Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. You know, this is a place where I decided years ago I wanted to interview the top entrepreneurs about how they built their businesses. I want to dissect their process. I want to learn as much as a can and have you, the person who’s listening to me, learn along with me.
Today I’ve got a legendary entrepreneur with me. In 1982 he pioneered the book superstore when he founded Bookstop. Barnes & Noble later acquired it in 1989 and it’s said to have gotten the know-how and infrastructure to create the bookselling goliath from what it learned from Bookstop.
He followed that up by creating Hoover’s, whose database of millions of companies, well, frankly, I remember reading when I was in school. It was one of the first things I was asked to check out when I went to business classes at NYU. Hoover’s went public and was later sold to Dun & Bradstreet.
Today, he’s running The Spark. The Spark is the first interactive and immersive new era museum of innovation combined with a year round World’s Fair of ideas. I invited him here to talk about how he did it, talk about entrepreneurship. And I’m looking forward to hearing his story.
This whole interview is sponsored by HostGator. If you need a web hosting company that is really good, later on I’ll tell you why you should sign up for HostGator. This interview is sponsored by Toptal. Later on I’ll tell you why if you need a developer, you need to go to Toptal.com. But first, I’ve got to welcome Gary. Gary, good to see you.
Gary: Nice to be here, Andrew. Thank you.
Andrew: You know, my first question to you is going to be about the thing you started showing me before the interview started. I was going to ask you do you still keep those notebooks and you started pulling–do you want to pull it out now, show people what that is?
Gary: Yeah. I started keeping a list of business ideas when I was 12 years old. I’ve been fascinated by business ever since I was a little kid. I had grown in a GM factory town and nobody could answer my questions about big business. I discovered Fortunate Magazine and all that. I started keeping a list of business ideas. About 16 years ago, I started keeping these little tablets, little French Rhodia tablets.
I’m up to number 247. I think that means I fill in a new one about every six weeks. I’ve got maybe 320 business ideas in there. They keep growing. I added another one the other day. And there’s really nothing to stop the flow once it stops flowing. The way it’s a little faster than startup time than an electronic gadget, and it’s available 24/7. Hey, I’ll leave my house without the phone, but I won’t leave my house without this little guy.
Andrew: And Gary, do you have just big business ideas in there or is it even a small idea?
Gary: Oh, they are all over the board. Let’s see, I’ll give you one of my biggest and one of my smallest. How about that? It’s just whatever comes to me when I see a need or a gap or an opportunity. So, the other day I was down in Columbia teaching entrepreneurship. We were taking a selfie, and I’m not real good at selfies, so I was letting them do it. But nobody could really hit the button. I know they make sticks and all that, but nobody could hit the button to take the picture.
Once we got the camera in the right place, it was just too awkward and I was thinking, well, you could probably make a business out of a tool that would allow you to wink at the camera and then have a two or three second delay and then take the picture. If they can do facial and smile recognition, obviously the technology could do a wink recognition. So, that’s a little tiny idea. Usually before I even talk about them, I look into them and see, “Is anybody doing that?”
The other extreme, probably would make somebody a billionaire if somebody wants to use it and run with it because I’ll never get any of these done–board game casino. That’s the idea that you raise several hundred million and you build a physical bricks and mortar casino in Las Vegas and then you cut deals with Hasbro and Mattel and the game makers. So, one floor is Monopoly, one floor is Risk, one floor is Battleship or whatever.
You pay the game companies royalties so they make more money than they’ve ever made selling board games maybe, hard to beat Monopoly. They’ve sold a lot of those puppies. Also it’s something different. It appeals to an aging baby boomer and retro and games we played as a kid.
Andrew: So, I would be able to go into–
Gary: Hopefully most do more to make the world a better place than those two ideas I just gave you. The ones I pick to do myself–I’m on my ninth one, I guess–are ones that I think the world will somehow be a better place if I do this and do enough of it.
Andrew: I want to understand how you analyze your ideas to decide which ones you should go with. I want to look at Bookstop. What did you see that led you to come up with Bookstop?
Gary: Yeah, Bookstop–I fell in love with retailing soon after I fell in love with business. My eighth grade term paper was the life story of Marshall Field, the great Chicago merchant. I came to the conclusion that retailing would be exciting. I loved being in retail stores and still do. It was a real to really make the world a better place, especially if you could lower prices to people because that’s like giving them a gift. It was the era of Kmart and all that.
So, I wanted to start a retail chain. I didn’t know what kind. As a startup entrepreneur, I’ve got to be looking 15 to 20 years into the future because it’s going to take 5 to 10 years to get anything up and running and then it’s got to have legs or you can’t sell it or take it public or give it to your grandkids or whatever you want to do with it. You’ve got to be looking out there.
So, I was in the 1970s trying to precede the 80s and the 90s. I wanted to do a retail chain but I didn’t know what kind. The first thing is what’s a new technology in retailing? What’s going to be the approach to retailing that’s going to be hot, like online retailing or giant discount stores or whatever?
And the new invention at that point, technology I call it, was the superstore, invented by Charles Lazarus with Toys-R-Us. He came out in the 1950s in the Washington area. But the idea was be a specialty merchant in one category of merchandise and have low prices and big selection, which kind of goes against the rules of economics in that if you’re a discount store, you carry very few items.
Like a Costco, they carry about a 40th as many items as a Walmart store and yet they do twice the annual revenue of the average Walmart store. So, if you’re going to discount, you don’t carry many items. If you’re going to have a huge selection within your category like Toys, you need to rent more space, finance the inventory. So, the idea of, “You can’t discount and have a big solution.”
Well, he did. He kind of took over the toy retailing industry. He had enormous market shares all over. This was back when it was a young, energetic company. I saw that and I said I want to bring that concept to some category of merchandise. Well, toys was already taken. Although, I wouldn’t stop just because somebody’s doing it, but I’ll stop when they’re doing it well, which Lazarus and his colleagues were.
And then I said, “What are people going to be buying over the next 20 years?” Business and economics all flows from demographics. This was the baby boom. This was the 1970s. I’m one of them. We’re the biggest generation in US history. So, then it’s a matter of, “What’s the baby boom going to be buying?”
You have to lock into what’s age-related–so, a lot of them go to college, more than any previous generation. Then they’re going to move to apartments and fall in love and get married and move to the suburbs and have kids and dogs and cats and station wagons and all that. And then another thing is what’s generation-related? What’s different about this generation? I thought we were well-educated. I thought we’d be lifelong readers and learners. I thought we’d be into movies and music.
So, I said I want to do a superstore of auto parts, sporting goods, toys, books, home improvement–there may have been one other one. But those were all categories from thinking, “Where is demand going to rise when you have this huge coming rise of these families?” And then books were on the hotlist and nobody was doing any of those. There was no Home Depot, which became the biggest superstore chain.
That’s how I came around. I probably did seven years of studying retailing to make sure I wanted to be in retailing. Then from there decided to do the bookstore, I did about seven years until I quit my job, convinced other people to get theirs and went out and raised some money. So, I really believe in doing your homework, of becoming an expert about any industry you’re thinking about going into.
Andrew: You mentioned earlier that as a kid you picked up a Fortune Magazine. What was it about Fortune Magazine that at age 12 lured you in?
Gary: Yeah. Well, my hometown, Anderson, Indiana, it’s a town of about 60,000 people and 27,000 worked for General Motors. The teachers in the classroom were talking about the Civil War generals and who had which strategy and who won, who lost and presidents and kings and queens and decision making and leadership styles.
