Biography Edition: Sam Walton's Blueprint for Dominance

Discover the origins of retail giant Walmart and the extraordinary man behind it, Sam Walton, as we journey through his autobiography, "Made in America." Our exploration reveals a tale of perseverance and thrift, from Walton's early days in Oklahoma to his rise as a business titan. Born during the Great Depression, Walton's frugal approach and relentless work ethic laid the foundation for his success. Whether he was selling magazine subscriptions or helming Walmart, these qualities remained central to his story—a story that resonates with entrepreneurs across industries.

Step into the Walton family's strategic world, where financial savvy meets tight-knit family business management. We peel back the layers of the Robson family's influence over Walton, unveiling how early ownership transfers and astute tax strategies fortified Walmart's legacy. But it wasn't all smooth sailing; Walton's brush with losing control of his Ben Franklin store franchise spotlights the critical importance of maintaining a grip on your business assets. These anecdotes not only enrich the saga of Walmart's rise but serve as invaluable lessons for those carving out their own business paths.

Lastly, we scrutinize the leadership ethos that propelled Walmart beyond its competitors, drawing parallels between Walton's principles and those of industry goliaths like Rockefeller and Bezos. Walton's commitment to efficiency, customer value, and a team-driven culture holds timeless relevance for modern business strategy. As we close, we leave you with a glimpse of Walton's top rules for success and the innovative strategies that secured Walmart's place as a household name. Stay tuned for our next installment where we'll continue to distill these insights to inspire your own business acumen.

Transcript

Speaker 1: 0:00

Great ideas come from everywhere. If you just listen and look for them, you never know who's going to have a great idea. That was an excerpt from Made in America by Sam Walton. This is Sam Walton's autobiography and this book was very dense with great ideas. So I really enjoyed reading this book. So I highly recommend it. I highly recommend it and I'm going to go through kind of the timeline of his life, sam Walton he was the founder of Walmart and kind of pick out some ideas that I think would be applicable to painting businesses here.

Speaker 1: 0:35

So first of all, in 1918, sam Walton was born in Oklahoma, and this is an excerpt from the beginning of the book here. No question about it, a lot of my attitude towards money stems from growing up during a pretty hard scrabble time in our country's history the Great Depression, and it goes on. I drive a truck and I get my haircut at a barbershop. I don't believe in wasting money, so this is a common thing throughout this book. Believe in wasting money, so this is a common thing throughout this book. Sam Walton is very frugal, even when he's a multimillionaire. He is always watching his money and being thrifty, and this is a common thing we see throughout other biographies I've read recently. With Rockefeller and Jeff Bezos, they're all very focused in on the dollars and cents, making sure they're not spending money where they don't need to be. So during the 1930s, during the Great Depression, sam Walton begins his entrepreneurial journey by selling magazine subscriptions and later working various jobs, including waiting tables, in exchange for meals. So here's an excerpt from the book.

Speaker 1: 1:51

I also started selling magazines subscriptions, probably as young as seven or eight years old, and I had paper routes from the seventh grade all the way through college. I raised and sold rabbits and pigeons too Nothing really unusual for country boys of that era. I learned from a very early age that it is important for us kids to help provide for the home, to be contributors rather than just takers. In the process, of course, we learned how much hard work it took to get your hands on a dollar and that when you did it it was worth something. One thing my mother and dad shared completely was their approach to money. They just didn't spend it, and so, like I said, this was drilled into him in his childhood and it continues to be a thing throughout his life.

Speaker 1: 2:38

In 1940, sam Walton graduated from the University of Missouri with a degree in economics and starts working at JCPenney as a management trainee. And Sam Walton says that he wasn't really a gifted student, but he worked really hard, and that was something else that. Rockefeller basically said the same thing in his biography and Ray Kroc also said something similar as well. So it's a common thing. We keep seeing, over and over again, the value of hard work. It's not about how intelligent you are, it's about how hard you work. And so this is an excerpt up from the book about his time at JCPenney. The deal was pretty straightforward Report to the JCPenney store in Des Moines, Iowa, three days after graduation, june 3rd 1940, and began work as a management trainee, salary $75 a month. That's the day I went into retail and, except for a little time out, as an army officer, that's where I stayed for the last 52 years.

