What separates a good business from a great business? Home Depot cofounder Ken Langone believes it all comes down to people. In the latest edition of The World According to Boyar podcast, I sat down with Ken to ask how he had found his path to becoming a successful businessman: Had he glued his eyes to the market? Had he stayed up nights endlessly crunching the numbers?
Ken emphasizes that two of the most important determinants of a business's success is retaining the right people and having the guts to push the envelope, because, as he said, "the world belongs to risk-takers." When I asked him why, he replied, "If you want to move the needle, you have to stick your neck out. Sometimes you get bruised, but the important thing is to always see the potential for discovery." In short, reaching the next level means having enough trust in yourself and your own capabilities to take a leap before anyone else has proven it can be done.
The son of a plumber and a cafeteria worker,
Ken graduated from Bucknell and went to night school at NYU to earn his MBA. He got his start on Wall Street with R.W. Pressprich, where he rose from working in institutional sales and investment banking to ultimately running the firm. That, however, was just a warm-up: Ken then proceeded to found Invemed Associates, a corporate finance firm - and soon began raising the initial capital used to start Home Depot, which today is a $235 billion chain that has revolutionized the home improvement industry.
Ken combines a no-nonsense approach with the sort of humility that is rare for someone who has reached his level of financial success and public recognition. He has seen it all during his career, and the lessons he has learned should resonate with today's generation of entrepreneurs. After chatting with Ken, I jotted down 5 behaviors every business person should adopt.
Let no opportunity pass you by. Others might be skeptical, citing forecasts and predictions - but gut instinct is often worth twice that. Ken has always created his own opportunities, and he described how back in 1963, his son's Christmas present helped him acquire a valuable client for his new employer, R.W. Pressprich. Noticing the manufacturer's mark on one of his son's toys, Ken looked up the company and arranged a meeting with its CEO to introduce himself and his firm (timing it for the day he and his boss, Jack Cullen, would be arriving in town on other business).
The firm, Ken had discovered, had previously tried to go public with another investment bank but had abandoned its plans. Where others would have been dissuaded, Ken sensed an opportunity. At first his boss dismissed the idea as "chasing butterflies," but by being proactive, Ken ended up landing a valuable new client for Pressprich - and two years later, the toy company was bought out for a sizable profit.
Invest in people, not companies
A company is only as good as the people it hires. Ken has said that the number of people who helped him get this far would "fill Yankee Stadium and then some."
But people need an incentive, he says, to make great things happen - so when he cofounded Home Depot, he gave his cofounders (the people who would be running the business), Bernie Marcus and Arthur Blank, a 50% share of the company. Ken had one notable condition: The equity used to hire more people before going public would come out of Bernie and Arthur's share. Ken reasoned that if the equity was coming out of their own pocket, they would issue it wisely.
By investing in his cofounders, he triggered a chain reaction of thoughtful investment that stretched all the way to the checkout clerks. As Ken said, "I am a great believer that if a business succeeds it succeeds essentially because of the people. The more the guys that have the success in their hands own, the more likely the success is to happen."
Act ethically and treat your investors fairly
Just 2 weeks before the hammer would fall on Madoff Securities, Langone turned down a seemingly golden opportunity, extended by Bernie Madoff himself, to invest in a new fund that would be superior (according to Madoff) to the securities held by long-time Madoff investors. Ken thought about it and put himself in the shoes of Madoff's existing clients, who would be left with a worse deal than his, asking himself how he would feel if he were an existing client. The answer he arrived at did not sit well with him, and - wisely - he walked away from the deal
Don't become complacent - keep moving
Ken left me with one parting recommendation: "See every competitor as a threat." I believe that's true in every field, not just business: If you stand still, you'll be overtaken by those who do not. That admonition took me back to the question he had posed at the beginning of our conversation: "The world is changing” and if you don't change with it, what's left?" By asking that, he had broadened the scope of our discussion beyond mere entrepreneurship: In life as in business, those who don't move with the times will become fossils - relics of the way things used to be.
Adopt a mindset ripe for success
After reviewing the notes from my conversation with Ken, I uncovered another lesson to add to Ken's roster of behaviors: Those who have truly changed our world have stepped out of their comfort zones to do something that has never been done before, whether it was the discovery of America or the subsequent taming of this vast and intimidating new continent: Our modern world would be unrecognizable had these explorers and pioneers not been of a mind to seize an opportunity. There is no question in my mind that if these brave pioneers had been alive when Ken Langone was recruiting initial investors for his cutting edge new store concept, they would have been among the first to see the promise of this revolutionary new business.
Disclaimer: Boyar Asset Management owns shares in The Home Depot
I am president of Boyar’s Intrinsic Value Research, an independent equity research boutique established in 1975 that counts some of the world’s largest sovereign wealth funds, hedge funds, mutual funds and family offices as subscribers. I am also a principal of Boyar Asset