We Don’t Have a Brand

Introduction:

This week, Paul Downs talks about why furniture makers traditionally have not stamped their names prominently on their work—and why he’s rethinking that now. That change of heart is the direct result of Paul’s unlikely experience connecting two very different businesses: One a Mennonite company manned by master craftsmen and the other a startup manned by tattooed hipsters with a mastery of Kickstarter. Not only has the resulting culture clash changed the way Paul thinks about his own business, it’s also the subject of a book he’s writing. In this conversation, Paul explains what he’s up to and also talks about how close his business came to failing, how he plans to double his revenue, why he’s thinking about trying TikTok, and how he feels about his son’s success in the alternative reality of venture-backed startups.

— Loren Feldman

Guests:

Paul Downs is founder and CEO of Paul Downs Cabinetmakers.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome, Paul. I want to start by reading a paragraph from the excellent book you wrote called Boss Life: Surviving My Own Small Business. I think it’s an interesting reminder for our listeners of where you’ve been with your business.

“I barely survived the terrible year 2009. Customers purchase our product, custom conference tables, when a business moves or expands. As 2008 ended, we still got a few orders from projects initiated before the crash, but sales volume soon took a huge drop. I took any job I could find, but I had to lay off five of my 11 remaining employees. I cut all my workers’ pay by 15 percent and set my own salary at just $36,000 a year. I rarely had more than a week’s worth of cash on hand. The stress of wondering whether I would have to close the doors was relentless. I experienced shooting chest pains and sleepless nights, but I never quite failed. By juggling incoming and outgoing payments, I managed to pay off my vendors and survive to see another year. The year 2010 started with no relief. In January, I came within a day of running out of money. But in February, buyers started calling. By March 2010, with orders appearing at a sustainable rate, I was able to restore everyone’s pay to previous levels and rehire some laid off workers. By year’s end, I had 10 employees and a bank balance of $106,777.”

You’ve obviously come a long way since then, Paul. I guess the first thing I would ask you is: Does it all come back to you, hearing those words again?

Paul Downs:
Well, sure, and in the time frame covered by that paragraph, of course, there was another significant event, which was you and I met.

Loren Feldman:
I was going to mention that.

Paul Downs:
But yeah, I mean, I think that one thing that got left out too from that particular paragraph, is that you said that I had 11 employees and went to five. But two months before that, I had 23 employees. So we had to lay off half the company in the fall of 2008, and then the rest slowly bit by bit over the next year. So it was a sudden drop, and then gradually got worse. And then got better.

Loren Feldman:
And you’re right, we did meet at that point. You reached out to me because I was editing the “You’re the Boss” blog at The Times. And you thought it might be interesting to have a business owner write about the process of shutting down a business that was in the process of failing, which you were convinced at that point was what was going to happen. Do you know what you were going to do if it had, in fact, failed?

Paul Downs:
No, I didn’t know what I was going to do—other than fail. But what precisely that looked like was very mysterious. Because at the end of 2009, I was looking for information about how you actually close an ordinary business and what happens to you when you fail, and really found absolutely nothing. The only mention of failure I found—and I was looking around on the internet at that point—was this kind of story that seemed to be associated with Silicon Valley startups where you tried to get your startup going and then it failed. And then you tucked your tail between your legs for a couple of weeks, then you went out and raised more money, and then you ended up a billionaire.

That seemed to be the only account of failure that I came across, and clearly, that’s not typical. So I was really terrified of failure. I had been doing my own business for a very long time, and one of the things that I was worst at was building a network of people who might possibly employ me, if I failed. I just really didn’t have a network of other business owners or of clients. I didn’t have a network at all, and that was my own fault. I think that a lot of it is just because of my nature. I’m a very solitary person, and I also like to just figure out how to do things myself. So I started my business when I was 22 with no real guidance, never had worked for anybody. And by 2008, which was 18 years later, I had no network. So failure was going to be pretty ugly. And I’m glad it didn’t happen.

Loren Feldman:
Is there an aspect of running the business—and maybe it has to do with the network that you’re referring to—that you feel especially proud of and that you think is responsible for the turnaround?

Paul Downs:
Am I proud of it? I think that there’s an enormous amount of luck in my story. And that varies from person to person, but we got put into the business we’re in now, of making custom conference tables for anybody who wants one, through a sheer moment of luck in which Google chose a page on my old website, back in 2003, and decided that that was going to be the top search result for “boardroom table.” And so people started calling, and they’ve just never stopped. And that’s the real foundation of any success I’ve had, that through sheer luck, I was given the opportunity to make a product that not that many people know how to do, that’s not that easy for foreign competition to take our market away.

Loren Feldman:
But that happened five, six years before the 2009 collapse and the period where you thought your business was going to fail. And it was only after that, that you turned the business around. So it wasn’t all about Google.

Paul Downs:
No, it’s a really complicated story, and even in the book, I had to leave a lot of it out. Because the years before the crash, I had a partner, and my partner and I did a poor job of growing the business and lost a bucket of money. So we were a wounded duck by the time the recession arrived. And then after the recession, my partner and I sort of stopped agreeing with each other about how the business was going to proceed. And that’s a big part of the recovery, was just me getting out of that partnership and sort of undoing a lot of mistakes that we had made beforehand. So is that a triumphant story of business success? I don’t know. It was a lot of cleanup and just undoing stupidity that I’d walked into with open eyes before then.

