Founders - #361 Estée Lauder

Episode Date: August 18, 2024

Warren Buffett and Charlie Munger said it was a crime that more business schools didn't study Henry Singleton. I think it's a crime that more entrepreneurs don't study Estée Lauder. She is one of the best founders to ever do it. This is the story of how she went from a childhood obsession, to a single counter in a beauty salon, to a multibillion dollar empire. This is my third time reading this book. It gets better every time I read it. This episode is what I learned from rereading Estée: A Success Story by Estée Lauder. ----Ramp gives you everything you need to control spend, watch your costs, and optimize your financial operations —all on a single platform. Make history's greatest entrepreneurs proud by going to Ramp and learning how they can help your business control your costs and save more. ----Build relationships with other founders, investors, and executives at a Founders Event----Founders Notes gives you the superpower to learn from history's greatest entrepreneurs on demand. You can search all my notes and highlights from every book I've ever read for the podcast. Get access to Founders Notes here. ----Join my free email newsletter to get my top 10 highlights from every book----Follow Founders Podcast on YouTube (Video coming soon!) ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

I'm reading this book called Money Masters of Our Time, written by John Train, and there is a chapter on Warren Buffett in here. And in the chapter on Warren Buffett, there's an incredible quote from Warren Buffett, where he says that a good manager must be a demon on cost. Buffett knows what most of history's greatest founders knew, that watching your cost was the foundation on which other competitive advantages can be built. Listen to what Jeff Bezos wrote about this in his shareholder letters. Jeff wrote, Focus on cost improvement makes it possible for us to afford lower prices, which drives growth. Growth spreads fixed costs across more sales, reducing costs per unit, which makes possible more price reductions.

Customers like this and it's good for shareholders. Please expect us to repeat this loop. Bezos brings up the importance of controlling your spending, watching your costs again in another shareholder letter. He says we will work hard to spend wisely and maintain our lean culture. We understand the importance of continually reinforcing a cost consciousconscious culture. What other trait do history's greatest founders have in common? They all studied the great founders that came before them. Jeff Bezos is on record over and over again

talking about the influence that Sam Walton had on the way he built Amazon. Sam Walton said in his autobiography, you can make a lot of different mistakes and still recover if you run an efficient operation, or you can be brilliant and still go out of business if you're too inefficient. The way to think about this

is that most success comes to efficiency and most failures are due to waste. Here, we go back to Buffett. The really good manager doesn't wake up in the morning and say, this is the day that I'm going to cut costs any more than he wakes up and decides to practice breathing. You keep costs low from the start. If you read that a company

is instigating a cost-cutting program, then you know that management has been slacking in keeping costs low from the start. Ramp keeps you from slacking on watching your costs. And if you have been slacking, Ramp helps you get back on track because Ramp has built the world's best tool that gives you everything you need to control your spend, watch your costs, and optimize all of your financial operations on a single platform. I have now read 361 biographies and autobiographies of entrepreneurs for this podcast. A fundamental law of company building is watch your costs. It is in the Estee Lauder autobiography, which you're about to hear. It's in the book. I

don't think I talked about it on the podcast though, but when Estee brings her husband in to partner on the company that they're building together, she focuses on sales and product, and he focuses on their finances. His job was to watch their costs. Ramp helps you do the same. Ramp helps you watch your costs. History's greatest founders knew that watching your costs was the foundation on which other competitive advantages are built. Ramp has built the world's best tool. Ramp gives you everything you need to control your spend, watch your costs,

and optimize your financial operations on a single platform. Go to ramp.com and start building your competitive advantage today. That is ramp.com, ramp.com. I hope you enjoy this episode on Estee Lauder. She's one of my favorite entrepreneurs. It's the third time I've read her autobiography. Business is not something to be tried on. It's not a distraction, not an affair,

not a momentary fling. Business marries you. You sleep with it, eat with it, think about it much of your time. It is, in a very real sense, an act of love. If it isn't an act of love, it's merely work, not business. What makes a successful entrepreneur? Is it talent? Well, perhaps, although I've known many enormously successful people who were not gifted in any outstanding way, not blessed with particular talent.

Is it then intelligence? Certainly intelligence helps, but it's not necessarily the education or the kind of intellectual reasoning needed to graduate from the Wharton School of Business that are essential. How many of your grandfathers came here from the old country and made a mark in America without the language, money, or context? What then is the mystical ingredient? It's persistence. It's that certain little spirit that compels you to stick it out just when you're at your most tired. It's that quality that forces you to persevere. Find the route around the stone wall. It's the immovable

stubbornness that will not allow you to cave in when everyone says give up. Just before we decided to commit ourselves to cosmetics full-time, our accountant and lawyer took us out to dinner. They had something grave to tell us. Don't do it. That was the advice. The mortality rate in the cosmetics industry is high, and you'll rule the day that you invested your savings and your time into this impossible business. We beg of you, don't do it. We did it. We make the business decisions, no one else. We make them.

Mark Twain once said, keep away from people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you too can become great. Our first year sales amounted to about $50,000. Expenses ate up just about every dime. No matter. Forward. That is an excerpt from the book that I just finished reading for the third time. One of my all-time favorite entrepreneur autobiographies,

definitely on my Mount Rushmore. Book keeps getting better every time I read it. And it is the autobiography of Estee Lauder. The book is called Estee, A Success Story. And it was published almost 40 years ago. And keep in mind as we go through this today, she was 77 when she is writing these words and still working every day, still going strong. The way I think about her is I really think she's just an American badass.

I say this over and over again. I really think a lot of today's entrepreneurs should try to emulate Estee and that if she was alive, that she'd be kicking other entrepreneurs ass up and down the court. Warren Buffett and Charlie Munger said it should be a crime that more business schools are not studying Henry Singleton. That's the way I feel. I think it's a crime that more entrepreneurs don't study Estee Lauder. So I'm going to jump right into it.

