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School of Business 04/28/2012

The BusinessMakers

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Russ and John host the show about the innovators, the entrepreneurs, and the real business makers. Our free market system is just amazing—provided the politicians will let it work. Includes: the BusinessMakers Quote of the Week—wise words from Mahatma Gandhi; This Week in Business History includes General Motors’ acquisition of Chevrolet, Martin Luther King Jr. delivers his “I Have a Dream” speech, and “Spam” email is created (ugh); the Jargon Challenge Round—trendy technospeak that YOU should know; and Dumb Moments in Business—still more trouble for the New Orleans Saints.

Full Interview text

Russ: This is the Businessmakers Show, heard on the radio and seen online at TheBusinessmakers.com. This is that show about the innovators, the entrepreneurs, the real business makers.

John: That's right. These are job creators. They're innovators, and they make products and services that people actually desire so much that they're willing to buy them and pay for them. And it's amazing how this capitalistic system works if you'll let it. And it seems to - with today's pressure on the business community, there's this cadre of entrepreneurs that still make it work. It's amazing.

Russ: Absolutely. It's a system that works, and I think about it all the time when I hear this debate right now about the word fair. What the president keeps talking about. Well, I don't think it's fair for people who don't work as hard as these entrepreneurs work to be able to benefit so much from what the other guys do. And even on the tax rate, even on the Warren Buffett thing, there's so many people that I know that are successful. I would rather them be able to keep that money that Buffett thinks they ought to pay in taxes, and let them create jobs.

John: Look, Buffett has got some health issues. We feel that's a bad thing. But he only makes $100,000.00 a year, and he pays taxes on it. He gets his money from dividend income, which has a lower rate. So this whole debate is so specious. You think Buffett would kind of man up and describe this situation that he's in for people so they understand that he's not really speaking the truth.

Russ: But speaking about those that do speak the truth, the entrepreneurs, here is our weekly shout out. It's from the EO Houston Group.

John: EO Houston. Boy, we like those people because they're the real deal.

Russ: They create jobs.

John: That's right, they do. And they don't complain about it, either.

Russ: That's right. And here is our lineup for today. Our own Esther Freeman is going to interview Sam Abraham, founder and owner of Abraham Fine Rugs. Now here is a guy that's been in business for 20 plus years, I think. Very successful on expensive oriental rugs, and he's in that space that somehow or another, he competes against people that are often doing these going out of business sales.

John: See, they're going out of business. That doesn't mean they are out of business.

Russ: They're just headed in that direction.

John: In the process of going out of business, they could have these huge financial windfalls with all the products they've got on sale that keeps them in business for the next season.

Russ: Right. So I guess, actually, everybody is going out of business at some point.

John: Or going into business. Sometimes, you say, "I'm going into business for myself." Well, that doesn't mean you're going to be successful. How many times do you hear that? "I'm going into business for myself. I'm going to be my own boss." Same thing. Same difference.

Russ: So anyway, I'm looking forward to the interviews. But first... that's right. It's time for the Businessmakers' very special School of Business that is not business as usual.

John: I know, it's so special that it's specialized. It's specialized in a way where we give real world ground level information that quite frankly, if you're going to spend 10, 20 grand a year going to some high falutin business school, I defy you to come up with a curriculum that's more useful than what we've got here.

Russ: Absolutely. And speaker of that 10 or 20k, you don't have to go out and get a college loan.

John: No, and if you don't like it, you can leave.

Russ: We don't check role.

John: We're not even on a pass/fail system here. Just show up, and we'll tell you when your degrees are ready.

Russ: And we kick it off each week with a quote of the day. Today's quote comes from Mahatma Gandhi, and it is, "Freedom is not worth having if it does not include the freedom to make mistakes."

John: That's right because you make mistakes. You learn from the mistakes, and the next time you do something, hey, you may exceed the expectation.

Russ: Yeah, mistakes are actually probably better for you.

John: Yeah, unless you have a gun that you think is unloaded that is loaded and you shoot somebody.

Russ: That's a mistake that's not good for you.

