#6 Sam Walton

What I learned from reading Sam Walton: Made In America by Sam Walton. ---- 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

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• 0:00David Senra?

  I want to talk to you about the autobiography of Sam Walton. It's called Made in America. And this book was published about a year before he died. So he was suffering from a rare form of bone cancer. And he knew he was going to die, so he decided to put all like his thoughts down on paper. So I want to jump right into the book. If you've heard previous episodes, then you know that we have this this section that I affectionately call critics don't know shit. And I do that because in almost every, and actually in every biography, there, there's always people around the entrepreneurs telling them

• 0:42David Senra?

  that their idea is no good, that it's not going to work out, that you're not good enough. And I just think it's a good reminder to anybody that no one knows what they're talking about. So this is a, we're going to start at the beginning of the book. And he's, Sam Walton is working at JCPenney. And let's start.

• 1:06David Senra?

  And he says, anyway, he'd get all upset at the way I would screw up the sales slips and generally mishandle the cash register part of things. I couldn't stand to leave a new customer waiting while I fiddled with paperwork on a sale I'd already made.

• 1:21David Senra?

  Walton, Blake would say to me, this is his manager. Walton, Blake would say to me when he came to Des Moines. I'd fire you if you weren't such a good salesman. Maybe you're just not cut out for retail. And I want to start there because this is one of his first jobs. This guy who's a training manager for JCPenney is telling what winds up being the world's greatest retailer, that he's not cut out for retail. The part continues, and this is part of his inspiration. Fortunately, I found a champion in my store manager Duncan Majors. He was a great motivator, who was proudest of having trained more Penny managers than anyone else in the country. He had his own techniques and was a very successful manager.

• 2:06David Senra?

  His secret was that he worked us from 6:30 in the morning until 7 or 8 o'clock at night. All of us wanted to become managers like him. On Sundays, when we weren't working, we'd go out to his house, there was about eight of us, all men, and we would talk about retailing, of course, but we also played ping pong or cards. It was a seven-day job. I remember one Sunday Duncan Majors had just gotten his annual bonus check from Pennies and was waving it around all over the place. It was for $65,000, which impressed the heck out of us boys. Watching this guy is what got me excited about retail. He was really good.

• 2:46David Senra?

  And at the time, Sam's making $75 a month at a JCPenney store in Des Moines, Iowa. And his manager is showing him a check for $65,000, which, as Sam just said, inspired him and he said, "Okay, you know what, I want to get into this retail game too." So let's skip ahead a little bit. So he quits JCPenney, he gets into the Army, this is right around World War II, so he wants to do his part. And this part is the importance of seeking wisdom. So a note about the book, this may be one of my favorite books that I've read about

• 3:27David Senra?

  an entrepreneur, just because it's written in, it's autobiography, so it's written in, he's saying "I" instead of somebody else describing him, but it's also written like he speaks. And it's just this, you know, he's got a lot of like this Midwest/Southern charm. And it's just, he's got some funny stories in here. But it's really, it's a really approachable book. And you'll see as we continue down this path. So, let's go back to the book. Helen and I spent two years living the Army life, and when I got out in 1945, I not only knew I wanted to go into retailing, I also knew I wanted to go into business for myself. My only experience was the penny's job, but I had a lot of confidence that I could be successful on my own. Our last army posting was in Salt Lake City,

• 4:13David Senra?

  and I went to the library there and checked out every book on retailing. So this is something we're gonna see throughout the book. He was obsessed with studying, not only people that were doing what he wanted to do, in this case, become a retailer, but also when he gets started in business, he's obsessed with studying his competition.

• 4:32David Senra?

  It says later on in the book that people who work for him think that he's, he visited more stores, more retail stores all over the world than anyone else in history. But he was obsessed with seeking information, which I find is a very common trait as I study entrepreneurs. Whether they're reading, talking to people, studying their competition, in this case, listening to podcasts about entrepreneurship, they're always looking for an edge. They're always looking for information that may help them. So I want to skip ahead a little bit. He figured out that he wants to go into retail, and he decides that he's gonna buy his first store. So he gets, he has a little bit of money saved up at this time, and he gets a loan from his wife's, his wife's father.

• 5:13David Senra?

  And they're in a little town in Newport, Arkansas, of only 7,000 people. So the wonderful things about these stories is, everybody knows who Sam Walton and how big Walmart got. You know, at the end of the book, I think they're doing $50 billion a year in sales. Yet, just like Walt Disney, or Elon Musk, or any of these other guys, they don't start out that way. They just start out, everybody starts small. We talked last week about Steve Jobs. I mean, it was him and Wozniak in a garage. And now, Apple's the most valuable company in the world. So this is Sam's first goal, and we're gonna get a little insight about his personality. But at that time, I was sure Newport and the Ben Franklin had great potential.

• 5:54David Senra?

  Ben Franklin was a chain of retailers, and he becomes a franchisee of a Ben Franklin store.

• 6:02David Senra?

  So they had great potentials, what he just said. And I've always believed in goals, so I set myself one. 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? Set that as a goal and see if you can achieve it. If it doesn't work, you had fun trying.

• 6:28David Senra?

