December 16, 2025 – Race to Innovation Dr. Roy Zwahlen and UGG Founder Brian Smith

0:04 Intro 1
Broadcasting from AM and FM stations around the country. Welcome to the Small Business Administration award winning School for Startups Radio, where we talk all things small business and entrepreneurship. Now, here is your host, the guy that believes anyone can be a successful entrepreneur, because entrepreneurship is not about creativity, risk, or passion, Jim Beach.

0:26 Jim Beach
Hello, everyone. Welcome to another exciting edition of School for Startups Radio. I hope you’re having a fantastic day getting ever closer to the holidays. I hope you’re going to have fun celebrating a bunch of them. You can celebrate all of them if you want to. I just hope you buy a lot of stuff to support the economy. Are you thinking that we’re in a recession already? Let’s talk about that a little bit. We keep hearing it. They’ve been trying to promote it for years, and I think that we may finally be there, with the media pushing and leading the way, which is, of course, the exact opposite of what it should be. I really think the media, of course, hate Trump and want a good recession. I just, I don’t know if we’re there yet or not. I’d love to hear your opinion. I have an opinion on today’s show, and that it is a great one: two fantastic guests, two great conversations. First, we have Dr. Roy Zuellen. We are going to talk about his new book, Race to Innovation, and the entire innovation and creativity topic. You know, it’s one of my favorite topics out there. I love talking about creativity, even though it’s not really that important to entrepreneurship. Maybe innovation is more important than creativity. We’ll talk to Roy about that. But the idea that you have to have a new idea, we have certainly proven that not to be the case. You should just go copy, borrow, or steal someone else’s idea, but then the innovation comes in and making it better than their version, right? That you do it in a way that the competitors lose, because the customers choose you, because it’s an easy comparison. You look at every single aspect of the business and do every single aspect better, and you will win the race. And so anyway, very excited to speak with Dr. Zuellen. It’s one of my favorite topics. After that, Brian Smith will be with us as a greatest hits. These are the files that we need to get back up on our server, because we changed servers. Brian Smith is the founder of UGG, the UGG boot company out of Australia. He is an incredible character. It is a lot of fun. It is a great conversation, and I’m sure you will enjoy it. Even my daughter was impressed that Brian was on the show, because she wears some UGGs. I do want to respond to a piece of email that I got about Airbnb. I made a comment, oh, a couple of weeks ago, just an offhand comment that they are dying. Maybe that’s too strong a word. They are certainly having hard, hard, hard times. They have been a bully in too many cities and have just wanted too many rules and regulations, and I think the karma is coming back to them. Now, huge pushback on Airbnb, and they are dropping off, I think, about 20% in sales this year. I will find out the exact data when it comes out next and relay it to you. But the problem is just that they’ve added too many expenses. These $300 cleaning fees, they ruined the business, and the customers are taking it out on the business itself. They don’t treat the house with respect because the renter does not treat the customer with respect.

3:51 The Real Environmentalists
Introducing The Real Environmentalists, the bold new book by Jim Beach. It’s not about activists, politicians, or professors. It’s about the entrepreneurs, real risk takers, building cleaner, smarter solutions, not for applause, but for profit. The entrepreneurs in the book aren’t giving speeches. They’re in labs, factories, and offices, cleaning the past and building clean products for the future. The Real Environmentalists is available now, because the people saving the planet aren’t the ones you think. Go to Amazon and search for The Real Environmentalists. Thank you.

4:20 Jim Beach
We are back, and again, thank you so very much for being with us. Very excited to introduce my first guest today. Please welcome Dr. Roy Zawalin to the show. He grew up an Army brat, with his father stationed all over the world in Jordan, Turkey, Kuwait, and Syria. Roy, I think that looks like a CIA job to me. Roy then went off and attended BYU and George Mason School of Law, and has created a life and a career on multiculturalism through political science, economics, and law. He has advised global leaders in biotech and policymakers in all areas on innovation and how to grow businesses. He is currently the Chief Strategy Officer at the Eshelman Innovation Institute at UNC Chapel Hill. Dr. Zawalin, welcome to the show. How are you doing?

5:25 Dr. Roy Zwahlen
I am well. Thank you so much for having me. I’m excited to have this conversation.

5:29 Jim Beach
I am too. I didn’t mention that he is the author, co author of a new book called Race to Innovation: Unleashing the Power of Entrepreneurship for Everyone. So, Roy, I have to point right off the bat, I think you have a typo on your cover. Oh no. It says entrepreneurship for everyone. That’s not right. It’s only special people who get to be entrepreneurs.

5:53 Dr. Roy Zwahlen
Yes, that is the misnomer.

5:56 Jim Beach
It’s the rule, only special people.

