Often times after a radio show or podcast has become popular there is a desire to release a book and How I Built This fits into the pattern. There is a podcast called How I Built This by Guy Raz which led to a book published by Houghton Mifflin Harcourt, NY, 2020. The podcast is Guy Raz interviewing entrepreneurs about their journey to become successful. In the book, Mr. Raz groups the answers into categories and as a journalist adds stories around the theme of the chapter.

One of the important elements of any company is their culture and in particular, how do they handle things when something unexpected goes wrong. All companies say they are run by wonderful people, but the reality is something that approaches a bell curve. Inside a company people will come and go for a wide variety of reasons, will you remember any of them as the company continues along? The answer is some. Companies come and go, and if they provided a needed product or service another company will offer a similar product or service. The issue is if something unexpected happens, how does the company respond. The classic case is the drug company J&J lead by James Burke. Someone tampered with Tylenol bottles and J&J was in a crisis situation. The company decided to recall all its product and introduce the foil seal which is still used today to ensure no tampering could be done again. To do that, CEO James Burke was in daily contact with the media, the company had to make decisions and then implement them in the manufacturing plants to do the foil seals and other measures. The cost was over $100 million, during the crisis market share fell, but the more important result is within 8 months they had recaptured and increased their market share. The values of the company shaped the decision making.

Another example in the book is Jeni’s Splendid Ice Cream which is based in Columbus, Ohio. The chain dominated the market and owner Jeni Bauer obsessed over the best ice cream for her customers. Then an outbreak of foodborne bacteria called listeria happened. The company had to recall all its ice cream, shut down the factory, eventually determined where the source was and then make ice cream again. There were time delays, when the recall happened, sales went to zero. When they found the source and it was cleaned up, Jeni announced that a new quality control leader had been hired and an increase in testing which is 1,000 times beyond the industry recommendation was standard operating procedure in the plant. Jeni’s sales came back and Jeni says it is the trust of your customers.

The classic case where companies tried to hide was Ford and Firestone tires. There was always a strong relationship between the two companies and one of the Ford’s sons and a daughter of Firestone were married. However, some Firestone tires used in the Ford Explorer SUVs at prolonged highway speeds and high road surface temperatures, the tread would separate from the tires’ sidewalls and in some cases send the SUVs into a roll.

Ford and Firestone executives knew this, but because it was some, did not tell the public for 4 years, ending up being sued and settled billions of dollars in lawsuits. Ford and Firestone’s executives were fired, and the Ford switched to a different tire company resulting in job loss at Firestone. Both Ford and Firestone lost billions because trust was seriously eroded.

Linking to dividend paying stocks, all companies will and do go through unexpected circumstances and the issue is how does it handle it? Send in the lawyers to pay off those who sued or take responsibility, fix the problem, communicate with the public and continue on. There are always examples of both responses and part of the response can be seen in the culture of the company. In your homework, one aspect you are looking for is the company culture, you like when it makes a profit and pays a dividend, but what happens when there are mistakes or unexpected events occur? what does the company do or not do?

There are more questions than answers, till the next time – to raising questions.