Motley Fool Hidden Gems Investing - Motley Fool Money: 08.27.2010

Episode Date: August 27, 2010

Aflac CEO Dan Amos talks about the business behind the duck.  Drive author Dan Pink talks about the business of motivation. Corporate Library co-founder Nell Minow talks about the movie business.  And journalist Eamon Javers talks corporate espionage.    Learn more about your ad choices. Visit megaphone.fm/adchoices

Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. Welcome to the show. I'm Chris Hill, and this week we have a special edition of Motley Fool Money, sharing some of our favorite recent interviews. Best-selling author Dan Pink talks motivation and shares some tips for parents looking to motivate their kids. Eamon Chavers gives us a look at the shady world of corporate espionage. And Aflac CEO Dan Amos talks about the story behind the duck. But joining me on the line right now is Nell Minow.

She's the co-founder of the Corporate Library, which reviews corporate boards. And she's the film critic known as the movie mom. Nell, always good to talk to you. Well, thanks. It's great to be back on the show. I want to talk about movies in a minute, but I want to begin by asking sort of a big-picture question. You're in the business of evaluating corporate boards on things like CEO pay, the company's financial planning, how the board responds in a crisis. In the wake of the financial reform, President Obama has signed into law. Do you feel like things are getting better?

Too soon to tell. I think that with regard to the financial reform, the issues that I care about, we came out a little bit ahead. I really wanted to see majority vote included in the reform package. It's unthinkable to me that boards of directors include members, even though a majority of the shareholders have said, you know, basically we're voting you off the island. And yet it continues to be true. at the corporate library, we discovered six directors who received less than a third of the support from the shareholders, and most of them are still on the boards. So I really wanted to see that in the package. On the other hand, we did get kind of, sort of proxy access. It was in,

it was out, it was up, it was down. Now it's been sent over to the SEC, and even though the Chamber of Commerce is sitting there with their rifles aimed at it and saying, no matter what you come up with, we're going to challenge it and drag it out as long as possible, it's still a step forward. Now, one of the recent shakeups in the corporate world involved the sudden departure of Mark Hurd, the CEO of HP. Now, here's a guy, he's credited with turning around HP, creating billions in shareholder value. But Hurd was accused of sexual harassment by an outside marketing contractor. HP's board said that on their investigation, Hurd had not violated the company's sexual harassment policy, but that he had falsified expense reports. So, you know,

Heard's gone now. Some people are saying that HP overreacted, but we've got some shareholders who have lined up and filed a lawsuit against the HP board for... Well, the inevitable lawsuit by the usual suspects. But I'm going to tell you something that despite my best efforts, the press completely ignored that I think was a crucial factor in the board's decision. First, I've got to tell you that this board, they're serial offenders. They can't get anything right. They mishandled Carly Fiorina on the way in and on the way out and while she was there. Of course, then they had the whole pre-texting scandal, which was a huge mess.

Now, what was the pre-texting scandal? Well, one of the board members leaked some information, and nobody would fess up. And so they hired a private investigator to look at cell phone records and try to figure out which board member it was that had spilled the beans uh the detectives used a text a technique called pre-texting which is that they call up and said oh hi you know my husband lost his cell phone and i'm trying to look at the records you know that kind of thing they pre-texting they pretended to be uh the owners of the of the account and um not only did one of the directors quit in protest but when they failed to make the appropriate disclosure required by sarbanes-oxley about

the reason for his quitting. He just raised a huge, huge fuss over it. So that was another big mess. Then when they hired Mark Hurd, this is, you know, as you know, I read through CEO employment contracts. This is one of the all-time Lulu's. His contract provided that all of his first year targets were deemed to have been met. Wow, that's nice. Wouldn't we all like to have that? That's a sweet deal. Yeah. So right out of the gate, you've already met your goals for the first year? Go to the beach we'll see you next year fantastic i love that one so in other words this board doesn't know how to do anything right um and now this thing came up and they also handled it badly however there's one really important fact that nobody has mentioned about this case and that is this

in the post enron reforms a very very very important new provision is that uh if the um company is trying to get government business, and of course, government buys a lot of printers, if the company is trying to get a government license, and of course, this company sells a lot overseas, or if the company is trying to settle a case, and this company is in the middle of settling a $50 million fraud case right now with the government, all three of those things apply, then the company has to be able to prove incontrovertibly that they've got a solid ethics policy in place that applies to everybody equally. If a middle manager can get fired for fudging on his expense accounts, you've got to fire the CEO, too. You're listening to Motley

