Founders - #345 George Lucas

Starting point is 00:00:00 I don't think you have to listen to the Quentin Tarantino episode or the Steven Spielberg episode before you listen to this episode on George Lucas. But if you haven't listened to them, I would listen to them after you listen to this episode, because you're going to see so much similarities in how they approach their work. I talked about last week how Spielberg would watch and rewatch movies that he loved. Decades later, entire scenes from those movies would appear in his own movies. Tarantino did the exact same thing. George Lucas talks about doing this. You're going to hear him being addicted to reading biographies, studying history, reading science fiction. A lot of the stuff that he was learning as a young person, he would use a decade

Starting point is 00:00:34 later. And the influences that he used to build Star Wars, which is obviously the cornerstone of his multi-billion dollar empire, have been well documented. And you see the exact same thing with company builders. This is just like Edwin Land's ideas that show up in Steve Jobs' companies and products. It's just like Sam Walton's ideas showing up in Jeff Bezos' companies and products. It's just like Henry Singleton's ideas showing up in how Warren Buffett and Charlie Munger built Berkshire Hathaway. Charlie Munger said Henry Singleton was the smartest person that he ever met. Warren Buffett said it was a crime that business schools didn't study him. And so I go back and start reading about Henry Singleton. You realize, oh, wow, these ideas that I was

Starting point is 00:01:07 attributing to Munger and Buffett actually originated with Singleton. And that is a main theme that reappears over and over again for anybody that gets to the top of their profession. Anybody who becomes great at what they do is seeped. They are all seeped in the history of their industry. They talk about these ideas over and over again. They don't just read a book one time. They don't just watch a movie one time. They don't just watch a movie one time. They don't just have one conversation. They do it over and over and over again. That is why if you haven't done so already,

Starting point is 00:01:30 I highly recommend that you subscribe to Founders Notes. For six years, I've been cataloging all of my notes, all of my highlights for every single book that I've read for the podcast. And it blew my mind because that's exactly what Quentin Tarantino did. He would keep scrapbooks, make notes, and he actually kept files on index cards of every single movie and what he wanted to remember about the movie for every single movie he's ever watched. And then

Starting point is 00:01:53 because he cataloged all those ideas, he was able to use them in future movies. And so now you're able to read now by signing up for Founders Notes. When you get a subscription, you get access to all my notes, all my highlights, transcripts for every single episode. You can search by keyword, by person, by subject. It's this giant database of the collective knowledge of history's greatest entrepreneurs. You can also read all of my notes and highlights by book. You can have all of my notes and highlights presented to you in a random order on the highlights feed. I've been searching by keyword. I've been rereading my highlights by book, and I've been rereading my highlights in random order on the highlight feed for years. I built this tool for

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Starting point is 00:02:59 person that is often looked to for guidance and advice. And that's exactly what Sage does. It's like search on steroids. You can ask it a question and it'll search every single note, every single highlight, every single transcript, meaning every single word I've ever uttered on this podcast and it'll start making connections. It's been making connections that I've even missed.

Starting point is 00:03:16 And so I mentioned last week, after I re-listened to the Steven Spielberg episode, I was asking Sage, I was like, give me what are the most important ideas to learn from Steven Spielberg? And within 20 to 30 seconds, it gives me this outline of the top nine, what it feels is the top nine most important lessons from Steven Spielberg. Now, the interesting part is, if you press on expand, it actually tells you what it searched to come up with the answer. So you could just read the outline. Or if you choose to, you can go deeper and see what it actually fetched and what it searched to come up with the answer. And of course, it's going to search the Steven Spielberg episode because I'd done the episode a few years ago. But what is fascinating is also included ideas when I mentioned Steven Spielberg on a Steve Jobs episode.

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Starting point is 00:04:15 Founders Notes and Sage in particular is the tool that I hope you condense and clarify the collective knowledge of history's greatest founders so then you can use their ideas in your work. Just like Bezos used Walton's ideas, just like Jobs used Land's ideas, just like Spielberg and Tarantino and Lucas used past filmmakers and everything they read, all the ideas they derived from that in their work. I highly recommend getting a subscription and you can do that by going to foundersnotes.com. That is founders with an S just like the podcast foundersnotes.com.

Starting point is 00:04:44 I'll also leave a link down below in the show notes. I appreciate the support, and I hope you enjoy this episode on George Lucas. George Lucas unapologetically invested in what he believed in the most, himself. As a result, the film empire that he created would empower not just him, but other filmmakers to produce movies exactly as they envision them, without a studio imposing its own priorities, complaining about budgets, or micromanaging the process. George Lucas, the small-town son of the owner of a stationery store, had said no to the family business and then built a cinematic empire based on his own

Starting point is 00:05:27 uncompromising vision of the film industry, not as it was, but as he thought it should be. Much of that vision lay in the possibilities presented by new technology, technology that Lucas developed with his own money. I can't help feeling that George Lucas has never been fully appreciated by the industry for his remarkable innovations, the director Peter Jackson once said. George Lucas is the Thomas Edison of the modern film industry. But George Lucas knew what he had done. He knew his place, and he seemed comfortable with it. When asked by interviewer Charlie Rose what he thought the first line of his obituary might say, Lucas gave perhaps the best summation of his lengthy career in two single-syllable words.

Starting point is 00:06:19 His answer? I tried. That was an excerpt from the book that I'm going to talk to you about today, which is George Lucas, A Life. And it was written by Brian J. Jones. Brian J. Jones writes excellent biographies. He wrote this one. I read his biography on Dr. Seuss, which was excellent. And he also wrote an incredible biography on Jim Henson. So I originally read this book like seven years ago. It was episode 35.

Starting point is 00:06:42 And there's some ideas in it that I've never forgotten. That sentence where it's like, you know, he unapologetically invested in what he believed in most himself is my favorite sentence in the entire book. And I also think that concept, investing in yourself, is the concrete and the foundation of his empire, if you will. So I want to go to the beginning, which is really fascinating, because the book is going to talk a lot about his childhood, but it doesn't start there. It opens up right in the middle of him shooting Star Wars. And I think his despair and depression and struggle that's going on, you see this a lot, not only with founder biographies that you and I talk about,

Starting point is 00:07:19 but especially with the filmmaker biographies. Tarantino talks about this. Christopher Nolan talks about this. James Cameron talks about this. Steven Spielberg talks about this. You'll see this in George Lucas. It is very hard to understand at the time you're doing something, how it's actually going to turn out and how impactful it was. He had no idea. There's no possible way when George Lucas started working on Star Wars that he could have predicted the impact that those movies would have on the world. And then of course, the influence and control it had over the building of his business. And thinking about how difficult this movie was to make is fascinating to think about. But what I'm really to the fact that he felt he had already lost control of his film. The executives at 20th Century Fox had nickel and dimed him every step of the way. They would deny him the money that he needed to ensure that everything worked.

Starting point is 00:08:16 The people at Fox were also skeptical. Science fiction, they said, was a dead genre. And they were actually right about that. At this time in history, science fiction was, in films, was a dead genre. And they were actually right about that. At this time in history, science fiction was, in films, was a dead genre. The difference was you needed the right people to show up. And those people happened to be George Lucas and his lifelong friend, Steven Spielberg. Steven Spielberg makes Close Encounters of the Third Kind. And Lucas, of course, made Star Wars.

Starting point is 00:08:38 Go back to Lucas. It was very, very difficult to get things to work. Everything was a prototype. We had to build this and we had to build it with no money, but we had to make this work. The problem is nothing really worked as we wanted. Lucas vowed he would never cede control over his film to executives at the studios again. And something he would repeat over and over again is like, what do they actually know about filmmaking? They've never made a film, but they would come down and talk to him and tell him this is how you should make the movie. And he says they decided they know more about making movies than directors.

Starting point is 00:09:07 And here's the problem. You can't fight them because they've got the money. And so Lucas vowed one thing. If Star Wars worked out, one thing he would have to change for sure. He would control the money. Back to Lucas. I was seriously, seriously depressed at this point because nothing had gone right. Everything was screwed up.

Starting point is 00:09:25 I was desperately unhappy a little more than a year before it was scheduled to hit theaters. Star Wars was a mess and the movie was going to be terrible. Lucas was certain of it. And I think that's a really important place to start when you analyze the career of George Lucas. The depth of his depression is going to influence all the decisions he's going to make. And in turn, the success of those decisions that he makes, makes him a multi, multi, multi-billionaire. So I want to touch on a few things in his childhood, because I think it would give you and I a better understanding of just really why he ran the business the way he did. He was the sole shareholder, the only shareholder in Lucasfilm when he sells it to Disney for over $4 billion.

Starting point is 00:10:09 And he's got this, I would say, juvenile delinquent streak in him since he was a very young boy. A lot of this came out of this kind of butting heads or fighting that he would have with his father because Lucas is kind of like a hippie or a rebel. And his dad's the exact opposite of that. So his dad is actually George Lucas Sr. And so George Lucas Jr. describes his dad as a very old fashioned kind of guy. He was a kind of classic small town businessman that you would see in a movie. He owned a stationary store. And Lucas said later in interviews that he was he would remember being very, very angry at his father for most of his childhood. And I think the main reason of that is because his dad was intent on controlling him. Something else that Lucas never had that he looked for his entire life. He really talks about the importance of mentorship, but he never had an older brother. And so throughout his entire career, you see him trying to attach himself to a slightly older, almost like bigger brother figure. And he talks about why this was so important. He said, that's one of the ways that you learn. You attach yourself to somebody older and wiser than you. You learn everything they have to teach, and then you move on to your

Starting point is 00:11:13 own accomplishments. And so another way that George Lucas was searching for mentorship was not only for like older brother figures, but also through books. He was never very good in school, but he loved to read. I got to this section of the book and it reminded me of, I saw this interview that's pretty incredible. All the way back in 2012, it's with Elon Musk and he's being interviewed by this guy named Kevin Rose. I will grab the link from YouTube and put it in the show notes in case you want to watch it. I highly recommend you do. Because it takes place on the Tesla, the factory floor of Tesla, back when I think they only had one model in production.

Starting point is 00:11:49 It was like the early Model S was in production. But Kevin was asking Elon, he's like, well, you're trying to figure out, how did you do all this? You emigrated from Canada. You didn't have a lot of money. You moved to California. You started your first company

Starting point is 00:12:01 when you were just in your early 20s. And he was like, well, how did you learn how to start a company? Did you read the question from Kevin to Elon was, did you read a lot of business books? And his answer actually had a huge influence on my desire and my dedication to making this podcast. And because Elon said, no, I didn't read business books. I read biographies and autobiographies.

Starting point is 00:12:22 I thought they were helpful. And then he went on to say that this was a way to develop mentors in a historical context. And you see that with a very young George Lucas. He talks about he didn't like school, but he loved reading. And he amassed this enormous collection of these things called landmark books, which was a series of biographies written for young readers. And reflecting on this time in his life, George Lucas says, I was addicted to those. It started me on a lifelong love of history.

Starting point is 00:12:50 And as a kid, I spent a lot of time trying to relate the past to the present. And just like everybody else that gets to the top of their profession, Lucas references and uses that learning from history as a form of leverage. He'll talk about, I watched this interview with him and Christopher Nolan that took place probably a decade ago. And in that, Lucas is just talking about the fact that all this reading and studying of history that he was doing as a kid influenced the storyline for Star Wars. And then Lucas continues to use the entire world and all of its experiences

Starting point is 00:13:18 as like this giant classroom. And so he actually gives, this was hilarious. You know what fictional character is going to have a huge influence on the way that Lucas builds his empire and thinks about building his business. Scrooge McDuck. I remember watching Scrooge McDuck and DuckTales when like I was a kid. I didn't even know that it was around when Lucas was a kid. And so listen to the lessons he draws from watching, you know, Scrooge McDuck, which is the the money hoarding, globe trotting uncle of Donald Duck, right? And so it says, Lucas was fascinated not only by Scrooge's exploits,

Starting point is 00:13:51 but also by his conniving capitalist ways. Work smarter, not harder was Scrooge's motto. And yet his stories were full of inventive schemes that more often than not made him richer and even more successful. In Scrooge's world, hard work paid off, but so did cleverness and a desire to do something in a way no one had ever thought of before. Think about, come on, think about the life and career of George Lucas, a desire to do something in a way that no one had ever thought of before. That is exactly Lucas's approach to the filmmaking industry. Movie making had been around for four or five decades before Lucas came along. Think about why Peter Jackson said, hey, this guy's the Thomas Edison of our industry. You know what? I wasn't even thinking about going

Starting point is 00:14:33 here. I was going to talk to you about this later, but I'm going to jump ahead because I think it's one of the most important ideas in the book. And I might repeat this in the future. But they talked about the fact that he was so dissatisfied with that he could not make the vision in his head real, right? That there was not, that the computer graphics weren't there, the special effects weren't there. So he's like, what's the solution? I'm going to start my own company. I have to create the technology that I want to see in the world, just so I can make the movies look how I want them to look. And so he founds this company called Industrial Light and Magic, which absolutely dominates in special effects for a couple of decades. Ron Howard has this excellent quote

Starting point is 00:15:10 later in the book, right, talking about the fact that who the hell would do something like that? And he I think he summarizes it better than I ever could. He goes, how many people think the solution to gaining quality control, improving fiscal responsibility and stimulating technological innovation is to start their own special effects company, Ron Howard said admiringly. But that's what George did. Back to Scrooge McDuck. In Scrooge's world, hard work paid off,

Starting point is 00:15:34 but so did cleverness and a desire to do something in a way no one had ever thought of before. Scrooge's ethic reflected honor, honesty, and allowing other people to believe in their own ideas, not trying to force everyone into one form, which is, I think, exactly how he described what his dad was trying to do to him. His dad was trying to make another him. And George is like, but I'm not the same as you. I want to live life on my terms. The lessons Lucas learned from Uncle Scrooge would shape the kind of businessman he would become in the future. Conservative and driven, believing strongly in his own vision and pursuing it aggressively.