I thought “Oh, that’s all cool. What can you tell me about General Motors because they’re a big deal? They’re like life itself.” They said, “Oh, they make Chevrolet, Pontiac, Buick.” I said, “I know that. Who started it? Why did they start it? What are their strategies? Are they smart or are they stupid? How are they going to deal with these new things coming out from Ford or Toyota?”
You know, nobody knew the answers. I’m like, “Why doesn’t anybody want to talk about this?” You talk about the gorilla in the room or elephant in the room or whatever. It was more important than I thought because today there are zero General Motors employees in Anderson, Indiana. They lost 27,000 jobs in a town of 60,000 people.
I’m in a newsstand with my big brother and big sister and they’re looking at car magazines and horse magazines and dog magazines and there’s the Fortune 500, the biggest companies in America. It’s a list of them. Not only are they talking about General Motors, but they’re talking about 499 other companies that I’d ever heard of. I went right in to my parents and said, “You’ve got to get me a subscription to this magazine.” They’re like, “Oh, you weird kid. Why don’t you go play basketball like a normal kid?”
Anyway, I got my subscription. Then I started going door to door at big company offices in Chicago and New York, everywhere I could, Indianapolis and saying, “What do you do here? Can I have a copy of your annual report?” Retail stores–I’d go into Sears and Penny and Kmart and say, “I want to meet the manager and ask them whether they like their job or not.”
Andrew: Really?
Gary: I really did become addicted to business at 12.
Andrew: How would you even get to those other cities to go and ask them?
Gary: Oh, those were actually–it wasn’t very often. We went to the New York World’s Fair in 1964, ’65. I would have been like 14. I convinced my parents, “Let me go walk around Manhattan by myself a little.” I knew where all the corporate headquarters were. I already had their annual reports.
My high school graduation present–they wanted to give me a color TV, but instead a got a roundtrip bus ticket from Indiana to New York, Philadelphia and Washington. And I just went. I went to J. Walter Thompson. I went to ABC. I went to CBS. I went to the big shopping mall development companies. I went to retail headquarters. When you’re 17 or 18, you show up a big company and say, “I want to learn about your company and I’d like to meet somebody and answer your questions,” at least back then they were very receptive.
It became harder to do if I got older. If I could, I would do that right now. When I’m in an office building going up to see somebody, I always look up every other tenant in the building going, “What are they doing?” It’s just endless curiosity that’s really just begun after 50-some years.
Andrew: I get that. I kind of still do that as an interviewer. I get to come into your life and into your world and ask you what do you do, how’d you get there and ask all kinds of questions that I’d be curious about.
Gary: No, no. I have ideas for several TV shows. Maybe we should team up on some of them. One of them–all these little light industrial facilities that are all over America. If you’re out around O’Hare Airport or anywhere in Texas and they’ve got little office buildings, little one-story warehouse office things, acres and acres of them. But if you go door to door, they do the most interesting things.
I met this one guy, he made all the laboratory tabletops for all the chemistry labs in the world. You know, like a 20-person shop. My cousin makes the paint for glass eyeballs. There are all these little 5-employee and 10-employee and 30-employee. There’s another outfit here locally. They make all the interiors for private jets that sell for $100 million and up. So, they mainly work for the Saudi family doing their bathrooms and things. They’re in a little town here in Texas.
Andrew: And that’s a whole company. The way they got into their first clients’ office is one of the things I’m fascinated with.
Gary: Absolutely.
Andrew: I get the idea is out there, but how do you now make it into a real business that people now are a part of? What about your idea? You had this idea for a retail outlet that was going to be huge, bigger than people had known at the time. What do you do? Do you just walk down the street, find the location and say, “This is the store?”
Gary: Oh boy, well, it was kind of a long process. I quit my job. I wanted to do it in Chicago, a great big store. I think it would have cost $3 million or $4 million to build and I couldn’t pull it off, couldn’t raise the money. Everybody thought I was nuts. There was no Home Depot, no Lowe’s, no Best Buy. Toys-R-Us was really the only big visible superstore.
Andrew: By the way, I heard that you used them as a model. Is that right, that you said, “I want to create the Toys-R-Us of books?”
Gary: Yes.
Andrew: You did?
Gary: Yes. But what it is, is when you do that, each type of superstore needs to be custom created for the merchandise category. I once had a venture capitalist send somebody to me and they said, “Well, the venture capitalists want to back us into a superstore of…” maybe it was jewelry. No, it was luggage. They said to be a superstore, you’ve got to be 40,000 square feet. Well, that’s stupid. If you’ve got to be a superstore of used cars like CarMax, you’ve got to be like 200,000 square feet. If you want to be a superstore of diamonds, you can probably do it in 10,000 or 12,000.
So, everything about it, Toys-R-Us, the whole company was designed around toys and how big they are and how you truck them, how you stack them. So, our company was completely designed around how you did that with books. But the basic thesis, that we’re going to have the biggest selection of titles in town, and offer the best prices and then good service, long hours–we had a lot of others–but they key things were you’ve got a lot of books and it’s good value.
Andrew: First of all, it’s hard to find the retail space if you don’t have it. Even Barnes & Noble has to build up their own retail outlets. It’s not like they can pull into the local candy store and suddenly setup shop in a former local candy store and setup shop there selling books. They needed to build it out. You were living in a world where you could afford to just build it out. Where’d you get the money? How’d you find locations?
Gary: In building out a retail chain, it’s not that hard. You have to convince the landlord that you’re a valuable tenant. It’s a lot easier after the first one. The first one takes up more risk.
Andrew: So, let’s spend a little time on the first one. How did you get that first location? How’d you afford to rent it and afford to buy books for it?
Gary: We were able to open the first one. I couldn’t raise the money to open a big one in Chicago. So, I scaled it down. The original idea was Book City and I renamed it Bookstop and it was written inside of a stop sign. I tried to lease like 6,000 square feet here in Austin. I found a location, looked like it would work.
There was another single-store Austin outfit called Whole Foods Market and they wanted to open a second store and they came in that center with me. I later served like four or five years on their board of directors. They went from store doing like $10 million to last year they did like $14 billion. That will teach you how to build a retail chain.
So, I wanted 6,000 or 8,000 square feet. The landlord said, “They don’t do bookstores that big. You’re nuts. I don’t want that big failure in my shopping center.” He only would lease me 4,500. Now, they put up as a part of that deal–you’ve got to put up a lease deposit–but they put up part of the construction cost, called tenant improvement or tenant allowance.
If you study Walmart as far as I can tell–I was looking into it the other day–after their $4.5 million that they raised in their IPO in 1970, they never added anymore equity capital. So, basically the growth of a retail chain is finances by the landlords. The inventory you finance with equity or we leaned real heavily on publishers. Inventory was as big a cost as building the store.
Andrew: So, you got the landlord to agree to rent the place to you because he liked your idea, he believed enough in it.
Gary: They want you. Barnes & Noble doesn’t have to spend a whole lot of money. If Barnes & Noble is a hot retail concept, the landlords want it. If you draw more traffic to their customer and from further away, Barnes & Noble is an anchor in a lot of shopping centers today. Years ago, the landlords would be very aggressive. Like a Nordstrom, they would pay a Nordstrom to come to them, a really powerful anchor.
Andrew: So, you got the landlord to understand that, so the landlord let you have the space and paid to build it out for you and you said–
Gary: They paid part of it.
Andrew: The books, did you have to give up equity in order to buy the books?
Gary: I raised $350,000 to open that first store. That was like 35 investors at $10,000 each. I always tend to give a lot of equity. That’s a high-risk thing doing startups. So, they got about 60 percent of the company.
Andrew: 60?
