Episode #41 - Free-Rider Friday - April 2015

Welcome to “Free-Rider Friday.” Most of our shows are “topic” driven, where we dive deep into one subject. Free-Rider Fridays are designed to be “event” driven—whatever issues are in the news that we (or you) find worthy of commentary.

In economics, free riding means reaping the benefits from the actions of others and consequently refusing to bear the full costs of those actions. This means Ed and Ron will free ride off of the news, and each other, with no advanced knowledge of the events either will bring up.

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Ed’s Topic - More on the “one-percent”

The top 1% of income earners in the USA pay nearly 40% of federal income taxes. You can see another breakdown here, based on 2012 IRS data, from the Tax Foundation.

Ron’s Topic - Net Neutrality Regulation Update

Ajit Pi (pronounced “Ah-JEET Pi”), FCC Commissioner, was interviewed in the April Rush Limbaugh Newsletter (no link available). Here’s some of what he said:

The FCC is wielding a regulatory sledgehammer to pound down a nail that simply doesn’t exist. Innovators, engineers, and technologists have decided how the Internet works—but now it’s going to be regulators, politicians, and lawyers.

He also mentioned how Netflix’s CFO said: “We didn’t really like Title II. We would have preferred a non-regulated solution.”

Allegations Netflix (1/3 of all traffic at peak) purposefully sends traffic on worse roads; refused open video standards to intentionally worsen the experience of users to gin up support for net neutrality regulation.

There’s no regulation of content contained in the 400 pages, which is good news. But Mr. Pi says it’s possible.

The “Universal Service Fee” (USF) now applies to broadband, not just voice. So expect to see this on your broadband bill.

Mr. Pi believes these regulations will help big companies at the expense of smaller ones—less competition, less choice, etc.

Ed’s Topic - AppleWatch

The Apple Watch pre-sold 2.3 million units. We discussed the blog post by pricing consultant and author Rafi Mohammed, who grades Apple an A for ambition, but a D in pricing strategy. Here's why:

Problems

1. Upgrades

2. No carrier subsidies

3. Price range too wide ($349 to $17,000)

Should have

1. Narrow price range $249-$2000

2. Offer a monthly payment plan

3. Trade-in program

4. Bundle watch with iPhone

It remains to be seen if the most profitable company on the planet really launched with a sub-optimal pricing strategy.

This is wonderful thing about enterprise: all value is subjective, and subject to the test of the market—that is, the preferences of individuals.

Ron’s Topic - Peter Drucker and 2020

An HBR blog post by Rick Wartzman, “What Peter Drucker Knew About 2020,” was discussed.

Here’s the article on the company that introduced a $70,000 minimum wage for its 120 employees.

Ed’s Topic - Learn Liberty and the TIP Story

Many great educational videos on economics, different schools of thought of classical liberalism, etc., at LearnLiberty.org.

Ron would also recommend Milton Friedman’s “Free to Choose” TV series, both the original 1980 series as well the updated series done in for 1990.

You can watch both for free at freetochoose.tv, along with other excellent content.

Ed also asked Ron about the TIP Clause used in some professional firms when they are delivering extraordinary value.

Here’s the story, as told in Ron’s Book, Implementing Value Pricing: A Radical Business Model for Professional Firms:

In 1997, Tim was the managing partner of top accounting firm, and his best, long-term customer (of 20 years) had come to him wanting to sell his $250 million closely held business. He told Tim (and I am paraphrasing here), “You’ve been my CPA for 20 years and I trust you with my life. It is time for me to sell my business and enjoy my golden years. Here is what I want you to do:

• Update our business valuation to maximize the sales price.

• Fly with me anywhere we have to go to meet with potential buyers.

• Be actively involved at every stage of the sales negotiation.

• Perform the due diligence, along with the attorneys, of the qualified buyers.

• Work with the attorneys on the sales contract to make sure my interests are protected.

• Perform tax planning and structure the deal in such a manner as to maximize my wealth retention.”

