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- [00:01]
Shane Parish
Dallas, Texas. August 1963. Mary Kay Ash is sitting at breakfast with her husband George, going over plans for their cosmetics company. They're one month away from opening. She's put her entire life savings into this. Everything they have is on the line. Then something terrible happens. George collapses face first onto the table with a heart attack. He was dead before the ambulance arrived. Everyone around Mary Kay tells her to stop opening the company, get whatever money back she can and find a job. You can't do this alone, her accountant says. You're going to go bankrupt. Mary Kay doesn't say anything. She buries her husband. Then she sits down with her youngest son, Richard, and asks him to quit his well paying job and help her launch this company for almost no money. He says yes immediately. Her older son can't leave his job. He has a family. But he pulls out his checkbook and writes her a check for $4,500. Every penny he saved since he was a kid. He hands it to her. One month after the funeral, she opens the doors. Welcome to the Knowledge Project. I'm your host, Shane Parish. This is an episode of Outliers. And it's all about mastering the best of what other people have already figured out so you can use their lessons in your life. Today we're talking about Mary Kay Ash, who built a $2 billion cosmetics company by solving one problem. How do you get ordinary people to achieve extraordinary results? Her answer wasn't motivation or charisma. It was a deep understanding of people and systems. After 25 years watching companies waste their best people, she sat down and designed a business from scrat. She inverted every broken incentive structure she'd ever experienced, every failed recognition system, every policy that killed performance instead of driving it. The results scaled to nearly a million people across 37 countries. The principles she discovered about incentives, culture and human psychology work in any business. We cover all 23 of her timeless principles in this episode. And I guarantee you at least one of them will make a difference in your life. Today, it's time to listen and learn. To understand what Mary Kay Ashe built, you need to understand what shaped her. And that starts with a telephone. In Houston, Texas, around 1925, Mary Kay was seven years old. Her father had just contracted tuberculosis at the sanitarium where he worked. The disease turned him from a capable man into an invalid, confined to bed with his lungs slowly failing to keep the family from starving, her mother took a job managing a restaurant. She worked 14 hours a day, seven days a week. There were no weekends and no holidays, just an endless cycle of breakfast shifts and dinner service while her husband lay dying at home. That left young Mary Kay very much on her own. She was responsible for cooking, cleaning, laundry and caring for her bedridden father. Every afternoon around 3:30, she'd pick up the heavy telephone receiver and dial the restaurant. Mother, Hi. Daddy wants potato soup tonight. And her mother would walk her through it while managing the dinner rush. Potato soup. Okay, honey. First you grab the big pot. Step by step, patiently explaining each detail. And always, she'd end the same way. You can do it, Mary Kay. You can do it. Talk about belief before ability. Her mother had no choice but to believe in her. There was no one else. Mary Kay had no choice but to rise to that belief and believe in herself. Those phone calls continued for years. Each call embedded the same pattern deeper. Someone believes you can do something difficult. Therefore, you can. You must. That phrase you can do it became so deeply wired into her that decades later, it would become her company's unofficial motto. She'd repeat it to thousands of consultants, willing them to accomplish what they didn't think possible. She built an entire company around one idea. Ordinary people can achieve extraordinary things if someone believes in them loudly enough, consistently enough and relentlessly enough. But first, she had to survive 25 years in corporate America. Those years taught her exactly what she did not want to build. After World War II, Mary Kay found herself newly divorced with three children to support. Her husband had returned from the war, decided family life wasn't for him, and left. She was now the sole provider in an economy that paid women a fraction of what it paid men for identical work. She needed flexibility. She had to be home when her kids came home from school. She needed to make parent teacher conferences and stay home with sick kids. Traditional employment didn't allow for any of that. Miss too many days and you'd be fired. So she went into direct sales with Stanley Home Products, a maker of brushes, mops and cleaning supplies. She chose it because it was the only path that gave her control over her own schedule. The economics were brutal. She earned 10 to $12 for each home party she hosted. To make ends meet, she'd need to host three parties every single day. Not three a week, three a day. But first, she had to learn how to actually make money at this. When she first started, it was catastrophically discouraging. The first three weeks, she averaged exactly $2 of income per show. And she was working herself to exhaustion for poverty wages. Most people would have quit, and Mary Kay nearly did, too. But then she heard about the company's annual convention in Dallas. It cost $12 to attend. $12 she absolutely did not have. So she borrowed the money, leaving her children with a neighbor, and took a bus to Dallas. Several hundred Stanley dealers filled the convention hall and Mary Kay sat in the back watching everything with an eye for detail. The company president, F. Stanley Beveridge, took the stage to crown the Queen of Sales. The winner walked up to thunderous applause. And then Beveridge presented her prize, an alligator handbag, a status symbol that announced to the world, I am successful. After the ceremony, Mary Kay walked up to Stanley and introduced herself. Then she looked him in the eye and told him she would be the Queen of Sales next year. He paused and studied her face for a moment. And then he said five words. Somehow I think you will. Something shifted in that moment. Someone with real authority had looked at her, a struggling single mother making only a few dollars per day, and believed she could do something extraordinary. She left Dallas and got to work. She started studying the current Queen of Sales presentation. She memorized it until she could deliver it in her sleep. But memorization wasn't enough. She needed assistance. So she started writing weekly sales goals and soap on her bathroom mirror. Every night before bed she'd update the numbers in the corner shows completed, money earned. Years later, she wrote about what those days looked like. She said, when I first started supporting my family as a Stanley dealer, I only had room for three things. God, family and career. I had no social life. Every waking hours was geared towards my three children, my work and my church. I didn't know what it was like to go to a movie or to have dinner out with a friend. My entire day was planned around the children's schedule with military precision. I got up at 5 o' clock so that I could do my housework before they arose. Then I gave them a good breakfast and got them off to school. After they were gone, I left too for my first party. I'd have another party in the early afternoon and then I would make certain to be home to greet my children when they came home from school. I gave them their dinner and got them ready for bed. Then at seven o' clock I would leave for my evening party. She was only