Motley Fool Hidden Gems Investing - 1 CEO Cooking Up Big Returns

Episode Date: March 6, 2015

Costco and Wayfair deliver the goods. Lumber Liquidators collapses. And two big tech stocks make a big switch. We discuss those stories and more. Plus, Motley Fool CEO Tom Gardner talks with Middleby CEO Selim Bassoul about hot ovens and hot stocks. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill, joining me in studio this week from Million Dollar Portfolio, Jason Moser. Thanks for being here, my friend. Well, it's an intimate setting today, right? It is. The winter weather hitting the East Coast has left us a little shorthanded this week, but we still got a great show. We've got the latest retail earnings and a big switch for two of the biggest technology stocks. We've got a CEO interview you are not going to want to miss, and we'll give you at least one stock to put on your radar. But we begin this week with the big macro. The monthly jobs report came out Friday morning. The U.S. added 295,000 jobs in February.

unemployment falls to 5.5%. And Jason, 12th month in a row, the economy's added at least 200,000 jobs. Yeah. And I mean, you have to feel really good about that. I think more jobs is obviously what we're going for here. And U6, which is sort of that broader measure, is also coming down, which is good to see. Long-term unemployed remain relatively flat, but encouraging that it's fallen by about 1.1 million over the past 12 months. So, that's all encouraging. Well, I think at some point, though, here, we have to sort of enter this argument or sort of this debate of quality versus quantity, right? Because while unemployment is improving, wages aren't really improving so much. And yet, we are going to see here, as time goes on, costs continue to go up.

So, you know, I look at the food service industry as an example there. That represents about 10% of our overall workforce. And that's obviously an industry with a lot of churn there, but it's also one where wages are relatively capped. And we've seen a lot of restaurant companies, fast food in particular, really pressing for a higher minimum wage here at some point. So, it'll be interesting to see how that battle plays out there with higher wages, and if that'll really play out on fewer jobs down the road. But yeah, more jobs is great. Again, it's a bit concerning that the average employee just really isn't making much more these days. And with a savings

rate that is so low, it's reasonable to at least be concerned about that. Let's get to a couple of retailers making headlines this week. Costco's second quarter profits rose 29%. Same-store sales up 2%. Looks pretty good, but it seems like Costco, when you look at the valuation of the stock, didn't really move off of what was a pretty solid quarter. Yeah, it was a solid quarter. I mean, there was nothing really to sneer at in regard to what they did. And I think that, really, with Costco, the thing is, it's just kind of the same story, quarter in and quarter out, right?

This is a really consistent, well-run business that keeps on doing a wonderful job of maintaining those high renewal rates. And so, you see the renewal rates of 90% plus with consumers in the U.S. and in Canada. And I think that's really a testament to the value that the company provides, that the consumer perceives they're getting. So, with Costco, they maintain a footprint today of around 671 stores. They still see that opportunity of getting to 1,000. And I think that's important to note here, because while it looks like it's kind of expensive

on the surface, it's also one of those stocks that never really looks cheap, yet it's such a quality business. And when you look at that runway for growth still, I think that that's something that should open investors' eyes there, and at least let them consider Costco as a stock that's still worth owning today and holding for a long time to come. Not nearly as big a household name. Wayfair is the online catalog company that sells home goods and furnishings. Fourth quarter profit and revenue came in better than expected. They raised guidance for the first quarter. Stock up nearly 30% this week. This was a blowout.

It was. And this is a really neat story. It's phenomenal, the rate that they're growing sales. Just back in 2012, sales came in at about $600 billion. This past year, 2014, they brought in $600 million. This past 2014, they brought in $1.3 billion in sales. So, they've better than doubled sales in just a couple of years, which I think is phenomenal. Especially when you consider, it wasn't that long ago, we saw this when they first IPO-ed. We're thinking, well, this is going to be a company that's really going to face probably some serious challenges from Amazon.com, among others. But it's a founder-led business that They've set this business model up so that it's more like a tech-slash-logistics company.

