Founders - #244 Harry Snyder (In-N-Out Burger)

Starting point is 00:00:00 Almost immediately, a boisterous crowd appeared, requiring the presence of police to direct traffic and help with crowd control. There were businessmen in suits, women in heels, truckers in jeans, college students in t-shirts, construction workers in heavy boots, and moms with babies on their hips. They all braved the long lines, enduring waits of more than two and three hours. Remarkably, the official kickoff was marked with little fanfare. Two workers carried a simple white sign with the familiar In-N-Out logo and the words, We are open. There weren't any prizes offered, furry mascots, or any other marketing gimmicks. There was no promotional advertising either, just a small sign that stood on the lot

Starting point is 00:00:46 for some time, coming soon In-N-Out Burger. In fact, there was no grand opening. The carnival atmosphere was created entirely by In-N-Out's rabid fans. The chain didn't need to advertise its opening. For weeks, its devotees had been broadcasting the news to one another. For two years, ever since word had spread that an In-N-Out was coming to their city, the residents had been waiting anxiously. People began lining up at 2 a.m. the day before, some sleeping in their cars overnight. In-N-Out's vice president of planning and development, Carl Van Fleet, assessed the scene with the chain's typical understatement. This is not something that happened overnight. It just grew with us. That is an excerpt from the book I'm going to talk to you about today, which is

Starting point is 00:01:36 In-N-Out Burger, a behind-the-counter look at the fast food chain that breaks all the rules, and it was written by Stacey Perman. This book was recommended to me by a listener, and it came at the absolute perfect time. Some of the best businesses in history could be described as cheerful cults. So reading this book, I wanted to read this book to better understand a phenomenon that I've noticed over and over again as I studied the history of entrepreneurship. In fact, on the very front cover of the book, there's a blurb and it says, this is an absorbing case study on how a family business came to be at the center of its own cheerful cult. And so it's important to keep in mind as you and I talk today, we're not talking about cults in the negative connotation, the most famous examples,

Starting point is 00:02:18 people like Jim Jones or like Charles Manson. What I'm trying to figure out as I read this book is like, how do you develop a positive, cheerful cult? How can you bring joy to somebody else's life through a product or service? You bring so much joy to somebody's life that they tell others about it compulsively. So that is the definition that we're working with. I'm going to link this below. I'm only going to read parts of it. But this is one of the best posts that I've ever come across. It's called Aliens, Jedi, and Cults, A Mental Model for Potential. And it was written by this guy named Richard Burton, who was a early employee at Stripe. Stripe, in case you don't know, is probably, I think it's the most valued, valuable private business in the world. It's going to wind up going public, I think, relatively soon. And his experience as an early employee allowed him to discover a mental model for potential

Starting point is 00:03:08 that he has then applied to other things like Bitcoin, Ethereum, SpaceX. He's got a bunch of other projects and businesses. He lists about eight in the post. I'm just going to read from the very beginning, though. He says, I want to explain some of the experiences that I've had that very few people can relate to. I have been lucky enough to stumble across a few rocket ships before anyone else cared. This has helped me build a mental model for things that have potential. So he starts with Stripe. He says, in 2010, I started a little company selling custom apparel on the internet. I integrated Wufoo, Google Checkout,

Starting point is 00:03:40 and PayPal to sell around 100,000 sweatshirts to students. So he's talking about the problem that you had, you know, 10, 15 years ago, trying to sell things online. You had to patch together a bunch of different products or services. It's very difficult. Stripe, that's the first solution, the first problem that Stripe solved, right? So it says in 2012, two years later, I read a blog post about a little company called Stripe. I instantly understood the value of what they were doing and it decided to apply for a job there. I researched every single person in the company. I learned

Starting point is 00:04:10 their names. I read their tweets. I sifted through their blog posts. I was completely focused on getting a job there. When I met John Collison, this is one of the co-founders of Stripe. He's going to be referred to as one of the Jedi and I'll get there in a minute. When I met John Collison and we started whiteboarding together, I knew two things. This guy is going to be a billionaire, and I'm definitely going to get this job. The short time I spent at Stripe had a profound impact on me. It showed me what was possible when a few brilliant people get together and make something people want. Stripe gave me a mental model for potential, and this is the single most important sentence in the entire post.

Starting point is 00:04:47 And it's something, the reason I'm reading this too is because this completely resonates with me. As I read this post, I immediately started filtering it through all the information that I've consumed, you know, between 200, somewhere, what, 250 biographies of entrepreneurs. And this is just fundamentally, it feels fundamentally correct to me. And he says stripe gave me a mental model for potential an alien founder assembles a group of jedi to start a cult and go on a mission together patrick he's telling us how this applies to stripe so patrick collison one of the brothers patrick is the alien john and then you list about four or five really important either co-founders or

Starting point is 00:05:25 very early employees, so John and a list of other people, were some of the Jedi. The developers raving about Stripe formed the cult. Their mission was to grow the gross domestic product of the internet. It seems to be working. And the most obvious example from the history of entrepreneurship that jumps out that fits that mental model, an alien founder assembles a group of Jedi to start a cult and go on a mission together is Steve Jobs. Steve Jobs is clearly the alien founder. The Jedi are people like Steve Wozniak, the people that the early employees that were on the Macintosh team, the small, the initially small group of Apple devotees formed the cult, and they went on a mission together. back to this post i'm only going to read one more example because it's

Starting point is 00:06:08 probably the most famous example that's in the entire uh in the entire post again i'll link it below so make sure you read the whole thing or you could just google aliens jedis and cults and it says uh he talks about discovering bitcoin back in either 2011 2013 and says i started reading more about the project and began to appreciate its potential. The founder, Satoshi, was clearly an alien. The people working on the protocol were Jedi. The project had assembled a cult-like following online. It ticked all of my boxes.

Starting point is 00:06:36 And then at the very end of the post, he makes it easy for us to take this idea and carry it with us. If you're searching for a project with potential, watch out for the alien founder, Jedi team, and a cult following of people on a messianic mission. How does that relate to the book that we're going to talk about today? Well, if you've ever met anybody that likes In-N-Out, you'll know that they like In-N-Out because they will tell you. All of my friends that live in California won't shut up about it. I sent this post to my friend Sam who listens to the podcast and he made a great observation. He says, if you think about it, the richest man in the world is a leader of a cult.

Starting point is 00:07:10 He was obviously talking about Elon Musk. This clearly fits it as well. An alien founder assembles a group of Jedi to start a cult and go on a mission together. Both Tesla and SpaceX are forms of cults. These are positive cults for the world, right? And something, so all this is coming together. So as I'm spending the last week doing all this research, and I'm going to pull out a couple more examples too, I saw a quote from a clip from this investor, Josh Wolf, who I stole one of his great ideas. He says, chips on shoulders puts chips in pockets. So somebody grows up

Starting point is 00:07:39 feeling that they're in a bad spot, usually has a lot of drive to fix that as they get older. And so Josh Wolf was famously known for shorting tesla for several years and he talked about why that was a mistake he even though he considers that he says you know there's some shenanigans going on inside the company where the case is he realizes like oh wait this isn't a company anymore it's a religion and so he says a few years ago this is a sign a sign of a cult a few years ago i started noticing that people were getting Tesla tattoos. It's very hard to short something when people are tattooing the brand on their body. So signs of a cult or tattoos. Think about it. The biggest podcast in the world is an example of this. If

Starting point is 00:08:18 you Google Joe Rogan experience podcast tattoos, you will see hundreds, if not thousands of people that literally tattooed Joe's face on their body. This idea is not a unique idea. It's been noticed over and over again. I've read the word cult in many of these books. Let me give you a perfect example where they explicitly talk about Trader Joe, who wrote the book when he was like 90 years old. I think the book was published and he died like the following week, right? So that's number founders 188. If you haven't listened to it. The book is called Becoming Trader Joe. And he says, this is what he says in the book.

