This Orphan Built a $116 Billion Empire Without You Noticing

1. 0:00 – 3:45

   Founders Obsessed with Investing in Technology

   1. DSDavid Senra0:00

      It's amazing to me how across the last three episodes, you had world-class founders, founders that build the leading companies in their industries, and they all share the same obsession, and that is investing heavily in technology. It didn't matter if they were making eyeglasses like Del Vecchio, or tires, or some of the best chocolate in the world. They all had the same obsession that founders like Andrew Carnegie had, that John D. Rockefeller had as well. If you read Andrew Carnegie's autobiography, you'll see one of the main ideas in that book is invest in technology because the savings compound, it gives you an advantage over your slower-moving competitors, and can be the difference between a profit and a loss. Leonardo Del Vecchio builds the most dominant business in his industry by far, one that is still thriving today. And in his biography, it says, "His profits must first be reinvested in the heart of his own company, in research and development, in automation and technology. Never skimp when it comes to spending to be at the cutting edge. It has always been like this. If there's a new machine to buy, he wants it immediately." This heavy investment in research and development and the latest technology is exactly what using Ramp for your business is like. 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. Many of the fastest-growing and most innovative companies in the world today are running their business on Ramp. Notion is an example of that, and the CFO of Notion said this: "People ask how we're using AI in finance, and I have a simple answer for them. We use Ramp." 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's financial operations. Let the robots chase your receipts and close your books so you can use your time and energy building great things for your customers. Because at the end of the day, that is what it is all about, building a product or service that makes somebody else's life better. That is what I'm trying to do, and that is what Ramp has done. Get started today by going to ramp.com. There is another tool in technology that I want to tell you about, and Ramp actually uses this tool. It is Vanta. I've told you how Ramp has the best technical talent in their industry, and knowing that the team at Ramp trusts Vanta was a huge positive signal. And when I talked to Vanta's founder, Christina, it became obvious why Ramp uses Vanta. Vanta helps your company prove that you are secure so more customers will use your product or service. You can think of Vanta 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's handling sensitive data, customers want to know that it's safe. The certifications that Vanta helps you get are proof that you take security seriously. Number two, Vanta helps you win deals and close contracts. You will lose deals without it. Many big companies will not sign contracts unless you're 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. History's greatest founders invest heavily in technology and will not tolerate wasting valuable company time doing something with labor when technology can automate it. And number four, you stay secure over time. Vanta helps keep checking your system 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, stay secure much faster and with less effort. Go to vanta.com to learn more, and if you tell them that David from Founders sent you, they will give you one thousand dollars off. That is vanta.com.

2. 3:45 – 6:13

   Profile of Del Vecchio: The Orphan Who Dominated Eyewear

   1. DSDavid Senra3:45

      Leonardo Del Vecchio is the patron, legend, and haunting spirit of the global eyewear business. He is its Citizen Kane and its Captain Ahab. His father died before he was born, his mother was poor, and he was raised in an orphanage. He went to work as a metal engraver at the age of fourteen. At twenty-five, Del Vecchio opened a workshop in a tiny village in the Dolomite Mountains that was giving away free land to companies that were willing to move there. Del Vecchio built a factory to make parts for eyeglasses. He had a young family. He built a house next door to the factory so he could start his day at 3 A.M. Over the next half-century, Del Vecchio grew his company, Luxottica, into the world's greatest maker of glasses. In an industry that was traditionally fragmented and small scale, the totality of Del Vecchio's ambition took his rivals by surprise. This will remind you of another great European founder, Bernard Arnault. There's a lot of things that, that Del Vecchio's gonna do throughout his career, which I'll talk about later, that are very Arnault-like. He sought to control every element of the business, from the metal alloys of the hinges to the stores where eyewear is sold. In a series of audacious takeovers, Del Vecchio acquired brands such as Ray-Ban, and Oakley, and Persol, and signed contracts with fashion houses such as Armani, Ralph Lauren, and Chanel. He built factories in China, acquired vision insurers in the US, and retail chains on four continents. Del Vecchio was Italy's highest individual taxpayer and the country's second richest man. A few years ago, people thought his career had run its course. But at the age of eighty-one, Del Vecchio announced the greatest deal of his life, in which he also secured the final missing part of his frames, the lenses, when Luxottica agreed to merge with Essilor. Del Vecchio is referred to as simply El Presidente. In the optical world, conversations turn to the personal charisma and menace of Del Vecchio. "He's the Godfather," said Dean Butler, who founded LensCrafters in 1983. Del Vecchio bought LensCrafters in 1995. The story there is crazy, and again, very Bernard Arnault-like. I'll get to that in a little bit. The Godfather is the guy. He runs it. He runs this industry

3. 6:13 – 11:33

   Luxottica's Two Ideas: Vertical Integration and Fashion

   1. DSDavid Senra6:13

      Del Vecchio built the empire of Luxottica on two ideas. The first was to do everything itself. After the company's initial progression from parts to complete frames in the early 1970s, it set out step by step to control the entire process of making and selling glasses, from acquiring the raw materials to selling its own products in its own stores. No one had done this before Del Vecchio. There is a simplicity to him. To him, it is a very simple equation. I make the best stuff. Why doesn't everybody buy it? For the first twenty-five years, Luxottica stayed on the wholesale side of the industry, behind the curtain, as it was called, selling its glasses through opticians to the public. In the 1990s, however, Del Vecchio decided he wanted a retail network, too. First, he got Luxottica listed on the New York Stock Exchange, an almost unheard-of move for a mid-sized Italian business, a move a lot of experts said was impossible. Luxottica later estimated that that listing was worth about a hundred million in free advertising in the United States, and it laid the groundwork for Del Vecchio's hostile takeover of U.S. Shoe, a conglomerate that owned LensCrafters, the country's largest optical chain. On paper, the deal seemed outlandish. U.S. Shoe was five times larger than Luxottica, and its board did not want to sell. Having its own shops would also put Luxottica in direct competition with the thousands of optometrists it had been supplying for decades. A colleague of Del Vecchio described the deal this way, "You have to not only be courageous, but a bit crazy." Luxottica completed the hostile takeover of U.S. Shoe for one point four billion dollars. Once the deal was done, Del Vecchio promptly broke up U.S. Shoe until all that was left were the LensCrafters stores which he wanted in the first place, which he then proceeded to fill with Luxottica frames. That is exactly the formula they have used ever since, said Jeff Cole, the former chief executive officer of Cole National Corporation, an even larger optical retailer that sold to Luxottica in 2004. When they buy a company, they spend a little time figuring it out and then kick out all the other suppliers. This formula means that when you and I walk into a LensCrafters or a Sunglass Hut or a David Clulow or an Opticas Carol, which has nine hundred and fifty branches in Brazil, or a Xuzhang Glasses in Shanghai or a Ming Long store in Hong Kong, around eighty percent of the frames on display will be made by Luxottica. Having its own designers, engineers, factories, supply depots, and retail outlets and contracts with a hundred thousand opticians around the world means it can also bring products to market faster and in greater quantities than any of its rivals. It also keeps a larger proportion of its profits as a result. In their factory, I saw robots pinning together a pair of Ray-Ban Wayfarers and basket after basket of metal frames being dunked in a series of chemical baths to coat and color them. Glasses may appear to be relatively simple objects, but they involve between a hundred and eighty and two hundred and thirty manufacturing stages to produce. With its own designers, lasers, and massive machines, Luxottica can take a pencil sketch to global production in about three weeks. Luxottica has around twenty-seven thousand models in production at any one time. Its plants turn out four hundred thousand pairs of frames per day. No other company comes close. Del Vecchio's second great insight is the one that changed the nature of the optical business forever, and that was to combine it with the fashion industry. In 1988, he signed a licensing deal with Giorgio Armani. The deal transformed the glasses industry. After the Armani deal, consumers that wanted fancy glasses could buy Prada, Gucci, and Chanel, and they were willing to pay for it. Armani himself negotiated a seat on the board of Luxottica and a five percent stake in the business. This started the transformation of glasses from a medical device to a means of self-expression, like clothes or sneakers or, as you and I talked about a few weeks ago with the Jimmy Iovine episode, or headphones like Beats by Dre. Luxottica bought Ray-Ban in 1999. At the time, the label was washed up. You could buy a pair of aviators at a gas station for nineteen dollars. They were selling Wayfarers at Walmart. Del Vecchio paid six hundred and forty-five million for Ray-Ban. Wait till I tell you this story later, too. Ray-Ban is now the most valuable optical brand in the world, and it generates more than two billion a year in sales for Luxottica. Over the next year and a half, Luxottica withdrew Ray-Ban from thirteen thousand outlets, hiked their prices, and radically improved the quality, increasing the layers of lacquer on a pair of Wayfarers from two to thirty-one. When speaking to one of Del Vecchio's longtime associates, I asked him, "How did a man who started with a small factory in a remote village come to rule the global eyewear industry?" His response, "Appetite comes with eating." This is very fascinating because Napoleon said the exact same thing. He said, "Appetite comes with eating. The more I conquered, the more I wanted to conquer." Larry Ellison said something very similar. He said, "I'm addicted to winning. The more you win, the more you want to win."

