Skip to content

Podcast

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

Founders

Source ↗ ← All highlights
  • Simple Doesn’t Mean Ordinary
    • Simple ideas are often mistaken for ordinary people.
    • Sam Walton, with his simple idea, was an extraordinary entrepreneur. Transcript: David Senra Of the benefits that Sam Walton had early in his career was that there’s a tendency for people to confuse a simple idea with an ordinary person. A simple idea taken very seriously is so powerful in business. Charlie said, in business, we often find that the winning system goes almost ridiculously far in maximizing and are minimizing one or a few variables. And so most of what I want to talk to you about today is just how long it took Sam to find his path and how messy it was. At the beginning of, you know, one of the greatest businesses that has ever been created. I read a little while ago that if you take his family’s net worth today, it’s almost a quarter of a trillion dollars. And yet it took Sam Walton 20 years of experimenting inside of retailing before he thrushes about, that’s the word he uses, and finds the idea slowly but surely through trial and error, Finds the idea that turns into Walmart. But before I get there, I just want to point out a few things that happened in his childhood that I think gives you an idea of the kind of person that we’re dealing with. There’s a few traits that appear in his early life that he never lets go of, a sense of duty. He’s extremely disciplined. And then he had unbelievable levels of endurance. And (Time 0:03:28)
  • Early Signs of Greatness
    • As a boy, Sam Walton exhibited duty, discipline, and endurance.
    • He excelled in academics, sports, and extracurriculars, embodying a strong work ethic. Transcript: David Senra So this is a description of Sam when he was in high school. Sam was going out for football and basketball, learning to play tennis, making A’s and friends, grinding away on merit badges in hopes of becoming an Eagle Scout, regularly attending Sunday school, and working odd jobs such as mowing the grass and delivering newspapers. He was following the example of his dad. His dad had a life motto that could not be more simple. It is only three words, and it’s the same word over and over again. Work, work, work. His dad taught his sons that you were supposed to have a fierce work ethic. He would not tolerate any of his sons not being industrious. They had to be industrious. They had to be ambitious, and they had to be decent people. And so here’s a little more about Sam in high school, and it goes back to this idea that do not confuse a simple idea with an ordinary person. He was quarterback of the undefeated football team. He led it in basketball. He was president of the student body. He was awarded the superlative, the most versatile boy. He was in every club and organization, and he was active. The description continues. He was a hard worker. He was optimistic. He felt that the world was something that he could conquer. He didn’t waste time. He was always busy doing something, and that’s something that he’s going to continue for his entire career. The (Time 0:04:41)
  • Determination Over Intelligence
    • Determination is a stronger predictor of success than intelligence.
    • Sam Walton’s determination transformed his family’s financial trajectory. Transcript: David Senra Fact that he’s always working, he hated wasting time, and he’s intolerant of slowness. And I don’t think you can understand Sam Walton until you understand the effect that the Great Depression had on Sam. He grew up in the Great Depression. He was born in 1918. And so he’s old enough to see the effects, the financial effects, and it actually leads to his parents’ divorce, which is obviously very rare at that time period. And he talks a little bit about seeing his father struggle through this time. He says, my father quit the mortgage company and went into business for himself in the real estate and insurance industry. Then came the depression. Dad’s business went down the drain. And so then his dad is moving the family around looking for opportunity. And yet for the next 10 years, this is the prime of his father’s life. They make no economic progress. They are distinctly lower middle class, right hovering around the poverty line. And And so Sam and his brother Bud get jobs to try to help out the family. And there’s a line in the book that I think is very important to understanding the kind of personality that Sam had. And it said the depression was a big leveler of people. Sam chose to rise above it. He was determined to be a success. And so when I was reading this section, what immediately popped into my mind is one of my favorite ideas. It comes from Paul Graham, and he was asking, what is the better predictor of company success, success in business? Is it determination or is it intelligence? And Paul’s answer to this is incredible. He says, it turns out it is much more important to be determined than smart. If you imagine this hypothetical person that is 100 out of 100 for smart and 100 out of 100 for determination, and then you start taking away determination, it doesn’t take very long Until you have this ineffectual but brilliant person. Whereas if you take someone who is super determined and you take away smartness, eventually you get to a guy who owns a lot of taxi medallions or a trash hauling business, but is still Rich. It is important to note it only takes one person on the founding team to be super determined. And the reason I bring that up and the reason I think it’s really important, especially in this section, is because, OK, we see he’s got this fierce work ethic, right? He is determined to be a success. He is not going to allow his family to hover over the poverty line. Think about how insane if you were mapping out this, I was thinking about this this morning. If you were mapping out the family tree and the trajectory, the economic trajectory of the Walton family before Sam Walton comes on the scene, you would see middling success. And then all of a sudden there’s this one data point, this generational inflection point, where it just skyrocket. Today, that family, present day, 100 years after Sam Walton was born, you know, they have a quarter of a trillion dollars, $250 billion. But 100 years ago, they were straddling the poverty line. The difference was one person, this super determined person, made that difference. He changed the trajectory of his entire family for generations. And (Time 0:05:51)
  • Recommended Reading
    • Read Sam Walton’s autobiography and Vance Trimble’s biography.
