#79 Dick Yuengling

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Dick Yuengling joined James to talk about business, beer, and why Yuengling beer hasn’t taken over the beer business.

Yuengling beer has had a bumpy road to become the oldest and largest American owned brewery in the country. Dick says that the brewery was nearly sold in the 1960’s but when his grandfather found out that the guy wanted to scrap it, they decided not to sell. Part of Yuengling survival has been just that, survival. Nassim Taleb writes that sometimes the best thing to do is just not die.

The brewery has been in the Yuengling family for six generations and Dick’s grandfather left Princeton to take over. Besides nearly turning to scrap in the 60’s the Yuengling company had to deal with prohibition from 1920 to 1933. As they couldn’t sell beer, they sold “near beer,” built a dairy to sell ice-cream, purchased real estate, and Dick’s grandfather even became a bank president. In that diversification that even partially owned the Roseland Dance Hall, and James remembers going there.

roseland-madonna

Throughout the interviews James brings up the expressions “shirt sleeves to shirt sleeves in three generations.” The expression means that the first generation will create something, the second will build it, and the third will bring it down. HBR reports that only 10% of all privately held companies are in existence after three generations.

Part of this problem is how the conditions change for each entrepreneur. For the founder things are always harrowing, rough, and getting by with just enough. For the second generation things are a bit easier, maybe too easy. For the third generation things are too easy. Paris Hilton, for example, is a 4th generation hotel Hilton.

What might make the Yuengling family different is the stressors they’ve withstood in various generations. Prohibition in the 20’s, slow business in the 60’s, getting lucky in the 90’s. Each stressor served as a reminder about what their core business is.

Malcolm Gladwell calls these things desirable difficulties and says that they matter quite a bit. In David and Goliath he writes that being dyslexic, being unorthodox, and losing a parent can be good because they force us to grow, think, and act in new ways. Nassim Taleb subscribes to the same process, though different terminology. He calls them stressors and writes that they are good for a system to have because it makes the system adapt – like Yuengling did. One final proponent is comedian Carol Leifer who told James, “you should be failing in your career because it’s through these failures you really get better.”

Dick took over the business in 1985 and began to modernize the facility. He tells James that he was a production nut. From his time in high school to now he’s been in the factory, knowing, learning doing. This was the theme in Mark Cuban’s interview too, where he knew the ins, outs, ups, and downs of his business. Samuel Zemurray, the man who popularized and delivered the banana to the United States did much the same thing, riding the boats from New Orleans to Honduras while his competitors stayed in Boston. Zemurray saw things, his competitors read about them. A favorite Zemurray saying was, “they’re there, we’re here.”

James brings up the idea that wheat may have been partially developed to make beer and both were created 8,000-10,000 years ago. For the full beer story, check out the Stuff You Should Know Podcast about beer.

Dick and James have a tennis match like conversation, James lobs a suggestion for the business and Dick sends it back. James tries again, Dick returns. This part of the conversation leads to a slew of great pieces of advice from Dick. He tells James that “they don’t jump into things” and “we don’t have to be the biggest.” I live in Ohio, a state where the arrival of Yuengling beer was a big deal. It used to be that if someone was traveling to or through Pennsylvania, it would warrant a stop, like Cuban cigars only iron city lager. James is talking from a similar east coast perspective about expansion, it seems like Yuengling could take over the world.

Eventually James comes around and says “you found your ideal space to form a monopoly.” He goes on to say, “that’s a hard thing for entrepreneurs to realize, they don’t have to do everything.”

In episode #43 Pete Thiel tells James the same thing, “you don’t want to start the 100th online pet food company or 500th restaurant in San Francisco.” This goes to the point that James makes to Dick (explicitly) and Dick makes to James in the interview (implicitly) that too much competition is going to squeeze you. About Coke and Coors, Dick says, “we don’t want to play in their space.” Thiel says, “extreme competition, extreme undifferentiation is not synonymous with capitalism.”

“Click to Tweet: “Build a monopoly and scale it if you want to take over the world. – James Altucher”

Rather than the ideas for expansion, Dick tells James they can grow in their current markets – Yuengling has only a 3 or 4 share in many of their markets, even capping out around 10 in Pennsylvania.

 In the interview James guesses that Dick might be worth over a billion dollars, to which he says that’s “a figment of someone’s imagination” and it doesn’t sound like he wants to cash out. Dick echoes what Sam Shank says in #78, wondering where he really wants to be. Sam is in a startup, in an area he knows, with good people, and room to grow. That’s what he wants so why sell. Ditto for Dick, who’s happy making beer.

 If you like this post, please share it on Twitter, email to a friend, or thank James for doing it. If I missed something, let me know on Twitter, @MikeDariano.

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