Starting point is 00:08:49 Let me read you an excerpt from it. Word of mouth, this is why it's so important because think about like Joe Rogan's never run an ad. Obviously, there's content marketing and stuff behind it. Tesla has never run an ad. Trader Joe's didn't run much ads. Most of their growth came from word of mouth. And then the fearless flyer is like a form of content marketing. A lot of that, which Trader Joe's says he just copies straight from David Ogilvie. That's why I've done like, what, four or five

Starting point is 00:09:13 podcasts on David Ogilvie. I legitimately think that guy's a genius. But this is what Trader Joe's says about this. Word of mouth is the most effective advertising of all. I have been, In-N-Out has that, Tesla has that Tesla has that stripe has that Bitcoin has that Trader Joe's has it Apple has it delicious goes on and on right word of mouth is the most effective advertising at all. I have been known to say that there's no better business to run than a cult Trader Joe's became a cult of the overeducated and underpaid partly because we deliberately tried to make it a cult once we got a handle on what we were actually doing. And partly because we kept the implicit promises with our clientele.

Starting point is 00:09:50 That is a huge, I need you to remember that as we go through the book today. We kept the implicit promises with our clientele. Trader Joe's, excuse me, not Trader Joe's, In-N-Out did that over and over again. We kept the promises for the most important people. And this is what Trader Joe's warns us though. It's fantastic to have a cult-like following. Word of mouth advertising is fantastic. It's the most powerful form of advertising.

Starting point is 00:10:17 It's the one every single business in the world is trying to go after. But he's like, you only do that. You cannot betray. He says, beware of ever betraying the true believers. So once you identify who your true believers are, you cannot disappoint them or they will turn on you. Another example for you, all the way back in Founders number 31, I did a podcast on Peter Thiel, read two books on him. One of those books happened to be Zero to One. And he says explicitly, talks about cults in that book.

Starting point is 00:10:42 He says the best startups might be considered slightly less extreme kinds of cults. The biggest difference is that cults tend to be fanatically wrong about something important. People at a successful startup are fanatically right about something those outside of it have missed. And In-N-Out, as we go through this book today, we realize that you have this giant explosion. In-N-Out started in 1948. And so most of what I'm going to talk to you about today is just the founder, Harry Snyder, right? In-N-Out started in 1948. The next three decades, there's this gigantic explosion in fast food in America.

Starting point is 00:11:21 It becomes a multiple hundred billion dollar, if not trillion dollar industry. And yet none of In-N-Out's quote unquote competitors have this cult-like following that In-N-Out does. And that's what that sentence right there, people at a successful startup. So In-N-Out was fanatically right about something like McDonald's, Wendy's, those outside of it have missed. Okay, so let's jump into the book. I'm going to start with the single most important sentence in the entire book. It's something that's repeated probably 15 times, something that Harry Snyder, co-founder of In-N-Out Burger, he founded it with his wife Esther, repeats for three decades. Keep it real simple.

Starting point is 00:11:58 Do one thing and do it the best you can. And so his simplicity starts with what is he going to offer? In-N-Out's famously limited menu of three burgers, french fries, soft drinks, and milkshakes has barely changed since Harry Truman was president. There's no Mediterranean wraps, no chicken Caesar salad wraps, or children's menus. There's no heat lamps. So what the, this, I'm still in the introduction of the book, what the author is doing is comparing and contrasting the way In-N-Out runs their business with the way all their competitors do. There's no heat lamps, no freezers or microwaves. There's no bags of flash frozen fries on site either.

Starting point is 00:12:35 Rather, in a procedure that has gone unchanged since the chain first opened in 1948, a cheery associate hand peels, cuts, and fries the raw potatoes that are grown especially for the chain. At In-N-Out, the lettuce is still leafed by hand. Buns are still baked daily. The family-owned, fiercely independent chain has remained virtually unchanged since its inception in 1948. So that sentence, just like, keep it real simple do one thing and do it really well repeated over and over again 15 20 30 times throughout the book that's also something that's extremely different than a lot of the competitors it is a to this day so this book

Starting point is 00:13:15 was published in 2009 fast forward over a decade later the chain is still family owned there's no franchises and it is still private it has long been adored by its legions of fans, whose main complaint seems to be there just aren't enough of the restaurants around. In-N-Out is frequently the subject of rumor and speculation. The private company has always shunned the kind of publicity that its competitors routinely courted. It has rarely bothered to counter or clarify the murmurings. The last example of this, at the time the book was written, is when the co-founder dies. She outlives her husband by about 30 years. So in 2006, In-N-Out Burger issued a statement announcing that Esther Snyder,

Starting point is 00:13:54 who along with her husband Harry, had founded the chain, had died. She was 86 years old. Esther's death left her 24-year-old granddaughter Lindsay the sole heir to the In-N-Out Burger fortune. A petite, unassuming woman, Esther had spent most of her life determinedly maintaining In-N-Out as a private family-owned business, keeping it virtually unchanged as the decades rolled by. She did so despite countless offers from investment bankers, venture capitalists, private individuals, and large corporations,

Starting point is 00:14:22 all of whom were hell-bent on buying into the hugely profitable chain's unparalleled popularity. Esther Snyder preserved her family's privacy even as In-N-Out transformed from a single burger stand to a cult phenomenon. And then one last sentence from the introduction, the counterintuitive chain had stridently bucked every industry trend. Later on in the book, like another 250 pages into the future, I double underline a sentence that I think is, I want to put at the very beginning to help you understand like the In-N-Out philosophy. It is known as the anti-chain with the cult-like mystique. The anti-chain is the perfect way to describe In-N-Out's approach to building their business.

Starting point is 00:15:09 So in 1948, Harry and Esther, they're already married at this point. They settle in this little suburb of Los Angeles called Baldwin Park. And so that is where the very first In-N-Out's going to happen. Built in 1948, this was the frontier of the American dream. This was where newly married couples like Harry and Esther could purchase land, buy buy a small house and build an even smaller burger joint and then dream big dreams this is where baldwin park is where the snyders develop their basic philosophy serve the freshest highest quality burgers and fries treat your employees well and your customers even better all while providing friendly service in a sparkling clean environment, and above all, remain family-owned and independent. Something they repeat over and over again, even as In-N-Out's competitors raced around the globe franchising,

Starting point is 00:15:53 In-N-Out never wavered from their simple philosophy. And so now we get a description of Harry. Harry Snyder was an uncomplicated man with sharp instincts. He was also, I would say, a workaholic. And I think a lot of that has to do with his upbringing. His father was, well, I mean, I'll just let you, he's going to describe his own father. Sounds like he thought his father was a bit of a loser. He had some crazy ideas. He didn't believe anybody, this is Harry talking,

Starting point is 00:16:21 he didn't believe anybody should be wealthy. He figured that if you made so much money, the rest of it should go back to the government, and then they could give it to poor people. So Harry was influenced by his father. His father's name is Hendrick. For a little bit, Harry was actually identified as a communist. And then Harry realized, well, that doesn't actually work out. He builds a business, but he also takes care of his employees. He paid way more. He thought it was just the right thing to do to share. Even if you're not sharing sharing profits like they don't want a percentage of the business they still make a lot more money his employees made a lot more money than other people working in similar restaurants uh hendrick was careless to the point of recklessness uh the old man always ran out of

Starting point is 00:16:58 money was how harry described his father's financial acumen or lack thereof and then imagine how much how much you have to mess up your life for one day for your kids to describe you like this. It's just, I shudder at the thought. And so he says, when he left Seattle, my dad owed everybody and their brother money. He was the biggest stiff there was. So not only was he not good with money, he didn't really work as, he didn't work that much, but then he would also essentially borrow money and just leave town. And he does this wherever. So he's doing it in Seattle.

