#234 Sam Walton: Made In America

What I learned from rereading Sam Walton: Made In America by Sam Walton. ---- Get access to the World’s Most Valuable Notebook for Founders at Founders Notes.com ---- [1:56] The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone. (Founders #179) [5:45] We just got after it and stayed after it. [6:06] Foxes and Hedgehogs [6:39] Hedgehogs may not be as clever as foxes but they obsessively measure and track everything about their business, and over time, they acquire deep, relevant knowledge and expertise. Their single minded approach may appear risky at times but they are conservative by nature. Hedgehogs don’t speculate or make foolish bets. If all their eggs are in that one proverbial basket, they follow Mark Twain’s advice – and watch that basket very carefully. [7:17] The thing with Hedgehogs is that they never give up. They keep at it – and they don’t ever get bored because they just love what they do – and they have a lot of fun along the way. [7:28] Hedgehogs are the ones who build great, lasting companies. As entrepreneurs, they are the rarest of breeds – those who can start something anew, make it work, stick with it, and build something special, and ultimately, inspire others along the way, with their determination, dedication and commitment. [8:49] At first, we amazed ourselves. And before too long, we amazed everybody else too. [9:26] Think about how crazy this is. He died weeks after that writing this. His last days were spent categorizing and organizing his knowledge so future generations can benefit. [12:32] Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger(Founders #90) [12:56] "It's quite interesting to think about Walmart starting from a single store in Arkansas – against Sears, Roebuck with its name, reputation and all of its billions. How does a guy in Bentonville, Arkansas, with no money, blow right by Sears? And he does it in his own lifetime – in fact, during his own late lifetime because he was already pretty old by the time he started out with one little store. He played the chain store game harder and better than anyone else. Walton invented practically nothing. But he copied everything anybody else ever did that was smart – and he did it with more fanaticism. So he just blew right by them all. —Charlie Munger [17:11] What motivates the man is the desire to absolutely be on the top of the heap. [17:32] Practice your craft so much that you're the best in the world at it and the money will take care of itself. [18:44] We exist to provide value to our customers. [21:18] A Conversation with Paul Graham [22:32] It never occurred to me that I might lose; to me, it was almost as if I had a right to win. Thinking like that often seems to turn into sort of a self-fulfilling prophecy. [26:42] Time to Make the Donuts: The Founder of Dunkin Donuts Shares an American Journey by William Rosenberg. (Founders #231) [29:35] It didn’t take me long to start experimenting—that’s just the way I am and always have been. [30:56] Do things that other people are not doing. [33:13] The Founders: The Story of Paypal and the Entrepreneurs Who Shaped Silicon Valley by Jimmy Soni. (Founders #233) [33:41] I think my constant fiddling and meddling with the status quo may have been one of the biggest contributions to the later success of Wal Mart. [34:10] Our money was made by controlling expenses. I gotta read that again because it's so important. Our money was made by controlling expenses. [37:49] Sam Walton: The Inside Story of America's Richest Man (Founders #150) [38:37] I’ve always thought of problems as challenges, and this one wasn’t any different. I didn’t dwell on my disappointment. The challenge at hand was simple enough to figure out: I had to pick myself up and get on with it, do it all over again, only even better this time. [42:47] Four Seasons: The Story of a Business Philosophy by Isadore Sharp. (Founders #184) [45:12] The Autobiography of Andrew Carnegie by Andrew Carnegie (Founders #74) [47:08] Sol Price: Retail Revolutionary & Social Innovator by Robert E. Price. (Founders #107) [49:56] Sam had a really simple hypothesis for the first Wal Mart: We were trying to find out if customers in a town of 6,000 people would come to our kind of a barn and buy the same merchandise strictly because of price. The answer was yes. [52:19] I have always been a Maverick who enjoys shaking things up and creating a little anarchy. [54:23] In business we often find that the winning system goes almost ridiculously far in maximizing and/or minimizing one or a few variables. —Charlie Munger [55:02] He does something really smart here. And this is something I missed the first time I read the book. He finds a way to force himself to know the numbers for every single store. [56:13] Distant Force: A Memoir of the Teledyne Corporation and the Man Who Created It by Dr. George Roberts. (Founders #110) [58:11] Driven From Within by Michael Jordan and Mark Vancil. (Founders #213) I’m not so dominant that I can’t listen to creative ideas coming from other people. Successful people listen. Those who don’t listen, don’t survive long. —Michael Jordan [58:43] We paid absolutely no attention whatsoever to the way things were supposed to be done, you know, the way the rules of retail said it had to be done. [1:03:15] Estée: A Success Story by Estée Lauder. (Founders #217) [1:04:00] One thing I never did—which I’m really proud of—was to push any of my kids too hard. I knew I was a fairly overactive fellow, and I didn’t expect them to try to be just like me. [1:06:38] I was never in anything for the short haul. [1:10:36] Michael Jordan: The Life by Roland Lazenby. (Founders #212) Like so many NBA players, Drexler was operating mostly off his great store of talent, absent any serious attention to the important details of the game. Jordan had been surprised to learn how lazy many of his Olympic teammates were about practice, how they were deceiving themselves about what the game required. [1:11:56] And you can think about Sam constantly learning from everybody else, visiting stores —that is a form of practice. Every single craft has a form of practice. It just is not as obvious as it is in sports. [1:13:26] He proceeds to extract every piece of information in your possession. [1:15:37] He has just been a master of taking the best of everything everybody else is doing and adapting it to his own needs. [1:18:52] We were serious operators who were in it for the long haul, that we had a disciplined financial philosophy, and that we had growth on our minds. [1:19:54] Most people seem surprised to learn that I've never done much investing in anything except Walmart. [1:20:42] He's like I just figured out the Walmart's worked. And then all I did was focus on making more of them. You don't have to over-complicate it. [1:23:04] If you ask me if I'm an organized person, I would say flat out, no, not at all. Being organized would really slow me down. (Optimize for flexibility) [1:24:26] The Difference Between God and Larry Ellison: God Doesn't Think He's Larry Ellison by Mike Wilson (Founders #127): My view is different. My view is that there are only a handful of things that are really important, and you devote all your time to those and forget everything else. If you try to do all thousand things, answer all thousand phone calls, you will dilute your efforts in those areas that are really essential [1:26:15] I think one of Sam's greatest strengths is that he is totally unpredictable. He is always his own person. He is totally independent in his thinking. [1:26:45] If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them. —Bruce Lee [1:28:40] You can’t possibly know the TAM. You are in the middle of inventing the TAM. [1:30:08] There is no speed limit by Derek Sivers [1:31:54] Built From Scratch: How A Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billion (Founders #45) [1:41:35] I like to keep everybody guessing. I don't want our competitors getting too comfortable with feeling that they can predict what we're going to do next. [1:42:25] He ties that investment int technology with the compounding savings and over the long-term, he's going to destroy his competition just off this one metric alone. [1:43:39] Big Brown: The Untold Story of UPS by Greg Niemann. (Founders #192) [1:47:56] Sam’s 10 Rules for Building A Business [1:48:04] One thing I don’t even have on my list is “work hard.” If you don’t know that already, or you’re not willing to do it, you probably won’t be going far enough to need my list anyway. [1:48:51] Commit to your business. Believe in it more than anybody else. I think I overcame every single one of my personal shortcomings by the sheer passion I brought to my work. [1:50:54] Control your expenses better than your competition. This is where you can always find the competitive advantage. For twenty-five years running—long before Wal-Mart was known as the nation’s largest retailer—we ranked number one in our industry for the lowest ratio of expenses to sales. You can make a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient. ---- Get access to the World’s Most Valuable Notebook for Founders at Founders Notes.com ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

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

• 0:00David Senra?

  A lot of folks ask me two related questions all the time. The first one is, could a Walmart-type story still occur in this day and age? My answer is, of course it could happen again. Somewhere out there, right now, there's someone, probably hundreds of thousands of someones, with good enough ideas to go all the way. It will be done again, over and over, providing that someone wants it badly enough to do what it takes to get there. It's all a matter of attitude and the capacity to constantly study and question the management of the business. The second question is, if I were a young man or woman starting out today with the same

• 0:40David Senra?

  sorts of talents and energies and aspirations that I had 50 years ago, what would I do? That answer is a little harder to figure out. I don't know exactly what I would do today, but I feel pretty sure I'd be selling something. Probably some kind of specialty retail, something to do with computers, maybe, or something like The Gap. Anyway, the next time some overeager, slightly eccentric shopkeeper opens up a business in your neck of the woods, before you write them off too quickly, remember those two old people who gave me 60 days to last in my store down in Fayetteville. Go check the new store out, see what they've got to offer, see how they treat you, and

• 1:23David Senra?

  decide for yourself if you ever want to go back. Because this is what it's really all about. In this free country of ours, that shopkeeper's success is entirely up to you, the customer. Those were the last words that Sam Walton wrote a few weeks before he died, and they appear in the book that I reread and the one I'm going to talk to you about today, which is Sam Walton: Made in America by Sam Walton. And I'm going to tell you why I think this book is so important to read and to reread. And part of me explaining that to you is I need to read this section to you that comes from the biography of Jeff Bezos. It's "The Everything Store" by Brad Stone. And this is what it says. It says, "On the last page, a section completed a few weeks before his death, Walton wrote, 'Could a Walmart-type story still occur in this day and age?

• 2:08David Senra?

  My answer is, of course, it could happen. Again, somewhere out there right now, there's someone, probably hundreds of thousands of someones, with good ideas enough to go all the way. It will be done again, over and over, providing that someone wants it badly enough to do what it takes to get there. It's all a matter of attitude and the capacity to constantly study and question the management of the business,'" and this is what Brad said. "Jeff Bezos embodied the qualities Sam Walton wrote about." And if you've read "The Everything Store," then you know that Sam Walton in this book is mentioned over and over and over again. Bezos read it, he loved it, he made executives in Amazon read it. He would stop by-- let me read you another section from "The Everything Store." He's literally handing out gifs of the book with underlines, highlights and annotations.

• 2:50David Senra?

  So it says, "Bezos stopped by Dazzle's home with flowers and a copy of Sam Walton's autobiography. Bezos had imbibed Walton's book thoroughly and wove the Walmart's founder's credo about frugality and a bias of action into the cultural fabric of Amazon. In the copy that he brought to Dazzle," that's Catherine Dazzle, the person he's bringing it to, "he had underlined one particular passage in which Walton described borrowing the best ideas of his competitors. Bezos's point was that every company stands on the shoulders of giants that came before it. The book clearly resonated with Amazon's founder." And finally, before I jump into the book, the other reason I wanted to reread this is because knowledge compounds, just like money does.

• 3:34David Senra?

  And I originally read this book almost four years ago. It was originally episode number six of "Founders." Since then, I've read over 230 other biographies and autobiographies of entrepreneurs. And everything I've learned up until, in between the day I read "Made in America," and now, has compounded and enhanced my rereading of Sam Walton's autobiography. So the words on the page never changed, but I have tremendously in this time period. And so even though the words on the page didn't change, they now have deeper meaning because of all the other information and the books that I've read up until this point. So I want to go into the foreword of the book. He brings up right the fact, so he's writing this book. He knows he's about to die. He has blood cancer.

• 4:18David Senra?

  He's very, very sick. And he's about to tell us something that we've seen countless other times. Entrepreneurs do not sit down and write autobiographies when they're in the middle of their career. First, they're too busy, and two, they don't want to give away their secrets. Inevitably, they wait till they're 70, 80 years old, and they're like, OK, I need to now pass on all this knowledge that I accumulated over multiple decades of building this business. And he says, "I realized that we've been through something amazing here at Walmart, something special that we ought to share more with the folks, with all the folks who've been so loyal in our stores and to our company. That's one thing we never did much of while we were building Walmart. Talk about ourselves or do a whole lot of bragging outside the Walmart family." And a few paragraphs later, he expands on this point.

• 5:01David Senra?

  He says, "We've always pretty much kept to ourselves, and we've had good reasons for it. We have been very protective of our business dealings and of our home lives, and we still like it that way." And a few times throughout the book, he mentions if he never had cancer, he doesn't know if he'd ever actually write the book. And so he says, "None of this has really changed," meaning his perspective on this, "but I've been fighting cancer for a while, and I'm not getting any younger anyway. And lately, a lot of folks, including Helen, that's his wife, and the kids, and some of our executives here at the company, and even some of our associates in the store, have been fussing at me that I'm really the best person to tell the Walmart tale, and that, like it or not, my life is all wrapped up in Walmart, and I should get it down right while I still can." And then he writes, in my opinion, it's one of the best sentences in the entire book.

• 5:45David Senra?

  And he says, "When folks have asked me, how did Walmart do it? I've usually been flip about answering them. Friend, we just got after it and stayed after it." And so I would say it's impossible to read this book and not like Sam Walton. There's a great way to, there's a great framework to think about his approach to business. I talked about this blog post a few weeks ago. It's by this venture capitalist. His name, I think, is pronounced Ho Nam. And I'll leave a link in the show notes, but it's called Foxes and Hedgehogs. And so Ho talks about a lot of the entrepreneurs that he admires, the ones that he admires the most are actually hedgehogs and not foxes. And so he puts people like Sam Walton, Warren Buffett, Steve Jobs as hedgehogs. So I just want to read, I'm not going to read the whole post. I want to read two sections to you real quick to give you an introduction into Sam Walton,

• 6:29David Senra?

  if this is the first time you're coming across his writing and his, really, his philosophy on building a business. And so this is from the blog post, Foxes and Hedgehogs. And it says, "Hedgehogs may not be as clever as foxes, but they obsessively measure and track everything about their business. And over time, they acquire deep, relevant knowledge and expertise. Their single-minded approach may appear risky at times, but they are conservative by nature. Hedgehogs do not speculate or make foolish bets. If all of their eggs are in one basket, they follow Mark Twain's advice and watch that basket very carefully." And then this sentence is particularly important when we hear what Sam just told us, and when we wait till we get to the end, where he arrives at the end of his life with no

• 7:13David Senra?

  regrets, which is a huge goal of mine, and I'm sure yours as well. "The thing with hedgehogs is that they never give up. They keep at it, and they don't ever get bored because they just love what they do and they have a lot of fun along the way. In the end, hedgehogs are the ones who build great, lasting companies. As entrepreneurs, they are the rarest of breeds. Those who can start something anew, make it work, stick with it, and build something special, and ultimately inspire others along the way with their determination, dedication, and commitment." So think about that sentence in The Everything Store. Think about a young Jeff Bezos in his 30s, running around with this book in his hand.

