How I Built This with Guy Raz - Leatherman Tool Group: Tim Leatherman

Episode Date: January 31, 2022

Most entrepreneurs expect it will take at least a few years for their businesses to gain traction. But Tim Leatherman waited 7 years to make a single, $175 sale. In the late 1970s, he had set up shop in his brother-in-law's garage, scavenged some metal from old appliances, and built a tool that he'd dreamed up a few years before: a foldable pair of pliers with several other tools tucked into the handles. Tim worked for years trying to market his design to knife and tool companies, but none of them were interested. Was it a tool? A gadget? A knife? Eventually he was able to convince mail-order catalogs to sell the tool; and within the space of a decade, he went from selling a single knife to a million every year. Today Tim's company is worth over a $100 million and his last name has become a household brand: the Leatherman. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.ca. I was at this show. There was a man and his name was Skeets Houchens. Skeets Houchins. Yes. It's like a movie.

So Skeets comes up to my table and says, what are you doing? And I said, I'm waiting for someone to stop, and I'm going to want to show them the prototype of my new type of pocket knife. And Skeet says, you can't do that. The people walking by, they're like zombies. They're in a daze. They don't see anything. And you've got to get up. You got to get out in the aisle.

You've got to grab them. You got to stop them. So I stood up. When people walked by, I'd say, you, sir, have you seen my new pocket knife? From NPR, it's how I built this. a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Tim Leatherman tried to market his foldable knife for seven years before he finally made a sale and grew his company into a multi-million dollar brand, Leatherman Tool.

Back in the early 2000s, I was a foreign correspondent for NPR and CNN. I covered the Iraq War, Afghanistan, Kosovo, and a few others. And the only reliable way to file my stories was through a big, bulky satellite phone connected to a device called a Roadrunner. Together, they took up a suitcase. Every time I arrived to a new place, a city, a village, a dusty outpost, I'd have to set up a mobile studio. I'd haul the sat phone up to the roof of the guesthouse or motel and then start to strip wires and screw and unscrew connections. I'd cut rope to hold things in place, and invariably, I needed a pair of pliers or a screwdriver, flat and Phillips, and a sharp knife, which meant that the one thing I always brought with me on every trip was a leatherman wave. Now, it may surprise you, as it did me, that the leatherman has nothing to do with leather making.

I always figured it came out of a 19th century tannery in Montana or something. But in fact, it's a tool that first came onto the market in the 1980s, and it was invented by a man named Tim Leatherman. Today, Leatherman is a company that sells well over $100 million of pocket knives and tools each year. But it took Tim more than seven years of tinkering on his idea before he managed to sell one. And then on that day in that convention hall, he literally sold just one. Tim tried to sell his idea to knife companies who rejected it because they thought it was a tool. And then he went to toolmakers who didn't want it because they thought it was a knife.

And in the very early days, he didn't attract any investors either. But that means that today, Leatherman is still a family-owned business, based in the city where Tim was raised, Portland, Oregon. His mom was a homemaker. His dad was a union carpenter, and Tim grew up in the two-story house his father had built. Tim was kind of a shy kid, a self-described nerd. And from an early age, he usually had a job, either mowing lawns or babysitting. Tim went on to study mechanical engineering at Oregon State in Corvallis. It was during the late 1960s, the height of the Vietnam War, But Tim wasn't drafted. He was actually too skinny to join the Army.

So he spent his time focusing on other things. In college, I decided I wanted to be really good at something. And I wanted to be able to leave some evidence that I'd been there. And I decided that the way I wanted to do it was to become really good in table tennis. And to win the school championship and have my name on the... the list of school champions. So I've put a lot of effort into trying to become good in table tennis. And during the summer, a friend of mine and I, while we heard that there was a ping pong table in the basement of a dormitory for the students at Portland State. So he and I went there,

and while we were playing, a group of students came down. And one of them was the most beautiful girl I'd ever seen. And so I tried to play even better to try to impress her. And somehow I got the courage to approach her and talk to her a little bit and even got her phone number. And her name was Cho. Her name was Cho. And I was so worried that when I called her back and wanted to follow up with her that I would mispronounce her name. And she'd never speak to me again. And I'm imagining you were just terrified and nervous, and you had butterflies in your stomach because you were a self-described socially awkward guy. Exactly. This took incredible courage for you to approach her. Well, let's not go that far, but I was, in college, I had three distinct lives. I had my academic life. I had my

table tennis life, and I had my foreign friends life. And so I was starting to come out. of a little bit. It seems somehow I was better able to interact with my foreign friends than with my American friends. So Cho was from Vietnam. Right. And I guess the two of you started dating and you got into a pretty serious relationship because after you graduated from college, you actually went to Vietnam to live with her and her family there and to teach English. This was like 1972. I mean, the Vietnam War was still going on. I don't think the fall of Saigon would happen until like 1975.

Tell me about living in Saigon in 1972. Like, as an American who was not part of the military, what was that like? It was the best experience of my life, the most formative experience of my life. Everything was new. Everything was different. For me, everything was exciting. In Saigon, there was chaos everywhere. I mean, organized chaos everywhere.