sleeping five or six hours a night, working from 5am until 10pm and seeing her children only in brief windows and earning maybe $30 a day on a good day and most days less. It was barely survival. But this is when something changed. She became what she called a follow through person. And this is one of the key ideas that I took away from her. And it started with the basics. Correspondence, returning phone calls, letters. And she writes. Correspondence is an area in which most people often fail to follow through. Most of us don't like to write. We naturally tend to put off those things we don't like to do. But here's what happens when you don't answer calls or letters. People get irritated. They take it personally because it kind of is personal. So Mary Kay answered everything. Every phone call, every single letter, every note from a customer. That's follow through. But the real breakthrough came from a story she'd heard about an efficiency expert named Ivy Lee and an industrialist named Charles Schwab. Lee walked into Schwab's office with a proposition. He told the president of Bethlehem Steel that he could increase his people's efficiency by spending just 15 minutes with each executive. Schwab looked at him and asked the obvious question, how much will this cost me? And Lee's answer will surprise you. He said, nothing, unless it works. In three months, you can send me a check for whatever you feel it was was worth. So Schwab agreed. And Lee met with every executive at Bethlehem Steel and asked them to make a promise for 90 days before leaving the office. Each day, write down the six most important things you need to do tomorrow. Number them in order of importance the next morning. Start with number one, finish it, scratch it off, move to number two. If something doesn't get done, put it on tomorrow's list. That's it. That is the entire system. 90 days later, Schwab sent Ivy Lee a check for $35,000. Lee had taught them follow through. And Schwab believed it was worth a fortune. I was so impressed by the stories message Mary Kay wrote that ever since I'd made up my own daily list. And it's worked out wonderfully for me. Remember, she was sleeping five hours a night, working from five in the morning until ten at night. Three kids, no husband, making $30. On a good day. That list kept her sane. It kept her going. Every evening before bed, she'd write tomorrow six things. The children's schedules, where the parties were, which customers needed follow up calls, what inventory to pack. My list keeps me on track, she explained. And I give it all the credit when people tell me how well I follow up. Once she wrote something down, it became what she called a tangible commitment. Something she had to do. It also disciplines me to do those things I'd rather not do. The list of things that most people tend to put off and never get around to doing. And then she'd add this warning. Don't trust it to memory. If you don't write it down, you'll never get around to doing even the most well intentioned task. But the most important application of follow through wasn't the lists or early mornings. It was the customers. Most salespeople made a sale and then vanished onto the next prospect, the next commission. But Mary Kay did something different. She called customers back regularly. Not to sell them something, just to check in. Tell me, how are you doing? How is the product working for you? The customer hadn't even used up what she'd bought yet. There was no sale to be made. But if there was a problem, Mary Kay wanted to know immediately before it festered. This kind of reminds me of Jim Clayton who said, you can solve 90% of all legal problems with good customer service. Two months later, there was another follow up call. Then another. When the customer was ready to reorder. Every customer became a relationship, not a transaction. And every sale became the beginning of something, not the end. Later on she'd write, success in our business depends on customer satisfaction. A one time order is not what we're after. After all those years and all those parties and all those follow up calls, she distilled it to one sentence. I would conclude that servicing the customer is the most common denominator shared by all great salespeople and sales managers. The system worked. Month by month, her sales improved. She learned which products sold best at which parties, which demonstrations made women reach for their wallets, which neighborhoods had money to spend. But she never got complacent. She'd later write, nothing wills faster than a laurel rested upon. Every person should have a lifetime self improvement program. In today's fast paced world, you can't stand still. You either go forward or backward. Every month she studied what worked. Every quarter she refined her pitch, expanded her territory and increased her efficiency. She was constantly testing things, refining and getting better. She was evolving. Mary Kay achieved her goal. She became the queen of sales. The victory was sweet. Walking up to that stage, she was so excited. She heard the applause, knowing she'd beaten every other dealer in the company. She'd proven it to be Ridge, and more importantly to herself. And the prize she got that year. A trophy. Not an alligator handbag. Not the status symbol of success she'd been dreaming about for 12 months. A lousy trophy. Of course she accepted it graciously. But something inside of her shifted. A seed planted itself that would grow for decades. When she eventually built her own company, recognition would be different. It would be Thoughtful. It would be meaningful. And women wouldn't get trophies that collected dust. They'd get diamond rings and pink Cadillacs. Prizes that announced to the world this woman was successful. Prizes that mattered. But that was years away. For now, she'd proven something crucial. The system that she had designed worked. Follow through, worked. Writing it down worked. Treating customers like relationships instead of transactions worked. She had a method. And that method got results. Then she discovered recruiting. Stanley Home Products offered small commission percentages on sales made by people you recruited to become salespeople as well. So most dealers ignored this because the percentages were so tiny. But Mary Kay understood the mathematics of scale. If she recruited 10 people who each sold $500 a month, that was $5,000 in sales, generating 100 to 150 in commissions for her. But if she recruited 50 people or a hundred, those small percentages compounded into real money. So she started recruiting systematically. She wasn't aggressive about it, but at the end of successful parties, when women asked, could I do what you do? She'd say yes, and then share everything she'd learned. Over time, she recruited about 150 women as salespeople. She was building a huge network. Each of those 150 women had their own customers. They threw their own parties, and they had their own recruits. And Mary Kay earned a small percentage from all of it. And this is where she learned the fundamental architecture of multi level marketing. Nobody called it that yet. Of course, your success as a recruiter depended entirely on your recruit success as sellers. If you recruited people and abandoned them, then they'd fail and quit and you'd earn nothing. But if you genuinely helped them succeed, then everybody in this system made money. By the late 1940s, Mary Kay had become one of Stanley's top performers in Houston. She could sell, recruit, and build. And the company started to take notice. Stanley Home Products wanted to expand into Dallas. The market was underdeveloped and full of potential. So they promoted her to manager and told her to move. But there was one problem with this. Stanley