The Empire Builders Podcast Stephen Semple and David Young

Have you every heard of the Yukadoodle? It was parents favorite toy. No learn how that turned into Barbie.



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.



[Tapper's Jewelry Ad]







Dave Young:



Welcome to the Empire Builders Podcast. Dave Young here, alongside Stephen Semple. And Stephen just whispered in my ear, I have to admit because I'm a certain age, the triggering words, Barbie, Matchbox and Hot Wheels. Now the reason I'm triggered is it just brings back fights between me and my sisters.



Stephen Semple:



What, you were fighting over the Barbies?



Dave Young:



Not so much fighting over the Barbies, but fighting for space on the living room floor for playing with stuff. And maybe some heads got torn off some Barbie dolls. I don't know. I can't... Maybe some Hot Wheels or Matchbox cars were damaged in retaliation.



Stephen Semple:



Do you have any scars on your head from them hitting you?



Dave Young:



They would key my Matchbox cars.



Stephen Semple:



A lot of memories.



Dave Young:



Take me back to my childhood trauma. This is a therapy podcast, right?



Stephen Semple:



I was thinking about the other day, so I think we have to do part two of Tetris just to really get you into your hang socketing place.



Dave Young:



Sounds good.



Stephen Semple:



So we're going to be doing something a little bit different because we're talking about two companies and three products. And so this is going to become a two part episode, which is unusual for us. But when I was looking at these companies, the stories are so linked, I couldn't figure out a way to break it apart. So I thought, you know what? We're going to tell it as the best way to tell it. And I think that's-



Dave Young:



Yeah.



Stephen Semple:



Looking at all three together. And the interesting thing is all three, Barbie, Matchbox and Hot Wheels, today are all part of Mattel, although Matchbox started as a competitor. But today they are all under the same umbrella. And Mattel today does like five and a half billion dollars in sales and has 33,000 employees around the world. And all three of these businesses basically started... for all three of these products, sorry, it's two businesses, three products, started following World War II.



And in North America, when we go back following World War II in North America, we had this baby boom as the troops returned from war and there was this GI Bill stimulating the economy, but it was very different in Europe following the war. They were rebuilding and recovering and in fact the economy was a mess. So the other part that's interesting is, the origins of both of these businesses were quite different in terms of the economic environment.



But first to California and Mattel. So Mattel was started by Elliot and Ruth Handler and a friend, Harold Matson. And the business started by making picture frames. They were manufacturing picture frames. And Ruth ran the business side and Elliot ran the creative side. Now keep in mind, this is following World War II. This is the late 1940s, early 1950s in manufacturing, and you've got a woman running it, which very, very out there for the time.



Dave Young:



It's California.



Stephen Semple:



There you go. A little bit more open to things out there. So things were a bit slow, and so Elliot started to make doll furniture with the leftover wood from the making of the picture frames.



Dave Young:



Okay.



Stephen Semple:



And it starts to sell really well.

An accident that really happened by an accident. Erno Rubik created his cube to visualize 3D space, but people just wanted to solve a puzzle.



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 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. Here's one of those.



[Seaside Plumbing Ad]







Dave Young:



Welcome back to the Empire Builders Podcast. Dave Young here alongside Stephen Simple. Stephen, you told me the topic today, and of course I know about it.



Stephen Semple:



Of course you do.



Dave Young:



I might even be able to guess the guy's first name and that I know that he was an Eastern European, but probably Russian, Erno Rubik, the inventor of the... Is it Erno?



Stephen Semple:



It is.



Dave Young:



Okay.



Stephen Semple:



Well done. Bing, Bing, bing, gold star, bing, bing.



Dave Young:



Bing, bing.



Erno Rubik. We're going to talk about Rubik's Cube.



Stephen Semple:



Correct.



Dave Young:



Erno is the Rubik in question. It was the big toy when I was a kid. I'm thinking eighties, early eighties, late seventies. Is that kind of... My frustration with it is I've never been able to do it. I can't solve a Rubik's cube to save my life.



Stephen Semple:



I'm with you.



Dave Young:



I know people that can just, the ones that can go click, click, click, click, click, click, click and done.



Stephen Semple:



I hate them.



Dave Young:



Dang.



With a passion. With a passion.



