The Greatest Marketer of All Time and The Cofounder of the Michelin Family Dynasty Andre Michel

1. 0:00 – 4:22

   The Michelin Brothers: Product Maker and Marketer

   1. DSDavid Senra0:00

      The Michelin brothers have to be one of the best cofounder teams that I've ever read about. So one brother made the product, and the other brother sold the product, and they did their respective jobs better than anybody else in the world. André Michelin may be the greatest marketer of all time, and his brother Édouard is one of the greatest industrialists of all time. In fact, Édouard would give the following speech to his employees constantly. It says, "Little streams make big rivers. A single minute lost each hour adds up to eight in a day, twenty-four hundred minutes in a year. That's forty hours per worker. If our factory employs twenty thousand workers and each loses that minute per hour, that is the equivalent of three hundred and thirty-three years of work lost." The best founders in history were all looking for ways to save both time and money. The Michelin brothers were no different. In fact, there's a line in one of their biographies that says, "Saving both time and money was one of the principal concerns of the chiefs." That is how I know that if they were alive today, they'd be running Michelin on Ramp. Ramp is the presenting sponsor of this podcast, and Ramp is a guaranteed time and money saver. Ramp gives your business easy-to-use corporate cards for your entire team, automated expense reporting, and cost control. Michelin was one of the fastest-growing and most innovative companies in the world in their day. Many of the fastest-growing and most innovative companies in the world today are running their business on Ramp. Why? Because one of the reasons is because Ramp has the most talented technical team in their industry. Becoming an engineer at Ramp is nearly impossible. In the last twelve months, Ramp has hired only point two three percent of the people that applied. That means when you use Ramp, you now have top-tier technical talent and some of the best AI engineers working on your behalf twenty-four seven to automate and improve all of your business' financial operations. And as you're about to hear, the Michelin brothers would have loved that. Ramp has built a team of A-plus players that would make Steve Jobs proud. And what kind of product can a team of A-plus players build? A product that creates so much value for their customers that the customers never leave. Ramp is an example of that. Last year, twelve thousand and fifty-nine businesses signed up for Ramp, and only eight of the twelve thousand and fifty-nine businesses decided Ramp wasn't for them. I run my business on Ramp, and so do most of the other top founders and CEOs I know. Make history's greatest entrepreneurs proud by going to ramp.com to learn how they can help your business today. That is ramp.com. There's another tool and technology that I want to tell you about, and Ramp actually uses this tool. It is Vanta. I just told you that Ramp has the best technical talent in their industry and how becoming an engineer at Ramp is nearly impossible. Knowing that the team at Ramp trusts Vanta was a huge positive signal for me. And when I talked to Vanta's founder, Christina, it became obvious why Ramp uses Vanta. Vanta helps your company prove you are secure so more customers will use your product or service. You can think of it like an intelligent security assistant that helps your company pass audits without tons of manual work. This is important because, number one, customers need to trust you. If your company handles sensitive data, customers want to know that it's safe. The certifications that Vanta helps you get prove that you take security seriously. Number two, Vanta helps you win deals and close contracts. You will lose deals without it. Many big companies won't sign contracts unless you are certified. No certification equals lost sales. This is why the average Vanta customer reports a five hundred and twenty-six percent return on investment after becoming a Vanta customer. Number three, manual compliance is slow and painful. Doing everything by hand takes months. The Michelin brothers would not tolerate wasting valuable company time doing something with labor when technology can help you automate it. And number four, you stay secure over time. Vanta keeps checking your systems constantly so you don't fall behind or forget anything important. Your intelligent security assistant works around the clock. Vanta will help you win trust, close deals, and stay secure faster and with less effort. Go to vanta.com to learn more. That is Vanta with a V. V-A-N-T-A.com to learn more. And if you tell them that David from Founders sent you, they'll give you a thousand dollars off. That is vanta.com.

2. 4:22 – 7:35

   Books and Background on a Failing Family Factory

   1. DSDavid Senra4:22

      So I spent the last two weeks reading two biographies on the Michelin brothers, and both books centered around how they took over a bankrupt and a decrepit factory and then turned it into one of the leading tire manufacturers in the world. In fact, a place that the company still holds more than a hundred years later. So the two books I read were Michelin: A Century of Secrets, which details how the two brothers kept their entire operations shrouded in secrecy while simultaneously going to extreme lengths to make their company and its products known to the world. And the second book was The Michelin Men: Driving an Empire. So the first book was actually translated from French by my friend Cameron Priest, who also helped me with last week's book on Michael Ferrera. Cameron and I have been texting all week about the just insane stories [chuckles] that are in these books. So most of what I want to talk to you about is the genius that the older brother, André, applied to marketing and advertising. But there are a lot of things... There's just a lot of things in, in, in this story I think will blow your mind, or at least they blew my mind. And even more amazing is what André was doing in marketing and advertising before there was any kind of playbook to learn from. He starts coming up with great ideas in the late 1800s, for God's sake. Before I get there, I need to give you... There's a few things you should know, like some prehistory and some background, uh, before we get into how André came up with all these great ideas essentially to market what would seem like a commodity product. [chuckles] It's a, it's a tire. There are other peoples making tires. So the, the prehistory that's important was the fact that the brothers were asked to take over a failing family business. So the two brothers, André's the older one, and Édouard is the younger one. They will eventually turn this failing factory into Michelin. It was not that at the time. And so André, when this happens, he's in his early 30s. Édouard is in, in his late 20s Andre was trained as an engineer, and he was the obvious choice to run a factory manufacturing new products, right? But he wanted to live in Paris and not the remote and isolated part of France where the factory is located. So in a reversal of roles, he convinces his younger brother, who is an art student, to run the factory instead. And so I was thinking about this while I was reading both books. The artist, the, the brother that's the artist, is going on to be-- is going to come- go on to become one of the greatest European industrialists in history, while the engineer may be the greatest marketer in history. Another thing to know, when they started doing this, they had no experience. They're very unlikely... You wouldn't have predicted that these two brothers would go on to do what they accomplished. But as you're gonna hear, they're both wicked smart, relentlessly resourceful, very secretive, which is actually really important, and I'll, I'll talk more about that later. They're obsessed with quality and obsessed with winning. And then I think one of the most important traits that just, it just jumps out in both books is the fact that they're both default aggressive. They don't dilly-dally and wait for opportunities to come to them. They- they're default aggressive. They go after them with everything they have. So when they did not-- When they, they took over the factory, they didn't know what product they should be making. So at the time, this small factory that's about to go bankrupt, that was founded by their grandfather, was producing farm tools and then assorted products made from rubber, like hoses. The rubber part is obviously going to be important, so keep that in mind. The factory was not making tires.