• 7:56David Senra?

  Is that not exactly what Sam Walton did? He was a hedgehog who was able to inspire others along the way with their determination, dedication, and commitment. All right, so let's go back to Sam's book. He's going to tell us a lot about maybe his main personality trait is that this guy is super, or he was, super competitive. If I had to single out one element in my life that has made a difference for me, it would be a passion to compete. That passion has pretty much kept me on the go, looking ahead. And then he's going to hint on why so many people are going to be inspired by reading this book. And the note I left myself on this paragraph is, he's got founder mentality. "This is a story about believing in your idea even when some other folks don't, and about sticking to your guns. But I think more than anything, it proves there's absolutely no limit to what plain,

• 8:40David Senra?

  ordinary, working people can accomplish if they're given the opportunity and the encouragement and the incentive to do their best." And then this is also one of my favorite lines in the entire book. He says, "At first, we amazed ourselves, and before too long, we amazed everybody else, too. The Walmart story is unique. Nothing quite like it has been done before. So maybe by telling it the way it really happened, we can help some other folks down the line take these same principles and apply them to their dreams and make them come true." And the note I left myself after I read that paragraph is, "God bless the founders that leave something for the next generation." Sam did not have to write this book. Maybe he wanted to write this book internally for Walmart executives, for his wife, for his family, his kids and grandkids, but he certainly didn't have to take all this time,

• 9:24David Senra?

  especially when he's dying, the last days. Think about how crazy this is. He died weeks after writing this. His last days were spent categorizing and organizing his knowledge so future generations can benefit. That is insane. So when he's writing this book, he's one of, he might be the richest person in the world or in America. If not, he's one of the richest. He's definitely up there. So a lot of that has to talk, he talks about the fact that, I think they own like 40 something percent of Walmart at this point, him and his family. He's uncomfortable with the attention. He's like, "They pay too much attention to my net worth and not enough attention to the actual valuable part, which is how the ideas and principles I use to build the business." And so he talks about, he's like, "Listen, I drive a truck, I get my hair cut at a barber

• 10:06David Senra?

  shop, I don't believe in wasting money, and I'm just being who I've always been, and people think I'm some strange creature." He says, "No question about it, a lot of my attitude towards money stems from," and he's telling us why he doesn't, he's like, "I'm not, I drive a pickup truck. I'm not in a Bentley, because I can't fit my hunting dogs in the Bentley." He's like, "My truck gets me to where I'm going. Why would I need that?" He says later on, he's like, "Why am I getting invited to Elizabeth Taylor's birthday?" So he says, "No question about it. A lot of my attitude towards money stems from growing up during a pretty hard, scrabble time in our country's history, the Great Depression." And so the point he makes repeatedly, over and over in the book, he's like, "It's very difficult, it takes a lot of energy to make a dollar, so don't squander that energy. If you're giving your life force, your life energy, your time to making money, and then you get the money and you squander it, that means you squandered your life."

• 10:50David Senra?

  So he says, "I learned from a very early age that it was important for us kids to help provide for the home, to be contributors, rather than just takers. In the process, of course, we learned how much hard work it took to get your hands on a dollar, and that when you did it, it was worth something. One thing my mother and dad shared completely was their approach to money. They just didn't spend it." And so then he gets into one of the most influential, there's a bunch of older influential people that Sam benefited very much from knowing, one of them happened to be his father-in-law. And so this is the first example in the book of a trait that Sam Walton had his entire life, something that Charlie Munger noticed about Sam Walton as he studied him, and I'll get to that in a minute. And so he says, "My knowledge about money and finances wasn't all that sophisticated.

• 11:35David Senra?

  Then I got to know Helen's family and listening to her father, L. S. Robson was his name. Getting to know him was an education in itself. He influenced me a great deal. He was a great salesman, one of the most persuasive individuals I've ever met, and I'm sure his success as a trader and I am sure his success as a trader and a businessman, his knowledge of finance and the law, and his philosophy had a big effect on me. My competitive nature," this is really important that he included this, though, "his reaction to seeing someone else's success, because there's a large contingent of humanity that have this crab-in-the-bucket mentality. We've got to avoid these people at all costs, right? And Sam has the exact opposite mentality, and in my opinion, the only correct mentality to have."

• 12:18David Senra?

  And he says, "My competitive nature was such that I saw his success and admired it. I didn't envy it. I said to myself, maybe I will be as successful as he is someday." And so I'm pretty sure, I have this quote saved from Charlie Munger, I'm pretty sure it's in Poor Charlie's Almanack, which I covered, I think, back on Founder's Number 93 or 97, somewhere, you can find it in the archive. But this is what Charlie said about Sam Walton. You know, Charlie Munger is a huge hero of mine. He's somebody I'm trying to essentially copy with founders because he's read hundreds of biographies and autobiographies. And he's constantly downloading everything else other people knew and using the parts he liked in his life. And so this is what he learned about Sam. He says, "It's quite interesting to think about Walmart, starting from a single store

• 12:59David Senra?

  in Arkansas, against Sears Roebuck, with its name, reputation, and all of its billions. How does a guy in Bentonville, Arkansas, with no money, blow right by Sears? And he does it in his own lifetime. In fact, during his own late lifetime, because he was already pretty old by the time he started out with one little store." And this is what Charlie's summary of Sam Walton. "He played the chain store game harder and better than anyone else. Walton invented practically nothing, but he copied everything anybody ever else did that was smart. And he did it with more fanaticism. So he just blew right by them all." And so that first mention, that first example of his, what he's doing with his father-in-law, he's learning from him, he's studying him.

• 13:44David Senra?

  There's a quote in Brad Stone's book on Jeff Bezos, that Jeff Bezos went to school on everybody. You could say that that exact same quote applies to Sam Walton. He went to school on everybody. And then he talks about, it's really important, the fact that he set his family up as a partnership because that's what he saw his father-in-law do. And so his kids had stock in the company way before that stock was even valuable. And he is always saying, "This is our most valuable asset." I always think of like what Warren Buffett said, that his three-point formula, which I absolutely love, that he gives to the managers of his business. And he says, "That you should just run your business as if, number one, you own 100% of it. Number two, it is the only asset in the world that you and your family have or will ever have. And number three, that you can't sell it for at least a century." And so Sam is writing about, "Hey, we're going to keep the stock.

• 14:29David Senra?

  We're not trading our stock for yachts. And the future generation that's reading this, you guys better not mess up all the work I put in." So he says, "Walmart's stock is staying right where it is. We don't need the money. We don't need to buy a yacht. And thank goodness, we never thought we'd need to go out and buy anything like an island. We just don't have those needs or ambitions, which wreck a lot of companies when they get along in years. Some families sell their stock off a little at a time and live high, and then boom, somebody takes them over, and it all goes down the drain." One of the real reasons I'm writing the book is so my grandchildren and great-grandchildren will read it years from now and know this: if you start any of that foolishness, I'll come back and haunt you, so don't even think about it. And so, one of my favorite quotes that I've ever learned from doing this podcast is what

• 15:13David Senra?

  Henry Ford said over 100 years ago. He says, "Money comes naturally as a result of service." And when you're studying Sam Walton, you realize that, yeah, he's very rich, he's very happy he's rich, but he's focusing on the servicing of the customer. Think about how he ended the book. He's like, "It's up to the customer. The success of your business is coming down to-- it's not-- it's up to that person. Are you serving them or not?" And so, he relates that to the Walton family wealth as just being a byproduct of that service. Here's the thing: money never has meant that much to me, not even in the sense of keeping score. If we had enough groceries and a nice place to live, plenty of room to keep and feed my bird dogs, and a place to hunt, a place to play tennis, and the means to get my kids good educations, that's rich. I'm not ashamed-- we're not ashamed of having money, but I just don't believe even a big,

• 15:56David Senra?

  showy lifestyle is appropriate for anywhere, least of all here in Bentonville, where folks work hard for their money and where we all know that everyone puts on their trousers one leg at a time. I'm sure if I ever really figured out this-- excuse me, let me start that over. I'm not sure I ever really figured out the celebrity business. Why in the world, for example, would I get an invitation to Elizabeth Taylor's wedding out in Hollywood? I still can't believe it was news that I get my hair cut at a barber shop. Where else would I get it cut? Why do I drive a pickup truck? What am I supposed to do? Haul my dogs around in a Rolls-Royce? And so, if money is not the motivation, an old friend of Sam's-- so, if you've never

• 16:37David Senra?

  read the book, you have Sam talking, and then every few, maybe pages, every few paragraphs is people, like people that were influential in the building of Walmart, his kids, his wife, people that are important in his life. And they just have these little paragraphs, and sometimes he'll comment. So, you'll read the paragraph, and then he'll comment on what that person said. It's actually a really interesting layout that they chose for this book. And so, this is one of an old friend and one of an early partner about what actually motivates Sam. He says, "I've known Sam since his first store in Newport, Arkansas, and I believe that money, in some respects, is almost immaterial to him. What motivates the man is the desire to absolutely be on the top of the heap." And he's unashamed about that. He's, "I'm extremely competitive. I want to be the best."

• 17:22David Senra?

  And it just so happens that entrepreneurship, if you happen to be the best, you are most likely going to be extremely wealthy. And so I actually think that's, if you read between the lines, really good advice. It's like, practice your craft so much that you're the best in the world at it, and the money will take care of itself. So I want to tie something in that Brad Stone said in The Everything Store that Jeff Bezos learned from Sam. It's the bias, having a bias for action, and the benefit of being frugal. He's going to talk a lot. Sam Walton, just like most of history's greatest entrepreneurs, talk about the importance of controlling expenses in your business over and over and over again. And so he says, this is an example of his frugality. "Now, when it comes to Walmart, there's no two ways about it. I'm cheap. I think it's a real statement that Walmart never bought a jet until we were approaching $40 billion in sales.

• 18:07David Senra?

  A lot of what goes on these days with these high-flying companies and these overpaid CEOs, who are really just looting from the top and aren't watching out for anybody but themselves, really upsets me. It's one of the things that's wrong with American business today." And so I think most entrepreneurs, most people understand, listen, early days of your company, frugality is mandatory. But then why would you, and he's asked, like, why do you keep this going even at this point? When you're doing tens of billions of dollars in revenue, billions and billions in profit every year? I'm asked today, when Walmart has been so successful, when we're a $50 billion-plus company, why do we stay so cheap? That's simple. Because we believe in the value of the dollar. We exist to provide value to our customers, which means that in addition to quality and service, we have to save them money.

• 18:52David Senra?

  Every time Walmart spends $1 foolishly, it comes right out of our customers' pockets. Every time we save them $1, that puts us one more step ahead of the competition. Remember, these steps was being on top of the heap. So he says, "That puts us one more step ahead of the competition, which is where we always planned to be." So now he's going to go into a little bit about his early life and something that's been with him since as long as he can remember. He says, "It is a fact that I have been over blessed with drive and ambition from the time I hit the ground. My mother was extremely ambitious for her kids. One of the great sadness in my life is that she died young of cancer, just as we were beginning to do well in business."

• 19:34David Senra?

  And then when I read this next paragraph, I wrote to myself, this is so important, read it twice. "Mother must have been a pretty special motivator because I took her seriously when she told me I should always try to be the best I could at whatever I took on. So I have always pursued everything I was interested in with a true passion, some would say obsession, to win. I have always held the bar pretty high for myself and I've set extremely high personal goals." And so that last sentence there about, "I've always set extremely high personal goals," that's something he repeats over and over again. He's clearly trying to give us advice on this, like, your goals, they should be so high that when you tell them to other people, the people laugh. And then what I love about Sam is his ability to just, he gives entire lessons in just a sentence.

• 20:19David Senra?

  He says, "I've always had," and there's two examples here. This is the first one. "I've always had a strong bias towards action, a trait that has been a big part of the Walmart story." And then this is the second lesson. This is, I remember this from the first time I read the book and I've repeated it over and over again. I think it's really important, like, to keep your ego. Your ego and drive, these are internal motivators. You gotta, you can't, people don't like when, like, you demonstrate your ego in public. And so, he says, "I learned a long time ago that exercising your ego in public is definitely not the way to build an effective organization." Another important point he makes here. "I wasn't what you'd call a gifted student, but I worked really, really hard." That makes me think of Paul Graham, the founder of Y Combinator.

• 21:02David Senra?

  He's seen, you know, what, thousands? Thousands of startups at this point? I don't even know. A large number. And he came to the conclusion, when people ask, "Okay, what's more, what feature is more important to business success, intelligence or determination?" And he gave this fantastic, it was in a speech. I think it's called "A Conversation with Paul Graham on the Y Combinator YouTube Channel," if I'm not mistaken. But he's, he gave this perfect example and he's like, "Listen, if you start off with one person..." Actually, you know what? Let me just read you the entire quote instead of me giving you. I don't want to mess it up because the way he said it was fantastic. So he says, "It turns out it's much more important to be determined than smart. If you imagine this hypothetical person that is 100 out of 100 for smart and 100 out of 100 for determination, and then you start taking away determination, it doesn't take

• 21:46David Senra?

  long until you have this ineffectual but brilliant person. Whereas if you just take someone, if you take someone who is super determined and you take away smartness, eventually you get to a guy who owns a lot of taxi medallions or a trash hauling business, but is still rich." And then he says, "Important note: It only takes one person of the founding team to be super determined." Back to the book, Sam Walton talks about what he learned from playing sports, playing team sports. And again, you get a sense of who this person was. "It taught me to expect to win, to go into tough challenges, always planning to come out victorious." And then this sentence comes at the end of that same paragraph, and it's one of the, I'm working from the Kindle version. I have both the paperback version and the Kindle of this book. That's how much I like it.

• 22:30David Senra?

  And I'm working from the Kindle version right now. And it, uh, this is one of the most popular highlights in the entire book, and I love it. It says, "It never occurred to me that I might lose. To me, it was almost as if I had a right to win. Thinking like that often seems to turn into sort of a self-fulfilling prophecy." One of the things I learned from Arnold Schwarzenegger, he would agree with that same thing, and he talked, and he warns you about the danger of the reverse, right? So Sam saying, "Hey, it never occurred to me that I might lose. It was almost as if I had a right to win. Thinking like that seems to often turn into a self-fulfilling prophecy." Arnold Schwarzenegger would believe that too, but he said that the other side of that is dangerous. "When you start doubting yourself, that is very dangerous." That is a direct quote from Arnold.

