Pod Insights How I Built This with Guy Raz Specialized Bicycle Components: Mike Sinyard About this episode Mike Sinyard helped put mountain biking on the map. In the 1970’s, he founded Specialized Bicycle Components to do exactly what the name suggests: sell high-quality bike parts. He eventually decided to make his own models, becoming a pioneer in the industry by designing the first mass-produced mountain bikes. By the 1990’s, Specialized was pulling in tens of millions of dollars in revenue, and Mike brought in outside experts to help grow the business. That turned out to be a huge mistake; Mike spent the next few years recovering from bad business decisions, and recalibrating the company after near bankruptcy. Today, Specialized has regained its reputation as an industry leader, and does around $500 million in sales per year.
This episode was produced by J. C. Howard, with music by Ramtin Arablouei
Edited by Neva Grant, with research help from Katherine Sypher.
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0:00 Guy Raz? We get support from US 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. 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.
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1:30 Guy Raz? 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. 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 2:00 AM 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?
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5:12 Guy Raz? Hey, really quick before we start the show, we have an announcement about a really exciting new thing we're launching, a newsletter. And like our show, the newsletter is designed to be interesting, informative, inspiring, and most importantly, fun. It's 100% free. And to sign up, just visit guyraz.com. That's G U Y R A Z dot com.
5:46 Guy Raz? You start to make these lower-cost bikes. How do they do? How did your sales do?
5:51 Speaker 01 Not very good. It's not who we are. It had an influence on the riders that were buying Specialized and the retailers. It was kind of a breach of trust.
6:02 Guy Raz? Yeah.
6:03 Speaker 01 You know, it looks great on paper. Or if you were to do a case study, you go, oh, that looks like a really brilliant idea. But it wasn't a brilliant idea, and it wasn't who the brand was. So it wasn't working at all. It was an absolute failure.
6:28 Guy Raz? Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.
6:39 Guy Raz? I'm Guy Raz, and on the show today, how Mike Sinyard started out in the bike business by importing parts from Europe and then built Specialized into a world-class brand, which helped put mountain biking on the map.
6:58 Guy Raz? I'm sure you've heard business aphorisms that make you think, "Well, isn't that obvious?" You know, things like "define your mission," or "gather your team around a shared value," or "always recalibrate towards your north star." I've heard this stuff thousands of times. So have the founders who've been on this show. So have you. And yet, many of us still ignore it. Now, the reason I'm pointing this out is because some of the most fundamental and even transformational changes a business can make come out of these very obvious and simple ideas. And today's story is a very good example of this. It's the story of Specialized Bikes.
7:42 Guy Raz? The founder, Mike Sinyard, is a pioneer in the world of cycling, especially mountain biking. He started his business in the mid-1970s, and originally, the company just sold parts for bicycles. But by the late 1970s, Specialized was making bikes, and by the mid-'80s, it was becoming a major force in the booming sport of mountain biking. Now, all that growth and success would eventually push Mike to make decisions that, as you will hear, almost put Specialized out of business. And it would take a very simple but pivotal decision to help turn the company around. And that decision, again,
8:24 Guy Raz? is about basic values, core principles, things that almost every brand and business need to reckon with. Today, Specialized is one of the leading bicycle brands in the world. But to get to where it is now involved a lot of upheaval, which, again, we'll get to. For now, what you need to know about Mike Sinyard is that he grew up in the 1950s and 60s in San Diego. His dad was a machinist who worked for the US Navy. And the family didn't have a lot of money, but as Mike remembers, they tried to be self-sufficient.
8:59 Speaker 01 Yeah, looking back on it, my sister and I always felt like the hillbillies in the city, you know, and we were, my sister and I, a little bit like outcast, right? You know, my mom would clean people's houses and my dad and I would paint houses or whatever was needed. And we would fix things. We put the plumbing in the house. Whatever needed to be done, we would do it.
9:25 Guy Raz? Yeah.
9:26 Speaker 01 We would never call any... So when I was growing up, because my...
9:31 Guy Raz? Yeah.
9:32 Speaker 01 We didn't have much money. We never went out to eat once. And my dad would say, "You know where the best restaurant is?" To my sister and I, we'd go, "Oh, where?" Because we thought we were going out. He goes, "Home." So we learned a lot. We were almost kind of raised like Quakers, if you will, in a very simplistic way. And at the time, I didn't think much of it. And now I look back and really appreciate that.
10:01 Guy Raz? Mike, when you were, I guess when you were a teenager, 16, you decided to drop out of high school. What did your parents think of that decision?
10:12 Speaker 01 Yeah, so when I was going to school, I did very poorly in school. I had ADHD, but I didn't know, they didn't say it was ADHD back in the day.
10:24 Guy Raz? Right. They didn't know what that was.
10:26 Speaker 01 Yeah, it was in the 60s, so it was just like, "Oh, you're stupid."
10:29 Guy Raz? Yeah.
10:30 Speaker 01 And I couldn't complete things. I couldn't follow through with things. And so I kind of celebrated doing poorly in school. Instead of being ashamed of it, I just kind of celebrated it. And then I moved out and I dropped out of school. And my parents go, "What are you doing? This is a big mistake." So they were very unhappy, but I had also moved out at that time, so they couldn't do anything about it.
11:01 Guy Raz? So you moved out of the house at 16 and what did you do to support yourself?
