Motley Fool Money - Motley Fool Money: 05.02.2014

Episode Date: May 2, 2014

The government reports surprising employment numbers. Ford and Yum name new CEOs. LinkedIn fails to connect. And Coach falls out of fashion. We discuss those stories and talk creativity with Pixar President Ed Catmull. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Matt Argusinger and for a million-dollar portfolio, Ron Gross. Good to see you, gents. Happy to be here. We've got a few companies with earnings results and a couple of companies with brand-new CEOs. The head of Pixar and Disney Animation, Ed Catmull, is our job. guest this week. And as always, we'll give you an inside look at the stocks on our radar. But we begin with the big macro. The jobs report for April was surprising in a good way. 288,000 jobs added, and the unemployment rate dropped to 6.3%. And, Ron, when you throw in some pretty

strong consumer spending numbers that we saw earlier in the week, how are we looking? I like what I see. I think it's great. 288,000 best since January, 2012, February and March, both revised up. The Fed felt comfortable tapering, another 10 billion from their stimulus program. GDP that we saw a few days ago, definitely the weak point, only 0.1%, which on the face of it, is a worrying headline. But I actually do believe that is weather-related. I'm sorry for those of you who are sick of hearing us talk about the weather. But I do think that is the primary reason for that week number. And I think we're already seeing a pickup. Maddie, anything stand out to you?

Well, people are going to look at the jobs number, which I thought was a great number. They're going to say, well, there are a lot of people that left the workforce. You know, the quality of the jobs might not be that good. But I'm an optimist, and I agree with Ron. The numbers look really good to me. Government numbers tend to get a bad rap. But I think we really now see a trend, I think, that the economy is much more on firmer footing. And this is just another indication.

And, Jason, we don't know how the numbers break up. But what we do know is that when people leave the workforce, some of them are leaving because they're retiring. They're leaving because they want to. Yeah. No, I think this was, I compared this jobs report to that Seinfeld episode of Even Stephen, you know how he like throws $20 out the window and then fines $20 in his jacket pocket? So, I mean, there were, you know, 28,000 jobs is great. Numbers revised up for February and March.

That's great. I mean, obviously the participation rate fell and that's not good. Wages are stagnant, and that's not so good. But, you know, I mean, I think that things are still turning and going in the right direction. I think that this probably really, I think, gave the weather excuse. for all of these companies this quarter, a little bit more stable footing there, because it really was a bad winter all the way around, and I think these numbers help bear that out.

Well, you have to also remember that. We're in a little bit of a different economy nowadays. I mean, I don't want to say things are different now. It's a new normal. But there are, you know, with the share economy, people working from home, doing part-time things, you know, doing services for other people. There's a lot of stuff. There's a lot of economic activity on the labor front that doesn't get picked up in these

government numbers. Agreed. At pre-recession, let's remember, we were about a 5% unemployment rate. We've now got ourselves back down to 6.3. We're really chipping away at it. We're not at 5 yet, but we're really making nice progress. This week, both Ford Motor and Yom Brands named new CEOs. Ford's chief operating officer, Mark Fields, will take over July 1st for Alan Maloney. And Greg Creed, the head of Taco Bell, is going to take over as the head of Yom Brands on January 1st. Jason, let's start with Ford Motor.

this was the guy all along, Mark Field. Oh, yeah. I mean, there was, I mean, we didn't know it for a fact, but I think we all kind of knew it. You know, Mark Fields has been that guy who has really served as Alan Malalley's right-hand man to help Ford make this turnaround. It was 2006 when Malawi got there, and Ford was operating at a loss of around $15 billion, and they brought the company back up to profitability there. So Fields was part of really developing that culture that Malawi helped and still there. And I think this makes a lot of sense. Mark Fields is still relatively young guy, 53 years old, so we can expect, I think, a number of years of service from him.

