SPEAKER_00 0:00

Hey everyone. So after ninety-eight episodes, I've never really shared what inspired me to start this podcast. We hear so much about successful businesses, about the achievements, the milestones and the exits. We admire them. But some of our deepest learnings happen in difficult moments when something fails, when our judgment is tested, and when we are forced to look inward. While studying John Osho's case at Howard Business School, I came across a small section outlining 16 mistakes that entrepreneurs don't have to make. He turned his years of experience into wisdom which could spare others the mistake. It made me wonder what lessons has every business owner collected along the way? What principles guide their decisions and what did it cost them to learn those lessons? Those questions became this podcast. And today I have the honor of having John Osher as a guest on the podcast. What an honor, John. Welcome.

SPEAKER_02 0:58

Well, I'll say the honor is at least equal. I've been associated with Harvard Business School for, I guess, 26 years or so. And um it's an honor. And as I say, I speak at uh several, I used to speak at a lot of different business schools, and I only speak at schools that I couldn't get at.

SPEAKER_01 1:15

So far, I haven't turned anyone down.

SPEAKER_00 1:17

John, just for the benefit of the listeners, if I had to request, how would you introduce yourself to people listening in today?

SPEAKER_02 1:23

Well, I'm an entrepreneur and I am a serial entrepreneur. It's a term though I didn't even know until after I pretty much retired and I read the term. And I look back at my career and I've been an entrepreneur since I was five years old. I'd never and I joke, but it's really true. I've always been an entrepreneur because I never qualified for a job. Um but I I consider myself extraordinarily fortunate, and I've had a ton of successes. I've been great to have that. But every one of my successes had a turning point that could have gone my way or not my way, that were beyond my own skill level and control, and they went my way.

SPEAKER_01 2:01

So I'm a very fortunate success story.

SPEAKER_00 2:03

And John, we'll touch on some of those successes. Like I said, your 16 mistakes inspired me for this podcast. So before we get into the business side, could you walk us through what you were hoping to make of your life when you were young?

SPEAKER_02 2:17

Well, I think most of us don't really have a lot of planning. When we're young, life just happens. And um, I started as an entrepreneur when I was five years old. Maybe I was six or seven. It was debatable between my mother and I. But when I was very young, my parents went to art school at night and um they would draw pictures of nudes, mainly nude women, at the Cincinnati Art Museum on Tuesday nights, and then they come back. After three months, the class was over and they brought all the paintings back and they put them in the attic, and I charged my friends a nickel apiece to see the nude paintings. So I started really in porn many years ago, and uh and to this day I've never had better margins. But uh from that point on, it sounds like a cute story and a joke, but it is a true story. But I got I gained confidence at an early age starting a business, even that little one, and through high school and all the times, whether we sold candy, shoveled snow, raked lawns, parked cars, you know. You know, by the time I was even in college age, I had always made a living creating some form of uh business. And that that's a very big opportunity and benefit that I have that a lot of entrepreneurs don't. Many entrepreneurs go on to work for big companies, train at Harvard Business School at different schools. And while they're in that position, they find an opportunity and they may get other friends of theirs involved with it. But at that time, they've never done it before, and they happen to have mortgages, families, things like this. And the risks are much greater and the unknown is greater. But I've been fortunate since I started as uh very young and really never had a job other than the jobs I got for periods of time when I sold my companies.

SPEAKER_00 4:08

Thank you, John. It sounds like you were always spotting opportunities and eager to find arbitrage or uh an economic opportunity. When you sold your businesses, was this at the top of your head to preserve your freedom to make sure there were no clauses which would bind you to the company you're selling your business to?

SPEAKER_02 4:26

No, I've always looked at businesses as projects. Each one has been a project and with the aim of selling the business. One reason is that I I'm really an entrepreneur and a very skilled entrepreneur, but I'm not particularly a skilled manager of a mature company. And you get to a certain point and somebody else can do a better job than I can. Also, if you tie in with a multinational company, you have the chance of growing in a way that you cannot do as a small company because they have the built-in distribution, brand power, et cetera, worldwide. So that's the reason I've always looked at it these as projects. I grew up though in Cincinnati at the beginning of airline flights, and so many families would have family businesses where they build a printing company or they make a part for a faucet company or a foundry or whatever it was. And they always, you know, for for generations would look at it as passing it on as a family business. I was never in that position. And that even changed as as airline travel and people moved to different cities and didn't stay with the family and this and that. So I've always looked at it as a project and one that I would build to a point to sell. And ultimately, as I got more experience, I would look at the exit from the very beginning, exit strategy.

SPEAKER_01 5:45

When I was younger, I didn't. You just do it and hope for the best. You also took up odd jobs.

SPEAKER_00 5:51

You worked as a taxi driver, a plumber, a carpenter before building some of your best known businesses. So what was going through your mind during those years? Were you still exploring and figuring things out? Or was there a certain pressure to go in a certain direction?

