How I Built This with Guy Raz - Taylor Guitars: Kurt Listug and Bob Taylor. From $3,700 Shop to Global Icon

Episode Date: January 26, 2026

A bright blue guitar covered in orange koi fish vanished from a museum display … and Swifties immediately knew what it meant.That distinctive guitar—the one Taylor Swift used to record Speak Now—had been a gift. Hand crafted, by the founders of Taylor Guitars. When she brought it back on stage during her Eras tour, the fans went wild.In this episode, Bob Taylor and Kurt Listug tell the unlikely story behind one of the world’s most respected acoustic guitar brands—how it grew from a tiny San Diego repair shop doing $30,000/year into a global business with nine-figure revenue. And how it survived every challenge that should’ve ended it: a distributor deal that didn’t add up, a brutal market crash in the disco era, and such slow growth that—five years into the business—the founders could barely pay themselves a salary ($15/week).It’s a story about serendipity, obsession, and the quiet power of a partnership where each person knows their lane—Bob with relentless craftsmanship, Kurt with the discipline to turn it into a massive business.Plus: the purple 12-string featured in Prince’s “Raspberry Beret” … the MTV Unplugged boom that boosted the business … and why the founders eventually chose to convert the business to 100% employee ownership.What you’ll learn:The operating principle that changed Taylor’s production: one finished guitar beats 10 half-finished onesHow to make a slow-growth business survivable (and why Bob saw it as “education”)How to recognize a bad distribution dealThe design innovations that drew musicians to Taylor guitarsWhy Bob got a call from Taylor Swift’s dad when she was 14—and the iconic guitar her fans grew to loveHow the business managed demand shocks during COVIDWhy an ESOP can be a founder’s best “succession plan” decisionWhat a great partnership looks like in practiceTimestamps:(Timecodes are approximate and may shift depending on platform.)00:06:39 – The high school moment: “I didn’t have $175 … so I thought, I’ll just make a guitar.”00:07:14 – The American Dream shop: the hippie setup that became a launchpad00:10:20 – The “baseball bat neck” problem with guitars—and Bob’s happy-accident innovation00:11:59 – Buying the shop for $3,700 … then realizing it didn’t include the name (or phone number)00:22:31 – The sentence that changed everything: “Would you rather have 10 half-done guitars or one done guitar?”00:26:28 – The distributor deal that ended in layoffs: good sell job, bad math, and what they learned00:38:30 – Buying out the third partner: why the business doubled when “the brakes were off”00:59:52 – Before Taylor Swift was Taylor Swift: a phone call from a proud dad, and a promotional concert that almost went unheard01:09:36 – The inflation economics of guitar building***Hey—want to be a guest on HIBT?If you’re building a business, why not get advice from some of the greatest entrepreneurs on Earth?Every Thursday on the HIBT Advice Line, a previous HIBT guest helps new entrepreneurs work through the challenges they’re facing right now. Advice that’s smart, actionable, and absolutely free.Just call 1-800-433-1298, leave a message, and you may soon get guidance from someone who started where you did, and went on to build something massive.So—give us a call. We can’t wait to hear what you’re working on.***This episode was produced by Alex Cheng with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Rommel Wood. Our engineers were Patrick Murray and Maggie Luthar.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. 8 years in, I would have been like, what is going on? We've barely grown in eight years. We're still struggling. Yeah, somewhere around six years. Maybe it was five. I sat down

with Kurt and Steve, and I said, we have a bad habit of not paying ourselves. I want a paycheck every single Friday, and I don't even care what that paycheck is. So we did our homework, and we decided we can pay ourselves every Friday, and that number was $15.15 a week. It's like, I want my $15. I want it. Gosh darn it, I worked two days a day for a week, and I want my $15. Welcome to 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 Bob Taylor and Kurt Liston pulled their money to buy a tiny guitar shop in San Diego and built one of the most popular acoustic guitar brands in the

world, Taylor guitars. One of the surprises Taylor Swift pulled off during her ERA's tour was to play an old guitar that for many of her fans was instantly recognizable. It's painted bright blue and decorated with orange coyfish swimming around the center and down the fretboard. That guitar is so distinctive that for a time it was on display at the Country Music Hall of Fame. It was the guitar Taylor used to record her album, Speak Now. But when it quietly disappeared from its display case right before the ERA's tour launched, Swifties had a hunch that Taylor would bring it out on stage, and when she did, it was a big deal.

especially for today's guests, because they made that guitar and gave it to her as a gift. And as you will hear, the connection between Taylor Swift and Taylor guitars, no relation, by the way, goes way back. Back before stadiums, before sold out tours, before most people knew who Taylor Swift was. And we'll get there. My guest today, Kurt Lestug and Bob Taylor co-founded Taylor guitars in the 1970s. The company grew out of a tiny guitar repair shop in San Diego into one of the most respected acoustic guitar brands in the world, right up there with Martin and Gibson. The brand really took off, at least initially, with the people who mattered most, serious musicians, the kind to obsess over tone and balance and how a guitar feels in your hands. Today, Taylor Guitar is a global company with revenue well into the nine figures, but in the beginning, growth was slow.

painfully slow. When Bob Taylor and Kurt Listug started the business in the mid-1970s, every guitar was made by hand. Sales came mostly through word of mouth. It took years just to gain traction. And like fashion and food, the guitar business is also shaped by trends. When Taylor guitars started, disco and new wave were on the rise. And acoustic guitar songs were considered boring and old-fashioned. But Taylor guitars adapted, experimenting with new designs, new manufacturing techniques, and eventually electronics that made acoustic guitars easier to amplify on stage. Through all of it, one thing stayed remarkably steady, the partnership between the co-founders. Bob focused on guitar design and innovation. Kurt ran the

business side. We'll hear from Kurt in a minute, but first to Bob, who grew up mostly in San Diego. His family moved there when he was a kid, and from early on, he was a tinkerer and a builder. And as a boy, he was also getting interested in music. I started when I was in third or fourth grade. I bought a guitar for three bucks from the kid across the street. And I was in shop classes, metal shop, in my junior high. Casting aluminum in sand castings after making wooden patterns. I was operating a lathe, 11th grade.

Two weeks into it, I had seen a guitar that I wanted to buy at a store. It cost $175. I didn't have that money, so I thought, well, heck, I'll just make a guitar. So I went over to the wood shop and asked the teacher if I could join late. And I made my first guitar there. And I think you continued to make a few more guitars in high school. And I guess it was around the time you discovered this little guitar shop in a suburb of San Diego called The American Dream. And I think they mainly did repairs or maybe they sold some supplies.

but they also made custom guitars, and I guess it was run by this guy, Sam Ratting? Yeah, it was kind of a hippie setup. If someone imagines a hair salon, that's how the business was working. He owned it. You got a bench there like a hairdresser would get a chair, and I saw that little shop, 1,500 square feet of space. And so after high school, I went there and showed him the guitars I made

and wiggled my way into having a bench there. And it was a dream come true to me. Yeah. And so basically, you finished high school, 1973, you get a job at American Dream, specifically to build custom guitars for people who wanted to buy them. That's right. And it was pretty crude. There were actually very few people that were making guitars on a small scale.

