#354 Sam Walton: The Inside Story of America's Richest Man

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1:29 Just like the podcast. That's founders notes dot com. Thank you very much for your support and I hope you enjoy this episode. On Sam Walton. So the book that I want to talk to you about today is Sam Walton, The Inside Story of America's Richest Man, and is written by Vance Trimble.

1:44 This book is way less known than Sam's incredible autobiography. In fact, this book came out a few years before Sam's autobiography is published at the end of the book, Sam Walton is still alive. And what is fascinating is how the book begins. And it talks about the fact that Before the early eighties there was no such thing as the Forbes four hundred list.

2:03 And so when the very first Forbes four hundred list comes out, Sam is on it. And then within a few years he obtains the number one spot and just holds it year after year after year. But before that happened, for the first sixty years of Sam Walton's life. He was not nationally known. He it says he was in the shadows. He was off the beaten track. Just building his incredible business empire. And so by the time the Force 400 list has come around, Sam has already built.

2:27 this six point three billion dollar fortune. And so the book opens with all these reporters in the early nineteen eighties descending on Betonville, Arkansas to try to figure out who Sam Walton is and how he accumulated such a massive fortune. And then In their research they give a great overview of his life. And so it says he grew up in Missouri in the depression. He worked his way through college, lived a clean Christian life. Served stateside in World War Two.

2:50 Married an Oklahoma banker's daughter. Open up his first five and dime store in backwater north central Arkansas. and raised four healthy kids. And then this is my favorite part of this entire section. Pretty darn ordinary. But only on the surface, Sam Walton underneath was no ordinary man.

3:07 He was a genius in business with an iron mind and unwilling to compromise any of his carefully thought out principles. And one of the most remarkable things about Sam is just how simple his idea really was. And he says it's a vr a very simple idea. I'm going to buy cheap, I'm going to sell low. I'm going to do that every day. I'm going to do it with a smile and focus on service. And one of the benefits that Sam Walton had early in his career was that

3:31 There's a tendency for people to confuse a simple idea with an ordinary person. And Charlie Munger, who extensively studied Sam Wong. hit upon why And I a simple idea taken very seriously is so powerful in business. Charlie said, in business, we often find that the winning system goes almost ridiculously far. In maximizing

3:51 And are minimizing. And so most of what I want to talk to you about today is just how long it took Sam to find his path and how messy it was at the beginning of You know one of the greatest businesses.

4:04 I I read Uh a little while ago. that if you take his family's net worth today, it's so it's almost a quarter of a trillion dollars. And yet it took Sam Walton twenty years of experimenting inside of retailing. Yeah.

4:18 thrushes about that's the word he uses. and finds the idea slowly but surely through trial and error, finds the idea that turns into Walmart. But before I get there, I just want to point out a few things. That happened in his childhood. that I think gives you an idea of the kind of person that we're dealing.

4:32 There's a few traits that appear in his early life that he never lets go of. A sense of duty. He's extremely disciplined, and then he had unbelievable levels of endurance. And so this is a description of Sam when he was in high school. Sam was going out for football and basketball, learning to play tennis. Making A's and friends, grinding away on merit badges in hopes of becoming an Eagle Scout. Regularly attending Sunday school.

4:54 And working odd jobs such as mowing the grass and delivering newspapers. He was following the example of his dad. His dad had a life motto that could not be more simple. It is only three words and it's the same word over and over again. Work, work, work. His dad taught his sons that you were supposed to have a fierce work ethic. He would not tolerate

5:14 Any of his sons. not being industrious, they had to be industrious, they had to be ambitious. And they had to be decent people. And so here's a little more about Sam in high school and it goes back to this idea that Do not confuse a simple idea with an ordinary person. He was quarterback of the undefeated football team. He lettered in basketball. He was president of the student body.

5:31 He was awarded the superlative. The most versatile boy. He was in every club and organization and he was active. The description continues. He was a hard worker. He was optimistic. He felt that the world was something that he could conquer. He didn't waste time, he was always busy doing something, and that's something that he's gonna continue for his entire career.

5:51 The fact that he's always working, he hated wasting time. And he's intolerant of slowness. And I don't think you can understand Sam Walton until you understand The effect of the Great Depression. had on Sam. He grew up in the Great Depression. He was born in nineteen eighteen.

6:07 And to be he's old enough to see the effects, the financial effects, and it actually leads to His parents divorce, which is obviously very rare at that time that time period. And he talks a little bit about seeing his father struggle through this time. He says my father quit the mortgage company and went into business for himself in the real estate and insurance industry. Then came the depression. Dad's business went down the drain.

6:28 And so then his dad is moving the family around looking for opportunity. And yet for the next ten years, this is the prime of his Father's life they make no economic progress. They are distinctly lower middle class right hovering around the poverty line. And so Sam and his brother Bud get jobs to try to help out the family. And there's a line in the book that I think is very important.

6:51 to understanding the kind of personality that Sam had. And it said the depression was a big leveler. Of people. Sam chose to rise above it. He was determined to be a success. And so when I was reading this section, what immediately popped into my mind is one of my favorite ideas. It comes from Paul Graham.

7:07 And he was asking. What is the better predictor? of company success, success in business. Is it determination or is it intelligence? And Paul's answer to this is incredible.

7:17 He says it turns out it is much more important to be determined than smart. If you imagine this hypothetical person that is one hundred out of one hundred for smart And one hundred out of one hundred for determination. And then you start taking away determination. It doesn't take very long until you have this ineffectual

7:34 But brilliant person. Whereas 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 it's still rich.

7:46 It is important to note it only takes one person on the founding team. To be super determined. And the reason I bring that up and the reason I think it's really important and especially in this section is because okay, we see he's got this fierce work ethic, right? He is determined to be a success. He is not going to allow his family to hover over the poverty line.

8:04 Think about how insane if you were mapping out this this I was thinking about this this morning. If you were mapping out The family tree and the trajectory, the economic trajectory. of the Walton family. Before Sam Walton comes on the scene.

8:18 You would see middling success, and then all of a sudden there's this one data point, this generational inflection point. We're just skyrocket today. That family, present day, a hundred years after Sam Walt was born. Yeah, they have quarter of a trillion dollars two hundred and fifty billion dollars But a hundred years ago they were straddling the poverty line.

8:39 The difference was one person this super determined Made that difference he changed the trajectory. Of his entire family for generations. And so it starts with determination, but

8:52 In this hypothetical situation, it's not that we have to remove Points for intelligence. It took Sam to find where he can be intelligent. What is the field that he can be the most intelligent. If you have a list of the greatest retailers of all time, Sam Walden has to be at the top of that list. And the reason I recommend if you haven't read his autobiography, get it immediately. Get the audio book, get the paperback, whatever you have to do. And then uh if you've already read that book, buy this book. Because you will see it took decades of him applying it to termination and then matching it. with one hundred of one hundred intelligence

9:21 In a specific field. And it's important to understand this was not plan out. Sam had no idea. He had one idea. Uh One idea of uh what his future career could be when he was around college age. He's like, Maybe I should be president of the United States. That's another personality trait that he has. He's gonna aim straight to the top. He has to be I think he calls it being like the top of the heap or the top of the pile. He's just uh has this ruthless competitive drive as well.

9:44 But he did not have this dream to be a retailer when he was a boy. He stumbled into it. And so let's go there right now. He actually gets a job at J C Penny. This is an extremely important turning point in his life. And you're gonna see a lot of the lessons that he's gonna learn. From J C Penny, he applies later on to Walmart.

10:01 And so let me just tell you, like in case you don't know Uh like this shocked me'cause I knew what J C Penny was. It was around when I was a kid. I don't even know if they exist anymore. But In nineteen forty, right, where we are in the story, J C Penny has almost sixteen hundred stores and they're doing three hundred million a year in revenue. And the founder is still actively involved, even though he's in his sixties.

10:20 His name is John Cash Penny. Sam is actually gonna meet John and get a l lesson directly from him. So Sam gets his job. He's being paid eighty five dollars a month. Remember that for this upcoming story about sharing incentives with store managers, which we'll get to in one second. But the first idea I have to point out to you that Sam's gonna use for Walmart. Is the fact that The company strength that J C Penny

10:42 Had built six tін stores. Avoiding big cities. This is exactly what Sam's gonna do for Walmart. And he focused on small towns. You're talking about towns of Two thousand people.

10:53 Six thousand people. Eight thousand people. That's the first idea. It's like Oh maybe there's a lot more business out in these small towns than we thought. The second idea. John J C of J C Penny is constantly in the stores. He's traveling around.

11:07 in the stores wanting to know what's going on. Sam does this his entire life. And it is one of these store visits to the store that Sam is working in. Sam's around twenty two years old at the time that he gets this lesson from this wiser, more successful retail legend. He's sixty five years old.

11:23 says a customer came in and bought something from Sam and while he wrapped it up for her, J C Penny was observing the transaction closely. I finished wrapping and tying the package and the lady left. Then Mr. Penny came over. Boys, he said, I wanna show you something. And he took a box about the same size and went around it with paper. And let it overlap. Maybe a quarter of an inch. Then he went around it with twine one time like this and one time like that, and he tied it.

11:46 He said boys. You know we don't make a dime out of the merchandise we sell. We only make our profit out of the paper and string we save. This idea of watching your cost twenty four seven. of making sure you're ruthlessly efficient is an idea that Sam Walden holds onto for the rest of his life.

12:03 There's a lot of things in Sam's autobiography that I absolutely love that he said. And this is one of my favorite w things that he said in the autobiography that I think relates to the story that we're learning right now. He says 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. So that is the second thing he learned from his time at JC Fanny. Here's the third. His direct manager, this guy named Duncan, he said he was a fantastic trainer. He used to invite us to his house. Every Sunday to play ping pong and to eat and talk.

12:32 We talk about business, of course. You could learn a lot. He was one of the managers who had a twenty five percent Bonus contract. Again, another idea Sam is directly gonna steal.

12:42 At the very beginning of Walmart, he sets up all his managers and gives him twenty five percent of the profits of the store. Now remember I said that at this time Sam is making eighty five Dollars. A month.

12:53 His manager shows him the twenty five percent bonus check. It was for sixty five thousand dollars. This is Sam's response. He waved that around And that made us run faster and work harder. Sam Walton's time working at J C Penny and applying what he learned there would eventually put a few billion dollars into his own cash register. So I want to get into where Sam buys his first store, where he gets the money from. He is twenty seven years old.

13:20 He marries a woman from Oklahoma named Helen. They both have this desire. They're small town people, so they're looking around Where they're gonna live. And where they're gonna live, they're gonna try to buy a Ben Franklin store. So they're called Ben Franklin Five and Dimes. The way I would think about this now.