3. 7:35 – 9:53

   Turning Around the Factory and Learning from Workers

   1. DSDavid Senra7:35

      So when the younger brother, Édouard, shows up at the factory, he finds a stack of unpaid bills, a small team of workers who haven't paid-- been paid their full wages in months, and a banker refusing to extend any more credit. So their grandfather's company's on the brink of bankruptcy. They can't get any credit, so they go to the grandfather's daughter, their aunt, and say, "Hey, we-- I need 500,000 francs to invest in turning around your dad's company." She says, "Give me a day to think about it." The next day, Édouard goes and, and, uh, visits her again. She says, "You can have the money." And then she tells him the reason that she asked for a day. She said, "I had to go to the local convent and make sure that if this fails, they have a room that I could live there." She literally invest every single last dollar in trying to save her father's company, and was willing to go live with nuns if this failed. So now that he has the money, Édouard takes an inventory of everything the factory's making. Most of the products are unprofitable, so he just starts cutting every unprofitable thing, and he decides to focus on their most successful product, which at the time, remember, this is the late 1800s, it's a brake pad for horse-drawn carriages made from rubber. The only problem is Édouard was, in his own words, completely ignorant of rubber manufacturing. Now, how he solves and alleviates his ignorance is really smart, and maybe even a little genius. So this is what he said: "The first necessity was for me to learn my trade. I can only learn it by questioning the workers. So I had to have a conversation with them where I was their inferior, and the best way to get them to talk was to openly and completely admit my ignorance. In practice, I conducted my questioning in the tone of a friendly conversation by saying, 'How are you going to do that? Why can't you do it differently? Is there another way?' I explained these questions to the worker, asking if he encountered any difficulties in the execution that I had not anticipated. I noticed that even when I knew the issue quite well, this friendly conversation was extremely useful for gathering facts." And then this is the most important sentence, in my opinion, of the entire thing he's talking about here. "There are things that the man who handles the material for eight hours a day knows, while his boss, who is necessarily occupied with multiple issues, may be unaware of them. This friendly talk was extremely useful in getting more details."

4. 9:53 – 13:23

   Betting on Bicycles and the Detachable Air Tire

   1. DSDavid Senra9:53

      Now, another thing I admire about the brothers is even though they're experienced, they're extremely ambitious. So their idea is like, "Hey, I don't wanna be just this, like, small local factory, you know, making a profitable product in a dying industry." They are going to, throughout their career, they're going to successfully ride multiple technological waves. This is 1891. So horse-drawn carriages, which they're making products for, they're currently being displaced by the bicycle, and then soon to be the car. So they're talking about switching to a market. Can we build products for instead of a dying market, for a growing market? And so they're reading about these inventions that Dunlop is making with the bike tire. And so the brothers had already been talking. They're like, "Hey, maybe we should make bike tires. There's gonna be a lot more bikes in the future. We can build the best product in a growing market and be in a way better position than just making this rubber brake for horse-drawn carriages." A few hours later, a tourist arrives in the yard of the factory with his bike. His tires have burst, and he asks for help repairing them, since he knew it was a rubber factory, right? So it takes Édouard half a day, and, and the book says a lot of swearing, which I thought was funny, to repair the Dunlop pneumatic tire. So all that means is Dunlop is the first person to invent tires that run on air instead of solid rubber tires. At the time, tires filled with air were extremely rare, and they had this weird... Dunlop came up with this weird idea that you should glue them to the rim, making them very labor and time intensive to repair. So imagine your bike gets a flat tire, and it takes you, you know, six hours to fix it. But Édouard realizes something. He fixes it, then rides the bike to test it, and he's shocked at how much more comfortable air-filled tires are for the rider over solid rubber tires. Before air-filled tires, everybody used solid rubber tires because they were puncture-proof, and they would last a long time, but they would ex- They'd produce this extremely rough ride. They said, like, it-- you'd ride around on rubber tires, and it would hurt your liver after a tire. After a while, you felt every bump. And if people weren't using solid rubber tires, they would use s- tires made out of wood, which also felt like shit, so he, he sees a, a massive opportunity to make improvement. And this insight that he has, he says, "As long as it takes a day to patch a nail hole, this new tire cannot develop a market. It will not find a market." What is needed is to make it easily removable, which they will call detachable. Okay? What is needed is to make it easily removable, and that will change the future of the bicycle. And so Édouard's first idea for a product is, "Hey, we're just gonna take this existing, and th-this existing product that has potential, and just make it easier to repair to save people time." And so he sets him and the rest of his employees to the task of creating a bicycle tire that rides on air and is easier to fix and repair. Now, this is nuts, and so this is essentially the product that he, that he is attacking. At the time, the repair manual that is used for changing a flat tire on a bicycle was 60 pages long of detailed explanations. So we're just gonna make that easier, and then we'll find a market. Now, they, they had a, an advantage over other rubber companies and other tire manufacturers, too, is because they were completely desperate and they were in a bad situation. Their backs were up against the wall. So they said, "We have to recognize the factory's best cards and play them hard." This is what I meant about them being default aggressive, which will reappear over and over again throughout our conversation. In May 1891, the Michelin factory began producing removable tires, and it never stopped.

