American Giant: Bayard Winthrop

25:40They're just not going to be in the U.S. But we need – we're business at the end of the day. We're not a charity. We're not a nonprofit. We have to make money to pay our employees, and this is the only way it can work. I agreed with everything you just said up to the last point. I think you do have to do all those things. That's absolutely right. But there are multiple ways you can make it work. And in my mind, there's another piece of this, which is at that time, I think it's more true now than it was then, is there was this emerging consumer desire and interest in local and farmers markets and curated things.

26:14Yeah. And I felt that that spoke to a larger shift in mindset and maybe even a growing sense of loss among consumers for great quality products that we grew up around. And so if you exist on a foundation of a commitment to a type of supply chain like American made or really high quality that gives you a leg up, you could stand out and do something unique and something that customers would really value. And I didn't know then whether that would be 2 % of the audience or 5 % or 10 % or 20 % of the audience. I'm not sure I even cared that much. I just felt that the challenge in consumer products is carving out a piece of turf that you can defend with a relatively unique value proposition to your customers.

27:01And I felt that opportunity was wide open for Chrome. And it definitely resonated. It was just my head was in a different place. So given that you were just committed to this idea, which made you an outlier, if somewhat naive as well, it was not tenable. You couldn't really run the company if the way you saw things was so different than the way the owner saw it. Yeah. I remember it was December. My wife had just had our first child, Agnes. December of 2010? December of 2010.

27:41And Rory asked to meet me at, I think, 5 a.m. at the Starbucks. And I remember saying to Allison before, I said, I think I might get fired tomorrow. And we both were like, no. Chrome was doing well. I think probably it was the best year in my career I'd put to bed up to that point. But anyway, so the next morning, after about an hour of polite conversation in the dark at a Starbucks, Roy said, so we're making a change. Wow. So my spidey sense had proven accurate about that. They needed somebody who was going to buy into what they wanted to do. Yeah, and it makes sense, right? I mean, if I was him too, I think you can't have a CEO running your company that is fundamentally misaligned with the way that you want to build the brand.

28:28And to your point earlier, his approach was super logical. In fact, probably more logical than mine was. So this is December of 2010 and probably you had a couple of weeks to wrap things up. Did you have a plan? Did you, I mean, I don't, you probably didn't anticipate this or maybe you did for a few months or something, but did you just think, well, I'll go find something else or what was your initial thoughts in early 2011? Well, it was, it was a little terrifying. I mean, I had a newborn baby. And Christmas coming up and, you know, 10 days later or whatever it was, it was a really discombobulating time.

29:07And I remember I sort of – I kind of laid out for myself three possible routes. One was I could get a group of people together, a group of investors that had worked me in the past and buy a company. That was one thought. Another thought was I could go run another existing company. And the third thought was I could start my own. What did you – did you have conversations with people? Yeah, called everybody I knew and called every investor I knew, called every entrepreneur I knew. And pretty quickly, the idea of buying a company slipped away. There was just no obvious companies that I could find that were for sale or I couldn't obviously get investors together.

29:44I had a couple companies that came up that were looking for CEOs that were sort of interesting. But at the same time, this idea that I had kind of lodged in my brain at Chrome was rapidly coming into focus for me. The concept of making something domestically. here of the best quality and thinking about growing up in the 70s and the American products that I loved and that I felt said something about me as a consumer, the blue jeans, the KitchenAid mixers, the Red Wing boots, the Woolrich shirts, these things that were iconic in my mind, they're still in my closet. These iconic American, well-made, indestructible, beautiful things and how that wasn't in the market today, period.

30:28Back then, those products were not just shining examples in the world of quality. They were also the shining examples of value. People used to think that the products that were made in the U.S. lasted forever. They were very well made. That paradigm is gone. And so for all of those reasons, I began to get really obsessed about starting my own company. And I remember I called my oldest brother in the middle of all this. I explained to him what I was thinking, which at that time was sort of a faint outline of making, launching an apparel business primarily online, all entirely made in the U.S. with the highest quality, and told him why.

31:02And I remember he was quiet for a minute, and he said, you got to do that. When we come back in just a moment, how Bayard found the money to get started and why one of his first calls was to someone who knew nothing about apparel. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Thank you.

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35:06Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2011, and while most companies are outsourcing their manufacturing, Bayard has decided that he wants to start a brand new clothing company where not just every piece, but every thread is made in the U.S. I had a gut instinct that it was going to be hard, but it was possible. and I did what I do, which is I kind of got on planes and got in cars and I started meeting with anybody that would meet with me and began to get a sense about what was still around in the U.S. in terms of capability. And it became clear that knitwear, which is knits as opposed to wovens, which is basically the two kind of categories you have in your closet, knits are t-shirts and sweatpants and sweatshirts and things like that, that knits, that capability was still in okay shape domestically, woven's less so.

36:01But I began to get enough faith that there was enough there that we could launch certainly a sweatshirt. And just to, again, to put this in context, this is around the time of like, and I don't want to get into the politics of this stuff, but it's like, you know, the rise of the Tea Party and, you know, whatever the reasons behind that, some would argue that some of that was a reaction to the collapse of the manufacturing base. And then, you know, eventually what would happen to our politics in this country? Were you paying attention to any of that, any of the sort of populist movements or conversations around people being frustrated, left behind, whatever it might be?

36:38Definitely the latter part, that idea that there was a whole bunch of people out there that had jobs where they could get up every day and make a decent living and serve on the school board and put food on their table at night and that those jobs were going, that was on my mind a lot. I really hated the political nature of those discussions. I view those types of things as patriotic and nonpartisan in their very nature. And this idea that, let's say, the conservatives have claimed a patriotism, I find to be just wrong. I think that we're all, you know, most Americans are deeply patriotic, and they might have different approaches to it.