Now, if you went to Spain, there's a guitar maker on every single corner, hundreds, thousands of them. But in the U.S., it wasn't a thing. Now, a lot of those people had burgeoning hippies that were starting to repair guitars and maybe make one, but all guitars were not handmade. Got it. Okay. I want to bring, I want to bring you and Kurt, because meanwhile, you also grew up nearby in San Diego. Yeah.

And from what I understand, you were a little bit of a hippie. I've seen a photo of you with, like, super long hair. And you were also getting, really getting into music at the time. and eventually, I guess you end up dropping out of college and getting a job at the American Dream too, right? Around the same time that Bob started there. Yeah, I grew up playing the piano. I just loved music.

You know, I absolutely loved music, and the opportunity to do something with music was exciting to me. And yeah, Bob came around the same time. It was August of 1973. And he stood out very quickly from everyone else with his talent and his ability to get things done. and he had a really good work ethic.

He wasn't just like hanging out to hang out and do a little bit of work like some of the other people. Or like me for that example, I wasn't that good at it. I think, Bob, you were 18 and Kurt, I think you were 21 or 22 when you guys were there. And, I mean, you were so young. So I have to assume that at the time, neither of you guys had big ambitions. Probably you were thinking, this is cool. I'm working at a guitar shop and I'm earning a paycheck. Yeah, I wanted to do something that had to do with music and the arts.

I didn't want to be behind a desk. Yeah. I still feel the same way today. Right. Right. All right. So the first year, 73, the both of you were working there. And I guess, Bob, I mean, you start to experiment with, like, different methods or techniques

of making, particularly the neck of the guitar. Explain what an acoustic guitar neck was at the time and what you started to do. The guitars that were available at that. at that time were kind of hard to play. They had a lot of tension on them being steel strings, so the necks were fat, big fat necks to try and make them strong. Not the width of the neck, the thickness of it. Yeah, just the thickness of it. The guitar players in those days started calling them baseball bat necks. You know, I mean, they were round and thick. Right. So if you had a small hand, it was hard to play guitar at that

time? Yes. And a lot of what I did was happy accident. Ignorance is bliss. man. If you don't know, if someone doesn't come up and tell you, this is how a guitar is supposed to be made, you make the guitar the way you think maybe it should be made. And for me, well, the first guitar I made it, the American Dream, I just kept shaving the wood off until it felt comfortable in my hand. And people were amazed. I made the neck slimmer. And then put it in people's hands and they're like, I love this. It feels like an electric guitar, which had slimmer necks and lower strings and easier to play. Basically, you shaved the wood down on the neck to make it easier to grip with your hand? Exactly. And I put the strings lower to the fretboards so they were easier to push down. So go back to those days, you have your early rock and roll bands and everything that's happening in Laurel Canyon and West Coast country rock music being developed. And people are playing electric guitars and acoustic guitars were being played down south, back east, and bluegrass and fiscass and fiscarves. folk music, and I made a guitar that electric guitar players loved because they could play it. Right. But you were, I mean, this was a small guitar shop in a suburb outside of San Diego,

and you come up with this idea, and it doesn't, it's not like all of a sudden like, Nirvana revolutionizes guitars. Like, it would take a while for people to see this innovation. And so I'm assuming at the time the people around you weren't like, oh my God, Bob, you have changed guitars, right? They were just like, oh, this is great. Yeah. To put in perspective guy, the American Dream did $30,000 a year in sales. So it was like a little speck. So, you know, Bob making a guitar with a neck that's more comfortable. Who's even going to know about it, just the few people that come in or the person he made the guitar for? Yeah. So this was a, this was a very small shop, probably the owner of the shop, Sam Redding,

well, from what I've read, it wasn't doing great. And I guess he decides in 1974 he wants to just move on. And he goes to his employees, including you guys, and says, hey, I want to sell it. Anybody interested in buying my shop? Do you guys remember how? I mean, did you both of you immediately put up your hands and say, we want it? Well, Sam called a little meeting. And I was interested along with my friend.

that I'd grown up with. And Bob was interested, too. And we each put together a little plan. And then I talked, I spoke with my dad and said, hey, would you, would you a mom consider loaning me the money so that we could do this to buy Sam? Sam wanted, I think, $3,700 for the business. Was that, said, that seems to me to be really low. Was that, was that a lot of money in 1974? I'm just, because he was doing $30,000 in sales a year. Was that a lot, $3,700? Well, it's a different world now, too, in terms of finance and values and all that. But his ambitions weren't to grow a business or make a lot of money. He just wanted to work on guitars. That's what he liked. He wanted some of us to continue it on. And you would take over the lease of the space.

Yep. Okay. So $3,700 was to buy the name of the business and his tools and equipment. I mean, when you heard that price, was that something that you guys could do easily? Not easily. We had to borrow the money from our folks, but actually we didn't find out until after we bought it that it didn't include the name. Did not include the name, okay. Yeah, we found out as soon as we signed the papers that we weren't getting the name, and then we weren't going to have the phone number that we'd counted on either. Because that was Sam, the owner's personal phone number. His brother, actually.

Oh, his brother's number, okay. Yeah. So you have, you would not get the phone number, which was critical. critical at the time because that was how people yellow pages, right? Totally. So, Kurt, how did you get the money? Both of you guys, I guess, went to your parents. What did your parents?

I mean, you were, you said to your parents, hey, I want to buy this guitar shop. And they said, what? Well, I asked them if they consider learning me the money. And my dad said, well, who's the best guitar maker there? Which is pretty smart of him. And I said, well, that would be Bob Taylor. He said, well, if Bob Taylor will join you and your friend and be a partner, your mother and I would consider it. So we actually put together $10,000 altogether

between the other partner, Bob, and myself. And we bought it, and the rest of the money was our working capital. The other partner was Steve, is it Schemmer? Schemmer, yeah, someone I'd grown up with. Okay. And you take over the shop October 15th, 1974, and it's doing about 30,000 sales a year. So it's, you know, tough business, but I'm assuming you guys are thinking of what. ways to maybe generate more revenue. The first challenge is that you don't get the name, American Dream. So you had to come up with a new name for what you were going to call it. Tell me about how you eventually landed on Bob's name, Kurt. I mean, how did, why did you guys decide to name it after Bob? Well, we actually didn't at first. We thought, okay, we're going to sell parts, and we

want to distribute mother-pull inlays and we want to do repair work and we want to make guitars and we want to do all those things and we want to grow it into a big company so we need a name that sounds like we're big so we decided to call ourselves westland music company westland music company yeah like like biggest in the west you know then a few years into it when we realized our future was really in in making and selling guitars and bob was really the talent then we, you know, we decided to call the guitars, Taylor guitars, and we added a little tailor underneath the neck on the little logo we had. But you could have called it, Lista guitars, or your other partner, Schemmer.

