The Primitive Podcast: David Alderson
Posted by Kade Wilcox | June 3, 2020
It’s been said less than 15% of family-owned businesses make it past the 3rd generation mark. Alderson Automotive Group can add their name to that elite list of businesses who have. On this week’s episode, we sit down with owner, David Alderson, and talk about the nuances of being a family-owned business.
Kade Wilcox (00:00):
Hi guys. Kade Wilcox here, host of The Primitive Podcast. Thank you for joining us for today's episode. Today we have David Alderson. He's the owner of Alderson Automotive Group, Mercedes-Benz, Lexus, BMW, Cadillac, and Audi. Just a great conversation. I really enjoyed talking about the facet of their business. It's very much family owned, started many generations ago. So just listening to that history and that story and the dynamics of being involved in a family owned business was really fun. And so I hope you enjoyed today's episode. As always, thank you all for joining us and being a faithful follower of the podcast. Hope you enjoy this one.
Kade Wilcox (00:53):
Alright, David, thanks for joining. I really appreciate you taking the time to be with me and for being on The Primitive Podcast. So for those of you that don't know David Alderson, tell us about you.
David Alderson (01:05):
David Alderson. Okay. Born in Lubbock, Texas in 1964. I attended Texas Tech University. So I've been in Lubbock for quite a long time. Actually my granddad showed up here in 1898.
Kade Wilcox (01:22):
David Alderson (01:23):
He and my grandmother Alderson came from Haskell in rural Texas. I go back to them because he started Alderson Cadillac in 1949.
Kade Wilcox (01:34):
What was he doing prior to that? What did he do initially?
David Alderson (01:38):
So my granddad was, I never knew him. I'm the last of my generation and my dad was the youngest of three boys. So he passed away in 1960 and I was born in 1964, but I know a lot about him. My grandfather, one of those great stories. He came from Tennessee my dad tells me and I think there were Tennessee moonshiners. I asked my dad one time, I said, what did we do? He said, well, we're kind of Tennessee moonshiners. He was one of five boys and I guess the family from Tennessee, a lot of people were migrating to Texas at that time. This is in the late 1800's. They sent three of the boys to Fort Worth, and my granddad Walter and his brother Homer to the Haskell area.
David Alderson (02:24):
So he gets married and comes to Lubbock with like an eighth grade education, but he must have had a knack for business and that was maybe not atypical of the day, getting a college degree and coming from the farm are probably not things people did. But anyways, he ended up working for Foxworth Galbraith and then he worked for the Kirkendall Family and he worked his way up to become the general manager for Kirkendall Chevrolet. And he left there in 1940 to go find his own store. So he'd called General Motors in Dallas and said, Hey, I'm looking for something. And the Cadillac store came available in 1949. And we can come back to all that, but he bought the Cadillac store and then he passed in 1960.
David Alderson (03:17):
But he was on the board at Methodist hospital when they did their first big expansion. He also was on the building committee for the First Methodist Church cathedral, the Cathedral of the West. It was Dr. High Robinson who was a pastor and he approached my granddad. I can't remember the other gentleman, so forgive me for not having their names, but he was the one that led that building committee to build that beautiful sanctuary.
Kade Wilcox (03:44):
That's amazing. So at what point was your dad involved in the family business?
David Alderson (03:51):
So my dad graduated Tech in 1952.
Kade Wilcox (03:54):
David Alderson (03:55):
He went off to Biloxi, Mississippi because the Korean War was happening. And so he was in the military. Fortunately, I think it was early 1953, the Korean War ended, so he came back to Lubbock.
David Alderson (04:12):
He was an engineer. A lot of people that graduated Tech were engineering students at that time. And his oldest brother Gene and my granddad were running the store. So he came into work and it just worked out from there.
Kade Wilcox (04:28):
Okay, cool. So tell those you don't know how many stores you have and what Alderson looks like now.
David Alderson (04:37):
Okay. So we have six dealerships that represent five franchises. So we'll start in order. In downtown Lubbock, we have Cadillac. We added BMW in 1976. We added Lexis in 1991. Then I purchased the Mercedes stores, there was a store in Lubbock and a store in Midland, Texas that was owned by the Britt family. And that was in December of 2006 when we added Mercedes in both those places. And then we opened Audi of Lubbock at the West loop in 2017.
Kade Wilcox (05:15):
Okay. When did everything start expanding? Cause it sounds like your granddad had one store, the Cadillac store. So what season did the vision become multiple different brands and multiple different locations? What was really the catalyst behind that and who really drove that success?
