IKEA

Transcript from https://podmenti.com/t/ebcf00d5cf2538e6

I also got a flat packed chocolate mousse.
I put it together this morning. It's very easy. It's three pieces. Oh, moose like an animal, not chocolate moose like a pudding.
Yeah, that's correct.
It looked really good at first, but like the sun rays came in my window and within like ten minutes it was melted and broke on the kitchen table.
Oh boy. Is there an analogy about Ikea furniture in there?
I hope not.
It was funny though. No, I don't think so.
I'm ready if you are.
I'm ready.
Let's do it.
Who got the truth?
Is it you, is it you, is it you Who got
No.
Is it you, is it you, is it you
Me down, say it straight
Another story on the way
Welcome to the fall twenty twenty four season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.
I'm David Rosenthal. And we are your hosts.
When you're running an in-person retail establishment, you know one thing for sure.
If people are gonna buy your products.
They have to be in your store.
And more time in your store.
generally means they buy more product.
So what is a great way to increase time in store is
Meatballs David.
Meeples.
Repose.
And hot dogs. And hot dogs.
We'll get there.
So listeners, today we dive into IKEA.
The company that sells over a billion Swedish meatballs a year.
And a lot of furniture and homeware is to go with it.
IKEA is an eighty-one year old company.
People visit their stores nearly nine hundred million times a year.
And it's quirky as hell. If you've ever shopped there, you're familiar with the crazy maze of showrooms.
David, I spent five hours inside the Seattle store last weekend. I went there to prepare for this episode. I didn't realize that I was gonna spend the whole day there, but
That's what happens when you go to IKEA.
God bless you. Did you uh make use of small land?
Uh I went with a friend who had a
kid old enough to take advantage of small land, so yes.
Nice.
Perhaps you know the relationship test of can you make it through IKEA together?
And that's just at the store, then you get home and you have to assemble all that flat packed furniture you just bought.
But the furniture
It does look good.
Even though it's extremely inexpensive and you do have to build it yourself using the funny diagrams with the funny little man and the funny labels.
It ends up looking pretty good.
Hell yeah, it does.
And the results of this crazy stew of ingredients is that IKEA has become the world's largest furniture retailer and one of the largest retailers, period.
Today we'll examine why it has worked so well, how its founder became the eighth wealthiest person in the world before shifting his ownership into a foundation.
and how all the little innovations have just added up and refined the concept along the way. So whether it's the Poeang chair, the lack shelf, the Billy Bookcase.
It is very likely that you have something from IKEA in your house right now.
This is the story of a mission to create simple, well-designed, low-cost furniture accessible to as many people as possible.
taken to its absolute logical extreme.
Totally.
Well, listeners, after this episode, come discuss it with us on Slack and check out ACQ Two, our second show, where we just had Luis Fawn as a guest, the CEO of Duolingo.
His company story is pretty unlikely given most investors assumed you could not build a large business in either the education or language learning market specifically. And Luis has some of the most practical advice I've ever heard for anyone building a consumer startup and have sent it already to a bunch of friends who are building consumer companies. So go check it out.
A CQ two available in any podcast player.
So with that, this show is not investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes.
Only.
Unfortunately, there is literally no possible way for us to have investments or for any human being to have investments in the companies that we discuss here.

But we start.
In the small town of Elmhoot.
Sweden.
Which is in the province of Smallland.
Which
Despite its name is not so small, but rather a large rural area in the south of Sweden.
Not too far from Denmark.
And
Small land, again, despite its sort of
Cutesy, friendly, Ikea like sounding name.
It's a pretty tough place.
It's rural.
It's agrarian the soil is pretty barren, it's really rocky.
There's a lot of forests and
Timber and
Timber, wood.
Foreshadowing maybe.
One day what will come out of this province in Sweden.
Yeah. Yeah. I mean it's Sweden. It's really cold.
Tough place to grow up.
Totally.
The farmers in smallland though, they
really have to work hard to scrape out their existence. And there's actually a word in smallland
Called Lista.
Which means making do with an absolute
Minimum.
Of resources appropriate to the province and uh appropriate to Ikea, as we shall see.
And so
It is there.
On a farm in Spotland.
In March of nineteen twenty six, when our protagonist
Theodore Ingvar Compre.
Or just Ingvar.
As he is known.
Is born.
And he's born where else for the region on a
Family farm named Elm Tarud.
In an area about twenty kilometers outside of
Elmhoofd called the M.
Aguna read.
Which
Apologies to all of our sweetest friends if we
But you does. I listened to a lot of pronunciations to try to get this right. Now
To give you even more of a sense.
of this land that we're talking about.
Elmhult, the you know, bustling
local metropolis.
I don't know what the population was in nineteen twenty six.
But in twenty ten, the population of Elmhult, the big city
was nine thousand people.
And that is
Including
Ike is
Major, major presence there in that town today, including the first sore.
The Ikea Museum.
The Ikea Hotel.
Et cetera, et cetera.
I'm imagining maybe a thousand people live there at this time. Maybe. And
Agunarud, the uh area where the farm is
In twenty ten, do you know what it's
Total population is?
Low hundreds.
Two hundred and twenty people. All right. So he's in the sticks. This is the sticks. So
How did the Comprade family come to Smallland?
Well, if you're perceptive and know your sort of
Northern and Central European family names here.
Comrad is not a Swedish name.
It's
German.
And actually.
Do you know?
what IKEA's largest market is still to this day.
It is not Sweden, it's not the US, it's not China.
Germany.
It's Germany. Ah.
So Engbar's grandmother and grandfather had

Only
Thirty years before Ingvar was born, so in eighteen ninety six.
And unfortunately it's not a happy story.
So they bought the farm, Elm Tarud.
Sight unseen.
When they were in Germany from an advertisement in a local hunting magazine. And uh people would sort of joke later that this was IKEA's first mail order purchase was
The farm and moving to Sweden.
So wait.
Why would you
buy a site unseen farm in Sweden.
Especially a not very attractive place to farm in Sweden.
Pre World War One Germany too.
Yes, so more to the story here.
The stated purpose and idea.
was that they were going to convert
the farm from like a agricultural farm
into a timber farm, into a timber forest.
Ingvar's grandfather, HM had
been connected to the timber trade in Germany.
So idea makes sense on paper.
Unfortunately, though, it doesn't
Work out.
And the next year after they immigrate
In eighteen ninety seven.
Ingvar's grandfather Him commits suicide.
Oof.
So
That leaves
His grandmother, Francisca.
Alone to raise three kids, one of which was just born.
And manage
This farm.
She's nothing about how to farm.
It's a really difficult farm to operate.
In a
rural, isolated part of a country that she's not from
Doesn't speak the language.
Totally rough.
Really, really rough. And I don't know if this came up in the stuff you were reading.
Something I read alluded to the idea that
Ingvar's grandfather committed suicide.
basically out of poverty. Like his life was so miserable.
from being totally impoverished that he was clinically depressed and
Yeah.
Well, yes, so there's a little more to the story.
Turns out
The actual reason for the family's emigration from Germany
was more about
Francisca and HM's marriage and Francisca's family.
So
A Tim
had been from a noble family in Germany, or at least a family with historically, you know, ties to the nobility.
Francisco was a commoner and I think an illegitimate child born out of wedlock.
So
Him's parents and particularly his mother was
Not happy about this, didn't approve of the marriage.
And so
part of or really probably the whole reason for their
Immigration from Germany to Sweden was to escape this.
This is uh
Tough.
So
To plant a seed here.
There is a strong cultural thing in this family.
Of
Don't be poor.
figure out a way to earn keep.
Make wealth.
Deeply ingrained from this.
Yes.
Really, really bad situation. None the less
The family perseveres.
And by the time these children grow up
Francisca has turned Elmtarood into like
A real?
Functional.
Farm.
They're getting by.
It's not gonna make them rich, which again, like nobody in small end is rich. Like they're making it work and they've
built themselves into a respected.
family in the area.
Now
The eldest of these children.
The eldest son, Franz Feodor.
Grows up.
And Mary's
The daughter of the biggest merchant in Elmhult.
So
Bringing, you know, now some merchant blood into the family.
When he's twenty five, Francisca asked him, and I uh I don't think she asked
To come help manage the farm.
So France Feodor and his new wife, Berta
They have two young sons, the elder of whom is
Fodor Ingvar Komrad, our protagonist here.
They arrive at the farm and this is where
Ingvar Compradi.
Founder, purveyor.
Janitor Soul Embodiment.
I mean really
We say this on a lot of episodes, but Ingvar
Is
Ikea.
As we shall see. Yeah. He is like Jensen and Mark Zuckerberg.
All in one. Singular founder.
The company wouldn't
exist but for his exact personality
magnified and multiplied into this huge behemoth. You already see the frugality, the
We're about to get to the like cleverness of being a merchant.
The adversity, the chip on his shoulder, I mean all of it. Yes.
Yeah.
So when Engbar is
Super young. Like
Five years old.
This merchant side of his DNA starts to come through and blossom.
his aunt, the youngest child, the third child of Francisca.
Helps young Ingvar.
by bulk sets of matchboxes mail order from Stockholm, the capital of Sweden.
Ingvar, little Ingvar, five year old.
That goes around the countryside.
Selling individual matchboxes.
to other farms and other families in the area.
At like a three X markup from what he got them unit price in the bulk package from Stockholm.
So he writes later.
My aunt
Didn't accept payment for the postage.
So then I sold the boxes at two to three
Or each or is like a penny to a croner at the time in Sweden. So like two to three cents each.
Sometimes even five.
The whole mail order package of one hundred
Cost eighty eight cents. Talk about profit margins. I still remember the lovely feeling.
From that time selling things
Became somewhat of an obsession for me.
Yeah, the seeds are sown of one of the greatest retailers of all time, right here at H five.
Totally. I mean
Sam Walton.
Jim Sinegal, Saul Price.
Jeffers.
Ingrid Comprade.
Absolutely. Yep.
So young Ing Bar.
He gets a taste of this, he's hooked.
He goes on all throughout his childhood. He's
Ordering
Bulk items mail order from elsewhere in the country.
selling all kinds of stuff out to the residents out in the smallland countryside. So like Christmas cards.
Wall decorations, garden seeds, you just like
Random
Small goods.
Ultimately he finds a niche and a good business
Importing and selling fountain pens from
other countries in Europe. He's like ten, twelve years old at this point.
He's selling these fountain pens so fast.
That he decides like oh hey
I wish I had some financing to be able to buy some more of these pens. I know I could make money. I have product market fit. I should raise money. I should raise money.
So he goes to the village in Elbhult.
And he takes out a five hundred kroner loan from the bank there, Swedish Kroner.
This is like sixty three dollars about at the time. This is in nineteen thirty eight. And in nineteen thirty eight dollars, sixty three dollars is hundreds of dollars today.
Yeah.
For a twelve year old.
So imagine your kid walking down the street and going and somehow going back with five hundred dollars. Right. That's also part of the story here. He finagles. Like I don't think his, you know, grandmother or his parents were helping him with this. Right.
So he uses that.
To import five hundred
fountain pens from Paris.
And then I think, you know, they sell quickly, he like repays back.
You know, the the the loan pretty quickly.
And that's
Listeners.

Only capital that
ever goes into Ikea. That is the only money.
That Ingvar would
Ever raise.
We will flash all the way forward to modern day.
Ingvar
Always
owned a hundred percent of IKEA.
He built it into the world's largest furniture store and one of the world's largest retailers, period.
Without
Anybody else owning a single share of the company.
No outside financing.
No debt financing, nothing.
Nothing.
They own I think all of their real estate today. They own all this stuff. I'm sure they probably use construction financing today, but
You know, they have twenty five billion euros in the bank, like
This is it. This is the background. This is what he comes from.
Five hundred Kroner loan in nineteen thirty eight, paid back immediately.
Only capital that ever goes into the business. Freaking wild. Totally crazy. Totally wild.
I don't recall exactly like the Walmart story, but
I mean even that I think Sam was like from family and banks and other folks taking money.
Yeah, his wife's family, I believe, invested. That's right.
His wife family.
The whole thing gets financed off of cash flow from pens.
Yes.
He literally trades matchboxes to Christmas cards to pens.

Two Ikea.
Nuts. It's like the story of the guy who starts with a paperclip and ends up with not just a house, but like a city.
It's not though.
It's not really trading. It's
He generates positive cash flow off of the sale of each of those items, then reinvests
That
positive cash flow in buying the inventory for the next thing. It's just this like
Thank God he's had eighty one years to do it, otherwise you could never grow to something this large.
financing your future growth only on the cash flows you've generated so far.
Right. It's a good point. Although he is a traitor for a very long time. I think that is how he would think of himself.
It's not like he's
getting the better of other folks. Like he's creating value. He's right.
creating value for suppliers, he's creating value for buyers, he's
Performing capitalism here. Right.
That's just the definition of capitalism. You sell something, you have excess cash flows in the form of profit margin, you reinvest that.
In growing your business. And he just did that.
Over and over and over again.
Okay.
So
In
Nineteen forty three, when Ingvar is seventeen.
He's about to go off to the equivalent of college at the school of commerce in Gothenburg, which is a
Much bigger.
city in Sweden. Like is actually a city in Sweden.
And uh
Ingard decides that before he goes,
He wants to officially
start a company, like a firm.
to formalize all of his trading activities that he's been doing'cause he
intends to expand it while he's in Gothenburg at school.
His sort of import export business, shall we say.
And there is one other thing happening during this period of time in Ingvar's life.
We will come back to that later.
So
Before he leaves.
He registers an official trading firm.
With the county of Smallland.
And names it.
Creatively.
The natural thing that comes to mind, very descriptive term. He names it
His name is
And his mailing address.
Ingvar.
Comproad.
Elm Tarude.
A Gunyard.
I
Okay.
Yeah.
A
Ikea. Ah, I never put together it was like his mailing address. I always knew it was the two initials of his name and the
farm in the city. Well I think that was his mailing address. Ah, that makes sense.
This is the countryside here. It's not like there's any more to the address than like Elm Tarud Gunyard.
He doesn't have a house number. So cool.
So that's idea. That's
Inkvir Comprise Trading Firm.
This is it.
And he does put the first IKEA logo sign.
on like a little shed.
on the property. It's simultaneously label the property by address, then, in addition to saying this is where IKEA does business. Yes, which is all

I'm not sure how much actually happens in the shed, besides he puts
To sign up there.
I think he just stores inventory there. Yeah.

Well, let's talk about inventory. So
Engmar goes off to the school of commerce.
And
For the first time there, he's able to do what I
Think he intended.
Which was get access in the school library to real actual
Trade publications.
import export trade papers and trade publications.
So he starts.
writing to the suppliers all over Europe who are listed in these trade publications.
And asks if he can become
A selling agent of theirs in Sweden.
No, I say agent.
At this point.
He's running.
an actually incredibly capital light.
Business.
Most
things. I think he is not taking inventory.
Some of it he is. He's storing some pens and stuff, small goods under his bed while he's at college, but a lot of it
What he's doing.
Is he's finding and aggregating
Demand in Sweden.
And sending it.
Purchase orders.
directly to the manufacturers wherever they are in Sweden or elsewhere.
And they just fulfill the orders directly to the customers.
By mail.
It's pretty awesome.
So like the first dropshipper.
Yeah, he's not doing the shipping.
And he's just an aggregator for demand. He's an agent. And he never takes possession of the inventory. It's a fulfilled in real time as he gets the order the
supplier puts it in the mail. It's great.
Yep. I think and not always, you know, sometimes he gets a box of five hundred pens or whatever. Like he's doing whatever
is gonna make him the most money and be the right arrangement, but
Being an agent is the best way to do this.
So
He starts off, you know, naturally he continues the pen business. He goes from fountain pens to ballpoints. That's a big hit.
Then he gets into wallets.
Cigarette lighters, file folders, you know, all
Sorts of small goods.
And at first
He's mostly
Just kinda
doing what a lot of other people are doing at this point in time who are trader agent types.
He's
A travelling salesman. He's going back and forth to Gothenburg and to small land and
He's selling to customers that he meets, mostly out in the countryside. It's you know, hand to hand combat. It's ringing doors, it's calling on his network.
Then though,
He gets the idea. He's like well
I'm getting all my supplier relationships.
Through trade magazines and corresponding by mail.
And then a lot of times when I'm the agent, they're fulfilling
The orders by mail.
What if I just get into the mail order business?
Myself.
These trade publications are a pretty good way to get business for the suppliers. What if I do that?
So he starts
A product catalogue.
And he advertises it in publications all around Sweden.
With the idea being that like oh
Rather than just what I'm limited to doing myself, I can
Now scale across the whole country and
I can aggregate a lot more demand. It actually doesn't matter if I don't know these people or I don't go to these parts of Sweden.
The suppliers don't know'em either. It's all gonna work the same.
Yep.
And he's also learned at this point that
If he can aggregate more and more demand and get higher volumes
He's for sure gonna get better prices from these suppliers.
No.
Here in the call it mid nineteen forties, this is
not a new innovation that young Ingvar is coming up with. I mean it's basically the story of the series robot catalog, you know, fifty years earlier in America, this is happening
All over the world.
And there's plenty of other people doing the same thing in Sweden at the time.
Once you had enough scale.
to say, hey, I've aggregated a bunch of interesting products.
You started making a catalog and you
Mailed out to everyone and that was your sort of client base.
I mean it was the e commerce
industry before the e commerce industry.
Yep. Anybody could do it. It was just about
Aggregating demand.
Yep.
So
Ingvar creates uh

