From a five-and-dime store in rural Arkansas to the largest retailer in the world, Sam Walton’s journey is a masterclass in purpose-driven entrepreneurship. His life’s work proves that the most powerful lessons in business history are often simple and deep.
In the world of business history, few stories shine as brightly - or as humbly - as that of Sam Walton, the small-town merchant who changed how America shops. From a single five-and-dime store in rural Arkansas, Walton built one of the largest companies in history, not through flash or fortune, but through ideas that were both simple and deep.
This episode of Deeply Driven explores the life and lessons of the man behind Walmart, his journey from hardship to abundance, and the timeless rules he left behind for every entrepreneur who dreams of building something that lasts.
Sam Walton was born in 1918 in Kingfisher, Oklahoma, during the Great Depression. Money was scarce, but lessons in work ethic were abundant. His father, Thomas Walton, a loan officer known for honesty and grit, taught him integrity in business; his mother, Nan, sparked his entrepreneurial instincts by starting a milk business that Sam helped deliver after football practice. From an early age, he learned that money was to be respected, not wasted, and that every dollar told a story.
By high school, Walton’s relentless drive was already visible. He became Missouri’s youngest Eagle Scout at 13, led his football and basketball teams to state championships, and learned how to outwork anyone. Later, as a college student at the University of Missouri, he picked up one of his simplest but most powerful habits—“Speak to people first.” That small, human gesture became a cornerstone of his leadership style, a lesson in connection that ran simple and deep through every store he opened.
After graduating, Walton joined J.C. Penney as a management trainee. He loved every aspect of retail - the rhythm, the competition, the service. When founder James Cash Penney personally showed him how to wrap goods efficiently and beautifully, Walton realized retail wasn’t just a job—it was a calling. “Maybe I was born to be a merchant,” he would later say.
Following his service in World War II, Walton took a risk that would define his life: he borrowed $20,000 and bought a small Ben Franklin variety store in Newport, Arkansas. Through relentless experimentation and sheer hustle, he doubled sales in just a few years, hauling his own goods, building his own shelves, and scouting competitors daily. But then disaster struck: his landlord refused to renew his lease, forcing Walton to sell everything and start over.
It was a crushing setback—but also one of his greatest turning points. “I didn’t dwell on my disappointment,” he wrote later. “I picked myself up and did it all over again, only better.” That attitude—optimism, grit, and humility—would become a hallmark of his career and a lesson for generations of entrepreneurs.
Relocating to Bentonville, Arkansas, he opened Walton’s Five and Dime, where he tested new ideas, including the revolutionary “self-service” concept that let customers choose their own items. He learned from everyone—his customers, his employees, and his competitors. His philosophy was simple and deep: listen closely, work hard, share credit, and never stop learning.
In 1962, Walton launched the first Walmart in Rogers, Arkansas, with a clear promise on the wall: “We Sell for Less.” The store was plain—concrete floors, wood shelves, no fancy displays—but it delivered unbeatable value. While big city retailers ignored small-town America, Walton saw opportunity. He built his empire one modest store at a time, powered by efficiency, trust, and purpose.
What made Walton remarkable wasn’t just his pricing strategy—it was his belief in people. He treated his employees, or “associates,” as partners, offering them profit-sharing, ownership, and respect. “The way management treats associates,” he said, “is exactly how the associates will treat the customers.” That one principle reshaped not only Walmart’s culture but much of modern retail.
His curiosity never faded. Walton studied other great merchants like Saul Price of FedMart and copied good ideas shamelessly, improving them with his own twist. He embraced technology early—computers, data systems, and private trucking fleets—to keep prices low and stores connected. By the time Walmart went public in 1970, he had paid off his debts, shared ownership with his employees, and built the foundation of a company that would outlast him.
When asked about his success, Sam Walton offered ten simple rules. They weren’t theoretical—they were born from lived experience: commit to your business, share profits, motivate your people, communicate openly, appreciate often, celebrate, listen deeply, exceed expectations, control costs, and swim upstream.
These ten rules are more than management advice—they are the DNA of purpose-driven entrepreneurship. They remind us that greatness doesn’t start with money or luck—it starts with belief, humility, and the courage to keep going when things fall apart.
In the end, Sam Walton’s story is not just about retail; it’s about resilience. It’s about a man who proved that simple and deep ideas—hard work, honesty, and putting people first—can build empires. His life remains a masterclass in business history and a timeless reminder that even in the smallest towns, big dreams can take root and grow beyond imagination.
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Past Episodes Mentioned
How Sol Price Crafted the Retail Industry | Insights from Business History
Kent Taylor and his Texas Roadhouse Dream
I can tell you this though. After a lifetime of swimming upstream, 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 do and learn, because we started out under finance and undercapitalized in those remote small communities, contributed mightily to the way we've grown as a company.
Had we been capitalized or had we been the offshoot of a large corporation the way I wanted to be, we might not have ever tried the Harrisons or the Rogers or the Springdale and all those other little towns we went into 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 [00:01:00] than anybody including me, had ever dreamed of.
This selection right here is from the book that I'd like to talk to you today about, and it's called Made in America, written by Sam Walton, along with John Huey, and this was my first time reading the book. I've listened to the audiobook three times, and this is one of those rare exceptions where I actually enjoy the audio book just a little bit better.
The narrator, at least in my mind's eye, really sounds like how I think Sam Walton would've sounded in his later years. And it just kind of feels like Sam is sitting next to me telling me about his life's journey how he found it and grew Walmart. But the book in itself is quite fantastic and I really have enjoyed reading it a great deal, I highly recommend that you pick up a copy for your library, if you can.
For me, it's more than a book. I see it as a brilliant guide with really deep insights, invaluable business [00:02:00] lessons. If you'd like to pick up a copy, you can use the link in the show notes, and if you do use that link, you'll be helping to support children's literacy As I'm donating 100% of all affiliate proceeds towards children's literacy because I believe that is just extremely important and critical.
