Founders - #184 Isadore Sharp (Four Seasons)

Episode Date: June 6, 2021

What I learned from reading Four Seasons: The Story of a Business Philosophy by Isadore Sharp.----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----[0:01] When I built my first hotel I knew nothing about the hotel business. [4:28] He refused to settle for the pragmatic dictum of maturity. Issy also skipped skepticism and "Let's be sensible." People said he was naïve, with a kind of glandular optimism. Perhaps. But as it turned out naïveté served him well. [6:32] Early on he made some audacious statements that sounded like pipe dreams. He told me once that his aim was to make the name Four Seasons a worldwide brand, synonymous with luxury, like Rolls-Royce.[8:39]Once, when Dad was excavating a basement with horse and plough, he broke his shoulder. But he shrugged it off and uncomplainingly kept on working, something I never forgot. [26:52] I decided to go ahead. I foresaw only one difficulty, but it loomed large: How do you build a two-hundred-room resort without any money? This was literal fact. My earnings barely covered my rising family costs. [35:23] I asked Sir Gerald Glover, "How do you keep your lawn so perfect?"  “No problem”, he replied. “You just cut it every week for three hundred years.” [43:48] I owe my success to my freedom. I think for me independence has an incalculable value. [44:44] All business proceeds on belief: Trying to run a company without a set of beliefs is like trying to steer a ship without a rudder. [56:03] The experience made me realize what I would really like to do: create a group of the best hotels in the world. And what we really want to do is usually what we do best.[56:51] We will not be all things to all people. We will specialize. ----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

So much of long-term success is based on intangibles, beliefs and ideas, invisible concepts. People often ask me about my original vision for Four Seasons. Well, the truth is, there was no vision or grand scheme. In 1961, when I built my first hotel, I knew nothing about the hotel business. My only professional experience was in building apartments and houses. I was just a builder, and the hotel was in building apartments and houses. I was just a builder, and the hotel was just another real estate deal. I never thought that this was going to be a career, nor did I ever imagine I would one day find myself building and managing the largest and most prestigious group of five-star hotels in the world.

I approached the business of innkeeping from a customer's perspective. I was the host, and the customers were my houseguests. I decided what to build and how to operate by asking myself, what would the customers consider important? What would the customers recognize as value? Because if we give them good value, they will pay what they think it's worth. That was the first strategy, and it continues to this day.

The company evolved slowly at first, and I'll admit I made a few mistakes along the way, but I never made the mistake of putting profit ahead of people. Looking back over the last 40 years, I've identified the four key strategic decisions that form the rock-solid foundation of Four Seasons. They are now known as the four pillars of our business model. They are quality, service, culture, and brand. Curiously, the last of these four key objectives was set way back in 1986. Sometimes people ask me, does that mean that you haven't thought of anything new since then? And I tell them that we make new initiatives every year, but nothing so far has

been as fundamentally important. Our main focus is to continue refining and reinforcing those original four pillars. It's not as though lightning struck and I said, I've got an idea, and we put it all together in a day. These decisions evolved over 25 years, each decision supporting the one before. Over the years, we've initiated many new ideas that have been copied and are now the norm in the industry. But the one idea that our customers value the most cannot be copied. The consistent quality of our exceptional service. That service is based on a corporate culture, and a culture cannot be mandated as a policy. It must grow from within, based on the actions of the company's people over a long period of time.

That was an excerpt from the introduction of the book that I'm going to talk to you about today, which is Four Seasons, the story of a business philosophy, and it was written by the founder of Four Seasons, Isidore Sharp. And real quick, let me go back to those last few sentences in the introduction, where he says that the service is based on our culture culture and culture cannot be mandated as a policy. It grows from within based on the actions of the company's people. The note I jotted down on that page, too, was this is the same for individuals. We become the actions that we take over an extended period of time. OK, so I want to start. We're giving you some insights into the personality of Isidore Sharp.

This is actually his wife wrote the foreword of the book. So before I get into his early life, I want to tell you a little bit about how she perceives her husband. And she says, Isidore has always been a dreamer. In the classroom, he spent more time gazing out the window than studying the blackboard. She talks about some of like he had a dream of being like a champion, like an Olympic pole vaulter when he was younger. And there's one sentence I want to pull out from that section. He saw no reason why this goal should not be within his reach. I remember that part for later because he has wildly audacious, audacious rather, and ambitious

goals. And everybody around him is telling me you're crazy. But it's funny that, you know, even eight years old, he's like, well, I don't understand why could this goal, if I really want to do something, why can't it be within my reach? When people asked him who served as his mentors and role models, he answers, those men who volunteered for the army in wartime, they put their lives on the line for their principles. So he's referencing, he's referencing World War II. His family's Jewish. They actually live in Auschwitz before it's turned into a concentration camp and they have to escape to Canada. And that also plays a role in some decisions he makes later on in his career, which I'll talk to you about a little bit.

He refused. This is one of my favorite ideas of his. He refused to settle for the pragmatic dictum of maturity. He also skipped skepticism and let's be sensible. People said he was naive with a kind of glandular optimism. Perhaps, but as it turned out, naivete, which others described as naivete, served him well. He made a lot of brash decisions against the trends and the pundits of vice, stubbornly trusting in his intuition and more ideas and aphorisms from his philosophy. The only thing you can control, he says, is your attitude. He has a strong belief in his decisions, which to him are just common sense. Bucking the naysayers can be a lonely responsibility, but his parents taught him to welcome responsibility.

Over the years, I've had the pleasure of watching his mind work. In bed, before first light, I sometimes find him with arms crossed behind his head, gazing up at the ceiling and weighing possibilities. And now she's going to quote one of his friends when he's talking about what one of the traits that Izzy has that he most admires. And he says he applauds Izzy's capacity for holding two opposing ideas while simultaneously producing a synthesis that is superior to either idea. And I love that idea of taking other people's ideas, synthesizing them, create something new. There's a founder of an online community called Indie Hackers, and his name's Cortland Allen. And

I saw that he wrote something the other day that I thought was fantastic. And he studied tons of different entrepreneurs and founders. And he says, to have great ideas, consume great ideas. The best thinkers are remixers. And we're going to see as we study the life story of Izzy that he did exactly that. More back to let me go back to his wife's description of him. He exudes energy and intellectual vigor that is contagious and constant. He'll never respond in anger and therefore he has no need for remorse. Nothing gets his dander up. And finally, just one more quote from this section written by his wife. dreams. He told me that his aim was to make the name Four Seasons a worldwide brand, synonymous with luxury like Rolls Royce. And she points out why this is so audacious at the time

when he made the statement, because he only had 10 hotels. Okay, so I want to get into his early life. If you read this book, you'll discover just how resourceful Izzy was. And I can't help but think that a lot of his resourcefulness was kind of forced on him by his parents and the way they chose to raise him, which is really interesting. But I want to give you some examples there. I was hit on the forehead with a stone. I rushed home into my house crying, blood running down my cheek. My mother gave me a quick look and slapped me across the face. She had seen at once that I wasn't badly hurt. Look at what you did to your shirts, he said. And then he's describing his mother's parenting technique. Understanding and practical. Always acting with common sense.

And then he's describing his mother's parenting technique. What people now call tough love. I remember walking alone to kindergarten, trying to figure out how to get there. My parents never thought of taking me or picking me up. Not only did they have too little time, they expected us to be as self-sufficient as they were as youngsters and then he gives a description of his dad he winds up working uh for his dad's small construction company uh i think it was like a three-person construction company when izzy takes over um but it's his dad's one of the most positive influences on his life he said he was the kindest man he ever met never said a harsh word to anybody and he lived to 102 and he um

one thing he learned from his father was the value of hard work and just not complaining. And so he's still a little kid at the time. His family does not have a lot of money by any means. They're going to wind up having to, they lose almost everything. They have to wind up living with their family members. But even when he had no money, his father taught him to do the right thing and to make sure that you're always doing the best job possible. So he says once, often he took jobs anywhere he could get them. Once when he was excavating a basement with a horse and a plow, he broke his shoulder, but he shrugged it off and didn't complain. Kept on working. That's something I never forgot.

