Bob Taylor (6:13)

I started when I was in third or fourth grade. I bought a guitar for three bucks from the kid across the street. And I was in shop classes, metal shop in my junior high. Casting aluminum in sand castings. After making wooden patterns. I was operating a lathe 11th grade. Two weeks into it, I had seen a guitar that I wanted to buy at a store. It cost 175 bucks. I didn't have that money, so I thought, well, heck, I'll just make a guitar. So I went over to the wood shop and asked the teacher if I could join late. And I made my first guitar there.

Guy Raz (6:50)

And I think you continued to make a few more guitars in high school. And I guess it was around that time you discovered this little guitar shop in a suburb of San Diego called the American Dream. And I think they mainly they did repairs or maybe they sold some supplies, but they also made custom guitars. And I guess it was run by this guy, Sam Ratting.

Bob Taylor (7:13)

Yeah, it was a kind of a hippie setup. If someone imagines a hair salon, that's how the business was working. He owned it. You got a bench there, like a hairdresser would get a chair. And I saw that little shop, 1500 square feet of space. And so after high school, I went there and showed him the guitars I made and wiggled my way into having a bench there. And it was a dream come true to me.

Guy Raz (7:40)

Yeah. And so basically, you Finish High School, 1973, you get a job at American Dream, specifically to build custom guitars for people who wanted to buy them.

Bob Taylor (7:52)

That's right. And it was pretty crude. There were actually very few people that were making guitars on a small scale. Now, if you went to Spain, there's a guitar maker on every single corner, Hundreds, thousands of them. But in the US it wasn't a thing. Now, a lot of those people had burgeoning hippies that were starting to repair guitars and maybe make one, but all guitars were not handmade.

Guy Raz (8:17)

Got it. Okay. I want to bring. I want to bring you in, Kurt, because meanwhile, you also grew up nearby in San Diego.

Kurt Listug (8:23)

Yeah.

Guy Raz (8:24)

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

Kurt Listug (8:42)

Yeah, I grew up playing the piano. I just loved music, you know, I absolutely Loved music, and the opportunity to do something with music was exciting to me. And, yeah, Bob came around the same time. It was August of 1973, and he stood out very quickly from everyone else with his talent and his ability to get things done. He had a really good work ethic. He wasn't just, like, hanging out to hang out and do a little bit of work like some of the other people. Or like me, for example. I wasn't that good at it.

Guy Raz (9:12)

I think, Bob, you were 18, and Kurt, I think you were 21 or 22 when you guys were there. And, I mean, you were so young. So I have to assume that at the time, neither of you guys had big ambitions. Probably you were thinking, this is cool. I'm working at a guitar shop and I'm earning a paycheck.

Kurt Listug (9:28)

Yeah, I wanted to do something that had to do with music and the arts. I didn't want to be behind a desk.

Bob Taylor (9:33)

Yeah, I still feel the same way today.

Guy Raz (9:36)

Right, right. All right. So this is the first year 73. The both of you are working there. And I guess, Bob, I mean, you start to experiment with, like, different methods or techniques of making, particularly the neck of the guitar. Explain what a guitar. An acoustic guitar neck was at the time and what you started to do.

Bob Taylor (10:00)

The guitars that were available at that time were kind of hard to play. They had a lot of tension on them being steel strings. So the necks were fat. Big, fat necks to try and make them strong.

Guy Raz (10:12)

Not the width of the neck, of the thickness of it.

Kurt Listug (10:14)

Yeah, just.

Bob Taylor (10:14)

Just the thickness of it. The guitar players in those days started calling them baseball bat necks. You know, I mean, they were round and thick.

Guy Raz (10:22)

Right. So if you had a small, small hand was hard to play guitar at that time.

Bob Taylor (10:27)

Yes. And a lot of what I did was happy accident. Ignorance is bliss, man. You know, if. If you don't know, if someone doesn't come up and tell you this is how a guitar is supposed to be made, you make the guitar the way you think maybe it should be made. And for me, well, the first guitar I made at the American Dream, I just kept shaving the wood off till it felt comfortable in my hand. And people were amazed. I made the neck slimmer and then put it in people's hands and they're like, I love this. It feels like an electric guitar, which had slimmer necks and lower strings and easier to play.

Guy Raz (11:00)

Basically, you shaved the wood down on the neck to make it easier to grip with your hand.

Bob Taylor (11:07)

Exactly. And I put the strings lower to the fretboard. So they were easier to push down. So go back to those days. You have your early rock and roll bands and everything that's happening in Laurel Canyon and West coast country rock music being developed, and people are playing electric guitars and acoustic guitars were being played down south back east in bluegrass and folk music. And I made a guitar that electric guitar players loved because they could play it.

Guy Raz (11:38)

Right. But you were. I mean, this was a small guitar shop in a suburb outside of San Diego. And you come up with this idea and it doesn't. It's not like all of a sudden like, Nirvana revolutionizes guitars. Like, it would take a while for people to see this innovation. And so I'm assuming at the time, the people around you weren't like, oh, my God, Bob, you have changed guitars. Right? They were just like, oh, this is great.

Bob Taylor (12:02)

Yeah, yeah.

Kurt Listug (12:03)

To put in perspective, Guy, the American Dream did $30,000 a year in sales. So it was like a little speck. So, you know, Bob making a guitar with a neck that's more comfortable, who's he even going to know about it? Just the few people that come in or the person he made the guitar for.

Guy Raz (12:21)

Yeah, so this was a. This was a very small shop. Probably the owner of the shop, Sam Redding. Well, from. From what I've read, he. It was. It wasn't doing great. And I guess he decides in 1974, he wants to just move on. And he goes to his employees, including you guys, and says, hey, I want to sell it. Anybody interested in buying my shop? Do you guys remember how. I mean, did you, both of you immediately put up your hands and say, we want it?

Kurt Listug (12:52)

Well, Sam called a little meeting, and I was interested, along with my friend that I'd grown up with. And Bob was interested, too. And we each put together a little plan. And then I spoke with my dad and said, hey, would you. Would you and mom consider loaning me the money so that we could do this by Sam. Sam wanted, I think, $3,700.

Guy Raz (13:18)

$3,700 for the business. Was that. That seems to me to be really low. Was that a lot of money in 1974? I'm just. Because he was doing $30,000 in sales a year. Was that a lot? 3,700.

Kurt Listug (13:33)

Well, you know, it's a different world now, too, in terms of finance and values and all that. But his ambitions weren't to grow a business or make a lot of money. He just wanted to work on guitars. That's what he liked. He wanted some of us to continue.

Guy Raz (13:45)

It on and you would take over the lease of the space.

Kurt Listug (13:48)

Yep.

Guy Raz (13:48)

Okay, so $3,700 was to buy the name of the business and his tools and equipment. I mean, when you heard that price, was that something that you guys could do easily?

Kurt Listug (13:58)

Not easily. We had to borrow the money from our folks. But actually, we didn't find out till after we bought it that it didn't include the name.

Guy Raz (14:05)

Did not include the name. Okay.

Kurt Listug (14:07)

We found out as soon as we signed the papers that we weren't getting the name. And then we weren't going to have the phone number that we'd counted on.

Guy Raz (14:14)

Either, because that was Sam. The owner's personal phone number.

Kurt Listug (14:19)

His brother, actually.

Guy Raz (14:20)

His brother's number. Okay. Yeah. So. So you have. You would not get the phone number, which was critical at the time because that was how people. Yellow Pages. Right?

