WEBVTT - The Brink Without Borders 0:00:04.400 --> 0:00:06.360 Business of the Brink is a production of I Heart 0:00:06.440 --> 0:00:14.680 Radio and How Stuff Works. It's like something out of 0:00:14.720 --> 0:00:18.079 a book of fairy tales. What began as a used 0:00:18.120 --> 0:00:22.280 bookstore flourished into a nationwide chain of huge bookshops. They 0:00:22.280 --> 0:00:25.079 were places where you could grab a coffee and a 0:00:25.120 --> 0:00:28.360 good book at the same time. But when things went wrong, 0:00:28.600 --> 0:00:32.800 they went really wrong, and we became a nation without borders. 0:00:33.760 --> 0:00:38.560 The book start not you know, real borders. We still 0:00:38.600 --> 0:00:41.960 have those. Hi. I'm Jonathan Strickland and I'm Ariel Casting, 0:00:42.080 --> 0:00:52.960 and you're listening to Business on the Brain. Hey, Ariel, 0:00:53.280 --> 0:00:56.320 Hey Jonathan. So for once I wrote the intro we did. 0:00:56.560 --> 0:00:58.920 It was very funny. I didn't do as many puns. 0:00:58.960 --> 0:01:01.320 I just did a really dumb joke. I like it. 0:01:01.720 --> 0:01:04.400 I'm glad. I'm glad. So, yeah, we're gonna talk about borders. 0:01:04.400 --> 0:01:08.640 But there's a reason we're specifically talking about this topic 0:01:09.040 --> 0:01:13.000 because it was a request yes from Ashley. Hi, Ashley, 0:01:13.120 --> 0:01:16.440 thank you for listening. Yes, Ashley asks why did borders 0:01:16.480 --> 0:01:20.480 fail when Barnes and Noble did not? As an excellent question, 0:01:20.600 --> 0:01:24.560 it is, And well we'll summarize that at the end. 0:01:24.600 --> 0:01:27.360 We're gonna we're gonna talk about the journey Borders takes 0:01:27.840 --> 0:01:30.080 to get there, to get there, because it's I mean, 0:01:30.160 --> 0:01:35.520 Borders was, it was a company that defined the modern 0:01:35.560 --> 0:01:38.520 bookstore in many ways. They were the trend setter. Yeah. 0:01:38.600 --> 0:01:41.560 To the point, where have you ever seen the series 0:01:42.040 --> 0:01:45.840 Black Books? That's that's a BBC series. I haven't, but 0:01:45.880 --> 0:01:48.200 I have heard of it. Yeah. Dylan Moran plays a 0:01:48.360 --> 0:01:53.000 very grouchy bookstore owner in England and at one point 0:01:53.320 --> 0:01:57.000 one of those mega bookstore conglomerates moves in right next 0:01:57.040 --> 0:02:02.520 door and it's it's essentially a Border's type of place, 0:02:03.120 --> 0:02:07.560 and uh, and it really irritates him. Although everything irritates him. 0:02:07.600 --> 0:02:10.120 It irritates him when customers come into a shop, it 0:02:10.160 --> 0:02:13.240 irritates him when customers go into the next door shops. So, 0:02:14.000 --> 0:02:16.200 but that's beside the point. We're going to talk about 0:02:16.240 --> 0:02:19.000 Borders and not Black Books. Um. I do want to say, though, 0:02:19.040 --> 0:02:21.480 I think it is horribly fitting that today our notes 0:02:21.480 --> 0:02:25.000 on the topic are on paper. Yeah. Yeah, Also a 0:02:25.080 --> 0:02:28.680 fun peek behind the curtain. We record this in the 0:02:28.760 --> 0:02:34.480 evenings and at my studio at my office, And by mine, 0:02:34.520 --> 0:02:37.040 I mean Hellsta works. It's not really mine. I just 0:02:37.080 --> 0:02:39.760 worked there and the day we're recording this is the 0:02:39.800 --> 0:02:42.320 same day that they're rebooting our network, so we had 0:02:42.400 --> 0:02:45.040 to go with the paper. But it fits. It fits 0:02:45.080 --> 0:02:48.120 for a bookstore, specifically for Borders. So you're gonna hear 0:02:48.160 --> 0:02:51.239 some ambient sound effects that are just us turning pages. 0:02:51.400 --> 0:02:54.720 Like yeah, yes, we'll have to do an s MR 0:02:54.880 --> 0:02:57.280 Brink episode at some point. So one of you a 0:02:57.400 --> 0:03:00.360 SMR artists, really needs to, like seriously bring gett of 0:03:00.360 --> 0:03:02.600 the pack. We can do a whole episode on you. 0:03:02.880 --> 0:03:06.560 So here's the thing this episode. It turns out that 0:03:06.639 --> 0:03:10.680 we learned it's not as simple an answer as you 0:03:10.760 --> 0:03:14.440 might imagine. I think most people would say that the 0:03:14.480 --> 0:03:17.360 Internet was the reason why Borders went out of business, 0:03:17.400 --> 0:03:19.200 and it was really just a small part of it. Yeah, 0:03:19.240 --> 0:03:23.880 that was that was one factor that was definitely important. 