37:19So I didn't care about the politics. I cared a lot about what was happening to rural communities and urban communities all across the country and believe pretty fundamentally that if we continued or continue down that path, we are going to start to create a country that is really divided. And people that have college degrees and can go on to be bankers and people that don't and that are getting left behind. And that's a driving force for me now. It certainly was then. And that I thought about a ton. Hmm. So you have this idea to make an American sweatshirt, right? And first of all, how did you go about it?

38:02I mean, you said, okay, everyone's on board. Everyone's like, Bayard, you're the guy. If there's anyone to do this, you're the guy. Go for it. Follow your dreams. No one was on board, Guy. My wife and my oldest brother, that's about it. I thought I was an idiot. Yes. But how did you just, what was the first step you took? I mean, yeah, you had experience, but first of all, how are you going to finance a sweatshirt business? So there's a few different questions in there. I think in the beginning, the concept was American-made clothing of the highest quality soup to nuts made here. If you go to China today and you and I want to launch a, let's say, a jacket business, we can go order 100 ,000 jackets in pink and 250 ,000 jackets with a hood in orange and we can do a turnkey.

38:50Just write the order. You can't do that domestically. Couldn't then, can't now. What you have to do is you have to assemble an actual supply chain of all of its component parts. The zippers. Yeah, all those pieces. The rivets. Right. The fabric. Yeah, and most brands, virtually all of them, and most retailers are not in that business. They are in the purchase order writing business. And so you have to become a manufacturer again, the way they all were. You know, they all were manufacturing businesses 20, 30, 40 years ago. Back in the day. Today they're not. They're marketing and purchase order writing businesses.

39:21And so that was the concept. And that then turned into, well, what can I make? And I was interested in what I think of as the American canon, you know, the most important pieces of clothing that identify American style. And that to me was the blue jean. It was the flannel shirt. It was a t-shirt and it was a sweatshirt. And those were kind of the four. A sweatshirt with a zipper, like a hoodie? Yeah, at that point, it was one of those four things. And I sort of looked at all of them and flannel shirt felt impossible to me. Blue jean felt, you know, a little less impossible, but so incredibly difficult for our early nascent business.

39:59And the t-shirt didn't feel particularly substantial. So I kind of defaulted into a sweatshirt. And so that became the thing I wanted to make as our flagship product. And so that was sort of the product piece of it that I was really focusing on and looking a lot at the underlying supply chain underneath it. And then separately, as I thought about financing it, I began to reach out to my network of people. And one of the most important father figures in my life was growing up back in Greenwich, was a man named Don Kendall who had really built PepsiCo. He became the, he was a CEO of Pepsi. Became the CEO of Pepsi and started out as a syrup salesman.

40:39And he had been someone that I was a very important professional and personal guide. And I would periodically meet with him and tell him what I was up to. And I, when I was forming this idea, I had a coffee with him and told him about it. And he said, I'm going to write your first check. And he did. He wrote me, I think a$25 ,000 check. I don't know whether he said it or whether it was implied. He said, if you go do what you say you're going to do with the 25 ,000, there's more behind that. And he was true to his word, and I guess I was true to mine. And he, over time, began to invest more and really became the professional and financial backstop to the business in those early days.

41:11So that money was going to be enough, I guess, to get you started, to design the sweatshirt, right? And what was the design going to be? I mean, a sweatshirt or a hoodie. How did you think about what your sweatshirt was going to be? So one part of it was just looking at what I remember of the kind of the heyday of American sweatshirts, which in my mind were sort of the 50s and the 60s with Champion and Russell and building these really beautiful, heavyweight, 100 % cotton, thick sweatshirts that got softer and better over time versus what was in the market then. And so I knew conceptually I wanted to get back to some of the things that I thought were so great about the best of American fleece.

41:56And then the other thing that I did that was maybe smart was I hired a guy named Philippe Manoux, who was someone I'd known for a long time. Philippe Manoux. Philippe Manoux. And he is one of the smartest people I know, one of the hardest working people I know. And he was an apparel designer? No. No. Quite the opposite. He'd spent his career in medical devices and working on the early Apple iPod. He worked on the glass surface on the iPod. And you thought he was the right guy? I mean, I thought he was very smart. I thought he was passionate. And what I liked was he had no apparel experience. As counterintuitive as that sounds, I really wanted somebody to come in that had completely unencumbered eyes, where he and I could ask very open-ended questions about what made a great sweatshirt.

42:42So I got with him somebody that started with no preconceived notions about anything, not what was possible, not the way things do things, not the way that designers are trained or merchants are trained. I wanted somebody to come at this totally fresh, and he did. And he challenged basically every single assumption. And we, piece by piece by piece, began to assemble what we thought was going to be a pretty great product. Bayer, this is 2011, the dawn of the direct-to-consumer age. So you're getting into it really at the right time. Because you decided, I think, from the beginning, we're going to sell this direct-to-consumers, right?

43:16We're going to go online and do it that way, at least initially. Yeah, not only that, but exclusively. I really, I thought at the time, which proved out to be wrong, that there was great economics to clean up if you could launch a direct-to-consumer business and try to, you know, pass on as much value and quality to the consumer without any distribution costs as we could. I mean, it's interesting. I remember being in San Francisco around this time with a friend walking through like Union Square and my friend saying brick and mortar is dead. There's going to be no brick and mortar. And parts of San Francisco might be true.

43:51But in general, that was wrong. Right. I mean, everyone said brick and mortar is dead. But now, of course, direct to consumers is not necessarily a bad model, but it's more competitive and that there are advantages to having a foot in both. Yeah, I think that myself included just misanalyzed the problem. I mean, I think physical stores and resellers provide a critical piece of the puzzle, which is just exposure to customers that an online brand only has a much harder time doing. And it's expensive to try to do that online. And I just didn't – that wasn't even part of my calculus. I didn't even consider it.

