Pod Insights How I Built This with Guy Raz Room & Board: John Gabbert. A Broken Deal, a Family Rift, and the Birth of a Furniture Giant About this episode John Gabbert built a massive furniture brand. But in order to do it, he had to defy his family.
John grew up working at his dad’s furniture store in the suburbs of Minneapolis. It sold classic, American-made furniture, with flowery prints and curved legs. But in 1972, John took a life-changing trip to Sweden, where he discovered an obscure store called IKEA. It was selling an entirely different type of furniture: simple, modern, and inexpensive, with a manufacturing process they controlled. To John, it looked like the future of furniture. The only problem, his dad didn’t agree.
That disagreement led to a 10-year family rift—but also a new business.
In 1980—zafter a deal to buy out his dad broke down—John spun out his own furniture brand, Room & Board. Today, it sells hundreds of millions of dollars of furniture in its own classic designs, mostly made by small American manufacturers.
This is the story of how John did it, without outside investors, and without chasing growth for growth’s sake.
What You’ll Learn
Why the right thing for your business might be the hardest thing for your family
How John connected with young boomers—not their parents
The key to long-term success: growing slow and saying “no”
Why John refused private equity money
Why Room & Board transitioned to employee ownership
Timestamps:
00:06:10 - Gabberts: flowery furniture in a fake living room
00:09:41 - Becoming president of the family business at age 23
00:13:33 - A fateful trip to IKEA in Sweden: “That's what the future needed to be”
00:18:36 - John tries to buy out the family business… until his dad backs out
00:35:47 - Design inspiration from modern art—and steel frames
00:46:38 - Why making furniture in America makes sense
00:55:27 - Investors come to call… and John says no
01:01:48 - The decision that transferred ownership to employees
This episode was produced by Chris Maccini with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Rommel Wood. Our engineers were Patrick Murray and Kwesi Lee.
Follow How I Built This:
Instagram → @howibuiltthis https://www.instagram.com/howibuiltthis/
X → @HowIBuiltThis https://x.com/howibuiltthis
Facebook → How I Built This https://www.facebook.com/howibuiltthis
Follow Guy Raz:
Instagram → @guy.raz https://www.instagram.com/guy.raz/
Youtube →guy_raz https://www.youtube.com/channel/UCNSfrxNEmCruNtjIzxCBHjg
X → @guyraz https://x.com/guyraz
Substack →https://urldefense.com/v3/__http:/guyraz.substack.com__;!! Iwwt! RZoD751oWzUzoqqdJiqaoL6HdJfRHDUO1TKvYJ424d3Udn7-Pw9Nj6nEsauh9zcgEvLjUEc$guyraz.substack.com http://guyraz.substack.com/
Website →https://urldefense.com/v3/__http:/guyraz.substack.com__;!! Iwwt! RZoD751oWzUzoqqdJiqaoL6HdJfRHDUO1TKvYJ424d3Udn7-Pw9Nj6nEsauh9zcgEvLjUEc$guyraz.com http://guyraz.com/
See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.
Transcript 11,484 words · 3 speakers
0:00 Speaker 00 Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2 a.m. kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one hard question. How do we make sure AI goes well for people? So they asked over 100,000 people their hopes and their fears and are publishing what they find, even the uncomfortable parts. Me? I've got my own hard question about AI. Here it is. If everyone has access to something that can help them write the business plan,
0:46 Speaker 00 build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.
1:32 Speaker 00 Say you're 18 months in. Business is growing. You've got expenses coming from six directions. Gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems. But here's the thing. Path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands, on the table in rewards you never earned, money that could have gone back into the business. Path B, you pause and get the US Bank Triple Cash Rewards Visa Business Card. Now, you're earning 3% cash back
2:16 Speaker 00 on gas and EV charging, office supply stores, cellphone service, and restaurants. You pick up an extra $750 cash back as a bonus. And you've got a low APR on purchases and balance transfers for 12 months while you're scaling. Same business, same expenses, two completely different outcomes based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. If you travel often, you'll want to hear about this unprecedented offer. For the first time ever,
3:00 Speaker 00 new Delta SkyMiles Reserve American Express Card members can earn two Delta Comfort Round Trip flights for travel within the 48 contiguous US states, Puerto Rico, or the US Virgin Islands. Plus, you can earn 50,000 bonus miles towards your next getaway. And who doesn't appreciate an elevated airport experience? Delta SkyMiles Reserve Card members get access to the Delta Sky Club, your pre-flight oasis to recharge, with 15 visits and four one-time guest passes each medallion year when flying Delta together. That's up to $950 in annual value. Value estimate based on $50 per visit rate to purchase additional visits
3:45 Speaker 00 or bring a guest to the Delta Sky Club. Make every trip feel more rewarding with the card that upgrades your travel. Apply today at delta.com/cardsocial. Offer ends November 4, 2026. Minimum spending requirements and terms apply. Flights are fulfilled as flight certificates valid for Delta Comfort or Delta Maine to select domestic destinations. Book 21-plus days in advance. Up to $80 per person, and taxes and fees apply. Other restrictions apply.
4:27 Speaker 01 One of the big decisions we made was there was a location in Los Angeles that I fell in love with. And we sat down as a group and said, okay, can we do this? You know, the furthest we'd gone to Chicago, we didn't know what to do. And we just said, no, we're not ready. And to me, it's an interesting point of view because people remember the decisions that they made where they did something. Sometimes the decisions you made where you did nothing is the most important decision in the business.
5:04 Speaker 00 Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz. And on the show today, how John Gabbert left his family's furniture business to branch out on his own with Room and Board, a national brand that was inspired by IKEA.
5:35 Speaker 00 Many, if not most, businesses we profile on this show started with an insight that the founder or founders translated into opportunity. And for John Gabbert, that insight happened on a trip to Sweden. It was the early 1970s, and on that visit, he walked into a store that, at the time, most Americans had never heard of. It was called IKEA. And what impressed John wasn't just the designs he saw, though that was part of it. What struck him was the whole idea, that a store could design its own furniture, control how it was made, keep costs down, and then sell it directly to customers without all the layers in between. And when John came back to Minneapolis,
6:18 Speaker 00 he couldn't stop thinking about this concept. Because at the time, he was working for the family business, a furniture store his dad started called Gabbert's. Gabbert's was a pretty successful local business, but what it sold was completely different than what John saw in Sweden. Gabbert's furniture was the kind of stuff your parents or grandparents might have bought in the 1950s. But this was the 1970s. Baby boomers were starting to buy homes and build families. And John believed that these customers would want more modern designs, more functional and more affordable. Unfortunately, John's dad didn't see it that way. And over time, their differences in vision started to create real tension.
7:03 Speaker 00 And that tension would eventually lead to a decade-long family estrangement. John walked away from the family business and bought out a small, experimental division he had created inside of it. He called it Room and Board. And over the next two decades, the brand would evolve into a modern, mainly American-made furniture brand, known for its use of steel, solid wood, and natural fabrics. Today, Room and Board sells hundreds of millions of dollars worth of furniture a year, and the company has never taken on outside investment. Like the customers who originally inspired him, John Gabbert is a true baby boomer, born just after World War II in 1946. He grew up in the suburbs of Minneapolis,
7:47 Speaker 00 working at Gabbert's from a pretty early age. And while we might associate the 1950s and 60s with mid-century modern furniture, John says that is not what was selling in Minnesota at the time.
8:00 Speaker 01 People today think of mid-century as being popular then, but that was not the popular design at all. The popular was more of this American colonial, turned legs, fabrics that had prints and flowers and birds on them. It was a very Americana sort of feeling.
