The Making of McDonald's: The Biography of Ray Kroc

1. 0:00 – 4:00

   Ray Kroc Discovers the McDonald Brothers and Their Multimixers

   1. DSDavid Senra0:00

      I have always believed that each man makes his own happiness and is responsible for his own problems. It is a simple philosophy. I find that it functions as well for me now that I'm a multimillionaire as it did when I was selling paper cups for $35 a week and playing the piano part-time to support my wife and baby daughter. It follows that a man must take advantage of any opportunity that comes along, and I have always done that too. After 17 years of selling paper cups, I saw opportunity appear in the form of a milkshake machine called the Multimixer, and I grabbed it. It wasn't easy to give up security and a well-paying job to strike out on my own. My wife was shocked and incredulous. Yet I was alert to other opportunities too when I heard about an incredible thing that was happening with my Multimixer out in California. I kept getting these calls, and the message was always the same. "I want one of those mixers of yours like the McDonald brothers have out in California." I got curious. Who were the McDonald brothers? And why were customers picking up on the Multimixer from them when I had similar machines in lots of other places? So I did some checking and was astonished to learn that the McDonald's had not one Multimixer, not two or three, but eight. The mental picture of eight Multimixers churning out 40 shakes at one time was just too much to be believed. So I flew out to California to check for myself. Something was definitely happening here. The cars began to arrive, and lines started to form. Soon, the parking lot was full, and people were marching up to the window and back to their cars with bags full of hamburgers. Eight Multimixers turning away at one time began to seem a lot less far-fetched in light of this steady procession of customers. I went over and introduced myself to Mac and Dick McDonald. They were delighted to see me. "Mr. Multimixer," they called me, and I warmed up to them immediately. We made a date to get together for dinner that evening so they could tell me all about their operation. I was fascinated by the simplicity and effectiveness of the system they described that night. Each step in producing the limited menu was stripped down to its essence and accomplished with a minimum of effort. That night in my motel room, I did a lot of heavy thinking about what I've seen that day. Visions of McDonald's restaurants all over the country paraded through my brain. In each store, of course, there would be eight Multimixers whirring away and padding a steady flow of cash into my pockets. The next morning, I got up with a plan of action in mind. I got together with Mac and Dick McDonald again. "I've been in the kitchens of a lot of restaurants and drive-ins selling Multimixers around the country, and I have never seen anything to equal the potential of this place of yours. Why don't you open a series of restaurants like this? It would be a gold mine for you and for me too because every one would boost my Multimixer sales. What do you say?" Silence. Then Mac McDonald said, "We don't need any more problems. We're in a position to enjoy life now, and that's just what we intend to do." His approach was utterly foreign to my thinking, so it took me a few minutes to reorganize my arguments. But it soon became apparent that further discussion would be futile, so I said that they could have their cake and eat it too by getting somebody else to open the restaurants for them. Then Dick McDonald asked, "Who could we get to open them for us?" I leaned forward and said, "Well, what about me?" When I flew back to Chicago that fateful day in 1954, I had a freshly signed contract with the McDonald brothers in my briefcase. I was a battle-scarred veteran of the business wars, but I was still eager to go into action. I was 52 years old. I had diabetes and arthritis. I had lost my gallbladder and most of my thyroid gland in earlier campaigns. But I was convinced that the best was ahead of me. That was an excerpt from the book I'm gonna talk to you about today, which is Grinding It Out: The Making of McDonald's, which is the autobiography of Ray Kroc.

2. 4:00 – 5:41

   Why Reread Kroc: It's Not What You Do, But How You Do It

   1. DSDavid Senra4:00

      So something that you and I have discussed before is this idea that the order that you read things in actually affects your interpretation of them. And the reason... The first time I read this book, it's been like six years since I read it. I think it was like episode seven of Founders. And back then, I didn't know what I didn't know. And so the past few weeks, I, I've noticed this really interesting pattern that has popped up over and over again, and it's the fact that it's not what you do but how you do it. And there's some examples that jump out at you on the last few episodes of Founders, like episode 288 with Ralph Lauren. The fact that he got wealthy... He almost went bankrupt when he was a manufacturer, and then he became one of the wealthiest people in the world when he switched from licensing instead of manufacturing. The early days on episode 290, the early days of Microsoft and Bill Gates. The fact that he would refuse to sell his software for a fixed price and instead get paid for every copy in perpetuity, but when he was buying other people's software, he'd always give them a fixed price and not let them get paid per copy. Then last week on episode 292, The Invisible Billionaire, Daniel Ludwig realizes in, in his early career, "Hey, I can make four X as much just switching from transporting lumber to oil." And so this idea that it's not what you do but how you do it has been coming up in conversations with other founders. And then I realized, oh, wait. Ray Kroc is actually a perfect example of this. I should go back and reread his autobiography because he made more money than other fast food chains by altering his business model where he'd actually own the real estate and then lease it back to the franchisee. And that alteration of his business model actually produced similar wealth effects like, uh, like Ralph Lauren changing from manufacturing to licensing, going from almost being bankrupt. In Ray Kroc's case, he could hardly pay his bills when he was just getting 1.9% of the sales of all the franchises to becoming unbelievably wealthy to when his wife actually dies a few years after he does. They wind up donating, I think, 1.5, close to $2 billion to charity. And so I'll go into a lot more detail about that in the middle of the book.

3. 5:41 – 8:45

   Early Life: Danny Dreamer, Red Cross, and a Brutal Work Ethic

   1. DSDavid Senra5:41

      I do wanna pull out two stories from his early life that I think are important, and then we'll get into his early career. Uh, we're gonna see a huge bias for action. Uh, even from a very young age, he was trying to start his own businesses and make a lot of money. They call me Danny Dreamer a lot, even later when I was in high school and would come home all excited about some scheme that I thought of. I never considered my dreams wasted energy. They were invariably linked to some form of action. When I dreamed about having a lemonade stand, it wasn't long before I set up a lemonade stand. I worked hard at it, and I sold a lot of lemonade. I worked at something whenever possible. There's an old saying that all work and no play makes Jack a dull boy. I never believed that because for me, work was play. And that last sentence is really important because that all-consuming work ethic that he has as a young man, he maintains throughout his entire life. I'll go over it. There's multiple highlights that I have where it's just like you won't believe his insane schedule. He makes it very clear in his autobiography that work was his number one priority throughout his entire life, and he makes no apologies for that, even though it destroys a lot of his personal relationships. And one more thing from his early life is when he drops out of high school because he wants to serve in World War I. The United States had entered World War I, and the war effort was very important. Everyone was singing, "Over there," and that's where I wanted to be. My parents objected strenuously, but I finally talked them into letting me join up as a Red Cross ambulance driver. I had to lie about my age. In my company was another... This is, this is crazy. I remember this from the first. This is one of the paragraphs that jumped out that I still remember from the first time I read this book six years ago. In my company was another fellow who had lied about his age to get in. He was regarded as a strange duck because whenever we had time off and went out on the town to chase girls, he stayed in his camp drawing pictures. His name was Walt Disney. And so the war ends, he refuses to go back to school, and he starts his career as a salesman. And this is what he mentioned earlier, that he's gonna sell, that he sold paper cups for 17 years. And this is the first indication that we get that he's gonna maintain an insane schedule throughout his career. It wasn't easy. I pounded the pavement in my territory from early morning until 5:00 or 5:30 in the afternoon. I would have worked longer, I suppose, but I had another job waiting for me at 6:00, playing the piano at a radio station. I had to arrive at the station at 6:00 PM and then play for two hours. I then had a two-hour break from 8:00 to 10:00 PM, and then I returned to work until 2:00 in the morning. A few hours later, at 7:00 AM, I'd be off with my sample case in pursuit of paper cup orders. The only break in this routine was on Sunday, which was my day off from selling paper cups, but we had afternoon hours at the radio station. So he just told you he's working from essentially 7:00 in the morning till 2:00 in the morning with a two-hour break from 8:00 to 10:00 PM, and he's maintaining that schedule for almost seven days a week. And he's married at this time. I think he got married when he was like 18 or 19. As you can imagine, his wife is not gonna be happy about this. They actually married for 35 years, and his decision to go all into McDonald's actually, actually causes them to get divorced. And so it says, Ethel used to complain about the amount of time I spent from, away from home working. Looking back on it now, I guess it was kind of unfair, but I was driven by ambition. I was determined to live well and have nice things, and we could do so with the income from my two jobs.

