Sol Price: The Retail Legend Who Taught Sam Walton, Jim Sinegal, and Jeff Bezos [Outliers]

The most influential retailer you’ve never heard of. How Sol Price invented the warehouse club and a philosophy that still runs Costco and Amazon. Have you ever wondered why you can still buy a hot dog and soda for $1.50 today at Costco? We can thank Sol Price for that. To him, keeping promises to customers mattered more than profit margins. Sam Walton said he borrowed more ideas from Sol Price than anyone else. Jim Sinegal of Costco said, “I didn’t learn a lot from Sol. I learned everything.” Jeff Bezos studied him. Home Depot echoed him. He invented the warehouse club, pioneered membership retail and built two multi-billion-dollar companies. The real lessons aren’t about what he built, but how he did it. This is the story of how a lawyer with no retail experience created an industry, mentored his competition, and proved that nice guys don't always finish last. Sol Price founded FedMart and Price Club, pioneering the membership warehouse model that inspired Costco and Sam’s Club. His principles—limited selection, fair wages, capped markups, no loss leaders—shaped modern retail through disciples like Jim Sinegal (Costco), Sam Walton (Walmart/Sam’s Club), Bernie Marcus (Home Depot), and influenced Jeff Bezos (Prime). ------ Approximate Timestamps: (00:00) Introduction (02:01) Early Years (08:29) Starting FedMart (28:33) Price Club (36:19) When Students Surpass the Teacher (42:09) The Teacher's Last Lesson (43:46) Reflections And Lessons ------ Upgrade: Get a hand edited transcripts and ad free experiences along with my thoughts and reflections at the end of every conversation. Learn more @ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠fs.blog/membership⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ------ Newsletter: The Brain Food newsletter delivers actionable insights and thoughtful ideas every Sunday. It takes 5 minutes to read, and it’s completely free. Learn more and sign up at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠fs.blog/newsletter⁠⁠⁠⁠⁠⁠⁠ ------ Follow Shane Parrish X ⁠⁠⁠⁠⁠⁠@ShaneAParrish⁠⁠⁠⁠⁠⁠ Insta ⁠⁠@farnamstreet⁠⁠ LinkedIn ⁠⁠Shane Parrish⁠ ------ This episode is for informational purposes only. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Shane Parrish?

  What does it take to build an empire? For Sam Walton, the founder of Walmart, it took a lot of hard work, a little genius, and one crucial ingredient: theft. Or as he preferred to call it, borrowing. In his autobiography, Sam freely admitted, "I've stolen," I prefer "borrowed," "as many ideas from Saul Price as from anyone else in the business." He wasn't the only one. Jim Sinegal, co-founder of Costco, was even more direct. When a reporter called him one day and said, "Gee, you knew Saul that long, since 1954? You must have learned a lot." Jim's response was blunt. "No, that's inaccurate. I didn't learn a lot. I learned everything I know." Jeff Bezos did the same thing. So did the founders of Home Depot. The list goes on. All of these people pointed back to one man,

• 0:45Shane Parrish?

  Saul Price. A man most people have never heard of. A man who never sought the spotlight, but whose shadow covers the entire landscape of modern retail. A man who didn't just create a business, but a school of thought. His classroom was the warehouse, and his students changed the world. Welcome to The Knowledge Project. I'm your host, Shane Parrish. In a world where knowledge is power, this podcast is your toolkit for mastering the best what other people have already figured out.

• 1:15Shane Parrish?

  This is the story of Saul Price, a man who invented the warehouse club, pioneered membership retail, and quietly revolutionized how 300 million people-plus shop today. He started FedMart and Price Club, which sold to Jim Sinegal, one of his proteges at Costco. His innovations touched everything, from how workers get paid to why you can still buy a hot dog and soda for $1.50 today at Costco. But Saul Price's real genius wasn't in what he built. It was how he did it. This is the story of how a lawyer with no retail experience created an industry, mentored his competition, and proved that nice guys don't always finish last. It's time to listen and learn.

• 2:00Shane Parrish?

  In the third grade, Saul Price dipped a girl's ponytail into his inkwell. When his mother got called to the school, the teacher delivered a prophecy that would follow him forever. "Your son is very smart, Miss Price, but he could go in one of two directions. He could become a gangster, or he could become someone who does much good." Think about that for a moment. The teacher saw gangster potential in an eight-year-old boy. Why? Because even then, Saul didn't just break the rules, he understood them so well that he could bend them. The drooping left eyelid that other kids teased him about, it had already made him an outsider who saw things differently. When Saul was 11 years old, his father, Sam, got tuberculosis. The doctor's prescription was simple: move to California for the dry air.

• 2:43Shane Parrish?

  So the family packed up and drove from New York to San Diego. But here's where Saul learned his first real business lesson, though not the way you'd think. His father had somehow gotten a disability insurance policy from Equitable Life: $500 a month, as long as he couldn't work. For the next 22 years, until he died in 1949, Sam Price never worked another day. Saul would later joke that his father "lived in grave danger of getting well." Now, think about what young Saul saw every day. His mother Bella worked her fingers raw with her sewing to keep food on the table. Meanwhile, his father collected those insurance checks month after month. It was all perfectly legal, but it taught Saul something important about how systems

• 3:27Shane Parrish?

  actually work versus how they're supposed to work. Most kids would learn to game the system like their dad. Saul, he learned to build better systems. In high school, Saul met Helen Moskowitz. Her father owned a successful junk dealership, which meant real money during the Depression. When Helen brought Saul home to meet her parents, they sized him up pretty quickly. They saw the drooping eyelid from the childhood paralysis. They saw the socialist parents. They saw the father who collected disability instead of working. Their verdict came rather quickly. "He's not good enough for our daughter." Now, here's the thing. Saul had turned that drooping eyelid into academic rocket fuel. Sure, the kids teased him about it, but it put a chip on his shoulder that made him work harder. He skipped two grades.

• 4:12Shane Parrish?

  He beat adults at chess and cards. But Helen's parents didn't care about his grades. They saw what they wanted to see. So what did Saul do? On January 1, 1938, he and Helen eloped to Las Vegas. The ring cost a dollar from Woolworths. When Helen's mother heard about it, she told her daughter, it's not too late to undo this. But it was too late. Saul had made up his mind. They'd stayed married for over 70 years. And while they didn't know it at the time, Saul would go on to change how people all over the world purchased goods. He would become fabulously wealthy. And in the ultimate kicker, he'd pay his employees double what his competitors paid, including his father-in-law's junk dealership. Here's what strikes me about these early years.

