Lessons in Entrepreneurship and Free Enterprise

Teacher Resources

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Lessons in Entrepreneurship and Free Enterprise

Created by: Jean Walber

Miller Professor of Entrepreneurship & Director, West Texas Center for Economic Education

College of Business West Texas A&M University

Canyon, Texas

Using Texas Entrepreneurs In the Classroom

Texas Entrepreneurs covers the following TEKS:

Texas History in Grade 4 Social Studies: (4) B; (5) A, B, C; (11) A; (12) A, B, E; (13)A, B; (20) A, B

American History in Grade 5 Social Studies: (4) F; (5) A; (8) A; (11) A, B, C; (13) A, B; (23) A, B, C

Texas History- Grade 7: (6) D; (7) A, B; (12) A, B, C; (13) A, B, C; (20) A, B, C, D, E

American History- Grade 8: (12) C; (13) B; (27) A, B, C, D; (28) A, B

Exploring Careers - Middle School: (2)E

American History- High School: (3) B; (18) A, B; (27) A, B, C; (28) A, C

Economics -High School: (ll)B; (16)C

Entrepreneurship- High School: (1) A, C; (17 ) A

Lesson 1 from Texas Entrepreneurs focuses on current entrepreneurs such as Michael Dell and

Mark Cuban. Lesson 2 from Texas Entrepreneurs focuses on the development of the cattle industry and

incorporates a case study of Colonel Charles Goodnight. Although the material is Texas-based, the development of that industry and the study of how the railroads and development of new

technology affected the industry can easily be incorporated into the 1836 - 1900 period of time.

Texas Entrepreneurs -1-

Lesson 1 What Opportunity Did I Recognize?

Lesson Description: Students meet nine Texas entrepreneurs, learn the meaning of entrepreneurship, learn how entrepreneurs recognize opportunities, and learn how entrepreneurship encourages economic growth.

Economic Concepts:

Student Objectives:

The lesson is appropriate for 4th I 7th grade Texas social studies students focusing on free enterprise in Texas or middle/ high school students learning entrepreneurship or free enterprise.

entrepreneurship, goods, services, risk, profit, complement, substitute, interdependence, urbanization, economic benefits of technology

Students will: • define the term entrepreneur and the related terms goods,

services, risk, profit, complement, substitute • understand the concept of opportunity recognition • learn the life stories of nine Texas entrepreneurs • understand how entrepreneurship benefits and changes the

economy and understand interdependence

Texas Essential Knowledge and Skills (TEKS): see attached page

Time Required: one to two class periods

Materials Required: Visuals 1-1, 1-2, 1-3 Copies of Activity 1-1 for each of 9 students

Background: The ability to recognize a business opportunity is vital for the successful entrepreneur. Creating a product (a good) or service is only half the equation. The successful entrepreneur must determine whether there is a market for the good or service. Entrepreneurs may see opportunities for new markets before they exist and work to create the markets.

Many times the opportunity comes not from introducing a new good or service but from offering a better price, more choice, better quality, greater convenience, a complement for current goods or services, an attractive substitute for current goods or services, a reorganization of an existing market, or a solution to a problem. Using new technology may cause these changes.

Changes brought about, in part, by these entrepreneurs changed the economic landscape of Texas encouraging urbanization and increasing interdependence.

Texas Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Texas Center for Economic Education, West TtxllS A&M University



Procedure: (1) Introduce the vocabulary word entrepreneur using Visua11-1. Within the definition, define the following terms: • goods- objects that satisfy people's wants • services- intangible activities that satisfy people's want • risk - the chance the good or service offered will not be

successful in the marketplace • profit - the difference between total revenue and total cost of a

business; entrepreneurial return for taking a risk

(2) Using Visua11-2, emphasize the vision that an entrepreneur must have. Discussion: Ask the following questions. • What is an example of a successful new product an entrepreneur

has recently introduced? (ipad) • What is an example of a successful new service an entrepreneur

has recently introduced? (Facebook, Twitter) • What is an example of improving a good or service through:

• better price (using Internet sales to avoid a middleman) • more choice (many new flavors of Lays Potato Chips) • better quality (better cell phone cameras) • more convenience (Netflix streaming service)

• What is an example of a product or service that became successful because it complemented an existing offering? (print cartridges for home printers)

• What is an example of a product or service that became successful because it was a good substitute for a current offering? (CDs for cassette tapes, then cloud storage)

• What is an example of a successful entrepreneurial reorganization of an existing market? (EBay reorganizing auction markets)

• What is an example of a successful entrepreneurial endeavor that solved a problem for the customer? (drive-up windows for pharmacy or food service)

• What is an example of using a new technology in an entrepreneurial way? (using the Internet instead of a paper catalog to sell merchandise)

(3) Do Activity 1-1: Cut out the 9 short biographical sketches of Texas entrepreneurs and give to 9 students. Have each student read a sketch to the class, followed by the question, "What opportunity did I recognize?" Have students respond fully to the question after each sketch. Possible responses might include:

Texas EnJrepreneurs (Lesson 1) Created by Jean Wallcer, Director, West Texas CenJer for Economic Education, West Texas A&.M University



Michael Dell offered a lower price for personal computers by eliminating the middleman. Dell gave more choice by allowing customers to easily select the specific combination of features purchased. Dell provided better quality service by having more knowledgeable sales people. (!'he teacher might also point out that the personal computer with the installed software is a good, and the help in selecting the right features is a service.)