Speaker 1: 3:46

And so Sam Walton is writing this book uh, actually towards towards the end of his life. He's, he has cancer. So he's, he knows that he only has a little bit left to live. And so this is when he's writing this book and looking back at his life. And the intent of the book really was to pass on to his kids. He wanted to communicate the things that he learned in his life to his kids so that they could keep the wealth that he built for them. And he goes on in the book here. Walton Blake would say to me when he came to me in Des Moines I'd fire you if you weren't such a good salesman. Maybe you're just not cut out for retail.

Speaker 1: 4:29

Fortunately, I found a champion in my store, duncan Majors. A great motivator, he was the proudest of having trained more penny managers than anybody else in the country. He had his own techniques and he was a very successful manager. His secret was that he worked us from 6.30 in the morning until 7 or 8 o'clock at night. All of us wanted to become managers like him. On Sundays, when we weren't working, we would go out to his house there were about eight of us all all men and we would talk about retailing, of course, but we'd also play ping pongs or cards. It was a seven-day job.

Speaker 1: 5:05

I remember one Sunday Duncan Majors had just gotten his annual bonus check from JCPenney's and was waving it around all over the place. It was for $65,000, which impressed the heck out of us boys. Watching this guy is what got me excited about retail. He was really good about retail. He was really good. So it's kind of hilarious that some management in JCPenney's were thinking that Sam Walton was not cut out for retail when he ends up owning the whole space. But this is, you know, when he starts cutting his teeth at JCPenney, this is kind of where he gets the motivation to continue with this line of business. And even though he starts Walmart a lot later in life, you know he's he's focused on retailing from an early age.

Speaker 1: 5:58

So 1942, sam Walton serves in the U S army during World War II and this is an excerpt from the book on this period. I went to the library there and checked out every book on retailing. I also spent a lot of time off-duty studying the ZCMI, the Mormon Church's department store, out there, just figuring out that when I got back to civilian life I would somehow get into the department store business. So again, even though he's in the war and the army during this period, he's still focused on retailing and he's absorbing everything he can on that subject, going to the library, getting the books, and so this is a common thing we've seen from Rockefeller Napoleon Alexander the Great. So this is a common thing we've seen from Rockefeller Napoleon Alexander the Great Jeff Bezos is that they're always consuming knowledge to improve themselves and the domain that they want to focus on. 1945, after the war, sam Walton purchases a Ben Franklin variety store in Newport, arkansas, with a $20,000 loan from his father-in-law and $5,000 from his own savings. And so there's an excerpt here. Sam Walton was, you know, got married somewhere around this time and his father-in-law he kind of looked up to, and so this is an excerpt from the book on this topic.

Speaker 1: 7:29

The Robsons were very smart about the way they handled their finances. Helen's father organized his ranch and family businesses as a partnership and Helen and her brothers were all partners. They all took turns doing the ranch books and things like that. Helen has a BS degree in finance, which back then was really unusual for a woman. Anyway, ms Robson advised us to do the same thing with our family and we did way back in 1953. What little we had at the time we put into a partnership with our kids, which was later incorporated into Walton Enterprises.

Speaker 1: 8:05

So this is a really interesting strategy. Sam Walton basically set his family up as a business, right, so he put all the assets of the business into an entity and then he gave parts of that entity to his family early on so that he didn't have to pay taxes on it later. Family early on, so that he didn't have to pay taxes on it later. So when they ended up going public, his family still owned 38% of the company stock, which is very rare for a founder of a publicly owned company to own that much of the stock Usually it's like 10% and they own 38%. So he was able to transfer a lot of the wealth to his family without paying much tax.

Speaker 1: 8:46

Here's another excerpt from the book. It's something that any family who has faith in its strength as a unit and in the growth potential of its business can do. The transfer of ownership was made so long ago that we didn't have to pay substantial gift or inheritance taxes on it. The principle behind this is simple the best way to reduce paying estate taxes is to give your assets away before they appreciate. So this is a key takeaway. If you have a painting business and maybe you're just getting started or maybe you've, you're still, you've been in business for a little while, but you're not, you haven't hit your goal of revenue and profitability and all that stuff you can go ahead and gift a portion of your business to your kids now, and so, instead of waiting until the end of your life to do it where your business is, you know, grown a lot more and then cause, then you'll have to cause. If you wait, and it's really appreciated, you're going to have to pay a lot of taxes on that transfer. So do it early and and then your kids will have that, that asset.

