#360 Robert Kierlin: Founder of Fastenal

Transcript from https://podmenti.com/t/dbbd8cf1e335b112

organizations succeed to the extent that all of their members pursue a common goal. Everything in this book goes back to that idea. It goes back
to the idea of keeping the main thing the main thing and how this is a very simple

That's
Excessively hard to practice over a long time because it goes against
human nature. It's in our nature to drift.
and complicate things. And the founder of Fast and all, Bob Kirlin,
Built his entire company building thesis.
around that idea.
Keep everybody in your organization pursuing a common goal. And then Bob uses
This book
to defend his ideas, but it's laughable.
That his ideas even need to be
Defend it.
His numbers speak for themselves.
How the hell does a company selling a commodity product?
He says in the book he had no advantage.
On products.
Yet that same company was able to compound all the way to a thirty eight billion dollar market cap.

over the last quarter century.
I'm friends with the co founder and CEO of Ramp, Eric, and I was texting him about this book and this incredible company while I was reading and researching this episode.
Because Eric is keeping everyone in his company pursuing a common goal.
That would make history's greatest founders proud.
Ramp is building the world's best tool that gives you everything you need to control your spin.
Watch your cost.
and optimize your financial operations on a single
platform.
So this is what I texted.
To error.
It describes why this obsession with cost control that Fastanol has.
Turned into a massive advantage that fuels other things. So it says anyone who claims that expense management for Gality is not a competitive advantage should pull up a long-term chart.
a fast null stock price and see how a company that sells nuts and bolts and keeps costs low
somehow has been able to eat their competitors lunch for decades. This is this
Very virtuous.
Flywheel.
that begins with keeping operating cost and watching costs very low.
By keeping operating costs very low, Fastanel is able to pay their employees incrementally higher wages.
And thus more effectively develop and retain talented salespeople.
The quality of service and depth of knowledge that the employees have eventually brings in more revenue.
Which grows the business and allows it to further lower operating expenses that is as a percentage of revenue.
Thus allowing for more hiring of top quality employees, which brings in more revenue.
This creates a virtuous circle of sorts.
I can read that paragraph, filter through the three hundred and sixty biographies of Hunepreneurs I've read so far for the podcast, and it summarize it even better.
History's greatest founders knew that watching your costs was the foundation on which other competitive advantages can be built. That is why so many of the great founders made cost control an obsession.
Ramp.
Helps you do the same. Ramp gives you everything you need to control your spin.
To watch your costs and to optimize
Your financial operations on a single
platform.
Start building your competitive advantage by going to ramp.com and sign up. That is ramp.com.
Since its founding in nineteen sixty seven, Fastenol has grown from a small fastener store
In Winona, Minnesota.
Into a multi billion dollar global organization.
The company is known for its exceptional leadership, innovation, and success. Fast and all
Was the top performing stock in America.
During the quarter century that began with the market crash.
of nineteen eighty seven.
How did a small town nuts and bolts shop?
become one of the world's most dynamic growth companies.
Whenever asked, company founder Bob Kirlin
attributes Fascinating success to the company's high quality employees
And their commitment to a common goal. This is something he's gonna repeat.
That is his
Main idea. The one he repeats.
Most throughout the entire book.
that your company should be organized and oriented around a commitment to a common goal.
And this is their common goal.
Growth through customer service. So whenever asked, company founder Bob Kairlin attributes fast enough success to the company's high quality employees.
and their commitment to a common goal.
Growth through customer service.
the company is organized in order to serve those four words, growth through customer service.
Underlying that simple answer is an unshakable belief in people that ordinary individuals can accomplish extraordinary things.
If given the opportunity.
In nineteen ninety seven, Kirlin published this book.
In an effort.
To share the unconventional business practices that stem
From this philosophy and fuel
Fasinal's success. The ideas presented within these pages flew in the face of the prevailing business wisdom at the time, and they remain every bit as relevant and challenging today.
The original idea was to provide a teaching tool
For future generations of Fast known leaders.
But to anyone with the courage to unleash the vast human potential within your business
Organization.
Team or group.
Welcome.
That is an excerpt from the back cover of the book that I'm gonna talk about today, which is The Power of Fascin All People.
and is written by the founder of Fastanol, Robert Kirlin.
So the way I would describe this book is it's a cult classic.
It's hard to find.
And it's about a compounding machine. I'm going to read
From the
Acknowledgments.
Preface and introduction, all of which are very short. What I love about Robert is he gets right to the point. And then I'm gonna put the book down briefly and give you an overview of this very unique company. So I wanna give you a little background first.
On Bob Kierlin.
He was the founder. He's still alive. He's the he founded
Fascinal in nineteen sixty seven and served as the co founder and CO for thirty five years.
So Fastenal's gonna grow from one one thousand square foot location in nineteen sixty seven.
To over thirty four hundred stores by two thousand twenty three.
They are doing like seven and a half billion dollars.
A year is in sales.
And their market cap is almost forty billion dollars.
Before founding the company, Bob got a degree in mechanical engineering and then also an MBA. And so in the acknowledgement section, he tells us exactly what.
why he's writing the book and what what this is all about.
The content of this book derived from what people have taught me.
Sometimes in classes, but more often through their example.
My parents were my first teachers.
Those that followed in grade school, high school, and college added to my knowledge.
I was privileged to observe good leaders in my early business career.
Perhaps I was also privileged to observe some bad ones too.
I learned from them all.
And the need to write this book derives out of these two sentences. I am aware that Fascinal is a unique organization.
Fast and all succeeds because its people succeed.
And so
It's very obvious as you start to read this book, there's a a lot of buffet and monger esque things in it.
And that popped out on me from the very first page because he's he's going through all the people he had a thing to write the book.
But then he says something like this.
No need to thank any typist, however.
Every little character was entered by
By one of my fingers into a computer at home.
One of Charlie Munger and Warren Buffett's favorite founders is this guy Les Schwab, who I've done two episodes on.
Les Schwab writes this incredible autobiography.
Which again is short and to the point.
And Less starts that book with this sentence.
I did write this a hundred percent with my forty year old typewriter.
I did not have a ghostwriter.
I wanted it in my own words.
And so there's gonna be a lot of things that Bob believes in and the traits that he has.