On the last episode, we looked at Saul Price and how he revolutionized the retailing industry with his low cost margin concepts, and he started this around 1954 these key business learnings would eventually be copied by dozens.
But the one who did it the absolute best was Sam Walton. He's gonna start off as a merchant with his own five and dime store in New Newport, Arkansas, taking over a store that was barely making ends meet. And then he is gonna transform it into a powerhouse amongst the Ben Franklin family of stores, ranking it first in sales [00:03:00] shortly before losing the store through a series of poor leasing decisions.
This is gonna teach Sam a really valuable lesson early in his business career, one that he's never gonna forget, and we'll cover this in more detail a little bit later in the show. Then with limited funds, he is gonna move to Bentonville, Arkansas, which was another small town, and he went right back into business with his Walton's five and Dime on the town square.
And it's here that he's gonna perfect his merchandising skills. He's gonna build a world class team. he's gonna learn how to swim upstream against all the odds, and he's gonna start opening more stores in Little Town America.
This is the story of Sam Walton and his deeply driven nature, how he started off scrappy hauling his own merchandise and his homemade trailer. Building his own shelves for his stores, working the sales floor, understanding his customer's [00:04:00] needs, and listening to his associates as he really believed that they had the true answers in business.
Most importantly, he spent more time in his competitor's stores than even his competitors themselves. And this really proved to be a major driving force for Sam as he's growing his network of variety stores and then later his Walmart stores. Before we hop into the story here, I just wanted to take a quick moment and welcome you to the show today.
If you're new here, I just wanted to give you an overview of the format of the show so that you're a little bit familiar and you know what to expect going forward here.
if you're returning, welcome back. I sure appreciate you taking the time to listen today.
Ever since I was growing up. I've always been an avid reader, and along with that, I've really enjoy business and entrepreneurship in this podcast is a way in which I can extract the most valuable lessons from the [00:05:00] books that I read, and then share them with you. So once I'm done reading a book, I generally spend anywhere from 10 to 15 hours going through that book. And making a show outline. I've really come to enjoy this process. It allows me to give you an overview of the person's life. In this case, Sam Walton
from the very early years, and how they discover their passions in life through their early successes. We look at those early struggles and the learnings that they take away, and then eventually how those feed into business growth. I tend to focus on the early lessons, and those are generally the key lessons in business that result to the path of growth for the entrepreneur or the founder that we're studying. Now, the show in itself is not intended to be a comprehensive summary of all the books that we talk about here, and I would always recommend that you pick up a copy of the book for all of the full details and just to have in your library on the shelf.
Just to sum it up [00:06:00] here, my goal is really to deliver a valuable podcast with some key lessons that you could possibly use in your business to hopefully make things a little bit better, a little more efficient, or possibly even just allow you to view things differently.
That is my goal and I do hope you find some value in the episode. alright. With that, let's turn our focus to Sam Walton and discover what makes him so deeply driven.
If we head back in time, we're gonna find ourself in King Fisher, Oklahoma, where Sam is born in 1918, but he is only gonna remain there for a couple years Until his family decides to relocate to Springfield, Missouri.
as Sam describes, he grows up in the depression era and he's forced to learn the value of the dollar very early on. this is a deeply rooted value that he's gonna learn and he's gonna keep it for the duration of his life. And it seems like all of the depression era entrepreneurs that we study on the show, [00:07:00] they learned this lesson, the value of the dollar.
the dollar wasn't easy to come by during these days. So when they earned one, they really respected it and used it very wisely. as a youth, we can really see that Sam's father would make a great impression on him. With Sam saying the following, my dad, Thomas Gibson Walton was an awfully hard worker.
Who got up early, put in long hours and was honest, completely, totally honest, remembered by most folks for his integrity. He was also a bit of a character who loved to trade, loved to make a deal just for about anything, horses, mules, cattle, houses, farms, cars, anything. And Sam, he's gonna go on to say that his dad was really one of the best negotiators that he had ever seen.
I think he's gonna learn very well from his father in one of the ways he's gonna do [00:08:00] this is that he would occasionally travel with his father when he was working. One of those jobs was to service loans that were in default for a bank. What this really meant was that he had to go out and remove mostly farmers from their homes and their land.
During the depression era. these farmers were in default. They were delinquent, and they were way behind. And his dad had to go work with the farmers to have them removed from their homes. Sam says that this was really hard on his dad, but he always worked with these farmers in a way that would allow them to keep their self-respect.
But for a young Sam, he is observing all of this, and we always talk about this concept that more is caught than taught. I think this really feeds into the way that he treats those that he works with he had a really deep respect for his associates, and he really believed that they held the keys to unlocking business growth as they were on the front [00:09:00] lines, and they knew what was actually happening in the business.
In addition, Sam, he's really well known for his listening skills, and he always kept an open door policy. Even when Walmart became a mega company, he always had his door open for employees to come and talk to him.
Now as a result of all these dealings with his father, Sam, he's gonna say the following. All of this must have made an impression on me as a kid. Although I don't remember saying anything to myself like, I'll never be poor.
I really think Sam's father is helping him build a deep foundation here that Sam is gonna use and he's gonna grow from later on in life. Now, if we take a look at his mother, she is also gonna provide him with a high degree of motivation, and that's gonna also have a major impact on his life.
She's gonna introduce him to business in the following way. Nan Walton got the idea during the depression to start a little milk business. Mother would [00:10:00] prepare and bottle the milk, and I would deliver it after football practice. In the afternoons, we had 10 or 12 customers who paid 10 cents a gallon.