Kurt Listug (14:28)

Totally.

Guy Raz (14:29)

So, Kurt, how did you get the money? Both of you guys, I guess, went to your parents. What did your. Your parents. I mean, you were. You said to your parents, hey, I want to buy this guitar shop. And they said, what?

Kurt Listug (14:40)

Well, I asked them if they'd consider loaning me the money. And my dad said, well, who's the best guitar maker there? Which is pretty smart of him. And I said, well, that'd be Bob Taylor. He said, well, if Bob Taylor will join you and your friend and be a partner, your mother and I would consider it. So we actually put together $10,000 altogether between the other partner, Bob, and myself, and we bought it, and the rest of the money was our working capital.

Guy Raz (15:07)

The other partner was Steve. Is it Schemer or Shemmer?

Kurt Listug (15:10)

Yeah, someone I'd grown up with.

Guy Raz (15:11)

Okay, and you take over the shop October 15, 1974, and it's doing about 30,000 in sales a year. So it's, you know, tough business. But I'm assuming you guys are thinking of ways to maybe generate more revenue. The first challenge is that you don't get the name American Dream. So you had to come up with a new name for what you were going to call it. Tell me about how you eventually landed on Bob's name, Kurt. I mean, how did. Why did you guys decide to name it after Bob?

Kurt Listug (15:43)

Well, we actually didn't at first. We thought, okay, we're going to sell parts, and we want to distribute motherfuck inlays, and we want to do repair work, and we want to make guitars, and we want to do all those things, and. And we want to grow it into a big company. So we need a name that sounds like we're big. So we decided to call ourselves Westland Music Company.

Guy Raz (16:06)

Westland Music Company.

Bob Taylor (16:08)

Yeah.

Kurt Listug (16:08)

Like. Like biggest in the west, you know. Then a few years into it, when we realized our future was really in. In making and selling guitars. And Bob was really the talent. Then we, you know, we decided to call the guitars Taylor Guitars. And we added a little. A little tailor underneath the neck on the little logo we had.

Guy Raz (16:28)

But you could have called it Lista Guitars or your other partners Shemmer. But why? I mean, Bob was the guitar maker, so now, of course, it makes sense.

Kurt Listug (16:37)

He's the talent. Yeah, he's the talent. It's also a great name for a guitar. Yeah, it's as good a name as Martin, as good solid American name guy.

Bob Taylor (16:46)

Let me ask you, would you like to buy a Shimmer guitar, a list of guitar, or a Taylor guitar? Yeah, let me just ask.

Guy Raz (16:52)

Good question. All right, so let's talk about division of labor. Now it's 1974. Now you guys are running your own shop. Clearly, Bob, you had the best skills to make the guitars. What was your role going to be, Kurt? Were you going to focus on, like, business operations more, or were you also going to make guitars? And what was Steve going to do? How did you start to talk about who was going to do what?

Kurt Listug (17:17)

Well, Steve was doing finish work, so he continued doing finish work.

Guy Raz (17:21)

Finish work means you would. He would, like, do the sanding or the lacquering or lacquering. Got it.

Kurt Listug (17:26)

And I was working on. Bob taught me how to build guitar bodies. I wanted to work on business. Not that I knew anything about business, but it was what I was interested in. But, you know, the only way we could hopefully make any kind of living was to do the work that was there to be done, which is work on guitars.

Bob Taylor (17:45)

Yeah, we were serious about that, too. We had. We kept time cards, believe it or not. And every day, Kurt, Steve and I filled out our timesheets.

Guy Raz (17:55)

And it was just the three of you initially, or did you have employees?

Bob Taylor (17:59)

Just the three of us initially. Well, there was employees, then no employees, then employees.

Kurt Listug (18:04)

I'd gone to the Small Business Administration, read a bunch of. Got a bunch of pamphlets, read a bunch of books, and I came to the conclusion that actually, we should actually employ everyone rather than, you know, their commission when they finish work by the end of that year. So having to pay everybody every week, you know, two and a half months later, we were out of money.

Guy Raz (18:25)

Right. Okay, so you. What were some of the things you decided to do to try and salvage this business? Because you were doing repair Work. You were selling parts and you were also making custom guitars.

Kurt Listug (18:38)

Well, we didn't have any sales other than a few people coming in the door. So we'd make a few guitars, we'd hang them on the wall. I would try to figure out how to advertise them. I'd run little ads like in the Daily Aztec, the newspaper for San Diego State. Try Flyers. I mean, anything we could think of to try to get the word out to gain customers.

Bob Taylor (19:00)

Yeah. So two years into it, that's when what we decided to do, we're going to focus on making guitars. Forget all these other things we're trying to do.

Guy Raz (19:09)

Stop doing repair work, stop selling parts, Stop it all. Yeah, yeah, but that was bringing in money, right?

Kurt Listug (19:15)

Yeah. Well, it's one of those strategic decisions you make because people would come by and hang out, you know, and we couldn't get any work done if people would come by and hang out on the couch and that sort of thing. So we decided, well, okay, we're going to stop doing repair work and we're going to shut the door and lock it and focus on the work in front of us.

Guy Raz (19:34)

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

Kurt Listug (19:53)

Right. Well, the money we'd get from guitars was potentially greater. That's what we had to look at. What was our future going to be? Bob was talented. We made guitars that people liked. Bob and I thought that was the future. Steve felt a little differently about it. And that's. That's one of the disagreements we had.

Bob Taylor (20:12)

We figured out that the real future would be to wholesale our guitars to music stores.

Guy Raz (20:18)

Did you guys. Bob, I'm curious. Take me back to 1975. Right. Because from what I understand, the ambition was let's make 10 guitars, you know, a month or something like that initially, Right?

Bob Taylor (20:31)

That's exactly what we thought.

Guy Raz (20:32)

But at that time, I read that it would take you about two months to build six guitars. So just help me understand, like, why again. And some people listening are gonna be like, guy, you're an idiot. What do you mean? Why are you asking this question? But why would it take so long to build a guitar?

Bob Taylor (20:48)

They're very hard to build. They resist guitars. Resist the attempt to be made at.

Guy Raz (20:54)

Every corner because you're bending wood, literally.

Bob Taylor (20:57)

Well, yes, and the humidity changes, and so the size of the part changes. And you put the finish on and it wants to fall off, and everything is going wrong with everything. And, you know, sometimes I say, if you were an engineering student and your task for your master's thesis was to design something that wants to fall apart, Just design a guitar, right? I try and make 10 in a month, and four of them would get ruined somewhere along the way. And I struggled and struggled to try and make it better every day. I really literally would work two days a day. The first day was guitar making, and then the second day, the evening shift was making some kind of tool so that the next time I did that job, it was a little bit easier. That tool could have been a stick with two marks on it, so I didn't have to get a tape measure out every time and remember the length of something. Or it could have been a little pattern that I could draw on or some jig that fits on a table saw to put fret slots where they're supposed to be. One little brick at a time, you make something so that it wasn't groundhogs. Every day for me, I love that idea.

Guy Raz (22:08)

You did two days of work every day, guy.

Bob Taylor (22:12)

Do you mind if I back up just a little bit and tell a story? So we were making these 10 guitars in a batch, and we're not getting anywhere at the end of a couple.

Guy Raz (22:19)

And when you say in a batch, it's like you make one part of the guitar at a time. And then you would put them all together at the same time.

