Capital Gaines: Smart Things I Learned Doing Stupid Stuff

by Chip Gaines

  Jo had a vision.

  It happened when she was dropping the kids off at school one day. For the first time she noticed—as in, really noticed—some abandoned buildings across the street capped off by two desolate, rusty old silos. It’s amazing how something so large could have sat there right in the heart of downtown Waco without anyone in town paying them much notice. And if they did, they were no doubt hoping that some wealthy developer would sweep through and tear those rusty old things down. But that’s the thing about Jo: she sees beauty in places where other people aren’t even looking.

  “Chip, just imagine if we put all of our businesses in that one spot. I could open a much bigger shop, and we could have our offices upstairs. The kids’ school is right across the street, and I’d be able to see them on the playground from my office window. We could even walk over to have lunch with them.”

  Jo made an excellent argument. These were all valid points. She really delivered this thing with a bow on top.

  When we drove by the place that first day and peered in through the chain-link fence, the excitement in Joanna’s voice made me want to jump out of the car and grab that property for her right then and there. I felt a bit like the man wanting to lasso the moon for his sweetheart. The thing is, Jo had gotten behind every crazy dream I’d come up with over the years. Now she was the crazy dreamer. When she first started dreaming about opening Magnolia Market back in 2003, I had basically pushed her into it. But this time, it was Jo wanting to leap. And I was gonna do everything in my power to help her do it.

  The price of the property itself wasn’t completely out of reach, but developing it would be the biggest project we had taken on to date. It would cost us just about every penny we had to our name. But we’d grown accustomed to risking it all on just about every investment we’d done prior.

  The financial risk was big on this property because of the sheer size of it. Just the grain barn alone was twenty thousand square feet. Not to mention the thousand-square-foot former floral boutique—which was, without a doubt, the most charming part of the property. Jo was already daydreaming about turning that building into a European-style bakery. And of course, the most striking feature of the property was the actual silos themselves. Those beautiful relics were massive—kind of like round exoskeletons of two high-rise buildings, each over a hundred feet tall. Each featured about four thousand square feet of potential usable space just waiting to be brought back to life. And because each silo was over a hundred feet tall, there was plenty of potential to add floors and expand the square footage even further.

  The Silos property before renovation began.

  There was just one problem. When we priced out what it would cost to do the renovations on all those old buildings, even the lowest estimates we received were in the millions of dollars.

  I hate to break it to you, but landing a reality TV show does not make you a millionaire.

  Clearly this was the riskiest thing we’d ever done by a mile. But Jo’s instincts are sharp, and she wasn’t wavering on this one.

  Up until that point in our business relationship, Jo had always been the one who was risk averse. She shied away from the idea of overextending ourselves. I had always been the one pushing the envelope and willing to take a bigger risk for a bigger reward.

  But I’d never heard her talk so passionately about a dream before. She sounded like me, but this time she was talking about a deal that could potentially put us millions—yes, I said millions—of dollars in debt.

  I suddenly wondered if I’d created a monster. Typically the thrill of something like this would propel me forward, but this time I hesitated.

  How do you make a decision like that—put everything on the line for one dream? There are no guarantees in life, and there sure as heck are no guarantees in television. We had no idea what the future held for the show. It could be over tomorrow. Our Magnolia clientele could disappear overnight. With the future uncertain, the thought of sinking everything into such a large property was completely terrifying.

  Yes, it could be perfect . . . if our wildest dreams came true. But anything short of that would make this property embarrassingly excessive.

  By the time you’re reading this book, you may know how it all played out. But what you probably don’t know is how we came to our decision . . .

  Jo gets a pretty strong sense about where God is leading her, and until she feels a certain peace, she doesn’t move. For me, though, it works a little differently. I’ve always believed in just going for it—making decisions, taking the risk, doing the work, whatever the work may be—knowing that God will be right there with me. If the thing I do turns out great, then I can rest easy, knowing I was probably on the right path. That’s a win. If it turns into a disaster, well then, God somehow uses that for my good too. He teaches me something I couldn’t have understood any other way. So I chalk that up to an even bigger gain.

  For people with a winner mentality, there’s a positive waiting for you no matter the outcome. For those with a loser mentality, if there’s a negative outcome anywhere along the way, you perceive that you’ve lost. That’s why I always say winning and losing isn’t an event; it’s a mind-set.

  I think a lot of people tend to take every win and every loss as some sort of a play-by-play: if you win, you win, and if you lose, you lose. But I don’t see life like that at all. There’s a much bigger game going on, and if you step back from the play-by-play and look at the big picture, the ability to make decisions gets a whole lot less daunting.

  Think of it like tennis. You’re Serena Williams. You’re at Wimbledon. You win. You lose. You win. You win. You lose. You lose. (Serena Williams is a hero of mine. No way would she lose this much, but let’s pretend.) This goes on set after set until the match is over. Winning the match is the goal. So after any win or loss, you adjust your strategy accordingly and press forward. Even if you’re way down, you don’t throw in the towel—at least not until the whole thing is over.

