33 Key Lessons From How Sam Walton Successfully Built Walmart
These are what Uncle Sam Walton has to say. Listen.
Introduction
Before I proceed, it’s important to establish that I took these lessons from David Senra’s Podcast on “Sam Walton — Made In America”.
Sam wrote this before he passed on. He had cancer. He died weeks after.
Entrepreneurs do not write autobiographies due to (1) time constraints, and (2) do not want to give away secrets.
There are lots of timeless principles that are extracted from Walton’s experiences of running Walmart. Just so you know, Walmart is worth a staggering $382 billion today. How often do you see companies of such sizes? It’s astonishing to even think about it.
Here are 33 key lessons, written, and quoted directly from the podcasts. Unedited. Raw takeaways. Enjoy.
Key Lessons
(1) Walton is characterized as a hedgehog
The concept of hedgehogs and foxes. Sam Walton is a hedgehog.
(2) Sam's main competitive trait
His passion to compete. It kept him on the go and moving ahead.
(3) Founder's mentality
Believe in your idea even when others don't. Stick to your guns.
There is no limit to what ordinary people can accomplish if given the opportunities, encouragement, and incentives to do their best.
"First, we amaze ourselves. Then we amazed everybody else too."
He hopes to convey the principles that he used for Walmart to help others.
(4) His attitude toward money
He is one of the richest guys in America. He drives a truck, not Bentley. Goes to a barber. And people think he is strange.
His attitude stems from the great depression. It's hard to earn $1 so don't squander it.
From a young age, he had to learn to be a contributor, to provide for his home.
(5) He admires people's success but doesn't envy it
(6) He takes successful ideas, copied them, and applies them.
"He played the chain store game harder than anybody else. Walton invented practically nothing...copied everything that was smart, and did it with fanaticism..." — Munger
(7) Stocks are the most valuable assets
Walton writes about keeping the stock and not trading it for a yacht.
"Walmart stock is staying right where it is. We don't need the money, we don't need to buy yacht...we never thought we need to go out and buy anything like an island. We just don't have those needs or ambitions. Which wrecks a lot of companies when they get along in years. Some families sell their stocks...to live high... somebody takes them over, and it goes down the drain. I wrote these for my grandchildren and great grandchildren years from and mnow this, if you start any of these foolishness, I'll come back and haunt you."
(8) A company's success is a byproduct of the service it provides
Walton became rich as a result of serving the customers.
And 💰 is not his motivation.
“Here's the thing: money never has meant that much to me, not even in the sense of keeping score. If we had enough groceries, and a nice place to live, plenty of room to keep and feed my bird dogs, a place to hunt, a place to play tennis, and the means to get the lads good educations—that's rich.” — Sam Walton
What motivates him is being competitive and being the best.
Practice your craft so much that the money takes care of itself.
(9) Importance of frugality (Focus on cost control)
He believes in the value of a dollar.
"We exists to provide value to customers. In addition to quality and service, we have to save them money. Everytime Walmart spent $1 foolishly, it comes out of customers' pocket. Everytime we save them a dollar, it put us one more step ahead of competitors. Which is always where we plan to be."
(10) Pursuit of excellence
His mum is his motivation. He took her words seriously to be the best he could in whatever he took on.
He always pursued whatever he was interested in with true passion. Some say obsession to win.
He set high personal goals for himself.
(11) Be mindful of your ego
"I've learnt a long time ago exercising your ego is definitely not the way to build an effective organization."
(12) Hard work beats Talent
Sam wasn't the most gifted student, but he worked very hard.
"It never occurred to me that I might lose; to me, it was almost as if I had a right to win. Thinking like that often seems to turn into sort of a self-fulfilling prophecy."
When you start doubting yourself, that is very dangerous.
(13) Importance of setting a giant goal
Sam Walton on making one store, the best store there is.
"I've always believed in goals, so I set one for myself. I want my little new port store to be the best, more profitable variety stores in Arkansas within 5 years. I felt that I had the talent to do it that could be done, so why not go for it. Set that as a goal and see if you can achieve it. If it doesn't work, you had fun trying."
Sam was always checking on peers' prices, and displays, and always looking for ways to do a better job.
(14) "Learn the roots first, so that you can break them later"
He was inside a franchise system. He was supposed to buy the majority of supplies from the corporate office. But he found out other smaller suppliers are offering better deals.