    • Learn how he applied his determination and intelligence to retail. Transcript: David Senra So it starts with determination. But in this hypothetical situation, it’s not that we have to remove points for intelligence. It took Sam to find where he can be intelligent. What is the field that he can be the most intelligent? If you have a list of the greatest retailers of all time, Sam Walton has to be at the top of that list. And the reason I recommend if you haven’t read his autobiography, get it immediately. Get the audio book, get the paperback, whatever you have to do. And then if you’ve already read that book, buy this book. Because you will see it took decades of him applying its determination and then matching it with 100 of 100 intelligence in a specific field. And it’s important to understand this was not planned out. Sam had no idea. He had one idea, one idea of what his future career could be when he was around college age. He’s like, maybe I should be president of the United States. That’s another personality trait that he has. He’s going to aim straight to the top. He has to be, I think he calls it being like the top of the heap or the top of the pile. He’s just has this ruthless competitive drive as well. But he did not have this dream to be a retailer when he was a boy. He stumbled into it. And so let’s go there right now. He actually gets a job at J.C. Penney. This is an extremely important turning point in his life. And you’re going to see a lot of the lessons that he’s going to learn from J.C. Penney. He applies later on to Walmart. And so let me just tell you, like, in case you don’t know, like this shocked me because I knew what JCPenney was. It was around when I was a kid. I don’t even know if they exist anymore. But in 1940, right, where we are in the story, JCPenney has almost 1,600 stores and they’re doing 300 million a year in revenue. And (Time 0:08:50)
  • First Store and Unconventional Tactics
    • At 27, Sam Walton opened his first store in Newport, Arkansas, financed by his father-in-law.
    • He used unconventional methods like ice cream and popcorn machines to attract customers. Transcript: David Senra He is 27 years old. He marries a woman from Oklahoma named Helen. They both have this desire. They’re small town people. So they’re looking around where they’re going to live. And where they’re going to live, they’re going to try to buy a Ben Franklin store. So they’re called Ben Franklin Five and Dimes. The way I would think about this now is like the modern day equivalent would be like the dollar store. The reason they were called Five and Dimes is because most of the things that you buy there are, you know, you can get for a nickel or a dime. And so Sam and Helen are going around looking for a small town where they can raise their kids and Sam could have his store. This is the very beginning of his retail empire. Sam is 27 years old. And so they stumble upon this little town in Arkansas called Newport. There is a Ben Franklin franchise. Now, keep in mind, at the very beginning for like 20 years of his life, Sam Walton is a franchisee of a much larger company. And we’ll get there in a little bit, but it’s crazy. He tried to give the idea for Walmart to Ben Franklin, to the big corporation, and they laughed him out of the room. And so 27-year Sam finds the store. The town, there’s 4,000 people that live in Newport. This is a tiny, tiny town that he can buy the Ben Franklin franchise. It’s going to cost him $25,000. He does not have $25,000. So his father-in is going to be very important in their lives, which I’ll get to later. His father-in is very successful. He’s a lawyer, a rancher, a banker. And so he loans Sam Walton the $25,000 needed to buy the Ben Franklin franchise. And at this time, Sam’s plan is very simple. He’s like, well, I’m just going to take the obsession with customer satisfaction that JCPenney had, and I’m just going to apply it to my own little five and dime store. And so he’s trying to figure out ways to like drum up business. And this is the first sign of something that Sam, Sam’s a showman. He’s like, you’re very much like a PT Barnum. He’s got the charisma of a Southern preacher. And so he’s constantly experimenting with these less conventional ways to attract more customers into the store. And you wouldn’t believe how some of these really simple ideas were so effective. So he bought, he spent a bunch of money on an ice cream machine. People are like, what the hell are you doing? It’s a crazy idea. And he’d put it out in front of his store. And on the weekends, families and all the farmers and all the people in this rural area, they would mob his ice cream machine. And then some of them would come into the store and then turn into customers. And then he’d obsess over their customer satisfaction. So then he’d make sure they return. And then if they return, they’re going to tell other people. And so five and a half years from now, when he loses this store, it is by far the most successful. I think he’s tied for first in all the Ben Franklin franchises, if I’m not mistaken. So he’s like, oh, the ice cream worked. What else can I do? Then he buys a popcorn machine, does the same thing, puts out the popcorn, same exact thing happens. He’s like, oh, there’s different ways to draw attention to the store than just by saying, hey, you know, 50% off or buy one, get one free. He’s finding another way to attract customers. And even if he only converts a small percentage of the people that buy ice cream, the people buy the popcorn, it’s still a great return on the investment for buying a popcorn machine and An ice cream machine. And that’s something that Sam’s going to repeat. He really felt one of his best advantages was consistent around the clock customer satisfaction. Says the most important discovery Sam Walton made in Newport was that there was a charm and satisfaction in retailing that he had not fully expected. He (Time 0:13:18)
  • Setback and Persistence
    • At 32, Walton lost his store due to a lease oversight, forcing a restart.