There was plenty of evidence that there was military activity, and there were soldiers and jeeps going through the streets and lots and lots of American infrastructure there. But for me, I went there. I paid my own way to get there. And once I got there, I tried to live more of a Vietnamese life. And I remember. And I remember just from being a reporter in places like Baghdad and Kabul, there's always this kind of slight sense of paranoia that, you know, the rumors and, and it's going to mean an attack coming or an explosion or something can.

I mean, did you, do you remember that feeling? Because Saigon was not, I mean, there were, there were attacks on, you know, on on, on U.S. backed forces, on South Vietnamese forces there and on U.S. soldiers. I mean, this was a war. Yes, but I was not, I wasn't, didn't have any war experiences. I could move around Saigon very well. My mode of transportation initially was a bicycle. And I would even ride out into the countryside sometimes. And I didn't feel unsafe.

And did any of your friends say, wait a minute, you're going to Vietnam right now? What are you doing? Did anybody say you're not? Because people, people had images of it from television, right? There was a war zone. I didn't consult with my friends. I was determined to go. Right.

All right. So you ended up spending three years in Vietnam, right? Yes, almost three years. Almost three years. Within a month after I arrived, Cho and I decided our love was real and we got married. She and I rented a room in a house. Her family was in Saigon, so we had lots of contact with them. And I was initially an English teacher.

and then I had some other jobs. I repaired helicopters, and then I got a job with an adoption agency to be their logistics person to arrange for the supplies that we needed for the kids and arranging for the transport of the kids when they're ready to be sent back to America. One of the things I read was that while you were there,

you noticed how just any kids, teenagers, kids as young as 10 or 11 were really handy. They could fix motorcycles and scooters. And you were sort of embarrassed because you didn't know how to do that. Yes, that was a real awakening for me in Vietnam. I had a degree in mechanical engineering, but I really knew nothing practical. And a colleague of mine when I was teaching at the hospital, one day we were sitting at lunch,

and somehow the subject of motor scooters came up, And he said, the engine of a motor scooter, it's really pretty simple, you know. And I thought, if he thinks it's simple, there's something wrong with me. And there were these kids on the sidewalk that set up sidewalk businesses who could repair motor scooters. And it was pretty much from that moment that I became very interested in the way things worked. And I'd buy clocks and take them apart and try to figure out how they worked. and just anything, lots of things that I pick up and try to analyze, try to understand, and try to repair. And I guess one of your very first ideas or inventions really was something you made for those motor scooters that you were seeing everywhere.

Yes, and I noticed that all of the Japanese motorbikes had luggage racks on the back. Yeah. But none of the Vespas had luggage racks on the back. And I thought, aha. market opportunity. I'll create a luggage rack for a VESPA. And with the help of my brother-in-law, I was able to design one and make 100 of them. After I finished making my batch of 100, I was able to talk a shop into taking two of them on consignment, and I hired a girl to distribute leaflets on parked Vespas. When we left Vietnam, there were still 97 in the bedroom of our house.

So you never sold them. No. And it turned out that all that the people who rode Vespas considered themselves a class above. Uh-huh. And they all had homes and they had maids, and their maids would go out and do the shopping and bring back the groceries and the live chickens on the backs of their motor scooters. Wow. So the VESPA was like the sort of upper class. The luxury vehicle. Considered to be the luxury vehicle,

and you would never be caught dead hauling anything on the Vespa in Vietnam. So nobody wanted to buy a rack. Exactly. It was your mode of transport, but you were driving a luxury vehicle and seen as such. Right. And I learned a lesson from that. I learned that when you're looking for customers, you need to also know the culture within which you're living and the attitudes of the people about the products that are for sale. So interesting. Wow. All right. So I think you guys were planning to stay in Vietnam for a while, but geopolitical forces actually got in the way because the war was ending.

Saigon was about to fall. The Americans were withdrawing. And I think you left Vietnam like just a few days before the fall of Saigon, right? I mean, the 1975 that the North Vietnamese come in, I'm assuming that that was what prompted you to leave. Yes, the country fell on April 30th, 1975. We were able to get my wife and her family out on about 10 days before. we still had some children at the agency I worked for, who's the adoption agency. The adoption agency that still hadn't been, we still hadn't been able to get out yet. And so about five days before I left and brought out and helped to bring out about our remaining 20 children or so. Wow. I wonder, Tim, whether those scenes from Afghanistan brought back memories for you of your time in Vietnam. Watching that.

Yes, I was part of the airlift out of Vietnam. I left on an airplane. It wasn't so late that I had to leave on a helicopter, but I did cut it a little bit close. So that was it. That was the end of your time in Vietnam. and you returned to Portland. Everybody went to Portland. Yes, we got Cho's family to Portland.

So now the project was to get them settled. And then Cho and I said, now what? What do we do with the rest of our lives? So this is around August of 1975. By August, the two of you decide, from what I understand, to travel, to backpack and hitchhike in Europe. and maybe even beyond. We wanted to experience other cultures,

and in particular the culture in Eastern Europe. By now we decided that maybe the best way for us to travel would be to have our own car. And we heard that the easiest and best place to buy a car was in Amsterdam. So we headed there, bought a $300-use car. It was a Fiat 600D, 1969. If you can imagine a Volkswagen bug scale down to two-third size, this was our little Fiat.

Beautiful car, by the way. Just a beautiful Italian car, right? I mean, it's a tin box, but a beautiful car. Well, our nickname for it was the Little Monster. All right, so you decide to take this trip. And, by the way, how long was the entire trip going to take? Well, it ended up taking 10 months. 10 months. I think you traveled through 17 countries in Europe and the Middle East, right?

