#46 I Love Capitalism An American Story

In this episode, the host delves into Ken Langone's autobiography "I Love Capitalism," exploring the billionaire co-founder of Home Depot's early life, his relentless work ethic, and the lessons he learned from both triumphs and failures. Langone, who grew up in poverty, credits unconditional love from his parents and a persistent drive to work from a young age as foundational to his later success. He emphasizes the importance of loving one's work and the power of resilience and creativity in overcoming adversity. Despite reaching significant wealth, Langone faced setbacks, including a major financial blow that led him to start his own venture, underscoring his belief in the value of equity and the necessity to never give up. The host highlights Langone's advice to leave more on the table for others than they expect, a principle that has guided his approach to business and contributed to his lasting success.

• Ken Langone's grandfather left school at six and worked with a shovel until death at 72, resulting in a deformed hand from years of labor.
• His parents had limited education, with his mother leaving school in the seventh grade and his father learning plumbing during the Depression.
• Ken's father struggled with colitis and manic depression, leaving the family reliant on relatives and friends.
• Despite financial struggles, Ken did not feel poor and had a wonderful childhood, with jobs starting at age eleven.

"My grandfather had left school when he was six years old and never went back. When he died at 72, he couldn't read or write."

This quote highlights the limited educational background and lifelong manual labor that shaped Ken Langone's family history, emphasizing the contrast with his later success.

"My parents effectively relied on the help of lots of relatives and friends."

Ken's family's reliance on a support network underscores the financial difficulties they faced and the community's role in their survival.

• Ken's father had initiative but lacked follow-through, often forgetting to bill for his plumbing work.
• Ken began working at age eleven, always seeking opportunities and enjoying making money.
• He demonstrated entrepreneurial savvy early on, buying and reselling Christmas wreaths for profit.
• Ken held multiple jobs simultaneously, including delivering newspapers, working in a butcher shop, moonlighting at a supermarket, caddying, and starting a landscaping business.

"I was different. I began working at age eleven. I was always on the lookout for opportunities, and I loved making money."

This quote illustrates Ken's early divergence from his father's work habits, showing his proactive nature and passion for entrepreneurship from a young age.

• Ken was motivated by his humble beginnings and his mother's encouragement to work hard and get an education to avoid poverty.
• He sought to be rich, influenced by the stark contrast between his neighborhood and the affluent Rosalind Estates.
• His parents' unconditional love and support, despite their own limitations, were crucial to his development.
• Ken's parents had a strong desire for him to attend college, which they saw as a path to a better life.

"My mother would say to me, would you like to live here one day? And I'd say, yes. And then she'd say, well, then you've got to work hard and get an education."

This quote captures the aspirational message from Ken's mother, linking hard work and education to achieving a better standard of living.

• Despite being bright, Ken was not academically curious or a good student in high school, focusing more on jobs and having fun.
• He was not initially interested in college, but after visiting friends at Bucknell and enjoying the social life, he decided to enroll.
• Ken felt out of place at Bucknell due to his working-class background, experiencing feelings of shame and inferiority.

"But the problem was that even though I was a bright kid, I wasn't a good student."

This quote reflects Ken's disinterest in traditional academic pursuits, foreshadowing his later success through practical application of his talents rather than formal education.

• Ken learned about supply and demand through various business ventures during college, such as selling custom stationery to homesick freshmen.
• He exploited the dress code requirement at Bucknell by selling ties to fellow students, demonstrating an eye for opportunity and profit.

"Supply and demand goes through everything in life."

Ken recognizes the universal principle of supply and demand and applies it to his entrepreneurial activities, showing his understanding of basic economic concepts from a young age.

• Ken married his wife Elaine during his senior year and was determined to make money, setting his sights on Wall Street.
• Despite having no connections or Ivy League education, Ken was drawn to Wall Street's excitement and the potential for financial growth.

"At that point in my life, all I knew was that I wanted to make money. And where did you make money? Wall street."

This quote illustrates Ken's ambition and attraction to Wall Street as a symbol of financial success, despite his lack of experience in the field.

• Ken met Hudson White Knight at Equitable Life, who advised him that loving one's work is key to success.
• Ken's drive and love for his work, even at 82, are central to his success and happiness, as he would pay to go to work if necessary.

"If you really love your work as much as I think you're going to, you're going to be a big success."

Hudson White Knight's advice to Ken emphasizes the importance of passion in one's work as a predictor of success, a lesson Ken took to heart throughout his career.

• Ken Langone was eager to work in the securities industry, fascinated by financing, and willing to work hard to achieve his goals.
• He proposed to get an MBA at night to qualify for a position in the investment department that required an MBA.
• Ken's commitment to hard work and his passion for the industry are highlighted as key drivers of his success.

"I suppose I pray at the feet of hard work. And I really was excited about the securities industry."

The quote emphasizes Ken's dedication to hard work and his excitement for the securities industry, indicating a strong work ethic and passion as foundations for his career.

• Ken loved his work from the beginning, which he considers one of life's great joys.
• He advises younger generations to find something they love and channel their passion into it.
• The importance of job satisfaction and passion for one's work is a recurring theme in Ken's book.