Obviously, this was a very sophisticated customer and it is true Tim had no idea, at the outset of this engagement, how long it would take to close the deal, and how much firm capacity (his and his team members) it would require. But he did know more than an average salesman would know, which is one of the enormous advantages professionals possess when it comes to pricing the customer, not the service. He knew the customer’s business was well niched, profitable, and growing. This would indicate a very high probability of success.

He also knew this customer was an audit customer of the firm’s and therefore he would not be able to charge a contingency price based upon a financial outcome (such as a percentage of the sales price, or of any tax savings), since that would impair independence, which is illegal for an auditor.

When I asked Tim how he priced this engagement, he proudly proclaimed that every hour charged to this project was at his highest consulting rate of $400 per hour, indicating, right from the start, Tim knew there was more value on this project than he would ever be able to pad on a timesheet.

He further explained how he had updated the business valuation, negotiated with two buyers, and did all of the other tasks requested by the customer. As a result of Tim’s work, the customer received (and saved in taxes) an additional $15,000,000, and acknowledged Tim was directly responsible for this outcome. In Tim’s own words, the customer was “elated.”

Tim then told how he priced the engagement. He reviewed all of the hours from the work-in-progress time and billing system, believed it did not adequately reflect the value he provided, and marked it up an additional 25 percent over the $400 hourly rate. He then sent out an invoice for $38,000, which the customer promptly—and happily—paid.

He believed he was value pricing. He was not—he was value guessing, since the customer had absolutely no input into the price up front, and only a customer can determine value.

When I asked Tim what he thought the customer would have paid if he had utilized a TIP clause (also referred to as the retrospective price, or success price), such as the following:

In the event that we are able to satisfy your needs in a timely and professional manner, you have agreed to review the situation and decide whether, in the sole discretion of XYZ [company], some additional payment to ABC [CPAs] is appropriate in view of your overall satisfaction with the services rendered by ABC.

The TIP is being based on the “overall satisfaction with the services rendered,” and not any financial contingency, which is the origin of the acronym TIP—to insure performance. This TIP clause would be discussed with the customer before any work began. If needed, you could put a minimum price on the engagement (such as $40,000) to cover immediate firm capacity.

But in this case, given the 20-year relationship with the customer, even a price solely determined by a TIP would have been acceptable, since the customer was not likely to take advantage of Tim after the services he rendered and the long-term relationship they had.

In answer to my question, Tim said his customer would most likely have paid him $500,000, a sum I believe to this day is below the real number—but at least better than the $38,000 he finally charged. Nevertheless, since Tim knows the customer better than I do, let us take his number as correct.

I informed Tim he had made the Ultimate Accounting Entry:

Debit Credit Experience $462,000 Cash $462,000

Tim was providing extraordinary value to this customer yet his cost-plus pricing theory prevented him from capturing a fair portion of it. Are we not ruled by our theories? This is why it is imperative to extinguish the cost-plus mentality from your firm.

No one in any seminar I have shared this story with believed Tim would have received less than $38,000 for his services on this engagement. In effect, Tim paid a reverse risk premium—he was assured he would not go below his hourly rate, but in return he gave up the added value the customer already believed he had created. This is not a risk worth taking if you want to maximize your firm’s profitability.

The deleterious effects of this are deeper than just being deprived the value from the work you provided on any one engagement. The problem lies at the very core of a firm’s measurement system and points out how it does not offer the opportunity to learn from lost pricing opportunities, or pricing mistakes.

In his inimitable way, Yogi Berra explains this situation with his quip, “We made too many wrong mistakes.”

When it comes to pricing, the wisdom from Yogi is profound. Tim made the wrong mistake, and here is why: He will not learn anything from it because the firm’s primary assessment is billable hours—once again the billable hour is the incorrect measuring device for value. When the partners review the realization report on this engagement, they will see 125 percent, which is excellent when you consider most firms realize between 50 and 95 percent overall on each hour.