11:06 Speaker 01 Sell, you know, buy things at the flea market, you know, sell things like that. But plus at that time, you know, there would be four or five of us renting a place. And so the cost was like nothing. Then after about a year, I decided I was going to go back to school. So I went back to continuation school and I did finish there.
11:30 Guy Raz? I know that eventually you went to San Jose State University. What do you remember about that time? This is the early 70s.
11:38 Speaker 01 Yeah.
11:39 Guy Raz? And what were you interested in maybe doing with your life? Do you remember?
11:46 Speaker 01 Yeah, well, I did go to a college, La Mesa College. It was a junior college and I had to then take remedial everything. We called it bonehead. Bonehead reading, bonehead math, bonehead English. And at the same time, I got a job at the airport fueling planes and things like that. And I thought, oh, that's pretty interesting. And then I thought, well, maybe I'll work to be an airline pilot. And then I went to San Jose State, applied for that program there and started in the aviation program. And before that, I had got a pilot's license, which I thought, hmm, that was, if, you
12:31 Speaker 01 know, kind of from how unaccomplished I was before, that felt like, hey, I actually did something.
12:38 Guy Raz? Okay, so you were a student at San Jose State. And had, did you, what, what point did you start to get into cycling and to just being a casual cyclist?
12:48 Speaker 01 Well, I was a little bit of a rider early on and I always liked the two wheels thing and the balance of it. In fact, one of the things I could add that might be relevant to this, that was really formative for me is since my dad was a machinist when I was a kid, we'd come up with these crazy ideas for things and he would make it. We'd make it together because he was very good at that or buying old junk bikes and fixing them up. And actually, as I was going through school, one of the ways to earn money. Kind of going back to what my dad would do. I'd go to the flea market and buy these old bikes. It was kind of fun picking through and finding the good ones and then taking all these parts and putting a bike together.
13:32 Speaker 01 And I loved painting the bikes and coming up with something that would look pretty good. So that was really the spark of the interest in bicycles.
13:42 Guy Raz? What was the, I mean, were there, did you notice an issue with the bikes that you were biking? Was there a problem? Did you feel like they weren't very good?
13:50 Speaker 01 What I discovered as I started getting into bikes, there was like the basic bikes that were made in America, you know, swim bikes and other things that were not very inspirational.
14:03 Guy Raz? Yeah.
14:03 Speaker 01 And then there were bikes from Europe that were to dream about. And there weren't very many of those bikes in the USA. And I realized, wow, what a gap. And my thinking was, hey, if these bikes were available or parts were available in this country, it would be really big.
14:25 Guy Raz? So I guess while you were a student, right? You were, you start to notice maybe there might be an opportunity
14:32 Speaker 01 Yeah.
14:32 Guy Raz? to import bicycle parts from Europe because they were better quality than, than parts from, available in the US.
14:40 Speaker 01 Yes. In fact, I had this one professor, who is a marketing professor, who is amazing, inspired us all. And he always said, every problem in the world is an opportunity to do something better. So I thought, well, here's a problem and this is such a great opportunity.
14:59 Guy Raz? So, so you would, you, from what I understand, you would basically buy bicycles, secondhand bicycles that were kind of in disrepair. You'd repair them and then sell them at a profit.
15:09 Speaker 01 Yes.
15:09 Guy Raz? That was initially how you were making money.
15:11 Speaker 01 Yeah, that was. And sometimes it wasn't just the bicycle. It was just like a frame here, a part there. And sometimes I would even see like an old bike locked up in, in front of somebody's house for a long time. And I would go there and go, hey, do you want to sell that bike? I've seen you haven't used it for a long time. And I would buy it and then fix it up and sell it.
15:34 Guy Raz? But I guess you start to think about maybe bringing in parts, bike parts from Europe, and selling them to people who really care about bikes. Like, you already were thinking about that before you graduated?
15:43 Speaker 01 Yes, I was. And I was kind of already doing those kind of things. And I graduated at the end of 72. Yeah, and I was already thinking about that. And I had a year out of school, and I thought, well, what am I gonna do?
16:00 Guy Raz? Yeah.
16:01 Speaker 01 You know, it's that thing when you're a young person, you go, oh, jeez, now I'm supposed to know what I'm supposed to do. And sometimes you realize not knowing what you want to do is really powerful, because then you can kind of explore and expand. And I was a janitor for a while at a high school. I probably cleaned more classrooms and more toilets than almost anybody. And it was a pretty good job. It was kind of more money than I had ever had before. And when they changed some of the janitorial things around, they let me go. In retrospect, I was disappointed at the time, but I thought, well, that was the best thing, because I probably would have kept that for a while, because I was
16:45 Speaker 01 appreciating having that kind of income.
16:48 Guy Raz? Yeah. All right. So you, I guess, around 74, you decide to take a bike tour through Europe, to go to Europe, take a bike tour. Was the, I mean, presumably, this was kind of for fun and to see Europe in adventure. But was there also in your mind this, maybe to see if you could figure out how to make connections in Rhodes with cycling companies in Europe?
17:13 Speaker 01 Yes, that's right. Everything in Europe seemed deeper and in some ways more exotic. So the idea was, with some friends, to go over, and I called that adventure capital, instead of venture capital.
17:28 Guy Raz? Right.
17:29 Speaker 01 And so...
17:31 Speaker 01 You know, one of the biggest places for cycling gear was in the UK. So then I went to the UK and contacted some of the suppliers there. And in talking to some of the suppliers there, I realized, well, I can't just be going in here and going, yeah, hey, I'm Mike from California, I want to buy some stuff. So I kind of made up the thing, which was true, but exaggerated, that I had contact with all the best riders in the United States. And so I made a few purchases there.