But why, I mean, Bob was the guitar maker, so now, of course, it makes sense. He's the talent, yeah, he's the talent. It's also a great name for a guitar. Yeah. It's as good a name as Martin, as a good, solid American name. Guy, let me ask you, would you like to buy a Schumer guitar? A Lista guitar or a Taylor guitar. Let me just ask you.

Good question. All right. So let's talk about division of labor now. It's 1974. Now you guys are running your own shop. Clearly, Bob, you had the best skills to make the guitars. What was your role going to be, Kurt? Were you going to focus on, like, business operations more?

Or were you also going to make guitars and what was Steve going to do? How did you start to talk about who was going to do what? Well, Steve was doing finish. work, so he continued doing finish work. Finish work means he would do the sanding or the lacquering or... Lackering. Got it. And I was working on Bob Tommy how to build guitar bodies.

I wanted to work on business. Not that I knew anything about business, but it was what I was interested in. But, you know, the only way we could hopefully make any kind of living was to do the work that was there to be done, which is work on guitars. Yeah. We were serious about that, too. We kept time cards, believe it or not. And every day, Kurt, Steve, and I filled out our time sheets. And it was just the three of you initially? Or did you have employees? Just the three of us initially. Well, there was employees, then no employees than employees. I'd gone to the small business administration, read a bunch of pamphlets, read a bunch of books.

And I came to the conclusion that actually we should actually employ everyone rather than, you know, their commission when they finish work by the end of that year. So having to pay everybody every week, you know, two and a half months later, we were out of money. Right. Okay. So you, what were some of the things you decided to do to try and salvage this business? because you were doing repair work, you were selling parts, and you were also making custom guitars. Well, we didn't have any sales other than the few people coming in the door,

so we'd make a few guitars, we'd hang them on the wall. I would try to figure out how to advertise them. I'd run little ads like in the Daily Aztec, the newspaper for San Diego State. Try flyers. I mean, anything we could think of to try to get the word out to gain customers. Yeah, so two years into it, That's when what we decided to do, we're going to focus on making guitars, forget all these other things we're trying to do.

Stop doing repair work. Stop doing parts. Stop it all. Yeah. But that was bringing in money, right? Yeah, well, it's one of those strategic decisions you make because people would come by and hang out. You know, and we couldn't get any work done if people would come by and hang out on the couch and that sort of thing. So we decided, well, okay, we're going to stop doing repair work and we're going to shut the door.

and lock it and focus on the work in front of us. Was that a hard decision to make? Because it's like, I imagine the repair work was constant revenue. Even though the money from guitar sales was bigger, you probably still needed the cash coming in from repair. So shutting that part of your business down would have meant, at least for some time, you would have had less money coming in. Right.

Well, the money we'd get from guitars was potentially greater. That's what we had to look at. What was our future going to be? Bob was talented. We made guitars that people liked. Bob and I thought that was the future. Steve felt a little differently about it, and that's one of the disagreements we had. We figured out that the real future would be to wholesale our guitars to music stores. Did you guys, Bob, I'm curious. Let's take me back to 1975, right? Because from what I understand, the ambition was let's make 10 guitars, you know, a month or something like that initially.

right? That's exactly what we thought. But at that time, I read that it would take you about two months to build six guitar. So just help me understand, like why, again, and some people listening are going to be like, Guy, you're an idiot. What do you mean? Why are you asking this question? But why would it take so long to build a guitar? They're very hard to build. They resist. Guitars resist the attempt to be made at every corner. Because you're bending wood, literally. Well, yes, and the humidity changes, and so the size of the part changes, and you put the finish on, and it wants to fall off, and everything is going wrong with everything. And, you know, sometimes I say, if you were an engineering student and your task for your master's thesis was to design something that wants to fall apart, just design a guitar. Right. I try and make 10 in a month, and four of them would get ruined somewhere along the way, and I struggled and struggled to try and make it better every day. I literally would work two days a day. The first day was guitar making, and then the second day, the evening shift,

was making some kind of tool so that the next time I did that job, it was a little bit easier. That tool could have been a stick with two marks on it, so I didn't have to get a tape measure out every time and remember the length of something. Or it could have been a little pattern that I could draw on or some jig that fits on a table saw to put fret slots where they're supposed to be. One little brick at a time, you make something so that it wasn't groundhogs every day for me. I love that idea. You did two days of work every day. Guy, do you mind if I back up just a little bit and tell a story? So we were making these 10 guitars in a batch, and we're not getting anywhere at the end of a couple. When you say in a batch, it's like you make

one part of the guitar at a time, and then you would put them all together at the same time? Yeah, we would bend sides for 10 guitars, brace tops for 10 guitars, then move all 10 to the next step. And the idea being, while I have my bench set up to do this work, I want to do a bunch of it because it's going to be more efficient. And I met an older gentleman that made guitars one at a time. He would start a guitar, and then a couple days later he'd start another guitar. He had this little miniature one-man assembly line to where every couple days, a guitar would come off the line, another guitar would get started, and five or ten guitars would all move a step forward, and I'd say, well, okay, you want to make the bridge for the guitar?

How many bridges do you make? He goes, well, if I need one, I make one. I go, you don't make 10? I don't need 10. I need one. Yeah, but Augie, you know, when I make a bridge, I set up, and I make all of those, I get almost nine of them for free. And he just looked at me and he said, Bob, what would you rather have, 10, half-done guitars or one done guitar? And that changed my life. It changed how you start to make guitars. It changed everything about our company. Changed everything.

I couldn't wait to get home and just walking the door and go, we're making one guitar at a time. That's our cars are made. Same thing. Exactly. They moved down the line. And we've run our company that way. That's how I learned about working capital. That's how I learned about just in time.

That's how I learned about, you know, cash flow. So that made all the difference for us. It was a huge, huge thing. Yeah. And, Kurt, you were, you sort of become the public face of this thing of, like, selling them and going store to store. Before you tell me about trying to sell these guitars to guitar shops, what was it about them? Like, what was your sales pitch to people when you were trying to explain why they should, why a guitar store should. buy these acoustic guitars.

Wasn't so much a sales pitch. You know, for me, one reason I wanted to learn to sell them was because, you know, it's fairly quiet and withdrawn, and I thought that's a really good challenge. And we won't be able to make it succeed as a business unless I learn how to do that. And I found out it's actually pretty easy because if you go to take a guitar and do a guitar store, there people working there play guitar. They don't want to hear me play guitar. they want to check it out and play it for themselves.

