Today’s Show Recap
Thanks for listening to Makin’ It. On this week’s episode, we talk about how one entrepreneur is trying to leverage a life-saving drug, a new profile in the Makin’ It Success Stories featuring Phil Knight and, on Makin’ It or Breakin’ it, everyone’s favorite topic: Taxes. Let us know what you think of the show in the comments section at the bottom of the page!
Get pumped up because it’s time to start the show!
Tommy, Todd and Brittany start the show by discussing a recent story of how an entrepreneur acquired a prescription drug and decided to increase the price 50 fold overnight. The pill, Daraprim, is a treatment for toxoplasmosis, and its price went from $13.50 to $750 a pill. Martin Shkreli’s company, Turing Pharmaceuticals, purchased the pill and increased the price claiming the profits would help create better medicines in the future. The cost of research and development of new drugs can be enormous, and the drug companies, like Shkreli’s, claim they have to get the money from somewhere. Despite Shkreli stating that he would give the drug to people for free who couldn’t afford the drug and met certain qualifications, he was still vilified for his actions. Conversely, medical organizations have said they will have to find cheaper alternatives to the drug, and that is always a risk when there is a price increase of that magnitude.
On a larger scale, the American health care system and political and moral ethics are also called into question. Normally, it is the invisible hand that dictates an economy. If people can pay for a product, you can charge for it, and if they cannot pay, you can’t. Health care brings a different factor to the market. During the recent presidential debates, it was marketed that if insurance companies compete, health care prices should get lower. However, when a person is sick, the stability of medical costs needs to remain clear. Moreover, if the government were to get involved in regulating health care and limiting the amounts of money health care professionals and researchers could make, it could stymie incentives to develop new drugs and cause students to seek other careers aside from medicine.
Health care remains in a category of its own when it comes to business because it involves people’s lives, creating a number of ethical issues. To complicate matters further, people are still not taking care of themselves, such as continuing to smoke cigarettes and expecting a pill to cure the effects of long-term use. Perhaps a compromise lies in wellness choices being a factor before a patient qualifies for free care. What do you think of Shkreli’s actions? Do you think drug companies should be held to a different standard than other businesses? If so, how do you think it should be managed? Let us know in the comments section.
OMG Fact of the Week:
Abraham Lincoln’s corpse has been buried, exhumed, inspected and reburied at least seven times.
In the next segment of the show, Tommy, Todd and Brittany do another installation in the Makin’ It Success Story Profile Series. This week, they feature Phil Knight. An American entrepreneur and philanthropist as well as being listed as Forbes’ 15th richest person in the world, Knight is the man behind Nike shoes.
Originally from Oregon and having a love of athletics and business, Knight got his start while at Stanford University getting a master’s in business and running track. He went to Japan and found Tiger shoes, which he loved and decided to get the license to sell. When he returned to America, he partnered with his Stanford coach to start a business that would eventually become Nike shoes when he had initially only wanted an endorsement.
Knight still worked his full-time job as an accountant when he first started out his company that would come to be known as Nike (named after the Greek goddess of victory), and he worked the rest of the time selling shoes, even out of his trunk. Initially, he went through all kinds of problems getting the company started. They got accused of hiding checks and were hurting for money. The company got into legal problems with the distributors in Japan, and he couldn’t sell the Tiger shoes anymore.
By the time he got around to actually start the Nike company, he had obtained a couple of people who were key in the startup, proving how crucial it can be to have people who believe in you on your side. One of these key people was Jeff Johnson, a runner. Johnson believed in Knight and the company, even giving Nike its name. Johnson would go to the local cleaners and have them sew in the soles of the shoes to customize them for the local runners, and he was the one who got them to start selling Nike across the coast.
What is truly innovative about Nike is its history as a brand and its marketing strategies. Having paid $35 to Carolyn Davidson to get the Swoosh logo, Knight was so grateful, he later gave her 200 shares of Nike stock, which at the time was substantial. However, the big move that Nike made was they were the first company to really use athletic endorsements as their main driver for their brand. Nike decided to obtain the top five athletes in the world and show them wearing the shoes, knowing the rest would follow. Their whole branding strategy involved talking to the pro athlete, not the buyer, as an incentive to get the consumer to want in to their world. Another big marketing move made by Nike was hiring the small ad agency of Wieden and Kennedy who were also located in Oregon. Initially against hiring an advertising agency, Knight soon saw the benefits of Wieden and Kennedy’s idea of tapping into the cultural events at the time to create an emotional connection with consumers to sell the shoes all the while not talking about the product.
