Founders - #370 The Founder of IKEA: Ingvar Kamprad

Starting point is 00:00:00 Ingvar Kamprad founded IKEA when he was 17 years old and worked on it until he died at 91 years old. He wrote what they called the IKEA Company Bible. It's a document that's called The Testament of a Furniture Dealer. I actually love the message inside so much that I had the document printed and bound and it is now sitting on my desk. And in that document, and something Ingvar repeated for more than six decades was that cost awareness was to be IKEA's anthem. Ingvar's dedication to that idea was total. And the way that Ingvar spoke about this, it sounded and reminded me a lot of what Sam Walton would say about the importance of cost control in his autobiography. There's multiple different quotes from his autobiography

Starting point is 00:00:40 where Sam talks about this. This is one of my favorite. He says, I'm asked why today when Walmart has been so successful, when we're already a $50 billion plus company, should we stay so cheap? That's simple because we believe in the value of the dollar. We exist to provide value to our customers. This is something Ingvar repeats over and over again, which means that in addition to quality and service, we have to save them money. Every time Walmart spends $1 foolishly, it comes right out of the customer's pocket. Every time we save them a dollar, that puts us one step ahead of the competition, which is where we always plan to be. Control your expenses better than your competition. This is where you can always find the competitive advantage. For 25 years running,

Starting point is 00:01:21 long before Walmart was known as the nation's largest retailer, we ranked number one in our industry for the lowest ratio of expenses to sales. Anyone and everyone who is committed to being great at building their business is obsessed with watching their cost. Ingvar says this in the book. He says that we pushed cost awareness at all levels with almost manic frenzy. There's a line in Andrew Carnegie's biography that describes him. It said, cost control became nearly an obsession. Sam Walton,

Starting point is 00:01:50 Andrew Carnegie, Ingvar, I talk about Henry Ford in this episode, they all built some of the world's largest fortunes. And what they all had in common, just like Elon Musk, who you and I talked about last week, and countless of other history's greatest founders, for them, cost control was an obsession. This is something I talk about all the time with my friend Eric, who is the co-founder and CEO of Ramp. Ramp is now a partner of this podcast. I've gotten to know all the co-founders of Ramp and have spent a bunch of time with them over the last year or two. They all listen to the podcast and they've all picked up on the fact that the main theme from the podcast is on the importance of watching your costs and controlling your spend. In fact, Eric just sent me a text from this biography of a founder that he's reading.

Starting point is 00:02:27 And in it, one of his employees is talking about the fact that you get a handwritten note asking things such as, why is this expense higher than last month? And what steps are you going to take to change it? And he didn't forget it the next month either. He would notice he was sharp. He knew exactly what every dollar went for. And that founder, just like Ivar Kamprad, Sam Walton, Elon Musk, Andrew Carnegie, Henry Ford,

Starting point is 00:02:47 the reason they did this is because they knew that watching your costs and controlling your spend gives you a massive competitive advantage. And that is the reason that Ramp exists. Ramp exists to give you everything you need to control your spend. Ramp exists to give you everything you need to make cost control an obsession.

Starting point is 00:03:04 I think Ramp's website is incredible. Make history's greatest entrepreneurs proud by going to ramp.com to learn how they can help your business control costs. That is ramp.com. 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 Godforsaken place deep in the forest. 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.

Starting point is 00:03:40 The country is Sweden. The man is Ingvar Kamprad, furniture dealer. He aims to give his business eternal life. It's a long way to the country where an empire was built. Where he was born, loneliness, silence, and reserve prevail. The cottages have always been small. Survival has never been taken for granted. It was here that the dream of IKEA first grew.

Starting point is 00:04:04 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? What about the vanity of one day showing your father and your mother and the whole world what you could do? Of course they count.

Starting point is 00:04:36 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 business in which he realized and through which he lived out all of these circumstances, for good or for bad. It is about an outstanding and natural genius, an incorrigible capitalist, so relentlessly obsessed by the lure of profit and power that he used a thousand tricks to endow his creation with eternal life. Others will

Starting point is 00:05:18 recognize themselves in his story, for all of us bear within us the embryo of a miracle. That was an excerpt from the book I want to talk to you about today, which is Leading by Design, the IKEA story, and is written by Bertil Torkel with a lot of close association with Ingvar Kamprad himself. So there's huge chunks of this book that are in Ingvar's own words. I want to go to the end of the book really quick because I think it's really important, and this is something that I absolutely love about entrepreneurs is that entrepreneurs love the future generations of entrepreneurs. So Ingvar Kamprad, think about how crazy this is. So he found Ikea. Ikea was founded 81 years ago. It is now today the largest furniture retailer in the world. And also strangely enough, one of the world's 50 largest restaurant chains. But he

Starting point is 00:06:05 found IKEA 81 years ago. He works on it for 74 years, from the time he is 17 until he dies. And Ingvar dies at 91. And so about 20 years before he passes away, Ingvar agrees to work on this book with the author. And he tells us at the very end why he did this. He says, for over 10 years, I've been called on by a number of writers and publishers wanting to write my biography. I have always been very reluctant to do this and have evaded the issue as politely as possible.

Starting point is 00:06:33 And that was his position until this author suggested that the book be written so that it could be used as study material for future entrepreneurs. That was the only time I listened. So I'm actually gonna put the book down for one second. I actually want to start with what is considered like the IKEA Bible. It is a document called The Testament of a Furniture Dealer and is written by Ingvar Kamprad in 1976. You can read it for free online, but I thought it was so great that I actually had it printed and bound. And the way that The Testament of a furniture dealer is described internally at IKEA,

Starting point is 00:07:06 they call it a sermon on the culture of IKEA. And in fact, later on in the book, they talk about the fact that this document is the basis of this sermon. So every year, Ingvar would have like top executives and then some new people that are new to the IKEA family. He would lead a meeting with them. And it says he essentially gave the exact same

Starting point is 00:07:25 sermon for 43 straight years. And that talk was based on the principles and the ideas in this document that's sitting before me. And so he starts with an act of service. He is telling them why IKEA exists. And he says, to create a better everyday life for the many people by offering a wide range of well-designed functional home furnishing products at prices so low that as many people as possible will be able to afford them. The best founders, the best leaders, they know their job is to get their entire organization's commitment to a common goal. So the very next sentence is a great description of IKEA's common goal. We have decided once and for all to side with the many. And so throughout Ingvar's

Starting point is 00:08:06 life, he will constantly repeat these principles. And he will also say, you are forbidden. You cannot change these principles ever. So this is the first one. We have decided once and for all to side with the many. This is an objective that carries obligations. And he's immediately going to contrast. This is the way, the IKEA way. This is the principles, this is what we believe in, and he's going to contrast it to what everyone else does. He is telling them this is how we will be different. All nations and societies spend a disproportionate amount of their resources on satisfying a minority of the population. Far too many of the fine designs and new ideas are reserved for a small circle of the affluent. That situation has influenced the formulation of our objectives.

