Founders - #51 Wild Company: The Untold Story of Banana Republic

Episode Date: December 17, 2018

What I learned from reading Wild Company: The Untold Story of Banana Republic by Mel and Patricia Ziegler----For every business, there is an appropriate scale [0:01]Fundamentally Unemployable [5:18]the prehistory of Banana Republic [10:02]"We didn't have any money, we didn't have any technology, and we didn't have a plan." –Jack Ma [14:30]A republic is born [18:13]when something is not selling, increase the price [20:45]relentlessly resourceful [25:45]finding assets hiding in liabilities [28:30]the catalog! [30:33]Eddie Murphy on why you shouldn't have a backup plan [36:40]media was the initial distribution strategy [42:15]Understanding the internet before the internet existed. A lesson on publicity/attention [45:22]when all else fails, expand [51:05]selling the company [56:24]the end of freedom [1:04:40]Misfits, quotes from Steve Jobs and what this has to do with the podcast industry [1:08:00] ----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

For every business, there's an appropriate scale. That one we got wrong twice. But I'm not complaining. We actually got what we wanted. Today we are happy and grateful. Our kids are in their early 20s, and although they've heard from a lot of other people that their parents started Banana Republic,

they haven't heard much about it from us. Kids love to look forward, so we did very little looking back. We tell this story now for them, hoping they will one day find the time to read it. We also hope our story will suggest to restless creative people everywhere that creation begins with creating the life you would like to live without fear or inhibition. It's never a straight or smooth road. But in our experience, it was the bumps and the breakdowns, the mishaps and the wrong turns that stimulated the breakthroughs we needed to get where we wanted to go. A special bonus for us in the process of writing,

we got to do it together and it brought back all over again how much fun it was. I jump back into the book, first of all, welcome to Founders. If you're new here, the premise of this podcast is straightforward. Every week, I read a biography of a company builder and then share some of the things that I learned. So first, I want to talk about how I found this book. I actually saw this really useful thread on Twitter where somebody was asking for recommendations of biographies of founders. And I went through the list and I saw a bunch of the ones that I've read already and made into previous founders podcasts but then I saw this one and it said Wild Company the story of starting and scaling Banana Republic so I was like oh that sounds interesting I immediately downloaded the Kindle sample on my iPhone, read the sample, immediately downloaded the book and devoured it within two days. Not only are Mel and Patricia gifted founders, but they're fantastic storytellers as well.

OK, so three quick things before I jump back into the book. Number one, for those who are asking how to get in touch with me, my Twitter is David Sunra One. Founderspodcast.com has been updated, so you'll find my Twitter linked below every episode now. And it's also in the show notes if you want to reach out to me. Twitter is probably the best way to do that. Number two, something I failed to mention last week, but just a reminder. If you like this podcast, if you're a regular listener, if you leave a review on Apple Podcasts or anywhere else you listen and you take a screenshot and email it to foundersreviews at gmail.com, I reply back to every email

with a private RSS feed, a private podcast feed of podcasts that I create exclusively for those that have taken the time to actually review and help spread the word. So almost everybody that listens to this podcast listens to it on Overcast or Apple Podcast. So on Overcast, you can't leave a review, but you can recommend podcasts. So you have like a little gold star there. So once you recommend,

just find an episode that you liked. Once you press that gold star, it'll go from clear to gold. And if you take a screenshot, send that gold star, it'll go from clear to gold. And if you take a screenshot, send that to me. I will reply back. So, so far I've done two reviewer only podcasts. One was on Max Lepchin and it focuses on the beginning time of PayPal, which is very fascinating. And then the other one is called the Steve steve we knew which is based on um ed catmull was the founder of pixar as a person that worked the longest consecutive time with steve jobs he worked with him for 26 straight years up until steve jobs death so it he tells stories uh in his book that i pull out and and turned into a podcast um about just what it was like or knowing steve jobs for

26 years and i've read two books on Steve Jobs, both of which I've turned into Founders Podcast. And I haven't heard these stories anywhere else. So if you want to listen to this podcast and help me out at the same time, leave a review. If you're listening on an app that doesn't have a review, some of them, they have stars, they have hearts, they have all different kind of mechanisms.

Whichever one that that app does is fine with me. Just take a screenshot, foundersreviews at gmail.com. If you've already emailed me, I responded, I just checked yesterday, I responded to every single email so far that I've gotten. So if you didn't get a response back from me, make sure you email me or you can get in touch on Twitter. And three, after what has been three months, I finally figured out a better name for what I was calling the members program, which is how you can support this podcast and you get an

extra podcast each week. But I will talk about that and some other things that have been on my mind at the end of the podcast. So let's get to why we're all here. So I'm just going to jump into the book and move through chronological order. Again, this is not meant to be a review or a summary. It's just the things that stuck out to me, the things that I highlighted and left notes on while I read the book. So I'm going to start at the beginning. And throughout the book, Mel and Patricia constantly refer to themselves as unemployable. And after reading the book, I would say that they're fundamentally unemployable. And we're going to get into why would you even start a business in the first place.

So it says, if you took $1,500 bills and laid them end to end, they would stretch all of 750 feet. That gets you about three quarters of the way down across town block in Manhattan. We had to stretch those dollars into a lifetime, a lifetime free of ever having to work for anyone other than ourselves again. So something that we constantly talk about on these podcasts is let's try to figure out like why, not only for yourself, like why do you feel the need to start a company, but why are these, why are the people that were studying, why did they start the company? And, you know, there's several different buckets usually that people fall into. I would say the number one is this, is being in control,

being able to dictate how your life goes, choosing what you spend your time on, choosing what you work on. And then secondary, you have all the things. Money is, of course, a motivator. Youator. The richest people in the world are successful entrepreneurs. Another one is some people, which I think is the most dubious of them all, is like fame or adulation from other people. But I do think the common theme through almost every single person that we've studied so far has been this, that they want to be in control and they want to choose how they're going to spend their time. And so I want to talk a little bit

about how they came to this realization. So at the time they're working at the San Francisco Chronicle. Mel is a writer and Patricia is an artist, an illustrator. So this is them describing the job environment. This is the San Francisco Chronicle in the 1970s. A union shop. Every reporter hired was required to join and pay dues. The prevailing mentality in the city room favored seniority over initiative. Plum assignments went to tired old-timers who hacked out stories between swills of Jack Daniels. If I happen to sneak a good story past the city editor and into the paper one day, I was punished the next day by being handed a pile of obituaries to write. And as you can imagine, picture yourself in that kind of environment.

This is his takeaway. I knew I had to get out of there. Of the 50 or 60 people working there, many of them were our friends. Most had been there considerably longer than we had, some even for 20 or 30 years. Not going to happen to us, we adamantly agreed. So the note I left myself is, I'm out of here. Already we're amongst most people. I can't tell you how many examples I've heard where, you know, I'm out of here already rare amongst most people.

I can't tell you how many examples I've heard where, you know, people are dissatisfied with what they're doing for a living. And usually what comes next is not a solution to how to get out of that or taking a risk. It's a reason why they must endure and continue to waste away doing work that they don't find enjoyable or they're not passionate about. And so Mel and Patricia are not these people. They jump and they jump with no safety net. So it says, oh, so one thing about the book that I'm not really going to designate here is they go back and forth. So Mel will write like a page and Patricia will write a page and they're telling a story from both sides. You'll kind of figure out as I read who's writing based on the context, but for all intents and purposes, for the purposes of this podcast, I treat them as one individual

because that's the easiest way for me to convey what's going on in the story without, you know, you having already read the book. Okay. One day I came home from work and shot Mel a playful, I've got something to tell you look. He had returned from an earlier shift and was on the couch reading. Looking up, he asked, what? Guess what? I could not wait to tell him. I just quit.

No, he replied impishly. Impishly? I think that's how you pronounce that word. I was going to surprise you. So did I. We weren't panicking. We were too young and optimistic for that. We were interested in money only so it could buy us the freedom to paint, write, and travel.

So at this time, they decide, hey, let's quit our jobs. We hate it. We're going to try to make it work just by being freelancers. But they do realize the utility that money has. So they're going to be led to this idea of maybe, hey, maybe the way to buy our freedom is to start a business. So it says, Mel came home from the library one afternoon with a copy of Napoleon Hill's Think and Grow Rich, and he tossed it to me. Maybe this is what we need to do, he said. The book prompted three basic questions. So the reason I'm bringing this up is because I think this is very much the prehistory of Banana Republic.