Loren Feldman:
Well, it’s certainly a long way from what we talked about the most recent time you were on the podcast, where you talked about your hopes that you may be able to double your revenue in the next five years and better position the company so that at least you’d have the option to sell it, if you chose to pursue that option. You mentioned in talking about that, that to do that, you would need to think very differently about marketing. Can you tell us what you had in mind?

Paul Downs:
We need to stop just being reactive. So in the Google business, somebody out in somewhere-land is looking for a giant conference table and has no idea where to buy it, because who does have any idea where to buy this thing? And they get on Google, and they find us. And in my mind, we don’t really need a brand presence or anything. We just need to be the guys at the top of the organic search results so that people patronize us, but don’t necessarily form a long-term relationship.

We need to build a brand and start reaching out and identifying people who might patronize us on an ongoing basis, and I’m thinking of architectural firms. We have a couple that we’ve picked up over the years that come back to us again and again, but not very many. And that’s what I’m trying to accomplish, and I think I just need a different marketing effort in order to do that. There are all these new platforms now. There are new ways to reach audiences. There are new ways to fly your flag.

Loren Feldman:
What kinds of platforms are you referring to?

Paul Downs:
Oh, Instagram, TikTok. You know, if you want people to understand that you exist, there’s just a lot of different ways to do it.

Loren Feldman:
You can imagine posting videos on TikTok to sell conference tables?

Paul Downs:
Well, I can imagine posting videos on TikTok to show people that Paul Downs makes cool things that you didn’t suspect existed. Now, am I gonna be dancing? No. That’s where the people are, and that’s particularly where the next generation of buyers is going to be. And we just need to get our name out there. And we have not been able to manage that effort successfully with the internal team, so I’m looking to hire someone who’s good at it and see how that goes.

Loren Feldman:
That’s a big step. A lot of people have struggled with that. I mean, neither you nor I is a digital native. And the step to TikTok and success there is a big leap. How far along are you?

Paul Downs:
Not very far at all. But I’ll tell you who I’ve decided to go with, which is, in my Vistage group, there’s another business owner who runs a company that does nothing but make video content. And he has concentrated on sort of medium-to-large-sized businesses for years and had a lot of success with it and assembled a very effective team. And he wants to roll out a new product, which is aimed at smaller businesses so that there’s a whole kind of series of steps that he takes your company through, produces content, and then—here’s what’s really interesting to me—his team will figure out how to deliver the content into the channels and target the audiences that we identify so that we can make the connection between having stuff and delivering it to the people who need to see it.

And that’s very analogous to the problem that I ran into when I was just trying to figure out how to actually make our product, which is that we could receive inquiries from Google, and we’ve got a kick ass shop, so we can make tables all day. But the big trick is to get them to where they need to be. And I see this as a version of the same problem, which is that we’ve got incredible stories going on on our shop floor every day. And there’s all kinds of people who are interested in woodworking, and we’re doing a version of woodworking that most people can’t do. So I’m not really worried that we can’t come up with interesting video content or just interesting content, because the projects we do really are amazing.

The question is: How do you get it in front of the people who need to see it, which is a fairly limited set of people? Like, okay, if I had a video that went viral, and 50 million people saw it, and it was the next “Gangnam Style” or whatever, that’s fine. I don’t expect that to happen. But how can I get my little story in front of the 3,000 architecture firms that I actually want to talk to? And the people I’ve engaged claim to be able to do that, and we’ll see. It won’t be cheap. We’re looking at a budget of about $100 grand over the next year. But I’ve spent that much and more before on marketing. When we were buying AdWords, we spent $150,000 a year for years to get the paid search results that we wanted. So it’s a gamble, but it’s not a crazy gamble.

Loren Feldman:
We’ll be interested in hearing more about that as time goes on, and you make progress with it.

Paul Downs:
I’m pretty sure that the video is going to be good, because we’ve made some decent videos with our own efforts and my in-house staff, and we don’t know anything about making videos.

Loren Feldman:
I’m sure the video will be good. Whether that translates into success on TikTok is another question in my mind, but we’ll be here to see.

Paul Downs:
Okay, don’t get too caught up on TikTok. That just came out of my mouth. That’s not like, “Oh, it’s got to be TikTok,” all right? Actually I think that the main targeting is going to be through LinkedIn, and then Instagram.

Loren Feldman:
That makes sense. Let me ask you this: Have you thought a lot about how your own role would have to transform over the next five years as you pursue this goal? Do you think you have to become a different kind of manager of the business?

Paul Downs:
I hope not, but I’ll tell you what. I’m just about to be 60, and I’ve been doing this business since I was 22. It’s been a long, long road. And I’ve gotten to a point where the company is of a size and a sort of a challenge that’s pretty manageable for me. So I don’t have to work super hard, and I’m not one of these people who likes to grind out 80-hour weeks. I really just do not care for that. So what I’m hoping is that we can get to a point where I don’t have to work a ton harder. I just have to make sure that the things that need to be done are being done.

Loren Feldman:
If you do, in fact, double in size, presumably you have to double your number of employees. Would you have to add another layer of management to do that?

Paul Downs:
I hope so. I mean, that would be the way that I get to where I want without just drowning in it myself, because I really have no desire to do that.

Loren Feldman:
All right, I want to take a step back and ask you about your father, who was a well-known economist, and your son, who’s had a lot of success in the venture-backed startup world. But first, let’s take a quick break to hear from our sponsor.

[Message from our sponsor, Work Better Now]

Loren Feldman:
And we’re back. Paul, your father was named Anthony Downs. I believe he died last fall.

Paul Downs:
Yes, he did. He died in October.

