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

In this episode, the host discusses the lesser-known biography of Sam Walton, "Sam, the Inside Story of America's Richest Man" by Vance Trimble, highlighting Walton's journey from obscurity to becoming the richest man in America. Walton's success stemmed from his simple yet powerful business philosophy of buying cheap, selling low, and focusing on customer service. The episode delves into Walton's early life, his relentless work ethic, and his innovative strategies, including his use of airplanes for quick store visits and his revolutionary approach to discount retailing. Walton's ability to learn from others and adapt, coupled with his ironclad principles and determination, were pivotal in transforming Walmart into a retail giant.

• Sam Walton grew up in Missouri during the Great Depression.
• Worked his way through college and lived a disciplined, Christian life.
• Served stateside in World War II and married an Oklahoma banker's daughter.
• Opened his first five-and-dime store in backwater North Central Arkansas and raised four children.

"Sam was going out for football and basketball, learning to play tennis, making As 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."

• Demonstrates Walton's early sense of duty, discipline, and endurance.

"Sam chose to rise above it. He was determined to be a success."

• Reflects Walton's determination to overcome the hardships of the Great Depression.

• Walton's father instilled a fierce work ethic, emphasizing industriousness, ambition, and decency.
• Walton was highly active in high school, participating in sports, student government, and various clubs.

"He was quarterback of the undefeated football team. He lettered in basketball. He was president of the student body. He was awarded the superlative, the most versatile boy."

• Highlights Walton's leadership and versatility from an early age.

"He hated wasting time, and he's intolerant of slowness."

• Walton's intolerance for inefficiency and his constant drive for productivity.

• The Great Depression had a significant impact on Walton's life, shaping his work ethic and determination.
• Walton's father struggled financially, leading to the family's economic challenges.

"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 ten years, this is the prime of his father's life. They make no economic progress."

• Demonstrates the financial instability Walton experienced growing up.

• Walton's determination was a key factor in his success, more so than intelligence alone.
• Paul Graham's idea: Determination is a better predictor of success than intelligence.

"It turns out it is much more important to be determined than smart."

• Emphasizes the value of determination in achieving success.

• Walton worked at J.C. Penney, where he learned valuable lessons that he later applied to Walmart.
• J.C. Penney's focus on avoiding big cities and targeting small towns influenced Walton's strategy.

"The company strength that JC Penney had built, 1600 stores, avoiding big cities. This is exactly what Sam's going to do for Walmart."

• Highlights Walton's adoption of J.C. Penney's strategy of targeting small towns.

"Mister Penny came over. Boys, he said, I want to show you something... We only make our profit out of the paper and string we save."

• Demonstrates Walton's early lesson in cost efficiency from J.C. Penney.

• Walton bought his first Ben Franklin store in Newport, Arkansas, with a loan from his father-in-law.
• He applied customer satisfaction principles from J.C. Penney to his own store.

"He spent a bunch of money on an ice cream machine... 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, his ice cream machine, and then some of them would come into the store and then turn into customers."

• Demonstrates Walton's innovative approach to attracting customers.

"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 was crazy about selling and about satisfying customers."

• Reflects Walton's passion for retail and customer satisfaction.

• Walton lost his Newport store due to a lease oversight but did not let this setback defeat him.
• He showed resilience by finding another store in Bentonville, Arkansas.

"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."

• Highlights Walton's determination and resilience in the face of adversity.

• Walton's long drives between stores led to the idea of using airplanes to cover more ground.
• This realization was crucial for the future expansion of Walmart.

"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?"

• Demonstrates Walton's innovative thinking and vision for expansion.

• Walton's early days were marked by being underfinanced and undercapitalized.
• This forced him to be resourceful and efficient in his operations.

"Many of our best opportunities were created out of necessity. The things that we were forced to learn and do because we started out under financed, and under capitalized in these remote small communities contributed mightily to the way we've grown as a company."

• Reflects how financial constraints shaped Walton's business strategies and growth.

• Sam Walton initially tried to give his business idea to Walmart, which was rejected.
• Found significant business potential in small-town America.
• Emphasized proving a concept with one store before expanding.

"We tried to give away the idea to Walmart, and they said no. We might never have tried all these small little towns that we went into in the early days."

• Walton's strategy involved reinvesting profits from one store to open another.

"Let's get one store up. That store is profitable. Let's take the profits, dump that into another store."

• Walton's reliance on small planes allowed him to visit multiple stores, a practice critical for his business.

"Without these small little Cessnas and these little planes, he could have never gone and traveled to all these stores."

• Walton visited numerous retail stores, including competitors, to learn and adopt successful practices.
• Emphasized learning through direct observation and questioning.

"He visited more retail stores than anybody else in history. He would also show up at the corporate headquarters without an appointment."