It was interesting to see Malawi. Alan Malawi want to step down a little bit early. I was reading where he, it's possible, there is a tech firm out there talking him up as possibly joining their board. And we know that he is a big fan of serving in some capacity. So while he may be looking forward to retirement, he may not be fully retiring from this. Was I the only one surprise by the year? Young Brands news. I mean, David Novak, given all of the challenges that Young Brands has had over the last

18 months or so, it really seems like they've turned the corner. I figured he would want to be part of that resurgence that is, I think a lot of people are expecting over the next couple of years. He's going out on top, baby. I mean, the breakfast taco had such a great recession. I mean, he's pulling a George Costanza to pull another Seinfeld reference. He's going out on top. But isn't that why this guy, Greg Creed, got tapped to be the next CEO at Young Brands? I mean, He is the guy who gets credit for the breakfast taco, for the Doritos Locos Taco. Makes a lot of sense. I mean, they've got someone in there with some good executive experience.

Well, you know, I have to say, it might be a good time to come in, because we know what YUM's comps look like, certainly, especially in China year over year. So it's not going to take a lot for them to get better. I think better results. Yeah, Creed's got to be looking at this and thinking, wow, this is a great opportunity because the work has basically already been done, right? I mean, they've tightened up their supply chain in China, and that's really a big pivotal market for young brands with their KFC presence.

So he just kind of has to get in there really not screw this up, and he's going to be in pretty good shape. Shares of eBay down this week after reporting a loss in the first quarter due to a tax charge, because eBay is repatriating $9 billion in cash and will pay $3 billion in taxes on that. Why are they doing this, Matt? This is a big question. Because if you look at other companies that have a lot of cash overseas, Apple, Microsoft, Apple just issued $12 billion in debt a couple weeks ago at an average rate of 2.9 percent. And so, why take this big tax it for eBay when they could probably do the same thing?

I mean, their balance sheet is in great shape. They only have about $4 billion in debt versus $10 billion in cash. I mean, doing a big bond deal of $9 billion, for example, wouldn't burden that balance sheet too much. So that's the CEO John Donoh gave some kind of vague saying, well, we need financial flexibility. We're worried about our credit rating long term. But I have to believe that this isn't something Carl Eichon would have signed off, but maybe so.

I don't know. When you look at how the business is performing, though, if they're looking for ways to deploy that after taxes $6 billion. Putting more money behind PayPal seems like a pretty smart bet. Way to go. That is obviously the best part of the business. Revenue was up 19% there versus only 14% for the marketplace business. But that, excuse me, 10% for the marketplace business. But still, I thought overall the results were pretty good. Now, if this helps them maybe make some acquisitions, do some buybacks. Again, the $3 billion hits kind of, it's lost money,

but they have some more money now to work with. Twitter's first quarter results were better than expected. Their monthly active users are now coming in at 255 million. But that's lower than expected, Jason. And we're seeing the growth slowing with Twitter. Yeah, but I mean, I feel like this has always been sort of that battle between expectations and reality. And maybe now expectations are actually coming back to reality. I mean, last year, obviously being a tremendous year for the market in general and with your Facebooks and LinkedIn's and tech doing so well, I think, There were some high expectations baked into Twitter from the very beginning. But I mean, when you look at this quarter, when you look at the way the company's performing, it's doing very well. I mean, total sales up about 120% from a year ago.

Timeline views are up, ad revenue per thousand timeline views. That's up 96% from a year ago. It's not like these guys are messing the bed here. They're doing a great job. I think it's just the expectations were unreasonable from the get going. And the stock price is back down to where now it seems a bit more reasonable. and this just left them kind of deliberately grow this business. I think Twitter's here to stay.

It's embedded with a lot of their platform. Partners use NBA, for example. We're watching the playoffs here. Every playoff game you see, they've got that Twitter feed going. I mean, Twitter's a big part of a lot of these real-time events. And I think they're going to continue to exploit that, learn from it, and make a lot of money from it. Yeah, Ron, when you look at the stock, it's basically been cut in half from where it was in late December. Is it now in your value territory?

