The Founder of Kinkos — Paul Orfalea

0:00 I originally made this podcast five hundred and sixty five days ago, and I wanted to republish it as a bonus episode for two reasons. The first reason is I think that you're gonna find Paul's life story inspiring. He goes from people telling him that he's dumb. When he's young because he can't read'cause he's dyslexic. uh from graduating at the bottom of his class in high school.

0:18 To being a billionaire. And I think you'll find a lot of his ideas Both counterintuitive And valuable. The second reason I wanted to publish this this episode again.

0:26 is because I wanted to tell you about this fantastic conversation. that Paul had with my friend Patrick, who's the host of Invest Like the Best. The conversation that Patrick and Paul had will make you laugh and you'll learn a ton about how Paul built A multi billion dollar business. I would say a majority of the people that listen to founders also listen to Invest Like the Best. If you don't listen to Invest Like the Best already,

0:47 Search for Invest Like the Best. Make sure you follow the show. It is one of my favorite podcasts. Patrick is now a very close friend of mine. Listen to ep it's episode two ninety nine. It's about the money. That's that's the conversation With Paul. And if you're interested in more of my story, my backstory, what I've learned from reading hundreds of biographies, I did an episode with

1:05 Patrick, which is my favorite conversation I've ever done. That is episode two ninety two. It is called Passion and Pain. And without further ado, we're gonna get into Paul's Amazing, amazing life story. I hope you like this. Paul says to me.

1:19 Hey, do you want to come out with me? I need some local information about rental rates. He grabbed me because I was a student and could give him some feedback. About the student perspective. on renting near UCSB.

1:31 So I'm driving with him and Paul is just a terrible driver. There are two sets of realtors trying to follow us. Suddenly. He sees his black cat. About three hundred yards ahead of us.

1:42 He screeches on the brakes. Pulls a U turn. And goes the other way. He will not let a black cat cross his path. Then we're driving along and he sees Pardell Road.

1:54 The site of the original Kinko's, which he sold to his partner. Because of that, he won't drive down Pardell Road anymore. We screech up in front. I follow Paul as he runs inside.

2:06 In each one he turns on a faucet. Let's it run for a minute. While he watches it. And then ask me. How much rent do you think I could get for this place?

2:15 I'd say something, and he'd say Nah. And then he'd give me a number twenty five percent above my estimate. We saw eight properties in what had to be under an hour. The realtors are running behind us.

2:27 We get back in the car. He puts offers on six of them, and And ends up buying four. Basically, he ends up buying about two million dollars of real estate In forty five minutes.

2:38 As we drive back to the office. We stop at a kiosk. Where at that time you had to pay a fifty cent fee to cross the university campus. Paul accidentally drops a dime between the seat and the door. It must have taken him at least two minutes to fish out that dime.

2:54 By this time cars are honking behind us. Paul finds a dime. Jumps out of the car. Puts it on the concrete. And then stomps his heel on it several times before he gets back in the car.

3:06 I'm nineteen and I'm silent. I'm completely silent. He knew I was muling that over. I'm looking at him. I'm thinking this guy just bought two million dollars in property

3:17 And he can't drive down Partell Road. Or let a black cat cross the road in front of him. Now what does this thing? What the dime mean? He says to me.

3:26 You know what the lesson in there is? Never lose money. All the way back. I try to figure that one out. I don't know if he was pulling my leg.

3:36 Or if he was extremely superstitious. Are just plain psychotic. Paul had some unusual ways of attracting talent. But it worked. He got my attention.

3:45 So did the company's financial performance. I was the shipping manager and my job was to send out all the profit and loss statements. to each of the stores every month. I mailed them to the approximately eighty stores we had at the time. So I saw how well the company was doing.

4:01 I became a partner in the organization with five stores in the Bay Area. And I eventually sat on the board of directors. I was with the company. For twenty years. That was an excerpt from the book that I'm going to talk to you about today, which is copy this.

4:15 how I turned dyslexia, ADHD, and a hundred square feet into a company called Kincos. And it was written by the founder Paul Orfala. And uh his co author Anne Marsh. And this is another book that I wasn't aware of. Uh more than half the books that I'm covering on the podcast are coming from listeners, so please keep the book recommendations coming. I read this book and then the second recommendation was another book written by Paul.

4:38 Uh that was it's like a almost like a c a hundred page like cliff notes version of this book. I would I would describe it as It's called Two Billion Dollars in Nickels. Has a fantastic title. And the reason it's called that is because uh the Kincos would sell uh copies for five cents at a uh five cents H

4:55 And Paul winds up selling the business for about two billion dollars. So I wanna start with the a description of Paul fr and uh the reason behind writing this book. From the co author. As you could guess from the excerpt. Uh, we're not dealing with a normal person. He's a crazy misfit.

5:10 And there's just gonna be a lot of crazy uh stories in the book. And just he has an entire chapter. Let me give you an example. He's an entire chapter. Called Deal with Your Dark Side. And it's all about the mental problems he has. all the mistake the the stuff he admits to, you w there's just very few people

5:26 on the planet that would voluntarily put this into writing all the deficiencies. uh that he has. And I think that's part of what makes the book so interesting is because he's clear a extremely flawed person. He knows he's a flawed person. And yes, yeah, he's still Was able to build a wildly successful business. So this is his co author. She says, Paul is uh definitely not a resident of the linear world. I've never met a more circular

5:48 Out of the box thinker. I'm often exhausting. It's often. Exhausting trying to keep up with him. But as I've discovered, it's worth the effort.

5:57 Because he has an important story to tell. It's important not only for business people and entrepreneurs who will benefit from his or unorthodox and inspirational teaching. But for kids, teachers, par and parents struggling with learning disabilities. That is what this book is about. It's the story of how Kinko's came to be

6:15 And the record of the peculiar genius behind the company. And that's a huge part of Paul's story his entire life. Everybody tells him, You're an idiot, you can't read, you can't write you're gonna be a failure. And he just refused to believe that. This is an example or a little description of some of the stuff he went to in his early life. Of the eight schools my parents enrolled me in.

6:33 Four expelled me. My typical report card came back with two Cs, three D's, and an F. I graduated from high school eighth from the bottom of my class of twelve hundred. Frankly, I still have no idea what How those seven kids managed to do worse than I did.

6:48 And the very next line we see the contrast between his his record in school and his record in life. My name is Paul Orfala Orfalla. In nineteen seventy I started a coffee shop in Santa Barbara, California, in an eight by twelve foot storefront next to a hamburger stand. I called it Kinko's after the nickname. uh college friends gave me because of my kinky hair. Today there are more than twelve hundred Kinko locations across the globe.

7:10 And revenues from those stores top two billion dollars annually. More than a hundred of my earliest co workers and partners are millionaires. Today because of what we built together. And so that stark contrast really does set the tone for the entire book'cause he's constantly talking about Other people might describe it as a disadvantage.

7:27 Uh other might people think you might fail, but you can flip those into opportunities. He talks a little bit more about that that now. Uh when tearful parents come up to me to talk about their child's learning disorder I asked them, Oh, you mean his learning opportunity? What is your child good at? What does he like to do?

7:42 When I meet their kids I tell'em, You're blessed. It's easy to forget that part of the equation in the face of a dire sounding pro prognosis. So he he goes to task on the way teachers and principals talked to him and his family when he was younger. Uh, he thinks they're doing a lot of damage by trying to make everybody uh be the same. He's a misfit one hundred percent. I didn't know it at the time that I opened my first Kinko's, but there's a long history of innovators and achievers who owe their particular brilliance

8:07 At least in part to their deficits. And he's putting deficits in quotation marks. Some of the these people make up the ranks of some of the most successful and inventive mem inventive members of our society. they have for millennia. So he goes on to name people from history that that would be They had some kind of deficiency.

8:22 Uh, Da Vinci, Churchill, Einstein, Disney Uh he says a startling number of successful business people have dyslexia. Richard Branson, telecom pioneer Craig McCaw. Uh Cisco CEO John Chambers. Broker brokerage founder Charles Schwab. Ikea founder Ingvar Camprout, I've done a

8:38 I I don't podcast on a bunch of these people. Uh, I'm in good co and this is his his main point here. I'm in good company. All of these innovators survived an educational system determined to make them feel like failures. Some of my closest friends We're social outcasts.

8:53 Some of them did end up in jail. And I could relate to them all. So I'm gonna move through the book chronologically, but it does not go in chronological order. Uh the co author described him as a hurricane. I think that's a good way to think about Uh

9:06 at least to the way he comes off in his writing. This is he's now flashing ahead and way ahead in the story talking about the way he managed and the fact that he took The fact that he couldn't read and that he couldn't sit still and and use that as to his advantage. So he is a big he's a big proponent of management by walking around. He's like, I'm not sitting in my office. I'm out in the stores. I'm on the front lines. He constantly talks about that he d he he works for the people that work on the front lines. He does not like the executives. In fact he winds up fighting and yelling at a bunch of them, which I'll go into some crazy stories about that as well. But he says anybody can sit in an office thinking about what people are doing wrong.

