March 26, 2024 • 54 mins
Ready to take an invigorating hike during the freeze of a winter in Central Park - Alongside the last CEO of Blockbuster Jim Keyes?
Our topics include:
- The Freedom of Education
- The Climb from Impoverished Beginnings
- Leading Mega Brand 7-Eleven to Gas Station Sushi?
- The REAL Story Behind Blockbuster
In this episode, host Darren Mass joined by Jim Keyes, they reflect on humble beginnings to leading major brands, the real story behind Blockbuster's decline, and the importance of education as a pathway to freedom. Keyes shares his insights on overcoming adversity, embracing change, and the power of positivity.
The show also touches on the potential of AI, the value of experiences over material possessions, and the transformative impact of education on individual lives and society.
This episode is a deep dive into the nexus of business, personal growth, and the natural world. Sponsored by DeFi Supplements
00:00 Welcome to the Concrete Wilderness
01:00 Boost Your Health with DeFi Supplements
01:23 A Frosty Adventure Begins: Insights into Jim Keyes' Past
02:08 From Humble Beginnings to Corporate Success: The Story of Jim Keyes
03:37 The Transformative Power of Education and Purpose
04:32 The 7-Eleven Journey: From Gasoline to Global Convenience
13:35 Blockbuster's Untold Story: Debunking Myths and Exploring What Really Happened
26:59 The Downfall of Blockbuster: A Financial Collapse
27:50 The Business Model and Profit Strategies of Blockbuster
28:27 The Rise of Netflix and the End of Late Fees
29:18 Nostalgia for Blockbuster and the Last Store Standing
30:02 From Oppenheimer to AI: Humanity's Quest for Peace
31:40 Education as the Pathway to a Better Future
38:07 The Power of Technology in Education and Personal Growth
43:14 The Importance of Liberal Arts and Finding Joy in Helping Others
48:26 Concluding Thoughts: Change, Confidence, and Clarity
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Alright, jim Keyes, are you okay with being recorded
on the podcast?
Yes, sir, there goes thatliability.
This is I Took a Hike.
I'm your host, darren Mass,founder of Business Therapy
Group and Parktime WildernessPhilosopher.
Here we step out of theboardrooms and home offices and
into the great outdoors wherethe hustle of entrepreneurship
meets the rustle of nature.
In this episode, we take aninvigorating hike during the
(00:25):
freeze of a winter in CentralPark alongside the last CEO of
Blockbuster, jim Keyes.
Our topics include the freedomof education for our future, the
extraordinary climb fromimpoverished beginnings to the
leader of mega-brands, and weset the record straight on the
real story behind Blockbusterwhen we close that chapter once
(00:47):
and for all, when I took a hikewith Jim Keyes.
This episode is sponsored byDeFi Supplements.
Are you feeling stuck in a rut?
Do you need more energy for thetrail?
Calibrate is a premium brainhealth supplement doctor
(01:09):
formulated to help with energy,focus, mood and longevity.
Visit defiyourmindcom and usecode HIK for 20% off and you
will defi your expectations.
This is going to be anadventure in New York, always In
the frozen, so we will end updoing most of this loop.
(01:30):
We're going to learn all aboutyou, so.
Speaker 2 (01:33):
I should be used to this.
I grew up in a house literallywith no heat.
We had a wood burning stove, sothere's absolutely zero excuse
for me to be whining aboutsub-zero temperatures or 30
degree temperatures.
We steps no bigger than me.
I remember growing up back inthe day, but it's one of those
(01:56):
things when you grow up likethat, it was actually an
adventure.
I loved it.
It was like camping full time,and so I never knew that.
I didn't know what the wordpoverty meant.
Were you like that?
Were you a pauperish growing up?
Yeah, I didn't realize itApparently.
Apparently we were.
We didn't have running water.
We had to pump outside.
Speaker 1 (02:16):
Well, that's actually interesting If people who are
not living in the confines ofcities but outside in rural
areas if they realize whenthey're growing up as children,
if they are living in poverty oryou just don't know any
different.
Speaker 2 (02:28):
No, you don't know.
In fact, I've got a great story.
I was one time I was had theprivilege of sitting on the
board of the American Red Cross.
I did a lot of work with them.
We were on a mission one timeand we're out in Vietnam, in
this really rural area, remotearea in Vietnam, and we were
bringing mosquito netting,things like that, and we went
(02:53):
into this village.
All the little huts had dirtfloors and I distinctly remember
it was such a striking contrastbecause one of the women said
how awful, look how these poorpeople are living.
And I thought I was probablythe only one that could really
appreciate this.
They were happy.
(03:14):
They were like these were thehappiest people I have ever seen
.
Now.
They were happy because theyprobably had never seen
Americans before, but they weretruly filled with joy and they
had no idea how poor they were,but it didn't matter.
Speaker 1 (03:31):
It's quite refreshing to realize that you can find
happiness in everything,absolutely.
Speaker 2 (03:37):
Well, in fact it's.
A big theme of my book is thatwe equate money and material
things to freedom.
But my book talks about reallyeducation being freedom, because
the more you learn, the moreyou can do, and the more you do,
the freer you are.
Speaker 1 (03:58):
That is absolutely true.
It's the purpose and that'skind of the pursuit of this
podcast and everything I've beendoing after the exit of a
company was I lost my purposeand my direction.
And I'll say this in this senseman who loses their purpose or
in a Confucius style sense, manwho loses their purpose, has no
value and you get reallydepressed and I'm with you on
(04:19):
that.
So I want to dive into yourcareer a little bit, because you
have a very interesting past.
Speaker 2 (04:25):
I've had some adventures.
Speaker 1 (04:26):
I know we're going to hear some good stories.
I don't want to dive into theepic blockbuster just yet.
Good A little of yourbackground, though 7-Eleven.
Speaker 2 (04:36):
Yeah.
Speaker 1 (04:37):
You were the chairman and CEO of 7-Eleven, correct?
I was president and CEO.
Speaker 2 (04:40):
Yeah, yeah, and it's a very, very interesting
adventure, career journey, ifyou will, because I joined the
company.
I was there for like 21 yearsand joined the company on the
planning side to be able to helpthem turn around an oil company
that they had acquired called.
Speaker 1 (05:01):
Citgo Petroleum, so 7-Eleven had an oil company.
Speaker 2 (05:04):
Yeah, yeah.
Speaker 1 (05:05):
Okay, most people forget this.
Okay, well, I didn't know this.
Speaker 2 (05:08):
Yeah, well, they acquired a company called Citgo
Petroleum and it was thedownstream operation of City
Service, the major oil company.
And so I had been previouslyright out of grad school working
for Gulf and Chevron and hadthe opportunity to take over the
(05:32):
planning function for Citgowhen Southland acquired it.
Okay, so it's kind of aconflict, so that would have
brought you to Texas.
Yeah, it was.
Okay, it was.
It's a much simpler story thanI'm making it, but the Southland
Corporation needed gasolinesupply for their 7-Eleven stores
, so they acquired this company,which was the refining and
(05:56):
marketing element of CityService, called Citgo.
Speaker 1 (06:02):
Hence Citgo, yeah, yeah, yeah, the epiphany, it
just hit.
Speaker 2 (06:06):
So Citgo, now part of 7-Eleven, a subsidiary of the
Southland Corporation, and I hada chance to leave the major oil
company and join them to do aturnaround on Citgo Petroleum,
which we did.
We were able to turn it fromlosing money to making money.
That's a positive.
(06:27):
That's a positive Returnshareholder value.
Exactly.
We then sold that subsidiary tothe government of Venezuela.
So Citgo today is a Venezuelanowned oil company.
Speaker 1 (06:41):
So I remember hearing that when there was some strife
with Venezuela a few years backand then there was a call to
boycott Citgo because it wasVenezuelan, so we sold Citgo to
the government of Venezuela butkept a supply agreement for the
stores, which was the originalreason for buying the company.
So 7-Eleven didn't always havepetroleum and gasoline.
Speaker 2 (07:06):
Back in the day they had just stores, and then in the
70s and 80s gasoline becamereally a big convenience item.
Speaker 1 (07:15):
Hence the convenience aspect of the convenience store
.
Right, exactly, and it was aperfect addition to a store that
already had everything that youwanted to buy conveniently
anyway.
Exactly, exactly, so what doesthe name 7-Eleven come?
Speaker 2 (07:28):
from.
It came from the back in the,trying to think probably the 60s
, I may not have that date right.
They had gone from being openvarious hours to.
They decided that from 7am to11pm would be more convenient.
(07:49):
Right, right.
Speaker 1 (07:51):
Okay, I got it.
It's unlike CVS, who reallydoesn't know its name.
I actually worked at CVS forquite a bit of time and it was
in the manual.
It said it was customer valueservice, customer value store.
Whatever we are, it's just CVSnow.
Speaker 2 (08:10):
I remember the first CVS in Massachusetts.
I remember they had the nameconsumer value store.
Speaker 1 (08:17):
And then it was customer value store.
They just kept playing with it.
Probably somebody's initials,I'm sure.
Yeah, probably Charlie, charlie, venezuelan.
So how long were you at7-Eleven?
21 years, so it was the full 21years.
Why did?
Speaker 2 (08:32):
you leave.
We sold the company to ourlargest licensee, 7-eleven Japan
, who had really perfected themodel.
They transformed the businesswhen they took on the license,
and if you've ever been to a7-Eleven in Japan, oh, not in.
Japan.
Oh yeah, you got to do it.
It's amazing.
Speaker 1 (08:52):
I got to go to Japan first.
Speaker 2 (08:53):
Yeah, it's a good start.
Speaker 1 (08:55):
I have a 10 year old daughter that wants to go to
Japan.
Speaker 2 (08:58):
Take her.
It's a great experience, greatlearning experience, and the
stores are phenomenal.
They have really usedtechnology to improve their
distribution systems andordering systems, so they
deliver to each store threetimes a day.
Speaker 1 (09:14):
That doesn't surprise me.
The Japanese operations mind.
When they're running businesses, they run it extremely
efficiently.
They practice kaizen littlesmall incremental changes for
monumental gains Exactly themost efficient company builders
there is.
Speaker 2 (09:29):
Exactly.
The best product they've eversold is that you can get fresh
sushi in a 7-Eleven store and Iknow the immediate reaction is
convenient store sushi.
Speaker 1 (09:38):
I've shied away from convenient store sushi, except
for hungover moments.
Speaker 2 (09:43):
You would not in Japan.
You'd be amazed that it isrestaurant quality probably
superior to most Japaneserestaurants here in the United
States, which is hard to imagine, but it's true.
Speaker 1 (09:54):
Well, that'll be on the mark when I do end up going
to Japan to eat some 7-Elevensushi.
Yeah, you gotta try it.
Speaker 2 (10:01):
It's literally world-class restaurant quality,
great stuff.
People in Japan use thosestores three times a day.
They go for breakfast, lunchand dinner.
So it is very convenient, Veryconvenient.
Speaker 1 (10:14):
So they've got the operations down perfectly and do
they own the licensees in theUS as well.
Speaker 2 (10:21):
They bought the entire company.
They were a licensee of7-Eleven for years and 7-Eleven
ran into some financial issuesin around 1991.
Did a leveraged buyout thatdidn't work so well and mine?
Speaker 1 (10:36):
You're a tootalitch.
Speaker 2 (10:37):
No, I was running the gasoline division.
The gasoline division actuallyperformed quite well, which
really gave me the opportunity,coming out of a restructuring,
to be the head of strategicplanning for the new entity.
That was a big career breakbecause I had gone from planning
to operations to running theirretail gasoline business had a
(11:00):
very good run.
We exceeded all of ourforecasts and we're making great
money for the company.
And then, coming out of therestructuring, they asked me to
be head of strategic planningfor the whole entity.
Going forward From there, theygave me the privilege of being
CFO, so I was able to thenfinance the plan that I was able
to help build.
(11:20):
And then from CFO they made meChief Operating Officer.
I was able to execute the plan.
Wow yeah, it was a greatopportunity.
Speaker 1 (11:29):
They promoted you throughout and which is
interesting to me as someone whofocuses on companies, putting
the right people in the rightseat.
And the first time I gotpromoted to being a manager, my
my manager had told me justbecause you're a great employee
doesn't make you a great manager.
You're gonna need to learn awhole new set of skills.
So for you to go from thepresident of one division to,
(11:51):
all of a sudden, the CFO, whichrequires a vast difference of
skills to now operations Anotherset of skills the fact that you
were able to commingle inbetween and see success is quite
impressive.