5:59 Dr. Roy Zwahlen
Well, that’s exactly what we’ve been trying to talk about for a long time. You know, it’s only special people get to be leaders. Only special people get to be creative, et cetera, et cetera. And, you know, over the last several years, I think we as a society have been pondering this question of, how do we bring others along? How do we actually leverage talent that might be hidden from an entrepreneurship perspective, an innovation perspective, valuable opportunities that are hidden to other people? You know, this is no longer in our world today. We do not need to leave it to the Vanderbilts to build empires, to build businesses. We need to be looking for innovation opportunities, entrepreneurship opportunities across the board.

6:44 Jim Beach
Well, I couldn’t agree more with that. That’s very true, but let’s not choose the Vanderbilts. They all went broke in the end. This is true. Let’s choose a different family, like the Rockefellers. They’re still all rich. There we go. There we go. Better job of maintaining their wealth. So, do we have a problem in America with innovation? Are we dropping off? How does innovation look in America right now?

7:14 Dr. Roy Zwahlen
Well, right now there’s a lot of metrics that makes everybody feel quite comfortable. And for us, that’s problematic, because while the outcomes seem very high, the growth rate of those outcomes feels very flat, at least to me. We have had the lead in the innovation entrepreneurship space for many years, and for a lot of good reasons, but we think that there are others that are coming to get us, so to speak, that really want to knock us off the innovation pedestal and the entrepreneurship pedestal. And you can look at China. You can look at other countries that are kind of sleeping giants, waiting to wake up in this innovation space and entrepreneurship space, and really investing strategically and unlocking the scientific talent, the entrepreneurial talent across the board, to really start leapfrogging those countries that have dominated the space. And so, I think on the other side of this conversation, the other way to look at America’s opportunity is that we’re just getting started. To your point about entrepreneurship being only for a few, we are really leveraging just a few. That’s why programs like yours exist, and why they add so much value to our society, because there’s a lot of people out there that can be great entrepreneurs, that can be great innovators. They just lack the resources, the training, and other assets, and people like us, who have the opportunities, or the investment dollars, or the connections, or whatever that might be, to bring them into the fold, to enable them, and really unleash the next wave of innovation that’s going to keep America in the lead.

9:00 Jim Beach
All right, who are you most worried about? You mentioned China. Is China your number one worry?

9:08 Dr. Roy Zwahlen
I think it would have to be, yes. From an innovation perspective, we see that play out in national security issues around technology that seems to get a lot of the limelight right now. But, you know, China has played to their massive internal market for a long time in this tech space. If you look across industries, look at auto, you look at the EV cars that are on the market in China, and try to just do a superficial test of looking at their cars compared to Teslas or others. This is real competition, and we need to take it seriously. And we see the end product of the innovation strategy, of the entrepreneurship that’s occurring in the U.S. and in places like China. What we don’t see is all the things that are going into it strategically, whether it’s at the national level, whether it’s at kind of regional levels, that we need to leverage better in the U.S. to keep those kinds of challenges at bay.

10:04 Jim Beach
Well, I agree with that. I’ve been talking a lot recently about China, and I am really on a kick recently, and I guess it’s because of the YouTube channels that I’m watching. The one YouTube channel that I watched that seems to be a good source, I mean, these seem to be legitimate, people said that there were 13,000 factory fires in China last month, and those fires were started by employees that haven’t been paid in a year in some cases, and that some of them were even government facilities, and even government workers in parts of China are not getting paid right now. And then that huge new bridge of theirs collapsed last week. Used to live in Asia. I just, I think it’s all a bunch of lies. I don’t believe what China says. So even what I see, I don’t believe, you know? Like the one of the factory workers where the lights were off and it was all robots, that was not a real video. You know, I’m just really down on China at the moment. So anyway, what are your thoughts on that?

11:25 Dr. Roy Zwahlen
Well, no, and understandably so, right? It is hard to see what is going on. And so in my mind, you have two choices as a result. We could either doubt China and do nothing, or we can assume that maybe even if it isn’t true, they have the capability for it to be true, potentially in the future, and we shouldn’t rest on our laurels, sit on our hands. We need to keep moving forward to stay ahead, whether that threat is real or perceived.

11:51 Jim Beach
I agree with that. We need to fight, fight, fight, but I think that just like you remember in the mid 90s, we figured out that the Soviet Union wasn’t that much of an adversary during the 80s, and they really weren’t that much of a threat, and most of their ICBMs didn’t work. And, you know, we realized that the threat just wasn’t as great as we had perceived. I kind of feel like that’s what we’re going to realize 10-20 years from now.

