#171: Chuck Feeney (The Billionaire who gave all of his money away)

What I learned from reading The Billionaire Who Wasn't: How Chuck Feeney Secretly Made and Gave Away a Fortune by Conor O'Clery. ---- He celebrated having divested himself personally of the vast wealth with which fate and his genius for making money had burdened him. [0:01] Feeney was already showing a trait that would assert itself throughout his life: thinking big and aiming to achieve the best result, even if it seemed unattainable. [3:27] I all of a sudden realized, shit, you can sell this to anybody, anywhere. [12:45] Feeney believed that there could be more lucrative opportunities in the less  crowded Pacific. [21:53] Chuck lived out of his briefcase. Everything was connected with business. We did a lot of screwy things. I became part of what he called his ‘teen  age frontier’ approach to business, because he surrounded himself with smart college youngsters, mostly single and aggressive ‘conquerors of the world.’ I was the oldest, always the damper, saying to him, "Are you out of your mind?" [25:44] We hadn’t spent any time on corporate structuring or anything like that, we were just simply busy selling cars, duty — free liquor, making the cash, putting the cash in the bank, cash in, and cash out. [28:06] They were on the verge of going bankrupt, perhaps already were. Feeney and Miller were almost back where they started. They could perhaps boost the cash flow from the duty   free shops in Hong Kong and Hawaii to clear off the debts. Feeney had moments of despair. “Of course. It goes with the territory. But there wasn’t much we could do. It was something we had started, and we thought we were going to make a million dollars out of it. We had no choice but to salvage the company or go over the cliff.” [31:21] The duty   free shops began to make substantial profits, the owners agreed to take 90 percent of the dividends in cash, a practice that would continue for a quarter of a century. [44:54] Paradoxically, while Feeney became more frugal, he was pushing himself ever harder to build up the business that was making him even richer. [48:26] He brings a focus on business that I hadn’t experienced before. If something doesn’t work, he has four or so different thoughts. He has a multifaceted way of looking at business. He is detail oriented in his approach. [48:51] His definition of success was not having all the money one desired, but being able to raise a happy, healthy family. “There has to be a balance in life. A balance of business, family, and the opportunity to learn and teach." [49:41] They were offering to pay the State of Hawaii some $2 million every three days, for the next five years, just for the right to run a couple of stores. [58:38] What only the four owners knew was that during that period (1978–1988), they had received cash dividends of $867 million, of which Chuck Feeney had got $334 million. [1:00:53] A new divorce settlement was reached that gave Danielle an additional $60 million. Feeney insisted that Danielle get all the family homes, in Paris, London, the south of France, Connecticut, Hawaii, and New York. He took nothing himself from the family property. [1:03:33] Nobody ever put a penny in the business. We took out $ 8 billion or whatever it was. Nobody is that smart. You have just got to have a lot of things going your way. [1:07:56] ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

  Chuck Feeney felt a profound sense of relief. He had flown into the Bahamas that morning, an extremely rich man. Now he was flying out with little more to his name than when he had started out on his various business ventures three decades earlier. He celebrated having divested himself personally of the vast wealth with which fate and his genius for making money had burdened him. It was all done with the utmost secrecy. Few outside the small group that gathered that day in the Bahamas would know what had taken place for a long time to come. Four years later, Forbes magazine listed Feeney as the 23rd richest American alive, declaring him to be a billionaire with $1.3 billion.

• 0:43David Senra?

  But Forbes had got it wrong, and would continue to repeat this mistake for many years afterward. Chuck Feeney had gotten rid of it all. He was the billionaire who wasn't. That was an excerpt from the book that I'm going to talk to you about today, which is The Billionaire Who Wasn't: How Chuck Feeney Secretly Made and Gave Away a Fortune, and it was written by Conor O'Clery. This is another book that I did not, I wasn't aware of. It was actually recommended to me by a listener. Before I read the book, I actually watched a documentary, it's available on YouTube, about Chuck Feeney. And there's a few notes that I wrote down that I just want to tell you before we jump into the book, because I think watching the documentary helped me understand him, watching the documentary before reading the book actually helped me understand who he was.

• 1:27David Senra?

  It was very, he may be the most unique person I've ever studied on Founders. He's a very complex and confusing person. Here's a few quotes from the documentary about, from people that knew him, or know him, he's still alive to this day. So it says, "I can't say I ever encountered such an extraordinary individual." One person described him in one word: complex. Another description: "He wanted to play fair, but he wanted to play rough," or, excuse me, "tough." Another one-word description: odd. This one was really great. "A conversation with Chuck Feeney is unlike any conversation you'll have with anyone on earth." Another one word description. Paradoxical, inspiring.

• 2:11David Senra?

  Chuck Feeney is a totally one-off. He will know more about you in 20 minutes than you will ever know about him. He's a type A personality. He walk quickly, talk quickly, and work incessantly. Okay, so let's jump into the book. The vast majority of my highlights, I would say 95% of the highlights I made in this book, have to do with how he built his business. I found that the most interesting. This business is going to produce billions and billions and billions. It's a private company. Before he sells it to LVMH, it's going to produce billions and billions in cash for the partners. But there's a few stories or anecdotes from his early life that gives us an insight into how he thought that I thought was interesting. So he comes from a very, like a working-class New Jersey background.

• 2:55David Senra?

  He's very uncomfortable. The reason people describe him as paradox is because he was very gifted at making money, but he was very uncomfortable with keeping money. And so, at this point, the story I'm about to tell you right now is, he's just graduating high school. He decides to shoot, to aim really high, even though no one in his family has gone to college before. He's like, "I want to go to Cornell. I want to go to the Ivy League." He didn't think, what was interesting, the reason I'm bringing this to your attention, is because he didn't think he'd get into Cornell, but he tried anyways. So it says, "The letter of acceptance was a major event for the Feeney's. No one in the family had ever been to a university, but Feeney was already showing a trait that would assert itself throughout his life. Thinking big and aiming to achieve the best result, even if it seemed unattainable." So that's very important.

• 3:40David Senra?

  After he graduates college, he's with a group of friends. They're traveling in the United States. He has no idea what he's going to do in his life. And this is just a short sentence, but really, the way to think about this is that he's always, he was always looking for an edge while others slept. And so, this is a friend of his, they were all living in this little apartment at the time together, and this is what his friend remembers. He says, "The three of us would sleep in, but Chuck would go off to summer school in the morning to take lessons in Russian." So he winds up serving in the military. He stays over in Europe. And at this time, he's hitchhiking. This is another example of the way he just thinks very differently than most people. He's hitchhiking in France and he realizes the power of differentiation. So there's a ton of hitchhikers all over Europe at this time.

• 4:25David Senra?

  You know, they're holding up signs saying, hey, you know, I'm going to Paris. I'm going to Munich. I'm going essentially advertising where they want you to take them. Now, if you haven't listened to last week's podcast, I highly recommend you do because I can't stop thinking about all the lessons Claude Hopkins taught, but it's specifically his idea that you always have to start with service. I think that that book that he wrote was a masterclass in what incentivizes and what motivates humans. And so in his advertising, he always starts with service. We're going to see the same thing, like, we're going to see the same lessons that Claude Hopkins applied in his life, writing advertising for companies and everybody else, that Chuck is applying to get a ride.

• 5:08David Senra?

  Okay, so this is again, a very short lesson on differentiation. Getting rides was difficult as there were so many people on the roads, holding up handwritten signs to show their destination. So Chuck does something different. He displayed a notice in large letters saying, "English conversations offered." He had no trouble getting a lift after that. Okay, so at this point in his life, he's 26 years old. He's living, he's living in France. He's actually running a summer camp for American kids, has no idea what he wants to do with his life. And this is where an opportunity pops up. This is the opportunity, the kernel of the idea that is going to, over the course of about two decades, make him billions and billions of dollars. So it says, "One night in a bar, he met Bob Edmonds, who was trying to start a business

• 5:52David Senra?

  selling duty-free liquor to American sailors at ports around the Mediterranean. He asked Feeny to help him. The US Navy did not allow the consumption of alcohol onboard, but Edmonds had established that sailors could buy up to five bottles of liquor duty-free and have them shipped as unaccompanied baggage to their home port. It could be a big market. There were 50 ships in the Mediterranean and the crews were rotated three times a year." This is the value proposition for the customer. Why would, why, why can the business grow so quickly? Because the value that the customer gets is immediately apparent to them. And it says, "The savings for the military personnel were huge.

