Conversations With Entrepreneurs - Mike Leven - US Franchise Systems and Marcus Foundation
"The Journey" - 20+ min. podcasts that let you wrap your mind and heart around the experiences of those business people and entrepreneurs who captivate you and motivate you. The emotions of the highs and lows are captured in a way that not only shares the experience but moves the soul. You won't help but find a nugget of truth you will write down and carry with you on your personal journey.
In addition to being a hotel industry icon and one of franchising’s most innovative leaders, Leven has served many industry organizations throughout his 45-year career, and has been active in numerous civic organizations.
MAL: Thank you very much. Can you hear me? Okay, I don’t know if my voice will hold up. When you said it’s a long week and today’s only Tuesday. Was I … did I miss something? It must have been a long weekend or something like that. I haven’t been at Cornell for about 10 years. So I’m moderately rusty in terms of my speaking to students and faculty members and I was asked today to talk a little bit about entrepreneurism and I want to give you a little bit of history and I’ll talk to you for maybe 15 or 20 minutes because I know it’s after lunch and I don’t want anybody dosing off and then we’ll open up the floor for questions. I’m sure you have a lot of questions you’d like to ask about my own career and things that I’ve done and what's entrepreneurial and what isn't and I’ve done some key words up here to just remind me of what I want to talk about today and Leven01_mythsAboutEntrepreneursLet me start off by saying that I wanted dispel a particular myth about entrepreneurs. Most of you probably feel that an entrepreneur in order to be defined as such would have to start his or her own business and I want to make sure you understand that you’re not looking at a young entrepreneur here because I worked in someone else’s businesses for 35 years before I actually became an entrepreneur by definition of starting your own business. However, during that 35 year period, I’ll give you some examples of entrepreneurial activity that I had to go through during the course of working for somebody else. So by no means do I want to leave you with the pure statement that being an entrepreneur necessarily means that you can… you’re in your business because entrepreneurial activity takes place daily not only in business but in institutions even in this one, like this one and academia, believe it or not or in other institutions such as religious organizations, political organizations and others where there are always people who effectively have this kind of a look and I am hiding this over here… this is supposed to be an unhappy face. My own personal belief is that entrepreneurism really begins with a level of dissatisfaction, a certain amount of unhappiness, a certain amount of thinking about making substantial change or starting something that will end up making a change in the status quo. So in fact you are this kind of a person, I’m not a cartoonist… this kind of a person and you are happy with everything. I was going to ask… is everybody happy here? Are you happy? Would you raise your hand if you’re happy all the time? Would you raise your hand if you do have somethings you’re unhappy about? You can raise your hand. Okay great. So we have potential entrepreneurs here just by the fact that you maybe unhappy about something. Now unhappy about something means that you’re not unhappy about something that just happened now and there’s … and that’s the last that’s ever gonna happen. Unhappy about something means that you are going to force a change or begin a change. If the word entrepreneur, I think entrée means enter, I think, and enter means begin or start. I convert that a little bit to saying it actually means change something. So today when I was in my hotel room, I was looking at the shower curtain rod. Now all of you who stay in hotels now are fortunate enough to have a shower curtain rod that basically is oval or runs this way. The reason that happened is because somebody finally after a 100 years got tired of having a shower curtain wrap around them every time they got into the shower and said, I’m going to do something about that. I’m going to change that. And so as a consequence, somebody sat down and developed this rod. Now it took probably 15 years before hotels, traditional hotels changed their shower curtain but today if we go to a Marriott, a Hilton, a Holiday Inn, if you go even to Statler, you will get this particular rod but it was an individual who was unhappy with the fact that he or she was standing there with the shower curtain draped all over them and developed this technique. So changes and progress generally come … we call entrepreneurial activity or inventive activity that changes the course of history. I’m not saying that the shower rod is gonna change the course of history but it comes from this. If you’re happy and if you’re satisfied, there’s a good chance that you won't engender any change on what you’re doing. OUT Leven02_bureaucraticCapitalismNow many of you particularly the students who go out to work from here and work in corporations or businesses that exists will be put into positions where you may get happy for a while. The odds are that you won't be happy for very long and the reason you won't be happy for very long really comes back to this theory. A man by the name of Carl Schramm who happens to be on this campus today, I think he’s teaching at the business school or lecturing at the business school, wrote a book called entrepreneurial capitalism and which I read about 6 months ago. He is the head of the Kauffman Foundation which is not a similar foundation to the Marcus Foundation but the Kauffman Foundation out of Kansas City spends a considerable amount of time in developing entrepreneurism and he wrote this book describing the American economy and mature economies in the world that essentially have all begun with entrepreneurial capitalism, somebody starting a business or changing a business, developing a new concept and a new situation and as the business grows, becomes bureaucratic capitalism. Bureaucratic capitalism simply means that a lot of people go from here to here and become happy. They also become risk averse. Entrepreneurism by its nature creates risk, takes chances and really in a sense in some cases gambles or takes… you know, it takes a financial risk. When you’re in bureaucratic capitalism like mature companies what happens is you get structures from the top down where people trying to protect their jobs resist change, resist innovation and as a consequence spend their time protecting themselves. People in the entrepreneurial world don’t. They spend their time taking risks not protecting themselves and they will take new and