12:16 Dr. Roy Zwahlen
Yeah, that’s a great point. But, you know, to build off of that, our space program and everything we’re doing in space was because we maybe over calculated their technology capabilities, and that pushed us forward, right? That rivalry between the countries. I mean, that’s how we get to SpaceX and all the modern rocketry, right? There’s a lot of things that happened in between. Of course, I don’t want to oversimplify, but that competition can be helpful to us. And now, having just talked about it from a competitive frame, one of the things that America has going forward is that we don’t have to think about innovation and entrepreneurship as zero sum in our country. It doesn’t just have to be for the few, as we’ve started this program out with. We can better leverage all the talent, all the ideas, all the capabilities in our country to really do, whether you believe in the competition or not, to really do these next moonshot ideas that are possible in this modern age.

13:15 Jim Beach
Yes, I can’t wait to see what Elon does next.

13:21 Dr. Roy Zwahlen
Yeah, there’s a lot of people making investments based on that right now, so it’s fun to see.

13:27 Jim Beach
Yes, what about the AI competition? What are your thoughts on AI internationally, and whether other countries are going to compete there?

13:39 Dr. Roy Zwahlen
Yeah, it’s such a great question, and there are certainly people that are more expert than me in this domain. But, you know, we saw it play out in the OpenAI versus, I’m going to blank on the name because it’s been long enough, the Chinese company that did it with much less energy, much less cost, right? So that still is real, from what I can tell. To your point that some stuff isn’t real, but that still is real, and there’s still a lot of competition coming in that frame. And it is a race, right? And we have to, whether it’s policies that we want to think about, or whether it’s, and more exciting to me, everyday entrepreneurs that are rethinking how not just to build AI startups, but how to actually bring AI into their startups to, you know, be the first, as many people have said, who’s going to be the first solopreneur unicorn company where there’s an employee of one because of AI agents that have been created to help stand up and run that company. Whether that’s possible or not, time will tell. But it’s an exciting thing to think about, an exciting challenge of, can entrepreneurship really take off? And can entrepreneurs take off in ways that they could never do so in the past, because they required a lot more capital? And that may not be needed, because AI makes a lot of the capital needs less expensive, because you could do marketing and sales and other things, or pieces of those jobs, much cheaper with AI. There’s lots of opportunity in the U.S. that, given our entrepreneurial and our innovative bend, we can take advantage of in unique ways that can really drive our country forward.

15:25 Jim Beach
One of the things you talk about in the book is minority entrepreneurship and the history of Black entrepreneurship in particular. Can you talk about that and talk about the importance of the enclaves? I live in Atlanta, so I certainly have seen a lot of that and have experienced enclaves. But more importantly, what I want to ask about is, we’re living in an age now where there are so many resources to help. I interviewed a lady the other day who is the first female Native American venture capitalist. So we now have resources for Native American females, right? We have hundreds of resources dedicated to African Americans and other minorities. It seems like right now is the golden age of resources available for minorities, because I’ve interviewed the boss of the organizations. There’s 18 questions there, Roy. Go.

16:38 Dr. Roy Zwahlen
I love it. I’ll start with the broader book to give people a frame of reference. So John Banforth and I wrote this book with other contributing authors from the community, really in the frame of utilizing the African American experience in the United States to teach us lessons, and by us, I mean everyone else in particular, about innovation and entrepreneurship. Because the book highlights story after story of entrepreneurs or enclaves that were incredibly successful because of entrepreneurship, because of innovation, in spite of all the extra barriers that those communities faced in the time that they faced them. So, getting to enclaves, I’ll give you one of my favorite stories and examples of Wilmington, North Carolina. So right after the Civil War, you have 55% of Wilmington is African American and recently freed slaves, and in the same generation, they go from slaves to upper and middle class. And our argument is because of entrepreneurship. Many of these individuals leveraged what skills they had or were able to accumulate over the years to start businesses. You know, the first Black newspaper. It’s a huge shipping town. It’s a port town for North Carolina, the largest at the time. And they were able to leverage the skills that they had, start businesses, and create the first Black Mecca in the U.S., as some would claim. And unfortunately, the story has a sad ending, because in 1898 there’s a coup d’etat in the region where many of the African Americans were killed, the businesses were burned down, and all that generational wealth was lost, and many of those entrepreneurs moved out of the area, and some moved to Durham, which is still a Black Wall Street to this day. But for us, we’ve heard about the tragedies. We heard about Tulsa over the last few years. But what frustrated us, and what drove, I think, the story is: what was it about Wilmington, North Carolina, where they had no access to banking, right, little access to property, if any at all, what was it about that enclave that led from slavery to upper and middle class in the same generation? Tulsa, the money was going around the Greenwood district 24 times because there’s no banking. It’s all angel investors investing in each other and creating those businesses.

19:05 Jim Beach
What do you mean by 24 times?

