#392 Michele Ferrero and His $40 Billion Privately Owned Chocolate Empire

0:00 This will be one of the most incredible founder stories you're ever gonna hear. For his entire seventy year career. Michael Ferrero was solely focused on serving his customer. As you'll hear He gives his customer a name. And he focuses on inventing on her behalf.

0:14 He invented products that no one else was able to create. was absolutely obsessed with crafting a high quality product. And he ran tens of thousands of experiments throughout his life. Every single experiment was aimed at making a better product for his customer.

0:28 And as I was reading about Faro's approach to building his business, I kept thinking of the similarities that he had with my friend Karim, who is the co founder and chief technology officer of Ramp. Karim is one of the greatest technical minds working in finance, and I spent a lot of time talking to him, and every single one of our conversations centers around. His obsession with crafting a high quality product. and using the latest technology to constantly create Better experiences for his customers.

0:53 You'll see a lot of similarities in this episode because Michael Ferrero was like this too. Karim was wanting Она мод технікал темс і фінанс. They use rapid, relentless iteration to make their product better every day. Just like Faro did. And so far this year. Ramp has shipped.

1:09 Over three hundred new Features. Ramp is completely committed to using AI. to make a better experience for their customers and to automate as much of your business's finances as possible. In fact, Karim just wrote this.

1:23 He said AI is all I think about these days. It is our duty to be first movers and push limits so we can make the greatest possible product experience for our customers. That sounds a lot like Michael Ferrero's approach. To using a combination of craftsmanship. And rapid iteration to invent new products.

1:39 for his customers. Many of the fastest growing Notion is a great example of this. In fact the CFO of Notion just said this. People ask how we're using AI and finance. And I have one simple answer for them. We use ramp.

1:56 Make sure you go to ramp.com to learn how they can help your business save time and money. Michael Ferrero was in love with the technology. And he talked about how incredible the robots were. That helped him make his products. Wait till we get to that part of the episode. It's hilarious. But like many of history's greatest entrepreneurs, Ferrero was always investing.

2:13 in the latest technology. That is how I know if he was alive today, he'd run his business on ramp. Let the robots chase your receipts. and close your books so you can use your time and energy to build great things for your customers because at the end of the day, that is what this is all about, building a product or a service that makes someone else's life better. That is what I'm trying to do and that what is what Ramp has done. Get started today by going to ramp

2:35 dot com. A silver haired man in his eighties. sits at a long table ready to begin an almost mythical daily ritual. From eight A. until dusk. He and a trusted circle of confectioners methodically taste and tweak recipes to

2:51 For new treats. This man with the tireless sweet tooth Is Michael Ferrero. The closest thing we have to a real life Willy Wonka.

3:00 Ferrero is the wealthiest person in Italy, and that is Even that is an understatement. So Ferrero owned a hundred percent of his company. He had no outside shareholders. He had no debt. Today. That company does.

3:14 twenty billion dollars a year in revenue with very high margins. When you look it up. It says that this is a forty billion dollar company, it's likely worth multiples of that. Again Hundred percent owned by the family. And the crazy thing about the story I'm about to tell you is Michael worked on this company for seventy years. From nineteen until he dies at eighty.

3:35 Nine. This story is unbelievable. I can't stop talking about it. So Ferrero was a paradoxically private chocolate king. Who rarely appeared in public without his dark sunglasses. And never granted a single interview in his lifetime. He actually granted a single interview. But when he was much older

3:52 And he only agreed. to do the interview. If the interview would not be published until after his death he had He has a series of maxims that he repeats. In fact Some of the people that worked for him said he would repeat the same thing sixty times a week.

4:05 This is something you and I talk about over and over again, that repetition is persuasive. The very best founders they identify a handful of principles and then they repeat them for decades. Michael Ferrero was no different. So he often had this maxim that he would repeat. that he says only on two occasions Should the papers mention one's name. Birthday

4:24 And death. Yet behind the guarded doors of his empire, he was a relentless innovator. Personally inventing globally beloved products. Like Nutella. Kinder.

4:35 Tic tac and Ferrara Roche. In his tasting room. Ferrero pursued perfection with monastic devotion. It was a scene equal parts humble workshop and secret laboratory. Ferero's weekly routine embodied the blend of tradition and modernity

4:51 that defined his company. Each week he would commute by helicopter. Between Monte Carlo, where he lived and his center of operations in northwestern Italy. He kept a secret lab.

5:03 In Monte Carlo. I have to tell you this part now too. 'Cause it's just too good to save for later. This is very much a family business and Michael wanted to make sure that his two sons could run the company.

5:16 after he was gone. So he technically Retires. When he's in his seventies, so that his sons can take over as CEO. But he still shows up to the factories, still goes into the stores where his products are sold to interview customers.

5:28 And he sets up a private laboratory at his house. So we can still run experiments and invent new products. That is is A hilarious definition. Of retirement. At the factory.

5:40 Workers knew him as Mr Michael. So his name obviously in Italian is Micele. I I'm gonna use the so I don't butcher. All these Italian uh these Italian words.

5:51 I'm gonna translate it obviously to English. That's why I'm calling him Michael. So they would call him Mr. Michael. They looked at him more Of a father figure. Than a boss. In Monaco, high society barely saw him at all. The reclusive billionaire preferred tinkering with chocolates behind closed doors.

6:06 This dual existence was emblematic of Ferraro's approach. Global vision rooted in local loyalty. Innovation. Cloaked in secrecy. Н імен суксес.

6:17 Coupled with self imposed Seclusion. So There's There is going to be a lot there I'm gonna tie in all these other entrepreneurs. uh past founders you and I've studied.

6:27 That Michael reminded me of. There is a bit of the founder of Red Bull. When it comes to this. Uh, he has this great line. If you m if you haven't listened to the Red Bull episode, it's one of the best episodes I've ever done in my life. It's episode three thirty three. It was another book.