Speaker 2 (12:07):
You've just described my book because, literally,
education is freedom.
I had to learn in each of thosepositions I had to deal with
change Bankruptcy.
Most people had their head downoh, oh, it's me, company's
gonna go away.
I worked harder, had my head upwe'll get through this Deal
with change.
Have confidence.
Speaker 1 (12:28):
A bad rap.
Bankruptcy is a reset.
It is a tool that thegovernment allows you for being
part of the corporate programyou are allowed.
That's the plus and minuses ofdoing business is the fact that
you're going to be a corporationand get government protections
and you have to accept thebankruptcy rules.
(12:48):
There's a restructure inchapter 7.
Is restructuring not going outof business?
Speaker 2 (12:54):
Chapter 11, chapter 7 .
Speaker 1 (12:55):
Yeah, chapter 7 is actually going out of business.
7 is going out of business.
Chapter 11 we'll scrap that.
Yeah, chapter 11 isrestructuring and chapter 7 is
going out of business.
Chapter 11 is the bankruptcythat most people are aware of,
and big companies, littlecompanies alike, they all go
through it and it offersprotection.
Stay protections from yourvendors from just turning off
(13:17):
the lights.
Speaker 2 (13:18):
Now.
It's not a preferable thing.
No one wants to go through it,but it does allow you to reset
and companies can come out of itwith a new life and the ability
to go forward.
Speaker 1 (13:28):
Many do and, coming from the telecom industry and
very familiar with bankruptcyprotection and resets.
Speaker 2 (13:35):
Well, and that's what we did with blockbuster.
We took it in to be able todeal with debt in the 2008
financial collapse and we'reable to restructure the company.
Come out with this network asour strategic partner, our owner
of the business.
Speaker 1 (13:50):
Yeah, this network ended up buying blockbuster,
correct?
So you brought it up.
So we're gonna obviously talkabout the elephant in the room
blockbuster.
I have my own theories that Iwill share, but I want to see if
they line up.
Speaker 2 (14:02):
So does everyone know 90% of them are wrong.
But go ahead, let's hear yours.
Speaker 1 (14:06):
I'm not ready to go there yet because I think my
theory does paint a betterpicture of what transpired.
So you come in.
What year do you come intoblockbuster?
Came in 2007.
2007, okay.
So this is after the thechallenges.
Speaker 2 (14:26):
We'll say they had already had some pretty severe
challenges.
And, by the way, to put this tobed, because there's an active
rumor out there all over theinternet that blockbuster turned
down Netflix.
That happened in the year 2020,23 years ago.
Speaker 1 (14:42):
So let's jump ahead to that, because this is where
my theory is.
So in 2000, the CEO and theboard of blockbuster was
presented with an opportunity tobuy the red envelope company.
Okay, now.
Speaker 2 (14:54):
I don't know for sure how that transpired, but the
discussion did happen.
Speaker 1 (15:00):
The discussion happened and we can make some
guesses of what happened in thatclosed boardroom session or
whatnot.
They're not a threat.
They are a threat.
They'll go away, we'll squashthem like a bug, whatever right,
but they turned it down.
Now many would view that thatwas the worst decision
blockbuster could have made.
Speaker 2 (15:18):
Yeah, now, this is with the benefit of hindsight.
Yeah, hindsight, if you werethere if you were there in 2000
and you saw what Netflix had.
They had a good idea.
They had a great idea To doDVDs by mail.
But blockbuster actually had amore robust infrastructure to be
able to satisfy that same model.
(15:39):
They had distribution centers.
They could easily ship DVDs.
They had stores that you coulduse to exchange them for the one
you wanted.
So blockbuster actually had anadvantage in the year 2000.
Speaker 1 (15:54):
Strong advantage and being the bigger player Right.
I imagine they kind of laughedit off like we don't need this
unless we want to put the threadout of business, probably.
Speaker 2 (16:03):
I know I wasn't there , but I don't.
I think they took it seriously,but I don't think they could
see the, the value at the time,at the time, yeah, which
probably most of us would nothave.
Speaker 1 (16:13):
I.
So this is where my theory goesand I think by our discussion
we'll be able to put it to bed.
So this is 2000, which is waybefore streaming and now coming
from the telecom world.
Yeah, we didn't have theinternet connectivity, the
infrastructure, the networkcomponents to allow quality
(16:34):
streaming.
Speaker 2 (16:35):
Right, we were we're in Dawson environment right,
with the green screen and alittle blinker blinking cursor.
Speaker 1 (16:42):
So if, if I'm in blockbuster boardroom land and
I'm being presented with thisNetflix option, I see the
opportunity for us, asblockbuster, to grow without
them, but there's nothing elsethere, I'm turning it down.
If blockbuster had acquiredNetflix, it would have fizzled
(17:04):
out, burned, disappear andNetflix would not be that was a
good one actually.
Speaker 2 (17:13):
Yeah, yeah, thank you .
Speaker 1 (17:15):
Just go to the toilet with Netflix?
No, but if blockbuster hadacquired Netflix, it would not
be what it is today.
It's impossible because there'sprobably little chance that
blockbuster would have pivotedto streaming services.
Netflix had no choice but topivot to create the brand they
are Exactly, and that shouldhopefully put the argument to
(17:37):
bed.
Blockbuster would have donenothing with Netflix.
It would have just fizzled,gone away.
Speaker 2 (17:43):
And there you have it .
Well, I'll give you evenanother comparison Blockbuster
to also put to bed the idea thatBlockbuster management never
saw streaming coming.
Most people don't realize.
Well, they could, because weall knew back in the day that
the technology would be there.
We just didn't know when.
So Blockbuster actually had adeal that very few people know
(18:07):
about With Enron.
Oh yeah, yeah yeah, oh, okay, dotell, yeah, no.
And this is fascinating.
Think about it.
Enron saw this coming.
They had technology,Blockbuster had the brand and
the business.
Enron said let us build thestreaming future for you and
actually worked on it.
(18:27):
They partnered up.
Now take that example and theNetflix example and it was about
the same vintage and say, well,what if Blockbuster partnered
with Enron and went all in andbought them?
Or if they bought Blockbuster,where would they be today?
Speaker 1 (18:45):
Well, we know the fate of Enron.
Yeah, yeah exactly.
Speaker 2 (18:48):
So that but it would have caught up regardless.
It shows you that it's so easyto look back and say, well,
could or would it should have.
Speaker 1 (18:55):
Well, it also shows you that all roads for
Blockbuster led to potentiallynowhere.
Speaker 2 (19:01):
No, not true, Not true.
Now that's where I have todiffer.
The reason I joined in 2007 isthat I saw at 7-Eleven the power
of technology.
I had the advantage of ourJapanese licensee transforming
the convenience retail businesswith technology, and I saw that
(19:22):
same opportunity for Blockbuster.
Now it wasn't as easy as comingin saying we're gonna go
streaming tomorrow morningBecause, as you said, the
infrastructure wasn't there,customers weren't there.
Speaker 1 (19:33):
Yet we didn't know what we didn't know.
Speaker 2 (19:36):
Correct Sort of a time stamp this.
The iPhone was launched in 2007.
Ipad not till 2009.
So people had a hard time evenenvisioning watching movies on
their little little ebiby screen.
Speaker 1 (19:50):
That's right, we were getting used to the fact that
text was actually enjoyable andwe could take a photo from our
phone.
Speaker 2 (19:55):
Yeah, exactly, we were a blackbird using
blackbirds back in the day.
Speaker 1 (20:00):
Oh, there's another case, doug, yeah, exactly.
Speaker 2 (20:03):
We talked to Blackbird about partnering on an
iPad-like device.
So Blockbuster had theopportunity.
They had the brand.
Here's the way I looked at thebusiness Convenient access to
media entertainment.
They weren't renting DVDs.
Yes, they were for a window oftime.
But what Blockbuster reallyprovided the customer was
(20:24):
convenient access to mediaentertainment.
That demand wasn't goinganywhere.
Now, could they pivot and makethat transition?
Yes, so why didn't we?
That's your question for me.
Ha, ha ha.
Speaker 1 (20:40):
So why didn't?
You, I didn't yeah exactly Goodright on cue.
I love that.
Speaker 2 (20:46):
Because what everyone also forgets is that in the
year 2008,.
The whole world collapsed,lehman Brothers melted down.
Speaker 1 (20:56):
Yes, with a CEO with a very appropriate name.
Speaker 2 (20:59):
Yeah.
Speaker 1 (21:00):
Dickfold.
Ha ha ha, I love it.
You can't make that name up,can't?
Speaker 2 (21:05):
make that up, I know.
Speaker 1 (21:06):
It's an amazing story .
Speaker 2 (21:08):
But now, going back to 2008,.
By the third quarter,blockbuster had bought a
streaming video company.
Movie Link had rebranded itBlockbuster on demand.
We had 3,000 titles.
You can remember that, yes, Yep, new releases, something
Netflix didn't have.
We had the infrastructure thereready to go.
(21:31):
We had something called TotalAccess stores, kiosks, online or
by mail, and streaming.
Everybody forgets that.
So what happened?
Well, we also had a billiondollars debt.
Speaker 1 (21:45):
Ah, and that debt saddlebag.
Speaker 2 (21:48):
Where'd the debt come from?
Viacom spun the company out asa public company in 2004, and
put a billion dollars of debt onit when they did perfectly
reasonable.
Blockbuster was a cash flowmachine, so there was no reason
to worry about that debt, butfor the timing 2004,.
(22:10):
Five year term, 2009.
What no one knew is thefinancial markets in 2009 would
be collapsed when it came timeto refinance that debt.
Speaker 1 (22:21):
If you had known that , we would have had a very
different outcome, but Verydifferent the financial markets
Right.
Speaker 2 (22:26):
Could I have done anything differently?
Yes, when I joined the companyin 2007,.
My idea in joining and thereason I got to Blockbuster is I
was trying to take it privatePartner with PE, take it private
.
Do the transformation outsideof the glare of the quarter by
quarter public markets?
Speaker 1 (22:48):
Which, for those that aren't in the know, working at
or for a public company, is justdaunting.
Speaker 2 (22:53):
Very challenging.
Speaker 1 (22:54):
You are constantly rushing for every single quarter
, feeling some mounting pressureto perform and if you don't
perform well, your stock price.
Speaker 2 (23:04):
Right.
And when you have atransformation like going from
DVDs to digital, it's likedriving down the street at 70
miles an hour and changing thetire while the car's going down
the road.
Speaker 1 (23:14):
Perfect analogy.
I love that.
Speaker 2 (23:15):
That's what it is.
It's hard.
We had the opportunity to goprivate but and if we did, we
would have refinanced all thedebt in 2007,.
Never bad.
In my last, at the financialmarket collapse, we didn't wish
I had that decision to do over.
Speaker 1 (23:32):
Would that be a hindsight decision?
Exactly yeah.
So it didn't happen.
So we're going to set therecord straight here forever
yeah, Blockbuster wasn't goingto buy Netflix.
Even if they bought Netflix,Netflix would not be who they
are today.
They would.
You wouldn't know the name.
You would have remembered themnostalgically as the red little
(23:54):
envelope company.
Speaker 2 (23:55):
We probably would have screwed them up because we
had big company.
Speaker 1 (23:58):
Big company doesn't pivot the small company.
Integration issues, culturalmismatches, all the reason why
acquisitions fail constantly.
70% of acquisitions failbecause of cultural mismatches
and there's no way that thegiant would have gobbled up this
little tiny company and pivotedsuccess.
Probably not.
Speaker 2 (24:16):
Probably May have but chances are.
Speaker 1 (24:20):
That's not the reason why Blockbuster went under.
They went under because of thecrisis and the inability to
pivot fast enough, because of asaddlebag of debt Correct, just
like many other companies.
Speaker 2 (24:32):
It happens, but there's a huge lesson there.
The lesson is for all companiescash flow is your life flood.
Cash is king.
Cash is king.
And could I have done a betterjob of managing cash flow?
I tried.
That's why we were focused onthe stores, trying to improve
the stores.
So I was telling you at thetimetable third quarter of 2008,
(24:53):
.
I know I have to refinance thedebt we were really working on
cash flow.
Speaker 1 (24:58):
We doubled EBITDA and tripled net Earnings before
debt interest taxationamortization for anyone who
doesn't know, it's a fun termthat Sir get for cash flow.