  And we're gonna skip ahead a few chapters. And we're gonna talk about when he reached the goal. And before, uh... We're gonna get there. There's a... So the guy Blake that we were talking about under the Critics Don't Know Shit section. Um, he's still traveling around and he winds up, uh, in a... In a... In Newport where Sam is. And let me just, uh... That sets up the story here. "Say," the manager told Blake, "we've got an ex-Penny Man right here in Newport. He came in a few years ago..." So this is obviously a few years ahead in the story. "He came in a few years ago and really made a big success of it. He doubled sales in his Ben Franklin. He's got two stores and he's the president of the Chamber of Commerce.

• 7:14David Senra?

  And 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. 'That fellow couldn't have amounted to anything.' He came next door and we both had a big laugh about it. And when he saw that I really was that kid who couldn't write..." Uh... And he really... And he saw that I was really the kid who couldn't write and you could... So you couldn't read it. He was talking about his handwriting on the receipts was just terrible. "By now, my five years in Newport were up and I had met my goal. That little Ben Franklin store was doing $250,000 of sales a year and turning $30,000 to $40,000 a year in profit.

• 7:58David Senra?

  It was the number one Ben Franklin store for sales or 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 the three or four neighboring states." So in between these two sections, they go into... He was just relentless. He would study his competition. He opened up a Ben Franklin store right across the street from another retailer. And within five years, he caught, uh... He caught up and then surpassed him. And he winds up opening another store, um... That story actually doesn't end that well though because his landlord saw that he was doing so well that when Sam's lease expired, he wouldn't renew it and no matter what.

• 8:42David Senra?

  So he had to sell his very successful business to the landlord. And he made a good profit on it, but he didn't want to sell and he learned something about that. So throughout the book too, there's all these little anecdotes that I have labeled as Sam's personality that I want to share. And if you hear that noise, it's just when I read, so if you're curious on how I do these podcasts, I read the entire book and as I'm reading, I'm highlighting sections that really stick out to me that I think will be interesting to you. And then I also leave sticky notes about what they are. So I don't have to sit here in silence and reread the parts before. And so if you ever see them, I should take a picture and show you guys what the books look like when I'm done with them. But they're marked up pretty, pretty well.

• 9:26David Senra?

  So this part is another anecdote I want to share on his personality. "I've never been one to dwell on reverses and I didn't do so then. It's not, it's not just a corny saying that you can't make, that you can make a positive out of most any negative if you work at it hard enough. I've always thought of problems as challenges and this one wasn't any different.

• 9:51David Senra?

  I don't know if that experience changed me or not. This is him having to be forced to sell his business. I know I read my leases a lot more carefully after that and maybe I became a little more wary of how tough the world can be. Also, it may have been about then that I began encouraging our oldest boy, six-year-old Rob, to become a lawyer. But 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. Helen and I started looking for a new town." So he sells his business. He didn't want to give it up like I said before, but he said, "You know what? I'm going to take this as a challenge.

• 10:31David Senra?

  I'm going to go look for a, a new place and I'm going to do the exact same thing, but I'm going to do it even better this time."

• 10:42David Senra?

  And this, so we're skipping ahead a little bit. He finds a store in another small town. And look where he's starting out. There's just some details about it. "Now I had a store to run again, and even though it didn't do but thirty-two thousand the year before I bought it, compared to two-hundred-and-fifty-thousand dollars in Newport, it didn't matter that much because I had big plans. We tore the wall out between the barber shop and the old store, put in brand-new fluorescent fixtures instead of the few low-watt bulbs that had been hanging from the ceiling, and basically built a new store in there. It was a huge store for Bentonville at the time, that's the city. Fifty feet by eighty feet are four-thousand square feet." So he's got himself a new store.

• 11:25David Senra?

  He was only doing thirty-two thousand the year before, and he's gonna try to improve on that.

• 11:32David Senra?

  There's another, it's really interesting because he doesn't start Walmart. The actual, so right now he's doing these things called variety stores. And he gets into discounting, which is what Walmart is, twenty years after he starts. So he's in his forties before he founds Walmart. And this is some stories, this is his opinion on how Walmart came to be. And this is before he opens the Walmart. "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 that it was just this great idea that turned into an overnight success.

• 12:15David Senra?

  It's true that I was forty-four when we opened our first Walmart in nineteen-sixty-two, but the store was totally an outgrowth of everything we'd been doing since Newport. Another case of me being unable to leave well enough alone, another experiment. And like most overnight successes, it was about twenty years in the making."

• 12:45David Senra?

  I want to skip ahead a little bit and give you another anecdote about his personality. This is from David Glass, who winds up taking over the CEO role for Walmart after Sam retires. And this is what David Glass says. "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."

• 13:27David Senra?

  So I want to jump ahead into where he... So now he tells you how that coming with Walmart was just an evolution of everything that he did before. And so now I want to talk to you about the first Walmart, which had very humble beginnings. And this is Sam talking again. "To tell the truth, though, that first Walmart in Rogers wasn't all that great. We did $1 million in a year, a lot more than most of our variety stores, which did $200,000 to $300,000 a year. But remember, St. Robert, up there in Army Town, was doing $2 million in sales. And once we opened in Rogers..." All these names are just names of little, small towns. "And once we opened in Rogers, we sat there and held our breath for two years.

