I've only been able to find one biography on Bernard orNo.
That's inEnglish. That biography is over 30 yearsold.
It is really difficult tofind.
At any giventime, you'll see it for sale onAmazon.
Anywhere from $1,500 to over $5,000 for acopy.
I covered that book last year on Episode296.
And since I've read thatbook, I've become fascinated by ourNo.
And so not only are there not many biographies on ourNo, but he does not give interviews veryfrequently.
So I was excited when I saw that Bloomberg BusinessWeek, actually did this long form piece called The House of OurNo.
And I wind up reading this threetimes.
I sent it to a bunch offriends.
And as I was readingit, so many of the lessons that you and I talk about on this podcast that appear over and over and over again came tomind.
So what I decided to do islike,well, if I'm super excited aboutthis, I'm reading it multipletimes.
I'm sending it tofriends.
I should always see do an episode onit.
And so what I did is I printed out the long form piece and I went through and highlighted and added notes just like I would for any otherbook.
So let's start at the verybeginning.
The title is The House of OurNo, the subtitle is HisCompany,LVMH, bought up many of the world's major luxury brands and he's not finishedshopping.
And it was written by Brad Stone and AngelinaRaskuyet.
And so the piece starts with ourNo, Visiting HisStores.
Every Saturdaymorning, Bernard No spends a few hours checking in on histemples, devoted tohandbags,couture, jewelry andwatches.
The 75 year old chairman and chief executive officer is not there toshop.
With a strict sensibility refined overdecades, or nospots, any incongruities that might disrupt the aura of opulence that he is carefullyconstructed, then he reels off texts and emails to his seniorexecutives, describing any perceived deficiencies in bullet points of obsessivedetail.
So this idea of bullet points of obsessive detail anytime I do an episode on people that are still alive when the episode comes outinevitably, I will get all these stories back for people either know the person I covered or had worked with them for a long period oftime.
Thisis, I got a bunch ofcrazy, justincredible,uh, our No stories after I put that episode out lastyear.
And a lot of them centered onthis.
His, he's just the insane level of attention to detail that hehas.
That idea is going to repeated throughout thestory, but it also comes up over and overagain.
And these anecdotes of stories that I heard abouthim.
And as we're about to see with this story that hisson, his oldestson, Antoine Arnotells, his dad has this extensive database in hishead.
And so Bernard sends his son amessage, says he recalls one such missive from hisfather, critiquing a counter at a store inTokyo.
He loved the first concept I did at Burludi with an architect 12 yearsago.
He comes back to mewith, do you remember that bar that you had in thatstore?
Put ithere. Hisson,Alexone, is working at Tiffany Company and also has astory.
He says a similar story from his father's recent visit toDubai.
He made a bunch of comments that werevery, very detailed oriented from the chairs in the stores to the shoes that the salespeople werewearing.
Things that you won't typicallynotice, but once you've seen tens of thousands of stores over theyears, I think it's what comes to your mindimmediately.
So I want to pausethere.
I think this idea of what he just said is extremelyimportant.
Once you've seen tens of thousands of stores over theyears, I think it's what comes to your mindimmediately.
This is something that pops up over and over again in these biographies that you and I saidtogether.
The importance ofquantity, the importance ofvolume.
I think of these in two differentdomains.
One, the successive learning that you see that all of these top entrepreneursdo, andtwo, just the decades of decades ofexperience.
So what I was thinking about when I got to this section is something that's come up over and overagain.
It's not that they are these top entrepreneurs and inventors andinvestors.
It's not like they find themselves interested in something and they'll read like one book onthem.
They will devour wholeshelves.
That line devouring whole shelves comes from this biography on a young WinstonChurchill.
It said while other politicians were content to get their information from a scattering ofnewspapers, he devoured wholeshelves.
It says Churchill began sleeping withencyclopedias.
This is something that pops up over and overagain.
Edwin Lann found her of Polaroid when he was a youngman.
He read every single book in the Library at Harvard onLight, which was his field of scientificexpertise, hisinterest.
When he was done withthat, he drops out ofHarvard, goes to Moose New YorkCity, goes to the New York City PublicLibrary, and does the exact samething, read every single book on his field ofinterest.
ThomasEdison, when he was a young boy working on therailroads, they would stop over and I thinkDetroit.
He would usually have several hours tokill.
He read the entire library inDetroit.
JeffBezos, when he was a youngman, there's a story in his biography aswell.
He would spend summers with his grandfather on the ranch inTexas.
His grandfather and grandmother would take him intotown.
He'd read the entire science fiction section of the locallibrary.
I got this to have a two hour conversation with Sam Zell before he passedaway.
He was exactly likethis.
He had an entire database in hishead.
When I met with CharlieMunger, same exact samething.
He had entiredatabases, both Sam Zell and CharlieMunger, had entire databases in theirhead.
We saw the samething. This idea of the importance ofquantity, the importance of volume and what that allows you to do quickly after you've built up this compoundedknowledge, think about QuentinTarantino, I just did an episode onhim.
He has a famous line in thebiography.
Hesays, I didn't go to filmschool.