• 6:35David Senra?

  A five-pack bought duty-free in Europe cost $10, while the same five bottles in the United States would cost over 30." It's also important to note, as we get going into the story, the reason that Feeney doesn't have a lot of money. His partner, they may have a couple thousand dollars to their names at this point. But something to keep in mind about the business is there's no need for capital. They did not have to pay for the merchandise in advance. Essentially, they're just drop shipping everything. So it says, let's go back to this conversation with Bob, though. We're not there yet. "Forty ships are coming in," he told Feeney. "I can only see 20. I'm looking for a guy that can see the other 20." "What do you mean?" asked Feeney. "Go and talk to them about buying booze." So Feeney's successful almost immediately. He's not going to work with Bob very long.

• 7:20David Senra?

  He's going to wind up trying to do this on his own. He travels to Barcelona and he runs into somebody that also went to Cornell. And this is going to be his long-term partner. And this is Robert Warren Miller. Bob, everybody calls him Bob Miller. And it says, "Miller recognized the wiry, blue-eyed American immediately. 'Feeney,' he said, 'what are you doing here?' 'What are you doing here?' replied Chuck. That casual exchange marked the start of one of the most profitable partnerships in international business history." That is a hell of a sentence, and it's probably true. "When Miller finished his shift that day, he and Feeney went out to dinner. Miller was already bored working in the hotel. They decided to throw their lot in together and try to make money from doing business with the US fleet.

• 8:05David Senra?

  Miller had already gotten a glimpse of duty-free rackets that were common in post-war Europe. He told Feeney about a Hong Kong priest living in Barcelona who changed US dollars at black-market rates." So one of the most interesting parts, and I'd say the vast majority of the book. Maybe 60% of the book is all about the charity work that he does later on. I don't have, I'm excluding most of that from what I want to talk to you about today because I found the building of the business to be most more interesting. But what I do like about reading this book is it's like it's full of international intrigue. Like this business that they set up, it's all over the world, it's in tax havens, they're running across, it's almost like it's borderline illegal. And so there's this idea that you're going to run into a priest from Hong Kong living

• 8:48David Senra?

  in Barcelona, changing US dollars at black markets, which is funny to me. So anyways, they start on Barcelona and they don't stay there very long. They're going to travel all over the world. They do not stay in many places very long. So this is the very beginning of their business. Feeney and Miller started taking orders for liquor from US naval personnel. They started driving or taking trains to ports all along the Mediterranean. So they're going after wherever the ships are, they're going to go there. They would not see each other for weeks, then they would meet back up, agree on what to do next, and go off in different directions. They found, and now there's a lot of, you're going to see a lot of the playbook that he's running when his business is just relegated to selling liquor to ships.

• 9:32David Senra?

  He's going to use that this same, a lot of these same ideas in different manifestations because he's eventually going to build this gigantic global retail network. And so one of that is like, how do you get, like, how do you get distribution? How do you get customers to know that you exist? And so they call the people that give them information, "bird dogs." Okay, so this is a little bit about that. They found bird dogs onboard the ships to whom they promised commission for getting sailors to sign up for five packs. Now, this is also gives insight into Feeney's really unique mind. He's not, they say, working with him, he did a lot by like instinct and just, he calls it mulling. He would just think about things and try to really go with whatever he felt bad, like felt the best opportunity was.

• 10:16David Senra?

  And a lot of that was just making sure that he had the flexibility to take the best path forward. Now, he's going to need that because this is going to work for a while, they're going to make a good amount of money, until others start seeing the same opportunity. Just like once Bob knew it, Bob Edmonds knew it, well, then he told it to Chuck. Chuck tells it to Bob Miller. And so this is going to go on and on. So it says, "The booze business had become very competitive, and the two looked for other things to sell. They got ideas for expanding their inventory. They started adding items such as perfume, cameras, toy trains, and transistor radios." The orders and the money piled up. Feeney boasted to Miller that they were on their way to making a million dollars. They called themselves the Young Turks. And so that's one of the wild things to think about. Think about it, right now, they're selling just to people in the military.

• 11:01David Senra?

  They're just selling liquor. They're excited about having the opportunity to make a million dollars. This is a business that by the time, but if you take out all the dividends that they take out for the four partners, Miller and Feeney being the major partners, they owned almost 40% of the company each. And the sale to Louis Vuitton, Moet Hennessy, they're going to pull out about $8 billion out of this company. This is a wild, wild story. I think you're gonna like it. Okay, so let me, we're not there, let me go ahead and tell you what I found interesting. It's like, why is this all working? So in 1950s America, there's a boom going on. So Americans at the time had a lot of disposable income. They liked to drink, so they're spending a lot of that on liquor.

• 11:43David Senra?

  And this is where Chuck realizes that he doesn't have to only sell to the military. And there's a couple of different points in his life where he realizes, wait a minute, I am artificially constraining my market here. Like, this market is a lot bigger than I think anybody actually knows. So this is where he comes up with an idea to expand his market. A lot of this is because he does, he's constantly sourcing information. He reads, he talks to people. And he realizes, okay, there's a loophole in the duty-free that applies to military, right? As just a benefit to being in the military and serving the country. But it also applies to people living in 15 specific states back in the United States. And a lot of these Americans from these 15 states, and other states, obviously, are traveling to Europe at this time.

• 12:27David Senra?

  And another thing that's helping him is that their television advertising is in its infancy at this point. And it's, there's a lot of ads for liquor, to cocktails, stuff like that. So it's really pushing up the demand for liquor. So it says Chuck Feeney discovered one day that these vacationers could buy duty-free booze abroad and bring it home, as long as they resided in one of 15 American states. They were permitted, this is a loophole, right? They were permitted by US Customs to import a five-pack of liquor, once every 31 days, without paying any duty. "I all of a sudden realized, shit, you can sell this to anybody, anywhere," said Feeney. "It didn't matter where you bought it, or where you shipped it from." That's also another important point. He could ship it from anywhere that was convenient for him.

• 13:11David Senra?

  It didn't have, like, let's say that the tourist was in Italy, didn't have to come from Italy. He could ship it from Geneva, he could ship it from Hong Kong, ship it from Canada, Mexico. So he builds this gigantic network. It's really, really fascinating. It didn't matter where you bought it or where you shipped it from, as long as you declared it when you got back to the United States. Feeney printed up tens of thousands of brochures to tell American tourists traveling in Europe that they could buy duty-free liquor from Tourist International. That is the name of the company, the very, the beginning, the incarnation of this company that Miller and Feeney are going to operate. They are going to ditch this later on, and I'm going to tell you why and how that came about. So they could buy duty-free liquor from Tourist International and have it shipped to their doorstep. And why are they doing it? Same reason that the people on board are doing it. A five-pack, this is just one example,

• 13:55David Senra?

  a five-pack of Seagram's VO would cost $47.75 in New York, but it could be bought from Tourist International's for $22. So quite a bit of saving, over 50% there. At this time, Feeney feels like he's stumbled onto this great idea. Then one day, he's shocked, right? He finds this beautiful, beautifully printed brochure that is advertising, it's not selling liquor, but it's advertising a bunch of other duty-free merchandise to American vacationers in Europe. So he's like, oh, wow, I gotta go meet these guys, maybe I can do a deal with them. And this is what he says. Feeney believed this company was way ahead of the game. He thought, now, this is the name of the company, this is the company,

• 14:40David Senra?

  he's going to buy this company, I'm not going to bury the lead here, and this company's eventually going to make him a billionaire, but not in its present incarnation. They actually go bankrupt and make a series of mistakes. So let's get into that now. Feeney believed this company was way ahead of the game. He thought they might agree to insert his liquor brochures into the next catalog if they weren't selling booze themselves. So he calls them up. He says, "He was surprised when the manager answered the telephone himself and invited him to come over right away." Duty-Free Shoppers, that's the name of the company, that's the name, that's the name of, it's going to be the name of Feeney's company moving forward. We're a few years away from that, though. Duty-Free Shoppers was a brainchild of Stuart Damon. He was a US Navy exchange officer who'd been based in Naples, Italy. Its goal was to sell duty-free goods to American tourists abroad.