John: Right, so not all mistakes are good, and not every mistake is unpleasant to make, but the savvy people learn.

Russ: And you learn from a lot of them. Now you don't learn from that loaded gun thing because your learning days are over.

John: That's right. You're in the slammer.

Russ: Or dead.

John: Yeah, you're gonna be dead, yeah. That's even worse than being in the slammer.

Russ: Yes, it is. And that brings us to This Week in Business History. So what happened during the last week in April, first week in May in business history?

John: Okay, this week in business history, 1918, General Motors acquires the Chevrolet Motor Company of Delaware.

Russ: And that turned out pretty good for them.

John: They're still making them. Very popular car. Still making these cars. People want them. Look at Todd and Buzz, Route 66. They're still out there. I guess they're in their 70s now, driving that Corvette.

Russ: Still driving a Corvette. They probably got a new one along the way.

John: I think so. One would only hope.

Russ: Well, General Motors was doing so good this past year that when they really started faltering, the government wouldn't let them go. They had to prop them up. But you know, hate to say this on the show, but it was the unions that sort of bring them down. I mean if you look at the cost, the union cost, the labor cost and the retirement program of every car is unbelievable.

John: I know, it's ridiculous. And a former head of General Motors lamented that they're actually a healthcare company that just happens to make cars. This week in business history in 1933, James Brown, the godfather of soul, was born in Augusta, Georgia. This week in business history in 1956, the polio vaccine is developed by Jonas Salk, and is made available to the public.

Russ: Now this is when it first was made available, and I went down and had a polio shot. I assume you did, too.

John: That's right, and they had the sugar cube.

Russ: Yeah, that came along later.

John: That came along later. That was all developed at the University of Pittsburgh.

Russ: That was huge. I imagine most of our audience knows very little about it, but man, was that ever a terrible, crippling disease.

John: We even had a president of the United States that had polio. FDR.

Russ: Yeah, that's right.

John: This week in business history in 1960, Cold War U2 incident. The U2 was a spy plane.

Russ: Not a rock band.

John: Yeah, fly at high altitudes. Francis Gary Powers, who was one of the pilots who was shot down over the Soviet Union. Right about the time President Eisenhower was meeting with Khrushchev or was going to meet with Khrushchev.

Russ: And this kind of changed the agenda.

John: Well, actually, this caused that whole summit to be canceled, so it was a huge thing. Eventually, Powers was returned to the United States. . They did a swap, a spy swap, and then I think he flew a helicopter for a TV station and crashed a helicopter.

Russ: Did he really?

John: That's how he got killed.

Russ: Not only was he a pilot, but he was the only pilot because those things had single pilot cockpits. But he was criticized quite a bit for not taking his own life. That was back in the days when they carried those cyanide pills and you're supposed to swallow them, and he didn't.

John: Would you?

Russ: I don't think I would. Think about it a second.

John: You have to think, that was a thought provoking question. All right, this week in business history, 1961, the prime minister of Cuba, Fidel Castro, proclaims Cuba as a socialist nation - actually, as a communist nation. He said he was a communist, and abolishes elections.

Russ: Yeah, he did. He said, "Well, what do we need elections for? I'm already here."

John: What do you think I did all this for?

Russ: Now you know, I learned when I was there a couple weeks ago -

John: Out there in the jungle all those years, you think he's going to give up power?

Russ: They do have elections now every five years, and the way that they work, and they have them at the neighborhood level, at the city level, at the state level, at the country level. And the way that they work at all levels, if you're going to enter the race, you have to send in a photo of yourself. I think it's still not a digital photo. It's got a small photo and your resume, and that's the extent of campaigning. So you look at it, and when I was told this by a specialist, I said, "Well, how do you decide?" And he kind of thought, "Well, usually, you just pick the one with the longest resume." And that's why Fidel keeps winning.

John: He has a long resume.

Russ: Yeah, now Raoul wins more than Fidel. Fidel has kind of gone to the back.

John: I think the whole place is terrible no matter who's running.

Russ: You're probably right. No, you are right.