SPEAKER_02 6:05

Well, in my youth, in that youth, I would call it from uh college age to maybe close to 30, I was exploring everything in life. And um, I was involved with uh ashrams uh in the US and in India, and I was interested in Eastern religions. And when I graduated from college in psychology at from BU, there's really no job for an undergrad in psychology. I mean, you can go get a master's and become a therapist, but I never thought of that. So when I graduated from uh college, I needed something to do. And I moved to a spiritual religion, it's kind of a spiritual philosophy group in Warwick, New York, that studied the teachings of Gurjief, if anybody knows who that might have been. And it was in a community that you had to make a living, and the only ways to really make a living back then, and these were from probably age 22 to 29 or something, was either in the arts. Many people became sculptures and potters, or in the trades. And so I had no background in the trades. I mean, when something broke in our house, my father was a physician and my mother a writer, and something broke, you'd call some guy who knew what to do and he could screw the light bulb in or whatever was required. But so I got involved in a whole variety of trades, initially fixing record players and radios and tape recorders. And I learned that I did have an aptitude for this. I didn't know it because we always hired somebody, but I found out I had my my method of thinking, which was by the way trained by reading Sherlock Holmes. My method of thinking would would love figuring things out to how to how to solve it. And I went from there. Uh even before then, I was a cab driver in Boston. Um, and I became a landscaper. I became a a carpenter, both Finnish and new houses. And in the process, I learned how things worked. And it it turned out, as I said, that I had an aptitude for these things that I had no way of knowing until I actually got into them. I eventually became a licensed plumbing and heating specialist with oil burners and pumps and every aspect of which is, I'll tell you it's kind of ironic because that was like 60 years ago. And I'm in my house right now and the hot water heater's broken and I'm trying to get a plumber here. But even though I know what to do with it, I don't have any tools or parts. But um and but I got into all this and I I learned early on that everything that we have as background can be generalized to what we do going forward. And as an example, when I used to fix pumps, submersible pumps, water pumps, oil pumps, and I later got into making things with plastic injection molding, they're just pumps also. You would take a plastic, you'd melt it down, it would be pumped into a mold, and then it would come out. So a lot of these things really through generalized education, I was able to very quickly understand how to make things from that. So most of us don't realize how much our early education, things we've done in childhood, and all this, how much they really mold us and can benefit us in everything we do forward. And since I did get involved in most of my entrepreneurship was in inventions, either my own or others, and learning how to make things and how to deal with uh manufacturing in the US and particularly Asia, all of this background was unbelievably useful. And I will even say later in this conversation how useful the Eastern religion time was too when things got difficult in businesses. Let's touch on that now.

SPEAKER_00 9:40

I think every every leader has gone through, you know, dark phases questioning themselves. What was it about the Eastern religions or the philosophies there which felt like you could trust them, have a conversation with them?

SPEAKER_02 9:52

What was it about the Eastern philosophies which I don't know if I can specifically say one thing or another. And I don't even know how much my interest in Eastern religions when I was younger was kind of it was kind of popular back then in the 60s and 70s. But every business I had would have a point. Every business, the bigger the business, the bigger the problems, but it would have a point of a problem that was beyond my intelligence or experience. And as an entrepreneur, you know, every successful entrepreneur can tell you they went through what would be called entrepreneurial terror at some point in their careers. And it's because you end up with these problems and you're it. The buck stops with you. You may have people who work for you who might have opinions to throw out, but ultimately you have to solve the problem. And your entire success comes from solving these problems over a period of many years. And somehow I got into the practice, and I don't know when it started, where I'd have problems that were just, I say, beyond my scope. And I would, I usually had a couch in my office and I would sit on the couch and I'd literally ask the universe. I'd ask God, I'd ask the universe, I'd ask the emptiness, I'd ask every religious. I would just ask the unknown, what do I do? And I didn't care where the answer came from. I didn't care if it came from God, my higher part of my brain. It was not limiting as far as uh where I was looking, but I would just ask what to do. And I wouldn't sit there and think of the answer. I just would be quiet. And this is a hard thing to believe, but it's available for anybody, is that a hundred percent of the time I would get the answer, sometimes within seconds or a minute or two, never more than a day, that I always got the pure answer. The solution wouldn't be everything's fixed. It would be here's exactly what you need to do. And through that, I actually became far more intelligent than I think I've been given as a natural brain power. And I always came up with the answers. And it got to a point with my different businesses that we called it the magic. And my when we'd have a problem that was literally scared everybody in the company, they'd say, Go in your office and ask the magic. And to this day, I still use the magic. It doesn't need to be a business problem. It doesn't even need to be a problem. But so just learning to be quiet and finding that there is so much more available than meets the eye. So that's my simple story.

SPEAKER_00 12:14

Brilliant. Thank you for sharing that. We just got an insight into how you go about problem solving. Wonderful. Thank you for sharing that. Going back to what we read in the case, I feel Spin Brush was successful, but there was a moment where you decided to acquire Glow Pops, which really stood out for me. The conviction you had that hey, this is a form of technology that we could benefit from in a license. Is that you typically? Do you do you back your conviction with so much strength and go all in? Or do you have moments of hesitation? Did you have moments of hesitation at that point as well? How did you go about getting this level of conviction?