What they do is, they maintain these web properties that allow consumers to go shopping for those home furnishings and whatnot. They're really playing out on the convenience of the internet. They're playing out on the consumer that really focuses on wanting not to pay for shipping. So, anything over $49 that you order from Wayfair, shipping is free. That's just something that they're including in their cost of goods, so to speak. So, I know that between the service side of things, they know what the consumer wants, and they're really focusing on that. And then, when you look at the market opportunity that's out there for them, it's around $230 billion overall, that market opportunity today. And that doesn't include any international

opportunities that still exist out there. It's going to be a market opportunity that continues to grow over time. And with this trend towards e-commerce, I think that you have to look at Wayfair as one of the companies out there that's really helping shape that path. It's no longer just Amazon.com. Wayfair is really doing a good job of it, too. Two years from now, you think they're a standalone company? You think a big fish buys them? You know, I think that these guys really want to build this company and not be acquired. So, I have a feeling that we will be looking at Wayfair as a standalone company for some time to come. It wasn't that long ago, before they went public, I really thought Amazon

might have jumped in there to try to buy them. But what they're doing is working, and I think they're really excited about it. So, I think they're going to keep it up. Last week, Lumber Liquidators was around $70 a share. That was before allegations that the company sold flooring imported from China, China with excessive amounts of formaldehyde. And Jason, there was a 60 Minutes piece that was just so damning about what was going on in China and these excessive amounts of formaldehyde that were way above U.S. standards in California. California. The stock has since been cut in half. Is this a buying opportunity, or is this a stay away until the dust clears? This is what we call in the business

a dog with fleas, Chris. I don't know that I'd be recommending anybody buy these shares today. This is not a good situation. I don't know if you had a chance to watch the 60 Minutes piece. I did, and really, there was no way to spin this thing in a positive light for the company. The way it looks now, the company is trying to contest the way that the testing was done, and they're saying that this deconstructive way the testing was done isn't the proper way for it to be done. And the problem with that is that, regardless of how the testing is done, the formaldehyde level is the formaldehyde level. I was going to say, I don't care how the test was done, I don't want formaldehyde

in my brand new kitchen floors. Precisely. The consumer doesn't want the formaldehyde in their kitchen floors, either. So, they're going to have a really hard time going in there and figuring out how to spin this positively for anyone. And so, we're seeing a company that's going to face a lot of lawsuits, they're facing congressional investigations, and really, the worst part of it all is that they maintain a balance sheet with just a very limited amount of liquidity. Now, they do have opening to a line of credit that they can use, but just because they have that line of credit doesn't mean that it's necessarily going to be extended to them, particularly if they're facing a

a lot of litigation here down the road. So, I think you have a company that's got a lot of problems ahead. I don't see any quick resolution to it. And I think that, really, the hit that the brand has taken here is going to be very difficult, if not impossible, to recover. The Dow Jones Industrial Average is supposed to be a barometer of the 30 most important companies in America starting March 19th. AT&T is being dropped from the Dow Jones index and taking its place is Apple. Really? How is Apple, which has been the biggest market cap company for a while now, how is it taking this long for them to make this move? Yeah, it seems like they could have done it a while back and it would have made more sense.

You know, this typically doesn't really mean much one way or the other. I mean, the Dow is representative of just a small cross-section of the economy. That's why we prefer to look at the S&P 500. I think it's worth noting that with the Dow, though, because the Dow is a price-weighted index, so when you have stocks with these very high prices, like Apple had, $500, $600, $700, that's going to give it an overweight position in that Dow index. So, when they split that stock, that's actually what enabled this to become a consideration. But, yeah, it's encouraging to see that they're bringing the Dow into the 21st century. This was just one of those things that I imagine they felt like they could do it now, so why

not do it? But it doesn't really change anything. Apple is still going to be Apple, and companies can maintain their positions on the S&P 500 index as well as the Dow. It's no biggie one way or the other. Earlier this week in Alexandria, we held Fool Fest, which is our annual two-day investing event. We had members from our Motley Motley Fool OneService, Million Dollar Portfolio, Supernova, Motley Fool Pro. Hundreds of members coming from across the United States and from outside the United States. So, thanks to everyone who made the trip. But a very special thanks to Jeff Ulick, one of our members, traveling from the Middle East, bringing a lovely note for the Motley Fool Money crew, as well as