19:10 Dr. Roy Zwahlen
The community. Yeah. So it’s a common metric when we talk about community and economic development, where people will look at how many times a dollar will circulate within a community before it leaves the community. And so a typical, in today’s world, a typical metric is like three to five times, a dollar circulating in a community. So somebody going to buy a good or service somewhere else, that person getting paid, and then going to buy a good or service somewhere else. And this idea of local economic growth is driven by this capital flowing in a community, or staying in a community. So we think three to five times is great. 24 times is astronomic, right? So what was it that drove that? And in our opinion, it was, again, no banking. So it wasn’t the banks, it wasn’t traditional financial mechanisms. It was other entrepreneurs in the African American community in Tulsa investing in each other. Again, enclave. So it’s these networks. It’s these resources you’re talking about. It’s the capabilities and skill sets around you. And there’s things changeable, things that are culturally driven, like psychological safety, where people are with people that look like them, that have common experiences, they’re going to be more willing to take risks than they might be if they’re in a fully majority community, where they’re going to feel othered or otherwise separate and apart from. So these enclaves play critical roles. And we’ve seen, to your point, lots of resources come in to these enclaves in recent times to try to unlock this hidden value. And so our book is really trying to shine a light on all of this, because I don’t think many people are aware of these resources, particularly people outside of the community, and to really magnify that and really make the argument that we need to keep going, because there has been some pullback. There’s some important legal questions around this, and constitutional questions that are being litigated, of course, but the private capital needs to have the case and see the value. And we argue that this isn’t just a justice thing, right? This isn’t about just doing something better socially. There’s economic justification for these investments, and it’s an exciting time. I think I hit all your questions.

21:31 Jim Beach
What about the Black innovators today? What did you encounter? Some cool stories?

21:43 Dr. Roy Zwahlen
Yeah, there’s lots of great things going on in that community, and many other communities as well. One of our favorite stories is actually a member of the Eshelman Innovation team who is in the process of creating, has created a startup and is in the process of getting going. But her story really represents one of the principles we talk about, which is having a unique lens that scales. And her story is that she had to drop out of Spelman to go take care of grandparents that were extremely sick, and she moved to rural South Carolina. And she was interested in gardening, so she set up a garden, but was really interested in food insecurity and understanding how different foods would actually improve the health of her grandparents. So not just access to food, but access to the right kind of nutritional food and the impact on their health. And she basically nursed them back to health. The grandparents had horrible prognoses for both of them, and she used nutritional gardening to bring them back to health. And since then, she’s created, she’s known as the Mocha Gardener. She’s been on the cover of Better Homes and Garden, and she’s now thinking about startups. And because of her time at Eshelman Innovation, she never thought about a startup before. She just wanted to share her story and talk about it, and then she realized that there’s actually an opportunity in hospitals where, actually, I think it’s one third of a hospital staff are food insecure. That means that they, even though they are in a hospital and in downtown settings, they don’t have access to the food that they need. And as a business, she thinks she’s starting one focused on solving that problem as a benefit, and using gardens that are in hospitals, but using that to actually drive health outcomes and not just food access.

23:35 Jim Beach
I love it. What a great, great thing, right?

23:39 Dr. Roy Zwahlen
We love that story for so many reasons. But again, it was her lived experience, right? It was dropping out of college, taking care of her grandparents, and looking at this in a unique way, but not in a health equity frame, right? Or not in a, hey, we need to bring resources to a particular community. It’s what is that unique lens, or that unique problem that they solve because of their insights, because of their lived experience, that can scale. And there’s many stories, you know. Madam C.J. Walker is a famous story that we talk about in our book, and there’s many more of people that did just that. They had a problem, they solved it in a unique way, and it was unique to their lived experience, and they grew businesses in a day and time when they shouldn’t have been, by all accounts of barriers and white supremacy and everything that was going on in their time, they still succeeded. And that’s what’s exciting for us, is, what is it, right, in that experiment? What can we pull out that teaches? What does that teach us about entrepreneurship and innovation that we can replicate and scale.

24:39 Jim Beach
Can we learn to be more innovative individually?

24:46 Dr. Roy Zwahlen
There are certainly a lot of disciplines and certificates and programs that are aimed at doing just that. And I think the answer is yes. I think it’s fair to say that that’s a skill. I think some people are born with advantages with that skill, just like an artist may be slightly more creative, but I’m biased. I work in academia, so I think a lot of these skills can be learned, and I think it’s worth learning, and I think it applies whether you’re an entrepreneur or whether you’re an intrapreneur working inside a company, that innovation is going to set you apart. It is a skill that’s going to matter now and in the future, to build your value and to solve problems that need to be solved.

25:27 Jim Beach
Tell us about your work at UNC in the Eshelman. Is it the institute? What is it?