5. 13:23 – 18:16

   Winning the Paris Race and the Focus on Tires

   1. DSDavid Senra13:23

      Now, again, this is a technical achievement. No one else in the world had this invention at the time. And now, for the first time, we get to their other superpower. The first superpower is they built the best products in the world in their category, and that was their goal from the very beginning. I told you they're extremely ambitious. They're extremely obsessed with winning. That was the talent of the younger brother, right? Édouard. The second superpower was that the older brother, André, may be the greatest marketer of all time. So the fact that the cofounders... This is a really important point before I start going into immediately th-they, they make this invention, and then they're like, "We're gonna find the best possible way to market it right away." Really important point to understand is the fact that the cofounders and brothers had complementary skills. This is very important. One makes the product, and one sells the product. André would show him to be as gifted in explaining tires as his brother was in designing them, and the way that Édouard explained this is, "I'm the champagne, he's the bubbles." So at this point in time, they're the only people in the world with a detachable, pneumatic, air-filled tire for a bicycle. So they're thinking of ways, "How do we sell this?" A few weeks later, the most read and influential newspaper in France announces a race for bikes. The race starts in Paris, it ends in Paris. It travels a total distance of 1,200 kilometers. The event was scheduled for 15 days later, and so we see this correspondence between the two brothers. You're gonna see that the, the older brother is obviously, you know, the, the, the one that's way more aggressive. So the older brother, André, writes his, his younger brother. He says, "This would make for a fantastic launch. We need to win it." His younger brother writes back, "The deadline is too short. We will never be ready." André, the older brother, writes him again, "We are the only ones with a detachable. It is an advantage we have and we may never have again. Figure it out." He was dead right in saying that because of what happens next. So the two brothers go to see the favorite of the event. They, again, they're, they, f- they, their tires are entered into the race. They obviously want to win it. The favorite of the event refuses to sign a contract because he's already signed to Dunlop. So they have the idea. It's like, "Hey, there was this great bicycle racer named Charles Terront. He's retired. Let's see if we can coax him out of retirement." So they invite him to lunch. They treat him royally. They essentially, it sounds like they got him drunk. [chuckles] So they ga- they, it says, "After liquors and a cigar, they propose that he try to race on the Michelin detachable," which is what they're calling it at the time. Three hours later, convinced in half days, Terront signs the contract. In the retelling of their own history, there was an interesting line that I came across. They, they call it the house, so the house of Michelin, 'cause k- it turns out to be a dynasty after this. Uh, they talked about this lunch being really important, how they were convincing to get Charles to, to race for them, and they had a great line in, in, in recounting their own history. They said, "Success is often made of these small details." So the end result of the race is that Charles races for three straight days with no sleep, and he arrives seven hours and 40 minutes ahead of the race favorite. Then André, in a single day, he'll make and run an ad in the largest newspaper announcing the v-victory. I just wanna pull out some lines in this. He said, "The pneumatic is and will remain, by its very nature, the most comfortable and fastest of the tires." Remember, they are the only company selling this product at the moment, okay? "We have confidence that the bicycle public will say of our pneumatic, 'This is an improvement.' No, this is a revolution." Now, this is the hilarious part. Remember when they're like, "Hey, we don't have time to do this. We can't do this if..." The younger brother's like, "We can't do this in 15 days." When the, when the race ends, Michelin has 12 tires in stock. They've only been able to make 12 of them. By the end, and this is how important, and their, their just gift of spectacle and getting attention, and then drastically increasing the market for their products in an indirect way, which is the main theme of what I wanna talk to you about. But they have 12 tires in stock at the close of the race. By the end of the following year, 10,000 French bicycle riders are using Michelin tires. So if you were in their position, think about this. You, you, you go from one year from nobody having your tires to 10,000. What are you gonna do? You're gonna do exactly what the Michelin brothers did, and I think would also play to their nature. They loved being focused. That's another thing we'll talk about a lot about. So they're gonna retain. From here on in, they're gonna retain a singular focus. Everything for tires, tires for everything. Everything for tires, tires for everything. So their dream is, like, anything that's gonna travel over land, we're gonna put on our rubber. And there's such great lines in both books about this. Let me read two of them, two of them to you. "This will be, until the death of the two brothers, the great ambition of the house." Here's another one: "The path that the company must take is laid out. It will be tires. Nothing but tires. Michelin will remain specialized." And

6. 18:16 – 21:18

   Spectacle Marketing: Nail-Filled Races and Wooden Horses

   1. DSDavid Senra18:16

      so when I say André may be the greatest marketer of all time, he's the inventor of the Michelin Guide, which leads to the Michelin restaurant stars. Maybe the most successful guide in history, drastically expands the market for their products. But it, it just-- That was just one great idea. His, his best idea. But I'm telling you, when I write out all... I, I took all my notes, you know, from two books. I read like, I don't know, 700 pages for this. And when you just list out all of the different marketing ideas that this relentless and prolific person had, it's 12 pages long. And so let me just give you an example. They obviously said, "Hey, you know what? Winning bicycle races seems to be pretty good for business. Maybe we should lean into that. Why are we waiting around for other people to have bicycle races? Why don't we have a, a bicycle race attached to our brand? And then what if we set up our..." This is such a great idea. "And then what if we set up the track, right, the, the, the racetrack, in a way that will demonstrate the advantage our product has over our competitors?" So one of their product's advantages over the competition was how much easier it was to change. It would take 15 to 30 minutes to change a tire instead of half a day. So they organized their own bike race. They call it the International Michelin Competition, which is hilarious 'cause it's only, [chuckles] it's only in France at the time. Then the basic requirement's simple. To get into the race, you have to ride on Michelin tires, and then Michelin fills the entire course with nails, thereby allowing a demonstration of how easy it is to change a Michelin tire. They're constantly obsessed with having fun and showmanship with their marketing. It's, it's almost like this is like Red Bull before Red Bull. If you haven't listened to that episode, I think listening to this and then immediately when you're done listening to episode 333, which is on Red Bull's founder, Dietrich Mateschitz, which I think is one of the best episodes I ever made, you're gonna see a lot of like similarities between them. So what do they do? They're gonna go to where all their potential customers are. So they set up this demonstration at this giant exposition in Paris in 1895. Now, in this case, this is truly international 'cause people from all over the world go to this exposition in Paris. So they call this demo the Michelin Wooden Horses. The clever demo consisted of two seats on a rotating carousel track. One seat is mounted on a tire, and the other was on a bare wooden wheel. So their product, and the other one is their competition, right? So at the time, the horse-drawn carriage market is so much larger. The car market, for all intents and purposes, barely exists. Let's just put it that way. So volunteers will sit on a seat, and when if they sit on the seat on the wheel wood, they were subjected to, quote, "Torment unknown to the, since the inq-Inquisition." André's got a gift with words. He's just hilarious. Uh, the rider was rattled mercilessly by bumps on the track. The riders on the pneumatic seats, which were obviously Michelin tires, the air-filled tires, right, experienced a smooth, silent glide. The President of France happened to stop by, try the, uh, the, the demonstration, and then congratulated on the, the Michelin brothers on their invention.

