UGG: Brian Smith. How an epiphany, surfers, and $500 launched an iconic sheepskin footwear company.

Success is a journey, especially when it comes to your finances. One of the most common obstacles in our financial journey is dealing with high interest debt. You can often leave people feeling trapped, but it doesn't have to. If you're dealing with high interest debt, there is a way forward. A so-fi personal loan could consolidate all your high interest debt into one low interest monthly payment, helping you craft a roadmap to paying down your debt. It even comes with no fees required, getting you a financial win right away. Keep pushing on your journey to financial success. You could even get as soon as the same day funding. View your rate for a so-fi personal loan at sofi.com/guiraz. Loans originated by SofiBankNA, member FDIC, terms and conditions applied. N-M-L-S-6-9-6-8-9-1. Fastfund's term apply at sofi.com/guiraz. September is world Alzheimer's month, but most people never check their brain health until something's feeling off or wrong. I wanted to stop waiting and look at my own data. So I signed up for function. It provides straightforward blood tests that can give you the kind of information about what's happening inside your body that was simply unavailable to most people just a few years ago. Your focus and mental stamina leave a data trail in your blood and function tracks it. Did you know that magnesium is tied to brain health? It actually supports nerve signaling and focus under stress. In your Omega-3 index, fuels brain cell membranes and is tied to focus and cognitive performance. You can get tests for these biomarkers and more through function. Plus, function members can also get brain-related add-on tests like an Alzheimer's detection test, which measures blood markers that can flag Alzheimer's risk years before symptoms. Check your brain and health the way I do. Function provides 160 plus lab tests for a dollar a day and member pricing on advanced imaging. Join at functionhealth.com/built and use code built25 for a $25 credit. When you are in a small business, you have to wear a lot of hats. You're the hiring manager, the payroll department, and the benefits team all wrapped into one. And after talking to hundreds of founders and running a business myself, I know how overwhelming wearing all these hats can be. Thankfully, Gusto is here to take a few of those necessary tasks off your plate so you can get back to the bigger picture. Gusto is online payroll and benefit software built for small businesses. It's all-in-one, remote-friendly, and incredibly easy to use, so you can pay, hire, onboard, and support your team from anywhere. Save time with built-in automated tools like offer letters, onboarding docs, direct deposit, and more. Plus, get direct access to certified HR experts to help support you through any tough HR situation. Try Gusto today at Gusto.com/built and get three months free when you run your first payroll. That's three months of free payroll at gusto.com/built. One more time, gusto.com/built. I could see it coming so clearly. In fact, the preseason orders looked like the company was going to be destined for, you know, $18 million, maybe even $20 million. But I knew I would not be able to finance an extra $5, $6, $7 million in product. And most people would be so excited about that. I saw this as a kiss of death. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raazan on the show today. How Brian Smith brought Australian sheepskin boots to America that turned uggs into a multi-billion dollar brand. In 1979, a 32-year-old Australian named Brian Smith decided to import boots from Australia and sell them in the U.S. At the time, Brian was living in Southern California. And the boots he was importing were made from wool and sheepskin. In Australia, everyone called them uggs because they were ugly, not because it was a brand name. Lots of small factories made their own versions of these same ugg boots. But when Brian tried to sell them in the U.S., he could barely move inventory. It would take more than a decade before he'd find any traction with consumers. He made mistake after mistake. He ran out of cash, he lost control of the company, then got it back, then nearly lost it again. And finally, in 1995, Brian managed to sell ugg to the footwear brand Decker's for a modest price. Decker's would go on to turn uggs into a global phenomenon, a brand that generated over two and a half billion dollars in sales last year. But long before celebrities wore them, long before ugg became one of the most recognizable footwear brands in the world, it was just Brian Smith, a van full of boots, and a conviction that comfort could become culture. Brian was born in Canberra, Australia right after World War II. Growing up, his family spent lots of time at the beach. Brian says he learned how to serve so young he doesn't even remember it. He never thought about starting a business, so instead he went into accounting for job security. But 10 years in when he was starting to feel really stuck, he had an epiphany, literally, all thanks to an iconic Pink Floyd song. One afternoon, I was driving along the highway. This music came on the radio and there was a song there that was called Time and the words were, and then one day you find 10 years of got behind you, no one told you when to run. You missed the starting gun and I just thought, oh shit, he's talking to me. And as soon as I heard those words, my body just got covered in goosebumps. And I thought, oh my god, all my friends were tracking off to partnerships in the accounting world. And other friends who had started business at a high school. I felt like I'd been running on the spot for 10 years. So it was literally it was so powerful. It was only a matter of weeks before I arrived in Los Angeles. And I had my surfboard, so I just started going up to Malibu. I surfed that place for nearly a year. So it sounds like you were, I mean, were you a good surfer or were you just a, like how would you describe yourself as a surfer? I was a good surfer, every surfer thinks they were a good surfer. But I was, no, I was pretty good. So all right. And now this is a different time. LA and in 1978, much different than a cheaper. So you probably had some savings. And I only was that expensive to rent a place in 1978. No, $200 a month for this little house. Wow. But all my friends told me it's such a bad area. Brian don't go there and I'm this dumb Australian thing. They were like me, I'm an Aussie, you know. But it turned out that all the houses in that area had bars on the windows. And you know, the first night I was there, I bought a pizza and a bottle of wine and a big tall candle about, you know, 15 inches tall. And I stuck it on a shelf in the living room and lit it. And then, you know, drank some wine. Listen to music went to bed. And the next morning I woke up in bed and everything went black. And I ducked underneath and I'm like, oh my God, the house is on fire. Because the candle didn't have a dish under it. And I just let it burn through. Wait, it was like a real fire fire in this house. Oh, the house was like rumbling with noise, yeah, on fire. And I got up to the front door and I was rumbling with the lock and I couldn't get it open. And the weirdest thing happened. I remember slumping to the floor and I just said, oh, I'm going to die. And this voice, this is going to be hard to believe. But this voice that just said, very calmly, you haven't done enough with your life yet, Brian. Wow. And I stood up and I worked my way all around the house, punching all the windows out with my fist and screaming out. And eventually a workman who'd been couple of houses down came up with a crowbar and got the bars off my bedroom to get out. And then, you know, it was just one of those weird, unexplainable moments for sure. All right, so you, you are in LA. I'm assuming you move to a new place and yeah, I got a great place in Santa Monica. I don't quite understand what that would you, I mean, because you quit your job. So you had to find a career in a profession. You couldn't just surf because you had to pay your bills. Did you think that that was maybe where you would find the thing you would do? Well, the trends all came out of California. Levi jeans, water beds, you know, all the surf brands and skate brands. All of vibrancy was coming out of California. You wanted to be in the place where those, those things were coming out of. Yes, and I was, you know, every day I, Look at the Wall Street Journal, and I'd look at billboards on the way to everywhere, and I'd look at, you know, shop windows and see what was, you know, and I was really literally on a search for something to take back to Australia. I had no desire to stay and live in America. So wait, just to be clear, the idea was you would come to the US, and I'm assuming you had saved money, right, from your time. And you were going to live off that money and surf, but also just, it was kind of like a reconnaissance trip. You were just looking for maybe a product or something that was cool there that you could then bring to Australia and sell. That's exactly right, yeah. And it could have been anything, it could have been lollipops, it could have been, I don't know, so you don't have to be a charter accountant basically. Exactly, yeah. Well, I was sitting around my house in Santa Monica with my buddy Doug, and I was reading surf a magazine. There was a photograph of this guy and a girl in front of a fireplace with the, all you could see was their legs with these white boots on their legs. And the instant I saw it, I thought, oh my God, you know, one in two Australians has some sort of sheepskin footwear, and there's none in America. So I just thought this is like the ultimate no brainer. And I looked at Doug and said, man, we've got to go into business, we've got to be instant millionaires, just like that. So let's just kind of break this down from it. So these are, I don't know, mid calf boots that the outer is a sheepskin leather. And inside is the sheepskin wool. That's right. Okay, and this was a thing that everyone in Australia had, they just had a pair of these boots. Whether it was slippers or little booties or scuffs or whatever, you can imagine Australia being a sheepskin country and every little town, there is someone with a sewing machine and they're making aug boots and every town would spell a different way, UG, UGH, UGHS. So this is the, you used to call them aug boots. What did that come from? Like ugly or ugly or what? Could be all of that. Nobody really knows. They've always been called aug boots in Australia. Oh, good, like, you would