Concept2 Rowing Machines: Dick and Peter Dreissigacker

27:40And they end up beating Harvard for their big Harvard-Yale race. And a lot of people took notice on that. And a lot of people attributed it to the quality of the oars that the Yale team was using. the fiberglass and carbon fiber oars? Well, let's put it this way. I think a lot of people attributed it to that, whether or not that was the case or not. Yale might have just had a better crew that year and be locked out. But I would say that after Yale beat Harvard, we got an order from Harvard for the oars. Got it. And tell me about the process in the barn. How long did it take to build one oar, for example?

28:22Oh, boy. I think in the beginning we could make two a day. That was with us, just us. But in the end, we were making one set a day, eight hours a day. Probably with the two of us and two or three other people. In the early 70s, the federal government, there was a ruling Title IX that essentially required publicly, I think publicly funded institutions to equally fund sports for boys and girls, men and women at high school and college level. How did that affect – I mean it must have had a huge impact on your business, right? Because all of a sudden you've got girls and women getting into rowing.

29:05I'm assuming it just doubles your potential market. Yes, I think right in the beginning it wasn't as big a factor because it took Title IX a few years to really gear up. But very shortly after we started making the oars, it really was noticeable that there was more women's crews at a much bigger pool of universities across the whole country. All right. So you guys are, I think by 1979, three years in, you have built your 1 ,000th ore. Okay. But this is still a very small business, right? Like how much was each ore, were you selling each ore for at the time? I think they started out at like$160, maybe.

29:55Less expensive than the wooden ores that were available. And I think that was one reason why we helped anyway, to kind of infiltrate the market. We tried to price it at what we thought we could eventually make it for. So we were projecting ahead that we could eventually get to the point where it was more profitable. And we use that philosophy all the time with other products now too. The business in 1980, which was basically making ores, this was a seasonal business. Can you explain why? I guess seasonal because nobody was buying ores in the middle of winter? Yeah, the teams that buy the oars, the college teams, they're on sort of a budget schedule, you know, that they have money to spend during certain times of year.

30:45So they would typically, you know, they would buy oars early. I mean, it would be kind of winter, really, because they're buying them for the spring. Yeah. So you had to come up with another product that could basically, you know, help sustain your business. Otherwise, you're just making a seasonal – a product that sells seasonally. That's right. So I guess the idea that came up was, all right, if we're going to have a business that we can sell a product year-round, let's sell an indoor rowing machine. Let's make an indoor rowing machine. Was that – that was the thinking? Yes. Most of the products that we've worked on and been successful with are products that we want to use ourselves.

31:30You know, and the theory is that if we, you know, like the idea of having some way to train specifically for rowing without having to get to the water or have water available, then there's going to be other people like us that are out there. So, all right. So you decide to create an indoor rowing machine. Now, let me actually clarify something because in 1980, indoor rowing machines existed, right? This was not an invention that wasn't out there. Probably you guys had used them before. Yeah. In 1880, there were rowing machines. Yeah. And were they widely used? Would you find rowing machines at fitness centers in 1980?

32:17Yeah. There was fitness studios, gyms would use them. And there was a pretty good market for those at one point. But I don't think people really liked to use them that much. It wasn't that exciting to use them. It was more of a drudgery. But the whole idea of indoor rowing was kind of nobody was out there beating the indoor rowing drum when we made our early rowing machines. I'm looking at a photograph of the first prototype that you guys built, which essentially looks like you took a bicycle, turned it upside down. I guess you nailed it to the ground and then attached some kind of chain to the rear wheel and then some kind of seat.

33:06And that's what you basically would just pull and pull and pull. And that would feel like you were rowing. Yes. And it felt quite good, actually, surprisingly, just in that crude form. we could see the potential. We had these little fan blades, paddles. It's almost like putting baseball cards on your bike, you know, on your bike spokes and putting the right amount of weight on the wheel, on the bike wheel. Which would create resistance. Yeah, the weight would create this sort of momentum and then the paddles would create the resistance and you get the right blend of momentum and resistance and it can feel like, you know, rowing on water.

