#308 The Founder of Glock

0:00Gaston Glock arrived in Luxembourg in July 1999 for an urgent talk with the Shell Company artist Charles Ewart. Ewart picked up Glock personally at the airport. Before proceeding to their meeting, he suggested that Glock take a look at the new sports car that he had just acquired. It was parked in a garage. When they got to the garage, Ewart guided Glock down to the third underground level, where they found themselves alone. Ewart pointed out the sports car, and Glock approached on foot to take a closer look. Suddenly, a tall man stepped out of the shadows, lunging at Glock. Glock raised his arms defensively, and the attacker swung a large rubber mallet and struck Glock on the top and the side of the head.

0:42Rather than intervene to help Glock, Ewert turned and ran. I'm a coward, he would explain later. Glock, meanwhile, was fighting for his life. The gunmaker, who usually carried a pistol, lacked one on this day. With no other option, Glock fought with his hands. he swung his large fists into the attacker's eyes and mouths. Though he was 70 years old, Glock put up a stout defense. He drew blood and knocked out several of his attacker's teeth. Despite the hammer blows to his head, he gained the advantage. When the police arrived, they found a bizarre scene. The bloodied attacker lay collapsed on top of Glock with his arms outstretched like Jesus.

1:22Glock was pinned to the ground but not mortally wounded. His attacker was unconscious. Glock had suffered several hammer blows to the head and lost a liter of blood. At the hospital, though, he was strikingly composed. Before doctors finished patching him up, he summoned his personal bankers. Those two bankers held $70 million of his cash in accounts to which Ewert had access. Within three hours of the attack, Glock had moved $40 million to a secret Swiss account. Ewert was busy, too. He blocked the other $30 million from being transferred. E -word, Glock's supposed financial advisor, had been stealing from him.

2:03That was an excerpt from the book that I'm going to talk to you about today, which is Glock, The Rise of America's Gun, and is written by Paul Barrett. I was not expecting to do this book this week. This book wasn't even on my radar until like a week or two ago. I saw somebody speaking about reading the book online, and what they said made me interested in ordering the book. And he says, what struck me is how his inexperience was a great advantage. He didn't assume anything about how to design a handgun because he never designed one before. Consequently, he, of course, designed the best one ever.

2:34He didn't know what was out of bounds. And so the idea of not knowing what's out of bounds, not knowing what you don't know, it sounds like to a normal person like a liability. But as we've seen in many of the books that you and I go over together, for entrepreneurs, especially attacking an industry they never worked in before, It winds up becoming an advantage. And that'll make a lot more sense as we go through the book. So that intro occurs about 15 years after Glock invents and starts selling his handgun. This story is wild because not only does he have people stealing from him, his financial advisor actually hired the guy to kill Glock.

3:08But what's crazy is over the course of the story, Glock has so many of his top lieutenants and top executives steal from him, which I'll get to in a bit. I want to start at the beginning because it doesn't make any sense. This guy was 50 years old. He was managing a car radiator factory outside of Vienna. He had a small manufacturing business on the side. He had never made a gun. I don't even think he owned a gun. And yet within a decade, he goes from zero to billionaire. So let's jump to that right now. After 30 years in manufacturing, Glock had yielded a respectable social station and a comfortable life.

3:42Still, he dreamed big. He was the son of an Austrian railroad worker. He was managing a car radiator factory outside of Vienna, and he operated a side business with his wife using a secondhand metal press. They produced a modest volume of brass fittings for doors and windows. He also made a bunch of shower curtain rods. Over time, the side business slowly expands, and this is one of the most important ideas in the book, and that is to always do the best with the job in front of you because you can never predict what future opportunity that unlocks. He gets really good at manufacturing things with polymer and plastic.

4:17One of those things he actually is going to make for the Austria's Ministry of Defense. He starts making knives for the Ministry of Defense. That is how he learns about the opportunity to make handguns. So it says the garage metal shop expanded over time to make steel blades, which so impressed Austria's Ministry of Defense that Glock obtained a contract to supply field knives and bayonets to the Austrian army. And this is where he's going to find the opportunity. Watch how fast he moves once he realizes there's a huge opportunity here. One day in 1980, he overheard a hallway conversation between two colonels that jolted his imagination.

