Interview with Douglas Kitchen, November 16th, 2019

Partial Transcript: Jack Stark: So you worked at Bradford for how many years?

Douglas Kitchen: 18 years. I was a…. We were a limited partnership. I was a general partner. So technically I was an owner not an employee. I was there 18 years. We were about a 500 million dollar company. We had 90 branch offices. 3000 employees. And I was one of seven people that navigated that ship through the water. In 2000 we sold out to Pain Webber. They integrated our sales force into their sales force, in essence eliminated the overhead of our office here in Nashville. I then started working with Sas Wheat pool. I was asked to come up and sit with the board in 2001.

Segment Synopsis: Douglas Kitchen and Interviewer Jack Stark begin their discussion by talking over Dougs' professional experience.

Keywords: Belmont; Broker; Finance; Futures; Options

Partial Transcript: DK: Saskatchewan Wheat Pool in Regina, Canada. They were the second largest grain company in Canada. I worked with them for ten years. I was never an employee. Technically I could be called a consultant. But I eventually became the lead director which is the defacto chairman of the board. And we did a hostile takeover of agricore united in Winnipeg and became the largest grain company in Canada. We were a ten billion dollar company. We moved 48% of all the grain and oil-seed in Canada. We had 115 one hundred car loaders. We could load a 100 train cars in 24 hours at 115 locations.
JS: That's quite the operation
DK: 4.8 million dollars an hour. 52 weeks a year.
JS: Ok. So you did that for how many years?
DK: Well. I was lead director for about a year and a half I guess. Then we sold the company. We soldout again. We sold the company for six billion dollars. They were bankrupt when I started with them in 01. That wasn’t all my doing they give me more credit than I deserve. But I helped them turn that company around.

Segment Synopsis: Douglas describes his participation at Saskatchewan Wheat Pool in Regina, Canada.

Keywords: Agriculture; Canada; Soybeans; Wheat

Partial Transcript: JS: What specifically did you do if you could point to anything
DK: Well, we did a lot of things. If you’d like a little history of the company. The company was a co-op. The co-op needed more capital so they did a 500 million dollar IPO. They took the 500 million new cash that they had acquired and they borrowed another 500 million from a consortium of 5 banks. They gave them a billion dollars. They blew it all away. With just bad management. Just bad management. The CEO had visions of grandeur. But not much business sense. Did not pay attention to detail. So they had lots of bad deals. When I first went up there they had 26 different fully owned subsidiaries. They asked me to look at. I looked at it and I said your in 26 different businesses and not one of them I’d like to be in. They had a fish hatchery, a newspaper, they owned a livestock auction company.
JS: Why where they so diversified
DK: That was the game plan to become was to become diversified more than a grain company. They had a fertilizer company, a farm equipment company
JS: So were they trying to be like a caterpillar?
DK: no. They wanted to be this. They wanted to solve all of the farmers needs. I think the CEO they had simply had visions of grandeur. He wanted to be the entrepreneurial king of Canada. And he broke them. We came within inches of filing bankruptcy.
JS: Do they have a chapter 11 in Canada.
DK: Yes. They call it.. It's a different term up there but yes. We were in default. There was no chance we could pay it. The banks said if you don’t we will forclose. We in our most tactful way said. Good luck. Those 100 car loader terminals are 15 million a piece. We said good luck auctioning those off at the courthouse. If you want to you’re going to get 20 cents on the dollar at best and you’re going to eat 80 percent of 500 million dollars. That 400 million that you’re going to write off. We had an appointment with the court to file bankruptcy on monday morning. I held a board meeting Sunday evening prior to that and we were ready to file. We were in close contact with the banks and the medium term note holders. And over night they figured out that maybe they didn’t want to auction off so bad. They extended us another 100 million line of credit and from there we grew.
JS: Wow. close call
DK: Very close

Segment Synopsis: Douglas describes specifically what he did to help keep SWP from going bankrupt.