Right. And on that trip, I was carrying a pocket knife, a multi-blade pocket knife, like a Boy Scout type knife. And I was using that for everything from adjusting, well, from using the knife blade for slicing food for dinner to the can opener for opening cans and the screwdriver for turning screws. but there were oftentimes when I needed a pair of pliers. An example would be when the car had issues, but even more so when we stayed in cheap hotels and pensions and the hotel plumbing had issues. Yeah, I bet. When you, on your trip, did the car,

I have to assume the car broke down now and again? Yes. Could you get the parts for it? Yes. If it stopped running? Like in the middle of, I don't know, Bulgaria or something. In Bulgaria, no. Okay, all right.

But, yes, there were parts. You could get parts. One kind of humor story is while we're in Bulgaria and driving down the highway, I noticed my wife was getting shorter. I looked across and, yeah, she was getting shorter. Then I looked down and I realized that the supports holding her seat had corroded and her seat was falling through the car down towards the pavement. So, Cho moved to the back seat, and she was back there.

She was sort of like, I'm James, the chauffeur up front and chosen back telling me where to go and when to turn. And then when we got to out of Bulgaria and into Turkey, there was a kid on every corner that had an oxyacetting tank, and we stopped at one of those, and he was able to weld the front seat back in, and then she'll move front again, and we continued on. So I don't know if this is apocryphal or not, but there were things that when you would do repairs to the car, you would take notes about the drawbacks or the deficiencies of the knife you had, almost as if you were thinking there needs to be a new knife. That just sounds so on the nose, like, prescient. Is that true? Is that how it happened? It was a, what are we going to do with the rest of our lives trip? And during the trip, I was jotting down notes of any ideas I had. Right.

And one of the ideas, in essence, said, add pliers to a pocket knife. Wow. And the reason for that was for my own personal need, both to fix the car, but even more so to fix the bulky plumbing in the cheap hotels and pensions in which we stayed. By the way, what were some of the other ideas that you jotted down? Actually, some of them turned out to be things that other people did, but I did not. One of them was that postage should have some kind of a barcode or something on it,

some kind of a method by which if you want to send it somewhere, you would buy a decal that had the zip code on it that was readable somehow so that the post office could process the mail more easily. Another idea was to congregate service shops within one shopping center, one mall, and in particular, like, repair shops. So if you, in particular, small repair shops. So if you have a TV repair, appliance repair, watch repair, locksmith, congregate all those into one place. You said you've done some traveling around the world, and I'm sure you've been in places where they have. have these bazaars, and within the bazaars, there's sections where the whole section of the bazaars, everyone's selling cloth. And you think to yourself, why would they all be in the

same place? Why wouldn't they each go in various places where there's less competition? Right. But when you think about it, it works really well because if you're in the market for cloth, you go to the place where there's the most selection. Love it. The problem today, and I'm going to sound like a grumpy, crotchety old man, is nobody repairs anything anymore because the prices of products are so cheap. People just throw them away and buy a new one. You'd be surprised. You'd be surprised how many people with a leatherman tool are still fixing things. That's a shameless plug for the leather man. All right, so you end up back in Oregon, 1976, and you're flipping through your book of ideas, and you decide the most viable idea, the one you want to pursue is this knife tool.

Exactly. It had the most realistic chance of actually being able to do something with it. And I asked my wife, could I build one, just one, just for me? she said, how long will it take? And I said, maybe one month. So she said, okay. And so she went to work to support us. And I went to, at the time at my parents' house,

I went into the basement and picked up a file and the hacksaw and started trying to build what was in my mind. Out of just, what, like scrap metal? Like scrap metal, I was able to scrounge up. And where were you doing this and whose garage? I was working in my brother-in-law's garage. And what did that mean? Were you, like, were you pounded?

I mean, you're not like a 19th century blacksmith where you're pounding metal, right? Or were you? Was that? Were you doing something like that? My initial prototypes, I was cannibalizing parts out of other tools. Okay. But then I was, and then to connect them and get it to design the way I wanted to. I was cutting the piece of the sheet metal of a hexaw or cutting them with ten snips and folding them together by putting the metal into vise and then bending it over the corner of the vice and pounding it by pounding it with a hammer.

It was really pretty crude. So you were like a 19th century blacksmith? Other than I didn't have fire and flames. I was doing everything cold. Right. Okay. So you're really like, you're trying to make a prototype. And you come up with a prototype.

And I'm trying to imagine it looks like a pair of pliers. But in the pliers, you had like some tools that would come out of the handles. What were the tools like knives and a file and bottle opener, that kind of thing? Yes, and screwdrivers. Right. And what did you do with it? Did you present it to friends, to your wife? Did you say, this is it?

I got it. I think this is it. This is the thing that's going to make me millions of dollars. No, I quickly discarded it. because even for me it had shortcomings. Which were what? Well, the first shortcoming was that I had a strict criteria in the length that it could be closed when you put it in your pocket. It added to be pocket knife length.

Okay. Not beyond. No longer than four inches. So by the time I had the pliers taking up about two inches, I only had about two inches of handle. Oh, yeah. And I couldn't get good leverage. So you realize that to make this work, it has to fold over. Yes.