And understanding this prehistory is going to help understand why they made the decisions building the company the way they did. Okay, so it says the book prompted three basic questions. How much money do I want to make? How long do I give myself to make it? How will I make it? We wrote down our answers separately and then compared them. We had both scribbled, to answer the first question, a million dollars. The second question, how long?

Five years. In 1978, a million dollars was a number that any 20-something middle-class American might have dreamed of making. Five years was the longest period we could envision. That both of us had come up with the same number and same timeframe validated our answers. Then we looked at what the other had jotted down as an answer to the how question.

Again, the same. Start a business. But what business? Okay, so I'm going to skip ahead. this is how they get the idea for banana republic mel takes a a freelance writing gig uh for a few weeks in australia and while he's there this is where the story picks up toward the end of the australian junket i wandered off one day into the back streets of sydney and stumbled on a disposal store which is what Remember that part. Because later on, Banana Republic, this is how Banana Republic is going to start.

They have like 80% margins, which is like five times what other retailers like The Gap were experiencing. Okay. Part of the reason was because military surplus clothing was so cheap. And then they also, as we'll see, they're relentlessly resourceful in what they do with the materials. Okay. So one item especially caught my fancy, a British Burma jacket. I had to have it. If only to wear when I landed in San Francisco the following day, I wanted to see

Patricia's reaction. Patricia had exquisite taste and a limited budget, a dichotomy she balanced with a talent for spying gems at flea markets and vintage stores. Most people looking at her thought she maxed out the credit card on Madison Avenue when she had really put herself together for pennies. So now you're going to see how they flip back and forth. Driving home, Mel regaled me with stories of the Outback and the Great Barrier Reef. But my eyes kept drifting from his face to the jacket. The jacket had a message for me, and it didn't take me long to get it.

Here was the business we'd be looking for. Patricia got the same message on her own. Yes. Between us, we had $1,500 in our bank accounts. So think back to the start of the book and the start of the podcast. They talked about if you laid out $ $100 bills, how far would that get you? That's where that number comes from because that's all they had. We could use it to start a company that would sell jackets like the British Burma jacket and anything else we could find. And then I highlighted this and underlined it. Therein lay the full and complete business plan of a writer and an artist who had quit their jobs

to make it on their own. So that's it. That's the extent of their plan. There's a basic idea. Okay, let's not plan too much out. Let's just figure out how we're actually going to do that. So they have the idea and they say, what should we name it? That didn't take me a second. Banana Republic popped into my head the moment she asked, what better proverbial source of military surplus than politically unstable tropical countries? I fantasize that routine coups produce an abundance of disposed uniforms from toppled regimes. I could not have been happier. And this is really important. And there's actually a lot of good stories in the book that I think the fact that they

were journalists and writers and worked in media before they started the company actually helped serve them well as founders. And it says the name was not only catchy, but in 1978, it was jarringly irreverent as well. If years in journalism taught me anything, it was to grab them and get their attention. Okay, so the note I left myself was, why did the company survive? That's a question that Jack Ma was asked. And this is from, if you listen to Founders number 32, which is about the founding of Alibaba.

And Jack Ma said, we didn't have any money, we didn't have any technology, and we didn't have a plan. And the reason that is such a famous quote is because he's taking all the things that most people would feel negatives about building a company and turn it into a positive. When I read this section, which I'm about to read to you now, that's the thought that jumped into my mind. He says, the name was the easy part. Starting a company wasn't so easy. Neither of us had any experience in business or had ever taken a single He says, asset we had was our own oblivion. And I love, absolutely love this sentence here. That would keep us blissfully ignorant of the bewildering and arbitrary impediments that would entangle us until we became so embroiled that quitting was no longer a possibility. Okay. So they have the idea, they have the name. Now they're like, okay, well, what are we,

how are we, like, what are we going to to sell so this is a story about how they bought inventory for the first time i'm skipping over large parts of course i would have to um and so they're in a military surplus uh warehouse i would say somewhere in san francisco and the guy it's run by this guy named zim so it says i sense that if we walked in cold zim would not know what to make of us. We needed a plan. Patricia devised one. We would pose as rich dilettantes. She would wear an expensive-looking dress and her highest heels to convey the impression that she was a trust fund heiress looking for some interesting pieces to supplement

a boutique she was about to open, and I would be the indulgent husband. One of the reasons I enjoyed and read this book so quickly is because they're just funny they like they're writing and not only the great writers but like just there's just all kinds of weird funny stories in this book similar to like this so they just have tons of personality and it definitely shows um so it says what are these she asked spanish army shirts, Zim said. You seem to have a lot of them, Patricia said. And that was a signal for me to take a closer look. The fabric was finely woven. There was an exotic parachute emblem on the sleeves.

You can have them for $1.75 each if you take them all, Zim said. We haggled and settled on $1.50 each. The car loaded. We drove home to Mill Valley. Half of our money in the world invested in 500 used Spanish paratrooper shirts stuffed in the trunk and piled to the ceiling on the back seat. So yeah, they're definitely risk on. And this is a story of their first sale and a republic is born. The shirts had not been washed since the Spanish paratroopers took them off.

The laundry we frequented in North Beach was out of the question. It would charge more money to launder the shirts than we paid for them. The only economical solution was to wash them ourselves, one load at a time. We finished only a few loads before we had to take a break and prepare for a long-arranged dinner party scheduled that night at home. Our friend Herbert Gold, the novelist, was one of our guests. When Herb asked the way to the toilet, we directed him downstairs to the only bathroom in a broad, impish smile, and interrupted the patter at the dinner table by presenting, as a matador might hold up a cape, one of the Spanish paratrooper shirts. What is this? he demanded in his deep, baritone voice. I told him.

I want one, he said. How much? The words, take it, Herb, it's yours, were about to come off my lips when Patricia interjected, $6.50. But he's our friend, my eyes pleaded across the table. Her eyes brushed me off. Plus tax, she added sweetly. Banana Republic was born. Okay, so that's their first sale. They still have a ton of these shirts left. So they're like, okay, where are we going to sell them? They scour the city. They find out all these, they find it like a dirty old flea market. And they're like, okay, we're just going to set up. We're going to

rent a booth and this is where we're going to sell our wares. And so this is, again, remember at the beginning, or I guess what was the beginning of the podcast, but the end of the book, talks about it's not a straight line. Like the problems we had, the bumps, the breakdowns, the mishaps, the wrong terms, you have to go through those to stimulate the breakthroughs that you need. Well, this is the very – today, Bonaire Republic, I think, is doing like two – I think a few billion dollars in sales, if I'm not mistaken. By the time they sell the company and they leave, it's's doing 250 million a year in sales in the 80s but like that famous Jeff Bezos quote uh everything starts out it's like the the analogy he uses the acorn turns into the oak tree

this is the acorn so uh it says uh we decided to sell the shirts there this is the flea market over the next few days we washed iron, and folded every one of them. Sunday morning, off we went. Sign in hand. Short-armed Spanish paratrooper shirts, $6.50. There was no lack of curiosity. Many people stopped to touch the shirts and ask about them. But by the end of the day, we had sold barely enough to pay the $30

booth fee. We had a problem. A chronicle, meaning San Francisco Chronicle, a chronicle paycheck flashed in my mind for a second, though I know I could never go crawling back there. But Tricia had a better solution. We need to double the price, she said. The shirts are too cheap. People can't appreciate the value. where they don't even exist, I don't know. But I remember, if you remember in Founders number 45, it was the one on Bernie Marcus, which is the founding of Home Depot. And there's a story in the book and in the podcast where Ken Langone, who's the subject of Founders 46, is set up a meeting between Bernie Marcus and Ross Perot.

And in an alternate history, Ross Perot owns 70% of Home Depot for $2 million. But while they're locking down the deal, Bernie and Ross have a disagreement over the type of cars to drive. Ross did not want Bernie to drive Cadillacs. He didn't think it was appropriate. Bernie stormed out of the meeting being the hard-headed person that he is, that most of the entrepreneurs that we talked about are And he said, you know, I'm like i'm not i'm not gonna do business with somebody that this that's gonna care What kind of car I drive? So he walks out and he asked he said he asked ken. He's like, well, what do we do now?