Bob Taylor (22:25)

Yeah, we would bend sides for 10 guitars, brace tops for 10 guitars, then move all 10 to the next step. And the idea being, while I have my bench set up to do this work, I want to do a bunch of it because it's going to be more efficient. And I met an older gentleman that made guitars one at a time. He did. He would start a guitar, and then a couple days later, he'd start another guitar. He had this little miniature one man assembly line to where every couple days a guitar would come off the line, another guitar would get started, and five or ten guitars would all move a step forward. And I'd say, well, okay, you want to make the bridge for the guitar? How many bridges do you make? He goes, well, if I need one, I make one. You don't make 10, I don't need 10, I need one. Yeah, but Augie, you know, when I make a bridge, I set up and I make all of those. I get almost nine of them.

Kurt Listug (23:15)

For free.

Bob Taylor (23:15)

And he just looked at me and he said, Bob, what would you rather have, 10 half done guitars or one done guitar? And that changed my life.

Guy Raz (23:24)

It changed how you, how you started to make guitars.

Bob Taylor (23:26)

It changed everything about our company. Changed everything. I couldn't wait to get home and just walk in the door and go, we're making one guitar at a time.

Kurt Listug (23:36)

That's how cars are made.

Bob Taylor (23:37)

Same thing exactly. They move down the line and. And we've run our company that way. That's how I learned about working capital. That's how I learned about just in time. That's how I learned about, you know, cash flow. So that made all the difference for us. It was a huge, huge thing.

Guy Raz (23:55)

Yeah. And Kurt, you were, you sort of become the public face of this thing of like selling them and going store to store.

Kurt Listug (24:04)

Yep.

Guy Raz (24:04)

Before you tell me about trying to sell these guitars to guitar shops, what was it about them? Like, what was your sales pitch to people when you were trying to explain why they should. Why guitar stores should buy these acoustic.

Kurt Listug (24:16)

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

Guy Raz (24:46)

So. All right, so you, I read that your first full year in business was really challenging and your second full year in business was also pretty challenging. I mean, you were, Kurt, you were having success selling these guitars. I think you went up to LA, but it was like 30, 40 guitars total that you would sell over time. Right. And so once you got paid, it wasn't much money, right?

Kurt Listug (25:14)

We didn't get paid, no. Well, yeah, some of those early trips were pretty exciting because I got leads on stores to call on, went to la, showed them guitars, they were receptive. I came back with checks, three or.

Bob Taylor (25:27)

Four checks on that trip. I couldn't believe it.

Guy Raz (25:29)

And how much was a guitar? Like how much would a store buy one of those guitars for?

Bob Taylor (25:33)

Yeah, you'd get 300 and something dollars for that.

Guy Raz (25:35)

300 bucks you guys would get for a guitar.

Kurt Listug (25:37)

I think I came home with 1800 something dollars. And you know, guys, some of the dealers would buy them just to kind of take pity on me or us, just to kind of help us out, you know, like, okay, here's some young guys trying, you know, I'll buy a guitar, and maybe that'll help you pay the rent this month, that sort of a thing.

Guy Raz (25:55)

But, I mean, you would spend a month or more building one guitar, and it would sell for you. Could you make 300 bucks?

Kurt Listug (26:01)

Yeah. It wasn't a very good financial model.

Guy Raz (26:03)

Yeah. I mean, even when you adjust for inflation.

Kurt Listug (26:07)

Right.

Guy Raz (26:08)

All right, so you. The business that you've got is struggling, and I guess around this time, you're approached by these two brothers, the Rothschilds, who are making. They've got a company called Rothschilds Musical Instruments, and they have an idea for how to help scale your business. Who were these guys, and what was the pitch they made to you?

Kurt Listug (26:29)

Okay, so, you know, our challenge at the time was getting out and showing our guitars to more music stores because we needed more dealers. And they came down as Paul Rothschild and his brother Edward. And what they were doing was approaching small brands that didn't have distribution, that made nice stuff.

Guy Raz (26:49)

Only guitars or all instruments.

Kurt Listug (26:51)

Guitars, audio equipment, too, you know, that was related. And they were putting together Salesforce, and they were going to call on music.

Guy Raz (26:59)

Stars nationwide, and then they would distribute them.

Kurt Listug (27:03)

Exactly. Yeah. They'd buy it wholesale and they distribute them. And Paul had been a record producer. He'd produced all the Doors albums. And, you know Janis Joplin.

Guy Raz (27:11)

Yeah, this guy was, like, kind of legendary, right? Yeah, I read about Janis Joplin. He produced Crosby, Stills, and Nash. So he's coming with, like, a lot of credibility. Presumably you're thinking, wow, these guys are the real deal.

Kurt Listug (27:23)

Yep, yep, totally.

Guy Raz (27:24)

But they were exclusive. You could not sell them anywhere else. They would buy everything from you.

Kurt Listug (27:28)

Correct. And their pitch was that, hey, fellas, you make great guitars. We checked them out in the stores. We think they're underpriced. We think they can sell for more. We think we can buy them from you for the same price you're getting now. And we'll just. We'll be selling them at a higher price, and, you know, the whole thing will work. And we found out quickly enough that it didn't work.

Bob Taylor (27:49)

We got a lot of orders at first because they had to outfit themselves with sales samples for their eight or 10 salesmen that they had around the United States. And at one point, we had to come out with a less expensive guitar for them. And we were selling a guitar to them for $150 is what, how much money we would get. And I always say that's when I figured out not to make love to every guitar that I'm building. I'm production minded. I like to get it done and come out with a good guitar, you know, at the end. And the amount of time that you stroke it isn't the key factor there.

Guy Raz (28:28)

So if they were selling, they were giving you $150 for a guitar and they were probably selling it for maybe 300 and then the shop was selling it for maybe what, 500, 600 and.

Bob Taylor (28:41)

Then discounting it 30 or 40%. And you know, it's a whole matrix out there.

Guy Raz (28:46)

So you were, I mean, so I have to assume that you were getting paid less, but were you selling more guitars? Was the math making sense?

Bob Taylor (28:56)

No, the math wasn't making sense, but our name was getting out there and hope rings eternal. You know, we weren't as bad as the watermelon truck that lost money on every watermelon. So he thought he needs a bigger truck. You know, we had more sense than that. Not a lot, not a lot. But we figured maybe one day we would reach a crossing point, a nexus where it could start to work. So we still didn't pay ourselves a salary. We lived for free with family, we did all of that. And it was some time before we paid ourselves money.

Guy Raz (29:30)

You know, you'd mentioned that when you bought this business in 1974, it was doing about 30 grand a year in sales. Were you able to substantially increase revenue by 1978? 4 years in a little bit.

Bob Taylor (29:45)

Sometimes we have to think ahead to be able to think backwards. So eight years into it, we were doing about 120, $130,000 worth of business. So if you back to put context, we had started by ourselves. We did two years with Rothschild, we quit doing business with them. So we were on our own by the time that had. It took us eight years to get up to that over a hundred thousand.

Guy Raz (30:11)

Dollars, which is really slow growth.

Bob Taylor (30:14)

And you know what I thought about that guy? I'll just say right now it was taking forever. And I just said, this is my education. There are people in college right now studying to be an architect and they're paying money for five years to learn how to do that. They're going to be a doctor, they're going into debt and they're going to come out of it eight years later. So how's that different for me? Why do I think that as a 19 year old, I'm worth money? I'm not worth money.

