David Appel (businessman)

Transcription

Eleanor Wachtel: So, you describe one of the ways you compare the two styles of entrepreneurship between Helena Rubinstein and Eugène Schueller. You described Rubinstein style as 19th century and Schueller's as 20th century. In what way? I mean, what... Presumably, you were suggesting Rubinstein's style wouldn't work in today's world, but Schueller's would? Or what are implications of that distinction? Malcolm Gladwell: No, it's more than... It's not quite that. It's that the, it is that the great creation of the 20th century are these sophisticated scientific industrial enterprises. So, he builds what... He builds L'Oreal, which is by the '30s and '40s resembles a modern day conglomerate. This kind of relentless acquisition of compatible businesses, this application he has professional management, he hires... He runs, he creates new products using... He builds a massive R&D lab. When he builds... He's the first person to figure out how to make hair dye that's actual, hair dye... I mean, that actually dyes hair properly. I mean, hair dyes were around for years but they were terrible. And if you... It's the origin of, do you remember the famous hair dye slogan, the first famous one which was for Clairol was, "Does she or doesn't she. Only her hairdresser knows for sure." Right, that was in the '50s. MG: Now, the reason that slogan was so powerful was that hair dyes were so terrible up until that moment, that if you dyed your hair, everyone knew, you dyed your hair. So, to be able to be at a point in the evolution of hair dye, where the only person who would know that you dyed your hair was your hairdresser, was this huge leap. It was like the man on the moon. It was... It changed the whole landscape of hair dye. So, the person who is driving a lot of those innovations is L'Oreal, right? Of course, L'Oreal then famously comes up with, "Because I'm worth it." Instead of saying the... MG: So, he's building what we would recognize today as this quintessentially modern corporation. Helena Rubinstein, Rubinstein Cosmetics was, there was nothing modern about it. I mean, she was hiring all of her relatives. They were expanding haphazardly here and there. She was spending all of her disposable income on bigger and more elaborate jewels and the worst painting by Picasso, next to the worst painting by Cézanne. [laughter] She's just kind of over the top. Those kinds of people don't survive... That kind of thing is increasingly rare these days. EW: And it usually doesn't outlive the founder as one of the characteristics. MG: Yeah and she does... I mean, and that... Oh, I don't know, if I might jump in there. EW: No, go ahead. MG: The great punchline to the story of course is that in the end, Rubinstein is bought out by L'Oreal. And the person that L'Oreal, that engineers the buyout is put in charge of those operations, is a guy who is a famous Nazi collaborator. So, can you imagine the horrible irony that a business built by a great Jewish entrepreneur is taken over and by the way run into the ground by a Nazi collaborator. I mean, its just sort of in the '60s and '70s. EW: But one of the things I mean, that's... As you say it's the punch line, but it also... One of the things that really interested me in your approach and what you do in that article is you bring a moral element into play. You introduce two other as you say, classic stories in the entrepreneurial can and the Swedish furniture manufacturer IKEA's founder, Ingvar Kamprad and Oskar Schindler. How does morality come into play in these stories? What... MG: Well, I was interested in the fact that we venerate entrepreneurs in our culture, right? They are our new profits. Literally, we worship them. You'll read the literature about entrepreneurs, great entrepreneurs. It is iconography... Iconography... Yes? So, the question is, why do we venerate them so much? Are they worthy of this level? EW: Maybe, you mean hagiography. MG: Hagiography, that's right. And what interests me about looking very closely at entrepreneurs, and by the way no one is more appreciative of what they do for us, then I am or any of us are. But one thing that's very clear about them is that the greatest entrepreneurs are amoral. Its not that they're a moral, it's that they're amoral. The reason Schueller collaborated with the Nazis in the '40s in France, is not that he's a Nazi. He's not a Nazi. He's a never thought more then five minutes about politics. He cares about one thing, which is L'Oreal, and he says, "The only way I can keep this company going is if I play nice with the Nazis. I'm gonna play nice with the Nazis." It doesn't