Well, it's certainly not in our value territory. But we've had it on our watch. for a bit of time, and we're looking at it really closely. And what we're seeing now, I think, is the battle of the momentum investor versus the long-term investor. And the second you see growth slow, those momentum guys just dump the stock, which creates opportunities, I think, for long-term investors. Coming up, a little advice for any business. Don't make Steve Broido angry. You wouldn't like him when he's angry. This is Motley Fool money. As always, people on the program may have interest in the stocks they talk about,

and the Motley Fool may have formal recommendations for or against, so don't buy our our sell stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill, here in studio with Jason Moser, Matt Argusinger, and Ron Gross. Shares of Coach down more than 10% this week after a third quarter earnings report showed that sales in North America fell 21%. And Ron, if that's not bad enough... Those were comp sales.

21%. Coach also warned that sales in 2014 would, and I'm quoting here, moderate further. Is that secret code for something? See if it's secret code for things are not going well. And this hits close to home because it is a holding of a million dollar portfolio, and then we've been smacked around pretty good on it. Stocks down 24 percent over the last year versus Coors, Michael Coors, which is up 65 percent. That's an 89 percent swing for those of you who aren't good with the math.

North America is the trouble here. It's been deteriorating for quite some time as companies like Michael Coors and Kay Spade kind of eat their lunch. Bright Spot is international, specifically China, but we need to see the North American business firm up. New designer. Mr. Vivers has some ideas behind that, some good critically accepted new designs coming. We need to see that translate into sales because we can't keep seeing negative results like this. As you mentioned, the designs have gotten some good reviews. When do those start rolling

out and when will we start to know if they are resonating with consumers? I think we're several months away still. Probably September, the fall, I think, is what we're looking at. First quarter revenue for 3D systems came in higher than expected, but gross profit margins are shrinking. Maddie. A lot to chew on. What stood out to you in their quarter? Well, you know, 3D systems is a company that makes a lot of acquisitions. And so even though the top line number looked really strong, if you look at the organic revenue growth, it was 28%. So that's pretty solid. But, you know, a company that is for many, a lot of 3D printers, price pretty high. that maybe that's not fast enough. And yet, the gross margin you mentioned. I was actually pleasantly surprised, though, that if you look back, not just this quarter, but if you look back two years, gross margins held pretty steady. And that's really what you want to watch with 3D systems. Because in my view, I don't think a lot of people think that the 3D printer is becoming a little bit more of a commodity product. There's a lot of competitors in there. There's prices keep coming down for the printer. So if they aren't able to maintain those gross margins, you'd have to really question whether or not they have a sustainable profit business model. And they do. But, I mean, it's just,

How profitable can it be? And gross margins are still holding pretty well. Prices are coming down on this stock, too. It's down about 45% year-to-date. It's been tough. Is it a buy at this price, or is this we want to wait and see one more quarter how they're doing? I think if you like 3D printing, and we certainly do in Supernova and Rule Breakers, we like the space. It's one you want to own in a basket. I walked away from CES, early in the Consumer Electronics Show in Vegas earlier this year, and I was amazed at just the number of 3D printing companies. And at that point, I think 3D systems was at its all-time high, right, at that point. And I walked away saying, you know, this is getting a little bit of a tight industry.

I'm not as enthusiastic about it. But I still like it as a package along with, say, Stratasys or X1 and some of the other ones. Shares of LinkedIn falling on Friday after its latest earnings report. Jason, first quarter sales and profit, both higher than expected. What's the problem? Not a bad quarter. But, yeah, I just sort of echo on something Ron was talking about there earlier. I think this is sort of, you see the momentum investors starting to flee from some of these bigger.

