459 Dolly Parton Told Elvis No. It Was Worth $10 Million. | The Pirate Street Journal

0:00Thanks for pressing play and welcome to this very special episode of the Pirate Street Journal. My name is Christopher Lochhead and yes, I am also the host of Follow Your Different. And what you're about to hear is something that I've been dreaming of for quite some time and we got a lot of feedback that people wanted us to do it, so we're doing it. And so what the it is, is a regular look at kind of relevant business news through the category design lens. it's predicated on the crazy idea that the Wall Street Journal doesn't know how business works. And as outrageous as that sounds, it's true in the context of most business press is focused on companies, maybe products and technologies, but almost never market categories.

0:49And so what the Pirate Street Journal is, is we take three important business topics of the day. And Eddie, Bree, and I look at those topics through the category design lens and share them with you and in and out in 30 minutes. It's the Pirate Street Journal. It's a very different look at business, and I sure hope you enjoy it. And we're going to be releasing PSJs on a regular basis for the foreseeable future and drop our regular follow your difference that are either one-on-one with me or a conversation with a legendary guest. So without any further ado, this is the Pirate Street Journal on Folly or Different.

1:25Hey-ho, let's go.

1:44Christopher Lochhead: topic one we are mourning the loss of dolly parton last week the tributes have all been about her voice as they should be but we want to make a tribute to the year she inspired us all by telling Elvis Presley know. Topic two, a$399 robot duck did$4 million in its first week. Days later, NVIDIA bought the company that built it for$13 billion. And topic three,$100 billion in tariff refunds is landing on corporate balance sheets right now. Some of it is showing up at the register and one company found out something uncomfortable about its own prices. We are recording on Friday, September 4th. Hey ho, let's go.

2:23Christopher Lochhead: Topic one, Elvis Presley wanted to cut I Will Always Love You. Dolly Parton was thrilled until she heard the condition. He wanted half the songwriting profits on a song he had nothing to do with writing. She said no. In her words, everybody said, you've got to be out of your damn mind. Rewind seven years, and 1967, before she had a single top 10 hit as a recording artist, Parton started her own publishing company with her uncle Bill Owens. She owned the copyright on everything she wrote from that year on. In that same era, Paul McCartney signed a deal he regretted for decades. His line about it, John and I didn't know you could own songs.

3:02Christopher Lochhead: Jagger and Richards lost their early catalog too. Then in 1992, Whitney Houston covers the song Elvis wanted. 11 million copies in the United States. The Bodyguard soundtrack passed 19 million. Parton is the sole writer. That one cover paid her roughly $10 million in the 90s alone. And then it compounded. Dollywood, 23 ,000 jobs,$1.8 billion in annual economic impact, the Imagination Library, 330 million books. Forbes valued the catalog at$120 million, her total worth at$450 million. The tributes have been about her voice, as they should be, but the decision that built everything else happened in 1967 before most of the world had heard her sing.

3:45Christopher Lochhead: So Christopher, the entire creator economy tells people to build the audience first and figure out the money later. Dolly did it in reverse. She owned the asset in 1967 when she had no audience, no hits, and no leverage. So is the modern creator playbook backwards or was her move only available because Nashville already paid songwriters in a way no other genre did? Dolly is a legend and we love Dolly and miss her. I've been quoting Dolly on my podcasts for years. I've been a fan since I was a little boy hearing her music. My wife, Carrie, and I just recently rewatched nine to five and we're going through all her old movies.

4:24My favorite Dolly quote is find out who you are and do it on purpose. So now let's go to the topic at Hanbury. I think it's an awesome one. When Dolly Parton refused to let Elvis record, I will always love you. It was because Dolly knew the value of her value. She knew that she had written a legendary song and she knew that regardless of the fact that Elvis at the time was arguably the most popular star in the English language world, if not the world, she was unwilling to give up her creation to give him half of it sadly Eddie and I made the mistake of selling our first books to publishers and we learned this hard lesson and Dolly is teaching every creator something about the future of business the biggest change happening right now in business people are confused.