33:48So as you started to kind of refine this concept, because it wouldn't take you very long. I think it took you about a year before you actually had a product. In your mind, was the market still rowers, like students and professional rowers who wanted to train the offseason? Yeah. At one point when we were first selling these, thinking that a lot of them were to individuals, we were visited by a benefactor of one of the schools. and he saw them and he said, you know, I think I'm going to get 10 for my school. And that was the first kind of mass school training sale that we had. Did you do any research at the time looking at, you know, the potential market for the product?

34:37I mean, did you have any data or insights that led you to believe that this could be actually a really big product? I think we figured that the rowing machine could branch out into the non-rowing market if we did it right. But I'm interested by Guy's question. One issue is we don't really have a good answer to your question about market research and that kind of stuff. I mean, we didn't go into this from the idea of a business major might go into it in a different way, you know, and say, well, let's look at the market size. What percentage of market can we get? And this kind of thing. We didn't do that.

35:20Because had you done that, you would have discovered that the potential, at least at that time, was small. Right. We might not have done it. Yeah. All right. Your first indoor rower comes out in 1981. help me understand how you 1981 pre-internet you know pre-fax machine i mean it's like you got to sell one of these things at a time i mean did you take it to a trade show did you how did you even start to make people aware that these were available the first thing we did was there was a national master's rowing race in boston that year this is on the on the charles river on the charles River, yeah.

36:03And we took the, probably the one machine we had down there and set it up in front of the boathouse that was where the registration was. I mean, it was a pretty rickety thing. You have to laugh at it at this point. And I would say almost every one of these people who registered for the race came out the door, looked at it, tried it, said, oh man, I'm going to get one of these. It was just instant. Yeah. Well, at that point, we were doing our first batch. I think it was like 50. And I think we sold most of those, if not all of them, at that Masters Championships regatta. How did you make these machines?

36:48How did you get the component parts for them? Were there factories that could make what you needed nearby? Well, one of the beauties of the design was that a lot of the parts were bicycle parts, just off-the-shelf bicycle parts. Yeah. And the metal framework, there was a machine shop in town that probably most of their work was fixing tractors and farm implements. But they were able to cut and weld and drill and poke. And so they took our pencil drawings and created the framework. So, all right. So I'm thinking like these initial, like from today's perspective, these first models looked kind of janky.

37:31Like they probably had like, you know, uneven welding, not uneven, but sort of they weren't machine tooled, right? It was like hand welded. So each one was probably a little different. Right. It wasn't robotic welding. Yeah. And how much did they go for at the time? $400. And was that a good deal in 1981, 82? These rowing machines that the colleges would use, that they couldn't really afford to have a whole bunch of them in their gym, but they maybe have one or two, they were over 3 ,000 at that point, maybe 3 ,500. And they were big, clunky kind of machines. They took a lot of space. Whereas for that same amount, they could get eight of our machines and have the whole team of eight rowing at the same time and training at the same time.

38:22And the difference between yours and the earlier versions was this air resistance, right? That basically you could ratchet up, make it harder or easier using air resistance, and it would adjust how easy or hard it was to use the rower. Right. And it felt more like rowing in a boat. And by February of 82, we had the first indoor race down in Boston. We got a call from a friend who was rowing down in Boston who said, we're going to put together a little race at the boathouse. What kind of race? An indoor rowing race. An indoor rowing race. What is an indoor rowing race? Explain this. You get a couple of machines.

39:11In this case, I think there were five or six. Yep. You set people in a starting line, and you have a starter, and you say, okay, everybody go. And they go for a distance on the speedometer. Okay. And how do you measure it? Oh, I see. Because it was an analog speedometer, right? A little cheapo bike speedometer. Yeah. And then you would time it, and then at the end, whoever had the highest number on that speedometer wins. Well, yeah. Or they have a stopwatch. Time it with a stopwatch. On the odometer, yeah. Do the distance. Right. And if we were a marketing group from the beginning, we probably would have come up with the idea ourselves, but we weren't.