6:41 That had to be translated because There were no English biographies of Dietrich Maschitz either. And so we actually my friend Craman Priest, who translated this book that I'm working from right now. He was the one that translated the Red Bull book for me for uh for me from German to English. And there's a line in there. that Dietrich Mashesis, the founder of Red Bull, says that sounds exactly like it would come out of

7:02 Fro's mouth. He says, I do not care about society events. It's the most senseless use of time. When I go out from time to time time time to time. It's just to convince myself that I'm not missing a lot. So There are no biographies in English.

7:17 of Michael Ferrero. I just said my friend Cameron Priest. Translated one from Italian. and he sent it to me. So what I'm gonna do is I'm gonna continue to give you the overview of His life

7:27 And then I just wanna rip through a bunch of interesting ideas that I found in the book. This guy is insanely great. His approach to his work, it's gonna remind you a lot of Like a Steve Jobs, an Edwin Land, a James Dyson. And Ivan Chenard.

7:42 There's a bunch of things that he does that are just like Sam Walton that Sam Walton did when he built Walmart. So I'm gonna go through hit like give you an overview of his life and then I'm gonna go through specific ideas on how he built his company. It's incredible. Uh, Michael's life began far from the wealth of Monte Carlo. He was born in nineteen twenty five in an Italian a tiny Italian village nestled in the Lang Heads.

8:02 Hills, I promise you. I went and looked up. how to pronounce these words. I still can't get it. I think it's Langhay Hills. The reason I'm Talking about this though, it's very important that he happened to be born there.

8:13 Because The region that he was born in in these hills that I cannot pronounce was famous for something that would shape Michael's destiny. And that is hazelnuts, okay?

8:24 Hazelnuts grew in abundance across these rolling hills. In the nineteenth century. Confessing. Had invented This paste called

8:33 John Do ya. So John Dewy is a chocolate hazelnut paste. That was born out of necessity. Because

8:40 Chocolate was expensive. And the the main ingredients for chocolate were scarce and nuts, hazelnuts, were plentiful. So when you hear John Dewey. Just think Nitella із the precursor. to one of Ferraro's most successful product

8:55 I looked up. Фраз руморд торі більон до єр. of Nutello. So Michael's father is actually the one that gets him involved in the business because Michael's father's Pietro. was a pastry maker. They lived in this tiny town.

9:10 In Italy called Alba. After World War Two, chocolate was rationed and very expensive. But hazelnuts were cheap. So Michael's father said if I use more nuts and less cocoa I could obtain a product that was just as good and not as costly.

9:24 So Michael's father, Pietro, and Michael's Uncle Giovanni began selling a hazelnut. Spread. They are gonna call it super crema. And what they were trying to set out to do was offer cash strapped Italian families a taste of affordable indulgence.

9:39 Since Italians are so poor after the war. This spread that they're making was one fifth The price of chocolate. And what they were setting out to do was making a sweet comfort food. that everyday workers could also eat every day. And so at the time it was actually called

9:53 The chocolate of the poor. And so when Michael was young, he literally grew up around Vats of hazelnut paste and sacks of cocoa. He starts working in the business when he's nineteen, when he is twenty four years old. His dad dies.

10:08 Suddenly there's a lot of tragic heart attacks that happen in his family. So his dad's gonna pass away at fifty one years old. His uncle also has a heart attack. In his fifties. And later on, Michael's son Pietro.

10:21 Who he named after his father has a heart attack and dies at forty nine. So it just twenty four years old. Michael has to run the family firm. And when he takes over, he writes this letter. to his employees.

10:33 with a bunch of promises that he intends to keep, which he did keep. says he marked that moment with a remarkable letter to all employees, vowing I pledge myself to devote all of my activities And all my efforts to this company, I shall only feel satisfied when I've managed to guarantee you and your children a safe And tranquil.

10:49 Future. He felt a responsibility To keep the company alive. He said that when he was twenty four. Decades later he would still say stuff like this on why he pushed himself, why he would work seven days a week, he'd work overnight.

11:01 He had no other life. He he was completely obsessed with the products that he was making and the company he was building. And this is one of the reasons he felt It was an obligation to his community'cause he's building he's gonna be the largest employer in these you know, these very rural In small towns. He says if this company goes into a ditch

11:17 There are thousands of families. that go into the ditch as well. This thought keeps me awake at night. I must find new projects. New ideas.

11:27 And new Products. Michael was determined to prove that a business could grow vast and rich. While still guaranteeing a safe and tranquil future for its workers. Deeply influencing Michael's outlook were the twin pillars of his upbringing. He was a devout Catholic

11:46 And he kept the values of small town Italian life. For the rest of his life. He talks over and over again about the importance of prayer. In fact, he had a shrine of Madonna placed

12:00 in every single factory and office. No matter how big the company got. And even though he wound up one of the richest people on the planet, he did not optimize He was not solely after making money. echoed the Catholic principle that wealth was o justified only

12:14 If used for the common good. In fact, the way he described running his business, he said, uh I am a socialist, but I do the socialism. So it says he arranged for buses to ferry workers from outlying villages to the factory and back every day. This is all free of charge. Employees and their families enjoyed free medical care and housing support. Ferrero built a social contract. In exchange for hard work and loyalty, the company would provide cradle to grave stability, and remarkably, in over seventy years of operations,

12:40 Fero's workforce never went on strike, which was unheard of. at the time and in the location which he's building his company a virtually unheard of record In their industry. And the way he funded all of this was by constantly and relentlessly And never deviating

12:56 From his main goal which is to invent New Products. He was not interested. in building me to commodity products. This is something he talks about over and over again.

13:05 Uh, Michael channeled his obsessive energy into venting entirely new confections. Ferraro proved to be an imaginative product developer with an almost uncanny sense. of what treats people craved. And he's got a lot of interesting ideas to how to discover that, which I'll go over. He had a rule breaking streak. A willingness to always act differently. to the other. So

13:26 I kept telling all my friends in every single conversation I've had'cause I've been reading about this guy for like two weeks now. And it's just like It's the same personality type over and over again. This is Edwin Lan. Edwin Lan was not making chocolate. He invented instant photography, but he said My personal motto is

13:41 Don't do anything someone else can do. Ferrero says the exact same thing, but he uses different words. James Dyson. Again. Not making chocolate, making vacuum cleaners, and he says difference. For the sake of it.