call like, you know, rubber boots, wellies, even though they're not, maybe Wellington's is a brand. Maybe it's named after like the Duke of Wellington, I don't know, but in the UK they call them Wellies. So these were just called UG's. Like, it wasn't a brand name, it was just the name of what they were. It was descriptive of that product, yeah. So you see this and you think, you know, Eureka, you're in California, you gotta say Eureka. Eureka, it's the official month of California. I have found gold and it is in sheepskin boots that are, you know, I'm going to just mint money doing this thing because, you know, everyone in Australia has this. Okay, so, because initially your idea was, let me bring a little bit of Southern California to Australia. Now you're thinking, wait, let me bring Australia to Southern California. Yes, yes, and Doug and I, we didn't have a lot of money, but we decided we got to get some samples. So we pulled 500 bucks together and called the guy who ran the advertisement. And we talked him into being distributors for the US. And I think this guy was, it was George Bercher. I think he was the guy who owned an Australian boot company called Country Leather. He would become your main supplier eventually, right? Exactly, yes. Eureka, you call him and? Yeah, and so we ordered six pairs of samples. And after they arrived, Doug was going to be the salesman because I was an accountant, I was terrified of salesman. And he went on the road and visited every single shoe store in Southern California. He came back with about 150 business cards of all these retailers and not a single order. And he said, Brian, they tell us we're crazy trying to sell sheepskin in California. And that sounds logical, but Australia's climate is identical to California. So that wasn't the real answers. And so, you know, as an entrepreneur, you have to pivot when you hit a wall like that. And I thought, well, maybe the surf markets are way to go. We looked at, you know, the yellow pages, there are probably 60 to 80 surf shops. And so Doug and I changed gears. And now he insisted I went on the road. And I can remember walking into Concert Fords, which was in Santa Monica right near where I lived. And I was so embarrassed to open up this bag of samples. I pulled him open, he goes, oh my God, Akbar. He says, they're great. All my friends have got him. What are you doing with those? And I said, well, you know, we're thinking of importing them into America. Oh my God, you're going to make a fortune. And so this happened in all the surf shops that I went into and the same with Doug. And we thought we were going to be instant millionaires, no doubt about it. Yeah. So, all right. So you're getting all this feedback that seems pretty great. Yeah. And before we get into like actually launching this business, you need money to purchase orders. And you also need to purchase different sizes, right? Because people have different size feet. And so first of all, you and Doug, I'm assuming establish a business together. That's correct. We're going to be partners. And the interesting thing about that road trip we both did, neither of us realized that we hadn't asked for an order, right? Now we knew we needed inventory. And by a pure fluke, my roommate in Santa Monica overheard us talking and said, oh, there's some guys at my office looking for other invest, new investments. And let me take it to them. And they did. And we were able to raise $20,000 from them as capital. And we didn't even have a business plan. It was just the enthusiasm of, you know, me talking about how big it was in Australia and everything. But so we raised this $20,000. And we knew we would never, ever, ever need any more money than that for the rest of the business. Right. I see. I got your kit. We'll get there. Okay. So you raised $20,000. But it sounds like you didn't have any orders. So you just ordered what you thought. You could sell or is that right? You just made up, came up with a pretty simple. And we had short and tall and we had brown or white. Short and tall, like a short would go to your ankle and tall. Short was ankle. Okay. Tall was up to the calf, yeah. Okay. And then brown or white and then how many pairs of jurors? 500. And just different sizes. $15,000, yes. And it takes what, six weeks, two months to get these boots. It was very quick, actually. We was October and we got the boots in by the end of November. Yeah, just beginning to December. So you get these boots in. And now you're going to go presumably back to these stores that had expressed interest. And you're like, hey, we're back. We got them. And I remember going back to Concert Boys and the owner goes, oh well done, Brian. You are going to be so successful, but we couldn't sell them out of our store. We just sell surfboards and trunks and flip flops, but you're going to do great in the shoe stores. Good luck, you know. And walked out without an order, right? And this happened to, you know, about 60 surf shops all the way down the coast from Malibu down to San Diego. And the total sales for the first year was 28 pairs. Which was how much money? Exactly $1,000, but it's just a fluke, but it was exactly $1,000. And I'm not, I'm not fast enough with the math. How much were you selling a pair? It retail, it was probably between 50 and 70 depending on the short and the tall. Got it. Okay. So in 1979, that was not super cheap. No, super expensive. And I was, that was one of the worst facets of the entire our project for 20 years. Was the lack of margins I had because the pressure of the retail price kept us way way down. So it was very hard to make money. So you make a thousand bucks in sales your first year. So you are, it's not looking very good. And you are now, you've got hundreds of pairs of these things. What just piled up in boxes. 470 something pairs, yeah, in the third bedroom. In this house that you're renting in Santa Monica? Yeah, that was the third bedroom was the warehouse, yes. Wow. You couldn't do that today. You couldn't rent a house in Santa Monica and be broke, right? I mean, just, it'd be impossible. Yeah. All right. So you, it's 1980 now. We have a bunch of shoes. And what are you going to do? I mean, and what does Doug do? Like you guys had started? Yeah, Doug decided to go into the video business, which was just starting at that time. We knew we couldn't make a living out of no sale. So, you know, I wanted to give up, but I couldn't because I got 400 pairs in the bedroom. And all my investors' money is tied up. So I started doing swap meets and street fares. And basically anywhere I could get a crowd. And over the next, you know, January February March, I ended up selling about $6,000 worth of product. Pretty good. And most of it, believe it or not, was out of the back of my van in the parking lot at Malibu. Yeah. I used to go up for a surf in the morning. And afterwards, I'd grab a coffee in the newspaper and I had my van full of product. And I would just sit there with the doors open. I made, you know, steady money. It's just a point of clarification here. I know that especially in California because the water is really cold, most surfers wear wetsuits because it's hard to swim in that water, unless you're in a wetsuit. We're surfers in Australia wearing these wool boots because they wanted to warm up their feet after they surfed, like it just seems. Well, these questions you're asking were asked by every single surf shop owner and every consumer. But why are they so good? And the answer is that, and all Australians know this, is that sheepskin breathes, so you can put them on with freezing feet and they will insulate and if you've got wet feet like after surfing, it wicks the moisture out towards the surface and so within 10-15 minutes your feet are dry and warm, so there was a very, very practical side to wearing them after surfing. So that's what I wanted to tap into. But you can't turn this to a business, just selling them out of the back of your van. You've got to figure out how to get into retailers, right? And so we're there, I'm assuming, there were trade shows back in the early 80s for shoes and apparel. Yep. In fact, the market, it's called the action sports market, just started that very same year as I started. So action sports, surfing and skateboarding and all of the above, yeah. And so I did go participate, but nobody understood what I had. So the bottom line is, you know, in March I just shut it down and my first job in the summer was scraping boats at Marina Del Rey, then I switched over to construction from a buddy of mine, owned a contracting company in Bel Air and I was working in Beverly Hills and Bel Air on construction projects and that filled up the summer. So you're working doing these jobs just to pay the bills? Yes. You're not giving up on the shoe thing yet, you're still committed to doing this. I had the most interesting motivator, which was that this one in two Australians owned some sort of sheepskin footwear. So it's not the product's fault, it must be me. And I had that mantra for like 10, 15 years, every time it's not working, it's not working, I would come back to that thought that well, how come everyone in Australia owns a pair. And so with that attitude, I was able to stay in the game a lot longer than somebody who'd never seen them in Australia. Fair enough. So this is now the summer of, or end of the summer of 1980, you got to sell a bunch of shoes. Yes. And from what I gather, you started to run small ads in surf magazines. First of all, how did you do that? What was that expensive to do? Um, relative to how much money I had, it was very expensive, yes. But back at that time, the surf magazines didn't want money out front, so I was able to get 30 to 60 days to pay the advertising bill. So I was totally gambling that if I ran these ads, I would get enough sales to be able to pay for the ads. I got it. Okay. So you were running these small ads and it was just, were you calling them ugboots or uggs or something? Yes. Yeah. I did, probably the smartest thing I ever did in that business was I did a search, a trademark search that cost me $600 at the time, which today's probably four or five thousand bucks, you know? Yeah. And I did a search of the world, especially the US, to see if there'd been any prior use of the trade name ug, and they had not. So that opened up the gate for me to do the registration of the trademark. So you trademarked that name? Yes. Uh, which was not a trademark, I mean, in Australia, it was just like, it was generic down there, yeah. Right. It would be like trademarking the word cheeseburger, right? That's right. It was just the thing. And you were able to