So how long did it take you to make that prototype? About two more years. So all told, you start this in 1976 after, and we're only supposed to do this for a month, by the way. All right. This is, it reminds me of James Dyson, who invented the Dyson vacuum. He was on our show five years ago for five years. I think he were six years. He worked on the vacuum.

I think he had 4,000 or 5,000 prototypes of his vacuum cleaner. People thought he was nuts. I mean, you were still a young man, but you're now in your early 30s. You were not earning any money. You were working on this prototype. But you believed that this was going to be a business. You clearly believed it. Did anybody else, do you remember anyone at the time saying, you know, maybe you should just, I don't know, get a job?

Well, I'm pretty sure people were looking ask and set me, but this was my day job. Every day I would go to my brother-in-law's garage and spend the whole day in the garage. And so I spent a lot of time in the library too when I was researching various aspects of materials or specifications on how good the tool should be. When you were kind of like working on the prototype, what were you imagining? this would be used for. I mean, you knew that you needed something like this on your trip to Europe. Did you think this would be like a utility knife? Like, you know, like lots of people have Swiss Army knives. They just have them, even if they're not handy. They just have them. But did you think it would be that kind of person who would want this?

Well, I thought that it would be anybody and everybody, anybody that carried a pocket knife, would rather carry this tool that I was creating because you not only got all the features of a pocket knife, You also got a pair of full-size, full-strength pliers. So this is what you were working on. And in the meantime, you know, it's a lonely pursuit, right? I mean, you're doing this by yourself. And I don't know. I mean, you didn't have like an office of people to get feedback from.

Did you remember feeling lonely? Like, I don't know. You were all alone in the world working on this thing? I do. One time in particular, it was the eve of my 30th birthday. And I've been working on this for two years already. And I went to bed that night thinking, I have nothing to show for this. Two years of my life are wasted.

But the next morning I woke up and remembered I have a goal. I want to build a tool that works for me. And if it works for me, I think other people are going to like it too. And so I went back to work and on I went. When we come back in just a moment, how Tim finally makes a sale, a single sale of a single knife, but still gets turned down by dozens and dozens of mail order catalogs. Stay with us. I'm Guy Raz, and you're listening to how to that.

I built this. Hey, welcome back to how I built this. I'm Guy Raz. So it's 1978 and Tim Leatherman has been grinding away on a prototype for a folding multi-purpose tool. And his plan is to patent it, sell it to a big knife company, and make lots of money. And they would pay me about $1 million, and I would sit back and live happily ever after. You would just count your gold coins in your vault of gold for the rest of your life. Yes. So the idea was, hey, I'll make a prototype, but I'll have a patent, and then I'll sell the technology to another knife company. And I believe the knife company was Gerber, which is also based in Portland.

They make great knives. And you actually approached them in 1978 or nine and said, hey, check out what I've built. What do you remember about that meeting? Yes, I approached Gerber. I called them and said I have a new kind of. and a pocket knife I'd like to show you. They said, sure, come on in. They agreed to borrow my prototype

and do an evaluation of it and get back to me. After a couple of weeks, I hadn't heard from them and I was getting really anxious, so I called them, and they said, sorry, we decided to not take this on.

It's not a knife, it's a tool. Okay, what's wrong with being a tool? They said, we're in the knife business, and this is a tool. It's not something that we're interested in getting into. Did part of you say, okay, well, maybe I'll approach tool companies and see if they want it? I'm a little more stubborn than that. I said, well, there's other knife companies, so I'll approach them.

So I did. Ultimately, I think I contacted every knife company there was. In the U.S. In the U.S. Even Victorinox in Switzerland. Wow. And this is pre-email. You're writing letters and mailing them.

Yes, I would say. Send him a letter, and all of the answers were the same. Sorry, we're not interested. And then I finally got the message and said, okay, if the knife companies aren't interested, I'll go to the tool companies. Yeah. And when I wrote to them, the answer's back was, sorry, this is not a tool, it's a gadget, and gadgets don't sell.

What tool companies do you remember going to? Well, the big ones like Stanley, Black and Decker. Wow. I mean, you're now talking about, you know, three, four years in, this is not a vote of confidence. This is not, this would not instill confidence in most people. And I would say most people at this point would say, I got to move on. And I wasn't too much different. My wife and I had a conversation, and we decided it was time that I get a real job. I looked through the want ads and I found one that said wanted salesman welding products and offered a job and I accepted it. This company you worked for was called Utecic, I think, right, the welding supply company. Yes, their headquarters was in Switzerland. It was actually a perfect job for me in a lot of ways.

I was calling on businesses where they could, they had equipment and they had processes. and they had processes that could be used in the manufacture of my tool. So I would show my prototype. And that was also a way of getting rapport with my prospective customers. Wow. So while you were representing Utecic selling supplies, you could also talk to these customers about by your passion, which was this pocket knife that you were inventing.

Yes. If you try to sell stuff to people, they get their antenna up, if you ask them for advice, they're plenty willing to talk to you. All right. By this point in the early 80s, I believe I read, you had already received more than 100, maybe more than 200,

either rejections or no replies from knife companies and tool companies. But you still thought you were still holding onto this dream, even though you'd already had about 200 or more rejections or no replies. Yes, I still had the goal, still had the dream, still persevering. Why did you think that it was going to work if no one was confirming that idea? There's a fine line between persistence and failure to accept reality. And I was determined to try to go on too long before giving up too soon.