David Alderson (05:34):
Well, I give my dad a lot of credit. He brought the BMW franchise in 1976. So BMW had just really come to the United States, but he had the foresight then to look for a luxury import. And so that was in 1976 and you had Mercedes over here and that was kind of it. So I give him a lot of credit for that. Personally, I've always had an internal saying to myself when I graduated Tech, I went to Tech thinking I was going to be in the car business.
David Alderson (06:11):
I'd been working there since 1979 and I decided that that was going to be my career internally. I just said, I'm going to leave it bigger and better than when I found it. So I really had a great opportunity. We had Cadillac and BMW at the time. But what's always motivated me was when I was done, when I completed my deal, I didn't want to just have Cadillac and BMW. So I've always been driven by that. Typically in family businesses, the first generation is the risk taker, like my granddad, cause they start with nothing but they're wanting to do something big. Second generations tend to be maintainers. Just by the nature of what they've got. Third generations tend to be more risk takers and want to enter growth mode.
Kade Wilcox (06:56):
David Alderson (06:56):
Maybe I fell into that, but that wasn't by reading a book. It was just that I just wanted to make sure that, again, I always said to leave it bigger and better than what I found it.
Kade Wilcox (07:06):
Yeah, it sounds like you've had a really great experience in terms of family owned business. A lot of times you'll hear it go one of two ways. One way is it's really bad, you hear horror stories. And then the other way is it works. What was the experience like for you when a lot of your family was still around and still actively involved and you were all doing it together? What are some of the things you learned and some of the experiences you had as it relates to a family owned business?
David Alderson (07:36):
I think my father was really good. He was not, I would say hands on. So I'm probably not that way. But he made this statement about 1990, he said David's going to take over as General Manager, so have the day to day operations in February of 1992. So we get February of 1992. Fast forward a couple of years and we had a dinner and I think all the managers forgot because he announced at that dinner, he goes, okay, here we are. It was January, we were at the Lubbock club and he announced that David's going to take over and you could see the room kind of like, Oh wow, the old guy wasn't kidding. And so I took over as GM in February of 1992, and my dad always wanted me to do things my way.
David Alderson (08:19):
He always told me that from a young age, he didn't want to name me jr. So I remember going into my first managers meeting and I asked my dad if he wanted to come and he's like, nope.
Kade Wilcox (08:28):
David Alderson (08:28):
I don't, it's all you. He said, I'm back here. I'm watching. He knew what was going on, but he wanted me to take over. So I was blessed to be able to do what I wanted to do, and we had some run-ins along the way. I wanted to do things and he was still like, no, we're not going to do that yet. Maybe after you bought me out totally or something.
Kade Wilcox (08:50):
You can spend all that money if you want to.
David Alderson (08:52):
So I'm in a business that's a blessing cause it's not always that way. So that helped me get going faster. And not having the managers look to my dad in the corner of the room, they were always looking to me. So you're thrown in the fire and you gotta go.
David Alderson (09:13):
Then I'll tell you, years ago Lubbock National Bank started a deal called the Family Business Forum. They started that because they were seeing family businesses not be able to make it to the second or third or fourth generation. And the only option was they would have to sell the business and it would go to another company. And so they started this family business form. And in that they brought in people from Wharton School of Business, Kellogg School of Business. There's a whole academia out there on family business about what to do and what not to do.
David Alderson (09:48):
And so that was very early on. That was in the nineties, probably mid nineties. So it was timely for me because I was still very young, but to be able to learn and hear from people that had studied successful transitions over multiple generations versus unsuccessful. So I still to this day think those things helped me manage the family, working in the business, and take the business to the third generation, which I am. I think it's like less than 15% make it.
Kade Wilcox (10:24):
Wow. So you beat the odds for sure.
David Alderson (10:28):
But I do give a lot of credit to that. It was about two years of hearing the speakers and being able to study what works with all sorts of different businesses.
Kade Wilcox (10:38):
Did it ever stress your mom out with you and your dad working closely together and the dynamics there, or was she just behind the scenes and let y'all do it?
David Alderson (10:49):
Oh, no, no, no. She's always been a big supporter. Never stressed her out. She was happy because she was ready to go and play. My dad was 52 when I took over. And he wanted me to get through Tech cause I was the only one in the whole family that was wanting to do the business. So if David didn't want to do this, they were gonna have to find somebody to buy him out. So he was hanging on and he had run it for since the late seventies. So he's like, okay, I want to go play. And so my mom was really glad for me to get there because then they started traveling and found a vacation home. So she was like, you get to work. Me and your father are going to go do something else.
