It was never intended to be an empire, she just wanted to make her work easier. Next thing you know, Gillette comes a knocking with a truck load of cash.

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Dave Young:
Dave Young, alongside Stephen Semple here for the Empire Builders Podcast. And Stephen just whispered in my ear what our topic is for today’s podcast and for the life of me it’s gone now. I can’t, oh wait, it’s been corrected. And then he’s retyped over it. We’re going to talk about Liquid Paper today. See what I did there with that little joke about he typed it into my head and then-

Stephen Semple:
Wiped it out?

Dave Young:
Yeah. It was a very small-

Stephen Semple:
Except not wiped out, liquid paper.

Dave Young:
It was a very small joke. Yeah. So I did get asked the clarifying question. Are we talking about Liquid Paper or White Out? It’s not white. It’s the other brand. The other guys.

Stephen Semple:
Yeah. No, we’re talking about liquid paper.

Dave Young:
So I have to admit that I have read about this invention. I think it’s a fabulous story. I think it’s so cool.

Stephen Semple:
It was invented by a woman whose name is Betty Nesmith Graham. Bette Nesmith, later known as Bette Nesmith Graham. She was born in Dallas, Texas and she was not a chemist or an engineer. She was a single mom who was a secretary. She started the business in 1956 and in 1979, the business was sold for $47.5 million.

Dave Young:
47.5 In 1979.

Stephen Semple:
’79, 1979.

Dave Young:
That’s not a bad retirement. Are you going to dig into who her son is? Was?

Stephen Semple:
Absolutely. There’s a neat tie in there.

Dave Young:
Yeah. Her middle name is the key there, right? Tell us her name.

Stephen Semple:
Yeah, it is. Yeah. Bette Nesmith Graham.

Dave Young:
Nesmith Graham. Yeah.

Stephen Semple:
Yeah, Bette Nesmith. So Bette’s mother owned a knitting store and had taught her to paint along with doing other crafts. And her father was a manager in auto parts company. So she grew up in this very middle class family. And at 17 she dropped out of high school. She married a soldier, Warren and had a baby boy. And when Warren returned from World War II, they got divorced and Bette was left single to raise a child, which let’s face it, back in the fifties. That’s a tough gig.

So to make ends meet, she worked as a secretary at Texas Bank and Trust. And money was tight for her and her son, but she worked hard and she started as a typist and eventually she rose to being the executive secretary at the bank, which at the time, that was the highest job available to women at the bank. So she did very, very well. So while she was doing this job, IBM came out with a new line of electric typewriter. So remember the one that had the ball on it and it was faster and it used a carbon film ribbon.

Dave Young:
The Selectric, I actually have, oh my gosh, this is going to take me just a second, but bear with me, Stephen, because this is going to be worth it. It may not even be on my phone. If I choose an alarm, turn it on, go to the settings and choose the sound. You ready? You ready?

Stephen Semple:
Ready.

Dave Young:
This is part of their advertisement too. I have this one too.

There’s a better way to put words on paper.

Dave Young:
There’s a better way to put words on paper. And she figured out a better way to take them off.

Stephen Semple:
What she found was, so this electric typewriter was faster used carbon film ribbon, but there was some drawbacks. First of all, the keypad was a lot more sensitive, so more mistakes were happening.

Dave Young:
Oh yeah.

Stephen Semple:
And they were hard to correct because carbon could not be erased without smudges.

Dave Young:
Yeah. Did you ever type with one of those?

Stephen Semple:
Oh, I did actually. I learned how to type on one of those. Yeah.

Dave Young:
Those keys were so sensitive. Right. I would have-

Stephen Semple:
You’d breathe on it and it would-

Dave Young:
Just as I would get my hands down to the keys.

Stephen Semple:
So to make extra money, Bette had the side hustle where she painted window displays at the bank and she realized, and here’s the realization that she ha as an artist, you don’t correct mistakes by erasing, you paint over it.

Dave Young:
Ah, yeah.

Stephen Semple:
So she decided to take this approach to typing. And after work one day she went to the library to look up a recipe for tempera, which is an age-old water-based paint. And she whipped it up in the blender because it uses like egg whites and things like that. And she whipped it up in the blender and she poured it into an empty nail polish bottle and started to use it at work.

Dave Young:
Nice.

Stephen Semple:
For correcting mistakes. And she actually tried to keep it a secret. But word got out and other typists wanted to use it, so she started to sell it. So by 1957, she’s selling a hundred bottles a month, four or five bottles a day. And she ended up turning her garage into a little mini packing plant. She paid her son and friends a buck an hour to fill little glass bottles and put on a label. The first name she had for the product was Mistake Out.

Dave Young:
Mistake Out.

Stephen Semple:
That was the original name Mistake Out. And she realized at this point she had a business, but she needed to make the product more consistent. So she got help from her son’s chemistry teacher and an employee at a paint shop, and they kept tweaking the formula. And on weekends she started traveling around Texas pitching it to wholesalers. And she had almost no success with that.

They could not see the potential. And how often have we seen that with new products?

Dave Young:
When was the last time a wholesaler had to type up a memo?

Stephen Semple:
Well, there you go. Absolutely. And how often have we seen this with new products that they just can’t get their head around it? She decided she need to market it herself. And so she took out an advertisement in a national supply magazine, and she sold all 500 bottles that she had in stock. Sold all over the United States, including 400 bottles to GE. But here’s where things get interesting. So one day she’s busy at work at the bank, and she accidentally signs off a letter, the Mistake Out company.

Dave Young:
From the bank?

Stephen Semple:
From the bank. She was fired. They found out she had this gig and she was fired. But it turned out to be a great thing. Turned out to be a great thing. And I don’t know where the origin of the name change happened, but in 1958, she realized Mistake Out was the wrong name, and she changed the name to Liquid Paper and filed for a patent.