Gary: I had 30 percent and my two key executives I had gotten to join the company got 5 each. That changed over time. We got heavily diluted with additional rounds. I owned like 6 percent when we sold the company seven years later. But we got it open for $350,000. A lot of that, that’s your pre-opening cost, paying people while you’re doing the buying and sorting it out. Then you’ve got a rent deposit and then you’ve got to buy enough inventory to get the baby open and meet your standards.
So, we opened small with 4,500 square feet. But within two years, the landlord kicked out the tenant next door and allowed us to expand to 6,000 or 7,000 square feet and then soon our stores were 12,000, 15,000–we may have gotten up to 18,000. A modern Barnes & Noble is like 28,000 square feet or one of the Borders while they were still around, they’d run up to 28,000, 30,000.
You gradually convince the landlord. Once you’re on a roll and once you know you’ve got cash flow and people see the crowds you draw at grand openings, the landlords are looking for good tenants. There’s always some turnover, some rollover. We took existing buildings. So, we restored an old 1930s movie theater in Houston. We did a roller-skating rink with beautiful wooden floors in San Antonio.
We did, I think it was a cafeteria in Dallas. I may have done a bowling alley. We did more theaters. After Barnes & Noble bought us, they continued to do some theaters. There’s one in Point Loma in San Diego. There’s one in Studio City, California. There’s one in Nashville. There’s one in Memphis. Our big one was in Houston but they’ve moved out of that. That’s now Trader Joe’s.
As a retailer, there are a whole lot of people that want to support you. The landlords, if you’re doing the business, they like you. Local advertising and media, they want to support you. And most all, if you’re delivering a good service, people who love books beat a path to our door.
Andrew: Why was it so hard, then, for you to raise a little bit of money?
Gary: It’s always hard. In my experience, it’s always hard. People don’t do retail. VCs don’t do retail very often. They kind of go in and out every few years, but mainly out. And my ideas tend to be bold. I’m not like, “I’m going to do the Uber of this or the Uber of that.” I’m not knocking that. The opportunities are good and Uber itself is amazing.
But I come up with a whole idea from left field it general. So, I’ve always found it challenging to raise money, even after I’ve made like over $100 million for investors in some of my deals. I’ve had winners and losers, but net they’ve made money.
And the average US bookstore did about a half a million a year in revenue, give or take. We had to have $1 million to break even. That’s why they said, “Guys, beat Walden books. They’ve been around for years. They don’t do that. How can you do that?” I said, “Well, we’re going to open in Austin, Texas and do $1.4 million.” We opened and we did $1.8 million the first year. And then within probably four years, our average store was doing $3 million.
Andrew: How did you get people in the door?
Gary: Oh, that’s the easy part in a way. It’s funny. With all this obsession with customer acquisition cost. I was hearing that at these business plan contests I’ve been judging. As a retailer, if you offer something that’s really a great value to the customers and you let them know it exists, that’s really all you’ve got to do. You’ve got to deliver when you get there.
Andrew: So, did you just have the lower price and the biggest selection, that’s enough. That was your model and it worked.
Gary: But we would do massive–back then, it doesn’t sound massive today–$100,000+ advertising campaign in three days.
Andrew: In the mail?
Gary: We made sure everybody in town knew about us. We did roadblocks, which is where you go to the local TV stations and you place an ad on all their 6:00 news on Sunday night or whoever it is. Sunday night news is heavily watched and television is still the key source for news for Americans. So, it’s the one place where you know they’re still turning on the tube in large quantities, especially the baby boomers and the educated people and all that. So, you put an ad on all four of them at the same time if you can. Even if they flip channels they can’t avoid you.
And then we dropped an insert in the Sunday newspaper, which would be a lot weaker today. But of course, you pick up a lot of the gains that you get from social media. So, your Sunday paper would have a full-page ad in it. If you were in the right parts of the city, it would have a little insert, colored catalogue. Also, if you were in the right zip code, you would also get a direct mail flier at your house Thursday night.
And then we’d have a grand opening sale from Friday to a week Sunday, so ten or eleven days. We’d have hotdogs. We’d have grand opening parties. We’d have the mayor cut the ribbon. We made sure we had all the TV stations out there. We did that by taking one store in each city and making it architecturally interesting. So, we won architecture awards wherever we went.
Like in Houston, we restored this old movie theater and all the TV stations and newspaper’s come to report on that and then when I’m talking, I’m like, “By the way, we also opened to others in these locations.” You use the glow from that. One of our Dallas stores had neon sculptures of like 10 or 15 greatest authors. You create this presence in a market. When people see it, they’ve never seen a bookstore like this, not with this big a selection and then discount prices.
They were, if I do say so myself, they were incredibly well organized, easy to find all this stuff. Our staff were great. We gave very high service levels. We changed the whole average revenue of the average bookstore and the whole nature of the industry. I think we had 12 stores by the time borders opened their second one. They came along later. There’s kind of a long answer.
Andrew: Let me do a quick sponsorship. The sponsorship message is for a company you might be interesting in. It’s called Toptal. Here’s what they realized, Gary. They said that the market for developers is really hot and it’s hard to find the right developer. So, what do you do as a company?
You at first go to your friends and the founder starts hiring his friends, but at some point they run out of friends. Then they try to look at freelance sites or help wanted sites. Frankly, those take a long time to find the right group of people and you end up with a big collection of prospects and you have to spend a long time trying to figure out who the right ones are.
So, a lot of people end up going to headhunters. The problem with headhunters is they cost a lot of money and take a while also. Freelance websites–yeah, you could go to a website and hire someone on the cheap who will work for a few hours a week, but frankly, those guys aren’t dependable and you don’t get the best people that way.
So, what these guys decided is, “What if we build a network of our own developers? These guys will be our gang, a huge gang of developers who are the top developers.” They’ll screen them out. They’ll do all kinds of tests to make sure they get the top people in there. They’ll have their peers review those test results to see, “Are we keeping up the quality and having the best of the best in the business?”
So, when an entrepreneur or business needs to hire new developers, they can go to Toptal. Toptal will ask a few questions of the entrepreneur, “What’s your issue? What are you guys looking to do? What’s your culture like?” And then based on that, go to their network, find the right developer and make the match. And within a day or two you could get started with your developer. That’s the idea behind Toptal.
Gary: Sounds great.
Andrew: They actually have no issues getting funding. Apparently like that they just talked to Marc Andreessen and that ended up getting Andreessen Horowitz on board with funding and backing and they’ve been doing really well since.
Let me ask you this. If I gave you today nothing but 80 hours of a Toptal developer and you could count on them being great and you could count on them working on the technology you were interested in, what would you have them build right now?
Gary: Oh boy, I have so many ideas. But my current project, the company I’m really focused on, we’re building this think called The Spark, this innovation experience. One of the things is really optimizing how we integrate people passing through the facility. They’re going to buy a ticket, like $15, and then have maybe a three-hour experience exploring new items, test driving a Tesla, seeing the telephone of the future, maybe buying some of this stuff.
So, how do we integrate that experience so it works on their Android phone, their iPhone, the Windows phone if those are around. Or what if they don’t have a smartphone? So, we may have a gadget where we can hand you this or you can use this with you or a smart RFID tag you put on your wrist as you walk through the place. So, how we really integrate systems in our place, in The Spark, is really going to be a key issue.
One of the things as I’ve studied museums around the world, I like art museums. I go through and I see all these artists I’ve never heard of and I’m like, “I need to know more about them.” I write their name down in my little tablets. I’ve got to wait until I get to the bookshop and say, “Here are all the artists. Do you have books on these people?”
You should be able to more like a retail store say, “I like that.” And just click or something and then the book is waiting for me when I get out of the museum. So, we really want to be one of the first places that really integrates all our systems. So, we have a lot of technology challenges.