So, all right. So you, I read that your first full year in business was really challenging. And your second full year in business was also pretty challenging. I mean, you were, Kurt, you were having success selling these guitars. I think you went up to L.A., but it was like 30, 40 guitars total that you would sell over time, right? And so once you got paid, it wasn't much money, right? We didn't get paid No

Well yeah Some of those early trips were Were pretty exciting Because I got leads on stores To call on, went to L.A., Shut them guitars They were receptive I came back with checks

Three or four checks on that trip I couldn't believe it And how much was a guitar Like how much would a store Buy a guitar One of those guitars for? Yeah you'd get $300 and something dollars

For that company $300 you guys would get For a guitar I think I came home With $1,800-something dollars that day And you know Guys, some of the dealers

would buy them just to kind of take pity on me or us just to kind of help us out. You know, like, okay, here's some young guys trying. You know, I'll buy a guitar and maybe that'll help you pay the rent this month, that sort of a thing. But, I mean, you would spend a month or more building one guitar and it would sell for, you could make 300 bucks. Yeah, it wasn't a very good financial model. Yeah, I mean, even when you adjust for inflation, right? All right. So you, the business that you've got is struggling.

And I guess around this time, you're approached by these two brothers, the Rothschilds, who are making, they've got a company called Ross Child's musical instruments. And they have an idea for how to help scale your business. What is the, who were these guys and what was the pitch they made to you? Okay. So, you know, our challenge at the time was getting out and showing our guitars to more music stores because we needed more dealers. And they came down as Paul Rothschild and his brother, Edward. And what they were doing was approaching small brands that didn't have distribution that made nice stuff. Only guitars are all instruments. Guitar, audio equipment too, you know, that was related. And they were putting together Salesforce and they were going to call on music stars nationwide. And then they would distribute them. Exactly.

Yeah, they'd buy it wholesale and they'd distribute them. And Paul had been a record producer. He'd produced all the Doors albums and, you know, Janice Joplin. Yeah, this guy was like kind of like, kind of, like, legendary, right? Yeah. I read about it. Janice Joplin, he produced Crosby, Sills, and Nash. Totally, yeah. He's coming with, like, a lot of credibility, presumably, you're thinking, wow, these guys are the real deal. Yep, yep, totally. But they were exclusive. You could not sell them anywhere else. They would buy everything from you. Correct. And their pitch was that,

hey, fellas, you make great guitars, we checked them out in the stores, we think they're underpriced, we think they can sell for more, we think we can buy them from you for the same price you're getting now, and we'll just, we'll be selling them at a higher price and, you know, the whole thing will work. And we found out quickly enough that it didn't work. We got a lot of orders at first because they had to outfit themselves with sales samples for their eight or ten salesmen that they had around the United States. And at one point, we had to come out with a less expensive guitar for them. And we were selling a guitar to them for $150 is how much money we would get. And I always say, that's when I figured out not to make love

to every guitar that I'm building. I'm production-minded. I like to get it done and come out with a good guitar, you know, at the end. And the amount of time that you stroke it isn't the key factor there. So if they were selling, they were giving you $150 for a guitar, and they were probably selling it for maybe 300, and then the shop was selling it for maybe, what, 500? 600, and then discounting it 30 or 40 percent, and, you know, it's a whole matrix out there. So you were, I mean, so I have to assume that you were getting paid less, but were you selling more guitars? Was the math making sense? No. The math wasn't making sense, but our name was getting out there and hope rings eternal.

You know, we weren't as bad as the watermelon truck that lost money on every watermelon, so he thought he needs a bigger truck. You know, we had more sense than that. Not a lot. Not a lot. But we figured maybe one day we would reach a crossing point, a nexus, where it could start to work. So we still didn't pay ourselves a salary. We lived for free with family.

We did all of that. And it was some time before we paid ourselves money. You know, you'd mention that when you'd mention that when you were, bought this business in 1974, it was doing about 30 grand a year in sales, were you able to substantially increase revenue by 1978, four years in? A little bit. Sometimes we have to think ahead to be able to think backwards. So eight years into it, we were doing about $120, $120, $120,000, $130,000 worth of business. So if you back to put context, we had started by ourselves. We did two years, with Rothschild, we quit doing business with them. So we were on our own by the time that had.

It took us eight years to get up to that over $100,000. Which is really slow growth. And you know what I thought about that guy? I'll just say right now, it was taking forever. And I just said, this is my education. There are people in college right now studying to be an architect, and they're paying money for five years to learn how to do that. They're going to be a doctor. they're going into debt and they're going to come out of it eight years later. So how's that different for me? Why do I think that as a 19 year old I'm worth money? I'm not worth money. And did you really, I mean, that to me seems very precocious. I don't think I would have been that optimistic. I mean, eight years in, I would have been like, what is going on? We've barely

grown in eight years. We're still struggling. You really thought that way that, hey, you know what? This is like an education, a free education. Yeah, and the other way I thought is somewhere around six years, maybe it was five. I sat down with Kurt and Steve and I said, we have a bad habit of not paying ourselves. I want a paycheck every single Friday, and we need to remove the things that keep us from having that paycheck. And I don't even care what that paycheck is, but we have to develop that habit. And so we did our homework, and we decided we can pay ourselves every Friday, and that number was $15.15 bucks a week. It's like, I want my 15 bucks. I want it. Gosh darn it, I worked

two days a day for a week and I want my 15 bucks. When we come back in just a moment, a purple Taylor guitar shows up front and center on one of the most popular songs of 1985. 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 1979, five years into the business, and Kurt Bob and the partner Steve have ended their relationship with their one distributor. And they have to lay off the small group of guitar makers that were working for them. But meanwhile, the business is actually not doing so bad. That was actually a really good time because we were making so many guitars. We had all these guitars in process.

We had one of the best summers ever then because it was still the three of us. We just worked on finishing up all those guitars and selling them. And I was calling on all the music stores at Rothschild had opened his dealers. You called the basically that people that they were selling to, and now you were selling direct to them. Exactly, because we'd get the owner registration cards when people and consumers would buy the guitars. So we knew who the dealers were. I read that the last year you worked under this agreement where this company would distribute your guitars. You had 11 people, eight other people helping build the guitars.

That year, you built and sold 448 guitars. It was 1978. The next year, 1979, had to let everybody go. So just the three of you, you built and sold 399 guitars. So actually, your productivity went way up. Bingo. Even with eight fewer people. Well, I was also finishing up guitars that had been started when the guys worked for us.

Yeah, it was. And I'm not sure what it was in next year. But you could see the progression of us getting better. at this. Kirk got better at selling. He got better at his bookkeeping and his finances. I got better at how are we going to make these things at building a little, a little factory. Yeah. I mean, but still, like the other thing I, from what I understand is, this is 1979. This was like a dark, dark period for acoustic guitars. Like the next three, four years, this is the disco era. There's like. like punk, and then there's rock. From what I read, like, people just stopped playing acoustic guitars in the early 80s and late 70s. Well, also, you know, the Saturday Night favorite thing, pre-recorded music, so bands weren't getting gigs like they used to.

