duty-free shoppers that's the name of the company that's the name that's the name of it's going to be the

name of phoenix company moving forward we're a few years away from that though duty-free shoppers was a brainchild of stewart damon he was a u.s navy exchange officer who had been based in naples italy its goal was to sell duty-free goods to american tourists abroad he and his partner harry adler had persuaded investors to put up 95000 and they arranged for manufacturers to package and ship their products. So they're drop shipping too. They printed half a million catalogs and opened an office in Geneva, Switzerland to process what they expected would be an avalanche of orders. Only a trickle came in. On the day Feeney turned adler adler was paying overdue bills and clearing out his desk it was his last day of business not knowing the dire straits of the company feeney told him

that he thought this idea was tremendous and was surely very successful and proposed to adler that if they inserted his liquor brochures in their next catalog and we're going to get to the huge mistake that Adler and uh that um that Adler and Damon had made in one second so it says um if they inserted his liquor brochures in the next catalog he would give them a commissioner commission on all liquor orders that resulted and this is what Adler said the irony of it all he was a fellow who thought that the idea could not fail and was coming to to us to help him distribute his cockamamie flyers. I really had no choice but to be honest. Dear friend, I said, our distribution was a huge one time gamble.

That's the mistake right there. And it is at this time a dismal failure. They raised money on on one printing it out, printing all their brochures and mailing them out. They use all the money on that one shot. And they just assume that, again, I don't even know if they had any experience running businesses before or whatever the case was. They're like, okay, well, sure, it's going to work.

And as the author just said, the sales trickled in. So now they're closing up shop. Feeney was visibly shocked. They also, two different approaches. I didn't even think about this when I read this, but now I'm just rereading it for the second time. Think about what. So Feeney, his partners, serve with no money, but they started distribution first. Okay, well, we know that Feeney at least served in the military.

I don't think Miller did. Okay, so I know how to get on ships. I know how to talk to sailors. I know, you know, what's the chance? I just go over there and I start with sales, we know that i can get distribution or excuse me i can get product easily but i need to solve distribution first these guys didn't reverse they just assumed mailing out catalogs was efficient was going to be good enough for for distribution it's very interesting all right go back to this um so he says visually phoenix was visibly shocked but but not but not at a loss for words he spoke very fast asking what is to become of this company, these offices, and what the orders that were still in the pipeline. Feeney then pulled out a pen and started making copious notes.

Feeney was convinced that the principles sound and that the company could still survive and thrive with proper marketing, which they failed at, right? Feeney made an offer for up to $10,000 of the company stock. So now he's going to own the limited assets and the name. He's not going to use that name. I think we're like four years away from when he actually is going to switch over and switch not only the name of the company, what the company does. And I'll get there in a minute.

A little bit about his personality that I thought was very, very interesting. Feeney came and went. He was always walking fast. He was forever thinking of new ideas. He used to order food, and when it arrived, it was hoofed down, and we would go. I thought it was hilarious. It reminded me when I read that section about, when I read that biography, Mornings on Horseback, about Teddy Roosevelt. That he was living at the time in a boarding house. And his friend that was living in the boarding house with him says he's always knew who was coming through the door because

before you'd hear the door open and before the door shut, Teddy would race up the stairs. He wouldn't walk. He'd be running everywhere. He fed a lot of life into 60 short years. Okay. So now let's go back to what Feeney and Miller are still selling directly on chips. And this reminded me of an insight that Jeff Bezos had. I'll tell you how I tie this together in a second. When Feeney and Miller were collecting orders to obtain onboard chips, they found themselves being asked if they were the guys who sold cars. They weren't, but they soon were. They discovered that American service personnel abroad also had the right to buy cars they weren't but they soon were they discovered the american service personnel

abroad also had the right to buy cars duty-free and some rival salesmen had already got in on the act miller and feeney picked up brochures from car showrooms and brought them on board the ships they found that selling cars was just like selling booze remember that part they took a deposit paid in advance to the car dealer and ordered the car shipped to the customer's home port once they became known as the guys who sold cars they were overwhelmed with orders so this is something i forgot i read uh invent and wander uh i think it's like maybe founders number 155 something like that and it's the collected writings of jeff bezos i had forgotten this like right at the very beginning of Amazon, Jeff Bezos started emailing. He emailed 1,000 of the early Amazon customers. And he asked what else they'd like to buy.

And one of them replied and said, I really wish I need windshield wiper blades. I really wish that you would sell windshield wiper blades. And Jeff talks about it. He's like, when I got that email, I realized we can sell anything this way. It doesn't just have to be books. And so we're seeing Feeney realize, okay, wait a minute, I'm trying to sell you liquor for $10 or $20. You're willing to buy a car that's a couple thousand dollars. Like I can sell anything this way. And, oh, let me tell you a little bit about, this is, it's very, very exciting. Like

the early days of a company, especially when it's a group of young people. And really, they're at the right place at the right time with the right set of skills. And he hires, Chuck and Bob hire people that are very similar to themselves. It says, Chuck and his team were aggressive, self-confident, and borderline legal. They enjoyed a great sense of camaraderie. So one of the saddest parts about this story is this camaraderie, as we've seen over and over and over again, the more money you make, it seems to just, it eliminates the bonds between co-workers and early workers in many cases. And they become, I wouldn't say enemies, but they have no relationship later on. It's one of the saddest parts of the story. But it says,

at this part, they're aggressive, self-confident, borderline legal, and they're having a great sense of camaraderie. The new age of affluence in the United States meant that their American customers had disposable cash and money rolled in. They were in the right place at the right time. The key to their success was that they did not have to maintain inventories. They sold liquor and cars, neither of which required a dollar up front. And the business was offshore, which meant they did not have to pay U.S. taxes. Okay, so they're doing well for a while. This is happening over several years. And what's about to occur, though, is a very important insight for all of us to

remember. And they're realizing, in general, it's more useful to go where it's less crowded, right? So their business is slowly going to be whittled away on both fronts the liquor and the car business by competition so now they have two two different companies it says cars international and tourists international we're facing even more stiff competition in europe so this is all happening in europe at the time salesmen flogging everything from cars to perfume and alcohol were elbowing each other out out of the way to get onto the U.S. ships. Feeney believed this is this insight that he has is what's going to make them billions of dollars. OK, Feeney believed that there could be more lucrative lucrative opportunities in the less crowded Pacific.