some chocolate and some international tang, some lemon pepper tang. You know someone's been listening to this show for a long time, when they're bringing the Tang. So, thank you, Jeff, for that. We've got about a minute left. Give me a stock that's on your radar. Well, you said at the beginning we'd give you at least one stock on the radar. I'm going to give you two here, Chris. It's a news article out here where Amazon is now listing on Alibaba property Tmall to open that market up to China. I think that's just really encouraging from a number of different perspectives. But it's right in line with Jack Ma's strategy here, his vision of really bringing China up to the more importer status,

bringing goods in from the United States and bringing them in from Brazil and from Russia. So, I think that Alibaba, with its market opportunity, it's a great long-term look at a difficult market to understand, but China's got a lot of opportunity there. Thank you, Jason Moser. Up next, a conversation with a remarkable CEO you've probably never heard of. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. You may not know the name Middleby, but chances are you've crossed paths with the business recently. Middleby makes commercial equipment for restaurants and food service companies. The brands include Viking, Toastmaster,

and Turbo Chef. The stock is a longtime Motley Fool recommendation, and it's been a long-term winner for investors. This week at our FoolFest event, Motley Fool CEO Tom Gardner sat down to talk with Middleby CEO, Saleem Basool, in front of a live audience. And the conversation began with some high praise from Tom. I've said and continue to believe that Saleem is the most remarkable leader and CEO that I've ever met and encountered in 22 years of Motley Fool work. We'll have a little opportunity to go through some of Saleem's personal story, some of what's happening at Middleby, and how he thinks about the company going forward. The company's market cap is above $6 billion. Saleem, what was the company's

market cap when you became CEO in 2001 ballpark not to put you on the spot less than 50 million yeah this is this is a company that has risen 110 times in value since Salim became CEO in 2001 that's uh thank you thank you thank you I'm gonna say something so I'm gonna remind you Tom about something since we're gonna have a dialogue here I was not always loved by the fool So there has been, if you remember, there has been a period where the fool did not love us. And it's good because the relationship that we've had is to listen. So when you didn't like us and some of your members and reporters said about us that we were not performing as we needed to be, we listened and changed. And that's why I'm here.

And I know that you can also turn that love into hate. So I have to make sure that I listen. And I hope today I can take something back to my team. I hope it's not only one way. I want you to basically challenge me today so I can take something back home so we can keep that stock going in our valuation. So I want as much input from you since you are all shareholders. So I want to listen from you and see if there's something that we should do differently. I want to take it back to my team.

Everybody is aware that I'm here today, and I didn't know that the room would be as full of shareholders. So let's make sure that I get something to take back to my team. Awesome. Let's start with your personal story, Salim. Where were you born, and how does where you were born and raised have an impact on who you are today? Well, I was born in Beirut in Lebanon, and I went to a Jesuit school. and they were basically all boys' schools and the gestures were tough.

If you didn't make it to the grade, they eliminated. So you started with basically 600 boys and kindergarten you ended up with 100. And those 100 have all performed. So you had a long day with the priests, basically studying and learning all those languages. But what marked me differently than anybody else is that my parents and my family didn't come from an entrepreneurial family.

They were mostly, my father was a civil servant. He was an Olympic swimmer. He was not highly educated. And he had become my idol. So why? Because he taught me several things early on in life. When he started competing, there was no swimming pool in Lebanon. So he's a swimmer practicing in the Mediterranean, in the open waters.

It's only when he got to Europe in the late 40s that he ended up seeing the first time competing in a swimming pool. He ended up winning many, many medals. And in 1948, he represented Lebanon at the Olympics in London. So the lesson I've learned is not the tools you have. It's literally how disciplined you are. He had no tools. He did not know what the pool looks like. He didn't have the best coach.