More on this forced resourcefulness. His mother. My mother was prudently frugal. Growing up with three sisters, I had some unusual hand-me-downs. So that's not the first time I've seen this. Actually, what surprised me when I was reading, I think it was Titan, the biography of John D. Rockefeller, talks about even he was so frugal, even when he was beyond wealthy, he insisted to do hand-me-downs for all of his kids' clothing. And he had a son. And his son would have to wear his older sister's dresses, which I thought was a little bizarre. So I'm fast-forwarding the story. They wind up losing almost all the money they had, the little money they have.

They have to move in with family. And it says his mother called her sister Sarah. We're coming to stay with you, she said, which we did. There were a family of six and a dog, as we were. And for six months, we all lived together in a small three-bedroom house with only one bathroom. So that's 12 people and a dog, three-bedroom house, and one bathroom. By the time I reached my mid-teens, we had moved some 15 times. That meant changing schools, as always, on our own.

And being trusted that we knew what to do made us, I believe, independent at a very early age. So they can't afford to take vacations, as you can imagine. Slowly but surely, his dad builds up a smaller, you know, they're not unbelievably poor. They have their own place to live. In fact, because they couldn't find a, they had no money to rent like a vacation cottage, which is very common at this time. They decide to buy, to build their own and Izzy has to help his dad. And I think it's two or three other people do this. And it only takes them a few weeks of really hard work, but I found this was interesting. And I'll read this part to you.

We worked from dawn to dusk on Sunday as well. After six such weekends, dad presented my mother with a cottage. From my early teens, construction became very much a part of my life. I'd often get up with the sun during summer holidays, go to my dad's then-current site, and work until dusk. And so at this point in the book, he's reflecting back on all the lessons. And a lot of times his father would teach him lessons without having to say a word. And really the summary of the next section I'm going to read to is experience is the best teacher and we see his father's preferred teaching method. Dad too taught me in his own inimitable way.

I was building two steps for a house, making wooden forms that were going to be filled with concrete. Dad who was watching never told me I was building them wrong. And it wasn't until I had poured the concrete that I saw my mistake. The first step was too big and the top step was too small. Dad handed me a sledgehammer. And all he said then or later was, break it and do it the right way next time. He could have saved me a little time and money by telling me beforehand, measure twice, cut once. But the method he chose was unforgettable.

And one more story for you from his childhood. And then I left myself on this page as well. That's one way to force resourcefulness. My parents never questioned how or what I was doing. Not only were they totally involved in work, monitoring a child's playtime was not in their tradition when they grew up. My father never took his children anywhere. He never took me fishing or swimming, though he did teach me to swim. He took me and my sisters out in a boat, threw us overboard, and said, now swim. So I want to fast forward in the story a little bit. He's now outside of, he's not in school anymore. He's starting to work. He's around 21 years old at the time and he's working in the small construction company with his dad. The back page says, how did a child of immigrants starting with no background in the hotel business create the world's most admired and successful hotel brand? And how has Four Seasons grown so dramatically over nearly half a century without losing focus on

exceptional quality and unparalleled service. Izzy Sharp answers these questions in his aspiring memoir. He started out in Toronto, the son of a modest builder from Poland, but ambition and fate took him beyond his father's three-man construction business. So that is where we are in this story, his father's three-man construction business. And we start to see this advice that he gets from a banker. And again, I think this is really smart what his dad did. Whether intentional or not, he forced his son to be resourcefulness. Not only when he was a kid, but now he's an adult. And part of this resourcefulness is making him do every single job.

And as a byproduct of doing every single job, this banker puts an idea in his mind. And let me read this to you. So it says, I was forced to be a jack-of-all-tr trades, working alone in a little construction shack with a small sales office in front. And when I wasn't there, I'd be on site, not only giving orders to workers, but also doing whatever needed to be done. I was not only in charge of construction. I was the rental agent, the salesperson, and the financier. Once at age 21, wearing rubber boots and work clothes i went to the bank of toronto and explained to the branch manager how we this is really really smart what he does here and we're

going to see and the banker picks up on okay this guy's got a brain here he's not just you know somebody that like he could be doing much more than where he's at now so he says and explain to the branch manager how we option land now worth considerably more than we had paid and before I read this quote from Izzy he's trying to convince him to give money even though he doesn't have any money to put down okay so he approaches it from a different angle he's like well I do have you're saying I don't have money but I am bringing equity to the table and this is what he means by that you know I could sell the land tomorrow and make a significant profit I said but I don't want to sell so this is funny now me reading this I'm going to interrupt myself. I'm sorry, but it's funny rereading this because there's many times where he's presented with the

opportunity to make a quick profit. And he's like, I don't want to sell. I haven't, I know what I'm doing. I want to build. He's going to say the same thing here, but remember this for later. So he says, you know, I could sell the land tomorrow and make a significant profit. I said, but I don't want to sell it. I want to build on it, and I want you to loan me the money I need. You may say I'm putting no money down, but that's not true. What I've gained on my land is my equity, and if I'd come to you when we first looked at this land and said, we'll put up that amount of equity, I'm sure you would have gone along with it. Well, our gain on that land, which is easily checked, is exactly the same. He then gave me some advice. Why don't you get rid of the rubber boots and start working with pencil and paper instead

of pick and shovel? I got the money, but not until afterward did the significance of his advice sink in. He was telling me, you've got a good business mind. Why not stop laying bricks and use it? I didn't know it then, but I'd be doing that very soon. And I'll just pause there and tell you up front. He's extremely thoughtful. He's put, as you can imagine, by the time he writes the book, he's four decades into his career. He's put a lot of thoughts. And this is something that's come up over and over again. The most recent examples, the most recent book I did, Warren Buffett, Buffett, The Making of American Capitalists, and talks about that most CEOs don't have a philosophy.

And Warren's point or let me summarize like my interpretation of Warren's point is like you're going to spend one third of your life working. You should develop a philosophy with how you approach your craft and that philosophy should be unique to you. And that's exactly what Warren Buffett did. And that's exactly what this book is about. We are downloading Izzy Sharpe's philosophy that he used to build the Four Seasons. So we're going to see a lot of this. He just again, I just want to think I want to impart that to you. He's extremely thoughtful. He thinks things through and not in like an overly intellectual way, just a very common sense. What is the best move forward way? So this is the beginning. This is the very beginning of his career. And just a reminder, his the beginning of his career was extremely hard. He did not have a

lot of money. Money was tight and he had a growing family. So he's married at this point. They still married to this day. The boys put a considerable strain on her income. But Rosalie, growing up with little money to spend, was a highly proficient economizer. She not only did her own decorating and made her own clothes, but she also shopped with inordinate care. Instead of having milk delivered, she would walk with the kids to the store and buy milk by the judge, which gave her one court free. It was five years before we could afford our first vacation, which was three days of sunlight and sunburn at the Midtown Motor Inn in Niagara Falls, which we then considered glamorous. So he continues giving us an update on his station in life at this point.

Three children, a couple still in diapers, in an apartment with only two bedrooms. Our situation was not only a drain on income, but on time. I was working morning till night, six or seven days a week. Rosalie never complained, never tried to change me, though she once left me a note so succinctly pertinent that I still keep the original in my notebook. And this is very interesting what she wrote to him at this point. Oh, remember, he's she's calling him an overachiever. She knows that his ambition right at this point in his life, his self-belief and his ambition far outstrip what he's able to actually accomplish in real life yet. And that's a main theme of his life. Belief comes first. Overachievers suffer loss of intimacy, no time for fun. Relationships starve on a diet of self-absorption. Home is the place to express the playful part of oneself. That's the end of her

note. I doubt it changed me immediately, though I certainly did thereafter. For home eventually became the one place I could leave my problems behind and enjoy the moment. Life settled into a routine. On the job by 7 a.m. and home by 7 p.m. No frills for us like vacations or the golf club. Work was my life. Okay, so we go backwards in the timeline. He's talking about how work is always on his mind and even when he's on his honeymoon. And this is very interesting that he's remembering this

because something he repeats over and over again is that he never like he kind of he always thought of himself as a builder. Even when he owned a bunch of hotels, he did not consider himself a hotelier, I think is how you pronounce it. And so he comes to a really important realization that even a mediocre business in some cases can make money. So if a mediocre business can make money, what will a great business do? So he says, even on our honeymoon, work was often on my mind. For our wedding night, in fact, I reserved a room at the airport hotel in Toronto. I heard that it was successful and I wanted to find out why. We expected glamour. It was anything but. Our room was small and noisy, people coming and going. Then in the middle of the night, Rosalie woke me.