So his idea is like, why don't we take this duty free? We know people like buying duty free things, right? Let's go to the Pacific. Let's go to these airports and let's bid. All the airports would give exclusive, you could bid on exclusive contracts, right? So you're not going to have 15 duty free sellers in an airport. Usually it's one. And so at the time, Honolulu in Hawaii is expanding their airport. Chuck decides, hey, we're going to bid for this duty-free contract. And this is going to be a very slow road to growth. It starts out very slow, then accelerates very fastly, very quickly. But this is going to save his company later down the road. And what's going to help the business grow is some things that are out of his control.

Like at the point, he's going to build his business off of Japanese tourists, right? And they're flying into Hawaii. And what helped one of the, one of the things that helped their business grow was that Boeing starts manufacturing the 707 and they start flying that into Hawaii. The pre I don't remember the model plane that flew previously into Hawaii, but the Boeing 707 essentially doubles the amount of passengers per flight,

but it doesn't start out like that. So it says the bid guaranteed to pay Honolulu Airport $78,000 for five years of the duty free concession. So this is going they have to renew these bids are usually, you know, four years, five years, 10 years. They vary in length, but only one person gets the bid. So this is, you know, I'm not going to bury the point here. They're paying $78 78 000 for five years eventually they they'll pay for this same airport two million dollars every five days just to have the right to sell there i think i got the number right i have highlights in the later but i'm pretty sure it was two million dollars in five five years for two

million dollars every five years it is it is It is wild what's about to happen. Now, we're not there yet. This is May 1962 that they're doing. It was a huge sum for a tiny retail space in the new terminal. Buffini and Miller were gambling on the duty-free business picking up as tourism increased. And they're so lucky they did this. Because the other two businesses that are happening in Europe, they're going to have to retreat. They're going to go out of business.

We're not there yet. So I said, oh, let me read my notes to you, though, because this is a very important point. They didn't know how large this business would turn out to be. They had no idea. At the time, they're having their two airports. It says at the time, the two airport duty free concessions werecessions were a sideline businesses that might or might not make money. They stocked the duty-free shops and appointed managers, but travel in the Pacific was in its infancy, and the tiny stores did little business when they opened. Selling cars to the military and liquor to American tourists were still the big money to be made.

They were, however, prepared to take chances with whatever opportunities arose. So as the years go on, there's more and more competitors are coming in and the profits are going to keep decreasing. We didn't realize when we started this five bottle pack business that we didn't have any exclusivity on it. And in no time, there were 15 other companies trying to do the same as what we were doing, said Feeney. This is a description of the early days of the company. Chuck lived out of his briefcase. Everything was connected with business. We did a lot of things. I became part of what he called his teenage frontier approach to business. Chuck surrounded himself with smart college youngsters, mostly single and aggressive.

They call them aggressive conquerors of the world i was the oldest of his cowboys and i was always dampening i was always putting the damper on him saying to him are you out of your mind but it was a very exciting chapter in my life feeney was traveling around so much that he had no permanent address it's uh that's well let me read this quote to you first i didn't have a domicile at that stage it would have been super superfluous, he recalled. He really never stops living like this. He kind of is just a wanderer, even when he's very wealthy and even after he gives all his money away. He doesn't really stay in any place for very long. So I need to get to the point where they're running into problems.

So they're making a good amount of money. Even as competitors come in, obviously numbers are going to drop in a little bit, and I'll share that with you. But this is really wild. They're all young. They don't know what they're making a good amount of money, even as competitors come in. Obviously, numbers are going to drop in a little bit, and I'll share that with you. But this is really wild. They're all young. They don't know what they're doing. There's money coming in, coming out. Essentially, what I'm telling you is they have no cash control. And it was interesting as I read this.

I was like, wow, this reminds me of the early days of GM because, you know, money. There was, I think, only two profitable companies in car companies in gm i think it was cadillac and buick and so they would have to constantly take money from buick and pay it over here and send it over here and it was just very you just can't believe that one of the most one of the largest most successful companies of all time started out that way but it did and so essentially we're going to see on a small much smaller scale uh chuck's company is doing the same thing and this is going to get they there they're becoming they're going to become almost bankrupt the company was booming but was chronically short of cash we ain't got no money boys where's the money there were severe problems in the auto

sales division they were taking deposits from service personnel and using that money to pay for expenses and car deal car deliveries the directors were stunned they thought they had an excess of funds and that it was just moving around the company network. They decided to slash costs and to figure out what was going on. We had no idea what we were doing financially. If an office was open somewhere, whoever had money sent the money. It was crazy. There was no accounting. We sent money to Hong Kong or Hong Kong sent money to Canada, but there was no tying it together. With the business expanding so rapidly, they hadn't paid enough attention to bookkeeping. We hadn't spent any time on corporate structuring or anything like that. We were just simply busy