13:54 They are the same. And they give an example. Take for example the launch of Kinder Chocolate, which is now one of the biggest Brands by revenue. Uh, conventional wisdom held that children's sweets should be simple.

14:05 But Michael introduced a candy bar explicitly designed for kids. It was a milk chocolate bar with a creamy milk filling, marketed as a treat that parents could feel good about giving their young ones. The Kinder line soon expanded into an entire range. Most famously the Kinder Surprise Egg. Which Michael introduced ten years later.

14:22 It hid a tiny toy inside a chocolate shell to capture the joy of Easter. But year around. Michael's inventions often blended playfulness and indulgence. Acknowledging that candy was as much about emotion As flavor, in fact.

14:38 He didn't call when he was making Candy or confections, he called his inventions. Comforts. I knew all about Ferrara Rocha, it's one probably my favorite chocolate. I knew all about Nutella. I didn't know that the same guy invented Tic Tacs.

14:51 So says Ferrero launched the Tic Tac. These petite Pill shaped mints ingeniously packaged in a flip top box. That dispensed one min at a time were a world away from chocolate. Yet they bore Michael's hallmark traits. An innovative form factor.

15:06 Obsessive quality control and global appeal. Now I this may sound Ridiculous. I don't even know. But I never thought Of

15:15 creating new chocolate products as inventions until I read and understood what went into his thinking behind every single one of his new products. And I didn't understand because many of these products are still successful and they've been they've been selling for fifty years. That before he made them, no other brand had a product in that category. And as Michael will repeat over and over again, he did that intentionally.

15:39 By diversifying beyond chocolate, Farrell showed early on that his company could master multiple segments of the sweet business. and do so internationally. So this is another thing. That he would repeat over and over again. Everybody try to get him like just we're successful in Italy, like just stay in Italy, it's too big of a risk to expand. And he's like, No. People eat chocolate everywhere.

15:56 People like sweets everywhere. If we stay only in Italy, we are a failure. He had this insistence on turning his company into a global phenomenon. During the nineteen sixties and seventies he methodically expanded Faro's reach across Europe and beyond. The company opened its first foreign production plant in Germany in the mid nineteen fifties.

16:13 recognizing that post war Germany was a crucial marker for sweet snacks. Soon he had plants and offices. Sprouted up in France, Belgium, Switzerland, Australia, Ecuador, and Hong Kong. Michael's inventions born in a provincial Italian pastry shop.

16:27 We're becoming global staples. Michael had one more golden idea up his sleeve, quite literally wrapped in gold. In nineteen eighty two he unveiled Ferrero Roche. A spherical hazelnut cream bon bon. I love these things.

16:41 Encased in a wafer shell. Covered in milk, chocolate, and chopped nuts. And wrapped in gold foil. For an elegant hue. If Nutella was the everyman spread, Ferrero Roche was the aspirational treat.

16:55 A candy that felt upscale. Yet affordably mass produced. Faro Shea became the world's best selling boxed chocolate. True to his form. Ferrero kept the development process for Rocher strictly secret.

17:10 Only a handful of trusted employees knew the recipe and production method. So again He not only see he's an innovator obsessed with keeping it keeping control of everything I ca obsess with complete vertical integration, obsessed with technology. One of the other main themes that runs throughout this entire book is the fact that He was one of the most secretive people.

17:29 This is one example, the fact that only a handful of trusted employees knew the recipe and production method. I'll give you a bunch of other examples. He was very important to him. Uh says the exact formula became a closely guarded secret, as fiercely protected as the recipe for Coca-Cola. For decades Michael's product innovation strategy had a consistent pattern. He favored slow, steady growth powered by internal experimentation.

17:50 rather than flashy marketing or big acquisitions. It takes time to make a good product, he said. And time was something than Michael was willing to take. This is another thing that he's gonna repeat over and over again, that he felt the fact that he owned all of his business, that he had no outside shareholders, that he wasn't listed on the stock market.

18:09 It gave him the ability to experiment and be patient with his products in some cases. He would Work on a product that he truly believes should exist in the world. And it would take ten years. For the market to to catch up.

18:22 And so the product would lose money for a long period of time. And then 10 years later winds up being a massive success. He would talk about hey, this is a just a massive advantage that I have over my publicly traded. Uh competitors. New confections were painstakingly developed in secret tasting rooms over months and years. then rolled out in select markets to prove themselves.

18:42 And this is another one of his interesting ideas. The fact that he loved doing these tiny little tests. So at the very beginning He would test out a new product. With a a tiny number. of existing customers. So let's say he o he invents like this new

18:53 You know. Boxed hazelnut or something like that. He would just send it to like thirty customers. And see their response. He has all these unique ideas on how to test a product out on a small scale and

19:04 Secretly. Always Secretly, which I'll talk more about later. The boy who started as an apprentice in the family in the family pastry shop had built over half a century. An empire spanning twenty factories worldwide.

19:16 selling products in over one hundred sixty Countries. Utterly. Dominating. With over seventy percent of the world's market.

19:24 For chocolate hazelnut spread. Ferrero with secrecy itself. Michael was notoriously tight lipped and protective, cultivating an aura of mystery around his company's operations. He never held a press conference in the first sixty five years of existence of the компані. He preferred to let his products speak for themselves.

19:41 He avoided the limelight. In public he always wore dark glasses and stood silently observing events from the sidelines. Ferrero declined all honorary degrees and official alkales. He found any external recognition was unnecessary. are distracting. So there's this idea that's been popping up that's been on my mind lately. I've shared on a a few past episodes.

20:02 And it's really the the importance. If you want to be truly, truly great at what you're doing. the importance of being prolific. So being prolific is highly correlated with greatness. Just because you're prolific doesn't mean that you're gonna be great. But if you're great, you've almost always been prolific. And so I've been thinking a lot about this a lot lately. It's like what these people have in common is a love and obsession.

20:22 For the activity. It's self. And so when I got to this part about hey He's awarded all these honorary degrees. These official accolades.

