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00:00This is my kitchen table and also my filing system over much of the past three decades. I've been an investor the highest quality of mankind. I've often thought as private equity. And then I started interviewing on my watch here interviews those I know how to do. I've learned in doing my interviews how leaders make it to the top. I asked him how much he wanted. He said to 250. I said fine I didn't negotiate with him. I did no due diligence. I have something I'd like to sell and how they stay there. You don't feel inadequate now because the only the second wealthiest man to rise out right. Over the past half century one of the most successful business leaders in United States has been Leonard LAUDER. He took a small family company started by his mother Estee LAUDER and built it into one of the largest beauty companies in the world. He's also become one of the greatest philanthropists United States devoting himself to the worlds of art and the worlds of Alzheimer's research and the worlds of cancer research. An incredible contributor in all of these areas. So at the beginning of this conversation I should point out to people that Leonard has recently written a book called The Company I Keep My Life in Beauty. It's an excellent book about his life in the world of beauty. So let's go back to the very beginning. You were born in New York City. Absolutely. 1933. Now your mother is Estee LAUDER. But that was not her name when she was born. Her first name was not FDA and her last name was not LAUDER. So how did that name come about. She was Josephine Esther LAUDER and her and her parents. Her mother was Hungarian. And they called her esteemed wife. And so she liked that SD better than Josephine. When you were growing up. Were you in a wealthy family at that time. We were very very very poor. Now remember this that this was the depression. My father had had a very successful business importing silk. Now silk didn't don't do it too well during the Depression. So he is his company had to close down. And my mother had always had ambitions to be an actress or to make people beautiful. And I never let friends who have been a high school classmate of hers. And he said she was always coming out of my girlfriends stare and making them look pretty. So that's what she loved doing that. And that became her education. Education. OK. Now when you're talking about your youth in New York City you do it in great detail in the book. How can somebody remember things that happened 80 years ago. How do you do that. David it's easier to remember 80 years ago than what I had for lunch today. I understand that phenomenon. OK. Your mother is interested in making people more beautiful but I guess everybody likes to make people more beautiful. So what is it that she did that actually got her started in the cosmetics world. Well she started to sell the products that her uncle had made. He was an institution. And then she decided she could do better. And she started making them in the kitchen. And I as a little kid sitting in my high chair would watch her make the creams on the kitchen stove. Then as time went on she would invite people to the house to do makeups. And I would come home for lunch every day. I would sit in the kitchen eating my lunch and she would be next door making soup making someone's face up. But she was a miracle worker. She had anyone who came in there would undoubtedly walk away looking fantastic. So when you're in high school you went to high school Bronx High School or Hang Seng School Science. Yeah. OK that's a pretty good high school. But did you have time to help your mother and father in the company at that time. I worked very often after school every day except when I wasn't. I was on the surfing team. So when I had soccer practice I wasn't there. But other than that I worked every afternoon. And did they pay you or they just said this is part of growing up. Well if 50 cents an hour's pay that's what I got. OK. So you then went to the University of Pennsylvania where you graduated third in your class. So what was it that you took out of the University of Pennsylvania that you were a good business person or you were a good scholar. What did you want to be when you graduated. I wanted to be a business man. I told my parents that's what I wanted to do. I wanted to be in the business. But my father wanted me to be a chemist. No thank you. I didn't want to be a chemist because I wanted to do marketing. OK so you graduate for University of Pennsylvania third in your class. You want to be in business. So in those days people would say well I guess I'll go to Harvard Business School. So you applied to Harvard Business School and did they accept you. I got turned down flat and which was which was a rather a shock for me. However I made lemonade out of lemons. I applied for the U.S. Navy officer candidate school. I was accepted there. And that was the beginning of my HD in leadership. And it's the best thing I ever did. Have you ever thought about how much more successful your life could have been. And you've gotten into Harvard Business School. I wish the people at Harvard would know. I would like to send them a thank you note for what they did to me. OK. So you go into the U.S. Navy where there are a lot of you know young Jewish boys from the university Pennsylvania in the Navy with you. When I went into the Navy my father said you know there are no Jews in the Navy. OK I know that too but that was. That was good. That was the wave. The United States was the Jews were in the minority. Everyone everyone was a minority then. But it was fascinating because I grew up in my view at the right time to grow up and learn. You don't grow up if you grew up in prosperity. You don't understand how to fight part. I had to fight hard. So one of your activities in the Navy is running the commissary on a boat. You're on a ship you're on. So how did you manage to make that a very profitable business. And did you realize you were a pretty good business person as a result of making the commissary so profitable. Well I became the ship's store officer aboard a an aircraft carrier. An aircraft carrier had we had three thousand men aboard the carrier. And so I had to get everything that they needed and then some. So I started by perfume that they could send out as gifts to the parents to their girlfriends etc.. I bought wristwatches toothpaste. Everything you wanted I had. And I made it a point to have that so successful that that supported the entire ship's entertainment policy. After you leave the Navy you presumably could go do many things. You could get a lot of business opportunities. Why did you join your parents company. Because I knew I could make it better. I had a vision of what the company could be and would be. And I didn't have to sell it to them because they I don't think they could see the same thing that I saw. So you joined the company. Was it 1958 when you joined right. Fifty