And he ended up winning. The second person who influenced my life was my aunt. She's a sister of my dad. She was a beautiful woman, very, very smart. She was probably the most educated of all our family. She ended up becoming a nun. And she died a few years ago, and she is considered the Mother Teresa of Lebanon, of the Middle East, not only in Lebanon.

And when I became a CEO and I started performing, she reminded me of one thing. She said, Selim, lead with your heart. Remain connected and compassionate. In business, you'll make decisions. She said, I make decisions, too. I have to turn away some people that I can't. I don't have enough room to take more orphans. I don't do that, but I do it with an open heart.

I don't ever do it with a hidden agenda. Your parents and you and Andrea and I rode to the airport in the traffic in Chicago after we were on stage in an event together where your work was being celebrated by the executive roundtable, executive luncheon in Chicago. and your parents were telling me that and it reminded me of our gathering last year together with Malcolm Gladwell and there was a chapter in his most recent book David and Goliath on dyslexia do you have the condition of dyslexia

did that have an impact on your childhood and can you relay some of the thoughts that your parents shared as we were riding the car for many of you who have children so I'm going to give you a hope how many of you have children and I'm going to give you a hope so I always amongst the hundred

ended up at the bottom of the class. Either at the bottom or just above the bottom. And so I'm always, always number 100 or 99 because I had a severe dyslexia that the Jesuits, and at the time in Lebanon, they could not diagnose. So what happened is I had a type of attention deficit disorder because I could not stay much. I could not understand.

And I looked at the blackboard, and most of the time, I missed the numbers. I missed whatever it is. And ultimately, I had to stay through the 100. You drop, you're out. So I started relying on memory, and my mother would most probably say, you're not getting out of this school. You're out. We don't know what to do.

Civil War in Lebanon, this is your passport to getting out of Beirut. You need to get us through that school. So I had ended up memorizing everything. So I will tell you, there is hope. So I did not have great, good grades. The pace of this class was too much too hard for me because I was not being able to catch up. And then it happened that I saw me ultimately when I ended

up at the American University of Beirut, I excelled. It's only when I came to Northwestern to my MBA that I found out that I got diagnosed with dyslexia. In fact, a professor of mine called Haskell Beneshe said, Selim, let me ask you a question. On your exam, I'm always finding that you're mixing some of the numbers. Are you dyslexic? I said, I don't know what it means.

He said, I think you're dyslexic, and that's what I discovered. Coming up, Selim Basul talks about how dyslexia shaped his leadership. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill, and this week we're sharing Motley Fool CEO Tom Gardner's conversation with Salim Basool, CEO of commercial oven maker Middleby. How does putting those two together, growing up in Beirut in the middle of a civil war

and having a condition that was not diagnosable in the school that you were in, And how does that impact decisions that you make today as a CEO? How does that impact and how has that led you to become the leader that you are today? I don't know if you saw the Malcolm Gladwell interview. I know you're a Motley Fool one member. But he talked about how a select group of people in that type of condition end up excelling to a great extreme. And I wanted to hear what you think. Or failing.

So it's either one. There's no middle. So either you fail very, very strongly, or you win fantastically. So the question has been is, knowing this, I always surrounded myself with the best CFO I could get. So it started with the best number guy I could get. And I decided that I need to surround myself with people that has the patience to clean after me. Why? Because I'm a vision guy. I'm not a detailed guy.

I can't get into details. So I surround myself with people that literally can execute my vision very well, and they have the same culture as me. They are patient because I'm impatient. So exactly, I'm impatient. They are very patient. I am emotional. They are rational. I am a big vision.

They are very detailed. And I committed that those people stay with me. I'll talk about this in a little bit longer, how I've been able to retain those people. So surrounding myself was being number one. Number two, there was something that helped me when I grew up. My family was asset-rich, cash-poor. And in the Civil War, you could sell any asset you have, but nobody wants to buy it. Similar to what happened in the recession here.