innovative techniques. OUT Leven03_bureaucraticCapitalismAnecdoteLet me give you a couple of examples that in my own history. In 1961, which I assume to almost everybody here was the dark ages, certainly to me it seems like the dark ages now, and when I was talking to Chris Hart before I was saying that when I look at the Roosevelt Hotel in New York City which is soon not to be a hotel any longer which is probably good because it’s really a lousy hotel, the … where I started working for a company was then called Hotel Corporation of America and became Sonesta Hotel. Some of you may know that chain. That hotel, I was hired as a sales promotion manager in February of 1961 and I started there and the job, believe it or not, paid $98 a week and more interesting than that was that I was told by the personnel director that if I worked there for forty years, which will be 2001, I could retire very comfortably on the pension that was given to me from my salary, $40 a month. I can't fill my car up for $40 a month today but at any rate that was the deal and my job was defined as changing the signs in the elevators and all the promotional material that was around the hotel, working on brochures and that kind of material for the people who use it both in banquets and in sales for conventions and things of that kind. We had a bar at the Roosevelt Hotel called the Club Car Bar that was actually a railroad car that was built into the side of the hotel at the entrance to Grand Central Station and I was young then and in the windows in front of this bar, there were flowers on both sides. I thought that the flowers were misplaced by being in the Club Car Bar because I don’t think people who go to a bar necessarily are looking for flowers in the window, maybe they are or maybe they need the flowers by the time they come out of the bar but this was a bar that everybody went into at about 5 o’clock before they took their trains from Grand Central home. So it was a very busy place, and since I had the job of changing the signs and doing the promotion material, I decided that I would cleverly in a very entrepreneurial way by the way, find a sponsor for the windows and that I could put in their product. So I marched myself down to the 24th street to the Empire State Building, I believe at that time Lionel Trains had their office there and I … being a young upstart sales promotion person, I walk into the Lionel sales promotion manager and I said look, I have these windows and these windows, there are 100,000 people a day coming and going and I said, I’ll give you the windows if you give me the trains. Seemed logical to everybody here, I mean … it’s a semi… is it logical… tell me now because I’ve been telling the story for 46 years, it’s got to be logical. At any rate, I get the sales promotion manager to provide me with the trains and I get the key to the windows, I forgot where I got it, and I put two trains … cars in both of the windows and it was … really I stood back and I looked at it and it was beautiful and really perfect and I would watch people go by and they would advertise the bar as a club car and the next thing I know I get a call from the controller’s office and 1961, I have to admit that when I got a call from the controller’s office, I didn’t really know what a controller was. I hadn’t been to a school like this. I was a liberal arts graduate and a communications postgraduate and I had no real hotel experience and I didn’t really take a business … any business school courses. So when I got a call from the controller’s office, I had to see who’s the controller. So anyway I march up and there’s this … what appeared to me then as a 23-year-old or whatever it was at that time, 24 years old, as an old man this guy must have been in his 40s or so… said to me, you’ve got one heck of a nerve. And I had no idea what he’s talking about and he said, I asked but why. He said, why did you change the windows in the… to the trains and I said, well I thought it was my job. He says, well, it’s not your job. He says I put the flowers in the windows and I want them returned into the windows. So I stepped on a toe with the controller which became a natural habit of mine for many years thereafter and ended up having my first conflict with going from an entrepreneurial person to a bureaucratic person. I immediately ran into a corporate layer of somebody who’s ox I gored or gored his ox or something and the end result was I had a conflict. So I began to learn in 1961 that taking risks or making change that you think needs to be done, you can't necessarily get it done in a situation with layers or you have to find ways to get it done that allow for understanding that kind of resistance that comes along. OUT The reason I point this out not to belay the situation, is that … Leven04_takingChargeWhen you go out to work and you work in corporations or businesses that exists, it’s not a purist scenario. It really is not about making changes for moving forward without… you can't just do it, you have to go through steps. Many years later, 35 years later when I finally decided to start my own business, people ask me today, what made you did it at 58 years old, to start your own business and I said, I got simply tired of going through the steps to make the changes I wanted to make. I wanted to be in charge of making my own changes and taking that risk, right or wrong, I made plenty of wrong ones by taking that risk. So when the opportunity presented itself at 58 years old when I was president of Holiday Inn, to step out and start my own organization, I took it. For many of you or some of you, you will take that opportunity a lot earlier. I took it later and the reasons I took it later was I had other obligations, family, children, financial responsibilities that didn’t provide me the opportunity to take the risk to be my own boss so to speak. And I want to leave you with the fact though that in this area, you can still try to do it and I did for many years in a variety of situations from the Plaza Hotel in New York to the Dunfey Family when I was Vice President of Americana with the Dunfey Family in 1973, when the airport in Dallas closed. It was Dallas Love Field. Some of you may … I don’t know if anybody here is from Dallas but it’s not reopened but in 1973, it closed and Dallas Fort Worth opened. The DFW opened. And I had a hotel called the Royal Coach Hotel which was at Love Field. It had 600 rooms and the hotel made a good occupancy. There was about 75% occupancy, we had 600 rooms and three different buildings and it was here I made one of my great entrepreneurial decisions because once the airport closed the occupancy went from 75% to 10%. So we were selling 70 rooms a night instead of 450 rooms a night because all of the business moved to the other airport. So a couple of months later the