Founders - #150 Sam Walton (America's Richest Man)

Episode Date: October 24, 2020

What I learned from reading Sam Walton: The Inside Story of America's Richest Man by Vance H. Trimble.----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----[3:11] Charlie Munger on Sam Walton: It's quite interesting to think about Walmart starting from a single store in Arkansas – against Sears Roebuck with its name, reputation and all of its billions. How does a guy in Bentonville, Arkansas, with no money, blow right by Sears, Roebuck? And he does it in his own lifetime – in fact, during his own late lifetime because he was already pretty old by the time he started out with one little store. He played the chain store game harder and better than anyone else. Walton invented practically nothing. But he copied everything anybody else ever did that was smart – and he did it with more fanaticism. So he just blew right by them all. [4:46]  Sam Walton was no ordinary man. He was a genius in business, with an iron mind —some say pig-headed—unwilling to compromise any of his carefully thought out policies and principles. [5:08] To him, making money was only a game. A test of his imagination and expertise to see how far he could drive a business concept. Wall Street had a hard time getting the drift of that Sam's idea, he readily admitted was absurdly simple: Buy cheap. Sell low. Every day. And do it with a smile! [9:23]  No one in the Walton household worked harder, except his father. ‘The secret is work, work work,” said Thomas Walton. “I taught the boys how to do it.” He was a bear for work, and would not tolerate sons who were not likewise industrious, ambitious, and decent. [12:08] Sam was optimistic all the time. He felt the world was something he could conquer. [15:13] A lesson the founder of JC Penney personally taught Sam: Boys we don't make a dime out of the merchandise we sell. We only make our profit out of the paper and string we save.” [21:42] The lawyer saw Sam clenching and unclenching his fists, staring at his hands. Sam straightened up. “No,” he said. “I’m not whipped. I found Newport, and I found the store. I can find another good town and another store. Just wait and see!”  [27:09] Sir, I never quarrel, Sir, but sometimes I fight, Sir, when I fight Sir, a funeral follows. [28:27] Sometimes hardship can enlighten and inspire. This was the case of Sam Walton as he put in hours and hours of driving Ozark mountain roads in the winter of 1950. But the same boredom and frustration triggered ideas that eventually bought him billions of dollars. [34:02]  One of the basic lessons Sam Walton learned at JC Penny was not to be so smug you ignored your competitors, especially their successful policies and practices. “If they had something good, we copied it,” Sam always said with total candor. [37:52] To these sophisticated and experienced businessmen in tailored suits and custom shoes, it looked like the tail was trying to wag the dog. What was that Arkansas country fellow’s experience with only a dozen or so stores compared to their thousand outlets and nearly a century of retailing know-how? [42:28] His tactics later prompted them to describe Sam as a modern-day combination of Vince Lombardi (insisting on solid execution of the basics) and General George S. Patton. (A good plan, violently executed now, is better than a perfect plan next week.) [43:43] I love this mindset: Move from Bentonville? That would be the last thing we do unless they run us out. The best thing we ever did was to hide back there in the hills and build a company that makes folks want to find us. [44:13]  The public conception of Sam as a good ol’ country boy wearing a soft velvet glove misses the fact that there’s an iron fist within. ----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----“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 ----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

He lives in a simple house in a small southern town. He's been married to the same woman for almost five decades. He drives a Chevy, dresses in store-bought clothes, and puts in long hours at his job. He also made for himself and his family over $9 billion, more than any other man in America. This extraordinary person is Sam Walton, In this fascinating, superbly researched book, Pierce's is carefully cultivated cloak of ordinariness to show what makes him tick and what made him succeed beyond the wildest dreams of wealth. It is a story and a quest that began in the dust bowl of Oklahoma in the depression, where a small boy saw firsthand the razor-thin line between survival and disaster. It was a lesson that stood him in good steed when he took an $85 a month job with

J.C. Penney and learned the principles of putting customer satisfaction over profits. In 1945, he bought a five-and-dime store in Newport, Arkansas, and began to put his ideas on how to make money to the test. The first Walmart was born, and while the rest is history, the story of Sam Walton is also the story of those ideas and how they worked through good times and bad to create one of the greatest triumphs in the annals of American retailing. What is most heartening of all about Sam Walton's spectacular success to create one of the greatest triumphs in the annals of American retailing.

What is most heartening of all about Sam Walton's spectacular success in this era notorious for greed, fraud, and financial shenanigans are his old-fashioned principles of doing business. Virtues of honesty and hard work. This rags-to-riches tale also reveals what others, both rivals and employees, boosters and critics, think of the wealthiest man in America and his methods. And Sam Walton himself tells how he has coped not only with success but with setback, working 16-hour days to pursue his passion for business perfection while remaining true to himself and devoted to his family.

For anyone looking for irresistible reading and a truly remarkable human being, meet Sam Walton, the plain folks genius who is utterly unique. That was an excerpt from the book that I'm going to talk to you about today, which is Sam Walton, The Inside Story of America's Richest Man. And it was written by Vance H. Trimble. Interesting to note, as far as I can tell, the author is still alive. I just actually ordered another book of his based on the founder of FedEx. And if that's accurate, if he's still alive, he is 107 years old. I found that very interesting. Before I jump into the book, I want to bring up this quote that I learned from Charlie Munger that I've never forgotten. And Charlie's famous for being a biography nut and studying the lives and the history of business and investing and everything else.

And this is what he said about Sam Walton. And it's one of the quotes that I always try to refer back to because I think it's something I try to aspire to myself. And he says, it's quite interesting to think about Walmart starting from a single store in Arkansas against Sears, Sears Roebuck with its name, reputation, all of its billions. How does a guy in Bentonville, Arkansas with no money blow right by Sears? And he does it in his own lifetime. In fact, during his own late lifetime, because he was already pretty old by the time he started out with one little store. and this is the most important part of the quote he played the chain store game harder and better than anyone else walton invented practically nothing but he copied everything anybody else ever did that was smart and he did it with more fanaticism so he blew right by them all okay so with that let me go to the very beginning of the book.