    • Undeterred, he found a new location and secured a 99-year lease after six attempts. Transcript: David Senra Then we’re going to see something that happens over and over again, that opportunity is a strange beast. It frequently appears after a loss. He’s running this thing for five and a half years. He gets sales up to $225,000 a year. No other store in Newport was performing like this. And that catches the eye of his landlord. And so this I consider one of the most important decisions of his entire life. Because at 32 years old, Sam Walton is going to lose everything and be forced to start over again. And it is because of an inexperienced kind of rookie mistake. When he bought the store, he didn’t read the lease close enough and he did not have the option to renew. And so Sam is meeting with his attorney and his attorney is telling him what’s taking place. It’s no good. I hope to God the next time you take over a lease from somebody, you check to make certain it contains a proper renewal clause. They’re not going to let you keep the store. The plain truth is they want to run the Ben Franklin in that building. You’ve shown the whole town what a moneymaker can be. His attorney watched the color drain out of Sam’s face. It looks like you’re finished, the attorney said. The lawyer, this is one of my favorite parts of this entire book. The lawyer saw Sam clenching and unclenching his fist, staring at his hands, and then he straightened right up. No, he said, I’m not whipped. I found Newport and I found the store and I can find another good town and another Ben Franklin. Just wait and see. And so think about that. You’re Sam Walton. You’re 32 years old. You have wife, several kids, and you just spent five and a half years building up a store that was a phenomenal success. And somebody took it from you from your own mistake. He wasn’t, Sam wasn’t out there blaming other people. And I love his response there. He’s like, I’m not, you know, I’m not whipped. I’m not gonna feel sorry for myself. That’s fine. I made a mistake. I won’t make that mistake again, which we’ll get to in a minute. And I’ll build up again from scratch. And (Time 0:17:04)
  • Inspiration from Hardship
    • Facing financial hardship and personal tragedy, Walton found a key idea.
    • Long drives between stores inspired him to learn to fly, enabling faster expansion. Transcript: David Senra She went in for an operation to remove some of the cancer. And then a few days after the operation, she passed away. So think about this. He’s 32 years old, right? He used all, he’s married with kids, like I said earlier, he used all of his money setting up the new store in Bentonville. Okay. He’s got no, he’s got no money. So he’s 32 wife, kids, no money. Your mom, who you adore, dies at 52 years old unexpectedly. At the same time, he still has to run his Newport store until the end of the year. So he is commuting back and forth. And even though the store is only 250 miles apart, it’s like an eight to 10 hour drive because it’s through these mountains. And the reason I bring that all up together is because, you know, no money, your mom dies, dies, you’re stretched as thin as could be. And yet it is this driving back and forth that leads to one of the most important ideas that he ever finds. Because he starts to think, what the heck? If I can never, if I cannot move ground faster, right? I always be relegated to just having one store. You already know by now, Sam Walton’s not the personality type to be like, oh, I’m just going to run one store for the rest of my life. And so it’s during these long drives to the mountain, eight hours, 10 hours each way, he’s like, I’ve got to figure out a way to cover faster ground. And then he hears the buzz of an airplane overhead. And the author does a great job of describing this. I want to read this to you. Sometimes hardship can enlighten and inspire. This was the case for Sam Walton as he put in hours and hours of driving Ozark mountain roads in the winter of 1950. But that same boredom and frustration triggered ideas that eventually brought him billions of dollars. He was struck with the realization that if he was competent enough to operate separate stores in two towns successfully, why not three, four, or maybe even a dozen? He could see the possibility of his own chain of five and dime stores. One evening, he heard the drone of a small airplane overhead and a light flash in his brain. So he goes down to the local airport. He’s like, maybe there’s a faster way. Can I charter a plane? And can somebody fly me between Bentonville and Newport? And so it says for a reasonable fee, he chartered a pilot to take him to Bentonville. The eight hour road trip shrank to a 90 minute flight. This (Time 0:20:08)
  • Study Your Competition
    • Visit competitors’ stores and headquarters.
