#146 Milton Hershey Chocolate

Summary Notes


Milton Hershey, an iconic industrialist, philanthropist, and social engineer, exemplified the spirit of progress throughout his life. Coming from a challenging childhood marked by neglect and poverty, Hershey channeled his experiences into building a chocolate empire and creating the utopian town of Hershey, Pennsylvania. His most significant legacy, however, was the Milton Hershey School, established with a trust that owned a controlling interest in the Hershey Company. Hershey's innovative approach to mass-producing milk chocolate made it affordable to the masses, and his commitment to social welfare was demonstrated through his substantial investment in the education and well-being of disadvantaged children. Despite his complex character, Hershey's contributions to industry and philanthropy left a lasting impact, with his school remaining one of the wealthiest educational institutions in the world.

Summary Notes

Milton Hershey's Belief in Progress

  • Milton Hershey was an industrialist, philanthropist, and social engineer, who always believed in moving forward.
  • His company's advancements reflected his progressive spirit.
  • Hershey had a personal connection with disadvantaged children due to his own challenging upbringing.

"Perhaps the only thing about Milton Hershey that is absolutely certain is that he believed in progress."

The quote emphasizes Hershey's commitment to progress and improvement, which is a central theme of his life and work.

Milton Hershey's Childhood and Empathy for Disadvantaged Children

  • Hershey grew up in a fractured family, with a neglectful father and a struggling mother.
  • He was a poor student and experienced loneliness, hunger, and want.
  • As an adult, he aimed to rescue children in similar situations to his own childhood.

"In his rare moments of open reflection, Milton Hershey showed his greatest affection for the little fellows whom he hoped to save."

This quote highlights Hershey's empathy for disadvantaged children and his desire to help those who faced challenges like he did.

Milton Hershey's Legacy and Philanthropy

  • Hershey created a utopian town and was successful in industry, fulfilling his father's dream.
  • He focused on serving something higher than personal wealth, as advised by his mother.
  • Hershey left his fortune to rescue boys in need, symbolically saving his younger self repeatedly.

"Then, when it came to consider his legacy, he invested his fortune with a poignant flourish."

The quote reflects on Hershey's decision to use his wealth to create a lasting legacy that would benefit others, particularly disadvantaged children.

The Milton Hershey School and Trust

  • Milton Hershey founded a school for orphans with his assets, despite not having biological children.
  • The Milton Hershey School Trust owns a controlling interest in the Hershey Company.
  • At the time of the podcast, the school and trust had approximately $12 billion in assets, making it one of the wealthiest schools in the world.

"Milton Hershey had one of the most unique ideas that I've ever come across in all the books that I've read for this podcast."

The quote expresses the uniqueness of Hershey's idea to leave his assets to an orphanage and create a trust that would ensure its ongoing funding and success.

Hershey, Pennsylvania: A Prosperous and Self-Sustaining Community

  • Milton Hershey built not just a business and charity, but an entire community that reflected his idealistic views.
  • Hershey, Pennsylvania, was a self-sustaining town built around his chocolate factory.

"He had created not just a great business and an enormous charity, but a complete, prosperous and self-sustaining community that reflected his idealistic attitudes about everything from commerce to education and architecture."

This quote describes the comprehensive nature of Hershey's achievements, extending beyond business to include philanthropy and community building.

Milton Hershey's Early Life and Family Influence

  • Milton's father, Henry Hershey, was a man of unrealized ambition and failed ventures.
  • Henry Hershey's lack of perseverance and inability to stick with one path contrasted with Milton's later success.
  • Milton's mother, Fanny, had ambitions for comfort and wealth, which she projected onto her son.

"One of my greatest fears in life, I would say, would be unrealized ambition. And Henry Hershey, Milton's father, was unrealized ambition personified."

The quote captures the fear of unrealized potential, which is evident in the life of Henry Hershey and serves as a backdrop to Milton Hershey's own drive for success.