• 14:10David Senra?

  Then we put up stores up in Springfield, a bigger town near Rogers, and Harrison, a smaller town." Here, of course, I have to let David Glass now tell his now-famous story about coming to Harrison to see what a Walmart was and being so horrified at the sight. And I include this in there because it's just a reminder that, again, things start small. And then he just worked at it every day and it turned into something beautiful.

• 14:40David Senra?

  This is David, Derek Ho from David Glass. In those days, word was starting to get out that a guy named Sam Walton had some interesting retailing ideas. So I drove down from Springfield, where I was with Crank Drugs at the time, to see a Walmart opening. Crank Drugs is just the name of the company David Glass is working for at the time. It was the worst retail store I had ever seen. Sam had brought 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 about 115 degrees and the watermelons began to pop. And the donkey began to, and the donkeys began to do what donkeys do. And it all mixed together and ran all over the parking lot.

• 15:24David Senra?

  So basically, donkey crap and watermelon juice. 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 totally wrote him off. It was just terrible. This is back to Sam now. The store was only 12,000 square feet and had an eight-foot ceiling and a concrete floor with bare-boned wooden plank fixtures. We were trying to find out if customers in a town of 6,000 people would come to our kind of barn and buy the same merchandise strictly because of price. The answer was yes.

• 16:08David Senra?

  So skipping ahead, this is the reason I think almost every entrepreneur should read this book. Not only, one, the way I found out about it is because if you Google Jeff Bezos book recommendations, this is on there and you can see there's a lot of ideas that Sam Walton had that Jeff Bezos has used to build Amazon. But he has interspersed throughout the entire book, he just has these little like...

• 16:31David Senra?

  Almost as if he was giving you advice directly to you. So it comes out of his own experience and they're just little short paragraphs. So here's one of them here. "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, we might never have ever tried." So what he's talking about there is originally he was fine just being a franchisee and he wanted to continue being a franchisee.

• 17:17David Senra?

  And then he had some ideas where he thought that the variety stores could be eventually taken out by these new discounters. So he approached the people that he was purchasing franchises from and said, "Hey, I have this new idea, let's be partners." Because he needed money for them to put up the money for the new stores. They said no, so he's forced to do it on himself. And that becomes Walmart.

• 17:41David Senra?

  Here's another section. It's more on Sam's philosophy on work.

• 17:49David Senra?

  "I read in some trade publication not long ago that of the top 100 discounters," discounters is what the category Walmart would fall into. "Of the top 100 discounters who were in business in 1976, 76 of them have disappeared. Many of these started with more capital 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 care of their customers, not minding their stores,

• 18:32David Senra?

  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's the most important single ingredient of Walmart's success. 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'd never even thought about before. I remember going to dinner at one of their houses and we got picked up in this limousine that must have had room for 14 people. Man, they were living high.

• 19:17David Senra?

  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. But you do have to work at it. And somewhere along the line, these folks stopped short of setting the goals and paying the price that needed to be paid.

• 20:02David Senra?

  So this is a really great story about information. And it goes back to Sam Walton was always collecting information, information on how to run businesses, information on how his retailers were doing. Like, remember, this is, now we're in the 60s, this is 67. So back in 45, he's sitting at the Salt Lake City Library reading every single book he can in about retailing.

• 20:31David Senra?

  So let's see that that continues. So this is a, this is a quote from Kurt Barnard, a retailing consultant.

• 20:39David Senra?

  "I was executive vice president of the Discounters Trade Association and working in my New York, 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 would give him 10 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 right 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. After two and a half hours, he left, and I was totally drained.

• 21:25David Senra?

  I wasn't sure what I had just met, but I was sure we would hear more from him."

• 21:35David Senra?

  So this time, it's the late 60s and he has, he has a dozen Walmarts and 14 or 15 variety stores.

• 21:51David Senra?

  Oh, I love this part. Okay. This is, this is another great story about information.

• 21:59David Senra?

  Okay. And so these are going to be direct quotes from this guy named Abe Marx. He was president, head of Hartfield, Zodies, and first president.

• 22:12David Senra?

  "I was sitting there at the conference, reading the paper, and I had a feeling somebody was standing over me. So I look up, and there's this grayish gentleman standing there in a black suit, carrying an attache case. And I said to myself, who is this guy? He looks like an undertaker." He asks me if I'm Abe Marks 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 never heard of Sam Walton. What did you say the name of your company is again?" "Walmart Stores," he says.

• 22:55David Senra?

  So I say, "Well, welcome to the fraternity of discount merchants. I'm sure you'll enjoy the conference and getting acquainted socially with everyone." "Well, to be perfectly honest with you, Mr. Marks, 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 am doing now." So he opens up this attaché case, I hope I'm pronouncing that correctly, and I swear, he had every article I had ever written and every speech I had ever given in there. I'm thinking, "This is a very thorough man." Then he hands me an accountant's working column sheet showing all of his operating categories, all written out by hand.

• 23:41David Senra?