And then that led straight into sampling keyboards, you know, synthesizers. Yes, new wave. So, like, 82 was really a low point for the entire guitar industry. I read that even like Martin and Gibson almost went under during that time. I can't speak to that, but their production was very low. Sales were very low, but you can't kill a dead man. And we were so small, we didn't know the difference between not succeeding because we didn't know what we're doing, or not succeeding because the market was low. The market could still take the amount of guitars that we were making.

And we were aggressive out there showing those guitars, people liked it. And then we started putting pickups in our guitars. Pickups allowed you to plug in the acoustic guitar to an amplifier. Yeah, instead of standing in front of a microphone, you could plug it into the PA system. And our guitars started getting used in pop music. We managed to wiggle our way into that by the guitars that we designed. We repeated what was successful, and we managed to survive. And so part of our success is that that bad market,

brought competitors down to our size for a period of time. And we're ready to go when they were ready to go when the market turned around. All right. So about nine years into the business is 1983, I guess you, the two of you offer and then agree to buy Steve, your third partner out. Tell me what was going on with Steve. I know, you know, he's not here to, you know, we're going to be respectful, obviously, but I think there was tension. Was it the two of you versus Steve, or was there tension between the three of you? Tell me what was going on with Steve. Bob and I discovered that we saw things pretty much the same way, and Steve had a different perspective on what he wanted to do and what he felt we should do. And Kurt and I, like, we move fast. We could say,

we have to stop doing this because it's not working and let's do that. And that was very hard for Steve to give up. let's say you're dating somebody and you can never agree on what you want to do or what kind of movie you want to watch. So nothing happens versus you meet somebody and they're like, yeah, let's do that. Or let's go to that concert together. Or let's go do this or let's plan a trip. It's that willingness and agreement. One can stop everything from happening. And the other one, it just leads to getting a lot done.

And was he game to sell his shares to you? Well, not exactly. We had to buy sell agreement. And that really saved you a lot of headaches in 1983 when... Well, yeah, because, you know, if it provided a path for a partner to be bought out or to sell his shares as opposed to having to dissolve the business and sell off the assets. So then I got back from being out on the road and we hired an attorney and to send a letter to Steve. And he got an attorney. And that was a real scary time because we thought, you know, this could be the end of it.

But we had the buy-sell agreement, and we had a good attorney, and we bought out his share. And we went back to our families and borrowed that money after just having a few years earlier paid off the loans from buying the shop in the first place. How substantial was it? I mean, you had to take loans out to pay him. $30,000. Yeah, we'd value the business at $100,000, and Steve owned 30%. So we each borrowed $15,000. Okay.

And that was a lot of money for you guys to pay him. Yeah. A lot of money. So we went into debt again, but we're excited. And then that first year, the business doubled. But what happened? Why? It just felt like the brakes were off. We could decide on things, just run with it, make changes quickly. I see.

I'll give you an example. Yeah. I'm trying to build a factory. We have 1,500 square feet. A bunch of that factory had this part, that thing, these magazines, those stuff left over. and it's like, I'm throwing all this away. I'm going to make room for what our business actually does, which is make guitars.

And then you have a partner who says, oh, no, you're not throwing that away. No, I want that there. We needed to move forward. You can't have somebody standing in the way of that. Yeah. By 1983, 84, so your tenure's in, where were you making the guitars?

Lemon Grove, California in our little shop. Still making them in a little shop? in a little shop. We'd added a little space. Okay, but you were making each guitar. So there was, and presumably there were people that you had to bring on to help you, Bob. But you would have to also train and apprentice everybody, right? I sure did, yeah.

It must have felt kind of overwhelming, right? Because on the one hand, I imagine at this already by the mid-80s, I know word of mouth is getting around. People are getting excited and interested in your guitars. And you're limited in how many you can make because you, Bob, you have to touch every single guitar that is being sold. You have to see it and inspect it, right? Am I right about that? Yeah, I was on the production line for almost 20 years of our business. That must have just been like overwhelming and stressful. Guys, this is my jam. This is what I do. I never stressed me out.

It didn't. Okay. No, it's what I do. Give it to me. Kurt, were you stressed about that, though? I mean, it was one guitar at a time that had to be great. People had expectations. And it was one Bob. He was the guy. Like, if he got hit by a truck, that would have been a problem. Well, that's true when we made decisions early on, too, like not riding motorcycles or things like that.

You did, really? Oh, yeah, you have to. I mean, we'd be out of business if something bad happened. Yeah. I lived a careful life because I thought, if I break my wrist on a little motorcycle fall, we're out of business. Yeah. Fair enough. All right.

I want to talk about what I think could be maybe a pivotal. I don't know. but this happens in 1985, which I think is just so cool. You started to make like specialized guitars. I guess you had a technique where you would use watercolors and you could paint the wood and it would kind of look funky. And it was a way to get the guitars in the hands of more prominent, you know, musicians. And I guess Kurt or Bob, one of you guys wanted to get a guitar in the hands of Prince. Well, we were trying anything and everything to sell guitars.

And part of that was at that time, acoustic guitars were very out of fashion and kind of associated with, you know, hippies and the hippie movement. Granola guitars. Yeah, so we thought, you know, let's try something different. I mean, electric guitars come in a lot of different colors. And then the Prince guitar came about, and I got a call from a salesperson named Glenn. at a music store in Minneapolis, and they serviced Prince.

He got all his gear from him, and they said, you know, Prince was looking for a 12-string. He's tried a few guitars and hadn't found anything he likes, and you guys make killer 12-strings. Would you be willing to make one, but here's the deal? You're going to make something, and it can't say Taylor on it, because he won't play anything. That's an implied endorsement by having the brand name on it.

So every guitar he played had to be custom-made for him without anyone knowing who made it. Yeah, those electric guitars are those weird shapes. Those are custom-made guitars for them. So we talked about it. We decided we're going to make a jimbo 12-string, and it's going to be purple because, you know, that was his color. And it's going to have the same kind of treatment on the top.

Like flames around the sound hole like you put on a hot rod is. Yeah, kind of hot rod is. To describe it. Yeah. So we got the guitar done, and Glenn put it in the green room before a show, and Prince came in and looked at it. loved it and bought it. We made it on spec. And then the cool thing is it led to a relationship with him, you know, over the years. And then he would order guitars from us that said,

Taylor, you know, later on. Is that purple guitar that you made for him, the same one used in the Raspberry Beret video? Yeah. And you know, things like that don't directly impact sales. It's more like an impression and all the impressions add up over time. Okay, I want to stick to the 80s for a moment because I know that by 1988, so this is now, what, 14 years in, you break a million dollars in sales for the first time. Yeah, finally. Finally. Big deal.

Now you're starting to feel some momentum. I mean, from what I gather in 1988 that year that you are doing a million dollars in sales, you're making eight guitars a day. And I hear that, and I'm thinking, so you're selling all those guitars, right? There was demand. Each guitar you were making was basically spoken for? Well, there's always a back and forth between the number we're making and the number we're selling. And really, that's the story of the company is the balance between how many a day we want to make, how many a day we can sell, you know, all the way up till now. And each, I mean, this was not automated.

