Made in America by Sam Walton

A good book on how Sam Walton built the greatest retail empire of the 20th century. The amazing thing is he did it late in life. I learned that in order to be the best at business you have to have a serious passion for it. Sam Walton would always go in K Mart stores whenever he saw them and he would look at the stores like a business owner. He would look at what they were selling and would look at all the intricate details of the store layout. Sam was also a humble man. He wasn't in business for the luxuries and to be rich. He just had a passion for it and focused so much on the customer (remind you of another retailer giant today named Amazon?). 

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If I had to single out one element in my life that has made a difference for me, it would be a passion to compete.  That passion has pretty much kept me on the go, looking ahead to the next store visit, or the next store opening, or the next merchandising item I personally wanted to promote out in those stores – like a minnow bucket or a Thermos bottle or a mattress pad or a bag of candy.

We don’t need to buy a yacht.  And thank goodness we never thought we had to go out and buy anything like an island.  We just don’t have those kinds of needs or ambitions which wreck a lot of companies when they get along in years.  Some families sell their stock off a little at a time to live high, and then – boom – somebody takes them over, and it all goes down the drain.

[Walmart] exists to provide value to [their] customers, which means that in addition to quality and service, we have to save them money.  Every time Wal-Mart spends one dollar foolishly, it comes right out of our customer’s pockets.  Every time we save them a dollar, that puts us one more step ahead of the competition – which is where we always plan to be.

Sam Walton experiments and doesn’t listen to Butler Brothers about buying from them with a 25% mark up.

Sam Walton learns that he could lower the price of his product, thus earning a lower profit margin, but still make more profits because he will make up for it by selling more volume.

Every crazy thing we tried hadn’t turned out as well as the ice cream machine, of course, but we hadn’t made any mistakes couldn’t correct quickly, none so big that they threatened the business.  Except, it turned out, for one little legal error we made right at the beginning.  In all my excitement at becoming Sam Walton, merchant, I had neglected to include a clause in my lease which gave me an option to renew after the first 5 years.  [My note: This became the low point of Sam’s life.  His success attracted a lot of attention, and the landlord gave his property to someone else once the lease expired.  He now had to start all over]

We were innovating, experimenting, and expanding.  Somehow over the years, folks have gotten the impression that Wal-Mart was something I dreamed up out of the blue as a middle-aged man, and that it was just this great idea that turned into an overnight success.  It’s true that I was forty-four when we opened our first Wal-Mart 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 twenty years in the making.

I probably lost $25,000 and that was a time when Helen and I were counting every dollar.  It was probably the biggest mistake of my business career.  I did learn a heck of a lot about real estate business from the experience, and maybe it paid off somewhere down the line – though I would rather have learned it some cheaper way.

David Glass, “Two things about Sam Walton distinguish him from almost everyone 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.”

Nobody wanted to gamble on that first Wal-Mart.  I think Bud put in 3%, and Don Whitaker – whom I had hired to manage the store from a TG&Y store out in Abilene, Texas – put in 2 percent, and I had to put up 95% of the dollars.  Helen had to sign all the notes along with me, and her statement allowed us to borrow more than I could have alone.  We pledged houses and property, everything we had.  But in those days we were always borrowed to the hilt.  We were about to go into the discount business for real now.

Two of the cornerstone philosophies that still guide the company are “We sell for less” and “satisfaction guaranteed”

It was totally unproven at the time, but it was really what we’d been doing all along: experimenting, trying to do something different, educating ourselves as to what was going on in the retail industry and trying to stay ahead of those trends.  This is a big contradiction in my makeup that I don’t completely understand to this day.  In many of my core values – things like church and family and civic leadership and even politics – I’m a pretty conservative guy.  But for some reason in business, I have always been driven to buck the system, to innovate, to take things beyond where they’ve been.

When somebody made a bad mistake – whether it was myself or anybody else – we talked about it, admitted it, tried to figure out how to correct it, and then moved on to the next day’s work.

Charlie Cate, “I remember him saying over and over again: go in and check our competition.  Check everyone who is our competition.  And don’t look for the bad.  Look for the good.”

Sam Walton described his bedrock principles of raising children: hard work, honesty, neighborliness, and thrift.

Jim Walton on Sam Walton, “Dad always said you’ve got to stay flexible…. Later, we all snickered at some writers who viewed Dad as a grand strategist who intuitively developed complex plans and implemented them with precision.  Dad thrived on change, and no decision was ever sacred.