Starting point is 00:17:28 Then they go to Los Angeles. And it says the same situation. His father is obviously not changing. The family moved from one rental house to the next after owing rent to the landlords they had left behind. When Harry was 13, his father landed in jail after he beat up a landlord who came by and demanded money. His father was also extremely entitled, extremely lazy. These are things that Harry is not. So he would make money as a house painter.

Starting point is 00:17:52 And he says the work paid a tidy sum of $25. This is in 1928. So they're going to have to struggle through the Depression. That's when Harry starts working. And I think that's where he gets this fierce work ethic that never leaves him. The work paid a tidy sum of $25 per week. But when Hendrick was refused a vacation, he simply put down his paintbrush and walked away, leaving his wife to support the family with her housekeeping jobs.

Starting point is 00:18:13 Really great role model here, Hendrick. Hendrick never held another proper job again. So it fell on Harry to pick up the slack of his father. So if you could think of Hendrick has loser mentality, Harry has founder mentality. During Harry's teenage years, he's a teenager, he's still supposed to be in school, and his dad is so lazy and apathetic that Harry's forced to pick up the slack. During Harry's teenage years, he took every job he could. He managed to maintain a fierce sense of responsibility. Although he was just a young man and the depression had flattened prospects for most harry always found a way to

Starting point is 00:18:48 make a dollar he landed a number of odd jobs he would do anything and he always supported his family giving them giving them money every week from whatever money he had earned he worked as a paper boy he worked in a grocery store he sold sandwiches that's the job he has selling sandwiches is the job that he's going to have right before he founds In-N-Out and realizes, hey, I can do this. I don't have to work for other people. He worked in a grocery store. He stole sandwiches. He delivered hot dog and hamburger buns for a bakery.

Starting point is 00:19:13 He worked at a concession stand. He picked up rental umbrellas on the beach. And again, he's doing anything he can. Gives his parents money. As you can imagine, he's working so much, he's not that great in school. Harry was not much of an academic. He was never more than a middling student. Rather, Harry excelled in the areas of common sense and resourcefulness.

Starting point is 00:19:32 That is a fantastic way to describe my interpretation of his business philosophy. It's a combination of common sense and resourcefulness, and then you layer in an intense work ethic. Following high school, he enrolled at Santa Monica Junior College but quit after one semester. I couldn't afford to go. I had to work to keep myself going. Harry's drive and tenacity were propelled by the uncertainty of watching his parents' labor to provide for his family. Harry grew into a disciplined fellow with a strong sense of responsibility.

Starting point is 00:20:01 He also did a really important thing as he built his business. He decided to build the people that worked for him. He's like, I don't consider, he hated, he wouldn't let you use the word employee. He's like, look up the definition of the word employee. Look up the definition of the word associate. We are associates. And so not only would he pay his associates well, he was trying to build young men at the same exact time. And as a result, when he dies, he dies rather young at 63 years old from lung cancer. He's got hundreds of people that show up at his funeral. Fast forwarding the story a little bit.

Starting point is 00:20:27 In 1947, Harry was 34 years old and working as a caterer, selling box sandwiches to the cafeteria at Fort Lawton. So he had skipped over a part. He serves in the military and he gets out and he's still working in the military selling sandwiches to the army. That's where he meets his wife. One day in 1947, while dropping off his sandwiches, Harry met the restaurant's 27-year-old manager. Her name was Esther Johnson. Esther's, just like Harry, extremely hardworking. A lot of that has to do with because they're growing up in the Great Depression. They see what happens when you run out of money. Esther's father

Starting point is 00:20:58 began working in the mines. The Great Depression, though, ended the mining boom for good. When Esther was 14 years old, the mine shut down permanently. She grew up in a house with eight children under modest financial circumstances. Yet despite the financial constraints, her parents did something smart here. They managed to place an emphasis on education. Esther was a gifted student, and she possessed a sharp brain disguised by a shy demeanor. She's also a badass. Check this out. Think about this time in history. They expected her, you know, why are you studying for? Why are you trying to work?

Starting point is 00:21:29 You should just go out and get married. Her grandfather and uncle seemed perplexed as to why a young lady like Esther wanted to pursue education. Don't you want to get married, they asked, to which she replied, I like to learn. And so they get married,

Starting point is 00:21:40 but they also discover they're perfect not only life partners, but they're also perfect business partners. The pair seemed to complement each other perfectly. While Harry was tough and could be demanding, Esther was widely regarded as a gentle soul. She did much to soften Harry's rougher edges. He had street sense. She was book smart. Harry was hard-nosed. Esther was sentimental.

Starting point is 00:21:58 He was a forceful presence, while she preferred to get things done quietly behind the scenes. Harry believed in his ability to create his own opportunities, and Esther believed in Harry. They decided to start their life together in Southern California. Harry had developed takeout bag lunches to serve the scores of soldiers passing through the area, and he had come up with an idea for a new kind of restaurant. And so this is one of my favorite parts of the book,

Starting point is 00:22:21 because you really realize that the founders of In-N-Out are going to build the foundation of their business by riding two waves. And I'll explain more. The first wave is that after World War II, according to the book, there were more cars in L.A. than anywhere else on the earth. Okay, so In-N-Out starts out as just a drive-thru. You cannot, there is no place to sit. You have to go in your car. So the two waves that they combine is that the fact that they just happen to be in the set-up shop in a place where there's more cars than anywhere else on Earth.

Starting point is 00:22:52 And at this point in history, this is post-World War II, there was an increase in the amount of families where both adults worked. So if you think about it, more cars plus less time to cook equals let's start a drive-thru. And so we go to the very beginning of this idea. Harry Snyder's dream was a modest one. He was going to start his own little food business, a hamburger stand. Harry had good reason to want to go into business for himself. He watched his father shift between the shipyards and the boom-bust cycle of Seattle in search of work. Harry was determined to live a different sort of life. Okay, so that is, I need to tell you, like this is, Harry was obsessed with control. He didn't like debt.

Starting point is 00:23:29 He owned, not only did he own the restaurants outright before he started another one, he would own the land underneath them. He's extremely interested in controlling his own destiny. You can kind of read between the lines here as a kid with a father like that. You kind of feel like you're just at the whims of an unreliable person, right? He's like, okay, I'm an adult now. I'm not letting this happen. Harry was determined to live a different sort of life. He was determined to create his own future. Harry had a strong gut feeling. Although he had a couple failed businesses

Starting point is 00:23:58 under his belt, that didn't stop him. Harry and Esther would open a new kind of hamburger stand, the drive-thru. So that's another thing that's going to blow your mind. In-N-Out is one of the first drive-thrus. Harry, it looks like he was the one that invented, like think about if you go up to any drive-thru restaurant now, you place your order through some kind of speaker system, right? Harry invented that. That blew my mind. And this is also interesting that like he had to trust his ability, like he had common sense resourcefulness, but he also had belief in himself, which sounds crazy because his two previous businesses failed, right? But everything at this point, most of the restaurants around were drive-ins. So you would drive into a hamburger stand.