0:03:23.960 --> 0:03:27.040 I mean, yeah, it wasn't small, but it wasn't the 0:03:27.120 --> 0:03:30.080 only thing. Yeah, So we're going to look at the 0:03:30.280 --> 0:03:34.880 entire journey of Borders. Also, this is an interesting story 0:03:34.960 --> 0:03:38.560 because we typically talk about companies that have a brink 0:03:38.640 --> 0:03:41.640 moment where they either get launched into the stratosphere and 0:03:41.720 --> 0:03:44.520 it goes from being a small operation into an enormous 0:03:44.560 --> 0:03:48.360 one or the reverse, where a big company has a 0:03:48.400 --> 0:03:53.559 series of misfortunes Lemony Snicket style and it plunges this 0:03:53.560 --> 0:03:56.520 This bat Dealer's story has both. It does it does. 0:03:56.840 --> 0:04:02.320 We're going to start with a h A little side 0:04:02.320 --> 0:04:06.600 note here. Um, I love bookstores. I love going into 0:04:06.600 --> 0:04:10.600 bookstores and perusing the books and looking at the book 0:04:10.640 --> 0:04:15.480 covers and maybe looking at the back blurbs. Yeah. I 0:04:15.800 --> 0:04:21.600 like the physical experience of having actual books to hold. Yes, 0:04:22.080 --> 0:04:23.680 that being said, almost all the books I own now 0:04:23.680 --> 0:04:28.120 are electronic. I I don't own any reader. I do 0:04:28.200 --> 0:04:31.400 have a tablet and obviously my phone, but I I 0:04:31.520 --> 0:04:34.360 much prefer I get much better retention of the content 0:04:34.440 --> 0:04:37.880 I'm reading when I read it on paper. So most 0:04:37.920 --> 0:04:43.239 of my books are hard copy. Yeah, dead Tree edition, 0:04:43.400 --> 0:04:45.280 dead Tree Edition. I'll say a lot of those are 0:04:45.279 --> 0:04:48.919 currently in the basement as we reorganize our house. But 0:04:50.000 --> 0:04:52.640 I do still really enjoy just crack and open a 0:04:52.640 --> 0:04:56.080 paper book. I'm about to go get another library card 0:04:56.160 --> 0:04:58.320 just for that reason. Oh nice. Now, were you ever 0:04:58.400 --> 0:05:00.279 the type of person who would go until I a 0:05:00.320 --> 0:05:03.120 Borders or maybe a Barnes and Noble and just park 0:05:03.200 --> 0:05:05.880 it on a wingback chair and read a book for 0:05:05.920 --> 0:05:08.960 like six hours. No, No, neither was I. UM. I 0:05:08.960 --> 0:05:12.240 would sit on a chair and like peruce the content 0:05:12.279 --> 0:05:16.520 if it was something like an art book or novel 0:05:16.800 --> 0:05:20.760 or a recipe book, just so I knew the contents 0:05:20.880 --> 0:05:23.400 because it can vary so widely. Do you know if 0:05:23.400 --> 0:05:25.720 I actually wanted to buy it, But no, I won't. 0:05:25.720 --> 0:05:28.120 Even like I won't read magazines in the grocery line 0:05:28.200 --> 0:05:31.039 check out, I won't. I won't read books. If I 0:05:31.080 --> 0:05:32.800 want to sit down and read a book that I 0:05:32.800 --> 0:05:35.160 don't want to buy again, I'll go to the library. 0:05:35.360 --> 0:05:38.960 Same here, same here. Yeah. I remember going through very 0:05:39.000 --> 0:05:41.280 important books just to make sure I wanted to buy them, 0:05:41.320 --> 0:05:44.760 mostly dungeons and dragon source books. That is important. So 0:05:44.839 --> 0:05:48.719 let's talk about the history of the Borders Store. It 0:05:48.800 --> 0:05:52.760 was founded way back in nineteen seventy one by the 0:05:52.839 --> 0:05:57.279 Borders brothers. The name comes from the brothers who founded 0:05:57.279 --> 0:06:00.840 the store, Tom and Lewis Borders. Yes, and they we 0:06:02.680 --> 0:06:05.440 l O U I s. So some of them are Lewis's, 0:06:05.520 --> 0:06:10.960 some of them are Louise Luis Laois Borders Borders from 0:06:11.000 --> 0:06:14.720 ann Arbor, Michigan. Yeah, and originally it was a used bookstore. 