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#244 In-N-Out Burger: A Behind-the-Counter Look at the Fast-Food Chain That Breaks All the Rules
1 hours 5 minutes 4 seconds
🇬🇧 English
Speaker 1
00:00
Almost immediately, a boisterous crowd appeared, requiring the presence of police to direct traffic and help with crowd control. There were businessmen in suits, women in heels, truckers in jeans, college students in t-shirts, construction workers in heavy boots, and moms with babies on their hips. They all braved the long lines, enduring waits of more than 2 and 3 hours. Remarkably, the official kickoff was marked with little fanfare.
Speaker 1
00:29
2 workers carried a simple white sign with the familiar In-N-Out logo and the words we are open. There weren't any prizes offered, furry mascots, or any other marketing gimmicks. There was no promotional advertising either, just a small sign that stood on the lot for some time, coming soon In-N-Out Burger. In fact, there was no grand opening.
Speaker 1
00:52
The carnival atmosphere was created entirely by In-N-Out's rabid fans. The chain didn't need to advertise its opening. For weeks, its devotees had been broadcasting the news to 1 another. For 2 years, ever since word had spread that an In-N-Out was coming to their city, the residents had been waiting anxiously.
Speaker 1
01:14
People began lining up at 2 a.m. The day before, some sleeping in their cars overnight. In-N-Out's Vice President of Planning and Development, Carl Van Fleet, assessed the scene with the chain's typical understatement. This is not something that happened overnight.
Speaker 1
01:32
It just grew with us.
Speaker 2
01:34
That is an excerpt from the book that I'm gonna talk to you about today, which is In-N-Out Burger, a behind-the-counter look at the fast food chain that breaks all the rules, and it was written by Stacey Perlman. This book was recommended to me by a listener, and it came at the absolute perfect time. Some of the best businesses in history could be described as cheerful cults.
Speaker 2
01:53
So reading this book, I wanted to read this book to better understand a phenomenon that I've noticed over and over again as I studied the history of entrepreneurship. In fact, on the very front cover of the book, there's a blurb and it says, this is an absorbing case study on how a family business came to be at the center of its own cheerful cult. And so it's important to keep in mind as you and I talk today, we're not talking about cults in like the negative connotation, the most famous examples, people like Jim Jones or like Charles Manson. What I'm trying to figure out as I read this book is like how do you develop a positive, cheerful cult?
Speaker 2
02:25
How can you bring joy to somebody else's life through a product or service? You bring so much joy to somebody's life that they tell others about it compulsively. So that is the definition that we're working with. I'm going to link this below.
Speaker 2
02:39
I'm only going to read parts of it. But this is 1 of the best posts that I've ever come across. It's called Aliens, Jedi, and cults, a mental model for potential. And it was written by this guy named Richard Burton, who was a early employee at Stripe.
Speaker 2
02:54
Stripe, in case you don't know, is probably, I think it's the most valued, valuable private business in the world. It's gonna wind up going public, I think, relatively soon. And his experience as an early employee Allowed him to discover a mental model for potential that he has then applied to other things like Bitcoin Ethereum SpaceX he's got a bunch of other projects and businesses. He lists about 8 in the post.
Speaker 2
03:17
I'm just going to read from the very beginning though. He says, I want to explain some
Speaker 1
03:20
of the experiences that I've had that very few people can relate to. I have been lucky enough to stumble across a few rocket ships before anyone else cared. This has helped me build a mental model for things that have potential.
Speaker 2
03:33
So he starts with Stripe. He says, in 2010, I started a little company selling custom apparel on the internet. I integrated Wufoo, Google Checkout, and PayPal to sell around 100, 000 sweatshirts to students.
Speaker 2
03:43
So he's talking about the problem that you had, you know, 10, 15 years ago, trying to sell things online. You had to patch together a bunch of different products or services. Very difficult. That's the first solution, the first problem that Stripe solved.
Speaker 2
03:56
So it says, in 2012, 2 years later, I read a blog post about a little company called Stripe. I instantly understood the value of what they were doing and decided to apply for a job there. I researched every single person in the company. I learned their names.
Speaker 2
04:10
I read their tweets. I sifted through their blog posts. I was completely focused on getting a job there. When I met John Collison, this is 1 of the co-founders of Stripe, he's going to be referred to as 1 of the Jedi, and I'll get there in a minute.
Speaker 2
04:24
When I met John Collison and we started whiteboarding together, I knew 2 things. This guy is going to be a billionaire, and I'm definitely going to get this job. The short time
Speaker 1
04:32
I spent at Stripe had a profound impact on me. It showed me what was possible when a few brilliant people get together and make something people want. Stripe gave me a mental model for potential, and this is the single most important sentence in
Speaker 2
04:46
the entire post and it's something the reason I I'm reading this use because this this completely resonates with me as I read this post I immediately started filtering it through all the information I've consumed you know between 200 somewhere about 250 biographies of entrepreneurs and this is just fundamentally, it feels fundamentally correct to me. And he says, Stripe gave me a mental model for potential. An alien founder assembles a group of Jedi to start a cult and go on a mission together.
Speaker 2
05:15
Patrick, he's telling us how this applies to Stripe. So Patrick Collison, 1 of
Speaker 1
05:18
the brothers, Patrick is the alien. John, and
Speaker 2
05:22
then you list about 4 or 5 really important either co-founders or very early employees, so John and a list of other people, were some of the Jedi. The developers raving about Stripe formed the cult. Their mission was to grow the gross domestic product of the internet.
Speaker 2
05:40
It seems to be working. And the most obvious example from the history of entrepreneurship that jumps out that fits that mental model, an alien founder assembles a group of Jedi to start a cult and go on a mission together is Steve Jobs. Steve Jobs is clearly the alien founder. The Jedi are people like Steve Wozniak, the early employees that were on the Macintosh team.
Speaker 2
06:00
The initially small group of Apple devotees formed the cult and they went on a mission together going back to this post I'm only gonna read 1 more example because it's probably the most famous example. That's in the entire In the entire post again. I'll link it below So make sure you read the whole thing or you could just Google aliens Jedis and cults and it says he talks about discovering Bitcoin back in either 2011 2013 and says I started reading more about the project and began to appreciate its potential. The founder Satoshi was clearly an alien.
Speaker 2
06:28
The people working on the protocol were Jedi. The project had assembled a cult-like following online. It ticked all of my boxes. And then at the very end of the post he makes it easy for us to take this idea and carry it with us.
Speaker 2
06:39
If you're searching for a project with potential, watch out for the alien founder, Jedi team, and a cult following of people on a messianic mission. How does that relate to the book that we're gonna talk about today? Well, if you've ever met anybody that likes In-N-Out, you'll know that they like In-N-Out because they will tell you. All of my friends that live in California won't shut up about it.
Speaker 2
07:01
I sent this post to my friend Sam who listens to the podcast and he made a great observation. He says, if you think about it, the richest man in the world is a leader of a cult. He was obviously talking about Elon Musk. This clearly fits it as well.
Speaker 2
07:13
An alien founder assembles a group of Jedi to start a cult and go on a mission together. Both Tesla and SpaceX are forms of cults. These are positive cults for the world, right? And so all this is coming together.
Speaker 2
07:25
So as I'm spending the last week doing all this research, and I'm going to pull out a couple more examples too, I saw a clip from this investor, Josh Wolf, who I stole 1 of his great ideas. He says, chips on shoulders puts chips in pockets. So somebody grows up feeling that they're in a bad spot, usually has a lot of drive to fix that as they get older. And so Josh Wolf was famously known for shorting Tesla for several years.
Speaker 2
07:48
And he talked about why that was a mistake. Even though he considers that, he says, you know, there's some shenanigans going on inside the company where the case is, he realizes like, oh wait, this isn't a company anymore. It's a religion. And so he says, a few years ago, This is a sign of a cult.
Speaker 2
08:02
A few years ago, I started noticing that people were getting Tesla tattoos. It's very hard to short something when people are tattooing the brand on their body. So signs of a cult are tattoos. Think about it, The biggest podcast in the world is an example of this.
Speaker 2
08:18
If you Google Joe Rogan experience podcast tattoos, you will see hundreds, if not thousands, of people that literally tattooed Joe's face on their body. This idea is not a unique idea. It's been noticed over and over again. I've read the word cult in many of these books.
