Founders - #104 Ingvar Kamprad (IKEA)

Episode Date: December 30, 2019

What I learned from reading Leading By Design: The Ikea Story by Ingvar Kamprad and Bertil Torekull.----Come see a live show with me and Patrick O'Shaughnessy from Invest Like The Best on October 19th in New York City. Get your tickets here! ----Subscribe to listen to Founders Premium — Subscribers can listen to Ask Me Anything (AMA) episodes and every bonus episode. ---[0:01]  He aims to give his company eternal life [3:45] Early life and entrepreneurship  [8:00] The beginning of IKEA [11:40] Learning entrepreneurship by imitating [16:30] IKEA almost dies in infancy / how Ingvar worked his way through it [26:00] Ingvar’s greatest regret in life: Neglecting his children for his business. “Everyone with children knows that childhood does not allow itself to be reconquered.” [32:20] Only those asleep make no mistakes. — Ingvar Kamprad [36:00] Thinking of the first store as a laboratory [43:43] Why IKEA stumbled upon self assembled furniture [46:30] A summary of the early history of IKEA [49:00] How Ingvar managed [54:00] Why Ingvar refused to go public [1:03:30] The IKEA Company Bible: The Testament of a Furniture Dealer [1:19:10] Ingvar the Misfit  A list of all the books featured on Founders Podcast. ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

Imagine one of the coldest little countries in the world. Think of the most barren part of that country. See in front of you a god-forsaken place deep in the wild forests. This book is about a man who grew up in this harsh environment, which was to mark his whole life and fundamentally color the philosophy with which he built his vast empire, consisting of thousands of employees and millions of customers all over the world the man is ingvar komprat furniture dealer he aims to give his firm eternal life it's a long way to the country where an empire was built here where he was born loneliness

silence and reserve prevail the cottages have always been small. Survival has never been taken for granted. In this stony silence, this harsh moraine immorality, the dream of Ikea first grew, for everything requires its special soil. This is where the rough outline of the whole concept began to be written by a dyslexic boy on a farm. Two empty hands, the myth says. He built an empire from nothing. But what are two empty hands? And what is really meant by nothing? Do love and encouragement, innate energy, desire for revenge, imagination and curiosity all count for nothing? Of course they count.

This is not a book about a man starting out empty-handed. On the contrary, it is a book about a man with his hands full of resolute dreams, a heart tormented by inadequacy and self-pity, and a stubborn and inquisitive enterprise. A strange mixture of a social animal and an eccentric. The book is equally about a firm in which he realized and through which he lived out all these circumstances, for good or bad. Objections may well arise to the idea of summarizing

an outstanding and natural genius so simply, or the elevation of the work of an incorrigible capitalist, so restlessly obsessed by the lure of profit and power that he used a thousand tricks to endow his creation with eternal life. Others will recognize themselves, for all of us bear within us the embryo of a miracle. All right, so that's an excerpt from the book that I read this week and the one I'm going to talk to you about today, which is Leading by Design, the IKEA story. And it was written by Bertil Torricul. Okay, so two quick things before I jump into the rest of the book. One, I want to tell you how I discovered this book.

I stumbled upon this online discussion where people were trying to figure out what is the largest company in the world that's owned by a single individual. And because these companies are private, it's really hard to know the accurate answer, but there's a good chance that Ingvar Kamprad was that person. He founded IKEA at 17 years old. And before he died, he died in 91, I think in 2018, Bloomberg put his estimated net worth around $58 billion. Okay, so does that pique my interest? Like, that's a really interesting question. Then I started looking for books on Ingvar Kamprad. And I found one where he worked, this is essentially, it's not

written by him, but it's essentially an autobiography. A large portion of this book are direct quotes from Ingvar. Okay. The second thing is I enjoyed the book so much. I'm going to have a hard time containing my excitement today. So I'm going to try not to jump out of my chair. I'm going to try not to knock my big head into the microphone, but I can't make that promise because I absolutely fell in love with this book. All right, so let me just jump right into it. I'm going to start a little bit about his early life, and there's a lot in the book about his early life. I'm only going to pick out a few of these just so as a way for you to understand, like, there's certain experiences you have as a young person that you're going to keep with you throughout life, so I want to try to highlight

what I perceive those to be an Ingvar's life okay so first he says he's describing his father here his family just give you some background his family they're German they wind up emigrating into like desolate farmland in Sweden back in like the early 1900s all right so he says this is a dad he's talking to his dad now only 25 he didn't really want to be a farmer at all, but his mother's word was law, and he became her obedient tool. He talks about his mom.

She was an amazing person to whom nothing was allowed to be impossible. Sounds a lot like his theory in life. She soon discovered the poor state of my father's business affairs, so we started a guest house. So one of the things that Ingvar is most well known for is his extreme extreme frugality and i think his early uh where he was raised in his early um experiences probably uh probably helped that trait to grow and something he kept for his entire life so he says uh so she started a guest house we rented our rooms to summer visitors every room taken except my parents into which we all squashed together my mother was a heroine in silence she contracted cancer before she was 50 she died at the young age

of 53 the very thought of it makes me weep um and then he talks a little bit about his early childhood he was a tree considers himself a merchant and a trader from the time he's like five years old so it says i suppose i was slightly peculiar in that I started tremendously early doing business deals. My aunt helped me buy the first hundred box of matches. They cost 88. I'm just going to, I don't know how to pronounce the current season. So I'm going to change everything to dollars. They're not actually dollars, but it says the first hundred boxes of matches cost me $88. This was 100, so he bought 100 boxes of matches for $88. I sold the boxes at $2 or $3 each. So he says, talk about profit margins.

I still remember the lovely feeling. I can't have been more than five at the time. Later on, I sold Christmas cards. I caught fish myself and then cycled around selling them. When I was 11, my main enterprise was garden seeds. He says, selling things became something of an obsession. Now, I guess I should back up. At the very beginning of the book, it says Ingvar Kamprad, furniture dealer. That's how he describes himself. He describes himself

as an entrepreneur, but primarily as a furniture dealer. So it says, some things became something of an obsession. It's not easy to know what might drive a boy more than the desire to earn money. The surprise that you could buy anything so cheaply and sell it for a little more. But I remember walking in the meadows with my father. We came to a place So this is a very important part of his life. This is a thought he's remembering, you know, 60 years after it happened. He says, I remember thinking, if only I could help father. Supposing I got some money so that I, and then he never finishes the thought, essentially to help his father.

He says, to carry something out, you clearly had to have the means. And he talks about something very important to him. He said he never owned, he never liked to owe anybody any money. The growth of IKEA, you know know if you start something at 17 he still worked on until he was 91. um he got rich very slowly but he would never he would always grow within the means so he never well let me just read this part he says on another occasion the manager of the bank lent me uh it's essentially the conversion 63 so that i could purchase 500 fountain pens from Paris Okay, so then this is what he says. This was essentially the only real loan. I have taken out in my life

That's bananas says trading was in my blood All right, so let me skip ahead a little bit This is the beginning of IKEA Like I said how many people found their head their company at 17 and then work on it their entire lives? This is a very unique experience that he had. And this is how that actually happens. He says, in my last year of middle school, my first rather childish business began increasingly looking like a real firm. So I've already referenced this word firm over and over again. This is the word that Ingvar and the author use. In America, we would use the term company or business.

So when you hear firm, that's what they're talking about. They're essentially talking about Ikea. So he says, my first rather childish business became increasingly like a real firm. Under my bed at the school boarding house, I had a cardboard box full of belts box full of belts wallets watches and pens all these things he would order through mail order he'd import them into sweden and then he'd resell them i was 17 in the spring of 1943 and wanted to start my own firm before going to the school of commerce so the school of commerce is kind of like what our equivalent would be like business school today um he says uh thus was the trading firm ikea founded now first he just sold a bunch of different things.

