Jim Koch, founder of Samuel Adams Beer, on why “people trump strategy & people trump financial resources”
…I guess the first one was, you know, that it’s all about people. You know, people trump strategy, people trump financial resources. Everything, you know, wins with people. So, you just have to start with people, and I was lucky my first employee became my partner. She was an amazing human being, and like I said, we didn’t hire a resume, we’d hire experienced and passionate people. The woman that I started Sam Adams with worked with me at Boston Consulting Group, but she was a secretary and you know, what we don’t think about — and there’s a lot of truth to it — we think America is a meritocracy, but really in a lot of ways it’s is a caste system, not based on birth but based on education. And so I was at Boston consulting group, you know, great institution, wonderful, amazing people. Rhonda was there too, Rhonda was the secretary and there was no way, no matter how good she was, how capable, she would ever have crossed that caste barrier from being a secretary to being a management consultant because she didn’t have an MBA, right? So that was the caste system based on education but the subsequent, you know, experience of Rhonda who helped build Sam Adams and Boston Beer Company is living proof of just how capable she really was, but without that MBA, she would have never been anything but a secretary.
I had the distinct pleasure to interview (over a beer) Jim Koch and Jessica Spaulding. Jim Koch, a Harvard grad, left a lucrative consulting job to create Samuel Adams beer in his kitchen (a move that his father called the “stupidest thing he’d ever heard) Jessica Spaulding is the founder of Harlem Chocolate Factory. While women are starting businesses 2.5 times faster than the national average, they have more trouble accessing capital according to a recent study by the New York Federal Reserve. That is why Jim Koch and Samuel Adams Beer has a program called Brewing the American Dream, which gives mentorship and capital to small businesses (more than 1,500 loans totaling $22.4 million to date). Jessica is one of the recipients of the Brewing the American Dream program.
Yitzi Weiner: Thank you so much for joining me! Can you tell us your backstory?
Jim Koch: Well I guess it’s the backstory of Sam Adams. I started it in my kitchen in 1984, before there was craft beer, back when American beer was just a wasteland and you couldn’t get good American beer and the best you could get were stale imports.I came from a brewing background. I’m the sixth oldest son in a row to be a brewer. So I knew a little bit about beer but my dad had been in brew master and he kept losing jobs as the breweries closed so he didn’t want me to go back into beer and I didn’t and I went to law school and went to business school and a consulting firm and worked there for six years and then realized I don’t want to do this for the rest of my life and then I realized, well, the rest of my life starts tomorrow. So I went in and gave my notice without knowing what I wanted to do and I looked at a lot of businesses and settled on the one that I was the most passionate about, which was beer. I looked at like high tech businesses that were much more promising and that could have been funded. Nobody wanted to invest in a small scale brewery. I mean mentor people turn me down, and I basically did it with friends and family and the whole company started with two people.
I made the first batches in my kitchen and you know, but it was a beer that nobody ever had, nobody had beer that, you know, was a great fresh, rich, flavorful beer like Sam Adams and that helped launch this whole craft beer revolution. Its 34 years later and there’s 6,000 craft breweries in the United States with four new ones opening every single business day. So I was a rebel and I named my beer, Sam Adams because he started a political revolution and I wanted to start a beer revolution and the revolution succeeded in both cases.
Yitzi: That’s fantastic. So this is a question that I often ask CEO’s and founders. What have you done to help your employees thrive?