4. 11:33 – 19:09

   The Essilor Merger and Del Vecchio's Ruthless Edge

   1. DSDavid Senra11:33

      So then this profile goes into the biggest deal of Del Vecchio's life. How did two companies, one in frames and one in lenses, come to dominate glasses? This part is wild because you have to think about this is the, the company that Del Vecchio gets control of. It is also wild to consider that the biggest deal of his life comes sixty years into his career. So in 1972, Essel and Essilor, two French optical companies, merged and began to sell aggressively into the U.S. market. Essilor specialized in plastic lenses, which were replacing glass, and it also invented the world's first progressive lens. The company set out to make sure its products were sold in every optometrist in the world. Lenses are the pixie dust of the optical business. Barely anyone knows what they are made of or how they are constructed. For the last half-century, persuading opticians to prescribe Essilor has been painstaking face-to-face work. The profit margins within the optical business are a closely guarded secret. While opticians might sell frames for two or three times their wholesale price, it is the lenses where they make the most money, charging markups of 700 or 800% to their customers. The largest margins of all are on complex progressive lenses and a protective coating, so think about, like, scratch resistance for your lenses, right? Those features cost Essilor a few cents to make, and opticians sell them between $25 and $50 a pop. That is absolutely nuts. A feature that costs you a few cents to make, the end consumer pays $25 to $50 a pop. The company supplies between 300,000 and 400,000 stores around the world, three or four times as many as Luxottica. If Luxottica has spent the last quarter of a century buying up the most conspicuous elements of the optical business, the frames, the brands, the stores, then Essilor has busied itself with the invisible parts, acquiring lens manufacturers, instrument makers, prescription labs, and the science of sight itself. What does that mean? The company holds more than 8,000 patents. Essilor buys up Belgian optical laboratories, Chinese resin manufacturers, and Israeli instrument makers. Within the industry, Essilor is regarded as an unstoppable enveloping tide. The first rumors of these two companies joining forces began more than a decade ago. There were considerable obstacles. The first was cultural. Essilor might be huge, but it has retained the feel of a traditional French industrial enterprise. 55% of its employees are shareholders of the company. Luxottica, on the other hand, function like a monarchy, with none of the management structures of most multibillion-dollar companies. The corporate governance and headquarters of Luxottica were Mr. Del Vecchio's dining room table. That was said by one of Del Vecchio's managers of one of his US businesses, and he continues the story. He says, "In the early 2000s, we'd fly to Italy, go to his house, and show him our annual plan, and he would say, 'Go do that.'" It's funny, let me pause here, 'cause when I read this section, it reminded me of something I read in one of Jeff Bezos', uh, biographies in the early days of Amazon. This guy named Wright was building out the early fulfillment and warehouse centers for Amazon, and he goes and shows Bezos his plans. I think it was like a three-- It was gonna cost, like, $350 million to build a new warehouse and everything else, and so he's showing the plans to Bezos, and Bezos goes, "This is beautiful." And then Wright asks Bezos, "Who do I need to show the plans to, and what kind of a return on investment would I have to demonstrate?" And Bezos replies, "Don't worry about that. Just get it built." And then Wright says, "Don't I have to get the approval to do this?" And Bezos says, "You just did." So back to this. The companies also saw themselves differently too. Essilor has a moral purpose. With Luxottica, it's all about domination. That line is gonna give you an insight into Del Vecchio's personality as we go through this. The most infamous Luxottica deals carried an edge of brutality. In 2001, the company clashed with Oakley, the world's hottest maker of sunglasses at the time. Luxottica had just bought Sunglass Hut, which sold a third of all US sunglasses, and Del Vecchio demanded that all of its suppliers drop their prices. Oakley refused. In the summer of 2001, the company's founder, Jim Jannard, flew to Milan to meet Del Vecchio and strike a deal. Jannard had founded Oakley out of the back of his car in 1975. At the end of their conversation, he said he hoped the two men would one day be friends. Del Vecchio replied, "We will never be friends." A few months later, Del Vecchio swung into action. Sunglass Hut stopped selling Oakleys. Sunglass Hut accounted for a quarter of Oakley's business, and its share price fell by 37%. Then Luxottica began to produce Ray-Bans with bright blue and green lenses that were eerily similar to Oakley's colored shades. Oakley sued, the case was settled out of court, and Luxottica bought Oakley for $2.1 billion. By that time, Del Vecchio appeared ready to retire. In the summer of 2004, as he approached his 70th birthday, Luxottica's founder handed over day-to-day control of the company to Andrea Guerra, a young chief executive. Guerra did not want to merge with Essilor. Del Vecchio forced Guerra out and came back to work. He was 79 years old. It became clear that Del Vecchio was worried about what would happen to Luxottica after he dies. Luxottica is his most precious child. His most precious child is this company. Del Vecchio has six children from four marriages to three women. He remarried his second wife. I'll tell you about that later. It is a wild story. Del Vecchio came to believe that folding Luxottica into Essilor was the best way for his work to endure. Essilor controls almost half of the world's prescription lens business and has acquired more than 250 other companies in the past 20 years. Between them, Essilor and Luxottica play a central, intimate role in the lives of a remarkable number of people. Around 1.4 billion people use their products. In many conversations, people describe the arrival of EssilorLuxottica as both extraordinary and somehow inevitable at the same time. That struck me as the kind of contradiction you come across more often in a person than in a business. And it's true, because EssilorLuxottica, the business of vision itself, is, to an amazing degree, the legacy of a single man. Okay, so that was a profile written almost a decade ago about this legendary merger between Luxottica and Essilor, and I wanted to start there because I think it's gonna give you a great overview of the person I wanna talk to you about today, which is obviously Leonardo, uh, Del Vecchio. This is another book. So the book that I read for this is another book that was translated for me by my friend Cameron Priest. The last few episodes, we've translated books from French and Italian. And so I spent a week reading the book, and I spent the last three days rewriting all of my notes and highlights, and what I wanna do is tell this remarkable life story. I, I couldn't have said it better, which is like, well, you're describing this, you know, the, the, just that you dominated, uh, the eyeglass and eyewear industry. In hindsight, it looks completely predictable It's extraordinary and inevitable at the same time. And what you'll come to learn now is that is the e- exact description of the orphan that builds this empire and the legacy of a single man. And this business continues to thrive. Del Vecchio passed away a few years ago, but the business that he built, that he gave his life to, continues to thrive. And mat- as a matter of fact, the founder of Meta, Mark Zuckerberg, just spent three and a half billion dollars buying a 3% stake in EssilorLuxottica. And before he died, Del Vecchio did the deal with Mark Zuckerberg to produce the glasses that Meta's making.