SPEAKER_02 12:50

Well, first of all, on any product choice, I have I don't have doubts. I just know that it's some are going to be successful and some aren't. You know, so I go with what I think is my best chance. And if I was in the toy business and each year, let's say we would come up with 10 new toys, and I would spend a lot of time, um, maybe a quarter of the year traveling the country. I had a whole group, maybe 200 toy inventors. That's all they did was invent toy ideas, and I would meet with them and um um and I would analyze the ideas and um and I would pick the ones I thought were best. Now I had a little group in my office and I'd I'd I'd I'd show the ones that I thought were candidates and we discuss it, and then but ultimately as the entrepreneur, it was my decision. But I had to realize that, you know, it's like being a baseball player. You can be the greatest hitter, but you're still at best batting 300. And that means you're you're out 700. 70% of the time you made an out. But in in um in in the business uh side of it, I I realized that in the toy business that if I had 10 ideas and three were big hits, my managing of the other seven were very key. When I used to be a poker player and I was a very serious poker player in college and paid for college and different things, we all got the same amount of cards, good cards and bad cards over time. But the winners were the ones that when they had the good cards, knew how to win the most, and when they had the bad cards, knew how to lose the least. And it was the same way in choosing uh a lineup of toys. It was the managing when I did have the winners, how to make those the most business successes. And when I had the losers, managing the downside of those losers. So there might be three of them that were losers, and there might be three or four in the middle that you also manage to make sure that you get the best out of it. Equally important is taking those winners and really maximizing them. So I kind of looked at it that way. I never looked at it either pessimistically or optimistically that this, these are all going to be great because I'm so smart. It was not like that. They all had the potential to be great because I had a lot of experience choosing them. And that's that's kind of the way with different businesses, but toys were that way because we come up with 10 ideas. If I had an idea, one idea like the spin brush, the analysis would be different because I don't have the option of it being successful and failing. There's only you're either successful with it or it fails, or it can be an in-between nothingness. But in that case, in analyzing it from the very beginning of the spin brush, there was no such thing as a powered manual, effectively toothbrush under $5. It just didn't, it was unheard of. So the idea that if I could have a far better toothbrush for under $5 at Walmart than all the manual brushes that cost anywhere, the most popular was $3.99 at the time, an Oral B cross-action, the odds were very good that it would be a success. And especially if we could be seen and putting a try me in our try me feature so that on the shelf you could see these and it and you know, for $5, a lot of people might think it's a toy virtually. And you press the button and you could hear it roar like a Volkswagen engine, and it makes it an easy, an easy sale. So when we put all that together, which was a lot of knowledge that came from experience in all my businesses, you know, by the time we did the spin brush, I was probably 50 years old. And I had had a good solid 25, 30 years of businesses, of successes and failures to learn from. So in that case, by the time we did get the product working beyond the threshold of way better than a manual brush, and it would be priced at Walgreens and Walmart and the likes for $4.95 or something, I was pretty sure that we had a success. We also tested it with everybody's families, if you want in a company, we all had families, this and that. And I would listen to, I would test it with them, not let anyone be polite, including testing it with myself and my family. And there was no question that this was a far better product than any manual brush. And I said we never cared about $50 electric toothbrushes. We were only after the manual brush users because there's way more of them. And we also were after the Walmart customers rather than wealthy customers because there's way more of them. So when when we did pull the trigger, which took a year, when we pulled the trigger, the the odds of success were great. But even then, I did a test with the Myers stores, M-E-I-J-E-R, if you know anybody who knows the Myers chain, the family-owned business, the only one that really has competed with Walmart and their markets for for years. When we tested it and found out, our test was done where we shipped them out to Myers. I happened to know the one of the presidents of the president of Myers. So I got a test, and we put 24 stores, uh 24 pieces in stores, and we were uh, yeah, I think we were five of us working for the company back then. And we we didn't have a Myers in Cleveland where we were based. We all left town, you know, to Toledo, Columbus, Detroit, and we all kind of got into a cheap hotel and went to the stores. And most of the stores hadn't even put them out. So we had to go in the back with meet the manager and get them put out because they were not part of a national program and we had to find them and everything. But once we put them out, we happened to know that the best-selling truthbrush in the country then was Oral Bee's cross-action at $399, and that they were selling, and we learned this from IRI data back then that told you the sale of every product, every consumer product, that we knew that they were selling two per week per store, and they had six SKUs. So they were selling basically 12 cross actions per store per week. And that was by far the best-selling toothbrush. Because you have to remember there were probably 80 different toothbrushes they were competing with. And we did our tests and we went out and we were selling seven spin brushes per day. We were in a different realm. And from that information, I went back on the phone to my partner, my production partner effectively in Hong Kong. I called him and I had them quadruple our tooling. And this was without even being able to get appointments with most of the buyers yet. But I know that not only did this an opportunity that was unbelievable, but I also know that companies like Walmart back then and Kmart don't even want to deal with a small company, usually because of their fear that they won't be able to supply them. So with my experience that I had with all my other businesses up to that point, I made that investment right then. And and that tooling amount, I mean, where we got up to, I don't know, 20,000 a day. I think after we sold the PNG, I got the production to 400,000 a day. So um, but um, so much of this a new entrepreneur would not know. I could never have done this product, by the way, as a newer entrepreneur. I probably couldn't have even done the product without doing what we had it with our toy company called spin pops. And I I don't know if you're familiar with that, but that was a lollipop that you press a button and it was spin in your mouth. And that was that was its own story with the four mailmen that came up with the idea. And uh we we sold millions of them with the toy company. And they so, but in the process of selling millions, we had factories that were making these for 60 cents apiece. We were buying motors that would cost most people, I don't know, 45 cents, 50 cents apiece. We were buying them for nine cents. We were buying alkaline batteries like Everetti batteries that would cost people 38 cents apiece in in volume. We were paying 11 cents because we were used to these quantities with our spin pop. So when we went into doing the spin brush, we already had these relationships that could buy at these levels that we could never have done without having the manufacturing or purchase of the spin pop. Also, the spin pop gave us the opportunity to have factories that became experts in manufacturing small with small motors, batteries, and gears. And we became very uniquely good at this. And so when we got into the spin brush and the idea of it, we knew we had these factories that were really honed in on this type of production. So we had all these advantages that we couldn't have done this project at an earlier age. And of course, I would have also had less experience and knowledge either, also before um this time. So a lot of things you have to be when you're recognizing opportunity, you have to recognize your resources. And in that case, I'm a resource, my factory's a resource. These things were ready for it. And earlier on they wouldn't have been.