• 23:14David Senra?

  "When you start doubting yourself, that is very dangerous." One of the traits Sam had from an early age that we see appears over and over again is the fact that he was forced, he had dire economic circumstances, so he was forced to be self-reliant at an early age, and he just built on that talent and ran with it for the next 60 years of his life. "Ever since high school, I'd made all my own money and paid for all my own clothes. This continued in college. Dad and mother would have been happy to help if they could have, but it was the Depression, and they had no extra money at all." So I'm skipping ahead in the story. I want to get right to where he gets his first job. It's in retail. And he says, "The deal was pretty straightforward. I'd report to JCPenney Store in Des Moines, Iowa, three days after graduation. It was June 3, 1940, and I would begin working as a management trainee. My salary was $75 a month.

• 23:59David Senra?

  That's the day I went into retail, and except for a little time out as an Army officer, that's where I've stayed for the last 52 years. I loved retail from the very beginning, and I still love it today." And now, this is one of my favorite anecdotes that I've ever read in any of his biographies. I've mentioned it to you many times on past podcasts. It's where he starts out JCPenney. He's not good at his job, and this guy says the funniest thing. And it's funny because we see how his career turned out. So he says, "One of his managers would get all upset the way I would screw up the sales slips and generally mishandle the cash register and that part of things. I couldn't stand to leave a new customer waiting while I fitted with paperwork. Walton, Blake would say to me, 'I'd fire you if you weren't such a good salesman. Maybe you're just not cut out for retail.'"

• 24:42David Senra?

  So imagine telling Sam Walton he wasn't cut out for retail. So even when he's in the Army, he's like, "I need to study up because I know when I'm done with this, I'm going to go back into retail." And so he's somewhere out, positioned somewhere out in Utah. And he says, "I went to the library there, and I checked out every book on retailing. I also spent a lot of my off-duty time studying the ZCMI, which was the Mormon Church's department store, just figuring that when I got back to civilian life, I would somehow go into the department store business." And that is really interesting. So he's a young man, and he's spending his time not working, visiting stores. Sam says it later on in the book. He's like, "I'm pretty sure that no one in the history of mankind has visited more retail stores than I have.

• 25:23David Senra?

  Every day, all over the world, no matter where I am, I'm going inside of stores and learning and seeing what they're doing." And so something Sam talks about over and over again is the fact that his opportunity came from a market that other people were just ignoring. They, all retailers at the time, focused on giant cities. His Walmart starts out where he lives his entire life and where he's building up Walmart is in these tiny towns. And what was interesting to me is that restriction actually was put on by his wife. And so he just made the most of it. And so this is what his wife Helen said. Sam, we've been married two years and we've moved 16 times. Now, I'll go with you anyplace you want, so as long as you don't ask me to live in a big city. 10,000 people is enough for me. And so this is what Sam says about that.

• 26:07David Senra?

  So any town with a population over 10,000 was off limits to the Waltons. If you know anything at all about the initial small town strategy that got Walmart going almost two decades later, you can see that this pretty much set the course for what was to come. She also said, no partnerships. They were too risky. And she knew that because she saw what her father experienced. Her family had seen some partnerships go sour, and she was dead set in the notion that the only way to go was to work for yourself. So that reminds me of what the Dunkin' Donuts guy that we just, Bill Rosenberg, Rosen, I'm pronouncing his last name wrong. But a couple podcasts ago, he said something in that book, because he had a bunch of bad experiences. And he said that he needed partners, like he needed holes in his head. So Sam gets out of the army, finds a little small town.

• 26:52David Senra?

  He's like, okay, I'm going to set up, I'm going to buy a store. This is many years. I think there's like 15 years of him owning stores before he gets the idea for Walmart. And so they're these, they're called Ben Franklin variety stores. There's all these changes in the retail industry over the 54 years that Walton was in it. So I want to go into his very first store. And so he says, a guy from St. Louis owned it. This is a Ben Franklin like franchise location that he's buying. And things weren't working out at all for him. He was losing money and he wanted to unload the store as fast as he could. I realize now that I was the sucker sent there to save him. I was 27 years old and full of confidence, but I didn't know the first thing about how to evaluate a proposition like this. So I just jumped right in with both feet. I bought it for $25,000.

• 27:34David Senra?

  I had $5,000 of our own money that I'd saved, and I borrowed $20,000 from Helen's father. My naivete about contracts and such would later come back to haunt me in a big way. So remember that for later, okay? The fact that he signs this lease not knowing much and it's going to wind up coming back and haunting him in a big way. And then he gets into the, again, the importance of setting a giant goal. You can think about this as Sam Walton's retail empire really starts off with just a, with a, with a one goal. Just make one store the best store there, there is. I've always believed in goals, so I set one for myself. I wanted my little Newport store to be the best, most profitable variety store in Arkansas within five years. I felt I had the talent to do it, that it could be done, and why not go for it?

• 28:19David Senra?

  Set that as a goal and see if you can achieve it. If it doesn't work, you've had fun trying. And so across the street from his little variety store, there's another store. And this is where I, I mentioned that he went to school on everybody. I learned a lesson that has stuck, that has stuck with me all through the years. You can learn from everybody. I didn't just learn from reading. I also learned the most from studying what John Dunham, he's talking about at this point in his career, John Dunham was doing across the street. And so his wife was talking about this, this part of Sam's career. She says, Sam was always over there checking on John, always looking at his prices, looking at his displays, looking at what was going on. He was always looking for a way to do a better job. So then he gets to the point that he's inside of a franchise system, which was very common at this time.

• 29:04David Senra?

  And that he's just like, you could tell this is not going to be a long-term solution for somebody like Sam Walton. So his advice, I think, would be learn the rules first so that you can break them later. He talks about his, he's like, I'm a maverick. I love mavericks. Study the rules and then break them. So he says, I wasn't all that great at accounting in college, so I just did it according to their book. In fact, I used their accounting system long after I had started breaking the rules on everything else. At the very beginning, I went along and ran my store by their book because I really didn't know any better. But it didn't take long for me to start experimenting. And that's just the way I am and always have been. And so part of the rules he breaks is that you're supposed to buy the majority of your stuff you're selling in the store from corporate office.

• 29:47David Senra?

  But he's like, I'm buying it from you guys, but I can go out and find all these little small suppliers and I'm getting way better deals. And so they started getting pissed off at him. So he says, that was the start of a lot of these practice, of the practices and philosophies that still prevail at Walmart today. I was always looking for offbeat suppliers or sources. I started driving over to Tennessee to some fellows I found who could give me special buys at prices way below what Ben Franklin was charging me. I've got to tell you, this drove the Ben Franklin folks crazy. And so he's going to wind up being the most profitable Ben Franklin franchisee. Right. And really, what I was thinking of as I read this, this part of the book is something I learned after, you know, I did not study Charlie Munger. I did not know much about Charlie Munger the first time I read this book, when this was just episode number six.

• 30:32David Senra?

  But now something that, and this is not just Charlie, there's a bunch of other people that, that say this, but really, if you think about what he's doing, it's like, okay, everybody else in the system, all my peers, maybe future competitors, they're all just, just running this, this company's playbook, they're doing exactly what they're told to do. I'm out here like trying to find any kind of advantage I can get. And so Charlie Munger says, explains this point in the most succinct manner possible. He says, do things that other people are not doing. Do things that other people are not doing. That's exactly what he's, he's like, I'm the only Ben Franklin franchisee that's driving over to Tennessee to try to find a supplier that's not on the approval list, that's not coming from Ben Franklin,

• 31:12David Senra?

  but yet has better deals. And therefore, if I can buy at a lower cost, I can then lower my prices and get more customers. And so one of these deals is the fact that he buys women's underwear. And this is, this, this is happening like a decade, like I said, a decade and a half before Walmart's even a thing. But he says right here, he's like, I'll never forget one of the best items I ever had and, and, and an early lesson I learned in pricing. It, it first got me thinking in the direction of what eventually became the foundation of Walmart's philosophy. If you're interested in how Walmart did it, this is one store you've got to sit up and pay close attention to. So they're selling ladies underwear for $2 a dozen. We'd been buying similar panties from Ben Franklin's

• 31:53David Senra?

  for $2.50 a dozen. And then we would sell them for three, three pair for a dollar. So he's like, okay, well, I can buy them now 50% or excuse me, 50 cents cheaper. So instead of, instead of selling three for a dollar, I can sell four for a dollar and, and it would make a great promotion for our store. And so this is exactly what his, he's going to do at Walmart later. He says, here's the simple lesson we learned. While others were learning at the same time, and which eventually changed the way retailers sell and customers buy all across America. I find out that I, I found out that by pricing it at a dollar, I could sell three times more than by pricing it at a dollar 20. I might make only half the profit per item, but because I was selling three times as many, the overall profit was much greater. Simple enough.

• 32:38David Senra?

  But this is really the essence of discounting. By cutting your price, you can boost your sales to a point where you can earn far more at the cheaper price than you would have by selling the item at the higher price. In retailer language, you can lower your markup, but earn more because of the increased volume. So that is the central idea of Walmart, the central idea that he uses to build Walmart. And then he makes a comment that I've tried to point out to you over and over again. It's the fact that there's all these examples in these books where you'll have an idea, and it just kind of sits and stews. And you might not use that idea for five years, like 10 years, like 15 years. The book of the founders I just did, Reid Hoffman was talking about the idea for to have a professional social network, like 10 years before he found a LinkedIn. And so Sam Walton's demonstrating the same idea here.

• 33:22David Senra?

  I began to mull over this idea in Newport, but it would take another 10 years before I took the idea seriously. He points out another trait that he has very early in his career that he uses, and it was very useful for when he's building Walmart. And that's the fact that he wakes up every day focused on improving something. So he says, as good as the business this was in, or this was, rather, I could never leave well enough alone. And in fact, I think my constant fiddling and meddling with the status quo may have been one of the biggest contributions to the later success of Walmart. And so now this is his brother Bud and his partner talking about the fact that Sam, even back then, Sam knew his business from A to Z. This is something he would do later at Walmart, too. That Newport store was really the beginning of where Walmart is today. We did everything. We would wash the windows, sweep the floors. We did all stockroom work, check the freight in, everything it took to run a store.

• 34:07David Senra?

  We had to keep expenses to a minimum. That is where it started years ago. Our money was made by controlling expenses. I got to read that again because it's so important. Our money was made by controlling expenses. That and Sam always being ingenious. He never stopped trying to do something different. So a few years into building up this store, he actually gets a visit from the guy that was working at JCPenney who said, "Hey, you know, Sam, I don't think you're cut out for retail." And so it says, "The manager told Blake, 'Hey, we've got an ex-JCPenney man right here in Newport. He came in a few years ago and really made a big success of it. He doubled sales in his store, in his Ben Franklin, the original one, and now he's got two stores and he's the president of the Chamber of Commerce." So I actually should pause right there. There is, this is, I think, the first reference in the book, but several times throughout the book,

• 34:52David Senra?

  Sam either has formally or informally this collection of other people doing the same thing that he's doing, whether it's specifically in retail or just other business owners. He is constantly meeting, talking, studying, and trying to learn from other entrepreneurs. And he did this when Walmart's a giant company and he's doing this in a town, I think there's 7,000. If I'm not mistaken, I'm pretty sure there's 7,000 people in this town. So he's the president of the Chamber of Commerce of a town of only 7,000 people. And he still realizes, hey, or not still, but he realizes then that's a good idea and he continues this idea later on. So let me go back to this part of the story. So it says, "When the manager told him it was Sam Walton, old Blake almost fell over. 'It can't be the same one I knew in Des Moines,' he said.

• 35:36David Senra?

  'That fellow couldn't have amounted to anything.' He came next door and we both had a big laugh about it when he saw that I really was the kid who couldn't write, who couldn't write well." So he's talking about like the slips at the cash register. And it's at this point Sam brings us up to speed with what he's been doing. He says, "By now, my five years in Newport were about, were about up, and I had met my goal. That little Ben Franklin store was doing $250,000 in sales a year and turning a profit of $30,000 to $40,000 a year. It was the number one Ben Franklin store for sales and profit, not only in Arkansas, but in the whole six-state region. It was the largest variety store of any sort in Arkansas, and I don't believe there was a bigger one in three or four, in the three or four neighboring states." And so, everything's going fantastic.

• 36:21David Senra?

  And this is when he gets kicked out of his store. And he learns something he never forgets the whole, his entire life. The note I left myself here is, "Control the land." And you can use the land literally, or really as a metaphor. In Sam's case, it was literal, but it's a metaphor. "Control the land that your business is built upon. And remember that success invites competition." And so, what does that mean? It says, "In all of my excitement at becoming Sam Walton, the merchant, I had neglected to include a clause in my lease, which gave me an option to renew after the first five years." And our success, it turned out, had attracted a lot of attention. "My landlord, the department store owner," so another competitor also owns the building, "was so impressed with our Ben Franklin success

• 37:05David Senra?

  that he decided not to renew our lease at any price, knowing full well that we had nowhere else in the town to move the store." As I read this part to you, keep in mind, at this point in his life, he's got four kids to support, okay? So it says, "It was the low point of my business life. I felt sick to my stomach. I couldn't believe it was happening to me. It really was like a nightmare. I had built the best variety store in the whole region and worked hard in the community. I had done everything right. And now he's being kicked out of town. It didn't seem fair. I blame myself for ever getting suckered into such an awful lease. And I was furious at the landlord." So I've read a couple of different descriptions about this point in his life, because it's really important, and it's been talked about over and over again,

• 37:49David Senra?

  all the way back on Founders #150. I read this other book about Sam Walton. It was called Sam Walton: The Inside Story of America's Richest Man. And I think it came out a few years before Sam's autobiography, if I remember correctly. But I want to read a quote from that book to you. And this is Sam's lawyer describing this time. And it says, "The lawyer saw Sam clenching and unclenching his fist, staring at his hands. Sam straightened up. 'No,' he said. 'I'm not whipped. I found Newport, and I found the store. I can find another good town and another store. Just wait and see.'" And so now, back to this book. And really, what Sam's about to tell us here is that problems are opportunities in work clothes. Problems are just opportunities in work clothes. I've never been one to dwell on reverses, and I didn't do so then.

• 38:33David Senra?