5. 19:09 – 19:11

   Childhood in the Orphanage

   1. DSDavid Senra19:09

      So I wanna start with Del Vecchio's childhood. Once you understand

6. 19:11 – 28:47

   Engraving, Obsession with Being the Best, and First Workshop

   1. DSDavid Senra19:11

      his childhood, this will, without a doubt, be one of the most remarkable founder stories you'll ever hear. So this is, is, at, at its core, this is a story of a poor orphan who will come to dominate an industry and build a $30 billion fortune. This is an orphan who built an empire. That might have to be the episode ti- title, An Orphan Who Built an Empire. So Del Vecchio's dad was a fruit peddler who died from pneumonia when Del Vecchio was in his mother's womb. His dad is only 49 years old when he dies. Del Vecchio is the youngest of four kids, so now his mom has to go work in a factory to support her other kids. She has to walk 40 minutes each way to her job every day. She had nobody to take care of young Leonardo, young Del Vecchio, so he essentially spends his days on the street. After several years, his mom realizes this is not sustainable. She's terrified of what's going to happen him, to him, if he stays on the street all day. So she goes to an orphanage and begs them to take in and care for her son. He is seven years old when this happens. Can you imagine thinking that your mother abandoned you when you were seven? This is how Del Vecchio describes his childhood: "We were a poor family. My mother was a widow. I grew up without a father and in an institution. Growing up without a family is something you can't explain unless you've lived it. It marks you." He lives in the orphanage for seven years. The orphanage has very strict and precise rules, and you'll see that he actually adopts these rules in the way he runs his life and runs his business. So y- at, at the time, you sleep in a dorm. There's 10 other beds in each room. You wake up at 6:00 AM no matter what. You line up shirtless, even in January when it's freezing. You eat breakfast at 7:00. You go to school until it's night. You are taught to work tirelessly. You are told to fight against your inherent laziness. You are told perseverance makes the difference, and that talent isn't enough. And what's interesting about this, and there's several stories in the book, but there's several Italian entrepreneurs of the 20th century that were at the same orphanage. They follow remarkably consistent and similar paths. They all start of, uh, out as great, great craftsmen first, then industrialists, and they said they were united by maniacal attention to the quality of their product and never satisfied with what they achieve. And keep in mind, this is Leonardo and glasses. The guy goes on to build a, l- one of the largest publishing, uh, houses in Europe. Another one is the best manufacturer of bicycles. Later in life, one of these entrepreneurs that were raised in the same orphanage, that go on to build a fantastic career as well, talks about this. He says, "I'm a lucky man. I was born poor, and this gave me a certain understanding of the facts of life." All of their stories are united by the same thread. They know the harshness of poverty, the pangs of hunger. They become skilled craftsmen thanks to a trade learned at the orphanage. They seek independence from a young age, are not satisfied with their first success, and continue to grow their businesses into becoming leaders in their respective fields. Young Leonardo Del Vecchio is orderly and precise. He says, at this time, "I liked to study." And the trade that he learns in the orphanage is engraving, which he doesn't know it at this time, is going to lead to his career in glasses. So he finds a master ready to take him in as, as an apprentice at a metal factory. He is 14 when he leaves the orphanage and starts working full time, and really more than w- full time. And from this point, for the rest of his l- year, year, for the rest of his life, he has a singular obsession: to be the best. The way he thinks about it is, if he is the best at what he does, he will never again be forced to suffer the hardships of his childhood. He will never have to be poor again. He will never be forced to rely on anyone other than himself. So the company he works at, he works there during the day, and then the company sends him to school at night, so he's taking drawing and engraving classes at night. Learning to draw is essential to be a great engraver. And this is important because it's engraving that first puts him in contact with eyeglass frames. He's handed a pair of aluminum eyeglass frames, and he's asked to engrave decorations on the temples. This is the very first time that a young Leonardo Del Vecchio will handle the object that will change his life. He quickly understands that he's good. He's very precise, he's meticulous, and he's restless. Almost immediately, he wants to start his own business as soon as he can because he does not like having to rely on other people. He refuses... There's a line in the book later on. It says, "Del Vecchio cannot be controlled." He d- he refuses to let other people have command over him. I think Del Vecchio is a great example of the wisdom that Charlie Munger had when Charlie Munger said, "Hey, it really helps... Don't read business books, read the biographies," 'cause it helps to tie the ideas to the personality that developed them. If you grew up like Del Vecchio, if you experienced what he experienced, of course. Like, if you look at his entire 60-year career, it's just him gaining more, and more, and more control over what he's doing. This relentless, methodical march for deeper and deeper vertical integration, and you see it when he's 14. He's also wicked smart. He understands two important things about himself from an early age. One, doing one's job well, whatever it may be, being the best at it, is non-negotiable for him. And the second thing he realizes is that he's got a lot more drive and passion than other people around him. He said, "I've always thought of myself as privileged for the passion I had inside and for my enormous desire to do." So by the time he's 18 years old, he's promoted to run the factory. He is now the head of the factory. For a few years, he keeps this position, and so he, he winds up getting married and having kids early on. And so he's making enough money, right? He's running the factory. He's in his late teens, early 20s, and he could have just stayed in that position. He would have never been poor. But there was no way that he was ever gonna stay working for anyone else. So this is when he starts his first company. He decides to open his first workshop in a tiny spot that he calls The Hole. By day, he's still working his day job at the factory, and at night he works for himself. And so Del Vecchio begins to produce molds for various industries. He starts out as a subcontractor. It is a strictly family-run business. It's Del Vecchio, his wife, and his brother are helping him out as well. And he doesn't quit his job right away because he needs a fixed salary as a guarantee for the loans required to start the business. This is how he's gonna transition from, you know, how he buys his, uh, his first machines, and he starts to transition from artisan to industrialist. He's very much a craftsman at this point. And one thing I love about reading all these biographies is there's always these examples in anybody that creates something great. And the way I think about this is like, how bad do you actually want it? Like, how bad do you actually want this to happen? He is working 20 hours a day, and one of the things that helps push him and to work way harder than anybody else, he know... He never-- He says he... There's a line in the book where it says he, he never stops because he knows he is good. He understands the key to success is in his pocket. This is what he said: "I realized I was good because when I delivered my finished work, I immediately got new orders and never had to make changes. Even though I was young, I realized that I had something more than my competitors." That is one of the most important lines in the book if you think about where he's at in his life. In fact, it reminded me of one of my favorite stories from Larry Bird, uh, the basketball player. You know, Larry went to-- Larry Bird went to a, a tiny college. He went to a small school, and people didn't think that he could make it in the NBA, and then they told him that, "You're not gonna be able to make it in the NBA." And so Larry's talking about this later in his career after he's won, you know, multiple championships and had a Hall of Fame career. And he said, "Oh, they won't-- that I won't be able to get my jump shot off, that I'm not quick enough, that I won't be able to rebound." And so after he was drafted in the NBA, but before the first season starts, he goes and plays in, where-- with all the rookies. And Larry says this: "It took me three days of rookie camp, and I found out, hey, this league is nothing. I can play in this league, and I will dominate in this league." The reason I bring that up is because you're gonna see Del Vecchio throughout his entire career, he cannot understand why his competitors don't have the ambition that he has, are satisfied with the small stakes, he'll repeat this over and over again, don't work as hard as he does, and are incapable of making the quality, the, the same quality of product that he is. And so as soon as he can, it's just a year that he's doing both jobs. After a year, he resigns from his day job and devotes himself full-time to building his business. He is 23 years old. And from this point at 23 until he dies, I think he dies at 87 years old, he follows one, only one categorical imperative: excellence. He says, "If you want to stay in the market, you must always seek perfection. And it's not perfection as a disease, not as an abstract ideal to refer to, but perfection as a fact." He has several great and important ideas. Number one, he realizes there is less competent competition in the eyeglass sector, and so he's gonna focus on that industry completely. He starts out as a subcontractor. This is what his first business is, producing molds and small metal parts for eyeglasses. Two, he also realizes that this sector is the most profitable. He says, "Among the small metal parts," that he was making, "the parts for glasses gave me the most profit." Three, he realizes to his customers quality is more important than price. You need to remember this idea. He's going to use this idea so many times over the next 60 years. "When my clients were ordering new molds for eyeglass temples, they were not so much interested in the product's price as in the quality and in the fact that the molds were made to perfection." And this is how the book describes this turning point in his life. Leonardo understands that he can expand into an industry that promises high profit margins to those who are able to produce high-level products. Remember, his obsession with quality is important, and it's also even more important because he deci- decides to, to direct that ep- his obsession with quality