You have a house and it keeps on, people want to steal it. Because when they know there is blood, the sharks arrive. my family taught me one thing every day my father come back and say how much cash we have today it doesn't matter if we have building so ingrained is me when I started early on in my career even before I joined middle B I was the first one I was at the time at a company called premark that ended up being bought at ITW prior to that I was an American House Supply and was a leading most probably rising star there because I always ask my people, my salespeople, how much cash did we brought in today? It didn't matter if you had ordered or sales, if they didn't pay us, it didn't

matter. I run company, the middle B today, it's run on cash. We are a very high cash generator. I am basically set up a system where every week I basically know what the cash was brought in. If I don't like the cash being brought in, a meeting is gathered among all my division present say, I need cash. I don't want you to sell. I want you to get cash. So the culture of cash is important to me. Let's talk more broadly about the culture of the company.

You have unbelievable retention rates for the people who work at Middleby. You have more than 3,000 people that work at Middleby and retention rates annually of 98%. So maybe start with how you select leaders and then how do you create a culture and an organization that people want to continue being a part of in good times, in tough times, not just staying there themselves, but I know you've talked about hiring entire families and the beauty of having multiple generations working for Middleby as well. So some of the methodology on selecting leaders and on developing a culture.

Well, the first thing I've done is something called number three. Three degrees of separation separates me today as it did 20 years ago between me and my lowest employee across every division. So I don't allow more than three degrees of separation, meaning between me and my lowest employee, whether it's a welder or a receptionist, there's no more than three degrees of separation. It's very tough to do. Why? Because you have people with you who have been with you for 20 years, and now people create false titles. So they now have manager reporting to a director, reporting to a VP, reporting to senior VP.

It doesn't happen at Middle Bay. There are no titles. There's basically, I tell you, whatever title you want to have, you can have it. There's not a lot of HR. It's only three degrees of separation. Number two, I've talked about it for a long time. I avoid four types of people. The sniper who gets up every morning and snipe at somebody else.

It's somebody else's fault. I couldn't do my job because accounting or engineering didn't do this. Done. The whiner. They come at work every day whining that the weather is not good. We don't have a great coffee machine. Our toilets are not as they should be. We don't do this.

Gone. I don't hire them. Passive-aggressive. They tell you exactly what you want to hear. And then at the end, let's talk about cash. I get a controller. Their cash is low. I say, Phil, how come your cash is low?

Oh, I'm working on it. We're getting cash. It's coming tomorrow. We've sent letters. The second month, the cash is low. Phil, have you done that? No, no, no. I didn't have time, but I will do it next month.

He's gone. I don't have time for passive-aggressive. And number four is the contaminator. The contaminator is the most difficult. They are most probably people who are extremely smart, and they will use all their intelligence to tell you why it cannot be done. Okay? So they get a lot of following because they are smart. So they are in the meeting, and they will use all their arguments and IQ to tell you it cannot be done.

So I get those people out. And then finally, incentive. I have been a big incentive. I've made many, and you as shareholder have benefit. I've made our people, I pay our people very well. I put them aligned to you and me. At one point, I used to be the biggest shareholder of Middleby. So I wanted, like you, to make sure that my people who've been with me are aligned with me.

So I gave them a lot of shares. And I said it's based on performance. It's not grants that because you stayed 30 years, you take that. You have to keep on getting the stock up. So incentive played a big role for us. Let's jump forward to the product line and subsidiaries of Middleby. Can you give us a walking tour of a handful of different products that are in the mix at Middleby right now that you're really excited about? We have a lot of interesting products.

I will tell you that I touch your lives more than most people. While we're not sexy as a business, I touch your lives a lot. Now, you know that when you go to Starbucks and Dunkin' and Subway and Cheesecake Factory and Buffalo White Dwellings, it's baked on our product, most of it. But let me show you something interesting. If you get a ham or a bacon or a sausage or a chicken from Costco, that chicken and that bacon and that hot dog is processed on our equipment. So this is a new thing we've entered in 2006, which is the food processing. And now, when you think about Viking residential, Viking and Uline, we now touch the high-end market with this. So exciting product we have today.