Speaker 1: 9:51

So Helen, it was Sam Walton's wife, and here's an excerpt from the autobiography, something that Helen had had said um, sam, we've been married two years and we moved 16 times. Now I'll go with you any place you want. So as long as you don't ask me to live in a big city, 10,000 people is enough for me. So any town with a population of 10,000 was off limits to the Waltons. If you know anything about the initial small town strategy that got Walmart going almost two decades later, you can see that this pretty much set the course for what was to come. She also said no partnerships. They were too risky. Her family had seen some partnerships go sour. She was dead set in the notion that the only way to go was to work for yourself. So basically here what we see is Sam Walton had that initial constraint of having to start in small towns, not because of a strategy, but actually because his wife didn't want to be anywhere else. But he built the business to suit his life, so that's kind of a takeaway there. Also, his wife was really against partnership from what she had seen previously with her family, which they ended up doing for a while. But they ended up setting up an incentive program that would actually bring other people in. So they eventually did get partners, but they were cautious about it and did it in a way where it was a win-win, which I think is a good takeaway. Partnerships, they are very dangerous. A lot of partnerships go bad. You know they are very dangerous. A lot of partnerships go bad. But if you set it up right and you have a way out, they can be beneficial. So it's just quote from the book.

Speaker 1: 11:42

In all my excitement at becoming Sam Walton merchant, I neglected to include a clause in my lease which gave me the option to renew it after the first five years In our success. It turned out had attracted a lot of attention. My landlord, the department store owner, was so impressed by our Ben Franklin success, which Ben Franklin is the store franchise that he had. They were so impressed by Ben Franklin's success which Ben Franklin is the store franchise that he had. They were so impressed by Ben Franklin's success that he decided to not renew our lease at any price, knowing full well that we had nowhere else in town to move the store. So basically, he was getting a lease from a store owner and the store owner didn't let him renew the lease so he basically had to close his business and he lost his business because of that. So this was a big lesson learned by Sam in this moment and basically you need to control the land that your business is built on.

Speaker 1: 12:41

Now, obviously we have painting businesses. You don't necessarily you might not have this as an issue specifically, but I think of it as like maybe not controlling land, but maybe think of it at like a franchisee. If you're, if you're buying into a franchisee, you know you don't really own the name. You're kind of buying into the name, the name. So I've seen several times where folks have buy into the franchise but then they don't feel like they get the support they need or they feel like they could have just they've done a lot themselves and they didn't really need it, but now they have to get out of that franchise agreement and that can be a really big pain. So you know, if you want to build your own business, you need to make sure that you have full control over that business from the start, otherwise you can run into some issues.

Speaker 1: 13:30

And here's another quote from the book. It was a low point of my life. I felt sick to my stomach. I couldn't believe it was happening to me. It really was like a nightmare. I had built the best variety store in the whole region and worked hard in that community, done everything right, and now I was being kicked out of town. It didn't seem fair. I blame myself for ever getting suckered into such an awful lease and I was furious at the landlord. And at this point he has four kids to support. But it goes on to say he didn't dwell on his disappointment and he just had another challenge that he had to figure out. And this time he had to basically do it all over again. But this time he was going to do it even better. So that in 1962, walton opens up the first Walmart in Rogers, arkansas.

Speaker 1: 14:15

And here's an excerpt from the book. Now, when it comes to Walmart, there are no two ways about it. I'm cheap. I think it's a real statement that Walmart never bought a jet until after we were approaching 40 billion in sales and expanded as far away as California and Maine, and even then they had to practically tie me up and hold me down to do it On the road. We slept two to a room, although as I've gotten older I have finally started staying in my own room. We stay in Holiday Inns and Ramada Inns and Days Inns and we eat a lot at family restaurants when we have time to eat.

Speaker 1: 14:50

A lot of what goes on these days with high-flying companies and these overpaid CEOs who are really just looting from the top and aren't watching out for anybody but themselves, really upsets me. It's one of the main things wrong with American business today. As you can see, sam Rawlton is really frugal. He was always pinching pennies, even when he was multimillionaire, billionaire, staying in cheap hotels, not a flying coach and all that stuff. So he really valued the value of a dollar and watched out for not only for himself but for his shareholders, because at a certain point there were other owners in the business that he brought in and the business ended up going public. Later on it goes on in the book. Here's another excerpt.