manager of the hotel who reported to me, I was the regional man at that time I think, said … called me up one morning at about 8 o’clock and he said I’m in my office and the third building is burning, got a fire. I said, anybody in … couldn’t be anybody in it, because we were running 10% occupancy. I said is there anybody in it. He said, no. I said, well here’s my executive decision was, don’t call a fire department. However, the end to that story is that in order to collect the insurance on the building we had to rebuild the building. Now rebuilding the building at that particular time where there was no business presented a challenge ‘cause how would you rebuild a building. We held a meeting and we said, look, we’ve got to find an opportunity to build a building where there was a market. Let’s build it for a market. So we went down to Braniff Airways that no longer exists, at that time and we offered to rebuild a training facility for them that had an airline simulator in the building where the crews, pilots and flight attendant crew could be trained. So we build the building to their specifications, we put another, I don’t know 100 or so rooms in it and we ended up with a sold out building built to the spec and we collected our insurance and we had that essentially for nothing. I never found out who lit the match but at any rate we never were accused of anything. OUT So another … another entrepreneurial opportunity that occurs that forces… it forces … what will happen is that you’ll find that opportunities for change sometimes will force find you. In 1973 also when I went to the Dunfey Family Company, we had 30 or so properties around the country and the great majority of them all but, I think 3 of them were motels on the highway and then we had the oil embargo of 1973 and there was no gasoline and of course my boss comes in to me and says well, you’re the marketing director, could you please tell us how we’re going to fill this up, fill these hotels up. (00:17:08) MAL: So we had to do a whole lot of stuff to figure out new ways of doing things to create business where there was no business before and lots of my experience ended up in the early days of my career with those kinds of situations where I had to create something new that didn’t exist. So I felt myself an entrepreneur all this time and lousy occupancy means unhappy faces and you gotta do something. You can't just sit there and say, well the economy is down. The thing is not working. So therefore close up and go away. You got to do your best to create opportunities in market. Just another example without dwelling too much on it. Leven05_hotelBarStoryIn 1978, Americano Hotels had a hotel in Ocho Rios, Jamaica called the Americano Hotel actually, it was a former Intercontinental that we had taken over as a lease from the government and we’ve been running it for a couple of years and then we had another opportunity in ’78 to take over a hotel that was formerly the Hilton International in Ocho Rios as well, and we had to make a decision as to how to find an opportunity to build a profitable facility in that environment and after a significant amount of discussion we decided to do an all inclusive hotel. Some of you may take Chris Hart’s course. He teaches actually with a case study of that hotel. He taught it at the business school and is still being taught now and a decision was to try to find … to build a hotel that essentially would fit what the market demand was as opposed to taking a hotel and just creating another hotel in the marketplace and after a long series of discussions and a long series of conversations and really urging of the traditional hotel people that we had in our company at that time, in fact that was one of the latter significant discussions I had with one of the controllers. We had a … we were at the all inclusive aspect and we were talking about the bar and we were talking about how we were going to serve since this was a hotel where you could drink as much as you wanted included in the price. So the marketing person was over here and the controller was here and I was over here and the controller says, well I’m sure we’re going to pour one and a quarter ounces and the marketing person says, well why would you do that, why would you pour one and a quarter ounces, and he says well that’s because we’re … we have to measure the beverage cost. And the marketing person then said, well why should we measure the beverage cost, it’s all included in the price anyway and at the end of the day you can just figure out how much liquor you used and the beverage cost is not a significant number and so the controller and the marketing person and fighting back and forth and finally the marketing person says, look, I think we need to have a say when bar, and I said, what's a say when bar, and you hold out the glass and you say … and the bartender says to you, ’say when’ and he just keeps pouring and the controller says, well you can't do that, you’re going to spend so much. And I said, well you’re not going to spend too much because if the ‘say when’ is a long ‘say when,’ they’re not going to be sitting at the bar very long. So the end result we … everything we tried to do in building in this all inclusive resort we ran into traditional types of behavior. So the entrepreneurial way of looking at it is once again what can we do differently, what can we change from the status quo to make things happen in a different way. OUT I just got a question before this meeting started about whether you should franchise something. I was asked about franchising a particular condition that’s franchisable and I said, look don’t franchise it, license it. You can license it without going through the FDC, license it without going through lawyers. You just pay a one page license agreement and you got the same benefits without going through all that. (00:21:06) MAL: A different way of looking at solving or creating an opportunity, if your head works in terms of everything that comes up that’s traditional what you want to change, you are in fact an entrepreneur and you can be inside an organization or you can be outside an organization and understand that when you get into bureaucratic capitalism, many of you will, you look at yourselves as to whether you’re happy or whether you’re not and there’s nothing wrong with being happy in it but understand that if you want to get out of it, or if you’re with an organization that is somewhere around here, you’re going to have more opportunities to do things and here you’re going to be building shields around you all the time and this is why companies like General Motors and Ford and all these companies have had significant problems compared to a company like Toyota which has not yet reached a bureaucratic capitalist environment that doesn’t allow them to gain market share