And I have to assume you probably didn't. have to invest too much money because it was like scrap metal and pretty, there was costs for the patent imagining. You probably had put a couple of several thousand dollars into developing this thing. Or maybe more. Actually, I don't know. I believe the patent cost about $1,400. And I probably put in maybe $5,000 into purchasing various types of equipment.

And the time. And put in a lot of time. I felt I had more time than money. And about seven years after starting the project, first going into the garage, I was about to give up. But what changed that? What happened that made you not give up on it? A friend of mine from University Days named Steve Berliner had been following my, let's not say, progress, but lack of progress all this time. And he stepped in and said, there's a...

Let's be partners. There's still a few things you haven't tried. And he stepped in and offered to become partners to try to see if we could get it onto the market. And Steve was a friend from college. Yes. We were fellow table tennis players. And Steve's father had a manufacturing business. And so Steve grew up with that environment.

Steve's education in university was on the business side. So he was kind of like a perfect... match. And when he approached you and said, hey, let's start a business. This is actually amazing. You had started this prototype in 1976. Steve approaches you in 1982. You had not yet incorporated the business. You did not have a business. No. Steve and I did agree to become partners. It was 75% me and 25% Steve. And so then we were smart enough to recognize that before starting to manufacture the tool, we should get an order for enough tools to justify going into business. I read that in 1983, so there'll be, what, seven years after you started work on this product,

you finally sold a tool? Yes. Yes. My very first sale was by going to a product. a knife show, I had a table and I had an exhibit on my table called the evolution of an invention where I had compiled the prototypes that I'd created over the by then seven-year period that illustrated my progress or lack of progress in trying to reach the tool that would be marketable. Did you get a lot, I don't know, did you get a bunch of people coming up to the table and

inquiring and asking you questions? No, I was at this show. People were walking by, and no one was stopping. I'm sorry. I would have stopped. I would have stopped for you, Tim. I promise. Well, after I tell you my story, you might agree that you might not have stopped. And the reason is, is that down at the end of the aisle, there was a man selling magnesium fire starters. And being at the end of the aisle, he would get up on a podium, so he would. He was up a little higher than everyone else, and he created this well-honed sales pitch that kind of you'd use it by a barker at a country fair. And he would go through his dog and pony show with sparks flying and him starting fires and drawing a big crowd.

And every once in a while, he would take a break. And to this day, I don't know why, but he came up to my table. And his name was Skeets Houchins. Skeets Houchins. Yes. Only a guy named Skeets Houchins is selling magnesium firestarters. It's like, you have a movie. Okay, keep going.

So Skeets comes up to my table and says, what are you doing? And I said, I'm sitting here waiting for someone to stop, and I'm going to want to show them the prototype of my new type of pocket knife. And Skeets says, you can't do that. The people walking by the aisle, they're like zombies. They're in a daze. they don't see anything and you got to get up

you got to get out in the aisle you got to grab them you got to talk to them you got to stop them and so I went back and I sat down and I started looking at the people

walking down the aisle and Skeese was right they weren't they weren't absorbing what they were seeing yeah it's true they were like zombies yeah so I thought to myself I'm at a nice show

why are people here they want to see new knives. What do you have, Tim? So I stood up. When people walked by, I'd say, You, sir, have you seen my new pocket knife? And I'd shake their head and turn around, look, who was that? What was that?

And I'd actually be able to talk to him a little bit. And I read that. I guess some guy walked by and offered to buy a knife from you. Who was he? He was a German immigrant. He had moved to San Francisco. and he had started a auto repair business repairing a high-end German automobiles. His name was Wolf Schultz Tottenpatch, and he agreed to pay $175.

To buy your knife? To buy a knife that I would go back and make in my garage for him. And he mailed me a check, and that was my very first sale. Wow. Wolf got the first leatherman ever. He could take a picture of that and sell that as an NFT. All right, so you finally sell a knife to Wolf. Well, by now, Steve and I were already partners.

We thought that if we could make and sell 4,000 tools in our first year, we could pay back our cash investment, but wouldn't pay ourselves anything for our time. So Steve and I were looking for someone to order 2,000 of the 4,000. and we thought, who could that be? And our first thought was the U.S. Army. They said, we approached them. They said, no.

Our next thought was AT&T, the telephone company, before it broke up. It had tens of thousands of people repairing telephones. They said, no. And then we thought mail order catalogs. So we found a list of 280 different. mail order catalogs. We got zero responses from 279. Cattelaglocks? Yeah. But the 280th catalog was in Seattle, and it was close enough to call and ask for appointment to come up and show them our tool in person. This is a catalog company, I think, called Early Winters? That's correct. Okay. So we drove to Seattle,

showed them the prototype. They said, hmm, Looks good. Yeah. How much? And I have to admit, I hadn't really thought yet, so I thought quickly. And I said, your price, $40. And they said, that means we have to sell it for $80. Sorry, don't think anyone would pay $80 for this.

But early winters did us a big, big favor. Instead of saying, go away, don't let the door hit you on your way out. They said, how could you make the tool less complex, less expensive? I said, okay. So Steve and I got back in the car, drove back to Portland, went back into my garage, and about six months later, I came out with a new prototype. We showed it to them. They said, we like this, how much?