0:06:15.279 --> 0:06:17.480 They didn't they didn't come out the gate with a 0:06:17.600 --> 0:06:21.480 mega ya mega bookstore. These were two guys who were 0:06:22.240 --> 0:06:27.200 still attending the university over at Ann Arbor and they, 0:06:28.240 --> 0:06:30.800 you know, the University of Michigan. So they didn't have 0:06:31.880 --> 0:06:34.719 a huge amount of money to just drop on a 0:06:34.800 --> 0:06:37.080 on a bookstore. And it's funny because it kind of 0:06:37.120 --> 0:06:42.440 came out of necessity because so Louis Borders comes to 0:06:42.720 --> 0:06:45.280 do some postgraduate work at the University of Michigan. He's 0:06:45.279 --> 0:06:48.600 studying mathematics, by the way, and he gets an apartment 0:06:49.360 --> 0:06:54.840 and the previous inhabitant of that apartment who had left 0:06:55.279 --> 0:07:00.480 left behind up apparently a bunch of books. So Louis 0:07:00.680 --> 0:07:03.159 and Tom De said, well, I don't want to hold 0:07:03.200 --> 0:07:06.039 on to these. I mean, but they could have poor 0:07:06.080 --> 0:07:09.080 college students need things like furniture and just come together 0:07:09.360 --> 0:07:12.440 and you get a two by four and you gotta 0:07:12.640 --> 0:07:14.160 put it on top of that, and you got yourself 0:07:14.280 --> 0:07:16.800 get yourself a dining room table. Yeah, but they decided 0:07:16.800 --> 0:07:19.960 they would sell the books. But they had apparently so 0:07:20.080 --> 0:07:23.120 much fun doing that that they thought, why not make 0:07:23.160 --> 0:07:25.600 a business of this and actually make a used bookstore, 0:07:25.600 --> 0:07:29.360 because being so close to the University of Michigan. They 0:07:29.440 --> 0:07:33.760 knew that they could have a pretty healthy business just 0:07:33.880 --> 0:07:38.560 catering to students, so they made that decision, and then 0:07:38.600 --> 0:07:42.840 they opened up their first location. What their first location 0:07:43.000 --> 0:07:47.840 was specifically is something that I actually had trouble tracking down. 0:07:47.960 --> 0:07:51.960 There's a lot of conflicting information about which location was 0:07:52.200 --> 0:07:56.040 in fact the very first location. I guess bookstore owners 0:07:56.040 --> 0:07:59.320 are better at reading information than recording it. Yeah, that's 0:07:59.360 --> 0:08:02.000 the nineteen and he's no one bothered to, you know, 0:08:02.800 --> 0:08:06.800 to keep track of that. But the various addresses I've 0:08:06.800 --> 0:08:10.240 seen are two eleven South State Street and three eleven 0:08:10.400 --> 0:08:12.680 Maynard Street, which are two different addresses I looked in 0:08:12.760 --> 0:08:16.800 Google Maps and everything, um, and so there's some disagreements 0:08:16.800 --> 0:08:19.560 about which of those stores was first, but the Maynard 0:08:19.600 --> 0:08:23.400 Street location was frequently cited as the company's flagship store, 0:08:24.320 --> 0:08:27.960 so whichever one was their first one. They ended up 0:08:28.000 --> 0:08:32.160 settling at another location at three oh three South State Street, 0:08:32.240 --> 0:08:35.160 and all of these were an easy walking distance of 0:08:35.240 --> 0:08:37.120 the campus of the University of Michigan. But this is 0:08:37.120 --> 0:08:40.000 when they started selling new books. Yes, they decided to 0:08:40.000 --> 0:08:42.440 switch from used to new, and I also decided to 0:08:42.480 --> 0:08:47.680 go from a modest bookstore to a larger storefront, not 0:08:47.720 --> 0:08:50.640 as big as what they would ultimately go with, but 0:08:51.000 --> 0:08:53.800 you're talking about ten thousand square feet. That's pretty big 0:08:53.880 --> 0:08:57.839 for a bookstore. It is it is a good, healthy bookstore. Yes, 0:08:58.040 --> 0:09:00.640 they kind of got addicted to big books stores too, though, 0:09:00.679 --> 0:09:03.840 didn't they, because they bought also bought a like an 0:09:03.840 --> 0:09:07.920 old department store, Yeah, Jacobson's, which was a really old 0:09:08.040 --> 0:09:10.840 chain up in the