  Then he says, "Tell me what's wrong. What am I doing wrong?" I look at these numbers. This was in 1966, and I don't 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 and unbelievable performance. So I look at it and I say, "What are you doing wrong?" "Sam," if I may call you Sam, "I'll tell you what you're doing wrong." I handed back his papers and I closed his 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 come from and keep doing exactly what you are doing.

• 24:22David Senra?

  There is nothing that can possibly improve what you are doing. There's nothing here that can possibly improve what you're doing. You are a genius." And that's how I met Sam Walton.

• 24:37David Senra?

  Also shows his humbleness that he that even though he was doing better than almost every any other retailer, especially any other retailer at that conference, he's still asking for help and advice. And then the crazy part is like now if you want to collect the writings and the speeches and like the information that people put out, well, we have the internet like we can do that in, you know, an hour or maybe even less. This guy's collecting information by hand in the 60s. I'm not going to spend too much time on this, but there is an interesting paragraph when they take the company public. And this is Sam talking again.

• 25:19David Senra?

  As everybody today knows, Walmart's stock performance and the wealth it has created is a story in and of itself. Just 15 years ago, the market value of the company was around 135 million. Today, it is over $50 billion. But here's a better way to look at it. Let's say you bought 100 shares back in the original public offering for $1,650. Since then, we've had nine two-for-one stock splits. So you would have 51,200 shares today. Within the last year, it's traded at right under $60 a share. So your investment would have been worth right around $3 million at that price.

• 26:03David Senra?

  So from $1,600 to 3 million. Obviously, our stock has made a lot of folks happy over the years. And pure and simple, that's where the Walton family net worth has been created. It paid off beyond any of our dreams. This is just one sentence, but I think it's important. Most everything I've done, I've copied from somebody else. Again, I may get annoying, I'm saying it so much, but it's the importance of collecting information.

• 26:35David Senra?

  So this part is, I call pilot as a strategy. There's no question whatsoever that we could not have done what we did back then if I hadn't had my airplanes. I bought that first plane for business to travel between the stores and keep in touch with what was going on. But once we started really rolling out, uh, once we started really rolling out the stores, the airplane turned out to be a great tool for scouting real estate. We were probably 10 years ahead of most other retailers in scouting locations from the air. And we just got a lot of great ones, great ones that way. From up in the air, we could check out traffic flows, see which way cities and towns were growing, and evaluate the location of the competition. If there was any. Then we would develop our real estate strategy for that market.

• 27:21David Senra?

  I loved doing it myself. I'd get down low, turn my plane on its side, and fly right over a town. Once we had a spot picked out, we'd land, go find out who owned the property, and try to negotiate the deal right then. That's another good reason I don't like jets. You can't get down low enough to really tell what's going on, the way I could with my little planes. Bud and I, that's his brother and his partner. Bud and I picked almost all of our sites that way until we grew to about 120 or 130 stores. I was always proud of our technique and the results we got. I guarantee you, not many principals of retailing companies were flying around sideways, studying development patterns, but it worked really well for us.

• 28:09David Senra?

  So skipping ahead a little bit, um, I know a lot of people like to ask like this, how really successful, uh, business owners or entrepreneurs like find the time to do everything? So I want to include this part about Sam not having a schedule.

• 28:25David Senra?

  But if you ask me, am I an organized person? I would have to say flat out, no, not at all. Being organized would only really slow me down. 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, I don't keep much of a schedule. I think my way of operating has more or less driven Loretta Boss and later Becky Elliott, my two secretaries, around the bend. My style is pretty haphazard. So this is his, now we're gonna get some direct quotes from his personal secretary of 25 years.

• 29:02David Senra?

  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 whatever's on his mind. If he gets something in his mind and that needs to be done, regardless of what else might have been planned, the new idea takes priority. And it has to be done now. Everybody has their day scheduled, and then bang, he just calls a meeting on something else. In the early years, this caused a number of embarrassments. I would make appointments for him and then tell him about them. We kept two calendars, one on his desk and one on mine. But he would just totally forget. I've had people fly in here from Dallas all set to see him.

• 29:47David Senra?

  I'd come in at 8:00 a.m. to meet them and find out he had flown out of town at 5:00 a.m. 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 that, I finally said, "I'm not gonna 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 is ever going to.

• 30:20David Senra?

  This is back to Sam. 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 always carry my little tape recorder on trips to record ideas that come up in my conversations with the associates. The associates is what they call the employees working in the store.

• 30:38David Senra?

  I usually have my yellow lego pad with me with a list of 10 or 15 things we need to be working on as a company. My lists drive the executives around here crazy, but it's probably one of my more important contributions.

• 30:53David Senra?

  So not everything Sam did was obviously correct, but he is quick, he was quick to make his, to admit his mistakes and change. So here's a paragraph from a gentleman that's working for him named Charlie Baum. These are direct quotes from him. "When I took over the store in Fayetteville, which would have been May of 1955, Sam was paying the girls 50 cents an hour. After that first, the first paychecks went out, I thought about it and decided, this is for the birds. So the next week, I raised them to 75 cents an hour, and I got a telephone call from Sam. He said, Charlie, we don't give raises of a quarter an hour. We give them a nickel an hour. But I didn't cut back. I stayed with the 75 cents because those girls were earning it.