Is we there he's gonna share in common with a lot of Buffett and Munger's favorite founders.
He talks about the fact that hey
You know, this is the updated version, so he's like, I wrote this book twenty years ago. Since then
our sales have actually grown by a factor of twelve and I think it's even higher now.
But he says it all comes.
from this basic belief that has provided the fuel for this growth. And it's Bob's heartfelt belief in people and their ability to do great things if given the opportunity. Now think about how crazy this is.
So he first wrote wrote this in nineteen ninety seven.
This updated version is printed twenty three years later.
So think about all the technological change that has occurred in those that twenty three year period. Although the applications of new technology such as the internet, smartphones, barcodes, vending.
and automated stocking have changed the how.
of industrial distribution, which is their business, okay?
It's changed the technology changed the how.
They have not changed the why of a distributor's success.
Success still stems
From the ingenuity, risk taking, and hard work of people working together as a team.
And he goes back to his really he has one idea is the way I would say this.
We continue to pursue our common goal.
And we continue to find ways to bring out and use the potential of our people. I'm not sure why, but when I got to that sentence.
That paragraph rather.
Where he's talking about, listen, the technology is gonna change. Technology that influences your business may change the how of how you deliver your service, but it will not change the why.
Michael Bloomberg in his autobiography said something that's very interesting. He says a lot of companies mistake their product for the device that delivers it. Listen to this. This is from Bloomberg's autobiography.
The technology that we pioneer in the early nineteen eighties has long since
been ancient history.
But we never made the error that so many others have, mistaking their product for the device that delivers it.
Kodak thought that they were in the camera and film business instead of the photography business.
The digital photography revolution passed them by
And after more than a century, as one of the most innovative companies in the world, they filed for bankruptcy at Bloomberg.
We got out of the business of building physical computers.
as soon as PCs began taking off.
We knew our core product.
Was data and аналітик.
Not
Hardware. Do not make the mistake
of confusing your product for the device that delivers it.
And then he ends the preface with repeating
This
Main idea. The first requirement to have a successful organization.
The need to have every member of the organization pursuing a common goal.
He already said what his common goal on the very back cover.
Growth through customer service.
And then he continues about the fact that he was a reluctant author, that he had to be pushed
To write this book.
And the reason he did, I love. He says I became more aware that peop that the people principles we practice at Fasinal are uncommon.
And they're in need of defense.
This book has only one purpose to support ideas that don't seem either common or accepted.
These ideas come from my experiences in life and are offered to younger people with the hope
That by understanding them here
they can avoid needing years to learn from their own experience.
These examples come mostly from my forty seven years.
With the Fasinal company. So this is what I love about autobiographies.

Half a century of experience.
It's almost like having a to to read this book or to listen to the podcast, it's almost like having a one sided conversation with somebody who has fifty years of entrepreneurial experience.
Facenol is a people centered company.
Fasinol has y no unique product and no unique process.
But it has some ideas about people.
that are at least uncommon if not unique.
So I want to put the book down briefly. Remember the the
What is the title of the book?
The power
of people, the power of fast and all people. So I'm gonna give you this company overview.
And a story about the CEO that succeeded Kieran and Warren Buffett that I think
Just knowing all this at the very beginning, I think will make the ideas that he repeats over and over again, that Bob repeats over and over again in the book very important.
What's the most important part of Facenol's success?
that outsiders discovering the company for the first time don't understand.
The number one thing.
Is the people aspect.
The goal is to unleash entrepreneuri.
A commitment
That I will be self driven to do better than what you can expect. It is a mindset.
This is what they're telling their employees. Run your business like you own it.
When you trust people to solve problems and make decisions, you let them go and you let them go, that's where magic happens.
That is the story of this company.
Fasinal embraces a spirit of radical decentralization and autonomy. Each of its 2700 stores
Operates.
as a standalone business with a clear leader
and full PL responsibility.
We grow from the ground up based on the actions and decisions of thousands of people.
who run their businesses like they own it.
I want those people to stay with us forever. They will never have to stop at a certain level.
You may have to move.
You may have to learn a new market category, but there'll always be opportunities here.
We call ourselves a blue collar sales company when our folks in the stores are doing it right.
Customers say.
This guy knows my business better than I do.
We don't care where we went to school.
We care what they can't teach in school wisdom, savvy, entrepreneurial spirit.
We want to know our customers' businesses so well.
What they spend.
How they could be more efficient that they can't imagine doing business with someone else.
We are not one giant organization. We are twenty seven hundred small businesses. So keep in mind this is I'm what I'm reading from is about ten years old. So now they have, you know, over thirty four hundred.
We are not one giant organization, we are twenty seven hundred small businesses wrapped up into one big company.
Society tells us, You're a big company, act like it. We say no.
You don't get to define us, we define ourselves.
We go against the grain in almost everything that we do.
And so there's just crazy stats about the company that more more than ninety five percent.
of our current batch of general managers have been promoted from within.
For nearly all of our senior leaders have worked their way up from entry level positions. So that leads into the second thing I want to tell you about, which is this.
interview with the CEO that had succeeded Kierlin Kierlin or Bob. We'll call him Bob.
Uh when he stepped down.
His name is Will Oberton. Oberton
started out Facinal as a store clerk. So we went all the way from they they mean businesses.
He went all the way from Storcler.
To CEO.
And so what I'm reading from I found this out after I finished the book because I'm like
It's just obvious. It's just like I wonder if Buffett and Munger have ever talked about these.
uh about this company or uh the way they are about the founder or anything like this.
And it turns out when you search, it's like Oh yeah.
Buffett would bring up this company in interviews.
And so I just want to pull out a couple things from this interview with the CEO.
So it talks about what Facinel is. It's North America's largest wholesale and retail distributor of nuts, bolts, hand tools, and other supplies.
to the construction and manufacturing markets.
It has built a loyal following among customers, do quality and service, and won countless fans on Wall Street.
For its thrifty
No nonsense waste. Warren Buffett is an admirer.
having praised Fasanal in an interview.
He loved its robust financial performance and its straightforward business plan. This is their business plan.
Boosting sales by adding customers.
and increasing its interaction with them.
The unexpected shot out prompted
Fascinal CO Will Oberton.
to trek to Omaha.