Basically, yeah, it really ismeaningless in a private company
, although we seem to likethrowing the term around.
Speaker 2 (25:14):
Well, it's good in a private company because it
measures your ability to satisfyyour debt, but bottom line is
we dramatically improve theperformance of the company in
2008.
Head streaming had all theseother things you were poised for
acceleration.
Speaker 1 (25:27):
Poised for acceleration, yeah.
Speaker 2 (25:29):
Moody is actually the rating agency.
Standard reports of Moody'sgave us a two notch upgrade in
our debt rating.
That's huge.
That is huge.
That is huge, yeah, and thatall of this occurred in the
third quarter release for 2008.
But when Moody's gave us thatupgrade, Lehman had just
(25:51):
collapsed and they also gave us,unfortunately, an increase in
our probability of defaultrating.
Speaker 1 (26:00):
And that sends the stock into Tizzy.
Speaker 2 (26:03):
Shockwish yeah.
Speaker 1 (26:04):
And that's the other problem of a public company is
it's very easy to lose it alland be crushed.
Because investors get sheepish,they get scared.
Oh yeah, exactly, they freakout, and especially when there's
a financial collapse, exactly,everyone's pulling out of the
market.
Speaker 2 (26:21):
Fear, fear uncertainty, doubt, fun fact.
A chapter in my book about fear.
Yeah, because fear is a killerof so many companies.
Because employees are afraidthey quit, shut down, vendors
are afraid they collapse creditterms.
That's really, if you want toget right down to the weeds,
(26:42):
what happened to Blockbuster.
The studios went from 90 daysso we could buy a DVD for $15.
And then, over the next 90 days, rent it 20 times more than pay
for it.
Talk about a cash flow machine,right?
Speaker 1 (26:59):
Huge market.
Speaker 2 (26:59):
Yeah, but when the first studio said, because
Moody's now declared you a riskof default, we don't want to be
caught with an outstandingreceivable, so we're going to
take you to cash terms, and thenit was like a house of cards
the other studio's default.
Speaker 1 (27:17):
Cash flow again.
Speaker 2 (27:17):
you didn't have enough cash to keep it up $300
million of cash out of thebusiness in a week yeah, just
like that.
Speaker 1 (27:26):
So is that how Blockbuster worked?
Is that they would almost havea consignment with the studio,
More or less?
Speaker 2 (27:32):
yeah, because of the terms, credit terms, and it
wasn't really a consignment deal.
But the credit terms were sofavorable that there was never a
reason for Blockbuster to filebankruptcy, but for the debt.
And then, when the credit termsevaporated, the business model
collapsed.
Speaker 1 (27:50):
And the business model really.
I mean, you had a quick ROI Ifyou bought the DVD for $15, what
was a rental?
I don't recall, was it $3.99?
$3.
$3 to $5.
?
All right, so rent it, let'ssay, between five and seven
times and you have a completeROI.
Yeah, everything on your shelfis pure profit.
Speaker 2 (28:07):
Yeah, it was a beautiful business.
It was a beautiful business andthat's before late fees, which
the company eliminated before Igot there.
Speaker 1 (28:14):
Well, I bet the company loved late fees.
That late fee is just purebottom line profit.
Speaker 2 (28:19):
Yeah, it was $80 million of EBITDA cash flow.
Speaker 1 (28:23):
Yeah, that one, it was late fees.
Speaker 2 (28:25):
Yeah, just late fees.
So the customers were annoyedby it, understandably.
But the irony is Reed Hastingssaid he started Netflix because
he was annoyed over late fees.
But realistically, blockbustercould have just said well, do
DVDs by mail, no late fees, justlike Netflix.
Speaker 1 (28:47):
Well, that's where a great idea comes right.
You take someone else's issueand you can make it into an
advantage for yourself.
Speaker 2 (28:55):
But that was one of those management decisions that
I think hurt the company prettybadly, because they didn't get
what they thought was sales aregoing to respond immediately.
People would be thrilled in, nolate fees, so they'll all come
back to the store.
Speaker 1 (29:10):
I remember the ads, the marketing around the just
rented and just return itwhenever.
What do you mean?
Whatever Turn it whenever, nolate fees.
I think we all, in a nostalgicway, miss going with our family
to go pick out a VHS.
Smell of that popcorn and thecandy.
We miss that.
I would love to see that again.
(29:31):
And do you know?
I don't know if you've paidattention since, but do you know
when the last Blockbuster storehad closed?
Speaker 2 (29:36):
down.
Well, it's still open.
Bend Oregon.
Speaker 1 (29:39):
Yeah.
Speaker 2 (29:40):
Yeah, they're still open.
Speaker 1 (29:41):
Oh well, on Wikipedia they have her closed down in 19
.
I think she's.
Speaker 2 (29:46):
I'm pretty sure she's still there.
But it's a story of persistencebecause she was not willing to
accept they were going to closethe store.
Speaker 1 (29:56):
Netflix has a special on it.
They have a documentary yeahit's hysterical.
Which is amazing.
Speaker 2 (30:01):
So here's the question though, do you see,
oppenheimer?
Speaker 1 (30:03):
Yes, oppenheimer frustrated me.
Speaker 2 (30:06):
Yeah, frustrated me too.
But the thing I didn't knowabout Oppenheimer is I didn't
realize how much they believedthat this technology would bring
peace to the world, because itwas so devastating, yes, that
humans would not want mutualmass destruction, right.
Well, it didn't work out andended up being an arms race.
(30:26):
We all know what happened.
So the question is will AIpresent humanity with that same
opportunity to bring peace tothe world.
Speaker 1 (30:36):
I think we can come up with an answer here.
Speaker 2 (30:38):
Well, it's interesting because every
military friend I have says it'simpossible.
It's going to go to thestrongest military to use it to
weaponize it.
Here's my question the firsttime it gets out of control and
the first time machine learningactually dominates human beings,
(30:59):
will that be our wake-up callfor humanity?
No, well, I hope you're wrong.
Speaker 1 (31:05):
I hope I'm wrong too, but it's again.
We can play hindsight, armchairquarterback and all that.
We have too many examples wherehuman beings don't put up the
stop sign until the accidenthappens, and then sometimes it's
too late.
Speaker 2 (31:18):
Well, that's what I'm hoping.
If there's an accident, doesthat bring the world together to
say, hey, all right, guys, wehave to work together.
Speaker 1 (31:26):
I do see that it is going to be too big of a crutch
for too many people andeventually the machine, the AI,
will write code for itself, andthat's where the bad stuff
happens.
That's the Skynet.
Speaker 2 (31:40):
So here's literally why I wrote the book, because
what is the name of the book?
Thank you.
Speaker 1 (31:47):
Education is freedom.
Education is freedom.
I will subscribe to that onefor sure.
Speaker 2 (31:52):
Yeah, and it's a call to action for individuals to
take learning in their own hands, because there's no excuse
today, with the power of justexisting technology, you're
struggling with algebra, khanAcademy's free you put in the
time, you can learn anything youwant online.
That's the call to action tothe kids, but the call to action
to humanity, literally, is thatthe answer to all of this stuff
(32:18):
is ultimately educating theworld.
And this sounds cliche, but ifyou could replace bombs with
books, then you replaceterrorists with teachers.
I mean, I know that'sridiculously simple.
Yeah, it's very lofty and verypolyanis, but it's true in
(32:38):
essence that if we dial up theknowledge of humanity, think
about what we're doing today.
Conventional warfare is anacronym.
I mean, we're out there withtanks blowing each other up.
Speaker 1 (32:52):
It's like there's no lines anymore.
Speaker 2 (32:54):
There's no lines.
So is it possible to elevatethe overall knowledge of
humanity to the point that wecan get beyond this archaic way
of behaving and find othersolutions?
Now, I know that's crazy.
Speaker 1 (33:15):
I think it's a little grandiose just knowing that we
do have fundamentalist thinkingin other cultures, and I think
you're coming at it from anAmerican lens, where this is the
land of opportunity.
You could do anything, andanyone who laughs at that and
says bullshit, no, you could doanything you want to do if your
(33:38):
drive is in the right direction.
Speaker 2 (33:40):
Yes, exactly, but even worldwide, much of the
fundamentalism that we deal within the world stems from the
ability to control those whohave no future, they have no
education, they have no economicstatus.
So, and this is my question,can technology quickly enough
(34:04):
bring knowledge to the globe?
I mean worldwide?
There are more cell phones inthe continent of Africa than in
the United States, it's greaterpenetration, and that cell phone
is a portal to knowledge, toinformation.
So can we light up thoseportals and help people learn in
(34:26):
a way that's never beenexperienced by humanity?
Speaker 1 (34:29):
So what would the learn it?
So let's say you're in afundamental extremist culture,
and how could lighting up affectchange?
Speaker 2 (34:41):
Simple answer and again, this is too grandiose and
too naive that I believe this.
But thanks for the preface.
I have to say that.
But critical thinking goes allthe way back to the earliest
days of man and the Greekphilosophers and Plato, asking
(35:01):
why and challenging conventionalwisdom, whether it's
conventional religion or justconventional science or
conventional politics.
That critical thinking elementis something that we're not
practicing worldwide as much,Even here in the United States.
You see it happening Well wecome to our position.
Speaker 1 (35:25):
We get lazy Again, with the average 100, right,
this is not equating 100 to lazy, but because there are so many
people that just immediatelydoubt that they could be a
leader and entrepreneur,business owner, successful
person, they get lazy and fallprey to that.
Speaker 2 (35:44):
That becomes the doubt Right exactly.
Speaker 1 (35:47):
You know, I tell my kids all the time when you say
can't, you absolutely won't.
Exactly, you have the abilityto do anything.
Yes, there are lucky scenariosthat we can put ourselves in,
take ourselves in and out ofluck, you get lucky to an extent
.
You are lucky if you're borninto a specific family or
(36:07):
demographic or country orculture.
Yes, that is your one stroke ofluck that can set you up with
an easier or better hand.
But what you choose to do withthat is up to you.
There are plenty of superwealthy families that have super
wealthy babies from the startand those super wealthy babies
(36:28):
turn out to be pieces of garbageand live horrible lives.
You could say they were lucky,born in the family, or that is
what destroyed them.
You can say and we've had manyexamples of people that grew up
in the worst situations possibleabsentee mother, no father,
call it whatever you want andthey have risen to success.
(36:50):
So you create your own fortuneand if you allow yourself to say
I can't because, then youabsolutely won't.
Speaker 2 (36:57):
Exactly.
So, chairman of the America RedCross, bonnie McElven Hunter.
This amazing woman created pacecommunications.
She's been the longest runningchairman of the Red Cross ever.
Speaker 1 (37:08):
Oh, wow.
Speaker 2 (37:09):
Yes, she tells a story.
Her mom took her, she and herdaughter and her sister out in
the backyard and made them rightcan't on a piece of paper and
they buried it in a box.
Speaker 1 (37:19):
I might try that with my kids.
Yes, it's a great.
It's a cool story.
I love stuff like that.
Yes, I got it in the book.
Yeah, well, I'm absolutelygoing to read the book and I
will say this too you are notsponsoring this show.
No, I do not allow guests tosponsor their show or their
episode.
It's disingenuous to me.
Speaker 2 (37:36):
Well, and I'm not making money on this book.
Speaker 1 (37:38):
My objective is I'm not making money on this podcast
Look at that.
We're in the same boat.
Speaker 2 (37:43):
No, my objective is to get the word out, because I
really do believe that humanityis at the crossroads here.
But I'm more optimistic aboutthe future of humanity because I
do believe and I've seen thepower of technology to light
people up.
I'm going to give you a greatstory, front of mind Will Talley
(38:04):
.
I put him in the book and Willwas one of those kids.
Speaker 1 (38:09):
By the way, great name.
Speaker 2 (38:10):
Will Talley William.
Speaker 1 (38:12):
Talley, it sounds like he's very stately.
Speaker 2 (38:15):
He is Midwest Farm Boy by 6'5" Good, good kid.
He grew up wholesome Americanvalues, but he hated school.
He was like B minus C plusmaybe.
In grammar school he wasstruggling.
His mom was worried about him.
He kept talking to him Well,what do you like?
He was constantly playing videogames, mostly war games.
(38:39):
He was looking at YouTubevideos.
I was like, hey, will, don'tyou think you could use those
YouTube videos If you like,looking at World War II stuff,
to supplement your education?
