2013 Entrepreneurship Award

0:00Well, good afternoon everyone. It's a pleasure to welcome you to the Ludwig von Mises Institute and we have a very special event planned for today. We're going to be giving the Ludwig von Mises Entrepreneurship Award to Mr. Henry Goetz. Entrepreneurship, as you know, is very important to the Austrian School. The entrepreneur is central to Mises' understanding of the market, of prosperity and of liberty. And the Austrian School is really unique among approaches to economic thought in the central role that it gives to the entrepreneur. And part of what we do in our entrepreneurship studies is to recognize the contributions of specific individuals who have been particularly important as entrepreneurs helping to move the economy forward, introducing products and services, and helping to spur the kind of prosperity that the Austrian School is all about.

1:02Henry Getz is a longtime friend and supporter of the Mises Institute. You have some information about his company, Morton Buildings, in some brochures in front of you. Mr. Getz is the founder and long-time president, president for nearly 40 years of Morton Buildings located in Illinois, extremely successful company. It's been our pleasure to know him and to interact with him over the years. Mr. Getz is a member of our Hayek Society and it's been wonderful having him on the premises today. Today, Mr. Getz is a great friend of Liberty as well as being a very successful entrepreneur. You can see in your program there one of the quotations that for many years adorned the company newsletters of Morton Buildings, a voluntary exchange for mutual profit is the good relationship among men.

1:58And I don't think Ludwig von Mises could have put it any more succinctly. So it's a real pleasure to have Henry Getz with us today. We've asked him to speak a little bit about his own career, what it means to be an entrepreneur, a little bit about his successes, and to tell us how he was able to thrive and build a great business in an interventionist society where the government was not doing him any favors along the way. So we'd like to know a little bit about what he did, how he did it, how the ideas of liberty and of Freedom, and Mises in particular, have been influential to him and ask him to give us any advice that he would have and what parts we can all play in this great movement going forward.

2:44So please join me in welcoming Mr. Henry Getz. You've all seen the brochure, seen modern buildings and the type of buildings we've built. Quite a number of buildings. We've built various kinds of buildings. And at the back side is the map of the United States and these little dots back here represent our sales and construction offices. So, this will be about more than buildings. No problem, you're going to be back there, right? Very clear.

3:31Okay, I'm going to start. Way back in 1890, a farmer in Cremont, Illinois invented a machine to weave farm fence. and some of these neighbors in the next town saw that he was making money and they wanted to get in on this and so they hired a man to make a machine for them and they formed a company and one of my grandfathers was one of the original people in this company and they called it Interlocking Fence Company and they made farm fence and of course there were no cars then but they so they shipped it by a by a real old freight to farmers in the area then in the 1920s automobiles came in and many of the farmers bought trucks and they would Bring a load of livestock into the stockyards, and so our people then rented a building at the period of stockyards, and stocked fence to sell fence, and it eventually became a store, and they added other farm items, and farm building materials, but basically the stores were there to sell interlocking fence.

5:05Fence, that was the big thing, but they had farm source, and sold many building materials, but did not have any lumber. Now, I started with the company in 1945, and at that time there was pretty much general farming. The farmer would have a dairy barn and beef cattle and a hog house and a chicken house and a corn crib and whatever. And these buildings required lots of maintenance. And in most of the towns there was a farm carpenter who specialized in helping these farmers keep up their buildings.

5:57of Building, and you know anything about this? You said you did something with that? Yes. Anyway, so I developed a little system that I called these farm carpenters and got them to tell me what they were going to do and what materials they were going to need, and And then, I'd go see the farmer, and many times he would buy it from me, because he knew this farm carpenter was going to get a little commission, and he kind of liked that idea of helping his carpenter out a bit, so this worked for a little bit, it did a little successful, but this only was good on remodeling or repair jobs, because I didn't could sell their lumber. So if he wanted to build a new building, I couldn't quote on it. He'd make a material list on it and he'd take it to the local lumber yard, but I didn't have any lumber. So I couldn't quote on the new barn.