Starting point is 00:08:50 So when I read that paragraph, the first person that came to mind was actually Henry Ford. If you go back and study the creation of the American automobile industry, I would argue the two most important figures are Henry Ford, obviously founder of Ford Motor Company, and then Billy Durant, founder of General Motors. The reason Henry Ford came to mind is because Henry Ford had one single idea. It took him like a decade and a half to figure out how to do this idea, but his one single idea was to make the car for the everyman. Let me read you a paragraph from one of the biographies of Billy Durant that I read, and this is really Billy Durant describing Henry Ford's one single idea. Says Durant noted that Ford was in favor of keeping prices down to the lowest possible point, giving to the multitude the benefit of cheap transportation. Henry Ford was obsessed with eliminating waste. He was obsessed with cost control.

Starting point is 00:09:44 And he was obsessed with rethinking the manufacturing process for the maximum level of efficiency. The same exact thing could be said about Ingvar Kamprad. And so we go back to this opening declaration from Ingvar Kamprad. After only a couple of decades, we have achieved good results, but we have great ambitions. We know that in the future, remember he's writing this in 1976, okay? We know that in the future, we will be able to make a valuable contribution outside of our homeland too. He's talking about Sweden. We know that larger production runs gives us new advantages on our home ground as well as more markets to spread our risks over. That is why it's our duty to expand.

Starting point is 00:10:21 The means we use for achieving our goals are characterized by our approach, by doing it a different way. That phrase, doing it a different way, something he repeats over and over again. Part of creating a better everyday life for the many people also consists of breaking free from convention. That part is important because fast forward to present day, Ikea is the largest furniture retailer in the world. At the time he's writing these words, obviously they're not, but they're also the most innovative. There are several ideas that Ingvar and the early employees at IKEA came up with. They were the first ones to come up with them, and they are now widespread throughout the entire industry. And you see him many decades before he's the largest

Starting point is 00:10:57 furniture retailer in the world saying, hey, we are going to break free from convention. We are going to find new and better ways. We are going to do it a different way. And he also says it's not going to be easy. He says we must demand much of ourselves. The essence of our work is described in the following chapters. The following chapters also describe the rules and methods that we have worked out over the years as cornerstones of the framework of ideas that have made and will continue to make IKEA a unique company. And so then he has a list of nine principles that IKEA is built on. And one of the key principles is that IKEA must have low prices so the vast majority of people can afford to shop there. And you'll see his dedication to that idea is total. So he says,

Starting point is 00:11:42 the concept of a low price makes enormous demands on all of our coworkers. That includes product developers, designers, buyers, office and warehouse staff, salespeople, and all other cost bearers who are in a position to influence our purchase price and all of our other costs. In short, every single one of us. Without low cost, we can never accomplish our purpose.

Starting point is 00:12:06 And so you and I have talked about this over and over again. The fact that the greatest entrepreneurs throughout history, they cost controls an obsession for them. That definitely applies to Ingvar as well. He talks about over and over again. You have to control your costs because we must have low prices. And then he ends this section saying there is no compromise. This principle will never be compromised. He says our policy of serving This principle will never be compromised. He says, our policy of serving the many

Starting point is 00:12:26 can never be changed. And so in the next section, he starts talking about the IKEA spirit, what he calls, what you and I would call company culture, he calls the IKEA spirit. And I think this part in particular is a great illustration of the idea

Starting point is 00:12:39 that the founder is the guardian of the company's soul. If you read this section, it's obvious that Ingvar is trying to guard the company's soul. He says, obviously, it was easier to keep alive our company spirit in the old days when there was not so many of us, when we were all within reach of each other and could talk to each other. Things were more concrete in those days. The readiness to give each other a helping hand with everything,

Starting point is 00:12:58 the art of managing on small means, of making the best of what we had, cost consciousness to the point of being stingy, humbleness, undying enthusiasm, and a wonderful sense of community through thick and thin. Those are just some of the principles that he's going to repeat over and over again for, you know, seven decades. Not, and this is what I really mean about, he definitely has a specific point of view. He knows exactly how he wants, what he wants his company to do. He knows exactly how he wants the company to be built.

Starting point is 00:13:28 He knows exactly the kind of people he wants working inside of his company. He says, not everybody in a large group like ours can feel the same sense of responsibility and enthusiasm. Some undoubtedly regard the job simply as a means of livelihood, a job like any other. Sometimes you and I must share the blame for failing to keep the flame alight, for faltering in our own commitment at times, for simply not having the energy to infuse life and warmth into an apparently monotonous task. The true IKEA spirit is built on our enthusiasm, our constant striving for renewal, from our cost consciousness, from our readiness

Starting point is 00:14:06 to take responsibility, from our humbleness in approaching our tasks, and from the simplicity of our way of doing things. Those who cannot or will not join us are to be pitied. A job must never be just a livelihood. If you're not enthusiastic about your job, a third of your life goes to waste. For those of you who bear any kind of leadership responsibility, it is crucially important to motivate and develop your coworkers. You, as the captain, make the decisions after consulting the team. There is no time for arguments afterwards. Okay, so the third principle is profit gives us resources. So the financial performance of Ikea, I don't think I've ever seen anything, any other business like this. At one point in time, it was believed that Ikea might later on the book, I think he was like 14 or 15 at the time because he starts selling things when he's like five. And later on the book, he says the only real loan he ever got was from a bank for $63 so he could buy a bunch of fountain pens.

Starting point is 00:15:16 And then he immediately sold the pens for a large profit. And so one of the iron laws of IKEA is that all expansion is to be self-financed. And his point was to do that, you have to make a profit. So his profit gives us resources, a better everyday life for many people. Profit is a wonderful word. It is a word that politicians often use and abuse. Profit gives us resources. He says it again. Let us be self-reliant in the matter of building up financial resources. The aim of our effort to build up financial resources is to reach a good result in the long term. You know what it takes to do that.

Starting point is 00:15:51 We must offer the lowest prices and we must combine them with good quality. This forces us to develop products more economically, to purchase more efficiently, and to be constantly stubborn in cost savings of all kinds. That is our secret. That is the foundation of our success. And so principle number four is reaching good results with small means. Again, this is what I meant about Henry Ford, the similarity to Henry Ford. They were both obsessed with eliminating waste and increasing efficiency. They were both relentlessly resourceful. So it says reaching good results with small means. Wasting resources is a mortal sin at IKEA.

Starting point is 00:16:32 It is not all that difficult to reach set targets if you do not have to count the cost. Any designer can design a desk that will cost $5,000, but only the most highly skilled can design a good functional desk that will only cost $100. This is one of my favorite lines out of everything that he said. 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. Waste of resources is one of the greatest diseases of mankind. And he's not just talking about money. He's constantly hounding on doing more with less time. It is also a mortal sin to waste time at IKEA.