Michigan area, not something that we 0:09:10.840 --> 0:09:16.040 would see down here in Atlanta, and another fairly big space, 0:09:16.440 --> 0:09:18.960 so yeah, they got that one too, also still not 0:09:19.080 --> 0:09:21.200 far from the campus. And that was one of the 0:09:21.200 --> 0:09:23.520 ways that they were able to really differentiate themselves from 0:09:23.520 --> 0:09:25.640 a lot of the other bookstores, which tended to be 0:09:25.840 --> 0:09:31.199 those small storefront like shops you go in and you know, 0:09:31.800 --> 0:09:34.000 they fact that they had so much spaceman that they 0:09:34.000 --> 0:09:38.120 could end up having a larger inventory, like a greater 0:09:38.240 --> 0:09:42.520 variety of books than what their competitors could have. So 0:09:42.840 --> 0:09:45.040 you might walk into a little bookstore and have to 0:09:45.080 --> 0:09:48.520 put a book on order, but at their bookstore, because 0:09:49.080 --> 0:09:53.680 they had much more space, they could order a greater 0:09:53.800 --> 0:09:56.160 variety of titles and have more there was a more 0:09:56.240 --> 0:09:58.720 likely chance that the book you wanted was already installed, 0:09:58.720 --> 0:10:02.400 and then this was a less calm and occurrence, so 0:10:02.600 --> 0:10:06.520 it gave them a leg up. Now, later on people 0:10:06.520 --> 0:10:09.200 would gravitate back to the as we get to the 0:10:09.200 --> 0:10:12.960 millennial age, back to the smaller, more um niche feeling 0:10:12.960 --> 0:10:16.680 bookstores for for big bookstores. But at this time, you know, 0:10:16.679 --> 0:10:19.480 bigger was better. Yeah, yeah, And it was something that 0:10:19.559 --> 0:10:24.080 again was really appealing to the population of ann Arbor 0:10:24.120 --> 0:10:27.520 in particular, they were known as sort of a literary crowd. 0:10:28.200 --> 0:10:32.840 And then Louis Borders put his degrees in mathematics and 0:10:32.880 --> 0:10:36.720 his knowledge of computer science to work because he designed 0:10:36.720 --> 0:10:43.079 a inventory management system and it was away a book 0:10:43.120 --> 0:10:45.280 inventory system or b i S is what it ended 0:10:45.320 --> 0:10:48.199 up being called, and it was a way for them 0:10:48.200 --> 0:10:51.000 to track not just what was in stock, but what 0:10:51.120 --> 0:10:53.839 was selling. And it got to a point where they 0:10:53.880 --> 0:10:57.080 realized something that would later become a big deal for 0:10:57.160 --> 0:11:00.160 big data, which is, if you look at information and 0:11:00.200 --> 0:11:02.800 you look at it carefully, you can start to identify trends. 0:11:03.600 --> 0:11:07.720 So they could look at book sales and start to 0:11:07.800 --> 0:11:11.440 predict which books were going to become popular before it 0:11:11.480 --> 0:11:14.000 actually became a trend, which meant that they could be 0:11:14.080 --> 0:11:17.520 proactive and order more of those titles so that they 0:11:17.559 --> 0:11:19.920 could meet the demand as it rose up, so they 0:11:19.960 --> 0:11:24.679 could actually start to predict trends as they were developing. 0:11:25.360 --> 0:11:29.000 And that's amazing, it is. I wouldn't I wouldn't initially think, hey, 0:11:29.120 --> 0:11:31.199 guy with a degree in mathematics would be the best 0:11:31.200 --> 0:11:33.560 person to run a bookstore. I would think his brother, 0:11:33.600 --> 0:11:36.960 who's who is a teacher, would be. But apparently it 0:11:37.000 --> 0:11:39.400 was a match made in heaven. They also did something 0:11:39.400 --> 0:11:41.520 really smart, and they took this b I S and 0:11:41.559 --> 0:11:44.360 they sold it to other bookstores as well. Right, So 0:11:44.679 --> 0:11:47.120 it wasn't like they had no, this is our secret 0:11:47.200 --> 0:11:50.800 saace and you can't have our secret solace. They said, no, no, 0:11:51.160 --> 0:11:53.640 this is a very useful system. It will come in 0:11:53.679 --> 0:11:57.520 handy and they that was another business. In fact, they 0:11:57.559 --> 0:12:00.760 operated it as a spinoff business this for a while. 