8:21 Speaker 00 Where was the, was all the furniture at that time that he sold, was it made in the US?
8:26 Speaker 01 It was. It literally was all made in the United States.
8:29 Speaker 00 And was it made locally, or was he importing it from, or bringing it in from all over the country?
8:33 Speaker 01 You know, North Carolina was really the headquarters where furniture was made. But there was some made in New England, Michigan, Grand Rapids a little bit.
8:44 Speaker 00 Still today, right? North Carolina and Vermont, even Michigan has.
8:47 Speaker 01 Yeah, exactly, exactly. But North Carolina was by the, by far the focus of it. Family businesses in North Carolina that made the bulk of the furniture in the United States.
8:57 Speaker 00 So, I guess, from what I understand, what made that store interesting and different was that, at the time, a lot of furniture stores would just have furniture displayed, like you would just see rows of chairs, or rows of desks, or beds. But he actually decorated them as fully decorated rooms, so you could see what it would look like in a room.
9:19 Speaker 01 That is correct.
9:19 Speaker 00 Was that unusual at the time?
9:22 Speaker 01 That was unusual for retailers at the time, but it was a fairly common practice in North Carolina as manufacturers displayed their product to sell to retailers. And my dad hired one of the designers that worked in North Carolina to do the store and present the furniture that way.
9:42 Speaker 00 I read that he designed a part of this furniture store where people could sit and have coffee, and there was even like an area for kids to play at. I mean, this is in the 60s. That just seems really unusual.
9:57 Speaker 01 It was really unusual. And you'll talk to adults today that say, "I remember when I was, you know, 50 years ago, I was a kid and spent time there." Yep.
10:08 Speaker 00 So, as a kid, like as a high school kid, I mean, was your life, weekends and after-school, working the store?
10:17 Speaker 01 I would work in the store summers, probably starting when I was 16 or 17. You know, I would just. Do basic movement of product and unpacking and that sort of thing.
10:30 Speaker 00 And did you, I mean, was it kind of assumed either in the family or even from your perspective that you would join the business?
10:38 Speaker 01 You know, that's an interesting question because I think about that today and I just never, I never asked the question. I just assumed that I would go into the business.
10:48 Speaker 00 While you were in college, were you also working at the store?
10:52 Speaker 01 I was, yes, yes. I went to University of Minnesota and I actually, I don't have a degree. I rejected taking a lot of the required courses. I took business courses, design, art-related courses. I knew I was heading into the business and it's a combination of I was being groomed and I think my dad had worked really hard his entire life. He had purchased a home in Florida. He'd fallen in love with golf and basically for six months of the year, he was gone. And so as I started working, first as a salesperson, then picking
11:35 Speaker 01 up different management roles in a fairly short period of time, I was running the business.
11:41 Speaker 00 And what did that mean? Like you were, you were dealing with inventory, you were managing personnel, people, the staff, all those things?
11:52 Speaker 01 Yeah, very quickly it was everything. Yep. And he acknowledged it and I was president at, I think I was 23.
12:02 Speaker 00 How did you learn how to do those things? Because, you know, managing people, for example, what do you remember about learning how to be a boss?
12:13 Speaker 01 I don't know initially how I learned it. I guess much of that came later through reading. I must say Jim Collins.
12:22 Speaker 00 Good to great, yep.
12:23 Speaker 01 Yeah, great books about what it is to be a manager and all of that. I don't remember the exact year I started reading that, but that literally became my bible. Margaret Wheatley, she's written several books about. Management and a kind of different point of view. So she was the second influence on me. I think I just felt comfortable. I just felt comfortable making the design, merchandise decisions. I basically felt comfortable managing people that were older than me, which almost everyone was.
12:54 Speaker 00 Do you remember finding it stressful or challenging? Or do you remember, do you remember it being like thrilling and exciting?
13:03 Speaker 01 Probably initially exciting, but over a relatively short period of time, I became frustrated with the process. So the, you know, it was a process where the manufacturers really controlled the product. You went to a market, you went to different manufacturers that were well known then, and you'd select, oh, I'd like to carry this or that or whatever. Or they'd say, you can't carry this because Dayton's now has it or somebody else. And it was especially complicated because they didn't ever make the product for a very long period of time. So there was tremendous turn of product based upon the manufacturer's decisions to carry something or not carry it. If it's sold well for us in Minneapolis, it may not sell for the rest of the country. And they would drop it.
13:47 Speaker 01 So you'd, you'd be starting over. So I became quickly frustrated with that process. And then the salespeople were all on commission. And I became very frustrated with that process. Because the truth is if somebody's working for you on 100% commission, they're working for themselves. They're not working for you.
14:08 Speaker 00 All right, let's break this down a little bit. So the employees were on 100% commission, which I don't think you can do that today. I think in most states it's not, probably not allowed. I think you have to pay a salary. But in theory, you could do very well or you could do not so well. I mean, you can walk out of, of working a whole day and have, and make zero dollars in theory.
14:27 Speaker 01 Exactly right. And I don't think they were doing what was actually best for the customer.
14:33 Speaker 00 Because they were really just trying to make a sale.
14:35 Speaker 01 They were just trying to make a sale.
14:37 Speaker 00 Got it. Okay. The other part of it is you were getting your furniture from manufacturers in North Carolina and New England and maybe Michigan, and you had no input. Like if they, whatever they made, you sold. And, but I think that's, that makes sense. I mean, obviously it has changed today, but from their perspective, they're thinking, well, you guys are just a sales channel. Like we make the thing and you put it in your store and keep your mouth shut and sell it.
15:06 Speaker 01 Exactly.
15:08 Speaker 01 You know, we were one retailer, basically, in Minnesota. I mean, not a lot of impact to them at all. They were doing their own thing.
15:18 Speaker 00 Yeah. You probably did not have much, much pull there, right? You didn't carry a lot?
15:22 Speaker 01 No, not at all. But in 1972, I took a tour with a company to visit other retailers in the world, around Europe primarily. And I went to IKEA. And at that point, I think they had a couple of stores in Sweden and one in Germany, maybe. But as I, as I learned more about what they do, the design, I really was fascinated by the design and the whole process of lower cost product that's well designed. But what really fascinated me was their process in that they designed everything and then they went to, at that time, Eastern Europe to have it made. So they kind of turned the process upside down and, and they said, we are the creators of the product.
16:07 Speaker 01 You are going to be the manufacturer and manufacture what we determine for the value that we want, for the period of time that we'd like you to continue to make it. And that really hit me as, oh, this makes a whole lot more sense from the retailer's point of view.
16:22 Speaker 00 So essentially, when you saw IKEA in Europe, this is the first time that you saw a furniture company, a furniture store, that actually was selling furniture that they designed?
16:35 Speaker 01 Yes.
16:35 Speaker 00 And so the manufacturer was just making their designs to spec?
16:39 Speaker 01 Yep.
16:39 Speaker 00 That must have been like a road to Damascus moment, like so revelatory.
16:45 Speaker 01 It was, absolutely. I mean, I just, I just remember being startled by how much sense it makes, knowing that the frustrations are with dealing with American manufacturers, the way the process was set up. And I couldn't do a lot about it at that time, but I tucked it away and knew that that's what the future needed to be.
17:04 Speaker 00 Okay, so you have this trip to Europe, you see IKEA, and you come back to the US and you're running Gabberts. And you were seeing at Gabberts, you were seeing stuff that was, that I guess sounds like you didn't really like a lot of the stuff that was being sold.