Stephen Semple:



I hate them. Yeah. Well, and when you say going on to be big, it went on to become the bestselling toy of all time, so big? Yes. The biggest, in fact, the biggest, in fact. The idea started in the 1970s, and if we go back to the 1970, games were primarily puzzles. And puzzles were kind of getting boring. Video games had just come out and were proving to be super popular, and were impacting other games. Other games and toys all started to incorporate lights and sounds and electronics. You remember Battleship? Battleship suddenly had sound effects where instead of you just saying, "You sank my battleship," you pressed a little sound and there'd be a little explosion and all that other stuff.



Toys were all starting to incorporate this stuff, and Milton Bradley even predicted the time that every toy in the future would be electronic. That was the mindset at that moment. Then along comes Rubik's Cube with no electronics, no sound effects, sells 3 million units in three years and goes on to become the bestselling toy of all time. It's 1974, Erno Rubik is the professor at the Hungary College of Applied Arts, which at that time is part of the Soviet Union, so it's behind the wall.



Dave Young:



Yeah, it's part of the whole deal.



Stephen Semple:



He's a trained architect and he's teaching architecture and design. His father's an engineer, his mother's a poet, and he's really interested with how people interact with things. He would teach a class on how to do 3-D drawings, and he would start with a cube. When drawing, you can only see three sides at a time. This started out not as a toy, but as a teaching device. He wanted to get across the idea of thinking in three dimensions. How can you rotate things around a core? How does this impact the relationship to each one of the sides? He creates this cube where you can rotate the sides.



Dave Young:



Amazing, okay.



Stephen Semple:



But he still needs to track the movement to show the special relationships. He puts stickers on the faces, but as he starts to turn it, he realizes, "How do I get things to line up again?" When he tries to move it to solve it,

Bill sells the family name and moves on from Whisky.  Marjorie knew he wasn't happy and told him to make whisky again.



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.



[Seaside Plumbing Ad]







Dave Young:



Welcome back to the Empire Builders Podcast. Dave Young here alongside Stephen Semple. We're business consultants. We do storytelling. So anyway, you heard all that right? Can we do that as spoken? So as we do here, Stephen just whispered the name of today's subject into my headphone through the other end of the internet. I'm familiar with it to an extent, to the extent that I've drank it.



Stephen Semple:



That's a good start. Yeah. So now we've narrowed it down to a liquid.



Dave Young:



Now we've narrowed it down to a liquid. It's Maker's Mark whiskey. I know that they've got an interesting brand story and I've probably heard a few bits of it here and there in the whiskey world that we're both a part of, but I'm anxious to learn what you've learned and hear the rest of the story.



Stephen Semple:



Well, it's a really interesting story because Maker's Mark goes back a long ways. T. W. Samuel and Robert Samuels made whiskey for George Washington.



Dave Young:



Oh, no kidding. All right.



Stephen Semple:



Way back there. And then the family moved to Kentucky to start a distillery, and this distillery was passed down over the generations. And then a lot of the American whiskey history impacted by prohibition because along comes prohibition and the distillery is shut down. And when prohibition is repealed, Leslie and his son, who are now fourth generation wanted to start it up again. But starting up a whiskey distillery is hard because there's a long lead time. It's not like I make whiskey and suddenly there's whiskey. It's I make whiskey, I put it in a barrel, it's got to age a bunch of years, and then I have whiskey.



Dave Young:



Oh, yeah. What was their last name?



Stephen Semple:



Samuels.



Dave Young:



Okay. So that explains the logo on the bottle. It's their Maker's Mark, and it's the letter S with a circle and a star, and then IV,



Stephen Semple:



Right. Right.



Dave Young:



Which is fourth generation, right?



Stephen Semple:



Fourth generation.



Dave Young:



That just all made sense to me. Okay.



Stephen Semple:



Yeah.



Dave Young:



I'm back on board. Promise I won't interrupt you until the next rapid [inaudible].



Stephen Semple:



Until the next thought happens.



Dave Young:



I won't interrupt you again until I do.



Stephen Semple:



So the other challenge that was also happening during prohibition is taste had also changed. And bourbon at this time was seen as a very low brow alcohol. Consumer's taste for bourbon was absolutely fading. And look, a lot of it is is because a lot of the bourbon that was being made was quite frankly pretty crappy. So Bill wanted to do something different than they had did before, something smoother. But the father Leslie didn't want to change anything, like this was the family history and Leslie prevailed. So they were making the bourbon the way they had been doing for over a hundred years. And then they're just getting things going again and World War II breaks out.



Dave Young:



Yeah.



Stephen Semple:



And shortages grind everything to a halt and they need to switch production to industrial alcohol, and there's hardly any money in that. So Leslie, the father, dies. It's 1943, Bill's on his own. The company's 99 years old, and he shuts down the distillery,

Two entrepreneurs, Russian Revolution, Prohibition, A-1 Steak Sauce, Grey Poupon mustard, two buddies having drinks over a failed business and a book turned movie.