Speaker 2
08:34
Let me give you a perfect example where they explicitly talk about Trader Joe, who wrote the book when he was like 90 years old. Then he book was published and he died like the following week, right? So that's number founders 188. If you haven't listened to it, The book is called Becoming Trader Joe.
Speaker 2
08:47
And he says, this is what he says in the book. Let me read you an excerpt from it. Word of mouth. This is why it's so important.
Speaker 2
08:52
Because think about like Joe Rogan's never run an ad. Obviously, there's, there's content marketing and stuff behind it. Tesla has never run an ad. Trader Joe's didn't run much ads.
Speaker 2
09:02
Most of their growth came from word of mouth. And then the fearless flyer is like a form of content marketing. A lot of that which Trader Joe says he just copied straight from David Ogilvy. That's why I've done like what 4 or 5 podcasts and David Ogilvy legitimately thinks that guy's a genius.
Speaker 2
09:15
But this is what Trader Joe says about this. Word of mouth is the most effective advertising of all. I have been, In-N-Out has that, Tesla has that, Stripe has that, Bitcoin has that, Trader Joe's has it, Apple has it, the list just goes on and on, right? Word of mouth is the most effective advertising at all.
Speaker 2
09:31
I have been known to say that there's no better business to run than a cult. Trader Joe's became a cult of the over-educated and underpaid partly because we deliberately tried to make it a cult once we got a handle on what we were actually doing And partly because we kept the implicit promises to with our clientele. That is a huge I need you to remember that as we go through the book today. We kept the implicit promises with our clientele.
Speaker 2
09:58
Trader Joshi managers in and out did that over and over again. We kept the promises for the most important people. And this is what Trader Joe's warns us though. It's fantastic to have a cult-like following.
Speaker 2
10:14
Word of mouth advertising is fantastic. It's the most powerful form of advertising. It's the 1 every single business in the world is trying to go after. But he's like, you only do that.
Speaker 2
10:21
You cannot betray. He says, beware of ever betraying the true believers. So once you identify who your true believers are, You cannot disappoint them or they will turn on you. Another example for you, all the way back in Founders Number 31, I did a podcast on Peter Thiel, read 2 books on him.
Speaker 2
10:38
1 of those books happened to be 0 to 1, and he says explicitly, he talks about cults in that book. He says, the best startups might be considered slightly less extreme kinds of cults. The biggest difference is that cults tend, he's talking about the negative connotation of cults, the biggest difference is that cults tend to be fanatically wrong about something important. People at a successful startup are fanatically right about something those outside of it have missed.
Speaker 2
11:04
And In-N-Out, as we go through this book today, we realize that you have this giant explosion. In-N-Out started in 1948, and so most of what I'm going to talk to you about today is just the founder, Harry Snyder, right? In-N-Out started in 1948. The next 3 decades, there's this gigantic explosion in fast food in America.
Speaker 2
11:21
It becomes a multiple hundred billion dollar, if not trillion dollar industry. And yet none of In-N-Out's quote unquote competitors have this cult-like following that In-N-Out does. And that's what that sentence right there people at a successful startup so In-N-Out was fanatically right about something like McDonald's, Wendy's, those outside of it have missed. Okay so let's jump into the book I'm going to start
Speaker 1
11:44
with the single most important sentence in the entire book It's something that's repeated probably 15 times, something that Harry Snyder, co-founder of In-N-Out Burger, he founded it with his wife Esther, repeats for 3 decades. Keep it real simple. Do 1 thing and do it the best you can.
Speaker 1
12:01
And so his simplicity starts with what is he going to offer. In-N-Out's famously limited menu of 3 burgers, french fries, soft drinks, and milkshakes has barely changed since Harry Truman was president. There's no Mediterranean wraps, no chicken Caesar salad wraps or children's menus. There's no heat lamps.
Speaker 1
12:20
So what the, this
Speaker 2
12:21
is, I'm still in the introduction of the book, what the author is doing is comparing and contrasting
Speaker 1
12:24
the way In-N-Out runs their business with the way everybody, they're all their competitors do. There's no heat lamps, no freezers or microwaves. There's no bags of flash frozen fries on site either.
Speaker 1
12:35
Rather, in a procedure that has gone unchanged since the chain first opened in 1948, a cheery associate hand peels, cuts, and fries the raw potatoes that are grown especially for the chain. At In-N-Out, the lettuce is still leafed by hand. Buns are still baked daily. The family-owned, fiercely independent chain has remained virtually unchanged since its inception in 1948." So that sentence, just like, keep it real simple, do 1 thing and
Speaker 2
13:05
do it really well repeated over and over again 15 20 30 times throughout the book. That's also something that's extremely different than a lot of the competitors it is a to this day so this book was published in
Speaker 1
13:15
2009.
Speaker 2
13:16
Fast forward over a decade later, the chain is still family-owned, there's no franchises, and it is still private. It has long been adored by its legions of fans whose main complaint seems to be there just aren't enough of the restaurants around. In-N-Out is frequently the subject of rumor and speculation.
Speaker 2
13:32
The private company has always shunned the kind of publicity that its competitors routinely courted. It has rarely bothered to counter or clarify the murmurings. The last example of this at the time the
Speaker 1
13:45
book is written is when the co-founder dies. She outlives her husband by about 30 years. So in 2006, In-N-Out Burger issued a statement announcing that Esther Snyder, who along with her husband Harry, had founded the chain, had died.
Speaker 1
13:57
She was 86 years old. Esther's death left her 24-year-old granddaughter, Lindsay, the sole heir to the In-N-Out Burger fortune. A petite, unassuming woman, Esther had spent most of her life determinately maintaining In-N-Out as a private family-owned business, keeping it virtually unchanged as the decades rolled by. She did so despite countless offers from investment bankers, venture capitalists, private individuals, and large corporations, all of whom were hell-bent on buying into the hugely profitable chain's unparalleled popularity.
Speaker 1
14:28
Esther Snyder preserved her family's privacy even as In-N-Out transformed from a single burger stand to a cult
Speaker 2
14:36
phenomenon. And then 1 last sentence from the introduction the counterintuitive chain had stridently bucked every industry trend. Later on in the book like another 250 pages into the future, I double underline a sentence that I think I want to put at the very beginning to help you understand the In-N-Out philosophy. It is known as the anti-chain with the cult-like mystique.
Speaker 2
14:59
The anti-chain is the perfect way to describe In-N-Out's approach to building their business.
Speaker 1
15:05
So in 1948 Harry and Esther they're already married at this point they settle they settle in this little suburb of Los Angeles called Baldwin Park and so that is where the very first the very first in-and-outs gonna happen built in 1948 this is the frontier of the American dream this is where newly married couples like Harry and Esther could purchase land, buy a small house, and build an even smaller burger joint, and then dream big dreams. Baldwin Park is where the Snyders developed their basic philosophy serve the freshest highest quality burgers and fries Treat your employees well and your customers even better all while providing friendly service in a sparkling clean environment and above all remain family-owned and independent Something they repeat over and over again even as In-N-Out's competitors raced around the globe franchising, In-N-Out never wavered from their simple philosophy.
Speaker 2
15:57
It's an area description of Harry.
Speaker 1
15:59
Harry Snyder was an uncomplicated man with sharp instincts. He was also,
Speaker 2
16:04
I would say, a workaholic. And I think a lot of that has to do with his upbringing. His father was, well, I mean, I'll just let you, he's gonna describe his
Speaker 1
16:14
own father. Sounds like he thought his father was a bit of a loser. He had some crazy ideas.
Speaker 1
16:18
He didn't believe anybody, this is Harry talking, he didn't believe anybody should be wealthy. He figured that if you made so much money, the rest of it should go back to the government and then they could give it to poor people. So Harry was influenced by
Speaker 2
16:30
his father. His father's name is Hendrick. For a little bit, Harry was actually identified as a communist.
Speaker 2
16:35
And then Harry realized, well, that doesn't actually work out. He builds a business, but he also takes care of his employees. He paid way more. He thought it was just the right thing to do to share.
Speaker 2
16:44
Even if you're not sharing profits, like they don't own a percentage of the business, they still make a lot more money his employees made a lot more money than other people working in similar restaurants Hendrick was careless to the point of recklessness the old man always ran out of money was how Harry described his father's financial acumen or lack thereof and then imagine how much how much you have to mess up your life for 1 day for your kids to describe you like this. It's just, I shudder at the thought. And so he says, when he left Seattle, my dad owed everybody and their brother money. He was the biggest stiff there was.