9:40 My job was to get out and find what people were doing right. And then exploit it. Then I would spread those practices throughout the Kinko's network. I also and then again he talks about it in his deficiency. I also have no mechanical ability to speak of. There isn't a machine at Kinko's I can operate.

9:57 I could barely run the first copy or released back in nineteen seventy. It didn't matter. All I knew was that I could sell what came out of it. And so the importance of sales and marketing, he'll talk about over and over again. He really identifies as a peddler. Uh, you know, that's a that's a tr that's a that's a craft or a job that that

10:15 goes back for centuries. He comes from a giant Lebanese family. All of them had businesses, whether they're selling women's clothing, Vegetables

10:23 uh cars, it doesn't matter. They were taught the value of sales of paying attention to your customer and then paying attention to the cash that the customer gives you. And so Paul takes a lot of the lessons that he learned from his giant, loud, crazy family. That's his description, not mine. And applies them to Kinko's.

10:40 Um, this is on him on not hiding your flaws and then the impact of his mother. So it says my hope is that anyone who picks up this book will come away with new insights into how to better run their business. uh and to cope with and capitalize on what other What others their flaws. In case I haven't made it clear. I'm extremely human.

10:59 I struggle with my temper. My dark side, as I like to call it. Uh, the dark side of the Kinko story is that the company was built At least in part on emotional extremes. most of them my own. So he talks about having a problem with self control.

11:13 that he's an extremely gregarious and outgoing and caring guy that can flip at the it's almost like b bipolar. in a sense where he he has this one like extremely light side of his personality and an extremely dark where he you know he's cursing at you, he's yelling, he's ripping things off the the wall. And he doesn't recommend that. He talks about being embarrassed by it. Um, and something that's slowly over the he ran Kincos for three decades before he sold it.

11:37 He's like, you know, the way it was in the let's say the nineteen eighties is not the way it was in the nineties although Before he winds up having to seek professional help and get on medication, that's the only thing that solved his problem, he said. Uh, building an entirely new sort of business from a single Xerox copy machine. Uh it gave me It gave me the life.

11:53 The world seemed determined to deny me when I was younger. And before I go into I I I I wanna pause here just before I go into uh he also had extremely positive a world modernist mother and the the the what he just said there, the fact that I could build an entire business for myself from a z single Xerox copy machine. I can work at it every day for three decades and then sell it make m myself extremely rich, all the people that work for me extremely rich.

12:15 That is why one of the entrepreneurship is one of the greatest human inventions ever, because it's open to everybody. That doesn't mean everybody can Like I don't think everybody uh should be an entrepreneur. But Anybody can there's not

12:28 Nobody can stop you but yourself. And so the the think about the the the alternate life as we go through this podcast, think about the alternate life Path of Paul. He was not gonna get a job. I mean the guy got fired. I'll go into detail. He got fired from every job he had, flunked out of school.

12:43 Um, but the fact was that he he had value and service that he could provide to others. And as long as you have value and service you can provide to others. People were willing to pay for that value. And then you can keep doing that and keep improving and make it bigger as big as you want it to be or as small as you want it to be. And he actually created his entire life.

13:01 That was denied to him by everybody uh every other authority figure besides his his family, telling him, you know, you're just a loser, kid. You're stupid. Get out of here. I have my mother to thank for encouraging the development of my own view of the world. Uh, so he talks about one day she was exp he was expelled well when he was thirteen. And the principal just you know it sh tells h her his mom that, you know, maybe he can he can find some other kind of work, maybe he can learn how to lay carpet or or do something else that doesn't require reading.

13:28 And her his mom is just crying and she's just like I know Paul can do more. Um and this is what he says, My mom dreamed her own dreams. You could say that exactly for him. He dreamed his own dreams. She never relied on the bleak assessment of others. Whenever I felt down, I'm Not even This is still the introduction. How many times does he compare to contrast to the way he felt, the way his family felt, to the way the outside world felt. That is so important because that's the only thing that matters.

13:53 Uh Andrew Carnegie in his autobiography talk c talks about uh the the the way you view yourself. I think you go to something like The Supreme Judge within But what he was the point he's trying to make is that how y there's no fooling yourself. You know

14:06 uh what you're qualified to do, you know if you're putting in the work that you need to do. And so all you need to worry about is making sure that you're not Relying on the judgment of other of you by others, but of how you judge yourself. And I think Paul's echoing that here. Uh let me go back to this sentence. Uh, whenever I felt down, whenever I started wondering what homeless shelter I would die in.

14:25 She would buck me up and uh buck me up by telling me. You know, Paul. The A students work for the B students, the C students run the companies, and the D students dedicate the buildings. And that's remarkable if that actually is something she said to him because He winds up graduating with D average and then he does wind up having a building dedicated I think he d donates like ten million dollars to and have has a building named after him at the uh University of Santa Barbara.

14:49 Uh, this is he picks up on he's got again a lot of just really practical knowledge about the world. That I think is the value in this book. Um and he talks about There's a difference between good being good at school and being good at life. And it's a lot easier to be good at life than it is to be good at school. And he says the education system teaches kids they have to be good at everything.

15:08 But out of the classroom I found this just isn't so. Adults have a much easier time. They get to specialize. They get to pick one thing. It's a whole lot easier. So his point is like if you're good at one thing in his case he was good at Building a copy.

15:21 And printing business. He didn't have to be good at algebra. Physics, history, anything else. But he provided a service and uh he he also has a great philosophy and I'll I'm gonna run over my future point. that I love that the the culture behind Kinko's he says listen we had fun they they call themselves capitalist hippies

15:38 Um, but he's like we had fun with everything else. The only thing we took ser serious is the service we provided to our clients. And then everything else o of that we we laughed and joked and had a great time. But I love the idea behind what he's saying here. Pick one thing pick one thing and be better than anybody else is at it. And he had a lot of competition, you know, anybody this point You can lease.

15:58 It was like a thousand dollars a month, something like that, to lease a copy machine, which is you know brand new technology at the time. And so we had a bunch of cop competitors that he had to to battle through. uh most of w most of w most of which went out of business. Uh, this is more about his early life and jobs. In my family, we were all peddlers. I found your average street peddler has more business sense than the guy walking past in a suit.

16:19 They deal with customers in real time and get instant feedback from the market. So that's something he talks about over and over again. That it's very easy to sit in office. Away from the front lines, away from the customers and come up with all these theories. But he's like you're just you're just using your imagination. If you just go and and talk to customers.

16:35 and try to sell them something, they're going to give you the most valuable information in the world. I was working at my father's clothing factory. My job had been buttoning up the dresses after they were steamed. But I really wanted to start assembling orders for customers. Uh, so his aunt was oversee this part a lot of his family works together.

16:51 And so he he goes to try to switch his job and he says, She spotted me trying to pick orders and shout out at the man helping me. Don't let him do that. He can't even read. I walk the factory that day and sat in my car in the parking lot. I cried for hours. I remember thinking

17:08 That it was no use trying to please anyone else. It simply wasn't possible. Not with my skill set. So I might as well try to please myself. And that is something that I love about reading all these biographies. 'Cause you know, these people build giant companies. A lot of people we cover super famous, they're they're historical figures.

17:25 And yet. the way when you read their own words, they all go through periods of this. This is what when you listen to like interviews with people That are still alive today. uh still operating companies, like they're incentivized to lie. You know, Oh, we're crushing it, everything's good. Everybody says the same thing. But when you pick up the books you realize no that that's not the the the lived experience of anybody.

17:44 Everybody's gonna go through this time. This g he's constantly fighting in this book. to deal with his emotions, to deal with a setback and just realizing Okay. That's fine, I'm gonna cry I'm gonna sit in my car, I'm gonna cry for a little bit. But then I'm gonna try again tomorrow.

17:56 And I'm gonna make some progress and then I'm gonna run into a Uh I'm gonna run into a setback. I'm gonna be down on myself, maybe I'll have go have a drink. Maybe I'll just take the day off and wander around, but I'm not going to stop. And reading stories like that just fires me up. All right.

18:10 Uh it took me a it took me a lot longer before I actually succeeded in doing so. My dad eventually kicked me out of the company. Uh, so he gets another job. I was serving ice cream. A couple of days into that job I was fired. Then I tried to work at a local gas station. I'm just giving you the highlights here, he's fired from that job as well. Delivering newspapers, painting, n none of this is gonna work out.

18:28 So it says it didn't take me long, uh f it didn't take long for me to conclude that it was basically unemployable. The only hope for me was to go into business for myself. Okay, so I'm gonna fast forward, he's in college. Um, they're working on a group paper. He's at University of Southern California. And his job is to go make copies and to turn the paper in, you know, he again, he's he's not gonna

18:47 be reading uh he's dyslexic. So this is where he actually gets the idea for Kinko's and it's small it starts it starts as a very, very small idea. And I'm gonna tell you how this this made me think of the no like myself. What is if you're only gonna read one book and I hope you read obviously dozens of the books that we cover here.