Called Ikea News.
Eventually he publishes IKEA news.
on its own with its own subscriber base. But at first he's just
Inserting it.
as an advertising supplement in
Local.
farming publications all around Sweden.
So
By the end of college, end of the war.
Like I said, he's
Doing really well. Like he's doing way better than probably
Anybody back in small end.
So after school.
He returns to the farm to Elmtarud.
And he recruits his family to also start.
helping him with the business and fulfilling these orders and running all the mail and all that stuff. And they're still just running it on the farm.
And then
In nineteen forty eight.
Engvar makes a
Fateful.
But again not.
Unique.
Decision.
Which is that he decides to add
Furniture.
Two
His catalogue.
No.
Other
Competitors of his other
rural focused mail order.
businesses and dealers.
Offered furniture at the time. And that's actually why Ingvar starts doing it too. He had been shopping the competition doing the Sam Walton thing. He's reading all the
advertising supplements of all his competitors.
And he notices that they start offering furniture. It seems to be working for them. They're promoting it more and more. And he says, Well, hey
I should try that too. And he would joke later, it was like it was an accident that he found his life's calling in the furniture business. Yep.
So he does
With furniture, what he's doing with
All IKEA products at this time.
Which is he goes around
Mm.
Sources some suppliers and
He asked them if Ikea can be their agent to
Sell their furniture.
No.
Furniture isn't exactly like uh fountain pens or wallets.
It's big.
You can't just
Order a box of five hundred armchairs and stuff it under your bed or put it in your little shed on the farm.
Really what you need to run this model is you need
local suppliers or at least domestic suppliers within Sweden. Yep.
Well.
Fortunately, as we discussed, the
Smallland is
Full of timber.
And it just so happens that
Probably because of that.
There are a number of furniture makers.
Right there in
The province.
So
Ingvar goes around to local small land furniture makers.
And asks if he can be their agent, like, hey
Can I bring you more business?
They're all like
Well.
Sure.
He's like there's one condition which is
You'll have to deliver
The furniture.
Yourselves. Is that okay?
Well, that's what we do anyway. It's part of our business. Sure. Yeah.
Now
Famously, and this is part of the lore about Ingvarin.
Probably is uh
Somewhat exaggerated.
He loved to tell people that he's dyslexic.
And it it totally serves this lore of like, Oh, here's this
Hard scrabble country retailer
I don't know how
Dyslexic he really was. Really? This was like a thing that I almost thought I was gonna stump you. I was because it comes up later in a key moment of IKEA.
that he's dyslexic and it's why some
I don't want to spoil it yet.
But obviously, not only do you know he was dyslexic, you're proposing he may not have been that dyslexic?
Well, I read some stuff from
Some former employees that suggested that it was more part of the legend that he
cultivated than reality. But
I actually don't know what you're referring to. I'm
Excited to be surprised.
So it's why the products are named the way they are.
Rather than having
Model numbers.
Oh, this is exactly what I was gonna say. It's like part of the
Hey, I w I need to have a word for each of these things and not only the thing. I thought that was like oh is there another point later?
Okay, so
Where are we going here, David?
Well
Regardless of its veracity or not.
Ingvar does not like remembering
Product numbers and codes and
Catalog. So he decides that he is going to give a name and not a product code or number.
To all these furniture pieces.
And
Yes.
This is the beginning of
Ikea.
Product.
Naming conventions.
Do you know though?
I actually had no idea until I started researching.
what these sort of general naming conventions are within IKEA today.
I think so. I think
different product categories are named after different things, like rivers and
Yes.
Certain furniture is named after certain it's almost like conference room naming at companies. Yeah. So
Products are usually named after
Scandinavian locations
I think
Swedish locations are used for sofas and coffee tables like the
core part of the line.
Norwegian locations I think are used for beds.
Danish locations for textiles.
And then some of the smaller goods like lamps are seas and lakes and um outdoor furniture is islands, I think. Ah. Clever. They got the whole, you know, schema here with names. So
Ingvar, if he truly was dyslexic, would now be having a tough time with all of this. So anyway.
Ingbar.
decides that he's gonna start all this off with his, you know, named pieces of furniture in the IKEA catalogue that
Again or not.
His furniture, he's just sourcing them from
Local furniture makers like other people are doing.
He's gonna start with a test.
And he puts three
Pieces from small land.
In the catalog two armchairs, one of which is a armless armchair, or so I guess just a chair.
That is intended for baby nursing.
Dude, an armless chair for baby nursing sounds awful. Sounds like torture.
Like that's the time when you need the arm the most.
Hey, man.
Different era. Different era.
So he writes.
The response was unambiguous.
We sold a huge amount of this quote unquote.
Test furniture.
And
Ingvar, of course.
He's a trader, he has a nose for business. He's like, Great, what more can we add?
So he quickly sources a sofa bed to add to the catalog. Famous, you know, IKEA sofa bed. There it is, right in the beginning.
Then a chandelier and then all sorts of other stuff and it's
Off to the races, pretty much.
Any
Piece of
furniture or furniture like home goods that
He can get his hands on.
And advertise in the catalog, it sells
Like hotcakes.
Or maybe
Meatballs. Is that too much? That's too much.
Anyway.
So now.
Why is it
selling like meatballs here.
Why is there a huge demand?
Before
Mail order.
The only way that
People out in the countryside.
could get furniture that wasn't locally made right there or
Passed down from
generations, but still it had to get made and bought.
At some point in time.
Was through.
dealers like Ingvar used to be, like, you know, traveling salesman type people.
And they had very limited access to inventory. They were sourcing like individual pieces
Probably more often than not, you know, secondhand estate stuff, or maybe they're from a distributor or a third party middle man.
I mean either way, we're talking
Super limited scale.
very sparse and unreliable product offerings, like
You need a
Baby nursing chair. An armless baby nurse. Whatever you need, a dining table, like
The likelihood that your guy
Had that.
in his stock was low.
And so that's just availability, but then also

Pricing. I mean
Again, we're talking about how everybody here is just basically eking out a living.
The travelling salesman agent types, you know, they're trying to eke out a living.
Two.
They're
Trying to make as much money as they can. They're not trying to build scale. They don't get like, Oh, hey, volume drives prices down, low prices drive volume. It's like
No no no.
No. What's the maximum margin I can extract for this?
very one off random special sale I'm making.
Totally.
Ingvar, though, because of his history in small goods and as a importer,
He's got a very different mindset. He knows that
Oh, selling goods in bulk in bulk orders, like it's all the way back to the match boxes.
That's how he's approaching the problem.
He's also young, he doesn't have a family, like he just operate in a very different mindset than everyone else here.
So
Scale doesn't
Bother him. He's happy to try and drive prices down as low as possible, pass that savings along to buyers, undercut everyone else, get more demand, like
This is how he operates.
And even more than that he realizes
Furniture.
Is way better.
Than these small goods.
Because even though, you know, I could sell cheaper these are still
large ticket purchases for people.
The absolute number of dollars or you know, Croner that I'm gonna make on
Any given piece of furniture.
Even if I'm selling it at a low margin, it's like
Way more than ballpoint pens here. Right.
And
Not only that, but
It's also selling quickly, even though these are high priced items,'cause there's this huge unmet demand in the countryside. People are starving for this stuff.
And
Even better.
The logistics and distribution for us for Ikea
Is just as easy as ever. The furniture makers are
Handling it all themselves.
This is great.
Let's
Poor resources into this. It is crazy he managed to aggregate demand for something that
is very difficult to manage and take inventory of.
And he managed to sell to those customers.
Without having to
deal with the really tough inventory problems. I mean it truly is like the first dropshipper.
Well.
As we'll see.
It works for a while and then it doesn't.
But for the moment in time.
The furniture makers love it.
Ingvar and the other folks who are doing this.
has just expanded their market.
This is the golden early days for
This whole catalog dropshipping industry.
Hm.
So within a couple months
Ingvar.
is getting so many orders from customers and so many furniture makers who want to be
In the catalogue.
Yeah.
He's like, Okay, we gotta just focus on furniture.
He starts hiring a handful more of other folks beyond just his family to
Help.
But it's still like a fairly lean operation. We're talking
Ten people or so through the forties.
They're still running it out of the farm at Elm Tarude.
And then
In nineteen forty nine.
Engvar decides to go really big.
He starts
Buying regularly every week.
Uh supplement.
And the
Big national
Farmers Paper.
In Sweden.
Which has a circulation of two hundred and eighty five thousand copies.
And
I guess we should have talked about this earlier. I'm talking about supplements, you know, advertising, you know I'm realizing that uh
I bet a lot of our audience has no idea what I'm talking about.
Like a supplement to a a newspaper.
Yes.
This is
here in America going back to the Best Buy Circular in the Sunday Paper or the Target Circular or the
Sears circular.
I don't get a newspaper anymore, but I'm pretty sure this still happens. I think this is still a very common advertising channel.
Totally.
Anyway.
Back to nineteen forty nine.
Ingvar goes big. He commits to
Regular
weekly publication as a supplement in the
National Farmers Paper. So before this when we said people were
subscribe to his catalog. How did that work?
It worked like
all these businesses I think did at the time, which was
If you were a customer
you saw something in this advertisement circular in a paper or somehow got exposed to it.
You then place an order
You then get placed on the customer list. So I think once Incvar's got your address and knows who you are, you're in his CRM, so to speak. Now I think you're getting
His
Catalog directly.
Mm.
So in this
First weekly supplement.
He specifically appeals
To what
He ultimately terms this idea of the many.
And we'll keep coming back to this. This is super critical to IKEA.
So
In this first
National circular that goes out.
He writes, You may have noticed
That it is not easy to make ends meet.
Why is this?
You yourself produce goods of various kinds.
milk, grain, potatoes, et cetera.
And I suppose you do not receive too much payment for them.
No, I'm sure you don't. And yet everything is so fantastically expensive.
To a great extent, that is due to Middlemen.
Compare what you receive for a kilo of pork with
With what the shops ask for it.
In several areas, it is unfortunately true that goods that may cost one or two corona to manufacture cost five, six, or more to buy.
In this price list.
We have taken a step.

By offering you goods at the same price your dealer buys for, in some cases lower.
I mean this is it. We'll make it up in volume.
This is
thinnest margins possible.
For the many people.
With an obsession.
In cutting out middle bed.
Yeah.
And what's interesting here is I think this is the first time where he's
By instinct.
Appealing specifically to the low price aspect.
Like again.
Almost everybody else was appealing to the selection, the availability of like, Oh, you can finally get furniture.
He's now saying like No, I know it's hard for you out there. I know you're struggling to make ends meet.
I'm gonna give you the absolute lowest prices on this stuff.
Oh yeah, this is worth a pause. Harken back to our Walmart episode. What's the uh
sort of perfect triangle of delivering a retail product. It's
Convenience.
Price.
And selection.
And what he's basically saying is
Price, price, price.
Yes.
And way better selection than you had in the old model.
Convenience probably not as good, but
Price. I know you care about price. You are struggling to make ends meet.
Yeah.
A little later we're gonna talk about
This amazing document that Engvar
writes in nineteen seventy six called The Testament of a Furniture Dealer. He's so folksy. But the very beginning of it, the very first thing reads that the mission of the company
is to create a better everyday life
For the many people
The many.
By offering a wide range of well designed
Functional home furnishing products at prices so low that
That as many people as possible.
We'll be able to afford them.
I mean that's it.
It's all right there in that sentence.
Yep.
Now
The interesting question though here and
For the rest of the episode is
Like we said.
Ingvar is not
The only
May I order furniture.

He has
Plenty of competitors who are doing the same things and
Probably catching on to this same idea that low prices are
Also important.
But none of them become Ikea.
And the next reason why none of them become Ikea.
Is none of them.
Have a showroom.
Oh yes.
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Okay, so David.
How does the first Ikea showroom come to be?
So
As we alluded to earlier.
In the early days of this
Mail order furniture, catalog, circular type business model.
It's the golden era. Everybody prospers. Consumers are happy.
Furniture makers are happy.
There's room for a competition. Like it's all greenfield. Everybody's going after new customers.
Nobody's stepping on each other's turf.
Inevitably, though, as we get into the early nineteen fifties
Competition gets more intense among these
mail order businesses like IKEA and
Price wars start.
Yeah. So this is
The next chapter.
And
The thing about mail order was
Yes, it enabled scale, and
Which enabled selection.
Which enabled low prices.
But
There was no governor on quality.
And what I mean by that is that
Anybody who had a mail order business
Could
Take attractive looking photos of their furniture and home goods and stick it in their catalog or their circular advertisements and say like
Ooh, buy my beautiful looking furniture at this really, really attractive price.
And those photos
may or may not have any sort of bearing on the reality of what the furniture actually was when it arrived. Not to mention you basically had no recourse because at this point there wasn't modern credit cards, so it's not like you could charge back. There wasn't
2024 style returns infrastructure where you could just get your money back by sending something back weeks or months after it was delivered to you and get a full refund. Nobody was building these big sort of global brands that were trustworthy. And so it was just a matter of
Which
small local circular brand
convinced you that their picture was worth ordering.
Right.
I actually don't know what their return policies are. I I hope they're good, but it's like the Timu of nineteen fifties Sweden here, right? Like the disconnect
After a couple of years of this between what you think you're getting and what you're actually getting. Right. Starts to widen.
And so even though Ingvar is focused on
quality furniture at the lowest possible prices, the fact that other people aren't is hurting him because it's hurting consumer trust.
I can just deliver at low prices.
If I compromise on quality. Right.
So he's searching for a way out of what's starting to become a
Pretty brutal competitive landscape.
And
One night.
As legend has it.
He's working late with one of his early employees, a guy named Sven Gota.
And they come up with a crazy idea.
And the crazy idea is
What if
We had a showroom.
Where people could come
And they could touch and see and feel the actual items that we are selling in our catalog and then they could
Convinced themselves like
Yes, this is the quality, this is the item that I'm going to get at this price.
I think if we could just show people they could see with their own eyes, touch with their own hands.
They would see that the quality we're delivering at this price is way better than anyone else out there.
And
It just so happens at this moment in time.
that the local furniture joinery in Elmhoult is about to close.
He is going to buy the building.
For thirteen thousand croner.
Which is about twenty five hundred dollars.
at the time. We're here in like early nineteen fifties. So
You know, not cheap, but
Not that much money.
And that
twenty five hundred dollar investment.

The first
Ikea showroom.
I mean we seriously kid you not listeners. The only money this guy ever raised.
Was that five hundred crone or bank loan? Yeah, it's nuts.
And the funny thing about this, it is a showroom. It's not like a store.
Our business model continues to be this catalog thing.
But we have a place where you can just kind of
Touch and feel the furniture.
I think Tesla does this today or has done it for a while. Or bonobos or Yeah, yeah. There's a store and a mall that you can go see the cars or see the pants. But you can take it home.
Right.
So
Let's illustrate why this is a completely nutty idea.
A there's the obvious you can't take it home. B
The whole point.
of the mail order business was that
Buyers and sellers can now
access each other across the whole country, all of Sweden as a market.
All the rural areas everywhere in the country. And Sweden has a pretty big geographical
Country.
Wgvar is doing here, they're opening a showroom
In one singular remote part.

You know, in a town with like a thousand people who live there.
And they're
Business.
The other towns of a thousand people all over the rest of the country. Why on earth would opening one showroom in one little town work?
Here's the thing. I mean, by God, does it work?
I don't know that the
Customer base in the town of Elmhull.
Was that important to IKEA itself.
People come from all over the country to go to the showroom.
This is wild.
So Ingvar advertises that they are opening this for months.
leading up to the actual opening, which is in March of 1953. So all of his customers and everybody getting the circular advertisements in the weekly paper all across the country.
They're hearing about this showroom in Elmhold.
On opening day
In March of nineteen fifty three, there are over a thousand people from all over the country.
Who show up and wait in line to get in. Like take the train, they somehow make their way to Elmhull to
Just see the furniture. They're not even buying anything. It's crazy.
Ingvar and the team, like they're so worried about this that
They don't know that the floorboards on the second floor of this old joinery are like you know, it's like an old building here. That are like
gonna stand up to a thousand people being up there plus all the furniture that they have as you know the showroom.
They had also advertised
In the circulars, that they were gonna offer free coffee and morning buns to anybody coming to shop.
Yes.
The very first time there's uh food at an IKEA is the very first time there's an IKEA.
That's right. That has always, always been part of the concept.
But yeah, Ben, as you say, like there's no warehouse, there's no flat pack furniture.
Everybody's just there to like see the stuff. And you could also fill out an order for them while you're there.
To them.
By by mail later.
So Ingvar has a quote about this.
At that moment, the basis of the modern IKEA concept was created, and in principle, it still applies. First and foremost, use a catalog to tempt people to come to an exhibition.
Which today is our store.
Come and see us in Elmhoot and convince yourself, we wrote on the back of the first catalog.
Two very important words there.
Convince.
And the other one is exhibition.
already they were seeing this idea and the fact that he marketed to the whole country
and offered food. I mean, we're not just offering you
a store that you can walk into and buy something. We are creating an exhibition.
Yes.
It is an experience.
It's almost like you're getting a free ticket to this experience, this exhibition. Yes.
Great retailers have more in common with PT Barnum than poor retailers. Totally. Oh my God.
So
This is
I think and Ingvar thinks he writes this
This is the very first time.
Anywhere in the world.
Yeah.
A mail order business is combined.
With a physical show.
So
You might think, Oh, Sears in the US, obviously that's a mail order business and they have Sears stores.
No no no they're different. Like the Sears stores, you buy the stuff at the stores and you walk out.
It's not a showroom.
Here with Ikea for the first time. It is
That concept you just described, Ben. It's like
We tempt you to come see this exhibition that then you order.
I don't think anybody had ever done this before, because again, it was a crazy freaking idea.
But of course it becomes an enormous
Success.
So within the first couple of years of the Elmhool
showroom store. It's not a store being open.
A huge portion of
IKEA's catalog subscriber base. They've now formalized it as
The IKE catalogue.
About half of their
catalog subscriber base, which is hundreds of thousands of people now at this point in time.
Make the pilgrimage to Elmul.
And they visit the showroom.
This tiny little village, hundreds of thousands of people are now coming there.
And you might ask yourself, what's the big deal with the catalog? Like why are people so interested in getting a catalog?
It was really inspirational.
I mean, it hadn't quite made the shift yet, but especially in the sixties after Britta Lange took over from Ingvar,'cause Ingvar is like
everything right now. He's like art directing the photography. I think he might even be taking the pictures and writing the copy.
But it turned into this thing with
these vibrant, beautiful living room settings, and people are anticipating
the arrival of the IKEA catalog. And it positioned IKE as this brand, this lifestyle. It illustrated
a life you could be living if you participated in the IKEA story.
Yeah.
that really, really becomes a thing in the sixties with
Modernity and when the target customer becomes the
urban and suburban customer, but here even with the rural customer, like it still works.
They lean into this model.
Heavily. So
They arrange for any IKEA customer.
to get discount tickets on Swedish railways to make the pilgrimage to Elmhood.
And then
They also set up this program where
Customers who come
From
Another location.
and commit to furnishing a whole house.
They call these the setting up house customers.
They get
They get free dinner at the hotel in Elmhult that night.
Like this is hokey stuff, but to your point, P T Barnum.
Yeah. That's what this is. Yep.
So
Within a year
They pass
one million kroner in sales.
Uh.
This.
Showroom, which has got to be by multiples the largest business.
Ever built in Elmult in like human history.
In nineteen fifty four
So the next year after this has been open.
They passed three million croner in sales.
I think the exchange rate was about five to one at this point in time of five cron or to one dollar.
Nineteen fifty five, they double again to six million in sales.
The number of
Ikea catalog subscribers around the country passes half a million.
And all this is.
Done with
Still less than thirty employees.
the business still being run out of the combination of the family farm
And this one showroom.
It's wild the scale they get to.
It's amazing.
Yeah, so it's one of these things that
You know, on the one hand, we are how many years into IKEA was founded in forty three and we're approximately in fifty three, fifty four here. So we're ten, eleven years in.
But
The thing that is really working is this thing that
just got started the previous year, which is the combo
of the catalog and the showroom, that proves to be this like amazing winning combination that they just realize, oh my God, we need to scale this.
Yep, totally. This is it, I would say like
generation three of the IKEA business. You know, generation one is just small goods trading company
Matches and pens. Generation two is
furniture plus catalogue.
Now we're here in version three of like
Furniture catalog plus showroom.
And that's what's really exclusive. Yep.
But
Here in the fifties, though,
The target customer base we
referenced this a minute ago.
And the product mix is still geared towards these rural farmland families, like
Hey, I'm outfitting my
Farmhouse. Yep.
And when you look at the old catalogs, you can tell.
Totally.
It's not this
simple Swedish design that we think about as IKEA as today. It's like pretty rugged, robust
Heavy furniture.
Yes.
So
When the nineteen sixties come around.
Sweden.
Like pretty much all of Europe starts rapidly and inexorably urbanizing.
The automobile becomes commonplace.
farms are closing down.
Young people are moving into cities and suburbs, they're taking jobs in factories, they're taking white collar jobs, other blue collar jobs.
I think there was some stat in the IKEA story that
During the decade between the mid fifties and the mid sixties, I think three quarters of the farms in
Sweden closed down. Whoa.
It's wild, but this is happening all over Europe. Huh.
And so
The customer base for IKEA and all their competitors.
Starts to
majorly, majorly shift. It's no longer
Families setting up
their farms are taking over the farm from
the elder generations. It's now like
a whole new lifestyle of modernity.
in the cities, in the suburbs.
smaller houses, modern houses, electricity
Apartments.
Not to mention it's kind of impossible to do the traditional thing of just pass down the furniture to the next generation, which is how most people got their furniture up until this point,'cause they were living
very close to their parents or perhaps
Taking over the house from their parents.
Totally.
This is
Oh, I'm getting an apartment in Stom.
I kinda need to start from scratch and the furniture
Needs to be
Pretty easy to move.
Or put together.
Yes, yes, indeed it does. So on the one hand, this is like a total existential threat to
I key it's business. It's like, well, your customer base is shifting the products that you are selling are
No longer wanted, they're going away.
On the other hand.
There has never been a bigger opportunity
in the history of furniture making and selling.
Throughout all of human history, then what is about to happen here.
And Ikea, even though it's currently serving what is effectively the
parent generation of these new customers.
With a little bit of adaptation.
has the perfect model for these new young urban and suburban families. Yep.
But
To get there.
Ben, I know you're itching to tell this story. There's one more element.
of the IKEA model.
That needs to fall into place.
And ironically, even though it is
totally identified core part of the company today.
It's a reaction to competition.
That drives it.
And that
Is designing its own furniture and specifically
Flat packing.
It is astonishing that
so far in the story, they've been shipping like full sized, fully assembled armchairs.
In order to get them to your house.
Well, remember, Ikea's not shipping it.
The suppliers are shipping it. But that it's taking up a huge amount. Think about a a flat packed chair that you're ordering versus a fully assembled chair and how much room that takes up in the truck.
Yep.
In the early days.
This doesn't really matter to IKE, like hey, it's all great, like that's my supplier's problem.
As the business is scaling, though
This becomes IKEA's problem because it's a limit to scaling.
Yeah.
Okay, so where does flat packing come from?
So it's totally intertwined.
with IKE taking on the furniture design itself.
And I said it was driven by competition.
It's not driven by competition because
Any of the
Other players.
Do the same thing.
It's actually the opposite problem.
Ikea
has become so dominant
in Sweden at this point in time.
That it's monopolizing like a huge portion of
All the furniture makers' production output.
And so the rest of the industry starts organizing against IKEA.
And Ikea is philosophically trying to drive down prices. They want to create the
Furniture for the many
And their competitors are all trying to maximize margin and have kind of small businesses because the whole furniture landscape, in fact, to this day, is very, very fragmented. It's tons of players.
serving niche local use cases. And so you've got the whole Swedish furniture industry that's
Pissed at IKEA for going to the furniture manufacturers and saying, What's the very best deal you can give me? And then turning around to customers and saying, I'm gonna make very little margin.
And sell you all of this manufacturer's capacity at extremely low cost. So that
Competitors are feeling it from both sides. They're saying, Okay
the manufacturers have no capacity to manufacture for me and no customers want my stuff because you're selling it cheaper.
It's freaking wild.
IKEA does not have a direct competitor today in twenty twenty four.
There is not a single other globally scaled furniture business in the world.
Put a pin in it.
I have a thesis on why.
Ooh, okay.
So what do the competitors do?
They start
locking IKE out of trade fairs trying to limit their access to suppliers. They start
pressuring IKEA's existing suppliers.
Into not selling to Ikea. They say oh we're all collectively gonna boycott other orders from you. And Ikea's not yet big enough.
Where that fails.
That actually works and the manufacturers just come to Ikea and say, sorry
the collective leverage of all your competitors is too large and we're not gonna serve you.
Yeah.
Competitors.
even go to the Swedish government and they lobby the Swedish government to limit
Ikea's ability to circulate its catalogue. I don't know on what grounds. This is like the most European thing ever that the regulation should uh
This is too good for consumers. Yes, exactly. Oh man. We could make a million.
Jokes about European regulation. Yeah. Anyway.
To your point, it starts to work and this becomes a real problem for IKEA.
So
Ingvar the company, they're like, All right, well, how are we gonna design our way out of this one?
And
Turns out.
Design is the answer.
So they start going to
the suppliers to the furniture makers and they say like
Okay.
We hear you that our competition
Does not want you to give your pieces to us.
Like you're also giving to them.
What if
We give you a new set of designs for different furniture.
And you make