Jim Koch: That’s a very good question and one thing that I learned very early on is that something you don’t learn in business school, which is in business, its all about people. Everything happens with, by and through people, whether they’re your customers or they are your employees. So, we very early on started a training program. I think, we started our first training classes when we were maybe 10 or 15 people because I’ve always believe that, you really, your company is only the set of skills that your employees have and you need to develop them. We hired people who were from outside the industry and who didn’t really have the skills that they needed. We didn’t hired for resume or experience. We hired for energy, talent, drive, self awareness, resourcefulness, mission of service. We defined a bunch of characteristics that we thought our people should have instead, and if they have those characteristics, we can train them to do everything else and in the beginning, you know, we mostly had to learn to sell beer because the distributors wouldn’t take us, so we had to sell it ourselves. We had no money for advertising. We went from bar to bar selling beer, so we developed first, you know, selling skills and then building brands through distributors and so forth. We now have a curriculum of about 15 courses that people take as they develop in their careers. You know, it was interesting, I had a distributor, ask me, “Why do you spend all this money training people when they might leave” and he said, “Well, that sort of makes sense I guess, but not when you think about it because you know, yeah, what if you spend money training people and they leave.” Well that it’s not the worst thing. The worst thing is what if you don’t spend money training them and they stay!
Can you describe this fascinating new initiative bringing venture capital to a wider audience?
Jim Koch: Well, it’s not actually venture capital. It is much more basic than that. What we do in the Sam Adam Brewing the American Dream program is basically micro-finance. We make small business loans to people who are smaller than the Small Business Administration deals with. They say it’s the small business administration, but they want to make loans of $100,000 and up, you know? Our average loan is less than $10,000 and many times we started out with somebody who basically just has a business plan, and, you know, enough ingredients to fill the grocery bag and has real passion and pride about what they want to do.
Like Jessica, when she started out, she got a $2800 loan, which has been paid back, and then she got another loan. We build businesses that are too small for anybody else, and a part of the reason that there haven’t been programs like Sam Adams Brewing the American Dream before is you can’t make money on those loans. They’re too expensive to screen applicants and to administer. So it has to be done as a philanthropic activity, but the people that we make these loans to have such a high sense of integrity, our repayment rate is 98%. That’s better than banks get because we’re lending to real people who have a sense of obligation and pride and they want to repay the loan even if they can’t afford it. We’re voting on character and it worked.
Jessica Spaulding: Yeah, like my loan was $2,800 and how at the time when I did it, I only had a business plan, there was no other part of the business. I think I had just purchased the domain name and so that’s all I had. I had a landing page with contact info and a business plan when I received the loan and I actually split it up. I put half of the loan into savings to pay it back just so I would never fall behind on payments, and the other half I used to actually, you know, invest in my business and make these samples and everything and for this business planning competition I was in. My goal in doing the business plan competition was to actually pay the loan back, because I’m like, the whole point behind the business plan is like to just see whether or not it’s feasible.
Sometimes you have a business idea and it’s cute, but there is no real business there, and I’m like, these people have already given me their money. I don’t look at, you know, I didn’t have someone interact with me at some like nameless bank, there was a person who spoke to me, who cared about me, who cared about what I was doing, on all sides, you know, this is a person who has his own job with Sam Adams calling me a part of this group, the American dream program. So I felt, you know, I felt like I was paying a friend back and so it was just like I have to make sure he gets his money and that was the goal behind the business plan competition and I wound up actually winning the grand prize for $10,000 and being able to… or was ti 15? No, it was $15,000, I’m sorry, there was a $15,000 competition prize and I paid the loan back and invested the rest into my company and actually, you know, kept my relationship for the next phase of my business and we were able to get a secondary loan to support the opening of my shop that just opened three weeks ago.
Yitzi: I recently read a report in Fortune magazine that of all the venture capital that was lent out only 2% of it goes to female owned businesses, to female entrepreneurs. It’s a shocking number, horrible number, you know. As a business leader yourself, what would you suggest to be done to remedy the situation? What are the systemic issues that underlie those numbers and what could be done to remedy them?
Jim Koch: Well, it’s a really good question and I have some personal experience with it because my wife was a biotech entrepreneur, I don’t know if you know, but with six kids, I’m sure your OB has provided the option of banking the umbilical cord for the stem cells. My wife created that industry 26 years ago, starting in her apartment and you know, obviously it was a great idea, right? But it took her a very long time, and I mean totally honestly, there is a bit of a boys club in venture firms. I mean you see it and a lot of it’s not even conscious, you know, they just, the way they do business, that jargon, I mean in venture capital, you’re kind of a cowboy and they kind of pride themselves on that, so it kind of develops a lot of, you know, more masculine attributes. So to me, one of the first things is for people in the venture community to just, you know, realize that. And they’re not sexist people. They all have wives and daughters that they have aspirations for. So they’re not bad people, but they should just, to me, just be aware of the talent, just be aware of the simple fact that when you know, they want to lend to smart, aggressive, talented, resourceful people. Well, guess what? When God made smart, aggressive, talented, resourceful people, she made half of them women.
