Invest Like the Best with Patrick O'Shaughnessy - Ken Langone - The American Dream - [Invest Like the Best, EP.368]

Episode Date: April 9, 2024

My guest today is Ken Langone. Ken is a legendary American businessman best known for his co-founding of Home Depot. He is also a former director of the New York Stock Exchange and a passionate philanthropist. He shares with us a lifetime's worth of wisdom, building Home Depot into a powerhouse and prioritizing his employees above all else. He says he still “bleeds orange” to this day. You’ll hear as he recounts his business endeavors, his strict belief in keeping your word, and his true pride in his country, which he knows to be the land of opportunity. We discuss his work with Ross Perot, the idea of an upside-down hierarchy, and the power of loyalty. For anyone who may find it easier to follow along, we have a transcript of the episode on joincolossus.com. Please enjoy this conversation with Ken Langone.   Listen to Founders Podcast For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Tegus, the go-to destination for bold investing. The investment research platform trusted by 95% of the top 20 global private equity firms just got even better. Building on their solid reputation for expert insights, Tegus has expanded to become the first true all-in-one research platform. The new Tegus makes diligence faster, easier, and more convenient than ever before. Your Tegus license gives you access to over 70,000 expert transcripts, more than 4,000 fully drivable financial models, and exclusive datasets like company management checks, industry KPIs, hard-to-find non-GAAP data, and more. Tegus is the fastest way to learn about a public or private company and the most cost-effective way to conduct investment research — now all under one roof. Learn more and get your free trial at tegus.com/patrick. ----- Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes.  Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes: (00:00:00) Welcome to Invest Like the Best (00:004:00) The Unforgettable Pitch to Ross Perot (00:08:37) Winning Over Perot with Honesty and Insight (00:16:08) The Art of Negotiation and Trust (00:19:31) Loyalty, Integrity, and the Power of Keeping Your Word (00:23:51) Home Depot's Culture of Service and Empowerment (00:29:16) Frank's Authentic Leadership and Its Impact (00:31:00) Transforming NYU Medical Center (00:33:45) Ken’s Investment Philosophy: Long Hold Only (00:39:56) The Power of Resilience in Business (00:45:37) The Kindest Thing Anyone Has Ever Done For Ken

Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest like the best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at join colossus.com. Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of positive sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of positive sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc. My guest today is Ken Langone. Ken is a legendary American businessman best known for his co-founding of Home Depot. He is also a former director of the New York Stock Exchange and a passionate philanthropist. He shares with us a lifetime worth of

wisdom, building Home Depot into a powerhouse and prioritizing his employees above all else. He says he still bleeds orange to this day. You'll hear as he recounts his business endeavors his strict belief in keeping your word and his true pride in his country what he knows to be the land of opportunity. We discuss his work with Ross Perrault, the idea of an upside-down hierarchy, and the power of loyalty. For anyone who may find it easier to follow along, we have a transcript of the episode on join colossus.com. Please enjoy this conversation with Ken Langone. So Ken, it's hard to know where to begin a conversation with you, given the number of interesting things that you've done across your life, your career. I saw when researching your

history, so many interesting early anecdotes with you establishing yourself, especially in your work with Ross Perot. And I always found Ross to be such an interesting character in business history. I'd love to hear the story of you taking his business business. public and what that represented to you at an early stage of your career and what it was like to work with him. I happened to be at a Mardi Gras Ball in Washington. And at the party, I met a fellow there by then Jack Height and I hit it off. And he was telling me that he was partners in a company that was getting ready to go public. And they had Alibor record. And I said to him, is there any chance I can get a chance to pitch by firm to be the other writer. He said, I want to shoot. I can do.

We had a good time that night, drank a little bit, raised a little hell. Monday, he called me up and he said, you got an appointment in Dallas at 1130 on Wednesday. Two things I want to tell you, don't be late. You got 30 minutes. When the 30 minutes are up, leave, and don't swear, because I'd been swearing like I saw a sailor at this party. So I did. I tell you. So I, I'd took two kids with me at our club and asked the one. I say kids, I was only 33 myself. And we went down to Dallas. The scariest thing was exactly at 1130. I got into his office. And there he was sitting behind a big desk. He's demeanorative. And he could go. I'm fellas. Come on. Come on. Bill. Sit'll be in. I have a little chat.

How are you all doing? I said, we're doing fine, Mr. Perot. I said, this is Roger Green, and this is to New Glenn. So we said Adam, he lists the farms that he met with Goldman Sachs, Merrill Lynch, Whitewell, Kidder Peabody, every one of the top firms of Wall Street was there to see him. He talks nonstop, the 29th, Goldman says this, Merrill says that, Kidder says that, Whitewell says that, and he says, what do you think of that? I'm looking at, I got 30 seconds left. As well, Mr. Perra, I think I'll just take advantage in the time I've got left to say goodbye, and I hope you'll see me again sometime. What do you mean? I wrote Jack Hight told me I had 30 minutes, by my calculations, 30 minutes. Forget that, tell me what you think? And I thought to myself, well, I'm on a bro the 30-minute rule.

