Game Changer
No, business is not a game, but in this Q&A, Steve Baker explains why it can help to think of it that way.
In a recent conversation, Steve Baker, a vice president with the Great Game of Business (our sponsor) talks about what the Great Game does and what he’s seeing out there as he works with businesses around the country. Along the way he acknowledges that the term “open book management” rallies people who are familiar with the Great Game but repels some people who aren’t. He explains how Great Game companies use the wisdom of the crowd to look five years into the future. And he discusses how Great Game companies are preparing for tough times next decade when they expect the labor shortage to be even more acute.
Loren Feldman
Steve Baker, tell us what do you do.
Steve Baker
Yeah, so my official title is vice president of the Great Game of Business, which sounds like I don’t do anything but have fun all day and get paid for it, which is sort of true. Just don’t tell my boss. We are a boutique consulting firm in Springfield, Missouri. We are one of the 12 divisions of SRC Holdings. And we basically help other companies do what SRC has done for 40 years, which is to create a business savvy, high involvement, ownership culture. And we do that by educating everyone on the financials of the business, helping them understand how they connect their daily actions and decisions to the financial outcomes of the organization. And they get to share in the rewards. So it’s pretty cool because I’ve accidentally stumbled into a job where I get to work with very enlightened leaders and very cool people every day. It’s really been life-altering for me.
Loren Feldman
I know you’ve been doing a lot of traveling lately, meeting with some of those enlightened leaders. Tell us about that. What are you seeing out there? I’m sure they’re facing a few challenges.
Steve Baker
Well, let me tell you, it’s not all doves and rainbows. And not all of them are experiencing what I would call, you know, rapid growth and massive financial impact that they’d like to have. Some are. But I just heard a story last week when I was in Chicago with some of our coaches, and one of our coaches in Michigan told me about a company that was really struggling, especially around communication. And so they did a 90-day kind of rapid-improvement campaign around communication. They have 280 people, Loren, and they have seven key leaders that run the business. And it’s what we call a mini-game, so the idea of focusing on something for 90 days to improve it.
Usually it’s on something financial, but this time, it wasn’t even operational. It was just communication. They said, we’ve got to talk to all 280 people, one-on-one: How are we going to do that? And they made a game of it. They said, Okay, seven people, 280 people to get to, to have one-on-ones, and we want to do it in 90 days. But if you do the math, 90 days is about, what? Sixty-ish business days? That’s less than one person a day they have to talk to. And when I first heard the number 280, I’m like, impossible. And I teach this stuff.
What I love is in 90 days, they actually created something that filled a void in their culture, where people thought things were way worse than they were. They thought nobody was doing a good job. They thought they were all waiting for pink slips. And what was really happening is this was just a cycle in their industry. We all have them. And it was just—it took the fear out of the organization, and that’s what I loved about it. So again, it goes back to hope and doesn’t mean that everybody’s doing gangbusters out there. Some people are just getting by right now. They’re trying to figure it out. But engaging their people is what is really turning things for them.
Loren Feldman
So in that mini-game, the idea wasn’t just to establish a connection with people who didn’t know each other all that well but to deliver a particular message to let them know how the business was doing. Is that what you’re saying?
Steve Baker
Yeah, in other words, they needed to communicate the real issues in their industry, in their marketplace, with their competitors, and with their internal people. In other words, the stuff people were hearing outside was rumor, gossip, and misinformation. And they needed to have one-on-ones so that people could, yes, reestablish that connection, that culture, that we’re in this together, and we’re not laying people off.
But during the conversation, someone handed me their phone, and it had a picture. I don’t remember the magazine, but it was a cover of a magazine that had Microsoft, Google, I’m not sure if Apple was on there, and X—so, you know, Twitter—about how many people they laid off in the past year. And it was tens of thousands of people, and I’m going, This is the sort of message we’re hearing—not that people are either creating jobs or maintaining jobs or innovating in some way. We only hear the bad stuff. So it’s just great to see somebody actually doing something structured, in this case a 90-day mini-game or improvement campaign around communication, relationships, and getting the right information, the true information, to their people so that they could focus on work, instead of worry.