17:24 Speaker 01 Yeah, I, you know, it's, what happened, though, is I started changing things at Gabberts, and I found little, little openings, right? So I found a New England manufacturer that wasn't doing all that great. And they were really interested in a true partnership in terms of product being designed together, being literally vertically integrated as a manufacturer and retailer. And I started down that road of finding those people that were different kinds of manufacturers.
17:55 Speaker 00 And what's the idea you had? I mean, you, you start to, you're starting to figure out, how can we take some of this IKEA model and apply it to Gabberts? Is that, is that fair? Is that what you were starting to think?
18:08 Speaker 01 That's, that's totally fair. Yep, that's exactly right.
18:10 Speaker 00 So how are you going to do that?
18:12 Speaker 01 Well, there was, it was mostly imported product. There was some made in the United States. We just opened this small department inside of Gabberts. It was called Put Together originally. I think we then called it Home and Company.
18:26 Speaker 00 And it was like a section of Gabberts. And just a Home and Company. And it was just modern stuff that you would assemble at home.
18:33 Speaker 01 And it was a small section. You know, if the, if the store was 100,000 square feet, this was 4,000.
18:39 Speaker 00 And much less expensive than what was sold.
18:42 Speaker 01 Much, much, much less expensive.
18:43 Speaker 00 And how did it do?
18:45 Speaker 01 It did fair, just fair, not great, but it was okay.
18:49 Speaker 00 Okay, so what this this kind of furniture line that had different names is called Put Together and then Home and Company. Eventually, you guys started calling it Room and Board?
19:01 Speaker 01 Yes. I just sat down with a couple of friends and we talked about names and something that was not too specific. So it had some reference to home. I think I realized later that Room and Board was more of a Midwestern term. In East Coast, it's like Bed and Board. But it worked and that's how we got it. It was just a maybe not very thoughtful process, but one that has worked okay.
19:31 Speaker 00 Okay, meantime, the family business Gabberts is expanding, right? I mean, you, I believe, opened a second store in Dallas in 1973. And then at some point, maybe it's around like 1980, you actually approached your dad with a proposal to take over the business, to take over Gabberts. Tell me about this idea you had.
19:53 Speaker 01 Well, it was first came, I was on the National Home Furnishings Association Board of Directors. I was the youngest member by maybe 15 or 20 years. So we'd have our board meetings and after the board meetings, you know, you'd sit around and talk and have a beer. And it seems like the conversations for most of the other board members who were in their 40s and 50s evolved to, you know, their old man still owns the business. What is the transition like? That typical generational transfer. So I listened to that and I went back to my dad. This must have been in 77, maybe. And I said, can we agree that I'm going to buy you out? I'm running the business. I've been running the business for a while.
20:38 Speaker 01 Things are going pretty well. And
20:42 Speaker 01 We had a legal document signed that I would buy enough of his shares of the business that I would have controlling interest.
20:50 Speaker 00 Okay, so he agreed and you were gonna have, and when you came to this agreement, how many years before he would?
20:58 Speaker 01 I'm thinking it was 77 or 76 when we agreed and the date was October 1st, 1980.
21:06 Speaker 00 He would step aside, you would buy his shares?
21:09 Speaker 01 Yes.
21:10 Speaker 00 And then you would become the full owner of Gabberts?
21:13 Speaker 01 I would be the controlling owner because I had siblings that still owned some shares.
21:17 Speaker 00 Got it, okay. Okay, that date comes, 1980, the moment for your dad to sell the shares, and what happens?
21:26 Speaker 01 I simply went to him and said, "Here, we have the agreement," and he said, "I'm not gonna do it." I said, "We have a legal agreement." And he said, "Oh, I'm not gonna do it."
21:36 Speaker 00 What was your dad's reasoning? I mean, he wanted to retire. He was in semi-retirement already, from what I understand, going to Florida. What was the reasoning he gave you?
21:47 Speaker 01 He thought the things that I was doing was going to ruin the company. I mean, it was his baby. Gabberts was a business that he built, and I was running it, and I was making changes, and he thought those changes were a serious mistake. And then you add in what was going on in the 70s in terms of the economy. Interest rates were crazy. I mean, it was a strange time. We continued to be profit the entire time, but not overly profitable in that period of time. So he just thought it was a big mistake for the business.
22:22 Speaker 00 He was worried you were gonna run it into the ground?
22:25 Speaker 01 Yes, exactly.
22:27 Speaker 00 When we come back in just a moment, the family business comes to a crossroads, which might be good for the business, but is not so good for the family. Stay with us. I'm Guy Raz, and you're listening to How I Built This.
22:49 Speaker 00 When I pull up to a gas pump to fill my car, I'm not thinking about chemistry or engineering. I'm thinking about getting in, filling up, and getting on with my day. And it reminds me a little bit of the founders I talked to on this show, because the best ones obsess over things their customers will never see: tiny details, invisible improvements, relentless iteration. And not because anyone's watching, but because it makes the product better. That's what the mobile brand does. It engineers fuel the same way great founders engineer their products. Mobile Supreme Plus Premium Gas helps keep engines three times cleaner, which can mean better performance and improved gas mileage. It's for people who care about what's under the hood,
23:33 Speaker 00 even if they never see it. Three times cleaner compared to mobile regular gas in port-fuel-injected engines. Actual results may vary. Visit mobili fuels.com for details. Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting, and a CMS built in, so the work is production-ready from day one. And you can get it done with help from Framer's AI agents. Framer is the AI website builder that helps creators, teams, and businesses ship production-ready sites faster than ever
24:16 Speaker 00 while getting every detail right: prompt, inspect, edit, and publish in one place at a whole new pace. AI agents and humans work together. The agents bring speed and scale, and people bring taste, judgment, and control. Learn how you can get more out of your site from a Framer specialist or get started building for free today at framer.com/built for 30% off a Framer Pro Annual Plan. That's framer.com/built. Rules and restrictions may apply. AI isn't just opening new business opportunities. It's changing the way businesses get work done. The questions they ask, the decisions they make,
25:00 Speaker 00 the routine tasks they can hand off. That's the idea behind NetSuite Next, the next generation of NetSuite with AI woven into the tools your business already relies on. NetSuite Next surfaces insights exactly when you need them, puts agents to work on routine tasks and problems, and lets you ask complex questions in plain language, like talking to a knowledgeable colleague. But technology is only part of the story. AI is also reshaping how people and teams work together, and that shift is already underway. That's why NetSuite wants to put a new, expert-created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work.
25:45 Speaker 00 And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization, and how to position your business to prosper from it. If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built.
26:27 Speaker 00 Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1980, and John Gabbard is trying to recover from a gut punch. His dad has reneged on an agreement to sell John the family furniture business.
26:40 Speaker 01 So I went to my attorney, and he said, "Well, this is the deal. It's a clear document." It will take two to three years, but you could win in court if that's what you want to do. But let's talk about what some of the other options are. Um, so, uh, my, my dad's proposal as a solution was I would move to Dallas with my family and run the Dallas store and my younger brother would step in and run the Minneapolis store. And I was, said, I'm not interested in moving to Dallas. So I went back to him with the proposal that I would buy what was then Room and Board as a division of Gabberts.
27:23 Speaker 01 Um, and basically trade my stock, I own about 30% of the business and I would trade that 30% for the full ownership of Room and Board.
27:32 Speaker 00 Okay. You had this legal agreement with your dad and you at some point considered taking him to court, which would have been very, uh, that'd been a, that's a lot of friction, taking your own dad to court. I imagine, I mean, did you consider doing it or was that something that you might have done?
27:53 Speaker 01 No, no, no. I mean, I sat with the attorney and we quickly said, you don't want to do that.
27:57 Speaker 00 Yeah.