eight. The company has under a million dollars in revenue more or less. Right. Eight hundred thousand dollars. Right. What was your job. Did you say to your mother and father guess what. I'd like to be the CEO. I'd like to be the CFO. What was the job you actually had. My job description was son. So I've always saw wondered why when you're in business with your parents do you do you call your your boss mom or do you call her every day. I would call her mom. However I would always address her in front of other people as Mrs. LAUDER added respect. And it worked. It worked well. They had trust in me from way back. They said oh everything that it wants to do he can do. So your job was basically everything that your mother and father didn't want to do. And your mother was the became the symbol of a company really missed the face of the company. Is that right. Yes. She did everything. My father did everything. But I was the one who sort of brought it together. And my my vision was make her famous. Everything that I could do to make her famous was a step in the right direction. As she became world famous because of that. How do you keep mentally sharp. What's the key. The brain is a muscle and if you don't use it you lose it. What did you do to convince people that your mother's products or your company's products were better than the competitors. But two things. First thing she created the idea of giving gifts away at the beginning. She would give a send out a card a postcard say greeting this card into the such and such a store and we'll give you the free lipstick or we have you free this or free that. Then she puts it up later on to say we'd give you if you buy something we'll give you a gift. That that that was magic. In those days it was really magic. Now when I tried it when I became I took over the sales area. In fact since I took over everything I remember visiting the buyer of a major department store. He wouldn't look at me. He kept his back to me cleaning his nails. And finally I said in I think. I can do great things for you. I can. I can make you a lot of money. And he turned around and said how can you do that. And then we were off and running from there. So I was able to think of the ideas necessary to make a hit and make a big splash no matter where we were. So at what point did you realize the company was actually going to be successful in the sense that it was going to survive. Did you always think that was going to become a giant gigantic global company or did you have offers to sell the company at some point when a small. And you thought about doing that. Well my mother came home one day when I was in high school. St. Charles reception offered me a million dollars but I turned it down because I wanted to have the business feel so very grateful for that. I knew that we were en route and we were out of the woods at the beginning of nineteen seventy. And by that time the company was in demand and I was then able to turn around and focus on what we could do in the future. Was there something about the products that were better than the others. Did you try to make your is a higher level higher cost kind of products. So that gives it more prestige. They were much better products. They're expensive and very very very good for the customers. Look at the beginning. We never advertise. What did we do. We gave out samples and gave us samples that were large enough. If you give a customer a sample of a product and they like it and they come back and buy it again and again again that's what feels suspicious. So it was years before I even started to advertise. Now the brand that you had was called Estee LAUDER. At some point you or somebody I think it was you came up with the idea of having a sort of competing brand called Clinique. Right. So what was the idea of building a product with a different brand name that was competing with in effect your other brand. By the time I started to work on an equity which is in the late 60s Estee LAUDER was very successful. The time and our customers were saying look you've only grown 15 percent this year. We need more. We need more. I didn't want to push Estee LAUDER into a wave of over promoting the brand. Because I knew what I wanted to do. So yes I said if I wanted to compete with Estee LAUDER what would I do. And that became the. You know it takes a thief to catch a thief. Remember the movie with Kari Grant. It takes three takes the theme to catch a thief. Now when I go into a department store and I can't say I'm the biggest shopper in department stores in the Western world but when I do go in. Usually on the first floor right to your right. You smell some nice fragrances and perfumes and so forth. And I always said to myself is that because these products are are kind of leaking out of the bottle or something like that. I mean. I mean I thought they were airtight packaging. But now in your book you kind of say well you spray it around a little bit to attract people is that right. That's right. Around spraying spray. So it's very important as you point out in your book to be at the right location and you and your competitors according your book what kind of spar over who is going to be in the right location in a department store. Is that right. That's right. That's why I said to you that the main thing we were watching for and doing was gross because every department store in the nation was built not just on the profits that they made but on their growth percentage. And I made it a point that we would drive the business our business faster than any other store and any other brand any time in the store. So if the store had say a 10 percent increase I want you to have a 15 percent increase. If they had 20 I wanted to have 30 and I always wanted to have a bigger increase than the whole store would have. When that happened I would have get over support in the world. Now if I would go into a drugstore and say I want to buy an estate lawyer product I wouldn't be horrified if you tried very hard to not go into drugstores compete with people at a lower price range is that right. That's correct. And the reason why is it makes people think and I guess it works that your product is a more upscale prestigious product. Well it's more than that though. Remember I just mentioned growth. If you have one department store and up and down the main street there are two or three or four drug stores there. If you divide the business between the two between everyone you will not have the growth in that one store. By giving the department store the growth at the beginning they were they were so happy with what we were doing. They gave us the space and location in the store so they could do more. And so the result is we basically helped the department stores grow in that era. If it wasn't for us they would have had the same growth. So I'm one point Don your company is doing so well that investment bankers who are not shy come to you and say why don't you take it public. It was a family owned