It starts with a very painful memory at the very beginning of her career. OK, so she just said the end of the first year of her company, they did $50,000 of revenue. I think last year they did something like $16 billion. The company's almost 80 years old. And what's remarkable is that her empire starts as just a small concession stand at a single counter inside of a single beauty salon. And when it starts, she is the sole employee. And so there's something that happens at this beauty salon that stayed. Now, she's talking about this, you know, 40 years after it happened, maybe even longer.

And yet she can remember it like it was yesterday. She says, I remember the woman at the Florence Morris Beauty Salon where I had my first cosmetic concession. She was thoughtless and cruel and will always remain that way in my mind. Maybe she was a catalyst for good in the end. Maybe I wouldn't have become Estee Lauder if it hadn't been for her. At the moment she was cast in my memory to last there forever, I despised her. Simply thinking about that incident brings back pain. She was having her hair combed and she was lovely. I was very young and vulnerable and I loved beauty. I felt I wanted to make contact with her in some small way. What a beautiful blouse you're wearing, I said to her. It's so elegant. Do you mind if I ask you where you bought it? She smiled. What difference could

it possibly make? You could never afford it. I walked away, heart pounding, face burning. And this is the punchline of this entire section. This is why I'm reading this to you. Never, never, never will anyone say that to me again, I promise myself. Someday I will have whatever I want. And then one of the most interesting things is she then starts her autobiography. That's the first story, right?

But then she doesn't go into her early life. She's not talking about herself. She's talking about her obsession, her obsession with beauty. And there's multiple things that are going on on the next few pages I think are important. I'll just tell you a few of them. Number one, beauty is an ancient industry, which leads to number two, which allows her to build a business around things that will never change. And so Jeff Bezos famously said in the early days of Amazon, he thought it was really important to build your business around things that won't change. So at the very beginning, he realized, hey, people are always going to want low prices. They're going to want faster delivery and they're going to want wide selection.

They're going to want that today. They're going to want that 10 years from now. They're going to want that 20 years from now. So that means he can invest heavily in those areas and reap the benefits for many decades to come, which leads to the third thing that's obvious about Estee Lauder. She studied the history of her industry. And then the fourth thing, it's not even implied. She says that over and over again. She's completely obsessed. She loved beauty. This was not, beauty was a mission for her. It was not just a product. And so she says, beauty has always commanded attention. Beauty secrets have been passed on from mother to daughter through the ages. So she talks about what primitive women were doing thousands of years ago. She talks about what they were doing

in Rome, what Cleopatra was doing, what they were doing in Egypt. And she says, women have always enhanced their God-given looks. It has always been so. It will always be so. And then she speaks to why this is her mission and why she made this her life's work, what it does for her customers. Beauty is the best incentive to self-respect. You may have a great inner resource, but they don't show up as confidence when you don't feel pretty. People are more apt to believe you and like you when you look fine. And when the world approves, self-respect is just a little easier. The pursuit of beauty is honorable. And then she continues talking about her obsession, but really this is a universal appeal of the product in the industry that she

built her empire in. Beauty transcends class, intellects, age, profession, geography, virtually every culture and economic barrier. There isn't a culture in the world that hasn't powdered, perfumed, and prettied its women. Love has been planted, wars won, and empires built on beauty. I should know. I'm an authority on all three. Love, wars, and empires have been woven into my personal tapestry for decades. I've been selling beauty ever since I could recognize her. And the last line is very important because that is one of the most important traits that she has. She is a master world-class salesperson. She talks about it over and over again. In fact,

she says, I have never worked a day in my life without selling. If I believe in something, I sell it and I sell it hard. And then the most important relationship that she's going to have outside of the one she obviously has with her immediate family, with her husband and her kids, is the one with her mother. True interest tends to be revealed early, and we definitely see that's the case with Estee Lauder in beauty. She says, the first beauty I ever recognized was my mother. Estee would observe the way her mother emphasized her own beauty routine.

My mother began brushing her golden hair in the morning, even before she opened her eyes. I remember her reaching out for that brush as soon as she began to stir. I adored my mother's hairbrush, her hand cream, and the gloves. When she passed away at 88 years old, she was still beautiful. And what I love that Estee's mother did is she instilled self-confidence and self-belief into her daughter really, really early. And it's obvious if you read Estee's autobiography, she does not lack for confidence or self-belief. You're as beautiful as you think you are, she would tell me. The secret is to imagine yourself

the most important person in that room, the person everyone else is waiting to see. If you imagine it vividly enough, you will become that person. And if you could see the notes that I left myself throughout the book, a lot of them are just, I repeat over and over again, the fact that she was born for this business that she was in, that it's really important to pick a career that you have an immense passion about. In fact, I love the advice that Charlie Munger gave, where he said, in my

whole life, I've never been good at something I wasn't very interested in. It just doesn't work. There's no substitute for strong interest. He could be speaking about and describing Estee Lauder. My very first memory is that of my mother's scent, her aura of freshness, the perfume of her presence. My first sensation of joy was being allowed to reach up and touch her fragrant and satiny skin. Her hair didn't escape my attention either.

As soon as I was old enough to hold a brush, I'd give her no peace. Estee, you've already brushed my hair three times today. I can still hear her complaining. My older sister Renee submitted to getting her face padded with my mother's cream. My sister-in-law was perpetually saint-like in her submission to my treatments. All of this annoyed my father considerably. Stop fiddling with other people's faces, he'd say. But that is what I like to do. Listen to this paragraph. It's insane.

But that is what I like to do. Touch other people's faces, no matter who they were. Touch them and make them pretty. Before I'm finished, all set, I'm certain, the world's record for face touching. I could spin magic on the faces of my family. As soon as school was over, I'd run home and start on faces about her childhood obsession a few years later. I want to paint a picture of the young girl I was. A girl caught up, mesmerized by pretty things and pretty people.

Thinking about my childhood now reveals such early patterns. My drive and persistence were always there, and those are qualities that are essential for building a successful business. Still, I sometimes wonder if I had set my heart on selling anything else but beauty, would I have risen to the top of my profession? Somehow, I doubt it. I believed in my product. I loved my product. A person has to love her harvest if she's to expect others to love it too. And beauty was such a bountiful harvest. How could I have known this at 12 years old?

