Chapter 71 - Henry J. Heinz: A Biography
Today’s Chapter is based on the book “Henry J. Heinz: A Biography” by E.D. McCafferty.
Here’s what I have learned:
Common People do Uncommon Things
"When you can do the common things of life in an uncommon way, you will command the attention of the world.”
— George Washington Carver
Henry Heinz is well-known as the founder of the H.J. Heinz Company, one of the largest food processing companies in the world especially known for its ketchup. Heinz achieved success by doing common things a little better than others. As he one said, "to do a common thing, uncommonly well, creates success.”
This philosophy came to him due to the way he was raised by his parents. In his household, education was sacred and as such, he had a valuable character trait of having a insatiable desire for knowledge. As a matter of fact, Heinz, from a young age, was always trying to seek new information and knowledge from others. He was never afraid or ashamed of asking questions in order to gather more facts and wisdoms.
And more importantly, he was always open-minded and would even listen to suggestions from the humblest source. In fact, whether it was an office boy or a partner, he always had the time to listen and to discuss about new ideas on how to improve his business. It is clear that Heinz’s success comes from him having this fundamental principle of recognizing facts as the truth even when they are exceedingly uncomfortable and unwelcome. As Ralph Waldo Emerson once said, "Every mind must make its choice between truth and repose. It cannot have both.”
This unsatisfiable desire of knowledge led Heinz to always find uncommon ways to improve common tasks at his company. As a student himself, Heinz never hesitated to be in the plant or the grounds working among his employees in order to find a better way of doing some task.
“His great satisfaction was that he had succeeded in passing on a new idea, or in promoting a new method, that would make for the greater comfort of men as well as for efficiency.”
— E.D. McCafferty
Furthermore, his concept of “doing common things, uncommonly well” also relates in the way he would treat his employees. He took great pride in training his employees who were considered “ordinary men” into making uncommon things for the company. As Isadore Sharp once said,“Four Seasons is the sum of its people—many, many good people.” But in doing so, Heinz never took credit for the improvements he provided.
“Find your man, train your man, inspire your man, and you will keep your man.”
— Henry J. Heinz
This idea of common people doing uncommon things reminds me of the concept of “unconventional thinking” that we have learned from Elon Musk. As a matter of fact, similarly to Henry J. Heinz, Musk uses unconventional thinking in order to improve his companies’ efficiency. Notably, when Musk did not have a conveyor belt at Tesla to move the unfinished cars to the next section of manufacturing, he decided to put “it on a slight slope, and gravity meant it had enough power to move the cars at the right speed.”
Elon Musk was laser-focused on keeping down costs. During his “maniacal sense of urgency”, Musk was often seen on the factory floors leading the way and questioning every single steps with maniacal intensity. Not only did Elon Musk question every single requirement, he often used unconventional wisdom to reduce cost and time.
“We are on a deletion rampage!! Nothing is sacred. Any remotely questionable tubes, sensors, manifolds, etc. will be deleted tonight. Please go ultra-hardcore on deletion and simplification.”
— Elon Musk
According to SpaceX and Tesla employees, Musk’s favourite sayings during his inspection visit of the assembly areas were “Why is that part needed?” and “Why can’t that be done faster?” Musk’s presence in the manufacturing line hustling was eerily similar to a general on the battlefield motivating his troops. As Musk once said, “It’s true that if they see the general out on the battlefield, the troops are going to be motivated. Wherever Napoleon was, that’s where his armies would do best. Even if I don’t do anything but show up, they’ll look at me and say that at least I wasn’t spending all night partying.”
For Musk, this fanatical desire to reduce cost and time wasn’t solely because it was his own money on the line. He truly believed that cost-effectiveness was critical for his ultimate goal of colonising Mars and of making electrical cars accessible to everyone. Funnily enough, this concept of reducing cost and time is also a key principle in Henry J. Heinz’s business philosophy.
Eliminate Waste!
“Step one should be to question the requirements, make them less wrong and dumb, because all requirements are somewhat wrong and dumb. And then delete, delete, delete.”
— Elon Musk
Similar to Elon Musk, Heinz was in a never-ending battle against eliminating waste. As E.D. McCafferty would explain in his book, “There was no man who more hated waste of any kind—waste of material, waste of time, waste of human opportunity. He could, and did, treat with equanimity and patience, losses large and small that were due to error or lack of judgment or other such human faults. But the hatred of waste was so ingrained in him that he often puzzled less careful men by pausing in most important work to investigate and eliminate some petty waste.”
As we have previously mentioned, Heinz was consistently seen with employees in order to find ways to improve the plant’s efficiency. And while it may seems trivial to spend so many hours in order to save a few pennies, for Heinz, he perceived it as a “fundamental importance in the whole conduct of the plant.” This can be reasoned by the fact that even small improvement can become large when done in scale.
Furthermore, Heinz established an elaborate system inside the company to eliminate waste that he called destructive research and criticism. Under this policy, he asked his entire organization to eliminate the weak spots. In fact, “He wanted his whole organization to know all that could be known about any given product before he would go further with it. He wanted to know that the necessary raw material could assuredly be procured in undiminishing quality, year after year. He wanted to know that his organization was able to make the product better than it was being made elsewhere.”
By consequence, Heinz had a high standard in terms of products he would manufacture and sell through his company. In fact, he had this special talent of discarding any products that did not measure up to the standard he requested, as he would believe catering to these products would be a waste of raw material. In the same line of thought, Heinz was never afraid of spending money to experimenting new products in order to improve products to his standard.
"All the money necessary for a useful purpose, but not a cent for waste."