I can tell you from experience, finding good developers, finding ones you can count on and you have to work with somebody while you get to know them. I also agree that traditional headhunters and all that, that doesn’t always work really well either. Sounds like a great idea.
Andrew: Any piece of that project or frankly even whole project that you couldn’t get done with your own team, you just call up Toptal or go to their website, let them know that you want to talk to someone. They’ll get on the phone with you. They’ll really understand your issue and then they’ll have someone come in and take care of that project for you.
If you go to Toptal.com, you’re going to get a really great company. If you go to Toptal.com/Mixergy, you’re going to get an incredible offer from a great company. They’re giving 80 free Toptal developer hours to anyone that’s listening to Mixergy when they pay for 80.
In addition to that, they’re giving everyone who’s listening to Mixergy an additional no-risk trial period of up to two weeks. That means if in two weeks you’re not 100 percent happy, you will not be billed, but the developer, of course, will still be paid. These are the guys that the bigger companies like Airbnb and Zendesk all depend on and have used.
I urge you, if you’re looking for a developer–frankly, these days if you’re looking for a designer. If you’re looking to work with the top people in the tech space, go to Toptal.com/Mixergy–Toptal.com/Mixergy. And they’ve to a nice photo of me there on Toptal.com/Mixergy.
All right. So, Gary, one of the things that I heard that you did was you wrote your own software for inventory management at Bookstop. That’s incredible that you would have to write it yourself. How’d you learn how to code?
Gary: I had to learn Fortran just to do homework. I was blessed to attend the University of Chicago and studied under Milton Friedman. Four of my econ teachers later won Nobel prizes. But I was cutting class to start companies. But you had to learn Fortran to do your homework. I enjoyed it. I learned Basic and probably dabbled around in the other languages, tried to teach myself a little Python. It’s fun.
The reality was a key part of building this giant bookstore with this huge selection is we had to be able to track our inventory. A traditional way of a buyer eyeballing what they’re out of or people keeping hash marks in a book or something, they weren’t going to work when we were going to carry 40,000 titles and it got much bigger than that soon enough. So, we had to automate it.
The B Dalton and Walden Books, they had their own internal inventory control systems probably written in COBOL on mainframes and they weren’t sharing them. And then the mom and pops had systems we looked at, canned system you could buy. They were only for a one-store operator and I wanted to build a chain. IBM had canned inventory programs but either a mainframe or maybe an IBM AS 400, the mini computer. But still, they weren’t adapted to the book business.
I finally found one outfit that had what we needed–a multi-store, book-oriented inventory control system. I met with them and they clearly weren’t going to last. They only had one customer and they weren’t getting any new ones. I said, “We’ve got to have the right to the source code.” They said, “We can’t give you that.” I’m sure I probably said, “Could you put in escrow?” I was just learning all that. It was my first startup, 1981-1982. I just said, “Well, I guess we’ve got to do it ourselves.”
I taught myself a software called dBase 2. It’s kind of like Microsoft Access. It’s a database management system. It really was pretty straightforward. I did the business plan for Bookstop on a Radio Shack TRS-80. And I’ve got Photoshop 1.0 and Premiere 1.0. I’ve been doing desktop music and desktop video since like the Dark Ages.
One of the things I realized, it was a lot easier to learn back then than it is today in a funny way. Computers are so much more reliable. I used to lose my whole business plan if a lightning storm came in. It was before floppy disks even. It was cassette tapes.
The thing is there are so many ways it’s better, but when I go look at Photoshop CS 9 million or whatever we’re up to, that’s got a real learning curve. Photoshop 1.0 didn’t have a steep learning curve. So, I kind of learned a lot of these things back when they were easy to learn and still sometimes just used the more basic tools, I’m afraid, although I’m pretty darn good on Excel. I’m kind of a hotshot on Excel.
Andrew: Did you require membership cards of your first people?
Gary: No. We never required. We offered a reader’s choice loyalty program. We were the first bookstore to do that. At first they were free. What it was was I had studied–my first job out of college was picking stocks on Wall Street for Citibank.
One of the companies I studied and my boss studied was Radio Shack, which was really one of America’s greatest retailers and most profitable and most wonderfully run in its glory days, which are obviously long over. A guy named Charles Tandy built that. He wanted to know the name and address of every customer. So, if you went in a radio shack store. They said, “What’s your name? What’s your address?”
Well, he had a list of 22 million customers. He knew exactly how often they came in and what they bought. He knew more about his customers than any retailer I knew. That’s something I always believed in for years and years. I worked for great big retail companies and was always frustrated how little they knew about their customers. So, I guess I was into big data before it existed. But Charles Tandy was really into it.
So, it was wonderful but he asked you every time you came into the store. They say, “What’s your name? What’s your address?” It drove me nuts. I’m an impatient person like most entrepreneurs. I said, “Let’s just ask them once and write their name and address and give them a card with a number on it and link those up.” By the time we sold to Barnes & Noble, I probably had a 20-person staff just typing card data at our headquarters. We’d pull it all back in. Even getting it once is time-consuming. You do that at the cash register. By the time we’d get there, our cash registers were early stage PCs, even before the IBM PC came out. So, there were a lot of issues.
So, then when we didn’t make our earnings goals–we were blowing through our revenue goals. We didn’t quite make our earnings goals. And I’m sitting there with my partner trying to keep the investors happy. We stayed up all night and decided, “We’re going to start charging for the card.” First it was just $1. It eventually rose up to around $10.
Barnes & Noble when they bought us, they didn’t really believe in it and let it ride where it was, but didn’t use it in their new stores. So then a few years later, they said, “Oh, it was a good idea,” and then spent millions and created the Barnes & Noble membership card. I think she’s $25 a year now. That’s probably where we would have ended up, the arc we were on.
My idea, the reason I captured those names–this sounds really weird, or at least I’ve n ever heard anybody else talk about something like this–companies have lifespans, most companies do. I’ve studied that since I was a kid. Especially a retail concept like Bookstop has a lifespan of about 30 years. The best companies in the group are going to do 30 or 40 years, whereas if you’re a general merchandise store like Macy’s or Walmart, you can have a 100-year life. You’re less subject to narrow category merchandise.
But in any case, I knew when I started Bookstop in ’82 that after like 30 or 40 years it would have run its string out. We would have built as many as the US could carry. We’d have to explore our growth and go overseas, that might work. I want to have encore ideas. Retail companies, unlike pharmaceutical companies and aerospace companies, they don’t have R&D departments. I’d urged my bosses at these big retail companies to start an R&D to start testing new ideas and nobody would do it. I wanted to be ahead of the curve.
When Bookstop was 30 years old, assuming Bookstop would have been the biggest bookstore chain on earth, which is what Barnes & Noble became, we would have the name and address and interest and hobbies of every affluent, educated American. We would know if they used a Nikon or a Canon, whether they listened to rock music or classical music, whether they drove a Toyota or a GM car.
We would know more about people and whether they liked horses more than dogs and what the trends were. And then I would know to open, “Let’s open a chain of bicycle stores or let’s open a chain of natural food stores.”
Andrew: Oh, so you’re thinking of the next idea.
Gary: Yeah.
Andrew: It wasn’t even about buying better books or matching them up with the books you already have, it’s about what’s the next idea.
Gary: That was the long-term idea. The idea was in the interim, we’ll benefit from it in the more traditional, “Oh, you love art books. Here’s a new art book for you.”
Andrew: Did you do anything like that? Did you start using it to market to your customers?