27:58 Speaker 01 That's not something you want to do to your family. It's just disruptive to everybody. So that's how we said, what are some of the alternatives? And we came up with the alternative of just my vacating Gabberts and buying what was then going to be Room and Board.
28:11 Speaker 00 Okay. Your proposal was, all right, fine. You don't want to sell me the business. I just want this slice of the business that I kind of created, this modern.
28:20 Speaker 01 Yes.
28:21 Speaker 00 Furniture thing.
28:22 Speaker 01 Yep.
28:23 Speaker 00 And, and what did you get for that? Would you get inventory? I mean, you, you had this kind of name, that Room and Board, but it wasn't a brand. So what, what were you actually buying?
28:33 Speaker 01 I was buying, um, some locations that were open. So we had leasehold improvements and inventory.
28:39 Speaker 00 Okay. So you actually had opened a few locations.
28:43 Speaker 01 Yes, we had opened a few locations.
28:45 Speaker 00 How, how many? Do you remember?
28:47 Speaker 01 I think there were three at the time.
28:49 Speaker 00 And they were, where were they?
28:51 Speaker 01 They were in Denver and Minneapolis.
28:53 Speaker 00 Okay. And at that point, under the name Room and Board?
28:57 Speaker 01 Yes.
28:58 Speaker 00 First of all, was it like what IKEA furniture is today? I mean, mostly it's particle board. It's not solid wood, a lot of veneers, um, assemble your own. Is that what you were selling?
29:09 Speaker 01 That's what room and board basically was at that time. It was still that IKEA-like product.
29:15 Speaker 00 And that enabled you to sell it for a low price because particle board is a lot cheaper than solid wood.
29:20 Speaker 01 Right, right, yeah. And I wouldn't say particle board was the focus, but then there were things made of plastic. There was, you know, more innovative.
29:29 Speaker 01 I think people perceived it as temporary furniture.
29:31 Speaker 00 Yeah. And by the way, I think IKEA furniture, much of it is high quality. I think it's a great, you know, value for money, for sure. But a lot of it is particle board and veneer and, you know, not always the kind of furniture you're gonna have for 25 years.
29:47 Speaker 01 Right.
29:48 Speaker 00 But the price point reflects that.
29:50 Speaker 01 Yep, exactly.
29:51 Speaker 00 And so your customers were like, what, I mean, college students or people out of college, young people, you know, with their first apartments, that kind of thing?
30:00 Speaker 01 That, and then older customers in secondary parts of the house. You know, do the basement for the kids, that kind of thing, so.
30:07 Speaker 00 Yeah.
30:07 Speaker 01 Yep.
30:08 Speaker 00 Okay. So you gave up your shares of Gabberts, which were worth, I think about $800,000 at the time.
30:16 Speaker 01 Yep.
30:16 Speaker 00 And you got, you got this, these three locations, this room and board, which you had started internally in Gabberts.
30:25 Speaker 01 Right.
30:25 Speaker 00 And your idea was, okay, let me see what I can do with this thing.
30:31 Speaker 01 Yes, exactly.
30:33 Speaker 00 Before we get to what you did, let's talk about the, this decision in general. I mean, you are leading the family business that you had run at this point now for, you know, almost a decade. Your dad, he kind of decides that he does not want to go through with this plan that you guys had agreed upon. What did that mean for the family? Did, I mean, it must have been not an easy time.
31:03 Speaker 01 No, it was, it was not an easy time, and it was a little more complicated because I owned about 30% of the business. I had three siblings that each owned about 10.
31:16 Speaker 01 And I sat with each of them and said, okay, here's your choice. You can vote with me and I'll continue to run the business and this is my future. Or you can choose not to vote with me. And, and they all chose not to vote with me. So that complicated it even more.
31:34 Speaker 00 Wow. So you've gone to your siblings and said, hey, if you guys vote with me, we have 60% control and I'll run the business and I'll grow it. If not, you know, and they decide not to, they went with your dad.
31:46 Speaker 01 Yes, exactly.
31:47 Speaker 00 And so I'm sure this is not easy to talk about even now, decades later. I'm sure it's still quite painful, but I mean, it's also business that happens in businesses, right? Family businesses for sure.
32:00 Speaker 01 Yes, it does, all the time.
32:01 Speaker 00 We've certainly dealt with it on this show. That's not just a business disagreement, that's a family fallout. That's personal.
32:11 Speaker 01 Very, very personal, absolutely. Yeah, no, I basically didn't see family for at least 10 years.
32:18 Speaker 00 Wow. So you, you kind of, I mean, you were estranged, you were estranged from family.
32:26 Speaker 01 Yes.
32:27 Speaker 00 But also living in the same city, right?
32:29 Speaker 01 Yes, oh, yes.
32:31 Speaker 00 So did you just stop talking to them?
32:34 Speaker 01 Oh, yeah, yeah, yeah, it was difficult.
32:37 Speaker 00 And on top of that, you're competing now against your family.
32:42 Speaker 01 Actually, strangely enough, not directly for the first years. I kind of avoided what that was. So Room and Board stayed what it was, which is more of this Ikea-like product, which didn't compete directly. And I think I subconsciously said, that's fine. It's interesting, I spent those next six or eight, eight years, I did a variety of things. I started a business called Bedrooms for Kids. I had a wholesale showroom. I bought a design studio. So I spent, as I look at it now, I kind of wasted eight years doing things instead of building Room and Board.
33:24 Speaker 00 Tell me why. What do you remember about that time? You thought it was better to just be diversified?
33:29 Speaker 01 You know, I really asked, I asked myself that question today and say, well, what was I thinking? Why did I try those different things? And I look back, it was a bad, it was not a good time from a business standpoint. I was doing too many things. It was just a mistake.
33:47 Speaker 00 Were you making money yourself?
33:51 Speaker 01 Some, but not a lot. And it didn't, I didn't feel like I was doing something that was important to me. I started having this clear vision of what room and board could be. And as that grew in my mind, it became really clear to me that that's way more important to me than doing all of these other things.
34:16 Speaker 00 Okay, this is happening against the backdrop of a family rift that had happened. So there's that personal component that is not easy. And then there's the professional component, which is, it is what it is. I wonder, do you remember at that time, between 1980, let's say 1980 and 1988, ever having doubts, ever thinking, God, I think I might have made a mistake?
34:45 Speaker 01 I don't think I had doubts about my choice at Gabbert's, the initial choice, right? I knew that was the right thing to do. I certainly started having doubts about the focus on those different businesses. And that's when I really, it was about 88, 87, that, you know, I turned 40. It's a time when you think about life and you say, what's the rest of it going to be? And that led me to really reevaluating the whole process and making the changes pretty quickly.
35:18 Speaker 00 All right. So you decide to give up on these other businesses, the kids furniture and the, I guess, the design studio, and really focus on room and board. And I guess one of the things you do is move your store in Edina into a much bigger space, right?
35:37 Speaker 01 Absolutely. And the decision seemed pretty easy. We moved room and board into this much larger building and
35:47 Speaker 01 Part of what we did is we put room and board in and then we created another department, if you will, which focused on better quality, American-made, at a considerably higher price. And I think the shock that hit us is our room and board customers, once they saw that, they bought it. They bought it readily and easily and it just opened our eyes to the fact that this customer we were trying to appeal to, you know, out of college, not a lot of income, they don't mind having the IKEA-like product. Well, now it's 10 years later and they're established in their job and they want more, not temporary furniture,
36:29 Speaker 01 they want permanent furniture. And they saw what we had, which was really quite beautiful, American-made, and it sold way more than we expected.
