Under the Influence with Terry O'Reilly - S7E10 - Worthless To Priceless

Episode Date: March 9, 2018

This week, we look at products that went from worthless to priceless. Products someone created out of something everyone else ignored. It might be scraps on the ground that people stepped over, or useless waste destined for the scrap heap. But in each case, the resulting product was a masterpiece of instinct and insight… Hosted on Acast. See acast.com/privacy for more information.

Hi, it's Terry O'Reilly. As you may know, we've been producing a lot of bonus episodes while under the influences on hiatus. They're called the Beatleology Interviews, where I talk to people who knew the Beatles, work with them, love them, and the authors who write about them. Well, the Beatleology Interviews have become a hit, so we are spinning it out to be a standalone podcast series. You've already heard conversations with people like actors Mark Hamill, Malcolm McDowell, and Beatles confidant Astrid Kershaw. But coming up, I talk to May Pang, who dated John Lennon in the mid-70s. I talk to double fantasy guitarist Earl Slick, Apple Records creative director John Kosh. I'll be talking to Jan Hayworth,

who designed the Sgt. Pepper album cover. Very cool. And I'll talk to singer Dion, who is one of only five people still alive who were on the Sgt. Pepper cover. And two of those people were Beatles. The stories they tell are amazing. So thank you for making this series such a success. And please do me a favor, follow the Beatleology interviews on your podcast app. You don't even have to be a huge Beatles fan. You just have to love storytelling. Subscribe now and don't miss a single beat. In case nobody's told you, weight loss goes beyond the old just eat less and move more narrative. And that's where Felix comes in. Felix is redefining weight loss for Canadians with a smarter, more personalized approach to help you crush your health goals this year.

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Peloton. Visit Peloton at onepeloton.ca. From the Under the Influence digital box set, this episode is from Season 7, 2018. You're so king in it your teeth look whiter than noon you're not you when you're hungry you're a good man with all the meat.

You're under the influence with Terry O'Reilly. On August 21, 1911, the most famous painting in the world was stolen. It was the legendary Mona Lisa, and it had been taken from the Louvre in Paris. At first, the police were baffled. Many people were questioned. Even the famous Pablo Picasso himself was questioned as a possible suspect. As it turned out, the actual culprit was a petty crook who had worked at the Louvre. He hid in a closet until closing time, carefully took the Mona Lisa out of its frame,

waited for the museum to open in the morning, then walked out with the painting hidden under his Louvre-issued white smock. Stealing a priceless painting requires two key elements. First, you have to engineer the perfect theft. Second, you have to plan how you're going to sell it. As the founder of the FBI's art crime team explained in an interview with The Atlantic, criminals who pull off these heists are good

thieves, but terrible businessmen. The value of a painting is determined by three things, authenticity, history of ownership, and legal title. According to the FBI, if you're missing even one of those factors, you don't have value. In other words, unless the criminal is stealing a painting to admire it in the privacy of his living room, the attempts to sell it are going to fail.

In one dramatic heist, criminals walked into a Swedish museum with machine guns, ordered everyone onto the floor in broad daylight, stole two Renoirs and a Rembrandt, then made their getaway in a speedboat. A perfect crime. The Rembrandt alone was worth $35 million. But even though the heist was flawless, the thieves couldn't find anyone to sell the paintings to. It didn't take the FBI long to execute a sting operation and recover all three masterpieces. In a recent study done by the FBI, it was determined 90% of museum heists are done by an insider who worked at the museum.

But even with that advantage, crooks have a very difficult time selling priceless paintings. People who can afford those price tags demand a legal title and they want to show them off. As a result, most don't get sold on the black market or any kind of market for that matter. In one sting operation that involved Miami, Madrid, Barcelona, and Paris, the FBI recovered 75 priceless paintings in a warehouse. They had all been stolen at different times, but couldn't be sold.

And the petty thief who stole the Mona Lisa? He was arrested when he tried to quietly sell it to an art dealer in Italy. And therein lies the irony. Famous paintings are priceless to museums, but are rendered technically worthless when stolen. In the world of marketing, the opposite is usually true. Products go from worthless to priceless. And if not exactly priceless, it's safe to say these products go from worthless to a valuation in the tens of millions of dollars.

In our stories today, someone created a valuable product out of something everyone else ignored. It might be scraps on the ground that people stepped over, or worthless waste destined for the scrap heap. In one instance, it was a product absolutely nobody wanted, until marketing got its hands on it. But in each case, the resulting product was a masterpiece of instinct and insight. You're under the influence. Ever thought about the lowly rubber band? It quietly holds a lot of our lives together.

An item found in almost 100% of homes and businesses, created from a worthless product. The history books tell us that British inventor Stephen Perry patented the rubber band in 1845. But his rubber bands were huge and used mostly for industrial use. Zoom ahead to 1923. A little bit further. Perfect.