19:06 But uh it would be James Dyson's autobiography. It's hard to to find, hard to get. um constantly out of stock, but it's the it's something you can read in a weekend and it's all about the the value of stubbornness and perseverance and it's just a really fun, interesting book to read. But he said um In that book, he's like listen.

19:23 people like put barriers in front of themselves. And one of them is like I don't know how to do what I want to do. And his point was like you can always learn you have time to learn the technology later. Uh his first vacuum cleaner. He built out a ser the the improvement to the Hoover vacuum cleaner. That he wanted to

19:37 that he thought was just a piece of junk and and led him down this path that he that uh Like his career path that he's on. W it was built out of cereal packets and masking tape. Long before I understood how it worked.

19:50 And um this we're gonna see ex same example here. He goes to make copies. He says, I went to the university's copy center. This is in LA, okay? I saw something far more interesting. The copy center itself. This is the spring of nineteen seventy and people were scurrying around making volumous copies of legal paperwork For the trial of Charles Manson.

20:08 I came run I came running back to class nearly out of breath. I had to talk to Danny, so this is one of his best friends at the time. And he says as Danny remembers it, this is Danny now, uh The quote from him, Paul was shaking all over. He told me, Danny, I've got this great idea. I realized I could start a copy shop myself.

20:24 And I always knew a and I knew a place that needed one. My girlfriend at the time was a student two hours north of Los Angeles up on the coast at the University of California at Santa Barbara. There weren't any copy centers there for students or faculty. I didn't write out a business plan or study the market. But my gut told me I could make money selling what came out of those machines.

20:44 It didn't matter that I had no idea how they work. And he moves on this right away. So he sees that by the fall of nineteen seventy, he's set up. And he says uh I rented a small small storefront near the university. There's only a hundred square feet. The rent was a hundred dollars a month.

20:58 The place was so small by the time we needed a second co a second machine We had to lug it out on the sidewalk. Yes. Customers made their copies outdoors. I was twenty two years old.

21:10 So the very first day Their first order, I think, is like fifty dollars. So think about his r his entire rent's a hundred bucks. And you have a professor that comes there that's all d he's anxious, he's upset. And he Paul really hits on something that's smart here. He understands that he's n what he's actually selling.

21:26 It's not that I'm selling copies. I'm selling a way to relieve your anxiety. People in general, especially at this point in time, are stressed out about technology, this is not a very different insight. If you think about the way Steve Jobs talked about How people approach personal computer before The very first Apple computer.

21:42 Or how the the book on Johnny Ive that we just did where he talks about, you know I'm I love designing. uh computers are becoming a huge part of this, but I'm frustrated. I don't think I I know how to deal with them. And then he sees an apple way before he works there. And he's like, wow. Okay, this is simple. This is now I'm like he he was able to calm down and his anxiety uh Yeah, was relieved.

22:02 And so this is uh what Paul realizes about this professor. He says, like each and every one of the subsequent millions of customers. We would serve over the next three decades. He was stressed out and in a hurry. It was a state of mind all of us at Kinko's would come to be immediately or excuse me intimately familiar with. Later on we would learn

22:20 That we weren't so much selling copies. As we were assuaging anxiety. And right from the very beginning we see he's got a very again, when you read these autobiographies of founders, you're essentially downloading their philosophy on how to run a business, right? There's no formula. uh the idea is take a bunch of ideas from other people, combine it, make your own unique philosophy,'cause there is no single right way to do it. And so he's gonna he's got this idea that's really, really unique.

22:44 One You should know about Paul. He tries to get out Out. of as much work as possible. He's not working nights, he's not working weekends. He's always thinking about the business, but he makes sure his physical body is still there for his family. He doesn't have a family at this time, he's still a college kid, so this this is many decades in the future.

23:00 But one of his ideas is that you y you have to ask yourself if you're in or on your business. And so being in your business is like you're so mired in the details. Uh you're not running your business, your business is running you. And therefore you're not thinking clearly, you're not doing any his whole thing is like you need to think harder. w uh before you w you can work hard, but you you have a lot of people work hard and never think hard. It's more important to think hard and then work hard.

23:22 But if you're on your business. You're not mired down in details. You can see where the business is going. You can make better decisions. And he talks about Th the time invested in thinking uh yields more leverage for you than just doing an extra print job. Right.

23:37 And so we're gonna go into the difference. He he's gonna bring this up in many different ways. And so Another good thing about this book. Uh he had Just like I love I'm a sucker for aphorisms and maxims. He thinks in maxims and aphorisms, very much like Charlie Munger. In fact, in the back book, the last like I don't know, ten pages are just aphorisms on how we think one sentences.

23:56 Like one sentence maxims. on how he thinks about businesses. So one of them is, you know, make sure you're on your business, not in your business. So he says as soon as I could, I had to turn tedious tasks over to others and pay them well for doing them. I could not let myself get swept up. by all the monotonous busy work that comes along with starting a company. I was already vowing to stay on my business and not in it.

24:15 He talks about his dad, he he he learned some of this from Watching his dad do things the wrong way. They was just always mired, couldn't make any progress. uh, but this is the reason I'm gonna skip over that part and this is the reason. I tur I learned to turn a lot of busy work over to other people. That's an important skill. If you don't develop it, you'll be so busy that you can't get a free hour, a free week, a free month. to sit back and think creatively about where you want to be heading. And how you're going to get there.

24:39 When your mind can break free of all that worry and clutter You'll find yourself coming up with the most improbable and inspired ideas. And one thing he really likes he really likes sales and marketing. And he really likes getting other people to do the work. Uh, I didn't spend much time in the store.

24:54 Now you may not believe that, but it's true. When I started the original Kincos, I was still a student two hours south in Los Angeles. I stayed in Santa Barbara for a full week when we opened the store, but after that I only work there two days a week. I hired people to run Kinko's for me. And I left it in their care. As a result, there was simply no way to become too bogged down by lots of busy work.

25:13 One day Or excuse me, on days I was there. I rarely made copies or work behind the counter. What I really enjoyed was getting out and meeting people. In a word.

25:22 Marketing. I went around campus handing out flyers. There's no better way to stay on your business than to think creatively and constantly about your marketing. How you are marketing, who you're marketing to.

25:34 And always how you could be doing a better job at it. You'd be amazed what kind of business k uh you can generate. By seemingly simple things. So he talks about this all over and over again. Uh, forgot I think it might have been Warren Buffett, like don't dismiss uh uh simple

25:48 Uh I I don't remember the exact quote, but I wanna paraphrase the meaning. It's like don't dismiss A simple action is not being effective. He said it a lot better than I just did'cause it's not i I don't have it in front of me. But he talks about, you know, we built we started building the business just

26:02 Going door to door. Essentially handing out fires on college campuses. Kinko's now well, I guess it doesn't even exist, it's like FedEx Office, but for the first maybe ten years of its life, it is going to be anchored around college campuses. They eventually make the transition to serving more of the corporate world to get and one of the one of the reasons they did this is because it gets away with like cyclical nature.

26:22 of revenue if you're only like during the summer then making no money'cause school's out. But he says you'll be amazed at what kind of business you can generate by a seemingly simple thing like handing out fires. I also sold pens and pencils out of a backpack. Um, no, this is funny. So he stores the backpack and then he goes and sells Oh I should I I sh

26:40 Should back up. So he's selling he knows he's gonna sell copies. They start printing, they start selling pens. He essentially used his first store as a giant experiment. He's like, I had four or five business lines in there, I wasn't sure which one was gonna work. Whichever one generated the most revenue we doubled down on. And so most of that is obviously gonna be copying printing.

26:56 Uh so I also sold pens and pencils out of a backpack out in front of the store on the sidewalk by just talking to people passing by. When this form of guerrilla market produced results, I expanded our use of it. So he talks about he then he goes and hires a bunch of students. And they're now selling pens and paper and and advertising kink goes door to door. They just go knock on people's dorm rooms. We also targeted targeted the faculty.

27:18 By going into their departments and pretending we were supposed to be there. We stuff flyers into the mailboxes of most of the professors on campus. University professors later drove some of our highest revenue businesses. And now he's gonna flash forward memory. He just told us his first story, he's telling us about this, then he goes ahead in the story like he does. It's this hurricane ball. And this was hilarious to me, I don't know why, but you can summarize it by saying be inaccessible.

27:41 Some years later, when we had a few stores up and running, I made my mind to be truly inaccessible. I happen to be sitting in my office. Uh that day when the phone rang. It was one of our store managers calling to ask me how to handle a bounce check. I held the receiver away from my face and looked at it, flabbergasted.

27:57 If and that that's J It was funny'cause I could picture that in my mind him doing it. But it's his insight here is he's A hundred percent correct.