Speaker 2
17:17
So not only was he not good with money, he didn't really work as he didn't work that much, but then he would also essentially borrow money and just leave town. And he does this wherever. So he's doing it in Seattle, then they go to Los Angeles and it's the same situation. His father's obviously not changing.
Speaker 2
17:33
The family moved from 1 rental house to the next after owing rent to look to the landlords they had left behind when Harry was 13 his father landed in jail after he beat up a landlord who came by and demanded money his father was also extremely entitled extremely lazy These are things that Harry is not. So he would make money as a house painter. And he says the work paid a tidy sum of 20. This is in 1928.
Speaker 2
17:55
So this is they're going to have to struggle through the depression. That's when Harry starts working. And I think that's where he
Speaker 1
18:00
gets this fierce work ethic that never leaves him. The work paid a tidy sum of $25 per week. But when Hendrick was refused a vacation, he simply put down his paintbrush and walked away, leaving his wife to support the family with her housekeeping jobs.
Speaker 1
18:13
Really great, really great role model, Hendrick. Hendrick never held another proper job again. So it fell on Harry to pick up the slack of his father. So if you could think of Hendrik has loser mentality.
Speaker 1
18:27
Harry has founder mentality. During Harry's teenage years, he's a teenager. He's still supposed to be in school, and his dad is so lazy and apathetic that Harry's forced to pick up the slack. During Harry's teenage years, he took every job he could.
Speaker 1
18:41
He managed to maintain a fierce sense of responsibility. Although he was just a young man and the Depression had flattened prospects for most, Harry always found a way to make a dollar. He landed a number of odd jobs. He would do anything.
Speaker 1
18:52
And he always supported his family, giving them money every week from whatever money he had earned. He worked as a paperboy. He worked in a grocery store. He sold sandwiches.
Speaker 1
19:00
That's the job he has. Selling sandwiches is the job that he's going to have right before
Speaker 2
19:04
he founds In-N-Out and realizes, hey, I can do this. I don't have to work for other people. He worked in a grocery store.
Speaker 1
19:10
He sold sandwiches. He delivered hot dog and hamburger buns for a bakery. He worked at a concession stand.
Speaker 1
19:15
He picked up rental umbrellas on the beach.
Speaker 2
19:18
And again, he's doing anything he can, gives his parents money. As you can imagine, he's working so much, he's not that great
Speaker 1
19:24
in school. Harry was not much of an academic. He was never more than a middling student.
Speaker 1
19:28
Rather, Harry excelled in the areas of common sense and resourcefulness. That is a fantastic way to describe my interpretation of his business philosophy. It's a combination of common sense and resourcefulness and then you layer in an intense work ethic. Following high school, he enrolled at Santa Monica Junior College but quit after 1 semester.
Speaker 1
19:46
I couldn't afford to go. I had to work to keep myself going. Harry's drive and tenacity were propelled by the uncertainty of watching his parents labor to provide for his family. Harry grew into a disciplined fellow with a strong sense of responsibility.
Speaker 1
20:01
He also did a really important thing as he builds his business. He decided to build the people that worked for him. He's like, I don't consider he hate it. He wouldn't let you use
Speaker 2
20:09
the word employee. He's like, look up the definition of the word employee. Look up the definition of the word associate.
Speaker 2
20:13
We are associates. And so not only would he pay his associates well, he was trying to build young men at the same exact time. And as a result, when he dies, he dies rather young at 63 years old from lung cancer. He's got hundreds of people that show up at his funeral.
Speaker 2
20:26
Fast forwarding the story a little bit, in 1947, Harry was 34 years old and working as a caterer selling box sandwiches to the cafeteria at Fort Lawton. So he had I skipped over a part he serves in the military and he gets out and he's still working in the military selling sandwiches to the army. That's where he meets his wife 1 day in 1947 while dropping off his sandwiches. Harry met the restaurant's 27-year-old manager.
Speaker 2
20:48
Her name was Esther Johnson. Esther's just like Harry, extremely hardworking. A lot of that's due is because they're growing up in the Great Depression. They see what happens when you run out
Speaker 1
20:57
of money. Esther's father began working in the mines. The Great Depression, though, ended the mining boom for good.
Speaker 1
21:02
When Esther was 14 years old the mine shut down permanently. She grew up in
Speaker 2
21:06
a house with 8 children under modest financial circumstances yet despite the financial constraints her parents
Speaker 1
21:12
did something smart here they managed to place an emphasis on education. Esther was a gifted student and she possessed a sharp brain disguised
Speaker 2
21:21
by a shy demeanor. She's also a badass. Check this out.
Speaker 2
21:24
Think about this time in history. They expected her, you know, why are you studying for? Why are you trying to work? You should just go out and
Speaker 1
21:30
get married. Her grandfather and uncle seem perplexed as to why a young lady like Esther wanted to pursue education. Don't you want to get married they asked?
Speaker 1
21:36
To which she replied, I like to learn. And so they get married but they also discover they're perfect not only life partners but they're also perfect business partners. The pair seemed to complement each other perfectly. While Harry was tough and could be demanding, Esther was rightly regarded as a gentle soul.
Speaker 1
21:50
She did much to soften Harry's rougher edges. He had street sense. She was book smart. Harry was hard-nosed.
Speaker 1
21:56
Esther was sentimental. He was a forceful presence, while she preferred to get things done quietly behind the scenes. Harry believed in his ability to create his own opportunities and Esther believed in Harry. They decided to start their life together in Southern California.
Speaker 1
22:10
Harry had developed takeout bag lunches to serve the scores of soldiers passing through the area and he had come up with an idea for a new kind of restaurant.
Speaker 2
22:19
So this is 1 of my favorite parts of the book because you really realize that the founders of In-N-Out are going to build the foundation of their business by riding 2 waves. I'll explain more. The first wave is that after World War II, according to the book, there were more cars in LA than anywhere else on the Earth.
Speaker 2
22:37
Okay, so In-N-Out starts out as just a drive-thru. You cannot, there is no place to sit. You have to go in your car, okay? So the 2 waves that they combine is that the fact that they just happen to be in the set up shop in a place where there's more cars than anywhere else
Speaker 1
22:52
on earth and at this point in history this is post-World War II there is more there's an increase in
Speaker 2
22:57
the amount of families were both adults worked. So if you think about it more cars plus less time to cook equals let's start a drive-thru and so we go to the very beginning
Speaker 1
23:06
of this idea Harry Snyder's dream was a modest 1 he was going to start his own little food business a hamburger stand Harry had good reason to want to go into business for himself he watched his father shift shift between the shipyards and the boom bus cycle of Seattle in search of work Harry was determined to live a different sort of life ok so that is I need to tell you like this is Harry was obsessed with control he didn't like debt he owned not only the own the restaurants that outright before he started another 1 He would own the land underneath them. He's extremely interested in controlling his own destiny. You can kind
Speaker 2
23:39
of read between the lines here as a kid with a father like that. You kind of feel like you're just at the whims of an unreliable person. He's like, okay, I'm an adult now, I'm not letting this happen.
Speaker 2
23:49
Harry was determined to live a
Speaker 1
23:50
different sort of life. He was determined to create his own future. Harry had a strong gut feeling.
Speaker 1
23:56
Although he had a couple of failed businesses under his belt, that didn't stop him. Harry and Esther would open a new kind of hamburger stand, the drive-thru. So that's another thing that's going to blow your mind. In-N-Out is 1 of the first drive-thrus.
Speaker 1
24:08
Harry, it looks like he was
Speaker 2
24:10
the 1 that invented, like think about if you go up to any drive-thru restaurant now, you'd place your order through some kind
Speaker 1
24:14
of speaker system, right? Harry invented that. That blew my mind.
Speaker 1
24:18
And this is also interesting that like he had to trust his ability like he had common sense resourcefulness but he also had belief in himself which sounds crazy because his 2 previous businesses failed right? But everything at this point, Most of the restaurants around were drive-ins. So you would drive into like a hamburger stand, they'd have people come out, usually like on roller skates or some kind of theme, and they would take your order, you'd sit in
Speaker 2
24:40
the car, they're like a waitress or a waiter, you take your order, then they'd skate back to where the restaurant is, bring your food back and just sit and
Speaker 1
24:47
eat in the car. He's like, well, let's not do a drive in. Let's do a drive through.