25:34 Dr. Roy Zwahlen
Yeah, it’s Eshelman Innovation. It is an institute within UNC Chapel Hill. We actually operate across the state of North Carolina in two frames: building digital health technologies and companies, and building therapeutics technologies and companies. And we exist at the very beginning stages. And so we are partnering with our innovators here on campus, but also innovators out in the community, to really discover, find difficult problems to solve, and stand up companies with technologies that can solve them. Our most favorite example right now is Goldie Health. It was actually a problem that we discovered, and we were given money to go look at the opioid use disorder crisis in Appalachia, in western North Carolina. We found community health workers that were riding along with ambulances, and when somebody had an overdose, with being on their phones and on clipboards, they were getting these people into care, getting them on the medication they need to treat their addiction, and getting them mental health care. And their success was orders of magnitude better than just a regular EMT or a police officer or fireman or whatever, because these people had lived experience. But again, they’re operating off of clipboards. And so we asked the question of, well, how does this scale, right? How do we go from solving and helping 20, 30, 50 people in Asheville to helping many more people in Asheville and across the country? And that’s where digital health software came in. So we created a company and an EHR, electronic health record, for these community health workers to basically scale that, so they’re not on the clipboard and on the phone the whole time. Utilizing AI and the software could solve all of those workflow problems for them. And now that startup has gotten, we invested in pre seed, they’ve raised a seed round, and they’re about to start their Series A. They are in multiple counties in North Carolina. They’re also in Baltimore working with Johns Hopkins. They’re talking to the state of New York, and they solve this critical problem for communities of getting people that have these addictions and have these repeated overdoses that drive so much cost to our healthcare systems, let alone the horrible stories that these are for these individuals, and creates an economic solution that we hope will scale across the country soon.

28:07 Jim Beach
That would be awesome. You’re doing great work, and I appreciate it, and thank you for the book and sharing it with us. Dr. Roy Zawalin, Z, W, A, H, L, E, N, if you want to look him up on LinkedIn or something, or look him up for the book. How do we find out more about you, get a copy of the book, follow online, all that, please? Yeah.

28:32 Dr. Roy Zwahlen
So for the book, it’s called Race to Innovation. You can, all the major, you know, Amazon, Barnes and Noble, et cetera, has it. The website for that book is racetoinnovation.net. That’s racetoinnovation.net. So you can find more information about the book, where it is, other, this podcast, et cetera. So you can find more about that there. Yeah, connecting with LinkedIn is the best way to reach out to me. I’d love to continue the conversation with you, Jim, or any others that are interested. I love talking about this, clearly, and I love helping out other entrepreneurs and other innovators to try to leverage this opportunity we have right in front of us.

29:10 Jim Beach
I love that attitude. Entrepreneurs love to help each other. That’s what sets us apart. Thank you so much for being with us, and congratulations on the book.

29:21 Dr. Roy Zwahlen
Thank you, and thanks to the audience for listening. I appreciate your time, and we will be right back.

29:40 Intro 2
Well, that’s a wonderful question. Oh, my gosh, I love the opportunity to do this. Thank you, Jim. Wow. That’s a great one. You know, that is a phenomenal question. That’s a great question, and I don’t have a great answer. That’s a great question. Oh, that is such a loaded question, and that’s actually a really good question. School for Startups Radio

30:55 Brian Smith
Hey, I’m doing great, Jim. Thanks for having me on the show.

30:59 Jim Beach
Oh, it is my honor. I can’t tell you how cool my 15 year old daughter thinks I am now, the fact that I got to talk to you. She thinks daddy is the coolest guy on Earth, just the fact that you and I got to speak. So it is my pleasure. That’s great. Can you tell us the beginning of the story, how you decided to start this business while you were at UCLA?

31:26 Brian Smith
Yeah, well, it started earlier. The process started earlier. I was an accountant, as you mentioned. I hated it, and it took me 10 years to graduate. And the day I graduated is the day I quit, and I was trying to figure out what to do with my life. And I realized that all the cool trends were coming out of California, like water beds and Levi jeans and all the surf brands. And so I thought my best bet was to go to California and find the next big thing that I could bring back to Australia. And while I was in Santa Monica in California, one month, two months, three months, still hadn’t found it, and my buddy was going to go surfing, and he brought the latest issue of Surfer Magazine. And I opened it up, and I just froze on one page. I got goosebumps, and it was this ad spot. There’s a couple pairs of legs in front of a fireplace wearing sheepskin boots. And I went, oh my God, there’s no sheepskin footwear in America. And so instead of taking something back to Australia, I borrowed 500 bucks with my buddy, and we sent the money down for samples to bring it to America and test. That was like the genius behind how we started that brand.

32:48 Jim Beach
And why did you think it would be so successful? I mean, if no one is wearing sheepskin boots, especially in hot Southern California, why did you think it would be a big hit?