faster-growing tech names. LinkedIn is still growing, but the growth is slowing a little bit. And so I think that's probably got some people a little bit spooked. And so they're taking off and looking for other stocks out there. But no, I mean, I think that LinkedIn, when you're looking at it from a long-term perspective, they're still doing a lot of things well. Sales up 46%. I was really impressed with the premium subscription segment of the business. I mean, that's the smallest segment of the business, but they saw 46% growth in that segment as well, which to me, I don't know how sustainable that is. I don't know how many people pay for LinkedIn subs. Apparently, some of us do. I don't. I don't know if anyone in here does. I do not. I think probably the biggest challenge LinkedIn faces, at least in the near term, is one of engagement. Because really, while they're not looking to serve sort of that ad market like a Facebook does, they do need to find, they need to give us a reason to go back to the site continually and keep our profiles up to date. I think things like endorsements have basically lost all meaning at this point. They're pretty diluted. So I think that's something they're going to have to work on there.

But to put it in the context here, you look at LinkedIn today selling it 42 times operating cash flow. You compare that to something like Facebook, and that's at 32 times. It makes sense. LinkedIn's smaller. Maybe we're looking for a little bit more growth there. But I think that long-term investors, this is actually a pretty good-looking stock at these levels. This week, Frontier Airlines became the first airline to charge for the following items, advanced seat assignments, putting carry-on bags in overhead bins and water. which is now going for $1.99 on Frontier Airlines flights.

United Airlines became the first airline to incur the wrath of our man behind the glass, Steve Broido. First, Steve, before we get to your recent experience with United, what do you think of the Frontier Airlines charging for water and carry-on bags in the overhead bins? I think on the surface, it's unfriendly, but when you really dig down, all airlines are charging for these things. It's just where those charges appear. So if I'm paying $500 for a ticket on United or $200 on Spirit Airlines or whatever, or Frontier in this case, you're still paying the same amount of money.

They're just charging it differently. Speaking of United, you made only your latest trip out to Las Vegas. Little trouble getting back to the office, though. Yeah, little trouble in the form of a seven-hour delay. A plane that was supposed to leave at around one, left around 8.30. Two hours stuck on a plane, and multiple-hour lines to talk to people. They offered me a $7 food voucher, which I... That's nice.

As long as you got a voucher. I know. And the closing deal was $150 credit, which was generously offered. And I said, you know what? This isn't going to work for me. So I have the United Mileage Plus credit card, which I canceled. I was a shareholder, sold my shares, and now I'm shorting... Wow.

Wow. Now I'm shorting. United Airlines. Wow. Really? That is a guy taking action. Stebo. I did.

I contacted the company. He said, unacceptable. Don't cross Steve. This just is not cool, you know. United subsequently contacted me and offered me an extra $100 bringing the offer up to $250. I don't really know what I'm going to do with that. They've sent it to me, and I may accept it.

I may not. I'm not really sure what I'm going to do. Good for you. Steve, after taking, let me go out and buy you a coffee. Absolutely. At a baby. I'll give you a $7 voucher for coffee. Let's wrap up with the stocks on our radar this week, and Steve will hit you with a quick question.

Ron, what do you got? Steve, a stock you never heard of L-Dall. $400 million market cap stock. They make filters and insulation for auto, medical, and HVAC-type industrial applications. Stock is at least 20% undervalued right here. Stock's around $24. We think it's worth at least $29. Steve? Is this the go-to company for folks that are putting insulation in vehicles? Is it Lydell and then number two as no one knows?

There are international companies, foreign companies, that are larger than them, but they do have major contracts at many of the OEMs. Matt Argersinger, what do you got? I'm looking at Zillow. Tigger Zee, of course, the online real estate company. They report earnings next week. This is a company that I have to say, if you look at the momentum stocks and tech stocks and internet stocks have been crushed over the last few weeks, Zillow keeps hitting new all-time highs.