Most likely, Tim will get nothing but accolades and praise from his fellow partners. No one will ask where the $462,000 is because the billable hour metrics do not have a way to capture that type of information, which is precisely why pricing is more of an art than a science.

This is an excellent example of a wrong mistake for another reason: Tim (or the firm) will not learn anything from this lost pricing opportunity. The $462,000 simply vanishes into thin air (or, more precisely, the consumer surplus remains on the customer’s income statement).

No knowledge was gained by the firm on how to price the next similar engagement in accordance with value—it will simply perpetuate the same mistake, over and over. Being a more accurate activity-based cost-accountant, or even excellent project manager, would also not have helped Tim to capture the value.

This is not meant to imply with value pricing you will never make mistakes. You certainly will. The difference is they will be the right mistakes, because with value pricing, as opposed to cost-plus pricing, you are forced to receive input from the customer as to your value, and have in place pricing strategies that will capture more of that value (like the TIP clause).

If you engage in After Action Reviews (AARs), which perform value assessments on each engagement, and elicit feedback from your customers, you will learn from your mistakes and become better at pricing in the future.

Most feedback firms receive on pricing is negative: “Your price was too high.” Or it is ambivalent: “Your price was just right.” No customer ever discloses how much money your firm left on the table. Since humans emerged from the cave and began to barter, it is the customer’s job to do everything in their power to push down prices. There is nothing new about this, and it should not surprise any executive. Your firm’s job, however, is to push back. The only effective way to accomplish this is by emphasizing value.

Ron was also interviewed for an article on the TIP clause, which you can read here.

Episode #39 - For Good and Evil: Taxes and Civilization

There have been great and powerful men who have moved civilization, but most of the time no heroes can be found, and the world is led by scoundrels, fools, and second-stringers. Taxes, however, are ever present, often making a strong impact upon our lives—for good and evil. The prosperity as well as the decline of nations has always had a tax factor, and this we will see time and again throughout history –Charles Adams, For Good and Evil

For Good and Evil by Charles Adams is the most comprehensive book on the history of taxation throughout civilization that I have ever read. Adams is an international tax attorney who offers a refreshing perspective on taxation, one you will not find among most practicing tax professionals.

It is a lively book that takes you from Ancient Egypt, Greece, Rome and the Middle Ages, all the way up to present day. It offers a perspective on taxation that you will not find in the current debates surrounding tax reform, and offers some very compelling alternatives and improvements to our existing system.

In order to tempt you to buy a copy of this book and read it, we offer the following tidbits of knowledge you will learn from Adams:

• Taxpayers from the beginning of time have reacted to oppressive taxation in three ways: 1) rampant tax evasion and flight to avoid tax; 2) riots; 3) violence;

• The first casualty of “dumb taxation” has always been liberty; the second casualty has been the wealth and strength of a nation;

• The origins of Hanukkah are rooted in the tax struggles of the ancient Hebrews;

• The Ancient Greeks extracted large amounts of wealth from rich private citizens through the liturgy—the voluntary alternative to progressive taxation. Enforced by tradition and strong public sentiment, most gave three to four times more than what was expected from them;

• Plane Geometry was not invented by Euclid, but rather by ancient tax collectors determining land size for harvest taxes;

• One of the causes of the fall of the Roman Empire was tax evasion;

• William Tell refused to acknowledge the Austrian Hapsburgs and their gang of tax collectors. For this defiance he was ordered to shoot an apple from the head of his son with a crossbow;

• The American Revolution was probably more the consequence of the oppressive administration of taxes than the taxes themselves. Taxation with representation has proven more expensive than taxation without representation;

• In 1787 no citizen of the United States could vote who was not a taxpayer;

• Was the Civil War fought over slavery or Northern Tax policy?

• In 1816 Britons put a tax on newspapers (the “knowledge tax”), designed to curb the opposition press. The tax was levied by the page. Papers today continue to print large pages, which were initiated for tax avoidance;

• Tax laws have taken away liberty more often than foreign invaders;

And ultimately,

• All good tax systems tend to go bad.