Loren Feldman
So is that why you’re known as the Great Game of Business? Is that a reference to mini-games?
Steve Baker
It is. So the Great Game of Business, in a nutshell, is an analogy that Jack Stack, our founder and CEO to this day, came up with 40 years ago—with an idea of, Hey, I want to try to save some jobs. As you recall, in the early ’80s, the economy was in the tank, and he was facing significant issues with a company he worked for, International Harvester. And instead of closing down his division, he said, Well, why don’t we try to buy our jobs and save 119 folks that trouble? And I’m way under-playing it here. It’s a great story. And I’d highly recommend all the listeners check it out.
But the bottom line is, what he learned from the banks was that if you’ve got a really tough situation, and you’re trying to save jobs or do anything else, you’re gonna have to understand business. The problem with most businesses is we are in different games than our employees and we speak different languages. So he just wanted to simplify business to demystify it. He used to say, Why does business get to be this elite sport for the select few that leaves everybody else in the dark and out of the money.
So when he went to his people, and said, “Hey, I want to teach you business. This is how we’re going to survive,” what do you think great technicians say, when you say, I’m going to teach you business? They go, I don’t want to become an accountant. And Jack had to basically use the analogy of a game because business and games have all the same elements: a team goal We have to teach around what game we’re in, teach them the rules of the game. We behave differently when we keep score, so we’ve got to follow the action and keep score. And finally, what’s in it for me? All encircling that one thing for them in the early days. It was survival. And then it became creating jobs and then creating wealth and finally sharing wealth with those who created it. So we continue to use the analogy to demystify, to make business approachable, and invite people into the secret that has kept the haves and the have-nots separated for hundreds of years.
Loren Feldman
So Steve, listeners to this podcast are well aware of the Great Game of Business. And if they know anything about it, they know that you guys encourage companies to practice what is known as open book management. Can you just give us a real quick primer on how you guys view that, what open book management is?
Steve Baker
Yeah, absolutely. In fact, I’m glad you brought it up, because it’s a huge misnomer for us. Open book management, that’s like what we’re known for. We’re the open-book people. And Jack Stack—Inc. magazine in 2009 called him the father of open book management. I’m just going to put it out there: if Jack were on the podcast with us now, he would say, I don’t really like that term that much. Because, see, what happens is, a lot of people hear it, and they assume that if they open their financials, someone’s going to magically care. Like they’re going to somehow be interested or even understand it.
And so, let’s go back in history a little bit. I mentioned before that Jack has used this analogy of a game for 40 years. In reality, he didn’t even name it Great Game of Business. In the beginning, it was just this analogy of a game and those principles that I laid out: know and teach the rules, follow the action and keep score, and provide a stake in the outcome, all encircling a team goal. Well, as they got more and more coverage at SRC through the ’80s and into the ’90s, when the book finally came out, you know, I believe it was Lucien Rhodes and Inc. Magazine that helped to coin that term.
John Case, another Inc. writer at the time, who wrote “Open Book Management: the Coming Business Revolution,” a lot of that was about SRC. He actually coined the term open book management. And then Bo Burlingham, from Inc., co-wrote the original book with Jack and is still a very dear friend and close partner of the game. What I’m trying to say is that, I love all that collaboration. But through the years, when you simplify something down, and it gets hung with a marketing moniker, sometimes it doesn’t describe it in the best way possible.
I was just on the plane back from Anchorage last night, and somebody next to me, “What do you do?” And I was so tempted to say, I’m “the open book management guy,” but instead, I decided to kind of peel it back just a little bit and say, “Well, what’s keeping you up at night?” And this particular person went on to tell me about, everybody wants to work from home. They want unlimited vacation, bemoaning, kind of the next-gen workers. And I said, What would happen if you could align everyone to a common goal and get them talking about things in a different way, and actually believe that they could move the number you worry about most. And for him, it was talent and cash, I’m just going to be honest. And I’m afraid if I would have started with open book management, that he would have shut down, put on his Bose noise-canceling earphones and left me alone.