occur to him that there's any moral element to that whatsoever. MG: That's the way great entrepreneurs are. That is, they are completely single minded and obsessively focused on the health of their enterprise. That's what makes them good at building businesses, but that's what also makes them people who are not worthy of this level of hagiography. Ingvar Kamprad, the man who founds IKEA... IKEA is founded on one brilliant decision made by Kamprad in the early 1960s when he's facing a boycott from all of his fellow furniture manufacturers in Sweden. They're driving him out of business. EW: Wait one second, just wait. That was a little capitalist that really wasn't happy with this. [laughter] MG: That's right. Someone was objecting to this line of analysis. EW: So, if you just back up to IKEA's founding, yeah. MG: Oh, yes. So, IKEA's built on a decision made by Ingvar Kamprad in the early '60s when he's facing ruin. He started this chain of discount furniture retailers in Sweden, and he's facing a boycott from all the Swedish furniture manufacturers. And he's gonna go out of business. And so, he has this great insight which is, "Oh, right across the Baltic Sea from Sweden is a country which has lots and lots of really cheap labour. Lots and lots of lumbar and a 500-year tradition of making furniture; Poland. I'm just gonna go to Poland." He goes to Poland. MG: Nobody went to Poland in 1963. Why? Because Poland was the enemy in 1963. They had missiles pointed at us, right? Did he care? No! He's trying to keep his business alive, right? So, in retrospect, a brilliant act of imagination and daring and entrepreneurial daring-do, is also profoundly, at least, morally agnostic, right? He didn't care. Are they trying to take us over and blow us up? I don't care. There, I can make cheap furniture, right. Contrast him with Schindler. Schindler is a man who, in the middle of the Second World War, is running an enterprise and he's making weapons for the Nazis and he's employing lots of Jewish labour, right? His factory is essentially in the Jewish quarter of Warsaw or Krakow? EW: I think also, Krakow. MG: Also Krakow. I'm constantly mixing these up. And he realizes that, unless he can keep this op... Or he realizes that he is responsible for the lives of all of these... Of all of these Jews, right? And he decides that he wants to keep them alive. How does he keep them alive? By compromising his business. Basically, he funnels all of the profits he makes into bribes. He's just bribing people. That's how he keeps it going. And then he, remember at the end of the war, he moves his factory to be even closer, I think, to... Or to be away from the front and it's very close to, I think, Auschwitz or one of the camps. At which point, he ceased making things at all. He's... Remember at that point, he is deliberately sabotaging the munitions he's making, so they won't fire. And every penny, he's not just using his profits, but he's using every penny he owns, he has, to pay off the local Nazis, so he can keep his Jewish workers alive. MG: This guy is not an entrepreneur. He is a hero, right? But he's a hero because he's a terrible businessman, [laughter] right? And by the way, after the war, he fails at every business he tries. He doesn't have that kind of... Here was a man who could not keep moral considerations from impinging on his ability to run a business. He couldn't overlook the fact that, "Oh, my employees who I like are gonna go to the camp unless I keep them here." Right? Now, I promise you, Eugène Schueller was not visited by those same pangs of conscience, right? That's why he was happily co-existing with the Nazis. So, we need to be clear when we venerate entrepreneurs, what we are venerating. These are not... They are not moral leaders. If they were moral leaders, they wouldn't be great businessmen, right? Now, some people... So, when a businessman is a great moral leader, it is because they have, maintain their conscience separately from their operations. They have taken... EW: Would you put Bill Gates in that? MG: So, Gates, sure, is the most ruthless capitalist and then he decides... He wakes up one morning and he says, "Enough." And he steps down, he takes his money, takes it off the table. And I think, I firmly believe that, 50 years from now, he will be remembered for his charitable work. No one will even remember what Microsoft is, and all of the great entrepreneurs of this era, people will have forgotten Steve Jobs. Who's Steve Jobs again? But Gates will be... There will be statues of Gates across the third world and people will remember him as the man who... There's a reasonable shot, he will cure... Because of his money, we will cure malaria. [pause] MG: Every single idea he ever had came from somebody else. And by the way, he would be the first to say this. EW: But was he the first... 