  It's not just a corny saying that you can make a positive out of almost any negative if you work at it hard enough. I've always thought of problems as challenges, and this one wasn't any different. I didn't dwell on my disappointment. The challenge at hand was simple enough to figure out. I had to pick myself up and get on with it, to do it all over again, but better this time. And so imagine dedicating five years of your life. You take a store that was doing nothing. Now, it's doing $250,000. It's making tons of $30,000 to $40,000 a year in profit, which is an insane number considering this point of history that we're in. And now, this is actually how he winds up in Bentonville, Arkansas, where, obviously, Walmart is still headquartered to this day. And look at how far—I mean, I just love this guy's resolve, his determination, his persistence. I think what he was just telling us, like, okay, that's fine. I did it once.

• 39:18David Senra?

  I'll pick myself up. I got knocked down. I'll pick myself up. I'll do it again. I think that's the absolute perfect mentality to have. And look, he has—to look how he has to start over. So, he finds a store in Bentonville. He says, "Now, I had a store to run again, and even though it didn't do but $32,000 a year compared to the $250,000 he was doing at Newport." Right? So, he's way back. "It didn't matter that much because I had big plans." And then, there's just this short paragraph. He's talking about all the research he does. Obviously, I've told you over and over again, he's constantly looking for any kind of edge or any kind of advantage that he can apply to his business, right? And he does this all the time. But there's just—I'm going to read this short paragraph, and then there's three highlights that just tell you everything about Sam Walton, the way he approached his craft. So, he says, "I read an article about these two Ben Franklin stores up in Minnesota that had gone to self-service."

• 40:03David Senra?

  So, he's using the word "self-service." In today's time, we might think of, you know, like, there's no cashiers, like, self-checkout. That's not what he's talking about. He's talking about that there used to be—in these, like, small stores, there'd be cash registers at different locations throughout the store. And so, what these two stores did, the innovation they had, is they just put all the cash registers or the checkouts in one place. It says, "They had gone to self-service." A brand-new concept at the time. "I rode a bus all night to the two little towns up there, up in Minnesota. They had shelves on the side and two island counters all the way in the back. No clerks with cash registers around the store. Just checkout registers up front. I liked it, so I did that, too." And so when I read that, I made three notes to myself. I was like, this tells us a lot about Sam. Number one, he's always searching for useful information. Number two, he's willing

• 40:48David Senra?

  to go to great lengths to get it. Three, he copies everything that works. And so this period where he's doing these variety stores, these five-a-dime stores, they all have different names, they're essentially distinct forms of retail now, he makes the point about how important this was. And this is why I think reading biographies and autobiographies is, it's just mandatory. I think it's table stakes at this point, because it allows you to see all the experiences that they had before they actually utilized them to their advantage in business. And he makes this point, Sam makes this exact point. So I don't know if I've told you, I don't know if I've repeated it yet, but Sam was 44 years old when he starts Walmart. But it's not like he started from a blank slate. What he's about to tell us is like, "All of my previous experiences informed the philosophy that I used when I

• 41:31David Senra?

  was building Walmart." And so he says, "We were innovating, experimenting, and expanding. Somehow, over the years, folks have gotten the impression that Walmart was something I dreamed up out of the blue as a middle-aged man. And then it was just this great idea that turned into an overnight success. It's true that I was 44 when we opened our first Walmart in 1962, but the store was totally an outgrowth of everything that we've been doing since Newport. Another case of me being unable to leave well enough alone," in other words, "another experiment." Another, oh, he says it right here, "another experiment." And like most other overnight successes, it was about 20 years in the making. And we're still not into the Walmart, but he's talking about looking back at this time from the perspective of somebody who'd already built Walmart into this gigantic company,

• 42:13David Senra?

  about these years that are so important. And he says, "I remember those days mostly as a time of always looking around for ideas and items that would make our store stand out." A few paragraphs later, he reiterates this point, "Most everything I've done, I've copied from somebody else." That's exactly what Charlie Munger said about him, right? "Most everything I've done, I've copied from somebody else," let's add what Charlie felt made a big difference to, "but with more fanaticism." It made me think of when I read the, I read that fantastic autobiography. It's Founder's Number 184. It's the founder of Four Seasons, Izzy Sharp. And in that book, he talks about the idea. He's like, Ray Kroc was asked, Ray Kroc, the founder of McDonald's.

• 42:57David Senra?

  He was asked why they were more successful than the other people that are also trying to make hamburger chains globally, whatever the case was. And he says, "We take the hamburger more seriously than they do." And Izzy Sharp said that if we're going to be, remember Izzy's idea, well, I don't know if you've listened to that podcast or read that book, but his idea is like, I just want the, I want a collection of five-star hotels. And to do that, we have to take service more seriously than they do. And the way you think about Sam Walton and his journey, the progression of his career is he's like, he took discounting, retail discounting, more seriously than anybody else did. This is a great formula to copy, one of my favorite parts of the book. This is, David Glass is going to wind up being the CEO of Walmart later on, but he's really important in the story, and he's telling us about Sam Walton.

• 43:41David Senra?

  It's really just a great formula to copy. "Two things about Sam Walton distinguish him from almost everyone else I know. First, he gets up every day, bound and determined to improve something. Second, he is less afraid of being wrong than anyone I've ever known. And once he sees he's wrong, he just shakes it off and heads in another direction. So number one, get up every day, bound and determined to improve something. Number two, when you're wrong, shake it off and keep going." And then Sam's going to tell us about euphoria and terror. He's going, everything's going along fantastically. This is about five years before he founded Walmart. So he says, "Everything was going on along really great until May 20th, 1957. I'll never forget the day. Bud called me and said a tornado had hit the Ruskin store." Why is that important? "This was our best store, the one we were really excited about, and it was there one

• 44:26David Senra?

  minute and gone the next." I think you can predict his next sentence, based on what you and I have already talked about. "We just rebuilt it and got back at it." So something Sam talks about that gave him a massive advantage over everybody else is that he was a pilot. This is not a jet. These are like little, small, little planes. And so he realized, because he's got, at this point in the story, he's got tons of stores. So he's just driving all the time. And so it says, "With all the places I had to visit, I was driving too much to have time for anything else. So I began to wonder if maybe flying wouldn't be the best way to go. I loved that little two-seater plane, because it'd go 100 miles an hour, and I could get to places in a straight line. Once I took to the air, I caught store fever." So I don't think, when many people think of Walmart, the first thing that comes to

• 45:11David Senra?

  mind is technology. But when I read the autobiography of Andrew Carnegie, and I've mentioned this phrase I'm about to tell you over and over again, I can't tell you how many times I'm rereading Sam Walton's biography, right? I had read Sam Walton's autobiography first, then like 60 books later, I read Andrew Carnegie's book. Now 160-something books later, I'm revisiting Sam Walton, and I realize he is using the exact same idea that Andrew Carnegie does. And that's the fact that you need to invest in technology, the savings compound, it can give you advantage over your slower-moving competitors, which we're about to see here, and it can be the difference between a profit and a loss. And Andrew knew that, Carnegie knew that 150 years ago. That note is all over this book on my second read-through, because he talks about this.

• 45:54David Senra?

  Not only in planes, and so he studies traffic patterns, figures out where's the best place to put a new store. He'll go and check out his competitors, he'll fly over his competitors' stores and count the cars. He also uses this for when they're building out their distribution center. It just appears over and over again. So it's obviously very important. Something he's saying about this time, that he's doing now, and he does later on with Walmart, "Whatever money we made in one store, we'd put in another store, and we'd just keep going. He would just let it compound." And then he's kind of wrapping up this whole period for us. These are really a summary of the years before he started Walmart. That whole period, which scarcely gets any attention from most people studying us, was really very, very, very successful. "In 15 years' time, we had become the largest independent variety store operator in the United States.

• 46:38David Senra?

  But the business itself seemed a little limited. The volume was so little per store that it didn't really amount to much. After 15 years in 1960, we were doing only $1.4 million in sales in 15 stores." So he is essentially saying, "Hey, there is a limit to this idea. If I don't keep experimenting to find a way through this, this is really the ceiling, the limit I can do." And at this point, he's looking for an opportunity. This is the first time he's going to mention the person that he said he stole. More ideas from than anybody else. That is Sol Price. I read his biography on Back on Founder's Number 107. Sol Price is by far the most influential retailer that has ever lived. The people that took ideas from him that built massive, multi-hundreds of billions of dollars

• 47:18David Senra?

  of companies, people like Jeff Bezos, Sam Walton, Jim Sinigal, the founder of Costco, Bernie Marcus, the founder of Home Depot, all of them talk about, hey, I stole this idea from Sol Price. And so he says, I started running all over the country studying the concept. This is the discount concept. He is not a discounter yet. They still have pretty high margins, even if the dollar amount is low. Remember, he said, this doesn't make any sense. Let's cut our margins and we'll increase the volume and then we'll make more money. So this is, he's transitioning from the mindset of a higher margin store to make money on volume, cut the prices. And really, the way he says is buy it low, stack it high, and sell it cheap. And so he says, I started running all over the country studying the concept. And he goes, I went to California where Sol Price had started FedMart in 1955.

• 48:03David Senra?

  And what he realizes is this idea is starting to spread. It is not where he is at now, but it is inevitable. And so he realizes, like, if I stay here, I'm dead. So I have, I have no choice but to evolve. We really only had two choices left. Stay in the variety store business, which I knew was going to be hit hard by the discounting wave of the future, or open a discount store. Of course, I wasn't about to sit here and become a target. And so this is where he gets the idea to start the first Walmart. It's not called Walmart yet. He says, nobody wanted to gamble on that first Walmart. I had to put up 95% of the dollars to know I left myself there, as they never do. First, you believe, and then you work on making others believe too. And this is where he puts up everything he has. He goes all in. Helen and I had to sign all the notes along with me, and her statement allowed us to borrow more than I could have loaned.

• 48:48David Senra?

  We pledged houses and property, everything we had. And from the time those doggone Walmarts opened until almost today, it has been a little challenging. So this is, I think, the next like 10 to 12 years, up until, from the very first day. So the very first Walmart, up until the IPO, that entire period. That would be what, how many years? I think it's eight years. Actually, it's eight years. Wrong, I was wrong. It's not 15 or 10 or 15. So it's eight years. He's in debt up to his eyeballs. The reason he finally decides, he did not want to run a public company. The reason he decided IPO is like, I gotta get out of debt. This is killing me. So they're building the store. It's the spring of 1962. He's in a plane with one of his first managers. And this is how they come up with the name Walmart. And it really is a demonstration that they are frugal to their core. So they're going back and forth.

• 49:30David Senra?

  And he says, I just kept the, I would just keep the Walton name and make it a place to shop. I scribbled W A L M A R T on the bottom of the card and said, and now he's talking to Sam, "To begin with, there's not as many letters to buy. I had bought the letters that said Ben Franklin and knew how much it costs to put them up and light them and repair the neon. So I said, this is only seven letters." Frugal to the core. And then Sam really had a really kind of simple hypothesis for the first Walmart. He says, "We were trying to figure out if customers in a town of 6,000 people would come out to our kind of barn," and you think of a very, I'll read a description of the first Walmart to you in a minute, "and buy the same merchandise strictly because of price."

• 50:14David Senra?

  The answer was yes. And so this is what a Walmart was like at the beginning. This is David Glass again. And he says, "In those days, word was starting to get out that a guy named Sam Walton had some interesting retailing ideas. So I drove down to see a Walmart opening. It was the worst retail store I had ever seen. Sam had bought a couple of trucks of watermelons in and stacked them on the sidewalk. He had a donkey ride out in the parking lot. It was 115 degrees and the watermelons began to pop and the donkey began to do what donkeys do, so crap on the floor, basically. And so the donkey crap and the watermelon all mixed together and ran all over the parking lot. And when you went inside the store, the mess just continued, having been tracked in all over the floor. He was a nice fellow, but I wrote him off. It was just terrible."

• 50:58David Senra?

  But from Sam's point of view, well, if you're willing to walk through donkey crap mixed with watermelon juice just to save a couple of dollars, what will you do when I actually get my act together? Skipping ahead a little bit, this is really an insight into his personality and his character. He's default optimist. "I was feeling pretty good. After we got those first three stores up and running, I knew it would work." And so Sam's going to elaborate on this. He knew it. He said, "Everybody else was skeptical, but I knew it. I knew we were on to something. I knew it in my bones that it was going to work." But at the time, most folks, including my own brother, were pretty skeptical of the whole concept. They thought Walmart was just another one of Sam Walton's crazy ideas. It was totally unproven at the time, but it was really what we'd been doing all along: experimenting, trying to do something different, educating ourselves as to what was going

• 51:42David Senra?

  on in the retail industry and trying to stay ahead of those trends. This is a big contradiction in my makeup that I don't completely understand to this day. This is so, to me, really important, the fact that he understood and he accepted, without trying to say, "I know why I feel this way, I can't explain why I feel this way, I just know I'm a complex individual, just like everybody else is." And he says, "This is a big contradiction in my makeup that I don't completely understand to this day. In many of my core values, things like my church, my family, and my civic leadership, and even politics, I'm pretty conservative. But for some reason, in business, I have always been driven to buck the system, to innovate, to take things beyond where they've been. In the marketplace, I have always been a maverick who enjoys shaking things up and creating a little anarchy."

• 52:27David Senra?

  And then he's just got this fantastic idea: " Constraints are your friend." Listen to this. "I can tell you this, though. After a lifetime of swimming upstream," so that's his, he uses that term, "swim upstream" all the time. It's being a maverick, it's going against the grain, it's thinking independently. That's the way you can think of what he means by that. "I am convinced that one of the real secrets to Walmart's phenomenal success has been that very tendency. Many of our best opportunities were created out of necessity. The things that we were forced to learn and do because we started out under-financed and under-capitalized in these remote, small communities contributed mightily to the way we've grown as a company. Had we been capitalized, or had we been the offshoot of a large corporation the way I wanted to be?"

• 53:09David Senra?

  So originally, he offered the idea to Ben Franklin and to these other franchisees, franchisers, rather, and they turned him down flat. They said, "Oh, you're not interested, I guess I have to do it myself." So that's what he's talking about there. "Had we been the offshoot of a large corporation the way I wanted to be, we might have never tried the Harrisons, or the Rogers, or the Springdales." He's just listing all these little towns that they opened up Walmarts in the early days. It turned out that the first big lesson we learned was that there was much, much more business out there in small-town America than anybody, including me, had ever dreamed of.

• 53:45David Senra?