And ken's answer being a crazy character that he is. He's like, well, we'll just find somebody else to invest in but this time uh, they'll only get 50 for two million well, we'll just find somebody else to invest in. But this time, they'll only get 50% for $2 million. And then Bernie and Arthur Blank, also co-founder of Home Depot, was like, wait, wait, but that's a better deal. And one of the lines Ken comes back with is very much along the lines of what Patricia is saying here, and I love. And he said, now Ken is in the investment, right?

He made his money on basically venture capital, investing in companies, etc. Bernie's a retailer. So Ken is explaining him in a very succinct way, what's the difference between those two businesses? And he says, in your business, if something's not selling, you mark it down. In mine, we mark it up. And turns out, as long as you're, you you're not a commodity and you have a unique product which is what banana Republic was at the beginning that works and we're gonna see here the next Sunday we went back to the same flea market this time Patricia wore herself wore a Spanish pair of trooper shirt belted at the waist with tighter jeans and heels she also dressed me in one with slightly with the collar slightly raised and the sleeves, of course, rolled up. Same table,

same spot, same everything except a sign, which now read, short arm Spanish paratrooper shirts, $12.95. It was a new day. By the end of it, we sold more than 100 shirts, 102 to be exact. $12.95, 100 times $12.95 equals $1,390. We had a good laugh. No one would ever believe us. Okay, so after that success, they don't rest on their laurels. Remember, they have no money, so they have no other options. And so this part made me me chuckle too because i just don't think how many people are going to make the decision they're about to make here and the reason they they make it so it says we decided to fast track with a thousand dollars in the bank banana republic needed a store it's just like oh it's just i don't hopefully i'm not the only one that finds this humorous. All right. Um, so they, they find this like tiny rundown. They, they, they talk a lot in the book. Um, and some of this, a lot of this is not the podcast about, you know, there's a lot of conventional wisdom that just didn't apply to

them. They just could not afford that. Like location, location, location. Well, we have a thousand dollars total. Like we can't get the best location. So they wind up subletting like a small retail spot for like $250 a month in a bad neighborhood. So this is their thinking right after they found the store, but what do they need to do? So it says it was early November. We made a list of the things we needed to do. Number one, find merchandise. We had only around 390 Spanish paratrooper shirts remaining. And besides, even we knew that you can't have a store that sells only one item. Two, print a catalog. This is a really, really important part. This might have seemed a bit excessive for our budget, but being an artist and a writer,

we needed the comfort of doing at least something we knew how to do. Also, we must have realized that if we had any chance of selling this stuff, we had to explain what it was. I'd write the catalog and Patricia would draw it up. Three, decorate the store, though there would be little money left to do that. Four, make a sign and hang it. The more we thought about it, the catalog struck us as a key to the whole endeavor. I would definitely agree with that.

What we were doing was unlike anything we'd ever seen in retail, and people would need a little help from us to catch on. Otherwise, who knows? They might think we sold bananas. Okay, so they go to the bank to try to tackle the first problem, which is finding more merchandise. They go to the bank for a loan. You know, of course, the bank is like, no. You have no experience. You have no money. No,

we can't do this. But if you're in retail, why don't you just get terms? And they're like, what is that? And they explain that there's a lot of wholesalers, which will give you 30 days. You can get the inventory right now, and you have 30 days to pay them. So again, this is almost every example from here on in is just going to be more examples of how Mel and Patricia are relentlessly resourceful. So picking right back up in the book, 30 days credit would do just the trick, we decided. It would give us a chance to get to the store stocked and open,

put a catalog in the mail, and start selling before we had to pay. All we had to do was talk to Zim into giving us terms. But if terms were common practice and we hadn't even thought to negotiate them in our initial transaction, why would Zim take anything less than cash on the spot from us now? I decided the best plan would be to get somebody else to give us the terms first. Very, very smart. Only then might we have a chance to talk the tough old geezer into doing the same. I remember that at one point Zim had asked me,

where else have you been? Instinctively, I knew it would be a bad idea to tell the truth and say nowhere. I just shrugged and implied that we'd been around. Well, let me give you a little piece of advice, Zimblustered. Don't buy anything from that swindler Shapiro in Sacramento. I don't trust that son of a bitch as far as I can throw him. I haven't talked to him in 10 years.

We headed to Sacramento to find Shapiro. So they go to Shapiro. They find him. He's got a bunch of good stuff too. He's basically a competitor of his own. And they select the inventory. When they get to the part where they need to pay, we're going to pick up there. How are you paying? Shapiro asked as he finished writing the invoice.

We usually pay net 30, I said. You got a DMB? Dun & Bradstreet is an agency that provides credit information to businesses. I was still formulating an evasion when Patricia said, the family prefers not to reveal its assets. So who else do you buy from then? Shapiro said. Zim, we both said at the same time. That stingy bastard gives you credit? We both nodded. Well, okay. 30 days, Sign here. Now we were ready for Zim. Okay. So I'm going to be skipping ahead. And this is, there's a chapter named finding assets, hiding and liabilities, which I love that term. And again, that's just another example of being

relentlessly resourceful. And the other note I left myself is you got to go with what you got. Okay, the more we dug, the more I suspected we were unlikely to find any other items as good as Spanish paratrooper shirts. Instead, I found a lot of unwearable items. Remember, all they're focused right now is just on military surplus. I guess at this time, I think it talked about in the book, there's just an abundance of this. And even later on, when Banana Republic was already up and running they went to like uh i want to say london might have been somewhere else in europe i can't recall at the moment and they found like the holy grail like picture five story warehouses in bunches full of

military surplus from World War II. Okay, so instead I found a lot of unwearable items. Arctic pant liners, mosquito nets, mattress covers, sleeping bag liners, and Abestus fire coats. I was growing discouraged, and then I realized that many of these discarded oddities were made of premium vintage fabrics. I could take them apart and make other wearable things from the materials.

The fabric themselves were treasures at below bargain prices. This way we could get some merchandise in time to open. I'll figure out something to do with this stuff, I whispered to Mel. Are you sure? Like they say, when life hands you lemons, you make lemonade. Our best finds continued to be in the underlying fabrics. The bureaucrats who commissioned these items spared no expense in fabricating them in the highest quality materials. They were Spanish army sleeping bags with real sheepskin liners, British army mattress covers made of pure Irish linen, French army firefighter coats lined with exquisite quilted black satin. Even ridiculous Arctic pant liners made of pricey windproof blend of wool and silk chenille.

Since it seemed that nobody else wanted this stuff, we often walked away with it for pennies. There's an adage that journalists on deadline follow, go with what you've got. And did we ever. We brought what we bought, geez, back to the store and dropped it all on the floor to be cut apart and re-sewn into new designs. Okay, so now I want to talk a little bit about this catalog. I hinted a little bit that how

it's probably the cornerstone of their business and undoubtedly wind up contributing millions and millions and millions of dollars in sales. Rubes of retailing we may have been. We had no illusion about one thing. Our eclectic cash of surplus, no matter how much we cleaned it, altered it, and reinvented it, could not tell its own story. Websites hadn't even been dreamed up yet. I appointed myself minister of propaganda. So I want to interject here. So after I read this book, I searched and they talk about it later on in the book, but it's on the podcast where they wrote another book. And it's a book based on after they sell Banana Republic,

a few years go by and they start and sell another company. And that company is the Republic of Tea. It's still around and quite large today. Anyways, they wrote a book about the starting of that company too. And in that book, the entire book is based on, they were three partners. There's Mel, Patricia, and this other guy. And they would communicate the ideas about the business through facts now i don't know if you're younger you're like what are you talking about like keep in mind this is in the 80s like um so they would communicate

writing and then faxing to each other and then somebody came along somebody had the idea they had like a a publisher friend they're like they're reading the faxes like this needs to be a book and so they turn it into a book um and in that book they talk about how they love to confuse companies with countries so what i what i found endearing and it made me chuckle is they don't have you know it's not like i'm a ceo or hey i'm the vice president it's government names and usually like dictators because it's a Banana Republic theme. So like the minister of propaganda, that's the person that's writing the copy editing.