Starting point is 00:16:09 Let's go back to more of his juvenile delinquent ways. As his grades suffered, Lucas began to look more and more like the juvenile delinquent his teachers were already convinced that he was. One of my favorite lines ever describing founder mentality and entrepreneurs comes from Yvonne Chouinard, who is the founder of Patagonia. He says, if you want to understand the entrepreneur, study the juvenile delinquent. The delinquent is saying with his actions, this sucks. I'm going to do my own thing. His grades were so bad, his dad was convinced that he was going to be a loser. Lucas thought his father's lack of interest in him was typical, and it was probably understandable. I was a hellraiser, and I didn't do very well in school. My father wrote me off. And then it doesn't help

Starting point is 00:16:49 that he's not doing well at school, doesn't really have a direction in what he wants to do in life yet. And so he goes and briefly works for his dad at the stationery store. This, he doesn't last long. He quits and then him and his dad get back into this argument. And so this is Lucas's description of that. I get really mad at my father. And I told him I'll never work in a job where I have to do the same thing over and over again every day. His father responded, you'll be back in a few years. I'll never be back, Lucas said. As a matter of fact, I'm going to be a millionaire before I'm 30. And that is one of the smartest insights that a young George Lucas ever had.

Starting point is 00:17:29 The fact that he realized that you need to make money not to buy a bunch of useless shit, but to actually buy your own freedom. And that's exactly what he uses his money for. So he is it. It's almost like a contrast in embedded in one person because he will bet literally the house, which he does multiple times, on the success of one movie. But he's unbelievably fiscally conservative with the way he runs his business. And that fiscal conservatism actually breaks up. He has like co-founder breakups with Francis Ford Coppola because Coppola was essentially the exact opposite.

Starting point is 00:18:02 George Lucas was always very, very concerned about protecting his downside because all he wanted to do is never jeopardize anything that would cause him to relinquish his freedom over what he worked on. You could think of George Lucas's constant invention of vertical integration as just another form of control, and that control to make sure that no one else can ever, ever tell him what to do. And so he gets to college. He's like, I have no idea what I want to do. So he just goes to like a little junior college, a little community college. And then he realizes he all he knew. He's like, listen, I'm not stupid. Remember the Tarantino episode? I don't know if I should back up. Why am I doing like Lucas right now? I think if you listen to relisten to the

Starting point is 00:18:37 Spielberg episode, I just republished a couple of days ago. And then Tarantino, I think this line through what I'm doing right now, Tarantino studied, they're about 10, they came about 10 to 15 years before he did. Tarantino studied Spielberg and Lucas, all the movie brats, which I'll get into like the rest of these guys, there's essentially like these filmmaking geniuses that all met in the early 20s. And in many cases, they're 70, 80 years old today, and they're still friends. But I find this fascinating because Tarantino studied Spielberg and Lucas. Spielberg and Lucas studied Walt Disney. Walt Disney's the next episode. I'm reading this 700-page biography of him now, so it's taken me a long time. This book, I have in my hand, is a monster. Over 500 pages, I have the hardcover version. And it took me over 30 hours to read and research and really think about before I sat down and talked to you today. So the connection to what's happening in Lucas's life is very similar to Tarantino's, you know, not great in school, but clearly not dumb. He just doesn't like other people telling him what he should study. Tarantino was the same way. So he gets to junior college and now, you know, college is the first time he can

Starting point is 00:19:38 actually pick his classes. And so once he's in control of his own curriculum, he becomes a phenomenal student. And so once it's time to be done with junior college, he's got to figure out, like, where do I transfer and what am I going to study? And this conversation with his dad actually changes the trajectory of his life forever because Lucas is like, I'm going to go to art school. His dad's like this old school 1950s, super conservative American businessman. He's like, there's no way in hell that my son, like, you're going to go to art school. There's no way in hell I'm paying for it. And he told his son, like, there's no way you're going to make money. You can't do that. And so one of Lucas's friends says, hey, why don't you, if you're not going to go to art school, take a look at USC, University of

Starting point is 00:20:18 Southern California has this new cinematography school. And keep in mind, this is the mid 1960s. There's not many film schools in the United States. And so this is why Tarantino last week in his book would talk about the movie brats. He said they love movies, they dreamed of movies, and they even received degrees in movies back when that was a dubious major. And Lucas talks about this, like it was embarrassing. Other people were like, you're going to film school? They didn't even call it film school, they called it cinematography school. It's like, what the hell is this? And he says, I lost a lot of face. The idea of going into film was a really goofy idea at the time.

Starting point is 00:20:52 But what was fascinating is his dad's like, there's no way in hell I'm playing for art school. Then he was impressed that his son got accepted into USC and he didn't understand. They said, you know, the school of cinema or cinematography. He didn't understand that it was his way of getting to a form of art school. And so his dad agrees to help him out, pay his tuition and help him get housing. And the reason I say that decision changed the trajectory of George Lucas's life is because that's when he meets essentially just a collection of filmmakers who are all obsessed with movies. They're all young and they wind up helping each other for decades. It's almost like the island of misfit toys because before this, it says, for many of them, it was the first time

Starting point is 00:21:28 they had a clique of their own, a gathering place where they could talk about their interest, movies, without eye rolling from the other cool kids. For many, reality finally began when they entered film school. Lucas knew that he had found his way. Before, he wasn't sure. He was into cars, he had all these other interests. And he's like, oh, wait, this is it. I was sort of floundering for something. And when I finally discovered film, I really fell madly in love with it. I ate it. I slept it 24 hours a day. There was no going back after that. That is a direct quote from George Lucas. There was no going back after that. You know what's fascinating? I just, I'm going to put this book down, picking up the Steven Spielberg book that I republished last week, right? That book is 25 years old, maybe? This book is 25 years old. Listen to how Steven Spielberg describes.

Starting point is 00:22:13 He uses the exact same language. This is what Spielberg said. Making movies grows on you. You can't shake it. I like directing above all. All I know for sure is I've gone too far to back out now. There is no going back. They both discovered what they're going to do.

Starting point is 00:22:33 Now, this is the fascinating part because this turns into the USC mafia. Spielberg's part of that, even though he didn't go to USC. You're talking about a group of super talented filmmakers. And a lot of them come out to California, even though they called the USC Mafia. Some of them like Martin Scorsese, Oliver Stone, they went to NYU. Brian De Palma went to Columbia.

Starting point is 00:22:53 Francis Ford Coppola is at UCLA. Spielberg's on the lot getting his own curriculum, I think at Universal or yeah, it was at Universal. Lucas would be one of a group of highly motivated and young filmmakers. They were all friends who one of a group of highly motivated and young filmmakers. They were all friends who would have a lasting impact on film and culture. This is another example that relationships run the world. You see it over and over again in these books. It's so important to develop relationships with other people that are just like you.

Starting point is 00:23:16 And even if you're they don't look at themselves as competitors, they tend to compete, but they also collaborate. But they all need each other because they're trying to break into a system that is closed. At this point in history, unless you're part of a union, unless you already know somebody in the industry, you're not breaking in even with a film degree. It's yet another illustration of one of my favorite concepts from Game of Thrones, where they said those on the margins often come to control the center. At this time, Spielberg, Scorsese, De Palma, Coppola, Lucas, they are on the margin. The center is controlled by these old school conservative studios that are locking all these young people out. It was unheard of to have a director in their 20s. And yet this network that they're building and the talent that they have for their craft, those on the margins often come to control the center. They become the center. Now, this is really fascinating because when I had dinner with Charlie Munger, this is the advice that he gave us. I'll get there in one second. So it talks about they refer to themselves as the mafia, right? That would end up being a more appropriate designation as they would all regularly hire, fire, and conspire with one another on countless projects over the next five decades, putting together a kind of system of their own.

Starting point is 00:24:27 Munger talked about the importance. He didn't use the word relationships run the world. That's the maxim that I put on it. But he talked about, that's exactly what him and Buffett did. I think he was 35 when he met Buffett. Buffett was, what, 28, 29, something like that. He talked over and over again the importance of, the advice he gave us is like,

Starting point is 00:24:42 you have to develop relationships with people. He's like, they were still doing deals. He's something, something like a, I can't remember exactly how he put it. I have to go back and read my notes or listen to that episode again. I think it's episode 295. If you haven't listened to it yet, but he talked about the fact that they would meet people, you know, in their third, their twenties, thirties and forties, and they would do business and do deals for the rest of their lives. Many of the people that he was, that Charlie was referring to, because Charlie was 99 when I met him, were dead.

Starting point is 00:25:08 But he said that's exactly what they did. Okay, so let's go back to this idea where Lucas is just, he's unmanageable. He's a juvenile delinquent. And so now he's in film school. And the film professors are like, okay, we're gonna practice making films. And they give you this sheet of instructions and film must be filmed in black and white.

Starting point is 00:25:28 Must be this. You must. The story must look this way. It must not go over, you know, this length. And George Lucas is like, I don't give a damn about your instructions. I'm going to do what I want. Lucas made his intentions immediately clear with his first onscreen credit. This was no student assignment. It was a short film by George Lucas. That is in big letters. That's what he put on this movie that he's making. Lucas had chosen to set his film to music in open defiance of his professor's instructions. And so the movie he made is called Look at Life. Even 50 years later, Look at Life is an impressive debut, aggressive, political, and utterly confident. As soon as I made my first film, I thought, hey, I'm good at this.

Starting point is 00:26:08 I know how to do this. From then on, I never questioned it, Lucas said. And right from the rip, he is completely obsessed. He preferred shutting himself in his top floor bedroom, sitting at the drawing board, planning out his films, and sketching out ideas. I would always try to get him to go out to parties and clubs and stuff. This is his roommate. And George would usually stay upstairs in his room drawing these things. He called them little Star Troopers. This is like

Starting point is 00:26:34 a decade before Star Wars. So he's drawing these things he calls little Star Troopers. But for Lucas, that was better than partying. I'd be working all day and all night, living on chocolate bars and coffee, said Lucas. It was a great life. I had enthusiasm and I was too busy to get into drugs. Movies were his addiction. We were passionate about movies. We were always scrambling to get our next fix. Listen to how they're describing this.

Starting point is 00:27:01 This is how he knew this is what you should be doing with your life. He described working as your next fix to get a little film in the camera and shoot something. And then here's a glimpse of something that he's going to have problems with his entire life. He wasn't really a big fan of collaborators. He wanted subordinates. Again, he is a dictator. He wants, you know, prefers working alone. In many cases, I almost feel like he was born at the wrong time because it even says like he's really kind of a really bad on set. Didn't know how to deal with humans. He's super shy, wouldn't talk, wouldn't give instructions. And yet he said like he really made films in the editing room.

Starting point is 00:27:37 He's just by himself editing. And so I almost think like if he was born now, he's going to, especially with all these new technologies, basically you have one person like filmmakers because they're going to use all this technology. I think that's how George would have preferred. And you see this from a very early age because he's getting all these assignments when he's in film school and they're going to make you work on teams. And he did not like that. He was becoming increasingly cranky about the idea of working with others and preferred doing everything himself. He could be easily irritated if he was saddled with crew members who could not keep up with him. He's also super, super competitive. Later on in the book, it says something like Francis Ford Coppola responds back,

Starting point is 00:28:15 because a few times Lucas says, I'm retired, never making movies again. He does this a few times, and Coppola's like, he'll be back. And they're like, why do you think he's going to be back? It's like, because George loves winning too much. And so young George says, I was really into making it a competition. Who can get it done first and best? If they couldn't cut the mustard, they shouldn't have been there. And then he also has some talents, obviously.

Starting point is 00:28:35 It was clear that he was one of USC's most dexterous editors. Lucas worked quickly and without complaint. He'd cover up any defects, shortages, or missing shots in the editing room. And that's not an exaggeration. It is funny. I'm not even going to talk about it because this book's gigantic and I've covered it on other like Steve Jobs and Ed Catmull episodes, but you know, he started Pixar. He's the one that hired Ed Catmull. He's the one that sold Pixar to Steve Jobs when George Lucas is going through a divorce, which also goes into a lot of detail in the book, which I won't cover.

Starting point is 00:29:06 But this idea of being able to kind of sit at a computer and make a movie, you know, I think if he could have done that, if he was alive now, that's what he would do. Because a typical movie that he would make, like his first movie, he shot for three days. I mean, you know, he's on set for three days, but then he edited for 10 weeks. His favorite part about the movie making process, he hated writing, which we'll get into. He forced himself to do it. He's got some ideas on how to do that. He wasn't good on set, but he would love, that's all he wanted to do. He wanted to be alone in the editing room, but we're not there yet. We're still in film school. This is more juvenile delinquent behavior. This is the one he's breaking into. This is hilarious. So he says, the rules were of no concern to him. I broke them all.

Starting point is 00:29:45 He said, whenever I broke the rules, I made a good film. So there wasn't much that the faculty could do about it. George Lucas was very resourceful. He always would find a way to get what he needed in terms of equipment and bodies to put together a crew. Like sometimes when you film like when you film Star Wars in London later on, they have these like really strict rules for the London like film union. You know, it's like you have to start at 830. There has to be a tea. I'm not even joking about this. You have to start at 830.