  Now he brings up something he repeats over and over again. I need to tie this together with something else. One of my favorite things Charlie Munger's ever said, and I know I've said, there's a lot of things that he says are interesting. And it's really, I'm going to read Charlie Munger's quote after this, but it's Charlie Munger's idea, or not even idea, it's his observation, just for the fact that he's paying attention to everything. It's his observation that the winner usually goes to extremes maximizing or minimizing one or a few variables. And so, this is what Sam says. "What we were obsessed with was keeping our prices below everybody else's. Our dedication to that idea was total." Now, think about that as I read this from poor Charlie Zama for what Charlie Munger said.

• 54:27David Senra?

  "In business, we often find that the winning system goes almost ridiculously far in maximizing and/or minimizing one or a few variables." And the example he gives, "Like the discount warehouses of Costco. In business, we often find that the winning system goes almost ridiculously far in maximizing or minimizing one or a few variables." And the only way that he could maximize, or excuse me, minimize prices, rather, and be completely dedicated to the idea is he had to know his business. He had to know the numbers of his business down pat. And so, even as he's expanding, he does something really smart here, and this is something I missed the first time I read the book. He forces himself, he finds a way to force himself to know the numbers for every single store. This is a fantastic idea.

• 55:12David Senra?

  I'm going to read the whole paragraph to you. "We would come up with a P and L, so a profit and loss sheet for each store, and get it out to the store manager as quickly as we could, something we still do to this day. If there was a problem, I would get with that manager immediately. But most of them owned a piece of their store, so they got a piece of profit, right? So they were likely to be as concerned as I was. I had a big ledger sheet pasted together to make room for everything I wanted on it. There was probably 15 different columns for every store." And so, I'm not going to read all the columns, but stuff like sales, expenses, net profit, markdowns, utilities, insurance, taxes, that kind of stuff. "I entered the numbers myself each month with a pen, which helped me remember them better. It became a habit with me, and I carried this ledger sheet in my pocket when I went to the store so everybody knew exactly where they stood."

• 55:57David Senra?

  For several years, the company was just me and the managers in the stores. There's no layer, there's no admin layer. So he had to do this. He forced himself to do this. We've seen this idea before. One of the smartest people I've ever studied on this podcast was Henry Singleton, all the way back on number 110. I'm going to read this. This is from the book Distant Force. And he said a very similar thing. He calls this a form of discipline. Very fascinating. So it says, "He pays all the bills and signs all the checks, calling it a..." This is now Henry talking. "Calling it a form of discipline. Through doing the signing, it's amazing how much you learn about the business. There's a reminder of each event or action behind every check. It influences your feel, what direction you're going to go."

• 56:38David Senra?

  He pays all the bills and signs all the checks, calling it a form of discipline. And so something that Sam mentions at the beginning, because it was just him and the managers in the stores, he had no admin layer, he couldn't be in every store. And so it was very important to align incentives, so that's why the store owners and managers would have a piece of the profits. But he also gave... It was like an extreme form of decentralization, which he's a big fan of. He even hypothesizes later, he's like, "I bet you, I wonder if Walmart would be better instead of being $100 billion company, if it was five $20 billion companies." So I'm just going to read you one sentence that there's an illustration of this time. Again, a lot of this is because he was forced to, going back to the idea that constraints are your friends. Like, "I don't have time to hold your hand. You've got to figure shit out for yourself." And he says, "Each of them," his managers in the stores at this point in time, "each

• 57:23David Senra?

  of them had lots of freedom to try all kinds of crazy ideas themselves." And then you combine that with Sam's natural instinct to have this bias of action. It says, "Very important in the early development of the company was establishing the philosophy of let's be out in front, let's do it right, let's get it done now and get on with it." He continues to steam the importance of having a bias of action later on. "We looked for action-oriented, do it now, go type of folks."

• 57:54David Senra?

  This is another example, excuse me, this is another early manager describing Sam Walton at this time. Sam was always open to suggestions, and that's one reason he's been a success. He is still that way. You know what that reminded me when I read that back on Founder's Number 213, when I read the autobiography of Michael Jordan. Michael Jordan had one of the best sentences in that biography I've ever read. He says, "I'm not so dominant that I can't listen to creative ideas coming from other people. Successful people listen. Those who don't listen don't survive long." This is Sam talking about the fact that he is completely obsessed and passionate about retail. "There hasn't been a day in my adult life," remember, he's writing these words 54 years after starting on the retail industry. This is insane. "There hasn't been a day in my adult life when I haven't spent some time thinking about merchandising.

• 58:38David Senra?

  It has been an absolute passion of mine." Let's go back to Sam's idea that it's very important to be a maverick. "We paid absolutely no attention whatsoever to the way things were supposed to be done. You know, the way the rules of retail said it had to be done." And so he uses this term for independent thinking. So what you and I would call independent thinking, he's going to call swimming upstream, okay? "We started out swimming upstream, and it's made us strong and lean and alert, and we've enjoyed the trip." That's a really good sentence. "We sure don't see any reason now to turn around and join the rest of the pack headed down current." And so one way Sam tried to force, like, there's really no work-life balance for him. It's more like work-life integration.

• 59:20David Senra?

  It was a family business, and so they'd work in the stores, they would talk about the, like, I mean, he gave his kids a piece of the business way before it was even valuable. That's one way they avoided inheritance taxes. You give away equity before it's worth much. He talks about, if you're interested in that idea, he talks about it at the very beginning of the book. So this is his, the reason I'm bringing this up to you, though, is this is his, one of a childhood memory from one of his daughter, or from his daughter, rather. And she said, "As kids, we worked for the company one way or another. I got to work behind the candy counter or run the popcorn stand when I was just five years old. The business was part of our life, and it was always included in the dinner conversation. We heard a lot about debt it took to open new stores, and I worried about it. I remember confiding to my friend one time, crying and saying, 'I don't know what we're going to do.

• 1:00:03David Senra?

  My daddy owes so much money, and he won't quit opening stores.'" So he does say even, you know, I'm going to be working a lot. He, his goal, he's like, I have to have a happy home. I didn't grow up in a happy home. My wife did, so let's try to be, make that like their version of familyhood, of like family life, the version that our kids experience. So he says, I have fond memories of my own boyhood, yet it pains for me to talk about one part of it. But because Helen thinks it had an important influence on me, I'll mention it briefly. The simple truth is, the simple truth is that mother and dad were two of the most quarrelsome people who ever lived together. I love them both dearly, but they were two, and they were two wonderful individuals, but they were always at odds. And they really only stayed together because of Bud and me.

• 1:00:45David Senra?

  Growing up as the oldest child, I felt I took a lot of the brunt of this domestic discord. I'm not exactly sure how the situation affected my personality unless it was a motivation to stay so busy all the time. But I swore early on that if I ever had a family, I would never expose it to that kind of squabbling. And then he says, you know, I could not have done, I could not have built Walmart without the support of my wife. Helen bore more than her share of raising the kids. I worked long hours, at least six days a week. Saturday was our big store day, and I worked all day Saturday and Saturday night, too. The, moving on, there's other idea that, that repeats over and over again in the history of entrepreneurship that I got to bring to your attention, that we've seen a lot. It's like the great, some of the greatest entrepreneurs ever lived, they optimized for flexibility.

• 1:01:28David Senra?

  And so it says, this is Jim Walton, one of Sam's sons, talking about this. Dad said, you've always got to stay flexible. Later, we all snickered when some writers who viewed dad as a grand, who, some writers viewed dad as a grand strategist who intuitively developed complex plans and implemented them with precision. Dad thrived on change, and no decision was ever sacred. I'm still in the family chapter, so there's a couple of these, like these family memories. And in a lot of these family memories that I read, this, this line, a variation of this line is repeated many, many times. And so it says, of course, they're talking about the family vacations. Of course, we've always had to stop and look at stores, any kind of stores, on the way to wherever we were headed.

• 1:02:10David Senra?

  And then his wife says, Sam never went by a Kmart that he didn't stop and look in. This is going over many, many pages. This is not all on one page. It's crazy. We would do, we would do it as long as dad could stop and see his stores along the way. So more about family vacations. This is a couple paragraphs later. He would go and look at stores. Another memory, another child. I remember Dad visiting stores. And so these are all like memories written by his kids, right? And I guess they were, you know, grown children, or grown adults, rather. At this point, they're writing this, and so now Sam comments on their memories. He says, of course, what they say is true. I was visiting stores all the time, and I still do it today. In fact, we've visited them all over the world and gotten some great ideas that way, as well as a few ideas that didn't work out so well.

• 1:02:55David Senra?

  I'm glad my kids remember the good times and don't seem to resent me too much for my absences and distractions over the years. I think maybe one reason they don't have too much resentment is that Helen and I have always involved them in the business and kept them informed right from the start. They worked in the stores, invested in the stores, and shopped in the stores. And this is also an idea that Estee Lauder did. She made her, she's like, how do I balance being a mom and a wife with being an entrepreneur? And she's like, I can't, so I have to make it a family business. And then that way, while we're working, we're still spending time together. So her husband came and started helping her build a business, and her son. She knew her son was going to have an involvement in business, so even when he was at school, this is when Estee Lauder was still a private company, she would send, I think he was at

• 1:03:39David Senra?

  Wharton, if I remember correctly, she would send financial statements and just constant like data from the company to him while he's in college, so he could stay informed and she'd be telling him about it. She was preparing him to take over. It was actually a really smart idea. And so we have Sam saying a very similar thing here. He's like, we always involved them in the business, and we kept them informed right from the start. He does say one thing that he avoided, a mistake he avoided. He says, one thing I never did, which I'm really proud of, was to push my kids too hard. I knew I was a fairly overactive fellow, and I didn't expect them to try to be just like me. So really, what he's telling us is let your kids choose their own path. But that doesn't mean, he's not a fan of idleness. He feels like you have an obligation to be useful to fellow humans.

• 1:04:24David Senra?

  And so he says, I do admit to worrying sometimes about future generations of the Waltons. I know it's unrealistic of me to expect them to all get up and throw paper routes, and I know it's something I can't control, but I'd hate to see any descendants of mine fall into the category of what I would call idle-rich. This is a group I've never had much use for. I really hope that somehow, the values that both Helen and I and our kids have always embraced can be passed down through the generations. And even if these little future Waltons don't feel the need to work from dawn into the night to stay ahead of the bill collector, I hope they feel compelled to do something productive and useful and challenging with their lives.

• 1:04:59David Senra?

  And so he just referenced himself as a fairly overactive fellow. He's also somebody who just didn't have any, didn't really believe in limits, didn't see any reason to stop. And this is something his wife said about him. "I kept saying, Sam, we're making a good living. Why go out? Why expand so much? So much more. The stores are getting farther and farther away. After the '17 store, though, I realized there wasn't going to be any stopping it." And so he talks about this compulsion in him, but he also says something here that is really fascinating, that "it is to your advantage if you can fly under the radar until you're way too far ahead to catch." This was fascinating. So he says, "There's no question that I have a personality of a promoter. That personality and our somewhat unorthodox style at Walmart probably confused people at the outset. In fact, I have occasionally heard myself compared to P.T.

• 1:05:42David Senra?

  Barnum because of the way I loved to get in front of a crowd and talk something out up. An idea, a store, a product, the whole company, whatever I happened to be focused on right then. But underneath that personality, I've always had the soul of an operator, somebody who wants to make things work well, then make them better, and then make them the best they possibly can be. So I guess when folks saw me walking around scribbling notes on my yellow legal pad or hauling boxes of ladies lingerie into stores out of my station wagon, maybe they didn't take me that seriously. They assumed we wouldn't be in it for the long haul. Some folks, no doubt, figured that we were a little fly-by-night. I think that misunderstanding worked to our advantage for a long time and enabled Walmart to fly under everybody's radar until we were too far along to catch."

• 1:06:26David Senra?

  And then this next sentence is fantastic, and if you read between the lines, he's telling us, he's giving advice to future generations of entrepreneurs. "The goal should be to build a real business. Anybody who has ever known anything about me knows I was never in anything for the short haul. I always wanted to build as fine a retailing organization as I could." He mentions Sol Price again. Sol Price is all over this book. "I learned a lot from Sol Price, a great operator who had started FedMart out in Southern California in 1955. I made friends with Sol's son-in-law, who was running a distribution center in Houston, and talking with him helped me sort out some of my thinking on distribution, which would eventually become another key to Walmart's success.

• 1:07:07David Senra?

  I guess I've stolen as many ideas from Sol Price as anybody else in the business."

• 1:07:14David Senra?

  And then he goes back to this idea that your goal is not to make money in the short term. It's like, I'm not in anything for the short haul. They thought, oh, okay, this guy's going to be here today and gone tomorrow. It's like, no, no, you didn't understand that I'm in this forever. And so he talks about all the people that got in for the wrong motivations and that they all disappeared. I read in a trade publication not long ago that the top 100 discounters who were in business in 1976, 76 of them have disappeared. You know what that makes me think of? If you saw my cell phone on my lock screen, I have a picture of Ernest Shackleton. And I have that picture. So every time I look at my phone, I'm reminded of his family motto, "By endurance we conquer." Just setting yourself up to survive. He didn't even have to be the best. Think about that. He didn't have to be the best

• 1:07:57David Senra?

  discounter, right? If you're in the top 100, he just waited. Now, at this point, 20 years later, 76 of them killed themselves. They rendered themselves obsolete. They were driven out of business. Another way to think about this is just surviving. If you just survive, 3/4 of your competition is not able to do that. "By endurance we conquer." "By endurance we conquer." I read in some publication not long ago that out of the top 100 discounters who were in business in 1976, 76 of them have disappeared. Many of these started with more money and visibility than we did, in larger cities with much greater opportunities. They were bright stars for a moment, and then they faded. I started thinking about what really brought them down and why we kept going. It all boils down to not taking

• 1:08:40David Senra?

  care of their customers, not minding their stores, not having folks in their stores with good attitudes. And that was because they never really even tried to take care of their own people. If you want the people in the stores to take care of the customers, you have to make sure you're taking care of the people in the stores. That is the most important single ingredient of Walmart's success. And in the very next paragraph, he tells us what happens when you ignore your business, and the opposite of that advice is staying close to your business. And then I describe these people as, in one word, clowns. "Most of these early guys were very egotistical people who loved to drive big Cadillacs and fly around in their jets and vacation on their yachts. And some of them lived in houses like I've never even thought about before. I remember going to dinner in one of those

• 1:09:25David Senra?

  houses, and we got picked up by this limousine that must have had room for 14 people." Remember, these are 76 of them that disappeared. 76% of the top 100 were rendered extinct.