• 4:57Shane Parrish?

  Saul turned every single disadvantage into fuel. That physical deformity, it drove him to excel academically. His father's questionable ethics, they taught him to value honest work. And his in-law's rejection, it became motivation to prove them wrong. This is a pattern we see in outliers again and again. They don't just overcome obstacles, they transform them into advantages. Fresh out of UCLA Law School in 1938, Saul opened his practice in San Diego and immediately did something that would define his entire approach to business. He took every charity case for free. The Hebrew Home for the Age needed contracts reviewed, free. The Jewish Welfare Society needed legal help, free.

• 5:42Shane Parrish?

  Other lawyers said he was leaving money on the table, but watch what happened. Those charity boards were full of San Diego business owners, and Saul met them all. He helped them all. So when those business owners needed a lawyer for their paying work, who do you think they called? This is classic Saul Price. Give away what others would sell and watch it come back multiply. Those charity connections, they'd become his first investors when he needed capital for FedMart in 16 years, too. When World War II started, Saul's drooping eyelid kept him out of combat. So he did what he always did. He found another way to contribute. Days at his law practice, nights teaching mechanics to fix bomber engines at consolidated aircraft. But here's what nobody expected.

• 6:26Shane Parrish?

  Those nights in the aircraft hangar taught Saul something crucial. He watched military teams tear down B-24 engines, clean every component, rebuild them, and test them. Same process every time. Maximum efficiency, minimal waste. Saul was watching the military move massive amounts of material through perfect systems, and he filed it all away. The lawyer was already inadvertently gaining a unique education in logistics that no business school could provide. After the war, Saul's law practice took off. Remember those charity connections? They were paying dividends. His clients were small business owners, corner stores, local shops, family operations. And they all had the same complaint. Suppliers wouldn't give them decent prices

• 7:10Shane Parrish?

  because their orders were too small. Then Saul met Eddie K., who ran something called the Seven Seas Locker Club. This was genius, and here's why. Navy rules said sailors had to leave their ships in uniform, but the minute they hit the shore on leave, they wanted civilian clothes. So Eddie created a business that solved every problem a sailor had: lockers for uniforms, civilian clothes to buy, a barber shop, everything, all in one place. Saul became Eddie's lawyer and studied the operation. What struck him wasn't what Seven Seas sold, it was who they sold to. They didn't try to serve everyone in San Diego. They served sailors, period. That's it.

• 7:53Shane Parrish?

  A total focus on one customer. Solve all of their problems. Ignore everyone else. Something in that moment clicked for Saul. His small business clients were trying to compete with everyone. Seven Seas competed with no one. They owned their niche completely. This lesson would echo through everything Saul built. Success didn't come from serving everyone a little bit, it came from serving someone completely. Then, in 1947, something happened that would push Saul from observer to operator. All these lessons he'd been filing away, he was about to put them to use.

• 8:30Speaker 01

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• 9:00Speaker 02

  College football is back. So Hilton called to me, the superstition concierge, to make your fan rituals a reality. Need a room to match your lucky number? We got you. Want to make sure our team doesn't wash your lucky jersey? Oh, that smells lucky. Hilton's unmatched hospitality can keep up with any superstition. Even a marching band wake up call at 5:55 and 55 seconds. Hit it! When you need a team that will do whatever it takes on game day, it matters where you stay. Hilton, for the stay.

• 9:30Shane Parrish?

  Here's where things get interesting. It's 1954 and Saul Price is crushing it as a lawyer. He's 38 years old with a very successful practice, representing all these small business owners all across San Diego. But his mother-in-law has this problem. She owns this warehouse on Main Street. It's just 21,000 square feet of nothing. It's just sitting there, eating up property taxes. Now Saul could have just said, "Sell it." That's what any normal lawyer would advise. But Saul starts talking to his clients, these jewelry wholesalers he represents. And one of them mentions something that catches his attention. The guy says, "You know Saul, there's this weird store up in LA called Fedco. You pay $2 to join and then you can buy stuff at wholesale prices.

• 10:14Shane Parrish?

  I've got customers driving all the way up there just to shop." Saul was like, "Wait, what? People are driving two hours to shop in a warehouse?" It turns out that thousands of people from San Diego County were making that 200-mile round trip to Los Angeles every single weekend. Think about that. Thousands of families thought it was worth four hours in the car to save money on appliances and clothes. So Saul decides to check it out himself. He drives up to LA, finds Fedco, and it's literally next to a cow pasture. The parking lot is dirt. The building looks like a barn, but the parking lot is absolutely jammed. Saul walks inside and immediately gets it.

• 10:58Shane Parrish?

  Government employees are flashing their IDs like they're entering some sort of exclusive club. They're pushing carts loaded with cameras, appliances, clothes, and everything else. And the prices? They're incredible. Here's what Saul figured out that day. Fedco had found a legal loophole. At the time, there was a fair trade law that said manufacturers could set the minimum prices. Retailers couldn't sell below those prices unless you weren't technically a retailer, unless you were a private buying club. Saul goes to Fedco's management. He says, "Listen, I've got a warehouse in San Diego. You've got 5,000 members there already. Let's open a branch." They listened politely, but then they said no.

• 11:41Shane Parrish?

  That rejection would turn out to be one of the biggest business mistakes in history. So Saul decides he's going to build his own version of Fedco. And here's one of my favorite Saul Price quotes about this moment. Years later, he said, "Fortunately, most of us had backgrounds that were alien to retailing. We didn't know what actually wouldn't work or what we couldn't do." And his ignorance turned into a superpower. Established retailers had hundreds of reasons why a warehouse membership club couldn't work. The location's wrong. People won't pay to shop. You can't sell tires next to toothpaste. But Saul, he didn't know any of that, so he just built one anyway.

• 12:23Shane Parrish?