He just had belts, wallets, watches, pens, seeds that you could use to grow crops, all kinds of anything that he thought he could make money on. Eventually, it's going to obviously become just furniture, and I'll tell you how we get there. Let me continue in this section first. Solving the question of how, in the simple and cheapest way to convey goods from the factory to the customer was fundamental if one were to become a good businessman. In the school library, I found trade papers with advertisements for exports and imports. I wrote to a foreign manufacturer whose general agent for pens I then became.

That's an interesting way to write, right? So he's importing a bunch of fountain pens and there's a high profit margin on these. And he begins selling those. He says the reason he wanted to do this because he's always obsessed with the lowest possible price. This is something he kept with him when he was building Ikea. He says direct import was a way of fixing the lowest possible price. Then he would go in and study other businesses. He's very interesting.

Like the way his brain worked from such a young age is just very fascinating to me. So he says, I went into a shoe shop and saw the old-fashioned way they had of selling anything. He talks about they have cardboard boxes stacked everywhere all the way up to the shelf. He says, and then they'd have ladders to access the inventory. So he says, they had ladders that they had to keep going up and down to fetch brown and black shoes. And then this thought I loved. That couldn't be rational, and it wasted money. So one great way to learn what you want to do is by learning what you don't want to do first. Something I want to bring to your attention too. So he started with, essentially he's going to turn to Ikea,

but he also had a job. So Ikea started out as a side hustle, if you want to think of it in that terms. So he's working at a clerk in this office and he says, the finance manager allowed me to sell files to my employer. This meant hundreds of files. There's a discrepancy in language here. I think what he means is like places to store files because he talks about how heavy they are and they have to come by train.

So again, this just gives you an insight into his personality. He's working there, but he's also looking for other ways that he can make money at the same time. He's like, hey, I'm in an office. I know the problems they have and I know people that sell solutions to the problems. Let me just go ahead and order those and resell them to the company I work for. And the reason I bring that up is because this realization is extremely important. This is what he says. Those files made a profit that turned out to be greater than my fixed salary. Once you realize that, this is the birth of a new entrepreneur there. Okay, so there's a bunch that are happening on this page. One, he starts selling furniture by

imitating, the way we all learn at the beginning. There's very slow growth at the beginning. And then we're going to see how he accidentally finds his destiny and then learning a life lesson from your competitors. There's a lot packed onto these pages. Let me just get into it. In 1948, I advertised furniture for the first time. Up until then, I had sold minor wares, Christmas cards, seeds, fountain pens, wallets, picture frames, table runners, watches, jewelry, nylon stockings, that kind of thing. I read its advertisements in the Agricultural Society's paper. Okay, so he saw somebody else sold furniture. And IKEA starts with a mail order at the time, right? There's no store.

We'll get there eventually. So he says, I read the competitor mail order at the time right there's no store we'll get there eventually so he says i read uh the competitors advertisements in the agriculture society's paper i decided to try the same route so that's what i mean he starts selling furniture first by imitating i tried advertising an armless an armless nursing nursing chair that i called ruth the response was unambiguous we sold a huge amount of this test furniture and then this sentence gives you a description of the prices or excuse me of the sales everything went that was how the business started people ordered on a form from us and the factories delivered furniture began to take over more and more and evenings were passed cutting up material for upholstery ikea could now no longer remain a one-man firm.

So he was doing everything himself. He says, in 1948, I appointed my very first employee. Two years later, the firm had grown to a staff of seven or eight. So that's what I mean. Even when you, later in the book, it goes into like how they did not, you know, you see some companies that start, they have no stores. And then, you know, maybe five years later, they may have hundreds. IKEA did not grow that way. It was very slow and deliberate, even the beginning.

First, it was a one-man company. Then, a few years later, it's a two-person company. Then, two years after that, they only have seven or eight employees. That's very slow growth. So, by chance, the furniture trade, which I entered in an attempt to imitate competitors, decided my destiny. No other event in life pleases me more than the fact that I ended up there. My interest at first was purely commercial, selling as much decent furniture as I could as cheaply as possible. Okay. So again, he's young.

He doesn't know. I always go back to like people debate about like what entrepreneurship is. And I think the best description I ever heard was it's from Peter Drucker. Entrepreneurship is not an art or a science. It's a practice, meaning that there's things that you're going to learn that you can only get to experience. And so that's that he's just like, OK, I'm copying everybody around me. I'm just going to copy what they're doing. But when you're when you mimic, you're not thinking. Eventually he realizes, oh, I need to rethink this. So he says, first, I'm just buying as much decent furniture as possible and sell as cheap as possible. Now, here's the problem. He didn't realize the limits to that business process. He says, not until the first complaint started coming in did I realize that it was quality that was lacking one day that would force me to draw

certain conclusions and choose another way. So that's going to wind up being the IKEA way. I had made a contact a few years previously with my nearest competitors, and that taught me something for life. So now he's going to meet another furniture dealer, but this furniture dealer's, you know, let's see, 35 years older than him. There's this guy named Gunner. Gunner was a man in his 50s and he offered me about a score or so of watches for $55, uh, for $55 each. Uh, remember this is not real dollars. I couldn't afford that. I said, and somewhat immodestly appealed to his sympathy. I was young and very much wanted to become a businessman like him and needed all the help I could get. So they agree on a price. He winds up giving in, uh, giving into Gunner's, uh, Gunner gets the best of him in, in, in this, uh, negotiation,

but he learned something for life. He says, taking his fat cigar out of his mouth, Gunner then said, young man, you'll never become a businessman if you say to start with that you could pay 50. When I say 55, then you can't accept 52 without first having tried off for 51. So he's saying like you gave up too early. Like you got to negotiate better than that. He says, this is the main lesson. One thing you have to learn in business is that $10 on a price can mean everything. So essentially the translation there is like not even $10.

Think of a dollar can mean everything. So he says, I promise I'll never forget that, I said politely, and I've kept that promise ever since. Still today at the open market where we live in Switzerland, I have a habit of taking the opportunity just before they are packing up to ask if I may buy a little more cheaply. My wife gets pretty tired of this. Okay, so at this point, I think he's already made the switch to just dealing furniture.

I want to talk, if you look at like the highlights and all the post-it notes I have all over this book, the vast majority of what I want to talk to you about today is going to happen at the beginning because I find it so fascinating. Like, Ikea, when it's, you know, turning over billions of dollars a year and he's already a billionaire, that's a less interesting story than understanding how he got there, right? At least to me. Now, what blew my mind is Ikea almost died in infancy. So, I want to spend some time talking to you about how he works his way through this. This is extremely important. All right. So, he says, Ikea was very much at a crossroads. Competition and mail order had become almost unendurable. A fact, one simple example can illustrate. So this is a simple example he's going to use as he's trying to resell ironing boards. So he's selling an ironing board,

all his competitors are, they start out, it's $24. Then somebody lowers it to $22.50 and it just keeps going down, going lower and lower and lower. They're just competing on price, which is a terrible situation to be in if you're trying to run a business that you want to survive, right? So he says, step by step, this price war affected the quality of the ironing board, which became simpler and simpler, but also worse and worse. The same applied to furniture. Complaints started to mount, and I could see how things were going. The mail order trade was risking an increasingly bad reputation and in the long run, IKEA could not survive in that way. The core problem with mail order was that customers themselves could not touch the goods but had to rely on descriptions in the advertisement or catalog. I think if you

analyze that sentence, you see where the logical step he's going to make soon. So this is a problem. Like they can't touch the furniture. They can't see it. What is Ikea today? Yeah, you have this huge catalog, but they use a catalog to drive people into their stores. So he says, we were faced with a momentous decision to allow Ikea to die or to find a new way of maintaining the trust of the customer and still making money. Out of the long talks through the night about how we were able to get out of this vicious circle, lower price, worse quality, the idea grew of trying a permanent display or exhibition of our furniture. People could go to the display, see the furniture for themselves,

and compare the quality at different price levels. So he lives in this little town. I think you pronounce it Almholt, Sweden. And there's this little, it's called like a little town store that's closing. So at this point in time, he's got to solve the quality issue, right? And he's got to find a way to, essentially, he's figuring out how can I differentiate myself from a bunch of mail order competitors.