There's somebody in our room, she said. Don't be silly, I replied. I'm telling you, she said, there's somebody in the bathroom. I got up and went into the bathroom. I just think I'm laughing, thinking if you were like, think of it, if you were in his shoes, you're on your honeymoon. Somebody's in my bathroom. No one was there, but someone had been for the bathroom served two separate rooms. I thought that, and this is really fascinating, his takeaway here. I thought that if a hotel like this was making lots of money, it shouldn't be hard to build a hotel that would make a lot more. So his very first introduction into hotels or motels or the hotel industry is building a motel for somebody else.

So he starts building this motel for someone else. And then he starts to think like, why don't I just build one of these for myself? So he says his motel went over so well, he asked me soon after he opened to finish the other rooms. And I thought if it works so well here, why wouldn't the same idea work downtown? The more I thought about it, the more intrigued I became. I was still building houses and apartments, of course, but in what little spare time I had, I had begun soliciting opinions from our current and previous financial backers on building a motel downtown. I began by calling Cecil. So Cecil is one of his previous investors. He's the head of a life insurance company called Great West.

And this is Cecil's response. I'm reading this to you because every single person thinks he's an idiot for even suggesting such a thing. Cecil did not like this new deal I was proposing. Then I went to my best friend and asked if he would invest it. So his best friend Wally, his parents had died young, so that left him some money. But he doesn't have control over it. So he says sorry izzy my money's all in a trust and my trustee won't invest in something that he thinks that

will never work so this is the second person this is a stupid idea it's never going to work so he approaches somebody else that had loaned him money to build houses and apartments scatting max he says you know nothing about the hotel business i do and i wouldn't touch it with a 10-foot pole so everybody's telling telling him, no, what is he doing? He goes out and looks for the best place to put this, this motel that he wants to make. I found a possible center. I found a possible center town site and then went back and propositioned Cecil. This is the first guy.

Again, he told me I didn't know what I was doing. Now, this is a crazy sentence that I'm about to read to you. This went on and on for three years. Every couple of months I would go see him. And he would patiently explain why he disagreed. But one day his patient his patients gave out. Stop bothering me, he said. Don't come back until you've arranged all the financing you need. I will give you 50% if you can get the other 50. And that's all Izzy needed to hear. So he goes out and he's hitting up bankers, anybody he can. Now he does something that's really interesting.

As he's collecting money, he's going in with a few other partners. There's like a friend and then maybe a brother-in-law. And he's not afraid. Izzy does something smart. He's not afraid to ask other people for help, and I'm going to read what he does here, and then I'm going to compare how Steve Jobs did the exact same thing. So he says, none of us knew anything about the hotel business,

so when Murray, this is one of his partners, read in Time Magazine about a man named Mike Robinson who ran a successful chain of motels, one of them in downtown Phoenix, I wrote him a letter. He invited us down. So Murray and I flew to Phoenix. So he's meeting with Robinson, Mike Robinson, who's already accomplished what he wants to accomplish, right? When this fellow said that we should fly to Los Angeles

and talk to a man named Al Parvin, who knew a lot more about the hotel business, we complied. So he's like, okay. Mike told us, go meet with Al. We mike told us go meet with al we're gonna go meet with al we fly over to see al al was about to leave for las vegas come with me he said and i'll show you something so he takes him to vegas and he explains to him there's this new hotel concept where you have a casino in there as well and the reason i thought this was interesting is because there's a there's an interview that i watched a long time with steve jobs and he's reflecting back i think the interview was taken in between his stints at Apple. And I'm going to read some quotes from the interview to you. OK, so he says, now I've actually always found something to be very true, which is most people don't get those

experiences because they never ask. I've never found anybody who didn't want to help me when I've asked them for help, which is exactly what Izzy's experiencing, too. Right. Jobs goes on to tell about a time when he was 12 years old that he decided to call Bill Hewlett, the co-founder of Hewlett Packard, to ask for some spare parts to build a frequency counter. So Jobs is talking about it. It's like Hewlett's number was, he lived in Palo Alto, which is where Jobs was, and it was in the phone book at the time. And so he calls him up and Bill just picks up the phone.

He's like, hey. So he says, not only did he agree to meet young Steve's request, but he offered him a summer job at his company assembling frequency counters. And so now back to a quote from Jobs, I've never found anyone who said no or hung up the phone when I called. I just asked. And when people ask me, I try to be as responsive and to pay that debt of gratitude back. Most people, and this is the most important part of why I'm telling you this, something that Steve Jobs knew and Izzy Sharp knew as well, most people never pick up the phone and call. Most people never ask. And that's what separates sometimes the people that do things from the people that just dream about them.

You've got to act. And you've got to be willing to fail. You've got to be ready to crash and burn with people on the phone, with starting a company, with whatever. If you're afraid of failing, you won't get very far. And I think in most cases, that fear of rejection. Like, oh, I can't ask for help. What if that person says no? Well, they said no.

And then you move on to somebody else that may help you. I just think it's a's a really good idea okay so there's two things that are happening on the following page uh that's really interesting the first four seasons was in the hood and number two four seasons was almost called thunderbird which is a terrible name almost everybody we talked to about it had the same reaction how could you think of building a motel or a hotel on jarvis street people will think it's a flop house it was a hangout for gangsters hookers and street people he's talking about the neighborhood not the hotel we needed a name and someone came up with the name thunderbird thunderbird but on checking it out we found it was already taken then eddie remembered a hotel in Munich that he had stayed at. It was the finest hotel he had known.

And it was a name in German. I'm not even going to try to pronounce it, but it translates as Four Seasons. It sounded right. And that was the extent of our market research for a name. Okay, so that first motel, some moderate success. He immediately starts building another one. There's a lot of things that are happening that is interesting about his early career. And it's another main theme of the book, that belief comes first.

His belief came way before any actual evidence of success. So he says, Our second hotel was even more of a gamble than the first. I was putting more scarce capital in a business I didn't really know. I was still primarily a builder, constructing houses and apartments. But even before Four Seasons Success rationalized my desire to build a second hotel, I was seeking a suitable site for building another one. I recognized the drawbacks while envisioning the possibilities,

which created a subconscious belief in success. I liked it. And that subconscious belief that he's liking, that's being instilled in him, causes him to go all in. And he risks everything on the second hotel. I decided to go ahead. I foresaw only one difficulty, but it loomed large. How do you build a 200 room resort without any money?

This was literal fact. My earnings barely covered my rising family costs. To build, I would have to leverage the entire 100%. If the hotel should not prove successful, a loss so great I could be in debt for the rest of my life. And it's during this construction of the second hotel that we really start to see his very simple operating system. I feel we've talked about it over and over again in the last few podcasts. I mean, there's an entire book, the bonus episode I just did on Amazon's process of building new products called Working Backwards. Izzy's doing the exact same thing. It could all be so simple. Simple does not, it could all be so simple. That does not mean simple, does not mean easy, but it's like, why don't we just start with what is best for the customer?

As we saw in the Kinko's book, a lot of managers, if left to their own devices, will start to do things that are best for the company, right? It's very natural to just think about things from our perspective. Izzy just put, he's just like, okay, what is the ideal experience for the customer? And he starts to identify things. And a lot of things he mentions now might even seem very common to you if you stay at a hotel. A lot of them were brand new. And a lot of them were copied by his competitors, which is mentioned a bunch in the book. In building our first hotel, I had been concentrating on customers. What would our customers want most?