  He put in $5,000 of his own money, which was serious money for him back then. His law firm chipped in $10,000. Seven friends invest $5,000 each. $50,000 total. Not exactly a fortune, but enough to get started. He calls it Fedmark. And in December 1954, opening day rolls around. The warehouse is in an industrial area surrounded by tuna canneries. Inside, Saul's got merchandise displayed on planks, sitting on sawhorses. There's no fancy fixtures, no decorations, just products and prices. And then Saul does something that shows his character. He makes a rule that nothing in Fedmark can ever be sold below cost. There's no loss leaders, period.

• 13:06Shane Parrish?

  Every other grocery store is selling milk at a loss to get customers in the door, but Saul refuses to play that game. He figures if you're losing money on milk, you have to make it up by overcharging on something else. And once customers figure that out, they'll never trust you again. The man was so committed to this principle that when grocery stores nearby would sell sugar below cost, Saul would put up signs telling his customers to go buy the sugar at the other store. Can you imagine walking into a store and seeing a sign that says, "Sugar is cheaper at Safeway this week. You should shop there." But that's exactly what Saul did. In the first year, he projected they would do a million in sales, but the actual first year sales were 3 million.

• 13:50Shane Parrish?

  Here's how Saul would describe scale economics. "Although we are interested in margin, it must never be done at the expense of our philosophy. Margin must be obtained by better buying, emphasis on selling the kind of goods we want to sell, operating efficiencies, lower markdowns, greater turnover, etc. Increasing the retail prices and justifying it on the basis that we are still competitive could lead to a rude awakening, as it has with so many. Let us concentrate on how cheap we can bring things to the people rather than how much the traffic will bear. And when the race is over, FedMark will be there." Isn't that brilliant? I think that's brilliant. Here's the insight.

• 14:34Shane Parrish?

  Saul wasn't trying to trick anyone. He was building trust. And when customers trust you completely, when they know you'll always look out for their interest, they become customers for life. That $2 lifetime membership was starting to look like one of the best investments a San Diego family could make. After FedMark opened, Saul's competitors are wondering how he's selling everything so cheap. The answer was something Saul called "the intelligent loss of sales", which sounds crazy until you understand how it works. Here's what every other retailer believed. "You need to carry every possible item in every possible size to capture every possible customer." Saul looked at this conventional wisdom and said, "That's completely backwards."

• 15:17Shane Parrish?

  The intelligent loss of sales turns conventional wisdom on its head, showing that customer demand is most sensitive to price, not selection. And low prices are only possible if there's integrity in the pricing combined with being the most efficient operator. Let me give you an example. At the time, there's this product called three-in-one oil. You know this stuff you use to oil hinges and fix squeaky doors. And it comes in three sizes: small, medium, and large. Every hardware store carries all three sizes because, God forbid, you miss a sale, right? Saul does the math, and he figures out the eight-ounce bottle is by far the best value per ounce. So that's the only size that FedMart carries.

• 16:01Shane Parrish?

  Though eight ounces is a lot for some customers, it's acceptable for most customers. But what about the customer who doesn't buy the eight-ounce size? Well, that's the intelligent loss of sales. You're deliberately choosing to lose those sales because the efficiency you gain makes up for it 10 times over. So what does limited selection have to do with efficiency? I'm going to let Saul's son, Robert, explain this. Because payroll and benefits represent approximately 80% of a retailer's cost of operations, pricing advantage follows labor productivity. Fewer items result and reduce labor hours throughout all of the product supply channels:

• 16:42Shane Parrish?

  ordering from suppliers, receiving them at the distribution center, stocking them in the store, checking out the merchandise, and paying vendor invoices. Put simply, the cost to deal with 4,500 items is a lot less than the cost to deal with 50,000 items. The intelligent loss of sales involves more than stocking fewer SKUs. Selling high-quality merchandise is more cost-effective than selling inferior merchandise. Fewer product returns is one obvious advantage. Also, selling one size, the large size of a product, is another way of giving up sales to gain more sales. Large sizes almost always cost less per unit than smaller sizes,

• 17:24Shane Parrish?

  beginning with the manufacturing and packaging costs and ending with the cost to handle it at the store. For example, a cashier can check out a 20-pound box of detergent as quickly as a 5-pound box. At FedMart, many products were available only in larger sizes. FedMart members were willing to spend more to buy the large size in order to save the money on the per-unit cost. Think about what this means operationally. Instead of dealing with three different SKUs from one supplier, you're dealing with one. Your buyer spends one-third of the time on the product. Your warehouse guys handle one-third of the variations. Your cashiers bring up a 20-pound box of detergent just as fast as a 5-pound box,

• 18:08Shane Parrish?

  but you're moving four times the product on an efficiency basis. Saul realized that 80% of retailing operating costs were payroll and benefits. And by running your store with fewer people and fewer products to manage, you could pass those savings directly to customers. It was brilliant in its simplicity, and it worked. As Saul put it, he had a professional fiduciary relationship with the members, like a lawyer has with clients. His duty was to be completely honest and fair. The best advertising Saul would say is the unsolicited testimonial of the satisfied customer. His golden rule was simple but profound. If you want to be successful, just put yourself in the place of a cranky, demanding customer. See your business through their eyes.

• 18:53Shane Parrish?

  And that's exactly what he did. Every decision, every policy, every price, Saul looked at the world's crankiest customer. If it passed that test, it stayed. If not, it was gone. Now, before we move on, there are some things you should notice about what's happening here. First, Saul isn't just building a business. He's completely rethinking how business works. Think about it. Here's a guy who tells his customers to shop at competitors when they have better prices. He pays his workers more than what everyone else is paying. And you know what happens? Turnover shrinks. Everyone wants to work at Fedmer. He gets this pick of the best people. And the Bare Bones Warehouse, that wasn't just about saving money. Saul understood the space itself was sending a message.

• 19:37Shane Parrish?

  Every concrete floor, every exposed beam, every forklift, moving pallets, it all screamed that we don't waste money on fancy stuff so you get better prices. The medium was the message. And the timing couldn't have been better. This is 1954, San Diego. The city's exploding. Military families from the Midwest and East Coast are pouring in, attracted by perfect weather and good jobs. Saul's riding a demographic wave he probably didn't even fully appreciate at the time. And here's what gave Saul an edge. Those fair trade laws I mentioned, they were killing regular retailers. Manufacturers could legally set minimum prices and stores had to follow them.

• 20:21Shane Parrish?