• 1:09:37David Senra?

  I remember going to dinner at one of their houses and we got picked up by this limousine that they must have had room for 14 people. Man, they were living high and they could afford to back then because this discounting thing was working so well. Customers just flocked to their stores and these fellows were covered up in cash. Most of them could still be around today if they had followed some basic principles about running good stores. There are a lot of ways to build strong companies. They don't have to be done the Walmart way, or my way, or anybody else's way. That's really, I really appreciate that statement right there. And it's something, you know, now I've read 240 of these books. There are a lot of ways to build strong companies. They don't have to be done the Walmart way, or my way, or anybody else's way, but you have to work at it. And if somewhere along the line, these folks stopped short of setting, and somewhere along the line, these folks

• 1:10:19David Senra?

  stopped short of setting the goals and paying the price that needed to be paid. I gotta stop this because I didn't, I didn't catch this the first time. Think about what he just said. Somewhere along the line, the folks stopped short of setting the goals and paying the price that needed to be paid. They stopped short of paying the price that needed to be paid. Let's go back to Founders number 212, 212. This 600-page biography of Michael Jordan I read called Michael Jordan: A Life. And I gotta read, I gotta read this section to you. "Like so many NBA players, Clyde Drexler was operating mostly off his great store of talent, absent," this is when Jordan was in the Olympics in 1992, the Dream Team. "So like so many NBA players, Drexler was operating mostly off of his great store of talent, absent any serious attention to the important details of the game. Jordan had

• 1:11:04David Senra?

  been surprised to learn how lazy many of his Olympic teammates were about practice, how they were deceiving themselves about what the game required." That idea locked into my brain when I read that section because also Michael talks about in the book. He's like, I, but he didn't talk about the games, the championships. He talked about practice. He says, "I've always been a practice player. I believe in it." And it's his way to focus on constant improvement. It's a very similar idea to what the mistake that Sam Walton is describing to us of all these people that went out of business. They deceived themselves. They were not paying the price that needed to be paid. Instead of focusing on their business, instead of focusing on the customers, they're focused on Cadillacs, yachts, and

• 1:11:45David Senra?

  jets, and now they're bankrupt. They just didn't, go back to Sam Walton, they just didn't stay close enough to their business. They sort of chose to get, to go over to the other side of the road. And you can think about Sam constantly learning from somebody else, visiting stores. That is a form of practice. Every single craft has a form of practice. It just is not as obvious as it is in sports, right? And so this is an example of this. I probably visited more headquartered offices of more discounters than everybody, than anybody else. I would just show up and say, "Hi, I'm Sam Walton from Bentonville, Arkansas. We've got a few stores out there and I'd like to visit with Mr. so-and-so," whoever the head of company was, "about his business." And as often as not, they'd let me in, maybe out of curiosity, and I'd ask lots and lots of questions about pricing and distribution,

• 1:12:29David Senra?

  whatever. I learned a lot this way. And this is, it's hard to say what my favorite story in the book is. This is definitely a nominee for my favorite story of the book. And the note I left myself now on the rereading of this is, this is hedgehog behavior. Okay, so this is Kurt Burt Barnyard talking about, he's a retailing consultant, and he was, he says, "I was executive vice president of the Discounters Trade Association. I was working in my New York office one day in 1967." Oh, actually, no. This is not, so this is a good story. This is not the story I thought it was. The next story I'm going to tell you is my favorite, but this is still a good story. So he says, "I was executive vice president of Discounted Trade Association. I was working in New York office one day in 1967. My secretary said there was a man out front who wanted to join our group. I said I'd give him 10

• 1:13:14David Senra?

  minutes. So in comes this short, wiry man with a deep tan and a tennis racket under his arm. He introduced himself as Sam Walton from Arkansas. I didn't know what to think. When he meets you, he looks at you, head cocked to one side, forehead slightly creased, and he proceeds to extract every piece of information in your possession. He always makes little notes and he pushes on and on and on. After two and a half hours, he left and I was totally drained. I wasn't sure what I had just, what I had just met, but I was sure we would hear more from him." And so this is the example, this is another example of this hedgehog behavior. This is Abe Marx. This is the guy who's head of this, he's the president of this retail association. This is so fantastic. I was sitting there at the conference, reading the newspaper, and I had a feeling somebody was standing over me. So I look up, and there's this grayish gentleman standing there with a black suit,

• 1:13:59David Senra?

  carrying an attaché case. And I said to myself, who's this guy? He looks like an undertaker. He asked me if I'm Abe Marx, and I say, yes, I am. Let me introduce myself. My name is Sam Walton, he says. I'm only a little fellow from Bentonville, Arkansas, and I'm in the retail business. I say, you'll have to pardon me, Sam. I thought I knew everybody and every company in the retail business, but I've never heard of Sam Walton. What did you say the name of your company was again? Walmart, he says. So I say, well, welcome to the fraternity of discount merchants. I'm sure you'll enjoy the conference and getting acquainted socially with everybody. Well, to be perfectly honest with you, Mr. Marx, I didn't come here to socialize. I came here to meet you. I know you're a CPA, and you're able to keep confidences, and I really wanted your opinion on what I'm doing now. So he opens up this attaché case, and I swear, he had every article I'd ever written and every speech I'd ever given in there.

• 1:14:42David Senra?

  I'm thinking, this is a very thorough man. Then he hands me an accountant's working column sheet, showing all his operating categories, all written out by hand. Then he says, tell me what's wrong. What am I doing wrong? I look at these numbers. This was 1966, and I do not believe what I'm seeing. He's got a handful of stores, and he's doing about 10 million a year with some incredible margin, an unbelievable performance. So I look at it, and I say, what are you doing wrong? Sam, I'll tell you what you're doing wrong. I handed back his papers, and I closed this attaché case, and I said to him, being here is wrong, Sam. Don't unpack your bags. Go down, catch a cab, go back to the airport, and go back to where you came from, and keep doing exactly what you are doing. There is nothing that can possibly improve what you are doing. You are a genius.

• 1:15:27David Senra?

  That is how I met Sam Walton. And then a few paragraphs later, the same guy highlights exactly what Charlie Munger knew about, or observed about Sam. He has just been a master of taking the best of everything everybody else is doing and adapting it to his own needs.

• 1:15:46David Senra?

  So then he starts bringing up, this is still, now we're about, what, seven, eight Walmarts deep. And he's getting nervous because he's just got a ton of debt. And so this is again, he mentions this over and over again until the IPO, and then he feels fantastic. "It's true enough that I was nervous about spending any unnecessary money in those days. We were generating as much financing for growth as we could from the profits of the stores, but we were also borrowing everything we could. I was taking on a lot of personal debt to grow the company. It approached $2 million. The debt was beginning to weigh on me. Our first seven or eight Walmarts were showing spectacular results. Once we got it going, it was hard to see why we should quit. The thing was, you could see the potential so clearly." So this is, let me, I'm going to start this paragraph over because I just realized I should have told you my note on this paragraph first.

• 1:16:27David Senra?

  This is what it looks like at the beginning of what will soon be a giant business. "Our first seven or eight Walmarts were showing spectacular results. Once we got it going, it was hard to see why we should quit. The thing was, you could see the potential so clearly. The profits and the sales were there, but we needed to get better organized and come up with a more sensible way to finance the growth. I needed someone to help me with systems and distribution." And this is where he realizes, like, I've gone as far as I can with this structure I have. I need talent. I need, I need people that are, that have the skills to take us to the next level. And this was crucial for that happening. And so he says, "Even though it may surprise people, I have to say that I consider the time Ron, when Ron Mayer was at the company, from 1968 until 1976," and again, like, he

• 1:17:09David Senra?

  winds up quitting because he wanted to run the whole company, "to be the most important period of development in Walmart's history. We had a good thing going before Ron arrived, but he and some of the people he brought on board, like our first data processing manager, gave the company its first sophisticated systems. And those systems were the beginning of a management method which allowed us to stay real close to our stores even as our growth exploded." And one thing Ron did was really push Sam to invest in technology, so that's why he's thanking him. And again, this is another version of the Andrew Carnegie, "You need to invest in technology, always invest in the latest technology." "We, as a company, have been ahead of most of the retailers in investing in sophisticated equipment and technology." And so he goes back to this idea. He's like, I wanted to get out of debt in the worst

• 1:17:51David Senra?

  way. I talked to, I talked a little bit about the idea of taking the company public. He needs a better way. He's looking for a better way to finance growth than constant debt. His wife does not want him to take it public, but he just can't stand the pressure. I'm skipping over large parts of the book. Obviously, I'm hopefully encouraging you to read it. All I'm saying is if Jeff Bezos and others have said, I picked up this book and it changed my life, I don't see why you would spend 15, 20 hours learning from a master. I really don't. I don't think there's a better use of time. So this is the day after the IPO. I'm obviously skipping over that, but I want to tell you how he feels. Coming back from New York that day, I experienced one of the greatest feelings of my life, knowing that all of our debts were paid off. And so people are asking him, you know, now it's public, you have a system that works, just kick, you're already, you know, you

• 1:18:32David Senra?

  started Walmart a little later on, just kick your feet up. Why not retire? Why not let somebody else run the company? And he says, but I enjoyed doing what I was doing so much and seeing the thing grow and develop and seeing our associates and partners do so well that I could never quit. And he's talking about the critics now that he's a public company. He says something fantastic here. He says, "The ones who paid attention understood that we were serious operators who were in it for the long haul, that we had a disciplined financial philosophy and that we had growth on our minds." That is fantastic traits to copy. "The ones who paid attention understood that we were serious operators who were in it for the long haul and that we had disciplined financial, disciplined financial philosophy and that we had growth on our minds." Made me think of something

• 1:19:13David Senra?

  a friend of the show Truman said to me. His mentor Sam, they both listened to the podcast. Sam gave Truman advice one day that I thought was genius and it said that you should always have the long, any room that you're in, you should always have the longest view in the room. Sam Walton is saying a very similar thing here. He says, "Listen, we are serious operators and we're in it for the long haul. We got disciplined financial philosophy and we have our growth on our minds. Let's go." Something that Charlie Munger and Warren Buffett repeat over and over again. He's like, "You don't need a bunch of businesses to get wealthy. One great company can make you and your family fabulously wealthy." What does Sam say here? Right here, what does Sam Walton say here? "I don't describe much to any of these fancy investing theories and most people seem surprised to learn that I've never done much investing in anything except Walmart."

• 1:20:01David Senra?

  One great company will make you fabulously wealthy. Skipping ahead, he hits this point again about being in the long, the importance of having a long-term view, being in it for the long haul. Really, the way to think about what he's about to tell us is just ignore the noise and please your customers. If we fail to live up to somebody's hypothetical projection to what we should be doing, I don't care. It may knock our stock back a little, but we're in it for the long run. We couldn't care less about what is forecast or what the market says we ought to do. If we listened very seriously to that sort of stuff, we would have never gone into small town discounting in the first place.

• 1:20:33David Senra?

  And so I'm skipping ahead. He talks about, you know, from store number seven or eight, actually store three, he believed in his bones is going to work. Seven and eight, it's very obvious going to work. And so he's like, all right, well, I just figured out that Walmarts worked. And then all I did was focus on making more of them. It's, you don't have to overcomplicate it. For the most part, we just started repeating what worked. Like so many ideas that have made our company work from the beginning, we're still more or less following this same strategy. And so we go back to this idea about investing in technology, it gives, it's savings compound, gives you advantage over slowing moving competitors. In the retail game, no one was actually investing in air travel like he was. So it says, there's no question whatsoever that we could have not done what we did back then if I hadn't had my airplane. I bought that first plane for the business to travel between the stores and keep in touch with what was going on.

• 1:21:17David Senra?

  But once we really started rolling out the stores, the airplane turned into a great tool for scouting real estate. We were probably 10 years ahead of most other retailers in scouting locations in the air. And we got a lot of great ones that way. From up in the air, we could check out traffic flows, see which cities and towns are growing, and evaluate the location of our competition, if there was any. Then we would develop our real estate strategy for that market. I loved doing it myself. I'd get down low, turn my plane on its side, and fly right over town. Once we had a spot picked out, we'd land, go talk to who owned the property, and try to negotiate the deal right then. That's another good lesson, that's another good reason I don't like jets. You can't get down low enough to tell what's really going on, the way I could in my little plane. Bud and I picked almost all of our sites that way until we grew to about 130 stores.

• 1:22:00David Senra?

  Go back to that idea, what Charlie Munger said, do things that other people aren't doing. Sam Walton says, I guarantee you, not many founders of retailing companies were flying around sideways studying development patterns, but it worked really well.

• 1:22:13David Senra?

  And then he's going to talk about his management style. "I've been asked if I was a hands-on manager or an arms-length type manager. I really think I'm more of a manager by walking and flying around. And in the process, I stick my fingers in anything, and I can see how it's coming along. I've let our executives make their decisions and their mistakes, but I've critiqued and advised them. My appreciation for numbers has kept me close to our operational statements and to all the other information that we have pouring in from so many different places. In that sense, I think my style as an executive has been pretty much dictated by my talents. I've played to my strengths, and then I rely on others to make up for my weaknesses." And then this next paragraph I wrote, "Unapologetically extreme. Imagine having to compete with this guy. I come in every Saturday morning, usually around 2 or 3 in the morning, and go over all the weekly numbers. I steal a march on everyone else for the

• 1:22:57David Senra?