Gary: Yeah, to a limited degree. It’s harder. It takes more work than you realize. We were doing some limited mailings to certain categories of buyers and trying to relate to what they bought. All of that, the company was sold in 1989. It was all pre-internet. I could only imagine what we could do today with that database.
Actually, it’s occurred to me to reach out to Barnes & Noble and offer to buy or lease on the right deal the data but stripped of the individual names because you can learn a whole lot just by looking at the aggregate trends to say, “Oh, interesting, beekeeping is really rising whereas chicken farming is declining.” There’s a lot of data in there you can get.
As a bookstore, even with the rise of Amazon, it reflects human life. I go in the stores, I was in there the other day, and I noticed the books about how to find a good job, “What Color is My Parachute?” and all this, they are still big, but what used to be tiny next to them, how to star your own company is now just as big. You can watch the rise in interest in the mafia and the rise in interest in Frank Lloyd Wright architecture and you can watch its decline.
And what movie stars–when I was in the business, we had table after table piled to the ceiling with Michael Jackson books. And this was when he was still alive. Then he peaked and all of a sudden we couldn’t see those books. In a funny way, there’s a big fashion component. Vampires coming through, all this jazz, certain types of novels. The number of computer books we sold–you could watch which languages were rising and falling. So, that information about what people buy has always fascinated me.
Back then, I would do printouts and I would order a printout of our top 200 customers at store seven. It would be like a 500-page green and white paper printout. But the top customer first and it would print out every receipt of everything they bought. I would just go through it. I didn’t share their names or anything.
There were a lot of myths in the bookselling business, like, “Oh, there’s a hardcover buyer and there’s a paperback buyer.” That’s bullshit. It turned out not to be true. They’re book lovers. They’re magazine lovers. Most magazine lovers are a subset of book lovers. But generally if you had a family that loved books, you’d be seeing them buy cookbooks and Harry Potter books and serious tech books.
At the same time most of our best customers were probably not book lovers. I’d say, “Do you love books?” “No.” I go to a party at their house and I’d look around the house and I’d say, “Why do you have 600 cookbooks? Why do you have 500 books about how to program in Java.”
Andrew: They don’t think of themselves as book lovers but they need books in order to do the things they love to do. Let me ask you this. You mentioned a moment ago the company was sold. You were fired before the company was sold, this baby of yours. Why were you fired?
Gary: There are always plenty of reasons. We had missed our earnings goals. Our revenue goals were fine. We had some hiccups in our computer systems. We were always pressing the envelope on those. The venture capitalists decided it was time–that classic thing of, “The founder knows how to found it. We need somebody else who knows how to build it out and roll it out an execute it.” That may have been true. I’ve fired people and don’t think I’m going to burn in hell for it.
Sometimes it’s better–often it’s better for people. They realize, “I really wasn’t right for that job anyway. I should be doing something else.” But it was awful. A lot of it is I didn’t see it coming. Part of it is you blind yourself to stuff. There was a philosopher that said, “Visionaries are visionary in large part because of the great many things they do not see.” You don’t see the obstacles and the problems, you tend to be an optimist. You have to be an optimist to be a successful entrepreneur, ultimately.
So, I didn’t see it coming. The venture capitalists came to me the night before the board meeting at the Dallas Airport and said, “Your successor is in the room next door and you’re out in the morning and all that.” I thought it was unfair to my team because they kept them around. It was a great team. When Barnes & Noble bought them, they kept them around. So, it wasn’t quite fair to my president and my chief operating officer to blindside him too.
Life goes on, but it was difficult. I got more ideas in the pocket. Here I am. I’m 64 years old and I’m on, if you count the three startups in college, number nine. I’m kind of unemployable. So, you’ve got to go onto the next one.
Andrew: The company sold for $41.5 million?
Gary: Yes.
Andrew: Based on what you told me your share of the business was, you ended up with $2.5 million?
Gary: Yes, about half of that after taxes. And then I spent about a third of it on the lake, which I later, when I had a business fail, had to sell, almost went bankrupt. And I used part of it to go traveling. I just took three weeks the first time that I went all the way around the world–a week in a Buddhist city, a week in a Hindu city and a week in a Muslim city. Both my grandfathers are protestant ministers, so I knew that side of things so I wanted to see the other cultures. And then a third of it was the money that went to start the Reference Press, which was later renamed Hoover’s.
Andrew: I want to ask you about Hoover’s and then I want to ask you about one of the failed startups that happened afterwards. But first, let me tell everyone about my sponsor, the second and final sponsor of Mixergy is HostGator. If you need a hosting company that will actually stay up, that will actually take your phone calls even after you’ve paid, well, you want to check out HostGator.
Let me as you this Gary. I like your ideas. So, instead of me yapping, I’ll ask you for one of yours. If you started out today with nothing but a HostGator account, which means you can host any kind of website you want–keep it legal–but no money, just your knowledge and this ability to launch any website you want, what would you launch right now?
Gary: Well, a lot of my 300-some ideas are website-oriented. If I could pull it off, but I’d also need to bring in people from Toptal, would be to create a little utility that’s basically a thesaurus so that if I go and it would be something that I could add in to any smart device or computer, so if I go look on Amazon about books about the history of India, it would smart enough to also look up South Asian history, which is another term academics use, or look up Central Asia history.
Like if I looked up something about New York City, New York City guidebook, either if I’m Google or Amazon, this little tool I’d want to be live on my computer any time I wanted it, it would know when I say New York City to also look under Gotham, Big Apple, all the other terms for it. Ideally, it would be built from existing thesauruses.
There are some good ones, but there are no good ones that are digital. All the great ones are still in print only. Or you’d have the users contribute to it. And then in my dream, you would have a dial where you could adjust. It’s just like if you go to Photoshop and say, “Take all the green in it and replace it with white.”
You could dial it up or down where it’s like every green or this particular green. The same would be the thesaurus. If I type in New York City, just give me the top two synonyms for it or give me every possible one. I always find myself searching for something and I’m finding out, “Oh, I just didn’t…”
Like if you’re doing research on the Iraq War–I have friends doing this. I’m at the School of Information, the Graduate School of Information at the University of Texas. I’m the entrepreneur in residence. They were trying to find where there video shot of all these people in the Iraq War, the first one.
They knew they were out there because all these soldiers got video cameras for Christmas and then they were shooting. This didn’t used to happen in other wars. So, you had all this war footage. But he couldn’t find it. He Googled “Iraqi war videos.” And then he found out everybody that was in the war called that OIF, Operation Iraqi Freedom. When he Googled OIF videos he found 10,000 of them. So, knowing the words.
Andrew: So, let me ask you this. As a way of starting, since that is a pretty software-intense business idea, what would you think of this as a way of starting–imagine a website that said, “I will do your research for you at,” and you come up with a fixed price–one question for $10, three questions for $20.
You get someone asking for a question like, “How do I find videos of the Iraq War?” or whatever they’re looking for. You take that question and you send it out to a virtual assistant. There are tons of services that you can use for that. You can sign up for Zirtual.com and get tons of hours from those assistants.
And you have it done manually by someone. You prove out the revenue model, you see the demand for it. And then you use the revenue and the profits you have from that business to start to automate some of these searches so that it’s easy for the virtual assistants. And then you automate it to the point where you don’t need the virtual assistants, anyone could do it online.
Gary: Sure. Hey, spinning information is always worth doing and always a challenge. And finding it efficiently–can you find it in five minutes instead of five hours.
Andrew: And frankly as a person who needs research here for Mixergy, I could totally understand that. If somebody built it, I would use it. So, my suggestion is if you’re listening to me and you have an idea like this or maybe you just want to take this idea, go to HostGator.com/Mixergy. When you do, they’re going to give you a deep discount on their services. It’s actually going to cost you 30 percent less than it will cost other people. They’ll give you 24/7, 365 technical support. That means every minute of every day of the year there will be technical support there.