So he buys the store. So it says the store is about to close. For what I thought was the tremendous sum of $1,625. So he did the calculation there for you. He spent 13,000 kronor, I think it's cost, but it was 1600 bucks at the time. I bought the entire shabby building. The decision was logical. In the spring of 1952, customers that in the future, excuse me, in the spring of 1952, we informed our customers that in the future, we would sell only furniture and domestic articles. That was how I became a furniture dealer. Okay, so that's when it happens. It happened about four years after. Okay, now he says,

we could now at last show those cheap ironing boards alongside those that cost five kroner or more and were of good quality. and people did just what we had hoped they wisely chose the more expensive ironing board at that moment the basis of the modern IKEA concept was created this is why it's so important and in principle it still applies first and foremost use a catalog to tempt people to come into an exhibition, which today is our store. So he says, he's talking about the process. This was maybe very common today, but back when he was doing it,

and especially in the place he was doing it, no one else was doing this. So he says, mail order and furniture store in one. As far as I knew, that business idea had not been put into practical use anywhere else. We were the first. Now he's going to say something here in this next paragraph that always reminds me of it's actually the the i'm pretty sure it's the company model for jeff bezos's rocket company blue origin but he also uses it in the building of amazon and this this this idea of doing things uh step by step but you're doing it he says step by step ferociously right we're going to take our time we're going to build for thestep, but you're doing it. He says step-by-step ferociously, right? We're gonna take our time

We're gonna build for the long term, but we're not gonna dilly-dally. We're not lollygagging We're making intentional steps and we're always moving forward. So Ikea is no difference He says success was immediate and in created the embryo and resource for the store We created five years later, but I have never been so scared in my whole life as when we opened and I saw the line outside. There were at least 1,000 people there. I couldn't believe my eyes. We didn't know whether the floor would hold up, or even more important, whether we'd be able to supply enough buns. So these are like cinnamon buns, I think. That was precarious, as we had promised coffee and buns to those who came to the opening i remember the time afterward as one long rush of constant and joyous work

ikea was taking shape as a real firm real company many of our unwritten laws were already written by this time and he's talking he's gonna i'm gonna talk a lot about because he's got he's does something i think is extremely smart people that that I've talked about over and over again, Henry Royce, founder of Royce Royce, kept meticulous notes. His philosophy on engineering was so, like so detail oriented. And so like his personal notes were so beneficial that Royce Royce bounded it up and printed it as an internal book. Last week I did, or not last week, a couple days ago, I did a bonus episode for Misfits that talks about Carl Braun did something very similar where he outlines like how a company should communicate. And he's writing it for his company first,

but other companies could copy. So anyways, Ingvar has done a lot of work on not only in like speeches, but in writing about what IKEA stands for. So this is some of the unwritten laws, he says, were already written at this time, helpfulness, thrift, and a strong sense of responsibility. I'm going to talk a lot more about all this stuff later. And then I'm still in the same section. This again, the note I left myself, it's so funny how all these ideas keep compounding, right? And you see a lot of the same ideas that are separated by, in some cases, hundreds of years and thousands of miles. Well, this section right here, where these are direct quotes from Ingvar, reminds me of Henry Clay Frick when he told us right at the beginning,

Gentlemen, watch your costs. Ingvar is telling us the same thing over and over again. To this day at IKEA, we try to translate everything into a clear price and state it. This is a fantastic idea. Our advertising brochures have, on the front or back, information on what they cost to compile, often with an indication that is, in the end, the customer who has to pay for whatever we waste.

He says, on the next page, I'm going to skip over a bunch of this stuff, but this section just says, hey, listen, we can all improve our station in life, all of us. We all have that power. And he says, gradually the pressure on this little town he founded in, I don't know how to pronounce it, grew even greater and greater, and it wasn't long before, apart from the restaurant, we also had an inn on the site with a hotel and a pool.

So he made the first IKEA store like a destination. People would travel all over the country to come and so to come and visit my grandfather so um I failed to mention something previously the store he bought uh was used to be run by his grandfather and his grandfather's dead at the time so he says gradually the pressure on this little town grew even greater and greater and it wasn't long before apart from the restaurant we also had an inn on the site with a hotel and a pool. My grandfather would have been amazed for the place was this old country store. So when I'm reading about the improvements that he made to what used to be his grandfather's store

in this tiny little town, it reminds me of, I think there's like, not two types of people in the world, but there's people that like, I'm gonna read this quote from Steve Jobs that I always think about all the time. And I think there's people that believe it to be true. And those are the people that, you know, they think they can influence their own life. They can change things.

They can make things better. And then you have some aspect of humanity that just thinks, oh, life is like, I'm born into this world. It is what it is. And I'm just going to live my life and die and not have any influence. Of course, like, I believe the first. And you probably do too if you're listening to this podcast. So he says, Steve Jobs, when you grow up, this is one of the most important quotes I've ever come across in my life. When you grow up, you tend to get told the world is the way it

is and your life is just to live your life inside the world. Try not to bash into the walls too much. Try to have a nice family, have fun, save a little money. But that's a very limited life. Life can be much broader once you discover one simple fact. Everything around you that you call life was made up by people that were no smarter than you. And you can change it. You can influence it. You can build your own things that other people can use. Once you learn that, you'll never be the same again. I don't know if Ingvar was ever taught that explicitly by anybody else,

but he definitely, through experience, is learning that lesson. And you see that. His fanatical focus on improvement every day, um, over a long period of time gets the result that, that he got. It starts out in one tiny store in the middle of nowhere, Sweden, and builds one of the most, uh, uh, the largest private companies in the world. All right. Now there's a lot of bad mistakes and dumb things. I've said over and over again, the podcast does not exist for us to unquestionably idolize these people. Human beings have great ideas and they have bad ideas. We all have flaws.

So we're learning from. We're not idolizing. That's an extremely important part. Ingvar is the same thing. I'm going to read this section to you because this happens over and over again and he mentions what I'm about to mention to you, I don't know, half a dozen times in different ways in the book and that is

that he was so obsessed with work that he didn't, his largest regret in life is that he was so obsessed with work that he missed his kid's childhood, okay, and this is what he says, he mentions it a bunch of times but this i think is the best description that's the one i wanted to share with you instead of just saying the same

point over and over again he says it was to be one of ingvar's great sorrows and the cause of some soul searching that business made him neglect his three sons as they grew up he has done everything to make up for it since but everyone with this is the most important sentence ready but everyone with the children knows that childhood does not allow itself to be reconquered that is just that is damn good writing right there that's a hell of a sentence and so Ingvar repeats that over and over again like now you know his sons are um uh his relationships will when this book was written, this book was 20 years old. He was still alive. And his sons were in, like, the 30s at that point.

He has relationships to them. They all work in Ikea in one form or fashion. He wants them to take over after he's gone and so on and so forth. But he's a very emotional person. He cries a lot. This book, I mean, I can't tell you how many times it mentions him crying. He's extremely heartbroken over this, that he felt that, yes, he was able to build a great empire. He was able to make the lives of his customers better, make the lives of his employees better. But he did that at a huge cost. And he says over and over again,

like, the cost was not worth it. And the reason I bring that up is because, you know, you'd be hard pressed to find somebody that is like more of an evangelist for entrepreneurship. But at the same time, like we can't forget

that at the end of the day, it's our job and our family has to come first. We are going, unless you're completely psychopathic, sociopathic person, you're going to regret missing out on your kid's childhood. They're small for such a short amount of time. It goes so fast until they grow up, you know, they have their own lives. It's such a tiny, tiny time period that i just think like i've read enough

biographies at this point and seen this mistake like phil knight sam walton and the people i use over and over again they're like damn yes i built nike yes i built walmart yes i built ikea but damn i didn't spend enough time with my kids and they're at the end of the this guy's they're doing phil was doing the same things just like sam Sam was, just like Ingvar is doing here. There's something in humanity that when you get to the end, Ingvar talked about in the book. He's like, listen, everybody approached me before talking about, oh, write a biography. He's like, I'm not interested in that. I'm a private person.