Loren Feldman:
He was a prominent economist who studied things that weren’t necessarily what you expect an economist to study, including why people vote and why expanding highways can actually lead to more traffic. He also served on the Kerner Commission in the ‘60s, which studied civil unrest. He sounds like a really interesting guy. I’m curious, was he interested in entrepreneurship and your efforts to build a business?

Paul Downs:
Not at all. He paid almost no attention to anything that was happening to me other than to be extremely supportive of the general idea of me being in business. And I should say that he was a man of wide intellectual interests, and he was a very, very smart guy. He had a lot of success in the political science field with his doctoral thesis from Stanford, and then went on to spend most of his adult life dealing with real estate and urban development economics. And that was his specialty. And the whole political science thing got him shortlisted for a Nobel Prize, but it ended up going to somebody who had taken his theory and developed it much more.

But when it came to actual business, he did not know a thing about it and did not care, which is sort of surprising, because his father was a real entrepreneur. And my father worked for his own father for many, many years. But my grandfather very early decided that my father was not suited to be any kind of manager or to be involved with sort of the day-to-day running of the business—and that what he was good at was being in front of the clients and sort of thinking great thoughts. And there was a consultant firm, so that worked out fine.

Loren Feldman:
What kind of consulting?

Paul Downs:
They consulted for anybody who wanted to, but mainly with union pension funds in the ‘50s, ‘60s, ‘70s, and ‘80s about what to do with pension funds in real estate investments. In other words, pension funds collect a lot of money, they need to do something with it. And the unions were interested in investing in real estate.

Loren Feldman:
This is in Chicago, right?

Paul Downs:
This is in Chicago. Yeah, this is pretty rough and tumble politically. But my grandfather was very, very well connected in Chicago politics. And he started a firm that was aimed at this market of giving advice to people who needed to invest in real estate. And his claim to fame was that he dealt with a lot of crooks, but that he was personally an honest guy. And he made no bones about it, made sure everybody understood that he would never lie. He wouldn’t cheat. He wasn’t open to bribes. You couldn’t send a girl to his hotel room. Like, forget all that. But he would give people honest advice, and it worked out very well for him. He was the entrepreneur—my father, not at all. And my father never once gave me any advice about how to run my business.

Loren Feldman:
And he wasn’t really interested in understanding what you had to do to build it.

Paul Downs:
No, he couldn’t have cared less, but he was there when I needed him. And there were a couple of occasions when I had to ask him for help, and fortunately, he was able to help me out. There was one time, I think it was 2006, when my partner and I realized we weren’t going to make payroll. And I had to call my father and ask for a pretty significant amount of money. And he said, “That’s a lot. What do you need it for?” And I said, “I’ve gotta make payroll.” He’s like, “Okay, when do you need it?” And I said, “Tomorrow.” And he still wrote me the check. It was for 100,000 bucks. And I eventually paid him back, but saying yes to your own kith and kin, in those circumstances, that shows to me the value of family connections—which I think is an under-explored topic in business finance. I mean, how many people start with a pool of money that they’ve gathered from their family?

Loren Feldman:
Are you suggesting that a lot do or a few do?

Paul Downs:
I think quite a few do.

Loren Feldman:
Right. It’s a huge advantage for those who have it and difficult for those who don’t. Let me ask you about your son, Peter. You sometimes laugh at me for including articles about Silicon Valley and venture-backed startups in the Morning Report. In fact, you’ve referred to those stories as “pornography,” because they’re not really intended for the audience that we imagine reading the 21 Hats Morning Report. But that’s kind of the world that your son inhabits. Am I right?

Paul Downs:
Yeah, he’s a poster child for that.

Loren Feldman:
Do you guys talk about the relative merits of the ways you both do business?

Paul Downs:
Yeah, actually, we have a very different relationship than I had with my father, in that my son is very interested in how I run the business. And we have a great ongoing relationship. He is now 28, and he’s managing a team for the first time. And he asks me for advice all the time, and I think it’s wonderful. It’s really brought us together. Now the world he lives in is just insane, by my lights, that the money just drops down like a blizzard of dollars on these companies. And they can’t even figure out how to spend it.

Loren Feldman:
The money you’re referring to being investment dollars, venture capital.

Paul Downs:
Venture capital. Like if you can be in that world, God bless you. You’re there, and go for it. But there are some things that are very strange about it, too. So there’s not much loyalty. It’s pretty assumed that everybody is always open to the next offer, and that if someone stays at a company for three years, that’s remarkable.

The rewards for the effort invested are just outlandish. My son, on paper, is worth 20 times what I am. He put himself through MIT. He didn’t make a ton of money before going there, but he made some money. He put himself through college at full sticker price, because nobody would give us any financial aid. And now that he’s been out for, I guess, five, six years, he’s really had a lot of work experience and is doing a great job for a company that’s on fire, as far as I can tell. And his future is very, very bright.

Loren Feldman:
Is there any chance that future would include running Paul Downs Cabinetmakers?

Paul Downs:
I hope not. It would be a disaster.

Loren Feldman:
For whom?

Paul Downs:
Everybody, probably. The reflexes he has, I think, are not well suited to my business. Just as if I tried to step into his shoes, I’m sure that my lack of experience with that mindset would be bad. Like, I just wouldn’t be able to get my head around the need to just put your foot to the floor and go and spend the money and grab the people and do the stuff. The pace of it, and the challenge of getting from zero to billions is real, and I’m not suited to that. I’m just way too fuddy-duddy and quiet.

Loren Feldman:
What would he struggle with if he were trying to adapt to your world?