I don't understand it. I just did. And so Estee Lauder has a lot of the same traits that are covered in one of my favorite talks on YouTube, which is called Running Down a Dream, How to Succeed and Thrive in a Career You Love by Bill Gurley. And there's a line in that talk that also speaks to what the advice that Charlie Munger just gave us that, you know, there's really no substitute for having this deep ingrained, like really strong interest in what you're doing. And the line from Running Down a Dream that I think applies to Estee Lauder and a lot of the great entrepreneurs that you and I speak about is that someone else has a deep passion for whatever

career path you're on, and they're going to smoke you if you don't have it yourself. And I think that's tied to another one of my favorite maxims, which comes from Ernest Shackleton, By Endurance We Conquer. We have in this book, think about it, she's 77 years old, she's writing the book. She's talking about an obsession that has taken hold of her almost 70 years ago and never let her go. If you love it, you're going to do it all the time. If you do it all the time, you're going to get really good at it. And more importantly, you won't quit. By endurance, we conquer. All the success is so many decades into the future. Estee Lauder, the company is, I think, 78 years old as of today. They did $50,000 of revenue their first year. They

did $16 billion last year. And so keep that in mind as she's about to talk about one of the most important experiences that she has is she starts working at a very young age with her uncle. So she says, when I dreamed of my private universe, I dreamed of being a skin specialist and making women beautiful, since I had heard that many in my mother's family did just that. My shining moment came in the form of a quiet man who also loved touching faces. My Uncle John, my mother's brother, came to visit us from Hungary. He was a skin specialist. What glories those words conjured up!

He captured my imagination and interests as no one else ever had. I was smitten with Uncle John. He understood me. What's more, he produced miracles. The first beauty products that Estee Lauder is ever going to sell are the ones that her Uncle John makes. I recognized in my Uncle John my true path. He produced his glorious cream in our home, working happily over a gas stove. I watched, I learned, I was hypnotized. My education was just starting. I was devoted to it. I loved his creams, loved his potions, loved my Uncle John. This is the story of bewitchment.

I was bewitched by the power to create beauty. Uncle John had worlds to teach me. We constructed a laboratory of sorts in the tiny stable behind the house. Do you know what it means for a young girl to suddenly have someone take her dreams quite seriously? To teach her secrets? I could think of nothing else. After school, I'd run home to practice being a scientist. I began to value myself so much more.

To trust my instincts. To trust my uniqueness. Trusting oneself does not always come naturally. If learned when young, the practice sticks. Today, there is no one who can intimidate me because of title or skill or fame. I do what's right for me. And this is a preview of what her business is going to be like. Because everywhere she goes, she carries her products with her and she'll strike up conversation and she'll do

like these mini makeovers and convert customers one at a time. She was doing this back in high school. I didn't have a single friend who wasn't slathered in our creams. Deep inside, I knew I had found something that mattered much more than popularity. My moment had come and I was not about to miss seizing it. Uncle John loved me. Okay, so now here's something that's going to be surprising. So she's, you know, 8 years old, 12 years old, 16 years old. She's completely obsessed.

She's essentially going to do this business for free, for fun, for a few decades. In the family that she was raised in at the time that she's living, it is expected to go from her family's house to her husband's house. She gets married young. She's around 22 years old. They have their first kid, I think, two, three years later. So she's 24, 25 years old. She's a housewife. And this entire time, she doesn't found Estee Lauder companies until she's 38. This is, you know, a decade and a half in the future. And during this entire time, she's still running a business. It's just for fun. And this is a great description of her obsession. We were struggling so hard to be independent. And sometimes this was not easy. Times were lean. We had a beautiful son and I

spent my days mothering. And all the time, all the time, I was mothering my zeal for experimenting with my uncle's creams, improving on them, adding to them. I was forever experimenting on myself and on anyone else who came within range. Good was not good enough. I could always make it better. I now know that obsession is the word for my zeal. It was never quiet in the house. There was always a great audible sense of industry, especially in the kitchen where I cooked for my family and during every possible spare moment cooked up little pots of cream for faces. I always felt most alive when I was dabbling in the practice cream. I felt as though I was conducting a secret absorbing experiment, a real adventure. And I think the

zeal that she has for beauty, for developing our own products, for teaching beauty, a lot of what she does is teaching how to use the products, what they can do for you. She did this for fun, and that is going to directly lead to this foundation, or excuse me, the founding of this empire, which starts with just a single counter inside of a beauty salon. So she'd go to this foundation or excuse me, the founding of this empire, which starts with just a single counter inside of a beauty salon. So she'd go to this beauty salon once a month to get her hair dyed and done. And she is an extrovert and a master saleswoman. And so she's talking to every single person in the salon. She'd become friends with them, invite them over to her house and then give them like free makeovers. So it says many of the young

women who came to Florence Morris, that's the name of the beauty salon, to get their hair done would come to my home for a quick beauty lesson. I love sharing what I knew and creating excitement about skin. One day, Mrs. Morris, the owner of the shop, said to me, what do you do to keep your skins looking so fresh and lovely? It would turn out to be a question of great importance for me. I didn't have to be asked twice. The next time I come, I said, I'll bring you some of my products. My heart was pounding. Estee comes back a few weeks later for her normal appointment,

meets with Florence Morris again. She says, would you mind leaving them with me? She asked as I offered my four products. I'm so busy now. I'll try them when I have time. I knew better. Goes back to this master salesmanship, this understanding of persuasion that Estee had. She said, I knew better.

Just let me show you how they work, Mrs. Morris. Give me five minutes and you'll see the right way to use them. Nothing could have induced me to leave my bounty without a demonstration. I have to pause there before I go on. That is one of the most important insights into the history of advertising. So I've gone back and read countless biographies about many of the great advertising agency founders. Many of them were founding their companies in the 40s, the 50s, the 60s. But they will tell you a lot of their ideas came from the early 1900s and this one guy named Claude Hopkins.