I had little hotel experience, but enough to know that what most people wanted. A quiet room, a good night's sleep sleep and an invigorating morning shower. So that part also reminded me about Jeff Bezos talks about, listen, you should build your business on things that will never change. And so when he was building Amazon's retail business, he identified very similar to what Izzy's discovering here. Today, people want a quiet room, a good night's sleep, and an invigorating shower. They want that today. They'll want that 10 years from now. They want that 20 years from now.

So I can build my business on top of those things, right? And so for Jeff, he's like, okay, people want low prices today. They want low prices in the future. So I can build around that. They'll want fast delivery today, and they'll want fast delivery in the future. And I want to build around that. And I think the third one, if I remember correctly, I'm going off the top of my head, was like a wide selection. And so he identified a bunch of things that they will not change.

So any investment I make in optimizing for these things will pay dividends many decades into the future. And we see Izzy doing the exact same thing here. He talks about going through and testing, I forgot the amount, maybe dozens, maybe hundreds of different mattresses. Finding the showerhead. I mean, I think a amount, maybe dozens, maybe hundreds of different mattresses, finding the showerhead. I mean, I think a lot of people have had the experience. You check into a hotel and you turn on the shower. It's like, you know, the water pressure is not there. So he found the best showerhead to optimize for water pressure.

He talks about what he hated going to hotels where they have these like thin towels that don't do anything. So he has, Four Seasons is one of the first people to do these like thin towels that don't do anything. So he has four seasons. One of the first people to do these fluffy cotton towels. So it says, again, we discussed ideas with set up, set us apart from, from competitors.

We were surrounded with picturesque parkland. We provided bicycles for rent and maps for walkers. We discussed smoking. Remember this is back in the 1960s. We discussed smoking, how tobacco smoke bothered a lot of non-smokers. So why don't we ask our guests if they smoke, I said, and if they don't, we could designate some floors as non-smoking and segregate them. And we did. This is the beginning of what became a worldwide practice.

And really what's happening here is when you start with the ideal customer, what he discovered, right, through trial and error and through just common sense is, then when you start with the ideal customer experience, that forces you to invent solutions to your customer's problems, right? Thinking in advance, well, you know, I'm not a smoker. I don't like being around other smokers. So maybe we could segregate them. How can we do that? So he continues thinking from a customer's perspective, what would they would like? He winds up teaming up with, I guess you could even think of this like a fitness influencer of his day, this guy named Lord Lloyd Percival. So he says, I exercise to keep in shape every morning and knew others who did or would like to. So I asked Lloyd if he'd operate a fitness club in the hotel. And he was

like one of these like famous people. He had like his own fitness club. You know, these people have been around forever. But it says, so I was like, okay, why don't you open your own fitness club in the hotel? The hotel would be the first location of his fitness institute, which was also the first kind of health club in the world. He was obviously famous, so he was able to leverage Lloyd's already existing fame into hotel guests. He gave us a welcome publicity for the first several years. The club was so successful, it changed the industry. No one would now think of planning a hotel without a health club or fitness center. But the Inn on

the Park, this is the name of his hotel before Four Seasons, the Inn on the Park was the first. This is another milestone. And it's a combination of all these different unique experiences that he's giving his customers that they can't get anywhere else at the time that contribute to making this project a success. He goes back. This is really interesting. The person that he kept hounding for three years, Cecil, to give him the money, says something interesting here. The hotel was so successful that Cecil congratulated me for reaching the pinnacle of success, which seemed to imply that business from here would be somewhat anticlimactic. Nothing could have been further from the truth. So it's like, oh, success? No, no, no. We're just getting started. Okay. So it's been eight years since he was married and went on that honeymoon

at Niagara Falls, right? And so they take a trip. He takes a multiple week trip with his wife to London. He's going to research. He wanted to research successful hotels. He's still only building in Canada at this time, but he knows he wants to expand into Europe and then eventually in America. And he does something here that's really interesting, more like a barbell strategy. So it's either zero or 100, no messing with the in-between. I thought that was fascinating. Because we wanted to stay on budget, remember he's not, he doesn't have a bunch of money yet, because we want to stay on budget while vetting some world-class hotels, we decided to average costs. We spent every other night in the cheapest lodging available, no messing around with the

in-between. So because I want to stay and I wanted to research in the best hotels in the world, I can't afford to do that. The only way I can afford to do that is I have to alternate between a night in the best hotels in the world and a night in the worst hotels in the world, I can't afford to do that. The only way I can afford to do that is I have to alternate between a night in the best hotels in the world and a night in the worst hotels in the world. And I think both of those are actually learning experiences. Okay, so there's a part in the book that plays out over an entire chapter. I'm going to give you a summary here. He winds up meeting, remember, he's not a hotelier yet. He's still a developer. Eventually, he realizes, and he almost goes bankrupt being a developer. So he realizes, no, I need to do, I just want to do hotels. So he's building hotels for other people, other hoteliers, right?

And he meets a group of very conservative, old school English businessmen. And the summary of this section is sometimes you have to fly all the way to London for lunch every few months for four years to close the deal of a lifetime. And part of the reason is they had to figure out, like, is this somebody we can trust? Is this somebody who could build a relationship? But also they thought he was crazy because his idea is like the only way I'm going to take this job because everybody told him, listen, London cannot support another five star hotel. There's not enough customers. Competition is too tough. They started referring to him as a crazy Canadian for even suggesting this. He's like enough customers. Competition is too tough. They started referring to him as a

crazy Canadian for even suggesting this. He's like, no, I know it can. If we do it better, and he identified, he's like, listen, we're only going to focus on, and he wasn't taking this idea for four seasons. He's like, a lot of the people building five-star hotels, they also have three-star hotels and four-star hotels. And then their five-star hotels have too many rooms. He's like, no, we're going to narrow the scope. We're only going to be a five-star hotel. And we're going to have, instead of having 500 rooms, we'll have 200 rooms. So we can make sure that level of quality is consistent across every single guest. Right. And this winds up being one of his great early successes in life. He says the first

year that London property opened, it was named Europe's hotel of the year. And it won that title twice in its first 10 years plus additional awards something no other hotel had done before its occupancy was considered consistently the highest in the city and it's still of one one of london's most successful hotels and it was during this process that he builds a relationship with an older he just learned a lot he soaked up information from everybody around him this is an an older, much successful, much more successful businessman. His name's Sir Gerald Green. Not Green. His name's Sir Gerald Glover. So this is something, well, first of all, this is one of my favorite sentences or favorite paragraphs in the entire book. So it's talking about, you know, he had an old school

manner, very polite, but he winds up staying, spending a lot of time with him. So he says, once standing at his front door, overlooking a lawn that seemed to go on forever, I asked him, how do you maintain it so beautifully? This is one of my favorite sentences in the book. My dear boy, he said, it's very simple. You just cut it every week for 300 years. And Gerald winds up being, you know, a mentor to him. So he says he was always a delight to be with.

And his role in my life was critical. I asked him about it several years after our London hotel had opened. Gerald, Sir Gerald, how could you have trusted me with such an important project when you knew if things didn't work out, I couldn't have covered my obligation? My dear boy, he said, over time, you make a judgment about people. You develop a belief and a trust. Those many meetings of ours were not primarily about business per se. They were about the foundation of business, trustworthy relationships. This is something I've long believed without giving it much thought, but from then on in every deal, it would be in the forefront of my mind.

Okay, so let's move on to his next big deal. Again, a main theme of his life story is that belief comes before ability. I was also deeply involved in another project, one that seems incredible looking back, for I can't believe my chutzpah in embarking on the idea of creating a hotel in Toronto five times bigger than our hotel in London. So the city of Toronto is building a new city hall, and they have a request for proposals about building this beautiful giant hotel next to it, and he sees the opportunity. He says, They called for tenders to build upon it a first-class hotel

that in elegance and size would harmonize with the new city hall. This would be one of the world's great hotels, and I don't know why I thought I could build it. I had neither the experience nor the money such a hotel required. So he wins a bidding on it, loses out. The other winning bid falls through. And so now it's reopened. And he's like, okay, well, how do I figure out how to do this?