39:49Yeah, and after the race was over, they tapped a keg of beer and everyone had a good time. I'm trying to remember. We had – we've done a bunch of fitness stories in the show. We did the story of jazzercise. But in 1982, 83, right, were – I mean, I don't think fitness studios were quite like what they are today, right? It wasn't – I mean, people went, but it wasn't as widespread and ubiquitous as it is today, right? I would say that's correct, yeah. But it was shortly after we were doing the rowing machine, there were other pieces of fitness equipment like the stair climber type one. Right, stair master.

40:32And the stair master. It became a whole class of machines that people just would kind of stride on. and if they had any a rowing machine at all in those gyms it'd be stuck in a corner and no one was using it i think by 83 you had sold a thousand rowing machines so you know you'd done about 450 thousand dollars in revenue by that point you know a couple years in which you know not not horrible but not you know gangbusters there's an advertisement that i'm looking at from that time And it's an awesome ad, actually, that you guys put out. And it's a series of photographs of a man doing different exercises with, like, different weight exercises, but holding up the actual rower.

41:18So, like, trying to lift it, trying to bench press it, trying to squat it. And then the last window is the guy just rowing on it. And it says, you know, you can do all of these exercises and work out, or you could just do this one exercise and be in great shape. So was it hard to make that case to people like, hey, this rowing thing is great. It's low impact. It's full body. Did people not quite get that concept in 1983, 84? Yeah. Well, that was me with the – Oh, that's you in the picture. Yeah. All right. It was somewhat of a take on machines that were meant to do all these exercises on and thinking that rowing does all these things for you.

42:06That is definitely what we're trying to convey there. I think we were one of the few voices trying to say that for quite a while in those days. But still not a whole lot of interest because you'd go to a gym, they'd have a rolling machine, and nobody would use it. Nobody would be on it. Right, right, right. All right, 1986, you're 10 years into the business. And I would assume at this point your overall revenue is in the hundreds of thousands of dollars. So it's still a very small company. Is that fair to say around that time? Yeah, I mean we were growing slowly. Were you concerned about the slow growth or was that sustainable?

42:49Even though you didn't have a lot of revenue, you were still able to make a profit? Yeah, we're profitable. And we had money to be able to sort of start putting into research, going away from the bike wheel to more custom components that were able to refine the machine. Because I think you changed the design in that year, which was it was no longer just an – the wheel was enclosed in like a – it looks like a big fan, like how fan blades are enclosed. I think that was an effort to make it more suitable for more general public. I think the health club market for us with the original Model A, as we call it, was very limited because you had this open flywheel spinning around that people could walk up to and stick their fingers in.

43:40Although nobody ever did that that I know of. It seems, you know, you see this spinning thing and you know you shouldn't touch it. But having it in a cage was a big, broke that barrier for us, really. I wonder by the, you know, by the late 90s when there actually were stores selling fitness equipment, were you still resistant to the idea of doing it that way? Did you still want to focus on, no, you got to buy it from us? I mean, I think when we first started out, you know, stores or retailers were demanding very large margins. You know, they had to have a 40 % margin or whatnot. And we didn't want to raise our price so that we could give them a 40 % margin.

44:23We were looking after the end user. We thought the end user was really our person. Our customer, yeah. But in the 90s, we were making some attempts to make it mainstream in clubs. And we said we have got this great idea similar to what the boathouses have now, where the boathouses will have 20 machines for their team and they'll work out together. So we've created this package and we said, okay, this is how much space you need. You need at least 10 machines. We'll train your staff to instruct and coach how to row in a team kind of workout. And we had the whole thing sort of packaged. And we had a couple of pilot health clubs that we inserted these into.