But the key is, Wow, that is so cool. Because what I did is, I stopped for a second and listened and said, What is your biggest problem? Rather than leading with, We want you to open your financials and go open-kimono with all of your people. That isn’t the point. It’s, let’s teach them some of the things you know. And over time, we’ll give them more and more not only exposure and education—it’s not just about transparency, because that’s worthless without education—but also more responsibility and accountability. Hey, if this is your number, tell me how you can actually move it. And then we’ll give you a piece of the action. We’ll give you some skin in the game.
Loren Feldman
So, you’re saying you do open the books. That’s true. It’s just that there’s a lot more to it than that.
Steve Baker
Yeah, I think that it’s the simplification of it to open book management that really rallies people who know us but repels people who don’t.
Loren Feldman
Especially people who are concerned that maybe that means fully opening the books and salaries and the owner’s profit, and everything is going to be revealed, which is not necessarily the case.
Steve Baker
Well, let’s test it, Loren. What do you make a year? Don’t answer that, by the way. But if I just opened with that—
Loren Feldman
You wouldn’t have a lot of customers, I suspect.
Steve Baker
I mean, really?
Steve Baker
Oh, yeah. Oh, yeah. The major thing is that I would really like to help people figure out a way to engage their teams around the same goals they have. But instead, what we come to work with is often the owners and leaders of businesses have one set of goals to move the organization forward. And many of our employees have different goals, which are, “I’m gonna get as far as I can, and then I’ll look for the next thing, because I’m trying to take care of me and my family.” Which I totally get, but what if those things were aligned and intertwined? That is real power.
Loren Feldman
So I think you said that the guy on the plane said to you that his biggest concern, the thing that’s keeping him up at night, is attracting talent. Is that right?
Steve Baker
Yeah, I would probably lump it into that attraction, retention, recruitment, all of that sort of thing. Because what his real problem was when we dug into it was churn, turnover. He can’t keep good salespeople. You got to have good salespeople in that world. In addition, once he trains them up, he felt like he was the training ground for his competitors to get talent. But I gotta tell you, I was coming from Anchorage, from working with the energy company, and the CEO of that company in Alaska, was talking to the team that I was going to present to. He opened the day for us, and I love it because it was so perfect.
I told the guy on the plane this story as well. He said, You know what? We have a couple things that are really important to us here. And that is, number one, we want to create a culture where people are happy to be here. So that’s number one: a high performance, very difficult work, very remote locations, all that sort of thing, but we want people to be happy to be here. That was number one. And number two came down to, and I’ve got to try to think about how he said it because it was just so eloquent. It was, “We want to be the kind of place where other people come to find talent.” So you see how those two things work together. For him, it’s like, we want to be that good, where we develop talents so well that people want to steal them. But we train them so well, we treat them so well, that they want to stay. Like that’s pretty powerful.
Loren Feldman
So that’s what you told the guy on the plane?
Steve Baker
Yeah. So the airplane guy was was a little bit dubious? You know, he kind of gave me that look, like, “Ahh, you know.” But everyone does that to me. Most people running companies either don’t believe that their people are capable of understanding the business, or they don’t yet trust them enough to empower them to run a part of the business that they’re closest to. So they’ve got their funnel flipped on information: Instead of asking people who are closest to the customer or closest to the job, what would you do differently to make this better knowing that it’s hard to put any money to the bottom line in this business, what they do is they, “You know what? Here, I’m gonna give you some KPIs, some OKRs, some metrics. If you take care of these, everything else will take care of itself.” In other words, divorcing them from the financial outcomes of their daily actions, decisions, and work. And so, once you—and honestly, it was a long plane ride. So luckily, I had my noise canceling earphones with me. And we did talk for a little while longer, and I did find out the guy had a heart. And it was really good to hear him talk about his folks.
Loren Feldman
How did you convince him that what you were talking about could actually change the culture at that company so that people wanted to stay and go to work there?
Steve Baker
Well, okay, you’re just opening this up, Loren, because now I’m going to tell you the story I told him. And you tell me if you’re convinced. So the man that owns this energy company is a billionaire. He’s on the list, and he’s been asking his people every five years, “If we double the value of this business, everyone will get a ridiculous B-hag bonus, a big-hairy-audacious-goal bonus, and the B-hag is double the business’s value every five years. And through the years it’s been—first it was a car or truck of your choice, taxes paid. The next five years it was $100,000, taxes paid, every employee. This is on top of their great compensation and their annual bonuses and everything else. This is just to keep everybody focused on we’re trying to add value to this business.