refused to continue paying her commissions on sales from the 150 women she'd recruited in Houston. Talk about a pennywise pound foolish decision. She'd spent years recruiting and training these women. And now, because the company was transferring her to Dallas and giving her more responsibility and more authority, they wanted to cut her off from all those override commissions. She'd have to start over from scratch while someone else inherited her entire Houston network and collected commissions on the relationships she'd spent years building. So Mary Kay protested of Course, moving cities shouldn't mean abandoning everything you created. But Stanley's policy was clear. Commissions were tied to geography. If you left the territory, you left the commissions. So she was faced with an impossible choice. Refuse the promotion, stay in Houston, or accept the promotion and abandon her income stream. Frustrated, but seeing no other option, she moved to Dallas and started from scratch. The experience left her bitter. And years later, when she designed her own company's compensation structure, she eliminated geographic restrictions entirely. Consultants could move anywhere and keep their teams because Mary Kay remembered what it felt like to lose everything just for changing cities. So after proving herself at Stanley, she moved to World Gift Company in Dallas. And her assignment there was to build their direct sales operation. So she spent the next 11 years, from 1952 to 1963, doing exactly that. She helped expand their sales network to 43 states, recruiting and training hundreds of salespeople. She increased company turnover by 50% in a single year. And she developed training materials. She tested different compensation structures. She was, by any objective, one of the most valuable employees WorldGift had ever had. And then came the moment that would change everything. Mary Kay trained a man to work under her. She doesn't mention his name. He was capable enough. He was smart, he was personable and, you know, good in front of groups. He was a solid hire, she thought. The company's leadership agreed. Within months, they promoted him to be her supervisor. And here, she recruited him, she trained him, she taught him everything he knew about the business. And now he would be supervising her. And his salary would be approximately double hers.
- [18:02]
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- [19:04]
Shane Parish
And of course she protested, she was told something considered perfectly reasonable. In 1963, men needed more money because they had families to support. And she was a divorced single mother of three children. This wasn't the first time. It was just the most egregious example. Throughout her entire career at Worldgift, when she brought ideas to the all male company board, they dismissed her suggestions with one variation or another of the same phrase, which is, oh, Mary Kay, you're thinking just like a woman. They didn't mean it as a compliment, never mind her. Thinking like a woman had helped increase their revenue by 50% in 1963. Having watched this pattern repeat itself across multiple companies over 25 years, Mary Kay resigned. She called it retirement. It was a refusal to continue participating in a system designed to ensure she'd never be properly compensated or recognized for her contributions. She was 45 years old. She had no pension, no significant savings and no backup plan. But she did have one asset. A lifetime of experience watching how not to Run a Business. So she decided to write a book. She sits down at our kitchen table and makes two lists. List number one is every negative experience she's had in 25 years of business. Every time she was passed over for promotion. Every time a man she'd trained was promoted above her. Every time her ideas were dismissed because of her gender. Gender. Every instance of unequal pay. Every meeting where men talked over her, interrupted her or simply pretended she hadn't spoken. Then list number two. What would her dream company look like? Well, fair pay based solely on performance. Promotions based solely on merit. Not gender, not race, not personal connections. Credit for good ideas regardless of who proposed them. Public recognition for achievement. Flexibility for family responsibilities. A support system that actually supported women rather than competed with them. The second list started to grow longer and longer. So she looked at it and had an epiphany. She later called this one of the most important moments of her life. She thought, wouldn't it be marvelous if someone would actually start such a company? Then the follow up, why not me? This wasn't material for a book. This was a business plan. She would start that company. Context is everything. The year is 1963. Women could not get credit cards without a male co signer. Banks refused to issue credit. Even demarried women because their income was considered unstable. They might get pregnant and quit working. Help Wanted ads were segregated by gender. In major newspapers, management positions, executive roles, anything with real authority appeared under Help Wanted Male. Women could look under Help wanted female. Only 5 to 7% of US businesses were owned by women and most of those were small retail shops or beauty salons. The Equal Credit Opportunity act that Prohibited credit discrimination based on sex wouldn't pass for 11 more years. The Pregnancy Discrimination act was 15 years away. And the Women's Business Ownership act would not exist until 1988. Mary Kay decided to build a major corporation in an environment where many women couldn't legally access the basic financial tools they needed needed to run a business. To her, these weren't obstacles. They were motivators. They were proof the system needed disrupting. But first, she needed a product. A decade earlier, at Stanley Home Products party, Mary Kay had noticed the hostess had beautiful skin. And she asked what she used. It was a homemade cream that her father had developed. The father was a hide tanner in Arkansas, and he'd noticed that despite working with harsh chemicals all day, his hands remained remarkably soft. He experimented with the formulation until he developed a cream that could be used on the face. So Mary Kay began using it and it transformed her own skin. But she also noticed the products didn't smell good and they were kind of packaged very amateur. The tanner had no interest in turning it into a business. So now in 1963, sitting at her kitchen table with her to list, she remembered this cream. So she contacted the tanner's family. The father had passed away, but his daughter and son in law still had the formula. So after some negotiation, they agreed to sell her the proprietary formulation. The price was nearly every penny she had. If this failed, she would have nothing. She took the formula to a manufacturer and ordered a small batch of skincare items. The cheapest packaging that looked professional. The initial inventory was her entire investment. So by 1963, she had remarried and her second husband, George would handle the administrative side. He would do the bookkeeping, the inventory, the ordering, and Mary Kay would handle marketing and sales. They set an opening date for Friday, September 13, 1963, and they spent weeks preparing. And one month before the opening, early in August, they were reviewing the final balance sheet when George clutched his chest. He had had a heart attack and he was dead before the ambulance arrived. Mary Kay called it the darkest day of her life. Her business attorney's advice was clear. Abandon this foolish dream. The venture couldn't succeed now. Her accountant said the exact same thing. In fact, everyone in her life told her she was