4. 8:45 – 12:07

   Florida Real Estate Boom, a Speakeasy Arrest, and Going All In

   1. DSDavid Senra8:45

      And so Ray starts the book saying, "Hey, every person's responsible for their own opportunity, and when you see an opportunity, you gotta chase it." The problem with the cup business is it's really slow. He's selling it in Chicago in the winter. And so he's like, "I don't make enough money during the winter. I gotta find another job during that period." And in the newspaper, he says, I had been reading about the business boom down in Florida. Newspapers compared the rush down there to the gold rush of 1849. This is in the mid-1920s, right before the Great Depression. There's this huge speculative real estate boom, uh, that's happening in Florida. And so he's worried that everybody's gonna get rich, and he's not. He convinces his bosses at the paper cup company to let him work down there during the winter, and he'll come back for the busy season. So he goes down and he says, "I got a job selling real estate." Everything I'd been hearing about the real estate boom was true. And so he's a young kid. He's in his early 20s, and he's trying to figure out, "Okay, where can I get customers? Like, where do I have an edge here?" And so he does something clever here. He says, I went to the Miami Chamber of Commerce, and I looked up the names of tourists who came from the Chicago area, where Ray was living and grew up. I'd call them and fill them in as one Chicagoan to another on an exciting development that I found in this land of crazy speculation. And his strategy worked really well. The problem was his timing was bad. Just when I was getting into the swing of selling these lots, the whole business vanished. And so now he doesn't have a product to sell, but he still has his piano pa- playing skills. So he's gonna get a job, and this job is going to lead him to go to jail. So he becomes a piano player at this nightclub on Palm Island called The Silent Night. This is happening in Miami. Today, Palm Island is still there, but now it is a really nice enclave of single-family homes. And so Ray loves his new job because he's making a ton of money. Soon, I was averaging $110 a week. That was really good money in those days. Why is he making so much money? Because the place is illegal, and he's working for a bunch of gangsters. The place itself was fabulous, gorgeous, glamorous, and illegal. The owner was a rum runner who bought the illicit booze he served from the Bahamas. A doorman was posted at the entrance gate to screen guests as they arrived. Before opening the gate, the doorman would push one of two buttons. One would ring a bell that would bring the maître d' bustling out to meet the patrons. The other button would sound an alarm that meant revenue agents, and those are the agents that are enforcing prohibition, which is currently, uh, the law of the land at this point in history. The doorman would delay the federal agents as long as he could. By the time they got inside, there was no evidence of liquor in the place. And so this goes on for a while. Ray is ecstatic until he gets popped. One night, the revenue agents outmaneuvered the Palm Island security men, and we all wound up in jail. I was mortified. And so he winds up getting out of jail and heading back to Chicago. He says, I had left Florida in the nick of time. The club closed its gates for good. Palm Island popped up into the news once in a while as time went by because Al Capone built a home there. And so when he gets back to Chicago, he does something smart. He says, "Okay, no more multitasking. I'm all in on one thing and one thing on- only. I'm gonna pick the best opportunity and go all in on that." When I returned to Chicago, I started selling paper cups again. I vowed that this was going to be my only job. I was going to make my living at it and to hell with moonlighting of any kind. I intended to devote every ounce of my energy to selling, and that's exactly what I did. And so when I got to that part, the note I jotted down, uh, for myself is actually this quote that I keep on the home screen of my phone, and it's a quote from the Michael Jordan documentary, The Last Dance, describing Michael Jordan, and it says, "A guy that was totally focused on one thing and one thing only." And so at this point in his life, he has to deal with a devastating tragedy, and that's the early death of his father. He was just

5. 12:07 – 13:47

   His Father's Death and the Psychopathic Drive for Success

   1. DSDavid Senra12:07

      explaining this huge speculative real estate bubble that was happening right before the Depression. And as I reread this highlight several times, what popped to my mind is that quote that I tell you over and over again that comes from episode 242, which is the biography of Francis Ford Coppola, and it says, "You can always understand the son by the story of his father. The story of the father is embedded in the son." Ray, even Ray says, like, he had this psychopathic drive to have financial success. And even though he achieved great wealth later in life, even after he had that wealth, he still had that psychopathic drive to keep doing more. And once you understand how his dad's life ended, I think that makes more and more sense. And so Ray's dad's got a job that he doesn't really like. He wants to make more money. He's not making enough money, so he's like, "Hey, I'm gonna..." He essentially began speculating in real estate. And so at a time where if you make 100 or a couple hundred bucks a week, that you're doing fantastic, his dad is, like, buying lots or houses for 6,000 and then selling it a short time, uh, for 18,000. And so in a story that's told as time, he confuses luck with skill and holds on way too long and gets caught up in the bu- the bursting of this, this huge speculative bubble. Father seemed to have a Midas touch when it came to picking property. He was so busy pyramiding his land holdings, so throwing more money into it, though he'd somehow failed to see whatever warnings there might have been of the impending crash. When the market collapsed, he was crushed beneath a pile of deeds he could not sell. The land was worth less than he owned. This was an unbearable situation for a man of my father's principled conservatism. He died of a cerebral hemorrhage in 1930. He had worried himself to death. On his desk the day he died were two pieces of paper, his last paycheck and a garnishment notice for the entire amount of his wages.