Yitzi: Going back to when you started, looking back, are there are five things you wish somebody told you when you first started that you learned over the way, over the course of your journey?
Jim Koch: I’m sure there’s at least five, but I’ll try to tick off some of the things that, you know, I should have known or somebody should have told me when I started.
- I guess the first one was, you know, that it’s all about people. You know, people trump strategy, people trump financial resources. Everything, you know, wins with people. So, you just have to start with people, and I was lucky my first employee became my partner. She was an amazing human being, and like I said, we didn’t hire a resume, we’d hire experienced and passionate people. The woman that I started Sam Adams with worked with me at Boston Consulting Group, but she was a secretary and you know, what we don’t think about — and there’s a lot of truth to it -e think America is a meritocracy, but really in a lot of ways it’s is a caste system, not based on birth but based on education. And so I was at Boston consulting group, you know, great institution, wonderful, amazing people. Rhonda was there too, Rhonda was the secretary and there was no way, no matter how good she was, how capable, she would ever have crossed that caste barrier from being a secretary to being a management consultant because she didn’t have an MBA, right? So that was the caste system based on education but the subsequent, you know, experience of Rhonda who helped build Sam Adams and Boston Beer Company is living proof of just how capable she really was, but without that MBA, she would have never been anything but a secretary.
- So I guess that’s my second point:that talent comes in all kinds of shapes, sizes and packages, and you’ve got to learn to look for talent, not any of the wrapping that it comes in.
- The third thing is about products. The quality of the product is key because, any consumer has lots of choices, and no matter what they’re buying.s a small company, you can’t compete at the commodity level. You cannot be cheaper, but you can be better and you only have a business if your product is either better or cheaper. Otherwise, why would anybody buy it? So as a small business, cheaper is not going to really work, it has to be better. It all comes down to having a superior product.
- And then I guess the last two would be selling. In a small business, you have to learn to sell. And you don’t really think about that. You think, “oh, we’re going to make this great product, people are going to fall in love with it,” and somehow you forget that step. Well generally you have to sell to a retailer and how are you going to do that? I had taught Jessica the same thing. You have to show up and actually sell it. You walk into the Whole Foods and you say, I have this great beer, it is so good, I’d like you to taste it. You’ve got to tell your story and you’ve got to learn to listen with a high awareness. And you have to realize that the essence of good selling is not, you know, this Willy Loman manipulative stuff. The essence of good selling is figuring out how what you have to offer will help the other person accomplish their objectives. Selling is all about helping the customer accomplish their objectives, not yours. It’s all about them.
- And then the last thing would be that, you know, starting a small business is hard. It’s at best a roller coaster and it’s going to have ups and downs and if it’s, you know, not working, you’re going to have to work your ass off and it’s going to eat your life. And if it is working and taking off, you’re going to have to work your ass off and it’s going to eat your life. So there’s no alternative to that and the only way you can really, you know, persevere through that is if you have real passion about your product and what you’re doing.
Yitzi: Fantastic. So, Jessica would you like to share?
Jessica Spaulding: Yeah, my five:
- One, is definitely going to be to pay people when the work is done, you know, that’s the lesson and the story of my life for the last year.
2. Two is to not about who is best first, it is who was there last. And yeah, sometimes for myself, I overthink it all and I’m trying to be like, I can’t compete with the big guys. They have more money than me. They have more market share, they have more everything. I have me and so what I can do is just continue to make sure that I’m there.