  Saturday morning meeting." This is more on his, why he favors and optimizes for flexibility. "If you ask me if I'm an organized person, I would say flat out, no, not at all. Being organized would really slow me down." That's a hell of a statement, right? "In fact, it would probably render me helpless. I try to keep track of what I'm supposed to do and where I'm supposed to be, but it's true that I don't keep much of a schedule. My style is haphazard." And this was hilarious. This is from his personal secretary. And she says, "He has always been like this. His mind works 10 times faster than anybody else's. I mean, he just gets going and stays two or three jumps ahead, and he's quick to go with what's on his mind. If he gets something on his mind that needs to be done, regardless of what else might have

• 1:23:40David Senra?

  been planned, the new idea takes priority." This is why he optimizes flexibility, and it has to be done now. Everybody has their day scheduled, and then bang, he just calls a meeting on something. This is the funny part, though. "In the early years, this caused a number of embarrassments. I would make appointments for him and tell him about them. We kept two calendars, one on his desk and one on mine, but he'd totally forget. I've had people fly in here from Dallas all set to see him. I'd come in at 8 o'clock, I'd come in at 8 to meet them, and find out he had flown out of town at 5:00 AM this morning without telling anybody where he was going. I would just have to look at this man from Dallas and say, 'He's gone.'" So after a few times like this, I finally said, "I'm not going to make appointments for you anymore." And he said, "Well, that's probably best." Then he would make his own appointments and forget about them. And I was still the one who had to give them the bad news. I couldn't organize him in a quarter of a century, and I don't think anyone else

• 1:24:24David Senra?

  is ever going to." And so I was reading, rereading some highlights from, I think it's the book... The difference between Larry Ellison and God, or God and Larry Ellison, I couldn't remember the exact title, but I had forgotten. And I'm glad, that's why you have to reread and constantly study, re-study the stuff that you think you know. But there's a passage in that book where Larry Ellison's debating his personal assistant. She's like, "There's 100 important things." He's like, "No, there's not, no such thing." He's like, "There's a handful of important things, and those are the only things I focus on, and I ignore everything else." And he's like, "If that means I have to miss this meeting, or I'm not living up to certain people's obligations, I don't care. I focus on the most important priorities and nothing else." So we go back to this flexible schedule.

• 1:25:08David Senra?

  Except for reading my numbers on Saturday morning and going to our regular meetings, I don't have much of a routine for anything else. I'm always carrying my little tape recorder to record ideas that come up in conversations. I usually have a yellow legal pad with me with a list of 10 things that I need to be working on as a company. My list drives the executives around here crazy, but it's probably one of my most important contributions. And so now this is one of his executives building upon this idea. "When Sam feels a certain way, he is relentless. He will just wear you out. He will bring up an idea. We'll discuss it and then decide maybe it's not something we should be doing right now or ever. Fine, case closed. But as long as he's convinced that it is the right thing, it will just keep coming up, week after week after week, until finally, everybody capitulates and says, 'Well, it's easier to do it than keep fighting this fight.'

• 1:25:50David Senra?

  I guess it could be called management by wearing you down." And then he gives us advice that we really need to find uninterrupted time. He says, "4:30 is not an unusual time, 4:30 a.m. is not an unusual time for me to get started down at the office. That early morning time is tremendously valuable. It's uninterrupted time when I think and plan and sort things out." And then the vice chairman of Walmart says, "I think one of Sam's greatest strengths is that he is totally unpredictable. He is always his own person. He is totally independent in his thinking."

• 1:26:25David Senra?

  So he's in another group of discount retailers. And so they would meet and then they'd compare numbers and strategy. This is, again, something we talked about that he did at the very beginning. He has all these little groups and organizations. Some of them are formal, some of them are informal. But this was very fascinating. And it really speaks to human nature, the fact that we love to put limits on ourselves, even if those limits don't actually exist. If you see my home screen on my laptop, it says it's Bruce Lee. And he says, "If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus. And you must not stay there. You must go beyond them." And that's important for me to see every day because I know that I put artificial limits. I just make up, I have these imaginary things. I'm like, "Oh, no, I can't, you know, you just can't get past this number," or whatever

• 1:27:10David Senra?

  the case is. No, it's not true. And this is a perfect example. It says, "Comparing notes with them made me realize what an amazing performance Walmart was turning in. I remember they were just astonished. They could not believe that we could be establishing this number of stores that we were. We were putting in 50 stores a year, when most of our group would be trying to start three, four, or five a year. So in their mind, there's limits, like, "Oh, I can't grow them." I can, you know, three stores a year, that's probably the limit that we can do. And then you meet with somebody else, you're like, "Oh, this dude's doing 50. That limit is bullshit. It doesn't exist. I just made this fake limit on myself for no reason." Back to Sam. It always confounded him. They would always ask, "How do you do it? There is no way you could be doing that." But we were doing it. We just stayed on top of it.

• 1:27:53David Senra?

  And it was weird because I just saw something in Current Affairs where I don't know why, I combined these two ideas in my mind. But when I read this, I thought of a headline I saw. It was the new, I guess, I think, I haven't been following it too closely. So I think the founder and CEO of Peloton just got replaced by some other guy. So there's like a new Peloton CEO. I could be wrong. Maybe the founder wasn't CEO, I don't know. It doesn't matter. But what the new Peloton CEO said was fantastic and talked about, you know, people predicting the limit of what their market is. And so he's going to use the word TAM. I think most people know what that is, but I hate acronyms, just like Elon Musk does. So that's total adjustable market. So like, how many customers? What's the most customers you could probably have, possibly have?

• 1:28:37David Senra?

  Is really the way to think about that, right? So he says, "You can't possibly know the TAM. You're in the middle of inventing the TAM." That is a fantastic idea. That's one of the best ideas I've ever read. That's fantastic. You don't know it because you're doing something new. You're inventing it, so don't worry about it. Just keep trying to expand it. He's got, Sam goes on about early days of Walmart. And this is even after they IPO'd. And he says, really, what he's telling us is like, you should only hire once it hurts. We always ran a real tight organization. We had no excess people. So something he talks about at length in the book is that logistics was the hardest problem to solve. He needed the talent and people that he didn't think he was like really good at that. So he says, "By now, I was really surrounding myself with guys who were good at things

• 1:29:22David Senra?

  I tended to just slough off, like organizing the company to handle the growth explosion that we had started. If I had not gone after those folks and kept on going after them, we would have been, we would have come apart somewhere in there in the 70s, in the 1970s. And we certainly wouldn't have been able to pull off our really incredible expansion that we had in the 1980s." And so he's like, "I'm always going to lean into my strengths, but I've got to hire people that cover up my weaknesses. And I need people that are building out not only the technology, but the logistics, all the things needed so we can actually keep servicing the stores when we have 200 stores, 500 stores, 1,000 different stores." So this is a guy named Jack that they hire because they're writing up like policies and procedures.

• 1:30:04David Senra?

  And really, I wanted to include this little story in here because of that famous, the post I always tell you about, that the standard pace is for Trump. Like, there's no speed limit. You can go a lot, usually a lot faster than most people think you can. And there's a, there's a benefit to being impatient, to having an intolerance of slowness, right? So he says, "We want you to come in and write up our policies and procedures for us. How long do you think it would take? I knew from experience that it would take six months to a year to properly do this job. But I said, 'I'll do it in 90 days.'" Right? So he says, "No, no, this, this is going to take six, six months to a year. I'm going to tell them three months." Sam replied, "You've got 60 days." Sam never wants to wait for anything. He has no patience. That was probably the meld between us, that bias towards action.

• 1:30:48David Senra?

  Anyway, we published it, all 360 pages of it, in 59 days.

• 1:30:55David Senra?

  So then he talks about the retailers that were used, so discounters, right? They're going to say, hey, I'm going to drop my profit margin per item, but I'm going to make it up in volume. But there have been all these companies that have made tons of money doing it the old way, but they see the discounting revolution happening. And so they get into it, but they get in it like half-assed. Sam went all the way in, right? And so really, the way I think about what I'm about to read you is like, a fully committed company will always beat a company that is half-assing it. These are variety store retailers that were trying to morph into discounters and failed. So it says, "Now, most of these guys had already had distribution centers and systems in place, while we had to build ours from scratch. So on paper, we really didn't stand a chance.

• 1:31:37David Senra?

  What happened was, they didn't really commit to discounting. They held on to their old variety store concepts way too long. They were so accustomed to getting their 45% markup that they could never let go." I mentioned him earlier, but Bernie Marcus is in this book as well. He's the co-founder of Home Depot. And he's, he learned a lot from Sam. He's obviously went out and Sol Price, he was walking with Sol Price one day, and Sol turned to him and was like, "Hey, you should take the idea that I'm doing here and apply it to..." I think he was doing Handy Man or Handy Dan, I forgot the name of the company at the moment. But he's like, "You should apply this concept to the home improvement before somebody else does." Bernie takes that idea and runs with it, and that's what Home Depot is. And so it says, "But if you ask Sam how his business, he's never satisfied. He says, 'Bernie, things are really lousy. Our lines are too long at the cash registers.

• 1:32:22David Senra?

  Our people aren't being helpful enough. I don't know what we're going to do to keep them motivated.'" Then you ask some of these CEOs from other retail organizations who know they are on the verge of going out of business, and they brag and tell you how great everything is, really putting on airs. Not Sam. He is as down-to-earth and knows who he is. Without question, Sam is one of the great all-time merchants, period. And then Sam goes into the fact that he's not just competitive at work, he's competitive with everything he does. He says, "If I've given the impression so far that Walmart has occupied most of my competitive energy over the years, that's not completely accurate. I've pursued my other passions all along too, mostly quail hunting and tennis, and I've pursued them both very competitively." And so he takes breaks throughout his day. This is actually surprising.

• 1:33:05David Senra?

  So he says, "For some reason, I loved to play tennis around noon, when the sun was hottest, and I guess I was pretty aggressive." And so he plays tennis during the day, and then later afternoon, this is what it meant. There's really no work-life balance, more like work-life integration. He'll go and he'll go out and hunt. It was really interesting that he had a break in his day, a few hours where he could actually get away and decompress and turn his mind off, which I think is really important. Bentonville, Arkansas appealed to me because I could quail hunts, I could hunt quail seasons in four states. So during the season, I usually took off almost every day around 3:00 or 4:00 in the afternoon and went out to do a couple of hours hunting. I would throw my dogs in the plane with me so I could hunt between store visits.

• 1:33:47David Senra?

  And then this is his son describing this, and this is wild. Just wait till you get to this last sentence, and I'll tell you when we get to it. "Until Dad was in his mid-60s, I really had to struggle to keep up with him. I thought I was in pretty good shape, but my tendency is to kind of walk along, to take it easy and enjoy the outdoors." So they're talking about when they're hunting. "I'd look up, and Dad would be out of sight." This is the last line. "He hunted like Sherman marched through Georgia." And so this is when, this is, I think, why he did this, and this is really important. "I like being outdoors in all kinds of weather. When I'm out there, I'm not thinking about Walmart, or Sam's Club, or anything, but where the next quail might be." And so David Ogilvie talked about that all the time. He's like, "Listen, I'm a workaholic. I spend all my time building my advertising agency.

• 1:34:32David Senra?

  I'm spending all my time reading and writing." But he said he also spends long times, periods of time, doing nothing. So he could, like, he's riding a bike, staring up at the sky, whatever the case is, because he feels this is the time when you get the results of the computations of your subconscious. Like, you've stepped away, you've given your brain time to work and to maneuver, because you're not really doing much, and then you get the download of all this synthesis of information and experiences that you've had. And he found it very useful for his work.

• 1:35:02David Senra?

  And so then he makes one of his biggest mistakes in business and he tries to step away and fails because, and he only did this because he was worried that he would lose talent because he knew that the guy that's going to take over as CEO for him, he wanted to run a company. So if he wasn't going to run Walmart, he'd run somebody else, run some other company, rather. So he says, "I have to admit, back around 1974, I was awfully tempted to take more time for myself, to step back and let Ron run the company while I went off to enjoy life. So for the first time since I'd begun retailing in 1945, I was beginning to back off from the business. What happened then is the one period in Walmart's history that I'm still the least comfortable talking about. As I look back on that period now, I realize I had split the company in half, setting up two factions which began to compete fiercely with one another, instead of working as a team. There was the old guard,

• 1:35:46David Senra?

  which was him, including many of the store managers, and the new guard, many of who owned their jobs to Ron. Pretty soon, everybody began to take sides. What I did next, which seems totally out of character for me, only compounded the problem tenfold." And this is when he relinquishes his role. "Because of all the technology and sophisticated systems we were needing, I felt, I really felt at the time that Ron was absolutely essential to the company's future. He had a lot of ambition. He made it pretty well-known that his goal was to run a company. He wanted to run Walmart. He told me one day that if he couldn't run our company, he wanted to get out and run another one. So I thought about that for a few days and I really worried that we were going to lose Ron. Then I said to myself, "Well, I'm getting pretty old and we could probably work together. So I let him be, so I'll let him be chairman and CEO and I'll just enjoy myself. Step back

• 1:36:29David Senra?

  a little and of course, continue to visit stores." So I put to this point, I think you have an understanding of Sam's personality. He's just way too formidable to do this. Of course, this isn't going to work out. So he says, "Well, I was no more ready to retire in 1974 at the age of 56 than the Arkansas Sun is ready to start rising out of Oklahoma. The truth is, I failed at retirement worse than just about anything I've ever tried. I tried to stay on Ron's way. The problem was that I actually just kept doing exactly the same thing that I've always been doing. I wanted to see my ideas keep flowing around the company, but I wanted Ron to be successful in operating the company and building an organization. Unfortunately, I just couldn't quite stay away from the company to that degree. The situation was quite a burden for Ron and would have been for any 40-year-old

• 1:37:12David Senra?

  guy wanting to run his own company, I think." And so this goes on for quite a bit of time. He says, "I agonized over all this. I rarely lose sleep over crises of the office, but this time I did. So finally, I called Ron in one Saturday morning, 30 months after I'd given up the chairman's job and simply said, 'Well, Ron, I thought I was ready to step out, but now I see that I really wasn't. I've been so involved, and in a way, it has put you under a real handicap.'" I told him I wanted to come back in as CEO and have him assume another job. "My proposal wasn't agreeable to Ron, and I certainly understand why. He wanted to run the company, and when he couldn't, he decided to leave us." In company lore, that incident became known as the Saturday Night Massacre. What followed became known as the Exodus. First, a whole group of senior managers who had been part of Ron's team, our financial

• 1:37:57David Senra?

  officer, our data processing manager, the guy who was running our distribution centers, all walked out behind him. So they talk about the beginning of this other idea of Sam's Club. And really, Sol Price summarizes Sam Walton in a couple of sentences. "Sam phoned me one day to tell me he was going to start a wholesale club. It was no surprise. He is notorious for looking at what everybody else does, taking the best of it, and then making it better." Sam talks about the importance of meeting competitors head-on, that if they ignored us, so we blew right by them, is something he says. So he says, "Our competitors have honed and sharpened us to have an edge that we wouldn't have had without them. We wouldn't be nearly as good as we are today without Kmart. And I think that we've made them a better retailer.

• 1:38:41David Senra?