Stanley Marcus improved an existing product. He took the typical retail apparel store and changed the shopping experience by adding fashion shows, gift wrapping, and unusual merchandise. Offering better quality service and catering to wants instead of needs was a change-a new approach to retailing.

Ross Perot recognized that offering data management services using computers was as important as selling the computer itself EDS solved record keeping and data management problems for businesses and government. He eventually saw the opportunity to sell the company for a profit. He then started Perot Systems when he saw new business opportunities. When he ran for president, he recognized that many "independent voters" did not support either party. He won many of their votes by emphasizing issues the two major parties were not touting.

Mary Kay Ash recognized the potential in recruiting women who wanted to run their own businesses to sell her cosmetics. She recognized that her selling ability was her strongest asset, and she used it to convince other women that they could successfully sell Mary Kay Cosmetics. She recognized that the "party concept" that she had used with other direct sales companies could sell cosmetics.

Herb Kelleher recognized that people would fly even short distances such as from Dallas to San Antonio if the price of flying was low enough. He then found ways to lower prices such as flying the same plane more often by reducing turnaround time on the ground and serving peanuts instead of meals. He encouraged his employees to have fun and make flying fun.

Red McCombs took existing businesses-car dealerships, radio stations, ranching, and athletic teams--and improved the existing business by offering his management expertise and enthusiasm to make the business more profitable. Like many entrepreneurs, he let his personal interests, such as sports, guide his business interests. He is a "serial entrepreneur."

Texas Entrepreneurs (Lesson I) Created by Jean Walker, Director, West Texas Center for Economic Education, West Texas A&M University



Howard Edward Butt reorganized an existing market by changing the grocery store where the clerk served each customer into a self-service supermarket that included many varied departments. H-E-B also purchased the canneries, bakeries, and milk plants that supplied the grocery stores. H-E-B used economies of scale to make the stores profitable.

Mark Cuban offered solutions to problems. If you couldn't "disco," he would teach you to dance. If you wanted to hear radio stations from out of your geographic area, he would find a way to let you listen over the Internet. With Broadcast. com he saw the opportunity to take the company public, and then he saw the opportunity to sell it to Yahoo! His Shark Tank appearances are blatantly about finding entrepreneurial opportunities.

George Mitchell improved the process for drillingfor oil and gas by using the new technologies of fracking and horizontal drilling to increase the oil and gas retrieved from drilling, especially in shale formations. His planned community of The Woodlands with green spaces and wildlife habitats became a substitute for living in many neighborhoods in Houston, the largest unzoned city in America.

Discuss the followin& questions: (A) Which of the entrepreneurs used new technology to create change? Michael Dell, Ross Perot, and Mark Cuban first used computer technology then the Internet to create change. George Mitchell usedfracking and horizontal drilling technologies to improve methods of drilling for oil and gas.

(B) What are the personal traits that successful entrepreneurs have in common? They are "change agents" who see what others have missed They are willing to take risks to make their ideas work They are "can do "people who are high achievers with self confidence. They are not afraid of hard work and not afraid of failure. Howard Edward Butt, for example had four efforts at starting a second store fail before he finally got it right. George Mitchell worked 17 years to perfect fracking.

(C) Which products made by these entrepreneurs are sold all over the world? Dell Computers, Neiman Marcus merchandise (through the catalog and Internet), EDS data services, Mary Kay Cosmetics, and television views hip of the professional athletic teams are examples. H-E-B has a store in Mexico. Southwest flies across the United States and will now go international with the addition of Air Tran. Write the word interdependence on the board and explain how the Texas

Texos Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Texos Center for Economic Education, West Texos A&M University



economy is interdependent on the economy of the rest of the country and the world.

(D) Give examples of businesses created by these entrepreneurs that encourage a move from an agrarian to an urban society. The types ofjobs offered by all these entrepreneurs except Mary Kay Ash are located in urban areas, not in the agricultural economy. While drilling for oil and gas occurs primarily in the countryside, Houston and other major cities have benefitted from the aggregation of professionals who service the industry in their cities. Write the term urbanization on the board and discuss the concept of agricultural jobs tied to the land compared to new jobs created in industry, transportation, and telecommunications.

(4) Use Visuall-3 to discuss the following questions:

(A) How many of the Texas entrepreneurs increased employment in Texas. All of them did

(B) Did this expand economic opportunity for their employees? Yes. As an example, many Dell employees in Austin are called Dellionaires because of the money they have made through their employment opportunities. In an era when many women had limited economic opportunity, Mary Kay Cosmetics gave them economic incentives which encouraged their hard work and initiative.

(C) Give an example of an entrepreneur who lowered prices by increasing competition. Southwest Airlines has brought down airfares all over Texas (and the country) by underpricing the competition. Dell brought down prices on personal computers because they cut costs.

(D) Give an example of an entrepreneur who increased choices by increasing competition. Mark Cuban gave Internet users who wanted to hear remote radio stations many listening options. Southwest gives more flying options.

(E) Which entrepreneurs increased economic growth by using new methods? Howard Edward Butt increased economic growth in the grocery industry by redefining what a grocery store did. Ross Perot helped define a new data processing and management information systems industry.

TexiiS Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West TexiiS Center for Economic Education, West TexJIS A&M University



(F) Which entrepreneurs used new technologies to increase economic growth? Michael Dell, Ross Perot, and Mark Cuban all started technology-based businesses. George Mitchell used advanced drilling technologies to increase the profitability of the industry.