6. 13:47 – 19:12

   The Multimixer Gamble and the $68,000 Buyout

   1. DSDavid Senra13:47

      And so as I mentioned earlier, Ray's gonna sell paper cups for 17 years. One of his customers, this guy named Earl Prince, is actually going to invent the Multimixer. So Ray's gonna jump from selling paper cups to selling the Multimixer. As we already know, the Multimixer is what leads Ray to the greatest opportunity of his life. So he says, he- we're selling the Multimixer. I wanna go over just the... He, he talks a lot about his first marriage, and I think in describing the, the di- the relationship dynamic between him and his wife, we actually understand a lot about who he was as a person. And so he says the Multimixer was the invention that really made big volume milkshake production possible, and it changed the course of my life. So he mentioned earlier that the, the reason... He made a, a good deal of money from selling paper cups. With the introduction of Prohibition, there was, like, this huge boom in America at the time for these soda and milkshake fountains. You'd see, like, stores would pop up everywhere. They'd be in, like, inside of Walgreens. And so this huge explosion in that industry actually helped him because they needed the paper cups that he was selling. And so his customer goes to him and says, "Hey, why don't you leave Lily Tulip," that's the paper cup, uh, company that he's working for, "and just go, we'll go into business together. I will make, uh, and manufacture the Multimixers, and you can sell them, and then we'd split the profits." And so Ray's super excited about this business opportunity. He believes in it, but when he tells his wife, she thinks he's crazy. Ethel was incredulous at the idea that I would give up my position and go off on a flyer like this. "You are risking your whole future if you do this. You are 35 years old, and you're gonna start all over again as if you were 20? What if the Multimixer turns out to just be a fad and fails?" "You have to trust my instincts on this," I said. "I'm positive that this is going to be a winner. I want you to help me. Come down and work in the office for me, and together we will make it a terrific business." "I will do no such thing," she said. "But Ethel, I need your help." She absolutely refused to help. I felt betrayed. That was when I began to understand the meaning of the word estrangement. It is a terrible feeling, and once it appears, it grows like dry rot. Ethel did not deter me, though. When I have my mind made up about a business deal, that's it. That's not the last time they're gonna fight about Ray's ambition over and over again. He does do some crazy stuff when he just said, "Hey, you know, if I have my mind made about a, about a business deal, that's it." Uh, he puts his money where his mouth is. He, he'll mortgage his home to go and raise the money needed for his business. We'll get there in a minute. I do wanna bring up one thing, though. He brings in the Multimixer contract to his actual employer because originally he's like, "Hey, maybe we could sell this together." They don't have an interest in it, so when he tells his boss, "Hey, I'm gonna strike out on my own. I'm gonna go into business with Earl," they won't let him because they have the contract. The actual Multimixer contract is with his company. But he's their best salesman, so he's like, "If you don't let me do this, I'm gonna quit anyways." And so they work out a deal that winds up being a terrible deal. And so this bad deal actually leads Ray to mortgaging his house to buy out his partner, but we're not there yet. Says, what we worked out was a deal in which I got the Multimixer contract, and the company got 60% of my new company. It was a satanic setup, but I didn't see that then. And so he sets up this new company to sell the Multimixer. He calls himself a one-man band, and he just starts hitting the streets. I was having a lot of fun back in 1938 when I struck off on my own. I was a one-man band, and I traveled all over the country. Sales were not bad considering the newness of the product, but I was extremely unhappy with my financial setup. I determined after a little more than two years that I was gonna have to get that, that 60% back somehow. And so he keeps pushing the point. He's like, "What's your buyout number? What's your buyout number?" He's gonna do the same thing for the McDonald's brothers. That's why I'm reading this section to you. And keep in mind, the company gave him $6,000 of startup capital. He's doing all the work. Two years later, this is what they tell him. I don't know how he kept from choking on his own bile as he mouthed the figure, $68,000. And so Ray's disgusted by the situation, but he wants out. I didn't know where the hell I was gonna raise that money, but I had made up my mind to do it. In the end, most of the cash came from my new home. I managed to get an increase in the mortgage, much to Ethel's dismay. I don't think she ever got over the shock of discovering that we were $100,000 in debt. And it's during this period of his life that he first mentions why the book is titled Grinding It Out. For me, this was the first phase of grinding it out, building my personal monument to capitalism. I paid tribute in the feudal sense for many years before I was able to rise with McDonald's on the foundation I had laid. Without the adversity, I might not have been able to persevere later. I learned then how to keep problems from crushing me. I refused to worry about more than one thing at a time, and when I... and I would not let useless fretting about a problem, no matter how important, keep me from sleeping. I knew that if I didn't sleep well, I would not be bright and fresh and able to deal with customers in the morning. And so think about how crazy this is. He sold paper cups for 17 years. He starts selling the Multimixer in 1938. Now, this is in the early 1950s, and he realized, "Uh-oh, I'm in a dwindling business." And he knows this because he spends his time traveling around talking to his customers, so his customers are restaurants, drug stores, soda fountains, and little by little, they're either downsizing or eliminating selling milkshakes or sodas completely. And so he has a few-year window to be like, "Okay, well, I'm going to either be in a decreasing business, or I have to find something else." And this is the, the punchline, the upshot of all this. "I knew that I had to find a new product." At this point, he'd been selling the Multimixer for 15 years. "It was not long after that that I became intrigued by the stories of the McDonald brothers and their operation that keep, that kept eight Multimixers whirring up. What the hell, I thought. I'll go see for myself. So I booked my 52-year-old bones onto the red-eye special and flew west to meet my future."