I thought this was a really interesting part. And it talks about his desire for anonymity. At this point in the story, he's already the richest American. And most Americans didn't even know who he was. Reporters start discovering, hey, it's not a Rockefeller. It's not a DuPont. It's not a Kennedy. But it's actually this strange guy out in the middle of nowhere, Arkansas.

So it says, for his first 50 or 60 years, Sam Walton was not at all a national figure. He remained in the shadows, off the beaten track. And that's the way he definitely preferred it. So he talks about the reporters. He said their digging soon enabled them to write in their notebooks that he grew up in Missouri in the Depression, These are the two most important sentences of this section, in my opinion. Pretty darn ordinary. Only on the surface. Sam Walton, underneath, was no ordinary man. He was a genius in business with an iron mind,

some say pig-headed, unwilling to compromise any of his carefully thought out policies and principles. And this next paragraph made me think of something I learned when I read all of Warren Buffett's shareholder letters. I'll read that to you after this section. To him, making money was only a game, a test of his imagination and expertise to see how far he could drive a business concept. Wall Street had a hard time getting the drift of that. Sam's idea, he readily admitted, was absurdly simple. Buy cheap, sell low every day and do it with a smile. And so let me read a quote from one of Warren Buffett's shareholder letters. And I think it's really important if you haven't already done so, go back and listen to the podcast I did where I read every single, it's like 60 years, something

like that, 54 years or something of his shareholder letters. And the reason I think it's important is because I don't know if there's another person alive, think about it, I don't know, he's probably close to 90 years old by now, that has studied more businesses than Warren Buffett. So I think if you read his shareholder letters, you derive all the insights that he's accumulated over his multiple decade career. And a lot of things stick out, I think, are valuable to us. And this idea where I'm going to relate it back to what the author is telling us here, that, you know, his idea is really, really simple and people don't understand that it doesn't have to be complex. Well, Warren also told us about that in his shareholder letters.

And this is what he says. Our investments continue to be few in number and simple in concept. The truly big investment idea can usually be explained in a short paragraph. We like a business with enduring competitive advantages that is run by able and owner-oriented people. That's a great description of Sam Walton. This is the point I really want to bring to your attention though. Investors should remember that their scorecard is not computed using Olympic diving methods. Degree of difficulty doesn't count. If you are right about a business whose value is largely dependent on a single key factor that is both easy to understand and enduring, the payoff

is the same as if you had correctly analyzed an investment alternative characterized by many constantly shifting and complex variables. So granted, degree of difficulty doesn't count. That doesn't mean it's a simple idea. It's obviously very hard to achieve and to do over multiple decades, which is what Sam Walton did. But that idea, buy low, sell cheap every day. And I think it's important to point out at this point in the story because, you know, people can confuse a simple idea with an ordinary person. Sam Walton is not ordinary at all. Sam Walton out Spartans to the Spartan. It was just part of his real life.

And I'll talk more about some of the characteristics that that he would share with Spartans, which is what the the authors are referencing there. Something to note, he hated being on the Forbes list. He did not like the attention. He says the fact that the Forbes magazine set him at top of the list of America's 400 richest people disturbed him greatly. He granted very few interviews. He turned his back on most TV cameras. He shuddered each time another magazine piece appeared. This next part was interesting because it's really saying that Sam is flexible, but he's also, excuse me, he's inflexible and flexible at the same time. Really, the way to summarize him, I would say, is he just always wanted the best ideas and he didn't care where

they came from. Sam Walton is flexible. If he adopts a business course that doesn't work out, he's neither too vain nor too blind to see his mistake and to say so and change his heading 180 degrees. It usually requires major persuasion by trusted lieutenants or his own recognition of unusual circumstance to let reason override his natural inflexibleness. So we see a little bit of a dichotomy there between his natural tendencies and then his ability to be flexible when he realizes, hey, I made a mistake and you actually have the better idea. So let's do that.

So I want to tell you a little bit more about his early life um and this is his father I would say the influence of his father um played a major role in who he was and at this point we see that uh even from an early age he has the traits of the Spartans that that the author is referencing duty discipline endurance I would say Sam had all three of these traits in spades. Sam was going out for football and basketball, learning to play tennis, making A's and more friends, grinding away on merit badges, he was in the Boy Scouts, in hopes of becoming an Eagle Scout.

He regularly attended Sunday school and would scramble after odd jobs, such as grass mowing or anything else. He also delivered newspapers that might put some money in his pocket. No one in the Walton household worked harder except his father. This is now a quote from his father, Thomas. The secret is work, work, work. I taught the boys how to do it. He was a bear for work and would not tolerate sons who were not likewise industrious, ambitious, and decent. Really no surprise there when you learn that his father had to struggle through the Great Depression.

Just a little bit about that. We lived there for several years, said Sam. My father quit the mortgage company and went into business for himself, real estate and insurance. Then came the Depression. Dad's business went down the drain. In this humdrum fashion, so he's just scrambling like almost everybody else in the country, trying to find any way to feed his family. In this humdrum fashion, about 10 prime years of Tom and Nan, that's Sam's mom, 10 prime years of their lives skittered away with no perceptible climb for the family up the social or economic ladders. They were still lower middle class, not poor, but dangerously close to it.

And now they, along with millions of other Americans, were in the cruel clutches of the Great Depression. Sam and his brother Bud were expected to work hard, be thrifty and not be wasteful of anything. Sam's about, I would say, 12 or 13 at this time. He says Sam Walton was already revealing the character traits that would dominate his future life. He stood out as an individual, different, no doubt about that. He was soft-spoken and quiet, yet despite being shy, he was a natural leader. He never got excited about anything. I would say externally. He didn't show his excitement externally,

but he definitely had a fire and a drive internally. More advice from his dad. He was being fed excellent advice by his father. If he wanted to achieve high and lofty goals, he must be willing to buckle down to work hard. So I'll tell you a little bit about high school Sam Walton, which I feel is very different from most of the people that we've studied on the podcast. Most are misfits.