History is all about lookingback Once you use YouTube videos
.
And he started doing that andhe got so excited that he didn't
(39:03):
have to learn history out of abook.
It lit him up.
He went through high school andended up with a 4-0 average.
I'm so proud of him.
I wrote a recommendation forhim to get into Harvard.
He's now a sophomore at Harvard.
He's going into his sophomoreyear.
Speaker 1 (39:22):
That's the alternative learning, almost
like a Montessori style learning.
Everyone's motivated bysomething else and you can learn
from almost anything if you'reagain willing to do it.
Speaker 2 (39:34):
That's the power of technology we can light up the
world and ignite their curiosityand their critical thinking,
all of those things that havelaid dormant for so many years.
We're clearly a pessimist.
Oh yeah, you can tell.
Speaker 1 (39:50):
You think there's such thing as humans being too
successful?
Speaker 2 (39:55):
Too successful.
Speaker 1 (39:58):
I'll preface it Every great civilization has crumbled
and burned, from the magical,mystical Atlantis to the Roman
Empire, the Byzantines, theOttomans, the Greeks.
They all collapse, many ofthose being democratic societies
.
Is there such thing where thepeople have too much control,
(40:20):
too much say, and we collapse?
Speaker 2 (40:25):
I hope not, but I do think.
Again, it depends on theevolution of those people.
I think what happens is theyfall prey to leadership using
those lowest common denominators, instilling fear, and then they
start to cannibalize fromwithin.
It happens, it's embarrassing,it infects from within.
(40:48):
You'd think we'd learn fromother civilizations that have
done exactly the same thing.
Speaker 1 (40:53):
That tells back to the AI conversation of why I
think you can recognize patterns.
I don't know how much faith Ihave in humanity to get this go
around right, I think.
Unfortunately, sometimes youneed to have the freight train
accident before you startlooking at safety.
Speaker 2 (41:12):
It's very likely that that will have to have that
catastrophic event.
Whatever it is, you know whatthe best thing to happen to
humanity could be An alien racevisiting the earth.
Speaker 1 (41:27):
Whoa pump the brakes, kids.
Let me show you how it's done.
You know what?
Speaker 2 (41:33):
I don't care what race you are, I don't care what
your religion.
We're all humans.
Come on, let's hang together.
Speaker 1 (41:37):
There's no extreme example here because we are in
New York City 9-11, which ishorrible and horrific,
especially as a New Yorker, buteverybody came together.
Everyone was flying a flag andproud.
Now we are so torn apart anddisjointed.
But it doesn't have to be andthat's the thing, we just all
need to figure it out.
Speaker 2 (41:58):
We all need to figure it out.
And if we can get back to thosefundamental skills, fundamental
things we all learn in grammarschool, we all need to figure
out how to get back to the rightplace.
How many conversations dopeople actually sit down and go
tell me why you feel that way?
Speaker 1 (42:16):
Let's talk, yeah, but unfortunately we live in a
black and white world.
If you don't like my footballteam, I don't like your face.
Where you live, football islife.
Speaker 2 (42:26):
But ironically that's not a democracy, because a
democracy is all about peoplecoming together and compromising
.
So maybe we need education onbeing democratic again, what we
kind of do and that's kind ofthe point I'm trying to make
that we all grew up flag waving,proud Americans, believing in
(42:47):
the democracy and democraticsystem, and yet we're not
behaving that way.
We're behaving like my way ofthe high-law.
I'm right, you're wrong.
Speaker 1 (42:56):
And the worst people of all, adults.
Adults, they act worse thanchildren, oh, the kids.
Speaker 2 (43:02):
that's why I've got a lot of hope in the next
generation, because they'relooking at us going.
You guys are crazy, they're thealiens?
Speaker 1 (43:08):
Yeah, Sure, sure you guys are nuts.
So let's get back to thebusiness world.
What do you think the mostvaluable lessons in education
are for a budding entrepreneur?
Speaker 2 (43:21):
I'm a big believer in the liberal arts approach
because at that age I don'tthink most of us know what we
want to be and the liberal artsgives you exposure to a more
classical education rather thanspecializing very early.
I know some kids want to beengineers.
Like you, in high school Mostof us don't really know what
(43:43):
they want to do.
I wanted to be a first.
I wanted to be a doctor.
I was a terrible doctor.
And then I wanted to be alawyer.
I was a terrible lawyer.
I actually had an intervention.
I had a professor undergrad.
He was a history professor, hadme in class for two years.
Where are you going to school,jim?
I told him I got into these twolaw schools and he's like no,
you can't, you'll be a terriblelawyer.
(44:05):
I've seen you in class but hesaid you got to go.
Promise me you'll get an MBA,even if you do a JD MBA.
Speaker 1 (44:11):
So was that the person that changed your life?
Yeah, what was his name?
Speaker 2 (44:15):
Father Lapamata.
He was a priest, yeah, a Jesuitpriest, lapamata, yeah.
And I mean here's a guy thatthank goodness he intervened and
I was a Holy Crossundergraduate and he jumped in
and said here's what you need todo.
So what brings you the most joy?
I think the most joy is beingable to share this idea that
(44:40):
anybody can do anything.
I've had some amazingopportunities, but the best
thing that can happen I had akid walk up to me one time in a
restaurant I was checking outthe sushi bar it has branded
Nata the 7-Eleven.
No, not Nata the 7-Eleven.
I wasn't in Japan Full circle.
We don't sell sushi here in theUnited States.
(45:02):
But he said you, mr Keys, Iguess, did you start the
Education and Freedom Foundation?
I was like, yeah, you guys, man, thank you.
He shook my hand.
It's like I'm the first kid inmy family to ever go to school.
He was at Southern MethodistUniversity at the time.
He was going to go off to medschool or something.
(45:22):
He was just grateful that wehad given him a jumpstart, made
him believe in himself.
And that kind of thing happensto you and it's like the best.
It's the best because yourealize you're making a
difference.
Even if it's one life, you'remaking a difference.
That checks the altruism bucket.
Speaker 1 (45:42):
That is phenomenal.
I love hearing stories likethat.
It's because you decided toinvest in a positive path and
this positive path yielded agreat life for you and paid
dividends for other people.
Speaker 2 (45:55):
Yeah, well, that's the hope.
That's the hope and I getcaught up a lot.
The lifestyle makes it looklike it's all about the money
Because, yeah, I fly my ownairplane.
It's a privilege.
I'm grateful every day for thatprivilege of being able to do
that.
I drive a nice car, but reallythe motivator for me is the
(46:19):
ability to experience life, todo things.
That's what freedom is allabout.
It's not having more money thanthe other guy.
I know a lot of very rich andhappy people.
Speaker 1 (46:30):
You and I are very, very similar.
After an exit, I had the moneyGreat, but I was very depressed.
Money buys you a whole bunch ofdon'ts Things you don't have to
do or worry about.
It gives you the ability tohave options, but it does not
fix emotional, mental issues.
It's cool to have nice things,but it doesn't bring purpose.
(46:54):
In fact, I know plenty of verywealthy people that are
miserable.
Speaker 2 (47:01):
Do you have a George Carlin's thing on stuff?
He does a whole thing aboutstuff.
That's why we have homes.
Oh, yes, because we have tohave a place for our stuff.
And then you get more stuff,and then you need a bigger house
for more stuff.
Speaker 1 (47:14):
He has a documentary on HBO.
Obviously he's no longer withus, so they have one.
If you were to replace some ofhis narratives with today's
people, it's all repetitive andit shows you.
Over the 60 years of his career, the message never changed and,
full circle, human beings neverchanged either.
(47:36):
It's very apropos today, and ifhe was alive today and still
doing his comedy, it would berelevant.
Year after year after year,decade after decade, he never
faded away.
So we are nearing the end ofour trail.
This is fun.
Speaker 2 (47:53):
See, that is why I do this.
Yeah, I confess I was a littleskeptical.
I was like we're going to dowhat?
We're going to go out and takea hike.
Speaker 1 (48:00):
Well, typically we've done these in warmer conditions
, but you were down for thewinter and I wanted to see how
it would go.
Little sniffly and runny nose.
No one slipped and tripped toobad, not over yet the sniffs are
going to be pretty pronounced.
That's fine.
We'll soften them withfiltering, but you see them.
Get me on camera.
I think I got a couple of thosein there.
(48:22):
Don't worry, you don't want toshake these gloves.
So do you have any partingwords of wisdom?
Speaker 2 (48:30):
Most important advice that I have and I get this
question a lot what would youtell your 17, 18 year old self?
And first thing I'd say is calmdown, it's going to be OK,
because we all worry too muchright, yeah.
And we are all victims of thatfear.
You know that, oh my gosh, I'mgoing to fail Imposter syndrome,
(48:51):
all that stuff.
So that's the first thing I'dsay.
But I have three things, andactually the origin of these
three things are kind of cool.
Happened in a dream.
Shortly after becoming CEO, Ihad this crazy dream Super
realistic, like a near deathexperience where you have the
bright light.
In the dream.
(49:12):
I was sent on these three tasksand I performed the tasks.
I didn't know if I was going tobe successful or not, but I did
each of the things I was toldand I was promised a gift at the
end.
And then I woke up and I waslike damn, where's my gift?
Come on, that's not fair.
You know those dreams.
You want to go back to sleep.
Speaker 1 (49:33):
I don't want to finish this.
You can't put yourself back inthere.
Speaker 2 (49:35):
No, no I want to get the gift.
And I started telling peopleabout this dream and, in
particular, I woke up my wife.
I was like hey, I had thisdream, I got to tell you about
it.
Speaker 1 (49:46):
And then she rolled over and said uh-huh, Crazy
dream.
Yeah, I don't want to hearabout that.
Careful about what you want totell me.
Speaker 2 (49:55):
But I wrote down three words Change, confidence
and clarity.
I shared those the next morningand she said has did my friends
, that's why you are where youare.
That is your gift dummy.
Speaker 1 (50:09):
Change, confidence and clarity.
Speaker 2 (50:11):
You've been able to your whole life, overcome
insurmountable things that arewhat other people would say make
you hopeless, whether it'sdivorce or parents or poverty,
or having a house condemned whenyou're a little kid and you
come home and see the red sign.
(50:31):
You've overcome all that stuff,but you've come out on the
other side with a very positiveattitude and you're able to
weather that storm and it'smaybe stronger so you can deal
with change as crazy as takingover a blockbuster and then
having the financial marketsmelt down.
You take it in stride, you dealwith it and then you have the
(50:54):
confidence somehow to believeyou can accomplish anything,
whatever you want to do.
And that confidence is backedup with preparation, because you
work your butt off.
You're able to be confidentbecause you know that you'll
tackle whatever it is that youhave to do.
And the third is clarity andthe ability to take really
(51:18):
complex things and make themsimple.
And so I have to do that,because I'm not that smart, so I
have to take complex problemsand make them simple.
Speaker 1 (51:29):
Well, I highly doubt you are not that smart, but I
think change, confidence andclarity will be the title of
your episode.
I might throw in blockbusterchange, confidence and clarity.
There you go.
Speaker 2 (51:40):
There you go, but it applies.
I could have bailed.
Very apropos, yeah, I couldhave bailed on blockbuster.
It wasn't my problem, I didn'tstart it.
I was there for a year and ahalf when it started to melt
down.
I could have bailed.
Speaker 1 (51:51):
Yeah, but your personality wouldn't allow that.
You can't admit failure.
Speaker 2 (51:54):
No Well, you never fail.
I use a Mandela quote I neverlose, I win or I learn.
That guy was in jail for 20years.
He didn't lose, he studied lawwhile he was there.
He could have died in prisonjust from depression, but no, he
studied, learned the law, cameout as president, and it's so
(52:17):
applicable to everybody.
It's really the reason behindthe book, because the power of
knowledge to turn the worstsituation into an opportunity is
something that too few peoplereally embrace.
Speaker 1 (52:33):
Well, Jim Keys, this was a blockbuster of a hike.
I absolutely enjoyed beingalongside you here in your story
.
You are a very positive humanand I love to surround myself
with positivity.
You are clearly very successful.
We have set the record straighton the Netflix dilemma and you
(52:54):
are inspiring the world.
Get his book.
Education is Freedom.
It's phenomenal.
I know I will be getting it andI will buy it too.
I actually have a copy for you.
I guess I'm not buying it, butotherwise.
Speaker 2 (53:09):
I would buy it.
I'll buy one too.
I need the sale.