selling cars, liquor, making cash, putting the cash in the bank, cash in and cash out. And this was the reason I thought it was so humorous. I was like, wow, that sounds like a lot like GM. This is how they solved the problem. They passed around themselves, Alfred P. Sloan's 1963 best seller, My Years with General Motors. I read that book. That book is on Founders number 122. It's one of the most influential books, especially in America at this time, let's say post 60s and 70s, just a ton of founders and managers that read that book and influence it really influenced a lot of the way large companies operate to this day. But he says, so they pass around this book in which Sloan attributed his success in running GM to decentralized management and financial controls. Tourist internationals had the former, but not the latter. So they had decentralized management,

but they had no financial controls. And then you combine this, all these things are happening at the same time. This is going to lead them onto the precipice of bankruptcy. Okay. One of their problems was that the car business, and this is, so it's, you know, it's very easy for anybody to sell duty-free liquor, right? But they, maybe you could say, okay, I could, I could carve out a niche with the car, like selling cars or higher ticket items. We might be able to make, you know, maybe not the higher private profit margins, but more sales per order. Right. Not for long. The U.S. military is going to do a deal with car manufacturers. And then Feeney realizes I can't compete. I can't compete with this. And so we see this. One of the problems was that the car business was now coming up against serious competition from the U.S. military. They gave showroom space to three American car manufacturers, General Motors, Ford and Chrysler. And pay taxes on it that sort of closed us out on that no one's gonna you know why am i gonna buy from

i'll just go directly to ford like why would i deal with you guys and then this is the problem so at the same time this is happening his other businesses is being destroyed too feeney's mail order liquor business had been assailed by copycat competitors it too was in decline this is wild imagine running a business and having to experience this. They did 20 million in sales in 1963. The next year, sales plummeted to 5 million. And this is an example of the old adage, the old maxim, when it rains, it pours. He's getting it from every angle at the same time. In the midsummer of 1965, eight years after founding their company and seeing an expanse of one of the world's first global retailers, Chuck and Bob faced the perfect storm. The company was buffeted by a series of setbacks.

President Johnson's smashing of the five-pack business. There's a longer story in the book about for some reason Johnson from car manufacturers, all combined with bad bookkeeping and extensive overspending to provide a classic example of how an innovative business with visionary leadership can be sunk. There was a deficit of $1.6 million, which is peanuts today, but in those days was a massive amount of money. They were on the verge of going bankrupt, perhaps already were. Now that happened in 1965. Okay. Remember 1962 is when they had the foresight, Chuck had the foresight, hey, why don't we try to go to less crowded? And they started doing that and they won that bid for the Honolulu

airport. And that's where they realized, okay, at this point, they have to start from scratch. Everybody jumped ship. Everybody left them. It's now down back to the two original founders. They're going to close down their business, Turs International. They're going to close down the car business and they're going to focus on the duty-free stores they have. So it says Feeney and Miller were almost back to where they started. Miller recalled telling Feeney, well, Chuck, just you and I now, looks like shit's hit the fan. We've got to get out of this thing. It's back to you and I to figure out how to do it. There's still a chance of getting out of the mess, said Feeney. They could perhaps boost the cash flow from the duty-free shops in Hong Kong and Hawaii to clear off the debts.

Feeney had moments of despair. And this is him talking about it. Of course, it goes with the territory. But there wasn't much we could do. It was something we had started and we thought we were going to make a million dollars out of it. We had no choice but to salvage the company or to go over a cliff. This is Feeney winds up marrying, he met a French lady, marries her, her name's Danielle. And this is what she was talking about or how she describes Chuck during this crisis. Danielle Feeney saw a change in her husband during the crisis. To her,

Chuck had always seemed driven by a desire to succeed. When they got married, he never talked about money, only making a go of his business ventures. A fortune was not his real goal, she perceived. His work was his challenge. Now she saw his hopes had been shattered and his ego wounded. But that's an example. You got to take a negative and turn it into a positive.

Yeah, he's down, he's depressed. His ego is wounded, but it also could be super motivating. I don't like the state of my life life right now so i'll work really hard to change it right so it says feeney and miller they wind up figuring out the best path forward feeney miller dropped the names tourist international cars international now that since they were reduced to the retail ventures they adopted the name that feeney had bought they would now be known as duty-free shoppers um So let's go to the beginning of their business. It's going to

start small, but it's not going to stay that way. This description of this store in Hawaii, they're eventually going to pay Hawaii over a billion dollars for this concession. Listen to how it starts. The duty-free shops at Honolulu International Airport, when Chuck arrived to run it in late 1965, was little more than a market stall. Its floor area was just over 100 square feet. It had three four-foot counters that were held together with scotch tape. So Chuck is also in the right place at the right time because this is where Hawaii is starting to experience this huge influx of Japanese tourists. So not only are the numbers of Japanese tourists going to increase, but there is domestic tax policy decisions in Japan that

benefited Chuck's business. So it says the Japanese were genuinely astonished at the duty-free prices because of a policy of protectionism. Japan levied a 220% tax on imported premium cognac and whiskey. In Tokyo, a bottle of whiskey that retailed for $25 only cost $6 in Chuck Shop. A bottle of cognac that would cost $50 in Tokyo cost $10 at Chuck Shop. Within a year, the trickle of japanese tourists turned into a stream and then a river okay so now i want to talk about there's very specific examples in the book about very about early problems they had to figure out how to overcome they don't figure out these problems they're never going to grow into the gigantic profitable business that they become. So there's a lesser known cognac brand, and I'm going to

pronounce it Caymus. That's the way I'm going to say it. I have no idea if this is correct. It's a multiple generation. I think this is the guy that's going to wind up passing through Hawaii. He's running the company at the time. I think he's like the fourth generation. They have very little market share. And so he comes through and he pulls up. He's like, why are you guys not selling my cognac? OK. And this is going to be so important because this relationship is going to wind up to a side business that's going to generate, I think, six to seven hundred million in profit over 20 years to the to the four owners of DFS. Okay. But we got to also remember the reputation that duty-free sellers have with luxury brands,

which is really funny because one of the best luxury brands in the world is going to buy it about, what, maybe 20 years from now. So it's very interesting. So it says, when Michael Kamis turned up in Hawaii in 1965, duty-free shoppers was having trouble getting credit from most suppliers.