13:36 is like the modern day equivalent would be like the dollar store. The reason they were called Bib and Dimes is'cause most of the things that you buy there are, you know, you can get for a nickel or a dime. And so Sam and Helen are going around looking for a small town. Where they can raise their kids and Sam could have his store. This is the very beginning of his retail empire. Sam is twenty seven years old. And so they stumble upon this little town in Arkansas called Newport.

13:58 There is a Ben Franklin franchise. Now keep in mind at the very beginning, for like Twenty years of his life. Sam Walton is a franchisee of a much larger company. And we'll get there in a little bit, but it's crazy. He tried to give the idea for Walmart. To to Ben Franklin, to the big corporation. They laughed them out of the room. And so twenty seven year old Sam finds a store.

14:19 The town there's four thousand people that live in Newport. This is a tiny, tiny town. The he can buy the Ben Franklin franchise. It it's gonna cost him twenty five thousand dollars. He does not have twenty five thousand dollars. So his Father in law is going to be very important in their lives, which I'll get to later. His father in law is very successful. He's a lawyer, a rancher, a banker, and so he loans.

14:40 Sam Walton, the twenty five thousand dollars needed. To buy the Ben Franklin franchise. And at this time, Sam's plan is very simple. He's like, Well, I'm just gonna take the obsession with customer satisfaction that J C Penny had, and I'm just gonna apply it to my own little five and dime store. And so he's trying to figure out ways to like drum up business. And this is the first sign of something that Sam Sam's a showman. He's like very much like a P.T. Barnum.

15:02 He's got the charisma of a southern preacher. And so he's constantly experimenting with these less conventional ways to to attract more customers into the store. And you wouldn't believe how some of these like really simple ideas were so effective. So he bought he spent a bunch of money on an ice cream machine and people like what the hell are you doing? It's a crazy idea. And he'd put it out in front of his store and on the weekends, families and all the farmers and all the people in this rural area, they would mob his ice cream sh uh his ice cream machine.

15:28 And then some of them would come into the store and then tur turn into customers and then he'd obsess over their customer satisfaction. So then he'd make sure they return. And then if they return, they're going to tell other people. And so you know, five and a half years from now, when he loses this store, It is by far the most successful. I think he's tied for first in all the Ben Franklin franchises, if I'm not if I'm not mistaken. So he's like, Oh, the ice cream works, what else can I do? Then he buys a popcorn machine.

15:51 Does the same thing, puts out the popcorn. Same exact thing happens. He's like, Oh, there's different ways to draw attention to the store. than just by saying, Hey, you know, fifty percent off or buy one, get one free. He's finding another way to attract customers and even if he only converts a small percentage of the people that buy ice cream to the people buy popcorn. it's still a great return on the investment for buying a Pacquia Machine and an ice cream machine.

16:11 And that's something that Sam's gonna repeat. He really fell one of his His best advantages. Was consistent. Around the clock customer satisfaction. says the most important discovery Sam Wald made in Newport.

16:23 was that there was a charm and satisfaction in retailing that he had not fully expected. He was crazy about selling and about satisfying customers. So customer satisfaction, satisfying customers. Repeated over and over again throughout the book. The way I would think about this. Is that Sam's satisfying customers

16:39 It's Jeff Bezos's Obsess over customers. It's the same exact idea. You and I have talked about this many times in the past. If you read about the early days of Amazon, Jeff Bezos is going around

16:49 handing out highlighted copies of Sam's autobiography for the early employees at Amazon. The life and career of Sam Walton had a huge influence. over how Jeff Bezos built Amazon in the early days. And so Sam Walton's Ben Franklin store was a smashing success. And then we're gonna see something that that happens over and over again, that opportunity is a strange beast. It frequently appears after a loss.

17:11 He's running this thing for five and a half years. He gets sales up to two hundred and twenty five thousand a year. No other store in Newport was performing like this. And that catches the eye of his landlord. And so this I consider one of the most important decisions of his entire life. Because at thirty two years old, Sam Walton is gonna lose everything and be forced to start over again.

17:30 And it is because of an inexperienced kind of rookie mistake. When he bought the store he didn't read the lease close enough and he did not have the option to renew. And so Sam is meeting with his attorney and his attorney is telling him what's taking place. It's no good. I hope to God the next time you take over at least from somebody, you check to make certain it contains a proper renewal clause. They're not gonna let you keep the store. The plain truth is they want to run the Ben Franklin in that building.

17:54 You've shown the whole town what a moneymaker can be. His attorney watched the color drain out of Sam's face. It looks like you're finished, the attorney said. The lawyer, this is one of my favorite parts of this entire book. The lawyer saw Sam

18:08 Clenching. And unclenching his fist. Staring at his hands. And then he straightened right up. No, he said, I'm not whipped. I found Newport and I found the store.

18:17 And I can find another good town and another Ben Franklin Just wait and see. And so think about that. You're Sam Walton, you're thirty two years old, you have wife, several kids. And you just spent five and a half years. Building up a store that was a phenomenal success and somebody took it from you.

18:33 From your own mistake. He wasn't Sam wasn't out there blaming other people. And I love his response there. He's like, I'm not, you know, I'm not whipped. I'm not gonna feel sorry for myself. That's fine. I made a mistake. I won't make that mistake again, which we'll get to in a minute, and I'll build up again from scratch. And so this is when he finds Betonville, Arkansas,'cause he's driving around. He's looking again. running the same fluid book when we go to the small town.

18:54 Let me try to buy a Ben Franklin franchise from somebody wants to sell. He finds one in Betonville and he doesn't make the same mistake. So what he does is like okay. I will buy This store from you. It's too small, so I also need to get the barber shop next door.

19:08 Sam insists on buying the building. And then next door, he's like, Well, this store is too small, we're not gonna make any money. I gotta knock down this wall. And so he finds that the barbershop next door is actually not for sale. And so he's like, I will lease that, but I need a ninety nine year lease. You won't sell to me, that's fine. Then I need a lease that that lives longer than I do. Now the least

19:28 The barbershop is owned by two widows. They say the first time he comes to him, they say no. The second time. He says they say no. The third time.

19:35 They say no. The four time. They say no. The fifth time. They say no.

19:39 The sixth time It took six tries, and you'll see he does this exact same playbook. when he's recruiting people. In some cases he will recruit the same person And they'll tell him no for a decade. This guy is relentless. But finally the sixth time they finally agree to this

19:56 outrageous, you know, ninety nine year lease. And at the same time, he suffers a devastating personal tragedy. His mom dies. Unexpectedly from cancer. She was just fifty two years old. She went in for an operation to remove some of the cancer.

20:11 And then a few days after the operation she passed away. So think about this. He's thirty two years old, right? He used all he's married with with kids, like I said earlier. He used all of his money. Setting up the new store.

20:24 In Betonville, okay. He's got n he's got no money. So He's thirty two, wife, kids, no money. Your mom Who you adore. dies at fifty two years old unexpectedly.

20:35 At the same time he still has to run his Newport store till the end of the year. So he is commuting back and forth. And even though the store's only two hundred and fifty miles apart, it's like an eight to ten hour drive because it's through these mountains. And the reason I bring that all up together is because, you know, no money Your mom dies dies.

20:51 You're stretch as thin as could be. And yet it is this driving back and forth that leads to one of the most important ideas. That he ever finds. Because he starts to think, What the heck? Like I I'm I'm n if I can never m if I cannot move ground faster. Right, I will always be relegated just having one store.

21:07 Uh, you already know by now, Sam Walton's not the personality type to be like, Oh, I'm just gonna run one store. For the rest of my life. And so it's during these long drives to the mountain, eight hours, ten hours each way, he's like, I've got to figure out A way to cover faster ground, and then he hears the buzz of an airplane. Overhead.

21:25 And the author does a great job of describing this, so I'm gonna read this to you. Sometimes hardship can enlighten and inspire. This was the case for Sam Walton as he put in hours and hours of driving Ozark mountain roads in the winter of nineteen fifty. But that same boredom and frustration triggered ideas that eventually brought him billions of dollars. He was struck with the realization that if he was competent enough to operate separate stores in two towns successfully. Why not three?

21:49 Four or maybe even a dozen. He could see the possibility of his own chain of five and dime stores. One evening he heard the drone of a small airplane overhead. And a light flash in his brain. So he goes down to the local airport, he's like, Maybe there's a faster way, can I like charter a plane?

22:05 And can somebody fly me between Bentonville and Newport? It says says for a reasonable fee, he chartered a pilot to take him to Betonville. The eight hour road trip shrink to a ninety minute flight. This gave Sam the answer he was looking for without this.

22:20 His Walmart phenomenon never would have been able to see the light of day. And so it's no surprise that the Bentonville store starts to do really well because Sam's paying attention to every single thing. And he just has this idea. Now, I guess I need to back up. He is all constantly until the IPO he is constantly underfinanced and under capitalized.

22:39 He actually talks about that in his autobiography, so I'm gonna read from his autobiography again before I pick this story back up. He says many of our best opportunities were created out of necessity. The things that we were forced to learn and do because we started out underfinance underfinanced. and undercapitalized 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 want it to be That's what I referenced earlier. We try to give away the idea to Walmart, and they said no.

23:06 We might never v tried all these small little towns. that we went into in the early days. It turned out The first big lesson we learn Was that there was much Much more business out there in small town America than anybody, including me.

23:19 had ever dreamed of. So his idea at the very beginning This is the good thing, like it he had to prove the concept over, you know, many, many years. Then once he knew it was working, he can pour, you know, gasoline on these promising sparks. But his idea first is like let's get one store up, m that store's profitable, let's take the profits.

23:36 Dump that into another store. Then get that store profitable, then dump it into another store. And so that is why the planes become so important. And these are not corporate jets. He's like flying around. There's a bunch of Almost like Very close calls. You know, Sam Walton was a kind of reckless, but you know, thank thankfully nothing happened.

23:53 in f his forty years of flying. But without these like small little Cessna and these little planes, they could ne he could have never gone and traveled to all these stores because That leads me to the next thing I want to talk to you about. It's not just that, you know, what J C Penny was doing back in the day, going to all of his sixteen hundred stores, same thing Sam would do when he has

24:10 This chain of five and dimes. Same thing Sam would do when he has his chain of Walmart. He did it for every single one of his competitors. He visited more retail stores than anybody else in history. He does his he actually he does it for the stores and in his autobiography says that he would also show up at the headquarters Uh like the the corporate headquarters. without an appointment and he says if you just show up and you ask, more often than not

24:33 They would let you in. And then he would ask him questions about pricing, distribution, and all this other stuff. He's like it was another form of education. And so he's doing this in the nineteen fifties. He's going to like Oklahoma. In Arkansas, in all these little country towns. And he says he studied how they did things. He was ready to pounce on any successful little trick they had and would copy it. And so when I got to this section of the book, two things happened. One, I had like a big smile on my face,'cause it's I just think it's hilarious. I love People that are truly dedicated.