I might have to go all the way. I said, Mr. Perra, that's the biggest pile of all shit I've never heard in my life. And he passed. He goes back. What I mean? I said, Mr. Perot, this whole process is fairly simple. you're going to pick somebody who's going to tell you what he thinks you can sell your stockboard and your bet is can they deliver on that number i said it's that simple that's what all the talk they have about working the market no in the market there were this all those things he'd be well that's interesting he said let's talk a little bit more we talked until one o'clock come wow drive me and two guys i was in the front seat he had a big baroon lincoln and he was driving us all over Dallas. We were going to go back on it's 3.30 playing the afternoon.

Now, I figured, oh, I'm not going to throw this meeting in. We were looking for a drugstore. We could buy shaving gear and toothbrush and stuff like maybe even a T-shirt because we brought nothing to Dallas. We finally found a place. We stayed at a hotel. He was going to make a decision by the following Friday. And he called up. He said, I'd like to get know you a little bit better. He said, come on back down. So I went back down. And we talked and we talked and we talked. I had not seeing one number on how much his sales were, what his earnings were, nothing. So he invited me back down. You get a chance.

Come on back down. I thought, I said, sure. To the third time, I went down. I went down along. He picked me up at the airport. We were driving back to his office. Ken? Have you given that I thought that would you think we're worth?

Mr. Perrault, I said, first of all, I said, I haven't had the benefit of your numbers. Let's assume the numbers are great. I said, can I get some kind of relevant? He got to his office and he had a closet and on the inside of the closet door, he had a graph, a chart. I didn't know what the numbers were. All it was was a chart of the percentage growth of the earnings and of the sales. It was doubling every year.

And I said to him, I knew what the business was. By now I got a good understanding. I should based on those numbers and if I could be made comfortable that they can continue that way for a while, I would argue your company's worth a hundred times earnings. What? They said, yeah, about a hundred times earnings. Are you sure? I said, well, loss, I'm not sure of anything.

I'm sure of this. Those numbers are what you say. I had no idea whether it was $5 million and $9 million. Well, it turns out it was $7 million of revenues and $3 million of pre-tax profit. It was a staggering mortgage and the clear prospects that it continued with diss dissent. So, you thought, I want to think about it. I left about two weeks later. What he had done with you?

He was calling all the other firms up and said, okay, what do you think I'm worth? They settled in around 30 times. Now when did May call me up and he's sipping me on, are you comfortable with what you said? I said, Ross, I'll say it again, that you can continue this progression. You just do simple math. You've got to cut the multiple every year by two. It's not going to take long to get this thing down to 25 times. I'm doing. But I said, I wouldn't be able to tell you that until I can get a better fix on the

business. So he said, well, come on down. Bring some guys down. Let's get to know each other better and talk about how we do things. He brought in a bunch of guys, one after the other. I swear to God, he has some kind of machine that created these guys. It was unbelievable, one more talented than the other. And common sense, plain spoken, gentleman. Don't forget, he had a dress code white shirts, no tassel loafers, wingtipped shoes, highly shine,

no facial hair, military style of haircuts, and the more I got exposed, the more excited I got it. So he saw, okay, well, let me think about it. This comes into June, two weeks later, he called me up. Ken? Mitch Hahn and I've been talking,

one of the things we expect of people, you know, we're optimistic people. They're very frank. He said, Mitch and I are a little word that you don't show much enthusiasm. I'm going with that. I said, Ross, I'll be on the next plane down. What are you talking about? I thought, I've never seen that in a little like you.

So I told you that. Well, I know, I don't, Ross. I'm coming down. No, no, don't come down. He's saying, no, we taxings have a good rule here. If you got a good sense of humor, you're a good text. And I said, well, God damn it, you guys were paying me ass, too, okay? So anyway, he gives me the deal.

The rest of Wall Street is stunned. Here's this little pisa of railroad findouts, getting the most short after a piece of business, probably in the last five or ten years. And we go through the whole process. He wants the hour going to do it. I go, gosh, I'm going to make one promise I didn't tell you before. I'm personally going to be on every meeting with every investor.

That's that I intend to build a issue. Oh, I know. He calls me up at the very end and decided he's going to give me the business. None of the firms that wanted him was G.H. Walker. there was a guy there by there at Jerry Lodge, who he knew it, who he liked. When Lodge heard that we were going to do the deal at a harder time journeys, he said, Ross, we'll go to a harder time journey,

and we'll be commashing. So Ross called me up and said that he'd got this call, and how do I feel about having a partner? I said, Ross, let me ask you. And then you and I are in a high racing speed car, going 200 miles an hour. I got the steering wheel, and you got the brakes. We're sitting next to each other.

