The Biography of George Lucas

1. 0:00 – 7:04

   Great Creators Are Steeped in Their Industry's History

   1. DSDavid Senra0:00

      I don't think you have to listen to the Quentin Tarantino episode or the Steven Spielberg episode before you listen to this episode on George Lucas. But if you haven't listened to them, I would listen to them after you listen to this episode, because you're gonna see so much similarities in how they approach their work. I talked about last week how Spielberg would watch and re-watch movies that he loved. Decades later, entire scenes from those movies would appear in his own movies. Tarantino did the exact same thing. George Lucas talks about doing this. You're gonna hear him being addicted to reading biographies, studying history, reading science fiction. A lot of the stuff that he was learning as a young person, he would use a decade later. And the influences that he used to build Star Wars, which is obviously the cornerstone of his multi-billion dollar empire, have been well-documented. And you see the exact same thing with company builders. This is just like Edwin Land's ideas that show up in Steve Jobs' companies and products. It's just like Sam Walton's ideas showing up in Jeff Bezos' companies and products. It's just like Henry Singleton's ideas showing up in how Warren Buffett and Charlie Munger built Berkshire Hathaway. Charlie Munger said Henry Singleton was the smartest person that he ever met. Warren Buffett said it was a crime that business schools didn't study him. And so I go back and start reading about Henry Singleton, you realize, oh, wow, uh, these ideas that I was attributing to Munger and Buffett actually originated with Singleton. And that is a main theme that reappears over and over again for anybody that gets to the top of their profession. Anybody who becomes great at what they do is seeped. They are all seeped in the history of their industry. They talk about these ideas over and over again. They don't just read a book one time. They don't just watch a movie one time. They don't just have one conversation. They do it over and over and over again. That is why if you haven't done so already, I highly recommend that you subscribe to Founders Notes. For six years, I've been cataloging all of my notes, all of my highlights for every single book that I've read for the podcast. And it blew my mind, because that's exactly what Quentin Tarantino did. He would keep scrapbooks, make notes, and he actually kept files and, and on index cards of every single movie and what he wanted to remember about the movie for every single movie he's ever watched. And then because he cataloged all those ideas, he was able to use them in future movies. And so now you're able to re- now, by signing up for Founders Notes, when you get a subscription, you get access to all my notes, all my highlights, transcripts for every single episode. You can search by keyword, by person, by subject. It's this giant database of the collective knowledge of history's greatest entrepreneurs. You can also read all of my notes and highlights by book. You can have all of my notes and highlights presented to you in a random order on the highlights feed. I've been searching by keyword, I've been rereading my highlights by book, and I've been rereading my highlights in random order on the highlight feed for years. I built this tool for me, for... I had this for half a decade before anybody else had access to it. I literally could not make the podcast without this tool. And now I've added a new feature that I'm super excited about that may have made it 1,000 times more valuable. It's actually called Sage. It is the Founders Notes AI. And the name actually came because there was a bunch of existing Founder Notes s- subscribers that were beta testing this feature for me, and one of them emailed me 'cause he heard some of the names, was like, "I, I... This feature's incredible, but I can't figure out what to name it." And he said that none of the names were good enough because they don't actually describe what the feature does, and he said, "You should call it Sage." And he sent me the definition of Sage. Sage is a profoundly wise person that is often looked to for guidance and advice. And that's exactly what Sage does. It's like search on steroids. You can ask it a question, and it'll search every single note, every single highlight, every single transcript, meaning every single word I've ever uttered on this podcast, and it'll start making connections. It's been making connections that I've even missed. And so I mentioned last week, after I re-listened to the Steven Spielberg episode, I was asking Sage, I was like, "Give me what are the most important ideas to learn from Steven Spielberg?" And within 20 to 30 seconds, it gives me this outline of the top nine, what it feels is the top nine most important lessons from Steven Spielberg. Now, the interesting part is, if you press on expand, it actually tells you what it searched to come up with the answer. So you could just read the outline. Or if you choose to, you can go deeper and see what it actually fetched and what it searched to come up with the answer. And of course, it's gonna search the Steven Spielberg episode, 'cause I'd done the episode a few years ago. But what is fascinating is also included ideas when I mentioned Steven Spielberg on a Steve Jobs episode, when I mentioned Spielberg on the Christopher Nolan and the James Cameron episode. It pulled an idea from Spielberg that I mentioned in an episode on Pixar. Its memory far exceeds mine, and so I really do believe a subscription to Founders Notes is the perfect companion. If you're going to invest tens of hours, dozens of hours, you know, I have hundreds, there's people who have listened to hundreds of hours listening to this podcast. Founders Notes, and Sage in particular, is the tool that'll help you condense and clarify the collective knowledge of history's greatest founders so you then you can use their ideas in your work. Just like Bezos used Walton's ideas, just like Jobs used Land's ideas, just like Spielberg and Tarantino and Lucas used past filmmakers and everything they read, all the ideas they, they derived from that in their work. I highly recommend getting a subscription, and you can do that by going to foundersnotes.com. That is founders with an S, just like the podcast, foundersnotes.com. I'll also leave a link down below in the show notes. I appreciate the support, and I hope you enjoy this episode on George Lucas. George Lucas unapologetically invested in what he believed in the most, himself. As a result, the film empire that he created would empower not just him, but other filmmakers to produce movies exactly as they envision them, without a studio imposing its own priorities, complaining about budgets, or micromanaging the process. George Lucas, the small-town son of the owner of a stationary store, had said no to the family business and then built a cinematic empire based on his own uncompromising vision of the film industry, not as it was, but as he thought it should be. Much of that vision lay in the possibilities presented by new technology, technology that Lucas developed with his own money. "I can't help feeling that George Lucas has never been fully appreciated by the industry for his remarkable innovations," the director Peter Jackson once said. George Lucas is the Thomas Edison of the modern film industry. But George Lucas knew what he had done. He knew his place, and he seemed comfortable with it When asked by interviewer Charlie Rose what he thought the first line of his obituary might say, Lucas gave perhaps the best summation of his lengthy career in two single syllable words. His answer? "I tried." That was an excerpt from the book that I'm gonna talk to you about today, which is George Lucas: A Life, and it was written by Brian Jay Jones. Brian Jay Jones writes excellent biographies. He wrote this one. I read his biography on Dr. Seuss, which was excellent, and he also wrote an incredible biography on Jim Henson. So I originally read this book, like, seven years ago. It was episode 35, and there's some ideas in it that I've never forgotten. That sentence where it's like, you know, he unapologetically invested in what he believed in most himself, is my favorite sentence in the entire book. And I also think that concept, investing in yourself, is the, the concrete in the foundation of his empire, if you will. So I wanna go to the beginning, which is really fascinating, because the book is gonna talk a

2. 7:04 – 10:36

   The Star Wars Shoot and Lucas's Vow to Control the Money

   1. DSDavid Senra7:04

      lot about his childhood, but it doesn't start there. It opens up right in the middle of him shooting Star Wars. And I think his despair and depression and struggle that's going on, uh, you see this a lot, not only with, with founder biographies that you and I talk about, but especially with the filmmaker biog- biographies. Uh, Tarantino talks about this. Christopher Nolan talks about this. James Cameron talks about this. Steven Spielberg talks about this. You'll see this in George Lucas. It is very hard to understand at the time you're doing something how it's actually gonna turn out and how impactful it was. He had no idea. There's no possible way when George Lucas started working on Star Wars that he could have predicted the impact that those movies would have on the world, and then of course, the influence and control it had over the building of his business. And thinking about how difficult this movie was to make is fascinating to think about, but what I'm really interested in is how this experience influences this intense desire for control and independence that is the main theme of Lucas's life and career. So he says, "The shoot was a disaster from the beginning. I was very depressed about the whole thing." His misery was due partly to the fact that he felt he had already lost control of his film. The executives at 20th Century Fox had nickel-and-dimed him every step of the way. They would deny the, him the money that he needed to ensure that everything worked. The people at Fox were also skeptical. "Science fiction," they said, "was a dead genre." And they were actually right about that. At this time in history, science fiction was, in, in films, was a dead genre. The difference was you needed the right people to show up, and those people happened to be George Lucas and his lifelong friend, Steven Spielberg. Steven Spielberg makes Close Encounters of the Third Kind, and Lucas, of course, made Star Wars. Go back to Lucas. "It was very, very difficult to get things to work. Everything was a prototype. We had to build this, and we had to build it with no money, but we had to make this work. The problem is, nothing really worked as we wanted." Lucas vowed he would never cede control over his film to executives at the studios again. And something he would repeat over and over again, it's like, "What do they actually know about filmmaking? They've never made a film." But they would come down and talk to him and tell him, "This is how you should make the movie." And he says, "They decided they know more about making movies than directors, and here's the problem. You can't fight them because they've got the money." And so Lucas vowed one thing. If Star Wars worked out, one thing w- he would have to change for sure. He would control the money. Back to Lucas. "I was seriously, seriously depressed at this point because nothing had gone right. Everything was screwed up. I was desperately unhappy. A little more than a year before it was scheduled to hit theaters, Star Wars was a mess, and the movie was going to be terrible. Lucas was certain of it." And I think that's a really important place to start when you analyze the career of George Lucas. The depth of his depression is going to influence all the decisions he's going to make, and in turn, the success of those decisions that he makes makes him a multi-multi-multi-billionaire. So I wanna touch on a few things in his childhood, 'cause I think it would give us a, you and I, a better understanding of just really why he ran the business, uh, the way he did. He was the sole shareholder, [chuckles] the only shareholder in Lucasfilm when he send, sells it to Disney for over $4 billion. And he's got this, I would say, juvenile delinquent streak in him since he was a very young boy. A lot of this came out of this kinda butting heads or fighting that he would have with his father, because Lucas is kinda like a hippie or a rebel, and his dad's the exact opposite of that. So his dad is actually George Lucas Sr. And so George Lucas Jr. describes his dad as a very old-fashioned kinda guy. He was a kinda classic small town

3. 10:36 – 16:09

   Childhood, Mentors, Books and Scrooge McDuck

   1. DSDavid Senra10:36

      businessman that you would see in a movie. He owned a stationery store. And Lucas said later in interviews that he was, he would remember being very, very angry at his father for most of his childhood, and I think the main reason of that is because his dad was intent on controlling him. Something else that Lucas never had that he looked for his entire life, he really talks about the importance of mentorship, but he never had an older brother. And so throughout his entire career, you see him trying to attach himself to a slightly older, almost like bigger brother figure, and he talks about why this was so important. He said, "That's one of the ways that you learn. You attach yourself to somebody older and wiser than you. You learn everything they have to teach, and then you move on to your own accomplishments." And so another way that George Lucas was searching for mentorship was not only for, like, older brother, uh, figures, but also through books. He was never very good in school, but he loved to read. Uh, I got to this section in the book, and it reminded me of, I saw this interview that's, that wa- that's pretty incredible, all the way back in 2012. Uh, it's with Elon Musk, and he's being interviewed by this guy named Kevin Rose. I will grab the link from YouTube and put it in the show notes in case you wanna watch it. Highly recommend you do, 'cause it's in the earl- it, it takes place, uh, on, like, the Tesla, the factory floor of Tesla back when I think they only had one model in production. It was, like, the early, uh, Model S w- uh, was in production. But Kevin was asking Elon, it's like, "Well," trying to figure out, like, "How did you do all this? Like, you emigrated from Canada. You didn't have a lot of money. You moved to California. You started your first company when you were just in your early 20s." And he was like, "Well, how did you learn how to start a company? Did you read..." The, the question from Kevin to Elon was, "Did you read a lot of business books?" And his answer actually had a huge influence on, you know, my desire and, like, my dedication to, to making this podcast. And, 'cause Elon said, "No, I didn't read business books. I read biographies and autobiographies. I thought they were helpful." And then he went on to say that this was a way to develop mentors in a historical context. And you see that with a very young George Lucas. He talks about he didn't like school, but he loved reading, and he amassed this enormous collection of these things called landmark books, which was a series of biographies written for young readers. And reflecting on this time in his life, uh, George Lucas says, "I was addicted to those. It started me on a lifelong love of history, and as a kid, I spent a lot of time trying to relate the past to the present." And just like everybody else that gets to the top of their profession, Lucas references and uses that learning from history as a form of leverage. He'll talk about... I watched this, uh, interview with him and Christopher Nolan that took place probably a decade ago, and in that, Lucas is just talking about the fact that all this reading and studying of history that he was doing as a kid influenced the storyline for Star Wars. And then Lucas continues to use the entire world and all of its experiences as, like, this giant classroom. And so he actually gives... [chuckles] This was hilarious. You know who's gonna have... what fictional character's gonna have a huge influence on the way that Lucas builds his empire and thinks about building his business? Scrooge McDuck. I remember watching Scrooge McDuck in DuckTales when, like, I was a kid. I didn't even know that it was around when Lucas was a kid. And so listen to the, the, the lessons he draws from watching, you know, Scrooge McDuck, which is the, the money-hoarding, globe-trotting uncle of Donald Duck, right? And so it says, "Lucas was fascinated not only by Scrooge's exploits but also by his conniving capitalist ways. 'Work smarter, not harder,' was Scrooge's motto, and yet his stories were full, full of inventive schemes that more often than not made him richer and even more successful. In Scrooge's world, hard work paid off, but so did cleverness and a desire to do something in a way no one had ever thought of before." Think of it. Come on. Think... That, that... Think about the life and career of George Lucas, a desire to do something in a way that no one had ever thought of before. That is exactly Lucas' approach to the filmmaking industry. Remember, the movie making had been around for four or five decades before Lucas came along. Think about why Peter Jackson said, "Hey, this guy's the Thomas Edison of our industry." You know what? I wasn't even thinking about going here. I was gonna talk to you about this later, but I'm gonna jump ahead because I think it's one of the most important ideas in the book, and I might repeat this in the future. But it talked about the fact that he was so dissatisfied with... that he could not make the vision in his head real, right? That there was not... That the computer graphics weren't there. The special effects weren't there. So he's like, "What's the solution? I'm gonna start my own company. I have to create the technology that I wanna see in the world, just so I can make the movies look how I want them to look." And so he founds this company called Industrial Light & Magic, which absolutely dominates in special effects for a couple decades. Ron Howard has this excellent quote later in the book, right, talking about the fact that, "Who the hell would do something like that?" And he, I think he summarizes it better than I ever could. He goes, "How many people think the solution to gaining quality control, improving fiscal responsibility, and stimulating technological innovation is to start their own special effects company?" Ron Howard said admiringly, "But that's what George did." Back to Scrooge McDuck. In Scrooge's world, hard work paid off, but so did cleverness and a desire to do something in a way no one had ever thought of before. Scrooge's ethic reflected honor, honesty, and allowing other people to believe in their own ideas, not trying to force everyone into one form, which is, I think, exactly how he described what his dad was trying to do to him. His dad was trying to make another him, and George was like, "But w- I'm not the same as you. I wanna live life on my terms." The lessons Lucas learned from Uncle Scrooge would shape the kind of businessman he would become in the future, conservative and driven, believing strongly in his own vision and pursuing it aggressively.