• 31:35David Senra?

  We were a high-volume store for those days, making pretty good money." And now here's Sam talking about the same situation. "I don't remember being that tight, but I guess Charlie's got it about right. We didn't pay much. It wasn't that I was intentionally heartless. I wanted everybody to do well for themselves. It's just that in my very early days in the business, I was so doggone competitive and so determined to do well, that I was blinded to the most basic truth. Really, the principle that later became the foundation of Walmart's success. You see, no matter how you slice it in the retail business, payroll is one of the most important parts of overhead, and overhead is one of the most

• 32:16David Senra?

  crucial things you have to fight to maintain your profit margin. That was true then, and it's still true today. Back then, though, I was so obsessed with turning in a profit margin of 6% or higher, that I ignored some of the basic needs of our people, and I feel bad about it. The larger truth that I failed to see turned out to be another one of those paradoxes, like the discounter's principle of the less you charge, the more you'll earn. And here it is. The more you share profits with your associates, whether it's in salaries, or incentives, or bonuses, or stock discounts, the more profit will accrue to the company.

• 32:57David Senra?

  Why? Because the way management treats the associates is exactly how the associates..." will then treat the customers. And if the associates treat the customers well, the customers will return again and again. And that is where the real profit in this business lies. Not in trying to drag strangers into your store for one-time purchases based on splashy sales or expensive advertising. Satisfied, loyal, repeat customers are at the heart of Walmart's spectacular profit margins. And those customers are loyal to us because our associates treat them better than salespeople in other stores do.

• 33:36David Senra?

  So in the whole Walmart scheme of things, the most important contact ever made is between the associate in the store and the customer.

• 33:56David Senra?

  So skipping ahead a little bit in the book, this is still in a chapter called Building the Partnership, and they're talking about building the partnership between management and their associates. And this was surprising.

• 34:11David Senra?

  If you've ever spent any time around Walmart, you may have noticed that it's not unusual for somebody in Philadelphia, Mississippi, to get in his pickup on the spur of the moment and drive to Bentonville, where you can find him sitting in the lobby, waiting patiently to see the chairman. That's Sam. Now, really, how many chairman of $50 billion companies do you know who are totally 100% accessible to their hourly associates? I know lots of peoples in big companies who have never even seen their chairman, much less visited with him. So that just shocked me.

• 34:50David Senra?

  At this time, anybody that worked for Walmart, and they had thousands of employees, could drive to headquarters and request a meeting with Sam, and he'd take the meeting.

• 35:08David Senra?

  This is what Sam says about that, by the way. "That's not to suggest that I always like what I have, that they always like what I have to say. I don't always solve their problems and I can't always side with them just because they bring their situation to my attention. But if the associate happened to be right, it's important to overrule their manager or whoever they're having the problem with, because otherwise, the open door policy isn't any good to anybody. The associates would know pretty soon that it was just something we paid lip service to, but didn't really believe in. If I'm gonna fly all around the country telling these folks they're my partners, I sure owe it to them to at least hear them out when they're upset about something."

• 35:53David Senra?

  This is fantastic.

• 35:57David Senra?

  So I'm gonna skip ahead in the book again.

• 36:01David Senra?

  There is a section in here where it deals with, when he's in his 50s, Walmart's already public, it's massively successful, he's like, "Okay, well, maybe, maybe it's time for me to step back." He was always somebody that delegated from day one. And there's one or two chapters in the book that deal with, basically, he retired too early. He misjudged his own personality and Walmart winds up losing like a third of their executives. It's called like the Saturday Night Massacre.

• 36:31David Senra?

  But I'm gonna skip over that part, because it has to do, there's just a lot of names in there that could get a little confusing if you're not reading and you're just hearing it. And a lot of it is not centered around Sam.

• 36:46David Senra?

  So, he has this interesting strategy, and it's called "Competition as Strategy."

• 36:55David Senra?

  And here's his strategy. "We decided that instead of avoiding our competition, or waiting for them to come to us, we would meet them head-on. It was one of the smartest strategic decisions we'd ever made. In fact, if our story doesn't prove anything else about the free market system, it erases any doubt that spirited competition is good for business, not just customers, but the companies which have to compete with one another too." Our competitors have honed and sharpened us to an edge we wouldn't have without them. We wouldn't be nearly as good as we are today without Kmart. And I think they would admit we've made them a better retailer.

• 37:37David Senra?

  One reason Sears fell so far off the pace is that they wouldn't admit for the longest time that Walmart and Kmart were their real competition. They ignored both of us and we both blew right past them.

• 37:52David Senra?

  This is his brother commenting on that. Competition is very definitely what made Walmart from the very beginning. There's not an individual in these whole United States who has been in more retail stores, all types of retail stores too, 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 this business. And there may not be anything he enjoys more than going into a competitor's store, trying to learn something from it.

• 38:35David Senra?

