May 20, 2024 • 32 mins
Discover the origins of retail giant Walmart and the extraordinary man behind it, Sam Walton, as we journey through his autobiography, "Made in America." Our exploration reveals a tale of perseverance and thrift, from Walton's early days in Oklahoma to his rise as a business titan. Born during the Great Depression, Walton's frugal approach and relentless work ethic laid the foundation for his success. Whether he was selling magazine subscriptions or helming Walmart, these qualities remained central to his story—a story that resonates with entrepreneurs across industries.
Step into the Walton family's strategic world, where financial savvy meets tight-knit family business management. We peel back the layers of the Robson family's influence over Walton, unveiling how early ownership transfers and astute tax strategies fortified Walmart's legacy. But it wasn't all smooth sailing; Walton's brush with losing control of his Ben Franklin store franchise spotlights the critical importance of maintaining a grip on your business assets. These anecdotes not only enrich the saga of Walmart's rise but serve as invaluable lessons for those carving out their own business paths.
Lastly, we scrutinize the leadership ethos that propelled Walmart beyond its competitors, drawing parallels between Walton's principles and those of industry goliaths like Rockefeller and Bezos. Walton's commitment to efficiency, customer value, and a team-driven culture holds timeless relevance for modern business strategy. As we close, we leave you with a glimpse of Walton's top rules for success and the innovative strategies that secured Walmart's place as a household name. Stay tuned for our next installment where we'll continue to distill these insights to inspire your own business acumen.
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Speaker 1 (00:00):
Great ideas come from everywhere.
If you just listen and look forthem, you never know who's
going to have a great idea.
That was an excerpt from Madein America by Sam Walton.
This is Sam Walton'sautobiography and this book was
very dense with great ideas.
So I really enjoyed readingthis book.
So I highly recommend it.
(00:20):
I highly recommend it and I'mgoing to go through kind of the
timeline of his life, sam Waltonhe was the founder of Walmart
and kind of pick out some ideasthat I think would be applicable
to painting businesses here.
So first of all, in 1918, samWalton was born in Oklahoma, and
(00:41):
this is an excerpt from thebeginning of the book here.
No question about it, a lot ofmy attitude towards money stems
from growing up during a prettyhard scrabble time in our
country's history the GreatDepression, and it goes on.
I drive a truck and I get myhaircut at a barbershop.
I don't believe in wastingmoney, so this is a common thing
(01:03):
throughout this book.
Believe in wasting money, sothis is a common thing
throughout this book.
Sam Walton is very frugal, evenwhen he's a multimillionaire.
He is always watching his moneyand being thrifty, and this is
a common thing we see throughoutother biographies I've read
recently.
With Rockefeller and Jeff Bezos, they're all very focused in on
(01:25):
the dollars and cents, makingsure they're not spending money
where they don't need to be.
So during the 1930s, during theGreat Depression, sam Walton
begins his entrepreneurialjourney by selling magazine
subscriptions and later workingvarious jobs, including waiting
tables, in exchange for meals.
(01:47):
So here's an excerpt from thebook.
I also started selling magazinessubscriptions, probably as
young as seven or eight yearsold, and I had paper routes from
the seventh grade all the waythrough college.
I raised and sold rabbits andpigeons too Nothing really
unusual for country boys of thatera.
I learned from a very early agethat it is important for us
(02:10):
kids to help provide for thehome, to be contributors rather
than just takers.
In the process, of course, welearned how much hard work it
took to get your hands on adollar and that when you did it
it was worth something.
One thing my mother and dadshared completely was their
approach to money.
They just didn't spend it, andso, like I said, this was
(02:33):
drilled into him in hischildhood and it continues to be
a thing throughout his life.
In 1940, sam Walton graduatedfrom the University of Missouri
with a degree in economics andstarts working at JCPenney as a
management trainee.
And Sam Walton says that hewasn't really a gifted student,
(02:55):
but he worked really hard, andthat was something else that.
Rockefeller basically said thesame thing in his biography and
Ray Kroc also said somethingsimilar as well.
So it's a common thing.
We keep seeing, over and overagain, the value of hard work.
It's not about how intelligentyou are, it's about how hard you
work.
And so this is an excerpt upfrom the book about his time at
(03:21):
JCPenney.
The deal was prettystraightforward Report to the
JCPenney store in Des Moines,Iowa, three days after
graduation, june 3rd 1940, andbegan work as a management
trainee, salary $75 a month.
That's the day I went intoretail and, except for a little
time out, as an army officer,that's where I stayed for the
(03:44):
last 52 years.
And so Sam Walton is writingthis book uh, actually towards
towards the end of his life.
He's, he has cancer.
So he's, he knows that he onlyhas a little bit left to live.
And so this is when he'swriting this book and looking
back at his life.
And the intent of the bookreally was to pass on to his
(04:05):
kids.
He wanted to communicate thethings that he learned in his
life to his kids so that theycould keep the wealth that he
built for them.
And he goes on in the book here.
Walton Blake would say to mewhen he came to me in Des Moines
I'd fire you if you weren'tsuch a good salesman.
(04:26):
Maybe you're just not cut outfor retail.
Fortunately, I found a championin my store, duncan Majors.
A great motivator, he was theproudest of having trained more
penny managers than anybody elsein the country.
He had his own techniques andhe was a very successful manager
.
His secret was that he workedus from 6.30 in the morning
(04:46):
until 7 or 8 o'clock at night.
All of us wanted to becomemanagers like him.
On Sundays, when we weren'tworking, we would go out to his
house there were about eight ofus all all men and we would talk
about retailing, of course, butwe'd also play ping pongs or
cards.
It was a seven-day job.
I remember one Sunday DuncanMajors had just gotten his
(05:08):
annual bonus check fromJCPenney's and was waving it
around all over the place.
It was for $65,000, whichimpressed the heck out of us
boys.
Watching this guy is what gotme excited about retail.
He was really good about retail.
(05:31):
He was really good.
So it's kind of hilarious thatsome management in JCPenney's
were thinking that Sam Waltonwas not cut out for retail when
he ends up owning the wholespace.
But this is, you know, when hestarts cutting his teeth at
JCPenney, this is kind of wherehe gets the motivation to
continue with this line ofbusiness.
And even though he startsWalmart a lot later in life, you
(05:53):
know he's he's focused onretailing from an early age.
So 1942, sam Walton serves inthe U S army during World War II
and this is an excerpt from thebook on this period.
I went to the library there andchecked out every book on
retailing.
I also spent a lot of timeoff-duty studying the ZCMI, the
(06:16):
Mormon Church's department store, out there, just figuring out
that when I got back to civilianlife I would somehow get into
the department store business.
So again, even though he's inthe war and the army during this
period, he's still focused onretailing and he's absorbing
everything he can on thatsubject, going to the library,
(06:39):
getting the books, and so thisis a common thing we've seen
from Rockefeller NapoleonAlexander the Great.