Sam goes on to say the following. Mother must have been a pretty special motivator because I took her seriously when she told me I should always try to be the best I could be at whatever it is I took on. So I've always pursued everything I was interested in with a true passion.
Some would say an obsession to win. I've always held the bar pretty high for myself. I set extremely high personal goals. In addition to that, Sam would have all kinds of other businesses growing up, including the following. I also started selling magazine 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 [00:11:00] too. Nothing really unusual for a country boy of that era. These jobs, really early on, they feed into Sam's understanding and respect to value the dollar and to not spend it in a foolish way. He had to work really hard to make his money, and I think that also feeds into the cost control here that he's gonna have later on in life.
He says the following. I learned from a very early age that it was 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 was worth something.
One thing my mother and dad shared completely was their approach to money. I think that is awesome, and I think more families should focus on that with their children to make them understand the value of a [00:12:00] dollar in where it all goes. Sit down and do a budget. Now, if we pause here just for a minute,
And talk about this concept that we've talked about so many times before on the show, and that's that concept in life, that chance are the cards that you're dealt, and then choice is how you play those cards. If we look at Sam right here, I believe he's been dealt a very strong hand.
His father was working hard, he was outgoing and he was a skilled negotiator and he had a very high respect for his fellow man. His mother introduced him to business and supported his ongoing efforts to work and help provide for the family. I think Sam's Foundation is very strong here as a youth in what he's doing is he's arranging his cards that he's been delved in life and as he's going into high school, we can really see that he has a very special drive with Sam saying the following. I have been [00:13:00] over blessed with a drive and an ambition from the time I hit the ground,
and we can really see this in Sam specifically, how he describes his high school activities. I played football and baseball and basketball with the other kids, and I swam in the summers. I was so competitive that when I started Boy Scouts in Marshall, I made a bet with the other guys about which one of us would be first to reach the rank of Eagle.
I won the bet, I got my eagle at age 13, the youngest Eagle Scout in the history of the state of Missouri at that time, right there, that is simply impressive. It's not easy to get your Eagle Scout, especially at the age of 13. There's a lot of work that's required, and most kids, they have trouble reaching it by the age of 18.
So that just gives us a lens into how focused Sam was as a youth
through his high school [00:14:00] years. Sam, he's gonna be highly motivated in his sports teams. He's gonna win the state championship in basketball and football in his senior years. This competitive drive, it's gonna translate for Sam into business. I really like his thinking here. Let me just read for you what he says.
It taught me to expect to win, to go into tough challenges, always planning to come out victorious. Later on in life, I think Kmart or whatever competition we were facing just became Jeff's city high school. the team, we played for the state championship in 1935.
It never occurred to me that I might lose. to me, it was almost as if I had the right to win. The right to win is exactly the right approach in business. This optimism is infectious, and I believe that when you're positive and you head into business with this mindset that you can really overcome anything, you've [00:15:00] actually cleared a major hurdle right from the start.
It allows you to get started and set you off on the right path. I think it's a similar mentality that we saw with Kent Taylor that we talked about on episode 11 when he ran 1500 miles between his junior and senior years. That allowed him to win at the same time, and it poured into him in an important lesson that he never forgot.
Kent says the following, I learned what would be my greatest lesson in running something that would eventually help me earn the early days of Texas Roadhouse. The lesson was, if you outwork the other guys, you will eventually get to where you want to go and be somewhat luckier than others think you ought to be.
The lesson there, get after it and outwork everyone. That's what Kent would do. He's gonna be rejecting more than 130 [00:16:00] times. Yes, 130 times. Imagine that trying to find an investor for Texas Roadhouse. But he keeps hammering hard. He got used to the rejection and he drove forward and eventually found an investor.
Just like Sam's gonna do,
Sam's gonna carry this ambition and this drive forward as he enters college and he is gonna decide that he wants to become the president of the student body. we learn another valuable lesson from Sam on how to treat people and also how to greet them. Let me read for you here real quick.
I learned early on that one of the secrets to campus leadership was the simplest thing of all speaking to people coming down the sidewalk before they speak to you. I did that in college. I did it when I carried my papers. I would always look ahead and speak to the person coming towards me. If I knew their name, I would call them by name.
But even if I didn't, I would still speak to them. [00:17:00] Before long, I probably knew more students than anybody in the university and they recognize me and considered me their friend. That right there is gonna get Sam elected as president of the student body. And he's also gonna use this approach for the duration of his business career.
Then later on he is also gonna use it with his Walmart associates. I think this is just very important. I wanna skip ahead and just explain to you how he would use this concept. So one day he would have a satellite broadcast, and Sam is gonna say the following to all of his associates all around the country that are watching him.
He says, 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.
So what Sam's gonna do here is he's gonna [00:18:00] continue on and he is gonna make his employees take the following pledge. He says, now I want you to raise your right hand and remember what we always say at Walmart
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 10 feet of me, I will smile, look him in the eyes and greet him. So help me, Sam.
I think it goes back to that concept of simple and deep. The request right here, it's super simple. look at the customer in the eye, smile and greet them. Simple. Really doesn't get simpler than that. And I think it's also a valuable lesson for you and I right here, that the simple things can yield really great result for us.
For Sam, he says that within two years time, they're gonna [00:19:00] pass Kmart and Sears and sales. This was during a period when many in the industry thought that Walmart was never gonna be able to catch those two giant retailers. But
Sam, he felt this was mission critical. And he says in the book that this simple philosophy helped propel them forward a great deal surpassing those two great competitors that they were facing. This right here is just a glimpse of the future of Walmart. Now if we hop back to the book, we'll see what happens next for Sam
as he is going to college. He continues to throw the newspaper route, and at this time he had several carriers working for him. And he says that he was making as much as four to $5,000 a year, which was really good money at the end of the depression.