Starting point is 00:17:10 Waste costs us even more in little everyday things. Filling out papers that you'll never need again. Spending time proving that you were right. Postponing a decision to the next meeting because you don't want to take the responsibility now. Calling somebody when you could just as easily send a note. The list is endless. Use your resources the IKEA way. Achieve good results with small means. Number five, simplicity is a virtue. Indecisiveness generates

Starting point is 00:17:32 more statistics, more studies, more committees, more bureaucracy. Bureaucracy complicates and paralyzes. Planning is often synonymous with bureaucracy. This is going to sound a lot like Elon Musk in the early days of SpaceX, which you and I talked about last week. There's a line in that book. No reports, no committees, just done. No work about work, just work. Ingvar is saying the exact same thing here.

Starting point is 00:17:54 And he's not shy about this. Listen to what he says here. Do not forget that exaggerated planning is the most common cause of corporate death. Exaggerated planning leaves you less time to get things done. Complicated planning paralyzes. So let simplicity and common sense guide your planning. Simplicity is a fine tradition. Simplicity is a virtue. Number six is a principle he's already mentioned multiple times, doing it a different way. If we from the start had consulted experts about whether a little community like Almhart, these are tiny little towns in Sweden that he grew up in, highly likely I'm mispronouncing

Starting point is 00:18:30 them. I looked it up and tried to practice the pronunciation before. I promise you I did. Almhart, I think is how you say it. But it's as if we had asked experts about whether this tiny little community in Sweden could support a company like IKEA, they would have undoubtedly advised against it. Nevertheless, Almor... Sorry.

Starting point is 00:18:48 ...is now home to one of the world's biggest operations in the home furnishing business. 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. We dare to do things differently.

Starting point is 00:19:09 Our protest against convention is not protest for its own sake. It is deliberate expression of our constant search for development and improvement. Maintaining and developing the dynamism of our business is one of the most important tasks. That's why I hope that we will never have two identical stores. Dynamism and the desire to experiment must continually lead us forward. I'm going to go back to that one line that I think really jumps out from this section. That is why I hope they will never have two identical stores. So Ingvar Kamprad was dyslexic. There's another dyslexic founder that I covered several years ago. It is the founder of Kinko's. Paul Orfalo, because of his dyslexia, would not sit in an office. So how he spent his time, he would travel around and visit all of the different Kikos

Starting point is 00:19:47 stores and Kikos stores at the time before he sold it to FedEx. They were all under different ownership and they were also all run in a different way. And there's a great line in his biography where it says, you have to remember, he's been picking up the best ideas from all around the country. And so one of my favorite ideas in Paul's biography is the fact because he was dyslexic, he would use, this is a long time ago, so he would essentially have a corporate-wide or company-wide voicemail system. So he'd spend his days visiting all the stores, all the great ideas that he'd pick up from around the country. At the end of his day, he would call into this number and he would just

Starting point is 00:20:19 talk for a few minutes about what he learned that day. And so then if you worked at Kinko's, you could come in the next morning and listen to that recording. And so this way of dispersing and spreading the ideas throughout Kinko's was so beneficial and so helpful. People were like, well, Paul, if this is like the best way to do checkout, or this is the best way to do marketing, or this is the best way, you know, to do this print job, why don't you mandate that all the other stores do it that way, since that's the best way? And what he said was brilliant. He said, because if I do that, then that is the best way it will ever be. Paul understood that all these individual stores were like miniature laboratories, and you did not want to restrict their ability to discover new things through trial and error. And you see Ingvar saying the exact same thing here

Starting point is 00:21:00 in 1976. That is why I hope that we will never have two identical stores. Dynamism and the desire to experiment must continually lead us forward. Number seven, concentration. 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 the time. We will never be able to satisfy all tastes. We cannot conquer every market at once. We must concentrate for maximum impact, often with small means. Concentration means that at certain vital stages we are forced to neglect otherwise important aspects. Concentration, the very word implies strength. Use it in your daily

Starting point is 00:21:43 work. It will give you results. Number eight, taking responsibility is a privilege. There are people at all levels in every type of company who would rather make their own decisions than hide behind those made by others. The fewer such responsibility takers a company has, the more bureaucratic it is. Constant meetings and group discussions are often the result of unwillingness on the part of the person in charge to make a decision. And so then he gets to why so many people are afraid to make decisions. They're afraid to make decisions because they're afraid of making a mistake. And he says this line over and over again. Only while sleeping, one makes no mistakes. Making mistakes is the privilege of the

Starting point is 00:22:18 active. Making mistakes is the privilege of the active. Constantly practice making decisions to overcome our fear of making mistakes. 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. And finally, number nine, most things still remain to be done, a glorious future. 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 which feels that it has reached its goal will quickly stagnate and lose its vitality.

Starting point is 00:23:02 Happiness is not reaching your goal. Happiness is being on the way. It is our wonderful fate to be just at the beginning. And I absolutely love that he said that because he's 33 years into running this company. And so I'm sure at the time, some people were like, yeah, okay, we're just at the beginning. You know, we're 33 years into this thing. But now 50 years after writing this, he was obvious that he was right. It is our wonderful fate to be just at the beginning. The positive joy of discovery must be our inspiration in the future. The word impossible has been deleted from our dictionary. Experience is a word to be handled carefully. Experience is a break on development. Many people cite experience as an excuse for not trying anything new. Bear in mind that time is your most important resource.

Starting point is 00:23:43 You can do so much in 10 minutes. 10 minutes once gone are gone for good and you can never get them back. 10 minutes is not just a sixth of your hourly pay. 10 minutes are 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. Let us continue to be a group of positive fanatics who stubbornly and persistently refuse to accept the impossible. What we want to do, we can do and will do together. And then he ends with a tagline that he repeats over and over again. He says a glorious future. Okay, so now I'm going to pick the book back up and I'm going to go straight into Ingvar in his own words. He's telling us the story of his early life and he's talking about the dynamic

Starting point is 00:24:29 inside of his family. And as he tells us about his early life and his early life plays out as the pages turn, more and more of my notes say the exact same thing, revenge. It becomes obvious the source of his extreme internal drive, the fact that he works all hours of the day, every day, that he talks later on. And in the book, his biggest regret is that he missed out on his three sons' entire childhood because all he did was work. He had extreme levels of dedication and obsession with building Ikea. And when you look at his early life, keep in mind the words that I'm about to read to you, these are transcripts of interviews that he gave when he was 72. And so immediately he starts talking about his father, the fact that his father is forced to work on the farm by his grandmother. Ingvar's grandmother is the matriarch,

Starting point is 00:25:15 the very powerful person in the family. She reminds me that she's like this Estee Lauder type of character, a personality and a person that dominates everybody around them. And so he says, my father was only 25 and he didn't want to be a farmer at all. But his mother's word was law and he became her obedient tool. Similarly, father's brother had also wanted to go out into the world, but he still lived on the farm. Grandmother said, you're to stay at home. And so he did. My uncle finally chose the same route as his father and he shot himself in 1935. I was nine. And so the backstory there, which I think also tells why his grandmother had to be such a hard ass, was they were German immigrants into Sweden. They had very few resources, almost no money,

Starting point is 00:25:59 and their farm was failing. And Ingvar's grandfather took the easy way out. He had two or three small kids and his wife was six months pregnant and he shoots himself and abandons them. And so his grandmother finds herself in a strange country, no friends, a failing farm, and a bunch of children to take care of. So his grandmother absolutely dominates his father. Now he tells us about his mother. My mother was loved by everyone. She was an amazing person to whom nothing was allowed to Now he tells us about his mother. So I'm going to pause there. What do we know? We know that he came from a family with very limited resources.

