The Empire Builders Podcast Stephen Semple and David Young

California joins the union and messages need to be delivered. UPS had a solution and decided it needed to be luxury and efficient.



Dave Young:



Welcome to the Empire Builders podcast. Teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop, to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I'm Stephen's sidekick and business partner, Dave Young. Before we get into today's episode, a word from our sponsor, which is, well, it's us. But we're highlighting ads we've written and produced for our clients. So, here's one of those.



[Colair Cooling & Heating]







Dave Young:



Welcome back to the Empire Builders podcast. Dave Young here with Stephen Semple. And we're talking about empires and how they were built. Get it? That's the name of the pod... that's what we do here.



Stephen Semple:



I've never put that together before.



Dave Young:



Wow, I see. Aren't you glad I'm here?



Stephen Semple:



I'm so glad.



Dave Young:



You whispered the three letters, UPS, into my ears just as the countdown started. And I'm trying to think of a UPS story, and mostly what I think of when I think of UPS, think back years ago, I sort of remember, I think their start but I remember that being a UPS driver was a way better job back then than it is today. But that's probably not a big part of this story. So let's talk about how they started.



Stephen Semple:



Pretty sure it was UPS recently that actually just put through a new pay package and benefits, and things along that lines. That really ramped up what people are being paid at UPS, if I remember correctly. But you're right, this is not a big part. It's not a big part of the story.



Dave Young:



I think it started... how long have they been around, Stephen?



Stephen Semple:



They were founded on August 28th, 1907.



Dave Young:



I feel like probably I lived in a town so small that we didn't have one until maybe the sixties or seventies. They just didn't show up.



Stephen Semple:



Well, and this is an interesting part. There was a big challenge to them becoming nationwide. They were founded in August 1907 by James Casey and Claude Ryan in Seattle. I didn't realize that they had started in Seattle.



Dave Young:



Oh, okay.



Stephen Semple:



And they actually first started as their original name was the American Message Company. And today of course is known as UPS, United Parcel Service. They do like 90 billion in sales and have over 500,000 employees. Just what a monster they have become in this space. But basically they started around the time California joins the union. And you know what ends up happening now, I know Seattle's not and before people go nuts, I know Seattle's not in California, but I was just trying to, you know, Historic landmark.



Dave Young:



It's the West Coast, yeah.



Stephen Semple:



Exactly. But I get it, before people know-



Dave Young:



Didn't all join at once. Yeah.



Stephen Semple:



... So, California joins the union. There's this growth happening. In the west, there's this need to transport items and it's hard getting things to the new territories. And lots of delivery services pop up. Wells Fargo pops up for the transportation of money. The Pony Express is created for transporting of mail. Now, of course, the Pony Express only lasts 18 months because the telegraph wipes them out. Right?



Dave Young:



Right.



Stephen Semple:



But here's the interesting thing, with the telegraph, you still need a messenger service to run the last leg. To take it from the telegraph station to the person. So, Jim Casey's, 19 years old, he's in Seattle and he sets up this business for basically running the telegraphs. That's how they start.



Dave Young:



Okay. They're the last mile guy.



Stephen Semple:



That's the reason why they're the American message service. They start off as being the last mile guy.

Stephen and Dave right a wrong from a previous episode and dive deep into the history of franchising. A system for making millionaires.



Dave Young:



Welcome to The Empire Builders Podcast, teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I'm Stephen's sidekick and business partner Dave Young. Before we get into today's episode, a word from our sponsor, which is, well, it's us, but we're highlighting ads we've written and produced for our clients. So here's one of those.



[BWS Home Services Ad]







Dave Young:



Welcome back to The Empire Builders Podcast. I'm Dave Young, I'm with Stephen Semple. And Stephen just whispered the topic into my ear and I missed something. Stephen, you said franchise and I didn't quite catch what franchise we're going to be talking about.



Stephen Semple:



We're going to talk about a little bit of the history of franchising.



Dave Young:



The idea here is the idea of a franchise, the business model, if you will.



Stephen Semple:



Yeah, because if we think about the concept of this podcast as we're talking about empires, how many business empires today would not exist if it wasn't for the concept of a franchise where you create something and you license to that person the right to operate? And it's grown today into being the business model and all those other things. It has allowed numerous numbers of ordinary citizens to own successful businesses and generate wealth. It has also created a way for businesses to grow rapidly because of the fact that they're able to leverage the person's interest, hardworking expertise, and money in order to grow these businesses. Especially in the restaurant space, there's no way companies like McDonald's and Wendy's and all of these other businesses would've been able to grow at the rate that they grow if franchising had not been created, perfected, developed, and modernized. And those things have a journey that they went on as well.



Dave Young:



Those two key points you mentioned, it gives the average person an opportunity. If you can scrape up enough money to buy a franchise, you now own a business.