  But membership clubs, that was a loophole. Saul could price however he wanted. And finally, Saul's idea of a fiduciary relationship with the customer was similar to the golden rule. The way Saul put it, if you want to be successful in retail, just put yourself in the place of a cranky, demanding customer. In other words, see your business through the eyes of the customer. This is a guy playing by completely different rules, and it's about to pay off in ways that nobody could have imagined. By 1957, Saul's opening stores in Texas, and he immediately shocks everyone by announcing FedMart will pay a dollar an hour. Every other retailer in town is only paying 50 cents. His advisors think he's lost his mind, but Saul's logic is bulletproof.

• 21:05Shane Parrish?

  Pay double and you get your pick of the best workers. Turnover disappears. Theft becomes almost nonexistent. People start treating your business like it's their business. But Saul's real test came with segregation. When he's negotiating a loan for his Dallas store, the bank wants a clause requiring separate bathrooms by race. Saul tells them to remove it or forget the deal. The bank blinks first. The San Antonio store presents a different challenge with its lunch counter. Texas law says that you need separate tables for blacks and whites. Saul finds an elegant workaround. He removes all the tables and chairs. Everyone has to stand while they eat, which means everyone can eat together.

• 21:47Shane Parrish?

  By 1959, FedMart had grown to five stores doing 26 million in sales.

• 21:54Shane Parrish?

  Here's this Jewish lawyer from California breaking every rule the Texas establishment holds sacred. Paying double the wages, integrating lunch counters, and his stores are packed every day. The lesson is timeless. When you treat people right, everybody wins. Your employees work harder, your customers trust you more, and somehow your profits go up too. Saul was proving you could do well by doing good, and he was about to learn what happens when you sell to someone who doesn't share your values. But first, you should know something about Saul Price. He was a teacher. If you ask Jim Sinegal what he learned from Saul Price, he'll tell you a story. A reporter once called him and said, "You've known Saul since 1954. You must have learned a lot." Jim's response was immediate. "No, that's inaccurate.

• 22:39Shane Parrish?

  I didn't learn a lot. I learned everything, everything I know." Think about that. Jim Sinegal, who built Costco into $300 billion company, and he credits every little bit of his knowledge to one teacher, Saul Price. So how did Saul teach? Well, first, you have to understand his role in classroom. Saul bought an old Greyhound bus and converted it into a mobile office. Beds, kitchen, the works. Late afternoon, he'd load up the family and executives in San Diego, and they'd roll east through the desert. At the time, he didn't like flying. Saul would cook his famous chili while they'd talk strategy. They'd sleep in the bunks and wake up in Dallas, Phoenix, or wherever they were expanding to next. Now, Saul could have flown,

• 23:23Shane Parrish?

  but he still wouldn't get on airplanes after watching those B-24 engines catch fire during the war. More importantly, though, the bus represented his philosophy perfectly. Never waste time. Those hours rolling through the desert weren't travel time. They were teaching time. And Saul was always teaching, but not the way you'd expect. He didn't lecture. He asked questions. Jim Sinegal remembers Saul walking the Fed Mark floors. "Why is this here? What's the turn rate? How much are we making? Could we sell it for less?" People felt like he was testing them, but he wasn't testing them. He was teaching them to think. Sometimes the lessons were harsh. There's one story about Saul finding an aisle that was too narrow. He had this rule about six-foot-wide aisles as a minimum.

• 24:08Shane Parrish?

  So he asked the manager, "How wide is this aisle?" And the manager looks at him, trying to be a wise guy, and shoots back, "What did you hire? A merchant or a surveyor?" Saul takes a breath and looks at the cramped aisle, looks at the manager and says, "Looks like I didn't get either." Boom, lesson delivered. But Saul's real genius was creating frameworks that taught people to think systematically. His big one was called the six rights. The right product in the right place at the right time, in the right quantity, in the right condition, at the right price. It sounds simple, but apply it to anything and it works. Take a cashier, for example. The right person is someone cheerful. The right condition means well groomed and professional.

• 24:54Shane Parrish?

  The right price means paying them properly with good benefits. The right quantity means having enough staff for your customer flow. Suddenly, hiring isn't guesswork, it's the system. Saul had another concept he called the alter ego principle. He'd explain it like this. If a store owner could do everything himself, greet customers and stock shelves and sweep floors, he would, but he can't do everything himself. So he has to hire people and teach them to be his alter ego, to think and act like he would. And that means the owner focuses on the highest value work while trusting his alter egos with everything else. Saul refused to create training manuals. Other retailers had thick binders of procedures

• 25:39Shane Parrish?

  and Saul thought manuals were a substitute for thinking. One of my favorite adages of his that he frequently found appropriate to repeat was, "You train an animal, you teach a person." He wanted people who could assess a situation and make the right call, not robots following a script. Jim Sinegal took this philosophy to heart. He used to say, "If you're not spending 90% of your time teaching, you're not doing your job." And that's pure Saul Price. Build people who can think, not people who just follow orders. This teaching philosophy would create a generation of retail revolutionaries. Bernie Marcus would take these lessons to build Home Depot. Sam Walton would adapt them for Walmart

• 26:22Shane Parrish?

  and Jim Sinegal would perfect them at Costco. All because Saul Price believed the most important thing a leader could do was By the early 1970s, FedMart is struggling a little bit. Competition from Walmart, Kmart, and Target is fierce. Saul's approaching 60 and looking for fresh ideas, so he flies to Europe and meets Hugo Man, a German retail magnate who owns furniture stores and hypermarkets. Man courts Saul Hart, promising capital and expertise to revitalize FedMart. Saul's early investors also need liquidity. Man seems like the answer. Saul agrees to sell him control. The first board meeting under Man reveals the real truth, though.

• 27:06Shane Parrish?

  For 90 minutes, Man screams criticisms while refusing to even look Saul in the eye. The charming businessman from Germany had morphed into a tyrant. Three months later, Man's board fires Saul Price from the company that he founded and built from the ground up. That very night, they changed the locks on his office doors. After 21 years of building FedMart from nothing into a $300 million company, Saul is out. Without Saul's vision, FedMart collapses fast. Man tries running it like a traditional retailer by raising prices, cutting wages, and ignoring everything that Saul had proven works.

• 27:47Speaker 03

  According to Saul Price, problems such as high interest rates and costly labor weren't half the story of FedMart's downfall. In his view, it was Mon himself.