John: This week in business history in 1963, Martin Luther King, Junior delivers his, "I have a dream," speech, gave it there in front of the Lincoln Monument, Lincoln Memorial.

Russ: Pretty incredible speech.

John: Right there in the reflecting pool. Very incredible. The family - some family members have actually taken the legal steps to copyright the speech and the use of the speech, and it's very controversial.

Russ: His message was really cool, but the basis and the way he presented it as a dream, it was really, really cool.

John: This week in business history in 1971, National Public Radio begins programming, and also begins skimming the taxpayer dollar for an entertainment choice.

Russ: Didn't they skim it a lot more then than they do now? Because now, they have ads.

John: They have ads. They say it's only ten percent of the budget. Well, if it's only ten percent of the budget, raise your ad rates and get off the public dole for God sakes.

Russ: There you go. Or maybe we could get on the public dole. You think?

John: Hey, I wouldn't mind that. I'm coachable.

Russ: Note to self.

John: Note to self, right. Hey, this week in business history, 1971, Amtrak takes over operation of the US Passenger Rail Service, continuing to bleed the National Treasury.

Russ: Are they still part of the government?

John: I think what they ought to do is they should have NPR broadcast on the railroad.

Russ: Try to work in the post office. Now think about that. The only one of those three entities that has some success is NPR, and that's because they've kind of moved over to the commercial world.

John: Yeah, right. It's still liberal radio.

Russ: Oh, definitely. But Amtrak is -

John: You really want the US government controlling the news you hear on the radio? No? Okay.

Russ: They do that in England. Don't they?

John: Well, yeah, look what happened to them. This week in business history in 1978, the first unsolicited bulk commercial e-mail, which later became known as spam, is sent by Digital Equipment Corporation marketing representative to every ARPANET address in the west coast of the United States. Maybe you can explain what that means.

Russ: ARPANET was the precursor, really, most people say to the internet. So there weren't that many -

John: That's before Al Gore invented it. Right?

Russ: Yeah. There weren't that many ARPANET addresses. But back then, people really thought this would never be used for commercial use. So it would be interesting if we had a research department go find out what happened to that DEC marketing rep that sent it out.

John: He's probably in jail.

Russ: Probably for spam abuse.

John: He probably got fired, too.

Russ: He might. He might have been salesman of the year. Who knows?

John: He could have been employee of the month. This week in business history in 1979, Margaret Thatcher becomes the first female prime minister in the United Kingdom.

Russ: What a woman.

John: Did a pretty good job.

Russ: Did you see the movie?

John: No, I have not seen the movie.

Russ: I did. I thought it was fantastic. I understand why the family - the family, I think, didn't like it that much because there really is a lot of focus on that part of her life where she's losing her memory, and they roll back in time through her kind of dementia and show some fantastic things. So I thought it was great. Meryl Streep was incredible.

John: She's a great actress. There's no two ways about it. They used to say she acted with her hair.

Russ: I think she did that in this movie.

John: This week in business history in 1982, as part of a general search for alternative sources of energy, this was when Carter was president, American oil companies decided to get oil from rocks, from shale, and there really wasn't the technology there to make it worth anybody's while. So it was kind of looked down upon as some government pipe dream. Now we have the technology for it. It's reviving our economy.

Russ: Well, I think more than a government pipe dream, it was creativity and innovation mostly from this guy, George Mitchell, who lives not too far from where we are that was an incredible innovator. He's also extremely sensitive about the planet, but he's the guy that thought that we could figure out a way to extract it and played a huge role in hydraulic fracturing and also played a huge role in horizontal drilling. If you see what's happening today, it's a paradigm shift of extraordinary proportions. There's so much fuel, and it's mostly natural gas, which is clean burning. There's so much of it that the price is so low that it's not making sense right now, but we could literally become an exporting nation.

John: We could be energy independent. You combine Canada and us.

Russ: Oh, yeah, and all that non-conventional.

John: But there are oil shale deposits.

Russ: Oh, absolutely, and in fact, that's what they're all shifting, trying to shift right now from gas to oil.

John: A lot of the shale was on federally owned land.

Russ: Well, a lot of it is everywhere.