4. 16:09 – 22:37

   Juvenile Delinquent to Millionaire Vow and USC Film School

   1. DSDavid Senra16:09

      Let's go back to more of his juvenile delinquent ways. As his grades suffered, Lucas began to look more and more like the juvenile delinquent his teachers were already convinced that he was. One of my favorite lines ever describing founder mentality in, in entrepreneurs comes from Yvon Chouinard, who is the founder of Patagonia. He says, "If you wanna understand the entrepreneur, study the juvenile delinquent. The delinquent is saying with his actions, 'This sucks. I'm going to do my own thing.'" His grades were so bad, his dad was convinced that he was gonna be a loser. Lucas thought his father's lack of interest in him was typical, and it was probably understandable. "I was a hellraiser, and I didn't do very well in school. My father wrote me off." And then it doesn't help that he's not doing well at school, doesn't really have a direction in what he wants to do in life yet, and so he goes and briefly works for his dad at the stationary store. This... He, he doesn't last long. He quits, and then him and his dad get back into this argument, and so this is Lucas's description of that. "I get really mad at my father, and I told him, 'I'll never work in a job where I have to do the same thing over and over again every day.' His father responded, 'You'll be back in a few years.' 'I'll never be back,' Lucas said. 'As a matter of fact, I'm going to be a millionaire before I'm 30.'" And that is one of the smartest insights that a young George Lucas ever had, the fact that he realized that you need to make money, not to buy a bunch of useless shit, but to actually buy your own freedom, and that's exactly what he uses his money for. So he is... It w- It's almost like a, a contrast i- in, embedded in one person because he will bet literally the house, which he does multiple times, on the, the success of one movie, but he's unbelievably physica- fiscally conservative, uh, with the way he runs his business. And that fiscal conservatism actually breaks up. He has, like, co-founder breakups with Francis Ford Coppola because Coppola was the, essentially the exact opposite. George Lucas was always very, very concerned about protecting his downside because all he wanted to do was never jeopardize anything that g- that would cause him to relinquish his freedom over what he worked on. You could think of George Lucas's constant invention and vertical integration as just a way, uh, another form of control, and that control to make sure that no one else can ever, ever tell him what to do. And so he gets to college, he's like, "I have no idea what I want to do." So he just goes to, like, a little junior college, a little, uh, community college, and then he realizes... He al- he knew. He's like, "Listen, I'm not stupid." Remember the Tarantino episode? I don't know if I... I should back up. Why am I doing, like, Lucas right now? Uh, I think if you listened to, re-listen to the Spielberg episode I just republished a couple days ago, and then Tarantino, I think this line through what I'm doing right now. Tarantino studied Sp- They're, they're about 10... They came about 10 to 15 years before he did. Uh, Tarantino studied Spielberg and Lucas. He, the, all the movie brats, which I'll get into, like, the rest of these guys. They're essentially, like, these filmmaking geniuses that all met in their early 20s, and in many cases, they're 70, 80 years old today and they're still friends. But I find this fascinating because Tarantino studied Spielberg and Lucas. Spielberg and Lucas studied Walt Disney. Walt Disney's the next episode. I'm reading this 700-page biography of him now, so it's taking me a long time. This book that I have in my hand is a monster. Uh, over 500 pages. I have the hardcover version, and it took me over 30 hours to, to read and research and really think about before I sat down to talk to you, uh, today. So, the connection to what's happening in Lucas' life is very similar to Tarantino's. You know, not great in school, but clearly not dumb. He just doesn't like other people telling him what he should study. Tarantino was the same way. So he gets to junior college, and now, you know, college is the first time he can actually pick his classes, and so once he's in control of his own curriculum, he becomes a phenomenal student. And so once it's time to be done with junior college, he's got to figure out, like, "What do I, where do I transfer and what am I gonna study?" And this conversation with his dad actually changes the trajectory of his life forever because Lucas is like, "I'm gonna go to art school." His dad's, like, this old school, 1950s, super conservative American businessman, and he's like, "There's no way in hell that my son... Like, I'm, you're, you're gonna go to art school? There's no way in hell I'm paying for it." And he told his son, like, "There's no way you're gonna make money. You can't do that." And so one of Lucas' friends says, "Hey, why don't you, if you're not gonna go to art school, take a look at USC. University of Southern California has this new cinematography school." And keep in mind, this is the mid-1960s. There's not many film schools in the United States, and so this is why, uh, Tarantino last week in his book would talk about the movie brats. He said they love movies, they dreamed of movies, and they even received degrees in movies back when that was a dubious major. And Lucas talks about this, like it was embarrassing. Other people were like, "You're going to film school? You're going..." They didn't even call it film school. They called it cinema- cinematography school. It's like, what the hell is this? And he says, uh, "I lost a lot of face. The idea of going into film was a really goofy idea at the time." But what was fascinating is his dad's like, "There's no way in hell I'm paying for art school." Then he was impressed that his son got accepted into USC, and he didn't understand. They said, you know, the school of cinema or cinematography. He didn't understand that it was his way of getting to a form of art school. And so his dad agrees to help him out, pay his tuition, um, and help him get housing. And the reason I say that decision changed the trajectory of George Lucas' life is because that's when he meets essentially just a collection of filmmakers who are all obsessed with movies. They're all young, and they wind up helping each other for decades. It's almost like the Island of Misfit Toys bef- because before this, it says, "For many of them, it was the first time they had a clique of their own, a gathering place where they could talk about their interest, movies, without eye-rolling from o- the other cool kids. For many, reality finally began when they entered film school." Lucas knew that he had found his way. Before, he wasn't sure. He was, like, into cars. He had all these other, uh, interests. And then he's like, "Oh, wait. This is it. I was sort of floundering for something, and when I finally discovered film, I really fell madly in love with it. I ate it. I slept it 24 hours a day. There was no going back after that." That is a direct quote from George Lucas. "There was no going back after that." You know what's fascinating? I just, I'm gonna put this book down. Picking up the Steven Spielberg book that I republished last week, right? That book is 25 years old maybe. This book is 25 years old. Listen to how Steven Spielberg describes. He uses the exact same language. This is what Spielberg said: "Making movies grows on you. You can't shake it. I like directing above all. All I know for sure is I've gone too far to back out now." There is no going back. They both discovered what they're gonna do. Now, this is the fascinating part because this turns into the USC mafia.

5. 22:37 – 25:13

   The USC Mafia and Those on the Margins

   1. DSDavid Senra22:37

      Spielberg's part of that even though he didn't go to USC. You're talking about a group of super talented filmmakers, and a lot of them come out to, um, California even though they call it the USC mafia. Uh, you know, but some of them, like, uh, Martin Scorsese, Oliver Stone, they went to NYU. Brian De Palma went to Columbia. Francis Ford Coppola's at UCLA. Spielberg's on the lot getting his own curriculum I think at Universal or, yeah, it was at Universal. Lucas would be one of, uh, one of a group of highly motivated and young filmmakers. They were all friends who would have a lasting impact on film and culture. This is another example that relationships run the world. You see it over and over again in these books. It's so important to develop relationships with other people that are just like you in... E- even if you're... They don't look at themselves as competitors. They c- they tend to compete, but they also collaborate. But they all need each other because they're trying to break into a system that is closed. Uh, at this point in history, unless you're part of a union, uh, unless you already know somebody in the industry, you're not breaking in, even with a film degree. It's yet another illustration of one of my favorite concepts from Game of Thrones where they said, "Those on the margins often come to control the center." At this time, Spielberg, Scorsese, De Palma, Coppola, Lucas, they are on the margin. The center is controlled by these old school conservative studios that are locking all these young people out. It was very... It was unheard of to have a director in their 20s, and yet this network that they're building and the talent that they have for their craft, like, th- those on the margins often come to control the center. They become the center. Now, this is really fascinating 'cause when I had dinner with Charlie Munger, this is the advice that he gave us. I'll get there in one second. So it talks about they refer to themselves as the mafia, right? That would end up being a more appropriate designation as they would all regularly hire, fire, and conspire with one another on countless projects over the next five decades. Putting together a kind of system of their own. Munger talked about the importance. He didn't use the word relationships around the world. That's the maxim that I put on it. But he talked about that's exactly what him and Buffett did. I think he was 35 when he met Buffett. Buffett was what? 28, 29, something like that. He talked over and over again the importance of... The advice he gave us is like, you have to develop relationships with, with people. He's like, y- they were still doing deals. He something, something like, uh, I can't remember exactly how he put it. I have to go back and read my notes or listen to that episode again. I think it's episode 295, if you haven't listened to it yet. But he talked about the fact that they would meet people, you know, in their thir- their 20s, 30s, and 40s, and they would do business and do deals for the rest of their lives. Many of the people that he was r- that Charlie was referring to, 'cause Charlie was 99 when I met him, were dead. But he said that's exactly what they did. Okay, so let's go back to this idea where Lucas is

6. 25:13 – 32:43

   Obsessive Student Filmmaker Who Breaks the Rules

   1. DSDavid Senra25:13

      just, he's unmanageable. He, he's a juvenile delinquent, and so now he's in film school. And, you know, the, the film professors are like, "Okay, we're gonna practice making films." And they give you, like, this sheet of instructions, and it must be, you know, film- it must be filmed in black and white, must be this, you must, the story must look this way. It must not go over, you know, this length. And George Lucas is like, "I don't give a damn about your instructions. I'm gonna do what I want." Lucas made his intentions immediately clear with his first on-screen credit. This was no student assignment. It was a short film by George Lucas. That is the, in big letters. That's what he put on this movie that he's making. Lucas had chosen to set his film to music in open defiance of his professor's instructions. And so the movie he made is called Look at Life. Even 50 years later, Look at Life is an impressive debut. Aggressive, political, and utterly confident. "As soon as I made my first film, I thought, 'Hey, I'm good at this. I know how to do this.' From then on, I never questioned it," Lucas said. And right from the rip, he is completely obsessed. He preferred shutting himself in his top floor bedroom, sitting at the drawing board, planning out his films, and sketching out ideas. "I would always try to get him to go out to parties and clubs and stuff." This is his roommate. "And George would usually stay upstairs in his room, drawing these things." He called them little star troopers. This is, like, a decade before Star Wars. So he's drawing these things he calls little star troopers. But for Lucas, that was better than partying. "I'd be working all day and all night, living on chocolate bars and coffee," said Lucas. "It was a great life. I had enthusiasm, enthusiasm, and I was too busy to get into drugs." Movies were his addiction. "We were passionate about movies. We were always scrambling to get our next fix." Listen to how they're describing this. This is how he knew this is what you should be doing with your life. Described working as your next fix to get a little film in the camera and shoot something. And then here's a glimpse of something that he's gonna have problems with his entire life. He wasn't really a big fan of collaborators. He wanted subordinates. Uh, again, he is a dictator. He wants, you know, prefers working alone. In many cases, I almost feel like he was born at the wrong time because it even says, like, he's really, he's kind of a really bad on set, didn't know how to deal with humans. He's super shy, wouldn't talk, wouldn't give instructions. And yet he said, like, he really made films in the editing room. He's just by himself editing. And so I, I almost think, like, if he was born now, he's gonna, especially with all these new technologies, basically, you're gonna have one person, like, filmmakers 'cause they're gonna use all this technology. I think that's how George would've, uh, would've preferred. And you see this from a very early age 'cause he, he's getting all these assignments when he's in film school, and, you know, they're gonna make you work on teams, and he did not like that. He was becoming increasingly cranky about the idea of working with others and preferred doing everything himself. He could be easily irritated if he was saddled with crew members who could not keep up with him. He's also super, super competitive. Later on in the book, it says something like, uh, Francis Ford Coppola responds back, 'cause j- a few times Lucas says, "I'm retired, never making movies again." He does this a few times, and Coppola's like, "He'll be back." And they're like, "Why do you think he's gonna be back?" He's like, "'Cause George loves winning too much." And so a young George says, "I was into ma- I was really into making it a competition. Who can get it done first and best? If they couldn't cut the mustard, they shouldn't have been there." And then he also has some talents, obviously. Everybody else, it was clear that he was one of USC's most dexterous editors. Lucas worked quickly and without complaint. He'd cover up any defects, shortages, or missing shots in the editing room. And that's not an exaggeration. I, I, it is funny. I'm not even gonna talk about it 'cause this book's gigantic, and I've covered it on other, like, Steve Jobs and Ed Catmull episodes. But, you know, he started Pixar. He, he's the one that head- that hired Ed Catmull. He's the one that sold Pixar to, to Steve Jobs when George Lucas was going through a divorce, which is also goes into a lot of detail in the book, uh, which I won't cover. But this idea of being able to kind of sit at a computer and make a movie, you know, I think if he could've done that, if he was alive now, that's what he would do. Because a typical movie that he would make, like his first movie, he shot for three days. I mean, you know, he's on set for three days, but then he edited for 10 weeks. His favorite part about the movie-making process, he hated writing, which we'll get into. He, he forced himself to do it. He's got some ideas on how to do that. He wasn't good on set, but he would lo- that's all he wanted to do. He wanted to be alone in the editing room. But we're not there yet. We're still in film school. This is more juvenile delinquent behavior. Listen to what he's breaking into. This is hilarious. So he says, uh, "The n- the rules were of no concern to him. 'I broke them all,' he said. 'Whenever I broke the rules, I made a good film, so there wasn't much that the faculty could do about it.'" George Lucas was very resourceful. He always would find a way to get what he needed in terms of equipment and bodies to put together a crew. Like, uh, sometimes when you film, like when you film Star Wars in London later on, they have these, like, really strict rules for the London, like, film union. You know, it's like you sa- you have to start at 8:30. There has to be a tea. I'm not even joking about this. You have to start at 8:30, then you have to break for tea at 10:00 PM, or 10:00 AM. And then you have to break for an hour lunch at 1:00. And then you need another tea break at 4:00. And then you can't work past 6:00. And he's like, "This is madness." He didn't want any kind of restrictions. So they would break into the equipment room to get not only materials that they needed, like an expensive camera But they would also break into facilities. It says, "Lucas didn't want to limit his use of the equipment to the building's regular hours either. We'd shimmy up the drain spout, cross over the roof, jump into the patio, and break into the editing rooms so we could work all weekend." And this idea that you use juvenile delinquent actions to actually be more productive. Uh, one of my favorite stories from history about this is Edwin Land. He's trying to do all these experiments, doesn't have the money for, uh, uh, for the equipment he needs. So him and his future wife, they actually, like, break into, I can't... I think it was NYU. It might've been Columbia. But they break into a university, and then all night they're just illegally using their science experiments, or scientific equipment to, to make experience, e-experiments rather. And this idea where Lucas is like, "What the hell? You guys don't work weekends? This is absurd." In the early days, way before it turns into Polaroid, Land's first company's called Land-Wheelwright, if I'm remember correctly. And Land had, had, uh, won a bunch of awards. He was, like, pretty well-known, a well-known scientist by the time he was, like, 19. And so he gets recruited to all these other... He, he's running his company. Uh, but he's getting recruited to all these other companies. Maybe they could, like, buy his company or convince him to come over. And I remember there's a conversation that takes place with Land and his co-founder. His co-founder's concerned, 'cause his co-founder's more like the money guy. His co-founder's concerned that he's gonna leave. And Land goes, "They start work at, you know, 9:00, they end at 5:00, and they don't work weekends." And so his co-founder's like, "Yeah, I know. Are you gonna go... Are you gonna leave and go work with him?" And Land's respon- response goes, "Of course not. How would I get anything done?" [chuckles] So you see George Lucas is like, "Wait a minute. You, you gave us this assignment to make this film. Uh, we don't have the right camera, so I'll just break in and take that. And then I can't edit on the weekends or at night? Are you ab- are you absurd?" So this is a guy... Now, this, this also causes severe health problems when he's older. He, when he's doing Star Wars, he's working, like, 20 hours a day. This cau- Like, I'm, I'm chuckling because he's just, like, he had these tendencies from a very early age. Uh, but, you know, winds up, he winds up getting divorced because of this. He winds up having health problems because of this. I think he burned out, you know, a few years before. He, he might've directed more movies and had a longer career if he, if he worked on consistency over intensity, but he, i-in terms of optimizing o- consistency over intensity, he went full throttle on intensity.