    • Ask questions about pricing, distribution, and gather any useful information. Transcript: David Senra It’s not just that, you know, what J.C. Penney was doing back in the day, going to all of his 1600 stores. Same thing Sam would do when he has this chain of five of dimes. Same thing Sam would do when he has this chain of Walmarts. He did it for every single one of his competitors. He visited more retail stores than anybody else in history. He does this. He actually, he does it for the stores. And in his autobiography, he says that he would also show up at the corporate headquarters without an appointment. And he says if you just show up and you ask, more often than not, they would let you in. And then he would ask him questions about pricing, distribution, and all this other stuff. He’s like it was another form of education. And so he’s doing this in the 1950s. He’s going to Oklahoma and Arkansas all these little country towns. And he says he studied how they did things. He was ready to pounce on any successful little trick they had and would copy it. And so when I got to the section of the book, two things happened. One, I had like a big smile on my face because I just think it’s hilarious. I love people that are truly dedicated to what they’re doing. And I would say one of my favorite maxims is actions express priority. You demonstrate to other people what’s important to you, not by what you say, not by what you believe, but what you do. Actions express priority. And so you got Sam running around all over the South visiting every single store. And so that just made me smile and laugh. And I love people like that. The second thing that came to mind is because I’ve become friends with Mr. Beast. Mr. Beast is like the biggest creator on the internet, biggest YouTuber. He’s got like a billion followers across all these platforms. I actually flew to Mr. Beast headquarters and spent seven hours with him, his top team. One of my friends is a major investor in Mr. Beast companies as well. And I heard a story that just screams like this is something that Sam Walton would do. And so Mr. Beast comes back from doing, he’s like a 17-hour flight or something like that, lands back into the United States, needs to do another connecting flight to get back to like the remote Area where his headquarters is. And instead of jumping on another flight, he maps out. There’s like a 500-mile distance between where he’s at and where his home is. And Mr. Beast’s chocolate company, Feastables, has a massive deal with Walmart. And so what he does, instead of flying home, he maps out every single Walmart in like a 500-mile radius and decides, hey, I’m going to drive. You can take a couple-hour flight or you can do like a 15-hour drive. I think this was over multiple days. And he visited every single Walmart in between where he was and where he was going. And so at every single store visit, he would find room for improvement. And one of the funniest things I heard was when in some cases in the front of the store, it’d be, it looked like all the feastables was sold out. And then he’d pull up, he’s like, well, my system says that you have inventory. So he would go to the back of the store and he would find the inventory in the back and he’d literally carry it to the front so he’d get more sales. I think that is what Sam Walton would do. I just love that idea where you have this crazy, determined madman in the 1950s driving through all these little towns, inspecting every single retail store that he finds, going to The headquarters, dropping in on the CEO and a doctor and just riddling them with questions and using them as a form of education. And (Time 0:24:03)
  • The Shopping Center Detour
    • Sam Walton got distracted by shopping centers, losing money and focus.
    • This highlights the importance of staying focused on your core business. Transcript: David Senra Then you see 70 years later, the same kind of determined individual doing something very similar. I just love that part. So as Sam is expanding, he’s opening new stores. I already told you earlier, he literally lifts that idea from JCPenney. He’s like, okay, I can’t be here. But he knew that you had to have a single, like single thread of leadership. There has to be one person that is completely responsible for the performance of the story when Sam was not there. So that’s when he says, hey, I’ll give you 25% of all the profits. And then here’s a fascinating story for you. This is what I love about biographies. We have some of the smartest, most productive people to ever live. And the biographies, their life stories are full of them making mistake after mistake after mistake. And so as he’s expanding, he comes across this brand new phenomenon. At this point in American history, there is no such thing as the shopping center. And so as he’s looking for locations to expand, he comes across, I think it’s the second shopping center ever built in the United States. And he’s just like, oh my God, this concept is genius. And so he gets distracted. He is already building a, it’s small, but very successful variety store, five and dime chain. And he takes a detour from something that’s already working. He says, I’m going to develop shopping centers. I have a line for this, what he’s doing. Because I did this the other day. I was on the phone with my friend Jared and was explaining about this other idea I had for another podcast. And he completely shut it down. And he used the blackjack analogy. He’s like, don’t split tents. Sam Walton split tents. I’ll cut right to the punchline. We lost our money and left town. So he had like a one to two year detour where he took his eye off the thing that was working. He got distracted. He gave into distraction and it cost him the opportunity cost of his time and a bunch of his money. So (Time 0:27:09)
  • Hula Hoop Hustle
    • When suppliers wouldn’t sell hula hoops to Walton, he made his own.
    • He distributed them using a John boat towed by his car, demonstrating resourcefulness. Transcript: David Senra Now he is back fully dedicated, fully focused on expanding his burgeoning retail empire. I love scrappy people. I love relentless resourceful people. I love people who don’t take no for an answer. And so Sam is always on the lookout for new exciting merchandise that he can stock in his stores. At this time, Hula Hoops is this phenomenon spreading all across the country. The main manufacturers of Hula Hoops will not sell to these small little merchants because he’s tiny at this time. And so Sam’s like, okay, cool. You won’t sell to us? That’s fine. We’re going to make our own. So he realized, what is a Hula Hoop? It’s like this little piece. It’s colored plastic pipe with just a connector at the end. He’s like, we’re just going to make our own. So after the stores close him and a bunch of other people, they get together and they start making several thousand of these a night. So that’s the first part of this high agency, relentless resourcefulness. This is hilarious to me. Remember, Sam does not have a lot of money. He’s under finance, underitalized for a long time, all the way until Walmart goes public. And Walmart doesn’t even exist yet. And so they’re making them at one central location, but they have to distribute them throughout all the stores that they have, right? Sam didn’t even have a truck. So how is he going to do this? He has a car. You know what he does? He sets up a John boat, a like 12 foot little John boat behind his car and loads the John boat with all the thousands of hula hoops that they spent the night making. And then he drives it around to his stores and a car and using a John boat as a trailer. And the end result is this line. The hula hoops were so popular that you couldn’t keep them in stock. And so there’s a combination of two ideas here that I think are really important. Number one, doing things that others were not doing lead to unexpected success. (Time 0:28:51)
  • Birth of Walmart
    • Sam Walton pitched the discount store idea to Ben Franklin, but they rejected it.