Just for us.
Separate line. Open up separate lines.
Could you do that?
And most of them say
Well yeah, I think I could do that.
And this is the beginning of Ikea.
In house design.
Furniture.
Now
The first
quote unquote designer.
who Engvar sets to work on this.
is a former advertising draftsman named Gillis Lundgren.
And Ingvar had hired him originally to help Ingvar do the set layout and the photo shoots for the catalogue as his like
Assisting.
Lund.
Starts.
cranking out sketches of furniture designs for the manufacturers.
And
So then as legend has it.
All this is going on.
And then one night.
The two of them.
Lundgren and Ingvar.
Are taking down the set.
From a photo shoot.
And Lundgren says while he's putting a table away, he's like
God.
This thing is so heavy.
Well what a huge amount of space it takes up.
Let's just take the legs off the table and put them under the table top and then we can store all the stuff better.
And Ingvar is like a bolt of lightning.
Has hit him.
He's like
Oh my God, I have just received like
You know, the last commandment from God on how to how to run this business. Like
Yes.
Take the legs off.
It takes up.
A lot.
Less.
Space.
My God, we can design these things to come off on purpose.
And then
When we have our manufacturers ship the tables to customers, they're gonna be able to fit a hell of a lot more of them in those trucks.
Yep.
And
It's kind of apocryphal.
I am sure something along the lines of this insight happened.
There were many other companies that were doing flat packed furniture before this, including the company we've talked about multiple times on this episode, Sears Robok.
Was
flat packing in their catalog distribution in America.
But
certainly the company that gets credit for
popularizing
and growing the volume of flat packed furniture being shipped a hundred X, a thousand X around the world is IKEA.
And it's a nice little story.
But I think what IKEA does is they go all in on this.
So the first
flat pack product that they design is the max
Table in the
Mid nineteen fifties.
But
by the end of the nineteen fifties.
flat pack and then self assembly by the customer.
is expanded across the entire range. Like all of IKEA's
Furniture.
Obviously some stuff you can't flat pack, but like as much as possible.
And because
They had for separate reasons started doing their own designs with manufacturers.
They can do this.
Yep.
So
Flashing forward a little bit to today, but it's interesting to look at all the downstream things that happen from flat packing.
One.
It enables this space saving in trucks.
It enables you to do more volume for the same cost.
Two, there's a cost reduction since customers can do the labor and transport.
before you had to have someone at your company put
the chair together.
And that costs.
A lot of labor.
Now you're putting that on the customer.
You're also making it so the customer has the capability
to transport the merchandise.
In a way that they couldn't before. They had to have a truck. Right. Mail order was the only way to make this happen. You're not gonna
drive away or get on a bus with a table.
Yep, absolutely. There's a further cost reduction since it decreases the broken merchandise in transit.
So there's this third amazing benefit to flat packing.
Ultimately they pass all this along to the customers, meaning now their products are definitely the least expensive on the market for their quality.
And
psychologically it gives this feeling of accomplishment. It increases your fondness for
Whatever object you assembled because of the labor, the blood, sweat, and tears that you just put into it. You feel like I made this. Yeah.
We almost broke up, but we didn't, and four hours later I have the t the the cabinet together.
One of the articles I was reading for uh research called it the uh Lego for adults. Totally.
That's totally right.
Yeah, another great Scandinavian company. We'll have to cover it someday.
I have a fun story for you, David, on Flatpak that I haven't told you yet.
Ooh, light on me. So there's another word for this. Do you know what it is?
Do you hear it anywhere?
Kind of an old school
retailer merchant phrase.
Knockdown.
Ooh no.
And it was referred to as KD. So in preparation for this episode, I talked to Jim Senegal, who's the co-founder of Costco.
'Cause I was asking about Ikea and the similarities. And he said he used to love going to Ikea to look at the KD furniture that they stocked. And I thought this was like a brand. I was like, Oh, maybe this was like a brand that IKEA used to stock. At some point I realized and I recall, Oh no, this is like what people used to call the flat packed is KD furniture.
That's amazing.
Yeah.
The interwovenness with Costco is really interesting. Another research call was with Bjorn Bailey, who ran IKE in the US in the late eighties, and he mentioned that Ingvar always looked up to Costco and thought they were like the greatest retailer in the world. So there's a lot of shared admiration there. Oh man. We're gonna talk about hot dogs in
You think I'm joking. I'm not.
All right, let's go.
Okay, before we get there though.
So
K D, you know, this innovation.
Knock down.
Flat back.
This is also though what enables this shift
in the product mix for the new modern young urban and suburban customer.
W
doesn't want the same kind of furniture, can't use the same kind of furniture.
That their parents were using back on the farmlands.
So legend has it that
Right around this time as the whole IKEA range is
Shifting to flat pack.
Ingvar goes on a trip
to the Milan furniture show in Italy.
And
While he's there, one of the suppliers, a carpet supplier at the fair.
offers to take him
Around the city and you know, Ingvar wants to see how people live and he's like sure, I'll
I'll ask a bunch of my employees who work in my
urban modern mechanized factory here in Milan.
If
You can just go into their homes.
And so Ingvar goes into their apartments.
And he's just appalled by like
the furniture that he sees there and how different it is from the
New modern city living.
designs he's seeing at the furniture fair
It's all the old
Rural farmhouse big, heavy dark.
furniture that takes up a lot of space and isn't practical.
In the city.
And so supposedly this is the moment when Ingvar really gets religion of like
Oh.
This is our new customer.
And this is our opportunity is to design
The low price, high quality, affordable furniture for this.
Target market.
All these people that are moving to cities for the first time.
This is modern middle class living.
Yeah.
So we're all familiar with the simple Scandinavian design.
That
Ikea furniture is and
It's become extremely popular. Basically universally adored. I just accept it as like the standard of what
Modern furniture is.
Right.
The question is, is there something intrinsic
Too simple.
Scandinavian design.
that makes it universally applicable or is it IKEA's success?
that now we all sort of
look at it and have some reverence for it. Cause it really
is beneficial to IKEA.
that we all like simple designs instead of ornate designs at this point, because it makes it work much better for flat pack, for reducing cost, for making transportation easy. I mean, imagine
chunky ornate furniture with intricate hand carved designs still being the creme de la creme of here's what you should have in your house and it's basic and expected.
It kinda makes the business model work that it's these simple designs.
Yeah.
I think these things are inextricable. I mean I'm not a
expert in design history and
People who are might contradict me here.
But
I don't
Think
There was necessarily that much about
Scandinavian or Swedish design that was particularly
light simple minimal
Before IKEA.
Yeah, listeners, join us in the Slack. I'm curious if someone has traced the lineage of
this sort of Scandinavian aesthetic in a pre nineteen fifties world where this sort of comes from. Who like who are we all copying? Cause there's definitely some lineage of designers that all this is sort of trying to emulate.
Yeah. So Engmar
Rights to this.
He says a design that was not just good
implied unlike what the
Milan.
factory workers previously had in their homes.
But also from the start adapted to machine production.
And thus cheap to produce, which Ben is exactly the point you are making.
With a design of that kind and the innovation of self assembly, we could save a great deal of money in the factories and on transport.
And keep the price down.
To the customer.
There it is.
So
Entering into the nineteen sixties here and all the demographic change that's happening.
Ikea is
Perfectly positioned and it's just explosive growth for the company.
And to capitalize on it.
They obviously need to ramp
supplier production significantly. So
They've had these battles in Sweden.
with competition. They've gotten around that with their own designs.
But now they need to ramp up so much.
Sweden itself, even if they didn't have these problems, just doesn't have enough
capacity for all this new furniture.
Yeah.
Ikea
needs to source. Yeah, just to illustrate your
Point about 1955, they did six million Kroner. By 61, they did 40 million Kroner. So that's almost a 7x in six years.
Yes.
So
Ingvar starts looking around elsewhere in Europe to expand.
Supplier production.
And then
In nineteen sixty
Ingvar reads in
The Swedish newspaper.
That the foreign minister of Poland

The Stockholm Chamber of Commerce with the express purpose of developing business relationships with Swedish companies.
And you might be like
Okay, you know.
Doesn't this kind of stuff happen all the time. What's the big deal? Well, Poland at the time was a communist country.
Behind the iron curtain.
Yep.
So this was odd.
And Engvar is like well.
You know
If we could find a way.
To work with the communists.
We could probably lock up a lot of production capacity that nobody else is gonna go through the trouble of getting.
Yep.
And I bet they can also produce things pretty cheaply over there. And in pretty high
Volumes.
Yep.
So in nineteen sixty one.
Ikea
Goes to Poland.
To
Help local
Manufacturers.
State sponsored manufacturers there.
Set up.
furniture production of the Ikea designs.
And by the end of the decade of the sixties, Poland is producing fifty percent
of Ikea's
furniture, including
Some of the first modern classics like the Billy Bookcase.
The Ala Cafe Chair?
It's the sort of wooden sort of curved back.
Chair that you know, the iconic one.
Uh
Think
I have it right, I think that design is actually based on like a Polish
Chair design. Oh, interesting.
Yeah, one of the biggest selling products for the company in history.
The other thing that they're doing here is
Ikea is
investing in bringing up these factories.
They're trying to build really close supplier relationships here and basically make
sure that those factories are going to be successful for the long run. So they can kind of bet their business on it.
Totally. And
I mean they get
Really, really.
Intertwine.
to the point where eventually in the this is a little later in the seventies
After IKE invests a ton in developing uh board on frame quote unquote technology or
Sandwich board construction, as it's called.
This is the lack table. So
listeners, probably many of you know, for those of you who don't, you definitely have seen this thing. You've probably owned it.
the lack coffee table. Or lack shelves or Yeah.
Poland is where they produce
This

