Episode 34: Landlords and Real Estate and Banks, Oh My!

Guests:

Dana White is founder and CEO of Paralee Boyd hair salons.

Laura Zander is co-founder and CEO of Jimmy Beans Wool.

Jay Goltz is founder and CEO of Artists Frame Service and Jayson Home.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Jay Goltz: “I’ve always borrowed against my house. It’s not the bank’s responsibility to be my partner. I’ve always been all in.”

Jay Goltz: “This is what I’ve done for 42 years. I get into stuff over my head. I choke on it. And I do figure it out eventually. But I’m not saying this is the way to do business.”

Laura Zander: “So here’s my question: At what point do you throw in the towel? At what point do you decide this is not meant to be?”

Full Episode Transcript:

Loren Feldman:
Let’s get started. One problem this crisis has created is a standoff between business owners who have no revenue or reduced revenue, and landlords who still want to get paid the rent. Dana, I think you’ve told us in the past that you’ve actually closed one of your locations, in part because of your struggle with your landlord. Can you remind us about that?

Dana White:
Sure. So I did, I closed the Southfield location in July, in large part due to the struggle with the landlord. I noticed, in that plaza, I wasn’t the only business who left during that time. I don’t think the landlord viewed our relationship as a partnership. I think he viewed it as, “You work for me.” He has several businesses.

You know, it wasn’t a conversation, even though a conversation was attempted. The conversation was, “Okay, so when are you going to pay me? And how much?” I was in a very aggressive and debilitating repayment cycle with him, but I could not endure and keep my business. So I chose to shut down that location, and we have been in court back and forth. We’ve been—

Loren Feldman:
He’s still trying to get his money.

Dana White:
Yes, and here’s the thing: he will get his money. But what you’re not gonna do is harass me and be mean and try to send me to jail. That’s what you’re not going to do. The landlord’s attorney actually tried to issue a bench warrant for my arrest.

Jay Goltz:
Oh, for God’s sake.

Dana White:
When I took over the space, there was inventory that was there, and I signed saying, “Yes, it was there.” But in order for me to renovate the space, his management people came in and took all that inventory out. Well, he has over 150 tenants. He doesn’t know. So when I returned what I had, they said, “Where is the stuff?” And I said, “Well, that’s what I had.” “Well, no, in September of 2012, when you took over, this is what we had.” And I said, “Yes, but you removed that so I could renovate.” And so his attorney says, “Judge, can we issue a bench warrant for the arrest of Dana White for the two mirrors and two chairs that are missing?” And she said, “Sir, this is a pandemic. We’re not even picking up criminals. We aren’t even issuing bench warrants for criminals.”

Loren Feldman:
This was over two mirrors and two chairs?

Jay Goltz:
No, no, this is just all intimidation. He knew he wasn’t gonna get it. He just wants to show what a big bad lawyer he is and he’s trying to scare you. That’s what this is all about.

Dana White:
The judge eventually dropped it because it’s ridiculous, and it’s a play. We’re at the point now where we’re going to come to a settlement agreement, which I will pay. I really don’t want anything in the way of some of the opportunities that I have coming down the line. I just want this done.

Loren Feldman:
How are things at that other location?

Dana White:
Slow.

Loren Feldman:
Well, in terms of your relationship with your landlord?

Dana White:
Wonderful.

Loren Feldman:
So then your revenue has to be down there. You just said it was slow, but you’ve come to an accommodation with that landlord?

Dana White:
Absolutely. This landlord, every time there’s a loan or a grant that she feels I qualify for, she texts me or emails me. That’s a partner, right? She’s doing what she feels she has to do to keep this tenant in business.

Jay Goltz:
Because there’s not a long line of people waiting to rent these spaces, and somebody needs to remind the landlord. Really.

Laura Zander:
Our guy in Texas, their office was sending us, “Hey, did you know about the PPP? Did you know about the EIDL? Did you know about this? Let us cut your rent in half for the first couple months, and then we’ll see how it goes.”

Loren Feldman:
Laura, you inherited that landlord when you bought the yarn supplier, Madelinetosh, late last year, right? That’s what you’re talking about?

Laura Zander:
Yes.