0:12:01.559 --> 0:12:03.840 They sold it off I think in the nineties, but 0:12:04.440 --> 0:12:06.679 they were still you know, and this is still in 0:12:06.720 --> 0:12:11.120 the seventies too. That's that's an era where there's still babies. Yeah, 0:12:11.240 --> 0:12:15.360 well they're giant giant babies. Yeah. Personal computers are not 0:12:15.440 --> 0:12:17.760 really even a thing yet. If you're buying a computer, 0:12:17.800 --> 0:12:21.480 you're buying a very expensive large machine, right, because this 0:12:21.559 --> 0:12:23.559 is not this is not yet the era of the 0:12:23.600 --> 0:12:27.320 Apple two or the IBM PC. This is just before that. 0:12:27.520 --> 0:12:31.719 So yeah, they were using these larger systems in this 0:12:31.880 --> 0:12:36.200 this custom made inventory system, and it was really going well. 0:12:36.240 --> 0:12:38.439 I mean, I think they could have probably just moved 0:12:38.480 --> 0:12:41.240 over to this b I S system, selling it to 0:12:41.320 --> 0:12:44.240 other places, updating it to keep up with the times, 0:12:44.240 --> 0:12:47.120 and been successful, but they didn't do that. They also 0:12:47.760 --> 0:12:51.160 expanded their bookstores as well. They opened in other locations. 0:12:51.360 --> 0:12:53.840 So they opened some in Michigan, but they also expanded 0:12:53.880 --> 0:12:58.319 beyond Michigan. Uh. They opened up one in Indianapolis and 0:12:58.400 --> 0:13:02.760 another one in an odd location considering that their home 0:13:02.800 --> 0:13:07.000 base was in Michigan. Do you know where that is? Atlanta? Yeah, 0:13:07.000 --> 0:13:10.960 it's right in our hometown, I mean in the Atlanta's 0:13:11.000 --> 0:13:15.160 big So it's a good hub. And and believe it 0:13:15.240 --> 0:13:18.520 or not, we know how to read. We do. In fact, 0:13:18.520 --> 0:13:21.319 we're doing it right now. Yeah. So they opened up 0:13:21.360 --> 0:13:24.120 a store in Atlanta. And the nice thing was that 0:13:24.160 --> 0:13:27.120 this b I S system proved to be incredibly useful 0:13:27.160 --> 0:13:31.040 in each of those locations, and it proved that if 0:13:31.040 --> 0:13:34.000 you knew how to use the system, you could customize 0:13:34.000 --> 0:13:39.160 that stores inventory for that particular population. It showed that 0:13:39.320 --> 0:13:44.040 different populations wanted different books. So the books that were 0:13:44.040 --> 0:13:46.400 being sold that we're doing really well in Atlanta might 0:13:46.480 --> 0:13:48.600 not be the same ones that are doing well in Michigan. 0:13:48.640 --> 0:13:51.600 But the system lets you predict which ones you need 0:13:51.640 --> 0:13:53.600 to order, so they were always on top of things. 0:13:54.280 --> 0:13:57.319 That's pretty cool. The next really cool thing in in 0:13:57.400 --> 0:14:01.040 Borders history is when they did in their first superstore. 0:14:01.080 --> 0:14:04.199 This is the one that you probably associate with Borders 0:14:04.240 --> 0:14:06.079 when you think of Borders or Barnes and Nobles that 0:14:06.200 --> 0:14:10.559 had the coffee shop in it. It was Giant Um 0:14:10.559 --> 0:14:15.199 and they hired a professional to help them expand this business, 0:14:15.320 --> 0:14:21.000 Robert d Romualdo. Robert d ra Mualdo. That's a heck 0:14:21.000 --> 0:14:23.800 of a name, it is. I had to keep going 0:14:23.800 --> 0:14:25.680 back and looking at it to remember how to spell it, 0:14:25.760 --> 0:14:28.160 you know, I I when I look at de Romoaldo, 0:14:28.320 --> 0:14:31.320 I'm convinced I'm not saying it correctly, but I will 0:14:31.520 --> 0:14:34.680 keep trying. I probably won't say the same way twice. 0:14:35.480 --> 0:14:38.840 And he helped them grow this superstore model and it 0:14:38.920 --> 0:14:42.560 was very successful, and by nine he was the CEO 0:14:42.640 --> 0:14:46.840 of the company, and he incorporated new things into their superstores. 