How many people were going to hit the wall because I'm going to hit the wall. I said, Ross, if I'm going to go 200 miles an hour, I got control in the clutch, steering wheel, shift, everything, or I getting in that car. I understand. I said, Ross, you want to give them the deal.

If you're more comfortable with them, you go to them, I'm going to be around. I'm sure we'll figure a way out for you and meet it. Oh, sir, he said, you were the one of me and go from 70 to a hundred. You're my man. Let's go. We spent a whole summer getting the prospectus together, The more I learned about it, the more excited I got, I had a whole money.

Now, back then, New York State had a stock transfer tax for your sole stock. It was the tax. And the way you get around with an underwriting, you go through the tunnel after midnight on the day of the deal, sign all the papers in Jersey and drive back in. The deal was done in Georgia with legal. The night before the underwriting, Elaine and I and Margo and Ross had dinner at 21. We got to know each up that summer. We really hit him to work personally well.

By the way, I'll tell you, one of the great choices in my life was his friendship. And this is aside. One of the great honors of my life was when I got the call from the family Ross, Jr. They'd like me to deliver a yield and she had a funeral. Wow. Me. So anyway, we're driving through the tunnel. Elaine won't harm because our kids had to go to school the next day.

We had three kids. So we're in a limousine. By the way, the limousine driver was always a witness signing the fake. This was all legal stuff. I love it. So we're driving through the tunnel. It was a back seat where you had two seats looking at each other. Lager and Ross are looking ahead.

I'm sitting with my back to the front, looking at them. Well, he said, Barron, all the other guys are Wall Street tall and now is the ones he's going to back away from what he said he's going to do. What are you talking about, Ruth? Well, I'm told, Ken. this is when you guys say sorry Ross I miscalculated I can't do it at the 100 times earnings I got to do it at a lower number

what do you talk about because I suppose this is when you're going to tell me I'm not getting a hundred times journey I said how'd you know that see what I know I know I said how's you know that what do you mean I said I'm not going to do it very hard time journeys I'm sorry

see what you are there are all light up here they get this country boys up here they pick us clean I said wait a minute Wait, man, does a hundred time journeys mean that much to you? Damn right. He says, that's just, put your hand out of your words you bought. It means a lot to me.

Not just the number, but the fact you kept your word. I said, Russ, look, the last thing I want is an unhappy client. We'll do it at a hundred time journey. Hmm. Damn, well, you will? I said, okay. So Margot, I winked at Margo. Well, he was a little bit of a tizzy.

She says to me, God bless Margo. She's sharp. She will, Ken, what were you going to do? I was going to do it at a 150-time journey, but it's the only one on a time journey. It's okay with me. We did it at a 115-time journeys. And by the way, it went from 16 to 24 the first day. So it was a very successful deal.

And that deal, the lack of the better way to describe it, pulled me on a map. The most important thing of all was he was a man who you delivered to him and you kept your word. He never forgot it. So he became perhaps my stoontious thing. that I was the young kid 33. I never done an underwrite. That friendship has lasted all through his life, and now it was his family as well.

What about his style do you feel is most lacking in the world of leadership today, if anything? Integrity. That's it. The man was maniacal about keeping his word. And the second day would be loyalty. If you promise to and delivered for it, you never forget. I miss him bad. One of my favorite ideas of yours is this notion of leaving more on the table for the other guy

than you think the other guy thinks he deserves. Did that come from Ross? No. Let me tell what that came from. That came from my experiences as a poor kid when I realized, if somebody expected this and me, I gave him that plus something. And to me, the order of negotiating is not see who best who. The order negotiating to me is to get a deal for yourself

and make sure the guy you're dealing with feels he got more than he thought he was going to get or he shouldn't get. 100 times earnings to 115 times earns. I can't think of a deal I've done where I couldn't have got more than I got. That's okay. Because the element of trust is the most precious thing. in living. If I trust my doctor, but he's going to do the right thing for me,

there's a better chance he's going to be more candid with me and more willing to try and help me whatever my condition is or a friendship or a marriage. I'll tell you what it is. Oh, you know, I'll give you for instance. I did a deal with a guy. I bought a company. He was a tough negotiator. He negotiated. He negotiated back. And I brought she gave in her at every point. We got down around 930 at night, my office. I said, now you say, oh, I'm happy. It couldn't be happy. Okay.

I said, I'll tell you what. Let's go back and I'll drop you up in a hotel and I'll pick up in the morning. We'll have breakfast. We'll talk to school. He's okay. So the next morning, I pick him up. We're driving to my office. He said, Ken, can I be honest with?

I said, please don't. He said, I'm sorry. As I reflect on this, I don't think. This is good enough for me as I'm retired. I said, well, let's talk stairs. And I said, okay, where do you think this thing is deficient for you? And he tells me, it's okay, you got it. What do you mean?