To have lunch.
with Warren Buffett.
The two Coss Conscious bosses hit it off.
We talked about the importance of sticking to the basics.
And one thing they talk about is that the CEO is not afraid to get his hands dirty and for and in fact this is something that Bob preaches throughout the book.
So you know you see.
And he'll jump in wherever's needed and the the commitment that he has. So
Let's say they're behind. He'll go help with deliveries. He'll help with sales.
He'll help with customer service calls.
He actually the CO actually
earned went through the process of getting a CDL, which is the commercial uh truck driving license.
So he can pitch in when drivers truck truck drivers are sick.
And so there's another description of Fas that talks about the fact that when w what Buffett realized that it says the two cost conscious bosses hit it off.
and how having a low cost structure is actually actually a major
competitive advantage because all the other things that it fuels.
And so it says anybody who claims that expense management and frugality is not a competitive advantage.
Should pull up
the long term chart of Fast and all stock price and see how a company that sells nuts and bolts.
and keeps costs low, somehow has been able to eat their competitors lunch for decades.
But by ke this is the the virtuous cycle, I think that Buffett realized as well.
By keeping operating costs very low.
Fast and all is able to pay their employees increase incrementally higher wages.
And thus
More effectively develop and retain talented salespeople.
The quality of service and depth of knowledge that the employees have eventually brings in more revenue.
Which grows the business and allows it to further lower operating expenses as a percentage of revenue.
Thus allowing
for more hiring of top quality employees, which brings in more revenue.
This is an overlooked virtuous s circle of sorts.
And then one last thing before I pick back up the book, my friend Raymond, and I were texting about this. So Raym is the one he he does the Rainmakers podcast. He's a phenomenal researcher. He's also the one this book is really hard to find. So he's actually sent me this book. And after reading it, he came to the same conclusion that I did.
And he says I realized how much Bob embodied the muggerisms on incentives.
And how he only focused on how he can make Fast and all the best company to work for.
The results speak for themselves.
thirty eight billion dollar market cap for a company selling commodity products.
And then he picks up on something that Bob says himself.
It's crazy to me how stuff like this is kinda common knowledge.
But people don't really apply it.
And so immediately the book begins with
An idea that's gonna sound a r a lot like one of Munger's famous f favorite founders, which is Jim Sinegal of Costco.
Of Costco.
Leadership must constantly be replenished. Every leader knows that a big part of leadership is training other people to be good leaders. So
Pause right there.
Every leader knows that a big part of leadership is training other people to lead good leaders. That's the way Bob says it. You know the way that Jim Sinegal says it?
He says as a the leader of your company.
If you're not spending ninety percent of your time teaching, you're not doing your job.
The business organization achieves long term success by continuously replenishing leaders inside the organization.
The word inside is important.
You can bring in a leader from the outside of the organization, but it's much more efficient to develop those you already have.
And then immediately Bob pushes back on this idea that
The person that starts the company can't be the person that leads the company. The belief that entrepreneurs must eventually be replaced or supplanted by skilled management is false.
Entrepreneurs are often time perceived to be eccentric. Yeah. Definitely.
This can lead to a belief that a more systematic planner is needed to quote unquote manage the organization.
Entrepreneurs can learn leadership just as well as anybody else.
An entrepreneur success.
Is as much due to his leadership skills as his work ethic.
Walmart's Sam Walton was a leader.
When the company he started with small
And he remained a leader throughout its remarkable growth. So we're already into, you know
I'm on page six of the book, for God's sake.
And
There's already been at least three examples of people that monger and buffet.
Admire Sam Walton.
Jim Sinegal.
Less schwab.
The commonality between how they all ran their businesses just jumps out at you, in fact.
But two pages later he's gonna come up with an idea, or actually the next page.
That sounds a hell of a lot like what Munger would repeat as well. And so
He starts out with saying, Hey, keeping your organization simple is not simple.
But it is very important. And so his idea is like the way to keep your organization simple is
Or
Everything around this commitment to a common goal.
Our society places too much importance on organizations. We tend to hold up the structure as important.
Rather than the people who make it up.
our first step is to show organizations for what they really are.
Groups of people who come together for a common purpose.
The business organization combines the talents of many in the pursuit of a common
Purpose.
All of his ideas. Okay, this entire book.
All of his ideas serve that idea.
that you need to commit your entire organization to a common goal
And then you have to look out for things
That distract
from that common goal. That is why he's saying keeping the organization simple isn't so simple. Human nature goes against it.
Successful organizations will achieve their success.
Because they find better ways to involve their members
In the purpose of the organization. So
That is what I meant about
Sounds a hell of a lot like Munger. Well, Munger says that the most elusive of all human goals is
Is keeping things simple.
And remembering what you set out to do.
I really think this book and Bob's main thesis.
This which he calls hey, we need to keep everybody in
uh your organization
You know, in
concentrated in pursuit of that common purpose of that common bul goal.
Is
The way Munger would would summarize that for us is that
you have to keep things simple and then remember what you set out to do. And that's very difficult because especially over a long period of time because it goes against your human nature. That's why he says it's the most elusive
of human goals.
And so Bob, like many of the great founders, they do a great job of distilling down
to the essence, the principles upon which their business is built into maxims and aphorisms.
That you can remember.
you can repeat and you can take with you. So he says, Hey, keeping the organization simple isn't so simple. What's the next one?
The uncommon pursuit of the common goal.
I almost feel like when I'm reading this book
He's saying, Hey
Guys, this isn't rocket science.
This is a simple idea that's not easy to do over the long term.
And so what is the uncommon pursuit of the common goal?
Organizations succeed to the extent that all of their members pursue a common goal.
This is one of those simple ideas that are so difficult to practice.
The greatest danger to the success of the organization is
Is that it starts developing unnecessary sub groups.
And these subgroups start pursuing their own goals rather than the common goal of the organization. That is bureaucracy is what he's describing.
Listen to what Napoleon said.
Nothing this is a direct quote from Napoleon.
Nothing is more important than unity of command.
You should have one army.
Acting on one line and led by one commander.
Bob says organizations succeed to the extent
That all of their members pursue a common goal.