Speaker 1 (53:12):
There you go.
This was a very inspirationaljourney.
I'm happy you said yes.
In fact, you were alsodemonstrating a core value of
mine, and that is to say yes toevery opportunity that aligns
with your purpose.
It is the reason why I'm heretoday.
It is the reason why you arehere today.
You say yes to opportunitieswithout even thinking about any
(53:34):
other answer.
Speaker 2 (53:35):
Burry a can in the box in the backyard.
Speaker 1 (53:40):
You have to do that with your kids.
I will bury my cants with mykids.
I absolutely love that.
So, jim Keys, thank you forhiking with us.
Speaker 2 (53:47):
Thank you, this was fun.
Speaker 1 (53:49):
Yes, my hands are frozen.
I didn't even have gloves Nexttime on, I Took a Hike.
We take one of the mostinspirational life purpose
journeys with Scott McGregor,ceo of Something New, author of
the Standing O Series and thefounder of the Outlier Project.
Alright, jim Keyes, are you okay with being recorded
on the podcast?
Yes, sir, there goes thatliability.
This is I Took a Hike.
I'm your host, darren Mass,founder of Business Therapy
Group and Parktime WildernessPhilosopher.
Here we step out of theboardrooms and home offices and
into the great outdoors wherethe hustle of entrepreneurship
meets the rustle of nature.
In this episode, we take aninvigorating hike during the
(00:25):
freeze of a winter in CentralPark alongside the last CEO of
Blockbuster, jim Keyes.
Our topics include the freedomof education for our future, the
extraordinary climb fromimpoverished beginnings to the
leader of mega-brands, and weset the record straight on the
real story behind Blockbusterwhen we close that chapter once
(00:47):
and for all, when I took a hikewith Jim Keyes.
This episode is sponsored byDeFi Supplements.
Are you feeling stuck in a rut?
Do you need more energy for thetrail?
Calibrate is a premium brainhealth supplement doctor
(01:09):
formulated to help with energy,focus, mood and longevity.
Visit defiyourmindcom and usecode HIK for 20% off and you
will defi your expectations.
This is going to be anadventure in New York, always In
the frozen, so we will end updoing most of this loop.
(01:30):
We're going to learn all aboutyou, so.
Speaker 2 (01:33):
I should be used to this.
I grew up in a house literallywith no heat.
We had a wood burning stove, sothere's absolutely zero excuse
for me to be whining aboutsub-zero temperatures or 30
degree temperatures.
We steps no bigger than me.
I remember growing up back inthe day, but it's one of those
(01:56):
things when you grow up likethat, it was actually an
adventure.
I loved it.
It was like camping full time,and so I never knew that.
I didn't know what the wordpoverty meant.
Were you like that?
Were you a pauperish growing up?
Yeah, I didn't realize itApparently.
Apparently we were.
We didn't have running water.
We had to pump outside.
Speaker 1 (02:16):
Well, that's actually interesting If people who are
not living in the confines ofcities but outside in rural
areas if they realize whenthey're growing up as children,
if they are living in poverty oryou just don't know any
different.
Speaker 2 (02:28):
No, you don't know.
In fact, I've got a great story.
I was one time I was had theprivilege of sitting on the
board of the American Red Cross.
I did a lot of work with them.
We were on a mission one timeand we're out in Vietnam, in
this really rural area, remotearea in Vietnam, and we were
bringing mosquito netting,things like that, and we went
(02:53):
into this village.
All the little huts had dirtfloors and I distinctly remember
it was such a striking contrastbecause one of the women said
how awful, look how these poorpeople are living.
And I thought I was probablythe only one that could really
appreciate this.
They were happy.
(03:14):
They were like these were thehappiest people I have ever seen
.
Now.
They were happy because theyprobably had never seen
Americans before, but they weretruly filled with joy and they
had no idea how poor they were,but it didn't matter.
Speaker 1 (03:31):
It's quite refreshing to realize that you can find
happiness in everything,absolutely.
Speaker 2 (03:37):
Well, in fact it's.
A big theme of my book is thatwe equate money and material
things to freedom.
But my book talks about reallyeducation being freedom, because
the more you learn, the moreyou can do, and the more you do,
the freer you are.
Speaker 1 (03:58):
That is absolutely true.
It's the purpose and that'skind of the pursuit of this
podcast and everything I've beendoing after the exit of a
company was I lost my purposeand my direction.
And I'll say this in this senseman who loses their purpose or
in a Confucius style sense, manwho loses their purpose, has no
value and you get reallydepressed and I'm with you on
(04:19):
that.
So I want to dive into yourcareer a little bit, because you
have a very interesting past.
Speaker 2 (04:25):
I've had some adventures.
Speaker 1 (04:26):
I know we're going to hear some good stories.
I don't want to dive into theepic blockbuster just yet.
Good A little of yourbackground, though 7-Eleven.
Speaker 2 (04:36):
Yeah.
Speaker 1 (04:37):
You were the chairman and CEO of 7-Eleven, correct?
I was president and CEO.
Speaker 2 (04:40):
Yeah, yeah, and it's a very, very interesting
adventure, career journey, ifyou will, because I joined the
company.
I was there for like 21 yearsand joined the company on the
planning side to be able to helpthem turn around an oil company
that they had acquired called.
Speaker 1 (05:01):
Citgo Petroleum, so 7-Eleven had an oil company.
Speaker 2 (05:04):
Yeah, yeah.
Speaker 1 (05:05):
Okay, most people forget this.
Okay, well, I didn't know this.
Speaker 2 (05:08):
Yeah, well, they acquired a company called Citgo
Petroleum and it was thedownstream operation of City
Service, the major oil company.
And so I had been previouslyright out of grad school working
for Gulf and Chevron and hadthe opportunity to take over the
(05:32):
planning function for Citgowhen Southland acquired it.
Okay, so it's kind of aconflict, so that would have
brought you to Texas.
Yeah, it was.
Okay, it was.
It's a much simpler story thanI'm making it, but the Southland
Corporation needed gasolinesupply for their 7-Eleven stores
, so they acquired this company,which was the refining and
(05:56):
marketing element of CityService, called Citgo.
Speaker 1 (06:02):
Hence Citgo, yeah, yeah, yeah, the epiphany, it
just hit.
Speaker 2 (06:06):
So Citgo, now part of 7-Eleven, a subsidiary of the
Southland Corporation, and I hada chance to leave the major oil
company and join them to do aturnaround on Citgo Petroleum,
which we did.
We were able to turn it fromlosing money to making money.
That's a positive.
(06:27):
That's a positive Returnshareholder value.
Exactly.
We then sold that subsidiary tothe government of Venezuela.
So Citgo today is a Venezuelanowned oil company.
Speaker 1 (06:41):
So I remember hearing that when there was some strife
with Venezuela a few years backand then there was a call to
boycott Citgo because it wasVenezuelan, so we sold Citgo to
the government of Venezuela butkept a supply agreement for the
stores, which was the originalreason for buying the company.
So 7-Eleven didn't always havepetroleum and gasoline.
Speaker 2 (07:06):
Back in the day they had just stores, and then in the
70s and 80s gasoline becamereally a big convenience item.
Speaker 1 (07:15):
Hence the convenience aspect of the convenience store
.
Right, exactly, and it was aperfect addition to a store that
already had everything that youwanted to buy conveniently
anyway.
Exactly, exactly, so what doesthe name 7-Eleven come?
Speaker 2 (07:28):
from.
It came from the back in the,trying to think probably the 60s
, I may not have that date right.
They had gone from being openvarious hours to.
They decided that from 7am to11pm would be more convenient.
(07:49):
Right, right.
Speaker 1 (07:51):
Okay, I got it.
It's unlike CVS, who reallydoesn't know its name.
I actually worked at CVS forquite a bit of time and it was
in the manual.
It said it was customer valueservice, customer value store.
Whatever we are, it's just CVSnow.
Speaker 2 (08:10):
I remember the first CVS in Massachusetts.
I remember they had the nameconsumer value store.
Speaker 1 (08:17):
And then it was customer value store.
They just kept playing with it.
Probably somebody's initials,I'm sure.
Yeah, probably Charlie, charlie, venezuelan.
So how long were you at7-Eleven?
21 years, so it was the full 21years.
Why did?
Speaker 2 (08:32):
you leave.
We sold the company to ourlargest licensee, 7-eleven Japan
, who had really perfected themodel.
They transformed the businesswhen they took on the license,
and if you've ever been to a7-Eleven in Japan, oh, not in.
Japan.
Oh yeah, you got to do it.
It's amazing.
Speaker 1 (08:52):
I got to go to Japan first.
Speaker 2 (08:53):
Yeah, it's a good start.
Speaker 1 (08:55):
I have a 10 year old daughter that wants to go to
Japan.
Speaker 2 (08:58):
Take her.
It's a great experience, greatlearning experience, and the
stores are phenomenal.
They have really usedtechnology to improve their
distribution systems andordering systems, so they
deliver to each store threetimes a day.
Speaker 1 (09:14):
That doesn't surprise me.
The Japanese operations mind.
When they're running businesses, they run it extremely
efficiently.
They practice kaizen littlesmall incremental changes for
monumental gains Exactly themost efficient company builders
there is.
Speaker 2 (09:29):
Exactly.
The best product they've eversold is that you can get fresh
sushi in a 7-Eleven store and Iknow the immediate reaction is
convenient store sushi.
Speaker 1 (09:38):
I've shied away from convenient store sushi, except
for hungover moments.
Speaker 2 (09:43):
You would not in Japan.
You'd be amazed that it isrestaurant quality probably
superior to most Japaneserestaurants here in the United
States, which is hard to imagine, but it's true.
Speaker 1 (09:54):
Well, that'll be on the mark when I do end up going
to Japan to eat some 7-Elevensushi.
Yeah, you gotta try it.
Speaker 2 (10:01):
It's literally world-class restaurant quality,
great stuff.
People in Japan use thosestores three times a day.
They go for breakfast, lunchand dinner.
So it is very convenient, Veryconvenient.
Speaker 1 (10:14):
So they've got the operations down perfectly and do
they own the licensees in theUS as well.
Speaker 2 (10:21):
They bought the entire company.
They were a licensee of7-Eleven for years and 7-Eleven
ran into some financial issuesin around 1991.
Did a leveraged buyout thatdidn't work so well and mine?
Speaker 1 (10:36):
You're a tootalitch.
Speaker 2 (10:37):
No, I was running the gasoline division.
The gasoline division actuallyperformed quite well, which
really gave me the opportunity,coming out of a restructuring,
to be the head of strategicplanning for the new entity.
That was a big career breakbecause I had gone from planning
to operations to running theirretail gasoline business had a
(11:00):
very good run.
We exceeded all of ourforecasts and we're making great
money for the company.
And then, coming out of therestructuring, they asked me to
be head of strategic planningfor the whole entity.
Going forward From there, theygave me the privilege of being
CFO, so I was able to thenfinance the plan that I was able
to help build.
(11:20):
And then from CFO they made meChief Operating Officer.
I was able to execute the plan.
Wow yeah, it was a greatopportunity.
Speaker 1 (11:29):
They promoted you throughout and which is
interesting to me as someone whofocuses on companies, putting
the right people in the rightseat.
And the first time I gotpromoted to being a manager, my
my manager had told me justbecause you're a great employee
doesn't make you a great manager.
You're gonna need to learn awhole new set of skills.
So for you to go from thepresident of one division to,
(11:51):
all of a sudden, the CFO, whichrequires a vast difference of
skills to now operations Anotherset of skills the fact that you
were able to commingle inbetween and see success is quite
impressive.
Speaker 2 (12:07):
You've just described my book because, literally,
education is freedom.
I had to learn in each of thosepositions I had to deal with
change Bankruptcy.
Most people had their head downoh, oh, it's me, company's
gonna go away.
I worked harder, had my head upwe'll get through this Deal
with change.
Have confidence.
Speaker 1 (12:28):
A bad rap.
Bankruptcy is a reset.
It is a tool that thegovernment allows you for being
part of the corporate programyou are allowed.
That's the plus and minuses ofdoing business is the fact that
you're going to be a corporationand get government protections
and you have to accept thebankruptcy rules.
(12:48):
There's a restructure inchapter 7.
Is restructuring not going outof business?
Speaker 2 (12:54):
Chapter 11, chapter 7 .
Speaker 1 (12:55):
Yeah, chapter 7 is actually going out of business.
7 is going out of business.
