Sam Walton may have been the richest person to ever exist. It is hard to get a number for his net worth when he was alive. But the inheritance he left his four children kept them consistently at the top ten richest people in the world. And he was declared the richest man in the United States when he was alive.
I just had to read his book Made in America to discover his secrets to success and learn more about him as a person. And man, was I shocked.
Sam is the complete opposite of the stereotypical show-off, jet-setting millionaire CEO who parties with models. In fact, he was humble, frugal, and cared about the lowest level employee. He was also charismatic, hard-working (sometimes to a fault), and a family man.
Lately, I’ve been noticing this trend of an “old-fashioned, humble guy” among the billionaires I’ve studied, including Warren Buffett and Phil Knight. Perhaps, these show-off millionaires on Instagram can learn a thing or two from them.
I wanted to share with you some of my favorite Sam Walton quotes and why they’re so awesome:
“I don’t subscribe to any of these fancy investment theories and most people would be surprised to know that I haven’t done much investing in anything but Walmart. I believe the folks who have done the best with Walmart stock are those who have studied the company and understood our strengths and our management approach and who, like me, have decided to invest with us for the long run.”
-Sam Walton, from the book Made in America
Sometimes, the best investment for a CEO is to reinvest in what they already understand and what’s already working really well. Having studied a lot of investing myself, I realize investing is a different skillset than running a company. Although Warren Buffett says they’re complimentary, it doesn’t mean you’re guaranteed to be good at one if you’re good at another.
Eerily similar to Warren Buffett’s investing method, Sam argues that the investment firms and individual stockholders who have done the best with Walmart stock were not looking for technical chart patterns or short-term profits. They were not people who saw Walmart as nothing more than a ticker symbol and didn’t know much about the actual company.
They were people who studied the company until they fully understood its strengths and management approach. And they were willing to hold the stock for a long time, if not, forever. According to the book Reminiscences of a Stock Operator, the real money is to be made in the long term, not the short-term jumping in and out.
“Outstanding leaders go out of their way to boost the self esteem of their personnel. If people believe in themselves it’s amazing what they can accomplish.”
“I have always been driven to buck the system, to innovate, to take things beyond where they’ve been.”
“High expectations are the key to everything.”
“I had to pick myself up and get on with it, do it all over again, only even better this time.” (And he did)
“What we guard against around here is people saying, ‘Let’s think about it.’ We make a decision. Then we act on it.”
“Everything I’ve done I’ve copied from somebody else.”
Like quite a few others I’ve met, I used to think it’s unethical to copy from someone else. While in some creative arenas, like art, music, or fiction, it is, that’s not the case for business. It’s not so black and white.
As long as its legal, you’d be a fool to not copy another who has found a much better way. According to Warren Buffett, a core part of any business industry involves building a durable competitive advantage so others can’t copy you and accepting copying as natural by realizing competitors will copy your good ideas.
A few years ago, I saw a popular thread on Reddit. The creator of the thread was complaining about how his own cousin stole his business idea and sold the same product behind his back. While I did think it was a dick move that his cousin shouldn’t have done, I also realize how small-sighted his thinking was.
If it’s a good product, tons of people will copy it. If it wasn’t his cousin, a stranger would have. In fact, it wouldn’t just be one person — but many. It’s legal to copy product designs if you don’t have a patent. So instead of whining, be like Sam Walton and learn from others, while strengthening your advantage so it can’t be copied.
“Great ideas come from everywhere if you just listen and look for them. You never know who’s going to have a great idea.”
“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.”
“The small stores were just destined to disappear, at least in the numbers they once existed, because the whole thing is driven by the customers, who are free to choose where to shop.”
This quote is so insightful. Sam was never one to be stuck with the old. You might think he is because he’s old and speaks in Old English. But he saw reality as it was and changed with the times. Sam knew that the penny-and-dime business model was coming to an end, so he started building discount retail stores instead. Others would have clung on to what they were comfortable and familiar with.
Another huge point is understanding that everything is driven by whatever the customers want. They are free to go wherever they want.