4:49The Army needed a new pistol to replace the antiquated ones from World War II. Glock interrupted the conversation and asked if it was possible if his company could bid on the pistol contract. He's asking to bid on a pistol contract. He's never made a pistol. Designing firearms was something far beyond his experience. He asked the colonels to describe the Army's requirements for a new handgun. And I just love his mindset here. He's like, well, this shouldn't be too difficult to make because he just describes it. To him, the handgun was simply another accoutrement that attached to a soldier's belt, similar to a knife that he already produced.

5:20As Gaston Glock himself put in an interview, that I knew nothing was my advantage, that I knew nothing was my advantage. He gets to start with a blank sheet of paper. All of his competitors have decades, in some cases centuries, of built -up procedures and processes and the way they do things. So let's skip ahead and go into his initial research process, because I think there's a lot of good ideas in here for you and I. Glock didn't own any guns. After the conversation at the Defense Ministry in early 1980, he bought a Beretta, a SIG, and a modern version of the German P38 pistol. He began disassembling the guns, putting them back together, and noted the contrasting methods used to make them.

5:58I started intensive studies in such a manner that I visited the Austrian patent offices for weeks, examining generations of handgun innovation. So what's he doing there? He's doing exactly what you and I are doing. He understood that learning from history is a form of leverage. Listen to what he just said. I started intensive studies in such a manner that I visited the Austrian patent office for weeks, examining generations of handgun innovation. What took people generations to learn, because he's going back and doing all this reading, he learns in a few weeks. I bought and tested all modern pistols available to time, and I tried to involve into conversation the best experts I knew.

6:31So he contacts a bunch of experts in the firearm industry. He invites them. He has a meeting with them. There's two guys, two main guys here, and I just want to go over this really quick. He invited several firearm specialists to join him. Among those who attended were this colonel, who was a champion shooter who also oversaw weapons procurement for the Austrian army. That becomes extremely important. He also invited an author of technical books, such as silencers for hand firearms. And then he just asked them flat out, gentlemen, what do you want to see in a pistol of the future? And the beautiful thing is his initial customer is going to give them the outline of exactly what he needs.

7:08Remember, he's going to have to bid against. It's not like they're just going to give him the contract outright. He's got to bid against other gun manufacturers. So it says they desired a high capacity pistol that held more than eight rounds. It should weigh no more than 28 ounces. It should have a light trigger pull for fast, accurate firing. And it should be streamlined and easy to holster. Crucially, the gun should have no more than 40 parts. This is so important. One of my favorite ideas about this entire book is the way this guy designs his company. And I'm going to repeat a lot of the things that he does.

7:36He designed a product and a company based on limiting the amount of moving parts. This is going to be very reminiscent of like the early days of Henry, when Henry Ford was building his car, of Herb Keller of Southwest Airlines, the limited moving parts, the simple product, the simple business processes they all created allowed them to stack advantages at one after another. Wait till you see the profit margins that this guy, this is incredible. All right, let me, I'm getting ahead of myself. So it says the colonel also told Glock that the pistol should be able to withstand extended contract with snow, ice, and mud.

8:08It should be able to fire 10 ,000 rounds with no more than one failure per thousand. The ideal pistol should have a long service life of 40 ,000 rounds. This professional research that Glock is engaged in is so important, and he knew. He knew it was important then. At the evening's end, Glock had his guest sign and date one of the sheets of paper that memorialized their thoughts. He treated the occasion as if it would be remembered by history. Another main theme that appears over and over again in the book. You don't need much to start out. He began working on a prototype. He tested crude early versions in a basement firing range that he built specially for this purpose.

8:46He shot alone using only his left hand. If the gun blew up on him, he would still have his good right hand. This guy moves fast, too. More professional research. Glock attended police academy classes and took private shooting lessons. Remember, he didn't own a gun. He knew nothing about it. My intention was to learn as much as possible, as fast as possible. This process lasted one year. He filed for an Austrian patent on April 30th, 1981. It was his 17th invention. So he called the gun, he called his gun, the Glock 17. So from zero to patent, that's one year. Then from finally actually submitting the actual prototype to, which is going to be his first customer, That's another year, so two years in total.