Starting point is 00:30:08 Then you have to break for tea at 10 p.m. or 10 a.m. And then you have to break for an hour lunch at one o'clock. And then you need another tea break at four o'clock. And then you can't work past six. He's like, this is madness. He didn't want any kind of restrictions. So they would break into the equipment room to get not only materials that they needed, like an expensive camera, but they would also break into facilities.

Starting point is 00:30:28 It says Lucas didn't want to limit his use of the equipment to the building's regular hours either. We'd shimmy up the drain spout, cross over the roof, jump into the patio and break into the editing rooms so we could work all weekend. And this idea that you use juvenile delinquent actions to actually be more productive. One of my favorite stories from history about this is edwin lan he's trying to do all these experiments doesn't have the money for uh for the equipment he needs so him and his future wife they actually like break into i can't i think it was nyu it might have been columbia but they break

Starting point is 00:30:57 into a university and then all night they're just illegally using their science experiments our scientific equipment to make experiments, rather. And this idea where Lucas is like, what the hell, you guys don't work weekends? This is absurd. In the early days, way before it turns into Polaroid, Land's first company is called Land Wheelwright, if I remember correctly.

Starting point is 00:31:16 And Land had won a bunch of awards. He was a pretty well-known scientist by the time he was 19. And so he gets recruited to all these other, he's running his company, but he's getting recruited to all these other companies. Maybe they could like buy his company or convince him to come over. And I remember there's a conversation that takes place with Land and his co-founders. Co-founder's concerned because his co-founder is more like the money guy. His co-founder is concerned that he's going to leave.

Starting point is 00:31:43 And Land goes, they start work at nine, they end at five, and they don't work weekends. And so his co-founder is concerned that he's going to leave. And Lan goes, they start work at, you know, nine, they end at five and they don't work weekends. And so his co-founder's like, yeah, I know. Are you going to go? Are you going to leave and go work with him?

Starting point is 00:31:51 And Lan's response goes, of course not. How would I get anything done? So you see George Lucas is like, wait a minute, you gave us this assignment to make this film. We don't have the right camera,

Starting point is 00:32:02 so I'll just break in and take that. And then I can't edit on the weekends or at night. Are you, are you absurd? So this is a guy. Now this, this is also causes a severe health problems when he's older.

Starting point is 00:32:14 He, when he's doing star Wars, he's working like 20 hours a day. This caught in that, like I'm, I'm chuckling because he's just like, he had these tendencies from a very early age. But you know,

Starting point is 00:32:24 winds up, he winds up getting divorced because of this. He winds up having health problems because of this. I think he burned out, you know, a few years before he might have directed more movies and had a longer career if he if he worked on consistency over intensity. But he in terms of optimizing or consistency or intensity, he went full throttle on intensity. And so he's going to graduate film school again. I said, like those on the margins often can control the center is such an important uh concept you see it over and over again because even if you when you graduate film school this time there there's no there's no mainstream movie studios hiring you and so he starts working for

Starting point is 00:32:58 the u.s government making like these propaganda films for them during vietnam making his own little movies on the side he He's going to wind up being able to learn. He wins like this, this grant to spend some time on an actual like big budget movie studio set. And that's really important because that's where he's going to meet Francis Ford Coppola. But before I get to that, I just want to point out like this is kind of hilarious and I feel exact same way that he does. And if you're listening to this you probably do too and at the beginning he's he's working on a like a movie set and his idea was like you know he didn't think he wanted to be a director i don't really think he liked people and he wanted he's like i'll be a cameraman or an editor and he gets

Starting point is 00:33:40 a job working on that and he's like i these people are bossing me around. Like, he goes, more than anything else, I didn't like being bossed around. I didn't like being told which shots I could do and which shots I couldn't. It annoyed him. And he says, at this point, I really wanted to be an editor and a cameraman. And in the course of doing this, I asked, well, maybe I want to be a director. And you know how he figured out why he wanted to be a director? Because he figured out who is the person on the movie set that no one else can tell what to do. The answer to that is the director. So he's like, okay, I guess that's what I'll do. I'll be that. So he's making a short movie at the same time. He has like two jobs. Again,

Starting point is 00:34:19 he's a workaholic his entire life, something that his wife causes the breakup of their marriage. So he definitely pays a price for this. But at this point, he makes this short movie. He's eventually going to turn it into a longer movie called THX 1138. But this is the shorter version of it. And I want to talk about this because it winds up winning a bunch of awards. And people watching it really think it's incredible. And one person in the audience was his dad.

Starting point is 00:34:48 And I think this is a very important part in their relationship. He says he could appreciate that his son had found his calling. His son had earned the respect of his peers. Now, I had been against this thing of his going to the cinema school from day one. But we guessed he had finally found his niche. As we drove home, I said to his mom, I think we put our money on the right horse. And so as a result of that little film doing well, he gets two things that happen. He gets a grant from Columbia Pictures where student filmmakers can come watch a real film,

Starting point is 00:35:22 like a big budget mainstream movie studio film take place. Right. And the second part is he gets to shadow the director, which is going to be Francis Ford Coppola. Now, this is really important because this is what I meant is it's really hard to there's almost like this contrast between this this innate fiscal conservatism, this hatred of debt, this hatred of risk that george lucas has with being full risk on which he's forced to do on his first movie american second movie american graffiti and his third and fourth star wars and then return of the jedi not return of the jedi uh empire strikes back i think it's the second one but this idea where it's like he'll bet everything he has

Starting point is 00:36:00 if he thinks that bet is successful and he'll creative freedom. And part of this because he's on this big movie set for the first time and he was disgusted by it. It says it was the first time he had a chance to see a major motion picture being made and Lucas was not impressed. We'd have been around such opulence, zillions of dollars being spent every five minutes on this huge, unwieldy thing, Lucas said. It was mind boggling because we've been making films for $300 and we saw this as an incredible waste. That was the worst of Hollywood. So this relentless resourcefulness that he's always going to have, like I'm going to get into some of the numbers of his movies later. It is remarkable. And think of them again, like I said last week in the Tarantino episode,

Starting point is 00:36:39 like these are miniature businesses. And viewed through that, the financial performance of his miniature businesses is remarkable before we get there. So now he's on the set of this movie. And this is really important because Francis Ford Coppola is like five, six years older than all the other movie brats. And he's the one. It's like, you know how people like the first time you can run, people thought you'll never be able to run a four minute. Humans can't run a four minute mile. And then one person does it. And then immediately all these other people start doing it. Same thing here. But their first interaction was hilarious. So Coppola notices this like skinny young man, beard, glasses, sitting there with his arms folded, not saying a word. And so he walks

Starting point is 00:37:15 up. They tell him, oh, that's a student observer from USC. So he walks up to Lucas and he goes, hey, do you see anything interesting? And Lucas shook his head and said, nope, not yet. And this is how I met George Lucas, Francis Ford Coppola said. Now, him and Francis are going to wind up being very good friends right from the moment that they meet. Go back to this advice that Charlie Munger gave, right? Develop relationships, relationships around the world. Lucas is 23 when he meets Coppola. Coppola is 28. They're going to be making movies,

Starting point is 00:37:46 doing deals, starting companies, breaking up, fighting for decades, right? But it's really important because at that time, there is no young directors. There's no 28-year-old director doing a major movie studio. You have to be an independent filmmaker to do that.

Starting point is 00:37:58 And so Coppola inspires not just Lucas. He inspires Steven Spielberg too. I want to read this paragraph to you. Coppola actually succeeded in getting his hand on the doorknob and flinging open the door, and suddenly there was a crack of light, and you could see that one of us, a film student without any connections, had put one foot in front of the other and actually made the transition from being a film student to being somebody who made a feature film sponsored by one of the

Starting point is 00:38:20 studios. To Steven Spielberg, Coppola was a shining star. Spielberg said Francis was the first inspiration to a lot of young filmmakers because he broke through before many others. So not only did Coppola prove to Spielberg and Lucas that, hey, this is possible, but the influence that Coppola had on Lucas too is like, listen, you have to learn to write. At this time, and you'll see Lucas

Starting point is 00:38:42 make this mistake a few times, he tries to outsource the writing and coppola was saying hey that what separates just a director to a filmmaker is like you have to any director he would tell lucas like any great director has to know how to put together a screenplay and so he would repeat to lucas over and over again like no one's going to take you seriously unless you write. And that winded up being excellent advice because Lucas forced himself to write Star Wars, which is obviously his entire empire. The reason he was able to sell his company 30 slightly older, but also like really showing, hey, we can young filmmakers can have a chance or like we can get in here and do this. But it's also he's one of the most charismatic people ever lived. I did an episode on Coppola a long time ago. I'll link it down below.

Starting point is 00:39:36 And everybody, the women in his life say this. The people that work for him say this. Spielberg and Lucas say this. In fact, listen to what how Lucas describes Coppola's just charisma. He says Francis could sell ice to the Eskimos. He has charisma beyond logic. I can now see what kind of men the great Caesars of history were. Coppola was magnetic. So I told you about Lucas meeting Coppola. I have not told you about this friendship. This might even be more important. Arguably, it is more important to his career, the friendship that

Starting point is 00:40:09 he has with Steven Spielberg, which is exactly why I published that episode last week. And I think, again, to Tarantino, to Spielberg, to Lucas, and then Disney next week, I think it'll be like, these will all tie together. But he goes, a young 21-year-old Steven Spielberg goes to just a screening, and they don't tell you what you're going to watch beforehand. And he sees this student film. And that student film was this THX 1138. And this is Spielberg's response. He says, I couldn't believe it was a student film.

Starting point is 00:40:39 I was awestruck. My first impression was, I hate you. I hate that guy, man. He's so much better than I am. Afterwards, Spielberg headed backstage where he found Lucas with Coppola. Spielberg remembered the moment warmly and vividly. George was really a friendly guy. We shook hands and became friends from that moment on. And so I'm going to pause there. When he says, I hate that guy, they both have extremely mature perspectives on this. It's just like, there's people going to see a Spielberg movie has no,

Starting point is 00:41:06 like him being successful does not, it's not, it's all positive. Some is not zero. Some, they can go see jaws. And then next year they'll go see star Wars. And so there's obviously some kind of inherent competitiveness,

Starting point is 00:41:16 but they really thought of each other as more collaborators. And Spielberg has said multiple times that George Lucas inspired him. It said at the time of his first encounter with Lucas in early 1968, Spielberg's filmmaking was still more aspiring than actual. And Spielberg talked about this, like no longer did his role models have to be these older, in many cases, deceased filmmakers. They're actually someone his own age, someone I could actually get to know, compete with, and draw inspiration from. And then it was around this time that Lucas finds his inspiration and his blueprint is going to be a blueprint for both him and Coppola as well and he's around the same age slightly older and it's this guy named John Cordy so Lucas is invited he sits on a panel he goes to a conference

Starting point is 00:41:56 sits on a panel with other filmmakers who made books into movies and one of the guys sitting next to him on this panel is a 31 year old, so slightly older. And he was an independent filmmaker who also lived in Northern California. At this time, Lucas is in L.A. He hates L.A. He hates Hollywood. He hates the studio systems. He's grew up in Northern California. He wants to go back, but he's not sure how to do it. And so John is sitting on this panel and he starts going into the details of his filmmaking. And Lucas is like, oh, wow, this is this is our blueprint. And so it says John had been running his own filmmaking facility out of a barn in a small ocean town just north of San Francisco. He had privately raised one hundred thousand dollars for this movie that he was

Starting point is 00:42:39 premiering by hitting up friends, colleagues and even his actors for money. He shot the movie locally and then edited it on his own equipment. At the film's premiere, it received a lengthy standing ovation, and Hollywood executives fell over themselves, scrambling to distribute it and recruit Cordy. But Cordy was having none of it. From what I saw of Hollywood, they can keep it, he said. I would rather work for myself.

Starting point is 00:43:02 In Hollywood, you have a producer breathing down your neck. I am happier working with less money. The risk of failure is far less. We can complete a film in maybe a year getting the results we want. That's the end of John Cordy describing how he does it. It was a speech that either Francis Ford Coppola, it could have came out of Francis's mouth, could have came out of George Lucas's mouth, but he's the one that, they had this idea in their mind, but then they see something that's like, oh, that's not just an idea. This guy's actually doing it. And so Lucas asks, like, can I come visit your setup?

Starting point is 00:43:31 And I'm going to bring Francis Ford Coppola with me. And so what they show up to is Cordy lives in the house on the property. He also has a barn. That barn serves as this, like, movie-making studio. This is exactly what, I mean, Lucas is going to do it on a bigger scale. They're about, Lucas and Coppola are about to found a company that tries to do this. And then that company is going to fail. But Lucas does this with Skywalker Ranch, where it's like, there's no movie studio there, but you can edit, you can do everything else that

Starting point is 00:43:55 you need to do. And what they realized is like, oh, this is exactly, like, this is our future. This is what we're going to do. And so shortly after this, they find another blueprint. So Coppola actually flies to Denmark to visit another independent film company. It's this Danish filmmaker. His name is Morgan Scott Hansen. And keep in mind, I need to back this up because it's so important. Lucas is 24 years old. He's 24 years old when this is happening.

Starting point is 00:44:18 Coppola is 29. Okay. So Scott Hansen is in Denmark. He's not in San Francisco. He's in Denmark. But he's working out of this old mansion that's on a hillside that overlooks a body of water and it's filled with state-of-the-art equipment come on this is Skywalker Ranch 15 16 years before Lucas has

Starting point is 00:44:39 the money to do exactly this and so Coppola tours Morgangan scott hansen's facility loves it's like i'm gonna do the exact same thing and then on the way out morgan gives him a uh like a gift and it's this 19th century optical toy and you essentially like spin it and it has like a series it produces like an illusion of movement and it's called a zoetrope and it's actually greek meaning life movement and coppola love the word and the description so much, that's what they're going to name. Coppola decides to name the company he's about to start with, George Lucas, Zoetrope.