    • This led him to start Walmart, focusing on small towns ignored by Kmart. Transcript: David Senra Were self-satisfied with what they had accomplished. Sam Walton was never, to the day he died, was never like that. They were self-satisfied with what they had accomplished. They thought they could roll over everybody. And they woke up one day and found out that the world had changed. And so now Sam knows. He’s like, I cannot stay in the variety store business. I cannot stay in this fine and dime business. Discounting is going to roll over everything. Let’s get ahead of this. And this is where this is where he goes. So keep in mind, I guess I should back up. He’s 43 years old when he’s trying to make this transition. He’s got 13 of these variety stores, right? These Ben Franklin franchisees or franchises over the last 11 years, he’s built 13 of these stores. So he goes, this is what I meant when he goes and tries to give away the idea for Walmart. He’s going to go to the headquarters of Ben Franklin in Chicago, and he’s going to pitch this idea to them. And this is the idea that turns out to be Walmart. I’m going to read this whole section to you because it’s so fascinating to me. His proposal was audacious, certainly unacceptable. He suggested that the variety store franchisors leap into the front line of the booming discount business. I think that kind of store will fit in the rural markets just as well in the major metropolitan markets, Sam said. You should franchise them and I will be your guinea pig. Imagine Sam Walton pitching you on the idea of a brand new business that’s growing like a weed, that is clearly the future, and he’s like, I will be your partner and operator. And you say no. That’s incredible. The Ben Franklin executives exchanged sour looks. Sam went on. You’re going to have to cut your wholesale prices. Instead of making 20% to 25% profit off the merchandise that you sell to your retailers, you’re going to have to be satisfied with about 12 and a half percent. So almost half. They blew up. They blew up at Sam. To these sophisticated and experienced businessmen in their tailored suits and custom shoes in Chicago, okay, it looked like the tail was trying to wag the dog. What was this Arkansas country fellows experience with only a dozen or so stores compared to their thousand outlets and nearly a century of retailing know-how? We (Time 0:34:27)
  • Walmart’s Humble Beginnings
    • Walmart’s name was chosen for its low cost, reflecting Walton’s frugality.
    • The first Walmart, a mere 16,000 sq ft, saw immediate success with 30% annual sales growth. Transcript: David Senra So how dedicated was Sam to keeping costs low? Well, Walmart is called that in part because fewer letters means cheaper signs on the outside of a store. And so Sam and one of his executives have this list of names. They’re trying to figure out what are we going to call this new concept? You know, I have to go out on my own. The Ben Franklin guys, they don’t want anything to do with this, so I’m going to do it anyways. Which one of those do you think we should call it? They study the list for a few minutes and all were long names, each made up of three or four words. And so his executive says, well, Sam, you had me buying the letters to go up on our Ben Franklin stores, and I know how much they cost and how much they cost to repair and how much to light These letters. It’s expensive to put that many words in a name. And the shortest name on the list was Walmart. And so Jeff Bezos has a saying, he says, we know from our past experiences that big things start small. The biggest oak starts from an acorn. If you want to do anything new, you’ve got to be willing to let that acorn grow into a little sapling and then into a small tree. And then maybe one day it’ll be a big business on its own. Listen to the description of the very first Walmart. The business that is going to generate for the Walton family quarter of a trillion dollars of wealth. The first Walmart is in a small town and is only 16,000 square feet. It is an immediate success from the very first year. What do they consider a success? $700,000 in total sales, which may seem like a small number. But from that day, from day one, the store, that furry first Walmart store for the next 15 years has a consistent 30% growth in sales. It (Time 0:39:14)
  • A Messy Grand Opening
    • The second Walmart’s opening was marked by exploding watermelons and a messy donkey.