  If you want to be a winner, then you have to prove yourself through all of the ups and downs over years and years of playing the game. One match does not define a legacy.

  Our family went to the 2017 Super Bowl in Houston. The game we witnessed that day was between the New England Patriots and the Atlanta Falcons, and it was one for the history books.

  I’m a southern boy, and while I’m not going to go on and on about the New England Patriots, even us Texans have to give credit where credit is due: quarterback Tom Brady and his teammates never gave up. Not for one second.

  The announcers were calling it for the Falcons before the third quarter was even over. The Falcons had this thing so far in the bag that all sorts of people who paid who-knows-how-much money for their seats left the stadium early just so they could beat the traffic. Patriots fans, who are known as some of the most die-hard fans of any game anywhere, started turning off their TVs before the game was over.

  But Brady and his band of cohorts? Uh-uh. No way. They kept their heads in the game. They never stopped trying to win.

  And against all odds, those Patriots started to turn it around.

  One play after another—boom!

  It looked and felt like a major comeback, and the Patriots fans at Houston’s NRG stadium started cheering as if the impossible might actually happen. They were still eight points down, and Brady got sacked. I thought to myself, Well, that’s the ball game, but they did give it a good college try.

  Then the very next thing I saw was Tom Brady doing what only Tom Brady can do.

  He twisted free.

  He launched a pass.

  Then they made a touchdown.

  Then a two-point conversion.

  And all of a sudden the game was tied!

  If you can believe it, the game was now in overtime—the very first overtime of any Super Bowl. Ever. And get this: the Patriots eventually won it. From twenty-five points down, they won!

  It was the greatest comeback in Super Bowl history.


  And my point here is this: If you looked at that game play by play over the course of the night, the Patriots looked like they were going to lose. Again and again and again, they “lost.” But Tom Brady and Coach Bill Belichick and the rest of the team never saw it that way. That wasn’t their mind-set. If they saw themselves as losers based on their play-by-play reality, then that game really would have been over before they even got to the fourth quarter. They would have just gone through the motions and finished out on the losing side of history. But they didn’t.

  Those dudes didn’t even consider losing as a possibility. Against million-to-one odds in Vegas, they bet on themselves.

  Not only did they win, they made history.

  Listen to me here: if you’re going to make a bet, bet on yourself. Of course you won’t always win. Life doesn’t work that way. But if you don’t at least try, how could you ever know what’s on the other side?

  A long time ago Jo and I built a foundation of betting on ourselves, and we weren’t about to stop just because the stakes got higher. Suddenly, with the silos, we were faced with putting our money where our mouths were. This was our moment. So, with a good dose of fear and trembling, once again we bet on ourselves.

  In hindsight, of course, our decision was a good one, and we ended up looking pretty smart. The renovations took way longer and cost far more money than we’d budgeted and also caused far more stress than our show was able to capture on television. But Magnolia Market at the Silos was a massive hit from day one. What Jo saw in her mind that day, as we peered through the chain-link fence, is the very thing people now come from all over to experience.

  We both know this could have turned out much differently. This whole thing could’ve gone bust and been a gigantic financial mess. And yet I’m confident Jo and I would’ve found our way through it. We might have landed on our sorry broke butts, and we may have had to take a moment to lick our wounds, but we would’ve helped each other back up and eventually gone on to chase another dream.

  That’s just what we do: Gaineses never quit. We look at the long game and consider the final score. And even when the decks are stacked against us, we keep on betting on us.

  CHAPTER 10

  WACKO, TEXAS

  For a long time it seemed like our hometown existed in the shadows of a dark storm cloud. Most people who even knew our town existed thought of it as a backwater, a place where nothing happened—unless it was something awful like the Branch Davidian disaster back in 1993. (Which, by the way, didn’t happen in the actual city of Waco . . . but that’s another story.)

  Back in college, I knew a lot of people who wouldn’t even own up to living here. They would say that they were from “Central Texas,” a term that blankets a good stretch of this area, all the way down to Austin. I myself was guilty of claiming I was from Dallas-Fort Worth because, although not currently accurate, it is where I grew up.

  People typically reacted to the news of my being from Waco with sympathy or disdain. After the Branch Davidian incident, the name of our town even became part of popular culture. It was routinely called out in movies, on television shows, in songs, and by late-night comedians in the worst ways possible.

  But none of that deterred Jo and me when we chose to cast our lot with Waco. Actually, it did just the opposite, because it seems that some of us are hardwired with a strong urge to root for the underdog.

  Just for fun, let’s call us the underdoggers. We’re the ones who see a strong, capable, powerhouse of an opponent and immediately feel compelled to root for the other side. This happens to us in sports, when we participate in politics, and of course during our favorite movies, where the nerdy kid ends up with the prettiest girl in school.

  Sometimes the opponent is one lone giant, and other times it feels like the whole freakin’ world. Either way, we underdoggers love to see the unexpected prevail. We get more joy out of the hard-fought, unforeseen successes than we ever could from the ones that everyone saw coming. (By the same token, we experience more pain from an unexpected failure than we do from the expected ones.) This is what gives us underdoggers that thrill in the first place.