Starting point is 00:45:13 And so he tells Lucas, like, this is exactly what we need to do. We need to get a big old house, kind of like a frat house, right? And in that frat house, we're going to make movies. There's only one problem. They don't have any money. So they have to go to the studios to ask for money. And at the beginning, as they're trying to do a deal or fundraise for what they're going to call American Zoetrope, it's actually the full name. The Hollywood studios is like, no, you can't make movies up there. You have to do it here.

Starting point is 00:45:38 But Lucas is very stubborn. He's very persistent. He's also willing to take risks, but he's like, I love San Francisco. I don't want to live in Hollywood. And so I'm just going to keep knocking on doors until I find the money. Now they have, something happens that, you know, in some ways they have perfect timing because you have to ride a wave. Go back to the episode you said on Port Charlie's Dominac. Charlie Munger's surfing model is so important. He'll analyze extreme success. And he always asks himself, he's like, they had to surf a wave. What wave are they surfing? And the studios actually figure out at this exact same time that Coppola and Lucas, they would have never got the money if this didn't happen. This is why I'm telling you. At the exact same time, they realized, oh, like if you,

Starting point is 00:46:18 the studios figuring out, it's like, if we can just hire young talent, making independent films can actually print money because they make make they make films for almost nothing. And some of these these are like power law outcomes. And so what I mean, there is a 1969. Remember, they start this in 1968. They're like, we're going to do this. They bang on doors. Hollywood's like, screw yourselves.

Starting point is 00:46:38 We're not giving you any money. The next year, the film Easy Rider comes out. OK, so it is written by a 32 written and directed by a 32-year-old or a 33-year-old Dennis Hopper. It was not made in Hollywood. It was made on a shoestring budget. They raised $350,000. Why is that important?

Starting point is 00:46:56 $350,000 is released in theaters. The film makes $60 million. Easy Rider goes on to be one of the most profitable films ever made. And so the studio executives see that and they're like, oh shit. And this is what they said. The studio smelled money. Why invest millions bankrolling production of an enormous film on a studio backlot when you could simply distribute independently produced films? Suddenly, independent films and independent filmmakers, which is exactly what Lucas and Coppola want to be, right? Made by young directors were in demand. The studio wanted young talent. I just said that Charlie Marner talks about the surfing, surfing the wave. Listen to the words

Starting point is 00:47:35 that they use to describe this. Easy Rider had created a tsunami of independent enthusiasm. Coppola decided to ride the wave right into the offices of Warner Brothers. Come on. That fit together so perfectly there. So goes to Warner Brothers. Coppola's like, sometimes I think you might need a guy like this because it's not like, hey, we're going to make one movie. He's like, listen, you front us a bunch of money. We're going to bring you a finished film just like Easy Rider did. We're not going to do this once. We have seven films we want to make with you guys. Now, here's the problem. Coppola probably shot too big.

Starting point is 00:48:10 And even if he didn't shoot too big, he definitely signed a bad deal because the executives gave them money not as an investment. The scripts aren't being optioned. They gave them a loan. And they said in the contract, this is going to cause them to go bankrupt or almost go bankrupt. The minute that Warner Brothers did not like what they were doing, had lost faith in the project, whatever the case is, they could call in the loan and Coppola and Lucas would

Starting point is 00:48:38 have to pay back everything. And in true Coppola fashion, he was like, oh, he's very confident that was never going to happen. So now he's got a bunch of money. And he's saying all these crazy things like, my company is going to be worth $10 million, you know, in a couple of years. And it's going to do all this stuff. But here's the weird thing. They took a bunch of money and he just invests in things.

Starting point is 00:48:56 This is like the un-Lucas. And, you know, Lucas is technically his partner, but he's definitely the subordinate partner in this arrangement. And so Coppola spends all this money in the reception area. He buys an antique pool table and a really expensive espresso maker and all this other stuff. And one, it reminded me when there's a great anecdote when Charlie Munger and Buffett, I think they're buying like the Buffalo Evening News. I can't remember which one. They're buying a newspaper and they're touring it. And Charlie Munger is disgusted at the opulence. And he says, why does a newspaper need a palace to publish in? And his point was the readers of your newspaper, they don't really care what's in the newspaper. They don't care. You're investing in things that are not important

Starting point is 00:49:38 to your customer. The movie equivalent of that is all that matters is what you put up on the screen. Your antique pool table, your expensive, super luxury or architectural design doesn't do anything for your customers. Like, what are you doing? We saw this again. I can now talk about this publicly, but my friend Jimmy Soni is the author of this book called The Founders. I think I covered it back on episode 234, and I also covered his biography of Claude

Starting point is 00:50:01 Shannon a long time ago, maybe episode 94, something like that. And me and Jimmy have become friends since I covered his biography of Claude Shannon a long time ago, maybe episode 94, something like that. And me and Jimmy have become friends since I covered those books. And his next book, there's this book called, I also covered a long time ago. It's called Steve Jobs and the Next Big Thing. And it's on the 13 years, what I call bizarro Steve Jobs, the 13 years between he was kicked out of Apple and then he returns. And it's really about the founding of Next. And the reason I call it bizarro Steve Jobs is because he's arguably the greatest entrepreneur ever. And yet in this 10 to 13 year period, you see this incredibly gifted entrepreneur just making one

Starting point is 00:50:32 bad decision after another. And so what do I mean? Oh, Jimmy, I can talk about this publicly. Now, I asked him. Jimmy's his next book. He's writing a book on this time period. And Jimmy's a fanatical researcher. He's been sending me, he's in these archives on this time period. And Jimmy's a fanatical researcher. He's been sending me, he's in these archives. It's just incredible what's going to come out. Anyways, reading that book, which was published a long time ago, I think it's by Randall Strauss, Steve Jobs' Next Big Thing. There was a line in that book that blew my mind that reminds me of what Francis Ford Coppola is doing here. It's like, what are you doing? You're putting an emphasis on things that are not important. And what I mean by that, Steve Jobs, one of the ninth employee, if I remember correctly,

Starting point is 00:51:10 ninth or 10th employee at Next was an interior designer for the office. That's absurd. That is not, that is, that is bizarro Steve Jobs. Steve Jobs made phenomenal decisions. That is a bad decision. This idea of putting a bunch of money into things that don't affect what actually the customer experience makes no sense. And yet you see this, it's a mistake that people make

Starting point is 00:51:33 over and over and over again. Another thing they do, they buy a bunch of expensive equipment, which maybe they need. Yes. Okay. But then they decide, hey, it's not just for us. Any filmmaker in San Francisco

Starting point is 00:51:43 can come by and rent this very expensive equipment that we need to make our movies. What do you think is going to happen to see and they tell their friends to go see it. That's all you have to do. And so this fight right now, like Coppola and Lucas start fighting immediately because this is a bad co-founder match because Lucas's thing, Lucas in very plain language, he's very easy to interface with because he tells you what's important to him when he's in his 20s and it's still important to him when he's in his 70s. And so he says, what we're striving for is total freedom where we can finance our pictures, make them our way, release them where we want them released and be completely free to express ourselves. You have to have the money in order to have the power to be free. That is why Lucas wanted to make as much money as possible. He wanted to buy his freedom. He never wanted, he wanted complete control and he never wanted people to decide what he should be working on or to tell him what to do. That's it. That's, that's all you need to know about Lucas. And the reason I would recommend reading this book is because it goes

Starting point is 00:52:56 into great detail of how he actually accomplished that. Now I'm going to talk a little bit about that, but I do want, what is fascinating is that not all the ideas they were having, you know, they're young entrepreneurs, never don't have experience, don't really know what they're doing. The movies they're going to make are going to flop. But what's fascinating is like they still had an insight into the future. And so it says both Coppola and Lucas predicted a bold high tech future. Remember, this is 1969, 1970, maybe. And they said movies will eventually be sold like soup. What does that mean?

Starting point is 00:53:25 You'll be able to buy it in cartridges for $3 and play it as you would a record, you know, music record at home. He's predicting, you know, VHS tapes, then DVDs, then Blu-ray, and now streaming. And so the first movie that American Zoetrope is going to make is this movie THX 1138. Really, Luke is making a film about himself because the main idea, it's like science fiction, kind of weird.

Starting point is 00:53:54 So he kind of like hides that. But essentially, you should reject the status quo and you pursue freedom. And so he's talking about the idea behind the movie. And one sentence here just stuck with me from the first time. I remember this line from reading this book for the first time seven years ago. So he says, this movie is the importance of self and being able to step out of whatever you're in and move forward rather than being stuck in your little rut. This is the sentence that stuck out to me. People would give anything to quit their jobs.

Starting point is 00:54:22 All they have to do is do it. They're people in cages with open doors. At its core, THX 1138 was about refusing to accept the status quo. It's about a hero who lives in an anthill and dares to go outside. This issue of leaving a safe environment and going out into the unknown would be an underlying premise of his first three films, THX 1138, the studio hates it. They hate it so much. This is so bad. Now, this is, I guess, is important.

Starting point is 00:55:03 There's two things that are going to happen. I want to talk to you about The Godfather. And I want to talk to you about the fact that George Lucas's first movie is so terrible that it literally causes the collapse of his company and the cancellation of his deal. And yet, as a direct result of this, it also leads to the next thing and his desire for control, which is Star Wars. It goes back to what Tarantino said, what Spielberg said. You know, a lot of entrepreneurs say the same thing. You're in the middle of it. You have no idea the impact that you're potentially having. And a lot of people quit before they even get to realize that. And so because the studio is like, this is freaking terrible. The deal's off. Give

Starting point is 00:55:36 us our 300 grand back. They're now in debt. The company's hemorrhaging cash. Coppola has no money at all. He's desperate for money. And so he gets an offer, right? He only wanted to do his own films. He gets an offer in the summer of 1970. So this happens really fast. You're talking about a year and a half and the company is gone. And it's an offer he couldn't refuse because it comes from Paramount Pictures. And they're saying, hey, we're going to make an action film based on one of the biggest books of 1969, which was written by this guy named Mario Puzo. And that book is a sprawling gangster novel called Godfather. And so he goes to Lucas. He's like, they offered me this Italian gangster movie. Does not want to do it. He's like,

Starting point is 00:56:16 should I do it? And Lucas is like, his whole thing is like, you have to stay in the black. Lucas has a mantra that he repeats over and over again, I think is really good. Stay small, be the best, don't lose any money. Stay small, be the best, don't lose any money. And so he's talking to Coppola, he's like, what the hell are you talking, like you have no money. They're offering to pay you a bunch of money to direct a film, you have to do it. I don't think you have any choice, is the advice that he gave his friend Coppola. We're in debt and you have to get a job. And so reluctantly, Coppola agrees to direct Godfather. He gets $75,000 to direct it

Starting point is 00:56:49 and he's going to get 6% of any profits the film makes. And so on the way out the door, the studio owns, because they lent them the money, they own THX 1138. They can do whatever they want with it. They didn't like the editing job that Lucas did, so they give it to their own in-house editor. And Lucas thought, listen to what he says here. So they went up cutting another four minutes from Lucas's final cut. And this induces Lucas into a state of rage. He says there

Starting point is 00:57:14 was no point for them to do it other than exercise some power. Their attitude was that we can screw around with your movie, so we're going to. Lucas had no patience with executives who argued that they'd only cut four minutes from a 90-minute film. They were cutting the fingers off my baby, he said. Lucas wouldn't trust the studios again, ever. And again, at the time, this sounds like the end of the world. It's the worst thing that ever happened. They cut my film, our company's over, but it winds up being one of the best things that ever happened to him because this is the founding of Lucasfilm, the exact company he's going to sell to Disney. And he talks about why they had to have a co-founder breakup because it really was sparked by the different management styles and their attitudes towards money. Lucas says, I'm very cautious. I don't borrow money. I'm very protective of the things that I build. Lucas was always tight with the dollar and Coppola would continue to spend money recklessly.

Starting point is 00:58:07 Lucas had made up his mind to break away from Coppola and to make it on his own. Determined to control his own projects, no studio, he vowed, would ever force him to compromise his vision again. This led him to forming his own company in 1971. Lucas officially opened Lucasfilm. This independent production company would be run out of his little house,

Starting point is 00:58:23 and its lone employees were him and Marcia. Marcia is his wife. So even though they broke up as co-founders, they're still friends. And Coppola actually gives him some good advice because THX is just this weird abstract. They called Lucas at the time a cold, weird director. So it's not he's just like, what are you doing with all this like strange abstract stuff? He's like, stop being so weird. You need to do something human.

Starting point is 00:58:47 You need to do something that makes money because if not, you're gonna, your career is over before it begins. And so the advice that Coppola gave him was like, you should just write something that has to do with your own life. An experience you know well, something that, you know, is more positive.