I went tofilms. And it's obvious when you read abouthim, when you listen to hisinterviews, he's got this comprehensive database of the history of movies in his head that he can call up and use any time that hewants.
And it comes from the fact that he's been watching obsessively and studying film for 50years.
We just went overthis, you and I just went over this last week with SamWalton.
Sam Walton had visited more retail stores than anyone else on theplanet.
The week beforethat,J.
PaulGetty.J. Paul Getty in both of hisautobiographies.
He talks about the fact that he owned over 200 businesses that he had 50 years ofexperience.
He shares stories in those books that he could walk on a site at one of his plants and immediately see the flaws that were invisible to everyoneelse.
That is exactly what is happening in these stories with BernardArnol.
The fact that when you've seen tens of thousands of stories over theyears, he's been at it for fourdecades.
You start to notice the flaws immediately that other people are missing because they don'thave,again, they don't have thevolume, they have the quantity that you'veexperienced.
This is areally, really important point and this is the very firstpage.
Let's goon. So it says the past 40 years or no has assembled the world's largest luxury conglomerate and globalized a sector once constrained by the limited ambitions of family-owned European companies and encrusted intradition.
Now, this is the fascinatingpart.
If you go back and listen to episode286, there's multiple times where you just realize that he saw opportunity way before anybodyelse.
There's two quotes from that book that I want to read realquick.
It says in the1980s, talk of luxury items was notwelcome.
The term luxury still had connotations of the craftsman and nothing to do with realindustry.
Obviously, Arnol changes allthat.
The second highlight I want to read toyou.
For Arnol had understood before anyone else that it was a trueindustry.
Heis, keep inmind, he's75,right?
In the piece that you and I are going rightnow.
In the book that I'm reading youfrom, I'm readingfrom, he's in his early40s.
Back to thispiece, thanks almost exclusively tohim, luxury is now a universalobsession.
Perhaps more than anyoneelse, he's made the clothes and accessories that signify status among the globalelite.
And forthat, he's one of the wealthiest people in the world with a net worth of around $200billion.
Arnol yoked together the newvo rich brands that symbolized Europe's post-war influence and exported them all around theworld.
So in addition to reading thispiece, rereading my highlights from the biography ofArnol, which is called the Taste ofLuxury.
I also watched an interview with one of theauthors, AngelinaRaskudier.
And she said when her and Brad were interviewingArnol, the way he describedthis, what they're talkingabout, the fact that he's the one that yoke together all these newvo rich brands that symbolized Europe's post-war influence and exported them all around theworld, thathe, the way he describedthis, is he said that he saw all these independent and atomized European family-owned luxury brands and figured putting them together would reinforcethem.
And this interview that he granted them is taking place inParis.
And it just talks what the influence that he has on thatcity.
Visitors to Paris will find that Arnol on his 75 luxuryhouses, spending fashionjewelry,handbags,champagne,spirits, and high-end hotels areeverywhere.
LVMH Billboard stores and Arnol back museums dot the Frenchcapital.
When they meethim, they find him dressed head to toe in LVMHbrands.
He's six foot one andslim, impeccably dressed in a Dior Navyblazer, Berloudiloafers, and he's wearing a Louis Vuittonwatch.
And this part was inadvertently funny tome, because it talks about the difference of like the European and Americanmindset.
So it says in luxury and fashioncircles, Arnol has a reputation as abully.
An aggressive warriorcapitalist.
He's considered too American in the gentlemanly world of Europeanbusiness.
And he was given thenickname, the wolf incashmere.
So there's this line inhis, his biography in the taste ofluxury, that Arnol is an iron fist and an ironglove.
This is something that you and I see over and overagain, lastweek.
There's a line from Sam Walton'sbiography.
Sounds very similar toit's, it's really interesting in that the order in which you read something really affects your interpretation of what comesnext.
From theoutside, you wouldn't think there's going to be many similarities between Bernard Arnol and SamWalton.
But the fact is that I just spent a week and probably 30 or 40 hours reading and researching Sam Walton to make last week'sepisode.
And then right afterthat, readthis.
The striking similarity is just jump out toyou.
So it says in taste ofluxury, that Arnol is an iron fist and an ironglove.
In Sam Walton'sbiography, it says the public conception of Sam is a good old countryboy, wearing a soft velvetglove.
This is the fact that there's an iron fist withinit.
This is something I found to be universally true when you read a ton of thesebiographies.
If you find somebody that gets to the top of their entireindustry, you will find that thefounder, the leader of that company is an aggressive and competitiveperson.
Another commentate of somebody that's going to dominate an entire industry is the fact that they just have the longest view in theroom.
And so he's asked about the recent pullback on luxuryspending.
It says he also gives the impression that he's not even close to beingdone.
And he is untroubled by the recent decline in spending on luxuryproducts.
Maybe the economy will not be as good in 2024 that as it was in2023, hesays, what I have in mind is2030.
Every one of our plans are aimed tothis.
When I read thatpart, I'mlike,oh, that sounds exactly like JeffBezos.
Jeff Bezos said this in2017.
When somebody congratulates Amazon on a goodquarter, I say thankyou.
What I'm thinking to myself is those quarterly results were actually pretty much baked in about three yearsago.