Fool Money. We're talking with Nell Minow from the Corporate Library and also the Movie Mom. Speaking of which, let's move over to movies. And I've got to give you credit now, because when we talked at the beginning of the summer, I asked you which movie was going to be a bigger hit, Toy Story 3 or Iron Man 2, you pick Toy Story 3, and the numbers bear you out. It's the number one movie of the year so far, over 400 million domestic, nearly a billion worldwide, so good call on that. You know, you can't go wrong betting on two things, Warren Buffett and Pixar. That's about it. A recent summer comedy that's out is The Other Guys. Did I read on your blog that you're saying that The Other Guys, which is a Will Ferrell movie, you're saying it's a

movie about corporate governance? How is that possible? Well, you've got to stay through the end credits. If you stay through the end credits, you will see that it's essentially a PowerPoint presentation about corporate corruption, Ponzi schemes, and the bailout. It's quite serious. It just goes on and on and on and on, flashing numbers. It's done in a humorous way, but it's flashing one number after another about the CEO pay, about the bailout, about how a Ponzi scheme works about, Madoff, et cetera, et cetera. And it's really quite something. Not only that, I don't want to give too much away, but I'll say that anybody who knows anything about corporate governance would have guessed the twist at the end. All right. Let's look ahead to the fall.

A couple of movies that are probably close to the hearts of investors. The Wall Street sequel, Money Never Sleeps. Yeah. And The Social Network, which is the Facebook movie. What's your take on these movies? And should we be lining up to see them? Yeah, they both look pretty good. The Wall Street movie, of course, has got Michael Douglas returning to the role that made him an Oscar. If you see the trailer, you'll see that it's very appealing. He's getting out of prison, and they hand him back all of the valuables he brought in with him, including, remember, that cell phone?

It's the size of a shoebox. Yeah, that gigantic cell phone. And, you know, he's got to come into the new world and see how it works. It's got Shia LaBeouf and Carey Mulligan, who are an off-screen couple as well. two of the most talented young actors out there. And so I think it does look very promising. And as for the social network, also a great cast. Not only Jesse Eisenberg, but also Andrew Garfield.

Keep your eye on him. He's the new Spider-Man. And with Andrew Sorkin behind it, this guy from the West Wing, you know it's going to have some very snappy dialogue and engage with some big issues. So both of those look good. And what's one movie to look for this fall that's not getting a lot of publicity but probably should?

One that I think is going to be very big this fall is red. Now, that doesn't stand for the color or the Communist Party. It stands for Retired Extremely Dangerous, and it's got Helen Mirren, Bruce Willis, and Morgan Freeman as former spies, and it's quite well done. You had me at Helen Mirren. Listen, it has two things that I cannot resist. One is Helen Mirren, Pack and Heat, and somebody says one of my all-time favorite lines, we're getting the band back together. Fantastic. All right, before we let you get away, let's do a quick round of Buy, Sell, or Hold. His stock is trading at an all-time low. He's on the verge of being delisted. Buy, Sell, or Hold, Mel Gibson. He's out for the count. He's gone. You can only

come back so many times, and he's used it all up. This was a huge hit for Avatar, but not so much for other movies. Buy, Sell, or Hold, 3D technology. I would hold on 3D. It's worked out very well for some movies very badly, for others, particularly those where it's been brought in after the movie's been shot. And it certainly is no substitute for a good script. Netflix recently announced a deal to stream movies from Viacom's Paramount, MGM, and Lionsgate through their joint pay TV venture Epix. So buy, sell, or hold the future of Netflix? That's a strong buy for me. And it looks like Hulu is going to go public, and I'd go a buy on that one too. I think streaming is the way to go in the future. Goodbye, TiVo. Goodbye, DVRs. It's going to be all about streaming.