• 15:22David Senra?

  He and his partner Harry Adler had persuaded investors to put up $95,000 and they arranged for manufacturers to package and ship their products. So they're drop shipping too. They printed half a million catalogs and opened an office in Geneva, Switzerland to process what they expected would be an avalanche of orders. Only a trickle came in. On the day Feeney turned up, Adler was paying overdue bills and clearing out his desk. It was his last day of business. Not knowing the dire straits of the company, Feeney told him that he thought this idea was tremendous and was surely very successful and proposed to Adler that if they inserted his liquor brochures in their next catalog,

• 16:01David Senra?

  and we're going to get to the huge mistake that Adler and Damon had made in one second. So it says, if they inserted his liquor brochures in the next catalog, he would give them a commission on all liquor orders that resulted. And this is what Adler said. "The irony of it all. He was a fellow who thought that the idea could not fail and was coming to us to help him distribute his cockamamie flyers. I really had no choice but to be honest. Dear friend, I said, our distribution was a huge, one-time gamble." That's the mistake right there. "And it is at this time a dismal failure." They raised money on printing all their brochures and mailing them out. They used all the money on that one shot.

• 16:45David Senra?

  And they just assumed that, again, I don't even know if they had any experience running businesses before, whatever the case was. They're like, okay, well, sure it's going to work. And as the author just said, the sales trickled in. So now they're closing up shop. Feeney was visibly shocked. They also, two different approaches. I didn't even think about this when I read this, but now I'm just rereading it for the second time, thinking about what... So Feeney, his partners, started with no money, but they started distribution first. Okay, well, we know that, Feeney at least served in the military. I don't think Miller did. Okay, so I know how to get on ships. I know how to talk to sailors. I know, you know, what's the chance? I just go over there and I start with sales, right? We know that I can get distribution, or excuse me, I can get product easily, but I need to solve distribution first. These guys did it in reverse.

• 17:30David Senra?

  They just assumed mailing out catalogs was going to be good enough for distribution. It's very interesting. All right, go back to this. So he says, Feeney was visibly shocked, but not... But not at a loss for words. He spoke very fast, asking what is to become of this company, these offices, and what the orders that were still in the pipeline. Feeney then pulled out a pen and started making copious notes. Feeney was convinced that the principles sound and that the company could still survive and thrive with proper marketing, which they failed at, right? Feeney made an offer for up to $10,000 of the company's stock. So now he's going to own the limited assets and the name. He's not going to use that name. I think we're like four years away from when he actually is going to switch over and switch not only the name of the company, but what the company does. And I'll

• 18:15David Senra?

  get there in a minute. A little bit about his personality that I thought was very, very interesting. Feeney came and went. He was always walking fast. He was forever thinking of new ideas. He used to order food and when it arrived, it was hoofed down and we would go. I learned to eat fast. He was always talking, talking, talking. His mind was like Speedy Gonzales. He was always racing. I just always find this interesting. I thought it was hilarious. It reminded me when I read that section about, when I read that biography, Mornings on Horseback, about Teddy Roosevelt, that he was living at the time in a boarding house. And his friend that was living in the boarding house with him says he's always knew who was coming through the door because before you'd hear the door open and before the door shut, Teddy would race up the stairs. He wouldn't walk. He'd be running everywhere.

• 18:57David Senra?

  He fed a lot of life into 60 short years. Okay, so now let's go back to what Feeney Miller is still selling directly to, on ships. And this is gonna, this reminded me of an insight that Jeff Bezos had. I'll tell you how I tie this together in a second. When Feeney and Miller were collecting orders to obtain onboard ships, they found themselves being asked if they were the guys who sold cars. They weren't, but they soon were. They discovered that American service personnel abroad also had the right to buy cars duty free, and some rival salesmen had already got in on the act. Miller and Feeney picked up brochures from car showrooms and brought them onboard the ships. They found that selling cars was just like selling booze. I remember that part. They took a deposit, paid in advance

• 19:42David Senra?

  to the car dealer, and ordered the car shipped to the customer's home port. Once they became known as the guys who sold cars, they were overwhelmed with orders. So- This is something I forgot. I read Invent and Wander. I think it's like maybe Founder's Number 155, something like that. And it's the collected writings of Jeff Bezos. And I had forgotten this. Like, right at the very beginning of Amazon, Jeff Bezos started emailing. He emailed 1,000 of the early Amazon customers. And he asked what else they'd like to buy. And one of them replied and said, "I really wish, I need windshield wiper blades. I really wish that you would sell windshield wiper blades." And Jeff talks about it. He's like, "When I got that email, I realized we can sell anything this way. It doesn't just have to be books." And so we're seeing Feeny realize, "Okay, wait a minute.

• 20:28David Senra?

  I'm trying to sell you liquor for $10 or $20. You're willing to buy a car that's a couple thousand dollars? Like, I could sell anything this way." And, oh, let me tell you a little bit about, this is, it's very, very exciting. Like, the early days of a company, especially when it's a group of young people. And really, they're at the right place at the right time with the right set of skills. And he hires, Chuck and Bob hire, people that are very similar to themselves. So it says, "Chuck and his team were aggressive, self-confident, and borderline legal. They enjoyed a great sense of camaraderie." So one of the saddest parts about this story is this camaraderie, as we've seen over and over and over again. The more money you make, the, it seems to just, it eliminates the bonds between coworkers and early workers in many cases.

• 21:14David Senra?

  And they become, I wouldn't say enemies, but they have no relationship later on. It's one of the, you know, the saddest parts of this story. But it says, "At this part, they're aggressive, self-confident, borderline legal, and they're having a great sense of camaraderie. The new age of affluence in the United States meant that their American customers had disposable cash and money rolled in. They were in the right place at the right time. The key to their success was that they did not have to maintain inventories. They sold liquor and cars, neither of which required a dollar upfront. And the business was offshore, which meant that they did not have to pay US taxes." Okay, so they're doing well for a while. This is happening over several years. And what's about to occur, though, is a very important insight for all of us to remember. And they're realizing...

• 21:59David Senra?

  In general, it's very, it's more useful to go where it's less crowded. Right? So their business is slowly going to be whittled away on both fronts, the liquor and the car business by competition. So now they have two, two different companies. It says Cars International and Taurus International. We're facing even more stiff competition in Europe. So this is all happening in Europe at the time. Salesmen flogging everything from cars to perfume and alcohol were elbowing each other out, out of the way to get onto the US ships. Feeney believed this is, this insight that he has is what's going to make them billions of dollars. Okay? Feeney believed that there could be more lucrative, lucrative opportunities in the less crowded Pacific.

• 22:41David Senra?

  So his idea is like, why don't we take this duty free? We know people like buying duty free things. Right? Let's go to the Pacific. Let's go to these airports and let's bid. All the airports would, would give exclusive, you could bid on exclusive contracts. Right? So you're not going to have 15 duty free sellers in an airport. Usually it's one. And so at the time Honolulu in Hawaii is expanding their airport. Chuck decides, hey, we're going to bid for this duty free contract. And this is a, going to be a very slow road to growth. It starts out very slow, then accelerates very fastly, very quickly. But this is going to save his company leader down the road. And what is helping, what's going to help the business grow is some things that are out of his control. Like at the point, he's going to build his business off of Japanese tourists. Right?

• 23:26David Senra?

  And they're flying into Hawaii. And what helped, one of the, one of the things that helped their business grow was that Boeing starts manufacturing the 707 and they start flying that into Hawaii. The prev, I don't remember the, the model plane that, that flew previously into Hawaii, but the Boeing 707 essentially doubles the amount of passengers per flight, but it doesn't start out like that. So it says the bid guaranteed to pay Honolulu Airport $78,000 for five years of the duty free concession. So this is going, they have to renew, these bids are usually, you know, four years, five years, 10 years. They vary in length, but only one person gets the bid. So it's set, this is, you know, I'm not going to bury the point here. They're paying $78,000 for five years.

• 24:09David Senra?