They don't do well in school. They're rebellious. They don't listen to anybody. A lot of them get expelled or kicked out of school. High school Sam was essentially the model student, the perfect person. Listen to this. It blew my mind. He was the quarterback of the undefeated football team. He lettered in basketball. He was president of the student body. This guy's a machine. He's absolutely insane. What I love about Sam Walton, if you look at pictures of him, you know, you just see like a normal person. And that to me is just a costume.

You have an absolute, a psychopath is not the right word. He's just one of the most driven individuals you will ever meet. As you can imagine from all these, these accolades that he's already getting. He was voted the most versatile boy. Sam was in just about every club and organization and he was active sam was a hard worker he was optimistic all the time he had a great smile on his face and felt like everybody was his friend and the world was something he could conquer walton was living up to his dad's work work work work ethic um in high school in high school in addition to his man-killing regimen of academics and athletics he found time

for odd jobs and was becoming self-supporting he would roll out of bed at dawn and delivered newspapers and he also significantly worked part-time at a five and cent ten store five and ten cent store excuse me when he actually opens one called uh walton five and dime i think is what it was called um and then this is a great summary of the section. He just didn't waste time. He was always busy doing something. So I want to skip ahead in his life. And I love this because I think it's a reminder.

I think everybody experiences this, not just Sam Walton, but he's a young adult. He has no idea, no idea what he's going to do for a living. He had no idea what his career would be. I thought it was hilarious. the one idea he did have. So it says, Sam Walton virtually tossed all of his dreams for the future up in the air to see how they landed. I really had no idea what I would be, he said. At one point in time, I thought I wanted to be president of the United States. So this is actually where he just says, hey, I'm just going to take up. He didn't really have a passion for retail. He just had to learn it.

So he starts working at JCPenney. He says, I interviewed at JCPenney and I liked what I heard. They offered me a job at $85 a month. Sam Walton plunged into this new world of merchandising with the keen and furious dedication of a quarterback who was one touchdown behind with two minutes to go. Sam Walton knew little of the scope of the JCPenney company chain. And this is fascinating because they were around when I was younger. I don't even know if they exist anymore. But in Sam's day, they were almost like the Walmart of their day. Obviously, their scope is a lot more narrow in terms of what they sell, but it was a wonderfully successful company.

So it says he didn't understand the scope of the JCPenney company chain and absolutely no details of the personality and meteoric rise of the old man himself. That's John Cashpenny, and John Cash is actually going to teach Sam something on an individual basis. He would learn more soon,

including one profitable lesson taught him personally by John when the founder was age 65. And this is the very beginning of what we see Sam's lifelong trait that most everybody that we study in the podcast has. And it's just this idea that I'm going to constantly search for good ideas. And when I find a great one, I'm going to steal it. In fact, he would steal or borrow is perhaps a more precise word, John Cashpenny's whole concept of how to succeed by putting customer satisfaction ahead of profit. JCPenney himself arrived in town and spent a lot of time wandering around the store. This is something Sam does later in life as well. A customer came in and bought something from Sam.

And while he wrapped it up for her, JCPenney was observing the transaction closely. He waits for the transaction to close, the lady to the customer to leave, and then he walks over to Sam. I finished wrapping and tying the package and the lady left, said Sam. Then Mr. Penny came over. Boys, he said, I want to show you something. And he took about he took out a box about the same size and he went around it with paper and let let it overlap like that, maybe a quarter of an inch. Then he went around it with twine one time like this and one time like that, and he tied it. He said, this is such an interesting idea. He said, boys, you know we don't make a dime out of the merchandise we sell. We only make our profit out of the paper and string we save. In Sam's memory, those days are still vivid.

This is actually the next part. I actually talked about when I covered Sam's autobiography, which is fantastic. I think it might be Founders No. 6. It's one of the first books I did for the podcast. If you haven't read the book, you should buy it immediately. It's fantastic. It's probably the one book that Jeff Bezos gave out more as gifts than any other book. Okay, so let me go back to this part.

This is Sam remembering this time about how important his manager at JCPenney was. This is a guy named Duncan. And he says, The manager was a fantastic trainer. He used to invite us out to his house nearly every Sunday to play ping pong, eat, and talk business. You could learn a lot how to do it and better. He was one manager who had who had a 25 percent bonus contract. So this is also another idea that Sam steals in the early days of Walmart. I don't even know if it was Walmart time.

It's like he has like this 15 year career before he starts Walmart where he's still doing experiments and owning all these retail stores. But the one way he would do it is he would to recruit the best talent, he would give them a percentage of the profits, usually a large percentage, like 25%, like this manager has here. So it says he got his bonus check, it was $65,000. Remember, Sam was working for $85 a month, this had to blow his mind, right? He waved that one around, he waved that around one Sunday, and that just made us run faster and work harder. Sam Walton's training time in Des Moines, this is where he's living at the time, doubtless put several hundred dollars into the company till. But what he learned would eventually put a few billion into his own cash registers. So now I want to tell you when he opens his first store

and he's got a lot of good ideas, but the really the most important part of this section is he makes a drastic, terrible mistake. And I think learning that is really important. Keep in mind, he is 27 years old at this point in the story. So it says he thought Lady Luck was giving him a nifty break. He didn't know just how fickle she can be. He had been out of the army just a few weeks, and now he had stumbled into a chance to buy the franchise of a Ben Franklin five and dime store. So he starts out as a franchisee. He actually gets the money, this is important too, for the first store from his father-in-law, who's a successful entrepreneur in his own right and a banker, and also taught Sam a lot. So it says he was willing to lend his son-in-law the $25,000