Speaker 1
24:51
So he needs to
Speaker 2
24:51
get started. Doesn't have any money. A typical entrepreneur, Harry was rich in ideas, but short on cash.
Speaker 2
24:56
He took on a partner who put up some $5, 000 in startup capital. They're going to wind up having a fight. Harry's going to wind up having to run the show. He's not going to share it with this guy that gave him
Speaker 1
25:05
the money. Harry Snyder's instincts were a good 1. Southern California was the most heavily motorized place on the planet.
Speaker 1
25:12
There were over a million cars in Los Angeles alone by 1940.
Speaker 2
25:17
So as he's getting started, Harry does something smart. He reaches out to somebody that's further down the line in what he's trying to accomplish. This guy's name, there's gonna actually be a married couple there.
Speaker 2
25:25
There's another married couple that are partners. It's Carl Karcher, I think is his wife's name is Margaret, but I think you pronounce our last name Karcher They're the people that start Carl's jr. This gigantic hamburger chain So it's
Speaker 1
25:38
a short on experience but long on common sense Harry sought advice from Carl Karcher 1 of fast-foods pioneers Who had built a small growing chain of hot dog stands in Los Angeles into a giant company called Carl's Jr. And says they came to see me because Harry saw a successful business a successful fast food business
Speaker 2
25:54
and they can also relate culture was a dropout worked on a farm had an intense work ethic just like Harry did and he also started just it with a single hot dog cart car at the time was he was working as a delivery man, and he would deliver like buns, like hot dog and hamburger buns all over the city. And he's, 1 of these stores, he's like, in some cases I'd have to do deliveries twice a day. How many hot dogs and hamburgers are they selling?
Speaker 2
26:19
He winds up buying in and that's the foundation.
Speaker 1
26:21
Again, a lot of these bills are real simple ideas.
Speaker 2
26:24
It's like, well, I'm delivering. I have access to information that many people might not know because
Speaker 1
26:28
I'm delivering buns. They wouldn't be ordering buns if they're not selling a ton of hot dogs. So maybe instead of the delivery business I should be in the hot dog business.
Speaker 1
26:35
That's exactly what he did. The first meeting would be a start of a lifelong friendship between the Carchers and the Sniders. The 2 couples had much in common. They were tireless and hands on and each pair worked as a team.
Speaker 1
26:45
Carcher's difficult childhood had produced a belief that luck was something you made yourself. That's also something Harry believed. A lesson with which Harry Snyder was all too familiar with himself, or for himself. When Karcher met the Snyders, Karl told them to focus on a great product and maintain the personal touch.
Speaker 1
27:00
So that is his initial advice to Harry. It is so important to make people feel special and that is the foundation. 1 of the reasons, there's gonna be a bunch of things that
Speaker 2
27:09
I think all work together. And remember, creating like this cult-like phenomenon is not a formula. We can only kind of deduce, like kind of read between the lines ourselves.
Speaker 2
27:17
But that idea is like you have to make people feel special.
Speaker 1
27:20
And so it says, during that first meeting, Karcher found that the inspiring entrepreneurs had already had very specific ideas about how they plan to run their business. These are ideas that they never deviate from. Many decades later, when he was 90 years young,
Speaker 2
27:34
as Karcher called himself, it's like I'm
Speaker 1
27:36
not 90 years old, I'm 90 years young, that's funny, they were very particular about their people smiling. They wanted their employees to feel like they were part of
Speaker 2
27:43
the company, like they were owners themselves. Karcher also did something extremely nice. We saw this example when I covered Jeff Bezos' biography for the first time.
Speaker 2
27:52
Jeff is struggling at this point in Amazon history. He goes to meet Jim Sinegal, who's the founder of Costco. They wind up, I think, having coffee together. I can't remember exactly.
Speaker 2
28:01
It might even be at Starbucks inside of like a Barnes and Noble if I'm remembering the story correctly. And Jim is just laying out, he's like, this is the philosophy that I use for Costco that is built into a multi-billion dollar brand. It's an idea I learned from Sol Price, who I also did a podcast on. That was episode number 107.
Speaker 2
28:16
If you haven't listened to Sol Price, you should. Jeff Bezos took ideas from him. Jim Sinegal took ideas from him. The founders of Home Depot took ideas from Sol Price.
Speaker 2
28:24
Sam Walton. Sol Price is probably, I would make the argument he's the most influential retailer to ever live. But in this meeting, Jim Sinegal's just laying out his blueprint for Jeff and Jeff winds up using that it's part of the inspiration for Amazon Prime and a bunch of other Ideas that that Jeff went back to Amazon and applied to him and his point is like do you feel Many years later. He's asked like do you feel Like should you have not told Jeff all these things?
Speaker 2
28:47
He's like no, I feel like I learned from a bunch of people It's your obligation You're gonna see Carl say the exact same things like why are you like in and out winds up being? Somewhat of a competitor Carl's jr Like do you do regret spending time and teaching? Harry all the Harry and Esther all these things and
Speaker 1
29:01
he says no He explained at the time that he had no problem sharing his expertise. I've always said that competition just makes you stronger. You shouldn't be afraid of the competition.
Speaker 1
29:08
That makes you stay on top of your game. I told the Snyders that it's very important to have respect for your competitors. I may have a different philosophy than some of my competitors, but I believe that your competitors are really your friends. They keep you on your toes.
Speaker 1
29:20
And so 1
Speaker 2
29:21
of these very specific ideas that Harry had is always you don't ever cut corners when it comes to the quality of your product.
Speaker 1
29:28
So it says Harry's philosophy was to stress fresh ingredients and high quality. Harry wanted to take the, this is a quote from him, I wanted to take the lettuce out of the ground, the tomato off the vine, and the onion, and prepare the burger fresh right now. That was the goal.
Speaker 1
29:45
The couple sold a Spartan menu. They had 1 cheeseburger, 1 hamburger, you can order french fries and soft drinks. And eventually they had milkshakes to that. So we've already seen some foundations of his philosophy.
Speaker 1
29:57
The people that are gonna come to my business, they have to feel special. Number 2, I'm not skimping at all ever on the ingredients to go into my hamburger. I'm not you're not going to say, oh, you know, if you just switch out this lettuce for 1, it's 15 cents cheaper and you're selling tens of thousands of hamburgers a month. Guess how much money you make.
Speaker 1
30:16
That's how a lot of people approach business. Harry's like, I don't give a shit. I'm not taking the advice that makes my product lower quality. And again, this is the foundation.
Speaker 1
30:24
There is no cult-like following to shitty products. So therefore, logically, you can say, okay, any kind of advice where somebody's trying to make my product worse because I may make more money, that's short-term thinking. You'll make more money now. You're not going to make more money over the long term because then you're going to find somebody else who's like, oh, this hamburger, just using an example of In-N-Out, is not as good as it used to be.
Speaker 1
30:45
Let me go look for other people. Somebody else might be the new in and out version. Somebody completely dedicated to quality that's not gonna skimp. So that's another example here.
Speaker 1
30:54
Now let's go into the very next page. This is where it just hit me. I was like, well, this is very interesting to think of drive-thru as a new technology. You and I don't think of drive-thru as a new technology because it's existed the entire time that we've been alive.
Speaker 1
31:08
But at 1 point, it didn't exist. And so he has 1 of the main lessons from Andrew Carnegie. This is lessons almost 200 years old. Invest in technology.
Speaker 1
31:16
The savings compound gives you an advantage over your slower moving competitors and it can be a difference between profit and loss. And so we're seeing, even though you might not think, hey, Harry's making cheeseburgers and fries. He's not a technologist. He invented the drive-thru speaker.
Speaker 1
31:33
That is technology. Absolutely. The surge in motorists and motoring meant that there was a captive audience of potential customers. And to attract them, the drive-in used architecture.
Speaker 1
31:43
Oh, excuse me. I jumped ahead of
Speaker 2
31:45
my point. They're comparing and contrasting the drive-in to Harry's drive-through. So at this point, drive-ins are already extremely popular in Southern California
Speaker 1
31:54
because you've got a ton of
Speaker 2
31:54
cars, right? And so this is where what I just said, you drive in, somebody like skates up or whatever the case is, and you sit in your car and eat. And so it's talking about how they, like, what is, how do you get somebody's attention?