crazy. But stopping wasn't an option. She'd invested her entire life savings. She had no job to go back to, no husband to support her. Stopping meant financial ruin. And somewhere deep inside her psychology, she could still hear her mother's voice. You can do it, Mary Kay. So she turned to her children. Her youngest son, Richard, was 20 years old. She asked him to give up his well paying job and join her for nearly no salary. And he didn't hesitate at all. He joined her on the spot. Her older son Ben would provide financial support and advice. They would open up on schedule. One month after George's death, the inventory was sitting there. The storefront lease was signed. She'd already recruited nine women, all personal friends, who trusted her to be her first beauty consultants. On Friday, September 13, 1963, Mary Kay Cosmetics opened its doors in a 500 square foot storefront in Dallas's Exchange Park. The entire inventory sat on a single steel shelving unit Mary Kay had purchased from Sears for $9.95. The location seemed perfect. There were 5,000 women who worked in the surrounding office complexes. The storefront sat directly in their path from the parking lot to their offices. Twice a day, in the morning and evening, thousands of potential customers would walk past their door. But there was a problem. All of those women kept walking. In the morning, they rushed past, hurrying to punch in on time. In the evening, they rushed past again, exhausted and eager to get home. Nobody stopped. Nobody even looked. She needed something to draw people in. Something that would make workers stop stride and think, I need to see what that is. Wigs were hot in 1963. Jackie Kennedy wore them. So Mary Kay decided to add custom wigs to their skincare offerings. She'd hired Renee from Paris, this famous stylist, and she even brought in a professional model and started serving champagne. And the strategy sort of worked, but not how she planned. The models attracted men, lots of men. And the women who bought wigs made terrible choices. Blondes bought brunette wigs, and brunettes bought blonde wigs. So by Monday morning, customers were returning everything. Their families had seen them and said, goldilocks, what in the world happened to you? But the real problem was the economics. Wigs took enormous amount of space. Each wig needed its own form, its own box. They had to rent basement storage for cosmetics, which meant walking two blocks in Texas heat every time they needed to restock. Richard calculated the actual return on investment. Each wig sale required approximately eight hours of labor. Eight hours for a product with a high return rate and marginal profit margins. A skincare demonstration took an hour and resulted in full product sets with higher margins and virtually no returns. So they quickly killed the wig business. The next month, sales jumped $20,000. Without the distraction, consultants could focus on what actually worked. Intimate skincare demonstrations that built relationships and sold complete product systems. The wigs weren't a complete failure. They did get People in the door and got them their initial customers. Like anyone in the arena doing things, they made other mistakes, some more embarrassing than others. For the first several weeks, they passed around the same jars of cream. At demonstrations, multiple women would dip their fingers into the same product. And Mary Kay would later write she was ashamed of this, but at the time they were brand new and had barely any inventory. They also learned not to break up their basic skincare set. The set contained five items designed to work together in a specific sequence. There was a cleanser, a magic mask, a skin freshener, a night cream and day radiance. But customers would come in asking for just one product and desperate for any sale. I think we've all been there before. Mary Kay or one of the consultants would break up the set and that would be a disaster. A night cream alone didn't produce the same results as the complete system. And sometimes it caused more problems. Without proper cleansing and preparation, some women's skin would react poorly to the night cream, just in isolation. Then these women would tell their friends about the bad experience. And one bad review could kill 10 potential sales. So Mary Kay put her foot down. She wrote, breaking up the basic set in this manner was like giving you my recipe for chocolate cake and leaving out the chocolate or the sugar. It just isn't going to be my cake. We finally concluded that we would not break the basic set. We decided we would rather face a customer's initial ire than having her fail to get the desired results. Mary Kay experimented constantly in those early months. She did sales presentations herself. She conducted facials in customers homes. And she loved it. Relationship building had been her bread and butter for 25 years. But she discovered her presence was setting the wrong tone. Customers would say, you own this company and you're at my house. Giving facials must be an awfully small company. And rather than being impressed, they'd assumed that the company was tiny and the products couldn't be very good. And this was a really painful lesson for her because she loved being close to customers, but her presence was hurting the brand. So she stepped back and left demonstrations to her consultants, focusing instead on training them to be as excellent as she was. She turned her energy to designing the business model. And here's where her genius becomes truly visible. Because every single policy and principle that she created and followed was a direct response to something that she'd experienced. Mary Kay's business model inverted everything that had been done to her over two and a half decades. But more fundamentally, it was built on what she called golden Rule, leadership, treat people the way that you want to be treated. She'd been treated unfairly, disrespectfully, and dismissively. So she built a company that treated women with dignity. She'd been denied opportunity, so she would create opportunity for others. Another principle guided everything as well. Help other people get what they want, and you'll get what you want. This was her actual business strategy. And this makes a lot of sense. This is reciprocity. It's go positive and go first in action. Mary Kay reasoned that if she helped a woman achieve financial independence, flexibility gave them recognition and success, then her company would succeed as a natural consequence. And she was 100% correct. The consultant's success and the company's success were the same thing. And with those philosophies as a foundation, she designed specific policies. I'll give you some examples. Problem one. She'd been repeatedly passed over for promotions in favor of those less qualified. So her solution to this was a pure meritocracy. There was no glass ceiling. There was no subjective evaluations, no politics. Any consultant who met the clearly defined sales targets could rise to sales director, regardless of age, education, background, race, or connections. Performance was the only thing that mattered. Competence mattered. Here's another problem. When she'd moved cities, she'd lost her customer base and had to start over from scratch. Military wives face this constantly. So her solution to this was no sales territories. Consultants could sell anywhere, recruit anyone, keep their teams no matter where they moved, relocate from Dallas to Denver, and your commissions continued. This created collaboration instead of territorial competition. In most direct sales companies, consultants viewed each other as threats. At Mary Kay, there were potential teammates. A brief word on competition here for a second. Mary Kay was