needed to swing the deal. And he's going to have a lot for the first five and a half years of owning the store. Remember, he only has one store, which is really fascinating. He's obsessed and driven. So I'm going to tell you a little bit about that before I get to this mistake. All right, he's already made the mistake, but realizing how big the mistake was. The most important discovery Sam Walton made in Newport, he's in Newport, Arkansas, was that there was a charm and satisfaction in retailing that he had not fully expected. Sam Walton was crazy about selling and about satisfying customers, completely obsessed, but also driven in the recesses of Sam Walton's mind, there looked volatile and not to be denied impulses. That's just really good writing

because that gives you this paragraph really puts like an image in your mind, or at least to put an image in my mind when I'm reading this, because he again, he is a very charming, you know, even killed person. But he is he like, it's like Kobe Bryant. If Kobe Bryant was a retailer, this is Sam Walton. He's just completely obsessed with being number one. In the recesses of Sam Walton's mind, there were volatile and not-to-be-denied impulses that drove him to challenge the status quo of many things

and to conjure up new business experiments. Now, this next sentence, these next two sentences is insane when you realize that his, his next rival, remember he's in a tiny town. I think there's like 2000 people in this, this town, a very small town. And when you hear like how, let me just read to you. I'm not going to run over my point. What am I doing here? The sales volume grew astonishingly each year. He ran it for five and a half years. okay? For the year 1948, Sam racked up sales of $225,000. His next nearest competitor was doing sales of $25,000. That's insane.

Then lady luck deserted him. The fantastic way in which Sam built up and enlarged his sales volume beyond anything that had ever been done before by a Newport five and dime store caught the eye of his landlord. Now here's this gigantic, gigantic mistake. So what does that mean? He's like, well, this guy's coming over here. He's demonstrating to us that these stores can be a lot more profitable, make a lot more money than we expected. So the mistake Sam made is he didn't have any kind of renewal.

It's not like, okay, I'm going to renew in five years, and it's going to be capped at a 10% increase or whatever. So the landlord is essentially saying, I'm not going to renew the lease, and then I'm going to put a Ben Franklin store in your same spot, and all that money is going to go to me. So that is a bad luck and a massive mistake. But really, I argue, based on the two books now I've read about Sam Walton and what I've studied, I think what's about to happen here is actually the most important decision of his life. So let's go to the book. The lawyer's, Sam's lawyer is trying to negotiate with the landlord. It's just not

working out. The guy's very stonewalling him. So it says the lawyer offered tons of other stuff he didn't accept. He tried to interest the landlord in various different terms, but kept running into a stonewall. Then finally, he grasped the real situation. It's no good, he told Sam. I hope to God the next time you take over a lease from somebody, you check to make certain it contains a proper renewal clause. They're not going to let you keep the store. The plain truth is that they want some other guy that they do. I think it might be a son or somebody he's doing business with to run a Ben Franklin in that building.

You've shown the whole town what a moneymaker it can be. The lawyer watched the color drain out of his client's face it looks like you're finished he said and now this is the most important decision in my opinion of sam walton's life it's the part that gets you fired up when you read it the lawyer saw sam clenching and unclenching his fists staring at his hands sam straightened up no he said i'm not whipped i found newport and i found the store i can find another good town and another ben franklin just wait and see and why do i think that's the most important part because you know there's an alternate reality where sam walton's like oh this guy whipped me you know what maybe retailing's not meant for me you know i'll close

up shop i'll go work somewhere else he's like no okay i this guy whipped me. You know what? Maybe retailing's not meant for me. You know, I'll close up shop. I'll go work somewhere else. And he's like, no, okay, I'm emboldened by this. Okay, I made a mistake. That's fine. But the last five and a half years, I learned a lot. I proved to myself I can do it and I'll just do it again. And this is where he discovers accidentally, I don't know if that's the right word. This is where he's essentially looking for another mission, another store. So he's driving all around and he has to fit these particular parameters. He wants to work in a small town. He wants to essentially repeat what he just did and then start building on it because he does have already designs here to expand. So I want to read this part because I just could not imagine.

I mean, it's easy to read a sentence like, wow, that fires me up. This guy's not going to give up. But let me give you more details on how crazy this decision is that, you know, he's just unwilling. Based on where he's at in his life right now, he's in his early 30s. And so it says Sam Walton parked his car across the street and walked over for a closer look. He's in some another small town in Arkansas. So he parks his car, walks over, leading his three sons and his wife carrying his baby daughter. Imagine being unemployed, your wife's with you, and you got four kids to support. They were scouting a possible new location. It was late spring 1950 and time was running out.

At the end of the year, they would lose their Newport Ben Franklin. I'd never seen him before, said Jim Dotson. But they all came in and looked around and right off the bat he said he'd wanted to buy me out the store was not for sale uh so sam's working on sam's also a master salesman he says i hadn't even been thinking about selling but he was so eager i had to consider it and what was funny to me about this part now he says okay i want to buy your your the store that's not for sale but also your house as a package deal. So they wind up, he gets the guy to agree to it. The problem is Sam doesn't have a lot of money at this point, and they're $5,000 away.

And I think the purchase price, the guy wanted $65,000 and Sam couldn't spend more than $60,000. So this deal doesn't wind up working out. It says, unwilling to pay another $5,000 to close the deal, Sam Walton loaded up his family and drove on, still looking for a new hometown. And this is where he discovers Bentonville, Arkansas, where Walmart is still found. The headquarters is still there to this day. About a week later, Sam arrived in Bentonville, Arkansas. Sam is 32 years old this time.