7. 19:12 – 24:43

   The McDonald's Contract and Its Fatal Clause

   1. DSDavid Senra19:12

      And so one of the most important decisions the, the McDonald brothers, uh, made early lo- on is that they, they made every detail perfect, and then they'd limit the number of details they had to perfect. This is something you can see that the present corporation totally got away from. But I thought this description was good. "It was a restaurant stripped down to the minimum in service and menu, the prototype for legions of fast for- fast food units that would later spread across the country. The simplicity of the procedures allowed the McDonald's to concentrate on quality in every step, and that was the trick. Make every detail perfect, and limit the number of details to perfect." And so from the very beginning, Ray makes two crucial mistakes. One, he acts as his own attorney, and two, he accepts just a terrible, uh, deal. This is, again, he's known for, like, accepting these bad, uh, financial deals at the beginning and then trying to figure out a way to wiggle himself out later. But there's one specific clause in the contract that is gonna cause the disintegration of the partnership between the McDonald brothers and Ray Kroc later on, and he says, uh, "I was for the contractual clauses that obligated me to follow their plans down to the last detail, too, even to signs and menus, but I should have been more cautious there. The agreement was that I could not deviate from their plans in my units unless the changes were spelled out in writing and then signed by both brothers and sent to me by registered mail." This is never going to happen, by the way. "This seemingly innocuous requirement created massive problems for me. A man..." There's, he says, "There's an old saying that a man who represents himself has a fool for a lawyer, and that certainly applied to me in this instant. I was just carried away by the thought of McDonald's drive-ins proliferating like rabbits. Also, I was swayed by the affable openness of the McDonald's brothers." And so he says, "The meeting was extremely cordial. I trusted them from the outset." And then he goes into what he agreed on financial terms. And again, this makes sense. I'm not criticizing him here when he says, "Hey, the agreement gave me 1.9% of gross sales from franchisees." So he gets... That, that's his whole thing. He g- ... "I'm gonna make 1.9%." He's gotta kick up half of a percent to the McDonald's brothers, so really, he gets 1.4%. They're selling hamburgers for 15 cents. And so eventually, he hires this guy, Harry, to work with him. They're, really, they're more like partners, and Harry's like, "Hey, you don't build an empire off of 1.4% of a 15 cent hamburger." But now that I've read this over and over again, I realize this, oh, well, keep in mind, at this point, he's signing this. He's not thinking he's gonna make a ton of money by building this huge franchise system that McDonald's becomes, right? He's like, "Oh, I'm just gonna create more demand for the Multimixer. If I can set up a bunch of s- McDonald's stores all over the country, all of them will have to buy eight Multimixers from me." That's an important point, and he does not realize the s- the sheer scope. There's no way he could, right? Like, McDonald's becomes one of the largest com- companies that ever existed, but he does not realize the size and scope of the opportunities right in front of him yet. We'll get there in a minute. The brothers were to get f- uh, half of a percent out of my 1.9%. I just told you that. If they had played their cards right, that, uh, half a percent would they, would have made them unbelievably wealthy. I'll get into more details of how he buys them out on that later as well. But this part is important because it explains his mindset. I kinda just gave you a summary of that, uh, a minute ago. "I've often been asked why I didn't simply copy the McDonald brothers' plan. They showed me the whole thing, and it would've been easy matter to pattern a restaurant after theirs. The idea never crossed my mind. I saw it through the eyes of a salesman. Here was a complete package, and I could get out and talk up a storm about it. Remember, I was thinking more about prospective Multimixer sales than hamburgers at that point." And then he also mentions the fact that he liked the name. This is something he repeats over and over again. I think product names, company names are actually really important. I think other people discount that. "There was, uh, there was also the name. I had a strong, intuitive sense that the name McDonald's was exactly right. I couldn't have taken the name." Meaning, if he did it on his own, he couldn't have taken their name. And so the fact that Ray goes all in on McDonald's is what kills his marriage. "Ethel was incensed by the whole thing. We had no obligations that would jeopardize, that we would be jeopardized by it. Our daughter, Marilyn, was married and no longer dependent on us, but that didn't matter to Ethel. She just did not want to hear about McDonald's. It closed the door between us. I had no time to bother with emotional stress. I had to find a site for my first McDonald's store and start building." And you're gonna see this guy's a little nuts when it comes to the women in his life. He's gonna be mult- uh, married multiple times in the book, and just the way he jumps into these things. I'll, I'll tell you more about that in a minute. So from the very first time, he violates this order, uh, this clause that they have in the contract that, hey, if you're gonna make any changes, you have to notify us in writing. We have to sign that it's okay, and then we have to mail it back to you. And for some weird reason, they would agree over the phone, but they would never actually put it in writing, so this causes him, he's gonna wind up being default, in default right from the very beginning. And again, this is partially Ray's fault. He jumped into business. Uh, he's in a partnership with people he doesn't really know. "I called the McDonald boys and told them about my problem. Well, you need a basement, they said, so build one. I reminded them that I'd ha- that I had to have it documented by a registered letter. They pooh-pooh'd it and said it was all right and go ahead. I went ahead with the building, telling myself that when I got breathing space, I'd fly out to see the McDonald's, uh, McDonald brothers and get the, all the contractual, uh, details wrinkled out once more, or ironed out once more," excuse me. "That would have worked had the McDonald's been reasonable men. Instead, they were obtuse. They were utterly indifferent to the fact that I was putting every cent I had and all I could borrow into this project. When we sat down with our lawyers in attendance, the brothers acknowledged the problems but refused to write a single letter that would permit me to make changes." And so Ray and the McDonald's brothers would have weird interactions like this. "'Uh, we have told you by telephone that you may go ahead and alter the plans as we discussed,' said their attorney." "But the contract calls for a registered letter. If Mr. Kroc does not have one, he's put in jeopardy," said my attorney. "That's your problem," the response would be. It was almost as though they were hoping I'd fail. This was a peculiar attitude for them to take because the more successful the franchising, the more money they would make.

8. 24:43 – 27:34

   Opening the First Store and Kroc's Perfectionism

   1. DSDavid Senra24:43

      And so Ray has no choice but to go ahead and open his first McDonald's store. Keep in mind, he is still working full-time selling Multi-Mixers at the same time that he's developing the first store. So this is, again, uh, another example of this, this crazy schedule that he would maintain. He was doing this when he was 17. Now he's still doing this in his 50s. I would drive down to the Des Plaines, uh, location each morning and help get the place ready to open. The janitor would arrive at the same time that I did, and if there was nothing else to be done, I'd help him. I'd never been too proud to grab a mop and clean up the restrooms, even if I happened to be wearing a good suit. So, uh, the reason I read that sentence to you, he repeats this over and over again in the book. Like, he's like a neat freak. He would explode if the bathroom was dirty or if there's, like, litter in the parking lot. Uh, so he says, uh, but usually there were a lot of details to be taken care of in terms of ordering supplies and keeping the food, food operation going. So I'd write out detailed instructions for Ed. Ed's the guy that he hired, uh, to run this first store. Uh, Ed came in at about 10:00 in the morning, and then, uh, he'd open the store at 11:00. I would leave my car at the store, walk a few blocks to the train, and then take the train to Chicago and be in my office before 9:00. This is where he's selling Multi-Mixers. Shows up to McDonald's early before they open, helps it get set up, then goes selling Multi-Mixers all day. When he's done with that, in the evening, he goes back to McDonald's. In the evenings, I would commute back and walk over to the store. I was always eager to see it come into view. My McDonald's, exclamation point. He's super happy about this. But sometimes the sight pleased me a lot less than other times. Sometimes Ed would have forgotten to turn the sign on when dusk began to fall, and that made me furious. Or maybe he [laughs] he brings up the, the litter again. Or maybe the lot would have some litter on it that Ed said he hadn't had time to pick up. Those little things didn't seem to bother some people, but they were gross affronts to me. I'd get screaming mad and really let Ed have it. But perfection is very difficult to achieve, and perfection was what I wanted in McDonald's. Everything else was secondary. And I think it's actually important to pause there. And I think one of the most important parts of this autobiography is that Ray is not trying to get you to like him. In fact, I would argue if you read this book and you get to the end of it, you're not gonna say, "Hey, Ray sounds like this great guy. I'd like to be friends with him." I think it's much more likely to get to the end of the book and be like, "Oh, wow, this guy's driven, persistent, ruthless, and willing to destroy anybody that gets in his way." This is a very old book. It was published in 1977. They just ma- they, they made a movie about the book where Michael Keaton plays Ray Kroc. You can watch it on Netflix. It's called Founder. And there's a line in that movie that I think is demonstrating the point I'm trying to make to you, where he says, "Hey, if my competitor was drowning, I'd put a hose in his mouth." He does not hide that side of him. He just referenced, like, even leaving a little piece of the trash, and I'm gonna explode. I'm gonna get in your face. I'm gonna yell. And his justification is that, hey, perfection is very difficult to achieve, but perfection is what I wanted in McDonald's, and everything else was secondary to me.