particle board, you know, sandwich board construction inspired by how doors are made. Sort of more cheap, not solid wood doors.
Today.
In twenty twenty four
The lack of
Table.
retails for nine dollars and ninety nine cents in America. This is a table that you can buy for less than ten bucks.
It's astonishing how they've driven price down on some of these things.
Totally astonishing.
And in fact I think it's worth a little bit.
Sidebar.
on the coffee table right now as an example.
Mm.
Perfectly illustrates.
the new consumer dynamic and demand explosion that Akea's about to head into.
The Lack Coffee Table is the first example of
This idea that Ingvar starts to develop.
Of
The item with the breathtaking price.
Quote unquote.
And
Every product that IKEA sells in its range should be high quality, great value.
Ideally way better on both dimensions than any competition.
Have beautiful form. I think that's a part of it too, is it's supposed to have the form and design.
It's not just build quality, but actually the form is should be elegant to look at.
Yes.
But
Over and above just kinda like the standard products in the range.
IKEA should always have a few products.
That are these breathtaking price products.
And these products
Should also be high quality.
But they should be priced at least
fifty percent below any competitive or substitutive products out there. And ideally like well less than fifty percent.
I mean a ten dollar table.
Today. That's breathtaking. That's astonishing.
And so
Ingvar says like it's our job.
To figure out
Yeah, start with that end goal in mind.
And then design backwards from that of like how are we gonna make that happen?
And he would later write and describe the whole idea is based on the substantial price difference, the easily understood price by the consumer.
We don't lose on the deal, nor do we make much profit, but at least we make a little.
And in the end that's what matters.
We can't actually lose money on these products.
And thus we need to design like
Not just what the furniture looks like, the manufacturing process, the transport process, the
Raw material sourcing process, like everything end to end about how are we gonna sell product as the whole supply chain.
Yes, a ten dollar coffee table.
And so the way they do it, at least in the
Case the lack is like
We're gonna
wholesale
reinvent the manufacturing technology process for this. We're not gonna make a solid wood coffee table.
We're gonna use
Board on frame construction.
And what are the raw inputs for that? Well we can use
the leftover scrap wood chips and then eventually now I think it's like
pulp material from the timber.
That's actually gonna be like ninety plus percent of the material that goes into the
product is our waste products from our other
Things that we're making.
A that's super cheap.
B, it's super lightweight, even though they're pretty solid and sturdy.
And then see if we can just scale this.
Indefinitely.
Today.
IKEA sells almost twenty million lac tables every year. And has been for decades.
I mean, they've sold hundreds of millions of these things. So like you can optimize the freaking crap out of your whole supply chain to do this.
That is wild.
I think they have multiple skies at that scale.
So
Later.
Once he
Like Charlie Munker got turned on to the virtues of Costco.
Ingvar would hilariously
Formalize this.
Idea.
This manifesto.
In nineteen ninety five as the
hot dog product policy. Because in nineteen ninety five, they copied Costco and they start selling hot dogs in the stores.
Okay, so I brought this up with Jim when I was talking about similarities between Costco and Ikea.
He did not believe that
IKEA copied the Costco hot dog.
And here is his rationale. There's no way.
Is a hundred percent a copy. I don't believe him. I know IKEA started doing it in nineteen ninety five.
There is a rich Swedish tradition in hot dogs.
Swedish hot dog carts are freaking everywhere.
I don't think you had to look at Costco
Yeah.
We could probably sell hot dogs at a Swedish store.
Jim is a very um kind and uh generous soul despite being one of the greatest retailers of all time.
So I'm just gonna chalk this one up to that.
The
Ikea hot dogs today are priced at one dollar.
Which is cheaper.
Than the buck fifty at Costco. Well no, David, the buck fifty is a combo.
That's what I was gonna say. I think though you can only get the buck fifty combo.
At Costco.
Yeah, I mean, I don't know if you could walk up and try to order a hot dog.
that's less than a dollar, but it is one dollar and fifty cents.
for a hot dog and a drink and there's no
menu item of just a hot dog.
Right.
We talked about all this on the episode, like part of how they do this is including the drink. It's a bundling. Yeah.
Anyway.
I refuse to believe that the ability to buy just a hot dog at IKE is not a nod to the Costco.
Deal because
Ikea also has the hot dog and drink combo for
one fifty.
And it's right after checkout, just like Costco's is, and it entered the store about a decade after Costco started selling the hot dog. There's no way. There's no freaking way that Ingvar wasn't just like
All right, we gotta copy the hot dog.
Yeah.
Uh.
The even more amazing thing is
He codifies this into
the official policy of the company, which is we must have at least
At first it's ten quote unquote hot dog products.
across the range. He later ups it to twenty.
And it's yes, it's like the lack table. It's an impossible price.
For
Ideally one product in every category that we sell.
That is just
It's criminal not to buy this thing.
Yeah.
And the fact that they just keep whittling it down year over year over year.
A great example of this is the Poeing chair. Yes.
Another hot dog product.
Absolutely. I think they've sold thirty million of these since nineteen seventy six.
They've just been baniac about optimizing. So
the initial poing chair, which was originally called the Poem, not the Poong.
I didn't know that. In inflation adjusted dollars was three hundred and fifty dollars in nineteen eighty eight.
By twenty sixteen, they had it down below a hundred dollars. And it's effectively flattened out. It's now$130, but with a little bit more inflation.
It's astonishing you can get this chair that
is a living room chair for a hundred and thirty dollars.
Comparable chairs are like two to three thousand dollars.
Right. You're not gonna buy a Poeing chair and
Have anybody mistake it for a Herman Miller recliner?
No.
But that's not what they're trying to be.
But it's pretty darn close.
For the
Delta in price. I mean a Herman Miller requiner is what, five thousand dollars, I think. Something like that. Yeah, maybe this performs the same function, but you're not gonna aesthetically mistake it for a Herman Miller chair.
Oh, I guess my point is like the delta in the design aesthetics is also
Way closer than four thousand seven hundred and seventy dollars.
Yes, that's a great point.
It has this wow price.
When you drive home with it and you set it up, you can marvel at the fact that it only cost you a hundred and thirty dollars.
Yes.
Okay.
Which brings us to
The other
I think really uniquely IKEA piece of this.
hot dog policy that even Costco doesn't really have. I just love it. The hot dog policy.
Ikea, thanks to the catalogue.
Controls.
Uh
parts of the demand and the supply chain.
They
Control the supply chain, obviously, as we've been talking about.
But the catalog for decades is the primary marketing
And demand driving channel.
So it's not like they're having to buy advertising.
They fully
The marketing channel. And so they can use these hot dog products strategically and promote them.
In each market in the catalogue
to then drive the visits to stores, drive the huge demands, position them with other products, then they do the layouts in the showrooms, you know, it's just
It's genius. It all works together.
It's kind of amazing that
because in many ways they are their own customer acquisition channel with the catalog.
That they never
turned into a customer acquisition channel for other businesses.
They should sell advertising. I mean, it's the Amazon play, right? Of once you reach scale and you have enough customer eyeballs.
you can staple on a near hundred percent margin advertising business for free.
And I flipped through
decades worth of IKEA catalogs.
Unless I miss something, I'd never noticed like an emergent advertising business in there.
Yeah, it's interesting.
But that doesn't actually surprise me.
I think Bing Bar probably have view that as a short term optimization and
That is like antithetical to how he wants to run the business.
Yeah.
So now what's also interesting though is like
This element that I was just saying of they control the whole demand and supply chain is no longer true.
in the Internet world. Like in the catalog world
Absolutely was true.
In the Internet world
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Okay.
So David.
I'm taking us back here to the late fifties, where we have a few more pieces of the puzzle of modern IKEA that kind of are coming together.
So in nineteen fifty eight
They expanded remember we said there was just like some cold food and coffee.
Yeah. They uh expanded that. They added hot food. They added self service. It's more like you see today.
This is all at the showroom in Elmud. Yeah, exactly.
And the philosophy behind this is the margin should never exceed ten percent at the restaurant. They want to use it to attract customers, to retain and delight, but they want to make their money on furniture. And it's kinda like David, these hot dog items you're talking about.
They don't want to lose money. Just like Costco, they're sort of opposed to loss leaders. I don't know if it's as religious, but
They are looking to make money on everything they sell.
I think it's equally religious for different reasons.
I think Costco was about not insulting your customers.
I think at Ikea it's
Ingvar just his
background and being.
religiously opposed to losing money.
Right. Is unbelievably frugal.
Oh man, we gotta tell that amazing story we heard in the research.
He was doing uh
Store visit somewhere in Europe. In Germany.
Yeah, I think it was in Germany at night.
And uh
The store manager is like, Okay, you know, come on in. I'm gonna turn the lights on. He's like, Dear God, don't turn the lights on. Do you know how much that costs?
And it wasn't a store manager, it was like a really junior person. Yeah, that's right. Do you know how much it costs? I'm gonna use this flashlight. And they spend hours
Going through the store with
Flashlights. And because he's also like obsessive about details and a micromanager, he finds like
thirty little things wrong all with a flashlight.
And you know, ask for all of them to be fixed by morning.
Amazing.
But this whole restaurant thing, they really find religion on this is here because we need to make it worth your while to come all the way to this store. It has to be an attraction. They develop this phrase, it's tough to do business on an empty stomach.
And so it's early days, it's not like prolonging time in store the way that it is today.
But it is, hey, we want to add a Disneyland effect.
and add perceived value to your trip here.
Yeah.
Today restaurants just to flash all the way forward.
It is technically the world's sixth largest restaurant chain.
measured by number of customers.
In twenty seventeen, they had seven hundred million people.
per year eat at their restaurants. Now I think that's not deduplicated. Like if I eat multiple times per year,
That might be counting me. Otherwise it's
Kind of unfathomable.
Does ten percent of the world really eat?
In IKEA's
Even more wild.
four hundred and seventy six IKEAs in the world. Right. So whether that's deduplicated or not.
Seven hundred million customers across only four hundred and seventy six locations is wild. Totally wild. Thirty percent of people who visit IKEA do so just to eat.

I love it. A lot of meatballs. I have done that many times in my life.
Most recently in downtown San Francisco.
I don't have many of these stories and I was trying to figure out why. Like I was talking to my wife and she was talking about oh my God, I loved getting the catalog growing up and oh I've furnished so many apartments in Ikea and and I was kinda thinking like
Actually, until the last few years I haven't.
Really. And like I've never eaten at an Ikea just to eat lunch and
I kinda realized
Ohio did not get an IKEA.
for a really long time. Like I grew up without an IKEA near me.
And
Even when I went to college in Columbus, they got one in Cincinnati, but it was until after I left Columbus that they got one there. So until I got to Seattle.
I don't think I had ever experienced IKEA.
And the Seattle Ikea is so great. Yeah.
Well, I have a question for you then.
What year did your family leave Delaware? Ninety six.
You grew up very close to an Ikea and you just didn't realize it. Oh, really?
Because Ikea has been
part of my life, pretty much my whole life. And again, I didn't realize why.
The first US store was in
Plymouth meeting.
Pennsylvania, right outside Philadelphia, which opened in nineteen eighty five. I was born in nineteen eighty four.
I grew up with, you know, Billy bookcases and all this stuff. Like it's just been a constant.
My entire life.
I mean, I went to the small land, I played in the ball pit, all this stuff.
Yeah.
All right.
It is funny how I've developed an appreciation as an adult, but it was not like a forta thing like for you and so many others.
Ha ha ha.
All right. So
Into the nineteen sixties, David, they open a bigger store.
Where. Yes.
So they actually had opened a showroom.
In Norway. In
Sweden's next door neighbor country to be able to
Selling.
in Norway. But that was you know same concept as the Elmhoop showroom.
Not really a store.
By the mid sixties, though
all of this, you know, new urban consumer
All really, really taking off.
In June of nineteen sixty five.
Ikea opens its second
Showroom.
Location.
Very different.
Than the original.
This one.
is almost five hundred thousand square feet.
What? Yeah. That's like even still probably their biggest store or among their biggest few. I think it is still, I believe, the flagship.
Ikea store.
'Cause even today they're like three, four hundred thousand.
When they build new stores.
It is a circular building inspired by the Guggenheim Museum in New York City.
Wow.
I think even this one is no longer circular. That
Does not last in
in the Ikea playbook. It costs 17 million kroner to build, or roughly three million dollars.
Compared with the original Almood location that
Eggvar bought for thirteen thousand Croner.
God, they must have done so much business out of that.
catalog and that little, you know, those two tiny showrooms.
in order to leap to this and spend all that money on this store.
Well,
By this time, the business was call it.
About a hundred million croner a year.
by the mid sixties.
When this second store
Is opening.
So twenty million USD.
At the time.
So a three million dollar USD
investment in this store is
You know, a lot.
'Cause I don't know what their profit margins were, but
Like a big investment, but they could handle it.
So it's probably like a year or two of all of their
Prophets.
Go into this.
Yes.
Most importantly, though, is the location.
It is on the outskirts.
Of Stockholm.
The biggest and the capital city.
Of
Sweden.
And
For the first time.
They actually stock.
Items in the store.
By now, Flatpak is really rocking and rollin', like they're trying to fit as much in the store for customers to
Buy Cash and Carry out.
Themselves.
And this is the first real
Modern IKEA.
On the first day that they open it in June of nineteen sixty five, they have eighteen thousand customers come through.
And then in that first year
That store alone.
Does seventy million croner in sales. So it doubles the company's revenue.
They also at this store, for the first time, now have the setup where customers fetch the products themselves from the warehouse.
Yes.
And a few more elements of this.
Stock home store that you might
recognize if you're an IKEA custom today.
It's located on the outskirts of the city.
With good highways leading to it and lots and lots and lots of parking spaces.
It's opening hours are eleven AM.
To seven PM.
So that both you as the customer and the employees, the co workers there
Are not battling morning rush hour to get there when
You know, who's gonna be shopping it.
Nine AM in the outskirts of the city anyway.
But it's open late after work, so you finish
You do work, you finish your shift at the factory, you finish your white collar job, whatever you're doing.
Great.
Hop on the bus.
Hop in your car.
Go on over to Ikea, buy some furniture.
And
Yes, Ben, as you say.
You can buy and carry away.
The flat packed furniture.
Right there.
the fact that you don't need employees to go and fetch things for you. You can just grab'em off of shelf yourself after you kind of wind through showrooms.
It's like further compounding their cost structure advantage.
Totally.
So then this is
Tragic, but it ends up being
Great for the company.
Five years later this beautiful designed Guggenheim Museum inspired store.
In nineteen seventy one night.
The neon IKEA sign on top of building.
Catches fire and the building burst. I don't know if it totally burns down, but it's you know a major, major damage. I believe
The insurance claim resulting from this was at the time the largest insurance claim in
Swedish national history.
Oof.
But
I think this is really
Part of the culture.
of IKEA, the company, and certainly
Ingvar's mindset is like every challenge is an opportunity.
When they reopen the store a year later,
It's got the full customer self service check out that
You know of IKE today, where like
Yes, there are, you know.
Co workers there.
helping you check out, but like you're wheeling the stuff up, you're scanning the stuff, you're putting it through.
It's got
more capacity for more and larger flat packed items in
The warehouse.
And this is really
The beginning of the end of the mail order business here. I mean it still exists, obviously, for a long time, but the
share of the business that is mail order versus
Cash and carry in the stores goes way, way, way down. Mm-hmm.
Two.
They add a children's playroom.
Uh
the front of the store with a ball pit for kids to be entertained while your parents shop because
Lord knows, you know, how on earth are you gonna do your IKEA shopping with your
Crazy little kiddos running around.
Which is also a genius way to prolong time in store. I mean, you're just gonna buy more stuff if your kids are looked after.
I will say the small land at the Seattle store
The idea is a little bit better than the execution. It was a two hour wait.
Once you
Get there.

into the small land and they only allowed five kids at a time. It was sort of this odd like I was all built up for all small land's gonna be this amazing thing. I suspect this is something that you know
Hey, a different era when we were growing up, like things were uh it worked a little better and uh you can't get away with these days. Totally, like one person watching forty kids or something. Yeah.
Chop your kid off. Go knock yourself out.
Come back with ten fingers, ten toes. Yeah.
Can't do that today.
Yeah.
And then finally, number three in the newly redesigned Stockholm store.
Yes, they had opened a restaurant.
at Almult at the showroom a couple of years ahead of time. But this was the real like cafeteria
The real cafeteria like we know and love it today with the
Traditional smallin style menu.
Yes.
And so this is
Basically
It.
There is a lot that happens after this, but the core concept of the store and why the business model works and all that is pretty baked here by the mid-60s.
Yep.
And certainly by nineteen seventy one in this sort of
V two of the Stockholm store.
Yeah.
So across the sixties they opened more Denmark and Norway stores.
in the seventies they open in Japan, Australia, Austria, Canada, Germany, Hong Kong and Singapore.
In seventy five they enter Japan for the first time.
They try real hard for twelve years to make it work.
But it fails and they withdraw in nineteen eighty six.
A few of the reasons are the furniture's too big. They just didn't understand the needs of that market well.
self assembly was kind of an anathema to Japanese culture.
And the delivery.
industry hadn't really been built out in the way that they need it to be. There's like a necessary precondition to IKEA entering a market, which is
There's robust delivery services.
to make it work if you're gonna rely on the catalog model. Otherwise people have to be able to drive to the stores and use the store concept where you grab it off the warehouse, put it in your big car, drive home.
In these dense urban areas in Japan, that's not really possible. And so they pull out after twelve years. They did eventually go back in in two thousand and six and make a bunch of changes to make it work today, but
I think Japan was kind of this
After they saw success in all these other markets, it was a little bit of humble pie.
for them not seeing it work there. And I think it spooked them a little bit for further global expansion.
Yeah.
It is amazing.
In the seventies, really until they
Go to Japan.
I'm laughing using the word uh
Well, we'll come back to another reason why I shouldn't be laughing using the word
It's almost like they did blitz scaling, you know, across
Europe and even beyond Europe in the seventies.
I mean
They went all throughout continental Europe.
They expanded to Canada, Australia, Singapore
I mean Ingvar totally got
Conviction that
The newly redesigned store in Stockholm was it, and we were gonna copy paste it and bring it everywhere. And they're rapidly scaling with profit dollars. Right. They're not raising money to do this.
Yeah.
As we've talked about, they have very thin profit margins. And so what it means is they are just doing tons and tons and tons of volume to enable them to do their future growth with their current profit dollars.
Yep.
It's hard to get
Consistent.
Revenue data on the company'cause it was
A private company still is a private company, but
By the nineteen eighties, they're doing
two billion dollars a year in
Revenue. So call it fifteen, twenty years to scale from
twenty million to two billion.
It's incredible.
Yeah, it's interesting. It's a company that is rapidly scaling.
At the same time.
that in their DNA they're unbelievably thrifty.
You kinda
Wouldn't expect
both of these things to be true of the same company.
Totally.
This is the same guy, like just to quote the testament of a furniture dealer, this like one of my favorite paragraphs.
Ingvar rights.
It is not all that difficult to reach set targets if you do not have to count the cost.
Any designer can design a desk that will cost five thousand kroner.
But only the most skilled can design a good functional desk that will cost one hundred kroner. Expensive solutions to any kind of problem are usually the work of mediocrity. We have no respect for the solution until we know what it costs. An IKEA product without a price tag is always wrong.
It is just as wrong when a government does not tell the taxpayers what a free school lunch costs proportion. Before choosing a solution, set it in relation to the cost. Only then can you fully determine its worth.
It's amazing that this level of thriftiness and paying attention to the details is also the same company that is in a decade expanding all over the globe.
Yep.
And it's
totally what enables it to happen because
It's almost like Warren Buffett, you know, in the Berkshire Hathaway episodes where as a young man he's like
I cannot spend any money because any money that leaves my bank account will not compound.
It's the same thing here with IKEA. They view
all of the profits that they are making as like
compounded value of future investment here.
Mm, that's an interesting way to think about it.
So
In the seventies during this, you know.
Decade of blitz scaling, if you will, for
Ikea.
Ingvar is in his early fifties.
And
For a couple reasons.
As
The company is doing this.
massive scaling outside of
Sweden.
He starts to become really concerned about succession.
And what
Will happen to IKEA when he inevitably
Guys.
Although he would live for another
Forty years after this, he lives to be
Ninety one.
Sweden at the time.
Had
High and rising.
Wealth.
And inheritance taxes.
So inheritance taxes for large estates of which
the compra I didn't.
estate in IKEA as an asset would definitely
B one.
was over sixty percent.
And on top of that, there was an annual wealth tax in Sweden at the time, which was two point five percent of your calculated wealth.
Annually.
And your calculated wealth included all of the working capital in any companies you owned. Whoa, really? Like it's the illiquid
ownership of the company plus the working capital in it.
Yes.
Especially
sitting there in the early seventies, knowing you're about to embark on this journey from, you know
Call it.
couple hundred million crone or revenue business to a multi billion
Dollar revenue business.
Oh.
His net worth would eventually rise to something around sixty billion dollars.
Yeah.
There it wasn't even just gonna be like enough capital to pay that.
Two and a half percent annual tax.
Side note, by the way.
In the mid two thousands, Sweden
ended up abolishing completely both
The wealth tax.
And the inheritance tax.
So actually at the end of his life, Ingvar moves back to small land, moves back to Sweden. Oh wow.
I didn't realize that was part of it.
Yeah, and he dies in Sweden.
Anyway.
This kicks off.
For
Environment.
Comprads.
A whole saga of wealth.
Succession.
Corporate planning that ultimately has a huge impact on the company.
So
In nineteen seventy three
Which is the first year that IKEA expands outside of Scandinavia.
Engvar and his family emigrate to Denmark.
First, to avoid the wealth tax.
And then a couple of years later in nineteen seventy eight, they
Settle in Switzerland.
Now.
Engvar actually has multiple goals here, though.
It's not
Just avoiding taxes, although I mean he'll be the first to admit.
Taxes was the like first and primary motivation here.
In addition to that, and I think this really, really was genuine.
He's concerned
With ensuring
Ike is
continuity and
Survival.
And they're
Multiple parts to that.
One, he wanted IKE to be
Completely independent from any one country's political fate.
the political history of Europe that
Ingvar live through and that we're gonna talk about later.
It's case in point here, right? Like he has lived through not knowing that countries are going to continue to exist. And he doesn't want any of that to risk IKEA.
Two.
He also doesn't want anything that would happen within his family.
to risk IKEA. So by this point he has three
relatively young sons.
And he doesn't want to set up a dynamic where the three of them are fighting over
control or selling off Ikea or et cetera, et cetera, tearing it apart.
And then I think
C
He also wants to ensure that IKEA keeps its focus on the long term.
And not the short term.
And
For him.
That meant specifically having a huge fear of what would happen if it ever were uh publicly traded.
Company.
He thought that like it was just like
Totally incompatible to be publicly traded and have shareholders and
Be long term.
Focused.
I heard a funny quote indirectly from someone who told me that Ingvar once said, Going public is a little like wetting your pants.
It's warm and comfortable for a few minutes.
But then after that. Oh my God.
What a folksy dude. Well.
So
Ultimately.
After a lot of international lawyers get involved.
They decide that what they're gonna do
Is set up a self owned
Found.
Based in
The Netherlands. So this is like echoes of our Novo Nordisk episode here.
And the reason they choose the Netherlands is that
Dutch foundations are
At least according to the lawyers.
The most bulletproof and
hardest to change the bylaws of.
And they're going to divide
Ikea into two quote unquote spheres.
One of which is going to be the physical sphere.
And company. And that is the actual