Today, I'm working on a quarter that is going to happen three years fromnow.
Not nextquarter. Next quarter for all practical purposes is done already and has probably been done for a couple ofyears.
And so a main thing that runs throughout this piece is the factthat, youknow, he's 75 yearsold, who's going to takeover?
Is there going to be like succession drama between all the familymembers?
He's got five kids working inLVMage.
But if you look at how hard he's pushing himself and what his schedule islike, it doesn't seem like he's going to slow down atall.
His work days start at 8a.m.
and he ends them at 8.30p.m.
Everymorning, I have fun when Iarrive.
And so even though we're only four pages into thispiece, I believe all these things are actuallyrelated.
So if you think about how we've been introduced and how he's been described sofar, I believe all thesethings, all these traits are related and they work welltogether.
So the fact that he'sambitious, he'sdriven, he's got an ironwill, he's focused on long term valuecreation.
He's got this encyclopedic knowledge of stores from 10,000 storevisits.
He's clearly obsessed with what he'screating.
And so this idea that this guys were $200billion, he's 75 years old and he's still pushing himself seven days aweek.
He's paying attention to the tiny details and he's saying every dayat, why am I going toquit?
What do you talk aboutquit?
Every day I'm havingfun.
This is exactly what Sam Zell said in hisautobiography.
Hesays, people often askme, when are you going toretire?
And Ianswer, retire fromwhat?
I've never worked a day in mylife.
Everything I've done has been because I've loved doing it because it was soenthralling.
This sounds exactly like Arnol's thinking in thispiece.
Now that's the way he looks atit.
Now something that's obviouslyvery, very common is the fact that he's going to push his executive teams veryhard.
We just went over this with SamWalton.
The fact that they compared SamWalton, the way he pushes executiveteams, they said it was like throwing wood into a fire and JeffBezos' biography says he would jump on yourback.
And if you'regood, just drive you into theground.
So it says fun is not a word many of Arnol's underlingsuse.
Meetings beginpunctually.
Deputies say they must preparethoroughly.
He sends so many emails allday, everyday, that his staff shares triagetips.
Currentemployees, formeremployees, and outsider seem both simultaneously odd by him and afraid ofhim.
He abhorrs complacency so much that somebody said the worst way to start a meeting is to tell him that sales arerobust.
I've already saidthis, but it even shocked me how much reading aboutArnol, reminding me of SamWalton, reminding me of JeffBezos.
There's a greatline. He wanted JeffBezos'biographies, where one of his executivessays, I brought Jeff very bad news about ourbusiness, and for some reason he gotexcited.
So thisidea, it'slike,Arnol,Horace, complies to seemuch, the worst way to start a meeting is to tell him the sales arerobust.
I need to explain why this thinking can be sopowerful.
And I think the answer is found in JeffBezos' shareholderletters.
And one of his shareholderletters, he wrotethis.
This is veryfascinating.
It really describes the mindset that a Bezos or Walton or a nohave.
The good news for shareholders is that we see much opportunity for improvement in thatregard.
Everywhere welook, we find what experienced Japanese manufacturers would callMuda, orWaste.
I find this incrediblyenergizing.
Think aboutthat. He's analyzing hisbusiness.
He'slike, look at all this wasteeverywhere.
And he'spsyched. He's hypedup.
Why? I see it as potential years in years of variable and fixed productivity gains and moreefficient, higher velocity and more flexible capitalexpenditures.
AWalton, a Bezos or a no are not going to rest on theirlaurels.
They don't want to sit there and pat themselves on theback.
Look at how great weare.
Look at how high our salesare.
They want to know where they canimprove.
They give us a little background on his earlylife.
Says he trained it as a classicalpianist, but determined he wasn't good enough to make it as acareer.
He got an engineering degree and then joined the family business and persuaded his father to focus on realestate.
Atfirst, the company developed vacation homes in the South of France and Floridacondos.
He credits a random conversation in the US with sparking his curiosity about France's historic luxurybrands.
When Arnoh asked a New York cab driver in the early70s, if he knew the current Frenchpresident, the driversaid, he only knew one Frenchname, ChristianDior.
And so Dior is going to be his first entry into the luxury goods market by1984.
The consumer goods and manufacturing can glomerate that own Dior wasbankrupt.
So what they're talking aboutthere, this is Marcel Boussac'sempire.
And so this is talked about in the book Taste ofLuxury, but originally Arnoh just wantedDior.
So he says he put forward his proposal to take over ofDior.
Out of the question theyreplied, it must be all ornothing.
Listen to this nextline.
No matter all it wouldbe.
And so Arnoh with the backing of the investment bank washard, persuaded France's government to sell it tohim.
This is Boussac'scompany.
Then he paired away meaning got rid of almost everything and keptDior.
France was not prepared for this bare knuckle American stylecapitalism.
The French press called him theterminator.
But look at the difference that Arnohdid.
Back then when he boughtit, Dior had three stores and the equivalent of 90 million euros a year insales.
Now it has 439 stores and did 9.5 billion in sales lastyear.
And sales lastyear. Now this is one of my favorite all time stories in a very weird way to pitch aninvestor.