"The truth is that I loved what I was doing from the day I went to work, which is one of the great joys in life, I found."

This quote reflects Ken's personal experience of finding joy in his work and suggests that loving what you do is a key component of a fulfilling career.

• Ken and his wife lived modestly in Queens, with a budget that required frugality and resourcefulness.
• Despite financial struggles, Ken was determined to succeed, working multiple jobs and furthering his education.
• Ken's early life is characterized by hard work, financial challenges, and support from family.

"Christ, we struggled. But my in-laws and parents were good to us."

The quote illustrates the financial struggles Ken faced early in his career and the support he received from his family during those times.

• Ken discusses the concept of hedonic adaptation, where satisfaction from achievements is fleeting as new goals are set.
• He reflects on his dream of earning $10,000 a year and how quickly aspirations can evolve.
• Ken warns against constantly chasing a "fake future" and emphasizes the importance of appreciating the present.

"It's the idea of hedonic adaptation, which is you could set a goal, and once you get there, you might be pleased for a few moments, and then usually human nature, you look forward and you set a new, further away goal."

This quote explains the concept of hedonic adaptation and its impact on personal satisfaction, suggesting that constant goal-setting without appreciation for the present can lead to dissatisfaction.

• Ken served in the military reserves during a national crisis, which temporarily interrupted his career.
• Despite the stock market crash, Ken saw an opportunity to pursue his dream of working on Wall Street.
• Ken's determination to work on Wall Street led him to make the counterintuitive decision to leave a secure job during a market downturn.

"President Kennedy activated 100,000 reserves, and lo and behold, I'm one of the 100,000."

The quote highlights the unexpected call to military service Ken experienced, which played a significant role in his life and career trajectory.

• Ken's decision to quit his job without a safety net to pursue a career on Wall Street exemplifies his risk-taking nature.
• He faced the challenge of getting hired on Wall Street during a time when investment banks were cutting staff.
• Ken's strategy to get hired involved offering to work for a secretary's salary and requesting to call on accounts the firm was not doing business with.

"Investment banks were cutting staff like crazy. To me, that meant it was a golden opportunity to get my foot in the door."

This quote captures Ken's willingness to take risks and his counterintuitive approach to career opportunities, seeing potential where others saw adversity.

• Ken leveraged his research background and teaching experience to excel in sales and identify new business opportunities.
• He focused on accounts that were previously untapped, allowing him to generate new business without competition.
• Ken's entrepreneurial spirit and work ethic led him to become a significant contributor to his firm's success.

"I would make more money because I wasn't competing with anyone else. I didn't give a damn about the size of the accounts, and I worked my ass off."

The quote demonstrates Ken's strategic approach to business development and his disregard for account size in favor of generating new revenue streams.

• Ken emphasizes the centrality of the customer in business, advocating for treating customers well to ensure success.
• He experienced friction with senior staff due to his unconventional methods but remained focused on customer satisfaction.
• Ken's philosophy of customer-centric business is a key lesson he imparts in his book.

"The way I thought about it then and the way I still think about it today, I had only one boss, the customer."

This quote underscores Ken's belief that the customer is the ultimate authority in business, shaping his approach to sales and relationship-building.

• Ken Langone discusses a valuable lesson he learned from his colleague Jack Kellen regarding presenting investment opportunities.
• He emphasizes the importance of building trust with clients by disclosing all potential negatives before the positives.
• Trust-building is highlighted as a key factor for long-term business relationships and success.
• Ken also talks about the confidence he gained from his coworker Bindi Banker, who taught him not to idolize the "big guys" on Wall Street.
• The discussion includes the idea that public personas often differ from private ones and the pitfalls of idolizing successful figures.

"Kellen once taught me a lesson I will never forget. When one of our analysts came up with a buy recommendation for a company called let's just call Harvest and Walker refractories... You're going to walk in there and the first thing you're going to do is tell Shorty all the negatives..." "This afternoon he's going to call up all of his buddies on Wall street... And your trust is going to go through the roof with him."

Ken describes a strategy where he was advised to initially present all the negatives of an investment to a potential client, Shorty Manhana, to build trust and credibility. When other investors would share these negatives, Shorty would already be aware of them, thus increasing his trust in Ken.

"The first big lesson Bindi taught me was one that he taught by example... In short order, he taught me to understand that a man's public Persona usually has very little to do with his private Persona."

Bindi Banker, Ken's coworker, taught him that the personas of successful individuals in the public eye are often not reflective of their true selves. This lesson helped Ken gain confidence and not feel subservient to these individuals.

• Ken Langone reflects on the difference between getting rich and staying rich, highlighting that they require different skills.
• He shares personal anecdotes about his early financial risks and the lessons learned from them.
• The narrative covers the pitfalls of hubris in financial decisions and the importance of experience in wealth management.

"Getting rich is one skill, and staying rich is a different skill altogether... I can name too many people who were wealthy, very wealthy, even enormously wealthy, and wound up literally going broke."

Ken acknowledges that acquiring wealth and maintaining it are distinct skills, and he has observed many individuals who failed to preserve their wealth.