where the others are losing share as we speak. (00:22:07) MAL: So that’s a … that’s just a little bit of a … of a summary of what I think about entrepreneurism and we can talk about it for hours and hours. I’ve got about 30 minutes left or 35 minutes left. I’d be happy to take some more questions or if there’s anything else you want to know about me, what I do, why I do it, how I survived all these years which is to me a major miracle and without enemies which is even more of a major miracle because when you are a change agent and you are looking to do things differently and you are potentially going to step on the toes of those that have vested interest in what you do, to survive without scars is very, very hard to do and you have to be a good politician but I’m not running for office. So with that I’ll sit and take your questions. (00:23:00) Male: ________ how do you structure your entrepreneurial _____ organization to foster people to bring _____ change… MAL: It’s a very, very good question, Matthew and it’s funny, I was talking about this … Leven06_encouragingIdeasI think last night at dinner saying that my own personal philosophy is that each person who’s capable of providing you far more than what you think and that as a manager or as a leader in an organization what you want to do is admire, protect and generate a risk oriented environment by encouraging ideas, welcoming ideas and trying. For example, by setting an example such as … I set the example to my people that any time that somebody called me with a new product that they were bringing out in the hotel business, any time they called me, they got to my office, I saw the salesperson and more times than not I tested the product. So if somebody had an energy control mechanism, if somebody had a new soap, or somebody had new this or new that… so my people began to… they didn’t want to do it half the time but by me doing it all the time, and wanting to find a better way to do things, just not accepting the status quo you engendered in that atmosphere and the people that work for you and so I never had any problem recruiting. I never had any problem with retention and in fact I’m really proud to say that a lot of people that worked for me are in very good positions and have retained good positions and basically always talk about the environment we had which was … I wouldn’t want to call it a skunk’s work environment but it was an environment where people knew that their ideas would freely be talked about and freely accepted and we were not cement on anything. Now certainly sometimes people have ideas you can't do for either economic reasons or it doesn’t work but it would be my responsibility to define that in a way that encouraged people to keep going as opposed to discouraging them. So I met with a few people who were here today about certain situations that we were talking about in terms of their own ideas, I couldn’t say… that idea, you know, that’s going out the window, it’s never gonna work as opposed to saying, look, let’s talk about this idea and see how can we make it work as opposed to doing the way you’re going, it will have trouble working, so let’s figure out a strategy to give you a better chance to be successful, and that’s just a personal behavior characteristic. And if you’re looking for a boss when you come out of here or wherever you’re going, whatever you do and you want to be… if you think … if you like that… if you’re that kind of a person, and you want to be in that kind of environment, you can find it. OUT Male: Sir, what's your name? Male: _______. Male: ________. MAL: Yeah. Male: Let me just repeat his question a little clearer. You cannot … he asked whether or not when you’re already in a bureaucratic company, whether or not there was ways to _______ the entrepreneurial capitalism… (00:26:20) MAL: Yeah. It’s very, very hard. Leven07_changeI have a personal philosophy about business. Actually it’s about everything. It is … you know, you get to a certain age, you can become a … you say philosophy, you know, years ago, you know, when you had to take Plato, I didn’t understand what philosophy was, now I understand what it is. So I … but it’s too late to use it… so I simply say… but at any rate, my… here’s a quote, nothing good happens until something bad happens. That’s a Mike Leven quote but I didn’t steal it. I steal a lot of quotes but I didn’t steal that. What do I mean by that? In the course of normal events, in the course of normal events, individuals for the most part are not interested in changing what's going on. Change happens to them, they don’t generate change. The answer to your question is, General Motors, in order for it to go back to entrepreneurial capitalism has to go broke first or has to have such a severe problem with their stock price and whatever in order for them to move. They’re so big that they can just simply deteriorate their market share year over year by finding additional ways … Ford, in order to get money from their lending company and things like that to support the deterioration of their product and finally, the party is over, the door is closed and shut, they have to make change. So yes, it is possible for these companies to do it but rarely will they do it without cataclysmic events. Now let’s take Chrysler as an example, just being sold by Daimler to Cerberus, a private equity firm and hiring a new CEO named Bob Nardelli. He used to run Home Depot to come in and run that business. Bob Nardelli is a numbers guy, very hard-nosed guy, can cut a lot of costs and I have a very good friend at Chrysler who I talked to about and I simply said to him, look, let me just ask you one question, what's he doing about product, because you can cut all the costs you want but if you don’t have the right product in the automobile business, you’re out. He said, well it’s funny you mentioned that because he’s starting … he’s working on product. He’s hiring… he hired a guy from Toyota, he’s hiring a product guy and stuff like that and he’s doing it. Now in that particular case, they’re trying to make an attempt to get back closer to entrepreneurial capitalism. They’re going to get closer. The question really becomes how entrenched is your human resource department. How entrenched is your labor union agreements, how entrenched is the stuff that stimulates a lack of change environment and what kind of cooperation are they gonna get. So it is possible but very difficult and very hard to do once you pass the line and you can see by looking at the history of the Dow-Jones companies, if you go back and look at that, you’ll see that there are companies that when the Dow-Jones averages in the 40s and the 50s and the 60s and the 70s that have gone, they’re out of business and ask yourself the question, why are they out of business and it is because they could not move