I’ve noticed a lot of small business owners who express feelings of outrage and injustice when their loyal customers leave them for a new competitor. First off, that implies that the loyalty they thought they had wasn’t as deep as they thought; they need to work on being better at building that. But more importantly, it means the customer will go where there is the most value.
At some point, every customer has a price. No matter how loyal a customer is to one company based on past history, some degree of higher value (in the form of cheaper price, higher quality, or something else) is able to steal that customer away. At least, that’s the theory I have come up with based on my studies.
“And this is a very important point: without the computer, Sam Walton could not have done what he’s done.”
Some context might help here. Sam said this — about himself. Also, he was the first of his competitors to adopt computer and satellite technology, which put him ten years ahead of everyone else. Don’t be confused by how traditional and non-tech Walmart seems, Sam constantly embraced change and innovation.
“I don’t think any other retail company in the world could do what I’m going to propose to you. It’s simple. It won’t cost us anything. And I believe it would just work magic, absolute magic on our customers, and our sales would escalate, and I think we’d just shoot past our Kmart friends in a year or two and probably Sears as well. I want you to take a pledge with me. I want you to promise that whenever you come within ten feet of a customer, you will look him in the eye, greet him, and ask him if you can help him. Now I know some of you are just naturally shy, and maybe don’t want to bother folks. But if you’ll go along with me on this, it would, I’m sure, help you become a leader. It would help your personality develop, you would become more outgoing, and in time you might become manager of that store, you might become a department manager, you might become a district manager, or whatever you choose to be in the company. It will do wonders for you. I guarantee it. Now, I want you to raise your right hand—and remember what we say at Wal-Mart, that a promise we make is a promise we keep—and I want you to repeat after me: From this day forward, I solemnly promise and declare that every time a customer comes within ten feet of me, I will smile, look him in the eye, and greet him. So help me Sam.”
“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 managers might fail to motivate and take care of our associates. I also was 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.”
“As an old-time small-town merchant, I can tell you that nobody has more love for the heyday of the smalltown retailing era than I do. That’s one of the reasons we chose to put our little Wal-Mart museum on the square in Bentonville. It’s in the old Walton’s Five and Dime building, and it tries to capture a little bit of the old dime store feel. But I can also tell you this: if we had gotten smug about our early success, and said, “Well, we’re the best merchant in town,” and just kept doing everything exactly the way we were doing it, somebody else would have come along and given our customers what they wanted, and we would be out of business today.”
“The two most important words I ever wrote were on that first Wal-Mart sign: “Satisfaction Guaranteed.” They’re still up there, and they have made all the difference.”
One of the best parts of Sam Walton is his ability to keep it so simple. How many businesses are failing at satisfying their customers every time? You don’t have to over-complicate it.
“Well, now, Sam, how big do you really want this company to be? What is your plan?” —FEROLD AREND, shortly after coming to work at Wal-Mart “Ferold, we’re going to take it as it comes, and if we can grow with our own money, we’ll maybe add a store or two.”
“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.”
“I’m asked why today, when Wal-Mart has been so successful, when we’re a $50 billion-plus company, should we stay so cheap? That’s simple: because we believe in the value of the dollar. We exist to provide value to our 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 customers’ 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.”
“Rogers had been open about a year, and everything was just piled up on tables, with no rhyme or reason whatsoever. Sam asked me to kind of group the stuff by category or department, and that’s when we began our department system. The thing I remember most, though, was the way we priced goods. Merchandise would come in and we would just lay it down on the floor and get out the invoice. Sam wouldn’t let us hedge on a price at all. Say the list price was $1.98, but we had only paid 50 cents. Initially, I would say, ‘Well, it’s originally $1.98, so why don’t we sell it for $1.25?’ And he’d say, ‘No. We paid 50 cents for it. Mark it up 30 percent, and that’s it. No matter what you pay for it, if we get a great deal, pass it on to the customer.’ And of course that’s what we did.”