Extensions: These are opportunities for groups or individuals to pursue further study. • Have students do further research on each of the nine entrepreneurs. • Have students write short biographical sketches on historical Texas figures who

were entrepreneurs, current entrepreneurs recognized statewide, or local community entrepreneurs.

• Have students build a website with links to the businesses of these and other Texas entrepreneurs.

Texos Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Texos Center for Economic Education, West Texos A&M University



Visuall-1

entrepreneur: (from the French entreprendre- to undertake)

''one who assumes the risk of starting a new business or

introduces a new service or good to the marketplace in the

hope of earning a profit"

TexllS Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West TexllS Center for Economic Education, West TexllS A&M Unlverslly



Visuall-2

The Opportunity Recognition Process

An entrepreneur has the vision to: • discover or invent a new product (good) • create a new service • improve an existing good or service

• better price • more choice • better quality

• • more convenience • offer a complement for existing goods or

• services • offer a substitute for existing goods or

• services • reorganize an existing market • solve a problem for the customer

New technologies may create these opportunities.

Tt!XIlS Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Tt!XIlS Qnler for Economic E®catlon, West Tt!XIlS A&M University



Visuall-3

How Entrepreneurs Benefit Society:

• increased employment (which expands economic opportunities for individuals)

• increased competition (which lowers prices and increases choices)

• increased economic growth (by encouraging new methods & technologies)

Texas EntrqJreneurs (Lesson 1) Created by Jean Walker, Director, West Texas Center for Economic Education, West Texas A&M University



Activity 1-1

My name is Michael Dell. Before I turned eighteen, I had run a mail-order stamp-trading business, earning $2000, and sold subscriptions to the Houston Chronicle, earning $18,000. At eighteen, I enrolled at the University of Texas at Austin and started selling upgraded personal computers out of my dorm room.

Other companies made computers to sell in stores, and customers couldn't always find a computer with the right combination of features they wanted. Some customers found that the salesperson who sold the computer was not very knowledgeable about computers.

A store served as the "middleman," needing to make its own profit even after the manufacturer was paid. So the store "marked up" the price over what the manufacturer charged them.

My company built computers to order. A customer got very good service because Dell employees taking orders over the phone (and then the Internet) knew everything about our computers, and we could build exactly what the customer wanted. We could charge a lower price because we had no "middleman."

What opportunities did I recognize?

My name is Stanley Marcus. People have called me the "merchant prince of Texas." I went to work for my aunt, Carrie Neiman, when I graduated from college and turned Neiman Marcus from a small specialty store in Dallas into one of the world's best known retail stores.

I recognized that speciality stores fulfill "wants" more than "needs." People want an exciting, unique shopping experience. Under my direction, Neiman Marcus became the first U.S. apparel retailer to stage weekly fashion shows, introduced personalized gift wrapping for Christmas, and introduced a Christmas catalog which included outrageous but publicity-attracting gifts ranging from matching camels to mummy cases.

I have always said, "Quality is remembered long after the price is forgotten." My commitment to excellence in customer service has been described as "unrivaled" in the world of retail.


Texas Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Texas Center for Economic Education, West Texas A&M University



My name is Ross Perot. You may recognize me as a candidate for President of the United States in 1992 and 1996. Before I was a politician, I was a successful entrepreneur who founded Electronic Data Systems.

I sold Christmas cards, broke horses, and delivered newspapers as a young man in Texarkana, Texas. After I graduated from the Naval Academy, where I was class president, I served at sea in the Navy. I then went to work for IBM's data processing division as a sales representative.

While working for IBM, a company which made large mainframe computers in the days before desktop computers were invented, I realized that the future of computing was in data services and software.

In 1962 I started a data processing company called Electronic Data Systems, or EDS, which would eventually contract with Texas Blue Cross and other providers of medical services to manage their data.

In 1984 I sold EDS to General Motors for $2.5 billion; EDS was spun off from General Motors in 1996 and later purchased by Hewlett Packard. In 1988 I created Perot Systems, another new venture, which was bought by Dell in 2009.


My name is Mary Kay Ash. To support my children, I sold children's books during the Great Depression when money was very scarce for my family. During the first nine months, I earned $7,500, a large amount in those days.

I left that job to work for Stanley Home Products, a direct distributor of home appliances and cleaning solvents. In my second year there, I was crowned Queen of Sales. In 1952 I became sales director for World Gifts, another direct sales company. In 1963 I quit my job when a male assistant I had trained was promoted ahead of me at twice the salary.

With my savings, I bought a formula for a face lotion and started a beauty company. I built my company to appeal to a woman's sense of femininity and emerging independence. I rewarded the women who worked for me as cosmetics sales representatives by awarding pink cars to the high achievers. Mary Kay Cosmetics now has nearly two million sales consultants around the globe.


Texas Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Texas Celller for Economic Education, West Texas A&M University



My name is Herb Kelleher. I co-founded Southwest Airlines with Rollin King in 1971. (I stepped down as Chairman in 2007.) We created a regional airline with services between Dallas, San Antonio, and Houston.

At that time most people did not fly such short distances because it was easier to drive. My first challenge was to prove that air travel could be as affordable, convenient, and safe as driving.

Instead of assigning seats, we let the customers find their own seats. Even today, Southwest Airlines has open seating. It saves time at the gate and turns planes around faster. This is an important concept since other airlines are criticized for their flight delays.