36:42 Speaker 00 Okay, so you've got to expand and now you have an opportunity to add a new line and you decide, okay, let's go up a notch and we'll still sell this flat-packed assemble-at-home stuff, but let's see if we can make more sort of high-quality design furniture. But who is going to make this stuff?
37:05 Speaker 01 Well, we were aware of a few of these, mostly New England manufacturers, some in the Midwest, that made this beautiful, quality product.
37:16 Speaker 00 Okay, and so were you going out to these places yourself and saying, "I like that, I like that, I like that"? Because this is before the internet, this is, you know, there were catalogs, but these places didn't have catalogs? It was a few people in a garage, not a garage, but in a small warehouse?
37:32 Speaker 01 You know, strangely, there's a furniture market in North Carolina, right, where everybody shows and usually these little guys don't show. But the state of Vermont, for one market, happened to rent a space for these different Vermont manufacturers. And we happened upon those people about that same time we were going into that space and that became our initial connection.
37:56 Speaker 00 So the design pieces from Vermont, what did those look like? I mean, did that, how would you describe that look? Because I think you were going for a very different kind of look than a Gabberts or a store like, and probably most furniture stores in America were like Gabberts.
38:14 Speaker 01 Yes, it was a very different look. The focus was really on the wood itself. So it was like classic, simple designs that really focused on the beauty of the solid wood. They have a reference to arts and crafts. They have a reference to some Japanese design. There's been periods of time where there's been a reaction against overindulgence and too much decoration, and it's more about the simplicity. And that's what this product was about.
38:49 Speaker 00 Yeah, you know, it's interesting because it's hard to describe, like, you know, people will say, well, what, how did you know what to pick? And your answer probably is going to be something like, I picked what I liked, right? Is that, is that true?
39:02 Speaker 01 True, yeah, it's very true.
39:03 Speaker 00 And here you are, and not, and please don't take this the wrong way, but you grew up in, you know, the suburbs of Minneapolis in the 50s and 60s. You know, you had a shop in Edina, Minnesota, and yet you had developed, I think, a pretty sophisticated design sensibility.
39:22 Speaker 01 Yes, I think that's true.
39:24 Speaker 00 So how, how did that come about? What, what influenced that?
39:29 Speaker 01 I think something that influenced it as much as anything else, even though it's not direct, is the Walker Art Center.
39:36 Speaker 00 Ah, interesting, yes. A significant museum.
39:40 Speaker 01 Significant museum with a very modernistic point of view.
39:44 Speaker 00 Yes.
39:45 Speaker 01 I mean, it's, I think it's considered the third best contemporary modern museum in the country.
39:49 Speaker 00 Yeah.
39:50 Speaker 01 Behind New York and San Francisco. They were in the forefront of doing all kinds of amazing things, especially as artists were developing and coming along. So it was just, it was exposure.
40:05 Speaker 01 To a pretty sophisticated point of view of design that was be unusual for Minneapolis.
40:12 Speaker 00 Do you remember any particular artist that struck you?
40:16 Speaker 01 Oh, my favorite of all time is Martin Purrier, who's a sculptor. I've actually have several pieces and have given a couple to the Walker.
40:24 Speaker 00 And he does a lot of stuff in wood, right?
40:26 Speaker 01 He does a lot of stuff in wood, but also in metal and bronze. You know, simple little things like, I don't remember the art itself, but I remember the framing on some of the pieces was just raw steel. Simple steel that was welded. You can see the weld marks. And I looked at that and it hit me, oh, how perfect for furniture.
40:49 Speaker 00 That's really interesting. That makes a lot of sense because anyone who knows room and board furniture will know that a lot of your iconic pieces are steel, basically steel framed.
41:01 Speaker 01 Exactly.
41:02 Speaker 00 Like tables or kitchen sort of islands or, you know, how
41:07 Speaker 01 Right.
41:08 Speaker 00 It's, and you see the steel, like on the credenza, it's like you see the steel legs.
41:14 Speaker 01 Yes. So that's, that was, I think that was the single biggest influence that came from Minneapolis.
41:21 Speaker 00 John, I'm curious about the storytelling side because I remember the first time going into a room and board store and seeing little signs like, this is, this is the guy in Vermont who makes this, or this is the person who designed this. Now you see this everywhere, right? You even see it at Ikea.
41:38 Speaker 01 Right.
41:39 Speaker 00 And tell me about how that started. I mean, did it start because you felt like you wanted people to understand why these pieces were more expensive and why they, and what the reasoning behind it was? Like, I guess to sort of telegraph the idea was that this is high quality and artisanally made and designed in the US. I don't know. What, what was the, what was the sort of the, the spark that, that had you guys start to tell stories around the pieces of furniture?
42:07 Speaker 01 I think the spark was,
42:11 Speaker 01 Information from our design associates in the stores kind of referring how much people like to know what they just spent a fair amount of money for, what the story is behind it. They like to know that piece of furniture in their home and where it was made and why it was made that way and what the materials are. That's not everybody, but a certain percentage really want to understand that, that it's a connection to what they purchased.
42:36 Speaker 00 Okay, so you are, you're working with these designers or manufacturers, you get these pieces in. And again, like you're picking stuff out that you like, but with the idea that it was going to be purchased by people around your age, let's say professionals between 30 and 50.
43:00 Speaker 01 Correct.
43:01 Speaker 00 So you open this location up and how does it do?
43:05 Speaker 01 I think that was, it was a moment that's really room and board. It gave me confidence to take room and board to a different spot. These things that, that you would not think our customers would be interested in at the price point seemed too high, and it sold really well. And it just told me, oh, this is the time to change. This is the time to move on to the next phase of what, of what it can be.
43:32 Speaker 00 When we come back in just a moment, John starts getting calls from investors looking to cash in on his success and why he says no to all of them. Stay with us. I'm Guy Raz and you're listening to How I Built This. Stripe is built for whatever comes next because the pace of change has never been faster than it is right now. New business models, new currencies, and new expectations for speed, reliability, and scale. Stripe builds financial infrastructure that helps businesses start, grow, and operate globally.
44:14 Speaker 00 From payments and billing to fraud protection and cross-border payouts, Stripe is built to support the new pace of commerce. They're trusted by the companies building at the frontier, from 86% of the Forbes AI 50 to global leaders like Salesforce and OpenAI.
44:33 Speaker 00 In fact, more than 1.6% of global GDP flows through Stripe, with Stripe's users processing a combined $1.9 trillion last year. So if you're already thinking about what's next for your business, see what's possible at Stripe.com.
44:52 Speaker 02 Confidence, it's listening to your gut. It's moving forward even when the path ahead is unclear. For nearly 160 years, Pacific Life has helped people keep their promises, building confidence for generations. Whether you're confident in your financial future or just beginning to envision it, we're here to help. Ask a financial professional how. Pacific Life, the power of a promise. Pacific Life Insurance Company, Omaha, Nebraska. And in New York, Pacific Life and Annuity, Phoenix, Arizona.
45:32 Speaker 00 Hey, welcome back to How I Built This. I'm Guy Raz. So it's the early 1990s, and John is starting to develop a distinctive room and board style. And he's making the furniture in just the way he'd imagined years earlier when he made that very first trip to IKEA.
45:48 Speaker 01 The way we did that was a process of finding people that could make the product.
45:56 Speaker 01 And steel was actually one of the first great examples. So what we would, we found, actually, the security gate manufacturer had a tiny little factory and said, how about making some furniture?
46:07 Speaker 00 They made security gates?
46:09 Speaker 01 Security gates.
46:10 Speaker 00 And you said make furniture?
46:12 Speaker 01 And we said make furniture.