And what I love about the simple language and the simple examples he gives in the book
immediately makes you stop. It made me stop. It's like okay, what is my common goal that I am pursuing?
And then once you identify that, then you start auditing how you're spending your time.
And so obviously my common goal is very simple. It's to help you learn from history's greatest entrepreneurs and to do that better than anybody else can in the entire world.
And so the second step of that was like, Okay, well let me audit how I'm actually spending my time.
Because anything that's not in service of that common goal is a distraction and should be eliminated.
And so then Bob says, Well, how do you keep everybody focused on a common goal? Remember he says
We sell commodity products for God's sake.
The only p the only competitive advantage we is we have is our people.
So it says f uh, how do you keep everyone focused on a common goal? First, you start treating everybody equally.
The organization cannot have some people who are put in a different status.
Then the rest.
You don't have executive dining areas and assigned parking spots.
Or stock options for only the highest paid people or even dress codes
For only some of the people.
If the engineers can take off to watch their kids in a softball game, so can the lathe operators
and the data entry people. So pause right there.
immediately when pops to mind when I get to that section.
That sounds a hell of a lot.
Like the stuff that Les Schwab and Sam Walton would preach as they built their business. This is from Les Schwab's autobiography.
We have had over the years some people in the office that sometimes think that they are more important than the stores.
The office serves only one purpose, and that is to serve the stores.
Some of our office people sometimes wonder about this, but I've warned them, don't bitch to me because this is the way I want it.
If you want to go out and start at the bottom changing tires and work into a manager's job, then hop right to it.
If it weren't for those men in the stores working their asses off.
In all kinds of weather.
Missing meals and working God awful hours, you wouldn't even have a job.
So if you're working for Les Schwab, is he not easy to interface with? He's very easy to understand.
There's no
Those that's like five sentences there.
Add the end of the five sentences. You know exactly.
What less believes and how he runs his b wants it to run his business. Same Walton said very similar. He says
If you're not supporting the customers.
or supporting the people that support the customers, then we don't have need for you in Walmart.
Kept it very, very simple.
The reason that's so important because if it's not simple, won't scale. Bob continues. Make sure that everybody can enter your building through the same door. So his whole point is like, listen.
These like special stock options, these assigned parking spots.
These executive dining areas.
these separate entrances over time it just you just you're telling people
With your actions.
These are the special people, you guys aren't the special people. So let me go back to Chang Ju Young. Cheng Ju Yang
wrote the most inspiring autobiography I have ever read. I gotta redo do another episode on it,'cause I think it was like episode one seventeen or something like that.
Chang Ju Young
Right, is the founder of Hondae. He starts off so poor as a son of a he's a peasant.
Son of a peasant farmer that he has to eat tree bark in the winter to survive?
No ends up dying.
as the richest person in south
Korea.
autobiography. He's writing his autobiography when he's like ninety.
And it's gonna sound a hell of a lot like what Les Schwab says, what Sam Walton was saying, what Bob is saying in
This
Book.
Some time ago, someone proposed installing a separate elevator.
for executives at the company headquarters.
I rejected the idea right on the spot.
I truly despise the inflated sense of sur superiority held by executives.
Who expect different treatment from their workers.
Why on earth would anyone need a separate elevator?
He continues, When I drop by a construction site one day,
The workers were busy laying a new carpet.
believing that this was a formality that they should observe for a their boss. So literally
Like a red carpet. So th they're
When their boss is a site visit, he c he can walk on it.
This was Chung's response. Such formality is meaningless.
With our company motto.
Their company mo motto was diligence.
frugality and affection.
Hanging right there on the wall.
Should they have a s spared a second to think about the workers laying
Carpet.
Is laying this carpet practicing frugality?
A carpet was a luxury that I despised.
After luxury comes corruption.
I have never seen a country.
Prosper with a leader who enjoys luxury.
I have never come across a company
That thrives
Under a luxury loving, wasteful
Owner.
And so we go back to Bob. Why is it so important to have everybody working as a single cohesive
Team to have everybody thinking that
Their role that they're playing.
is just as important as the person next to them.
At Fasinal, we believe that you could be the best salesperson in the world.
But if the order picker doesn't pick it right.
or the truck driver doesn't get it there on time, or the billing clerk doesn't bill it correctly, you end up with an unhappy customer.
Everyone is key.
You are better off working to make everyone equal.
So they stay focused and comes back. What do you think he's about to say?
I bet you can already finish his sentence for him.
You are better off working to make everybody equal so they stay focused on the common goal of pleasing the customer.
he's gonna give us more advice on how to do that. You need to install a reward system.
that keeps everyone focused on the common goal.
He's talking about incentives.
If you have Fast and all's common goal of growing our company through customer service.
you will avoid any rewards that don't fit that goal.
And so when I got to this part of the book, I thought about Munger.
Uh Charlie Munger's like three rules for incentives.
And so this is what he said. Number one, everyone underestimates the power of incentives.
Number two, never, ever think about anything else before thinking about the power of incentives.
And number three.
Which Bob is nailing.
The most important rule in management get
The incentives right.
And again, you have to be careful of these subgroups that are going to naturally develop in your company because
His whole point is like listen, your incentives
have to they have to fit your overall common goal.
Right, right, the common goal of pleasing the customer.
And so he gives an example. If you do these incentives based on like separate groups
they can optimize for things that go against your common goals. So he gives an example of that. This is a really smart idea.
We do not reward production people for minimizing scrap.
If some of that scrap you eliminate comes from the extra parts
The guarantee you have a full order quantity.
Ready when the customer wants it.
The incentive superpower that Munger talks about.
You s clearly see by picking up the book.
We were like up.
quarter into the book.
That Bob clearly has thought a lot about this. Of course he has.
He had thirty five years of experience, I think, by the time he wrote the book, and I think forty seven years but by the time it was published again, or something like that. Just a a t a ton, decades of thinking about this and experience with a single company.
Another piece of advice.
If you want to use a financial reward to motivate
Pay it right away. Do not wait until the end of the year or pay a special bonus.
For t to to pay a special bonus.
bonus or profit sharing.
at pay it at the end of each month if you can. So right you know, right after the to reinforce that good behavior that you want.
Or at least at the very least quarterly. Do not wait to the end of the year.