They make it really easy to install WordPress, this idea that I just came up with can easily run on WordPress, but you can run other sites with it. They will give you an AdWords offer, $100, $100 search credit for Bing and Yahoo, which means you can start bringing in some customers one you setup with HostGator. If you’re not happy with them and I think you will be, but if you’re not, they have a 45-day money back guarantee.
They’ve been telling me to say to you guys if you’re listening to me that if you’re not happy with your current hosting company, they will make it easy for you to migrate. A lot of people wish that they started with HostGator when they see how bad their hosting company is doing. Well, HostGator wanted me to tell you guys you don’t have to wish. You can actually switch over to HostGator and they’ll make it easy for you and some ways they will even help do the migration for you.
Go to HostGator.com/Mixergy. You deserve and your company and your ideas deserve to be out there on a good hosting platform so that they’re accessible and they don’t keep going down. And I should say thank you to them for sponsoring Mixergy.
I always used to say, “Why do people at the end of a sponsorship message say thank you to sponsoring?” I realized it’s a way to say to the audience, “Hey, again, just a reminder, that is a sponsor. I am ethical here and we don’t get paid to talk about people unless we explicitly say that we do.” Thank you for HostGator for sponsoring.
The idea for what became Hoover’s, where did that come from?
Gary: Well, that was really just my curiosity about business and trying to learn about it. Maybe 70 percent of all the sales of a bookstore are information seekers, like. “What hotel do I stay at in London? What’s the best version of Mozart on CD? What’s the best movie to show my kids? Who won the Word Series in 1948?” So, maybe 30 percent is entertainment, novel and everything and 70 percent is people seeking answers.
If you came in the bookstore and said, “Which is bigger, Toyota or General Motors?” or, “Didn’t the head of IBM get fired? Isn’t Dell Computer in trouble?” whatever question, that’s the one question you couldn’t answer in a bookstore. You had to go a stock brokerage office or big expensive research books like Moody’s Manuals and Standard & Poor’s, which I collect. I have volume one number one Moody’s. I live in a library with 56,000 books. So, I live in an 8,500 square foot one-bedroom house surrounded by books. You can’t see the books around me but they’re around me.
Andrew: Are you on a laptop right now?
Gary: So, I wanted a guide to big companies. I thought one of my things is that it amazes me how little business people know about business. They know their own little industry maybe. They don’t know their own company. They usually don’t know their industry. They definitely don’ know other industries. They don’t know the history and the context.
So, I just wanted a $20 book with a page each on the 542 most important companies in the world. It was something I believed was going to be the world almanac of business, come out annually and be a consumer product. Over time it morphed more into a B2B than a B2C product and it morphed into an online from a printed product.
Andrew: If you’re on a laptop, I’d love to see the books. Can you take your computer and show us later?
Gary: Boy, yeah… If the Wi-Fi holds up if I walk that far.
Andrew: We can try towards the end of the interview. I’d love to see it. I read about your book collection on Wikipedia. At the time you had 55,000 books. It looks like you get another 1,000 since then.
Gary: And on my Facebook page there are a number of shots of me with the books.
Andrew: I’ll take a look at that. Where did you get your first customers for Hoover’s?
Gary: It was a book and we distributed it to standard bookstores. So, the first customers were regular retail customers. We put a $100,000 advertising budget behind it. I did a national radio and TV tour and all that. I think we moved about 30,000 copies the first year through bookstores. It was in Barnes & Noble and Borders and everybody and airports and so on. Once you get a retail product like that, if you get the right distribution and try to get exposure…
But it was a challenge. That’s something that over time I decided I’d turn it over to an old college friend to run the company. He had helped write the first book, Patrick Spain. He’s the one that really morphed it into a huge success online and then it went public and sold to Dun & Bradstreet.
Andrew: Why’d you pass it on to him instead of running it? I think within two years you did that, right?
Gary: Yeah. Well, I’d been fired from one the and they thought I was not the right guy and I probably thought I did. That one it was clear, he had a better vision for it. The books were not going to be as big as I hoped. But he had been an attorney and used dialogue and disclosure and Lexis and Nexis.
So, the book was $19.95, which means we the publisher got maybe $8 a copy by the time you took the retailer and wholesaler margins out. So, we could get $8 for selling all 542 of them or Lexis and Nexis were selling them to the lawyers at $10 a page and paying us a 10 percent royalty. So, they’re we’re getting $1 a page and not having to print anything. It was all digital. We’re like, “That works.”
I love books. My 56,000 books are all paper. I actually took all the things like Kindle and all that off because of the way I digest the information in a book, it doesn’t work with digital media.
Andrew: Why not? How do you digest books differently?
Gary: That’s a $1 million question. The most downloaded thing off my website, HooversWorld.com, is called, “How I Digest a Book in 15 to 30 Minutes.” What it is, I’m an information junkie and I’m impatient. Over the years, I think I’ve developed systems to allow me to suck all the key information out of a book without–I never read a book cover to cover. This only works for nonfiction reference books. I do a lot of textbooks. But the system is to get the key ideas out of there, but also to remember all of them. It wouldn’t work with a novel or anything.
But some of the ideas–you can go to HooversWorld.com and you can see the whole thing–is I really study the table of contents, which is the outline of a book. If that’s a well-constructed table of contents, it will tell me what the book is all about and say what the key ideas are. I go look at say, “I don’t need to read that chapter. I understand why that’s there. But I don’t understand why this author is saying that.”
So, I read that first two paragraphs of that chapter, the last two paragraphs. I look at all the pictures, graphs, charts, illustrations, maps and the whole book, all of it because if it’s a well done book, it will have a lot of information in those forms, which is a more efficient way of getting information.
The key is I go to the index and I look up all the stuff I already know about. The more you do this method, that compounds, it gets bigger and bigger in your head. I know a lot about Alfred P. Sloan, the management genius that built General Motors. I know a lot less about Henry Ford, about whom much more is written. So, when I get a new biography of Ford, I go right to the index and I look up Alfred P. Sloan and I read all the sections about the two of them because then it’s adding to what I know about Sloan.
If I get any economics book, I look up my old teacher, Milton Friedman. 80 percent of economics books are going to mention him. They love him. They hate him. They agree or disagree. I read those sections. I may end up reading a whole book over a period of years. But my thing is all my books are there for my own lifetime reference. I need to know what’s in them, what they’re a good source of, how to use them or what the key ideas are.
Most business books, they should have been an article. It’s like, “Here’s one big idea,” and then there are 250 illustrations. Well, if I don’t understand it by illustration number 249, maybe I’m not really cooking. If it’s well-written, maybe one or two illustrations or one graph or chart. If I don’t get it, I’m free to read more.
There was a book called “How to Read a Book” by Mortimer Adler and a guy named Van Doren, maybe from the 40s. I believe my method turns out to be one of their five methods called inspectional reading or it’s very, very similar. But that’s a whole book about all the different ways you can read a book.
People are too caught up. My books don’t own me. I own them. I don’t have to read it cover to cover. I don’t have to read every page. I get impatient and board. There are some books I read very closely, some I read over and over. I ready Peter Drucker like he was the Bible. I just keep going back to him and studying him and trying to figure out what he would do if he was alive. He was the greatest management thinker, I think.
Andrew: I agree with you. People do believe that they have to read every single page of a book or else and every word on every single page or else they don’t have a right to say they’ve read it or to actually have learned from it. Meanwhile, they get sucked into reading every page and they get bored with reading and they don’t read as much and they end up suffering just because they want to look like they’re readers. They end up suffering and not reading as much.