Speaker 2
32:04
While they're driving down the road, I have a drive-in, I'll have like big colors and neon lights and weird architecture, just anything to pull their eye, right? And so
Speaker 1
32:12
it goes into like the history of drive-ins. In Southern California, You got 1 that's the shape of a giant sombrero, sells tacos, 1 that's a giant root beer bottle, stuff like that, okay? And since then, In-N-Out arrived.
Speaker 1
32:23
The Snyder's Burger Shack was tiny. It had no indoor seating, and there was little room for a full-fledged drive-in with carhops. That's the name of the servers, the waitresses and waiters, carhops. Harry was an amateur electronics enthusiast and he came up with an idea that would compensate for these deficits.
Speaker 1
32:40
I really love this idea. I wrote on this page too. I love and I come across this example from time to time, but I like businesses that are defined by what they are not, by what they lack. That's very fascinating.
Speaker 1
32:51
So you realize it's like, well, I don't have a bunch of spots like the first In-N-Out is tiny. You can't, not only can you not park here, you can't go inside. So like, I got to find a different route in. And so this is the way he does that.
Speaker 1
33:02
So he's figured out an idea to compensate for these deficits. He dispensed with the carhops altogether. Okay, get out of here. No waitresses, no waiters.
Speaker 1
33:09
You're gone. And then placed them with an invention of his own. And so this whole thing, let's go back to the very first page of the very book. I'm coming back to the page, don't worry.
Speaker 1
33:17
Where I'm at. Keep it real simple. Do 1 thing and do
Speaker 2
33:20
it the best you can. This dude is obsessed with simplicity. That is an important point that I cannot repeat enough.
Speaker 2
33:28
Because it goes against... So human... The weird thing is there's a conflict in human nature, right? We cannot stop over-complicating things.
Speaker 2
33:37
Yet, we have an intense desire. We crave simplicity 1 of my favorite quotes in that book. I did a bonus episode It's called insanely simple the obsession that drives apple's success And there's a quote in that book I never forgot and I try to keep in the back of my mind. Never underestimate the degree to which people crave clarity and respond positively to it.
Speaker 2
34:01
Never underestimate the degree to which people crave clarity and respond positively to it I think the reason that we respond positively to it because it doesn't exist very commonly because we're constantly our nature causes us to overcomplicate constantly add things when all we want is a reduction. It is a joy when you go into like an In-N-Out or even the 5 Guys has this too where it's just like okay there's like 2 things I can choose from here. Like this is not like you make the decision for me this is what you do this every day you know what is the best and so you just say hey I've been trying to work at this burger stand I was driving in the case of In-N-Out for 30 years by the time he dies like this is clearly what works
Speaker 1
34:40
I don't need to overcomplicate things things so let's go back to this he dispensed with the car hops all together and replaced him with an invention of his own A single two-way speaker box made out of a few off-the-shelf electronic components that was connected to the eatery's kitchen. That way motorists could order at the end of 1 drive-thru and pick up their food at the other end. Why is that important?
Speaker 1
35:00
Because that's where you got the name. Let's keep it simple keep it simple That's how Harry ended up with the name of in-and-out hamburgers because you drive in there's a speaker I made and it's funny It's like it's not kidding. It's just it just like this loud distorted voice that they hear in the kitchen So it's like obviously gets better with time the very beginning. It's very rudimentary very like rough around the edges, right?
Speaker 1
35:23
But it's like, all right, well, on 1 end of the driveway, you're driving and you're telling me what you want, and then you drive on the other side of the driveway and you're walking out with, you know, the best cheeseburger you've ever had in your life. That was just hilarious. Now, check this out, because this is another example of any time you introduce new technology, it confuses people. Harry's new speakerphone drive-thru format got off to something of a troubled start.
Speaker 1
35:40
In 1948, most customers were bewildered by the invention that in time became as standard and familiar as fast food itself. The Snyder's, this is why you always have to educate, educate, educate, right? The Snyder's had to show customers how to use the drive-thru. Think about how crazy that is.
Speaker 1
35:57
Something to you and I is completely obvious. It's not obvious if you only saw it for the first time. And what's crazy is how far ahead of the curve Harry was. He's doing this in 1948.
Speaker 1
36:08
McDonald's didn't add a drive-thru window till 1975. Another crazy thing, Harry never took a patent out for that invention.
Speaker 2
36:17
And at the very beginning of In-N-Out, it's just Harry and Esther. They don't even have any employees. This is also something that you notice throughout his entire life.
Speaker 2
36:26
Like he, if he was alive today and you could ask him for advice, I think he would just say, do it yourself. He's obviously gonna have a ton of employees by the time he dies, but he never stops. He'll take out the trash. He's constantly working.
Speaker 2
36:38
He's not these absentee owners with his feet up.
Speaker 1
36:41
As I said, the start of In-N-Out Burger, it was just Esther and Harry. The Snyders did everything themselves. The couple worked punishing hours, often logging 14 or 15 hour days.
Speaker 1
36:50
On In-N-Out's first day of business, the couple sold a total of 57 hamburgers. They do over a billion dollars in revenue a year in present day. During the very early years, the Snyders made great personal sacrifices. The company funneled every cent they made back into the business.
Speaker 2
37:06
And so that is the first mention of that theme that Harry is just gonna use throughout his entire life. He's just do as much of the work as yourself, be there. He's constantly there 7 days a week.
Speaker 2
37:14
He's obsessed. He's completely obsessed with building. He's not trying, and this is an important distinction, and I think also how you get to like cult-like following he's not interested in being the biggest he's interested in being the best and so there's that there's this hilarious interview that Jerry Seinfeld did a few years ago with the Harvard Business Review. And his work ethic and his ethos, Jerry Seinfeld's ethos on work is exactly it's the same as Harry Seinfeld put that like philosophy and directed it towards stand up comedy and building, you know, 1 of the most successful television shows of all time.
Speaker 2
37:49
Harry just channeled it towards making really good hamburgers, cheeseburgers, and fries. I'm just going to pull out a couple of quotes because I read this interview because a lot of stuff that Harry did made me think of it. So Jerry's asked the question, you and Larry David wrote Seinfeld together without a writer's room. And burnout was 1 reason you stopped.
Speaker 2
38:09
Was there a more sustainable way to do it? And this is the most Harvard Business Review question ever. Imagine saying this to Jerry Seinfeld.
Speaker 1
38:18
Was there a more sustainable way to do it? Could McKinsey have helped you find a better model? Jerry says, who's McKinsey?
Speaker 1
38:25
And they say,
Speaker 2
38:26
it's a consulting firm. Jerry says, are they funny? No.
Speaker 2
38:30
So that's, they're like, no, they're not funny. And so Jerry's answer is perfect.
Speaker 1
38:34
Then I don't need them. If you're efficient, you're doing it the wrong way. The right way is the hard way.
Speaker 1
38:41
That show was successful because I micromanaged it. Every word, every line, every take, every edit, every casting. That is my way of life. And so we see the perfect illustration of this on the very next page.
Speaker 1
38:55
Harry was a micromanager before the term existed. He was a rigorous taskmaster. He was not inclined to even leave the smallest detail to others from the start He kept scrupulous records noting how many paper cups were dispensed. He was known to be fanatical about quality Deals were struck
Speaker 2
39:12
on a handshake So he's talking about deals for his supplier of people that uh, like people that give him the ingredients he needs to make his product. Deals were struck on
Speaker 1
39:20
a handshake and they lasted decades, often ending only if the supplier went out of business or failed to meet Harry's exacting standards. When it was discovered that a vendor had hidden a batch of substandard onions within a truckload of good ones, the supplier was dumped. And so there we see that he's frugal, right?
Speaker 1
39:37
But not when it comes to product quality. A frugal man in most respects, Harry was prolific when it came to purchasing the freshest, highest grade of meat, potatoes, and produce. He refused to sacrifice quality for the sake of profits. When it came to cleanliness, Harry's zealousness matched his fervor regarding quality.
Speaker 1
39:59
He did not feel it was beneath him to scrub the floor or pick up trash.