Now in 2015, he paid out over $150 million, just for that B-hag bonus. You know what he got in return? Two billion in value. Is he crazy? Now I told this guy on the plane the story, and he’s like, What are you talking about? I said, go ahead. It’s in all the business magazines. They’re best places to work. You can read about them online. You know, most billionaires will not want to share all the wealth because they’re in it for certain reasons. This guy just says, Hey, if I make people wildly successful themselves, I’m looking at long-term success for my company and long-term success for my people. And what does it cost him? Nothing.
Loren Feldman
Well, you are talking about an energy company there. I believe it’s an oil business, so there’s a lot of money to play with there. Does that story resonate with the owners of businesses in less profitable industries?
Steve Baker
Well, this is why you have a podcast, Loren, because you’re asking the right questions. That’s exactly what you should ask. Because of course, I’m going to pull out the big guns. I was just coming back from a day of training for these guys, so I was on fire about it. And I was excited and everything else. But it’s also demonstrative, right, and it throws it right in his lap. And so now let’s do this. I come back to his world. And I talked about our friends at Keep Supply, which I believe that you know them through the years.
A couple of young guys started a web development company, built it to about 40 people, and very successful. And so it was attractive. They sold it. And then they were like, well, what do we do now? And they said, What if we turn our knowledge of creating online presence to an industry that has been neglected? And I know I’m way oversimplifying the story, but they found a business that was for sale. A guy was trying to get out of the industrial refrigeration business, industrial refrigeration parts. And these two young guys get in there, and they go, Well, we need to take this online. No one’s doing it. So they saw Blue Ocean, and they said, let’s just do this.
Their philosophy, in my opinion, is that the user experience equals the employee experience and vice versa. So as I was talking about this with the gentleman next to me, it changed his view, because it wasn’t oil and gas, it wasn’t boom or bust, it was, this is sort of along the lines of the kinds of things we do. You know, it’s tech people.They’re writing code. They’re working with customers, that sort of thing. But it’s so unsexy, isn’t it? Industrial refrigeration parts. You know, it’s very pedestrian. It sounds like—
Loren Feldman
Like most businesses.
Steve Baker
Like most businesses, yes. And these young guys, they just said, Well, what if we made it fun? What if we made it attractive? What if we made it cool for young people to come and work here and stay here and build a career? So I know, I’m again, I mean, I’m throwing stories out, because that’s what I do. That’s my whole job. When you asked me what I did, I should have said, I’m a storyteller. I’m preaching the gospel.
Loren Feldman
Let me ask you about something else that you guys are known for, which I think surprises a lot of business owners, and that’s financial planning. I talk to a lot of business owners who even planning a year out in advance sounds farcical to them. It’s like, we don’t know what’s going to happen. I don’t know what’s going to happen next week, next month. I can’t predict where we’re going to be in a year. You guys try to do it for five years, I believe. How does that work?
Steve Baker
Well, you’re asking the million-dollar question there. Was it Drucker that said, “The best way to predict the future is to create it.” So, we think of it more like that. You know, we have to plan ahead. There’s just no two ways around it because life is going to happen, business is going to happen, economies are going to cycle, industries will flatten and boom. That’s just the way that it is. I don’t know if this was the first guy to say it, but I do know it was the first time I read it. Jason Fried wrote a book called “Rework.” And in it, he said, long-term planning is fantasy. And when I read it, I’d been here at SRC for almost 19 years. So I had been inculcated into this idea of, we’ve got to plan because we don’t want to be victims of the future. Right? The idea is, we’re going to take our destiny into our own hands.
So when I read that, I took offense to it, like, Oh, my gosh, he’s just not thinking very clear. But that’s not it at all. That’s the perception in a fast-moving environment, especially something like tech or health care or biosciences. Anything that has to do with speed. People are gonna go, you can’t plan ahead. You don’t know what’s gonna happen next. Well, that may be true. But if we don’t plan, we can’t look at the business in what I would call a very cold and objective way to say, What do we want it to be? Where do we want to go?