7:04So, the national thing is, who would be the, why don't we have lumber? Well, kind of made me feel harder with our general manager at that time, and he said, this is really a dumb, dumb idea, and he said lumber is too low on marches, it's got to be handled by the local lumber yards who doesn't take any markup, and he had all kinds of reasons The reason he talked to the world, he said, this has been tried before by Sirs Rowland. And here's a sample of a Sirs Rowland catalog page. Here's the bill to the whole barn for $950.

7:53I don't know how long I have to go. Anyway, it had been tried before, and it was never successful, so let's forget the idea. In the 1950s, the farmers were buying combines, and this combine was a big machinery, a big So the farmers really didn't need tents anymore, but they had a problem with the new combine, it cost a lot of money, and the farmer didn't want to let it sit out and get rusty in the weather, but no, not in this building, it was a good house, the combine, because it took a 14 foot high door, so there was a demand for buildings.

9:08Now, one of my farm carpenters had a prospect for this type of... this is the type of machine building here with a wood laminated rafter and covered with galvanized steel. So one of my carpenters had a prospect for a building like this, and so I put together a package, and we had most of the materials in Interlaken Feds Company's store, but we didn't have lumber, but I had to buy my lumber from an local yard, but I was still able to put the package together, and we had a little market. So this turned out, and I sold another, another, and pretty soon it looked like a pretty good idea, so other salesmen in Interlaken The Federal Reserve, like the Fed's company, latched onto the idea and we began selling this billy and sold quite a few of them in 1950, 1951 or so more, 1952 the sales doubled and then they doubled again and then in 1954 the sales stopped growing and in fact we had

10:32a bit of a decline and the reason was the poll billy came in, everybody know what a poll The poll building is? Nobody knows what a poll building is? Anyway, the old agricultural farming service said that the farm buildings being built were built way too much. They were built in the last 100 years and farm methods were changing too fast. And so they recommended a poll building. Now, geez, I'm surprised that too many people know what a pole building is. A pole building was built... pine tree trunks were set in the ground, that was a pole, and you put the loaner on it and cover it with galvanized seal.

11:28And it was a real cheap building, and a real ugly building, but it did serve the purpose. and many farmers, more farmers were doing this because it's too cheap. And so we had a problem, what are we going to do? So we decided we'd have to go along with that. So we designed a pole building. But the pole building we designed was better quality than the dome building. And it was higher priced. And we came up with, this is like our first building, the big innovation, we put this red term around the building, so now we had a little higher price, but we had a status building, and farmers, a lot of farmers went for this, because it made the farm yard look better.

12:28It was a better-looking building than what the zone people were selling, and then the big change we made was we began selling buildings with painted steel. And boy does that have a lot of cost, but that's the result. The building didn't cover it. And we shot way up then after this, because we were the only people that were offering this. So the building is so good, and we made a lot of money.

13:15Now, we still have the farm stores. And the manager of the company was my father and his brothers and his cousins. And they didn't care much for buildings, but they wanted to sell pets. So we, this is a 1954 catalog at the farm stores. The catalog was all built on Fence and Fence Products, except for the form of building materials, were in the end of the cabinet. But, the problem was the fence visitors were shocked. It had gone off. The same thing had made form of my buildings, made of territories fences. But our guys still The company wanted to sell fence, so we had this catalog in 1955, 1956, but we were losing money on the fence. The fence was a shock, and stores were losing money, and the company was going out of business.

14:28So, the owners wanted to sell. Everybody wanted to sell. So the Interlaken Feds Company was up for sale. But the problem with that was nobody wanted to buy it. With a company going out of business way, no one went to the market. So, I was much opposed to get something. So, I finally said, I want to buy the business, and I'm going to pay a dollar more than the best offer you've had. And that was okay, but they said, where do I get the money?