I'll talk about this. Innovation. So in Las Vegas, we unveiled something dear to me. Zero preheat on all our residential ranges. amazing. It's disruptive. We'll be the only one in the world to be able to do this. So let me tell you why. I am a big Costco user. I like to, Andrea and I like to go into Costco. We buy everything at Costco. I think most of everything here. The thing you don't see in my socks and this shirt is old costco so uh so ultimately i buy everything from costco i like this jim senegal in his

philosophy i always did and we'll talk about this also about why we've learned from him but what happens is i get the croissant in the morning and by the time you heat your oven how long does it take preheat the oven the oven is cold you come down you say i'm gonna get a coffee and this croissant i got from costco how long does it take to preheat the oven there's no 10 minutes There's no 12 minutes. I can tell you the minimum to get to 350 degrees is between 15 to 20 minutes. 20 minutes, I don't want to get that croissant anymore. I'm gone.

How many of you have had that experience? Raise your hand where you give up. Or you get a pizza. You have somebody over. You have a frozen pizza. And you put it. You say, by the time I preheat the thing, I don't need to. So it drove me nuts.

So what I did is I turned around. I said, we should take out that preheat system. So we worked at it for two years at Viking, and now we have a zero preheat. So when you buy any Viking range, any Viking wall oven, there's no preheat. You take it out, and we eliminated that 15, 20 minutes preheat. So on the label, if you say preheat your oven to 350,

and then you cook, the oven within most probably a minute or two minutes will start cooking right away. A huge disruption. It was huge at the show. So as shareholders, you should be very excited. We've disrupted residential. And Saleem, maybe this seems like there's some obvious answer to this, but really, why wasn't Viking doing that before you acquired Viking? What elements, what are the traits of a culture that thinks about eliminating preheat as part of their residential oven when no other oven companies have done that?

And I ask that question not just about Middleby, but as investors, how do we find the cultures that are focused on disruption and have the traits that actually are more than a marketing spiel about how they're disruptive? There were three reasons why. It's not only Viking. You look at Sub-Zero and Wolf. They saw themselves as marketing companies versus innovators. So Viking was a marketing company. So what they did, they saw themselves are marketing a piece of furniture in your kitchen that really did not perform as well. So when people bought a Viking or a Sub-Zero or a Wolf, you're paying $11,000 for a refrigerator because you want that status symbol, but it doesn't do exactly what it does.

So basically, today, I discovered that a Sub-Zero refrigerator or a Viking refrigerator is not better than buying a Frigidaire, except that it has a status symbol. Number two, in that specific example of Viking, the owner started being interested in literally wineries and owning hotels and owning an advertising company. So he lost focus. Number three, it was a culture of lack of quality and fit and finish. So I could tell you what makes Middleby different than anybody else. And in your case of finding an investment, our people like to spend time in kitchens, in our customers' kitchen. We like to spend time on the shop floor. I could tell you when I came to Viking, those people never went to the shop floor.

Well, if you design a product and you can't have it built by your people, and how easy it is, it doesn't work. Coming up, Tom talks with Salim about executive compensation. Stay right here. You're listening to Motley Fool Money. welcome back to motley fool money i'm chris hill now let's join more of motley fool ceo tom gardener's conversation with celine basool ceo of commercial oven maker middleby when we talk about the strategy that you've taken at middleby i know that some of your shareholders have sent you a copy of will thorndyke thorndyke's book the outsiders and have suggested that they think

Middleby is the next chapter that should be added to that book. To what extent do you believe that's true? To what extent have you heard about the outsider methodology and do you see a pattern that you've utilized? Or do you think that that's a mistaken read on the higher level approach of strategy at Middleby?

Well, I read the books and definitely there are some great, great chapters in there and some great leaders. But I will tell you what I'm humbled that some of you thinks I should be in the next chapter, but I'm not there yet. 40% annualized return since 2001 would fit very well in that book. Well, I am humbled. But I would say the thing that we do is we're contrarian.