45:14And that was the same year that spinning started. Spinning, yeah. Which was a huge craze, yeah. So, yeah. So all the space that we were thinking the health clubs could use for a rowing-style class. That they said, well, spinning is where it is at. And it was a bad timing. It was kind of a flop, yeah. A flop, yeah. And so it just kind of blew rowing out of the water, so to speak. Why don't we come back in just a moment? After rowing gets run over by spinning, it finds a new home in another fitness craze. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

46:04The holidays are upon us and businesses are hiring for seasonal roles. Everything from haunted corn maze workers to snowplow drivers. This means that people with certain skills, experience, or even a special license are in high demand and not easy to find. Whether you're hiring for one of these roles or any other role, the best way to find the perfect match for your role is on ZipRecruiter. And right now, you can try it for free at ZipRecruiter.com slash built. ZipRecruiter's matching technology works fast to find top talent, so you don't waste time or money. You can find out right away how many job seekers in your area are qualified for your role.

46:45Let ZipRecruiter find the right people for your roles, seasonal or otherwise. Four out of five employers who post on ZipRecruiter get a quality candidate within the first day. And right now, you can try it for free at ziprecruiter.com slash built. Again, that's ziprecruiter.com slash built. ZipRecruiter, the smartest way to hire.

47:14Hi, my name is Diane and I'm from Paris, France. I've been listening to How I Built This for four years now, and I even listened to some episodes while I was running my first marathon. My favorite episode is the one about Ben & Jerry's. I love how these two outcasts who knew each other from high school came together to create one of the most successful ice cream brands. They were also very disruptive in terms of company values and were one of the first companies to be vocal about social issues. I think it's a very inspiring company that has had a strong influence on many brands that we consume today.

47:50Thank you so much, Guy, and the How I Built This team for bringing us such an inspiring content. If you want to share your favorite episode of How I Built This, record a short voice memo on your phone telling us your name, where you're from, what your favorite episode is, and why. A lot like the voice memo you just heard. And email it to us at hibt at id.wondery.com. And we'll share your favorites right here in the ad breaks in future episodes. And thanks so much. We love you guys. you're the best. And now, back to the show.

48:29Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2007, 30 years into the business, and Concept2 is selling pretty well. But the rowing machine is mostly being used by competitive rowers, so still pretty niche. But then, Dick and Pete go to a trade show and meet a guy named Greg Glassman, the founder of another fitness community, CrossFit. The way I understand it, Greg had always been a fan of the rowing machine. I mean, he's into that hardcore stuff. And he said he liked the machine because it'd make people puke, basically. And so that was one of the pieces of equipment he started his gym with.

49:15He told me a story one time that he actually felt a little self-conscious when he would contact Concept2 to buy more rowing machines because he wasn't in the rowing community. And he was concerned that we wouldn't sell them to him because he wasn't a rowing team. So at this point, they started – and CrossFitters are a tribe, you know, and they are very loyal. And that's a different audience because it's not rowers. All of a sudden you've got, and did you see a shift starting in 2007 with your rowers becoming more mainstream? Yeah, absolutely. You know, we saw our planned 5 % or 10 % growth year over year increase to more.

50:04I don't know exactly what, but it was like, you know, higher growth than we expected. We called it, that's the CrossFit bubble. It'll pop soon. But it lasted a number of years. I mean, I think there's something like 13 ,000 CrossFit gyms out there now. Many of them with these rowers, with the concept of rowers. Probably, yeah, 90 % or more. When did you, I mean, were you still able to manufacture most of the rowers in Vermont? Or at a certain point, I imagine, as you started to scale, you had to move some of the manufacturing overseas, or at least some of the components had to come from overseas?

50:43Yeah, our first step was moving from the farm production shop, but also we happened to find a good one in Vermont that was very progressive in terms of efficient metalwork. But we do make components. I mean, now it's a world product. We get components from everywhere. But you were able to and you continue to assemble them in Vermont. We assemble here, yeah. So everything is assembled in Vermont, right. Okay, so what I'm trying to figure out is as these kind of grew, I mean, was the growth just kind of organic? I mean, I imagine you didn't have a huge marketing budget ever really to get the word out about what you were making.