Starting point is 00:24:35 They'd have people come out, usually on roller skates or some kind of theme, and they would take your order. You'd sit in the car. They're like a waitress or a waiter. You'd take your order. Then they'd skate back to where the restaurant is, bring your food back, and you'd just sit and eat in the car. He's like, well, let's not do a drive-in. Let's do a drive-through. So he needs to get started.

Starting point is 00:24:52 Doesn't have any money. A typical entrepreneur, Harry, was rich in ideas but short on cash. He took on a partner who put up some $5,000 in startup capital. They're going to wind up having a fight. Harry's going to wind up having to run the show. He's not going to share it with this guy that gave him the money. Harry Snyder's instincts were a good one. Southern California was the most heavily motorized place on the planet.

Starting point is 00:25:12 There were over a million cars in Los Angeles alone by 1940. So as he's getting started, Harry does something smart. He reaches out to somebody that's further down the line in what he's trying to accomplish. This guy's name, there's going to actually be a married couple there. There's another married couple that are partners. It's Carl Karcher, I think is his wife's name is Margaret, but I think you pronounce her last name Karcher. They're the people that start Carl's Jr., this gigantic hamburger chain.

Starting point is 00:25:38 So it's a short on experience, but long on common sense. Harry sought advice from Carl Karcher, one of fast food's pioneers, who had built a small growing chain of hot dog stands in Los Angeles into a giant company called Carl's Jr. And it says, they came to see me because Harry saw a successful business, a successful fast food business. And they could also relate. Karcher was a dropout, worked on a farm, had an intense work ethic, just like Harry did. And he also started just with a single hot dog cart. Carl at the time was, he was working as a delivery man and he would deliver like buns,

Starting point is 00:26:09 like hot dog and hamburger buns all over the city. And he's one of these stores. He's like, in some cases, I'd have to do deliveries twice a day. He's like, how many hot dogs and hamburgers are they selling? And then so he winds up buying in and that's the foundation. Again, a lot of these bills are like real simple ideas, right?

Starting point is 00:26:24 It's like, well, I'm delivering. i have access to information that many people might not know because i'm delivering buns they wouldn't be ordering buns if they're not selling a ton of hot dogs so maybe instead of the delivery business i should be in the hot dog business and that's exactly what he did the first meeting would be a start of a lifelong friendship between the carters and the snyders the two couples had much in common they were tireless and hands-on and each pair worked as a team. Karcher's difficult childhood had produced the belief that luck was something you made yourself. That's also something Harry believed.

Starting point is 00:26:50 A lesson with which Harry Snyder was all too familiar for himself. When Karcher met the Snyders, Carl told them to focus on a great product and maintain the personal touch. So that is his initial advice to Harry. It is so important to make people feel special. And that is the foundation. One of the reasons there's going to be a bunch of things that I think all work together. And remember, creating like this cult like phenomenon, it's not a formula, we can only kind of deduce, like kind of read between the lines ourselves. But that idea is like you have to make people feel special. And so it says during that first meeting,

Starting point is 00:27:22 Karcher found that the inspiring entrepreneurs had already had very specific ideas about how they plan to run their business. These are ideas that they never deviate from. Many decades later, when he was 90 years young, as Karcher called himself, it's like I'm not 90 years old, I'm 90 years young. That's funny. They were very particular about their people smiling. They wanted their employees to feel like they were part of the company, like they were owners themselves. Karcher also did something extremely nice. We saw this example when I covered Jeff Bezos' biography for the first time. Jeff is struggling at this point in Amazon history. He goes to meet Jim Sinegal, who's the founder of Costco. They wound up, I think, having coffee together. I can't remember. It might even be at Starbucks,

Starting point is 00:28:02 inside of a Barnes & Noble, if I'm remembering the story correctly. And Jim is just laying out. This is the philosophy that I use for Costco that has built it into a multi-billion dollar brand. It's an idea I learned from Sol Price, who I also did a podcast on. That was episode number 107. If you haven't listened to Sol Price, you should. Jeff Bezos took ideas from him. Jim Sinegal took ideas from him. The founders of Home Depot took ideas from Sol Price, Sam Walton. Sol Price is probably, I would make the argument he's the most influential retailer to ever live. But in this meeting, Jim Sinegal is just laying out his blueprint for Jeff and Jeff winds up using that. It's part of the inspiration for Amazon Prime and a bunch of other ideas that Jeff went back to Amazon and applied to him. And his point is like, do you feel,

Starting point is 00:28:42 many years later, he's asked like, do you feel like should you have not told jeff all these things he's like no i feel like i learned from a bunch of people it's your obligation you're going to see carl say the exact same things like why are you like in and out winds up being somewhat of a competitor carl's junior like do you do you regret spending time and teaching harry all the harry and esther all these things and he says no he explained at the time that he had no problem sharing his expertise. I've always said that competition just makes you stronger. You shouldn't be afraid of the competition. That makes you stay on top of your game.

Starting point is 00:29:13 I told the Snyders that it's very important to have respect for your competitors. I may have a different philosophy than some of my competitors, but I believe that your competitors are really your friends. They keep you on your toes. And so one of these very specific ideas that Harry had is always, you don't ever cut corners when it comes to the quality of your product. So it says Harry's philosophy was to stress fresh ingredients and high quality. Harry wanted to take the, this is a quote from him, I wanted to take the lettuce out of the ground, the tomato off the vine, and the onion and prepare

Starting point is 00:29:41 the burger fresh right now. That was the goal. The couple sold a Spartan menu. They had one cheeseburger, one hamburger. You can order French fries and soft drinks. And eventually they had milkshakes for that. So we've already seen some foundations of his philosophy, right? The people that come to my business, they have to feel special. Number two, I'm not skimping at all, ever on the ingredients to go into my hamburger. I'm not, you're not going to say, oh, you know, if you just switch out this lettuce for

Starting point is 00:30:11 one that's 15 cents cheaper and you're selling tens of thousands of hamburgers a month, guess how much money you make. That's how a lot of people approach business. Harry's like, I don't give a shit. I'm not taking the advice that makes my product lower quality. And again, this is the foundation. There is no cult-like following to shitty products. So therefore, logically, you can say, okay, any kind of advice where somebody's trying to make my product worse because I may make more money, that's short-term thinking. You'll make more money now. You're not going to make more money over the long term because then you're going to find somebody else who's like, oh, this hamburger, just using an example of In-N-Out, is not as good as it used to be.

Starting point is 00:30:44 Let me go look for other people. Somebody else might be the new In-N-Out version, somebody completely dedicated to quality that's not going to skimp. So that's another example here. Now let's go into the very next page. This is where it just hit me. I was like, well, this is very interesting to think of drive-through as a new technology. You and I don't think of drive-through as a new technology because it's existed the entire time that we've been alive. But at one point, it didn't exist. And so he has one of the main lessons from Andrew Carnegie. This lesson is almost 200 years old. Invest in technology. The savings compound gives you an advantage over your slower moving competitors, and it can be the difference between profit and loss. And so we're seeing, even though you might not think, hey, Harry's making cheeseburgers and fries.

Starting point is 00:31:29 He's not a technologist. He invented the drive-thru speaker. That is technology. Absolutely. The surge in motorists and motoring meant that there was a captive audience of potential customers. And to attract them, the drive-in used architecture. Oh, excuse me. I jumped ahead of my point. They're comparing and contrasting the drive-in to harry's drive-through so at this point

Starting point is 00:31:50 drive-ins are already uh extremely popular in southern california because you got a ton of cars right and so this is where what i just said you drive in somebody like skates up or whatever the case is and you sit in your car and eat and so it's talking about how they like what is how do you get somebody's attention well they, they're driving down the road. I have a drive-in. I'll have, like, big colors and neon lights and weird architecture, just anything to pull their eye, right? And so it goes into, like, the history of drive-ins. In Southern California, you've got one that's the shape of a giant sombrero that sells tacos, one that's a giant root beer bottle, stuff like that, okay?