Keywords: Bankruptcy; Canada; Chapter 11; Chapter Eleven

Partial Transcript: JS: Incredible. Let's switch gears a little bit. How would you try to characterize your leadership style if you could put words to it.
DK: I think I am personally fairly methodical. I am also fairly analytical, and I think I am fairly realistic. But those don’t really address leadership style. I do not lead…. I never use fear or intimidation unless I am about to terminate someone. Then it’s over. But I don’t lead by fear or intimidation or threats. I set high standards. I had set high expectations. I try to hire people that are smarter than I am, and I’ve found that very easy to do. So, I think collaborative is a very overused word. But to an extent I am somewhat collaborative. I do ask for input from subordinates.
JS: Do you delegate tasks?
DK: Yes. I do. Although occasionally I am guilty of micro managing. I will ask hard questions. I won’t necessarily manage but I am not at all bashful about asking hard questions.
JS: What would you say is your best tactic for inspiring people to do their best, or for getting people under you to do their full potential.
DK: I will offer a theory. People don’t work for money. People work for recognition. They will work a lot harder and a lot smarter for recognition than they will for money. If you don’t believe that. Pay an above average wage for whatever service you’re providing and abuse the people, and see what happens to productivity. And rewards, recognition is incredibly cheap. I held every year a sales contest for my brokers where I took my five best brokers on an elaborate trip. You would not believe the competition for that. For those positions. And it was more than the trip. We took them to Bance Canada, The Caribbean. We took them on expensive trips. And it paid huge dividends. Huge dividends. They all got a wall hanging that said they were on their senior advisory council. The recognition that they were on the senior advisory council to those guys was worth more than any amount of money that I could have paid them. So I’ve sort of lost your question, I think it was how do I motivate people? Moneys’ nice. You got to pay a fair wage its not that people aren’t motivated by money, but their far more motivated by recognition. And that recognition can come in very small pieces. Just walk by saying nice job Joe, I see you opened a large account. Good job. Simple as that. It has to be sincere. It has to be genuine. They know when you’re blowing smoke.

Segment Synopsis: Douglas describes the qualities of which make him an effective leader.

Keywords: Global Leadership Studies; Leadership Strategies; leadership

Partial Transcript: JS: Absolutely ok. Great I appreciate. How do you measure success? Or if you were to try to describe what your goals have been in your experience. How would you measure your success?
DK: This may sound greedy. But I have been money motivated all my life. I was raised poor. When I graduated from college I had more debt than the average student today, and none of it was going to my education. My dad came close to losing the ranch in Kansas. I mortgaged land and bailed him out. So I started fairly deep in the hole.
JS: Was your dad a poor business man?
DK: My dad was a plunger.
JS: A plunger?
DK: If he made money. We typically ran 4 to 5 hundred cattle. We made some good money so the next year we bought 800 cattle and they damn near broke him. They did break him. They did break him, we managed to salvage the ranch.
JS: He had some scaling issues perhaps?
DK: He would. He was a plunger. There was an element of a habitual gambler in there although he didn’t gamble. He didn’t gamble on football or vegas or any of that. He had an element of habitual gambling. It was inevitable that he would eventually go broke, because no matter how much he made he would always leverage it that much higher.
JS: Right ok, so he put you in a relatively tough position to start out.
DK: I had two choices. I could be poor. Or I could figure out a way to make a lot of money and dig myself out of the hole and accumulate a little. And I chose the latter.

Segment Synopsis: Douglas takes a moment to discuss what has motivated him in his life and how he measures his own achievement.