20:30 he found external recognition uh recognition unnecessary and distracting. He wouldn't even show up. They'd give him awards and he wouldn't even show up. I just finished watching the new the Bob Dylan movie, which is called A Complete Unknown, which is About the beginning of his career. And at the very end of the movie is this quote. It says Since nineteen sixty five. Bob Dylan has released fifty five albums and continues to tour the world.

20:53 He is the only songwriter to be awarded the Nobel Prize in Literature. He did not attend The ceremony. That sounds like Michael Farrow. To me.

21:03 Faro's focus was on products and people, not on personal fame. This obsession with secrecy. Was not merely a personal quirk. It was a calculated business strategy. Inside of his factories, outsiders. We're rarely allowed.

21:16 The factory was compared to a high security jail. with ten foot walls surrounding it, rigorous tr and rigorous checkpoints. Tours were banned outright. To prevent industrial espionage, і wasn't until two taus eleven. Then he made the unprecedented decision.

21:33 to open the doors to one of his factories to a small pool of reporters. This was the first media visit in the company's modern history. So keep in mind. He's born in nineteen twenty five. starts in the business in the nineteen forties. So two thousand eleven. When he lets anybody from the outside in.

21:47 Of course the sacred tasting rooms remained off limits. Those who entered saw a spotless Highly automated operation. But they were kept under strict watch and not allowed to wander unescorted. Michael's need for control permeated every aspect of the production. Many of the machines were invented and built in-house.

22:08 by Michael's own engineering department. So this idea of control over everything from the raw materials to the production to the distribution of logistics to the marketing to the relationship with the customer. It's just The entire book is about this. One of Michael's proudest technical achievements was a custom built roasting apparatus.

22:25 A massive contraption that could toast hazelnuts perfectly. Without burning them. Such proprietary machinery was a tangible manifestation of Of the company's philosophy. Control everything you can. Ingredients

22:37 Process. technology to safeguard quality and Trade secrets. That instinct for control extended far beyond the factory floor. In an industry.

22:46 Often buffeted. By commodity swings. Ferero took dramatic steps to secure its key raw materials. Especially. Over the years

22:56 The company quietly acquired hazelnut orchids. In both the northern and southern hemispheres. Ensuring a year round supply of fresh nuts by the mid two thousand tens. Ferrero is purchasing.

23:10 Roughly one third. of the entire world Hazelnut crop. And had even become the world's largest hazelnut supplier itself. This level of vertical integration.

23:21 Controlling the ingredient supply chain from farm to factory. Helped inoculate Ferrero against price shocks and shortages. It was also another layer of secrecy by owning the supply and making products in house. On custom machines. Foreau needed to rely less on external partners.

23:39 Who might expose its methods. Nutella's recipe is famously not patented. Why? He didn't want to patent it because if you patent it, you have to avoid You have to reveal its proportions. The company's line on it is that everyone can find out the ingredients.

23:56 We simply know how to combine them better than other people. Michael Farrow's fierce protectiveness proved enormously effective. By keeping Ferrero private and family owned, he avoided the disclosures that publicly traded companies must make. And remain free from the pressure of outside shareholders. This is what he said.

24:14 Our identity is based on our independence. If we had shareholders They would ask us to increase turnover. But it takes time. Product.

24:23 Growth he believed. should come from within or not at all. This discipline kept Ferrero healthy and debt free. And this is such an important point because the podcast I get to meet all these like privately held businesses that you've never heard of.

24:36 You don't know who the founder is. You you might know their brand. In many cases you do know their brand. And This pattern that they have. This is their setup.

24:44 No outside shareholders. In many cases no debt. Just A very profitable business that just shoots off cash. And so You talk to them and w we talk a lot about their business and like w what their plans are and everything else and obviously I think there's an element of trust because they understand how how obsessed I am about this and they probably you know, by the time I meet them they probably listen to

25:01 We speak for a hundred hours about the history of entrepreneurship. And it it just It so in many cases I'll like find out how much these businesses make and just like oh like Yeah, I just take personal dividends. Yeah, any cash that can't be reinvested in the business, we just take it as a family. And it's just like, Yeah, my paycheck last year was, you know, six hundred million dollars.

25:18 Which sounds crazy, but I've talked to several people like that. It's like Oh yeah, I made like three hundred million personally last year or six hundred million, or In cases over a billion. I find these like family held b private businesses, they're just Their beautiful and their elegance and simplicity. And they are usually started by somebody like a Michael Ferrer, where he's like, Hey, growth's gonna come from within or not at all.

25:38 Uh, we're gonna be health financially healthy and debt free. We're gonna have no outside shareholders, no debt, just straight cash. This the tsunami of cash that's coming out of these businesses. Uh, Michael Ferrero built a business that by the time of his death was among the world's top three confectionery companies by revenue. All achieved on its own terms of secrecy, quality, control, and long term orientation.

26:02 And before I move on, I guess the reason I bring that up is because Because these they don't need outside investment, because these are not public companies. They they they shun publicity. So you don't even know they're kind of like invisible, but this This is not like a one off occurrence. The amount of people that I that I know that I've met Because of the podcast that that

26:18 have businesses like this. I just had a few days ago, I had lunch with a guy. Him and his partner. Own a hundred percent of the company. He's the majority shareholder. And he personally made three hundred million dollars last year.

26:29 And when I speak to him about his approach to his life and work, it is the same what the reason I bring this up. It's the same personality type over and over and over again. That's why somebody just bought the domain the domain. Uh church for founders. Church for Founders.com. If you go to it, it forwards to Founders Podcast'cause exactly what it is.

26:44 We're just talking about the same people over and over and over again. They're all obsessed. with what they're building and if you're obsessed with your building you'll see these little details how much they care. As we'll go through with Michael today. The intense secrecy hit a rather straightforward ethic. Again, they they talk about their business in simple terms.

27:01 Very clear thinking. An assistance on excellence and a focus on making excellent products. No one can see him at work without being impressed by his dedication to the production of goods that can be sold on quality rather than price. So that's again. Your tele starts out. As

27:16 You know the chocolate for the poor. Over time he's more interested in making the best product, a product that would be sold on quality rather than price. So His products average. They cost about fifty percent more than their competitors. And consumers like myself.