28:05 If every store manager needed my help to deal with a bounce check. Then we really had problems. I made up my mind then and there I wouldn't be picking up my own phone every five minutes. Staying relatively inaccessible. was the only way to stay on my business.

28:20 And so we're still in the chapter about staying on your business. So everything relates what I'm telling you here, everything relates to this idea of Don't get mired down. You're the one running the company. Make sure that you're actually running it and it's not running you, that you're thinking long term. that you're coming up with the very best ideas you do like you can.

28:36 I would summarize this next section that you can work in sprints like Larry Ellison. Study competitors like Sam Walton. and invent and wander like Jeff Bezos. And those are all insights from past podcasts I did on those three guys. Multiple. I think I've done what, like four or five podcasts on Jeff Bezos now, two on Sam Walton and three on Larlison, if you haven't gone back and r listened to those. Uh I worked in cycles, spending roughly three weeks on the road followed by three weeks back at the main office. I visited different stores.

29:00 I also visit as many competitors as I could Since the fact that they existed meant they were doing something right. That sounds just like Sam Walton. I wanted to find out what those things were. They got me away from the main off from the main office so I can leave people alone to do their work.

29:15 way to show people you trust them is to leave them alone. Equally important, I found that leaving headquarters got me away from the mundane daily grind that left no space for insight, inspiration, or innovation. Instead of chief executive, I preferred the title of chief wanderer.

29:33 And I guess that now's a good time to talk to him about this bizarre This bizarre. Uh organizational structure of Kinko's, they're all individual partnerships. So you know, you think You start a company, you either uh the company either owned you o open new locations, either you own it or maybe you have a franchise model.

29:51 He didn't do either of that. Uh some of them he owned 100% of, but he had a by the time he sold it, he had a hundred and twenty seven different partners. All of them were individual partners. Partnerships. So in some cases he might earn thirty percent. So maybe there's one store and he owns it with one guy, right?

30:05 And he owns maybe forty percent and the other guy owns sixty percent. And sometimes he there's a a series of partners They all own maybe fifteen percent of the store, but they own Fifteen percent of ten stores. And it was so cumbersome that they had to hire

30:19 Once they they They get bought out. before they get bought out they had to Uh, they had to hire a series of attorneys and some venture capitalists helping with this. But they had to go through and roll everybody up.

30:30 Into one corporation, so you can actually sell the corporation. Um but the reason I bring that up is'cause what he's saying here is like I'm a chief wanderer He's not it's almost like he's it's it's very like analogous to to what nature does, right? It's just there's no top down hierarchical systems in nature. It's a bunch of there's millions of different experiments and all those experiments r uh Yeah.

30:50 result in different slightly like slighter variations or different outcomes, right? And so what what what Paul did it was actually really, really brilliant. He's like, Okay, I'm I'm gonna do a light hand From from central HQ. and tell you, you know, this is basically what we do here, but you come up with the best way to do it. Then he's traveling around, observing all these good ideas. And then

31:09 He'll pick up a good idea say in Toledo. And then he'll go back to California and give it to the California stores. Or he'll go down to Florida and do it there. but he's allowing this like hotbed of experimentation. They talk about, you know, one time in the book I don't think I'm gonna cover this later, but one time in the book he's he's uh traveling with some other sp other

31:25 From other partners of his. And they come up with a great way they summon a store that has like the greatest way they've seen so far. to organize the workflow of Kincos. And his partner asked him, like why don't you mandate Instead of telling people this idea, like why don't you mandate every store looks like this? And Paul said something that was brilliant.

31:43 He said, because if I do that, this will be the best it ever is. And what that comment tells us is there's always room for improvement. Again, there's just a lot of practical Like simple knowledge is the way I would describe this book. It it was very, very fascinating the way he thinks. And again, it just comes from there's no theory. It comes from

32:00 Three decades of trial and error. And I think that's the most valuable knowledge you can tap into. So now we're getting into the a lot of the he talks about like his brain Like your brain being your own adversary. Like you just can't figure something else to maybe think it's impossible. And really I would I would, um This reminds me of Charlie Munger's idea, invert

32:18 Always invert. And so he realizes I don't want I don't want he he d he's not thinking about what he wants. He wants he's thinking about what he wants to avoid. He's like I don't want only one store. One particular effective way of staying on your life is to envision the kind of future you do not want.

32:33 In my mind's eye, I saw this scene unfold. The parents of incoming freshmen take a tour. Uh of their old alma mater. Look, Polly, one dad says. There's Kinko.

32:43 He runs Kinko's. Or he runs Kinko's copies. There I sit. My curly hair shot through with gray. I wave back at them.

32:50 That's not where I wanted to be in my old age. But try as I could, I couldn't figure out how to open another store. So he can't figure it out. He's got What's the equivalent of I guess writer's block, but for your mind? Right? So he's like, All right, I'm out of here. Dad used to tell me that um so he talks about

33:04 Again, contrasting like what his dad did with okay, I gotta avoid that mistake. They go him and it his uh His his dad before he's born. uh his dad and his mom go on this long vacation. He says uh he used to tell me that was one of the few times he got a proper perspective on his life. He finally had time to think.

33:22 Uh he never gave himself another trip like that. So okay, I gotta avoid that. So he thinks traveling is a way to find perspective. So his business is up and running. Two years later, they don't have any I don't I think there's only one store at this point. So he he takes off to go back back in Europe. He says I left Kinko's in the care of my co workers for a few months while I took off on my own. I guess I should pause there. He does not use the word employee. He does not believe in the word employee.

33:46 Everybody's a co worker. If they have He does profit sharing, he does a lot of like A lot of interesting things. So His partners are called partners, everybody else is called a co worker. All of them have

33:56 uh ownership and the profits of the business. Uh, so he says and it w um backpacking around Europe was highly motivating. I became ambitious again. So he talks about He's extremely poor. He's like I watched vacationers strolling in and out of five star hotels in Paris and Milan. And he just he says, I could not imagine how what how is it possible they could afford those rooms? And I think that is a very common experience for entrepreneurs. I remember uh listening to Mark Cuban talk in an interview one time. They used to drive around, he's really poor. I think he was running like a bar in college.

34:24 And he would drive through. And just look at these like twenty thousand square foot houses. He's like, What do these people do? Um so we're seeing a very similar experience that that that Paul's having. It's like on the you know, I I can barely keep this tiny little one hundred square foot

34:39 company open, like I can't imagine s ever staying in a five star, you know, restaur or five star hotel in Paris and you know, a few years later this guy's gonna be worth hundreds of hundreds of millions of dollars. Uh it's high it was highly motivating. I became ambitious again. That's what a little perspective can do for you. I started to envision how I might open a second store. Um I can't even tell you exactly what changed my mind. My thinking just unstuck itself. And so he's giving now direct advice to the reader.

35:04 Do what you need to do to get some time off. Let your soul Cat up with your body. It could change your life. So I tell you his idea of really paying attention to incentives is what I would call this, but

35:16 First. This is the best definition of management he's ever heard. It's a really good definition. He says my wife gave me the best definition of management I've ever heard. She said the goal of management is to remove obstacles. It's a good way to think about how this guy manages. Now he talks about the difference between employees and why he wanted to

35:32 to make sure he provided uh ample financial uh incentives for all of his employees. I don't want employees. Some of the definition one of the definitions of that word employees to make use of. I didn't want to use people. I wanted co workers. who would be empowered entrepreneurs.

35:46 Who try to instill a sense Excuse me, we tried to instill a sense of entrepreneurship in all of our workers. one very important part one one vo very important way We accomplish this. was by giving everyone a share of the profits from the stores. This is why he said at the beginning, you know.

36:03 hundreds of people have been millionaires off of Uh the business they built. I wanted to work with people that I made money with. And the best single best book you can you can read about the that the importance of that incentive structure if that's something that you might consider. I was going deep. This is like when I back when I read every single Warren Buffett shareholder letter, I read like three or four books on Charlie Monger. I've done podcasts on this. This is like from the eighties.

36:26 to like around in the hundreds in the episode numbers. But Something. as a result of reading and studying more and buff and Charlie Munger deeply, is they talk about constantly the operators and the entrepreneurs they ha they respect. And they led me to a bunch of people that I read books on. So I'm gonna read this quote from Charlie Munger. Uh he said this back in two thousand four at a um Burshire meeting.

36:46 And he says, if you want to read one book that will demonstrate really shrewd compensation systems in a whole chain of small businesses, read the autobiography of Les Schwab. I covered this, uh it's called Pride and Performance. Keep it going is the name of the book. It's founders number one oh five if you haven't listened to it. We the autobiography of Lush Wab, who had a bunch of tire shops all over the Northwest, and he made a huge fortune in one of the world's really difficult businesses by having shrewd systems. And he can tell you a lot better than we can. And you know, he was an orphan. I think he starts

37:14 The tire center, you know, you got plenty of competition. thirty five hundred bucks when he's like thirty five years old or something like that. Over the next couple decades he winds up building this gigantic profitable company. If I remember correctly, every store he'd split like fifty percent of all the profits With the people that worked in the store.