Starting point is 00:59:01 And so Lucas has this idea to make this movie that's gonna be one of the most profitable, best return on investments of every movie ever made. And it's called American Graffiti. And so at the time, he grows up in this little town in California. They do this thing called cruising. So on Friday and Saturday nights, it's this little town. They would soup up these cars, and they would just drive slowly down one block, then turn around and do it all over again. And they just cruise over and over again. And so he's he's like well since i spent my youth doing this it's like a coming of age film about you know your last year of high school transitioning in like you know everybody knows

Starting point is 00:59:31 that experience it's like your entire life's going to change you have no idea what's going to happen so that's what he's going to make a movie on here's the problem no one wanted to give him money and this was fascinating didn't even think about this because he's got no money he's considered damaged goods and he's struggling to get any kind of money for to write the script. And then once he writes a script, then he's got to make the movie. And he talks about the predicament that he's in. He says, listen, the easiest job you'll ever get is trying to make your first film. That's the easy one to get because nobody knows whether you can make a film or not. After you've done that, then you have

Starting point is 01:00:02 a heck of a difficult time getting to your second film off the ground. They look at your first film and they say, oh, no, no, we don't want any more of that. And so Lucas goes back to doing what what he was doing. He's like knocking on doors, trying to figure somebody just give me a little bit of money so I can write this script. Now, this is hilarious. He eventually fails a few times. Then he gets to the president of United Artists. This guy's got the perfect name for his job. His name's Picker, David Picker. He's literally having to pick screenwriters and filmmakers. Like, what's going on here? And so he's like, he's telling Lucas's birthday. He had just turned 27 years old. He gives him like $10,000 to write the script.

Starting point is 01:00:51 Lucas is going to make the mistake because he hates writing. He gives all that money to a screenwriter and the screenplay sucks. So he's got to do it himself anyways. But what was fascinating about this is in this meeting with David Picker, okay, is the birth of Star Wars. So he's like, OK, I'll take American Graffiti. Let's let's do a deal on that. Do you have anything else? And Lucas is like, actually, I do. Members him sitting back in his room eating chocolate bars and drinking coffee and getting diabetes, which he definitely got diabetes at a young age.

Starting point is 01:01:19 He was drawing a little Starship Troopers. So Picker's like, hey, what else you got? And Lucas told Picker about his idea for this unnamed space opera fantasy film. Great, said Picker. We'll make a deal on this too. And that, Lucas said, was really the birth of Star Wars. It was the only, this is fascinating. Think about how he says this, right?

Starting point is 01:01:40 It's the birth of Star Wars. It goes from a notion to an obligation. It was only a notion up to then. At that point, it became an obligation. Then I got to get to one of the most fascinating things, what I personally find most fascinating about Lucas, other than his desire to innovate, his invention, to be vertically integrated, to control everything. These are things, obviously, you know, personally identify with, and I think a lot of entrepreneurs

Starting point is 01:02:02 do. But there's just parts of your job. It doesn't like we get to, we're unbelievably lucky to be entrepreneurs. I think of what Sam Walton said in his autobiography. He says, the great thing about entrepreneurship is you get to spend your time building something you enjoy. Most people don't get to do this. They're stuck in jobs. They hate. I had the time of my life, but even with that, there has to be something that Sam didn't like doing. And Lucas' version of that is like, he hates writing. And so he blows all the money. He has no money.

Starting point is 01:02:31 He is poor. He's got no money. He's going to go into debt in a minute. And so he says, my intense desire to get a writer had backfired on me, and I ended up with an unusable script and no money. And so this is what he's going to do. He calls it bleeding on the page. He says that line, I don't even know,able script and no money. And so this is what he's going to do. He calls it bleeding on the page. He says that line, I don't even know, 10 times in this book. And so he's

Starting point is 01:02:50 like, okay, forget it. I'm going to have to do this myself. And so over the next three, the next three week period, he writes from eight in the morning until eight at night, seven days a week. He calls us bleeding on the page. He also is humiliated because now he's got no money. Coppola's got a bunch of money because of Godfather. So he goes to Coppola and George Lucas Sr. He's got to go to his dad. His dad that told him, don't do this. You'll never make any money.

Starting point is 01:03:16 You'll be a bum. And he's almost 30. And he's like, I need money, dad. Can you loan me money so I can do this movie? And this is the insane thing. It's so hard to comprehend, and I don't even know how many people would make this decision because he somehow maintains this focus

Starting point is 01:03:36 on getting his own project done through the struggle, okay? So he's writing, the script is done. Now he needs money to make the movie. He's going around. No one wants to give him money to make the movie. He's going around. No one wants to give him money to make the movie. But they were interested in him as a director, just not directing his own screenplay. Think about this.

Starting point is 01:03:51 He's got no money. He's in debt to his dad and Francis Ford Coppola. They're offering him $100,000 to direct a film. He thinks the film is shit. He hates it. He's like, these are terrible projects. And he says no. And this is shit. He hates it. He's like, these are terrible projects. And he says no. And this is interesting.

Starting point is 01:04:08 Why? He's like, if graffiti sells, I can't be in the middle of another project for someone else. So he had to turn down every offer. Listen to what he says about this. That was a very dark period for me. We were in dire financial straits. He's already married. Okay.

Starting point is 01:04:23 That was a very dark period for me. We were in dire financial straits. He's already married, okay? It was a very dark period for me. We were in dire financial straits. I turned the movies down at my bleakest point when I was in debt to my parents, in debt to Francis Ford Coppola, in debt to my agent. I was so far in debt, I thought I'd never get out. It took years to get from my first film to my second film, banging on doors, trying to get people to give me a chance, writing, struggling with no money in the bank, getting little part-time jobs, eking out a living, trying to stay alive, and pushing a script that nobody wanted. A script that nobody wants is going to give the person that finally finances the film one of the greatest return on investments

Starting point is 01:05:02 in movie history. Think about that. So there's this guy at Universal, this guy named Ned Tannen, finally gives him a shot. But Tannen produces films that are usually only budgeted. These are small scale films. You know, million dollars or less is usually what Tannen can do. And even though, this is incredible though, even though Lucas doesn't have any other options, no one else is willing to finance this. You see that his desire, remember how this started? George Lucas unapologetically invests in what he believes in most, himself. He bets on himself here. He could have been paid, you know, a hundred.

Starting point is 01:05:34 He could have asked for a big director fee. He's like, no, no, I want a less director fee. I will cut my director fee in half. I want $50,000. I will not only direct it, I will write it for that fee. There's no extra money for that. But I want 40% of the profits if there are any profits. And at this time he's doing that, it is a big if that American Graffiti could ever turn a profit.

Starting point is 01:05:54 George Lucas before this has never had a successful film. He's just had a flop. And so through this entire book, there's huge chunks of the book that I think you should read because it's just problem after problem after problem after problem. I'm going to read just a highlight of this from American Graffiti, and then I'm going to tell you one of my favorite ideas I've ever come across. It says, despite the agreement he had negotiated with the town under which he could pay $300 a night to film on 4th Street, local businesses were already complaining about closing the street. When Lucas and his crew arrived, they learned that a local council had withdrawn permission

Starting point is 01:06:24 for him to film and would not permit to clear or control traffic. Lucas made the most of the evening anyway, rapidly shooting his way through 19 setups and scrambling to find a new location. Then we had a focus problem on the camera and the assistant cameraman was run over by a car. Then we had a five alarm fire.

Starting point is 01:06:41 That was a typical night. So Tarantino in his book, he says the job of a director is to solve problems, right? Solve problems for your actors. And I read this book by Danny Meyer, the famous restaurateur a long time ago. Now you're talking about eight years ago, probably. It's called Setting the Table. It's excellent. And he tells a story that I've never forgotten. And so he's at dinner with Stanley Marcus, who is part of the Neiman Marcus family,

Starting point is 01:07:09 the family that controls Neiman Marcus. He's a wiser, older man, probably, I would guess, 40 years older than Danny is at this point. I think Danny's in his like mid-20s, maybe late 20s at this point. And so they're having this conversation and he says, opening this new restaurant

Starting point is 01:07:21 might be the worst mistake I've ever made. Stanley set his martini down, looked me in the eye and said, so you made a mistake. You need to understand something important and listen to me carefully. The road to success is paved with mistakes well handled. His words remain with me throughout the night. I repeated them over and over to myself and it led to a turning point in the way I approached my business. Stanley's lesson reminded me of something that my grandfather had always told me.

Starting point is 01:07:50 He said the definition of business is problems. His philosophy came down to a simple fact of business. Success lies not in the elimination of problems, but in the art of creative, profitable problem solving. The best companies are those that distinguish themselves by solving problems most effectively. I tried to reduce that idea. First of all, that line right there, the road to success is paved with mistakes well handled. That's just straight up wisdom

Starting point is 01:08:16 from an older, well-schooled entrepreneur. But this idea that the definition of business is problems, success lies not in the elimination of problems, but in the art of creative problem, profitable problem solving. What I say is, is like the way I condense that down so I can remember it myself. Business is problems. Therefore, the best companies are just effective problem solving machines. The best directors are just effective problem solving machines.

Starting point is 01:08:41 And so after this grueling schedule, he finally finishes the movie. And what he says here, this is what I meant. It's like, if you could dial the balance between consistency and intensity, I think he's way too far in the intense level. And maybe that's the way he wanted to live his life. It's none of my business, right? But I think for a long career, you have to have more of a balance between consistency and intensity. And so he says, Lucas was glad that it was over. You couldn't pay me enough money to go through what you have to go through to make a movie, he said. It's excruciating. It's horrible. You get physically sick. I get a very bad cough and cold whenever I direct. You feel terrible. There's an immense amount of pressure and emotional pain, but I do it anyway. And I really The audiences love it. And the studio execs can. This is so nuts to me. The studio executives can be in a theater full of cheering potential fans and customers.

Starting point is 01:09:32 Right. And they're like, this movie isn't good enough. We're not going to release it. Maybe we'll put on TV. They're just like completely jerking around and screwing him over. And he's obviously depressed. And he's like, this is where he's like, I'm going to be an independent filmmaker. I'm going to control the money.

Starting point is 01:09:45 He hates these people. And he's like, this is where he's like, I'm going to be an independent filmmaker. I'm going to control the money. He hates these people. And then they edit his film again. And they take out another four minutes, just like they did in THX. And this is the importance of just having good relationships and good friends that truly care about you, too, because they're at a screening. Lucas is there. Coppola is there. The studio executives are there.

Starting point is 01:09:59 And the crowd loves it. But after, in the lobby, the executive's like bitching at George Lucas and Coppola. It's just, he comes to the defense. He's like, are you out of your mind? Did you not hear them? And he pulls out his checkbook. He's like, how much do you want for the movie? You don't want to put this out, sell it to me and I will invest my own money and I will release this movie. You have a hit on your hands. Coppola's forcefulness kind of calls their bluff. They wind up releasing the movie. The movie's a smash hit. Listen to this, though. So it has this great review in the New York Times.

Starting point is 01:10:27 They called American Graffiti a work of art. Now, this was very fascinating because this is the way I thought when you read about George Lucas, the way I think of him is I think of him as a craftsman. Turns out that's how he thinks of himself because he does a lot of this stuff himself. He didn't really like the fact that people called it a work of art. My thing about art is that I don't like the word art because it means pretension and bullshit. And I equate those two directly. I don't think of myself as an artist. I'm a craftsman. I don't make a work of art. I make a movie. And you can also see he's not modest by any means. I know how good I am, he said.

Starting point is 01:10:58 American Graffiti is successful because it came entirely from my head. It was my concept. And that's the only way I can work. And it prints money. Keep in mind, American Graffiti is released in 1973. So these are 1973 dollars I'm about to tell you. American Graffiti cost a million dollars and it earned at the box office 55 million, making it one of cinema's most profitable returns on investment ever. Lucas earned nearly $4 million after taxes. And as he had vowed to his father more than a decade before, Lucas was a millionaire before the age of 30.

Starting point is 01:11:35 He had done it with two years to spare. And he's got to figure out, what am I going to work on next? And he has, at this point in his life, he's got a couple million in the bank, and he's got a two-page treatment on handwritten notebook paper. And the title, which is scrawled on the center of the treatment's cover page, is The Star Wars.

Starting point is 01:11:55 Now, one of the smartest things that George Lucas does is learns from his own mistakes. So he's not going to hire somebody to write The Star Wars, and he's going to bleed on the page. There's an entire chapter about this. It's called bleeding on the page because George says over and over again, like in the book, I forgot, I lost track of how many times he says this. He's like, he does not believe that he had a natural talent for writing.

Starting point is 01:12:17 And so he calls the process awful. He hates it, but he makes himself do this. Listen to this. So it's going to take him three years to write like the first version of Star Wars. But the way he does this is fascinating. So he's like, OK, I'm going to treat the writing of Star Wars. It's going to be a full time job. OK, so he's still working out of his home. He's got upstairs like an office, studio, library kind of thing. And he's like, I'm going to go upstairs at nine o'clock. I can only do one thing.

Starting point is 01:12:50 I can look at the wall or I can write, but I can't do anything else. And from nine to five, eight hours a day, listen to how he describes this. He says, I would sit at my desk for eight hours a day, no matter what happens, even if I didn't write anything. It's a terrible way to live, but I do it. I sit down and I do it. I can't get out of my chair until five o'clock. It's like being in school, but it's the only way I can force myself to write. Then over his desk, he would hang this giant like

Starting point is 01:13:13 wall calendar to track his progress. And he's like, okay, I have to write five pages every day. And you mark a big X, like a big X on the days where you write five pages. And here's the deal he made with himself. If I can finish my five pages a day early, then I can leave. So some days he gets to, you know, eat his chocolate bars and listen to music. But most days, no words are written at all. And then he would just go downstairs and he'd glare in anger at the TV. He'd eat a TV dinner. And he would just be pissed off, staring and watching the news.

Starting point is 01:13:46 Another idea I think is useful is he's having a problem, right? Like think about the, you know, the, a lot of the scenes in Star Wars, it's action. He's got an idea in his head, but he's reading on the paper. It doesn't seem, it's like not matching up. So I thought this was fascinating. He makes kind of a demo of sorts. If you read the book book Creative Selection, it's episode 281. I've read that book like four or five times. Anybody building a product, I think, should read it. It's this programmer that worked at Apple under Steve Jobs named Ken Kosienda. And Steve's main thing is like, hey, we need to make demos.