So this is a common thing we'veseen from Rockefeller Napoleon
Alexander the Great Jeff Bezosis that they're always consuming
knowledge to improve themselvesand the domain that they want
to focus on.
1945, after the war, sam Waltonpurchases a Ben Franklin
(07:09):
variety store in Newport,arkansas, with a $20,000 loan
from his father-in-law and$5,000 from his own savings.
And so there's an excerpt here.
Sam Walton was, you know, gotmarried somewhere around this
time and his father-in-law hekind of looked up to, and so
this is an excerpt from the bookon this topic.
(07:29):
The Robsons were very smartabout the way they handled their
finances.
Helen's father organized hisranch and family businesses as a
partnership and Helen and herbrothers were all partners.
They all took turns doing theranch books and things like that
.
Helen has a BS degree infinance, which back then was
(07:52):
really unusual for a woman.
Anyway, ms Robson advised us todo the same thing with our
family and we did way back in1953.
What little we had at the timewe put into a partnership with
our kids, which was laterincorporated into Walton
Enterprises.
So this is a really interestingstrategy.
Sam Walton basically set hisfamily up as a business, right,
(08:16):
so he put all the assets of thebusiness into an entity and then
he gave parts of that entity tohis family early on so that he
didn't have to pay taxes on itlater.
Family early on, so that hedidn't have to pay taxes on it
later.
So when they ended up goingpublic, his family still owned
38% of the company stock, whichis very rare for a founder of a
publicly owned company to ownthat much of the stock Usually
(08:37):
it's like 10% and they own 38%.
So he was able to transfer alot of the wealth to his family
without paying much tax.
Here's another excerpt from thebook.
It's something that any familywho has faith in its strength as
a unit and in the growthpotential of its business can do
.
The transfer of ownership wasmade so long ago that we didn't
(08:58):
have to pay substantial gift orinheritance taxes on it.
The principle behind this issimple the best way to reduce
paying estate taxes is to giveyour assets away before they
appreciate.
So this is a key takeaway.
If you have a painting businessand maybe you're just getting
started or maybe you've, you'restill, you've been in business
(09:19):
for a little while, but you'renot, you haven't hit your goal
of revenue and profitability andall that stuff you can go ahead
and gift a portion of yourbusiness to your kids now, and
so, instead of waiting until theend of your life to do it where
your business is, you know,grown a lot more and then cause,
then you'll have to cause.
(09:40):
If you wait, and it's reallyappreciated, you're going to
have to pay a lot of taxes onthat transfer.
So do it early and and thenyour kids will have that, that
asset.
So Helen, it was Sam Walton'swife, and here's an excerpt from
the autobiography, somethingthat Helen had had said um, sam,
(10:01):
we've been married two yearsand we moved 16 times.
Now I'll go with you any placeyou want.
So as long as you don't ask meto live in a big city, 10,000
people is enough for me.
So any town with a populationof 10,000 was off limits to the
Waltons.
If you know anything about theinitial small town strategy that
got Walmart going almost twodecades later, you can see that
(10:23):
this pretty much set the coursefor what was to come.
She also said no partnerships.
They were too risky.
Her family had seen somepartnerships go sour.
She was dead set in the notionthat the only way to go was to
work for yourself.
So basically here what we seeis Sam Walton had that initial
constraint of having to start insmall towns, not because of a
(10:44):
strategy, but actually becausehis wife didn't want to be
anywhere else.
But he built the business tosuit his life, so that's kind of
a takeaway there.
Also, his wife was reallyagainst partnership from what
she had seen previously with herfamily, which they ended up
doing for a while.
But they ended up setting up anincentive program that would
(11:07):
actually bring other people in.
So they eventually did getpartners, but they were cautious
about it and did it in a waywhere it was a win-win, which I
think is a good takeaway.
Partnerships, they are verydangerous.
A lot of partnerships go bad.
You know they are verydangerous.
(11:34):
A lot of partnerships go bad.
But if you set it up right andyou have a way out, they can be
beneficial.
So it's just quote from thebook.
In all my excitement at becomingSam Walton merchant, I
neglected to include a clause inmy lease which gave me the
option to renew it after thefirst five years In our success.
It turned out had attracted alot of attention.
(11:56):
My landlord, the departmentstore owner, was so impressed by
our Ben Franklin success, whichBen Franklin is the store
franchise that he had.
They were so impressed by BenFranklin's success which Ben
Franklin is the store franchisethat he had.
They were so impressed by BenFranklin's success that he
decided to not renew our leaseat any price, knowing full well
that we had nowhere else in townto move the store.
So basically, he was getting alease from a store owner and the
(12:23):
store owner didn't let himrenew the lease so he basically
had to close his business and helost his business because of
that.
So this was a big lessonlearned by Sam in this moment
and basically you need tocontrol the land that your
business is built on.
Now, obviously we have paintingbusinesses.
You don't necessarily you mightnot have this as an issue
(12:46):
specifically, but I think of itas like maybe not controlling
land, but maybe think of it atlike a franchisee.
If you're, if you're buyinginto a franchisee, you know you
don't really own the name.
You're kind of buying into thename, the name.
(13:06):
So I've seen several timeswhere folks have buy into the
franchise but then they don'tfeel like they get the support
they need or they feel like theycould have just they've done a
lot themselves and they didn'treally need it, but now they
have to get out of thatfranchise agreement and that can
be a really big pain.
So you know, if you want tobuild your own business, you
need to make sure that you havefull control over that business
from the start, otherwise youcan run into some issues.
(13:30):
And here's another quote fromthe book.
It was a low point of my life.
I felt sick to my stomach.
I couldn't believe it washappening to me.
It really was like a nightmare.
I had built the best varietystore in the whole region and
worked hard in that community,done everything right, and now I
was being kicked out of town.
It didn't seem fair.
I blame myself for ever gettingsuckered into such an awful
(13:50):
lease and I was furious at thelandlord.
And at this point he has fourkids to support.
But it goes on to say he didn'tdwell on his disappointment and
he just had another challengethat he had to figure out.
And this time he had tobasically do it all over again.
But this time he was going todo it even better.
So that in 1962, walton opensup the first Walmart in Rogers,
(14:14):
arkansas.
And here's an excerpt from thebook.
Now, when it comes to Walmart,there are no two ways about it.
I'm cheap.
I think it's a real statementthat Walmart never bought a jet
until after we were approaching40 billion in sales and expanded
as far away as California andMaine, and even then they had to
practically tie me up and holdme down to do it On the road.
(14:35):
We slept two to a room,although as I've gotten older I
have finally started staying inmy own room.
We stay in Holiday Inns andRamada Inns and Days Inns and we
eat a lot at family restaurantswhen we have time to eat.
A lot of what goes on these dayswith high-flying companies and
these overpaid CEOs who arereally just looting from the top
(14:58):
and aren't watching out foranybody but themselves, really
upsets me.
It's one of the main thingswrong with American business
today.