And finally, buy, sell, or hold sneaking adult beverages into the movie theater. Hey, I'm an officer of the court. I can't comment on breaking the rules. I think if you're of age, that's always a strong buy. Nell Minow from the Corporate Library and the Movie Mom, thanks so much for being here, Nell. My pleasure. Coming up, Dan Pink on the business of motivation. You're listening to Motley Fool Money. There is nothing quite as wonderful as money

There is nothing quite as beautiful as cash Welcome back to Motley Fool Money. I'm Chris Hill. So what really motivates us? Well, if you look around, you'll see a lot of carrots and a lot of sticks. But if you ask our next guest, you'll hear words like autonomy, mastery, and purpose. Dan Pink is the author of Drive, The Surprising Truth About What Motivates Us, and he joins me in studio now. Dan, welcome. Chris, thanks for having me at The Fool.

So one of the things I like to ask authors is what surprised you most when you were writing the book, but you actually put it in the subtitle. So what is the surprising truth about what motivates us? Well, I mean, to write this book, Chris, I looked at 40 or 50 years of research in behavioral science about human motivation. And what the science shows is that these carrot-and-stick motivators, or what you can think of as the if-then motivators, if, Chris, you do this, then I'll give you that, are effective for relatively simple tasks, for solving simple puzzles, for carrying out a set of rules, for doing things that aren't all that interesting. The problem is that the science also shows that when you introduce even some small amount of, if a task requires even a small amount of creativity, conceptual thinking, those kinds of contingent motivators don't work. They often backfire. They often do harm.

And I think one reason these characteristic motivators persist, I think it's a couple of reasons. Number one, it's how we've always done things. So there's the inertia explanation. Another reason is that they produce results in the short term. I mean, if I say to you, Chris, I'll give you $1,000 for doing something, I got your attention. Yes. Yeah, right. Whatever it is, the answer is yes.

You got it, right? You know, you respond. And so you look about that in organizations. If I'm a head of a team and I say, all right, team, we need to be more innovative. So what I'm going to do to foster innovation, whoever comes up with a cool breakthrough idea, I'm going to give $5,000. You're going to get activity. People will respond to that. Science is pretty clear that they're not going to do anything that great, but they're going to work.

And you're going to feel as a manager like, whoa, what an inspiring leader I am to foster that degree of activity and response. So that's another reason. And the other reason is that they're easy. It's much easier to – You mean from a management standpoint? Management point, sure. It's much easier for me to say, here's $5,000 to whoever comes up with a great idea than it is for me to say, really tap true motivation, which has to do with a sense of autonomy, which has to do with a sense of getting better at something, which has to do with a purpose. That's much harder work for managers.

You're listening to Motley Fool Money. We're talking with bestselling author Dan Pink. Let's talk about, let's go in the other direction. Let's talk about some of the companies that you cite in the book, companies that have tapped into ways to motivate their management teams, their employees in some pretty creative ways and in ways that have really produced results. Let's start with 3M. Oh, well, 3M is in some ways the poster child for this because 3M figured out a new approach literally several decades ago with what they called 15% time. There was a CEO there, a very traditional CEO, who had this kind of renegade, subversive streak, who said, let's let some people have 15% of their time here to work on anything they want.

And lo and behold, that's where the Post-it note came from. Post-it note, which is one of 3M's cash cows, was not an official project. It was some guy's 15% project. And now you see it at places like, you know, that's a fairly well-known example. I think what Google is doing now is a fairly well-known example of 20, you know, they do 20% time. and a lot of Google's innovations are rooted in that. In fact, there's some, you know, one Google engineer I quote says, all of the good ideas here have bubbled up from 20% time,

which makes you wonder what they're doing the other 80%. But, you know, something like Gmail, which is ubiquitous, was a 20% project, not an official project. One of the most surprising examples in the book to me is not just a publicly held company, but one that's in an industry that is traditionally not known for innovation or greatness, particularly on a shareholder level, and that's JetBlue. Yeah. How is an airline making it into your book in terms of motivation? Right.

Well, what they do is I write a little bit about call centers, in fact, because call centers are among the most deadening, soul-hollowing jobs there are on the planet. Worst job I ever had in my life. How long did you work there? Six hours. Oh! Six hours. The boss came to check on me and said, how are you doing?

And I just looked at him and I said, I don't think I can do this. Yeah. So that's a little bit shorter tenure, but not that much shorter than the typical tenure. This is an industry or profession with typical turnover of nearly 100% annually. Okay. I mean, think about 100% annual turnover. That's like office supplies. And so there's some companies taking different approaches, one of which is JetBlue, which basically routes the calls to people's homes.