Loren Feldman:
But it sounds like you developed a pretty good relationship. Is that right?

Laura Zander:
Yeah, I think so.

Jay Goltz:
“Think” being the operative word. She “thinks” so.

Laura Zander:
Yes and no. He owns a ton of property in the Fort Worth area, and as it turns out, he had never been to this operation before, to this space. And they had been in this space for, I don’t know, eight years, 10 years. So he didn’t know what they had been doing, and didn’t know about all of the different changes that they had made to his building. He’d never gotten approval for any of those changes.

We do have a good relationship. He stops by every time I’m in town, and we talk a little bit. But he got very involved, and he started coming in every other day. He would come in early in the morning. He’d come in when I was not there, checking in on the staff, and really checking in on his building, because it had been changed a lot. And so, all of a sudden, he wanted to make sure that his building was okay.

We are going to leave there. The lease ends at the end of December, and he was really good. He said, “We’ll give you half off of rent,” for I think it was April and May, but the lease originally was supposed to end at the end at the first of August. He’s like, “We’ll give you half off, but only if you extend the lease until December 31st.” And I’m like, “Okay, that seems fair.” And that made sense for him not to try to look for new tenants at the end of the year. But I don’t think he’s going to renew our lease at the end of December. We’re kind of scrambling right now. But that’s unrelated to the pandemic or anything else.

Jay Goltz:
Well, yes and no. I mean, because of the pandemic, he’s gonna have a harder time finding a new tenant, so it’s not totally unrelated.

Laura Zander:
I don’t know about that. [The previous owners of Madelinetosh] had been leasing four different units, and so we gave one of the units back to him in June, because we just didn’t need that space, and he had somebody interested. He’s already filled it. He filled it last month. The reason he started coming to us is because he had somebody who was interested in the space that we’re in now, which now expires at the end of December. He’s got people lined up.

Jay Goltz:
Okay, good for him.

Laura Zander:
Yeah, I know. Good for him.

Loren Feldman:
So one question, this raises is, how great would it be if you owned your own location? Jay, you’ve been in that position for quite some time. How did that come to be?

Jay Goltz:
23 years ago, I was a tenant, and the neighborhood was getting hotter and hotter and the block was getting hotter and hotter. When I moved in, in 1978, it was basically an abandoned factory district. I was paying $1 a square foot for rent. I was paying 200 bucks for 2,000 feet or something.

So, over the next 20 years, the neighborhood was turning into a hot block. I recognized I was gonna get pushed off the block. A building came up for sale next door, and I decided I needed to buy it as a placeholder just for when that happens. I got an SBA loan, which is one of the greatest things the government does, and I put down 10 percent, and I bought the building. And then luckily, the building next door came up for sale two years later, and I bought that building. Again, on an SBA loan.

It is clearly one of the critical pieces to my survival and to my net worth. I can’t tell you I was smart enough, or I had someone whispering in my ear, “Hey, Jay, you better buy some buildings.” I did it out of necessity. But now I tell people, probably—there certainly are exceptions to this—you’re probably better off buying a building, especially if you’re in retail where people are coming to you. If you’re in an office that doesn’t matter where you’re at, maybe not as important. But it’s a critical piece to my stability at this point. I own three buildings, and a parking lot, and it gives me a lot more stability as things go bad.

Loren Feldman:
How hard was it for you to afford it?

Jay Goltz:
I came up with 10 percent of—I don’t remember what it was—it wasn’t that much money. The part that I did sweat was, I bought it for land value. The building was just falling down. The roof was caving in. There was no heating. It was a warehouse. I figured I’d put a couple hundred thousand dollars in to fix it up, which of course turned into $600,000, and I was totally stretched out and totally stressed out. It was clearly one of the most difficult periods in my business. It was extremely painful, but it was a game-changer.

Laura Zander:
How long was it painful? I mean, are you talking like, 12-hour labor painful, or 10 years?

Jay Goltz:
No, I would say it was painful for a year or two until I finally… there are multiple layers of pain. There’s also [the fact] that Jay’s nuts and got into a business he knew nothing about: “Oh, we should sell plants. There’s no plant stores around here.” So I opened up a store, it was called Jayson Home and Garden. We opened up a store to sell plants. My home store was still across the street, and the only problem was, I knew nothing about plants. So I opened up this store, I hired people who I thought knew what they were doing, and it was a couple years of pain.

