Walter Noot - COO of USANA

This is the President McCormac Podcast with your host, Mark McCormac.

Today in the podcast, ladies and gentlemen, Walter Noot. Thanks for coming on, my friend.

I do. I think I do. We were probably playing basketball.

Yeah, yeah. I used to go up there. How long ago was that? That's like years ago, right? 15 years ago?

I did, until the friends of yours were a little aggressive, and so I just thought, man, you know...

Yeah, yeah. I mean, but we did. Who didn't? We had a couple of young kids that played with us who ended up playing at BYU a few times. Nick Emery, did Nick come play?

Yeah, they were both really good. I mean, the trick was those two guys would just sit out in their yard, because they lived not too far from me. You could see them out there playing all day long, just shooting, just practicing. Being really consistent. It was really good. No, that's way cool. I haven't even told you this yet, but have you heard of Tandem Ventures yet? Tandem is a venture capitalist firm that's owned by the two managing partners, Alex Bean from Divvy and McKay Dunn. Jimmer Fredette and I are actually venture partners in there, so we raise money for them. It's kind of funny being around Jimmer. One of the events they did was over in Highland at Alex's house, and they did this shoot with Jimmer. I'm telling you, dude, that guy doesn't miss. He started under the hoop and went all the way back to the other three-point or the other free-throw line in a full court. I bet he missed two shots the whole time. I just never could figure out why that guy... I think it was the Suns, I think he went to the Suns. I'm trying to remember what team he played for, and he finally came back to the NBA again. He started with the Kings, yeah, started with the Kings, and that was a flop. But it's always kind of a flop when you're a freshman, when you're a brand new guy. Very few guys really make it that way anyway.

Yeah, that's wild. In fact, even Mark Madsen, obviously, Mad Dog. When he was at UVU, I got to meet him, got to know him pretty well. You hear about him and it's like, yeah, he backed up Shaq, and he's a two-time NBA champion. But when you really look at him, you wouldn't say he's got this insane career. But when you play ball against him, holy crap. He's got to be 6'11" or 6'10" or something like that. He just hurts you. He's massive. I'm a big guy, and he makes me feel like I'm a 6'1" guard.

What you're saying too, a lot of them don't make it, and they are the best player on their college team. Some of these guys, they're like on Duke, and they still kind of wash out, like Tyler Hansbrough. Okay career, I guess.

Well, even look at Zion Williamson. He just cannot get through a season without hurting himself, hurting a toenail or something. I don't know what that guy does to himself exactly.

Yeah, that Celtics team... someone will text me later and be like, it was 14. I'll be like, okay, he's still in the league? Oh, my bad.

Yeah, they should be. The Kings, they're here in the West, and you think you'd know them, but really this year it was the playoffs when I finally was like, wow, yeah, they're good. I remember Sabonis's dad. He was this amazing passer. I think he had bad feet or something, where he couldn't last very long. But he was really, really good. And then his son is kind of skinny, so you think this guy's not like his dad, but he's decent. I've loved watching them. I wanted them to go all the way. I actually love watching the Heat. I just like it because they're underdogs. I love underdogs. Jimmy Butler... you know what's funny about Jimmy Butler? I love the Michael Jordan son conspiracy theory. Have you ever heard that?

Well, another funny thing is Michael's other kids weren't that good at ball. None of them. I think one kid went to college, but he didn't even sniff the NBA. Michael Jordan Jr. or something like that. You would think they would. Sometimes you do see that hereditarily, kids come in and they're there. Look at Kenyon Martin's kid. Kenyon Martin was a bruiser, and his kid is actually pretty finesse. I really like watching him play.

Oh, is it? I did not know that. Is he young? He's really young. I don't think he's a rookie, maybe. But man, I love watching him play. He reminds me of some of the old school players, just the way he runs up and down the court, the way he shoots, his defense. He plays really strong. This series is kind of not that great, but the last series was amazing.

That's funny. So is he still that way?

Oh, jeez. So they have to outlive each other. Burgess is kind of old too. He's like 70 or something, I don't know.

Yeah, I don't even know. The rise of Roger Goodell... I feel like he's been the commissioner forever. A lot of the owners love him, but a lot of the players hate him. I think with the NBA, Adam Silver... this year, it's like any other business. Somebody gets a job and grows up in their career, and they end up being the right guy. I'm sure that's how both of them ended up there. But it does change the personality of the organization. Even though they've grown up that way, they still have their own personality, and it drives the organization's personality for sure. David Stern seemed to be a guy that was pretty beloved.