Keywords: success

Partial Transcript: JS: If you were to try to give me your one best piece of financial advice. If you could give me…. What would be your best piece of financial advice for a young person trying to figure out having to navigate, not only just saving money, but I guess managing their own health in a way to where they could gain it like you did.
DK: I will start with one of my favorite cliches, I am always amazed at what people would rather have than money. What they are willing to give up their hard earned money for. But as far as financial advice. Make every decision, financial decision the same way. Am I getting value for what I am paying. Am I getting value. And I will give you a classic example. I was out to lunch last week and I got a sudden hankering for a Butterfinger. I used to eat Butterfingers in the 3rd and 4th grade, and I swung into a shell station, walked in, picked up a Butterfinger and walked up to the counter and laid it down. Now I used to pay 5 cents for a Butterfinger. I thought damn they’ll probably charge me a dollar for this. They charged me a dollar and 74 cents. I was outraged. I couldn’t believe that anyone could ask a dollar and 74 cents for a Butterfinger. Now I made 6000 dollars on the opening that morning, in the market. It wouldn’t have been unusual for me to lose 6000 dollars on the open, in the market. That I understand. And I’m getting value for what I pay for there. I wasn’t getting a dollar and 74 cents worth of good out of that Butterfinger. I viewed that as simply a bad decision. I paid for it because I went through the trouble of walking up and I didn’t want to make a scene. So I bought it. I also walked out and said I would never do that again. So my best financial advice is it doesn;t matter…. And one of the things that really bothers me is people who say “oh, it’s just five dollars.” Those five dollars add up over time. And I see people spend money foolishly. And I see them make really bad business decisions. They start a company and the first thing they do is go out and buy a 65 thousand dollar pickup and put spinner wheels on it. You do that and you’ll be poor all your life, plain and simple. I see them pay 18 percent interest. I guess one of the best financial aids is the rule of 72. Do you remember the rule of 72? Any multiple of interest times time that equals 72 will double your money. 9 percent interest for 8 years will double your money. 8 percent interest for 9 years will double your money. 18 percent interest for 4 years will double your money. So I hear people say o gee, I found a sweater on sale for half price, and I bought it and put it on my credit card. They’ve had a balance on that credit card their whole life. They didn’t buy a sweater for half price, they bought it for full price, because the cost of that interest will bring it right back up to full price. 18 percent interest. Somebody asked Albert Einstein what the most interesting mathematical formula he had ever encountered was. His response was compound interest. Compound interest. The rule of 72 will either save you or get you every time. People grossly underestimate how much interest costs. And if you’re paying interest on consumer goods, you’ll never make any money. You pay interest on investment, but only if the investment pays more than the interest on it. Which leads me to my last thought and that is. Be careful buying non performing assets. A non performing asset is land, gold, silver, diamonds, assets that don’t pay any return. You’re simply buying it with the expectation of selling it later on. You buy a piece of land and keep it ten years and double your money and you say boy I was smart. No you weren’t. You could have put that money in government bonds years ago when they were six percent and made that same amount of money. So, I’ll stop where I started. In business decisions. If you look at Sas Wheat Pool. Thoes 26 wholly owned subsidiaries that the CEO took that billion dollars and pissed away. He made poor judgement decisions about the value of what he was buying.
JS: Ok. Was he hoping that in the future he would value. Or rather was he trying to go the venture capital approach were he would buy a lot of things in hope that only one of the things would do well enough where it would offset the negative finances from the other businesses?
DK: They had fired him before I got there so I never met him. My guess is in the simplest terms he wanted to play hero. He wanted to go up there be the CEO of the Sas Wheat Pool, and make it the biggest most powerful company in the world. He had visions of grandiose. And he didn’t let small details like how much am I paying for it get in his way. He entered into a deal in Mexico to a soybean crushing plant down there. To process soybeans into oil and meal. The deal blew up, as usual. They shipped a bunch of beans down there that never got paid for. We sued them. And when we got into the contract it was a terrible contract. He didn’t bother to negotiate a deal he just said buy it, and let someone else handle the details. But remember the boss said buy it. The boss didn’t say go see what kind of deal you can put together. He just said buy it. So they bought it, and it broke them. They pissed away a billion dollars, that's with a B.
JS: I bet they made some other people very rich.
DK: Well yeah the people that sold them they were very happy.

Segment Synopsis: Douglas shares his best pieces of financial wisdom and discusses a couple stories related to the matter.

Keywords: Advice; Currency; Finance; Financial Advising; Money

Partial Transcript: JS: Very good. I’m going to switch gears one more time on you. You’ve been alive a long time. Who would you say…. Who has been your favorite or who do you think has been the most effective presidential administration in your lifetime.
DK: Well…. That always gets political.
JS: Certainly. I didn’t mean to ask a political question of you.
DK: I know but you can’t help being political because I don’t like any of the Democrats because I don’t like what they stand for. I don’t like socialism. It destroys initiative, and brings about stark poverty. Ronald Regand caused this country to believe in itself again. He had values that…. In many respects he changed the course of the nation, in many ways. I always had a great deal of respect for Jack Kennedy, even though he was a Democrat. Jack would have been a republican today. What he stood for would aline much more with Republican values than Democrat. But Jack Kennedy was incredibly bright. He was a great motivator, and a very strong leader.
JS: I’m sorry who was Jack Kennedy?
DK: President, from 1962 to about 1964.
JS: Ya JFK of course. Sorry I apologize. Of course
DK: I had a great deal of respect for him. He was a historian. He had a very agile mind. So, I think he should go down as one of our greatest presidents, and I think Ronald Regan will go down as one of our greatest presidents.
JS: How old were you when Ronald Regand was president.
DK: Well, I think Regan won the election of 82. I would have been in my late twenties. I was born in 44. So maybe I would have been 34. That was my early thirties, mid thirties.
JS: At Bradford?
DK: No. I was at Bradford from 81 to 2000. You know ya he was president during because the Regan tax act of 86 wiped out some of our good ideas. I wound up going down to the bank and writing a check for those funny money notes that we were never going to have to pay off. We did.
JS: Alright Douglas I really appreciate it. I think that is everything I need.

Segment Synopsis: Douglas shares his opinions on who has been the most effective presidential administration during his lifetime.

Keywords: Executive; President; Presidential; USA