5:31They think it's AI. It's not. AI is driving the change. And the change goes like this, from being paid for your time as a proxy for value to being paid for the actual value you create. And so when you write a song and you own the songwriting credit, the publishing, you get paid every time that song gets played and or recorded. And so when she said no to Elvis, she retained the rights. And so a little more than a decade later, when Whitney wanted to record, I will always love you for bodyguard. Guess who owned a hundred percent of her song? Dolly Parton. And so this is a missionary. This is somebody who understands I create radically valuable, highly differentiated intellectual capital.

6:27And I don't get paid for my time to create that IC. I get paid for the value of the IC. Dolly Parton understood this in the 1970s. and we should all pay heed to this lesson amongst many others. But this one in particular for creator capitalists, this one in particular for people who are making the transition to how do I create value in a post-AI world? It's by owning the value that you create and being paid for that value on an ongoing basis, not just for your time. God bless Dolly Parton. Well, you know, all of this stuff, I didn't know about Dolly, like the business side of her. I was shocked to learn it.

7:10And kudos, we've made fun of the journal from time to time of having bad stuff. This was an excellent article that they put out. So nice job to the Wall Street Journal on this. And, you know, I feel stupid, not only compared to Dolly, like she's just a much better creator capitalist than I've ever been, but also that we didn't open the book creator capitalist with Dolly. We wrote about Dr. Dre being a B2B2C hip hop artist and the mogul within hip hop. Not, you know, Snoop is a performer. Dr. Dre is a performer and an entrepreneur. And, you know, who knew that Dolly is the Dr. Dre of country music?

7:43And that, and it's not even within country music. It, when we look up, you know, the Forbes estimates of, you know, net worth, you know, they're always kind of like, you know, thumb in the air. But she's number 13 on the list of all musicians out there, which is remarkable for a woman who has not had a mainstream hit, who's not been performing in the last recent time. And when we talk about intellectual capital, helping you make money while you sleep, can you imagine just the cojones to walk away from Elvis but also the humility to say yes to Whitney because here's my personal preference I think Whitney is the goat like I think her voice is you know there's a lot of great singers out there I just think she's the pinnacle and it's not just her songs I always remember when she sang the national anthem at the Super Bowl like tears to my eyes chills her acapella like I would listen to that all day long And so for Dolly to have the knowledge of her value to say no to Elvis and the humility to say yes to Whitney, I just think it's a rare combination.

8:44And so it's just one of those things where I have such respect for her. You know, Taylor Swift doesn't exist without Dolly standing and paving the way. Taylor stands on Dolly's shoulders, and Taylor's done an amazing job as a creator capital. So re-recording her songs, making all that money to live performances, paying all those huge bonuses to her team and whatnot. All that's Dolly stuff. All of it. All that is based on Dolly. Dolly has health care for her employees. She pays way above market in Dollywood, et cetera, et cetera. Most people forget her philanthropy is so successful, so heart-centered around the things that matter, whether it's getting books to children, things that are non-controversial that we can all agree are great things.

9:27Jeff Bezos gave her, and maybe Brie, check it for me, but I believe he donated, I think it was$100 million to her foundation for her to do whatever she wanted with. I think that's the number, but if it's not that number, it's something like that. And her business acumen must be underscored. It's extraordinary. And her humor, of course, is like nobody else's. if you go out on the internet you can find it um people asking her how she felt about Whitney's version of her song because of course Whitney is everything you just said she is and did Dolly feel bad or weird or whatever that Whitney had created this incredible version of her song and Dolly's answer was something to the effect of well however I felt is how I felt when I heard the song but you know what I felt pretty good when that first check showed up you know dolly as a songwriter i should not be surprised that she is an amazing languager and is it not just some of the quips like some of the quotes that the journal mentioned i i just can't get over she says why would i work for hundreds and thousands when i can work for hundreds of thousands an amazing turn of language you know we bow down to dolly she says And also, every day I count my blessings, then I count my money.

10:44I mean, just, you know, I think we were robbed of her as a writer. Like she would have been an amazing, you know, Berkshire Hathaway, you know, pilgrimage, Annie Report, like in the same way Warren Buffett, you know, people read his letters all the time. I wished for a Dolly State of the Union on music and what it means to be a creator and all that. So, you know, all the kudos to her on that front. And there's so much that I feel like we can yet still learn from her because there's a lot of nitty gritty about what's going on. And partly, I remember one of the lines that stood out to me was she didn't have to work early on because she had royalties from her songwriting, that she started out as a songwriter.