Okay, this is a huge problem they have to overcome. They need, I want you to front your product to me. I will sell it, but I don't have the money to buy it from you. Send it to me. When I sell it, I'll give you money, right? Now, so that's one problem to overcome. Obviously, the second problem is, there's going to be a number of problems here. But in this example, the second problem is they just got a really, you know, really crappy reputation. They think these guys are like drug dealers, scam artists, that kind of thing.

If you were becoming a success, they would give you credit. But if you were just starting out, they wouldn't, said Feeney. So he's talking about that he's got chicken and egg problem there, right? The duty-free business was seen by most luxury good manufacturers as a rather shady operation run by hustlers in small cramped shops. The elite sellers felt their brands would be diminished by association with a discount store. And this is the punchline. People didn't understand it. And therefore, if they didn't understand it, there must be something wrong with it. Okay. So let's go back to Michael Kamis is in this store. It's like, Hey, why aren't you carrying my cognac? So Chuck is having a conversation with them. He's like, I need credit, man. And so Chuck convinces Michael, right? Give

me, give me beneficial terms. Give me 120 day credit and sell it to me at $2 a bottle. Check, check, check. Chuck sells it in the store for $10, $10 a bottle. Okay. So he's saying, Hey, give me, give me 120 to 120 days to put you back and give it to me at $2 a bottle. I'm going to read this section to you. And then I'm going to talk about how it's, it's the same fricking idea that Claude Hopkins used, uh, when he was advertising Goodyear tires. He said, now it says Chuck, he said he needed to buy directly from the cognac maker and he needed generous credit in return. OK, so he's not just asking, hey, give me $120 or 120 credit. Give me good deals on it. Right. He says in return, he's caught. This is what Claude says. Start with service. In return, DFS would promote the cognac and give it a much needed distribution network in the Pacific and the Far East, where the Japanese were beginning to travel around and spend in small numbers, primarily in Europe in small numbers. Chuck is saying, hey, we're building this gigantic, we're going to build this gigantic network all throughout Asia. That's where

most of his bread and butter, where he makes his money, right? He says, you have no presence there. You don't really exist in the mind of Asian consumers. I will fix that. Caymus winds up taking him up on this offer. And over the next few years, I think they've become the number one cognac brand, either number one or number two, somewhere towards the top cognac brand in asia so it was really smart the reason i say this compares to what claude hopkins did with goodyear because he's like okay no one was advertising tires at the time he's doing the advertising for goodyear corporation good uh dealers at the time would say hey um they would just order tires from goodyear as their customers needed it and claude hopkins wanted to find a way to incentivize the dealers to buy more

stock to keep stock and he says listen if you'll spend 250 bucks on on tire stock before you need it we're going to do this giant advertising campaign and we will list all the people all the different dealers that um that wind up purchasing at least 250 dollars worth of tire stock from us and he winds up signing up like I't know, 30,000 customers in a few months. Why? Because it was, he started with service. He's like, listen, I need you to do something for me, but I didn't just say, Hey, buy $250 worth of tire for me before you need it. Who's going to respond to that pitch? Nobody. But if you say, Hey, if you do this, I'm running up, excuse me. If you say I'm running an advertising campaign to get included, all you have to do is do this, that completely changes it. And that's, that's a lot more compelling to people. And Chuck

would not have succeeded. It's like, oh, okay. Hey, thanks for coming to my store. Oh, I don't, I'll sell it, but you got to give me to give it to me at $2 a bottle. And let me pay you 120 days days from now that you might take it up on the order. But if you say, hey, I'm going to build out this giant network. You're not, your brand's not really selling in Asia. We have all this information showing that Asian tourism is rising, that they're having more disposable income. Your brand could benefit from that. So let's find a way to work out this mutually beneficial agreement. That's just a lot better. Now, the reason I say this is really important. Okay. So you're seeing how Chuck thinks, right? There's a series of these problems. Maybe they're large problems, maybe they're small problems, but they're problems nonetheless. And if he doesn't overcome them, he's not going to

grow and to be as profitable as he is in the future. Here's another problem. So now he doesn't need credit from liquor manufacturers, right? But banks aren't lending him money because why? Duty-free is seen as like, you know, you're a hustler. You're a few steps above a drug dealer. So they have, there's another problem to overcome. We need banks to give us credit. We don't just need manufacturers to give us credit. We need banks to give us credit. They come up with a crazy workaround here.

And this comes as a direct result of the relationship that he's building with the head, Michael Kamis, Kamis Cognac. So he says, okay, let's do this. They're going to use their direct, now that Chuck has established a direct relationship between DFS and the Cognac company, they're going to use it as a way to get banks to extend them the badly needed credit they need to grow their business, but they don't get credit for their stores. Banks are not willing to do that, right? They get credit for setting up a company. It's going to be set up, I think, in the Bahamas. They get credit for setting up a company that resells cognac to other duty-free companies. It's a very creative way to get money. And this is what I just referenced earlier. This separate company is going to wind up making the partners, the four partners of