As you can see, sam Rawlton isreally frugal.
He was always pinching pennies,even when he was
multimillionaire, billionaire,staying in cheap hotels, not a
(15:19):
flying coach and all that stuff.
So he really valued the valueof a dollar and watched out for
not only for himself but for hisshareholders, because at a
certain point there were otherowners in the business that he
brought in and the businessended up going public.
Later on it goes on in the book.
(15:40):
Here's another excerpt.
I read an article about thesetwo Ben Franklin stores up in
Minnesota that had gone toself-service a brand new concept
.
At the time I rode the bus allnight to two little towns up
there, pipestone and Worthington.
They had shelves on the sideand two island counters all the
way back.
No clerks with cash registersaround the store, just checkout
(16:01):
registers up front.
I liked it and so that's what Iused.
That's what I did too.
So this happens again and again.
Where he's visiting all thesedifferent stores, he's seeing
what the best practices are andhe's taking those ideas and
applying it in his store.
And the self-service thing isnot the auto checkout that you
see now at Walmart, but this isjust the fact that they're
(16:22):
putting the registers at thefront of the store instead of
sprinkling them out, like yousee, in like JC pennies.
Um, they don't do that.
He liked the idea of justkeeping all the cash registers
at one point towards the uh, theexits.
So this is basically Sam.
He's always searching foruseful information when he goes
(16:43):
on trips with his family.
He's stopping by every storethat he sees and checking out
what they're doing, what kind ofsales they're offering, how
they had set up the store.
He's always looking for usefulinformation and copying it the
things that are good ideas.
Here's an excerpt from the book.
We were innovating,experimenting and expanding.
Somehow, over the years, folkshave gotten the impression that
(17:04):
Walmart was something I dreamedup out of the blue as a
middle-aged man and that it wasjust a great idea that turned
into an overnight success.
It's true that I was 44 when weopened our first Walmart in
1962, but the store was totallyan outgrowth of everything we'd
been doing since Newport.
Another case of me being unableto leave well enough alone.
(17:26):
Another experiment.
And like most other overnightsuccesses, it was about 20 years
in the making.
So again, he was into retail asa young man focused on it.
He didn't start Walmart till 44, but he had been focusing and
learning about it as much aspossible up until that point.
(17:46):
So all his previous experiencesinformed his philosophy on
building Walmart.
And here's another quote fromthe book about Sam Walton,
coming from one of the folksthat worked with him.
Two things about Sam Waltondistinguish him from almost
anyone else I know.
First, he gets up every day,bound and determined to improve
something.
Second, he is less afraid ofbeing wrong than anyone I've
(18:09):
ever known, and once he seeshe's wrong, he just shakes it
off and heads in anotherdirection, which I think this is
a great thing to emulate Get upevery day bound to improve
something, and then, if you'rewrong about something, just
shake it off and keep going.
If you're going to be wrong,try to be wrong for the smallest
amount of time possible, andthat's what Sam did.
(18:30):
He was always looking forwhat's the best thing that works
.
Let me implement in my business, and if I'm wrong, we can
change it and make it right.
Here's another quote from thebook we were trying to find out
if customers in a town of 6,000people would come to our kind of
barn and buy the samemerchandise strictly because of
price.
The answer was yes.
So he basically tested lowprices and found out that that
(18:52):
does attract people to yourstore.
And so it goes on to say thatwhat we were obsessed with was
keeping our prices beloweverybody else's.
Our dedication to that idea wastotal.
This is something that CharlieMunger has observed that the
winner in industries usuallygoes to someone who goes to the
(19:12):
extreme of maximizing orminimizing one variable, and so
in this case, sam Walton isminimizing prices, and so they
are reaping the rewards of doingthat and owning the retailing
industry and something that wesaw Jeff Bezos ended up doing
later on after Walmart on theinternet space basically an
(19:36):
internet retailer.
His whole focus was minimizingprices, and Amazon is now
dominant today prices and Amazonis now dominant today.
Jeff Bezos actually read thisautobiography written by Sam
Walton and took a lot of notesand applied a lot of the things
that he learned out of this bookinto his business, amazon.
(19:57):
Here's another quote from thebook.
Most of these early guys werevery egotistical people who love
to drive big Cadillacs and flyaround in their jets and
vacation on their yachts, andsome of them lived in houses
like I never even thought aboutbefore.
I remember going to dinner atone of these houses and we got
up picked up by a limousine thatmust have had room for 14
(20:18):
people.
Man, they were living high andthey could afford to back.
They could afford to back downbecause discounting thing was
working so well.
Customers just flocked to theirstores and these fellows were
covered up in cash.
Most of them could still bearound today if they had
followed some basic principlesabout running good stores.
There are a lot of ways tobuild strong companies.
(20:39):
They don't have to be done theWalmart way or my way or anybody
else's way, but you do have towork at it, and somewhere along
the line these folks stoppedshort of setting the goals and
paying the price that needed tobe paid.
Maybe it wasn't the Cadillacsand the yachts, maybe they just
decided it wasn't worth it.
But whatever it was, they justdidn't stay close enough to
their business.
(20:59):
They sort of chose to get overon the other side of the road.
And so I think this is a reallykey thing is you know, so a lot
of folks and I've seen thishappen and I've in my own life,
observed it myself in my, inmyself is, when you get to a
(21:21):
certain level of success, yousometimes start getting
distracted, pulled away todifferent things and that can be
dangerous also or justindulging.
You know you get to a certainlevel of success, you want to
indulge and like, start buyingall the fancy stuff and show off
you know your wealth and thatdoing that is often can be your
(21:44):
downfall.
And so during this time,discount retailing was a big
thing that was really workingfor a lot of different companies
, not just Walmart, but a lot ofthem ended up failing because
they got distracted and theyweren't trying to improve their
position and continue to pushthe envelope.
(22:04):
So I think this is a key lessonthat we need to protect
ourselves against is not getdistracted.
Stay close to our businessesand keep the eye on the ball.
So by 1970, Walmart becomes apublicly traded company, and
there's a quote from the book.
Coming back from New York thatday, I experienced one of the
(22:26):
greatest feelings of my lifeknowing that all our debts were
paid off.
So leading up to the the timewhere they were publicly traded
Sam Walton took out a lot ofdebt to finance the growth of
Walmart.
So they're opening up a lot ofstores throughout the country
and so they took on a lot ofdebt to finance that growth.
And so when they becamepublicly traded, that basically
(22:49):
took away those debts and thatwas a great lift to him.
Here's another quote from thebook if we fail to live up to
somebody's hypotheticalprojection for what we should be
doing, I don't care.
It may knock our stock back alittle bit, but we're in it for
the long run.
We shouldn't care less aboutwhat is forecast and what the
(23:09):
market says we got to do If welisten very seriously to that
sort of stuff, we would neverhave gone into small town
discounting in the first place.
