The Ice Cream Story: The Dark Side

Installment #9

I’ve have had more than my share of dramatic business ups and downs. I’ve had breathtaking successes. I’ve had violent train wrecks. I danced euphorically with friends one day and I’ve experienced vicious betrayals the next.

Everyone has something extraordinary to offer and, at the same time, everyone is seriously flawed. Even me. Especially me.

I have noticed that one’s strongest asset can also be one’s greatest liability. For example, someone who is intellectually brilliant beyond measure, who comprehends quickly, and who is therefore able to make rapid-fire decisions, is a wonderful asset to a business. However, the downside of quick decision-making is when the decisions are wrong. When bad decisions are made quickly one after another, they can just as quickly sink a business.

I believe my greatest asset is my innocence. I’m a fairly guileless dude. As a result, I am a terrible liar and actor. I am basically incapable of cheating someone. I have to deliver value. I believe that it is this character trait that has attracted enormous good luck, people, and resources to me. That’s the good news.

But like I said, assets are double-edged swords. The downside of innocence is that I am easily taken advantage of. Those who don’t appreciate what I bring to the table can easily dismiss me as a lightweight or unsophisticated or unnecessary.

In the early days of my enterprises, I attracted good friends to join me. I wanted to have fun and share the joy and the gains. Those early days were wonderful, filled with laughter and creativity and high spirits. I could not wait to get there in the morning. I never ever regarded it as work and I never ever wanted anyone else to experience it as work either. It was all to be fun.

For the record, I never required anyone to stay late. Ever. I don’t like to be bossed so I didn’t boss others. I did unto others as I would have others do unto me. The collective energy that was created was mutually supportive, relaxed, loving, and free. As a result the businesses grew.

Here’s a downside to growth which I have experienced in both my fast-growing businesses: As the stakes increase, people (some of whom were my dear friends) get increasingly grabby for money and power and ego-enhancements. (I won’t go into sordid details.)

I remember leaving for a three-week vacation to India. When I left, the ice cream business operated as a harmonious wholeness. It was highly creative and fun. Of course, we had our disagreements, but they were never strong enough to disrupt the underlying harmony and friendship.

When I returned from my trip, refreshed and recharged, I was taken aside and told that while I was away, many important changes were made. Decisions, I was told, were now being made more quickly with less discussion and undisciplined input. The sounded okay until I was told that while I was away, they cut the funding for two of my pet projects without even asking me.

Cubicle walls then started to go up around desks. The reason given was that the past chaotic nature of the business disallowed focused attention. That sounded reasonable at the time but what it actually did was physically divide the collective spirit.

The food business is a tough, ruthless business. Supermarket chains in the major cities are corrupt. I don’t know if the practice still exists, but back in the 80’s, there was a kind of institutionalized bribery called slotting allowances. That meant that the food producer had to PAY the supermarket to get their products put on a supermarket’s shelves.

This is how a slotting allowance was computed. The number of flavors was multiplied by the number of stores in the chain and that was multiplied by the slotting allowance. It added up to be a HUGE number. And even if we were able to pay such a bribe, if the product didn’t sell within a month or so, we’d be thrown out.

We refused to pay slotting allowances. That doomed us to the smaller independent stores. And because we did not have a large promotional budget, I had to try to stimulate consumer demand through publicity.

I’d travel to various cities, meet with the press, and gave everything I had in each interview. Three or four interviews per day for several days in a row really took it out of me. I’d come home quite tired. Added to that, I’d have been out of the loop and ignorant of all the quick decisions that were being made by the guys who were organizing the distribution.

Most of our ice cream distributors did miserable jobs. One even cheated us for over a hundred thousand dollars. Yet I was the one receiving more and more criticism and resentment from my so-called friends in the office. I overheard one spouse complain, “My husband does all the work but Fred gets all the credit.”

What used to be a place I could not wait to come to in the morning turned into a place I dreaded. Each morning I’d go with an awful feeling in my stomach.

It was finally concluded (without my input, of course) that the business could not survive trying to create its own brand. Instead it should private label other people’s ice cream. And since PR was no longer needed with such a strategy, I was no longer needed. A monthly buy-out plan for my stock was arranged and I agreed to step down. My colleagues praised me up and down for this decision.