7. 28:47 – 34:09

   Founding Luxottica in Agordo and Learning from Partners

   1. DSDavid Senra28:47

      to an industry that will pay for it. And again, he repeats that he sensed that he had something extra compared to his competitors. His guiding strategy is very simple: "I want to be the best at everything I do. That is all." This is very important because the application of that idea leads directly to the beginning of Luxottica. The way he founds Luxottica is that one of his best customers... Remember, he's a subcontractor at this time. He's gonna start at the very bottom of the industry and then just c- Sherman march to the sea and absolutely dominate it over the next, you know, 50 years. So h- one of his best customers wants to become his partner. So they are two wildly successful entrepreneurs. They own a company called Metalflex. They have more demand than they can fill, and they want to start a new factory, so they propose partnering with Del Vecchio to run that new factory. He will be a minority shareholder. They want him to run it. He was worried about being a minority shareholder there. He said this would castrate his ambitions. Remember, this is a man obsessed with control. Maintaining control was important to him, and he would never, ever compromise that. And even though he's very young at this point in the story, he had very clear ideas about his future. So he forms a limited partnership, and he's the general partner, so he can maintain control of the factory. He insisted on operational control despite not owning the majority of the company. So he sets up the factory in this town of Agordo because the mayor is giving away free land for companies that will come create jobs. It used to be a mining town. Once the mine closed down, the population was dwindling, and so the mayor actually did something smart. He's like, "Hey, you know, you can have the land. Just come here, build factories, build businesses, and hire the people that are living in the town." Now, the degree to which Del Vecchio will thoroughly dominate this village and really anybody, anybody in his life and h- this entire industry, he, he's gonna turn this village that was depopulating into a Luxottica town. At one point, there's like 4,000 residents of the village, and there's 4,500 people working at this factory And so he is 26 years old. And again, the book makes this point several times, I think it's important to point out. This is the start of his empire, but he didn't know it at the time. He never did. He just sees an opportunity for growth, and he pursues it. His entire career is one step at a time with a clear and simple idea, to be the best. And if you wanna be the best at what you do, then growth is necessary. Now, Del Vecchio's relationships with his partners is gonna remind you a lot of Rockefeller. So the Metalflex owners, what they thought is like, "Oh, we found a way to expand our business," but what they didn't see is that they created a threat. So before setting up the factory, they say, "Come work at the Metalflex headquarters so you can actually learn how to build these businesses." So they had him do everything from delivering parcels to customer, to customers at the post office, to receiving sales and purchasing documents. Months and months of apprenticeship that allowed him to understand the industry from inside one of the leading factories. And this guy, he doesn't miss the opportunity to learn from the best, and he also takes note of everything. Names, addresses, people. He studied every detail of the industrial activity, understood who the most promising customers were, which products were the most popular. Information that would prove useful a few years later to compete directly with his former partners. This is another great example of the maxim that you and I see over and over again in these books. If you know your business from A to Z, there's not a problem you can't solve. He's gonna run through these dudes like a hot knife through butter. This is an example of his early employees describing him, but also another example of how bad do you actually want it. "I would wake up and it was still dark. I would open the shutters and check the factory on the other side of the river. I would always find the light on before dawn. I would tell my brother," who also worked in the factory, "Wake up. The boss is already there." In 1961, Del Vecchio invest 500,000 lira for 33% of the company. So that's about 6,000 euros today. So he puts in 6,000 euros for 33% of this company. 60 years later, his shares will be worth 25 billion euros. From 6,000 euros to 25 billion in 60 years. My friend Moses Kagan had this great tweet, and something me and him bond over is this obsession of not interrupting the compounding, of finding what you're meant to do and do it forever. And he was looking at resumes, if I remember correctly, and it's just like, you know, people just jumping around every year, two years, three years, whatever the case is. And this is what he said. "By jumping around like this, you're giving up the benefits of long-term compounding, and long-term compounding is one of the most powerful forces in business and life." From 6,000 euros to 25 billion in 60 years. And all of this happened in a remote location. The town that he sets up his first factory in doesn't even have a single paved road. And I actually think there's a benefit that people overlook here. He benefits from being in such a remote location. The early employees had no other options. They gave everything to the company because it was their only opportunity to provide for their families. Some of the early employees stayed for 50 years. Their sons and daughters worked in the factory. Their grandsons and granddaughters worked in the factory. And they're willing to follow Del Vecchio because he leads from the front. This is what he says. "I used to come to the factory at 5:00 or 6:00 in the morning, really whenever I woke up, and I would stay until midnight. The company is my life."