Starting point is 01:14:16 That's how we're going to push these ideas forward. Not presentations. I want to actually see it. And so George is trying to explain his idea himself and to others. So he's like, I need a demo. And so this is this demo that he makes for Star Wars. And so he says, one of the key visions I had of the film when I started was of a dog fight in space with spaceships, two spaceships flying through space, shooting each other.

Starting point is 01:14:38 That was my original idea. But trying to get the dog fight in my head on paper was difficult. And so what he would do is he'd go to the television and he'd start taping old war movies. And specifically footage of airplanes, like, you know, dogfights with airplanes. And he taped 20 hours of these, like, scenes from random movies, right? He then transferred it to film. And then he would edit it down to a reel of about eight minutes long. And the description of this reel is fascinating. He says, while he didn't yet know, the reel of dogfighting would be one of the most important bits of film he would ever put together. The wet concrete that he would pour raise the money for the movie now this is fascinating we you and i've talked about this over and over again already lucas desires control above

Starting point is 01:15:28 all else and he still stuck to that idea even though fox was the only studio who said yes to star wars think about this are you know arguably the most successful movie franchise in history and only one only one studio said yes and so even though he's negotiating with the only interested party, one, there's certain things in his contract that he demands, right? And so he wants as much control over the final edit of his film as possible. And he even says, like, I'm not willing to listen to other people's ideas. I want everything to be my way. That's an exact quote from George Lucas. And so I would argue this is his most important, what's about to take place here, this is his most important decision ever. So he starts negotiating with Fox. And this is what

Starting point is 01:16:08 George Lucas says about this. Fox thought I was going to come back and demand millions of dollars and all these gross points for called Lucas. I said, I'll do it for the deal memo, but we haven't talked about things like merchandising rights and sequel rights. He would insist that those particular clauses normally considered underbrush in a contract. It's really weird that they didn't understand at this point how important merchandise rights were. Because if you remember, I've done a bunch of episodes on Walt Disney before, and they were even surprised. They did this show called Davy Crockett. They sold like $300 million in a year of like those Davy Crockett like hats.

Starting point is 01:16:39 And that was, you know, two decades before what's going on here. So for Fox to just give them away,'re gonna make three to five times it says three times the amount on toys lucas makes three times the amount of toys as he does on the films and the films they make billions and billions of dollars it's insane so he's like okay i want you know the merchandise and i want the sequel rights i'm not going to charge you more money what was normal par for the course that this is if you have a smash hit then your director fee, you know, should go from whatever, $50,000. She could go to a million, could go to $2 million, whatever the case is. He would also insist that Star Wars be produced by Lucasfilm, thereby

Starting point is 01:17:13 ensuring that he could keep an eye on the bottom line and that any expenses billed against the film were really his. I was very careful to say, I don't want more money, Lucas said. I said, I don't want anything financial, but I do want the rights to make the sequels, and he wants the merchandise rights. Fox was willing to sign over the sequel and merchandising rights, mainly because they'd gotten the director of American Graffiti so cheaply. And no one, not even Lucas, appreciated that by securing sequel and merchandising rights, he had just negotiated for himself a billion dollar clause.

Starting point is 01:17:51 Decades later, Fox executives would shake their heads in wonder at Lucas's instincts and audacity. So let's go back to this idea that business is problems and that the best companies are just effective problem-solving machines. He's got a problem. He's got an idea in his head. No one can make the special effects. There's no technology at the time. So what does he do? The solution sometimes to a problem is to found your own company to solve that problem. The solution to this problem he's having now

Starting point is 01:18:12 is the founding of industrial light and magic. So it says Lucas would not merely have to produce the visual effects. He would have to develop the technology needed to shoot them in the first place. George was absolutely adamant that he wanted to set up his own shop with his own people. Industrial Light and Magic would then be an official subsidiary of Lucasfilm, born of necessity, seeded with his own money, and feeding off Lucas's need to control every aspect of the production. Industrial Light and Magic would stand as one of the cornerstones of Lucasfilm's empire, an investment that would set him well on the way to becoming a multi-billionaire. And then this is a quote I shared earlier, which is one of my favorite quotes in the book.

Starting point is 01:18:51 How many people think the solution to gaining quality control, improving fiscal responsibility, and stimulating technological innovation is to start their own special effects company? Ron Howard said admiringly, but that's what he did. You and I have already talked about the fact that this guy is stubborn. He's persistent. He's bullheaded. And you have to be. Why is that so important? People thought he's like making this like little kids movies. This is like he's kind of getting depressed, but he's still persevering because his friends advice says Lucas

Starting point is 01:19:22 saw Star Wars as his response to a weary world in need of new heroes and mythologies. His friends said it was a juvenile exercise unworthy of his talent. They said, George, you should be making more of an artistic statement. Yeah, that's a good way to go out of business. What are you talking about? He did that with THX 1138. How did that go? People were telling me that I should have made Apocalypse Now, George Lucas said. They said I should be doing movies like Taxi Driver. His own wife was telling him that because she was one of the main editors for Martin Scorsese and she wanted her husband to make movies like Martin Scorsese did. But I think this idea, it's one of the most important ideas I've learned in the last

Starting point is 01:19:57 year, year and a half. It's like you have to believe that your own opinion about what you're working on is greater than everybody else's opinion around you. None of this works if you can't trust your own judgment. And so another important thing, this is really the power of deadlines because he's been working on the script for three years and he has to shoot the movie now. And the important part about having a deadline is like if that didn't happen,

Starting point is 01:20:21 he'd probably still be working on the script now. I didn't really know where to go with it and I've never fully resolved it. It's very hard stumbling across the desert, picking up rocks and not knowing what I'm looking for. And knowing the rock I've got is not the rock I'm looking for. I kept simplifying it. I kept having people read it. And I kept trying to get more of a cohesive story, but I'm still not very happy with the script. I never have been. I have never arrived at a degree of satisfaction where I thought the screenplay was perfect. If I hadn't been forced to shoot the film, I would doubtless still be rewriting it now.

Starting point is 01:20:49 The power of deadlines. And again, there's an entire book I might cover. So I think you already know this, but when I read all these biographies, when I'm done, I go through the bibliography and I find a bunch of new sources to read more books on in the future and turn them into more episodes. And so I found one, two, three, four new books from this bibliography. And one of them is just about how gut-wrenching and difficult making Star Wars was. I think maybe reading that book and doing an entire episode on it would be fascinating. But I can give you a brief synopsis here. From day one, Star Wars would be

Starting point is 01:21:25 problem plague production that would blow through its budget, mentally and physically exhaust Lucas, and try the patience of executives at Fox, so much so that the studio very nearly pulled the plug on the film altogether. I forgot how impossible making movies really is, Lucas wrote. I get so depressed, but I guess I'll get through it somehow. And another example of this idea, it's really hard to tell what you have when you're in the middle of it. He goes and visits, Star Wars is nearly killing him. This is what I mentioned earlier. He's working 20 hours a day on it. And he's so deep into it. He goes, decides to fly down to Alabama to visit his friend, Steven Spielberg, who's working on the movie Close Encounters of the Third Kind. And he brings with him like this booklet of all these like black and white pictures that from

Starting point is 01:22:10 the set. And Spielberg's going through this and he thought it was amazing. But the reason I bring this up to you is because Spielberg tells us what George was thinking at this time. He says George was so depressed. He didn't like anything. He didn't like the lighting. He didn't like what the cameraman was doing. He was very, very upset. He didn't like what the cameraman was doing. He was very, very upset. He was saying, I got myself into a mess that I'll never really get myself out of. He was in a state of near despondency, so much so that he's rushed to the hospital.

Starting point is 01:22:35 He feels sharp pains in his chest. He was afraid that he was having a heart attack. So he gets checked into a hospital. They diagnose him with hypertension and exhaustion. So after that, he's like, I'm never doing this again. But he had no intention of relinquishing control over the film, even if it killed him. He's got to get this done first. And it wasn't until I read that section, I went back and looked. I thought he directed all the Star Wars movies. This is the last movie he directs for 22 years until episode one, The Phantom Menace. So Star Wars comes out in 1977.

Starting point is 01:23:06 He's a director. And then he stops doing that. He becomes an executive producer. He bankrolls it. He writes the stories, picks the directors. But he really meant it. He hated directing. And so he finally finishes the film.

Starting point is 01:23:20 It's almost done. And this is fascinating because this happens too. I mentioned I was going to do another episode on Tarantino at the end of the tarantino episode but i re-listened to tarantino and i thought it was really really good so much and i could kind of tell because you get a lot of responses and like the text messages i was getting from like like hit a note like people really really liked it and i was like i'm not and then i looked at the outline for the second tarantino episode i was making and i maybe will do in the future but I was like man if I do this right like it's gonna pay on comparison to the Tarantino episode so I shelved it for now but in that source material

Starting point is 01:23:55 some of the research I was doing I come across this conversation where Tarantino you know Reservoir Dogs was a hit but it wasn't like a smash commercial hit. And so he nothing like what Pulp Fiction is going to be. And so he actually screens Tarantino screens Pulp Fiction before it's released to a bunch of director friends. And everybody hates it except one person, all of his director friends. One of his director friends, he tells a funny story. It's like, OK, I got to have a real serious conversation with my friend Quentin like this. He's got to change it. This isn't good enough. He's like, I'll wait till he gets back from Cannes.

Starting point is 01:24:27 I think Cannes Film Festival is how you pronounce it. Or Cannes. I don't know how to say it. But he's like, I'm going to wait till he gets back. And then Pulp Fiction wins all the awards there. So he's like, OK, I guess I'll not say anything. But this idea where even your really gifted friends may not understand the value of your idea, where you had, let's say not understand the value of your idea where you

Starting point is 01:24:45 know you had let's say six director friends of tarantino five of them say this sucks think about how the hell you can see pulp fiction and think it sucks and one was like super supportive the same thing happens here he goes and he screens star wars and his wife who hadn't seen the film since the first cut she was off i think uh editing for Scorsese, if I remember correctly. She burst into tears. She's certain that it's a disaster. Brian De Palma is just lighting into him. He goes, what is all this force shit?

Starting point is 01:25:13 Like, you know, the force will be with you. Screaming at him. They go to dinner. He's still railing at it. And yet there was one person in the room who was impressed. I loved it because I love the story and the characters, said Spielberg. I was probably the only one who liked it. And I told George how much I loved it. That evening, an executive from Fox called Spielberg. We all need friends like this. Called Spielberg to ask

Starting point is 01:25:33 what he thought about what he had seen. Spielberg told the executive that he thought he had a hit on his hands, one that it would eventually make 50 or 60 million dollars. Wow, we're really wrong, Spielberg said. Why? It's not going to make 50 or 60 million. The budget for the original Star Wars was 11 million dollars. At the box office alone, it brought in 775 million. Think about funding a business. All you took to build that business was 11 million.

Starting point is 01:26:02 And yet that business makes 775 million just at the box office. Think about all the money it's made since then. Probably four times, five times that amount alone, just from that one movie between merchandise and rides and everything else. That reaction from a movie where all these other talented people, all the other people in the room besides Spielberg said, this is trash. So much so that some people were crying at how bad it was. And so before I move on to his biggest bet, which is, hey, I'm going to control the funding for The Empire Strikes Back. This is he's going to make $100 million on this bet that he's about to make on himself.

Starting point is 01:26:39 But I did think I'm a sucker for these really interesting marketing distribution ideas. So something they did before the original Star Wars came out is they they correctly identified like who is the natural audience for Star Wars. Right. And there was this huge subculture of science fiction and comic book fans, even if they weren't making a bunch of science fiction and comic book movies at the time. So they're like, hey, we should target these people. Let's do a novelization and a comic book adaption series before the movie comes out. So they publish like a novelization of Lucas's script. They publish it November 1976. That's before there was even a trailer. By February 1977, so you're talking, what is that, three months, four months later, they had already sold out of its initial print run of 125,000 copies, and the movie wasn't available to see for another three months. In addition to this, they also had articles written in several of the largest sci-fi magazines. Again, several months before, there's like kind of like planting the seeds several months before the movie's actually available so it says by the spring of 1977

Starting point is 01:27:50 enthusiasm for star wars was like a pot roiling to a slow boil and the lid was about to blow off okay so now we get to i would say probably the craziest and most important time in the entire book in his entire life because it's going to set up the future success for everything that comes after. So he's like, I want to control as much. He was disgusted that Star Wars is making all this money. Like I said, $11 million budget, $775 million at the box office. But Fox, the studio, all they did was finance the film and they get 60% of the profits. And he said they're getting 60, the way Lucas looked at

Starting point is 01:28:25 it, he's like, well, they're getting 60% for doing absolutely nothing. And he's like, well, what do you mean they didn't do anything? And he would compare and contrast what he did for the rest of like his share, right? He's like, I know what I'm doing for my percent. I put my heart and soul in this. My whole career is at stake. I have to actually go out and make the movie. And so when he's having these conversations with other people at Fox, even people he likes, like an executive there named Alan Ladd, he's like, well, what the hell are you doing? And Ladd's response is like, well, I provided the money. And George said to him, it was very fascinating the way his brain works.