This was all, it was like table saws and hand saws and lathing machines, like, right? Like every, it was entirely handmade. Yeah, we had a fair amount of specialized cutting tools that I would make. It wasn't until 1989 that we were able to really get modern using computerized cutting machines. Right. In other words, imagine I'm bending a guitar side and I'm doing it over a hot four-inch pipe with a barbecue lighter inside it to make it hot. and I'm steaming and moving and steaming and working. Well, when I'm done, that side, it risks having been broken.

It might not fit in the mold perfectly. Or I can make a machine that's that shape that automatically bends it. It does something in one minute that I do in a half an hour, and it's a better part. And now they're consistent. Yeah. We still have way more people working by hand than we have machines. It's not an automated factory. And if anybody here has ever gone through a car factory, the first step, they're going to be stamping car parts.

And there's not even a person in there. It's all robots. There's one guy in a control room. But by the time they're making seats and dashboards, it's loaded with people, right? Yeah. And it's the same with the guitar. We can make these parts on machines, but we have to put them together by hand. I'm curious, because we're going to get to the 90s in a second here.

But at this time, right, this is still the late 80s, you've broken a million dollars in sales. Compared to Martin, you're still small. I mean, Martin was founded in 1833 or something like that. It's been around for so long. It's an old company. And it's obviously a venerable, widely respected brand. I mean, this is like what Elvis played and Johnny Cash and Bob Dylan. I mean, they played Martin guitars, right?

Hank Williams. So this is a storied brand. Absolutely. And you guys are kind of an upstar brand at this time, even 14 years in. Absolutely. We made it through the disco age. They also made it through the Civil War. Right.

You know what I'm saying? Right. Exactly. Yeah. And they're still family owned. Yeah. And we were doing something different. We were making a different kind of guitar that they didn't make.

Martin was still making a traditional guitar that you played in Bluegrass, music or folk music. So we became symbiotic with a couple styles of music. One was acoustic guitar tracks in pop music. So like when a band like the Gougu Dolls was really popular,

they're all playing acoustic guitars, right? And they're playing our guitars. So we were chasing Martin as far as venerability, as far as brand. But truly, they were starting to actually chase us a little bit because we had the red ball that they wanted and they had the blue ball that we wanted.

But you were definitely looking at them and saying, we have an opportunity here. Okay, so this is the late 80s. And something is going to happen because anybody, I mean, you know, my age or, you know, anybody sort of over 40, let's say now, will have remembered a time when MTV actually was relevant and played videos and music and everybody watched it. In 1989, they launched this thing called MTV Unplugged, which would be unplugged series of concerts. The most legendary one, of course, is Nirvana's MTV Unplugged. And Eric Clapton. And Eric Clapton, sorry, which he had to win Grammys for. And this is going to, even though it wasn't like MTV Unplugged sponsored by Taylor, it was going to bring about a renaissance in acoustic guitars, right? For like all of a sudden acoustic guitars, like the digital guitars, like the did.

disco era was disastrous. This was the opposite. What did the MTV unplugged thing mean for your business? Well, the world changed, and we started growing like crazy. Were you able to get your guitars into the hands of some of those musicians? Yes, we weren't as aggressive as other people have been. Our goal with that artist's relations is to help artists get their music played. we're sort of like the pit crew for them and their race. But getting our guitars into the hands of artists takes going to those shows. You need to be backstage during the MTV Video Awards or the Grammys or those types of things. You have to develop relationships. And we try and honor that relationship.

All right. So I read that in 1990s. You're 16 years in. I guess there was this feeling. You had about 40 employees at the time. And I guess there was this feeling that the two of you had that you didn't have a professional company, that you didn't have a professionalized workforce and that you hired a consultant to kind of help you guys. I don't know if this is the right description, but turn you into like an adult run business. Is that fair to say?

Yeah. Somewhere back then I read that when you have maybe a founder run company, where you're making something, most companies get sold at around 45 or 50 employees. That's when the owner is starting to feel like they're just babysitting all day long. Tell me what do you mean by that? What was the challenge that you would face on a day-to-day basis? You're just, I don't know, employee. Well, you don't really have an HR department, people that decide that they want to make guitars.

They're not really thinking of themselves as a professional guitar maker. they're thinking themselves more as a, hey, this could be a cool job. You know, you go into a department and they're all cutting up or laughing or choking. And I walk in and go, it might be nice if maybe what some of your conversation was about during the day would be how to build guitars, right? And so the problem's not with them, the problems with me, us, our company. We have to learn how to become a good employer. We had to be able offer better benefits.

And so I wanted to get to where I felt like I deserved good employees. I mean, it seems to me that because you guys both got into this business because you wanted a job after high school, right? Like it wasn't like you were any different from the people who were now working for you. You were a couple of guys were like, this sounds like a cool job. But you didn't really begin to care about it until you owned the thing. I'm going to say this. This is for me. I made a commitment early on based on the experience that I had being poorer than a church mouse

for the first five or six years that we made guitars, and no one had ever heard in San Diego of such a thing as even being a guitar maker. They'd say, what do you do? Well, I make guitars. Oh, really, do you do that in your garage? No, I'm trying to build a factory. Oh, how's that working out? I'd be like not very good.

I was embarrassed. So that became a secondary goal. that was every bit as important to me as the quality of the guitar and the market share we had. I wanted people to say, oh, yeah, I worked for that company and I retired from it. It was an incredible career for me. And that's sort of what I felt during that time. Now I want to make this job a career for the people who want it to be a career. When we come back in just a moment, another Taylor enters the picture.

This one, probably the most famous Taylor, in the world. 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 the early 90s and acoustic guitars are becoming popular again. And in a bit to drive growth for Taylor guitars, Kurt launches an ad campaign. One of the ads I've seen, this in the early 90s, it's very unusual. You put these in guitar magazines. And it wasn't even a guitar in the ad. It was a tree. It's a tree and it says, you know, here's a tree. And it says, here's a tree, it's a piece of wood, it can become a coffee table in one pair of hands. And another pair of hands, it can become a sweet sounding guitar.

Right. Some trees have all the luck. Right. Very unusual kind of ad. Tell me about that approach. We were lucky in being approached by a San Diego agency that had some ideas. And it was not focusing on features of the guitars or artists who played them. It was really telling the story about the brand.

and the love of the guitars, that really made an impact on the industry. They were also double-page ads, which people weren't doing. And we had also started a quarterly magazine, which we still do today. Wooden steel, you started this. Yeah, wooden steel, yeah. And that proved to be a good, I'm assuming a good investment, because it doubles as a catalog. Yeah, exactly.