backwards. Eventually what Carl Schramm’s theory is that bureaucratic capitalism, if you eliminate this, if you take away entrepreneurs and take away the ability of people to find differences then you will not have a society that keeps moving forward and you will lose your place on the world stage. OUT Yes Jonathan. Male: You talked about entrepreneurial capitalism, would you able to talk to us a little bit about your entrepreneurial endeavors that made your ________ Foundation, given the ______ it’s a way of life ______. MAL: Sure. (00:30:18) Male: So let me just repeat his question. You were asking how he applies entrepreneurism ______. MAL: Yeah Leven08_foundationsIt’s a very interesting question because some of you maybe aware of the fact that entrepreneurial or venture capitalism has found its way into foundation giving, major foundation. The foundation market, by the way, the foundation business has exploded, for those of you who may not know, I run a foundation for Bernie Marcus who was one of the co-founders of Home Depot. He’s been a friend of mine for 20 years. He’s a very, very big entrepreneur but he comes out of a corporate environment. He didn’t start his own business till he was 50 and basically… but he was… he did the same things in his companies before that and got fired twice because of it, making changes and new people took over, etc. And everything we do… well not everything, but anything we do of a major nature in the foundation is designed to start something or change something and is measured, is evaluated and is monitored. For example, I’ll give you four things that we do in significance. We built the Georgia Aquarium, it was 250 million dollars. Bernie sits as Chairman of the board; I sit as Vice Chairman of the board. We’re involved… if I showed you my e-mails today, I got 6 e-mails here from the Aquarium president. We’re involved day to day with how the Aquarium runs. The Aquarium was designed to generate significant tourism, economic development and whatever in employment in the city of Atlanta, in the state of Georgia. It does over 100 million dollars a year in business. It’s created 3 billion dollars of development around it in downtown Atlanta, spectacularly numerous convention business, hotels, restaurants and new office building and employs about 250 permanent people and about 400 volunteers… 250 part time people and about 1800 volunteers on an annual basis. So it’s money that goes in as a charitable gift, but Bernie was involved in the construction. He was involved in the selection of the exhibits, all of that kind of stuff. He’s is now out in chairman and I have the day to day responsibility and reporting live to the person who runs it. Second thing we do is we … 95% of the support to the Israel Democracy Institute which is a think tank in Jerusalem which works on things such as the Israeli constitution which they don’t have, believe it or not, and other things such as religion, society, military and society, Israel-Arab relationships and a variety of other think tank activities in terms of ability to secure Israel as a democratic state which might be at risk from time to time. We run an organization, we founded an organization with two other foundations called the John Poe Foundation, the William Templeton Foundation that is called the center of excellence and higher education which is designed to influence and adjust higher education in the United States. I sit as chairman of that board and we help donors who want to give to higher education to give their money in ways that direct their personal interests as opposed to dumping it into the general fund of the university and helping them to … not give the money but to give the money appropriately to support their particular wishes in direct giving. Le Pillsbury and Mary Pillsbury giving a gift to Cornell for an entrepreneurism study and center. That’s the type of thing that this organization would do. And fourthly we have a thing called the Marcus Institute which has been … has received up to … nearly 100 million dollars of Mr. Marcus’ gifts which deals with development of disabled kids specifically about two-thirds of which are autistic and we do a lot of work in Autism Speaks which is an organization to get more autism research into the field. So we do things that have results that we measure that viral into bigger businesses or bigger situations as opposed to just what I call support giving which is 20,000 here for this and 10,000 for this or 5000 for this. So that’s the kind of thing we do and it’s also the kind of thing that you’re seeing with many foundations, private foundations today that essentially where in the last 15 or 20 years, significant wealth has been created because of the stock market, etc., that the founders will do these kinds of innovative and situations… so it’s very entrepreneurial from that standpoint. In fact it’s so entrepreneurial I’m working my tail off. OUT (00:35:06) Male: Sorry. Male: Name. Male: _______ creative thinking has said the downfall of business is the MBA, and he was a very strong believer of burdening lateral versus vertical thinking and then there’s a guy, Daniel Pink ______ 2005, wrote a book called the New Model of the Mind and he says the MBA of tomorrow is the MFA. Wonder if you can comment about those thoughts. MAL: You’re talking… you’re talking about the master of fine arts? Male: The MBA really is freezing people say. MAL: You know, that’s a … that’s a very interesting question. Leven09_MBAsI think that… we should not stereotype, it’s like saying is the BS in a hotel school a dinosaur too or you know… I don’t think it’s necessarily true. I think that there is a core curriculum that has to be provided; it has to be provided for young people in certain areas of knowledge that they have to have. I think the MBA that turns out somebody that works in the accounting department of Ford and is prevented from even exerting their intelligence other than factual detailed stuff that comes to their desk, you’re certainly going to waste an MBA to do that. I don’t think… you know, it’s fine to have the education but you’re not going to use it, but the individual who comes out of any decent MBA program, who has a foundation of knowledge then understands… has also desire and ability to make impact, I don’t think the MBA necessarily hurts. I think people who write books about this stuff, ten to one package it in a way that describes anything… but everything is the same. It’s really not. What you have in this room is a group of 25 of 30 people, all of whom are very different, all of whom have different personalities and different skill sets. What you’re doing is providing them a foundation of education, a way of looking at the world through an education vision. However, they then have to go and look at the world through the eyes they see when