Notes From: Jim Koch. “Quench Your Own Thirst.” iBooks. (Chp. 4-9)

November 5, 2016 

“After figuring out the “better or cheaper” principle, I recognized an important corollary: The size of your business is defined by the number of customers who care about getting either the higher quality or the lower cost, as well as by how much these customers purchase.”

November 5, 2016 

“I INCORPORATED BOSTON BEER Company on July 2, 1984. My first important task, one that only took a few weeks, was to secure funding. I calculated that I needed $250,000 to start the company.”

November 5, 2016 

“I signed a one-year lease for $80 a month for warehouse space in the old Haffenreffer Brewery, which had been the last operating brewery in the city of Boston. Since the brewery’s closure in the mid-1960s, the building had fallen into disrepair and had been largely abandoned. ”

November 5, 2016 

“I had a warehouse, but with only $250,000 to work with, I knew I wouldn’t be able to build my own brewery. My dad came up with a great solution: “Jim,” he said, “there are plenty of good breweries out there with excellent quality control that aren’t working to their full capacity. Why don’t you rent time in one of them and brew your beer there? That will give you a foothold until you have the capital to build a brewery of your own.”

November 5, 2016 

“Contract brewing would make my start-up leaner, and it would also be better for the beer, since a quality established brewery would have a much better brewhouse, cellars, and laboratory that I could use. In addition, our recipe is complex, and my father and I knew we needed a traditional brewery with modern quality control to maintain consistency from brew to brew.”

November 5, 2016 

“Through a BCG contact, I arranged a meeting with Arthur F. F. Snyder, a vice president at U.S. Trust Company. Art was your classic, crusty old Yankee banker right down to the suspenders. ”

November 5, 2016 

“Before I could get very far, he stopped me and said, “Jim, I have some bad news. You can go to as many banks as you want, but nobody is going to lend you any money.”

November 5, 2016 

“Because we’re a bank, and we don’t get paid to take risks. ”

November 5, 2016 

“With banks out of the picture, I went to see whether a friend of mine at a venture capital firm would help. He looked at the business plan and proclaimed he wasn’t interested. When I asked why, he said, “Well, we need to invest in businesses that have at least a reasonable possibility of returning ten times what we put in it. We make ten investments a year, knowing we’ll lose our shirts on five of them. Four of them might break even or make double our money. We need one that will allow us to make a healthy return—say, ten times our money. ”

November 5, 2016 

“I had known from the outset I wanted a partner, since my father had always told me how good it was to have someone with whom to share the highs and lows. I also felt that a partner could contribute some of the skills I didn’t have and perhaps have a personality that complemented mine.”

November 5, 2016 

“ Then it hit me: The resumés accumulating on my assistant Rhonda’s desk weren’t the solution. Rhonda was the solution!”

November 5, 2016 

“Rhonda Kallman’s presence at BCG was a great testament to the way BCG cherished talent. Serving as admin assistant to not one, not two, but seven people, she was smart as a whip, a fast learner, and a good listener. She didn’t have a bachelor’s degree, but that didn’t matter; I had plenty of degrees. Rhonda had something I did not, something they don’t teach at Harvard Business School: Rhonda liked bars and she liked people. She was a very determined person—“force of nature” comes to mind. She understood people and what motivated them. She understood bartenders and servers. Plus, she was single and in her early twenties. Bars were her natural habitat.”

November 5, 2016 

“Confident and self-possessed, she knew how to handle the hyper-achieving, high-anxiety, Type-A business consultants at BCG. With her sharp sense of humor, she had a knack for making people feel comfortable so that they did what she needed them to do, often without even realizing it.”

November 5, 2016 

“Her skills aside, I knew it would be fun to go to battle with her on my team. I first broached the notion of a partnership to her during the spring of 1984, just before I incorporated the company. I had not yet worked out many of the specifics of our operations, so I suppose my offer came across to her as vague or overly idealistic or stupid. She didn’t definitively say no, but she made it clear that she was not interested; she valued the stability of her job with BCG and the fun of bartending on the side. She also had serious doubts about whether my idea of a richer, full-bodied, craft-brewed beer would fly. “Jim,” she said, “nobody drinks your kind of beer. They drink light beer. There’s no room for little guys in the beer industry. I doubt we’d even serve it in the bar where I work.”