8. 34:09 – 40:21

   Breaking from Metalflex: A Rockefeller-Style Buyout

   1. DSDavid Senra34:09

      So this is when he starts to take control of Luxottica and he has to break up with his partners. What they didn't understand, they never treated him as a real partner. This is a guy that is the best in the world at what he does. He has pride, he has drive. He's doing all the work. And he realizes, "Oh, you're not... I'm not a partner to you. I'm just like a supplier to be squeezed." So they try to push him on price, they drop in on the factory without telling him, and Del Vecchio realizes, "Oh, th- this is not a long-term solution, and I'm at risk right now because I have way too much revenue concentration with Metalflex." And so he does something really smart before he breaks up with his partners. He starts looking for other customers. And he also realizes even though he's younger and has way less money than his partners, he's like, "Wait a minute. I have a form of leverage here because no, literally nobody else can match the quality of my product." Think about it as quality is his survival strategy. And he would tell his employees, he's like, "Listen, we're going up against these giants," and there's not just the Italian companies, the German companies, the Austrian companies. And he's, and he says, "An obsession with perfection." And he was convinced of the fact that the only way to grow in a world of giants is to offer the best products. And so there's all this fighting going on between him and his partners, and then they realize, "Uh-oh, we created a competitor. So we need to destroy this guy, and the way we're gonna destroy him is," they were the ones that were guaranteeing the company's credit. You need a credit line from a bank for the factories to survive. So they go, "Hey, we're gonna pull the credit." And this is where, I mean, there's like this Rockefeller-esque situation going on here. They're convinced, "We're gonna pull this credit. We're gonna s- we're gonna strangle this guy. This guy can't get far without us." And the reason I compare it to Rockefeller is 'cause they didn't know who they were dealing with. So they pull their credit. Leonardo calls all his employees together, and he has, like, tears in his eyes. He's like, "I'm afraid I can't pay the salaries this month." He's crying, but he's also refusing to give up. He said, "We will move forward on our own. If you don't feel secure, you can leave." They all stay. He doesn't lose a single employee. And so he has two ideas. He goes to his second largest customer, right? 'Cause he just lost his first customer and they pulled the credit. And so this guy named Boris Killot was making a ton of money importing Italian eyewear into the United States. He owed the factory 35 million lira. And so Del Vecchio goes to him, explains what's going on. He's like, "I will die if... I need this money now. If you don't pay me, I can't pay my employees, and then therefore you don't have the product that you're making a ton of money importing into the United States." So Boris gives him the money. And then since the bank pulled his credit line, in true Rockefeller fashion, what does he do? He goes bank to bank to bank until he finds another bank willing to extend him credit. This is a line from Rockefeller's autobiography. What if the... 'Cause people don't understand, I, I, I guess you do 'cause you've probably heard the podcast and you, and you've, uh, hopefully read a bunch of biographies on Rockefeller. But one of his advantages is that he always went into battle, Rockefeller, better capitalized than his competitors, and most of that was debt from banks. So this is Rockefeller in his autobiography talking about this. He goes, "What if the president of a bank refused to make me a loan? That was nothing. That made no difference to me. It simply meant that I must look elsewhere until I got what I wanted." So then with the bank credit, which his partners didn't think he could ever get, Leonardo says, "Hey, I'm gonna buy you out. I wanna buy you out of our partnership." He offers them 45 million lira each for a stake that less than 10 years earlier was worth 500,000. So y'all put in 500,000 each. Less than 10 years later, "I want that stake. I will give you 45 million lira for that." And it's amazing how dismissive of him his partners still were. They didn't believe he actually had the money. So when they set the date for closing, they don't even bother to show up because they don't think it's real. Eventually, he buys them out and he says it was one of the greatest days of his life. He now answers to no one else. The book says he was literally bursting with joy, having achieved a goal that was fundamental to him. And Del Vecchio tells a friend at the time that he's amazed that they agreed just when the factory, after years of shared sacrifices, could start to bear fruit. He said it's a little like David who kills Goliath, a paradox where those who did not have money buy, while those who were well off financially decided to sell. And then what happens next? He takes most of their customers. He is a true predator. This is something that'll reoccur throughout his entire career. Those who compete against him, they call him a true predator, and they call him a hawk 'cause they says he would circle, wait, and then strike. And so what just occurred in Leonardo Del Vecchio's life reminds me of this story about a young John D. Rockefeller. This is from this book called Conspiracy, which was, was, which was written by Ryan Holiday, and I wanna read this excerpt to you. "Rockefeller found himself stuck with bullying corrupt business partners. He wants to break with them, but he can't because they control the votes. They're squeezing his business to death. They abuse him, talk about forcing him out. What is he to do? Quietly, Rockefeller lines up financing from another oil man and waits. There's a confrontation. One of them tries to threaten him. 'You really wanna break this up?' 'Yes.' He calls their bluff. They go along knowing that the firm's assets will have to go to auction. They're sure they'll win. Rockefeller doesn't have that money. He bids. They bid. He bids. They bid. Rockefeller wins the auction. A few weeks later, the newspapers announce his new partnership, revealing who had backed his bid and the news that Rockefeller, at age 25, is an owner of one of the largest refineries in the world." This is what Rockefeller said. "On that day, his partners woke up and saw for the first time that my mind had not been idle while they were talking so big and loud. They were shocked. They'd seen their empire dismantled and taken from them by the young man they had dismissed. Rockefeller had wanted it more." You could take out the name Rockefeller and put in Del Vecchio, and that story's almost exactly the same. 60 years later, Del Vecchio's business is thriving, so much that Mark Zuckerberg pay- pays $3.5 billion for 3% of it, and Metalflex doesn't exist.