44:25And I was just totally blind to that. So you found the company – and by the way, the name American Giant. How did you come up with that name? Yeah, I'll tell you a really quick funny story about that. When you are starting a company and naming a company, you have to go through this agonizing personal process of what am I going to name it? And then you have to, once you come up with a name you might like, you have to make sure that your URL is available and that there's no trademark infringement or any other thing. And I started to keep notes and lists and pads of paper in my car next to my bed and everywhere that I might jot things down.

44:59And I had gotten it down to, I don't know, three or four that I thought were okay. I didn't love them. But I was sitting at a coffee shop. I was on a phone call with part of the supply chain I was starting to build. And I was kind of daydreaming on the call. And I had my mother's mother grew up in northern Maine. And if you looked out of her window of her house, you could see these two hills that were called the Sleeping Giant. And I was thinking about that, kind of reminiscing about that. And the name American Giant popped into my head. And I was like, gosh, that's great. And I love this idea of a giant being a quiet but strong thing and sort of felt there were correlations to American manufacturing kind of has been left alone, but would be strong if it got reawakened.

45:46So I got on my computer and did a USPTO search and saw on there that it was available for automotive, but not for apparel. And I was just crushed. And the next day I drove to my trademark attorney's office in Sacramento. I met with him. I said, hey, I had this name. It's taken. And he looked it up and said, no, this guy just renewed like a month ago. He just renewed his trademark on it. You're not getting it. For apparel. For apparel. And I was just bummed. And so anyway, I was driving back to the city from Sacramento. I was on the Bay Bridge and I just couldn't let it go. And so I got the phone number attached to the trademark filing.

46:28I called the number and somebody answered the phone. And I said, hey, do you own the trademark to American Giant? And he was like kind of taking it back. Yeah, I do. And I said, well, I told my story. And I said, is there any chance you would sell it to me? And he was quiet for a few minutes. And he said, I'll tell you what, I'm a lawyer. I wrote a thriller in the kind of John Grisham vein called American Giant. It's like a legal thriller. And I've always thought that I might one day become a New York Times bestseller and people buy t-shirts or something with the name of the novel on it. But that's a pipe dream.

47:07And if you write me a$5 ,000 check, you can have it. I almost drove off the road. Anyway, that guy, Keith Berkshire has become a dear friend of the company. He just emailed me two days ago said he was going to go to our store in Boston. But he's a part of the, you know, as you know, any of us that have ever started a company, there are these moments that feel like it was meant to be. You know, Keith is... You told him your vision over the phone? Yeah. What a great story. It's a great story. Yeah. So here's my question. Like you, it took you, it would take you a little less than a year before you had the first product.

47:40And I want to get to how you made it. I mean, the goal of course is to, is to get to the point where you can sell something. I mean, you want everything to be in the U.S., right? That means, you know, the zipper, the fabric, the stitches, and then the labor. Was that even possible? Was there even, for example, like a zipper manufacturer that made zippers in the U.S.? I mean, the real answer is I didn't know. We began some of the early work with a group called the S Group in Portland, Oregon. Gary Peck runs that operation up there. And Gary had worked for Adidas for many, many years, had worked in the American-made division of Adidas and had a lot of knowledge.

48:20And Gary was a really integral part early on as the S Group was helping us steer through the difficulty of figuring out exactly the questions you're asking, where to go for what. They're like a consulting group? Yeah, they're kind of like a turnkey, like you want to go make a fill in the blank, a pair of boots. They can help you design and develop and then source that product. And so we began to, through him, I began to meet more and more people. But the fabric piece of it, we couldn't figure out. We were after a very specific, if you hold our, it's called our classic full zip sweatshirt. If you hold it, the fabric is pretty unique.

48:54It's very tightly knitted. It's 100 % cotton. It's got a very dry feel to it. And to get that fabric knitted, I don't want to get too wonky with your audience, but it requires a certain type of knitting machines. And those machines had gone over to Japan a long time ago. And so we were really struggling with how to get that made. And in the middle of all that, I had met in a town called Gaffney, South Carolina, a company called Carolina Cotton Works. And the man that ran that company was a man named Paige Ashby. and page saw something that i think lit a spark for him and he sat in his conference room on the second floor of that building and page looked at me and said i'll get this figured out for you and he did what did they make carolina cotton works is a originally was a washing facility that just washed fabric um but page grew it into what we refer to as a finishing facility so they put color into cloth and they put texture into cloth.

49:52In our case, napping. And napping is, if you ever think about a bath towel, that's essentially a French terry. If you ever stare at it, you can see that the loops of the knitted fabric are intact. When you nap that fabric, it's literally thousands and thousands of needles that pick those loops. They kind of cut them. And that's what creates kind of a fuzzy backing, let's say, to the inside of your sweatshirt. Paige got us connected to a group called Clover Knits in Clover, South Carolina. Clover knitted the cloth and Paige figured out how to get it napped and finished to our specs. And it's not an overstatement to say we would not be here today if it hadn't been for Paige and his leadership.

50:32And Paige passed away a few years ago, but he was a remarkable human and a remarkable business person and a good friend and really got us off the ground in a way that we couldn't have done on our own. All right. So you have this deal with them to make it. And they produced the first run of sweatshirts, right? And these were zip-up hoodies. And I guess I should be at this point, just full disclosure, Bayard, I own a few of your sweatshirts. In fact, for this interview, I'm wearing one now so I can feel it as you describe it because there's those double stitches and it's heavy and it's just a thick, solid sweatshirt.