15:16So, this was 1960, and then in a couple of years while negotiating, talking to people in banks and that, we ended up with a package where the old stockholders accepted notes, I did Salerno for five years for 65% of the company. That's 35%. And in the 35% of the 35%, I ended up with 35%. And my brother and cousins had 65 percent. So I did not get majority control. So anyway, I was now in control, I guess I was in control of a company that was going on, you know, going I was going out of business and had a big debt. So, what can we do about it? Well, I got all my employees together and made a wonderful speech. And I said, what can we do? I said, are we going to raise prices? And they said, God, we can't do that. Our prices are too I'm too high, that's why we're going out of business.

16:51And how about reducing salaries? No. I didn't sell that, very good. What's left? There's nothing left, except we'll all just have to get together and work harder and smarter than we've ever done before. That sounded good. But at the end of the year, we made a little profit, but we still had to come up with $100,000 to pay this, you know, this installment note to the other shareholders, and we didn't have the $100,000. And I can't see how this happened, I don't remember, this was so long ago, but a bank in Chicago gave us a million dollar loan.

17:44But they charged us 9% interest, we agreed to pay 9% interest on that goal. But that gave us a start, and we turned on these whole billies of color, and things just kept going good. Things kept getting better all the time. Now, I do want to mention that I was exceptionally fortunate in having a couple of good men and the International Banking Association. And by this time now we changed the name and became Martin Biltes. And one of them was Ken Weaver as a company. And man, he was good. He just seemed to have the answer to every financial problem.

18:32So we just worked ourself one out. But the real gem was a guy by the name of Bill Uphoff. and he was a CD-looker here. I could never get him to put on a waistcoat and a tie, but he worked for our store in what he was a manager of, one of the interacting retail stores. So I got him to come to Morton as the sales manager and he really ended up more like a general manager. And he's the guy that set up a bunch of incentive programs. In other words, he set up a program where there were so many hours allowed to build a building.

19:17And if the crew built a building in the hours allowed, they earned a big bonus. And if they built a building in less than the hours allowed, they got an even bigger bonus. But if they didn't build a building in the hours allowed, then they were in trouble. and we had a problem with it. And the same way he had incentive programs for the, well, as I say, everybody, the designers and plants and the salesmen, everybody was on bonus or incentives of some kind. And a lot of the systems he sent out were so good that basically we are using the same systems 40 years from now. Am I right or not, Rudy? Yeah, okay. He always agrees with me, but...

20:05The reason I agree with you is that you still use it today. Okay, so... And he set up this program of all the offices we built in a building and had sales of a construction office. And the idea was to have a building We set the buildings a hundred miles apart, and we'd go out and get home at night, but we didn't have to stay out. And then we got some buildings over here, we were building a building over there, and we kept building buildings. So we got almost halfway across the country, just not by plans, but by, we just followed the demand, you might say.

20:57So, we just ended up, every year, breaking new records, and I guess we sold a total of, I don't know, 350,000 buildings, something like that, we were building five to ten thousand buildings a year. And, for one thing, let's see, I got something here, oh, yeah, here's a page of one of our letters, let's see, this is year 2001, we earned a $27 million profit.

21:51Now, what are you going to do with $27 million profits? That would be for taxes and profit sharing, but here we paid $5 million for the employees as profit sharing. Then we had an extra $3 million, which we invited among the employees, simply because we made some money and we wanted the employees to have more of it. And then we paid an $8 million in dividends, which We went mostly to the shareholders, and we paid $8 billion in indium taxes, I think I had most of it, but anyway, we still had a couple of million dollars left to reinvest in the company, and this just went on year after year.

22:41Now, how could this have happened? Well, I'd like to give part of it to two real Rockwells. We tried to teach pre-marketing for non-solid employees, and here's one of our pages and one of our employees' letters with the slogan on it, as often as we could, on Ayn Rand.