SPEAKER_00 21:34

John, that's a great response. But I also have a question around that. Is you said you were around 50. That's a great response, but not what you meant. No, no, no. I'm trying to I'm trying to get into your mindset, into your DNA, right? Because there doesn't seem to be fear. And I'm trying to understand why. In my experience, there's no fear when you have the right knowledge. And so I'm trying to understand where that knowledge came from for you. You were you said you were around 50 years old when this initiative was getting off the ground. ground. Uh and you credit a lot of your previous business for the relationships and knowledge around where to approach manufacturers, how to get the right costs in. But still, 50 is not, you know, an age where one would want to spend sleepless nights. So d and you already had a successful exit in the millions before that. So what was there ever the temptation to take it easy and feel like, hey, why am I doing all of this? I'm already, you know, there's access to so much capital I have, I can easily live my life and not take on the strength.

SPEAKER_02 22:30

I never thought really in the terms of either one. Either that I've had enough success I don't need to do it, or I have to do another one. I always kind of looked at this because it was a pattern that appeared to be forming as a project and the projects I stay in a mode, a posture of looking for opportunities. So I stay in that posture, but I never know when the opportunity will come or when I either come to my mind or walk in the door. So after each project, I fortunately I was able to financially retire if I wanted to after selling the toy company but I I wasn't sitting there thinking I got to do something. I actually at the time went to play golf, moved to Florida and played golf, remaining in the posture of looking. So I never said I'm playing golf, I'm retired and this is my this is my life or end. And um as long as I was in that posture I always attracted ideas. I had hundreds of inventors would call with things I'd have ideas in my head. It's just because that's the way I lived. If you were a comedy writer you'd wake up in the morning thinking funny things all the time. You'd be used to it. And I don't know if you were tired if you're no longer funny, but you would you get in a posture of what your profession is. And um and and then over time you have to realize that you know when you first start you don't know a lot and you learn a lot through mistakes. They're expensive. That's one of the reasons I recommend it's a debate to go to getting an MBA because MBAs are very expensive to go to get an MBA now. But at the same time making the mistakes you make without it are also very expensive. So it's not a it's not a clear cut uh choice. I just um as I went along I got more knowledgeable my odds of success with anything I did become much greater because I could analyze a product I may have 11 different criteria for an invention to be viable. And if I looked at a thousand ideas I might find three or four or five that are viable. I might find 980 that are intelligent. But trying to find things that fit all of the criteria to become a real opportunity is usually a small number.

SPEAKER_00 24:42

But that comes from a lot of experience of analyzing there was also a moment where the the spin brush was having quality challenges right after launch. And so what was your mindset at that point? Were you were you doubting your manufacturers or were you still going ahead with production trying to figure out hey in real time let's try and fix whatever the issue is.

SPEAKER_02 25:02

Well it turned out to be the most important th decision uh that I think I made in my entire career. Murphy's law has always entered into every business. You can't help it that would can't go. But I didn't even look at this as Murphy's law. We designed the product a certain way for the for the toothbrush for the water to go through it and out the bottom we thought though that's real easy you you know you're you get it wet and it gets out red out the bottom. We didn't realize that it would have a form of electrolysis or whatever and that the switches after a month would stop working. It would break. And we didn't have one return by the way we had we had shipped I don't know what we had shipped thousands of them already and hadn't had one return but we happened to know that after a month they were breaking and we had about a half a million dollars of inventory in the warehouse and I had to make a decision well nobody returned them. We could ship them and um and fix it, you know, then fix it. But I realized this was a consumable product. This was not a one-off like a toy a toy's going to break in the first hour the kid's going to break the toy no matter what it doesn't matter really what the lifespan of most of them are but but this is something that was very critical that it's a good product. And so I made the decision to throw out all $5000 worth of inventory. We replaced the $5000 we spent the next two weeks on the phone half the night or more because our 12 hour difference in Asia redesigning it with my factory and in two weeks we redesigned the product totally so the water didn't no longer went through it and and that was be no longer a problem. We called all our retailers and we told them that we found a flaw with it and if they would please be patient with us we were fixing the problem and we'd be a month or two behind our original plan. And we didn't have that many retailers to call at that time it was still early. Without that we would have failed we would have kept our 5000 the other thing is fortunate is that we were a pretty wealthy company I mean we had already I had already sold the toy business and everything and I could afford the mistake. When you're newer company and you got on you know you scrape together the money to even be in business and you lose that kind of money the decision becomes much more difficult you know because can you even afford the decision to throw out much of what you raise to even run the company but I was I was fortunate that way and I made the right decision and uh everything went on from there.