'Cause you say he also tried to take credit or... MG: Oh, he would also take credit for things. Oh yeah, famously. EW: For other people's ideas. MG: Yes. Yes. That was... He was shameless and he was someone who... I say all of these things. He was an extraordinarily brilliant businessman and entrepreneur. He was also a self-promoter on a level that we have rarely seen. Think about it. Look, all the things that made him a brilliant self-promoter were... They overlap with what made him a great businessman, right? He was brilliant at understanding the image he wanted to craft for the world. What was brilliant about Apple? He understood from the get-go that the key to success in that marketplace was creating a distinctive and powerful and seductive brand. And he was as good at doing that for laptops as he was just doing it for himself. Look at the cover of, for goodness' sake, of the biography that was written about him. It's the photo... I mean, he designed the cover. Who does that? Right? [laughter] Someone's gonna write your bio because... "By the way, you can say whatever you want, but I want control over the packaging." Right? Of course, of course, he did that. But he was someone who... In his... Favourite is the wrong word, but to me, the most extraordinary moment in the biography of Jobs is the description... EW: This is Walter Isaacson's book. MG: Walter Isaacson's book, which is a really tremendous book. He's on his death bed and he is undergoing one last medical procedure. And he is... He is shrunken, he is... It's over and he knows it. And they're trying to put a oxygen mask over him. And on, I forget how many occasions, three, four occasions, he refuses the mask because he is unhappy with its design. It's just not elegant enough. [laughter] He's like, "Send it away, bring me back a... " That's who he was. Right to the very end, he had a set of standards about... If he was gonna die, damn it, he is gonna die with the right kind of oxygen mask. [laughter] It wasn't... To him, it was like making him send his final emails using Windows. [laughter] I mean, a man's got to draw the line somewhere, right? [laughter] MG: And there's this other moment when he's describing, his family had... They were trying to decide which kind of washing machine to buy. And because the Great European washing machines will make your clothes really, really clean, but it takes, like, three times longer, and the American machine is not quite as clean, but they're really quick and efficient. And they would have family discussions for weeks about which one to buy. Just buy the... By the way, is he really doing his laundry? This is the other question I had. [laughter] EW: I didn't think of that. But yes, you described it and it goes to eight weeks. And his wife is telling the story, though. MG: But she's not doing the... Let's be clear. EW: Yeah. MG: No one's doing laundry in this relationship. I remember interviewing a big Silicon Valley billionaire and you forget, 'cause you meet these guys, and they're hugely powerful, wealthy. And then, you start talking to them, and of course, they sound just like you. I mean, and you forget they're billionaires. So, I'm talking to this guy, and I go into some rant as I often do about, why can't... He's a software guy. I said, "Why can't you fix the thing at the airport because in the security and... Can you do that better than they're doing it?" I'm going on and on and on and on, 'cause the lines are so long, and he looks at me. And I realized, "Oh, he hasn't been inside an airport in... " And he doesn't know those lines. [laughter] He thinks that an airport is a thing that you drive up on to the runway in your car and you get out. And he's like, "The line? There's no lines. The guy standing at the top who, like, rolls a red carpet down for me, [laughter] which is like he... And I was like, "Oh, right." EW: Private jet. MG: Sorry. Yeah, yeah. I also... In the same conversations, so embarrassingly, went on and on and on about how... I couldn't believe. I had this whole thing at the time, I don't do it anymore. I had a whole thing at the time about the problem with most rich people is they have no imagination. So, you get a lot of money and you'd think... Okay. Now, you have a billion dollars. Use a little imagination about how you're gonna spend it, right? Don't build a 45,000-square foot house in Mississauga. [laughter] If you have a billion, you can do better than that, right? You