Guy Raz (30:41)

And did you really? I mean, that, to me, seems very precocious. I don't think I would have been that optimistic. I mean, eight years in, I would have been like, what is going on? We've barely grown in eight years. We're still struggling. You really thought that way, that, hey, you know what? This is like an education, a free education?

Bob Taylor (31:00)

Yeah. And the other way I thought is somewhere around six years, maybe it was five. I sat down with Kurt and Steve and I said, we have a bad habit of not paying ourselves. I want a paycheck every single Friday. And we need to remove the things that keep us from having that paycheck. And I don't even care what that paycheck is, but we have to develop that habit. And so we did our homework and we decided we can pay ourselves every Friday. And that number was $15, 15 bucks a week. It's like, I want my 15 bucks. I want it. Gosh darn it. I worked two days a day for a week, and I want my 15 bucks.

Guy Raz (31:44)

When we come back in just a moment, a purple Taylor guitar shows up front and center on one of the most popular songs of 1985. Stay with us. I'm Guy Raz, and you're listening How I Built this. Hey, welcome back to How I Built this. I'm Guy raz. So it's 1979, five years into the business, and Kurt, Bob, and the partner Steve, have ended their relationship with their one distributor, and they have to lay off the small group of guitar makers that were working for them. But meanwhile, the business is actually not doing so bad.

Kurt Listug (32:41)

That was actually a really good time because we were making so many guitars. We had all these guitars in process. We had one of the best summers ever. Then, because it was still the three of us. We just worked on finishing up all those guitars and selling them. And I was calling on all the music stores that Rothschild had opened as dealers.

Guy Raz (32:58)

You called basically the people that they were selling to. And now you were selling direct to them.

Kurt Listug (33:02)

Exactly, because we'd get the owner registration cards when people and consumers would buy the guitars. So we knew who the dealers were.

Guy Raz (33:09)

I read that the last year you worked under this agreement where this company would distribute your guitars. You had 11 people, eight other people helping build the guitars. That year, you. You built and sold 448 guitars, is 1978. The next year, 1979, you had to let everybody go. So just the three of you, you built and sold 399 guitars. So actually Your productivity went way up.

Bob Taylor (33:38)

Bingo.

Guy Raz (33:39)

Even with eight fewer people.

Kurt Listug (33:41)

Well, that was also finishing up guitars that had been started when the guys worked for us.

Bob Taylor (33:45)

Yeah, it was. I'm not sure what it was the next year, but you could see the progression of us getting better at this. Kurt got better at selling. He got better at his bookkeeping and his finances. I got better at how are we going to make these things? At building a little. A little factory.

Guy Raz (34:02)

Yeah, I mean, but still, like, the other thing I. From what I understand is this is 1979. This was like a dark, dark period for acoustic guitars. Like the next three, four years. This is the disco era. There's like punk and then there's rock. From what I read, like, people just stopped playing acoustic guitars in the early 80s and late 70s.

Kurt Listug (34:30)

Well, also, you know, the Saturday night favorite thing, pre recorded music. So bands weren't getting gigs like they used to. And then that led straight into sampling keyboards, you know, synthesizers, yes, New wave. So like 82 was really a low point for the entire guitar industry.

Guy Raz (34:47)

I read that even, like Martin and Gibson almost went under during that time.

Kurt Listug (34:53)

I can't speak to that.

Bob Taylor (34:54)

But their production was very low, Sales were very low. But you can't kill a dead man. And we were so small. We didn't know the difference between not succeeding because we didn't know what we're doing, or not succeeding because the market was low. The market could still take the amount of guitars that we were making. And we were aggressive out there showing those guitars. People liked it. And then we started putting pickups in our guitars.

Guy Raz (35:19)

Pickups allowed you to plug in the acoustic guitar to an amplifier.

Bob Taylor (35:23)

Yeah. Instead of standing in front of a microphone, you could plug it into the PA system. And our guitars started getting used in pop music. We managed to wiggle our way into that by the guitars that we designed. We repeated what was successful and we managed to survive. And so part of our success is that that bad market brought competitors down to our size for a period of time. And we were ready to go when they were ready to go when the market turned around.

Guy Raz (35:55)

All right, so about nine years into the business, this is 1983, I guess you, the two of you offer and then agree to buy Steve, your third partner, out. Tell me what was going on with Steve. I know he's not here to. We're going to be respectful, obviously, but I think there was tension. Was it the two of you versus Steve, or was there tension between the three of you? Tell me what was going on with.

Kurt Listug (36:19)

Steve, Bob and I discovered that we saw things pretty much the same way, and Steve had a different perspective on what he wanted to do and what he felt we should do.

Bob Taylor (36:31)

And Kurt and I, like, we move fast. We could say, we have to stop doing this because it's not working, and let's do that. And that was very hard for Steve to give up.

Kurt Listug (36:41)

Let's say you're dating somebody and you can never agree on what you want to do or what kind of movie you want to watch. So nothing happens versus you meet somebody and they're like, yeah, let's do that, you know, or let's go to that concert together, or let's go do this, or let's plan a trip. It's that willingness and agreement. One can stop everything from happening, and the other one, it just leads to getting a lot done.

Guy Raz (37:03)

And was he game to sell his shares to you?

Kurt Listug (37:07)

Well, not exactly. We had a buy sell agreement.

Guy Raz (37:10)

And that really saved you a lot of headaches in 1983 when.

Kurt Listug (37:14)

Well, yeah, because, you know, if it provided a path for a partner to be bought out or to sell his shares, as opposed to having to dissolve the business and sell off the assets. So then I got back from being out on the road, and we hired an attorney and just sent a letter to Steve, and he got an attorney. And that was a real scary time because we thought, you know, this could be the end of it. But we had the buy sell agreement, and we had a good attorney, and we bought out his share, and we went back to our families and borrowed that money after just having, a few years earlier, paid off the loans from buying the shop in the first place.

Guy Raz (37:55)

How substantial was it? I mean, you had to take loans out to pay him $30,000.

Kurt Listug (38:00)

Yeah, we'd value the business at $100,000. And Steve owned 30%. Said we each borrowed $15,000.

Guy Raz (38:07)

Okay, so. And that was a lot of money for you guys to pay him, right?

Bob Taylor (38:11)

A lot of money.

Kurt Listug (38:12)

So we went into debt again. But we were excited. And then that first year, the business doubled.

Guy Raz (38:18)

What happened? Why?

Kurt Listug (38:19)

It just felt like the brakes were off. We could decide on things, just run with it, make changes quickly.

Guy Raz (38:26)

I see.

Bob Taylor (38:26)

I'll give you an example.

Kurt Listug (38:27)

Yeah.

Bob Taylor (38:28)

I'm trying to build a factory. We have 1500 square feet. A bunch of. That factory had this part, that thing, these magazines, those stuff left over. And it's like, I'm throwing all this away. I'm going to make room for what our business actually does, which is make guitars. And then you have a partner says oh, no, you're not throwing that away. No, I want that there. We needed to move forward. You can't have somebody standing in the way of that.

Guy Raz (38:55)

Yeah. By 1983. 84. So you're 10 years in. Where were you making the guitars?

Bob Taylor (39:03)

Lemon Grove, California, in our little shop.

Guy Raz (39:06)

Still making them in the little shop.