trademark that as a brand name in the net, which is amazing that no one had thought to do that. But I guess this really wasn't a popular product in the US. Oh, nobody had heard of it. Yeah. All right. So you, um, from what I've read, because you've written about this in, in a book, um, you actually sold about $30,000 worth of these shoes for the year 1980. Pretty good. Yes. But you end up with a loss because that costs the boots and the expenses of the trade shows and taking out ads. So you actually, you're still running in the red. Yeah, still, still using my own capital, yes. And still living on summer, summer jobs to basically the state to stay, you know, and you were not a kid. I mean, you're now well into your 30s, right? And I imagine that maybe part of you or maybe your parents, or thinking, what's he doing with his life? Yeah. Well, he's in California, he's surfing, he's trying to sell these boots, I mean, did you get any, any of that feedback from your family at all? Yeah, my dad, who'd been a contractor, you know, absolutely did not want to be running my own business. And I think it's probably because he had such a hard time of it. That's why I got into accounting. He wanted a safe, secure job, you know, work your way up to chief accountant. You know, I couldn't think of that to me was like going to prison. All right. So you're, so you're still committed to this and you're now a full year in and still kind of pounding the pavement, going to these trade shows, trying to get more and more interest. And I think you even, in 1981, you even attend a snow or ski kind of trade show in Los Vegas, right? That's right. Okay. And was there more interest at that snow show? The ski market was even harder than the surf market because their attitude was, well, we have mud and we have slosh and we need rubber, you know, we got to have some rails. And they couldn't see sheepskin being strong enough or waterproof enough to work in their area. So, yeah, the ski markets were very, very difficult to get into. You get a job that summer in 1981, a very unusual job that would not exist today. You had a friend who gave you an in for this job that would pay well. What was it? It was, at the time when all the big mainframe computers were being replaced by desktop computers. And what nobody knew is that these big refrigerator size mainframes, every connection where one wire touched another wire or a motherboard touched, you know, plugged into another one. It was gold connections. And so he arranged to buy up all of these old mainframes which most accountants were paying to get rid of them, right? Not knowing they were full of gold. And so I was given a bunch of cash and a pair of snips and hammer and I found out when I got home that I'd made $3,000, which was a fortune to go on the road for a month, you know. But I realized I'd shipped over $300,000 worth of gold back to San Diego, not really knowing that I was doing it. It's still like on this ug thing, like who was manning your phones to take orders? Well, nobody was calling. I mean, I was like a non-entity for the first three to four years. And every time I'd go into summer mode, I wouldn't think about ugbots for four or five months. And then it would be, you know, July, August, September, I'd say, I think, oh, shit, I better figure out who I'm going to sell to, how do I get more sales, you know? Because I learned early on that trying to walk into a surf shop with sheepskin boots on a hot day was like pointless about. So I learned to wait for a really shitty day when, you know, the storm would hear, you know, then I'd go on the road and sales would, you know, I would open up, you know, half a dozen pairs in lots of different little surf shops. So like in the off season, I was fully into making money to stay alive. And then I would have to backtrack and get the ugboat business started up again. So like October and November was when you would run ug. Correct. I got you. Okay. So it was totally seasonal. Yes. So you would basically focus on this in October and November and try to get, you know, people to order these. You could get them in time for Christmas presumably. Yep. I mean, the unpredictability, this is insane because you've got to figure out how much you should spend on ads with the hope that it would convert and then hopefully order the right amount of shoes that you wouldn't be left with a bunch of inventory. Yes. Okay. Now, just at the ads for a moment, what do they look like? Were they like, was it just text or were there photographs of people wearing them? No. I thought I was doing a brilliant job, you know, telling you about one of the biggest mistakes I ever made, right, which was hiring these two models, really good looking, we posed them on the beach. And I'd run those things and the sales, you know, let's say 81, 82 was about 30,000. And the sales went to 35,000 like it was like, my ads were doing nothing. And then again, some a job and then come back to it and I used it. good-looking models again, sales went to I think as 45,000 that year and it was like just getting nowhere and it was probably the fourth season of me being in business. I really wanted to give up. I was working on a golf course in the summer time, right? To in what? I was a greenskeeper. I was changing the holes on all the greens and I was helping with construction and all that. By the way, I understand the necessity of doing all that, right? You needed to earn a living and now I mean, you're in your late 30s and you have been a certified, you've been a chartered accountant, which is kind of a prestigious gig, right? And here you are, you know, like doing manual labor. I mean, were you ever like, what am I doing? I actually love that golf. That golf course job is probably the best job I've ever had in my life outside of art, you know? But over the summer I realized, you know, my product's so expensive. It needs a huge inventory because you never know if someone's going to walk in the door their size seven or a size 13. So it was a very hard product for a retailer to stock because of the cost. Americans still didn't understand sheep's skin. They thought it was hot and sweaty and prickly and so so I've got that against me and I by a pure fluke was having a beer with one of my good retailers in Ocean Beach in San Diego and at his store and I was talking about how hard it was for me to get traction in the advertising and he called out to the back and he called a half a dozen of these little kids, you know, the 12 to 13 year old grommies who store their surfboards in the shop and he says, hey you guys, what do you think of Args? And they pretty much all just said, oh there's Args man, they're so fake. Have you seen those ads? Those models, they can't surf and instantly I realized that not only was my ads not working, I was actually turning people away from Agbirds because of the images that I portrayed them in. So it was a huge learning thing. So presumably you started to use real surfers in your ads. Yeah, I had a buddy who's a former world surf champion Pete Townend who worked for Surfing magazine and he was running a scholastic surf team at the time and I called him up and said, hey do you have any young kids who are about to turn pro? And he gave me Mike Parsons and Ted Robinson as two people to check out and so I hired them for, I paid them in boots, you know, and I just took my own little cannon sure shot and we went surfing at Blacks Beach in La Jolla and Tressels up in San Anofre. Yeah. So when I ran those ads, the sales which had been around, you know, 30 to 50,000 per year, the immediate jump was like $200,000. Wow. And it was because I finally connected the image that kids would want to be in the photographs, like they would be dying to walking to Blacks Beach with Mike Parsons or to Tressels with Ted Robinson, you know, and that reality really taught me everything I learned about sales and marketing. The jump from 1982 to 1983 was big. I think a couple of things happened that year, which one was you designed a logo for Uggs, right? Like you designed a logo as like a ram's head, I think. Yes. Right. I don't think it's a logo today, is it? They took the ram's head out of it. Yeah, it was too difficult to reproduce. Yeah, but that was the logo. Okay, so you had a logo, but you were basically able to just order, you know, from a manufacturer in Australia. Yeah, country leather. And then they would be shipped to the U.S. and you could sell them. And then the other thing, I think happened that year is you get a threatening letter, like a seasoned dices letter from another company called Uggs, U-G-H-S. It's also, they also sell Ugg boots. They're, I guess, Australian couple, but based in Oregon, who were doing the same thing you were doing, but they were actually making their boots in Oregon. In Oregon, yeah. They said you a letter saying, hey, you're using the name Uggs, we've, you know, we've got trademark on it. We're going to see you. Yes, that was, that was a horrible period. And I tried to find other names to use. But didn't you already have a trademark on the name Uggs? Yes, I'd registered a trademark, but they claimed that like in in Australia, the trademark law is if you feel the first guy in with your $10 and you feel the form out, you ain't the trademark. Right. The rest of the world, you have to establish first use and continuous use. And I was able to do that with this woman. She, she came in after me and I had advertisements. I had lots of public information that showed I was in business before she even came to America. So I knew I would always win a lawsuit, but I didn't want to be in one because I didn't have any money. And this was going to be, well, just because we're going to come back to this, it's going to be a 10 year saga. No, yeah. It was going to last a long time. But I'm sure in the meantime, it was, it's a competitor, right? I mean, since somebody is trying to do the same thing that you're doing, one other thing that I, I know happened that year is that you met somebody who gave you a line of credit. And I'm assuming because you were, you were doing well that year, right? And again, John Booster, who I guess you had met when you were in the mainframe. Yeah, he was a computer, yeah, decommissioning business. He gave you a line of credit, but he wanted to have the business, basically. That's correct. Yeah. And you know, when I look back on my experience of hug, the greatest weakness I had was my lack of financial knowledge, right? I was an accountant, sure. Yeah. But finance is not the same as accounting, right? Accounting is what happened last year. Here's the balance sheet. Finance is forecasting. What am I