William H. Spencer lived in a town called Alliance in the state of Ohio. One day, he was looking at some rejected inner tubes from the Goodyear Tire Company. They were destined for the garbage dump. As he stared at them, he had an idea. He took them home and cut them into thin bands in his basement. Then he took a box of these elastic bands and tried to sell them to office supply stores, but didn't have much luck. Then one day, a gust of wind dropped an idea at his feet.

The Akron Beacon Journal newspaper had blown across his lawn. As Spencer ran around picking up the pages, he had a thought. He went to see the folks at the beacon and persuaded them to roll their papers up with his rubber bands so when they were thrown on a driveway or a doorstep, they wouldn't blow away. That idea worked beautifully.

With that success, he talked another newspaper into doing the same. Not long after, he persuaded grocers to start using rubber bands to secure broccoli, carrots, and asparagus in their produce aisles. He started marketing his rubber bands as solutions to many industries. Soon, William Spencer had rubber band factories in his hometown of Alliance, Ohio, as well as Arkansas, Kentucky, and California. Today, the Alliance Rubber Company produces 2 million pounds of rubber bands per month.

From worthless to valuable, all because William Spencer looked at rejected inner tubes and stretched his imagination. Before the outbreak of World War II, Coca-Cola had a massive presence in Germany. It was setting sales records and, by 1939, Coke had over 40 bottling plants and more than 600 local distributors there. But when the war intensified, it became impossible to obtain the ingredients necessary

to manufacture the special Coke syrup due to embargoes and wartime sanctions. In spite of that, the man in charge of Coca-Cola in Germany, Max Keith, wanted to try to keep the company open and his staff safely employed. With no way of obtaining supplies, Keith had to stop making Coca-Cola. That's when he decided to create an entirely new soft drink. He did it by using the scraps

from other food industries. For example, discarded apple pulp from cider presses became a chief ingredient, as did whey, a cheese by-product from cheese companies.

Each batch his company produced was different, because it all depended on what scraps and fruit waste were available at the time. Keith held a contest with his employees

to name the new drink. He told them to use their FantaCy, which was German for imagination. That inspired one of his salespeople to yell out, Fanta. And there it was. Fanta sold well enough to keep the plant operating and the Coca-Cola staff employed. In 1943, 3 million cases of Fanta were sold. Not everybody was drinking Fanta, though.

Much of it was used to sweeten soups and stews, as there was a sugar ration on at the time. According to Snopes.com, Coca-Cola executives in Atlanta had no idea whether Keith was working for them or for the Nazis, as all communication with him had been cut off. After the war ended, Coca-Cola hired an investigator to determine if Keith had been a Nazi during the unsupervised time.

But the resulting report stated Keith had never been a Nazi even though he had been often pressured to become one and endured hardships because of his refusal. Keith could have also made a lot of money for himself by selling Fanta under his own name, but instead handed the wartime profits and Fanta back over to Coke in 1945. And by the way, Fanta didn't become orange-flavored until the 1950s. Today, it is sold in over 180 countries,

a major soft drink brand created from the scraps of other industries. You may remember the story we told recently about Velveeta. A cheese company was noticing bits of cheese left over from their cheesemaking process and wondered if they could make money from this cheese waste. One of their top cheesemakers took the scraps home, experimented on his stove, added some whey to the bits, and created a smooth, velvety cheese product, which he christened Velveeta.

From cheese scraps to multi-million dollar brand, Velveeta is now in its 98th year of production. You may also remember a story we told about Henry Ford a few seasons back. Between the frame, wheel spokes, dash, and running boards, each Model T contained about 100 board feet of hardwood. And Henry Ford wanted to own a hardwood forest to produce his own wood. So he asked a real estate agent named Edward Kingsford

to help him buy 313,000 acres of timberland in Upper Michigan. The sawmill Ford built there produced all the wood he needed, but it also produced a lot of waste in the form of stumps, branches, and sawdust. When Ford looked down, he saw money lying on the ground. So he hired a chemist to create a pillow-shaped lump of fuel from sawdust and mill waste. He combined it with tar and held it all together with cornstarch.

Ford called the invention charcoal briquettes. Next, Ford built a briquette factory beside the sawmill and recruited Edward Kingsford to run it. Soon, Ford was marketing picnic kits containing briquettes and portable grills at his dealerships, capitalizing on the link between motoring and outdoor adventure.

After World War II, with suburbia beginning to take hold, backyard barbecuing caught fire. That's when a group of businessmen purchased the Ford Charcoal Company in 1951, renaming it after the man who had first run the briquette plant. And that's how Kingsford Charcoal Briquettes came to be. From worthless scraps of wood on the ground, Henry Ford fueled the barbecue industry, using a product everyone else had ignored. Like the founder of IKEA did when he looked at the ground in Sweden.