11:23And when I think about creator capitalists, she is the epitome of what that dream meant, not just late in her career, not just at the peak of her career, but the ability to say, I have the equivalent of F you money early in her career because she invested in her intellectual capital so that she could be choosy to say no to Elvis. Like Elvis, you know, that's not just in spur of the moment, emotional decision. She had the financial runway to do that because she built it for herself on her own intellectual capital. And as a result, she knew the value of her value. She knew what that song was worth.

11:59And she said, I wrote this song. There's another thing I found out that I didn't know. there's a video and you'll excuse me for forget for forgetting what um the award she was getting but there's a video out there you can find where pink is introducing uh dolly uh and sort of setting her up for some award that she's winning and it's a long powerful introduction of her achievements and she says something i did not know which is dolly parton wrote jolene and i will always love you in the same evening at the same setting. And so it sort of struck me, Eddie, like the next time I'm sitting there working on one of our mini book newsletters and I feel like, okay, I've hit my creative wall for the day.

12:45I can't keep looking at this damn document. Now I go, Hey, lazy bastard, Dolly Parton wrote Jolene and I will always love you at the same time. You know, next time I'm, I asked you for something and I'm waiting for it. I'm going to text you that exactly. Text you the song of Joey. I will always love you, donkey. That's a great line. I will definitely use that. Now, the last thing I'll say is, you know, there's some whatever about this, right? But I didn't know that she helped fund the COVID vaccine with Moderna. That was really, really interesting to me. And so, you know, regardless of what people's feelings about the vaccine, I just thought it was telling that the Moderna CEO said he praised Dolly's generosity optimism and belief in science and it said he says which made a difference at a moment when the world needed it most and so I just think it's such a you know odd combination of you don't hear a lot of entertainers that are belief and interested in science and even rare regardless of your field in your profession very very few people step up when it matters the most and when everybody is scared that the world is ending she stepped up in a huge way There's one other thing.

14:00I'm just checking now because there's another thing about her that's incredible. Let me get this here. So she denied the Presidential Medal of Freedom. She was given it more than once by more than one president. Let me just see here. And the reason she denied it, she didn't want to accept it. Yeah. OK, so here it is. Dolly Parton turned down the Presidential Medal of Freedom at least twice and effectively three times. First, Trump administration. She declined because her husband was seriously ill at the time. Second, Trump administration. She was asked again later, but she declined because of the travel restrictions and COVID was going on at the time.

14:45And then Biden tried to give it to her as well. and she decided not to take it because she didn't want to make what she thought people might interpret as a political statement. So what do we have here? We have a woman who was given the Presidential Medal of Freedom, which if I'm not mistaken is the highest civilian acknowledgement that can be given in the United States. And she turned it down three times. And the reason she turned it down was because she was concerned that if she accepted it, but come with a political wrapping that she didn't want. She purposely wanted to befriend people of both sides.

15:24As Michael Jordan famously said, when he was tried to be jammed into a political corner, he said, hey, listen, Republicans and Democrats buy Nikes. Right. And she didn't want to be that person. She wanted to be the opposite of that person. She wanted to be for everybody, not on a side, so to speak. And we live in a time and in a world where, you know, a personal branding was like, hey, man, look at me. I'm eating a burrito. Aren't I great? Let me take more selfies of myself and tell you more about my journey and all this horrible bullshit, self-centered crap. Dolly's mission of wanting to make a difference for people and in her mind being apolitical in order to be as broad-based as possible.

16:12She gave up the most laudatory achievement award an American can give three times because her mission of being available and making a difference, entertaining and contributing to people of all political stripes was more important to her than her own self-aggrandizing. That's legendary.

16:34Christopher Lochhead: Two quick follow-up items. Jeff Bezos did donate exactly$100 million to Dolly, and Pink introduced her to the Rock and Roll Hall of Fame in the video. Moving on to topic two, the micro duck, Hugging Face, and Pollen Robotics just shipped a robot duck. $399, 25 centimeters tall, 15 accuators, a camera, LIDAR, out of the box, it walks, roller skates, picks things up with its beak, and gets back on its feet when it falls over. 10 ,000 units in the first week,$4 million new orders are already pushed past Christmas. What's interesting about this duck is that the software is completely open. The simulator, the full reinforcement learning training stack, the entire control stack, all of it is on GitHub.