  And this is another anecdote about his personality. This one's a direct quote from Herb Fisher, who was the founder, chairman and CEO of James Way Corporation. These are his words. "Kmart was opening up so many stores, it was regarded as the Genghis Khan of the discounting business. Sam has always been clear about his attitude. Meet them head on. Competition will make us a better company. He is that way with everyone. Personally, he's such a fine, unassuming, quiet gentleman. But he's always picking your brain and he'll always have a notebook or tape recorder. He'll learn everything you know, but he shares his information freely with you in return.

• 39:16David Senra?

  Now, of course, he's a competitor of James Way, but he would never apologize for that. He thinks it makes us a better company and he's right."

• 39:27David Senra?

  Okay, so now skipping ahead a little bit in the book. He has this idea about thinking small. So you have to think small to get big. And he has interesting ideas on how you resist bureaucracy by doing it right the first time. So I want to read this part. This is now David Glass. These are going to be direct quotes from David Glass on Sam's philosophies. "If you don't zero in on your bureaucracy, every so often, you will naturally build in layers. You never set out to add bureaucracy. You just get it, period, without even knowing it. So you always have to be looking to eliminate it. You know, when Tom Walton Sr. was running IBM,

• 40:11David Senra?

  he decided they would never have more than four layers from the chairman of the board to the lowest level in the company. That may have been one of the greatest single reasons why IBM was successful." A lot of this goes back to what Deming told us, excuse me, to what Deming told the Japanese a long time ago. "Do it right the first time." "The natural tendency, when you've got a problem in a company, is to come up with a solution to fix it. Too often, that solution is nothing more than adding another layer. What you should be doing is going to the source of the problem to fix it. And sometimes, that requires shooting the culprit." I'll give you an example that just drove Sam crazy

• 40:55David Senra?

  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. People who would go around the stores with handheld scanners, making sure everything is priced correctly. There's another layer right there, and Sam didn't ever visit a store without asking if we really needed these folks." Well, we still have some, but that, but what we've done is overall our back office procedure to make sure we get it right more often than the first time.

• 41:40David Senra?

  And in the process, we eliminated one and a half people out of the office in every Walmart store in the company. That's big bucks. They have hundreds of stores at this time. Really, it's a pretty simple philosophy. What you have to do is just draw a line in the dirt and force the bureaucracy back behind that line. And then, and then know for sure that a year will go by and it will be back across that line and you'll have to do the same thing again. Now here's Sam's words on this. "I guess one reason I feel so strongly about not letting egos get out of control around Walmart is that a lot of bureaucracy is really the product of some empire builder's ego.

• 42:24David Senra?

  Some folks have a tendency to build up big staffs around them to emphasize their own importance, and we don't need any of that at Walmart. If you're not serving the customer or supporting the folks who do, we don't need you. When we're thinking small, that's another thing we're always on the lookout for: big egos. You don't have to have a small ego to work here, but you'd better know how to make it look small, or you might wind up in trouble." So you see what I mean when I say you have to think small to grow big? And really, I don't have any doubt that Walmart will stay the course and reach $100 billion in sales by the year 2000. It's a challenge.

• 43:09David Senra?

  Nothing like it has ever been done before, but our folks will do it. And now I'm going to confess to a really radical thought I've been having lately. I probably won't do anything about it, but the folks who come after me are eventually going to have to face up to this question. Even by thinking small, can a $100 billion retailer really function as efficiently as it should? Or would maybe five $20 billion corporations work better? That's the end of his quote. I actually have a personal theory on this. I think, given that we're in the information age, that the optimal size of a company is actually decreasing instead of increasing.

• 43:54David Senra?

  So if you read the book, he has an entire, we're almost towards the end. But he has a chapter, it's chapter 17. And it's called Running A Successful Company: 10 Rules That Worked For Me. There's no way for me to highlight that. I'd have to read the whole chapter. So I just think you should, there's 10 rules. A lot of them are just common sense, like his philosophies. But I don't wanna, I don't think it's possible to summarize them. Before I get to, towards the end where he talks about building a legacy. And I think one of the most interesting parts of the book is him reflecting on his life. Now, keep in mind, he's, he's, at this point in the book, we're almost to the end.

• 44:34David Senra?

  He is told his entire recollection of his life, the vast majority of that life being building this company. So it's just an interesting perspective to somebody that knows he's gonna die since he has terminal cancer, and it comes down to whether he regrets it or not. But before that, I just wanna read some, some interesting parts. These are just little anecdotes.

• 44:59David Senra?

  And they're from the beginning of the book. And this, this is Sam talking. 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."

• 45:15David Senra?

  Another quote, "This is a funny thing to do, this looking back on your life, trying to figure out how all the pieces came together. I guess anybody would find it a little strange, but it's really odd for somebody like me because I've never been a very reflective fellow. Never been one to dwell in the past. 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 to the next store visit, or the next store opening, or the next merchandising item I personally wanted to promote out in those stores." As I do look back, though, I realize that ours is a story about the kinds of traditional

• 45:58David Senra?

  principles that made America great in the first place. It's a story about entrepreneurship, and risk, and hard work, and knowing where you want to go and being willing to do what it takes to get there. It's a story about believing in your idea, even when maybe 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, ordinary, working people can accomplish if they're given the opportunity and the encouragement and the incentive to do their best. So maybe by telling it the way it really happened, we can help some other folks down

• 46:39David Senra?

  the line take these same principles and apply to their dreams and make them come true.

