The opposite of selling out

During the Covid pandemic, looking to play more music and brighten up my family’s household at a dark time, I started playing a Taylor Guitar. Among other things, I was excited to try out the new internal framework they’d introduced called V-Class bracing, which changes the way a guitar vibrates in order to produce even better sound than the traditional X-bracing. These guitars do sound amazing, but even more, they are really lovely to play. A professional musician can get a great sound out of almost any instrument, but for the rest of us, it's nice to have one that is more forgiving.

V-Class bracing was invented by Andy Powers in 2018, when he was the company’s Master Guitar Builder (if you’re into guitars, you can hear him talk about launching it on Taylor’s “From the Factory” podcast – scroll down to Episode 10). It’s the kind of innovation that’s only possible when a company is fully committed to its purpose and the patient work involved in pushing technology to the next level.

That’s why, in the years after the introduction of V-class bracing, Taylor’s founders, Bob Taylor and Kurt Listug, took a series of steps to ensure the company’s dedication to craft would never be compromised. In 2019, Andy Powers became an ownership partner. Then he worked with Taylor and Listug to transition the company to a 100% Employee Stock Ownership Plan (ESOP) structure in 2021. “Rather than selling the company to another guitar company or outside investor,” the partners felt that “the best way to position the company for future success was to entrust it to the people within who are the lifeblood of its innovative culture and have directly contributed to its growth and success.” In addition to US employees, the ESOP includes those at Taylor’s production facility in Tecate, Baja California, Mexico, while the company’s European employees participate in a similar kind of plan regulated by EU regulations.

ESOP’s are a form of what I call “constitutional governance” – a topic I spend a lot of time on in my new book. Founders who understand their company’s true source of value are using them more and more to protect that wellspring. They understand that governance is a crucial tool for protecting both a mission and the people who embody it. 

To name just a few more examples: Eileen Fisher, Bob’s Red Mill, and King Arthur Baking have all converted to ESOPs. This article about a Pennsylvania audiovisual company that recently made the move notes that the structure is: “one of the best kept secrets in the private sector. In the context of the wealth inequalities we see, and the crisis of economic insecurity we see, and so many Americans struggling to build a nest egg for retirement, it is just a really powerful tool.” 

Decades of evidence proves it works on all fronts. ESOPs are far less likely to go bankrupt or shut down than companies with traditional governance structures. Their sales grow faster, and these conversions also spur an immediate boost in productivity. (For more advantages and examples, check out this discussion, “The promise of employee ownership”). As a succession planning tool, an ESOP guarantees that when founders retire or pass on, the purpose that inspired them to start their company in the first place will be protected.

In 2022, Listug and Taylor stepped down from their roles (they remain on the company’s board), and Andy Powers stepped into them as both CEO and President (adding Chief Guitar Designer to boot). “We needed a guitar maker at the helm of the company,” Listug said. But even if a master designer isn't always next in the line of succession, no matter who follows Powers, Taylor's ESOP will ensure the company never strays from its mission: “giving people the joy of music for generations to come.”

EVENTS THIS WEEK

Book Party at Kapor Center

Tuesday, May 5 at 5:00-7:00pm PT in Oakland, CA

Looking forward to this fireside chat moderated by founder of SPILL, Alphonzo “Phonz” Terrell.

We have a few invites left to extend, so if you’re in the SF Bay Area on Tuesday night and can join our private event hosted by Freada Kapor Klein and Mitch Kapor, reply to this email. (If you’re interested but can only join virtually, reply and I’ll get you access, too.)

Marin Sonoma Impact Ventures

Wednesday, May 6 from 9am-5pm PT, Marin County, CA

Register here

There’s incredible talent and dedication to building high growth, sustainable businesses in the counties north of San Francisco. I’m looking forward to speaking at this event for startup founders, builders, and investors working in the area. If you’re local (or visiting!), hope to see you there.

Manny’s San Francisco with Bob Sutton

Thursday, May 7 at 6:00-7:00pm PT in San Francisco, CA or virtual

Ticket options here

Stanford professor and bestselling author Bob Sutton is my partner in a lively conversation about Incorruptible. Manny's is an incredible experience, like a village square, so if you’re coming, bring a group of friends or teammates. There’s an option to join on Zoom for folks outside the Bay Area.

Bloomberg Beta with Roy Bahat

Friday, May 8 at 12pm PT, Virtual

Request to join here 

I’m excited to be in conversation with Roy Bahat and my friends at Bloomberg Beta. Roy is the head of Bloomberg Beta, an early stage VC fund focused on investing in the future of work. Roy and I warmed up for a great discussion by recording  an episode for his This is Not Advice podcast on being an author last Friday, so this will be a fun one.

BONUS OFFERS

Last Chance! Preorder a Limited Time Only Bundle today and get immediate book access

Today is the last day to take advantage of these 2 bundles. Tomorrow, May 4, this offer goes away.

Both of the book bundles below also include a PDF of Incorruptible you’ll be able to download immediately thanks to special permission from my publisher to share the e-book version with a select group of readers. 

1. Buy two copies of Incorruptible plus a bonus e-book for $50. → Get the $50 bundle here

OR

2. Get four copies of Incorruptible, plus a collector’s edition printed copy of The Leader's Guide, plus a bonus e-book for $99.  → Get the $99 bundle here

The Leader's Guide is my practical handbook for adopting Lean Startup at scale, and it’s not available in print anywhere other than this special offer. 

Note: These bundles are only for US delivery.

Preorder Bonuses

Reminder that if you’ve preordered, you can claim these 5 bonuses.

You can also reply to this email if you’re short on time and we’ll get you registered. 

I’m also giving private event access to people who have pre-ordered whenever the opportunity arises. This past week I gave away two free Startup Grind Conference passes, and am on the lookout for more chances to share.

Eric