intensely competitive, but only with herself. She built that into her business model. The company held competitions constantly, but never where there could only be one winner, at least not at the start. They'd set high sales targets, and if everyone hit the target, everyone won the prize. So if 50 consultants all sold $5,000, then all 50 were celebrated. And this inverted the traditional competitive model. Instead of trying to beat each other, consultants helped each other succeed because someone else's success didn't diminish your own. And I think that's a key point. That's amazing. So another problem was she'd struggled to balance work with raising children, missing school plays for meetings, and taking sick children to babies babysitters because missing work could cost you your job. The constant guilt she felt of failing at both work and motherhood. So her solution was, you can set your own Hours entirely work from home. There was no mandatory quotas. There was no manager demanding you attend meetings at specific times. You could scale your effort up and down as your life evolved. If your child was sick, you stayed home. If your daughter had to resettle, you went. If you needed to take the summer off, you could. This was decades before anyone else ever used the phrase work, life, balance. And Mary Kay built it into her structure because she knew from personal experience what happened when women didn't have it. Problem four, her ideas had been dismissed because male bosses said she was thinking like a woman. What they meant was she was emotional and not strategic, relationship focused and not numbers focused. So her solution to this was she made thinking like a woman basically a job requirement. The very qualities corporations devalued became her competitive advantage. Empathy, intuition, and relationship skills. The ability to make someone feel heard and valued was more important than making a hard sell in traditional corporations. These were soft skills. They were kind of nice to have, but not essential. And at Mary Kay, they were the essential skills. Everything else was secondary. Problem five, despite exceptional performance, she'd never received real recognition. Do something extraordinary and it went unnoticed. Make a mistake and everyone heard about it. So her solution to this was to build the most elaborate recognition system in business history. We're going to talk more about this in a bit. But Mary Kay understood a fundamental principle. Here everyone has an invisible sign hanging from his or her neck saying, make me feel important. Never forget this message when you're working with people. I love this. This is so true. Imagine everyone you see today has a sign around their neck saying, make me feel important. What do you think would happen if you approached life like that and you made everyone you interacted with just for a day, and then you turn that into a week or a month and you made them feel important? So Mary Kay knew what it was like to work yourself to exhaustion and have nobody notice. She knew what it felt like to be unrecognized. She knew what it felt like to be counted out. So she knew that recognition could fuel performance in ways that money alone never could. What do we need for recognition? It needs to be public, it needs to be specific, and it needs to be frequent. So she created an entire awards infrastructure. There were pins for achievement levels, ribbons, trophies. She established competitions with prizes, not cash. Cash tended to disappear into household budgets. But prizes were visible, permanent, constant reminders of achievement. They were status symbols, the very thing that she was after when she wanted that alligator bag and she won her trophy instead. So she made sure that recognition happened in front of your peers. At company meetings, she'd call consultants to the stage one by one and celebrate their accomplishments in detail. For major achievements, the prizes got bigger and bigger. Diamond rings, fur coats, and eventually the famous pink Cadillacs. Mary Kay started with nine beauty consultants. They were all personal friends. They weren't experienced saleswoman. They were housewives, secretaries, mothers who needed flexible work and extra income. After one year, the company had grown to 200 people. And Mary Kay set her sights even higher. At their first annual convention in September 1964, she stood before those 200 women and declared that by next year's convention, they'd have 3,000 people in their salesforce. 3,000. That is a 15 fold increase in one year. And the audience applauded, politely, of course, but you can imagine what some of them were thinking. Mary Kay has lost her mind. This woman is crazy. 3,000 people is impossible. And Mary Kay saw it as inevitable if they just executed this system correctly. The numbers tell the story. In their first three and a half months, they made a small profit of $34,000 in sales. In fact, they barely covered expenses. Mary Kay paid herself nothing. And Richard barely made minimum wage. Everything was reinvested. In their first full calendar year, however, 1964, they brought in $198,000. Enough to prove that the concept worked. But by the end of year two, that $198,000 had turned into $800,000, a four fold increase. And Mary Kay's impossible prediction of 3,000 consultants. They exceeded it. At the second annual convention, she declared they'd have 11,000 beauty consultants by the end of year three. To understand what Mary Kay built, you need to understand direct sales. So traditional retail has multiple steps. Manufacturer to distributor to retailer to customer. And each step adds a markup. So a jar of cream might cost a manufacturer $2 to make. And they sell it to the distributor for $3. And the distributor sell for $5 to the retailer. And the retailer marks it up to 15. So the customer pays 15, but the manufacturer only sees $3. Direct sales collapses this chain. The consultant buys it from the manufacturer at $5, sells to the customer at 15 and keeps the $10 margin. So there's no middleman, there's no retail markup. But the real money isn't in selling products. The real money is in recruiting other people to sell products and earning a commission on their sales. And this is multi level marketing. It can be either brilliant or predatory, depending on how it's structured. In the predatory version, consultants make almost no money on product Sales, they're pushed to recruit other consultants, and they have to buy large amounts of inventory themselves. The company makes money by selling products to consultants, not products and consumers. Most consultants end up with a garage full of unsold inventory and downlines full of people who also have garages full of unsold inventory and can't sell. It's a pyramid scheme with a thin veneer of legitimacy. Mary Kay was building something different though. In her system, consultants could make good money just selling products. 