• 27:54Speaker 04

  He absolutely assumed that what he did in Germany was transferable in detail to this country. The way he treated employees in Germany could treat them here. The way he put his merchandise on the shelf he could do here. All of that he assumed. But then he had one other terrible failing, and that was that he was a terribly suspicious man.

• 28:27Speaker 03

  Price says FedMart's operations took on the trappings of an atomic energy lab with employees muzzled and the news media unwelcome on the premises. He estimates Mon poured $100 million into the venture, starting with a $25 million buyout, of which Price got about 13%. Certainly, there were big tax write-offs, but Mon once said he just wanted to get his money out of a socialist-leaning German economy.

• 28:48Speaker 04

  I don't believe that that was his real reason. No, I think he was on an ego trip.

• 28:55Speaker 04

  I think he was on an ego trip. I think he figured he was going to become the retailing giant in the world.

• 29:01Speaker 03

  Price says he has mixed feelings about the collapse, mainly because it's more of a blow to Mann's pride than his pocketbook.

• 29:06Speaker 04

  And the unfortunate part of it is that economically, I don't think Hugo Mann is going to lose. He's got valuable real estate. Well, the people who gave their lives to that company are going to lose. And that's sad.

• 29:21Shane Parrish?

  By 1982, FedMark is dead. Here's what I find fascinating. Saul Price is 60 years old. He's wealthy enough to retire comfortably. Most people would have quit right there, but failure, it turns out, can be the best teacher of all. Everything Saul learned from losing FedMark would make his next venture even stronger. It's December 1975. Saul Price has just been fired from the company he built. Not just fired, but literally locked out. Hugo Mann's people changed the locks on his office door. He's 60 years old. He could take his money and retire to a beach somewhere. Instead, within one week, he's signing a lease on a new office in the very same building, one floor up. Think about this for a second.

• 30:05Shane Parrish?

  Every morning on his commute, Saul rides the elevator past the FedMark offices where they locked him out, past the company he spent 21 years building. Most people would find that torture? I think Saul saw it as fuel. He hangs exactly two things on his new office wall. A sign on the door that says "The Price Company" and a small sign above his desk with three words: "Do it now." Saulson Robert remembers those early days. "My father always needed a project. He was not a happy guy if he didn't have something to do." So they walk and they talk, and father and son pounding the San Diego pavement dissecting 20 years of FedMark. What worked, what didn't?

• 30:49Shane Parrish?

  And they kept coming back to one division that made money when everything else struggled. The wholesale operation run by Jim Sinegal. Here's what clipped. FedMart stores barely broke even selling to customers, but the warehouses that sold to those stores? Different story. Low overhead, minimal staff, no advertising, just pure efficiency. Then they started talking to small business owners, liquor stores, restaurants and convenience shops. Everyone has the same complaint. We pay too much because we can't buy in volume. Saul sees it immediately. What if you created a wholesale only warehouse? No retail headaches, just sell to businesses that know what they want. But then Saul does something that changes everything.

• 31:32Shane Parrish?

  He charges an annual membership fee of $25. Not $2 for a lifetime like FedMart, $25 every year. This is real money in 1976. He sounds crazy. Who's gonna pay $25 just to shop? But Saul understands psychology. That $25 isn't a fee, it's a commitment. Nobody pays $25 just to join a club and then shop somewhere else. You've already invested, you're gonna make it work. And Saul also understood you can use that $25 to lower prices on everything. It's March 1976. Robert's driving around the industrial San Diego when he spots it. 100,000 square foot corrugated steel warehouse.

• 32:15Shane Parrish?

  Oil stains on the floor, pigeons in the rafters, perfect. This isn't just about saving money on rent. Saul wants the building itself to make a statement. Every exposed beam, every concrete floor, every forklift beeping in the background says the exact same thing. And it's talking to your subconscious. We don't waste money on fancy, you get the savings. July 12th, 1976. It's opening day. Everyone is excited. Only, it's a total disaster. The first week's sales, $32,000. Saul needs $200,000 a week to break even. Week two is even worse. By month three, they're hemorrhaging cash.

• 33:00Shane Parrish?

  Saul's looking at bankruptcy before Christmas. At the morning meetings, he's telling employees to park in the customer lot to make it look less empty. It was terribly slow, Saul admitted later, and it got worse from there. But here's where it gets interesting. He doesn't panic, he just diagnoses. They've broken their own rules. They have the wrong products for the market. They have the wrong location that nobody can find. They have the wrong hours that didn't work for the business owners. The breakthrough comes from an unexpected place. The San Diego Credit Union calls. They want to know if their members can shop at Price Club. Saul's team resists. The business was intended for wholesale use only, for businesses.

• 33:43Shane Parrish?

  But Saul's desperate enough to try something radical. So he creates a two-tiered system. Business members pay $25 for wholesale prices. Credit Union members pay nothing upfront, but add 5% at the checkout. Within days, something magical happens. Business memberships explode. Why? Because Credit Union members realize they can qualify as business owners. That janitor who does cleaning on the side, business owner. That teacher who tutors, business owner. They'd rather pay $25 once than 5% every time. By November, Price Club is hitting $150,000 a week. And by January, their cash flow positive. Crisis averted.

• 34:26Shane Parrish?

  Sometimes your biggest mistakes contain your biggest opportunity. Saul thought he was building a wholesale business, but his customers showed him that he was building something bigger, something much bigger. A membership club where the fee wasn't a barrier, but a badge to belonging. Eventually, they started getting all these calls from hot dog vendors wanting to set out carts outside of Price Club and take advantage of all the volume and all the traffic. At first, Robert ignored them, but the calls kept coming. Saul looks at this and thinks, why should we let someone else profit on our customer traffic? So they contact the best hot dog company at the time, Hebrew National, who not only agrees to supply the hot dogs, but throws in a free cart.

• 35:07Shane Parrish?

  They price it at $1.50 for a quarter pound all beef hot dog and a soda. That's at cost, maybe even a small loss. Robert thinks his dad has lost his mind. Why sell hot dogs for no profit? But Saul sees something bigger. That hot dog isn't about the money, it's about the message. Every time a member buys that $1.50 combo, they're reminded that Price Club will always put value first. And nearly 50 years later, Costco still sells that exact same combo for $1.50. They lose money on every single one. When someone suggested raising the price, the current CEO famously said that if they ever raise it, he'll kill them. That hot dog isn't food, it's a promise.