And it grew to over 300,000 circulation, which is bigger than in a guitar magazine. Yeah. In 2002, you broke around on a factory in Tecate in Mexico to increase capacity. And I'm curious, I mean, you know, it's interesting because a lot of people think that inexpensive products from China have been around forever. But it really, they haven't. I mean, in the 90s, it wasn't as common, certainly not in the 80s. There was a shift in the 90s when China became a member of the World Trade Organization. A lot of U.S. companies and other European companies started to move production to China and manufacture in China. Did you guys also start to see a shift in sort of cut rate acoustic guitars coming into the U.S. market from Asia? Absolutely. We saw that shift. We've seen a lot of people copy our guitars, but you pick them up and it's like, this is not a Taylor guitar. All right. I know you're going to say that, but if I don't know anything by guitars, I'm like, hey, I can just get this off Amazon for 80 bucks. You know, I don't care what it's made, but I can get yours for $250 or let's just say I can get one for $200 from Asia

and yours for $250. What is it about your guitar that sounds better? Why would I choose that guitar over a cheap factory-made one and, you know, from China? The most obvious thing you're going to notice is what it is that we excel at and built our company on and that's the playability of the guitar. Go back to the necks, the string height, all of that. We invented that. So people are going to notice that. And then they're going to like the sound. The sounds more vibrant. And that's, in a way, it's hard to copy in a way it's not.

For example, if I try to make a guitar that sounds like a Martin guitar, which sounds different than our guitars, if I try to make that, it always turns out to sound like my guitar. Like your mom's spaghetti, no matter how much she tries, it just keeps tasting like her spaghetti. And then the other part of that is the brand. Kurt built a brand. Our guitars lived up to that brand. and people want to be associated with that brand.

So we do have a little pricing power in that we can make that guitar there. And to me, it's offering those guitars to people that get into the brand. And a lot of times they don't move up from that. That's their guitar for life. It's all the guitar they need. I, there are, I've spent so much time looking to see which guitars are played by which artists I love. And so I'm not going to mention some of them because they don't all. play your guitars, but you have Jason Moraz and Zach Brown, Dave Matthews, Katie Perry,

and most importantly, Taylor Swift. She plays your guitars, not surprisingly, because her name is Taylor. How did that relationship begin? I have to hear the story from the horse's mouth, because this is a big deal. So our receptionist rang my desk, and she said, Bob, I've got a guy on the phone who's called a couple times. When was this? Do you remember what year? I'm going to say Taylor's 35. She was 14, 20 years ago. Okay. First record came out in 2006. It was, I think it's named Taylor Swift. Yeah, okay. So it was just right around then, just kind of just before then.

So, yeah, I picked up the phone. And hi, my name's Scott Swift. I know that every dad thinks their daughter's special, but my daughter really is. and I sent a cassette tape with some of her music on it. He's also calling record companies. He's putting every iron in the fire. But he's calling thinking maybe you guys could also be part of a promotional thing. Absolutely. And so I listen.

It's like, yeah, it's great. Well, we have a trade show coming up. We have a little stage at the trade show. She could play at that trade show. Where was this convention? Anaheim, California. Anaheim. Okay, the convention is there.

So you have Taylor Swift. She comes out sitting on a stool, playing some songs that she wrote. Nobody's in the room. I literally walked out into the foyer all these trade show, and I'm like, guy, do me a favor. Come in here and sit down. I got a girl that's playing. I don't have anyone to listen to her. I don't have a crowd.

Can you please? I'm embarrassed. Can you come see? Her name is Taylor Swift. I need a crowd. Come in. And I'm like, Bob, I don't have time. I'm like going to see Jason Maraz down the road.

I filled that room with people and she plays and people like, wow, she's. She's good. And then the next time she played in our booth was a couple of years later, and it kind of closed down the convention center, just getting her in and out. And then she released her album called Fearless. That was her second album. Yeah, that has a love story on it. I know this because I've seen her in concert. So I went on the air, sir. And it was, yes. She ran a contest in the United States and picked, it was a radio contest. And two winners from every state won. And they all got to bring a guest. And she, She paid for their air flights and their hotels to come out and get a 200-person private concert from her at Taylor Guitars.

In San Diego, in El Cajon. Yeah, in our factory here in El Cajon. And so she had her album release here at the factory. We set up a chance. We've had a pretty close relationship with her for all that time. She also has split her guitar playing between Taylor guitars and Gibson guitars, so she uses those. now too. We are the first and the longest, so a lot of people just think of her as playing Taylor guitars. Okay, respect Gibson, too, but her most famous guitar, which she brought on stage

during this last tour, I think is the guitar a coy fish guitar you guys made for her? Well, what happened is we started a, we started a series called The Gallery Series. And the first guitar I made, I named it Living Jewels, and I had coy fish swimming around. it and we had this relationship with Taylor and her birthday is just before Christmas and I took that guitar out and sent it to her for her 18th birthday slash Christmas present and she loved that guitar. I remember she called me on Christmas morning but she played that guitar and she put it in the country music Hall of Fame in her display and then it disappeared out of there before the heiress tour and all of her fans you know started online talking about what happened to

of that coy fish guitar. What happened to the coy fish guitar? It's not there anymore. I wonder if she's going to bring it out. And her dad actually wrote me on the first concert when she brought it out and sent me a little video of just people going nuts when she pulled that guitar. Because her fans follow every move she makes. All of these tiny little like factoids and nuances, they know everything. It was crazy. Yeah, they know the Kansas City Chiefs now too. Yeah, exactly. You know? Exactly. In all the stats, they're playing fantasy football. Yeah, exactly. Yeah. Yeah, she's a force that truer words were never spoken than the words that Scott Swift said to me on the phone that day, which is every dad thinks their daughter's special, but mine really is.

Yeah, she is. You know, I'm curious. There's so many questions I have about guitars, right? Because it's not, it's not like a subscription. It's like diapers where you're buying them every week, right? Or, you know, or shaving cream, right? It's a product that most people probably buy once. Obviously, if you're a very good guitarist, you might buy a few guitars, maybe more than that. But most people will buy one guitar. And the other thing is, to what extent does this industry just depend on cyclical trend? Is it cyclical? I mean, we've talked about the disco era, the MTV unplugged era. I mean, it seems like there's things that are out of your control, that they're just going to be periods of time where people aren't interested.

in acoustic guitars and when they are interested in acoustic guitars. Or am I wrong about that? You're right about that. Yeah, I think that's true. Also, you know, if people get into guitar, they buy more guitars. And we call that gas. That's an acronym for guitar acquisition syndrome, where they're buying and selling guitars. I got this one, I got that one, they're looking for the new one. So there's that hobby. And they don't necessarily play well. But you are correct in that if somebody bought one of our full-sized guitars that we make in our Takati Mexico factory, that's really enough guitar to last them their whole entire life. And so we wonder about this too, because, Guy, we make 700-something guitars every day.

Like, where do they even go? You know, sometimes people say, man, I see your guitars everywhere. I go, well, yeah, we've made two million guitars. You're bound to see one. Yeah. Yeah. Yeah, but you're right, Guy. You know, what is the, what's going to happen as the baby boomers who came back to who really grew the guitar market all, get older and die off, our younger people are going to come in and take up the guitar.