they get out and I think it’s really up to them and the environments that they’re in. Certain MBAs from schools that the peer group is not as exciting or as interesting as some other MBAs will probably have no use for that MBA but the ones that are and want it, I think can get it. So I would take an opposite… I would take an opposite view for that. My own view of education is you get as much as you can when you can because it’s going to be a gap period in your life where when you’re working, you can't get it and that … I’m a perfect example of that. I mean I stopped really doing anything outside the hotel business for maybe 30 years because 30 years every minute of my mind was focused on learning my business and learning everything that was in the business. So if somebody says something I knew about it, I could talk about it, I could relate to it. I wanted to know it. It was my… that was my PhD essentially, and then as soon as I sold my business seven years ago, or eight years ago, I started to take courses again and so now I’m learning from a whole different perspective. So I think that that’s going to happen to the young people here too. They’re going to get blocked in their ability within their organizations. But I think that the education they’re getting here or an MBAs later on … you know they’re still going to have the opportunity. So I don’t … it’s a good question but I don’t really agree with it. OUT Yes ma’am. Male: Sorry… your name is? Jane: Jane. Male: Jane. Jane: What aspect of your work brings you the most satisfaction and do you consider that to necessarily be the most important? Male: Okay the question was what led… area of work brings you the most satisfaction. (00:39:13) Leven10_mostSatisfactionI get very uncomfortable when at the end of the day I haven’t accomplished anything, that I think that when I go to the foundation and work now and a day goes by and I haven’t moved a needle or I haven’t organized something, I haven’t found a grant or managed a grant or done something that can say it was worth it that I was there, every job I’ve been in I’ve concentrated on the results and the results can be small on a day by day basis but as I look back in terms of accomplishments what's makes me happy is know that I did … something changed, something was different, something was better, something was bigger because I was there. I had a hand in doing something; sort of like an architect builds a building and he or she can look at that building and say I built the building. A painter… I can't paint and I can't architect, you know, so … I mean I can play golf, but maybe some painter can't play golf either but the point is that my score card basically is what I’ve accomplished in the past. When I went into somebody in the dining room today who used to work for me and I haven’t seen him in a year or so and he comes up and he gives me a big hug and you know, and this and that… I feel good about it because I know I had some relationship with this person that was different and wonderful but I accomplished that. So that’s what you know, to me that’s what we’re here for and that’s where I am going to be 70 years old next month and that’s why I’m still working because I think that the thing that will sustain me is the ability to continue to accomplish something and when I came here, without really a lot of preparation and I said to myself I got to leave these people, I got to leave the students, I got to leave people with something, something that they can take away with them or I failed for the day. I wouldn’t want to get in the limousine and go back to the airport saying that gee, you know what, I showed up, I talked for an hour, met a few people, wonderful, good bye. I want each one of you to walk out of here if it’s word, one sentence, one thing to say I saw Mike Leven speak, he told me this, you know it meant something, ‘cause some day, someday it will … you’ll say it, you’ll use it and I bet people that saw me speak 35 years ago and I ran in to them and say, gee whiz, I remember when you spoke at such and such and I was a bell man at the Americano Hotel in Albany, New York and you were talking at HSMAI and I was standing in the hall and I opened the door and I listened to you talk and I went out and joined the sales department, I’m now the Senior Vice President of marketing at Ritz Carlton, that was because I heard you speak. That’s a wonderful thing, wonderful thing and that’s what makes me happy. OUT Yes sir. Male: Your name? Male: My name is Ed Bevin… As the CEO… you know what… what works ________ best in terms of _______. (00:42:13) Male: So the question was when we … Michael was the CEO what worked best for ______ to motivate his employees? MAL: What do you think? Female: Budgets. Male: You get one _____. Female: Personal intention. MAL: Absolutely not. Male: _______. MAL: What motivates … how I would motivate the employee… in other words… what motivates the employee to work with me… what keeps them motivated? Not money at all. That’s the third or fourth thing on the list and don’t ever kid yourself, it’s not about money. In some professions, in some organizations, it will be hard if you’re working in Goldman Sachs not to be motivated by money but in terms of this business, it’s not money. Anybody else want to make a suggestion. Male: Empowerment. MAL: Yeah. That’s one. (00:43:06) Male: That’s what _____ make a difference in the organization. Male: _________. MAL: Closer. They’re all part of the same thing. Yes sir. Male: _________. MAL: That’s part of it too. Sure. Although some people … Leven11_settingTheExampleYou know, I remember working in hotels in New York City where the people were maids for like 35 or 40 years, housekeepers or so we call them now, 35 or 40 who were bellmen. I had a bellman who was… when I was in the Plaza Hotel in 1965, I played on the softball team there, I was the third baseman of the Plaza softball team, I was the only non-union person on the softball… I like to play softball, I don’t care whether it’s union or not, I used to play, got very friendly with the bellman. One day the bellman said to me, he lived in New Jersey, a guy named Bobby Pantikus that’s when he said, gee you know I’m playing the King and his Court in New Jersey in softball, would you like to come over and see me play, you know, and I was in … I lived in New Jersey and I went and saw the game. Thirty years later I’m walking through the lobby of the Plaza Hotel and I run into Bobby Pantikus because he’s now the bell captain and he says to me… gives me a big hug in the Plaza lobby and says I remember you, you came to see me play against the King and his Court. You know, I think you can do this. I think you have to … you have to love your people, I think you have to believe inherently that every person who works for you is critical to your success. Critical, that