  Eventually, they they'll pay for this same airport. $2 million every five days just to have the right to sell there. I think I got the number right. I have highlights in them later, but I'm pretty sure it was $2 million in five, five years. For $2 million every five years. It is, it is, it's wild what's about to happen. Now, we're not there yet. This is May 1962 that they're doing. It was a huge sum for a tiny retail space in the new terminal. But Feeny and Miller were gambling on the duty-free business picking up as tourism increased. And it's so, they're so lucky they did this because their other businesses is gonna go, the other two businesses that are happening in Europe, they're gonna have to retreat. They're gonna go out of business. We're not there yet. So it's, and it, oh, let me read my notes to you, though, because this is a very important point. They didn't know how large this business would turn out to be.

• 24:54David Senra?

  They had no idea. At the time, they're having, there's two airports. So it says, "At the time, the two airport duty-free concessions were a sideline, sideline businesses that might or might not make money. They stocked the duty-free shops and appointed managers, but travel in the Pacific was in its infancy, and the tiny stores did little business when they opened. Selling cars to the military and liquor to American tourists were still the big money to be made. They were, however, prepared to take chances with whatever opportunities arose." So as the years go on, there's more and more competitors are coming in, and the profits are gonna keep decreasing. "We didn't realize when we started this five, five-bottle pack business that we didn't have any exclusivity on it.

• 25:37David Senra?

  And in no time, there were 15 other companies trying to do the same as what we were doing," said Feeny. This is a description of the early days of the company. "Chuck lived out of his briefcase. Everything was connected with business. We did a lot of screwy things. I became part of what, what he called his teenage frontier approach to business. Chuck surrounded himself with smart college youngsters, mostly single and aggressive. They call them aggressive conquerors of the world. I was the oldest of his cowboys, and I was always dampening, I was always putting the damper on him, saying to him, 'Are you out of your mind?'" But it was a very exciting chapter in my life. Feeny was traveling around so much that he had no permanent address.

• 26:18David Senra?

  Well, let me read this quote to you first. "I didn't have a domicile at that stage. It would have been superfluous," he recalled. He really never stops living like this. He kind of is just a wanderer, even when he's very wealthy and even after he gives all his money away. He doesn't really stay in any place for very long. So I need to get to the point where they're running into problems. So they're making a good amount of money. Even as competitors come in, obviously, the numbers are going to drop in a little bit and I'll share that with you. But this is really wild. They're all young, they don't know what they're doing, there's money coming in, coming out. Essentially, what I'm telling you is they have no cash control. And it was interesting, as I read this, I was like, wow, this reminds me of the early days of GM.

• 26:59David Senra?

  Because, you know, money, there was, I think, only two profitable companies, car companies in GM. I think it was Cadillac and Buick. And so they would have to constantly take money from Buick and pay it over here and send it over here. And it was just very, you just can't believe that one of the most, one of the largest and most successful companies of all time started out that way. But it did. And so essentially, we're going to see on a small, much smaller scale, Chuck's company is doing the same thing. And this is going to get, they're going to become almost bankrupt. "The company was booming but was chronically short of cash. We ain't got no money, boys. Where's the money? There were severe problems in the auto sales division. They were taking deposits from service personnel and using that money to pay for expenses and car deliveries. The directors were stunned.

• 27:43David Senra?

  They thought they had an excess of funds and that it was just moving around the company network. They decided to slash costs and to figure out what was going on. We had no idea what we were doing financially. If an office was open somewhere, whoever had money sent the money. It was crazy. There was no accounting. We sent money to Hong Kong, or Hong Kong sent money to Canada, but there was no tying it together. With the business expanding so rapidly, they hadn't paid enough attention to bookkeeping. We hadn't spent any time on corporate structuring or anything like that. We were just simply busy selling cars, liquor, making cash, putting the cash in the bank, cash in and cash out." And this was, the reason I thought it was so humorous. I was like, wow, that sounds like a lot like GM. This is how they solved the problem. They passed around themselves Alfred P.

• 28:28David Senra?

  Sloan's 1963 bestseller, My Years with General Motors. I read that book. That book is on founders number 122. It's one of the most influential books, especially in America at this time. Let's say post 60s, 70s, just a ton of founders and managers that read that book and influenced, it really influenced a lot of the way large companies operate to this day. But he says, so they passed around this book in which Sloan attributed his success in running GM to decentralized management and financial controls. Tourist Internationals had the former, but not the latter. So they had decentralized management, but they had no financial controls. And then you combine this, all these things are happening at the same time. This is going to lead them onto the precipice of bankruptcy. Okay.

• 29:10David Senra?

  One of their problems was that the car business, and this is, you know, it's very easy for anybody to sell duty-free liquor, right? But maybe you could say, okay, I could carve out a niche with the car, like selling cars. They're higher ticket items. We might be able to make, you know, maybe not the higher profit margins, but more sales per order, right? Not for long. The US military is going to do a deal with car manufacturers. And then Feeney realizes, I can't compete, I can't compete with this. And so we see this. One of the problems was that the car business was now coming up against serious competition from the US military. They gave showroom space to three American car manufacturers, General Motors, Ford and Chrysler. And this is what Feeney said about it.

• 29:54David Senra?

  Of course, they had very attractive deals. You arrived back from your overseas tour and then you went to your local Ford dealer and you picked up your car, which you'd ordered in Europe and you didn't have to pay taxes on it. That sort of closes out on that. No one's gonna, you know, why am I gonna buy from, I'll just go directly to Ford. Like, why would I deal with you guys? And then this is the problem. So at the same time this is happening, his other business is being destroyed too. Feeney's mail order liquor business had been assailed by copycat competitors. It too was in decline. This is wild. Imagine running a business and having the experiences. They did 20 million in sales in 1963. The next year, sales plummeted to 5 million. And this is an example of the old adage, the old maxim, when it rains, it pours. He's getting it from every angle at the same time.

• 30:38David Senra?

  In the midsummer of 1965, eight years after founding their company and seeing an expansion to one of the world's first global retailers, Chuck and Bob faced the perfect storm. The company was buffeted by a series of setbacks. President Johnson's smashing of the five-pack business, there's a longer story in the book about, for some reason, Johnson wanted to get rid of this loophole. The cutthroat rivalry in the Mediterranean, competition in auto sales from car manufacturers, all combined with bad bookkeeping and extensive overspending to provide a classic example of how an innovative business with visionary leadership can be sunk. There was a deficit of $1.6 million, which is peanuts today, but in those days was a massive amount of money. They were on the verge of going bankrupt,

• 31:23David Senra?

  perhaps already were. Now, that happened in 1965, okay? Remember, 1962 is when they had the foresight, Chuck had the foresight, "Hey, why don't we try to go to the less crowded?" And they started doing that, and they won that bid for the Honolulu Airport. And that's where they realized, okay, at this point, they have to start from scratch. Everybody jumped ship. Everybody left them. It's now down back to the two original founders. They're going to close down their business, Terrence International, they're going to close down the car business, and they're going to focus on the duty-free stores they have. So it says Feeney and Miller were almost back to where they started. Miller recalled telling Feeney, "Well, Chuck, just you and I now, looks like shit's hit the fan. We've got to get out of this thing. It's back to you and I to figure out how to do it." "There's still a chance of getting out of the mess," said Feeney. "They could perhaps

• 32:06David Senra?

  boost the cash flow from the duty-free shops in Hong Kong and Hawaii to clear off the debts." Feeney had moments of despair, and this is him talking about, "Of course, it goes with the territory, but there wasn't much we could do. It was something we had started, and we thought we were going to make a million dollars out of it. We had no choice but to salvage the company or to go over a cliff." This is Feeney winds up marrying, he met a French lady, marries her, name's Danielle, and this is what she was talking about, or how she describes Chuck during this crisis. Danielle Feeney saw change in her husband during the crisis. To her, Chuck had always seemed driven by a desire to succeed. When they got married, he never talked about money,

• 32:46David Senra?

  only making a go of his business ventures. "A fortune was not his real goal," she perceived. "His work was his challenge." Now she saw his hopes had been shattered and his ego wounded. But that's an example, you gotta take a negative and turn it into a positive. Yeah, he's down, he's depressed, his ego is wounded, but it also could be super motivating. I don't like the state of my life right now, so I'll work really hard to change it, right? So it says Feeny and Miller, they wind up figuring out the best path forward. Feeny and Miller dropped the names, tourist international, cars international. Now, since they were reduced to the retail ventures, they adopted the name that Feeny had bought. They would now be known as duty-free shoppers. So, let's go to the beginning of their business that's going to, it's going to start small, but it's not going to start to stay that way.