Starting point is 00:32:21 And it says, then, In-N-Out arrived. The Snyder's Burger Shack was tiny. It had no indoor seating, and there was little room for a full-fledged drive-in with car hops. That's the name of the servers, the waitresses and waiters, car hops. Harry was an amateur electronics enthusiast and he came up with an idea that would compensate for these deficits. And I really love this idea. I wrote on this page, too. I love and I come across this example from time to time, but I like businesses that are defined by what they are not, by what they lack. That's very fascinating. So you realize it's like, well, I don't have a bunch of spots like the first in and out is tiny. You can't not only can you not park here, you can't go inside. So like I got to find a different route in. And so this is the way he does that. So he figured out an idea to compensate for these deficits. He dispensed with the car hops altogether. Okay, get out of here. No waitresses, no waiters, you're gone. And then placed them with an invention of his own. And so this whole thing, let's go back to the very first page of the very book. I'm coming back to the page, don't worry,

Starting point is 00:33:17 where I'm at. Keep it real simple. Do one thing and do it the best you can. This dude is obsessed with simplicity. That is an important point that I cannot repeat enough because it goes against a human. The weird thing is like there's a there's a conflict in human nature, right? We cannot stop over complicating things. Yet we have an intense desire. We crave simplicity. One of my favorite quotes in that book, I did a bonus episode. It's called Insanely Simple, the obsession that that Drives Apple's Success. And there's a quote in that book I never forgot. And I try to like keep in the back of my mind, never underestimate the degree to which people crave clarity and respond positively to it. Never underestimate the degree

Starting point is 00:34:02 to which people crave clarity and respond positively to it i think the reason that we respond positively to it because it doesn't exist very commonly because we're constantly our nature causes us to over complain constantly add things when all we want is a reduction it is a joy when you go into like an in and out or even five guys has this too where it's just like okay there's like two things I can choose from here. Like, this is not, like, you make the decision for me. This is what, you do this every day. You know what is the best. And so you just say, hey, I've been trying to work at this burger stand. You know, just drive in, in the case of In-N-Out, for 30 years by the time he dies. Like, this is clearly what works. I don't need to overcomplicate these things. So let's go back to

Starting point is 00:34:42 this. He dispensed with the car hops altogether and replaced them with an invention of his own. A single two-way speaker box made out of a few off-the-shelf electronical components that was connected to the eatery's kitchen. That way motorists could order at the end of one drive-thru and pick up their food at the other end. Why is that important? Because that's where he got the name. Let's keep it simple. Keep it simple. That's how Harry ended up with the name of In-N-Out Hamburgers

Starting point is 00:35:07 because you drive in, there's a speaker I made, and it's funny. It's like it's not – it's just like this loud, distorted voice that they hear in the kitchen. So it's like obviously it gets better with time. At the very beginning, it's very rudimentary, very like rough around the edges, right? But it's like, all right, well, on one end of the driveway, you're driving and you're telling me what you want. And then you

Starting point is 00:35:27 drive on the other side of the driveway and you're walking out with, you know, the best cheeseburger you've ever had in your life. That was just hilarious. Now check this out, because this is another example of anytime you introduce new technology, it confuses people. Harry's new speakerphone drive-thru format got off to something of a troubled start. In 1948, most customers were bewildered by the invention that in time became as standard and familiar as fast food itself. This is why you always have to educate, educate, educate, right? The Snyders had to show customers how to use the drive-thru. Think about how crazy it is. Something to you and I is completely obvious. It's not obvious if you only saw it

Starting point is 00:36:01 for the first time. And what's crazy is how far ahead of the curve harry was he's doing this in 1948 mcdonald's didn't add a drive-to window till 1975 another crazy thing harry never took a patent out for that invention and at the very beginning of in and out it's just harry and esther they don't even have any employees. This is also something that you notice throughout his entire life. If he was alive today and you could ask him for advice, I think he would just say, do it yourself. He's obviously going to have a ton of employees by the time he dies, but he never stops. He'll take out the trash. He's constantly working.

Starting point is 00:36:38 He's not these absentee owners with his feet up. As I said, the start of In-N-Out Burger, it was just Esther and Harry. The Snyders did everything themselves. The couple worked punishing hours, often logging 14 or 15 hour days. On In-N-Out's first day of business, the couple sold a total of 57 hamburgers. They do over a billion dollars in revenue a year

Starting point is 00:36:57 in present day. During the very early years, the Snyders made great personal sacrifices. The company funneled every cent they made back into the business. And so that is the first mention of that theme that Harry is just going to use throughout his entire life. He's just do as much of the work as yourself.

Starting point is 00:37:12 Be there. He's constantly there seven days a week. He's obsessed. He's completely obsessed with building. He's not trying to, and this is an important distinction, and I think also how you get to cult-like following. He's not interested in being the biggest. He's interested in being the biggest he's

Starting point is 00:37:25 interested in being the best and so there's there's this hilarious interview that uh jerry seinfeld did a few years ago with the harvard business review and his work ethic and his ethos jerry seinfeld's ethos on work is exactly it's the same as harry is seinfeld uh to put that like philosophy and directed it towards stand-up comedy and building one of the most successful television shows of all time. Harry just channeled it towards making really good hamburgers, cheeseburgers, and fries. And so this is – I'm just going to pull out a couple of quotes because I read this interview because a lot of stuff that Harry did made me think of it. And so Jerry's asked the question. You and Larry David wrote Seinfeld together without a writer's room,

Starting point is 00:38:07 and burnout was one reason you stopped. Was there a more sustainable way to do it? And this is the most Harvard Business Review question ever. Imagine saying this to Jerry Seinfeld. Was there a more sustainable way to do it? Could McKinsey have helped you find a better model? Jerry says, who's McKinsey? And they say, it's a consulting firm. Jerry says, are they funny? No. So that's, they're like, no,

Starting point is 00:38:32 they're not funny. And so Jerry's answer is perfect. Then I don't need them. If you're efficient, you're doing it the wrong way. The right way is the hard way. That show was successful because I micromanaged it. Every word, every line, every take, every edit, every casting. That is my way of life. And so we see the perfect illustration of this on the very next page. Harry was a micromanager before the term existed. He was a rigorous taskmaster. He was not inclined to even leave the smallest detail to others. From the start, he kept scrupulous records, noting how many paper cups were dispensed. He was known to be fanatical about quality. Deals were struck on a handshake.

Starting point is 00:39:13 So he's talking about deals for a supplier of people that give him the ingredients he needs to make his product. Deals were struck on a handshake, and they lasted decades, often ending only if the supplier went out of business or failed to meet harry's exacting standards when it was discovered that a vendor had hidden a batch of substandard onions within a truckload of good ones the supplier was dumped and so there we see that he's frugal right but not when it comes to product quality a frugal man in most respects harry was prolific when it came to purchasing the freshest, highest grade of meat, potatoes, and produce. He refused to sacrifice quality for the sake of profits. When it came to cleanliness, Harry's zealousness matched his fervor regarding quality.