They were sharply taken aback when they stepped into the gloom of the five and dime. Now, I bring up that one sentence because they find a little store, this tiny little store. But the reason he was so excited about it, because he realized it was under the management was not as good. He saw there was a room, immediate room for improvement, which is beneficial if he's going to buy something that he feels he could rapidly expand the value just by making a few different enhancements to it. Now, what was interesting, though, is this is also Sam just demonstrating to us. It's like I'm not making the same mistake twice. I'm willing to experiment. I'm willing to be aggressive and I'm willing to make mistakes one time. I'm not going to make the same mistake twice. He says Harrison, Harrison, the guy he's trying to buy from, did not own the building, but rented it for $25 a month. Sam insisted on buying the building. And it's this point in his life where we see Sam is revealing his true ambitions. That's what I wanted to be. The leader. What is he talking about there my personality is my store will be the best

not among the best not one of the best it will be the best and that requirement that setting the bar that high for yourself requires a completely different level of dedication than most of the people that Sam competes with and that's where you see a lot of the parallels between Sam Walton and Jeff Bezos. It's a relentlessness that just few people that, not only a few people alive today possess, but few people that have ever existed in history possess that level of relentlessness. I mean, in fact, to this day, go to relentless.com, see where it forwards, see who owns that domain. It's hilarious. And it's an example of another similarity between Jeff Bezos and Sam Walton. This is Sam Walton setting up.

You know, he's Spartan, very, very, very, very, very frugal. And this is how he sets up his desk. He grabbed a couple of sawhorses and slammed down a piece of plywood on top of them. That was his desk. That put him in business. He used that desk for five or six years. And so if you read The Everything Store, I think it was Founders No. 16, maybe somewhere around there, the book on Jeff Bezos, The Biography of Jeff Bezos, early days of Amazon, Jeff Bezos did the exact same thing.

If he would hire you, he'd say, okay, go down to Home Depot, buy a door, and make your own desk. So Jeff used door desks. In this case, Sam Walton's using, you know, a piece of plywood and some stall horses. All right, allow me to deviate from the story for just one second. I want to tell you about another extreme character. And at this point in the book, the author is giving us some background, some historical background about the little small town

that Sam sets up and sets shop up in, right? And this quote is going to come from the guy that Bentonville, Arkansas was named after. And you'll see what I mean by being an extreme person. So he's a politician as well. And he says he was the first senator to serve 30 years. And moreover, he had the courage and daring, once asserting in a Senate debate.

This is a crazy quote I'm about to read you. Mr. President, sir, I never quarrel, sir, but sometimes I fight, sir, and when I fight, sir, a funeral follows. So moving on to another important realization, important idea, Walmart would never have came to be if it wasn't for what was happening this year. For one year, a little less than a year,

he's running his store in Bentonville until the lease expires back in Newport. So he has to drive back and forth between the two stores, driving back in between the two stores. And these mountain roads takes a very long time. This is where he realizes, hey, I got to find a faster route. I'm wasting too much time here. And this is where he learns how to fly. Now, the point here is not that you need to learn how to fly. The point is that you've got to find an advantage that others aren't doing. So sometimes hardship can enlighten and inspire.

This is the case of Sam Walton as he put in hours and hours and hours of driving Ozark Mountain roads in the winter of 1950. But the same boredom and frustration triggered ideas that eventually bought him billions of dollars. These countless eight to 10 hour commutes between Bentonville and Newport So it talks about some places you're going less than 20 miles an hour There's no highways, it's very dangerous So it says as he's doing this drive But one evening he heard the drone of a small airplane And a light flashed in his brain

So he's like, oh, maybe I can fly this So he doesn't know how to fly yet So he goes and sees, can I charter, can I have a pilot do this? So he says for a reasonable fee, he chartered a pilot to take him to Bentonville. The eight-hour road trip shrank to a 90-minute flight. This gave Sam the answer he was looking for. Without this, his Walmart phenomenon never would have seen the light of day. Quite a bit of capital was needed to open and stock a new store and profits did not flow in immediately.

So why is the author telling us this? Because new ventures require close managing means he's got to be there. And so almost from reading this book and the other one, it sounds like he basically flew almost every day. And he'd visit, you know, five, six, ten different stores in a day. And of course, he's only able to do that because eventually he learns how to fly. And he also says in his autobiography that he didn't like jets. He liked these small little single-engine planes. I mean, some are small dual engines as well.

But because you could get down low, he could study traffic patterns. And that's how he'd pick out potential uh beneficial locations that other retailers were were ignoring and he would discover future locations for walmart's it's very very successful ploy so it's again one of the most important realizations of his entire career um i'm fast forwarding a little bit because really there's two things that are happening in this section i'm about to read to you uh one um he's a retailer, obviously, so he's got to ride trends. And at this point, hula hoops are extremely popular. And they're so popular that small stores cannot get them.

So Sam's like, okay, well, he didn't give up there, right? He's like, okay, he just studies what a hula hoop is. Like, well, this is just a little piping that you put together in a big circle. He's like, all right, I'll just make my own. And then as he's making his own, though, we see the relentless resourcefulness that this guy had. It's really interesting. So he says we would make several thousand a night. So he works all day, then at night he's making hula hoops by hands. He's also partnering with this other retailer, so they're doing it together. But he says we'd make several thousands a night. Sam would haul

his off and spread them around his stores. Now, okay, so that's pretty straightforward. Okay, that's interesting. He's going to make his own product so that way he can sell it, right? He didn't have a truck. So how is he going to take, they're making thousands of these a night. How's he going to transport them? This is hilarious. I don't have a truck, but I got a John boat and a trailer. He didn't have a truck. He had sort of a trailer hooked to the back of his car it was a actually it was a boat it was a john boat that was about 12 feet long on a two-wheeled trailer but he made do with it sam would comb over with his john boat trailer and haul off his part of the order every nickel and dime counted so this next part is a there's a bunch of quotes that are

happening maybe 30 years in the future. And it's Sam and his brother, Bud, giving an interview to their like Walmart internal magazine kind of thing. So I'm, I'm going to read this to you. It doesn't matter who said what, because the points, the main point is that doing things others were not led to unexpected success um and really this is a story of walmart before walmart existed so it says all the stores were open under different arrangements it was a collection of partnerships and individual ownerships including all the store managers who could raise money to invest so they didn't have any money that's why they had to do that stuff we were uh we were basically all financially strapped We put everything we had in the stores at the beginning.