17:22Christopher Lochhead: A vibe coder can teach it new tricks over a weekend. The design files for the body are the only part still locked up. And yesterday, September 3rd, the Wall Street Journal covered NVIDIA agreeing to buy Hugging Face for$13 billion. 18 million developers on that platform, 3 million models, half a million data sets. The brain inside that duck is a Rockchip RK3566. Rockchip is Shanghai-listed and just posted$428 million in first-half revenue, up 40%. The cheapest on-ramp to physical AI in the world is open source software running on a Chinese chip, wrapped in something that looks like a bath toy.

18:02Christopher Lochhead: So, Eddie, for$400, anyone who can VibeCode can now program a real robot. So, what does open source do to the physical world that it already did to software? Well, in some respects, it changes everything and keeps things the same, but in a more compressed time frame. Let me explain the latter first, is that when it comes to robots in particular, but it did all new categories, they go through three phases. Novelty, niche, and then necessity if they get lucky and they actually get to the scale. And so you think about my old buddies at iRobot and the Roomba started out as a novelty, was first sold at the Sharper Image, a place known for novelty things that you buy and you play with once and you never use again, right?

18:47And then it found its niche as a military use case for bomb removal and bomb search. And then as a result of some of the work that Colin Engel, Dwight Brown, and Christian Sertor had done, they realized that, you know what, the B2B side was not the upside. It was the B2C side on the vacuuming. And the vacuuming was the niche use case that became a necessity because it turns out vacuuming is like brushing your teeth. Everybody says they do it. Very few people do it on the regular, right? And that actually, when you dig into why, it's not a surprise. Vacuuming takes some effort. It's a little bit out of sight, out of mind.

19:24And the real kind of secret to Roomba being able to sell their military part and the commercial part of the business, take the remaining consumer business and triple it to quadruple it to over a billion dollars of revenue at the time, was the idea of daily cleaning. And so how do you go from novelty to niche to necessity? You find the super consumer, obviously. But here's a problem. The super consumer of a novelty is not the same as a super consumer of a niche. This is a really, really important distinction. The people who go to Sharper Image and Hamrick or Schlemmer, I don't know if the stores actually are still in business or not, they like to buy toys and they never use it again, right?

19:59The super consumers of a niche are very, very different. These are the people who have decided that the niche behavior is a necessity and they turn out to be on the vanguard and the forefront to say, you know what, this is actually something that everybody should be doing. And so vacuuming is a great example where, again, not everybody vacuums as much as they should, but a super consumer like my wife will own eight vacuums. You know, you have a cleaning service and the belief system is they're not dirty and clean. Everything is various stages of dirty and that the hard work that you put into cleaning is just immediately disrupted by pets and children and the annoying husband who's, you know, just tramples all over the clean that's been done.

20:38And that the use case became for iRobot around daily cleaning. which is like living at a hotel. When you are at a hotel, a maid service comes in and the next day is just like it was before. And that use case is not practical. Most people aren't going to live at a hotel full time. However, if you could have the cleaning service of a hotel, people would really like that. And it became very, very simple from a frame name and claim is like, you know, hey, do you brush your teeth every day? Do you take a shower every day? Unless you're a celebrity, apparently. Then it's kind of disgusting if you don't.

21:12isn't it just as gross if you don't vacuum your home every day? And that's how it got to necessity. Now, what the micro duck, I've been kind of trying to figure out what exactly it means. You know, it could be just a novelty thing, you know, chasing Christopher's chickens around or being around or our cats or whatever. But you go from that to like, hey, you know what? We have two cats and routinely we find cat barf. And I would like not to find it by stepping in it and the micro duck could find it and identify it and maybe pick it up and throw it out. That would be amazing. Oh, and by the way, this would be interesting for me.