32:59 Brian Smith
It’s crazy, but one in two Australians has some sort of sheepskin footwear when I left there. And what I didn’t count on, and this is a very, very important entrepreneur lesson, you have to have a certain amount of ignorance to be a good entrepreneur, because if you did all the research and knew what was ahead, you would never start. And my ignorance was that everyone in Australia is born with sheepskin knowledge. They know it breathes, you don’t sweat in it, it’s insulating, you can get it wet, you can rug it. But in California and America in general, it’s, oh, it’s hot, it’s sweaty. You can’t get it wet. We have mud and slush and snow. It’ll never work here. And so that difference in my perception of what the product was could have been enough to make me not go into the business. But because I was blind and ignorant, and in a sense innocent, I just forged ahead anyway. Ultimately it became a billion dollar brand, but it could never have started if I didn’t have ignorance.

34:15 Jim Beach
Well, I started my first business also totally stupidly. I didn’t even know what the word entrepreneur was, and so I really agree with you. If I had known, I would not have done it. What was your first success? How did you start actually getting some traction and start finding stores to sell the product?34:35 Brian Smith
Yeah, well, it took three years. Like, my first road trips were in late December, and we started, you know, we had bought, you know, 500 pairs of boots in because we raised 20 grand in capital, and we bought 500 pairs of boots in, and we sold 28 pairs. The first season was exactly $1,000. But there’s no billion dollar company out there that didn’t start with $1,000. That was a good thing to look back on. But we tried surf shops first, and they were easy, because all the California surfers had been to Australia, had bought some back, and they knew about them. But we were advertising with these models on the rocks at Windansea Beach, and the sales were $30,000. And for the next year, we advertised with better looking models and more expensive photographers, the models on the beach at Windansea, and sales were $30,000. And I felt like such a failure because we couldn’t get in the mall stores. And I was back in Chicago at Montgomery Ward’s buying office, and did my best sales presentation ever, and the buyer just looked at me and says, Brian, why are you here? And I sort of stammered, well, I want to get an order for the California stores. And he said, hey, Brian, don’t you get it? We’re the elephants. We don’t move until the mice are running around under our feet. And I instantly knew what he meant, that if I didn’t get all the specialty stores just scrambling for it, then the malls were never going to touch it. So I got back to California, and I was having a beer with one of my surf shop owner customers, and I was explaining the problem. He just called out to the back of the room, hey, you kids, come out here. And all these little grommets come out. What do you guys think of UGGs? They went, they’re so fake. Have you seen their ads, those models? They can’t surf. And then I got goosebumps once again, because I realized, oh my God, I’m sending the wrong image to my target market. And within a couple of days, I called up a buddy of mine who ran a scholastic surfing program. I said, are any of these kids going to go pro soon? And he gave me a couple of guys. One was Mark Occhilupo, and I started photographing these guys walking to the surf breaks, and started running those ads in the magazines, and the sales instantly went to $400,000 that season. So the huge lesson I learned was that if you have a product, you got to look like people might be in the photos. And there was a huge marketing lesson for me that turned out to be that I was a really good marketer.

37:45 Brian Smith
No, it’s been around Australia forever. There are several old people in Australia who claim they invented it, but nobody really knows. It’s sort of descriptive about sheepskin boots now, and it’s in the dictionary down there. I mean, sheepskin boots. But, you know, when I came to America, there were no sheepskin boots here, and no one had heard about it, so I registered it. And that really became the fulcrum of the whole business. I built the brand around the UGG logo, and I made it stand for quality, and I made it stand for comfort, and I made it stand for reliability, you know, and all the customer service that I did was what went into building that into being a brilliant brand.

38:37 Jim Beach
And how did you deal with the seasonal nature of the product? Is this a winter boot? I mean, if people are wearing it surfing, it sounds like a summertime product. What are your thoughts on the seasonality of it?

38:51 Brian Smith
Okay, there’s two ways of looking at it, three ways of looking at it. Firstly, the product itself, because it breathes, you can never sweat in it. So the using season is pretty much 12 months. I see people in the summertime when I’m here with shorts, you know, in the early mornings. The second way of answering that is that the buying patterns of the retail industry will be they’ll only buy winter products in October, November, and they usually do that at the trade shows, you know, six months previous. And so there’s a very narrow shipping window and a narrow window to collect receivable. And the third part of answering that is that it’s a very, very difficult proposition to run a business that is so seasonal. Because if you’ve got a product that’s selling every month of the year, well, when you collect from one shipment, you use the money to pay for buying the next product. Well, when you get into a seasonal product, it’s one time a year for only a couple of months. And it’s okay when it’s small, but when it gets up to be 5, 10, 15 million, the amount of money and capital you need to buy product for the rest of that season just becomes prohibitive, and ultimately is why I had to sell it. I was so successful that I couldn’t bankroll the inventory ramp up every year.