The decisions were made for Walmart long before the company was developed. This is, I want to pause here, because in his autobiography he says something. He's like, listen, not enough people have studied that 15-year period. A lot of people are now studying Walmart because it's the most successful retail in the country at the time he's writing his autobiography. But he's like, really, a lot of the ideas we learned in this 15 years of struggle, trying to develop the concept that would become Walmart. So he's describing those days, which I found really fascinating. Back in the Ben Franklin days, we learned so much.

And he talks about one store. The St. Robert's store was the originator of Walmart stores. St. Robert's showed us how much volume was there if we went into larger units in small communities and pushed the merchandise. And this is really, really surprising. We became the first independent variety chain in the country to try large stores in small towns. We were doing an inordinate,

an amazing amount of business in a 13,000 square foot store. Now they're, you know, 130, 150,000 square feet. I think some of his warehouses are like the super centers, whatever they're called. So 13,000 square foot store, which is totally out of character for a town of 2000 people. Again, no one else was trying this. They're just like, hey, well, let's just, let's experiment. Let's see what happens. And as a result, we found we could do a million dollars in a variety store. That was unheard of at the time. A famous quote by Steve Jobs is saying, we've already been shameless about stealing great ideas. Sam Walton's echoing that same exact thing here. One of the

basic lessons Sam Walton learned at JCPenney was not to be so smug you ignored your competitors especially their successful policies and practices he was always going around expect inspecting stores um i think in i think it was in his autobiography as well said there's not a person alive that had been in more retail stores across the world than sam walton. He would do this constantly. So at this point, they're naming all these other companies that were competitors of his at this point, but they don't exist anymore. I'll skip over their names. They're not important. But his realization is the most important part. If they had something good, we copied it.

That's a direct quote from Sam. Sam Walton always said with total candor. So now this is really interesting. It's going to be a little longer part. This is Sam on Kmart and the founder of Kmart and also his admiration for them, but also the mistakes that they made. Cunningham is going to be, let's see, what is his name? Harry Cunningham is the founder. I didn't know Cunningham until much later, said Sam. He went to see Ann and Hope. This is another store, people just as I did. He was much more organized

than I was he came up with the Kmart concept what a guy I've always had the greatest admiration for Harry Cunningham because when he threw that vehicle down that thing was 10 or 20 years ahead of its time and he did it better than anybody else what I did later was take pieces of it and make our walmart as much and make our walmart as much like it as we could it was a copying proposition now he's saying this in 1990 there are they are coming back and copying us but they're making some mistakes at the start we were so amateurish and so far behind we had our merchandise price right and it worked in small towns. Kmart just ignored us. They let us stay out there while we developed and learned our business. If they had jumped on us, I hate to think of what would have happened.

But we were protected by our small town market. It would have been unthinkable for them to have tried to put a competing store in a small town. Their strategy was going into large cities and metropolises. They gave us a 10-year period to grow, and finally we were able to hold our own. Kmart stayed with it for too long. They were self-satisfied with what they had accomplished. They thought they could roll over everybody,

and they woke up one day and find out that the world had changed. Retailing had changed and they were behind. What I learned for the first time reading this book, which is really interesting, Sam tried to give away the idea for Walmart. He tried to give it away and they wouldn't listen. Remember, he's a franchisee to the Ben Franklin brand. So it says, his proposal was audacious perhaps impertinent certainly unacceptable he suggested that the variety store franchisee franchisers leap into the front line of the booming discount business so this that's what he's calling uh this phenomenon

retail which is what walmart is built on okay discount business uh i think i think that kind of store will fit in the rural markets just as well as the major metropolis markets, said Sam. You should franchise them. I'll be your guinea pig. That's the idea. This is the idea that turns out to be Walmart. Listen to their responses. The Ben Franklin Brass Exchange sour look.

So how do we know that this was obviously a mistake? I never even heard of Ben Franklin stores. And the only reason I know about them is because I read about Sam Walton. So obviously they went out of business. They're gone. Sam still survived, right? So it says, I think I just looked. I think Walmart did something like $500 billion in revenue last year,

some crazy stuff like that. So it says, the Ben Franklin brass exchange sour looks. Sam went on. They'd have to cut their wholesale prices. Instead of making 20 or 25% profit off the merchandise they sold their retailers, the Ben Franklin warehouses would have to be satisfied with about a 12% profit. They blew up, Sam said. To those sophisticated and experienced businessmen in tailored suits and custom shoes, it looked like the tail was

trying to wag the dog. What was this Arkansas Country Fellows experience with only a dozen or so stores compared to their thousand outlets in nearly a century of retailing know-how? And so Sam is using the example of Kmart as part of his pitch to them. And they think it's ridiculous. Now, this is hilarious. Look what happens the next day. The next day, one of the Ben Franklin executives went out to take a close look at the first of the new Kmart's discount stores. He got a surprise. Sam Walton was already there.

Here he was, 25 miles from our office, and he was talking to a clerk. He was writing in a little spiral notebook. And at one point, he got down on his knees to look under the display cabinet. I said, this is what I love about Sam. And how could you not love about anybody that has these characteristics, right? Listen to this. I said, Mr. Walton, what are you doing?

He said, this is just part of the educational process. I'm still learning. Something most people understand, controlling costs, being frugal when you're running a business. It's an idea as old as time. It's clearly a good idea. But there's a difference of knowing something and understanding it and applying it. Right.