This practice and philosophy still prevail at Walmart today.
"I was always looking for off-beat suppliers or sources. I started driving to Tennessee to some fellows I found could give me for special buys at prices way what Ben Franklin was charging me. This drove the Ben Franklin folks crazy." — Sam Walton
He was the only franchisee that drove to Tennessee to find suppliers not on the approval list and yet have better deals.
"Do things that other people are not doing" — Charlie Munger
"I found out that by pricing at a dollar, I can sell 3 times more by selling at $1.20. I might only make half a profit per item, but because I was selling 3x more, the overall profit was much greater. Simple enough."
The increased volume makes up for lower profits per item.
(15) Focus on improving day-by-day
"As good as the biz I was in, I could never live well enough for long. My constant fiddling and meddling of the status quo may have been one of the biggest contribution to the latest success of Walmart."
Sam knew everything about Walmart.
"The new port store was really the beginning of where Walmart is today. We did everything...wash window, sweep the floor... everything it takes to run the store. We had to keep expenses to the minimum...years ago, our money was made by controlling expenses. That and Sam always being genius. He never tried to do something different.
(16) Blake, one of his co-workers: "It can't be the same guy...that fellow (Sam) couldn't have amounted to anything." He was proved wrong.
Blake and Sam met again one day. And Blake realized it was the same kid who couldn't write.
"By now, my 5 years in new port was about up, and I have met my goal. That little Ben Franklin store was doing $250K sales a year...profit of $30K-$40K....#1 Ben Franklin store for sales & profits. Not only in Arkansas, but in the whole 6 states region. It was the largest variety store of any sort in Arkansas, and I don't believe there is a bigger one in 3-4 neighbouring states." — Sam Walton
(17) One of the Most Important Lessons of His Career
"Control the land, that your business is built upon, and remember that success invites competition." — Sam Walton
One of his landlords, a department store owner, and also a competitor, was impressed with Sam's Ben Franklin success that he refused to renew his lease at any price, knowing he had no other place to move to in the town. He had 4 kids, and it was one of the lowest points in his life.
"I had built the best variety store in the whole region & worked hard on the community. I had done everything right and now have been kicked out of town. It didn't seemed fair. I blamed myself for getting suck into an awful lease. I was furious of the landlord."
Also, noticed how he didn't blame anyone, but himself. He took responsibility.
He was determined to start all over again but better.
"No I'm not wiped. I found new port, and and I found a store. I can find another new town, another store. Just wait and see.
I’ve always thought of problems as challenges, and this one wasn’t any different. I didn’t dwell on my disappointment. The challenge at hand was simple enough to figure out: I had to pick myself up and get on with it, do it all over again, only even better this time."
In May 1957, a tornado hit the Ruskin store, which was his best store....it was there one minute and gone the next.
"We just rebuilt it and got back at it." — Sam Walton
(18) He is always looking for an edge/info in his biz
He read that 3 Ben Franklin stores were doing self-checkout (with cash registers). It was a brand-new concept. He liked that, and he did that.
This proves that Sam:
Always searching for new info
Willingness to go to great lengths to get it
Copied everything that works
(19) Walton was 44 when he started Walmart
"All my previous experiences informed the philosophy I used when I was building Walmart. We were innovating, experimenting, and expanding. Somehow, over the years folks have gotten the impression Walmart was something I dreamed out of the blue as a middle-aged man. And it was just this great idea that turned into an overnight success.
It was true that I was 44 when I opened Walmart in 1962, but the store was totally outgrow everything we've been doing since new port.. like most other overnight success, it was 20 years in the making."
I remember those days mostly as a time of always looking around for ideas and items that would make our store stand out.”
Most everything I've done, I've copied from somebody else." — Sam Walton.
And /w more fanaticism, Munger said.
Walton took retail discounting more seriously than the others.
Ray Kroc, the former CEO of MacD, was asked why were they more successful than the others — "we take the hamburgers more seriously than they do."
(20) David Glass on 2 traits that distinguish Walton from anybody else he knows
1. He gets up every day bound and determines to improve something
2. He is less afraid of being wrong than others. When he is wrong, he shakes it off and keeps going.
(21) Replicating success and compound interest
"Whatever money we made in one store, we'd put in another store, and we just keep going."