Is the fact that Boussac was trying to recruit somebody to run one of his clothingfactories.
This ismany, many years before Arnoh buys thecompany,okay?
And one of those people that he approaches is ChristianDior.
Yeah, this is what Dior tellsBoussac.
I am not interested in managing a clothingfactory.
What you need and what I would like to run is a craftsman's workshop in which we would recruit the very best people in the trade to reestablish and perish a salon for the greatest luxury and the highest standards ofworkmanship.
It will cost a great deal of money and entail muchrisk.
Back to thispiece. A few years after the Dioracquisition, Arnoh again exploitedcircumstance.
There was a struggle for control between factions in the newly formed suitcase and spiritsgroup, LVMH using cash from the Dior operation and again with the support of Azard as well as another Frenchbank, Arnoh acquired a decisive block ofshares.
Then he ousted his ally in the struggle and eventually maneuvered to get himself elected chairman andCEO.
The world of old luxury had never seen anything quite like this or had never seen anything quite like himeither.
Arnoh believed that luxury brands could be larger than anyone at the timeimagined,okay?
So I need to pause thereagain.
That is such an important sentence in this book or in thispiece.
Arnoh believed that luxury brands could be larger than anyone else at that timeimagined.
So that's another trade that I would add to that list that you see great entrepreneurs people dominate theirindustry.
They get to the top of aprofession.
They also have a common effect that they see value in unexpectedplaces.
They'reambitious, they'redriven, they have this ironwill, they have this focus on long term valuecreation, they have encyclopedic knowledge of theirindustry, of the history of theirindustry.
They have an obsession with what they're creating but they're also seeing opportunity where others seenothing.
The parallels between Sam Walton isstriking.
What did Sam say in that biography lastweek?
It turned out that the first big lesson we learned was that there wasmuch, much more business out there in small town America than anybody had everdreamed.
That sounds a hell of a lot like Arnoh believed that luxury brands could be larger than anyone at the timeimagined.
He also understood that this was a business of selling not just physicalthings.
Soagain, something we know is like he has a very advanced understanding of human psychology aswell.
And this will make sense as I read this toyou.
He also understood that this was a business of not just selling physicalthings, monogramtrunks, goldpendants, alligator skinpurses, but names and logos with history as well as an implicit promise that the buyer is gaining access to an exclusiveclub.
They're talking about the power of brand and the status that it conveys on thecustomer.
These handbags sell for about 10 times the cost of makingit.
That's another thing that he understood from the verybeginning.
Go back to Arnoh in that biography taste ofluxury.
He's ayoung, he's in his mid30s, the most of thatbook, early 40s when the bookends.
And this is what hesays, my relationship to luxury goods is veryrational.
It is the only area in which it is possible to make luxury profitmargins.
Software margins on physical goods is another way to think aboutthat.
If you put various luxury brands together or noreasoned, they can reinforce oneanother.
The stronger brands compensate for the weaker ones and give them time to establish an identity andgrow, I'm going to interrupt myself and pausethere.
Again, whichremarkable, the reason I became obsessed with this guy and I wanted to read as much about him as possible isone, obviously there's not a lot outthere.
And so my initial instinctis,okay, I'm gonna read every single book on this person and there's nothing toread.
But it's also because that biography ends in his early 40s and he calls this shot 30 yearsago, hesaid, my tenure objective is that LVMH's leading position in the world be further strengthened in the luxury goodssector.
I believe that there will be fewer and fewer brand names capable of retaining a worldwide presence and that those of our group will be among them as we will provide them with the means forgrowth.
We see close to 35 yearslater, that thinking is verysimilar.
It doesn't appear to change at all the stronger brands compensate for the weaker ones and give them time to establish an identity andgrow.
While the entire group shares back office functions and becomes a magnet for attracting and keeping talentedexecutives, it was an idea I had after having broughtDior, hesays.
I saw how the luxury market was made up of many medium-sized companies that taken together could be much stronger in agroup, composed of severalbrands.
Combining these divisions would let them be completely autonomous and independent when it came to crafting theirimage, designing their products and having their ownmanagement, but it would provide them with the scalebenefits, such as when buying ad space and finding a good retaillocation.
His ambition was concentrating in his portfolio all the crown jewels of the luxury market and a variety ofindustries.
One of my favorite descriptions of a young Bernard O'Neal from that book says that he liked direct confrontations and rapidcampaigns.
Here's an example of that from thispiece.
AtDior, O'Neal decided to go after Chanel with a new upscalehandbag.
On a visit to Argentina in1995, Princess Diana was photographed carrying a Dior black lamb skinpurse.
O'Neal exploited the ensuingfrenzy, renaming it Lady Dior and selling hundreds of thousands of thebags.
The geysers of cash put Dior on firmer financial footing and allowed O'Neal to cancel its licenses with third parties that churned out products like Dior labeled purses and dresses at discountedprices, which was deluding thebrand.
This led him to control quality and raiseprices, making his products slightly lessobtainable, but more desirable and claim more profit forhimself.
And so when you read aboutO'Neal, I think it becomes obvious that he understands that a powerful brand is magic and all this other stuff can befixed.