Claude Hopkins may be the best copywriter of all time and the most influential thinker in the advertising industry. He wrote this book called Scientific Advertising. His boss, Albert Lasker, thought the book was so valuable that he locked it in a safe for 20 years because he didn't want his competitors to have access to the ideas. Eventually, the book gets out of the safe, gets printed, and goes on to sell like eight or nine million copies. The reason I tell you all this is because there's a line in Claude Hopkins' autobiography that is demonstrating exactly what Estee Lauder knew at this time in her life.

No argument in the world can ever compare with one dramatic demonstration. Estée knew that instinctively because she says, nothing could have induced me to leave my bounty without a demonstration. So she goes through this quick beauty routine and it says, I showed Mrs. Morris a mirror. She was raving beauty. She then said, do you think you would be interested in running the beauty concession at my new salon? I did not hesitate for a second. Up until that point, I had been giving away my products. This was my first chance at a real business. I would

have a small counter in her store. I would pay her rent, but whatever I sold would be mine to keep. No partners. I never did have partners. I would risk the rent, but if it worked, I would start the business I always dreamed about. Risk-taking, this is one of my favorite sentences in the entire book. Risk-taking is the cornerstone of empires. No one ever became a success without taking chances. And this is one of the most remarkable things about Estee Lauder and why I'm trying to shout from the rooftops, please study her, read her biography, listen to the episodes I've done on her over and over again. She understood this by instinct, this fundamental

understanding of humans, human nature, and then combining that with building her business on a handful of simple principles. One of the most important things she will ever do, again, if you're going to want to go from $50,000 of sales in your first year to multiple, you know, 16 billion, 70 years later, customer loyalty over everything else, customer loyalty over everything else. She just understood this. And so she invents, at least she claims to, and I haven't found any examples of other people doing this. She claims to invent the sales technique of the century, which is giving gifts with purchase.

And in sometimes giving gifts even without a purchase. This is so powerful. Now the big secret. I would give a woman a sample of whatever she did not buy as a gift. It might be a few teaspoons of powder in a wax envelope. Perhaps I'd shave off a bit of lipstick and tell her to apply it with her fingers. Perhaps in another envelope, I would give her a bit of glow. The point was this.

A woman would never leave empty-handed. A woman would never leave empty-handed. I did not have an advertising department. I did not have a copywriter. But I had intuition. I just knew, even though I had not yet named the technique, that gift with a purchase was very appealing. In those days, I would even give a gift without a purchase. The idea was to convince a woman to try a product, having tried it at her leisure in her own home and seeing how fresh and lovely it

made her look. She would be faithful forever. We're going to come back to this idea about customer loyalty and how Estee Lauder cultivated this over and over again. She would be faithful forever. Of that, I had not a single doubt. Again, this is not just Estee Lauder. I can come up with this idea of the importance of customer loyalty over everything. I feel has been like in a bunch of the books, you know, over the years, but especially in the last few weeks, the last few months, go back to Les Schwab, one of Charlie Munger's favorite founders. He had this idea. He's like, hey, he ran these ads. He's like, we will change.

We will fill your tire and change your flat for free, even if you don't buy anything. And what he knew was that, hey, you come in, we fix it for free. We did you a service. We did you a favor. When it's time to get new tires, you're going to go back regardless of price or anything else. You are going to go back to regardless of price or anything else, you are going to go back to the store that did something for you. Last week, we had an example of this with Fastenal. They would custom order a part that they don't carry as a special request for their customer. In that episode, I referenced that Bugatti was doing this back in, what, the 1940s, probably? There's a line

from Bugatti's biography. He receives a letter. 30 years. He had sold this customer a car 30 years earlier. Something broke on it. They don't have that part anymore. Bugatti offered to custom manufacture that part and give it to him at cost. A few weeks before that, we talked about Sam Walton in the early days of Walmart. If somebody would return something, not only would he give them their money back, he would instruct his salespeople, the one doing that return, to give them a gift for free. Customer loyalty over everything. A few pages later, this should not be a surprise. A devoted clientele was developing. Not to my surprise, of course,

my products were the finest and the beauty salon atmosphere was perfect. Women were already in the self-improvement mood. Think about this. Go to where your customers are. That is what she's doing. The beauty salon atmosphere was perfect. Why should they go home with beautiful hair and a tired, lifeless face? It made sense to sell a total beauty package. Word spread. Business moved gradually but steadily. I worked every day from 9 a.m. when I arrived to polish my jars to 6 in the evening. I never took lunch. I felt I had to be there for every woman or I would surely lose her. I cleansed, creamed, colored, talked, talked, talked, and talked. It worked like a charm and the interest in my products grew. There is a line that Warren Buffett has when he describes Rose Blunken, affectionately known as Mrs. B, and he says, I would rather wrestle grizzlies than compete with her. This would be an example of why the same would apply to Estee Lauder. She's on vacation. She's at a beautiful hotel poolside. What do you think

she's doing? She walks over to the women at the poolside and she starts giving them free makeovers. The response was electric. In the next few years, I'd spend some weeks alone at this hotel or that hotel as what might be called working vacations. Many women would gather around and ask me to teach them about skincare and cosmetics. It was fun for them and profitable for me. Women wanted to learn. One summer after another, I pushed myself, lotting creams, making up women, selling beauty. In the winters, I'd visit these eager ladies at their homes, where with a bridge game as a backdrop, I'd make up their friends and sell more creams.

The mood of these sessions was as exhilarating for me as for them. I didn't need bread to eat, but I worked as though I did. For the pure love of the venture, for me, teaching about beauty was and is an emotional experience. I brought them charisma and knowledge about their possibilities. They gave me a side of obsession. What is the negative side? It's difficult for me to speak of it. I'm always reluctant to divulge intimate family matters, but I've determined to be candid in this book, so I shall. I am a visceral person by nature. I act on instinct quickly without pondering possible disaster and without indulging in deep introspection. This quality can work well in business where instinct counts and

where one must be able to risk and take immediate action, but the same quality can be an irritant in personal relationships. I was moving steadily forward and all the progress brought with it a great deal out of activity that neither interested nor in many ways included Joe. Joe is her husband. This is going to lead to divorce. Says when he wanted to talk, I'd usually be off in another world, thinking, projecting, planning my thoughts on a dozen projects, my mind a world. I was busy building a business. I was single minded in the pursuit of my dream.