The operator of the stores. Yep.
Operate of the stores.
And the other one is going to be the quote unquote mental
Sphere.
Which is the brand and concept of IKEA.
And this is where you end up with this crazy structure.
Where Ikea
Is two companies today.
It is
Inca holdings.
Which is the
Physical sphere.
the technically
largest franchise operator of IKEA stores. They own and operate four hundred of the four hundred and seventy six.
Ikea stories in the world today.
And that is owned by the Dutch.
Inca Foundation, which is a charitable foundation, is an actual charitable foundation.
And then you have
The mental company the brand company, which is Inter IKEA systems.
An Inter owns the IKEA brand, the concept, and then they license
The Ikea brand concept.
To everyone else who operates the stores as a franchise operator, of which today Inca is by far the largest. And in return for that
licensing of the brand and concept.
Inter Ikea gets a royalty of three percent.
Of gross sales.
From every store.
So
I'm gonna say all of this again in different words just because it is impossibly hard to parse the first time.
You can essentially think of it as a franchiser franchisee relationship.
The franchise or
Who owns the brand, the IP, all that.
Is
Inter IKEA systems.
They work with a company called Inca.
who has the privilege of operating the stores
And getting access to the intellectual property in exchange for
A three percent.
royalty on their revenue.
So every year
Inter-Ikea systems, and this changes a little bit over time, but Inter IKEA systems, the parent company.
Designs furniture.
And works with manufacturers to have it made.
And upkee the brand and all the corporate stuff.
Designs the catalogue, et cetera, et cetera. Sell that furniture.
Two.
Inca.
or any of the other franchisees. And the reason there's other franchisees is because you want
specialized franchisees in different markets where you don't understand the local culture. So that's kind of why there's Inca for
a lot of the like Western Europe and English speaking world. And then there's specific franchisees that are not Inca for other parts. But just simplify it for now because Inca is like 90% of the stores.
And then Inca.
buys that furniture from Inter IKEA holdings.
Pays three percent.
of revenue and then runs the stores.
Cup.
Now, David, I simplified out the part about the foundations that own each of them. I think we should come back to that later, because there's some interesting nuances there.
But that's sort of the structure they devise here.
Yeah.
And then ultimate foundation owners for
both of these two separate companies that get set up.
The Comprod family
At least after Ingvar dies.
The Compread family
Will be involved.
But does not have ultimate
Control.
our voting power over
Either of these companies.
So today certain of the brothers are on the board of certain companies. All three of them are on
the board of one company or the other.
But
They are far from a majority and they cannot even if all three of them get together.
Influence or control.
The decisions of either company.
And that was super important.
To Ing Bar.
Yep. It's pretty interesting.
And
I believe the
Ink uh
company and foundation still rolls up to a Dutch.
And the
Enter
Holding company.
I believe is a Liechtenstein
Foundation.
That owns it?
It's all like this sort of spread around to ensure this sort of
political continuity of the company. It's almost sort of like Bitcoin maximalist people who have
ripped up their keys into different parts and put it in different safe deposit boxes all around the world. That is exactly what Ingbar is doing here.
That's a good analogy. Yes, you are correct.
Inca, the franchisee who operates the stores, rolls up to
A Netherlands based charitable foundation.
where Inter Ikea systems, the kind of parent that owns the IP, rolls up to a Liechtenstein based
Enterprise Foundation, different like non charitable
is an enterprise self owning foundation based in Liechtenstein.
Which for those
wondering what Liechtenstein is. It is a country that is sort of landlocked and sandwiched in between
Austria and Switzerland with a very small population, but it happens to be very
good for establishing entities like this from a tax and treat perspective.
Yeah. And you said to sort of a enterprise foundation, I think is the word you used.
Not a charitable foundation.
The
purpose, this is like a circular function in computer science. The stated purpose and goal and activities of that foundation is
is to ensure
the continued operations and success of
I keep it.
Yes.
To secure the independence and longevity of the IKEA concept and the financial reserves needed to ensure this.
That is the

Which is so interesting. Again, the Inca Foundation is a charitable foundation.
And they
Do disperse, I think now like
two, three hundred million Euros a year in
Charitable donations around the world. And it's to things you would expect. It's climate, it's poverty, it's
Charitable causes.
But yeah, to your point, the inter IKEA holdings, the foundation at the top of that is literally
To ensure IKEA's continuity.
It is like a Fort Knox.
for IKEA.
Fascinating. Okay. So the structure is gonna shift a little bit. As I mentioned, like they'll rename things, they'll break some things apart, they'll shift who's responsible for what on the edges, but that's largely the structure that is in place going forward.
Yeah.
So once this is all
Done and
Ingvar and the family no longer directly
own the company.
In nineteen seventy six.
He writes.
This document.
That is intended to serve as sort of a like
Forever operating system.
of the company. It's almost like the Bezos leadership principles. Yes.
Exactly. Ex that's exactly what it was like.
And he titles it.
The testament of a furniture dealer, as we've talked about. And it literally like he's treating this like it's his last will and testament, even though he stays involved in the business for another forty two years and hands on.
The whole time.
It's an amazing document. We'll link to it in the show notes. Like you should go read it. It's on the IKEA website.
It's really cool.
So it has nine
Testaments, so sort of commandments and
You already read one, which was the mortal sin of wasting resources at IKEA.
The first one though, number one.
The product range
Our identity.
We shall offer a wide range of well designed functional home furnishing products at prices so low that as many people as possible will be able to afford them.
Talked about that earlier.
Our products must be functional and well made.
But quality must never be an end in
In and of itself.
It must be adjusted to the consumer's needs.
This is
Fascinating.
He continues. A table top, for example
Needs a harder wearing surface.
Than a shelf in a bookcase.
In the first example, a more expensive finish offers the consumer long lasting utility.
Whereas in the latter, it just hurts the customer by adding to the price.
Quality must always be adapted to the consumer's interests in the long.
Term.
No effort must be spared to ensure our prices are perceived to be low.
There shall always be a substantial price difference compared to our competitors, and we shall always have the best value for money offers in every function.
Every product area must include
breathtaking offers. This is before the hot dog analogy in ninety five.
It's great.
It makes so much sense.
It's so great.
The analog to software companies is engineering for engineering's sake. There's many examples of sort of architecting the perfect system that's like wildly overkill.
Anyone who's put together IKEA furniture knows
Anything that's not
Scene.
Like things that on the bottom that face the floor or that face the wall.
Are not finished.
And oftentimes like the back of shelving units or the back of cabinetry is like thin, flimsy
You don't need it to be structurally stable, so it's not, because they wanted to cut a corner there and make it as cheap as possible because they view that as a value for you.
The customer.
It's not that they don't care or that it's sloppy. They care a lot. Right. It's that it would be insulting to spend money on it.
Yes, exactly. This is the polar opposite.
Viewpoint.
of the Apple Steve Jobs, the insides must be beautiful. But it's actually a lot closer in philosophy than you would think. It is
Intentionality about it. Yes.
Nowhere in either company is there. Sloppy.
But at IKE it's
We are going to intentionally
make the back side and the insides not beautiful.
So that
It is
a higher value to you as a customer.
Yeah, there's so much good stuff in this document.
Just to illustrate.
Ingvar's personality.
The fact that he wrote this is
Well, here it is.
Bear in mind that time is your most important resource. You can do so much in ten minutes.
Ten minutes, once gone, are gone for good.
You can never get them back.
Ten minutes are not just a sixth of your hourly pay.
Ten minutes are a piece of yourself.
Divide your life into ten minute units and sacrifice as few of them as possible in meaningless activity.
It's a fun. I'm so glad that you brought this up. I wasn't gonna put this in the episode, but I totally highlighted that reading it and I was like
Wow, I need to think about that in my life.
Totally. And there's so many times where we're like 10 minutes away from a call that you and I are jumping on, or 10 minutes away from recording an episode, and I'm like
I'm amazed.
in the amount I could get done in those 10 minutes when I really was forced to. And it's such a good point. Like if you actually force yourself, hey, just go focus and get 10 minutes of work done.
You can be astonishingly productive in ten minutes. Totally.
I hadn't thought about this, but um
Maybe Ikea and Apple are more spiritually aligned than I even realized.
IKEA and Apple are very similar in a way that I will get to later.
Ooh, okay, I love it.
Okay. And then another
Similarity analogy. Yeah. The last Testament, number nine, is just so
early Jeff Bezos shareholder letter like that we can't not read it.
The title of the testament is
Most things still remain to be done.
A glorious future.
Exclamation mark.
So he's he writes.
The feeling of having finis something is an effective sleeping pill.
A person who retires feeling that he has done his bit.
Will quickly away.
A company which feels that it has reached its goal will quickly stagnate and lose its vitality.
Happiness is not reaching your goal.
Happiness is being on the way.
It is our wonderful fate to be just at the beginning.
In all areas.
We will move ahead only by constantly asking ourselves
How what we are doing today can be done better tomorrow.
The positive joy of discovery must be our inspiration in the future, too.
Oh, I share this affliction. A hundred percent. Me too.
I feel for Ingvar that this is his like
view on life because
Anytime anything awesome happens, I'm like immediately onto the next thing and unwilling to acknowledge like it doesn't give me happiness that something great happened. What gives me happiness is working toward the next great thing.
If we ever just decided, all right.
We made all the good episodes. We're done.
I'd be miserable.
I was gonna laugh. I mean like this is the story I've acquired to think, you know. It's so funny.
But more on the
personal life advice from this too. Like
Engvar, I think, is living proof of this. I mean, the man lives to be ninety one. He clearly didn't think he was gonna live to be anywhere near that age.
And the stories we heard of him.
Visiting stores.
Being super engaged in board meetings, making decisions, making product decisions, up until
The last weeks of his life.
At ninety one years old or
I think he is totally right. He writes a person who retires feeling that he has done his bit.
Will quickly weather away.
No more perfect example of that exists than Ingbar himself. Yeah, happiness for him was
Making things a little bit better.
If he has nothing to make better, what's his
reason for being.
Yeah.
Totally.
So this is the mindset that Ingvar and the company are
Going into the eighties with.
And the eighties is just
continuing this compounding. So nineteen eighty one
They stores in France and Spain.
Nineteen eighty three they go to Saudi Arabia.
Nineteen eighty four they go to Belgium, nineteen eighty seven they go to the UK.
Nineteen eighty nine, they go to Italy.
And
Along the way.
In nineteen eighty five.
We talked about they opened the first US store.
Outside Philadelphia in Plymouth meeting.
Right by King of Press, uh.
Frequented it.
Often.
as a child, outfit in my bedroom and my family room and everywhere else.
The interesting thing about the US though, which
I was so surprised reading because again Ikea has just been

Forever.
It actually doesn't work that well for a really long time.
Yeah, it opens with a bang.
In
Nineteen eighty five.
they do this like incredible marketing campaign or in the Philadelphia area.
Part of it actually was figuring out how it should be pronounced because in Europe it was Ikea.
The way you would pronounce it.
As a Swedish person is Ikea.
And the ad campaign.
They decided Americans are just gonna pronounce it IKEA, so let's lead into it. So it was an I
And a picture of a key.
Dash U H.
And so coming soon, Ikea.
And people sort of knew about it because it had been in Canada for nine years. I think it had started in Nova Scotia.
And actually I happen to know the founders of Costco made a special trip up to one of the Canadian IKEA.
Even before the founding of Costco, because they had so much respect for Ikea as a brand they admired, they like wanted to go and see it and experience it.
Oh, that's amazing. Yeah, isn't that crazy?
So like people in the US, especially merchants and people knew of IKE from its Canada presence. So it's opening
The pent up demand in Philadelphia from the cacophony of factors leading to the excitement around it was insane.
There was over a one mile long line to get into the store. They ran out of merchandise on opening day, and they actually had to run radio ads apologizing and announcing that they were restocking the store as fast as they can.
Wow.
That's wild.
That said
A failure of
IKEA corporate as they were expanding around the US.
Was assuming that the US was homogenous.
And so
I think they expanded to ten or twelve stores.
And it wasn't going great relative to their other markets. And I think it's'cause they sort of m misunderstood that the US
has really different needs in really different parts of the country.
Yeah, that would make sense. I mean in
In Europe.
Not to say all European.
Countries are homogenous, but
Any given European country is a lot more homogenous than
All of the United States of America.
And there was also some just
Basic US market specific stuff.
I love this uh softer sofas.
Americans like to sit.
In the sofa, whereas Europeans sit on the sofa. Oh really? Is that part of it?
Yep, yep. So the sofas are softer in America, you sink into them.
Whereas in Europe, you know, yeah.
Funny.
Yeah, around this time, I think when they were observing
the US stores were not in great shape.
They
were open to the idea of individuals franchising IKEA stores now that they had this structure in place.
they thought maybe this is an interesting thing for former longtime Ikea employees to do
to sort of open up a store. So they did an experiment
Starting in Seattle.
And the sort of idea from Ingvar was if you have your own wallet on the floor.
How do you do compared to the corporately owned stores?
And it was this essentially like a bake off and a test to see if the bureaucracy was hurting them or if they had too many layers of management.
Or
if they had more innovative marketing ideas, which the independently owned stores, specifically the Seattle one, absolutely did.
created their own marketing campaigns and like
It became pretty divergent.
The Seattle store was actually a released old Boeing warehouse.
that ended up being laid out pretty differently than other IKEA stores.
And so you kinda get what you ask for. If you want different ideas, the concept is gonna end up being pretty different.
So they only opened one or two more, despite the fact that the locally owned stores well, the Seattle store.
Actually
did way better. I think it was the highest performing US store and beat all the corporate owns.
Despite doing another deal in San Diego and another one in Houston
Eventually they kinda wanted
to bring the learnings back to the mothership to kind of have them all be homogenous.
And so all the US stores are now operated by Inca.
But for anyone.
in Seattle that during the twelve years of independent ownership visited that store, it actually was a pretty different thing with very different marketing materials than anyone else in the US was getting.
Was it in the same location, uh, that the current one is, down in Raton?
I think that
Where the original IKEA was is now the parking lot and they've shifted and built this new shiny building next to it.
Man, I spent so much time in that store when I first moved to Seattle to work for Majona.
I mean I was
Moving across country as a young person
On my
Four
And fifth.
apartments since graduating from school.
Three years earlier. Wow.
Man.
I was so squarely in the sweet spot for IKEA.
At that moment in my life.
It was almost a weekly pilgrimage that I did to that IKEA store. Wow.
And I used to love going to the as is section. Like I would always start there at the end and be like, Okay, what can I get a deal on here?
'Cause as is is like returns and Yeah, broken stuff or showroom floor stuff that they're getting rid of.
Yeah, yeah. It's like when I enter a Lululemon, I always go right to the back and look at the clearance rack.
Yeah.
Even the Lululemon's clearance is horrible. They're like fifteen percent off or something.
Oh man, sometimes in the IKEA as is section you can get some
Screaming deal. Some of you would argue everything is a screaming deal.
But to this point of like the reason they were doing this Seattle specific thing, the individual franchising, this like
Ingvar was obsessed with
reducing bureaucracy. I get the sense this is still an ongoing battle today, now that they're a bigger company.
in figuring out how to be as lean and scrappy as they were.
You know, when you have more committees and more lawyers and more traditional corporate leaders from other companies and all that coming in.
this sort of thing is a helpful antibody.
Against that.
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There's one other thing.
That happens in nineteen eighty five.
And I can't land. Meatballs, baby.
It's like the final piece of the puzzle.
They had
Meatballs.
To the menu.
Now this is what's funny.
You would think this would be like
The capping of his career, the end of the story
Yeah, it's um
Nineteen eighty five, they add meatballs, the concept is perfected. In nineteen eighty six
Ingvar is sixty years old.
He steps down.
As president.
Of the Ikea store operation of Inca. It's the reverse Morris Chang.
Isn't that the year he started T SMC?
It was fifty nine, something like that.
That's right.
Yes, he steps down as president in nineteen eighty six.
I don't think anything changed whatsoever in his
Daily activities.
I think he was doing exactly the same things that he was always doing and uh
His successor, a guy named Anders Moberg.
does stay there, I think for twelve, thirteen years maybe.
He would leave at the end of the nineties
to go become president of Home Depot's planned
European expansion.
Which then ends up not happening until he would leave Home Depot. But yeah, I think he was constantly clashing with Ingvar about like, hey, I'm the president here.
No. There's only one president at ITI. Even if not in name, and that was Ingvar.
Do you know what Anders Moberg is doing now?
Ooh, I do not.
Unders is on the board of directors for
The IKEA Foundation.
Oh, interesting.
Yep.
Well, there couldn't have been that many hard feelings then.
Right. Yeah, which is the foundation on the Inca side of the tree.
The franchisee side.
Amazing.
With two of
The Suns.
Two Comprod brothers.
Yeah.
And I think the third son is on the inter board. Yes.
Yep, exactly.
So that takes us into the nineties.
Basically the compounding story
continues unabated.
In nineteen ninety four, they enter Taiwan.
In the spring of nineteen ninety eight, they entered China.
They expect that China will become a
Obviously huge, huge.
market for them, which it does.
By the end of the nineties, Ikea is a ten billion dollar annual revenue business.
So
Rocking and rolling. Seriously.
There is another thing that happens in the nineties that
We have to talk about on this episode.
And happened way earlier in
Ingvar's life, but this is the moment where it really intersects the IKE story.
The news comes out that in his youth

was a part of a Nazi and fascist movement in Sweden.
Which in some ways is not surprising. I mean his grandparents had
immigrated from Germany, had very strong feelings.
had lived this horrible life.
And Ingvar very much looked up to his grandma and sort of looked to her for
political, moral, social guidance.
And
So
Unfortunately, Ingvar
was a part of this Swedish fascist movement.
It was like
Sort of uh
provable that he was attending meetings, helping to organize, raised funds, recruited members.
He
stayed close to this Swedish leader.
Even after the war in
as late as nineteen fifty wrote a letter that he was proud of his involvement.
The net of all this is in nineteen ninety four when this came out
He immediately