Tell me what you want, you got it. I've got to want to tell you something else. I will never be this for you again. You're bargaining hard all day yesterday. You assured me at the end of the day, it was exactly what you wanted, you were fairly treated. I said, I can't think at one point that didn't concede to you. I said, I'm sorry. You got what you want on this deal.

but I never wanted the business wouldn't look at. And I feel strongly about that. And the best testimony is, I never had a fear of client or a potential partner in a deal saying something bad about me because I did okay. I would say it's almost if I do okay. You're sitting where I started and sitting where I am right this minute. And it's okay to bargain with it. But when you're done, you're done. and he was shot.

I thought he got your deal and got exactly what you want. Now you got it. Frankly, I said, I thought you had a great deal last night, but obviously you thought there might be more on the table, so I would disappoint you. By the way, that company turned out to be a home run. But you're okay. So that's a philosophy of life.

I pride myself on that. I think there's nothing more precious in my life other than my family than my word. Was there an early formative experience, a specific experience that most taught you that lesson? How did you come to that conclusion? It sounds like at a really young age. My mother thought they were humble, uneducated, but incredibly honorable people.

But just how they lived their lives, that was really where it was chiseled hold. It was chiseled home to me. You know, keep your work as hard as you can and give it all you got. And live by the golden rule. One of the things that I feel strongly about is I'm very forthright about my job because that's what it all started. Then I had a good fortune meeting this lovely lady. She was 16 and I was 18.

We got married and she was 18. When I was 20, almost 68 years later, we were still hanging around with each other. That's pretty good. What's the key to doing that well? Have your fights, but that's a carry a grudge. Don't go to be a person. We were two kids. and truly loved each other and with trauma and success wouldn't change. I hope it hasn't. I urge my

kids to be genuine wine to be authentic. That actually very important being with. Life and business is a repeat game. The story you just told about not doing the second deal with that guy, even just the way you've created successful financial outcomes seems to have been by holding longer than anybody else. My loyalty, if I would like to be remembered for what they Only one thing. I'd like to be remembered that I was a loyal friend, a loyal husband, a loyal father, whatever you want. Loyalty is in shorts of life. And he'll say.

The world has become very transactional. My epic battle with Elliot Spitzer, who was shy who whipped his ass, I can tell you right? He ain't coming back for more. I can tell you right now. He ain't coming back for more. I got his ass with it. And it was a fight that I loved every single second of it. But there, people were saying to me that I showed my loyalty to the grass, so I said, no, in that case, by the way, it wasn't just loyalty.

It was the facts. The facts were that the whole committee, all the mind of us, always voted unanimously giving me these pay packages, which, by the way, will magnify because every previous chairman of the stock exchange never had a 10-year short of longer than 10 years. So I know when you got these deals ready here, five years, six years, seven years, Dick Grasso started at the exchange is an $82.50 a week. Union cart, union cart. Went from that all the way to the chair. How I guess what? He had 37 years of service.

When you put the yardstick to that, well, that's what you wanted. He created it that way to get people to stay. And look what he did. When he took over, they had $1,200 list. what he's got the bulletin is that he had 2,800. He made all of us. I bought seats for $72,000 a piece. I got $8 million for each one of them.

I mean, how bad a deal is that? We had guys that the employee exchange brought out with it. The whole key of the exchange was listings. But people say, well, that was loyalty. I yeah, it was loyalty, but more importantly, it was being loyal to the truth. I knew the truth. The truth was every single, member of that committee knew exactly. That was a sad thing to me that I'm with high-powered guys

that with it under this guy's... Oh, he is snitch it. Bring him on, baby. I'll show you out, okay? Bring him on. He did. He got it. Where was that part? I didn't want it to end. When Cuomo replaced him as AG and when the Court of Appeals found in our favor, 7-0, Cuomo called me up, and it was a Wednesday. It's when the decisions came out. He said to me, you know, he said, I don't know, give me some advice. He said, I'm thinking of appealing it. I'm not.

He's lost. I know he's playing with my head. He says, I'm thinking of appealing it. What do you think? As well, there's two things I think. Number one, the most joyous thing I could hear is the fact you're going to appeal it that the game goes on. Because I'm having a hell of the time in my life. And number two, you haven't got the balls to look at it.