Gary: No. Actually, I’m an incredibly slow reader. I bombed out in remedial reading in school. I read every sentence twice because I think about what it means. So, it’s almost impossible for me to read a novel. But this is not at all about scanning or speed reading. This is really about slowing down and thinking about what you’re reading. So, I don’t scan. I don’t speed read.
Andrew: My process is I read the intro. Usually within the intro of a book, they tell you a story about what’s the vision that they have for you at the end of this book, “This is what we’re trying to get to.” Kind of like if you’re going to get a recipe, here’s a recipe. They don’t give you just the instructions on the back. They tell you, “Here’s where we’re going, right here. This is what it’s going to look like after you follow all these directions in this recipe.” I’m holding up so the camera can pick up on my complexion.
So, the intro does that and that tells me, “This is what we’re working for.” And then every chapter will break down their process. Like you said, you don’t need to spend pages and pages explaining each step of their process, just like a recipe only has one little section for each part, most books only need a page or two, if that, to explain each section of how to build whatever it is they’re trying to get you to create.
Gary: And you’re always free to read more, read less if you want. A lot of it is just about giving yourself the freedom to control your own books and your own reading that you aren’t locked into some system you learned in the third grade. It’s just like these little tablets. When I started, I think maybe it was really about business ideas. But then I said, “No, they’re my tablets. I paid for them. If I want to put a recipe or a movie I want to see or a girl’s address, they’re mine. They’re not anybody else’s.”
Andrew: A girl’s address? Who are you dating these days?
Gary: Give yourself freedom.
Andrew: Is it inappropriate for me to ask you who you’re dating these days?
Gary: I’m dating my business ideas and my 56,000 books.
Andrew: I see. Okay.
Gary: Happily married to 56,000 books and two more coming from Amazon today.
Andrew: So, you’re not even interested in dating anymore?
Gary: I really am a bachelor. My life is so full. I have so many things to do and so many interests. So, no, at 64 I’ve kind of gotten used to it.
Andrew: You know, I’ve been talking about a lot here about Scribd here on Mixergy because it’s a really good place. For $9, you get access to all these books. Part of the Scribd that I have gives me access to “How to Read a Book.” There it is.
Gary: My book I wrote was originally a hardcover book called “Hoover’s Vision.” It’s out of print now.
Andrew: It’s on Scribd.
Gary: We called it “Hoover’s” to tie into the Hoover’s Company. But it was published in 2001. And so, the only form available now is an extended version called “The Art of Enterprise.” It’s $10 and it’s on Scribd. I have business classes that use it as a textbook in entrepreneurial thinking.
All I can tell you for sure is it’s like no other book you’ve ever read. It’s very different. It covers a lot of ground. My book was built so you couldn’t use my method. It’s dense. Every page has one or two big ideas on it. It’s not the same idea over and over. It’s like surfing the ocean and hitting every island. It’s very different. It’s called “The Art of Enterprise.” It’s Scribd.com. People take it off there all the time.
Andrew: I want to finish up by asking you about a business that I didn’t realize you weren’t pushing anymore, Bigwig Games.
Gary: Yeah.
Andrew: The idea behind Bigwig Games was…?
Gary: Well, I started inventing games as a kid. A big one was a presidential election game. I’ve been dying to get a presidential election game out for years. And then I started inventing–these were board games I played with my friends–I invented a game where you could run a retail chain or a chain of hotels or whatever or make movies. They used real data because I had all these Fortune magazines and I loved them and I always wanted to put them on the computer.
So, a couple years ago I raised capital and we created Bigwig Games. The idea was to start out with a game that modeled the restaurant industry and used all real data from the restaurant industry. You go fine food, fast food, fine dining and it was on iOS. It just didn’t go well. A number of things, some my fault, some not, but it didn’t go well. I didn’t take off. We know there’s a business market, a restaurant training and restaurant association but that’s kind of a long sell. I’m more of a B2C than a B2B person. I much prefer to sell–I’d rather sell a $10 thing to a million people than a $10 million people thing to one, just my own nature.
In the midst of it not taking off, I came back to another idea I had about 10 years ago, the idea of this for-profit museum, a place that kind of blended what you find in a World’s Fair and a museum. I had it on different subjects. I was going to do a story of the American road about cars and trucks and diners and motels and national parks and travel. I still love that because I’m interested in so many subjects, but I was thinking about, “How could I bring that basic concept to Austin?”
It’s led to this thing called The Spark. When I studied that idea, it’s so big, so important. I think it can really make a difference in people’s lives. It is so timely and appropriate to Austin. It’s like, “Guys, I really need to do this other one.” I feel awful about raising money from people for the game idea and leaving it.” So, I’m giving almost half of my founder’s stock in the new company to the stockholders of the game company because I feel an obligation to them to devote my energy.
Andrew: Really?
Gary: Yeah. Hey, at the end of the day, all you can do is look in the mirror. There’s only one judge. You’ve got to go to your grave being able to look yourself in the mirror.
Andrew: I feel like they’re adults. They invested in a business knowing that it could go well but also accepting it may not go well and it’s a high likelihood it wouldn’t. They’re okay with it, but you’re going above and beyond.
Gary: Well, you’ve got to live with yourself.
Andrew: Did you make out bigger with Hoover’s than you did with Bookstop? Did you make more?
Gary: No. Hoover’s, because I used the money to finance TravelFest, the one we didn’t talk about, which was where I lost all my money, the day Hoover’s sold for $117 million I got $60,000, all of which I owed to other people.
Andrew: Wow.
Gary: Yeah. I almost went bankrupt. I borrowed $1 million personally to try to save TravelFest, which was the first chain of travel superstores. They were a huge hit. We did triple our revenue projection. They won all kinds of awards. But the airlines stop paying commissions on airline tickets to travel agents. I couldn’t dig myself out of that hole and sold the stores to a competitor at a big loss and she had to close them a year later.
I tried to save it. So, I got in a position where I had $9,000 a month house payments and no income because I took myself off the payroll and I borrowed against the house to cover everyone else’s payroll. You do what you do. In my classes–I teach a class on entrepreneurial thinking. When the students say, “How do you know when to quit, how do you know when to give up?” I say, “Go ask another teacher. I’m the wrong guy.”
Andrew: Because you never would give up.
Gary: I’m the rat that goes down with the ship, I’m afraid.
Andrew: Wow. So, are you still a millionaire to this day?
Gary: No, I lost all the money. I’m still broke broke, really broke, month to month.
Andrew: Really?
Gary: Yeah. What can I say? We’re all responsible for our own choices. I decided to become an entrepreneur because I wanted to control my own destiny. For better or worse I have. I don’t know. You get philosophical about it. The older you get, you look at change around you and everything. All I do is I think I’ve done the best I can and I treat people fairly with respect, I think and try to do things that are cool and interesting that both engage me and engage other people and if The Spark works well, I’ll be a multi-multi-millionaire and if it doesn’t, I won’t.
Andrew: That’s a little bit scary, Gary, the idea that you have studied business from a pre-teen age and still to this day you could end up without a giant fortune is a little scary.
Gary: Well, what can I tell you? That’s the real world. And I do have this addiction to books. If I never bought any books, I don’t know if I’d be a millionaire, but I’d have a lot more money, but I wouldn’t want to live like that. Thomas Jefferson, he died in debt. His family had to sell off his book collection to pay his debts.
Andrew: Is that right? I didn’t know that.