Southwest doesn't serve meals on flights, only peanuts (and pretzels). Back when we frrst started, the flights were too short for hot meals. Today, it saves money and labor. I believe the employees are the most important part of the company. I want them to have fun and make flying fun for the customers. Today the company flies to over 91 cities nationally, has been profitable when other airlines lost money, and recently purchased Air Tran to go international.


My name is Red McCombs. I grew up in the West Texas town of Spur. At an early age, I worked selling peanuts to migrant workers, washed dishes in a cafe, and delivered newspapers. I attended college on a football scholarship, served in the army, and started a career as an auto salesman in Corpus Christi in 1950.

I became a top salesman, and by the age of25, I owned a car dealership. In 1958, I moved to San Antonio and became a partner, then owner, of McCombs Automotive, which became the country's sixth largest automotive conglomerate.

As a businessman, I like to be involved in many activities. I founded Clear Channel Communications. I also bought and sold Longhorn cattle.

My love of sports has also led to sports team ownership. I have owned the San Antonio Spurs and Denver Nuggets professional basketball teams, the Minnesota Vikings professional football team, and brought Formula One racing to Central Texas.


Texas Entrepreneurs (Lesson I) Created by Jean Walker, Director, West Texas Center for Economic Education, West Texas A&M University



My name is Howard Edward Butt. My mother opened a grocery store in Kerrville, Texas, in 1905. I took over the store after I served in World War I. I envisioned a store that would reach beyond Kerrville. Four efforts at starting a second store in another town failed.

I could see grocery stores changing from the days of the old -fashioned credit-based, telephone-ordered shopping system to a self-service, cash and carry system. I began to acquire smaller stores, then began manufacturing goods when I bought the Harlingen Canning Company. We produced "Texas-grown, Texaspacked" goods. We also opened a milk plant and a bakery.

In 1981 we moved the headquarters to San Antonio. Our one-stop shopping concept, which included a drugstore, butcher shop, fish market, florist, delicatessen, bakery, and department store under one roof became the successful H-E-B chain of350 Texas grocery stores. We have also moved into Mexico.


My name is Mark Cuban. As a kid growing up, I had a garbage bag route and sold everything including greeting cards to make money. At Indiana University, I even taught disco lessons for cash. After college, I founded MicroSolutions, working hard to offer whatever computer services my clients wanted. Seven years later I sold it to CompuServe for more than $3 million.

With Todd Wagner, I started AudioNet in 1995 with a transmitter set up in my bedroom sending radio signals from Dallas station KLIF to home computers via the Internet. First we broadcast sporting events. (As Indiana University graduates, we wanted to hear Indiana basketball on the radio.) We built an online gateway to the broadcast of more than 400 college and professional sports teams and 420 radio stations from around the world, 3000 albums on the CD Jukebox, and an audio book library with 1400 titles.

In May, 1998, we changed the name to Broadcast.com and sold the shares on the New York Stock Exchange. A year late, Yahoo! bought the company. I then bought the Dallas Mavericks professional basketball team and enjoy being an active basketball team owner. I have been an investor in many business start-ups and have been a regular on the TV show Shark Tank, where I vet entrepreneurs.


Texas Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Texas CenJer for Economic Etblcation, West Texas A&:M University



My name is George Mitchell. I was born in Galveston in 1919, the son of a Greek immigrant who ran a laundry and shoeshine parlor. I majored in engineering at Texas A&M University. After working in the oil fields on summer break, I became hooked on the excitement of the oil industry.

After time spent in the US Army Corps of Engineers, I returned to Houston to start an oil exploration company with my brother Johnny. We successfully developed a gas field centered in Wise County, north ofFort Worth, and signed a contract to supply Lone Star Gas, the DFW metroplex utility, with natural gas. We also shipped gas to Chicago by pipeline from this area which eventually came to be called the Barnett Shale.

People call me the "Father ofFracking" because Mitchell Energy pioneered shale-drilling techniques which inject water, sand, and chemicals into shale rock under high pressure to release natural gas or oil. I did not invent fracking, but I refined it and paired it with horizontal drilling.

These technology advances are now used worldwide, including in the Eagle Ford shale south of San Antonio, North Dakota's Bakken Shale, and the Marcellus Shale in Pennsylvania. By 2014 the U.S. became the largest producer of natural gas, moving past Russia. Natural gas also moved past coal to become the preferred fuel for generating electricity, which also reduces the level of greenhouse gas emissions.

I sold Mitchell Energy & Development Corp. to Devon Energy Corp. of Oklahoma City in 2002 for $3.5 billion.

As a real estate developer, in 1974 I developed The Woodlands from 25,000 acres of pine forest north of Houston into a master-planned community. I was interested in sustainability, so The Woodlands features wildlife habitats, protected green space, and a winding waterway along with housing and offices.

I have used my fortune to donate to Texas A&M University, the University of Houston, M.D. Anderson Cancer Center, and to renovate older buildings in the downtown area of Galveston. My wife Cynthia and I built the Cynthia Woods Mitchell Pavilion, an outdoor concert venue, in the Woodlands.


Texas Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Texas Center for Economic Education, West Texas A&M University



A Note to Update the entrepreneurs of Texas Entrepreneurs:

Dell: As computers became "commodity" purchases rather than unique and the price per unit decreased, Dell's built-to-order system became less important to customers. Rather than ordering on line and waiting, customers wanted to shop a retail store where they could look at and experiment with the product. As Dell began to supply retailers, they lost the competitive inventory and financial advantages gained from the original business model which only created computers after the sale (and after the customer had already used a credit card to pay for it.)