• 35:50Shane Parrish?

  By 1978, people were noticing what Saul was building. Bernie Marcus shows up. He was just fired from Handy Dan. He's angry, he's talking about lawsuits and revenge, and Saul gives him a little bit of advice. It's pure Saul press. Don't waste time suing, build something better. He walks Bernie through the warehouse and shows him everything. The membership model, the concrete floors, the forklift ballet. Bernie takes notes, and one year later, Home Depot opens. It's Price Club for hammers. Then in 1982, Sam Walton returns. He wanted to see Price Club. Saul invites him for lunch, but this time, Sam's not subtle. He comes back later with a tape recorder, walking the aisles, dictating notes.

• 36:33Shane Parrish?

  Security confiscates it. And when Sam calls to get it back, Saul could have erased the tape or not given it to him. Instead, he mails it back intact. He never even listened to it. Within a year, Sam's club opens. It's Price Club, period. The exact same model, same membership fee, same concrete floors. A reporter once asked Saul how it felt to be the father of the warehouse club industry, and Saul's response becomes legendary. I should have worn a condom. Saul wasn't just building a business. He was building an industry by teaching everyone else how to compete with him. He understood that when you're that far ahead, when your principles are that sound, copycats just validate your model. They expand the market, they train your customers, and they make your innovation normal.

• 37:17Shane Parrish?

  But they also can't copy everything, which we'll get to in a second.

• 37:21Speaker 05

  Flowing ad budget on metrics that look great till the CFO sees them? That's bull spend, and marketers are calling it out in Dashboard Confessions.

• 37:31Speaker 06

  I remember telling my boss, "It'll be good for the brand," when leads were slow. Yeah, it wasn't.

• 37:39Speaker 05

  Cut the bull spend. LinkedIn lets you target by company, job title, and more. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 37:52Shane Parrish?

  By the late 1980s, Saul Price found himself in a strange position. He was watching his ideas beat him at his own game. Remember that quote about wearing a condom? It was starting to feel less like a joke. Costco and Sam's Club, both born in 1983, both direct copies of Price Club were expanding like wildfire, while Price Club hesitated. Saul would later tell his son, Robert, something revealing. "We're good at creating businesses, but we weren't really good at running the business." Think about that admission for a second. Here's a guy who's revolutionized retail twice, and he's saying he's not good at running a business. But he wasn't wrong. Saul was a creator, an innovator, that dated a grind of optimization and expansion. That was never his strength.

• 38:37Shane Parrish?

  The irony was painful. Jim Sinegal, who worked for Saul since he was an 18-year-old beggar at FedMart, was now out executing the master using his own ideas. Senegal was a great operator. Costco added fresh food departments while Price Club debated whether perishables fit the warehouse concept. Costco expanded nationally while Price Club stayed cautious. Costco innovated constantly while Price Club protected what works.

• 39:05Shane Parrish?

  By 1992, the writing was on the wall. Price Club had pioneered the industry but was losing the war. Saul and Robert started exploring options. The only buyers that made sense were Sam's Club or Costco. Sam's Club had Walmart's deeper pockets, but Saul could never merge with them. The Walton family's anti-union stance went against everything Saul believed about treating workers well. Costco was different. Jim Sinegal didn't just learn the business from Saul. He absorbed the entire philosophy. When they announced the merger in June 1993, they called it a marriage of equals. 195 stores, 16 billion in sales. They even called it Price-Cosco. But here's the thing about mergers of equals.

• 39:50Shane Parrish?

  They never stay equal. Within 14 months, it kind of fell apart. Two founding families, each used to calling their own shots, couldn't really share power easily. Saul engineered an elegant exit. The Price name disappeared from warehouses, absorbed fully into Costco. But Saul, even at 78, wasn't done. Saul took the real estate from the separation and built Price Enterprises. His son, Robert, ran Price Smart, bringing warehouse clubs to Latin America. For a while, it worked. Then the aftermath of the 2001 crisis hit. Price Smart was drowning, suppliers demanding cash upfront. Auditors started questioning if the company could survive. 3,000 employees were about to lose their job. Saul, at the time, was 87 years old. He could have let it fail.

• 40:35Shane Parrish?

  Instead, he did what he always did. He fixed it. First with an emergency loan, then with an elegant restructuring where the Price family actually paid more per share than other investors to show they were all in. Think about that. At 87, when most people can't remember the grandchildren's name, Saul Price was engineering complex financial rescues. And he was doing it in a way where he treated everybody with respect and dignity, and he was committing, he was going all in. The man who got locked out at 60 was still fighting at 87. Saul Price died in December of 2009 at 93. The obituaries called him the "Father of Warehouse Clubs", but I think they missed the real story.

• 41:19Shane Parrish?

  Walk into any Costco today, and that hot dog combo is still $1.50, just like Saul Price did. Costco pays wages that make Wall Street analysts cry. They cap their markup at 14 to 15% when they could charge more. They treat suppliers fairly when they could squeeze them. And they do all of this because Jim Sinegal learned it from Saul Price. And he built it so deep into Costco's DNA that it survives without either of them. But Saul's influence goes way beyond just warehouse clubs. What's Amazon Prime? It's a membership program that creates loyalty through value. Where'd Jeff Bezos get that idea, do you think? Of course, from studying Saul Price. What's Home Depot? It's Price Club for hammers.

• 42:03Shane Parrish?

  It doesn't have the membership fee, but they copied everything else. It's built by Bernie Marcus after Saul told him to stop whining and start building. At Saul's memorial service, Jim Sinegal revealed something. Four years before Saul died, he'd written Jim a letter. After decades of withholding praise, Saul finally wrote, "You've been very generous about giving me credit for influencing you. I suspect that's true. But you would have been a great achiever under any circumstance." Jim's reaction? "I've been waiting 50 fucking years for this letter." Even at the end, Saul was teaching. This time the lesson? Don't wait 50 years to tell people. They really matter. Saul Price gave away every advantage he had. He taught competitors all of his secrets.

• 42:48Shane Parrish?