Starting point is 01:28:54 He goes, you didn't provide the money. You go to a bank with a letter of credit and they supply the money. And then you get 50% of the movie. This is such an important distinction he makes there. George looked at it like a businessman saying, wait a minute, the studio's borrowed money. Then they take a 35% distribution fee off the top. This is crazy. Why don't we just go borrow the money ourselves? And he said, some of the bravest and our most reckless acts were not aesthetic, but financial. For the sequel, Lucas matter-of-factly informed the studio that he would be financing the film himself

Starting point is 01:29:25 using his profits from Star Wars as collateral for a bank loan. So this time around, the last time around, the studio's got 60% of the money. This time he's like, hey, I'm getting 77.5% and you can get 22.5%. And they take the deal because of course you want to be involved. Think about it. Like even if you own less of Star Wars and you're the Fox, Fox has a bunch of other movies. So there's going to be millions of people going to watch Star Wars 2. And at the very beginning, you see this huge logo, the Fox logo. It's like advertising for them. And then I loved the way Spielberg, you know, he saw this coming.

Starting point is 01:29:58 He's like, Spielberg wasn't at all surprised by the way Lucas was playing hardball. He says, if you're an executive and you're going into business with George Lucas, you are no longer in the 20th century Fox business. You're in the George Lucas business and George is going to call every shot. And then another mind blowing fact, do you know that Spielberg made over $40 million off of the original Star Wars? They're actually, they had a bet. So they're really, again, they don't know what's going to be successful before it happens. So George Lucas is working working on sci-fi that's star wars one spielberg is working on sci-fi that's close encounters of the third uh close encounters of the third kind and so they're like okay let's bet who's going to be more successful and let's just trade points and so

Starting point is 01:30:39 spielberg gave lucas 2.5 percent of close encounters of the third kind lucas gave spielberg 2.5% of Close Encounters of the Third Kind. Lucas gave Spielberg 2.5% of Star Wars. And it says this 2.5% would earn Spielberg more than $40 million over the next four decades. And so this idea about using his assets as collateral to a bank loan, it's exactly what Fox was doing with their just a bigger company. So he's going to use the money he made from star wars and remember he owns all the merchandising rights this is nuts just in 1978 alone george lucas sells 40 million star wars figures that's in a year and so what he did it says lucas would finance the sequel one action figure at a time he used the substantial profits from the film themselves but also tapped into the revenues from an almost endless stream of Star Wars merchandise. At the same time, he's looking for a place where he can actually house all of his studios and build this vision that he's had,

Starting point is 01:31:34 you know, that he was working on when he was in his early 20s with Francis Ford Coppola. And so this is the idea for Skywalker Ranch. And he has this idea. He's like, I want to live in a ranch house or work in a ranch house, rather. I had forgotten that Lucas never lived at Skywalker Ranch. It was just where he worked out of. And so he's like, I want a lot of property. I want it to be a house. I want it to be in the middle of nowhere. And I want to fill it with the most advanced technology where we could sit, see the trees and make movies. So he buys the first 1700 acres right now as he's building, making the sequel that eventually he buys a bunch of surrounding properties and builds 5000 or owns

Starting point is 01:32:12 5000 acres. And so the way to think about what he's doing, he's literally betting the Skywalker ranch on the sequel. He's either going for complete freedom or bankruptcy. He's putting everything he has into this. And everybody around him is saying, hey, don't do this. Give up more points. Take more money. Like, this is nuts. And so it says, even those who knew Lucas were aghast at his bullheaded determination to finance the entire film himself. Independence was one thing. Bankruptcy was another. But those people were missing the point. Lucas wasn't paying for a movie. He was buying his own creative freedom. He realized that this was an opportunity he had to pounce on. He was buying his own creative freedom. He realized that this was an opportunity he had to pounce on. He says it's the perfect opportunity to become independent

Starting point is 01:32:49 of the Hollywood system. There would be no studio executives staring over my shoulder in the editing room. No executives forcing him to make arbitrary changes. That is the part that I wanted to avoid, he said. Everything I own, everything I have ever earned is wrapped up in the Empire Strikes Back, he said. If this is a flop, I will lose everything. He continues, all the money I made from Star Wars was committed to this film, plus more. But I didn't want to go to Fox and give them the movie because I'd have to give them all the rates back, meaning if he had to get money from them. I had to keep the picture going somehow, get people to work without pay, hope to hell that whatever they asked for didn't involve me having to go back and renegotiate with Fox. As always with Lucas, it was always a question of control. I wanted my independence so badly, he said. But at the same time, he has this loan from

Starting point is 01:33:39 Bank of America and they see his weekly expenses and his costs are ballooning for the sequel. His weekly payroll alone was a million dollars a week, and they're threatening to pull the loan and call the loan and shut down the operation, which is nuts considering how big Star Wars winds up becoming. So he comes up with a unique solution to his problem, and he goes to Fox. He's like, listen, I don't want any more money from you, but I will give you a couple more percentage points than you were getting earlier. I just need you to do one thing. So he says eventually he agreed to give a few points to Fox, he's like, listen, I don't want any more money from you, but I will give you a couple more percentage points than you were getting earlier. I just need you to do one thing. So he says eventually he agreed to give a few points to Fox in order to have the studio guarantee a new loan from the First National Bank of Boston. But even with this agreement, Lucasfilm remained the

Starting point is 01:34:18 main guarantor of the loan. And if this movie didn't turn a profit, highly likely that his business was going to go under. And so the good news was the bank didn't have to wait very long for the outcome. Listen to this. This is an entire story in two sentences. The Empire Strikes Back opened in May of 1980 in 126 theaters and broke attendance records in 125 of them. No other studio opened a single movie against it. The movie was going to have to make $57 million just for Lucas to break even, and to build Skywalker Ranch into the kind of complex he envisioned, the movie was going to have to do much more than break even. He needn't have worried. It became the third most successful movie of all time, and George Lucas would pocket more than

Starting point is 01:35:01 $100 million in profits. Lucas had literally bet the ranch, Skywalker Ranch, and won. And that is where I'll leave it for the full story. Highly recommend reading the book. The book is excellent. There's so much more in it. Like I said, this thing is massive. The hardcover is over 500 pages. If you want the full story, highly recommend reading the book. If you buy the book using the link that's in the show notes on your podcast player, you'll be supporting the podcast at the same time. That is 345 books down, 1,000 to go. And I'll talk to you again soon. Okay. So what you're about to hear is this question I was asked a few months ago. I actually recorded this a few months ago. They asked, how did History's Greatest Entrepreneurs think about hiring? All the answers. People think

Starting point is 01:35:40 I have a better memory than I actually do. If people say, oh, David, you have a great memory. My wife would laugh at that because I forget things all the time. It's not that I have a good memory. It's I reread things over and over and over again. Every single answer, every single reference you're about to hear in this 20-minute mini episode came from me searching all of my notes and highlights. That option is now available to you. If you like what

Starting point is 01:36:05 you hear, if you think it's valuable, if you're already running a successful company and you want an easy way to reference the ideas of history's greatest entrepreneurs in a searchable database that you can go through at your convenience anytime you want, then you can go to foundersnotes.com and sign up. I want to start out first with why this is so important. There's actually this book that came out in like 1997. It's called In the Company of Giants. I think it's episode 208 of Founders. It's two Stanford MBA students, if I remember correctly, and they're interviewing a bunch of technology company founders. And in there, Steve Jobs is one of them. This is, you know, right, I think even before he came back to Apple. And they were talking about, well, yeah, we know it's important to hire, but in a typical

Starting point is 01:36:47 startup, a manager or a founder may not always have time to spend recruiting other people. And I first read Steve's answer to this, I don't know, two years ago, and I never forgot it. I think it's excellent. I think it sets up why this question is so important. And you should really be spending, especially in the early days, like basically all your time doing this. In a typical startup, a manager may not always have the time to spend recruiting other people.

Starting point is 01:37:12 Then Steve jumps in. I disagree totally. I think it's the most important job. Assume you're by yourself in a startup and you want a partner. You take a lot of time finding a partner, right? He would be half of your company. I'm going to pause there. This idea of looking at each new hire as a percentage of the company is genius. Why should you take any less

Starting point is 01:37:30 time finding a third or fourth of your company or a fifth of your company? When you're in a startup, the first 10 people will determine whether the company succeeds or not. Each is 10% of the company. So why wouldn't you take as much time as necessary to find all A players? If three, three of the 10, were not so great, why would you start a company where 30% of your people are not so great? A small company depends on great people much more than a big company does.

Starting point is 01:38:03 Okay, so to answer this question, the advantage that I have making founders and that you have as a byproduct of listening to founders is not only that I've read, you know, 300-something biographies of entrepreneurs now, but I have all of my notes and highlights stored in my ReadWise app. And that means I can search for any topic. I can look at the past highlights of books or I can search for keywords. So what I did is, first of all, like what I've started to do with these AMA questions is I read them, decide which ones I'm going to do next, and then think about it for a few days. I don't put any, I just literally, I know that's the next question.

Starting point is 01:38:37 Just let my brain work on it in the background for a few days. And then I'll go through and start searching all of my notes. And so that's what I did here. And so there's a bunch of, you know, I don't have, I may have like 10 or 15 different founders talking about hiring. The first idea is the most obvious, but I think probably works best when you're already established. So Steve Jobs is talking about, hey, you know, the great way to hire is just find great work and find the people that did that and then try to hire them. When you're Steve Jobs, that's a lot easier, right? Than if you're just somebody that doesn't have reputation, maybe you don't have resources, maybe your company's rather new or

Starting point is 01:39:16 not as well known. David Ogilvie, I just did Confessions of an Advertising Man a couple episodes ago, I think 306 or something like that, 307. And he did the same thing. But he's David Olgovie at that point. So he would find, he'd go through magazines, find great advertising, great copywriting, and he'd write the person a letter. And then set up a phone call. And he says he was so well-known,

Starting point is 01:39:38 and he's one of the best in his field, that he wouldn't even have to offer a job, just the conversation. Then the person would, he'd want to hire the person a job just the conversation then the person would the he would want to hire the person never mention it and the person would apply to him um and so again i think if you can do that then of course it's straightforward who find for somebody does great work usually you can do this i actually have a friend i can't say who it is he's doing this right now actually um i have a friend that's really good at doing this. He's finding people that do great stuff on the internet and then just cold,

Starting point is 01:40:08 cold DMing them and then getting, convincing them to work on things. And that usually works, especially with people like younger people earlier in their career. There's a bunch of different ways to think about this and a bunch of different ways to prioritize. So the first thing that came to mind that I found surprising is you read any biography on Rockefeller, and he had a couple ideas where he felt the optimization, you know, table stakes, that you're intelligent and you're driven and you're hardworking, right? We don't even have, like, if you're listening to this, you already know that. But he prioritized hiring people with social skills. And so this is what he said. The ability to deal with people is as purchasable

Starting point is 01:40:45 a commodity as sugar or coffee. And I pay more for that ability than any other under the sun. There's the second part to this, though. And this also works well if you have access to more resources. Rockefeller would hire people as he found, as he found talented people, not as he needed them. It's not like, okay, Standard Oil has six open spots. Let's go find six candidates, right? He'd come across what he considered a talented person. It didn't even matter if he didn't know what they were going to do.

Starting point is 01:41:14 He's like, I'm just going to stack his team. And if you really think about the, his partners at Standard Oil, he essentially built a company, an executive team of founders, because he was buying up all their companies. So it's very rare. But there's a line from Titan I want to read to you. Taking for granted the growth of his empire, he hired talented people as found, not as needed. And then I found

Starting point is 01:41:37 another idea in the hiring, like the actual interview process. So there's this guy named Vannevar Bush. I did two episodes on him. I think it's 270 and 271. He is the most important American ever in history in terms of connecting the scientific field, private enterprise, and the government. The most important person to keep alive for the American war effort was FDR. The second one was Vannevar Bush. Vannevar Bush is like the Forrest Gump of this historical period. He is involved in everything from the Manhattan Project to discovering like a young Claude Shannon to building a mechanical computer. Like this guy literally has done, he's just, he pops up in these books over and over again. If you were reading about American business history during World War II

Starting point is 01:42:19 and post-World War II, you are going to come across the name Vannevar Bush over and over again. I read his fantastic autobiography called Pieces of the Action, and I came across this weird highlight. And so this is his brilliant and unusual job interview process. And so he's talking about this organization he's running called Amrad. At Amrad, I hired a young physicist from Texas named C.G. Smith. The way I hired him is interesting. An interview of that sort is always likely to be on an artificial basis and somewhat embarrassing. So I discussed with him a technical point on which I was then genuinely puzzled. The next day, he came in with a neat solution, and I hired him at once. Here's another idea. This is from Nolan Bushnell. Nolan Bushnell is the founder of Atari, founder of Chuck E. Cheese, and Steve Jobs' mentor. He hired Steve Jobs when Steve Jobs was like 19 at Atari.

Starting point is 01:43:08 He would ask people their reading habits in interviews. This is why. One of the best ways his whole thing was he wanted to build all of his companies laid on a foundation of creative people. So that's what he's looking for. He's like, I need creative people. One of the best ways to find creative people is to ask a simple question. What books do you like? I've never met a creative person in my life that didn't respond with enthusiasm to a question about reading habits.