Chapter 11 we'll scrap that.
Yeah, chapter 11 isrestructuring and chapter 7 is
going out of business.
Chapter 11 is the bankruptcythat most people are aware of,
and big companies, littlecompanies alike, they all go
through it and it offersprotection.
Stay protections from yourvendors from just turning off
(13:17):
the lights.
Speaker 2 (13:18):
Now.
It's not a preferable thing.
No one wants to go through it,but it does allow you to reset
and companies can come out of itwith a new life and the ability
to go forward.
Speaker 1 (13:28):
Many do and, coming from the telecom industry and
very familiar with bankruptcyprotection and resets.
Speaker 2 (13:35):
Well, and that's what we did with blockbuster.
We took it in to be able todeal with debt in the 2008
financial collapse and we'reable to restructure the company.
Come out with this network asour strategic partner, our owner
of the business.
Speaker 1 (13:50):
Yeah, this network ended up buying blockbuster,
correct?
So you brought it up.
So we're gonna obviously talkabout the elephant in the room
blockbuster.
I have my own theories that Iwill share, but I want to see if
they line up.
Speaker 2 (14:02):
So does everyone know 90% of them are wrong.
But go ahead, let's hear yours.
Speaker 1 (14:06):
I'm not ready to go there yet because I think my
theory does paint a betterpicture of what transpired.
So you come in.
What year do you come intoblockbuster?
Came in 2007.
2007, okay.
So this is after the thechallenges.
Speaker 2 (14:26):
We'll say they had already had some pretty severe
challenges.
And, by the way, to put this tobed, because there's an active
rumor out there all over theinternet that blockbuster turned
down Netflix.
That happened in the year 2020,23 years ago.
Speaker 1 (14:42):
So let's jump ahead to that, because this is where
my theory is.
So in 2000, the CEO and theboard of blockbuster was
presented with an opportunity tobuy the red envelope company.
Okay, now.
Speaker 2 (14:54):
I don't know for sure how that transpired, but the
discussion did happen.
Speaker 1 (15:00):
The discussion happened and we can make some
guesses of what happened in thatclosed boardroom session or
whatnot.
They're not a threat.
They are a threat.
They'll go away, we'll squashthem like a bug, whatever right,
but they turned it down.
Now many would view that thatwas the worst decision
blockbuster could have made.
Speaker 2 (15:18):
Yeah, now, this is with the benefit of hindsight.
Yeah, hindsight, if you werethere if you were there in 2000
and you saw what Netflix had.
They had a good idea.
They had a great idea To doDVDs by mail.
But blockbuster actually had amore robust infrastructure to be
able to satisfy that same model.
(15:39):
They had distribution centers.
They could easily ship DVDs.
They had stores that you coulduse to exchange them for the one
you wanted.
So blockbuster actually had anadvantage in the year 2000.
Speaker 1 (15:54):
Strong advantage and being the bigger player Right.
I imagine they kind of laughedit off like we don't need this
unless we want to put the threadout of business, probably.
Speaker 2 (16:03):
I know I wasn't there , but I don't.
I think they took it seriously,but I don't think they could
see the, the value at the time,at the time, yeah, which
probably most of us would nothave.
Speaker 1 (16:13):
I.
So this is where my theory goesand I think by our discussion
we'll be able to put it to bed.
So this is 2000, which is waybefore streaming and now coming
from the telecom world.
Yeah, we didn't have theinternet connectivity, the
infrastructure, the networkcomponents to allow quality
(16:34):
streaming.
Speaker 2 (16:35):
Right, we were we're in Dawson environment right,
with the green screen and alittle blinker blinking cursor.
Speaker 1 (16:42):
So if, if I'm in blockbuster boardroom land and
I'm being presented with thisNetflix option, I see the
opportunity for us, asblockbuster, to grow without
them, but there's nothing elsethere, I'm turning it down.
If blockbuster had acquiredNetflix, it would have fizzled
(17:04):
out, burned, disappear andNetflix would not be that was a
good one actually.
Speaker 2 (17:13):
Yeah, yeah, thank you .
Speaker 1 (17:15):
Just go to the toilet with Netflix?
No, but if blockbuster hadacquired Netflix, it would not
be what it is today.
It's impossible because there'sprobably little chance that
blockbuster would have pivotedto streaming services.
Netflix had no choice but topivot to create the brand they
are Exactly, and that shouldhopefully put the argument to
(17:37):
bed.
Blockbuster would have donenothing with Netflix.
It would have just fizzled,gone away.
Speaker 2 (17:43):
And there you have it .
Well, I'll give you evenanother comparison Blockbuster
to also put to bed the idea thatBlockbuster management never
saw streaming coming.
Most people don't realize.
Well, they could, because weall knew back in the day that
the technology would be there.
We just didn't know when.
So Blockbuster actually had adeal that very few people know
(18:07):
about With Enron.
Oh yeah, yeah yeah, oh, okay, dotell, yeah, no.
And this is fascinating.
Think about it.
Enron saw this coming.
They had technology,Blockbuster had the brand and
the business.
Enron said let us build thestreaming future for you and
actually worked on it.
(18:27):
They partnered up.
Now take that example and theNetflix example and it was about
the same vintage and say, well,what if Blockbuster partnered
with Enron and went all in andbought them?
Or if they bought Blockbuster,where would they be today?
Speaker 1 (18:45):
Well, we know the fate of Enron.
Yeah, yeah exactly.
Speaker 2 (18:48):
So that but it would have caught up regardless.
It shows you that it's so easyto look back and say, well,
could or would it should have.
Speaker 1 (18:55):
Well, it also shows you that all roads for
Blockbuster led to potentiallynowhere.
Speaker 2 (19:01):
No, not true, Not true.
Now that's where I have todiffer.
The reason I joined in 2007 isthat I saw at 7-Eleven the power
of technology.
I had the advantage of ourJapanese licensee transforming
the convenience retail businesswith technology, and I saw that
(19:22):
same opportunity for Blockbuster.
Now it wasn't as easy as comingin saying we're gonna go
streaming tomorrow morningBecause, as you said, the
infrastructure wasn't there,customers weren't there.
Speaker 1 (19:33):
Yet we didn't know what we didn't know.
Speaker 2 (19:36):
Correct Sort of a time stamp this.
The iPhone was launched in 2007.
Ipad not till 2009.
So people had a hard time evenenvisioning watching movies on
their little little ebiby screen.
Speaker 1 (19:50):
That's right, we were getting used to the fact that
text was actually enjoyable andwe could take a photo from our
phone.
Speaker 2 (19:55):
Yeah, exactly, we were a blackbird using
blackbirds back in the day.
Speaker 1 (20:00):
Oh, there's another case, doug, yeah, exactly.
Speaker 2 (20:03):
We talked to Blackbird about partnering on an
iPad-like device.
So Blockbuster had theopportunity.
They had the brand.
Here's the way I looked at thebusiness Convenient access to
media entertainment.
They weren't renting DVDs.
Yes, they were for a window oftime.
But what Blockbuster reallyprovided the customer was
(20:24):
convenient access to mediaentertainment.
That demand wasn't goinganywhere.
Now, could they pivot and makethat transition?
Yes, so why didn't we?
That's your question for me.
Ha, ha ha.
Speaker 1 (20:40):
So why didn't?
You, I didn't yeah exactly Goodright on cue.
I love that.
Speaker 2 (20:46):
Because what everyone also forgets is that in the
year 2008,.
The whole world collapsed,lehman Brothers melted down.
Speaker 1 (20:56):
Yes, with a CEO with a very appropriate name.
Speaker 2 (20:59):
Yeah.
Speaker 1 (21:00):
Dickfold.
Ha ha ha, I love it.
You can't make that name up,can't?
Speaker 2 (21:05):
make that up, I know.
Speaker 1 (21:06):
It's an amazing story .
Speaker 2 (21:08):
But now, going back to 2008,.
By the third quarter,blockbuster had bought a
streaming video company.
Movie Link had rebranded itBlockbuster on demand.
We had 3,000 titles.
You can remember that, yes, Yep, new releases, something
Netflix didn't have.
We had the infrastructure thereready to go.
(21:31):
We had something called TotalAccess stores, kiosks, online or
by mail, and streaming.
Everybody forgets that.
So what happened?
Well, we also had a billiondollars debt.
Speaker 1 (21:45):
Ah, and that debt saddlebag.
Speaker 2 (21:48):
Where'd the debt come from?
Viacom spun the company out asa public company in 2004, and
put a billion dollars of debt onit when they did perfectly
reasonable.
Blockbuster was a cash flowmachine, so there was no reason
to worry about that debt, butfor the timing 2004,.
(22:10):
Five year term, 2009.
What no one knew is thefinancial markets in 2009 would
be collapsed when it came timeto refinance that debt.
Speaker 1 (22:21):
If you had known that , we would have had a very
different outcome, but Verydifferent the financial markets
Right.
Speaker 2 (22:26):
Could I have done anything differently?
Yes, when I joined the companyin 2007,.
My idea in joining and thereason I got to Blockbuster is I
was trying to take it privatePartner with PE, take it private
.
Do the transformation outsideof the glare of the quarter by
quarter public markets?
Speaker 1 (22:48):
Which, for those that aren't in the know, working at
or for a public company, is justdaunting.
Speaker 2 (22:53):
Very challenging.
Speaker 1 (22:54):
You are constantly rushing for every single quarter
, feeling some mounting pressureto perform and if you don't
perform well, your stock price.
Speaker 2 (23:04):
Right.
And when you have atransformation like going from
DVDs to digital, it's likedriving down the street at 70
miles an hour and changing thetire while the car's going down
the road.
Speaker 1 (23:14):
Perfect analogy.
I love that.
Speaker 2 (23:15):
That's what it is.
It's hard.
We had the opportunity to goprivate but and if we did, we
would have refinanced all thedebt in 2007,.
Never bad.
In my last, at the financialmarket collapse, we didn't wish
I had that decision to do over.
Speaker 1 (23:32):
Would that be a hindsight decision?
Exactly yeah.
So it didn't happen.
So we're going to set therecord straight here forever
yeah, Blockbuster wasn't goingto buy Netflix.
Even if they bought Netflix,Netflix would not be who they
are today.
They would.
You wouldn't know the name.
You would have remembered themnostalgically as the red little
(23:54):
envelope company.
Speaker 2 (23:55):
We probably would have screwed them up because we
had big company.
Speaker 1 (23:58):
Big company doesn't pivot the small company.
Integration issues, culturalmismatches, all the reason why
acquisitions fail constantly.
70% of acquisitions failbecause of cultural mismatches
and there's no way that thegiant would have gobbled up this
little tiny company and pivotedsuccess.
Probably not.
Speaker 2 (24:16):
Probably May have but chances are.
Speaker 1 (24:20):
That's not the reason why Blockbuster went under.
They went under because of thecrisis and the inability to
pivot fast enough, because of asaddlebag of debt Correct, just
like many other companies.
Speaker 2 (24:32):
It happens, but there's a huge lesson there.
The lesson is for all companiescash flow is your life flood.
Cash is king.
Cash is king.
And could I have done a betterjob of managing cash flow?
I tried.
That's why we were focused onthe stores, trying to improve
the stores.
So I was telling you at thetimetable third quarter of 2008,
(24:53):
.
I know I have to refinance thedebt we were really working on
cash flow.
Speaker 1 (24:58):
We doubled EBITDA and tripled net Earnings before
debt interest taxationamortization for anyone who
doesn't know, it's a fun termthat Sir get for cash flow.
Basically, yeah, it really ismeaningless in a private company
, although we seem to likethrowing the term around.
Speaker 2 (25:14):
Well, it's good in a private company because it
measures your ability to satisfyyour debt, but bottom line is
we dramatically improve theperformance of the company in
2008.
Head streaming had all theseother things you were poised for
acceleration.
Speaker 1 (25:27):
Poised for acceleration, yeah.
Speaker 2 (25:29):
Moody is actually the rating agency.
Standard reports of Moody'sgave us a two notch upgrade in
our debt rating.
That's huge.
That is huge.
That is huge, yeah, and thatall of this occurred in the
third quarter release for 2008.
But when Moody's gave us thatupgrade, Lehman had just
(25:51):
collapsed and they also gave us,unfortunately, an increase in
our probability of defaultrating.
Speaker 1 (26:00):
And that sends the stock into Tizzy.
Speaker 2 (26:03):
Shockwish yeah.