51:10So I know them well. When you got this first run in, what did you do? Like, did you just like put them on the website? Did you reach out to media to get some attention? Like, how did you get people to become aware of this thing you were trying to do? Well, the basic business idea was if you built a really great sweatshirt and did it in a way that both the brand and your consumers would be proud of that customers would care. So that basic idea was what we wanted to launch the business around. And so we poured everything into the product, basically. And I sent out, you know, a thousand emails to everybody I've ever met in my life saying, hey, I'm launching this company, please buy a sweatshirt.

51:53And so we did that. And so we launched, we shipped our first sweatshirts, men's only at the time, in February of 2012. We got a little bit of press and we had friends buy stuff. but it was still tiny guy. I mean, I think we sold, I don't know, maybe$10 ,000 worth of sweatshirts a month. And they were expensive compared to the mass-produced, you know, sweatshirts made overseas. They were, I mean, like you could buy, you go to, you know, Uniqlo and you could get one for like 15 bucks, right? Yours cost, what, 75, 80 bucks at the time? Maybe a hundred, close to a hundred. From a brand nobody knew.

52:32And that was because the cost to manufacture them was going to be – naturally, it was going to be higher if you were sourcing almost everything from the United States. Well, it was really every component part. In fact, we underpriced the sweatshirt at the beginning by quite a bit. Yeah. The fabric itself was expensive. The zippers are expensive. The ribbing, I mean, I can give you a chapter and verse on all these different parts, the double-lined hood, the metal aglets, the custom poles on the zipper, all these things, they are expensive. The needle in hiring, you know, we really wanted craftspeople sewing these things.

53:10We didn't want just ton and gun sewing. And so at every part, we were investing in the product and asking our customers to trust us on that because they weren't walking into a store to feel it, right? They had to take it on faith that when it arrived in their house in a box, that it would meet their expectations. And I think concurrently you opened a store, right, around that time? Well, when I started the business, I opened it up in the back of a friend's factory and just rented a desk. But eventually, when the business started to get going, we rented a tiny little building on 21st Street and Mission in San Francisco.

53:45and we put five desks upstairs and we built a little, essentially a warehouse downstairs where we could store the sweatshirts. And then a little at the front door, a little desk where someone could come in and buy stuff. So you had a little, if you walked down 21st street, you could walk in and try on a sweatshirt and buy one. And we did all of our shipping out of there and we did all of our everything out of there. But it was good to have a place where people could walk in because you could interact with people and see when they tried it on, was there the response? And so there was this feedback loop there that was great, But it was really small.

54:17So that first year, you're trying to sell to whoever you can. And by the end of that year, and this is when I first heard about this product, it was December of 2012. An article on Slate comes out by Farhad Manju, who used to be at the New York Times. This article was titled, This is the Greatest Hoodie Ever Made, which doesn't get much better than that. I mean, it's a pretty ringing, rousing endorsement. Yeah. I was working at NPR at the time, and I interviewed you when I came out. We talked about the sweatshirt. What did that article do? Because I imagine just things blew up like for a time.

54:58It, I mean, changed everything. I had met Farhad. We had approached him and said, listen, we think we're doing something kind of interesting. Why don't you look at this and compare it to a bunch of other sweatshirts and see what you think? and he was a tech reporter for slate at that time and i think this kind of grabbed his fancy a little bit it was a some part of tech story because of the e-commerce angle i guess but it just felt something different for him and i think he intended to give it a couple of hours and move on and he came up to the city one day and met with me and he ended up spending i don't know four or five days with us and really immersing himself in the whole thing and wrote this really detailed article that was not only an exploration of the business model, but the sweatshirt itself.

55:42And I think he was moved by what he saw in the product and wrote this article that when it went out, and to your point, it was early December of 2012, I'll never forget it. The article hit. I didn't know it. I got a phone call from the people that were hosting our e-commerce platform and said, are you aware of what's happening here? I said, no. He said, something's happening. We are trying to get - Yeah, we're getting inundated. But inundated was the understatement of the year. I think we were getting something like 100 orders a second. Wow. And we didn't have that much inventory. When we come back in just a moment, Bayard scrambles to meet demand.

56:21And soon after, a key partner leaves him with thousands of orders to fill and nowhere to get them made. Stay with us. I'm Guy Raz and you're listening to How I Built This.

57:04We'll see you next time. Try it out now at Wix.com.

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57:55Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2012, and American Giant's hoodies are the subject of a viral article. But at the very moment customers are beating down his door, Bayard realizes that he just doesn't have that much inventory. And not only did I have that much inventory, the contracts that we had for future yarn and knitting and finishing were finite, too. We had maybe, I don't know, another, call it 10 ,000, not even, probably 5 ,000 sweatshirts on order. And so within the span of like 12 hours, we sold out of everything that was downstairs in our facility in the mission.

58:35We're heading into holiday. Which seems like a good problem to have. Yeah, right. And in fact, you know, one of the guys I worked with had come in a week prior saying we have way too much inventory for holiday. So that was gone in an instant. And the next day we kind of all gathered and said, what are we going to do? We said, why don't we put up a blog post that said, if you want to get a sweatshirt, fill out this form, which people did. filled out a form in droves and in within 12 hours bought all future production. So sweatshirts that we were not going to ship until March, people were buying today in December and saying, ship it to me when it's done.

59:11So that sold out instantly. And then we sat in a room and said, well, we got to order more. How much are we going to order? And that was a good luck with that conversation. You know, by the time that new stuff was going to land, it was going to be hitting our warehouse in the middle of summer. That article would be old news and it'd be 90 degrees in New York city. And so we made a guess and off we went. And what ended up happening just to complete that story is he wrote a follow on article about, I don't know, eight or nine months later. And the title of that article was the only problem with the greatest hoodie ever made is you have to wait nine months to get it.