0:14:46.960 --> 0:14:49.760 Now they didn't just have all of the books ever, 0:14:50.120 --> 0:14:52.760 and some coffee shops. They also had music and movies 0:14:52.840 --> 0:14:55.360 and things like that. Yeah. I remember walking into these 0:14:55.400 --> 0:14:59.200 big bookstores and seeing like the entire section set aside 0:14:59.240 --> 0:15:02.360 for music and film and thinking that's odd for a 0:15:02.840 --> 0:15:05.920 for a bookstore. I loved it. Well, I mean, yeah, 0:15:06.400 --> 0:15:09.160 we will talk a little bit more about the music 0:15:09.320 --> 0:15:13.360 and movies stuff a little later, because it's another one 0:15:13.360 --> 0:15:15.680 of those factors. Yes, yes, but you know I loved 0:15:15.680 --> 0:15:17.000 it at the time because I could go find the 0:15:17.040 --> 0:15:18.800 book and then I could go find the VHS of 0:15:18.840 --> 0:15:21.600 the movie version, yeah, of the bus, right, so you 0:15:21.640 --> 0:15:24.360 can you can read The Princess Bride while you watch 0:15:24.440 --> 0:15:28.240 The Princess Bride. That would be a sobering experience. They 0:15:28.240 --> 0:15:31.160 don't exactly match up. Is pretty close though, I mean 0:15:31.640 --> 0:15:36.640 Golding also wrote the screenplay. But in the early nine nineties, 0:15:36.720 --> 0:15:39.360 at this point, Borders is doing well and starts to 0:15:39.400 --> 0:15:42.240 head toward an initial public offering to go from being 0:15:42.240 --> 0:15:45.800 a private company to a publicly traded company. So under 0:15:45.840 --> 0:15:48.240 the proposed I P O, the company they had not 0:15:48.400 --> 0:15:51.720 yet launched an I P O. But they were in 0:15:51.760 --> 0:15:54.080 the preparation for it, and that that involves a lot 0:15:54.120 --> 0:15:58.040 of work, a lot of very technical legal work, to 0:15:58.040 --> 0:16:01.240 to set what the stock price should be, what you 0:16:01.280 --> 0:16:03.480 think the opening price is going to be, how many 0:16:03.520 --> 0:16:06.160 shares you plan to offer? That in turn tells you 0:16:06.400 --> 0:16:09.480 how much you think your company is worth. Right, because 0:16:09.480 --> 0:16:11.440 if you say we're going to open at twenty dollars 0:16:11.440 --> 0:16:13.240 a share and it's going to be X number of shares, 0:16:13.280 --> 0:16:15.200 then you multiply those two numbers together and say, oh, 0:16:15.200 --> 0:16:17.520 so you think your company is worth blah blah blah. 0:16:17.520 --> 0:16:19.520 It's like you're going on shark take, except for you're 0:16:19.520 --> 0:16:24.800 already established. Yeah. So they had estimated that they were 0:16:24.800 --> 0:16:27.720 going to have three point six million shares of stock, 0:16:27.760 --> 0:16:30.280 and at the stock price they were looking at, uh, 0:16:30.360 --> 0:16:33.720 that would have given the company of value of one 0:16:33.800 --> 0:16:38.480 hundred ninety million dollars. Not too shabby. But they didn't 0:16:39.200 --> 0:16:42.280 end up doing the I p Oh. Something else happened. 0:16:42.320 --> 0:16:46.400 Another company swooped in. Yeah, of all things, Kmart swooped 0:16:46.400 --> 0:16:50.400 in and they said, hey, we're going to buy borders. 0:16:52.360 --> 0:16:56.600 They had already bought Walden Books, and they had bought 0:16:56.600 --> 0:16:59.480 that back in the eighties. Yes, yes, and now they 0:16:59.520 --> 0:17:03.680 wanted to buy Borders as well. They were hoping that uh, 0:17:03.840 --> 0:17:06.439 merging these large bookstores would bring them a lot of 0:17:06.480 --> 0:17:09.080 extra revenue. Yeah, they were looking at Walden Books, which 0:17:09.119 --> 0:17:12.320 had a lot of like mall locations. That's where I 0:17:12.359 --> 0:17:14.639 always remember Walden Books, not as a standalone but as 0:17:14.680 --> 0:17:19.800 a mall bookstore, more of an express experience. Yeah, and 0:17:19.840 --> 0:17:22.159 then you had Borders the larger bookstores. And then they 0:17:22.200 --> 0:17:26.720 also owned a few bookstores that were connected to Walden 0:17:26.760 --> 0:17:29.760 Books but were called Bassett Books. That was largely in 0:17:29.760 --> 0:17:32.359 the Northeast. There are all books about dogs, yes, the 0:17:32.440 --> 0:17:35.960 Bassett Hound Books. No, it was it was another chain 0:17:36.040 --> 0:17:39.719 of a small chain, like a regional chain of large bookstores. 