Business itself was the purest romance for me. So they're going to get divorced in 1939. She considers this her greatest mistake. She winds up fixing her mistake. They're going to get remarried and they're going to be married for over 50 years. And there's an insight that she has here that I think also Sam Walton realized as well that I want to tell you about one second. But she says we were never to be separated for longer than a few days ever again. We always till the day he died. That day was the blackest, saddest day of my life, had each other to hold and to talk to.

So Joe and I were remarried this time forever, but with a few changes. Now, this idea in this point is really important. She makes it a family business for these obsessed, obsessive entrepreneur types like a Sam Walton, like an Estee Lauder, like my friend Justin, who I was just talking to this about. You want to spend so much of your time. I'm the same way. You want to spend so much of your time building your business. One way to not have it absolutely destroy your personal life is to involve your family in that business. And so Estee Lauder convinces Joe to give up his business, which wasn't doing as well, and come help her with the Estee Lauder business. And so I was telling my friend Justin about this because he's doing the same thing. His wife is going to come into his business so they can dedicate a lot of time to the success of the business, but also spend time together. And so when this book is published, right, this book is published in 1985. It is still considered a family business. It

doesn't go public, I think, for like another 10 years after the fact. So Estee is obviously leading the company. Her husband helps her. Her son is involved. Leonard, the older son, is involved at a very young age. And then they have a second son like 10 years later, you know, this myth of the overnight success. And since success, she says it does not happen that way. I cried more than I ate. There was constant work, constant attention to detail, lost hours of sleep, worries and heartaches. Friends and family didn't let a day go by without discouraging us. Despite all the naysayers, there was never a single moment when I considered giving up. That was simply not a viable alternative. I had a secret weapon. This is very fascinating. Keep in mind, we're in 19, maybe 1940s at this point. I had a secret weapon. There were in those days before television and high gloss advertising,

only two key ways to communicate a message quickly. The telephone and the telegraph. I came up with a third and it was potent. Tell a woman. Women were telling women. So word of mouth was her base. That was her initial distribution. Women were telling women. They were selling my cream before they even got to my salon. Tell a woman was the word of mouth campaign that launched Estee Lauder cosmetics. And it's something she's going to use over and over again, as we'll see. And she makes another point. In addition to this, there's just no way she's going to quit. But she says, I knew there was a business in beauty as long as there was a woman alive. Every day I touched 50 faces. So I think by now you've heard her say a few times

that she was obsessed with beauty and obsessed with details. And this is a combination of the two when she's deciding what the packaging, what the jars of her cream will look like. And so this is how she makes the decision. First of all, I reasoned, where would my jars sit? In every woman's bathroom, naturally. Second, I knew that I wanted every woman to remember whose cream it was that was making her look so fresh and lovely. The name would have to be embedded right on the jar. Needless to say, the jar had to be beautiful.

And this was the hard part. It couldn't clash with my customer's bathroom decor. Having obtained sample jars, my research consisted of matching the few colors to which I had narrowed my choices to wallpapers in every guest bathroom I could manage to visit. Every time I went to a friend's house or an elegant restaurant, I would excuse myself from the company, visit the bathroom, and match my jar colors against a vast array of wallpapers. There were silver bathrooms, purple bathrooms, black and white bathrooms, brown bathrooms, gold bathrooms, pink bathrooms, even red bathrooms. Which color would look wonderful in any bathroom? I deliberated for weeks. I spent an inordinate amount of time

freshening up. People must have been worried about my long absences. And so eventually she has her eyes set on growing out of beauty salons and into Saks Fifth Avenue. And she says that she needed a larger marketplace, the great department stores, because of the new phenomenon of charge accounts. At the beauty salon, her customers would have to pay for the merchandise with cash. And some of the women that didn't have enough cash on them at the time would ask her, well, do you have a counter at Saks Fifth Avenue?

And I could just add it to my charge account. And so what she's about to do here, she's going to repeat at later stages as she's building her business, but she wants to break into these stores through the ground up. And you also see why earlier she thought that persistence was the most important trait for an entrepreneur to have. Says my name was not exactly unknown at Saks Fifth Avenue. The tell a woman campaign had already resulted in hundreds of phone calls from women asking for my products. The store was beginning to wonder about me. The enthusiastic phone calls from my own clients were having an effect.

So she goes and talks to the cosmetic buyer, this guy named Mr. Robert Fisk. And he says no a bunch of times. And he says he finally acceded to my millionth request. He gave me a small order for approximately $800 worth of merchandise. Hallelujah! We decided to send my own customers and all the people with charge accounts at Saks a small elegant white printed card with gold lettering that read Saks Fifth Avenue is proud to present the Estee Lauder line of cosmetics now available at our cosmetic department. And this is another example of that big thing starts small. Did we have 100 wonderful products?

No, we had four. But she had a lot of confidence in those four products. And you had to because this is where she goes and she's going to invest all of her savings. Previously, she'd been making all of her products at home. And so they wind up getting their first, like, laboratory slash office. It was a former restaurant, and they had to pay six months' rent in advance. We swallowed hard and signed the lease. On the restaurant's gas burners, we cooked our creams.