• This hands-on approach was a form of continuous education for Walton.

"He studied how they did things. He was ready to pounce on any successful little trick they had and would copy it."

• MrBeast's dedication to visiting Walmart stores to optimize product placement mirrors Walton's relentless pursuit of improvement.

"Instead of flying home, he maps out every single Walmart in a 500 miles radius and decides to drive."

• MrBeast's actions of manually moving inventory to the front of stores reflect Walton's hands-on approach.

"He would go to the back of the store, find the inventory, and carry it to the front to get more sales."

• Walton incentivized store managers by offering them a share of the profits.

"He knew that you had to have a single-threaded leadership. There has to be one person completely responsible for the performance of the store."

• Mistakes were part of Walton's journey, including a failed venture into shopping centers.

"We lost our money and left town. He took his eye off the thing that was working and got distracted."

• Walton demonstrated resourcefulness by creating and distributing his own Hula Hoops when manufacturers wouldn't sell to him.

"We're going to make our own. After the stores close, they start making several thousand of these a night."

• Used unconventional methods to distribute products, such as using a John boat to transport Hula Hoops.

"He sets up a John boat behind his car and loads it with thousands of Hula Hoops."

• Walton was fascinated by discounting, a concept where lower prices and margins could lead to higher sales.

"The concept behind discounting at this time is very counterintuitive, that you lower the price, you lower the margin, but you'll make more money because you sell more."

• He studied successful discount stores like Ann and Hope and Kmart to adopt their strategies.

"I was totally fascinated by the idea of discounting. There was no discount store in existence between 1960 and 1962 that did not get a visit from Sam Walton."

• Walton's proposal to franchise discount stores was rejected by Ben Franklin executives.

"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 you say no."

• Despite rejection, Walton continued to learn and adapt, visiting competitors like Kmart.

"He got a surprise. Sam Walton was there ahead of him, talking to a clerk, writing in a little notebook."

• Walton's dedication to low costs extended to naming Walmart for its shorter, cheaper signage.

"Walmart is called that in part because fewer letters means cheaper signs on the outside of a store."

• Focused on keeping stores within a 300-mile radius of the distribution center to ensure efficient logistics.

"I want to run a bunch of stores so close to the distribution center that my trucks can deliver whatever you're missing that same day."

• Walton emphasized exceeding customer expectations as a business principle.

"The essential ingredient is, of course, customer satisfaction. Remember Walmart's golden rule number one, the customer is always right."

• Policies included cheerful replacements and additional compensation for customer inconvenience.

"Not only should you cheerfully replace the shoes, but you should also throw in a pair of socks and stockings for the hassle."

• Walton's continuous improvement mindset was critical to Walmart's success.

"Sam never did that. He has never gotten to the point where he is comfortable with who he is or how we're doing."

• His approach combined solid execution of basics with a willingness to act quickly on plans.

"A good plan, violently executed now, is better than a perfect plan next week."

• The first Walmart store was a modest 16,000 square feet but achieved immediate success with $700,000 in sales.

"The first Walmart is in a small town and is only 16,000 sqft. It is an immediate success from the very first year."

• Despite initial skepticism, Walton's unorthodox methods proved effective.

"David Glass thought that Sam might have lost his marbles with all this discount store foolishness."

• Walton's blend of promotion, charm, and business acumen made him a unique and effective leader.

"He's an old-fashioned promoter in the PT Barnum style, but he's more than that. He's a little bit Jimmy Stewart, a little bit Billy Graham, and more than a bit Henry Ford."

• His relentless focus on improvement and customer satisfaction set the foundation for Walmart's growth.

"His tactics prompted people to describe him as a modern-day combination of Vince Lombardi and General Patton."

• Walmart's early expansion was driven by Sam Walton's instinct rather than a structured process.
• Initial operations were makeshift, with makeshift solutions like using window fans for air conditioning.
• Similar to Walt Disney's approach in Disneyland's early days, the focus was on doing the work without formal processes.

"It was still largely a seat of the pants instinct of Sam Walton that guided this Walmart expansion."

• Reflects the ad-hoc and instinct-driven decision-making in Walmart's early days.

"During the Walt Disney period of designing Disneyland, we didn't have processes. We just did the work."

• Emphasizes the lack of formal processes and reliance on spontaneous problem-solving.

• Sam Walton spent years learning and proving his retail strategies before aggressively expanding.
• Walton balanced patience in learning with impatience in expanding once he was confident in his methods.
• He faced significant debt and sought a permanent solution via an IPO.

"He did five and a half years with one store in Newport, learning, learning, slowly proving that he knows what he's doing."

• Shows Walton's methodical approach to learning before expanding.