And so they describe in the book Taste of Luxury what he had to fix withDior.
It says Bernard O'Neal had understood that Dior was the jewel and the crown of thegroup.
Dior was to be a starting point for hisstrategy, a famousname, but innumerabledifficulties.
Too manylicenses, not enoughboutiques, are ready to wear range that had been a failure and a troubledatmosphere.
All of those problems are just opportunities forO'Neal.
All of them has long beensolved.
And the end result goes from threestores, 90 million euros to 400 and somethingstores, 9.5 billion euros insales.
Another thing that he's really gifted at is gettingattention.
There's some things that he changed at Louis Vuitton aswell.
This is gonna blow yourmind, Ithink.
He also persuaded reluctant executives at LouisVuitton, which was then just a bag and luggage brand to add a ready to wearline, hand-picking American designer Mark Jacobs to developit.
Ready to wear generates10% of sales atVuitton, so not a bignumber,right?
But the perpetually debuting seasonalcollections, fashion shows and ad campaigns create a drumbeat of attention for the entirebrand.
Louis Vuitton is responsible for a quarter of LVMH's overall revenue and half of itsprofit.
They just mentioned the fact that he recruited MarkJacobs.
He does this over and overagain, hesays, Arnault is clever enough to realize when someone is an extremely creative personality that you need the horse room to run and then back up that talent with strong LVMHmanagement.
One of his executives says that seemsobvious, but it's reallynot.
The reason it seemsobvious, but it's reallynot, is because you need a strong leader and founder that is a complete control of the company to let everybody else in the company know that we are putting up withthese, youknow, non-conformist dissenters andrebels.
These talented people are unbelievably hard to dealwith.
So I wanna quote DavidOgovie, because I think he just nailsthis.
And I think Bernard O'Rnoe understands thisinstinctively.
So David Ogovie said that talent is most likely to be found among non-conformist dissenters andrebels.
As aleader, this is what Ogovie's advice to you and I wouldbe, as aleader, you have to learn to tolerategenius.
What David's about to tell us is why the executive justsaid,hey, this seemsobvious, but it's reallynot.
This is what David Ogoviesays.
My observation has been that mediocre men recognizegenius, resent it and feel compelled to destroyit.
There are very few men ofgenius, but we need all that we canfind.
Almost withoutexception, they aredisagreeable.
Do not destroythem. They lay goldeneggs.
And then the piece gets into some waves that are no successivelyserved.
This comes from Charlie Munger and Port Charlie's Almanac that I haven't stopped thinking about since I readit.
When Charlie's analyzing allthese, the success of all these different businesses and foundershave, he constantly references his surfingmodel.
And so hesays, there's huge advantages for the earlybirds.
When you're an earlybird, there's a model that I callsurfing.
When a surfer gets up and catches the wave and just staysthere, he can go for along, longtime.
But if he gets off thewave, he becomes mired in theshallows.
But people get long runs when they get right at the edge of thewave.
And he's how he talks about Microsoft orIntel, or even going way deep into business history with this company called National CashRegister.
Surfing is a very powerfulmodel.
And so one of the things that's obvious if you study Charlie Munger is the importance of getting into a great business and staying init.
This is definitely what Arnal hasdone.
But he also talks about these trends that you can ride aswell.
And he's analyzing like LesSchwab.
He'slike, how this uneducated guy never changed a tire in hislife.
It starts a tire company at 35 and just runs up the score and dominateseverybody.
And he'slike,oh, he was riding the wave of this new Japanese tire importtrend.
And so one of the trends that Arnal successfully surfed was the fact that he got into Chinareally, reallyearly.
And China's gonna have this massive economicexplosion.
Arnal visited China for the first time in 1992 for the opening of a Louis Vuitton store in the basement of the Beijing PalaceHotel.
When Iarrived, there were nocars.
There was even hot water in thehotel, hesaid.
And he observed that most people on the street were dressed identically in malsuits.
I remember calling the CEO of Vuitton andsaying, are you sure we're gonna sellsomething?
The answer was a resoundingyes.
He harnessed the world's biggest economic success of success story of the past 100years.
LVMH was early among its peers to obtain a retail license to own its stores inChina.
And it rode the country's historic economicgrowth.
China is now LVMH's second largest country by sales behind the UnitedStates.
23 different LVMH brands open 58 stores in 2023alone.
And so then they talk about what I think is the largest acquisition that Arnal has evermade, which is theTiffany.
So he took over the oldest and largest luxury brand in the UnitedStates.
This surpriseme, Tiffany and company was founded in 1837 as a stationarymaker.
It is counted nearly every US president since Abraham Lincoln as acustomer.
And it redesigned the great seal of the UnitedStates, which is on the country's dollarbill.
That wasfascinating. And so it goes into why Arnal wantedit.
He long wanted to bolster his jewelrydivision, which he felt was one of the few weaknesses in hisportfolio.
AbsorbingTiffany, a public company would help close thisgap.
So he presented a surprise takeover offer in 2019 and then tried to back out of thedeal.
Tiffany sued accusing LVMH of trying to run out the clock on their mergeragreement.