9. 40:21 – 48:37

   Building Luxottica's Own Glasses and Distribution

   1. DSDavid Senra40:21

      And from here on in, the rest of his career, it's just step-by-step vertical integration. He's obsessed with controlling everything. He is not satisfied with a slice of the market. He wants everything. And he has a bunch of very simple ideas that he builds his career on. The way I think about what's happening in his life, he's like, "Number one, I'm better than anyone else. I know my product is better. Two, I want control. I want to eliminate intermediaries everywhere I find them." And this takes decades and decades. This isn't something that happens overnight. Three, so, uh, uh, the, the logical next step is three, I should build my own glasses. And this is what he says: "I produce the semi-finished goods necessary to make the glasses. Why give this advantage to the final assembler? I can do everything in-house. Why should I allow others to benefit from my expertise? The answer is self-evident. We must manufacture a finished product." And he just has this great mindset early. He sees where he's vulnerable, and he's like, "Well, if I just analyze my company honestly, right? I see my vulnerability, and if I was on the outside, this is what I would do." And so it says for him, company growth is a natural consequence of the choices of creative destruction. Companies are obligated to continuously develop. Whoever stops is lost. They risk being crushed by the competition and overtaken by more dynamic entrepreneurs. And I think it's been obvious up until this point, but this guy is extreme. He says, "It is forbidden to get distracted, to rest on one's laurels, to be complacent, to enjoy success and personal achievement." So think about what he just said. It's forbidden to enjoy success and personal achievement. This is something that's gonna reappear over and over again. His work is by far the number one priority in his entire life. For Del Vecchio, Luxottica comes before everything else. He always puts the company before everything else, even his own family. He gets married four times and has six children. He divorces his second wife after just three years, gets married again, has more kids, divorces her too, then remarries his second wife again 10 years after they get divorced. There is a 47-year age gap between his oldest child and his youngest. And later, when he's in his 80s, 'cause he's, uh, like, 85 when the, the book is written. When he's in his 80s, he says he only has one regret, and that is not spending more time with his kids when they're young, and I don't believe him. And the reason I say that is he's definitely driven because he wants to be the best in the world. He wants to... What, what he wants to do. But he's also driven by fear that I don't think ever ends. A fear that somebody else is gonna come along, somebody better, and take what he gave his life for. So let's go back to the story where he's just like, "Okay, I'm gonna eliminate intermediaries anywhere I find them. I think I can build my own glasses." Everybody tells him, "You can't build your own glasses. You should just stay a subcontractor." So he develops some prototypes for his own glasses. He travels from the little town back to Milan. Milan is having this huge fair, and he's like, "This is where th- th- this, this exhibition, this is where I'm gonna sell my own glasses, attempt to sell my own glasses for the first time." And something he doesn't know, but he's doing this at the perfect time. There is... This is-- There's a wave starting that he's going to surf for decades. There is an eyewear boom. Glasses and sunglasses are changing from a medical device, and they're turning into a fashion accessory and a cult object. And he's gonna benefit from not only more people buying them, but the fat margins that come along with this. So Del Vecchio himself, he travels, he's selling this, he brings some of his employees, but he's so desperate for orders he doesn't know what to charge, so he sets the price really, really low. So he said, "Okay, you can buy..." And again, they're-- this is a fair, so you have wholesalers coming to buy product. And so he's like, "Okay, they're-- we're gonna sell our frames for 600 lira each." Very first day they get swamped. Their booth is im- swamped immediately. Every day of the fair there is so much demand that Luxottica increases the price every day. Within three days their prices triple. And again, it goes back to the excellence of the product. This guy is working 20 hours a day. He's obsessed with being the best at what he wants to do, and the wholesalers see this immediately. There's a great line about this: "When he left for the Milan fair, he was still full of doubts and fears. When he comes back, he's full of orders." By the time the fair is over, they have gathered orders for two years of production, and they have no idea how they're gonna keep up with all these requests. But he is certain of one thing, that he was right, that Luxottica was ready to sell their own glasses under their own brand. And he does another thing smart. This is, this is in the '70s, early '70s when this is happening. He continues to spend to grow. So most of the profits are reinvested into research and development and new machinery. This guy's obsessed with watching his costs. He keeps this, like, coin on his desk that says, "Every euro saved is another euro in profit." And what Del Vecchio has in common with most of history's greatest entrepreneurs that you and I talk about, they, they manage their costs down to the penny, but they invest heavily. They empty the clip when it comes to investing in technology. So it says, "Most of the profits are invested in research and development and new machinery. The 1970s started a virtuous cycle. New orders determined the need to increase production, which in turn led to the need to expand departments and invest in new machines, for which it is mandatory to obtain new orders and increase market share. Increasing volumes lead to a reduction in unit production costs, which allow for a more competitive pricing without compromising profit margins." And so it continues, more control, more vertical integration. Now he's like, "Okay, I'm making my own glasses. I wanna own my own distribution." He would sell to distributors who would then sell to opticians and the end user, which is the, the retail stores. And so his first step is, "I only wanna work with the best. So now that I'm making my own glasses, I need to sign with the literally the best distributor." And then once he does that, he's like, "I need to own this." So it says he only wants to work with the best. This applies to partners outside the company as well. He finds the person he thinks is the best distributor. This is this guy named Mr. White, who's one of the largest distributors in America. At first, Mr. White says no. Leonardo doesn't flinch. He comes back a year later as a bigger company with better products. They finally sign a partnership. Then you already know where this is going. You know where this is going. And he goes, "Actually working with distributors is too risky. Luxottica is at the mercy of other people's choices. This is a situation I cannot live with." So he starts another phase. He goes, "I wanna grow my company by acquisition. How am I gonna grow my company by acquisition? Well, I need to raise more money." So he raises more money by selling stock in his company. He also gets more banks to loan him more money. He uses that money to keep pressing his advantage, to keep controlling more and more parts of his business. The more he vertically integrates, the higher his profit margin becomes, which allows him to keep controlling more parts of his business. So he buys his largest American distributor. So Mr. White, right, and his partner... This is so funny. The guy, you know, a few years ago said, "I, I'm not gonna sign a deal with you," not realizing that, you know, a few years, uh, a few years in advance Del Vecchio's gonna own your whole company, man. So he buys his largest American distributor. Mr. White and his partner are fighting. This gives Del Vecchio the opportunity to buy out Mr. White's partner. So he buys 50% of this company for $11 million. This is wild. This is how-- This guy's just risk on, okay? He buys 50% of his largest American distributor for $11 million at a time when his entire company's just doing, uh, 14 million in revenue. And Del Vecchio describes this when he's an older man. He says, "This was a decisive turning point because now I am one of the largest distributors in the world." Four years later, he buys the other 50%. And again, he just said it's forbidden to rest on your laurels, so what does he do? Buying distributors is not enough. He wants to own the retail stores that the distributors sell to. Distributors sell to opticians who sell glasses to the end consumer. He is missing the relationship with the end customer, which he says is, quote, "Indispensable to understanding how tastes and trends change, on which lines to focus on, and where higher margins can be extracted." And so we're gonna get into how he breaks into retail, but there's another thing that reappears throughout his entire career. He wants high barriers to entry. He does not want competition.