Stephen Semple:



Correct.



Dave Young:



And if you own a business, you created a business and you want to quickly expand to multiple markets, you can do it with other people's money by giving them their piece of their own little location as opposed to going and borrowing it all or doing some kind of a public offering, those kinds of things, an alternate way of growing fast.



Stephen Semple:



A really interesting Netflix show to watch, and it's not a documentary, but it's actually pretty accurate, is The Founder with Michael Keaton.



Dave Young:



Yeah, the Ray Kroc story.



Stephen Semple:



Yeah, the Ray Kroc story. And one of the things that Ray Kroc discovered was the best franchisees, so franchisees are the people purchasing the franchise were actually common, everyday hardworking folk who wanted to make a better life for themselves. And buying a McDonald's franchise was that avenue that actually made a better life for them. And they were the best source of franchisees, not rich folks who are looking for investments. And look, Chick-fil-A. Chick-fil-A today, it's very difficult to become a Chick-fil-A franchisee because they want to look at it and say, do you fit in? Are you that type of person? Will you actually be a great part of this family? And in Culver Restaurant, which I forget what episode Culver Restaurant is, we talked about how Culver, it's really, really important to them that basically franchisees really fit into what's being created.



I think it's worth exploring the history of franchising. And I have to right a wrong, because back in episode 94, we talked about Martha Harper, and I referred to the fact that Albert Singer was the first commercial franchise.

The amazing rise of Kodak was due to innovation after innovation and you'll never guess why George Eastman called it Kodak.



Dave Young:



Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I'm Stephen's sidekick and business partner Dave Young. Before we get into today's episode, a word from our sponsor, which is, well, it's us, but we're highlighting ads we've written and produced for our clients. So here's one of those.



[Tommy Cool Air Ad]







Dave Young:



Hey, welcome back to the Empire Builders podcast. Dave Young here, and Stephen Semple's right there. Well, you probably can't see him, but I can see them. How you doing this morning? Because we record these in the morning. If you're listening in the evening, I felt the need to say that in case you were confused.



Stephen Semple:



Especially since before we started the recording, you were slurping your coffee.



Dave Young:



Right, in case you've never listened to a podcast before, and you didn't know they weren't live. So just before we started, yes, I was slurping my coffee, and yes, Stephen whispered into my ear today's topic. And I tell you, it is funny how words do this. This brand has sort of defined its own... It became the word for its product. It became the word for an industry almost. And when you told me the name, I had a Kodak moment.



Stephen Semple:



There you go. Yes.



Dave Young:



Right? But we're going to talk about Kodak, Eastman Kodak company, and when you said Kodak, I'm like, "Oh, man." I remember my first little Instamatic Kodak camera. And the pictures that, I think it was the 110 film that took a picture and-



Stephen Semple:



Oh yeah, the little film? Yeah.



Dave Young:



... when you developed it, you got a four-by-four picture and a little smaller version of the same picture, wallet sized, right next to it.



Stephen Semple:



Yes.



Dave Young:



I thought that was the coolest thing. I would carry those little photos around. And I had a picture, I don't know if I still have it. It's probably tucked away somewhere. It's probably in a box somewhere. But there was a picture of me on my grandfather's horse. He had passed away already, and I was like maybe four or five, and I'm on this horse, and the horse's name was Euchre Bill.



Stephen Semple:



Euchre Bill.



Dave Young:



I can't explain that. Grandpa was gone.



Stephen Semple:



Card-playing horse, Euchre Bill.



Dave Young:



Maybe. I don't know. So that was the Kodak moment. Instantly, as soon as you said Kodak, it took me to that picture, which was still attached with its little picture next to it.



Stephen Semple:



I think we forget how big Kodak was. And lots of things led... Well, we even did an episode, back episode 77, where we actually looked at what we felt was the decline of Kodak that I did with Gary Bernier. At its peak, in 1996, Kodak was two-thirds of the global film market. In '76, it was 90% of all film sales in the United States, 85% of camera sales. In '96, it was the fifth most valuable business in the world, which is really quite remarkable.



Dave Young:



We tell our local clients that, man, if you can get to 35%, 40% market share in your category, you're a rock star. Here these guys were worldwide.



Stephen Semple:



Worldwide, 66%. Yeah. So today we're going to talk about what made Kodak amazing, and then the decline. We've sort of done this backwards. The decline we talked about back in 77. They were founded on May 23rd, 1892 in Rochester, New York by George Eastman. And George became the breadwinner of his family at age 14 when his father died, and he took a job as a messenger boy at an insurance company, and he was making three bucks a week. And then he became an office boy at another insurance company.