Minister of finance, it's like they do all this other stuff. And I just found it funny that, you know, I never thought about that idea. Like, hey, let's confuse, what if instead of using the normal jargon of a company, let's use it as if it's some kind of banana dictatorship. So I don't know. I thought that was funny.

So this is Mel. He's the minister of propaganda. He's like, I appointed myself minister of propaganda and went to work. So now he's talking about the catalog. However, this time in setting out to go with what I got, I found there wasn't much got to go with, which put me in a position of having to go with what we didn't got, such as the missing hoods on Italian camouflage jackets we'd found. This is so, again, another smart idea here. So on the back of the collar were prominent, they're talking about this jacket they bought, on the back of the collar were prominent horn buttons for hoods that originally came with the jackets. Somewhere along the way, the hoods

disappeared. So in the catalog, they have to explain that right so he says in my copy i was left to conjecture about where they might be still on back order from a factory in turin that had been on strike since 1949 perhaps defects i saw could be worthy sources of inspiration. I typed furiously, never missing a chance to dwell on what was wrong, what was missing, and what made the item useless to the Army or Navy or Air Force that it declared its surplus. So the very first catalog, I forgot the name of the industry. I don't know if it's direct marketing industry or the mailer industry, but the original Banana Republic catalog

wins best catalog ever. And it winds up, the writing and the drawings were so different from anything else going on at the time that it turns into a collector's item. And here's the thing about, you have to, the main priority of a business is to survive. And the reason you have to like the the the main priority of a business is to

survive and the reason you want to survive is because a lot of the profits are very far out into the future so I think they're writing this in 1978 it was so it helped it obviously helped the the the business survive but something interesting from 1985 to 1988, the catalog grew exponentially to the point where they were mailing 30 million of them a year. But before they get to that point, they have to overcome doubts. And so this is initial feedback from friends. This won't work. I personally love this attitude. It could also be something we talk about a lot on the podcasts is this thing where I said, hey, we should have this section called critics don't know shit.

It's not saying that criticism is not valid. It's just saying criticism should be expected in almost every single one of these biographies. There's examples where people are told by other people that your idea sucks. You suck. You don't know what you're doing, it's not going to work. And I would say the most outrageous example of this that comes to mind at the time is Sam Walton was working at JCPenney. His manager told him, you know, it's time to start looking for another career. You're just not cut out for retail. What actually happens, Sam Walton becomes the most successful retailer in the history of the world. looking for another career. You're just not cut out for retail. What actually happens, Sam Walton becomes the most successful retailer in the history of the world. So you see examples like that over and over again. Bonaire Republic is no different.

So they're handing it there. They're really proud of what they built for this catalog. They hand it out to their friends and their friends come back and are like, are you you're not are you expecting to actually sell stuff because no one's going to buy this so it gets them down momentarily mel and patricia talk um they're talking together and the attitude that i love is is what mel is telling patricia he says look it doesn't make any difference anyways does it we can't turn back now it's as if we're swimming across the bay, and halfway across we realize there are sharks circling. We're no safer if we swim back than if we keep going to the other shore. Failure was not a possibility.

Not ever. The catalog had to work. The store had to work. The whole idea had to work. There was no other way. Okay. So in other words, there's no backup plan. And when I got to this part in the book, I'm going to do something that I haven't done before. It's a little odd, but it's just, you know, it's what came to me when I read it. So I need to share that with you. That's the whole

point of what I'm doing here. So I'm going to play something for you. It's on my phone. The sound quality is not going to be fantastic, but there's just certain things that I save like clips or motive. Like sometimes, you know, we always talk about the entrepreneur rollercoaster, how it gives you the highest highs with the lowest lows. And sometimes you need, like I need, at least I'm speaking for myself myself i need like replenishment of motivation or some like listening to somebody else's story about you know just don't give up and this idea that they did not have a backup plan it's like okay they did my our friends didn't like it we like it we're going forward because we cannot go back at this point and this might sound a little weird to other people hopefully it doesn't and hopefully there's somebody out there listening that this actually helps so again I'm going to apologize for the

audio quality, but I think it's useful. And it's this clip I've saved on my phone that it's Eddie Murphy talking to Arsenio Hall. This is probably, you know, 15 years ago or 20 years ago. It looks like from the clothes they're wearing. and he's just got some some some i think good advice that kind of echoes what's happening with mel and patricia here so i'm going to go ahead and play that real quick i think you know you know you if you you know what you're supposed to do deep down inside i think everybody does a lot of people just don't go after it you know like most people start out they say i want to be a this but i'm going to get that to make sure i have something to fall back on and what you're doing is you're setting yourself

up a fade because you're going there's a possibility that i'm gonna fall back and when you put that out there then you fall back but if you just say hey this is what i want to do and you go do it you usually get your stuff the way you want it man so to me what eddie's saying there is the same thing as what uh mel and patricia are saying that um you know the most common route is what he just said he's like oh yeah i want to do this but you know i want to do this but more realistic is i'm going to do this just in case it doesn't work out where you're already giving yourself an excuse or an out to not do what you really want to do. And we're temporary beings. None of us get out of this alive.

Or in other words, like what Steve Jobs says, you're already in the face of death. You're already naked. Like, what do you have to lose? Go live the life you want to live. So I don't know if that's helpful or not. So I listened to it and, you know, there's tons of points where I need something like that to recalibrate myself and realize that you don't have any other option but onward. Okay, so hopefully that was interesting.

I'm going to skip ahead. So another example of being relentlessly resourceful. In order to rush to complete the merchandise, we had forgotten about display racks and shelves. So all this stuff I've been describing is all in the interim before they opened the store. I remembered seeing some wooden fruit crates earlier that morning behind the Mill Valley Market. I asked and I was told I could take them. Mel went in search of dowels and brackets at a hardware store. The dowels were reasonable enough, but the brackets cost more than $35 a pair,

which eliminated them as a solution. There must be something we can use, Mel said when he came back. I looked around and there was a box of old Argentinian belts we had bought from Shapiro, now dubbed gacho belts. We buckled a belt around each end of the dowel and nailed it to the ceiling perfect hanging racks to complete the ad hoc displays we tore the fruit labels off the wooden crates from the mill valley market stenciled on the words imported from banana republic and stacked them against the wall we had shelving. So they do all of these like mini miracles to get open. And then what happens when they open? Nothing. That's the problem. It was a slow start. So here, we're going to talk about that here. If this was the busiest retail season of the year,

we were in trouble. We had miraculously managed to get our merchandise clean, remade, tagged, hung, the store open, and even the catalog printed and mailed in three weeks. But the moment we opened the door, thud. I waited. For the next couple of days, I stood in the store from 10 until 6, waiting for someone to come in. I tried to keep busy rehanging and rearranging the skirts, dresses, and vests into ever new displays.

I also busied myself sweeping the sidewalk out front, straightening stacks of bags and aligning the credit card forms and catalogs behind the counter. Waiting, waiting. Mel and I kept assuring each other that it was just a matter of time, just a matter of time. So they have slow sales. The only thing that changed is because the store was so unique and so different from everything else at the time, a reporter from a local like a local publication just happened to stop by one day. And a few days later, she wrote up a like she wrote up a story about the Banana Republic and didn't tell them. So they're coming to work. I think it was like on a Monday morning or Sunday morning or something like that, and there's a line out the door.