And the way I always envision it is—sort of going back to Jack’s simple analogies of games—is to say, the goalpost doesn’t change in a game of football but how we get there changes with every play. So that addresses the issue of, Well, you can’t do long-term planning, because you don’t know what’s going to happen. But if you don’t plan, like Zig Ziglar used to say, how can you hit a target you can’t see? If you don’t put a stake in the ground somewhere, you’re not going to be able to get there. If you don’t set a goal, you’ll never achieve it. And so I don’t want to wander through life. I’d rather have this sort of, Oh, this way of seeing that there is a target out there, and we’ve got to get to it somehow. It’s the commitment we made to one another, and together, we’re going to get there.
I’m telling you, there’s nothing that brings a group together like belief in a common goal. And knowing that this is the way we do business, we’re going to do it, and in a certain way. We’re going to do it ethically and community-based, or we’re going to do it in a way that supports the families of our employees. Or we’re just gonna make a lot of money. Whatever your come-from is, you’ve got to put a goal out there, or you’ll never get there.
And then the idea, is we’ve got to reverse-engineer it. How could we get there. So for those listeners that don’t know, SRC, is in remanufacturing. And specifically, for 40 years, we’ve remanufactured internal combustion engines and engine components. We could be regulated out of business tomorrow. If we didn’t do long-term planning, we wouldn’t be doing the engineering work and the research on EVs and batteries and different things like that. We also have to look at things like fuel cells, and we have to look at all of the things that are going on and say, which is our best bet? Now, if you’re in tech, the whole thing is, do you leap from one technology to another? Or do you say, I don’t know what it’s going to be tomorrow, but we’re going to be nimble enough to go there.
I think that’s why Agile is so great with the Great Game of Business, because while Agile seems like it’s just, we’re gonna do what we need to do and then quickly pivot, what it really says is, we’re able to think ahead far enough where we can create Plan B’s and contingencies and growth opportunities that maybe aren’t in our main buckets of revenue right now. But we’re building them on the side so that we can easily either use them for a Plan B, if we need one, if the economy tanks, or if a certain technology doesn’t pan out, or if we don’t need those for emergencies, we can use those for our growth. It becomes our innovation engine.
Loren Feldman
What’s the process? I’m curious how you go about this planning. I assume it’s not just the owner sitting there and putting his finger in the air and guessing where things are going. I’m guessing, knowing what I know about the Great Game of Business, that this is more of a collaborative effort. But tell me, how does it work?
Steve Baker
Look, the thing is, we believe that the process should be more high-involvement. And now, Loren, what I mean by that—and I started the conversation this morning by saying we believe in building a business-savvy, high-involvement ownership culture. Well, planning is the same way. I don’t believe that you can have a good strategic plan for an organization that doesn’t involve conversation with your people because they have to execute it. And if they don’t buy in, they won’t commit. If they don’t commit, they will never execute like you want them to.
So part of that high involvement means we’ve got to teach people the business they’re in and start macro, say, Do you understand the economy? Let us teach you about the economy and the world we live in. And then we’ll draw it back a little bit. Let’s just zoom back a little bit and say, Okay, well, this is our industry. And this is our marketplace. And these are our competitors. And this is what we do with our customers. In other words, we’re teaching a macro-to-micro how the business works, how it makes money and generates cash, and how they are involved.
I know that sounds crazy, but we’ve spent an entire four decades figuring out how to simplify this and to make it approachable. It does take time. It does take investment. But the power is now I can ask someone, Hey, look, if you were trained as an engine remanufacturer and your job was to grind crank shafts all day, and then we came in, in a year or two, and said, Hey, guess what? You’re laid off, because we’re gonna go strictly EV, I mean, that’s how we used to do it in the Industrial Revolution.