Starting point is 01:43:30 Actually, which books people read is not as important as the simple fact that they read at all. I've known many talented engineers who hated science fiction but loved, say, books on bird watching. A blatant but often accurate generalization. People who are curious and passionate read. People who are apathetic and indifferent don't. I remember one, that's such a great line, and I obviously agree with it. I remember one, I'm going to read it again, a blatant but often

Starting point is 01:43:54 accurate generalization. People who are curious and passionate read, people who are apathetic and indifferent don't. I remember one particular woman who during an interview told me that she had read every book that I had read. So I started mentioning books I hadn't read and she had read those too. I didn't know how someone in her late 20s found this much time to read so much. But I was impressed. I was so impressed that I hired her right there and assigned her to international marketing, which was having problems. This is why. This is why I'm reading this whole section to you. A job with a lot of moving parts benefits from a brain that has a lot of moving parts it wouldn't be possible to have read that many books without such a brain so do you see what i mean like we start with steve

Starting point is 01:44:36 jobs saying this is the most important thing that your role as the leader of the company the founders do right and you are and it's so important to study. And this is why I'm glad this question exists and why I'm glad that I took the time and I had the foresight to like, hey, I should really organize my thoughts and notes because there's no way I would have remembered all this without being able to search my read-wise, right? But you have Rockefeller saying, this is what's important to me. You have Bush saying, this is how I hire. Now you have Nolan Bush now saying, well, here's another weird thing that I learned. Let me go through what Warren Buffett says about this. So this is about the quality. One thing that is consistent, whether it's Jobs, Buffett, Bezos, Peter Thiel,

Starting point is 01:45:15 this just pops up over and over again. They talk about the importance of trying to find people that are better than you. The hiring bar constantly has to increase. Now, obviously, the larger the company gets, that's impossible. Steve Jobs has this great quote where he's like, you know, Pixar was the first time I saw an entire team, entire company of A players, but they had 400 players.

Starting point is 01:45:35 They had 400 team members. He's like, at the time, Apple had 3,000. It's like, it's impossible to have 3,000 A players. So there is some number that your company may grow to where it's just, you're just not, you're not going to have thousands000 A players. So there is some number that your company may grow to where you're just not. You're not going to have thousands of A players. In my argument,

Starting point is 01:45:50 I don't even know if you get a 400. I guess, I mean, I'll take Steve's word for it on there and Pixar definitely produced great products, but it's probably a lot lower than that as well. So Warren Buffett would tell you to use David Ogilvie's hiring philosophy. And so Warren said,

Starting point is 01:46:03 Charlie and I know that the right players will make almost any team manager look good. Again, that is why it's the most important function of the founder, maybe directly next to the product or right above the product, actually, because those are the people building your product. We subscribe to the philosophy of Ogilvie and Mather's founding genius, David Ogilvie. This is what Ogilvie said. If each of us hires people who are smaller than we are, we should become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants.

Starting point is 01:46:31 Jeff Bezos used a variation of Ogilvy's idea too. Jeff used to say in Amazon, every time we hire someone, he or she should raise the bar for the next hire so that the overall talent pool is always improving. They talk about this idea on Amazon where the future hires that we do should be so good that if you had applied for the job you already have at Amazon, you wouldn't get in. That's a very interesting idea. Take your time with recruiting. Take your time with hiring. There's this great book on the history of PayPal. It's written, actually, I've recently become friends with the author. His name is Jimmy Soni. And this is in his book.

Starting point is 01:47:11 The most fascinating thing that I found was that PayPal prioritized speed. So from the time they're founded to the time they sell to eBay, it's like four years. Jimmy spent more time researching the book than, he spent six years researching the book. I always tease him.

Starting point is 01:47:26 He goes like, you took longer on a book than they took to start and sell their company. It just speaks to like the quality he's trying to do. But as a byproduct of that, like obviously they move fast, but they prioritize speed over everything else except in one area, recruiting. Max Lutgen kept the bar for talent exceedingly high, even if that came at the expense of speedy staffing. Max kept repeating A's, higher A's, B's hire C's, so the first B you hire takes the whole company down. Let's read that again. A players hire A players, B players hire C players, so the first B player you hire takes the whole company down. Additionally, the company leaders mandated that all prospects, here's another idea for you, all prospects must meet every single member of the team. Now, the next one is the most bizarre. It makes sense. If you study, I did this three part on Larry Ellison, three part series on Larry Ellison. I should read those books again because the podcast is like 50 times bigger than when I published those episodes. And he's just, he's crazy.

Starting point is 01:48:25 So he would hire based on the confidence, the self-confidence level of the candidate. Listen to this. I have tears in my eyes. I don't know why I'm laughing. Okay. This is just so, because this is, you read about Larry Ellison

Starting point is 01:48:40 and he's one of these people it's like really easy to interface with because you just know exactly who he is and what's important to him that's why I think it's so funny Ellison insisted that his recruiters hire only the finest and cockiest new college graduates when they were recruiting from universities they'd ask people are you the smartest person you know and if they said yes they would hire them if they said no they would say who is and they would go hire that guy instead. I don't know if you got the smartest people that way, but you definitely got the most arrogant.

Starting point is 01:49:10 Ellison's, and this is why, the personality of the founder is largely the culture of the company. Apple is Steve Jobs. Apple is just Steve Jobs with 10,000 lives, right? I was just texting a founder friend of mine. He listens to the podcast. I actually met him through the podcast. And he's going through this process of self-discovery. He's already started a bunch of companies

Starting point is 01:49:29 that are really successful, but he's like, I think I'm more of this type of founder than the other type of founder. And that's good that he's doing that because hopefully his next mission is his life's mission. And you can't get to your life's mission

Starting point is 01:49:40 unless you figure out who you are. Ellison knew who he was. Ellison's swaggering combative style became a part of the company's identity. This arrogant culture had a lot to do with Oracle's success. Here's another odd idea for you. Izzy Sharp, the founder of Four Seasons, actually could figure it out that in his business, which was hotels, right, that hiring the right person could actually be a form of distribution for his hotel. He gave me the idea because of what? What do we know?

Starting point is 01:50:09 What do you and I know in our bones? That history's greatest founders all read biographies. They all read biographies of people that came before them and took ideas from them. Izzy Sharp is trying to build Four Seasons. What do you think he did? He picked up a biography of Cesar Ritz, the guy that Ritz-Carlton is named after, arguably the greatest hotelier of all time.

Starting point is 01:50:26 And when he realized, oh, shit, Ritz, he says, remembering that Cesar Ritz made his hotels world famous by hiring some of the foremost chefs, we decided to do something similar. So what is he talking about? Cesar Ritz went out and partnered with August Escoffier. What Cesar Ritz was to building hotels, August Escoffier was to French cooking and so what happened is you partner with world famous chefs people come into your restaurant that's in the hotel because the world's famous chef and now they know about your hotel that leads to more get that leads to more activity in your restaurant that you own but also leads to more brand

Starting point is 01:50:58 recognition of your hotel and then by as a byproduct of that more people staying at the hotel so hiring as a form of distribution this this is fascinating. That is a fascinating idea. Okay, here's the problem. You can identify great people, right? Maybe they even want to come work. Like you've identified them, you've sold them, hey, this is our mission, this is what we're doing. And yet humans have complicated lives. They have spouses, they have kids, they have a reason maybe they can't move across the country to work for you, even though they want to. So there's a problem-solving element that you see in these books on you have to solve. Like you've already identified the person. You've recruited them.

Starting point is 01:51:39 They can't go for some other reason. Okay. Well, the great founders are not going to take no for an answer. I read in this book called Liftoff, which is about the first six years of SpaceX. This is what Elon Musk did. They had anticipated his friend's issue. Having convinced Musk they needed to bring this brilliant young engineer from Turkey on board, it became a matter of solving the problem. His wife had a job in San Francisco. She would need one in Los Angeles, right? Because that's where SpaceX is at the time. These were solvable problems, and Elon's better at solving problems than almost anyone else.

Starting point is 01:52:09 Musk therefore came into his job interview prepared. About halfway through, Musk told the guy that he wants to hire, so I heard you don't want to move to LA, and one of the reasons is that your wife works for Google. Well, I just talked to Larry, and they're going to transfer your wife down to LA, so what are you going to do now? To solve this problem, Musk had called his friend Larry Page, the co-founder of Google. The engineer sat in stunned silence for a moment. But then he replied, given all that, he would come to work at SpaceX. That's really smart. There is another idea when you're promoting.

Starting point is 01:52:41 Are you going to promote from within or from without? You know, that's dependent on you, depending on what's going on. I do think this is interesting though. There's this guy named Les Schwab who built this really valuable chain of tire companies in the Pacific Northwest. I actually found out about him because Charlie Munger is like, hey, you should read this biography. He said it in, he didn't say it to me personally. He said it to, in like one of the Berkshire meetings, that to study, Les Schwab had one of the most, one of the smartest financial incentive structures of any company that Charlie Munger had come across.

Starting point is 01:53:14 So this is what Les Schwab did. He did not want to hire from, he didn't want to hire other people from other companies because they might come with bad habits. He liked to train his own executives. And so he says, in our 34 years of business, we have never hired a manager from the outside. Every single one of our more than 250 managers

Starting point is 01:53:30 and assistant managers started at the bottom changing tires. They have all earned their management job by working up. And then another thing, if you're going to hire the best of the best and A players, A players don't like to be micromanaged. And so this came in Larry Miller's autobiography called Driven. He owns like 93 companies all throughout Utah, car dealerships, movie theaters, all kinds of crazy stuff. But he also owned the NBA team, Utah Jazz.

Starting point is 01:53:56 And what was fascinating is he's trying to recruit Jerry Sloan as the coach at the point. And Jerry Sloan would only take the job on one condition. And I really like it. I really like this idea. If you hire me, let me run the team in business, right? That's what you're hiring me for. One of the best things we had ever done was hire Jerry Sloan as coach. At the time, he said, I'm only going to ask you for one thing. If I get fired, let me get fired for my own decisions. If you hire me, let me run the team slash business. Here's another idea from Thomas Edison that I think is fascinating. Really, the way I think about a founder is like you're developing skills that you can't hire for. You're going to hire for everything else, but you shouldn't be hireable. And Edison wasn't. Edison expressing his views on the preeminent role of applied scientists, which that's what

Starting point is 01:54:42 he considered himself, coined the expression, I can hire mathematicians, but they can't hire me. And so when I read that paragraph for the first time, the note I left myself was develop skills that you can't hire for. Capitalism rewards things that are both rare and valuable. S.J. Lauder would give you advice that you need to hire people aligned with your thinking and values. Hire the best people. This is vital. Hire people who think as you do and treat them well. In our business, they are a top priority. So this idea is like, that seems kind of weird, like hire people who think like you. There's obviously not one right way to build a business. I think that your business should be an expression of your personality and who you are as a person at

Starting point is 01:55:20 the core. And so I think there is an art to the building of your business. And the reason I use the word art, I don't mean in like a hoity-toity, you know, pretentious manner. That's not me at all. I don't even care about art at all, really. I mean that you're making decisions not just based on economics. Like there are non-economic important decisions based on how you're building your business. Like you could probably make more money doing a decision a but decision a is goes against who you are as a person or you just don't like it or it's just not as elegant or beautiful and so therefore you don't do it so that's what i mean about you know hire people who think as you you do and what for whatever reason when i read s.a lauder say that i was like okay that there's like this art to what

Starting point is 01:56:02 she's doing one thing that's gonna be helpful in recruiting, this comes from Peter Thiel. I think this is the book Zero to One. Understand that most companies don't even differentiate their pitches to potential recruits and to hiring. So therefore, as a byproduct of that, you're going to wind up with a lower overall talent base. And so he says, what's wrong with valuable stock, smart people, or pressing problems? Nothing. But every company makes these claims. So they won't help you stand out. General and undifferentiated pitches to join your company. Don't say anything about why a recruit should join your company instead of many others. So that idea of like your pitch, your actual, he would tell you, you shouldn't be building an undifferentiated commodity business.

Starting point is 01:56:44 But even above and beyond that, like the mission that you're trying to engage everybody to join you in, that pitch, that sale you're trying to make to potential recruits should be differentiated. Should not, if that person's applying to five other jobs, there should not be like, it's like, they may not like your mission, they may not like your pitch, but they shouldn't be able to compare it to anything else. Another quote from Nolan Bushnell, hire for passion and intensity. That's what he would do. Or that's what he did when he found Steve Jobs. If there was a single characteristic that separates Steve Jobs from the massive employees,

Starting point is 01:57:14 it was his passionate enthusiasm. Steve had one speed, full blast. This was the primary reason we hired him. And one thing all these founders have in common is that they know how important hiring is. And when something's important, you do it yourself. This is, again, Elon Musk on hiring. He interviewed the first 3,000 employees at SpaceX.

Starting point is 01:57:35 That's how important it was. One of Musk's most valuable skills was his ability to determine whether someone would fit his mold. His people had to be brilliant. They had to be hardworking, and there could be no nonsense. There are a ton of phonies out there, and not many who are the real deal, Musk said of his approach to interviewing engineers.

Starting point is 01:57:49 I can usually tell within 15 minutes, and I can for sure tell within a few days of working with them. Musk made hiring a priority. He personally met with every single person the company hired through the first 3,000 employees. It required late nights and weekends, but he felt it was important to get the right people for his company. And then to close on this, we started with Steve Jobs telling us why it was so important and why it should be a large part of how you spend your time. And now we'll close with what you do after. What do you do after you hire the person? This is what he says. It's not just recruiting. After recruiting, it's building an environment that makes people feel they are surrounded by equally talented people and their work is bigger than they are.

Starting point is 01:58:27 The feeling that their work will have a tremendous influence and is part of a strong, clear vision. So that is the end to that 20-minute mini episode. I just re-listened to the whole thing. And it really does, I think, it's a perfect explanation and illustration of why I think Founders Notes is so valuable because some of those books I haven't read in five, six years. And just the ability to have a searchable database of all these ideas, like this collected knowledge of some of history's greatest entrepreneurs to reference and then contextually apply to our own businesses. It's nothing short of like it's magic. That's really the way I think about it. I think it's a massive superpower. It gives me a massive superpower. I couldn't make the podcast without it. I also think if you have access to it, it'll make your business better. And so if you're already running a successful business, I highly recommend that you invest in a subscription

Starting point is 01:59:15 and you can do that by going to foundersnotes.com.

Founders - #345 George Lucas

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