7. 21:18 – 25:30

   Betting Early on Car Tires

   1. DSDavid Senra21:18

      So then they have this very simple idea where they're like, "Well, most of our business right now is bicycle tires," but they have two wheels. Four wheels is better than two. Can we make tires for vehicles that have four wheels? At first, they're like, "Oh, maybe we should make tires for horse-drawn carriages." But pretty quickly they realize, "Hey, I have a, we have a great idea. Four is better than two, but we're pointing it at the wrong target." So André, [chuckles] again, this, I love the way this guy, this guy spoke. He sees the first, the first few horseless carriages in Paris. And so he says, "Why not also put these strange vehicles that make a hellish noise and crawl like turtles on our removable tires?" And his little brother says, "Wouldn't it be better to concentrate our efforts on horse-drawn carriages which offer a practically unlimited customer base?" This is so smart. Again, André just gets it. André does not share this opinion. He says, "The car with tires will replace the horse. It is not the last progress that one, that with one should, should proceed. Not even with today's progress, but with that of tomorrow." And André's point is, "I believe that the car is gonna replace the horse, therefore we should focus and put all of our resources on inventing for the new, not the old." To which his brother then provides the following objection. "It is very difficult to port the air tire from the bicycle to the much heavier car." André replies, "The more difficult the problem, the less chance there is of being followed, the more fruitful the triumph will be. True progress, boldly supported, always ends up triumphing." And so you could think about this in a very simple way. Four tires are better than two. So what do they do? They do another smart... They, there's a lot of smart bets they make early. And so they agree to take... They're making a ton of money obviously from manufacturing, you know, their, their bicycle tire. So they agree to take large profits from making bicycle tires, and instead of taking very large dividends for themselves, they're gonna reinvest that profit into creating tires for cars. In other words, they made a very smart bet early. There's not a lot of cars in France when they made this decision. I've read varying accounts, sometimes as low as 350 cars in France at the time, to as many as 3,500 total cars in France, but not... Th- this is 3,500, any-anywhere from 350 to 3,500 total cars in the entire country at the time. At the time they make this bet, cars are expensive. They're toys for the rich. They require full-time chauffeurs that will double as mechanics. These cars could not stray far from a repair shop. In fact, many, many years ago, probably five years ago, I read, I'm gonna reread it, the biography of the founder of Cadillac, this guy named Henry Leland. It's a, he's a fasci- He had a fascinating mind and fascinating experience. He came up with the first successful car company ever founded, and he also came up with one of the most successful new car ads by Cadillac, and the ads were successful because it said, "Return trip included." At this time, it was expected you're gonna go out in your car. At some point it's gonna, something's gonna break on it, so your chauffeur has to fix it, and that's the only way you're actually gonna come back. Now, I also think it's important to point out the perspective the Michelin brothers had. So there is this story I shared a few weeks ago that I absolutely love. So two shoe salesmen arrive on a remote island. The two s- salesmen, right, see completely different realities based on their mindset. One salesman looks around, notices that nobody on the island wears shoes, writes back to his company, says, "Hey, there's no opportunity because no one here wears shoes." The other salesman sees the exact same situation but reaches the opposite conclusion. He sends back a message saying, "There's an entire population that could benefit from our shoes, but s- but simply hasn't been introduced to them yet." The Michelin brothers were like the second salesman. They look at the market and they're like, "Oh my God, we're gonna go all in on making car tires that run on air," because there is an infinitesimal, that's the word they use, minority of the cars in France running on air. So a small number of a already small number, and they're excited about this. And their point was if you just use their product... They believe in the superiority of their product. So if they test out their product and they go for a ride in a car on their product, their outcome after that happened, Andre proclaims, he's like, "In 10 years, all cars are gonna have our tires. Our product is just so su- obviously superior over the alternative."