Now keep in mind, over the previous year, I had made some major life decisions based on a salary that I thought would never go away. I married. We decided to have a baby. We bought a house. And we borrowed money to buy furniture.

Yet the salary went away. The monthly stock buy-out was supposed to keep our noses above water until I got whatever was next in my life up and running.

However, right around the time my son was born, I was called back to the office and told that the business was no longer going to buy back my stock. The same guy who structured the stock buy-back deal and who praised me effusively for selflessly stepping down, had now researched the law to find reasons why buying back my stock was no longer possible. (A note on this guy: He at one time was a dear friend who desperately wanted to move to my town but could only do so because I gave him a job in the ice cream company.)

I went from following Nancy Reagan through the buffet line to standing on the unemployment line. I had no money, no income, no assets, and having signed a non-compete clause with the most recent investors that said that if I left the business for any reason, I could not compete in the ice cream industry.

During this time, I met and had lunch with John Mackey, the founder and CEO of Whole Foods, an enormous health food store chain. He knew about me and my ice cream. He asked if I could develop a special health food brand that he could sell in his chain of stores. I said I could.

I went to my old ice cream factory and told the new president that I had a private label account for them. It did not compete with any of their other business; it only opened up a new, potentially huge, market for them. I would  need to come in for only ONE day to use the small R&D freezer. The distribution was already in place. They would manufacture the product. All I wanted was a small royalty (like one nickel) on each pint sold. To me it seemed like a major win-win for them as well as me.

I was told no. Flat no.

Basically, just to satisfy my own curiosity, I borrowed an inefficient household ice cream freezer and did the experiment in my kitchen with non-commercial grade ingredients. Even still, the health food ice cream that I created was drop-to-your-knees fantastic.

All that took place seventeen years ago. While it may appear that I am bitter, I am not. I’m only trying to tell a good story. I’ve forgiven those guys long ago (although I haven’t forgotten). I am cordial to them (but I don’t invite them to our family celebrations). And rest assured, I certainly won’t do business with them again.

My next business turned out to be over 100 times larger than Great Midwestern Ice Cream and gave to me innumerable priceless (and pricey) gifts. Getting shoved out of the ice cream business was a great blessing. But I am certain the shovers didn’t have that in their long range vision when they pushed me from the plane without a parachute.

P.S. When the three guys in charge of Great Midwestern cut me off financially, claiming they could not afford to pay me any more, they sold the store in Iowa City (the one that I built with my own hands) for $250,000. They then gave themselves 50% pay raises and did not pay down the bank loan (the one that I had personally guaranteed). I had to pay off that loan years later, even though I never received one penny from the sale of that store and got screwed in a rights offering that reduced my stock ownership from 40% to between 1% and 2%.

The moral of the story: If you are going to be an entrepreneur, make sure you develop equanimity in pleasure and pain, victory and defeat. 

www.lazyway.net

Comments

[ted]

Amazing! Incredible! Unbelievable! Yet so typical.

From one guileless person to another, I feel your pain.

The other moral to the story: make sure you cash in your lucrative options BEFORE you step down from your CEO position.

[Berlin Brown]

I bought the Lazy Guide book, nice book. But, I think these are way too cool too. If you are considering a second installment of the book, these stories could be a part of them.

The Michael Dells/Bill Gates won't tell these kind of stories.

Good job.

[Ben]

I liked your book too. But I think this story complements it very well. When I first read your ideas about being lazy, one could easily assume it would mean one should have a life without any trouble. This is not what you mean, I guess, but one could think that.

Fred, one question: since you got screwed by some of your friends, would you still run your business the same way again keeping your innocence and trust in other people?

[Jim]

Telegroup. Heh. I called them up asking to be a rep based on a WSJ story and explained I wanted to market them on the Internet (pre-web). They said "sure, go for it". I marketed in the soc.culture groups and signed up people in South America and Europe. I actually got "Thank You" emails from people that were getting horribly screwed by their long-distance monopolies and could actually talk to their children in the US now. Good times. Got checks from Telegroup for a long time.