51:29I think most of – yeah, we tried. But I also think our best marketing was really taking care of customers, making sure that people have access to the parts they need to maintain their machine and make sure that the parts aren't obsolete. And then the word of mouth tends to follow. And the customer service folks we have here have a lot of pride. I think they consider themselves part of the product. We sometimes try to embarrass them when we get these glowing letters from people and we read them at staff meetings. And you've got how many employees now do you have total? It's like 130. 130, which includes about 40 overseas at subsidiaries.

52:24And I guess eventually you would branch out into things like ski machines and even a bike. You now make a bike as well, all based on a similar concept of the air resistance wheel. Yeah, and the technology for accurately monitoring that output, I think, has been a technology that we've transferred to each of the products quite well. So one of the things that really intrigued me about this story when it came to me was, you know, your Vermont based is still mainly assembled there. And it's a decidedly, you know, lower tech machine than some of its competitors. Not to say there's no tech. There is.

53:10I mean, but and you can attach an iPad and get to that and use whatever you want. But, you know, the competitor machines out there, there's like the Hydro or the Peloton and they've got these immersive screens where you can, you know, attach to them where, you know, you're like on any river you want. And you're, you know, they have sound effects and things like that. As those competing machines started to come out, did you worry? Did you think we better get on this and try to do something like this? Well, it's interesting. Years ago, we made the decision to have the data from the monitor be able to be used by other apps.

53:55We have like 40 other third-party apps that connect with that monitor. But your monitor, just to be clear, it's not a graphics monitor. It's just numbers. Right. It's just a digital LED screen with numbers. Right. We made that decision to not create content and not be an entertainment company. A media company. Media company. Like Peloton. Yes, yes, yeah. And to basically allow creative people in the world to do that stuff that connects with our machine. So basically, you have a holder for like an iPad or a tablet, and there are apparently, I guess, a bunch of apps that are rowing apps that can integrate with your machines.

54:44Yeah, yeah. And you could have the scenes of any river in the world or have guided workouts with a coach. And that's a customer's choice if they want to do that or not. Right, right, right. I think one of the things is we have such a diverse customer base. Some people like to throw the machine in the back of their car and take it with them everywhere. Right. And you can do that. You can just fold it up. Yeah, yeah, yeah. And then some customers are going to like the more media-based, media-driven kind of workout experience too. It's interesting because I think that there is a lot of membership fatigue going on.

55:26We pay – constantly are paying subscription fees for these things. So you buy a concept too and it's a lot cheaper. But that's it. You buy it and you don't have to pay anything anymore. Yeah, it will last you for a long time. It's so good that you have your rower and now you're going to buy a ski erg or a bike. Yeah. That's the hope. Right. And it happens a lot. One of the things that I'm curious about is community. Because my brother-in-law has a concept two rower. You know, there definitely is a type of person who loves these things, machines, right? How have you cultivated the community? You know, we did Strava on the show years ago, and those guys, they've really cultivated a community of hardcore Strava users, people who, you know, are in a community, in a social network.

56:15How have you guys been able to harness the concept to community? One of the things that comes to mind are all the little events and challenges. we would have, you know, like the holiday challenge. How many meters can you row between Thanksgiving and Christmas? You know, it all gets posted online. You get this big list of people, and, you know, you see where you stand in that. There's the ranking system, and people look to see where they are and who's ahead and behind them in the ranking system. I had a UPS driver come by, drop off a package, and he looked at it and said, Oh, I'm right behind you in the ranking.

56:59Did either of you ever worry about money over the course of the lifetime of the business? We haven't had to. I mean, we haven't ever. Well, to go back to the very beginning, an interesting story. Our father was kind of worried at some point when we were making and selling the product. But when you start making product, you have to buy materials and you have to pay bills. So in general, the cash flow goes down in the beginning. He was worried, so he said, here's a check for$5 ,000 because I think you're going to need it before you start going up. So we kept that check and didn't cash it. We watched the bank account go down.