Starting point is 00:39:59 He did not feel it was beneath him to scrub the floor or pick up trash. From the start, and I double underline the sentence because it's so important. From the start, In-N-Out ran a customer-driven shop. So again, maybe you have business consultants come in and say, hey, you're selling tens of thousands of hamburgers a month. This lettuce over here is 15 cents cheaper. No one will notice. Don't worry, you'll make more profit. You wouldn't do that if you truly cared about the customer experience and i think that's another example of of harry taking advantage of like a flaw in human nature most people are motivated by greed they're like okay i will do that because they're thinking short term they don't realize they're sowing the seeds for their

Starting point is 00:40:38 ultimate demise you're gonna make more money now those people are gonna leave and so then we see the first time they repeat it's repeated over and over and over again. Harry Snyder made a promise to himself that he had no intention of breaking. Keep it real simple. Do one thing and do it the best you can. Another idea for you. Ride another wave adjacent to you. I'm going to describe what that means. The example that came to mind when I got to this section was this is exactly what the founder of Vans did. If you remember, I read the autobiography. That's another 90-year-old founder that wrote an autobiography. It's founder's number 216, if you haven't listened to it yet. But he made the point, he's like, I'm trying to sell shoes, but he's in Southern California at the time too. And

Starting point is 00:41:14 there's this huge growth happening in skateboard and surfing culture. And so he tried to make his brand of shoes the number one choice for skaters and surfboards and so his as those two sports grew right it brought his brand right along with it's actually really smart ride another wave adjacent to you uh so it says vans shoes did this with skate culture i just told you that growing rapidly in popularity in the 1950s surfing had by the 1960s exploded into a full-blown cult with a language, clothing, music, and lifestyle of its own. In almost a religious ritual, surfers woke before dawn, strapped their boards onto their cars, and headed towards the beaches. Many lived inland,

Starting point is 00:41:57 and so commuting an hour to catch a wave before the sun was fairly common. Afterwards, a group of hungry surfers packed up their cars and headed for in and out soon enough word spread and ended and ending up at an in and out burger stand after surfing became part of the surfing experience so again the main theme there is try to ride a wave that's adjacent to you um this is just hilarious so he's always i i think i'm repeating myself on the ring around about this guy's work ethic he's extreme extremely dedicated he's always tending to his business there's always something to do i feel like he would be one of these characters if you read buffett's shareholder letters he's like constantly

Starting point is 00:42:37 referencing people like rose blumpkin or other people like there's one guy he bought the business from and he's like the guy was so obsessed that he like would count the toilet paper rolls to make sure he wasn't being overcharged like harry is that kind of energy so it says harry's nature did not allow him to sit back and relax he was the first person at the shop in the morning opening the store inspecting the sacks of potatoes ensuring that everything ran smoothly to his exacting specifications it wasn't unusual to see harry picking up trash by the side of the road or leafing lettuce. This is wild. This is the part that made me laugh. So the first, the first in and out is across the street from their house. So even though he's first in the morning, there in the morning, somebody else is running it later at night. He's sitting in his living room, looking

Starting point is 00:43:18 out the window. I don't know why I found it so funny. Since the Snyder's house was directly across the street from in and out, he, I don't, I just picture it so funny. Since the Snyder's house was directly across the street from A&L, he... I just picture him doing this. He rarely seemed to be able to relax and call the night. In the evenings, Harry regularly kept an eye on the restaurant through his living room window. Frequently, he'd be sitting on the sofa watching TV when all of a sudden he would stand up and sprint over to the shop and pitch in. So he sees, obviously, as a driver, so you could see when there's a backup it just the idea of this man just watch tv look out the window immediately putting his head down and spreading across the street i just love it i love the enthusiasm oh my god i have tears in my eyes

Starting point is 00:43:55 i don't know why i find this so funny uh he paid he paid his employees well when in and out first started california's minimum wage was 65 cents an hour but harry paid a dollar an hour plus one free hamburger per shift he believed in paying for quality and that included in wages not just and this is just super smart anytime i see founders or entrepreneurs talking about like bragging you know talking about oh i you know i i'm paying these employees so little or like oh i'm doing some kind of geographic arbitrage i'm like man you're missing the point you're missing the point you don't like these are employees of your business. They interact with your customers ostensibly like or they help build the product.

Starting point is 00:44:32 Why would you skimp on the level of quality of people you work with? That's insane to me. It just makes no sense at all. Like people are not just something in a spreadsheet like they were very complicated. And there's an example in this where like i'm going to show you how he was very similar to les schwab les schwab built this gigantic fortune selling tires les schwab tires and he'd share 50 of his profits with all his employees he winds up at the end of his life so looking back he's like the the people the employees i built up like that means just as much to me as the wealth i built up he winds up going to people's weddings and they tell him hey like you're as influential there's two most influential people

Starting point is 00:45:08 in my life it's my parents and you and so that result like when you when people really feel valued and they're working for you and like they really feel like you give a damn and they can tell if you give a damn or not like just like you could tell when you just have a job right and when you so when you like they will they they just pay it back it comes back to you in sp spades. It's not as simple as like, oh, I can afford to pay. I'll make more money if I pay them 10% less. It's just not, it's very short-term thinking. So it says, while his wife had an unwavering faith in God, Harry's faith was in hard work. Sorry, I'm just thinking about him running across the street again.

Starting point is 00:45:40 Harry had, oh, this is really important. So I'm going to read my outline on this page. Embrace hard work. Ignore fads. Identify what's important to you and repeat it for decades. And then build people like Les Schwab. I just, I'll get to that in a minute. So it says Harry's faith was in hard work. He had little interest or patience in trends or fads.

Starting point is 00:45:57 He muted the world. He did not care at all what other, his competitors, like if they were trying to to franchise they were adding things to the menu he's like i don't care i know i'm i'm not being the biggest i'm going to be the best so this is harry drilled into his workers the singular importance of quality and simplicity his maxim dude i'm not making this up this is repeated over and over again do one thing and do it well was repeated with frequency it was also strictly adhered to harry kept a menu simple and streamlined he didn't see much advantage in introducing new items or tinkering with the ones that already that they already offered and then it gets into why so many people showed up at his

Starting point is 00:46:36 funeral right can compare and contrast this with a few weeks ago when i did the sugar king of havana hulu lobo he's you know his whole ethos is like, I'm going to beat everybody. I'm going to get one over. Well, that's nice. How'd that work out at your funeral? Like less than a handful of people even showed up. Like that's just a shitty way to get through life, man. He helped.

Starting point is 00:46:53 We should be, like in my opinion, like I'll be much happier accumulating friends and allies than I will a bunch of enemies. It's just a bizarre way to live your life. He helped many of his employees get loans for houses and cars sometimes he would lend the money himself one of his oldest employees says he helped everybody and so this like obsessiveness about quality is also why he was so reluctant to expand he would have never expanded he didn't really plan on expanding except he kept building up like he had a ton of talented people he's like well i should they should be running their own stores they're in those stores they're providing economic opportunity for them they could go out and have a family buy a house

Starting point is 00:47:33 do all these other things so says harry's thinking was that he was just trying to make a living for his family he was not interested in being a rich man the only reason he built up his stores was because he paid his people well and he didn't want them to leave. And so I think he winds up working on In-N-Out for the last 28 years of his life. And I want to say he only had like 14 stores, maybe 15, maybe 17, somewhere in that number. It took him a really long time. So it says, if In-N-Out expanded, it was, this is what he was worried about. If In-N-Out expanded, it was vulnerable to dilution of quality.

Starting point is 00:48:04 It was the Snyder's commitment to looking after their people that prompted In-N-Out Burger's growth into a chain. The couple opened new stores as a way to reward the hard-earned dedication of their longtime associates who wanted to remain within the In-N-Out fold. There's many examples of people in the book that have been working for In-N-Out for over 40 years. A significant number of those early associates who began in In-N- out's tiny kitchen as potato peelers ended up staying on for decades so this is at this point he's starting he has a couple stories he's got like four or five and he starts getting into a fight with his partner that gave him the money to run the business and we see that his partner was like let's expand let's expand well we can increase uh prices we can cut costs and harry's just like no i just want to focus on quality.