The Importance of Perseverance in Milton Hershey's Success

  • Milton Hershey's life exemplifies the value of perseverance, a trait he possessed in abundance.
  • His first candy business experienced multiple failures before he founded the successful Hershey Company.
  • Hershey's early work experiences, including an apprenticeship, taught him valuable business skills and the importance of customer satisfaction.

"I'm convinced about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance."

This quote, attributed to Steve Jobs, resonates with Milton Hershey's story and underscores the critical role of perseverance in achieving success.

Early Business Ventures and the Centennial Exposition

  • Milton Hershey's first successful candy business coincided with the Centennial Exposition in Philadelphia.
  • The exposition brought in 10 million visitors, greatly benefiting Hershey's shop.
  • Hershey's business continued to grow post-exposition, with expansion into wholesale and relocation to a larger retail space.
  • Family members, including his mother and aunt, contributed unpaid labor to support the business.
  • Despite initial success, the business faced competition and financial difficulties.

"The centennial would bring in nearly $38 million... A flood of cash so huge that even a novice shopkeeper would have to try really hard to fail."

This quote highlights the economic boom brought by the Centennial Exposition, which provided a unique opportunity for Hershey's business to thrive initially.

The Struggle with Competition and Innovation

  • Hershey's business faced intense competition from other candy retailers and wholesalers.
  • Success only came after Hershey innovated in the industry by making milk chocolate affordable.
  • Hershey's innovation involved mass production and selling chocolate at a low price point.
  • The business eventually failed, with Hershey unable to pay bills and losing credit with suppliers.

"Milton made it clear that he can no longer pay his bills and was about to lose his credit with suppliers."

This quote demonstrates the financial struggles Hershey faced due to competition and the importance of managing supply chain and costs in business.

Lessons from Failure and the Importance of Control

  • Hershey learned the importance of controlling crucial elements of the business.
  • He later started his own sugar plantations to ensure a steady supply for his chocolate production.
  • Hershey's early failure taught him the significance of self-reliance in business.

"No matter how hard Milton Hershey worked, he couldn't balance the expense of making his products with the slow pace of payments from his wholesale customers and the tight credit terms demanded by his main supplier, the Franklin Sugar company."

This quote underlines the financial challenges Hershey faced and foreshadows his future strategy of controlling essential resources for his business.

The Colorado Experience and the Caramel Innovation

  • Hershey almost fell victim to a labor scam but avoided it with his own gun.
  • He learned a valuable caramel recipe in a Colorado candy shop, which was not patented.
  • Hershey used this knowledge to create a successful caramel business in the East.

"The Denver recipe for caramel, which yielded a vastly superior candy, was not under any copyright or patent."

This quote reveals the source of Hershey's next business venture and emphasizes the role of intellectual property, or the lack thereof, in his strategy.

New York Ventures and Social Concerns

  • Hershey started a small-scale candy business in New York.
  • He was influenced by the social conditions of the city, particularly the plight of poor children.
  • These experiences contributed to his later philanthropic efforts and critiques of urban life.

"Like it or not, the biggest city in America was the place where Milton would begin to get his business right."

The quote suggests that despite Hershey's dislike for urban environments, New York played a crucial role in refining his business approach.

The Failure of the Cough Drop Venture and Learning from Competitors

  • Hershey's father persuaded him to invest in a cough drop business, which failed.
  • Hershey learned from the successful strategies of his competitors, such as the Smith brothers.
  • The failure of the cough drop venture was costly, forcing Hershey to return home.

"By paying low wages and manufacturing their product in a low cost area, a strategy Milton Hershey would one day copy, the Smith brothers defeated all their competitors."

This quote indicates that Hershey took inspiration from the Smith brothers' business model, which he later applied to his own chocolate empire.

Perseverance as a Key to Success

  • Bouncing back from defeat is crucial for growth.
  • Milton Hershey's life epitomizes perseverance despite failures.
  • Hershey faced financial ruin and embarrassment but did not give up.
  • After two major business failures, Hershey still pursued his confectionery ambitions.