Speaker 1: 15:42

I read an article about these two Ben Franklin stores up in Minnesota that had gone to self-service a brand new concept. At the time I rode the bus all night to two little towns up there, pipestone and Worthington. They had shelves on the side and two island counters all the way back. No clerks with cash registers around the store, just checkout registers up front. I liked it and so that's what I used. That's what I did too.

Speaker 1: 16:07

So this happens again and again. Where he's visiting all these different stores, he's seeing what the best practices are and he's taking those ideas and applying it in his store. And the self-service thing is not the auto checkout that you see now at Walmart, but this is just the fact that they're putting the registers at the front of the store instead of sprinkling them out, like you see, in like JC pennies. Um, they don't do that. He liked the idea of just keeping all the cash registers at one point towards the uh, the exits. So this is basically Sam. He's always searching for useful information when he goes on trips with his family. He's stopping by every store that he sees and checking out what they're doing, what kind of sales they're offering, how they had set up the store. He's always looking for useful information and copying it the things that are good ideas. Here's an excerpt from the book.

Speaker 1: 16:59

We were innovating, experimenting and expanding. Somehow, over the years, folks have gotten the impression that Walmart was something I dreamed up out of the blue as a middle-aged man and that it was just a great idea that turned into an overnight success. It's true that I was 44 when we opened our first Walmart in 1962, but the store was totally an outgrowth of everything we'd been doing since Newport. Another case of me being unable to leave well enough alone. Another experiment. And like most other overnight successes, it was about 20 years in the making. So again, he was into retail as a young man focused on it. He didn't start Walmart till 44, but he had been focusing and learning about it as much as possible up until that point. So all his previous experiences informed his philosophy on building Walmart.

Speaker 1: 17:52

And here's another quote from the book about Sam Walton, coming from one of the folks that worked with him. Two things about Sam Walton distinguish him from almost anyone else I know. First, he gets up every day, bound and determined to improve something. Second, he is less afraid of being wrong than anyone I've ever known, and once he sees he's wrong, he just shakes it off and heads in another direction, which I think this is a great thing to emulate Get up every day bound to improve something, and then, if you're wrong about something, just shake it off and keep going. If you're going to be wrong, try to be wrong for the smallest amount of time possible, and that's what Sam did. He was always looking for what's the best thing that works. Let me implement in my business, and if I'm wrong, we can change it and make it right. Here's another quote from the book we were trying to find out if customers in a town of 6,000 people would come to our kind of barn and buy the same merchandise strictly because of price.

Speaker 1: 18:47

The answer was yes. So he basically tested low prices and found out that that does attract people to your store. And so it goes on to say that what we were obsessed with was keeping our prices below everybody else's. Our dedication to that idea was total. This is something that Charlie Munger has observed that the winner in industries usually goes to someone who goes to the extreme of maximizing or minimizing one variable, and so in this case, sam Walton is minimizing prices, and so they are reaping the rewards of doing that and owning the retailing industry and something that we saw Jeff Bezos ended up doing later on after Walmart on the internet space basically an internet retailer. His whole focus was minimizing prices, and Amazon is now dominant today prices and Amazon is now dominant today. Jeff Bezos actually read this autobiography written by Sam Walton and took a lot of notes and applied a lot of the things that he learned out of this book into his business, amazon. Here's another quote from the book.

Speaker 1: 19:59

Most of these early guys were very egotistical people who love to drive big Cadillacs and fly around in their jets and vacation on their yachts, and some of them lived in houses like I never even thought about before. I remember going to dinner at one of these houses and we got up picked up by a limousine that must have had room for 14 people. Man, they were living high and they could afford to back. They could afford to back down because discounting thing was working so well. Customers just flocked to their stores and these fellows were covered up in cash. Most of them could still be around today if they had followed some basic principles about running good stores. There are a lot of ways to build strong companies. They don't have to be done the Walmart way or my way or anybody else's way, but you do have to work at it, and somewhere along the line these folks stopped short of setting the goals and paying the price that needed to be paid. Maybe it wasn't the Cadillacs and the yachts, maybe they just decided it wasn't worth it. But whatever it was, they just didn't stay close enough to their business. They sort of chose to get over on the other side of the road.