21:44I've been thinking about buying one of these things. So as you mentioned, we have hens and we currently have, I think we have nine right now. And because they're pets, they come in the house. Okay. So they live in the garden. And if the right doors are open, they could just walk right into the house. And by the way, if the right doors aren't open, they come to the door and sit there and bark until they can come in the house. and they come in the house for two reasons. One, they're flock animals. So we're part of the flock and they, safety in numbers. They want to be with mom and dad. And more importantly, they know there's a giant silver box in the kitchen that has dinosaur treats in it.

22:27And so they come, we'll have friends over and they'll come right through the bedroom into the kitchen barking for snacks. And people are amazed, right? And then there'll be a cat right next to them And, you know, I've had friends say, hey, does the cat know the chickens or birds? Like, how's this working out here? And then, of course, it all works out. But the point being, right, we have these critters in the house. And now I want to see what happens when you put the robot duck next to real live analog IRL chickens. We're going to find out. Wait, this is the same path. We'll probably write about this at some point, this kind of novelty to niche to necessity, is that, you know, when you have kind of the novelty of a, you know, a robot chicken duck bird playing with a real chicken, right?

23:17And then you have it do a niche use case, like pick up the cat barf or whatever else it is to a necessity of analyze the cat barf and tell me in advance if something is wrong, you know, and anticipate issues that are there, that that's how you get to, again, using the super consumer. and the part that people miss, the novelty super consumer, not the same as the niche super consumer. And so like all of that, I think is absolutely on the table. Now, the next thing that I'll say about this that's kind of interesting is that Breedis gets to the hugging face point. The fact that the software is open source is a huge deal.

23:50Christopher Lochhead: The executives at iRobot, the thing that they would complain the most about was it was so hard to hire software engineers. They could do the hardware, but getting the right software people was a real difficulty and a pain point for them. And it showed the app is not as good as it should be, you know, and the whole user experience is the problem, which is now ultimately in an open source environment going to be that much better because everyone's going to be working on it at the same time. And so this gets to a couple of issues. One is that I think the limiting factor for why iRobot, you know, take the FTC and LenaCon out of it, take the fact that the Amazon deal didn't work out and take the fact that, you know, the Chinese competitors really took over.

24:27Had they gotten the software right, I believe that they would be a much bigger, stronger company, you know, they'd be a going concern. now. And they weren't going to get there because of the scarcity of software developers. And open source plus AI is solving for that in a way that's really meaningful. So two things will happen. I think that, A, the microDuck use case and the UX combined with open source will make that problem that iRobot face a non-issue for them. And the second thing is that the broad theme of the profit pool forever had been in software. And the profit pool, if it disappears in software, it's going to hardware.

25:04And so what I see in this is that there is some percentage of the bill of materials, Christopher, that is going to memory in the microduck. And the more you use the microduck, that means that there's going to be more inference and training somewhere in the cloud about how to use this in the microduck. And so when I see this, I actually see channel expansion for the whole memory TAM and that, you know, SK Hynix, Samsung, and Micron, they're all going to go through the roof because this wasn't something that they had in their tan, like, oh, you know, we're going to sell memory to NVIDIA and everybody else.

25:36But imagine a world where you have, you know, hundreds of millions of microducts, you know, basically R2-D2s, right, is the kind of use case and imagination that you should have versus Optimus, you know, is coming, you know, and you have a billion Optimus robots, which is what Elon is, you know, predicting is the low end of the thing at call it a$30 ,000 price per unit and say, let's say that the memory cost of goods is 3%, we're talking a trillion dollars of memory revenue that no one's ever accounted for, right? And this is not a hard thing to imagine that we are early, early in the inference build-out and the training build-out and the AI build-out in a way that I think every size of prize estimate is just low because guess what people want?

26:19They want an R2-D2 and they want a 3-CPO. some of us want that shit really bad and some of us have wanted that shit since i believe uh brie check me i think the original star wars came out in 1977 and some of us were young enough to have seen it in the theater not i or old enough i guess is what i should say we were young enough

26:42Christopher Lochhead: at the time and we're old enough now you're right 1977 boom shaka laka laka and i think the star Star Wars Sheets came out in 1978 or nine, because I had those two. And we all had the poster, the Luke poster with the, yes, legendary. Actually, we need to get that poster. We should. I need one for the studio. I will say that the two lanes for AI that are germane to using the Star Wars analogy and beating it to death is that 3CPO is very different than R2-D2. 3CPO, broadly useful because it can speak the language. but annoying and frustrating and not particularly useful, kind of like some of the LLMs when they lecture you about what you can and can't do.