We disrupt. What we do is I've learned a long time ago that customers don't drive innovation. That's a big, big revolution for me. It was a big revelation. It was a big revolution with our company. No customer will tell you what to do. And the big example is our waterless steamer. No customer came to me and said, I want you to steam without water.

They've never heard of that. And we did it. And it's been a big, big success for us. And I find out, similar to Steve Jobs, nobody told him. They used to be a computer company and then became an iPod company. You know, they had music, and then they became the phone, and they changed the phone. And nobody told them. In fact, most probably, a lot of people say, why can't we take a BlackBerry and enhance it?

And I remember the debate, because I know many people at Apple, and the debate was about, should we put a keyboard or not? Because everybody at the time, BlackBerry was the big one. And what happened today, we listen to our customer a little bit on a big trend, but we tend to innovate. Nobody came to me because you would not know that you could get to an oven that has zero preheat. You would love to hear it. You will never even engage with me in this conversation

and say it's crazy. So we create things that ultimately dazzle you. How do you articulate the competitive advantages at Middleby? Maybe top three, if you want to rank them, great. But what do you see as the reasons that you feel protected from being disrupted by an upstart or another company in the category?

First, focus. We are the most focused company in the space. What I mean by that, we understand very much what we do. We do it best. Nobody can beat us on combustion. Zero. There's nobody in the world that knows combustion and cooking than Middle Bay.

I will challenge. I will win every test. I will win the MIT test. I will win any test in the world. Number two, continuity of our people, 98% retention. Our people have so much knowledge. So, interestingly enough, when you talk about this, our customers' churn out is humongous. So, when YUM changes a new president at KFC, because they have a lot of changes there, either they get promoted or retired or fired,

they come to Middleby to ask for history, because we can tell them what two presidents, two CEOs before did the mistakes, because we've still been there, the same people. So we've become a wealth of knowledge that our competitors don't because our competitors have churned. So I'll give you a perspective. I'm the longest-standing executive in the industry in the same role I've been. My three closest competitors who are public, ITW, Manitowoc, Dover, and then I can go to everybody else.

In 20 years, me at the head of this company, or 15 years at CEO, I've seen them churn five or six times. They're my equivalent in their group so continuity the third thing is Pushing the envelope and creating Such trends we follow trends better than anybody else in our innovation trends is a big thing I spent a lot of time on trends. My final question is Salim in 2013 shareholders rejected your compensation plan and

And I looked at that with complete surprise until I remembered that the reality is we all want to compensate for some normal range. And a company that I see that does this so beautifully and completely opposite to that normalcy is Google. And Google has a new book coming out by the head of their people team. It's a wonderful book. And one of the chapters is entitled Pay Unfairly. And basically, you could have two developers with the same job title, and one of them is making 10 times more than the other person sitting next to them on the same team because they pay unfairly for performance. So it looks to me like the marketplace says we don't want to pay unfairly, whereas my thought, Salim, is we want to give you a big equity grant that vests over the next 10 years so that you continue to lead the business as CEO or as chairman of the organization. How do you think you should be compensated going forward?

And what would cause you to go, yeah, that makes me, I'm excited to be CEO for the next five to ten years? Tom, I will tell you the answer. The people who found, who got it right, is private equity. Private equity take businesses, they keep those people there, they give them a big share of the equity and say, when we exit, you will make money. And fortunately, there is a company called ISS, Institutional Shareholder Services, that said, no way, you have to be paid equal to your peer.

We take part of your peer and use this way. I think we should be paid for performance. If today I came to you and I said, this is the market today, it'll be $6 billion in valuation. incentivize me and my team to take it to $10 billion in market cap. I should deserve, me and my management team, a cut of this. If I don't get it there, if we set the target aggressively and I don't get there,

don't give me the money. When nobody loses, anyway, you always have a veto. The board has a veto to fire us. The key is we need to feel aligned with you. To hear the entire interview with Salim Basul, plus a whole lot more from our Motley Fool One team, you can just go to radio.fool.com slash one. That's O-N-E, radio.fool.com slash one. That's going to do it for this week's show. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening, and we'll see you next week.

We'll be right back.