Martha had a great idea. Xavier had a bigger dream. Roger knew what to call them. The story of the Cabbage Patch Kids will surprise you.



Dave Young:



Welcome to The Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I'm Stephen's sidekick and business partner, Dave Young.



Before we get into today's episode, a word from our sponsor, which is ... Well, it's us. But we're highlighting ads we've written and produced for our clients, so here's one of those.



[Colair Cooling & Heating Ad]







Dave Young:



Hey, welcome back to another edition of The Empire Builders Podcast. Dave Young here, alongside Stephen Semple. We're talking about empires being built, and people building fortunes and all these, I assume, serious business topics, until Stephen whispers in my ear just before we start that we're going to talk about Cabbage Patch Kids.



Stephen Semple:



That's right.



Dave Young:



I feel like this happened before my siblings and little sister's ... Between the time that I had sisters that would have had Cabbage Patch Kids or children that would have had Cabbage Patch Kids, because I think the whole thing was done by the time I had kids.



Stephen Semple:



You missed it?



Dave Young:



It happened in that liminal space between being a brother with sisters that had Cabbage Patch Kids, or being a dad. It was a big, big thing, and then it wasn't.



Stephen Semple:



You just missed it is what you're telling me.



Dave Young:



Yeah, yeah. When did they start?



Stephen Semple:



The big thing is when they got really big was really in the '80s is when they were massive.



Dave Young:



Yeah.



Stephen Semple:



They set ... There were three years there where they set every toy sale record known to mankind. They sold over 130 million units.



Dave Young:



Yeah.



Stephen Semple:



They're still around today, they're just not a really huge, massive thing. They're actually one of the longest running doll lines in the United States.



Dave Young:



Okay.



Stephen Semple:



But yeah, there was a period there where they were like, holy smokes, just crazy, crazy, crazy big.



Dave Young:



Just the fact that I know about them. I was a dumb kid in his 20s with no reason to know about them in the '80s. But I did. They were a cultural phenomenon.



Stephen Semple:



They were. I remember seeing on television, you would see shots of lineups at toy stores, and people going nuts trying to buy these things. It was really, really, really crazy.



Dave Young:



Cultural references, Tonight Show and all kinds of things. They were everywhere.



Stephen Semple:



Oh, yeah. They really were. They were created by a lady by the name of Martha Nelson Thomas. She was an art student. She went to the Louisville School of Art, she graduated there in '71. She wanted to create dolls that would touch people. They were handmade and they were each different. She was an artist. In art school, one of the things she did is this whole idea of what's called soft sculpture, which is about using sewing techniques and things along that lines, to create shapes, and soft items, and pillows, and things along that lines.



If we think back to the '60s and '70s, dolls were all mass-produced from plastic. In the '70s, we started getting this folk art movement rising and this return to more organic forms. What she started to do was creating this dolls where the features were created by stitching. This created something soft.



Dave Young:



Okay.



Stephen Semple:



And cuddly. She called them doll babies. When she was selling them, she included an adoption certificate, she named each baby and would write down some of the characteristics. Things that the baby liked and disliked, and things along that lines.



Dave Young:



Right.



Stephen Semple:

How to build a tech company without being techy! No seriously, Rob Kalin, an artist, started Etsy and then polled more artists to make it awesome.



Dave Young:



Welcome to the Empire Builders Podcast, teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I'm Stephen's sidekick and business partner, Dave Young. Before we get into today's episode, a word from our sponsor, which is, well, it's us, but we're highlighting ads we've written and produced for our clients. So here's one of those.



[No Bull RV Ad]







Dave Young:



Welcome back to the Empire Builders Podcast. I'm Dave Young. Stephen Semple is here with another fascinating story about building an empire, and we're looking at a tech empire today. We're going to talk about Etsy.



Stephen Semple:



Yes.



Dave Young:



And so all I know about Etsy is you can buy all kinds of weird stuff on Etsy.



Stephen Semple:



Etsy is very much a technology company. In other ways, Etsy is very much an arts and craft company when you really think about it, right?



Dave Young:



Yeah, yeah. A community of arts and crafts people.



Stephen Semple:



Yes, very much so. Etsy was started by Rob Kalin and it was founded on June 18th, 2005, and it went public 10 years later in March, 2015, raising 237 million and giving it an evaluation of 1.8 billion at that time. They do about two and a half billion in sales. They've got 2,800 employees. So you know what? A pretty big deal.



Dave Young:



Yeah.



Stephen Semple:



And Rob Kalin, he's like this artistic hands-on kind of guy. He's not involved with Etsy any longer, but the home he lives in today, he built the entire thing from the ground up, including all the furniture. Today he's got this thing where he makes these custom-made speakers that are these $50,000 speakers. And he's constantly looking at this whole idea of trying to match technology with old school tools and craftsmanship, and he really thinks about himself as being a creator. And Etsy started because of a need that he had. Like a lot of these empires we covered, it came from filling his own need, because he would make stuff and he'd want to try to find a place to sell it.