SPEAKER_00 27:23

You said you had no returns and you know when we were discussing this case uh during unit one of the OPM program we were asked the question how many of y'all have little children? I have a three year old but she hadn't started brushing as regularly back then. And now I understand what a challenge it is to to make her brush. And what we were told is even if it's a tiny bit of shock, the fact that your child is still picking up the toothbrush and brushing every day is a huge win for any parent. And you know that point finally drives home for me today when as a parent of a three year old I see that my daughter would probably take to an electric toothbrush, would not need a lot of convincing and clean her teeth. So I you know it's incredible everything worked out in your favor. But also the fact that you found a product which parents could benefit from and despite a small flaw at a point in time chose not to complain or return is incredible.

SPEAKER_02 28:12

Well let me comment on that because the product was the it was never designed initially as the a children's toothbrush of being the key part of our market. We were basically saying there back then there were, I forget the number of billion toothbrushes sold a year, some tremendous amount of toothbrushes and we were after that market. Worldwide we never will find a market like this that's every man, woman, child, country, religion you know, never most every product is for women 20 to 30 toys are for kids three to eight, you know, and you have a limited market. This was the most unlimited market and so we were making a product that was a better toothbrush for everybody. As we got into it and we had certainly were aware of kids going in the entire uh kids kids' oral care business was only in the whole country in the U.S. was only $600 million or something. Tooth kids oral care products you know which had some Barbie toothbrushes and and some things but it was not a big business. So we decided well obviously let's make a fun looking spin spin brush and we made a race car I think and we decided not to go with licenses for it. With the spin pops we had Batman and all the Looney tune we had a lot of licenses. But with this we said there's no point in making a license let's make a ballerina for the girls and a race car for boys. That was our original thing just make it fun looking and because this is really it would be a great product it might be easier to get kids to brush their teeth. Well we ended up it certainly did not take over our business we still the by far the majority of our sales were for adults but it took it took the kids oral care business in more than double the entire oral care in the United States the amount of spin uh spin brushes we sold for for kids. So it did become a very important uh market for us but it was small compared to all the adults that existed worldwide John I also want to touch on the exit you were initially trying to license the toothbrush and then there was a meeting which you you went into did you expect a deal at that meeting was there a different intention you walked in with and then walked out with no first of all I never had an interest really in licensing the toothbrush. What we what we did was that from day one we analyzed every company in the business. Again this is from experience this is not something I would have thought of in younger years as a newer entrepreneur but with the experience I had and having sold businesses we looked at all the opportunities that who needed this the most and everybody you know Oral B had they already had they owned Braun so they already had their own manual brushes and electric and companies that had $50 electric would not be interested in this initially because they don't they're afraid they'll cannibalize their high-end product and so they would need a good year of meetings to make a decision to get into this. And uh Reach which was owned by I think they were not J and J. I I forget they had and they had developed a $10 vibrating battery operated toothbrush ahead of us. And their $10 toothbrush would vibrate at like 30,000 times a second or some crazy amount unless it touched your teeth when it would go to about zero. Most of the vibration was in a handle so it was a failure. One it was $10 which is not an easy jump from somebody who's using a manual brush to go from $3 to $10. And so they failed. Colgate had nothing but they were in the process of inventing a battery operated $20 electric toothbrush. But the one who was really in in trouble was Procter and Gamble. Procter Gamble owned Crest and Crest for 30 years was the number one selling toothpaste. And by the way in the oral care business toothpaste is where the biggest bucks are by far and mouthwash too. But they crest was number one for 30 years and now after 30 years Colgate's total had taken over number one. PG's stock was down to a very low point one of the lowest they hadn't been in years and the entire Crest oral care business of PNGs was going through a real downturn. So we picked them and they had no electric toothbrush and their manual brushes were the that was they were the bottom of the totem pole in manual brushes. They just never did it. So they were absolutely our target that needed it I also grew up in Cincinnati with Procter and Gamble and we used to go in fourth grade class would go to the ivory soap factory you know so we grew with grew up with them uh as uh big fans of PNG um so when we started the company the aim was to sell it to Procter and Gamble I was aware of their multiple their sales to earnings their price to earnings multiple and I knew everything about where they were with Crest um and and the rest. So that was our target from day one. I also knew that they were selling at 24 times earnings I mean a big multiple so my focus on the spin brush from day one was profit. How much profit we can make so that if we sold it to them even under 24 times, it would make pay us a fortune and it would be accretive to them. And so they'd have an excuse at least to buy it. So they were our target. Now how do we get PNG? Even though if you looked at the IRI data in the few stores we were in, you'd see that by far we were way outselling everybody. But most of the people who worked for these companies didn't read these reports in that type of detail. They go home at five o'clock or they might work hard during the day they might not they're part of a big group of decision makers. And um so my feeling was that Procter Gamble despite who we were and how well this was selling never heard of us which proved to be true. And I figured that uh if if Colgate heard of us, they would have thought we were a uh a