going to need over the next one, two, three, five years? You know, in a company that's that was growing pretty fast. So I was always in a position of the sales exceeding my ability to finance the production. And the more sales you get, the bigger your problems get in supply. Yeah. I never really understood that my accounting thinking was we just sold a million dollars worth of product. We're broke. That's the answer. Oh, sell two million next year. I think we'd have more money, but you don't, your twice is broke. Right. It's interesting because you did have this deep experience as an accountant, but as we will see, you know, for a variety of reasons, you felt like you had to make decisions that would over time chip away at your control of the business. That's correct. And you made deals that weren't necessarily in your favor, like basically giving half of the business away for a line of credit. Yes. I was always trying to get financing from someone who had cash. It wasn't like a well thought out, you know, business plan or anything. And always in September, October, where I had these humongous orders to fill and no product. So I was in the worst negotiating position of all time. And this happened two or three times during those early years where the old investors didn't have the money to buy the new product. So I had to do a deal to get them out and bring in bigger investors. And that was a really horrible cycle. Okay. So you now have a partner essentially, maybe a silent partner in the sketch on who's giving you a line of credit. Yes. Meantime, you are, you still have this kind of like potential lawsuit hanging over you. And I guess you just, you start to think, well, who wants to deal with this? Maybe I'll just change the name. And you thought about changing the name of August. I did. I came out with the name Jack Arru, which is like a cowboy. It is an Australian cowboy. Australian cowboy jacket. I see. And Jill Arru is the, the female version. And had these young kids that, you know, I knew the parents and they were riding for the AgSurf team. They they they had ag logos on their surfboards. I like all the surf, all the brands had surf teams. And so they wanted to be on the AgSurf team. You sponsored a surf team? Yeah. But only with logos and and product and stuff like that. I didn't really have any money. Right. And I went to them and I said, hey, listen, guys, we, you know, I'm going to have to give up the Ag name. And we're going to call them Jack Arru. So you'll be riding for Jack Arru. And I went, no way. We're never, that's a dumb name. We're never, you know, and I realized how passionate they were about the Ag brand. And just made me forget all about changing the name. And I said, damn it. I'm just going to go to court and fight this because that name is really powerful. When we come back in just a moment, how brands trademark fight is just the beginning of the struggles that put Ag and his ownership of it at risk. Stay with us. I'm Guy Raaz and you're listening to How I Built This. This message is a paid partnership with Applecard. I've noticed that a lot of people we talk to on this show, founders, entrepreneurs, creatives, they spend a surprising amount of time thinking about systems, not because they love complexity, but because they're trying to reduce it, the best systems usually make life feel simpler, calmer, more manageable. Apple well-being works the same way, because most people don't want to spend all day thinking about money. They just want to understand where things are going, feel in control, and remove some of the stress and guesswork from everyday life. That's part of what Applecard is designed to do. You can apply for Applecard right in the wallet app on your iPhone in minutes. Once you're approved, you can use Applecard right away with Apple Pay without any friction. And here's the fun part, you spend, and then you earn unlimited daily cash back on every purchase every day, not a month later. That's it, it really is that straightforward. And you earn 3% daily cash back on anything you buy from the Apple Store, and at select merchants when using Applecard with Apple Pay. One more thing people really seem to like is being able to track spending right from their iPhone. You can see purchases, search transactions easily, and get a clearer picture of where your money is going over time. It just makes things feel a little more transparent and manageable. Easily pin down spending with Applecard. Apply in the wallet app on your iPhone today. Subject to credit approval. Some transactions may not be displayed in maps. Merchant offers may change at any time. Applecard issued by Goldman Sachs Bank USA. Salt Lake City Branch. Find more at Applecard.com. When you're working with a team, it's easy to get stuck. What was supposed to be a simple landing page can turn into a pile of tickets and handoffs. Framer helps your team move faster. It's the Pro AI website builder for creators, teams, and businesses that want a professional site done right and more quickly. With Framer, agents and humans work in tandem. The agents bring speed and scale while the people bring taste, judgment, and control. Humans can collaborate in real time, iterate on the same page, and publish instantly. In Framer, you can build custom code components, create and manage CMS content, optimize SEO settings, and more. Framer is an enterprise-level solution trusted by the world's leading brands, like Proplexity and Miro. Learn how you can get more out of your site from a Framer specialist or get started building for free today at framer.com/built for 30% off of Framer Pro Annual Plan. That's framer.com/built for 30% off. Framer.com/built rules and restrictions may apply. Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. What the marketing plan, the 2AM kind, is this idea any good, am I the one to build it? Should I quit my job? Anthropic got built the same way, a public-benefit corporation founded on one hard question. How do we make sure AI goes well for people? So they asked, over 100,000 people, their hopes and their fears, and are publishing what they find, even the uncomfortable parts. Me? I've got my own hard question about AI. Here it is. If everyone has access to something that can help them write the business plan, build the prototype, analyze the market, maybe even come up with the idea. What separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at Claude.ai/hibt. Hey, welcome back to how I built this, I'm Guy Roz. So it's 1984, and Brian's business is growing, but he's tied to a seasonal sales cycle without reliable financing. He knows he has to grow beyond surf shops, but he can't get traction with any national retail chains. And he's feeling stuck until a trade show friend named Paul Busman starts opening doors for Brian to another sport, skiing. He was one of the founders of the ski industry association, what became this humongous trade show in Las Vegas, and he came on as a sales rep for me in the ski industry. I wasn't looking for a sales rep, but he came and convinced me that the ski market was a totally different market to the surf market, and he was right. So he had a group that was already selling gloves and socks and everything to all the ski areas and all the ski shops, so he added Ugg boots to the line. Guy, okay. 1984, record year, right, but not yet profitable. You had still had a loss, and you have this line of credit still kind of growing and challenging, and from what I understand that year, you, and I should mention, you had been recently married. You met Laura who became your wife, and you said to her, hey, I got a band in this thing. This is not going to work. You realize or decide that you see no future in Uggs. Yeah. That partner investor that gave me the line of credit, he was used to finding an idea and doubling his money overnight. That's why he had the computer business that nobody else ever saw, you know, stripping out the gold. And he wanted to double his money, but, you know, he had no concept of advertising, cost of samples, cost of communicating with the sales floor. Right. And you're getting stressed out, and you're thinking, that don't need this. Yeah. Yeah. And he just wanted his money out. And I do remember that there was a period when he was putting intense pressure on me, and I remember I was at home with my wife, Laura, and we were watching TV. I was lying on my back on the floor and the show finished. I clicked the TV off, and I rolled over on my stomach and got up on my hands and knees and I started crawling towards the bedroom, you know. And Laura, who is a really quiet person, she just looked at me and said, you get up now and walk to bed like a man. She sort of shocked me. And as I stood up, I just, I was like coming out of a fog, it was like, oh my God, there's so much more to life than this crappy little sheepskin company. And that night I started, you know, how can I get out of this? You know, I literally wanted to just get out. Yeah. I mean, I can understand, because you were feeling a bunch of pressure. And I mean, now you are almost 40, right, and probably still struggling, really struggling financially. Yeah, Laura was working for an architect, and she was paying the bills at the time, yeah. So all right. So there's a lot of pressure, and this guy wants his money back, or he may want to get out of business, and you want to just throw your hands up and walk away. And, but like will happen again and again in this story, some intervention, call it divine, whatever you want. You call up this guy Paul Busman and say, hey, I want to get out of this thing. He says, well, I know somebody who could potentially help you. His name is Neil Fearing, and he is his name. And he is a, what? Who is he? He's like a wealthy investor. His business was Yamaha motorcycles, and he was a distributor for them. But he was also an opportunist, and if he saw good deals in the marketplace, especially in the ski industry, he would buy a whole bunch of clothes out and figure out a way to make money out of it. So that was who Paul Busman introduced me to. And Neil came down and looked at our operation and said, you know, I could do this, but then we had to sit down and try and figure out how we were going to do it. Okay, and your operation at the time was you had a warehouse in San Diego, because you had moved. Yep. Just San Diego a few years earlier. And it was you and how many people do you remember working with you? I had a warehouse girl and someone that came in pot time did accounting. Okay, and who was doing like logistics, like sending, like shipping the orders? May. May. May. Okay. So he comes down. This guy, Neil, and says, yep, I