Starting point is 00:26:42 His father allowed himself to be dominated and to be told what to do by other people. His father was very bad at business. His father did not have a lot of money. When you read about Ingvar's early life, this is a perfect illustration of this principle you and I talk about over and over again, that you can always understand the son by the story of his father. The story of the father is embedded in the son. And he's going to say so explicitly in a few pages. So let's go back to his mom. Mom discovers, hey, my husband, the father of my children, is going to send us into poverty if I don't do anything. She discovered the poor state of my father's business, so she started a guest house. We rented out rooms to visitors.

Starting point is 00:27:12 We rented out every room. Every room was taken except my parents, into which we all squashed together. My mother was a heroine in silence. He loved his mother. He admired her. He just said she was loved by everybody. Listen to what happens next. She contracted cancer before she was 50.

Starting point is 00:27:31 She died at the young age of 53. I was 27. A few years later, I started up a foundation for cancer research that bore her name. This theme of revenge is ever-present and reoccurring in his life. Fate took my mom, the person I probably loved more than anybody else for me at a young age. I will have enough resources that I can set up a foundation for cancer research and name it after her. The very thought of my mother's death makes me weep. He was 27 when she died. He is 72 when he says that. And then he moves into the fact that he was a

Starting point is 00:28:06 born entrepreneur. I suppose it was slightly peculiar in that I started tremendously early doing business deals. My aunt helped me buy my first hundred boxes of matches in Stockholm. The hundred boxes of matches cost me 88 cents. I sold the boxes at two to three cents each. 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 and it would cycle around on my bicycle selling them. When I was 11, I was selling garden seeds. Selling things became an obsession. It is not easy to know what might drive a boy more than a desire to earn money,

Starting point is 00:28:45 the surprise that you could buy anything so cheaply and sell it for a little more. But here we go. But I remember walking in the meadows with my father. I was 10. We came to a place at which he said, I'd like to make a forest track here, but it would cost too much. Then we went somewhere else. And again, it was the money that was lacking to carry out my father's many plans. I remember thinking at 10, if only I could help father, suppose I could get some money so that I could help father. And this is the lesson that his little 10 year old brain took away from that. To carry something out, you clearly had to have means. He starts that paragraph saying selling things became an obsession. He ends it telling you why. He is

Starting point is 00:29:32 telling us when he was a child, he realized my obsession will fix the financial problems of my family. And it's a few years later where he says a manager of a bank lent him about $63, which he considered to be a fortune at the time so that he could purchase 500 fountain pens from Paris. This was essentially the only real loan I have taken out in my life. That is nuts. Trading was in my blood. And he talks about another one of his heroes, and this is going to be another source of revenge. So his paternal grandfather shot himself, right? His maternal grandfather ran a little country store. And Ingvar, when he was very, very small, would spend entire days in his grandfather's country store. And he said, grandfather had one great love on earth, and that was me.

Starting point is 00:30:16 He became my very best playmate. Unfortunately, he was just as kind in business life, and he quite simply found it difficult to accept payment. So this country store no longer exists as a business. But by sheer chance, IKEA took it over. I bought the whole property and the site around it. A furniture store now stands on the foundation of the country store. Revenge. He says by sheer chance,

Starting point is 00:30:52 bullshit. That was not chance. That was sheer will. And then he goes back to talking about his relationship with his paternal grandmother, the fact that she treated him differently. He was special. Grandmother was a domineering person regarded with great respect, but she liked me very much. In contrast to most of the others on the farm, I never suffered at all from her dictatorial temperament. In fact, she gave him a lot of confidence. She was his first customer. When I was about five and began buying and selling things, she became my very special and my most faithful customer. That gave me the courage to take the next step and go on selling to the neighbors as well. I was a child who loved both my stern grandmother and my good father. I listened to their stories. And of course, as a child, I was indoctrinated and pro-Germany. So

Starting point is 00:31:31 later on, many decades later, this, I think in the eighties or nineties, he talks about this, this point of his life, the fact that his grandmother was a fan of Hitler and sympathetic to the Nazi movement. This comes up and almost ruined his life. And so he says this was to have unexpected consequences in my life long after the political aberrations of my childhood and teens. I was made to pay for this German influence. To give you some context here, his grandmother was from a German state called Sudenland. And after World War I, Sudenland became part of Czechoslovakia. But his grandmother was a German who did not identify nationally as a part of as a Czech. So she would tell her grandson that the happiest day of her life was actually when Nazi Germany annexed Czechoslovakia in 1938.

Starting point is 00:32:17 And obviously Hitler was in power at that time. But from his grandmother's point of view, the Nazis were reuniting Germans with Germans. And so what Ingvar said, it was he was indoctrinated into this ideology through his grandmother, but he was too young to think independently. He would have been 12 years old in 1938. So anyways, in 1994, this comes up. The media says the founder of IKEA is a Nazi. Ingvar's response is to cooperate with the media.

Starting point is 00:32:40 He gives these long interviews. He explains everything. And then it blows over. A few years later, another media organization says, hey, actually, you weren't a kid. We might have evidence that you were actually still believing this when you were in your 30s. Ingvar is able to disprove that. But what was fascinating and ties more to the scope of what you and I want to talk about,

Starting point is 00:32:59 which is the way he built his business, is the second time around, what he was most mad at is they tried to say that he got the seed money to start IKEA from the Nazis. And since he had already settled these allegations a couple of years before, it said he was furious that anyone thought he borrowed money at all. And he says in his own words, they could have accused me of murder, but not of borrowing money. And so let's go to the founding of IKEA. He is 17 years old. He is about to go away to school. He calls it the School of Commerce. And he decides he wants to start his own trading firm. So this is way before he goes and he is exclusively a furniture dealer.