Jay Goltz:
This is what I’ve done for 42 years. I get into stuff over my head. I choke on it. And I do figure it out eventually. It takes me a year or two, but I did figure it out. But I’m not saying this is the way to do business.

Laura Zander:
Is there a moment where you’re just like, “Okay, the pain is over?” In a marathon, at least you know where the finish line is.

Jay Goltz:
This is exactly a moment I had. The woman who runs the store’s father is an architect, and I had a relationship with him. He always comes to our openings and stuff. And I walked up to him during our opening for the garden store, and I was absolutely at the end of my rope. And I said to him, “I’m completely freaked out. I spent $500,000 more than I thought.” I went through the whole thing, and he started laughing. And I walked away, and I said, “Caroline, what’s with that?” She goes, “Jay, you don’t understand. You’re from a different culture. My father’s not used to people being that honest, and he just didn’t know what to say.” If it was my Uncle Irving, he would have put his hand around my shoulder, and said, “Jay, it always costs more when you build these buildings. Don’t worry about it. You’re going to be really glad you bought it in the long-term.” So I am your Uncle Jay, and I’m telling you, it’s okay.

Loren Feldman:
Laura, tell us: Where do you stand? You have to leave your current location. What are you doing?

Laura Zander:
Well, we’re trying to buy a building. We put an offer in June, July. We found a place. Oh, it must have been the beginning of July. I spent about two months working with the bank that we always use.

Loren Feldman:
The bank you always use in Nevada?

Laura Zander:
Yeah, U.S. Bank.

Jay Goltz:
A big bank.

Laura Zander:
Yeah, a big bank. It got down to August 14th, and I think we were supposed to close at this point—no, early September—so we’re just a couple days away from the due diligence period closing, and the loan officer sends a note and says, “Sorry,”—I just reread it—he said, “This went like four levels above what it normally needs to go to for approval. With COVID and with your industry being retail and e-commerce, we’re putting in new standards, and you don’t meet the new standards.”

Loren Feldman:
Madelinetosh is not a retail business. You mean sell to retailers. Is that the issue?

Laura Zander:
It’s a part. 30 percent of the business is retail.

Loren Feldman:
Oh, is that right?

Jay Goltz:
Let me cut to the chase. They all lie. They don’t want to deal with small business. End of the story. U.S. Bank doesn’t need you. They don’t need me. They don’t need small business. They’ve got big business to deal with, and you started at the wrong bank, and a smaller bank needs our business. I’ve been through this 10 times. These big banks always tell you, “No problem. We want to do this. We’re excited.” They come out with their loan officers. And then all of a sudden, out of the clear blue, somebody, somewhere back in Ohio or Toledo somewhere decides—in my case, I was with the big bank, and they literally the day before I was supposed to close, they told me they couldn’t give me the money. One of my friends luckily had a credit line. He lent me money ‘til I could change banks. I asked the banker a year later, he called me because he’d already changed banks. He said, “Well you know how it goes.” I go “No, tell me.” He said, “The new guy didn’t like retail.” That was the entire explanation. The new guy didn’t like retail—that was the whole explanation. So, I’m telling you: The big banks don’t need you.

Loren Feldman:
Dana, you’re listening to all this. I’m wondering, as you think about one day opening another location, are you thinking you want to buy? Or are you thinking you want to deal with another landlord?

Dana White:
I’m thinking I want to deal with another landlord. Eventually buy, but own the buildings, put Paralee Boyd in those buildings. But everything is so different now. This conversation, eight months ago or a year ago? Everything was just so different, and I think—

Loren Feldman:
Because of COVID?

Dana White:
Yes, because of COVID. And so buying is just not on my radar right now.

Jay Goltz:
But to be fair to what you’re doing, you might need a high-traffic downtownish location. And that kind of real estate in a smaller thing might not exist. So for you, if you want to be on a busy street in a bigger building, that’s not the kind of building you can buy. So for you, it might not make any sense to buy a building.