think I'd be interested in buying you out. Yep. But from what I understand, he says, you're going to lose, we're going to buy you out. You're not going to have any ownership, but you can regain 25% of your ownership. Once this little issue with that other company, the Uggs, you just HS company. Once that lawsuit or that situation gets resolved, then you can, you get your 25% back. That's basically the deal they offered you. Yep. That's from his perspective is exactly how he saw it. Okay. But me being a naive, you know, business man, I was looking at, oh, he's so lucky I'm bringing in three new partners to my business. him it was this guy Neal. Paul was this guy you'd worked with so he'd be a partner. He had Paul and another guy Joe who was the close out guy. So the three of them we're gonna buy the company together. In their minds yes. Okay. And I was this sort of impediment that came along with it. But they needed you because you knew you had the connections, you had to run the business. Yeah. So you would stay on and I'm not trying to second guess you or anything. I'm just trying to get in your head when you were you know that time like when they said we're gonna buy the company to they give you a check that you could then cash that was your money. No no no we we set up a new corporation and in my mind we were all going to own the company 25% each and what were they bringing to this cash? They were bringing in cash the ability to buy more product they were we also moved the entire operation up to their warehouse in Anaheim and I was not going to be involved in the day-to-day operations anymore. I was going to be the salesman and by now I loved sales. I was just an incredible Uggboot salesman and so I was going on the road full-time and making I was on not on salary I was gonna make a commission on sales. Okay. And they were gonna do all of the operations so they're 75% was overheads and running the company. Okay so you saw this as it's almost like if you were to raise capital from an outside investor except not only did you raise capital they were also gonna operate the side of the business you didn't really want to do you wanted to focus on selling. Exactly. Sounds like you were also looking for some some kind of certainty or more financial stability so as a sales rep you would get commission. That's correct but you were giving up the business basically. Well in my mind I wasn't in my mind they were my new partners and nothing had changed. They're the ones that thought they just bought the business from me and it came to a head we spent a whole week organizing everything up in the Anaheim warehouse and getting the accounting working and everything and I finally went on the road my first day as a full-time sales rep and I drove down beach Boulevard to Huntington Surf and Sport and I walked in and the manager's name was David and before I could say anything he said hey Brian I heard you sold the company and I went what he said yeah I called an order in this morning and they said you don't own the company anymore and like I couldn't wait to get out of the store and I went to the Shell gas station next door to the phone birth because this is before cell phones right and I called up Neil and I said Neil what the hell are you telling people and he said what do you mean and I said you're telling them I don't own the company and he says well you don't yes I do you're my three new partners and he goes no you don't get your stock issue don't tell you finish the trademark and I just hung the phone up and I drove from Huntington Beach straight back to San Diego and I pulled out my contract and I read it and I reread it and I just went oh shit I don't own the company anymore well okay so you're frustrated but you know that you could get 25% of your ownership back sounds like they actually did pretty well that that year that they sort of came in I mean you guys did 650 thousand dollars in sales so yeah clearly on the up and up yeah the weird thing was I I actually loved being on the road selling and you know after we got a we made a deal that from then on they would not tell anybody that I'd sold the company okay right so that we got that out of the out of the way I'd already committed that I don't own the company I don't run this anymore but my mantra was I'm gonna try and get a pair of updates on every single person in America and I went back on the road to all myself in California guys and I got back to the office and Neil handed me a check for five thousand dollars and said that's your commissions and would you believe that I think that was the fifth or sixth year that was the first money I'd ever taken out of the company and here's a question I have for you I remember it you said that early on you would cringe it was so hard for you to go into these shops and try and sell them you were embarrassed you were you were nervous now it sounds like you're really excited to do it so what changed there was a couple of things by being out there with the customers it was so much easier for me to you know get a rapport going and introduce the product by having them try the boots on now that turned out to be the biggest factor in closing our first orders was having the buyer try them on but while I was in the stores I this girl walked into the shop one day I think I was in in Newport beach somewhere and she was touching the eggbirds and she obviously loved the look of them the feel of them and she was asking the staff guy there you know what are these like well I'm not really sure you know well they are they hot not really sure you know what happens if I get them dirty and the guy was useless right yeah and I saw that interaction and I came up with what I called the six pair stocking plan and if a store would open up with six pairs I'd give a free pair to the store manager and now you know I was in a different surf shop you know a month or two later and a guy walked in and he says you know what are these boots like and the the sales guy says oh they're fantastic I'm wearing them now he says I don't your feet hot no they breathe you know so well what happens if you get them where to oh you can wash you know I mean it was just like night and day and so the guy bought a pair of egg boots because there was somebody to validate how good they were and so that cost me a pair of boots for each new store I opened but that changed the trajectory of argh forever that was probably the best marketing plan I ever executed on okay so you are now full-time selling and baking commission and driving all around Southern California I think at a certain point even tried to build like a boot for the ski market specifically for the ski market called the Z-lander and I've seen it described as a ski boot but I don't think it was a ski boot what what wasn't no it wasn't a technical ski but no it was an after ski but yeah a boot that you could wear in the snow because the original classic line had an EVA saw it was a flat piece of right the vinyl acetate whatever and it was super slippery on snow and ice so we created a rubber cup saw because it was rubber it was much more sticky on snow and ice but yeah that was a big big change made us much more credible in the snow industry so it's 1986 and you are selling you're on the road and the litigation or the the threat of litigation or the loss it essentially gets settled I guess and neither side really comes out the winner or loser I guess your trademark wasn't invalidated hers was not invalidated um U.G.H.S. could continue to sell in the U.S. but say made in America that's correct and yours the U.G.G. would also be allowed to sell in the U.S. but had to emphasize made in Australia yes so this sounds like a great result and now you get to 25% back now officially in stock yep settling that lawsuit was a big step and and probably the best advice my lawyer ever gave me was okay Brian now you can sell just beat her in the marketplace but I didn't really push to get my stock right away because a weird thing had happened you know the second month I was out on the road after we made this change you know Neil had to me a check for $10,000 and the next month another $10,000 this is your commission in commissions yeah I'm realizing oh my god I don't have to do any ordering I don't have to do any accounting I don't have to do any warehousing and shipping I don't have to I just am doing the marketing and I'm on the road selling and I and it wasn't even selling anymore it was hanging out with all my buddies who who owned the surf shops and the ski shops and you know we'd go fishing in Idaho we'd go golfing in Nevada you know it was just a great great lifestyle and I this was a classic case of nearly always your most disappointing disappointments will become your greatest blessings which is one of my favorite sayings and here I was like destitute with didn't own the company anymore but suddenly I'm traveling the the America I'm making more money than I could have ever imagined at that time and that literally went on for the next three years all right but from what I gather you did not recover your 25% ownership I was very very close because in that three-year period I was just talking about Neil had bought Joe and Paul out okay so he owned a hundred percent of the company now but you had settled that lawsuit so certainly yeah so he finally called me up and said hey Brian look you've settled the trademark come in next week I've got the attorneys ready to issue your stock and that day he hired we had a life insurance salesman come in from Trans America and we wrote out life insurance policies on each other so we were full steam ahead but that next weekend Neil was at a motor cross race he was a big you know motorcycle rider and he was not in good health and he had a massive heart attack during a race the next week after the next between the time he called me to get my stock and that was a very next Sunday he had a heart attack in this race and never recovered and so now his widow who'd never stepped foot inside the our business now owned 100% of our Wow and and I was like out in the cold again you know so because we because you hadn't signed the deal we hadn't signed the contract to bring me back in as an owner wow so I called her up and you know commissar ed and everything and I said look I'll be up tomorrow and I'll commit to working a year for for the business to see if we can salvage it and that became you know coming off the three best years of my life this became the hardest of my life for sure so okay this is 1988 and so you're you're running the business but apparently the accounting was a mess a total like it was books were just a mess checks hadn't