"Bouncing back from defeat is essential for growth in any endeavor."

This quote underscores the importance of resilience and the ability to recover from setbacks, which is a central element in Milton Hershey's story of eventual success.

Overcoming Rock Bottom

  • Hershey reached a low point, both financially and emotionally.
  • Realizing he had nothing left to lose, he saw potential for growth.
  • The stress of his failures aged him prematurely.

"I'm at rock bottom, but you're going to be somewhat depressed and obviously downtrodden. But there's also something freeing about that, because he realizes, I can only go up from here. It can't get worse than this."

This reflects Hershey's mindset at his lowest point, recognizing that his situation could only improve, which provided a form of liberation.

The Role of Family Expectations and Support

  • Hershey was driven by his mother's high expectations and his father's ambitious dreams.
  • Despite past family support, he faced rejection when seeking another loan.
  • Hershey's family ultimately decided not to invest further due to his previous failures.

"Though he was only 28, the stress of two big failures made him look older."

This highlights the physical toll that Hershey's business failures took on him, reflecting the intense pressure he faced.

Innovation and Market Differentiation

  • Hershey sought to create unique products to avoid direct competition.
  • He planned to produce Denver style caramels, which were not available in his area.
  • Hershey's innovation was a strategic move to carve out a niche in the confectionery market.

"He intended to make candy no one else produced in the east Denver style caramel."

This illustrates Hershey's strategic pivot to create a unique product that would distinguish him from competitors, a key step in his path to success.

Rejection as Motivation

  • Hershey's family's refusal to invest became a significant motivator.
  • He started his business alone, selling candy on the streets.
  • The rejection by his family led to a newfound independence and drive.

"For the first time in his life, Milton Hershey was without the support of his family."

The lack of family support marked a turning point for Hershey, forcing him to rely on his own determination and resourcefulness.

Securing Financial Backing

  • Hershey managed to secure a 90-day loan from a local bank.
  • A lucky break with a large order for London provided him with an opportunity to request additional funds.
  • The bank officer, Frank Brennaman, was impressed by Hershey's honesty and decided to lend him the money personally.

"With the wholesale contract in hand, he went to the bank to ask for more time to repay the $700. He also requested an additional $1,000 to fill the big order."

This quote captures the pivotal moment when Hershey leveraged a significant business opportunity to secure the financial backing needed to sustain and grow his business.

The Importance of Honesty in Business

  • Hershey's transparency with the bank officer about his financial situation earned him trust.
  • Brennaman's decision to personally lend money to Hershey was based on his honesty and potential.

"He hadn't tried to exaggerate his little firm's potential. And he made it clear that his future depended on the success of that single export contract."

Hershey's forthrightness about his business's state and his reliance on the success of the export contract played a crucial role in securing the loan that saved his business.

Focus on Fundamentals and Continuous Improvement

  • Hershey emphasized high-quality products at fair prices.
  • He understood the importance of branding and protecting market share.
  • Continuous improvements and learning from others were central to his business philosophy.

"Small, continuous improvements over many years produces miracles."

This quote from Walter Chrysler, which resonated with Hershey, emphasizes the cumulative power of incremental progress, a principle that guided Hershey's approach to business.

Learning from Competitors and Innovators

  • Hershey studied the British chocolate industry and learned from companies like Cadbury.
  • He adopted strategies from successful businesses, such as building a company town and investing in technology.
  • Hershey was dedicated to learning and improving his manufacturing processes.

"No one alive had gone into more confectioneries and candy shops than Milton Hershey."

This highlights Hershey's commitment to learning from others in his industry, a habit that informed his strategies and innovations.

Transitioning to Chocolate and Mass Production

  • Hershey decided to pivot from caramels to chocolate, foreseeing the latter's long-term potential.
  • He invested in European chocolate-making technology and took two years to master the craft.
  • Hershey recruited experts to help him overcome his knowledge gaps and perfect his chocolate-making process.