And I really wish I could have found where the origin of the Liquid Paper name was, but I was unable to come across that. She continued to get help. She enlisted Bill Mero to further refine the product. And Bill Mero was credited with not only perfecting Liquid Paper, but he also invented things like clumping cat litter. And he worked on space shuttle heat tiles and developed a way to artificially age scotch. That’s where you might have come across his name.

Dave Young:
Really? A Renaissance man, a modern day Da Vinci kind of guy.

Stephen Semple:
Yeah. Improved the rubber skin on robots at Disney World. Did a bunch of things. So he worked with Bette to improve the formula, and by 1964, they’re selling 5,000 bottles a week. And by 1967, they’re doing a million bucks in sales. And she worked hard to promote the product. She advertised on Tonight Show in Glamour Magazines Fortune Magazine. By 1975, she’s has to move to a bigger facility. She moved into a 35,000 square foot automated facility that was making 25 million bottles a year. 1979, guess who came along the buy them in 1979 for 47.5 Million? Gillette.

Dave Young:
Gillette. That’s not who I was thinking it would probably have been.

Stephen Semple:
Gillette. And sadly, six months after selling the business, she died of a stroke. But the company was very progressive. It had onsite daycare facilities. So think about this, in the sixties and seventies, onsite daycare facilities, an employee-owned credit union, there was wheelchair access, there was tuition reimbursements. They had a racially integrated staff and in Texas recognized affirmative action policies.

Dave Young:
This is a business started by a single mom.

Stephen Semple:
Right.

Dave Young:
Right. No venture capitalist tech bro is going to do those things.

Stephen Semple:
No.

Dave Young:
Especially in the sixties, seventies.

Stephen Semple:
Exactly.

Dave Young:
Yeah. I mean, that’s man, groundbreaking.

Stephen Semple:
And one of the things that she did is she made sure her son was taken care of because not only was there the wealth that she had built in the business, but he also got an ongoing royalty for the sale of Liquid Paper. And you know what? He went on to become a pretty well known little dude himself.

Dave Young:
Now, she might have helped give him a leg up, but he ended up doing okay for himself, right?

Stephen Semple:
He sure did. Because if anyone has listened to episode 88, we talk about Michael Nesmith. He was a member of The Monkeys and the guy who came up with the idea for MTV.

Dave Young:
Okay. Yeah. I’m a huge fan of Michael Nesmith and his mother as well. What a cool story. To me. One of the lessons here, we talk about this a lot with clients and in our Wizard of Ads world, it’s a technique called business problem topology mapping, problem topology. And so basically, you look at the problem at hand and you look for ways that same problem has been solved in other industries, in other categories. And the fact that she was an artist doing signs on windows and painting over mistakes is the only thing that led her to coming up with paint to paint over mistakes in typing. Because that problem had been solved by window artists, right? We don’t scrape it off and start over. We paint over.

Stephen Semple:
And even the first iteration was an old style of paint that she went and researched, and that’s where she started.

Dave Young:
You could even say that using nail polish bottles, right? Because it easily could have been, oh, well, you have a little jar sitting on your desk and a paintbrush. This stuff dries just like nail polish, so you’ve got to keep the lid on and you got to keep it tight. And it’s actually the same size bottle. So the same problem that was solved in nail polish.

Stephen Semple:
And I had not even thought about that. The lesson I had down here was she knew from painting and being an artist, she took that idea and applied it, which was don’t erase the mistake, paint over it. But man, I did not even think about who else has learned how to apply this type of thing in a small manner, which actually her customer would be used to, which was the nail polish bottles. That’s brilliant. I did not even connect that. It’s the thing she had around and had handy.

Dave Young:
Yeah, no doubt had nail polish bottles sitting around. I hate making not a sexist comparison here, but the fact that all of the people doing all of the typing in the 1950s and sixties were women and expected to maintain their femininity and have good-looking nails, and all of the things that led up to this are things that made not only this product perfect for her, but perfect for her intended audience. They’re just naturally going to love it because it’s going to save them time. They already understand how to use it.

Stephen Semple:
No instructions required. Now, the other part that I also really admired is that when she went to wholesalers and they resisted, she realized, well, what I’ve got to do is just go straight to the customer. And so she advertised straight to the customer. And we’ve seen that on lots of other of these podcasts where a new product comes out and the existing industry doesn’t understand it doesn’t get behind it. And all of a sudden when you go straight to the consumer, straight to the end user, they’re like, oh my God, this is amazing.

And often when I meet with businesses that are fairly new businesses or startups, they’re hoping their whole distribution strategy is, I’m going to get it in the Walmart, or I’m getting it into Costco. And really, a lot of the times your best strategy is, especially if it’s a new, innovative product, you got to go around all those things and go straight to the customer,

Dave Young:
Get it into the hands of consumers, and they’re going to walk into a store. These women are going to walk into a office supply store and say, I want some of that Liquid Paper. And the guy’s going to be like, what? Liquid Paper you paint it on the page after you make a typo. That store owner’s going to contact the distributor and go, why don’t we have this?

Stephen Semple:
Exactly. Exactly.

Dave Young:
Oh, well, she was in here six months ago, tried to hawk it to us. No. So you get it in the hands of the consumer, they’re going to demand it from their suppliers, and if they don’t, you can sell around them.

Stephen Semple:
Exactly right. So there was a number of things that I really admire in terms of what she did, and it was a great story. And she raised a pretty amazing son as well.

Dave Young:
Thanks Stephen. That was a fun one. Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review. And if you have any questions about this or any other podcast episode, email to questions@theempirebuilderspodcast.com.

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