Another main theme of the book is the fact that he's got this radical belief.
in encouraging and using everybody's creativity throughout your entire organization.
And he really goes against remember, he's got an MBA.
And this is what uh one of the things that also reminded that I think Bob had in common with Munger and Buffett when you read the shareholder letters, you listen to them what they said at their AGM.
He's repeat over and over again, like like business school, they're teaching you the bad things. And so his whole point is like this command and control structure.
was not something that Bob believed in. He thought it was actually would limit the growth of the company.
And so he said and he gives an example of
the idea that like one person or like a group of leaders at the very top should should should do everything is actually harmful and is eventually going to lead to the decrease of growth in your company. And he learned this
One of the ways he learned this is when he was a boy scout when he's a young boy.
One of my first lessons in how not to promote creativity came from the boy scouts.
The troop that I joined when I was ten had a leader who did not challenge the kids.
He arranged everything for us, so they would go on camping trips.
And instead of teaching them, you know, and they're obviously when you teach somebody
when you let them do something they've never done before, they're gonna make mistakes. And so
the troop leaders like oh you know, I'll set up the the the tent, I will do all the cooking.
I will start to fire. They're essentially just sitting around useless.
And he says we watched other troops
Cooking stew.
Making fires.
Setting up TPs and rope bridges.
While we sat around.
At the end of a few years, nobody was above the rank of second class scout in our troop.
Today
I probably couldn't survive in the woods for more than a few hours.
And he immediately translates that lesson to what he observed in his, you know, multi decade career.
Too many business organizations practice central planning

That the creativity of their people is effectively ninety five percent curtailed.
And he rails against this because
He was taught that this is better management and he clearly does not agree with this.
Businesses that become large and quote unquote better manage.
Saw their markets and profits eaten up.
by nimble startup firms with great ideas and efficient ex execution.
Many large companies resemble small socialist states.
Ideas and plans all come from the top.
The majority of the workers are treated differently than the top planners, and most of the workers receive little or no self-fulfillment in their jobs.
And so this is when he starts repeating another one of his ideas like you have to learn to delegate. He was afraid to delegate.
It's a common f he calls delegate uh the fear of
uh delegation.
Common.
But he thinks it's a terrible bad habit. Why do companies develop such bad habits? Simply because the people at the top of the organization start focusing.
On how smart they are.
Rather than focusing on how little they know.
If ninety five percent of the people in your company do not participate in the creation of ideas
They will spend their time thinking and talking about cars, sports, and office politics. To add insult to this loss of creativity, most of the people who are ignored are on the front lines. To go back to what Les said.
Les Schwab said and Sam Walton said, right?
You're either serving the customer or serving the people that serve the customer. We don't need you.
The founder of UPS, Jim Casey.
Same thing.
He didn't want to sit and talk to his executives all day, right? I've told this story a million times'cause it's just very memorable and hilarious.
Not even hilarious, just like very informative.
The fact that
Every time he he had a driver.
And
He he instructed his driver every time.
That we pass a big
Brown UPS truck.
Pull over.
And Jim would spend all his time, as much time as possible, talking to the people on the front lines, the people actually delivering
The service to his customers.
So let's go back to this.
To add insult to this loss of creativity, most of the people who are ignored are on the front lines, running the machines or talking to the customers.
While the people doing the thinking and the planning are isolated from both, which group do you think receives the best stimulus?
To foster creativity.
Decentralized decision making, decentralized decision making.
decentralized decision making. He he wrote wrote that three times. I'm not you know, I'm not
Repeating that on my own.
Say it a few times, so it becomes a mantra.
He feels decentralized, this extreme decentralized decision making is one of the most valuable things that they have in their company culture.
With over twenty six hundred stores around the world, the decisions about which items to stock
in each store are left to the people in the store.
Computers help to pick a basic starting inventory.
But items are added.
as uh as store personnel gather information about customers
in their local market.
The people in our stores are able to special order items that their customers request
that are usually unavailable within our warehouse system.
That idea of allowing them.
Right, do you have a
a one off special request from a customer that then you can fill you have the complete autonomy and trust
from your organization to fulfill their request.
What's gonna h like and then you obviously inform the customers like, Hey, this is special, we had to do this for you.
And then you do it to their satisfaction, you have a customer for life. This is something that
Uh uh one of my favorite biographies I've ever read. I think it's episode three sixteen. It's on the founder of Bugatti, and the reason I even
Found this book.
is because I became obsessed with Enzo Ferrari and I did a bunch of episodes on him.
And in
Ferrari's biographies, it talks about hey, his blueprint, he was just copying
What Bugatti did.
And so I find this like
Crazy
uh biography of Bugatti written by his daughter, I think in like the nineteen sixties.
And there's a story in there that I never forgot.
That Bugatti
receives a letter from one of his customers. Okay.
About a car.
That's still operational, a Bugatti car.
Uh, that the guy bought thirty years ago and he something broke on it and he needed it fixed.
And Bugatti reads his letter and then writes him back and the the the the the punchline is
the the incredible level of customer service and and just love for the work uh his work that Bugatti had.
was Bugatti offered to custom make
They didn't stock that part. They didn't even have it anymore.
He's like, hey, I'm gonna custom make
This replacement part part for that car that's almost thirty years old.
And I'm gonna give it to you.
At cost.
that long term view. Okay.
Not trying to make a couple dollars on this call. First of all, even doing it's remarkable, right?
And then selling it at cost is actually genius.
Because how many people is that satisfied customer gonna tell?
A lot more than whatever markup you would make on that one off.
Hurt.
And so Bob then tells us why is this so important because it's this virtuous cycle it leads to.
Consider where your new product ideas come from.
We encourage people in each store to come up with products to add to our general lines. If a customer asks for a product that we don't currently sell,
We encourage our people to find a possible source to satisfy this customer's request.
If successful
The store may then start selling the same product to other customers.
Our nearby stores may then also start offering the item eventually.
It becomes a company wide.
Product.
So a lot of people were like, Okay, well, how are you gonna manage? You know, you got at the time twenty seven hundred of these little stores.
You know, they're all run independently.
And he's like, Listen, uh Bob's like
Of course you need some rules.
But you don't need these thick manuals that nobody's reading. You need you need a handful of principles.
all oriented oriented around the goal of the organization. This is why it's so genius.