and said that his fascist activities were a part of my life which I bitterly regret.
And the most stupid mistake of my life.
He was direct about it.
In fact, the first employee of IKEA was
A Jewish refugee who had fled
Austria in nineteen forty three.
So
There's a lot of
Complex stuff going around here.
But the thing that is
Definitely admitted to, proven is
That
He was a recruiter organizer for the Swedish fascist movement during the Nazi regime.
Yeah.
The extent of his involvement in the Swedish
fascist movement after the war actually didn't come out then in the nineties.
Came out later.
In
The two thousands and
Engvar, I think, rightly took a lot of flack for not fulcing
How long that went on. Yeah, he had a friendship with the Swedish fascist party leader
Who would go on to be this pretty horrible vocal Holocaust denier.
And Ingvar maintained that friendship and even at the end of his life went on the record and said this person was a great man.
So
You know, on the one hand you wanna say, look, he apologized and it was
fifty years earlier, and he was seventeen at the time.
Can't a person make a mistake when they were younger and admit a mistake and move on.
On the other hand, you could imagine wanting to give him more forgiveness
If he hadn't continued to stand by the Holocaust denier guy.
Maintain that friendship.
Or just came clean about that whole thing initially. Totally.
Or with his vast, vast resources.
made a big contribution to a Holocaust Museum or the Families or something.
Yeah.
This is one of these things that covering these old European companies. Like you
Can't.
Avoid this.
Totally.
My heart dropped and was also not surprising when we first started doing the research and had no idea and came across it's not hard to find this. You come across it for the first time and you're like ah crap.
Yeah.
So coming out of the nineties.
Coming out of the nineties, in two thousand, Ikea starts
Their next big geographical growth initiative.
Which is Russia.
So they reach a deal with the Russian government that IKEA is gonna enter Russia.
And they're gonna use the market, which they expect to be
Really big for IKEA.
To also pilot
The quote unquote mega
M E G A all Capital.
shopping center concept, which I think was actually like the brand name of the shopping center that they then later roll out to other places around the world. And the idea is
Ikea writ large.
has so much capital and so much resources at this point.
We've always owned our own real estate and we think that's a key part of securing that future.
We have.
So much more cash resources now. What if we also invest in like large retail centers around
Which they hadn't really done before.
And the idea of the
This is kinda genius and not novel now because so many other folks do it.
We surround the IKEA
With
Lots of partial competitors. Cause Ikea sells so much stuff in its range.
That's
Yes, there could be a home depot there, or yes, there could be a bed bath and beyond there. I'm using American terms here, obviously these are not Russian stores.
And we compete with them partially. I didn't realize Russia is where they started the strategy. Yeah, Russia's where they started
But
Because it's now this retail center.
If even only say ten percent of the people that are coming
Go there for

might also visit IKEA. Well then that's
a found extra ten percent customers for us.
So they pilot this in Russia, which is interesting. And I think it works pretty well.
Unfortunately.
For Ikea and everything that
would happen in Russia over the next twenty years.
They end up completely exiting the market.
in March of twenty twenty two.
after Russia invades Ukraine. So they had seventeen
Stores total in Russia.
Fourteen of which were these mega
Complexes.
They close all the IKS stores.
They sell off the fourteen mega complexes.
to the um
Russian uh I think supermarket chain, Gazprom bank.
So they end up fully exiting the market after twenty years. But it does become pretty large for them and sort of pilots this
mega retail center idea.
Yeah, I mean as much as
Twitter.
They had to sell it all off.
Or in some cases I imagine they didn't get a return. They just had to like
Close up shop.
It does.
lead them to this insight which is
We've been building these Disneylands out in the potato fields. And I've heard a few people refer to the potato fields, and and I I read it in a few places.
And then
Everything springs up around.
We should probably benefit from the fact that everyone is springing up around it to try to take advantage of the fact that people are driving out for their day at IKE.
And so they wanna be everyone's landlords.
who are drafting off the success of IKEA, creating a whole bunch of traffic to this area.
I think it's a pretty major strategy of theirs now, whenever they open a new store to own as much real estate as possible around it and help develop it.
Yeah.
I mean gosh, I think about here in the Bay Area, the Emeryville store.
Cross.
the Bay and the East Bay.
I don't know how much of
the Emeryville complex they own, but there's so much retail.
All around that.
Yes, it would be genius for IKEA to participate in it.
Yeah.
So
Another thing that happens around this era, it's sort of the mid to late nineties, is they really codify these principles with what they call democratic design.
They had always believed in optimizing form and function. Like they wanted things to have beauty, but also
Incredible purpose.
But they added three more pillars.
So they now have these five pillars.
So you've got form function.
Quality
Sustainability.
And low price.
And
We've talked about the quality, we've talked about
Again, quality is not maximum quality, it's appropriate amount of quality for the object.
Low price, we've talked a lot about
Sustainability.
They were extremely early. This is before anybody's mentioning ESG or anybody like uh most people are mentioning climate.
They are making heavy investments
Even in the late nineties.
When
it was kind of viewed as heretical. They probably wouldn't have been able to do it if they were a public company, but starting to invest in renewable energy and other things. And now this is like a huge if you go to Ikea.com, it gets a lot of real estate and everything they do is their sustainability efforts.
But their goal is to optimize across these five vectors.
and weigh the trade off in between them.
And so their idea of democratic design is that
Everyone, regardless of their income, can access well designed products to improve everyday life.
And
Every time they iterate on a product, every year.
they should be further optimizing some set of the products in the range to get
a little cheaper or find a little better way to manufacture it or develop
some way to serve more customers with the same product to get a little bit better scale economies.
Or to do something in a slightly greener way.
You could imagine a five point diagram.
Where they have sort of a score on each of these five.
They want the total area.
to be as high as possible for everything they do across those five vectors.
Sound like a uh
McKinsey consultant now. I am confident that diagram has a name and I am proud that I don't know it. Yes. Me too. I've seen them before and I don't know what it's called and I don't want to know. But yeah, that is democratic design.
Jumping forward to two thousand seven, they hit twenty billion in revenue in two thousand seven, up from, you know, call it ten in ninety nine, two thousand. So
Growth is really still going here.
And then
They hit a rough patch.
Part of that obviously is the financial crisis.
In two thousand eight and onwards.
But it's also e commerce.
So Ikea makes the like
considered and deliberate decision here in the mid two thousands is
E commerce is taking off.
Not to participate.
Or at least to participate
Only as minimally as is required.
Which you can understand. It is against
Every
other element of their DNA.
Totally.
And I'm sure still to this day very much less profitable for IKEA than in store visits.
I bet e commerce is not a profitable business for them.
I suspect that is right.
If you just think about
all the ways in which they whittle price down. Every single place they could make a deal with a customer and say, hey
How about
You do a little bit of work and we don't.
We'll give you a better price. And the customer says, Okay, you know, it's picking it out yourself in the warehouse. It's assembling it yourself at home. It's driving it to your house.
It's
Oh, I don't need the back to look good.
You know, it's every single way in which the customer makes the deal with IKEA.
to yeah, lower the price a little bit. E commerce blows it all up. The overhead, the cost structure required.
for e commerce, I mean shipping things to your house, having the delivery network, figuring out a whole new
supply chain, like should it come from the store every time? Should it not come from the store every time? Should we box them differently? Should we use third party logistics? Should we use our own, et cetera, et cetera.
It goes in the opposite direction as everything they've been trying to optimize for the last fifty years.
Totally.
And even more than that.
We alluded to this much earlier in the episode.
It also breaks the
beautiful sort of closed loop ecosystem of controlling both the demand and the supply chains.
in an internet e commerce post catalog world
IKEA no longer controls the demand chain in the way that they did before.
Right.
So
For the next four years between two thousand seven and
Two thousand ten, revenue is basically flat.
Growth.
Falls off a cliff. Like
Zero growth.
For four years.
In twenty eleven
They do start growing again, revenue hits twenty five billion euros.
They enter Latin America
So they're starting to open up.
New markets again.
Yeah, but twenty fourteen
they decide to shift strategy
But not to start doing e commerce.
The strategy shift is to start opening small stores in cities.
Starting in Hamburg, Germany.
They have now embraced this and launched in dozens of cities. Yep, including San Francisco.
Yeah, it's this smaller set of products.
So
It's pretty interesting observing this.
trend toward urbanization and trend toward buying online.
As of twenty fourteen, they still don't really
Have e commerce.
Yeah.
And on the one hand, maybe that's the right strategy. Maybe they never should have done e commerce. I don't really know.
because they're not a public company and because they don't break out segments
We don't really get to know.
If e commerce is a profitable business for them.
What we do know
Is
That
Over time their revenue keeps growing.
At least if you look at Inca, the operator of these stores.
Their operating profit
Does not.
In fact, over the last several years it's been declining.
So as a percentage of their revenue
The operating profit of these stores is going
Down.
And David, I think where you're sort of going with this is
They really start going down.
Once IKEA does meaningfully start investing in e commerce starting in twenty eighteen is when they really put their foot on the gas.
And
Today, twenty twenty four, e commerce is twenty six percent of
Revenue.
Right. So it is what their customers want. So you can't bury your head and say, look, forever we're not gonna do e-commerce because it doesn't really fit with our model.
if it's what your customers want and the fact that twenty six percent of people are doing it today.
Clearly you do have to go do that.
But I'm not
sure yet that they have a profitable way to do that with their model.
I mean
Simply just inferring from the financial statements they don't.
Because revenue is growing.
E commerce share is growing and operating income is flat to declining.
Yeah.
My only skepticism on it is like before truly issuing judgment there is maybe there's something we're missing since we don't have
full financials and we're just looking at Inca, which is the franchisee that operates the stores. Maybe there's
I don't know. But
Yeah, I mean you and I ran the numbers. I'll pull up the spreadsheet real quick.
Starting in twenty seventeen, revenue continues to grow on the order of five ish percent per year.
But their uh operat drops from
Eight percent, six percent, five percent, and kind of hovers in this three to five percent range the last few years.
Yeah.
So something is happening that is making them less profitable.
Yeah.
And
Seems like a fair assumption. It's
E commerce.
Yeah.
Twenty eighteen.
Two big things happen. One, they enter India.
Two
Ingvar
Passes away in January twenty eighteen at age ninety one. And you know, like we said, he's working
Right up to the end.
One sort of thing.
Poignant story we heard in the research is
Yeah, after one of the last board meetings that he was part of, he sort of took
I'm so jealous of you. He knows he's coming to the end of his life.

You get to keep
working in IKEA and running this business and I don't. It's like
This was his life.
Yep.
Absolutely.
So twenty twenty one
They finally discontinue the catalogue.
It's a sad, sad time.
At peak, two hundred and twenty million copies were printed across sixty-nine different versions, thirty-two languages, and fifty markets.
I mean
They really used to
have their own proprietary relationship with customers.
And in this new era.
On the internet.
Any time that I have a thought, Oh, I I need to go buy something.
I Google it.
I look at a bunch of retailers. I am not specifically IKEA's customer in the way that in nineteen seventy
you would have been an IKEA catalog subscriber.
And they don't really have a way to engage people as strongly as they once did. I mean, email marketing is just not the same as what the IKEA catalog was. No.
Not the same kind of catalogue.
Now
On the one hand, they're competing on equal footing. On the other hand, I've spent thousands of dollars at IKEA over the last few years since moving to a new house, having a baby.
Yesterday morning.
I bought seven hundred dollars worth of Ikea merchandise in part to prepare for this episode, but in part I needed stuff.
Right.
I mean
Hell, I've got the Ikea high chair that

Yep.
Oh yeah, my son's crib is IKEA. Oh, and by the way, that seven hundred dollars was spent
On e commerce.
Oh, you didn't spend that on your trip to the store? No, I sp I had two big IKE transactions in the last week.
I mean I wouldn't have gone to the store if I wasn't preparing for this episode, but
The stuff that I bought online
That was stuff I needed and I probably wasn't gonna go to the store to buy it.
Man.
So you willfully and intentionally
cost IKEA margins. Literally took money out of their foundation's
Profit. I could have taken more time and gone to the store, but this episode would have been worse. I wouldn't have had as much time to research.
Oh, there we go. This is like the version of
You know, when you uh Google for products you want
You know, click on the organic results, don't click on the add result, even though it's at the top of the page to save your
you know, favorite company's money.
Don't buy Ikea online. Go to the store if you love IKEA. Uh at some point it'd be great to talk to somebody at the coven about this. I'm sure they don't like lose m but they don't make as much money.
I don't know maybe they do lose money on online orders, I don't know.
I don't know. Engvar isn't alive anymore. I don't know.
That's true.
I will say a thing that illustrates every point we make making on this episode really
really well is so they bought Task Rabbit.
For a small amount, fifty to seventy five million somewhere in there a few years ago. Yep.
Twenty seventeen.
And
I checked the little box, like
provide me an estimate of what it would cost for a task rabbit to come to my house and assemble all this stuff.
Three hundred and fifty bucks.
On a seven hundred dollar order. So half of your purchase.
Yeah.
That is
The perfect
encapsulation of how much money customers save.
By
the IKEA flat pack
Pick up yourself at the warehouse model.
In fact, it's more than that'cause I think it was like thirty bucks or fifty bucks in a deliver fee. So call it four hundred dollars.
that you're saving by buying something the Ikey away versus a fulfill delivered at your house.

I'm saving over a third of the total purchase price.
by doing it the Ikea way versus the traditional way.
Mm-hmm.
Which I'm laughing, uh brings up
What for me was the ultimate Ikea hack for
Many years of my life.
I think I talked before on the meta episode about how much I love Facebook marketplace and
Craig's list before that. Yeah.
I decided probably I don't know.
Ten, fifteen years ago.
Hey.
Ikea furniture, despite the fact that you have to assemble it yourself and whatnot, like
It actually is pretty durable. On the one hand it gets the rep of like disposable but
If you take care of it, it'll last a long time.
Even through a disassembly and a move?
Oh, I can attest to that. Not
Really? Because my whole thing with it is to me, it feels like once you assemble it, it is good.
But then when you disassemble it and put it together somewhere else, it always feels like it's a little wiggly.
Well,
My hack for
Quite a number of apartments and houses was
Just buy secondhand IKEA on.
Craig's list in Facebook marketplace and be cool with it.
Oh.
So you could successfully move the IKEA and it wouldn't.
Yeah.
Not so much to save money, but more to save on the assembly. That was the reason I was doing it.
Hm.
And they hold their resale value pretty well.
Well, first of all, they can't really go down in value. So they're fully depreciated when you buy them for a a ten dollar lakh table.
Right.
I was not buying lack tables on uh Craigslist. But there are some things that
Are super durable and some things that aren't. Like a lot of the press board stuff, once you pull it apart, I wouldn't expect to be able to put it back together, but they do now sell like.
thousand dollar dining tables made out of solid oak.
First of all.
I didn't realise you could get
just the materials to make that for a thousand dollars. That's like a four or five thousand dollar table at other retailers.
But something like that I expect to survive moves very well. I I think it's just
It's unfair to say everything from this retailer is throw away or everything from this retailer is infinitely durable. Neither are true.
Yeah. What I really used to do my hack with was the hemness line, hemness bookcases. We have had so many hemnis bookcases in our homes over the years. You know, uh Jenny did a PhD, so she has lots of books. Lord knows I have tons of books now.
As uh
My vocation, our vocation.
And hemness bookcases, like, they'll last if you take care of'em and you can disassemble, reassemble.
Fascinating.
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All right, should I take us through to the uh state of the business today and then we'll get into the analysis?
Let's do it.
All right.
So
We'll start with a quick refresher on structure.
There's
Two branches of IKEA to think about.
There's inter-IKEA systems. This is the corporate entity that owns the brand and the IP.
And as of twenty sixteen
They also do all the product development, supply chain
All that stuff. So they own sort of all the inventory
and the franchisees take possession of it almost on like a real time basis as they need it.
So
Inter IKEA.
Does three things.
Franchise.
The range, which is the products.
And supply, which is supply chain.
And the way that I would sort of think about this is
There are like two things in one. One, they're a company that designs and makes products to sell to franchisees.
And two, they're a licensor that takes
A three percent rake effectively on all sales.
Which
It's pretty fair.
Totally.
Three percent of your revenue for the IKEA brand and concept?
That seems very fair.
But also like if you're selling razor thin margins, it's actually a huge percentage of your profit pool. It's kinda like payment processing. You're like, oh, what's three percent?
And then you look at the profits on a retailer and you're like, Whoa, I'm shipping half my profits to Yeah, what did you say um operating income margin is these days, like six, seven percent, if I remember right. That's high. It's like four or five percent.
Okay. So yeah, they're taking.
Basically half of your
Operating income. Yeah.
On the other hand, like are these really different companies? Like what there's not really a deal between the two. That's yeah.
And there's actually a specific
Tax reason, right? Why.
It's a royalty on sales.
From what I could tell
I'm not a tax expert. I think royalties are tax deductible.
So by shipping money around between two entities instead of having it just be one
simple C Corp that
Runs the whole company.
they are actually able to deduct those royalties.
off their taxes.
Yeah.
It is helpful for tax purposes.
That
Parent company.
did twenty seven billion dollars in sales of goods.
And they made one point four billion dollars from franchise fees.
That number pencils pretty well. Ikea as a whole
did forty seven billion dollars in revenue. So when you think about it, the parent company
Cells.
twenty seven billion dollars of goods.
to the franchises who then
have their own top line of forty seven billion, you can kinda start to understand the margin structure a little bit.
And then they get that call it one and a half, two billion ish.
Sort of.
effective cash flow back in the royalty of that forty seven billion dollar
Total revenue. That's exactly right.
Okay, so where does money go?
when it comes up to the Inter IKEA Foundation. This is again the parent company, the one who owns the IP, the one who develops the product range, all this stuff, but they don't operate the stores.
That company is owned by the Inter IKEA Foundation in Liechtenstein.
The main purpose, as we talked about, is to ensure the independence and the longevity of the IKEA concept and to own and govern the IKEA group.
The Inter IKE Foundation is a self owned entity.
That's a new thing that I didn't know existed.
Is the Novo Nordisk Foundation also? This is sounding familiar to me.
And there is no nor can there be
Any individual beneficiary, funds held by the foundation can only be used in accordance with the foundation's purpose.
Which again, the purpose is ensuring
The future of IKEA.
So, David, you were doing some napkin math on this.
What sort of cash do you think?
Is
held.
by the Inter IKEA Foundation in Liechtenstein.
Right. So it was reported around twenty eleven
that it had roughly fifteen billion euros in
Assets.
And that does not include the value of the company. So that's just like
Cash and marketable securities call it.
sitting, you know, on the balance sheet of
This foundation.
In the thirteen years since then
If you can sort of
Infer from the
the financial statements and I think they actually do disclose now how much
the operating holding company.
sends in cash up to the foundation every year, it's like a billion euros in cash every year.
That gets sent.
Two.
The Inter IKEA Foundation. So
Just add thirteen more billion Euros in cash every year, you're up to
call it close to thirty billion euros in assets there. That's assuming no investment return compounding. But twenty eleven to today is among the best investment returns in history.
Assuming they were just at market beta.
Totally. And it's like
Fifty billion ish seems like a v wildly conservative estimate for
The amount of assets in this foundation, you know, arguably closer to a hundred, but we don't know.
It's not a charitable foundation. Let's be super clear. This is an enterprise foundation.
and their purpose is to ensure the continuity of IKEA.
What do you do with fifty plus billion dollars? Well, you start investing in retail centers. Right.
This is not including the ownership of Inter IKEA.
itself, the company, this is an addition
to the value of your ownership of that enterprise.
This is like uh remember we were joking at the arena show that the Forbes uh net worth estimations of Taylor Swift are laughable because they're just looking at like what is her bank account, you know, and they're not
Enterprise valuing Taylor Swift. This is like the bank account of the foundation, not valuing
Inter IKEA the company had anything.
Fascinating.
Yes.
One of the largest
Entities in the world.
Bye.
Assets. And then if you include the value of IKEA, I mean
My God, what do you value?
Ikea at as a company.
Yeah.
Funny, I had done some napkin math on w if I were to buy all of IKE, including Inter and
Inca.
What would I value it at?
Maybe now's a good time to share that.
So the whole company does something like forty five billion a year.
It's growing at about five percent per year.
But operating income at least for the moment.
Is not growing.
Right.
There's another company out there.
that grows at about five percent a year, that has a net income margin that bop around the three percent range.
That's also a retailer.
And that company is Walmart.
Ooh.
Walmart is valued at about one point one X sales.
So you could value all of IKEA. Again, this would be Inter plus Inca plus the other franchisees.
At about fifty sixty billion dollars.
That feels low to me just given
The
Durability and defensibility of IKEA, but
Uh you could also make an argument.
That it's fair.
Yeah.
But call it.
Fifty to a hundred.
I don't really care about slicing it Inter versus Inca. I think this is all
Silly.
But
It is interesting to think like there's a cash pile.
That
The
Inter IKE Foundation.
has to ensure the continuity of IKEA.
That is approximately equal in value to all of IKEA itself.
Right.
Yes, that cash pile.
is almost certainly between fifty and a hundred billion.
Uuros, dollars, whatever you want to say.
Similarly.
The value of IKEA is somewhere between fifty to a hundred billion Euros dollars.
Yes.
Totally fascinating.
So then flipping over to the Inca side of the house, this is the largest franchisee with ninety percent of stores.
That is the four hundred different IKEA stores out of the what did you say was four hundred and seventy total?
Seventy six, I think.
That they operate.
They also have what they call Inca centers.
which is this shopping center concept we talked about.
They have forty four of those experience oriented shopping centers across Europe and China.
And more are on the way.
And
They're also applying that concept to the small city stores here. So like interestingly in San Francisco, the
Ikea here in downtown San Francisco. Ikea
Bought the building.
Yeah, it's not just like they leased some space in downtown San Francisco. It was actually an empty building. It was empty for long, long time on Market Street. Huh. They bought the whole thing.
They put IKE in and now they're putting other tenants into this complex. So they're like
IKEA is participating in San Francisco downtown urban renewal, which is kind of wild, but like I think it's all part of this.
Hey, we need to make some investments with all this cash.
Yep.
So they have this arm Inca investments.
That
basically allows them to invest in other companies that they think will in some way be additive to
their core business. So it's like effectively
super large scale corporate venture.
And then
Their owner, this is again the franchisee that operates ninety percent of the stores.
Inca's owner is the stitching
Inca Foundation.
Based in the Netherlands.
The other one was Liechtenstein, this one's the Netherlands.
And this one is an actual charitable foundation that has a specific focus on climate and poverty.
And with this one, Inca sends about fifteen percent of their net income up to that charity, and then they use the other eighty five percent for reinvesting in the business. So call it
two to three hundred million euros a year.
that Inca actually ships up to their charitable foundation. And from what we can tell, it seems like the charitable foundation then
does about two hundred million euros of grant making every year.
So
Hard to know exactly what the endowment size is.
Of
The
Stitching Inca foundations.
net of the asset itself. Like any estimates that float around kind of include the enterprise value of Inca.
But there exists some cash pile there.
that probably grows modestly because they're doing so much
Donating.
out of the
Endowment.
Oh, that reminds me.
There's another big cash pile that we forgot about.
Oh, the actual balance sheet?
The balance sheet of Inca. Yeah. Inca has twenty five billion dollars in cash on hand.
Yeah.
Cash is not the constraint here. No. And that cash again is at Inca totally separate from that call it.
fifty to a hundred billion of
Cash and securities we can estimate that is over at Inter.
Yeah.
Anyway.
Well one way to think about this company is basically as like
The Berkshire Hathaway of Europe.
Yeah.
If you wanted to sum some things together.
And just pick some midpoints.
Let's say you got seventy five billion dollars for the enterprise value of the whole kit and caboodle.
Then you've got another twenty five billion on the balance sheet. So call it a hundred billion for the IKEA business.
Then let's say another seventy five billion
for the
Inter IKEA Foundation's cash pile.
So that's one seventy five.
And then the question is what is the cash size of the endowment that the stitching Inca foundation has?
I'm gonna guess it's smaller, ten ish billion.
But we're still approaching two hundred billion dollars here in value.
All created.
With
No equity investment. No debt investment.
I mean this is just eighty one years
Of selling things.
That provide value to customers.
and reinvesting the dollars to do that again on a grander scale.
I truly don't think there is
Anything like this in the entire world.
Yeah, I wonder if that's true. This this is the only
business like that. And if we define it as like
two hundred billion dollar scale
built from nothing with no investment, exclusively investing the cash flows of the business for growth.
Like there has been no inorganic growth.
Right.
No material in organic growth. I mean with
Berkshire, they traded a paperclip for a house many times. With L VMH, they did the same thing.
He had like three years where he turned
some small amount of money into six hundred million dollars to get the whole thing started, if I'm remembering our L VMH episode correctly. Yep.
But L VMH certainly capital.
Both from
Bernard and the family and other sources went into the business.
Berkshire.
Maybe you could make more of an argument it was trading paper clips, but either way it was all inorganic growth.
Right.
Airmes is a pretty good I mean, it's been around twice as long.
That's a good point.
Doesn't have as much cash.
Is worth
The same or maybe arguably more. Right.
But doesn't have the ludicrous cash pile that Ikea has.
Meta didn't use much of their cash.
Otherwise you could say Meta's this example, but they have a lot of other Mark is not the only shareholder the way that
Ingvaru was And it took venture capital to build that business.
Yeah.
And debt capital, as we talked about.
Yeah.
That to me is like the most impressive thing about this whole
businesses that it was just