"The caramel business is a fad. It is not a staple business. But chocolate is something we will always have."

Hershey's foresight in recognizing the enduring appeal of chocolate over caramels guided his strategic shift, setting the stage for the future Hershey Chocolate Company.

Experimentation and Innovation

  • Milton Hershey, without a background in chemistry or engineering, devoted years to experimenting with making milk chocolate.
  • He created a secretive "milk chocolate skunk works" on his homestead farm to control every aspect of production.
  • Hershey's approach mirrored Thomas Edison's principle of design and James Dyson's method of developing unique insights through laborious experimentation.
  • The team, led by Hershey, worked long hours, starting their day at 4:30 a.m., and sometimes worked through the night.
  • Hershey's dedication to experimentation was driven by his belief in his vision, despite not knowing how to mass-produce milk chocolate initially.

"With no background in chemistry or engineering, Hershey would need years of experimentation, much of it in an attempt to copy the European outright, to arrive at his own method for making milk chocolate, which he does." This quote highlights Hershey's commitment to mastering the art of milk chocolate production despite lacking formal training in relevant fields.

"A group of about 18 men, led by MS, that's what they call them, would rise at 04:30 a.m. To milk the herd of 78 cows." This quote illustrates the rigorous and demanding schedule Hershey and his team maintained in pursuit of perfecting milk chocolate production.

Mass Production and Efficiency

  • Milton Hershey was inspired by Henry Ford's mass production of automobiles and applied similar principles to chocolate manufacturing.
  • He focused on creating a simple, efficient production process using the latest technology and machinery.
  • Hershey's strategy involved producing large quantities of a few chocolate varieties at low cost, which gave him a competitive edge.
  • The emphasis on high quality and low cost was crucial to Hershey's success, mirroring the business strategies of other innovators like the McDonald's brothers and Jack Dorsey.

"Milton Hershey had no ideas on mass production. He wanted to produce a lot of milk chocolate. He was determined, but like everyone else at the time, he didn't know how. He just grew into it like the rest of us." This quote underscores Hershey's determination and willingness to learn and adapt, which was essential to his eventual success in mass-producing milk chocolate.

Philanthropy and Community Building

  • Hershey's financial success led him to a unique business strategy and philanthropy, focusing on producing affordable chocolate and investing in community projects.
  • He established the Hershey orphanage and school, echoing Andrew Carnegie's belief that dying rich is a sin, and he invested his wealth in the community.
  • Hershey's philanthropic efforts were sincere and aimed at the betterment of humanity, not just the accumulation of wealth.
  • He followed the Cadbury family's example in social reform, planning to publish a magazine to promote his philosophy of combining populism and capitalism.

"It's a sin for a man to die rich." This quote reflects Hershey's philanthropic philosophy and his belief in using wealth for the common good, which led him to donate his assets to the trust that ran the school and town.

Leadership and Legacy

  • Hershey's leadership style was complex, with both temperamental and generous traits.
  • He was known for his frugality in some areas while being remarkably generous in others, such as paying his workers a 20% bonus.
  • Hershey's approach to business emphasized honoring labor alongside capital, sharing profits with employees, and improving the broader economy.
  • His death was widely reported, with his contributions to the industrial school and the town of Hershey recognized as his greatest achievements.
  • Hershey's life story serves as an inspiration and reminder of the impermanence of life and the importance of living purposefully.

"The bonus, which he would continue to pay for many years, honored labor alongside capital." This quote exemplifies Hershey's belief in the value of labor and his commitment to sharing his company's success with his employees.

"Hershey amassed a great fortune, but during his lifetime, he gave it all for the benefit of those with small opportunities." This quote from the governor of Pennsylvania summarizes Hershey's legacy as a philanthropist who used his wealth to create opportunities for others.

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