59:52And so that took us from our being completely swamped and like shoved us under, you know, another hundred feet of water because that article went as crazy as the first one did. And those two really created havoc for us for, you know, it went on for about three years. Yeah. There's a backlog for almost three years. Yeah. And I think everyone asked about that, right? Which is like, why can't you get in front of it? And the thing that I think people don't really appreciate is when you sit in a room and try to figure out what demand is going to look like in six months, it's incredibly difficult. And so you make your best guesses.

1:00:26And we chronically underestimated demand. And I think what that did was it was creating - Is that because you were worried about spending too much money? Yeah. If you get it wrong, you just, you'll bankrupt the business. And so we, so you end up being conservative in those bets and that conservatism ended up in sellouts and the sellouts added to demand. And everyone thinks like, oh, that's great. It is partially great. We, we, luckily our customers really stood by us and we were very transparent with the challenges that we were having getting back in stock but it's not a great feeling when you feel like you're chronically disappointing your customers and not not able to deliver what they're what they're asking for so but yeah it went on for a long time how long did it take to make one sweatshirt yeah so so i'll just keep the whole step-by-step process so yeah um the big regions of cotton production are California, Texas, and the Southeast, North and South Carolina.

1:01:17So that cotton gets grown. It gets harvested typically in late October, early November, and goes to a gin. If you remember your old history lessons about Eli Whitney, the ginning process removes seeds and leaf litter. It used to be done by slave labor in the United States, which was a big part of the Southern economy. Now it's done through automated ginning machines, which are kind of dotted all over the United States cotton growing regions. So it goes and gets ginned. So in this example that I'm giving you would get ginned at the Enfield gin, which is in Enfield, North Carolina, and that gets cleaned and then baled.

1:01:50And so that gin takes in raw cotton and out the other door goes a bale of cotton and that cotton gets labeled. So you get varietal, you get moisture content, color, but a whole bunch of quality controls, much like a grape and a wine. And then that bale goes to a storing facility where it sits for anywhere from a month to eight or nine months until it gets pulled into a yarning production facility. They have to turn into yarn. It has to turn into yarn. In our case, that goes from North Carolina, where it was grown, across the border into Gaffney, where there is a company called Parkdale Mills, and they convert that raw cotton into finished yarn.

1:02:24And that's a highly automated process. But that yarn can't be turned into a sweatshirt. It's supposed to be turned into something else. That's right. That spun yarn would then go to Clover, South Carolina. So another factory. Another factory. This is a knitting facility. So it takes the raw yarn and converts it into knitted cloth. And to basically fabric, the fabric that you would see in the fresh product. Correct. And that's sheets of the fabric. Sheets of that fabric that look like the color of cotton grown in a field. So it's sort of like a dirty white, maybe. Yep. It's, they call it grayish color.

1:02:57And it's sort of a tough fabric. Rolls of that raw fabric then would go to Carolina Cotton Works right down the street. from where Clover is, Clovers and Clover, South Carolina, now back to Gaffney, where it gets dyed, napped, and finished. And so - Finished means it's smoothed out. It's smoothed, and in our case, the back of it, the front of it gets some sanding, the back of it gets napped. So that fabric gives you that dry hand feel that you can feel in your sweatshirt now, and the napping gives that soft and cozy interior. Now you've got finished fabric in a roll that looks like basically what you're wearing.

1:03:32And the final step is that goes north about 140 miles. Back to North Carolina. Back to North Carolina to a facility that we own outside of Raleigh where that fabric is cut and sewn into a final sweatshirt. And what emerges out of that facility is the finished product that you're wearing. I mean, just the number of steps from field to finish, it's going through so many different places. So the costs add up over time and the time to do it, right? I mean, so given that this is all done domestically and all of those people involved are domestic employees or workers of those factories, you know, by the time it's ready to be sewn into the garment, the cost of that role must be relatively high.

1:04:19Yeah. I mean, I think if I took you through our supply chain step by step, it's hard not to emerge out of that process and think, boy, it's underpriced maybe. The amount of craft and knowledge and people that touch it is remarkable. I think it's important that we as, you know, just people understand how hard it is to get food produced or products to get produced that we consume. And I think we've lost touch with a little bit of that. But it is amazing to see it up close and to see all the people and all the skill that goes into making a sweatshirt or a T-shirt. What were the reasons people were interested in buying the product?

1:04:58Was it a sense of patriotism? Was it like, I want to support Made in the USA? Was it, or was it something different? Or was it a bunch of different things? I think it was a bunch of different things. I think at its core probably was, probably what you experienced was this article that came out that seemed totally unique and different, went totally viral. You couldn't get it. But I think in addition to that, I got a handful of brands in my life that I like giving them my money because I admire what they're doing and it aligns with my own values. And I think that is probably behind it is – this gets back to the earlier comment about this sort of nonpartisan patriotism that I think lots and lots of Americans feel.

1:05:35That there's this intuitive sense that the Amazonification of our lives is not great and that we're getting this disconnected reality from the people and the places that make the things that we need and love. And we got to turn back on that a little bit. And I think that's probably part of it too. One of the things I wonder about is, as you were introducing this product to people, of course, one of the reactions was going to be, this is too expensive for me. I can't spend$100 on a hoodie or$120 or whatever. How did you explain to potential customers why the price was what it was and why that was worth it for them?

1:06:14Yeah, we still get that, right? I mean, our stuff is expensive. Any way you look at it, it's expensive. And it's, in many cases, too expensive for a lot of customers of ours. You know, we can't sell to the... You can't make a$8 sweatshirt. It's not possible. It's impossible. An$8 sweatshirt is not possible, but... You can't make a$20 sweatshirt. Yeah. What is interesting, though, is the role of volume and commitment, what that plays with pricing. So if you had a significant commitment from a major brand or a major retailer, the pricing paradigm changes pretty fundamentally. Even with the cost of labor in the U.S., like even though just the built-in costs are higher because American workers are paid more.