Kurt Listug (39:07)

We'd added a little space.

Guy Raz (39:09)

Okay. But you were making each guitar. So there was. And presumably there were people that you had to bring on to help you, Bob, but you would have to also train and apprentice everybody, right?

Bob Taylor (39:20)

I sure did. Yeah.

Guy Raz (39:21)

It must have felt kind of overwhelming, right? Because on the one hand, I imagine at this already by the mid-80s. I know word of mouth is getting around. People are getting excited and interested in your guitars, and you're limited in how many you can make because you, Bob, you have to touch every single guitar that is being sold. You have to see it and inspect it. Right. Am I right about that?

Bob Taylor (39:44)

Yeah. I was on the production line for almost 20 years of our business.

Guy Raz (39:48)

That must have just been, like, overwhelming and stressful.

Bob Taylor (39:51)

Guy, this is my jam. This is what I do. It never stressed me out.

Guy Raz (39:56)

It didn't. Okay.

Bob Taylor (39:57)

No, it's what I do.

Kurt Listug (39:58)

That's what he loves.

Bob Taylor (39:59)

Give it to me, Kurt.

Guy Raz (40:00)

Were you stressed about that, though? I mean, it was one guitar at a time. That had to be great. People had expectations, and there was one Bob, he was the guy. Like, if he got hit by a truck, that would have been a problem.

Kurt Listug (40:13)

Well, that's true. And we made decisions early on, too, like not riding motorcycles or things like that, because we.

Guy Raz (40:18)

You did? Really?

Kurt Listug (40:20)

Yeah. You have to. I mean, we'd be out of business if something bad happened.

Guy Raz (40:23)

Yeah.

Bob Taylor (40:24)

I lived a careful life because I thought if I break my wrist on a little motorcycle fall, we're out of business.

Guy Raz (40:30)

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

Kurt Listug (41:03)

Well, we were trying anything and everything to sell guitars. And part of that was, at that time, acoustic guitars were very out of fashion and kind of associated with, you know, hippies and the Hippie movement, granola guitars. Yeah. So we thought, you know, let's try something different. I mean, electric guitars come in a lot of different colors. And then the Prince guitar came about when I got a call from salesperson named Glenn at a music store in Minneapolis and they serviced Prince. He got all his gear from them and they said, you know, Prince is looking for a 12 string. He's tried a few guitars and hadn't found anything he likes. And you guys make killer 12 strings. Would you be willing to make one? But here's the deal. You're going to make something. And it can't say Taylor on it because he won't play anything. That's an implied endorsement by having the brand name on it.

Guy Raz (41:59)

So every guitar he played had to be custom made for him without anyone knowing who made it.

Kurt Listug (42:03)

Yeah, those electric guitars are those weird shapes. Those are custom made guitars for him. So we talked about it. We decided we're going to make a jumbo 12 string and it's going to be purple because you know, that was his color. And it's going to have the same kind of treatment on the top.

Bob Taylor (42:18)

Like flames around the sound hole. Like you put on a hot rod is. Yeah, kind of hot roddish to describe it.

Kurt Listug (42:23)

Yeah. So we got the guitar done and, and Glenn put it in the green room before a show and Prince came in and looked at it and loved it and bought it. We, we made it on spec. And then cool thing is it led to a relationship with them, you know, over the years. And then he would order guitars from us that said Taylor, you know, later on.

Guy Raz (42:44)

Is that purple guitar that you made for him the same one used in the Raspberry Beret video?

Bob Taylor (42:49)

Yeah.

Kurt Listug (42:49)

And you know, things like that don't directly impact sales. It's more like an impression. And all the impressions add up over time.

Guy Raz (42:58)

Okay, I want to stick to the 80s for a moment because I know that by 1988, so this is now what, 14 years in, you break a million dollars in sales for the first time. Yeah, finally, finally, big deal. Now you're starting to feel some momentum. I mean, from what I gather in 1988, that year, that you are doing a million dollars in sales, you're making eight guitars a day. And I hear that and I'm thinking, so you're selling all those guitars, right? There was demand. Each guitar you were making was basically spoken for.

Kurt Listug (43:33)

Well, there's always a back and forth between the number we're making and the number we're selling. And really that's the story of the company is the balance between how many a day we want to make, how many a day we can sell. You know, all the way up till now.

Guy Raz (43:49)

And each. I mean, this was not automated. This was all. It was like table saws and hand saws and lathing machine, like. Right. Like every. It was entirely handmade.

Bob Taylor (44:04)

Yeah. We had a fair amount of specialized cutting tools that I would make. It wasn't until 1989 that we were able to really get modern using computerized cutting machines.

Guy Raz (44:17)

Right.

Bob Taylor (44:17)

In other words, imagine I'm bending a guitar side and I'm doing it over a hot 4 inch pipe with a barbecue lighter inside it to make it hot. And I'm steaming and moving and steaming and working well. When I'm done that side, it risks having been broken. It might not fit in the mold perfectly. Or I can make a machine that's that shape that automatically bends it. It does something in one minute that I do in a half an hour and it's a better part.

Guy Raz (44:46)

And now they're consistent.

Kurt Listug (44:48)

Yeah.

Bob Taylor (44:48)

We still have way more people working by hand than we have machines. It's not an automated factory. And if anybody here has ever gone through a car factory, the first step, they're going to be stamping car parts. And there's not even a person in there. It's all robots. There's one guy in a control room. But by the time they're making seats and dashboards, it's loaded with people, right?

Guy Raz (45:13)

Yeah.

Bob Taylor (45:14)

And it's the same with the guitar. We can make these parts on machines, but we have to put them together by hand.

Guy Raz (45:20)

I'm curious because we're going to get to the 90s in a second here. But at this time, right. This is still the late 80s. You've broken a million dollars in sales. Compared to Martin, you're still small. I mean, Martin was founded in 1833 or something like that. It's been around for so long. It's an old company and it's obviously a venerable, widely respected brand. I mean, they're, you know, this is like what Elvis played and Johnny Cash and Bob Dylan. I mean, they played Martin guitars. Right. Hank Williams. So this is a storied brand.

Kurt Listug (45:55)

Absolutely.

Guy Raz (45:55)

And you guys are kind of an upstart brand at this time, even 14 years in.

Bob Taylor (45:59)

Absolutely. We, we made it through the disco age. They also made it through the Civil War.

Guy Raz (46:05)

Right.

Bob Taylor (46:06)

You know what I'm saying?

Guy Raz (46:07)

Right, Exactly. Yeah.

Bob Taylor (46:08)

And they're still family owned.

Kurt Listug (46:10)

Yeah, yeah.

Bob Taylor (46:10)

And we, we're doing something different. We're Making a different kind of guitar. Yep. That they didn't make. Martin was still making a traditional guitar that you played in bluegrass music or folk music. So we became symbiotic with a couple styles of music. One was acoustic guitar tracks in pop music. You know, so, like, when a band like the Goo Goo Dolls was really popular, they're all playing acoustic guitars. Right. And they're playing our guitars. So we were chasing Martin as far as venerability, as far as bran. But truly, they were starting to actually chase us a little bit because we had the red ball that they wanted, and they had the blue ball that we wanted.