And they're like, what the hell is going on? And they're like, hey, what's going on? And they're like, didn't you see? And they hold up the front page of whatever publication it was, and there's a story about Banana Republic. So this was a very like peak and valley kind of thing. They'd have an initial media coverage and then it would taper off and they'd have to find different ways to keep getting covered. But the point of where I'm at in the book, where I'm going to share with you next is

media was the initial distribution strategy. It's what made Banana Republic. So just think about that and like whatever you're working on, that might be a strategy for you. So it says, up until we jumped into business, I wrote stories about other people. And he's going to make some good points here too. Suddenly things were different. I wasn't reporting the story anymore. I was the story. Banana Republic was the story. Seeing it from both sides of the reporter's notebook wasn't like looking into the mirror. It was being the mirror. As every journalist knows, you are only as interesting as your subject. And so this is a very, I would assume it's counterintuitive. Maybe it's not. Maybe I just wouldn't have thought about this because I've never been a reporter. But he says,

so what's the next logical conclusion to this is, as an entrepreneur, it was my job to be interesting. What reporter doesn't appreciate it when you help him do his job by being quotable um so there's a gap here um the banana republic remember the catalog that they mailed out the one that in the future is going to win all these awards it somehow found its way to a radio host so one day patricia's in the store this guy named john gambling calls up and he's like hey you're live're live on the air. And he's like, I'm reading passages because the copy was so great in the catalog. I'm reading passages from Bonaire Republic. And so he keeps her on the phone for like 20 minutes. And they wind up like tons of people hear the radio show. And at the end,

they're like, hey hey what do people do if they want to get their hands on this catalog and they're like hey send a dollar to this po box in san francisco and we'll send it back to you um and so as a result like they were reading books at the time like uh business books like uh like how to do mailing lists and stuff like that and all the books are said the same thing oh you know you You have to lose money. It's so expensive that your first few sales are not going to be profitable. Well, theirs were. And so I think the average response rate

was something like, let's say, 2%. Their response rate was 10%. The average return would be, let's say, $2. Theirs was $10, so on and so forth. Those might not be the exact numbers, but you get what I mean. They had a vastly different performance than what the industry standard was. Okay, so it says, once John opened the radio microphone to Patricia, media became the petroleum that powered our growth. Another

hugely important point that he's making, not only because he was media, but now he's on the other side of that. He says, media loves media. And media is where media often goes to get story ideas. The more press we got, the more press we got. We happily played our part and accommodated each new media query with a press packet stamped, Propaganda, Handle with Respect. See, still buying into this whole country theme. And it filled with all the other media stories. So he's basically saying, hey, I'm just going to make your job easier for you.

John Gambling, that's the radio host, had delivered us a marketing campaign we could never have bought. Okay, so this is something that I want to, it's hilarious that people still don't understand this. So there's a couple notes here. So the note I left myself was, understanding the internet before

the internet existed a lesson on publicity and then in the age of the internet something i've talked about multiple times is this need the need for evangelists over critics have never been more important and this is why first of all i say that just because i think it's more interesting if you talk about things you love and talk about you things hate. But I'm going to tie this into this example that happens to them. So they're saying, at the SOP School of Business, they're calling their training and retail the seat of the pants school of business. We took help wherever we could get it. We exhumed Italian army something shorts. Oh my goodness.

You know, I can barely pronounce English and there's no way I'm gonna be able to pronounce this. It's called the Bersaglieri. I don't even know why I try. All right, this group that starts with a B, we're an elite group of sharpshooters. After paying wistful homage to the bygone quality of the fabric

and the expert workmanship in the short in the shorts construction the catalog mused again going back to the importance of good copy uh the catalog mused italians may not be much on the battlefield but when it comes to style they conquer all okay so a hilarious little quip right the serendipitous law of unintended consequences elevated that throwaway sentence into a small international incident. Who knows what odd chance brought the catalog to the attention of the Italian consulate in Los Angeles, but fate did, and he was insulted. He was outraged. The guy running it, I don't know his name um he uh he's gonna bring them

attention he was outraged he was fuming and he was right who were we to use our catalog to disparage the italian army for all i knew which is basically nothing they may have the bravest most fearsome formidable soldiers in the world so he this guy starts leaving up a stink and he's like as his protest fed the airwaves beaming radio talk shows for hours one one morning to commuting angelinos i cheered him on this is the proper response if somebody criticizes you in my opinion and people take the opposite response and it's also this guy's not very bright he had he had no more fervent supporter than i applauding his everly righteously scorned for a word so laden with publicity the incident brought us

four times as many orders to fill as we had shorts again confirming the adage there is no such thing as bad publicity so the guy gets all offended, which is ridiculous, first of all. You should try your best to just not ever say the words, I'm offended. But in this case, this guy's offended, so he's bringing a big stink. How dare you insult us? I have national pride. All this other stuff, right? But this is what I don't get, and this is why I said in the age of the Internet,

the need for evangelists over critics has never been more important is we just saw this. We saw this in a political, uh, uh, uh, uh, an election cycle. You see this constantly when you take to the internet or any other form of media to trash people that you don't like because they said something or you think they offended you or whatever it is you're not damaging them you're publicizing them and this is the one like uh you know this podcast i never bring up politics because i you know i i'm i'm sure you're like me like you're sick of hearing like ever since 2016 it's it's like you can't escape it but you you had a media that seemed to not like Trump, and yet they couldn't stop talking about him, not realizing that they gave him, they're giving somebody they protest to hate

billions of dollars for free publicity. And so that is on the largest scale possible, right? But the smaller scales, you see this constantly where it's just like somebody, you know, oh, this YouTuber said something offended me. What happens? Their subscribers go up. You saw this example with, I don't know his name. I think his name is like Logan Paul or something. He did some video. I didn't even watch it. But I think he put like a dead body in his video or something like that.

I just know that people were protesting and at least the media reaction, the reaction of social media was like outrage. And again, I'm not making a point that you should be outraged or you shouldn't be outraged. I didn't pay attention close enough to the attention i didn't pay close enough attention to to no one way or the other uh but i know the result was that he gained a couple million more subscribers just like uh mel and patricia gained a couple thousand more um or i don't know if it's a couple thousand but four times as many orders as they had previously. So that's why like, I'm not, I'll never talk about like you hear it in these podcasts. Like I don't

make podcasts to criticize other people. Like I've seen podcasts that are literally dedicated to things people hate. Like to me, that's just a miserable way to spend the short amount of time we have on this earth. Like I'd rather talk about things that I love. So that's why, um, you know, you hear me repeat this whole thing there. Like i'd rather see more we need more evangelists and less critics because in some cases you have to be careful where what you're criticizing you just might be bringing more attention to and thus making it more strong uh making it stronger okay um let's see okay so they're they're at this point i'm skipping ahead. Their store is successful. The catalog is successful, but they're doing everything themselves,

and it almost leads to premature death, which I'm going to get into here. But this section is called When All Else Fails, Expand, and this is another counterintuitive point. So this is fixing the problems that occurred while we were away. They went on a short vacation in between printing catalogs. Drained everything out of me. We wanted to put things right again. We gave it everything we had all day long, every day of the week. So I'm skipping over a bunch of the problems they had. As you could imagine, retail,

they hired employees. The employees went up stealing from them. Like this hired this one lady and her boyfriend like robbed the place place. Other people broke the playground window and stole stuff. Just all kinds of things that you could imagine. Okay, so failure is not a possibility had been our motto all along. But with the chaos, we came scarily close to a place where even the self-hypnosis of such mantras would not work. We both carried on. It would have been unthinkable for either of us to let the other down.

Nonetheless, by the time we got things back into a semblance of order, while Mel seemed to be still hanging on, I was beginning to crumble. Gone was a yoga practice that I had relied on for 10 plus years. Not enough sleep, eating on the run, too much coffee. No time for anything but keeping it all going. So this might sound familiar to you. Might be the situation you're in. And you're going to see why if you are in that situation, you really need to try to change. So this is Patricia's own experience with that. We never ceased giving it everything we had.

But for the first time, it began to question whether it was enough. One night after a final post-midnight press check at the printers on yet another catalog, having had no sleep for two nights prior, I was driving home. The blast of a truck horn startled me. I had fallen asleep at the wheel. Were it not for the truck horn, I might have died in a head-on collision. It was a turning point. I decided the catalog was too much. I could not do it anymore. The store itself was more than enough to handle.

At breakfast the following morning, I told Mel firmly of my resolution. We have to stop the catalog. We've taken on too much. He shook his head. We can't go backward he said well we can't stay where we're at i insisted i'm at my limit i know was mel's cryptic response i've been giving it a lot of thoughts our problem is that we were going in circles we need to bust out make a go for it what bust out how open another store he said what i was furious you're not hearing me i got up to leave angrily mel came after me i do hear you he said and i've been thinking a lot about this we need to scale up so we can get the

help we need to make this work mel was right we felt we feel defeated if we'd we would feel defeated excuse me if we close the catalog in the end by contracting the business we'd be constricting the upside and end up feeling even more trapped. So another, I put in big letters, a note to myself, because I just think that I never thought of it that way. I said, don't do anything to constrict the upside. I should get that like tattooed so I can read it every day. So I said, continuing story, we couldn't go backward.