Speaker 1 (26:04):
And that's the other problem of a public company is
it's very easy to lose it alland be crushed.
Because investors get sheepish,they get scared.
Oh yeah, exactly, they freakout, and especially when there's
a financial collapse, exactly,everyone's pulling out of the
market.
Speaker 2 (26:21):
Fear, fear uncertainty, doubt, fun fact.
A chapter in my book about fear.
Yeah, because fear is a killerof so many companies.
Because employees are afraidthey quit, shut down, vendors
are afraid they collapse creditterms.
That's really, if you want toget right down to the weeds,
(26:42):
what happened to Blockbuster.
The studios went from 90 daysso we could buy a DVD for $15.
And then, over the next 90 days, rent it 20 times more than pay
for it.
Talk about a cash flow machine,right?
Speaker 1 (26:59):
Huge market.
Speaker 2 (26:59):
Yeah, but when the first studio said, because
Moody's now declared you a riskof default, we don't want to be
caught with an outstandingreceivable, so we're going to
take you to cash terms, and thenit was like a house of cards
the other studio's default.
Speaker 1 (27:17):
Cash flow again.
Speaker 2 (27:17):
you didn't have enough cash to keep it up $300
million of cash out of thebusiness in a week yeah, just
like that.
Speaker 1 (27:26):
So is that how Blockbuster worked?
Is that they would almost havea consignment with the studio,
More or less?
Speaker 2 (27:32):
yeah, because of the terms, credit terms, and it
wasn't really a consignment deal.
But the credit terms were sofavorable that there was never a
reason for Blockbuster to filebankruptcy, but for the debt.
And then, when the credit termsevaporated, the business model
collapsed.
Speaker 1 (27:50):
And the business model really.
I mean, you had a quick ROI Ifyou bought the DVD for $15, what
was a rental?
I don't recall, was it $3.99?
$3.
$3 to $5.
?
All right, so rent it, let'ssay, between five and seven
times and you have a completeROI.
Yeah, everything on your shelfis pure profit.
Speaker 2 (28:07):
Yeah, it was a beautiful business.
It was a beautiful business andthat's before late fees, which
the company eliminated before Igot there.
Speaker 1 (28:14):
Well, I bet the company loved late fees.
That late fee is just purebottom line profit.
Speaker 2 (28:19):
Yeah, it was $80 million of EBITDA cash flow.
Speaker 1 (28:23):
Yeah, that one, it was late fees.
Speaker 2 (28:25):
Yeah, just late fees.
So the customers were annoyedby it, understandably.
But the irony is Reed Hastingssaid he started Netflix because
he was annoyed over late fees.
But realistically, blockbustercould have just said well, do
DVDs by mail, no late fees, justlike Netflix.
Speaker 1 (28:47):
Well, that's where a great idea comes right.
You take someone else's issueand you can make it into an
advantage for yourself.
Speaker 2 (28:55):
But that was one of those management decisions that
I think hurt the company prettybadly, because they didn't get
what they thought was sales aregoing to respond immediately.
People would be thrilled in, nolate fees, so they'll all come
back to the store.
Speaker 1 (29:10):
I remember the ads, the marketing around the just
rented and just return itwhenever.
What do you mean?
Whatever Turn it whenever, nolate fees.
I think we all, in a nostalgicway, miss going with our family
to go pick out a VHS.
Smell of that popcorn and thecandy.
We miss that.
I would love to see that again.
(29:31):
And do you know?
I don't know if you've paidattention since, but do you know
when the last Blockbuster storehad closed?
Speaker 2 (29:36):
down.
Well, it's still open.
Bend Oregon.
Speaker 1 (29:39):
Yeah.
Speaker 2 (29:40):
Yeah, they're still open.
Speaker 1 (29:41):
Oh well, on Wikipedia they have her closed down in 19
.
I think she's.
Speaker 2 (29:46):
I'm pretty sure she's still there.
But it's a story of persistencebecause she was not willing to
accept they were going to closethe store.
Speaker 1 (29:56):
Netflix has a special on it.
They have a documentary yeahit's hysterical.
Which is amazing.
Speaker 2 (30:01):
So here's the question though, do you see,
oppenheimer?
Speaker 1 (30:03):
Yes, oppenheimer frustrated me.
Speaker 2 (30:06):
Yeah, frustrated me too.
But the thing I didn't knowabout Oppenheimer is I didn't
realize how much they believedthat this technology would bring
peace to the world, because itwas so devastating, yes, that
humans would not want mutualmass destruction, right.
Well, it didn't work out andended up being an arms race.
(30:26):
We all know what happened.
So the question is will AIpresent humanity with that same
opportunity to bring peace tothe world.
Speaker 1 (30:36):
I think we can come up with an answer here.
Speaker 2 (30:38):
Well, it's interesting because every
military friend I have says it'simpossible.
It's going to go to thestrongest military to use it to
weaponize it.
Here's my question the firsttime it gets out of control and
the first time machine learningactually dominates human beings,
(30:59):
will that be our wake-up callfor humanity?
No, well, I hope you're wrong.
Speaker 1 (31:05):
I hope I'm wrong too, but it's again.
We can play hindsight, armchairquarterback and all that.
We have too many examples wherehuman beings don't put up the
stop sign until the accidenthappens, and then sometimes it's
too late.
Speaker 2 (31:18):
Well, that's what I'm hoping.
If there's an accident, doesthat bring the world together to
say, hey, all right, guys, wehave to work together.
Speaker 1 (31:26):
I do see that it is going to be too big of a crutch
for too many people andeventually the machine, the AI,
will write code for itself, andthat's where the bad stuff
happens.
That's the Skynet.
Speaker 2 (31:40):
So here's literally why I wrote the book, because
what is the name of the book?
Thank you.
Speaker 1 (31:47):
Education is freedom.
Education is freedom.
I will subscribe to that onefor sure.
Speaker 2 (31:52):
Yeah, and it's a call to action for individuals to
take learning in their own hands, because there's no excuse
today, with the power of justexisting technology, you're
struggling with algebra, khanAcademy's free you put in the
time, you can learn anything youwant online.
That's the call to action tothe kids, but the call to action
to humanity, literally, is thatthe answer to all of this stuff
(32:18):
is ultimately educating theworld.
And this sounds cliche, but ifyou could replace bombs with
books, then you replaceterrorists with teachers.
I mean, I know that'sridiculously simple.
Yeah, it's very lofty and verypolyanis, but it's true in
(32:38):
essence that if we dial up theknowledge of humanity, think
about what we're doing today.
Conventional warfare is anacronym.
I mean, we're out there withtanks blowing each other up.
Speaker 1 (32:52):
It's like there's no lines anymore.
Speaker 2 (32:54):
There's no lines.
So is it possible to elevatethe overall knowledge of
humanity to the point that wecan get beyond this archaic way
of behaving and find othersolutions?
Now, I know that's crazy.
Speaker 1 (33:15):
I think it's a little grandiose just knowing that we
do have fundamentalist thinkingin other cultures, and I think
you're coming at it from anAmerican lens, where this is the
land of opportunity.
You could do anything, andanyone who laughs at that and
says bullshit, no, you could doanything you want to do if your
(33:38):
drive is in the right direction.
Speaker 2 (33:40):
Yes, exactly, but even worldwide, much of the
fundamentalism that we deal within the world stems from the
ability to control those whohave no future, they have no
education, they have no economicstatus.
So, and this is my question,can technology quickly enough
(34:04):
bring knowledge to the globe?
I mean worldwide?
There are more cell phones inthe continent of Africa than in
the United States, it's greaterpenetration, and that cell phone
is a portal to knowledge, toinformation.
So can we light up thoseportals and help people learn in
(34:26):
a way that's never beenexperienced by humanity?
Speaker 1 (34:29):
So what would the learn it?
So let's say you're in afundamental extremist culture,
and how could lighting up affectchange?
Speaker 2 (34:41):
Simple answer and again, this is too grandiose and
too naive that I believe this.
But thanks for the preface.
I have to say that.
But critical thinking goes allthe way back to the earliest
days of man and the Greekphilosophers and Plato, asking
(35:01):
why and challenging conventionalwisdom, whether it's
conventional religion or justconventional science or
conventional politics.
That critical thinking elementis something that we're not
practicing worldwide as much,Even here in the United States.
You see it happening Well wecome to our position.
Speaker 1 (35:25):
We get lazy Again, with the average 100, right,
this is not equating 100 to lazy, but because there are so many
people that just immediatelydoubt that they could be a
leader and entrepreneur,business owner, successful
person, they get lazy and fallprey to that.
Speaker 2 (35:44):
That becomes the doubt Right exactly.
Speaker 1 (35:47):
You know, I tell my kids all the time when you say
can't, you absolutely won't.
Exactly, you have the abilityto do anything.
Yes, there are lucky scenariosthat we can put ourselves in,
take ourselves in and out ofluck, you get lucky to an extent
.
You are lucky if you're borninto a specific family or
(36:07):
demographic or country orculture.
Yes, that is your one stroke ofluck that can set you up with
an easier or better hand.
But what you choose to do withthat is up to you.
There are plenty of superwealthy families that have super
wealthy babies from the startand those super wealthy babies
(36:28):
turn out to be pieces of garbageand live horrible lives.
You could say they were lucky,born in the family, or that is
what destroyed them.
You can say and we've had manyexamples of people that grew up
in the worst situations possibleabsentee mother, no father,
call it whatever you want andthey have risen to success.
(36:50):
So you create your own fortuneand if you allow yourself to say
I can't because, then youabsolutely won't.
Speaker 2 (36:57):
Exactly.
So, chairman of the America RedCross, bonnie McElven Hunter.
This amazing woman created pacecommunications.
She's been the longest runningchairman of the Red Cross ever.
Speaker 1 (37:08):
Oh, wow.
Speaker 2 (37:09):
Yes, she tells a story.
Her mom took her, she and herdaughter and her sister out in
the backyard and made them rightcan't on a piece of paper and
they buried it in a box.
Speaker 1 (37:19):
I might try that with my kids.
Yes, it's a great.
It's a cool story.
I love stuff like that.
Yes, I got it in the book.
Yeah, well, I'm absolutelygoing to read the book and I
will say this too you are notsponsoring this show.
No, I do not allow guests tosponsor their show or their
episode.
It's disingenuous to me.
Speaker 2 (37:36):
Well, and I'm not making money on this book.
Speaker 1 (37:38):
My objective is I'm not making money on this podcast
Look at that.
We're in the same boat.
Speaker 2 (37:43):
No, my objective is to get the word out, because I
really do believe that humanityis at the crossroads here.
But I'm more optimistic aboutthe future of humanity because I
do believe and I've seen thepower of technology to light
people up.
I'm going to give you a greatstory, front of mind Will Talley
(38:04):
.
I put him in the book and Willwas one of those kids.
Speaker 1 (38:09):
By the way, great name.
Speaker 2 (38:10):
Will Talley William.
Speaker 1 (38:12):
Talley, it sounds like he's very stately.
Speaker 2 (38:15):
He is Midwest Farm Boy by 6'5" Good, good kid.
He grew up wholesome Americanvalues, but he hated school.
He was like B minus C plusmaybe.
In grammar school he wasstruggling.
His mom was worried about him.
He kept talking to him Well,what do you like?
He was constantly playing videogames, mostly war games.
(38:39):
He was looking at YouTubevideos.
I was like, hey, will, don'tyou think you could use those
YouTube videos If you like,looking at World War II stuff,
to supplement your education?
History is all about lookingback Once you use YouTube videos
.
And he started doing that andhe got so excited that he didn't
(39:03):
have to learn history out of abook.
It lit him up.
He went through high school andended up with a 4-0 average.
I'm so proud of him.
I wrote a recommendation forhim to get into Harvard.
He's now a sophomore at Harvard.
He's going into his sophomoreyear.
Speaker 1 (39:22):
That's the alternative learning, almost
like a Montessori style learning.
Everyone's motivated bysomething else and you can learn
from almost anything if you'reagain willing to do it.
Speaker 2 (39:34):
That's the power of technology we can light up the
world and ignite their curiosityand their critical thinking,
all of those things that havelaid dormant for so many years.
We're clearly a pessimist.
Oh yeah, you can tell.
Speaker 1 (39:50):
You think there's such thing as humans being too
successful?
Speaker 2 (39:55):
Too successful.