He and I became good friends, by the way. So, loyalty's in short supply of the world. The idea about loyalty rings through the Home Depot story in such an incredible way. Like so many stories of people kind of like Grasso, starting as a cashier and becoming, you know, a senior executive. I would just love to hear the beauty of the long term at Home Depot, as you've experienced it as a co-founder and now incredibly long-term. holder of that business. The most precious thing Home Depot has are the kids on the floor where the orange aprons are. We had what we call the most corporations have a triangle that the base and the point at the top

and the point at the top is where the CEO is. And the base is literally hired employees. We turned it upside down. We said the most important person in the company is the person that comes in touch with the customer. If that customer gets what he wants at a fair price and feels he got great service, he's never going on anyplace else again. The most precious part of that equation there, I call me kid anybody under 88. I mean, you're 18, you're a kid. They're all right now. You're under 88. You're a kid. They don't get pissed off. Those kids really challenging jobs. They need to learn with

their seller. They don't have the luxury of not being able to handle the difficult customer. They crazy hours, and most of them are still right at the bottom without a college education. And those kids made this company. If there's one thing Home Depot is doing for, it's our service. Big thing. We give you great prices, no question about that. We're always in stock, no question about that. We have every imaginable item you want the given category that you've got to sort of it.

But the thing that holds all together is a kid that's dealing with you. I'll give you it for instance. This is a good friend of mine. customer. His faucet was dripping. When it turned it off, it was still dripping, meaning that the washer had failed. So the water got through with the valves, put into the nozzle of the faucet and drip, drip, drip, drip, drip, drip. Three o'clock in the morning and your wife kicked you and says, go to the faucet. I can't sleep. The trip was keeping me awake. Guy gets up in the morning. He goes to the home depot store, how long are there me. He says to the kid, I need to. I need

a new one of these. A kid says to him, a new one of what? He said, I need a whole new stem. Leak it. They tell you, I'm sorry, see, you need a wash. Follow me. We have a little glassy and bags of assorted-sized washes. Can't tell you, 25, 330 on who download that cheap.

Takes it off the peg, opens it up, gets the right-sized washer as a screwdriver in his apron, takes it off, unscrews the screw, takes the band washer out, takes the good drop washer, puts it in, puts a screw back in, and he says to the guy here, go home where we'll drink. Guys were an oil. He said, nothing. He said, happy he came to Old Depot. Three months later, the wife wants him to the kitchen. He's only got to one of these food, food joints, kitchen and bad guys. He's on over to my friend. They went back. They found him a kid. Kid brought him over to a kitchen designer. When we sold kitchens, we got a $100,000 kitchen order. That's the value. Do we make an effort to train the kids? We make an effort to

treat them failing. Last year, unilaterally, we raised wages, $1 billion. Why? Why? Because we really feel for our kids. They own stock. Well, I guess I could say, I made some money. Just a bit. I should be. I'll tell you this. The greatest number of a wall to me is not my network. We have 3,000 kids that are still working for the company today. 3,000. They started out pushing courts in from a lot in multi-millionaires, and they're still working for the company. You want to talk about culture carries?

Trust me. That's the value of treating your people right and taking care of them. We do everything we can't for them, and they know it. What in the history of Home Depot went the most wrong, and how did you fix it? Well, the thing that went most wrong was a mindset that cost was more important in the culture. How did we fix it? We changed leadership. That's simple.

Frank came to the company. I'm going to guess around 2003, 2004. At that point, we were 23, 24 years old. But I would call Frank Blake, the founder of the company. Why? Frank restored the culture. He led by example. No doubt about it.

His selection as CEO was, I think, the smartest decision, and I take great pride in that personally, because when we were confidently decided that we had those different ways of Bob. By the way, get Bob credit. The first four years, Bob was coming. Everything he touched, he made better.

However, once we got past that four years, he started to now get a little too aggressive, and I think, got away from the culture. Fright was not a popular choice. It's a natural. And the reason Frank is a natural is he embraces the finest of values the human being could have. One year, Frank didn't even want to take a bonus. No, I don't know.

We're just getting this thing going right. I don't need a bonus issue. Frank is selfless, Frank. Frantzileys squatters at three-fold hours. He graduated in Harvard, Columbia Law School graduate, clerk to Justice Stevens of the Supreme Court, throwing harder than the year. I'm a two or three guy and I think

the form of energy. Comes to people to work on strategy and nerdy kind of guy you meet him. You'll never get a prize for me a picture of Sartorial Splendant, okay? And I say that because they tell them, I mean, that's Frank's charm. What you see is what you get.

And I talk about being authentic. He is the best example of authenticity I can imagine. So culture is there, is it? Interesting aside, when I was at, they joined it, NYU Medical Center, places at the shambles. Broke, morale was terrible. They just merged their hospital with Mount Sinai. Ironically, it is an example of bad faith. Each side, they looked at the other side.

They were getting rid of a bad hospital. So we took two bad hospitals and made it one to one huge bad hospital. The element of distrust was powerful. So when I took the job, I went, and I said, the body looked at me. You want me to do this? Yeah, I really bad. So I need help. The body was chairman.

It was really bad. I believe he was. I was okay, Morty then I want the hospital back. I want this thing diverse. And it was going to be easy. It's illegal. It was a dead effect. We did it.

And I think we had home deep, but we'd already get all. I said myself and Pat. We put this culture in place. Day one. We lived it. We lived it. I tell people, here I had highly educated, double degree, triple degree doctors.

