diamond journey jewelry

"top of mind" with thom ruhe, episode 18,4/12/2013 >>> hi. i'm thom ruth of the kauffman foundation.and today on "top of mind," we're going to take a stroll through the entrepreneurialjourney of one kansas city's greatest entrepreneurs, barnett helzberg, jr., former ceo of helzbergdiamonds. this is "top of mind." >>> today on "top of mind" i'm here with anicon of kansas city, barnett helzberg, former ceo of helzberg diamonds and founder of hemp,the helzberg entrepreneurship mentoring program. barnett, thank you for joining us today on"top of mind." >> thank you, i'm thrilled to be here.>> well it really is a treat for me. i have to tell you, because i get to meet entrepreneursall over the world, but the distinction you

have at least as it relates to me, you'rethe only person i know that has ever sold a company to warren buffet. and you know,that guy knows a thing or two about entrepreneurship and has some business savvy. so you know,i have to, i have to laugh, when i first saw your book, "what i learned before i sold towarren buffet," you know, for those of you who have ever had this book, the funny picturethat i really enjoy is, there's on the cover there's a picture of barnett. now, is it you'retaking his wallet? >> yes.>> okay. so you're taking the wallet from warren buffet. which really says something,doesn't it? what were you thinking? what were you trying to say with that?>> he has a great sense of humor and we were

shooting these pictures. and this one wasn'treally for the book. he just said i'm going to hand you my wallet. and of course that'sthe one they picked up for the cover of the book. so that was>> now was it heavy? like could you hold on to it? it looks like>> barely. >> well, you know, kidding aside, i thinkto get started for the episode today, if you wouldn't mind, could you share just a littlebit of the story of helzberg diamonds and, you know, how it is that you came to havethat experience and eventually sell your company to warren buffet?>> well my grandfather started it in 1915. and i think i just figured out how he gotenough money to start it. someone gave me

a book about prohibition. and this is my theory.in the days of prohibition, before prohibition, if you had $200 and he was a russian immigrant,you could start a saloon if you would agree with the beer company to only buy their brandforever. they'd pay for everything, silverware, the build out, everything.>> really? >> and he didn't like being in that business,i think he saved his money and was able to go in the jewelry business.>> so that's how he transitioned and he did that around 1915.>> right. >> and then from there did it, just was itlocal? was it one store? >> it was in kansas city, kansas a 15 footwooden front. about three years later he had

a stroke and my dad, believe it or not, atage 15, took over the business. >> wow.>> and loved it. and he really broke a lot of the rules, normal he didn't just copy everybody.he had his own ideas, and really, unique and quality ideas. and actually he was in businesswith his brother for a while. but my dad forgot the key to the store one day. and his brothersaid you're irresponsible. anybody that wouldn't would forget the key to the store i don'twant to be in business with. but they were great friends all their lives. but he didn'twant to be in business with this irresponsible >> so they split off of that just one absentmindedmoment? >> so then they both had jewelry stores. myuncle moved to wichita and had the wichita

store there.>> now which brother had more commercial success? and i think i know the answer to that.>> probably my dad. but my uncle was killed in 1934 in a car wreck. he was one of thesepeople that drove like a maniac. and he always told my dad, a miss is as good as a mile.but was it a miss i was six months old. and it wasn't a miss.>> wow. >> so he died. and so my dad bought the storein wichita. and so they were very young in those days. and really neat old ads meet thehelzberg boys where diamonds they really did neat things.>> now did they so at 15, you know, that's a heck of a thing to step into as a child.and i imagine he matured very, very quickly.

you know, how did he handle, you know, 15,16, 17, 18 years old, you know, all of what we would perceive as the adult actions ofmanaging a store, you know, from marketing selling and whatnot?>> you're talking about adult actions. he only told me about one or two things. onething that was tough. and i think that was telling, his uncle he had dirty fingernailswhen he worked for him. and he always quoted that.>> really? >> but i don't know, he was a natural i guess.it's just amazing to me. >> that's great. you know, i think then atsome point you come into the picture. you know, eventually gets married and starts havingchildren. was it something that you grew up

with so that>> yes. >> you were around this?>> oh, yeah. we, of course, talked about it at the dinner table. and i think one of thegreat favors he did us was have us work. and frankly, some of my folks' friends thoughtit was just horrible. we'd come home for christmas from college and we'd work. it's busy, that'sseason. and of course, we might go to a party and be there late. and i think, some peoplethat well, i think it was the greatest favor he ever did us.>> and why do you say that? >> well, i think, you know, we grew up ina family with privilege. and you just have no idea, i'll never forget, the nicest ladyin the world, but i just thought, people couldn't

be this nice. she was no phony. the qualityof people and you learn about people. and you just get to appreciate working peopleor whatever you call 'em. and also, frankly, i was a very timid kid. and all of sudden,i found out i could sell. and i started to get some confidence. and that's what i love.and that's almost everything all i'm good at i think today. and so i just loved it.>> you know, we've talked, we know each other, you know, outside of taping things like this.and i know personally that selling and the selling skill is a passion of yours. you know,maybe for the benefit of the viewers watching this interview, you know, can you expand onyour philosophy around that? why, especially from an entrepreneurial perspective is thatselling experience important in the arc of