27:29 Willingly pay it. This is again, this is just like James Dyson. Let me read from James Dyson's first autobiography. The best kind of business is one where you can sell a product At a high price with a good margin. And in enormous volumes.

27:41 For that, you have to develop a product that works better and looks better than existing ones. That type of investment is long term and high risk. Or at least it looks like a high risk policy. The in the longer view. In the longer view.

27:55 It is not half so likely To prove hazardous. To one's financial health. is simply following The herd.

28:03 I think if Michael was alive And you can read that statement to him, I think he would agree with that statement. He had a lifelong dedication. to doing things differently than what was already on the market, just like Dyson does. And again You can go on

28:17 Amazon and buy a a vacuum cleaner for forty dollars. Or you can buy Dysons. For six hundred. And people choose to buy Dysons'cause it's the best in the world. I have his vacuum hobby say I'm obsessed with the guy. It's my favorite fo you know, my probably my favorite founder. So obviously and then you know everything that goes in

28:32 To the work he does how he thinks about it and actually g makes the his products more valuable. And so again, Faro's products on average cost about fifty percent more than their competitors. Uh, Michael often said that his greatest success was born from thinking differently. But in at least one respect he was proudly traditional. He saw Ferrero as a family company above all.

28:49 In an era where many storied Italian brands sold out to international conglomerates Or were taken over by banks. Ferrero remained absolutely family run. Yeah, uh Ferrero's wife. uh and him they had two sons, Pietro and Giovanni, named after his father and uncle.

29:04 And from the very beginning, they start training them from a young age in the ethos of the company. By the 1990s, as Michael approached his seventies, he began entrusting more responsibilities to his heirs. In ninety seven, he made the bold move of stepping back from day to day management and appointed Pietro and Giovanni as co CEOs. of the company. Michael remained as chairman and he was the final arbiter of major decisions.

29:25 He officially retired, but he was far from idle. This is what I mentioned earlier, which is funny. He couldn't resist time sp spending time in his laboratory. Dreaming up new delights. He was known to work through Sundays and even overnight. Feverishly experimenting. To perfect a flavor or texture. Remember how this started?

29:40 He's in his eighties. And eat. His mid eighties and he's still in he can't help himself. He just he loved what he did. He never really took his foot off the gas, even as his sons were nominally in charge. Michael ensured that the standards he set never slipped.

29:53 Tragically he was dealt with The family was dealt a blow in two thousand eleven when his son I was wrong, I thought he died when he was forty nine. He was actually only forty seven. He had a heart attack while Bicycling. He was uh like a cyclist. And so he had a heart attack and unfortunately died at forty seven.

30:08 Leaving Michael's soul son. who now becomes the sole CO and sole owner of the company. And his name was Giovanni. Michael then in his mid eighties responded he's always had in crisis by focusing on work and the future. Observers noted that Michael seemed to pour even more of himself into guiding Giovanni. As if determined to import

30:26 All his remaining Wisdom. One of Michael's often bits of advice to his son was simply Always act differently. From the others.

30:35 Have faith. Stay strong and put the customer At the center each day. Michael often repeated this maxim only on two occasions. Should the newspapers mention one's name, birth and death.

30:47 In February two thousand fifteen One of those two occasions came from Michaero. Fittingly and poignantly, he died on Valentine's Day. A day dedicated to chocolate and love. At age eighty nine.

31:01 The company's website went dark except for a simple tribute. We are proud of you. Thank you, Michael. Okay, so that is the end of the overview. So what I did is I rewrote all my notes and highlights. And really they're they're grouped into like there's like nine traits of Michael that I would basically describe. So I'm just gonna tell you the nine traits and then I'll just go through these ideas. So number one.

31:21 He's just obsessed with product product quality. The product is at the center of every activity of the company. That is why it exists. Number two. He loved his business.

31:31 He didn't want to do anything else. Uh, I don't think he was capable of doing anything else. He just couldn't help himself. Number three, he was not interested in making me two products. He insisted on differentiation. Number four.

31:43 He believed in keeping secrets. Number five he believed creating wealth was a moral duty. And that you must take care of your people. Number six, he loved technology and he invested heavily in it. Number seven, he paid attention to everything.

32:00 little detail. He believed if you do everything You will win. Number eight. He was obsessed with control. He went to great, almost absurd lengths.

32:11 To control everything about his business. And number nine, he had an extreme focus on the customer. He actually named His customer. Called her Mrs. Valeria.

32:22 He considered Mrs. Valeria. the real CEO of the company. And is obsessed with pleasing her. And so you you can kind of think about it as like, Oh, you know, we have millions of millions, I don't know, tens of millions of Customers. He didn't think that was helpful. He's like, No, you have one.

32:36 And it's you you put a name on her. You think about your customers as serving an individual person. You do everything you possibly can to act in service of the customer. He's gonna talk a lot about that. So just gonna run through some of these these traits and ideas that he had. So it says he possessed a genuine Childlike passion. For bringing joy

32:55 Through his creations. He said that doing good for others is doing good for oneself, and that is how you create wealth. It's a very interesting idea because that sounds almost exactly What Henry Ford said, which is one of my favorite maxims from the history of entrepreneurship, that money comes naturally.

33:13 As a result of service. Michael had a life characterized by monastic habits. Discretion. No visibility. No interviews.

33:22 religious faith. And a love of quality. Michael saw the poverty of his childhood, and he never forgot it. Hій came of age. in post World War Two. And in Italy at the time.

33:34 There was a lack of supplies. You didn't even electricity was even scarce to come by. Chocolate was considered a luxury. So for his entire life he never forgot how bad things could get. And when he f he found other people struggling in poverty. He would always give money to people in need, and he always did this discreetly and never he never publicized it.

33:54 The growth of the business is hard to imagine. Because at the very beginning they only had two machines. That operated on electrical power. Everything else was done by hand. And another obsessive.