1:06:57That is true. And you cannot get around that, right? So the cost of labor in the United States compared to China is – they're not really comparable. and and i think um we should be addressing some version of that in our trade policy but there's an inherent cost structure about making the united states that is forever going to make it more expensive than let's say manufacturing in china but you can close the gap down massively if there was volume and commitment there but so so to your original question how do we communicate that to our customers you know i think yeah we try to communicate on our website we try to talk to the media and we hopefully deliver on the quality, but how our customers understand that they're buying and supporting communities and neighbors and when they buy products from us.

1:07:42And that hopefully that, that is part of the value proposition, right? And by the way, there's no judgment attached to that. I, there are many people that need to shop at places where they can get a, you know, a sweatshirt for 1999 and it's important that they can do that. But I think for people that have the ability to make choices there, I think that that is part of the value proposition, that if I can direct my dollars towards something that I think is going towards something I believe in and is consistent with my values, it's part of how our customers think about value when they buy a sweatshirt or a t-shirt or a pair of jeans from us.

1:08:13You acquired a manufacturing company called Eagle Sportswear, which means that you essentially became a manufacturing business. I mean, you earlier talked about how most apparel companies are just purchase order companies. They're just filling out forms. They're probably designing it, and then everything's just made for them in China or wherever. You are actually, you had to become a manufacturing company in order to do what you wanted to do. Yeah. So the real quick story there is we were making all of our stuff in a facility about 20 minutes south of where I am today called SFO Apparel. And that facility is run by a guy named Peter Mao, who was a very important partner of ours.

1:08:51And when that Slate article hit, I went down and saw Peter Peter, I need all your capacity through the end of the year. And in any normal circumstance, that would be the best news ever if you were a domestic sewing facility. And Peter said, OK, let me spend the weekend. I'll talk to my team. I'll get back to you on Monday. And he called me on Monday and said, I've just gotten a phone call from Under Armour. And they have a container ship of, I forget what it was, jerseys or something that had a problem with it. And they needed Peter to fix them. And he said, I love American Giant. I love you guys, but you've been around for a year and this is Under Armour and I can't turn this business down.

1:09:28Yeah, I got to do it. Yeah, and he shrunk our capacity down. I think we had two sewing lines at the time. He said, I can keep one open for you. Yeah. And so in the middle of all that, we were panicking. And I remember I met with Mr. Kendall and – This is Kendall, the guy who was your mentor. Yeah, sorry. This is my primary investor and our kind of guiding force. And he said to me, do the customer want the product? It's like the most basic question. And I said, yeah, we're having a hard time supplying them. And he said, well, then you can't have your manufacturing be a constraint. And so we ended up buying a facility in Middlesex, North Carolina, which is a sewing facility called Eagle Sportswear that now sews probably 60 % of our product.

1:10:15Wow. Well, Bayard, in March of 2024, a book came out called American Flannel by a guy named Stephen Curitz. And a lot of this book is about you and about it's about basically about entrepreneurs who are trying to make clothing in the United States and how hard that is. and part of it talks about this saga that you went through to create a flannel shirt, which I think initially when you launched American Giant in 2011, this was like in your vision. You wanted to make a flannel shirt, but it would take like seven years to figure out how to make a flannel shirt in the United States. I think most people think of that and they're like, a flannel shirt?

1:10:57What's so hard about making a flannel shirt? What's the challenge there? Why can't you make this in the U.S.? What was so hard about that? Well, yeah, so... Where do you begin, right? Yeah, I mean, I think when I originally thought about the business, I thought of, you know, there are probably four iconic American silhouettes. There's the t-shirt, there's the sweatshirt, there's the blue jean, and there's the flannel shirt. And of those four, the flannel is the most complicated and much more complicated than I even give it credit for. The difference is, just to try to keep it really simple, when I was young, the great flannel shirts you bought from Woolrich, L.L.

1:11:34Bean that lasted forever and they were beautiful and got more and more patinaed as they aged and got softer as they aged. Those were yarn dyed flannel shirts. And yarn dyeing is a, it's kind of half art, half science that the individual strands of yarn are dyed and then woven into the fabric to create the flannel pattern. Oh, it's not like dyed. You don't just make the shirt and then just stamp a flannel. And print flannel on it. And that is what you buy today is most of it. Yeah, absolutely. Yeah. And so I wanted to do a yarn dyed flannel shirt in the United States. So you have to actually buy the yarn and then dye it.

1:12:12Unlike the knitted fabric that we spoke about earlier, but it has to be individual strands of yarn need to be dyed. Wow. And so I got it in my head that I wanted to do a yarn dyed flannel program. And I reached out to the New York times and there was a reporter there who worked in the, in the fashion team named Stephen Currence and asked him if he wanted to come along for the journey. I didn't, had no clue whether we were going to be successful or not. And he's a guy that grew up in Western Pennsylvania under the shadow of Woolrich, grew up in a mill town and had witnessed the decline of that brand and the offshoring of its production.

1:12:48And I think it struck a note with him. And he said, yes. And he ended up following us for a year, basically, as we went down this incredibly arduous path of assembling the component parts necessary to make a yarn dyed flannel. And we released it in time for Christmas of that year. I think it was 2017. And Stephen wrote an article for the New York Times called The Annals of Flannel that tracked that journey. And I think Stephen got approached by two or three publishing houses to turn it into a book. But I think the thing that's interesting about that book is it poses pretty fundamental questions about, you know, what happens to a country if we don't make things anymore?