been cashed POs hadn't you know been paid and then you guys had outstanding bills that you had to pay what did you discover it was what you said a mess and I had to try and reconcile everything and it ended up about eighty seven thousand dollars in the hole when I finally finished the accounting had no leads on financing for the following year my supplier country leather had just had three fabulous years working with Neil and he got his money on time all the time and when I called him up and told him the news about Neil he started to clam up and he was I knew he was thinking back to when I was running the company before Neil and he you know I always paid him but he never knew when or you know the money was coming and so he started to get very cautious and I said George don't worry I'm gonna do a business plan I'm gonna go out and refinance the company and I'll have plenty of money to start production right but it didn't work out that way it you know I wrote a business plan but I got nowhere with the bankers friends and family were way beyond that so you know I really was desperate for three or four months on who the hell can I approach and and I mean you were still running the business orders are coming in yeah in fact that it was the best of worlds and the worst of worlds you know the best was that I'd created a black and charcoal two new colors for the lime which all the sales reps had and that was right before Neil died so they were out in the field and black and charcoal were just kicking butt with all of their orders and we were you know getting two three thousand pairs of orders a week and I was bundling them and sending them down to the manufacture going hey George get ready it's gonna be a killer season you know working on the financing and it got to be April May you know and I started thinking who would benefit from me being in business yeah and I thought initially I thought all the retailers but when I called my best retailers they just laughed at me so you know you're one brand in a hundred brands we have in this store Brian forget it you know and then I hit upon well how about the tanneries you know that their business is selling sheepskin and I'm a huge user of sheepskin you were trying to get them to finance yeah so I sent a business plan down to several them and one guy Gordon Jackson who owned a big tannerie in Melbourne he called me out and said Brian this looks fantastic you know come on down and he was a really weird guy he had the mantra you know I reserved the right to change my mind and he he was a very difficult guy to work with at first it was come on in what how many sizes do you have how many colors do you have how many skins are we gonna need and the next day was oh my god this is you know this is pretty risky Brian I'm not sure we can go forward with this and the next day was oh I found a guy in Los Angeles looking on you and then the next day was oh look it's a family business and you know my family don't want to go into there yeah the bottom line is I spent like a week with him but we never got a commitment to finance or build product and apparently this guy that you've been buying boots from this guy George virtue yes he's gone unpaid for a long time and he basically says I'm not gonna ship you anything anymore yes and and so I mean that's it game over right I mean you can't there's no business if you're suppliers and selling you sending you boots yeah pretty much but when I went to the trade show that September we had no new product to put on the you know displays I put all last year's product there I didn't want anybody to know that I was out of business wow and you know I didn't tell any of my staff I didn't tell any of the retailers that we were selling to that I wouldn't have product to ship I so when I got back to San Diego after the trade show we you know around about midnight I called Gordon in Australia at the tannery and I said Gordon I'm just gonna have to shut the business down and he was very sad and we hung up and went to bed and then about a half an hour later the phone rang and it was Brian it's Gordon here screw George I'll get you all the boots you need you know and just like that his commitment meant that we didn't have a handshake we didn't have a contract nothing he said send me down the patterns which I did and he duplicated the patterns and sent them out to four or five manufacturers and he cranked up his tannery to full production instead of supplying skins to everybody and it took us about three weeks but then we started getting the first two thousand pairs in and then the next week five thousand pairs the next week and it was enough to keep the our company alive and there was product out in the marketplace with our labels ago and it was so lucky so how did you regain your ownership I mean if if his nails widow owns the company did you say go to her and say hey let's figure this out maybe you don't want this business maybe I can buy it out like what what did you do so what happened is that towards the end of the season I got a call from the life insurance company trans america because I made a claim when Neil died back in February March and I'd not heard much except they rejected they rejected I had a lawyer who kept pressing them and they finally called us and said look we've got to get this off the books by December 31st can you come to Los Angeles and we spent a day negotiating with them and we ended up getting two hundred thousand dollars as a settlement to walk away even though Neil didn't even have his you know physical done so I was super lucky to have got that offer and in the meantime I'd said to Della look I think I can pay you this amount I don't have the cash right now but if I can keep this season together I'll pay you and so I signed a promissory note with her and this two hundred thousand dollars was enough to pay her note out and then by you know I I owned the company one hundred percent again you know who would have ever thought that that would happen again when we come back in just a moment how Brian tackles a new problem his boots are finally flying off the shelves but Brian doesn't have enough money to meet the demand stay with us I'm Guy Raaz in your listening to how I built this one thing I've learned from talking to hundreds of founders is that as a business grows complexity can become a huge problem suddenly you've got different systems for finance inventory customers operations and they don't always talk to each other if I were building a company today I'd want all of that in one place with AI helping me make sense of it and that's exactly what net suite next is designed to do you probably know net suite the AI powered business management suite that brings your financials inventory commerce HR and CRM into a single source of truth net suite next is the next huge leap in how business gets done because AI is built into everything you do AI agents work alongside you to solve problems and handle routine work and anytime you have a question about anything ask just like you're having a conversation with a colleague for the first time ever you can try net suite next for free if your revenues are at least in the seven figures go to net suite dot AI slash built built for every industry ready for every boardroom net suite dot AI slash built when I pull up to a gas pump to fill my car I'm not thinking about chemistry or engineering I'm thinking about getting in filling up and getting on with my day and it reminds me a little bit of the founders I talked to on this show because the best ones obsess over things their customers will never see tiny details and visible improvements relentless iteration and not because anyone's watching but because it makes the product better that's what the mobile brand does it engineers fuel the same way great founders engineer their products mobile supreme plus premium And gas helps keep engines. three times cleaner, which can mean better performance and improved gas mileage. It's for people who care about what's under the hood, even if they never see it. Three times cleaner compared to mobile regular gas in port fuel injected engines. Actual results may vary. Visit mobilefuels.com for details. Hey, welcome back to How I Built This. I'm Guy Roz. So it's 1989. Brian is now the sole owner of Ugg, and by the end of that year, for the first time ever, Ugg turns a profit, $140,000, which is great news. But Brian's inability to secure stable financing is still a big problem. I didn't have the skill to go out and raise the money, traditionally, by this time there were business plan modules, but I didn't really get into that. I was still, you know, who's a rich person that I know? There was no real structure to it. And so I was always pushed down the road until I was desperate to get financing. Here's the irony. The business didn't need that much cash to run for the season. It just needed the guarantee that the manufacturers would get paid. So that meant a letter of credit. So that when they shipped their product, they were automatically paid. If I just had a standby letter of credit for two, $300,000 each of those years, because when we shipped product, we had cash immediately, pretty much immediately, we were able to pay our bills and we get more product. And it was, it only took a couple of hundred thousand to get that cycle running. But because I pushed it so late every year, I needed a half a million and three thousand of a million dollars. And that was the hard money. And so you were constantly, and in this saga, there are so many names of people who were involved as partners at one point or another. It sounds like your strategy was the same. I've just got to find somebody with money who's willing to infuse the business with cash and then they'll be an owner, a part owner. And you kept coming back to this strategy. The danger is that you might have a partner that you don't like or you don't get along with. Yeah. And so I had an associate, Alan Greenway, who was another Australian who had done very well in the hotel industry. And I'd been in business with him in a different deal. And so we trusted each other. And he would have been a great investor. However, he thought I was a bit of a wild candidate. He said, Brian, look, I love you. But if I gave you money, I wouldn't hear from you until you needed more. And he was pretty right. And so eventually I finally said, look, Alan, I'm throwing away thousands of thousands of dollars of worth of orders every week because I don't have product. Can you please just give me a letter of credit? You're getting, you're having, you have more demand than you can actually. Yeah, so much more demand. Yeah. And so finally he