18:07 Guy Raz? Yeah.
18:08 Speaker 01 And really, the big breakthrough was Milan in Italy. I had an appointment to visit those suppliers and I thought, I better buy some clothes so I don't look like a bum. So I bought some clothes in Milan and then went to visit some of these suppliers. And they were interested to sell to me because of my passion. And as soon as I bought the product, I thought, ooh, I don't have any money. Now I got to go home and sell this.
18:35 Guy Raz? So, all right, so you managed to make inroads with some of these bicycle parts manufacturers in Europe, with the idea being you would import, what, like handlebars and what else?
18:48 Speaker 01 Yeah, there was handlebars and stems, gears and pumps, all the, all the really good things that were hard to get.
18:56 Guy Raz? Got it. Okay, so you would come back to the US and import them and then resell them? How, you would just go door to door to bike shops and?
19:04 Speaker 01 Yes, that's right. I knew some of the best stores and they go, wow, where did you get this? And I go, well, I've got connections. And so then I sold those products. I sold the $1,500 worth of product for probably $2,000 or $1,800, but that wasn't much, right? And so to get more, then I told the bike shops, I said, look, if you pay in advance for the product, I'll give you even a better price. And so I got advanced money, bought those products. And with the profit I made, I bought more product and sold those at a higher price. And that was the start.
19:46 Speaker 01 I think the first year, the sales were $64,000.
19:50 Guy Raz? Wow, that's amazing. How did you find the bike shops? Because presumably you were back, I think you were back in San Jose, but you couldn't. I mean, were you just selling to bike shops in the Bay Area?
20:03 Speaker 01 Well, so I sold to bike shops in the Bay Area. And then at that time, of course, there was no internet. So I went to the library and looked at the Yellow Pages for bike stores in New York and places like that. And I would send each of them a letter and say, hey, I've got these parts. And so that's how I got it started. Because the suppliers weren't about to give me credit. The first credit I had was from the Bank of America. I came upon this European banker. He goes, I'll tell you what, we'll give you a loan against your. I lived in that little mobile home, the eight by 30 trailer with two roommates.
20:47 Speaker 01 He says, we'll give you a loan against the trailer and you give me the pink slip to the trailer. And he made me do all of these incredible cash flow projections, which actually I realized I was pretty good at. And I paid the money back. So that was kind of the starting.
21:11 Guy Raz? So you were, I mean, see initially, I'm assuming you were financing, you financed this by buying the parts with cash and then selling them, but getting paid immediately, right? I think you, at the time, you would probably do cash on delivery when the bike stores got the parts.
21:27 Speaker 01 Yeah, yeah, absolutely. Cash on delivery. And I remember people would say, oh, you don't need to worry about us. We're a well-established company and we'll pay you. And I said, that's great. Then pay me now because I don't have the ability to finance it.
21:45 Guy Raz? And by the way, you called the company Specialized because you were selling specialized. Bike gear, right? Equipment.
21:52 Speaker 01 Right, right.
21:53 Guy Raz? Parts.
21:54 Speaker 01 Yeah, and in Italy, you know, people that were really into what they were doing, frame builders and that, they were specialistas, you know, specialist.
22:04 Guy Raz? Yeah.
22:05 Speaker 01 And so I thought, hmm, I'm going to call the company Specialized.
22:08 Guy Raz? I guess, so the first kind of two years, I mean, year one, you did 64,000 in sales, year two, 128,000 in sales.
22:16 Speaker 01 That's right.
22:17 Guy Raz? Which is amazing. I mean, so there was really interest in what you were doing. And by year three, you started to make your own product. You actually made a tire for bicycles. Before I ask you how you did that, why did you land on that as a product that you would make? Because you were essentially an import, an import company.
22:37 Speaker 01 Yeah.
22:38 Guy Raz? Import-export, yeah.
22:39 Speaker 01 Yes, and the third year, I made the Specialized tire. And at the time, I was importing some tires from a company in Italy, and they would get bubbles in them. And I remember reporting it to the factory, and they go, "Oh, that must be you, because nobody else has this problem." And I thought, "Well, that's not right." And then I thought, "There's no choice but to make our own. We can make a regular clincher tire with a separate tube in a way which could be really high-performance and available to people."
23:15 Guy Raz? How did you make your own? Like, where did you even start?
23:18 Speaker 01 Well, you know, I contacted the commercial consulate in San Francisco. I knew some of the best makers of tires were in Japan. And so I contacted the Japanese commercial consulate in San Francisco. And those consulates are there to promote the business in that country. And so through the contacting the consulates, I got the list of those tire companies there. And I just sent them a letter. Saying I wanted to make the best tires in the world and admire what they were doing
24:03 Speaker 01 and like to make our own tires.
24:06 Guy Raz? You, I mean, did you have like a formula or a certain kind of ingredient, kind of rubber?
24:11 Speaker 01 Well, you know what? I didn't really know. We had landed on this one configuration of rubber compound that was good. And at that time, I knew this one guy in Portland who was a big cyclist and he was riding from Portland all the way down to Panama. And his name was Jim Urs. And I sent him the tires and he goes, these work pretty good. He goes, well, I'm going to be going on this trip and if you send me the tires, I'll ride them and I'll give you a test report. And so that was, that was the first of doing those tires. And many years later, I hired him as the first engineer and that's how we developed
24:56 Speaker 01 the first tire.