8. 25:30 – 29:18

   Selling Movement: The Core Loop

   1. DSDavid Senra25:30

      So once they have this new product, they have this air-filled tire that you could attach and change, and it's, uh, it's easier to change a tire, it's a sm- much smoother ride. Now they have to figure out, "Okay, we can make this thing, but how do we sell this thing? We're, we're in a, such an almost non-existent market, so how do we make this happen? How do we sell more tires?" This is the genius part. This is the part that I was most fascinated with in both books. You must... They, they figured out you must create the conditions for your product's success. You must create the conditions for your product's success. They converged everything around this core loop. Encourage more driving, which leads to more movement. More movement leads to more wear. More wear leads to more tire sales. They realized that a tire company will only prosper if people travel more, so we are not going to sell tires, we are going to sell movement. And they commit to this mission for the long term. There's a great line in the book. It says, "In the year 1900, Michelin's purpose had been to get more people on the road, and in the mid-1920s, that purpose had not changed." And there's just a litany of great ideas that they use to do this, to encourage more people to get out on the road. If more people are on the road, we're automatically, we don't have to do-- We're automatically gonna sell more tires. So the first thing they do is they increase demand with spectacle. They viewed races as opportunities to demonstrate their new products. They already knew this worked for bicycle racing. Why wouldn't it work for car racing? They build their own car, called The Lightning, and they drove it themselves in one of the longest car races in Europe. It was the first car ever raced using Michelin tires. The exact same thing happened in this race that happened when they were, did this for the bicycle race. It gives them a ton of publicity, and then orders for tires start flooding in. When they're not driving in these races, they made sure to sponsor. They sponsor air races, bicycle races, car races. They would offer to put up money for cash prizes for the, uh, the contestants that win. This is what they said: "To sell tires, we first had to sell excitement." And there's a great line where it says Andre Michelin made promiscuous use of the press. So think about it. It's like when you do these bike races, when you do these car races, when you're sponsoring airshows, and you're sponsoring e- every single thing where people are traveling on rubber. Because they're spectacles, the newspapers and the media of the day are automat- automatically for free covering the spectacle. But Andre didn't stop there. Again, he made promiscuous use of the press is one of the greatest lines. He wrote a column every Monday for one of the most widely read papers in France. The column was called Michelin Mondays. Readers of the column would learn about routes they could take for driving. They'd lear- learn about hotels and inns on that route. Special meals... Remember, [chuckles] this is gonna be the, turn into the Michelin stars, uh, when he does the guide, you know, many years to the future. They'd learn about special meals on the route. They'd learn about different sites. They'd learn about where the mechanics are. And Andre was prolific in all things that he did, not just this. He wrote hundreds of these columns. One of the books made a reference to an idea that appears in the 636th Michelin Monday column. Here's another idea that blew my mind. They built road signs across France. The job of the government was done by a private company. They built all these road signs, thousands of them, for free. Why? Because better signs meant longer trips, more driving, more wear on those, on the tires, and therefore more tires sold. Every single sign had an ad that said, "Gift of Michelin." If you think about this, they just designed this core loop, right? Encourage more driving, which leads to more movement. More movement leads to more wear. More wear leads to more tire sales. And then they just figured out, "How can we keep this loop spinning? How can we expand it?" So this is, this is

9. 29:18 – 36:53

   The Michelin Guide: Free Travel Book as Disguised Ad

   1. DSDavid Senra29:18

      one of the most, uh, remarkable things. So in 1900, okay, Andre publishes the very first Michelin Guide. It is a free travel book with maps, locations of mechanics, locations of hotels and restaurants. The goal was to give people helpful information so they drive farther and thus wear down their tires. Their insight was interesting here. The car is just an accessory to the tire. Now, making the Michelin Guide was what Andre loved the most and what he was best at. He starts it in 1900, and he works on it for 31 years until his death. Eventually, these little red books that he creates will spawn the Michelin star rating for restaurants and become the global gold standard in fine dining that we still use today. In fact, when me and Cameron were talking about this book, he said something that was interesting. He's like, "It's pretty wild that a, that a guide made by a tire company, you fast-forward, you know, 120 years, and chefs today will literally commit suicide if they lose one of their Michelin stars." History unfolds in very unpredictable ways. So again, this is another smart bet early. The publication of the first Michelin Tire Guide informed new motorists. Remember at this time, these were rich people. So the publication of the first Michelin Tire Guide informed new motorists, wealthy people accustomed to a certain class, about well-kept hotels, good restaurants, and ways to communicate by mail, telegraph, or telephone. Andre intended the guide for chauffeurs to whom it would be offered free of charge. The extravagance of this wager continues to astonish. This 400-page travel guide for users of a mode of transportation then only in its infancy represented considerable investment. That is another smart bet early. I need to bring this up. The maps inside the guides. They made those maps. They even printed standalone maps. So you know the accordion style maps that used to be in like every single car? That device of making it easy to fold and unfold, they, the Michelin brothers invented that. They drew the maps. They wrote the guides. They created the routes. They built the signs. And they did this when the market was tiny, so when cars arrived in large numbers, Michelin already owned the roads. It also is important to point out they didn't wait till perfect to start. The very, the very first issue in 1900 of the Michelin Guide was very rudimentary. And Andre does something smart. Everything this guy does is smart. He turns the readers and users of the guide into contributors. So in the first guide, he puts this, "The present edition will obviously be found to be imperfect, but the work will improve from year to year. It will become perfect all the sooner if drivers will reply more precisely and in greater numbers to the questionnaire." So in every single book, there's a questionnaire. What did we get wrong? Without them, the drivers or the contributors, we can do nothing. With them, we can do everything. Then he does another smart thing. He then runs ads to help improve the guide, which itself is a form of a- an ad. The Michelin Guide is, is essentially an ad disguise, in disguise. So he's going to run ads in newspapers as a call to action to improve the guide, which is also an ad. And so this is what the ad said. "So Mr. or Mrs., it is in your interest that the guide be as accurate and complete as it can be, for if Michelin had to work only with its own resources, it would take several years to produce an accurate and perfect guidebook." Andre's call for help was an early example of a form of publicity that he may have invented, containing a question or announcing a competition engaging the reader's participation, all at the same time reminding them of the name Michelin. This is something he does over and over again, more advertising for your advertising. So he goes to the hotels that are featured in his guide, which advertises his products, and says, "Hey, if you're gonna be in the guide, you need to agree to put these in a special place where patrons of your hotel can see them and pick them up." Then he didn't stop there. He insisted on getting better prices for the people using his guide. So hotels listed in the guide had agreed to indicate prices for each meal and for different rooms. Prices representing a formal agreement to holders of the Michelin Guide, an engagement that Michelin was able to attain thanks to the publicity value of gui- the guidebook to hotel keepers. What is he saying? "I give you publicity. You give my readers better prices." So then this may be the first time I mention another trait that both Andre and his brother have and they believe in, in the fact that they are willing to invest for the long term. Remember, in 1891, they start making their tires, and they never stop. The first Michelin Guide could only be used by a small minority. There was not a lot of motorists in France yet. Yet it found its readers. It helped that the guide was given away for free for the first 20 years of its existence, and it helped that Andre was hell-bent on making every issue better and better. Here's a line about that. "Each new edition was a tour de force requiring painstaking checking, updating, and the introduction of new features." So look how much progress he makes in just five years. First one comes out in 1900. In 1905, 60,000 copies of the French guide had been distributed free of charge. And then Andre advertises the fact that 60,000 of these free guides are available. You should use them. You should help make them better. But he does it in a, in the Andre way. He, he calculated that so many books, each about an inch thick, if piled up, would equal five Eiffel Towers, one on top of the other. And then he says, "Why are so many people?" And we, we, we... There's 60,000 people using this book. Why so many people? You know, we could stack it fi- the size of five Eiffel Towers. Why are people using this guide? One picked up the red guidebook because it contained the key to some magical experiences. This is just great writing. Opening the door to truly fine hotels, tables set for superb meals. It was a guaranteed time and money saver. So from the customer's perspective, from the user's perspective, it's like, "Okay, this is free. You guys put all this effort into it. All these 60 other thousand people are using it, so it has to be good. I'm gonna get a key to magical experiences. I'm gonna be able to, to start going on the road, seeing my country, staying at wonderful inns, having great meals." But the, the point from the, the company's perspective, it's brilliant. Anything that could get more people to join the automobile age was good for Michelin. The Michelin guides provide them with compelling reasons to try out their cars and to wear out their tires. The restaurant or the hotel could become the reason for the journey, and this is when they introduced the Michelin star system. And the Michelin stars spelled that out. So the initial Michelin star system was a single star called attention to, quote, "A good table in its community. Two stars to an excellent table worth the detour." What a great line. Worth the detour. No, drive a little further. Just, just a couple more miles. You know, a couple more miles would cost, cost tens of thousands of customers. How many more tires are you selling? And then three, one of the best tables in France worth the trip. Edouard knew how to make tires, and Andre knew how to make them indispensable. And then again, this guy is prolific. Look where we are 12 years after Andre launches this. So now, 1912, okay? He has 12 of these guidebooks because he starts translating them into other languages. The 12 books now total for the year 7,046 pages. Total printings amounted to 274,000 copies. I think the number I heard is they distribute over 30 million of these guidebooks. And so then André