7. 32:43 – 41:23

   Meeting Coppola and Spielberg: Inspiration and Friendship

   1. DSDavid Senra32:43

      And so he's gonna graduate film school. Again, uh, I said, like, those on the margins often con-control the center. It's such an important, uh, concept. You see it over and over again. Because even if you g- when you graduate film school this time, there, there's no, there's no mainstream movie studios hiring you. And so he starts working for the US government, making, like, these propaganda films for them during Vietnam, making his own little movies on the side. He's gonna wind up, uh, being able to learn. He wins, like, this, this grant to spend some time on, uh, an actual, like, big budget movie studio set, and that's really important because that's where he's gonna meet, uh, Francis Ford Coppola. But before I get to that, I just wanna point out, like, this is kind of hilarious, and I feel the exact same way that he does. And if you're listening to this, you probably do too. And at the beginning, he's, he's working on a, like, a movie set, and his idea was, like, you know, he didn't think he wanted to be a director. I don't really think he liked people. And he wanted... He's like, "I'll be a cameraman or an editor." And he gets a job working on that, and he's like, "I... These people are bossing me around." Like, [chuckles] he goes, "More than anything else, I didn't like being bossed around. I didn't like being told which shots I could do and wouldn't, and which shots I couldn't." It annoyed him. And he says, "At this point, I was, really wanted to be an editor and a cameraman. And in the course of doing this, I asked, 'Well, maybe I want to be a director.'" And you know how he figured out why he wanted to be a director? Because he figured out who is the person on the movie set that no one else can tell what to do? The answer to that is the director, so he's like, "Okay, I guess that's what I'll do. I'll be that." So he's making a short movie. At the same time, he has, like, two jo- two jobs. He, again, he's got... He's a workaholic the whole, his entire life, something that his wife, you know, causes the breakup of their marriage. So he definitely pays a price for this. But, uh, at this point, he makes this, like, short movie. He's eventually gonna turn it into a longer movie, uh, called THX 1138, but this is a shorter version of it. And his... I wanna talk about this because it winds up winning a bunch of awards and, and people go, like, people watching it really think it's incredible. And one person in the audience was his dad, and I think this is a very important part in their relationship. He says, "He could appreciate that his son had found his calling. His son had earned the respect of his peers. Now, I had been against this thing of his going to the cine- cinema school from day one, but we guessed he had finally found his niche. As we drove home, I said to his mom, 'I think we put our money on the right horse.'" And so as a result of that little film doing well, he gets two things that happen. He gets a, uh, s- uh, s- like, a grant from Columbia Pictures where student filmmakers can come watch a real, like, film, like a big budget, uh, mainstream movie studio film take place, right? And the second part is he gets to shadow the director, which is gonna be Francis Ford Coppola. Now, this is really important because this is what I meant. It's, it's really hard to... There's almost, like, this contrast between this, this innate fiscal conservatism, this hatred of debt, uh, this hatred of risk that George Lucas has with being full risk on, which he's forced to do on his first movie, American, or second movie, American Graffiti, and his third and fourth, Star Wars, and then Return of the Jedi. Not Return of the Jedi. Uh, Empire Strikes Back, I think is the second one. But this idea where it's like he'll bet everything he has if he, if he thinks that bet is successful and it'll buy his creative freedom. And part of this, because he's on this big movie set for the first time, and he was disgusted by it. It says, "It was the first time he had a chance to see a major motion picture being made, and Lucas was not impressed. 'We had been around such opulence. Zillions of dollars being spent every five minutes on this huge, unwieldy thing,' Lucas said. 'It was mind-boggling because we've been making films for $300, and we saw this as an incredible waste. That was the worst of Hollywood.'" So this relentless resourcefulness that he's always going to have. Like, I'm gonna get into some of the numbers of his movies later. It is remarkable, and think of them again, like I said last week in the Tarantino episode. Like, these are miniature businesses, and viewed through that, the financial performance of his miniature businesses is remarkable. Before we get there, so now he's on the set of this movie, and this is really important because Francis Ford Coppola is, like, five, six years older than all the other movie brats, and he's the one. It's like you know how people, like, the first time you can run. People thought you'll never be able to run a four-minute, humans can't run a four-minute mile, and then s- one person does it, and then immediately all these other people start doing it. Same thing here. But their first interaction was hilarious. So Coppola notices this, like, skinny young man, beard, glasses, sitting there with his arms folded, not saying a word. And so he walks up. They tell him, "Oh, that's a student observer from USC." So he walks up to Lucas, and he goes, "Hey, do you see anything interesting?" And Lucas shook his head and said, "Nope, not yet." And this is how I met George Lucas, Francis Ford Coppola said. Now, him and Francis are gonna wind up being very good friends right from the moment that they meet. Go back to this advice that Charlie Munger gave, right? Develop relationships, relationships around the world. Lucas is 23 when he meets Coppola. Coppola is, Coppola is 28. They're going to be making movies, doing deals, starting companies, breaking up, fighting for decades, right? But it's really important because at that time, there is no young directors. There's no 28-year-old director in the, in a, doing a major movie studio. You have to be an independent filmmaker to do that. And so Coppola inspires not just Lucas, he inspires Steven Spielberg too. I wanna read this paragraph to you. "Coppola actually succeeded in getting his hand on the doorknob and flinging open the door, and suddenly there was a crack of light, and you could see that one of us, a film student without any connections, had put one foot in front of the other and actually made the transition from being a film student to being somebody who made a feature film sponsored by one of the studios. To Steven Spielberg, Coppola was a shining star. Spielberg said, 'Francis was the first inspiration to a lot of young filmmakers because he broke through before many others.'" So not only did Coppola prove to Spielberg and Lucas that, hey, this is possible, but the influence that Coppola had on Lucas too is like, "Listen, you have to learn to write." At this time, and you'll see L- Lucas make this, this mistake a few times, he tries to outsource the writing, and Coppola was saying, "Hey, uh, the, what separates just a director to a filmmaker is, like, you have to..." Any director, he would tell Lucas, like, any great director has to know how to put together a screenplay. And so he would repeat to Lucas over and over again, like, if no one's gonna take you seriously unless you write. And that wind up being excellent advice because Lucas forced himself to write Star Wars, which is obviously, you know, the f- his entire empire, the reason he was able to sell the, the, his company, you know, 30, 40 years into the future to Disney for many, many billions of dollars. And it's also one that, that, that Coppola was, you know, older, slightly older, but also, like, really showing, hey, we can, young filmmakers can have a chance here. Like, we can get in here and do this. But it's also, he's one of the most charismatic people to ever lived. I did an episode on Coppola a long time ago. I'll link it down below. And everybody, the, the women in his life say this. The people that work for him say this. Spielberg and Lucas say this. In fact, listen to what, how Lucas describes Coppola's just charisma. He says, "Francis could sell ice to the Eskimos. He has charisma beyond logic. I can now see what kind of men the great Caesars of history were. Coppola was magnetic." So I told you about Lucas meeting Coppola, right? I have not told you about this friendship. This might even be more important. Arguably, it is more important to the c- his career, the friendship that he has with Steven Spielberg, which is exactly why I published that episode last week, and I think it, again, to Tarantino, to Spielberg, to Lucas, and then Disney next week. I think it'll, there'll be like a, uh, t- these will all tie together. But he goes, a, a young 21-year-old Steven Spielberg goes to just this screening, and they don't tell you what you're gonna watch beforehand. And he sees this student film, and that student film was this THX 1138. And this is Spielberg's response. He says, "I couldn't believe it was a student field- film. I was awestruck. My first impression was, 'I hate you. I hate that guy, man. He's so much better than I am.' Afterward, Spielberg headed backstage, where he found Lucas with Coppola. Spielberg remem- remembered the moment, uh, warmly and vividly. George was really a friendly guy. We shook hands and became friends from that moment on." And so I'm gonna pause there. When he says he, they, "I hate that guy," they both have extremely mature perspectives on this. He's just like, "There's n-" People going to see a Spielberg movie has no, like, him being successful does not, it's not, it's all positive sum. It's not a zero sum. They can go see Jaws, and then next year they'll go see Star Wars. And so there's obviously some kind of inherent competitiveness, but they, they really thought of each other as more collaborators. And Spielberg has said multiple times that George Lucas inspired him, and said, "At the time of his first