I said, your price, $24. They said, that's fine. Yeah. My hopes are rising. So I said, so you're ready to order 2000. And they said, no. We don't think we could possibly sell that many. Wow.

So, I mean, now you're talking about what? This is 1983. Yes. Because both of you are still doing your day jobs. Yes. So no orders? No order from early winters. None of these catalogs.

And what catalogs was? I mean, Sears was probably still. you know, Neiman Marcus and Eddie Bauer, L.L. Bean, sharper image. Sharper image, sharper image. They weren't interested? Well, so once Erdy Winner said, sorry, we don't think we can sell 2000, Steve and I then took a picture of this latest prototype, wrote a cover letter, mailed it to the remaining 279 catalogs. Do you want to see this prototype?

Wait, because you had this new prototype. You just reached out to the exact same catalogs as before? Yes. And this time we got one response. It was from a company called Cabellas. Cabellas, which I think is owned by Bass Pro Shops today. Today, yes, it's owned by Bass Pro Shops. Okay.

And one day, in late May of 1983, eight years after I had first thought of the concept, I got a letter at my business address, which was really my home address. I opened it up, and inside was a purchase order for $12,000. Wow. For 500 tools. Wow.

Do you remember, I mean, I would have cried. You can't believe how happy I was. I was climbing the walls. I called Steve. He was so happy. And then we both settled down and realized, well, this is only 500 tools. we wanted 2000. Yeah.

But still, pretty great. Finally, after eight years, an order, a sale. And presumably, this is May of 1983. Presumably, how much time did you have to make 500 tools? Their order came in late May of 1983, and they wanted a delivery date in late December of 1983. Okay. That seems reasonable, but who was going to make 500 tools?

Just you and Steve? Well, we were very lucky in that Steve's father had a metalworking business, and Steve's father agreed to let us move the equipment I'd accumulated my garage into his shop, and he let us use his machines and his employees on a subcontract basis. Right. How long did it take to make one knife, one pocket knife? Like several hours? Well, if you think of the labor hours, those days, labor, like, pretty good wages and manufacturing jobs were like $5 an hour. So, you know, we had two or three hours of labor in every tool. Wow. You were, I mean, we've been calling it a pocket knife up until this point, but I think in 1983, once you got that order, or maybe around the time you got the order, you gave it an official name. You called it the pocket survival tool, which from what I read,

was a very well-considered decision. Like, you thought about a bunch of different possible names for it. Yes. And we were surprisingly astute at considering markets and marketing and who our customers could be. And we finally settled on knife enthusiasts as one category. And back in those days, there were people who, were building bomb shelters because they thought the Soviet Union was going to drop the big one on us.

I remember those days, oh, yeah. So we quite consciously added the term survival in our tool with the thought that maybe that would trigger a response from them. Well, as it turned out, during that seven-month period when we were building the tools for Cabellus and anyone else we could convince by them, early winters called and said, anything happened? Oh. We said, yes, we're in production. They said, put us down for 250 tools.

Oh, all right. Also for delivery in late December, 1983. All right. That's great. So now you're closing in on a thousand tools. Right. And by the way, you were, in the daytime, you were a salesperson selling welding equipment, and then any free time you had, you were rushing to the metal shop and making these tools, these personal survival tools.

During that period, I was basically totally neglecting my sales job. I was pretty much spending all the time in Steve's dad's shop. Just trying to turn out, you were one of the, I mean, it was an assembly line. You were on the assembly line. I was personally checking every tool. My name was on every tool, and I wanted each one to be perfect. All right. So, 1983, you're getting these orders in, and December approaches, and what?

What's going on? Are you going to have enough product to send to Cabellas and to early winters? Late December arrived much more quickly than we thought. About two days after Christmas, we got a call from early winters. They asked our tools, our 250 tools, where are they? We need them really badly because they've all been sold. Oh, they actually had it in their catalog at that point. Their catalog had been printed and released, and they already had. We had 250 orders.

Ooh. You are so lucky that you did not do business in the Amazon Prime two-day delivery era. That's for sure. You could have been wiped out. Everyone's like, what? I just ordered this two hours ago. Where is it? Yes.

We were lucky that in those days, people had a little bit more tolerance for how long it took to ship an order. But the catalogs didn't add very little tolerance. They wanted their product in stock. And when they got an order, they wanted to be able to ship immediately. So they weren't too happy, but they said the 250 have been sold, here's an order for 500 more. Wow. And a week after that, they called and said the 500 are gone. Here's an order for 750.

Just to – I'm just going to point something out. This is the same company early winters who were supportive, who said, hey, try to make it cheaper. But at the same time, they were also skeptical whether they could even sell 250 of these things. Right. Two weeks later, they called back. and said the order is now with 1,000 tools. And then it turned out that the catalogs were all monitoring each other. And if they got us since there was a hot product, then they all wanted on board.

Of course. Then we started getting calls from all these catalogs that had turned us down before or hadn't even responded. They were saying, well, this said we want this. They called up and say, hey, hey, we understand you have a new product. Would you mind sending us a sample? I love it. And Steve and I, rather than saying, you idiots, we sent you a letter.

