How they built that, or, how I learned at the gym that everything I thought about starting a business was wrong
A while ago I decided it would be a good idea to listen to How I Built This in the gym.
I spent a lot of time in the gym, and I listened to a lot of episodes.
If you’re not familiar with the concept: How I Built This is a public radio show in which the host, Guy Raz, interviews a founder about their company for about 45 minutes. At the end of each episode, there’s a cute little story called “How You Built That” featuring an obscure small business started by a listener.
Anyway, if you deadlift a lot, you will listen to enough of these stories in a short span of time, and you see trends. So here’s what I learned: that almost everything I knew about starting a business was wrong.
Disclaimer: Why everything in this article might be BS
First, the businesses profiled on How I Built This are not a representative sample of businesses. The show goes out of its way to pick subjects that its listeners will have heard of: almost every single business profiled was a business-to-consumer company whose products are widely available in the US.
Second, the stories are told entirely by interviews with the founder. This is not an unbiased source of information, especially as the questions tend to be gentle softballs rather than hard-edged probing.
Third, being on the show doesn’t mean you’re a wildly successful business. Several profiled businesses failed or declined sharply after a period of success, and the businesses covered vary enormously in success and scope.
Fourth: There are, as of the time I wrote this sentence, 121 episodes of How I Built This; I have listened to about 50. So don’t tell me that something I said was contradicted by the episode about Stacy’s Pita Chips. (Actually, please do! It would be interesting.)
Harry was right
In the film When Harry Met Sally, Harry, played by Billy Crystal, has the famous line, “men and women can’t be friends because the sex part always gets in the way”. Whether this is true of friendship, who knows, but it does seem to be true of co-foundership.
Of twelve businesses profiled in the show that had both male and female co-founders who were not brother and sister, in every single case, the co-founders were romantically involved with each other. The one quasi-exception is Bumble — and I don’t really consider this one an exception because even though Andrew Andreev is described as a co-founder, his role was mostly providing funding and he doesn’t even live on the same continent as founder Whitney Herd.
In about half the cases they were partners before starting the business, and in the rest they got involved afterwards. There were several cases of same-sex co-founders and in none of those scenarios were the founders romantically involved. This may be the result of the timeframes in the show — it takes a business a while to get big, and many of the businesses profiled were started in the 60s, 70s, and 80s, when it might have been more difficult for same-sex couples to go into business together, or for women to find men other than their husbands who took them seriously as potential business partners.
As you might expect given how tightly intertwined founders’ relationships are, breakups usually involved one of the founders leaving the company, although the businesses generally did fine after their departure. Of four businesses in which the founders broke up, only in one of them — Cisco Systems — did they continue to work together cordially.
You can have it all
If that sounds depressing — on the bright side, the stories showed it is possible to balance work and family. Almost all the founders profiled had children, even the female founders, and they didn’t wait to have kids until the business was mature (or vice versa). At least thirteen of the profiled companies were founded or co-founded by moms, including Crate & Barrel, Lonely Planet, and Stitch Fix. This requires either resources — many of these founders do talk about being financially well off enough to pay for childcare or having an arrangement where a spouse or ex spent lots of time with the kids — or a willingness to shape the business hours, format or location to allow childcare. Stacy Brown of Chicken Salad Chick started a restaurant that serves lunch but not dinner so she could spend evenings with her kids, Five Guys founder Jerry Murrell hired all his kids to work in the restaurant, and Maureen Wheeler of Lonely Planet ended up trekking across India with a baby on her back.
Explosive growth is the outlier, not the rule, for new businesses — even hugely successful ones
Relatively few founders profiled took what folks in Silicon Valley might think of as the only route to success — coming up with a longshot idea worth tens of billions of dollars, then bringing it to fruition. As the founders in these stories frequently point out, venture capital is a recent innovation. Prior to the 2000s, it was almost impossible for a founder to get a big investment of capital without going public, so most of the businesses were started the old-fashioned way — taking an idea and slowly building it as it gets more and more successful.