8. 41:23 – 52:29

   American Zoetrope and Blueprints for Independence

   1. DSDavid Senra41:23

      encounter with Lucas in early 1968, Spielberg's filmmaking was still more aspiring than actual." And Spielberg talked about this. Like, "No longer did his role models have to be these older, in many cases, deceased filmmakers. They're actually someone his own age, someone I could actually get to know, compete with, and draw inspiration from." And then it was around this time that Lucas finds his inspiration and his blueprint. This is gonna be a blueprint for both him and Coppola as well, and he's around the same age or slightly older, and it's this guy named John Korty. So Lucas is invited. He sits on a panel. He goes to a conference, sits on a panel with other filmmakers who made books into movies, and one of the guys sitting next to him on this panel is a 31-year-old, so slightly older, and he was an independent filmmaker who also lived in Northern California. At this time, Lucas is in LA. He hates LA. He hates Hollywood. He hates the studio systems. He's grew up in Northern California. He wants to go back, but he's not sure how to do it. And so John is sitting on this panel, and he starts going into the details of his filmmaking, and Lucas is like, "Oh, wow, this is, this is our blueprint." And so it says, "John had been running his own filmmaking facility out of a barn in a small ocean town just north of San Francisco. He had privately raised $100,000 for this movie that he was premiering." By hitting up friends, colleagues, and even his actors for money. He shot the movie locally and then edited it on his own equipment. At the film's premiere, it received a lengthy standing ovation, and Hollywood executives fell over themselves scrambling to distribute it and recruit Cordy. But Cordy was having none of it. "From what I saw of Hollywood, they can keep it," he said. "I would rather work for myself. In Hollywood, you have a producer breathing down your neck. I am happier working with less money. The risk of failure is far less. We can complete a film in maybe a year, getting the results we want." That's the end of John Cordy describing how he does it. It was a speech that either Francis Ford Coppola, it could've came out of Francis's mouth, could've came out of George Lucas's mouth, but he's the one that... They had this idea in their mind, but then they see something that's like, "Oh, that's not just an idea, this guy's actually doing it." And so Lucas asks, like, "Can I come visit your setup? And I'm gonna bring Francis Ford Coppola with me." And so what they show up to is Cordy lives in a house on the property. He also has a barn. That barn serves as this, like, movie-making studio. This is exactly what l- I mean, Lucas is gonna do it on a bigger scale. They're about, Lucas and Coppola are about to found a company that tries to do this, and then that, that company's gonna fail. But Lucas does it to the Skywalker Ranch, uh, where it's like there's no, you know, movie studio there, but you can edit, you can do everything else that you need to do. And they, what they realize is like, "Oh, this is exactly, like, this is our future. This is what we're going to do." And so shortly after this, they find another blueprint. So Coppola actually flies to Denmark to visit another independent film company. It's this Danish filmmaker. His name is Morgan Scott Hansen. And keep in mind, I, I need to back this up 'cause it's so important. Lucas is 24 years old. He's 24 years old when this is happening. Coppola is 29, okay? So Scott Hansen is in Denmark. He's not in San Francisco, he's in Denmark, but he's working out of this old mansion that's on a hillside that overlooks a body of water, and it's filled with state-of-the-art equipment. Come on, this is Skywalker Ranch 15, 16 years before Lucas has the money to do exactly this. And so Coppola tours Morgan Scott Hansen's facility. Loves it. He's like, "I'm gonna do the exact same thing." And then on the way out, Morgan gives him a, uh, like a gift, and it's this 19th century optical toy, and you essentially, like, spin it and it has, like, a series, it produces, like, an illusion of movement, and it's called a zoetrope, and it's actually Greek meaning life movement. And Coppola loved the word and the description so much, that's the com- that's what they're gonna name. Coppola decides to name the company he's about to start with George Lucas Zoetrope. And so he tells Lucas, like, "This is exactly what we need to do. We need to get a big old house, like a, kinda like a f- a frat house, right? And in that frat house, we're gonna make movies." There's only one problem. They don't have any money. So they have to go to the studios to ask for money. And at the beginning, as they're trying to do a deal or fundraise for what they're gonna call American Zoetrope is actually the full name, the h- the Hollywood Studios is like, "No, you can't make movies up there. You have to do it here." But Lucas is very stubborn. He's very persistent, and he's also willing to take risks, but he's like, "I love San Francisco. I don't wanna live in Hollywood, and so I'm just gonna keep knocking on doors until I find the money." Now, they have... Something happens that, you know, you, the, they, in some ways, they have perfect timing because the, you have to ride a wave. Go back to the episode I just did on Charlie Munger. Charlie Munger's surfing model is so important. He'll analyze extreme success, and he always asks himself, he's like, "They had to surf a wave. What wave are they surfing?" And the studios actually figure out at this exact same time that Coppola and Lucas, they would've never got the money if this didn't happen. This is why I'm telling you. At the exact same time, they realize, oh, like if you... The studios figuring out is like, if we can just hire young talent making independent films, can actually print money because they make, they make films for almost nothing, and some of these, you know, these are like power law outcomes. And so what do I mean? There's in 1969, remember, they start this, they, in 1968, they're like, "We're gonna do this." They bang on doors. Hollywood's like, "Screw yourselves. We're not giving you any money." The next year, the film Easy Rider comes out, okay? So it is written by a 32, written and directed by a 32-year-old or 33-year-old Dennis Hopper. It was not made in Hollywood. It was made on a shoestring budget. They raised $350,000. Why is that important? $350,000. It was released in theaters. The film makes 60 million. Easy Rider goes on to be one of the most profitable films ever made. And so the studio executives see that and they're like, "Oh, shit." And this is what they said. "The studios smelled money. Why invest millions bankrolling production of an enormous film on a studio backlot when you can just simply distribute independently produced films?" Suddenly, independent films and independent filmmakers, which is exactly what Lucas and Coppola want to be, right? Made by young directors were in demand. The studio wanted young talent. I just said that Charlie Munger talks about the surfing, surfing the wave. Listen to the words that they use to describe this. "Easy Rider had created a tsunami of independent enthusiasm. Coppola decided to ride the wave right into the offices of Warner Brothers." Come on. That fit together so perfectly there. So goes to Warner Brothers. He's, th- this is, Coppola's like [laughs] , you know, sometimes I think you might need a guy like this 'cause it's not like, "Hey, we're gonna make one movie." He's like, "Listen, you front us a bunch of money. Uh, we're gonna bring you a finished film just like Easy Rider did. We're not gonna do this once. We're gonna, we're, we have seven films we wanna make, uh, with you guys." Now, here's the problem. Coppola probably shot too big, and even if he didn't shoot too big, he definitely signed a bad deal because the executives gave them money not as an investment. They, the scripts aren't being optioned. They gave them a loan, and they said in the contract, this is, this is gonna cause them to go bankrupt, uh, or almost go bankrupt. The minute that Warner Brothers did not like what they were doing, had lost faith in the project, whatever the case is, they could call in the loan and Coppola and Lucas would have to pay back everything. And in true Coppola fashion, he was like, "Oh, that..." He was very confident that was never gonna happen, so now he's got a bunch of money and He's saying all these crazy things like, "My company's gonna be worth $10 million, you know, in a couple years, and it's gonna do all this stuff." But here's the weird thing. They took a bunch of money, and he just invests in things. This is like the un-Lucas. And, you know, Lucas is technically his partner, but he's definitely the subordinate partner in this arrangement. And so Coop- Co- Coppola spends all this money in the reception area. He sa- he buys an antique pool table, and a really expensive espresso maker, and all this other stuff. And one, it reminded me when, um, there's a great anecdote when Charlie Munger and Buffett, I think they're buying, like, the Bu- Buffalo Evening News. I can't remember which one. They're buying a newspaper, and they're touring it, and Charlie Munger's, like, disgusted at the opulence. And he says, "Why does a newspaper need a palace to publish in?" And his point was, like, the, the readers of your newspaper, they don't really care what's in the newspaper. They don't care. Like, you're investing in things that are not important to your customer. You know, uh, the movie equivalent of that is all that matters is what you put up on the screen. Your antique pool table, your expensive, super luxury ar- architectural design doesn't do anything for your customers. Like, what are you doing? Uh, we saw this again. My-- I, I can now talk about this publicly, but my friend Jimmy Soni is the author of this book called The Founders. I think I covered it back on episode 234, and I also covered his biography of Claude Shannon a long time ago, maybe episode 94, something like that. And, uh, me and Jimmy have become friends since I covered those books, and his next book... There, there's this book called, uh, I also covered a long time ago. It's called Steve Jobs and the Next Big Thing, and it's on the 13 years. This is what I call bizarro Steve Jobs, the time, the 13 years between he was kicked out of Apple and then he returns. And it's really about the founding of NeXT. And the reason I call it bizarro Steve Jobs is 'cause he's arguably the greatest entrepreneur ever, and yet in this 10 to 13-year period, you see this incredibly gifted entrepreneur just making one bad decision after another. And so what do I mean? Oh, uh, Jimmy, I can talk about this publicly, uh, now. I asked him. Uh, Jimmy's, his next book, he's writing a, a book on this time period, and Jimmy's a fanatical researcher. He's been sending me, like, he's in these, these archives. It's just incredible what's gonna come out. Anyways, reading that book, which was, you know, published a long time ago, the next, uh, I think it's by Randall Stross, Steve Jobs and the Next Big Thing. There was a line in that book that blew my mind that reminds me of what Francis Ford Coppola is doing here. It's like, what are you doing? You're putting an emphasis on things that are not important. And what do I mean by that? Steve Jobs, one of the, the ninth employee, if I remember correctly, ninth or tenth employee at NeXT, was an interior designer for the office. That's absurd. That, that is not, that is an- that is bizarro Steve Jobs. Steve Jobs made phenomenal decisions. That is a bad decision. Um, this idea of putting a bunch of money into things that do- don't affect what act- what actually the, the customer experience makes no sense, and yet you see this o- it's a mistake that people make over and over and over again. Another thing they do, they buy a bunch of expensive equipment, which maybe they need, yes, okay. But then they decide, "Hey, they're-- it's not just for us. Any filmmaker in San Francisco can come by and rent this very expensive equipment that we need to make our movies." What do you think is gonna happen? Most of that equipment winds up being lost or stolen. And then Coppola also has ideas like, "Hey, you know what we need? We need, uh, our own airport. We need a fleet of helicopters." He doesn't have the money to buy this yet, but that's where his eye is like, that has nothing to do with what you're trying to do here, which is just make great films that people love so much that they pay money to see and they tell their friends to go see it. That's, that's all you have to do. And so this fight right now, like Coppola and Lucas start fighting immediately because this is a, this is a bad co-founder match. Because Lucas' thing, he, he descri- Lucas in very plain language, he, like, he's very easy to interface with because he tells you what's important to him when he's in his 20s, and it's still important to him when he's in his 70s, right? And so he says,

9. 52:29 – 59:01

   THX 1138 Collapse and the Founding of Lucasfilm

   1. DSDavid Senra52:29

      "What we're striving for is total freedom, where we can finance our pictures, make them our way, release them, uh, where we want them released, and be completely free to express ourselves." You have to have the money in order to have the power to be free. That is why Lucas wanted to make as much money as possible. He wanted to buy his freedom. He never wanted... He wanted complete control, and he never wanted people to decide what he should be working on or to tell him what to do. That's it. That's, that's all you need to know about Lucas. And the reason I would recommend reading this book is because it goes into great detail of how he actually accomplished that. Now, I'm gonna t- talk a little bit about that, but I, I do want... What is fascinating is that, uh, not all the ideas they were having, uh, you know, they're young, uh, entrepreneurs, never, don't have experience, don't really know what they're doing. The, the movies they're gonna make are gonna flop. But what's fascinating is, like, they, they still had an insight into the future. And so it says, uh, "Both Coppola and Lucas predicted a bold, high-tech future." Remember, this is 1969, 1970 maybe. And they said, "Movies will eventually be sold like soup." What does that mean? You'll be able to buy it in cartridges for $3 and play it as you would a record, you know, mu- music record at home. He's predicting, you know, VHS tapes, then DVDs, then Blu-ray, and now streaming. And so the first movie that American Zoetrope is going to make is this movie THX 1138. Really is a m- Luke, Lucas is making a film about himself because the main, uh, idea, it's like science fiction, kind of weird, so he kind of, like, hides that. But it's essentially just you should reject the status quo in your pursuit of freedom. And so he's talking about the idea behind the movie, and one sentence here just r- stuck with me from the first time. I, I remember this, uh, line from, you know, reading this book for the first time seven years ago. Uh, so he says, "Th-this movie is the importance of self and being able to step out of whatever you're in and move forward rather than being stuck in your little rut." This is the sentence that stuck out to me. "People would give anything to quit their jobs. All they have to do is do it. They're people in cages with open doors. At its core, THX 1138 was about refusing to accept the status quo. It's about a hero who lives in an anthill and dares to go outside. This issue of leaving a safe environment and going out into the unknown would be an underlying premise of his first three films, THX, American Graffiti, and Star Wars. He is really making a film about himself. Reject the status quo and pursue freedom." And the problem is that THX 1138, uh, the studio hates it. They hate it so much. [chuckles] This is so bad. Now, this is, I guess, is important. There's two things are gonna happen. I wanna talk to you about The Godfather, and I wanna talk to you about the fact that George Lucas's first movie is so terrible that it literally causes the collapse of his company and the cancellation of his deal. And yet, as a direct result of this, it also leads to the next thing and his desire for control, which is Star Wars. Goes back to what Tarantino said, what Spielberg said. You know, a lot of entrepreneurs say the same thing. When you're in the middle of it, you have no idea the impact that you're potentially having, and a lot of people quit before they even get to realize that. And so, because the studio's like, "This is freaking terrible. The deal's off. Give us our 300 grand back," they're now in debt. The company's hemorrhaging cash. Coppola has no money at all. He's desperate for money. And so he gets an offer, right? He only wanted to do his own films. He gets an offer in the summer of 1970. So this happens really fast. They, they, the, you're talking about a year and a half, and the company is gone. Um, and it's an offer he couldn't refuse because it comes from Paramount Pictures, and they're saying, "Hey, we're gonna make a, an action film based on one of the biggest books of 1969, which was written by this guy named Mario Puzo," and that book is a sprawling gangster novel called The Godfather. And so he goes to Lucas. He's like, "They offered me this Italian gangster movie," does not wanna do it. He's like, "Should I do it?" And Lucas is like, h- his whole thing is like, "You have to stay in the black." Lucas has a mantra that he repeats over and over again that I think is really good. "Stay small, be the best, don't lose any money. Stay small, be the best, don't lose any money." And so he's talking to Coppola. He's like, "What the hell are you ta- Like, you ha- You have no money. They're offering to pay you a bunch of money to direct a film. You have to do it. I don't think you have any choice," is the advice that he gave his friend Coppola. "We're in debt, and you have to get a job." And so, reluctantly, Coppola agrees to direct Godfather. He gets $75,000 to direct it, and then he's gonna get 6% of any profits the film makes. And so on the way out the door, the studio owns, because they, they lent them the money, they own THX 1138. They can do whatever they want with it. They didn't like the editing job that Lucas did, so they give, uh, to their own in-house editor. And Lucas thought, he... Listen to what he says here. So they, they wind up cutting another four minutes from Lucas' final cut, and this induces Lucas into a state of rage. He says, "There was no point for them to do it other than exercise some power. Their attitude was that we can screw around with your movie, so we're going to. Lucas had no patience with executives who argued that they had only cut four minutes from a 90-minute film. 'They were cutting the fingers off my baby,' he said. Lucas wouldn't trust the studios again, ever." And again, at the time, this sounds like the end of the world. It's the worst thing that ever happened. They cut my film. Our company's over. But it winds up being one of the best things that ever happened to him because this is the founding of Lucasfilm, the exact company he's gonna sell to Disney. And he talks about, like, why they had to have a co-founder breakup because it really was sparked by the different management styles and their attitudes towards money. Lucas says, "I'm very cautious. I don't borrow money. I'm very protective of the things that I build." Lucas was always tight with a dollar, and Coppola would continue to spend money recklessly. Lucas had made up his mind to break away from Coppola and to make it on his own. Determined to control his own projects, no studio, he vowed, would ever force him to compromise his vision again. This led him to forming his own company in 1971. Lucas officially opened Lucasfilm. This independent production company would be run out of his little house, and its lone employees were him and Marcia. Marcia is his wife. So even though they broke up as co-founders, they're still friends, and Coppola actually gives him some good advice because THX is just this weird abstract. They, they called, uh, Lucas at the time a cold, weird director, so it's not... He's just like, "What are you doing with all this, like, strange, abstract stuff?" He's like, "Stop being so weird. You need to do something human. You need to do something that makes money because if not, you're, you're gonna, your career is over before it begins." And so the, the advice that Coppola gave him was like, "You should just write something that has to do with your own life, an experience you know well, something that, you know, is more positive."