Dave Young:



And I just know from being in the art glass and that kind of world, before the internet, if you're a crafts person or an artist, however you want to put it, well, you got to find a show somewhere, right? You got to go to a craft show, you got to go to a fair, a Renaissance Fair or something and set up a booth, drag all your stuff there and hope that you sell some.



Stephen Semple:



Yeah,



Dave Young:



And Etsy became that online.



Stephen Semple:



It did, very much so. Very, very much so.



Dave Young:



Yeah.



Stephen Semple:



So he grew up outside of Boston. His mom was a teacher, his dad was an architect. Rob was one of those kids who couldn't sit still in school and he stopped going to school. He wouldn't go to school and he didn't tell his parents. He got a job at a camera store and he had to figure out what he wanted to do. And he graduated from high school, barely.



Dave Young:



Started wearing suits and carrying his lunch in a briefcase. Parents didn't notice.



Stephen Semple:



Exactly. So he graduates from high school, barely. He did the GED approach and he became a cashier at Marshalls, and he said it was a good learning experience, but not a lot of money in it. He decides he wants to go to art school and he had to get to New York City. So he gets to New York City and he is working at a bookstore, and he started to do construction at night to make money because what we know is not a lot of money in retail, right?



Eventually that construction at night turned in the full-time and he was then taking classes at night. It sort of flipped around, and he was doing classics and languages and things a

How does a serial entrepreneur turn into the owner of one of the largest shoe companies in the minimalist category? One shoe at a time...



Dave Young:



Welcome to the Empire Builders podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Simple is a marketing consultant, story collector and storyteller. I'm Stephen's sidekick and business partner, Dave Young. Before we get into today's episode, a word from our sponsor, which is, well, it's us, but we're highlighting ads we've written and produced for our clients. So here's one of those.



[Waukee Feet Ad]







Dave Young:



Welcome back to the Empire Builders podcast...



Stephen Semple:



Do I have you stumped this time?



Dave Young:



Well, I don't know. I'm thinking, I'm thinking, I'm thinking. I'm stalling... I was talking about the podcast. This is the Empire Builders podcast. Stephen Semple just interrupted me, got me off my train of thought because he just, just before I started yammering, you whispered the topic and it is...



Stephen Semple:



That's correct.



Dave Young:



Xero Shoes, but zero with an X. Zero with an X. There's something tickling my memory that says, maybe I know it, maybe I don't.



Stephen Semple:



Well, they are a private company. The best I could find as it's estimated that they probably do around $50 million a year in sales. They have 61,000 reviews on their site, and they were launched on November 23rd, 2009 by Steven Sashen and Lena Phoenix out of Boulder, Colorado. They're in a small space in the shoe market 'cause they are a minimalist shoe, and minimalist shoes are basically 1% of the shoe business, but is a growing part of the shoe area.



Dave Young:



Mm-hmm.



Stephen Semple:



And this shoe was, it was actually kind of a bit of an accidental business for them, and it was not their first business. They did a lot of different things, and Steven was, when he was in school, did a lot of running and things like that. And when he turned 45, he decided to get back into sprinting and he'd been reading the book Born to Run, and in the book Born to Run, the author of the book talks about this whole idea of minimalist shoes and really allowing the natural body to govern itself in terms of running and that you'd have fewer injuries and things along that line. So he decided to make his own sandals. But again, as I was saying, he did a lot of different things.



Dave Young:



Okay.



Stephen Semple:



Like he was an athlete in high school. He did magic shows to make money. He went to Duke University and he did stand-up comedy when he was at Duke. And when he graduated, he went on the road for 10 months doing comedy, and he moved to New York and did stand-up comedy there. And when he was doing his comedy, he created a software for helping write screenwriting because back in the day, auto-pagination was really, really hard to do. So he wrote the software that did that. Then he moved to Boulder, Colorado and he started another business there. So he did a whole pile of different things. In '92, '93, he got into internet marketing and he was doing this internet marketing-



Dave Young:



Okay.



Stephen Semple:



... and then he was doing this mortgage brokerage stuff on the side, and they were doing real estate investments, and he got back into running. When he got back into the running, he was getting a bunch of injuries. He read the book and started to run barefoot, let the body do what it does naturally. And he loved the experience of feeling his feet on the ground. And when you run wrong when you're barefoot, it hurts. When you run right, it feels good. And minimalist shoes at the time did not fit the shape of his feet and his wife, she did not like him doing the whole barefoot thing around the house because basically she was like, Lena was like, "You know, you come home after barefoot running and you walk around the house bare feet and