a company, especially as it related to growinghelzberg? >> there's a new book called, "to sell ishuman." daniel pink wrote the book. and he said if you asked ten people who's in selling,one will hold their arm up. then he did research, 40 percent of life, all of us is selling.it is just vital. and i think to be able to project yourself into the mind of other people,and maybe help them and not just think of what they think you're going to do. one ofmy favorites was i'm showing a ring set. one is $1,200 and one is $1,000. and they saidto me which one looks better on her hand. and i said the $1,000 one. i think they wereprobably surprised that i tried to but it did look better. and, of course, i was veryhappy. that was a very big sale in those days.

but i think instead of just thinking how ami going to get more money out of you if i want to help you>> right. >> and serve you. obviously it is a very happybusiness as my dad called it. and my mother by coincidence my stars were lined up. mymother's father was a retail jeweller on main street in kansas city, missouri.>> oh really? >> my dad's father was a retail jeweller inkansas city, kansas on minnesota avenue. so my stars were pretty tightly lined up. i don'tthink they ever knew each other. it's just, you know, a wonderful business. because peopleare coming in, they are happy. this is not a new refrigerator.>> right.

>> this is something you want to buy. andyou want to show someone you love 'em. >> it is an elective for sure.>> so it's a very emotional, exciting business. >> so here's, you know, i was listening toyou answer that question. what rang in my ears was authenticity. you know, yeah, it'sprobably in your interest to recommend the $1,200 ring set but you said the $1,000 ringset because it looked better. >> it did look better.>> and you know, it has been my experience in my own companies that often authenticityis a hard thing to fake. and salespeople or, you know, just professionals in general thattry to fake it can rarely pull that off. >> and people are very smart of every age.and they know when it's not authentic.

>> yeah. i would believe you on that. andi get that. so you know, so you had this kind of authenticity, this ethos in your company.you're right, it's a happy industry. i'm buying it for engagements and holidays, and you know,what's not to love about that business. so i'm sure that was a factor in the growth ofhelzberg. like how, you know, how long and what was that arc, that journey like thatyou were growing it >> it was very interesting.>> to the point that you sold? >> we took a lot of wrong turns.>> really? >> i think that we might have been prettyclose to going out of business, but i didn't understand accounting enough to know that.we went into we had a lease in one of the

very first covered malls in the country, wardparkway shopping center, kansas city, missouri. and we were so smart, we had a clause thatif you don't build it in two years we can walk away. and frankly, my dad was ill andthe attitude wasn't and without agonizing we pulled out. and we had downtown stores,they were going downhill. and we were just struggling. christmas was miserable. because,you know, every year the downtowns were going down. and so then because of some competitorsthat had done it, we made another great error and we wasted years of progress. we went intothe licensed department and discount stores running jewelry departments. and some mademoney, some didn't. you didn't control your destiny. and now i'm always extremely lucky.how were we lucky? we sold all but two of

those. but we had about 39 stores in departments.i think we closed 38 of them. we had to transition the whole company over to shopping centers.but one day we went to the bank, and the suppliers in our industry would try to load you up andsay you don't need to pay until january 10th, don't worry about it. and january 10th came,we mailed out the checks. and of course, with great forethought on january 11th we wentto the bank. well, i had a letter that said you can have $500,000. i didn't read the lastparagraph very well. it said you had to have some kind of good shape.>> right. >> and the bank turned us down. and all ofsudden i thought, you know, you can be a failure too. just because you were raised in a fancyhouse and all of this, you can be a failure.

and my heart is pounding. well i learned alwayshave two suppliers. so we went over to kansas city, kansas. the breidenthals had backedmy dad forever. and their question was, how much do you need. and it took about 60 secondsto make a loan. so they saved our company. we would have ruined ourselves. so that wasa very valuable experience. >> you know, i'm glad you share that, becauseagain in my capacity i get to have conversations like this. and you know, so what i heard youarticulate is a fairly common experience that successful entrepreneurs have. and that is,not confusing cash flow with profitability. you know, i bet at the time at january 10thwhen you even shipped out the checks probably on paper you were profitable. but if you can'tcover the float, you've got to close the doors.