Michael Dell left as chairman in 2004 then returned in 2007. In recent years Dell has focused on supplying business customers a broader range of hardware, software, and services, with the profit being in the services. However, the value of the company's stock declined to the point that Michael Dell and Silver Lake, a private equity company, bought the stock and took the company private in October, 2013, a transaction valued at $24.9 billion.

Neiman Marcus: For the last twenty years, Neiman Marcus has been owned by various other corporations, private equity groups, etc. It is currently owned by Ares Management LLC and Canada Pension Plan Investment Board. The Neiman Marcus name, however, has remained attached to the stores. The corporation also includes two Bergdorf Goodman stores. And 36 Last Call outlet centers. Stanley Marcus died in 2002.

Mary Kay Cosmetics: Mary Kay Ash died in 2001 but the company continues to grow.

George Mitchell died in 2013 in his beloved hometown of Galveston.

Texos Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Texos Center for Economic Education, West Texos Ad:M University

Texas Entrepreneurs

Lesson 2

Lesson Description:

Economic Concepts:

Student Objectives:

Time Required:

Materials Required:

Texos Entrepreneurs (Lesson 2)

-16-

Charles Goodnight: A Texas Original

Students understand the development of the cattle industry in Texas as they meet Colonel Charles Goodnight, one of the first to drive cattle from Texas to the railheads in Kansas and Missouri ( 1860s-1880s ). Goodnight established one of the fust ranches in Texas. "Just for Fun" exercises allow students to understand the use of traditional cowboy clothing and gear and to learn the history of famous brands. Students learn how cattle ranchers make profits in the cattle industry.

entrepreneurship, risks, revenue, costs, profit, interdependence

Students will: • trace the development of the cattle industry from its

Spanish "free range" beginnings through the trail drives to the fencing of the land as ranches were established

• understand the cowboy way of life • meet Colonel Charles Goodnight, a trail driver who

established one of the fust ranches in Texas • understand the influence of the railroads on the cattle

industry and on patterns of Texas settlement • understand the affects of technology such as barbed wire,

windmills, and well-digging equipment on the cattle industry

• understand the interdependence of the cattle industry with the national economy

• understand the functions of the free enterprise system with respect to the cattle industry

two to three class periods

Visual1-1 from Lesson #1 (optional) hat, western jeans, western boots, chaps Copies of Activity 2-1 for each student Visual2-1 Visual2-2

Copies of Activity 2-2 for each student

Created by Jean Walker, Director, West Texas Center for Economic Education


Lesson 2 Charles Goodnight: A Texas Original

Background: The evolution of the cattle industry from its Spanish beginnings through the era of the open range and the trail drives into the fenced ranches of today serves as a background for teaching the economic history of Texas. The cattle industry is a business with a profit motive, and produces its own entrepreneurs.

Colonel Charles Goodnight, a trail driver and rancher, is a case study in entrepreneurship. Analyzing the economics of the industry at various points in history brings together the influences of economics and geography on this history. Teaching opportunities abound for integrating cattle industry history into the history of the railroads, the development of technology, and the study of increasing Texas interdependence with other states and then the world.

The figure of the Texas cowboy has become larger than life in the legends created by movies and TV. Studying the real story of the cattle industry and a real entrepreneur of that industry allows students to explore a colorful era by focusing on the historical realities.

Procedure: (If you have a cowboy hat or other cowboy clothing, stimulate interest by wearing them to introduce the lesson, or you might wait until you introduce the "Just for Fun" activity about cowboy clothing.)

1. Use Visual1-1 from Lesson #1 to review the meaning of entrepreneur.

2. Tell students they are going to meet an entrepreneur from the past and learn about the development of the cattle industry in Texas. (It is helpful to debrief the article a section at a time.)

3. Give each student a copy of Activity 2-1. Read aloud while they read along or have them read silently before you discuss it.

Use the following guestions to debrief the information and structure the discussion:

Questions about "The Rise of the Cattle Industry in Texas": a. How did cattle first get to Texas? (The Spanish brought cattle and horses with

them to the missions they were establishing in southern Texas.) b. What was the state of the "cattle industry" when Texas declared independence in

1836? (Cattle and horses had both escaped from the missions and multiplied freely on the free ranges so that many cattle and horses roamed wildly.)

c. What is meant by "free range?" (Individuals did not own the land or the animals.

TtxDS Entrepreneurs (Lesson 2) Created by Jean Walker, Director, West Texas Center for Economic Education



If you could catch the animal, it was yours. This could be compared to fishing in open seas where anything you catch is yours. This could also tie in to a discussion of property rights.)

d. Why were young men attracted to a life of riding wild horses and herding wild cattle on the open range? (Discuss the economic incentive of herding cattle to sell as food Discuss the practical importance of taming horses to ride. On the open range the cattle had to be herded on horseback.)

e. Why do you think this figure of the Texas cowboy was an image that eventually took on mythological portions? (Answers will vary, but this is an opportunity to talk about myth versus reality regarding the cowboy. Point out that "western" movies and TV shows have created part of the myth. Also point out that the reality of being a Texas cowboy in the 1800s was that it was a rough, rugged, unglamourous life.)

f. Why did the cowboys begin the trail drives? (After the Civil War, the South was bankrupt, so the cowboys recognized the opportunities in the markets outside of Texas.)

g. What were the destinations of most trail drives? (Army posts all over the west and midwest were destinations because they purchased beef for the soldiers and for the Native Americans on nearby reservations. The rail heads in Kansas and Missouri were destinations because the cattle could then be transported to the population centers further east. )

Questions about "Charles Goodnight's Trail Drives: An Economic Enterprise": h. Explain the circumstances of the first cattle trail created by Charles Goodnight.