As Adams Points out: “Polybius, considered the greatest historian of the ancient world, said that the best preparation for politics was the study of history in order to avoid the disasters of others.”

With respect to taxation, there have been plenty of disasters. If enough of us educate ourselves, it may be possible to avoid those historical debacles. Adams reminds us of the wisdom from past thinkers that we have foolishly forgotten.

The Lost Legacy: The Enlightenment Thinkers on Taxation

It is vain to say that enlightened statesmen will be able to adjust these clashing [tax] interests, and render them all subservient to the public good. Enlightened statesmen will not always be at the helm

–James Madison, The Federalist, No. 10, 1787-1788

It has been noted that the principal trouble with the contemporary generation is that it hasn’t read the minutes of the last meeting. With respect to tax policy, this is an understatement. The Enlightenment period (1650 to 1700) was the high watermark for tax wisdom, ethics, jurisprudence and plain common sense, according to Charles Adams in For Good and Evil.

The Enlightenment thinkers knew their history; they searched the world’s governmental systems for what worked and what didn’t, and took the best of many. With regard to taxation, they frequently spoke of the relationship between taxation and despotism and prosperity. Their primary insight was that government exists to maintain our liberty—not our prosperity.

The legacy they left us has largely been forgotten. Listen to the present tax reform debates and you will not hear the ideas and ideals of the Enlightenment thinkers, especially amongst the media and the “tax experts.” Instead, they report on any changes as if it were a sporting event—who wins and who loses, rather than what is good for the whole country.

This is tragic. It is amazing that in a society such as ours—with instantaneous access and ability to transmit information far and wide—we have forgotten the wisdom of these thinkers. It proves that information does not equate to wisdom.

Charles Adams points out:

Perhaps this is an example of the simple truth about life—what comes easy is taken lightly. Our liberty and freedoms were handed down to us by generations past that had to fight for the liberty we now enjoy. Liberty to us is an inheritance, not something we earned or achieved on our own. We take liberty lightly, and we don’t seem to realize how hard it is to get it back once it is lost.

The following is the “priceless legacy” the men of the Enlightenment passed on to us, adapted from For Good and Evil (first edition), Chapter 26.

1. Government is at best a necessary evil

Thomas Paine in Common Sense (1776): “Government, even in its best state is but a necessary evil, in its worst state an intolerable one.”

Paine said that taxation was tyranny, and a great destroyer of liberty as well as of property and industry, and it impoverishes the people more than foreign enemies do.

1. The imaginary wants of the state

“Baron de Montesquieu in his The Spirit of Laws (1751), a book which greatly influenced the Framers of the U.S. Constitution, explained this problem:

                  The revenues of the state are a portion of that each subject gives of his property in order to secure or to have the agreeable enjoyment of the remainder.

To fix these revenues in a proper manner, regard should be had both to the necessities of the state and those of the subject. The real wants of the people ought never to give way to the imaginary wants of the state.

Imaginary wants are those which flow from the passions, and from the weakness of the governors, from the charms of an extraordinary project, from the distempered desire of vain glory and from a certain impotency of mind incapable of withstanding the attacks of    fancy. Often has it happened that ministers of a restless disposition, have imagined that the wants of the state were those of their own little and ignoble souls.”

1. Government should stay out of business

Adam Smith in The Wealth of Nations:

Princes, however, have frequently engaged in many other mercantile projects, and have been willing, like private persons, to mend their fortunes by becoming adventurers in the common branches of trade. They have scarce ever succeeded. The profusion with which the affairs of princes are always managed, renders it almost impossible that they should. The agents of the prince regard the wealth of their master as inexhaustible; are careless in what price they buy, are careless in what price they sell; are careless at what expense.

Two words: Post Office.

1. Liberty carries the seed of its own destruction

          Montesquieu noted that people living in a state of liberty tend to let their guard down and tolerate great taxes, but once granted they discover they cannot take a backward step: “Liberty produces excessive taxes; the effect of excessive taxes is slavery.”