Well, I'll tell you where it started. It started getting ruined on the talk shows, like ESPN. I used to travel a lot for business, and everywhere I woke up, I'd turn on First Take and listen to the debate, this player or that player. It was always interesting. Then it just got more and more political, and I was like, dude, I can't watch this anymore. I haven't watched an ESPN show in years. Do you know Andis Kažmers?

Well, it's a pretty big black eye. Honestly, they pumped that Black Lives Matter organization like mad. So did a lot of others, though. The NFL, I heard at one point pledged like $100 million to them. But as we've kept living, the Black Lives Matter organization has blown every dollar they ever spent on vacations, private jets, and homes. It's ridiculous, unbelievable. And supporting the Democratic Party. It's just political stuff. Anything one way or another, all of it sickens me somewhat. But you kind of see that in businesses. Businesses are doing a lot of that, trying to please one audience or another. I guess there's some value in it. I'm assuming there is if they're doing it, unless they really, really believe it. In a lot of cases, they're just taking advantage of people, and it's manipulative. I guess it's a way of marketing.

Ooh, ugly. Well, it finally backfires on somebody. Now everybody's trying to go after Target, and there's this thing with Chick-fil-A, like, 'Oh, you have an ESG person.' Well, guess what? Every freaking company in the entire world has a person that does ESG. Sorry, every company that we do... every company does. The reason you do that is because you're freaking smart. You have to do stuff like that. If you don't do that stuff, you're going to get burned.

It's environmental, sustainability, and governance. There's a push, definitely a left-wing push on ESG. It's gotten to the point where even within your public filings, there's stuff you have to say about sustainability and all that stuff. It goes from one extreme to another. We spend a lot of time on different facets of it. There's equality, making sure it's equality, sustainability, and governance. We spend time on all three of those within our company. We do a report once a year, an annual report on it. It's all about how much plastic we're using, how we're recycling materials, our energy usage in our buildings, and a lot of other things we try to improve. We're always working on packaging. On the sustainability side, those are the easy wins, the things you can make an impact on and show the impact. There's nothing wrong with that. But some companies take it to an extreme and try to take a political stand on it, and that's where it goes crazy. I've never really understood why companies feel the need to take a political stance on anything. If you're a tree-hugger company like Patagonia, that works for you. You've got a certain brand of customer that wants your company to do those things. Your customers become more loyal, your brand is very specific to certain types of people, and that works. But then I see other brands like Nike, and I'm not exactly sure why they do what they do. Maybe that's just who they are.

I hear a lot of these things. I don't know what to believe anymore because everybody's got these theories. I'll give you a really good example of this, which we just lived through: COVID. We literally, as an entire world, went through this experience where people started getting sick, everybody started speculating what it is, where it comes from. Then all at once, the whole narrative is supposed to change. Now we're all supposed to believe something different. Then we're told, 'Hey, don't wear masks, these masks don't work. You have to wear the N95s.' So you've got to wear these masks, that's the only thing that'll work. So don't buy any masks. You remember that, right? Then absolutely within a very short period of time, everybody was wearing these crappy masks, and that was supposed to save us. When anybody had a differing opinion, they were shouted down. It was this peer pressure push where everybody had to go for it. Then people started saying, 'Well, how many people are getting sick?' And it was like, 'Keep your mouth shut, don't worry about how many people are getting sick. You need to do whatever.' 'What are the odds of this or that? Do little kids get sick?' Then the vaccine comes out. Is it a vaccine? For my understanding, when I take a vaccine, it actually prevents something. This is not a vaccine. I'm not a doctor, but it seems to me like a vaccine prevents something. If I take this vaccine, I still get it, but they say you get less. So I guess it's not a vaccine. So okay, whatever. I did the shot. Some of my family were like, 'We're not doing the shot.' But I didn't even care because one way or another, I'm going to die anyway. But then people are asking questions like, 'How do you get sick? Who gets sick? When do they get sick?' And everybody gets shouted down. They say, 'Just believe this science.' The craziest thing I heard through this whole process was when Fauci said, 'I am the science.' I was like, do you understand what the word science is? Do you understand what that means? Wow. Now I'm confused. What it showed me was that in our world, the way the world works, there's so much that goes around. Everybody has a certain amount of brain power, a certain amount of process power. It's limited. Because it's so limited, groupthink doesn't work very well. You just saw that with the entire world doing groupthink. It was a disaster.