    • Despite this, David Glass initially underestimated Walton’s potential. Transcript: David Senra Made a profit from the very beginning. So then he opens the second one. He invites this guy named David Glass, who is going to many years into the future is going to become the CEO of Walmart. Sam tried to recruit him really early. In fact, it takes him a decade to get David Glass to say yes. So he invites David Glass out to the opening of the second Walmart. And this is what David Glass said. David Glass thought that Sam might have lost his marbles with all this discount store foolishness. It would surprise him if this kind of store had any future. It was the worst retail store I had ever seen. Sam had brought a couple of trucks of watermelons in and stacked them on the sidewalk. He also had a donkey ride out in the parking lot. It was 115 degrees and the watermelons began to pop. And then the donkey began to poop all over the sidewalk. And the watermelon and the donkey shit ran together all over the parking lot and got inside the store. Like so many people before him and since, David Glass was guilty of a snap judgment on this unorthodox merchandiser named Sam Walton. In fact, there’s a great description of, you know, Sam’s personality and part of his, like, success is this promotion ability. There’s this article in 1989 in Fortune magazine I’m going to quote from, and it says, so how from there, from this exploding watermelon donkey crap opening, so how from there did Sam Walden get to be America’s most admired retailer? He willed it through sheer force of a complex personality. As the donkey watermelon episode illustrates, he’s an old-fashioned promoter in the P.T. Barnum style. But he’s more than that. He’s a little bit Jimmy Stewart. He’s handsome and he’s got this all-shucks charm. He’s also a little bit Billy Graham. This is what I meant. Billy Graham’s this famous preacher. Sam Walton’s very much an evangelist. He’s a little bit Billy Graham with a charisma and a persuasiveness that heartland folks find hard to resist. And he’s more than a bit Henry Ford, a business genius who sees how all parts of the economic puzzle relate to his business. (Time 0:40:56)
  • A Short-Lived Retirement
    • Sam Walton briefly retired but returned due to his inability to stay away.
    • This forced Ron Mayer, his chosen successor, to leave Walmart. Transcript: David Senra Stepping aside of the company you spent your whole life building because someone else is in a rush does not seem wise. And so Sam is about to turn 57 and Ron Mayer is putting pressure on him saying, hey, you know, I don’t want to just I want to run my whole company. Like I want to be CEO of Walmart. And, you know, if I can’t do that here, then I’ll have to do it somewhere else. And so it says as he approaches 57th birthday, Sam Walton was reluctantly trying to change his lifestyle completely by surrendering the day-to command of his Walmart empire. Now, Sam was going to find this impossible to do, and I’ll describe him. Essentially, he retired and never retired. It’s the weirdest thing. And so he’s having this conversation with his wife and his top executives. He says, I’m going to lose Ron if I don’t step aside, and I don’t want to lose him. He’s a very talented guy. And so it was official. Sam had retired. Ron was the new chairman and CEO of Walmart. It is the most uncharacteristic Sam Walton kind of thing that Sam Walton ever did. So essentially he retires, but he’s still working. His role was now supposed to be unofficial, but he couldn’t keep his hands off. When he saw something, anything, he didn’t think was right, he’d just step in and correct it on the spot. That is the way I’ve always been. I guess I was getting in the way of Ron’s authority. And the problem is the numbers, the sales and profits under Ron Mayer. He’s doing a magnificent job, but Sam just has to control the company. It bothered Sam’s conscience that he personally had made a mistake. He discovered that he really wasn’t ready to retire, that he missed his old job. And so he comes to this fork in the road. He’s like, okay, this obviously isn’t working. You either have to get back into it, take back your job, or you have to leave completely. And so when he tells Ron, hey, I’m coming back over, I’d love to keep you. Of course, Ron’s going to do what most people would do. He’s like, you know, I can’t accept that. I’m not going to stand for a demotion. He winds up leaving the company. So Sam takes back over control of the company. He does exactly what he goes back to doing exactly what he was doing. And (Time 0:54:01)
  • A Technological Leap
    • In 1979, Walmart invested $500 million in a computer system.
    • This allowed real-time communication between stores, warehouses, and headquarters. Transcript: David Senra And now we get to one of the most mind-blowing things that happens in the book, at least mind-blowing to me. Remember, he was talking about the fact that he’s not resistant to change. Now, he has his principles he’s not going to deviate from, but he always wants the best ideas. And he repeats over and over again. You know, he says RC is that formula, resistance to change. We want a low resistance to change. We’re willing to change. It’s a trademark of the Walmart culture, the Walmart philosophy. Every day is a different situation in the retail business. We have to be flexible. These are things that Sam Walton would repeat. Now, this is insane what they do here, the size of the investment. So at first, you know, this is 1979. Okay. At first his team, his top executives, people he trusts are like, we need computers. We need help. The business is like, it’s too unwieldy. We don’t, we need access. We need more organized data, be able to make better decisions. And at first Sam thought computers were just overhead, but then he listened and he learned he changed his mind. And more importantly, and he invested, he put his money where his mouth was. Finally, his lieutenants educated and convinced Sam and Walmart plucked down $500 million for a modern communications computer system. And when they say computers at this time of history, it was like giant IBM mainframes. And so now all the Walmart stores, the warehouses, and the distribution centers are able to communicate in real time. By 1979, the stores and warehouses could communicate around the clock with headquarters. So keep in mind, inside of every single store, there’s at least 36 departments in each store. And they’re all selling different things. So this computer system is now telling them daily sales from not only every store, but every single department inside of every store. They tell them what the bank deposit for that day is. They would estimate sales figures. They would flag reports on like hot selling items that they may need to either order more and deliver more to the stores. You’d have up-to warehouse inventory. And it just goes on and on and on. So Sam is writing the annual report of Walmart in 1979, and he summarizes this perfectly. He says, the financial savings and the number of personnel hours saved daily by using the computer center are incalculable, even by the computer. So it’s one thing to say, yeah, we’re willing to change. We want the best ideas. Sam is 61 years old when he makes this decision. 61 years old, investing 500 million, a half a billion dollars in 1979 dollars. That’s one of the most remarkable things in the entire book. And this just proves his dedication. He talked about investing in technology as a huge advantage that he had over other discounters too. But he’s putting his money and his actions behind this, where his mouth is. When he said, you know, he was saying with his mouth, no, we have a low resistance to change. We want the best ideas. And then it’s one thing to say that it’s a completely different thing to match up his actions and this half a billion dollar investment with that. (Time 0:56:52)
  • Acquisitions for Growth
    • If your growth feels slow, consider acquisitions to accelerate it.
