Long-form business podcasts.

I've started listening the "Acquired," a podcast about tech companies that usually runs 3 or 4 hours long. They go in-depth into the history of major companies, from their precursors all the way up the present day. 

So far I've done Costco and Nike. (Yes, Nike is a tech company now.)

Whenever I start one of these, I think that there will be very little parallel to my Mom And Pop business; but I've been surprised. Costco, not so much, but Nike more so.

Costco comes across as a very admirable company; but bottomline, it's a discounter. It's the best of what to me is a destructive thing. We Americans have traded middle-class businesses that offer regular prices for volume of discount scale. They present this as an unmitigated good.

But do we really need so much cheap stuff? 

When I was younger, downtowns were filled with drugstores, clothing stores, etc. etc., all of which provided middle-class or even better earning for their owners. Owners who were all local residents. But most people could afford less clothing, less furniture, less toys. 

So yeah, we have more bang for the buck now, but for what? Cheap stuff that either we don't really need or that falls apart and can't be repaired. We fill the land and oceans with crap we don't essentially need. 

The other problem with the podcast was that the two guys seem to believe that volume discounting started with Walmart and Costco, but it has been around at least since the turn of the century. The idea of putting a big warehouse sized building on cheap land on the edges of cities and undercutting retail has been around for a hundred years (or more.) It's just that they get old, they don't adapt, and they get clogged with bureaucracy. I would posit that the big stores of today will someday follow Sears, Montgomery Ward, Woolworth, and Kmart into obsolescence. 

Nike, I thought I'd have almost nothing in common with; but their beginnings were very familiar. They started by importing shoes from Japan. Phil Knight had very little cash. His business was doubling every year. It was nearly impossible to grow without cash for inventory. Roughly speaking, a 50% margin and doubling sales means that all your money is going toward growth. There is nothing left over. One or two bad quarters and you're gone. 

Worse, if your margin is more like 30 or 40%, you literally can't pay for the doubling of sales. You're constricted by a punishing slow process of building your inventory. It's almost the definition of pulling yourself up by your bootstraps. In order to grow, you need money--either investment (give up some or all of your control) or by borrowing money.

But 40 years ago, that "investment capital" (or venture) didn't really exist. So you went to an old fashion bank, who in those days were unwilling to loan you more than about the value of the inventory you already have. 

So Nike and Pegasus had similar beginnings. Sales doubling every year, banks being very leery of loaning money. 

There's a funny anecdote in Phil Knight's book, "Shoedog," where he went into a bank and proudly showed how his sales were doubling every year and that it didn't look like that would slow down anytime soon. 

The bank officer looked at him and said, "That's a problem."

"That's a problem?"

"Yes, you are growing too fast."

The reasoning is, you're plowing all your money into growth, but if you don't keep growing, if you have a bad quarter or two, you have nothing left. You're toast. 

Of course the answer is to get enough borrowed money to be able to withstand that kind of downturn, but there was the Catch-22 back then. Banks would only loan what you where already doing, no more, no less. So failure was almost built in. 

So here's the funny thing: I had EXACTLY the same conversation with a bank officer. "You're growing too fast. That's a danger sign."

"Huh?"

It proved to be true. With the money we had, we could barely survive a downturn, and we had several, it was only by stubborn tenacity that we survived at all. 

I had no interest after we stabilized to gamble like that again. But people like Phil Knight and my old boss, Mike Richardson of Dark Horse Comics, constantly leveraged their way to bigger business, taking chances all the way. That they succeeded was unusual. Most who try that technique don't.   

The other thing that I find fascinating is that these broadcasts, which get into the nuts and bolts, are often describing processes that I figured out for myself. When I finally got a loan from a bank it was with the help of a small business counselor from COCC. He told me I had a "primitive sophistication." 

I figure these things out the hard way, I guess. My eyes blur over at any business book I read.