Starting point is 00:48:46 So it says, this guy's name is Charles. Charles had very different ideas about the future direction of In-N-Out as it expanded. Harry insisted on maintaining a quality product at a reasonable price. While Charles wanted to increase prices and cut costs. At the time, Charles' strategy was becoming, this is why I'm reading this section to you. Because Harry's independence of mind. It's having the fortitude to buck the trends. It's extremely difficult if there's 10 of you in a business, right? Like you're running a business, nine other people are running similar businesses. All nine are doing

Starting point is 00:49:14 things very similarly for you to say, no, I'm not doing it. That's extremely hard. So it says it was, uh, Charles's strategy was becoming commonplace among fast food chains, but Harry was determined not to go the way of every other burger stand. He believed that his way was the right way. He was stubbornly independent and had a real aversion to ceding to the opinion of others, especially when he thought he was right, so they wound up dissolving their partnership. But the experience taught Harry a lesson. He insisted that In-N-Out remained forever independent.

Starting point is 00:49:41 After that, Harry swore he would never sell out or never take a partner. He was happy with his golden goose. Harry's expansion, like how he picked the sites for his store was really easy. You should just go to where your customers are, right? And then you just, and he rides the expanding technology of his day, which is they're building a ton of freeways, right? So he puts his stores, his drive, his drive-thrus next to freeways. Catering to the car-reliant customer, Harry focused on putting his drive-thru right next to off-ramps of the fast-expanding freeway system. The growing Southern California freeway network became a significant factor in In-N-Out's rising popularity. Another example of where he deviates from his competitors,

Starting point is 00:50:23 they're going public, they're taking on a lot of debt to fuel expansion. Harry abhorred debt. He insisted on using cash, not credit, to open each new restaurant. Harry followed old rules. He built one store, saved money. He built a second store and saved more money. That was the Harry Snyder way. He did not take out loans. He didn't take on debt. He was beholden to no one. And so what you'll start to notice is just he's got a lot he's got like a handful of really simple principles he refuses to deviate from he focuses on quality does that for decade after decade he's giving us somewhat of a blueprint to build like a cult-like following people will respond to this because you've put their interest

Starting point is 00:51:00 ahead of your own this was the fast food game in the 1950s. Start, grow, franchise, sell. In-N-Out Burger could have easily been one of them if not for Harry and Esther's steadfast philosophy. The couple was unmoved when Ray Kroc, of McDonald's fame, more than made good on his promise to open 100 new McDonald's a year. The Snyders remained remarkably unconcerned. What a great sentence. They remained remarkably unconcerned. Harry had an extraordinary lucid vision for In-N-Out Burger. They had no interest in selling or franchising. If you did that, he said, you would lose control and focus. He saw no point in sacrificing quality for profits and there's the dirty little secret you focus if you never sacrifice quality you wind up getting the profits in the end anyways and so there's a

Starting point is 00:51:53 paragraph that comes later in the book that reminded me of uh herb keller's i think it was founders number 56 he's the founder of southwest airlines southwest is the only airline to ever achieve profitability for like 40 straight years he's got he i feel like um herb's approach to building an airline was so counterintuitive it's very like compared to the rest of his competitors very similar to what harry uh harry's approach to building like a fast food restaurant was um there's just a ton of benefits that come from just keeping things simple and again i think this goes against our nature and so here's an example of how this one paragraph just reminded me of Southwest because Southwest would only fly one type of plane.

Starting point is 00:52:29 They only focused on their niche. They weren't going international. They essentially looked at what the industry was doing. It's like, no, we're not doing any of that. So it says, it's hard enough to sell burgers, fries, and drinks right. And when you start adding things, that gets worse. In-and-outs limited scope and narrow focus also meant that the chain didn't have to continuously spend money on new equipment needed to prepare and cook new menu

Starting point is 00:52:50 items. It also wasn't necessary to repeatedly train his associates to learn how to ready those new offerings. So if you're interested in the benefits of applying the benefits of simplicity to your own business, I think the best book is just read that book Nuts. It's called number 56. You can find it obviously anywhere books are sold., Nuts. It's called number 56. You can find it obviously anywhere. Books are sold. It's fantastic. It's called Nuts, Southwest Airlines' Crazy Recipe for Business and Personal Success. It goes into a lot more detail about just how this constant focus on simplicity and

Starting point is 00:53:18 cost and not market share and only profits that Herb Keller was obsessed with. Again, how the hell are you running the same business? You're offering essentially the same service, right? It's just like a bus that goes through the air, what the airlines were, right? And how the hell were you able to get like most, not only were you profitable for 40 straight years, there's many cases where airlines are so badly managed that any profits they'd made maybe like the previous decade could be wiped out in one bad year. It's just remarkable how all these things are connected. So I think reading that book is just a good start. Anyways, I want to go back to the author, Stacey Perman, does a fantastic job of putting in like historical context. So what I'm about to read you is going

Starting point is 00:54:00 to take place over like five pages, but it's about like the increase in processed food fast food this explosion of a of an industry that you know is now very mature and it's kind of like a day-to-day life not only for americans but all over the world it wasn't always like that and so you had all this money being dumped into it all this quote-unquote innovation and you could definitely argue if that innovation was good or bad or not right but it's all occurring while harry's building his business and he's just he i wrote harry snyder was having none of it that's how i described the section so it starts with people trying to find ways essentially like food technology i guess so when you think about it this is pretty wild you've heard the term tv dinner that was at one point a quote-un unquote technology and it was an invention. So it says TV dinners were invented by C.A. Swanson and Company. There was a food technologist

Starting point is 00:54:49 named Betty Cronin. She initially expected to sell 5,000 units. Her company sold 10 million TV dinners the first year on the market. It was just one invention in the era of easy instant food. And so that is what the authors explained to us. And nowhere did this budding emphasis on the frozen, dehydrated, prepackaged, and automated food find a more welcoming home than the growing fast food industry. So it talks about people were making a ton of money. These businesses were coming in. They'd invent things like an infrared heat lamp, right? So they're selling, they make that invention, then they sell them to McDonald's. So instead of making the food as it's ordered, right, like Harry does, it's like, no, we can

Starting point is 00:55:28 kind of predict how many we're going to sell. You might, your food might have been made for five minutes, but it's okay because it's sitting under an infrared heatlamp. Another example, White Castle replaced fresh beef with frozen square beef patties. 12 years later, Ray Kroc reluctantly made the switch to frozen beef. This is all these things that are happening that everybody else is doing that Harry's not. That's why I'm telling this section. Then we see J.R. Simplot, who was the country's largest supplier of fresh potatoes, devised a new method that could freeze French fried potatoes on a mass scale.

Starting point is 00:55:59 Simplot met with Ray Kroc and convinced him to buy his quick-freeze potatoes because he said it would keep the quality consistent. And so that's the sales pitch, and Ray Kroc and convinced him to buy his quick-freeze potatoes because he said it would keep the quality consistent. And so that's the sales pitch, and Ray Kroc agreed. So now McDonald's has frozen beef and frozen french fries, neither of which Harry's doing. And it goes on for a little bit more. I'm skipping ahead a little bit. The relentless competition and new preparation techniques

Starting point is 00:56:19 had transformed the entire industry that had once uniformly prided itself on the personal touch. Guess who keeps the personal touch? Harry Snyder was having none of it. Harry was determined to do things exactly as they'd always been done. He had developed and clung to his own values, focusing on quality. As many of the leading chains were beginning to use frozen beef patties, Harry went in the other direction. He hired In-N-Out's first butcher. He wanted to exert more control over his products, not just find a way to wring more money out of cheaper products.