  He helped rivals succeed. By every rule of business that should have destroyed him, instead, it immortalized him. Why? Because the real competitive advantage isn't in your tactics or your systems. It's in your principles. And principles, unlike tactics, get stronger when you share them. Today, when hundreds of millions of people flash their membership cards at warehouse clubs worldwide, they're walking through Saul Price's classroom. When someone signs up for Amazon Prime, they're using his model. When employees earn middle-class wages in retail, they're benefiting from these principles. Saul Price didn't just create competitors. He created disciples. And disciples don't diminish the teacher. They multiply the teaching.

• 43:31Shane Parrish?

  The man who'd wished he'd worn a condom didn't just father an industry. He fathered a philosophy. And unlike companies, philosophies don't die when founders do. They just keep teaching.

• 43:44Shane Parrish?

  Saul Price never wrote a memoir. This entire episode is based on the book Saul Price, Retail Revolutionary and Social Innovator. When people asked about his proudest accomplishments, he'd redirect. He didn't want to talk about revenue. He wanted to talk about Jim Sinegal and Bernie Marcus, the employees who understood why you treat customers like clients and not targets. Because Saul knew that brilliant ideas mean nothing without believers. The warehouse club concept, it was brilliant, but without people who understood why you kept margins at 14%, without a culture that chose integrity over quarterly earnings, it would all collapse. Just look at FedMart after Hugo Mann took over. Do it now. These three words that sat above Saul's desk

• 44:29Shane Parrish?

  explained everything. Locked out at 59, start over in seven months. Hear bankruptcy? Pivot immediately. That wasn't impatience. It was a philosophy. Why wait when you can do it now? His son, Robert, captured the paradox. Saul was a tough negotiator who paid more than required. He was a fierce competitor who helped rivals succeed. He was a pragmatist who made decisions on principle. Most people think those are contradictions, and Saul proved that they're all the same thing. Today, when you walk in any warehouse club worldwide, anywhere in the world, or you see a $1.50 hot dog at Costco, you're walking into Saul Price's classroom. It's still in session, and it's still teaching the lessons that he started in 1954.

• 45:13Shane Parrish?

  The price is right when everybody wins. That's not just good business. That's a good life. Wow, okay. Let's talk about some of my reflections from that episode. This book is phenomenal. I just want to show you some of the highlights that I've made in this book. Like, you can see how much of this book I loved and highlighted. And we'll make the highlights available for our members if you go to fs.blog/membership.

• 45:41Shane Parrish?

  So there's some things that didn't make it into this episode that I thought were really interesting. One of them was a comment by Charlie Munger, which he said Saul Price used to say, success in business came from deciding which business you could intelligently do without. He had a list of business he didn't want. He didn't want business from people who wrote bad checks. He didn't want business from people who shoplifted. He didn't want business from people who clogged up his parking lot without buying very much. He carefully invented a system where he kept those people out and succeeded by deciding what he would be better off without and avoiding it. This is a very good way to think, and it is not all that common. Isn't that such a brilliant insight?

• 46:26Shane Parrish?

  One of the reasons that Costco charges a membership fee even to this day is this very reason. It keeps people out who are just gonna go in and buy one thing. It keeps people out who are going to shoplift. It selects for the right type of customer. Another thing that was really interesting that never sort of made it in is a little bit about Saul, the person. He was always reading. He was always learning. He was a voracious reader. He loved to ask questions and understand things. He also didn't waste words. What he said was always worth close attention. Saul's business philosophy was quite simple. It consisted of four points. One, provide the best possible value to the customers, excellent quality products at the lowest possible prices.

• 47:09Shane Parrish?

  Two, pay good wages and provide good benefits, including health insurance to employees. Three, maintain honest business practices. And four, make money for your investors. Saul also insisted on testing ideas and proving them before rolling them out. He would use each individual store as a bit of a laboratory testing. And this is what happens today in a lot of stores. They'll test in one market, and if it's successful, they'll roll out into others. He had a quote that I liked that I couldn't quite work into the episode, but he said, "Our first duty is to our customers. Our second is to our employees, and our third duty is to our stockholders," in that order. I thought that was really interesting.

• 47:51Shane Parrish?

  He put customers first. That was the fiduciary relationship he had with them. And the second was employees, because you have no customers without employees. Employees make everything tick. And third and finally, the stockholders. A good example of the application of how Saul managed occurred in 1960 at FedMart's flagship store. Rick Leibenson, the store manager at the time, described an encounter he had with Saul. Saul comes in one night. We're exceptionally busy. The sales floor was shut and it was a mess. And I'm out there pulling cardboard, turning the egg rack, making sure the milk cases is full, just trying to keep our heads above water. We're drowning. It was so busy that day.

• 48:33Shane Parrish?

  And Saul finally grabs me by the shoulder and yanks me back to the warehouse off the sales floor. He drags me. He literally grabs me and drags me. He's got me by the shoulder and he looks me in the eye and he says, "You're not running this place. It's running you." And I mean, he was yelling and on me. The main message has stuck with me my entire life. It made me change everything I did. After that day, I just stayed ahead of the business. His point was that all I was doing was reacting to what was happening. You have to take charge. You have to run the place. You have to stay ahead of it. And here's another point that I really liked. When they made a purchasing mistake and they paid too much for the product, they wouldn't price it as a loss, but they wouldn't add the customary sort of 10 to 15% margin.

• 49:18Shane Parrish?

  They would price it as if they had bought it at the right price. And one thing that's really interesting here is you think that Saul doesn't make a lot of mistakes. He actually makes a ton of mistakes that you can read about in the book or in my highlights. His instincts weren't always right. He believed, for example, that FedMart's sales would increase when they opened to the public, but they didn't. They barely budged at all. They opened a store in a very rundown area once, as Saul believed that the local community would be thrilled to have a new store with high-quality products, low prices, and a staff made up entirely from the community earning great wages. But sales were poor from day one and it had to be shut down. When he asked a vendor to lower the price on pantyhose and

• 50:01Shane Parrish?

  He promised them significantly more volume, but he refunded the vendor when the volume never materialized. I find it shocking today, looking at the success of Price Club and the success of Costco, that it almost failed, that they opened with the wrong idea. It was only the immediate pivoting and iteration on that idea that kept them alive. Another innovation they had at the time was sampling, and they realized that not only did it increase sales, both because members liked the products, but also because of the reciprocity rule and that people subconsciously desire to reciprocate when receiving something for free. Okay, I want to get into 10 lessons that you can take away from this, if you remember anything about this show.