24:57 Guy Raz? So at what point, Mike, because you know, you start this business in 74, by 79, you are going to begin building your first bike that you are going to make and you are going to brand as a specialized bike. And what, from the beginning, did you anticipate doing this or was there a moment in those early years where you realized, hey, we should be making bikes?
25:22 Speaker 01 Yeah, initially, I thought that we would stay to things like the tires and components, which were simpler to do, which we could really make a difference and the capital required was less. And then later, I realized there was a lot of need for making bikes in a different way. And at that time, Touring bikes were very, very big and there was custom bikes being made that were appropriate for this, but there was no production bike. So I knew at that time that, hey, why
26:01 Speaker 01 don't we make a bike on a more production basis that has all the nuances of a custom bike? So that was the first bike we made.
26:12 Guy Raz? So you basically start to produce bikes and you're getting them manufactured in Japan initially, right? That's where, that's where you get them done. And tell me how, how they were received. I think your first bike was, was a road bike.
26:27 Speaker 01 Right.
26:27 Guy Raz? Racing bike, the Ale.
26:28 Speaker 01 Yeah, that was Ale and the Sequoia.
26:31 Guy Raz? But not too long after you released your first mountain bike, the Stump Jumper.
26:35 Speaker 01 Right.
26:36 Guy Raz? And I want to, I want to kind of dive into this for a moment because mountain biking really, it, it begins in the sort of the sixties and seventies as kind of this informal activity that teenagers in Marin County, California are doing. There, there's a group called like the Larkspur Mountain Biking Gang or something and they would ride up and down Mount, Mount Tamalpais. So people know the Bay Area, it's one of the tallest, it's the tallest mountain in Marin County. And, and that's really where mountain biking begins. But it wasn't until, I guess, the mid seventies that a, a mountain bike was actually manufactured and, and put on the, you know, put on the market for sale. Like before that time, people
27:17 Guy Raz? just took bikes and modified them and they went, they did this thing called mountain biking.
27:23 Speaker 01 That's right. Yeah. In the early days, people would take an old beach cruiser bike, modify it a little bit, and that was a mountain bike. The real innovation was needed because the use and abuse of those bikes, those bikes weren't standing up to the needs of the riders.
27:40 Guy Raz? Yeah. Was at that time, I mean, the, you know, I think the guy who's kind of widely believed to be the first One to market or sell mountain bikes is Gary Fisher. I don't know if that's true. You may have a different view on that. But did you, were you in the sort of, at least informal sort of communication with people like Gary Fisher and some of these other mountain bike producers, makers?
28:07 Speaker 01 Yeah, there was a few producers. The main one was Tom Ritchie, who was a maker and one of the best makers, and Charlie Cunningham and Steepots. So there were a few makers around. And at that time, because I imported the different parts, the frame tubing and brakes and that, so I supplied all of them, a number of parts.
28:32 Guy Raz? But they were, so there were some mountain bikes. I mean, this was starting to emerge, right? There was a community of people starting to make these bikes in the, by the mid 80s.
28:42 Speaker 01 Yeah, there was a few people that were making them for friends and things like that, but it hadn't evolved yet. But when the first bikes came out, the first ones that we made, most of the stores said, well, Mike, what are you doing with the big kids' BMX bikes? We don't want that at all. We are only interested in selling serious adult bikes. I said, this is a serious adult bike. And I said, you know, just shut up for a second and let the ride decide. And you'll see, this isn't just a new bike. This is an all new sport.
29:25 Guy Raz? When we come back in just a moment, Mike is proven right. Mountain biking really does take off. But later, he makes one of the worst decisions of his career when experts give him some advice and he takes it. Stay with us. I'm Guy Raz and you're listening to How I Built This.
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32:34 Guy Raz? Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1981, and Mike Sinneyard has built one of the very first mountain bikes on the market. And he starts to shop it around the Bay Area.
32:47 Speaker 01 I could see it right away when I'd go riding. You'd see a young kid and go, the young kid would go, "Oh, that is rad. That's like my BMX bike. I could relate to that." And then you'd see an old person and go, "Hey, you know, I used to ride bikes like that when I was a kid on the dirt road." So I could see immediately the appeal, the emotional, cultural appeal of this bike was so broad. It really hit a chord.
33:15 Guy Raz? So when you first put these into stores in 1981, did it take off, or were customers looking at these skeptically? Did they sell right away?
33:27 Speaker 01 It did not. I mean, a few stores that were into it was, I mean, we sold 500 the first year, but it wasn't easy. It wasn't easy, and the sales were not, it was, it was slow, and people were very skeptical.
33:45 Guy Raz? Right. I'm curious, you know, you were making road bikes, right? Essentially, bikes for people in cycling gear and really like, you know, riding fast, right? These are bikes designed for roads. They generally have smooth tires. They're, you know, you lock in. I mean, you were making those kinds of bikes. And then you shift to mountain bikes, but you continue to make the road bikes. What is it, was it risky at the time? I mean, was there a view that like, hey, you know, you either do this kind of bike or that kind of bike?
34:17 Speaker 01 Yeah, there was a, there's quite a division, a cultural division between mountain bikers and road bikers.
34:26 Guy Raz? Yeah.
34:27 Speaker 01 Probably back in the day, like you had seen, uh, snowboarders and skiers.
34:31 Guy Raz? And skiers, yeah.
34:32 Speaker 01 Yeah.