So basically, you know, oncethey go public, you have a lot
more shareholders involved andyou have all these market
projections and analystsanalyzing Walmart and whether
they're on track or off trackfor quarterly earnings, and he's
(23:31):
basically like saying, hey,we're just ignore that stuff, we
just focus on pleasing ourcustomers and providing a great
service.
If we're doing that in the longrun, we're going to win in the
short term.
You know, next quarter maybe wehave our sales go down a little
bit, but we're not concernedwith that we're.
But as long as we're stayingfocused on and pleasing our
customers, we'll be fine.
(23:51):
I think that's something wecould take to our as a lesson
for ourselves.
You know, maybe you have a slowwinter and things are tough,
but as long as you're stillpleasing your customers, you can
get through those tough timesand folks are going to refer you
and once the economy comes backaround or slow season comes
back around, you'll be there.
(24:12):
So if you have that long-termviews of just providing a great
service to people, other peopleare going to take notice and
they can't ignore you and you'regoing to be going to be able to
stick around.
So having that long-term viewis really helpful.
Here's another quote for thebook.
My style has always been to layoff a lot of the day-to-day
operating responsibilities tofolks.
(24:33):
So basically he delegated a lotof the day-to-day operating
responsibilities to folks.
So basically he delegated a lotof the day-to-day
responsibilities to his team.
And this is a common threadthat we see for other successful
folks like Rockefeller and JeffBezos.
They free up their time bygiving empowering people to take
(24:54):
the work and get it done andgive them the freedom to get it
done in the way that they needto get it done.
So he's basically picking thegood people and giving them
maximum authority andresponsibility.
And then here's some otherexcerpts from the book about Sam
Walton and what he did with histime.
So this is an excerpt fromLoretta Boss Parker, who was the
(25:16):
personal secretary for 25 years, and she says he has always
been like this His mind works 10times faster than anybody
else's.
I mean, he just gets going andstays two or three jumps ahead
and he's quick to go with what'son his mind.
If he gets something in hismind that needs to be done,
regardless of what else might'vebeen planned.
The new idea takes priority andit has to be done now.
(25:39):
Everybody has their dayscheduled and then bang, he just
calls a meeting on something.
In the early years this caused anumber of embarrassments.
I would make appointments forhim and then tell him about it.
And we kept two calendars, oneon his desk and one on mine, but
he would just totally forget.
And we kept two calendars, oneon his desk and one on mine, but
he would just totally forget.
I've had people flying in fromDallas to see him.
I'd come in at 8 am to meetthem and find out that he had
(26:01):
flown out at 5 am withouttelling anybody where he was
going.
I would have to look at thisman from Dallas and say he's
gone.
So after a few times I finallysaid I'm not going to make
appointments for you anymore.
So basically, he, when heidentified a priority in his
business, he would try to get itknocked out as soon as possible
with his team and he would movehis calendar or disregard his
(26:25):
calendar completely, and and andact on that immediately.
And it goes on.
Here's another excerpt from SamWalton.
He says except for reading mynumbers on Saturday morning and
going to our regular meetings.
I don't have much of a routinefor anything else.
I always carry my little taperecorder on trips to record
ideas that come up inconversations with the
associates.
(26:45):
I usually have my yellow legalpad with me with a list of 10 or
15 things that we need to beworking on as a company, and
that's the quote from the book.
So basically he just had thathis focus of his priorities, and
then he would try to executethose.
Here's another quote fromsomeone he worked with when Sam
feels a certain way, he'srelentless.
He'll just wear you out.
(27:05):
He will bring up an idea, we'llall discuss it and then maybe
decide that it's not somethingwe should be doing right now or
ever.
Fine, case closed.
But as long as he's convincedthat it's the right thing, it
just keeps coming up week afterweek after week until finally
somebody capitulates and sayswell, let's give it a try.
So once he had something in hismind, he was relentless about
(27:27):
it.
Another quote the percentage ofgross margin in this industry
really the markup on themerchandise has dropped steadily
, from around 35% in the early60s to only 22% today.
Almost all of that representsincreased value and savings to
customers who shop discountstores.
So the guys who weren't runningefficient operations, who had
(27:47):
taken on loads of debt and wereliving high and not taking care
of their associates, who weren'tscrambling around to get the
best deals on merchandise andpassing those deals on their
customers, these guys got intotrouble.
So this is another point.
Basically he was, he wasfocused, was a low, low, low
(28:08):
cost discount retailer and henot only just lowered his prices
, he was also relentless aboutdecreasing his operational costs
and getting more efficient andgetting better deals on what he
was buying to resell.
So even though they had reallylow prices at the stores, they
(28:32):
kept good margins becausethey're running such a lean
operation.
And you know we've seenfounders like Rockefeller,
carnegie and now Sam Walton.
They're so obsessed withcontrolling their costs so they,
so they can maintain theirmargins and beat out their
competition.
And then, towards the end of thebook he has, sam Walton
(28:52):
provides rules that he has forrunning a great business and he
calls it Sam's rules forbuilding a business, which are
pretty useful.
So rule number one is commit toyour business, believe in it
more than anybody else.
I think I overcame every singleone of my personal shortcomings
by sheer passion I brought tomy work.
Rule number two share yourprofits with all your associates
(29:16):
.
So that was something that hehad done.
Is you figure out an incentiveprogram for his associates so
that they brought?
So everybody's moving in thesame direction with the same
incentives.
Rule number three motivate yourpartners.
Money and ownership alonearen't enough.
Constantly, day by day, thinkof new and more interesting ways
to motivate and challenge yourpartners.
Set high goals, encouragecompetition and then keep score,
(29:39):
make bets with outrageouspayoffs.
So he's always trying to figureout how to motivate.
That's rule number three.
Rule number four communicate.
Communicate everything youpossibly can to your partners,
and the more they know, the morethey'll understand.
So keeping those lines ofcommunication open so that they
understand the intent of whatyou're doing.
Rule number five appreciate.
(30:00):
Appreciate everything yourassociates do for the business.
A paycheck and a stock optionwill buy one kind of loyalty,
but all of us like to be toldhow much somebody appreciates
what we do for them.
We like to hear it often, andespecially when we have done
something we're really proud of.
So not only are weincentivizing them with a share
(30:25):
of the profits or whatever,we're also verbally telling them
, because people are motivateddifferent ways.
We're saying hey, we reallyappreciate the work that you're
putting in.
Rule number six celebrate yoursuccesses.
Find some humor in yourfailures.
Don't take yourself tooseriously.
Loosen up, and everybody elsearound you will loosen up.
Rule number seven listen toeveryone in your company and
(30:48):
figure out ways to get themtalking.
The folks on the front lines,the ones who are actually
talking to the customer, thoseare the ones that really know
what's going on.
So make sure you're listeningand getting that feedback.
Rule number eight exceed yourcustomers' expectations.
Rule number nine control yourexpenses better than your
competition.
This is where you can alwaysfind the competitive advantage.