0:17:40.080 --> 0:17:43.600 So yeah, that was kind of there. There um their 0:17:43.640 --> 0:17:46.800 strategy moving forward. And and at that point Borders consisted 0:17:46.840 --> 0:17:52.120 of twenty one bookstores. Yes, and in after Kmart bought them, 0:17:52.160 --> 0:17:57.560 they became the Borders Walden Group. And things look pretty good. 0:17:58.720 --> 0:18:07.720 But things we're about to change. Musical sting. Yeah, so 0:18:07.920 --> 0:18:11.000 we'll explain how they're about to change in just a moment, 0:18:11.000 --> 0:18:18.760 But first we're going to take a quick break. All right, now, Ariel, 0:18:18.880 --> 0:18:21.240 you were saying things were about to change. What did 0:18:21.280 --> 0:18:24.600 you mean by that? Well, I meant that things were 0:18:24.640 --> 0:18:26.960 actually going to get a little bit worse than a 0:18:26.960 --> 0:18:28.800 little bit better, and then pretty better and then a 0:18:28.800 --> 0:18:35.400 lot worse. Okay, could you perhaps elaborate? Yes. So Kmart, 0:18:35.400 --> 0:18:38.880 like we said, bought borders they expected to bring an 0:18:38.880 --> 0:18:42.440 extra revenue, and it did. Under their their first year 0:18:42.520 --> 0:18:46.560 under Kmart, they brought in about two d foot eight 0:18:46.560 --> 0:18:50.960 million dollars profit. Nice. Yeah, And in ninety four they 0:18:51.040 --> 0:18:54.159 reached one point five billion dollars in sales. That's also 0:18:54.320 --> 0:19:01.200 pretty nice, but surprisingly not enough. So Kmar was struggling. 0:19:01.840 --> 0:19:05.840 They were having some financial troubles and borders Walden was 0:19:05.880 --> 0:19:10.760 not helping as much as they had hoped. So there's 0:19:10.880 --> 0:19:14.879 there's some slight variation in reports. Some people say that 0:19:14.960 --> 0:19:19.720 kmars like, uh, we're gonna we're gonna ditch these bookstores 0:19:19.760 --> 0:19:22.119 and let them become their own thing, and some some 0:19:22.200 --> 0:19:24.320 reports say that these bookstores are like, hey, we're gonna 0:19:24.359 --> 0:19:28.640 become our own thing later. Yeah. Whether or not it 0:19:28.760 --> 0:19:32.879 was a decision made internally from the book side of 0:19:32.920 --> 0:19:35.520 things or internally from the Kmart side of things, the 0:19:35.600 --> 0:19:39.800 result was the same. Kmart did spin off the Border's 0:19:39.800 --> 0:19:42.000 Walden Group, although at that point it had become the 0:19:42.080 --> 0:19:46.920 Borders Group. So Borders Group gets spun off into its 0:19:46.960 --> 0:19:49.959 own company and gets put back on track for that 0:19:50.000 --> 0:19:52.399 I p O that was so hoping for. They finally 0:19:52.440 --> 0:19:58.920 get their public offering UM. Now right afterwards they bought 0:19:59.400 --> 0:20:02.480 share that came it still had in them, so Kmart 0:20:02.520 --> 0:20:07.239 had retained at ownership and then decided that or at 0:20:07.280 --> 0:20:10.920 least the Borders Group folks decided to purchase that back 0:20:10.960 --> 0:20:15.320 from their former parent company. Yes, and in seven they 0:20:15.359 --> 0:20:18.600 had really good luck with their public offering. They ended 0:20:18.680 --> 0:20:22.720 up closing at forty four eight cents of share. That's 0:20:22.880 --> 0:20:26.199 that's a pretty healthy per share price. Yeah, it was 0:20:26.240 --> 0:20:28.840 healthy enough that they did a two for one stock split. Yeah, 0:20:28.880 --> 0:20:30.600 we talked about those in the past. It's where you 0:20:30.680 --> 0:20:34.320 double the number of shares, but you have the value 0:20:34.440 --> 0:20:39.239 per share and it helps it helps inspire liquidity, it 0:20:39.240 --> 0:20:43.320 helps inspire smaller investors getting involved. Yes, and and all 0:20:43.359 --> 0:20:47.320 of the success UM encourages them to expand into Europe 0:20:47.320 --> 0:20:51.880 and Asia, So now they're starting to open international locations there. 