But then he says he was finally convinced because he said, yeah, but think of all the future entrepreneurs that can learn from you. And then that's when he said it drew his attention but there's something in our species that towards the end of our life we want to pass on the knowledge that we've accumulated through decades of experience and i see this over and over again and maybe have a unique perspective because i don't know how many people read that many biographies but like i'm just it's i'm telling you like it's it's it's present enough that it's a big deal and there's something in our nature that causes us to make that mistake over and over again. And hopefully by me bringing it to your attention, you think about that. You know, when, hey, there's nothing wrong with being obsessed.

You know, I'm sure I'm attracted to obsessive people. And in some degree, I am obsessive. But like, damn, I don't want to be a bad dad. I just don't. Okay, I want to go on to another regret that's on the very next page. And again, we see this regret a lot. There's a desire or a longing for the earlier, smaller days of a company. And I don't know what the takeaway here is, other than you have to do whatever you feel is right. All I can tell is bring this attention that I read this a lot, that they all long, you're like, yeah, I built this giant company. I have 40,000, in his

case, he's got 40,000 employees, but they missed the days when there was 10 of us. It's very interesting. All right. So he says, the transition from the closeness of, that's the city there, and I'm going to skip, to the less intimate atmosphere of a large company was difficult for the founder. Essentially, he has never really accepted accepted it that's a hell of a sentence right so now we're going to go directly to his words the first wonderful time of strong working fellowship with a circle of individuals all of whom i knew personally made me dream foolish dreams of it always remaining the same i nourished a false belief that would be possible to preserve the total us feeling even when we grew large. The days of the family have passed.

The IKEA spirit still lives on, but in another way. But those days at the beginning on the farm at home when IKEA was really a family family that remains my very best memory now keep in mind he's probably 70 I would say he's about 71 years old when he's writing those words and a multi multi billionaire and he's telling you his very best memories when he had one store and ten people to work very closely with there is something in our nature where we prefer to work in small bands of tight like close-knit individuals yet, you know, the history of entrepreneurship is, you know, the opposite. It's like this start off small, just as like a

means to an end. I'm sure there are some people that have realized that and say, I'm never going to allow myself to grow to that. But again, it really is like personal preference. I don't understand the debates back and forth. Like you, if you want to build a giant company, build a giant company. If you want to build a small company, build a small company. You got to do, like, I always go back to that saying, that quote in a book, Michael Ovitz's biography. Like, you have to be who you are. I think it's Michael Ovitz. I might be confusing that with a readout.

One of them said it. So, anyways. Okay, so he's got his famous quote. Ingvar is very, the way I think about him is almost like a preacher. He has these ideas that he repeats over and over again because he understands reputation is persuasive, right? So one of those is only those asleep make no mistakes, he says. So he says, I have not been able to avoid severe losses.

Both fiascos and triumphs have marked the history of the firm. So I bring that up because, again, everybody sees the end result they know ikea is this huge successful company it's like that no huge successful company gets huge successful without a a lot of mistakes um he's going to talk now about his many weaknesses he says he's too trusting that he's gullible that he is in his inability to learn from some mistakes this is a very i you know what it is i was nervous i'm not usually nervous when i sit down to do this i'm nervous that i'm not going to be able to convey everything that i learned from this book because it's so unique and weird and i mean that the most positive way possible he's like he's got this like typical they say he's like this typical and I don't know anything about the culture,

but, like, he says, like, his family, like, Germans were, like, you know, you hold your emotions in, you, like, you're kind of, like, stoic, I guess, is the way I would describe it, but this guy, like, the book is full of him essentially being extremely insecure and full of self-doubt, which is surprising. It surprised

me. So he's very like a forthcoming with his, a lot of his mistakes. Oh, I guess I should, should, should bring this up now because it made national news in like the nineties. Um, when he was young, he was part of the Swedish, it's like Swedish neo-Nazzis so he says like it there's an entire chapter of the book dedicated to this um he he says you know he was a byproduct of a German grandmother who was devoutly like pro-German and a German father who had the same beliefs and so they taught his beliefs and he believed that up until his like 20s and then he started changing his beliefs. And according to the book, it's more pro-German and less anti-other religions or other ethnicities. And there's no explicit evidence that he was anti-Semitic, but his dad would read Mein Kampf and stuff like that.

So again, I bring that up because there's no perfect person and they're all going to make terrible mistakes. And this is something that he talks about over and over again, like, you know, staying up late night in his bed, crying about the mistakes that he made when he was younger because it did damage to his company, you know, 50 years after the fact. But you can never really know what's inside somebody's own heart unless they're going to express it. But he says like, you know, that was a short part of his life, that he was, like, interested in fascism and that he changed later on. But I don't know.

It was a – my point being is, like, he didn't leave out the unflattering parts because that entire chapter was extremely unflattering and makes him, you know, look extremely bad. All right. So it says – now back to Ingvar's words, he says, again, I had to find a solution. I wept a lot as I couldn't bear adversities. Actually, I often fail to look at things from the bright side. The sad thing is that I didn't learn much from these early failures. On the contrary, I kept repeating them. See what I mean? This is extremely hard for somebody to

admit about themselves. Father always said you're too gullible and that is still true for a long time i found it difficult not to believe people now that i'm older i become slightly more crafted and guarded towards people in general so there's some of his faults um i like this idea so eventually they're going to open so they have this like little showroom right but eventually they um they open well it's i guess no i'm sorry i was wrong this is still in the he's got his his two-story wooden showroom which is what he's gonna what i want to talk to you about real quick here eventually they build like their first what they consider their first real store but we're not there yet all right so it says the good idea here is that he thought of his first store as a laboratory so he says a renovated two-story wooden building became the superb laboratory for everything new

that was to be created a workshop was formed for learning to build the perfect selling machine this is an interesting way to think about your business as you're constructing a perfect selling machine so he says we needed a laboratory to learn how to build the perfect selling machine with the help of a catalog, business sense, and the underdog's obsession with always doing the opposite of what others were doing. So we've seen this a lot in the founders that we've studied, this obsession with going their own way, with finding, not just copying what other people are doing and accepting it without thinking it through, but really saying, hey, I can find a better way. Ingvar was no no different and he says um now here's another another fault of his right i want to bring a lot of this to your attention because i think it's important his obsession with work led to his

first divorce and this is what he means though he never really learned so he doesn't have any he has an adopted daughter with his first wife right they get divorced which i'm going to tell you about here in a minute and then he has he gets remarried doesn't have his first kid who's 38 but he's making the same mistake over and over just like he neglected his his children for work he neglected his first wife for work and so this is what he says about it goes on and on i think the sentence is at least two sentences gives you a good summary but the whole matter pains me and still hurts. I considered myself a real shit. So he's taking blame. He's like, listen, you know, I didn't give her the attention I needed.

You know, I was so focused on my business, and of course it's going to end in divorce that way. Okay, skipping ahead in the timeline. So his goal is to knock out middlemen, right? From a very young age, he's like, I don't understand. Like the prices that comes, like the price increased once a product moves from the factory's gates to in the customer's hands, it's much more expensive. What's going on here? And so he realized, oh, you got all these people in the middle taking a little piece and adding onto it. So he wanted

to eliminate that. When you do that, when you try to change, and that's the way the furniture business was in his country at the time. And so he's trying to rewrite how the industry sells things. Well, what's going to happen? Your competitors and your industry, like, what do you call them? Like organizations are going to push back. And so they do that severely to him. So he's dealing, at this point, he's dealing with angry competitors and supplier boycotts.