He said, no, you could have had an exclusive. You didn't even reply. No, no, no, we didn't say that. We said, yes, sure, we'll be happy to send you a sample. When we come back in just a moment, how a few samples morph into many, many sales for Leatherman. But how September 11th sends business back into an unexpected slump. Stay with us, I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz.

So it's 1983, and after years in the wilderness, Tim Leatherman's multi-purpose tool is finally finding a market with mail-order catalogs. And sales, they start to grow. Like mad. Yes, by then it was quite evident that there was a market for this tool when we're able to go from 200 tools in 1983 to 1 million tools in 1993. Wow. Those were really exciting years with growth rates of 50% per year compounded.

How were your profit margins? I mean, it cost you $24, or you were selling them for $24, I guess. But I imagine they were not cheap to make. I imagine your margins were kind of pretty thin, or am I wrong? In that first partial year, we did manage to sell 200 tools, and we had revenues of $6,000. And with that money, we were able to start launching, launch the business and eventually be able to make and sell some tools. In that first year of 30,000 tools of sales, we had about $680,000 of revenue and actually made a few dollars. You made a profit.

Yeah. Here's no wonder. I mean, now all of a sudden, you are scaling fast. You go from 200 and year one, full year one, you go to 30,000, then 70,000. Then you're doubling 160,000 by 1986. Yes. You were funding the growth and the scaling of this purely through the cash flow? Almost entirely. After about three years, we finally found a young bank. who shouldn't have been willing to talk to us but did and was willing, saw that our balance sheet was strong and agreed to give us a line of credit. All right. Here's a question. One of the things that you did, I think it was 1996, so this is like, you know, about 13 years in, you build a very big facility in Portland to manufacture the product. And I think to this day, they are assembled in Portland, right? Every, pretty much every leatherman product. Yes. We do all the assembly ourselves and the vast majority of the manufacturing

ourselves in our own factory in Portland, Oregon. How, I mean, I know that, because some of the components you import, right, some of the components that you use in the knife are made in Europe and maybe even in Asia. But how, why was it so important to make them in the U.S.? I mean, I think I know why, but it meant that they were going to always be more expensive. I mean, your wife was from Vietnam. You had probably some contacts there, and it would have been much cheaper to make them in Asia. Why did you decide to continue to make them in Portland? I was born in Portland. I was raised in Portland. The jobs created were created in Portland. And among the things I'm most proud of in the whole Leatherman journey is that I've created all these jobs and that they were

not a cannibalization of the world supply. They were in addition to the world supply because this was a whole new product category that added jobs that didn't take away from companies that were selling other things. So one is one of my everlasting goals is to do everything I possibly can to keep these jobs here in Portland, Oregon. I know, Tim, that at one point there was a lawsuit, a class action lawsuit, against Leatherman, because your tools were stamped made in the USA, even though some of the component parts were actually made in Europe or elsewhere. But most of it was assembled and made in the U.S., including most of the components. Anyway, I know there was a, it was based on an obscure law, this lawsuit. It was a complicated legal back and forth, but the upshot was, or the outcome was that you ended up taking made in the USA off of your products.

Yes. As a result, we were required to label our tools. A proper label in our tools could be made in the USA of U.S. and foreign components and assembled in the USA. Actually, that lawsuit, it could have spurred us to say the heck of it. We'll just go all the way and make our tool abroad. But the opposite happened. It spurred us into being more resolute and seeking more domestic suppliers and adding even more U.S. content into our tools so that we can, in most of our tools now, we can label them as made in USA. A leatherman is not cheap, right?

You can get a knockoff. You can get another knife that is a knockoff that's made in China or in a cheaper country. How do you make sure that people are, you know, aren't going to those alternatives? Yes, it's true that you can buy a, knockoff of our tool or made in China for $10, whereas a leatherman tool might

be $100. We used to fight the knock-offs. We used to file lawsuits against the importers and the retailers that were selling the knock-offs. It really wasn't possible to go after the manufacturers in China. And we were quite successful in those lawsuits for

quite a few years. And of course, our labor costs are higher here in Portland. But We do have some advantages. We sweat the details. I think it was Mr. Sears of Sears and Roebuck long ago said quality is remembered long after price is forgotten. I mean, I know that lots of people have stories of the Leatherman, right? Because it's one of those things that you bring with you for the eventuality when something will go wrong.

And you need a fake set. Right. We get testimonials of the Leatherman Tool saving lives. We get testimonials from Leatherman tools from a couple of soldiers who've said the Leatherman tool has stopped a bullet. We've received testimonials of a leatherman tool being used as a surgical instrument, saving a life in an emergency. We have many testimonials of a leatherman tool being used to rescue someone out of a burning vehicle. There's another one out of a fallen helicopter. There's many, many, many different markets where everyone finds the leatherman tool to be of great value.

You were really just every year growing, growing, growing, growing. And I think, you know, around 1999, your sales really. over $100 million. You're a private company, so you don't reveal your numbers. But that was reported at the time. And then next three, four years, sales dropped 20, 30%. What was going on? What happened?