(31:08):
For 25 years running, longbefore Walmart was known as the
nation's largest retailer, weranked number one in our
industry for the lowest ratio ofexpenses to sales.
And then rule number 10, swimupstream, go the other way.
Ignore conventional wisdom.
If everybody else is doing itone way, there's a good chance
you can find your niche by goingexactly the opposite direction.
(31:30):
So those were Sam Walton's 10rules for a business, running
and building a business.
In 1992, sam Walton receivedthe Presidential Medal of
Freedom from George W Bush, andthen he ended up passing away
shortly after receiving theaward.
So all in all, I highlyrecommend taking a look at Made
(31:52):
in America by Sam Walton.
A lot of great wisdom in herethat I think you can apply in
your business.
And with that, I'll see younext week.
Great ideas come from everywhere.
If you just listen and look forthem, you never know who's
going to have a great idea.
That was an excerpt from Madein America by Sam Walton.
This is Sam Walton'sautobiography and this book was
very dense with great ideas.
So I really enjoyed readingthis book.
So I highly recommend it.
(00:20):
I highly recommend it and I'mgoing to go through kind of the
timeline of his life, sam Waltonhe was the founder of Walmart
and kind of pick out some ideasthat I think would be applicable
to painting businesses here.
So first of all, in 1918, samWalton was born in Oklahoma, and
(00:41):
this is an excerpt from thebeginning of the book here.
No question about it, a lot ofmy attitude towards money stems
from growing up during a prettyhard scrabble time in our
country's history the GreatDepression, and it goes on.
I drive a truck and I get myhaircut at a barbershop.
I don't believe in wastingmoney, so this is a common thing
(01:03):
throughout this book.
Believe in wasting money, sothis is a common thing
throughout this book.
Sam Walton is very frugal, evenwhen he's a multimillionaire.
He is always watching his moneyand being thrifty, and this is
a common thing we see throughoutother biographies I've read
recently.
With Rockefeller and Jeff Bezos, they're all very focused in on
(01:25):
the dollars and cents, makingsure they're not spending money
where they don't need to be.
So during the 1930s, during theGreat Depression, sam Walton
begins his entrepreneurialjourney by selling magazine
subscriptions and later workingvarious jobs, including waiting
tables, in exchange for meals.
(01:47):
So here's an excerpt from thebook.
I also started selling magazinessubscriptions, probably as
young as seven or eight yearsold, and I had paper routes from
the seventh grade all the waythrough college.
I raised and sold rabbits andpigeons too Nothing really
unusual for country boys of thatera.
I learned from a very early agethat it is important for us
(02:10):
kids to help provide for thehome, to be contributors rather
than just takers.
In the process, of course, welearned how much hard work it
took to get your hands on adollar and that when you did it
it was worth something.
One thing my mother and dadshared completely was their
approach to money.
They just didn't spend it, andso, like I said, this was
(02:33):
drilled into him in hischildhood and it continues to be
a thing throughout his life.
In 1940, sam Walton graduatedfrom the University of Missouri
with a degree in economics andstarts working at JCPenney as a
management trainee.
And Sam Walton says that hewasn't really a gifted student,
(02:55):
but he worked really hard, andthat was something else that.
Rockefeller basically said thesame thing in his biography and
Ray Kroc also said somethingsimilar as well.
So it's a common thing.
We keep seeing, over and overagain, the value of hard work.
It's not about how intelligentyou are, it's about how hard you
work.
And so this is an excerpt upfrom the book about his time at
(03:21):
JCPenney.
The deal was prettystraightforward Report to the
JCPenney store in Des Moines,Iowa, three days after
graduation, june 3rd 1940, andbegan work as a management
trainee, salary $75 a month.
That's the day I went intoretail and, except for a little
time out, as an army officer,that's where I stayed for the
(03:44):
last 52 years.
And so Sam Walton is writingthis book uh, actually towards
towards the end of his life.
He's, he has cancer.
So he's, he knows that he onlyhas a little bit left to live.
And so this is when he'swriting this book and looking
back at his life.
And the intent of the bookreally was to pass on to his
(04:05):
kids.
He wanted to communicate thethings that he learned in his
life to his kids so that theycould keep the wealth that he
built for them.
And he goes on in the book here.
Walton Blake would say to mewhen he came to me in Des Moines
I'd fire you if you weren'tsuch a good salesman.
(04:26):
Maybe you're just not cut outfor retail.
Fortunately, I found a championin my store, duncan Majors.
A great motivator, he was theproudest of having trained more
penny managers than anybody elsein the country.
He had his own techniques andhe was a very successful manager
.
His secret was that he workedus from 6.30 in the morning
(04:46):
until 7 or 8 o'clock at night.
All of us wanted to becomemanagers like him.
On Sundays, when we weren'tworking, we would go out to his
house there were about eight ofus all all men and we would talk
about retailing, of course, butwe'd also play ping pongs or
cards.
It was a seven-day job.
I remember one Sunday DuncanMajors had just gotten his
(05:08):
annual bonus check fromJCPenney's and was waving it
around all over the place.
It was for $65,000, whichimpressed the heck out of us
boys.
Watching this guy is what gotme excited about retail.
He was really good about retail.
(05:31):
He was really good.
So it's kind of hilarious thatsome management in JCPenney's
were thinking that Sam Waltonwas not cut out for retail when
he ends up owning the wholespace.
But this is, you know, when hestarts cutting his teeth at
JCPenney, this is kind of wherehe gets the motivation to
continue with this line ofbusiness.
And even though he startsWalmart a lot later in life, you
(05:53):
know he's he's focused onretailing from an early age.
So 1942, sam Walton serves inthe U S army during World War II
and this is an excerpt from thebook on this period.
I went to the library there andchecked out every book on
retailing.
I also spent a lot of timeoff-duty studying the ZCMI, the
(06:16):
Mormon Church's department store, out there, just figuring out
that when I got back to civilianlife I would somehow get into
the department store business.
So again, even though he's inthe war and the army during this
period, he's still focused onretailing and he's absorbing
everything he can on thatsubject, going to the library,
(06:39):
getting the books, and so thisis a common thing we've seen
from Rockefeller NapoleonAlexander the Great.
So this is a common thing we'veseen from Rockefeller Napoleon
Alexander the Great Jeff Bezosis that they're always consuming
knowledge to improve themselvesand the domain that they want
to focus on.
1945, after the war, sam Waltonpurchases a Ben Franklin
(07:09):
variety store in Newport,arkansas, with a $20,000 loan
from his father-in-law and$5,000 from his own savings.
And so there's an excerpt here.
Sam Walton was, you know, gotmarried somewhere around this
time and his father-in-law hekind of looked up to, and so
this is an excerpt from the bookon this topic.
(07:29):
The Robsons were very smartabout the way they handled their
finances.
Helen's father organized hisranch and family businesses as a
partnership and Helen and herbrothers were all partners.
They all took turns doing theranch books and things like that
.