Guy Raz (46:58)

But you were definitely looking at them and saying, we have an opportunity here. Okay, so this is the late 80s, and something is gonna happen. Cause anybody, I mean, you know, my age or, you know, anybody sort of over 40, let's say now, will have remembered a time when MTV actually was relevant and played videos and music, and Everybody watched it. 1989, they launched this thing called MTV Unplugged, which would be Unplugged series of concerts. The most legendary one, of course, is Nirvana's MTV Unplugged.

Kurt Listug (47:31)

And Eric Clapton.

Guy Raz (47:32)

And Eric Clapton. Sorry.

Kurt Listug (47:34)

Yeah.

Guy Raz (47:34)

Which I think he won Grammys for. And this is going to. Even though it wasn't like MTV Unplugged sponsored by Taylor, it was going to bring about a renaissance in acoustic guitars. Right. For, like, all of a sudden, acoustic guitars, like, the disco era, was disastrous. This was the opposite. What did the MTV Unplugged thing mean for your business?

Kurt Listug (48:00)

Well, the world changed, and we started growing like crazy.

Guy Raz (48:04)

Were you able to get your guitars into the hands of some of those musicians?

Bob Taylor (48:07)

Yes. We weren't as aggressive as other people have been. Our goal with that artist relations is to help artists get their music played. We're sort of like the pit crew for them and their race. But getting our guitars into the hands of artists takes going to those shows. You need to be backstage during, you know, the MTV Video Awards or the. The Grammys or those types of things. You have to develop relationships, and we try and honor that relationship.

Guy Raz (48:40)

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

Bob Taylor (49:07)

Yeah. Somewhere back then I read that when you have maybe a founder run company where you're making something, most companies get sold at around 45 or 50 employees. That's when the owner is starting to feel like they're just babysitting all day long.

Guy Raz (49:27)

Tell me, what do you mean by that? What was the challenge that you would face on a day to day basis? You're just, I don't know, employee?

Bob Taylor (49:34)

Well, you don't really have an HR department. People that decide that they want to make guitars, they're not really thinking them of themselves as a professional guitar maker. They're thinking themselves more as a, hey, this could be a cool job. You know, you go into a department and they're all cutting up or laughing or choking, and I walk in and go, it might be nice if maybe what some of your conversation was about during the day would be how to build guitars. Right? And so the problem's not with them, the problem's with me. Us, our company, we have to learn how to become a good employer. We had to be able to offer better benefits. And so I wanted to get to where I felt like I deserved good employees.

Guy Raz (50:20)

I mean, it seems to me that because you guys both got into this business because you wanted a job after high school, right? Like, it wasn't like you were any different from the people who were now working for you. You were, a couple of guys were like, this sounds like a cool job and. But you didn't really begin to care about it until you owned the thing.

Bob Taylor (50:39)

I'm going to say this, this is for me. I made a commitment early on based on the experience that I had being poorer than a church mouse for the first five or six years that we made guitars. And no one had ever heard in San Diego of such a thing as even being a guitar maker. They'd say, what do you do? Well, I make guitars. I. Oh really? Do you do that in your garage? No, I'm trying to build a factory. Oh, how's that working out? I'd be like, not very good. I was embarrassed. So that became a secondary goal. That was every bit as important to me as the quality of the guitar and the market share we had. I wanted people to say, oh yeah, I worked for that company and I retired from it. It was an incredible career for me and that's sort of what I felt during that time. Now I want to make this job a career for the people who want it to be a career.

Guy Raz (51:35)

When we come Back in just a moment. Another Taylor enters the picture. This one probably the most famous tailor in the world. Stay with us. I'm Guy Raz and you're listening to How I Built this. Hey, welcome back to How I Built this. I'm Guy Raz. So it's the early 90s, and acoustic guitars are becoming popular again. And in a bid to drive growth for Taylor Guitars, Kurt launches an ad campaign. One of the ads, I've seen this in the early 90s. It's very unusual. You put these in guitar magazines and it wasn't even a guitar in the ad, it was a tree. It's a tree and it says, you know, here's a tree. It's a piece of wood. It can become a coffee table in one pair of hands and another pair of hands. It can become a sweet sounding guitar.

Kurt Listug (52:40)

Right.

Bob Taylor (52:40)

Some trees have all the luck.

Guy Raz (52:42)

So. Right. A very unusual kind of ad. Tell me about that approach.

Kurt Listug (52:47)

We were lucky in being approached by a San Diego agency that had some ideas. And it was not focusing on features of the guitars or artists who played them. It was really telling the story about the brand and the love of the guitars that really made an impact on the industry. They were also double page ads, which people weren't doing.

Bob Taylor (53:12)

And we had also started a quarterly magazine, which we still do today.

Guy Raz (53:17)

Wood and Steel. You started this?

Kurt Listug (53:18)

Yeah, wood and steel, yeah.

Guy Raz (53:20)

And that proved to be a good, I'm assuming a good investment because it doubles as a catalog.

Kurt Listug (53:25)

Yeah, exactly. And it grew to over 300,000 circulation, which is bigger than any guitar magazine.

Guy Raz (53:31)

Yeah. In 2002, you broke ground on a factory in Tecate in Mexico to increase capacity. I'm curious. I mean, it's interesting because a lot of people think that inexpensive products from China have been around forever, but really they haven't. In the 90s, it wasn't as common. Certainly not in the 80s. There was a shift in the 90s when China became a member of the World Trade Organization. A lot of US companies and other European companies started to move production to China and manufacture in China. Did you guys also start to see a shift in sort of cut rate acoustic guitars coming into the US market from Asia?

Bob Taylor (54:15)

Absolutely, we saw that shift. We've seen a lot of people copy our guitars, but you pick them up and it's like, this is not a Taylor guitar.

Guy Raz (54:22)

All right, I know you're going to say that, but if I don't know anything about guitars, I'm like, hey, I can just get this off Amazon for 80 bucks. You know, I don't care where it's made, but I can get yours for 250 bucks. Or let's just say I can get one for $200 from Asia and yours for $250. What is it about your guitar that sounds better? Why would I choose that guitar over a cheap factory made one? And, you know, from China?

Bob Taylor (54:45)

The most obvious thing you're going to notice is what it is that we excel at and built our company on. And that's the playability of the guitar. Go back to the necks, the string height, all of that. We invented that. So people are going to notice that and then they're going to like the sound. The sound's more vibrant and that's, in a way, it's hard to copy in a way it's not. For example, if I try to make a guitar that sounds like a Martin guitar, which sounds different than our guitars, if I try to make that, it always turns out to sound like my guitar. Like your mom's spaghetti. No matter how much she tries, it just keeps tasting like her spaghetti. And then the other part of that is the brand. Kurt built the brand. Our guitars lived up to that brand. And people want to be associated with that brand. So we do have a little pricing power in that we can make that guitar there. And it's. To me, it's offering those guitars to people that get into the brand. And a lot of times they don't move up from that. That's their guitar for life. It's all the guitar they need.

Guy Raz (55:46)

There are. I've spent so much time looking to see which guitars are played by which artists I love. And so I'm not gonna mention some of them because they don't all play your guitars. But you have Jason Mraz and Zach Brown, Dave Matthews, Katy Perry, and most importantly, Taylor Swift. She plays your guitars, not surprisingly, because her name is Taylor. How did that relationship begin? I have to hear the story from the horse's mouth because this is. This is a big deal.

Bob Taylor (56:24)

So our receptionist rang my desk and she said, bob, I've got a guy on the phone who's called a couple times.

Guy Raz (56:30)

And when was this? Do you remember what year?