1. Direct taxes are the badge of slavery, and indirect taxes the badge of liberty

         Again Montesquieu: “Capitation [direct taxes on the individual] is more natural to slavery; a duty on merchandise is more natural to liberty, because it has not so direct a relation to the person.”

Recall that the Supreme Court ruled the 1894 income tax unconstitutional because it was a direct tax (thus had to be apportioned amongst the states).

1. Tax evasion is not a criminal act

            Tax evasion is the consequence of excessive taxation, it’s a “positive offense” because it’s one manufactured by the state, not worthy of being called a true crime.

Taxation means forced exaction. Taxes aren’t debts, no principle of fair value received, which is basis for legally enforceable debt.

The US Treasury Department defines a tax as: “A compulsory payment for which no specific benefit is received in return.”

A tax is owed because the government says so, nothing else is required. You can’t be put in prison for not paying your VISA bill.

1. Liberty’s most dangerous foe: arbitrary taxation

          David Hume:

“But the most pernicious of all taxes are the arbitrary. They are commonly converted, by their management, into punishments on industry...It is surprising, therefore, to see them have place among any civilized people.” If any of the following three principles are violated, the taxation was considered arbitrary:

Taxation must be with consent. Have to be apportioned among the people by a definite standard or rule. Must be equal, counter to the inclination of everyone to push their taxes off onto someone else.

1. Common sense economics: the supply-siders

            Not a new theory at all, goes back into antiquity.

1. The marks of a bad tax system: Adam Smith’s four points:

1. A tax was bad that required a large bureaucracy for administration.

2. A tax was bad that “may obstruct the industry of the people, and discouraged them from applying to certain branches of business which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so.”

3. A tax was bad that encouraged evasion. “The law, contrary to all the ordinary principles of justice, first creates the temptation, and then punishes those who yield to it.”

4. A tax is bad that puts the people through “odious examinations of the tax-gatherers, and exposes them to much unnecessary trouble, vexation, and oppression...It is in some one or other of these four different ways that taxes are frequently so much more burdensome to the people than they are beneficial to the sovereign.”

1. What a good tax system should be: Lord Kames’s six rules:

            Lord Henry Home Kames, a scholar of that era, published his Sketches on the History of Man (1769), which analyzed tax issues and greatly influenced Adam Smith. Here are Kames’ “Rules to be observed in Taxing”:

1. “When the opportunity for evasion exists, taxes must be moderate. It is unjust for a legislature ‘first to tempt and then to punish’ for yielding to temptation.”

1. Taxes that are expensive to levy should be avoided.

1. Arbitrary taxes are “disgustful to all.” The amount paid is determined by the “vague and conjectured opinion of others.”

1. To remedy the “inequity of riches,” the poor should be relieved of any significant tax burdens.

1. Taxes that sap the strength of a nation should be avoided. Such taxes “contradict the very nature of government, which is to protect not oppress.”

1. Taxes that require an oath are to be avoided. Said Kames:

Perjury has dwindled into a venial transgression and scarcely held an imputation to any man’s character...Lamentable indeed has been the conduct of our legislature: instead of laws for reforming and improving morals, the imprudent multiplication of oaths [for tax enforcement] has not only spread corruption through every rank, but by annihilating the authority of the oath over conscience, has rendered it ineffectual.

The U.S. Supreme Court condemned the use of oaths for tax administration as late as 1885, Boyd v. United States, 116 U.S. 616, 631.

How many of these tests would our present-day tax system meet?

Very important question:

                        Have we squandered our inheritance?

Those who have no concern for their ancestors will have none for their descendants

–Edmund Burke

To know nothing of what happened before you were born is to remain ever a child

–Cicero

You can watch an hour long interview with Charles Adams from Booknotes here.