I don't have the money. I don't have the experience. So he says, one evening after a workout, I was relaxing in the sauna when I spotted an old Time magazine with a picture of Harold Janine on the cover. Janine was then America's foremost business guru. He headed ITT, the world's largest conglomerate. I scanned the article.

Janine's next move, it said, would be in the hotel business. So I called ITT. And so this is another example of books being the original links. I had this book recommended to me by a listener a long time ago, then reading this whole section because he goes and he works with ITT for a little bit. Like it's a main, it has this entire chapter. So it's a main part of the book, right? And I was like, okay, let me go and move that up to Q. So I ordered it and check this, this book is coming soon. Let me read you the title, which I think really got me intrigued. I was like, OK, what's going on here? It says Janine, the biography of Harold Janine,

who made ITT into the most successful conglomerate in history. His development methods, triumphs and scandals. The real story. So I was like, all right, I want to know, like, what does that mean? I want to figure this out. And then the praise on the back was interesting too the four deadly sins of a business biography are adulation antagonism inadequate research and overwhelmingly overwhelming dullness this book avoids all four and is certainly the best text so far on the most dynamic business figure of our time and so i go back and start researching them and i'm not surprised this has happened many many times where like everybody somebody could be super famous in their day.

Think Henry Kaiser, right? He was like how famous Elon Musk is in present day. And yet multiple generations pass and people forget he's not nearly as known. Most people don't even know who he is, right? But then you realize, hey, they've spent half of a century working. Like what is the chances they were able to build

these gigantic successful businesses and they didn't come up with useful ideas that we could use like that's impossible so janine is no different um i wound up doing research and i mean he's just he was unbelievably well known and famous in his day so let's see what's in that book and hopefully we can use his ideas his it says his scandals and triumphs so we'll take his best ideas and then hopefully we'll avoid whatever causes scandals but anyways let me get back to so he goes to itt and he's like listen with you with my planning and your expertise and money we can build on this site so they do this joint venture between itt sheridan and his company but i i'm going to spare you the details because really what what's really the most important part is that izzy knows why he is here. And the main point here is

like, if you know why you're here, it simplifies your decision-making process, right? So it says, here I was with no money and not much expertise up against the smartest people of one of the biggest and richest companies in the world. So he's going to help build it. His company is going to get a 49% interest in the hotel for $3.5 million. Sheraton's going to manage it. ITT would finance it. So he's got to come up with $3.5 million. He doesn't have that money. Takes this agreement, goes to the bank. We've seen this over and over again. Once you have the agreement, the bank lands on that contract. This was very common when I did a bunch of the podcasts on the people that build gigantic shipping empires, like Aristotle Anastas used this, Daniel Ludwig, the invisible billionaire.

If you haven't listened to this podcast, I think they're back in like the 60s, somewhere in there. But anyways, that's how he got the $3.9 million so he could have 49% interest in what's going to be one of the largest hotels in the world, right? But this is why I'm reading this section to you. With that agreement, I went to the Bank of Nova Scotia and had no trouble in borrowing the $3.5 million we needed since IT&T guaranteed my payment. From having no money whatsoever and very little hotel experience, our little company now owns 49% of the world's biggest hotels, which is an extraordinary outcome. So most people are like, wow, this is great. How can I leverage this opportunity? And so IT&T is realizing they offer to buy them out here is what I'm essentially telling you. IT&T saw it much the same way.

During the negotiations of the deal, the company said, look, this deal is way out of your reach. You're not putting much money into it. Why don't we just pay you $2 million in all of your expenses? Anything you've paid up or invested up until now and we'll take over. So they're guaranteeing him a $2 million profit. You could stop. You don't have to do any of the work now. We'll deal with the construction and management, all the other stuff. And you pocket $2 million profit. You could stop. You don't have to do any of the work now. We'll deal

with the construction and management, all the other stuff. And you pocket $2 million. His answer was surprising. No, that's not what I'm here for. We're here to become a partner. And they respond, listen, we'll give you a good profit for your work. And he says again, no, that's not the deal I'm interested in. Back to Izzy. I know what he was thinking. He's talking about somebody advised him. One of his advisors, just sell. This is a quick $2 million profit. You're a young man.

I know what he was thinking. $2 million clear profit was a lot of money for a young man. I've thought about it, I said. I'm not here to sell. This is echoing what he told the banker. I'm not here to sell the land. I'm here to build. I'm here to be a partner.

And so they said, okay, well, you're not going to let us buy you out. Why don't you quit your company and come work for us? We clearly see that you're talented. So this is an example of know why you're here, part two. Later, IT&T wanted to make our relationship permanent. They offered to buy Four Seasons and give me a job with IT&T at whatever salary I thought I was worth. So this is like the best technology company of the day, whatever you consider it to be, Google, Amazon, whatever your opinion of that is, right? They're willing to buy your startup, come work for us.

Again, he's like, no, I'm not going to. Name your salary, whatever I thought it was worth. You'll earn way more with us, I was told, than you'll ever earn on your own. Yeah, right. That one's being hilariously incorrect. Today, I think he has a net worth of somewhere like five or six hundred million dollars. I listened. I don't think the word tempted fully conveys my feelings at the time. Overwhelmed might be more accurate. This is such an important part of the book, man.

Here I was with just two small hotels dealing with a company that owned hundreds. I didn't know what to say. I'll give you some thought I've ever applied. The following morning, I rose early. Between 3 or 4 a.m., nothing stirred. I sat down at my desk with pencil and paper and thought for a couple hours, not writing a single sentence, just letting my thoughts about working for such a large organization sink in.

I started to make a list of pros and cons as darkness faded. By dawn, I knew, without further thought, exactly what my answer would be. Strange as it was, this was the beginning of a generally beneficial habit when facing my most consequential decisions, one that I practice to this day. I then responded to ITT. Look, I said, I wouldn't be much value to you within your organization. I owe my success to my freedom. I think for me, independence has an incalculable value. So I'm honored by your request, but let's just continue as partners. Now, later on, after the hotel was built, he winds up having strong disagreements with how Sheridan wants to run the hotel.

They start nickel and diming the customers. He's like, this is just not what Four Seasons would do. So he winds up selling his interests at a later time. So he puts up to $3.5 million, most of which he borrowed. And then at a later time, he winds up selling his interest back to i think i can't remember i think itt bought it for 18 million dollars and that's actually important because that's when he realizes later when he almost that's a huge win right when he almost goes bankrupt because he's still a developer at this point right still a builder he realizes hey why

don't i just limit my liability and just actually manage hotels? I can hire developers. I don't have to be the developer. There's a great quote on the next page. All business proceeds on belief. Trying to run a company without a set of beliefs is like trying to steer a ship without a rudder. Okay, so now we're going to take a turn and I'm going to try to get, well, I don't know if I'm going to be able to do this. I'm going to try to get through this part. Every time I've read this part, I've had to stop because I have tears in my eyes hotel business in fact didn't want to go to college because he's like what do i have to learn i can just learn everything i want from my dad in the family business he's gonna wind up dying at 18 years old from melanoma so he finds a tumor like a growth on his groin it was just like the size of the egg a size of an egg and they do

a biopsy and it turns out he's really light-skinned uh it turns out to be melanoma and unfortunately they don't catch it in time and so i'm gonna i'm going to attempt to read from his wife's autobiography about this point but it's it's not easy because as any if you have kids you know like when you hear about things like this, you immediately put yourself in their shoes. And it's the worst thing you could possibly experience. So Chris slept in our bed and Izzy and I took teams to turn sleeping with him while the other kids slept in Chris's room. Once as I was fussing with the sheepskin, which lay on his bed because of his bed sores, he asked, Am I going to die?