And the same thing I did with this 18-year-old kid that barely got out of high school with this professional, highly accomplished, fabulous doctor. Treated them the same way and it worked as guess what the UVs at the end of the day. Gotta celebrate hourly people on the floor. They have the key to the, this is the magic source. This is a secret source, not so much of a secret. But it takes effort. It takes time.

And you try to do everything you can to let these kids know that they really matter that they can make a difference, that their opinion to share with us, you rise here, share with us. You'd be amazed at the number of great ideas we had. We implemented the stores that came out of the wind of a kid that barely get out of high school. We encourage that to be open to come express themselves. I give you, for instance, we'll be a store in Elmont. So the Wednesday, before the stores got open, I'm in there. And they're kidding the plumbing department.

Because after me, he said that, are you somebody in this company? Yeah. Come on, I'll show you yourself. I'm curious. You guys born stupid or you become stupid? Okay, I said, maybe it's a combination of both. You don't want these kids to feel intimidated or threaten.

You want to get it out of their head. I just, okay. So he takes me over and he shows me a big cardboard box that's on the floor at the bottom of the rack. and in the box are a bunch of plungers when you got stopped up to a lot. You say you put your hand in that box, you think you were in a coal mine,

you come out black. So what? Nobody sees the plunges. Now, think of this, you don't wake up on a Saturday morning, say, hey, Andy, let's go the whole depot by a plunger. It's 3 o'clock in the morning. The toilet stopped up,

and you haven't got to plunge it. You get your ass to the Home Depot store as soon as it opens, you get the plunger. So back to the kid, I said, okay, What would you do? He said, I'd get pipe looks like in a gun store, how they show guns on the wall. And I put the plunges at the end of the thing on the rack.

Why don't you do it? He said, get on, I said, why can't you? You think it's such a good idea? Why don't you do it? Okay. Saturday morning at 11 o'clock, the store is now open, people who clamped. And I see, come on, come here, come here. It's like, well, there's no plunges in the pipe cooks.

I said, oh, you put them back in the box? Honey, three odds. Punggy, you can buy three, three, fifty, four. Hey, honey, we need a plunger. I don't have a plunge. You made it an impulse item. That was out of the mind of the kid that barely got out of high school. You don't know where you're going to find a gem, but you're never going to find them if you don't look for. What do you think was the reason you've been able to hold on to these investments, these positions for so much longer than everybody else? So the average length of your investments is 35 years or something crazy like that? Stop it, 42 years. Sorry, I don't want to take that.

I'm stupid. Because I'm stupid. I'm loyal. I'm loyal to my investment positions. What about I tell you? You know, you're loyal, you're loyal. Look, I got my lily stock two years before home people was founded. A little medical device job, they bought. I got to know the manager people. I liked them. You know, there were solid Midwestern people. The guy that I negotiated to deal with was a tough son of a bitch by the name of a gene step. But I had such aberration and respect for gene. I had no doubt that Lilly would turn out to be a great company. Now, it didn't hurt that if I'd sold the stock, I'd had an hour of the tax.

Because my cost basis, the little device company I took over at a proxy fight, Reddy, had a market cap of a million and a half dollars. Then, how the market got a million and a half dollars? Lilly gave us $50 million. That was proxified with May of 72. Lilly gave us a million and a half shares of Lilly stock worth 37-50 a share of our stock for share, roughly that. And Lilly paid a dividend. So the dividend was an ice thing, the little bit of income. Lily stock has split over those, all those years, from 77 to now, 16 to 1.

So the $3.5.5 shares, $2.9, $24 million. Okay. You ready now? $18,360 million. Now, catch this. Lilly's stock from 77 to 2002, went from 37 who got to his eyes $100. From 2002 to 18, the stock did nothing. It was a 109 and 2002. and it was 109 and 18.

However, going back to 77, November 3077, until last August, counting the dividend, including it was 16 years or nothing. It compounded at 15% a year. You're a home run. Every stock I own compounded at 15%. I spent a lot of time with companies. I get to know the management. My first and my major and my principally concern is people.

I bet on people. I've got a Home Depot position now. I got a little 47 years. People I got 46 years. J.P. Morgan, I bought the warrants, but I brought him way back. I got my JP Morgan stock today 16 years. I got my park ahead of him 16 years. They're puppies.

I've got a new position called Option Care Holdings. I bought it six years ago, and I'll be there with him. The law of the management stays, quality people, along the prospects of the business are bright. It's like my wife. These guys, you get married three and four times. How do they remember what to call them? What name do you use?

I mean, can you imagine? Jane, Mary, my bad, Pat. Life is simple. And hold it out of these situations. You know, the food I ate as a kid is still my favorite food. Peasant food. What's your death row meal? Pasta vaguel.