25:01 And Yeah, I I would say one of my favorite maximums is actions express priority. You demonstrate to other people what's important to you, not by what you say, not by what you believe, but what you do. Actions express priority. And so you got Sam running around. All over the South. visiting every single store.

25:17 And so that just made me smile and laugh and I l I love people like that. But the second thing that came to mind Is because I become friends with Mr Beast. Mr. Beast is like the the biggest creator on the internet. Biggest YouTuber. He's got like a billiers across all these platforms.

25:30 I actually flew to Mr. Beast headquarters and spent seven hours with him. uh his top team. One of my friends is a major investor in uh Mr V companies as well. And I heard a story that just screams like this is something that Sam Walton would do. And so Mr. Beast comes back from doing He's like a seventeen hour flight or something like that. lands back into the United States, needs to do another connecting flight to get back to like the remote area where his headquarters is.

25:55 And instead of jumping on another flight, he maps there's like a five hundred mile distance between where he's at and where his home is. And Mr. Beast Chocolate Company feestables. has a massive deal with Walmart. And so what he does, instead of flying home, he maps Every single Walmart in like a five hundred mile radius and decides hey

26:15 I'm gonna drive. You know, you can take a couple hour flight or you can do like a fifteen hour drive. I think this is over multiple days. And he visited every single Walmart in between where he was. And where he was going. And so at every single store visit, he would find room for improvement. And one of the funniest things I heard was when in some cases in the front of the store, it'd be it looked like all the feastables was sold out. And then he'd pull up, he's like, Well, my system says that you have inventory. So he would go to the back of the store and he would find

26:43 The the inventory the in the back and he'd literally carry it to the front so he could get more sales. Like that is what Sam Walton would do. I I just love that idea. Where you you have this This crazy determined madman in the nineteen fifties driving through all these little towns. inspecting every single retail store that he finds, going to the headquarters, dropping in on the CEO and a doctor.

27:05 And just riddling them with questions and using them as a form of education. And then you see seventy years later an um the same kind of determined individual doing something very similar. I just love that part. So as Sam is expanding, he's opening new stores. I already told you th earlier, he literally lifts that idea from JC Penny. He's like, Okay, I can't be here, but he knew that you had to have a single, like single threaded leadership. There has to be one person that Yeah.

27:30 completely responsible for the performance of the store when Sam was not there. So that's when he says, Hey, I'll give you twenty five percent of all the profits. And then here's a fascinating story for you. This is what I love about biographies. We have some of the smartest, most productive people to ever live, and the the biographies, their life stories. or full of them making mistake after mistake after mistake. And so as he's expanding, he comes across This Brand new phenomenon.

27:52 At this point in American history There is no such thing. As the shopping center. And so as he's looking for locations to expand, he comes across, I think it's the second shopping center ever built in the United States. And he's just like, Oh my God, this is this concept is genius.

28:06 And so he gets distracted. He is already building a It's small, but very successful. Variety store five and dime chain. And he takes a detour from something that's already working, says I'm gonna develop shopping centers.

28:22 I have a line for this, what he's doing,'cause I did this the other day, I was on the the phone my friend Jared. And it's explaining about this other idea I had for another podcast. And he like completely shut it down. And he used a blackjack analogy. He's like, Don't split tense. Sam Walton split tens. I'll cut right to the punchline. We lost our money and left town.

28:41 So he had like a one to two year detour where he took his eye off the thing that was working, he got distracted, he gave in to distraction, and it cost him the opportunity cost of his time and a bunch of his money. So now he is back fully dedicated, fully focused on expanding His burgeon retail empire. I love scrappy people. I love relentlessly resourceful people. I love people who don't take no for an answer.

29:02 And so Sam is always on the lookout for new exciting merchandise that he can stock in his stores at this time. Hula hoops is like Is is this like phenomenon. Spreading all across the country. The main like manufacturers of pool hoops will not sell to these small little merchants.'Cause he's tiny at this time. And so Sam's like, Okay, cool.

29:18 Uh, you won't sell to us? That's fine. We're gonna make our own. So he starts he realized like what is a hulu? It's like this little clip pee it's colored plastic pipe. Well, there's a connector at the end. He's like, we're just gonna make our own. So after the stores close. Him and a bunch of other people. They get together and they start making several thousand of these a night.

29:36 So that's the first part of this high agency relentless resourcefulness. This is hilarious to me. Remember, Sam does not have a lot of money. He's underfinance, undercapitalized for a long time. All the way until Walmart goes public and Walmart doesn't even exist yet. And so they're making them at one central location, but they have to distribute them through all the stores that they have, right? Sam didn't even have a truck, so how's he gonna do this? He has a car. You know what he does?

29:59 He sets up a John boat. A like twelve foot little John boat behind his car and loads the John boat. With all the hul thousands of hulops. that they spent the night making and then he drives it around to his stores and a car In using a John boat as a trailer.

30:15 And the end result is this line the hula hoops were so popular that you couldn't keep them in stock. And so there's a combination of two ideas here that I think are really important. Number one, doing things that others were not doing lead to unexpected success. And two, goes back to that quote. That I read from Sam's autobiography, the fact that Many of the best opportunities were created out of necessity because we were so underfinanced, we were so undercapitalized. We had no idea.

30:40 just how large these businesses can be built in what, you know, these towns, these towns were ignored. And so they arrived at this very valuable idea through trial and error. They're just testing a bunch of things. And so here's a description of one of the things they found out that the larger they made the store, the more money they made. The decisions were made for Walmart long before Walmart as a company was developed. Back in the Ben Franklin days.

31:03 We learn so much. And so they use one example of a store where they make a s a s a slightly bigger, slightly larger Ben Franklin store. And how much sales grew as a result of just having a larger storage surprised them. And so this store, the example that they're using, was in this little town called Saint Robert. So Saint Robert showed us how much volume was there if we went into much larger units and small communities and pushed the merchandise.

31:27 We became the first independent variety chain in the country. To try large stores in small towns. We were doing an amazing amount of business. In a third eighteen thousand square foot store.

31:40 Which is totally out of character for a town of just two thousand people. We found that we could do a million dollars in each variety store. That was unheard of. And so it is through this constant experimentation the fact that he is still relentlessly visiting every single retailer everywhere he's at, that he discovers

31:58 what is going to be his life's work, which is discounting. The concept behind discounting at this time is very counterintuitive. That you lower the price, you lower the margin. But you'll make more money'cause you sell more. And all throughout his autobiography, all throughout this book, every single interview that you'll see with Sam, even though he didn't do a bunch of interviews.

32:14 He talks about the fact that you know, I have no shame In admitting this, like if I would I was searching for good ideas. And if I found a good idea, if I found a competitor That had a better idea than I did, I would just adopt He was always he didn't care the of the origination source of the idea.

32:29 He just wanted the very best idea. So he's like He says, If they had something good, we copied it. And it is through this that he says, I was totally fascinated By the idea of discounting. And when he discovers discounting in the nineteen sixties, he's blown away.

32:42 He winds up studying this guy named Erwin Chase. Who starts this company called Anne and Hope. They only had six stores, but they're doing two hundred and fifty million dollars a year in sales. So all throughout the early nineteen sixties, it says there was no discount store in existence between nineteen sixty and nineteen sixty two. That did not get a visit from Sam Walton.

33:04 And it is through this that he discovers that another person Had studied An and Hope. Two and they'd studied it before him. There's this guy. Name Harry Blair Cunningham. He is the one that comes up with the concept. for Kmart.

33:17 And so Kmart was a dominant player way before Walmart. And so Sam Walton is looking back on this He's saying what I'm about to read you in nineteen ninety. After he's already beaten Kmar. He says I've always had the greatest admiration for Harry Cunningham. Because when he threw that business down, that thing was ten or twenty years ahead of its time.

33:34 And he did it better than anybody else. What I did later was take pieces of it, meaning take pieces of Kmart. And make our Walmart as much like it as we could. The difference was, and this is a fascinating thing that happens over and over again. Is Kmart took the discounting idea.

33:48 And they set it up set up shop in major cities. Walmart looked at that and like well, why would we compete head on with somebody that's already doing that? We'll take the discount idea and set up in tiny, tiny little towns. And so back to what Sam was saying at the start, we were so amateurish and so so far behind. Kmart just ignored us.

34:05 They let us stay out there while we developed and learned our business. If they had jumped on us, I hate to think of that. But we were protected by our small town market. It would have been unthinkable for them to have tried to put a competing store in a small town. They gave us a ten year period to grow. And then he also brings up the fact that they got rich

34:24 And successful. And fat and lazy. They were self satisfied with what they had accomplished. Sam Walton was never To the day he died. Was never like that.

34:34 They were self satisfied with what they had accomplished. They thought they could roll over everybody. And they woke up one day and found out that the world had changed. And so now Sam knows he's like, I cannot stay in the variety store business. I cannot stay in this five and die business. discounting is going to roll over everything. Let's get ahead of this. And this is where

34:51 This is where he goes. So keep in mind, I I I guess you should back up. He's forty three years old when he's make trying to make this transition. He's got thirteen of these variety stores, right? These Ben Franklin franchisees. Franchises. Over the last eleven years, he's built thirteen of these stores.

35:07 So he goes This is what I meant when he he goes and tries to give away the idea for Walmart. He's gonna go to the fr to the Headquarters of Ben Franklin in Chicago, and he's going to pitch this idea to them. And this is the idea that turns out to be Walmart. I'm gonna read this whole section to

35:22 to you because it's so fascinating to me. His proposal was audacious. Certainly unacceptable. He suggested that the variety store franchisers leap into the front line of the booming discount business. I think that kind of store will fit in the rural markets just as well in the major metropolitan markets, Sam said.

35:40 You should franchise them and I will be your guinea pig. Imagine Sam Walton pitching you on the idea that of a brand new business that's growing like a weed. That is clearly the future and he's like, I will be your partner and operator. And you say no. That's incredible.

35:55 The Ben Franklin executives exchanged sour looks. Sam went on. You're gonna have to cut your wholesale prices instead of making 20 to 25% profit off the merchandise that you sell to your retailers. You're gonna be have to be satisfied with about twelve and a half percent, so almost half. They blew up. They blew up at Sam.