Episode #38 - Entrepreneur Heaven: Thomas Edison, Henry Ford, Walt Disney, J.W. Marriott

They say you can’t turn back the clock and go back to the good old days. Yet this is precisely what is happening with the total quality service movement, the customer loyalty movement, CRM, and other philosophies that put the customer at the center of the business organization. Millions of dollars are being spent on consultants to relearn what was once common sense, practiced by the great entrepreneurs from the turn of the century to the mid-1950s. This show, the first in our Entrepreneur Heaven Series, will explore the wisdom of Thomas Edison, Henry Ford, J.W. Marriott, and Walt Disney. Wisdom is timeless, and occasionally turning back the clock is the wisest course of action. Sometimes history is our best teacher.

Thomas Edison (Feb 11, 1847 – October 18, 1931)

Born in Ohio, died 1931, at 84. Scarlet fever as boy may have contributed to him being deaf.

Before age 40: invented the phonograph, electric light, and improved the motion picture camera.

World record of 1,093 patents over lifetime; first at 21; last one granted ten months before his death, and four posthumously.

Sign in Edison’s laboratory:

            Hell! There ain’t no rules around here! We are tryin’ to accomplish somep’n.

Notable Quotes

It is too much the fashion to attribute all inventions to accident, and a great deal of nonsense is talked on that score.

Asked if the age of invention was passing in 1908: “Passing? Why, it hasn’t started yet.”

He loved silent films (he was deaf), but didn’t think there was any money in talking movies. He believed talking films would never supplant silent films (“The public does not want talking movies”).

He also thought films would completely supplant books in schools.

When will you retire: “A few days before the funeral.”

There is no free lunch. 2/22/1929, Fort Myers Press

If you want to succeed, get some enemies.

Most assuredly I do believe in God. Nature and science both affirm His existence, and where the layman believes the man of science knows. 1890 [You could argue he believed in Intelligent Design]

I am at work on an invention which will enable a man in Wall Street not only to telephone to a friend near Central Park, but to actually see that friend while speaking to him…Of course, it is ridiculous to talk about seeing between New York and Paris; the rotundity of the earth, if nothing else, would render that impossible. --September 1, 1889, Levant Herald

Henry Ford on Edison: “It might be said we live in the age of Edison…in many ways, the greatest man since the world began. March 7, 1929, NYT

Henry Ford (July 30, 1863 – April 7, 1947)

Ford’s father: “Henry worries me. He doesn’t seem to settle down and I don’t know what’s going to become of him.”

William Ford died in 1905, before Ford achieved great success.

There’s no record of Ford personally meeting Hitler. But Ford was awarded the Grand Cross of the German Eagle, highest honor in Nazi Party (July 1938).

Revolutionized: $5/day, 8-hour day; five-day-week, as a tool to induce his employees and their families to better living; and profit-sharing.Yet very few employees were paid $5/hour (the average pay was $2.34/hour); efficiency experts set unachievable standards; Ford had the reputation as the worst sweatshops.

He established a “Sociological Department” to monitor his employees behavior on and off the clock. (closed in 1920, when he distanced himself from this view).

He believed in reincarnation; was raised Episcopalian; and was an anti-Semite. He bought the Dearborn Independent in 1919, which ran anti-Semitic articles, and was closed in 1927.

He didn’t believe in charity, which is interesting since the Ford Foundation has given millions. He believed charity “Lowers the self-respect of receiver and deadens the conscience of the giver.”

He had a Puritan streak, disliking jazz, consumer debt, and supported Prohibition.

Thomas Edison was his idol, and they each had a vacation home in Ft. Myers, Fl.

The Model T came only in black because paint dried faster—a case of efficiency over effectiveness. Ford said of the Model T: “The only thing wrong with that car was that people stopped buying it.”

GM started GMAC in 1919 to begin financing cars, which is what really grabbed market share from Ford, who didn’t start a financing arm until the late 1920s. Ford didn't think people should go into debt.

He also believed in abolishing patents, since he thought they killed competition.