• 33:31David Senra?

  This description of this store in Hawaii, they're eventually going to pay Hawaii over a billion dollars for this concession. Listen to how it starts. The duty-free shops at Honolulu International Airport, when Chuck arrived to run it in late 1965, was little more than a market stall. Its floor area was just over 100 square feet. It had three four-foot counters that were held together with Scotch tape. So Chuck is also in the right place at the right time, because this is where Hawaii's starting to experience this huge influx of Japanese tourists. So not only are the numbers of Japanese tourists going to increase, but there is domestic tax policy decisions in Japan that benefited Chuck's business.

• 34:13David Senra?

  So it says the Japanese were genuinely astonished at the duty-free prices. Because of a policy of protectionism, Japan levied a 220% tax on imported premium cognac and whiskey. In Tokyo, a bottle of whiskey that retailed for $25 only cost $6 in Chuck's shop. A $50 of bottle, a bottle of cognac that would cost $50 in Tokyo, costs $10 at Chuck's shop. Within a year, the trickle of Japanese tourists turned into a stream, and then a river. Okay, so now I want to talk about, there's very specific examples in the book about very, about early problems they had to figure out how to overcome.

• 34:57David Senra?

  They don't figure out these problems, they're never going to grow into the gigantic profitable business that they become. So, there's a, there's a lesser-known cognac brand, and I'm going to pronounce it Camus, Camus, that's the way I'm going to say it. I have no idea if this is correct. It's a multiple, multiple generation, I think this is the guy that's going to wind up passing to Hawaii, he's running the company at the time, I think he's like the fourth generation. They're not, you know, they have very little market share. And so, he comes through, and he pulls up, he's just like, "Why are you guys not selling my cognac?" Okay? And this is going to be so important, because this relationship's going to wind up to a side business, that's going to generate, I think, 600 to 700 million in profit over

• 35:38David Senra?

  20 years to the, to the four owners of DFS, okay? But, we've got to also remember the reputation that duty-free sellers have with luxury brands, which is really funny, because one of the best luxury brands in the world is going to buy it about, what, 20 years from now? So it's very interesting. So it says, "When Michael Camus turned up in Hawaii in 1965, duty-free shoppers was having trouble getting credit from most suppliers." Okay, this is a huge problem they have to overcome, they need, "I want you to front your product to me. I will sell it, but I need you, I don't have the money to buy it from you. Send it to me, when I sell it, I'll give you money," right? Now, so that's one problem to overcome.

• 36:21David Senra?

  Obviously, the second problem is, there's going to be a number of problems here, but in this example, the second problem is, they've just got a really, you know, really crappy reputation. They think these guys are like drug dealers, scam artists, that kind of thing. "If you were becoming a success, they would give you credit, but if you were just starting out, they wouldn't," said Feeney. So he's talking about that he's got a chicken and egg problem there, right? "The duty-free business was seen by most luxury good manufacturers as a rather shady operation, run by hustlers in small cramped shops. The elite sellers felt their brands would be diminished by association with a discount store." And this is the punchline. People didn't understand it. And therefore, if they didn't understand it, there must be something wrong with it.

• 37:03David Senra?

  Okay, so let's go back to Michael Camus is in this store. It's like, hey, why aren't you carrying my cognac? So Chuck is having a conversation with them. He's like, I need credit, man. And so Chuck convinces Michael, right? Give me beneficial terms. Give me 120 day credit and sell it to me at $2 a bottle. Check, Chuck, check. Chuck sells it in the store for $10, $10 a bottle. Okay, so he's saying, hey, give me, give me 120, 120 days to pay you back and give it to me at $2 a bottle. I'm going to read this section to you and then I'm going to talk about how it's it's the same freaking idea that Claude Hopkins used when he was advertising Goodyear tires. He said, now it says Chuck.

• 37:48David Senra?

  He said, he said he needed to buy directly from the cognac maker and he needed generous credit. In return, okay, so he's not just asking, hey, give me $120, $120 credit. Give me good deals on it, right? He says, in return, he's, this is what Claude says, start with service. In return, DFS would promote the cognac and give it a much needed distribution network in the Pacific and the Far East, where the Japanese were beginning to travel around and spend in large numbers. At this time, the cognac was sold primarily in America in small numbers, primarily in Europe in small numbers. Chuck is saying, hey, we're building this gigantic, we're going to build this gigantic network all throughout Asia. That's where most of his bread and butter, where he makes his money, right? He says, you have no, you have no presence there.

• 38:32David Senra?

  You don't really exist in the mind of Asian consumers. I will fix that. Camus take winds up taking him up on this offer. And over the next few years, I think they've become the number one cognac brand, either number one or number two, somewhere towards the top cognac brand in Asia. So it was really smart. The reason I say this compares to what Claude Hopkins did with Goodyear. Cause he's like, okay, no one was advertising tires at the time. He's doing the advertising for Goodyear Corporation. Good dealers at the time would say, hey, they would just order. Tires from Goodyear as their customers needed it. And Claude Hopkins wanted to find a way to incentivize the dealers to buy more stock, to keep stock. And he says, "Listen, if you'll spend $250 on tire stock before you need it, we're going to do this giant advertising campaign and we will list all the people, all the different

• 39:17David Senra?

  dealers that wind up purchasing at least $250 worth of tire stock from us." And he winds up signing up like, I don't know, 30,000 customers in a few months. Why? Because he started with service. He's like, "Listen, I need you to do something for me, but I didn't just say, 'Hey, buy $250 worth of tire for me before you need it.'" Who's going to respond to that pitch? Nobody. But if you say, "Hey, if you do this, I'm running a..." Excuse me. "If you say, 'I'm running an advertising campaign to get included, all you have to do is do this,' that completely changes it. And that's a lot more compelling to people." Chuck would not have succeeded. He's like, "Oh, okay. Hey, thanks for coming to my store. Oh, I'll sell it, but you've got to give it to me at $2 a bottle and let me pay you 120 days from now." He might take it up on the order, but if you say, "Hey, I'm going to build out this giant network.

• 40:02David Senra?

  Your brand's not really selling in Asia. We have all this information showing that tourism is rising, that they're having more disposable income. Your brand could benefit from that. So let's find a way to work out this mutually beneficial agreement." Like, that's just a lot better. Now, the reason I say this is really important. Okay, so you're seeing how Chuck thinks, right? There's a series of these problems. Maybe they're large problems, maybe they're small problems, but they're problems nonetheless. And if he doesn't overcome them, he's not going to grow and to be as profitable as he is in the future. Here's another problem. So now he doesn't need credit from liquor manufacturers, right? But banks aren't lending him money because why? Duty-free is seen as like, you know, you're a hustler, you're a few steps above a drug dealer.

• 40:47David Senra?

  So there's another problem to overcome. We need banks to give us credit. We don't just need manufacturers to give us credit. We need banks to give us credit. They come up with a crazy workaround here. And this comes as a direct result of the relationship that he's building with the head, Michael Camus, the Camus cognac. So he says, "Okay." Let's do this. They're going to use their direct now that Chuck has established the direct relationship between DFS and the cognac company. They're going to use it as a way to get banks to extend them the badly needed credit they need to grow their business, but they don't get credit for their stores. Banks are not willing to do that, right? They get credit for setting up a company. It's going to be set up, I think, in the Bahamas.

• 41:31David Senra?

  They get it credit for setting up a company that resells cognac to other duty-free companies is a very creative way to get money. And this is the what I just referenced earlier. This separate company is going to wind up making the partners, the four partners of DFS, six to $700 million. I think it's over 20 or 25 years, something like that. And the same amount of money is like a side business, right? DFS would set up an agency in the Bahamas to become exclusive worldwide distributors for cognac. So they take that contract and they go to financiers, to different investors and banks. The agencies would purchase large stocks from Michael Camus, which would be sold to which we sold now to this this separate company. I forgot what it's called.

• 42:14David Senra?