36:14 To these sophisticated and experienced businessmen. And they're tailored suits and customs shoes in Chicago, okay? It looked like the tail was trying to wag the dog. What was this Arkansas country fellows experience with only a dozen or so stores? Compare to their thousand outlets.

36:31 And nearly a century of retailing know how. We have to pause here'cause this is such an important point. You have to think about the incentives. of the people that you're selling to. Sam Walton is trying to sell to them. So the greatest example that got lodged in my brain many years ago.

36:48 No one is ever eager. To fix a cash machine that isn't broken. And the person that put that idea into my brain, the fact that you have to think about the incentives of the people that you're selling to, then no one is ever eager to fix a cash machine that isn't broken, is in James Dyson's autobiography. He invents the world's first Cyclonic Vacuum cleaner.

37:06 That means his vacuum cleaner Doesn't need bags. So before that, if you own a vacuum cleaner, you're constantly having to buy more vacuum bags, right? What does James Dyson do? The first person he tries to go and sell his invention to Is a company that is making five hundred million a year selling vacuum bags. It he's like, Oh, they're gonna see how superior.

37:26 A cleaning machine. That my vacuum is compared to theirs. That is irrelevant. You cannot sell a bag this vacuum cleaner. To people to make five hundred million a year selling vacuum bags.

37:38 You cannot sell the idea of discounting at a lower margin and saying, Hey, sell me your stuff at twelve and a half percent and selling s instead of selling it to me at twenty five percent. How do you think they paid for those tailored suits and those custom shoes? With that twenty five percent margin. And so they laugh him out of the room and then there's a great story that is told in this book. It's also told

38:01 in Sam Walton's autobiography the very next day one of the Ben Franklin executives goes and checks out, he's like, All right, maybe I should go check out this new Kmart thing that this crazy Sam Walton fella Is talking about And here's a description of what happens. He got a surprise. Sam Walton was there ahead of him.

38:16 Here he was twenty five miles from our office. And he was talking to a clerk. He was writing in a little notebook, and at one point he got down on his knees to look under the display cabinet. I said, Mr. Walton, what are you doing? And he said it's just part of the education process, Don. I'm still learning.

38:33 And so Sam talks about this time. It's not like He thought discounting was the future, right? But he wasn't sure if he could do like he was gonna succeed at it. He knew he could He was really good. The variety store business. But he decides I'm just gonna experiment. He's he he's constantly experimenting. And he talks about this, uh the way he describes

38:48 uh this point of his life, he has a great term on it. He says, I was threshing around for the right way to go. It was uncertain. But one thing that he knew is that discounting does not work if you have a high cost structure. Discounters must. They must have Low cost.

39:04 And there's like these all these indicators that Walmart might be more successful than their competitors. early on is because even after they go public. They have like the lowest cost to sales ratio in the entire industry. And so how dedicated was Sam?

39:17 to keeping costs low. Well Walmart is called that in part. Because fewer letters. Means cheaper signs on the outside of a store. And so Sam and one of his executives have this list of names. They're trying to figure out what what are we gonna call this new concept. You know, I have to go out On my own.

39:33 The Ben Franklin guys, they don't want anything to do with this, so I'm gonna do it anyways. Which one of those do you think we should call it? They study the list for a few minutes and all were long names, each made up of three or four words. And so as executive says Well, Sam, you had me buying the letters to go up on our Ben Franklin stores, and I know how much they cost and how much they cost to repair.

39:53 And how much to light these letters. It's expensive. To put that many words in a name. And the shortest name on the list was Walmart. And so Jeff Bezos has this saying, he says we know from our past experiences that big things start small, the biggest oak.

40:10 starts from an acorn. If you wanna do anything new, you've gotta be willing to let that acorn grow into a little sapling. And then into a small tree and then maybe one day it'll be a big business on its own. Listen to the description of the very first Walmart. the business that is going to generate for the Walton family Quarter of a trillion dollars.

40:27 Of wealth. The first Walmart is in a small town and is only sixteen thousand square feet. It is an immediate success from the very first year. What do they consider a f success? Севенд таузен долар In total sales.

40:42 Which may seem like a small number. But from that day, from day one the store f that very first Walmart store. For the next Fifty.

40:50 eighteen years. has a consistent thirty percent growth in sales. It made a profit from the very beginning. So then he opens the second one. He invites this guy named David Glass. who is gonna many years into the future is going to be become the CO of Walmart.

41:07 Sam tried to recruit him really early. In fact, it takes him a decade. To get David Glass to say yes. So he invites David Glass out to the second opening of Uh the the open of the second Walmart.

41:18 And this is what David Glass said. David Glass thought that Sam might have lost his marbles with all this discount store foolishness. It would surprise him if this kind of store had any future. It was the worst retail store I had ever seen.

41:31 Sam had brought a couple of trucks of watermelons in and stacked them on the sidewalk. He also had a donkey ride out in the parking lot. It was one hundred and fifteen degrees and the watermelons began to pop. And then the donkey began to poop all over the sidewalk. And the watermelon and the donkey shit.

41:45 ran together all over the parking lot and got inside the store. Like so many people before him and since David Glass. was guilty of a snap judgment on this unorthodox merchandiser named Sam Walton. In fact Is a great description of you know Sam's personality and and and part of uh his like success is this like promotionability. There's this article in nineteen eighty nine in Fortune magazine I'm gonna quote from

42:10 And it says so how from there, from this like cra you know This this exploding watermelon donkey crap. Uh opening. Uh, so how from there did Sam Walden get to be America's most admired retailer? He willed it through sheer force of a complex personality.

42:25 As the donkey watermelon episode illustrates, he's an old fashioned promoter in the Pete Barnum style. But he's more than that. He's a little bit Jimmy Stewart. He's handsome, he's got this all shucks charm. He's also a little bit Billy Graham. This is what I meant, Billy Graham's this famous preacher. Sam Walton's very much an ev evangelist.

42:43 He's a little bit Billy Graham with a charisma and a par persuasiveness. That Heartland folks find hard to resist. And he's more than a bit Henry Ford, a business genius. Who sees how all parts of the economic puzzle relate to his business. Overlaying everything.

42:58 Is that of an old yard rooster. Who is tough Loves a good fight. And protects his territory. And so the mistake that Glass made is the mistake that most people make. They they don't understand that small improvements every day over a long period of time.

43:14 what that compounding can generate. The thing that I ask underestimated about Sam is that he has an overriding something in him that causes him to improve every day. That's not difficult when you have something as bad as he had. Back in Harrison, this is the donkey in the the watermelon store. But sometimes

43:30 You achieve success and say, Boy, now I got it like I want it. I can lay back a little and enjoy it. Sam never did that. He has never gotten to the point where he is comfortable With who he is. Or how we're doing.

43:43 And this is probably my favorite description of Sam Walton in the book. His tactics prompted people to describe him as a modern day combination of Vince Lombardi. Who insisted on a solid execution of the basics. And General Patton, who said a good plan violently executed now. Is better than a perfect plan next week.

44:01 And so once he realizes Walmart is a winning formula, he he starts to expand really rapidly. But what you see is at the very beginning. He's just got a b uh simple Basic plans, simple basic principles. that he executes on. So the first thing is

44:13 He's obsessed. Just like th there's principles for Amazon that can be distilled down to obsessed over customers. For Walmart, it was just customer satisfaction. He said the central ingredient is, of course, customer satisfaction. Hardly a day passed. When without Sam reminding an employee Remember Walmart's golden rule.

44:30 Number one, the customer's always right. Number two, if the customer isn't right. Prefer to rule number one. And so what he means by customer satisfaction is always exceeding the expectations of the customer. So let's say you buy a pair of shoes. They don't fit.

44:44 You don't like them, whatever the case is, you bring them back. Sam would tell his stories. Not only should you cheerfully replace the The shoes, meaning you should be happy, you should be smiling. Then you should throw in a pair of socks and stockings for the hassle. He understood the value of a satisfied customer. That s that customer's gonna come back to Walmart.

45:02 Not next week, not just next week, not just next month. A we're habit humans are habitual. They'll probably be shopping there for decade after decade as long as you don't upset them or let them down. And then as far as expansion, you know, this is pre computers, which we'll get to just the the massive surprising investment that Walmart made in computers in the nineteen seventies.

45:21 But before that he's like okay, well I wanna run A bunch he he had like this idea was like I need to make sure that all my stores are so close to the distribution center that my trucks can deliver whatever you're missing. That same day. He essentially started with the distribution center and then worked backwards.

45:36 And he's like, I don't want to expand outside of this distribution center. If it takes my truck drivers longer than five or six hours to get to anyone's store. And so the first handful of Walmarts were in a this three hundred mile radius of Betonville, Arkansas. And that's really what it was, his faith and this adherence to this small handful of principles that he refused to deviate from. He talks about this later.

45:56 I had no vision of the scope of what I would start, but I always had confidence That as long as we did our work well and we were good to our customers, there would be no limit to us. And for this fact alone is why reading these biographies and these early company stories Are so important because it talks about like how

46:12 There's a lot of rough edges in these Walmart stores. The eighth Walmart ever. They put in this old It used to be a Coca-Cola uh bottling plant. And so It still wasn't all the way converted and so you had like all these pipes sticking up out of the floor everywhere. There was no air conditioning i in that entire building. So what's their solution? Okay, we don't have AC. We can't put it in before we open. We'll just get twenty eight window fans.

46:33 And then we'll take care of the A C problem later. And there's a line that describes what this was like in the very early days of what's going to become a very valuable company. It says it was still largely A seat of the pants instinct of Sam Walton. That guided this Walmart expansion. Again, at the beginning there's gonna be a lot of rough edges.

46:52 And half working things and not a lot of process. The way I think about the early days of Walmart is the exact way I think about the early days of Disneyland with Walt Disney. There's a great line in that book. I just covered the history of Walt Disney. If you haven't listened to it, Uh it's episode three forty seven, how Walt Disney built his greatest creation. which he considered his greatest creation to be Disneyland.

47:13 And one of the people working with Walt was describing this time. So you asked the question, what was our process like? I kinda laugh because process is an organized way of doing things. I have to remind you. During the Walt Disney period of designing Disneyland, we didn't have processes.

47:27 We just did the work. Process came later. All of those things All of these things had never been done before. Walt just gathered up all these people who had never designed a theme park or never designed a Disneyland. So we're on the same boat at one time and we just have to figure out what to do and how to do it on the fly as we go along. And not even discuss plans, timing, or anything. We just worked.

