James Altucher interviews Marcus Lemonis (@MarcusLemonis). Lemonis is the CEO of Camping World and star of The Profit, a show where Lemonis invests his own money for a stake in turning around struggling businesses. If, like me, you want to catch up, episodes from season two are available for streaming and new episodes air on Tuesdays at 10P on CNBC.
Altucher begins the interview by thanking Lemonis for coming on the day before his third season begins, telling him The Profit is one of his favorite shows, and that his daughters watch too. A few years ago Altucher felt the same way about Shark Tank, writing “I just gave up all parenting responsibilities this weekend to Mark Cuban. Meaning, my kids and I watched eight straight episodes of “Shark Tank”.” In that post Altucher wrote he hoped his kids would learn, “not everything is as it appears” and “the deal doesn’t close until the money hits.” A new lesson from Lemonis is the value of your word, because on The Profit it’s all – initially – handshake deals. Which has come back to bite Lemonis a time or two.
Altucher praises one of Lemonis’s investments, Crumbs Bake Shop, “Crumbs changed my life. I lived on Wall Street, and there’s like – there was a Crumbs right around the corner. My wife and I would go there every single day. I probably gained 20 pounds.” After this praise Altucher is surprised to find out that Crumbs went out of business, Lemonis explains why, “They really got too singularly focused. While a cupcake is a great thing, in order for a business to make it under a real thick cost structure, you need to have high repetition of visits.”
Past guest of the show Nassim Taleb might suggest that Crumbs was very fragile. Offering a single item – the cupcake – made the business sensitive to someone wanted anything other than a cupcake. By adding breakfast and a bagel croissant hybrid, Lemonis has moved the business to the “robust” stage. It hasn’t reach the anti-fragility that Taleb advocates, but it’s one business moving in the right direction.
Before Lemonis invests in anything he examines the three P’s; people, process, and product. For the Crumbs Bake Shop and Key Lime Pies it was about focusing on the product where each company needed to find its essential vein. Being essential is important because essentialism give you focus. In his book Essentialsim, Greg McKeown writes that the first stage in finding what is essential is finding the essence of your idea. With Crumbs the first instinct might be to suggest that the essence is cupcakes, but the essence is really a tasty treat. New menus and food items fit this space. For Key Lime Pies the essence was real food rather than frozen and processed ones.
One part of the interview that struck me was how adept Lemonis was at rolling different business together. Crumbs Bake Shop and Key Lime Pies are now a single store in Key West. Ditto for Sweet Pete’s Candy which is available for sale at the Crumbs locations. Lemonis’s growing empire reminded me of a stool where each business is a new leg to lift the stool higher but also make it less likely to tip over.
Later in the their interview Lemonis references an another interview he did with Inc. Magazine. The whole things is worth reading, and adds to what he and Altucher spoke about. I particularly enjoyed this section:
What finally started working for Lemonis, quite simply, was work itself. Some people believe in the transformative power of faith or love or education. Lemonis was all about the transformative power of business.
In his interview with Altucher, Marcus says that chasing money is a bad idea. “And if you do all those things (talk to customers, have a passion for the work, love employing people) and you do them right, making money is going to become a byproduct of it, and it shouldn’t be your sole motivation. If it is and you make decisions solely on money, then you’re going to be letting good employees go during the downturn. You’re going to be cheating customers out of situations.” This is an idea that reflects the meta pursuit of inputs rather than outputs. Inputs we can control, outputs not as much.
Altucher and Lemonis go on to talk about Michael Sena’s Pro-Fit, which like Crumbs, was too one dimensional. At this part in the interview, I noted that while Lemonis is moving the businesses from being fragile to robust, his personal holdings are moving from robust to antifragile. If suddenly everyone swears off cupcakes and wants to exercise, he’ll profit from that. Taleb probably has a more robust definition than just this diversification, but I found the opposing sectors interesting fellows. Coincidentally, Tim Ferriss recently interviewed Tony Robbins about diversification.
After sharing some deal details, Lemonis shares a bit of his story. “I’ll give you the Cliff Notes version. I was born in Beirut, Lebanon. I lived in an orphanage. I was adopted by an American family in Miami, Florida.” Lemonis went to college at Marquette, where before freshman year he thought, “if I can get in real shape, like super fit, I could be that cool, tan guy from Miami.” That quote is from the Inc. magazine article where Lemonis comes as off as much more vulnerable, but also that he had a few more business connections than the typical orphan.
After college Lemonis went to work for a guy by the name of Wayne Huizenga. At this point in the interview I paused the podcast. “Wayne Huizenga” I thought, why do I recognize that name? Oh, that’s right, it’s billionaire H. Wayne Huizenga, founder of Waste Management. Lemonis also says Lee Iacocca is a family friend. In past interviews Altucher would pounce on connections like this, and often get great insights. Lemonis only shared that Huizenga taught him to “always be straight with people. Good news, bad news, no matter what.”
Sometimes though, the people Lemonis is working with aren’t straight with him. Altucher brings up the Jacob Morris Florists episode and Lemonis says that some people get a “wild case of amnesia” once they get the check.
Altucher suggests that reciprocity plays a part in the other deals where people are more conciliatory and willing to work with him. Altucher is right, humans are wired to give when something is given to us. This is why charity mailers arrive with a packet of return address stickers. They are using social norms to get something – money – back from you. The Hare Krishna group used to also do this throughout airports all over the country, walking up to you and forcing over a flower before kindly asking for a donation.
Within the realm of business, Adam Grant (@AdamMGrant) examined givers and takers in his book Give and Take. Grant concludes that people who give without expectations of their effort being returned will find the most success. Giving creates a wide network of people who feel a connection to you, but not one that they feel obligated to immediately repay. This wide web is a resource we can draw upon if we do need help. Contrast this with the wide web Tony Soprano had, where the expectation was to be repaid. That’s a web you wouldn’t want to be tangle in.
Altucher asks Lemonis about what sort of calculations he does before entering a situation. Lemonis says, “I look at it in the case of a consumer.” This doesn’t seem like much of a switch, but the change in perspective from owner to customer engages different ways of thinking about a problem. When we solve a problem one way, our brain notes that we were successful and stores that process away for the next time we need to solve a problem.
An analogy might be with cooking. If you look in your pantry, throw together some ingredients, and the meal comes out tasting good, then you’ll remember that. The next time you’re hungry, chances are you’ll do the same thing. And then again and again. This is fine for solving the problem of hunger, but just as different meals will satisfy you better than others, different businesses situations require different solutions. Getting stuck on one type of solution is known as the Einstellung effect. We can get into problem solving ruts, and if we wear these grooves too deep we’ll be unable to look around to see other solutions. It sounds like Lemonis switches his hat from owner to customer to see a new shade of changes to make.
This interview had great energy and I enjoyed it. Let me know what you thought in the comments or on Twitter, @MikeDariano.