34:07 In Italy. And A very different industry was also starting out. And starting his company under these s very same conditions where you're very hard to find any kind of machines. Even if you did have machines, you couldn't find electricity.

34:20 And his name. was Enzo Ferrari. Michael had a lifelong habit of going on long walks to think. His mind was perpetually turned towards the future. He did this his entire life. But the very beginning he was walking through all these hills where the hazelnuts grew.

34:36 So this is what I mean and he goes to just absurd lengths. He does stuff that you would never even Consider. He felt That the air that he was breathing was so conducive. To thinking.

34:47 Та хір архітекс. To recreate the characteristics of those walking paths. In his office. They exactly replicated the characteristics of the air. In the hills at about six hundred meters in altitude.

35:02 This is a level of obsession that's very rare to come across. He would take existing and oftentimes more expensive products and see if he could approve them. Some of what he learned by doing this he would use twenty years later when he launched Nutella. So last week I did this Jimmy Ivean episode. And Jimmy Ideen is a record producer, right? He's a music producer. And Jimmy did almost this exact same thing. Jimmy would take

35:23 Old songs. And say hey. This is an old successful song. Can I improve it? And he was doing this as a a form of practice to get better at his craft of music producing.

35:33 I really like this idea of both Michael and Jimmy it's like, hey, there's an existing product out in the market. Let me just grab it and see if I can actually improve upon it. Uh before going into the family business. Michael's actually studying accounting.

35:45 And the he's studying it, but he never went to college. So this is like this would be our equivalent of Of high school. But He's not really studying accounting. He's studying Chocolate.

35:56 And hazelnuts. So as a student in class. He would be mixing hazelnuts and chestnuts. together to figure out the right mixture. So during class he would crush hazelnuts.

36:07 Then use a pencil sharpener to reduce them to tiny pieces. Then he would peel chestnuts, chop them up, and then combine them with hazelnuts. And he was very much a you would consider him a scientist. 'Cause he would take note of how much each ingredients he was using. Then he would combine them and while he's in class, he would ask his classmates to taste his concoction and if they said, Oh, this tastes terrible He said th his classmate said that he refused to give up.

36:29 They would say, Okay. I must have got the proportions wrong. I will try two thirds hazelnuts and one third chestnuts. You will see it will definitely get better. This obsession. was present at a very young age. He brings a friend down to the basement.

36:41 And shows his friend this machine that he's building. Now keep in mind this is during World War Two. His friend thought it was a machine gun. And Michael's like, No, it's not a machine gun, it's a machine for making chocolate. When the war is over, I will finally be able to devote myself to this full time. one thing he was adamant about is that he wanted low employee

36:59 Turnover. He wanted you to have a lifelong job. at Ferrero. Many people worked with him. For more than three or four decades. Their their kids

37:08 Would be born. They would grow up and then they would come to work at Ferrero as well. When he they let in the reporters for the first time, you know, sixty years into the the history of the company. They remarked that how many of the relatives were related to each other.

37:22 And they would talk about what Michael would do for them. So he would show up and he'd make coffee for the factory workers before they arrived. Uh, he would bring hot chocolate to the people working on the night shift. He would ask them questions about what they're seeing on the factory floor. What was going on in their personal lives. He traveled with some of his employees to see machines that they could use production. They went and traveled to Germany.

37:40 What if his employees wasn't feeling well and decided to go back to his hotel room? Michael shows up a short time later with herbal tea and wanted to see if there's anything else that his employee needed. He believed that creating wealth was a moral duty and it was imperative to treat your employees well. There was so much demand for the products that they're making that he has to operate his factory seven days a week.

38:01 the local priest did not approve. Michael convinces the priest of the necessity Of working on Sunday. And to compromise, he actually has them move the mass And hold it in the courtyard of the factory. He built up an advantage over his competitors by using this rural workforce model. This is what I mentioned earlier. So instead of centuriz centralizing operations.

38:21 inside a big city. He actually employed people from nearby rural towns. This allowed them to stay in their homes because at the time so many people were having to move from their their own communities to go into the city to where all the jobs were. And so he builds a network of free buses that pick them up in the countryside. Bring the and bring them back home so they don't have to spend part of their salary on renting an apartment in a bigger town. They could also spend more time with their families. He also insisted on building and controlling his own distribution system into the store. So most of people in his position would sell to wholesale. Like, no, I'm gonna skip right that. I'm gonna sell directly to the retailer selling my products.

38:56 So he built up this huge network of delivery trucks that are simultaneously delivering and advertising his products. So they would paint the outside of these trucks and sometimes they're they're like little small fiats all the way up to like big buses. They'd paint them with all the Ferrero signature branding. They'd have all of these advertisements for the different products, all of their taglines. And at the very beginning, you know, in the nineteen forties, he has 41 vans. You fast forward twenty years later. He's got thousands of them.

39:22 And by this time, Ferrero had the largest private fleet in Italy, second only to the Italian army. All completely controlled. by the company. And there's an interesting line about that that said Michael was interested in building infrastructure That supported both scale and identity. And so this is another thing that Michael would repeat, the importance of

39:41 Paying attention to the entire process. He wants to control everything. These are his words. We are particularly interested in following the product through all of its phases. When it's broken down in the crumbs. When it takes shape. And when it leaves the factories, when it enters the homes where the judgment will be pronounced, a judgment

39:57 That can make our fortune or our ruin. That is why we want to know immediately. This is an in an easy thing to say. But a difficult thing to realize. That is why he hangs out in the aisles.

40:10 Oh where? Oh, where his product is sold. And there's other ideas on how he he gets information from customers later I'll tell you about. Ah, he also had a passion for machines. He would buy a machine that was meant to be used in his factory. He did not use it as designed. He would immediately take it apart.

40:25 specifications. And then he had like this love affair with this technology because he view the technology, right? as a way to scale up and deliver more his product to more people. And you see the passion that's evident in his own words when he talks about this.

40:40 I've always been particularly fascinated by machinery. When I see it moving, it seems to me that has a soul. Like a person. If you've been to the plant you will have noticed That kind of automatic milking machine.