47:46 And Walt just walked around and made suggestions. Same exact idea is happening in the early days of Walmart. And so now Sam realizes oh Walmart is the main thing. This is where my entire entire focus should be on. And so this is where he really really wants to start putting

48:01 He's really think about how long, like he he did five and a half years with one store store in Newport, right? Learning, learning slowly. Proving that he knows what he's doing. Then he gets Ben Franklin another Ben Franklin story. Then you know, a handful I think in what, eleven years he does

48:15 Watch how He's the weird thing I I'm trying to describe to you is like he's simultaneously Impatient And has an abundance of patients, if that makes any sense. So

48:24 takes a while to make sure he knows what he's doing and it's actually gonna work, but once he knows it's going to work He puts his Foot all the way on the gas pedal. And so up until this point, he's got one big problem. He is

48:36 Eyeballs deep in debt. It's like causing him anxiety, stress. He's been borrowing and and financing the expansion of Walmart. He gets loans from banks. And loans from insurance companies and he's dying. for a permanent solution and he only has one idea for a permanent solution. He's like we have to IPO. We have to we have to tap the public markets.

48:55 And so he's gonna meet these local Arkans Arkansas entrepreneurs. They're called the Steven Brothers. They're gonna team up with another Wall Street firm. That that is successful in selling the stock. I'm gonna get there in one second'cause it's kinda nuts.

49:07 at how spookily accurate a bunch of Sam Walton's predictions are. But I just love they they give a short background in the book on the Steven Brothers. who, you know, are very helpful in in getting this IPO done. I'm gonna skip over all that. I just love the advice'cause they were like, you know, poor Arkansas boys too. And they went up being they they hit the Forbes four hundred list too.

49:27 For different reasons. But I love the advice that their dad told'em. When they were growing up in like rural Arkansas, he says, uh he used to tell his sons, Don't be ashamed of your poverty and don't be proud of it. Just get rid of it as quickly as you can. And his uh sons made good on that advice, but I want to talk about how nuts

49:44 It is. That Sam's he was just dead on on a lot of his sales growth. So he's he's doing this pitch to potential investors. And they're like, Okay. Your sales volume right now is around twenty million dollars a year.

49:56 And Sam's like, yes, sir, our business is really growing. This year we did twenty one million, twenty one point three million. That's quite a jump. Because the year before we only did twelve point six million. And he says our calculation is that in the next five years, our five year projection from now, then in nineteen seventy five our sales Will be two hundred and thirty million.

50:14 And so the the other side of the table is like decidingly skeptical. Like this guy's a nuts. And here's the punchline. Sam Walton, however, was right on target. Total sales for nineteen seventy five. Came to two hundred and thirty six million dollars. So in nineteen sixty nine when he was done with that, he was at twenty one point three. He's like we're gonna hit two hundred and thirty million five years from now.

50:35 And you came in at two thirty six. And then I want to point out a part of Sam's personality. This is also something he shares in common with Jeff Bezos. He's very polite. He has this country charm. But he drives

50:50 The way he pushes his top executives, he pushes them Unbelievably hard. It's really fascinating the difference he the way he treats his like frontline workers who he spends a lot of time with. pays attention to them, makes them feel special, make sure they're doing their good job, but like He doesn't push them like he pushes his top executives.

51:06 And so it says Sam had seen others resign or get fired because of the rigors of working in a pressure cooker. For boss that some executives called That old slave driver. That's that's that's his internal nickname. There's a line from one of Jeff Basil's Biographies, it's very similar. It says if you're not good

51:23 Jeff will chew you up and spit you out. And if you are good, he will jump on your back and ride you into the ground. So they both hold They're top executives. to an unbelievable rigor rigorous standard of excellence. the way I think about Sam's affable country boy personality with what's really inside.

51:41 When I read a biography on a young Bill Gates excellent book if you haven't read it yet. It's called Hard Drive. The making of the Microsoft Empire. Covers the first thirty five years of Bill Gates' life. You realize that a young Bill Gates was just Genghis Khan in a Mr. Rogers costume. Something similar is going on here with Sam.

51:57 says he also claims that the public conception of Sam as a good old country boy Wearing a soft velvet glove. This is the fact That there's an iron fist within that glove. The boss himself candidly agrees. I guess I can get a little tough if I see things I don't like.

52:11 Sam stressed that he knew his business from top to bottom. I used to do it all, sweep the floor, keep the books, buy the merchandise. One of my assets is my willingness to try something new and to change. That is a concept that we carry out throughout the company. We have a low resistance to change. We call it our RC factor. And so there's many examples in the book of what I just referenced. The fact that

52:33 As hard as he is on his executives, as hard as he seems to be on his executives, He's just as supportive of his frontline workers and genuinely cares about them. There's a bunch of examples here's one, he would flag down one of his own eighteen wheelers and climb into the cab to ride a hundred miles with the driver to gain firsthand experience. that might improve Walmart transportation.

52:52 He would get up at two thirty in the morning, buy a box of donuts. and take him over to his warehouse to the warehouse loading dock. Where he solicited ideas to upgrade their effort. If the docker said they needed two additional shower stalls, they immediately got them. This is all connected to something that

53:06 Sam Walton would repeat. Remember, repetition is persuasive. So he repeats over and over again throughout this book, but also in internal communications that he believed in management by walking around. When Sam discusses his management style, he's dead serious about identifying it. as M B W A Management by Walking Around. There's this company newsletter.

53:26 Called Walmart World that would go out every month and it says this adherence, this reference, this repetition of the importance of management by walking around at s for Sam and for everybody in the company. It rarely not appear in an in an issue. Think about how crazy it is. Every month he's just repeating the same thing, the importance of this same thing over and over and over and over again. These are all great ideas and smart things that Sam Walton does. Let's get back to another mistake.

53:50 He winds up retiring. He ha he recruits this guy named Ron Mayer, who he thought of like this boy genius. And so I will read to you my note. Which gives an overview of what's about to take place here. Stepping aside of the company you spend your whole life building because someone else is in a rush does not seem wise.

54:07 And so Sam is about to turn fifty seven. And Ron Mayer's putting pressure on him. Saying, Hey, you know, I I don't wanna just I wanna run my whole company, like I wanna be CEO Uh Walmart And you know, if I can't do that here, then I'll have to do it somewhere else. And so it says

54:20 As he approached his fifty seventh birthday, Sam Walton was reluctantly trying to change his lifestyle completely. By surrendering the day to day command. of his Walmart Empire. Now, Sam was gonna find this impossible to do, and I'll describe retired and never retired. It's the w it's the weirdest thing. And so he's having this conversation with his wife and his top executives. He says, I'm gonna lose Ron.

54:39 If I don't step aside and I don't want to lose him, he's a very talented guy. And so was official. Sam had retired. Ron was a new chairman and CEO of Walmart. It is the most uncharacteristic Sam Walton kind of thing that Sam Walton ever did. So essentially he retires, but he's still working. His role was now supposed to be unofficial, but he couldn't keep his hands off.

54:58 When he saw something, anything he didn't think was right, he'd just step in and correct it. On the spot. That is the way I've always been. I guess I was getting in the way of Ron's authority. And the problem is the numbers, the sales and profits under Ron Mayer, they're he's doing a mand a magnificent job.

55:13 But Sam just has to control the company. It bothered Sam's conscious that he personally had made a mistake. He discovered that he really wasn't ready to retire, that he missed his old job. And so he comes to this fork in the road. He's like, Okay This obviously isn't working. You either have to get back into it, take back your job, or you have to leave completely.

55:32 And so when he tells Ron, Hey, I'm coming back over, I'd love to keep you, of course, Ron's gonna do what most people would do. He's like, You know, I can't accept that. I'm not gonna stand for demotion. He winds up leaving the company. So Sam takes back over control of the company does exactly what he goes back to doing exactly what he was doing, and that's it, he's always recruiting. Now he he not only did he lose Ron Mayer, he lost a bunch of like Ron Mayor's lieutenants, so he lost, you know, a big chunk of his executive staff, so he's got to go back and recruit.

55:55 And he does what he does over and over again. He would pitch the same person over and over and over again. So someone said Sam Walton used up men the way He threw wood into his fireplace. Just like the logs, they blazed up with a fury. generated powerful and beautifully efficient flames and after a time

56:11 Died down into cold ashes. It was necessary for him always to be looking for good men and talent to replenish his stockpile. He fell back on old habits. And started to recruit. Again.

56:24 Those who had scornfully turned him down before one of these people was going to be David Glass, the eventual CO. Ten. twelve, maybe fifteen years into the future where we're in the store. He's eventually going to become CEO and and Rather successful CO.

56:38 Of Walmart. And David didn't go into this job. you know, ignorant or blindly. He knew. He says he was under no m misconceptions. He could expect to work harder and put in more hours than ever before in his life. And now we get to one of the most mind blowing things that happens in the book, at least mind blowing to me.

56:56 Remember he he was talking about the fact that he He's not resistant to change. Now he has his principles he's not gonna deviate from, but he always wants the best ideas. And he repeats over and over again, you know, he says R C is that formula, resistance to change. Like we want a low resistance to change. We're willing to change. It's a trademark of like the Walmart culture and the Walmart philosophy. Every day is a different situation in the retail business. We have to be flexible. These are things that that Sam Walton would repeat. Now this ins this is insane. What they do here. The the size of the investment.

57:23 So at first, you know, this is nineteen seventy nine. Okay. At first. His team, his top executives, people he trusts are like, We need computers, we need help. The business is like It's too unwieldy. We don't we need access we need more uh organized data, be able to make better decisions.

57:37 And at first Sam thought computers were just overhead. But then he listened. And he learned And he changed his mind. And more important than that, and he invested, he put his money where his mouth was.

57:49 Finally, his lieutenants educated and convinced Sam And Walner Walmart plucked down. Five hundred million dollars. For a modern communications computer system. And when they say computers, this time history

58:02 There's like giant IBM mainframes. And so now all the Walmart stores the warehouses and the distribution centers are able to communicate in real time. By nineteen seventy nine, the stores and warehouses could communicate around the clock with headquarters. So keep in mind inside of every single store, there's at least thirty six departments in each store.

58:22 And they're all selling different things. So this computer system is now telling them Daily sales from not only every store. But every single department inside of every store. They tell'em what the bank deposit for that day is. They would estimate sales figures.

58:33 They would flag reports on like hot selling items that they may may need to either order more and deliver more to the stores. You'd have up to date warehouse inventory. And it just goes on and on and on. So Sam was writing the annual report of Walmart in nineteen seventy nine and He he summarizes this perfectly.

58:50 He says the financial savings and the number of personal hours saved daily. By using the computer center are incalculable. Even by the computer. So it's one thing to say, Yeah, we're willing to change, we want the best ideas. Sam is sixty one years old when he makes this decision.