Take your money, keep plowing it into the next thing.
Yep.
More stats on the business today. They have two hundred and sixteen thousand employees. They call them co workers.
It's a slight decrease year over year from last year. Ikea is in sixty-three markets worldwide.
Last year they welcomed eight hundred and sixty million people to the store.
Sometimes they say store visits, sometimes they say visitors. So I don't know if it's eight hundred and sixty million unique people or eight hundred and sixty million times a person walked into the door, but whatever, either way.
It's crazy.
The demographic of their customer base is twenty to thirty six.
So there is an age where you kind of like churn out of IKEA, and they know this. This is measured in a bunch of external surveys.
I'm surprised to hear you talking about
how you're doing so much active buying right now. Perhaps
Because you have your first child and yeah.
I've totally aged out. As much as I love Ikea and it's been such a huge part of my life.
for a long time. Now that we're on to kid number two, we're reusing a lot of stuff.
I don't actually buy from there that much anymore.
There's a great study that Ernest did that we'll link to in the show notes.
That shows IKEA's peak customer age is twenty four.
It's
Like they start churning after that.
It's interesting to see the distribution. Like Creighton Barrel's PKH is thirty one, West Elm is thirty three.
William Sonoma is thirty three.
Then you start to get into like restoration hardware is forty four, Pier one imports is forty five, home depot is forty eight.
Lowe's is fifty four.
This is like the cycle of life.
I love it.
Sort of.
The Ikea
semi self construction or believe self construction.

I'm just buying consumer furniture.
To then no, I'm actually building this stuff myself.
Yes, exactly. Well, you go from furnishing your apartment to furnishing your home to fixing your home. Yeah.
That sounds right.
Yeah.
So geography, Europe is still their core. Seventy one percent of sales
even still come from Europe, even with the US as a huge and developed market.
And Germany
It's still bigger than the US, I think.
Seventy one percent is products in stores, twenty six percent is e commerce, three percent is services to customers. I assume that basically means Task Rabbit.
I assume so, yeah.
The majority of the revenue is still products sold in stores.
Growth is pretty slow, five percent or so, not so different than Walmart.
I decided I wanted to do a sales per foot.
analysis the same way that we did in our Costco episode.
It's a private company, they don't break it out and they're limited in what they have to report to you.
But
If you assume all their revenue is spread over their four hundred and seventy three stores and you estimate it's about three hundred thousand square foot per store.
That gives you three hundred and twenty euros a foot.
Which is like, I don't know, three hundred and fifty bucks a foot or something like that. Yeah. Yeah. Yeah.
Restoration hardware's nine hundred.
Okay.
Williams Sonoma is one thousand three hundred.
But if you've ever been at a William Sonoma store, that makes sense. It's overpriced and it's very small. These are also small stores, too. I mean
Well, restoration hardware is huge complexes, but few of them.
And they're
These weird palaces. It's a crazy business.
Have you been to the one in San Francisco? No.
It's freaking wild. You would think it's like a tech company headquarters.
But no, it's the restoration hardware building.
Really?
Yeah, they've been on quite the transformation sort of going up market.
over the last couple decades.
Lazy Boy is uh hundred and fifty seven dollars a foot.
None of this
is on a spectrum of like bad to good.
'Cause Ikea is intentionally not trying to maximize
There's
dollar per foot here.
Right.
There are trade offs they're willing to make.
instead of maximizing that.
Now let's compare it to the companies we mentioned on our Costco episode.
Costco is eighteen hundred dollars a foot.
They are trying to maximize their dollars per foot.
Walmart is about six hundred.
Target is about four hundred and fifty dollars.
And then these like crazy businesses just to compare it to the all time greatest.
Tiffany is three thousand dollars a foot for jewelry and Apple is five thousand five hundred dollars.
Much smaller footprint.
Yeah.
I should remember this from our Hermes episode.
Do they report?
Sales per square foot.
I don't remember. I don't think we talked about it.
I don't think we talked about it either.
It doesn't feel like a thing they would report.
But
I gotta imagine though that it is.
As high, if not higher, than Apple.
You think it's higher than Tiffany?
Yeah.
Yeah, you might be right.
We've spent a lot of time in our med stores recently. Can attest to some of the behavior.
That uh we have observed in there.
You're raising their price per foot. No, I think I'm lowering their price per foot.
It's interesting. I don't really know how to think about this three hundred and fifty number. Like they have a huge amount of square footage. They intentionally try to sell things as inexpensively as possible.
the ultimate maximization function.
Is
It's almost like
It's not margin dollars.
I think it's like number of items sold profitably at all.
They want to sell more things to more people.
Yeah.
I think it comes back to this concept of the many.
Which again, maybe is a little hokey.
But like I actually think it is true.
They've built our hundred billion dollar business on the idea of the Medi. It's not hokey at all.
Yeah, it is
The many. That is the optimization. And so I think you're totally right.
I don't think they're trying to optimize sales per square foot at all.
I think it's just like
The square feet are all in function of
The many.
Right.
And they own all the real estate. So like it's not like they're paying rent.
They choose the location strategically.
Then they become a landlord to other people in these new mega shopping centers.
Yeah.
The optimization function is they want to provide as much value to as many people in the world as possible.
Here's another reason why this metric doesn't make any sense at all for IKEA.
With the exception of Costco, which is its own
Yeah.
None of those other businesses.
also have their warehouses in their stores. Right. Right.
So then the last thing in the sort of snapshot of the business today
is the market.
Today.
In twenty twenty four
With forty seven billion dollars in revenue.
IKEA holds only a five
Point seven percent market share.
This is an astonishingly fragmented market.
It was when Ingvar started the company and it is today still.
Right.
Which is
So wild. And they are by far the largest player.
Yeah.
I mean even if you look around
Where else do people get
Furniture that
gets the job done.
Looks good enough.
And is it good value to them.
Target.
Amazon
Wayfair.
But then you start to get quickly into like more expensive C B two pottery barn.
I mean I g Walmart sells furniture, but
Oh yeah. I've been chomping at the bit.
All episode to talk about this. This is like the