And then Arnal countersued.
They wind up finally coming to terms after LVMH negotiated roughly $425 million discount on the originalprice.
So the sale was completed and then Arnal went towork.
And I have a ton of highlights on this page because it talks about what does hedo?
Like when he goes to work onTiffany, what do youdo?
Numberone, he added talent at the executivelevel.
Numbertwo, he did a bunch of influencers celebrity addeals.
Numberthree, he's gonna invest in physical realestate.
And numberfour, gossip is just freeadvertising.
So that's gonna be from ChristianDura, which we'll get to in onesecond.
So numberone, he moved an executive from Louis Vuitton to take over CO and installed his son alongsidehim.
Hisson, Alessone hired Beyonce andJ.Z.
for a swashing marketingcampaign.
More celebrity ads followed with GalGadot, Zoe Kravitz and ElaineZong.
I don't know a bunch of thesepeople.
Before the acquisition Tiffany couldn't have afforded thesedeals.
Now it's social media mentionssword.
Numberthree, investing in physical realestate, LVMH also invested $350 million to revamp Tiffany's New York flagship store on Fifth Avenue and 57thStreet.
They secured a painting by Boschiat in a collar that resembles Tiffany Blue and hung it on the groundfloor.
The company suggested that the late street artist intended a deliberate reference to thejeweler.
This is what I meant about gossip is freeadvertising, which I'll explain in onesecond.
So the companysuggests, heyBoschiat, the Boschiat paintedthis, they're referencing TiffanyBlue.
The company suggested the late street artist intended a deliberate reference to thejeweler, which many in the art world found both implausible and juststasteful.
The resulting controversy was covered in newspapers all over theworld.
So if you go back and you actually read Christian Dior'sautobiography, it's very fascinating that he realizes that gossip is just freeadvertising.
And so there's a huge budget that obviously LVMH can do for ads now when they take overTiffany.
But when Christian Dior was starting hisbusiness, he didn't have any ofthat.
So this is the way he gotattention.
It was veryfascinating.
And so hesays, it is widely and quite erroneously believed that when the House of Christian Dior waslaunched, enormous sums were spent onpublicity.
On thecontrary, in our first modestbudget, not a single penny was allotted toit.
I trusted to the quality of my dresses to get Christian Dior talkedabout.
Moreover, the relative secrecy in which I chose to work aroused a positive whisperingcampaign, which was excellent freepropaganda.
Gossip, malicious rumorseven, are worth more than the most expensive publicity campaign in theworld.
Undoubtedly, they spent a lot ofmoney.
LVMH spent a lot of moneyon, youknow, Beyonce and GZ and Gal Gadot and so we crab it's in socialmedia.
But inturn, they also got tons and tons of free advertising because this gossip went around this idea that a lot of peoplemaybe, inside the artworld, foundobjectionable, but it wound up spreading throughout the entire world for free through all thesenewspapers.
Gossip is just freeadvertising.
Christian Diorunderstood, Christian Diorunderstood, and LVMH benefited for the fact that gossip is just freeadvertising.
So then what else does Arno do when he takes overTiffany?
He raisesprices. The company raised prices asusual.
So this is what Imean. Goes back to what he understood inDior.
The power of a great brand ismagic.
The power of a great brand means that you can raiseprices.
So Tiffany's US customers now spend $2,000 on average versus around $500 on average before theacquisition.
This is something monger and buffet talk about over and overagain.
They talk about the value of abrand, that a great brand acts as amode.
So I'm gonna quote from one of thebiography, one of the biographies I read onmonger, and this is what mongersays, there are actual businesses that you'll find a few times at a lifetime where any manager could raise the returns enormously just by raising prices and yet they haven't doneit.
So they have huge untapped pricing power that they're notusing.
This is the ultimateno-brainer.
And so he's gonna talk about all the growth that Disney company had under Michael Eisner andWells.
And he says Disney found that it could raise the prices a lot and the attendance at their theme parks stayed right upthere.
So a lot of the great record of Eisner and Wells came from raising prices at Disneyland in DisneyWorld.
At BerkshireHathaway, Warren and I raised the prices of C's candy a little faster than others mighthave.
And of course we invested inCoca-Cola, which had some untapped pricingpower.
The power of a great brand means that you can raise prices and we're seeing this play out withTiffany.
Now this is veryfascinating.
The fact that they're raising prices and they're trying to go higher end becauseTiffany, I guess it targetsmore, they says Tiffany's more exposed to middle class discretionaryspending.
And so it's growing slower than its rivals that are higherend, they're considered higher end and have more expensive products likeCartier.
And so this is what our no-sense aboutthis.
What's key is that we attract high end consumers and sell a lot of high endjewelry, which was not the case before we bought thecompany.
I'm very confident aboutTiffany, but it takestime.
You cannot do thingsinstantly.
This is just again the realization of this idea that you had30, 40 yearsago, the fact that you combine all these brandstogether, this strong balance sheet and make themstronger.
He can be a lot more patient because of the success of all the otherbrands.
And he doesn't stop looking for ways to press thisadvantage.
That they advantage the scale and size giveshim.
Or no exploits this imbalance through realestate.