Dana White:
Yeah. For me, I don’t believe it does. Eventually, maybe. But you know, I’d like to take all that I’ve learned in dealing with landlords and put that to use, and then maybe eventually become one for Paralee Boyd—be the best landlord I’ve ever had. Plus, there are economic gains to being your own landlord—how you pay yourself and how you leverage that.

Laura Zander:
A big part of it for us is—I had an agent who broke it down for me, leasing vs. buying—because now we have, in some ways, very different kinds of businesses. The business in Texas is manufacturing, so we need to put $100,000 to $200,000 into the space so that we can use it to manufacture. We’ve got to get vents and plumbing and this and that. Whereas the other business is distribution. We just need pallet racks, and so we can really be anywhere. The other one is a little more dependent. We need to put more investment in.

Doug feels really strongly—and I agree—after experiencing the landlord, nice guy, but being in the building all the time. He threatened to kick us out one day because somebody had the fans turned the wrong way or something, and it was just a light threat, but being under that umbrella of being constantly threatened… If we can be our own masters, I think that that is really appealing. Plus, if we need to invest 100 or 200 grand to make this space into something that’s usable, why do that in somebody else’s building, if possible? That said, we may not be able to get a loan. I mean, I’m on bank six, and I’ve had—it’s been one large bank, and then five small banks.

Loren Feldman:
What are they telling you?

Laura Zander:
It’s just a slow, slow process. I’ve got the one bank that I’ve invested a lot of energy in. It’s a local Texas bank. I’m supposed to find out today. It’s at the—what do they call it—convergence? No, concurrence. It’s the last two guys.

Jay Goltz:
Are you trying to get an SBA loan?

Laura Zander:
Yes.

Jay Goltz:
Do they do a lot of SBA loans?

Laura Zander:
Yes. The SBA agent is who recommended this bank, and the SBA has already given us approval.

Jay Goltz:
Great. That’s a good start.

Laura Zander:
We have approval from the SBA. I’ve got one bank in Nevada, who said, “We would love to do it, but because it’s in Texas, we can’t,” after I spent two weeks giving all the documentation going through the dog-and-pony show.

Jay Goltz:
I can’t tell you how many times I’ve been through stuff with them, where they string you along for a month or two. And then all of a sudden, they tell you something that… My kid went for a mortgage at the same big bank. I said, “You’re wasting your time.” He does development. Finally after five weeks, they said, “We can’t give you the mortgage because you make your money on capital gains.” And it’s like—

Laura Zander:
Why couldn’t you tell me that five weeks ago?

Jay Goltz:
Right. They didn’t know that when he started? I mean, it’s unbelievable. So this is what I’ve learned: They’re salespeople. That’s what they are. They’re salespeople, and then they go back to the underwriters, who are in some room somewhere with no windows figuring out whatever they do with their spreadsheets, and then they bury you.

Laura Zander:
Yeah, but now I’m on a timeline, because our lease is up December 31st. We can’t just move. We need to build. It’s gonna take us probably a month.

Jay Goltz:
Your landlord can’t throw you out overnight. If you have to go back to him and say, “Listen, sorry, but we can’t move till March 1st,” he’s gonna have to go along with you. Because what are the options for him? Go get a court order?

Laura Zander:
Yeah, so I’ve already planted that seed, and I’m like, “We may need another month. We may need another month.”

Dana White:
It’s not even just with buying property, though. I have a girlfriend who’s trying to open a second location. She’s been trying to get a loan, and they told her to put her house up. They told her to do all of these things, all of these hoops. And this has been going on for over a year.

Jay Goltz:
Wow.

Dana White:
And again, there’s nothing like, “Oh, well. You may not know this, or there’s some things we don’t know.” No! It’s this guy sitting in an office who doesn’t like retail.

Jay Goltz:
Big bank?

Dana White:
No, it’s a CDFI. It’s a non-traditional lender, and the reason why they’re more cautious than they were when I initially went through them is because some of the businesses that went through them prior to her but after me didn’t do well with their money, meaning they would submit money, submit their final budget, submit to get a draw, and then use that money for something else other than what they told, other than the invoice they presented.

Jay Goltz:
What kind of money is she looking for, $100,000?

Dana White:
I think $200,000 to $300,000.

Jay Goltz:
And did she borrow against her house?