9. 27:34 – 33:47

   Harry Sonneborn's Real Estate Insight

   1. DSDavid Senra27:34

      And so this is the part where the most important person in the McDonald's story not named Ray Kroc appears, and this is this guy named Harry Sonneborn. And Ray admits without Harry's idea, McDonald's would have never grown into the company that it grew into. And so I'm gonna tell you the way that Ray describes Harry's idea, and then I'm actually gonna read you the summary of Harry's idea from the movie, which I think is absolutely fantastic. And it says, "This is the move that made possible McDonald's dramatic growth. It started our evolution as a company whose business was developing restaurants and selling franchises to operate them. Our aim was to ensure repeat business based on the system's reputation rather than on the quality of a single store operator. This would require a continuing program of educating and it's..." This is gonna sound, like, uh, basic to us now because this is, uh, what, like, the world we live in now where there's a ton of franchises for everything, but this world did not exist at the time they're building McDonald's. This required a continuing program of educating and assisting operators and a constant review of their performance. It would also require a full-time program of research and development. I knew in my bones that the key to uniformi- uniformity would be in our ability to provide techniques of preparation that operators would, would accept because they were superior to methods they could dream up for themselves. But research and development and staff to supervise and service operators effectively takes money. That's a big problem because what is he getting now? It takes more than 1.4% of a 15-cent hamburger and some fries and shakes. The only practical way for McDonald's to grow as we envisioned would be for us to develop the restaurants ourselves. We could plan a strong system in which locations could be developed by McDonald's as part of, part of an overall long-range nationwide marketing program. It would make the right to operate a McDonald's restaurant far more valuable to a potential operator than if we were franchising only a name. Actually getting into the restaurant development business was a seemingly insurmountable problem. Harry's solution, the formation of Franchise Realty Corporation, was to my mind a stroke of financing genius. When Harry came up with a way to make it possible, I backed it by going into hawk for everything I had, my house, my car, you name it. And this part is exactly why I wanted to read this book right now in the sequence that I'm reading it in, given what I told you about Ralph Lauren, Bill Gates, and Daniel Ludwig at the beginning. It is not what you do, it's how you do it. Let me go to Harry's fantastic summary of this idea that appears in the movie, and he's talking, in the movie, he's talking to Ray. He says, "You don't seem to realize what business you're in. You're not in the burger business. You're in the real estate business. You don't build an empire off of a 1.4% cut of a 15-cent hamburger. You build it by owning the land upon which that burger is cooked. What you ought to be doing is buying up plots of land, then turning around and leasing those lots to franchisees, who as a condition of their deal are permitted to lease from you and you alone. This will provide you with two things." Two things that at this point in McDonald's history Ray Kroc does not have. Number one, a steady upfront revenue stream. Money flows in before the first stake is in the ground. And number two, greater capital for expansion, which in turn fuels further land acquisition, which in turn fuels further expansion. That, that right there is how they go, at this point they have maybe a few dozen McDonald's, to by the time the book ends in 1977, to 4,000, to today, 40,000. This changes everything because now they have access to capital. Before, Ray's trying to get, uh, loans for expansion. They're like, "Okay, well what do you own?" "Well, I own the contract that lets me build franchises." And they're like, "What do you get for that?" And they're like, "1.4%." And so bank after bank and lender after lender are like, "Uh, no, no, no thank you." But by owning the real estate and then leasing it back opens up these giant pools of capital. First they start off doing, like, regular mortgages and then, then Harry's like, "Oh, wait, we gotta target..." They start targeting, uh, life insurance companies. And there's a line in the book on that. It says, "We're doing fine with these bank mortgages," Harry said. "But if we're gonna... But we're gonna have to get some big institutional investors to back us." Harry went after life insurance companies. And so if you look back at Ray's life up until this point, it's fascinating. You know how Steve Jobs said you can't, you can't connect, connect the dots looking forward, it only makes sense looking backwards? Let me actually pull the full quote, because I think repeating it from time to time is actually valuable. Uh, s- I think Steve said this at, uh, his commencement address. But he says, "You can't connect the dots looking forward. You can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something. Your gut, destiny, life, karma, whatever. This approach has never let me down and it has made all the difference in my life." So Ray goes from selling paper cups, which leads him to selling multi-mixers, which then leads him to discovering McDonald's brothers, which then leads him to setting up more McDonald's stores so he can sell more multi-mixers, which then leads him to meeting Harry Sonneborn, and Harry leads him to the true business innovation that is going to be responsible for all of Ray Kroc's wealth. There's no way you're connecting those dots looking forward. And so in addition to his financial genius, I think having somebody that truly believes in the opportunity that you're pursuing the same way you do is very valuable. We see Harry thinks about this opportunity, the, the size of the opportunity just like Ray does. I recall that Harry made a trip to San Bernardino, that's where the very first McDonald's was, where the McDonald brothers lived. Uh, made a trip to San Bernardino about the time where we were really starting to roll. And Dick McDonald asked him what he thought of the future, what the future of McDonald's would be. Harry told him that one day this company would be bigger than FW Woolworth. So that's not gonna make... That's gonna mean nothing to most people. But if you read stories about the early American retail industry, FW Woolworth was a gigantic company. It was one of the most successful American, uh, retail companies. Started in the late 1800s and got gigantic in the middle of the, uh, middle 1900s. And so with that background, you're gonna see Dick McDonald's response is gonna make a lot more sense. So let me read this to you again. Uh, when we were really starting to roll, uh, Dick McDonald asked Harry what he thought about the future, or what the future of McDonald's would be. Harry told him that one day this company would be bigger than FW Woolworth. Dick really did a double take at that. He told me later, "I thought you had a genuine nut on your hands, Ray." But Harry knew exactly where he wanted to go, and he knew how to get there. And so at the beginning of all this, they have a tiny, tiny team

10. 33:47 – 36:00

    The Human Cost: Missed Birthdays and June Martino

    1. DSDavid Senra33:47

       at headquarters, and so Ray's gonna ask for an unbelievable amount of sacrifice. I'm just gonna tell you what I wrote before I read this to you. Missing your kids' birthdays to sell 15 cent hamburgers is whack. But again, Ray does not hide who he is. Unfortunately, he convinced other people to make the same sacrifices, and I'll tell you why that's so tragic in one second. I felt deeply indebted to Harry and June. June, I think, was the first employee of the McDonald's Corporation, what's gonna turn into the McDonald's Corporation. She act- she's actually, when they go public, the first woman ever allowed on, uh, I think it's the NASDAQ or the New York Stock Exchange. Um, so it says, "They worked tirelessly. I knew that both of them were negle- neglecting their family obligations completely so that they could stay on top of things in our rapidly building operation. June later told me that all the while her two boys were growing up, she never made it to one of their birthday parties or graduation ceremonies." How do you think her kids feel about that? And when I tell you in one second, how do you think if June was alive, we could talk to her how she felt about it. I'll get there in one second. I was in the same boat. It was a little easier for me perhaps because of my continuing cold war between Ethel and my daughter and me. So again, he's saying, "I got shit relationships with my daughter and shit relationships with my wife. My total commitment to business had long since been established in my home. I gave them stock, 10% to June and 20% to Harry, and ultimately it would make them rich." Now why did I ask you how do, how her kids feel about it? You know how her kids feel about it. How does June feel about it? A few years from now, Harry and Ray are going to have a falling out. Ray is going to kick Harry out of the company, and they wind up not talking for almost a decade. And shortly after that, he said he made June retire because she was part of the old guard and she wasn't with the new way they were doing things. That's another way of saying he fired her. Yeah, she got to keep her stock. She was still rich. But this person saying, "Hey, miss your kids' birthdays. Every single one of your two boys when you're growing up, miss them for me," is the same person a decade from now that is going to fire you. Missing your kid's birthday to sell 15 cent hamburgers is whack. You got work to do? That's fine. Wake up earlier when your kids are still sleeping. Work after they're sleeping if you have to, but don't miss their birthday party.