Starting point is 00:33:36 That's the way he describes himself the rest of his life. At this point, he's just buying and selling all kinds of things. And so when he's 17, he founds the firm IKEA. The I is for his first name. The K is for his second name. The E is for the name of the farm he grew up on. And A is for his hometown. And so something that's common when you read a lot of biographies is you see that true interest is revealed early. So even before he founded IKEA, he was obsessed with something that most kids are not obsessed with, which is distribution. He did not understand why he could buy something so cheaply. And yet when he would see it in stores, it was so expensive to buy. And so he uses a term that I wasn't familiar with to describe

Starting point is 00:34:14 this obsession. And I looked it up and it says it's an idea that dominates the mind, an obsession. And what he's talking about is that distribution became an idea that dominated his mind and that was an obsession. And so even before he had his own business, he would like go inside of like a shoe shop and he would see like this old fashioned way they had of selling stuff. They were like, well, you have to get on a ladder and you have to go up and down and just to fetch shoes. And he would look at things in all these businesses like this just cannot be rational because it seems to waste time and money. Remember, he says wasting time and money is a mortal sin in Ikea. It's something that he was obsessed though when he was a little kid. And so the first thing he does to

Starting point is 00:34:48 start Ikea, he's just a mail order company and he'll go and find importers and exporters and he'll become agents for them. And so before he ever tries to sell furniture, he's selling things like Christmas cards, seeds, fountain pens, wallets, picture frames, table runners, watches, jewelry, nylon stockings. And he actually gets the idea to start selling furniture from one of his toughest competitors, who is another mail order firm, this firm called Gunners. And when he's 22, he decides to try to advertise what he calls an armless nursing chair that he calls Ruth. And because he's dyslexic, he couldn't remember the order numbers.

Starting point is 00:35:21 So he had to give, instead of having order numbers, he'd give all his products names, which still continues to this day if you order something from Ikea. And so right away, he realizes, hey, I think I stumbled into something very valuable. He says the response, once he advertises his chair, the response was unambiguous. We sold a huge amount. So then he doesn't stop just at chairs. He's like, OK, I'll advertise a sofa and a chandelier. And this was the result. Everything went. That was how the business started. People ordered on a mail order

Starting point is 00:35:50 form from us and the factories delivered it to them. This is when he's going to go all in on furniture. And at the time, Ikea was a one-man business, but the demand was so great. He says, I could no longer remain a one-man firm. So in 1948, I appointed my very first employee. Two years later, the business had grown to a staff of seven or eight. And this is how he describes the turning point of his life. So by chance, the furniture trade, which I entered in in an attempt to imitate competitors,

Starting point is 00:36:16 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. 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. What he's talking about there is combining a mail order

Starting point is 00:36:41 catalog with an actual furniture store. And they did that because seven or eight years into the business, the business is about to die. And so he describes this time for us. Ikea was very much at a crossroads. Competition in mail order had become almost unendurable. A fact that one simple example can illustrate. So all the mail order, him and his mail order competitors, they're all ordering from the same manufacturers.

Starting point is 00:37:03 So he talks about, hey, we're all selling the same ironing board. And so if I advertise it for $23, then my competitor will just come along and advertise it for $22. And then another competitor will just come along and advertise it at $21. And then eventually when we can't make money on that ironing board, we'll find another ironing board and that ironing board will be cheaper, but also lower quality. And so he says, step-by-step, this price war affected the quality of the ironing board, which became worse and worse. The same applied to furniture. Complaints started to mount

Starting point is 00:37:28 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 the customers themselves could not touch the goods,

Starting point is 00:37:41 but had to rely on descriptions and the advertisement in the catalog. So we were faced with a monumentous decision to allow IKEA to die or to find a new way of maintaining the trust of the customer and still make money. And so Ingvar is having a bunch of conversations with early employees at IKEA. It's like, how do we get out of this vicious circle of lower price, worse quality, then continuing lower price, then even worse quality? And so the idea they came up with was, hey, why don't we try a permanent display or exhibition of our furniture? And so Ingvar has a choice, let his business die or take a risk and try something new. So he winds up buying a rundown out of business department store. He spent $1,600

Starting point is 00:38:15 to get the store and then he has to invest another like $75,000 to renovate it and get it ready to open. And so it is at this point in 1952 that he stumbles upon out of necessity to save his company, the blueprint upon which the future success that he's going to have rests upon. He says, at that moment, the basis of the modern IKEA concept was created. And in principle, it still applies. First and foremost, use a catalog to tempt people to come to an exhibition, which today is our store. And so I think at the time this book is published, remember the book comes out in the late 90s. They have something like 300 stores or something like that.

Starting point is 00:38:50 They had sent out by that time over 100 million catalogs. And he was the first one to do this. Mail order and furniture store in one. That business idea had not been put into practice anywhere else. We were the first. And so he sends out all these catalogs of all his products and telling them where and when the first store was going to open. And this is the result.

Starting point is 00:39:12 Success was immediate. But I have never been so scared in my entire life as when we opened and saw the line outside, there were at least a thousand people there. I couldn't believe my eyes. There was so many more people than he expected. He was worried that the floor was going to collapse. He says, we didn't know whether the floor would hold all these people. Tens of thousands of people those first years were to go on a pilgrimage to the remote Omolt, this is the little town he's in, from all over Sweden. Most of them had learned

Starting point is 00:39:41 about us through the free catalog. So this is an idea I jotted down. I've seen over and over again. In fact, I think I'm going to do another episode on Bernie Marcus. I haven't done one in probably like five or six years. He was the founder of Home Depot. He just passed away recently at 95 years old. So this is something he talks about in his book. It's in the books on Sam Walton and Walmart as well.

Starting point is 00:40:01 And we see the same concept is happening in Ingvar Kamprad's life. It's the idea that in human nature, people will go to great lengths. They will travel vast distances if they think they can save money. That principle is in the founding stories of Walmart, in the founding stories of Home Depot, and we see it again in the founding story of Ikea.

Starting point is 00:40:17 And then I've mentioned over and over again that he has a sermon on the culture of Ikea. He repeats the principles upon which he built his business. He's talking about that very first store, and listen to what he says. Ikea was taking shape as a real business. Many of our unwritten laws were already written by that time. So he talks about this, repeats these over and over again. Helpfulness, thrift, a strong sense of responsibility. To this day, he talks about the, probably a hundred times. I don't think there's a Kindle version of this book, so I can't search through it. Probably mentions the importance of watching your costs a hundred times. To this day

Starting point is 00:40:48 at Ikea, we try to translate everything into a clear price and state it. Our advertising brochures have on the front or back information on what they cost to compile, often with an indication that it is in the end, the customer who has to pay for whatever we waste. Cost awareness was to be IKEA's anthem. And so he sets up, remember he said earlier, you know, if experts said, hey, could, you know, this tiny town of Walmart support this giant furniture store? People are like, of course you can't. There was so many people. So a lot of the stuff that they're known for, right? Childcares and all the Ikea, the restaurants, they were born out of necessity because so

Starting point is 00:41:29 many people were traveling vast distances to get to the store. And since people are coming from all over the country, like they need a place to stay. And so he says, gradually, the pressure on this little town grew even greater. It wasn't long before we opened a restaurant and we also had an inn, so a hotel or motel on the site with a hotel and pool. My grandfather would have been amazed for the place was his old country store. Step by step, we were building our future philosophy. And so to deal with this rapid growth, the family turns into a business, the business turns into a family. They set up their offices at the time or on the farm and clear everything out to make room for the growing IKEA headquarters.