Notable Quotes

Visitors often ask me what the car of the future will be. I don’t know. If I did I would be making it now. Feb 1936

Business men go down with their businesses because they like the old way so well they cannot bring themselves to change. Circa 1923

[Sound business] is to provide a service. Try to run a business solely to make money and the business will die. Circa 1932

A manufacturer is not through with his customer when a sale is completed. He has then only started with his customer….If the machine does not give service, then it is better for the manufacture if he had never had an introduction, for he will have the worst of all advertisements—a dissatisfied customer. Circa 1923

Profits are merely what we think we work for…The real profit is not what the promoters get, but what the country gets. July 7, 1929 NYT

Walt Disney (Dec 5, 1901 – Dec 15, 1966)

One estimate, in 1966 alone, the year of his death, 240 million people saw a Disney movie, a weekly audience of 100 million watched a Disney television show, 80 million read a Disney book, 50 million listened to Disney records, 80 million bought Disney merchandise, 150 million read a Disney comic strip, 80 million saw a Disney educational film, and nearly 7 million visited Disneyland.

NASA acknowledged that Disney’s early drumbeating for its program was instrumental in generating public support for space exploration.

During London blitz, children’s gas masks had Mickey on them.

Disneyland was just a modern variant on the old Puritan ideal of a shining City on a Hill. “Why should I run for Mayor [of Los Angeles] when I’m already king”

The Walt Disney Family Museum, Park Presidio, San Francisco display over 900 awards for artistic work and service, including his Presidential Medal for Freedom, presented by Lyndon Johnson in 1964.

In 1955, Walt paid $4,000/acre for Disneyland property; 4 years later it was valued at $20,000/acre.

Walt’s good friend, Art Linkletter, refused to invest in Anaheim, and he figures the tour of the property with Walt cost him $3m per step!

Walt Disney World is even more dramatic (27,400 acres bought for $5m = $185/acre. Worth well over $2 million per acre today.

Realtors axiom: Location, location, location. Bunk! It can be trumped with intellectual capital.

Late 1930s, Mickey lost his tail. Thousands saved not drawing it! It was restored. Effectiveness over efficiency.

Paul Anderson, a Disney Historian at BYU lists six characteristics to describe Walt’s success:

1. Curiosity

2. Knowledge

3. Experimentation

4. Quality at all costs

5. Control—delegate to good people

6. Vision

Every theme park operator told him he’d go broke with Disneyland within one year. Ward Kimball, one of the famous Disney animators:

            If you want to know the real secret of Walt Disney’s success, it’s that he never tried to make money.

Ron’s favorite Disney line:

            I could never convince the financiers that Disneyland was feasible, because dreams offer too little collateral.

J. Willard Marriott (Sept 17, 1900 – Aug 13, 1985)

Started a Hot Shoppe $3,000 in 1927 (A&W Root Beer).

First hotel was Twin Bridges, Arlington, VA, Jan 1957.

In-Flight catering started by JW visiting Hot Shoppe in 1937 next to airfield, watching customers buy food for airplane flight.

Had an “employees-first philosophy. Knew human touch was all-important for guests staying away from home.

Diversified into catering, cruise ships, theme parks (1972)—got out of all of them eventually.

Rule of decision making: Listen to your heart (research & data only get you so far).

Recommend Books and Readings

Obviously, there are lot of books written on each of these men. The following are the ones Ron has particularly enjoyed, and found to be reliable as to the actual history of their lives.

The Quotable Edison, edited by Michele Wehrwein Albion

The Quotable Henry Ford, edited by Michele Wehrwein Albion

The Animated Man: A Life of Walt Disney, by Michael Barrier

Walt Disney, by Neal Gabler

How to Be Like Walt, Pat Williams

Marriott: The J. Willard Marriott Story, by Robert O’Brien

Earning My Mouse Ears, Part I, by Ron Baker

Earning My Mouse Ears, Part II, by Ron Baker

Earning My Mouse Ears, Part III, by Ron Baker