So you don't come to some cavernous, deadening call center with windowless rooms and people striding around monitoring you. You basically route it to people's homes, and they do it their way. In their pajamas. In their pajamas, in whatever clothes they want. They configure their own schedule. And, of course, what that does is that draws on a very different group of people and produces much greater response in the way of customer service. We're talking with Dan Pink, author of the new book, Drive, The Surprising Truth About What Motivates Us. There's obviously a lot in here about, as we talked about early on, the gap between what science knows and what business is actually doing.

So obviously much of the book is focused on business. But there's also stuff in here about education and about parenting. You have three children. What can you share with parents like myself about how to better motivate our children? Well, I do have three children, a 13-year-old, an 11-year-old, and a 7-year-old. And I have to say as a parent, and you probably can empathize with this, Chris, is that carrots and sticks are very attractive. They really are. They really are. Why are they attractive? It would be so simple.

Exactly. They're easy and they work in the short term. But I think they have a lot of collateral damage in the long term. So let's take an interesting example. Let's, you know, this summer, somebody I know, some family I know was, you know, the school's out and they're worried that their daughter isn't much of a reader, doesn't like to read that much. And so they say, I got the idea. We're going to pay her $2 a book. Every book she reads, we're going to pay her $2. Okay? It's just fraught with disaster. Well, you know what?

There's a certain logic to it. And the truth is, is that, you know, if you pay a kid $2 a book to read a book, that kid's going to read books. There's no question about it. Chances are that kid's going to go to the library and pick fairly short books, maybe not that challenging books, but the kid will respond to the reward. There's no question about that. The danger comes if you stop paying the reward. And so if you take a 10-year-old and you expect to pay her $2 for every book she reads the rest of her life,

if you have this kind of IV drip of money for reading, you might be able to sustain it, but eventually you have to pull the reward. And what happens? Inevitably, the science shows the kid's going to stop reading. Because what you've done is you've basically said that reading is like working at a fast food restaurant. It's something that only a chump would do for free. And that has huge collateral consequences over the long haul. The book is Drive, The Surprising Truth About What Motivates Us.

It's available in bookstores, on Amazon, on our website, MotleyFoolMoney.com. Dan Pink, thanks for being here. Chris, my pleasure. I'm going to own this town. I'm going to own this town. I'm going to own this town. Yeah, it's all mine. Oh, I even tried.

Coming up, Eamon Javers talks about the shady world of corporate espionage. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill, and it's time to dig into the business of spying with Eamon Javers. He's a reporter for Politico, and he's the author of Broker, Trader, Lawyer, Spy, the secret world of corporate espionage. Eamon, welcome to Motley Fool Money. Hey, thank you for having me.

So, I think when the average person thinks about spies, you know, we have visions of the CIA, the KGB, government agents, that sort of thing. But you've written a book here that the private spying business is becoming a big part of the way regular companies do business. How are companies using spies these days? Yeah, that's right. if you want to really understand the global economy, you've got to understand the intelligence piece of how companies, large financial institutions, law firms, and others are using corporate espionage to get an edge in this very complicated, expanding, contracting global economy. What I found is pretty much any time there's a major dispute, if you've got massive

litigation, if you've got a merger acquisition, a hostile takeover, perhaps, if you've got a hedge fund that's looking to get information. All of those are areas where espionage comes into play because the information edge that you can get from spying techniques and technologies can really help you win the day in a lot of those different fights. Well, and one of the things that surprised me in looking through your book is there are active CIA officers. They're on active duty and they can work freelance for these private businesses. How is that working? How does that happen? Well, when I revealed that in the book, the United States Congress was a little surprised to see that too. And they actually passed an amendment to the Intelligence Authorization Act

this year, a bipartisan amendment that said, you know, the Director of National Intelligence, they want him to report to Congress every year now on who these CIA freelancers are, where they're working, and what exactly they're doing. In the book, I revealed that because the CIA is under so much pressure right now, financially, they are losing a lot of people to this private intelligence industry, which pays a lot better than the government does, as all private industry always pays better than the government. The CIA decided that they have to have this moonlighting policy where they allow their guys to work nights and weekends in the private sector. And that's sort of everywhere in the private sector doing all kinds of different