    • Sam Walton acquired retail chains and converted them into Walmarts. Transcript: David Senra That’s nuts to me. Another surprising thing that I don’t think I remembered. You know, I’ve read this book before. I’ve read Sam Walton’s autobiography twice. I’ve reread my highlights and notes from those books. I don’t even know, dozens of times. And I had forgot. So once he realized, oh, Walmart’s a thing, he’s like, man, this thing’s growing too slowly. And it’s hilarious because this is what he considers slow growth. And I’ll tell you how he fixes this. So from 1974 to 1977, he goes from 78 Walmarts to 153. So let’s call that double. And he goes from annual sales of 167 million to 478 million. And he’s like, this is too slow. So what he does next is something I had forgotten. He actually accelerates store growth by acquiring entire retail chains and then converting them to Walmarts. Now that he’s a public company, now he’s got access for the first time in his ever. He’s got access, you know, to way more resources. He’s not constrained by money anymore. And so he buys a chain of 16 discount stores, converts them to Walmart. Then he buys another chain of 104 stores, converts them to Walmart. He’s showing that he can master both growth internally and by acquisition. So there’s just a few more ideas that I want to tell you about. (Time 0:59:38)
  • Customer Feedback is Gold
    • Sam Walton valued customer feedback.
    • He took a customer complaint call directly and used it as a learning opportunity. Transcript: David Senra Two main ones, but here’s another interesting one. They reference the fact that Sam is constantly collecting information from the front lines. He hates people sitting in the office. He’s like, you need to get in stores and you need to go all across the country. But as Walmart grows, they have like this entire fleet of planes. And so they use their planes every single day to be on site where the work is actually happening. But his friend’s daughter has a bad experience at Walmart. And she actually calls her dad, who just happens to be with Sam at the time. And it was fascinating. And so we’re hearing this story. He says, my daughter bought a pair of shorts for her father-in They turned out not to be the right size. So she goes back and they didn’t have the right size, but the manager is refusing to give the money back. And so she calls her dad from the store. Her dad just happens to be with Sam. Sam gets on the phone and he listens to the customer and her name is Sarah Bell. And so he listens to Sarah Bell and he goes, okay, let me talk to the manager. Sam talks to the manager. Then the manager suddenly gets really, really nice and gives the money back. And so later on, Sam’s friend was apologizing. Oh, sorry, you know, to disrupt you getting on the phone with my daughter. And he goes, no, I’m glad that Sarah called that the way he learned on that phone call had been, it’s been worth its weight in gold. I told the manager that I wanted him to bring that pair of shorts to our Saturday morning meeting. I made him stand up and hold up those shorts. Then I asked him, what is our motto? And he said, satisfaction guaranteed. You know, every once in a while, you have to refresh their memory. This constant flow of information from the front lines, from the people actually serving the customers, from the customers themselves, is something that Sam Walton definitely believed In. Here’s (Time 1:00:57)
  • Early Estate Planning
    • Sam Walton followed his father-in-law’s advice on estate planning in 1954.
    • This involved giving his children shares, minimizing future estate taxes. Transcript: David Senra Another fascinating idea. This one definitely surprised me, and I think it’s another example of Sam copying good ideas. I mentioned earlier that his father-in played a huge role in his life. Businessman, entrepreneur, as a father-in to give advice to. Not only did he loan the first $25,000 for that first store, but he saved them untold amount of money in the way that he had set up the estate planning. The Forbes 400 list assumed that Sam Walton owned all that Walmart stock. Turned out he had given it away years before it had any value, and he got that idea from his father-in When and how and why he and Helen shared their business resources with their four children Is one of the more fascinating untold Walton stories. The children have each owned one-fifth of their parents’ stock and property since 1954. Sam and Helen created the trust that set this up when Ron was 10 and Alice was only five. Doing this kind of estate planning so early in the game was urged on by Sam through his father-in L.S. Robson, who had earlier done precisely the same thing in giving Helen and her siblings equal shares in the vast ranch that he assembled in Oklahoma. Mr. Robson was a banker and a lawyer, and he was pretty smart, Sam said. I could see it was the thing to do. And this all took place four decades ago. And so his son is talking about this. At that time, all dad and mother had was a variety store or two. Our shares then couldn’t have been worth more than $5,000 each at the time the book was printed, which is in 1990. Each of the kids were worth about $2 billion because of this. So by turning over ownership of 80% of his holdings to his children so early on, he avoided any substantial gift or inheritance taxes. And so his father-in put it best, the best way to reduce paying estate taxes is to give your assets away before they appreciate. All (Time 1:02:28)
  • Learning from Sol Price
    • Sam Walton learned from Sol Price, the founder of Price Club.