46:13 Speaker 00 And it would be, it would be the frame of a sofa? Or it would literally be, what would it look like?
46:20 Speaker 01 The initial pieces were a dining table.
46:24 Speaker 00 Uh huh.
46:24 Speaker 01 Right? And you just take two inch by two inch steel.
46:27 Speaker 00 Okay.
46:27 Speaker 01 And you make the classic Parsons frame. That you have a different levels of tops to sit on, different kinds of tops to sit on.
46:36 Speaker 00 Okay, these Parsons tables, I don't know if everyone knows them, but it's, it's a, it's a very simple minimalist table. It's a long table. It's got four thin steel legs, very strong. And then on the top, you can put wood, you can put marble, you can put.
46:53 Speaker 01 Wood tops, marble tops, glass tops. It's, it's one of our best-selling products today.
47:00 Speaker 00 To this day.
47:01 Speaker 01 Today, that same product, same manufacturer. Yeah, they're the second largest manufacturer today, as a matter of fact.
47:08 Speaker 00 The same company that you worked, that was making secure gates is now mainly making your steel frames for your tables?
47:16 Speaker 01 Yes.
47:17 Speaker 00 And how did you come up? I mean, who even thought of, let's go to these guys who are making steel gates and have them make furniture for us and make a, was there, what inspired that design, which would become this best-selling product that you would have?
47:34 Speaker 01 I mean, I think that's what I bring, I brought to the business then, not so much now, is that inspiration for design, just because I'm so interested in it. Pretty soon, you find the right partner and then it gets pretty easy and you do one and then you do more. And first he did tables and then he does beds. And the way I describe it often, if you buy a table and chairs from us, it probably is coming from four different manufacturers. Because the person that makes the chair well is not the same person that makes the wood top well. The person that does the upholstered seat is very different than the person that makes the wood chair. So the unique thing we bring to the process is we bring the design
48:14 Speaker 01 and then we have these different manufacturers make the components, which actually reduces the cost of the piece, because we've got these specialists doing what they do really well. And it has the bonus advantage of now you've got lots of choice. So now, instead of having just two choices for the table, you've got 20 choices for the table, because you can have these different tops.
48:38 Speaker 00 So it's almost like a, like a supply chain for cars, right? You know, components come to a factory and, you know, somewhere in Michigan. And then that's what was happening. You get, you're getting different pieces from different places and then you guys could put it together. And that ultimately would save you money.
48:54 Speaker 01 That will ultimately save us money and it gives the customer considerably more choice.
49:00 Speaker 00 Interesting. Okay. So you've got this, you've got these pieces coming in into your shops and you've got three stores. And then you open, I believe the fourth store was in Chicago.
49:13 Speaker 01 Yes.
49:14 Speaker 00 It's around 1993.
49:16 Speaker 01 Yep.
49:16 Speaker 00 And Chicago is a design city. It's one of the centers of design in the world.
49:21 Speaker 01 Yes, yes. I think that the whole transition to what Room and Board is today started with a point of view about design and value. And a lot of that came from what the manufacturer's capabilities were. I mean, obviously, one of the big questions we had in the beginning was furniture was not being made in America. By the time we got to this point in our career, imports were the primary way product was made. If you must go anywhere and you buy furniture in America, that's made overseas.
49:55 Speaker 00 Yeah.
49:56 Speaker 01 And we actually went through a really thoughtful question about can we make product in America that's completely competitive? And we determined that the only advantage that you have making it in China is wages, right? It's about a 30% advantage in cost of product. Well, we felt like between freight and quality and a series of other things, we could make up that difference. So we could totally make competitive product in America, given the design of the product that we focus on, where it's really more about material. The cost is, you know, there's a, there's a ratio always in making something between the material and the labor.
50:37 Speaker 01 So if you're making a simple, classic something out of solid wood, the labor cost is a fairly small percentage of the cost. If you're making something very elaborate, the labor cost gets to be a pretty high percentage and the advantage of making it overseas becomes pretty significant.
50:55 Speaker 00 Yeah.
50:56 Speaker 01 So our, our design and approach allowed us to compete really effectively with imported product.
51:04 Speaker 00 Yeah, and you had a very strict approach at that time. I think there was like, there would be no sales, no volume discounts.
51:13 Speaker 01 Right.
51:13 Speaker 00 No discounts for like interior designers, which they get, a lot of people know this, they get them.
51:18 Speaker 01 Yep.
51:19 Speaker 00 I think some of those rules have changed, but this was really a hard and fast rule for those first few, for several years, right?
51:25 Speaker 01 Yeah, yep.
51:25 Speaker 00 And why was that? Why no sales or no discounts?
51:31 Speaker 01 It comes from a basic philosophy of personal philosophy. Say, I want to treat each customer, they're like my best friend.
51:38 Speaker 00 Yeah.
51:39 Speaker 01 Right? That's just like a core approach to think about how do you answer these questions? And why would you do that to your best friend? You say, oh, you know, if you came in last week, it was going to be 20% lower in price. So everybody's buying product at different price. It just didn't seem like a fair thing to do to customers. So we just said, we're not going to have sales. It's one fair price and it just makes it simple and easy to have a consistent offer for your customers. It has a side benefit of it evens your business pretty. If you have a sale, you're creating peaks in your business. So you got the back end of the business, which is handling the product and delivering to customers. Now you're dealing with these ups and downs because of the sales. Without sales, you've got a pretty steady, steady line of business going through.
52:26 Speaker 00 And you became a logistics business as well. You're not just a retailer. You're not just design, having furniture made to your specifications now. You're also taking over the logistics part of it. The like even the delivery to the customer part of it.
52:45 Speaker 01 Oh, absolutely. Yes, we do that all ourselves. I mean, it's a really critical part of the business and it's often treated as a very secondary way. And it's interesting, we talked about, we opened in Chicago and the surprise in Chicago was, Chicago gets a lot of visitors from all over the country. And that store opened and did quite well and pretty soon, we were having to figure out deliveries for all over the country because the visitors came to the store and bought product.
53:14 Speaker 00 In Chicago, but they might live in San Francisco and you don't have a shop there?
53:18 Speaker 01 Exactly.
53:18 Speaker 00 Okay, so but you normally a business would just have a third party. You know, logistics company handle it. You know, you go to go to Penske or whatever, somebody.
53:29 Speaker 01 Right, right. And then you get lousy service, damaged product, you know, they don't take it into the home for the customer.
53:36 Speaker 00 That depends, but that was your fear. You thought, hey, we know how to deliver our stuff and how to put it together. So we're gonna actually employ the the drivers and and own the trucks.
53:49 Speaker 01 Yep.
53:50 Speaker 00 That seems like really, of course, we know how to turn it out, but that seems like really risky. Like, that's where businesses really can unravel because you're pouring money into something that may actually not be that efficient.
54:01 Speaker 01 Yes. Well, we actually did a partnership with Allied Home Movers. Where they do the work for us, but if you talk to their employees, I think they're room and board employees.
54:12 Speaker 00 I got you, okay.
54:13 Speaker 01 So, so that's how we do that.
54:14 Speaker 00 But it's that part of Allied is dedicated entirely to room and board?
54:18 Speaker 01 Yes.
54:19 Speaker 00 And and then how did you, now you're, you know, we're getting into the mid 90s and what room and board is might have been totally unique and, you know, maybe there was Crate and Barrel, but now you've got Design Within Reach, you've got other, some other high end, design focused furniture stores, Blue Dot, coming online. And I wonder how you thought about differentiating and staying, you know, different from those other also high end, high quality brands?