3. Number three, allow people to grow with you. For me, there were times that I’ve stopped myself from putting things out because I’m like, this box does isn’t perfect yet and like, does it fit, you know, you have a little structure like is it good? Is it nice, you know, does everything work about it? Then do it, you know? When you can get the fancy stuff a little bit later, you know, do that.
4. Then number four is this is going to be, even as an entrepreneur I practice self care, right? Like it is only me so there are going to be times I have to go to bed because you just counted that box 75 times and somehow you can’t subtract three. So either you need a nap or rest or something. If you don’t practice self-care, you’ll never get to where you want to go.
5. And number five is have fun. And I know that sounds crazy, but it’s just, there are ways that I find,especially being in groups of entrepreneurs and stuff, I’m like, wait, why did you stop having fun? Like why did you stop enjoying what you do? Like you’ve made it so about, you know, oh, we have to meet. There’s a way to meet that while you’re still not a robot in everything, and so I make sure that OK, yeah, for me, when things are not to say like everything’s just going to be fun, because listen, I just have a date with QuickBooks tomorrow and I am not really looking forward to it. But at the same time it’s still one of those things that kind of brings me joy because I’m working in my business and I really love what I do and, and it’s important not to get so run down by the business that you resent it. I’ve seen people walk away from their businesses because they resent them because of an issue that you could’ve found. Like if you aren’t having fun with an aspect, how do you make it better? How do you divvy up that workload between the people that you have? How do you allow people to help you with getting it done so you don’t hate it?
There’s no reason to kill yourself for your business In your business, the things will get done. You have to break it down. Sometimes it’s not the pizza, it is the slice. Take a slice, eat that, go back and finish the rest. But sometimes as an entrepreneur you see you’re always focused on the on the pie. You can’t eat that. Somebody has to sit with you, grab a beer. You might have to talk it out. How are we going to eat this? How are we going to break it down? But it’ll get eaten and so have some fun. Drink your beer, you know, and get it done and it’ll get done. And that’s the way you don’t wind up hating your business and you enjoy yourself while you’re doing what you do.
Jim Koch: That’s awesome. I want to read your book when you write it. I’m going to learn something.
Yitzi: I’ll be honest, I’ve done close to a thousand of these interviews that was among the most thoughtful answer I’ve heard in all my interviews. That was really good.
Jessica Spaulding: What? Omg. Listen I appreciate it and it was so funny because we were just talking about it. Like I don’t have the same, you know, it’s just me and two of my… some of my close friends and thinking about how to you make sure that your people thrive. And so when I was going at that I knew that I have amazing people in my life who all have talent. Especially when you’re coming from that community, and when we talk about, it’s all these things that overlap. We’re talking about women, we’re talking about the opportunities they have. There’s a lot of times that women are already been told that the skills that you have kind of relate to something. Being able to juggle six kids is operations management, you know, it has COO written all over it. And sometimes we’re just not taught that those aspects of who we are translate in this business world.
So I selected two people that I’m like the way that your minds sync are perfect for where we’re going to go. And it’s a lot of convincing them that they’re good at what they do, but they have to blossom. It is amazing to work with them. I have other friends that I’m like, go out, continue to work in this field and learn what you need to learn, because I can’t afford to hire you to learn those lessons right now. Someone else can teach you, and when you’re done learning those lessons, we should have a space, the space for you. And you know, and if you don’t, if you just love where you’re at, stay there, but this is the thing that I think you’re made for. I have one more friend that I’m trying to prime for my operations manager. She thinks that she’s just anal and I’m like, no, you’re perfect. I call her every once a month to clean my closet.
Jim Koch: That’s great, there is proof about it. Attention to detail is good.
Jessica Spaulding: She’s like, just the way she thinks about things is like me. I’m just kind of like, I’m thinking about everything like that pizza advice is something I tell myself on a regular basis, because that’s what I do. And I’m like Jessica, just eat the slice, while she is like, she can go into a room and reorganize it, so the flow and like so you can take one package and this package and that has the label. And it’s just like you don’t realize that when you’re not a corporation, because corporations have things that do this and you know there are people that do this. There’s somebody that when you go into the gap that says — bags go here, there’s somebody that does that and that’s what I’m learning is that we need to do that. It doesn’t just all happen. Do you think when you open and you run into a business, it just kind of like does that. Like who puts the bags together so we know which bag to take? We have to kind of develop those processes.