Bob Taylor (56:32)

I'm gonna say Taylor's 35. She was 1420 years ago.

Guy Raz (56:35)

Okay. First record came out in 2006. It was, I think it was named Taylor Swift. Yeah.

Bob Taylor (56:40)

Okay, so it was just right around then. Just kind of just before then. So, yeah, I picked up the phone and, hi, my name's Scott Swift. I know that every dad thinks their Daughter's special, but my daughter really is. And I sent a cassette tape with some of her music on it. And he's also calling record companies. He's. He's putting every iron in the fire.

Guy Raz (57:03)

But he's calling, thinking maybe you guys could also be part of a promotional thing with.

Bob Taylor (57:08)

Absolutely. And so I listen. It's like, yeah, it's great. Well, we have a trade show coming up. We have a little stage at the trade show. She could play at that trade show.

Guy Raz (57:18)

Where was this convention?

Bob Taylor (57:19)

Anaheim, California.

Guy Raz (57:20)

Anaheim. Okay. The convention's there. So you have Taylor Swift.

Bob Taylor (57:23)

She comes out sitting on a stool.

Guy Raz (57:25)

Okay.

Bob Taylor (57:26)

Playing some songs that she wrote. Nobody's in the room. I literally walked out into the foyer. All these trade show. And I'm like, guy, do me a favor. Come in here and sit down. I got a girl that's playing. I don't have anyone to listen to her.

Guy Raz (57:39)

I don't have a crowd. Can you please. I'm embarrassed. Can you come see? Her name is Taylor Swift.

Bob Taylor (57:43)

I need a crowd. Come in.

Guy Raz (57:44)

And I'm like, bob, I don't have time. I'm like going to see Jason Mraz down the road.

Bob Taylor (57:49)

I filled that room with people. And she plays and people are like, wow, she's good. And then the next time she played in our booth was a couple years later and it kind of closed down the convention center, just getting her in and out. And then she released her album called Fearless. That was her second album.

Guy Raz (58:06)

Yeah, that has Love Story on it. I know this because I've seen her in concert. So I went on the air show her and it was. Yes.

Bob Taylor (58:13)

She ran a contest in the United States and picked. It was a radio contest and two winners from every state won. And they all got to bring a guest. And she paid for their air flights and their hotels to come out and get a 200 person private concert from.

Guy Raz (58:30)

Her at Taylor Guitars in San Diego. In El Cajon.

Bob Taylor (58:34)

Yeah, in our factory here in El Cajon. And so she had her album release here at the factory. We set up tents. There was a big. We've had a pretty close relationship with her for all that time. She also has split her. Her guitar playing between Taylor Guitars and Gibson Guitars. So she uses those now, too. We are the first and the longest. So a lot of people just think of her as playing Taylor guitars.

Guy Raz (58:59)

Okay. Respect Gibson, too. But her most famous guitar, which she brought on stage during this last tour, I think is the guitar, a koi fish guitar you guys made for her.

Bob Taylor (59:12)

Well, what happened is we started A. We started a series called the Gallery Series. And the first guitar I made, I named it Living Jewels. And I had koi fish swimming around it. And we had this relationship with Taylor, and her birthday is just before Christmas, and I took that guitar out and sent it to her for her 18th birthday slash, Christmas present. And she loved that guitar. I remember she called me on Christmas morning. But she played that guitar and she put it in the Country Music hall of Fame in her distress display. And then it disappeared out of there before the ERAS tour. And all of her fans, you know, started online talking about what happened to that koi fish guitar. What happened to the koi Fish guitar? It's not there anymore. I wonder if she's going to bring it out. And her dad actually wrote me on the first concert when she brought it out and sent me a little video of just people going nuts when she pulled that guitar. Because her fans follow every move she makes.

Guy Raz (60:12)

All of these tiny little, like, factoids and nuances. They knew everything. It was crazy.

Bob Taylor (60:17)

Yeah. They know the Kansas City Chiefs now, too.

Guy Raz (60:19)

Yeah, exactly.

Kurt Listug (60:20)

You know?

Guy Raz (60:21)

Exactly. They know the stats. They're playing fantasy football. Yeah, exactly. Yeah.

Bob Taylor (60:27)

Yeah. She's a force that truer words were never spoken than the words that Scott Swift said to me on the phone that day, which is, every dad thinks their daughter's special, but mine really is.

Guy Raz (60:38)

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

Bob Taylor (61:25)

You're right about that.

Kurt Listug (61:25)

Yeah. I think that's true. Also, if people get into guitar, they buy more guitars.

Bob Taylor (61:31)

And we call that gas. That's an acronym for Guitar Acquisition Syndrome, where they're buying and selling guitars. I got this one. I got that one. They're looking for. For the new one. So there's that hobbyist.

Kurt Listug (61:42)

They don't necessarily play well.

Bob Taylor (61:43)

But you are correct in that if somebody bought one of our full size guitars that we make in, in our Takati, Mexico factory, that's really enough guitar to last them their whole entire life. And so we wonder about this too, because, guy, we make 700 and something guitars every day. Like, where did they even go? You know, sometimes people say, man, I see your guitars everywhere I go. Well, yeah, we've made 2 million guitars. You're bound to see one.

Kurt Listug (62:14)

Yeah, yeah, but you're right, Guy. You know, what is the, what's going to happen as the baby boomers who came back to, who really grew the guitar market all get older and die off? Are younger people going to come in and take up the guitar?

Bob Taylor (62:28)

Mm.

Guy Raz (62:29)

I know that by the 2000s, I think by 2002 you cleared $50 million in sales, which is there. I mean, I'm jumping ahead for a sec here, but in terms of sales now, are most of your sales direct to consumer through your website or is it still mainly through retailers?

Kurt Listug (62:47)

It's through retailers, yeah. The direct sales is very small.

Guy Raz (62:50)

Interesting. So it's like, it's almost like running shoes. Like running stores still have a lot of pull, a lot of weight in the running shoe business. It sounds similar to guitars. Like you need to go to the shop and really talk to the people there and. But you're saying the majority of your sales by far are still through retailers.

Kurt Listug (63:07)

Absolutely.

Bob Taylor (63:07)

By far. When we say the majority, we're not saying 51%, we're saying 90%.

Kurt Listug (63:12)

90 plus percent.

Bob Taylor (63:13)

90 plus.

Kurt Listug (63:14)

You know, the thing about direct sales, even like Nike, you know, I read in the last year how they'd really pushed their own direct sales and then they took that so far and now they're going back and, you know, embracing retailers again. So.

Bob Taylor (63:29)

Yes, except for Hoka got in while they were gone.

Guy Raz (63:32)

Right, right.

Kurt Listug (63:32)

Yeah. There's not just one way of doing it.

Guy Raz (63:35)

Right. I think Nike's doubling down on wholesale again because they've seen how it's been successful for other brands. I want to ask you about a very anomalous, weird period in the history of tailored guitars, the history of every business versus Covid. And it's interesting, you know, we've done some businesses on the Show now over 10 years, doing a lot, but there are a few that we've done that were really crushing it during COVID There's one in particular, I'm not going to mention the name, but they're, they're Having some major challenges now because they bought way too much inventory in the post Covid period, thinking that that was the new normal. How did you guys. I know that guitar sales went up, like, by an order of magnitude during COVID Like crazy numbers. Like you and you guys had your own. You're, you know, fully integrated, you had your own production facilities. What was the demand like for you and how did you deal with it?