54:54 Speaker 01 You know, I don't think we thought a lot about comparing ourselves to them. We we kind of knew what we wanted to be. We knew what kind of product we wanted to sell, we knew how we wanted to sell it. So we didn't, we didn't really stop and compare. We just said, what we're doing is working, it's who we are, and we're not going to adjust that based upon competition.
55:17 Speaker 00 But I would think some of these brands would see the cool things you're selling and just go to those same manufacturers and have them make a variation of that. So, so didn't, did you ever start to go to some of your manufacturers and say, hey, let's do an exclusive deal where you only make furniture for us?
55:39 Speaker 01 Um, we, you know, we haven't, but we know that some of those people have gone to some of our manufacturers, like our steel manufacturers are a good example.
55:47 Speaker 00 Which you don't own. It's their, they own it.
55:49 Speaker 01 Yeah, they can, they can do what they want, but, but they're, they're generally really happy with our relationship. I mean, we are truly a vertically integrated company through partnership. That, that's how I think about it. I mean, we care a lot about that steel manufacturer, about how they grow, about are they profitable, about how we balance our business that's effective for them. Uh, we work together on new product. I mean, it's virtually as if we own that business, but we don't.
56:18 Speaker 00 So, okay, so here's, here, I'm curious, cause I, you know, now we're, we're getting into the, you know, uh, into the 2000s, right? You're, the 90s, you're growing steadily. And in, I think by, I don't know, 2004 or something, I think that year, maybe 2005, you opened a store in New York and San Francisco. And now you're talking about two of the most important sort of retail spaces in the country, right?
56:44 Speaker 01 Yes.
56:45 Speaker 00 Um, and competitive and certainly New York. And, uh, and, and they, they just did really well in those places. Did you start to feel like, okay, we need to become a billion dollar business? Like, once you hit a hundred, 150 million dollars in sales, are you thinking, how do we get this to be a billion dollar business?
57:07 Speaker 01 No.
57:08 Speaker 00 No?
57:08 Speaker 01 We, we never talked about growth that way. We never had a plan for specific growth in terms of what kind of volume it should be, um, or how many stores we should add.
57:19 Speaker 00 Why not?
57:20 Speaker 01 Because, um, I think you make a bunch of bad decisions when you start doing that. Um, through organic growth, you're able to evaluate what your natural growth is, and then you're able to take advantage, if it makes sense, you're able to take advantage of opportunities, um, as they come along, rather than forcing yourself to say, oh, we gotta add a store this year, and you make, you make bad decisions. Um. Before we opened in New York and San Francisco, one of the big decisions we made was there was a location in Los Angeles that I fell in love with. And we sat down as a group and said, okay, can we do this? You know, the farthest we'd gone to Chicago, we didn't know what to do.
58:02 Speaker 01 And we just said, no, we're not ready. And to me, it's an interesting point of view because people remember the decisions that they made where they did something. Sometimes the decisions you made where you did nothing is the most important decision in the business. And so we said, no. But three years later, we said, yeah, we can do San Francisco and New York within six months of each other.
58:26 Speaker 00 All right. So clearly, you're growing. And at this point, you're still entirely privately owned, right? Like, you had not taken on any outside investors.
58:35 Speaker 01 Yeah, exactly.
58:37 Speaker 00 But were you starting to get calls? Like, were private equity groups saying, hey, listen, you've got something good going on, John. We can really scale this. You can keep a chunk of it. You know, we'll put in 30%. You'll get a big chunk of cash, but we'll really grow this thing. Did you start to get approached?
58:58 Speaker 01 Oh, we got tons of approaches. It was the most common call I got from outside of the business.
59:03 Speaker 00 What would people say to you?
59:05 Speaker 01 Just what you said. You've got something that works, that makes sense. We can make it grow.
59:11 Speaker 00 None of those were interesting? Conversations are attractive?
59:14 Speaker 01 No.
59:15 Speaker 00 No, not a single one?
59:16 Speaker 01 No.
59:17 Speaker 00 Why?
59:18 Speaker 01 One, if you looked at their performance generally, they've ruined more businesses that they've grown. They just don't... One, they think they're smarter than the owners, the people that created the business in the first place. Second, they think they can over-leverage this thing, take a lot of cash out first, put debt against it, and make it grow faster than it wants to grow. So they generally cause failures, is my general... that's my take on it.
59:45 Speaker 00 But you could have gotten, I mean, I imagine by this point you're making a nice salary and even getting a nice distribution, but I mean, all of a sudden, somebody is like, "Hey, you can get 50, 75 million dollars right now in your bank account and we'll just take 30% of this thing." And, you know, that can be kind of attractive, especially when you've been working on something and you're now, you're in your 50s and, I don't know.
1:00:12 Speaker 01 I just had, had no interest in that. I really didn't. I knew they would ruin whatever it is we built. I knew they would ruin it.
1:00:19 Speaker 00 And you just said, "No, I don't even want to have a conversation."
1:00:21 Speaker 01 Exactly. Yep.
1:00:23 Speaker 00 So you felt like growth was just going to happen if it happened, but you wanted to make sure that it was sustainable?
1:00:29 Speaker 01 Yes. Yes. And that we were profitable the whole way. I mean, we, early on, we just said, "No bank debt. We're going to operate with no debt." And we did that for years and years and years. You know, it's a part of our story that I think is important is that we developed a, a online web business early, early on in the process.
1:00:55 Speaker 00 Yeah. And like 2000, right?
1:00:57 Speaker 01 Yeah.
1:00:57 Speaker 00 Oh, no, sorry. In like 90, in the 90s.
1:00:59 Speaker 01 Yes, exactly. So it's a huge part of our business. And I say this because as we go to look at other markets, we say, "Oh, you know, Bozeman, Montana, we're doing, I don't know, $5 million right now, today." We say, "Oh, at a store, what's the potential?" The potential is $9 million.
1:01:21 Speaker 00 Right.
1:01:23 Speaker 01 It makes no sense.
1:01:23 Speaker 00 Yeah. So you don't need stores in every city?
1:01:27 Speaker 01 We do not need stores.
1:01:28 Speaker 00 Okay. Now we're into the 2000s and you're, you know, you're, you're hitting like over $200 million in sales.
1:01:37 Speaker 01 Right.
1:01:38 Speaker 00 And then you've got the financial crisis, 2008. And you're not selling lipstick. You're not selling cigarettes, right? These are things that are, you know, it's like inelastic products. Like you're selling really expensive, high-end furniture for people who are buying homes. All of a sudden, there's a financial crisis and a real estate crisis.
1:01:58 Speaker 01 Yes.
1:01:59 Speaker 00 A mortgage crisis, the collapse in value of homes. I mean, Americans, you know, their net worth drops by trillions of dollars. This is not good for the construction business. This is not good for the furniture business.
1:02:15 Speaker 01 No, no, we took a, we took a big dip in sales. Okay, so you have to understand, the economy drops 2%.
1:02:22 Speaker 00 Yeah.
1:02:23 Speaker 01 The furniture business will probably drop 20 or 25%. That's just been the history of, as I think through the years. Because it's such a discretionary purchase, it gets put off first thing. That's what happened back then. But part of our, a part of our original philosophy was that our goal is to generate an 8% profit.
1:02:43 Speaker 00 Every year, you want 8%.
1:02:45 Speaker 01 8%.
1:02:46 Speaker 00 Which is pretty modest, right? Well, it's great, but, but that's, that's not, that's a nice profit, but not, you know, crazy?
1:02:55 Speaker 01 No, exactly, exactly. But, but part of this is saying that if we generate 8% profit on times are good, sales drop 20%, that basically takes us down to break even, right? No profit at that point. But we didn't have to cut things. We didn't have a profitable year, but we didn't have a loss. So now we're able to move forward, open new stores. A lot of our store openings are related to downturns in the economy.