"By the spring of 1965, I was earning $100,000 a year on commissions alone... But the truth is that buying that house for $77,000 was a big risk for me relative to my net worth at the time."

Ken discusses a personal financial decision where he took a significant risk by purchasing an expensive house, which he later recognizes as a decision he would not make with his current understanding of wealth management.

• Ken Langone's career progression is discussed, including his role in taking Ross Perot's company, EDS, public.
• He emphasizes the value of demonstrating dedication and personal investment when seeking business opportunities.
• The story illustrates the importance of seizing opportunities and proving oneself in competitive environments.

"Ross, I said, your deal is going to get done because you've got a great company and investors are going to want it... If I mess up your deal, my one chance of success is gone. But if I do a great job for you, my reputation is enhanced."

Ken explains to Ross Perot why he should be chosen to handle the IPO despite his lack of experience. He argues that his personal stake in the success of the deal would ensure his utmost dedication and attention to detail.

• Ken discusses the consequences of hubris in business decisions, sharing a personal story of a significant career setback.
• He highlights the importance of humility and the dangers of overconfidence in the volatile world of finance.
• The narrative serves as a cautionary tale about the risks of becoming a target due to public success and the need for prudent financial management.

"My hubris kicked in, and I stupidly thought we could make a stand... What I didn't realize was that I couldn't play that game if I didn't have unlimited funds."

Ken admits to a mistake he made by trying to counteract short sellers without having sufficient capital, leading to a significant financial loss and a low point in his career. This experience taught him a hard lesson about overconfidence and risk management.

• Ken Langone experienced a proxy war with partners at his firm.
• Despite being a partner and ostensibly wealthy, his assets were illiquid.
• He left to start his own investment and venture capital firm.
• Focus was supposed to be healthcare, but he diversified.
• Partners were relieved to see him go.
• His wealth was tied up in shares used as collateral, making it inaccessible.

"The partners want him out. He won't leave... I was worth almost a million dollars at that point, but it was all on paper... The partners would never let me get that money out."

This quote explains the conflict Ken faced with his partners and the illiquid nature of his wealth, which was a significant challenge as he started his own business.

• Ken Langone turned to selling his expertise as a personal financial advisor.
• He managed to secure clients, ensuring a steady income.
• Lived frugally, buying used furniture and subleasing office space.
• His anxiety about financial stability fueled his drive for business.

"I went out and did something I was good at selling equities, except that in this case, I was selling my own expertise... I have $110,000 a year coming in... I was determined to keep overhead as low as possible."

Ken leveraged his skills in a new context as a personal financial advisor, demonstrating resourcefulness and determination to maintain a low overhead.

• Ken Langone describes the emotional rollercoaster of entrepreneurship.
• He turned his anxiety into a driving force for business.
• The story parallels the experience of a Bumble founder who also channeled anxiety into work.

"By early 1975, we were still struggling... my anxiety drove me to be almost maniacal about bringing in business."

Ken's quote highlights the mental challenges of entrepreneurship and the potential to convert anxiety into a positive, motivating force.

• Ken Langone was introduced to Bernie Marcus through a mutual connection.
• Bernie Marcus, despite success, lacked equity in Handy Dan, which limited wealth potential.
• Equity ownership is emphasized as crucial for substantial wealth accumulation.

"Bernie Marcus is in his mid-forties at the time... he's 49 when he starts Home Depot, basically broke... within ten years, he's a billionaire because he owns equity and the company was successful."

This quote illustrates the transformative power of equity ownership in a successful venture, as exemplified by Bernie Marcus's journey with Home Depot.

• Ken and Bernie learned from other founders' experiences and applied those lessons to Home Depot.
• The concept of large, organized stores with low profit margins inspired Home Depot's business model.

"Saul had come up with this brilliant concept of buying in bulk and selling at very low profit margins in big, clearly organized stores... Bernie never forgot that."

Saul Price's influence on Bernie Marcus is highlighted, demonstrating the importance of learning from peers and applying their successful strategies to one's own business.

• Home Depot faced initial challenges with cash flow and stock.
• Creative solutions, like using empty boxes to fill shelves, were employed to create an appearance of prosperity.
• Personal involvement in customer attraction was critical.

"Pat Farah came up with a genius idea... Customers would walk in and see what appeared to be a prosperous store packed with merchandise."

The quote shows the innovative thinking needed to overcome early-stage business challenges, as done by Home Depot co-founder Pat Farah.

• Ken Langone emphasizes the value of never giving up and thinking creatively to overcome difficulties.
• These principles were key to Home Depot's success.

"Never giving up when the chips were down and thinking creatively instead of just reactively. It's a style I recommend highly."

This advice from Ken underscores the significance of resilience and innovative problem-solving in entrepreneurship.

• Ken Langone believes in the importance of incentivizing business partners by offering them a significant stake.
• He recounts a successful partnership where he allocated more equity to the operator, which paid off.

"Leave more on the table for the other guy than he thinks he should get... my one third is going to be worth a hell of a lot more than if I own two thirds and you owned one third."

Ken's strategy of generous equity distribution is revealed in this quote, illustrating his belief in aligning incentives for maximum business success.