Knight has been successful in other businesses since his success in Nike. In the 1990s, he invested in a small studio called Vinton studios. Knight’s son Travis graduated from college and tried to have a career as a rap star, and Knight got him involved as an animator in this studio. After some mismanagement, Knight went from an investor to the owner of the company, now called Laika, which is known for their stop-motion animation films. Travis Knight took over the company, making it very successful.
With all of Knight’s success, he is not without his share of tragedy. While in El Salvador on a shoot for Laika, his son Matthew went scuba diving and had a heart attack and died. After the tragedy, Knight resigned from being CEO of Nike and took a backseat in the company thereafter.
Like many entrepreneurs, Knight was also a philanthropist, being known for giving the largest donation ever, as of 2006, of $400 million to Stanford University.
Knight is a prime example of an entrepreneur who has been in the spotlight but also has taken many behind the scenes roles, staying under the radar with his company, but keeping his products above the radar with his innovative marketing strategies. When asked why he didn’t invest more money in product innovation, his replied that advertising is his product. Knight is an entrepreneur who knows how to sell cool, making him worth billions of dollars.
Two Minutes with Tommy:
Next up is a new segment of the show called Two with Tommy where Tommy takes two minutes and explores things that have recently come to our attention. This week, Tommy talks about the power of words. The words we speak have determine our success. This is both a practical and spiritual truth. The power of life and death is in the tongue. That’s even in the Bible. We can speak negative and discouraging words, or we can speak positive and encouraging words. This is our choice. It is our choice what we will allow our self to think, to say and to believe. This is the power we have as human beings. The way our world responds is a direct response to how we perceive and create our world. Successful people realize that words have power. They realize that we can actually direct our world by the words we speak. Our words are like the baton of the orchestra leader. What we direct with our words, the world’s orchestra plays back to us note for note, chapter and verse. We must choose our words carefully when speaking to ourselves. This is really important. Our self-talk has the same positive or negative effect as the words we speak to others. We must all learn to build ourselves up, to encourage ourselves, to pat ourselves on back, and speak kindness, love and respect to ourselves and others. For more great content, insights, inspiration and products go to tommyrunfola.com
Finally, Tommy, Todd and Brittany end the show with the Makin’ It or Breakin’ It segment. This week they ask whether it’s better to have a flat tax or retain our current system of a percentage-based tax. A flat tax is a tax system with a constant marginal rate, applied to individual or corporate income. A true flat tax would be a proportional tax, but some implementations are often progressive or regressive, depending on deductions or exemptions in the tax base. However, a flat tax still has tax exemptions. A flat tax has us all paying, more or less, the same rate of taxes, which seems fairer at its face.
While many believe if you make more money, you should pay more taxes, believing that they are taking more advantage of the things for which the taxes are paying. However, most everyone is taking advantage of the tax system in some way, so everyone should pay something, but that’s not the way it’s working.
Additionally, there is also a great misunderstanding about businesses paying taxes in comparison to individuals paying taxes. The main difference is that a business takes all of its deductions and, then it pays its taxes. An individual working for one of those business pays taxes first and, then they take their deductions. On the surface, it appears that corporations are getting a bigger tax break than individuals. This is only partially correct. A person can be an individual taxpayer and run a business and pass those deductions through to his personal returns. Another fact to consider is that the super wealthy who are claiming capital gains taxes are nearly avoiding paying taxes altogether, while people in the upper-middle class are paying the most.
Another solution could be to have a national sales tax and do away with income tax altogether. However, with all that said, there really isn’t a lot of incentive for the government to change the way we pay taxes. Do you think we should have a flat-rate tax or retain our current tax system? Do you think we should do away with taxes and focus on a national sales tax? Who do you think gets the most tax breaks? Let us know in the comments section.
Thanks for tuning in to Makin’ It. Let us know what you think of the show and if you have questions about your business, send us an email at info@makinitnow.com or leave us a comment below. We love to hear from our listeners and we read comments on the air. We just might choose yours for next week’s show (so don’t forget to tune in!).
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Additional Resources for Entrepreneurs:
For more information on Phil Knight click here.
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