Paul Downs:
I think he would have a lot of difficulty dealing with—can we swear on this?—just the bullshit. [Laughter]

Loren Feldman:
There’s bullshit in his world too.

Paul Downs:
There is, but the bullshit of the physical world and manufacturing products is… There’s stuff that happens that you’re just like, “Oh my God. How did that happen?” Yesterday, we were trying to deliver a job to a client, and the client was already kind of touchy and troublesome. And we were delivering a bunch of stuff, and one of the things was just a big piece of stone that was going to be used for a desktop.

And we’re on tenterhooks about this delivery. And when we get to the site and we pull the stone out of the back of the truck, it’s just cracked in half. It was packed the way it should have been packed. A $6,000 piece of marble is just split in half, and we’re standing there in front of the client, who’s nervous as anything, because he’s spent a lot of money on our product. And we’ve got to say to him, “Oh, sorry, the stone broke in half. We’ll take it back. And we’ll start all over,” and I’ve got to eat 6,000 bucks on that and try to calm this person down. And who needs that? But that’s the world I live in.

Loren Feldman:
Don’t you think there’s a version of that in most businesses?

Paul Downs:
Yeah, I do. But in his world, six grand is like the coffee bill for the morning. In my world, it’s 6,000 bucks. It comes out of my pocket, and then all the labor involved to redo this thing. And the client is now double nervous, so when we come back the next time, it’s going to be even harder to make sure everything is perfect. So that’s one.

The other thing would be, I think it would be a surprise to him how ordinary people actually are. He’s been working in this world of, let’s call it the upper 5 percent, maybe even the upper 1 percent, in terms of cognitive ability and education and resources. And he just hasn’t been exposed to the entire range of how people are. Now, in his family life, he’s got a severely autistic twin brother, and that’s taken him into an entirely different world than his peers inhabit. And so I think that I’m confident that he’s got his head on his shoulders, and that he’s an empathetic person. But that’s not the professional world he lives in.

Now, one thing that is strange—something that he remarked to me—is that almost everybody he deals with, in terms of being an engineer for a Silicon Valley startup, is somewhere close to being on the Asperger’s spectrum, and that has a huge effect on how he can manage his team. Because a lot of the people just are wired differently from your average cat. And I think that that, again, is a story that’s under-reported in business, which is how different people get attracted to different types of businesses, and that managing them can be completely different, depending on who you’ve got and what kind of person you attract.

Loren Feldman:
That makes me think that—I mean, I’m not saying this should happen—it’s more likely that Peter might be able to slide in if he wanted to, and run your business at some point fairly well.

Paul Downs:
Possibly. I think that he would, given his resources at the moment, if for some reason, he ended up needing to do that, he would be more likely to hire someone to do it than to try to do it himself. And I think that that would be a wiser move, honestly.

Loren Feldman:
I wasn’t thinking of it so much as needing to do it, because it seems unlikely that that would be the case.

Paul Downs:
Well, I’ll disagree with you. In my Vistage group, there are several second-generation businesses where the person who’s running the business now was put in the position of running their parents’ business at a moment’s notice. One guy’s dad died in a motorcycle crash, and another one just dropped dead of a heart attack. And all sudden, these guys are like, “Oh, you’re running the business.” And they were doing different things and had different plans for their lives, but the whole family was invested in these businesses, and somebody had to do it. So I’ve seen how that plays out, and it can be an extreme challenge. And I’m sure that there are lots of instances where that happens, and everybody just fails and you never hear about it.

Loren Feldman:
But he wouldn’t necessarily have to run the business in an ongoing way. I mean, obviously, we’re hoping this won’t be necessary.

Paul Downs:
Yeah, maybe we should stop talking about this right now.

Loren Feldman:
But, you know, he could wind the business down and go back to his life—if that’s what he chose to do.

Paul Downs:
He could. I think that it might be a difficult business to wind down. We’ll see. Let’s talk about something more fun.

Loren Feldman:
Okay, one of the things that I’ve found so enjoyable working with you through the years, Paul, is that—I hope you take this as a compliment—you really have kind of the mind of a journalist. You love talking to other business owners. You love doing research, and you love really getting an understanding of how other businesses work. You talked about, just the last time you were on, I think, the guy who built a staircase business and sold it for a lot of money. And you said something about, “He had a really interesting marketing scheme.” Is that worth sharing?

Paul Downs:
Yeah, absolutely. His business was probably closest to mine, in that he had a not-very-sexy product, which is custom spiral staircases, generally made out of welded metal. Sometimes they had wood stair treads, sometimes they had metal stair treads, and he bought this business in 2009, I think, and it was a small business. And he decided that he wanted to pump it up, and that the way to do it was to really get good at marketing over the internet—to use Google searches and paid search to get people to call, and then develop a sales effort where you could get predictable yields out of a given number of people calling by having a very tightly controlled sales staff doing the things that he wanted to do.

He put his mind to this in a way that I think is extremely impressive, which is that he would hire people to do something. And it could be, “I’m going to hire a digital marketer to double my leads every 18 months,” or, “I’m going to hire someone to sell the stairs, and I’m going to give them the script, and I’m going to give them the support, but I expect you to sell this much.” He would hire people. He would set an expectation. And then he would say, “Tell me everything you need to succeed,” and then he would give it to them. And so that they have been given a goal, and they have been given the resources that they thought they needed. And he gave them support as they attempted to hit the goal. And if they didn’t hit the goal, he’d be like, “Sorry, you’re gone.” And then he would find somebody else and do the same thing.