It was odd for me to see people comply so easily, especially with something they were taking into their own body. I got the shot as well. I wouldn't wear the mask. I got so many people pissed off. I know that's bad because I'm supposed to be really compliant and nice. It was more a courtesy thing. A lot of friends said, 'Well, you just need to be courteous to other people.' And I was kind of like, 'Yeah, I'll be courteous, but this is so ridiculous.' I felt like it was so ridiculous because I kind of knew... I won't say I was interacting with a guy who's really famous, who was kind of the spokesman for the whole COVID thing at the very beginning. I was sitting down with him, and I said, 'Is this... does it help me?' I asked him, and he goes, 'No, it doesn't do anything for you.' I said, 'Well, why should I wear a mask?' He goes, 'Well, I think it gives people courage to get out and do things, because otherwise they will be crippled. They're not going to come out, they're going to be so scared. So it's probably a good thing that we have it.' That was his way of looking at it. But for me, I'd go to a store and I'm not trying to scare anybody. If I don't wear my mask, I'll freak everybody out. I was like, 'I'm not wearing this crazy thing. This is ridiculous.' Sometimes people catch me... I'm still blown away by how many people still wear them in the airports and stuff. It's crazy. I saw yesterday at Costco in Salt Lake, there was some lady standing next to me, and she looked really freaked out, really scared, looking around like who's going to breathe on me. When I see that, I make the assumption that she maybe has some real illness and is really worried about getting COVID. I shouldn't judge other people. I saw that lady and I felt kind of bad for her. If anyone sits next to me on a plane and still has one on, I'll eventually during the flight ask them why. I can't help myself. It's like a big red button. I go, 'Hey, you might have to ask me a question.' They're always like, 'Sure.' I'm like, 'Why are you still wearing a mask?' Almost every time, it's just like, 'Well, I just got used to it.' I don't know how you could get used to that. I never got used to it. I hated it. The first time I got on a commercial flight during COVID, I was flying to California for a Porsche experience thing. Because I had the mask on my face and I was stuck in this tube going 500 miles an hour through the air, I felt very claustrophobic. I've flown probably a million and a half to two million base miles, so it's not like I haven't been on a plane before. But I was feeling very uncomfortable. I was pretending to eat the entire flight, and I kept getting told that I need to put my mask on. I was trying to put food in my mouth, so I would pretend like I was eating. There was some sense of rebellion there, but I was truly feeling claustrophobic because I had that thing on my face and I felt like I couldn't breathe very well. Then I flew to the Philippines, and I wore that mask while I was sleeping on the plane. By the time I got home, I had pneumonia. I've never had pneumonia. I wonder how that happened. Wearing a mask, trying to sleep for that long period of time, breathing my own air wasn't the best thing in the world. Or maybe I got it from somebody on the plane. I have no idea. But it wasn't a good thing.

I was there in January. It was probably just before Chinese New Year. We were there with our employees. We had about 500 or 600 people there at this event. We have this dinner, and they do these skits and sing. It is super uncomfortable for me because the food is Chinese, and it's really Chinese. It's hard for me, and I can't understand anything they're saying. I'm not really into this humor. We were meeting with our employees, and they were introducing me: 'This is the group from Wuhan, this is the group from here.' I remember when we were there, our employees were talking about the Wuhan flu that was coming around. They were like, 'There's this flu, it's a Wuhan flu, and it's pretty bad. People are getting really sick from it.' We were kind of like, 'Oh, okay,' because there's always something going on in China. It wasn't a big deal. We came to the US. I think Trump was calling it the China flu or something like that, but in China, they were calling it the Wuhan flu. That was their name for it. They said it was coming from there. That was all very early on.