• 46:48David Senra?

  That would be, I think, a great description of the reason to catalog the history of entrepreneurship. I want to read that one more time. "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."

• 47:10David Senra?

  Uh, here's another quote from him. "The media usually portrayed me as a really cheap, eccentric recluse, sort of a hillbilly who more or less slept with his dogs in spite of having billions of dollars stashed away in a cave. Then when the stock market crashed in 1987 and Walmart's stock dropped along with everything else in the market, everybody wrote that I'd lost half a billion dollars. When they asked me about it, I said, 'It's only paper,' and they had a good time with that. But now I'd like to explain some of my attitudes about money up to a point." I think this is really important.

• 47:49David Senra?

  No question about it, a lot of my attitude toward money stems from growing up during a pretty hard scrabble time in our country's history, the Great Depression. So before I go ahead with that, what he's talking about is even after he was worth many billions of dollars, he drove like a rusted old pickup truck and he was obsessed with like quail hunting and he'd do that with with bird dogs. So he needed a, you'd spot him in Arkansas, just in like a truck knocking on people's doors, asking if he could hunt their land with a bunch of his dogs, even after he became a multi billionaire. So he talks about that he grew up in the depression. And I'm going back in the story before we go to the end.

• 48:34David Senra?

  So he's talking about how tight his family was with money and he started, he goes, I al- this is when he was a kid. "I also started selling magazine subscriptions, probably as young as seven or eight years old. And I had paper routes from the seventh grade all the way through college. I raised and sold rabbits and pigeons too. Nothing really unusual for country boys of that era. I learned from a very early age that it was important for us kids to help provide for the home and to be contributors rather than just takers." Or in another word, to be producers instead of just consumers in today's society. "In the process, of course, we learned how much hard work it took to get your hands on

• 49:16David Senra?

  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." Okay, now here's his brother talking about how they grew up. "People can't understand why we're still so conservative. They make a big deal about Sam being a billionaire and driving an old pickup truck or buying his clothes at Walmart or refusing to fly first class. It was just the way we were brought up. When a penny is lying out there on the street, how many people would go out there and pick it up? I bet I would and I know Sam would." This is back to Sam.

• 49:58David Senra?

  By the time I got out in the world, ready to make something of myself, I already had a strongly ingrained respect for the value of a dollar. But my knowledge about money and finances probably wasn't all that sophisticated in spite of the business degree I had. Then I got to know Helen's family, this is his wife, and listening to her father, L. S. Robson, was an education in and of itself. This is again, he always learned from everybody around him as much as possible. He influenced me a great deal. He was a great salesman, one of the most persuasive individuals I have ever met. And I'm sure his success as a trader and businessman, his knowledge of finance and the law, and his philosophy had a big effect on me.

• 50:43David Senra?

  My competitive nature was such that I saw his success and I admired it. I didn't envy it. I admired it. I said to myself, maybe I will be as successful as he is someday. The Robsons were very smart about the way they handled their finances. Helen's father organized his ranch and family businesses as a partnership, and Helen and her brother were all partners. They all took turns doing the ranch books and things like that. Helen has a BS degree in finance, which back then was really unusual for a woman. Anyway, Mr. Robson advised us to do the same thing with our family, and we did way back in 1953.

• 51:26David Senra?

  What little we had at the time, we put into a partnership with our kids, which was later incorporated into Walton Enterprises. This is something he did his whole life. It's very similar to the podcast we did on Joseph P. Kennedy, where his goal was just to make enough money that his kids and grandkids never had to work so they could dedicate their lives to public service. And he accomplished that, if you remember the podcast, by 40. If you haven't listened to that podcast, you should go back because he was fabulously wealthy. At the time, he had the equivalent of something like $3 billion. But even though the Kennedys, which obviously have vast family wealth to this day, they lived somewhat extravagant lives. He's, he had basically- Set them up in trust where his kids and their grandkids could never spend the principal.

• 52:10David Senra?

  So all the money they're living off of is just the interest. And like I said in that podcast, if you had $10 million and you let that $10 million accrue, I think at 2% or 3% compound interest for 200 years, you have 3.5 trillion. So Joseph Kennedy was not thinking short term at all. He was thinking multi-generations and he was able to do so. Sam did something very similar with his kids. I don't know what the Forbes list is nowadays, but for a while, they were like 5 out of the top 10 because of this partnership.

• 52:44David Senra?

  And he continues here. "The principle behind this is simple. The best way to reduce paying estate taxes is to give your assets away before they appreciate." And then he talks about his personal, his family philosophy. "We don't need to buy a yacht, and thank goodness, we never thought we had to go out and buy anything like an island. We just don't have those lands or 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 to live high and then boom, somebody takes them over and it all goes down the drain. One of the real reasons I'm writing this book

• 53:25David Senra?

  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."

• 53:40David Senra?

  That's pretty funny. "We're not ashamed of having money, but I just don't believe a big 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 not sure I ever really figured out this 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'd get my hair cut at the 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?" So, he's pretty funny.