Craziest thing to me about this whole story.
Ikea has proved
Beyond a shadow of a doubt.
That
Furniture and home furnishings.
is an extremely large
Extremely global.
Very attractive market.
One.
Two, Ikea and a whole set of other retail companies.
Costco probably being foremost among them.
Have also shown
That becoming a scale global player
In a consumer market.
Is a good position to be in.
Ikea.
has no competitors.
Yeah.
the Venn diagram of those two things. They are the only globally scaled
Furniture and home furnishings company.
That's crazy.
Yeah.
Okay, so
I'm foreshadowing power. As we move into analysis here, power is gonna be our next thing we examine.
No.
Just to name it.
This company is scale economies.
And so
Now that they have reached escape velocity, like they're through the takeoff phase in Hamilton's parlance.
You can't compete directly with them.
because there's no chance that you could beat them on price or on quality for price.
So
It's almost like if there was gonna be an IKEA competitor, they would have needed to start fifty to eighty years ago.
a direct IKEA competitor. So the most credible way to compete with them.
Is
doing something different.
I mean probably the best competitive strategy is Wayfair, something that's born on the internet.
that does something with a completely different cost structure.
than they're capable of.
Wayfarer.
is not a high margin business.
But
they have built the whole business around the idea that they sell online, whereas IKEA needs to figure out how to do that.
Which as we've talked about, e commerce is a challenge for IKEA, if you make it your strength.
Yes.
But uh
You really gotta squint today to see Wayfair becoming a
global business on the scale.
Of Ikea.
Wayfair's a five billion dollar market cap company.
Yeah.
Yeah. Long way to go.
Now
It's interesting as I was saying that part of the reason I'm thinking like that's so crazy.
But you're right. Like let's think through how would you actually
Compete.
with IKEA if you wanted to build a globally scaled furniture brand
Well
An obvious one that pops out to me is
Okay, give the low and
low medium ends to Ikea and then compete at the top end, like restoration hardware is doing.
The issue with that though about going global is that
Tastes at the high end are way more heterogeneous and fragmented, especially across geography. Yep.
than they are at the middle and low ends. Yep. That's a great point.
You can't have a narrow product range.
Yep. So you have a more expensive overhead in producing a wide variety of SKUs.
Yeah.
Probably the most credible competitor from my perspective.
with me as a customer is target.
Yeah.
I probably would look at target.com and see if there are because they partner with all these designers. They have like a reasonable sense of taste. It's not like high-end furniture and never will be, and it's not the best designs, but it's like, okay, this is gonna get the job done for a commodity thing in my house.
They don't just sell furniture, but you know, target's a
seventy billion dollar company.
I don't think it's global in the way that IKEA is.
Again, it's like to your point.
competing on just furniture and competing at global scale.
Uh
That's tough. Tough not to crack.
Yeah.
I totally agree with you that
within the US or in North America.
Target
feels like the closest
competitor to Ikea.
However,
Exactly that. Target is a North American company. It is not a global company. Yep.
So we're pretty squarely in power here.
Normally when we try to assess power, we say, what is it that enables the business to achieve persistent differential returns or put another way, be more profitable than their closest competitor and do so sustainably?
We're asking a slightly different question here.
Which is
What enables this business?
to own this market.
Almost.
uniquely exist. Yeah. Yeah. When no one else is really competing with them.
directly.
Or at least
competing with them across everything they do.
Yeah.
I'm trying to think if we've encountered a business like this before. You would have to counterposition them because no one else can outscale economies them.
Maybe Amazon
would be the most credible because they have the scale.
If they were to make a real run at it. I assume there's an Amazon basics line of furniture.
Yep, Amazon definitely has furniture.
There's not switching costs from a customer perspective.
It's funny, I'm thinking through that now, like
Yes, Amazon definitely has furniture. Amazon is more or less global.
More so every day.
But there's a supply side scale economies.
mode here for Ikea, which is
How on earth if you're Amazon, even if you're just a retailer, you're not
designing or sourcing any of this furniture yourself, how on earth are you gonna do the logistics?
around the world in the way that Ikea does. Right.
Not to mention at this point IKEA
I think ten percent of their
furniture is actually made in house at IKEA. They own their own manufacturer.
Yes.
And specifically they own their own
manufacturing for their highest volume and most strategic products for the hot dog products.
Yeah. Normally when we do a
power analysis we're like looking at.
The competitors
Yeah, there's nobody to look at here. Right.
I guess we should assess it versus
Target in North America.
And
local competitors in any given market.
Right.
They're not in the same segment as William Sonoma or Restoration Hardware, any of these other furniture companies.
Who by the way also are not
Global
Yeah.
Ultimately.
It's scale economies.
Everything about this is the same scale economies as Costco. They take every
Dollar.
that they're not shipping up to the foundation, one of the two foundations, and they're not using to try to figure out e commerce.
And they try to deploy it in
How do we
further increase our fixed cost base.
To reduce variable costs.
Like what are the ways in which we can
design it better or or manufacture it better or invest in another factory or something.
to reduce the price for customers over time.
Yeah.
And I think that really is the only one that matters. I was tempted to say, like, oh, brand's important here too. And like
Yeah, the Ikea brand, great.
But
Compared to scale economies.
Well, and the definition of branding is that you're willing to pay more for it because it's from that brand. Right.
The definition of the IKEA brand they're paying less. Yeah. Right. So
Right.
It's scale economies.
It should be cheaper every time because of scale economies.
Yeah.
That's it.
And the interesting thing is
Cash really isn't the constraint.
This is a lot like the big tech company. It's kinda like what we were talking about with Meta.
They have way more cash than they could ever strategically deploy.
And so
the way for them to obtain more power is just
grow even more?
But
they're already using their cash maximally to the extent that they can grow without ruining some part of the business. And so
Time.
is kind of their constraint because time needs to
march on in order for them to grow at whatever the rate they feel they can optimally.
Which also kinda comes back to their
Wackadoo crazy structure that Engvar set up. Right.
To make it as durable as possible.
You know, there's a a method to his madness here. Yep.
Time is
Arguably the thing that the company is most optimized for.
Yeah.
So one question I have for you right before we move to playbook is
What is IKEA?
Is it primarily a store, like a retailer or a merchant?
Or is it a furniture brand that happens to have vertically integrated stores?
I always thought about it as like
Oh it's kinda Costco esque.
because they're in locations kinda like Costco and in some ways their business model and their obsession with
Thin margins and serving many people in high volume is Costco esque.
But they're not a merchant, really.
I think they're a merchant at heart and Engvar was uh
Merchant at heart.
In the same way that
Sam Walton and Jim Senegal and Sol Price and Jeff Bezos.
Were in our own.
It's the whole P T Barnum aspect that we were talking about with the early days. It's the showroom. Right.
Shop the competition, incorporate their best ideas.
Yeah.
That was the ethos. And I think also
That's where this focus on value for the many I it's a very
Merchant retail.
Type idea.
But
The way that it actually manifests.
Is this
Vertically integrated.
furniture and homeware's brand
that happens to have a really great experience for you to go and buy their products.
Yes.
Which is funny, most merchants that are vertically integrated are focused on higher margins. They are not.
Hm, that's an interesting point.
Like Apple. This is the way in which Ikea is a lot like Apple.
An Apple store sells Apple products and a few other things.
An IKEA store sells IKEA products and a few other things, but IKEA is focused on minimizing margins and Apple is focused on maximizing margins. Yes.
Super interesting.
Okay.
Playbook.
We've talked about some of this already, but just to underscore this crazy corporate structure.
Basically only helps them.
When I was first digging into it, I was like, Oh, this is gonna have lots of trade offs and pros and cons.
I mean
In the way that it helps them, it minimizes taxes, protects them from takeovers, ensures their durability.
They have the benefits of being a nonprofit corporation. There's no shareholders to appease, which enables longer term thinking. They're protected from transitions of government power.
You know, the tax savings, the European Parliament Green Party estimated that they saved a billion dollars in taxes between two thousand nine and twenty fourteen alone.
There's all these benefits.
Not to mention it neutralized what
probably was realistically the biggest risk to the business, which was
now or future family squabbles in generations to come.
That's just off the table.
Absolutely.
The only way in which it hurts them is access to capital.
But they don't need money.
Right.
I mean, can you come up with another way that the corporate structure
Is a con.
I mean it's a con for society, I guess. It deprives
people from the tax dollars that they would have to pay otherwise.
Or the participation as a
index fund holder or equity holder in like
The building of this business.
Right. Oh that's true.
But yeah, I mean that's kinda where my mind was going of like, well, maybe there's some like reputational
hit to the company by having this crazy structure and
For a long time people believed it as, you know, tax dodge, which it may also be.
But at the end of the day with Ikea's customer being like it doesn't matter. Nobody knows or cares about that.
It's kinda true. If imagine they're ten times more successful.
And they are worth a trillion dollars.
Well, it's a real shame that the public is deprived from being an owner of all that value creation.
Right.
Yeah, fascinating.
The other big playbook theme here is
All of this is basically only possible.
Because
Ingvar built a business.
by reinvesting solely the business's own cash flows.
All this other stuff.
Kinda does rely on that.
If there had been external capital and thus
de facto external stakeholders, even if it was debt capital.
along the way. It's hard to imagine
History playing out like this. Right.
Costco managed to make it work, even though they raised a bunch of money.
Yep, but they're not structured like this. Right.
But they can make a lot of the same sort of long term thinking decisions and
In fact, Costco even runs on thinner margins.
IKEA's gross margins are like
mid thirty percent and Costco's are thirteen percent.
Yeah.
There's definitely this thing that we've talked about a few times, frugality as an edge.
They originally built in the potato fields as a way to save money, but
It ended up kind of
creating and inspiring their business model that they need to create this destination experience.
Yeah, the the culture of frugality is interesting. Trying to buy materials at a discount, minimal sales staff, no finishes on unseen services, flat packing.
No one has assistants. I think actually the CEO is the only person at the company with an assistant.
No one flies first class. They print on both sides of the paper.
Oh yeah.
And the assistant thing.
The CEO may have a an administrative assistant these days, but for
Years Ingvar had an assistant.
But it wasn't an assistant, like an administrative assistant. It was like his, you know, sort of chief of staff, like COO. Didn't he become CEO after? Yeah, exactly.
But it kinda does actually beg this so frugality as an edge, but could they run leaner?
Why is it that Costco can have thirteen percent gross margins?
But I key uh
Marks their goods up more.
Is IKE bloated?
Is the fixed cost of running the business has it just gotten high to the point where you need high gross margins in order to pay for all that overhead?
I think there's an explanation here.
Which is the
Costco.
Let's put Kirkland aside.
Costco is selling.
Other companies' products.
So
Therefore
At least with the non Kirkland products.
Costco can take a lower margin because they're reselling those products. They don't have to develop them.
Whereas IKEA is designing, developing, producing
So they should have a lot higher overhead. They should have a lot higher fixed cost base.
Yeah.
Exactly.
Mm.
Still feels like a big gap.
Where it's like
In Costco.
There's actually
Again.
Kirkland aside.
third party products in Costco, there are two margins happening.
There's Costco's gross margin.
But then there's also the
Suppliers ghost margin.
Yeah, that's the right way to think about it.
We're looking at the sum of two margins when we're comparing IKEA and Costco. Yeah, you're right. Yep.
Fair.
This is kinda a funny one.
They lean into Sweden.
Super hard.
Go international.
try to embrace the local market and let their origin fade into the background.
But that's just the opposite of the strategy that IKEA runs. I mean in the meatballs.
There's this little Swedish flag that sticks out of the top of'em.
Every time you buy'em, you walk into the store
And it says Hey.
H. E. J.
Which is so funny.
IKEA has become the greatest Swedish ambassador.
So true.
So David, you're gonna love this'cause it's like
It's from the complete other side of the spectrum.
Here's what IKEA does.
They sell a sense of place.
Oh wow.
Hermes and Ikea.
Separated at birth.
There we go.
There we go. For listeners that haven't listened to L VMH and Hermez episodes, this borrows from the luxury playbook.
And luxury companies sell a sense of place.
And mark their goods up.
ten to thirteen X on the cost of materials.
for that sense of place.
And IKEA.
does the complete opposite.
Ben, you got a mic drop there. We should just end the season right there.
It's not gonna get any better than that.
No, it is not. GS sells a sense of place. Amazing. Amazing.
I do have one more.
Which
is not nearly as poetic, but I'll just finish my section off.
They have a very contrarian view.
on working capital.
And this didn't really come up in the story'cause I couldn't really find the right place for it, but
Most companies common wisdom is
You should keep your inventory low.
And you should minimize the amount of your capital that's locked up in working capital.
And IKEA has a very different optimization function.
Theirs is about cost for the end consumer.
and ensuring availability of products at all times.
To keep customer confidence high.
So they're willing to do things like build up excess inventories during certain periods if it means getting a favorable rate from a manufacturer who might have extra capacity, as long as it means eventually their customers will save money when they do buy it.
And I think a huge part of this
is the foundation ownership.
And the other part of it.
is the scale and the timelessness of their product lines.
They sell these things forever. So they know they'll eventually sell through that inventory. So if there's a good price on it.
Yeah, give me a thousand.
Sha
The Billy book case is never going out of style.
Right.
Honestly, if I describe a Billy book case to you, there's not a simpler way I could describe it. It is straight lines.
With no facade.
The simplest bookcase that you could draw on a piece of paper, that's the Billy bookcase.
That's the lack shelf. That's a lack table.
So in their reporting you kinda dig into it, you see
pretty high levels of working capital tied up.
But they just don't care.
Capital is not a problem. They can't deploy the capital that they have.
And so they may as well use it strategically.
And the other benefit that dovetails out of this is
They
get to be really, really supplier friendly.
they can do things like net thirty terms when the rest of the industry is on net sixty or net ninety.
Because they're just not cash constrained. So they sort of invest in the relationship.
with their manufacturers and that's why they have what is it now, sixteen hundred suppliers, fifty five countries, and the average supplier relationship is eleven years long.
Yep.
To pick up on that point, I was just thinking about
What is my biggest complaint about IKEA and as a customer over
Several decades in my life.
When have I been most frustrated with the company?
It's when I go to the store
And they don't have what I want.
In stock.
And I'm sure they know this too.
That is my number one biggest complaint.
biggest negative experience I would ever have as an Ikea customer.
So like
Yeah, tying up.
More working capital and inventory.
For the sake of the value to the customer. Very worthwhile investment.
Yep.
Okay. One more I wanted to add on this, Sam Bean.
That's similarly
Didn't have the right place to put it in the story.
Is there supply chain and just
How really, really smart and strategic. Oh yeah, didn't you read a whole book
Yeah.
There was like three or four books that we read, but you read a whole book on their supply chain.
Yes.
So there's a book called Strategic Outsourcing and Category Management, Lessons Learned at IKEA.
By Magnus Carlson.
And Magnus was a senior executive in IKEA supply chain for twenty five years.
This book is awesome. This is like the luxury strategy.
for supply chain.
I haven't read that many supply chain sort of business school textbooks. But you hadn't read that many luxury books before either. I hadn't read that many luxury books either. I can vouch this thing is amazing.
If you are at all interested
Either for like your own edification or if it's relevant to your business in
Supply chain like
Buy and read this book. It is so good.
And it talks a lot about how they like
became more and more strategic.
In
their supply chain and specifically their sourcing over time at IKEA. And it's the kind of stuff you talked about of like
Hey
You would think ordinarily we wanna
Squeeze our suppliers on terms.
But actually
What we really care about is continuity of supply, depth of a relationship with these manufacturers. Let's
Do the opposite and embrace them.
That was sort of like one level.
And then
The next big transformation is
When they
Stopped thinking about
Sourcing and supply chain.
And
terms of individual products and moved instead to like product packages
Suites of products and then whole categories.
They could say like
Oh, rather than sourcing
The Poeing armchair. That's a bad example,'cause I'm sure they make that in house now. But like
Whatever product.
Let's take like a whole set of arm chairs that are pretty similar.
And let's bid that out.
globally
rather than in individual markets. And then that'll let us
You know A sure get the best price and then pass that on in value to consumers.
But B.
Билто депст и мостратич релішенші.
with the suppliers who are gonna make that for us. And then we can also
transfer technology to them too. So stuff like the board on frame construction, they've done dozens and dozens of these technology advancements in
Fabrication
factory layouts and all sorts of stuff over the years. And they transfer that to their supplier partners. So
It's super cool. Then stuff like their distribution center strategy. So
You would think totologically almost like Costco.
The stores are the warehouses.
Well,
Over time they found the
Oh, actually it doesn't totally make sense that we keep
a hundred percent of our product stocked it.
All of our stores.
what I was talking about my complaint.

fifty percent of our products that account for ninety percent of our sales.
are like really in stock at all of our stores.
And then for the
Second half of our product catalog that accounts for the tail end of the power law, you know, ten percent of sales.
Let's do that across
Pan geographical distribution centers and keep actually a minimum of that in the stores with constant restocking.
So that we can maximize the space for the products that we know people are gonna want.
Anyway, lots of really, really, really great stuff.
Fascinating.
Stuff you can only do with eighty one years of history and a lot of scale.
And a lot of money. A lot of cash. Yeah.
Right.
All right, David. The quintessence.
Ooh, the quintessence. I've been thinking about this one. This is our new. Yeah, for anyone who didn't listen to the meta episode, Dave and I renamed
this section because we've been struggling with how do we land the play, what's the end of an episode look like. And David, you came up with this term the quintessence.
Yeah, we boil it down after all this work we've done on the company.
This long recording, like what is the essence? What is the
quintessential factor of this company.
I had been planning to say this idea of the many and I think that
There's a reason Ingvar had it as testament number one.
In testament of a furniture dealer.
But man, the more we talk about this, I really think it's
Something a little more.
meta, quote unquote, which is like this is an N of one company. There is no other company.
In the world.
Like this.
It is so
Esoteric in so many ways.
There is nothing else like this out there.
Yeah.
We're put differently. I think mine is
the combination of never taking
A single
Outside shareholder.
Plus
Ingvar's personality.
And the desire to serve the many.
equals this company.
Yeah.
All of those are necessary.
conditions and there's many more too.
But those are really necessary.
In order to create
what IKEA ended up becoming.
And the structure that it ends up with.
I guess maybe to
put an even finer point that this is an N of one company.
The N of one term is a little
overused, you know, post zero to one and you know. Yeah.
And like
We make the argument all the time, like every company we cover on Acquired is unique. Meta is an N of one company
Amazon is an N of one company, you know, et cetera, et cetera. But that's the point.
That's all true.
I think this is like even another level.
All the big tech companies, yes, they are all unique. Yes, they are all individual.
But they're all big tech companies.
There just is no other idea. There's nothing like it.
Mm, that's interesting. No other vertically integrated retailer brand of this scale.
In any category. Yep.
Huh.
It's Apple.
But if they serve the many instead of the few.
Yeah.
Well, I guess arguably they do serve the many.
But they have very high margins.
Right.
Well, but they specifically could serve
five times more people than they do serve if they were willing to forego margins. And maybe eventually they will. They might be on a
Path to that.
That's a good point.
This company is Apple if they decided to also be Android, essentially.
Like we're gonna own the whole market.
It seems like you're
definition is
A
Brand
That is vertically integrated.
That is at
fifty billion dollar a year.
scale and serves
Philosophically the many.
Yeah.
Hm.
In some ways that's what Tesla.
Is aiming to be.
I mean these are not high margin cars.
they're sold at the price where they can be the best selling car in America.
It's hard to compete globally on E Vs since the US and China are becoming pretty fragmented ecosystems.
Yeah.
But everything about Tesla is rate manufacturing, drive prices as low as you can.
Vertically integrate. They don't sell through any analysis. There's no channel. There's no middlemen.
Yeah.
But like a brand of consumer good that is vertically integrated and sold at low margin to the many.
Globally. Yeah. I'm just having a really tough time thinking about it. Like I could think of retailers for sure.
Yeah.
Super fascinating.
All right.
We have reached it, the quintessence of IKEA.
Yes.
I think so. I'm so glad we did this company. It was
In many ways, sort of off the wall. It's like
This private.
Weird structure.
Nobody can invest in it.
Totally.
And I will tell you, like, for some reason I'm just like not as fired up about it as compared to a Costco or
An airmaz.
But like
You study it.
It's really interesting, and it totally is N of one.
Yep.
I think the future to me is like
Not quite as clear as some of these other companies.
I think there's like
certainly a lot of question marks around what do they look like in an e commerce world and a world that's shifting to urbanization.
In a world where they're
Now a big company
Yeah.
What are they gonna do with all this cash, et cetera, et cetera.
Right. That's the reason watching them is gonna be fun over the next decade or two.
Yeah.
All right.
Come outs.
All right, I've got two.
One is a show on Netflix called Detroiters.
I think a previous carve out of mine was the show I think you should leave.
With Tim Robinson.
This is his first show with his buddy, who's sort of the I think he's like a co producer. He appears in I think you should leave also.
It's a little bit more story driven and less skit driven than I think you should leave, but it's like totally the same Tim Robinson sense of humor.
It has me like dying laughing. So I highly recommend
Detroiters.
The second one, I have a device. I just recently bought the new super thin 11 inch iPad Pro.
Oh, how is it?
Awesome.
Oh, I've been I it's so sexy. There's something like really amazing about the promotion scrolling on a big screen where when I'm just sitting there and it feels impossibly thin. I mean, I know that's a marketing slogan, but like you feel it in your hands and you're like, How
How is there an all day battery life in this?
And the screen is much more enjoyable to sit and read things on it.
on there than looking at my computer. In fact, in particular
For each of these episodes, now I read the worldly partners research on the company we're covering from Front of the Show Arvind.
And
I was able to
read the whole thing, take it in in a much more like enjoyable way.
when reading it on the iPad versus sitting on my computer scrolling. Like it's just a it feels really good. And by the way, we'll link to that research in the
Show notes for anyone who wants to go read.
fifty to a hundred pages analyzing.
in a very structured way, the business of Ikea.
Listen to four hours and then read another fifty to a hundred pages.
But yeah, I love it. This iPad is like
So great. I'm so tempted.'Cause you know, I mean, we both have the iPad minis that we got for
When we do things live with guests. Yeah, this is too big to use on stage.
Oh oh no, I was gonna say the iPad mini suck.
And the thing that's worse about them is the screen.
It's awful. Apple doesn't love it at all.
Yeah.
Yeah, like they really suck. It's a terrible product. We need it for that specific use case. And it was fine when it came out, but it just feels like the leftover parts bin now. I almost bought the new one and I'm like, it's the same screen.
It's like last year's dead end processor from the iPhones.
It's just a weird Franken device.
The size
is very compelling. I wish it had the iPad Pro screen. I wish it was thin. It doesn't have to be thin, but like
Try.
I wish should had a new processor. I d I don't know, I just
It's a bummer. They don't care and it's clear.
Yeah.
They don't care.
I don't even know why they make it.
Yeah.
I mean I'm glad they do'cause we can use it for our use case, but like yeah.
Anyway.
All right. I also have two carve outs. My first one
It's a recarve out.
Admittedly.
I've been enjoying so much.
This season.
The QB school.
I thought that was what you were going.
Man.
It is
So
Awesome.
To have
The Q B school specifically, but stuff like this on YouTube where
You know, for folks who don't know, this is a YouTube channel called the Q B School.
Dio Sullivan, who was a journeyman NFL quarterback for
A decade.
He breaks down film of quarterback performances.
every week like breaks down the actual film.
From the whole you know, as they would do it in a
NFL.
quarterback's room.
But like the all twenty two quote unquote camera angle where you see all twenty two players on the field as opposed to what you see when you're watching highlights or watching a game.
When I first started watching and I had it as my
Carve out the first time I was like,
Oh, it's just cool to see this. Like I don't understand ninety percent of what he's talking about.
I now understand a lot more and it's so awesome that consumers like I'm never gonna play football again and certainly never gonna play in the NFL.
But being able to
appreciate and understand what quarterbacks are doing and what teams are doing and players are doing.
at this professional level just increases my enjoyment so much more. And especially this season when there's
So many quarterback narratives going on.
I don't even listen to the talking heads anymore talk about
X Y, you know, Anthony Richardson or Bryce Young or whatever,'cause like
Even if those talking heads were NFL players and they know what's happening, they need to dumb it down.
For the mass audience.
I'd rather just watch the film with J T.
Oh, dude, I feel like that with Tom Brady. He just like sits there in silence.
Because
Whatever is going on in his head is not at the right level for what needs to be said. And it's like I want to know what's going on in your head.
Yeah. Anyway.
Really enjoying it.
It's been great this season.
And then my second carve out, another sports
Media related one.
Was
Did you watch Ice Cube's performance during the World Series?
At the Dodgers game. I did not.
Oh man, it was so good. I mean
I'm a Giants fan, so it sort of pains me to say this, but
So Ice Cube, I think it was game two of the world series at Dodger Stadium.
Performed at the start of the game.
And he just walks out.
From the center field fence.
And then performs two songs, wraps two songs.
while walking to home plate, it's just him and a cameraman. Whoa and like
I mean you and I now have like
Performed in an arena. And we know what that is like.
And
One person Ice Cube
With
No backing vocals.
live on a mic, walking the length of a baseball field up to home plate and just holding
the stadium in the palm of his hands. It's like one of the most incredible performances I've ever seen. In broad daylight. Yeah. It's awesome.
Ice Cube.
Thanks to you.
Well
Listeners.
Thank you so much for going on this journey with us.
We wanna give three special thank yous.
To Jim Senegal the
Co founder.
and former CEO of Costco.
For his
Chat about IKEA.
as we were doing the research, to Bjorn Bailey.
the former president of IKEUS and to Lars Johan Jarnheimer, who is the chairman of the board of
Inca group, is that right, David?
Or I guess it's the IKEA group within Inca.
Yes. I think that's I is of IK group, which I think is the sort of
operating entity within
Inca holdings. Yep. The Inca side of the company. And you read all of Leading by Design, right? That's sort of the most canonical
sort of autobiographical book.
Ah, yes.
This is the confusing one. The updated version of the book is called The IKE Story.
D.
First edition of the book is titled Leading by Design.
But it's the same book.
Yeah.
It it probably has the best detailed account of the blow by blow that we went through. Anyway.
If you like this episode, go check out our episodes on Costco.
On Walmart or on Amazon.
Or Hermes. Or Hermes. That's true. That wasn't on my piece of paper here because uh
I did not expect it to come up that way.
After this episode, come discuss it on Slack. Check out ACQ2 with Luis Vaughan from Duolingo. Be super fun.
find A C Q two in any podcast player. And seriously, I'm sending it to anyone I know running a consumer startup. He's
I mean there's just so many
Practical lessons.
Well with that, listeners, we'll see you next time.
We'll see you next time.
Who got the truth?
Is it you, is it you, is it you who got the truth now