Starting point is 00:42:08 So everybody in the family is helping out in the business. And I do think if you read between the lines and like the fact that he was just treated differently, I think his family knew he was gifted. I think his family understood that he was an unusual talent. It says his home became his office and his office is home. The farmhouse was cleared so that the boy, not the farm, could expand. And so you got everybody in the family helping out. The father's helping out. The mother's helping out. So it says

Starting point is 00:42:32 the family became his firm. And then a contradiction jumps out. It says it appears contradictory that this profoundly family-bound man often neglected his own family for the sake of the business. 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 children knows that childhood does not allow itself to be reconquered. I read this book for the first time, I think, close to five years ago. That idea, childhood does not allow itself to be reconquered. I read this book for the first time, I think close to five years ago. That idea, childhood does not allow itself to be reconquered, has been imprinted on my mind. I remember that line exactly as if I had read this yesterday and not five years ago. And then on the

Starting point is 00:43:17 very next page, he goes into another regret that you see a lot in biographies. And I talked to a lot of founders about this. You know, a lot of super successful founders, they build giant companies and yet in private conversations, they're nostalgic for when the company was small. So it says the transition from the closeness of the farm to the less intimate atmosphere of a large company was difficult for the founder. Essentially, he has never really accepted it. This is what he said. That 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 it would be possible to preserve the feeling even when we grew large. When IKEA was a family, that remains my very best memory. And so keep in mind, when he

Starting point is 00:44:01 says those words, Ingvar's reported net worth is around $50 billion. And so then he goes into just how difficult it was to build IKEA. Remember the idea was like, well, everybody wanted me to write an autobiography. I said no for 10 years. And they said, yeah, but it'd be a service to the future generation of entrepreneurs. And so he doesn't hide, you know, what I would say, I guess, about this is Ingvar has an unusual personality compared to many of the people that you and I study. Way higher levels of insecurity. He's

Starting point is 00:44:30 constantly crying. He's very sentimental. And he's still, even though his company's wildly successful, wracked with self-doubt. But I think one of the best things he did for future generations of entrepreneurs is like he didn't try to hide that. He says, I have not been able to avoid severe losses. Both fiascos and triumphs have marked the history of the business. And he talks openly about all the many moments of weakness. He's like, I wept a lot. I couldn't bear adversity. Often I failed to look at things from the bright side. The sad thing is I didn't even learn much from these early failures. On the contrary, I kept repeating them. Fiascos have continued throughout my life. And so he goes through a list over the next several pages of all of these ideas and investments that Ikea did,

Starting point is 00:45:11 where he lost millions and millions of dollars. And so he had the idea, we're going to sell TVs, let's buy partial ownership in a television factory. And in the 1960s, it said this one mistake, this one tragic investment cost Ikea 25 to 30 percent of their total assets at the time. And he's like, but I didn't even learn from that because decades later, I decided, hey, I'm going to dismantle a Swedish sawmill and I'm going to set it up again in Russia. And he loses about 12 to 15 million dollars on this because of the Russian mafia. This is his description of it, by the way, the Russian mafia, an endless Soviet-type bureaucracy. And the list just goes on and on. A terrible investment in Romania,

Starting point is 00:45:50 a terrible investment in a factory in Thailand. He's like, we lost hundreds of millions of dollars on projects like this over the years. But even after all of this, he repeats his philosophy that only those who are asleep make no mistakes. Making mistakes is the privilege of the active. The fear of making mistakes is the root of bureaucracy and the enemy of development. And a few of his employees are interviewed in the book and they said that Camp Rad preferred them to make mistakes rather than to be idle.

Starting point is 00:46:17 And so one thing that can help you overcome a lot of mistakes is if you're just in a great growing market and you're in there early. There's this concept that Charlie Munger talks about over and over again that he calls surfing. And so when Charlie would try to analyze like what caused the success of somebody, he would look for some kind of wave that they were surfing. So he would talk about like Les Schwab was surfing the wave of brand new Japanese tire imports into America. And the durability and low cost of those Japanese tire imports gave him a massive

Starting point is 00:46:41 advantage, cost advantage over his American competitors. Another example you and I recently talked about was in that episode on the rare Bernard Renault interview that he caught the early wave in China's luxury market expansion. And so the wave that Ingvar Kamprad rode was the fact that Sweden's countryside was quickly becoming depopulated right when he started selling furniture. During the 1950s alone, 50,000 farms closed down, and those people moved into either the cities or the suburbs. And this one paragraph gives a great description of the wave that they're surfing. The building program that came to have such an enormous influence on IKEA, or rather, the need for IKEA, broke all records. During the first 20 years after the end of the war,

Starting point is 00:47:30 1 million new apartments were built. The company quite simply was in step with an accelerating development. So as I've already mentioned throughout the book and throughout his career, he's constantly repeating these virtues that he used to build Ikea, the ones that he wants to infuse the company spirit with, the one he wants to preach to his employees constantly about. And one of them I haven't covered is going to be really important for this next section. This is the turning point of IKEA into a truly differentiated business. And so it's this idea of craftiness. And I love Ingvar's definition of craftiness. So he defines craftiness the following way. The craftiness is the ability both to be content with the resources one has and to find ways out of tight spots. And so one of the benefits that IKEA enjoyed once they moved away from just a strictly mail order is the fact that they saved on shipping.

Starting point is 00:48:13 They have a store. Their other competitors do not. All their other competitors are strictly mail order. And so as IKEA's costs get lower and the efficiency increases, the prices go down. And so all ofkea's competitors could not match Ikea's prices so they band together and there is a trade association it's the national association of furniture dealers and so the national association of furniture dealers does everything in its power multiple times to try to push Ikea out of business and get in the way of Ingvar remember that definition he has of craftiness the ability to get your way out of business and get in the way of Ingvar. Remember that definition he has of craftiness, the ability to get your way out of tight spots. So the first thing they do is at the time, trade fairs were really popular and it's a way a lot of people discovered in furniture they want

Starting point is 00:48:52 to buy. So he brought stuff from the store to the trade fair. And so the trade association said, hey, you can't do that. It's against the rules. Fairs are just for showing items, not selling them. So they managed to get him banned from selling at trade fairs. He's like, that's fine. I'll still attend the trade fairs and I'll make sure that my prices are prominently displayed. And since his prices were so much lower, they then go and get him banned from even advertising the price of his furniture. And here's a description of this in the book. A ridiculous game developed in which petrified conservative sales thinking was up against a new and insolent price pressure. IKEA was banned again and again

Starting point is 00:49:29 again for doing anything, but kept finding new ways of getting around each ban. If the company was not allowed to appear itself, it would send another Camp Rad-owned company exhibit or some reliable supplier. In a letter from the National Association of Furniture Dealers, IKEA was likened to a monster with seven heads. If you cut off one, another soon grows. So eventually he gets tired of this and he starts his own trade fairs. And then another tactic that the National Association of Furniture Dealers decided