Starting point is 00:56:50 So again, you don't build a cult following by trying to wring more money out of cheaper products. You might make more profits temporarily in the short term. But what is the value of this relentless cult-like following that In-N-Out has? The word-of-mouth advertising that they relentlessly-Out has, right? That they, the word of mouth advertising that they relentlessly do and proselytize every single other person. So like when I, anytime I visit California, I eat In-N-Out just because the people

Starting point is 00:57:13 that my friends that live in California wouldn't shut up about it. They literally converted me. And so this continues. I'm still in the same section. Harry's decision proved to be a critical moment in deciding just how the company would define itself. In-N-Out took the same approach with its french fries the snyder still made theirs by hand burlap

Starting point is 00:57:28 sacks of whole fresh potatoes especially grown for in and out arrived daily and they were distributed to each store where they were washed peeled cut and cooked they're not frozen frequently the potatoes were picked in the morning and delivered to in and out the same evening that's crazy i don't know i wonder if it's still like that harry made sure to scrutinize the fresh freshly delivered sacks they were inspected for starch content and a test batch of fries was made up right away if the potatoes weren't up to muster the whole truckload was rejected so this guy's extreme right in an industry that was substituting chemically processed pre-packaged and frozen food for the real thing in In-N-Out continued to use traditional sponge dough buns fresh baked daily that took several hours to rise. Its competitors took to purchasing buns

Starting point is 00:58:13 injected with chemicals that considerably reduced the rising time of the dough. That is the main thing here. He's like, I'm focused on the customer. I'm focused on quality. My competitors are focused on the spreadsheet. They're like, why are we spending 25 cents on a bun when we can spend 10 cents? Which is really bizarre. If you think about how much of your life energy you're putting into building up your company, to building up your products, why on earth would you skimp on what you're dedicating your precious and finite life energy to? Clearly, Harry's way is better. And when you focus on product, like you can, on the quality product, you can let the product speak for itself.

Starting point is 00:58:51 That's the focus of the product. How do you know people have weak products? They do stuff like this. McDonald's started to focus on idealized experiences and created alternative universes with fuzzy mascots that were heavily geared towards children. Ronald McDonald was a clown in a bright yellow jumper. Burger King began featuring a king who sat on a burger throne. Their advertising campaigns had jingles and slogans. They focused on fun and

Starting point is 00:59:14 fantasy and for a time everything but the actual product. The story of In-N-Out remained static. The message was hamburgers and fries and it was broadcast by its customers. The chain's simplicity endeared In-N-Out to its longtime regulars, establishing an uncommon customer loyalty, one that its competitors spent hundreds of millions of dollars trying to create. And I think that's another main lesson of the book. I think this is a quote I got from Jack Dorsey, the founder of Twitter. And he said, make every detail perfect and limit the number of details to perfect. And if I was writing that, I actually put in the reverse order. I would say limit the number of details to perfect and then make every detail perfect. And that is exactly what Harry Snyder did. So now we are 25 years into the company. And let me read this to you and I have a question for you. Inside the company, franchising was a dirty word.

Starting point is 01:00:20 After 25 years, there were only a dozen In-N-Out burgers. Harry owned each store and the land underneath them. And that was exactly how Harry liked it. And so I thought about that. I was like, that's really interesting. What is a dirty word inside your company? It's a way to define your company by what you're not. Inside the company, franchising was a dirty word. And I also love his perspective.

Starting point is 01:00:40 Let's check out. This is one line that really resonated with me. From his perspective, In-N-Out was simply a different creature than its competitors. There's a fantastic line I heard in a song one time. He says, we may be in the same genre, but we don't put out the same product. That's exactly what he's saying. He's like, yeah, technically I'm in the fast food, just like McDonald's in the fast food. Is our product the same? No. So therefore, I don't really, I'm not really competing with you. In-N-Out was simply a different creature than its competitors. Another great one line for you.

Starting point is 01:01:08 This is just a fantastic trait describing Harry. He was very much about problem solving before it became a problem. And then there's just a funny story. He also had a hell of a temper, as you can imagine. And so this is a quick story about people with no brains. And so they're trying to open up, as they open up new stores they have to meet with like city planning commissions and everything else this is happening in rancho cucamonga california we had a meeting there with the city's planning staff he remembered this is somebody that's working with harry

Starting point is 01:01:36 and there was this planner who was just out of college he was greener than grass and he said to harry i think your hamburger stands are ugly with that harry turned red and jumped to his feet and so at this point harry is probably a close to 60 year old man okay so he's having some kid doesn't never experienced anything in his life say i'm not gonna prove this because i think i personally think it's ugly right so he says he was greener than grass he said i think your hamburger stands are ugly with that harry turned red and jumped into his feet and less and let loose with a string of expletives after After calming down, Harry turned to the young city planner and demanded, how many millions are you worth? How many successful businesses do you run?

Starting point is 01:02:15 Recounting the tale, Harry's friend concluded, I love that story. It's about city planners, people with no brains. And so Harry smoked for about 20 years he'd quit for i think the last like 15 20 years of his life but unfortunately uh they found a bunch of lung cancer and this is what harry was thinking about as he's battling lung cancer and he knows he's going to die successful family businesses are often erected through the sheer will and force of a specific individual that obviously being harry the one we're focused on. The challenge for Harry was the challenge of all patriarchs. To pass on the company he built to someone who would be able to maintain its success without abandoning the unique culture that had made it a winning hand in the first place.

Starting point is 01:02:57 And to keep it in the family for successive generations. It is now currently in the third generation. Both his sons, so he passes on to his second son after he dies. His son dies a few years later in actually a plane crash on their corporate jet. And then his other son that he didn't want to take over the firm winds up taking over the firm. He dies. He's a drugging kind of like a loser, unfortunately. He dies a drug overdose. And so unfortunately, his wife, Esther to she survived not only her husband's death then her two sons death and then she lives so she's like 90 and then when she dies it passes on to the only they only had one surviving grandchildren a blood relative and that's

Starting point is 01:03:35 lindsey the one that um that runs that owns the company now but harry worked wind up working on in and out till he died he winds up working on it from 1948 to 1976. So it says in 1976, when McDonald's opened its 4,000th restaurant, In-N-Out opened its 18th store in Woodland Hills. The Woodland Hills drive-thru was the last In-N-Out burger opening that Harry Snyder oversaw. He died on December 14th, 1976, at 63 years old. On a warm winter morning, Harry's funeral mourners filled into a 120 seat church. The chapel was too small to accommodate the hundreds of mourners who had come

Starting point is 01:04:19 to pay their last respects to Harry Snyder. Many stood outside. He really touched a lot of folks. It seemed that everybody that he had ever had contact with arrived to say goodbye. That part made me think of what Charlie Munger said, think about the kind of funeral you want and act accordingly. The book goes into more detail about the succession plan and the growth that happens over the next 20 years. To get the full story, read the book. If you want to support the podcast and buy the book at the same time, I'll leave a link down below.

Starting point is 01:04:49 Another way to support the podcast is to give a gift subscription to a friend or a coworker. That link, as always, is down below in the show notes in your podcast player and also available at founderspodcast.com. That is 244 books down, 1,000 to go, and I'll talk to you again soon.

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Founders - #244 Harry Snyder (In-N-Out Burger)

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