“The basic discounter’s idea was to attract customers into the store by pricing these items—toothpaste, mouthwash, headache remedies, soap, shampoo—right down at cost. Those were what the early discounters called your “image” items. That’s what you pushed in your newspaper advertising—like the twenty-seven-cent Crest at Springdale—and you stacked it high in the stores to call attention to what a great deal it was. Word would get around that you had really low prices. Everything else in the store was priced low too, but it had a 30 percent margin. Health and beauty aids were priced to give away.”
“When you move like we did from town to town in these mostly rural areas, word of mouth gets your message out to customers pretty quickly without much advertising.”
“The first one is could a Wal-Mart-type story still occur in this day and age? My answer is of course it could happen again. Somewhere out there right now there’s someone—probably hundreds of thousands of someones—with good enough ideas to go all the way. It will be done again, over and over, providing that someone wants it badly enough to do what it takes to get there. It’s all a matter of attitude and the capacity to constantly study and question the management of the business.”
This is probably one of the most inspirational quotes in his whole book. The fact that Sam had enough faith to believe that there are hundreds of thousands of people out there with the right idea that can take them all the way is amazing.
It made me excited for what other amazing businesses will arise and other incredible game-changers will show up. It also ends with some useful advice:
- It’s about attitude.
- You have to want it badly enough to do what it takes.
- It’s about constantly studying, examining, and questioning the management of your business.
“A lot of what goes on these days with high-flying companies and these overpaid CEO’s, who’re 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.”
“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 competitive endeavor, and job security lasts only as long as the customer is satisfied. Nobody owes anybody else a living.”
“A little later on, Phil ran what became one of the most famous item promotions in our history. We sent him down to open store number 52 in Hot Springs, Arkansas—the first store we ever opened in a town that already had a Kmart. Phil got there and decided Kmart had been getting away with some pretty high prices in the absence of any discounting competition. So he worked up a detergent promotion that turned into the world’s largest display ever of Tide, or maybe Cheer—some detergent. He worked out a deal to get about $1.00 off a case if he would buy some absolutely ridiculous amount of detergent, something like 3,500 cases of the giant-sized box. Then he ran it as an ad promotion for, say, $1.99 a box, off from the usual $3.97. Well, when all of us in the Bentonville office saw how much he’d bought, we really thought old Phil had completely gone over the dam. This was an unbelievable amount of soap. It made up a pyramid of detergent boxes that ran twelve to eighteen cases high—all the way to the ceiling, and it was 75 or 100 feet long, which took up the whole aisle across the back of the store, and then it was about 12 feet wide so you could hardly get past it. I think a lot of companies would have fired Phil for that one, but we always felt we had to try some of this crazy stuff.
PHIL GREEN: “Mr. Sam usually let me do whatever I wanted on these promotions because he figured I wasn’t going to screw it up, but on this one he came down and said, ‘Why did you buy so much? You can’t sell all of this!’ But the thing was so big it made the news, and everybody came to look at it, and it was all gone in a week. I had another one that scared them up in Bentonville too. This guy from Murray of Ohio called one day and said he had 200 Murray 8 horsepower riding mowers available at the end of the season, and he could let us have them for $175. Did we want any? And I said, ‘Yeah, I’ll take 200.’ And he said, ‘Two hundred!’ We’d been selling them for $447, I think. So when they came in we unpacked every one of them and lined them all up out in front of the store, twenty-five in a row, eight rows deep. Ran a chain through them and put a big sign up that said: ‘8 h.p. Murray Tractors, $199.’ Sold every one of them. I guess I was just always a promoter, and being an early Wal-Mart manager was as good a place to promote as there ever was.”
Two big points here:
First, Sam was willing to try crazy out-of-the-box initiatives. This helped him find better ways of doing things, and stand out from the competition. Other CEOs may be too conservative, which prevents them from finding more efficient and profitable strategies, like Phil Green did.
Second, it’s important to hire people fit for the job and get out of their way. Sam identified Phil as a natural-born promoter and trusted him not to screw it up. When it seemed like he might, he waited until the results took place before he did anything. As noted, other companies would have immediately fired Phil for trying something so bold.
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