10. 59:01 – 1:06:42

    American Graffiti: Debt, Writing and a Huge Return

    1. DSDavid Senra59:01

       And so Lucas has this idea to make this movie that's gonna be one of the most profitable, uh, best return on investments of every movie, movie ever, ever, ever made, and it's called American Graffiti. And so at the time, he grows up in this little town in California. They do this thing called cruising. So on Friday and Saturday nights, it's this, like, little town. They would soup up these cars, and they would just drive slowly down one block, then turn around and do it all over again, and they'd just cruise over and over again. And so he's like, "Well, since I spent my youth doing this, it's like a coming-of-age film about, you know, your last year of high school, transitioning in." Like, you know, everybody knows that experience. It's like your l- entire life's gonna change. You have no idea what's gonna happen, so that's what he's gonna make a movie on. Here's the problem. No one wanted to give him money, and this was fascinating. Didn't even think about this because he's got no money. He's considered damaged goods, and he's struggling to get any kind of money for, to, to, to write the script, and then once he writes the script, then he's gotta make the movie. And he talks about the predicament that he's in. He says, "Listen, the easiest job you'll ever get is trying to make your first film. That's the w- easy one to get because nobody knows whether you can make a film or not. After you've done that, then you have a heck of a difficult time getting to your second film off the ground. They look at your first film, and they say, 'Oh, no, no. We don't want any more of that.'" And so Lucas goes back to doing what, what he was doing. He's, like, knocking on doors, trying to figure somebody, "Just give me a little bit of money so I can write this script." Now, this is hilarious. He eventually fails a few times. Then he gets to the president of United Artists. This guy's got the perfect name for his job. His name's Picker, David Picker. He's literally having to pick screenwriters and filmmakers. Like, what's going on here? And so he's like, he's telling him about this, and he's like, "I wanna write. I need money, and I wanna write American Graffiti." And Picker says yes on May 14th, which is also Lucas's birthday. He had just turned 27 years old. He gives him, like, $10,000 to write the script, but Lucas is gonna make the mistake 'cause he hates writing, and he gives all that money to a screenwriter, and the screenplay sucks, so he's gotta do it himself anyways. But- What was fascinating about this is in this meeting with David Picker, okay, is the birth of "Star Wars". So he's like, "Okay, I'll take 'American Graffiti'. Let's, let's do a deal on that. Do you have anything else?" And Lucas is like, "Actually, I do." Members him sitting back in his room eating chocolate bars and drinking coffee and getting diabetes, which he definitely got diabetes at a young age. He was drawing little star troopers. So Picker is like, "Hey, what else you got?" And Lucas told Picker about his idea for this unnamed space opera fantasy film. "Great," said Picker, "We'll make a deal on this, too." And that, Lucas said, was really the birth of "Star Wars". It was the only... This is fascinating. Think, think about how he says this, right? It's the birth of "Star Wars". It goes from a notion to an obligation. It was only a notion up to then. At that point, it became an obligation. Then I gotta get to one of the most fascinating things, what I personally find most fascinating about Lucas, other than his in- his desire to innovate, his invention, to be vertically integrated, to control everything. These are things o- obviously, you know, personally identify with, and I think a lot of entrepreneurs do. But he- there's just parts of your job. Doesn't... Like, we get to... We're unbelievably lucky to be entrepreneurs. I think of what Sam Walton said in his autobiography. He says, "The great thing about entrepreneurship is you get to spend your time building something you enjoy. Most people don't get to do this. They're stuck in jobs they hate. I had the time of my life." But even with that, there has to be something that Sam didn't like doing. And in Lucas's version of that, it's like I... He hates writing, and so he, he blows all the money. He has no money. He is poor. He's got no money. He's gonna go into debt in a minute. And so he wr- [laughs] he says, "My intense desire to get a writer had backfired on me, and I ended up with an unusuble- unusable script and no money." And so this is what he's gonna do. He, he calls it bleeding on the page. He says that line, I don't even know, 10 times in this book. And so he's like, "Okay, forget it. I'm gonna have to do this myself." And so over the next three, so the next three-week period, he writes from 8:00 in the morning until 8:00 at night, seven days a week. He calls this bleeding on the page. He also is humiliated because now he's got no money. Coppola's got a bunch of money 'cause of "Godfather". So he goes to Coppola and George Lucas Senior. He's gotta go to his dad, his dad that told him, "Don't do this. You'll never make any money. You'll be a bum." And he, he's almost 30, and he's like, "I ha- I need money, Dad. You have to... Can you loan me money so I can do this movie?" And this is the insane thing. It's so hard to comprehend, and I don't even know how many people would make this decision because he somehow maintains this focus on getting his own project done through the struggle, okay? So he's got, he's writing... He, the script is done. Now he needs money to, to make the movie. He's going around. No one wants to give him money to make the movie, movie. But they were interested in him as a director, just not directing his own screenplay. Think about this. He's got no money. He's in debt to his dad and Francis Ford Coppola. They're offering him $100,000 to direct a film. He thinks the film is shit. He hates it. He's like, "These are terrible projects." And he says no, and this is interesting. Why? He's like, "If Graffiti sells, I can't be in the middle of another project for someone else." So he had to turn down every offer. Listen to what he says about this. "That was a very dark period for me. We were in di- dire financial straits." He's already married, okay? "That was a very dark period for me. We were in dire financial straits. I turned the movies down at my bleakest point when I was in debt to my parents, in debt to Francis Ford Coppola, in debt to my agent. I was so far in debt I thought I'd never get out. It took years to get from my first film to my second film, banging on doors, trying to get people to give me a chance, writing, struggling with no money in the bank, getting little part-time jobs, eking out a living, trying to stay alive and pushing a script that nobody wanted." A script that nobody wants is going to give the person that finan- finally finances the film one of the greatest return on investments in movie history. Think about that. So there's this guy at Universal, this guy named Ned Tanen, finally gives him a shot. But Tanen produces films that are usually only budgeted... These are small scale films. You know, million dollars or less is usually what Tanen can do. And even though, this is incredible too, even though Lucas doesn't have any other options, no one else is willing to finance this, you see that his desire, remember how this started, George Lucas unapologetically invests in what he believes in most, himself. He bets on himself here. He could have been paid, you know, 100. He could have asked for a big director fee. He's like, "No, no. I want a less director fee. I will cut my director fee in half. I want $50,000. I will not only direct it, I will write it for that fee. There's no extra money for that. But I want 40% of the profits if there are any profits." And at this time he's doing that, it is a big if that "American Graffiti" could ever turn a profit. He, George Lucas before this had never had a successful film. He's just had a flop. And so through this entire book, there's huge chunks of the book that I think you should read because it's just problem after problem after problem after problem. I'm gonna read just a, the highlight of this from "American Graffiti", and then I'm gonna tell you one of my favorite ideas I've ever come across. Says, "Despite the agreement he had negotiated with the town under which he could pay $300 a night to film on 4th Street, local businesses were already complaining about closing the street. When Lucas and his crew arrived, they learned that the local council had withdrawn permission for him to film and would not permit, uh, to clear or control traffic. Lucas made the most of the evening anyway, rapidly shooting his way through 19 setups and scrambling to find a new location. Then we had a focus problem on the camera, and the assistant cameraman was run over by a car. Then we had a five-alarm fire. That was a typical night."

11. 1:06:42 – 1:15:19

    Problem-Solving Machines and Writing Star Wars

    1. DSDavid Senra1:06:42

       So Tarantino, in his book, he says the job of a director is to solve problems, right? Solve problems for your actors. And I read this book by Danny Meyer, the famous restaurateur, a long time ago. We, now you're talking about eight years ago probably. It's called "Setting the Table". It's excellent. And he tells a story that I've never forgotten. And so he's at dinner with, uh, Stanley Marcus, who is part of the Neiman Marcus family, the family that, uh, that controls Neiman Marcus. He's a wiser, older man, probably, I would guess, 40 years older than Danny is at this point. I think Danny's in his, like, mid-20s, maybe late 20s at this point. And so he's... They're having this conversation, and he says, "Opening this new restaurant might be the worst mistake I've ever made. Stanley set his martini down, looked me in the eye and said, 'So you made a mistake. You need to understand something important and listen to me carefully. The road to success is paved with mistakes well handled.' His words remained with me throughout the night. I repeated them over and over to myself, and it led to a turning point in the way I approached my business. Stanley's lesson reminded me of something that my grandfather had always told me. He said the definition of business is problems. His philosophy came down to a simple fact of business. Success lies not in the elimination of problems, but in the art of creative, profitable problem-solving. The best companies are those that distinguish themselves by solving problems most effectively." I tried to reduce that idea. Th- th- first of all, that line right there, "The road to success is paved with mistakes well handled," that's just straight-up wisdom from an older, well-schooled, uh, entrepreneur. But this idea that the definition of business is problems, right? Success not... lies not in the elimination of problems, but in the art of creative problem- profitable problem-solving. What I say is, is, like, the, the way I condense that down so I can remember it myself, business is problems, therefore the best companies are just effective problem-solving machines. The best directors are just effective problem-solving machines. And so after this grueling schedule, he finally finishes the movie. And what he says here, this is what I meant, is, like, if you could dial the, the, the balance between consistency and intensity, I think he's way too far on the intense level, and maybe that's the way he, the way he wanted to live his life. It's none of my business, right? But y- I think for a long career, you have to have more of a balance between consistency and intensity. And so he says, "Lucas was glad that it was over. 'You couldn't pay me enough money to go through what you have to go through to make a movie,' he said. 'It's excruciating. It's horrible. You get physically sick. I get a very bad cough and cold whenever I direct. You feel terrible. There's an immense amount of pressure and emotional pain, but I do it anyway, and I really love to do it. It's like climbing a mountain.'" And what is fascinating is he starts to preview the movie, the audiences love it, and the studio execs can... This is so nuts to me. The studio executives can be in a theater full of cheering potential fans and customers, right? And they're like, "This movie isn't good enough. We're not gonna release it. Maybe we'll put it on TV." They're just, like, completely jerking him around and screwing him over, and he's obviously depressed. And he's like, this is where he's like, "I'm going to be an independent filmmaker. I'm gonna control the money." He hates these people. And then they edit his film again, and they take out another four minutes, just like they did in THX. And this is the importance of just having good relationships and good friends that truly care about you, too, because they're at a screening. Lucas is there, Coppola is there, the studio executives are there, and the crowd loves it in the... But after, in, like, the lobby, the executive's, like, bitching at George Lucas, and Coppola is just... Uh, he j- he comes to the defense. He's like, "Are you out of your mind? Did you not hear them?" And he pulls out his checkbook. He's like, "How much do you want for the movie? You don't wanna put this out, sell it to me and I will invest my own money, and I will release this movie. You're s- you have a hit on your hands." Coppola's forcefulness kind of calls their bluff. They wind up releasing the movie. The movie's a smash hit. Listen to this, though. So it has this great review in The New York Times. They called American Graffiti a work of art. Now, this was very fascinating because this is the way I thought. When you read about George Lucas, the way I think of him is I think of him as, as a craftsman. Turns out that's how he thinks of himself, because he does a lot of this stuff himself. He, he didn't really like the fact that people called it a work of art. "My thing about art is that I don't like the word art because it means pretension and bullshit, and I equate those two directly. I don't think of myself as an artist. I'm a craftsman. I don't make a work of art. I make a movie." And you can also see he's not modest by any means. "I know how good I am," he said. "American Graffiti is successful because it came entirely from my head. It was my concept, and that's the only way I can work, and it prints money." Keep in mind, American Graffiti is released in 1973, so these are 1973 dollars I'm about to tell you. American Graffiti cost a million dollars, and it earned, at the box office, 55 million, making it one of cinema's most profitable returns on investment ever. Lucas earned nearly $4 million after taxes, and as he had vowed to his father more than a decade before, Lucas was a millionaire before the age of 30. He had done it with two years to spare. And he's gotta figure out, "What am I going to work on next?" And he has, at this point in his life, he's got a couple million in the bank, and he's got a two-page treatment on handwritten notebook paper, and the title, which is scrawled on the center of the treatment's cover page, is The Star Wars. Now, one of the smartest things that George Lucas does is learns from his own mistakes. So he's not going to hire somebody to write The Star Wars, and he's going to bleed on the page. There's an entire chapter about this. It's called Bleeding on the Page. Because George says over and over again, like in the book, I, I forgot, l- I lost track of how many times he says this. He's like, he does not believe that he had a natural talent for writing. And so he calls the process awful. He hates it, but he makes himself do this. Listen to this. So it's gonna take him three years to write, like, the first version of Star Wars, but the way he does this is fascinating. So he's like, "Okay, I'm gonna treat the writing of Star Wars, it's going to be a full-time jo- job," okay? So he's still working out of his home. He's got upstairs, like, a office, studio, library kind of thing, and he's like, "I'm going to go upstairs at nine o'clock. I can only do one thing. I can look at the wall or I can write, but I can't do anything else." And from 9:00 to 5:00, eight hours a day, listen to how he describes this. Uh, he says, "I would sit at my desk for eight hours a day no matter what happens, even if I didn't write anything. It's a terrible way to live, but I do it. I sit down and I do it. I can't get out of my chair until five o'clock. It's like being in school, but it's the only way I can force myself to write." Then over his desk, he would hang this giant, like, wall calendar to track his progress, and he's like, "Okay, I have to write five pages every day," and you mark a big X, like a big X on the days where you write five pages. And here's the deal he made with himself. "If I can finish my five pages a day early, then I can leave." So some days he gets to, you know, eat his chocolate bars and listen to music, but most days no words are written at all. And then he would just go downstairs and he'd glare in anger at the TV. He'd eat a TV dinner, [chuckles] and he would just be pissed off staring and watching the news. Another idea that I think is useful is he's having a problem, right? Like think about the, you know, the, a lot of the scenes in "Star Wars," it's action. He's got an idea in his head, but he's reading it on the paper, it doesn't seem... It's, like, not matching up. So I thought this was fascinating. He makes kind of a demo of sorts. If you read the book "Creative Selection," it's episode 281. I've read that book, like, four or five times. Anybody building a product I think should read it. It's this programmer that worked at Apple under Steve Jobs named Ken Kocienda, and Steve's main thing is like, "Hey, uh, we need to make demos. Like, that, that's how we're gonna push these ideas forward. Not presentations, I wanna actually see it." And so George is, like, trying to explain his idea himself and to others, so he's like, "I need a demo." And so this is this demo that he makes for "Star Wars," and so he says, "One of the key visions I had of the film when I started was a, of a dogfight in space with spaceships. Two spaceships flying through space shooting each other. That was my original idea, but trying to get the dogfight in my head on paper was difficult." And so what he would do is he'd go to the television and he'd start taping old war movies, and specifically footage of airplanes, like, you know, dogfights with airplanes. And he taped 20 hours of these, like, scenes from random movies, right? He then transferred it to film, and then he would edit it down to a reel of about eight minutes long. And the description of this reel is fascinating. He says, "While he didn't yet, yet know, the reel of dogfighting would be one of the most important bits of film he would ever put together, the wet concrete that he would pour into the mold for the cornerstone of his film empire."