November 5, 2016 

“We like to think of America as a pure meritocracy, a place where the best talent always wins out. Yet in many cases, the best candidate doesn’t get hired; the candidate with the best education or the best resumé does. Many companies, beholden to what is essentially an education-based caste system, would never consider Rhonda, who had an associate’s degree in secretarial science, for the same job as a Stanford M.B.A. ”

November 5, 2016 

“PERSUADING RHONDA TO JOIN Boston Beer was my first sales call and, to this day, probably my most important one. Her value to the business became clear immediately, when we sat down together in a bar to sketch out our initial sales efforts.”

November 5, 2016 

“Among bars and restaurants, we would target places that sold significant quantities of imported beer and were the best at what they did. ”

November 5, 2016 

“ We wanted to be in a premium place like the Ritz-Carlton, but also in the best neighborhood pubs in Boston and the best dive bars—essentially, all the places that offered Bostonians the most authentic, high-quality drinking experiences.”

November 5, 2016 

“A START-UP ENTREPRENEUR has to juggle a lot of balls. You’re not really a chief executive officer, because there’s nobody but yourself to execute. The CEO title takes on a new meaning. You’re the chief everything officer. In my case, starting a beer company required I handle a dizzying array of tasks.”

November 5, 2016 

“My previous efforts at home brewing hadn’t produced anything memorable except my first wife’s dismay. Now that I had the recipe from my father, I got serious and started experimenting in our kitchen. ”

November 5, 2016 

“ Not every batch was successful. On one occasion, the beer exploded in our basement. When you home brew, the final step is to fill the bottles with fermented but flat beer, prime them with a precise amount of sugars, cap them, and let the carbonation build up as the yeast eats all the sugar. I was making an all-malt beer, so I was using maltose instead of sugar, and I miscalculated how much I needed. In a few days, the bottles started exploding: Pop! Pop! Pop! Pop! They sounded like muffled grenades. Oh, man, I thought. I went carefully downstairs and saw that only a few of the bottles had exploded.”

November 9, 2016 

“A lot of start-up stories talk about the lone genius founder toiling away in solitude until he has perfected his product and then emerging to dazzle the world. Those stories don’t ring true to me, and they weren’t my story. I wanted to make uncompromisingly great beer, and I knew it would be a better beer if I had the help of the best brewmaster in the world.”

November 9, 2016 

“Given all that Joe had accomplished, I felt he was the ideal person to help me re-create my unique beer. When starting a business, there is probably one thing in a hundred where you need to be the best in the world. The other ninety-nine things, you can be pretty good at. For that one thing, though, it’s vital that you get the very best person in the world to mentor you and help you achieve perfection. You know Yoda from The Empire Strikes Back? You need a Yoda.”

November 9, 2016 

“There’s a story about a ship whose boilers were not working right, and nobody knew how to fix them. They found a world-famous expert who came in, banged on a pipe with a hammer, and made the boiler come back to life. “That’ll be $10,000,” the expert said.

The ship’s captain was beside himself. “Ten grand? For banging on a pipe? That’s an outrage! Send me a bill that justifies the expense.”

So the expert sent a bill. He charged $1 for hitting the pipe, and $9,999 for knowing which pipe to hit.

Joe was like that. He knew which pipe to hit, and in exchange for that kind of knowledge and expertise, I paid him as much as I could muster ($7,500 for his services for all of 1984) and gave him 2 percent of the company. He more than earned his keep.”

Notes From: Jim Koch. “Quench Your Own Thirst.” iBooks. 

Check out this book on the iBooks Store: https://itun.es/dk/it2x-.l

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Notes From: Jim Koch. “Quench Your Own Thirst.” iBooks. (Chp. 1-4)

October 2, 2016 

“ Driven by further innovations like Angry Orchard hard cider, Boston Beer’s 2015 revenues have reached nearly $1 billion. That might be an impressive-sounding number, but Samuel Adams is still only about 1 percent of the overall U.S. beer market. That’s right; it took us thirty years to get to 1 percent. We started at invisible, grew to infinitesimal, got to minuscule, and moved to tiny. In 2015 we can proudly say, “We finally made it to small!”