It's incredible. There's also news recently about Tiger Global taking a stake that's a major hedge fund. They bought almost a 10% stake in Zillow. They also made a $50 million investment in Redfin, which is a competitor of Zillow. So, it's an interesting company to focus on right now. I'm interested to see if the earnings match up to the stock price next week. Did you say the name of the hedge fund is Global? Tiger Global. That's a pretty strong name. Steve, question about Zillow. Seems like Zillow is trying to disrupt real estate as we know it today. How does it, does it stand a chance against thousands and thousands and thousands of realtors who just hate Zillow? They don't want to be disrupted. They don't want, you know what, I'm better than an online resource, you know. So, well, so in a way, they're not really disrupting the realtors.

And the realtors, I think, even if, even those that hate Zillow recognize the fact that it's just got tons of eyeballs. And they're willing to pay for the leads and, you know, put their ads up no matter what. So I feel like it's just a resource to them, whether they like it or not. I do think, yeah, it's a misconception. They're not really going after the realtor. They're a resource for the realtor. And realtors have varying thoughts on that. My wife is a realtor, so I have a little information on this front.

But they are a resource if you want to capture and use them for marketing. Jason Moser, what do you got this week? Yeah, looking at MWI Veterinary Supply. Ticker is MWIV. They distribute animal health products to vets in the U.S. and the U.K. Grown sales at 23 percent annualized over the last five years net income up 26 percent. I've actually spoken to the vet. I take my dogs, too.

A lot of good things to say about them as a distributor and supplier. And so it's a stock with Ernie's coming up early next week. I will be keeping a close eye on it. Steve? What's the best name for a dog? Well, it's a tie between Duval and Piper. Those are my two dogs. So I'm playing that card right there.

You agree with that, Steve? I do indeed. That sounds great. Go Piper. All right, Ron Gross, Matt Argusinger, Jason Moser. Guys, thanks for being here. Thanks, great. Coming up, a conversation with Pixar President Ed Catmull.

We'll talk about Steve Jobs and the secrets behind Pixar's success. Don't go anywhere. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. The highest grossing animated film of all time is Disney's Frozen. The second highest is Pixar's Toy Story 3. And it is not a coincidence that the same man is in charge of both companies. Ed Catmull is the president of Pixar Animation and Disney Animation. And in his 40 years in the business, he has helped revolutionize not just animated films, but the movie industry writ large, It is a journey that he captures in his new book, Creativity Incorporated, overcoming the unseen forces that stand in the way of true inspiration. Ed, thank you so much for being here. Oh, it was my pleasure.

I think for a lot of people, their first encounter with Pixar is the movie Toy Story, which came out in the mid-90s. But one of the things that you write about is that, boy, Pixar was around for a lot longer than that. What is sort of the origin story of Pixar, and how did you get involved? Well, the origin for me was growing up in the 50s, post-Depression post-World War II, in a very safe environment. And at that time, the two iconic figures were Albert Einstein and Walt Disney, both of whom I deeply admired. But I grew up, I wanted by the time I got to college, I realized I didn't even know what the path was to get there, so I switched over into physics. and it was in graduate school in computer science, but I was at the Foundation School for Computer Graphics.

And I realized on getting my doctors from amazing people, George Lucas bought into this, he was the first person in the film industry, willing to bring high technology into the film industry. John Lasseter joined us, who is a unique genius in this animation, bought us out, or Steve Jobs bought us out in 1986. At that time, there was no business on hardware for imaging and medical processing.

Steve, at the time, it also bought next. He had left Apple companies. We started, while keeping alive, our dream of making an animated film. We finally got our chance. The contract we had with Disney, they decided to also make an animated film. So we entered into that contract in 1991. And in 1995, 20 years after starting down this path, that we finally achieved the goal. I was going to say, it seems like the overnight success that I think a lot of people just sort of attributed,

obviously took you close to 20 years to get there. You mentioned Steve Jobs. It's almost like Pixar is an afterthought when people think about Steve Jobs and his impact on the business world and everything that he did at Apple and reshaping the music industry with iTunes and the iPod and mobile phones with the iPhone. But walk me through a little bit of your experience

with Steve Jobs because he could come off as very forceful, even egotistical. What was your first meeting with him like? Well, at the first meeting, he was trying to spin out from Lucasone, and he disappeared from the radar. And we, of course, learned later was because of his conflict with Apple.