Speaker 2
40:04
From the start, and I double underline this sentence because it's so important, from the start In-N-Out ran a customer driven shop. So again, maybe you have business consultants come in and say, hey, you're selling tens of thousands of hamburgers
Speaker 1
40:16
a month. This lettuce over here is 15 cents cheaper. No 1 will notice, don't worry, you'll make more profit.
Speaker 1
40:22
You wouldn't do that if you truly cared about the customer experience. And I think that's another example of Harry taking advantage of a flaw in human nature. Most people are motivated by greed. They're like, okay, I will do that.
Speaker 1
40:35
Because they're thinking short term. They don't realize they're sowing the seeds for their ultimate demise. You're gonna make more money now, those people are gonna leave.
Speaker 2
40:42
And so then we see the first time they repeat it, it's repeated over and over again. Harry Snyder made a promise to himself that he had no intention of breaking.
Speaker 1
40:49
Keep it real simple. Do 1 thing and do it the best you can. Another idea for you.
Speaker 1
40:54
Ride another wave adjacent to you.
Speaker 2
40:57
I'm going to describe what that means. The example that came to mind when I got to the section was this is exactly what the founder of Vans did. If you remember I read the autobiography that's another nine-year-old founder that wrote an autobiography.
Speaker 2
41:07
It's Founders Number 216 if you haven't listened to it yet but he made the point he's like I'm trying to sell shoes but he's in Southern California at the time too and there's this huge growth happening in skate skateboard and surfing culture. And so he tried to make his brand of shoes the number 1 choice for skaters and surfboards and so his as those 2 sports grew right it brought his brand right along with it's actually really smart ride another wave adjacent to you so it says Vans shoes did this with skate culture I
Speaker 1
41:37
just told you that growing rapidly in popularity in the 1950s surfing had by the 1960s exploded into a full-blown cult with a language clothing music and lifestyle of its own in almost a religious ritual surfers woke before dawn, strapped their boards onto their cars, and headed towards the beaches. Many lived inland, and so commuting an hour to catch a wave before the sun was fairly common. Afterwards, a group of hungry surfers packed up their cars and headed for In-N-Out.
Speaker 1
42:08
Soon enough, word spread and ending up at an In-N-Out burger stand after surfing became part of the surfing experience."
Speaker 2
42:18
So again, the main theme there is try to ride a wave that's adjacent to you. This is just hilarious. So he's always, I think I repeated myself on the ringer and about this guy's work ethic.
Speaker 2
42:30
He's extremely dedicated. He's always tending to his business. There's always something to do. I feel like he would be
Speaker 1
42:34
1 of these characters. If you read Buffett's shareholder letters, he's constantly referencing people like Rose Blumkin or other people like there's 1 guy he bought the business from and he's like, the guy was so obsessed that he would count the toilet paper rolls to make sure he wasn't being overcharged. Like Harry has that kind of energy.
Speaker 1
42:50
So it says, Harry's nature did not allow him to sit back and relax. He was the first person at the shop in the morning opening the store, inspecting the sacks of potatoes, ensuring that everything ran smoothly to his exacting specifications. It wasn't unusual to see Harry picking up trash by the side of the road or leafing lettuce lettuce This is wild. This is the part that made me laugh.
Speaker 1
43:07
So the first The first in-n-out is across the street from their house So even though he's first in the more there in the morning Somebody else is running it later at night. He's sitting in his living room looking out the window. I Don't know why I found it so funny since the Snyder's house was directly across the street from in out he Don't I just picture him doing this He rarely seemed to be able to relax and call the night in the evenings Harry regularly kept an eye on the restaurant through his living room window. Frequently, he'd be sitting on the sofa watching TV when all of a sudden he would stand up and sprint over to the shop and pitch in." So he sees, obviously, this is a drive-in so you can see when there's a backup.
Speaker 1
43:45
Just the idea of this man just watch TV, looking out the window, immediately putting his head down and spreading across the street, I just love it. I love the enthusiasm. Oh my God, I have tears in my eyes. I don't know why I find this so funny.
Speaker 1
43:57
He paid his employees well. When In-N-Out first started, California's minimum wage was 65 cents an hour but Harry paid a dollar an hour plus 1 free hamburger per shift he believed in paying for quality and that included in wages not just and this is just super smart anytime I see founders
Speaker 2
44:15
or entrepreneurs talking about like bragging you know talking about oh I you know I I'm paying these employees so little or like oh I've doing some kind of geographic arbitrage. I'm like, man, you're missing the point. You're missing the point.
Speaker 2
44:26
These are employees of your business. They interact with your customers ostensibly. Or they help build the product.
Speaker 1
44:32
Why would you skimp on the level of quality of people you work with? That's insane to me. It just makes no sense at all.
Speaker 1
44:39
Like, people are not just something in a spreadsheet. Like, they were very complicated. And there's an example in this where like, I'm gonna show you how he was very similar to Les Schwab. Les Schwab built this gigantic fortune selling tires.
Speaker 1
44:51
Les Schwab tires.
Speaker 2
44:52
And he'd share 50% of his profits with
Speaker 1
44:54
all his employees. He winds up at the end of his life. Looking back he's like that the people the employees I built up like that means just as much to me as the wealth I built up he winds up going to people's weddings and they tell him hey like you're as influential there's 2 most influential people in my life it's my parents and you and so that result like when you when people really feel valued and they're working for you and like you really feel like you give a damn and they can tell
Speaker 2
45:16
if you give a damn or not. Just like you could tell when you just have a job.
Speaker 1
45:22
They just pay it back. It comes back to you in spades. It's not as simple as like, oh, I can afford to pay.
Speaker 1
45:27
I'll make more money if I pay them 10% less. That's just not—that's very short-term thinking. So it says, while his wife had an unwavering faith in God, Harry's faith was in hard work. Sorry, I'm just thinking about him running across the street again.
Speaker 1
45:40
Harry had—oh, this is really important, so I'm going to read my outline on this page. Embrace hard work, ignore fads, identify what's important to you, and repeat it for decades. Then build people like Les Schwab. I'll get to that in a minute.
Speaker 1
45:51
So it says Harry's faith was in hard work. He had little interest or patience in trends or fads. He muted the world. He did not care at all what other competitors, like if they were trying to franchise they were adding things to the menu he's like I don't care I know I'm not being the biggest I'm going to be the best so this is Harry drilled into his workers the singular importance of quality and simplicity his maxim do I'm not making this up this is repeated over and over again do 1 thing and do it well was repeated with frequency it was also strictly adhered to Harry kept a man menu simple and streamlined he didn't see much advantage in introducing new items are tinkering with the ones that already that they already offered and then it gets into why so many people showed up at his funeral right can compare and contrast this with
Speaker 2
46:39
a few weeks ago when I did the sugar king of Havana who little oboe he's a you know his whole ethos is like I'm gonna beat everybody I'm gonna get 1 over well That's nice How'd that work out of
Speaker 1
46:48
your funeral like less than a handful of people even showed up like that's just a shitty way to Get through life, man. He helped we should be a Like in my opinion like I'll be much happier Accumulating friends and allies than I will a bunch of enemies. It's just a bizarre way to live your life.
Speaker 1
47:02
He helped many of his employees get loans for houses and cars. Sometimes he would lend the money himself. 1 of his oldest employees says he helped everybody. This obsessiveness about quality is also why he was so reluctant to expand.
Speaker 2
47:19
He would have never expanded. He didn't really plan on expanding, except he kept building up, like he had a ton
Speaker 1
47:24
of talented people. He's like, they should be running their own stores, they run their own stores, they're providing economic opportunity for them, They could go out and have a family, buy a house, do all these other things. So it says, Harry's thinking was that he was just trying to make a living for his family.
Speaker 1
47:37
He was not interested in being a rich man. The only reason he built up his stores was because he paid his people well and
Speaker 2
47:44
he didn't want them to leave. And so I think he winds up working on In-N-Out for the last 28 years of his life and I want to say he only had like 14 stores maybe 15 maybe 17 somewhere in that number it took him a really long time
Speaker 1
47:57
so it says if in-and-out expanded it was fun this is what he was worried about if in-and-out expanded it was vulnerable to dilution of quality. It was the Snyder's commitment to looking after their people that prompted In-N-Out Burgers growth into a chain. The couple opened new stores as a way to reward the hard earned dedication of their long time associates who wanted to remain within the In-N-Out fold.