Many of the companies, especially the women-owned ones, started out as cottage businesses. Stacy Brown founded Chicken Salad Chick by perfecting a chicken salad and then selling it to friends and neighbors; Alli Webb of Drybar started it as a business she ran from her van, driving between appointments as a way to stay busy while her kids were in school; Lisa Price of Carol’s Daughter invited people to her house to buy homemade cosmetics and was reported to the cops by her neighbor as a suspected drug dealer. Even the more traditional businesses started small. When Whole Foods started it was just an organic grocery store with one location; Crate and Barrel was just a furniture store; Patagonia was a guy trying to build better mountaineering equipment. Very few founders had explicit plans for creating a scalable business that would become an empire worth hundreds of millions of dollars. (Although some did start with that plan — including Jennifer Hyman of Rent the Runway and media mogul Haim Saban.)
You don’t need to have a good idea to start a successful business…
Some of the businesses weren’t just not billion-dollar-ideas, they were ideas that seemed flat out terrible. Dollar Shave Club came from founder Michael Dubin seeing if he could apply his improv comedy background to unloading a warehouse full of razors his friend’s father-in-law had bought. Toms was founded by a serial entrepreneur who knew nothing about shoes or fashion trying to sponsor shoe giveaways to poor children in Argentina. Burt’s Bees founder Burt Shavitz sold gallon-sized milk jugs full of honey from the back of a truck. These aren’t just businesses that you’d have to take a gamble on, like Airbnb or Twitter — these are businesses that no sane person would invest in.
…but you will need to develop one at some point
And yet there is a difference between the “How I Built This” businesses and the “How You Built That” ones created by listeners — the really successful businesses can scale. They weren’t necessarily built with scaling in mind, and they might not have scaled at the beginning, but they got there eventually. Their owners franchised, or opened multiple locations, or dropped product lines that took a lot of effort to make, or added new ones. Ability to scale is why Clif Bar and Bonobos are large businesses and Rex Specs (my favorite listener-run business, which makes sunglasses for dogs) is not. Rex Specs could get there one day, but not by selling dog sunglasses — but if they diversified into dog dental health chews, or little dog booties for snowy days, or doggy earplugs, you might see them profiled on the show one day.
Business school is not completely useless
Only a handful of business profiled were founded by business school grads. The main conclusions I can draw from the list (Honest Tea, Rent the Runway, Bonobos, Stitch Fix) are that business students care more about how they dress than I do (to be fair, so does everyone), and that B-school is a great place to meet a co-founder — unsurprisingly, all of those founders met their co-founders at school.
Distribution is even more critical than you think
First time founders are obsessed with product. Second time founders are obsessed with distribution. — Justin Kan, founder of Twitch
Distribution is important. You already knew that. But what’s clear from the show is that having a single good distribution deal is the difference between foundering and wild success for many startups. The story of the founding of Springfree Trampoline, for example, is as much about the inventor’s fight to get his product stocked by Costco as it is about anything else. Every retail product is at the mercy of the companies that stock their product and many were heavily dependent on a single retailer early on, like Method Soap on Target or Honest Tea on Whole Foods or Bob’s Red Mill on Fred Meyer.
It’s fine to sell out
It’s OK to sell out — especially in certain sectors. You can predict a company’s exit more by its industry than by anything else. About half the retail food and beverage brands sold out — Bob’s Red Mill and Clif Bar are still independent, but Larabar and Honest Tea sold to larger companies, as did almost all of the personal care or cosmetics companies. They did this even when this led to real backlash from their customers due to a clash between the existing brand and the brand of the acquirer, like with Carol’s Daughter (a hair care company for Black women, founded by a Black woman, and sold to L’Oreal) or Burt’s Bees (a natural products company with a hippie marketing vibe, sold to Clorox). As Urban Decay founder Sandy Lerner pointed out, these industries — especially cosmetics — are prey to trends, have no lock-in, and are easy to copy. The brands can decline fast and it can make sense to get out while the getting’s good. In addition, they can also benefit tremendously from a larger company’s relationships with retail stores and distribution networks. Honest Tea sales exploded when they were acquired by Coca-Cola, due to increased distribution.