• 54:25David Senra?

  But he's also deadly serious about not wasting money. I mean, he talks about it all throughout the book. How if he was, is extravagant with his finances, his other discounters, where they would go out of business. So he applies those same principles to his own life. Um, this is a quote from Charlie Baum, which is an early Walmart partner. "I've known Sam since his first store in Newport, Arkansas, and I believe that money is, in some respects, almost immaterial to him. What motivates the man is the desire to absolutely be on top of the heap. It is not money. Money drives him crazy now. His question to me at 6:00 a.m. not long ago was, how do you inspire a grandchild to

• 55:07David Senra?

  go to work if they know they'll never have a poor day in their life?" And now he's gonna talk about his philosophy, how these philosophies apply to Walmart. "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 and expanded as far away as California and Maine. And even then, they had to practically tie me up and hold me down to do it. On the road, we sleep two to a room. Although, as I've gotten older, I have finally started staying in my own room. We stay in Holiday Inns and Ramada Inns and Days' Inns, and we eat a lot at family restaurants when we have time to eat.

• 55:50David Senra?

  A lot of what goes on these days with high-flying companies and these overpaid CEOs, who are really just looting from the top, aren't watching out for anybody but themselves. It really upsets me. It's one of the main things wrong with American business today." He's saying this in 1991. Imagine if he was alive to see what goes on today.

• 56:15David Senra?

  This is also a little bit more about, he's now, he's still reflecting on his early life. "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. An obsession to win. I've always held the bar pretty high for myself. I set extremely high personal goals."

• 56:45David Senra?

  So what he's saying there is, "I'm obsessed."

• 56:51David Senra?

  And now I want to get to, I mean, I learned a lot from this book. So I almost don't want to say it's the most interesting part of the book, because that's, it's just, it's just hard to make that statement. But it's very rare where we have one of the most successful entrepreneurs writing an autobiography. And not only writing an autobiography, but writing an autobiography right before he knows he's going to die from cancer. And so this is one of the last chapters. It's called "Wanting to Leave a Legacy." And I would, so the sticky note I put in the book has a question. It says, "Does he regret it?"

• 57:26David Senra?

  And I just, I'm going to read it and it might be the longest passage we do today.

• 57:34David Senra?

  I think it's really interesting and I think it's, it's a good, it's a good story here for, for all of us. "By now," this is directly Sam talking, "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. 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 those stores trying to pump up our associates to do an even better job,

• 58:18David Senra?

  or in the office looking over numbers to see where the next trouble spot was, or leading cheers at a Saturday morning meeting, I was probably at the stick of my airplane, looking out over some part of this beautiful, 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 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 when you can't sleep and your mind is turning everything over and trying to take stock of where you've been and what you've done.

• 59:03David Senra?

  The truth is, that if I hadn't gotten sick, I doubt I would have written this book, or taken the time to try to sort my life out. As you now know, temperamentally, I'm too much biased towards action to undertake such a sedentary project. But since I'm going to have to go all the way and try to share with you how I feel about some things that seem important. This will sound strange to people who've known 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?

• 59:45David Senra?

  Am I really leaving behind something on this earth that I can be proud of having accomplished? Or does it somehow lack meaning to me, now that I'm facing the ultimate challenge?

• 59:57David Senra?

  We could have 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 have kicked back and played with the grandchildren. Or I could have devoted the latter years of my life to good works, I guess. 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, built an organization of this size and quality, and kept on doing it right up to the end because they enjoyed it so much.

• 1:00:43David Senra?

  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 Glass said about me is true. I had to get up every day with my mindset on improving something. Charlie Baum was right too, when he said I was driven by a desire to always be on the top of the heap. But in the larger sense, the life and death sense, did I make the right choices? Having now thought about this a lot, I can honestly say

• 1:01:25David Senra?

  that if I had the choices to make all over again, I would make just about the same ones.

• 1:01:34David Senra?

  The reason I think I get goosebumps when I read that part too, is because obviously he dies a few months after writing this. But I just think it's so rare that many of us get to the end of the life without any regrets. And in addition, it's great that he built Walmart and made billions of dollars and made all kinds of people in his organization rich. But I think that's his greatest achievement. He lived the life he wanted to live, and I think that's all anybody is trying to do.

• 1:02:08David Senra?

  And I want to close on this part here.

• 1:02:17David Senra?

  This is almost on the last

• 1:02:23David Senra?

  the last part of the book. Finally, 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.

• 1:03:05David Senra?

  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 old two codgers who gave me maybe sixty days to last in my dime store in Fayetteville. Go check the new store out, see what they've got to offer, see how they treat you, and 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.

• 1:03:41David Senra?

  I included that part because he's describing Jeff Bezos.

• 1:03:47David Senra?

  So he's writing this in ninety-one. Jeff Bezos used the principles in this book and others and built Amazon into a new and improved Walmart, but one for the digital age.

• 1:04:00David Senra?

  Sam Walton knew they were out there. He said, "There's definitely people out there, maybe hundreds, maybe thousands, but somebody's going to come along with good enough ideas to go all the way."

• 1:04:14David Senra?

  So, that's where we're going to close.