We did everything ourselves. Every bit of work was done by hand. Four hands, to be exact. Joe's and mine. We stayed up all night for nights on end, snatching sleep in fits and starts. And then she talks about the fact that breaking this mammoth barrier into retail for the first time

was one of the most exciting moments that she'd ever known. And so by building up all this goodwill over years and years and years of developing her customer base, literally one at a time, then also doing this direct outreach campaign to her customers, but also Saks' customers that she just described, here's the result. All the people to whom I had given samples, all the people who had been telling other people, all those people appeared on opening day at Saks Fifth Avenue. In two days, we sold out. The fun was about to start. And with that came the endless work, the endless traveling, the endless streams, rivers, tides,

torrents, oceans of words I would utter in praise of the products I knew were the cream of the crop. I was a woman with a mission. I had to show as many women as I could reach, not only how to be beautiful, but how to stay beautiful. On the way, I hoped in my secret heart to find fame and fortune. It was 1946. That is the official founding of the Estee Lauder company. She's around 38 years old at the time. And now she's off and running because when she's in one Saks store, she's going to expand to other Saks stores. If she's in a bunch of Saks stores, that makes it easier to expand into other department stores. And she just has a lot of great, I really feel like great advice and great lessons for future generations of entrepreneurs. This one, this one story is about the importance of never underestimating a customer's desire. It was 101 in the shade in downtown San Antonio, Texas, and I was making

my first personal appearance at the Estee Lauder counter in an elegant department store. This is something she would do. She would travel all over the country and launch. She'd spend like a week or two there, launch every single store personally to make sure that all the people are trained right and they were doing things to up to her expectations. Slowly, a woman made her way towards us. She was short, swarthy, and definitely out of her element. She had no shoes and two gold teeth. She stopped directly in front of the counter. Then she pointed to one jar and looked up expectantly. I was about to assist her when the salesperson tapped me on the shoulder. Not her, Mrs. Lauder. Don't waste your time. She's

not going to buy anything. I know her type. I whirled around. Since when do you know how much money she has in her pocketbook, I asked. I went to work. First, the cleansing oil, which I patted on and immediately took off. Then the cream pack. Then the super rich all-purpose cream. I worked all of it in and then removed the excess and then handed her a mirror. She stared and stared and then smiled. She couldn't speak English. I couldn't speak Spanish. Still, at that moment, I felt such a bond with that woman and she and I both marveled at the miracle of makeup. You know the ending to this story before I write it. She bought two of everything I'd used on her face and the next day her relatives did the same. I never forgot her. She symbolized so much for me.

Never be patronizing. Never underestimate any woman's desire for beauty. That proud woman embodies my entire philosophy. How bad do you want it? I would open each store myself. I might have to travel by bus, train, or donkey, but I'd be there for a week to train the salespeople, to set out the merchandise, and to create the aura. And then that was another description of

this free sales, this free sample sales technique that she pioneered, the free makeover she just gave that woman with no shoes and gold teeth, the free gifts she would give with purchase, the free gifts sometimes without purchase, and what this, this was the engine that drove her business. The reason to appear at my counter was the gift to the customer the free something that would sell everything else it sounds so simple doesn't it i'd have to agree it was simple most good ideas start in simplicity so much so that everyone wonders why no one did it before the sample was the most honest way to do business you give people a a product to try. If they like it, they buy it. They haven't been lured by an advertisement, but convinced by the product itself.

This is so smart, what she did here. And again, this is instinct. She just knew this to be true. We took the money we had planned to use on advertising and invested it instead in enough material to give away large quantities of our products. It was so simple that our competitors sneered when they heard what we were doing. Today, even the banks are copying us. And so it's obvious as you go through her life story that, especially at this point in her life, she's acting with this insane

sense of urgency. And so she said that the fact that she started business when she was older, she thought that was a distinct advantage. And I love the way she describes this. I started late. I didn't have the time for waiting. Women of a certain age are seasoned enough to bypass certain temptations. They can focus on their interests more steadily than their youthful counterparts. It takes a certain tunnel vision, the ability to look directly ahead. And older women are not quite as easily distracted. They are usually more successful when they have an advantage of years. And then Estee

Lauder is just relentlessly resourceful. How many people are willing to put in this type of effort? She's going to recruit customers one by one. And I would make the argument after this that she's actually not recruiting customers one by one. I'll explain what I mean. In the early days, I spent an endless amount of time riding the rails. So she's traveling all over the country by train. The sound of train wheels became background music to my dreams. As I traveled around the country to be present at each Estee Lauder counter opening, I met the women who would one day be my customers. At least I hope they would be. To that end, I never stopped talking to people, not ever. If she sees a woman sitting by herself, she'd go up, say, I'd love to make up your face and over the world, met, touched, and made up

during spontaneous moments. And so my point is like, well, first off, how many people are willing to put in this type of effort, recruiting customers one by one? But think about that. Some of these people she might've met 20 years ago, 30 years ago, they're still writing to her. They're still customers of hers. How many other customers have they gone and evangelized and recruited for Estee Lauder? It wasn't a one-on-one. If you're in things for the long term, it's not a one-on-one interaction. It's one-on-one thousand because it's that person and then whoever that person tells and then whoever that person that that person tells, tells.

And that just compounds and grows throughout the decades. And so the relentless resourcefulness doesn't stop there. So you're, you know, you're launching your Estee Lauder. You're inside of a department store, right? You're at the cosmetics counter. Do you think she stops at the cosmetics counter? No, she does not. She goes to the, when she's launching a store, she'll go to every other department.

Say they're selling dresses or hats, whatever the case is. She'll make friends with the people. She'll give them free samples and say, hey, when you sell that hat, mention a new shade of lipstick might look good with the hat. I can make friends with saleswomen selling hats, and she might suggest to her customer that a free makeup at the Estee Lauder counter would enhance the new hat immeasurably. And the dress salesperson might mention to her customer that Estee Lauder has the perfect shade of lipstick to wear with the new dress. I would induce the whole store to speak for my products. More relentless resourcefulness from her.