John: Because we don't want to hurt the grizzly bears.

Russ: Yeah, but there's a lot of it everywhere.

John: It is everywhere.

Russ: And it is just amazing. And once again, innovation plays a role.

John: Technologically speaking, that horizontal drilling has changed the entire cost structure, and the cost and the return on investment.

Russ: I've heard it described because it's more like a manufacturing process now than it is trying to hit a little pool 3,000 feet below the surface. Really cool.

John: This week in business history, 1988 near Maui, there's a flight attendant, Clarabelle CB Lansing, is blown out of an Aloha Airlines flight and falls to her death when part of the fuselage rips open in mid flight. Imagine what that was like.

Russ: I know. And remember, they landed it, and I think she was the only death. And there were people sitting strapped into their seats. That's why you should wear your seatbelt when you fly. I remember it.

John: This week in business history in 2001, millionaire Dennis Tito becomes the world's first space tourist. 2001.

Russ: Now it's starting to become -

John: It's coming down. Now it's only $500,000.00. Actually, it's like 50 grand or something.

Russ: No, I think it's - well, it's probably headed there. I heard like 200 grand, which is really interesting.

John: If we live long enough, we can go out there for cab fare.

Russ: I'm waiting to where you can use your frequent flyer miles.

John: That's a lot of miles. This week in business history in 2004, Oldsmobile builds its final car, ending 107 years of production.

Russ: Oldsmobiles were cool. Really cool.

John: They were. I had an Olds '98.

Russ: Wasn't the 442 an Oldsmobile kind of hot rod?

John: It was a hot rod, and then they had the Aurora. Then they had the Riviera. _______ had the Aurora. This week in business history in 2011, Osama Bin Laden, the suspected mastermind - he was the mastermind behind the September 11th attacks. Of course, he wasn't brought to trial, so they killed him.

Russ: You should have brought him to trial in New York? Yeah, no, I agree. I think this is the biggest success in the Obama administration.

John: That's right. They don't let you forget it, either.

Russ: But that's okay. I think it's good that they got him. I like the way they got him and stuff, and here it is to the Navy Seals. All right, and that brings us to navigating business jargon. Also known as our vocabulary lesson. We haven't warned you in a while, but there's no wagering allowed on this.

John: You are void where prohibited by law.

Russ: That's right, and this is where I go out and select a brand new jargon word or techno speak or acronym, and then challenge John to see if he can guess the meaning. Are you ready?

John: Challenge me because this is no jive out there. I don't know what the word is.

Russ: This is serious stuff. Today's word is a two-word noun. Expenditure cascade.

John: Two word noun, expenditure cascade. That's kind of like when the government over spends. I'm using as an example. They'll have a motivational meeting, and instead of having it in Cleveland, they'll have it in Las Vegas. And instead of spending 50 grand, they'll spend $883,000.00.

Russ: Kind of like the GSA has been doing.

John: The GSA, I was just getting to this. So if you want to know what the real - if you looked up the word in the dictionary.

Russ: Expenditure cascade.

John: Yeah, and they had a picture there, they would have the GSA meeting in Las Vegas.

Russ: I think I'm going to give you a win, even though that's not anywhere close. It's probably better. What this definition is is just sort of a different way to look at that trickle down economics of the Reagan era.

John: Well, no, of any era.

Russ: I think trickle down is viable. And maybe they should have used a different verb than trickle, but trickle probably describes it better. But here is how expenditure cascade is defined. It's a cascade of spending that results from consumption by the wealthy, which triggers emulative spending by the next lower class, which triggers spending by the class below that, and so on.

John: People get the money, they gonna spend it.

Russ: That's right.

John: So like in a rich, like a billionaire, or I'm talking about Warren Buffett, if he would buy a yacht, he'd probably buy an expensive yacht, a couple million bucks.

Russ: Well, there's a lot of people that work in building yachts.

John: That's what I'm getting at. There's blue-collar workers that not only build the yacht, but there's blue-collar workers who service and clean the yacht, and there's suppliers, and there's truck drivers, and then the people who watch over the wharfs where they dock these ships.