This idea of just organizing my entire company.
on this commitment to a common goal.
And then
Regularly checking. Like is the action, is the way we're spending time, is this idea in service of that common goal? Yes or no?
Uh so he says
You need rules, but you can probably put them on three sheets of paper and give them to each new employee. These rules will state the common goal for the organization.
These rules should instill a good understanding of the common goal of the organization. He's repeating it again.
And he says what his common goal is growing our corp our company through customer service.
Eliminate all those three ring binders filled with standard management practices.
Another suggestion to develop the potential of your people is to emphasize training.
Most of the people who join us come out of school with little expertise in our product line.
We see their potential and give them an opportunity to achieve.
Most of our executive officers started in entry level positions in fascinal stores. So he's gonna use
This this importance of constantly training over and over again.
I actually think there's a better word for that. Sol Price, who is the most influential retailer to ever live.
Sam Walton took more ideas from him. Jim Costco. Or Jim Costco.
Jim Cynigal of Costco.
With sole prices.
Uh Menti.
And he started working for Sol Price soon as he's like nineteen.
He gives us interviews when he's like seventies like people like Oh, you must have learned a lot from Soul Price, like No.
I don't learn a lot. I learned everything I know.
The amount of successful retailers that built, you know, in c in some cases, many cases, hundreds of billions of dollars.
of retail companies.
Costco home depot.
Walmart.
that talked about and learned from Sole Prices, it's just absolutely incredible. But
I think so
has a better he has this this mantra, this this maxim that he would repeat.
And he says you train an animal, you teach a person.
And so when Bob uses the word training, I automatically substitute that for the word teaching.
That's why I think about why Jim Sinagal, who is the obvious the mentee
Uh of
So price. He's like if you're not spending ninety percent of your time teaching, you're not doing your job.
You're teaching or training all of the people in your organization the standards and expectations of this common goal that your entire business is oriented around.
And so the way Bob would describe this is he wants leaders. He doesn't want managers.
And
If you're a leader
It's much more like a coach than it is and it gives us baseball it gives us sports analogy, right?
And so he talks about the difference between a coach and basketball.
and a manager. Remember, he wants leaders, not managers.
and a manager in baseball.
Have you ever considered and this this will basically illustrate his entire idea around this.
uh chapter.
Have you ever considered the top supervisor on a baseball team is called a manager?
While the top supervisor on a basketball team is called a coach.
Look at the control each one has. His whole point is like you've got to get over this fear of relinquishing control.
The baseball manager is controlling each move of the player.
Waving the short stop over a little.
Are signaling when the runner should s steal.
uh the base or ordering the pitcher to walk a runner. In the baseball game, the manager is in complete control.
and fits the old style idea of a manager.
What he means by old style idea of a manager is what they teach in business school, which he feels is useless.
In the basketball game, the coach is relying on each player to make quick decisions about passes and shots. This is much more Bob's.
uh philosophy. Okay. The coach may send in a play after a timeout.
But control swiftly passes back to the players on the court.
In business, the manager controls what each person does, assigning tasks and communicating the results upward.
Bob does not like that.
The leader, however, tells the team members what the group has to accomplish.
And challenges them.
to find the best way to do so.
So now that we know that he wants leaders and not managers
Let's
get to his definition of a leader. A leader is somewhat like that of the master learner among apprentice learn of all different levels.
With the intention of developing more master learners to allow the organization
To grow.
His stated goal on the back cover.
our commitment to a common goal, which is growth through customer service.
And then he tells a story to illustrate what this would look like inside of an organization. I worked one summer in quality control department of a metal products manufacturer.
There were two people who managed the department.
The first was a general manager who had a separate office.
The other was an assistant who had a desk.
out with the rest of us. Whenever we had a question or a problem arose,
Nobody went to the generator, who's hiding in his cave, right?
We all went to the assistant who was accessible.
The assistant was growing in stature with the overall plant managers because the assistant knew so much more about everything else than
That was going on.
So over time the assistant leapfrogged the manager within the organization.
The assistant
was the true leader.
Stay out there on the front lines where the action takes place.
You learn more when you see everything up close.
And then he repeats, do not deviate from the common goal. And the way he would say this is the team's pursuit.

must be defended by outside attempts to weaken it.
And then spread throughout the book are just simple, but I would say very valuable pieces of advice. Here's one of them.
Pay attention to the silent people when you are leading.
If half of the people are not asked for their new ideas.
You only have a fifty percent chance of finding the best
solution. Pay attention to the silent people when you are leading.
This reminded me of uh Brad Jacobs.
Uh one of the most
popular episodes I've done recently was episode three thirty five. It's How to Make a Few Billion Dollars by Brad Jacobs.
Excellent book. Also written.
by a person that loves founders. Brad sent me a great message that he said he was addicted to these founder book reviews.
But in that book that he wrote.
I thought it was actually genius. So you know, when he buys a bunch of
uh new companies all the time.
And he was shocked that
How many people
never solicit advice from the people working in the company. It's very similar to what Bob's telling us here.
And so he's got two questions.
They would ask every single employee.
And I think there's genius in the simplicity of this idea. Number one.
What's the single best idea to improve
Our company.
Or what's your single best idea to improve our company, rather? And number two.
What is the stupidest thing that we're doing as a company?
And he makes the point in the book, like you would be shocked at how much valuable information
That you get just from asking those two simple questions. Sounds very similar to what Bob is saying here. If half the people are not asked for their ideas.
You only have a fifty percent chance of finding the best solution.
And then something Bob also talks about is just how much he learned.
Just by the example that other people example's good and bad.
From other people he worked with and worked for over the years.
And
This is really i like we're halfway through more than halfway through the book and it really clicked for me the first time.
I was going through'cause you obviously you know, before I sit down and talk to you, I r I not only read the book, but I reread it.
the highlights and notes over and over again.
I'll I'll read what I wrote on the note in one second.
He says, While I attended college, I worked for a manufacturing company that employed about three hundred people.
I spend a lot of hours in the office on Saturdays.
Sometimes other people came in on Saturdays, but only one person.
was certain to show up.
the president and founder of the firm.
At the time he was seventy two years old.
He had an obvious interest and pride in what was going on.