New Speaker (11:30):
That's great. That's awesome. You have really good managers at all your locations. How do you see your role as the leader of the organization? You clearly own it which makes sense, but how do you see your role as a leader? How do you lead your people and what does that dynamic look like for you?
David Alderson (11:50):
Well, I think you have to know your style. You have to know yourself. I'm always big in a 360 degree appraisal. I think you have to know how you act, how you act around other people, how you interact in business. I think you have to work within your own style. I'm not a hands on, as I mentioned previously. So I think you have to surround yourself with people. And I've always enjoyed the car business. We have a lot of full of life people. I enjoy cars. I'm not a motor hound. But I love the car business. I love the people in the car business. And so I've always enjoyed seeing our associates grow, put their kids through college. So really for me it's about trying to influence that within our department managers and our people of what you can accomplish in whatever career you have in the automobile business, throughout the entire organization.
Kade Wilcox (12:54):
Yeah. That's good. How do you treat failure? As you've gone through your career and as you've led your organizations and things haven't worked or you've experienced failure. Do you have a specific approach that you take to learn from failure or what's that look like for David Alderson?
David Alderson (13:12):
Well, I guess we're all sinners. We're all failures. I think one of the things I say over and over, especially to our managers is we're all gonna make mistakes. Just learn from it and fix it. And if it's a big one, let's not do it again. The successful managers and successful leaders I've seen tend to be able to minimize the big mistakes and learn from them and move on. When you talk about failures that's what I've tried to do. Man, I'm not perfect. And there are certain departments in our dealerships that I wish could have always been better. You know, I'm almost 56. I've been doing this a long time. I've been running the stores since 1992 so I'm better at some things than others.
David Alderson (14:07):
Some of our departments I wish would have turned the corner and really been great, but they're good. So you just, you have to expect that and you can't be great at everything, but you just want to learn from those failures and try not to repeat them. And especially if I could teach that to the managers and everybody, that's good. It's frustrating when you work with someone that can't figure that out.
Kade Wilcox (14:31):
You're almost into this for 40 years. You've been in the car industry longer, but in terms of really leading it, you're almost 40 years in. Am I doing my math right?
David Alderson (14:42):
That's right. On my first job I couldn't even drive cars. I could wash them. I could dry them off. That was 1979. So yeah.
Kade Wilcox (14:49):
So you've been at this a long time. I'm curious, how do you stay inspired? How do you stay sharp? How do you stay effective as a leader? Like what do you do for that source of encouragement for your own leadership?
David Alderson (15:03):
I think looking back, it's the goals you set for yourself. When I started, I said my goal was to leave it bigger and better than when I found it. So we checked that one off. I had a goal that this year I would be able to spend more time away from the business. So I had to develop our three general managers and our CFO. I set that goal about three years ago. I said by January of 2020, I want to keep my head in the business and I want to be around it, but I really am gonna fully turn over day to day and feel like I trust and I have faith in them to execute and check with me if they need to.
David Alderson (15:45):
So I think you have to develop goals for yourself professionally. I think back to what I didn't want to do and especially in the car business, I can name them, but it was the image of the owner being hauled out of his office on a gurney because he never could go do anything else. So that was something I never wanted to do. In fact, my dad told me that. He said, don't do that to yourself. Make sure you develop people so that as you get to the point in your life in your fifties or sixties or whenever that is you can go do other things.
Kade Wilcox (16:24):
That's good. What does the car industry look like moving forward? Every industry is constantly changing as technology requires industries to innovate and either change or die is what it feels like. What do you anticipate the car industry looking like from your perspective in the future?
David Alderson (16:45):
Wow, that's a great question. Especially right now going through the COVID-19 situation. I think we've been going to more of an online sales model. I don't think we're ever going to get to Apple. I mean a car is a car. It's not a telephone. It's not Amazon. It's not a box of new underwear.
Kade Wilcox (17:08):
David Alderson (17:11):
I do think you're going to see less brick and mortar. And it's been interesting because probably since the early two thousands, there's been a push to have these huge dealerships and huge showrooms that can show all the product. And now we're seeing where the showroom that's most important is your digital showroom. So the type of sales people that we have or our associates are gonna be different. Service and parts, we still have to maintain the vehicles but how we approach that changes. So I don't think the franchise system is going away. But if you look back at all the things that have changed in the franchise system over the years since it was established back in the twenties or thirties. I think the people that run dealerships are pretty entrepreneurial. If you're going to be successful, you have to be and you have to adapt to change. So I figure that the next generation that comes up that's running retail will embrace those changes and do what they need to do.