things, but they won't say sort of exactly what. But what I found and I reveal in the book is that in past years, active duty CIA officers have worked at a firm called BIA, Business Intelligence Advisors, which was founded by a core group of veteran CIA interrogators, people with 20, 25 years of experience doing interrogations, who are now selling that interrogation experience and those techniques that they learned and developed inside the CIA in a corporate context, mostly to hedge funds who are looking to really eyeball CEOs when they're appearing on television or when they're giving their quarterly earnings calls and that sort of thing and really watching the body language and listening to the word choice the way an interrogator would

to get a sense of whether they're really confident in what they're saying, whether they're telling the truth or not. So CIA folks, active duty folks, were working at that firm in the past. We know at least that much. But there's a lot about this that we don't know, and I think that's why Congress jumped in after my book came out. They really wanted to find out a little bit more about where these folks are working and what they're doing. You're listening to Motley Fool Money. We're talking with Eamon Javers, author of Broker, Trader, Lawyer, Spy,

The Secret World of Corporate Espionage. So, you talk about BIA and how they're watching CEOs testifying. One of the things you write about in the book is how BIA listened in on an earnings conference call. This is back in 2005, and the company is Southwest Airlines. What was BIA listening for? Well, the key thing they listened for in all of these is indicators of deception. They pride themselves on the ability to do what they call deception detection. And they basically turn themselves into human lie detectors. And what they're listening for is any indication that the team, the executive team that's presenting on that quarterly call is not telling the truth,

is unsure about something, is hedging on something. And they've developed a series of psychologically based techniques where they can actually spot that, or so they claim. And it's all based on this principle, which is kind of fascinating. I got really into this when I was doing the research, and I was just incredibly fascinated by it. The principle of cognitive dissonance. And that's the theory that the act of holding two opposite ideas in your brain at the same time actually causes sort of subconscious physical discomfort. And people will do almost anything not to have that physical discomfort.

And so when people are being deceitful or lying, they don't tell a flat-out lie. They look for ways to hedge so that it's sort of true but still misleading. And the classic example of that is Bill Clinton during the Lewinsky affair when he said, there is no affair. Well, of course, that was correct when expressed in the present tense, but there had been an affair in the past. But he was telling the literal truth there in an effort to be deceptive without experiencing cognitive dissonance. The other thing that they found is that it causes physical symptoms of discomfort. And so people tend to scratch themselves or rub their face or they engage in what's called grooming behavior. They line up all the pens on the desk neatly and squarely or, you know, rustle their papers and line everything up.

And they try to clean the area where they are. All of that is sort of subconsciously driven behavior that these CIA interrogators say is an indication that the person is being deceitful when they're giving whatever remark they're giving at that time. So they're watching for all that in the CEO context. These also sound like good tips for the average listener out there the next time they go in a meeting with their boss. I tell you, I mean, you can use this in your day-to-day life. I mean, what's your wife up to? You know, I found, you know, a lot of it, just as an investigative reporter myself, a lot of it sort of made intuitive sense. I mean, it sort of hit me in the gut.

You know, we all, reporters all have sort of a BS detector. And, you know, what these guys have done is sort of laid it out in a very detailed way, sort of how you can develop a good BS detector. But a lot of it just seems like, you know, good old-fashioned street smarts to me as much as anything else. You're listening to Motley Fool Money. We're talking about the secret world of corporate espionage with Eamon Javers. The things that you write about where companies are hiring spies to listen in on conversations at public restaurants, that sort of thing, that's not illegal. No, it's not. In one of the chapters in the book, I call it the Chocolate War, this sort of epic battle that's been going on for years between Nestle and Mars in which Nestle spies were dumpster diving at Mars headquarters

to try to pull documents out of the trash. And I loved what they did. They were so meticulous about their dumpster diving that they were worried the janitors at Mars headquarters would notice that the trash was missing when they came by every night to take it. And so they brought dummy trash with them to put into the trash bin so that there would be the same number of trash bags in the morning when the janitor came back out to bring the next load in.