When he was at his 7/8th store:
"...I just figured out the Walmarts worked...all I did it was focus on making more of them. For the most part, we just started repeating what worked. Like so many ideas that have made our company work from the beginning, we're still more or less following this same strategy."
(22) Importance of keeping up with changes, or you risk lagging behind
In 1960, Walmart was the largest variety store operator in the U.S. But, volume per store was v little. After 15 years, they were doing only $1.4m in sales in 15 stores.
He said: "If I stay here, I'm dead. So I have no choice but to evolve."
Stealing ideas from Sol Price, he transitioned from the higher-margin store to making money on volume by cutting prices.
"I started running all over the country studying the (discount) concept...This doesn't make any sense. Let's cut our margins, and we'll increase the volume, and then we'll make more money...We really only had two choices left - stay in the variety store business, which I knew was going to be hit hard by the discounting wave of the future, or open a discount store. Of course, I wasn't about to sit here and become a target."
He went all in:
"Nobody wanted to gamble on that first Walmart. I had to put up 95% of the dollars...Helen and I 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."
Innovation:
"Everybody was skeptical, but I knew it. I knew we were on to something. I knew it in my bones that it was going to work. But at the time, most folks, including my own brother, were pretty skeptical with the whole concept. They thought Walmart was just another one of Sam Walton's crazy ideas. It was totally unproven at the time, but it was really what we've 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...in business, I have always been driven to buck the system, to innovate, to take things beyond where they've been. In the marketplace, I have always been a Maverick who enjoys shaking things up and creating a little anarchy."
(23) Go against the grain. Think independently.
"I am convinced that one of the real secrets to Walmart's phenomenal success has been that very tendency. Many of our best opportunities were created out of necessity. The things that we were forced to learn and do, because we started out underfinanced and undercapitalized in these remote, small communities, contributed mightily to the way we've grown as a company."
He offered the idea of discounting to Ben Franklin & other franchisees. But they turned him down.
"Or had we been the offshoot of a large corporation the way I wanted to be, we might have never tried the Harrisons or the Rogers or the Springdales." These are list of towns that Walmarts were opened up in the early days.
It turned out that the first big lesson we learned was that there was much, much more business out there in small-town America than anybody, including me, had ever dreamed of."
(24) "In business, we often find that the winning system goes almost ridiculously far in maximizing and/or minimizing one or a few variables." — Charlie Munger
"What we were obsessed with was keeping our prices below everybody else's. Our dedication to that idea was total." — Sam Walton
To do that, he had to know the numbers for his business, down to every single store.
"We would come up with a P&L...for each store and get it out to the store manager as quickly as we could, something we still do to this day. If there is a problem, I would get with that manager immediately. But most of them owned a piece of their store...so they were likely to be as concerned as I was...For several years, the company was just me and the managers in the stores...There was no admin layer."
Managers were incentivized to perform & they ran with an owner-operator mindset. They can try out any crazy ideas from the norm. Walton specifically looks for action-oriented folks, and he is open to suggestions. These contributed heavily to Walmart's success.
(25) Building a real business
"The goal should be to build a real business. Anybody who has ever known anything about me knows, I was never in anything for the short haul. I always wanted to build as fine a retailing organization as I could...I'm not in anything for the short haul."
People that got in for the wrong motivations all disappeared.
(26) Walton on why 76/100 retailers disappeared
"Most of these early guys were very egotistical people who loved to drive big Cadillacs and fly around in their jets and vacation on their yachts...they were living high. And they could afford to back then because this 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...somewhere along the line, these folks stopped short of setting the goals and paying the price that needed to be paid."
(27) Walton's Management Style
"I've been asked if I was a hands-on manager or an arm's-length-type manager...I'm more of a manager by walking and flying around. And in the process, I stick my fingers in anything, and I can see how it's coming along. I've let our executives make their decisions and their mistakes, but I've critiqued and advised them...my style as an executive has been pretty much dictated by my talents. I've played to my strengths, and then I rely on others to make up for my weaknesses."
(28) There is only a handful of important things, not many important things. Learn to Prioritize.
(29) Putting more than 100% commitment and Don't put a limit on what you can do
P.S. I love this quote:
"Comparing notes with them made me realize what an amazing performance Walmart was turning in...they were just astonished. They could not believe that we could be establishing this number of stores that we were...putting in 50 stores a year when most of our group would be trying to start three, four or five a year...It always confounded them. They would always ask, 'How do you do it? There is no way you could be doing that.' But we were doing it. We just stayed on top of it."