50% margins on retail sales meant someone doing 2,000amonth earned $1,000 in profit. That was life changing income for women in the 1960s. But if you recruited other consultants and trained them well, you could earn override commissions on their sales. Typically it was 10 to 15%. So if you recruited five consultants who each sold, let's say, $2,000, earn roughly $1,500 in overrides, plus your own thousand in sales commission, and you'd be making $2,500 a month. The key was that everyone in the chain needed to be selling actual products to actual customers for the math to work. And Mary Kay obsessed over this balance. She insisted that consultants focus on selling and not recruiting. And she implemented policies to actually prevent against predatory dynamics. So there were no inventory requirements. You bought what you needed when you needed it. There was a super generous return policy. If you couldn't sell something, you could return it for 90% of what you paid. Commissions were based on sales and not recruiting. Your override commissions were based on how much your downline sold, not how many people they recruited. And you couldn't buy your way to titles. They were earned through actual sales performance over time. And these policies created a system where the incentives aligned correctly. Your success as a recruiter depended on your recruit's success as sellers, which depended on your customers actually wanting the products. But policies weren't enough. She needed to turn those housewives with no sales experience into effective business people. She needed a training system that was replicable and scalable. And she understood a principle she'd later write about extensively. You build with people. Leaders are dependent upon the performance of their people, and so is a company's success. Good people are a company's most important asset. People are more important than the plan. She'd seen brilliant strategies fail because companies didn't invest in their people. She'd build the opposite. A company where developing people was the entire strategy. She also understood another principle. People will support that which they help to create. She didn't want to impose a training program top Down. She wanted consultants to participate in refining the system, to share what worked, to feel ownership. So she developed what she called the Mary Kay way, which was a step by step system for conducting skincare demonstrations and building a customer base. This wasn't about teaching people to be pushy or manipulative. It was about teaching them to be helpful and genuine. The core was the beauty show. A consultant would book an appointment at someone's home with five or six women present. The demonstration took about 90 minutes and followed a precise sequence. First, there was education. The consultant explained skin types and how products work, the science behind the formulations. This positioned the consultant as an expert and not a salesperson. And second, there was customization. Each woman tried the products while the consultant explained which items were right for her specific skin type. Not one size fits all. Your specific combination for your specific needs. Third, results. By the end, women could see and feel the difference in their own skin. And because they were in a group, they watched it work on their friends too. Fourth, there was the soft close, which was no pressure. It's just based on what we've discussed today, I'd recommend the basic set for you. It's five products for $45. Would you like to that home today? If yes, great. If no. The consultant left samples and followed up later. The genius of this was by the end of every demonstration, the consultant would ask, would any of you like to host your own beauty show? I'll give you a free product for hosting. And this created this self perpetuating system. So every successful beauty show generated one or two more beauty shows. The consultants calendars filled weeks in advance. There was steady predictable income. This is how Mary Kay had hosted three parties a day, every day. And when someone asked, could I do what you do? Could I become a consultant? The answer was always absolutely. Let me tell you how. Mary Kay trained her initial consultants personally. And those consultants trained their recruits using the exact same methods. And Mary Kay documented everything she had scripts, techniques, responses to common objections. She didn't want consultants to wing it or figure things out from scratch like she had to. So she wanted to deliver a proven system that they could use. So by 1966, she held weekly training sessions at the Dallas office. Half day workshops where experienced consultants demonstrated the process, answered questions and shared tips. It was peer to peer learning. But the training alone wasn't enough. Mary Kay understood something profound. People need to feel seen and valued. They need to know their efforts matter. That their efforts make a difference. Difference. And she built this into their culture obsessively she remembered what it felt like to be ignored. So every week, she sent handwritten notes to top performers. Janet, I heard you had a $3,000 week. That's extraordinary. You're showing everyone what's possible. I'm so proud of you. These notes became treasured possessions. Consultants framed them and hung them in their offices. And some carried them in their purses and pulled them out when they needed motivation. At monthly meetings, Mary Kay recognized top sellers publicly. She'd bring them in front of the room and applaud them while explaining exactly what they'd accomplished. Then she'd ask them to explain their strategy so others could learn. By celebrating success publicly, Mary Kay was teaching everyone else how to replicate it. For major milestones, the recognition got bigger. Sell $10,000 in a single month. You'd receive a special pin marking you as elite. Hit certain career sales goals. You would get diamond rings and designer watches that you could wear every day. And for the very top performers, the ultimate recognition. The pink Cadillac. And the pink Cadillac wasn't originally part of the incentive plan. Let me tell you how this came to be about. So in 1967, Mary Kay walked into a Lincoln dealership in Dallas. Her company was growing rapidly and she wanted to buy herself a luxury car. The salesman took one look at her and told her, little lady, go home and get your husband. The same condescension that drove her to start her company in the first place. So Mary Kay got in her car and she drove straight to a Cadillac dealer in Fort Worth with a specific request. She wanted a Cadillac sedan deville painted to match the coral pink blush in her makeup compact. They didn't blink. They said yes. So when Mary Kay got that car in 1968, something happened she wasn't expected. When she needed to merge into busy Dallas traffic, other drivers would stop and wave her through. That car commanded attention. It turned heads. It was a mobile advertisement that couldn't be ignored. Several of her top sales directors saw their boss driving this eye catching pink Cadillac and thought, I want one too. So they went out and bought their own pink Cadillacs with their own earnings. The car was proof of success that you couldn't hide in a bank account. When you drove a pink Cadillac through your neighborhood, everyone knew you'd achieved something extraordinary. At the 1969 Mary Kay convention, the company awarded brand new pink Cadillac Coupe de Villes to the top five salespeople. Each car cost about $6,000, double the average car price at the time. But Mary Kay was clever about how she did this. These cars weren't gifts. They weren't. Here's $6,000. Good job, go away. Two year leases and the company made the monthly payments as long as you maintained your sales performance recognition 100%. But also motivation. It was a rolling trophy. You had to keep earning month after month. Mary Kay became the first company to introduce the career car concept in direct marketing. General Motors officially named the exclusive color Mary Kay pink pearl. And it was only available to Mary Kay representatives. The company had created a trademark color that would become one of the most recognizable corporate symbols in American history. Mary Kay's genius for recognition reached its peak at the annual conventions, which became legendary in the direct sales world. The first convention in 1964 was modest. It was 200 people in that hotel room. But Mary Kay had a vision for what these events could become. So by the early 1970s, the annual