So he wouldn't say, hey, wait a second, where's this going? Where do you go to get dummy trash? Or do you have to just create it on your own? I think they just took it from their kitchens. I'm not totally sure. But eventually what they were doing was it got very elaborate, and they were taking the old trash out, bringing it back to their offices, sifting through it looking for documents, emails, calendars, anything that could help them sort of

build a case about what was going on inside Mars headquarters on behalf of Nestle. And then after a certain number of days of, you know, looking through that trash, they would bag it back up and they would bring that back. And so they were bringing the old trash back and stealing the new trash. And they had this sort of elaborate, you know, conveyor belt of trash going. But these guys were also tailing the Mars executives. They were listening to their conversations when they're at an executive retreat in the eastern shore of Maryland. They followed them there and they booked hotel rooms in the hotel so they could listen in on what the guys are saying at the bar after work. All of that was going on in order to help Nestle get a picture of what Mars was up to.

And, you know, all of it, you know, these veteran Secret Service officers who were involved in this thing. All of it was done with government-style intelligence investigative techniques, but it was all about chocolate. All right. Before we let you get away, we're going to play a quick round of buy, sell, or hold. I'll spot you up with some concepts, ideas. You tell me, if they were stocks, would you be buying, selling, or holding them? And keeping in mind that you do have a new book out, but your day job is working for Politico. So, reports out this week that Sarah Palin has earned at least $12 million since resigning as governor. Buy, sell, or hold the likelihood that Sarah Palin will run for president in 2012? Sell. I don't think, I think she's in this for the

money. Speaking of people who are in it for the money, I think she's making an enormous amount of money right now. And it's clear that she enjoys that. She relishes the stage and platform that she has, it's not entirely clear that she wants to get back into the arcane policy weeds and do the kinds of things that she needs to do on the substance end to really get through a Republican presidential primary. I think that if she's savvy at all, she knows that the other Republican presidential candidates will be really after her in a big way in a primary. And she will, at the end of the day, I would predict, and this will come back to haunt me, but I would predict she'll sit it out. All right. It's one of the more ubiquitous online scams. Buy, sell, or hold

the future of the Nigerian email scam. Buy. Buy it. Strong buy, huh? I'm a strong buy. It's always going to be with us. And in fact, one of the things that I learned in doing the research for my book, a precursor to the Nigerian email scam, which they called in the 19th century, the Boodle game. And basically, it was a deal where people were so embarrassed at having been taken in by this that they never reported it to the police because it was too humiliating to admit that they had been suckers. I think that's just a part of human nature, and it will always be with us. And finally, Eamon, he's been around for a while, but he's got a lot of competition these days. Buy, sell, or hold the future of James Bond.

that's a really good one especially given my book i mean i would say bye uh just in the sense that it's such an iconic figure and can always be reinvented for a new generation i mean the the sort of dashing uh globetrotting spy with all kinds of technology uh there's something just inherently appealing to that and and it's like the star trek franchise you know you can kind of keep reinventing it for a new generation and coming up with new takes on it and making it current. I think Bond is sort of the same way. I think we'll be watching Bond movies with our grandchildren, probably. The book is Broker, Trader, Lawyer, Spy, The Secret World of Corporate Espionage. It is fascinating stuff, and any investor will think twice about their investments when they

read this book. Eamon Jabbers, thanks so much for being here. Hey, thanks a lot. I really appreciate it. As always, people on the program may have interest in the stocks they talk about. Don't buy or sell stocks based solely on what you hear. Coming up, everything you ever wanted to know about the Aflac duck but were afraid to ask. Stick around. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Dan Amos is the chairman and CEO of Aflac, the largest provider of supplemental health and life insurance in the world, and a Motley Fool stock advisor recommendation. He was named CEO in 1990, and one of his decisions

would end up making Aflac a household name. He joins me in studio now. Dan, welcome. Oh, thank you for having me. So when I say Aflac, everybody automatically thinks of the duck. How did the duck become part of this historic company of yours? Well, I've been CEO now for over 20 years, and I was trying to get name recognition for the company.

And for the first 10 years, I just couldn't move the needle. We went from like 2% to 10%. And I knew that I could never really get it up. And so we put out bold opportunities for people to bid on coming up with the idea of something that would get our name recognition. Ad agencies? Ad agencies, exactly. And a particular ad agency came up with the idea of the Aflac duck. They kept saying Aflac, Aflac, and they said, that sounds like a duck.

And so we ended up going with the Aflac duck. And today our name recognition is 94%. Now, how do you make that sell to your colleagues at the company, to the board of directors? I mean, this is an insurance company. Insurance is not a particularly bold and innovative industry. We're certainly not known for that. No, that's right. I think insurance companies, as a general rule, are considered somewhat stodgy.