Helen has a BS degree infinance, which back then was
(07:52):
really unusual for a woman.
Anyway, ms Robson advised us todo the same thing with our
family and we did way back in1953.
What little we had at the timewe put into a partnership with
our kids, which was laterincorporated into Walton
Enterprises.
So this is a really interestingstrategy.
Sam Walton basically set hisfamily up as a business, right,
(08:16):
so he put all the assets of thebusiness into an entity and then
he gave parts of that entity tohis family early on so that he
didn't have to pay taxes on itlater.
Family early on, so that hedidn't have to pay taxes on it
later.
So when they ended up goingpublic, his family still owned
38% of the company stock, whichis very rare for a founder of a
publicly owned company to ownthat much of the stock Usually
(08:37):
it's like 10% and they own 38%.
So he was able to transfer alot of the wealth to his family
without paying much tax.
Here's another excerpt from thebook.
It's something that any familywho has faith in its strength as
a unit and in the growthpotential of its business can do
.
The transfer of ownership wasmade so long ago that we didn't
(08:58):
have to pay substantial gift orinheritance taxes on it.
The principle behind this issimple the best way to reduce
paying estate taxes is to giveyour assets away before they
appreciate.
So this is a key takeaway.
If you have a painting businessand maybe you're just getting
started or maybe you've, you'restill, you've been in business
(09:19):
for a little while, but you'renot, you haven't hit your goal
of revenue and profitability andall that stuff you can go ahead
and gift a portion of yourbusiness to your kids now, and
so, instead of waiting until theend of your life to do it where
your business is, you know,grown a lot more and then cause,
then you'll have to cause.
(09:40):
If you wait, and it's reallyappreciated, you're going to
have to pay a lot of taxes onthat transfer.
So do it early and and thenyour kids will have that, that
asset.
So Helen, it was Sam Walton'swife, and here's an excerpt from
the autobiography, somethingthat Helen had had said um, sam,
(10:01):
we've been married two yearsand we moved 16 times.
Now I'll go with you any placeyou want.
So as long as you don't ask meto live in a big city, 10,000
people is enough for me.
So any town with a populationof 10,000 was off limits to the
Waltons.
If you know anything about theinitial small town strategy that
got Walmart going almost twodecades later, you can see that
(10:23):
this pretty much set the coursefor what was to come.
She also said no partnerships.
They were too risky.
Her family had seen somepartnerships go sour.
She was dead set in the notionthat the only way to go was to
work for yourself.
So basically here what we seeis Sam Walton had that initial
constraint of having to start insmall towns, not because of a
(10:44):
strategy, but actually becausehis wife didn't want to be
anywhere else.
But he built the business tosuit his life, so that's kind of
a takeaway there.
Also, his wife was reallyagainst partnership from what
she had seen previously with herfamily, which they ended up
doing for a while.
But they ended up setting up anincentive program that would
(11:07):
actually bring other people in.
So they eventually did getpartners, but they were cautious
about it and did it in a waywhere it was a win-win, which I
think is a good takeaway.
Partnerships, they are verydangerous.
A lot of partnerships go bad.
You know they are verydangerous.
(11:34):
A lot of partnerships go bad.
But if you set it up right andyou have a way out, they can be
beneficial.
So it's just quote from thebook.
In all my excitement at becomingSam Walton merchant, I
neglected to include a clause inmy lease which gave me the
option to renew it after thefirst five years In our success.
It turned out had attracted alot of attention.
(11:56):
My landlord, the departmentstore owner, was so impressed by
our Ben Franklin success, whichBen Franklin is the store
franchise that he had.
They were so impressed by BenFranklin's success which Ben
Franklin is the store franchisethat he had.
They were so impressed by BenFranklin's success that he
decided to not renew our leaseat any price, knowing full well
that we had nowhere else in townto move the store.
So basically, he was getting alease from a store owner and the
(12:23):
store owner didn't let himrenew the lease so he basically
had to close his business and helost his business because of
that.
So this was a big lessonlearned by Sam in this moment
and basically you need tocontrol the land that your
business is built on.
Now, obviously we have paintingbusinesses.
You don't necessarily you mightnot have this as an issue
(12:46):
specifically, but I think of itas like maybe not controlling
land, but maybe think of it atlike a franchisee.
If you're, if you're buyinginto a franchisee, you know you
don't really own the name.
You're kind of buying into thename, the name.
(13:06):
So I've seen several timeswhere folks have buy into the
franchise but then they don'tfeel like they get the support
they need or they feel like theycould have just they've done a
lot themselves and they didn'treally need it, but now they
have to get out of thatfranchise agreement and that can
be a really big pain.
So you know, if you want tobuild your own business, you
need to make sure that you havefull control over that business
from the start, otherwise youcan run into some issues.
(13:30):
And here's another quote fromthe book.
It was a low point of my life.
I felt sick to my stomach.
I couldn't believe it washappening to me.
It really was like a nightmare.
I had built the best varietystore in the whole region and
worked hard in that community,done everything right, and now I
was being kicked out of town.
It didn't seem fair.
I blame myself for ever gettingsuckered into such an awful
(13:50):
lease and I was furious at thelandlord.
And at this point he has fourkids to support.
But it goes on to say he didn'tdwell on his disappointment and
he just had another challengethat he had to figure out.
And this time he had tobasically do it all over again.
But this time he was going todo it even better.
So that in 1962, walton opensup the first Walmart in Rogers,
(14:14):
arkansas.
And here's an excerpt from thebook.
Now, when it comes to Walmart,there are no two ways about it.
I'm cheap.
I think it's a real statementthat Walmart never bought a jet
until after we were approaching40 billion in sales and expanded
as far away as California andMaine, and even then they had to
practically tie me up and holdme down to do it On the road.
(14:35):
We slept two to a room,although as I've gotten older I
have finally started staying inmy own room.
We stay in Holiday Inns andRamada Inns and Days Inns and we
eat a lot at family restaurantswhen we have time to eat.
A lot of what goes on these dayswith high-flying companies and
these overpaid CEOs who arereally just looting from the top
(14:58):
and aren't watching out foranybody but themselves, really
upsets me.
It's one of the main thingswrong with American business
today.
As you can see, sam Rawlton isreally frugal.
He was always pinching pennies,even when he was
multimillionaire, billionaire,staying in cheap hotels, not a
(15:19):
flying coach and all that stuff.
So he really valued the valueof a dollar and watched out for
not only for himself but for hisshareholders, because at a
certain point there were otherowners in the business that he
brought in and the businessended up going public.
Later on it goes on in the book.
(15:40):
Here's another excerpt.
I read an article about thesetwo Ben Franklin stores up in
Minnesota that had gone toself-service a brand new concept
.
At the time I rode the bus allnight to two little towns up
there, pipestone and Worthington.
They had shelves on the sideand two island counters all the
way back.
No clerks with cash registersaround the store, just checkout
(16:01):
registers up front.