37:32 So this is an idea that that different people in different industries have used in different times of history. Whenever I come across that, I have to bring it to your attention because that's like it's like a siren should go off. Red flashing lights in our minds like hey This idea w can can work in a lot of different domains. we might find it useful, let's remember it. Um, and just I love people like Lashwabu. He reminds me very much of like Paul. It's just like this no frills business just Take care of employees.

37:56 Focus on Uh Like the service you provide to your customers and don't overcomplicate things. And I I love that because I think a lot of people just Oh human it's human nature to overcomplicate things. And when you see the way these these guys these people approach their businesses, it's just like all right, this is simple. I can understand this, I can wrap my mind around this.

38:14 Yeah, no, I got I didn't even I just turn the page. I didn't realize I'm gonna run over. Another I mean, I just talked about how they keep it simple. He says uh our plan for expansion our expansion was a pretty simple one. I got the idea how for how to grow by playing the board game Risk when I was a kid. In risk, the object of the game is world domination.

38:32 Playing the game taught me there was no reason to expand in a neat geographic progression. In fact We didn't need to respect geographic boundaries at all. So that's something he talks about a lot. He'll learn uh business business lessons from games that he applies in real life. So he learns lessons from playing poker, from playing Monopoly, from playing Risk. And the note and uh the note left on this page is there we're about five years in.

38:56 They have fifteen stores at this time. And no master plan. They're just taking it as it comes. Another thing Paul talks about over and over again is the importance of saving money, being frugal. He says we were really frugal. We I would sleep excuse me, we're talking about the his partners this time. And him we'd sleep in our cars.

39:13 To save on hotel rooms. He continues that trade. He made not only does he have that trade, but he wants to make sure all his partners have the trade. He says, I would never do I'll never do business with people who can't save money. Spenders won't be cautious with their store profits. So the importance of saving Avoiding debt, being frugal. He talks about it maybe a dozen times in the book in different scenarios.

39:32 Paul also in in addition to like putting all his like warts and and ugliness of him out in the book Talks about, you know, I have A D H D I have dyslexia, like he's gone to just tragic, tragic experience in his life when he was younger, he was molested. He was kidnapped and molested. Uh

39:49 I think by an older neighbor. Um This at this point in his life his first child dies and it's just fucked Just devastating. I just couldn't I'm gonna read this to you just so you we understand who this is a person. It's just it it kills me.

40:03 When I read stuff like this. Our firstborn son, Ryan, died of a congen congenital heart defect. Some things you just never really get over. You just try to come to terms with them. Ryan was seven months old and had been doing well when he died unexpectedly.

40:18 We were with him long enough to know that he was a special boy. We still keep photos of him in our house. It's just I have you know, my son's a little over years old a little over a year old and it's just It's just devastating reading stuff like that. Moving on, there's a great quote uh from Naval Robacon that he says, like there's no skill called business

40:39 Uh, I would add This is these few sentences I'm gonna read to you, I think that's a good way to think about this. It's really all service and anyone can learn to serve. Uh, our first partners and our first co workers weren't business majors. They weren't even particularly interested in business. This is fine by me. We had biologists, philosophers, psychologists, English majors, and lawyers. We had more degrees at Kinko's than a thermometer.

41:01 He's got another great uh aphorism about are are we looking at our customers or as our customers? And so his whole point is like you always should be looking at things from your customer perspective. He talks about most businesses. We've talked about this. It could all be so simple. Start with what's best for the compar c customer and work backwards, right? Most companies, most businesses don't do this because they look at it from their perspective. The only thing perspective that matters is the customers. So he says I never walked in the back door that was used by my co-workers. I always walked in the front door so I could see things from the customer's perspective. And then he talks about

41:31 There's hidden little actions that people do. As a result of not looking at things from the customer. And this is where some of the times he flips out on his partners, his co workers, everything else because of this. He has a he's maniacal. about looking at things from the customer perspective. And this is just really, really smart because a lot of the the uh the

41:49 The cost to a lot of these actions you'll see. um that businesses do. I just went to an experience like this and I'll tell you about in a minute. They're hidden. And that's his point. It's this is extremely n uh wise what's about to happen here. Some of our partners created an inhospitable climate for customers.

42:05 Some posted negative signs. At one store, a manager hung a sign warning customers That they would be charged a steep fee if they bounced a check. It said The bank doesn't make copies and we don't cash checks.

42:18 That really got me boiling. I jumped up on the counter and ripped it down as customers and co workers looked on amazed. They may sound extreme, but I needed to make the point in a memorable way. I didn't want signs like that staring our customers in the face. I told our co workers that the occasional hit we took for a bounce check

42:36 cost far less than what we lost and couldn't quantify. That's the most important part of this entire sentence. by creating a subt a subtly hostile atmosphere Customers didn't need to be reminded not to write bad checks. Especially when, as we knew They were stressed out and anxiety ridden to start with.

42:54 I noticed the managers had stopped putting out little freebies customers love so much. The paper clips and the pens. But the customers steal them, my partner complained. Of course they do, I said. And so let's go back to that point.

43:08 That it uh Yeah. It talks about uh w an occasional hit for a bounce check costs far less. then when we lost and couldn't quantify. I had to pick up like two, you know, the um like the uh outlet covers. They're like, you know, dollar fifty, three, two dollar, something like that in any local hardware store. So I go pick them up by this hardware store by myself by my house.

43:27 I'm waiting in line. First of all, I think it's weird'cause there's only one there's like a long line there's like five people in line, one there's only one cashier open, but there's three people around the counter just sitting talking to each other. It's like Oh great, this is another poorly ran business. Then you see all these signs about, you know, no refunds and just like Nothing positive. And they're like taped up in like this mismatch, like really just shitty Weighted to if you're gonna if you need it. Conveyor uh

43:50 Something to your customers like that's a terrible way to do it. So then I get up there, I think the order's like Three dollars and fifty cents. Pull out. Uh try to pay by credit card.

43:58 And so lady's like, Nope, you're not spending ten dollars. You can't use a card. You have to give me cash. I was like, but I don't have any cash. And she's like, Well, that's too bad And I was like, Okay I was like, Can you please make an exception? I just these are the only two things I need. Can you please make an exception this one time? No. Okay, so I left this thing on the counter, walked out the door and ordered on Amazon. And I'll probably never go back to that store again. So like that's the point. Like the the the owner of that store d doesn't know that's happen, or maybe they do know, but they sure as hell can't quantify.

44:25 What the ridiculous policies are losing them in the long term. And one of the things I love about reading all these books and studying the history of entrepreneurship is you you really see the contrast. Mo like and I think it's it's also motivating'cause there's a lot of people that want to run a business or wanna start a business and I get emails from people like this all the time, but they may think they they it's too hard or it's just it's uh maybe they don't have the skills. It's just like

44:46 The bar is so low. the vast majority of businesses you will ever encounter are poorly run. Um, I wanna read this quote from one of Warren Buffett's shareholder letters that I think is dead on that, you know,'cause how many people have analyzed more businesses? that are alive today than Warren Buff and Charlie Mugger. I don't think anybody

45:03 And it says our major contribution to the operations of our subsidiaries is applause. But it's not the indiscriminate applause of a Pollyanna. Rather it is an informed applause, based upon the two long careers we have spent intensively observing business performance and and managerial behavior. Charlie and I have seen so much of the ordinary

45:22 In business. that we can truly appreciate a virtu virtuoso performance. What Paul was doing, he was taking an ordinary or a poor experience from uh from the customer's perspective. And setting the tones like that's not acceptable. We're gonna do a virtuoso performance. It doesn't matter.

45:40 that the customers steal our paper p our paper clips and our pens. It doesn't matter if they bounce a check every once in a while. 'Cause the percentage of people that are doing that are tiny compared to the hundred percent of customers that come in and realize, Hey, I don't have this is not convenient, I don't have a pen, I don't have a paper cup, hey, I got this sign that's you know, trying to make fun of People that bounce checks or whatever the case is. Like that is extremely wise. And maybe you do this already, but if not, just think about when you go in in in whether it's a restaurant, a business, anything.

46:08 I'm constantly looking. It's like could this be done any better? Like is this an actual good experience? And the the businesses that provide excellent experiences, I obviously return just like anybody else would. And the ones that don't deserve to go out of business for their incompetence. Because it's easily avoidable incompetent. Just ask yourself if the decision I'm making, is it best for the customer? Yes or no?

46:30 And Paul used that sis like that that as an operating system. This is an example of this. Whenever I saw managers from the head office disrespecting co workers from the field, I defended the field. The energy in most other companies runs in exactly the opposite direction. And he makes the point that the people serving our customers are a lot more important to the overall health of the com the the company than you sitting in the office. And he goes over this over and over again. This is not very different. Remember back I think it was on Founders number thirty seven. One of the best books I've ever read for the podcast, it's such a crazy story. It's called The Fish That Ate the Whale, and it's Sam Zamur.