And I answered, We hope you recover, but it's possible you may not. No one knows for sure. Once I said to him, there can't be a God. And he answered, don't say that. There is a God. Those were black days and black nights. I remember going up the stairs so heavily with nothing but dread in each step. The night before Chris died, the rest of us ate chicken dinner in his bedroom. We were chatting normally hoping to make him feel included. He didn't speak. He just lay there quietly, very still looking at the ceiling. I marveled at that stillness that he had maintained during the three months he was bedridden. Graceful and easy in his body, never a twitch of anxiety.

That last night he was wearing sunglasses, which he had asked for before dinner. He was removing himself, the way people do when they are ready to leave the world. The next morning, Friday, March 10th, 1978, Chris said, Dad, don't go to work today. Izzy stood by his bed, and I lay across the bed, and each of us held one of his big beautiful hands.

Now back to Izzy. That was the day he died. Losing Chris changed my life forever. We must each find our own way to deal with the pain of losing a child and I continue to include Chris as part of our family. Years have passed but I still say we have four sons. Over time, you build a protective shield to fend off your emotion that a child's absence arouses at family events, celebrations, and weddings. But there are unexpected times when the shield is down and the tears flow. You never get over it. Okay, I had to take a break. That was difficult to get through. That's one of the things, though, about reading biographies, reading somebody's life story, is you experience like a full spectrum of human emotion. You see their tragedy, their triumphs,

their saddest times, the best times of their life. And I really do think that the fact that biographies are able to evoke emotion makes the ideas that we learn from reading them more impactful. They're more likely to stick. So one of the things after his son dies, one of the things he's most proud of is that Four Seasons sponsors,

it's called the Terry Fox Hope Run I think and it's another young young person running across Canada suffering from cancer he's going to wind up dying they wind up raising tens of millions of dollars and getting a lot of attention for cancer research and I'm just going to read a section to you because well let me read it it's a description of Terry fox and he says we didn't know yet of course that he was running despite heart problems he was running 26 miles a day on one leg he had part of it amputated because of the cancer he was running 26 miles a day on one leg despite exhaustion a swollen ankle and a bleeding stump because he felt he was generating a great swell of support for his cause. And when you read something like that, this guy has cancer. He's had part of his leg amputated.

He's running 26 miles. He's got a heart problem, swollen ankles, bloody stump. And yet he's still doing it because there's a greater cause bigger than himself. And it's just a reminder that we are all much more capable than we know. Sometimes it just takes something larger than ourselves to actually realize our potential. Okay, so I want to move back to his career. And it's really important to know that his realization that Four Seasons was going to be his life's work was a very slow process. He repeats what I'm about to read to you over and over again. I was still constructing houses, apartments, and condominiums. Neither conceiving, building, and operating our hotels made me think of myself as a hotelier. Throughout the 1960s and early

1970s, even though we'd built seven hotels, I continued thinking of myself as a builder. He's still a builder. He's still a developer. So in addition to the a builder he's still a builder he's still a developer so in addition to the hotels he's also building stuff for other people he builds this brand new like clubhouse it's some kind of these old school social clubs and while he's building it he's like listen I will only take this job if you stop discriminating I think at the time they would not let in Jewish people I think you just had to be like a Protestant male, if I'm not mistaken. And so they agreed like, OK, no, you make a good point here. And I thought this was this conversation they have was really instructive because we get a good idea of what was important to Izzy. Right. So it says in light of our commitment to end

discrimination, why don't you become our new club's first Jewish member? We'll give you an honorary membership with complete privileges. Thank you, I said, but I'm not a club person. I'd never use it. And I just love that. That's the note I left myself. I'm not a club person. My life is work and family. I'm not going to hang out at your club. But if you're sincere, as I think you are, talk to reporters about your opening and make sure the public knows of your new policy. So again, he's doing something that's larger than himself as well he's like i'm not gonna take it but i would like other other jewish people to have the same opportunity that you're trying to give me okay so now we've reached the point where he says to make a change um there's a my note is huge on

this page so okay there's a lot of things happening here i got a lot of highlights too let me read read what's about to happen to you uh or let me tell you what's about to happen rather a lot of things happening here i got a lot of highlights too let me read read what's about to happen to you uh or let me tell you what's about to happen rather a lot of things are happening here he's getting out of development into just running hotels uh he's got a maxim for us an aphorism do what you really want to do because that is what you'll will be best at and then this reminding me of steve jobs on selling three thousand dollar computers because some people always pay for quality and not to sell netbooks because they aren't the best at anything. So that's something I learned a few episodes ago on the Johnny Ive book. So let me read to you and we'll see how this relates to that. Okay.

That near ruinous experience. So he almost goes broke. As a developer, he's highly leveraged. Actually, it was friends, acquaintances. I don't know. Maybe we were friends with a developer he's highly leveraged i actually was friends acquaintances i don't know maybe we were friends uh with a developer a few years ago and it's really interesting because he was a about a decade older than me and i actually learned a lot from him but he was talking about the wild swings in his net worth and he got caught up unfortunately in the the real estate crash that happened in 2008 2009 and he said it affected his net worth from plus $40 million to negative, you know, whatever he could salvage, unfortunately. It's a crazy, crazy business.

And I love looking at real estate, really interested in architecture in general. I would love to build physical things. I would just have to find a way not to do it in like another life because maybe it would be something I would just have to find a way to not to do like in like a not another life because maybe it'd be something i would just do it's like a passion project but i do i would love the idea of being able to point to like a physical thing that you built that stays you know in case he was but this guy was building buildings some buildings you know been there for 20 years or whatever the case is i found that very very interesting but anyways he uh izzy is highly leveraged almost goes bankrupt and this is when he's like,

forget this. I'm going to focus on hotels. I need to limit my liability. I'm too old at this point. I have too much experience. I have my family, all these employees are relying on me to go out of business. I'm not going to let that happen. So I got to figure out a different way here. That near ruinous experience changed my thinking on hotel investment. I decided that in the future, we would protect the company financially by capping our share of ownership at a small percentage of equity. No more than three to six million dollars per property. This was based on a simple principle. Invest no more than our hotel fees would give us over the first five years.

An amount we could easily borrow on our management contract. And if more money to invest was required, we had the option to reduce our equity or put up our share. And he's doing this for two reasons. And he tells us those two reasons right now. Besides limiting risk, it established a new business model. Four seasons as a management company, not a real estate developer. Now, just as bankruptcy loomed, I thought of the ITT Sheridan contract, which gave me $18 million as my most consequential as well as most productive business deal. Remember, that's the one where you put up 3.5 million, borrowed it against the contract, sold it a few years later for 18 million. Until then, I was a builder engaged

in development. And I don't know if I've been clear enough explaining this to you, and maybe I didn't even understand until I got to this point in the book, but he's going to synthesize or add some clarity here for us. I was a, up until here, up until now, I was a builder engaged in developer and development, a hotelier only part-time, but the contrasting comfort between running a huge convention hotel in Toronto, and that's the ITT contract that he sold, and catering to the carriage trade in the finest hotel in London made me realize what I would really like to do. So he experienced both scopes, right? He had that small London hotel. He's like, I'm shooting for the top.

I only want a five-star hotel. No, I don't want to build 500 rooms, 400 rooms. Let's do 200-something rooms and just deliver literally the best hotel experience in the world versus you've got convention people coming in. They're more budget conscious. There's a thousand of them. I didn't like that. So he says, those two experiences made him realize, okay, what I would really like to do, create a group. This is his life's work now. Create a group of the best hotels in the world. And what we really want to do is usually what we do best. I want to read that part again. It made me realize what I would really like to do, create a group of the best hotels in the world. And what we really want to do is usually what we

do best. His partners, Murray and Eddie, disagree with my do is usually what we do best. His partners, Murray and Eddie, disagree with my vision of building the world's best hotels. They felt I was getting delusions of grandeur. You're narrowing your market, they said. How will that ever work? Who's going to pay the kind of money you'll have to ask? This is where we're going to get it tied into Steve Jobs, what we learned in the Johnny Ive.