27:28R2-D2, hard to communicate with, you know, the beeps and this and that, but immensely more useful and valuable because it actually fixes stuff, gets you out of trap, you know, compressed garbage things and whatever else it is. And so I actually think the use case of a robot and micro-educt that doesn't have necessarily the natural language ability, but will find a niche use case that practical and tactical could actually have a lot more value and affection than a 3-CPO-LLM.

27:58Christopher Lochhead: Two for two on exact endings with the bell. Topic three, how the tariff refunds impact consumers. In February, the Supreme Court ruled 6-3 that the reciprocal tariffs exceeded the administration's authority, which means the money goes back. $128.7 billion earmarked for refunds, and about$100 billion of it already out the door by early August. And some of it is reaching consumers. Walmart got$2.9 billion back and cut prices on 11 ,000 items, including ground beef. Shark Ninja is getting $247 million and using it to hold prices instead of raising them. Tractor Supply won't say its number and it is spending it on pine shavings and pet food.

28:42Christopher Lochhead: Then there's Elf Beauty. They got about 50 million back and in May they ran a test. They dropped one product, the Halo Glow Skin Tent, by$4. Unit sales jumped almost 40 % so they ran it across nearly the whole portfolio a dollar at a time and made the cuts permanent on 10 % of the lineup. Net sales that quarter up 36%. A$4 cut moved 40 % more units. That is a company discovering what its price should have been all along funded entirely by an accident of policy. And Tractor Supply is already warning investors that the refund cushion runs out in the back half of the year. So Eddie, every company that ran the Elf experiment just learned something permanent about its own pricing power.

29:25Christopher Lochhead: So when the refund money is gone in December, do those prices quietly go back up or did the American consumer just reset what this stuff is worth? So I think we're going to see the greatest multiplayer game theory on pricing that we've ever seen. Because this tariff policy, man, it's a whipsaw. It's a roller coaster. We hope that there's some stability and certainty and some logic that goes into it if it goes forward with it. But in general, what you're going to see is one of a couple of scenarios. Number one, all these companies are getting their money back. And so you could see likely, I would put my money on the most likely scenario is a monkey do monkey see scenario.

30:06Because pricing is a follow the leader, even if you follow the lemmings off the cliff, right? And so Mandy Fields is the CFO of Elf, was someone I met at Safeway when she was there running consumer brands as a CFO. You know, she's selectively taking stuff down and she can see the price sensitivity. As you mentioned, Bree, like, you know, a$4 drop on one of their beauty products drove a 40 % increase in unit volume. I'm not surprised by that, right? And that's the right strategy is a selective one. So scenario one, monkey see, monkey do. Everybody kind of does the same thing. If one domino falls, everybody follows suit.

30:39And the CFO of Walmart said that he rolled back prices on 11 ,000 items. We're using price discounts of 2 billion. So if one person does it, everybody will follow. That's probably the most likely scenario. The selective discounts is actually what is really smart. Because what you actually want to do Now, the CFO Walmart mentioned in the article 11 ,000 items including ground beef. Why is ground beef important? There's a lot of meat that consumers buy, and especially in America. But having done the work for cargo, I actually know this in a little bit too much useless information about this, right?

31:16No matter how much pork and how much chicken and no matter how much fish or huge cuts of steak are sold, they cannot hold a candle to the volume of ground beef that is sold in America every day. Why is that the case? Is it because it's the most beloved form of protein? No, it is the most versatile and useful. You can make burgers out of it. You can have taco night out of it. You can have pasta night out of it. Hey, meatloaf is way underrated. A good meatloaf is unbelievably legendary. 100%. So it's one of the things that is just always on the shopping list and the menu because, guess what? Cooking is hard.

31:52I wrote an HBR article about cooking is going the way of sowing. and that made a lot of people who like to cook really mad, but that's true. We are less good at cooking than we were years ago, decades ago with it. So cooking is hard. Ground beef is a simple solution for that. Now, where are we going with this? If the CEOs and CFOs of these companies that are receiving the tariff refunds are smart and not just monkey see, monkey do, what they should do is selectively discount on certain trip drivers. Like, you know, and we learned this from the greatest of the greats, the Costco executives. right?