  And then and they in turn, that company would sell to DFS and other duty-free companies in Asia, which would create tax-free cash profits for the DFS owners in the Bahamas. So this is another example of everybody benefiting from this example or from this arrangement, rather. Camus would get his his distribution network. Feeney would get cash and money flowing through Nassau and the money would get Feeney would get cash and the money flowing through Nassau would guarantee Alan Butler security for bridging the loan. So all the three parties, the financier, they the manufacturer and Feeney and his partners are all benefiting. It's a very unique way. And then, once they start getting a little bit of credit, they it's not like they have to they don't. I mean, this is a problem they

• 42:56David Senra?

  had overcome, but the profit margins on these on what they're selling are so large that they don't really tap into, especially as it gets going. Now, the profits are very small. I'm going to read that to you now. So they do need some credit, but eventually, they're going to be able to finance almost everything just from the sales of the business. So they avoid bankruptcy. They make a small profit. The first dividend was $31,250. It was divided among the four owners in 1967. So Chuck and Feeney get $12,000. They have a third partner, Alan Parker. He gets six grand and Tony gets $780. Now, That's the first dividend. That's in 1967. By 1980s, they're turning over billions. How crazy is this? Tony, I think at the time, what?

• 43:39David Senra?

  I think he's got like a 2% stake, something like that. Tony, he's gonna, he just made 780 bucks in his first dividend from, from the company, right? He is going to hit the Forbes 400 with even his tiny, tiny percentage. So this is, gives you an idea of how much this is going to grow. Another creative solution they have. So they rely on tour guides. They give concierge in hotels, tour guides. They're all getting kickbacks, right? This is very common. This is happening in Hong Kong, but it also happens everywhere. So they're, they incentivize the tour guides to bring them to the shop because the tour guides gets, gets a kickback, right? But Chuck's company wants them to go, to come to the store more than once. And the tour guides refuse. So this is DFS's solution. They went to the agents again.

• 44:21David Senra?

  They went to the agents to get them to bring the Japanese shoppers back a second time. A lot of the agents resisted. They wouldn't give me the, they wouldn't give me this bullshit. They've already been back to your store. So what excuse have I got to bring them back to the same store? So that's the, I wasn't clear. That's the, that's what they're hearing from the tour guides. Like, no, I'm not doing this. Like, why? I've already sent them there. Why would I go back again? They said, okay, we'll build another one. So that you visit this one and then you go to that one, which is what DFS did. The company opened a second downtown store. They called it the repeater store. The, the way the company, once it gets up and running, doesn't need a lot of money. So all the profits could go to the owners. Just a little bit about that. Duty free shops began to make substantial profits. The owner agreed to take 90% of the dividends in cash every year. This is a practice that would continue for a quarter of a century.

• 45:07David Senra?

  We didn't want cash to build up in the company, said Feeney. So from the time that DFS worked, we did nothing but distribute the money out in dividends. So they're living in Hong Kong. Now they're, they moved to Hong Kong and they're ballin'. They're, they're making a lot of money. The Feeney, and this is, was very interesting because this, this is going to change. Feeney began sharing a life with wealthy and extravagant people. They bought a Jaguar and a small boat. They employed a driver and several other domestic workers. They joined clubs and gave parties. Feeney, in those days, had two tuxedos. They patronized one of the most exclusive and prestigious clubs in the colony. His wife found it easy to live in luxury in Hong Kong. She had domestic help, construction, and food was cheap. She brought jewelry and antiques and made the apartment a showcase of decor and beautiful objects.

• 45:49David Senra?

  So it's important to note, all the other shareholders are not, like, eventually Feeney realizes, I don't like this lifestyle. I don't like having money. He felt, I don't even, his daughter says he was self-flagellating is the way she would describe him later in life, like, he just felt guilty about it. And so that's going to, eventually it's going to cause a rift between all his partners. You know, they're still worth billions to this day. His wife, they're eventually, you know, she's, they're gonna wind up being divorced, I'll tell you more about that in a little bit, but it says, "The time went by, Feeney was starting to rethink his attitude about that kind of life. He was so far removed from the life he had lived, the life that his family and friends continued to live in Elizabeth, New Jersey, and the values of thrift that were imbued in him from his childhood.

• 46:30David Senra?

  It only became clear to Danielle afterward how strongly her American husband felt that he did not, how strongly her American husband felt that he did not belong to the world of black tie dinners and leisure yachts, and how much he was coming to hate ostentation and despise the life of wealthy socialites." And so this is where we start to see this development, this development of philosophy he continues to this day. I think he's 52, 53 when he gives all his money away. He's 89 now. He gives, and I like how he set up his foundation where it's not like, it's not, it doesn't happen in perpetuity. They tried, they spent all, I think, close in 2016, they spent all of it. It's like, I'm not, we're not keeping this on, we're gonna do the, he was a big proponent of giving while living.

• 47:14David Senra?

  And he did not like the idea of these foundations that, like, calcify over time, and they stop acting entrepreneurial in their giving. And there's a lot of grift, he said, and, you know, you have people, there's examples in the book of people who are supposedly working for charities, making a couple million dollars a year, taking limos to lunch, and, you know, just, you can clearly see that the, what they profess to the outside world does not match up with their actions, just to put it that way. All right, so it says, "He was even beginning to have doubts about his right to have so much money." When asked if he was rich at this point in his life, he replied, "How much is rich? Beyond all expectations? Beyond all deserving? I just reached the conclusion with myself that money, buying boats and all the trimmings didn't appeal to me. He was consciously cultivating a frugal lifestyle, wearing a cheap watch and buying a secondhand car.

• 47:59David Senra?

  He insisted that he and his family fly economy class. He reluctantly attended a few black tie dinners in Paris, but when a picture of him and Danielle appeared in the media, he was furious. He stopped attending such events and broke off all connection with the wealthy social group the couple had started to become part of." So this is where I mean, he's just very, he's unlike anybody else that I've studied before. He's a paradox. Because it's like, okay, he clearly doesn't like having money, but he likes making money. Says, "Paradoxically, while Feeny became more frugal, he was pushing himself ever harder to build up the business that was making himself even richer. He seemed more driven, more involved in his professional interests. He read business books and biographies of successful businessmen. He was constantly traveling.

• 48:43David Senra?

  Associates remembered Feeny in those days as a driven man, constantly searching for new opportunities, constantly traveling and constantly studying." This is more about how Chuck worked at this time. He was very focused and serious about business. "He brings a focus on business that I hadn't experienced before. If something doesn't work, he has four or so different thoughts. He has a multifaceted way of looking at business. He is detail-oriented in his approach. He would visit the main store. He would talk to the salespeople and check on display and pricing. The following morning, he would have a list of things to discuss. A lot of managers like to talk down and don't really listen. Chuck listened to the salespeople." So he's constantly looking for new information, not only through books, but talking to people. He just sucks up the... What's that? They called him a suction pump, a suction cup?

• 49:27David Senra?

  Suction pump, I think is what it was. I think it was Henry Kaiser on the book Freedom's Forge. I would say Chuck's very much the same way. This is more about motivate him. He was intensely competitive, but his motivation was derived from the creative challenge of applying a better approach to something that had already existed. "His definition of success was not having all the money one desired, but being able to raise a happy, healthy family. There has to be a balance in life," he said. "A balance of business, family, and the opportunity to learn and teach." So this is when his net worth's about like 250 million, something like that at the time, he's seriously considered giving it all away. He winds up, the closest person to him, and they wind up having, falling out later, is this guy named Harvey Dale.

• 50:08David Senra?