And then he wanted to buy us to turn us into what later became next. But we declined the first time. He then formed next to us, and again wanted to acquire us. And the thing about Steve, which a lot of people don't really call it, the hero's journey, kingdom if you always liked and he was, he had to leave it. He formed next and he formed Apple. he was initially the kind of person that people have in their stereotypical view of him.

And he did have those characteristics when he began with. What people didn't realize is that Steve was so smart that while he was starting up, he would get deals that were too good. In fact, he was so good in the long term. But Steve was so smart that he realized that the working, weren't giving him the results that he wanted. So he changed his behavior. The way he interacted with people changed.

He became pathetic. The way was intense. But the way he delivered the news changed. And what's interesting is that after he made this change about 15 or 20 years ago, everybody that was with him stayed with him because he was a good friend of them. Because they all stayed with him, nobody talked with the press or reporters or anybody else writing about him because so this arc in Steve's life is missing from the public record. You're listening to Motley Full Money talking with Ed Catmel.

His new book is Creativity Incorporated, overcoming the unseen forces that stand in the way of true inspiration. I was telling you during the break, I love this subtitle because this really is a theme that pops up repeatedly in your book and in the history of Pixar and even carrying over into Disney animation. It seems like there are so many points along the way where either a film is on the verge of collapsing or in some cases the company is on the verge of collapsing where Pixar is facing financial troubles or in the case of some of the movies it takes years to really figure out how to get the story right. What is it about the culture at Pixar that enables you and your team to really work through? through these things because, let's face it, some of these movies that have turned out to be phenomenal Academy Award-winning films at various points along the way, they are absolute train wrecks. Well, the beginning of the movie, when we first basically mock it up, we make what are called real. So you draw what you think is going to happen, and then you edit it together

with temporary music and temporary voices. And you get a feeling for what it's going to be. And these early versions, as John Lasser would say, is like the worst thing you've ever seen. So you need to go through several iterations to figure out works or what doesn't work. But by definition, if they're terrible, you can't judge the team by what they've produced, because I just said it was terrible. So you have to judge them by the spirit of the team. How well they're working? Are they focused?

Do they laugh? You put all those things together, and you protect them at that early stage. So that was one of our lessons, realizing that's how the front end is different than the back end. I always say that when we were first struggling with Pixar, I watched what took place at Disney, because Disney, in the 90s, produced this set of four phenomenal films, which was Little Mermaid, Beauty and the Beast, Aladdin, and Lion King. And then they started to go downhill. And the question is, okay, what's going on?

Why are they going downhill? But I looked at other companies because I had friends in Silicon Valley. We were close to Silicon Valley and well-known companies. But I would watch a lot of these companies rise and then fall, and yet they had smart and creative people. So something was going screwy with them. So I began to formulate this question of what's going on, when you're successful.

They're like something mysterious that's happening. Because these aren't dumb people. They're really smart people. Manufacturing because Pixar initially saw a computer, so we had to figure out manufacturing. And of course, the role model at that time, creative act. So this was an aha moment.

And not just seeing how do they get to creating it on the line and the way they give authority to people down the line. But you recall a few years ago, they had a break problem. The management, actually hid the problem or from the public. So the question was, what is going on in a company that would make them go counter to a deep culture? They're hidden. And the implication is that they're hidden for me, and I can't see them either.

And we can easily get blindsided and do some dumb things. Human nature is always at work here. There are things that we can do to be more aware of it. We're not changing the nature, but if we're aware of the nature, then we can take an attitude, which makes us adapt to the changes and the random things that life throws at us. Coming up, what do animators at Disney and Pixar think about competition like the Lego movie? More with Ed Catmell. This is Motley Full Money.