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.



[Waukee Feet Ad]







Dave Young:



Welcome back to the Empire Builders Podcast, Dave Young here alongside Stephen Semple, and we're talking about more famous brands, and you told me what the brand is that we're going to talk about, and they've probably been eclipsed in recent times, but man, these guys were the bomb for a while. Smirnoff's brand, mainly a vodka brand.



Stephen Semple:



Yep.



Dave Young:



And this goes back to... I don't know how far back. You're going to tell us, I assume, but this was the vodka that my dad and his friends drank in the 60s.



Stephen Semple:



Yep, and it's a fun story because the story of Smirnoff is really a story of two entrepreneurs, Russian Revolution, Prohibition, A-1 Steak Sauce, Grey Poupon mustard, two buddies having drinks over a failed business and a book turned movie.



Dave Young:



Oh, wow. Let me pop some popcorn and pour myself a glass.



Stephen Semple:



Yeah, sit back, relax. It's going to be a little bit of a ride, but you are talking about how big they are. How big they are, in 1982, they were sold to R.J. Reynolds for $1.4 billion, and they are still the best-selling spirit globally with 27,000,000 cases sold a year.



Dave Young:



Amazing.



Stephen Semple:



There's six bottles sold every second. So boom, six, boom, six, boom, six. That's how big they are.



Dave Young:



There's some thirsty people out there, right?



Stephen Semple:



Yeah, they are a monster. So we're going to start with Heublein. So Gilbert Heublein, who is a second generation business owner, and he was a president of the family business, Heublein, which was a maker of mixed drinks. And so they were making mixed Manhattans, pre-mixed Manhattans and things along that lines. And the family got into the liquor business quite by accident. So the family had a successful restaurant in Hartford, Connecticut, and in 1875, they accepted a large order of pre-mixed martinis and Manhattans for the annual foot guards picnic. But the event got rained out, so the event was rained out, and they had all of this product leftover. And when they went to dispose of the drinks, they discovered that the drinks were, surprise, shelf stable because of all the alcohol in it.



Dave Young:



Oh. All right.



Stephen Semple:



So they started to sell pre-made drinks out of the restaurant, and this became so successful that they ended up building a distillery to satisfy the demand.



Dave Young:



Wow. And this was when?



Stephen Semple:



Oh, this was back in the late 1800s.



Dave Young:



Okay.



Stephen Semple:



So at this time, G.F. Heublein takes over the family business, and they also start developing interest in other packaged products such as sauces. And in 1903, he buys the right to A-1 Steak Sauce for the North American market. Later in 1936, he buys Grey Poupon mustard. So they have A-1 Steak Sauce and the Grey Poupon mustard, but back to Smirnoff.



So Heublein has this successful business selling pre-made alcoholic drinks, and in 1920 what comes along? Prohibition, which wipes out the liquor business, but fortunately, they've got the steak sauce to focus on to keep them going. So they focus on the steak sauce and some other food products. This keeps them alive. G.F. passes away and the business is taken over by his son,

Isaac Singer had 2 passions, being a travelling actor, and inventing and improving things. He used one to fund the other.



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. Here's one of those.



[Seaside Plubming Ad]







Dave Young:



Welcome back to The Empire Builders Podcast. Dave Young here alongside Stephen Semple. Stephen, you told me that we're, we're going back in time. We're revving up the time machine again to look at a brand that's been around, boy, a long time. I'm anxious to find out how long, because I know it was around in Pioneer Times. Because when you read old books or Little House on the Prairie or look at an old Sears and Roebuck catalog, you could buy a Singer sewing machine. Singer is the brand that we're going to talk about. It's sort of been synonymous with sewing machines for long as I know.



Stephen Semple:



Oh, yeah, yeah. Well, it was founded in 1851 in New York.



Dave Young:



There we go.



Stephen Semple:



By Isaac Singer. But while we still know about them today, they are not the force they used to be. They used to be huge. For example, when they built their headquarters in New York, at the time, it was the world's tallest building. They had a massive building in Russia. They had a huge factory in Scotland. At the time, it was one of the largest factories in the world. They were massive. When Isaac Singer died in 1875, his fortune was estimated to be $14 million, which is over a billion dollars today in today's month.



Dave Young:



That's in a period of 25 years or so, right?



Stephen Semple:



Right.