And he had to be tough to do that, because when people are not quite hitting their targets, it’s always very tempting to make excuses for them. This is something I do all the time, which is, I’m just not tough with my people. I tend to have sympathy for why they might not be doing what I want them to do, and I don’t like to get rid of people. And he got his head around that, and it really made a huge difference in growth rates. We started off—his business and my business—at about the same sales volume when we both joined Vistage. And when he sold, he was about six times the size of mine. I had taken my business from two and a half million to 4 million. He took his from two and a half million to 20-something million.

And so I think that he was extremely impressive. And one thing to emphasize, is that he wasn’t a jerk. He wasn’t mean. He didn’t enjoy firing people. He just had a very clear idea of where he wanted to go, and he was willing to do the hard things to get there. And he worked really, really hard himself. So it’s just something that I couldn’t do, because I’m not that person. But I think it’s a model of taking a business which isn’t all that sexy, and making a real success of it, because he figured out what it was that needed to happen in order for it to grow.

Loren Feldman:
So, if I understand you correctly, it wasn’t so much that he understood something about marketing, or figured out something about the mechanics of marketing, as that he figured out a way to manage marketing people that got results.

Paul Downs:
Right. His success in all directions was based on the idea of: Try to do as good a job as you can with hiring, and then try to give people the resources that they think they need to do the job, and then hold them accountable. That’s three steps that nobody could argue with, really, but they’re hard to execute. And it takes a lot of energy and the ability to deal with frustration to actually pull that one off.

Loren Feldman:
All right, let me ask you about another one. In another podcast episode, you refer to a company that started doing what I think you called “open hiring,” where they didn’t interview people. Just whoever responded to an ad would show up and start working.

Paul Downs:
Yeah, this is a small company. Well, it’s not small now. That’s something that I’m still trying to get to the bottom of exactly how well that worked, because I’m writing my next book about this company.

Loren Feldman:
Oh, I didn’t realize. I knew about the book. I didn’t realize, when you told us about this, that it was referring to one of the companies in the book.

Paul Downs:
Yeah, so it’s a company that makes wooden accessories for the gaming community—people who play Dungeons & Dragons. I guess I can mention: The company’s called Wyrmwood, and they’ve been very, very successful, very fast growth. Again, in sort of non-sexy manufacturing. And they had a whole series of decisions they made and also a bunch of lucky bounces that helped them to succeed.

But the founder, a guy named Doug Costello, has some very particular ideas about company culture. And when his company was very small, and he was trying to keep up with 50 percent or 100 percent year-on-year growth, he just desperately needed warm bodies. So he put the call out to anybody he encountered, and anybody his employees knew—like, “If you know somebody, recommend him.” There was actually a very short interview process, just to make sure that they weren’t complete bozos. But you could basically get a job there—just walk in.

My understanding, based on a couple of years now of talking to these people, is that it worked for a while, and then it didn’t work. Because what happened was, a culture of not super productivity kind of settled into the company, and a lot of the people were allowed to set their own hours and sort of design their own job, and that was attractive. But they ended up having a somewhat dysfunctional factory floor because people just didn’t work that hard.

And they eventually decided to acquire another company that was a very, very different culture—a company that was owned and run by Mennonites and Amish. A Mennonite family owned it, but there were a lot of Mennonites and Amish working there. And in that company, they had a much more productive culture. And there’s been kind of an ongoing schism, after the acquisition, between these two cultures. And it’s playing out now in an interesting way. And that’s one of the reasons I wanted to write a book about them.

Loren Feldman:
How did you get connected with these companies?

Paul Downs:
Well, there’s a lot of luck in that. I was giving a lecture at a woodworking-machinery show, and the guy, Doug, and his brother, Ian, who owned the gaming company, came up to me afterward and said, “Hey.” They liked my talk, which was about how to introduce technology on to a woodshop floor, and what happens when you do it, and what do you need besides just the machine in order to make it work? And they were at a point where they needed to do that. They needed to get more high-tech equipment into their shop, and they didn’t really know anything about it. And so we met then.

And they were rolling out a big dining table/gaming table—a table that was specialized for holding a board game, but could also be used for dining. And I said to them, “Oh, that looks pretty good. And have you sold any?” And they’d already sold something like… They had orders for 50 of them at 10,000 bucks a pop, which is just astonishing.

They didn’t really know how to produce it, and they also didn’t have any chairs to go along with it. And I knew—because I had been in the dining table business for many years before I started making conference tables—that if you sell dining tables, you can sell chairs. People just want to buy them both at the same time. And I had designed all these different chair designs back when I was doing that and sort of stopped making them when we started doing conference tables. But I had all the designs. So I suggested that, “Hey, you’re going to need some chairs to go along with your table, and I’ve got chairs. Why don’t we make a deal?” And so they hired me to provide some chair designs, and then I had to go find a manufacturer for it.

Loren Feldman:
You didn’t want to manufacture it yourself?

Paul Downs:
No, because making chairs is just different from making conference tables. It’s like different medical specialties. The guy who does brain surgery and the guy who does ear, nose, and throat. They’re just different. And so that happens in woodworking, too. So I thought I would go find a chair manufacturer, and just by sheer luck, the guy who was running the spiral stair company had just met the Mennonite company owner. And he suggested I should go talk to this guy, James Martin, running the Mennonite company.

And they were doing nothing but high-end chairs and residential furniture. So I thought, “Well, this is a pretty good fit.” So I went out to look at the Mennonite factory, and it was very well-equipped and very well-run, and so I connected the two companies. I designed a chair and showed it to the gamers, said, “Here’s the chair, what do you think?” They liked it. And then I said, “You should have the Mennonites make this,” and they agreed. And so these two started doing business with each other.