seminar had grown into a massive production at the Dallas Convention center with thousands of consultants attending from all over the country. And these weren't traditional business conferences. They were part revival meeting, part award ceremony, part trading event, and part celebration. Women would save up all year to attend, bringing their best dresses and their highest hopes. And the event ran three days. The first two days were training and workshops on new products, advanced sales techniques, motivational speeches from the top performers. And the third and final day was just pure recognition. It started in the morning with smaller awards there were pinned for various achievement levels, recognition for recruiter of the year, milestone anniversaries. And this built gradually all the way through the afternoon. Then in the evening came the main event director recognition. The top sales director celebrated an elaborate ceremony as Mary Kay herself presented the awards, calling each director to the stage by name. The emotional intensity was overwhelming. There was women crying, moved by the recognition and seeing what was possible at the end. The ultimate recognition. Next year's pink Cadillac recipients, each name called the director, walking through the audience to the stage while a video played showing highlights from her year. When she reached the stage, Mary Kay presented her with the car keys and a jacket that said Mary Kay Pink Cadillac. The crowd went wild. It was pure showmanship. It was pure theater, but it was also deeply meaningful. For many of these women, this was the first time in their lives they'd been publicly celebrated for their professional achievements. The first time somebody had stood in front of thousands of people and said, what you did matters. You are extraordinary. And Mary Kay understood that the recognition itself was more valuable than any prize. The pink Cadillac was wonderful, but people didn't care about the Cadillac. They wanted the feeling the Cadillac would give Them, Them. The feeling of being recognized, the feeling of being seen, the feeling of standing on stage while thousands of people applauded your success. That feeling is what everyone wants, and it's irreplaceable. Armed with clear training, fair compensation, geographic flexibility and elaborate recognition, Mary Kay cosmetics scaled rapidly. 1967, their four years after opening. Annual sales, $10 million. 1971, they hit 27 million with nearly 30,000 consultants. By 1976, they exceeded 100 million in annual sales for the first time. Growth created all these new challenges. With tens of thousands of consultants spread across America, Mary Kay could no longer personally train everyone or send handwritten notes to every top performer. The company needed infrastructure. Richard, who'd stepped up on opening day, proved invaluable. So Mary Kay focused on culture and training. Richard built the operational machinery. He implemented computer systems to track sales and commissions. Cutting edge technology. In the 1970s, he established distribution networks. He professionalized accounting and legal operations. And the company went public in 1968, trading on the American Stock Exchange. This provided capital for expansion, but also created tensions. Wall street wanted predictable quarterly earnings growth and Mary Kay wanted to invest heavily in recognition and consultant support. Wall street saw pink Cadillacs and elaborate conventions as wasteful extravagances. And Mary Kay saw them as essential to the culture. And these tensions came to a head in the early 1980s. Wall street analysts pressured Mary Kay to cut costs, particularly spending on recognition and conventions. They couldn't understand why the company was spending millions on award ceremonies when that money could go to shareholders. In response, Mary Kay took the company private again. In 1985, in one of the largest leveraged buyouts by a woman led company at the time, she and Richard borrowed to buy out all public shareholders. And the price? 315 million. She refused to compromise on culture. And the recognition system wasn't nice to have. It was the foundation of everything. Taking the company private meant they could operate according to their values rather than earnings reports. By the 80s, Mary Kay Cosmetics had become the largest direct sales cosmetics company in America, with over 200,000 independent consultants. But their impact extended far beyond cosmetic sales. Mary Kay had created an economic engine that gave hundreds of thousands of women income and complete flexibility. Single mothers could support their families. Military wives could maintain careers despite frequent moves. Women in rural areas with limited job options could build businesses. Women, told they were too old or not educated enough or didn't have the right background could succeed purely on merit. The numbers tell a remarkable story. By the mid-1980s, more than 20 top sales directors were earning over $50,000 per year. The median household income in America at the time was $23,000 and a dozen were earning over 100,000.
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This was extraordinary incomes for women in an era when many corporations still had explicit policies against promoting women to senior managers. And Mary Kay tracked other metrics too. She found that divorced women in her sales force had significantly higher remarriage rates than the national average. And she thought about this. And she attributed this to confidence. When a woman is earning her own money, supporting herself, achieving recognition, she becomes more confident. And confidence is attractive. She found that children of Mary Kay consultants were more likely to pursue higher education their mothers could help them afford with their tuition, yes, but they also watched their mothers build something, overcome obstacles and achieve their goals. Goals. And she found that the bankruptcy rate among her consultants was lower than the national average, suggesting the business provided genuine financial stability rather than get rich quick fantasies. Mary Kay Cosmetics faced criticism as well. Critics pointed out that most consultants made only a modest income, a few hundred dollars a month. The top performers? Sure, they were earning a hundred thousand, but they were outliers and most treated it as a side hustle. And that was true. Mary Kay never promised everyone would get rich. You earned what you needed based on how hard you worked. Critics also pointed to pressure to recruit, suggesting this made it pyramid like. And some consultants oversold the opportunity to friends and family, making it sound easy, but it required a significant amount of effort and this had a bit of merit. But Mary Kay had tried to counteract it through training and culture. She'd tell consultants, don't recruit someone unless you genuinely want to help them succeed. The real test of whether a multi level marketing company is legitimate or predatory is are consultants making money by Selling products to customers or recruiting other consultants. And by that measure, Mary Kay largely passed. The company's revenue came primarily from product sales to end customers. The average consultant maintained reasonable inventory levels and not garages full of unsold merchandise. Mary Kay stepped back from operations in the 1990s, and she died in 2001 at age 83. And by then, Mary Kay Cosmetics had over 800,000 consultants in 37 countries, generating over 2 billion in sales. But her greatest legacy was what she proved about building companies. She proved that you could scale collaboration. She proved that recognition systems aren't soft, they're performance drivers. She proved that getting incentives right