    • Walton copied Price’s membership wholesale club idea, creating Sam’s Club. Transcript: David Senra Right, so let’s talk about speed and soul price. This is one of my favorite stories in the entire book, something that Sam Walton said over and over again, that he took more ideas from soul price than any single other person. Think about how relentless this guy was on studying everything that everybody else was doing. He’s like, this is the person I learned the most from. In fact, I had a cool experience happen. You might be interested in this. I read Soul Price’s autobiography. It’s not my autobiography. His biography was written after Soul Price passed away by his son, Robert Price. That is episode 304. In that episode, I talk about how Soul Price is the most influential retailer of all time. Sam Walton learned from him. Jeff Bezos, Jim Sinegal, the founder of Costco, the founders of Home Depot. The list goes on and on and on about how influential Sol Price was. Anyways, I put that episode out. Robert Price, Sol Price’s son, the author of that book, listened to the episode and emailed me. He loved the episode and he thought it honored his father and his father should be honored. If you haven’t listened to the episode, go back and listen to it and try to find that book. It’s incredible. Sol Price was a remarkable man. So let’s talk about Sol Price and speed. Look how fast Sam Walton is moving. Okay. So he’s got this idea. He’s got it. And that Walmart’s already successful. He’s never, we just heard somebody else say earlier, he doesn’t, he never gets fat and happy with his success. That never has never happened. Didn’t happen in the past and didn’t happen up until the day he died. And so he’s always looking for, you know, I believe in Walmart and discounters, but there’s always people coming with new ideas. And he realizes that sole price is going to invent an entire new category. And so it says on a January morning in 1983, Sam Walton flies to San Diego to investigate a new wrinkle in the discount business, a membership wholesale club. What we think of as Costco and which obviously turns into Sam’s Club as well. The idea originated five years earlier by a savvy California entrepreneur named Sol Price. Sol Price was making an astounding success by selling merchandise that only a 10% above manufacturer’s prices and getting rich. If Sol Price could do that, Sam Walton figured he could too. The Wholesale Club idea was good, extremely good. And so Sam goes back to Bentonville and he’s like, okay, we’re just going to do the exact same thing that Soul Price is doing out in San Diego. And we’re going to do it. We’re going to call it Sam’s Club and we’re going to start right now. This is insane. First visit, January, 1983. Okay. January, he does his first visit. April, the same year, he opens the first Sam’s Club. In the next eight months before the end of 1983, okay, so January 1st, he visits the first one, doesn’t have any. By the end of that same calendar year, he’s got three. Then the next 12 months, he opens eight more. Within three years of stepping foot in SoulPrice’s Price Club, Sam now has 23 Sam’s Club wholesale stores, and he’s doing $776 million. That’s insane. From nothing to almost a billion dollars in sales in three years. And then within seven years, he’s got 105 of these things, and they’re doing $5 billion a year. Extreme patience coupled with extreme intolerance for slowness. That is the career of Sam Walton. He’s going to take his time to make sure this thing works. And when it works, he pours gasoline on it. (Time 1:04:24)
  • Patience Meets Action
    • Combine patience with a bias for action.
    • Validate ideas thoroughly, but execute rapidly once proven. Transcript: David Senra And so it’s this extreme bias for action that runs throughout this entire book. It’s what Jeff Bezos says. Jeff Bezos said that two of the things that he learned most from Sam Walton’s autobiography that he applied to the early days of Amazon is frugality and a bias of action. And I think this extreme bias of action is a great place to close and we’ll close in Sam’s own words. Our method of success as I see it is action with a capital A and a lot of hard work mixed in. As we’ve said throughout the years, do it, try it, fix it. It’s not a bad approach and it works. There are a lot of people out there who have some great ideas, but nothing in the world is cheaper than a good idea without any action behind it. And that is where I’ll leave it. If you have not yet read Sam Walton’s autobiography, I would read Sam Walton’s autobiography first. If you have a top 10 list of entrepreneur biographies, autobiographies, Sam Walton’s autobiography has got to be in that list. So if you haven’t read that one yet, I would highly recommend doing that. You can also listen to the episode I did on the last episode I did on Sam Walton’s autobiography is episode 234. If you’ve already listened to the podcast, listened to it again, and read the book, then I would highly recommend getting this book as well. Sam Walton is far too important of an entrepreneur to only read one book about. So (Time 1:07:38)