Loren Feldman:
Where are the companies based?

Paul Downs:
The gamers are up in Taunton, Massachusetts, which is just south of Boston, about 30 miles. And the Mennonites are out in Myerstown, Pennsylvania, which is not far from Lebanon. It’s the northern edge of the Amish belt out there. So, very, very different, extremely different. Because the gamers were a very young workforce, a very Northeastern, hip, liberal kind of workforce. Lots of tattoos, lots of hair colors, blah, blah, blah, blah, blah. And Mennonites are Mennonites, and Amish are even more than Mennonites, and so you’re looking at basically the entire span of American culture.

Loren Feldman:
Tell us what that means. Do they use electricity?

Paul Downs:
Mennonites use electricity. So one of the things is that both the Mennonite and the Amish are ways to describe a grouping of small churches and congregations, which have their own rules about exactly how they deal with technology. And there’s a range from Old Order Amish who don’t use electricity and ride around in buggies up to every little gradual step of more technology and more connection.

The Mennonites kind of take up where the Amish leave off and become more and more technologically adept, so that James Martin and his company—which is called Keystone—they were kind of the most technologically adept end of the Mennonite spectrum. And so that on their shop floor, you would see electricity, and you would see computers, and you would see robots and things. But it was more how the people behaved in the interior company culture.

So there was no swearing allowed. Nobody was allowed to listen to music while they worked. Nobody could wear shorts, ever. You were encouraged to wear just black, gray, or white. No words on the clothes. You couldn’t have any tattoos visible. And company meetings began and ended with prayers. And the company culture statement was very explicitly Christian. And you know, that’s fine. There’s a zillion businesses like that. There are a lot of companies in America that are run on these Christian principles, and they may allow tattoos and red shirts or something. But Christianity is a huge part of American business that, again, goes under-reported.

So these guys are doing that, and then here come the gamers, and they have an extremely different culture. But the reason that they ended up getting together is because the Mennonites were stuck in a business model that had been working in the ‘80s and ‘90s, but was really not working in the 2000s.

Loren Feldman:
Why is that?

Paul Downs:
Well, they had built a business model on selling high-quality, American-made, handcrafted solid wood furniture through small local furniture stores. And this was how business was done in the furniture business, say, up to about 2000. That’s just how it happened. And then you have China entering the World Trade Organization, and you have IKEA, and then eventually, you get to Wayfair. And then all of a sudden, the way people think about buying furniture, and the speed on which it’s delivered, and the price points—all of that gets totally disrupted.

And furniture goes from being a kind of a once-in-a-lifetime purchase, where you save up and buy the dining set, and you’re going to have it and pass it on to your kids—all of a sudden, it’s just a disposable thing that’s really cheap. And people just buy based on how it looks and the price, as opposed to any other virtues it might have. And it was really hard for the Mennonites to figure out how to get out of their business model and become successful in just a completely different way of thinking about production and distribution.

Loren Feldman:
I’m guessing they weren’t on TikTok.

Paul Downs:
Nope. No TikTok. And they were actually struggling. They were heading for failure. COVID would certainly have killed them, because it shut down people going to small stores to shop. And they were already in financial trouble at that point. And the gamers swooped in and bought them, because their business model was basically coming up with cool products and selling them through Kickstarters and over the internet. And they rolled out a new version of their gaming table that had just an unbelievably successful launch in the summer of 2020 on a Kickstarter.

This was, I think, the fourth most successful Kickstarter ever. They sold a million dollars worth of these tables in seven minutes. And at the end of the first day of running the Kickstarter, they had over $8 million in orders. And the way Kickstarters work is that people place an order and make a commitment in order to sort of hold their place in line, and then the actual size of the order gets determined later. And so the Kickstarter happened in late August of 2020, and by December when the dust had settled on this, they had collected $20 million in orders for this one table, and they needed someone to build it. And they had no idea how to do it themselves, because they had not built tables before, so they just bought the Mennonites for cash.

Loren Feldman:
Oh, they didn’t buy him just to make the chairs. They bought them to do the whole thing.

Paul Downs:
To do the whole table. Kickstarter delivers the money from the pledges in one lump sum at the conclusion of the Kickstarter. So they had an $8 million war chest in their hands, and they were fairly comfortable with the performance of the Mennonites, because they’ve been sending them chairs, and they just decided to go for it. James, the Mennonite owner, called me and said, “Hey, these guys offered to buy me.” And I said, “Well how much?” And he told me, and I was like, “Take it. Because you’re never gonna get an offer like that again.”

His company really had no worth. They’d been losing money for years. They had no book value. I should say that. They had incredible value as a collection of skilled craftsmen who knew how to make furniture, and so the gamers bought them because they were going to be able to upgrade their own manufacturing prowess in a way they could never get to by trying to bootstrap it themselves.

Loren Feldman:
So they were going to buy the Mennonite company and have the Mennonite workers build gaming tables.

Paul Downs:
Right, they were going to have the Mennonite workers upgrade the skills of the whole organization—the combined organization. The manufacturing in Taunton was pretty primitive, because nobody who worked there had ever been in manufacturing. And the guys in Myerstown knew manufacturing, and so the acquisition was to get a hold of that workforce and that kind of institutional knowledge of how to do the business, and then redeploy it in a whole new business model with a huge number of orders in hand—like, a mountain of work to do—and then just try to get this work done.