0:20:52.000 --> 0:20:56.640 Their first store was opened in Singapore and they opened 0:20:56.720 --> 0:21:00.480 up forty more stores, so rapid expansion of this point, 0:21:00.560 --> 0:21:04.320 and their plans were for an international superstore chain with 0:21:04.359 --> 0:21:07.520 a thousand locations. Yeah, and at that point they had 0:21:07.600 --> 0:21:10.760 just a little more than two hundred locations. So a 0:21:10.760 --> 0:21:13.359 lot of people also point to this era as being 0:21:14.119 --> 0:21:19.920 in retrospect a dangerous one for Borders in the fear 0:21:19.960 --> 0:21:25.320 that they were trying to expand too quickly and too aggressively. 0:21:25.800 --> 0:21:28.040 There are a lot of stories that talk about Borders 0:21:28.119 --> 0:21:32.200 the company that was opening up stores like crazy in 0:21:32.240 --> 0:21:35.399 the nineties, Like, there are a lot of stories about that. Yeah. However, 0:21:35.600 --> 0:21:41.560 in two thousand's now at this time, Amazon's also become 0:21:41.920 --> 0:21:44.440 becoming big. Yeah. This is a right around the time 0:21:44.440 --> 0:21:48.199 where Amazon was. They hadn't yet become profitable, but they 0:21:48.320 --> 0:21:52.840 were becoming more of a player in especially in the 0:21:52.960 --> 0:21:56.119 I mean Amazon started in the book business. Yeah, they 0:21:56.119 --> 0:21:59.240 were just a bookstore, and to be fair, they weren't profitable, 0:21:59.320 --> 0:22:03.840 but they were bustling. Like from the get go, Amazon 0:22:04.240 --> 0:22:08.000 had high, high traffic. Yes. Yeah, so while while it 0:22:08.080 --> 0:22:14.119 wasn't yet the goliath of goliaths that Amazon is today, 0:22:14.440 --> 0:22:18.800 it was, it was doing well enough where it could 0:22:18.960 --> 0:22:22.280 survive the dot com crash that was on the horizon 0:22:22.640 --> 0:22:25.119 and make it through the other side and actually start 0:22:25.160 --> 0:22:29.200 to turn a profit. And de rom Nualdo knew he 0:22:29.480 --> 0:22:32.080 could see that this was this could be a big threat, 0:22:32.480 --> 0:22:35.360 and he decided that Borders needed to adapt to meet 0:22:35.359 --> 0:22:39.360 this threat, and so they created Borders Online. Yeah, so 0:22:40.480 --> 0:22:44.160 important step that he recognizes that the internet is going 0:22:44.200 --> 0:22:50.639 to be a really pivotal thing for commerce in the future. However, 0:22:52.000 --> 0:22:59.600 launching an online presence is sometimes more difficult than it sounds. Yeah, 0:22:59.680 --> 0:23:02.040 it takes a while to get notice, it takes a 0:23:02.040 --> 0:23:04.600 while to get traffic, it takes a while to become 0:23:04.680 --> 0:23:07.320 muscle memory for your consumers, and it takes a while 0:23:07.359 --> 0:23:09.880 just to work out the kinks so that you've created 0:23:09.960 --> 0:23:13.879 an experience that people enjoy. Yeah, and so when they 0:23:13.960 --> 0:23:19.800 launched this site, they had some initial losses and the 0:23:19.840 --> 0:23:24.560 investors freaked out and they said, nope, we're shutting it down. Yeah, 0:23:24.680 --> 0:23:27.520 we're gonna we're gonna remove this. It's a drain on 0:23:27.640 --> 0:23:30.480 our attention and our money and our time, so we're 0:23:30.480 --> 0:23:32.919 going to close it off. And I would say this 0:23:33.080 --> 0:23:37.760 was their first really big mistake. Yeah, they gave up 0:23:37.800 --> 0:23:41.320 too quickly. Yeah, because a lot of and we have 0:23:41.480 --> 0:23:44.240 more into it later, but a lot of analysts say 0:23:44.240 --> 0:23:52.400 that them committing to the market late was what really 0:23:52.440 --> 0:23:57.040 contributed to Yeah, and it's interesting because they didn't really 0:23:57.040 --> 0:24:00.440 commit to it late. They well, I guess you could 0:24:00.440 --> 0:24:03.479 say they committed to it late, but they carefully they 0:24:03.520 --> 0:24:08.000 attempted it earlier. Yeah, I was. I feel a lot 0:24:08.040 --> 0:24:13.800 of sympathy for for Borders at this time because you're 0:24:13.800 --> 0:24:17.360 talking about again. In hindsight, it's so easy to say, right, 0:24:17.480 --> 0:24:21.720