Instead, we’re teaching people all the different things. I want them to come to us and say, Hey, did you know I read an article on California’s legislation about no internal combustion being sold by 2035. That was scaring me. But now, I understand that isn’t true. And you say, Well, what do you mean by that? Because this is actually a story I heard. He said that that’s not true at all. They say no new internal combustion engines can be sold, but there’ll still be 350 million vehicles on the road that might need remanufacturing. Holy cow, isn’t that different? It’s different than what you read in the paper or see on the news, that’s for sure.
Loren Feldman
Can you be more specific about what it is that you are trying to accomplish in your planning? Are you actually trying to come up with numbers, number goals that you want to hit? And are you acting on that?
Steve Baker
So Loren, let’s go back to man on plane. I simply asked him, I said, “When you guys come up with goals? Do you look at the available market? Do you look at what’s possible?” Well, absolutely, he was very proud of the planning that they did. And so I just said, Well, how many of your people know what you discovered about the available market and how you’re going to address it? He didn’t have any words, right? He was completely dumbfounded, because it was like, he’s got an entire organization of people who are headed toward a goal that really don’t even know if it’s possible. And we all know that there’s a whole lot to belief, to make things happen in life in general plus business as well.
The second thing is you just got to start. It’s like getting on a road trip with your kids. They may not fully understand we’re going to the Grand Canyon or anything, or how long it’s going to take and are we there yet, but we figure it out as we go. But we have the goal in mind. And so what we had talked about was, Why don’t you teach them some of the things you know? And so this idea of that macro-to-micro can really take SRC—we do it in 30 to 40 minutes, a couple of times a year. We start out by saying here’s the way the economy is: again, the industry, competitors, customers, and our own employees. And we look at all of those voices. We say what is this telling us?
And what was cool—because this guy had all the data. It just wasn’t getting past the C suite. And so my encouragement to him was, what if you show them your vision with the data? That would be amazing because it will be the first time they’ve been trusted enough with any data in any job they’ve ever been in to really understand where you’re going and to start asking questions. Because that’s really the fun part. You start to see buy-in when people go, Well, wait a minute. If the market’s only 500 million, how are we going to be a billion-dollar company? I want someone to question those things.
So the technical part, the nuts and bolts of planning for us, are to literally do that: say, what will the economy do in the next one, three, five years. We’re even looking 10 years out to say what’s possible. We know the world breaks every 10 years. We just don’t know exactly when or exactly how. But if we don’t plan for it, we’re probably—you’re going to be a victim, not a person positioned, or an organization positioned, to take advantage of it. What I’m getting at here is, we’ve got to look out far enough to say, What’s possible? How would we attack that? How would we get that market? What do we do if there’s a problem? And then we are asking for people’s buy-in to our plan, rather than just dumping it on them.
Loren Feldman
That’s what I want to ask you about, Steve. It sounds a little bit like what you’re describing is you want him to teach his employees enough to understand the numbers and the goals and the plan that he puts in front of them. Is that right? Or do you actually, at the Great Game of Business, encourage owners to get their employees involved in the actual planning and participating in coming up with the numbers and goals that the company then shoots for?
Steve Baker
Yeah, good question. In the early days, for anyone, you’re gonna have to teach them. There’s no doubt about it. But you don’t have to teach them everything. They don’t have to become accountants or CFOs, or even operations managers or anything like that to understand some of the things. We’ve just got to start somewhere. And with the ultimate goal of, Yes, I do want high involvement, because the higher the involvement, the much more likely we are to hit our goals. And frankly speaking, we see some incredible forecast accuracy, not necessarily in what products or services are offered over time, but our five-year forecasts are 97-percent accurate.
Yeah, Loren, that capturing the wisdom of your team is so important. The first story I heard at SRC all those years ago was the story about Jack getting press in the early days for turning around this dying division of International Harvester. And, you know, when he tells me the story, I can picture him cruising through the factory with his loafers and his blazer, and he’s feeling good. And, you know, “Good job, everybody. Let’s go!”