DFS, $600 to $700 million. I think it's over 20 or 25 years, something like that. And the same amount of money is like a side business, right? DFS would set up an agency in the Bahamas to become exclusive worldwide distributors for cognac. So they take that contract and they go to financiers to different investors and banks. The agencies would purchase large stocks from Michael Kamas, which would be sold to which we sold now to this this separate company. I forgot what it's called. And and then they in turn, that company would sell to DFS and other duty free companies in Asia, which would create tax free cash profits for the DFS owners in the Bahamas. So this is another example of everybody benefiting from this example, or from this arrangement, rather. Camus would get

his distribution network. Feeney would get cash and money flowing through NASA, and the money would get, Feeney would get cash, and the money flowing through NASA would guarantee Alan Butler security for bridging the loan. So all the three parties, the financier, the manufacturer, and Feeney and his partners are all benefiting. It's a very unique way. And then once they start getting a little bit of credit, it's not like they have to. I mean, this is a problem they had overcome. But the profit margins on what they're selling are so large that they don't really tap into, especially as it gets

going. Now the profits are very small. I'm going to read that to you now. So they do need some credit, but eventually they're going to be able to finance almost everything just from the sales of the business. So they avoid bankruptcy. They make a small profit. The first dividend was $31,250. It was divided among the four owners in 1967. So Chuck and Feeney get $12,000. They have a third partner, Alan Parker, he gets six grand and Tony gets $780. Now, that's the first dividend. That's in 1967. By 1980s, they're turning over billions. How crazy is this? Tony, I think at the time, I think he's got like a 2% stake, something like that. Tony, he just made $780 in his first dividend from the company, right? He is going to hit the Forbes 400 with even his tiny, tiny percentage. So this

gives you an idea of how much this is going to grow. Another creative solution they have. So they rely on tour guides. They give concierge and hotels, tour guides. They're all getting kickbacks, right? This is very common. this is happening in hong kong but also happens everywhere um so they're they incentivize the tour guides to bring them to the shop because the tour guides gets gets a kickback right but chuck's company wants them to go to come to the store more than once and the tour guides refuse so this is dfs's solution they went to the agents again uh they went to the agents to get them to bring the japanese shoppers back a second time a lot of the agents resisted they wouldn't give me the they wouldn't give me this bullshit they've already been back to your store so what excuse have i got to bring them back to

the same store so that's the i wasn't clear that's the that's what they're hearing from the tour guides like no i'm not doing this like why i've already sent them there why would i go back again they said okay we'll build another one so that you visit this one and then you go to that one which is what DFS did. The company opened a second downtown store. They called it the Repeater Store. The way the company, once it gets up and running, doesn't need a lot of money. So all the profits could go to the owners. Duty-free shops began to make substantial profits.

The owner agreed to take 90 percent of the dividends in cash every year. This is a practice that would continue for a quarter of a century. We didn't want cash to build up in the company, said Feeney. So from the time the DFS worked, we did nothing but distribute the money out in dividends. So they're living in Hong Kong. Now they moved to Hong Kong and they're balling. They're making a lot of money. And this was very interesting because this is going to change.

Feeney's began sharing a life with wealthy and extravagant people they bought a jaguar and a small boat they employed a driver and several other domestic workers they joined clubs and gave parties phoenix in those days had two tuxedos they pet they patronized one of the most exclusive and prestigious clubs in the colony his wife found it easy to live in luxury in hong kong she had domestic help construction and food was cheap she brought jewelry and antiques and made the apartment a showcase of decor and beautiful objects so it's important to note every all the other shareholders are not like eventually feeney realizes i don't like this lifestyle i don't like having money he felt yeah i don't even his daughter says he was self-flagellating is the way she would describe him later in life like he

just felt guilty about it um and so that's going to eventually it's going to cause a rift between all his partners you know they said they're still worth billions to stay um his wife they're eventually you know she's they're going to wind up being divorced i'll tell you more about that in a little bit but it says the time when by phoenix started to rethink his attitude about that kind of life he was so far removed from the life he had lived the life that his family and friends continue to live in Elizabeth, New Jersey, and the values of thrift that were imbued in him from his childhood. It only became clear to Danielle afterward how strongly her American husband felt that he did not belong to the world of black tie dinners and leisure yachts and how much he was coming to hate ostentation and despise the life of wealthy socialites and so this is where we start to see this development this development of philosophy he continues to this day i think he's 52 53 when he gives all his money away he's

89 now um he gives and i like how he set up his foundation where it's not like it's not doesn't happen in perpetuity uh they tried they spent all i think closed in 2016 they up his foundation where it's not like it's not doesn't happen in perpetuity. They tried it. They spent all I think closed in 2016. They spent all of it. It's like I'm not we're not keeping this on. We're going to do the he was a big proponent of giving white living. And he did not like the idea of these these these foundations that calcify over time. And they stop acting entrepreneurial in their giving. And there's a lot of grift, he said. And, you know have people, there's examples in the book of people who are supposedly working for charities, making a couple million dollars a year, taking limos to lunch.

And, you know, just you can clearly see that what they profess to the outside world does not match up with their actions. Let's put it that way. All right. So it says he was even beginning to have doubts about his right to have so much money. When asked if he was rich at this point in his life, he replied, how much is rich? Beyond all expectations? Beyond all deserving? I just reached the conclusion with myself that money, buying boats, and all the trimmings didn't appeal to me. He was consciously cultivating a frugal lifestyle, wearing a cheap watch and buying a secondhand car. He insisted that he and his family fly economy class. He reluctantly attended a few

black tie dinners in paris but when a picture of him and danielle appeared in the media he was furious he stopped attending such events and broke off all connection with the wealthy social group the couple had started to become part of um so this is where i mean he's just very uh he's unlike anybody else that i've studied so far he's a he's a paradox because it's like okay he did he clearly doesn't like having money but he likes making money so it's paradox okay he did he clearly doesn't like having money but he likes making money so it's paradoxically while feeney became more frugal he was pushing himself ever harder to build up the business that he was making himself even richer he seemed more driven more

involved in his professional interests he read business books and biographies of successful businessmen he was constantly traveling associates remembery in those days as a driven man, constantly searching for new opportunities, constantly traveling, and constantly studying. This is more about how Chuck worked at this time. He was very focused and serious about business. He brings a focus on business that I hadn't experienced before. If something doesn't work, he has four or so different thoughts.