On the other hand, fitness chains and retail stores seemed to get little benefit from being acquired. Of those profiled, Soulcycle was the only one to sell out. And to hear the founders of Peloton tell it, there seem to be few businesses in the fitness space that are interested in making acquisitions at all.
Cultural export is a great recipe for a business
A very common theme among businesses was taking an idea that was successful in one place and bringing it to a new market or context. At least nine of the profiled businesses fit this model. Haim Saban, for example, loved the show Kyōryū Sentai Zyuranger and thought kids in the US would love it too, and more importantly, he realized that its style and costumes meant that the English remake — which he called Mighty Morphin’ Power Rangers — would be cheap to produce. Method’s cultural export was more local, started when its founders noticed that trend for more upscale and stylish consumer products, as popularized by Target, hadn’t yet hit the cleaning aisle. Soulcycle took the flashy, high-energy fitness classes of LA to New York, and Zumba did the same thing with popular Brazilian dance.
Near-death experiences are common
Many of the businesses profiled came close to failing at one point in the beginning, with at least half a dozen founders telling stories about this, and many more likely having stories they didn’t tell. Whole Foods was hit by a catastrophic flood in its early days — one of the best anecdotes in all the episodes was John Mackey posing as a looter while entering his flooded store to retrieve the week’s cash from the safe. Bob’s Red Mill burned down. Lululemon and Clif Bar both nearly failed after making large advance payments to suppliers who never delivered — Chip Wilson of Lululemon ended up making payroll that week by spending the severance check from his previous job. Haim Saban lost most of his life savings when the Yom Kippur War forced a band he had booked and pre-paid to cancel a countrywide tour — and then lost the rest of it to Israel’s hyperinflation.
There’s no such thing as a “founder personality”…
Some of the founders, like media mogul Haim Saban or serial enterpreneur Blake Mycoskie, have stereotypical founder traits — supremely confident, extroverted risk-takers who see business opportunities wherever they go. But a wide variety of people start companies. Some, like Eileen Fisher (of the eponymous clothing company) and Andy Dunn, of Bonbobos, struggled with anxiety or depression. Others were introverts, like Roxanne Quimby of Burt’s Bees, who spent seven years in a rural Maine cabin she and her boyfriend built. Still others didn’t seem to have instincts for business — Bob Keith Alexander of Springfree Trampoline comes across as basically a real-life version of Belle’s dad from Beauty and the Beast; Bob Moore of Bob’s Red Mill was a 46-year-old seminary student who previously owned a failing gas station.
…but there is one thing all founders have in common
The one thing that the founders do have in common is a willingness to go after opportunity — to have a cool idea and actually do it, rather than talking about it and moving on. Listening to the episodes, I was shocked to realize that the original vision for Kickstarter was almost identical to an idea some friends and I had discussed, long before Kickstarter existed — with the difference being that Perry Chen actually built his idea, and we didn’t. If you spend about ten minutes a day thinking about business ideas, or if you write down every business idea that crosses your mind, it’s highly likely that within a week you’ll have at least one totally viable idea. Actually building it, though, is another story, and requires extreme persistence and dedication, which leads directly to the next lesson.
Making money is a terrible reason to start a business
OK, starting a business is a good way to make a huge amount of money. But it probably won’t work, and even if it does, you will have worked incredibly hard for a good 10–15 years before it does. Most people need to be motivated by something else rather than the promise of a possible, far-future payday in order to put in the work that starting a business requires. All the founders seemed legitimately passionate about their product — even the guy whose business consisted of wringing every possible dime out of the intellectual property rights to Alvin and the Chipmunks. If you just want the things money can buy, it’s a much better idea to get a high-paying job.
If you open a restaurant, and on your first day you open the doors at 10am, you will be sure your business is about to fail, because nobody goes to restaurants at 10am
Now you know.
Bonus: the best episodes of How I Built This.
Special thanks for this article goes to Alex Allain, without whose persistence it would have been yet another cool idea that I never built.