34:33 Guy Raz? Right, and most, and most snowboard companies didn't make skis and vice versa. Now, of course, a lot of them, a lot of the ski companies do make snowboards, but back then, they wouldn't do that.
34:40 Speaker 01 Right, yeah, so it was culturally quite different. And in fact, you think about the road bikes, kind of the rules of Rome for racing bikes, and at the same time, you think about the mountain bike, was much more of a free spirit. And what I saw as our advantage is, we used a lot of the ideas from the, from the racing bikes, which are really strong and light, to make the bike really strong, light, and durable.
35:11 Guy Raz? What, I mean, I guess in 1981, when you started, you made about 500 of these stump jumper mountain bikes, and they were really designed to be ridden on mountain, you know, on, on trails that people are probably used to hiking on. Do you remember when you started to see traction with these bikes?
35:32 Speaker 01 Well, I would say the first year was, was slow, and then the second year, I remember being at the bike show, and there seemed to be more interest in that, and then things started to develop.
35:48 Guy Raz? And who was buying mountain bikes?
35:50 Speaker 01 You know, and I would say, the people that were buying the bikes were probably, um, people between 16 to 50.
36:00 Guy Raz? Yeah.
36:01 Speaker 01 And some older, but mainly in that area, and probably in the beginning, much more men than women.
36:10 Guy Raz? And at the time, I mean, in the 80s, right? Bikes were still generally made out of steel? Maybe some of them started to be made out of aluminum?
36:19 Speaker 01 Yeah.
36:19 Guy Raz? And so what was the difference between engineering a road bike and a mountain bike? If they were both steel? Did you have to? Was there a risk that a steel frame could crack on a mountain bike?
36:31 Speaker 01 Yes. In fact, a lot of the early mountain bikes were breaking a lot. And not bragging, but I would say that's where we felt like we had an advantage. Because I had a frame builder, Jim Mers, who had personally built thousands of bikes over the years. And he was a great machinist and a very practical person. He always would err on the side of safety. And so, you know, when we made the bikes, any bike that had a problem came back to us. And we saw where it cracked and we would fix that. So it was just like continuous improvement all the time.
37:13 Guy Raz? I guess by the late 1980s, this was a booming market for you. Was there ever a point where you thought, well, let's just focus on mountain bikes? Because we're in California. And as goes California, goes the rest of the country and the rest of the world. And that would happen with mountain biking. Did you ever think this is where you should just put all of our eggs in this basket? And focus on mountain bikes and not road bikes?
37:37 Speaker 01 Yes. And what I liked about the mountain bikes is the mountain bikers were open. You know, if we have a new idea and it would work, they're open to it. Whereas the road bike was not open. So we didn't get out of road bikes, but we shifted the energy more towards mountain bike components.
37:57 Guy Raz? And that would persist for many, many years. I mean, now, of course, you still make road bikes and you make electric bikes and we'll get there and all kinds. But I guess by the early 90s, there's a lot of competitors start to get in the space. Trek, Cannondale. Schwinn, actually the first mountain bike I ever had in 1991 was a Schwinn. We didn't have the money to buy a specialized at the time. So, sorry about that. That's what my parents couldn't afford. But that started to cut into your sales at the time, right? That actually started to hurt you guys a bit.
38:32 Speaker 01 Yeah, well, a lot of people came in and then at that point I thought, you know what? We don't have the money to compete with all these volume guys. Let's just move up and make better and better bikes.
38:43 Guy Raz? So go more premium.
38:45 Speaker 01 Yeah, go more premium. And it's like, we always had the thinking, no matter what we make, it's going to stand up to the use and abuse of the rider. So in other words, if somebody buys it, they're not going to buy it and be disappointed later. They're going to be continually amazed at how well it holds up. That was always the thinking.
39:09 Guy Raz? This is now, we're hitting the 90s. You've made it through the 70s as a kind of bicycle component part seller. And then you started in the 80s making and selling your own bikes. And then you get in, you know, you're growing and you get into the 90s. And from what I understand, this is really, this is when your education as a leader begins. Like, I think up until that point, you were, because you described yourself as a bottleneck. Somebody who, you know, you said you were fanatical about quality, about design. And the process was very slow. The production process, the design process, because you were so focused on making something
39:54 Guy Raz? really, really excellent, which isn't a bad thing. But it seems like you were, when you look back on it. You would have done it differently today.
40:04 Speaker 01 Yeah, it's always good to think about what you know and how you would do it differently. And at some points, you know, we kind of grew more than I thought we would ever grow. And I thought, that's fine. We don't need to grow anymore to do a good job.
40:20 Guy Raz? What were you do? What was your, were you profitable by the 19, early 1990s?
40:24 Speaker 01 Yeah, we were. In fact, we always had to be profitable. Starting off with no money, I thought, everything I do has to increase cash flow. I'm not going to do one thing which decreases cash flow and operating very cheaply. Even when I operated the business out of that little trailer park, trailer, I would ride my bike with a little trailer over to the Safeway dumpster and get all the boxes. So I wouldn't even buy boxes. Just everything really minimalist. And in some ways, it didn't seem that for him because that's the way I grew up with my parents.
41:05 Guy Raz? Yeah. And do you remember in the early 90s, what your annual revenue was roughly?
41:11 Speaker 01 I think in the 90s, it was probably 60 million or something.
41:18 Guy Raz? Wow. So you were really, really.
41:20 Speaker 01 It was a lot.