So what would happen is his competitors would buy so much for, they'd buy from similar suppliers and his competitors would put pressure on his suppliers saying, hey, if you sell to Ingvar, to Ikea, we're going to yank our business from you. Now, what would happen is they would refuse to sell to Ikea because Ikea at the time was much smaller than the other competitors, right?

So this just reminded everyone's struggles. It's just a lot of these struggles are hidden. So it says the atmosphere became increasingly rancorous, and Ingvar had many tearful nights, there's a crying again, as he lay awake wondering how he could solve the problem. All right, so this is now I want to tell you, this is why the industry fought IKEA and how IKEA won, and then his idea of nursing the supplier.

All right, it says, superficially, the battle was about whether fair exhibitions could sell to the visiting public, which Ikea did, or whether only wholesale trading could occur. Less superficially, it was about breaking an upstart. Okay, so that gives you like the basis for what's happening here. Essentially, a lot of furniture retailers at the time to get customers, they'd go to trade shows. And sometimes, essentially, you were supposed to sell just to wholesalers who would then turn around to sell to directly to customers. But IKEA was selling direct to customers. So they would sell to customers and wholesalers at the same part. And that's when people, organizations were essentially trying to change the rules.

So this practice was no longer allowed. They're essentially like what you said, superficially, less superficially. It was about breaking an upstart. They're not, it's not a debate over rules. It's a debate about limiting competition, unfortunately. It says year after year, the same complaints against the key were made. By 1952, restrictions had gone so far that exhibitors were not even allowed to take orders and the young director was summoned to the chamber of commerce for questioning he's the young director a few years later the national

association of furniture dealers succeeded in forcing their the fair to ban ikea from even giving the prices of exhibited goods so anytime you see this pushback in or in industry within an industry these are these are short-term band-aids eventually the the the better competitor which is ikea is by far the better run company at this point is going to overtake this is just silly nonsense that you see over and over again uh petrified conservative sales thinking was up against a new and insolent price pressure and that's what they didn't like that he was eating into their their profits ikea was banned again and again from doing anything but kept finding new ways of getting around each new ban

that's why they say he's extremely creative in a letter from the national association of furniture dealers ikea was likened to a monster with seven heads. This is how they describe Ikea. If you cut off one, another soon grows. Says this battle of fair participation was really only over one issue, the low prices of the upstart. It finally abated, not because anyone changed their opinion, but because the price, this is an actual organization in Sweden, the Price and Cartel Commission. But because the Price and Cartel Commission intervened, it was not because they intervened,

but mostly because IKEA was growing at record speed and acquiring its own exhibition premises, meaning I'm not going to the fair anymore, I'm just going to open these stores, in the three most important cities. It says they could not be bothered with the battle, for they were fully busy with succeeding. And then we're going to wrap this up here.

It says, a manufacturer's description of the difference between IKEA and other furniture dealers. IKEA paid within 10 days with a deduction for a cash discount. Others did not pay for three or four months and yet made the same deduction. Nursing the suppliers is one of Kamprad's hobby horse principles, one that he still imparts to his staff, meaning that you're going to get better. Like he understands how humans work, that yeah, there's a company

and you have to deal with the company, but the company is just a collection of human beings. And if you treat them better better if you're nicer to them you pay your bills on time you're in turn going to get better service and so that's something that he continues to preach to this or he did uh till you know obviously he passed away okay so now this is ingvar's philosophy on problems this is going to sound familiar this is uh one of my favorite quotes that I've discovered by reading all these books is from Henry Kaiser, problems are just opportunities

and work clothes. We see a similar echo here from Ingvar. It says, in IKEA's business philosophy, the whole matter should be inscribed as a golden rule. Regard every problem as a possibility. New problems created a dizzying chance. When we were not allowed to buy the same furniture that others were we were forced to design our own and that came to provide us with a style of our own a design of our own and from the necessity to secure our own deliveries a chance arose that in its turn opened up a whole new world to us um now one of the things that ikea is most famous for is that you pick up the furniture yourself, you take it home, and you put it together yourself. So it's called self-assembled

furniture. That's something that was kind of discovered by accident. And he says, perhaps it'd be said that reality forced the innovation upon us. We had begun to experience a worrisome high percentage of damaged furniture and transport, broken table legs, and that kind of thing. So initially, self-assembled furniture is just a way for them to get less damaged furniture and transport, right? And it has, so it says, once it started working, it says, thus self-assembled bookcases, chairs, beds, and other pieces successfully appeared. But it also had other effects, like beneficial effects. He says, a design that was not just good,

but also from the start adapted to machine production and thus cheap to produce. With a design of that kind and the innovation of self-assembly, we could save a great deal of money in the factories and on transport, as well as keep down the price for the customer. Okay, so we just heard that he considers every problem an opportunity, right? And so he realizes that a few suppliers are still blocking him in Sweden. So he's like, okay, I got to find a solution to this problem.

I'm going to look outside the borders. And so Poland was just, I guess, had just stopped being communist, or it's like half, like it's kind of transitioning from like communist to more like a market economy so expanding into poland turns out to be a major turning point in ikea's history and there's like there's a chapter that goes in depth on this i'm just going to pick out real short to give you like a summary of it it says ikea's simple and open open structure of command had had has become a dream for people used to inaccessible state hierarchies and young well-educated

academics have been attracted to private enterprise so a lot of these people come to work for Ikea and it says it went well for other reasons too having spent 20 years with Ikea in Poland this guy Ericsson explains the company's success. And that's a direct quote from Ericsson about IKEA's success in Poland. He says, because young people were given responsibility, because employees were permitted to use both imagination and common sense, because the company maintained its humble attitude. This is the humble attitude.

If we don't improve, someone else will, so we must make the effort. And because from Ingvar Kamprad comes the same perpetually driving question that keeps developments going. How can we make it a little cheaper? What do you think? Of course we can. So essentially he's just giving people that did not have large influence over their work and kind of directed by a central authority the ability to,

like he trusted in them to make the best decision. Now, at this point in the book, there's a summary of the early history of IKEA. I want to read the whole thing to you because I think it's in a few short paragraphs. It gives you a general overview of the first few years of IKEA. It says, the story of IKEA is a businessman's manual. It teaches that few events in the inception and growth of a company can be ignored as unimportant. Both fiascos and success build an entrepreneur. Sometimes even a disaster can turn into a miracle. IKEA's route to progress resembles most of all a process in which every new stage

seems to have happened naturally, though perhaps not logically. When the boy, meaning a young Ingvar, sold his first box of matches, his innate genius was tested, and the driving force of greed was also aroused. When the first piece of mail order furniture sold better than all of his minor wares, he had the first impulse that turned him in stages from a peddler into a furniture dealer. Yet he still lacked a vision of something greater than money. When falling prices in the competition with other mail-order firms threatened quality and thus undermined the public's confidence in his firm, he gained insight into the relation between price and people's needs. That is how adversity

is sandwiched with progress and opposition creates openings that invite new successes as well as new obstacles. The flow of customers to the little town gave the founder courage and resources to make the decision to build an impossible store in the countryside. His successes caused the blockade by competitors, who forced IKEA to go outside the borders of the country to seek new manufacturers, thus issuing a world citizen passport for the world. Production costs dropped, prices dropped, and success in the market was secured. Without this resolute triumph, the money would not have existed to make it possible to open a store outside Stockholm, which required an investment of $2.1 million, financed by Ing Ingvar himself without borrowing a single cent.