  In other words, if you’re rooting for the long shot, you have much less to lose if they lose and a lot more to gain if they win. It’s just simple risk versus reward.

  I am a real estate guy, so I understand the importance of location. And Waco, of all places, is where Jo and I decided to put down our roots. Actually one of the things that initially drew Jo and me to each other was our shared desire to stay put in this town. It makes me smile that one of our first all-in decisions together was betting on an underdog.

  This was also the first time Jo and I noticed our shared ability to see the beauty in the rubble. We have since made a life out of expecting and working toward restoration at every turn. Establishing our roots here in this city was us declaring what team we were going to fight for—for the long haul.

  We bet on Waco. No matter the outcome, no matter what the cost.

  To us, restoration can be about a home, a marriage, a family, or anything looking for a new story. For the better part of fifteen years, Magnolia Homes has been remodeling houses under the tagline “Making Waco Beautiful One Home at a Time.” Even back when we started, we knew that one home being restored makes a real difference, just as investing in one person makes a real difference.

  I am not going to get into the details of Waco’s history. This is not an attempt to gloss over the bad stuff or to pretend it didn’t happen. This is our history, and our city owns that. At the same time, more than ample attention has been given to the city’s negative past. I don’t want to pay tribute to it by lingering on it for even another minute. It’s time to look ahead, not behind, to focus on the future, on full restoration.

  In my opinion, this town was built for such a time as this.

  I’m not the only one who thinks that way either. For years, people and churches of all different denominations and belief systems around Waco have been coming together to pray over and to believe for the restoration of this city. They’ve been expectant for something big and powerful to take place to reenergize our hometown. And something big is happening.

  This is a resilient underdog of a town, and it just needed a chance.

  LOCATION, LOCATION, LOCATION

  In the world of real estate, one factor reigns supreme. Real-estate agents know that if you have the right location, the rest of the equation will come together. The details on your wish list can be replicated or added. However, if the place is in a less-than-desirable area of town, they will remind you of the severe risks you are taking. Depending on whether or not we’re discussing a residential or commercial property, location can affect resale, safety, schools, traffic, culture or lack thereof, status, walkability, pollution, local politics, property taxes and value, quality of life, area attractions, and on and on.

  There are endless factors that go into determining whether this particular piece of real estate is in a great location or if it’s in a place where you can’t even give the thing away. For a long time Waco was the latter. Homes and land were dirt cheap, well below the national average. Waco, in general, was not considered a good investment.

  And yet this is the place Joanna and I call home. It’s the city where I opened my first small business, and it’s where Jo and I wanted to base Magnolia.

  In hindsight, of course, we wouldn’t have it any other way. I even have to laugh about the specific locations we’ve hitched our wagon to within the city limits. We have consistently chosen some of the most questionable parts of town to set up shop. (Maybe our underdogger impulses got the best of us.)

  Jo’s original Magnolia Market, for instance, was located in an old house in a transitional area of town with no other similar retail nearby. When driving past, most people wouldn’t even have noticed the shop if they weren’t looking for it. Not because the place wasn’t cute—it was. It’s just because that particular area wasn’t necessarily the go-to spot in town to
shop for home decor. Anyone coming there was more likely looking for used washer and dryer parts or a mom-and-pop hardware shop. But still, somehow, it worked.

  Another example of this disregard for location is the housing subdivision Jo and I built. It’s located less than a mile from the Little Shop on Bosque. Where some people may have seen few opportunities or even neglect in the area, we saw possibilities. So, we built this darling little development smack dab in the middle of an area we thought was ready for a renewal.

  Then, years later, we chose some rusty old silos in one of the most un-sought-after portions of downtown. In the 1940s and early 1950s, this area was actually bustling and booming, and the site would’ve been prime real estate. But that was before an F5 tornado rolled through downtown and tore everything apart. The entire area never quite bounced back. On top of that, the silos were located right by the train tracks. Every few hours a freight train would roll through, blasting its horn all the way past. It still does. The people who are sitting on the Magnolia Market lawn relaxing, enjoying a beautiful day at the Silos, are suddenly scared out of their minds before they realize it is in fact not a meteor falling out of the sky.

  These are the types of things that normal folks would notice during an initial real-estate tour and simply say, “Thanks, but no thanks.” These are the types of things that in some cases make a property unsellable. But to us, the quirky features and charm we saw on those sites were just what we were looking for.

  Considering Waco’s reputation and relatively small size, it was hard to convince HGTV to believe that basing our show solely in Waco, Texas, would be a recipe for success. Even folks in Waco kept asking us, “How are you ever going to find enough houses?” The network tried to talk us into doing just the first few homes in Waco and then branching out into neighboring cities like Austin or Dallas. We completely understood their perspective. But we felt we had to hold firm on this because our family was here and our kids were young. Not to mention that our business was based in Waco, and it would be hard to travel such long distances and still maintain the quality we’d grown to expect from ourselves. After some discussion the network understood that if they wanted us, a show based in Waco, Texas, had to be enough for them.