matters more than having the smartest people in the room. She proved that you don't have to choose between principles and profits. When Wall street demanded she cut recognition spending to boost quarterly earnings, she bought the company. Rather than compromise, she proved that culture isn't what you say, it's what you systematically reward. Every policy traced back to a specific problem that she'd experienced. Every system reinforced the behavior she wanted to see. And most importantly, she proved something about human psychology that people still miss today. Belief is contagious. Her mother believed a seven year old could run a household. And that seven year old grew up believing women could build businesses. And those women believed the recruits could succeed. Each generation of belief created the next. Today, there are still pink Cadillacs on American roads. And there's still conventions where thousands gather to celebrate success. Still consultants using techniques that Mary Kay developed 60 years ago. And somewhere in Houston, a restaurant that no longer exists. You can almost hear a mother's voice through the telephone line saying, you can do it, Mary Kay. You can do it. It. And she did. Before she died, Mary Kay distilled everything she'd learned into 23 principles. We've covered a lot of them throughout the episode. This was the operating system that built a multi billion dollar company. And each one traces back to a specific problem she solved or a mistake she made. Now, I want to go over all of them again, so pay attention. I guarantee you there's something here you can use today. Number one, the Golden Rule. Leadership. The Golden Rule is one of the world's oldest and best known philosophies. Yet it's frequently overlooked in business circles. Circles. Mary Kay proved this rule is still powerful in today's complicated world. Number two, you build with people. Leaders are dependent upon the performance of their people, and so is a company's success. Good people are a company's most important asset. People are more important than the plan. Number three. And this one is my personal favorite. It's the invisible sign. Everyone has an invisible sign hanging from their neck saying, make me feel important. Never forget this message when you're working with people. Number four. Praise people to success. Each of us craves recognition. Let people know you appreciate their performance and they'll respond by doing even better. Recognition is the most powerful of all motivating techniques. Number five, the art of listening. Good leaders are good listeners. God gave us two ears and only one mouth, so we should listen twice as much as we speak. Speak. When you listen, the benefit is twofold. You receive necessary information and you make the other person feel important. Number six. Sandwich every bit of criticism between two heavy layers of praise. Sometimes it's necessary to let somebody know you're unhappy with their performance. But direct your criticism at the act and not the person. Criticize effectively in a positive way so you don't destroy morale. Number seven, and this is probably my second favorite or even tied with my favorite, so listen to this one. Be a follow through person. Be the kind of person who can always be counted on to do what you'll say you do. Only a small percentage of people possess follow through ability and they're held in high esteem by all. It's particularly important for your team to know you possess this rare quality and to think of you as totally reliable. Number eight. Enthusiasm moves mountains. Nothing great is ever achieved without enthusiasm. Leaders are enthusiastic and enthusiasm is contagious. Interestingly, the word enthusiasm actually has a Greek origin meaning God within. Number nine. The speed of the leader is the speed of the game. You must set the pace for your people. Real leaders aren't afraid to get their hands dirty. They set examples by demonstrating good work habits, displaying positive attitudes and possessing team spirit. True leaders establish success patterns that make everyone think success. Number 10. People will support that which they help to create. Invite people to participate in new projects that are still in the thinking stage. People often resist change when they don't participate in the decision making process. Number 11, an open door philosophy. At Mary Kay corporate headquarters, there are no titles on executive stores and there's ready access to all management levels. Everyone within the company from mailroom clerk to chairman of the board is a human being and treated accordingly. Number 12. Help other people get what they want and you'll get what you want. As the parable of the talents tells us, we're meant to use and increase whatever God has given us and when we do, we shall be given more. However, the way that I frame this is go positive and go first so go out of your way to make other people's dreams come true. And your dreams will come true. Number 13. Stick to your principles. Everything is subject to change except one's principles. Never compromise your principle. Number 14. A matter of pride. Everyone within an organization should have a sense of pride in their work. They should also feel proud to be associated with a company. It's a manager's job to instill that feeling and promote this attitude among their people. Number 15. You can't rest on your laurels. Remember what she said. Nothing moves faster than a laurel rested upon. Every person should have a lifetime self improvement program. In today's fast paced world, you can't stand still. You're either moving forward or you're moving backward every single day. Number 16. Be a risk taker. You must encourage people to take risks. Let them know that nobody wins them all. If you come down on them too hard for losing, they'll stop sticking their necks out. Number 17. Work and enjoy it. It's okay to have fun while you work people. Good managers encourage a sense of humor. In fact, the more enjoyment people derive from their work, the better they will produce. Number 18. Nothing happens until somebody sells. Every organization has something to sell and every person in the company must realize that nothing happens until somebody sells something. Accordingly, they should be fully supportive of selling the effort. Number 19. Never hide behind policy. Never say that's against company policy unless you have a good explanation to back up the policy. It infuriates people. I think we've all been on the receiving end of this at one point or another. It's as if you're saying we do it this way because it's the way we've always done it. Number 20. Be a problem solver. The best leaders recognize when a real problem exists and know how to take action to solve it. You must develop the ability to know the difference between a real problem and an imaginary1. Number 21. Less stress. Stress stifles productivity. Leaders strive to create a stress free working atmosphere for their workers by using both physical and psychological approach. Number 22. People develop from within. The best running companies develop their own managers from within. They rarely seek outsiders. In fact, it's a sign of weakness when a company goes outside too often for management personnel. Number 23. Finally, the 23rd of her principles that she outlines in her book the Mary Kay Way. Live by the Golden Rule on and off the job. Don't be a hypocrite. Live every day of the week as if it were Sunday. There's no place for two sets of moral codes. Conduct yourself in business with the same scruples that you would want your children to observe in their life. And I think that's a perfect place to end this episode. Thank you for listening and learning with us this week. I'll see you next week.