His private equityarm, ElCaterton, owns properties worth billions ofdollars, including premiere retail locations and office buildings in most majorcities.
I know a few founders that actually took investments and work with ElCaterton, they all lovethem.
The basic read on that is that they leave youalone, but if you're asking forhelp, they're extremelyhelpful.
They know everybody as you couldimagine.
Lastyear, El Vimei spent 2.4 billion on real estateacquisitions.
And this description of this phenomenal position that Arno has maneuvered himselfinto.
He makes money from his ownstores, from leasing space torivals, and from the appreciation of premium realestate.
When El Vimei buys abuilding, it takes the best storefronts for its own brands and often ask rivals to move out when their leasesexpire.
This is verysimilar. What happened with SamWalton?
We covered this lastweek.
The fact that he was extremely patientearly, beginning of hiscareer, he ran one store for five and a halfyears.
Thelandlord, he made the mistake of not having control over where the storewas.
He didn't have a renewal option in thelease.
And so the landlord seized the success that Samhad,said,great,Sam, great job on thatstore.
I'm not renewing toyou, and I'm just gonna open the same store in thatlocation.
And so here's the description of what this does in the luxuryindustry.
It is a clever way to distract competitors and make them sweatmore.
InMiami, ElVimei, Caterton teamed up with a developer to transform an area of empty warehouses into a new luxury shopping neighborhood called the designdistrict.
I used to live very close to thespot.
The story behind this is veryfascinating,actually.
Arnal waited into thedetails, including decisions aboutarchitecture,landscaping, and which tenants could movein.
The bigpicture, how it'sentire, everything going on in hisconglomerate,right?
Butit's, it'ssimultaneously.
You don't normally find somebody understands the bigpicture, still understands the capital allocationdecisions, and then also pays attention to the most minutedetails.
Think aboutthis. He's got 200,000employees, and he's paying attention to the details about landscaping in the designdistrict, which hecreated,right?
Which him and CraigRobbins, a developer that Arnal teamed upwith.
But thisidea, this is like paying attention to every singledetail.
It reminded me of the quote that Walt Disney said when he was buildingDisneyland.
Hesays, if we lose thedetails, we loseeverything.
And Disney and Arnal share thattrait.
The fact that there's just countless stories of their extreme attention todetail.
Now, I happen to know because I live overhere, there's a back story here that's not mentioned in the story that'sfascinating.
Before thishappened, fourdecades, all there was one spot where you had highluxury, like the wealthy tourists and wealthy people in Miami went to buy their Gucci and theirCartier, the DiorChanel, LouisVuitton, and it was at Bell Harborshops.
And Iknow, showed the power that he had because he didn't own Bell Harborshops.
And so he pulled Louis Vuitton out of Bell Harbor and moved the designdistrict.
If you go toMiami, his design district looks nicenow.
There are texturesinteresting.
It was dilapidated beforethat.
That was not a goodneighborhood.
They changedeverything.
It is an unabashed successnow, but thatneighborhood, if you would go back 15 yearsago, I'm goingto, oneday, there's going to be a super high-end luxury enclave with all thesebrands.
These amazing luxury brandshere.
You'd belike, what are youcrazy?
That was a huge risk that hetook.
And by him pulling out of ashop, like amall,essentially, that he doesn't own and thensays,hey, I'm going to own the real estate overhere.
That had a hugeimpact. I don't know anybody that goes to Bell Harbornow.
They go to the designdistrict.
And Bell Harbor dominated fordecades.
So forrivals, all this creates an intolerable imbalance ofpower.
They are at the whim of property owners desperate to score a Dior or Rutanstore.
Or LVMH itself is theirlandlord.
Eitherway, they're likely to get bumped from the bestlocations.
And eventhis, this extension into realestate, this goes back to Arnose originalthesis, one that he's been executing on for fourdecades.
The fact that he saw all theseindependent, atomized European family and luxury brands andfigured,hey, putting them together will reinforce them and makes themstronger.
And so all these rival luxury brands co-complain about the power theyhave.
This is Arnose'sresponse.
He does not have a lot of sympathy for thatsentiment.
We have good and efficient competitors and we have competitors are not asgood.
Usually the ones who complain are the ones who are not thebest.
They needexcuses, hesays.
And if you think about what he'ssaying, it's not like we know thehistory.
He started outwith, I think it was 35 when he took overDior.
He starts off with one brand 35 yearsold.
He'snot, he worked himself into thisposition, this formidableposition.
When I got to thissection, it reminded me of what Jeff Bezos thought exactly the sameway.
It's like you don't wanna just be one of thebest.
You want to be the best and he talks about thiswhy.
And he sayswhy. When itcomes, this is JeffBezos.
When it comes tocompetition, being one of the best is not goodenough.
Do you really wanna plan for a future in which you might have to fight with somebody who is just as good as youare?
Iwouldn't. And then the piece ends with Arnalsaying, he's got no plans toretire.
One of his son says that his father calls him all at all hours to discuss business that he doesn't think he'll everstop.
And then this hilarious story with Bernard Arnal and WarrenBuffett.
Arnal himself notes that he recently raised the CEO retirement age at LVMH from 75 to80.