41:21 Guy Raz? It was a lot. Yeah, okay. So you, you hit the mid 90s and, and you are an established, you know, bicycle brand. But I guess something at around that time, you felt like you needed more help managing the company. And you started to look for executives, professionals, who had a management experience in other industries. Tell me, first of all, why you felt that way? What was happening that you felt that you weren't capable of really running the company in the right way?
41:56 Speaker 01 Yeah, as the company grew, I realized everything I was doing, I was doing it for the first time. So I'd always reach out to other people to see what I could learn. And I knew that I didn't know. Very much how to do different things. And so I thought, wow, you know, I feel like I'm really holding the company back. And if I hire somebody who's really kind of a finance operations person, and then somebody who really is a marketing person, the company can really develop. So then I brought in some really key people. One came from a leasing company, was a finance expert.
42:40 Speaker 01 Another person came from marketing, worked at a ski company before, and then worked at Citibank. And I thought, oh, they could really help level us up. But it didn't work out. That was probably my first lesson. And it's not about the skills that somebody have, but it's about the culture and the belief they have.
43:03 Guy Raz? From what I understand, these executives, they had extensive experience in consumer products. And they had a playbook, which was, it was like, hey, it doesn't matter if it's bicycles, or razors, or whatever you're selling. It's the same playbook. We're going to help you scale this thing. You're focused on, the brand's called Specialized. You're focused on a very small, narrow market. We can turn this into a billion-dollar company by going big, by really mass-producing and focusing less on the long innovation process, the long development process that you have here. And let's just focus on making a good enough bike, right? That's essentially what they said. What was wrong with that? I mean, there's some elements of that make sense.
43:48 Guy Raz? A good enough bike that most people could afford. Let's get them, let's bring the price point down. Let's sell them in places like Costco, which you did. What was the problem with that?
43:59 Speaker 01 The problem with that is it's not who we are. You know, it looks great on paper, or if you were to do... Case study, you go, oh, that looks like a really brilliant idea. But it wasn't a brilliant idea and it wasn't who the brand was. And when you get into those things of just offering something in the Red Sea, a commodity, you can never be low enough. And it also diluted what the brand Specialized was. So that was a big mistake.
44:32 Guy Raz? How did it affect sales? I mean, you know, you did get into Costco. You start to make these lower cost bikes. I think they were called Full Force.
44:41 Speaker 01 Yeah, that was the name.
44:42 Guy Raz? How did they, how did they do? How did your sales do?
44:45 Speaker 01 Not very good. And it had an influence on the riders that were buying Specialized and the retailers. It was kind of a breach of trust with customers.
44:57 Guy Raz? They felt like you had...
44:59 Speaker 01 Sold out.
45:01 Guy Raz? Sold out, right.
45:02 Speaker 01 Everything just kind of diluted down the brand and also the culture of the company. It was a failure. It was an absolute failure.
45:12 Guy Raz? When we come back in just a moment, how Mike brings the company back from nearly going bankrupt. Stay with us. I'm Guy Raz and you're listening to How I Built This.
45:38 Speaker 02 Hi, guys. This is Lindsay Steinberg from Augusta, Georgia. And I just wanted to mention how grateful we are to you and your team for all your inspiring work. Our favorite episode was definitely the one with Ben Chestnut, where he talks about his experience growing up in Augusta and forming MailChimp. And I wanted to let you know what a domino effect this episode had. One of our colleagues went and asked to it. We recognized how Ben Chestnut was a part of the community. We reached out and he came and spoke to our students at Augusta University. So the domino effect your episode had on inspiring a ton of students at Augusta University for entrepreneurship and innovation, we really are tremendously grateful. Thank you.
46:18 Guy Raz? If you want to share your favorite episode of How I Built This, record a short voice memo on your phone telling us your name, where you're from, what your favorite episode is, and why. A lot like the voice memo you just heard. And email it to us at [email protected] and we'll share your favorites right here in the ad breaks in future episodes. And thanks so much. We love you guys. You're the best. And now, back to the show.
46:51 Guy Raz? Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1996 and Specialized is having an identity crisis. It's put out a new line of lower-cost bikes, but its loyal customers, they feel betrayed. And the executives who advised Mike to put out that line, well, they start to backpedal.
47:13 Speaker 01 As things got more difficult, those executives that came in were like, oh, this isn't working. We're going to move on to something else.
47:21 Guy Raz? Right.
47:22 Speaker 01 So at that time, I wrote an apology to retailers.
47:27 Guy Raz? To bike stores? You wrote an apology letter? What did the apology letter say?
47:31 Speaker 01 The apology letter said, look, we created this brand of the full force. We lost focus. We weren't taking care of you and your riders in the right way. And we're closing this. And I appreciate you to consider forgiving us for this. And we'll make it up.
47:50 Guy Raz? I think by the end of 1996, you'd lost about 30% of your bike store business.
47:56 Speaker 01 Yes.
47:57 Guy Raz? And your sales had declined. So essentially, you go to these independent stores. You had had relationships for a long time and a great reputation, right? Specialized was a great brand. And you said, we're really sorry. We made a mistake. And did they, did most bike shops say, okay, I accept the apology. We're going to work with you?
48:17 Speaker 01 Yes, they did. I mean, in different levels for different ones. But overall, yes, I think people knew that we were sincere about it and we had got out of it. And we said, well, let us earn back the position with you. We don't expect you to give it to us. Let us earn it. And over time, we did.