32:25What did the great CEO Jim Senegal say of Costco to the guy who replaced him as a successor? If you ever raise the price of a$1.50 hot dog, I will kill you. Figure out how to get it done, right? And that what he knows - Didn't he say I would come back from the dead and - From the dead. You can see his hand coming out of the grave and doing that, right? And it is one of these things where he knows intimately that the way that humans work is that they will go nuts about the idea of I cannot believe the deal that I am getting on this$1.50 hot dog that maybe should cost$3,$4. So they're saving two bucks on the hot dog, give or take, right?

33:07And in the same trip, drop$200 on something that they completely did not need. And that's what's called an impulse purchase, right? And so the smart retailers will take the tariff discounts and drop the price on the trip drivers. You would drop the price on the ground beef. You would drop the price on the thing that I go to the store regularly because it's just a necessity in my life. And hopefully you've designed the retail experience where you are looking around and you go here and there and you say, ooh, what is that? That's something I've never seen before. That is called the impulse in that you do not want to discount or lower prices on impulse because here's the magic thing about consumers, which the vast majority of executives do not get.

33:49consumers will tell you they always want the price to be lower they don't always mean it and sometimes they want the price of the impulse things to be just high enough so that you make them think twice about buying it because they know they want it and they know they shouldn't right and so this is the line right you have to figure out how do you get them in the store and then you can win them over with the impulse purchases you know there's a reason why the candy at checkout is a dollar or two dollars, even though you can get for a few more bucks, way more volume in the back of the store. You're tempting consumers, you're tempting shoppers to buy the thing that they want but shouldn't get.

34:26And a smart retailer knows how to navigate that line. And if you are smart and not stupid, you will selectively take the tariff refunds to actually reset pricing in a way that makes complete sense. Because the consumer wants the give and take. They want the give to get to be, I feel seen and valued for the thing that I have to buy. And so that I can take that saving and maybe maybe consider a thing that I shouldn't, but I really do want now. The only thing to add, I think from a company perspective is forget whether you politically agree with or disagree with the tariffs and all that stuff. Forget that for a second.

35:03In the scenario like this, where you get gifted something that you thought had been taken, regardless of what you think of how you got there, this is an indication of what happens in a capitalist system. right so when businesses get this advantage what can they do they can take it as 100 profit or they can use it as a catapult to lower prices increase distribution invest in new innovation etc and so in a capitalist situation like this where this is essentially a bit of a windfall that comes back to companies they don't just keep all the money what do they do they pass savings along to improve results for consumers, to increase their performance, to increase their market share, to improve their lifetime value, et cetera, et cetera, et cetera.

35:57And so in a world that is not provided with incentives to continuously innovate and deliver for others, you might see more companies keeping all of this money. But interestingly enough, in a capitalist world where the incentive is to continuously make a bigger and bigger difference, create more and more value, what are we seeing? Companies figuring out how to use this money to produce more value in one way or another for their customers. God bless capitalism. And this is an important point to underscore because it's not just capitalism. The great capitalists know that keeping the money will not get them credit because Wall Street will see that as a one-off item and they're going to back it out of earnings.

36:41And so you're not going to get credit with Wall Street that you kept the money. If you actually distributed the money back to investors as a dividend or a buyback, you get a little bit of credit, but not nearly as much as if you said, hey, I'm going to take this windfall and I'm going to plow it back into product innovation or business model innovation or category design in a way that actually makes the pie bigger in a meaningful way. And so this is the part that people don't understand is that capitalism, as Christopher said, it's not about the capture of money. It is about the flow of money.

37:14That's the important part. Capitalism rewards the smartest flow of money, and it's not to the wealthiest people. It's to the people who can take the money and deploy and invest the capital in a way that the pie gets incrementally and exponentially bigger. That's the part that gets missed is that Wall Street, for all of its foibles and issues and this and that, is actually quite rational and smart about rewarding the executives and CEOs who take the money and reinvest it versus sit on their money and do nothing with it, pocket the money as a one-off thing, or frankly just say, here investors, have it back because I have no clue what to do with it.

37:52Christopher Lochhead: We'll see you next week, Pirates.