40:24 Jim Beach
So you sold.., I know money has been an issue several times, and you’ve had to reach out to raise capital several times. I want to ask about that. But before that, was the reason you sold, then, just for inventory management, that the buyer, Deckers, could afford to grow the brand more quickly than you?

40:47 Brian Smith
Well, two things. One was that I was looking at a $20 million season, up from like 12, and that was a huge amount of capital to raise. And back then, you know, the investment bankers were thinking, oh, well, you’re lucky, but it’s a fad. It’ll never be around next year, right? And every year for like 10 years, I got that same argument. And it didn’t matter, even though I was doubling every year, they still thought it was a fad. And Deckers, I had known the owner of Deckers back when I was selling boots out of the back of the van in Malibu Beach. He was a couple of vans up selling his Triple Decker sandals out of the back of his van. So we knew each other for the 17 years that I was in business, with Doug. And he had taken his company public with a brand called Teva, when the outdoor market took off. And so I was facing this dilemma of, how do I get $20 million bucks worth of product? And we were going to the Super Show in Atlanta, and I saw Doug at the other end of the baggage claim at the terminal, and I got goosebumps again, and I thought, oh my God, it’s perfect. You know, his business dies every winter. Our business dies every summer. And so we walked up and high fived each other, and we had the accountants talking to each other that afternoon. You know, it just made so much sense.

42:23 Jim Beach
Oh, that’s a great story. I got goosebumps hearing it. How do you keep the brand fresh? So you mentioned that the investors said, oh, it’s a fad. It won’t be there next year. How did you fight back with that and keep it fresh each and every year?

42:39 Brian Smith
I had a mantra that you’ll also buy into, especially if you have a product that isn’t protectable by patents and stuff. And it’s pretty simple: get out front first and then run faster. And every year when the competitors were knocking off all the styles and colors that I had the previous year, I would come out with new stuff. And every year they’d kind of catch up, but they never could, because they didn’t have the creativity. All they had was the ability to copy. But I had the ability to think of new styles, think of new colors, new ways of marketing. And so it was always a case of being out front first and running faster.

43:33 Jim Beach
I love it. And how did you, let’s go back to the financial question. Prior to that year where you needed 20 million, was fundraising a perpetual yearly problem for you? And how did you solve it?

43:48 Brian Smith
Well, it was a problem because if any business grows more than 20% a year, now this may have changed with the internet where you don’t handle your own product, but generally the rule was, if you grow more than 20% a year, you have to get more capital in to finance the growth. Okay, we were doubling every year, so it was like always chasing bigger investors, buying out old ones, bringing in new ones. And then that’d be good enough for a couple of seasons, and then they wouldn’t have the ability to take it to the next level. So we’d have to buy them out and bring in new ones. So it was a perpetual cycle. Now, in retrospect, I wish I had brought in a really good financial person into the company who could have projected three to five years out and then gone to the proper banks and got the proper level of financing commitment. But that was only after I learned what I’d done wrong. And that’s like every entrepreneur, you know. You never know how to do it up front. You just learn it as you go. But looking back, that’s one of the things that I wish I had done.

45:00 Jim Beach
And what about luck, Brian? I don’t hear any luck in this story at all. I only hear incredible hard work and some really smart marketing decisions. Was luck part of your story?

45:16 Brian Smith
Well, I don’t believe the word luck, but karma does, right? Which is like, you know, everything has its opposite. You know, yin and yang, black and white, positive, negative, plus minus, you know, ones and zeros. That’s all the computers are, and the universe works that way. So in respect to luck, if you put the effort out, and you’re continually putting the effort out, things will fall into place, and that’s the universe balancing itself out. So I call it more karmic than luck. But yeah, we had, you know, for instance, there was a girl that we’d been shipping to in England called Trudie for five or six seasons. Every year she called us up in November, December, wanting 20, 30 pairs to be shipped to her friends in London. Pain in the butt, really, but we always did it. And after the fifth year, I got a call from Trudie, and she goes, oh my God, Brian, I’ve just been to a conference. It’s changed my world, and I want you to get the most perfect pair of size whatever, you know, tall sand, and send them to this address. And she said, you have a pencil? I went, yep. She goes, Oprah. Care of Oprah Winfrey. And Trudie was Trudie Styler, who was Sting’s wife, right? So those are things that you would say were lucky, but it really wasn’t. We put the effort into to make that happen. And, you know, there were other issues where we were trying to get PR in USA Today, and when I made the appointment with the girl, you know, I arrived five minutes early, and she came running out and goes, oh my God, Brian, I’m so sorry. I’ve only got five minutes. I’ll have to be on a conference call. And, you know, I had the perfect presentation ready, would have taken an hour. And so I just reached into my briefcase, I pulled out a folder that had all these old photos of all these people I just ripped out of magazines. And there was Tom Kenny and Neil Young and Sting and, you know, Heather Locklear and all these things. And one of them was Pamela Anderson in a swimsuit on the beach, and she just grabbed that. She goes, give me that. And she wrote down the photographer’s name and the tabloid newspaper it came from and said, sorry, I gotta go. You know, that was like four minutes, and I thought I totally blew it. In the airport next day in Chicago, on the way home to San Diego, I bought coffee and USA Today, and I stuck it open to the lifestyle section. And there’s this, like, front page, middle article on UGGs and the Pamela Anderson photo, and another page behind that. And by the time I got back home, I found out that the phones hadn’t stopped, from retailers all over the country calling up asking how they can stock the boots, and consumers wanting to know where to buy them, you know. So those two issues could have been luck, but you put the work in, you know, right? And one of my rules is, as long as you’re moving, as long as you’re taking steps, the universe will always try to work with you. That’s an ancient saying. It’s not mine. It’s been around thousands of years.