you cannot be successful without them and you have to convey that. It doesn’t mean you don’t discipline them, it doesn’t mean that you don’t fire them, it doesn’t mean you don’t… it doesn’t mean any of that, but you have to have a basic philosophy and I think every person that’s worked for me, I’m sure there were some exceptions but I think most of the people who worked for me believed that I believed that and that’s the … and you set the examples. You set the example. OUT Yes sir. (00:45:05) Male: I was wondering what companies in the hospitality business that you have created that… that culture that you just talked about. Leven12_hospitalityBusinessCultureWell I think in the early going Marriott created that culture. It’s no longer there but it was there in the entrepreneurial capitalistic stage, there are not anybody here who know some of the old Marriott people who were there. Budd Greiss, one of the graduates no longer alive, one of the graduates from Cornell was very critical in that early going of creating a culture at Marriott. I think most of the companies, the great hotel companies all started with cultures like that because I think you will be very successful without that, then bureaucratic capitalism sets in and then it goes away but today I’m hard pressed to think of a company now that I would think reflects that culture. What's happened in the hospitality business, I can't speak so much for the restaurant business is that, the business has gotten so big that the majors that we talk about all the time, Four Seasons at one time had a wonderful culture also and still probably maintains some of that culture but today it’s big money, big stock, big stock options and in the big ones, it’s hard to find it. In the medium size company, some of the ones we talked about, Jonathan, we were talking to Isaac this morning… some of those companies, still the medium size companies have a good culture. White Lodge and companies like that have established a pretty good culture as far as employees and of course there’s Harris Rosen’s company that I think above all, I don’t know if any of you saw Harris Rosen when he spoke here but I think the culture in Harris Rosen’s company is probably as good as you’ll ever find, at least it was when I was there a few years ago. OUT Yes. (00:46:54) Male: What's your name? Male: _______ do you believe that the shift from entrepreneurial capitalism to bureaucratic capitalism has more to do with size or more to do with simply going public… simply because the companies are called corporations and then they’re … they’re sort of dictated by ____. MAL: It’s size, it’s not public. We were a public company, US Franchise System went public a year after we were formed and it never changed our culture. It did create some other problems but it didn’t change the culture of the company. It changed some of the strategy of the company but not the culture. A small company… I think size… size is the great deterrent to good culture. It’s very, very high. Home Depot is a good example of that too, when they were growing, whatever their culture was wonderful. That culture has changed a great deal now, not only in the stores, the retail stores but in the corporate office. Very hard to get big. Look, the US government was a lot different in 1792 or whatever it is than it is today and the culture I’m sure has changed dramatically and I think it’s the same every place. You can't be big and maintain what got you there. Very hard. Yes sir. (00:48:09) Male: We have a continuing dialogue, can you … you’re taught to be an entrepreneur or is it in your DNA? MAL: That question … we talked about that question. Leven13_bornOrRaisedI think you can be taught to understand what you like and what you don’t like. I think you can be taught to understand over time what your capabilities are you’re not… or not. There were many hidden entrepreneurs in the … around that never get the opportunity to really extend themselves and try. There were some people who you would think were not entrepreneurs at all, who get laid off and thrown out with a severance and buy a franchise and end up being very successful in their own business. I think clearly just like the leadership question, there were those entrepreneurs who were born just like there were leaders who were born but I do think that you can take people who may not know what they really like and want and may not be confident enough about their own individual initiatives to be able to be pushed into entrepreneurism or in fact leadership, and sometimes the time will create an environment that creates that entrepreneurial spirit and situations will create it. So I’m not one that believes that every entrepreneur is born or every leader is born but that some… many will emerge from the environment and can do it. OUT (00:49:36) Male: Is it better to say that can be learned that other than trying? MAL: I think that’s better. I think that’s better. I think it’s … Leven14_psychologyOfEntrepreneurshipIn the discussions we’ve been having about this forum, I’ve been making a big point about the psychology of entrepreneurship of understanding, understanding what goes through the mind and today at lunch … not at lunch but at breakfast we were talking about when you see a person like Harris Rosen who’s up here or a person like Burton Sack who’s up here or some of the other speakers that you’ve had, what you should be doing is thinking about what is it about that individual, what sets that individual, what makes that person different. How does that person tick compared to yourself. What characteristics is that individual bringing to the table versus what you bring to the table and understanding the mindset of what that is, because I think that … that’s where… ‘cause you can teach that, you can teach how to understand it and then you can learn how to do it. OUT Yes professor. Male: Sorry, your name is? (00:50:44) Chris Hart: Chris Hart. With your pictures behind you, very nice by the way. MAL: Thank you. Chris Hart: I know you were on the board of Starwood and Starwood got very deeply into Six Sigma and the team at Six Sigma is _____ by a large organization to identify opportunities and creating that dissatisfaction of wow, there’s something we can fix. Any comments or thoughts on that? MAL: I was one board member who voted against it. It’s a very interesting thing that you mentioned that. This is not a setup because Chris and I have been talking about … but this never came up, but Barry Sternlicht brought that to the board and I was the … I voted against it. I thought… I’m not a big believer in what I call the corporate boondoggles. I don’t think you can substitute outside third party massive programatical stuff for your personal leadership and what I think the big companies do is they do a lot of Six Sigma kinds of activities which