9:28After another year of testing and improvement, Glock submitted four samples of the pistol to the Austrian Army. I worked for two years, day and night, to bring the sample to the Army on time. Move fast. And then, as we'll see a few times today, Glock has a lot in common with James Dyson. Difference for the sake of it, and retention of total control. To this day, the Glock family owns the company. Glock is obsessed with control, just like James Dyson was. If you don't know what I'm talking about, listen to episode 300. That's the third or fourth time I read Dyson's autobiography. Two overarching concepts would set the Glock 17 apart.

10:01Remember, he's bidding against other existing pistol manufacturers, okay? First, it was to be made largely out of light, resilient, injection -molded plastic. And second, it was designed without a pre -existing factory. I need to go ahead a few pages before I come back to this because this comes up over and over again. It's black plastic and metal construction set it apart from everything else on the market. suggesting modernism and efficiency, difference for the sake of it. Something that James Dyson talked about that benefited, that his product, his first vacuum cleaner, benefited in the early days, they gave him an edge over all of his competitors, is it looked different.

10:39You would go into a store, you'd see seven, eight vacuum cleaners all look the same, then you get to the end, you're like, what the hell is this thing? It immediately snaps the consumer. It's like, oh, I need to pay attention. This is different. He also has a great line. James Dyson has a great line on the value that a strange looking product, will actually get you more media attention. He says, it is one of the virtues of having such a strange looking product that journalists are more likely to take an interest in it. That's something that he learned when he designed a wheelbarrow with, instead of a wheel, had a ball.

11:07And he got so much more attention than other people trying to build wheelbarrows that all look the same, that he applied that idea about 10 or 15 years later when he was designing the vacuum cleaner. We see that same exact idea benefiting Glock right here. And so not only did Glock's gun look different, but it also had a huge benefit. Remember, it has to survive in rain, snow, and mud. This was initially designed for the military. So he's using industrial plastic, which they said is often called polymer, was actually remarkably strong and resistant to corrosion, a major problem with traditional steel guns.

11:40And then because he started from a blank page, he's like, well, I don't have to just manufacture guns in a factory that's been manufacturing guns for 50 years. What would a factory look like if I designed it now? From scratch, this also gives him, This also makes him produce his gun a lot more efficiently and cheaply, and that increases his margins. The important thing that gave him his big price advantage was that he designed the pistol for complete production on computer -controlled tools. And I probably have 75 highlights in this book, but really this is a summary of why, like, studying the way he— He's a very flawed person, as we'll get to later on.

12:16But his approach to company building and creating a new product is very fascinating to me. I says, this is just a note I'm writing to myself. The book is all simplicity, focus, and differentiation. That is the best way to get my attention. Simplicity turns me on. I love it. I'm drawn to it. Clock produced the simplest handgun with only 34 components. Again, simplicity lets you stack advantages one on top of another. I also wrote down one of Steve Jobs' favorite quotes, one of my favorite quotes. This was plastered all over Apple in the early days. Simplicity is the ultimate sophistication. That, of course, is Leonardo da Vinci.

12:47Because of the unfussy way, the simple way, Gaston Glock fabricated his slide, his pistol required fewer steps to manufacture, saves money, and there were fewer opportunities for error. Adds durability, the Glock 17 was put through a preliminary firing run of 10 ,000 rounds. The Glock malfunctioned just once. And then again, the benefit of starting from a blank sheet of paper and a brand new company. None of his competitors could say the same. He got it right because he hadn't done it before. One of the largest problems in getting a new design accepted by an established manufacturer is not just the quote -unquote not invented here syndrome, but also the we don't have that tooling syndrome.

13:24Why would we invent something new when you can simply modify what we already have? Glock started with a blank sheet of paper. As a result, he came up with something original. And he was at the right place at the right time. The book starts out with this crazy shootout that's happening in Miami in the 1980s between the FBI, police officers, and I guess these drug dealers or bank robbers. A lot of these cops and FBI agents get killed. They're all at that time. They're like running around with these Smith and Weston revolvers that hold like six shots. And if anybody's seen the documentary on Netflix called Cocaine Cowboys, the flood of drug violence in Miami in the 80s and spreading all over the country.