— Henry J. Heinz
This concept of improving the weakest point in order to improve the company as a whole reminds me of the idea of antifragility from Nicholas Nassim Taleb. In his book “Antifragile”, Taleb advocates that systems that eliminate weaknesses or fragilities can become stronger and more resilient when facing volatility and randomness. Here’s how Talex explains the concept of antifragile:
“Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure , risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better. This property is behind everything that has changed with time: evolution, culture, ideas, revolutions, political systems, technological innovation, cultural and economic success, corporate survival, good recipes (say, chicken soup or steak tartare with a drop of cognac), the rise of cities, cultures, legal systems, equatorial forests, bacterial resistance … even our own existence as a species on this planet. And antifragility determines the boundary between what is living and organic (or complex), say, the human body, and what is inert, say, a physical object like the stapler on your desk.
The antifragile loves randomness and uncertainty, which also means— crucially—a love of errors, a certain class of errors. Antifragility has a singular property of allowing us to deal with the unknown, to do things without understanding them— and do them well. Let me be more aggressive: we are largely better at doing than we are at thinking, thanks to antifragility. I’d rather be dumb and antifragile than extremely smart and fragile, any time.
It is easy to see things around us that like a measure of stressors and volatility: economic systems , your body, your nutrition (diabetes and many similar modern ailments seem to be associated with a lack of randomness in feeding and the absence of the stressor of occasional starvation), your psyche. There are even financial contracts that are antifragile: they are explicitly designed to benefit from market volatility.
Antifragility makes us understand fragility better. Just as we cannot improve health without reducing disease, or increase wealth without first decreasing losses, antifragility and fragility are degrees on a spectrum.”
— Nicholas Nassim Taleb
However, it is important to remind ourselves that complex systems are full of interdependencies and that scaling is often non-linear. As Taleb mentions, “when you double the dose of, say, a medication, or when you double the number of employees in a factory, you don’t get twice the initial effect, but rather a lot more or a lot less. Two weekends in Philadelphia are not twice as pleasant as a single one— I’ve tried. When the response is plotted on a graph, it does not show as a straight line (“linear”), rather as a curve. In such environments, simple causal associations are misplaced; it is hard to see how things work by looking at single parts.”
As such, it is important to understand that while eliminating weakness may help improve a system on a whole, there may be some second-order effects that we may need to consider due to scaling being non-linear at times.
Business Reputation
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
— Warren E. Buffett
Warren Buffett mentions that a good reputation is invaluable in business and should be protected at all cost. As he once said, "Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless.” Similarly, Henry J. Heinz worked extremely hard in order to maintain the goodwill of his company as he believed it was the key to his success.
In fact, he explains that goodwill is a company’s most important capital. He mentions that “there is only one way to get good will. It is something that you get only by giving it.” As such, Heinz understood that if he wanted customers to recognize “Heinz” as a trustable brand name, he had to seek to produce the highest quality product.
As a matter of fact, based on Heinz’s character, it would be unthinkable for him to sell products that he did not believe were the best quality. Heinz believed it is better to work for a better business rather than a bigger business; meaning producing better products and making people better. As he once said, “we are working for success, and not for money. The money part will take care of itself.”
"Quality is to a product what character is to a man.”
— Henry J. Heinz
Furthermore, when making transactions with his customers, Henry J. Heinz always made sure to fulfill more than what was required on the letter of contract signed. As a matter of fact, “He wanted the consumer to get the worth of every penny that he paid, and he wanted the dealer to profit, not only in cash, but in holding a satisfied customer.”
While it is easy to think short-term when dealing with customers, Heinz saw the long-term reward of treating customers well. He believed it was his duty as a seller to protect his customers from lack of knowledge and to make sure that his customers receive the largest return on its investment. In fact, for Heinz, it was bad ethics and policy to sell something a man doesn’t need or more than what he needs.
As such, long before others, Heinz often provided merchandising services to his customers. As a manufacturer, he believed he had the duty to help merchants to clear off their shelves of the Heinz products he sold to them. As E.D. McCafferty mentions, “To Mr. Heinz any business transaction in which all parties did not benefit equitably was not only wrong as practical business, but morally wrong.”
This reminds me of how Jack Taylor built Enterprise by exceeding customers’s expectations. In fact, for Jack Taylor, having “satisfied” customers isn’t enough, you need to exceed their expectations. This is because customers who are completely satisfied are 70 percent more likely to become repeat customers.
Why are repeat business so valuable? The reason is simple; studies shows that it costs 5x or 6x more to gain a new customer compared to keeping a current one. Over the years, Enterprise’s management team believe that there are six reasons why people stop doing business:
1 percent die
3 percent move away
5 percent develop other relationships
9 percent leave for competitive reasons
14 percent are dissatisfied with the product
68 percent go elsewhere because of the poor way they were treated by employees of the company
Similarly, according to a survey done by Enterprise, 70 percent of those in the “completely satisfied” category were willing to use Enterprise again the next time they need to rent a car. However, only 22 percent of “satisfied” customers mentioned they would come back.
“Repeat customers are the quickest way to build a solid business.”
— Jack Taylor
It is fair to say that this philosophy of Enterprise of exceeding customers’ expectations in order to gain repeat customers is largely a differentiation between the company and their competitors. While others may be concerned about getting renters in and out of cars as soon as possible in order to increase their bottom line, Enterprise are much more committed in making sure customers have a good experience and will come back.
As Andy Taylor once said, "We derive our success from careful adherence to a common sense approach: We treat our customers well, we give our employees respect and opportunities to grow, and we know that if we stick to these two rules, profits and growth will naturally follow."
Beyond the Book
Read "A Definition of Antifragile and its Implications" by Farnam Street
Watch "Warren Buffet talks about the importance of reputation" on YouTube