Speaker 1: 21:04

And so I think this is a really key thing is you know, so a lot of folks and I've seen this happen and I've in my own life, observed it myself in my, in myself is, when you get to a certain level of success, you sometimes start getting distracted, pulled away to different things and that can be dangerous also or just indulging. You know you get to a certain level of success, you want to indulge and like, start buying all the fancy stuff and show off you know your wealth and that doing that is often can be your downfall. And so during this time, discount retailing was a big thing that was really working for a lot of different companies, not just Walmart, but a lot of them ended up failing because they got distracted and they weren't trying to improve their position and continue to push the envelope. So I think this is a key lesson that we need to protect ourselves against is not get distracted. Stay close to our businesses and keep the eye on the ball. So by 1970, Walmart becomes a publicly traded company, and there's a quote from the book.

Speaker 1: 22:24

Coming back from New York that day, I experienced one of the greatest feelings of my life knowing that all our debts were paid off. So leading up to the the time where they were publicly traded Sam Walton took out a lot of debt to finance the growth of Walmart. So they're opening up a lot of stores throughout the country and so they took on a lot of debt to finance that growth. And so when they became publicly traded, that basically took away those debts and that was a great lift to him. Here's another quote from the book if we fail to live up to somebody's hypothetical projection for what we should be doing, I don't care. It may knock our stock back a little bit, but we're in it for the long run. We shouldn't care less about what is forecast and what the market says we got to do If we listen very seriously to that sort of stuff, we would never have gone into small town discounting in the first place. So basically, you know, once they go public, you have a lot more shareholders involved and you have all these market projections and analysts analyzing Walmart and whether they're on track or off track for quarterly earnings, and he's basically like saying, hey, we're just ignore that stuff, we just focus on pleasing our customers and providing a great service. If we're doing that in the long run, we're going to win in the short term. You know, next quarter maybe we have our sales go down a little bit, but we're not concerned with that we're. But as long as we're staying focused on and pleasing our customers, we'll be fine. I think that's something we could take to our as a lesson for ourselves. You know, maybe you have a slow winter and things are tough, but as long as you're still pleasing your customers, you can get through those tough times and folks are going to refer you and once the economy comes back around or slow season comes back around, you'll be there. So if you have that long-term views of just providing a great service to people, other people are going to take notice and they can't ignore you and you're going to be going to be able to stick around. So having that long-term view is really helpful.

Speaker 1: 24:26

Here's another quote for the book. My style has always been to lay off a lot of the day-to-day operating responsibilities to folks. So basically he delegated a lot of the day-to-day operating responsibilities to folks. So basically he delegated a lot of the day-to-day responsibilities to his team. And this is a common thread that we see for other successful folks like Rockefeller and Jeff Bezos. They free up their time by giving empowering people to take the work and get it done and give them the freedom to get it done in the way that they need to get it done. So he's basically picking the good people and giving them maximum authority and responsibility.

Speaker 1: 25:04

And then here's some other excerpts from the book about Sam Walton and what he did with his time. So this is an excerpt from Loretta Boss Parker, who was the personal secretary for 25 years, and she says he has always been like this His mind works 10 times faster than anybody else's. I mean, he just gets going and stays two or three jumps ahead and he's quick to go with what's on his mind. If he gets something in his mind that needs to be done, regardless of what else might've been planned. The new idea takes priority and it has to be done now. Everybody has their day scheduled and then bang, he just calls a meeting on something.

Speaker 1: 25:44

In the early years this caused a number of embarrassments. I would make appointments for him and then tell him about it. And we kept two calendars, one on his desk and one on mine, but he would just totally forget. And we kept two calendars, one on his desk and one on mine, but he would just totally forget. I've had people flying in from Dallas to see him. I'd come in at 8 am to meet them and find out that he had flown out at 5 am without telling anybody where he was going. I would have to look at this man from Dallas and say he's gone. So after a few times I finally said I'm not going to make appointments for you anymore.