59:04 Sixty one years old, investing five hundred million, half a billion dollars. In nineteen seventy nine dollars. That's one of the most remarkable things in the entire book. It just proves His dedication's like I want He talked about investing in technology is a huge uh advantage that he had over other discounters too.

59:23 But he's putting his money and his actions behind this where his mouth is. When he when he said, you know He was saying with his mouth. No, we we have a low resistance to change. We want the best ideas. And then it's one thing to say that's a completely different thing to match up his actions in this half a billion dollar investment with that. That's nuts to me. Another surprising thing that I don't think I remembered, you know, I've read this book before I've read Sam Walton's autobiography twice.

59:47 I've reread my highlights and notes from those books, I don't even know, dozens of times. And I had forgotten. So once he realized oh oh Walmart's a thing. He's like Man.

59:57 This thing's growing too slowly. And it's hilarious because this is what he considers slow growth. And I'll tell you how he fixes this. So From nineteen seventy four to nineteen seventy seven. He goes from seventy eight Walmarts to a hundred and fifty three. So let's call that double.

1:00:13 And he goes from annual sales. Of a hundred and sixty seven million. to four hundred and seventy eight million. And he's like, This is too slow. So what he does next is something I had forgotten. He actually accelerates store growth.

1:00:26 by acquiring entire retail chains and then converting them to Walmart. now that he's a public company, now he's got access for the first time in his ever, he's got access to you know to Way more resources. He's not constrained by money more. And so he buys a chain of sixteen

1:00:42 Uh discount stores converts into Walmart. Uh, then he buys another chain of one hundred and four stores converts in Walmart. He's showing that he can master both growth internally and by acquisition. So there's just a few more ideas that I want to tell you about.

1:00:57 Two main ones, but here's another interesting one. Uh that reference are the fact that Sam is constantly collecting information from the front lines. Hate People sitting in the office, like you need to get in stores. And you need to go all across the country w but as Walmart grows, they have like this entire fleet. of planes and so they they use their planes every single day to be on site where the work is actually happening.

1:01:16 But his friend's daughter has a bad experience at Walmart. And she actually calls her dad, who just happens to be with Sam at the time and it was fascinating. And so he we're hearing a story. He says my daughter bought a pair of shorts Uh for her father in law.

1:01:31 They turned out not to be the right size, so she goes back. And they didn't have the right size, but the manager is refusing to give the money back. And so she calls her dad. From the store. Her dad just happens to be with Sam. Sam gets on the phone and he listens to the customer. And her name is Sarah Bell.

1:01:47 And so he listens to Sere Bell and he goes, Okay, let me talk to the manager. Sam talks to the manager, then the manager suddenly gets really, really nice. And gives the money back. And so later on Sam's friend was apologizing, Oh, sorry, you know, to disrupt you, getting on the phone with my daughter. And he goes, No, I'm glad that Sarah called.

1:02:02 That the what he learned on that phone call had been it's w it's been worth its weight in gold. I told the manager that I wanted him to bring that pair of short to our Saturday morning meeting. I made him stand up and hold up those shorts. Then I asked him what is our motto and he said satisfaction guaranteed. You know, every once in a while you have to refresh their memory. This constant flow of information from the front lines, from the people actually serving the customers, from the customers themselves. Is something that

1:02:26 Sam Walton. definitely believed in. Here's another fascinating idea. This one definitely surprised me and I think it's another example of Sam copying good ideas. I mentioned earlier that his father in law played a huge role in his life. you know, having a successful businessman, entrepreneur, as a as a father in law to to give advice to, not only did he loan the first twenty five thousand dollars for that first store, but he saved them untold amount of money. in the way that he had him set up the estate planning.

1:02:51 The Forbes four hundred list. Assume that Sam Walton owned all that Walmart stock. Turned out he had given it away. Years before it had any value, and he got that idea. From his father in law.

1:03:05 When and how and why he and Helen shared their business resources with their four children is one of the more fascinating untold Walton stories. The children have each owned one fifth of their parents stock and property since nineteen fifty four Sam and Helen. Created the trust.

1:03:24 That set this up when Ron was ten and Alice was only five. Doing this kind of estate planning so early in the game was urged on By Sam. Through his father in law L S Robson. who had earlier done precisely the same thing in giving Helen and her siblings

1:03:40 Equal shares in the vast ranch that he assembled in Oklahoma. Mr Robson was a banker and a lawyer and he was pretty smart, Sam said. I could see it was the thing to do. And this all took place four decades ago.

1:03:53 And so his son is talking about this. At that time, all dad and mother had was a variety store or two. Our shares then couldn't have been worth more than five thousand dollars each at the time the book was printed. Which is in nineteen ninety. Each of the kids were worth about two billion dollars because of this.

1:04:10 So by turning over ownership of eighty percent of his holdings to his children so early on, he avoided any substantial gift or inheritance taxes. And so his father in law put it best, the best way to reduce paying estate taxes is to give your assets away before they appreciate. Alright, so let's talk about speed and soul price. This is one of my favorite stories of the entire book, something that Sam Walton said over and over again. That he took more ideas from Sol Price than any single other person.

1:04:35 Think about how relentless this guy was on studying Everything that everybody else was doing. He's like, This is the person I learned the most from. In fact, I had a a cool experience happen. You might be interested in this. I read Sol Price's autobiography. It's or not autobiography, his biography. was written after Sol Price passed away by his son Robert Price. That is episode three oh four. In that episode I talk about how

1:04:56 Sol Price is the most influential retailer of all time. Sam Walton learned from him, Jeff Bezos, Jim Sinegal, the founder of Costco. The founders of Home Depot. The list goes on and on and on about how influential soul price was. Anyways. I put that episode out. Robert Price, Soles Price's son, the author of that book, listened to the episode and emailed me.

1:05:15 He loved the episode and he thought it honored his father, and his father should be honored. If you haven't listened to the episode, go back and listen to it and try to find that book. It's incredible. Soul Price is a remarkable man. So let's talk about Soul Price and Speed. Look how fast Sam Walton is moving. Okay, so he's got this idea, he's got net and net one more time he's successful. He's never We just sa heard somebody else say earlier. He doesn't he'd never gets ha fat and happy with his success. That never has never happened.

1:05:39 didn't happen in the past and didn't happen up until the day he died. And so he's always looking for You know, I I believe in Walmart and discounters, but there's always people coming with new ideas. And he realizes that Sol Price is going to invent an entire new category. And so it says on a January morning in nineteen eighty three, Sam Walton flies to San Diego to investigate a new wrinkle. In the discount business. A membership wholesale club, what we think of as Costco and what which obviously turns into Sam's Club as well.

1:06:05 The idea originated five years earlier by a savvy California entrepreneur named Sol Price. Solprice was making an astounding success by selling merchandise at only a ten percent above manufacturers' prices. And getting rich. If Sol Price could do that, Sam Walton figured he could too. The wholesale club idea was good, extremely good.

1:06:25 And so Sam goes back to Benville and he's like, Okay, we're just gonna do the exact same thing that Sol Price is doing out on San Diego. And we're gonna do we're gonna call it Sam's Club and we're gonna start right now. This is insane. First visit. January nineteen eighty three.

1:06:38 Okay. January He does his first visit. April, the same year he opens the first Sam's Club. In the next eight months before the end of nineteen eighty three.

1:06:48 Okay. So January first, he visits the first one, doesn't have any. By the end of that same calendar year, he's got three. Then the next twelve months. He opens eight.

1:06:58 More. Within three years of stepping foot In Sol prices price club. Sam now has twenty three Sam's club.

1:07:08 wholesale stores. And he's doing seven hundred and seventy six million dollars. That's insane. From nothing. to almost a billion dollars in sales in three years.

1:07:19 And then within seven years, he's got a hundred and five of these things and they're doing five billion a year. Extreme patience. coupled with extreme intolerance for slowness. That is the career of Sam Walton. He's gonna take his time to make sure this thing works, and when it works

1:07:36 He pours gasoline on it. And so it's this extreme bias for action that runs throughout this entire book. It's what Jeff Bezos says. Jeff Bezos said that two of the things that he learned most from Sam Walton's autobiography that he applied to the early days of Amazon is frugality and a bias of action. And I think this extreme bias of action is a great place to close, and we'll close in Sam's own words. Our method of success as I see it is action with a capital A.

1:08:00 And a lot of hard work mixed in. As we've said throughout the years. Do it. Try it. Fix it.

1:08:06 It's not a bad approach and it works. There are a lot of people out there who have some great ideas. But nothing in the world is cheaper. Then a good idea. Without any action behind it.

1:08:17 And that is where I'll leave it. If you have not yet read Sam Walton's autobiography. I would read Sam Walton's autobiography first. If you have a top ten list of, you know, entrepreneur biographies, autobiographies, that Sam Walton's autobiography's gotta be in that list. So if you haven't read that one yet, I would highly recommend doing that. You can also listen to the episode I did on the last episode I did on Sam Wahn's Autobiographies, episode two thirty four. If you've already Listen to the podcast, listen to it again. and read the book, then I would highly recommend getting this book as well.

1:08:46 Sam Walton is far too important of an entrepreneur to only read one book around about So if you buy this book using the link that's in the show notes on your podcast player, also available at founderspodcast.com. You'll be supporting the podcast at the same time. That is Three hundred and fifty four books down, one pound a go.

1:09:01 And I'll talk to you again soon. Okay, so what you're about to hear is this question I was asked a few months ago. I actually recorded this a few months ago. They asked how did history's greatest entrepreneurs think about hiring all the answers. People think I have a better memory than I Then actually do.

1:09:16 You know, if people say, Oh, you David, you have a great memory, my wife would laugh at that'cause I forget things all the time. It's not that I have a good memory, it's I reread things over and over and over again. Every single answer. Every single reference you're about to hear in this twenty minute mini episode. came from me searching. All of my notes and highlights.

1:09:34 That option. is now available to you. If you like what you hear, if you think it's valuable, if you're already running a successful company. And you want an easy way to reference the ideas of history's greatest entrepreneurs in a searchable database. That you can go through at your convenience any time you want.

1:09:49 You can go to founders notes. dot com and sign up. I wanna start out first with Why this is so important? There's actually this book that came out in like nineteen ninety seven. It's uh called In the Company Giants. I think it's episode two oh eight of Founders.