Dana White:
No, I don’t think so.

Jay Goltz:
Okay, I’m just telling you, I’m here to say from my perspective only, I’ve always borrowed against my house. It’s not the bank’s responsibility to be my partner. I’ve always been all in, and I use the equity in my house. And the fact of the matter is, to be fair to banks, they make a tiny little percentage on these loans. They can’t afford for 10 percent of the loans to go bad. They go out of business. So I understand that they need security.

Laura Zander:
That’s what’s making me crazy, Jay, is that we have enough equity in the homes. We have enough cash in the bank. We have enough for it.

Jay Goltz:
Which is why I’m confident you’ll get a loan.

Laura Zander:
It’s also a property. It’s four acres. So we’re being told that the land—

Jay Goltz:
No, you’re going to get a loan.

Laura Zander:
Well, good God, is this exhausting.

Loren Feldman:
Jay, have you been in a situation like Laura’s, where you had approval from the SBA but couldn’t get a bank to make the loan?

Jay Goltz:
No, that’s never happened. I’ve had three SBA loans, and they all went through, and everybody says, “Oh, it’s so much.” It really wasn’t bad. It was fine.

Loren Feldman:
Can you explain it? Why is Laura having a problem with it?

Jay Goltz:
There’s more behind this story. There’s something going on at the bank, God knows what.

Laura Zander:
Ahhh.

Jay Goltz:
They’re never honest. I’m in the middle of trying to get a mortgage for my building with no mortgage on it, and I’m on my 10th bank. I believe I’ve got the bank ready to do it, and I think I will, but it’s like dating. You’ve got to date 10 girls or boys before you find the right boyfriend or girlfriend to marry. These banks don’t want to take a risk, a lot of them.

Laura Zander:
The other factor that we’ve got going here is that, in the last two years, we’ve acquired three brands. We’ve invested, and we did a bunch of investment in technology. So our books for the last two years don’t look great.

Jay Goltz:
There you go. That doesn’t surprise me. Me neither. I’ve done the same thing. So that’s the answer.

Laura Zander:
They’re doing all these add-backs.

Jay Goltz:
And in my case, this is a zero-risk loan. I have more than enough assets to cover these loans. I have enough life insurance to cover these loans. And all they do is they want to check the one box: Do they have the cash flow to pay for this loan? That’s all. I don’t care if you’re worth $100 million. It’s shocking. All they want to know is you have the cash flow. So it doesn’t surprise me that your books don’t look great for the last couple years. Because this is the same issue I’m having. They just want to see nothing but profits galore.

Laura Zander:
So here’s my question: At what point do you throw in the towel? At what point do you decide this is not meant to be?

Jay Goltz:
I don’t believe in that “meant to be” thing. I absolutely do not buy into “meant to be.” There is a bank that is looking for business right now that would love to do your loan, and you have to find that bank.

Loren Feldman:
Laura, do you have the right location? Are you excited about what you found?

Laura Zander:
Well I am, but I guess where we got scared, or I start to wonder if I need to just surrender and maybe this isn’t meant to be, is because then we got thrown into a Phase II environmental. The due diligence period has actually taken two months now instead of just a month. We’ve had to push it back twice.

Jay Goltz:
Okay, been through that, and I can tell you, it’s all part of real estate. Phase II, part of real estate. No big deal. They find an oil tank that was down there. They get a bulldozer. They take the oil tank out. They fill it in. Not a big deal. I’m telling you, I’ve been through that.

My parking lot I bought, there was something in it, and my lawyer said, who is my brother-in-law, “You can’t buy it.” It would have put me out of business. I called my friend in real estate. He goes, “Please, there’s stuff in all the dirt in Chicago. You’re not putting a well on it. There’s not a problem.” This is just real estate stuff. Phase II’s are normal business.

Laura Zander:
And maybe it’s meant to be because it is pushing it forward so that we can get the loan that we need.

Jay Goltz:
All right, stop with this “meant to be.” You’re in control. You are in control of your destiny.

Loren Feldman:
Laura, you mentioned the equity in your home, so you’ve obviously made the decision that you’re willing to borrow against your home. Was that a tough decision?