"He's simultaneously impatient and has an abundance of patience."

• Illustrates Walton's dual nature of being patient in learning but aggressive in expansion.

• Walton pursued an IPO to solve his debt issues and expand Walmart.
• He partnered with local entrepreneurs and Wall Street firms to successfully go public.
• Walton's sales growth predictions were remarkably accurate, showcasing his business acumen.

"We have to IPO. We have to tap the public markets."

• Walton's determination to go public as a solution to financial constraints.

"Sam Walton, however, was right on target. Total sales for 1975 came to $236 million."

• Demonstrates Walton's accurate forecasting and business insight.

• Walton had a dual approach to management: rigorous standards for top executives and supportive interactions with frontline workers.
• He was known for his charm but also for being a tough taskmaster with high expectations.
• Walton practiced "management by walking around" (MBWA), staying connected with employees and operations.

"He pushes his top executives unbelievably hard."

• Reflects Walton's high expectations for his leadership team.

"Management by walking around."

• Highlights Walton's hands-on approach to management and staying engaged with frontline operations.

• Walton's attempt to step back from day-to-day operations by appointing Ron Mayer as CEO was unsuccessful.
• Walton's inability to fully relinquish control led to Mayer's departure and Walton resuming control.
• The experience highlighted Walton's deep involvement and difficulty in stepping back.

"Sam had retired. Ron was the new chairman and CEO of Walmart."

• Walton's brief retirement and the leadership transition.

"It bothered Sam's conscious that he personally had made a mistake."

• Walton's realization of his mistake in stepping back too early.

• Walton initially viewed computers as overhead but was convinced by his team to invest in technology.
• Walmart invested $500 million in a modern communications computer system in 1979.
• The investment led to significant operational efficiencies and real-time communication across stores and warehouses.

"Finally, his lieutenants educated and convinced Sam and Walmart plucked down $500 million for a modern communications computer system."

• Walton's eventual acceptance and substantial investment in technology.

"The financial savings and the number of personnel hours saved daily by using the computer center are incalculable even by the computer."

• The immense benefits of the technology investment.

• Walton accelerated Walmart's growth by acquiring and converting entire retail chains.
• This strategy allowed Walmart to rapidly increase store count and sales.
• The acquisitions demonstrated Walton's ability to grow both organically and through strategic purchases.

"He buys a chain of 16 discount stores, converts them to Walmart."

• Example of Walton's strategy to grow through acquisitions.

"He actually accelerates store growth by acquiring entire retail chains and then converting them to Walmarts."

• The approach Walton took to expedite Walmart's expansion.

• Walton valued direct feedback from customers and frontline employees.
• He used real customer experiences to reinforce company policies and improve service.
• Walton's personal involvement in resolving customer issues exemplified his commitment to customer satisfaction.

"He listens to Sarah Bell, and he goes, okay, let me talk to the manager."

• Walton's hands-on approach to customer service.

"Every once in a while, you have to refresh their memory."

• Walton's belief in reinforcing company values through real examples.

• Walton's father-in-law influenced his approach to estate planning, leading Walton to distribute ownership to his children early on.
• This strategy avoided substantial gift or inheritance taxes and ensured family ownership.
• The early distribution of stock significantly increased the family's wealth as Walmart grew.

"The children have each owned one fifth of their parents' stock and property since 1954."

• Early distribution of stock to Walton's children.

"He avoided any substantial gift or inheritance taxes."

• The financial benefits of Walton's estate planning strategy.

• Walton was heavily influenced by Sol Price, the founder of the membership wholesale club concept.
• After visiting Price's store, Walton quickly implemented the idea, leading to the creation of Sam's Club.
• The rapid rollout of Sam's Club demonstrated Walton's ability to quickly adapt and scale new business models.

"Sol Price was making an astounding success by selling merchandise at only 10% above manufacturers' prices."

• Price's successful model that inspired Walton.

"Within three years of stepping foot in Sol Price's price club, Sam now has 23 Sam's club wholesale stores."

• The rapid expansion of Sam's Club following Walton's visit to Price's store.

• Walton emphasized a bias for action and continuous improvement throughout his career.
• He believed in trying new ideas, learning from them, and quickly implementing changes.
• This approach was a key factor in Walmart's growth and success.

"Our method of success, as I see it, is action with a capital A and a lot of hard work mixed in."

• Walton's philosophy of action and hard work.

"Do it, try it, fix it. It's not a bad approach, and it works."

• Walton's iterative approach to business and problem-solving.

• Steve Jobs emphasizes the critical importance of hiring in startups, equating each new hire to a significant percentage of the company.
• Early hires determine the company's success, with each of the first ten employees representing 10% of the company.
• Essential to spend significant time finding "A players" to ensure the company's success.