What's your last pasta vajol? It's got all in me and beans, plant parmesan, fried peppers and potatoes. Oh, God, they cooked fried pepper and potatoes. And I got my mother, God, she was so cook. But those are my favorite foods. I got a little dive in Port Washington, I coulda, DiMaggio's. Great pizza, a bowl of pasta vajoli or a bowl of scarliaul and beans.

Man, it's like dining going to heaven. What do you love most about capitalism? I love that title of your book. If you had to sum it up, what do you love most? The good it does for mankind. Good at Descent. Look at our society. Look at every other country that moved towards socialism.

Look at what's happened. Venezuela, Cuba, Argentina. Look at them. Brazil. Look at the York. Look at York. Hey, look. A poor kid working his ass off with a shot at the grass ring, he may never get it.

What is going to do a lot of good along the way? even if they didn't get it. Well, I'll give you, for instance. You got a call one day, Jim. We opened that first-hand wall in the late 80s. I walked the store. He was working at one of our first stores on the island.

Bam, Jim, and it says to be a mosque to that you've got to come see you today. Okay. And I have a rule. Home Depot employees got to first. Bernie called me. And it was another call for a kid. I said, if I'll call you back. I got to talk to this kid.

Because the kid comes in at the same day. Hi, Mark. What's up? He said, I thought you should know. He said, this morning, I got a call for my Merrill Lynch broker. That my home deposed stock. That works a million dollars. I'm a millionaire. That sounds. He said, let me think of something else. He said, I paid my parents mortgage off before. I paid my mortgage off. My two kids are in college, and I'm a millionaire. Do you know the impact that had on that kid and all those people in the store? He did it. I can do it. They got to work hard. You're going to have deals that don't always work. And you might have two, you got six months.

I tell you all my dear deals. Everything is an all I'm not. Oh, I'd be happy if they were breaking it. But you're going to get up the plate and take us weight. You ain't going to hit the ball every time. It's going to have a few strikeouts. That's slight. But what does capitalism do?

I think it all has promised me, me, a plume of a son, a cafeteria working son, not a very good student. I thought I was a bad student. Look at what capitalism, a lot of opinion. You can't take out widely. That's heavy duty stuff. What did you see most commonly in the opportunity around Home Depot or other stuff that you got involved with early on beyond the people? I know you were optimizing for amazing people.

Was it just that? That's 95%. You weren't doing store fragmentation calculation for... No, look. You get into a bad idea with a breakthrough. guy, the great guy's going to tell you it's a bad idea, we made a mistake. Hey, more barn. Not everything is going to harm.

I haven't got a crystal ball, but that's the key. Jesse Haddock was a golf coach at Wake Forest. One time I asked Jesse, what do you look for on a high school kid? The one thing I never do is I don't mess with their swing. If what they're doing and their results of their play gives them my attention, I get my attached to it because they got a very bracket. I leave him alone. I won't even look for it, Jesse. He said, I look for the kid that gets a line on a four-three. And the next little goes back in birdies, you know, I look for resilience. And that's about it. I look for a managing guy,

Bernie Marcus, fired at 49 years old, no money, a mortgage, no health insurance. All right, let's go. Let's do it. Let's start it. But same thing. By far, same thing. You just took bankruptcy. A lot people can bounce. More people can come back. They got fighting them. They got, hey, okay, that didn't work, but I'm going to give it a shot again. Old Depot let it. You realize Home Depot today, it's got to walk a cap approximately $400 billion.

$400 billion. $400,000. That's a lot of money. Huh? No bad. What bad deal most stands out in your memory? We don't have six months, sadly, but we got a few minutes. What bad deal is most memorable?

I did a deal that I got by virtue of there was an article in Fortune magazine after Perot deal. The title of the article, The Fastest, Richest Texan Ever about Perot. And in that article, he was incredibly generous in describing me. The guy called me up from Avon, New York, outside of Rochester. They were building modular homes. In fact, I went up to see it. It blew my mind.

I got so caught up at the moment for what they were doing. I failed myself to take a step back and talk about the people, but I did. And together I had a hot hand, the stuff of what I could do that people weren't going to jump on. Those guys had to the foregoing to jail. Fortunately, I didn't know anything about it. They left me. We looked at a deal for it. In 1970, it was a bad year.

They left me and they went to Merrill Lynch. It's all about reputations. Always is. It always will be. Nothing matters to me more than I was a member to keep in my word. Curious how the hospital thing resolved. It was a mess when you showed up and you oversaw it for a long time. And it's one of the best ever. We're number one in America. We got a culture that won't stop. We're heading on all solarists. We got three and a half billion dollars cash in the bank. The brand is thing of all. We took over a rundown, broken down hospital in Brooklyn called

Lutheran Hospital. The zip code has the highest percentage of welfare patients in the United States. It's the poorest zip code in the country. We don't make a nickel on that hospital, but that hospital on a show and was now right, number one. We have three hospitals, Long Island, Brooklyn, and Manhattan. We put all those three in separately. All three of them separately got eight. Number one, how good are we doing?