10. 48:37 – 53:36

    Fashion Licensing, NYSE Listing, and the LensCrafters Takeover

    1. DSDavid Senra48:37

       So he winds up-- Remember that company that, uh, he was, uh, he, he was first an engraver at? The one that sent him to school at night? 25 years later, he buys that company. So he buys the company that he first worked at as an engraver 25 years earlier. Why? Because that company owns a valuable patent. They own the patent on the elastic hinge on the temples of eyeglasses. Again, think about this idea of fear. How can I stop anyone from taking what I have from me? One way to do that is to increase the barriers to compete with me. Then what does he do? He moves into fashion and ex- drastically expand... This is just gonna blow your mind. He drastically expands not only his revenue, but his profit margins at the same time. So question he, he's having is like, okay, how do you transform a commodity product into a customized one? If he can move into the higher-end fashion market, he could greatly increase his profit margins. So this part was surprising to me 'cause I've never bought, I don't think I've ever bought... I have a, like, pair of Ray-Bans, but I've never bought, like, luxury gra- gla- glasses. It said in, uh, the book that the sale prices for some of these luxury brand glasses that are made by, like, the high-end fashion houses, they could be 10 to 20 to 30 times the cost of production. So they give an example of they're manufacturing some of these glasses, some of these companies are manufacturing these glasses that cost $30, and then turning around and selling them to the end consumer for $900. So the first person he works with is Giorgio Armani. And again, Armani wanted to work with the best, and he believed that the best was Del Vecchio. So this is where he signs that agreement, Del V- and he insists to get 5% of the company. Del Vecchio wisely gives him 5% of the company. Why is that important? Because Armani's another turning point for Del Vecchio. Armani Glasses alone, this is just a single brand. They sign a bunch of them. Armani Glass alone will account for 10% of the overall revenue of Luxottica. That is nuts. But also, not only the 10% of revenue, but it opens the door. So then he, uh, starts signing up with another... Who makes Armani's glasses? So he starts signing agreements with other fashion houses like Valentino, Chanel, Yve Saint- Yves Saint Laurent, Ralph Lauren. The list just goes on and on and on. And so then Del Vecchio's like, "Hey, I need a bigger stage. I still need more resources 'cause I need to get to that end user." So he says, "It's time to go public." Everybody's like, "Okay, you're like a medium-sized Italian business. You're obviously gonna list on the Milan Stock Exchange." He goes, "No, I'm not." And this is what he said about that. "If you have to sail, it's better to choose the big C rather than the small one." He lists on the New York Stock Exchange. The company is 30 years old, and Del Vecchio is now a multi-billionaire. I mentioned this earlier, but he estimated that going public gave the company $100 million in free advertising. He is now one of the wealthiest people in the world, and he's asked the secret to his success. This is what he says: "There is no secret. It's decades of hard work." Then he's asked a follow-up question: "Why are you still working?" He replies, "Because I enjoy it." And so now he has more resources, he has more currency, and this is where he launches his hostile takeover of LensCrafters. He launches a surprise hostile t- offer to buy the U.S. Shoe Corporation, which owns LensCrafters, which is the largest optical store chain in the world. U.S. Shoe, this is the nutty part, was a conglomerate that had a stock market value five times higher. Their market cap was five times higher than Luxottica, and its board of directors did not wanna sell. So this is a debt-heavy deal. Del Vecchio's gonna use leverage financing. He raises money through bank loans, bond insurance, uh, bridge financing from major European and American financial institutions, and his plan is immediately when he grabs, uh, when he takes control of this asset, he just s- literally sells off every single thing. He doesn't care about anything else but LensCrafters. That winds up helping... He does this for $1.4 billion, and I think he recoups around $500 million from selling off the other pieces. And it was helpful for him to get financing for this because he's like, "Listen, if you just take LensCrafters, if you ignore everything else at Shoe Co., in, in U.S. Shoe Corporation, LensCrafters is actually highly profitable. They're throwing off a ton of cash flow. We're just gonna take that cash flow to service the acquisition debt." And so it was at this point in the book, you know, 'cause he makes the point over and over again, he just felt like he was competing against very weak competition. They, uh, he'll talk about this later. It's like, you know, if they could get enough to have a house by the sea, they didn't wanna work anymore. He's like, "I don't give a shit about having a house by the sea," even though he has a house and a helicopter and all kinds of crazy stuff. And there's something that Warren Buffett said that I think was simple and profound if you think about it for a while. There's a beautiful genius to what Buffett said. He says, "The important thing is to keep playing, and to play against weak opponents, and to play for big stakes." I think Del Vecchio is an ex- example of exactly that repeatedly for decades. Again, what'd he do? He kept playing, he played against weak opponents, and he played for big stakes. At every turn, Del Vecchio is surprised how slow his competition in, is, and how limited their ambitions were. He had no ceiling

11. 53:36 – 56:38

    The Ray-Ban Deal and Trusting His Own Judgment

    1. DSDavid Senra53:36

       to his ambition. He'd still be working in the business. He d- he was working in the business, I think he dies at 87. He died from, uh, I think pneumonia. The only way to get this guy to stop was to kill him. And one of the things I loved about him is he trusted his own judgment. He didn't care what other people thought about him or the way he ran his business. And the perfect illustration of this is when he buys Ray-Ban. There are other bidders for Ray-Ban. Look at what he does here. So Bausch + Lomb are the ones that own Ray-Ban at this time. They need to get rid of it. You know, Ray-Ban had, was like hugely popular in the '60s, '70s, and '80s. You know, by the '90s it's like a failing brand, b- uh, brand. They're still doing $500 million a year in revenue, but they're losing $50 million a, a year. So they're like, "Just please take this. Uh, get this $50 million hole away from us." Now, why would Leonardo want a failing brand with decreasing quality and a cheap price point? Remember, when he buys Ray-Ban, you can literally buy them at gas stations. They're selling them at Walmarts. The price point is less than $20. And somehow, Del Vecchio transforms it into a luxury brand with fat margins. So what is going on? What does Del Vecchio see that other people don't see? It says Lux- Luxottica was still too focused on prescription glasses, contrary to the trend in the sector where sunglasses represented over 60% of the market. Moving towards sunglasses follows the same logic that Leonardo had adopted a decade earlier when he ventured with Armani into the world of designer glasses: to target segments where competition is not on price. But on product and service. Sunglasses have a much higher fashion content than prescription glasses. They are a product where brand and fashion are decisive, and above all, they have a higher turnover. People buy sunglasses to renew their look much more frequently than they switch to a new prescription frame. Now, there are other bidders for Ray-Ban at the time. They are- all the other bidders are offering between 300 and 400 million, but they also move slow and overcomplicate the process. Del Vecchio grabs a sheet of paper and a pen, and he asks the question, "How many pieces does Ray-Ban produce each year?" Next question, "How much will it cost us to produce a single piece?" Next question, "How much can we sell the glasses for?" Having obtained the answers, he does a simple multiplication and arrives at his final price, $640 million. At the time, everyone else tells him he is overpaying. He doesn't give a fuck what other people think. He says, "But I knew the glasses sector well and what Ray-Ban could give me. It would open the doors of any optician in the world. They," meaning the other bidders, "could not understand that." And he was right. They're screaming, "You're overpaying. You're so stupid." He now sells more than 10 times the amount of Ray-Bans as when he bought the company. Now, what was one of the most surprising things about reading this story is he makes the same exact mistake that Sam Walton did. They're the same person in the sense that they're, they, like, they're gonna dominate their industry. They're completely obsessed. They think about it all the time. So he

12. 56:38 – 59:53

    Stepping Down, Returning, and the Essilor Merger

    1. DSDavid Senra56:38

       steps j-just what, just, just the same thing what Sam Walton did. He stepped down, let somebody else be CEO, and then is just unbelievably unsatisfied. One, wants to do the work themselves anyways, and two, unsatisfied with, you know, the, what other... Uh, just w- they're gonna wanna... This is their baby. This is their life. They wanna run it. You should never step down. It's, it's fascinating that, you know, two brilliant people can make the same exact mistake. So he says, you know, he, he tried to transform himself. They used to call him the craftsman president, 'cause, you know, he, he was in the factories. He was doing the work. Like, he, he wasn't in an office. He never... [chuckles] I'll tell, tell you about this in a little bit. It's like there's only one office that's empty in the Del Fac- in, in o- uh, in the factory, and it's Del Vecchio's. He, he was on the factory floor. He's in the stores. So he tries to transform. He fails at doing this, transform himself from craftsman president to shareholder president. But the problem is he's struggling in a role that's very different from the one he had built up over the previous 50 years. And then he also doesn't like how much attention that the new CEO... You know, Del Vecchio's very, very quiet, so he doesn't like the fact that he sees his CEO, the one he hired, on the front pages of the newspapers in Italy for reasons that have nothing to do with selling glasses. And he can't understand why this guy doesn't understand that you have to dedicate all your time to the factory. And what Del Vecchio would say is, "Factory above all. There is so much to do that a CEO should have little space to focus on other things. The sh- CEO should fuse with the factory, live there full time." That is what he's saying. So he winds up firing him and comes back to run the company. He wants Essilor. Remember that the CEO that was running it before did not want Essilor. He needs to become a leader. This is what Del Vecchio believes. He needs to become a leader in the corrective lens segment as well, where he finds high margins, which you and I have talked about over and over again today, but also significant barriers to entry, patents, excusivity, exclusivity. Still didn't say that right. [chuckles] Advanced machinery, and lots of specific technology. Now, what was fascinating is when this deal comes together, it's announced. Luxottica and Essilor have reached a €50 billion merger agreement, the world's largest lens manufacturer is tying the knot with its absolute leader in frames and eyewear sales. That makes sense, right? But everybody thought that Del Vecchio was selling out. So it says, "The structure hides a substantial truth. It'll be Del Vecchio who has control. At first glance, it seems that he was the one who was selling. For the first three years, the management will be perfectly equal between the French and the Italians. Just wait. Three years in, Del Vecchio will be able to assert the weight of his controlling stake as stipulated in the agreements that they s- both signed. It is the majority shareholder of the Italian company who becomes the majority shareholder of the group after the merger. In other words, Del Vecchio wins again." And so remember, his greatest deal came 60 years into his career. He's in his 80s. So at the time, young people were asking him, "How did you manage to accomplish all that you did?" This is his answer: "I've always tried to improve. Every time I achieve something, I started thinking about how to make the next step." I see this over and over again. The way I summarize this is no rearview mirror, no resting on laurels, no sleeping on wins. Make something great, and then do it again. And then the book ends perfectly. In the end, his strategy has always been only one. "I want to be the best at everything I do. That is all."