(Goodnight joined with Oliver Loving to drive cattle from Fort Belknap, between present-day Fort Worth and Abilene, across central Texas through Fort Sumner, New Mexico. Eventually the trail ended in Ft. Laramie, Wyoming.)

i. What innovation for use on the trail drive is Charles Goodnight credited with? (l'he chuckwagon, driven by the cook, hauled food, utensils, tents, and bedrolls.)

j. Describe the rest of the trail-driving outfit. (A trail boss had 10-12 cowboys, a horse wrangler, and 60-7 5 horses called the remuda at his disposal to drive the herd)

k. Describe the risks of driving cattle. (Cattle rustlers or the Comanches on horseback might take the herd, and bad weather or problems finding water were risks. The cattle could wander or get lost from the herd, resulting in losses or extra time spent.)

I. Distribute copies of Visual 2-1 or use a document camera to match the clothing and gear of the cowboy to the use of it. Some of the "myth" of the cowboy is based in the reality of his life circumstances and economic needs.

TeJCIIS Entrepreneurs (Lesson 2) Created by Jean Walker, Director, West TeJCIIS Center for Economic Education



Answers to Visual 1-1: 5. B 6. D

l.C 7. E

2. F 8. H

3. J 9. I

4. G 10. A

m. Use Visua12-2 to show some famous brands. Cover each answer and let students guess, then show them the answer after they have guessed.

Questions about "The Panhandle Plains Ranching Industry Begins": n. Describe the ranch Charles Goodnight founded. (Goodnight founded the JA

Ranch in the Palo Duro Canyon south of the present-day town of Claude, driving out 10, 000 buffalo in the process. He partnered with Lord John Adair of Ireland.)

o. For what economic reason did Lord John Adair want to become Goodnight's partner? (Many from the British Isles were buying land in Texas as an investment. They were entrepreneurs in search of opportunity. Many of those same investors left in the mid-1880s when cattle prices dropped and the cattle business became unprofitable. This question also could lead to a discussion of the fact that some preserved beef was even exported to Europe, creating international interdependence. The economic consequences of the "boom and bust" nature of the cattle business can also be discussed)

p. In addition to the drop in cattle prices, what other events of the 1880s changed the cattle industry? (When the railroads arrived, trail drives ended The end of the open range came as farmers bought plots from the railroad and moved in.)

Questions about "Technology Changes the Panhandle Plains": q. How did the introduction of barbed wire and mechanical well-digging equipment

work together to change the Panhandle Plains? (Ranchers were more likely to dig water wells if they could fence their land, and both the fenced land and a well and windmill within the fence encouraged the end of the open range.)

r. In what sense was J. F. Glidden, the inventor of barbed wire, entrepreneurial? (He wanted to profit from his invention, so he bought the Frying Pan Ranch to demonstrate his product. Some products are hard to sell unless the customer can see them in action.)

4. Give each student a copy of Activity 2-2. (Math skills are incorporated into the lesson as students calculate profit.)

a. Explain to students that a 350 pound calf can be weaned from the mother cow and placed in a separate herd of animals of similar weight. Each student is now a rancher who buys a calf weighing 350 pounds, keeps it for 5 months, and sells it. (The $1.10 price per pound will fluctuate with market conditions, and the teacher

Texas Entrepreneurs (Lesson 1) Created by Jean Walker, Director, West Texas Center for Economic Education



may want to discuss how supply and demand for calves will affect the price. The teacher may ask students to do research to find the current price. In the summer of2014, the price per pound approached $3.00. A reduction in the number of cattle available was brought on by an ongoing drought lasting several years, which significantly reduced the supply of beef because of lack of feed.)

b. Have students calculate the TOTAL COST PER CALF by multiplying then adding. The example assumes average costs per calf for pasture and other cattle feed as well as medicine. Explain that these costs will vary with conditions and are not constant. For simplification, other costs such as transportation to market have been omitted. (A field trip to a pasture where a rancher explains costs and risks would be the optimal experience for students.) Answers for Activity 2-2 (] ): Buying calf $385.00

Pasture $ 55.00 Feed $ 75.00 Medicine $ 10.00

TOTAL COST PER CALF $525.00

Answer (or Activity 2-2 (2): 2 pounds x 150 days = 300 pounds + 350 original pounds = 350 pounds

650pounds

Answer (or Activity 2-2 (3): @ $1.05 per pound= $682.50 @ $ .95 per pound= $617.50 @ $ .85 per pound= $552.50 @ $ . 75 per pound= $487.50

Make the point that at the time a 350 pound calf would sell for $1.10, the most likely selling price for a 650 pound calf would be $ . 85, but supply and demand and market conditions could change significantly over a 5 month period (Afield trip to a livestock auction to see an auction market for cattle would be an optimal experience for students.)

Answer for Activity 2-2 (4): Profit@ $1.05 per pound= $157.50 Profit@$ .95 per pound=$ 92.50 Profit@$ .85 per pound= $ 27.50 Profit@$ . 75 per pound=($ 37.50)

Texos Entrepreneurs (Lesson 2)

Emphasize that at any price below $.81 per pound ($525/650), the rancher will have a loss.