Mm-hmm. I know that by the 2000s, I think by 2002, you cleared $50 million in sales. Is there, I mean, I'm jumping ahead for sec here, but in terms of sales now, are most of your sales direct to consumer through your website, or is it still? mainly through retailers. It's through retailers. Yeah, the direct sales is very small. Interesting. So it's almost like running shoes.

Like running stores still have a lot of pull a lot of weight in the running shoe business. It sounds similar to guitars. Like you need to go to the shop and really talk to the people there. But you're saying the majority of your sales by far are still through retailers. Absolutely. By far. When we say the majority, we're not saying 51%. We're saying 90%.

90 plus percent. 90 plus percent. Yeah. You know, the thing about direct sales, even like Nike, you know, I read in the last year how they'd really push their own direct sales. And then they took that so far. And now they're going back and, you know, embracing retailers again. Yes. Except for Hoka got in while they were gone.

Right. Right. Yeah, there's not just one way of doing it. Right. I think Nike's doubling down on wholesale again because they've seen how it's been successful for other brands. I want to ask you about a very anomalous, weird period in the history of Taylor, Guitars, the history of every business versus COVID. And it's interesting, you know, we've done some businesses on this show now over 10 years.

We've done a lot. But there are a few that we've done that were really crushing it during COVID. There's one in particular, I'm not going to mention the name, but they're having some major challenges now because they bought way too much inventory in the post-COVID period thinking that that was the new normal. How did you guys, I know that guitar sales went up like by an order of magnitude during COVID, like crazy numbers. Like you, you guys had your own, you know, fully integrated. You has your own production facilities. What was the demand like for you? And how did you deal with it? A thousand guitars a day. A thousand guitars a day.

Yeah. Yeah. Just like stop and think about that for a second. And we're still recovering from it up and down of COVID. inflation. And you had to hire tons of people probably quickly. Yeah. Yeah, we did. And we were ripping boards off the wall to make guitars out of, you know, and it was good. We knew that it wouldn't last. We tried our very utmost to protect us ourselves. We really tried for a soft landing, and it wasn't exactly that. It was a hard landing. Kurt and his sales team got on the phone and spent four months, canceling from our end, $50 million worth of orders, knowing that those aren't real orders.

They weren't going to be real, no. And if we actually made the guitars and filled the channel with all those guitars, then the retailers were going to have a big problem, and we wouldn't be able to sell guitars because they'd be overloaded. That's what happened with other companies that made too much stuff. Yeah. And you know, the last several years have been at least as hard as any other years going all the way back to the beginning. Why? Because cost just ratcheted way up, but guitars, you can't just raise the

price. What's gone up? I mean, you've got wood, you've got labor. All the labor, all the overhead. Yes, and wood always costs more. The very best day to buy wood is today, because tomorrow it's going to be more. Yeah, because there's less of it. We're doing things about that, but we have to have another show in 35 to 100 years to see how that turned out. Right. You guys have planted all these lots of trees. These trees in Cameroon, but they take like 70 years to mature, right? These ebony trees. Maybe 100. And then also in Hawaii, but we can use that wood in 30 years from now. Coa wood. You know, all our costs are up due to inflation, but that doesn't mean that products that are price sensitive, you can just raise the price to make the same margin that you were. It just doesn't

work that way. You know, I'll just say it here. We go into a taco shop down here by two burritos and two cogs, and you ask yourself, how did I just spend $41? Right. So that's what happened to our profit. That $41 lunch of a couple of burritos, those costs have moved throughout all of society and into our manufacturing process. Yeah, for sure. And I mean, you guys have made some pretty big changes to the business over the past few years. Because I know Kurt, I know you stepped down as CEO, I think in 2022. And then you promoted your head of guitar development, Andy Powers. He became the new CEO. And I'm curious about this other thing you decided to do around that time, which was you created an ESOP. And for people who don't know what it is, it's an employee stock

ownership plan. Cliff Barr did it. New Belgian beer did it. I think like King Arthur Flowers and ESOP company. Bob's Redmill, which means it's employee owned. It really does give the employees, I mean, they have a stake now in the business. They're not just like paid a wage. They actually have real equity in the company. And so they're they're incentivized to increase the value of the company because if the company ever gets sold, I mean, I think when Cliffbar was sold, I don't know how many millionaires were created by that sale to Mondalise. And so all your shares were sold to the employees. They were sold. We're both on the board. We're co-chairs of the board. And I work every day. I still come in all the time. Yeah, we work for free. We work for free.

It was the best choice of all the choices. And I always, one of my sayings is invest in the inevitable. And one thing that's inevitable is I'm going to die. Yep. That's inevitable. And so I'm going to sell this company. My shares of it by accident when I die are on purpose, before that. Unless you're in real estate. Yeah. And so knowing that that's going to happen allows us a chance to do it in the best way. Yeah. When you guys think about the journey you took, you know, how much of where you guys got to today, the success that you have had, do you attribute to the work, the grind, and how much do you think has to do with just luck and good fortune? I want to put that to Kurt to you first.

Luck and good fortune? Well, there's a little bit of that. And it's like it, oh, older. I see more of it. I'm less maybe egocentric about it. For example, we're lucky when we started that there weren't as many guitar brands. And obviously, we've worked very hard. We've kept our relationship from blowing up. Well, I think that we're lucky that we have good enough chemistry and I've been very happy with my partnership with Kurt and the work that we've accomplished together. And I could tell you that right now I could still work, but I can't work like I did then. Yeah. You know, well, you know, maybe I could. I just don't want to. It's nice to be able to take a nap in the afternoon if you want. Yeah.

Bob, I think you are 70 and Kurt maybe you're 72. 73. Yeah. 33. Okay. I mean, I know you're still involved in Taylor, but now you're not operationally involved in the day to day. You've got more time on your hands. hands, what are you doing? Well, I love being here. I want to be here as long as I can. We still have a lot of responsibility here, and make sure things stay on track. I have a car hobby, and my wife is president of her local Bichon Frize Club of San Diego. Wow, the Bichar Frize Club. Yeah, and she, you know, bought this good little dog and trained it, and she's known her

handler, and she's been to the Westminster. competing. Wow. So she's got the leash and the perfect U-shape and she's like walking and the dog is trotting. Exactly. Yeah, the whole deal. She's been there and yeah, the dog has over 70,000 Instagram followers. That dog? That's incredible. Yeah, it's amazing. You're going to put a Taylor guitar in that dog's hands. Pause. That's Kurt Listic and Bob Taylor are co-founders of Taylor guitars. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up

for my newsletter at gairoze.com or on Substack. This episode was produced by Alex Chung with music composed by Ramtinor Ablui. It was edited by Neva Grant with research help from Ramele Wood. Our engineers are Patrick Murray and Maggie Luthar. Our production staff also includes Casey Herman, John Isabella, Sam Paulson, Carrie Thompson, Catherine Seifer, Norigill, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.