It was a turning point that provided the foundations from which the modern IKEA would soon conquer the world. All right, so that gives you a good idea of where we are in the story. Okay, so now that we have that foundation, I want to talk to you a little bit about how Ingvar managed and then him dealing with what the book calls like his Judas, somebody that stabbed him in the back or they had a falling out, whatever word you want to put on it. So first, I got to tell you about one of his employees. And through telling you about him, you'll see how Ingvar chooses to manage. His name is Jan. I don't know how to pronounce his last name, so we're just going to call him Jan the whole time. All right, so Jan, employed in 1968 as

the first of Ingvar's many assistants, tells of how he was practically left on his own for the whole of his first month because the boss was in Poland. He had to, Jan meaning Jan, he had to find out for himself how the furniture store functioned. Everything seemed very free, disorganized, chancy, and full of unwritten laws. Jan had to become his own entrepreneur, form his own sphere of influence, and Ingvar approved of that. As immovable as he is in his demands to follow the IKEA concept, he, meaning Ingvar, is susceptible to the independent mavericks. This is something that's mentioned in the book a lot, over and over again. He's got a soft spot, because I think he's a misfit.

Ingvar is definitely a misfit, maverick, whatever word you want to put on it. And so when he sees other people that are like him, even when they, then this guy Jan, they go like, they fight a lot to the point where like Jan thought he was fired multiple times but there's something where he gives leeway to people that look like himself does that make sense like he just he didn't like other people telling what to do he wanted to come up with his own ideas and so when he sees these people in his organization he kind of nurtures that even if they go against him so he says uh he is susceptible to independent mavericks the combination of lone wolf and herd animal is in fact the sum the sum total of ingvar's own makeup as an entrepreneur and builder of firms he knows how to recognize himself okay then he talks about

there's a change that's going to happen in any the growth of any company he says a decisive moment in the growth of a company is when the founder has to hand over the financial function to somebody else right somebody more uh experienced in in in those uh like in that job because it hinders his business activities this happened when ingvar appointed the economist alan cronval cronval willingly became increasingly high-handed in the business press and gave the impression of being IKEA's strongman. Big mistake. With Ingvar as a secondary figure.

Sometimes he decided he didn't even have time to speak to the founder who had an appointment. That's just, listen, if you're working closely with the founder of a company, that's a stupid idea. That's just not smart. The founder's making an appointment with you and you're saying I'm too busy to talk to you. That's not a good idea. He was good about enforcing routines and systems but came into conflict with the dynamic go-getter. So Cronwall is not how Jan is.

Cronwall, he was an academic and a bureaucrat. So he comes in Ikea and he tries to like set up a hierarchy but we just i just got done telling you jan kind of kept everything kind of free he's got laws he's got a company bible if you will but it's not like everything essentially planned okay and so it says he came to betray ingvar's confidence in a shady property deal and the two parted ways in a highly painful manner. Cronwald was more or less dismissed as a board meeting in front of his members. So this is the dynamic,

like the dichotomy of human beings' personalities. Ingvar wanted to build IKEA as a family, and I have my own personal reservations comparing companies to families. I think families are most, rightfully so, operate in more of a socialistic manner. Companies aren't. Ingvar has a $58 billion net worth.

The people working for him don't. So I don't think like you should lie to your employees and say that you're family. I mean, you're not sharing resources as a family. So this is something I would never like, I don't know, any time anybody's ever said that to me, I just know that they're trying to manipulate me so anyways Ingvar is extremely emotional. He'll hug and kiss you who like you want to touch you all the time

He's got like this this huge emotional aspect to him But when you cross him he can be unbelievably cold and distant And so we just saw that with you know firing somebody in front of everybody's probably not the best idea But you know he was he emotionally, or he reacted. I keep forgetting that he's no longer with us. So he can be unbelievably generous. The point that I'm poorly making at this moment is that he's got multiple sides, just like a lot of us do, and that we can be loving

and accommodating to people we love and that we get along with at the same time, it's unbelievably cruel and heartless and cold to people that cross us. Um, okay. Okay. So I, this is, I want to talk to you a little bit about why, like, how did, like, why didn't Ingvar ever want to go public? You know, would not have accelerated the growth. And so the book actually spends a good amount of time talking about this. So I just want to pull out some highlights because I think it's important. It says, this is, is this a quote from him? Yeah, this is a quote from Ingvar. He says, still today, we want to grow at our own pace

so that we keep up, not just with what is new, but also develop what we already have. So he doesn't want to keep growing just to grow. What if we're growing too fast and we're not developing the resource we already have, right? IKEA's strategy has long been to take at least half of our resources to improve what already exists the other half to do what is uh to do what it is in the future if if at a somewhat slower pace than if we had had on access to unlimited money okay so that's what he talks about but unlimited money is essentially the public markets he's like we're going to grow at a more slow and deliberate pace and we think that's going to be better for the overall company that's something he believed now here's the author talking about expanding on ingvar's own words and in his beliefs

today everyone has been converted to the conviction that going public would do more harm than good to ikea in the long run the perils of a quotation on the stock exchange are uh exposure to the media and demands for constantly increased profit and expansion regardless of the business cycles of competition and vision. So he's listing all the stuff he doesn't want. He doesn't want employees to focus on what the stock price is that day. He doesn't want constant exposure to the media. He's a very private person.

He doesn't want external demands for constantly increased profit and expansion. What if he doesn't want to do that? What if that's going to harm his business? And then he doesn't want to compromise on his vision. In addition, Ingvar likes to point out that stock exchange is an expensive solution. Public companies like to distribute one third of their annual profit to their shareholders.

Money that disappears out of the companies and works against building up reserves. And he says IKEA needs to build up reserves in order to take bold decisions. So this whole idea of like, you know, keeping the money within the company, something we heard from Henry Singleton, something we heard from Warren Buffett. Now we're hearing again from Ingvar. You know, he's going to keep the money in house. And then now Ingvar talks a little bit about this. He says,

it was not only a long life for IKEA. Remember, I started out the podcast talking about he wants to give IKEA eternal life. That's a very explicit goal. Eternal life. That's not very common for any entrepreneurs that I've ever talked in such explicit terms. So he says, it was not only a long life for IKEA I wanted to achieve, but also its independence of any one single country. Okay, so now we're getting to a weird part. I'm going to omit almost completely out of the book because frankly, I don't understand it.

There's pictures in the book. So Ingvar leaves Sweden because they have this crazy crazy tax system and like inheritance laws where essentially if he died he wanted the Ikea to survive but also to be beneficial to his family and that was impossible so he lives the last like 40 something years of his life in Switzerland and as he's emigrating out he creates what he calls and the author says he's um like like downplaying he says it's a unique company structure and the author's like it may be the only company structure like it like that exists in the world there's there's pictures in the book that show part of how the company is organized it's a series of trusts and these venn diagrams and i look at the

picture like there's no way i can explain this like just with words you have to look at it and even then and it also talks about how ingvar will only reveal the parts of the company ownership structure that the law in the specific company that that in the specific country that that part of the company structure requires them to do so so it's largely a secret and this is extremely complicated i had a good friend of mine who for a long time was an estate planning attorney. And essentially, when you're an estate planning attorney, the vast majority of the people you interact with are supremely wealthy, like super, super wealthy. And the area that he was practicing in, it was a it's in a part of

the country that has a huge population of extremely wealthy people and i'd have many many conversations with them because it blew my mind it came from you know like if you watch game of thrones like my upbringing is more like flea bottom these people are living high garden and so i would talk to him about all every week when he was doing this because it just blew my mind it opened my eyes up to like an entire world i didn't even exist. There's a book called Family Wealth that goes through, I read probably 15 years ago, that goes through some of these ideas

and it's just completely different how most people think. So I'm going to skip over large parts of that again. You can read about it online. It talks a little bit about, I think the structure has its own Wikipedia page actually. But I do want to just tell you how complicated it gets. This is the very beginning of this change.

Let me just read this to you. This is after the ownership structure was changed. It says, now IKEA had a Danish head office, a Dutch foundation, a Belgian coordinating group, whatever the hell that means, and a founder living in Switzerland. Was Comprat or IKEA in general still Swedish? Who knows? And so they call it the inaccessible, it says the inaccessible company is how it's referred to. What a weird term, right? Let me just, and I can read, I'm going to read two more paragraphs and then I'm going to move forward because this is something that I don't think any of us are ever going to have any experience with,

but you might be interested in it. When Ingvar Kamprad decided to go abroad, his ambition was undeniable to give his life work the best possible chance of eternal life. There's that phrase again. Long after he passed away, he wanted the company to be able to develop and flourish. In his own words, as long as there's human housing on our earth, there will be a need for a strong and efficient IKEA. But his ambition was further than that.