11. 36:00 – 39:06

    Overnight Success, Company Stores, and Advertising as Investment

    1. DSDavid Senra36:00

       And so something also that he mentions in the book is how different people will treat you. At the very beginning, he starts trying to sell these franchises, uh, you know, he's 52, 54 years old, and he's a member of a country club, and people are, like, kind of laughing at him. They're like, they thought he was nuts. Like, why are you going and trying to sell hamburgers? And then once they start seeing that McDonald's is gonna turn into, like, this massive success and the growth happened so fast, they're like, "Oh, McDonald's is like this overnight success," and he's got an interesting response to that. And he says, "People have marveled at the fact that I didn't start McDonald's until I was 52 years old, and then I became a success overnight." But I was just like a lot of show business personalities who work away quietly at their craft for years, and then suddenly they get the right break and make it big. I was an overnight success all right, but 30 years is a long, long night. So some of their franchisees are absolutely fantastic. Some are con artists. One con artist causes them, uh, to lose about $400,000. And that, taking that negative, they actually re- realize, oh, wait, we have to protect our downside here. So they actually do something really interesting and something that Ray was previously against. And so they decide one way to protect their downside is actually by owning a group of stores themselves. And so up until this point, Ray was adamant about not selling stock, but he did want to protect his downside. So it says, "In the course of our loan discussions, the idea emerged that we should build and operate 10 or so stores as a company. If worse came to worst, we could always retrench and operate our company stores under some other name." Remember at this time, he's still partners with the Mc- McDonald's brothers, so if he's saying, if they enforce, like, this default on the contract, well, we own these stores. This is a separate company. We could just start anew under a different name. So that's what he's talking about there. And so a bunch of these, uh, insurance companies are willing to lend him money to do this in exchange for they want 20%, they want 22% of our stock, uh, in exchange for $1.5 million. I fought with the idea of giving up any part of the stock in the company I had struggled so desperately to build. Yet the appeal of $1.5 million was irresistible. This is in 1959. So it says they, they wind up doing this deal. The three insurance companies make a ton of money on this. It says they sold their stock a few years later for between $7 and $10 million. So they turned 1.5 into 7 to 10 million. However, if they waited until 1973 to sell, so what's that, like 14 years in the future? They would've gotten over $500 million for it. And it's a good thing he did this because the fights with the McDonald brothers continue. This time they're fighting over advertising. The McDonald brothers were simply not on my wavelength at all. I was obsessed with the idea of making McDonald's the biggest and best. They were content with what they had. They didn't want to be bothered with more risks and more demands. We asked them to contribute 1% of their gross, uh, their gross sales towards an advertising campaign that would benefit our stores and all of them as well, but they would have nothing to do it, do with it. All I could do for the time being was to live with it. And so this is something that Ray's gonna repeat us- uh, several times throughout the book. He's like, he, he has an intense belief in advertising because he saw how effective it was, uh, for the early growth in McDonald's. In our business, there are two kinds of attitudes toward advertising and public relations. One is the outlook, outlook of the begrudger, who treats every cent paid for an ad program as if they were strictly expenditures. My own viewpoint is that the pr- is that of the promoter. I never hesitate to spend money in this area because I see it coming back to me with interest. So they saw it as another expense. He saw it as an investment.

12. 39:06 – 40:18

    Kroc's Love Life and the Divorce from Ethel

    1. DSDavid Senra39:06

       So I mentioned earlier that this guy, when it comes to, like, his love life, is, uh, a little nuts. He's still married, uh, to Ethel. They're estranged, but they're still, uh, technically together. He's gonna try to steal this guy's wife and the wive- they're... It's a husband and wife that actually are one of the franchisees. And so because of the fact that they're running one of the stores, he winds up talking to... Her name's Joanie. He winds up talking to Joanie on the phone all the time, and then he just decides, hey, like he's trying to convince her, "Hey, leave your husband." And he's like, "Oh, I guess I have to get divorced first." He, this guy's nuts. Uh, so he says, uh, this led to long telephone conversations between Joanie and me. I would be tingling with pleasure from head to toe when I hung up the receiver. Feeling this way made it impossible for me to go on living with Ethel. I moved out of our home. The next step was to propose to Joanie that we both get divorced and marry. She says no, but this goes like, uh, he's gonna wind up... This is what I mean about this guy's nuts. He winds up pr- preventing... He's like, "Okay, I guess I gotta divorce first." So he gets divorced. Joanie says no. Then he's gonna marry somebody else for like five or six years. Then he has another shot at Joanie, so he divorces that lady too. This is wild. And then again, in his divorce settlement with Ethel, we see what he really believes in. So I bought my freedom from Ethel. She wound up getting everything I had except my McDonald's stock.

13. 40:18 – 42:04

    Buying Out the McDonald Brothers with the 12 Apostles

    1. DSDavid Senra40:18

       So the tension between him and the McDonald's brothers keeps growing until he's just like, "Okay, just name your price. I need to get the hell out of this contract. How do we do it?" Very similar to when he needed to get out of the contract for $68,000, uh, w- when he was selling Multimixers. I called Dick McDonald and asked them to name their price. He did, and I dropped the phone, my teeth, and everything else. He asked me what that noise was, and I told him that was me jumping out of the 20th floor of the office. They were asking for $2.7 million. Needless to say, Ray does not have $2.7 million at this point in his career. This was gonna really take some financial wheeling and dealing. So they wind up getting in touch with this guy. He's actually a financial advisor to Princeton University, Howard University, Carnegie Tech, the Ford Foundation, and about 12, uh, 12 educational and charitable ins- uh, institutions in total. These 12 charitable, uh, and education institutions are going to lend him the $2.7 million. They call these guys the 12 apostles. And in return for the $2.7 million of cash that they get to buy out the McDonald's brothers, the 12 apostles want the McDonald's brothers what they were getting, the half a percent of gross sales of all McDonald's stores. And the reason I'm reading this to you is because it's just crazy. When you have a business that's working, how much value creation can happen, you know, in five, 10, 15 years. It was an extremely successful deal. The 12 apostles wound up making $12 million on it. Okay, so they do 2.7 million. 2.7 million in, they get 12 out. But here's where it gets real crazy. Remember that we had been forking over half a percent to the McDonald brothers all along anyhow. The total cost of this transaction to us was about $14 million, and it was peanuts compared to what the corporation earned in the years that followed by retaining that 5% instead of paying it to Mac and Dick McDonald. On today's system-wide sales, which is in 1977, on today's system-wide sales of more than $3 billion, that half a percent would be 15 million a year.