10. 36:53 – 39:57

    Guide Growth, Media Coverage and the Tourist Office

    1. DSDavid Senra36:53

       is advertising the fact that, "Hey, we have 12 guidebooks. They're in all these different languages. It's 7,000 pages. There's 275,000 people reading this." But that's not... He's not gonna list just those numbers. He says, "If stacked together, the copies printed this year would rise 20 times the height of the Eiffel Tower. In fact, they would match the height of Mount Everest." And then not scared to boast, not scared to promote, he says, "These days, there isn't a driver around the world who would want to travel without having a Michelin Guide handy." And the thing about me- forms of media is media begets media, so this becomes so successful that in America they start writing about this. Now, keep in mind, the book is so incredible, so now you're gonna have The New Yorker, right, which has a massive audience, talk about this book, which then leads to more free publicity for your brand. So this is what they said in The New Yorker. It says, "Michelin tires are presumably good tires, but one is apt to assume it because the Michelin maps and guides are so good, not the other way around." The reporter went on to enumerate the wealth of detail contained in each volume. It is human nature for customers to be predisposed to have a positive view of a brand they've never used a, the, the product from if it is associated closely with something that they love, and this reporter gets it. They're presumably good tires because the guides are so good, not the other way around. Think about how difficult it'd be like, "Here, I make tires. They're great tires. This is what I do. These are all the, the stats, and this is the innovations I have. Will you please buy them?" That's a lot harder sale than, "Hey, you've used this guide for years. Now you're driving. Now you have a car. Now you're driving more. Of course you're going to use Michelin tires." Michelin has already provided something for you of great value for free at considerable expense of time, money, and resources. What do I mean? By this point, they have 150 people working on the guide, and they receive 12,000 copies of the questionnaire. Okay? So that, that questionnaire slips into every copy saying, "Hey, please, uh, give us your feedback. Please tell us where we're wrong." 12,000 readers every year are sending back this questionnaire. So you have 150 people on staff, and you got a 12,000 volunteers helping make this thing better. And so then André has another incredible idea. He's like, "Okay, well, the guide, you know, it's, it's a portable... It's such a portable tour guide. Why don't we open a tourist office in Paris?" So you go to Paris, you walk into the office, and you say, "Hey, this is the kind of trip that I wanna take. This is what I desire. This is how much time I have." Michelin plans the ent- They do the rest. They plan the entire trip for free. Why? You already know the answer, because everything goes back to that core loop. We're gonna encourage more driving, which leads to more movement. More movement leads to more wear, which will automatically lead to more tire sales. Our company will prosper if people travel more, so let's create the conditions for people to do so. We are not selling tires. We are selling movements.