40:51 That fills these little plastic boxes with spreadable chocolate. It closes them, seals them, And then packs them to be shipped. Well that machine turns out twenty two thousand boxes like that every hour. Isn't that a wonder?

41:06 Michael understood. Then investing in new technology was not Optional. It was mandatory. He said, We need technology and innovation to grow in production and employment. He would travel the world looking for the absolute best machines.

41:18 One time he bought one. He brought one that was so big and so foreign. Employees were scared. It looked like alien technology to them. It was so successful at increasing production that Michael soon ordered two more.

41:32 Michael like James Dyson and I would say like Steve Jobs, he believed in the Edison principle of design. It's these constant small iterations over time. Uh, Michael finds himself spending hours kneading, discarding, tasting, creating, retrying, testing. Bringing to customers. Hearing their feedback. Reciprocating and retesting said even a mistake.

41:50 can be an indication for something different and new. He would take A helicopter. to all of his factories, land there. And he insisted on personally inspecting the quality of the work.

42:02 He said you have to verify The quality of the product in person. He also said that you have to control your raw Inputs. This is nuts.

42:12 Uh Michael's intense interest in raw materials is very evident. For example, he was not satisfied with knowing that the lemon was brought from Calabria or the Amafi coast. He wanted to know at what altitude it was grown. Whether it was exposed to the sun or not. Then he wanted to know if two hundred meters higher there were other lemons, perhaps with a different flavor, a better flavor. He had extraordinary knowledge. Of the raw materials.

42:36 If you wanted to know all the details of an Indian mandarin. He could tell you in detail. He defined Oh, this is such a great idea. He defined the product as an orchestra.

42:46 And each raw material had to be tuned. According to the score. of that orchestra. But he said, Be careful. Your product can be a catchy tune. But it risks only lasting one summer.

42:58 Or it can be a big work of art. Like La Travata. Which lasts forever. And if you really think about what he's saying there, he invented Products. That's sold for decades.

43:08 Product's highly likely. That will still sell for decades. He would go around and talk to all the factory workers and he would say the same thing over and over again. Tell me the problems. Tell me the problems.

43:19 If I problems, I can figure out the solutions. He was intensely interested I knew exactly like this. Like the g it's what Warren Buff and Charlie Marger said, hey. Tell us the

43:30 Tell us the bad news, because the good news takes care of itself. We don't have to worry about the good news. Just tell me the problem so we can fix it. he had a really interesting idea of how recruiting talent. He would go to all the surrounding schools. Remember these is this is Not big cities. This is tiny communities, rural communities. And so he goes around to all the different schools and he says, Hey Give me the top seven students in each class. He would then go and personally recruit them into the company.

43:54 Michael was also obsessed. With studying and knowing every single thing. About His industry. When I got to this section, this is exactly what Sam Walton they said. Sam Walton s went into more stores

44:07 More retail stories than anybody has ever lived. He was obsessed with knowing everything that was going on in this industry. This description of Michael sounds a lot like Sam Walton to me. He knows a lot of things about the confectioner industry worldwide. He loves to read and study everything that he comes across. He spends hours and hours and hours. In the laboratory, he tries to understand the taste of the public. He wants to know what others are doing. He wants to intercept signs of the future and uncover the latent desires of his consumers.

44:31 He doesn't limit himself to replicating what others are already doing. Everything is tested and revised according to the needs of the company. It is not enough to see or know superficially, he said. One must understand. He was comfortable trusting his own judgment, people around him.

44:47 He didn't believe. This is what they told him. He didn't believe. That people in other countries wouldn't love The chocolate he's making. As much as the Italians do. Even if his initial attempts to export his products into other countries didn't work, he would try again.

45:02 There was no option to not expand. He says if we are nobody in Europe We will be nothing even in Italy. He insisted on this. He also insisted on continuous innovation. The refusal of repetition what is already known. This is what I meant about

45:17 That great Edwin Land. Motto. I have a personal motto. Don't do anything somebody else can do. He refused.

45:25 what everybody else is already doing. He wanted to search for new paths. He wanted to open up new horizons by differentiating from others. He would travel all over the world studying his competitors. He says, You must go and see. You must understand

45:39 how the co the competition's products are affecting ours. You must do this all over the world. На майко. Studied his competitors. But he never told them what he was doing. And so he insisted on expanding in secrecy. Let's say he's buying a new hazelnut plantation.

45:54 Uh a new factory. All of these would be purchased under different company names, especially as he became more successful. If he used the name Ferrero. The price would shoot up. So he cloaked all of his operations just like Rockefeller. cloaked all of his operations in secrecy. I think at one point

46:10 They have like a hundred and ten different like name companies that were like named something different, but all owned by Ferrero. Oh, there's not Another great idea. So

46:20 He had this idea of hiding the brand. And talking to customers. So what does that mean? One of his secrets for fine tuning his product. He found a supermarket. that agreed to put his new products on the shelf

46:33 without the Ferrero brand name. Then he would hire He'd have his employees wait outside the store. Intercept the ladies who had bought these chocolates. Offered them compensation to be interviewed.

46:44 They would go to the offices. Michael would hide behind Like a plate glass. Like mirror, she can't see him. And listen attentively from beh from behind the glass.

46:53 And he would also suggest the questions to be asked to the customers. Like during this interview. And so incognito. He understood why his new products were liked or were not liked. by his customers.

47:06 He insisted on having a long term orientation. He said if a new product for the first two years for the first year, first two years doesn't make money. That doesn't matter.

47:15 You must think in the span of five or six years. And in the case of this like new T That he that he made? It took ten years to succeed. And th this is like the the the the the reason he kept talking about we're gonna make we're we have constantly have to look not where we're at, but where we're going. He had this this intense focus on like long term orientation. Because think about the compounding value of staying in the game for a long time. There is he he has this line where it's like many grandparents today who are eating

47:41 Ferreros ate them. Ate our creations as children. And then those children grow up. And then they have their own kids and they're still eating furrow and then their kids are eating our our creations as well.