48:38 Guy Raz? How many years did it take for you to regain the trust of your traditional customers and the retail shops?
48:47 Speaker 01 Probably over three years, just kind of steady. Of course, some people never forgive you.
48:54 Guy Raz? Right.
48:55 Speaker 01 Right?
48:56 Guy Raz? I guess by the late 90s, your sales started to stall again. They started to slow down.
49:01 Speaker 01 Yeah.
49:01 Guy Raz? And I guess around that time, you decide to seek advice from a guy named Peter Moore, who had worked at Nike.
49:10 Speaker 01 Yes.
49:10 Guy Raz? Who's Peter Moore? How did you even know about him? Why was he, why was he somebody you wanted to meet?
49:16 Speaker 01 So Peter Moore, he was the original creative director of Nike. Created the Air Jordan brand and really created the brand and the brand standards. And then he went on to Adidas and was the CEO of Adidas. And I read this article that he'd ride his bike to work every morning at five o'clock in the morning. And I read this and I was so inspired. I, I sent him a letter and I sent him a helmet. And I said, wow, that's impressive what you do. And I said, I'd like to visit you sometimes. And he goes, come on up with a few people.
49:54 Speaker 01 We went up and talked to him and I said, Peter, how did you take Adidas that was kind of just lost its soul, at least in this country, and bring it back to a clarity? And Peter goes, I created this brand book and I got key people involved and here's what it is. And we were so inspired by it. And at that time, we were really in trouble. And we said, Peter, we're going to work on this. Could we use the framework? Could we copy what you did? He goes, sure. If you want some help, I'll give you help. And so we dug in and did it. And we created the first brand book, gosh, like 20, 25 years ago.
50:39 Speaker 01 It was so powerful. It was basically, what do we believe? Really believe, not about how much we're going to sell or how much we're going to make. What do we as people believe about what we're bringing to the world? What is our conviction? If we do the right things, the profit will follow.
51:00 Guy Raz? So Peter suggests you write, you put together a brand bible for the company. This is in, this is in 2000, this is 25 years after you start the company to actually put down, and I'm going to read some excerpts from it, but basically you have, you've got a bunch of rules in there. Rule one, the writer is the boss. Number two, seek to understand. Number three, innovate or die. Number four, adapt immediately. Number five, simplify and go. And it goes on like that. And this was a booklet that was designed to be given to every employee so they really understood what specialized was about and how they represented that. That was the idea?
51:44 Speaker 01 Yeah. It was to give to every person. And when we would look at decisions, we would say, when we're doing something, hey, the writer's the boss. Is this going to satisfy the writer?
51:56 Guy Raz? And that, when you handed that to people who'd worked at the company for 10 years or more, were they puzzled? Were they like, what is this?
52:04 Speaker 01 Yeah, a lot of people were like, well, what is this thing? And we go, look, this isn't something new. This is what we've always done when we're at our best. This is what we strive for, and we're going to hold ourselves to this. And that's something that we use even today.
52:24 Guy Raz? Yeah. In 2001, you guys were in a bit of a financial hole challenge, right? I mean, to the point where, it's not quite clear to me how you got to this point, but from what I understand, you guys were close to bankruptcy. What was going on?
52:44 Speaker 01 Well, we had a negative net worth.
52:46 Guy Raz? How did that happen? How did you go from 150, $100 million in sales just a few years earlier to being almost out of business?
52:56 Speaker 01 Bad decisions, again, trying to grow and trying to offer the bike shops lower-priced product, but then also selling it to them at a very low margin. You know, good intention, but really put us in a very tight situation. And then we ended up having a lot of inventory and...
53:23 Speaker 01 We had got into such a trouble, we were in the workout group of the bank. That's when the bank transferred you to kind of the bankruptcy group. And they make you report the information every day. And at that time, I was able to get this guy, Mike Haynes, came in. And he was a really calm, smart guy. And when the bank was pushing on us like that, Mike, who was a saint of a person, would never cuss or anything. But he told the bank, look, if you're going to be after us like that, come here and get the fucking keys.
54:02 Guy Raz? Yeah.
54:03 Speaker 01 And at that point, they backed off. And I would say we worked to get in good shape.
54:11 Guy Raz? I guess in 2001, you were in a, you know, you really needed to be bailed out. And I imagine you started to look around for potential buyers or acquirers. And you found one in Marita Bikes, a Taiwanese manufacturer. And they had already been making your bikes, their factories. They bought almost half of the company for $30 million, which, wow, that's a, now it looks like a bargain, right? I mean, you guys were, I mean, you had really, I mean, just a few years earlier, you might have been three or four times that amount. But I guess that was, you know, that gave you guys a second chance at surviving.
54:51 Speaker 01 That's right. We took that investment from Marita at that time. And they were a good trusted partner as far as a manufacturer. And they made that investment in us. And, you know, since that time, we bought down that investment. And so now they're a minority, more like a third. And they've been very good, very trusting of us. And we've delivered on that trust. And them as a minority investor. But yeah, that was a pivotal moment.
55:25 Guy Raz? And so that, so that investment in 2001, I mean, you were still, you know, now you've got this cash on hand. But now the company really begins to turn around and shift in a positive direction.
55:38 Guy Raz? Just a few years after that infusion of cash, that 30 million, you guys, your revenues hit half a billion dollars. So it was clearly like, there was a combination of things. It was a kind of a realignment of values, the brand bible, and then getting, of course, getting bailed out, and then returning to focus on quality and on design.
