Usually, when someone a few decades your senior is speaking, the best thing to do is to shut up and listen. Particularly when that person is, say, the current Chairman Emeritus and former Chief Executive of a massive corporation. Like Leonard Lauder.
On Tuesday evening, Lauder sat down with Fern Mallis as part of her "Fashion Icons" series at the 92nd Street Y to talk about everything from his extensive art collection to the most successful products in Estée Lauder's nearly 70-year history. It's a lot to cover, but, fortunately, Lauder speaks in specifics. Here are his best pearls of wisdom about running a successful business.
1. Sex(y fragrance) sells.
"There are two things [that drove our business at first]: one was our gift with purchase and the other was in 1953, [Estée] invented Youth Dew bath oil, which was a bath oil that doubles as a skin perfume. It had an incredible fragrance, the sexiest thing you've ever smelled in your life. I promise you. I married Judy, who uses it, and if there are any single women here, let me give you some advice...
"The fragrance was so good that something like 20 years later the hottest perfume in the world was a new fragrance by YSL called Opium. Anyone ever smelled Opium? That's Youth Dew! Youth Dew drove the company. We did so well with it that our accountant said — at that time we weren't incorporated — you have to do something because you're giving all your money to the government. Remember, at that time tax rates were very, very high. So we formed a corporation called the Fragrance Products Corporation, and it sold all of our fragrances. The Estée Lauder of today was the company that started years ago as the Fragrance Products Corporation from one sexy fragrance. If you use it, and it doesn't work, write me a letter!"
2. He got the idea for creating competitive businesses while running a cinema club at the University of Pennsylvania.
"With the Cinema Club, I did a membership for one dollar and for that, you got to see ten films. It was so successful that we had something like 2,200 members, but we only had the capacity for a thousand people, so I was terrified that one day everybody would show up. So I decided that I would run a competitor film society. I called it the Film Art Society, and I sold three films for $1.50, and I did very well there. From that came the idea later on of creating Clinique to compete with Estée Lauder. If I could do it with the Film Art Society and the Cinema Club at Penn, I could do this again later on with Estée Lauder.
"Estée lauder was getting so big. I was getting worried because Estée Lauder was growing so fast at that point — 20, 25 percent a year, maybe more like 40 — that the people we were selling to, the Saks Fifth Avenues and the Neiman Marcuses, would demand that the growth keep going. I was afraid that if we had to keep that amount of growth going, we would have to do things that weren't right for the company. Promote more, etc. So I wanted to bring another company along that would compete. I thought, if I were to compete with Estée Lauder, what would I do? I thought about all the things that I would do, and that's exactly what we did."
3. ... and then he did it again with Mac and Bobbi Brown.
"I bought Mac, and I said, 'Who's the number one competitor to Mac?' So I bought Bobbi Brown six months later, and boy were the people at Mac mad. As edgy as Mac was, Bobbi Brown was different. It wasn't a replica. No one really understood what I was doing. I did, but no one else did."
4. It's been said before, but seriously: hire people who are better than you.
"You can't get anywhere without people who are smarter than you. When I was a kid, I was pretty smart. I thought I was smart, anyway. When I went to Penn, I was number three in a class of 750, and I thought, boy, I was smart. Then I went to Navy Officer Candidate School. I was put in a section of 24 men, of which four or five were Ph.Ds. Some had engineering degrees, etcetera. Of the 24 men I was number 12. Okay, three out of 750, 12 out of 24. That taught me the greatest lesson in my life. The lesson is, no matter how smart you think you are, there's always someone around you that's better than you, and I vowed when I got out of the Navy that I would only hire people who were better than me. That doesn't mean that they were smarter than me, but they were better than me. To this day, if someone isn't better than me, forget it. When I hear someone saying, 'I'm not hiring that person. They're overqualified' — forget it."
5. And find ways to make them want you to succeed.
"I write people little notes congratulating them if they've done well. Today we had a great presentation at our board of directors meeting from the people at Mac. The minute I got back to my office I sat down and I wrote everyone a handwritten note about how great they were. If you tell people that have done well for you that you appreciate how much what they've done, when the time comes to ball someone out, they'll take it. And they want you to succeed, because you're congratulating them for what they've done."
6. Even as a big business, think small.
"[Mac] has the smallest distribution of any of our brands in the whole corporation. But what they will do is there are very few stores and try to do as much as possible in each one of those stores. If you take, for example, a company like P&G or Walmart, they would sell between $30 and $50,000 per door. The average sale that Mac would have is about $1,800,000 per store. So if you have a hot brand and you don't over-distribute, if you hold it tight, that's thinking small to me."
7. People who are unlike you are an asset to your business.
"I'm a nice Jewish kid from West End Avenue. What do I know about drag queens [like RuPaul, the first face of Mac VivaGlam]? The world is changing, and if I keep doing the same thing, it's boring. Mac had developed this strange business. All the people working at Mac had hair that was pink or green or blue, and they had tattoos here and there, face jewelry, and instead of saying, 'They're creepy,' I said, 'Wow! That's great.' So we bought the company and slowly built it. But the key thing with this was to keep Mac, Mac. There are people who buy a company and try to change it to their image. I wanted to change ourselves to make us like Mac. And Mac today, it's been 20 years, is as much Mac today as it ever was."
8. Hire women.
"I love women in business. All of the people who were working cosmetics in the field [used to be] men, salesmen. [My brother] Ronald created the job of account executive. We hired women who were well-educated and wanted to do this, and to this day, I think we have something like 96 or 98 percent women [of people working in the field]. There's a lady who worked for me, who was the account executive on Bloomingdale's. She said, "You know, all the men I work with, all they want is to get promoted. I don't care about getting promoted. All I want to do is do the best job possible." And that resonated with me over the years. I love women, I want to hire as many women as I can, and if they're good, they're really great."