Helen Walton on Sam Walton, “Of course, we always had to stop and look at stores – any kind of stores – on the way to wherever we were headed.  You know, we would go through a good town, and he knew about some store there.  I would sit in the car with the kids, who, of course, would say, ‘Oh no, Daddy, not another store…’ We just got used to it.  Later on, Sam never went by a Kmart that he didn’t stop and look at it.”

I read in some trade publication not long ago that of the top 100 discounters who were in business in 1976, 76 of them have disappeared.  Many of these started with more capital and visibility than we did, in larger cities with much greater opportunities.  They were bright stars for a moment, and then they faded.  I started thinking about what really brought them down, and why we kept going.  It all boils down to not taking care of their customers, not minding their stores, not having folks in their stores with good attitudes, and that was because they never really even tried to take care of the customers, you have to make sure you’re taking care of the people in the stores.  That’s the most important single ingredient of Wal-Mart’s success.

Abe Marks says that Sam is a master of taking the best out of everything and adapting to his own needs.

Helen Walton hates the idea of Wal Mart going public because her life is open to be much more open and she hated that.

I guess what’s annoying to executives – to anybody who tries to spend their time managing a company as big as this – is these money managers who’re always churning their investors’ accounts.  You know, the stock will get to $40 or $42, and they’ll rush in there and say, “Hey, let’s sell this thing because it’s just too high.  It’s an overvalued stock.” Well, to my mind, that doesn’t make much sense.  As long as we’re managing our company well, as long as we take care of our people and our customers, keep our eye on the fundamentals for himself.  If I were a stockholder of Wal-Mart, or considering becoming one, I’d go into ten Wal-Mart stores and ask the folks working there, “How do you feel? How’s the company treating you?”  Their answers would tell me much of what I need to know.

Our demise has been predicted ever since we hit the stock market.  And whenever one of these big institutional investors reads something like that, and decides he believes it, he unloads a million shares, or 500,000 shares, and in the past that has created some fluctuations in the price of our stock.

What’s really worried me over the years is not our stock price, but that we might someday fail to take care of our customers, or that our mangers might fail to motivate and take care of our associates.  I also worried that we might lose the team concept, or fail to keep the family concept viable and realistic and meaningful to our folks as we grow.  Those challenges are more real than somebody’s theory that we’re headed down the wrong path.

But if you asked me am I an organized person, I would have to flat out say no, not at all.  Being organized would really slow me down.  IN fact, it would probably render me helpless.  I try to keep track of what I’m supposed to do, and where I’m supposed to be, but it’s true I don’t keep much of a schedule.  I think my way of operating has more or less drive. Loretta Boss, and later Becky Elliott, my two secretaries, around the bend.  My style is pretty haphazard.

Most of Wal-Mart’s competitors disappeared because they just didn’t commit to discounting.  They were so used to their 45% markup, they never let it go.  Wal-Mart wasn’t afraid to cut their costs and this shut the door on variety stores.

“Our relationship with the associates is a partnership in the truest sense.  It’s the only reason our company has been able to consistently outperform the competition – and even our own expectations.

The biggest single regret in my whole business career is that we didn’t include our associates in the initial, mangers-only profit-sharing plan when we took the company public in 1970.  But there was nobody around preaching that philosophy in those days, and I guess I was just too worried about my own debt, and in too big a hurry to get somewhere fast.

The decision we reached around that time, to commit ourselves to giving the associates more equitable treatment in the company, was without a doubt the single smartest move we ever made at Wal-Mart.

Keeping so many people motivated to do the best job possible involves a lot of the different programs and approaches we’ve developed at Wal-Mart over the years, but none of them would work at all without one simple thing that puts it all together: appreciation.  All of us like praise.  So what we try to practice in our company is to look for things to praise.  Look for things that are going right.  We want to let our folks know when they are doing something outstanding, and let them know they are important to us.

A strong corporate culture with its own unique personality, on top of the profit-sharing partnership we’ve created, gives us a pretty sharp competitive edge.  But a culture like ours can create some problems of its own too.  The main one that comes to mind is a resistant to change.  When folks buy into a way of doing things, and really believe it’s the best way, they develop a tendency to think that’s exactly the way things should always be done.  So I’ve made it my own personal mission to ensure that constant change is a vital part of the Wal-Mart culture itself.  I’ve forced change – sometimes for change’s sake alone – at every turn in our company’s development.  In fact, I think one of the greatest strengths of Wal-Mart’s ingrained culture is its ability to drop everything and turn on a dime.

For my whole career in retail, I have stuck by one guiding principle.  It’s a simple one, and I have repeated it over and over and over in this book until I’m sure you’re sick to death of it.  But I’m going to say it again anyway: the secret of successful retailing is to give your customers what they want.  And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience.