47:01 Seventeen or eighteen year old Russian immigrant. Starts a business. on uh around a on a around rotting bananas or ripe bananas, bananas that other ban um banana companies would throw away. He realizes, hey, I got two or three days, if I move fast I can sell them and they're still good and they're cheaper for customers. But anyways, he uh the his competition, they'd sit I think their headquarters were in Boston, if I remember correctly, and he's like, But I'm out here in the field. And then when he winds up taking over that giant company, right? He starts a small company, takes over that giant company.

47:28 And he he he's constantly asking them when he's l their largest shareholder. He's like, Who knew like you hired a guy that's running your plantation down in Honduras. But you're m you're overriding his decisions up here in Boston. Who knows more? And so he's like I that's why he would work out in the fields and that's why he had respect for the people that worked for him. 'Cause like this guy's out here doing the same stuff we're doing.

47:46 And it just came from a simple idea. Who actually knows more about what's happening In our business. The people in on in in Sam's Murray case, the people in Honduras on his U banana plantation and in Paul's case the people in the Kinko store. Okay, so let's go to some of the ideas he had to come up with to get around his dyslexia.

48:03 He can't he he can't do email. He still won't do email. He he has a hard time reading. D the few t he he the f funny thing is he's really good at numbers, so he'll pour over. Uh like the income statements. That's what he really likes. But so they come up with this is funny'cause they're They use

48:17 instead of email, they're using essentially asynchronous voice recordings. And I actually see there's companies trying to do the same thing. Uh this is you know Well, close to forty years ago, so they're using voicemail. But it says wherever I traveled, I found great ideas. Let's say a co worker in Idaho had devised a particularly brilliant inventory system. When I met this co worker, I dialed into our voicemail system and then handed him the phone.

48:38 Go ahead, I'd say, introduce yourself and explain it. The co worker got a chance to explain his his idea in his own voice. And by the end of the week, thousands of other people would have heard about it too. So it's not like a conference call. You can pick it up and listen to it whenever you want. And this is how This is the tool that that Paul used to to spread information throughout the company when he wasn't in like in the physical store.

48:59 Uh, so even though I was generally inaccessible at any given moment It was still possible to reach me. And so he continues about the importance of you need to pick up the best ideas. We just covered in two of the books I just did on Jeff Bezos. Talks about G anybody can email Jeff at Amazon dot com. Jeff and his team would read through these emails, they would think about customer anecdotes as valuable intelligence.

49:19 to to fix problems that you don't see in your business. So Paul's not gonna use email, he's a suggestion box. And then he finds his suggestions And he starts talking to people

49:29 uh different stores. Like why is this important to you? And one of his partners made the good point. He's like you had to remember He's from all around the country. And when I read that sentence I was like, Hey, you really think about what founders is doing. We're picking you and I are picking up the best ideas.

49:44 From the history of entrepreneurship. And we're spreading that around to and w hopefully when you learn these things and you go tell your employees, your co founders, your friends, and then they keep spreading these ideas. And we just create this giant tsunami Of some of the best uh knowledge that you ever find in the history of entrepreneurship. And those ideas and those insights can actually make people more effective. It's amazing. We also relied on the prosaic suggestion box for the For input from our customers.

50:08 Um So in this case There's a there's a suggestion box. It all goes I'm not gonna go into detail this weird structure I t just told you about. But in this case it all goes for some reason.

50:20 With this other company called Kinko's North West. But this is very fascinating. The marketing manager And the president Of King Goes Northwest. Remember, you figure they got th they could be sent in the office. You know, coming up with theories. No. We're reading every single message.

50:34 They read every single customer suggestion from their region for nine years. That's another idea. Paul and his team are using this decades ago. Jeff is still using it. And the customers that care enough to write you, to talk to you, to to to send you a message. Like they care enough about your business that they're gonna tell you what they feel can be improved. Like that's very, very valuable.

50:55 Let's go back to this. I love this idea. Take the service you provide your customers seriously, but have fun with everything else. They knew they're talking about this this group of capitalist hi hippies, they have like hair down to their butt. bunch of the you know partners were in their early twenties when they started Kinko's now we're a few decades into the story. They knew how to enjoy life and they knew not to take things too seriously other Than delivering their product. And I love that I go back to uh go back to what we just learned from Jeff uh last few weeks.

51:21 Yeah, he's talking about there's a lot of Yeah. There's a lot of things he says in the meetings and it's really saying You know. Yeah, you could do a shitty job, but do you have professional pride?

51:31 A third of your life is going to be dedicated to your work. Do you actually care about that or not? And I love this idea. It's like, listen, we're gonna have fun, we're gonna we're gonna have beers after work. We're gonna have picnics, we're gonna go bowling. we're not gonna be too stressed out as as much as you can. I mean Paul has a lot

51:46 deal with a lot of stress and he gets on antidepressants later on and everything else but the idea is like listen, you know, life is temporary, it's an experience to be enjoyed. But our work is serious because we're serving customers and we can never take advantage of that'cause then they'll go somewhere else. There's only one that's what Sam Walton said, there's only one boss and it's the customer. He can fire you anytime he wants. We were the kind of anti business uh we were c a kind of anti business in a way at the beginning. We felt we were going to do it our own way.

52:10 We are gonna have good values and we're gonna make money. That's they're talking about the They're it's almost similar to the Yeah, if it's similar, but Ivan Chanard had that kind of that let my people go surfing. uh one of my favorite founders I've ever come across'cause he's like listen, if I if I

52:24 I never wanted to be a businessman, but if I'm going to be, and it appears I'm going to be, and I'm gonna be one for mo many decades, I have to come up with I have to do it my way, I have to come up with my own philosophy. Um, and we're seeing the same kind of ethos here from from Paul and his partners. And it's an update in the company thirteen years in. Uh by nineteen eighty three we were doing about seventy million in sales a year. With a hundred and twenty stores.

52:45 We were thirty partners with an average age of twenty eight years old. We were motivated by our own value systems, ideals, and ambitions. With scant input. From the head office. Each person made his or h her own decisions.

52:58 And then Paul's gonna talk about there's even difference between the partners. This is I'm really running over the point I just made. There's no formula, your philosophy should match you is the note I left on this page, and this is why we all did business differently. Uh Dave, one of his partners, admired and sought to emulate big blue chip companies like General Electric. He ran his company with many more levels of bureaucracy than I would have. And yet the posse manual that his company wrote up ended up being adopted by most of by most of the other partners. So it's a voluntary adoption basis. This is how the company was run up until it was sold.

53:26 I hate policy manuals myself. Obviously I'm never gonna spend free time reading them. But if our other partners could make use of one, I'm glad that Dave writ uh got it written. He loved concocting five year strategic plans. An activity I find pointless and unbearable.

53:41 In contrast, he thought my stores were loosely and poorly run. I repeatedly told him that he could have expanded his business ten times faster were he not so wrapped up and tending to all the bureaucratic mumbo jumbo. So even then it's like okay, well, I'm gonna have other ideas on the stores that I don't own with you. And we don't have to agree on everything. And this goes back to why he wants to spread the best information, why he wants to get feedback from customers. why he wants to talk about what he experiences at other stores like hey you know they had this sign up about the bouncing the checks don't do that

54:09 And his the point of this section about to read to is really if you have skin in the game, you want to know the dirt inside your company. I've observed that corporate executives, those who take a salary but don't have a stake in their enterprises like to be lied to. It makes them feel comfortable. Uh They like they they are the type to be deluded into thinking that everything runs as smoothly as the table service as their at their favorite restaurant.

54:29 They don't want to know about the problems. It might upset them. The more the they are more interested in managing their careers Than their companies. But if it's your own money on the line, you have a completely different attitude.

54:41 You want to find out all the dirt. You don't want to be spared the gory details. That's another point he makes in different in different words later on. It's like if y There's no such thing as a smooth running business. Like businesses problems. Companies are just effective problem solving machines.

54:56 You might solve a problem now. There'll be problem you can't even imagine that you're gonna run into a year from now. So this idea you're just gonna, okay, I set up my business and then it's gonna run smoothly, that doesn't doesn't exist. So knowing that going in and knowing that other people experience that. Yeah. for when you inevitably run into this yourself like okay, okay, this is normal. This is how things are supposed to be. This is just another problem. I'll solve it and I'll keep moving forward. Talks about more about not wanting power, about constantly trying to uh

55:22 to to delegate work and, you know, not being a workaholic. Even he says, you know, I can't I won't stop thinking about it. But I'm not gonna give up all my time. I'm still gonna have fun. I'm still gonna spend time with my family. And I think that's just really smart. A lot of people don't believe me when they hear me say that I'm not interested in power. But in the deepest sense, I'm really not. Power to me means having to do a lot of work. I believe in getting out of as much work as I possibly can.