Jim Koch: What I’m hearing is you really is, you’re really good at recognizing talent, even though it’s not the exact talent, it is the more generalized form of that talent and that can be applied to your problem.
Jessica Spaulding: And that’s what I took from your book because it was just like when I was reading the book and just about how to really not, not get focused on, you know, these people don’t have credentials in places, you know, some of us went to college, some of us didn’t. I mean, most of my friends did, but at the same time that we got degrees because our parents wanted us to get a job. But it’s not in these areas, you know, teachers this, that, and, but, I’m like no, the way that you just operate as a person, you could do my operations. Like that’s what you can do. That’s what you’re good at and so that’s how I’m like, I’m learning to look beyond that and like, no, what are you in tune with? OK, yes. You’ve never worked with chocolate before; you’ve never worked in a small business. What do you like doing? And what makes you happy? What brings you joy? What makes you sure that you show up and you don’t hate what you do and those are the things that I asked now for my first round of hiring or anything.
Jim Koch: Yeah. I mean we, when we hire people, we’ve formalized it now, but we hired somebody into a job and we have a form that people fill out about what is the person who is going to be really successful in this job? What are the adjectives that describe them? And then we match that up with the employee, the candidates, and they have a similar thing, and we asked them what are the adjectives that describe how you are? And then what are the adjectives that describe how you think people want you to be? And what we’ve discovered is if the things that people need to be to succeed in their job match up with what they are, forget resume, forget experience, grades all that stuff. If you’re motivated to do — inherently motivated — to do the things that you need to do to be successful in a job, you’re going to be successful.
I never forget there was a guy that was interviewing for an accounting job, right? And so we’d given the guy applying to be an accountant this little test, it’s called the predictive index. And I’m looking at this guy and looking at the results and it had nothing that would match with an accountant. He had a high need for proactivity and taking control. He had a high need for social interaction. He had a low need for patience and a low need for order and structure. You know, like this is not good for an accountant. You know when somebody that wants to be creative in accounting. For an accountant, you don’t want somebody who likes to be around people. You don’t want somebody who has no patience and you don’t want somebody who doesn’t like order and structure. Those are great characteristics for a salesperson. So I asked him, “Hank, you like being an accountant?” and he said, “No, but my dad was a CPA and he told me if I got my CPA, I always have a good job.” OK, so you don’t like it? I asked a question: “Have you ever thought about selling beer?” He’s like “Oh, I could sell beer.”
Long story short, we hired him as a salesperson. He got promoted three times. Married another Boston Beer Company salesperson and they live happily ever after. Yeah, he never went back to accounting.
Yitzi: So this is my final question. I’m very blessed that very prominent CEOs or entertainment figures read my column. So this is your chance to reach out to them. Is there somebody that you would like to have a breakfast or lunch with? Anyone in the world? Who would that be and why?
Jim Koch: It would’ve been Steve jobs. He’s like, to me his biography was awesome. We all dream of that, such a great story. You start something in this garage, built it up and the money guys get control of his company, they fire him, you know, they immediately started to fail and fail for 10 years. And then they realized their mistake, they bring the entrepreneur back, he turns the company around and makes it the most valuable company in human history. I would love to ask him, how did it feel? You know, in each of those points.
Jessica Spaulding: I guess this is the Harlem part of me, but it would be the person who has turned himself into a multi-billion dollar business and it’d be Sean Combs because the way that he has, you know, the way he structures his marketing and businesses to all like work towards this goal is amazing to me.
Yitzi: It’s really been a delight to meet you and I wish you only success and feel free to keep in touch. I will send you the article soon and I wish you only success.
Jim Koch: Cheers. Almost finished my beer. Bye now.
The complete interview can be viewed below: