William Kellogg: how to win the billion dollar cereal race

It started with chronic bad stomach. Whenever he would face stress, Charles Post’s digestion would break down and he would become incapable of work. And so, Post started travelling to search for a cure. After travelling extensively through Europe, he came to the Battle Creek Sanitarium in Michigan, USA in 1894.

The food over there was extremely bland. Because the two brothers who owned it thought that sweet or spicy foods would cause unhealthy passions in people. But the sanitarium did not serve porridge or eggs: the breakfast of choice for people in the 19th century.

Because that sanitarium is where breakfast cereal was first invented!

The accidental invention of cereal

The brothers would boil wheat, roll it into sheets, and then grind it into a type of granola bar that they served for breakfast. But one day, they forgot about a pot of wheat after boiling it. By the next day, it had gone stale, yet they proceeded to roll it into sheets. And were surprised to see that instead of a long sheet of dough, they had flakes on their hands. Instead of throwing it away, they toasted it and served it to their patients. And surprisingly, their patients loved it even though it was bland!

Charles Post was one of the patrons who found cereal delicious! And so, he commercialised this cereal and opened the Postum Cereal Co. in 1895! Which made one of the brothers: William Kellogg very jealous!

2 years later, Kellogg started his own food company. But he found himself playing catchup with Charles Post – someone who had just copied their idea!

In 1906, William Kellogg fought with his brother John. Because he wanted to add sugar to their cereal – but his brother disagreed. And in anger, they both split and William continued in the food business.

But William Kellogg never managed to catchup and beat Post’s first movers advantage. Until it was the worst of times.

The rise of the Kellogg company during the Great Depression 

It was 1929 and things were dire for America. Every company had to tighten their budget, lay people off, and cut down their expenses just to survive. Thats what Postum Cereal Co. was doing. And thats what Kellogg’s accountants were advising him to do.

But Kellogg did the opposite. Instead of reigning in his budget, he doubled it. He started expanding their ad campaigns and pushed into radio ads. And for the first time ever, Kellogg’s overtook Postum’s and became the market leaders!

“The biggest competitive advantage is to do the right thing at the worst time.” – Bill Hewitt and David Packard (Founders of HP)

Some would say that William Kellogg was a fool who just got lucky. Things could have gone very wrong during the great depression! But without doubling down during the worst of times, there is no way Kellogg’s would have triumphed.

As the founders of HP astutely say: the greatest edge you can get is by doing the right thing at the worst time. Lets break that down, shall we?

Doing the right thing

In 2011, during Black Friday, Patagonia ran a very controversial ad. The headline said: Don’t buy this jacket! The whole ad asked people to reduce, repair, reuse, and recycle. Patagonia took a stand against fast fashion and impulse buying.

And surprisingly, their sales went up 30%! If you do the right thing with the right intentions, very rarely will things go wrong.

But to get the most out of it, you’ve got to do it at the worst time.

At the worst of times

As Nathan Rothschild of the Rothschild banking family teaches: the best time to buy is when there is blood in the streets. Be fearful when others are greedy and greedy when others are fearful.

The best of the racecar drivers overtake the most during the mid-to-late stages of the race. When everyone’s tyres have worn down the most!

It’s almost always scary going against the grain and doing things that most people would avoid doing. But that’s what gives you the winning edge. The timing boosts your performance!

But it’s scary to do the opposite at the worst of times. Very scary. How can you be brave and do the opposite?

You need conviction

Step 1: Ask yourself: what would you do if it were not the worst of times? If things were not tough?

Step 2: Build conviction and know that the right things work doubly well during the worst times!

Conviction is a misunderstood term. Open a dictionary and it’ll tell you that certainty and confidence are synonyms of conviction. But is that correct?

(Heavy dose of psychology ahead.)

The angrier you become, the more certain you become that you’re right. The more coffee or alcohol you have, the more confident you feel. These emotions cloud your conviction. Because they work in helping you narrow your mental focus. They help you ignore variables that may create self doubt – which is great from a survival point of view. But lousy in helping you build conviction.

Conviction means being ok with uncertainty. Having a deep and unwavering belief in a purpose even in uncertain situations.

The “for” vs “against” check

Psychologist Steven Stosny teaches us that an important feature of conviction is that it is for something, not against something.

For eg: if you are for justice, you will want fairness. If you are against injustice, you will want retribution. It’s subtle but crucial.

Being for something creates positivity. Whereas being against something derives from a feeling of certainty, and creates anger, envy, disgust. 

Throughout his life, William Kellogg was envious about Charles Post’s success. And he was angry with his brother who shared the recipe freely and was rigid with the ingredients.

It was only during the great depression where he went for a cause: of thinking that during the worst of times, the cheapest breakfast people could eat is cereal. And so he had to double down even when experts advised against it!

Action Summary:

  • The first thing to do is figure out what’s the right thing to do. Judge the task outside of its context, beyond time, to know if it’s the right thing to do or not. 
  • Then build conviction, strengthen your purpose, and double down doing the right thing – even if the timing is not right.