No one and nothing was to destroy or endanger his business vision. Were they a member of the family or market forces or politicians? Barriers were to be constructed against not only hostile assaults, but also against the danger that lies in apathy. All the dynamism was to be guaranteed as long as humanly possible." Okay, so now I want to talk about a casual culture, a love of misfits, letting people make mistakes, and then the company Bible. And I'm going to spend a lot of time in the

company Bible. Okay, so it says at this point of work it says the pioneers would be accused of being frivolous in their business methods so that means like uh ikea is a bigger company at this point now since it's growing they feel the need to put in like more structure so the pioneers think of those like the first like 10 or 12 the book i think compares them to like jesus and the apostles or excuse me jesus and disciples um and obviously ingvar being jesus so it's a different time period in the company history and so now we're going to go back to that jan you know person i talked to talk to you about earlier so it says uh the pioneers would be accused of being frivolous in their business methods at least four times jan considered himself fired in his role as the company's perhaps necessary and font terrible and super entrepreneur.

It's an interesting phrase, right? Fortunately, Ingvar Kamprad has never really had anything against Mavericks, however rowdy they are. So it goes back to seeing people that are like him and giving them leeway that other people would not be given. It says, Kamprad remained in the background, at first not restraining these young men bursting with energy. So new lifeblood coming into the company. The founder has always had a notorious weakness. Some call it talent for testing the limits of ideas and sometimes letting the, this is another good idea, so for sometimes letting the rope run out. So what does that mean? Letting the rope run out on a project in order once and for all to prove what is wrong.

As Jan says, Camp Rad preferred them to make mistakes rather than be idle. The time for afterthought soon came, and the company spirit's needs were admitted to be as great as the need for external expansion. So this is what I mean about him being extreme. Think about when they say Company Spirit, that's what we would refer to as company culture, okay? So gradually, this insight would lead to a phenomenon that goes under the name of the IKEA way. The global company's Bible study that takes...

Okay, so I've got gotta explain this to you in the 1970s before I read this book when I was researching before before I realized I was going to buy the book no I think I already ordered book anyways I found something online it's essentially an internal text company textbook that Ingvar wrote in the 1970s I'm gonna leave it linked in the show notes anybody can read it for free it's called a furniture dealer's testament okay so think about that as the company bible so let me read this back to you now you have the information it says um gradually since i would lead to a phenomenon that goes under the name of the ikea way the global company's bible study that

takes a furniture dealer's testament as its number one textbook the ikea way trains managers to be spiritual ambassadors thank cultural ambassadors out in the empire and one of the first compulsory lectures was by the rebellious jan whatever his last name is okay so now this is where i'm going to spend a lot of time probably the majority of the rest of our time together this week talking about the company bible first i need to give you the basic laws of ikea before i go and i'm going to spend a lot of time, probably the majority of the rest of our time together this week, talking about the company Bible. First, I need to give you the basic laws of IKEA before I go, and I'm going to quote extensively from A Furniture Dealer's Testament. The four laws of IKEA. So it says, for thus have the laws been since the birth of IKEA.

So this is like a general framework to organize IKEA. Number one, a good cash reserve must always be insured. This is something we've seen multiple other entrepreneurs preach. Number two, all property must be owned. I mean, you have to own the stores and the land that the stores are on. Number three, all expansion is to be largely self-financed. So it talks about later when he's going through this like this uh media crisis in the 1990s about his early ties to nazism they they they um erroneously uh one reporter erroneously suggested that some like early like nazi gave the seed money for ikea and that caused jan to be more emotional and almost anybody's ever

seen him before because he said he goes you could accuse me of murder don't ever accuse me of borrowing money. So that's just an insight into his personality. So all expansions will be large in itself. Finance number four, there should be no boasting. All right, so now I want to get into, let me, okay, so this is in the, so I was pleasantly surprised that in the appendix of this book, they reprint a furniture dealer's testament. Again, this is written in 1976.

You could probably read it half hour, something like that. I'm just going to pull the parts that I thought were interesting. He's got like nine, how many, like think of this like the Ten Commandments, except there's nine, the Nine Commandments of Ikea. And so he starts off, this is the ten commandments except there's nine the nine commandments of ikea and so he starts off this is the very first paragraph we have decided once and for all to side with the many what is good for our customers is also in the long run good for us this is an objective that carries obligations that's those are words written by ingvar that could easily have been said word for word by hen Ford. All right, so we're still

in the introduction. The means we use for achieving our goals are characterized by our unprejudiced approach by doing it a different way. So he's saying, like, what did James Dyson tell us back in the day? Difference for the sake of it. Ingvar says the same thing. We're going to do things differently. And by our aim to be simple and straightforward in ourselves in our relationship with others always bear in mind that freedom implies responsibility meaning that we must demand much of ourselves um he says uh so he talks about his the product range and philosophy what are they describing they also describe the rules and method that we have worked out over the years as cornerstones on the framework of ideas that have made and will continue to make IKEA a unique company so this is this company Bible this is saying the thing

like you know chefs publish like cookbooks that you can you can view the recipes and try them out yourselves this is exactly what Ingvar is doing here number one the product range is our identity. And there's in this range, there's in under like each heading, there's a bunch of subheadings. So the first one is the product range of our identity. I'm going to read my note to you. Quality only where it matters to the customer. Plus it is the entire company's responsibility to keep our costs low so we can keep our prices low and forever. This cannot change. Okay. um i'm gonna just pull out some quotes here qual this is an interesting idea quality must never be an end in itself it must be adjusted

to the consumer's meat needs and at first i read that it's like oh i don't like that idea at all then when he explains it okay that makes sense he says a tabletop for for example needs a more durable surface than a shelf and a bookcase. So would it be over-improving on quality at the expense of the customer's needs to make the bookcase from the same material as the tabletop? That made way more sense. In the former case, a more expensive finish offers the customer long-lasting utility because your tabletop has to be more high quality in the bookshelf, right? Whereas in the latter, in the bookshelf, it just hurts the customer by adding to the price. Quality must always be adapted

to the consumer's interest in the long term. So now why is this obsession with low price? It is the many whom we aim to serve. The concept of a low price with a meaning makes enormous demands on all of our coworkers. That includes product developers, designers, purchasers, office and warehouse staff, salespeople, and all other cost bearers who are in the position to influence our purchase prices and all other costs. Meaning that if our goal is to aim,

it just said, we are aiming to serve the many. That means we can't just reduce costs in our stores. It has to reduce costs in our warehouse staff, in our offices, everywhere. All other costs. He didn't say some other costs. He said all other costs. And he says, our basic policy of serving the many can never be changed.

The second, it says the IKEA spirit is a strong and living reality, so I'm just going to say, this is my note, company spirit was easier to maintain when we were smaller, plus don't waste your life in a job you hate, it's a two great ideas, so he says, things were more concrete in those days, the readiness to give each other a helping hand with everything, the art of managing on small means, he he's like uh nostalgic for the early days again uh the art of managing on small means of making the best of what we had the cost consciousness to the point of being stingy the humbleness the unconquerable enthusiasm and the wonderful sense of community through thick

and thin and so what does this have to do with not wasting your life in a job? Hey, he says, if you are not enthusiastic about your job, one-third of your life goes to waste. Number three, profit gives us resources. So another way to think about this is profit and why it is important. To achieve our aim, we must have resources, especially in the area of finance. We do not believe in waiting for ripe plums to fall into our mouths. We believe in hard, committed work that brings results.