He kneach employee
And appreciated
his or her contribution.
I count him.
As one of the three people
who was most influence who has most influence my understanding of leadership. And so I got to that part.
And I re read it.
I was like, wait a minute, he knew
Each employee.
and appreciated his or her contribution and this is when it started to click.
If his goal we're talking about Bob now, okay, this is my note to myself.
If
His goal if Bob's goal is growth through customer service.
He has to fulfill every single employee.
That delivers that service.
His constant repeating
That Fasinal's advantage
Is people
serves his main goal.
All of his ideas work together. It's that virtuous cycle, that virtuous flywheel.
There's another advantage of decentralized this extreme decentralized decision making, and that's the flexibility to respond.
to changes in the future.
The future is not just next week or next month.
But years out.
Fastinal has been growing at a rate where it doubles in size every two and a half years.
That means that in five years we are four times the size.
So our people have to think that in five years we will haul four times as much product around the country.
I love this sentence.
Good ideas start by simple approaches.
To what lies ahead.
A proactive leader understands that unless one attends to the future, you get locked the past.
the main reason Fastanol doesn't grow much through acquisition.
Is that we would buy too much old baggage with acquired companies.
We want our leaders to do what is best for what lies ahead.
Rather than repeating what brought success in the past.
Any time you stop thinking about the future.
Some people with better ideas will come along to eat your lunch.
Any time you stop thinking about the future.
Some people with better ideas will come along to eat your lunch. And if you have the flexibility and the empowerment of all and the decentralized decision making and the this complete autonomy that Fasinal does.
Sometimes you're the one.
That is inventing the future. So let me go back.
I'm gonna put the book down for one second.
And I want to go back to that story of the CEO that was meeting with Buffett, the CEO that succeeded curlin. So this giant part of Facenal's business now.
after this was invented after this book was written.
Okay, the first the first the first uh version in nineteen ninety seven.
was the fact that they have these vending machines.
And the way I think about the vending machines is like, you know, think of every t any time you've been in like a hardware store, right? You go to Ace Hardware or Home Deep or anywhere else.
And think about how
All the equipment.
And supplies are presented.
Yeah, like kinda like searching through it's kinda like a chaotic mess.
So
Will Oberton, which was the the C the former CO, but he he's no longer CO now, but he's the one that was CO after Bob, okay?
Oberton also developed an industrial vending machine system. There's a video on YouTube that's fascinating about this. It's from Fasinal. Fascinating has their own YouTube channel. You can see the vending machine. If you just type in Fastinol vending machine if you're interested in this. I thought it was actually cool.
Uh, Oberton developed an industrial vending machine.
And I searched for it after I read this, because I gotta see what this looks like. Oberton had developed an industrial vending machine system helping Bob realize a lifelong goal. In nineteen fifty one, as a twelve year old working in his father's auto parts store.
Bob was bothered by the fact that his dad had to send customers searching for nuts and bolts.
To someone else's store, he imagined that a vending machine installed at its father's place.
might pop out fasteners like gumballs.
Once on his own he tried to convert a cigarette vending machine to this purpose. He couldn't get it to work.
So he started selling fasteners over the counter.
Thus Fasanel was born.
Forty years later.
Working with a snack machine manufacturer and off the shelf software.
Will Overton got the job done.
Fast and all's vending machines have been a big hit with customers, so their vending machines are actually
installed in their customers locations.
It cannot get simpler for this. You gotta watch the video, I'm telling you.
Oberton got the job done. Fast and those vending machines had been hit been a hit with customers, generally helping them save 30% on supplies.
The machines have cut down on theft.
and enabled automated reordering.
That four year old business, which I think now it's like fifteen years old.
With within four years old, they this new idea
already started contributing to thirty six percent.
of the overall sales
of fast now. Who know? I think it's like over forty percent now.
Think about that.
Go back, so now I'm picking back up the book.
Think about the vending machine idea, which was not invented.
When Bob wrote these words, this makes these words hit s so hard.
We want our leaders to do what is best for what lies ahead.
Rather than be repeating what brought success in the past any time.
You stop thinking about the future, some people with better ideas will come along to eat your lunch.
Thank God.
Due to their unique
enabling of this and this super belief in the power of people.
They were the one.
that came up with the better idea. They were the ones that invented
The future.
Thus avoiding somebody else coming along and eating their lunch.
And so that relates to this idea of Bob's that you have to overcome
the common fear of delegating.
And he has a really interesting way to illustrate this idea that was rather unexpected to me, and I don't think I've heard it described like this way this way anywhere else.
The death of a family member or a close friend gives us a sense of great loss.
A feeling something.
that something will now be missing in our life.
What we are missing is the uniqueness of the person who has died.
A uniqueness that we were privileged to know and understand.
That same uniqueness is present in everybody.
We just don't come around to seeing it and to understanding it.
Our first step to becoming a better leader is to start valuing everybody.
For the unique humanness.
When I was a young man, I learned that everyone did better at tasks than I thought they would.
Before starting them.
I recognize this as a bias within me.
and adjusted my willingness to delegate accordingly.
I delegated more than I used to and I saw even better outcomes.
My bias was a common fear.
Of delegating.
This came from not appreciating what talents lie hidden in other people.
And he talks about people that started just picking out orders are now COs are very valuable executives. People who started picking orders are answering phones at Fastnol.
have grown to lead hundreds and thousands of new team members.
And so some of this fear of delegat comes from
You know, this
The giant egos.
That
A lot of people in entrepreneurship have and a lot of leaders and executives definitely have.
And so he's got a piece of advice and he's got four ways to do that. He's like, You have to learn
To suppress your ego.
Sam Walton said the exact same thing. He said, Listen, you don't have to have a small ego
to work at Walmart, but you have to be
you know, very adept at hiding it. At sub uh essentially suppressing your ego is the way Sam Walton
Oh that is the way Bob describes Sam Walton's idea. So
Bob says, learn to suppress your ego. The first place to start, if you want to suppress your ego, is to admit that you have one.
We all have one and nobody likes theirs to be insulted.
And in a work environment, egos in a typical work environment.
Especially at a successful company.
Egos are in full bloom.
So how do you work at suppressing your ego? I can give you four suggestions that I've observed over the years. Number one.