  He's an attorney, and he's really influenced Chuck's view on philanthropy. And he does it by using examples of like John D. Rockefeller, Andrew Carnegie. So he sends him a quote that Frederick Gates gave to John D. Rockefeller. He says, "Mr. Rockefeller, your fortune is rolling up like an avalanche. You must distribute it faster than it grows. If you do not, it will crush you and your children and your children's children." They discuss the writings of Andrew Carnegie. I would say Carnegie's the most influential person, like historical person on Feeney's thinking on this. If you haven't listened to that, I've done two podcasts on him, Andrew, number 73 and number 74. So it says Carnegie accumulated a massive fortune

• 50:53David Senra?

  and gave away much of it during his lifetime to fund the establishments of libraries, schools, and universities. Feeney reread several times Carnegie's famous essay. They're calling it wealth. I always had it referred to as the gospel of wealth. I'm pretty sure it's the same thing. I've read it, too. Carnegie argued that there are three ways to dispose of surplus wealth. It could be left to the family, given to the government, or given away while alive. The first was motivated by vanity and misguided affection for the children. He felt that you burden them, and it could be a curse to give too much money to your kids. The second required the owner to die before the wealth was used, and then his wishes could be thwarted. He's dead, can't do anything about it, right? The third ensured

• 51:36David Senra?

  that the surplus wealth was put to good use and not dispersed over hundreds of years in trifling amounts. The best way to use wealth, concluded Carnegie, was to provide the ladders upon which the aspiring can rise, such as universities and libraries. So, you know, a lot of his giving, he likes to build brick and mortar, mortar like education systems, he'll pay for people's colleges, Feeney that is. But this idea of, you know, If you're aspiring, there's a lot of poor, smart, determined people that don't have access. So if I can use my wealth to give them access, it's a good... and he does this all over the world. This is in Vietnam, Ireland, America, Australia, everywhere. I think his foundation, by the time they're done, they gave away seven billion, something like

• 52:18David Senra?

  that. It's a lot of money. Carnegie also cautioned that a man of wealth should set an example of modest, unostentatious living, shunning displays of extravagance. What Carnegie advocated was to have a profound effect on Feeney. I do remember somebody giving me a copy of his speech that Carnegie had given at Cornell, and for some reason, I researched that speech and read two books on Carnegie. And so Carnegie continues to... once he becomes influenced by... excuse me, Feeney, once he becomes influenced by Carnegie, he passes that on, right? I always think about that great quote from Bob Noes, "Knowledge is power. Knowledge shared is power multiplied." And we see that, Feeney. Now, the reason I'm reading this section to you, though, is because I think Feeney has a problem that's

• 53:03David Senra?

  very common with people. It's like, you find, you can't express, like, there's a thought that you have in your mind, but you can't find the words to express it as eloquently as other people have. So you see this, like, music sometimes is able to express how you feel better. Writing can sometimes describe your feeling or your point of view better than you can. And so Feeney was definitely one of those people. It says, "Feeney gave all the people involved in his foundation a copy of Carnegie's essay on wealth to read. Although brilliant when talking about business, Feeney was never good at articulating his philosophy on life. It embarrassed him. Instead of explaining what was going on in his mind, he'd give friends and family members articles from magazines and newspapers. They had to infer the message. Giving out copies of Carnegie's essay was a clever way of enlightening

• 53:45David Senra?

  them on the essence of his giving. He also kept a copy of the essay on his desk." And this is an important point. People can influence you, but you don't have to copy everything they do. We want their ideas. We're not idolizing these people. Says Carnegie was not a precise role model for Chuck Feeney. Carnegie made his fortune through harsh and ruthless business methods, and he loved having his name on libraries and schools, neither of which applied to Feeney. But his basic message was clear: Give while alive. And so he's going to give away his fortune. He puts it into his foundation. He doesn't tell anybody. Winds up becoming public because there is a lawsuit between the partners because Chuck wants to sell to LVMH and some of them don't.

• 54:29David Senra?

  And it's just, you know, this is a tale as old as time. It's clearly something to know that the partners grew apart as they made more money. The more successful they were, the weaker the bonds of friendship became. Things had changed since the 1970s, when the company was still young, energetic, entrepreneurial, and fun. And we could argue and debate each other during the day and then go out to dinner that night with our families and never mention work. So he's going to give everything away. He's going to hold back because I don't think his wife was on board. And we see this later on because she gets more money in the divorce. But it says Chuck Feeney reached an agreement with Danielle that when they came back to sign everything away, 40 million in the houses would be held back for her and the children, and the money paid out over a few years. It was a figure of thought necessary to take care of the houses, the kids, the education, clothes, boats, artwork, and jewelry.

• 55:13David Senra?

  And I'm thinking to myself, but who wants to close boats and jewelry? Well, as we see later on, his wife liked that lifestyle. And that causes a rift, and they're going to get divorced a few years after this. So he did agree, okay, I'm not going to give away. He put away almost all of his assets, but and this money and houses are in her name, not his, which is really interesting. She regrets this later on, and then when they get divorced, she winds up suing for more money. This is more about Chuck's desire for privacy. We see the same, like, he definitely moved in secret during his business years and in giving. Eventually, the lawsuit comes out, and then he realizes he can't keep staying anonymous

• 55:55David Senra?

  if he wants to influence other billionaires to give while they're alive. But this is more about his desire for privacy. From the start, Chuck Feeney was adamant that he did not want recognition for his giving. There would be no plaques or names on the buildings he funded, no thank you dinners, no honorary degrees. People should not know that he was behind the foundation. Beneficiaries should not even be told his name. While this stemmed from an absence of a demanding ego, being secretive had become almost second nature to Feeney. Practically everything he undertook in his life depended on keeping confidences and maintaining a low profile. Feeney insisted at meetings, "Don't go out and blow your horns about how big and successful we are. The less you speak and the less ostentatious you are, the fewer people who will be angry

• 56:40David Senra?

  and jealous." So that is something that Ben Franklin said almost 300 years ago. In his biography, he talks about that. "You're going to be a lot more successful if you can avoid making other people envy or jealous of you." And so we see Feeney echoing the same idea that Franklin had a couple centuries before. At this time, the four owners are getting dividends, but there's a different CEO running the company. And this guy, he does what's very common. A successful CEO, he wants attention. And he gives an interview, and the owners are very not happy. The owners are not happy. "The Great Department stores are a century old, but we were born with the jet," enthused Bellamy, that's his name, in an interview published in the Financial Times, explaining how the company had created an unequal sales machine to cash in on Japanese consumer culture.

• 57:25David Senra?

  He explained how DFS had employed shrewd marketing to get Japanese patronage. "Why are you telling people? Our playbook. We're a private company. Shut up." When the DFS owners saw the article, their reaction was explosive. Feeney was agitated. The partners knew that one of the reasons for DFS's success was that its international operations were a mystery to outsiders. No one quite knew how duty-free worked or how big DFS was. And they're really going to know when these bids become public. It says, "Above all, the DFS owners wanted to keep secret the amount they were taking out of the company in dividends. This is bananas. In 1986, it was a staggering $186 million.

• 58:07David Senra?

  One year, $186 million in cash in profit. Feeney received $39 million of the $186 million." The size of the duty-free opportunity is just hard to comprehend when you're reading this book. Here's an example. "This is just one store. Sales at the Waikiki store had soared to $400 million a year."

• 58:31David Senra?

  They were making $20,000 a square foot in revenue. And their bid shows just how valuable the store was. This is what I referenced earlier. They were offering to pay the state of Hawaii $2 million every three days for the next five years, just for the right to run a couple of stores. That's insane. $2 million every three years for five years. So they wind up, the bid they put in, they overbid by a long shot, but there was a silver lining. And again, this is not like, there's no coming in second place. If you lose these bids, your company's gone. You have to win the bid. So there's a lot of risk here. The DFS owners sat there aghast. They had overbid by $779 million.

• 59:14David Senra?

  "We left a shitload of money on the table, three quarters of a billion dollars," they said. What happened? I wish I knew. "We were rather foolish. Maybe we were all making too much money." There was one upside apart from winning the concession, though. Never again was anybody gonna come in and bid against us. Five years later, there was no counter bid. Yeah, if you're overbidding by three quarters of a billion dollars, I don't know how much competition you're gonna have. Looking back years later, Feeny defended the bid. "The worst thing to do was lose. The truth was that we could pay this amount and we could still make huge profits." So not only, at this point, all the profits that he's getting is going into his foundation, but he's also investing it rather well, and he's got a couple other side businesses. This guy just couldn't help himself and make a lot of money. The following year, 1988, even in the wake of the huge bid in Hawaii, the cash dividend

• 59:59David Senra?

  paid to the owners from the profits of the duty-free stores was $400 million. This is a private company owned by just four people. $400 million. Of this, Chuck received $155 million. So really, it says Chuck received, but his foundation, that money goes to his foundation, okay? On top of the profits from its own business portfolio and multimillion-dollar dividends from the KMS Agency, that other business I told you about, check this out. The foundation was raking in more than $2 million every five days in cash. That's just Chuck. That's not his other three partners. The foundation was raking in more than $2 million every five days in cash.