We're kicking ass and taking names like, you can't believe. Is it all culture? 100% Oh wait a minute Whoa Whoa Culture And making sure

You bring the very best With you As you embrace that culture We're number one in brain surgery We're number one in neurology In the top 10 in virtually Every Special League of name Urology

Dermatology You name it We're there How do we do it? We celebrate these people We pay them well Okay, we pay them well But we're delivery

a product second to none. A guy shot me the other day in a restaurant. I own a peaceful restaurant, Danny Bogor, called Gallagher. It's unbelievable. That there's a good example. The kid that runs Gallagher's in. He's 60-7, I call him a kid.

He bought that restaurant. I was doing $6 million a year, 2012. Last year he did $30 million in business. One restaurant. Home rot. This year he's going to do $33, $34 million in business. It's all about the people.

Now, all I can say to you is, I'd say all the time, under promise and all the deliver. But it's always about the people. And if you get those people to know, you're going to take good care. You've got to be fair with them. It's critical. This guy in a restaurant the other night comes to me, he's starting to go. You must lying on it.

Yes, I am. Your hospital saved my wife's life. That's a pretty strong statement. He said, no, no, no, I'm telling you. He's got tears coming down and say, I said, you know, what did you think? You said, babe right day. Who made me? She'll wake up somebody.

How do we do it? Go to him why you and grab a guard. They think I'm a work job. I walk in and I say, I say, it was security. He's a big security guy. You're happy? Yeah, I'm happy.

You like it? I love it. If you ever got a problem, I hope, you know, I am. Call me up. And I prefer they call me Ken by the way. Mr. is a barrier that blocks you from authenticity with each other. Call me whatever you want.

Just don't call me late for an order, okay? I mean, that would piss me off. The last question I ask everybody is what is the kind of, kindest thing that anyone's ever done for you. Oh, God. I've not so many current things done for me. I can't count. I'll give you it, for instance.

You know one thing. I worked in a butcher shop as a kid. I'm on my many jobs. I had two or three jobs at one car. In fact, I worked in a butcher shop, and the guy that ran a butcher shop didn't know. I worked for the supermarket down the street, down packing. I said the shelves up on the store closed,

nine o'clock a day. He'd have fired me if you'd known it. was as competitive. Anyway, next to the butcher shop was a liquor store. And the Yoran family ran, maybe we had five Jewish families in town, Ross. Lenny Ormond, good man, came to me, said to me, hey, kiddies, you want a couple of bucks? I said, yeah, sure how. A couple of bucks, I'd kill you for a couple of dollars. What do I do? He said, I want you to use it. I got cardboard boxes that the liquor comes in. I put him up. He had a little porch back of the store. He says, This is a garbage company.

We'll come and take them down 150 yards where there's a spot where they pick them up. You got to take the boxes. They're there. And I said, I'll give you a dollar a week. Two nights a week, 50 cents. You got it, money. About three weeks after I'm doing it, one day I'm carrying the boxes. The guy on a garbage truck is there putting the boxes.

But I notice you're breaking the boxes up. What are you doing with the boxes? He says, it was a lot of money. What are you going on? Yeah, he said, I break them off and I tie him up or I take them to the junkyard and they buy this scrap paper. I'm going to see again. He's all.

I'll probably get three bucks a day. Who can? Yeah. So I go back to, Lenny. I said, Lenny, you got a deal. I said, if you let me break the boxes up, a stack of them in a pile on, because over the box is broke, you got a lot of space. I'm going to tie them up with twine.

And we haven't got to pay me in it. Why not? Because I'll be able to sell. look, okay, two to four, make a three, four, five dollars a week. So on the boxes. About a year after that, I'm all prepared for liquor store. He said, hey, come here. He said, here you going to college.

I said, yeah, come on in. Takes me in, he had a counter, and he had a little opening to the back. In the back, the shelf and the back of the county, here's a county, here's a little shelf or the back of that shelf. You have a little desk where he did his bookkeeper, takes out a dollable. He says, he's going to a trial. He said, who might need this? He put a dollar a week in the envelope. For all those weeks, I was selling my, selling stuff.

You talk about kindness? There have been so many people who have been so kind to me, I can't count. People are good. Talk about kindness. If you gave me a month, I couldn't have enough time to list to all the people that have been good to me. me. This is one of the reasons I believe in God. I really do. That's me. Your story, your book, all your ideas, they're wonderful. Remember this? Most important thing in that book covered, an American story. It only happened in America. This is the genius of America.

That a poor kid rough around the edges like me could do okay. That whole promise that ain't, not to the matter of one. Now with a silver spoon in my mouth, just, the chance to live in this great country was all I needed. I've so enjoyed our time together. Thanks for doing this with me. Cheers. If you enjoy this episode, check out join colossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.