Loren Feldman:
When you saw the results of that Kickstarter, did it give you a moment’s pause? Did you think maybe a combination conference table and gaming table could work?

Paul Downs:
Oh, no, it scared me. When we sell a million dollars with the tables, that takes us months. It takes us a lot of effort to do it, and we have a very clear idea of how we’re going to deliver that. And the idea that these guys could sell a million bucks of tables that they hadn’t actually ever produced in any quantity in seven minutes, and then make a commitment… A few months later, they were committed to delivering thousands of these things. And they had the money, but they just had never built them.

Loren Feldman:
But you know you could have figured out how to build them.

Paul Downs:
I probably could have, but maybe not. It’s not trivial. These days, most people are so disconnected from the actual production of physical goods, they don’t realize how hard it can be, even to make something—I mean, these are not iPhones. They’re just wooden gaming tables. But even that is a complicated thing to make in any quantity, and so there are a lot of challenges to executing on that. But these guys had all the money sitting there in their hands. It’s an interesting comparison with my son Peter’s task to scale up the engineering capacity of the company he’s working for, and he has all the money he wants. And he’s out there hiring people.

Loren Feldman:
What company is that?

Paul Downs:
His company is called Pipe, and it’s a company that provides financing to people who have ongoing revenue streams. So if you’ve got a business that is kicking out some kind of monthly subscription revenue, or let’s say you’re a gym—anytime you’ve got an ongoing revenue stream and you wanted to convert that into a lump sum so that you could grow faster, and you didn’t want to give up equity by going to venture capitalists, you go to Pipe. And they take your situation, analyze it, and then offer it to people who want to invest their money and buy that revenue stream. And they make the market between those two types of entities, which is a great idea.

And it’s going gangbusters. And it’s a lot of smart people, and he’s doing great at it. And then you’ve got a version of the same need to scale up capacity very, very fast being executed by people who are just from a different place, in terms of resources, education, culture. And they’re trying to make a go by combining liberal hipsters with Mennonites and see if we can come up with the game-winning team. And there’s plenty to write about in all this. I will say that.

Loren Feldman:
At what point did you decide you wanted to write a book about this?

Paul Downs:
As soon as I heard it happened. I was like, “This is going to either succeed or fail, but it’s going to be a hell of a ride on the way.” And it was just the kind of story that I think is really interesting, which is a story about real people in ordinary Main Street business. And there’s not a single person who went to Harvard Business School, or ever talked to venture capitalists. It’s just something that’s more accessible, and I think it’s just interesting to see a business like that really growing and succeeding, seeing how the leaders are responding to an unexpected level of success.

The Mennonites were sort of a version of every American steel mill that was about to shut down. These are people who had been doing a business successfully, and then it wasn’t successful, and they were about to hit the bricks, and then something came along. And they had to change the way they think in order to succeed. And will they be able to do it?

Loren Feldman:
And the thing that came along was a company made up of people—

Paul Downs:
—who had no idea what they were doing. But they had a pile of money. And so, it’s like, “What could possibly go wrong?”

Loren Feldman:
Can you give us a hint of where this is going? How far along are they, and is the collaboration working?

Paul Downs:
If you had asked me all the things I thought were going to happen, and all the trouble they were going to have, I would have predicted that there were a number of things. One, the gamers bought a factory that was doing a certain kind of production and that was more varied on a day-to-day basis. So the Mennonites would be making a set of chairs one day, they’d be making a dining table the next day. They were doing it more or less on a custom basis—very short runs, one-offs. And the employee basis there was, there’s a lot of variety in the work that comes across the shop floor. And the people, in order to do that and have any hope of staying in business, they had to be very, very skilled and flexible. So a lot of the production in that business prior to the acquisition is really based on the skill-set of the people.

You could never write a manual that told you everything they knew how to do. It’s all residing in the minds and the hands of the workforce, and that’s very similar to my business. There’s no manual for how to make conference tables. And when you need to, in the next year, produce $20 million of basically one thing, you are looking for a different workforce, honestly. You’re looking for more technology, less skilled labor. The skill part of it needs to be turned into someone who can do mass production techniques, and that’s a different worker. And so that was one thing. I felt like the gaming guys probably bought the wrong company, because the Mennonites weren’t actually doing the business that was arriving.

Now, the other thing is, the gaming guys needed to ramp up their own workforce very, very quickly. They went from 40 employees to something like 125 up in Massachusetts in the course of a year. And so the culture that they had developed, this kind of loosey goosey—I mean, there are details about how they describe themselves and how they manage their internal culture, which are kind of mind-blowing. But let’s just say it was a very relaxed atmosphere, very individual respecting, and there wasn’t much emphasis on, “Hey, we’ve just got to get this done, and I don’t really care about your feelings while we do it.”

And so you triple the number of people at the end of the year than at the start of the year without the management structures to accommodate it, and there’s going to be trouble. That happened extremely predictably, that the management that worked with 40 lackadaisical workers did not work with 120 new people who were even wondering what was going on. They didn’t have an HR department at all, and they didn’t have anybody who was tasked with dealing with HR issues when they started this, and the trouble arrived.

Then there’s another thing, which is they had to go out and buy a bunch of machinery to accommodate the production pace they needed. So now these guys are going out and buying machines—from people whose main job is to sell machines, not necessarily to make sure they work. And everybody involved is dealing with COVID and a huge international supply chain crisis at the same time. So the price of machinery and the ability of the machinery manufacturers to deliver their products was really impacted by what was going on in the last year.