I said it correctly. Johnny Ive podcast. Ready? Who's going to pay that kind of money? More money for a hotel room than anyone's ever paid before. Most of my senior people agree with them. No other company does that, they said. Look at Westin, Marriott, Sheraton. They've got hotels in three, four and five star categories. And look how well they're doing. But my mind was made up. We will no longer be all things to all people, I said. We will specialize. We will offer only midsize hotels of exceptional quality.

Hotels that were ever located will be recognized as the best. I resolved to sell any hotel that didn't meet our new standards. And this part just gets me fired up. He's wrapping up his thoughts here. I no longer thought of myself as primarily a builder. I was now a hotelier with a clearly defined objective. I believe that what we had done in London, we could do anywhere in the world. Be the best.

The strength of that conviction overrode doubt, bolstering my self-confidence to press on with an idea that no one else thought would work. But that raised an immediate question. How precisely could it be done? So that part about, you know, I'm only shooting for the top, I'm going to charge more money than anybody else has, but the customer will get value for that. I'd rather build the best five-star hotel in the world instead of just another, you know, three or four-star hotel that are available everywhere. It's not very different from Steve Jobs' line of thinking when he came back from

Apple. You know, they're competing on, they lost their like market leadership position. They're starting to compete on prices. And he's like, no, no, no, I want to build the best $3,000 computer. And so he says, rather than competing with commodity PC makers like like, no, no, I want to build the best $3,000 computer. And so he says, rather than competing with commodity PC makers like Dell, Compaq, and Gateway, why not make only first-class products with high margins so that Apple could continue to develop even better first-class products? The company could make much bigger profits from selling a $3,000 machine than a $500 machine, even if it sold fewer of them. Why not then just concentrate on making the best $3,000 machines around? Not very different from what Izzy's saying here. Why not just make

the best five-star hotel around? Jobs aimed at making innovative products again, but he didn't want to compete in the broader market for personal computers, which was dominated by companies making generic machines for Microsoft microsoft windows operating system these companies competed on price not features or ease of use jobs figured their rate theirs was a race to the bottom and then this idea where what what is he says he's like listen i'm gonna make a chain of the best five-star hotels in the world not one of the best but the best thought about at the time uh they're deciding they're they're inside apple they're talking about different products they can make well

you know at the time netbooks this is pre-ipad uh accounted for 20 of the laptop market a gigantic percentage of a gigantic market and jobs never considered making one so it says apple never considered making one netbooks aren't better than anything steve jobs said at the time they're just cheap laptops so what did steve do instead of dedicating the the the finite resources of attention and money that apple had at the time to making a netbook which are not they're not better than anything they're just cheap laptops he directed those resources and they invented the ipad so then the book starts going into like, how am I going to do this? He has to, he's changing the direction of his company midstream. He's going to wind up having to get rid of a bunch of people.

But something about Izzy and all the best founders do this. They go to school and everybody, they learn from every single experience, every person they can. And, you know, he's trying to do, he's taking, he's like, okay, I'm going to build the best hotel company in the world, right? He winds up learning about service. Now, this is the 1970s. So McDonald's at the time was different than it is now. They actually probably did have the best service back then. So he winds up going to, I guess they eventually call it Hamburger University, just to see like, how do they, how do they communicate service to so many different customers? Because at the time, any McDonald's you go to in the world had the same level of service. Well, he's like, okay, I want four seasons to have the same level of service,

no matter where I go. And so he says something very interesting. He gets pushback from some of his executives. He says, the next day I told our senior headquarters people, I want you to come with me to McDonald's and see how they train their people for service. One of them said, look, they're selling hamburgers and we're selling filet mignon. How can you even compare it? I know what we're selling, I said. I'm talking about how we sell it. And this is something I feel me and you have been talking about a lot the last few weeks. Don't copy the what, copy the how.

Izzy is saying that exact same thing. Let's go back to what we learned in the book, Working Backwards. Bezos didn't make another iPod when he had that meeting with Steve Jobs. He didn't copy the what. He copied the how. Steve Jobs' strategy for the iPod and iTunes, Bezos copied the strategy to make the Kindle. He didn't make the iPod.

He took the idea behind the how, not the what. That is so powerful. Don't copy the what. behind the how not the what that is so powerful don't copy the what copy the how because those ideas transfer to any discipline this is something we also learned from kobe bryant among others it's so smart what he's picking up here and he's continuing to have these discussions with these executives and he's talking about he says something right here and um i'm just going to read to you it's a quote he repeats over and over again variations of this quote we are only what we do not what we say we are and something my own personal maxim that i use in my life is actions express priority it doesn't matter what i tell you is important to me it's my actions will tell tell others other people what's actually important to

me actions express priority uh giving our customers more value than anyone else, I figured would ensure in return, excuse me, would ensure that they return and that would give us a profit. So again, start with what's best for the customer and work backwards. That's just another way to express the same idea. I kept restating our aim of superior service, focusing employees at every level

to one single compelling purpose, pleasing customers. Very similar to one single compelling purpose, pleasing customers. Very similar to what Bezos says. Start with the customer and work backward. That is the best way to create shareholder value. We see Izzy expressing the same idea here. We're going to see Izzy echo another one of history's greatest founders here. This section is going to remind me of, it reminded me rather, of what Walt Disney said when he was building Disneyland. And I'm going to read the quote from that from that book. It's called Disney's Land. I did it. I don't know, maybe 15 or 20 books ago. But he says, not all my senior people agree with all these decisions on quality.

This is Izzy talking. Why don't we use vinyl instead of leather? They asked polyester instead of silk. Most people can't tell the difference. This is his response response a lot of the people we hope will become customers can i told them so they're in the rush to create disney disneyland which happened i think 366 days if i'm not mistaken um they're they're having trouble with the quality of uh the leather on a horse-drawn carriage so it says they were among the first park attractions to be finished but the pressure of time was already weighing on everyone. One day, John Hench stopped to check on the progress of the coaches and had an idea which he brought to his boss. Why don't

we just leave the leather straps off, Walt? The people are never going to appreciate all the close up detail. Let me pause there before I get to Walt Disney's response. Is this not the same thing? He just said, the people are never going to appreciate all the close-up detail. This is what Izzy's executive said. Why don't we use vinyl instead of leather? Polyester instead of silk?

Most people can't tell the difference. Same exact thing is happening, right? The same scrupulousness that had recently made Disney refuse to license a Davy Crockett Colt revolver because the firearm hadn't existed in Davy's day treated Hench to a tart little lecture. a Davy Crockett Colt revolver because the firearm hadn't existed in Davy's day, treated Hench to a tart little lecture.

You're being a poor communicator. There's a direct quote from Disney, obviously. You're being a poor communicator. People are okay. Don't you ever forget that. They will respond to it. They will appreciate it. Hench didn't argue.

We put the best damn leather straps on that stagecoach you've ever seen. And those kind of people that have that level of dedication to their products. These are the people that I want to buy products from. I love this. He repeats this, so I'm going to repeat it to you. Actions speak louder than words. And actions speak louder and much clearer than words. He says that probably half a dozen times in different ways.

He's constantly communicating that to all of his employees. Everybody's around him. All that matters is what we actually do, not what we say. So he talks about how he recognized the way he felt about his job is very similar to how Ray Kroc, the founder of McDonald's, felt about his. So he quotes him here. To compete, we'd have to feel about service the way Ray Kroc felt about hamburgers, explaining why his company led competitors around the world. Kroc had said, we take the hamburger more seriously than they do. So now he's going to talk about how

difficult it was. Like he has this insanely high bar for quality, very similar to how Walt Disney had, and he's got to make sure that reverberates to his entire organization, every single position. And the people that don't live up to his quality standards, he has to let them go. Enforcing our credo was the most far-reaching decision I ever made. A painful process, often personally distressing. It is perhaps the hardest thing I ever did, but the fastest way for management to destroy its credibility is to say employees come first and be seen putting them last. And this is a great last sentence, better to not profess any values than to not live up to them. This is more on his philosophy and just his importance of focusing on one thing. He's constantly trying to narrow his focus. I just want to be the best five-star hotel in the world. I don't want to do anything else. Japanese

accountants have a saying, over is the beginning of under, meaning that growth can become addictive, adding volume without value. I wasn't hooked on momentum or quarterly results. I agreed with Peter Drucker who said, doing too many things at once is the most common mistake in business. And now here's Izzy's interpretation of that. If quality is your edge, you can't compromise it. So the travel industry, as you probably know, is highly cyclical. Usually when there's an economic downturn of any sort, it's impacted to a much larger degree than most other industries. And so the book, he has to constantly navigate through several different economic recessions. And in one case, he has to pledge every single asset he has.