11. 39:57 – 45:23

    The Michelin Man and Pushing the Automobile Market Forward

    1. DSDavid Senra39:57

       So not only does André come up with this genius loop, not only does he create probably the, the most successful guidebook in history, the one that's still used to this day, the one that still is having effect on high-end culinary experiences to this day, he also creates probably the most successful company mascot in history. I looked this up. It's been voted the most successful company mascot, uh, multiple times. He, he creates the Michelin Man, this fat, lovable tire man. And again, th- th- they, they loved demonstration. This is something that a lot of the great entrepreneurs in history, a lot of the great advertising and marketing people said over and over again. The, the great, even the greatest copywriters would say this, that not... There's not a single ad that will perform better than one dramatic demonstration. So when they invent the mascot and they start running ads, it's this fat, lovable tire man, right? But in every ad, he's drinking a cup full of nails and glass. This fat rubber mascot becomes a celebrity and a metaphor. The reason he is drinking nails and glass is because he says the Michelin tire drinks up obstacles. The Michelin Man will show up at every single event. He even signs some of the columns as if it was written from him. He's used in posters. He's used on signs, and he is still around today. And then another core tenet of André is the fact that he's just relentless. He's always pushing harder for the development of more automobiles. So there's actually a funny story here before I get to that. I, I was thinking one time, um, when I was reading Rockefeller's autobiography. You know, Rockefeller was likely the richest person on, in the world at the time he retired. But he actually got richer and wealthier in retirement than he did when he was working because somebody else invented a technology that created more demand for his product, right? And so obviously Henry Ford's ability to mass produce automobiles for the very first time is going to drastically increase the amount of demand for his c- for his, for Rockefeller's product. And I remember it's, Rockefeller says, says something like in his autobiography, "Oh, like this youngly y- lovely young fellow, Henry Ford, came to visit today, and I just like him so much." I'm like, "Yeah, I bet you do. I bet you do like him so much considering he probably expanded the, the market for your product, I don't know, 1,000, 10,000X." And so what André realizes is like, "Hey, we're, we made a lot of progress. We're now in the, you know, in the 1920s. There's a lot more cars than we started, but we're way behind America and, and Henry Ford. So I'm not gonna keep asking you to buy tires. I'm going to push hard for further development of the automobile." And again, they do these massive campaigns. The amount of... They, they don't like, "Oh, we're gonna... Like we have an idea, and we're gonna put it out in like this weak, tepid way." Here, maybe we'll put up 5,000 flyers. No. Million, hundreds of thousands, millions over, and tens of millions over the life of the company. So here's an example of that. In December 1922, Andre launches a major national survey for po- of popular automobiles. Thousands of posters are pasted on the walls of major cities. Thousands of flyers are distributed. Andre explains, "In the United States, there is one car for every 10 people. In France, one car for every 150. We need to close the gap." Imagine how many tires we'd sell if there were 15 times the amount of cars on the road than there is today. Six months later, he prints another brochure about the same thing. We have a lot of room to grow. We should be making more cars in France. This one brochure, in one month, in 1923, is printed 600,000 times. Again, the guy's completely relentless. "Hey, we're making money on bicycles, we're making money on cars. I find it personally offensive," Andre found it personally offensive, "that the buses in my beloved Paris are still using solid rubber." And then he does it in a hilarious way. It says, "Andre teased the public transport authorities into renewing their equipment by running ads in the press with the following argument. 'Pigs, pigs, filthy, disgusting pigs are transported on air-filled tires because it's more economical, and they arrive in better shape. Parisians still ride in buses on solid tires. It costs more, and they arrive aching all over.' I want that business too. The buses in my beloved city should be riding on Michelin tires." And remember, this worked because the division of responsibility between the two cofounders. Andre sold the product, Edouard made the product. And the, the interesting part here is, like, once you have this up and running, obviously it starts with the product. They didn't market anything until they had a great product. But now, because there's all these innovations that Edouard's gonna do, he invents like four or five different, uh, innovations, 'cause he's j- he never leaves the factory. He's obsessed with, with trial and error. But the, the, the way these things, th- these two, uh, talents work together is that they know that the inventive mind of his younger brother, he's gonna churn out new products. And what would be devastating is he, you have this gifted mind, he's churning out new products, and yet no one hears about it. So when Edouard came forward with a new product, you had this publicity machine that was very, kept very well oiled by his brother, ready to run with it and make sure everybody knew of this product's existence. This is a necessity. This is not optional. As David Ogilvy said, "You can't save souls in an empty church." It didn't matter if Edouard was a genius inventor if no one knew those products existed.

12. 45:23 – 50:29

    Secrecy, Cost Control and Édouard's Efficiency

    1. DSDavid Senra45:23

       So then huge parts of both books go into how did the brothers manage their business? And so it says, "The spirit of the house," the House Michelin, okay? "Tenacity, creativity, secrecy in design and manufacturing, rigor in management, and often humorous advertising." There is just a handful of traits that reappear over and over again in both books. The fact that they're focused, they're super secretive, they're obsessed with technology, they're obsessed with cost control and efficiency. And so this factory in this remote part of France that I can't even pronounce, they describe it as the Rome of the Michelin Empire. There, the obsession remains. The tire, nothing but the tire. And not just any tire. They had a mantra that they repeat over and over again, "The best at the best price." That was their goal. For nearly a century, Europe's most secretive company had set its rhythm, calibrated its clock, and adjusted its ambitions according to this passion that borders on mysticism. What are they talking? This bur- what are they talking about? This burning, uncompromising, exclusive obsession. They are talking about the tire. And it seems almost paradoxical that probably the best firm at public relations, advertising, and, and promotion was also the most secretive. It said Europe's most secretive company. There's all kinds of rumors and innuendo about how secretive they were. All their secrecy revolved around protecting the IP, protecting the inventions, and a few of the ideas, the way they organized the company actually, uh, enhances their secrecy. So it says, "Michelin's ran a tight ship. It helped in keeping secrets that the firm made no appeal to outside sources of financing. Operations and expansion were financed out of profits. Managerial jobs stayed within the family. One student of the family compared the Michelin dynasty to that of the Rothschilds." This is what they said, "The same allegiance of each member to the tribe, the same allegiance of all to one. Discretion extended to factory operations. Prosperity depended on being first with improvements such as a better resistance, surer adherence to the road, and easier handling. The perfect tire came from the research department, from patient trial and error, and of course, secrecy would help. In this company, every scrap of paper was considered to be a secret." So then you have this relentless innovator, you have this person obsessed with secrecy, but Edouard would also not tolerate wasting time or money. He would tell his employees, "You have not considered the financial consequences." What was their, what's their organizing principle of the factory? Best tire, best price. You can't do that if you don't watch your costs. "You have not considered the financial consequences. I will not tolerate neglect on this point since our goal is to produce the best tire at the best possible price." He would not... He had a, like a visceral disgust to waste. This is what he would tell his employees. "Little streams make big rivers." This is not just watching every little cost. It's watching every little wasted movement inside of the company, right? So he says, "Little streams make big rivers, which means that a single minute lost under each hour adds up to eight in a day. That is 2,400 minutes in a year or 40 hours per worker. If the factory employs 20,000 workers and each loses that minute per hour, that is 800,000 hours in a year, the equivalent of 333 years of work." And so what Édouard did was he would look all-- He would, he would, he would look-- He would search the world for great ideas. He didn't care where they came from, and then he would implement those ideas into the business. So he sees the s- the, the form of scientific management, essentially me- what's happening in factories i-in America on a large scale, measuring and then breaking down tasks into their simplest elements, spreading them across a continuous chain, thereby making it possible for workers to produce more with less effort. He's essentially describing the Ford Motor Company's conveyor belt system. That is obviously a better system, so he takes that idea, and he applies it. Instead of manufacturing cars, he takes it and applies it to manufacturing tires. Now, he watches every penny, but he, he invests heavily in technology. If you listened to the episode last week, the Michael Ferraro episode, secretive, obsessed with technology, doing something for a very long time, no outside financing. It's the same ideas over and over again. Are you seeing this? And again, obsessed with watching costs, but investing heavily in technology because technology leads to growth and efficiency. The company never hesitates to spend fortunes on industrial robots or ultra-sophisticated measurement equipment. Remember, Michael Ferraro talked about, almost like in a lustful way, about his robots and about how beautiful they are, that he thought they had a soul. It's the same thing here. And so we're gonna invest in technology, but we're not gonna tolerate waste. Édouard returned to one of his favorite subjects, economy. Saving both time and money was one of his principal concerns. He had a penny-pinching side, a pathological penchant for efficiency, and he rooted out anything that would slow him down. This is a maxim that he would repeat over and over again and, and, and a great line, by the way. "Slowness is the special defect of large companies and a cause of their ruin." And so