1:03:21 Speaker 00 What about your inventory? Were you finding that you had pieces that just were not moving, that, that were weighing you down?
1:03:30 Speaker 01 No, I don't think so. I don't think so. I think if, the, the, the decrease in sales was just across the board. It wasn't a specific product that didn't work.
1:03:39 Speaker 00 And, and are your, do you think that you deliberately worked to get products that had that sort of timeless look that you could sell today or in five years or in 10 years from now?
1:03:48 Speaker 01 Oh, completely. We don't think of our business as a fashion business at all.
1:03:53 Speaker 00 Yeah.
1:03:53 Speaker 01 And much of the industry thinks they're in the fashion business. And I think it's a big mistake. We think we're in the business of good design. So you'll be happy with it five years from now, 20 years from now. But we're definitely not in the fashion business from our point of view.
1:04:07 Speaker 00 Yeah.
1:04:09 Speaker 00 Okay, so you get through the financial crisis and Room and Board, once again, gets into growth mode. You stepped down officially as CEO in 2017. You stayed on as chairman. So you weren't involved in sort of the operational challenges of COVID, but I know that affected everyone, including furniture stores.
1:04:32 Speaker 01 Yes.
1:04:33 Speaker 00 Because people were not going to visit them and buying furniture necessarily. People were buying furniture for remote office space and stuff like that.
1:04:40 Speaker 01 Right.
1:04:41 Speaker 00 So there was some, but it was challenging. One of the things that happened in the last few years is that, because we talked about how you never brought in outside funding, right? Like, for most of the history of Room and Board, it was 100% owned by you, right?
1:04:58 Speaker 01 Yes. Yep, yep. I have two daughters and they had some ownership, but it was mostly 100% by me.
1:05:04 Speaker 00 Okay. At some point, the business started to get transitioned to being an ESOP. This is Employee Stock Ownership Plan. Companies like Clifbar did this. I believe that King Arthur Flower is an ESOP. New Belgium was an ESOP. This is a program that essentially transitions ownership of the company to employees.
1:05:30 Speaker 01 Yes.
1:05:31 Speaker 00 Over time. They essentially buy it.
1:05:33 Speaker 01 Yes. I mean, I was getting to the age where the question is, what's next, right?
1:05:36 Speaker 00 Right.
1:05:37 Speaker 01 Who's the owner going to be?
1:05:38 Speaker 00 Right.
1:05:39 Speaker 01 And we looked at all of the options. We looked at going public briefly.
1:05:44 Speaker 00 Yep.
1:05:45 Speaker 01 We looked at all of the private equity options, as we talked about earlier, and the complications and the opportunities within that. And we kept going back to ESOP. And once we came to the acceptance that the way that makes sense for us to do it is have a 100% owner finance. So there's no bank loan involved. We just, we gave a loan to the employees, basically, the ESOP, to buy the shares from the owners at an established price. And once I got comfortable with that option, that there's no guaranteed payout, right? You just sold your business. But you don't know if you're going to get paid or not because you finance the whole thing yourself.
1:06:29 Speaker 00 So basically, in other words, for the time being, you're giving away your shares over time with the promise that you're going to be paid in the future for those shares.
1:06:38 Speaker 01 Yes, exactly.
1:06:39 Speaker 00 And so when you join Rum and Board as an employee, over time, your ownership increases, presumably.
1:06:46 Speaker 01 Oh, substantially, yes, exactly.
1:06:47 Speaker 00 And now they have a stake in keeping it going and keeping it successful because then they'll make more money.
1:06:52 Speaker 01 Yep.
1:06:53 Speaker 00 It's a really interesting model.
1:06:54 Speaker 01 It's a great model that probably isn't used as often as it should be used.
1:06:59 Speaker 00 Yeah. So, we touched on this earlier, more than touched on it, which is, when you left Gabberts, there was a falling out in the family, and that's one of the challenges and perils of a family business. They can often lead to, you know, internal dissension, and it's hard. I'm assuming you eventually were able to reconcile with everyone in the family, or not?
1:07:27 Speaker 01 Uh huh, yeah, I was.
1:07:28 Speaker 00 Was it formal? Was it like a formal kind of sit-down, or did it, I don't know?
1:07:33 Speaker 01 It was not formal, and it was probably different with different members of the family.
1:07:39 Speaker 00 Because your brothers took over Gabberts.
1:07:41 Speaker 01 My brother took over.
1:07:43 Speaker 00 Yeah.
1:07:44 Speaker 01 And that's probably been the most difficult reconciliation.
1:07:46 Speaker 00 Hmm.
1:07:47 Speaker 01 And it was made more complicated because he struggled running Gabberts, to be honest.
1:07:52 Speaker 00 Yeah.
1:07:53 Speaker 01 He sold it for almost nothing in 2008. And Rum and Board continued to grow and be successful.
1:07:59 Speaker 00 Yeah.
1:08:00 Speaker 01 So that's the most complicated one.
1:08:02 Speaker 00 How about your dad? Were you able to reconcile with him?
1:08:07 Speaker 01 I think so, in certain ways. He wasn't someone that would necessarily reconcile his differences with people, whether it be his children, or his brother, or whatever. It kind of goes away, but you don't sit down and really define it.
1:08:26 Speaker 00 He was a man of his generation.
1:08:29 Speaker 01 Yes, exactly, exactly. The closest thing he came, actually, was, this was like the day before he died, last thing he said to me, no, not the last thing he said to me, second to last thing he said to me, my mom said to him, "Okay, Don, what's going to happen with Gabberts?" Because they were struggling. And my dad said, "Oh, don't worry, John will buy it."
1:08:51 Speaker 01 So that was as close as he came to kind of saying, oh, okay, maybe this was a mistake in the whole process.
1:08:58 Speaker 00 Hmm. It was his way of kind of acknowledging your success?
1:09:05 Speaker 01 Yes, he was acknowledging, yeah, my success, exactly.
1:09:08 Speaker 00 Yeah. When you think about the journey you took and all the things that happened along the way and the success that this became, how much of it do you attribute to the work you put in and the grind? And how much do you think had to do with luck, being lucky, being at the right place at the right time?
1:09:27 Speaker 01 I mean, I think anybody that's successful, you have to say it was timing, luck, circumstances, that'll fit into it. It's not just what you do. And I must say, I believe a lot in that hardship creates opportunity.
1:09:42 Speaker 00 Yeah.
1:09:43 Speaker 01 Life's not about how fast you run or how high you jump, but how well you bounce.
1:09:49 Speaker 00 That's John Gabbert, founder of Room and Board. By the way, as John mentioned, the original family furniture business was acquired in 2008 by a larger brand. And today Gabbert still has two stores in the Minneapolis area, just a short drive, in fact, from Room and Board's headquarters. 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 as always, it's totally free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at guyraz.com or on Substack. This episode was produced by Chris Messini with music composed by Ramtin Arablouei.
1:10:33 Speaker 00 It was edited by Niba Grant with research help from Rommel Wood. Our audio engineers were Patrick Murray and Kwesi Lee. Our production staff also includes Alex Chung, Carla Estevez, Casey Herman, J.C. Howard, Sam Paulson, Catherine Seifer, Kerry Thompson, John Isabella, and Elaine Coats. I'm Guy Raz, and you've been listening to How I Built This.
Previous Advice Line with Jonah Peretti of Buzzfeed Next Advice Line: New Offerings, Bigger Markets Page updated October 26, 2026 · transcript and summary are machine-generated