The point was to keep thinking, to keep placing the products in the public eye, to keep devising new ways of capturing the consumer's attention. During the week I usually spent at an opening promotion, I made it my business never to leave town without seeing every beauty editor of every magazine and newspaper. I brought them samples, made up their faces, gave them beauty advice. I promoted beauty and made friends. There is no such thing as bad time. She's doing this, you know, in a, they were telling her during like economic downturns that she's going to be in trouble. This is her response. There's no such thing as bad times. I kept telling myself there is no such thing as bad business. Business is there if you go after it. A few pages later, more relentless, resourceful behavior. Give full effort always everywhere. No community was too small for my attention. My absolutely full effort. I had ridden, for instance,

on a bus for six hours to open a small store in Corpus Christi, Texas. The store's clientele was modest in size and economics. No matter. Never underestimate people who live in small towns or those with limited budgets. People, no matter where they live or on what their finances will spend if they're convinced of worth. This idea, she repeats constantly, go out, build relationships, make friends, keep these friends for your entire career. This is what I told you Sam Zell and Charlie Munger both said to me in different ways in person. I used every second to make friends and to spread word about our products. This is just fantastic advice. She says, never underestimate the value of an ally. And so one of her early allies was this woman named Helen Blake. And again,

never underestimate the value of an ally. It's a great line. And she's on the phone with Helen Blake. And this is what she says, you know, she would say to me quite casually during a phone call, I think you might want to give Miss Pope, the merchandise manager from Woodward, a call. I was with her yesterday and she mentioned that I looked wonderful and I told her it was due to your cosmetics. And while I just think she'd like to know more about you, that instant I would call Miss Pope. If you do not do important things, when you think of them, you probably never will and you will lose out. Today, they call this networking, this sharing between colleagues. It is one of the most powerful tools in business. Another great line about this. Imagine a business world where you are the seller and the buyers are

your allies. Then go make that happen. Another thing that Estee Lauder does is really smart is she wants to answer this question. How can I get more women to buy their own perfume? And her answer to this question is genius is going to wind up launching this giant business line for them. And so Estee Lauder had studied Coco Chanel. She quotes Coco Chanel multiple times in this book. At the point she's writing this book, Coco Chanel's perfume, Chanel No. 5, is wildly popular. But Estée realized, like, perfume is a very high margin, very expensive product. But at this time, women don't buy it for themselves. It's like a man buys it for a woman to mark a special occasion like a birthday, an anniversary, things like that. And so she asked the question, okay, well, how can I get American women to buy their own perfume? How could I get the American woman to buy her own perfume? I would not call it perfume. I would call it youth do a bath oil that doubles as a skin perfume. That would be acceptable for them to buy because a woman would buy her own bath oil, right? They're all taking baths. A woman could buy herself a bottle of bath oil the same way that she'd buy

lipstick without feeling guilty, without waiting for her birthday or anniversary. And the result is something she says was a mini revolution. This is why. Instead of using their French perfumes by the drop behind each ear, women were using youth dew by the bottle in their bath water. It doesn't take a graduate school business to figure out that meant sales. Beautiful sales. In 1953, Youth Do did about $50,000 worth of business for us. In 1984, that figured had jumped to over $150 million. One product in a family, remember, this is family-owned business in 1984, Okay. One product line from one question three that she asked herself three decades earlier is generating over 150 million in revenue a year. So I want to go back to her idea about the importance of making it a family business.

She was completely enraptured and obsessed and completely this idea taken hold of her building this company. But she says, I refuse to either choose business or family. I wanted both. And so this is a little bit about how they structured the business, not only between themselves, husband and wife, but also, more importantly, I think, their young kids. And I think the experience that they gave them, you fast forward now, both of her sons are still alive. I think one is 91 and one is 80. And they're both multi-billionaires as a result of this decision. Remember going back to the very beginning, the accountant and the lawyer, don't do this, don't do this. Thank God Estee didn't listen to anybody but herself. And you fast forward 80 years later and look at how she changed the trajectory of her entire family. So as the business grew, we cared very much about involving our sons. Leonard worked at the office every day after school. He delivered packages. He was our first billing clerk, and he would type up every invoice. This is when he's in high school, by the way. And then he'd work full time for us or with us during every summer. After high school, he went to the Wharton School of Finance at the University of Pennsylvania. And

then after that, he went to Columbia Graduate School of Business. All while in college, we had been sending him copies. This is such a great idea. All while in college, we had been sending him copies of all the correspondence at Estee Lauder. So things like notes from distributors, deals lost or made, letters from customers, financial statements, positive and negative, were all forward to him at school. And it was around this time where they get an acquisition offer and they're like, well, we received an offer to sell the business for a million dollars. You know, we're in 1950s. And so they asked their son, you know, what should we do? And I think it's obvious Estee didn't consider selling for one

second. But he said, you know, a million dollars doesn't sound like too much. We should keep going. And today the market cap is somewhere around $30 billion. And then when Estee wants to expand into Europe, the way she does it, I think, is really smart. So she says, I'm going to start with the finest store in London, which at the time was Harrods. And she thought, if I could get my products inside of Harrods, then all the other great stores in Europe would follow. And so she goes and pitches the buyers at Harrods. The first meeting, the buyer is simply not interested. And so Estée does exactly what she does when she's in town to

launch anything, even though at this time she was unsuccessful getting into her products in there. She goes and she says a little media attention was called for. I visited the beauty editors of various magazines and she convinced the beauty editor at Harper's Bazaar to write a piece about her products. And they agree. But then they ask her, OK, well, what store in London would are your products available? And she says, my products are not available in London. And she replies, OK, that's fine. I'll write a piece saying that Estee Lauder's cosmetics will be coming soon. The article comes out. It's well received. Estee goes back to the buyer at Harrods. Again, I went. Again, the answer was no. There was no space at this time. There was no call for my products. This wasn't the right time of year. Maybe another time. I had to keep trying.