We had to leap. Mel's point was that if we could grow the company a little larger, we'd generate enough money to hire competent help to get organized. There was no other way out of the problem. Okay, so that's why now you kind of understand what sounds, I feel counterintuitive, like when all else fails, expand. What Mel meant by that. Okay, so we're about five years in.

And before I get to when they meet the founder of Gap, this is just a description of day-to-day life of running the company. Every day was another challenge. The stores, they've expanded at this point, were busy all the time. Mel and I still constituted the total creative department. Each catalog had to have its own theme. Every new item needed to be drawn, and there was copy to write. And that was just the start. Then came the typesetting, proofreading, tweaking, color separations, attending the press check at the printer, renting lists, all of which we had managed to get done by hiring, firing, and supervising everybody,

double-checking to see the bills weren't paid twice, more orders weren't shipped to the wrong address, and more leather jackets weren't being stolen. On top of that, the two of us were the buyers, the merchandisers, the accountants, the sales trainers, and the go-to people for whatever else was going wrong somewhere in the business at that particular moment. Okay. So they're introduced through um to don fisher through as they expand stores they they're talking to commercial real estate people um don at this time the gap was huge so he's like hey you should really talk to

this don fisher guy he might be interested and so um well this is this is the part. Now we've got to the part where they're selling the company. And I want to talk about this. Okay. So it says, so Don Fisher, again, is the founder of Gap. And I'm going to jump right into the conversation they're having. Your store is so creative, Don said, more animated now. Do you think you'll be able to keep coming up with new ideas? Keep coming up with new ideas? Keep coming up with new ideas? Of all the questions in the world, there could not have been one more baffling to us than this one. Keep coming up with new ideas? Everybody doesn't? Ideas are not our problems, I said. What's your problem? Patricia told him we needed to manufacture our own line. We could no longer

meet the demand with surplus alone. We needed a broader line of products to fill our safari image so at this time they've expanded out from military surplus to travel and safari clothes i guess they say uh khaki is the denim of the 80s i guess which um i'm lucky i missed out on that. All right. So it says Don sucked in everything we said. I could almost hear the information cell inside him. It was unnerving. But as someone who values the power of deep listening, I was also awed by it. The man was all ears. Of what use would he put the facts, tidbits, disclosures and ruminations he was vacuuming out of us. We talked too much. And then abruptly he asked, how much do you want for the business? Now this comes as a surprise to them. They didn't even think about selling the business.

Now that was a question, wasn't it? You'd think we would have talked about it or at least thought about it beforehand. We hadn't. Probably because we didn't believe he'd be interested in buying us. A New York stock exchange firm buying a left coast renegade company irreverently named Banana Republic? He made an offer. Not surprisingly, it was for more money than we had ever dreamed of, probably because we weren't dreaming of money. In our minds, our futures became all about freedom. Now go back, why did they start the company? They wanted freedom to live their life as they saw fit. So it says, the freedom to

disengage from the safe and suffocating middle-class consumer-driven existence we each found empty. We were determined to live life our own way. The last thing either of us wanted was orthodoxy in any form, particularly in our work, and we saw self-sufficiency as key. Paramount to each of us was creating the free spirited life we wanted to live. It was a future in which Patricia saw herself painting and I saw myself writing. We never saw ourselves in business. And that oddly enough includes even when we were in business, an artist and a writer on an adventure in the wilds of business. And that was it. So here we were nearly five years later in business, but not of business. And the guy from the gap wants to buy us. It says the negotiators dragged off for four months,

leaving us exhausted and the company ignored and nearly paralyzed. And then Don called us to say he decided he could not buy the company unless the two of us stayed on to run it. I wouldn't know how to run your company. It depends on your ideas and your creativity, he said. I'll buy it, but only if you two stay with it. We aren't looking for jobs, I said. That's not the way to think about it, Don said. It'll just be like you own it. Nothing will change. Okay, so before I continue this, I want to know how often that's actually true. How often will a founder buy another company and the founders actually stay on and nothing changes and it's just like you own it. I think that's probably a myth or at least if it's not a myth, it's probably something

that happens in a tiny percentage of the cases. So it obviously, as I'm foreshadowing, it's not going to work out well for them. So before we get there, it says, I'll give you as much money as you need to grow the business as long as it's profitable, and you'll get a percentage of the profits. You can do whatever you want, and then their response is, but you own the company. I interjected thinking, and since we are the company, doesn't that mean you also own us? You'll be operating autonomously. You'll have total creative control, autonomous, total creative control, as much money as you need, whatever you want. So this is them thinking over the buzzwords that he's using or the way he's trying to persuade them. We were left with two stark choices. Number one, start the whole process over again with another investor, assuming we could find one and get him interested in a company that was now almost broken.

Or two, sell the damn thing, sign the five-year contract he wanted, and take the money in dribbles as an earn out. The 50-page document detailing the terms of the sale and including a five-year employment contract was drawn up and presented by Ted Tite. Ted Tite is the lawyer of Gap. Bernard, Bernard's their lawyer, found little wrong with it other than the occasional typo or legal phrasing. Don't worry, Patricia tried to soothe me. We'll have fun. We'll have the money to make the company we dreamed it could be and we can see the world. She wanted to do it. I didn't know. By a vote of one yes and one maybe, The Gap acquired Banana Republic on February 1st, 1983. So they're going to last about five years before Don goes back on his word.

But before I get to that, I just want to tell you about the new reality of running a much larger company and the difference between focusing on building the best product and then profits allowing you to build products versus switching that or flipping it in the words of Steve Jobs and putting profits first. So it says, we were hiring daily. How had we handled all these tasks by ourselves only a few months ago? I wondered more than once. My job, of course, was to oversee it all, which oddly at times I found harder than doing it all. I've actually heard this several times.

I think it's really interesting. And he's going to explain the mindset and how you might come to that conclusion. Managing didn't come easily to me. Probably because I had the youthful conceit of thinking myself unmanageable. Bluntness, little regard for consistency, and burst of compulsiveness are not usually what define an exemplary manager. At least I saw my shortcomings and was conscious enough to exercise spotty restraint and better moments of self-awareness. Luckily, good employees are not dependent on good managers, and we had a lot of them.

Maybe everybody was happy because we didn't fixate on profits. Instead, we were focused on being a company as good as we wanted to believe we were and claimed to be. This had many employees finding hidden reservoirs of energy and talent in themselves. More enterprise and productivity were the results, creating a self-fulfilling prophecy. And guess what? Those profits we didn't fixate on. So they're saying they're actually generating more profit when they don't focus on it. They just focus on what's best for the customer. Having at the start of the company not known any better, we regarded profits as a natural byproduct rather than the goal of our process. And so now I want to get to the end of freedom.

So I'm skipping over vast parts here. the entire book there's all these weird sentences and paragraphs randomly spread um that foreshadowed a change uh what I guess they consider would be entirely predictable about you know they're not going to last in an environment like that they're just too they don't fit they're just not going to fit in the corporate culture. So what I did is I took those parts out and put them into a story form, and that's what the bonus podcast is this week. It details what happens during an acquisition. And in the case of using, as a case study, like Banana Republican Gap, and you start to see, I think this happens over about a five-year period, just a slight little thing here, then it builds on it and then the frequency changes and then

other people are involved and it leads to the inevitable outcome of, hey, there's one founder and his name is Don Fisher and he runs the company and you're going to get in line or you're going to leave. So that's happened and we're going to get to that right here. The end of freedom. My assistant buzzed to say that Don Fisher was here to see me. I had not been expecting him. Oh, boy. With him was Mickey Drexler. So Mickey Drexler was, he's now famous for his time at J.Crew. But before this, he was hired by Don to be the CEO of Gap. They came in, sat down, and Don cleared his throat, a habit of his, and said stiffly, there's going to be some changes I have to make for the good of the company.