57:44And just as it was getting close to being ready to cash, we got some more payments coming and are more sales. And from then on, it's gone up. So we tore up the check. And I know you're a privately owned company. You guys never took on any outside investors. Is that right? Correct, yeah. And so your revenue numbers are not public. But from what I gather, you would be considered to be still a small business by U.S. standards. I think a small business, anything under$100 million. We'd be a little bigger than that. Medium business. So pretty efficient. I mean, it's such a small number of employees and you've got pretty healthy revenue.

58:35But I think it's – would it be fair to sort of assume that – how do I put this? It sounds like neither of you really care all that much about getting rich. Is that fair to say? I think that's fair to say. Yeah. I don't think it mattered to make a lot of money. I mean, in the beginning, it mattered to make enough money. The bigger issues are how to keep the thing going once we're not around. Yeah, and how do you do that? Do both of you have children? Yep. And any of your kids interested in taking it over? No, they all have different things, different directions. Different going on, yeah. So looking ahead, I mean, have you been approached by, I don't know, private equity groups or other companies that have said, hey, we want to maybe buy you?

59:33We've been approached for the last 30 years. Well, we're working on how we can assure that the company continues on more or less in the way it is now. And it just hasn't seemed like from experience that the sort of buyout thing is not necessarily a way to do that. You know, yeah. We had a guy on the show many years ago, Bob Moore. And some people listening will recognize his name because he passed away not that long ago. He founded Bob's Red Mill. Oh, yeah. And which became one of the most successful, you know, flour and, you know, baking goods brands in the United States. And essentially, he gave the company to his employees.

1:00:21We're studying that right now, actually. And we've looked at things like what Patagonia has done. And they become kind of this poster child a little bit for this idea of the purpose, trust. Where the company was given to a trust. Yeah. So that's all being looked at right now. What do you guys – it doesn't sound like the two of you have had many disagreements. Have you? Not many. I'm sure we have. But in general, I think this stems back to our kind of the concept two thing, where the problem solving or decision making process is more of a mechanical decision making process of trying to figure out what the best option is, what's going to give us the best outcome.

1:01:18And I think some of it's temperament. I just think the boat both of you are just – neither of you seem like you have massive egos. Well, you know, it kind of – you wouldn't know about rowing a pair unless you've rowed a pair, that it's a boat that has no stability whatsoever. And all of the stability is based on how you're holding the oars. and each person only has one oar. So you have to sort of have this mental connection and physical intuitive connection as to what is the other person going to do with his oar and when's he going to do it. Because if it doesn't happen simultaneously in the total flow, it just messes up entirely.

1:02:08And you guys wrote together. Yeah. So naturally you knew how to work in tandem. Yeah. There is a thing there to it, yeah. What's your favorite place you ever rode at? For me, it's got to be someplace in Vermont. It's either Crassbury or Lake Champlain on a calm day. Yeah, yeah. Crassbury is where we did all of our ore testing. Yeah. And we'd always go on the perfect mornings. And I mean, just be able to water, be calm and just black. And you could see the bubbles from your last round. still sitting on top of the water, that's pretty nice. One question I'm curious about is, rowing, right, you've got to do it really early in the morning, but it's cold.

1:02:57It's so cold. It's so freezing. I've done it before. It's freezing cold. But how do you deal with the cold? Do you wear a wetsuit or do you just like, I don't know, just have like walrus blood or something? You stay out of the water. Fair enough. That's Pete and Dick Dreisigacker, co-founders of Concept2. By the way, both of them still row regularly and both still compete indoors and out. They even compete at the famous Head of the Charles Regatta in Boston, where they row with other over-70s in a boat called the Motley Crue. 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.

1:03:43And as always, it's free. And don't forget to sign up for my newsletter at GuyRoz.com. It's free and full of incredible insights from some of the world's greatest entrepreneurs. This episode was produced by J.C. Howard with music composed by Ramtina Ablui. It was edited by Neva Grant with research help from Catherine Seifer. Our audio engineers were James Willits and Patrick Murray. Our production staff also includes Casey Herman, 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.

1:04:37If 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.