He has a multifaceted way of looking at business. He is detail-oriented in his approach. He has a multifaceted way of looking at business. He is detail oriented in his approach. He would visit the main store. He would talk to the salespeople and check on display and pricing. The following morning, he would have a list of things to discuss. A lot of managers like to talk down and don't really listen. Chuck listened to the salespeople. So he's constantly looking for new information, not only through books, but through talking to people.

He just sucks up. What's that? They call them a suction pump, a suction cup. I can't remember. Suction pump, I think is what it was. I think it was Henry Kaiser on the book Freedom's Forge. I would say Chuck's very much the same way. This is more about what motivated him. He was intensely competitive, but his motivation was derived from the creative challenge of applying a better approach to something that had already existed. His definition of success was not having all the money one desired, but being able to raise a happy, healthy family. There has to be a balance in life, he said,

a balance of business, family, and the opportunity to learn and teach. So this is when his net worth is about like 250 million, something like that at the time. He's seriously considered giving it all away. He winds up the closest person to him and they wind up having falling out later. This guy named Harvey Dale. He's an attorney and he's really influenced Chuck's view on philanthropy. And he does it by using examples of like John D. Rockefeller, Andrew Carnegie. So he sends him a quote that Frederick Gates gave to John D. Rockefeller. He says, Mr. Rockefeller, your fortune is rolling up like an avalanche. You must distribute it faster than it grows.

If you do not, it will crush you and your children and your children's children. They discuss the writings of Andrew Carnegie. I would say Carnegie is the most influential person, like historical person on Feeney's thinking on this. If you haven't listened to that, I've done two podcasts on him, number 73 and number 74. So it says, Carnegie accumulated a massive fortune and gave away much of it during his lifetime

to fund the establishments of libraries, schools, and universities. Feeney reread several times Carnegie's famous essay. They're calling it wealth. I always had it referred to as the gospel of wealth. I'm pretty sure it's the same thing. They're calling it wealth. I always had it referred to as the gospel of wealth. I'm pretty sure it's the same thing. I've read it too. Carnegie argued that there are three ways to dispose of surplus wealth. It could be left to the family, given to the government, or given away while alive. The first was motivated by vanity and misguided

affection for the children. He felt that you would burden them and it could be a curse to give too much money to your kids. The second required the owner to die before the wealth was used and then his wishes could be thwarted. He's dead. Can't do anything about it, right? The third ensured that the surplus wealth was put to good use and not dispersed over hundreds of years in trifling amounts. The best way to use wealth, concluded Carnegie, was to provide the ladders upon which the aspiring can rise, such as universities and libraries. So, you know, a lot of his giving, he likes to build brick and mortar like education systems. He'll pay for people's colleges, Feeney that is. But this idea of, you know, if you're aspiring, there's a lot of poor,

smart, determined people that don't have access. So if I can use my wealth to give them access, that's a good thing. And he does this all over the world. This is in Vietnam, Ireland, America, Australia, everywhere. I think his foundation, by the time they're done, they gave away $7 billion, something like that. It's a lot of money. Carnegie also cautioned that a man of wealth should set an example of modest, unostentatious living, shunning displays of extravagance. What Carnegie advocated was to have a profound effect on Feeney. I do remember somebody giving me a copy of his speech that Carney had given at Cornell.

And for some reason, I researched his speech and read two books on Carnegie. And so Carnegie continues to, once he becomes influenced by, excuse me, Feeney, once he becomes influenced by Carnegie, he passes that on. I always think about that great quote from Bob Noyce, knowledge is power, knowledge shared is power multiplied. And we see that Feeney. Now, the reason I'm reading this section to you, though, is because I think Feeney has a problem that's very common with people is like you find you can't express like there's a thought that you have in your mind, but you can't find the words to express it as eloquently as other people have. So you see this like music sometimes is able to express how you feel better. Writing can sometimes describe your feeling or your point of view better than you can. And so Feeney was definitely one of those people.

It says Feeney gave all the people involved in his foundation a copy of Carnegie's essay on wealth to read. Although brilliant when talking about business, Feeney was never good at articulating his philosophy on life. It embarrassed him. Instead of explaining what was going on in his mind, he'd give friends and family members articles from magazines and newspapers. They had to infer the message.

Giving out copies of Carnegie's essay was a clever way of enlightening them on the essence of his giving. He also kept a copy of the essay on his desk. And this is an important point, like people can influence you, but you don't have to copy everything they do. They're not, we want their ideas. We're not idolizing these people. Says Carnegie was not a precise role model for Chuck Feeney uh carnegie made his fortune through harsh and ruthless business methods and he loved having his name on libraries and schools neither of which applied to feeney but his basic message was clear give while alive

and so he's going to give away his fortune he puts into his foundation he doesn't tell anybody winds up becoming public because uh there is a lawsuit between the partners because Chuck wants to sell to LVMH and some of them don't. And it's just, you know, this is a tale as old as time. It's clearly something to know that partners grew apart as they made more money. The more successful they were, the weaker the bonds of friendship became. Things had changed since the 1970s when the company was still young, energetic, entrepreneurial, and fun. And we could argue and debate each other during the day and then go out to dinner that night with our families and never mention work. So he's going to give everything away. He's going to hold back because I don't think his wife was on board. And we see this

later on because she gets more money at the end of the divorce. But says Chuck Feeney reached an agreement with Danielle that when they came back to sign everything away, 40 million in the houses would be held back for her and the children and the money paid out over a few years? It was a figure thought necessary to take care of the houses, the kids, the education, clothes, boats, artwork and jewelry. And I don't know for myself, but who wants to close boats and jewelry? Well, as we see later on, his wife liked that lifestyle. It's just and that that causes a rift and they're going to get divorced a few years after this. So he did agree. OK, I'm not going to give away every—he put away almost all of his assets, and this money and the houses are in her name, not his, which is really interesting.