And we'll be right back after this message. Whatever your vibe, Peloton has thousands of classes built to push you. We know how life goes. New father, new routines, new locations. What matters is that you have something there to adapt with you, whether you need a challenge or rest. And Peloton has everything you need, whenever you need it. Find your push. Find your power. Peloton.

Visit Peloton at onepeloton.ca. If you're enjoying this episode, why not dip into our archives? Available wherever you download your pods. Go to terryoreilly.ca for a master episode list. Ingvar Kamprad was an entrepreneur. He sold books of matches door to door and turned a nice profit. He was six. At age ten, he crisscrossed the neighborhood on his bicycle selling Christmas decorations, fish, and pencils.

When he turned 17, his father gave him a small sum of money for doing well in school. With that money, he started a business in 1943. He named his company after his initials, the first letter from the name of his family farm, and the first letter of his village. Together, it spelled IKEA. Later in his 20s, Komprad was visiting sawmills. While there, he saw something most people would have ignored.

He looked at the offcuts, the waste wood that was left over from the sawmill. He wanted to know what the most regular shapes of those offcuts were. He wondered what he could make out of all this discarded wood. That led to furniture making. He also started selling furniture from local manufacturers at a very low cost. His thinking was that it was easy to build expensive furniture. The real challenge was building affordable furniture

for the many, not the few. And in the 1940s, not many had big money to spend. He was always looking to make a little go a long way. Then in 1955, the manufacturers began to shun IKEA, protesting his low prices. That's when Comprod moved everything in-house, from furniture design to furniture making. He would innovate flat packaging

and design furniture that customers assembled. Soon, he opened his first store, and the rest is IKEA history. But his ability to see what others could not didn't stop in his 20s. As the authors of the excellent book A Beautiful Constraint note, 50 years later, a 70-year-old Ingvar Kamprad

was standing in an open-air food market in Beijing. He was staring at rows of plucked chickens, and he wasn't thinking about dinner. He was wondering what the pluckers did with all the feathers, because in that moment he had an idea. He persuaded them to stop burning the feathers and sell them to him cheaply for stuffing inexpensive comforters. It was a win-win.

The farmers made money from something they had historically burned as waste, and IKEA sidestepped the expensive cost of goose down. IKEA sold $60 billion worth of merchandise last year, and it is said that 1 in 10 Europeans are conceived in an IKEA bed. As IKEA hints at in this commercial about a machine that tests their beds. Oh that, that's Doink. Doink knows you people do more than just sleep in your bed. So Doink quality tests our mattresses to guarantee them for 25 years.

And if you find you don't love your new mattress, just exchange it for another. Happy Doinking leads to a happy home. A furniture empire begun and maintained with odds and ends. Because its founder had the ability to see opportunity where others only saw waste. One day in 1859, English chemist Robert Chesbrough spent his life savings on a ticket to Titusville, Pennsylvania. Chesbrough's area of expertise was oil, and he wanted to learn more. So he traveled to the oil state to meet with oil barons and take a tour of their fields.

It was there he noticed a rigger scraping thick black goo from the machinery. When Chesbrough asked about the gunk, he was told it was a byproduct of the crude oil, and that it had to be scraped off regularly or it would literally gum up the works. It was a pain in the rig. But some workers, he was told, believed that when the substance was applied to skin, it could help cuts and scrapes heal faster. So Chesbrough left the oil fields that day with a bucket full of the worthless goo.

He took it back to his lab and began to analyze it. It took him a few years to clean, clarify, and perfect the gunk into a household product. He named it Vaseline. The name Vaseline

came from the German word for water, Wasser, and the Greek word for oil, Lodi. Because the unfiltered gunk was virtually valueless, Chesbrough knew his Vaseline could turn a huge profit. And at that time, most oil products were made from animal fats or vegetables, so they had a finite shelf life. But Vaseline didn't expire.

The first Vaseline factory opened in 1870, and two years later, Chesbrough secured his patent. But when it came time to sell his invention, his target market, pharmacists, weren't interested. So Chesbrough decided that in order to sell his miracle product, he'd have to demonstrate its effectiveness. The best way to do that? To injure himself repeatedly and then apply Vaseline. Chesbrough took Vaseline on the road and began scraping, stabbing, and burning himself in front of crowds of people. Because he'd traveled from city to city, over time he acquired both old and new wounds

and thus could show audiences how Vaseline helped treat injuries at different stages of healing. But when his audiences flocked to pharmacies to buy themselves a jar of Vaseline, it was nowhere to be found. So pharmacists quickly changed their minds and started stocking his product. Chesbrough became a very rich man. Today, Vaseline has hundreds of uses. From protecting wounds to preventing diaper rash, to removing makeup, to moisturizing dry elbows.