Speaker 1
48:17
There's many examples of people in the book that have been working for In-N-Out for over 40 years. A significant number of those early associates who began in In-N-Out's tiny kitchen as potato peelers ended up staying on for decades. So this
Speaker 2
48:28
is at this point, he's starting, he has a couple stories, he's got like 4 or 5, and he starts getting into a fight with his partner that gave him the money to run the business and we see that his partner was like, let's expand, let's expand. Well, we can increase prices, we can cut costs and Harry's just like, no, I just want to focus on quality.
Speaker 1
48:46
So it says, this guy's name is Charles. Charles had very different ideas about the future direction of In-N-Out as it expanded. Harry insisted on maintaining a quality product at a reasonable price, while Charles wanted to increase prices and cut costs.
Speaker 1
48:56
At the time, Charles' strategy was becoming, this is why I'm reading the section to you, because Harry's independence of mind. It's willing to, it's having the fortitude to buck the trance it's extremely difficult
Speaker 2
49:09
if there's 10 of you in a business right like you're running a business 9 other people are running similar businesses all 9 are doing things very similarly for you to say no I'm not doing it that's extremely hard
Speaker 1
49:18
so says it was a Charles strategy was becoming commonplace among fast food chains but Harry was determined not to go the way of every other burger stand he believed that his way was the right way he was stubbornly independent And had a real aversion to ceding to the opinion of others especially when he thought he was right so they wind up dissolving their Partnership, but the experience taught Harry a lesson he insisted that in and out remain forever independent After that Harry swore he would never sell out or never take a partner. He was happy with his golden goose. Harry's expansion, like how he picked the sites for
Speaker 2
49:52
his store was really easy. You should just go to where your customers are, right? And then you just, and he rides the expanding technology of his day, which is they're building a ton of freeways, right?
Speaker 1
50:00
So he puts his stores, his drive-thrus, next to freeways. Catering to the car-reliant customer, Harry focused on putting his drive-thru right next to off-ramps of the fast-expanding freeway system. The growing Southern California freeway network became a significant factor in In-N-Out's rising popularity.
Speaker 1
50:20
Another example of where he deviates from his competitors, they're going public, they're taking on a lot of debt to fuel expansion, Harry abhorred debt. He insisted on using cash not credit to open each new restaurant. Harry followed old rules. He built 1 store, saved money, he built a second store and saved more money.
Speaker 1
50:37
That was the Harry Snyder way. He did not take out loans. He didn't take on debt. He was beholden to no 1.
Speaker 1
50:44
And so what you'll start to notice is just he's got a lot he's got like a handful of really simple principles he refuses to deviate from he focuses on quality does that for decade after decade he's giving us somewhat of a blueprint to build like a cult-like following people will respond to this because you've put their interest ahead of your own this was the fast-food game in the 1950s start grow franchise sell In-N-Out Burger could have easily been 1 of them if not for Harry and Esther's steadfast philosophy. The couple was unmoved when Ray Kroc of McDonald's fame more than made good on his promise to open 100 new McDonald's a year. The Snyders remained remarkably unconcerned. What a great sentence.
Speaker 1
51:25
They remained remarkably unconcerned. Harry had an extraordinary lucid vision for In-N-Out Burger. They had no interest in selling or franchising. If you did that, he said, you would lose control and focus.
Speaker 1
51:39
He saw no point in sacrificing quality for profits and there's the dirty little secret. If you focus, if you never sacrifice quality, you wind up getting the profits in the end anyways.
Speaker 2
51:52
And so there's a paragraph that comes later in the book that reminded me of Herb Keller's, I think it was Founders Number 56, he's the founder of Southwest Airlines. Southwest is the only airline to ever achieve profitability for like 40 straight years. He's got, I feel like Herb's approach to building an airline was so counterintuitive, it's very, like compared to the rest of his competitors, very similar to what Harry's approach to building like a fast food restaurant was.
Speaker 2
52:16
There's just a ton of benefits that come from just keeping things simple. And again, I think this goes against our nature. And so here's an example of how this 1 paragraph just reminded me of Southwest, because Southwest would only fly 1 type of plane.
Speaker 1
52:30
They only focused on their niche. They weren't going international. They just did it.
Speaker 1
52:33
They essentially looked at what the industry was doing. He's like, no, we're not doing any of that. So it says, it's hard enough to sell burgers, fries, and drinks right. And when you start adding things, that gets worse.
Speaker 1
52:41
In-N-Out's limited scope and narrow focus also meant that the chain didn't have to continuously spend money on new equipment needed to prepare and cook new menu items. It also wasn't necessary to repeatedly train his associates to learn how to ready those new offerings.
Speaker 2
52:56
So if you're interested in the benefits of applying the benefits of simplicity to your own business, I think the best book is, just read that book, Nuts. It's called, number 56, you can find it obviously anywhere. Books are sold, it's fantastic.
Speaker 2
53:08
It's called Nuts, Southwest Airlines Crazy Recipe for Business and Personal Success. It goes into a lot more detail about all the, just how this constant focus on simplicity and cost and not market share and only profits that Herb Keller was obsessed with again like how the hell are you running the same business you're offering essentially the same service right where it's just like a bus that goes through the air what the airlines were right And how the hell were you able to get, like most, not only were you profitable for 40 straight years, there's many cases where airlines are so badly managed that any profits they'd made maybe like the previous decade could be wiped out in 1 bad year. It's just remarkable how all these things are connected. So I think reading that book is just a good start.
Speaker 2
53:49
Anyways, I want to go back to
Speaker 1
53:53
The author Stacy Perman does a fantastic job of putting in like historical context So I mean what I'm about to read you is gonna take place over like 5 pages But it's about like the increase in processed food, fast food, this explosion of an industry that is now very mature and it's kind
Speaker 2
54:10
of like a day-to-day life, not only for Americans, but all over the world. It wasn't always like that.
Speaker 1
54:15
And so You had all this money being dumped into
Speaker 2
54:17
it, all this quote-unquote innovation. You could definitely argue that innovation was good or bad or not, right?
Speaker 1
54:23
But it's all occurring while Harry's building his business. I wrote, Harry Snyder was having none of it. That's how I described the section.
Speaker 1
54:32
It starts with people trying to find ways essentially like food technology I guess the way you think about it. This is pretty wild. You've heard the term TV dinner. That was at 1 point a quote-unquote technology and it was an invention.
Speaker 1
54:44
So it says TV dinners were invented by C.A. Swanson and company. There was a food technologist named Betty Cronin. She initially expected to sell 5, 000 units.
Speaker 1
54:54
Her company sold 10 million TV dinners the first year on the market. It was just 1 invention in the era of easy, instant food. So that is what the author has explained to us. And nowhere did this budding emphasis on the frozen, dehydrated, prepackaged, and automated food find a more welcoming home than the growing fast food industry.
Speaker 1
55:15
So it talks about people were making a ton of money, these businesses were coming in, they'd invent things like an infrared heat lamp, right? So they're selling, they make that invention, then they sell them to McDonald's. So instead of making the food as it's ordered, right, like Harry does, it's like, no, we can kind of predict how many we're gonna sell. Your food might have been made for 5 minutes, but it's okay because it's sitting under an infrared heat lamp.
Speaker 1
55:35
Another example, White Castle replaced fresh beef with frozen square beef patties. 12 years later, Ray Kroc reluctantly made the switch to frozen beef. This is all these things that
Speaker 2
55:46
are happening that everybody else is doing that Harry's not that's why I'm telling this section Then we see J.R.
Speaker 1
55:51
Simplot who was the country's largest supplier of fresh potatoes Devised a new method that could freeze french-fried potatoes on a mass scale Simplot met with Ray Kroc and convinced him to buy his quick freeze potatoes because he said it would keep the quality consistent. And so that's the sales pitch and Ray Kroc agreed. So now McDonald's has frozen beef and frozen French fries, neither of which Harry's doing.
Speaker 1
56:15
And it goes on for a little bit more. I'm skipping ahead a little bit. The relentless competition and new preparation techniques had transformed the entire industry that had once uniformly prided itself on the personal touch. Guess who keeps a personal touch?