14. 42:04 – 44:05

    McDonald's as Religion: Faith, God, Family and McDonald's

    1. DSDavid Senra42:04

       And so you and I have talked about before the fact that if you understand why, you have to understand why somebody's doing something. And if you understand why they're doing it, their actions will make a lot more sense to you. I always use the reference of the fact if you go and study John D. Rockefeller's career, he literally believed that he felt moneymaking was a God-given talent and that he had to make as much money as possible so that for he could give away as much money as possible. And so viewed through that lens of his belief, it makes sense about why he made the decisions he made in his career. Ray's a very extreme dude. He's not hiding it. And the reason being is because he views McDonald's as his religion. He uses the word faith. He says, "I have a whole album of mental snapshots from this time period. Turning through them brings back a rush of memories. Not nostalgia, but reaffirmation of my faith in McDonald's. I speak of faith in McDonald's as if it were a religion. That is exactly the way I think about it. I've often said that I believe in God, family, and McDonald's, and in the office, the order is reversed." That makes sense. So now when you're like, "Hey, dude, why are you getting this guy's face with, like, a little piece of trash on the ground?" Or you're throwing shit in your office, or you're banging on the tables, or you're kicking out partners, or you're firing people that have been with you for 25 years. It is a religion to him. And if he feels you're getting in the way for the constant growth and expansion of that religion, he will view you as a problem and stop at nothing at solving that problem. And it's because he has this religious zeal for McDonald's. Just like when, uh, when Harry was talking to Dick McDonald, he's like, "Oh, I think we'll be bigger than FW Woolworth's." He's like, "This guy's a nut." There's examples in the book where Ray says the same thing. He's sitting there talking to him. He's like, "Hey, listen, one of these days, we're gonna be a billion-dollar company." The person he's talking to fro- They're having lunch. "... froze, was frozen by that statement and stopped in mid-bite and looked at me with a funny pop-eyed expression." And that religious zeal, he never lost it. Like, there's a line in the afterword, a- that's written after Ray, Ray dies, uh, like seven or eight years after the, the book is published, and it says, "Even in the last few years when he was confined to a wheelchair, he still went to the office every day."

15. 44:05 – 49:57

    California Advertising, Harry's Exit, and Kroc's Remarriages

    1. DSDavid Senra44:05

       And so eventually he moves out from Chicago to California. He feels California is going to be more valuable, the most valuable state for McDonald's, almost more than any other, uh, all the other states combined at this point. But he's displeased with how slow the growth is. So this again goes back to his belief in investing in advertising. "As we solved our supply problems in California and built more stores, business gradually picked up, but it remained far lower than it should have been." So this guy named Nick that is working for him, "came to me with a proposal for a television advertising campaign. The, uh, the project, uh, was gonna cost $180,000, and he wanted to pay for it by raising the price of hamburgers a penny. 'This is a terrific plan,' I said, 'but we're not gonna raise the price.' It demonstrated precisely how an ad campaign would repay its cost many times over, while failing to spend the money would cost us much more in the long run." So again, he's echoing back to this argument that he was having with his former, uh, partner, Dick McDonald. Dick is no longer in the picture anymore. So if Ray says, "We're gonna spend advertising money," they're gonna spend advertising money. This is the result. "It turned Californians into our parking lots as though blindfolds had been removed from their eyes." And so business is booming, they're expanding everywhere, and he is miserable. And this is what I mentioned earlier. When it comes to his love life, this guy is a little nuts. "All this progress was very rewarding. I should have been elated." So he's talking about he's making a ton of money. He's got this beautiful house on the hill in California, franchises dotting all across the country, and yet he says, "I should have been happy, but the undeniable fact was that I was miserable. I had forced Joni out of my mind," after she said she wasn't gonna leave her husband, "but I could not get her out of my heart. Some people are bachelors by nature. I am not. I guess I need to be married to feel complete. That is why I fell so hard for Jane." This is gonna be wife number two. Joni's gonna be wife number three. "Her name was Jane Dobbins Green. She was John Wayne's secretary. A mutual friend introduced us." This is what I mean about this guy's a little nuts. "We had dinner together the night after we met, and the next night, and the night after that. We had dinner together five nights in a row. I was enchanted. Within two weeks, we were married. Joni found out about it eventually. One day, I got a telephone call from her, and we had a brief business-like conversation. Uh, she ended the conversation by asking, 'Ray, are you happy?' I was shaken and astonished. It took me a moment to catch my voice. Then I blurted, 'Yes,' and slammed down the receiver." So a number of times throughout the book, Harry and Ray are having these fights over this philosophical difference on how to run the company. A series of fights is gonna wind up leading to their final confrontation. Remember, to Ray, McDonald's is a religion, and if you're trying to get him to slow down the spreading of that religion, you're then deemed his enemy. We're gonna get there in a minute. But one thing Ray believed in was that they h- should have a decentralized management structure. Harry did not. "Harry didn't quite see things my way in these matters. He wanted tighter corporate controls, a more authoritarian posture. I maintained..." This is a good line. "I maintained that authority should go with the job. Some wrong decisions may be made as a result, but that's the only way you can encourage strong people to grow in an organization. Sit on them, and they will be stifled. The best ones go elsewhere. I knew that very well from my past experience. I believe that less is more in the case of corporate management." And then he explains what caused the end of their partnership. "It's lonely on top. I've never felt this so keenly as when Harry and I had our final confrontation and he resigned. The most important problem I had with Harry was his growing conservatism in real estate development. He was listening to bankers who told him that the country was heading into a recession in 1967 and that McDonald's ought to conserve cash and hold down its construction of new stores." Ray is all gas and no brakes. There's no way that he's gonna slow down construction of new stores. "Harry put a moratorium on all new store development. No more construction. I was opposed to it. I was in our offices the next morning waiting for Harry. When he came in, we went at it hammer and tongs. I forced the issue all the way with the result that he resigned. It was a hell of a mess." And then Harry, in turn, makes a drastic mistake, probably influenced by his emotions. "Harry had a substantial chunk of McDonald's stock, but he was so certain that the company would go down the chute when he left that he sold it all. The sale gave him a few million dollars at the time. Had he kept it, his stock would be worth over $100 million." And then listen to the words that he's going to describe Harry's actions. "So his lack of faith..." There's that word again. "So his lack of faith in us was very costly for him." And so he has to let a bunch of people go, and it doesn't stop there. "There was one other thing I had to do to set the situation in the Chicago office straight, and that was to ask June Martino to retire. It was a tough thing for me. June was a wonderful person." But, and she had been a tremendous asset to the organization, but she was part of the old regime, and her approach would no longer work. She held onto her stock, however, and it made her extremely wealthy. Did you catch what just happened there? He fired the woman who missed all of her kids' birthday parties for the company. And so by now, McDonald's is a public corporation. Ray Kroc is unbelievably wealthy. He winds up buying the San Diego Padres baseball team. He's still with his second wife. But we see that this guy is a little nuts, and he just can't stop. "I hadn't seen Joni for five years when we met at the Western Region Operators Convention in San Diego. Truthfully, I didn't expect to be hit by the same wave of emotion that had bowled me over before, but that's exactly what happened. I attended a small dinner party the first evening of the convention, and Joni was there with her husband. I made sure that Joni sat right next to me. 'Rolly,' that's her husband's name, 'Rolly, you sit down there at the other end,' I said. Everyone tittered. They thought I was kidding. Little did they know. And when I made my after-dinner speech about how I had attained all I had ever wanted in life except for one thing, little did they suspect that the missing element, all I needed to make my life complete, was sitting there at the very table beside me." And so Ray says again, "Let's both get divorces and get married." When he said this last time, he was married to Ethel.