14:00Actually, these guys have Uzis. They have high powered rifles. And so you have military and law enforcement officials all over the country and all over the world trying to get better guns that could hold more rounds and more reliable. And so even though he starts out in Austria, he's going to wind up dominating the most valuable market for his product in the world. It's also interesting because I think I'm pretty sure he's he's pretty he's very anti -American. He does not like Americans. He says they're stupid. But that's where I think almost all of his wealth came from. Within just a few years, another market far larger and richer than the Austrian defense sector would be keen for a pistol of the future.

14:36American police officials wanted a new handgun and Glock was there to offer a powerful alternative to the revolver. And then the author talks about the dynamics of this market, the fact that the American civilian gun buying population tends to gravitate towards what the professionals carry. And as a result for Glock, this will this translated into a bonanza. And then finally, one more thing from the section before I move on, something we see over and over again. First, they ignore you, then they laugh at you and then they copy you. Smith and Wesson, who dominated the American law enforcement market before Glock, created something new and better.

15:07Smith & Wesson ignored Glock at first, then they scoffed at him and eventually they began imitating him. He actually sues them later on and wins like a patent infringement case against them. Okay, so in addition to simplicity, differentiation and retention of total control, the other main theme of the book that stuck out to me that I've been thinking about a lot, like how can I use this in my own business, is he's got all these very unique and unusual forms of distribution. And so my answer to this question, How did a pistol produced by an obscure engineer in Vienna, a man who barely spoke English and had no familiarity with America, become in the space of a few years an American icon?

15:46The answer to that question is distribution. And a lot of this is going to be media driven and media begets more media. So first of all, there's people in America that are really they're gun salesmen. They understand the industry. They see this headline and they're like, wait a minute, what's going on? So this guy named Carl Walter is going to play a very important role in the first few years of Glock Glock. I don't think really maintains very many professional relationships for a very long time. This guy builds up his entire American distribution of Salesforce, and he winds up firing him later on.

16:16But Carl is just this gun salesman, and then he sees a headline. He's like, an unknown gun manufacturer won a large contract to supply pistols to the Austrian Ministry of Defense. He was intrigued. So let's go back to this very important theme that we see over and over again. Do the absolute best job on the opportunity that's right in front of you because you have no idea what opportunity that will unlock in the future. Glock starts making knives for the Austrian government. He's reliable, does the best job possible. So then they allow him to bid on the pistol contract. He does an incredible job there.

16:47That headline then gets the attention of this guy who's going to build out his entire American distribution and sales force. And so Carl is sitting in America reading a German's weapon magazine and that's where he hears about the Glock 17. And so he says, I was extremely curious why the Austrian army bought it. So he goes and meets Glock. And there's two things that are happening here. One, he's like, well, here's this gap in this extremely valuable market. How many guns does the American police and military buy? And so he's like, well, there's actually some really, there's a lot of money to be made if we could convert U .S.

17:24police departments from revolvers to pistols. And there's all these news stories about the cops in the 1980s being outgunned by other people, not, you know, having six shots, their guns jamming, all this other stuff. And it's just like, okay, well, why would you carry a Smith & Weston revolver that carries six shots and can jam? Why don't you carry this weird looking pistol that's made mostly plastic by this Austrian engineer that carries 17? And so it goes back to the Dyson thing about having the benefit of having just a strange looking product. Assuming that the product is good, obviously, we're operating on the assumption that the product you're making is world class or really great.

17:59And he's like, wow, that's really ugly. But that initial reaction by Carl is like, oh, that's really ugly. But yeah, at least you have his attention. And then this is another example of Glock's like fetish for simplicity working in his advantage. Because Carl at the time when he's going to meet Glock, he actually works. He's a he works for this company. I don't know how to pronounce this maker. It says he represented Steer, S -T -E -Y -R. But Steer made really complicated pistols. So it says this is what Carl said. the handgun that they made was far more complicated and it was a pain in the ass to service.