The changes were that going forward, Patricia and I were to report to Mickey Drexler. Mickey didn't waste a second. He said, I want Patricia to go to Paris tomorrow, copy the best stuff that she sees in stores, and put together some ideas for me for the fall line, which I want by next week. And when I read that sentence for the first time, you know that emoji is like slapping on your face, like hand on your face emoji. That's what I did in real life. Yeah, that's a great way to build a company. Let's just go copy what other people do. Okay. Which is the exact opposite, which is weird because you bought the

company to begin with that was doing the exact opposite. They weren't copying. Other people were forced to copy them. And as a result, Banana Republic was collecting all the profits. Gap was copying and they weren't getting the profits. I don't know. This stuff frustrates me. All right. So yeah, Mickey Drexler in his infinite wisdom says, you know, Patricia, go to Paris and copy everything and then bring it back here. It was almost impossible in the moment for me to compute what was happening.

My heart was pounding and rage was bubbling up from every cell in my body. I looked at Don who said nothing. Then I took a breath and looked Mickey in the eye. It's not going to happen, Mickey, I said. Fuck you, Mel, Mickey screamed and stormed out. This sounds like a great guy, right? I want to work for this guy. I asked Don if we could buy back our company. This is a fascinating response, by the way. I don't sell, he said. I only buy. We left a lucrative new five-year contract we had just signed on the table

and went our own way. The money, as much as we enjoyed having it, was an unexpected byproduct anyway. All along, we had been in it for the freedom. And did we ever have the freedom? The freedom to ignore convention. The freedom to imagine anything was possible. The freedom to hop on planes to explore anywhere at any time we wished. And ultimately, the freedom to bring this product of our unfettered imagination to life.

All of it for no other purpose than creating the kind of company we wanted to work in. Free we were indeed, until we weren't. Okay, so that's where I'm going to leave the book. I want to talk to you about a few things that have been on my mind and also tell you where you can pick up the book if you want to get the full story which I highly recommend it was a fantastic fantastic read so I've been talking in the last few weeks I was like listen the member program which is the primary method of supporting this podcast I just presented this entire podcast ad free and so I rely on the member program to be able to keep this podcast going. So I want to talk about what the program means to me, what the new name is, and why the success of

the program is linked to the overall success of this podcast. And I want to tie in a bunch of different things, some different ideas. So just hopefully this makes sense. This is going on in my mind for a long time. So first, I couldn't come up with a name for a long time because I wanted it to tie into what we're talking about every week on this podcast. And I always talk about humans are just copy machines. So it's very important that we expose ourselves to people that we look up to and constantly collect ideas because eventually what you expose yourself to, they become a little bit of a part of you. And this podcast has become a part of me. You can't read all the books that I've read for the podcast and spend all the hours that I've spent writing and highlighting and taking notes, just absorbing the material.

So I kept coming back to this iconic marketing campaign by Apple that you undoubtedly have heard of. And it's from, I've heard it called different things. Some people refer to it as Think Different. The Think Different campaign or the Crazy One campaign. So I want to read the text from that marketing campaign. And it says, and it's available on YouTube. I think it seems like Richard Dreyfuss, he does a lot better job than I do.

But here's the text. Here's to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes, the ones who see things differently. They're not fond of rules, and they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can't do is ignore them because they change things they push the human race forward and while some may see them as the crazy ones we see genius because the people who are crazy enough to think they can change the world are the ones who do so when i I wanted to figure out, I knew for a while and I just couldn't figure out how.

The name of the program is in there. It's not members because that's not really what we're describing here. Everybody can have a member program, right? So then I started looking up the definitions. Like there's a bunch of different, it could be the crazy ones, the misfits, the rebels, the troublemakers, round pegs. And the more I looked at the definition and then the synonyms of them, the more it jumped out at me. And some of these books have even explicitly said this. Like the reason they're writing books, they wrote books about these people and sometimes are, the reason they're fascinating to study is because they're different.

They stand out. They do not fit in. And therefore, because of the way they live their lives and decisions they make, we're so far out of the norm. They have ideas that are beneficial for us to study and then adapt to our own lives. And when it really comes down, when you look at the definitions, they're misfits. A misfit is a person whose behavior or attitude sets them apart from others. The synonyms are a nonconformist, a maverick, an individualist, an oddball. And so the new members program is called,

the members program is now Misfits. So if you want to support this podcast, if you do support the podcast on a monthly basis and you become a misfit, you get one extra podcast per week and you also unlock the 16 previous private podcasts that I've done immediately. So that's the name. Now let me tell you why it needs to exist. And I'm going to take a passage here. This is from Isaacson's book, Steve Jobs. And this is Steve Jobs in his own words shortly before he died. My passion has been to build an enduring company where people were motivated to make great products.

Everything else was secondary. Sure, it was great to make a profit because that was what allowed you to make great products. We just heard this in the story we just went over. But the products, not the profits, were the motivation. Scully, meaning John Scully, the former head of Pepsi that Steve Jobs recruited to come over to run Apple and then eventually led to kicking Steve Jobs out, he said, Scully flipped these priorities to where the goal was to make money. It's a subtle difference, but it ends up meaning everything. The people you hire,

who gets promoted, what you discuss in meetings. So he's talking about there is if you're focused on the profits, eventually your profit stream is going to run out. And because you haven't thought about what's best for the company, or excuse me, for the customer, those profits that you're so solely focused on are eventually going to be withered away. So what does that have to do with the Misfit Program? Well, I want to tie this into something else that's going on in the podcast industry. And that's this debate over, hey, if we want podcast industry to really grow, the one argument is, oh, you know, you need more analytics. You need more intrusive tracking on listeners

so advertisers can get more data so then they can buy more ads, right? One, you obviously know I'm not going to agree with that stance if you've listened to this podcast for any length of time. Two, I'm not even sure it's accurate because the podcast industry in the United States is three to 500 million, almost all advertising-based podcast industry. In China, four to seven billion,

almost all subscription-based. So you're talking about, what is that? Eight to 14 times larger. But the reason it ties in is because I don't engage in these debates, but I do read a lot of the content because I want to know what people are thinking. And I came across this tweet. And it's just a series of tweets going back between one person who's saying, hey, I don't want to support all these intrusive ads. And I'm going to read the tweet from the guy that has a counter argument. And he says, I mean, this is incredibly obvious. If you think about what an advertiser wants,

you're just making a pointless stand against it because of the Orwellian-esque ad tracking that majors like Google and Facebook do. So what stuck out to me, the reason I bring this up is because he says like this, I mean this is incredibly obvious if you think about what an advertiser wants. I don't want to think about what an advertiser wants. I don't care what an advertiser wants. I don't want to think about what an advertiser wants. I don't care what an advertiser wants. I think about what is the best listening experience.

I think about you, the listener. This is where they're doing exactly what Scully did. They're flipping the priority instead of focusing on what's best for the listener. They're focusing on what's best for the advertiser.

So what programs like Misfit does and any other member program where it's a Patreon, a donation, whatever it is, it allows me to focus on what is best for you. And it allows us to keep this podcast around because here's the thing. Right now, this is what you're,

and I'm just going to talk about this because it's on my mind and hopefully you find this interesting because i always tell you i like what's called like breaking the fourth wall and i don't know why people in more podcasts don't discuss this but podcasts are a business it takes an unbelievable amount of time to do to make one of these and just like any other business like there's an opportunity cost and is it like am i getting enough is there enough of a return to, to justify the amount of time put in? Right. And so how do most people get returns? They, they do advertising. So what's happening now is, but here's the problem to get advertising on any, like you, they want advertisers want scale again, going,

thinking about what advertisers want. That's why, you look at the trends in advertising dollars in the United States, most of it's flowing to already established huge podcasts. I'm an independent ad-free podcaster. I don't have a large social following. I'm not part of an advertising network. I have no choice but to rely on the support from the people that value the podcast. And so something I'm seeing in the industry that I hate, because I remember, you know what it is, man?

It'd be a lot easier if I just started a podcast. Like I did it. The problem is, and it's a good thing, is I was a podcast fan for almost a decade before I became a podcaster. So I know what, at least I know what I like as a listener. And so that's why somebody left a review that, and I really appreciate what they're saying.

They're like, he's trying to craft a fine listening experience in the sense of like, I just, I know what I, by listening to podcasts for so long, what I don't want to see. And that's why I don't like, just an example, I don't have intro music because I don't want to waste your time. I want to get right to it. The example I always use about like podcasters, oh, you need intro music.