I stayed in England another month, visiting every beauty editor to make my name known. I was getting write-ups, but no order from Harrods. The next year, I go back to London and I go back to Harrods. The buyer was not quite as hostile at this time. She says, let me tell you, I have no room, but as I told you before, but perhaps I could take a tiny order and put it in with the general toiletries. It won't be next to the good cosmetics. That you'll have to understand. It was not a victory yet. I visited every one of the beauty editors again to remind them of me. Another round of makeups, another round of samples. Do you think you might write another piece? I asked them. Now they were in London at Harrods. The articles

appeared. Customers also appeared. Women began asking for Estee Lauder. The Harrods buyer was reluctant to notice, but she had no choice. In the flush of a good week's sales, I summoned up courage to ask if she could give me a more important counter. Oh no, she said. Other counter space is definitely not available. That's fine. Six months later, I made a third trip to London. I met with the buyer again. Well, we seem to have many London women asking for your products, she grudgingly admitted. I think I'll give you a small spot at a more prestigious counter. And that is how Estee Lauder came to Europe. This relentless way that she follows up, this relentless way that she draws attention to her brands and gets other people, other customers to ask, you know, through the media, through her own clientele is something she does over and over again. So she wants to expand into Canada. The buyer at this department

store is like, no, like the cosmetic department is spoken for. We have all these exclusives. And she's like, OK, well, what? Not a cosmetic. You need bath oil. Why don't you stock my youth do? So she says you need a bath oil. Women would love to come into a department store instead of a drugstore to buy it. Look, buy it on consignment. If you sell it, fine. If you don't, you've lost nothing. Oh, okay, he said, but send me just a few bottles and only the oil. You know she's not going to do that. So I was wrapping up the bath oil to send to Canada. I decided to put a few creams in with a note. Take these on consignment also. You certainly wouldn't want to have to say no to any woman who asks if you have anything else in this line, right? And his response was, what about

our exclusive with other companies? What about my lack of space? What about, what about, what about? He sputtered when I spoke with him later on. Look, you must go with the trend and with the world. Everyone is using the bath oil and these creams in America. You don't have to pay me for them until you sell them. Oh, okay, fine. he said in resignation. When I came to make a personal appearance at the opening of Estee Lauder in Canada, my sales department had sent everything. The bath oil, the cologne, the cream, little boxes of powder I could give away as gifts. We sold out of everything. The buyer came down to see me after three or four days. How did you do this, he said. You don't sell cosmetic, he responded. You sell yourself.

It all goes back to what she said. I've never worked a day in my life without selling. If I believe in something, I sell it and I sell it hard. She has an entire chapter on selling. It is not enough to have the most wonderful product in the world. You must be able to sell it. One person with definitive ideas and pride in their product and a hands-on approach can lay the foundation for a strong business. Creating a great product is an accomplishment. Making people aware of its existence, let alone getting them to try it, is sometimes harder to do than to create it in the first place. Combine this with her unique philosophy about building a business that's authentic to her. Goes back to what the gentleman in Canada was saying,

oh, you don't sell your products, you sell yourself. This is what Estée said, each business person must find a style, that voice that grows clearer and louder with each success and failure. Observing your own successes and failures makes your inner business voice more sure and vivid. She continues, and she states, it. Today, the same firms are spinning off all the subsidiaries because they weakened instead of strengthening their original product. The voice grows stronger with each success. Remember that company building philosophy voice is what she's referencing. The voice grows stronger with each success, each observed failure. All one has to do is listen. Business is a magnificent obsession. I've never been bored a day in my life, partly because as a true business addict, it's never been enough

to have steady work. I had to love what I was doing. Love your career or else find another. Soup, glue, or beauty can all be packaged in jars, tubes, and bottles and all vended like any other commodity. The big difference lies in the vendor. The big difference lies in you, not the items to be vended. Even excellent glues, soups, and beauty products can die in the marketplace if the vendor isn't passionate and clever. Develop your own style. Our unique style has come from years of trial and error. And this is two pieces of advice I think go well with each other. Visualize and then work like hell to make your visions a reality. Visualize. If in your mind's eye you see a successful venture, a deal made, profit accomplished,

it has a superb chance of actually happening. Projecting your mind into a successful situation is the most powerful means to achieve goals. If you spend time with pictures of failure in your mind, you will orchestrate failure. Countless times before the event, I have pictured a heroic sale to a large department store every step of the way, and the picture in my mind became a reality. I visualized success, then created a reality from the image. Great athletes, business people, inventors, and achievers from all walks of life seem to know this secret.

Sounds willy-foo-foo. I'm just telling you it's in a bunch of the books. Bob Noyce, founder of Intel, Edwin Land, Steve Jobs, Arnold Schwarzenegger, Estee Lauder, they all did this. They all talked about doing this as well. And then combine that with working like hell to make your dreams a reality. I tend to work nonstop during the day, usually seven days a week. And then at night, she goes out at night about five times a week on average. Why? It helps my business. It keeps me in touch with the people who buy and sell my cosmetics. It keeps my finger on the pulse of my customers who are also the kind of people I choose as

friends. It's very useful to stay in close social contact with business associates. Those who are connected with my business life, store owners, buyers, media people, movie stars, young career women are all involved on another level in my social life. And then finally, she has some parting advice for you and I, which is focus and don't quit. First comes the wish. Then you must have the heart to have the dream. Then you work and work and work. From where you sit, you can probably reach out with comparative ease and touch a life of serenity and peace. You can wait for things to happen and not get too sad when they don't. That's fine for some, but not for me.

Serenity is pleasant, but it lacks the ecstasy of achievement. Living the American dream has been intense, difficult work, but I couldn't have hoped for a more satisfying life. I believe that potential is unlimited. Success depends on daring to act on dreams. How far do you want to go? Go all the way. Within each person is the potential to build the empire of your wishes. And don't allow anyone to say that you can't have it all.

I've always believed that if you stick to a thought and carefully avoid distraction along the way, you can fulfill a dream. My whole life has been about fulfilling dreams. I keep my eye on the target, whatever that target was. I've never allowed my eye to leave the particular target of the moment. Whether your target is big or small, grand or simple, ambitious or personal, I've always believed that success comes from not letting your eyes stray from the target. Anyone who wants to achieve a dream must stay strong, focused, and steady. You must expect and demand perfection and never settle for

mediocrity. If you push yourself beyond the furthest place you can go, you'll be able to achieve your heart's dream. And that is where I'll leave it for the full story. Highly recommend reading the book. If you buy the book using the link in the show notes or available at founderspodcast.com, you'll be supporting the podcast at the same time. That is 361 books down, 1,000 to go. And I'll talk to you again soon.