October 2, 2016 

“ Never did I think I’d get to drink some 24,000 beers as part of my job. Never did I think my work days would be so diverse and engaging, and that they would include tasting experimental brews, presiding over weddings at our brewery”

October 2, 2016 

“Throughout my childhood, my dad’s mantra was: Every problem has a solution. This optimistic yet pragmatic perspective helped my dad overcome any fears he might have had as he started his own business—and, I might add, it helped him in the rest of his life, too. ”

October 2, 2016 

“As a kid, I watched my dad’s pragmatic optimism in action every day. But I didn’t just soak it in; I put it into practice myself. When the washing machine broke, Dad and I went down to the cellar with a toolbox, took the thing apart, and figured out what was wrong. ”

October 2, 2016 

“We enjoyed our share of family activities, but the ones I remember most growing up had to do with work, not play. No job was a “dirty” job; all work was worthwhile and valued as a craft. One year my family and I planted thousands of Christmas trees on our farm. Other times my brother and I went to my dad’s company and helped him fill drums of chemicals. ”

October 2, 2016 

“All these chores and jobs forced me to solve problems, and to rely on my own resources to do it. When obstacles arose, I thought, Okay, there’s a solution out there. Maybe I can’t see it, but it exists. I have everything I need inside me to find it. If I try hard and still don’t see the answer, then maybe I need to start fresh. Eventually, I will see it. Every problem has a solution.”

October 2, 2016 

“By the time I reached my mid-thirties, starting a company didn’t seem fundamentally different from any other practical task I’d attempted. I wasn’t terrified at the prospect of leaving stability and familiarity behind, because I knew things would work out.”

October 2, 2016 

“The year was 1973. I was twenty-four years old, and instead of working toward something I cared about, I had enrolled in graduate school, a dual J.D./M.B.A. program at Harvard. I had gone to Harvard as an undergraduate, and now I felt like I was in “nineteenth grade,” sequestered in what was essentially a womb with a view. ”

October 2, 2016 

“I felt trapped, like I was floating down a pounding river. If I continued on toward graduation, I would be routed onto a life stream I didn’t want. ”

October 2, 2016 

“I wrote letters to the deans of Harvard Law School and Harvard Business School, telling them I was dropping out. They urged me to reconsider, since I would have to reapply for admission if I wanted to return. But I had decided. I didn’t want to go where the river was taking me.”

October 2, 2016 

“Over the next three years, I was at Outward Bound schools in the mountains of Colorado, the desert in Texas, the mountains in Oregon, the lakes of Minnesota, and the rivers and mountains of British Columbia.”

October 2, 2016 

“In retrospect, that’s kind of what I was doing with my life—charting my own path. It may have seemed like I was a “dropout,” and in a literal sense I was. I was moving in no particular direction, toward no particular goal. ”

October 2, 2016 

“Should you change something big in your life? Should you switch departments or take on a new role? Should you quit your job and start a business? I can’t tell you that. What I do know is you shouldn’t settle when it comes to work and career. If you’re going to work hard, you should find it satisfying and meaningful. Work is too much a part of your life and identity not to. ”

October 2, 2016 

“BACK IN 1983, when I started thinking about starting my own business, I had no idea what it would be. It’s not like I had always been obsessed with beer. Sure, beer was a fairly strong presence in our family life when I was growing up; I visited breweries with my father on many occasions, and, in keeping with our German heritage, we kids were sometimes given a little beer with dinner. But that didn’t translate automatically into an irresistible business idea. ”

October 2, 2016 

“I loved the intellectual challenge of consulting, but the constant business travel had gotten to me. I wanted to see more of my family while doing something I enjoyed, something that was meaningful.”