She regrets this later on, and then when they get divorced, she winds up suing for more money. This is more about Chuck's desire for privacy. We see the same, like he definitely moved in secret during his business years and in giving. Eventually, the lawsuit comes out and then he realizes he can't keep staying anonymous if he wants to influence other billionaires to give while they're alive. But this is more about his desire for privacy. From the start, Chuck Feeney was adamant that he did not want recognition for his giving. There would be no plaques or names on the buildings he funded.

No thank you dinners, no honorary degrees. People should not know that he was behind the foundation. Beneficiaries should not even be told his name. While this stemmed from an absence of a demanding ego, being secretive had become almost second nature to Feeney. Practically everything he undertook in his life depended on keeping confidences and maintaining a low profile. Feeney insisted at meetings, don't go out and blow your horns about how big and successful we are. The less you speak and the less ostentatious you are, the fewer people who will be angry and jealous.

So that is something that Ben Franklin said almost 300 years ago. In his biography, he talks about that. You're going to be a lot more successful if you can avoid making other people envy or jealous of you. And so we see Feeney echoing the same idea that Franklin had a couple of centuries before. At this time, the four owners are getting dividends, but there's a different CEO running the company. And this guy, he does what is very, very common. You know, a successful CEO, he wants attention. And he gives an interview, and the owners are very not happy. The owners are not happy. The Great Department stores are a century old, but we were born with the jet.

Enthused Bellamy, that's his name, in an interview published in the Financial Times, explaining how the company had created an unequal sales machine to cash in on Japanese consumer culture. He explained how DFS had employed shrewd marketing to get Japanese patronage. Why are you telling people our playbook? We're a private company. Shut up. When the DFS owners saw the article, their reaction was explosive. Feeney was agitated. The partners knew that one of the reasons for DFS's success was that its international operations were a mystery to outsiders. No one quite knew how duty-free worked or how big DFS was. And they're really

going to know when these bids become public. It says, above all, the DFS owners wanted to keep secret the amount they were taking out of the company in dividends. This is bananas. In 1986, it was a staggering $186 million. One year, $186 million in cash, in profit. Feeney received $39 million of the $186 million. The size of the duty-free opportunity is just hard to comprehend when you're reading this book. Here's an example. This is just one store. Sales at the Waikiki store had soared to $400 million a year. They were making $20,000 a square foot in revenue. And their bid shows just how valuable the store was. This is what I referenced earlier. They were offering to pay the state of Hawaii $2 million every three days for the next five years just for the right to run a couple of stores. That's insane.

$2 million every three years for five years. So they wind up the bid they put in. They overbid by a long shot, but there was a silver lining. And again, this is not like there's no coming in second place. If you lose these bids, your company's gone. You have to win the bid. So there's a lot of risk here. The DFS owners sat there aghast. They had overbid by $779 million. We left a shitload of money on the table. Three quarters of a billion dollars, they said. What happened? I wish I knew. We were rather foolish. Maybe we

were all making too much money. There was one upside apart from winning the concession, though. Never again was anybody going to come in and bid against us. Five years later, there was no counter bid. Yeah, if you're overbidding by three quarters of a billion dollars, I don't know how much competition you're going to have. Looking back years later, Feeney defended the bid. The worst thing to do was lose. The truth was that we could pay this amount and we could still make huge profits. So not only at this point, all the profits that he's getting is going into his foundation,

but he's also investing it rather well. And he's got a couple other side businesses. This guy just couldn't help himself and make a lot of money. The following year, 1988, even in the wake of the huge bid in Hawaii, the cash dividend paid to the owners from the profits of the duty-free stores was $400 million. This is a private company owned by just four people 400 million of this chuck received 155 million so really says chuck received but his foundation that money goes to his foundation okay on top of the profits from its own business portfolio and multi-million dollar dividends

from the the camas agency that other business I told you about. Check this out. The foundation was raking in more than $2 million every five days in cash. That's just Chuck. That's not his other three partners. The foundation was raking in more than $2 million every five days in cash. In the last decade before 1988, they're going to sell the company in the 90s,

before 1988, annual sales had increased from $278 million to $1.5 billion. It was an astonishing growth rate of almost 20% per year. What only the Ford owners knew was that during that period, they had received cash dividends of $867 million. So that's from 78 to 88, right? They received almost $900 million in cash, and Chuck took $330 million of that. Now, here's the crazy part. And again, I just think this just speaks to human nature, something we should know. Even while making hundreds of millions of dollars, the four partners find a way to fight over little things.

So it says, we wanted to protect the integrity of the company and not have a shareholder substitute that would tear dfs to shreds it was too valuable of an asset to play games with so they sign a contract together where if they have a disagreement they're going to bring in what they call the wise man it's an arbitrator and they they bring in this arbitrator and he's just like what the hell is wrong with you guys he says now he sat the four partners down and told them you jerks you've got the greatest thing going come on you've got to get it together and find a method of resolving disputes and so they're not going to accomplish this they're going to be a huge fight over whether to sell the company or not right before this happens chuck is going to wind up he's got like five kids i think they've been married for 25 30 years and this is crazy and sad in october 1990 chuck and danielle had separated

over his close relationship with his longtime german assistant helga i think he remarries his secretary essentially who often traveled with him they had been leading increasingly separate and different lives danielle had known for some time from her husband's depressed and angry moods at home that her relationship with him was over and again he's depressed and angry at a time when he's making hundreds like what does that tell you about us? We are very complex beings. Apparently, Feeney had been spending less and less time at the family's houses, and he made a point of never going on board the yacht that Danielle had purchased. Nor did he set foot in the elegant mansion, which served as a family home on the French Riviera.