55:44 When you're not stuck working twelve hours a day, you've got time left over to goof around. To think creatively. And to get to know the people next to you. Uh and to get to know the the people next to you and eventually you'll be back on your business instead of in it. Okay, so now we got to this chapter that is just remarkable. You don't find many chapters like this. This is all about his dark side.

56:01 And all about the things that he does not like about himself, the imperfections that he has. By now y you would have to be as bad a reader as I am, not to figure out that I have a dark side. You rarely hear people talk about their dark sides, especially business leaders. Which is a shame because successful business person b businesses aren't usually started by laid back personalities.

56:20 I don't hide the fact That I have a problem with anger. I'm not proud of those outbursts. I apologize. To all my co workers and partners who've had to deal with the worst of my anger.

56:31 Someone once told me that the only true victories in life Our victories over ourselves. And I think that's true. My suggestion is Fight your emotions.

56:40 Don't let them rule you. I let my anger rule me too often. At Kinko's and at home. And then he starts talking about all the ways that They have a philosophy, they have aphorisms to spread around the company, but he's like

56:52 They're aspirational. I don't I failed like no one's perfect. I failed to reach up uh to meet my own expectations. He and this is he's gonna go into more detail about it, eventually seeking treatment for this and realizing like I I kinda wanna live like this. Uh Everything in each of our businesses were guaranteed with a personal signature.

57:09 I personally was on the hook. As were many of my partners, for every Xerox machine and least guarantee in the entire business. If Kinko's took a dive, As it nearly did at several junctures and w in In its rapid stepladder like growth.

57:22 I stood to lose everything. By nineteen ninety, when we had about four hundred and fifty stores I remember discovering my liability was many times greater than my net worth. So for many years. Despite the motivational pep talks.

57:35 I delivered at company meetings. I was literally running scared. So he's like you can't make money if you're running scared. He's telling people not to be running scared and he's doing the exact same thing. And he's doing this for a long period of time. He talks about the outcome here. After a time these fears wore me down.

57:49 In my late to in my mid to late forties, he's talking about fear of going broke, fear of fail failure. Which I think everybody feels. Uh, in my mid to late forties I struggled to increasingly to manage my own emotional nature. He was I think fifty two.

58:03 When he sold the company? Sometimes I felt I'd created a monster. The monster wasn't Kinko's, it was me. After I retired, I started taking Prozac. And believe me.

58:12 It's a much more pleasant experience living in my own skin. Now this is think about who's gonna admit this. Who's gonna write a book and put this on the page? We're we're we all benefit from this. This is a this is remarkable that he he bears so much of this. Like listen I Yeah, from the outside on this hugely successful, worth hundreds of millions of dollars and I it was a Not a pleasant experience living in my own skin.

58:34 It's much more pleasant for the people around me too, now that he's on Prozac. Yeah, it talks about you know. going to he'd had counselors. He had that go to um like couples counseling for some w some of his partners. I mean, there's a lot of times where he's going and and trying to seek help for his like just extreme uh behavior.

58:53 And this is just a a really, really ugly story. Like how many people would share this voluntarily? What I'm about to read you. I'm gonna let Dave tell you an ugly story. So Dave was one of his partners. In the prime of my King Coast life in nineteen ninety two, I was in the hospital. I've been diagnosed with leukemia. I I'd already written a out all my read upon my death letters to my kids.

59:12 And gone through massive doses of chemotherapy to wipe out my bone marrow. I had no marrow left in my body. I was left totally without an immune system and any sort of infection would have killed me. I get this phone call from Paul and he says What about these PLs?

59:26 What's the problem with them? He just gets on me. He's the godfather of my daughter. He's the lead trustee of my living trust. I just knew Paul didn't know what to say.

59:37 He's a rhinoceros. I don't know what that means. I just said Paul. I'm gonna have to get back to you on that. So your partner, your friend is on the verge of dying in the hospital. And you're calling about profit and loss statements. Luckily this guy survived and he recovered. Another partner.

59:53 Paul could be abusive. He's immature. He could be h hostile. But he could flip that and be phenomenally gracious. He would create chaos. There was constant turmoil in the organization.

1:00:04 You never knew what was expected of you. Paul's extremely difficult to work with. Because everything else is so Personal. And this th this trait of you know somebody being

1:00:15 Borderline genius as far as like an oper operator is concerned. And being um you know, difficult. Uh there's a Co Yeah, this is a very th this is something you we've seen a lot.

1:00:25 sixty, seventy years ago, David Ogie wrote. He's like, listen, you have to learn to tolerate genius. Talking about the the some of his best employees. He's like you have to tolerate genius because it usually and use the word tolerate because he says genius usually comes a comes with disagreeableness. And difficult personalities. Uh more examples of him just flipping out. This is him losing his temper over bureaucracy. I fought overhead every day

1:00:49 Or excuse me, I fought overhead from day one at Kinko's. It was an uphill battle all the way. Everywhere I looked, I saw unnecessary expenses. The problem with bureaucracy at most headquarters is that there's so much there's so much passing the buck. No one takes any sort of responsibility.

1:01:03 Uh, where and then he kinda compare and contrast. He hated hanging out at headquarters. So he wasn't getting in fights there. And he's gonna compare and contrast the behavior he's at headquarters. with what he sees out in the field. Um So no one takes the sort of responsibility people shoulder as a matter of course out in the field.

1:01:17 Where achievement is transparent and measurable. I also began to notice that often the people who survived and received promotions at our head office We're the cautious ones and not the creative audacious thinkers. The culture was upside down. At most companies the headquarters is a notoriously uncreative place.

1:01:33 Spared from reality. It is a danger to the health of many companies. That said, I think I was wrong in my passionate dislike of our head office. I just couldn't keep my feelings in perspective. I was like a caged animal when I was there.

1:01:49 And so that leads to him throwing things, yelling, fighting, you know, tears, there's a lot of turmoil there. A lot of emotional turmoil, which is exactly what this entire chapter is about, which again is so important because This is hidden from outsiders. He says the upside to my dark side is passion. Now this is very interesting, another example of uh this another partner of his that just This is the guy he hires, I think he winds up hiring to be CO of one of like his these like sub companies and Kinkos, let's say, you know, one of these companies that maybe own like twenty five of the like

1:02:17 you know, hundreds of something stores at a time. Uh but really the the the reason I'm bringing this to you is like you have to stand up to bullies. That's the only thing they respect. So it says Mark Madden is a passionate guy, which I tap which is why I tapped him to run my own company. One day I lit into him more severely than usual. As Mark remembers it.

1:02:34 One time Paul was nagging me about something. Then he started sending me voicemails. He left me about three or four in a row. All personal tax. I had had it.

1:02:43 I hit reply and I said Hey, Paul. Fuck you. And I sent the message. Then I sat there and thought that probably wasn't a good idea.

1:02:53 I ran to Paul's assistant because I knew she could stop the message, but she wasn't in. I called the VMX guys, these are the people who run Kinko's voicemail service. Couldn't get in touch with them. A few a few minutes later, the phone rings. It's Paw.

1:03:06 He goes. Hey buddy. How you doing? Then he goes. Hey.

1:03:10 Hey. Their message. That was great. The passion was there. Hey.

1:03:15 Thanks, buddy. And he hangs up. Then he calls back. Today. Don't ever do that again.

1:03:21 As long as a person this is Paul speaking about this he says as long as a person had passion and gumption I could forgive a lot. He also talks about great detail where you know the the The financial an insecurity or financial anxiety that entrepreneurs go through is a source of a lot of his troubles. Even like uh even if he's wildly successful two decades into his career, he's worried that you know he could lose everything. And so just something that he has to deal with.

1:03:44 And really what he's talking about, he's like, I just want the independents of wealth that wealth provides and I wanted it desperately. As a dyslexic, I never lost sight of the fact that savings were gonna get me much farther along in life than any report card ever would. I wanted to grow up to be like my uncles. When they were older they had fancy cars. They spent their days polishing them. The hardest decision they had to make was where to go to lunch for that day.

1:04:04 They were also free to take care of their kids, to spend time with their families. They never missed a dinner at home. People often equate wealth with immorality. But that's not what I saw as a kid. I saw people who made who both made and then saved enough money to have the leisure time to devote to their hobbies and to their families. So that's what he wanted.

1:04:22 I'm gonna talk a little bit about because remember I told you this um like a chronological bo book where like just We're inside the mind of Paul. And he's just Okay. He's just telling us whatever's on his mind at this point.

1:04:33 But what's so fascinating is how he felt and how his partners felt after they they sold the company. But He works at the company for a little bit after he doesn't own it anymore. And there's a there's a lot of things that are going on this page. Let me read it to you and then I'll read my note. Uh, I'll give you an example of co a corporate view of money. So remember, he always thinks of he's like I ran my business like a peddler.