16. 49:57 – 58:04

    Press On: Persistence Until the End and Show Outro

    1. DSDavid Senra49:57

       Now he's married to Jane, and this time Joni says yes. "I didn't want to hurt Jane any more than was necessary, but I had to have a divorce immediately." And then he immediately turns around and marries Joni. "Joni and I were married in 1969. At, at last, I felt like I was a complete person. Now, I told myself I could take life a little easier and enjoy it. I was finished grinding it out. But business is not like painting a picture. You can't put a final brushstroke on it and then hang it on the wall and admire it. We had a slogan posted on the, on the walls around headquarters that says, 'Nothing recedes like success. Don't let it happen to us or you.' I wasn't about to let it happen to me. The key element in individual success stories and McDonald's itself is determination. This is expressed very well in my favorite saying, 'Press on. Nothing in the world can take the place of persistence. Talent will not. Nothing is more common than unsuccessful men with talent. Genius will not. Unrewarded genius is almost a proverb. Education will not. The world is full of educated idiots. Persistence and determination alone are omnipotent.' That's the spirit that built 4,000 McDonald hamburger restaurants. Dedicating the 4,000th restaurant was quite a milestone. Now we're shooting for 5,000. Personally, I'm thinking about number 10,000. A lot of people would say I'm dreaming. Well, they'd be right. I've been dreaming all my life, and I'm sure as hell not gonna stop now." And he never does stop. Ray works at McDonald's until the day he dies, even after being confined to a wheelchair. And that's where I'll leave it. For 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 this podcast at the same time. If you have not yet signed up for the Founder's Premium feed, make sure you do that. That link is in the, the show notes as well and available at founderspodcast.com. Signing up gives you access to listen to the Ask Me Anything episodes that I make, and is a fantastic way to support the podcast. If you want to get on my free email newsletter, that link is also in the show notes. I email my top 10 highlights of every book that I read. As always, links below and available at founderspodcast.com. That is 293 books down, 1,000 to go, and I'll talk to you again soon. Okay, so all the way back on episode 227, I read this fantastic book called The Essays of Warren Buffett. So all the way back on episode 88, I read every single one of [laughs] Warren's shareholder letters. But what this book that was put together by Lawrence Cunningham, uh, called The Essays of Warren Buffett, uh, did that was so smart is that he took the shareholder letters and instead of organizing them by year, which is standard, he organized them by topic. And so in the original podcast I did on this book, which again is episode 227, one hour and 28 minutes into the podcast or thereabouts, I go over this letter that I'm about to read to you now. It's under the heading titled On Selling One's Business. And the reason I'm bringing this up is because one of the sponsors of this episode is Tiny. And one way that Tiny has been described is that they're building the Berkshire of the internet. And you can go to tiny.com and read the testimonials and see all the founders that have sold their business to Tiny and how their main differentiation, just like Warren Buffett and Charlie Munger, is there's no BS. We're gonna make this transaction as simple and easy as possible, where a lot of people that buy businesses make you jump through hoops, and it's just a, a headache. And so if you think about what Warren is doing here in this letter is his business is buying businesses. And so his customer are founders or managers of businesses. And so he is essentially writing a letter to a guy. So he wrote this letter in, uh, 1991 to a guy who indicated he might want to sell his family business. And so I'm just gonna pull out a few highlights here, and really think about what Warren's doing is he is differentiating his services from other people that also buy businesses. He says, "If you s- if you should decide to sell, I think Berkshire Hathaway offers some advantages that most other buyers do not. Practically all of these buyers will fall into one or two categories." And so now Warren is going to describe his competition. If you go to tiny.com, you'll see they described their comp- in, in some ways their competition, which is typically VCs or private equity companies. Okay? So Warren says, "Number one, a company located elsewhere but operating in your business or in a business someone akin, somewhat akin to yours. Such a b- buyer, no matter what promises are made, will usually have managers who feel they know how to run your business operations and sooner or later will want to apply some hands-on," and he puts the word help in quotation marks. Obviously, Warren does not think that the, the managers they're gonna install in that business are actually gonna be helpful at all. The second other option, "A financial maneuverer "Invariably operating with large amounts of borrowed money, who plan to resell either to the public or to another corporation as soon as the time is favorable. Frequently, this buyer's major contribution will be to change accounting methods so that earnings, earnings can be presented in the most favorable light just prior to his bailing out." And then listen to this persuasion technique that he uses, 'cause he's writing to somebody that he knows it's a family business, which means they put a lot of their time and life energy into. So he says, "If the sole motive of the present owner is to cash their chips and put their business behind them, and plenty of sellers do fall into this category, either type of the buyer that I just described to you is satisfactory. But if the seller's business represents the creative work of a lifetime and forms an integral part of their personality and sense of being, buyers of either type have serious flaws." So he's just described his competitive landscape. He says, "Listen, there's option one, there's option two, but then there's a new option, something that's completely different and better." And he's describing the services that he provides to founders, right? So he says, "Berkshire is another kind of buyer, a rather unusual one. We buy to keep." Tiny does too, by the way. "All of the businesses we own are run autonomously to an extraordinary degree. When we buy a business, the sellers go on running it just as they did before the sale. We adapt to their methods rather than vice versa." And in Tiny's case, it's up to the founder if they wanna stay or if they wanna go. Tiny's fine with either solution. And then Warren does something fantastic. He's like, "Listen, you know who the pa- the past businesses that we bought. In fact, I'm including in this letter a list of every single person we've ever bought a business from." Tiny does something very similar on their website, which you can go see. "You know some of our past purchases. I'm enclosing a list of everyone from whom we have ever bought a business, and I invite you to check with them as to our performance versus our promises." And then Warren says, "Hey, I'm gonna keep it simple with you. If you should decide to do a business, uh, do business with Berkshire, we would pay in cash." Tiny says the exact same thing on their website. "Your business would not be used as collateral for any loan by Berkshire. There would be no brokers involved." Warren also says, "You deal with me. And finally, you would know exactly with whom you are dealing. You would not have one executive negotiate the deal only to have someone else in charge a few years later, or have the president regretfully tell you that his board of directors required this change or that change." And because Warren has hacked away at the unessential, all that is left is simplicity, and his pitch is simple. "Do you want a great home for your business? Then call me, and I will do a cash transaction really fast." Same thing that Tiny does. "I will not pester you. If you have any possible interest in selling, I would appreciate your call. I would be extraordinarily proud to have Berkshire, along with the key members of your family, own blank." So he took out any identifying information of who he's writing to, okay? "I believe we would do very well financially, and I believe you would have just as much fun running your business over the next 20 years as you have during the past 20. Sincerely, Warren Buffett." I think reading the entire letter is worth your time. If you buy the book, it's on pages 230 through 233, and make sure you go back and listen to episode 227, The Essays of Warren Buffett, if you have not done so already. And if you have a business that you're interested in selling now or in the future, make sure you go to tiny.com.

Episode duration: 58:05