• 1:00:40David Senra?

  In the last decade before 1988, they're gonna sell the company in the 90s. Before 1988, annual sales had increased from 278 million to 1.5 billion. It was an astonishing growth rate of almost 20% per year. What only the Ford owners knew was that during that period, they had received cash dividends of 867 million. So that's from 78 to 88, right? They received almost 900 million in cash and Chuck took 330 million of that. Now, here's the crazy part. And there's, again, I just think this just speaks to human nature, something we should know. Even while making hundreds of millions of dollars, the four partners find a way to fight over little things. So it says, "We wanted to protect the integrity of the company and not have a shareholder dispute that would tear DFS to shreds.

• 1:01:25David Senra?

  It was too valuable of an asset to play games with." So they sign a contract together where if they have a disagreement, they're gonna bring in what they call the wise man. It's an arbitrator. And they, they bring in this arbitrator and he's just like, "What the hell is wrong with you guys?" He says, "Now he sat the four partners down and told them, 'You jerks, you've got the greatest thing going. Come on, you've got to get it together and find a method of resolving disputes.'" And so they're not going to accomplish this. There's gonna be a huge fight over whether to sell the company or not. Right before this happens, Chuck is gonna wind up, he's got like five kids. I think they've been married for 25, 30 years. And this is crazy and sad. "In October 1990, Chuck and Danielle had separated over his close relationship with his longtime German assistant, Helga."

• 1:02:08David Senra?

  I think he remarries his secretary, essentially, who often travel with him. They had been leading increasingly separate and different lives. Danielle had known for some time from her husband's depressed and angry moods at home that her relationship with him was over. And again, he's depressed and angry at a time when he's making hundreds. Like, what does that tell you about us? We are, we're very complex beings, apparently. Feeney was, Feeney, Feeney had been spending less and less time at the family's houses. And he made a point of never going on board the yacht that Danielle had brought, had purchased. "Nor did he set foot in the elegant mansion, which served as a family home on the French Riviera." "The children were immensely saddened by the split. They were close to both parents. Their contrast between the mother and father was nevertheless obvious to them."

• 1:02:50David Senra?

  "He became a frugal, self-flagellating philanthropist who craved anonymity, whereas Danielle had a big yacht and a big personality." Feeney told his children, now all young adults, that he would be changing his life, that he would be constantly on the road, living only a few weeks at most in any one place at any one time. He gave each a binder with articles explaining what motivated his giving. One was Carnegie's essay on wealth. Another was about the excesses of the Sultan of Brunei, who spent $1 million on a children's birthday. This was his singular ways of telling them about himself and his motivations. So now Danielle is like, okay, I don't like the agreement that we had six years earlier. And so they sue. And it says, "A new settlement was reached.

• 1:03:33David Senra?

  They gave Danielle an additional $60 million. That comes from the foundation. And then another $40 million that was pledged over five years to a family charitable foundation. Feeney insisted that Danielle get all the family homes in Paris, London, the south of France, Connecticut, Hawaii, New York. He wanted them to stay in the family to avoid any bitterness, he said. He took nothing for himself." Okay, so at this time Chuck is the one that leads the deal with Bernard Arnault, the guy that runs LVMH. And they agree to purchase price. It's right around $4 billion, somewhere in there, $3.5, $4 billion. That purchase price, I think he gets like 1.6 billion. Two partners, him and another partner, agree to sell. The other partner do not. And so, again, they have a fight.

• 1:04:17David Senra?

  This is the last time they ever meet together, which is just insane, considering they built one of the most profitable businesses, private businesses. Says, "The wise man," the arbiter, expressed, arbitrator, rather, "expressed frustration with the impacts. Two people want to sell, two do not. This has happened before in the history of the world, and people have worked it out. It doesn't require a rocket scientist, only a recognition of reality." And he's like, "Don't, why you guys, they're gonna wind up suing each other." He's like, "A protracted legal wrangle could expose DFS's dirty linen," he warned. "And if he were forced to arbitrate, the inner workings of the most secretive companies in the world, of one of the most secretive companies in the world would be revealed. His words had no effect." So it says at this time, Miller, which is the main, you know, Feeny and Miller, their relationship disintegrated a long time before this. But, you know, as you recall,

• 1:05:00David Senra?

  these are the two that started the company. Feeny recalled that Miller went storming out. It was the last occasion that the four guys who had presided for three decades over one of the most successful retail operations in the 20th century would meet together in one room. Miller's the only one that doesn't sell out. He's on the side with Tony. Tony fought the deal the whole way. On the very last day, he's like, alright, yes. And then later on, he says Chuck was right all along. So this is what he says, "He conceded that he had been wrong to oppose the sale all along. Chuck was a genius on timing. He had a great sense of the unknown. I feel that something wasn't right somewhere and he was right because this company winds up going, losing, going down by quite a bit. It happened more than once in our company that he came in," meaning Feeny, "and said, let's do something.

• 1:05:43David Senra?

  And we took a different track and he was right. Our Nalt had in good, had in fact required a declining asset. In the 18 months DFS sales dropped from 3 billion to 1.5 billion. With Japan's recession, an Asian economic downturn, and the weakening of European currencies, the core DFS customers were spending less. Dividends dried up. A year after the sale, 320 people, 320 members of the staff were laid off. And Hong Kong had its first ever loss." And this is Bob Miller on his relationship about what he calls bullshit and lawyers. And I just think there's a lot of like wisdom in his experience. And hopefully, if we ever

• 1:06:27David Senra?

  get in a situation like this, whether the numbers are this big or not, you know, to try to avoid it because he has a regret. He's like, "All the stuff we did, the legal stuff was just, it was stupid. It was useless. We should have just figured it out ourselves." So again, he didn't know that. Maybe it's obvious to the wise man telling him, "Hey, what are you guys doing? You're screwing this up. Just talk it out, figure it out." And you maybe have to go through this experience to learn, dang, he's right. We were distant at that time in any case. I really hadn't seen Chuck since 1996. All partnerships break up at some stage, even the Beatles. Arguments about who contributed most to the success of the partnerships, and then the wives get involved, and it gets extremely complicated. We've got more, we had more money than we knew what to do with. So everybody was happy. Forget it. It's just not worth worrying about.

• 1:07:09David Senra?

  LVMH bought out Chuck and Alan at a very good price. God bless them if they are happy with their money. Do I regret not selling out at the same time? I don't know. I have, I have thought a lot about it. I don't know if all that money in a lump sum would have made me any happier than I am now. I really loved DFS and the company, but all the legal things we did with the wise man, to be quite frank, it was all pure bullshit. We didn't really need all that fancy legal stuff. The lawyers have a way of dragging you in and making things more complicated than they are. We were paying huge legal bills at the time and I don't think any of us, or excuse me, I don't think any of that would have affected the outcome.

• 1:07:50David Senra?

  When the dust settles, you find out it was all just a huge waste of time, energy and money. And I think this is a good way to close on just a quick summary on the history of the company. The success of DFS arose from the fact that we were in the right place at the right time. Nobody ever put a penny in the business. We took out eight billion. Nobody is that smart. You've just got to have a lot of things going your way. And that is where I'll leave it. If you want the full story, I'll leave a link in the show notes. If you buy the book using that link, you'll be supporting the podcast at the same time. The book is, I would say 60, I don't know, 70% of the book is, is really not about the business. It's about what happens after all the work he does with philanthropy.

• 1:08:31David Senra?

  There's obviously a lot more parts I skipped over about his early life and everything else. I do think it was a really unique perspective, really unique story. I can see why the book is so highly recommended. But if you want to read the full story, there's a link in the show notes for you. Also, a lot of new listeners are discovering the podcast from pre, from existing subscribers, buying gift subscriptions for friends, for coworkers. So if you want to do that, I'll leave a handy link down there as well. It feels good to do something nice for somebody and it helps the podcast at the same time. That is a 171 books down, 1,000 to go, and I'll talk to you again soon.