company. Did you want to take the company public. We weren't ready yet. We really weren't. Because when you are the property of the company you can invest a lot of money and do what you think is right for the long term and not have to worry about it. So a few moments ago we talked about the launch of Boutique. The clinic cost us millions and millions of dollars of losses to get the brand started but we weren't public and therefore we could simply launch it and get it started. And and it happened well now. But today it's harder to launch a brand. And since we are public we not have to buy brands rather than launching a brand than pretty them ourselves. Are you part one or two extremely successful brands. You might mentioned one or two of your most famous brands you bought. Well they weren't so famous. Really want them. But we. We bought a company called Mac that can be called Bobby Brown to be called Joe Malone Company called Creme de la Mer and and et cetera. So we would buy a company that had already started itself. We kept the entrepreneur working with us. And and then one hated the other. And sooner or later we had a whole portfolio of brands that competed with each other as well as competing with in the marketplace. When the company did ultimately go public at the end of the last century I guess it was then it's very public what your company's worth and what your own net worth is. And was that something you kind of didn't really want to have. People know how quite how successful the company was and people now realize how wealthy you are. Did it change your life in any way. It never changed my life but I'd rather have no one know if I have any money. I collect art and give it away. I don't need to show my wealth. I let it spread what I'm doing to make other people better off. Well let's talk about some of those things you've done. For example as a young boy you got interested in postcards right. And then you later built one of the biggest postcard collections in Against the world. What was the fascination with postcards postcards in those days with the snap chat of today. I have postcards that say see you at lunch today. Mail it before 10 o'clock in the morning and it would arrive in time for lunch as weather would go. So we don't realize that this. This was before the phone was used all the time to swim before e-mail for everything. And so that I love the idea of postcards because I liked the idea of instant communications. And so what did you do with your postcard collection. You still have it or give you put it in a museum somewhere. Well I've given 80 or 90 percent of it to the Museum of Fine Arts in Boston and a good portion of it to the Library Gallery in New York City which was started by my brother. I don't buy things to possess them. I buy things to give them away. Only things that doesn't mean anything to me. So one of the things you've given away is your cubist art collection which I'm told is one of the finest if not defined it's in the world. What is it a back cubist start that made you want to collect it. And why did you alter me decide to give this million dollar plus collection to the Metropolitan Museum of Art in New York. Well first it's a British sketch which means it goes to them on my desk. I've already given them almost never right. I love the idea of creating things. Now if I if I buy a postcard it could cost me anywhere anywhere between five cents in the dollar or five or ten. Maybe if I buy a Picasso painting I could pay fifty thousand one hundred thousand dollars for it. So to me I love the hunt and the search and then I love at the same time. The act of putting it together for a museum and giving it away so that every time I give something away I give them money to display it and do exhibitions. So you're now one of the wealthiest people in the United States but when you're building your art collection you weren't quite as wealthy. So did you have to worry about getting coming up the money to buy these Picasso's. Absolutely. I was adept at up to my ears. You've also been involved with the Whitney and where the chair of the Whitney Museum of Art in New York for longtime and bigger their biggest donor. What was it about the Whitney that made you so attracted to it. I helped that brought thousands of works of art for them. And I like making museums successful because when I was a kid. Three afternoons at a five after school. If I wasn't doing something else I was in a museum looking at things and I love museums and I wanted to make that grade with greater and greater. Let's talk for a moment about another thing you've mentioned. Your first wife was very involved with breast cancer. She had had breast cancer. And you and she put together a foundation to work on breast cancer. You're still involved with that is that right. Absolutely. Yeah. And your mother as you point out in the book on the latter year suffered from some Alzheimer's. And you've also been involved with Alzheimer's research. Is that an important cause for you as well. Very important. We my brother and I both created the Alzheimer's Drug Discovery Foundation. We're a pure play. We just do drug discovery for prevention and cure. We don't do care. We don't do anything else. But the research that we're doing is amazing. And in my lifetime we're going to have a prevention and a cure for Alzheimer's and related diseases. So what do you attribute your obviously sharp mind at your age and a good physique at your age. What did you do. You exercise a lot. How do you keep mentally sharp. What's the key. I exercise a lot. Number. And don't forget this that everyone should know this. The brain is a muscle. And if you don't use it you lose it so that each day I'm doing something not doing it. Of course it puzzles to activate my my interest. We will read the newspaper the mine and we'll discuss the matters and which is leading to. And I'll make predictions by the way I'm very good about to see in the future. So I don't have my crystal ball with me. But I can lend it to you from time to time and I can see the future. And I and I work with that with that knowledge to help in all the things that I'm doing. Right. Any regrets in this sad life story you've put together anything you wish you had done differently. None whatsoever. I really I loved every step along the way. I've never regretted anything. Look if you can't build your life based on what you look it back to what you can only be the right one. Looking forward to it to everything.

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The David Rubenstein Show: Leonard Lauder

Leonard Lauder, Estée Lauder chairman emeritus and former CEO, talks about how the business started, the art of spraying perfume on customers, and why he's glad he didn't get into the Harvard Business School. He appears on the latest episode of "The David Rubenstein Show: Peer-to-Peer Conversations." The interview was recorded Jan. 15, 2021. (Source: Bloomberg)

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