Afterward, he got a letter from Warren Buffett telling him he made the mistake by setting the new age limit solow.
After everything I read abouthim, I would not be surprised that as Arnal gets closer to80, he doesn't raise thatagain.
I'd be very surprised if hedidn't.
So I hope you enjoyedthat.
I absolutely loved reading the piecehighly,highly, highlyrecommend.
I will leave the link downbelow, highly recommend reading the entirething.
And if you haven't done soalready, I'd go back and listen to episode296, which is about thebook, which is the biography of BernardArnal, it's called The Taste ofLuxury.
Very proud of thatepisode.
That is 355 books down 1,000 togo.
And I'll talk to you againsoon.
Two quick things before yougo.
If you've already subscribed to FoundersNotes, make sure you log in and you grab the new private podcast feed that is included in yoursubscription.
I just made a new episode that you're not going to want to miss for that feed a few daysago.
If you have not already subscribed to FoundersNotes, I have made a tool for me that now you can get accessto.
Thistool, which is FoundersNotes, allows you to tap into the collective knowledge of history's greatest entrepreneurs ondemand.
Since2018, I've been putting all my notes and highlights for all the books that I've read for the podcast into this giant searchable database that you can tapinto.
So you just heard me useit.
When I'm referencing Jeff Bezos and Walt Disney and Sam Walton and Jay Paul Getty and Charlie Munger and Warren Buffett on the episode that you justheard, that is me searching through and put through Founders Notes and pulling up thoseideas.
This is really important to getacross.
What you see when you use FoundersNotes, that's the tool that Iuse.
That is the exactsame, you see the exact same thing that Iuse, the tool that I made for myself that you now can get accessto.
So manypeople, so many subscribers to Founders Notes are using it to help them think through issues that they're having in their company from hiring andrecruiting, tomarketing, toleadership, to preparing for boardmeetings, to preparing for salespresentations.
If you're already running a successfulcompany, I think it's a no-brainer to invest in this tool and now I've added a new feature that's also going to show you how I use it and is going to push ideas from his shoes greatest founders directly into your brainquickly.
And that is the private podcast feed that comes with every subscription to FoundersNotes, which I have called SageAdvice.
And so let me give you anexample.
The episode I just madewas, I've read two biographies on JamesDyson.
That's probably 50 to 60 hours ofreading, countless hours inputting the notes and highlights into FoundersNotes.
And so what I did is I went and reread every single note andhighlight, there's also this AI assistant that lives inside of Founders Notes calledSage.
And so I wasasking, I was searching and reading through every single note and highlight for JamesDyson.
I was also asking Sage multiplequestions.
Give me a list of James Dyson's bestideas.
How did James Dyson think aboutmarketing?
What did James Dyson say aboutpersistence?
Things likethat. And then what I did is I composed this all into a single document and distilled down what I think are the most powerful ideas from James Dyson's 50 yearcareer, where he's built thismultiple, multiple billion dollarcompany, he owns100%of.
And so I distilled all that down into an episode of 12minutes, that 12 minuteslong, it's just this rapidfire.
Here's how James Dyson thought aboutthis.
Here's another idea from JamesDyson.
And so the idea with these many small episodes is I wanna create a tool where if I can condense somebody's entirecareer, multiple books that I read about thisperson, to around 10minutes, you're gonna be able to listen to that over and over and overagain.
It will serve as a constant reminder and an easy way for you to download those ideas into yourbrain.
So then you can use them in yourcareer.
So if you want access to the tool that will give you the superpower to access the collective knowledge of history's greatestentrepreneurs, when you needit, make sure you go and subscribe at foundersnotes.com that is founders with anS,foundersnotes.com.
And so the second thing I wanna talk to you about is these founder events that I put on to help you build relationships with other high valuefounders,investors, andexecutives.
I just mentioned in thisepisode, the fact I know a few founders that have taken investment and have this partnership withElcaderton.
And so what they say is one of the best things that has resulted from that partnership is the fact that they know Elcaderton knowseverybody.
They have relationships all over theworld.
And these introductions that they're able to make have substantial value in developing theirbusiness.
And so another way to think aboutthis, is the term I puton, this the maximum I puton, this is that relationships run theworld.
And this is something that both Charlie Munger and Sam Zell said to me in person that you really knew need to invest heavily in developing relationships with other high valuepeople.
Both Charlie and Sam didthat.
And they wind up compounding those relationships for decades and doing business with these people fordecades.
And so the next founders event is happening July 29th through the 31st in ScottsValley,California.
There's also one happening September 27th through the 29th inAustin,Texas.
These events take place at beautifulvenues.
I ran out the entirevenue.
They are allinclusive, which means all you have to do is get to the event and your ticket includes yourlodging, everymeal, access to every singleevent.
You get there and I take care of therest.
If you're interested in building relationships with otherpeople, listen to founderspodcasts, other high valuepeople, come hang out with me for two days at a foundersevent.
You can learn more by going tofounderspodcast.com, forward slashevents, that isfounderspodcast.com, forward slashevents.
Thank you very much forlistening.
Thank you very much for thisport.