What happened around 1999? 9-11. Oh, 2001, 9-11. Yes. And 9-11 had a huge impact on sales? Yes. Because people couldn't travel with them in their pan bags. Yes, they were still carrying him when they got to the airport.

and they, as to use the euphemism that the TSA was using, is that they were voluntarily abandoned. Which meant that people had to leave them at the airport, these $70 knives. Right. Well, we thought that the people that lost their tool would go out and buy another one. Buy another one. So I wouldn't hurt business at all. But it turned out that, well, maybe some of them did buy another one,

but then they stopped wearing it because they were afraid that if they went the airport again that they would forgotten they still have it and they'd lose it again. Right, because it comes with a leather holster that you put your belt in through. So then they stopped carrying them. They stopped using them. Other people

didn't see them using it and we lost that word of mouth advertising that was so valuable to us. So, all right, so really people were not buying them. And you had to get to do laughs

in 2002, I think, right? I mean, your sales were dropped off considerably to the point where you actually had to let people go. That's one of the down points of my Leatherment journey. That was really, really hard. But you had no choice. Really, we had no choice. It was, you have to, it's better to have most employees employed rather than have no employees employed. Yeah.

How did the company turn around from that low point? What was it just the economy bounce back? Or was it a more methodical, like new product line, new strategic approach? We bounced around in that low nine-figure revenue number for quite a few years. In the last few years, we've been able to introduce some new products. We've been able to take a little bit better control of the market. And after the pandemic, kit, we thought we'll never sell another tool. We did make a few adjustments. Then a few months

later, a couple of months later, we started getting orders again. And by the end of 2020, we had had our third best year in our history. Wow. Wow. And this year, we project we'll have our best revenue year ever in our history. Wow. You stayed on as CEO until 2005. when you decide to step down, I guess, and kind of change your role at the company and become the chairman of the board. Were you just at that point burned out? Were you kind of done with the day to day? By that point, I was a bit tired. Earlier on, I had set the criteria for my leadership of the country.

company, two criteria, one that the job remained fun, and the other that I be an asset, not a hindrance. And all those many years from the garage, even, but from 1983 to 2005, the job was fun. But near the end, it was fun most days, but not every day. And also, when I would go home at night and Joe had asked me, what did you do today? So often my answer was, I processed paper. And there was one other factor, but at that point I was 57 years old in calendar years. But in terms of all the hours I'd put in all those previous years, I was 67 years old in work years. And I thought I had earned the right to be able to cut back a little bit. Wow. I read that in 2019.

Actually, heard you in an interview. You said you were making about 8,000 tools a day. Yes. Are you making more now? Yes. So that... Or you're selling about 8,000 tools a day. Yeah, so that 2 million tools a year is now closer to 3 million tools a year.

Wow. I know you don't reveal your revenue, but it's not hard to do the math. I mean, it's... Yeah, I've admitted, I'm quite willing to admit because it is pretty well publicized that were in the very low nine figures of revenue. I'm quite proud that about 30% of those sales are export sales. And for an American company, 30% of sales being international is pretty good. So, Tim, when you think about the journey you've gone on, right, you know, this is this kind of crazy story.

I mean, we're toiling away on this thing that nobody wanted. And you're kind of like, you know, every reason, to question why you were doing this. And everybody had a reason to question why you're doing this because it was not rational. This was not selling, you were not making a product people seem to want because you weren't getting confirmation from the market, and yet you persisted.

And it's a 100 plus million dollar company today. How much of this story do you think has to do with just your hard work and persistence and smarts? And how much do you think it has to do with luck? I think that it's around 10% luck and about 90% pluck. I've persevered. I've worked hard. I've had great people working with me.

Obviously, I'm privileged to, born into a life of privilege in the United States and growing up in a middle-class household. I've been so many places in the world where life is not nearly as good. as I've had it. There have been things in life where I've beaten the odds, the fact that Leatherman Tool became successful of products that are patented. I've read that only about 5% of or less of products that are patented to get on the market. So I feel like I've been a lucky person. I've never bought a lottery ticket because I feel like I've already beaten the odds. And it's not going to happen again. That's Tim Leatherman, founder, owner, and chairman of the board at Leatherman Tool Group.

These days, Tim describes himself as a very engaged part-time employee. But he's also spent the past few years becoming quite an accomplished pickleball player. In fact, in 2019, Tim won the national silver medal in doubles in his age group. But that silver medal was in an ancient age category at a middling, skill level. Oh, you're just being modest. It was the 70 plus division. Yes. That's still national pickleball championships. It's actually led to a new entrepreneurial spark in me. Oh, really? I've come up with a product that I think many pickleball players will love. A pickleball multi-purpose tool? No, I'm not a liberty to disclose it entirely.

I'm thinking you could combine, like a portmanteau of the Leatherman and a pickleball paddle like a Chinese fan that folds, and then you unfold it and then like the Leatherman, but then you've got the pickleball paddle. Good job of trying to scuff out what it is. Hey, thanks so much for listening to the show this week. Please do follow us on your podcast app so you always have the latest episode downloaded. If you want to contact us, our email address is hibt at npr.org. If you want to follow us on Twitter, our account is at How I Built This and mine is at Guy Raz.

Our Instagram account is at How I Built This NPR and mine is at guy.org. This episode was produced by Carrie Thompson with music composed by Ramtin Arablewe. It was edited by Neva Grant with research help from Catherine Seifer. Our production staff also includes Casey Herman, Liz Metzger, Farah Safari, J.C. Howard, Elaine Coates, and Julia Carney. Our intern is Margaret Serino. Jeff Rogers is our executive producer. I'm Guy Raz and you've been listening to How I Built This. This is NPR.