23:30A voluntary exchange for Ludwig's profit is the only good relationship among men. Try to get everybody to believe this, that you work hard and you get rewarded for it. And I also wrote a lot of editorials, and my editorials were all free-market. This was against social maturity, and this was against unions and so forth. and we had meetings and lectures and so forth and I like to think this is a big help in making employees more productive and one thing we did that was a little bit unusual we promoted only from within Everybody in the company started at an entry-level position.

24:35So everybody was experienced by the time they got their job.

24:44But the big thing we had for incentives was incentives. As I mentioned, we had profit-sharing, we had special bonuses, In the 80s, we had an ESAP, whatever an ESAP is, anyway, all the employees owned stock in the company, so they all got dividends. And then we had individual bonds, everybody had their own individual incentives. And, one of the big incentives, we had incentive trips, and we're everybody, not everybody, but almost everybody, had a chance to qualify for these trips, and we had Caribbean cruises to Hawaii, and we took people to Chinatown, Hong Kong, and Athens, Greece, and so on.

25:45And this is a big modifier for production. So, I have seven on my program. Incentive programs are great. If the incentives go to the right people, and that's the problem, with incentives to be awarded, you have to set up, whatever, what do you call them, what do you call them, do you set up really, programs and procedures and all that kind of stuff.

26:37And then you have to have a way of measuring the performance. And then that is tough. And the only way I know is you've got to have a good man who can handle this. And we did have a good man. And he's the guy right there, Rudy. He handled this. And you take a building, there are many people involved in making a building, you've got the crew people, the salesmen, the truck drivers, the platoons, the guys in the road, the tankers, all kinds of people. And when everything goes smooth, everybody gets a nice bonus. And the county makes good money.

27:31But, people do make mistakes, and when sometimes the mistakes are bad, and sometimes the mistakes are so bad that the whole building goes sour, and instead of making a profit the company loses money. Now what happens to the incentives? Now the key is finding who made the mistakes. Now, when everything was good, everybody's happy. He says, boy, I did a great job. But when things go bad, it's a different story. It wasn't my fault. See, it was somebody else's fault. Now, it's Rudy's job. Rudy's job is not to be in the settings. He's got to find somebody who's going to be Nick.

28:20And he's got to find that guy, and he has got a jury or trial in which he's got to make the decision on a basis of knowledge he can gain quickly. And by doing this, Rudy's going to take away the incentive bonus from that guy, and that guy didn't think he was guilty. So Rudy ends up with a hell of a lot of enemies. Well, I'm not sitting here rooting.

28:56But, Jesus, no other way of doing it. The fact that he did a wonderful job, was that it went up that way. Just now, it was a great, great job.

29:20In our company, like in other companies, there's politics, there's lots of it. And as I mentioned earlier, I never did have majority control of the company. I was the biggest stockholder, but I never had majority control. And I got to give my brother and his brother some credit. He helped me run the company for 41 years, and then I got to be 82 years old, and that was 11 years ago, so you know how old I am now, and he walked in one day and set your fire, and as I say, that was a long time ago, but the company is still going, they hired a new president and he had very little experience in our type of buildings The Prophet went down, and he brought in a bunch of guys from his own team, and that didn't happen. He went down even further, and then he got rid of that president, and got a different president, and so on.

30:30So the company is still in business, and still making some beautiful buildings, with the Prophets going way, way down. And when this, when we were going good, we were going this way, not going this way. This day we were building, building, expanding, empowering people. And last year we laid off people in closed tent offices. Well Henry, thank you very much for that wonderful talk. Periodically we present the Mises Entrepreneurship Medal to somebody who represents not only a great amount of entrepreneurship in his own person, but also supports the idea of freedom to make the entrepreneur's work possible.

31:30Ludwig von Mises Institute proudly presents to Mr. Henry Guetz, the Mises Entrepreneurship Medal, a grateful recognition of his dedication to learning, prosperity and freedom, presented at Auburn, Alabama, of course not today. So Henry, thanks a million.