55:59 Speaker 01 That's right. And I kind of liken it, like the company to growing up, kind of like going through adolescence, if you will. And there was always the discipline principles there, but we got off course. And so I would say it was like, Mike Caines brought this real practical thing to us of like, serving the customers, getting them the inventory on time, making things easy to work. And it was really back to basics.
56:31 Guy Raz? One of the things, Mike, that is interesting to me is that, you know, reading about you, you are just consistently described as being relentlessly committed to quality and innovation and the best possible products, but also obsessive to the point where, you know, I'm going to read the description of you by, you know, it was an anonymous employee, but it's interesting. And I think it's, it can be seen in multiple ways. I actually read it and I, I kind of admire you after reading this. It says, you know, Mike isn't quite human. When he would go out for a drink after work, we'd refer to him as a combination
57:15 Guy Raz? of Steve Jobs, Howard Hughes, and the devil. You know, that he was just so driven to work. And I understand that. It was your company and your business. Do you hear that description and feel like that's harsh? Or are you proud of that?
57:34 Speaker 01 I guess I would say it's, it's real. And I would say, yeah, determination. I definitely had that from my parents.
57:42 Guy Raz? Yeah.
57:43 Speaker 01 And also being a kid with ADHD and never doing... Well, at something, I always had to work harder. So when I could see the success, I just really wanted us to achieve it. Right? I would say that's probably, probably accurate.
58:00 Guy Raz? By the way, I mean, there's, there's tons of examples of this, like Steve Jobs or Reed Hastings at Netflix, like they're notorious for absolutely demanding the best work from their people and, and not, you know, and getting rid of people that, that weren't prepared to be hardcore.
58:20 Speaker 01 Yeah. You know, within the bike business is a complex business. You know, people think bicycles are simple, but they're actually very complex. And having people that are really obsessed about what we're doing and passionate about what we're doing, that's why we have been able to be successful over all these years. Cause if you look back, how many companies have went out of business, right? And we did almost a few times as well.
58:51 Guy Raz? Yeah.
58:51 Speaker 01 And I would just say, you know, one of the things that I have seen over the years is how much the bicycle brings to people, whether for me or my son or other people with ADHD and how it really calms your mind. And I never knew about that until later. But I'd say then it makes you more driven than ever to get more people on bikes.
59:20 Guy Raz? Yeah. Um, the, the, there's been a slight, maybe not slight, but it's not an insignificant slowdown in, in the cycling business. And we, I know this from other conversations we've had with founders of, you know, bike brands. Do you think that is just a cyclical trend or, cause it's not insignificant?
59:42 Speaker 01 Yeah. Well, no, we do see a slowdown, you know, going through the pandemic, the bike boomed like crazy.
59:51 Guy Raz? Yeah.
59:52 Speaker 01 And I liken it to whenever the world gets stressed.
59:57 Speaker 01 People return to the simpler things in life and the bicycle is definitely one of that.
1:00:04 Guy Raz? Yeah.
1:00:05 Speaker 01 And I would say it went so much that it had to adjust down. I think it's a natural adjustment and at the same time, the long-term outlook for riding is more positive than ever.
1:00:18 Guy Raz? Um, you stepped down as the CEO of the company just in 2022. I mean, you really, and you spent all of the 2000s as the CEO, really, I guess, coming to the realization that you needed to run the company, that when you outsourced it to other executives, decisions were made that didn't align with the values that you had for the business. Tell me about, you know, where you sort of imagine this brand going. I mean, do you see this as a 100-year brand or beyond?
1:00:53 Speaker 01 Yeah, I imagined Specialized going on forever. I often thought, like when I started working on bikes, I thought, I don't care how much or how little money I make, I want to do this because I believe in this. So I would say more and more, I see the, the activity of cycling, the whole mobility, the EV of the future is the two-wheel bike, not the 8,000-pound vehicle. I see that that's the future.
1:01:26 Guy Raz? Um, Mike, when you think about the, the journey you took and where you started and where you ended, how much of, of that do you attribute to, to the work you put in and how much do you think had to do with just timing and luck and, you know, the fact that you rode this early wave of mountain biking and, and its, its success?
1:01:44 Speaker 01 Well, I would say a lot of it is luck, just fortunate kind of serendipity of meeting different people in the world and the fact that I'm not such a smart guy. I ask other people their views and I encourage, you know, other entrepreneurs, just ask people. Ask people you admire. Ask them, what would they do? How do they look at it? Often say that, you know, life and business is an open book desk. But I'd say, I've been very lucky. A lot of the things I've done is because I personally am interested in that. I learned like, if you're doing things just for money, that doesn't work.
1:02:27 Speaker 01 If you're doing things because you believe, you can do anything.
1:02:34 Guy Raz? That's Mike Sinjar, founder of Specialized Bicycle Components. By the way, specialized bikes have shown up from time to time at the Tour de France. And in 2014, Italian cyclist Vincenzo Nibali won the race riding a specialized road bike, the Tarmac. His model had a custom paint job. It was black and painted near the head tube, the open jaws of a shark.
1:03:03 Guy Raz? 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 free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at guyraz.com. This episode was produced by J.C. Howard with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Katherine Seifer. Our engineers were Robert Rodriguez and Maggie Luthar. Our production staff also includes Casey Herman, Sam Paulson, Kerry Thompson, Alex Chung, John Isabella, Chris Messini, Carla Estevez, and Elaine Coats. I'm Guy Raz, and you've been listening to How I Built This.
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