And that was one of the challenges we had is we tried the traditional way of doing it, of being very conservative, and we just couldn't do that. And so I finally said, let's do something different. And we tested different commercials. And one of the stories I like to tell is that commercials of insurance categories and financial services test it kind of like a 12 on average for these particular tests they give. And we came up with the idea of a commercial back in 2000 with Ray Romano that we thought about making. and it tested with little children and building blocks in the end it formed Aflac and it tested an 18 well we'd never scored higher than a 12 before and so that was perfect but then the Aflac duck idea came up and it tested a 27 and so uh it was very hard for me in some ways to do it

because you're basically making fun of your name but I thought this will ultimately be better I remember though, one of my friends that's the CEO, I called him and I said, now what would you do? And he said, look, nobody's ever gotten fired for doing 50% better. Go with Ray Romato. But ultimately I took him to the board, showed him the 27 scores and said, look, y'all just have to trust me. We're going to try this. If it doesn't work, we'll pull it fast. And of course we got more hits the first week we introduced it than we did the entire year before on the internet. What has it meant for your business, you know, beyond just the name recognition of your company skyrocketing? What does it mean in terms of revenue for your company?

Well, in the United States, the first three years that we brought out the Aflac duck, our sales doubled. So it was a tremendous, a positive thing for our sales. And then it, you know, leveled off to some degree. But it was an exciting period for us, and it helped us in recruits. It helped us with existing policyholders. And I think to some degree, even people like to be able to identify with stocks they own. So I think from that standpoint, to say I own X, and they say, oh, yeah, I know that. I've seen the commercials.

I think people like that. So it's worked out well. You're listening to Motley Fool Money. We're talking with Dan Amos, the chairman and CEO of Aflac. Japan represents a huge chunk of your business. Is this right? You insure one out of every four households in Japan? Yeah, most people don't realize how much of our business is in Japan.

Almost 80% of our business is in Japan. We insure one out of four households. We insure 90% of all the companies listed on the Tokyo Stock Exchange. And we became the number one insurance company in Japan in terms of policies in force, passing upon life who held that title for over 100 years. How did you get that kind of foothold in Japan? Well, the health care environment over there has gradually changed. They have national health care.

They had gone from a zero deductible in copay to 10%, then 20%, and now 30%. And so they needed something to help fill those voids. And we've always been the low-cost producer over there, and giving the best product at the best value. and so our business skyrocketed and it's continued to grow over there and we're having a great year this year how does the duck translate over in in japan the duck is very interesting um the duck is a much softer duck we we use for example the gilbert godfrey in the united states sure but japanese do not like loud voices or strong voices so gilbert godfrey not doing big

business in japan gilbert godfrey is not we use a much softer voice the other thing that's interesting is in our commercials, you've probably noticed that only one person notices him. There's this African-American that we use who notices the duck, but nobody else does. And that works very well in America because many people feel they're being ignored, and it actually relates to people. In Japan, that's considered rude. So everybody sees the duck in Japan, and it is a very big hit over there. Aflac, the stock has, your company has a market cap of $20 billion. For the past eight years, Aflac has been on Fortune magazine's list of America's most admired companies. For the past 12 years, Fortune's list of 100 best companies to work for. Do you ever get sick of talking about

the duck? I mean, you've amassed an amazing track record here. Doesn't that, I don't know, does that ever bother you on some level? Oh, no, it doesn't bother me at all. In fact, I get kidded all the time. I only own duck ties. I gave away all my ties. I came from marketing, so I like to be branded with the duck because the duck has been a winner. And so anytime I'm in the presence of a winner, I enjoy it. And so from that standpoint, it's been great. Since Dan Amos became CEO in 1990, Aflac stock is up 27 times in value against the S&P 500, which is up three times in value over the same period. Talk about shareholder value. Dan Amos, thanks so much for being here.

Thank you for having me. That's it for this edition of Motley Fool Money. Thanks to our special guests, Nell Minow, Dan Pink, Eamon Javers, and, of course, Dan Amos from ATLAC. If you missed any part of the show, you can get it at our website, MotleyFoolMoney.com. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening, and we'll see you next week.