October 2, 2016 

“I had been home brewing off and on for a few years, seeing it as a way to feel connected to my family’s heritage (President Jimmy Carter had only legalized home brewing in 1978 and it hadn’t yet become popular). I understood the basics and, having worked with manufacturing processes at the consulting company, I also thought I had a basic understanding of what was required to brew great beer consistently and on a commercial scale.”

October 2, 2016 

“I realized that I would face several challenges in getting this business off the ground. First, I would have to persuade drinkers to pay a premium for a beer that was richer and more flavorful than the pale, bland beers that were then as ubiquitous as Coke and Pepsi.”

October 2, 2016 

“Next, I would need to demonstrate something far more difficult: that an American brewer could brew beer that was as good as or better than the pricey European brews.”

October 2, 2016 

“If I could overcome all of these hurdles in educating drinkers, then the real Beer 101 would start. I would need to teach drinkers about the importance of brown bottles over green (to protect the beer from the damaging effects of light), about the reliable freshness of our product, and about quality ingredients and brewing practices. If I could teach drinkers all that, then, I thought, they would seek out a beer brewed in America using the world’s best ingredients and packaged to protect the integrity of the beer.

My idea boiled down (no pun intended) to three basic phases: Make great beer. Give it to people fresh. Find customers.”

October 2, 2016 

“We build all these frameworks, models, and modes of understanding to organize and explain what we experience. But there are always discrepancies or inexplicable truths, if you will, that fall outside our models. Our knee-jerk response? Either ignore these inexplicable truths or explain them away inelegantly.”

October 30, 2016 

“ Most commercial activity operates within the accepted paradigms of how the world works, with companies making incremental improvements in cost or quality. Entire industries are built around expanding and tweaking the accepted paradigm, and attempts to challenge the accepted paradigm are almost always frowned upon or marginalized, dismissed as impractical or wrongheaded. The truth is that most of the value in an industry is created precisely by people who venture outside of conventional wisdom. You know the people I’m talking about—the ones who embrace those wondrously creative, “holy shit” moments and who go on to do what most people didn’t expect or even think was possible.”

October 30, 2016 

“As a management consultant, I always took a special interest in the outliers in any industry. We would draw graphs to prove general rules, like the bigger the company, the larger the profits, or the faster the equipment ran, the lower the cost—stuff like that. But in processing the data, we always had certain data points that were off the line. Most people looked at the graph and saw the general rule, but I liked to observe and wonder at the weirdness of the outliers. Everybody already knew the general rule—that’s why it was the general rule. For me, the real opportunity lay in understanding the outliers, since these phenomena reflected activity that people usually ignored.”

October 30, 2016 

“As you tune in to listen for your great business idea, don’t get too influenced by what most people in an industry or a field say you “need to do.” Go your own way. A new business is built on a different and better approach than what’s already out there. And it’s okay to enter a field you know only a little about, because that little bit that you know can be key.”

October 30, 2016 

“You’ll of course want to look for skeptics who can help you test your idea. Some entrepreneurs fall so in love with their genius concept that they think they can’t lose. I get worried when I hear “all my friends love it.”

October 30, 2016 

“NOT LONG AGO, Harvard Business Review published an article on a two-decade-long study of thousands of businesses. The research revealed that there were precisely two rules of successful companies. The first rule: You succeed by adding value rather than reducing cost. The second: There are no other rules. I would add a third: If you can do both, you have a home run.”

October 30, 2016 

“ Price is important, but if that’s all you have to offer customers, then eventually you’re just a commodity and you hit a dead end in the market. You’re stuck always trying to be the lowest-price provider, cutting corners to reduce your costs. Somebody can always underprice you by cutting more corners.”

October 30, 2016 

“As I began to think about starting my own company, I was determined that any enterprise I created would clear a place for itself in the market by doing something better than its competition. That’s where all the passion and excitement in business was. We wouldn’t just ask customers to pay more; we would give them a good reason for doing so. In crafting your business plan, be brutally honest: Are you really providing a better product or service than what’s out there? Does anyone truly care? If so, can you do it at a price point that enough customers will find palatable?”

Notes From: Jim Koch. “Quench Your Own Thirst.” iBooks. 

Check out this book on the iBooks Store: https://itun.es/dk/it2x-.l