can do what? You can go to the moon. You can, don't just... So, what they invariably do, these guys, is they just do what they would have done when they were poor, only 10X. So, instead of having... Buying one Corvette, they buy 10 Corvette. Don't buy a Corvette, you don't have to. You're rich now. Anyway, so, I was going on on this long, long thing, [laughter] and I was saying... EW: You're doing this rant that you don't do anymore. MG: I don't do it anymore 'cause I've learned my lesson. So, I'm interviewing this guy, and I, of course... It doesn't sound like an interview does it, anymore? But I go into this whole thing about, all these guys, they buy yachts. Why do they buy yachts? Like, what more boring thing to do than buy a yacht, which you're only on two weeks a year. And all your friends have yachts, by the way, like crazy. Do something like going on a... Then I go home that night, and I was like, "Oh." And I google this guy's name and yacht. Of course, Image Google, first thing I see, huge, 425-foot, the something, something, something. Like four names, helicopter pad. I was like, "Oh," the whole time. [laughter] EW: One of the things that surprised me in relation to Steve Jobs is you say that we wrongly fetishize the idea of being first, where in fact, you don't necessarily want to be first in order to capitalize on an idea. And Jobs was never first. Why not? I would have thought you needed to be first to get the patent or to get the copyright or... Like, that would be what people are... Was significant. MG: Who was the first... Who built the first social media site? Nobody remembers. EW: Mark Zuckerberg is what you're gonna say. MG: It was Friendster. Who built the second one? It was probably Myspace. Who built the third one? Facebook. You don't want to be first. They're long gone. You don't want to be second. You wanna be third in that case. Who built the first search engine? Probably like, AltaVista, or something. [laughter] And then, it was Yahoo! And then, it was, like, Lycos, and then it was... The Google guys were so late to that party. I mean, they were massively... They slept through [laughter] the first generation of search engines. Show me an example of why you wanna be first. Who was first? No one's ever first. It's so weird. There is a sort of fetishization about it, but there were very few cases... EW: This is only because of application rather than research. So, you have the competing scientist, like the discovery of DNA or something like that. And there, it's significant who's first. And what we're talking about, it's a different sphere, because we're just talking about, not just, but we're talking about the ability to capitalize on an idea to... MG: Yeah. Well, you want to be first-ish. You want to be in the first wave. You don't want to be a 100th. But I don't know if you ever... And also, another problem with the first is, there's so many problems with being first. I was having this conversation, remember Michael Milken? The guy who went to jail in the '80s for junk bond stuff? I was talking to some guy, and he was like, "You know, everyone does what Michael Milken did. It's just that he was first." And it was so weird, and people couldn't figure it out, and they're like, "Oh, he must be criminal." So, they sent him to jail and they barred him from securities industry. And now, everyone does it, and it's like, "Oh." So, you didn't want to be first doing that [laughter] 'cause he went to jail. I don't know, I just don't think first is... I just think it's overrated. Wouldn't you rather be second or third and see how the guy who went first did? [laughter] And then... Want to improve it if you could, right? EW: Is that how they win? Because they improve... Or they... MG: Yeah, that was the thing about Jobs. Jobs was never first. He was late to every single party. He was... There were Blackberrys years before there was the iPhone. There was... The Mac was a copy of the computer he saw at Xerox PARC. He did an mp3 player because he was disgusted with the... He so hated the music players he had. He's like, "We can do better than this." The tablet is an idea, the iPad is the idea that was Microsoft's idea. And he went to a dinner party, and the developer of the tablet for Microsoft talked his ear off and he found the guy so annoying. He was like, "You know what, I'm gonna do my own." No, no, the reason he was upset was that the Microsoft guy wanted to do a stylus with the iPad. MG: And, Steve Jobs, among his many idiosyncrasies, he hated styluses. Styli? [laughter] And he just... If you mentioned the word 'stylus', he would literally blow his stack. So, he was like, "If