18:31So Carl goes and meets Glock. He says, hey, listen, I represent this handgun manufacturer in the United States. Perhaps I could do the same for you. I could represent Glock in the United States. This is the crazy part. The biggest sales opportunity of Glock's entire career was somebody else's idea. And so Carl also had contacts in the American gun media industry. This is again, this is this cannot be overlooked. It was extremely important. So he's having this conversation with Glock. He says, listen, the pistol will sell, but it must be sold. He meant that he could explain to the American law enforcement market why a gun that looks so strange deserved a chance.

19:06And so he brings with him this guy that runs this magazine, this really influential magazine at the time called Soldier of Fortune. And so he says, listen, this is my suggestion. You should give the scoop on publicizing the Glock 17 in the United States. Word of mouth will then spread in gun circles. By the time that you have expanded your manufacturing capacity, America would be hungry for your new pistol. So what Carl understood is that media begets more media, and this is going to supercharge Glock's distribution. And so this article is going to come out. The guy writing the article says he argued that the Glock's design set it apart from everything else on the market.

19:39Back to the importance of differentiation. Now, with the one exception, Glock studied and copied the greats. Remember, he was going back and reading generations of patent filings in a few weeks. And so this is from the article. The only conventional thing about the Glock was the method of operation he adopted for his handgun. Glock borrowed his basic mechanics from John Moses Browning, the greatest gun designer of the late 19th century. Okay, so let's go back into more unusual distribution. This is fascinating. So the Secretary of State in 1985, the U .S. Secretary of State goes and meets the foreign minister of Vienna.

20:14And so the U .S. Secret Service agents and their Viennan counterparts actually start talking. And the Austrian counterparts give the U .S. Secret Service a gift. They give them a bunch of Glocks. The U .S. Secret Service agents return with unusual gifts from their Austrian counterparts. Three high capacity black polymer pistols. It was Glocks first official foray westward. So that's the first way the pistols get from Austria to America. Once they're there, the Secret Service then passes some of the pistols along to the U .S. Department of Defense. Those two organizations are both going to be future customers of Glock.

20:50So then what happens next? American defense procurement officials invite Glock to compete in trials in 1984 to select a new sidearm for U .S. soldiers. Now, I mentioned earlier that this guy's obsessed with control. You see this example. He objected to the Pentagon. So he's going to compete and then win at this. He objected to the Pentagon's insistence that the rights to manufacture the winning gun design would be open to competitive bidding. Glock intended to collect all profit from the production of his gun himself. It's really smart. Again, goes back to the advice from James Dyson, retention of total control.

21:24And so then this goes back to how if you go back in Glock's life, even before he had a lot of financial success, he was obsessed with quality. In fact, there's a great line that comes somewhere later in the book where it says quality will always bring you more money. Glock demanded high quality. The motto of the company is perfection. Glock perfection to this day. It's like all on the walls and everything. But this was very interesting. This is the three -star general in the Austrian army, and he's describing Glock at the early days of building his company. So Glock is still alive today. He's like 93.

21:55I think he's like 52 where we are in the book. He says, there's this interesting guy. He never in his life designed a field knife, and he delivered the best quality samples among all the industry participating. And all those guys have been in the knife industry for hundreds of years. Then this interesting guy came back and sold a newly designed handgun to the Ministry of Defense. Quality will always bring you more money. Now, what happens if you're able to make high quality in the simplest way? you have a company that's going to essentially, he just created a money printing machine. And this paragraph is really the benefit of a product with fewer moving parts and a company with fewer moving parts.

22:35They settled on a commercial wholesale price of $360 and a recommended retail price of $560. These levels undercut comparable American and European brands, yet they generated generous profits. Glock's gross margins exceeded 65%. By comparison, Smith & Wesson and Beretta ranged 5 to 20 % of profit. The Glock's simpler design and the computerized manufacturing methods allowed for larger profits. Another benefit of a low -cost structure, Glock said in their first year, if they could break even, All they had to do was sell 8 ,500 guns for the year, right? So they have a very low cross structure. We sell 8 ,500 guns.