said, look, Brian, I have an associate, he's a CPA. If he can come into the business and look over your shoulder, I'll invest. So as much as I really disliked this person when I finally met him, my option was to keep the company alive and bring him in or refuse him and that the company probably would have followed it. So I opted for the devil that I knew by bringing him in. This is a guy named Chuck, I believe. Chuck Kaiser, yeah. So you were constantly bringing in new partners, which, I mean, man, that's going to create a lot of tension and a lot of challenges. But keep in mind that the new money did never ever want the old money in the company. So that's why each iteration was a new version of the business, a new entity was formed. And I had to make a deal with the previous investors to pay them back. So I would do promissory notes to pay them back their capital with a little return so that I could move forward with the bigger financial, yeah. Okay, so one question is, and maybe this would just be unrealistic, did you ever entertain the idea of just building your own manufacturing facility in the United States, like the people making uggs in Oregon? Yes. Because that would have solved maybe some of your problems because then you controlled the production. Yes. In fact, it was around about that time that the owner of the UGH company came to us and said, look, we're desperate. We're not making any money. This is the company that sued you. That had sued me. Yeah. And the woman who sued me, she'd been taken out of the business by investors. So it was the investors now I was talking to, and they just wanted desperately to get out of it. So we ended up doing a deal where we purchased the UGHS company and we maintained that factory for a couple of years. So you actually buy the factory, and so was that does that become your primary supplier now? Not a primary supply, but it did end up making significant dancing to the end of the production for us, yeah. But again, we still had to then we had to finance the factory. Sure. Right. And they could make the same exact boot. It looked exactly the same. Yeah. But yeah, you had to finance the factory. So that's also cash that you got to put out there. And meantime, most of your sales are still in, what, boutique shops, small businesses, or by 1992, or are you starting to get into bigger retailers? That's the year where we started to get traction in the stores, yeah. We were huge in the surf market. Then there was a ski side. Well, snowboarding was just starting. And I picked up on that vibe very, very early. So we started advertising to the youth snowboarding thing. Yeah. That worked in the snowboarding industry. It took a long time for me to get back east, because I didn't know what the kids did for sport in the winter. And I was talking to a sporting good owner from, I think it was Chicago. And he rolled his eyes and go, "Dah, they play hockey." And being in Australia, I had no idea of the hockey market. And when I looked it up, I went, "Oh my God, this is twice as big a surfing." And so we started making our ads for the youth hockey players, which were all over from Chicago all the way back to Boston. And that turned out to be a huge market. And the big department stores now are seeing this happen. And so they started calling me to come and negotiate, getting their product into the stores. All right, so this is 1992. And I want to put this in perspective. And not to discount or diminish what you've done. You talk about huge markets. Your total sales that you were $5.8 million. So you were still a very small business. I mean, Ugg was not a nationally known brand. Not at that time, not. Become, right? And I think, you know, the United States Small Business Administration considers anything under $40 million of small business, right, in the United States. I agree with that. But the thing is, is that you really, you know, to go from a winter boot or a surf boot to a fashion accessory, that's a bigger leap. And I guess it's around this time, where the guy who originally, you originally joined you, Doug Jensen back in 1978. He's been out of picture. He suggests that you actually get these boots on the legs of celebrities, which is hard. You can't just say, "Here's celebrity, you know, wear this." But he suggests that instead of going to the celebrities, you go to the people who style them, like the makeup artist and the people who dress them, right? And you send them pairs of the shoes for free? Yes. How did you find these stylists? I found a mailing list of stylists in Hollywood and sent a letter to them. And about 400 people responded. And so I sent them all a pair of Ugg boots. You know, no questions asked. And it was a couple of months before I started seeing them on celebrities. But the biggest thing that came out of that was that I started looking at People Magazine and Us Magazine, bit by bit. The Ugg boots started showing up over and over again in all of the celebrity magazines. So I came up with the description "casual comfort." And I said, "I want to market Uggs as the ultimate casual comfort footwear." So we had the money to hire a PR agency that I was hoping would take this to the market and make it a much more mainstream product. And I'd made an appointment with the USA Today Fashion Editor. And by the time we arrived at her office, she'd double booked and we only had like five minutes to make a pitch. I pulled out a little folder that I had full of celebrities. One of those photographs was Pamela Anderson on the set of Baywatch. And she was in a red swimsuit with tall white Ugg boots. And she took the name of the photographer and the name of the magazine. And you know, the next morning on the Lifestyle section there was a photograph of Pamela Anderson. You know. And the whole internal next page was that this expesay on sheepskin and shelling in fashion and I don't know where she got her information from overnight, but she did a tremendous job in creating this category. Okay. There's another parallel ad campaign that may have been even more successful at least temporarily. You guys in 1994, that year you did 11 million in sales. Yeah, large part because of a three month ad buy that I believe cost half a million dollars, which is a huge amount of your budget, on Rush Limbaugh. Now Rush Limbaugh, some young people may not remember, was he was like Joe Rogan Plus, you know, like the biggest conservative talk show host far and away the biggest national audience, and he had very successfully sold snapples, snapples and advertisement show and really had helped snapple grow. And this is a little controversial because some people might have said, oh, it's on Rush Limbaugh, I don't want to buy this product because I don't agree with his politics. So it's a little bit of a risk, right? But he reaches a huge audience. Yeah, I thought that initiative, you fought it, you didn't want it. He was just not a fashion icon. He was a hard right winner and very polarizing, you know, we'd spent years building up this image of casual comfort and fashion and everything. And so I really fought it, but I was outvoted out of board meeting by your partners. They wanted to be on, and what was their rationale was, look, he reached the biggest audience in America, I think of as much more selfish than that. Alan was a Rush Limbaugh groupie. He wanted to be in the audience in the front row with Rush Limbaugh. What do you mean be in the audience? Well, he wanted to go to New York and be in a taping of one of the Rush Limbaugh shows. So he was excited about it. That was his motivation, half a million dollars. I mean, that is a huge amount of your budget. That's 5% just on Rush Limbaugh for three months. It's ridiculously big, yeah. What happened was that because the board voted for it, I didn't want to fight him. I said, okay, I'm on the team, right? So I'm going to go there, I'm going to introduce the Uggbirds to Rush Limbaugh. And I said, here, try this, I know I don't need to try it on. And I had a bit of a fight with him. I said, well, look, if you don't try him, we're not going to do the advertising. And I was bullshitting because I had to make this deal. And eventually he tried them on and he goes, oh, my God, these are so comfortable. I could sell these. So fast forward, it's now November, I think, came on the show, hey, folks, I got some good news to tell you, today we have a new sponsor and it's Ugg Boots from California. And that second, our switchboards shut down because every broker in the country, every stock broker was calling us saying, are you guys public? Can we buy stock? Can we spot, yeah? Because they'd seen what had happened to Snapple, and Snapple had gone into the millions to the hundreds of millions and they were wanting to jump on board. So effectively, our switchboards shut down for the entire season. We had to create new phone numbers and we sent them out the phone numbers to our best retailers and said, you're going to have to fax the orders in. But in 1993, you did 9 million in sales in 1994, which was the Rush Limbaugh ad campaign to do 11 million. So not that much of a boost. So it's interesting because I would have thought when I read about this that it would have really supercharged your business like it did for Snapple, even though his audience was conservative. But you know, these audiences older, too, and I think this was more of a younger product. Yeah, and I'll give you a good example of that. One of my best surf shops is pretty hardcore surf shop in Hermosa Beach in LA said this grandmother drove into the shop because they had args on the big banner outside and she ordered eight pairs for all her grandchildren and she said she'd never heard of the brand before, but Rush Limbaugh said she had to do it, right? Yeah. So we substituted really good fashionistas who loved the product for these people who'd never even heard of it. Got it. All right. But it doesn't sound like it did any damage. It just moved a sideways. Yeah. It was just a huge ad span. So, okay. So you do that. But you end up the year with 11 million in sales and so, you know, you get into 1995. And even with all this buzz, you are worried that you guys are doomed to repeat the same mistakes, too much spending and I could see it coming so clearly. In fact, the pre-season orders for the January February March period looked like the company was going to be destined for $18 million, maybe even $20 million. I saw this as a kiss of death because you could not finance those orders. I knew I would not be able to finance an extra $65, $67 million in product, yeah. But there were no real competitors, either there were no knockoffs at that point. Not