The children were immensely saddened by the split. They were close to both parents. Their contrast between the mother and father was nevertheless obvious to them. He became a frugal, self-flagellating philanthropist who craved anonymity, whereas Danielle had a big yacht and a big personality. Feeney told his children, now all young adults, that he would be changing his life, that he would be constantly on the road, living only a few weeks at most in any one place at any one time. He gave each a binder with articles explaining what motivated his giving. One was Carnegie's essay on wealth. Another was about the excesses of the Sultan of Brunei, who spent a million dollars on a children's birthday. This was his singular ways of telling them about himself and his motivations.

So now Danielle was like, okay, I don't like the agreement that we had six years earlier. And so they sue. And it says, a new settlement was reached that gave Danielle an additional $60 million that comes from the foundation. And then another $40 million that was pledged over five years to a family charitable foundation. Feeney insisted that Danielle get all the family homes in Paris, London, the south of France, Connecticut, Hawaii, New York. He wanted them to stay in the family to avoid any bitterness, he said.

He took nothing for himself. Okay, so at this time, Chuck is the one that leads the deal with Bernard Arnault, the guy that runs LVMH. And they agreed a purchase price. It's right around $4 billion, somewhere in there, three and a half, $4 billion. That purchase price, I think he gets like 1.6 billion.

Two partners, him and another partner agree to sell. The other partner do not. And so again, they have a fight. This is the last time they ever meet together, which is just insane considering they built one of the most profitable private businesses. Says the wise man, the arbitrator rather expresses frustration with the impasse two people want to sell two do not this has happened before in the history of the world and people have worked it out it doesn't require a rocket scientist only a recognition of reality and he's like don't why you guys they're going to end up suing each other he's like a protracted legal wrangle could expose dfs's dirty linen he warned and if he were forced to arbitrate,

the inner workings of one of the most secretive companies in the world would be revealed. His words had no effect. So it says at this time, Miller, which is the main, you know, Feeney and Miller, their relationship disintegrated a long time before this. But, you know, as you recall, these are the two that started the company.

Feeney recalled that Miller went storming out. It was the last occasion that the four guys who presided for three decades over one of the most successful retail operations in the 20th century would meet together in one room uh miller's the only one that doesn't sell out he's on the side with tony every tony fought the deal the whole way on the very last day he's like all right yes and then later on he says chuck was right all along um so this is what he says he conceded that he later on he says chuck was right all along um so this is what he says he conceded that he had been wrong to oppose the sale all along chuck was a genius on timing he had a great sense of the unknown it feel that something wasn't right and somewhere

and he was right because this company winds up going losing going down by quite a bit it happened more than once in our company that that he came in meaning feeney, and said, let's do something. And we took a different track and he was right. Arnault had in fact required a declining asset. In the 18 months, DFS sales dropped from 3 billion to 1.5 billion. With Japan's recession, an Asian economic downturn, and the weakening of European currencies, the core DFS customers were spending less dividends dried up a year after the sale 320 people 320 members of the staff were laid off and hong kong had its first ever loss and this is bob miller on his relationship um about what he calls bullshit and lawyers and i just think there's a lot of, um, like wisdom in his experience. And hopefully if we ever get in a situation like this,

whether the numbers are this big or not, you know, to try to avoid it because he has regrets. Like all the stuff we did, the legal stuff was just, it was stupid. It was useless. We should have just figured it out ourselves.

So again, he didn't know that maybe it's obvious to the wise man, tell him, Hey, what are you guys doing? You're screwing this up. Just talk it out, figure it out.

And you maybe have to go through this experience to learn dang he's right we were distant at that time in any case i really hadn't seen chuck since 1996 all partnerships break up at some stage even the beatles arguments about who contributed most of the success of the partnerships and then the wives get involved and it gets extremely complicated we've got more we had more money than we knew what to do with. So everybody was happy. Forget it. It's just not worth worrying about. LVMH bought out Chuck and Allen at a very good price.

God bless them if they are happy with their money. Do I regret not selling out at the same time? I don't know. I have thought a lot about it. I don't know if all that money in a lump sum would have made me any happier than I am now. I really love DFS and the company, but all the legal things we did with the wise man, to be quite frank, it was all pure bullshit. We didn't really need all that fancy legal stuff. The lawyers have a way of dragging you in and making things more complicated than they are. We were paying huge legal bills at the time,

and I don't think any of us, or excuse me, I don't think any of that would have affected the outcome. When the dust settles, you find out it was all just a huge waste of time, energy, and money. And I think this is a good way to close on just a quick summary on the history of the company. The success of DFS arose from the fact that we were in the right place at the right time. Nobody ever put a penny in the business. We took out $8 billion. Nobody

is that smart. You've just got to have a lot of things going your way. And that is where I'll leave it. If you want the full story, I'll leave a link in the show notes. If you buy the book using that link, you'll be supporting the podcast at the same time. The book is, I would say 60, I don't know, 70% of the book is really not about the business. It's about what happens after, all the work he does with philanthropy. There's obviously a lot more parts I skipped over about his early life and everything else.

I do think it was a really unique perspective, really unique story. I can see why the book is so highly recommended. But if you want to read the full story, there's a link in the show notes for you. Also, a lot of new listeners are discovering the podcast from existing subscribers, buying gift subscriptions for friends, for coworkers. So if you want to do that, I'll leave a handy link down there as well. It feels good to do something nice for somebody and it helps the podcast at the same time. That is 171 books down, 1,000 to go.

And I'll talk to you again soon.