1:13:30And I'll shamelessly plug Stephen's book because he did a heck of a job. And I think Stephen King said it was, without question, was going to be one of his favorite books of 2024. And if I just will say, I think it's a good example of, I think, the nonpartisan nature of domestic manufacturing. You've got people on the right and the left that care really deeply about this stuff. And I think that's as it should be. You've been at this since 2011 and even before, but publicly pushing for making things in the U.S. And there are some brands that were doing it. American Apparel was doing it for a while.

1:14:08But you've been on this, out there talking about this. Have you seen any movement? I mean, have you seen manufacturing, at least in the apparel business, moving towards making more stuff in the U.S.? or has it not really happened yet? Well, here's the thing. About 40 years ago, we made a bipartisan decision to place consumption at the center of our foreign policy. We felt that getting consumers the cheapest prices and the most choice was the absolute best thing to do as opposed to putting manufacturing at the center of our foreign policy. And I think that a lot of that policy makes some sense, right?

1:14:48That we now can get flat screen TVs for cheap. Lots of choice. but there's also a lot of consequences of that policy, which has resulted in real devastation to lower middle-class jobs, to urban rural communities that have been just decimated. If you have a four-year degree and you can be a consultant or work in banking, or, you know, you're doing well, you can be in the stock market, you've done great. If you have not done those things, if you've, if you've got a high school degree and you have a job that's going to put you into the trades or manufacturing, the last 40 years have been absolutely devastating and that doesn't end well for a country.

1:15:20And I think that was a fundamental mistake. It was a bipartisan mistake. We cannot build a country on the back of consumption, arriving at your door,$8 pair of sneakers the next day. We are going to hollow out the middle class in this country in ways that have long-term very bad consequences. I think the good news is that consumers are waking up to it. Policy makers are waking up to it. And so have we seen movement? I think you're definitely seeing movement in D.C. Certainly the Biden administration is doing that in a pretty important way. And the Trump administration was as well, actually. Two pretty opposed administrations, obviously.

1:15:57They're quite consistent on trade policy. Bob Lighthizer, who is the U.S. trade representative under Trump, right? And Ambassador Tai under Biden actually see the world quite similarly. And are doing good work, Ambassador Tai particularly, doing good work at beginning to restore some protections to domestic manufacturing that are going to have good long-term consequences. There's a lot more work to do. But she particularly has been at the fore of driving real change that we're going to see the benefit of in the coming years. Yeah. A couple years ago, you guys took on a strategic investor who gained a controlling stake in the company, Miguel McKelvey, who co-founded WeWork.

1:16:41Tell me about why you sort of made the decision to partner with him. Well, I assume it's appropriate to talk about this, but I got a phone call one morning when I was out walking my dog in the Presidio in San Francisco from you, Guy. And you had reached out to me and said, you and I hadn't spoken for a long time, I don't think. And you had said that you had a guy that was interested in U.S. manufacturing and was kind of poking around and someone that you felt was a good human and was wondering if you could make an introduction so that I could share some of our scar tissue with him. Yeah, he was Miguel McKelvey, who had been on the show.

1:17:22He was looking to start a sneaker company because he played basketball in college and he wanted to make the sneakers in the US. And I said, oh, you should talk to Bayard Winthrop, who makes everything in the US. He could be a really good resource. And he wasn't looking to invest or buy anything. He was just looking for some advice on where he could make the shoes. Yeah. And like all these things, you spend enough time banging your head and fist against the wall. You learn stuff. You learn who can do what things and what things are possible domestically, which aren't, where to spend time, where not to spend time.

1:17:54And I was trying to, as you know, Miguel, he's a great person. And so those were invigorating conversations to be able to speak to somebody that has done interesting things and was thinking about the problem well and was kind of trying to enter into the industry. And so those were really good conversations. And I began to sense that, you know, the conversations, though, were kind of in the micro about footwear, where they're more broadly about his interest in him trying to improve work environments for humans. And you know him. He's a very philosophical, deep thinker. And the conversations often took on that form.

1:18:26And I remember one day I was talking to him and said, you know, why don't we do something together? You know, you're thinking about this in a way that's different than me, but that's very much consistent and aligned with what we're trying to do here. And I think you have a huge impact. And I think it would allow you to explore some of the things that you're interested in. And that conversation over the course of a long time evolved into him saying that was something that he'd consider and then ultimately happened. And I think it was two years ago now or three, two and a half years ago. He's your main investor now.

1:19:00And he's now our main investor. And I think it was a condition on his investment that he wanted to be able to really have a long-term view about how to build something great and be able to do the things that he felt were important. And so it was really important to him that he could have controlling interest in the company. And so that's what he ultimately did. It's just been a fascinating thing for me to have a thought partner who really thinks about things quite differently than I do, but has made me a lot smarter and I think more thoughtful about how we're approaching the problem. I'll give you an anecdote.

1:19:30In our facility in North Carolina, he came in one day and said, he was asking about labor and the challenge of getting labor there. And Miguel said, well, who's the typical worker here? And Miguel said, you know, it's all women. And the fact is probably 98 % women. And Miguel said, a lot of them have kids. Yeah. A lot of them have to like get kids after school. Yes. Be home after school. Yes. And so Miguel said, why don't we convert a couple of these offices into an after school program? Put in some computers, provide some snacks. In North Carolina. In North Carolina. We haven't done that. But that was a suggestion eight months ago.

1:20:05And it hit me like a ton of bricks, guy. I was like, well, yeah. You know, what's that going to cost me? $50 ,000 maybe? You know, I worry about whether I've got free coffee and snacks in my offices in San Francisco, but it didn't even occur to me to do that in North Carolina. So we're looking into that exact thing. And so that kind of thinking is pushing us forward. You know, you mentioned earlier, you mentioned this idea of scale, right? And so to produce something inexpensively, like to make an$8 t-shirt, you can do that if you make a bunch of them in Asia and then put them in a container and ship them over here to do domestically much harder.