Imagine you’re doing that. You’re cruising through the factory saying hi to people checking on things. You’re just doing great. And he sees the janitor pushing his broom, and [the janitor] says, “Yeah, all this debt-to-equity equals job security stuff is crap.” And Jack stops in his tracks. He’s like, Dave, what’s wrong with you? What are you talking about? He goes, “Well, I happened to be looking at our financials, and it looks like about 76 percent of our receivables are in the truck market. Well, I happen to know there’s a recession in the truck market every seven years. So it really doesn’t matter if we do our jobs or not, you’re still gonna lay us off.” And he kept pushing his broom.
Jack is like, Wow, what are you talking about? And think about it. They had bought a dying division of International Harvester. They had one customer, International Harvester, who was a financial disaster, and they were so busy saving jobs that they hadn’t looked out. And so this was the first time where Jack, like a captain of industry, got his managers together and said, “Did you know there’s a recession in the truck market every seven years, and we have 76 percent of our business tied up in one organization?” You know, the point of the story is this: They said, “Well, wait a minute. The whole idea of this business was to save jobs. That’s what it was. And what are we talking about? We’re gonna have to lay them off if we hit a recession? We are not diversified.”
So what they did is, they looked out there and said, Okay, at that point, the game was all about hours in the shop. How many other products do we need to produce to offset these diesel engines that we would lose if there’s a recession? And they said, Well, what goes up in a recession if everything else is down? And they’re like, well, car parts, because people hang on to their cars longer. Okay, let’s do automotive engines. We’re going to need four engines for every one of these. It turns out Dave Skidmore, the janitor, was a burned out Merrill Lynch broker. You know, during those times, the Carter years, a lot of brokers left the markets. They said, “I just need something with no responsibility.” And as it turns out, Jack was able to learn from that.
Loren Feldman
I want to know how you’re hiring janitors at that business. I was fortunate enough to attend your terrific conference in Kansas City last September, where I kind of got the hell scared out of me by the economic consultants that you put up on the stage, who predicted that we are going to be hit with a depression in the 2030s. That’s depression with a D, not unlike the depression in the 1930s. We’re talking about planning here. How do you think about something like that? How do you plan for a depression?
Steve Baker
Well, first of all, you’ve got to get over the fear.
Loren Feldman
I think fear is the right response.
Steve Baker
Absolutely, fear is the problem, right? And think about the last Depression: “The only thing we have to fear is fear itself,” as Roosevelt said. What we have to do is we have to say, Okay, look, we know it’s coming. We have the silver tsunami happening. When this pig goes through the Python, so to speak, we’re going to run out of people. Look, Japan is already dead, as far as zero population growth. Germany is already dead. And when I say that, you know what I’m saying? It’s about their workforce. China by 2050, will be half the population it is today. Why on earth does Steve Baker know this stuff?
Loren Feldman
Half the population or half the population growth?
Steve Baker
Half the population. Remember, they had a one-child mandate for many, many years. They did it to themselves. Here’s the thing. We’re going to be in a pickle too. One of the things that will save us, believe it or not, is that we do have people that want to come to America and make a run at it. So the thing is, we’re still going to have a problem. And when you look at something like that, as harrowing as a depression sounds, you’ve got to look at it through the eyes of the experts that you can trust. We trust ITR Economics, because they’ve been doing this for something like close to 80 years. They’re 90-plus percent accurate. So as soon as you get over the nausea and the terror of, there’s going to be depression, you go, Well wait, is it going to be like the ‘30s? Is it going to be different? What does that mean?
Our approach to it is this: We know it’s coming. There’s still years to go. And we learned something in the last recession. It was, hey, let’s do this: let’s set aside a war chest. And this war chest is not to be covering payroll. It’s not to be covering the bills, so to speak. It is for opportunities that will present themselves during the next recession. We’re approaching the depression the same way, because guess what: if we walk into the depression with 150 million in cash equivalent, well, if it doesn’t happen, we’re just rich. But if it does happen, this is how we grow the next 40 years. It’s to take advantage of all the things that will be on a fire sale.
The key is, you want to buy when everyone else is selling. You want to buy when there’s blood in the streets, and it’s not that we’re heartless, cold capitalists. It is that someone’s gonna buy it. Why can’t good people buy it? And why can’t we create opportunity, jobs, and wealth for the people who want to be a part of our organization? You can either be smart, or you can be a victim. And I choose to be smart.