>> i'm not an accountant, but as far as i'mconcerned all that matters is cash. create cash>> right. >> that's the business, not profit. anothermistake i want to talk about is a great example of an emotional person making an emotionaldecision without enough agony and diligence. and almost destroying the future of the company.>> wow. >> and here it was. so we went into a mallthat was not a good mall in the denver area. and my dad and max garr, our real estate manfor 50 years, they wanted to go in. and the deal was ridiculous. it was so good. theybuilt the store. they did everything. i didn't want to go. p.s. the store was a great success.and we had an exclusive. in those days we

thought we wanted to be alone in the mall.our competitor built a store in spite of our lease. and we i we sued the landlord and thecompetitor. and why was that wrong? here's why it was wrong. facts don't really matter.what matters is how people feel. we could have been blacklisted in the entire landlordcommunity from doing that, and some people were, and never gotten another store in amall or a good mall. >> wow.>> so i risked the entire future of the company with a very emotional, dumb decision.>> so at what point do you get to critical mass? and i don't think how many stores thatis that you start saying, you know what, maybe i can find somebody that wants to buy thisfrom me.

>> well it really wasn't how many stores itwas what i saw happening. i saw myself getting lazy. i saw myself>> i find that hard to believe for the time i've known you.>> not living on airplanes like i had before. because between looking for new locationsand visiting stores, i was gone a lot. and frankly, what i saw happening in the futurewas tremendous escalating of real estate rents. and a difference in the risk reward ratios.my dad had a lot more courage than i had. and he had paid $30,000 a couple of places.and when i started making these $10 or $15,000 versus 5 percent, well, the figures are astronomicalnow. and i knew it was coming. i couldn't grow up to the modern world. and i just thoughtthe whole risk reward ratio was different.

so those were some of the things.>> and i wonder, you know, for a lot of people that have this journey, they have a partner,significant partner that's part of that journey. i happen to know a little bit about you andthat you have a significant partner in your wife. and how she influences a lot of thethings in your life and decision making. you know, is there, was there a role there? imean, i have to imagine to she was >> no, truthfully, and i don't know what shewould say today. she wasn't happy, but she really had tremendous feelings as i did aboutthe family business. and i don't think she was thrilled with it. of course, i broughtmy sons and my wife into some of the selection when we talked to morgan stanley and thesedifferent people. so i i don't think she i

know she was not thrilled at that time.>> yet you still went ahead with that decision? >> yeah, i did. and i probably i was rightabout my predictions and the difficulties. but i probably didn't put enough agony intoit. >> you know, as i think of your life trajectoryand the success that you had with helzberg diamonds and here we sit, you know, in thekauffman foundation, the house that mr. k. built, you know, who had a similarly successfulrise and the experience that he had, you know, in entrepreneurship afforded his intentionto live out in the legacy of the foundation. i know you are very passionate now about,you know, giving back or paying forward. you know, the second book i have here is reallya toolset that we use in your organization,

the helzberg entrepreneurship mentoring program.mentoring i know is a big, big passion for you. perhaps you can, you know, help us understandwhy you see that in such a priority lens that you do, and what drives you to support a programlike hemp. >> well as you know, mr. kauffman was oneof my mentors. and your foundation actually backed our startup financially as well asemotionally. well i think the proof has been in the pudding. if you read this book you'llsee that we have created jobs. we've actually saved companies. and we're active people,i mean, these mentors. and frankly, after being in one business 39 years it gives meexposure to a lot of exciting, fun businesses. and i don't consider it giving back. i considerit selfishness because i have so much fun

out of it. and frankly, it's more fun thanhanging out with my contemporaries with their new knees and their new hips and all of thesethings. so it is very, very exciting. >> well, you know, i'm certainly not surprised.obviously i hadn't mentioned yet on this interview but i will now. you know, i have the privilegeof serving on the hemp board. it really wasn't even a hesitation when you asked me to joinbecause the work the group has been doing has been so great. and i agree, you know,it's really a big way to give back. when i look at the potential that mentoring has tounlock this kind of latent potential that's in the economy, it's enormous.>> well i look at it as a renewable, nonpolluting underused resource. and it's there. and it'screated jobs. it saved companies. i mean,

the stories are absolutely amazing. so it'sjust like it's there and we need to use it. and there's a lot of people that are anxiousto help. >> here at the kauffman foundation we're obviouslyvery passionate about entrepreneurship. we study it. we promote it. we celebrate it.and i know you know this because you participate in some of the programs like 1 million cupsthat are here. so i have to think now back when, you know, you were building the helzbergempire and maybe you didn't even consider the title of entrepreneur. but you certainlywere because long before the word was in common use the concept, the people that were existed.how would you compare and contrast like what the entrepreneurial environment was then towhat you see it today?

>> you just can't even compare it. becauseyou have limitless resources and people to talk to and people to share the ups, the downs,and help you understand that it's not easy. they're going to have a lot of surprises.failure is a big part of success. and i just think it's a wonderful time for entrepreneurs.>> well today on "top of mind" we had barnett helzberg in. and, barnett, i just want tothank you again. what a great opportunity it has been to have you in the seat so tospeak. i want to thank you for sharing, i mean it's just decades' worth of advice that'sjust not easy to come by. and you know, it has been a real thrill for me to get to knowyou and serve on your board at hemp, to see how you've interacted with the ecosystem herein kansas city.

>> thank you. well i just hope there's benefithere for the people watching. and especially in these errors i made. i hope they can avoidthem. >> well let's hope that they will.