Russ: Right, there's people that clean.

John: So if Warren Buffett doesn't buy his yacht, none of these people get any money.

Russ: And if they increase his taxes, he might not be able to buy a yacht. He probably still could. Same thing is true for private airplanes. Our president has dissed those that own planes.

John: Who do you think builds those airplanes? Blue-collar workers.

Russ: Yeah, and services them.

John: Union guys.

Russ: Yes.

John: Some of them are unionized, I'm sure.

Russ: Doesn't anybody get this? It's just not fair.

John: Now there's a definition of fairness.

Russ: Now that brings us to dumb moment in business. Do you have a story for us?

John: Yeah, this is interesting. We all know about the problems of the New Orleans Saints, and I maintain - I mean if you - what's the difference of having a hit squad going out and trying to injure -

Russ: Sounds like you're gonna argue for some jail time.

John: I think so. If you ran a company and wanted to eliminate your competitor and you couldn't compete with him on the field of battle like you're supposed to, you hire a couple hit men. You don't think you're going to do jail time.

Russ: Yeah, unless you don't get caught.

John: So they have a lot of problems, New Orleans Saints, and it's certainly spilling over to the NFL anyway. I mean if you have enough people whose confidence in the integrity of the game, then it's going to be perceived as roller derby or something like that. Well anyway, here is something, I just got this right not too long ago on ESPN.com, and I'm just going to read this. The US Attorney - this is New Orleans. US Attorney's office in the eastern district of Louisiana was told Friday that New Orleans Saints general manager Mickey Loomis had an electronic device in his Superdome suite that had been secretly rewired to enable him to eavesdrop on visiting coaching staffs for nearly three NFL seasons.

Russ: During the game then?

John: I don't know.

Russ: It probably is because they use electronics so much. So he knew what plays they were calling.

John: Yeah.

Russ: God. There's a bunch of hoodlums in the league.

John: So acknowledged at being told the allegations recently, sources say he was briefed by the FBI in New Orleans about Loomis' alleged activity. If proven, the allegations could be both a violation of NFL rules and potentially a federal crime. Federal Electronic Communications Privacy Act prohibits any person from intercepting communications from another person and using an electronic or mechanical device.

Russ: Well, you know, they send the plays in now electronically.

John: The Saints are saying that this is 100 percent - 1,000 percent false they say, but I gotta tell you.

Russ: Well, they've also got that brain injury problem going in the league now that everybody that's over about 45 years old -

John: Concussions. So you have the concussion problem, you have the hit squad problem. I mean this guy may be innocent, we don't know. But the thing is that this game, the game of football at the NFL level is under such scrutiny that I can't believe, number one, the Saints are the only team that does anything.

Russ: That's probably true, too.

John: And then look at New England Patriots. They had a member of the coaching staff videotaping the signals on the other side of the field.

Russ: Integrity of the game is in question.

John: Integrity. You know, you get too big and there's too much money floating around, and the pressures to win, a lot of bad stuff happens.

Russ: And then at the same time, we're all paying for their giant stadium with the luxury suites. Just to set the record straight, we're both pretty strong football fans.

John: We are, right.

Russ: But there's a lot of stuff going on.

John: I was just down to see the mayor of Houston the other day, and I threatened her that if she would not build us a luxury suite to do our show, that we were going to leave the city.

Russ: We need that.

John: So she's calling an emergency meeting with the Greater Houston Partnership and city council to see what they can come up with to keep us here in Houston.

Russ: We're thinking about going out to the woodlands and doing this show out there.

John: I think we'd be much better accepted out in the woodlands.

Russ: They'd probably build us one out there.

John: We don't want a stadium. We just want the suite.

Russ: All right, and before we wrap up today's school of business, it's time for that very popular PKF Texas Entrepreneur's Playbook, so let's welcome Mr. Greg Price. All right, and that wraps up today's School of Business. Stay tuned in for Esther Freeman's interview with Sam Abraham, founder and owner of Abraham Fine Rugs. This is the Businessmakers Show, heard on the radio and seen online at TheBusinessmakers.com.

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