12. 1:15:19 – 1:21:46

    The Fox Deal: Sequel and Merchandising Rights and ILM

    1. DSDavid Senra1:15:19

       So now he has something that he can show. Now he needs to go and raise the money for the movie. Now this is fascinating. We've, you and I have talked about this over and over again already. Lucas desires control above all else. And he still stuck to that idea even though Fox was the only studio who said yes to "Star Wars." Think about this. Uh, you know, arguably the most successful movie franchise in history, and only one fo- o- only one studio said yes. And so even though he's negotiating with the only interested part, party, one, he, there's certain things in his contract that he demands, right? And so he wants as much control over the final edit of his film as possible. And he even says, like, "I'm not willing to listen to other people's ideas. I want everything to be my way." That's an exact quote from George Lucas. And so I would argue this is his most important, what's about to take place here, this is his most important decision ever. So he starts negotiating with Fox, and this is what George Lucas says about this. "Fox thought I was gonna come back and demand millions of dollars and all these gross points," recalled Lu- Lucas. "I said, 'I'll do it for the deal memo, but we haven't talked about things like merchandising rights and sequel rights.' He would insist that those particular clauses, normally considered underbrush in a contract..." And it's really weird that they didn't understand at this point how important merchandise rights were, because if you remember, I've done a bunch of episodes on Walt Disney before, and they were even surprised. They did this show called "Davy Crockett." They sold, like, $300 million in a year of, like, those Davy Crockett, like, hats. And that was, you know, two decades before what's going on here. So for Fox to just give them away, they're gonna make three to five time... It says three times the amount on toys. Lucas makes three times the amount of toys as he does on the films, and the films, they make billions and billions of dollars. It's insane. So he's like, "Okay, I want, you know, the merchandise and I want the sequel rights. I'm not gonna charge you more money." What was norm- par for the course at this is if you have a smash hit, then your director fee, you know, should go from, whatever, 50,000, should, could go to a million, could go to two million, whatever the case is. "He would also insist that Star Wars be produced by Lucasfilm, thereby ensuring that he could keep an eye on the bottom line and that any expenses billed against the film were really his. 'I was very careful to say I don't want more money,' Lucas said. 'I said I don't want anything financial, but I do want the rights to make the sequels,'" and he wants the merchandise rights. "Fox was willing to sign over the sequel and merchandising rights mainly because they'd gotten the director of "American Graffiti" so cheaply, and no one, not even Lucas, appreciated that by securing sequel and merchandising rights, he had just negotiated for himself a billion-dollar clause. Decades later, Fox executives would shake their heads in wonder at Lucas's instincts and audacity." So let's go back to this idea that business is problems and that the best companies are just effective problem-solving machines. He's got a problem. He's got an idea in his head. No one can make the special effects. There's no technology at the time. So what does he do? The solution sometimes to a problem is to fo- to found your own company to solve that problem. The solution to this problem that he's having now is the founding of Industrial Light & Magic. So it says, "Lucas would not merely have to produce the visual effects, he would have to develop the technology needed to shoot them in the first place. George was absolutely adamant that he wanted to set up his own shop with his own people. Industrial Light & Magic would then be an official subsidiary of Lucasfilm, born of necessity, seeded with his own money, and feeding off Lucas's need to control every aspect of the production. Industrial Light & Magic would stand as one of the cornerstones of Lucasfilm's empire, an investment that would set him well on the way to becoming a multibillionaire." And then this is a quote I shared earlier, which is one of my favorite quotes in the book. "How many people think the solution to gaining quality control, improving fiscal responsibility, and stimulating technological innovation is to start their own special effects company?" Ron Howard said admiringly, "But that's what he did." You and I have already talked about the fact that this guy is stubborn, he's persistent, he's bullheaded, and you have to be. Why is that so important? People thought he's, like, making this, like, little kids movies. This is like, he, he's kinda getting depressed, but he's still persevering because his friend's advice. It says, "Lucas saw Star Wars as his response to a weary world in need of new heroes and mythologies. His friends said it was a juvenile exercise unworthy of his talent. They said, 'George, you should be making more of an artistic statement.'" Yeah, that's a good way to go out of business. What are you talking about? He did that with THX 1138. How did that go? "People were telling me that I should've made Apocalypse Now," George Lucas said. "They should-- They said I should be doing movies like Taxi Driver." His own wife was telling him that because she was one of the ed- main editors for Martin Scorsese, and she wanted her husband to make movies like Martin Scorsese did. But I think this idea, it's one of the mo- the most important ideas I've learned in the last, like, year, year and a half. It's like you have to believe that your own opinion about what you're working on is greater than everybody else's opinion around you. None of this works if you can't trust your own judgment. And so another important thing, this is really the power of deadlines, because he's been working on the script for three years, and he, he has to shoot the movie now. And he-- The, the, the important part about having a deadline is, like, if that didn't happen, he'd probably still be working on the script now. "I didn't really know where to go with it, and I've never fully resolved it. It's very hard stumbling across the desert, picking up rocks, and not knowing what I'm looking for, and knowing the rock I've got is not the rock I'm looking for. I kept simplifying it, I kept having people read it, and I kept trying to get more of a cohesive story, but I'm still not very happy with the script. I never have been. I have never arrived at a degree of satisfaction where I thought the screenplay was perfect. If I hadn't been forced to shoot the film, I would doubtless still be rewriting it now." The power of deadlines. And again, there's an entire book I might cover. So I, I, uh, um, I think you already know this, but when I read all these biographies, um, when I'm done, I go through the bibliography, and I find a bunch of new sources to, to read more books on in the future and turn them into more episodes. And so I found one, two, three, four, uh, new books from this bibliography, and one of them is just about how gut-wrenching and difficult making Star Wars was. I think maybe reading that book and, and doing an entire episode on it would be fascinating. But I can give you a brief synopsis here. "From day one, Star Wars would be problem-plagued production that would blow through its budget, mentally and physically exhaust Lucas, and try the patience of executives at Fox that the s- that the s- so much so that the studio very nearly pulled the plug on the film altogether. 'I forgot how impossible making movies really is,' Lucas wrote. 'I get so depressed, but I guess I'll get through it somehow.'" And another example of

13. 1:21:46 – 1:27:58

    Star Wars Struggles, Spielberg's Faith and the Marketing Build-Up

    1. DSDavid Senra1:21:46

       this idea, it's really hard to tell what you have when you're in the middle of it. He goes and visits... St- Star Wars is nearly killing him. This is what I mentioned earlier. He's working 20 hours a day on it, and he's so deep into it. He goes, decides to fly down to Alabama to visit his friend Steven Spielberg, who's working on the movie Close Encounters of the Third Kind, and he brings with him, like, this booklet of all these, like, black and white pictures that, from the set. And Spielberg's going through this, and he thought it was amazing. But the reason I bring this up to you is 'cause Spielberg tells us what George was thinking at this time. He says, "George was so depressed. He didn't like anything. He didn't like the lighting. He didn't like what the cameraman was doing. He was very, very upset. He was saying, 'I've got myself into a mess that I'll never really get myself out of.'" He was in a state of near despondency, so much so that he's rushed to the hospital. He feels sharp pains in his chest. He was ha- afraid that he was having a heart attack, so he gets checked into a hospital. They diagnose him with hypertension and exhaustion. So after that, he's like, "I'm never doing this again." But he had no intention of relinquishing control over the film, even if it killed him. He's gotta get this done first. And it wasn't until I read that section, I went back and looked. I thought he directed all the Star Wars movies. This is the last movie he directs for 22 years until Star, Episode One, The Phantom Menace, Pha- Phantom Menace. So Star Wars comes out in 1977. He's the director, and then he stops doing that. He just, he becomes an executive producer. He bankrolls it. He writes the stories, picks the, the, uh, the, the directors. But, uh, but he really meant it. Like, he hated directing. And so he finally finishes the film, or b- is ab- it's almost done. And this is fascinating because this happens, too. I mentioned I was gonna do another episode on Tarantino at the end of the Tarantino episode, but I re-listened to Tarantino, and I thought it was really, really good. So much, and I, I c- kinda tell because you get a lot of responses in, like, the text messages that I was getting from, like, like, hit a note. Like, people really, really liked it, and I was like, "I'm not..." And then I looked at the outline for the second Tarantino episode I was making, and I maybe will do it in the future, but I was like, "Man, if I do this right, I'll, like, it's gonna pale in comparison [chuckles] to, to the Tarantino episode." So I shelved it for now. But in that source material, some of the research I was doing, I come across this conversation where Tarantino, you know, Reservoir Dogs was a hit, but it wasn't, like, a, a smash commercial hit, and so he, nothing like what Pulp Fiction's gonna be. And so he actually screens, Tarantino screens Pulp Fiction before it's released to a, a bunch of director friends, and everybody hates it except one person, all of his director friends. One of his director friends, he tells a funny story. He was like, "Okay, uh, I gotta have a real serious conversation with my friend Quentin. Like, this mo- he's gotta change it. This isn't good enough." He's like, "I'll wait till he gets back from Cannes." I think Cannes Film Festival is how you pronounce it, or Con. I don't know how to say it. But, uh, he's like, "I'm gonna wait till it g- you know, gets back." And then Pulp Fiction wins all the awards there. [chuckles] And so he's like, "Okay, guess I'll have to say thank." But this wh- this idea where even your really gifted friends may not understand the value of your idea, where, you know, you had, let's say, f- six director friends of Tarantino. Five of them say, "This sucks." Think about it. How the hell are you gonna see Pulp Fiction and think it sucks? And one was, like, super supportive. Same thing happens here. He goes and he screens Star Wars. And his wife, who hadn't seen the film since the first cut, she was off, I think, uh, editing for Scorsese if I, if I remember correctly. She bursts into tears. She's certain that it's a disaster. Brian De Palma is just lighting into him. He goes, "What is all this Force shit?" Like, you know, the Force will be with you. Screaming at him. They go to dinner. He's still railing at it. And yet there was one person in the room who was impressed. "I loved it because I love the story and the characters," said Spielberg. "I was probably the only one who liked it, and I told George how much I loved it." That evening, an executive from Fox called Spielberg. We all need friends like this. Called Spielberg to ask what he thought about what he had seen. Spielberg told the executive that he thought he had a hit on his hands, one that it would eventually make $50 or $60 million. "Wow, were we wrong," Spielberg said. Why? It's not gonna make 50 or 60 million. The budget for the original Star Wars was $11 million. At the box office alone, it brought in $775 million. Think about funding a business. All you took to build that business was 11 million, and yet that business makes 775 million just at the box office. Think about all the money it's made since then. Probably four times, five times that amount alone just from that one movie between merchandise and rides and everything else. That reaction from a movie where all these other talented people, all the other people in the room besides Spielberg said, "This is trash," so much so that some people were crying at how bad it was. And so before I move on to his biggest bet, which is, hey, I'm gonna control the funding for The Empire Strikes Back. This is... He's gonna make $100 million on this bet that he's about to make on himself. But I did think, I'm a sucker for these really interesting marketing and distribution ideas. So something they did before the original Star Wars came out is they, they correctly identified, like, who is the natural audience for Star Wars, right? And there was this huge subculture of science fiction and comic book fans, even if they weren't making a bunch of science fiction and comic book movies at the time. So they're like, "Hey, we should target these people. Let's do a novelization and a comic book adaption series before the movie comes out." So they publish, like, a novelization of Lucas' script. They publish it in November 1976. The... That's before there was even a trailer. By February 1977, so you're talking, what is that? Three months, four months later, they had already sold out of its initial print run of 125,000 copies, and the movie wasn't available to see for another three months. In addition to this, they also had articles written in several of the largest sci-fi magazines. Again, several months before. There's, like, kinda, like, planting the seeds several months before the movie's actually available. So it says, "By the spring of 1977, enthusiasm for Star Wars was like a pot roiling to a slow boil, and the lid was about to blow off."