1:04:52 And I'm just focused on cash flow. That's all I focus on. And he says the corporate like they complicate things and they they they overthink things and they wind up doing things in a w worse way, in his opinion than like a simple peddler would. Uh, we used to sell passport photos at Kinko's and we advertise the service in the local yellow pages. It would cost us seventy five cents to make a passport photo. The price.

1:05:11 Uh the the price jumped to a dollar. Excuse me, the the the cost. Jump to a dollar to a dollar seventy five. when you added the cost of yellow pages. So now all in. To get the customer in the door and buy the password and make the passport photo.

1:05:25 And sell the passport photo to them, they're at a dollar seventy five, right? Uh we'd sell those photos for thirteen dollars a piece. You think this is a nice business, question mark. Shortly after we sold a controlling stake in Kinko's, the new budget people came in and got rid of the yellow page ads. They saw it as an advertising expense.

1:05:43 I used to go to the office and think. Are they deliberately trying to be idiots? Then, like a self fulfilling prophecy, they abandon the Pascal business. That is corporate dyslexia. There is a lot of corporate dyslexia going on.

1:05:57 going on out there rather. Uh so First note, he says he ran he ran his business like a peddler. He just focused on cash flow. I already told you that. The second thing, which I found interesting,'cause he's like they saw it as an expense. Let me quote David Ogby again. And you know, maybe he's speaking his book a little bit because he made his money as an advertising agency, but he's like, Listen, you need to treat advertising agency or you need to treat advertising not as an expense.

1:06:19 It's a production. It's a part of manufacturing the product. And his point was that some people treat it as like a uh sales and marketing expense, right? But he's like if you can't sell your product without advertising What happens is and he's seen this many times, people with in like a downturn in the economy, they'll cut back on advertising, which just cut back on sales. Like no. you you have that in the wrong expense column. It's a part of it's an ex a manufacturing

1:06:41 Cost. And if you're gonna keep manufacturing your your product, then you need to keep advertising. And we see a similar idea here from Paul. It's just like yellow page ads work. And there's just plenty of books that you can like I think of Ray Crock, uh founder of McDonald's. You know, one of the first books I ever did for the podcast. He talks about once they started advertising.

1:07:00 In uh in California. Um, I think that's where some of their first stores were. And he says it was like a blindfold was was removed from our like we went from like a trickle to like an overflow. It clearly works. Uh, there's an entire section in zero to the book by Peter Thiel, Zero to One talks about you know, everybody talks about oh advertising It doesn't work on me and he's like, Yes, it works on you. It works on everybody. A little bit about the kind of businesses that Paul likes. They're simple, they're high margins, and there's no inventory. The copy business appealed to me.

1:07:27 Because it fell perfectly within my circle of competence. It's a simple business. It didn't take extraordinary genius to figure out the fundamentals. And it wasn't an inventory business. And I think at the time he started Copies would cost let's say half of one cent.

1:07:44 So it's and then they charge ten X that to the customer. Well, this is a good aphorism that he has. So uh this is something he learned from his mom. No point in bragging in good times. And the aphorism is give the glory, but take the money. During our years of most rapid growth of Kincos, I made a policy of not talking to the press.

1:08:00 What would I have stood to gain by doing so? I kept my personal profile intentionally low when it came to my relations with the outside world. When Forbes published its first piece to me back in the mid nineties. I wouldn't let them take a picture of me. I always told my partners to give the glory and take the money.

1:08:17 There's no point in bragging in good times, as my mother used to say. Your friends don't need to hear it and your enemies anyway. And it as many other entrepreneurs know, it invites competition, unwanted competition. Okay, so they went up selling the business to this uh venture capital firm that reorganizes it and then s resells it to FedUX a c a couple of years later. And this is the surprising this is in a chapter called Know When to Walk Away and it says no matter what anyone says

1:08:43 Walking away from something you spent thirty years nurturing. Remember, he's this is gonna make him hundreds of millions of dollars, and this is how he feels after the fact. This is very surprising. Um, no matter what or maybe counterintuitive is a better way to describe it. No matter what anyone says, walking away from something you spend thirty years nurturing, whether it's a child, a company, or even a hobby. It's gonna take a toll. How could it not? How is it humanly possible to say goodbye to something that contains so much of you?

1:09:07 And your love and devotion. When my father shuttered his business in nineteen eighty one, A part of him died along with it. It wasn't that he stopped living after. But it was hard on him.

1:09:18 I don't know if closing the company took the life out of him. But he died soon. Five years after. And so one of his main partners, Dan, there's a quote here where it talks about how he felt after The sale.

1:09:29 And he says when the Kinko's thing ended for me I almost felt like I wasn't anywhere. Any I wasn't anywhere anymore. When the job was gone I was gone.

1:09:39 Dan went into a severe depression. Most of us men identify far too personally With our work. It's only human. And the note I left myself is There should be a podcast. Here's a podcast idea if if you want to start one.

1:09:53 You know, we're always interviewing people that are raising money now or running businesses now. Um, obviously we focus on learning from dead entrepreneurs as much as we can. Or people that are at least Close to dead. Or at least retired. I guess a better way to put that. There should be a podcast that only interviews founders five or ten years after they sold.

1:10:11 And to see if they regret it. I would definitely subscribe to that. And this is a little bit more about what happened after the sale. He wasn't ready for this. The first decision of C D and R that's the firm uh made after the sale was to name himself, this is the guy that did the deal, interim

1:10:27 Interim CEO. This was not what we were expecting. CD and R swiftly began to set about creating a new company on its own on its own terms. Very quickly, relations between the old and the new guard disintegrated. It was startling.

1:10:43 How quickly they stop listening to us. Increasingly I was cut out of decisions. I should have left right then. Yet in truth I wasn't yet ready to let

1:10:53 Go. And then he talks about he's writing this book about five years, six years after this happened. The book is close to fifteen years. Old, I think it was published in two thousand six. And with

1:11:03 Interesting is like he's still emotionally troubled by this. He says for emotional reasons, I just can't go inside the stores anymore. I don't know if I ever will again. It's too difficult for me. When I see Kinko's co workers today They naturally want to tell me about their problems.

1:11:21 I can't blame them. I spent three this is very this is a very interesting statement he's gonna make. I can't blame him. I spent three decades browbeating them to confess every grievance about their work lives to me. But I don't want to hear their complaints anymore. And he continues to start.

1:11:36 Continues his start about the ideas like I'm a hippo I'm a hypocrite. We are. He says the truth is for everything I just told you about keeping Paul separate from Kinko's It's been excruciatingly difficult for me to let go.

1:11:49 My friend John used to tell me that sometimes in life You have to forget who you were. And learn to be happy with who you are. I'm trying to do that now. And then this was

1:12:00 I mean honestly I I laughed the first time I read the sentence'cause it I was completely out of left field. He's talking about the health issues that the company caused him. Ten years ago. I had bad gas. I couldn't sleep a night.

1:12:13 And my neck hurt constantly. I've read almost two hundred biographies for this podcast. No one's complaining about the bad gas they had. Now I don't have gas. My neck doesn't hurt and I sleep like a baby. Getting to this point hasn't been easy. But it was necessary.

1:12:29 We finally took our chips off the table. And let the game move on without us. He's coming to exit to yours is he finds a new mission. He calls it repurposing your sort. He's like, Okay, I don't run Kinko's anymore.

1:12:41 So now he runs uh at least the time in the book. He starts doing a he starts an asset management company. He runs he invests his own money and then invests uh money on behalf of other people. He develops his d has a lot of money in real estate, stuff like that. But so he has A business he can run that's not that doesn't require as much stress as it was when he was running King Code, but still gives him a purpose in life. You know, he's gotta find something to do for the next few decades. Uh he's got a great definition of success. I'm gonna read this to you now. I always believe that the dish definition of success in life

1:13:11 is when your kids want to spend time with you after they've grown up. And so that's something, you know, he tried to be aware of even when he was building Kinko's. He's home on the weekends he's home at night for dinner. He's still thinking about the business, but he's not going to just he's not going to be an absent father, an absent husband. And then I'll close on this. There's just still obviously a little bit of ambiguity. As for myself, I'm still letting my soul cat up with my body.

1:13:34 How long will it take? I can't answer that question. But it's a good one to ask. Do you know why children finally outgrow their tendency to ask millions of questions? Not because they've got the answers.

1:13:46 They figure out that it irritates the grown ups. If you've stopped asking questions. Start asking them again. Learn be immature. At least some of the time.

1:13:56 It's taken me my whole life to figure out That I don't have all the answers. All I've ever had was a bunch of questions. When you think about it. Kinko started with a question.

1:14:08 How come there's a copy center here at USC? And now one up at U C S B. Why is that? The most important thing is to keep dreaming.

1:14:17 Keep playing. And keep asking questions. And that is where I'll leave it. For the full story, I recommend you buy the book. If you buy the book using the link that's in the show notes, you'll be supporting the podcast at the same time. That is a hundred and eighty one books down. One thousand to go and I'll talk to you again soon.

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