13. 50:29 – 54:51

    Singular Focus, Long-Term Compounding and Closing Lessons

    1. DSDavid Senra50:29

       the fact that he was obsessed on making the best product, the fact that he would watch his costs, the fact that he invested in technology, the fact that he was obsessed with the long term, his singular focus fed all of this. People would come in like, "Hey, we have this other idea for a product," and he would flip out. He wanted to hear nothing about creating a different product. "The tire, just the tire," he would say. "Let us not get distracted. Sirens are seductive but dangerous," he would say. "We have too much to do with our tire to embark on anything else. Besides, this industry is thrilling. It will revolutionize the world. I cannot resign myself to seeing it grow without contributing to it." Édouard believed in the power of specialization and focus. Now, keep in mind, the other competitors, there's a bunch of other rubber companies that are making tires, but they would dabble. They would also dabble in other products. They'd make hoses. They'd make shoes. They'd make balls. Not the Michelins. They bet the future on one thing, tires. The brothers instilled a culture of everything for the tire and tires for everything. Everything for the tire and tires for everything. And think about how crazy this is, right? They start in 1891. They both die about 40 years later. What's the chance of the... They picked right. What is the chance? Think about this, like think about what the car was like in 1895 or 1900 when the Michelin Guide came out. The cars from that point, you know, even 10, 20, 30, 40 years in the future, certainly now, they're gonna change in every single imaginable way as the years go by. Who the hell would have predicted that the single constant would be the rubber tires? The Michelin brothers picked right. They could invest. [chuckles] If you think about it, what did Jeff Bezos say? Like, you should invest in things that won't change. In the beginning of Amazon, he's like, "You know, what's true today, that's gonna be true 10 years from now. And if you can identify those things, you can, uh, you can invest heavily in them and re- and reap rewards over a long period of time." His whole thought was like, "10 years from now, people are gonna want... They're not gonna wake up and say, 'Hey, I, I, you know, I d- I don't want my package faster. I don't want more selection, and I don't want lower prices.' So let's just invest in those things, and then we're gonna reap dividends for decades." That is the key that we, we see over and over again in these stories. Stay in the game. Do not interrupt the compounding. And so Édouard would say that. He's like, this is what he's talking to his, his people in the factory. "Do not rest on your laurels. We have customers who came to us at the beginning of our activity 20 years ago who have never bought tires from anyone else but us because they are good tires." That's the same thing that Ferrero said, that, "I made the best possible sweets and comforts and chocolates that I could, and now that kid who used to eat my chocolate 60 years ago has grown up, is a grandmother or grandfather, and their grandkids are now eating the chocolate." We have people who bought tires from us 20 years ago. They are still buying tires from us because they are good tires. To make good tires, you must make constant improvements. Got to beat last year's Michelin tire. And finally, it helps if you love what you do. Édouard stayed in the factory. He says it was an exceptional event if he made a departure from his sacred habits. He rarely left his workshop. And after his older brother André dies unexpectedly from bronchitis when he was in his 70s, Édouard tells his doctor, "You've got to keep me alive for another two or three years. The factory needs me." The Michelin brothers loved their business, and they believed in their mission. You cannot ask for more. And I'll leave you a reminder with the main idea, to create the conditions for your product's success. The Michelin brothers embedded their product inside human movement itself. They were engineers of movement, their genius insight. Make the world move, and make sure it wears out your product when it does. And that is where I'll leave it. For the full story, recommend reading the book. One of the books is only available in French, so I'll just link to the English version of the book, The Michelin Men: Driving an Empire. And if you buy the book using the link that's down below, you'll be supporting the podcast at the same time. Also, do me a favor and make sure that you're on my personal email list. You can sign up by going to davidsenra.com. The link will also be down below. I email my top 10 highlights for every single book that I read. If you go to the website, you can also read my top 10 highlights. I think I have top 10 highlights for like 177 books up there as well. That is 393 books down, one dozen to go, and I'll talk to you again soon.

Episode duration: 54:52