The whole thing taught me a lesson about the way the national media seems to think.  When you start out as an unknown quantity with just a dream and a commitment, you couldn’t buy a mention of your company in one of these publications.  When you become moderately successful, they still ignore you unless something bad happens to you.  Then, the more successful you become, the more suspicious they become of you.  And if you ever become a large-scale success, it’s Katie bar the door.  Suddenly, you make a very convenient villain because everybody seems to love shooting at who’s on top.

If American business is going to prevail, and be competitive, we’re going to have to get accustomed to the idea that business conditions change, and that survivors have to adapt to those changing conditions.  Business is a completive endeavor, and job security lasts only as long as the customer is satisfied.  Nobody owes anybody else a living.

Pg 185-186 - How Wal-Mart got the best price from their vendors

Everything we’ve done since we started Wal-Mart has been devoted to this idea that the customer is our boss.  The controversies it has led us into have surprised me, but they’ve been easy to live with because we have never doubted our philosophy that the customer comes ahead of everything else.

I don’t know how the folks around our executive officers see me, and I know they get frustrated with the way I make everybody go back and forth on so many issues that come up.  But I see myself as being a little more inclined than most of them are to take chances.  On something like the Kuhn’s decision, I try to play a “what if” game with the numbers – but it’s generally my gut that makes the final decision.  If it feels right, I tend to go for it, and If it doesn’t, I back off.

Principles that Wal-Mart uses to think small: 1. Think 1 store at time 2. Communicate, communicate, communicate 3. Keep your ear to the ground 4. Push responsibility – and authority – down 5. Force ideas to bubble up 6. Stay lean, fight bureaucracy

It’s only human nature not to want to have your job, or the jobs of the people who work for you, eliminated.  But it is absolutely the responsibility of a company’s top management to be thinking about this issue all the time – to ensure a sound future for the overall company.  [Sam had a formula where he always tried to keep his stores with general office expense being only 2% of sales.  Sam used this formula when he had just 5 stores and still uses it with 2,000 stores.

Tom Watson, Sr. was running IBM, he decided they would never have more than four layers from the chairman of the board to the lowest level in the company.  That may have been one of the greatest single reasons why IBM was successful.

Education will be the issue that Helen and Sam focus on the most with the wealth that they have accumulated.

Sam’s rules for building a business:

  1. Commit to your business. Believe in it more than anybody else.

  2. Share your profits with all your associates, and treat them as partners.

  3. Motivate your partners. Money and ownership alone aren’t enough.

  4. Communicate everything you possibly can to your partners.

  5. Appreciate everything your associates do for the business.

  6. Celebrate your successes. Find some humor in your failures.  Don’t take yourself so seriously.  Loosen up, and everybody around you will loosen up.  Have fun. Show enthusiasm – always.

  7. Listen to everyone in your company

  8. Exceed your customer’s expectations

  9. Control your expenses better than your competition

  10. Swim upstream.  Go the other way.  Ignore the conventional wisdom.  If everybody else is doing it one way, there’s a good chance you can find your niche by going in the exactly the opposite direction.

You can’t just keep doing what works one time, because everything around you is always changing.  To succeed, you have to stay out in front of that change.

I’m really sick these days, and I guess when you get older, and illness catches up with you, you naturally turn just a little bit philosophical – especially late at night when you can’t sleep and your mind is turning everything over and over trying to take stock of where you’ve been and what you’ve done.

Almost from the beginning, our objective has been to charge just as little e as possible for our merchandise, and to try and use what muscle we’ve had to work out deals with our suppliers so we can offer the very best quality we can.  Many people in this business are still trying to charge whatever the traffic will bear, and they’re simply on the wrong track.  I’ll tell you this: those companies out there who aren’t thinking about the customer and focusing on the customers’ interests are just going to get lost in the shuffle – if they haven’t already.  Those who get greedy are going to be left in the dust.

Free enterprise is the engine of our society; communism is pretty much down the drain and proven so; and there doesn’t appear to be anything else that can compare to a free society based on a market economy.

A lot of people think it’s crazy of me to fly coach whenever I go on a commercial flight, and maybe I do overdo it a little bit.  But I feel like it’s up to me as a leader to set an example.  It’s not fair for me to ride one way and ask everybody else to ride another way.  The minute you do that, you start building resentment and your whole team idea begins to start at the seams.

© 2018 Mike Gorlon                                                                                                                                                                                                                                         Amazon Affiliate