gimmick or toy. So I went into I decided the best way to do it is to go into their licensing department, their brand licensing department with the request to uh license the crest name for our product. Now first of all I had no concept they'd even be interested in that would even do anything other than I'd give able to give their entire office the product I'd be able to tell them, show them the IR data and literally make them aware of the spin brush. But it turned out they were not aware of it and I passed them around the office and everyone in the office loved them. And so they called the brand guys, the Crest brand guys to come in and look at it. And then we were there trying to license the Crest name for it. So they decided to test it. Now we didn't know that after their test that it was the highest testing product in the history of Rocter and Gamble with consumers. We didn't know that till a few years after the deal actually but uh of course they wouldn't let us know that but um they so we shipped them so many hundreds of pieces for them to test and I'm waiting for them to call me back. A month goes by not a word. Two months I don't want to call them because it lowers your price it lowers your value if you're hungry selling it's much more important for a company to want to buy you than for you to want to sell. So I didn't call nothing three months go by not a word and well I figure at this point there's nothing to lose so I called the guy I'm negotiating with for this license and I I said what I want to know what happened with your test and he says well we've been waiting to hear from you and I said I thought you guys were supposed to call me and they said no we thought you were going to call you know we're both sitting there and he says we've run a test on it and we've decided we're willing to license the name to you. Now I don't want to license the name because I want to sell my company and if I license the name to Crest I can't sell it to anybody else and and PG has all the leverage of any kind of future acquisition. But I'm I don't know what to do. I put them through all this work and um I said to him I said oh my God I'm so honored but you have to realize that we couldn't we couldn't pay like a normal 12 or 15% royalty. That's what a lot of major brands back then were selling you know would sell for I said we couldn't use more than 3% and still maintain our $5 price point. And so they said well let me talk to our people he comes back a couple days later or the next day he says okay we'll do 3% and now I'll sit and say my God and all I kept saying was I'm so honored so honored. And I said well I'm gonna take this back to my my board. Now of course my board is basically me but I'm gonna take you always have to have it's very important if you're ever in a situation you always create another a more important higher level decision than you. You never like them to know that the highest decision maker is sitting there because you need to have a bad guy. I came back a couple days later and I said I'm sorry his name was Darren at the time and I said my board said they're amazed and they're so honored that Cockton Gamble would be interested in this. The board says that they've invested in this company to eventually sell the company and that if we do it with Crest we'll never be able to sell it to anybody but but PNG and and we've had other interests and that's when he says well why don't we look at buying your company and that's where it it literally went right from there. And there were many things to learn from this the most important of all was that when you're negotiating with a massive multinational company whether it's it's I did Gerber and uh Hasbro and this and that, you're you negotiate with one person. It's no different than playing poker. You're sitting across from each other you both have a level this is the one time that uh being dishonest is kind of okay and expected where you're both kind of bullshitting a little bit to find the right price and the right deal and that's uh part of the game. But um ultimately when you sit and you negotiate with a company to buy you're really negotiating with the guy sitting across the table. He may have to get approval from boards and this but he's also been given a lot of the parameters are going in no matter what he claims. And so from that point on though it went uh to an acquisition and and then of course they say they say to us, what is it you guys are looking for and I say well I'd rather hear what you guys are willing, you know, because you don't want to establish a price that's too high or way too low. And then we spent and even take it further I was going to have Goldman Sachs I figured this is too big a deal for me even though I've had experience I said I'm I gotta get uh I gotta get a a major to negotiate for me. And I called a friend of mine who was a hot shot at Goldman Sachs and he gets me in charge of the guy who's in in charge of these type of acquisitions and mergers and stuff and we have dinner in New York. I don't know how long this is supposed to be or if I'm taking too long for one story but I I have all the time I was going to ask you that if if you had the time. I'm waiting for a plumber from a hot water heater so I'm okay. But um so we have dinner in New York and we hit it off great. We we spend four hours and he loves this and tell him all this and I said to him I said first of all you have to know that this is highly confidential. This is not this is cannot be totally so anyway he's gonna get back to me in a couple days. I go home a couple days goodbye no call a week no call two weeks nothing I start to call him no return call nothing this goes on for a month I'm calling my friend who hooked me up with him I said you know I don't know what's going on. All he had to do if he wasn't interested was to say I have a conflict he could have said anything but he never returned my call and uh eventually I found out that he called Colgate his friend at Colgate and told him about the deal and wanted to know if this spin brush was any good. And the Colgate guy told him oh that's a gimmick so he never returned my call. So I ended up negotiating it myself. So now I brought with me my lawyer and I brought maybe one of my head engineer to answer questions if it come up and things like that. But basically I sat across the guy and we negotiated this over I don't know how long it took us didn't take us that long. We made a deal. But I said the most important thing to learn is that it's almost like sounds impossible to negotiate with a multinational company when it ultimately comes down to two people sitting across the table and bullshitting each other.

SPEAKER_00 40:33

John phenomenal thank you for walking us through that entire event that unfolded and what an honor the fact that you also took on a broker or a banker's role. I think that's what true entrepreneurship is right just rolling up your sleeve, being a gentleist, trying to learn what you may not know and trying to do the best you can at that.

SPEAKER_02 40:53

You know to add to add to the end of this story to put a cap on it, of course after I sold it and I did get a lot of money for it, of course who's the first one to that number's public. Would you would you mind sharing it if you Well I'll tell you the the the entire amount turned out to be 475 million. But the moment that the deal was closed who's the first person to call me Goldman Sachs wanting to invest the money for me. And I that I I ended up getting you know right you know getting having the president of Goldman Sachs calling to apologize and I was I I could never do I would never do business with them with how dishonorable they were but um I'm sure they're a good a great company I know that but um um uh what was the question you just asked it was it was about around the number how much soil the business so the amount initially was this it was um and this is an interesting educational thing also the the initial amount I believe either 150 or 150 million or 175 plus an earnout. Now earnouts are often hard to write that can be held up you know there's usually loopholes in the earnouts that make them give the company an opportunity to not pay it. So we spent a lot of time getting the earnout right the the fault that PNG had is that for them to get approval from their board to do this, they were using our maximum potential for PNG of $125 million in sales. We did, no in our one year we did $44 million with a $22 million profit. And that's that's what we used for their to get these multiples that were very large. They used that with their board almost in a way sandbagging their own board to get the deal closed. So they paid little attention to the earnout what happens well beyond this. And what happened well beyond this was vast amounts of money but they didn't even consider it and they didn't pay much attention to it. So um after we were in business with them after the first year, which I think they did $400 million in the first year. Something I mean it was it instantly became the biggest became the biggest selling toothpress in the world. I get called back by the um executive vice president number two guy at at PNG and he says I hate to tell you this but we're gonna have to discontinue all our advertising and we're gonna have to maybe even take it off the shelf for a bit. I said why he says because we've gone over the earnout and the earnout is becoming so big that it's beyond what we can handle. I said we can't continue this it's too big a liability and I said to him that's crazy. I mean the opportunity you have your the big you have patents that are very good but even more important than the patents is your marketing your advantage that you've got at the shelf shelf space getting a two year head start over anybody I said you can you can't do that. I said why don't we look at somewhere between zero and infinity we can find a number that'll work for you and work for us. And from that point we ended up negotiating it which paid us 475 million which turned out to be a great deal for them even though I've been told since that I they paid too much by the president and I said you're full of shit. And the reason that foolish it is because obviously we were thrilled with it. We had we were in business a year and a half and our million and a half dollars sold for 475 million. So it was it's a beyond belief uh experience. But their stock at the time they had also developed white strips. So between the spin brush and the white strips, Crest's toothpaste became number one again. Crest went way up, and they got their whole business went up. But this was really, they really publicized their progressiveness and all this stuff, and their stock went crazy in the billions of dollars improvement. So when he told me they paid too much, I say, Well, look how much your stock is worth now. And don't tell me I paid too much.

SPEAKER_00 44:43

John, just for my clarity, an earnout is like a royalty to you, correct? And they bought out the and earnout is like a royalty that they pay pay to you?

SPEAKER_02 44:51

No, the own out is the earnout. The earnout is basically saying that, okay, we'll sell it to you for this much, but if the business does this much, I want much more money.

SPEAKER_00 45:01

Okay.

SPEAKER_02 45:02

Okay. And but but and if it does this much, it's worth it to you. You know, it's worth it to you because you're doing way more money than what you paid for it. And to pay us this amount is is worth it. So they ended up uh as I said, the amount the the sales on it were way beyond their even looking at the earnout because they didn't think in those terms. And the amount became a billion dollars of, you know, stuff like this. And back then that was when a billion dollars was a lot of money. And so it became untenable, you know, the particular earnout deal.

SPEAKER_01 45:34

John, you have a few more minutes. I want to be respectful. I'm not busy. I can do what you will be old and retired. You did all of this in two or three years, I believe, right? Within three years of starting the company. Well, we were in the business for a year and a half, but most of the year was in developing the product.

SPEAKER_02 45:50

So we were only selling the product and shipping it for about six, seven months. So um, as I said, it was a once-in-a-lifetime Grand Slam and um and Murphy's Law, other than those hundred thousand, their first goods, did not enter in. The fact that I did these, we'll go back to these 17 mistakes.

SPEAKER_00 46:08

Yes, that was my next question.

SPEAKER_02 46:10

Well, I'm gonna go back to them because before I started this business, I had already had a bunch of business and a bunch of successes and a lot of learning. And I decided before I did this toothbrush business, I'm gonna put down all the things that an entrepreneur, myself or anyone else, uh, all the mistakes that are natural or seem to be natural tendencies that entrepreneurs don't have to make. You read these mistakes, don't make them. And so I put together initially 16. And when Bill Solman wrote the uh the case study, there were 16. So it got kind of set in stone as 16. But shortly after that, I came up with the 17th mistake, and the 17th one, I think, is the most important, in that um, most entrepreneurs or inventors don't do enough research on their product before they start it. And part of the reasons is that their invention is their dream, and they don't want to find something that's gonna rain on their own parade. And so they don't pay, they don't, and what happens is the truth comes out. If it turns out that there's prior art or there's something that in the in the history or something that's going on currently and that would prohibit them from doing this, they need to know in the beginning. And I know so many entrepreneurs don't do that and would go ahead with it with a cursory uh search. Maybe they have their patent attorney search, which, you know, that's nothing compared to what Google and what AI now offers in in ways of complete searches of what's uh ever been thought of. Because remember, if it's something's been conceived of, you can't patent it. It doesn't have to have been patented. If it if it's been shown to be conceived of, and you can prove it, it's not patentable. So, but um, so many inventors and entrepreneurs do not do the research. And it and it was when I wrote the first 16, it was really before the Google and all the opportunities to find out so much more research than you could through just a patent search that was often expensive if you did a very extensive one. So most people did cursory patents, patent searches. But I wrote these 16 initially, though, for myself. I wrote them on the back of envelopes, napkins, and things like this. Every time I come up with an idea of how I can make a perfect company by not making these mistakes. So I I did not write them for anyone else. I certainly didn't write them to be reproduced or printed, but they probably are. I haven't looked at them in years myself, but they probably are very valuable and useful for somebody who's just getting started as an entrepreneur. Things you don't have to do. You don't have to hire your brother-in-laws, and you don't have to go buying all kinds of fancy desks. But so much of that has changed since the internet world and the fact that people can work at home. There's entire different um opportunities now and and methods than when I did my businesses.

SPEAKER_00 48:57

John, with all the success you've had, and just to take a moment, I wrote you a cold message on LinkedIn requesting to be on this podcast, and and you said yes. Despite all the success you've had, how do you not let ego come in the way of your personal identity? You know, when it comes to relationships, young entrepreneurs like myself who you don't know at all, and everything else in life that you approach, how do you not feel like you're the king of the world?

SPEAKER_02 49:21

Well, first of all, I can't say that pride doesn't enter in at some point and you feel real proud. I remember when we completed the 475 million part, my wife at the time, I'm not married to her anymore, but I remember we went to celebrate, we went to Burger King, each had a whopper. You know, we're all different personalities. And um, I think that I've been fortunate to feel more gratitude than pride because I've had, as I said, I've had so many things that could have gone either way that went my way. Could have failed with all my intelligence and best effort both combined. Everything I did had an opportunity to fail for variables that were beyond my control, and they went my way. So I think that kind of built in a sense of uh a deeper sense of gratitude than pride. And also, I don't know, we're all just a bunch of people walking around. I'm gonna be 80 years old in a few weeks. Life just comes and goes, and uh I don't pay as much attention to everything that happens. We have an infinite amount, infinite amount of personalities and stories that we all walk around. You walk down the street of New York and everybody there is a bundle of stories wrapped in a body walking down the street. And so I you get to I get to a point, especially at my age, that I realize that most of the things about me, good and bad, have been given. I d I wasn't successful or or smart at this because I did something on purpose. I was given that. I have traits that aren't as good, and I was given that too. And I think that makes it easier to be more accepting of people and circumstances and take less both having less pride and less guilt for things you do wrong. That uh we're just people going around. And but I do love, I do feel so grateful to have such wonderful stories. You know, I look back and uh my history is not here right now. I'm living right here as I'm talking to you, but it is fun to have a lot of good stories. John.

SPEAKER_00 51:12

What advice would you give yourself if you could speak to the younger version of John Oshaw?

SPEAKER_02 51:17

I think somebody asked me that question before, and I don't I don't think I'd say a word. I think it is so critical that that younger version experience and learn everything that I was fortunate enough to do through the life. I would not warn them about any pitfalls. I wouldn't. I would just I would I think like all of us, we have a a reason that we ever given our lives and our particular everything, and um, I don't think it requires interference.

SPEAKER_00 51:40

John, do you like reading? Is there any book that you've read which has influenced you?

SPEAKER_02 51:45

No, the biggest book that's ever influenced me was Sherlock Holmes. It really did. It taught me how to think, I forget if it calls it inductive reasoning, but it taught taught me how to figure things out, how to take the fewest amount of data, the smallest amount of data, and create pictures and recognize when you need more data or when you can basically make a a good estimate or guess to move to the next uh thing. It it served me my entire life, and I certainly recommend everybody read that. I now, because I'm older, I have a tendency to listen to everything, and I don't necessarily have the patience and necessarily the focus to sit and read like I used to.

SPEAKER_00 52:22

Thank you, John. That's everything from me. You've been very gracious with your time and all the experiences that you shared. I'm very honored and very grateful to you. Thank you, John.

SPEAKER_02 52:31

Well, I'm honored that you asked me, and I I always enjoy doing this. So and I am planning on coming back to Harvard in February when they do the case for the day, and uh I look forward to that every year.

SPEAKER_00 52:42

Amazing, John. Thank you again.

SPEAKER_02 52:44

Okay, thank you.

SPEAKER_00 52:45

Bye.

SPEAKER_02 52:45

Bye bye.