really because the hug brand was so powerful that anything else was called a fake hug. Like kids would not wear them to school if they didn't have the hug brand on them. And hugs were not cheap. No, they were up in the $100 range by now, yeah. Wow. Okay. So you're still concerned about this. I'm just surprised because by 1995, you would have thought, okay, they've proven this out. It's growing. Did you see an endgame? Did you see an end point? Did you think, okay, we're going to go public, we're going to get acquired. Like, did you even was that on your mind? Well, I'm going to open up here. I don't really talk about this so much, but I had a different pressure on me this year. Chuck Kaiser had sort of turned out to be a bit of a sociopath and was a very narcissistic person. He started to create such chaos within the company that I spent most of my time fighting him versus going out and marketing and selling the product. And I didn't really want to have to deal with Chuck anymore. And so this weird serendipitous thing happened. It was a goose bump moment again, right? I was in the baggage claim area at Atlanta Airport, I was going to the Super Show, which was one of the biggest sporting goods shows in the country at the time. And way up the other end of the hall, I saw a friend of mine. His name was Doug Otto. This is in 1995, when you go to the Super Show now. It was a very beginning. I think the show was in January of February and I'm going to backtrack, do you remember? I was in the parking lot at Malibu, selling oak birchwood out of your van. Doug was selling sandals out of his car, found about the same time. And he parlayed his business into licensing different brands like surf brands and stuff. And he eventually took on the license for Tiva sandals. And in the very early '90s, the outdoor market took off and Tiva went with that. You know, they went from like 16 million to 60 million. Wow. Just through this. And because of that, they did an IPO. And I knew that they were sitting on about $25 to $30 million in cash. When I saw Doug in Atlanta, right, and I walked up to him and we hiked five to each other. Because we'd seen each other going in and out of surf shops for like 10 years, right? We'd joked about selling out to each other in the past. And I said, Doug, if ever we're going to do it now is the time. That afternoon we had the accountants back in California talking to each other and suggesting meetings to start the due diligence on selling the company. So he was interested in this idea of acquiring you. And because he had the success with Tiva. Yes. His company died every winter. Our company died every summer. Because he was selling summer Tivas for the summer. Yeah. Yeah. And his company was not called Tiva, right? What was it called? No, it was called Decker's Corporation. Okay. So I called up Alan and I said, Alan, we have this opportunity to sell the company to a really good guy. He's honorable. He's not going to screw us around. I'd like to start negotiating or have the accountants start negotiating on one condition that Chuck Kaiser is never ever allowed to speak to anybody in this deal. Okay. We went along with that. And it took us, I think, from February as when we met in Atlanta, it probably took October November to finish all the due diligence and have the actual transaction consummate it. So by the end of the summer, the deal closes and Decker's agrees to acquire UGS for a little under $15 million. And I guess you didn't really want to stay on. I mean, you agreed to kind of stay on as a consultant, but you really didn't go, want to go because Decker's is based in just north of Santa Barbara, I think, and you didn't want to go there. You want to stay in San Francisco? They offered me the position of VP of marketing, but Alan took me aside and said, Brian, You don't have to. have a political bone in your body. So if you join this public company, you're going to get chewed up and spat out. Yeah. And so he was the one that made me see that, yeah, I'd be better off as a consultant. And so I worked for two seasons with them, uh, just helping with, with their marketing and sales. All right. So Decker's acquires, uh, uh, in 1995, 1995. I should mention that we've done another brand on this show that Decker's also acquired a shoe that many people will know called Hoka. Yeah. Great brand acquired that brand, uh, for about $3 million. It's a multi-billion dollar brand. Decker's is a, I don't know enough about Doug or the company, but what I do know about Decker's is that this is a business that knows how to take a small brand and turn it into a massive brand because they have three brands, uh, Hoka and Tiva. And it's a multi-billion dollar company. I mean, they have, they've figured out how to make Hoka and Doug like not just a practical shoe, but a fashion statement. Yes. So they take over, uh, and they supercharged it. I mean, they do deals with Jimmy Choo. They open, uh, brick and mortar stores in New York and in Tokyo, they, they did an endorsement deal with Tom Brady. I mean, for years, he was just wear hugs everywhere. Yeah. No, he turned out to be a great ploy for getting into the mail, you know, the guys who are on TV every weekend watching football. And that moved with Tom Brady. I thought it was a brilliant stroke to bring people back to the, to just the fact that males do wear these products. Yeah. What did you notice about how they were able to take this thing? It was the same product, the same name. Yeah. And now you had done a lot of the foundational work you had gotten it on the legs of Pamela Anderson and yeah, people were sort of becoming aware of it. But what did they do that turned this into a an iconic global phenomenon? How did that, do you think they did that? After they did the acquisition, they immediately hired a guy who had come out of a company called LA Gear. And he tried to turn the brand into a street cool product. He lasted less than a year. And then they brought in a young lady called Connie Rishwane, who had spent time in a lot of the New York high fashion footwear industry. And she's the one that started advertising in, you know, the, the really, really high-end women's fashion mags. That teamed up with the fact that we'd sent boots to Oprah. And she ordered pairs for her staff and everything. And if we had announced that Oprah was, was wearing our shoes or boots, it would have killed the company when I owned the company because I didn't have the capital or build the product to take on that demand. That in conjunction with Connie Rishwane, who knew New York fashion, those two things coincided to make, like, break through the $100 million barrier and the $200 million, $500 million. And that, that combination is what really built deckers into the, uh, billion dollar hug brand. That was just in a, uh, a macy's in New York City recently. And I mean, uh, it's, you know, it's still a huge brand. No one's a macy's these days. But, uh, you know, hug still has a section there. And, you know, the got shops and, uh, it's still going. It's still a powerful brand, which is quite remarkable. Yes, especially after, it's coming up on another two years, it'll be 50 years, I think, two or three years. And, and I, I am just blown away at the longevity of it. The fact that it's, uh, it's in the two billion range now for a couple of years. And, you know, a lot of people ask me if I resent the fact that I don't own it anymore. And it, it couldn't be more opposite. In fact, after all of this, I wrote a book called The Birth of a Brand. And the theme of that book was, you can't give birth to adults, right? Every entrepreneur has this aha moment, which is the conception. And then they take some action, which is the birth, right? So for me, buying six pairs of samples was the birth of hug. But then every business just goes into this horrible infancy and it just lies there. But if you can keep feeding it and keep it alive, it'll hit the totalling stage, which is really cool because magazines are running articles about your product and your, all your true reliever friends are telling their friends. And that's a pretty cool phase. And that goes from totalling into youth, which to me is the best phase of every business because production's working, accounting and madmen's working, you know, everything's working. And you can run a 10, 15, 20 million dollar company in that youth phase. And if it's a great product or a great service, it'll hit the, the teenage phase. And then, you know, all bets are off. But eventually it becomes mature as a company. Yeah. And when you think about, you know, the journey you took and, and, you know, taking this risk and you were in your mid 30s, you'd establish careers and account and you left it and it was a tough 10 years that you went through after that, trying to build this brand and really making no money and struggling. But in a, and it worked out and you were able to sell it and you were happy with the result. And, and now you've got your legacy is tied to this massive brand. How much of, of, of this do you attribute to the work you put in and do you, or do you put any, any stock in, in luck? Oh, it was a hundred percent attributable to perseverance. That's all I can say. I, and again, I had that vision behind me of, of the Australian acceptance of the product. So, I, I just was happy with the mantra that it can't be the product. It's got to be me. What can I do to fix this? And just having that attitude when I came to every sort of obstacle. And so, when I walks through an airport in the winter and somebody walks past wearing ugly, so I always look around to see if it's got the ugly label on the back, you know. And I get such a kick out of seeing them randomly on the streets. So, in that part, I feel extremely lucky. In some part of me surviving and building it into something that I knew that it could be. That's Brian Smith, the founder of UG. Since Brian left the company, he started a few other businesses, including one that installed pre-fabricated walls. He even patented the process. But the 2008 recession hit the business hard and he wound it down. He's also written a book about the UG saga. It's called The Birth of a Brand. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at gyros.com or on Substack. This episode was researched and produced by Casey Herman with music composed by Rumtina Roblui. It was edited by Andrea Bruce, our engineers of Patrick Murray and Maggie Luthar. Our production staff also includes Alex Chung, JC Howard, Chris Messini, Carla Estevez, Sam Paulson, John Isabella, Kerry Thompson, Niva Grant, and Elaine Coates. I'm Guy Raaz, and you've been listening to How I Built This.