"Assume you're by yourself in a startup and you want a partner. You take a lot of time finding a partner, right? He would be half of your company. Why should you take any less time finding a third or a fourth of your company or a fifth of your company?"

• Emphasizes the meticulous approach needed for hiring in startups.
• Highlights the importance of each hire in a small company.

• Steve Jobs and David Ogilvy: Find great work and hire the people who did it.
• Rockefeller: Prioritize social skills and hire talented people as found, not as needed.
• Vannevar Bush: Use job interviews to solve real problems to assess candidates' problem-solving skills.
• Nolan Bushnell: Assess candidates' reading habits to gauge creativity and curiosity.
• Warren Buffett and Jeff Bezos: Hire people who are better than current employees to continually raise the talent bar.

"The ability to deal with people is as purchasable a commodity as sugar or coffee. And I pay more for that ability than any other under the sun."

• Rockefeller's emphasis on the value of social skills in hiring.

"At Amrad, I hired a young physicist from Texas named CG Smith. The way I hired him is interesting. An interview of that sort is always likely to be on an artificial basis and somewhat embarrassing. So I discussed with him a technical point on which I was then genuinely puzzled. The next day, he came in with a neat solution, and I hired him at once."

• Vannevar Bush's innovative interview method to assess problem-solving skills.

"People who are curious and passionate read. People who are apathetic and indifferent don't."

• Nolan Bushnell's method of identifying creative and passionate individuals through their reading habits.

• David Ogilvy: Hire people who are bigger than you to build a company of giants.
• Jeff Bezos: Each new hire should raise the bar for the next hire.
• Max Levchin (PayPal): Maintain a high bar for talent, even at the expense of speedy staffing.
• Larry Ellison: Hire based on the candidate's self-confidence.

"If each of us hires people who are smaller than we are, we shall become a company of dwarves. But if each of us hires people who are bigger than we are, we shall become a company of giants."

• David Ogilvy's philosophy on hiring.

"Max kept repeating, 'A's hire A's, B's hire C's.' So the first B you hire takes the whole company down."

• Max Levchin's emphasis on maintaining high hiring standards at PayPal.

"Ellison insisted that his recruiters hire only the finest and cockiest new college graduates. When they were recruiting from universities, they'd ask people, 'Are you the smartest person you know?' And if they said yes, they would hire them. If they said no, they would say, 'Who is?' And they would go hire that guy instead."

• Larry Ellison's unique approach to hiring based on self-confidence.

• Elon Musk (SpaceX): Solved relocation issues for recruits by coordinating with other companies to transfer their spouses' jobs.
• Les Schwab: Promoted from within to ensure managers understood the company culture and values.
• Jerry Sloan (Utah Jazz): Demanded autonomy in decision-making as a condition for taking the job.

"Musk, therefore, came into his job interview prepared. About halfway through, Musk told the guy that he wants to hire, 'So I heard you don't want to move to LA, and one of the reasons is that your wife works for Google. Well, I just talked to Larry, and they're going to transfer your wife down to LA. So what are you going to do now?'"

• Elon Musk's proactive approach to solving potential recruits' personal challenges.

"In our 34 years of business, we have never hired a manager from the outside. Every single one of our, more than 250 managers and assistant managers started at the bottom changing tires."

• Les Schwab's strategy of promoting from within to maintain company culture.

"If you hire me, let me run the team/business."

• Jerry Sloan's condition for taking the job, emphasizing the importance of autonomy for A players.

• Thomas Edison: Develop skills that can't be hired for.
• Estee Lauder: Hire people aligned with your thinking and values.
• Peter Thiel: Differentiate your pitch to potential recruits to stand out.
• Nolan Bushnell: Hire for passion and intensity.

"I can hire mathematicians, but they can't hire me."

• Thomas Edison's emphasis on developing unique, irreplaceable skills.

"Hire people who think as you do and treat them well. In our business, they are a top priority."

• Estee Lauder's advice on hiring people who share your values and thinking.

"General and undifferentiated pitches to join your company don't say anything about why a recruit should join your company instead of many others."

• Peter Thiel's advice on making a unique and compelling pitch to potential recruits.

• Elon Musk: Interviewed the first 3,000 employees at SpaceX to ensure they fit his mold.
• Steve Jobs: Emphasized the importance of building an environment where talented people feel valued and part of a strong vision.

"Musk made hiring a priority. He personally met with every single person the company hired through the first 3,000 employees."

• Elon Musk's dedication to personally ensuring the quality of new hires at SpaceX.

"It's not just recruiting after recruiting. It's building an environment that makes people feel they are surrounded by equally talented people and their work is bigger than they are."

• Steve Jobs on the importance of creating a supportive and inspiring work environment post-hiring.