Created by Jean Walker, Director, West Texos Center for Economic Education



Answer for Activity 2-2 (5): Other risks are price variability of pasture or feed, larger veterinary bills, or the risk of the animal's death.

Answer for Activity 2-2 (6): Trail drives were often raided by rustlers or Comanches on horseback (Although this was also a risk for ranchers, it was a much less serious risk) Animals could escape the herd more easily during a trail drive than when contained in a fenced pasture.

Answer for Activity 2-2 (7): Modern ranchers have financial risks that are more closely linked to international trade because beef has an international market. Transportation costs have varied over the years. First the cattle were driven on hoof, then the railroads transported them, and now most go by truck Publicity given diseases such as "mad cow disease" in the media may affect prices in a way they would not have before radio and TV.

Extensions: These are opportunities for groups or individuals to pursue further study. • Research and write the stories of other ranches such as the XIT, 6666, or the King

Ranch. • Study and learn to sing the songs composed by Texas cowboys on the trail such as

"Bury Me Not on the Lone Prairie," "Git Along Little Dogie," and "Ridin'Ole Paint."

• Create a time line starting with the Spanish introduction of cattle to the New World in the 1500s and parallel the events in the rest ofNorthem America with significant dates in the development of the cattle industry.

• Create a salt map showing the cattle trails from Texas north. • Find current financial information about prices and costs in the cattle industry, and

do an analysis similar to Activity 2-2. • Visit a cattle ranch. • Visit a livestock auction. • Tour an historical museum such as the Bob Bullock Texas State History Museum

in Austin, the Panhandle-Plains Historical Museum in Canyon (which has Charles Goodnight artifacts), or the Ranching Heritage Center in Lubbock (which has many original ranch houses which can be toured.)

Texas Entrt!preneurs (Lesson 2) Created by Jt!an Walkt!r, Dirt!aor, West Texas Center for Economic Education



Activity 2-1

An Entrepreneurial Case Study: Colonel Charles Goodnight

The Rise of the Cattle Industry in Texas "Spanish explorers brought the first cattle and horses to the New World in the 1500s; and

when the Spanish established their missions in southern Texas ( 1690-1720), they brought domesticated stock with them. The animals adapted well and increased rapidly. Many cattle and horses escaped from the missions and multiplied on the free ranges. By the time Texas declared its independence from Mexico in 1836, more than 100,000 Spanish Longhorns and untold numbers of horses were roaming wild. From then until the end of the Civil War, thousands of Longhorns went unbranded and unclaimed.

During that period of30 years (1836-1866) many adventurous young men deserted the cotton farms of East Texas and went out into the cow country of West Texas, where they learned to ride wild horses and herd wild cattle. And so there came into being the Texas cowboy, a unique individual, new to Texas and new to the United States, devoting his days on horseback to the wild, wiry, and vicious Longhorns.

When no market for the cattle developed in the bankrupt South, (Charles) Goodnight and others began in earnest walking them in long trail drives to sell at distant army posts or to load onto trains in Kansas bound for eastern markets. Some were trailed all the way to Chicago or California. Steers which sold for no more than $3 or $4 a head in Texas would command as much as $40 a head in the eastern and northern markets."1

Charles Goodni&ht's Trail Drives: An Economic Enterprise Charles Goodnight was a legendary cattleman. He was born in 1836, the year the

Republic of Texas was born, and came to Texas in 1845, the year Texas joined the union. Although he had also served as a Texas Ranger, he became famous for joining with Oliver Loving to trail cattle from Texas to the northern markets.

The Goodnight-Loving Trail (established in 1866) reached from Fort Belknap in central Texas through Fort Sumner, New Mexico, and eventually to Ft. Laramie, Wyoming. He blazed four more trails, including his last trail from Palo Duro Canyon to Dodge City.

He built the first chuck wagon known, an innovation for his long trail journey. It hauled food, cooking utensils, tents, and bedrolls of the cowboys. A cook drove the chuck wagon. The trail-driving outfit also included 10 or 12 cowboys under the direction of a trail boss, 60 to 75 horses, called the remuda (Spanish for a relay of horses), and a horse wrangler to herd the remuda.

Texos Entrepreneurs (Lesson 2) Created by Jean Walker, Director, West Texos Center for Economic Education



The trail drive provided the best way for the cattlemen to reach their markets, but the trail was not without risk. The Comanches often raided the trail drives, and cattle rustlers were a problem. However, the U. S. Army bought beef for its forts in the west, and driving the cattle to the railheads in Kansas and Missouri could be profitable. The beef could be shipped to the east where the larger population was eager to buy. Goodnight once said, "My drives averaged about $25 per head during the nine years I was on the trail."

The Panhandle Plains Ranching Industry Begins In 1876, after years of trailing cattle, Charles Goodnight drove 1,450 cattle from Colorado

to the Palo Duro Canyon south of Claude in the Texas Panhandle. After driving 10,000 buffalo from the floor of the canyon, he established the JA Ranch with Lord John Adair of Ireland. (During this time many investors from the British Isles invested in Texas ranch land.) The ranch was over 250 miles from a railroad and a base of supplies. The JA ranch covered two million acres at one time.