And so this section was really surprising to me. And the quote, or excuse me, the note I left myself was how dedicated are you to keeping costs low? And so what's happening? He's already going on. He's starting his first Walmart at this point in the story. And this is, I'm going to read it to you because this is dedication to keeping costs low. So they're figuring out him and another person that's working with them, trying to figure out what the hell we're going to call this new chain of stores we're doing, right? It says, which one of those names do you think we should call it? Bogle studied the list for a few minutes. All were long names, each made up of three or four words. Well, Sammy said, you've had me buying the letters to go up on our Ben Franklin stores,

and I know how much they cost and how much they cost to repair and how much they cost to light. It's expensive to put that many words in a name. In other words, Walmart is called that in part because fewer letters means cheaper signs. That's amazing. Now, remember at the beginning, what is the phrase they said? Something about piercing the ordinary. Let's see. Yeah, this book is going to pierce his carefully cultivated cloak of ordinariness. Remember, that's how he appears, like a disguise.

I want to give you a summary of this. And there's another, I think another part later that I bring up to emphasize that point. I really do think it, I do think it was genuine. I'm not saying that, but it was definitely camouflaged. Like he's a very nice, calm person. You know, I'm just an ordinary country boy. But that is also camouflage to just a complete obsessive, you know, competitor. And this is really a summary of Sam I'm giving you here. So how from there did Sam Walton get to be America's most admired retailer? The theory here is that he willed it through sheer force of a complex personality. He's an old-fashioned promoter in the P.T. Barnum style, but he's more than that. He's a little bit Jimmy Stewart, handsome and halting.

He has all shucks charm. He's a little bit Billy Graham with the charisma and persuasiveness that heartland folks find hard to resist. And he's more than a little bit Henry Ford, a business genius who sees how all parts of the economic puzzle relate to his business. But this is really the summary of this entire section. Overlaying everything is a lot of the old yard rooster who is tough, loves a good fight, and protects his territory. This is one of his associates describing Sam.

The thing that I underestimated about Sam is that he has an overriding something in him that causes him to improve every day. Not only does he want to improve every day, but he's relentless in that pursuit. He's not going to rest on his laurels just because he's successful. Sometimes you achieve success and say, boy, now I got it like I want it. Now I can lay back a little and enjoy it. Sam has never done that. And this is just absolutely fantastic. I love this. His tactics. All right. I love when you compare different historical figures, right? I think I said, I think I described Frank Lloyd Wright as a cross between P. barnum and kanye west right it gives you just an idea of who these people are this is a combination of historical figures

to describe sam welton and again the note i left myself really simple this is fantastic his tactics later prompted uh some trade publication to describe him as a modern day combination of vince lombardi who would insist on solid execution of the basics, and General George S. Patton. And the quote they leave here for Patton is, a good plan violently executed now is better than a perfect plan next week. And one of the best things, I obviously heard the name Vince Lombardi, didn't know much about him.

I read the book Creative Selection, which goes into what it was like designing products for Steve Jobs. I did a bonus episode. You can find it in the archives. But it was very interesting where Vince Lombardi had this one play. I think it was like the Power Sweep or whatever it was. And he gave a lecture or presentation one day. In eight hours, he talked about perfecting one play and one play only.

And I just love that. This insisting on solid execution of the basics. So once he makes the Forbes list, he gives a comment to them. And I love this. I just love this sentence. And I love this mindset. I think this is the right mindset. Be so good that I'm not adapting to you. You're going to adapt to me. And so they're talking about, oh, now you're rich and successful. Why don't you get out of Bentonville? And this is a direct quote from Sam move from Bentonville that would be the last thing we do unless they run us out the best thing we ever did was hide listen to these words he's using the best thing we ever did was hide back there in the hills

and eventually build a company that makes folks want to find us. Okay, I finally reached the part where I talked about this idea of camouflage. And this is a close family friend and somebody that works with Sam. And he says, he also claims that the public conception of Sam as a good old country boy wearing a soft velvet glove misses the fact that there's an iron fist within it. And so when I read that sentence, it made me think of the book that's been on my mind lately because I've done it recently, which is that book Hard Drive, which is the biography of young Bill Gates up until, I think, Microsoft IPOs.

And a good way to think about how Sam Walton relates to Bill Gates, I think they had in common was a young Bill Gates was Genghis Khan in a Mr. Rogers costume. Sam also still was making mistakes as anybody is going to his buildings company. And this is another example that he steps aside of the company that he spent his whole life building because someone else is in a rush. And from hindsight, we see, you know, this is not wise. He did it anyways. And, you know, this experiment, it's going to be disastrous. It's only that's about 20 months until he takes his company back. As he approaches 57th birthday, Sam Walton was reluctantly trying to change his lifestyle completely by surrendering the day-to-day

command of his Walmart empire. But he found that difficult, almost impossible to do. The thought of stepping aside nettled Walton, but he had to think seriously about it because of mounting pressure from one of his foremost underlings. So he has this guy named Ron Mayer, who he feels like this boy genius who'd be the perfect successor. But Ron Mayer's in a rush, so he's not willing to wait and let Sam run the company for another 10 or 15 years. So it's got to be now or never. And so this is pushing Sam to make a decision that winds up being a big mistake. He says, I'm going to lose Ron if I don't step aside and let him be chairman. And I don't want to lose him. He's a talented guy. It was official. Sam had retired. Ron was a new chairman and CEO of Walmart. But here's the weird part when you're reading the section.

It's like, well, so he retired, but he's still working every day. And he said it's not like he's just letting Ron run things. He's still poking in there. He says, but it never been Sam Walton's nature to dilly dally. That's one of my favorite words ever are back off. He hadn't changed his habits. He was on the scene every day. His role was now supposed to be unofficial, but he couldn't keep his hands off. When he saw something, anything he didn't think was right, he'd just step in and correct it. That's the way I've always been. I guess I was getting in the way of Ron's authority. It bothered Sam's conscience that he personally had made a mistake.