Dave Young:



That's amazing.



Stephen Semple:



Isaac Singer was born in 1811 near Schaghticoke, and I'm butchering the name because it's one of these ones that's like an S and an H and a G and a T and a H and a K in New York. Basically it's in Northern New York near the border of Vermont. Today, it's still a small town of only about 8,000 people, so I can't imagine how tiny it was back in 1811. At the age of 19, he's an apprentice to a machinist, and at the same time he becomes a touring actor. He spent much of his life being a touring actor. He was married. He had a son. He moved to New York where he worked in a press shop.



But I got to say this, not a loyal guy. He went on tour again and married again. This happened several times. He had multiple wives who did not know about each other. This happened several times. But this time he had an idea. He went and worked for a little while as a laborer clearing boulders on the Illinois-Michigan canal. He's clearing away rocks on the canal, and this gives him an idea to design and patent a rock drilling machine that he sold for $2,000. He created this patent, designed it, sold the patent, and he used this money to set up another touring company.



He goes out touring again, and he runs out of money, and eventually he's back in New York where he set up a shop making wood type signs. He patented a type cutting machine for those big wooden signs that we used to see. Singer's landlord is a guy by the name of Orson Phelps was making sewing machines, and it turns out they were hard to make. They were not reliable, and there were lots of returns and unhappy customers. Singer was not getting any orders for his type cutting machine, so he takes a look at the sewing machines.



Dave Young:



It seems like there would be a lot more people that need to sew something than to cut signs.



Stephen Semple:



You would think. Yeah, you would think.



Dave Young:



That seems like a consumer market as opposed to business t

When Spotify showed up and interrupted his revenue stream, Jack Conte didn't roll over, he found a way to to help all creators.



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.



[Seaside Plumbing Ad]







Dave Young:



Welcome back to the Empire Builders Podcast. Dave Young here alongside Stephen Semple, and Stephen whispered today's topic into my ear, and then hit the record button and away we go. This is a new one. This is one of those internet companies that has been a disruptive force, a revolutionary force in a lot of ways about how people go about raising money and sustaining artistic endeavors. We're going to talk about Patreon today.



Stephen Semple:



Yeah, Patreon was founded on May 2nd, 2013. Yeah, relatively new company by Jack Conte from the band, Pomplamoose, and a school buddy of his Sam Yam. If Jack was here, he would say it was not a disruptive force. He would say it was a helpful force.



Dave Young:



Oh, I agree. I'm just saying a disruptive, not like an Uber or an Airbnb where it's disruptive and upsets a whole industry, but in a way that disrupts the way maybe you could fund your band or fund an artistic endeavor. It's almost a throwback to Renaissance days when artists had patrons. That's where they got their name.



Stephen Semple:



Right.



Dave Young:



You would have rich people that would say, "I love what you're doing, and keep doing it. Here's some money every month."



Stephen Semple:



Yeah, yeah. Just keep being you.



Dave Young:



Yeah, I think it's a beautiful thing, a beautiful platform.



Stephen Semple:



It's really interesting how it came to be because today it's valued at over a billion dollars, and there's 200,000 content creators and artists, musicians that are on the platform, 400 employees. They have 3 million monthly active patrons on the platform.



Dave Young:



Yeah, it's pretty amazing.



Stephen Semple:



It supports a lot of people you know and people you don't, including organizations like the Whiskey Vault. Supports the distillery. Both Sam and Jack had this mutual love of music, and they were roommates in Stanford University, and Sam studied computer science. When he was in Stanford, he had this little internet burger business, pre DoorDash. He would take burger orders and go get them. There was one time he found himself pulling into a drive through at night and ordering over a hundred burgers at a time.



While Sam was doing that, Jack studied music in college, and Jack had actually started in physics and decided he didn't like it and rolled over into music. He was an artist and interested in being a full-time artist. In college, he was doing movies and soundtracks for movies. In 2006, they both graduated and Sam goes to work in tech startup and Jack starts a band with his girlfriend, now wife, Natalie. This is where Jack is a really interesting person because Jack had been watching YouTube. He would wonder if he could use it to get views. He would put up these videos of him playing music in his bedroom, and he sold MP3s online for a few hundred bucks a month on E-Junkie. He felt like he could make money on music and when iTunes came out, this was a game changer because of the ease of now selling music.



What he realized was, at its heart, YouTube is a search engine. If you post a cover of a song that is popular, and if it's a good cover, it will get people watching it and if they like it, they will look for your other music and then go and buy it on iTunes. This was working pretty well.