"...there's a benefit to being impatient, to having an intolerance of slowness." — Quote by David
Sam hired a guy called Jack to write policies and procedures for Walmart. Jack said it will take 6-12 months, but Sam demanded it in 60 days.
He then talks about how other discounters who had an edge over Walmart and yet they failed:
"Most of these guys had already had distribution centers and systems in place, while we had to build ours from scratch. So on paper, we really didn't stand a chance. What happened was they didn't really commit to discounting. They held on to their old variety store concepts way too long. They were so accustomed to getting their 45% markup that they can never let go."
(30) Importance of hiring and retaining talents
"By now, I was really surrounding myself with guys who were good at things I tended to just slurp off, like organizing the company to handle the growth explosion that we had started. If I had not gone after those folks and kept on going after them, we would have come apart somewhere in there in the 1970s. We certainly wouldn't have been able to pull off a really incredible expansion that we had in the 1980s.
I'm always going to lean into my strengths, but I've got to hire people that cover up my weaknesses. And I need people that are building out not only the technology but the logistics...the things needed so we can actually keep servicing the stores when we have 200 stores, 500 stores, 1,000 different stores."
(31) Walton on investing in technology while KMart and others were resistant to changes
32) Think Small, Grow Big
"…the bigger Walmart gets, the more essential it is that we think small because that's exactly how we've become a huge corporation, by not acting like one. Above all, we are small-town merchants. And I can't tell you how important it is for us to remember, when we puff up our chests and brag about all these huge sales and profits that they were all made - Were all made one day at a time, one store at a time and mostly by hard work. For us, thinking small is a way of life. It's almost an obsession. And I suspect thinking small is an approach that almost any business could profit from.
The bigger you are, the more urgently you probably need it. At our size today, there's all sorts of pressure to regiment and standardize and operate as a centrally driven chain where everything is decided on high and passed down to its stores. In a system like that, there's absolutely no room for creativity, no place for the Maverick merchant that I was in the early days of my career and no call for the entrepreneur or the promoter."
33) Sam List of 10 rules for building a business
#1: Commit to your business.
Believe in it more than anybody else...I overcame every single one of my personal shortcomings by sheer passion, by the sheer passion I brought to my work. I don't know if you're born with this kind of passion or if you can learn it, but I do know you need it. If you love your work, you'll be out there every day trying to do it the best -- do it the best you possibly can. And pretty soon, everybody around will catch the passion from you like a fever.
#2: Share your profits with your associates and treat them as partners.
#3: Motivate your partners.
Money and ownership alone are not enough. Constantly, day by day, think of new and more interesting ways to motivate and challenge your partners, set high goals to encourage competition, and then keep the score. You should make bets with outrageous payoffs.
If things get stale, cross-pollinate. Have managers switch jobs and then, with one another, stay challenged. Keep everybody guessing as to what your next trick is going to be. Do not become too predictable.
#4: Communicate everything you possibly can to your partners.
The more they know, the more they'll understand. The more they understand, the more they'll care. Once they care, there's no stopping them.
#5: Appreciate everything your associates do for your business.
A paycheck and stock options 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. Nothing else can substitute for a few well-chosen, well-timed, sincere words of praise. They're absolutely free, and they're worth a fortune.
#6: Celebrate your success. Find humor in your failure.
Don't take yourself too seriously. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasm always.
#7: Listen to everyone in your company and figure out ways to get them talking.
The folks on the front lines, the ones who actually talk to your customer, are the only ones who really know what's going on. You better find out what they know.
#8: Exceed your customer's expectations. If you do, they'll come back.
#9: Control your expenses better than your competition.
“This is where you can always find a competitive advantage. For 25 years running, long before Walmart was known as the nation's largest retailer, we've ranked #1 in our industry for the lowest ratio of expense to sales. You can make a lot of different mistakes and still recover if you run an efficient operation or you can be brilliant and still go out of business if you're too inefficient.”
#10: Break all the rules.
"Swim upstream. Go the other way. Ignore conventional wisdom. If everybody else is doing it one way, there is a good chance you can find your niche by doing it exactly the opposite direction. But be prepared for a lot of folks to wave you down and tell you that you're headed the wrong way….The goal is to get to the end of your life with no regrets.”
Conclusion
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