1:10:04 It's two Stanford NBA students, if I remember correctly. and they're interviewing a bunch of technology company founders and In there, Steve Jobs is one of'em. This is, you know, right be I think even before he came back to Apple. And they were talking about, Well, yeah, we know it's important to hire, but in a typical startup, a manager or a founder may not always have time to spend

1:10:23 Recruit other people. And St I I first read this this Steve's answer to this, you know, I don't know, two years ago, and I never forgot it. I think it's excellent. I think it sets up Why uh this question is so important and you should really be spending especially in the the early days, like

1:10:39 Basically all your time doing this. Uh, in a typical startup manager may not always have the time to spend recruiting other people, then Steve jumps in. I disagree totally. I think it's the most important job. Assume you're by yourself in a startup and you want a partner. You take a lot of time finding a partner, right? He would be half of your company. I'm gonna pause there.

1:10:55 This idea of looking at each new hire as a percentage of the company is genius. Why should you take any less time finding a third Or fourth of your company. Or a fifth of your company. When you're in a startup.

1:11:10 The first ten people will determine Whether the company succeeds or not. Each is ten percent of the company. So why wouldn't you take as much time as necessary to find all a players? If three

1:11:23 Three of the ten. Uh we're not so great. Why would you start a company where thirty percent of your people are not so great? A small company Depends on great people.

1:11:33 Much more than a big company. Does. Okay, so To answer this question. The advantage that um That

1:11:40 I have making founders and that you have as as a byproduct of listening to founders. is not only that I've read, you know, three hundred something biographies of entrepreneurs now, but I have all of my notes and highlights stored in my ReadWise app. And that means I can search for any topic. I can look at the past highlights of books. Or could search for keywords. So what I did is First o of all, like what I've started to do with these AMA um questions is I read them.

1:12:03 decide which ones I'm gonna do next and then think about it for a few days. I don't put any I just literally that m that I know that's the next question. Just let my brain work on it in the background for a few days. And then I'll go through And start searching all my notes. And so that's what I did here.

1:12:17 And so there's a bunch of, you know, I don't have I may have like ten or fifteen different founders talking about hiring. The first idea is the most obvious, but I think probably works best when you're already established. So Steve Jobs is talking about hey, you know, the great way to f to hire is Just fine great work.

1:12:35 And find the people That did that and then try to hire them. When you're Steve Jobs Yeah. That's a lot easier, right? Than if you're just somebody that doesn't have reputation, maybe don't have resources.

1:12:46 Maybe your company's rather w uh new or not as well known. David Ogie, I just did confessions of an advertising man. couple episodes ago, I think three oh six or something like that. Three oh seven. And He did the same thing.

1:12:58 But he's David Ogy at that point. So he would find he'd go through magazines, find great advertising, great copywriting. And he'd write the personal letter. And then set up a phone call. And he says he wouldn't he was so well known and you know, he's one of the best in his field. That he wouldn't even have to offer a job.

1:13:15 Just the conversation, then the person would the the he'd want to hire the person, never mention it, and the person would apply to him. Um, and so again, I think if you can do that Then of course it's Straightforward. Fine for somebody who does great work.

1:13:30 Usually you can do this. I actually have a friend that I can't say who it is. He's doing this right now, actually. Um, I have a friend that's really good at doing this. He's finding people that do great stuff on the internet and then just cold Yeah. Call DMing them. And then Getting convincing them to work on things. And

1:13:45 That usually works, especially with people like younger people earlier in their career. There's a bunch of different ways to think about this and a bunch of different ways to prioritize. So the first thing that that c that came to mind that I found surprising is you read any biography on Rockefeller. And he had a couple ideas where He felt

1:14:02 The optimization you know, table stakes that you're intelligent and you're driven and you're hardworking, right? We don't even have like if you're listening to this, you already know that. But he prioritized hiring people. With social skills. And so this is what he said the ability to deal with people is as purchasable A commodity as sugar or coffee.

1:14:20 And I pay for I pay more for that ability than any other under the sun. There's a two the second part to this, though. And this is also works well if you have access to more resources. He Rockefeller would hire people as he found As he found talented people, not as he needed them. It's not like okay, standard oil has

1:14:38 Six open spots. Let's go find six candidates, right? He'd come across what he considered a talented person. He didn't even matter if he didn't know what they were gonna do. He's like, I'm just gonna stack his team. And if you really think about the the his partners of San It Oil. He essentially built a company. An executive team of

1:14:55 Founders. Of course,'cause he was buying up all their companies. So it's very rare, but Um, there's a line from Titan I wanna read to you. Taking for granted the growth of his empire He hired talented people as found. Not as needed.

1:15:08 And then I found another idea. in the hiring like the actual interview process. So there's this guy named Van Ever Bush. I did two episodes on him, I think it's two seventy and two seventy one. He is the most important American ever. uh in history uh in in terms of

1:15:24 Connecting the scientific field, private enterprise, and the government. The most important person to keep alive for the American war effort was FDR. The second one was Van Ever Bush. Van Ever Bush uh is like the force gump of this h historical period. He is involved in everything. From the Manhattan Project. to discovering like a young Claude Shannon to building uh a mechanical computer, like this guy literally has done he's just uh he pops up in these books over and over again. If you were reading

1:15:48 about American business history during World War Two and post World War II, you are going to come across the name Van Ever Bush over and over again. I read his fantastic autobiography called Pieces of the Action. And I came across this weird highlight. And so this is his brilliant and unusual job interview process. And so he's talking about this organization he's running called Amrad.

1:16:08 At Amrad, I hired a young physicist From Texas named CG Smith. The way I hired him is interesting. An interview of that sort is always likely to be on on an artificial basis and somewhat embarrassing.

1:16:20 So I discussed with him a technical point. on which I was then genuinely puzzled. The next day he came in with a s with a neat solution. And I hired him at once. Here's another idea. This is from Nolan Bushnell. Nolan Bushnell's the founder of Atari, founder of Chuck E Cheese.

1:16:35 And Steve Jobs mentor. He hired Steve Jobs when Steve Jobs was like nineteen at Atari. Hm. would ask people their reading habits in interviews. This is why. Uh one of the best ways c his whole thing was he wanted to build a all of his companies w laid on a foundation of creative people. So that's what he's looking for. He's like, I need creative people.

1:16:53 One of the best ways to find creative people is to ask a simple question, What books do you like? I've never met a creative person in my life that didn't respond with enthusiasm to a question about reading habits. Actually which Books people read is not as important as the simple fact that they read it all. I've known many talented engineers who hated science fiction but loved

1:17:10 See books on bird watching. A blatant but often accurate generalization. People who are curious and passionate read people who are apathetic and indifferent don't I remember w that that's such a great line, and I obviously agree with it. I remember one

1:17:24 I'm going to read it again. A blatant but often Accurate generalization. People who are curious and passionate read, people who are apathetic and indifferent don't. I remember one particular woman who during an interview told me that she had read Every book that I had read.

1:17:38 So I started mentioning books I hadn't read and she had read those too. I didn't know. That time. This much time to read so much.

1:17:46 But I was impressed I was so impressed that I hired her right there and assigned her to international marketing. Which was having problems. This is why. This is why I'm reading this whole section to you. A job with a lot of moving parts.

1:17:57 benefits from a brain that has a lot of moving parts. It wouldn't be possible to have read that many books without such a brain. So do you see what I mean? Like We start with Steve Jobs saying this is the most important thing that you your role as the leader of the company and the founder to do, right?

1:18:14 And you are in It's so important to study and this is why I'm glad this this question exists and why I'm glad that I've I took the time and I had like the foresight to like, hey, I should really Organized my thoughts and notes.'Cause there's no way I would have remembered all this. without being being able to search my read wise, right? But you have Rockefeller saying this is what's important to me.

1:18:31 You have Bush saying this is how I hire. Now you have Nolan Bush now. Saying well Here's another th weird thing that I learned.

1:18:38 Um, let me go through uh what Warren Buffett says about this. So this is about the quality. One thing that is consistent. Whether it's Jobs, Buffett, Bezos. uh Peter Teal. This just pops up over and over again. they talk about the importance of trying to find people that that are better than you. the the hiring bar constantly

1:18:55 has to increase. Now obviously the larger the company gets, that's impossible. Uh, Steve Jobs has this great quote. Where he's like, you know, Pixar was the first time I see I saw an entire team. Entire company of A players. But they had four hundred players. They had four hundred

1:19:08 Team members. He's like at the time Apple had three thousand. It's like it's impossible to have three thousand A players. So there is some Number that your company may grow to, where it's just you're just not. You're not gonna have thousands of A players.

1:19:21 In my argument, I don't even know if you get a four hundred. I guess you I mean I'll take Steve's word for it on there and Pixar definitely produce great products, but it's probably a lot lower than that as well. So Warren Buffett would tell you to use David Ogies. hiring philosophy.

1:19:35 And so Warren said, Charlie and I know that the right players will make almost any team manager look good. Again, that is why it's the most important function of the founder. maybe directly next to the product. Right above the product actually,'cause those are the people building your product.

1:19:48 We subscribe to the philosophy of Ogie and Mather's founding genius, David Ogie. This is what Ogie said. If each of us hires people who are small smaller than we are We shall become a company of Dwarfs. But if each of us hires people who are bigger than we are. We shall become a company of giants.

1:20:02 David or Jeff Bezos rather, used a variation of Ogy's idea too. Jeff used to say in Amazon, every time we hire someone. He or she should raise the bar for the next hire. So that the overall talent pool is always improving. They talk about this idea on Amazon.

1:20:19 Where The the the future hires that we do should be so good. that if you had applied for the job you already have at Amazon, you wouldn't get in. That's a very interesting idea. Take your time with recruiting.

1:20:31 Take your time with hiring. There's this great book on the history of PayPal. It's written by actually I've I've recently become friends with the author. His name's Jimmy Sony. Um

1:20:41 And this is in his book. The the most fascinating thing that I found was that PayPal prioritized speed. So from the time they're they're founded to the time they sell to eBay? It's like four years. Jimmy spent more time researching the book than than four he spent six years researching the book.

1:20:57 I was teasing'em'cause like you took longer on a book than they took to start and sell their company. It just speaks to like the quality he's trying to do. But tha as a byproduct of that, like obviously they move fast, but they prioritize speed over everything else except In one area. Recruit.

1:21:11 Max Slugshin kept the bar for talent exceedingly high, even if that came at the expense of speedy sa staffing. Max kept repeating. A's higher A's, B's higher Cs. So the first B You hire takes the whole company down. Let's read that again.

1:21:26 A players hire A players, B players hire C players. So the first B player you hire takes the whole company down. Uh additionally the team the company leaders mandated that all prospects here's another idea for you. All prospects must meet every single member of the team. Now the next one is the most bizarre. It makes sense.