So machines would get ordered, and then they would either show up and not be working because they’d been rushed through production, or they just wouldn’t show up for months and months, because they couldn’t get the chip or they couldn’t get the gasket, or whatever, the little bit that was required to make it work. And that caused huge problems because there were all these people who’d put down money to get a table, and no tables were being produced. So those are the highlights of what was going on, that was highly predictable, but there’s even more.

Loren Feldman:
How have you managed to track this? I mean, initially your role was to introduce the companies and provide designs for chairs. Did you tell them you wanted to write a book and somehow maintain access?

Paul Downs:
I’m probably uniquely qualified to tell this story because I not only know all the parties involved, but I actually understand the business, so that if you put Michael Lewis or some other reporter-type on this, they would probably be able to get the rough outline of it, but they wouldn’t understand the business. They wouldn’t understand how these guys succeeded and failed and the decisions they’ve made, and they wouldn’t understand the product in the same way I do. And so I’m only interested in stories that I feel like I can bring something unique to, and I think that putting me in the middle of this from the get-go has allowed me to maintain the relationships required to tell the story. And I kind of say that if you ever have a chance to write a book about two crazy companies that collide like tectonic forces, do it, because you’ll you’ll learn so much about your own business and just the decisions that you’ve made,

Loren Feldman:
Well, do you feel that’s happened? Do you feel you’ve learned things that will have an impact on your own business?

Paul Downs:
Absolutely, I think that the main thing was that the gaming guys succeeded because they decided to go all-in on branding their product, and like physically putting their name all over it, which is not unusual for a lot of products, like Nike on sneakers or cars or clothes. But in the furniture world, it’s absolutely unheard of. It was a huge no-no to ever put your name anywhere where anybody could see it, and they decided to break that rule, and it paid off huge for them. Because as it turns out, people aren’t nearly as bothered by it as you might think. And that’s really influenced my own thinking about trying to transition beyond the Google business—which is, basically, we don’t have a brand, we just do the thing and then move on—and trying to build a brand. And I’m being much less shy about putting my name all over stuff and really trying to establish that brand than I would have otherwise.

Loren Feldman:
Can you tell us, did it have a happy ending for James Martin selling his business?

Paul Downs:
A much happier ending than he would have had, because he was going to go broke and basically, he and his father had loaned tons of money into the business. His father was the one who actually started it, so one of the interesting things about that business was that the father started it just to give the kids something to do when they were young, and James had started working in the business when he was 14. And Mennonites don’t have any education past eighth grade, so James had started at work at age 14, had been in the business his whole life, and had managed to guide it into using computers and all kinds of technology, but he’s a guy who is not what you would call educated. Never been to college.

And then there’s other things that Mennonites don’t do. Like, James has never seen a movie. He had never listened to the radio. He just doesn’t. They don’t do that. So having him interact with the Wyrmwood team, who were very media savvy, was pretty interesting. And one of the things that happened to him is that after the acquisition, his personal financial situation was really vastly improved. But he had to kind of give up on his whole life in that business.

And this is something that, again, I think I’m uniquely suited to sympathize with, because I put my whole life into my business. And if someone came in and said, “You know, what? You’re just not profitable enough, and here’s what we’ve got to do. We’ve got to get rid of all the employees you’ve got now and get different employees and do this and do that.” Maybe they would put money in my pocket, and maybe I would enjoy the money. But at the end of the day, there would be this huge sense of loss, of having, “Oh, I struggled for years to get the business to go a certain way, and it didn’t work.” And now, all that effort just kind of vanished.

And he went through that in a very poignant way, and it’s just tough. It’s a form of mourning for everything you tried to do that didn’t work out. And again, I think that that’s an experience that a lot of business owners have, but that nobody ever, ever wants to talk about. And I think that I came close. I was heading that way when I first met you, and then we avoided it by the skin of our teeth, but that’s where I was going. And so I’m very happy to tell his story, because he didn’t end up bankrupt, and he’s started another business—a trucking business that I think is going to be very successful. And he was able to clear all his debts and all kinds of good things happened to him. But he also had to watch most of his workforce depart because they didn’t want to be part of a company that had the same culture as the gaming guys. And he had to kind of walk away from all of his skills and all the stuff and all the effort he put in. It would have failed, and he knows that. And so it’s just a tough situation.

Loren Feldman:
Are you still reporting the story? Or has it run its course?

Paul Downs:
No, it hasn’t run its course. Long story short, they’ve only delivered about 10 percent of the orders that they received in August of 2020, so far—although they’re ramping up fast now. But it’s been a real long journey.

There are so many zigs and zags in the whole course of it that I have a lot more work to do and a lot more people to talk to about what actually happened—and which I’m really enjoying. I’ve been able to just contact all the company owners and then a lot of the workforce and be like, “Who are you? Where did you come from? How did you end up working on the shop floor of a Mennonite company? And what was that like?” And just hear stories about ordinary people quietly doing something, which is actually pretty extraordinary, which is going to work every day, building something with your hands that’s intended to last forever, and watching it go out the door to its life with its new owners. And knowing that you didn’t just do garbage all day, that you really did something good.

That, again, is a story that I don’t think gets told. Most products that are made are so disposable, or they’re just experiences, or you’re just doing some kind of weird corporate project. People don’t have the opportunity to build a thing that’s intended to be great, and both of these companies are trying to do that. And they’re coming at it from very different places, but that, at the end of the day, is what all the people in these companies are trying to do—just make beautiful products that last forever.

Loren Feldman:
All right, Paul Downs, thank you so much for taking this time. I really enjoyed it.