47:51 Ah, he believed in daily prayer and meditation. He insisted on going. For an evening walk. And his evening walk was a ritual. No matter where he was.

48:02 He was an unabashed perfectionist who lost track of time. In fact, it says in the lab, he tries and retries dozens of combinations. He loses track of time, does not know what is happening outside. Whether it is day or night. We had s they're they're doing A test. I'm just

48:17 One new thing they're trying to make, okay? In one single day, they do seventy different variations of it in a few hours. He felt his laboratory was magical. And while inside it, the outside world ceased to exist. He names his customer And designs with her in mind. This is one of my favorite I mean, he's got all all these ideas I absolutely love, but this is one of my favorite ideas.

48:37 His great care was for her. He repeated to us. Ремер да if we're good Mrs. Valeria will buy from us. And I can pay all of you.

48:46 If she doesn't buy, I can pay you for a month and then I have to send you home. That's why I am first a servant of of Mrs. Valeria. I can lose money. Бо ви масна лузер.

48:58 Because if we lose Mrs. Valeria We lose Everything. Michael demanded exceptional uniqueness. He will repeat, if you want to go bankrupt, just listen to everybody. We must do something new.

49:10 Something different, something unique, and something against the current. If we imitate the products of our big company our big competitor companies. We will inevitably lose because they will can crush us with their strength. They are fire bombers, and we are a small boat. They can wipe us out with a single blow.

49:27 We must keep our distance. Instead, we We must invent new products that they do not have. Michael would repeat His favorite sayings sixty times in a single week.

49:40 That even the most stubborn of his employees would adopt his key ideas. He insisted that all shares remain in the family. He said, I never want to have to justify my choices. To anyone. You must have financial autonomy. The real CEO of this company is Mrs. Faleria.

49:58 He was like this with everything. This is This is how he proposed to his wife. Listen to this the way he proposes to his wife. I would be extremely happy if you were to say yes to my proposal to marry you. But think it over carefully, and mind you, if you accept you marry a man who will always talk to you about chocolate. He is a missionary. That is a line in the book.

50:18 I'm not quoting Jeff Bezos there, even though Bezos says that missionaries are the ones who wind up with all the money anyways. Obviously a missionary. This is what he says about this, and you know The next quote is not gonna surprise you, I don't think, because he just got done proposing to his wife and saying, Hey If we get married, I'm gonna talk to you about chocolate all the time. And he says, For me, work is a spiritual necessity.

50:36 I was accustomed to it from a young age and I can't do without it. Only work has the ability to entirely absorb me. My greatest dream. is for others to realize that I live for work. Michael believed in constant customer contact. How many of his competitors, the people running the his competitors

50:55 the founder, the CEO of the company is hanging out and posting up In the chocolate aisle. And some Tiny little store in the middle of nowhere just interviewing and talking to his customers. Doing this when he's one of the richest people on the planet. And he says the product must be put at the center of everything.

51:11 Around the product, all of the company's activities must revolve. He says a company only justifies its presence in the market If it's products manage to satisfy better than its competitors. And he's got a great line about this. Listen to this line. He says, We create mythical products that create the markets. We create mythical products that create the markets. He looked at his business. a in a three part system. Number one

51:37 We must discover the latent needs of the customer. Number two, we must transform those needs into a product. And number three, we must design new technologies for large scale industrial production. Of those new products. That if a market was interesting, we must become the leader.

51:56 One of his favorite metaphors for his outlook, he says, a good entrepreneur Must be like a good skeet shooter. Hitting the target by aiming not at the launch station. But further ahead, always with an eye on the long term vision.

52:11 He would remove everything out of his life. You know how um Bu Buffett says that the difference between successful people and really successful people is really successful peop people say no to almost everything. Michael has a line. Almost like that that describes his relentless focus. I feel I must continue to concentrate on the work that I am most passionate about.

52:27 The research Forever new Products. And in this interview that was published after his death, he gives the same advice from the grave over and over again. He says Mrs. Valeria is the mistress of it all. The CEO.

52:38 The one who can decide your success or your demise. The one you have to respect. Never betray and understand. Completely. And he serves Mrs. Valeria by inventing on her behalf. He says innovation means

52:52 To do something different from everyone else. Everyone made solid chocolate. And I made it creamy and Natella was born. Everyone made boxes of chocolates, and so we started selling them one by one, but wrapped like a gift. Everyone thought that we Italians could not go to Germany and sell chocolate, and today it's our biggest market.

53:09 Everyone made the Easter egg. But I thought it could be made smaller. And sold every day. Everyone wanted dark chocolate, but I said it should have more milk and less cacao. Everyone thought that tea could only be the kind with a bag and hot

53:23 And I made it cold and without a bag, and this tea did not take off for ten years. But I did not get discouraged because I was convinced. That it required time and that my intuition was right. And that Mrs. Valeria didn't yet realize that. І вас вощі.

53:39 But then she did, and it was a huge success. I was able to do all this because we're a family business and we're not listed On the stock exchange. This allowed us to grow calmly. To have long term plans.

53:50 To know how to wait and to not be caught up in the frenzy of the daily ups and downs. And his final parting advice was his answer to the question what his secret was. He says my secret Always doing things differently from others. Having faith. Staying strong and putting Mrs. Valeria at the center of everything.

54:08 Every single Okay. And that is where I'll leave it for the full story. I would say read the book, but unfortunately the book's not even available. So what I'll do is I'll just leave a bunch of my highlights and main ideas in the show notes if you want to read them. Also

54:21 If you're not on my personal email list. Uh, make sure you go to DavidCenter.com and sign up. I email you for every single book I read, I I email the top ten highlights or top ten ideas from every book. The email's free to sign up, free to read. You can also go to DavidCenter dot com. You can read I think in my top ten highlights for like 176, 177 books up there, too. A bunch of founders and COs I know that. read uh the email and go to the website, actually share the website with their entire team. So in case you haven't done that, that's davidcenter.com.

54:47 That is Three hundred ninety two, I think. I think I'm three ninety two. That is three hundred and ninety two books down, one thousand to go. Thanks for listening and I'll talk to you again soon.

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