The first ranches were established in the era of the free range, when there were no fences and cattlemen were able to graze Texas' public land free. In the mid-1880s prices of cattle dropped, causing the large foreign investors to leave. Railroads came in the 1880s, bringing more settlers. At the same time, farmers were able to buy small plots from the railroad and began to move onto the land. Those factors ended the open range, and the arrival of the railroads ended the need to drive the cattle. The last cattle drive was in 1891.

Technology Changes the Panhandle Plains From 1880 to 1890 technological achievements made it easier to settle the land.

Mechanical well-digging equipment and windmills allowed the deep water of the plains to be brought to the surface. In 1881, J. F. Glidden, inventor of barbed wire, bought the Frying Pan ranch in Potter and Randall counties, and enclosed it in a fence using cedar posts from the Palo Duro Canyon and four strands of barbed wire stapled to the posts. Ranchers were more likely to drill wells when they could fence in their waterholes. In 1883 Colonel Goodnight had wells drilled at the JA ranch.

Over the years Goodnight became known for developing better breeds of cattle. He engaged in other business pursuits in addition to ranching. In 1927 at the age of91, Goodnight still drove his car into the town of Clarendon every day. He died in 1929 at the age of 94. He was one of the original five inducted into the Cowboy Hall of Fame.

Colonel Charles Goodnight, the cattleman and rancher, was truly one of the original Texas Entrepreneurs.

1 Pauline Durrett Robertson and R. L. Robertson, Panhandle Pilgrimage, p. 172.

Texos Entrepreneurs (Lesson 2) Created by Jean Walker, Director, West Texos Center for Economic Education



Activity 2-2 Let's Buy a Cow!

A rancher buys cattle, feeds and cares for the cattle for several months, then sells the cattle. The rancher is an entrepreneur trying to make a profit from the cattle business.

Profit may be defined as: Sales Revenue- Total Costs= Profit

(1) Calculate the costs for buying and raising a 350 pound calf for 5 months:

Calf- $1.10 per pound X 350 pounds =$

Pasture- $11.00 per month X 5 months =$

Feed- $15 per month X 5 months =$

Medicine- $2 per month X 5 months =$

TOTAL COSTS PER CALF $

(2) A rancher would expect the calf to gain about 2 pounds per day. How much would the calf weigh in 150 days?

(3) One of the risks the rancher takes is not knowing the price per pound for selling the calf. (If prices remain constant, the price per pound still decreases as animal size increases.)

Assume you sell the calf at the weight you just calculated in #2. How much is your sales revenue (or loss) if you sell the calf for any of the following prices per pound:

____ pounds x $1.05 per pound=$ ____ _

___ _..rpounds x $ .95 per pound=$ ____ _

-----"pounds x $ .85 per pound=$ ____ _

___ _..rpounds x $ .75 per pound=$ ____ _

Texas Entrepreneurs (Lesson 2) Created by Jean Walker, Director, West Texas Center for Economic Education



( 4) Calculate the profit for each of the selling prices per pound:

Sales Revenue - Total Costs = Profit

Sales revenue at $1.05 per pound = $ = $

Sales revenue at$ .95 per pound=$ = $

Sales revenue at $ .85 per pound = $ = $

Sales revenue at $ .75 per pound=$ = $

( 5) In addition to the risk of price per pound varying, what are other risks that would increase or decrease profitability?

( 6) If you have read the story about Colonel Charles Goodnight, explain what risks the early trail drivers had that the early ranchers did not have.

(7) What risks do modem ranchers have that ranchers in the 1880s did not have?

TI!XIIS Entr~pr~n~urs (Lesson 2) Cr~at~d by J~an Walker, Director, West TI!XIIS Center for Economic Education

Texas Entrepreneurs


Visuall-1

Cowboy Clothing and Equipment

JUST FOR FUN, match the cowboy clothing and equipment with the reason for wearing it:

__ 1. tight trousers

__ 2. leather chaps

__ 3. wide-brimmed hat

__ 4. high-heeled boots

__ 5. bandana

__ 6. rope

__ 7. knife

__ 8. gun

__ 9. western saddle

__ 10. spurs

TUIIS Entrepreneurs (Lesson 2)

a. used to make the horse move instantly

b. used as a filter against dust or to keep sweat from the cowboy's neck

c. worn to keep loose cloth from catching in the brush as he chased cattle

d. used to catch cattle, hold his horse, pull his wagon, tie things down, and kill snakes

e. used to eat and mend bridles

f. worn to protect his legs from thorns and branches while he was in the saddle

g. worn to give him a hold in the stirrups and protect him against rattlesnake bites

h. used to hunt, defend the herd, and frighten the cattle to make them move

i. used as a pillow, used for tying rope to, used to support cowboy while riding

j. worn to keep the sun and wind out of his eyes, to double as a bucket when

necessary, to use as a whip if needed, or to serve as a signal "flag"

Crealed by Jean Walker, Director, West TUIIS Center for Economic Edllcalion



Visua12-2

Cattle Brands

Cover the answers in the right column and see if you can identify the brand by its branding iron symbol. ---1. ____ Ts ________ __

2. V-bar ----- --------

3. BQ ____ Bu~~--------

4. D+ D-cross ---~ ------------

5. XIT ---~XIT (fen in Texas) ______ _

__ Tur)cey tracks. ____ _

TaDS EniTepl't!lleurs {Ussotr 2) Cretded by Jetl/1 Walko, Dir«tor, Wm TaDS Cmter for Economic Edllcatiotr

Lessons in Entrepreneurship and Free Enterprise

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