1:20:44But is there a world where you can actually use scale and domestic labor here in the U.S. and produce something competitively priced? No question about it. It can be done. Absolutely can be done. the key factors are volume and durability of commitment. What I mean by that is if you had a major retailer, of which maybe there are three or four in this country, or a major brand that said, I am going to make a commitment to a t-shirt, let's say, and I'm going to commit to it in a reasonable volume. Maybe that's some small fraction of the number of t-shirts you sell in a year, but I'm going to do it domestically.

1:21:30And I'm going to be steady in that commitment measured in years, not months. So that the supply chain partners knew that there was going to be steady volume over time that has a fundamentally transformative impact on cost. And that therein lies the irony is that there is a real chicken and egg with domestic textile production, that it is all offshored. And so the businesses that are left are constantly trying to land the next 5 ,000 piece order. But if you had a way to drop in a order quantity measured in the hundreds of thousands of units, it changes price in the most basic levels and blows up entirely.

1:22:16The negative paradigm of, boy, American manufacturing is so wildly expensive. It's only available for the elite. So in theory, a t-shirt, right, that retails on your site for 50 bucks, which is, again, we know the supply chain, the Cotton's American, it's spun in four different factories. It's made in a facility in North Carolina. The cost of that could go down considerably if you had a factory that was on order to produce 200 ,000 of them. Yeah, I mean, I could produce a great quality 100 % cotton t-shirt that you would love that would retail for 15 bucks or less. Made in the U.S.? Made in the U.S.

1:22:59Entirely domestically sourced. Entirely and of great quality. Wow. Yep. Amazing. That is the impact of – and the thing is, is what we need is we need a retailer or a brand to step up and lead. So, I mean, what kind of impact can consumers have on this? I mean, if consumers make the decision to instead of buying four shirts at H &M, buying one shirt that's American made, they could have a significant impact on how big retailers behave? Well, I think there are a number of constituents that are going to impact domestic manufacturing. Consumers are the least important in my mind or should bear the least responsibility.

1:23:45Because as we keep talking about, there are many, many, many customers out there that don't have the luxury to spend 40 bucks on a t-shirt. And I don't want to be in a position where we're asking someone like that to make trade-offs that they otherwise may not be able to do. I think the people that really play roles are brands like American Giant or pick any other brand that you may admire. Are they trying to have some values component? And to be clear, if you make stuff in the United States, you get the human rights benefits, the environmental benefits, the worker safety benefits that are baked into domestic law in a way that if you make it somewhere else like Bangladesh or China, there are nowhere near the levels of protections for those brands.

1:24:27no matter what greenwashing may be coming from those brands, there's nowhere near the level of protections there. So to lead with values that they Instagram about, to apply those into actual supply chain decisions, that's one group. The retailers, particularly the big retailers out there, have a huge role to play between whether they're going to be helpful in this regard or not. And then the third are policymakers. If you think about, let's just pick an example, car fuel efficiency, we make decisions to say we're going to ratchet up fuel economy standards over time. Our policymakers could easily be doing a similar thing with constraining a little bit where we allow our brands to manufacture based on some criterion that we can agree on, like human rights records, living wage, environmental standards.

1:25:16We do a really inadequate job to do that. But I think those are the three most important ones, probably in this order, probably policymakers number one, probably retailers number two and brands number three. And then consumers, I think, are fourth and the least important because I think consumers have got to act rationally and they should. Bayard, when you think about the journey that you've been on, right, and where the brand is today and, you know, its future, right, where it's heading, how much of where you got to today? Do you attribute it to the hard work and the grind? And how much do you think has to do with getting lucky?

1:25:50You know, people being interested in craft made goods and, you know, meeting Miguel and just what do you attribute your success to? Yeah, I mean, it's a good question. I think it took me a long time to realize this guy. I think you and I have talked about this off the air that it took me, you know, into my 50s to realize the importance of affiliating with and working with people that I like, that I think have good values. And so I think that that's mattered a lot because I've surrounded myself, thankfully, around a bunch of people that want to have an impact, that have a sort of nonpartisan patriotism in them.

1:26:25And so I think that's helped. It's kind of got me into an ecosystem of people that are good and are trying. But boy, do I attribute a lot to luck. You know, meeting Paige Ashby or having Farhad write that article or having you introduce me to Miguel or whatever it might be. Those are just hard not to contribute those to lucky to be at the right place in the right time. Hard work helps. All those other things help. Great product helps. But luck, I think anyone that tells you otherwise is lying. I think luck plays such an important role in any company's success. That's Bayard Winthrop, founder and CEO of American Giant.

1:27:05And by the way, if Bayard's name sounds a little familiar, like you might have heard it in a history book somewhere, well, that's because he's actually a descendant of John Winthrop, the first governor of the Massachusetts Bay Colony. 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 don't forget to sign up for my free newsletter at GuyRoz.com. This episode was produced by J.C. Howard with music composed by Ramtina Rablui. It was edited by Casey Herman with research help from Catherine Seifer.

1:27:40Our audio engineer was Robert Rodriguez. Our production staff also includes Neva Grant, Alex Chung, John Isabella, Elaine Coates, Carrie Thompson, Chris Messini, Carla Estevez, and Sam Paulson. I'm Guy Raz, and you've been listening to How I Built This.

1:28:04If you like How I Built This, you can listen early and ad-free right now by joining Wondery Plus in the Wondery app or on Apple Podcasts. Prime members can listen ad-free on Amazon Music. Before you go, tell us about yourself by filling out a short survey at wondery.com slash survey.