Profit is a wonderful world. Let us start by stripping the word profit of its dramatic overtones. It is a word that politicians often use and abuse. Profits give us resources. So this is what I love about the fact that human nature just does not change. He's talking about at the time he's writing this in the 1970s, politicians are demonizing people that are successful, demonizing companies that are making profits.

It's happening today. It will happen 40 years from now. Just realize that we're not coming up with unique ideas. We're just replaying over and over again and arguing about the same things over and over again. It's bizarre. The aim of our effort to build up financial resources is to reach a good result in the long term.

Profit forces us to develop products more economically, to purchase more efficiently, and to be relentlessly stubborn in cost savings on all kinds. That is our secret and that is the foundation of our success. Number four, reaching good results with small means. Four, five, and six, there's three words that can summarize this whole section I'm about to read to you. Be resourceful, or it's resourceful, simplicity, and difference. Those are also great like foundations to build any business on. All right, so he says, that is an old IKEA idea that is more relevant than ever. Time after time, we have proved that we can get good results with small means or very limited

resources. Wasting resources is a mortal sin. It is hardly an art to reach set targets if you do not have to count the cost. Any architect can design a desk that will cost $5,000, but only the most highly skilled can design a good functional desk that will cost $100. Expensive solutions to any kind of problem are usually the work of mediocrity. We have no respect for a solution until we know what it costs. An IKEA product without a price tag is always wrong. Before you choose a solution, look at it in relation to the cost. Only then can you fully determine its worth.

Waste of resources is one of the greatest diseases of mankind. Many modern buildings are more like monuments to human stupidity than rational answers to needs. But waste costs us even more in little everyday things. Filling paper, excuse me, filing paper that you will never need again. Spending time, he's just giving examples of how a lot of companies waste time and resources. Spending time proving that you were right anyway. Postponing a decision to the next meeting because you do not want to take the responsibility now. Telephoning when you could have just easily wrote a note or sent a fax.

So a lot of younger people listening are not going to understand that long-distance calls used to cost money. The list is endless. User resources the IKEA way. Then you will reach good results with small means number five simplicity is a virtue the more complicated the rules are the harder they are to comply with complicated rules paralyze it's kind of now i'm reading that i was just telling you that the culture was kind of like casual more relaxed kind of makes sense if he believes like over complicated rules there's too hard to comply with. Historical baggage, fear, and unwillingness to take responsibility are the breeding ground for bureaucracy.

Indecisiveness generates more statistics, more studies, more committees, more bureaucracy. Bureaucracy complicates and paralyzes. Planning is often synonymous with bureaucracy. Do not forget that exaggerated planning is the most common cause of corporate death. Exaggerated planning constrains your freedom of action and leaves you less time to get things done. Oh, that sounds exactly like Henry Singleton. planning paralyzes so let simplicity and common sense guide your planning simplicity is a wait simplicity is a fine tradition among us simple routines have a greater impact simplicity in our

behavior gives us strength and six is let me just read that part, sorry, is doing it a different way. By always asking why we are doing this or that, we can find new paths. By refusing to accept a pattern simply because it is well established, we make progress. Our protest against convention is not protest for its own sake. It is a deliberate expression of our constant search for development and improvement. Number seven, concentration is important to our success. The general who divides his resources will be defeated. For us too, it is a matter of concentration, focusing our resources. We can never do everything everywhere all at the same time.

We must concentrate for maximum impact, often with small means. Now he also, so everybody, you're probably nodding around. Yeah, that makes sense. But I love he makes the additional point that if when you're forced to concentrate on one thing, then inevitably that means you have to be okay having other parts that you're not concentrating on be less beneficial. So he says, concentration means that at certain vital stages, we are forced to neglect otherwise important aspects. The things about if a trade-off is easy, then the trade-off is probably not important.

What he's bringing to our attention here is like, yeah, you need to concentrate your resources, but you have to understand the decision to where to concentrate can be hard because you have other good opportunities. You've got to let the other good opportunities diminish or wither away to focus on the great opportunity. That's what makes the trade-off so hard. Concentration, the very word means strength. Use it in your daily work and it'll give you results. Number eight, taking responsibility is a privilege. There are people at all levels in every type of company and community who would rather make their own decisions than hide behind those made by others.

These people dare to take responsibility. The fewer such responsibility takers a company or community has, the more bureaucratic it is. Constant meeting and group discussions are often the result of unwillingness or inability on the part of the person in charge to make decisions. Go back to the famous quote by David Ogilvie. He says, go to all the parks in your city so you'll never see a statue dedicated to a committee. He's telling you that the companies are run best by usually one person leading the way and making the hard decisions. Taking responsibility has nothing to do with education, financial position, or rank. Responsibility takers are essential for progress. I love that part. Because think about Ingvar,

becomes one of the most successful entrepreneurs of all time. He's dyslexic, doesn't really have much formal education, and did not have much financial position or rank when he started. Only those who are asleep make no mistakes. There's that quote he fits against. Making mistakes is the privilege of the active. It's a very unique way of thinking about it right the fear of making mistakes is the root of bureaucracy and the enemy of development it is always the mediocre people who are negative who spend their time proving that they were not wrong the strong person is always positive and looks forward that's why in a lot of the early episodes of founders i had that uh critics don't know segment because i think what he's right it's the mediocre person who is negative who spend their time proving that they were not wrong

the strong person is always positive and just moves forward okay number nine most things still mean to be done a glorious future that is how he ends a lot of his letters. He's got his own like motto that we saw with Stan Lee, right? All right, so this section, the summary is don't quit. Be wary of experience as an excuse to not try. That's another Henry Fordism. Don't waste even 10 minutes and be a positive fanatic. That's a great great term all right so

he says the feeling of having finished something is an effective sleeping pill a person who retires feeling that he has done his bit will quickly wither away a company that feels that has reached its goal will quickly stagnate and lose its vitality. Happiness is not reaching your goal. Happiness is being on the way. The positive joy of discovery must be our inspiration in the future too. Experience is a word to be handled carefully. Experience is a break on all development. Many people cite experience as an excuse for not trying anything new. Now this is extremely important. Bear in mind your time is your most important resource. You can do so much in 10 minutes.

10 minutes once gone are gone for good. You can never have them back. 10 minutes is not just one-sixth of your hourly pay. 10 minutes is a piece of yourself. Divide your life into 10 minute units and sacrifice as few of them as possible in meaningless activity. Most of the job remains to be done. Let us continue to be a group of positive fanatics who stubbornly and persistently expect to accept the impossible the negative what we want to do we can do and will do together a glorious future and that's the end of the company bible now i want to close

back on not ingvar the family man not ingvar the entrepreneur, but Ingvar the person. And at his core, he was a misfit. And so I think this is a good place to leave the story. He says, or it says, the author says, he comes back again and again with painful self-searching and an almost bitter undertone to his defects, a hopeless favorite expression he uses both about himself and all too often about other people when he is dissatisfied. Anyone who sees Ikea's monumental progress may find it difficult to understand why Ingvar

wrestles with self-doubt. Nonetheless, still in the autumn of his years and despite his astonishing life's work, there is an outsider within him who always feels threatened. A small, naive, 17-year-old entrepreneur fussing over a lost dollar and crying when he's misunderstood. Even today, behind this multinational tycoon is a country boy with a fierce sense of being an underdog, standing on tiptoes and peering uneasily through adult eyes. Am I good enough? Ingvar recognizes himself as an outsider, and in that way, he is one of us all. He knows what it's like to be odd, to fall outside of the establishment to feel

rage against injustices he keeps coming back with the light to an old headline in a popular tabloid the furniture king who does not look like a capitalist the article describes him as a troublesome capitalist who is far too likable that That's just what he wants to be, a rebel and friend of the people, a patriot and a capitalist, all in the same bargain box. That's where I'm going to leave the story. If you want to read the full story, I can't recommend this book enough. This is a book I think I'm going to go back story. If you want to read the full story, I can't recommend this book enough. This is a book I think I'm going to go back to many times to reread. There's so much more in the book that I have to leave out.

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