Speaker 1 (39:58):
I'll preface it Every great civilization has crumbled
and burned, from the magical,mystical Atlantis to the Roman
Empire, the Byzantines, theOttomans, the Greeks.
They all collapse, many ofthose being democratic societies
.
Is there such thing where thepeople have too much control,
(40:20):
too much say, and we collapse?
Speaker 2 (40:25):
I hope not, but I do think.
Again, it depends on theevolution of those people.
I think what happens is theyfall prey to leadership using
those lowest common denominators, instilling fear, and then they
start to cannibalize fromwithin.
It happens, it's embarrassing,it infects from within.
(40:48):
You'd think we'd learn fromother civilizations that have
done exactly the same thing.
Speaker 1 (40:53):
That tells back to the AI conversation of why I
think you can recognize patterns.
I don't know how much faith Ihave in humanity to get this go
around right, I think.
Unfortunately, sometimes youneed to have the freight train
accident before you startlooking at safety.
Speaker 2 (41:12):
It's very likely that that will have to have that
catastrophic event.
Whatever it is, you know whatthe best thing to happen to
humanity could be An alien racevisiting the earth.
Speaker 1 (41:27):
Whoa pump the brakes, kids.
Let me show you how it's done.
You know what?
Speaker 2 (41:33):
I don't care what race you are, I don't care what
your religion.
We're all humans.
Come on, let's hang together.
Speaker 1 (41:37):
There's no extreme example here because we are in
New York City 9-11, which ishorrible and horrific,
especially as a New Yorker, buteverybody came together.
Everyone was flying a flag andproud.
Now we are so torn apart anddisjointed.
But it doesn't have to be andthat's the thing, we just all
need to figure it out.
Speaker 2 (41:58):
We all need to figure it out.
And if we can get back to thosefundamental skills, fundamental
things we all learn in grammarschool, we all need to figure
out how to get back to the rightplace.
How many conversations dopeople actually sit down and go
tell me why you feel that way?
Speaker 1 (42:16):
Let's talk, yeah, but unfortunately we live in a
black and white world.
If you don't like my footballteam, I don't like your face.
Where you live, football islife.
Speaker 2 (42:26):
But ironically that's not a democracy, because a
democracy is all about peoplecoming together and compromising
.
So maybe we need education onbeing democratic again, what we
kind of do and that's kind ofthe point I'm trying to make
that we all grew up flag waving,proud Americans, believing in
(42:47):
the democracy and democraticsystem, and yet we're not
behaving that way.
We're behaving like my way ofthe high-law.
I'm right, you're wrong.
Speaker 1 (42:56):
And the worst people of all, adults.
Adults, they act worse thanchildren, oh, the kids.
Speaker 2 (43:02):
that's why I've got a lot of hope in the next
generation, because they'relooking at us going.
You guys are crazy, they're thealiens?
Speaker 1 (43:08):
Yeah, Sure, sure you guys are nuts.
So let's get back to thebusiness world.
What do you think the mostvaluable lessons in education
are for a budding entrepreneur?
Speaker 2 (43:21):
I'm a big believer in the liberal arts approach
because at that age I don'tthink most of us know what we
want to be and the liberal artsgives you exposure to a more
classical education rather thanspecializing very early.
I know some kids want to beengineers.
Like you, in high school Mostof us don't really know what
(43:43):
they want to do.
I wanted to be a first.
I wanted to be a doctor.
I was a terrible doctor.
And then I wanted to be alawyer.
I was a terrible lawyer.
I actually had an intervention.
I had a professor undergrad.
He was a history professor, hadme in class for two years.
Where are you going to school,jim?
I told him I got into these twolaw schools and he's like no,
you can't, you'll be a terriblelawyer.
(44:05):
I've seen you in class but hesaid you got to go.
Promise me you'll get an MBA,even if you do a JD MBA.
Speaker 1 (44:11):
So was that the person that changed your life?
Yeah, what was his name?
Speaker 2 (44:15):
Father Lapamata.
He was a priest, yeah, a Jesuitpriest, lapamata, yeah.
And I mean here's a guy thatthank goodness he intervened and
I was a Holy Crossundergraduate and he jumped in
and said here's what you need todo.
So what brings you the most joy?
I think the most joy is beingable to share this idea that
(44:40):
anybody can do anything.
I've had some amazingopportunities, but the best
thing that can happen I had akid walk up to me one time in a
restaurant I was checking outthe sushi bar it has branded
Nata the 7-Eleven.
No, not Nata the 7-Eleven.
I wasn't in Japan Full circle.
We don't sell sushi here in theUnited States.
(45:02):
But he said you, mr Keys, Iguess, did you start the
Education and Freedom Foundation?
I was like, yeah, you guys, man, thank you.
He shook my hand.
It's like I'm the first kid inmy family to ever go to school.
He was at Southern MethodistUniversity at the time.
He was going to go off to medschool or something.
(45:22):
He was just grateful that wehad given him a jumpstart, made
him believe in himself.
And that kind of thing happensto you and it's like the best.
It's the best because yourealize you're making a
difference.
Even if it's one life, you'remaking a difference.
That checks the altruism bucket.
Speaker 1 (45:42):
That is phenomenal.
I love hearing stories likethat.
It's because you decided toinvest in a positive path and
this positive path yielded agreat life for you and paid
dividends for other people.
Speaker 2 (45:55):
Yeah, well, that's the hope.
That's the hope and I getcaught up a lot.
The lifestyle makes it looklike it's all about the money
Because, yeah, I fly my ownairplane.
It's a privilege.
I'm grateful every day for thatprivilege of being able to do
that.
I drive a nice car, but reallythe motivator for me is the
(46:19):
ability to experience life, todo things.
That's what freedom is allabout.
It's not having more money thanthe other guy.
I know a lot of very rich andhappy people.
Speaker 1 (46:30):
You and I are very, very similar.
After an exit, I had the moneyGreat, but I was very depressed.
Money buys you a whole bunch ofdon'ts Things you don't have to
do or worry about.
It gives you the ability tohave options, but it does not
fix emotional, mental issues.
It's cool to have nice things,but it doesn't bring purpose.
(46:54):
In fact, I know plenty of verywealthy people that are
miserable.
Speaker 2 (47:01):
Do you have a George Carlin's thing on stuff?
He does a whole thing aboutstuff.
That's why we have homes.
Oh, yes, because we have tohave a place for our stuff.
And then you get more stuff,and then you need a bigger house
for more stuff.
Speaker 1 (47:14):
He has a documentary on HBO.
Obviously he's no longer withus, so they have one.
If you were to replace some ofhis narratives with today's
people, it's all repetitive andit shows you.
Over the 60 years of his career, the message never changed and,
full circle, human beings neverchanged either.
(47:36):
It's very apropos today, and ifhe was alive today and still
doing his comedy, it would berelevant.
Year after year after year,decade after decade, he never
faded away.
So we are nearing the end ofour trail.
This is fun.
Speaker 2 (47:53):
See, that is why I do this.
Yeah, I confess I was a littleskeptical.
I was like we're going to dowhat?
We're going to go out and takea hike.
Speaker 1 (48:00):
Well, typically we've done these in warmer conditions
, but you were down for thewinter and I wanted to see how
it would go.
Little sniffly and runny nose.
No one slipped and tripped toobad, not over yet the sniffs are
going to be pretty pronounced.
That's fine.
We'll soften them withfiltering, but you see them.
Get me on camera.
I think I got a couple of thosein there.
(48:22):
Don't worry, you don't want toshake these gloves.
So do you have any partingwords of wisdom?
Speaker 2 (48:30):
Most important advice that I have and I get this
question a lot what would youtell your 17, 18 year old self?
And first thing I'd say is calmdown, it's going to be OK,
because we all worry too muchright, yeah.
And we are all victims of thatfear.
You know that, oh my gosh, I'mgoing to fail Imposter syndrome,
(48:51):
all that stuff.
So that's the first thing I'dsay.
But I have three things, andactually the origin of these
three things are kind of cool.
Happened in a dream.
Shortly after becoming CEO, Ihad this crazy dream Super
realistic, like a near deathexperience where you have the
bright light.
In the dream.
(49:12):
I was sent on these three tasksand I performed the tasks.
I didn't know if I was going tobe successful or not, but I did
each of the things I was toldand I was promised a gift at the
end.
And then I woke up and I waslike damn, where's my gift?
Come on, that's not fair.
You know those dreams.
You want to go back to sleep.
Speaker 1 (49:33):
I don't want to finish this.
You can't put yourself back inthere.
Speaker 2 (49:35):
No, no I want to get the gift.
And I started telling peopleabout this dream and, in
particular, I woke up my wife.
I was like hey, I had thisdream, I got to tell you about
it.
Speaker 1 (49:46):
And then she rolled over and said uh-huh, Crazy
dream.
Yeah, I don't want to hearabout that.
Careful about what you want totell me.
Speaker 2 (49:55):
But I wrote down three words Change, confidence
and clarity.
I shared those the next morningand she said has did my friends
, that's why you are where youare.
That is your gift dummy.
Speaker 1 (50:09):
Change, confidence and clarity.
Speaker 2 (50:11):
You've been able to your whole life, overcome
insurmountable things that arewhat other people would say make
you hopeless, whether it'sdivorce or parents or poverty,
or having a house condemned whenyou're a little kid and you
come home and see the red sign.
(50:31):
You've overcome all that stuff,but you've come out on the
other side with a very positiveattitude and you're able to
weather that storm and it'smaybe stronger so you can deal
with change as crazy as takingover a blockbuster and then
having the financial marketsmelt down.
You take it in stride, you dealwith it and then you have the
(50:54):
confidence somehow to believeyou can accomplish anything,
whatever you want to do.
And that confidence is backedup with preparation, because you
work your butt off.
You're able to be confidentbecause you know that you'll
tackle whatever it is that youhave to do.
And the third is clarity andthe ability to take really
(51:18):
complex things and make themsimple.
And so I have to do that,because I'm not that smart, so I
have to take complex problemsand make them simple.
Speaker 1 (51:29):
Well, I highly doubt you are not that smart, but I
think change, confidence andclarity will be the title of
your episode.
I might throw in blockbusterchange, confidence and clarity.
There you go.
Speaker 2 (51:40):
There you go, but it applies.
I could have bailed.
Very apropos, yeah, I couldhave bailed on blockbuster.
It wasn't my problem, I didn'tstart it.
I was there for a year and ahalf when it started to melt
down.
I could have bailed.
Speaker 1 (51:51):
Yeah, but your personality wouldn't allow that.
You can't admit failure.
Speaker 2 (51:54):
No Well, you never fail.
I use a Mandela quote I neverlose, I win or I learn.
That guy was in jail for 20years.
He didn't lose, he studied lawwhile he was there.
He could have died in prisonjust from depression, but no, he
studied, learned the law, cameout as president, and it's so
(52:17):
applicable to everybody.
It's really the reason behindthe book, because the power of
knowledge to turn the worstsituation into an opportunity is
something that too few peoplereally embrace.
Speaker 1 (52:33):
Well, Jim Keys, this was a blockbuster of a hike.
I absolutely enjoyed beingalongside you here in your story
.
You are a very positive humanand I love to surround myself
with positivity.
You are clearly very successful.
We have set the record straighton the Netflix dilemma and you
(52:54):
are inspiring the world.
Get his book.
Education is Freedom.
It's phenomenal.
I know I will be getting it andI will buy it too.
I actually have a copy for you.
I guess I'm not buying it, butotherwise.
Speaker 2 (53:09):
I would buy it.
I'll buy one too.
I need the sale.
Speaker 1 (53:12):
There you go.
This was a very inspirationaljourney.
I'm happy you said yes.
In fact, you were alsodemonstrating a core value of
mine, and that is to say yes toevery opportunity that aligns
with your purpose.
It is the reason why I'm heretoday.
It is the reason why you arehere today.
You say yes to opportunitieswithout even thinking about any
(53:34):
other answer.
Speaker 2 (53:35):
Burry a can in the box in the backyard.
Speaker 1 (53:40):
You have to do that with your kids.
I will bury my cants with mykids.
I absolutely love that.
So, jim Keys, thank you forhiking with us.
Speaker 2 (53:47):
Thank you, this was fun.
Speaker 1 (53:49):
Yes, my hands are frozen.
I didn't even have gloves Nexttime on, I Took a Hike.
We take one of the mostinspirational life purpose
journeys with Scott McGregor,ceo of Something New, author of
the Standing O Series and thefounder of the Outlier Project.
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Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.