Bob Taylor (64:28)

A thousand guitars a day.

Guy Raz (64:30)

A thousand guitars a day.

Bob Taylor (64:33)

Yeah, yeah. Just like stop and think about that for a second.

Kurt Listug (64:36)

And we're still recovering from it. The up and down of COVID and inflation and.

Guy Raz (64:42)

And you had to hire tons of people probably quickly.

Kurt Listug (64:45)

Yeah, yeah, we did.

Bob Taylor (64:46)

And we were, you know, we were ripping boards off the wall to make guitars out of, you know, and it was good. We knew that it wouldn't last. We tried our very utmost to protect us ourselves.

Kurt Listug (64:59)

We really tried for a soft landing. And wasn't exactly.

Bob Taylor (65:03)

It was a hard landing. Kurt and his sales team got on the phone and spent four months canceling from our end $50 million worth of orders, knowing that those aren't real orders.

Kurt Listug (65:15)

They weren't going to be real. No. And if we actually made the guitars and filled the channel with all those guitars, then the retailers were going to have a big problem and we wouldn't be able to sell guitars because it'd be overloaded.

Guy Raz (65:26)

That's what happened with other companies that made too much stuff.

Kurt Listug (65:31)

Yeah. And, you know, the last several years have been at least as hard as any other years, going all the way back to the beginning.

Guy Raz (65:39)

Why?

Kurt Listug (65:39)

Because costs just ratcheted way up. But guitars, you can't just raise the price.

Guy Raz (65:46)

What's gone up. I mean, you've got wood, you've got labor. Okay.

Kurt Listug (65:50)

All the labor, all the overhead.

Bob Taylor (65:52)

Yes. And wood always costs more. The very best day to buy wood is today. Because tomorrow it's going to be really more. Yeah, because there's less of it. We're doing things about that. But we have to have another show in 3,500 years to see how that turned out.

Guy Raz (66:08)

Right. You guys have planted all these.

Bob Taylor (66:10)

Lots of trees.

Guy Raz (66:11)

These trees. Trees in Cameroon. But they take like 70 years to mature. Right.

Bob Taylor (66:14)

These ebony trees, maybe 100. And then also in. In Hawaii. But we can use that wood in 30 years from now. Koa wood.

Kurt Listug (66:23)

You know, all our costs are up due to inflation. But that doesn't mean that products that are price sensitive, you can just raise the price to make the same margin that you were. It just doesn't work.

Bob Taylor (66:34)

That way, you know, I'll just say it here. We go into a taco shop down here, buy two burritos and two Cokes, and you ask yourself, how did I just spend $41?

Guy Raz (66:45)

Right.

Bob Taylor (66:46)

So that's what happened to our profit. Yeah. That $41 lunch of a couple of burritos. Those costs have moved throughout all of society and into our manufacturing process.

Guy Raz (66:59)

Yeah, for sure. And, I mean, you guys have made some pretty big changes to the business over the past few years, because, I mean, Kurt, I know you stepped down as CEO, I think, in 2022, and then you promoted your head of guitar development, Andy Powers. He became the new CEO.

Kurt Listug (67:16)

Yeah.

Guy Raz (67:17)

And I'm curious about this other thing you decided to do around that time, which was you created an esop. And for people who don't know what it is, it's an employee stock ownership plan. Clif Bar did it. New Belgian beer did it. I think, like King Arthur Flowers and Aesop Company.

Kurt Listug (67:34)

Bob's Red Mill.

Guy Raz (67:35)

Bob's Red Mill. Which means it's employee owned. It really does give the employees. I mean, they have a stake now in the business. They're not just, like, paid a wage. They actually have real equity in the company. And so they're. They're incentivized to increase the value of the company, because if the company ever gets sold, they. I mean, I think when Clif Bar was sold, they. I don't know how many millionaires were created by that sale to Mondelez.

Kurt Listug (67:58)

Yeah.

Guy Raz (67:59)

And so all your shares were sold to the employees.

Kurt Listug (68:02)

They were sold. We're both on the board. We're co chairs of the board.

Bob Taylor (68:05)

And I work every day. I still come in all the time.

Kurt Listug (68:08)

Yeah, we work for free.

Bob Taylor (68:10)

We work for free. It was the best choice of all the choices. And I always. One of my sayings is invest in the inevitable. And one thing that's inevitable is I'm going to die. That's inevitable. And so I'm going to sell this company, my shares of it, by accident when I die. Or on purpose before that.

Guy Raz (68:31)

Unless you're in real estate.

Bob Taylor (68:32)

Yeah. And so knowing that that's going to happen allows us a chance to do it in the best way.

Guy Raz (68:39)

Yeah. When you guys think about the journey you took, you know, how much of where you guys got to today, the success that you have had, do you attribute to the work, the grind, and how much do you think has to do with just luck and good fortune? I want to put that to Kurt. To you first.

Kurt Listug (68:58)

Luck and good fortune. Well, there's a little bit of that. And as I get older, I see more of it. I'm less maybe egocentric about it. For example, we were lucky when we started that there weren't as many guitar brands. And obviously we've worked very hard. We've kept our relationship from blowing up.

Bob Taylor (69:19)

Well, I think that we're lucky that we have good enough chemistry. And I've been very happy with my partnership with Curt and the work that we've accomplished together. And I could tell you that right now I could still work, but I can't work like I did then.

Guy Raz (69:36)

Yeah.

Bob Taylor (69:36)

You know. Well, you know what? Maybe I could. I just don't want to.

Kurt Listug (69:40)

It's nice to be able to take a nap in the afternoon if you want. Yeah.

Guy Raz (69:45)

Bob, I think you are 70. And Kurt, maybe you're 72, 73. Okay. I mean, I know you're still involved in Taylor, but now you're not operationally involved in the day to day. You've got more time on your hands. What are you doing?

Bob Taylor (70:00)

Well, I love being here. I want to be here as long as I can.

Kurt Listug (70:04)

We still have a lot of responsibility here to make sure things stay on track. I have a car hobby, and my wife is president of her local Bichon Frise club of San Diego.

Guy Raz (70:17)

Wow, the Bichon Frise Club.

Kurt Listug (70:20)

Yeah. And she, you know, bought this good little dog and trained it, and she's known her handler and she's been to the Westminster competing.

Guy Raz (70:29)

Wow. So she's got the leash and the perfect U shape and she's like walking and the dog is trotting.

Kurt Listug (70:34)

Exactly.

Bob Taylor (70:34)

Yeah.

Kurt Listug (70:35)

The whole deal. She's been there. And yeah. The dog has over 70,000 Instagram followers.

Guy Raz (70:40)

The dog.

Kurt Listug (70:42)

That's incredible. Yeah, it's amazing.

Guy Raz (70:44)

Put a Taylor guitar in that dog's hands. Pause. That's Kurt Lisztig and Bob Taylor, co founders of Taylor Guitars. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter@guyraz.com or on substack. This episode was produced by Alex Chung with music composed by Ramtina Rabloui. It was edited by Neva Grant with research help from Mermel Wood. Our engineers are Patrick Murray and Maggie Luthar. Our production staff also includes Casey Herman, Chris Masini, John Isabella, Sam Paulson, Kerry Thompson, Katherine Cypher, Nour Gill, and Elizabeth in coats. I'm Guy Raz, and you've been listening to How I Built this.