1:21:45 If you study I did this three part on Larry Ellison, three part series on Larry Ellison. I should read those books again. 'Cause the the podcast is like fifty times bigger than than when I uh publish those episodes. And he's just crazy. So he would hire Based

1:22:00 On the confidence the self confidence level of of the candidate. Listen to this. I have tears in my eyes. I don't know why I'm laughing. Okay. 'Cause this is it. W you read about Larry Ellison and

1:22:13 he's one of these people it's like really easy to interface with. Yeah. You just know exactly who he is and what's important to him. That's why I think it's so funny. Ellison insisted that his recruiters hire only the finest and cockiest

1:22:26 New college graduates. When they were recruiting from universities, they'd ask people, Are you the smartest person you know? And if they said yes, they would hire them. If they said no. They would say who is

1:22:37 And they would go hire that guy instead. I don't know if you got the smartest people that way, but you definitely got the most arrogant. Ellison's and this is why. The personality of the founder is largely the culture of the company. Apple is Steve Jobs.

1:22:49 Apple's just Steve Jobs of ten thousand lives. Right. I was just t texting a a founder friend of mine. Uh, he listens to the podcast. I actually met him through the podcast. And he's going through this like uh process of self discovery. Like he's already started a bunch of companies that are really successful, but he's like

1:23:03 I think I'm more of this type of founder than the other type of founder. And that's good that he's doing that because he's he's Hopefully his next mission is like his life's mission, you know? And you can't get to your life's mission unless you do figure out who you are. Ellison knew who he was.

1:23:16 Ellison's swaggering combative style became a part of the company's identity. This arrogant culture had a lot to do with Oracle's success. Here's another odd idea for you. Izzy Sharp, the founder of Four Seasons, actually could figure it out that in his business, which was hotels, right? that hiring could hiring the right p person could actually be a form of distribution for his hotel.

1:23:37 He gave me the idea. Because of what? What do we know? What do you and I know in our bones? That history's greatest founders all read biographies. They all read biographies of people that came before them and took ideas from them. Izzy Sharp is trying to build four seasons. What do you think he did? He picked up a biography of Cesar Ritz.

1:23:53 The guy that Rith Carlton is named after the great arguably the greatest hotelier of all time. And when he realized like oh shit. Rich. He uh he says, uh remembering that Cesar Ritz made his hotels world famous by hiring some of the foremost chefs, we decided to do something similar. So what is he talking about? Caesar Ritz. went out and partnered with August Escafier.

1:24:12 What Cesar Rich was ho to hotel to building hotels. August Scafia was to French cooking. And so what happened is you partnered with world famous chefs. People come into your restaurant. That's in the hotel. Because the world famous chef and now they know about your hotel that leads to more gat that me leads to more activity in your restaurant that you own, but also leads to m more brand recognition of your hotel. And then by as a byproduct of that, more people staying at the hotel.

1:24:34 So hiring as a form of distribution. This is fascinating. That is a fascinating idea. Okay, here's the problem. You can Identify great people.

1:24:43 Right. Maybe they even want to come work. Like you've identified them You've sold them, hey, uh this is what this is our mission, this is what we're sh we're doing. And yet humans have have complicated lives.

1:24:55 They have spouses, they have kids, they have A reason maybe they can't move across the country. to work for you, even though they want to. So There's a problem solving element that you see in these books.

1:25:07 On you have to solve like you've already identified the person. You've recruited them. They can't go for some other reason. Okay. Well The great founders are not gonna take an answer. I read in um

1:25:17 in this book called Lift Off, which is about the first six years of SpaceX, this is what Elon Musk did. They had anticipated his friend's issue, having convinced Mus they needed to bring this brilliant young engine from Turkey on board. It became a matter of solving the problem. His wife had a job in San Francisco. She would need one in Los Angeles, right?'Cause that's where SpaceX is at the time. They're these are solvable problems, and Elon's better at solving problems than almost anyone else.

1:25:41 Must therefore came into his job interview prepared. About halfway through Mus told the guy That he wants to hire. So I heard you don't want to move to LA. And one of the reasons is that your wife works for Google.

1:25:52 Well, I just talked to Larry and they're gonna transfer your wife down to LA, so what are you gonna do now? To solve this problem. Musk had called his friend Larry Page, the co founder of Google. The engineer sat in stunned silence for a moment, but then he replied, Given all that He would come to work at SpaceX. That's really smart.

1:26:09 There is another idea. When you're promoting. Are you gonna promote from within or from without? You know, that's dependent on you, depending on what what's going on.

1:26:18 I do think this is interesting though. There's a guy named Les Schwab. Who built this? this really uh valuable chain of uh t like tire companies in the Pacific Northwest. I actually found out about them'cause Charlie Munger's like, hey, You should read this biography. He didn't say it to me, personally.

1:26:33 He said it too uh in like one of the Berkshire meetings. That Leswab had one of the most m uh one of the smartest uh financial incentive structures of any company that that Charlie Mugger come across. So this is what Les Schwab did. He did not

1:26:48 Want to hire from He didn't want to hire other people from other companies'cause they might come with bad habits. He liked to train his own Executives. And so he says in our thirty four years of business, we have never hired a manager from the outside.

1:26:59 Every single one of our more than two hundred and fifty managers and assistant managers started at the bottom changing tires. They have all earned their management job by working up. And then another thing, if you're gonna hire the best of the best in A players They're eight players don't like to be micromanaged. Um and so this came in Larry Miller's autobiography.

1:27:18 Call driven. He owns like he owned like ninety three companies. all throughout Utah, car dealerships, movie theaters, all kinds of crazy stuff. But he also owns the the the MBAT in Utah Jazz. And what was fascinating is he's trying to recruit Jerry Sloane as the coach at the po at at the point, and Jerry Sloan would only take the job on one condition, and I really like it. I really like this idea. If you hire me, let me run the team and business, right? That's what you're hiring me for.

1:27:41 One of the best things we had ever done was hire Jerry Sloan as coach. At the time he said, I'm only gonna ask you for one thing. If I get fired, let me get fired for my own decisions. If you hire me, let me run the team slash Business. Here's another idea. From

1:27:56 Thomas L uh Edison that I think is fascinating. Really, th I th the way I think about a founder is like you're developing skills that you can't hire for. you you're gonna hire for everything else. But you shouldn't be hireable. And Edison wasn't.

1:28:10 Edison expressing his views on the preeminent role of applied scientists, which that's what he considered himself. Coin the expression, I can hire mathematicians, but they can't hire me. And so when I read that paragraph for the first time, the note I left myself was develop skills that you can't hire for. Capitalism rewards things that are both rare and valuable. Uh Estee Lauder would give you advice that you need to hire people aligned with your thinking and values.

1:28:33 Hire the best people. This is vital. Hire people who think as you do and treat them well. In our business, they are top uh top priority. So this idea is like That seems kinda weird. Like hire people. Who think like You. There's obvious not one right way to build a business. I think the your business should be an expression of your personality and who are who are as a person at the core.

1:28:53 And so I think there is an Art. To the building. Of your business. And the reason he used the word art, I don't mean in like a hoity toity, you know, pretentious manner. That's not me at all. I don't even care about I don't art at all, really.

1:29:07 I mean that you're making decisions not just based on economics. Like there are non economic Important decisions based on how you're building your business. Like you could probably make more money doing a decision A. But decision A is goes against who you are as a person. Or you just don't like it or it's just not as elegant or beautiful.

1:29:25 And so therefore you don't do it. So that's what I mean about you know, hire people who think it's you do. And what for whatever reason when I read Essay Lauder say that, I was like, Okay, that there's like this art to what she's doing. one thing that's gonna be helpful in recruiting. Uh, this comes from Peter Thiel. I think this is the book Zero to One. understand that most companies don't even differentiate their

1:29:44 pitches to potential recruits into hiring. So therefore like they're just gonna by as a byproduct of that, you're gonna w wind up with a lower overall talent base. And so he says what's wrong with valuable stock, smart people are pressing problems. Nothing. But every company makes us these claims. So they won't help you stand out. General and undifferentiated pitches to join your company. Don't say anything about why a recruit should join your company instead of money of instead of many others. So that idea of like your pitch. Your actual

1:30:12 He would tell you you're y you shouldn't be building a undifferentiated commodity business. But even above and beyond that. Like you're the the the mission that you're trying to engage everybody to join you in. that pitch, that sale sale you're trying to make to potential recruit should be differentiated. Should not If that person's applying to five other jobs.

1:30:29 There should not be like it's like They may not like your mission, they may not like your pitch, but they shouldn't be able to compare it to anything else. Uh another quote from Nolan Bushnell. Higher for passion and intensity. That's what he would do. All right, that's what he did when he found Steve Jobs.

1:30:43 If there was a single characteristic that separates Steve Jobs from the mass of employees, it was his passionate enthusiasm. Steve had one full uh one speed. Full blast. This was the primary reason we hired him. And one thing all these founders have in common is that he know how important hiring is and when something's important.

1:31:00 You do it. Yourself. This is again Elon Musk on hiring. He interviewed the first three thousand employees at SpaceX. That's how important it was.

1:31:08 One of Musk's most valuable skills was his ability to determine whether someone would fit his mold. His people had to be brilliant. They had to be hardworking and there could be no nonsense. There are a ton of phonies out there, and not many who are the real deal, Must said of his approach to interviewing engineers. I can usually tell within fifteen minutes and I can sure I can for sure tell within a few days of working with them. Musk made hiring a priority. He personally met with every single person the company hired.

1:31:31 through the first three thousand employees. It required late nights and weekends But he felt it was important to get the right people for his company. And then the close on this we started with Steve Jobs telling us why it was so important and why should be a large part of how you spend your time. And now we'll close with what you do after.

1:31:48 What do you do after you hire the person? This is what he says. It's not just recruiting. after recruiting, it's building an environment that makes people feel they are surrounded by equally talented people. And their work is bigger than they are. the feeling that their work will have a tremendous influence And as part of a strong

1:32:04 Clear. Vision. So that is the end to that twenty minute mini episode. I just re listened to the whole thing. And it it really does, I think it's a perfect explanation and illustration of why I think Founders notes is so valuable'cause tha some of those books I haven't read

1:32:19 In five, six years. And just the ability to have a searchable database of all this These ideas like this collected knowledge. of some of History's greatest entrepreneurs to reference and then contextually apply to our own businesses.

1:32:32 It's nothing short of Like it's magic. That's the really the way I think about it. I think it's a massive superpower. It gives me a massive superpower. I couldn't make the podcast without it. I also think if you have access to it, it'll make your business better. And so if you're already running a successful business, I highly recommend that you invest in a subscription. And you can do that by going to foundersnotes.com.

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