Laura Zander:
To be honest, I don’t think they asked us that. I mean, we have to give all of our personal financial information, so we gave them all of that stuff.

Jay Goltz:
You’re going to be signing personally.

Laura Zander:
Are we? Okay. Yeah, we must have made that decision. Honestly, I leave that to Doug, because he’s so much smarter financially than I am. But I think that when we were originally going to do the loan to buy the business, we were going to have to do the same thing.

Jay Goltz:
Banks are not venture capitalists. Venture capitalists make a zillion dollars when the deals go well; banks make a little tiny percentage. They’re not in the business of sharing risk with you. So, I get it. I just wish they’d be upfront. When you show up, they say, “Yeah, you know what? Don’t waste your time with us. We’re not going to do it.” No, they drag you through four weeks, and then they tell you.

Like I said, I’ve been through this more than once. It’s ridiculous. You’re getting a loan today. That’s my prediction. And I say that not because of some spirit out there. You got sent to this bank by the SBA people. That’s an excellent reference. I believe they’re gonna give you the loan.

Laura Zander:
Yeah, I mean, I’ve met the presidents. One of the presidents came and picked me up at the airport.

Jay Goltz:
Wow.

Laura Zander:
Yeah, you know me. I took my best—I took my only nice outfit—and show up and meet everybody there and tell them my story. They all watched my TED Talk. Apparently, they are all in love.

Jay Goltz:
Okay, you’re probably getting the loan. That’s my answer.

Loren Feldman:
And if not, Jay’s on 10 banks. You’re only on six, Laura.

Jay Goltz:
Right, exactly. And every time you go through this, you get a little smarter. So now when I interview the banks, I know the right questions to ask. I’m brutal to them.

For instance, here’s something I didn’t know. I’ve got this new bank who my kid uses for his real estate stuff, and they’re largely a real estate lending bank. And he told me, in talking to him, [they said,] “Listen, we really would like to get this loan. Because since it’s owner-occupied, we can put it on the books as a business loan. We get criticized for being too real estate heavy in our lending.” So this is good for them, and that was good to know. I would have never known that. I would have never figured that out. So this is good for them. They’re looking forward to doing this loan because it’ll help their portfolio balance. I do believe I’m going to get it from them, and I’ve got two others that are interested. So you can’t get discouraged.

Laura Zander:
Come on, what do you mean, “You can’t get discouraged?” You’ve never gotten discouraged?

Jay Goltz:
I didn’t say I’ve never gotten discouraged.

Laura Zander:
You see my face? It’s called discouragement.

Jay Goltz:
No, stop with discouragement. Entrepreneurs can’t have discouragement. We dig in, and we forge on, and we get the job done. That’s what you’re gonna do. No more “meant-to-be” routine. That’s not for entrepreneurs. There’s no meant-to-be.

Laura Zander:
That’s bullshit. I’m sorry, but that’s like saying that you can’t be scared. I can be discouraged.

Jay Goltz:
We’ll save this for the podcast that we have on psychology. We’ll save it for that one. But I’m telling you, if this one doesn’t work, you go back to the SBA people, and you say, “Okay, give me a different one,” and they’ll find someone.

Laura Zander:
Well, I’ve got three other ones.

Jay Goltz:
Ahhhhhh!

Loren Feldman:
There you go. There you go. All right, we’re gonna stay on top of this, Laura. We’re gonna keep track of this. We’ll come back to this topic, but guess what? Back by unpopular demand, I have a Morning Report News Quiz for you guys today. As you may recall, these are questions taken from our daily email newsletter, which brings together all the news a business owner needs to read first thing every morning. You can subscribe at 21hats.com. You guys ready for the first question?

[Silence]

I’ll take that as a yes. Early this week, we highlighted a news item about a special travel adventure for those getting restless during the pandemic.

Laura Zander:
Oh, the flights to nowhere?

Loren Feldman:
Laura, you’re jumping the gun too quickly!

Laura Zander:
I’ve got things to do.

Loren Feldman:
This won’t take long.

Jay Goltz:
She’s just a winner.