I liked it and so that's what Iused.
That's what I did too.
So this happens again and again.
Where he's visiting all thesedifferent stores, he's seeing
what the best practices are andhe's taking those ideas and
applying it in his store.
And the self-service thing isnot the auto checkout that you
see now at Walmart, but this isjust the fact that they're
(16:22):
putting the registers at thefront of the store instead of
sprinkling them out, like yousee, in like JC pennies.
Um, they don't do that.
He liked the idea of justkeeping all the cash registers
at one point towards the uh, theexits.
So this is basically Sam.
He's always searching foruseful information when he goes
(16:43):
on trips with his family.
He's stopping by every storethat he sees and checking out
what they're doing, what kind ofsales they're offering, how
they had set up the store.
He's always looking for usefulinformation and copying it the
things that are good ideas.
Here's an excerpt from the book.
We were innovating,experimenting and expanding.
Somehow, over the years, folkshave gotten the impression that
(17:04):
Walmart was something I dreamedup out of the blue as a
middle-aged man and that it wasjust a great idea that turned
into an overnight success.
It's true that I was 44 when weopened our first Walmart in
1962, but the store was totallyan outgrowth of everything we'd
been doing since Newport.
Another case of me being unableto leave well enough alone.
(17:26):
Another experiment.
And like most other overnightsuccesses, it was about 20 years
in the making.
So again, he was into retail asa young man focused on it.
He didn't start Walmart till 44, but he had been focusing and
learning about it as much aspossible up until that point.
(17:46):
So all his previous experiencesinformed his philosophy on
building Walmart.
And here's another quote fromthe book about Sam Walton,
coming from one of the folksthat worked with him.
Two things about Sam Waltondistinguish him from almost
anyone else I know.
First, he gets up every day,bound and determined to improve
something.
Second, he is less afraid ofbeing wrong than anyone I've
(18:09):
ever known, and once he seeshe's wrong, he just shakes it
off and heads in anotherdirection, which I think this is
a great thing to emulate Get upevery day bound to improve
something, and then, if you'rewrong about something, just
shake it off and keep going.
If you're going to be wrong,try to be wrong for the smallest
amount of time possible, andthat's what Sam did.
(18:30):
He was always looking forwhat's the best thing that works
.
Let me implement in my business, and if I'm wrong, we can
change it and make it right.
Here's another quote from thebook we were trying to find out
if customers in a town of 6,000people would come to our kind of
barn and buy the samemerchandise strictly because of
price.
The answer was yes.
So he basically tested lowprices and found out that that
(18:52):
does attract people to yourstore.
And so it goes on to say thatwhat we were obsessed with was
keeping our prices beloweverybody else's.
Our dedication to that idea wastotal.
This is something that CharlieMunger has observed that the
winner in industries usuallygoes to someone who goes to the
(19:12):
extreme of maximizing orminimizing one variable, and so
in this case, sam Walton isminimizing prices, and so they
are reaping the rewards of doingthat and owning the retailing
industry and something that wesaw Jeff Bezos ended up doing
later on after Walmart on theinternet space basically an
(19:36):
internet retailer.
His whole focus was minimizingprices, and Amazon is now
dominant today prices and Amazonis now dominant today.
Jeff Bezos actually read thisautobiography written by Sam
Walton and took a lot of notesand applied a lot of the things
that he learned out of this bookinto his business, amazon.
(19:57):
Here's another quote from thebook.
Most of these early guys werevery egotistical people who love
to drive big Cadillacs and flyaround in their jets and
vacation on their yachts, andsome of them lived in houses
like I never even thought aboutbefore.
I remember going to dinner atone of these houses and we got
up picked up by a limousine thatmust have had room for 14
(20:18):
people.
Man, they were living high andthey could afford to back.
They could afford to back downbecause discounting thing was
working so well.
Customers just flocked to theirstores and these fellows were
covered up in cash.
Most of them could still bearound today if they had
followed some basic principlesabout running good stores.
There are a lot of ways tobuild strong companies.
(20:39):
They don't have to be done theWalmart way or my way or anybody
else's way, but you do have towork at it, and somewhere along
the line these folks stoppedshort of setting the goals and
paying the price that needed tobe paid.
Maybe it wasn't the Cadillacsand the yachts, maybe they just
decided it wasn't worth it.
But whatever it was, they justdidn't stay close enough to
their business.
(20:59):
They sort of chose to get overon the other side of the road.
And so I think this is a reallykey thing is you know, so a lot
of folks and I've seen thishappen and I've in my own life,
observed it myself in my, inmyself is, when you get to a
(21:21):
certain level of success, yousometimes start getting
distracted, pulled away todifferent things and that can be
dangerous also or justindulging.
You know you get to a certainlevel of success, you want to
indulge and like, start buyingall the fancy stuff and show off
you know your wealth and thatdoing that is often can be your
(21:44):
downfall.
And so during this time,discount retailing was a big
thing that was really workingfor a lot of different companies
, not just Walmart, but a lot ofthem ended up failing because
they got distracted and theyweren't trying to improve their
position and continue to pushthe envelope.
(22:04):
So I think this is a key lessonthat we need to protect
ourselves against is not getdistracted.
Stay close to our businessesand keep the eye on the ball.
So by 1970, Walmart becomes apublicly traded company, and
there's a quote from the book.
Coming back from New York thatday, I experienced one of the
(22:26):
greatest feelings of my lifeknowing that all our debts were
paid off.
So leading up to the the timewhere they were publicly traded
Sam Walton took out a lot ofdebt to finance the growth of
Walmart.
So they're opening up a lot ofstores throughout the country
and so they took on a lot ofdebt to finance that growth.
And so when they becamepublicly traded, that basically
(22:49):
took away those debts and thatwas a great lift to him.
Here's another quote from thebook if we fail to live up to
somebody's hypotheticalprojection for what we should be
doing, I don't care.
It may knock our stock back alittle bit, but we're in it for
the long run.
We shouldn't care less aboutwhat is forecast and what the
(23:09):
market says we got to do If welisten very seriously to that
sort of stuff, we would neverhave gone into small town
discounting in the first place.
So basically, you know, oncethey go public, you have a lot
more shareholders involved andyou have all these market
projections and analystsanalyzing Walmart and whether
they're on track or off trackfor quarterly earnings, and he's
(23:31):
basically like saying, hey,we're just ignore that stuff, we
just focus on pleasing ourcustomers and providing a great
service.
If we're doing that in the longrun, we're going to win in the
short term.
You know, next quarter maybe wehave our sales go down a little
bit, but we're not concernedwith that we're.
But as long as we're stayingfocused on and pleasing our
customers, we'll be fine.
(23:51):
I think that's something wecould take to our as a lesson
for ourselves.
You know, maybe you have a slowwinter and things are tough,
but as long as you're stillpleasing your customers, you can
get through those tough timesand folks are going to refer you
and once the economy comes backaround or slow season comes
back around, you'll be there.