are brought to them by the McKenzie’s and others of the world and they feel comfortable about it but they’ve abrogated their responsibility, they’ve moved their responsibility off to other people to do the work that they should do and it takes a tremendous amount of money, a tremendous amount of effort and nothing changed. (00:52:10) MAL: Starwood’s culture went in the tank after Six Sigma. It never really recovered and I’m not a … I’m just not a big fan of that. This is an experiential comment which having been through a number of those things, they just don’t work. What works … what I think works is tea group stuff in the old days, is confrontation of the human person, is getting your hands into the stuff and dealing with people on an individual basis and I don’t think you can manage that through a Six Sigma kind of situation. Now 360 is another thing that was a big deal for years. I don’t know how many of you know about 360 or Six Sigma for that matter. You can look it up on the internet, I’m sure they’ll sell one to you one of these days but GE was a big 360 situation, 360 essentially means that it’s a confrontation between the manager and the employee on how to confront the conflict there that may… it’s sort of a beat up kind of environment and Home Depot put that in too and they put it in because one of their board members was a board member of GE and loved the 360 and Jack Welch was a big 360 guy. (00:53:22) MAL: It doesn’t do it for me and that’s purely a personal opinion. I’m not suggesting to any of you that I’m right about it. It’s just how I feel. I just think that you want to get in there and manage your stuff, you got to get in there and manage it yourself with your own people and do it. It’s not bad to have a consultant help you in an area where you have no expertise but don’t let them do it for you. You have to do it … so Six Sigma is a complex, expansive way of setting up strategy stuff and I don’t think it moves a needle. Sorry. Male: ________. Male: Hi. I’m Keith. If you had to do your career all over again, what type of things would you do differently? (00:54:00) Leven15_thingsDoneDifferentlyWell I’d probably be an investment banker and probably try to get very wealthy very quickly, so I could enjoy the rest of my life and do what I want and run a foundation like I’m doing now at 45 instead of at 70. I don’t … you know, I think if I were going… if things worked the same when I went into this business, there’s not much I would have done differently, you can always look back in hindsight about a job you took or a job you didn’t take but for me I had a really wonderful run in this business. I’ve got people all over the world that I can go to and see. I’ve done business everywhere. I’ve been every… seen things I never would have seen if I were a lawyer or a doctor or any other career. I’ve had the ability to teach and to lecture and to talk and meet a lot of people. I think the one thing I might have done differently strategically was in my own company, my partner and I conflicted over how to grow the business and he was insistent on staying in the hospitality business and I wanted to go into other franchise businesses and I didn’t insist enough and perhaps the company would have been much bigger and much more successful because we made a mistake going into a different brand but I mean that’s a tactical decision that you know, is not… I don’t think in the course of history, is terribly important. So for me, I would say if anybody gets through the 45, 46 years in your work career in the same way I did, you can be very happy, ‘cause I think the rewards far outweigh the difficulties and the stresses and strains. OUT (00:55:48) Male: What are the biggest challenges do you see _______ entrepreneurs? Leven16_challengesToEntrepreneursWell I think a couple of challenges to entrepreneurs, first of all, it’s capital. To start a business, if you’re starting a business or to be entrepreneurial in a corporation, starting your own business, it’s capital. It’s experience, it’s the ability to build a track record and if I had to say from an intangible standpoint, I think the toughest thing for young entrepreneurs is patience. You have to play the game for a while before the opportunity is going to come available. Now I don’t say you have to play for 35 years like I did but I think that you … if you keep your eye on the ball of wanting to be … wanting to be your own person and be in charge of your own destiny then the opportunity will come but you have to get experience and you have to get credibility in order to attract people, capital and expertise. So patience will probably the most important thing. OUT (00:56:55) Male: One more … Female: I’m going on the side… if you wanted to actually create your own corporation ______ activity, would you start in the finance industry and learn how to finance it or would you start in the hospitality industry if you were thinking of a hospitality venture… Male: Let me make sure they heard that … so if you’re starting your business, where would you start it, in finance or in operations … Female: To gain your experience… coming out of the Hotel School, where would you go? Leven17_adviceOnStartingI would start in the area where you could be the most expert the fastest. That if you’re a great… if you feel you could be a great operator, be a great operator, build a reputation. The most important thing is not how you start or where you start but how you accumulate the experience and reputation for yourself as a person, as a capable person because whether you start in finance or operations or marketing or whatever, if you become an expert in any of those, you can always attract the other people to work with you, that you need to form your business or your opportunity. So therefore, if you’re comfortable in finance, start there. If you’re comfortable in operations but don’t do … don’t start in something where you think that’s going to take you to a certain place where it’s not your area, where you’re best in. Do what you do best. I was lucky. I got into sales by accident and it turns out I’m a pretty good salesperson. Probably a better salesperson certainly than I am an accountant. So it was lucky for me that I could be an expert and was looked at as a salesperson all the time that I kept banging on the door of my people Sonesta saying, put me in operations, I want to be in operations. No we can't. We can't afford you out of sales. Fine. But when it came to raising the money for my business, nobody talked about what a hotel operator I was. Nobody talked about what I knew about intrinsic marketing and segmentation and all those kind of stuff. They only talked about, this is the great salesman. I’m going to back his money. I’m going to back him with money. And I hadn’t sold for years. So you build that… build that reputation. OUT