Welcome back to Motley Full Money, talking with Ed Catmell. His new book is Creativity Incorporated. Disney is obviously a huge corporation with many divisions. If you just look at the studio division, it makes up, I think, less than 10% of the overall company's revenue. And yet, I think, Ed, if I were the head of merchandising for the Walt Disney Corporation, I would be calling you every other week just bugging you about what is the next thing in the pipeline so I can sell more dolls so I can sell more T-shirts, et cetera.

How much pressure do you get from other divisions within Disney? because I have to believe that merchandising and theme parks are increasingly dependent on the creative output of Pixar and Disney animation. Well, first of all, all of Disney has been telling us what to do. That is, if they were trying to do things to satisfy their particular needs, we would screw up the process. So everybody from Bob Iger through the consumer products says, okay, just make great. and that's worked really well. And a lot of people assume that they don't like something we do, they'll say, well, Disney made us do it.

Disney has given us the ability to screw it. The second thing is we didn't want to be an island. And actually that's what happened before, when Disney animation was that, even when they were very successful in the 90s, the needs were so large that it could be overwhelming to the studio. So basically they threw the film over the wall. We wanted a different approach.

And so what we did was we put in a person who had responsibility. That is, there's a person who was responsible to us and the marketing. And another person has responsibility between us and consumer products. So the model that we, like we're in Ireland, We need the ownership of the local culture, but we do not want to be isolated. When you have the right people in there, then it just works wonders on both sides. But the third element in terms of the toys is when we make our films, we want them to all be great films, so that goes without saying.

But it's clear that if you make something like, we just announced Incredibles 2 as an example, then public wants it, consumer products wants it to make. It would be difficult. It's a low-risk idea. There's a certain range of our films which are low-risk. When you do a car's film, then you know that at the same time, we've got the other end. Films would not pass the elevator test. So the idea of a rat cooking commercial idea or a trash compact that falls in love of the robot.

Or if you make a film about an old man who, well, no matter how successful the film is, you were never going to sell a lot of toy. What we try to do is say, okay, let's span this range, because you do want to do some things commercially likely to succeed because we want to be healthy, and we're in a business. It's important for our films to do well. But we're also a group of artists sometimes really hard to figure out. But by saying, and explicitly, people,

we're spanning that range from the very hard, or conceptually hard, to those that are likely to do well, then we make ourselves financially healthy, and that allows us to continue to take risks. One of our guests in the past on the show has been Jim Sinigal, the co-founder of Costco, currently the chairman of the board, and for a very long time, the CEO. And one of the things we had talked about was how he would, from time to time, check out the competition. He would walk into a Walmart, he would walk into a target, and just see how they are doing business and pick up what he could and put it to use for Costco. How much do you check out the competition? I'm curious with the success of a recent animated film like the Lego movie,

if that's something that people at Pixar or Disney animation are studying in any way. Well, unlike a lot of other businesses, in that you want a healthy ecosystem. So it's to our advantage, you know, Fox or Warner Brothers or puts out a good movie, and people go and have a good experience. So if they have a good experience, they're more likely to want to go back another time and see another movie from somebody else. We want them to do well. But, of course, when our film is out there, we don't want any of them. him to be around. So we have this like split personality. Do great. Just don't do it near us. I know you got a lot in your plate, but before I let you go, I have to ask when it comes to the

creative process. What's been the biggest change in your thinking since you first started your career? Well, I would say the lease that focused on a small number of people on what they do and just people want to turn into them. And it was a realization that, not every element of our life. And it's how we think about the problems in our life. And it's our intentions and our freedom to think that we can make a difference that allows us to do something that makes a mark in the world. He is the president of Pixar Animation and Disney Animation.

He's an Academy Award winner. And he can now add bestselling author to his resume, Ed Catmull's book, is Creativity Incorporated, overcoming the unseen forces that stand in the way. of true inspiration. It is a great read. Ed, thanks so much for being here. Thank you, Chris. That's going to do it for this week's show. Our engineer is Steve Broido. Our producer is Matt Greer. The show's mixed by Rick Engdahl. I'm Chris Hill. We'll see you next week.