(24:12):
So if you have that long-termviews of just providing a great
service to people, other peopleare going to take notice and
they can't ignore you and you'regoing to be going to be able to
stick around.
So having that long-term viewis really helpful.
Here's another quote for thebook.
My style has always been to layoff a lot of the day-to-day
operating responsibilities tofolks.
(24:33):
So basically he delegated a lotof the day-to-day operating
responsibilities to folks.
So basically he delegated a lotof the day-to-day
responsibilities to his team.
And this is a common threadthat we see for other successful
folks like Rockefeller and JeffBezos.
They free up their time bygiving empowering people to take
(24:54):
the work and get it done andgive them the freedom to get it
done in the way that they needto get it done.
So he's basically picking thegood people and giving them
maximum authority andresponsibility.
And then here's some otherexcerpts from the book about Sam
Walton and what he did with histime.
So this is an excerpt fromLoretta Boss Parker, who was the
(25:16):
personal secretary for 25 years, and she says he has always
been like this His mind works 10times faster than anybody
else's.
I mean, he just gets going andstays two or three jumps ahead
and he's quick to go with what'son his mind.
If he gets something in hismind that needs to be done,
regardless of what else might'vebeen planned.
The new idea takes priority andit has to be done now.
(25:39):
Everybody has their dayscheduled and then bang, he just
calls a meeting on something.
In the early years this caused anumber of embarrassments.
I would make appointments forhim and then tell him about it.
And we kept two calendars, oneon his desk and one on mine, but
he would just totally forget.
And we kept two calendars, oneon his desk and one on mine, but
he would just totally forget.
I've had people flying in fromDallas to see him.
I'd come in at 8 am to meetthem and find out that he had
(26:01):
flown out at 5 am withouttelling anybody where he was
going.
I would have to look at thisman from Dallas and say he's
gone.
So after a few times I finallysaid I'm not going to make
appointments for you anymore.
So basically, he, when heidentified a priority in his
business, he would try to get itknocked out as soon as possible
with his team and he would movehis calendar or disregard his
(26:25):
calendar completely, and and andact on that immediately.
And it goes on.
Here's another excerpt from SamWalton.
He says except for reading mynumbers on Saturday morning and
going to our regular meetings.
I don't have much of a routinefor anything else.
I always carry my little taperecorder on trips to record
ideas that come up inconversations with the
associates.
(26:45):
I usually have my yellow legalpad with me with a list of 10 or
15 things that we need to beworking on as a company, and
that's the quote from the book.
So basically he just had thathis focus of his priorities, and
then he would try to executethose.
Here's another quote fromsomeone he worked with when Sam
feels a certain way, he'srelentless.
He'll just wear you out.
(27:05):
He will bring up an idea, we'llall discuss it and then maybe
decide that it's not somethingwe should be doing right now or
ever.
Fine, case closed.
But as long as he's convincedthat it's the right thing, it
just keeps coming up week afterweek after week until finally
somebody capitulates and sayswell, let's give it a try.
So once he had something in hismind, he was relentless about
(27:27):
it.
Another quote the percentage ofgross margin in this industry
really the markup on themerchandise has dropped steadily
, from around 35% in the early60s to only 22% today.
Almost all of that representsincreased value and savings to
customers who shop discountstores.
So the guys who weren't runningefficient operations, who had
(27:47):
taken on loads of debt and wereliving high and not taking care
of their associates, who weren'tscrambling around to get the
best deals on merchandise andpassing those deals on their
customers, these guys got intotrouble.
So this is another point.
Basically he was, he wasfocused, was a low, low, low
(28:08):
cost discount retailer and henot only just lowered his prices
, he was also relentless aboutdecreasing his operational costs
and getting more efficient andgetting better deals on what he
was buying to resell.
So even though they had reallylow prices at the stores, they
(28:32):
kept good margins becausethey're running such a lean
operation.
And you know we've seenfounders like Rockefeller,
carnegie and now Sam Walton.
They're so obsessed withcontrolling their costs so they,
so they can maintain theirmargins and beat out their
competition.
And then, towards the end of thebook he has, sam Walton
(28:52):
provides rules that he has forrunning a great business and he
calls it Sam's rules forbuilding a business, which are
pretty useful.
So rule number one is commit toyour business, believe in it
more than anybody else.
I think I overcame every singleone of my personal shortcomings
by sheer passion I brought tomy work.
Rule number two share yourprofits with all your associates
(29:16):
.
So that was something that hehad done.
Is you figure out an incentiveprogram for his associates so
that they brought?
So everybody's moving in thesame direction with the same
incentives.
Rule number three motivate yourpartners.
Money and ownership alonearen't enough.
Constantly, day by day, thinkof new and more interesting ways
to motivate and challenge yourpartners.
Set high goals, encouragecompetition and then keep score,
(29:39):
make bets with outrageouspayoffs.
So he's always trying to figureout how to motivate.
That's rule number three.
Rule number four communicate.
Communicate everything youpossibly can to your partners,
and the more they know, the morethey'll understand.
So keeping those lines ofcommunication open so that they
understand the intent of whatyou're doing.
Rule number five appreciate.
(30:00):
Appreciate everything yourassociates do for the business.
A paycheck and a stock optionwill buy one kind of loyalty,
but all of us like to be toldhow much somebody appreciates
what we do for them.
We like to hear it often, andespecially when we have done
something we're really proud of.
So not only are weincentivizing them with a share
(30:25):
of the profits or whatever,we're also verbally telling them
, because people are motivateddifferent ways.
We're saying hey, we reallyappreciate the work that you're
putting in.
Rule number six celebrate yoursuccesses.
Find some humor in yourfailures.
Don't take yourself tooseriously.
Loosen up, and everybody elsearound you will loosen up.
Rule number seven listen toeveryone in your company and
(30:48):
figure out ways to get themtalking.
The folks on the front lines,the ones who are actually
talking to the customer, thoseare the ones that really know
what's going on.
So make sure you're listeningand getting that feedback.
Rule number eight exceed yourcustomers' expectations.
Rule number nine control yourexpenses better than your
competition.
This is where you can alwaysfind the competitive advantage.
(31:08):
For 25 years running, longbefore Walmart was known as the
nation's largest retailer, weranked number one in our
industry for the lowest ratio ofexpenses to sales.
And then rule number 10, swimupstream, go the other way.
Ignore conventional wisdom.
If everybody else is doing itone way, there's a good chance
you can find your niche by goingexactly the opposite direction.
(31:30):
So those were Sam Walton's 10rules for a business, running
and building a business.
In 1992, sam Walton receivedthe Presidential Medal of
Freedom from George W Bush, andthen he ended up passing away
shortly after receiving theaward.
So all in all, I highlyrecommend taking a look at Made
(31:52):
in America by Sam Walton.
A lot of great wisdom in herethat I think you can apply in
your business.
And with that, I'll see younext week.
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