  One reason Sears fell so far off the pace is that they couldn't admit for the longest time that Walmart and Kmart were their real competitors. They ignored both of us, and we blew right by them." And this is his brother about the fact that, like Jeff Bezos, Sam went to school on everyone. "Competition is very definitely what made Walmart from the very beginning. There's not an individual in the whole United States who has been in more retail stores, all types of retail stores, not just discount stores, than Sam Walton. Make that all over the world. He's been in stores in Australia, and South America, Europe, and Asia, and South Africa. His mind is just so inquisitive when it comes to business. And there may not be anything he enjoys more than going into a competitor's store, trying to learn something from it." And he goes back to this idea of why it's so important to control your costs.

• 1:39:24David Senra?

  And really, the note I put myself here is that this is why founders like Rockefeller, Carnegie, and Walton were so obsessed with controlling costs. The percentage of gross margins in the industry, so the markup on the merchandise, had dropped steadily from around 35% in the early 60s, in the early 1960s, to only 22% today. Almost all of that represents increased value and savings to the customer, for the customers who shop at discount stores. So the guys who weren't running efficient operations, so your margins over this period of time, if you were in this industry, right, they drop by what? What is that, 33%, right? Somewhere around there, 30%? Almost all that represents increased value and savings to the customers who shop at discount stores. So the guys who were not running efficient operations, who had taken on lots of debt

• 1:40:07David Senra?

  and were living high and not taking care of their associates, who weren't scrambling around to get the best deals on merchandise and passing those deals on to their customers, those guys got into trouble. So to summarize that, the guys who weren't running efficient operations got into trouble. Hard to survive, 30% drop in your margins if you don't have an efficient organization, is what Sam is telling us there. So remember when Charlie was saying, Charlie Munger was saying, hey, you know, the people, the winners in this business are usually the people that go excessively far. They go to extremes, maximizing or minimizing one or a few variables. They're talking about Sam's Club. He uses the, Charlie uses the example of Costco, which obviously runs on a very similar model.

• 1:40:52David Senra?

  And really, it's a, when you think about what their description of Sam's Club, the paragraph I'm about to read you, it's just a simple idea that was taken really seriously. That's one of my favorite ideas. Just find a simple idea and take it seriously. This business is fun. It really is. It is so basic, so straightforward. We do no advertising, but our whole business is based on selling the concept. We sell small business operators on the idea that for $25 a year, they can have a just-in-time warehouse, they can have just-in-time warehouses with all the same price advantages for goods that large companies get. And so all the, the membership fees is where we actually make our money. And so that's what they're talking about. It's, the business is fun. It really is. It is so basic, so straightforward. Going back to the idea that Sam loves to be a Maverick, he likes to be unpredictable.

• 1:41:36David Senra?

  I like to keep everybody guessing. I don't want our competitors getting too comfortable with feeling that they can predict what we're going to do next. I hate to keep repeating myself, but it is extremely important. Invest in technology, the savings compound, it gives you an advantage over your slowing moving competitors and can be the difference between a profit and a loss. There's no question about it. One of the main reasons we've been able to roll this company out nationally was all the pressure put on me by guys like David, Jack, and Ron to invest so heavily in technology. Yes, I argued and resisted, but I eventually signed the checks. And we've been able to move way out in the industry in both communications and distribution during that period in the late 70s when Kmart's management was such had such a strong resistance to any kind of change. That resistance included investment in technology. At the same time, our fellows, our people, were just absolutely convinced

• 1:42:20David Senra?

  that computers were essential to managing growth and keeping down our cost structure. And then he ties that investment into technology with the compounding savings. And over the long term, he's going to destroy his competition just off this one metric alone. The time savings and flexibility are great, but the cost savings alone would make the investment worthwhile. Our costs run less than 3%, while it probably costs our competitors between 4.5% to 5% to get those same goods to their stores. The math is pretty simple. If we both sell the same goods for the same price at retail, we'll earn 2.5% more profit than they will. And part of their advantage is they had to build these things from scratch, where other retailers had existing distribution channels or distribution systems, they were

• 1:43:03David Senra?

  trying to convert over from the old way, the old retailing to discounting, right? And really what they're about to say here is like, you just have to control as much of your business as possible. When you own and manage your distribution and logistic channels, you have a great competitive advantage over companies that rely on third-party suppliers. It automatically shortens your lead times. But also, you can constantly look for ways to improve your operation and try to make it more efficient. You never have to rely on what is going on in somebody else's shop. This is something I missed the first time I read the book because the first time I had read this book, I had not yet read the founder of UPS's, Jim Casey, his biography. That is Founder's number 192 if you've not listened to it yet. But the notes I left here

• 1:43:47David Senra?

  is, "This is the Jim Casey founder of UPS idea," and there's like six exclamation points. And so Sam says, "I'll just say it. We have the best damn truck drivers in America. Their loyalty and their attitude have made a huge difference to the company." And so now, right after this, there's another guy that works in the company talks about what Sam does. It's genius. This is exactly what Jim Casey did with UPS drivers. "Our drivers really are extremely loyal to their mission, which is to serve the stores. They report back to Walmart continually on things like merchandise thrown out behind the store that looked like it was good, attitude and morale problems in the stores. For a long, long time, Sam would show up regularly in the driver, the truck driver's break room at 4:00 a.m. with a bunch of donuts and just sit there for a couple hours talking

• 1:44:31David Senra?

  to them. He would grill them. What are you seeing at the stores? Have you been to this store lately? How do the people act there? Is it getting better? It makes sense. The drivers see more stores every week than anybody else in the company." And I think what Sam likes about them is that they're not like a lot of managers. This is exactly what Jim Casey realized about UPS truck drivers. "They don't care who you are. They'll tell you what they really think." Sam's got another great idea. It's the fact that if you think small, you grow big. And so this is what he says. "Here's the point. The bigger Walmart gets, the more essential it is that we think small, because that's exactly how we've become a huge corporation, by not acting like one. Above all, we are small-town merchants. And I can't tell you

• 1:45:13David Senra?

  how important it is for us to remember, when we puff up our chests and brag about all these huge sales and profits, that they were all made," he's talking about the huge sales and profits, "were all made one day at a time, one store at a time, and mostly by hard work."

• 1:45:30David Senra?

  For us, thinking small is a way of life. It's almost an obsession. And I suspect thinking small is an approach that almost any business could profit from. The bigger you are, the more urgently you probably need it. At our size today, there's all sorts of pressure to regiment and standardize and operate as a centrally-driven chain, where everything is decided on high and passed down to its stores. In a system like that, there's absolutely no room for creativity, no place for the maverick merchant that I was in the early days of my career, and no call for the entrepreneur or the promoter. Man, I'd hate to work at a place like that. And I worry every single day about Walmart becoming that way. So Sam also has an idea that as you grow, bureaucracy is natural. And so you've got to, like, you've got to zero in on it, and you've got to keep building

• 1:46:15David Senra?

  it back, because it's natural to, like, add these excessive amounts of layers as the company grows. And he says, like, "You never set out to get bureaucracy. You just get it, period, without even knowing it. So you've always got to be looking for ways to eliminate it." And so here's an example of that, and then what Sam says about that. He says, "I'll give you an example that drove Sam crazy until we started doing something about it. When merchandise came into the back of a store, it was supposed to be marked at the right price or marked correctly on the spot. But because it often wasn't getting done properly, we created positions called test scanners. These are people who would go around the stores with handheld scanners, making sure everything is priced correctly. There's another layer right there, and Sam never visited a store without asking if we really needed these folks."

• 1:46:58David Senra?

  And he says, "Really, it's a simple philosophy. What you have to do is draw a line in the dirt and force the bureaucracy back behind that line. And then you know for sure that a year will go by, and it will be back across that line, and you have to do the same thing again." And one way to think about how to minimize bureaucracy in your company is how, it's this simple framework that Sam has here, which I love. It's really on how to remove unnecessary layers. If you're not serving the customer or supporting the folks who do, we don't need you.

• 1:47:32David Senra?

  And so there's a series of things that he repeats over and over again. And so if you read about Jeff Bezos, these are called Jeffisms. It's like a handful of things. We talk about this idea over and over again, that repetition is persuasive. You're supposed to be spending a lot of your time teaching throughout your company, throughout your organization. And so one way to do that is you've got to repeat. And you can't repeat 100 different things. So you've got to figure out, okay, what are the most important things? Sam has essentially a list of about 10. And so you can think about this as Sam's 10 Rules for Building a Business. But I also love what he says here, and this is part of him being unapologetically extreme, before he even gets to the list. And he says, "One thing I don't even have on my list is work hard. If you don't know that already, and you're not willing to do it, you probably won't be going far enough to need my list anyway." And so he's going to describe a little bit more about these.

• 1:48:17David Senra?

  He says, "Listen, these rules are in no way intended to be the 10 commandments of business. They're just some rules that work for me. But I always pride myself on breaking everybody else's rules, and I always favor the mavericks who challenge my rules. So pay special attention to rule number 10, and if you interpret it in the right spirit, as it applies to you, it could simply mean, break all the rules." And so he'll state the rule, and then he'll describe it. Sometimes I'm going to read you the entire thing. Sometimes I'll just read you the highlight, because I think that it does the job. Rule number one: Commit to your business. Believe in it more than anybody else. I think I overcame every single one of my personal shortcomings by sheer passion, by the sheer passion I brought to my work. I don't know if you're born with this kind of passion, or if you can learn it, but I do know you need it.

• 1:49:02David Senra?

  If you love your work, you'll be out there every day trying to do it the best you possibly can, and pretty soon, everybody around will catch the passion from you, like a fever. Number two: Share your profits with your associates and treat them as partners. Number three: Motivate your partners. Money and ownership alone are not enough. Constantly, day by day, think of new and more interesting ways to motivate and challenge your partners. Set high goals, encourage competition, and then keep the score. You should make bets with outrageous payoffs. If things get stale, cross-pollinate. Have managers switch jobs, and then with one another to stay challenged. Keep everybody guessing as to what your next trick is going to be. Do not become too predictable.

• 1:49:47David Senra?

  Number four: Communicate everything you possibly can to your partners. The more they know, the more they'll understand. The more they understand, the more they'll care. Once they care, there's no stopping them. Rule number five, appreciate everything your associates do for your business. A paycheck and stock options will buy one kind of loyalty, but all of us like to be told how much somebody appreciates what we do for them. We like to hear it often, and especially when we have done something we're really proud of. Nothing else can substitute for a well-chosen, for a few well-chosen, well-timed, sincere words of praise. They're absolutely free, and they're worth a fortune. Number six, celebrate your success. Find humor in your failure. Don't take yourself too seriously. Loosen up, and everybody around you will loosen up.

• 1:50:32David Senra?

  Have fun. Show enthusiasm, always. Seven, listen to everyone in your company and figure out ways to get them talking. The folks on the front lines, the ones who actually talk to your customer, are the only ones who really know what's going on. You better find out what they know. Rule number eight, exceed your customers' expectations. If you do, they'll come back. Rule number nine, control your expenses better than your competition. This is where you can always find a competitive advantage. For 25 years running, long before Walmart was known as the nation's largest retailer, we ranked number one in our industry for the lowest ratio of expense to sales. You can make a lot of different mistakes and still recover if you run an efficient operation,

• 1:51:12David Senra?

  or you can be brilliant and still go out of business if you're too inefficient. And rule number 10, which he says if you interpret it, it's to break all the rules, swim upstream, go the other way, ignore conventional wisdom. If everybody else is doing it one way, this is a good chance you can find your niche by doing it exactly the opposite direction, but be prepared for a lot of folks to wave you down and tell you that you're headed the wrong way. And I'll close on this, the goal is to get to the end of your life with no regrets. By now, it's probably clear to you that I've devoted most of my life to Walmart, starting it, growing it, and always refining the concept of this whole phenomenon. My life has been full, and fun, and challenging, and rewarding beyond even my wildest expectations.

• 1:51:57David Senra?

  I've pretty much gotten my own way for the whole run. While a lot of people were working away at jobs they might not have particularly enjoyed, I was having the time of my life. If I wasn't in the stores trying to pump up our associates to do an even better job, or in the office looking over numbers to see where the next trouble spot was gonna pop up, or leading the cheers at a Saturday morning meeting, I was probably at the stick of my airplane, looking out over some part of this beautiful country of ours, and checking out the number of cars in those Kmart parking lots. Or maybe I was taking a few hours off to get in some tennis, or to hunt with my dogs. All of that has wound down for me now. I'm really sick these days, and I guess when you get older and illness catches up with you, you naturally turn just a little bit philosophical, especially late at night,

• 1:52:42David Senra?

  when you can't sleep and your mind is turning everything over and over, trying to take stock of where you've been and what you've done. The truth is, if I hadn't gotten sick, I doubt I would have ever written this book, or taken the time to try to sort my life out. As you know, I'm much too biased toward action to undertake such a sedentary project. But since I have, I'm gonna go all the way and try to share with you how I feel about some things that seem important to me. This will sound strange to people who know me well, but lately I've wondered if I should feel bad about having been so wholly committed to Walmart. Was it really worth all the time I spent away from my family? Should I have driven my partner so hard all these years? Am I really leaving behind something on this

• 1:53:26David Senra?

  earth that I can be proud of having accomplished, or does it somehow lack meaning to me now that I'm facing that ultimate challenge? We could've gone a lot of different ways at several points. Many folks started out in retailing, just like I did, and built their companies up to a point and then said, "I've had enough," and sold out and bought an island. I could've kicked back and played with the grandchildren, or I could've devoted the later years of my life to doing good works. I don't know that anybody else has ever done it quite like me. Started out as a pure neophyte, learned his trade, swept the floor, kept the books, trimmed the windows, weighed the candy, rung the cash register, installed the fixtures, remodeled the stores,

• 1:54:08David Senra?

  built an organization of this size and quality, and kept on doing it right up until the end because they enjoyed it so much. No one that I know of has done it that way. Here's how I look at it. My life has been a trade-off. If I wanted to reach the goals I set for myself, I had to get at it and stay at it every day. I had to think about it all the time. And I guess what David said about me is true. I had to get up every day with my mindset on improving something. Charlie was right, too, when he said I was driven by a desire to always be on top of the heap. But in the larger sense, the life and death sense, did I make the right choices?

• 1:54:49David Senra?

  Having now thought about this a lot, I can honestly say that if I had the choices to make all over again, I would make the same ones. And that is where I'll leave it. Highly recommend reading this book. I think it should be in every entrepreneur's library. If you buy the book using the link that's in the show notes, you'll be supporting the podcast at the same time. If you want to buy a gift description for a friend or coworker, there's a link in the show notes as well. You can also go to founderspodcast.com and do that, too. That is 234 books down, 1,000 to go, and I'll talk to you again soon.