Loren Feldman:
Let me finish the question next time, and just to finish this one so our listeners can know what you’re talking about, Nippon Airways sold 300 tickets for a special Hawaiian-resort-themed flight, and a Taiwanese airline sold 309 tickets for a special Hello Kitty-themed flight. The question was supposed to be: Where did these flights go? Laura. The answer was…

Laura Zander:
Nowhere.

Loren Feldman:
They took off and returned to the same airports.

Laura Zander:
Yeah, sorry.

Loren Feldman:
That’s okay. Question number two: As usual, we had a few items this week that mentioned Amazon. One noted that Amazon has been limiting the ability of rival companies—companies with products that rival Amazon products—to advertise on Amazon.com. In other words, the rival products don’t get positioned as well on Amazon.com as Amazon products. Here’s the question: What percent of all product searches occur on Amazon.com?

Jay Goltz:
42 percent.

Loren Feldman:
Not a bad guess.

Dana White:
70 percent.

Loren Feldman:
Dana says 70 percent. Laura?

Laura Zander:
I’d go 82.

Loren Feldman:
Actually, It’s 50 percent. I actually thought it would be higher, too. But still a lot.

Number three: John Mackey, the founder and CEO of Whole Foods, likes to promote what he calls “conscious capitalism.” His stated goal is to get businesses to elevate humanity by recognizing that there are more important things than profits. Here’s the question: Remind me again, which practitioner of conscious capitalism did John Mackey sell Whole Foods to?

Jay Goltz:
Jeff Bezos?

Loren Feldman:
Jeff Bezos, that’s right.

Jay Goltz:
No shame.

Dana White:
Somehow, profit is not important to the people who profit the most.

Laura Zander:
Exactly.

Loren Feldman:
Number four: Instagram is now 10 years old. Our item this week noted that the social network was the first platform to understand that, for all of us, our most important relationship is with A) Jeff Bezos, B) our landlord, or C) our phone. This is an easy one for Jay.

Jay Goltz:
I don’t even know what you’re saying. What’s Instagram?

Loren Feldman:
You have a terrific Instagram feed for Jayson Home. You should check it out some time.

Jay Goltz:
The telegraph is the answer.

Loren Feldman:
Finally, last question. We had an item this week about the decline and fall of Magic Leap, a startup that raised $3.5 billion and a lot of hype to create an augmented reality headset. In 2012, some of that hype was generated by a TEDx talk that was titled “The Synthesis of Imagination.” The question is, that talk consisted entirely of the CEO A) using a Magic Leap headset to guide him while making repairs to a car engine, B) using a Magic Leap headset to guide him while performing surgery, or C) the CEO wordlessly danced around in a spacesuit alongside several people in furry monster outfits. Laura, do you know the answer to this one?

Laura Zander:
I don’t.

Jay Goltz:
I don’t want to know the answer to this one.

Dana White:
B or C.

Loren Feldman:
Car engines, A. Performing surgery, B. Dancing around with people in monster outfits, C. It was, of course, C.

Jay Goltz:
And you said it was three and a half billion dollars?

Loren Feldman:
That’s right.

Jay Goltz:
Okay.

Laura Zander:
And I can’t buy a building?

Jay Goltz:
We can’t get a loan to go buy some buildings to employ people and help commerce and make people happy. But this guy got three and a half billion dollars to dance around—

Laura Zander:
For an idea.

Loren Feldman:
For extra credit: Tell me which publication that I used to work for wrote a cover story about this company that included this paragraph: “Magic Leap’s innovation isn’t just a high-tech display. It’s a disruption machine. This technology could affect every business that uses screens or computers and many that don’t.”

Jay Goltz:
Can you hear my eye roll?

Loren Feldman:
Well, the whole goal of this quiz is to get you to groan, Jay. I think I’m almost there.

Jay Goltz:
You’re there. Done. Mission accomplished.

Loren Feldman:
Let me finish.

Jay Goltz:
I don’t want you to finish. Inc. Magazine.

Loren Feldman:
I’m finishing. It’s my podcast.

Jay Goltz:
Ahhhh.

Loren Feldman:
There’s the groan! I got it!

“It could kill the $120 billion market for flat panel displays and shake the $1 trillion global consumer electronics business to its core. The applications are profound. Throw out your PC, your laptop, and your mobile phone because the computing power you need will be in your glasses.”