I don't know. We were exposed to it, or I don't know if I ever got it. I have no idea. I've had colds and stuff, so I'm sure I don't know. Who cares? I think I got it. It was 2019 New Year's Eve. My cousin was over, kind of hanging out. Totally fine, totally normal, no big deal. The next morning, I wake up, dude, I am super sick. My throat hurts like hell. I'm like, 'That's weird. Must have had a rough night.' We go for a couple more days. New Year's was on a Wednesday or Thursday. Then going to work the next Monday, I was totally feeling fine. I wake up, eat breakfast, no big deal. I go to eat lunch, can't taste it at all. I'm like, 'This is odd.' Then it dawned on me. I was like, 'Oh, I might have COVID.' So I quietly left the office, no need to cause a panic. Went and got tested. I took the next day off, and I got my test results in the afternoon. I tested positive for having COVID. I was like, 'Okay.' I just waited for five days, which was what the CDC was recommending at the time, and went back to work the following Monday. That was it. So if you think about the beginning, we were in China. A couple of the guys that were with me in China got pretty sick. They were like, 'Maybe it's this flu that they were talking about in China.' I don't know if they had COVID or not. I don't know what the heck was going on. We had this event. I think it was in... when did everything blow up? February or March? It seems like it was March. So maybe it was late February. We've got in our office, Ben McAdams. He's a local congressman. He comes in, and he just wants to get to know us. We meet with him one-on-one, and then we have him present to our employees. For some reason, one of our employees we find out has COVID. It's like the plague, like he's going to die. It's this big thing. So we have an employee that's got COVID, we're freaking out. Then Ben McAdams, who had met this guy, announces that he's got COVID. I'm guessing he got it one way or another. Something's going on here. They shook hands, I don't know what happened. A French kiss or whatever it was. We were so freaked out. We shut down that part of the building. We had cleaning people come in and sanitize his office. We have manufacturing here in Salt Lake. I don't know how many people in manufacturing, maybe 300 or 400 people. We make vitamins and powders. I was super freaked out. I had no idea what this thing was. This is the plague, and everybody's going to die. This is the end of civilization as we know it. We have to figure out a way to survive this apocalypse. We'll have to keep manufacturing. We can't stop because that will shut our business down. People are going to come to us and ask what we're doing to keep our products clean. We had really high standards of quality. So immediately, before anybody else, we built all these protocols. I said, 'Everybody's got to wear masks.' I felt terrible because these poor people have to wear masks all day long at work. But we got to do this. Everybody had to wear masks. We broke everything up into small groups. We did temperature checks as everybody came in the office. We recorded all that. We wouldn't let people in the building. We limited who could come into our main office. It was mostly manufacturing people and a few of us. Everybody else, we were like, 'Just stay home.' We literally shut the world down and got really paranoid because we had no idea what this thing was. It was interesting. I remember when the PPP loans came out, my banker called me up. He goes, 'Hey, you should get one of these.' I'm like, 'I don't need it, dude. I got plenty of cash. We'll be fine.' He goes, 'Do you know what's going to happen in a year, two years, three years, four years?' I was like, 'No.' He's like, 'Get the loan.' I was like, 'All right, fine.' So we got it. It was nice, some free money. Thank you, citizens of the United States. I didn't get any of that money, but I'm glad you guys all got money. That's great.

So we should talk. Where are you currently working?

Are you guys in Vietnam?

Oh, really? Interesting. I just met a guy the other day that exports to Vietnam all the time, but not a direct model, I guess. He's sending a consumable sports drink. He has a buyer over there, a business partner he works with. I'm actually meeting with the guy on the 20th. I'm sure his name's Bob, but you know, whatever his local name is. That's always my favorite thing when those guys pick American names. I'm always like, 'What's your name?' They're like, 'George.' No, it's not. All the Chinese people I know have American names. It's like, 'Okay, let's just go with your real name here.' 'Hi, I'm Larry.' No, you're not. No one's Larry.

For a while. The company before this was Young Living, essential oils. I was the COO for USANA. At Young Living, I had basically the same role. I was over operations, IT, and all that. My official title was CIO and Executive VP over operations or something. I ran the back side of the company, the thing that makes the products and gets them to customers. Before that, another company called MonaVie. Young Living got up to about 1.2 billion. MonaVie was not as big, probably 500 to 600 million when I was there.

My friend would always end up going to Scotland like every year or every other year for corporate meetings, and he's like, what do I do here? I'm like, visit castles. You don't drink, so there's not much else to do.