Starting point is 00:49:55 was like, hey, we're gonna cut you off from your suppliers. So they sent out, they organized the boycott. They told all their suppliers, listen, you can sell to one firm like IKEA or all of us, but if you sell tokea, we will no longer buy from you. And so now they're starting to lose supply. Now, there are a bunch of them said, OK, we can't sell to Ikea anymore. Some of them, I need to back this up because this is actually really important. We call nursing the supplier. So I talked about this last week with how SpaceX paid its vendors. They paid like,

Starting point is 00:50:23 you know, and their competitors would pay like 30 or 60 or 90 days later. SpaceX would give you the money that day. And so because they wanted their parts as fast as possible. So they're like, well, how do we get our parts as fast as possible? We treat our suppliers better than anybody else. Ingvar did the exact same thing. So a manufacturer is giving an interview in this book and he talks about the difference between IKEA and other furniture dealers. IKEA paid within 10 days while others did not pay for three or four months. Nursing the supplier is one of Camprad's principles, one he still imparts to his staff until this day. So as a result, some suppliers are saying, OK, you know, I can't break this boycott. I'm sorry I can't sell to you.

Starting point is 00:50:59 Others remain loyal to IKEA, but they would have to have to like deliver things to other addresses. They would remove the logos from the delivery vans so they could hide that they were the company making a delivery to Ikea. They'd do deliveries in the middle of the night so no one would find out.

Starting point is 00:51:15 And what his competitors and adversaries didn't understand is this constant pressure from them was a blessing in disguise because for one way around the boycott, they're like, OK, you won't sell us this chair because, you know, the other people buying this chair from you as well said if you sell it to us,

Starting point is 00:51:29 they won't buy from you anymore. Okay, what if we make slight alterations to the design? And the suppliers are like, oh, well, I can sell you that because I'm not selling that to them. And so they start having a differentiated product, a product that none of their competitors are offering. At prices, their competitors couldn't match anyways. And then the second way this was a blessing in disguise, I guess it's the second out of maybe three ways, it's a blessing in disguise, was the fact that like, okay, this boycott and this constriction applies to the country of Sweden. We need to start looking abroad for new suppliers. And so another turning point in Ingvar Kamprad's career and the history of IKEA is the fact that they start sourcing materials in Poland. And so this is what

Starting point is 00:52:05 Ingvar said about that. The boycott simply reinforced our unity. It was a crisis that became a non-crisis as we kept finding new solutions. Remember, you cut off one of their heads, another soon grows. In IKEA's business philosophy, the whole matter should be inscribed as a golden rule. It regarded every problem as a possibility. New problems created a dizzying chance. When we were not allowed to buy the same furniture as others, 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 turn opened up a whole new world to us. That was the beginning of our designing our own furniture. And then that is

Starting point is 00:52:45 going to directly lead to one of their innovations, which is going to drastically reduce their costs and further differentiation them from their competitors. It's going to lead to flat packing and self-assembled furniture. It didn't look that way at the time. It didn't feel that way at the time because he's talking about crying himself to sleep. He's completely depressed. He's very stressed going through all this. But it was the best thing that could have ever, this boycott was the best thing that could have ever happened to him. And so here's another example of them turning a problem into unlimited possibility.

Starting point is 00:53:14 So they're now designing their own furniture. They have other alternative supplies and suppliers. And so they're working on a catalog. They're photographing a table and one, and they go to pack up the table afterwards and one of their employees muttered something that changed the trajectory of Ikea forever. And so they're working on a catalog, they're photographing a table, and they go to pack up the table afterwards. And one of their employees muttered something that changed the trajectory of IKEA forever. He's like, man, this takes up a lot of space. Why don't we take the legs off and put them under the tabletop?

Starting point is 00:53:36 And so they're like, wait, if we do that, that changes everything. And so they make their very first self-assembled table. It's called Max. And since it's self-assembled, we had our first flat parcel. And thus, we started a revolution. And Ingvar describes it this way. Perhaps it could be said that reality forced the innovation upon us. We had begun to experience a worrisome high percentage of damaged furniture and transport,

Starting point is 00:53:58 broken table legs, that kind of thing. Now, with flat packing, the less damage occurred during transport and the lower the freight costs were. That was the logic behind it. Thus, self-assembled bookcases, chairs, beds, and other pieces successfully appeared. There was an also unexpected benefit. So, okay, you have less damage in transit. You have way cheaper shipping costs. And now that it's flat-packed, the customer can take home the furniture that day.

Starting point is 00:54:22 If you were ordering, like, a mail order from another furniture, like, mail order, you wouldn't get, in some cases, you wouldn't get your furniture for months. You could go to Ikea store and pick it up that day. And then another accidental discovery of this, which was proven after the fact, they weren't doing it because of this, but it turns out there's this cognitive bias where because the customer is now plays a role in actually creating and putting together the furniture, the customer now values IKEA's products more highly. This cognitive bias, which was discovered after the fact, is actually called the IKEA effect. And then Ingvar continues to realize benefits from this, what do you call this, innovation that was forced upon us.

Starting point is 00:55:03 Because now they can go all the way back to the source of the manufacturing and design the manufacturing process and make it more efficient as a result of flat packing. And so he says it resulted 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 to the customer. And this goes back to this obsession when he was a little boy going into stores, like, why is it so cheap to buy things and so expensive to sell them? That peculiar obsession with distribution. And so he says, I kept asking myself, why does a product that is so cheap to produce get so expensive so quickly once past the factory gate? It was not difficult for me to see the advantages of self-assembled furniture and the superiority of flat parcels. Flat parcels saved enormously on storage and freight. And in the long run, they were to be the prerequisites

Starting point is 00:55:55 for the next step, customers taking home parcels of large furniture themselves. And this point is important. We were not the first with this basic idea. There was a small furniture store called NK in Stockholm that was producing the stuff they called knockdown furniture, which is essentially flat packed furniture that you had to assemble yourselves. The difference was Ingvar was able to inject that idea into a system and a flywheel that compounded all these advantages together over decades. He says they just didn't realize what commercial dynamite they were concealing. IKEAkea was the first to systematically develop that idea commercially. And so we should get into why Ingvar was adamant about Ikea never

Starting point is 00:56:32 being a public company and then how he was obsessed with this idea of giving his firm eternal life. And so he talks about one of the benefits of being a private company is the fact that you can grow or not grow. You can grow at whatever pace you're not for, you can grow or not grow. You can grow at whatever pace you want. You can take your time or not grow at all. In fact, a friend of mine wanted to be coming close to the, his heirs or the people still running the company. And he told me something a few months ago, it's fascinating that they said one of the

Starting point is 00:56:58 unfair advantages that private, the private companies have is the fact that in, in, in Ikea's case particular, in particular, there was like a 20-year period or something like that where growth was basically flat. They were profitable. They were still making money, but they just weren't growing very fast. And now they're growing much faster today than they were during that period. And so in this book, Ingvar 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 ikea's strategy has long been to take half of our resources to improve what already exists and the other half to improve what's in the future we move at a somewhat

Starting point is 00:57:37 slower pace than if we had had access to unlimited money so there is i think this is tied into something that's that happens later in the book that I think would be beneficial if it was here. It talks about the iron laws of Ikea that have been present since the birth of Ikea. Number one, a good cash reserve must always be insured. Number two, all property must be owned. Number three, all expansion is to be self-financed. Number four, there shall be no boasting. And so one problem he knew he had to solve was, you know, Sweden's inheritance taxes were really high. And he knew he wanted his sons involved in the business.