So I'm not selling and my back is up against the wall. And the financial situation is so dire that even his vice president of finance, like we need to sell the company. We had worked together on many deals, but the downturn was making our business much more difficult than he expected and now his advice was was to sell the company we could walk out of this a big winner he said in my mind there was absolutely no question of selling i went back and pledged all of my four seasons stock knowing to so he had to pledge his stock to get a loan to continue the company knowing that i had to succeed or lose everything it's strange but i can't recall being deeply concerned perhaps because of my depth of involvement and belief in what i was doing interesting enough something that

i learned while reading this book that was actually surprising is so four seasons winds up being a public company but then it's taken private towards the end of his career he winds up being a public company, but then it's taken private. Towards the end of his career, he winds up selling majority ownership. Since 2006, I think, Bill Gates and a Saudi prince have been the majority owners of Four Seasons and Four Seasons is private now. I was very surprised when's got this idea of invisible automatic service. Excellent. This is a great quote. First, excellence is often just a capacity for taking pains. And this is what I mean about invisible automatic service. He comes up with one of the first companies to actually track, like the user computer to track what the preferences of their customers and then just deliver to them without asking, without them having to ask for it. We made this a common experience by setting up early on, far ahead of other hotel companies, what we called a guest history system.

The first time guests stayed with us, we computerized their preferences in rooms, food, drink, and anything else our employees noted, so that when they returned, we could give them, without them having to ask, whatever they wanted and liked best. Then he's continuing to rethink the experience that he has for customers. And this is really interesting. Well, let me read this to you. Remembering that Cesar Ritz made his hotels world famous by hiring some of the foremost chefs, we decided to do something similar. So that's the founder of Ritz-Carlton.

And Izzy, like all great founders, borrowed ideas from his predecessors. There's actually a book because of this sentence. I went and researched. There's a book about the partnership between the founder of the Ritz-Carlton and the greatest chef in history. That's what Izzy is referencing there. And that's going to be an episode coming very, very soon. So why is he doing this? By the mid 80s, we had completely demolished the longstanding stereotype of a hotel restaurant as a mediocre, overpriced trap for tired travelers. And so he's picking up like I have an opportunity because most businesses are poorly run. And then we if we just try a little bit harder, we can do better. So he says what really counted

was doing the right thing in the right way, which should have been done long before. So he's talking about like, yes, putting an emphasis, like taking Ritz's idea, putting an emphasis on high quality food, getting world renowned chefs, partnering with them, winds up increasing restaurant sales like by 30 to 50 percent. So it was financially a great idea right that he borrowed from ritz but his whole point is like above and beyond that we made more money it's like we were doing it the right way this should have been done in the past hotels should not have been using their restaurants just as a way to upcharge or to nickel and dime their customers i really like that what really counted was doing the right thing in the right way, which should have been done long before. Very much like Ingvar Kamprad and the founder of IKEA.

He grew, Four Seasons grew, but he grew much slower than he could have, just like IKEA did, because he's not after growth for growth's sake if it compromises the quality. So he says, entrepreneurship often breaks down when a company starts to expand. So he's extremely conservative. I think they added five or seven hotels a year, something like that. Even though they had access to more money and to people telling them, you can go faster. Izzy did not do that. At this point in the story, his dad passes away.

His dad lives to be 102 years old. And this is him reflecting on what he learned from his father. First and foremost, of course, was the influence of my father. For he taught me reflecting on what he learned from his father. First and foremost, of course, was the influence of my father, for he taught me how vital people are to success in business. Dad was the most tolerant, kindest, and most positive thinking person I've ever known. His example and his unquestioning and unconditional faith in me are the underlying reasons for whatever I've achieved. At this point, they're expanding all over the world. They hire, obviously, local people working there,

sometimes in different countries. In this case, it's Hawaii, but they do this in all over the world. And what's very interesting is they say it's easier to train somebody brand new than to have them unlearn things. Like if they worked for other hotels, they probably learned how to do things a way that's not that will not meet izzy's standards he's like i'm just going to meet i'm going to hire people brand new and his thinking behind this was actually really really smart more than 3 000 people applied many with hotel hotel experience that we didn't want we

find that expertise is easier to learn than bad habits are to unlearn instead we hired a lot of people who had been doing back-breaking labor in sugarcane and pineapple fields, people who would feel appreciative of a clean work environment and nourishing meals in a healthy, attractive, air-conditioned environment. We were right. These were people with positive attitudes who soon learned their jobs and took pride in sharing their aloha spirit with guests just a few more ideas for you this is really interesting how bad do you really want it hurricane hugo swept across nevis i've heard this this island saint kitts and nevis and saint kitts and nevis i don't know how to pronounce i'm gonna go nevis hurricane hugo swept across nevis the following monday morning when John went to check on his office, Faye Walters was there.

It was 8 o'clock. She was sitting at her desk, immaculately dressed and attentive, surrounded by debris in a room with no roof, no electricity, and all of her files had blown away. What in the world are you doing here, John said, he asked her. Well, you told me if you hired me, I'd have to come to work on time looking smart and happy. And then Izzy's got some advice for us on continuing to advertise during a recession. has slowed by an average of 27%. But consumer studies of those recessions have showed that companies that didn't cut their ads had, in the recovery, captured the most market share. So we didn't cut our ad budget. In fact, we raised it modestly to gain brand recognition, which continued advertising sustains.

And this is his main point here. It is much easier to sustain momentum than restart it. And finally, how he thinks about competitive advantage. Underlying and justifying my view of the future was what Warren Buffett, the world's most successful investor in his latest year-end discourse, has called the only competitive advantage that matters,

a barrier to entry. This was what I believed our competitive advantage now provided. Our portfolio of hotels was the largest group of authentically first-class hotels in the world. A physical product no other company had to the same degree. These were exceptional assets almost impossible to duplicate. And that is where I'll leave it for the full story. If you buy the book using the link that's in the show notes or your podcast player, you'll be supporting the podcast at the same time. I also leave a link in the show notes. If you want to buy a friend or

a coworker, a gift subscription to founders, you'll be supporting not only your friend, feels good to do something nice for somebody else, but you're also supporting the podcast is because so many people have been doing this lately. Not only they've been buying gift subscriptions, but they've been telling people about the podcast. I've spent, I've been having, I've been able to spend less time on marketing and more time reading and making podcasts. That's why my, I've, you'll see, like I've been releasing podcasts more frequently. I guess I should tell you about this. I don't really think, I've told you this before, I think of Founders more as like it's a course on the history of entrepreneurship.

It's one giant discussion on all the best and worst ideas in the history of entrepreneurship. I do not think of it as a show. That's why I don't have ads. I don't have intro music. I don't have interviews. And so what I realize is I want to get away from anything that is show like and just releasing podcasts on the same day every week. Like sometimes I'll have it finished for a few days. I'm like, oh, I got to release it on a Sunday because that's what shows do. And I was like, David, this isn't a show. Why am I holding

this? Like if it's ready, why don't I just release it? The sooner you get this information in your mind, the more time you have to apply these lessons to your own career. So this line of thinking, the reason I would encourage you, if you can, and if you know anybody that wants to, if you do buy gift subscriptions for other people or if you can keep telling people about the podcast, Yes, other people benefit. Yes, I benefit. But do it for selfish reasons because the more you do that, the more time I dedicate to reading and making podcasts, the faster you get more podcasts is basically what I'm saying. So you don't have to.

It's optional. But there is, you know, your own personal incentive if you choose to do that as well. That is 184 books down, 1,000 to go. And I'll talk to you again soon.