Speaker 1: 26:14

So basically, he, when he identified a priority in his business, he would try to get it knocked out as soon as possible with his team and he would move his calendar or disregard his calendar completely, and and and act on that immediately. And it goes on. Here's another excerpt from Sam Walton. He says except for reading my numbers on Saturday morning and going to our regular meetings. I don't have much of a routine for anything else. I always carry my little tape recorder on trips to record ideas that come up in conversations with the associates. I usually have my yellow legal pad with me with a list of 10 or 15 things that we need to be working on as a company, and that's the quote from the book. So basically he just had that his focus of his priorities, and then he would try to execute those. Here's another quote from someone he worked with when Sam feels a certain way, he's relentless. He'll just wear you out. He will bring up an idea, we'll all discuss it and then maybe decide that it's not something we should be doing right now or ever. Fine, case closed. But as long as he's convinced that it's the right thing, it just keeps coming up week after week after week until finally somebody capitulates and says well, let's give it a try. So once he had something in his mind, he was relentless about it.

Speaker 1: 27:27

Another quote the percentage of gross margin in this industry really the markup on the merchandise has dropped steadily, from around 35% in the early 60s to only 22% today. Almost all of that represents increased value and savings to customers who shop discount stores. So the guys who weren't running efficient operations, who had taken on loads of debt and were living high and not taking care of their associates, who weren't scrambling around to get the best deals on merchandise and passing those deals on their customers, these guys got into trouble. So this is another point. Basically he was, he was focused, was a low, low, low cost discount retailer and he not only just lowered his prices, he was also relentless about decreasing his operational costs and getting more efficient and getting better deals on what he was buying to resell. So even though they had really low prices at the stores, they kept good margins because they're running such a lean operation. And you know we've seen founders like Rockefeller, carnegie and now Sam Walton. They're so obsessed with controlling their costs so they, so they can maintain their margins and beat out their competition.

Speaker 1: 28:50

And then, towards the end of the book he has, sam Walton provides rules that he has for running a great business and he calls it Sam's rules for building a business, which are pretty useful. So rule number one is commit to your business, believe in it more than anybody else. I think I overcame every single one of my personal shortcomings by sheer passion I brought to my work. Rule number two share your profits with all your associates. So that was something that he had done. Is you figure out an incentive program for his associates so that they brought? So everybody's moving in the same direction with the same incentives.

Speaker 1: 29:27

Rule number three motivate your partners. Money and ownership alone aren't enough. Constantly, day by day, think of new and more interesting ways to motivate and challenge your partners. Set high goals, encourage competition and then keep score, make bets with outrageous payoffs. So he's always trying to figure out how to motivate. That's rule number three.

Speaker 1: 29:45

Rule number four communicate. Communicate everything you possibly can to your partners, and the more they know, the more they'll understand. So keeping those lines of communication open so that they understand the intent of what you're doing. Rule number five appreciate. Appreciate everything your associates do for the business. A paycheck and a stock option will buy one kind of loyalty, but all of us like to be told how much somebody appreciates what we do for them. We like to hear it often, and especially when we have done something we're really proud of. So not only are we incentivizing them with a share of the profits or whatever, we're also verbally telling them, because people are motivated different ways. We're saying hey, we really appreciate the work that you're putting in.

Speaker 1: 30:35

Rule number six celebrate your successes. Find some humor in your failures. Don't take yourself too seriously. Loosen up, and everybody else around you will loosen up. Rule number seven listen to everyone in your company and figure out ways to get them talking. The folks on the front lines, the ones who are actually talking to the customer, those are the ones that really know what's going on. So make sure you're listening and getting that feedback.

Speaker 1: 30:59

Rule number eight exceed your customers' expectations. Rule number nine control your expenses better than your competition. This is where you can always find the competitive advantage. For 25 years running, long before Walmart was known as the nation's largest retailer, we ranked number one in our industry for the lowest ratio of expenses to sales. And then rule number 10, swim upstream, go the other way. Ignore conventional wisdom. If everybody else is doing it one way, there's a good chance you can find your niche by going exactly the opposite direction. So those were Sam Walton's 10 rules for a business, running and building a business. In 1992, sam Walton received the Presidential Medal of Freedom from George W Bush, and then he ended up passing away shortly after receiving the award. So all in all, I highly recommend taking a look at Made in America by Sam Walton. A lot of great wisdom in here that I think you can apply in your business. And with that, I'll see you next week.