He discovered that he really wasn't ready to retire. He missed the old job. So he winds up getting some kind of like hairy cell leukemia. I think he's like 62. That goes eventually into remission. But he dies of cancer at 74, I think. And this idea where at 57, he could give up. He is still going around and giving speeches and working at Walmart. And the cancer's in his bones. Like, he's in drastic pain all the time, and he's still working. So that gives you this idea that, like, you know,

at 57, and as far as he knows, perfect health at this point, there's this idea that he's going to give up. It's impossible. And that's why he realized, oh, man, this is completely my fault. He had to either get back into it or leave it completely. So he winds up asking Ron to go back to his other position. Ron, of course, doesn't accept, leaves the company, winds up losing a bunch of executives. You know, like, he's an extreme person. He's going to be extreme to the people around him, even if he's nice. And it says, someone said Sam Walton used up men the way he threw wood into his fireplace. Just like the logs, they blazed up with a fury, generated powerful and beautifully efficient flames,

and after a time, died down into cold ashes. So he went to a lot of people. The same was said about Jeff Bezos. I think in everything Stuart said, something like, you know, he would jump on your back and ride you into the ground. So I think Bezos and Walton, yeah, you know, were definitely pushing people around them. And here's another evolution of Sam. So he starts out in these tiny little stores, then he realizes, hey, discounting business is going to be huge. And then he's doing another evolution again, where he realizes warehousing is going to

be a gigantic business I need to get into. And so let me read the section to you. On a sunny January morning in 1983, Sam Walton flew into San Diego to investigate a new wrinkle in the discount business, a membership wholesale club. The idea was originated five years earlier by a savvy California entrepreneur named Sol Price. Now, if you've listened to all the podcasts I've done so far, you know who this person is. He is one of, I don't know of anybody else that's been more influential. Maybe Ben Franklin, as far as how many entrepreneurs this one person inspired. If you haven't listened to it, it's Founders number 107.

Sol Price, Sam Walton said, on record saying, I learned more from Sol Price than any other individual. He came up with this concept. Jim Senegal, the founder and CEO, well, he's not the CEO anymore, but he was the founder and CEO of Costco for a very, very long time, says in the foreword to Sol Price's biography, it's like, not that I learned some from Sol. I learned everything I know from him. He was his

protege. He took the idea from Sol and built Costco. You can draw a direct line from Sol Price to Sam Walton, Jeff Bezos, Jim Senegal. Bernie Marcus, the founder of Home Depot, is walking with Sol Price and Sol turns to him and says, hey, this idea I'm doing right here in San Diego, it's only a matter of time until somebody does that for home improvement stores. It might as well be you. And that's the idea of Home Depot. This guy was one of the most influential thinkers that have ever existed. Listen to that podcast and read the book.

I mean, why not? He influenced so many people. Okay, so let me go back to this. So he's a savvy California entrepreneur named Sol Price. Sol Price was making an astounding success by selling merchandise at only 10 percent above manufacturers prices and getting rich. Is Sol Price could do that? Sam Walton figured he could, too. Sam intended to crib, meaning steal, borrow from Sol Price just as he had copied schemes originated by J.C. Penny, Herb Gibson and many other good merchants. The wholesale club idea was good. Extraordinary good. Sam returned to Bentonville and called

together his top strategists. Walton hopped on this new scheme with enthusiasm. Brashly copying from sole price, Walton began creating a division of Sam's Wholesale Clubs. For years, Walton had been seeking some effective way to get his everyday low-price methods and concepts into rich and sophisticated metropolitan markets, and now he had finally found it. And that's exactly what Costco wound up having a lot of success with as well. And this was actually really surprising and another example of Sam copying good ideas. And this has to do with why he was eventually knocked off Forbes list. They realized, oh, he gave away the stock that we thought he owned. He gave away a long time ago to his children. This is, I'm just going to read the section. It's very fascinating. But if Sam was not individually

the richest man in 1989, he never had been. For when and how and why he and his wife shared their business resources with their four children is one of the more fascinating untold Walton episodes. The children have each owned one fifth of their parents' stock and property since 1954, way before. Sam and Helen created the trust that set this up when Ron was 10 and Alice is only five. Those are obviously their kids. Doing this kind of estate planning so early in the game was urged by Sam by his father-in-law. This is the one that lent him the money. Also helped him negotiate for that first store. His name's L.S. Robson, who had early done precisely the same thing giving Helen, that's his daughter and Sam's wife, and her siblings equal shares in the vast ranch that he assembled in Oklahoma. Mr. Robson was a banker and a lawyer and pretty smart, Sam once explained. I could

see that this was the thing to do. And this all took place four decades ago. I came home and he had this lawyer drop all the papers. Rob Walton, with Sam on that occasion, observed, that's his son, at the time, all dad and mom had was a variety store or two. That was so fascinating about this. This was way before Walmart. The foresight is amazing. Our shares then couldn't have been worth more than $5,000 each. It had been Sam's imagination, genius, and drive,

with extraordinary good luck, that exploded these shares to a value of almost two billion dollars each. So I actually want to close not on something that's in this book, but from another book, and it's from the Everything Store, and it says Bezos had imbibed Walton's book thoroughly and wove the Walmart founder's credo about frugality and a bias for action into the cultural fabric of Amazon. Bezos had underlined one particular passage in which Walton described barring the best ideas of his competitors. Bezos' point was that every company stands on the shoulders of giants that came before it. The book clearly

resonated with Amazon's founder, and on the last page, a section completed a few works before his death, Walton wrote, could a Walmart type story still occur in this day and age? My answer is, of course it could happen again. Somewhere out there right now, there's someone, probably hundreds of thousands of someones, with good enough ideas to go all the way. It will be done again, over and over, providing that someone wants it badly enough to do what it takes to get there. It's all a matter of attitude and the capacity to constantly study and question the management of the business. Jeff Bezos embodied the qualities Sam Walton wrote about.

And I wanted to close on that because we are the hundreds of thousands Sam was talking about. We can learn from great people of the past, add in our own unique ideas, and then push that knowledge down the generations. Buy the book using the link in the show notes. You'll be supporting the podcast at the same time. That's 150 books down, 1,000 to go. And I'll talk to you again soon.