It's interesting you say that. We talk in my men's group, and some guys are wildly successful, others are newer in their career. We have a 23-year-old in the group, and I'm a bit older—41. Many of us have backgrounds in construction, manufacturing, and investment. Guys always ask how to learn all this stuff; you just have to find a mentor or volunteer at the company you work at. For example, if you implement lean in your manufacturing plant, it's about making people more efficient, adding automation, and increasing widget output per hour. I wish people would ask why they're doing it, because it's about turning cash over faster. It goes back to basics. Many people follow concepts without knowing why; they just do it because it's a rule. If you break down your goal, it makes more sense. I always break it down: find out what you want to accomplish. If you're cash-rich, that might not be your number one goal, but most companies are cash-poor, so cash is king. If you're low on cash, you're screwed. The first thing in a business is to have choices and options. Cash gets you options. So you work on inventories, speed efficiencies, and lean. Basic principles: if you slow down and do it right with fewer errors, you might actually be faster.

At Young Living, we had a fulfillment line running 20 hours a day, producing 12,000 packages a day as their max. I was new and watched the line. They had two orders in a tote, and employees frantically tried to fill orders, minimizing real estate to get more through. I asked about errors and what they did when they had one. I thought they were going too fast, which caused errors. I told them to put one order per tote. Three days later, I talked to a worker who didn't know who I was. He said it was a mess because some a-hole hired thought one order per tote was a good idea. I laughed. But our efficiencies went up, and we got more orders out. You have to think differently, be willing to take risks, learn from experience, and apply things based on your environment. Everything's different. You need to pick your number one thing: topline, gross margin, cash flow, or SG&A. Then you go with speed and efficiencies. At USANA, I'm working on reducing COGS because of COVID. We've thrown some stuff out the window because it's not critical right now. I don't care about extra inventory in the supply chain because I've got cash.

When you were young, what did you think of older guys? You thought they were bozos because they didn't think as fast, so they weren't smart. But experience is amazing. I learned early on that experience is king. When I took over as president of ADP at 27, I'd rather hire experienced people, especially sales guys. We hired some older guys past their prime, but they worked with young, dumb guys. Our management team from that time went on to run big companies successfully. We thought we knew everything. Now I'm in my late 50s, and I can watch situations and know the solution based on experience.

Do you feel like younger employees, say 20- and 30-year-olds, are more or less interested in taking advice from experienced people?

I watched a TikTok about how tech companies screwed the market by hiring away people and inflating salaries. Now those people are on the street because they were overpaid.

I told a friend in his early 30s to go to a company and stay for 10 years in his 20s to learn everything. I recently mentored a smart kid stuck in one job. I told him he can become a CEO, but he needs to be well-rounded. Understand finance, marketing, sales, IT, and even legal and contract law. Having broad experience helps. You have to take your lumps.

We do M&A at my company. It's surprising how hard it is to spend money. It's easy to buy a Ferrari, but not companies. Some PE people are drunk on spending money. Valuations are extreme, and it feels like passing the parcel to the next person. I look at acquisitions more like the Berkshire Hathaway model: generate capital, invest in businesses that generate capital, and snowball. We look for returns, tax benefits, and better use of capital. You have to be conservative; don't project wildly successful growth because ceilings exist. Yeah, that makes sense.

Is capital allocation the number one mistake companies make?

I have a spirits brand company. We go to small distilleries with no idea how to operate. We help them get listed and make money. When you dive into their P&Ls, they allocate 47% of cash to advertising. I saw a company yesterday that's growing fast, 150% year over year, over $100 million. They spend 43% of their P&L on marketing. Their operating margins are 8%, so EBITDA is okay. They haven't scaled. They're constantly fishing for customers instead of processing them. That business model has risks. We've seen it with local companies. One founder I talked to said he doesn't regret it because he got his name out there, but now he's going retail. DTC with lots of marketing dollars and influencers becomes a noose around your neck. You can't reduce COGS much; you're stuck. So what gives?

The C-suite looks at financials and operations to find efficiencies. Most of your day is spent figuring that out, right?

We're an hour and a half in. I always ask for the best two minutes of advice, but I want something specific. For a 21-year-old, how would you advise them to find a career they'll enjoy?

Walter, thank you for coming on the podcast. This has been fun.

Thank you for listening to the President McCormac Podcast, brought to you by McCormack Foundation, Zakon Fund, ADP, LMCO, and Professional Floor Systems. Make sure to subscribe and keep up with Mark on Instagram at presidentmccormac.