Jim Thiel: A Coherent Source Page 8

Atkinson: There seems to be a lack of recognition outside of our small audiophile world that very good hi-fi equipment is made here in the United States.

Thiel: I think American culture does not do a very good job of appreciating quality. This is one of the advantages high-end audio companies have in the Asian market, where quality has a lot stronger place in the cultural wisdom. In the mainstream American culture, things are treated more as commodities, and our culture is more price-oriented. It's very noticeable that in Eastern cultures, more people have an appreciation of differences of quality rather than quantity.

Atkinson: Perhaps because quality is a rare thing in the East. I remember being shocked, the first time I went to Japan, to see cities where, to the people there, it must be like living on the set of Blade Runner. Yet in the midst of the industrial mayhem and overcrowding, you'll find a tiny but perfect rock garden. As the quality is rarer, it is appreciated more.

Thiel: That may be so. In this country, by comparison, there is a general assumption that a car is a car, a screwdriver is a screwdriver, and so on.

Atkinson: In a seminar I recently attended, the management guru Tom Peters said that the one thing every American industry has to resist is the commoditization of its product—that if you remove quality, then all you have left to compete on is price. Then the game is over. Do you think there will always be a place for a company like Thiel, which tries to engineer quality into every one of its products, in a world where the concept of quality seems increasingly less valued?

Thiel: In the US, most audio has always been a commodity. It's bought only on the basis of features and price, without any awareness even that there's a huge range of difference in the intrinsic quality that cannot be easily identified. But on the other hand, there is certainly an adequate market for higher-quality products. [laughs] It's easy to think that the world as a whole values quality less and less. But I don't know if that's really the case, or if it's just that we're becoming more and more aware of the segments of the market that do not particularly value quality.

I feel that it's always been true that only a relatively small part of any market values very high quality and is willing to pay for it. And that is the segment of the market that we design products for. We're well aware of the fact that a very high percentage of the music market or the sound reproduction market will not be interested in a product from our company. That's not a problem in itself. We're just making products for the segment of the market that is interested in very high quality. I don't know if that segment of the market is decreasing in terms of a percentage. I almost feel it might be the opposite—that over the last 20 years we've been in business, there's actually more awareness among the general population that quality levels, differences in quality levels, do exist, and that high-quality segments of markets do exist. It's certainly well known in many other fields—automobiles, whatever—that there are very-high-quality segments of the market. So I don't feel that the segment of the market that's attuned to very high quality is diminishing in terms of its percentage of the total market.

Kathy Gornik: My experience has been that if consumers who would otherwise not be aware become aware of what the high-end audio industry produces, high-quality music almost always becomes a priority in their lives. What I find sad is that there are people who I think would really enjoy the experience of high-quality sound in their lives, and would be willing to spend the money and have the money, but they do not even know that it exists. And I don't know the answer to that. Our goal has always been to try to find the best retailers who can create the best sound. Because we know that Thiel is not a household word and they're not going to come in asking for it, we have to blow their socks off.

Atkinson: Thiel is probably more of a household word in Taiwan!

Gornik: Yes. Our interface with the consumer is through the retailer. And that is a real bottleneck. It's like an hourglass—at the top you have all of these great American companies manufacturing terrific products, and at the bottom you have all of these consumers . . . We're the richest nation in the world, they have the means, and if they could be exposed, they would buy. And then the bottleneck in the middle is the distribution channel that we use to access those customers.

Atkinson: And that's because that distribution channel has limited resources?

Gornik: It has limited resources, and there aren't that many of them. We're all vying for a handful of qualifying retail outlets. I'm very pleased with the fact that Thiel has a very big number of those qualified retailers, but I sense that our company could easily be twice, three, four times as big as it is without compromising anything in terms of our quality. Yet we don't have any different way to access the consumer.