• 50:45Shane Parrish?

  So one is bet on yourself. At 38, Saul put $5,000 into Fedmer. For a small-town lawyer in 1954, that was serious money. When he got fired at 68, most people would retire to a golf course, not Saul. He dumped 800,000 of his own cash, which was a significant portion of his net worth at the time, into Price Club. There was no backup plan, no safety net, just a conviction that he could figure it out. The first company became a $300 million giant. The second one spawned a trillion-dollar industry. When you believe in what you're building, go all in. Half measures guarantee half results. Two, the intelligent loss of sales. Saul stocked exactly one size of everything.

• 51:29Shane Parrish?

  Every competitor carried three, small, medium, and large. And sure, we lost the customer who wants the small sales, Saul said. That's the intelligent loss of sales. But here's what happened in practice. Carrying 4,000 items instead of 50,000 meant a lot less time ordering, stocking shelves, checking out. Labor costs crashed. Every saved penny, it went to customers as lower prices. It created this flywheel, this positive loop, where every advantage just became more and more. As they got more buying power, they would give it to customers. Price Club hit $1,000 per square foot. Competitors with the complete selection were struggling with 300.

• 52:11Shane Parrish?

  It turns out that customers prefer low prices to endless choices. Three, think like a fiduciary, not a merchant. When Safeway sold sugar below cost, Saul did something insane. He put up signs in FedMark saying, "Sugar is cheaper at Safeway this week. Go buy it there." His managers thought he'd lost his mind, but Saul's view was, "I have a duty to my members," like a lawyer to his clients. And that radical honesty created something very powerful. People drove hundreds of miles round trip from San Diego to shop at his LA store. When you treat customers like clients and not targets, trust becomes your greatest asset. Four, win-win, the math of success. Most businesses think someone has to lose for them to win.

• 52:56Shane Parrish?

  We have to find a sucker. We have to sell at a higher price. We have to deceive somebody. But Saul flipped that entire equation. The San Antonio retailers paid 50 cents an hour in 1957. Saul paid a dollar. Let's look at what happened. Employees could afford healthcare and dignity. Communities got stable families, not desperate workers. FedMark attracted the best people with near zero turnover. There was no constant hiring, no training costs, no theft. All of those savings went straight to customers with lower prices. Higher wages created lower costs. Saul didn't split the pie differently. He just baked a bigger pie where everybody could win. And I just want to do a brief aside here. I love this idea of win-win

• 53:39Shane Parrish?

  because it's the only sustainable relationship with anybody in your life, be it your customers, your suppliers, your employees, your investors. Everybody has to win. The only sustainable relationship is win-win. Think about compounding. What we know about compounding is that all the advantages from compounding go to the end. They come at the end. And the only way to get to the end, the only way to extend your timeline in anything that you're doing is win-win. Five, ignorance is superpower. Saul had never worked retail when he started FedMark. Fortunately, we didn't know what would work or what we couldn't do. Retail experts knew you couldn't sell tires next to toothpaste, but Saul did it anyway. Experts knew that stores needed elaborate displays, and Saul used sawhorses and plywood.

• 54:24Shane Parrish?

  Experts knew that warehouse locations were deft. And Saul thrived there. Revenue went from zero to 300 billion. Sometimes the most dangerous thing you can know is why something won't work. Six, balance don't break. Helen's parents said Saul wasn't good enough. He had socialist parents, he had a lazy father, he had a drooping eye. He married her anyway, with a dollar ring from wars. Fedco rejected his partnership and he built FedMart and crushed them. Hugo Man locked him out of FedMart at 60 and within a week Saul had signed a lease one floor up. Every morning he rode the elevator past the company that had fired. Seven months later, Price Club opened. And at 87, when Price Smart tanked, he rescued it with his own money.

• 55:08Shane Parrish?

  Three knockdowns, three comebacks, each one bigger. Success isn't avoiding failure, it's what you do after it. Seven, be a teacher. Saul believed that you train animals but teach people. He bought a Greyhound bus, he installed beds and a kitchen. He turned an eight-hour drive into rolling universities. Teaching executives while cooking chili at 70 miles an hour. When Bernie Marcus got fired, Saul walked him through every Price Club detail. Home Depot was born. Sam Walton showed up with a tape recorder. Saul mailed it back to him intact. Sam's Club was born. His secret, you can copy warehouses and membership keys, but you can't copy principles. That's why Costco dominates while Sam's Club survives. Eight, the $1.50 promise.

• 55:53Shane Parrish?

  Price Club sold a hot dog and soda for $1.50 in 1976. Today, nearly 50 years later, Costco still charges $1.50. They lose money on every single one. When someone suggested raising the price, Costco's CEO said, "If you raise the price of the fucking hot dog, I will kill you." He was joking, of course. That hot dog isn't food, it's a promise to customers. It says that some promises matter more than profit margins. What you refuse to change reveals who you are. Number nine, turn problems into principles. There's almost always another way. Texas law in 1957 required the blacks and whites couldn't eat at the same table. So his solution, remove the tables and chairs and everybody can lunch at the

• 56:35Shane Parrish?

  counter. If everyone had to stand, then everyone could eat together. When a Dallas bank demanded segregation clauses for his loan, Saul said to remove it or no deal. The bank blinked first. He didn't fight the system, he just worked around it. Number 10, do it now. Finally, Saul understood that tomorrow was where dreams go to die. If there's something in front of you and it's obvious, you should do it right now. And that's it. That is Saul Price in a nutshell. What a fascinating character, what a fascinating man. Thank you for listening and learning with us. I hope you enjoyed this episode as much as I did researching it. Thanks for listening and learning with us. Be sure to sign up for my free weekly newsletter at fs.blog/newsletter. The Farnham Street website is also where you can get more info

• 57:19Shane Parrish?

  on our membership program, which includes access to episode transcripts, my repository, ad-free episodes, and more. Follow myself and Farnham Street on X, Instagram, and LinkedIn to stay in the loop. If you like what we're doing here, leaving a rating and review would mean the world. And if you really like us, sharing with a friend is the best way to grow this community. Until next time.