32:00Mr. Gibbs, were your other offices franchises? Could people buy into them? Why don't you stand up there and repeat the question? Henry, it sounds like the company has always been fairly generous with its employees in terms of providing Bonuses for work that's well done, employee stock options and so forth.

33:03We often hear critics of capitalism describe a fundamental antagonism between management and employees or between owners and employees. In your case, it sounds like treating employees well was very good for the profitability of the company. It's no antagonism at all. Could you elaborate on that a little bit? Well, we all want the same thing. We want to earn income, we want to have profits, and we want to keep money in the company so we can expand. As we expand everybody, and as everybody gets more and more, more and more, more and more within, so what better way to get a better job, make the company expand, do your job.

33:56No problem. Yeah. No HR department. But yeah. No HR department. Mr. Getz, are you still involved in other business projects and ventures? No, no, no. Well, more or less. Yeah, I want to farm land and have a few real estate properties. But basically this is the only business for me. Mr. Guest, was there ever any temptation to move out of your core business? Many businesses lose money when they do that. I mean, at any point did you contemplate moving out of it into something else?

34:41No, we were expanding so fast that we couldn't. This is Billy Joel up over at Mises. You want to do this, this, this, this. We have got plenty to do this. What about debt? Did you take a position on getting into debt much? Just the first sub? Just the first billion dollars. And then after that? After that, yeah. It was all just financed by return earnings? Right, yeah. Mr. Getz, I know you said that the current president had to close offices and lay off employees. Did that ever have to happen during your tenure?

35:34Oh, no. It never happened. We were just expanding all the time. Boy, do you have a question? Henrik, if you were going to build your business today, in 2013, what would be any different difficulties you might come across to be successful? Yeah. Well, the thing is, it should be hard for you. There's more root. I can't even speak to you anymore. I'm tongue-tied. There's more regulations today than there were four years ago. No question. What would be some of the most important regulations in your business that would be more complex and onerous today than they were when you were starting?

36:23EPA, environmental, OSHA, How, when you were building Mr. Getz, how did you compensate for the various building codes in the different localities? What's that again? How did you, did you have a standard system for accommodating the different building codes and different states and localities? Not really. Of course, our biggest building was farm buildings, and we didn't worry about codes or anything like that. But if you went into an area that didn't have the codes, well, you had to accommodate that code, whatever it is. Mr. Getz, I remember you saying that there was a editorial that you wrote about unions.

37:09Well, what? Unions? Yeah. Did that convince your workers to not unionize? Did they ever consider that? Well, I hope. That was a part of writing this article. Yes. No unions. Did other workers in other companies in the same industry, did they try to unionize in other companies? Not really. This whole building industry was pretty much a farm building thing. It was not very much unionized. As an entrepreneur, how far ahead did you look in your planning for your business when you made investments and so on?

37:54How long? Two years, or less, or more? More like two weeks. So things were changing very rapidly? The market was... We were just following the market. If people like Sherby Mander are good, we'd have to build a an office over at her. They were going all the way to Spain. Sounds ridiculous, but That's the way it was. Any other questions? Alex? You were president through a lot of economic ups and downs throughout your career. And I wonder, did you have any philosophy about dealing with business cycles?

38:40Or did you watch your company in the recent financial crisis do things that you would have done differently? So there were business cycles, recessions, and boom periods when you were running your company. Did you do anything special to adjust to those cycles? Well, the big change was in the 1970s, a lot of inflation. The farm values are going up ten-fifty, fifty percent of your regularity. Then when Reagan got in, it was in 1980, and they stopped de-inflation. And the farm values went down as fast as they'd gone up.

39:30Fortunately, they started a big armament program out east, and these had a big demand for buildings out there, and we were able to get some of those out there, and we could tell the people, we have a job for you out east at the settlement in the east, and we didn't have to really lay any bit. essentially all. So it's been fortunate in this period. We were able to flow with the cycle. Okay, thank you.