13. 59:53 – 1:06:12

    Fifty Rules: How Del Vecchio Ran His Life and Business

    1. DSDavid Senra59:53

       Okay, so now you know what I think are the most important parts in the story of the life and career of Leonardo Del Vecchio. What I did is, I told you I had 29 pages of notes for all the reading I did about him. I then condensed those 29 pages into a list of about 50 short sentences that I think will give you a sense of the man and how he ran his life and his business. So I just wanna run through them. He followed a few simple but essential rules. Those who have competed against him call him a true predator. Rivals called him a hawk. He would circle, wait, and strike. He believed the world belonged to those bold enough to take it. Those who owe their well-being to him revere him like a deity. He devoted his entire life to mad and desperate work at the expense of children and marriages with the ambition to be the best always. He had a will of iron and a fierce stubbornness to follow his own intuitions. He was always looking ahead. He was never satisfied. At 87, he had no intention of letting go. He knows no boundaries. Every strategy of his starts with the product. His choices always head in one direction, excellence. He would insist on seeing and improving every new design every week. He had a fear that never left him, that someone better might come along and take everything away from him. He said, "What you don't take for yourself, others will take from you. You mustn't nurture potential competitors. If you get distracted or rest on your laurels, as I've seen several entrepreneurs who started with me do, someone comes along to snatch your market away from you. The difference between me and many entrepreneurs who started with me? They felt they had made it when they could afford the apartment by the sea. I never got tired of moving forward." He had a passion for order, cleanliness, and control. He'd show up at factories running a finger across machineries to check for dust. He uses simple words that get straight to the point. He has a great talent for simplifying the most complex situations, just like he did when he bought Ray-Ban. He said, "I follow every model we sell in every country on every line." He has no desire to talk about the past. He's in his 80s when he said that. He never feels at ease. His moves are all born from the need to protect his business, his employees, and his brand. A longtime associate of his was asked, "How did a young orphan from the outskirts of Milan manage to dominate a global industry?" His answer when describing Del Vecchio, "So much passion." On his desk is a plaque with the phrase engraved, "Simplicity, transparency, clarity, humility." Also on his desk is another plaque with the words, "Every euro saved is an extra euro in profit." He said, "Here we produce. We don't talk. Our story is told through the excellence of our products, the processes required to make them, and the cleanliness of our financial statements." His passion does not lie in the office. His fixation always remained with what happens in the factory. "I like to see the new models born, study the designs, the making of the prototype all the way through to the complete collection." He has never changed his mind. His profits must first be reinvested in the heart of his own company, in research and development, in automation and technology. Never skimp when it comes to spending to be at the cutting edge. It has always been like this. If there is a new machine to buy, he wants it immediately. Here's a great description of Del Vecchio's career. A man who was trained in the field, who bet on a few simple and powerful ideas, on the quality of his products, on his spirit of conquest, and on a hunger that no achievement has managed to satisfy. It all starts with the product. This I just wanna be the best at what I do is such a powerful idea. Ask yourself, am I the best at what I do? If not, how can I be? Del Vecchio started out by making a mold that turned out to be the best product on the market, and everything developed from there. It happened naturally, step by step, almost without realizing it. He said, "Some have a passion for the mountains. Some have a passion for cycling. My passion has always been the factory." He understood decades ahead of his competitors that the winner would be the one who places the customer at the center and manages to retain him. He's described as having the same charisma as Steve Jobs and having a reality distortion field effect on those around him. He shaped reality to his liking. His requests were very clear. His employees would describe him as easy to understand. He watches every penny, doesn't tolerate waste, and invests heavily in technology. He said, "I have great respect for money. I have always invested my money in the company to keep it competitive." He says, "I have a respect for money and the effort required to make it." He maintained a great perspective. Some would say, "You're working so hard. How difficult your life would be." He would say, "To remain alive is a privilege, as is being fortunate enough to get up in the morning and make frames all day, feeding dozens of families." He lived by a simple but powerful principle. One's own work must be done to the best of one's ability. There is only one office that is always empty, his. He is never at his desk. The office is not for him. He is a trench man, a factory man. He said, "I'm always around the factory. I talk directly with everyone explaining why and how we do things this way." What is he saying? He's using the word explaining. He's really... What he's saying? He's saying he's teaching. This is what Jim Sinegal, the founder of Costco, said. "If you're not spending 90% of your time teaching, you're not doing your job." That is a direct quote from Jim Sinegal. "I'm always around the factory. I talk directly with everyone explaining why and how we do things this way." He explains his very simple strategy for the factory. You have to do things well, then better, and then always better. Innovation has to be continuous. He had so many ideas that he had to keep a tape recorder next to his bed. He would wake up in the middle of the night with a solution to a problem or an idea to expand his business. He would record the idea, and then he'd go back to sleep.

14. 1:06:12 – 1:07:45

    Closing Reflections and Wrap-Up

    1. DSDavid Senra1:06:12

       He was driven for decades by a deep need to be autonomous. He does not want to depend on other people. He believed that complacency kills. Others took vacations at the sea. I kept moving forward. He experienced a lot of change in his lifetime. His first son, Claudio, is 47 years older than his younger Clemente. Claudio grew up in a small attic room overlooking the factory. Clemente grew up the son of a billionaire. He says, "I follow the performance of our 1,500 reps every day." He's in his mid-80s. It's the weekend, and he's obsessively checking every single individual store sales data on his iPhone. He says, "I have never been satisfied." He was described as simply a man who sees far, much farther than others. Del Vecchio could never be controlled. He has taken over the world of frames by destroying the competition, humiliating his Italian rivals, buying out the Americans, annihilating the French and Germans. And finally, Del Vecchio found his reason for being in his work. And that is where I'll leave it. I would say for the full story, read the book, but the book's not even available in English, unfortunately. I will leave as many of my notes as possible in the show notes, so you can see it on your podcast player. And make sure you're on my personal email list. I email the top 10 highlights from every single book and episode that I make. I'll leave that link down below. You can sign up for free, and it's also available at davidsenra.com. That is 394 books down, 1,000 to go. Thanks for listening, and I'll talk to you again soon.

Episode duration: 1:07:46