Okay. Do you watch Netflix? Yeah, I watch Netflix. What is the best, the most widely acclaimed feature that Netflix has done in the last five years? I don't know. What is that? Search social media. It's the skip intro button. Because if you're watching a show and you want to binge watch it, just like if you binge listen to podcasts or you listen to podcasts on a consistent basis, you don't need to hear the same music over and over again. So I just jump right into the podcast. I don't have mid-roll ads because my favorite podcasts don't have mid-roll ads. I'm in the middle of a story. I'm not going to take a break to sell you something you don't need. So the reason I bring this up is because what I'm a disturbing trend, I'm also seeing in podcasts is, and the reason I bring this up is so podcasts make, uh, they, they charge money based on CPM. So what CPMs means is, uh, how much can you charge per thousand downloads that you get? Right.

And right now in every single form of media podcast has the highest CPMs. And it's like, I mean, it's way higher. It's like, I have to look at the numbers again, but let's say it's 10 to 15 times what like a YouTube CPM would be. Meaning that a thousand views on YouTube and a thousand downloads in podcasts, you'd make like 10X, right? So what do you think is happening? You have a bunch of these podcast networks. You have a bunch of these ad networks. You have a bunch of these ad networks. You have a bunch of these people wanting analytics. What they do is they go out, they recruit somebody with a large social following, whether they're an Instagram star or a YouTube star or famous in some other, or have an audience in some other domain and say,

hey, why don't you come set up a podcast? We'll sell ads on the podcast. We'll edit the podcast for you. Just come show up, talk for an an hour would you like to make twenty thousand dollars who's gonna say no to that and so what do we get and i just saw this happen somebody i'm not gonna mention who because i'm not here to you know criticize i want to criticize generally of a trend not a person but somebody had three million followers on instagram just started a, never talked about podcasting, wasn't a fan of podcasting, wasn't a podcaster, right? I listened to the first three episodes. It's this person and another person just sitting around

talking about nothing, shows we've seen done a million other times, nothing unique, nothing, no, like there's no like love of podcasting in it. And why are they doing that? Because they don't... Can you make $20,000 in an hour of work? Because the podcast networks and the ad guys know that, hey, we'll do all the work for you. You literally do nothing.

We'll take 20% or 30% or 40% of the ads we sell for you. Just sit down, talk into a microphone. Those 3 million people, we bet 500,000 will download the first episode. So the reason I bring this up is if you get value from the work I do and if you are like me, like I am an evangelist of podcasts. I love them. I don't want to see this medium destroyed like other areas of the web that have been destroyed by greedy people. My favorite podcast started as independent podcasts. They grew with time because now some of them are over 10 years old, but they're not starting how podcasts today are starting,

whereas people that already have a lot are trying to squash people that have a little. So what I'm asking you is if you're valuing this, support this podcast on a monthly basis. Not only will you ensure that this podcast, the work continues to get made, hopefully you find these ideas very valuable, but I'm willing to do extra podcasts every week just as a thank you for supporting my work. And here's the thing. What this allows is when you have people that directly support instead of waiting on advertisers, that means you have a lot wider set of diversity of actual podcasts. They don't have to just be interviews or the same basic stuff.

Think about the podcast you just listened to. I listen to a lot of podcasts on business, entrepreneurship, startups, so much that I even have a subscription service to my podcast notes. There's nobody else doing what Founders is doing. And if we want more ideas, and there's going to be somebody listening to this podcast, and I'm not trying to say that I'm special in any means because I'm definitely not, but all this came from was an accumulation of other ideas, three or four different ideas I got from podcasts that went into my brain over a course of years that gave me the idea to do founders. So by supporting this podcast, it makes this podcast survive. It makes it viable. It makes sense for me to spend all this time doing it.

And then there's going to be somebody listening to this that gets an idea from something that happens. And then they're going to get to do a new podcast that has a spin on something different that's not out there. Relying on ads is breaking podcasting because there's like 500,000 podcasts in the Apple podcast library, right? But when you look deeper, like 75% of them are no longer updating. Why? Because you have tiny podcasts, right? Who are doing it just because they do it. They're just doing it. Maybe they release episodes every once in a while, but they have something else they're doing right something else they're focusing on and then you have large huge podcasts that make a ton of money because they're ad base and they

have large audiences the problem is i'm neither small and i'm neither large and i don't have to be i don't even care i would much rather like, like right now, I have one metric. I have the metric I pay attention to. You know, downloads increasing, that's nice. The only thing I pay attention to is how many people support the podcast on a monthly basis. And what this mechanism allows is for there to be something in the middle, something different that doesn't have to be, you know, something that somebody has to do part-time but can't spend that much time doing it because they have to have a full-time job.

And then the other end, you know, somebody just doing ads for Robinhood and Casper and Squarespace and the rest of the stuff. So if it's important to you to see independent podcasts not only survive but thrive, please sign up. You can go to Founders Podcast. You don't even have to do that. Before, I was saying you can go to Founders Podcast for such support. Now, you don't even have to do that. I redid the website. I include the signups right in the show notes so you can do it on your podcast player, on Apple Podcasts or Overcast or anywhere else you're listening or if you want to, you can go to founderspodcast.com. Okay. And if you want to, there's other ways you can support the podcast too. Being Misfits, number one. But if you liked the book and you want to read the book and support the podcast at the same time,

there's a link in the show notes. You can also go to amazon.com forward slash shop forward slash founders podcast. You'll see this book and all, I think there's 48 books, something like that. It's actually interesting if you go there to see them all. They're in order from the time, a reverse chronological order. So you'll see that up there. Not only will you see this book you can buy,

you can buy any of the past books. Amazon sends me a small percentage of sale. It greatly helps out this podcast. But you'll also see early the book I do next because a few people have emailed me saying hey I want to make this like a book club which I think is a freaking fantastic idea and I want to read the book can you let me know what book you're gonna do for up in advance because I want to read it before you do

the podcast so amazon.com for slash shop for slash founders podcast or you just click the link and you're gonna see a collection of every single book that I have in order it was done. It's actually really interesting to see it up there all at once. And then the last thing, and I'll just close on this, is if you are passionate about entrepreneurship like I am, I have a subscription service that you can sign up for. It's delivered via email. It's called Founders Notes. And what Founders Notes is, the way I think about it is when I listen to an entrepreneur go on a podcast and do an interview, I don't really think about that as a podcast. I just think that's the medium

that they're using. I really think that's a lecture on entrepreneurship. And just like you took notes in college, I take notes as if I'm listening to a lecture. So I make the joke that like, remember that nerdy kid in college that you copied their notes off of? Well, Founders Notes is that nerdy kid, except you're copying notes off of entrepreneurship. We take notes so you know what's going on in the world of entrepreneurship. You'll get an email every week, comes out on Sunday. You can sign up at foundersnotes.co. The free version just gives a small sampling of the notes I produce every week. The paid version is the way to support the podcast.

But if you want to see what it is first, you can test it out and see a small sampling. You'll get just a handful of the ones I do. If you want every single note that I create plus access to the entire backlog. And now I'm up. I got to be close to like 90. I didn't count before I started recording, but that's 90 different founders. So I write down their ideas on entrepreneurship, how they came up with their idea, how they got their initial distribution, how they think about the market they're operating in, any tools they use to help them, books, et cetera. Basically anything that I think was valuable I write down and what happens

is, you know, usually it takes about 10 hours of audio total and condenses it down into key ideas you can read in about 15 minutes. So it's not meant to be like a tiny little newsletter like, you know, oh here's some links to click on. No, no, this is very substantial. You don't even have, there's nothing you have to click on. It's just, I just happened to deliver by email because I find that to be convenient for myself. So yeah, that's it. Other than that, I just, I really appreciate all of you guys that sent me DMs on Twitter this week, talking about how you found the podcast, what you like about it. That, that fuels me, honestly, because sometimes like sometimes like anybody, if you're working on something, you're like, damn, am I making the right decision? Am I spending time? You have

doubts. And so I've never worked on anything in my life that has been this emotionally motivating as I have on founders. So that's why I wanted to stick around. I want to do this for a long time and I need your support to do so. So thank you very much. If you like this podcast, please tell a friend. If you want to get in touch with me, you know how to get in touch with me, the reviews, you know everything. So I don't need to tell you more. Thank you very much for listening. I will be back next week with another biography of a founder.