48:39 Jim Beach
Why in the world did you ever advertise on the Rush Limbaugh show?

48:45 Brian Smith
Well, I did not want to personally, but I had a couple of partners, and they brought the money in, and they were rabid Rush Limbaugh fans. And they just wanted to be part of his show, because that was in the heyday of the Clinton era, where Limbaugh was at his peak. And, you know, I knew he would sell product for us, but I didn’t think he’d be good for the brand that I was trying to create, which was casual comfort. He was more, such a certain guy, and not a great casual image. But the bottom line is, the day he opened up and he’s, hey folks, we have a new sponsor tomorrow, the phones shut down immediately because all the stock brokers in the country were calling us, asking where they could buy stock in our company, and all of our retailers couldn’t get through to replace their orders or reorder. So it was a bit of a nightmare. So all we did was swap our regular customers for Rush Limbaugh customers, you know. But, and you want to know something, many of the stores that we sold to were stoked because they were Rush Limbaugh fans as well. So it didn’t really take us backwards, but it just didn’t do much to build the brand.

50:10 Jim Beach
We only have a couple of minutes left. Brian, what inspires and motivates you today?

50:17 Brian Smith
I’m out talking a lot and speaking from the stage, you know, universities and small business groups. And I love it, and I like to get the theme across to every entrepreneur, which is part of my book, is the core of my book, that is, you can’t give birth to adults. Every business starts with someone conceiving the idea, and then the first action is the birth. In my case, I sent that 500 bucks to Australia and bought six pairs of boots for samples. That was the birth of UGG in America. And then it just lies there, and there’s no amount of feeding it, or figuring it, or playing with this infant. It cannot get up and go to college. It has to be an infant. And that’s the three years I went through where I was $30,000, $30,000, $30,000, you know. But eventually it’ll start toddling, and that’s when customers are interested. And then it goes on through to the youth, which is a great period. And ultimately it’s a teenage phase, where any good business is going to hit a teenage phase, which is really dangerous, because it wants to be everywhere at once. But then ultimately the administrators come in and put all the controls in, and it becomes a mature company. So if I could get one message across to every entrepreneur, it would be that they will be in one of those stages. And if you’re in the infancy, hang in there. Just believe. If you’re in the toddling stage, go for it. If you’re in the youth, that’s the best part of your business. Try and stay there as long as possible, you know. But that’s the prime message of my book, and it’s got about 51 different business tips that I’ve come up with through the course of the UGG business. And it’s just a real, real good textbook for any entrepreneur. It’s partly what not to do, it’s partly what to do.

52:22 JIm Beach
How can we get a copy of the book and become part of your tribe, Brian? Great.

52:27 Brian Smith
Well, it’s on Amazon, called The Birth of a Brand, but you can also go through my website, which is briansmithspeaker.com. That’s briansmithspeaker.com. You can order the book there. And you can also sign up to download those 51 tips I mentioned. I started doing little two minute videos of them all. And so you can sign on to get the Friday’s Brian Boots on the Ground business tip, you know. And that’s pretty cool. And if you’re in the first few years of your business, this is such a great inspirational roadmap for any entrepreneur. So just The Birth of a Brand on Amazon.

53:16 Jim Beach
Fantastic! Brian Smith, the founder of UGG footwear. Thank you so much for being with us today. Great story, and we love your product at our house.

53:27 Brian Smith
Way to go, Jim. I love it. I love hearing that.

53:30 Jim Beach
Well, I think you should name part of your house after us for all of the financial support we’ve given your company. Thank you, sir. Let me go buy a pair of boots right now. We’re out of time for today, but back tomorrow. Be safe, take care, and go make a million dollars. Bye now.