Treat
Everyone is equals.
Number two, learn to stay silent sometimes.
Number three, be willing to get dirty. That goes back to the CO.
You know who's answering customer calls.
And he's driving trucks. He's not like I'm the CEO of
This you know, public company. How how how can it be a truck driver? He's like
Well
What's my goal?
Our common goal
Our commitment is to to this common goal of
Growing through customer service.
Is
Not driving a truck because we're shorthanded in that department.
And therefore our customer delivery comes late, later than it would if I get behind the wheel. Is that serving
Our customer.
Is that me being committed to this common goal? No, it is not.
So number three, be willing to get dirty. Number four, do good things anonymously.
And then he feels the need to offer what he calls a few words of caution.
there's some things that you're going to have to watch out for.
Goes back to this number one, keep the team goal consistent.
with that of the main organization. So you know you're gonna have subgroups, he calls them subgroups, teams.
They will naturally develop their own goals.
And in many cases those goals will be in conflict.
with that of the main organization. One department can develop such great spirit and cohesiveness.
That it loses sight of its role in the larger organization. Keep that team goal consistent. Make sure all your team goals are consistent.
With that of the main organization.
And another way to keep on the path. Keep reminding yourself how little you know.
Pardon me if I keep telling you how to forget how smart you are.
Even if you are smart, you're better off forgetting about it.
Start thinking instead about how little you know compared to the vast amount of knowledge in the world.
Consider that everything that I have written here about leadership is something I learned from someone else.
They either taught me or I learned from their example, good or bad.
Nothing here stands out as a brilliant breakthrough.
Everything is a passage of information through the lens of my observations.
And I have no way of knowing how much
is still out there to learn. And so he talked about early in the book. Let me go back to that real quick.
That even as an elderly gentleman, he's still constantly learning at my senior citizen age.
I am still improving.
Perhaps at a faster rate than I was several decades ago.
With the experience of a lifetime, you're able to find the final pieces to complete the puzzle.
And then if you think about what he's saying here, it's like you know, there's nothing here stands out as a brilliant breakthrough. Everything that I
wrote everything that I've learned, I learned from other people.
either th their example or otherwise, it that's another form of suppressing his ego, of keeping your ego in check.
And a good way to keep your ego in check is just to keep reminding yourself
How little that you know.
Thomas Edison has a great quote about this.
And he says we don't know one one thousandth percent of anything.
And I think it's important to point out the reason he keeps talking about pride and ego.
Is because that gets in the way
of your organization's commitment to the common goal.
So
He's going to summarize this'cause he loves maxims.
And he he taught he makes this ten basic rules about leadership. And he says the simplicity of each rule must overcome the thick walls of pride.
that prevent its implementation.
One can only dream of a world where these rules are universally practiced and
We know because human nature doesn't change.
They they'll never be universally practiced.
And so our ability to actually learn
and change our behavior.
will always be at odds with the larger human nature. That's why I think it's so valuable. It's not because
The ideas are are so hard to understand. They're so hard to apply.
And especially apply them over, you know.
Since nineteen sixty seven, like Fastnol has.
Number one challenge rather than control.
Number two, treat everyone as your equal.
Number three, stay out of the spotlight.
Number four, share the rewards.
Number five, listen.
Rather than speak.
Number six, see the unique humanness in all persons.
Number seven, develop empathy.
Number eight.
Suppress your ego.
Number nine, let people learn.
Number ten.
Remember how little you know.
Follow these rules.
and provide leadership to your world.
And then what I love is he ties this all together.
To serve a mission.
That is bigger than any one person.
Any one company?
Anyone industry
Any
One lifetime.
He says the example that we set in the workplace will live on after us.
Your life is an example for all to imitate.
What parts of it others will imitate depends on the respect they have for you.
If you have earned respect through your leadership, others will imitate your actions.
And you will influence people beyond your generation.
The exceptional leadership of a Thomas Jefferson
Or an Abraham Lincoln.
Or Martin Luther King.
Or Helen Keller.
Or Alexander the Great lives on for centuries.
And makes the world a better place for all of us.
Become a leader at home.
And in your work.
Make the world a better place.
Because of what you do.
And that is where I'll leave it for the full story. Highly recommend reading the book. If you want to buy the book using the link that's in the show notes on the podcast player.
or available at founders podcast dot com.
You'll be supporting the podcast at the same time. That is three hundred.
And sixty books down.
One thousand ago.
And I'll talk to you again soon.
One more quick thing before you go. There is a founders event.
Taking place in person.
in Austin, Texas, from September twenty seventh through the twenty ninth.
For years people have asked me to introduce them.
to other founders listeners. These events that I do, this is the third and final one this year.
They exist for that.
Reason, that sole reason only to help you build relationships with other founders, investors, and high value people that listen to founders podcasts. It turns out that's a good filter and an easy way to build a relationship with somebody, and these relationships produce nonlinear returns.
There's a few separate sources for this idea that I think you'll find interesting.
I was at an in person event in Texas and I was actually having a very fascinating conversation
With a guy where his job
There's a a ton of wealthy family offices.
in Texas and like a lot of them built fortunes in real estate and oil and gas.
And his job was to do in person events for other people.
That worked at other family offices.
And the family office he was with
They put a ton of time and energy and money and resources behind this.
And he had a great line to describe why. He said because the relationship between these two types of people
produce nonlinear returns.
This is also true for people that listen to founders. It is also something that reoccurs in the biographies that you and I study every week, this idea that relationships run the world.
In fact, when I w when I was able to speak to both Sam Zell and Charlie Munger before they passed away, they both said similar things. They said it's a little bit.
They had the same idea, they said in different ways, but the idea was that you need to invest heavily in relationships. And they both told me examples of relationships they had built and maintained over decades. And so that is why the founders events exist to help you build relationships with other founders, investors.
and high value people.
That is also why I ran out the entire venue. So every single person that you see there is for the same reason that you are.
And has the exact same interest that you do.
These are also all inclusive locations, which means all you have to do is get yourself there and I take care of the rest. Your lodging, your food.
Access to all the events is all taken care of.
If you want to attend, go to founderspodcast.com forward slash events. That's founderspodcast.com forward slash events and apply. And I hope to see you in Austin.