Starting point is 00:58:16 The sons wanted to be involved in the business. And so he starts thinking about, you know, how do I give this business eternal life? So it's not relying on one person. It's not relying on one one person, it's not reliant on one country. And it starts off just with these handful of questions he's asking himself. How can we keep the future of IKEA without inheritance taxes bleeding the company to death? How can we avoid greedy interest endangering what we've built up? How can moves abroad be achieved without personally affecting me and my family in a financially devastating way?

Starting point is 00:58:43 So to achieve this, he hires an army of lawyers. He spends almost a decade. It is one of the most confusing corporate ownership structures I've ever seen in my entire life. If you go to IKEA's Wikipedia page, you can see like a flow chart of all this. I'll try to give you a simple overview of this labyrinth. So the original IKEA company becomes a holding company whose profits are moved to a tax exempt nonprofit, who then later moves that money into this foundation called Inca, which is based in the Netherlands. Then apart from that, there's a trust which owns a Dutch holding company, which then owns another holding company in Luxembourg, which then owns IKEA's intellectual property.

Starting point is 00:59:21 The book says the business structure that Ingvar with an understatement calls fairly unique in the world is so legally intricate that no outsider is really able to understand it. And bizarrely, this foundation that he created now over 50 years after he created it is the fourth largest, technically the fourth largest charity in the world. And so far has accomplished Ingvar's goal, which was we're going to sell furniture that can be taken apart and reassembled, but the company itself can never be dismantled. And so I think the reason that he spent so much time repeating the principles and then doing like leading essentially the Bible study is what they call it.

Starting point is 00:59:57 He says over and over again that IKEA is a concept company. And then if we stick to the concept, we will never die. In fact, in the book, it's not just that they're a concept company. They call the concept of IKEA the sacred concept. The company Bible, a furniture dealer's testament, which I read to you earlier, has been reprinted and distributed to over 100,000 employees all over the world. They describe this annual sermon that he gives. He says when he's doing it, he is Billy Graham. A preacher has become a household god, a revivalist speaker and moralizing pastor. He makes jokes, tells stories and literally sheds a tear.

Starting point is 01:00:30 So he's constantly in the book bursting out with tears. He's very emotional. Like his motions are right at the surface. He describes his leadership as the noble art of hugging management and says he's must have hugged several thousand IKEA employees. But I think the most important part of this is to get across that repetition is persuasive. It is altogether a repetition of 43 previous speeches. The theme is the same. IKEA's philosophy, cost awareness, the majority of people, the dream of the good capitalist,

Starting point is 01:00:56 hard work, a mission to seek profit and glory. And then he also repeats the need for humbleness over and over again. He says, never be cocky in a moment of triumph. Always prepare for harder times. He says they push cost awareness at all levels with almost manic frenzy. He explains the laws of Ikea and why one of them must be that all property must be owned. He said owning the properties might slow our pace of growth, but it provides security. No landlord can come in in 10 years time and raise the rent by 20%. He believes in the ability to wait out difficulties. He talks about the importance of gathering unfiltered intel from

Starting point is 01:01:30 the front line so he's known. They call it the owner's dawn raids. He will literally appear unexpectedly at a store without warning, sometimes at 5.30 in the morning, just to talk with the men delivering goods into the store. He wants to know what the security was like, what annoyed them the most. Were they given morning coffee? The people that are closest to him and know him the best say that his greatest anxiety, and he's full of anxieties, is that IKEA won't survive. They say that he's almost maniacally oriented towards the future, towards the next day. They say it's impossible to satisfy him and that he will never be satisfied.

Starting point is 01:02:05 And if you ask Ingvar what kept him going well past any financial needs or well past the retirement age, he says, what keeps me going is the feeling that in a wider sense, I'm participating in a gigantic project of democratization. That is his mission. He asked, in what way as an entrepreneur can I be of the most use? I asked myself, why do poor people have to put up with such ugly things? Was it necessary that what was beautiful could be bought only by an elite, a small elite for large sums of money?

Starting point is 01:02:32 And I've gone on demanding an answer from me all of my life. And so at the end of the book, the author is trying to give a summary, like who is Ingvar Kamprad the man? And he writes, who is the man we have followed through this book? What should we call him? Manufacturer? Innovator? The greatest small business entrepreneur in the world? Perhaps all of those rolled into one or something else we cannot fathom. What drives him? What makes him think as he does and governs his decision? How much of IKEA consists of Ingvar Kamprad and how much of Kamprad is IKEA? There are days when he seems a prisoner in his own system, obsessed by expanding his own house

Starting point is 01:03:07 while at the same time locked in it. The day he is free of Ikea, life for him will no longer be worth living. He loves it, always wants to lie as close as possible to it and never tires of improving it. He bombards his people with a thousand ideas from a bottomless store, thoughts crowding in and clamoring to get out. Ingvar says, a demon in me says I have so much to

Starting point is 01:03:31 do. I am never satisfied. Something tells me what I'm doing at the moment has to be done better tomorrow. He comes back again and again, with painful self-searching and an almost bitter undertone to his defects. Even today, behind this multinational tycoon is a country boy with a fierce sense of being an underdog, standing on tiptoe 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 has a peasant's distrust of a favorable destiny that keeps his feet on the ground. He is full of regrets and eternal hope.

Starting point is 01:04:17 When asked, he said, what I've missed most in my life was never taking the time to be with the children when they were young. I have also talked about my many defects, my lack of self-confidence, my difficulty making decisions, my disastrous organizational skills, and all the horrible faults that I fully recognize in myself. Fortunately, I have also been given a certain nose for business and a reasonable dose of peasant common sense. Finally, I am often asked whether when I was young, was I able to predict the development that IKEA had achieved? Naturally not, although my dreams early on were both great and bold. My life was to be spent demonstrating that a functional and good product

Starting point is 01:04:58 does not have to be expensive. That is still true today. We still have a long way to go. As I have written so many times and have said at the end of hundreds of speeches, we are just at the beginning of a glorious future. And that is where I'll leave it for the full story. Highly recommend reading the book.

Starting point is 01:05:16 If you buy the book using the link that's in the show notes on your podcast player or available at founderspodcast.com, you'll be supporting the podcast at the same time. I will also leave a link down below to the Testament of a Furniture Dealer, which you can read for free online. That is 370 books down, 1,000 to go, and I'll talk to you again soon.

Founders - #370 The Founder of IKEA: Ingvar Kamprad

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