you're gonna do it with a stylus and ruin it, I'm doing it myself." Right? With the finger. So, he did. So, he's never, like... He had no... He didn't... I don't think he even wanted to be... It never occurred to him that he wanted to be, he was quite happy ripping people off. And I think there's nothing wrong with that. I think when ideas get really complicated and when the world gets complicated, it's foolish to think the person who's first can work it all out. But most good things are... It takes a long time to figure them out. EW: Another entrepreneurial idea that you've debunked is that entrepreneurs are great risk takers. You use Ted Turner, the media advertising mogul, as an example. But you suggest that the really big movers, in fact, don't take risks. MG: Yeah. EW: How... How do you... MG: Well, I, yeah. I was reminded... I read this hilarious thing recently. Somebody was describing the founders of Google as risk-taking entrepreneurs. And then, this guy writes a response, this guy who was also an entrepreneur in Silicon Valley, who points out that they were both PhD graduates from Stanford in engineering in the 1980s. And the phrase that sticks in my head was, "Short of inheriting the throne of England, there is no one who has taken less of a risk than a PhD graduate in Computer Science and Engineering from Stanford." [chuckle] His point is, if you get a PhD in Computer Science from Stanford in the 1980s, people line up to give you money for whatever you wanna do. I mean, they are brilliant guys. They did amazing things. MG: They did not take risks. Other people gave them money, which they spent on a whole bunch of ideas which paid off. Right? That's many things, it's not risk taking. The risks that entrepreneurs take, I think, are social risks. So, what they do? That was what that article was all about, it was understanding the risks they take are not material risks. They're very often using other people's money or more interestingly, what makes them brilliant entrepreneurs, is they understand a business that's not risky. Everyone else thinks it's risky, but it's actually not. They're geniuses understanding that something is a far surer bet than the rest of the world thinks. Ted Turner is a good example. Ted Turner is the first guy that understood. He was running a billboard business and he wanted to buy a cable television station. EW: And incidentally, inherited the billboard business from his father. MG: Yeah, from his father. Wants to buy a cable television station. Everyone says, "That's crazy, you're gonna lose your shirt." And he's like, "No, I'm gonna do it anyway." What he realized, which we all now understand, is that billboards and television stations are the same business. They're in the business of selling ads, right? The fit between those two was beautiful. And he buys this station for next to nothing and turns it into one of the most powerful, lucrative media properties in the world. The risk he took was social. All of the business old guard of Atlanta, when he made that move, essentially ostracized him and called him an idiot. That is, to be called an idiot by your peers, is a very devastating thing, right? And if you look at the careers of great entrepreneurs and you look at the moment that they took their plunge, the plunge is rarely a great financial or material risk. It's a social risk. At the moment they started their new business, everyone around them said, "You're an idiot." MG: And they had to endure years and years and years of essentially being a pariah. That is insanely difficult. That's way harder than gambling with someone else's money, right? Sam Walton borrows money from his relatives to start Walmart. Borrowing money from your relatives is not a material risk, it's a social risk. If you blow it, and if you're doing something your relatives are rolling their eyes at, every time you go to Christmas or Thanksgiving, [laughter] your father-in-law's looking daggers at you, and saying, "You're gonna squander my money, son?" Right? That's the risk, right? But the idea of running a discount retailer where you pay your workers almost nothing, and you lock them in at night, so they can't go home, that's not financial risking. [laughter] That turns out to be a fabulous business proposition. Who knew that exploiting people, could make a lot of money. Like, what is, what a... EW: What an active imagination. MG: Brilliant active imagination. [laughter] MG: I will get staff from China where they pay their workers nothing and I will sell it in stores in America where I pay my workers nothing, and that could translate into a huge amount of money. [laughter] [applause]