Laura Zander:
Well, that’s definitely not The Times.

Loren Feldman:
Correct.

Jay Goltz:
Inc. Magazine.

Loren Feldman:
No.

Dana White:
Forbes?

Loren Feldman:
Correct, it was Forbes. You got it, Dana. That was four years ago. Have any of you thrown out your laptops or mobile phones yet?

Dana White:
Not at all.

Loren Feldman:
Not yet.

Dana White:
But see, this is what’s so discouraging. I know you don’t like the word, but here you’ve got Laura, you’ve got Jay, even myself. Then you have companies that get on stage in a little outfit and jump around, and can raise billions of dollars. You’ve got a woman who cannot even have the box to draw blood at home. It’s just a really good idea. And she can have billions of dollars and former generals—

Loren Feldman:
You’re talking about Theranos, and she is going on trial soon, I think.

Laura Zander:
They’re good storytellers and good salesmen. But it’s the media who are writing—I mean, sorry, Loren—but you have to have people who are willing to be sold to. And so these are these great, romantic, exciting stories that hype everybody up.

Loren Feldman:
Well, let me just say, you’re right, the media did fall for that, but only after a whole slew of investors fell for it. So it’s not just the media.

Laura Zander:
No, you’re totally right. But I just think through Inc. Magazine covers over the last 10 years…

Loren Feldman:
She was one of them.

Laura Zander:
Has anybody done the study to see how many of the people on the covers are still in business?

Loren Feldman:
Hey, when I was at Inc. Magazine, we put Jay Goltz on the cover.

Jay Goltz:
I’m still in business. I’m the one that’s still in business.

Laura Zander:
Exactly, there you go. Evergreen businesses.

Dana White:
So when you have an investor, why are they investing in businesses they don’t know work?

Jay Goltz:
No, I can tell you the answer. This is the simple answer, and I believe this is still true: Only one out of seven venture capital deals work. But when they work, they really work, and they make a zillion dollars. Six times out of seven, they don’t work.

Dana White:
But the characteristics you have to have to be that one business… It seems to me when you’ve got a business like Jimmy Beans Wool, it works. It’s been working. It’s like a car: You turn it on, and there you go. Right?

Jay Goltz:
It’s not going to turn into a billion-dollar company. That’s the problem.

Loren Feldman:
It’s not gonna make an investor rich, right.

Jay Goltz:
Right, so it gets back to, this isn’t the world we live in. That’s the other world. It just is what it is. The number one rule of entrepreneurship: It is what it is. And that’s what that is.

Dana White:
Why can’t Jimmy Beans Wool make somebody rich?

Jay Goltz:
Because the market’s too small.

Laura Zander:
Yeah.

Loren Feldman:
Well, it’s gonna make its owners rich.

Dana White:
Even with the international market?

Jay Goltz:
No, you need a disruptive new technology. Because she’s almost in the same business I am.

Laura Zander:
You know what, though? We have two players in our industry that both raised 60 million bucks. One of them got bought for, I don’t know, $250 million and then got shut down.

Jay Goltz:
I know, but it’s just not hundreds of millions or billions. The point is, she’s in the same business I’m in. It’s a very small percentage of people who actually go into a custom picture frame shop, and very few people knit their own stuff. It’s not a mass market kind of thing. And as a result, the market’s limited.

All we can do is go check out other banks and get the damn loan so we own a building, so in 20 years, your son can say to me, “Hey, Uncle Jay, thank you so much. Because look at the new Porsche convertible I bought.” That’s what we’re talking about: buying the building, and in 20 years, your kid’s going to be rich. Boom!

Loren Feldman:
Guys, we’ve done it again. We’ve completed our 34th straight podcast without a workplace injury.

Dana White:
Nice.

Jay Goltz:
You don’t know that. You don’t know that.

Loren Feldman:
Unless you count the injury to Jay’s psyche.

Jay Goltz:
No, I’m actually good. I’m good because I feel like even though Laura pretends she’s not listening to me, she’s listening to me. Stop being discouraged. Go get the job done.

Laura Zander:
I can be discouraged and get the job done.

Loren Feldman:
My thanks to Jay Goltz, Dana White and Laura Zander.