Speaker 1
56:26
Harry Snyder was having none of it. Harry was determined to do things exactly as they'd always been done. He had developed and clung to his own values, focusing on quality. As many of the leading chains were beginning to use frozen beef patties, Harry went in the other direction.
Speaker 1
56:41
He hired In-N-Out's first butcher. He wanted to exert more control over his products, Not just find a way to wring more money out of cheaper products. So again, you don't build a cult following by trying to wring more money out of cheaper products. You might make more profits temporarily in the short term.
Speaker 2
56:59
But what is the value of this relentless cult-like following the In-N-Out has, right? That they, the word-of-mouth advertising that they relentlessly do and processize every single other person. So, like, when I, any time
Speaker 1
57:10
I visit California, I eat In-N-Out just because the people that, my friends that live in California wouldn't shut up about it. They literally converted me. And so this continues.
Speaker 1
57:18
I'm still in the same section. Harry's decision proved to be a critical moment in deciding just how the company would define itself. In-N-Out took the same approach with its french fries. The Snyder's still made theirs by hand.
Speaker 1
57:28
Burlap sacks of whole fresh potatoes, especially grown for In-N-Out, arrived daily and they were distributed to each store, where they were washed, peeled, cut, and cooked. They're not frozen. Frequently, the potatoes were picked in the morning and delivered to In-N-Out the same evening. That's crazy.
Speaker 1
57:41
I don't know. I wonder if it's still like that. Harry made sure to scrutinize the freshly delivered sacks. They were inspected for starch content and a test batch of fries was made up right away.
Speaker 1
57:51
If the potatoes weren't up to muster, the whole truckload was rejected. So this guy's extreme, right? In an industry that was substituting chemically processed, pre-packaged and frozen food for the real thing, In-N-Out continued to use traditional sponge dough buns, fresh baked daily, that took several hours to rise. Its competitors took to purchasing buns injected with chemicals that considerably reduced the rising time of the dough.
Speaker 1
58:17
Do you like that is the main thing here. He's like I'm focused on the customer. I'm focused on quality. My competitors are focused on
Speaker 2
58:24
the spreadsheet. They're like why we spending 25 cents on a bun when we can when we can spend 10 cents
Speaker 1
58:30
Which is really bizarre if you think about like how much of your life energy you're putting into building up your company You're building up your products Why on earth would you skimp on what you're dedicating your let your precious and finite life energy to? Clearly Harry's way is better And when you focus on product like you can and the quality product you can let the quote the product speak for itself That's the focus of the product. How do you know people have weak products?
Speaker 1
58:55
They do stuff like this. McDonald's started to focus on idealized experiences and created alternative universes with fuzzy mascots that were heavily geared towards children. Ronald McDonald was a clown in a bright yellow jumper. Burger King began featuring a king who sat on a burger throne.
Speaker 1
59:10
Their advertising campaigns had jingles and slogans. They focused on fun and fantasy and for a time everything but the actual product. The story of In-N-Out remained static. The message was hamburgers and fries and it was broadcast by its customers.
Speaker 1
59:27
The chain's simplicity endeared In-N-Out to its long-time regulars, establishing an uncommon customer loyalty, 1 that its competitors spent hundreds of millions of dollars trying to create. And I think that's another main lesson of the book. I think this is a quote I got from Jack Dorsey, the founder of Twitter, and he said, make every detail perfect and limit the number of details to perfect. And if
Speaker 2
59:54
I was writing that, I actually put
Speaker 1
59:55
in the reverse order. I would say limit the number of details to perfect and then make every detail perfect. And that is exactly what Harry Snyder did.
Speaker 1
01:00:05
So now we are 25 years into the company and let me read this to you and I have a question for you. Inside the company franchising was a dirty word. After 25 years there were only a dozen In-N-Out burgers. Harry owned each store and the land underneath them.
Speaker 1
01:00:25
And that was exactly how Harry liked it. And so I thought about that. I was like, that's really interesting. What is a dirty word inside your company?
Speaker 1
01:00:32
It's a way to define your company by what you're not Inside the company franchising was a dirty word and I also love his perspective Let's check out this is 1 line that really resonated with me from his perspective in and out was simply a different creature than its competitors. There's a fantastic line I heard in a song 1 time. He says, we may be in the same genre, but we don't put out the same products. That's exactly what he's saying.
Speaker 1
01:00:55
So again, technically I'm in fast food, just like McDonald's in the fast food. Is our product the same? No. So therefore, I'm not really competing with you.
Speaker 1
01:01:02
In-N-Out was simply a different creature than its competitors Another great 1 line for you. This is just a fantastic trait describing Harry He was very much about problem-solving before It became a problem
Speaker 2
01:01:17
and then there's just a funny story He also had a hell of a temper
Speaker 1
01:01:20
as you can imagine And so this is a quick story about people with no brains
Speaker 2
01:01:24
And so trying to open up as they open up new stores They have
Speaker 1
01:01:27
to meet with like city planning commissions and everything else. This is happening in Rancho Cucamonga, California We had a meeting there with the city's planning staff, he remembered.
Speaker 2
01:01:34
This is somebody that's working with Harry.
Speaker 1
01:01:36
And there was this planner who was just out of college. He was greener than grass and he said to Harry, I think your hamburger stands are ugly. With that, Harry turned red and jumped to his feet and so at this point Harry is probably a close to 60 year old man Okay, so he's having some kid doesn't never experienced anything in his life Say I'm not gonna prove this because I think I personally think it's ugly right as he says he was greener than grass He said I think your hamburger stands are ugly with that Harry turned red and jumped into his feet and less and let loose with a string Of expletives after calming down Harry turned to the young city planner and demanded how many millions are you worth?
Speaker 1
01:02:12
How many successful businesses do you run? Recounting the tale Harry's friend concluded. I love that story. It's about city planners.
Speaker 1
01:02:21
People with no brains. And so Harry smoked for about 20 years. He'd quit for I think the last 15-20 years of his life, but unfortunately They found a bunch of lung cancer. And this is what Harry was thinking about as he's battling lung cancer and he knows he's gonna die.
Speaker 1
01:02:36
Successful family businesses are often erected through the sheer will and force of a specific individual. That obviously being Harry, the 1 we're focused on. The challenge for Harry was the challenge of all patriarchs, to pass on the company he built to someone who would be able to maintain its success without abandoning the unique culture that had made it a winning hand in the first place, and to keep it in the family for successive generations. It is now currently in the third generation, both his sons.
Speaker 1
01:03:03
So he passes on to his second son after he dies. His son dies a
Speaker 2
01:03:07
few years later in actually a plane crash on their corporate jet. And then his other son that he didn't want to take over the firm winds up taking over the firm. He dies.
Speaker 2
01:03:17
He's a drugging kind of like a loser, unfortunately. He dies a drug overdose. And so unfortunately, his wife, Esther, had to, she survived not only her husband's death, then her 2 sons death. And then she lives, so she's like 90.
Speaker 2
01:03:29
And then when she dies, it passes on to the only, they only had 1 surviving grandchildren, a blood relative. And that's Lindsay, the 1 that that runs that owns the company now. But Harry worked wind up working on In-N-Out till he died. He winds up working on it from 1948 to
Speaker 1
01:03:43
1976. So it says in 1976, when McDonald's opened its 4000th restaurant, In-N-Out opened its 18th store in Woodland Hills. The Woodland Hills drive-thru was the last In-N-Out burger opening that Harry Snyder oversaw. He died on December 14th, 1976 at 63 years old.
Speaker 1
01:04:08
On a warm winter morning, Harry's funeral mourners filled into 120 seat church. The chapel was too small to accommodate the hundreds of mourners who had come to pay their last respects to Harry Snyder. Many stood outside. He really touched a lot of folks.
Speaker 1
01:04:25
It seemed that everybody that he had ever had contact with arrived to say goodbye. That part made me think of what Charlie Munger said, think about the kind of funeral you want and act accordingly.
Speaker 2
01:04:37
The book goes into more detail about the succession plan and the growth that happens over the next 20 years. To get the full story, read the book. If you want to support the podcast and buy the book at the same time, I'll leave a link down below.
Speaker 2
01:04:49
Another way to support the podcast is to give a gift subscription to a friend or a coworker. That link, as always, is down below in the show notes in your podcast player and also available at founderspodcast.com. That is 244 books down, 1, 000 to go, and I'll talk to you again soon.
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