14. 1:27:58 – 1:35:31

    Betting the Ranch on The Empire Strikes Back

    1. DSDavid Senra1:27:58

       Okay, so now we get to, I would say, probably the craziest and most important time in the entire book and his entire life, 'cause it's gonna set up the future success, uh, for everything that comes after. So he's like, "I wanna control as much..." He was disgusted that Star Wars is making all this money. Like I said, $11 million budget, 775 million at the box office. But Fox, the studio, all they did was finance the film, and they get 60% of the profits. And he said they're getting 60... Th- The way Lucas looked at it, he's like, "Well, they're getting 60% for doing absolutely nothing." And he's like, "Well, what do you mean th- they didn't do anything?" And he would compare and contrast what he did for the rest of, like, his share, right? He's like, "I know what I'm doing for my percent. I put my heart and soul in this. My whole career is at stake. I have to actually go out and make the movie." And so when he's having these conversations with other people at Fox, even people he likes, like an executive there named Alan Ladd, he's like, "Well, what the hell are you doing?" And Ladd's response is like, "Well, I provided the money." And George said to him, it was very fascinating the way his brain works. He goes, "You didn't provide the money. You go to a bank with a letter of credit, and they supply the money, and then you get 50% of the movie." This is such an important distinction he makes here. George looked at it like a businessman, saying, "Wait a minute. The studio's borrowed money. Then they take a 35% distribution fee off the top. This is crazy. Why don't we just go borrow the money ourselves?" And he said, "Some of the bravest and/or most reckless acts were not aesthetic, but financial." For the sequel, Lucas matter-of-factly informed the studio that he would be financing the film himself using his profits from Star Wars as collateral for a bank loan. So this time around, th- the last time around, the studio's got 60% of the money. This time, he's like, "Hey, I'm getting 77.5%, and you can get 22.5%." And they take the deal because, of course, you, you wanna be involved. Think about it, like, even if you own less of Star Wars and you're the... Fox. Fox has a bunch of other movies. So there's gonna be millions of people going to watch Star Wars II, and at the very beginning, you see this huge logo, the Fox logo. It's like advertising for them. And then I loved w- the way Spielberg, you know, he saw this coming. He's like, uh, Spielberg wasn't at all surprised by the way Lucas was playing hardball. He says, "If you're an executive and you're going into business with George Lucas, you are no longer in the 20th Century Fox business. You're in the George Lucas business, and George is gonna call every shot." And then another mind-blowing fact. Do you know that Spielberg made over $40 million off the original Star Wars? They're actually... They had a bet, so they're really... They, again, they don't know what's gonna be successful before it happens, so George Lucas is working on sci-fi. That's Star Wars I. Spielberg's working on sci-fi. That's Close Encounters of the Third, uh, Close Encounters of the Third Kind. And so they're like, "Okay, let's bet who's gonna be more successful, and let's just trade points." And so Spielberg gave Lucas 2.5% of Close Encounters of the Third Kind. Lucas gave Spielberg 2.5% of Star Wars, and it says this two five point five percent would earn Spielberg more than $40 million over the next four decades. And so this idea about using his assets as collateral to a bank loan, it's exactly what Fox was doing, but they're just a bigger company, so he's gonna use the money he made from Star Wars. And then remember, he owns all the merchandising ri- rights. This is nuts. Just in 1978 alone, George Lucas sells 40 million Star Wars figures. That's in a year. And so what he did, it says, "Lucas would finance the sequel one action figure at a time." He used the substantial profits from the film themselves, but also tapped into the revenues from an almost endless stream of Star Wars merchandise. At the same time, he's looking for a place where he can actually house all of his studios and build this vision that he's had, you know, that he was working on when he was in his early 20s with Francis Ford Coppola. And so this is the idea for Skywalker Ranch. And he has this idea, he's like, "I want to live in a ranch house," or work in a ranch house rather. Uh, I, I, I didn't-- I had forgotten that Lucas never lived at Skywalker Ranch. It was just where he worked out of. And so he's like, "I want, you know, a lot of property. I want it to be a house. I want it to be in the middle of nowhere, and I want to fill it with the most advanced technology, where we could sit, see the trees, and make movies." So he buys the first 1,700 acres right now as he's building, uh, making the sequel, and then eventually, uh, he buys a bunch of surrounding properties and, and builds 5,000, or, or owns 5,000 acres. And so the way to think about what he's doing, he's literally betting the Skywalker Ranch on the sequel. He's either going for complete freedom or bankruptcy. He's putting everything he has into this, and everybody around him is saying, "Hey, don't do this. Give up more points. Take more money." Like, this is nuts. And so it says, "Even those who knew Lucas were aghast at his bullheaded determination to finance the entire film himself. Independence was one thing. Bankruptcy was another. But those people were missing the point. Lucas wasn't paying for a movie. He was buying his own creative freedom." He realized that this was an opportunity he had to pounce on. He says, "It's the perfect opportunity to become independent of the Hollywood system. There would be no studio executives staring over my shoulder in the editing room, no executives forcing him to make arbitrary changes. 'That is the part that I wanted to avoid,' he said. 'Everything I own, everything I have ever earned, is wrapped up in The Empire Strikes Back,' he said. 'If this is a flop, I will lose everything.'" He continues, "All the money I made from Star Wars was committed to this film, plus more. But I didn't want to go to Fox and give them the mo- give them the movie because I'd have to give them all the rights backs," meaning if, uh, he had to get money from them. "I had to keep the picture going somehow, get people to work without pay, hope to hell that whatever they asked for didn't involve me having to go back and renegotiate with Fox. As always with Lucas, it was always a question of control. 'I wanted my independence so badly,' he said." But at the same time, he has this loan from Bank of America, and they see his weekly expenses, and his costs are ballooning for the sequel. His weekly payroll alone was a million dollars a week, and they're threatening to pull the loan and call the loan and shut down the operation, which is nuts considering how big Star Wars winds up becoming. So he comes up with a unique solution to his problem, and he goes to Fox. He's like, "Listen, I don't want any more money from you, but I will give you a couple more percentage points than you were getting earlier. I just need you to do one thing." So he says, "Eventually, he agreed to give a few points to Fox in order to have the studio guarantee a new loan from the First National Bank of Boston. But even with this agreement, Lucasfilm remained the main guarantor of the loan," and if this movie didn't turn a profit, highly likely that his business was gonna go under. And so the good news was the bank didn't have to wait very long for the outcome. Listen to this. This is an entire story in two sentences. "The Empire Strikes Back opened in May of 1980 in 126 theaters and broke attendance records in 125 of them. No other studio opened a single movie against it. The movie was gonna have to make 57 million just for Lucas to break even, and to build Skywalker Ranch into the kind of complex he envisioned, the movie was gonna have to do much more than break even. He needn't have worried. It became the third most successful movie of all time, and George Lucas would pocket more than $100 million in profits. Lucas had literally bet the ranch, Skywalker Ranch, and won." And that is where I'll leave it. For the full story, highly recommend reading the book. The book is excellent. There's so much more in it. Like I said, this thing is massive. The hardcover is over 500 pages. If you want the full story, highly recommend reading the book. If you buy the book using the link that's in the show notes on your podcast player, you'll be supporting the podcast at the same time. That is 345 books down, 1,000 to go, and I'll talk to you again soon.