Kade Wilcox (18:22):
Has the consumer changed a lot in terms of expectations. Like I primarily think about convenience, like I might be extreme in this, so take that for what it's worth. But I think of service and maintenance, I don't want to have to drop my car off and figure out what to do and then come back five or six hours later. Do you think the consumer is changing so rapidly that even things like parts and service and things of that nature will have to change? Or do you think it's pretty consistent with what it's always been?
New Speaker (18:55):
I think it changes. Now, we don't change oil every three or five thousand miles. Electric vehicles are gonna change that. They say by the year 2030, 30% of the new cars will be an electric vehicle. If I'm a car dealer and I have all this facility dedicated to service and parts, there's not much to do on an electric vehicle. You got some breaks, but you don't have all the engine. So you're probably not going to have to have as many techs. Although it's a computer now, they say something like the cars now have as much electronics on them as a rocket that goes to the moon and stuff like that. But we do all our communication digitally. Now we're going to send you a reply that says, here's what we found on your car. It's all texts. It's all email. So I think there'll be a reduction probably because of electric vehicles. And if they could build an engine where you didn't have to change the oil for every 20,000 miles, they would do it because that would be a competitive advantage to that brand.
New Speaker (20:07):
Right. That's great. So they're going to keep pushing the envelope. This is a totally random question, but is there an opinion of Elon Musk and Tesla within the larger, auto industry? You don't ever see any other auto industry leader in the public all the time, but you see him because of Space X and SolarCity and The Boring Company. I mean the dude's running like four or five billion dollar companies. And so Tesla obviously gets a lion's share of that attention. But I'm curious, you're in the industry, do like your franchises, do they talk about him? Does he consume a lot of oxygen in the room with all these other brands? Or is he a nobody to them because they've been in the industry forever? I'm just really curious what that looks like, if anything.
David Alderson (20:59):
I'll try to answer that as shortly as I can. When he first came on, the smart people took notice of him. He has made an impact on the industry. Up until he came none of the other brands were even thinking of electric. They were thinking diesel, biodiesel, hydrogen you know, what's going to propel a car? We've got to get off of oil. And so they were toying with electric, but all of a sudden Tesla comes and provides that really electricity is going to be the new way for the most part. I mean, you're never going to be able to take a family across the country in an electric vehicle. It doesn't work even with the best batteries 15 years from now. But around town, it's great. So now you see BMW, General Motors, Toyota, everybody is saying, electricity, we've got to go there.
David Alderson (21:54):
Now I will give Lexus and Toyota credit. They came out with hybrids before that and they still do that and it's still a very viable solution. But I think he turned a lot of heads. The process of ordering is like an iPhone. He's a technology company really. So I think he's made everybody take note. I've heard speakers from Audi stand up and go, let's just look at the numbers that Tesla has done in the last two or three years. It's very impressive. They're selling more cars than a lot of current brands that are out there. So now he's made a huge impact. He's made a huge impact. Financially I think there's still some questions, cause without tax credits and a lot of things that the business model for Tesla doesn't work like it does for a BMW or a Toyota. So I think those are some things that we'll see what happens.
Kade Wilcox (22:49):
I guess when you're using other people's money, profitability matters a lot less.
David Alderson (22:55):
That's the head scratcher.
Kade Wilcox (22:55):
Yeah. I need one of those kinds of companies where profitability doesn't matter.
David Alderson (22:58):
We lost this much money yet our stock price went up.
Kade Wilcox (23:01):
That makes no sense. That's fascinating. A couple more questions for you. It sounds like you had a really close relationship with your dad from a working standpoint. What are some of the things you learned from him that you feel like made a really big impact on your own own leadership?
David Alderson (23:19):
Oh, I think that what I've mentioned earlier, just the fact that he had trusted me. We had to buy him out, almost 20 years to pay off him and my mother. But once we executed that and had the note and all the payments, it was amazing how he never, I think I would have been checking more, calling and asking questions if we have a bad month.
David Alderson (23:47):
He just took off. So I think the faith and the trust that he put in me helped me a lot.
Kade Wilcox (23:53):
That's really cool. That's good. Well, thanks for all your time today. I love cars. And so I always admire you cause I'm like, he can just drive whatever car he wants and I can't. I wish I had a new car every year.
David Alderson (24:06):
It is a perk.
Kade Wilcox (24:08):
Oh, it's awesome.
David Alderson (24:09):
I know you try to trade every year, but I've convinced you that's not what you need.
Kade Wilcox (24:13):
And I appreciate your honesty and saying, I don't think it's time Kade. I think you should wait a little longer. Thanks for being a good friend. Thanks for your time. It was good to have you.
David Alderson (24:24):