When Robert Chesbrough died in 1933, it was revealed he ate a spoonful of Vaseline every single day. You might think, yuck, but he lived to 96. Farmers in the dry desert of southern Israel struggled for decades to keep crops healthy and irrigated.

One day, a water engineer noticed a long line of trees, all planted at the same time, except one tree towered above the rest, and its foliage was fuller and greener. The engineer wondered why that was. Upon closer inspection, he discovered a small leak in a pipe that slowly dripped near the tree's roots. Judging by the condition of the pipe, it was clear it had been dripping for years and nobody noticed or cared. But that dripping pipe fascinated the engineer. The tiny drops penetrating the soil causing the growth of a giant tree inspired the engineer to wonder if drip irrigation could be the answer to farming in desert areas. Through a series of experiments,

he was able to create a drip irrigation system that used friction and water pressure to create a slow, constant dripping action. And with the invention of modern plastics in the late 1950s, the concept of drip irrigation took a giant leap forward. As the authors of A Beautiful Constraint note, this new drip irrigation system enabled farmers in arid Israel to use 50% less water while their fruit and vegetable yields

experienced double-digit growth. The growth was so dramatic, they could start exporting their crops for the first time. That drip irrigation idea became a business called Netafim in 1965 and is now an $800 million company operating in 150 countries. An incredibly valuable breakthrough, all due to spotting a drip that everyone else overlooked. One day in 1973, a rich businessman bought a beautiful island in French Polynesia. Turquoise waters lapped up on the warm sand. Over time, he discovered those turquoise waters were home to oysters.

Black-lipped oysters. Those oysters produced something very unusual. Black pearls. There was no market for black unusual. Black pearls. There was no market for black pearls, zero demand. As a product, they were worthless. But this businessman wondered if he could create a demand for them. So he partnered with a pearl merchant, and this merchant went to New York to try and market their strange black pearls.

He returned to Polynesia without a single sale. A year later, they came up with another plan. They brought the black pearls to Harry Winston, the legendary jeweler in Manhattan. The same Harry Winston that Marilyn Monroe name-checks in the song, Diamonds Are a Girl's Best Friend. Here's what Winston did. He put the black pearls in the window of his Fifth Avenue store with an outrageous price tag attached.

Then, full-page print ads were placed in upscale glossy magazines like Vogue, Town & Country, and The New Yorker. And here was the important part of that strategy. The ads showed a string of black pearls set among a collection of emeralds, diamonds and rubies. Soon, every wealthy socialite in town was sporting a black pearl necklace. I've long believed in the theory that prestige can only be transferred by association. Very few items in life are instantly prestigious. One element has to lend its prestige to another in life are instantly prestigious.

One element has to lend its prestige to another in the world of marketing. Harry Winston lent his prestige when he put black pearls in his store window. And the diamonds, emeralds, and rubies lent their prestige

to the black pearls in the print ads. In the end, the businessman, the pearl merchant, and Harry Winston all became rich, or shall I say, richer. They succeeded in taking a worthless item and making it outrageously valuable. Why didn't I think of that? If you've ever uttered that question after seeing a smart, simple product making a fortune, get in line.

But here's the cold reality. You did see exactly what the inventor of that nifty product saw. But the inventor saw something else you didn't see. And that was the connective tissue between all of our stories today. With the exception of one story, each of these inventors or founders looked at waste or scraps other people were ignoring and saw a huge opportunity. Rubber bands made from rejected inner tubes, a soft drink made from food scraps, a food product made from discarded cheese bits,

charcoal briquettes made from sawdust and tree branches, drip irrigation inspired by a leaky pipe, a furniture empire born of sawmill waste, and a skincare product made out of oil rig gunk. Each of those products went from worthless to having valuations in the tens of millions of dollars, some into the tens of billions. Then there are

black pearls. No waiting market, no demand, zero value. But when they were grouped with rubies and diamonds in the Harry Winston window, the prestige of those gemstones trickled onto the pearls. It's often said that the value of something is determined by what someone is willing to

pay for it. Maybe. But a great idea has power, and marketing can pull some discreet levers to influence what you're willing to pay. In the end, it's all how you frame it when you're under the influence. I'm Terry O'Reilly. Under the Influence was recorded in the Terror Stream.

Producer, Debbie O'Reilly. Sound engineer, Keith Ullman. Theme music by Ari Posner and Ian Lefevre. Co-writer, Sidney O'Reilly. Check us out on Facebook for some fun behind-the-scenes content. See you next week. This episode brought to you by... Vaseline Petroleum Jelly. So delicious! See you next week.