15. 1:35:31 – 1:59:17

    Bonus Mini-Episode: How History's Greatest Founders Hired

    1. DSDavid Senra1:35:31

       Okay, so what you're about to hear is this question I was asked a few months ago. I actually recorded this a few months ago. They asked, "How did history's greatest entrepreneurs think about hiring?" Uh, all the answers. People think I have a better memory than I, than I actually do. You know, if people say, "Oh, you, David, you have a great memory," my wife would laugh at that [chuckles] 'cause I forget things all the time. It's not that I have a good memory. It's I reread things over and over and over again. Every single answer, every single reference you're about to hear in this 20-minute mini episode came from me searching all of my notes and highlights. That option is now available to you. If you like what you hear, if you think it's valuable, if you're already running a successful company and you want an easy way to reference the ideas of history's greatest entrepreneurs in a searchable database that you can go through at your convenience anytime you want, then you can go to foundersnotes.com and sign up. I wanna start out first with why this is so important. There's actually this book that came out in, like, 1997. It's, uh, called "In the Company of Giants." I think it's episode 208 of Founders. It's two Stanford MBA students, if I remember correctly, and they're interviewing a bunch of technology company founders. And in there, Steve Jobs is one of them. This is, you know, right b- I think even before he came back to Apple. And they were talking about, well, yeah, we know it's important to hire, but in a typical startup, a manager or a founder may not always have time to spend recruiting other people. And St- I, I first read this, uh, Steve's answer to this, you know, I don't know, two years ago, and I never forgot it. I think it's excellent, and I think it sets up why, uh, this question's so important, and you should really be spending, especially in the early days, like, basically all your time doing this. Uh, in a typical startup, a manager may not always have the time to spend recruiting other people. Then Steve jumps in. "I disagree totally. I think it's the most important job. Assume you're by yourself in a startup and you want a partner. You take a lot of time finding a partner, right? He would be half of your company." I'm gonna pause there. This idea of looking at each new hire as a percentage of the company is genius. [chuckles] "Why should you take any less time finding a third or a fourth of your company or a fifth of your company?" When you're in a startup, the first 10 people will determine whether the company succeeds or not. Each is 10% of the company. So why wouldn't you take as much time as necessary to find all A players? If three, three out of the 10, uh, were not so great, why would you start a company where 30% of your people are not so great? A small company depends on great people much more than a big company does. Okay, so to answer this question, the advantage that, um, that I have making Founders and that you have as, as a byproduct of listening to Founders is not only that I've read, you know, 300 something biographies of entrepreneurs now, but I have all of my notes and highlights stored in my Readwise app, and that means I can search for any topic. I can look at the past highlights of books, or I could search for keywords. So what I did is, first of all, like what I've started to do with these AMA, um, questions is I read them, decide which ones I'm gonna do next, and then think about it for a few days. I don't put any... I just literally that, that I know that's the next question, just let my brain work on it in the background for a few days, and then I'll go through and start searching all of my notes. And so that's what I did here. And so there's a bunch of, you know, I don't have-- I might have like 10 or 15 different founders talking about hiring. The first idea is the most obvious, but I think probably works best when you're already established. So Steve Jobs is talking about, hey, you know, a great way to, to hire is just find great work and find the people that did that, and then try to hire them. When you're Steve Jobs, [chuckles] that's a lot easier, right, than if you're just somebody that doesn't have a reputation, maybe you don't have resources, maybe your company's rather, uh, new or not as well known. David Ogilvy, I just did Confessions of an Advertising Man a couple episodes ago, I think 306 or something like that, 307, and he did the same thing. But he's David Ogilvy at that point, so he would find... He'd go through magazines, find great advertising, great copywriting, and he'd write the person a letter and then set up a phone call. And he says he wouldn't-- He was so well known, and, you know, he's one of the best in his field, that he wouldn't even have to offer a job, just the conversation, then the person would... The, the-- He would wanna hire the person, never mention it, and the person would apply to him. Um, and so again, I think if you can do that, then of course it's straightforward. Who-- Find per- somebody that does great work. Usually, you can do this. I actually have a friend that, I can't say who it is. He's doing this right now, actually. Um, I have a friend that's really good at doing this. He's finding people that do great stuff on the internet and then just cold, cold DM-ing them and then getting, convincing them to work on things. And that usually works, especially with people, like younger people early in their career. There's a bunch of different ways to think about this and a bunch of different ways to prioritize. So the first thing that, that co- that came to mind that I found surprising is you read any biography on Rockefeller, and he had a couple ideas where he felt the optimization, uh, you know, table stakes, that you're intelligent and you're driven and you're hardworking, right? We don't even have... Like, if you're listening to this, you already know that. But he prioritized hiring people with social skills. And so this is what he said: "The ability to deal with people is as purchasable a commodity as sugar or coffee, and I pay for, I pay more for that ability than any other under the sun." There's a two-- The second part to this, though, and this is also works well if you have access to more resources. He, he-- Rockefeller would hire people as he found, as he found talented people, not as he needed them. It's not like, okay, Standard Oil has six open spots. Let's go find six candidates, right? He'd come across what he considered a talented person. It didn't even matter if he didn't know what they were gonna do. He's like, "I'm just gonna stack his team." And if you really think about the, the-- his partners at Standard Oil, he essentially built a company, an executive team of founders of co- 'cause he was buying up all their companies, so it's very rare. But, um, there's a line from Titan I wanna read to you. "Taking for granted the growth of his empire, he hired talented people as found, not as needed." And then I found another idea in the hiring, like the actual interview process. So there's this guy named Vannevar Bush. I did two episodes on him. I think it's 270 and 271. He is the most important American ever, uh, in history, uh, in terms of connecting the scientific field, private enterprise, and the government. The most important person to keep alive for the American war effort was FDR. The second one was Vannevar Bush. Vannevar Bush, uh, is like the Forrest Gump of this historical period. He is involved in everything from the Manhattan Project to discovering like a young Claude Shannon to building, uh, a mechanical computer. Like, this guy literally has done-- He just, he pops up in these books over and over again. If you were reading about American business history during World War II and post-World War II, you are going to come across the name Vannevar Bush over and over again. Uh, I read his fantastic autobiography called Pieces of the Action, and I came across this weird highlight, and so this is his brilliant and unusual job interview process. And so he's talking about this organization he's running called AMRAD. "At AMRAD, I hired a young physicist from Texas named C.G. Smith. The way I hired him is interesting. An interview of that sort is always likely to be on, on an artificial basis and somewhat embarrassing. So I discussed with him a technical point on which I was then genuinely puzzled. The next day, he came in with a sol- uh, with a neat solution, and I hired him at once." Here's another idea. This is from Nolan Bushnell. Nolan Bushnell is the founder of Atari, founder of Chuck E. Cheese, and Steve Jobs' mentor. He hired Steve Jobs when Steve Jobs was, like, 19 at Atari. He would ask people their reading habits in interviews. This is why. Uh, one of the best ways c- his whole thing was he wanted to build, uh, all of his companies laid on a foundation of creative people, so that's what he's looking for. He's like, "I need creative people." One of the best ways to find creative people is to ask a simple question: "What books do you like?" I've never met a creative person in my life that didn't respond with enthusiasm to a question about reading habits. Actually, which books people read is not as important as the simple fact that they read at all. I've known many talented engineers who hated science fiction but loved, say, books on bird watching. "A blatant but often accurate generalization. People who are curious and passionate read. People who are apathetic and indifferent don't." I remember w- That, that's such a great line, and I obviously agree with it. [chuckles] I remember one... I'm gonna read it again. "A blatant but often accurate generalization. People who are curious and passionate read. People who are apathetic and indifferent don't. I remember one particular woman who, during an interview, told me that she had read every book that I had read. So I started mentioning books I hadn't read, and she had read those too. I didn't know how someone in her late 20s found that ti- this much time to read so much, but I was impressed. I was so impressed that I hired her right there and assigned her to international marketing, which was having problems." This is why, this is why I'm reading this whole section to you. "A job with a lot of moving parts benefits from a brain that has a lot of moving parts. It wouldn't be possible to have read that many books without such a brain." So do you see what I mean? Like, we start with Steve Jobs saying this is the most important thing that you, your role as the leader of the company and the founder to do, right? And you are-- And it's so important to study, and this is why I'm glad this, this question exists, and why I'm glad that I've, I took the time and I had, like, the foresight to like, "Hey, I should really organize my thoughts and notes," 'cause there's no way I would've remembered all this without being, being able to search my Readwise, right? But you have Rockefeller saying, "This is what's important to me." You have Bush saying, "This is how I hire." Now you have Nolan Bushnell saying, "Well, here's another weird thing that I learned." Um, let me go through, uh, what Warren Buffett says about this. So this is about the quality. One thing that is consistent, whether it's Jobs, Buffett, Bezos, uh, Peter Thiel, this just pops up over and over again. They talk about the importance of trying to find people that, that are better than you. The, the hiring bar constantly has to increase. Now, obviously, the larger the company gets, that's impossible. Uh, Steve Jobs has this great quote where he's like, you know, "Pixar was the first time I see, I saw an entire team, entire company of A players." But they had 400 player... They had 400 team members. He's like, "At the time, Apple had 3,000." It's like it's impossible to have 3,000 A players. So there is some number that your company may grow to where it's just, you're just not, you're not gonna have thousands of A players. In my argument, I don't even know if you could have 400. I guess you, I mean, I'll take Steve's word for it on there, and Pixar definitely produced great products, but it's probably a lot lo-lower than that as well. So Warren Buffett would tell you to use David Ogilvy's hiring philosophy, and so Warren said, "Charlie and I know that the right players will make almost any team manager look good." Again, that is why it's the most important function of the founder, maybe directly next to the product, or right above the product actually, 'cause those are the people building your product. "We subscribe to the philosophy of Ogilvy & Mather's founding genius, David Ogilvy." This is what Ogilvy said: "If each of us hires people who are small, smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants." David, or Jeff Bezos rather, used a variation of Ogilvy's idea too. Jeff used to say in Amazon, "Every time we hire someone, he or she should raise the bar for the next hire so that the overall talent pool is always improving." And they talk about this idea on Amazon where the, the, the future hires that we do should be so good that if you had applied for the job you already have at Amazon, you wouldn't get in. That's a very interesting idea. Take your time with recruiting. Take your time with hiring. There's this great book on the history of PayPal. It's written by... Actually, I, I've recently become friends with the author. His name is Jimmy Soni, um, and this is in his book. The, the most fascinating thing that I found was that PayPal prioritized speed. So from the time they're, they're founded to the time they sell to eBay, it's like four years. Jimmy spent more time researching the book than, [chuckles] than fo- He spent six years researching the book, and I always tease him 'cause like you took longer on a book than they took to start and sell their company. [chuckles] It just speaks to, like, the quality he's trying to do. But the, as a byproduct of that, like obviously they move fast, but they prioritize speed over everything else except in one area, recruiting. Max Levchin kept the bar for talent exceedingly high, even if that came at the expense of speedy sa- staffing. Max kept repeating, "A's hire A's. B's hire C's. So the first B you hire takes the whole company down." Let's read that again. "A players hire A players. B players hire C players. So the first B player you hire takes the whole company down." Uh, additionally, the team, the company leaders mandated that all prospects... Here's another idea for you. All prospects must meet every single member of the team. Now, the next one is the most bizarre. [chuckles] It makes sense if you study... I did this three-part on Larry Ellison, three-part series on Larry Ellison. I should read those books again 'cause the, the podcast is like 50 times bigger than, than when I, uh, published those episodes, and he's just, [chuckles] he's crazy. So he would hire based on the confiden- the self-confidence level [chuckles] of, of the candidate. Listen to this. I have tears in my eyes. I don't know why I'm laughing. Okay. [chuckles] This is just so... 'Cause this is... You read about Larry Ellison, and he's one of these people that's like really easy to interface with 'cause he just, y-you just know exactly who he is [chuckles] and what's important to him. That's why I think it's so funny. Ellison insisted that his recruiters hire only the finest and cockiest new college graduates. When they were recruiting from universities, they'd ask people, "Are you the smartest person you know?" And if they said yes, they would hire them. If they said no, they would say, "Who is?" And they would go hire that guy instead. I don't know if you got the smartest people that way, but you definitely got the most arrogant. Ellison's, and this is why, w- the personality of the founder is largely the culture of the company. Apple is Steve Jobs. Apple is just Steve Jobs with 10,000 lives, right? I was just te-texting a, a founder friend of mine. Uh, he listens to the podcast. I actually met him through the podcast, and he's going through this, like, uh, process of self-discovery. Like, he's already started a bunch of companies that are really successful, but he's like, "I think I'm more of this type of founder than the other type of founder." And that's good that he's doing that because he's, he's... Hopefully, his next mission is, like, his life's mission, you know? And you can't get to your life's mission unless you, you figured out who you are. Ellison knew who he was. Ellison's swaggering, combative style became a part of the company's identity. This arrogant culture had a lot to do with Oracle's success. Here's another odd idea for you. Izzy Sharp, the founder of Four Seasons, actually could- figured out that in his business, which was hotels, right? That hiring could-- hiring the right p- person could actually be a form of distribution for his hotel. He gave me the idea. Because of what? What do we know? What do you and I know in our bones? That history's greatest founders all read biographies. [chuckles] They all read biographies of people that came before them and took ideas from them. Izzy Sharp was trying to build Four Seasons. What do you think he did? He picked up a biography of César Ritz, the guy that, uh, Ritz Carlton is named after, the great-- arguably the greatest hotelier of all time. And when he realized that, oh, shit, Ritz... He, he says, uh, "Remembering that César Ritz made his hotels world-famous by hiring some of the foremost chefs, we decided to do something similar." So what is he talking about? César Ritz went out and partnered with Auguste Escoffier. What César Ritz was ho- to hotel-- to building hotels, Auguste Escoffier was to French cooking. And so what happened is you partner with world-famous chefs, people come into your restaurant that's in the hotel because of the world-famous chef, and now they know about your hotel. That leads to more gu- that m- leads to more activity in your restaurant that you own, but also leads to m- more brand recognition of your hotel, and then by... as a byproduct of that, more people staying at the hotel. So hiring as a form of distribution. This is fascinating. That is a fascinating idea. Okay, here's the problem. You can identify great people, right? Maybe they even want to come work. Like, you've identified them, you've sold them, "Hey, uh, this is what-- this is our mission. This is what we're, we're doing." And yet, humans have complicated lives. They have spouses. They have kids. They have a reason maybe they can't move across the country to work for you, even though they want to. So there's a problem-solving element that you see in these books on you have to solve, like, you've already identified the person, you've recruited them, they can't go for some other reason. Okay. Well, the great founders are not gonna take no for an answer. I read in, um, in this book called Liftoff, which is about the first six years of SpaceX. This is what Elon Musk did. They had ant- anticipated his friend's issue. Having convinced Musk they needed to bring this brilliant young engineer from Turkey on board, it became a matter of solving the problem. His wife had a job in San Francisco. She would need one in Los Angeles, right? 'Cause that's where SpaceX is at the time. They... These were solvable problems, and Elon's better at solving problems than almost anyone else. Musk therefore came into his job interview prepared. About halfway through, Musk told the guy that he wants to hire, "So I heard you don't wanna move to LA, and one of the reasons is that your wife works for Google. Well, I just talked to Larry, and they're gonna transfer your wife down to LA, so what are you gonna do now?" To solve this problem, Musk had called his friend Larry Page, the co-founder of Google. The engineer sat in stunned silence for a moment, but then he replied, given all that, he would come to work at SpaceX. That's really smart. There is another idea when you're promoting. Are you gonna promote from within or from without? You know, that's dependent on you, depending on what, what's going on. I do think this is interesting, though. There's this guy named Les Schwab, who built this, this really, uh, valuable chain of, uh, t- like, tire companies in the Pacific Northwest. I actually found out about him 'cause Charlie Munger is like, "Hey, you should read this biography." He said it in, um... [clears throat] He didn't say it to me personally. He said it to, uh, in, like, one of the Berkshire meetings, that to study-- Les Schwab had one of the most, m- uh, one of the smartest, uh, financial incentive structures of any company that, that Charlie Munger had come across. So this is what Les Schwab did. He did not want to hire from-- He didn't wanna hire other people from other companies 'cause they might come with bad habits. He liked to train his own executives. And so he says, "In our thirty-four years of business, we have never hired a manager from the outside. Every single one of our more than two hundred and fifty managers and assistant managers started at the bottom changing tires. They have all earned their management job by working up." And then another thing, if you're gonna hire the best of the best and A players, they're... A players don't like to be micromanaged. Um, and so this came in Larry Miller's autobiography called Driven. He owns, like-- He owned, like, ninety-three companies all throughout Utah, car dealerships, movie theaters, all kinds of crazy stuff, but he also owned the, the, the NBA team, the Utah Jazz. And what was fascinating is he's trying to recruit Jerry Sloan as the coach at the po- at, at the point, and Jerry Sloan would only take the job on one condition, and I really like it. I really like this idea. "If you hire me, let me run the team and business," right? "That's what you're hiring me for." One of the best things we had ever done was hire Jerry Sloan as coach. At the time, he said, "I am only gonna ask you for one thing. If I get fired, let me get fired for my own decisions. If you hire me, let me run the team/business." Here's another idea from Thomas El- uh, Edison that I think is fascinating. Really, I th- the way I think about a founder is, like, you're developing skills that you can't hire for. You, you're gonna hire for everything else, but you shouldn't be hireable, and Edison wasn't. Edison, expressing his views on the preeminent role of applied scientists, which, that's what he considered himself, coined the expression, "I can hire mathematicians, but they can't hire me." And so when I read that paragraph for the first time, the note I left myself was, "Develop skills that you can't hire for." Capitalism rewards things that are both rare and valuable. Uh, Estée Lauder would give you advice that you need to hire people aligned with your thinking and values. Hire the best people. This is vital. Hire people who think as you do and treat them well. In our business, they are t- uh, top priority. So this idea is like, that seems kinda weird. Like, hire people who think like you. There's obviously not one right way to build a business. I think, though, your business should be an expression of your personality and who you are, are as a person at the core. And so I think there is an art to the building of your business. And the reason I use the word art, I don't mean in, like, a hoity-toity, you know, pretentious manner. That's not me at all. I don't even care about... [chuckles] I don't... art at all, really. I mean that you're making decisions not just based on economics. Like, there are non-economic important decisions based on how you're building your business. Like, you could probably make more money doing a decision A, but decision A is, goes against who you are as a person, or you just don't like it, or it's just not as elegant or beautiful. And so therefore you don't do it. So that's what I mean about, you know, hire people who think as you, you do. And what-- for whatever reason, when I read S.A. Lauder say that, I was like, "Okay, that there's like this art to what she's doing." One thing that's gonna be helpful in recruiting, uh, this comes from Peter Thiel. I think this is the book "Zero to One." Understand that most companies don't even differentiate their pitches to potential recruits into hiring, so therefore, like, they're just gonna buy... As a byproduct of that, you're gonna wind up with a lower overall talent base. And so he says, "What's wrong with valuable stock, smart people, or pressing problems? Nothing. But every company makes this, these claims, so they won't help you stand out. General and undifferentiated pitches to join your company don't say anything about why a recruit should join your company instead of money, instead of many others." So that idea of, like, your pitch, your actual-- He would tell you, you're, you shouldn't be building an undifferentiated commodity business. But even above and beyond that, like, your, the, the, the mission that you're trying to engage everybody to join you in, that pitch, that sale, sale you're trying to make to a potential recruit should be differentiated, should not... If that person's applying to five other jobs, there should not be like, it's like they may not like your mission, they may not like your pitch, but they shouldn't be able to compare it to anything else. Uh, another quote from Nolan Bushnell, "Hire for passion and intensity." That's what he would do, or that's what he did when he found Steve Jobs. "If there was a single characteristic that separates Steve Jobs from the mass of employees, it was his passionate enthusiasm. Steve had one full, one speed, full blast. This was the primary reason we hired him." And one thing all these founders have in common is that they know how important hiring is, and when something's important, you do it yourself. This is again Elon Musk on hiring. He interviewed the first three thousand employees at SpaceX. That's how important it was. One of Musk's most valuable skills was his ability to determine whether someone would fit his mold. His people had to be brilliant. They had to be hardworking, and there could be no nonsense. "There are a ton of phonies out there and not many who are the real deal," Musk said of his approach to interviewing engineers. "I can usually tell within fifteen minutes, and I can sure, I can for sure tell within a few days of working with them." Musk made hiring a priority. He personally met with every single person the company hired through the first three thousand employees. It required late nights and weekends, but he felt it was important to get the right people for his company. And then the close on this, we started with Steve Jobs telling us why it was so important and why it should be a large part of how you spend your time, and now we'll close with what you do after. What do you do after you hire the person? This is what he says: "It's not just recruiting. After recruiting, it's building an environment that makes people feel they are surrounded by equally talented people and their work is bigger than they are. The feeling that their work will have a tremendous influence and is part of a strong, clear vision." So that is the end to that twenty-minute mini episode. I just re-listened to the whole thing, and it, it really does, I think it's a perfect explanation and illustration of why I think Founders Notes is so valuable, 'cause that, some of those books I haven't read in five, six years. And just the ability to have a searchable database of all this, these ideas, like this collected knowledge of some of history's greatest entrepreneurs to reference and then contextually apply to our own businesses. It's nothing short of, like, it's magic. Uh, that's really the way I think about it. I think it's a massive superpower. It gives me a massive superpower. I couldn't make the podcast without it. I also think if you have access to it, it'll make your business better. And so if you're already running a successful business, I highly recommend that you invest in a subscription, and you can do that by going to foundersnotes.com.

Episode duration: 1:59:18