Gary: And that became the Library of Congress. But those books burned in the War of 1812, so a real loss, or a bunch of them did. We each are responsible for our own lives. My thing is I’ve been to 44 countries. I probably have looked at 15,000 business plans. I probably have 3,000 people I mentor in all those countries. I now have 20 new friends from Bogotá, Colombia from last week. I took the bus from Austin to Mexico City a few years ago and I gave a speech at South by Southwest about Mexico and its future, which I’m a big believer in Mexico.
I don’t know. Hey, my main thing when I left my hometown was I didn’t want to be bored in life. That I’ve pretty much achieved.
Andrew: What was the most exciting day for you as an entrepreneur?
Gary: Oh boy, it’s a good day when you raise capital. That’s definitely a good day. My biggest single day was when Bookstop opened the Alabama Theater bookstore. That was the greatest single accomplishment and most visible thing. It’s like people say, “What’s your favorite city?” I say, “The next one I see, the one I haven’t seen yet.” So, I think my biggest day will be The Spark. You’re always looking for it. We pull that off and build that thing, it really is going to be world-changing.
Andrew: Where do we see information about The Spark?
Gary: Go to TheSparkAustin.com.
Andrew: TheSparkAustin.com.
Gary: TheSparkAustin.com. It’s very early stages, so it’s all primary information. People can email me. I have business plans. I’m always raising money. They can always email me. Can I give out my email address?
Andrew: Of course.
Gary: Anybody can email on any subject. I answer my own emails. It’s GaryHoov@Msn.com, a real old school email address, but MSN as in Microsoft Network. So, it’s my name without the ER at MSN.com. I answer my own emails. I just got back from overseas. So, I’m probably about four days behind on them, but I’ll get caught up here soon.
Andrew: You have a really good team here for The Spark.
Gary: Oh yeah. I think I’ve always drawn great people to my–when you do bold things that are interesting that can really make a difference in people’s lives–if you really look at it, people don’t understand innovation. We do a lot of superficial innovation, which is copying someone else. We tend to obsess on the technology itself and say, “Look how cool Uber is.” We spend somewhat less time, “How did they come up with it? How did they dream it up?”
Andrew: You want to give us an experience where we see how they built it up, how Uber came about.
Gary: You as a visitor become an innovator. If a kid comes through, he or she should invent something by the time they leave.
Andrew: Really?
Gary: Or at least get a sense. Oh yeah. This is like Walt Disney meets a science museum or something. It’s a brand new baby and it’s going to take some evolution. You see if you go to Maker Fair, you go to South by Southwest and South by Southwest Create or you go to a big game expo, you see all this engagement of people.
The Maker Fair in San Francisco drew 300,000 people at $30 a piece or something? When you see real stuff taking place–I’ve been to over 600 museums worldwide. When they have colors, sound, light and motion, it draws people. They’re badly run overall.
I love museums. I couldn’t have gone to 600 if I didn’t love them. But they don’t tell human stories. You look at the piece of art. Here’s the art. It was made in 1958 and here’s the title. We don’t learn that the person painting it was about to kill themselves or going through a divorce or had really struggled or was really famous but was down now.
Emerson said there rightly is no history. There is only biography. What people love are stories, storytelling. So, putting the customer first–we aren’t going to close at 5:00 at night. We aren’t going to kick you out because we’re having a big party for a bunch of rich people. I have nothing against rich people.
We’re more like, in a way, Nordstrom’s and Whole Foods than we are your typical museum where even the wonderful ones, all you see are kind of sullen guards and maybe a few docents. So, and there are models–the for profit museums, the International Spy Museum in Washington, the National Museum of Crime and Punishment. The Biltmore House in North Carolina is a privately owned historic home that does enormous revenue.
US for profit museums do over $1.2 billion a year. But nobody has done a chain, multiple ones. And you’ve got Ripley’s Believe It or Not and the wax museums. That’s a little bit different, maybe not as seriously educational. But our places are going to be just as fun and entertaining as a Ripley’s.
Andrew: I know what you mean. I went to a Picasso museum in Spain. I forget which one it was.
Gary: In Barcelona.
Andrew: Yeah.
Gary: I’ve been there.
Andrew: I’m looking at their website right now. Their website makes it look so much more fun. That’s what made me doubt this was the one that I went to. I remember going in there and I said, “I’m never going to a museum again,” on my backpacking trip through Europe because Pablo Picasso wouldn’t have wanted to walk through this kind of museum.
He was so full of life and this was just this quiet place where you’re supposed to quietly with your hands behind your back take in the art. This was a guy who had energy, who was willing to do crazy things, even the way that he painted. They created an environment that was not crazy, that was very–I don’t even know what to describe it like except it’s a museum.
Gary: Art museum-ish.
Andrew: Yeah, very museum-ish.
Gary: Again, these are great people and I love what they do and they show us all this art and everything. Some of them, like the Metropolitan Museum of Art in New York is still my favorite museum in the world. It’s awesome, and the Louvre and everything. But they’re kind of stuck in their own world and there’s a kind of snobbism about it.
They spent enormous amounts on architecture. They spent $500 million building the MoMA in New York, the Museum of Modern Art. I would have spent $100 million, had a nice building and used the rest of the money to teach art to all the kids all over the New York area or go to them with a bus full of Picassos.
Andrew: When the MoMA in Manhattan was actually down while they were renovating it, they opened up PS1 in Queens, which had much more experiential art. They had this room full of drums that you could bang on. They would allow people to come in late at night on Friday and party and you’d hear some music and you’d get to walk through the museum at night. You’d see like five year old kids with their parents and 21, 22-year old people drinking beer with their friends. It was an experience.
Gary: All that and more is going to take place at The Spark. In fact, any visitor will be able to play a real pipe organ. It’s a virtual pipe organ using sampled sounds from great pipe organs in Europe. You’ll be able to rattle the walls with this thing. Anybody can come in and play with it.
When I talk about innovation, it’s not just science and tech and math, STEM and all that. It’s definitely a lot of that. We’re going to talk about innovation in music because Austin is a huge music center; innovation in art, innovation in food, innovation in retailing, innovation in lodging–Airbnb, HomeAway. So, it really is the whole scope of human creativity and entrepreneurial thinking and imagination and how we apply it to life–innovation in medicine and healthcare and transportation.
Always having a historical perspective because you don’t know where you’re going if you don’t know where you’re coming from and look far into the future. The real focus is on what’s new, what’s now, what’s forthcoming. And companies can use this as a beta test. Like you’ve got a game, well, put it out on our floor on a Saturday and have our customers try it and give you feedback. There are a lot of different revenue streams as well.
Andrew: I like the idea. The website is TheSparkAustin.com. I’m telling you, I used to be assigned reading your stuff at NYU Business at Stern. It’s so good to get to meet you in person here and to hear the rest of your story. Like you said, on your Facebook pages, your photos of you and our books. You’re really engaged there. You’ve published on your personal website–where is that URL?
Gary: HooversWorld.com.
Andrew: HooversWorld.com, where the article you mentioned earlier is “How I Digest a Book in 15 to 30 Minutes.” I’ve got it here.
Gary: I write a newsletter once a twice a month and all those are posted right on HooversWorld. Some of those have gotten a lot of attention on social media. Some of my writing about Mexico got like 80,000 views on the web, which is pretty good for me.
Andrew: Cool. If you’re into those interview and you want more, subscribe to the podcast even though, frankly, Mixergy is a membership-based site, every single interview that we publish is free for the first two weeks when it’s up in the podcast or frankly on the website. So, you could go to the website and get it or you could subscribe to the podcast and it will come directly to your phone immediately for free–easy peasy.
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Gary, it’s good to have you on here.
Gary: Great to be here.
Andrew: You bet. Thank you all for being a part of Mixergy. Bye, everyone.