At the same time, he was waiting tables in exchange for meals, and he was the head lifeguard at the local swimming pool. But as he is getting ready to graduate, he's gonna meet with a few recruiters. Sam [00:20:00] mentions that he was getting a little bit burned out working all of these different jobs, and he really wanted to turn his focus more towards a professional type of career.
So he is gonna meet with a recruiter from Sears and then another one from JC Penney's, and he's ultimately gonna decide to go with that JCPenney job. So on June 3rd, 1940, Sam starts as a management trainee with a salary of $75 a month at JC Penney's. Now this next statement from Sam, I see this as the first flame that is his purpose, and it's gonna be ignited, and let me just read for you what he says.
Maybe I was born to be a merchant. Maybe it was fate. I don't know about that kind of stuff, but I know this for sure. I loved retail from the very beginning, and I still love it today. Not that it went all that smooth right off the bat, like I said, I could sell, and I loved that part. [00:21:00] For me, this is the part that I always love
when you get to see that very first peak into the purpose of someone's life and what is gonna give them that deep drive and that deep focus. Sam has a strong, strong hand here. He's got good values and work ethic from his mother and his father. He's been working hard all through high school and college.
He's running these little side businesses and he is just finished college.
The world is really his right here and he's gonna start to play his hand in retail.
However, like all of us, as he's getting started, he is gonna have a few speed bumps and he says that he wasn't really good at his handwriting and he would mess up a lot of the sales slips. Then what he was doing in the stores is he was bouncing from customer to customer. Trying to make as many sales as he could.
He says that he didn't really like seeing customers waiting around to get helped. So he would make a sale, then he would take 'em [00:22:00] to the front counter to get things completed and he would mess up their orders or they would mess up the translation for their orders. And this caused him a little bit of frustration at the start, but that's no big deal.
He is gonna overcome this. Also, while he's at Penny's Sam, he's gonna be inspired and motivated by his boss, who was Duncan Majors.
It says that on Sundays he would have all of the management trainees over to his house where they would play ping pong and just spend time getting to know each other as friends and learning more about retailing. Well, I guess one Sunday after Duncan had gotten his yearly bonus, he was showing it off to all the guys, and this was a check for $65,000, which was just an incredible amount of money back in those days.
Sam says the following about that,
watching that guy, is what got me excited about retail. And right there with that statement, we can really see [00:23:00] Sam's inner purpose growing right here.
As he is really learning from this high performing manager, Sam, he is like a sponge, taking in as much as he possibly could. Then one day while he was working in the store, James Cash, penny would actually visit the store, and he's gonna take time to show Sam how to tie and package merchandise, and he's gonna show him how to wrap it with very little paper and very little twine, but still make it look nice and presentable for the customer.
And I really think that that was an important event for Sam for a couple of reasons. One, it showed him that even as the owner of a major corporation, that JC Penney himself would visit the store and take time to show Sam how to do his job. And then the second reason is that of an early lesson in cost control.
We've already learned that Sam knows the value of a dollar, [00:24:00] and this further drives it home as JC Penney takes the time to show him how to wrap something
simple and effective from a cost control standpoint.
For Sam, store visits and cost controls are gonna be major cornerstones for his career, and they're gonna start almost immediately in the book. Sam says that he's gonna begin visiting other local department stores in the area to get a look around and see how they were conducting business. And this would ultimately become super critical for Sam, and we'll talk about this more a little bit later on, but seeing how your competition is doing business is also critical for you and I to look at their operations and really figure out what are they doing well and how could we possibly implement some of this goodness in our own businesses.
now a few years later, in 1942, Sam, he's gonna have to take a step away from retailing as the war is getting [00:25:00] started. And he was trying to enter the army, but due to a heart irregularity, this was gonna make him ineligible for combat duty. So what he does here is he head south to Oklahoma where he takes a job at DuPont in their gunpowder processing plant.
And then during his off time, he's gonna meet a young woman by the name of Helen Robson one evening when he is out in the bowling alley, and they're gonna immediately hit it off they would be married the following year on Valentine's Day, soon after this, Sam, he's gonna be enlisted and he's gonna end up doing security detail work here in the United States.
Due to that heart irregularity, he wouldn't be allowed to go over and see any combat. But he would do this for a couple of years and he would exit the Army in 1945. He doesn't really say a lot about what he did during that period of time. He just said that they were bounced around all over the United States and he had to move something like 16 [00:26:00] times,
But upon his exit, he did know one thing. And let me just read for you here. I not only knew I wanted to go into retailing, I also knew I wanted to go into business for myself. My only experience was that Penny job, but I had a lot of confidence that I could be successful on my own. I went to the library and checked out every book on retailing, I love that self-confidence that Sam has right here.
He has that experience from pennies Plus he had that small business experience and then he fuels his fire by going to the library and checking out as many books as he possibly could. I tell you, so many of these deeply driven entrepreneurs that you and I talk about here on the show, they're all readers. And as we always say, readers are leaders. Elon Musk, as an example, he dove deep into [00:27:00] books when he wanted to understand rockets, and then he used those concepts to help him build SpaceX, trader Joe.
He used books and magazine articles to help him develop a reasonable strategy to grow his business, and it really had a major impact on the long-term viability of his company and made them change for the better. The list is quite lengthy. There are so many examples of these great founders who constantly read.
They're always learning and most importantly, they're applying what they learn. And this is what Sam's gonna start doing, applying his learnings. Sam is all about application over and over in the book. He describes how he would discover a good idea and he would almost immediately implement it. He was notorious for carrying around this little yellow legal pad to write [00:28:00] everything down, every idea.
Then later he's gonna switch to a tape recorder. But this was simply just his way of life. Application application and more application. There's probably at least a hundred examples in the book alone, probably more just around application. So you might ask, where is Sam gonna open his first location?
Excellent question. He wanted to start in St. Louis, but his wife, she was a very, very wise woman and she had grown up in these small towns in Oklahoma. So she put a size limit on the town where they could go. And she said, no towns of more than 10,000 people. And this really sets the early strategy for his variety stores.
As it allows him to grow up almost undetected by the larger department stores because he is out here in these smaller towns and they [00:29:00] just look him over and his growth is really gonna be amazing. Then another rule that Helen had is she insisted that as they start their business, there would be no partnerships outside the family.
Her family had been involved in several bad business partnerships and she was using these learning lessons to advise Sam right here, and this is the way it had to be. No large towns and no outside partnerships. So with these rules in place, Sam, he's gonna go visit a firm called Butler Brothers and they ran the Ben Franklin five and Dime franchise system and he wanted to see if they had any opportunities they certainly did have one that was located in Newport, Arkansas, which was a little cotton town of about 7,000 people.
This particular store, it was losing money primarily due to an absentee owner who resided in St. Louis, and he really wanted to [00:30:00] offload that store for $25,000 was his asking price in the book. I really feel that Sam, he's open and he's honest with his views about where he was successful and also where he made mistakes.
He doesn't hold a lot back when he is writing this book. He's dying from cancer and he really puts everything out there for us to understand about how he grew in, where he made mistakes. Let's just see what he's gonna say about this first store. I realize now I was the sucker Butler brothers sent to save him.
I was 27 years old and full of confidence, but I didn't know the first thing about how to evaluate a proposition like this. So I jumped right in with both feet. I bought it for 25,000. 5,000 of our own money and 20,000 borrowed from Helen's father.
This would set Sam and Helen up with that first location in Newport, [00:31:00] Arkansas. And before we look at that first business, just a few words here on Helen's family, the Robsons, they really made a big impact in Sam's life. they had this very deep, background in business, which Sam would learn a great deal from.
One concept was around organizing that of a family partnership. And it's probably best if I just read a few brief selections here so that you can get an understanding and a feel of how this works. I think it's brilliant and it really helps Sam in the Waltons in the long run.
Helen's father organized his ranch and family businesses, a partnership, and Helen and her brothers were all partners. Mr. 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.
Over the years, our Walmart stock has gone into that [00:32:00] partnership. Then the board of Walton Enterprises, which is us, the family, makes decisions on a consensus basis. The partnership works in a number of different ways. First, it enables us to control Walmart through the family and keep it together rather than having it sold off in pieces haphazardly.
We still own 38% of the company's stock today, this is also gonna help them from any hostile takeovers. and Sam says that it saved them a fortune in real estate taxes at the time as well. We can really see that Sam takes advice from those that he trusts and he puts it into action.
He doesn't wait around. He is a man of action. We can do the same. We can take action when we hear wise wisdom, especially from those who have proven track records or those that we trust and those who [00:33:00] have deep experiences in life. Action, action, action.
That's what Sam was all about. Alright, let's, hop back to the book here and see what's going on. So Sam takes over his first store. He sets this really aggressive goal right out of the gate. Sammy's always a goal setter. There's something he always wants to achieve. And any guesses on what that might be?
well, if you said to be the top Ben Franklin store, you would be close. He wanted to be the top store in Arkansas within five years. Now, as he's taking over this store, they're doing about $72,000 a year in sales, not really quite enough to cover cost. Plus, there was another challenge.
Sam is soon gonna realize that his lease stipulated that they pay 5% of sales. And as he is getting to know other merchants in the area, he discovers this is a really high rent, no one is paying this amount.
He says [00:34:00] that this is one area where he neglected to vet out and make sure that that was a good deal. When he first looked at it, he thought that was fair, but later on he would discover that is not quite the case, and then there's gonna be another nasty surprise that's waiting for him in the lease as well.
And we're gonna talk about that here in just a few minutes.
As Sam starts off, he's really ambitious. He wants to get going and I just really love what he says here next. It was a real blessing for me to be so green and ignorant because it was from that experience that I learned a lesson, which stuck with me through all the years.
You can learn from everybody and I didn't just learn from reading every retail publication I could get my hands on. I probably learned the most from studying what John Dunham was doing across the street.
His competition across the street was Sterling Stores and it was run by John Dunham and they were doing about [00:35:00] $150,000 a year in sales, which was more than double what Sam's Store was doing. And he was constantly.
In that store, checking out everything you could imagine, the displays, the pricing, the inventory, you name it. It was all going in his little yellow legal pad. He was using this information and comparing it against his own store. And he's arranging all of his retail cards here, and he's making his hands stronger and stronger.
it wouldn't be long after this that Sam also starts going a bit rogue on the Ben Franklin way of doing business because he's gonna start doing his own promotional programs. And then he starts buying his own merchandise directly from manufacturers versus buying it through Butler brothers.
And he describes his early days of purchasing in the following way.
I'd work in the store all day, then take off around closing [00:36:00] and drive that windy road over to the Mississippi River Ferry at Cottonwood Point, Missouri, and then into Tennessee with an old homemade trailer hitched to my car I'D stuff that car and trailer with whatever I could get a good deal on.
Usually soft lines ladies panties and nylons, men's shirts. I'd bring them back, price them low, and just blow that stuff out of the store. I gotta tell you, it drove the Ben Franklin folks crazy. Not only were they not getting their percentages, they couldn't compete with the prices I was buying at, right here I just visualized Sam having so much fun scouting out those deals, bringing stuff back to the store, and then just watching it fly off of the shelves.
And with this one selection in the book, we can really see his purpose and his passion in full bloom. He's out [00:37:00] there working his ass off, but at the same time, it was fun for Sam and I almost guarantee that it never really felt like work. I imagine that he never complained and he took on each new day as a challenge
To make his business better, and I can really feel his energy coming through the pages of the book, or when you're listening to the audio book, you're just really ingrained and involved in the story. He just really pulls you in, Sam. He's gonna eventually meet an agent in New York by the name of Harry Weiner, and this gentleman's gonna offer him a wider selection of goods, at even deeper discounts.
From this, Sam is able to do a few things and he makes a really big discovery that's gonna be key for him for the rest of his retailing career. First, he could price items cheaper than his competitors, and that really drew in a lot of foot traffic from the locals, but it also [00:38:00] drew people in from towns that were farther away.
And because Sam was always talking to his customers, he realizes where they're coming from. That gives him an idea in his head. If he never spoke to his customers, he wouldn't realize they were coming from 20, 30, 50 miles away. The second thing it allows him leeway for experimentation.
This leads him into a massive realization into the discounting concept that would become what Sam calls to be a core foundation for Walmart's philosophy later on. And let me just read for you how it works. It's pretty simple here, and I think you'll get it right away. Say, I bought an item for 80 cents.
I found that by pricing it at a dollar, I could sell three times more than if I were pricing it at a dollar 20. So we make 60 cents versus 40 cents. He goes on to say,
I might make [00:39:00] only half the profit per item, but because I was selling three times as many, The overall profit was much greater, But this is really the essence of discounting by cutting your price. You can boost your sales to a point where you earn far more at the cheaper retail price than you could by selling the item at the regular price.
The reason he couldn't go full tilt on this just yet at this point in time, is that he was obligated to buy 80% of his merchandise through Butler brothers. If he fell below that, then there were penalties that were involved specifically around how much he paid for his merchandise.
They would raise the price up and that would really hit him hard in the pocketbook. Sam was always about cost control. So we always kept a fine line here, but it is really simple and it's effective. And Sam says that it's gonna take him many more years to fully implement. [00:40:00] But these are really the early lessons that are building his foundation for the years later to come.
the future. Sam right here is really being taken care of by the younger version of himself.
So after a few years, Sam, he's doing really well. He's gonna go out and buy a popcorn machine, and then he would take out a loan to buy an ice cream machine, and he is gonna put those in the front of the store. And they were really big attractions to pull customers in. And addition, he had paid back that $20,000 he had borrowed from his father-in-law sales.
They would go up 140,000 in his second year, 175,000 in his third. That allows him to pass his competition across the street for Sam and Helen along with their four children. They're doing really, really well in Newport. They're both part of the community. Sam says that he was active in the Rotary Club, the Chamber of Commerce, and he [00:41:00] was teaching Sunday school.
And by the end of five years, Sam, he had exceeded his goal. He was doing $250,000 a year in sales and turning a nice profit of 30 to 40,000 a year. Plus, he held the title as the top Ben Franklin store, not only in Arkansas, but in their little six state region surpassing his goal. But this is soon to come to an abrupt halt for Sam.
You see one little legal error made at the beginning is gonna have major implications. He had neglected to add an option to his lease that would allow him to renew at the end of five years. The landlord, he was so impressed by all the success of the store, 72,000 in sales, up to 250,000 that he decides not to renew Sam's [00:42:00] lease at any cost.
And for Sam, there's no way out. He would have to sell his franchise, the fixtures and the merchandise to the landlord. He says he got about 50,000 for that. Everything would be turned over to the landlord and then the landlord would end up giving it to his son to run. And let's just see what Sam would say right here.
It was the low point of my business 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 the 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. That is just brutal. I tell you, imagine for a second that you're in [00:43:00] Sam's shoes, you're flying high one day and then just wham outta nowhere. How would you approach it? we've seen other great entrepreneurs in this spot also on the show, and one that comes to mind that we just spoke about on episode 11 was Kent Taylor, who was the founder of Texas Roadhouse, and he lost his first restaurant that he should have been an owner in because he didn't read the agreements and he failed to consult a lawyer.
He says that after that he learned a really valuable lesson to always hire your own lawyer and get the legal stuff done first. And he didn't sit around and dwell on the past. He moved on quickly and he started over. It might be painful at the time, and I know I've had some business failures that were not fun at all, but the learning lessons were extremely valuable and they paid off for me later on down the [00:44:00] road. The same thing goes right here for Kent and Sam. We're gonna learn another valuable lesson right here, my friend. Let's see what Sam would say. I've never been one to dwell on reverses, and I didn't do so then. It's not just a corny saying that you can make a positive out of most any negative
if you work at it hard enough. I've always thought of problems as challenges, and this one wasn't any different. I don't know if that experience changed me or not. I know I read my leases a lot more carefully after that, and maybe I became a little more weary of just how tough the world can be. 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, Helen and I started looking for a new town. Just so wise right here, just this [00:45:00] one page in the book is worth its weight and gold. I tell you,
Sam overcame a major setback. He didn't dwell in the past and he learns his lessons and he's much, much wiser and he simply moves on to the next town. He had confidence and he knew that he could do it. Again, as I'm speaking this, I'm just thinking about a quote that I really like from Fred Rogers, and this is really simple and deep.
Let me just read it for you. The only thing that evil cannot stand is forgiveness. It's simply disintegrates in the presence of forgiveness that is so compact and true. While Sam, he doesn't really mention forgiveness in the book. I believe that's really what it takes because he didn't dwell, he didn't hold a grudge.
He simply picks up and he moves on. And I really admire the way that he approached this situation. The young version of Sam is about [00:46:00] to make a massive impact on the US retailing scene in these small towns. Now it's gonna take him a few months of searching, and he's eventually gonna land in Bentonville, Arkansas, where he had found an old variety store and the owner was willing to sell it to him.
Sam says that it was poorly lit, it had a limited selection in really abysmal sales of about 32,000 a year. However, for Sam, it was exactly what he needed, a fresh start. Now thefloor space of the store, it was a bit small for Sam, so he is gonna end up leasing the barbershop next door on a 99 year lease.
And right here we see Sam learning very quickly from his mistakes. He's wise, he learns quickly, and this is gonna give him a grand total of about 4,000 square feet. So just a little bit smaller than his previous store, but good enough to move on. He's gonna start doing the remodel, and when he is doing this, he hears about a new concept in [00:47:00] retailing that was called self-service.
So what Sam would do here is he'd hop on a bus, he'd ride up to Minnesota and check out these two Ben Franklin stores that had set up this concept of self-service. And basically what it was, is that customers, they would go into the store and they would select all of their merchandise from the shelves and then just bring everything to the front of the store to central checkout register.
Basically, it's what you and I know today and just about every store that we visit But prior to this, the standard at the time was that every department store would generally have a sales person that would assist you, and then they would ring you up at the register in that department. They'd wrap everything up real nice for you and send you on your way.
This was generally considered full service treatment. Once Sam saw this concept, he really liked it and he's gonna implement self-service, and he says that he would be the first one in Arkansas to implement this concept. He's gonna bring in new fixtures for a store and he would put in plenty [00:48:00] of bright lighting, he says.
Then he would change the name and call it Walton's Five and Dime. Even though it really was a Ben Franklin story, he says, from the start the store, it's a hit. The remodel was a success and Sam's experience in retailing. In merchandising, they're really unfold display right here. Shortly after this, Sam, he's gonna get an itch to open yet another store.
So he would find an empty Kroger's that had closed down on the town square in Fayetteville, Arkansas. He would quickly convert this over into another one of those self-service Walton Five and Dimes.
Now, at this point, he's starting to realize that he needs to hire a manager. He needs someone with experience. He's bouncing around between stores, and he really needs someone that he can trust. So where would he go for that? Let's just find out here.
I needed someone to run my new store. I didn't have much [00:49:00] money, so I did something I would do for the rest of my run in the retailing business without any shame or embarrassment whatsoever, nose around other people's stores, searching for good talent. That's when I made my first real hire, the first manager, Willard Walker, this concept right here, I really like it.
Sam was known to spend an amazing amount of time in his competitor's stores. He got to know these employees and the managers. He can observe them firsthand. He gets to talk to them firsthand, and as a result, he can really derive who's committed to the business and who's just checking in and checking out for paycheck.
This allows him to extract excellent talent. He would pay them just a little bit more, and this was really a major advantage for Sam. Now, if we stop here and look at the flip side of this, say you're a [00:50:00] business owner, you might be very upset if someone was trying to poach your best employees, but in this case, I think there's a major learning lesson for you and I in this.
Are you doing everything possible to retain your top talent, such as providing training and empowering them to make decisions, Allowing your employees to act like owners. How are their pay and their benefits? Are they better than what they might find with the competition? Do you have options for career growth or possibly a path to equity ownership or some sort of profit sharing?
If we're really doing everything we can to retain top talent, then I think we can have some peace of mind that if a poacher like Sam does come along, we're reducing their chance of success a great deal. And you know what? If they do pick off one of your key employees and you've got your employment packages dialed in so that they're more attractive than others in your [00:51:00] industry,
It's gonna result in high quality candidates applying for open positions that you need to fill. And it's really gonna give you a lot of options, my friend. It's just key in a very important concept right here for you and I to always be on the lookout for the top talent that's out there in our industries. And at the same time, to make sure that you're treating your employees well, taking care of them, empowering them, and allowing them to act like owners in your enterprises. This will pay huge, huge result for us down the line.
Alright, with that, let's hop back into the book here and see what Sam's up to.
His next move at this point in time is gonna be to open another store. This one is gonna be a much larger store and he is gonna open it in partnership with his brother Bud. They'd be 50 50 and they're gonna open it in a town called Ruskin Heights. This was a little suburb outside of Kansas [00:52:00] City and they had located this new shopping center.
Sam really felt that this new shopping center complex was gonna be a major hit, and he was absolutely correct. In the first year, they're gonna do $250,000 worth of sales. Profits would be around 30 k, and then the next year they would go up to $350,000 in sales and this would become their top store immediately, but not long after this.
In 1957, Sam says that disaster is gonna strike this particular location when it was hit by a tornado. His brother, bud would call him one day and tell him the news, and at first, Sam just thought that this was minor damage. So he hops in his car, he drives almost all night, arriving at the location at two in the morning, and he's gonna say the following, I got there about two in the morning and saw that the whole shopping center was practically leveled.
None of our people were seriously hurt, but the store was almost gone. [00:53:00] And even though the merchandise and the fixtures were insured, it was still a big blow to butted me. This was our best store, the one we were really excited about. It was there one minute and gone the next. We just rebuild it and got back at it.
By now though, with all the places I had to visit, I was driving too much to have time for anything else. So I began to wonder if maybe flying wouldn't be the best way to go, certainly that is devastating news. Thankfully, no one was hurt there, but I really love how Sam, he basically shakes it off, rebuild and get back at it.
At this point in his business career, he really knows how to overcome adversity. He's been here before
and he knows that he can come back stronger and even wiser as a result.
And then as we just heard, another major element's gonna come into play here, which allows Sam to [00:54:00] scout for locations and travel around to his stores a little more efficiently. This is gonna see him buying his first airplane. He says it was an air coop that he bought for $1,850. His brother Bud's gonna describe it in the following way.
I never forgot going out to the Bentonville airport and seeing what he called an airplane. It had a washing machine motor in it and it would put, put and then miss a lick and then put, put again. it didn't even look like an airplane and I wouldn't go near it for at least two years. And that just really makes me smile.
It really shows how scrappy Sam was. It didn't really care about something fancy, he just needs the tools to get the job done. And he says that he really loved flying that little airplane because it could go up to a hundred miles an hour and now he can get to places in a straight line, whereas before he is driving all [00:55:00] these winding roads and this really saved him hundreds of hours from driving around all over the place.
Plus another major thing happens right here, Sam. He's able to see all these little towns from the air. Let me just read for you what he says. Once I took to the air, I caught store fever. We opened variety stores, many of them Ben Franklin franchises in Little Rock, Springdale, SLO Springs, Arkansas, and we had a couple more in Odessa and Coffeeville, Kansas.
this little plane gives Sam an unfair advantage, one that he would enjoy for more than 10 years before his competitors would start using this. it was a hidden secret weapon for him because it allowed him to expand rapidly. He can see from the air the locations that are desirable.
Once he finds a spot, he would hit the ground, [00:56:00] check it out, and then work aggressively to secure a lease. He says that he would do this for the first 120 to 130 locations. And he was focused on these small towns and growing in these small towns.
Now, another concept that I'd like to discuss with you that I think is really brilliant is that of the limited partnership.
So starting with his first manager who was Willard, as we heard just a bit ago, he's gonna let his managers put in up to a thousand dollars per store to make them a small owner of that particular store. Then they would get issued private stock, and then he would pay about four and a half percent interest to them a year on that stock.
Now, as an employee, when you are holding ownership in your store, you're really gonna feel deeply connected and empowered to make the best possible decisions for your store. And that helps the company as a whole because after all, you are a minority owner and that [00:57:00] impacts you directly. you're gonna work to hire the best. You're gonna train your employees well, you're gonna treat your customers fair and keep things organized in an orderly fashion.
I really feel that this was one of the key elements that would fuel Sam's growth long term.
After about 15 years in the variety store business, Sam says he was doing about $1.4 million a year across his 15 stores. At this point, he's starting to get a little bit restless, he says, and he really wants to expand his empire. He sees the concept that he's developed is really catching on.
And Sam, he starts hearing a lot of talk from discounters, such as Marty Chase, who had founded Ann and Hope, Saul Price, who we covered on the last episode out in California, who had started Fed Mart. Sam, he says that he's gonna learn a tremendous [00:58:00] amount from Saul. And then there was a gentleman by the name of Herb Gibson and he had a store called Howard's.
Herb had this saying, buy it low, stack it high, and sell it cheap. And guess what? Howards are gonna show up on the town square in Fayetteville, in direct competition with his Walton's five and Dime. Now Sam, he's a smart fellow and he knew exactly what Howards was doing here with the discount retailing.
He had learned his lesson all those years before about selling more units for less and how it would yield more profits. He was well educated in the industry and about his competition.
So what would Sam do at this point? That is a great question. He's gonna go back to Butler brothers. Uh, remember they were the ones that owned the Ben Franklin five and Dime franchise system. And he [00:59:00] did this because they had all of the backend systems in place for ordering and tracking inventory, along with running payroll and doing all of the accounting.
So basically they had all of this infrastructure support in place, and Sam, he didn't want to get involved with setting all of that up from scratch. He really wanted to use their system.
So as he approaches them, he's their largest franchise holder and he really believed that he could convince them to see his point of views on discounting, and they basically said no thanks to which Sam would say the following. We really had two choices left. Stay in the variety store business, which I knew was gonna be hit hard by the discounting wave of the future, or open our own discount store.
Of course, I wasn't about to sit there and become a target, and
Sam is gonna make a pivot right here in his life.
and began focusing on discount [01:00:00] retail like he had done with that self-service store concept. He's gonna embrace this change and he's gonna go all in. In typical Sam Walton style, he's gonna scout out locations and eventually find a spot in Rogers, Arkansas. That was perfect for his first store, but many of his business associates and his managers, they're a bit skeptical at first,
as this was quite a departure from the typical variety store that he was running. His brother Bud would end up putting up something like 3%, and then I think he said some of the store managers would put in some additional percentages for maybe about 2% or so, and then Sam says the following, and we see him dive in really deep.
Right here. 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 a loan. We pledged houses and property, everything we had, but in [01:01:00] those days, we were always borrowed to the hilt. We were about to go into the discounting business for real now, and from the time those doggone Walmarts opened until almost today, it has been a little bit challenging and it's really a bold risk that he takes right here.
It reminds me of Joe Colo over at Trader Joe's, who sold his house. He invested his wife's savings and he borrowed from family members, plus he went to the bank to borrow money to buy his first six proto market locations, Those would later become Trader Joe's. He put everything on the line and just like Sam Joe, he could really see the future that was coming along. And both of these guys, they really risk everything to follow their passions and their purposes in life. I have a great admiration for both of them.
They've both been dealt cards in life and they're [01:02:00] playing them the best that they know how,
so Sam is getting everything arranged. He doesn't quite know what name he's gonna call this new store. And one day he would be out flying with one of his managers and he pulls this card outta his pocket with a few names written on him. And they're both like three or four word names.
He would ask the manager his opinion on these names. And the manager, his name was, uh, Bob, he's gonna say the following, I just keep the Walton name and make it a place to shop. I scribbled Walmart on the bottom of the card and said to begin with, there's not as many letters to buy.
I had bought the letters that said Ben Franklin, and I knew how much it cost to put them up and to light them and repair the neon. So I said, that is just seven letters. He didn't say anything and I dropped the subject and then Bob, he's gonna go on to say the following. A few days later I went to see when we could start setting fixtures in the new [01:03:00] building, and I saw that our sign maker, Rayburn Jacobs, already had the WAL up there and was heading up the ladder with the M.
You didn't have to be a genius to figure out what the name was gonna be. I just smiled and went on. That is amazing. How would you like to be the manager who came up with that name? it would have to just give you an immense feeling of pride and joy knowing that your boss loved your suggestions so much that he would adopt it right away.
So along with the sign, Sam is also gonna include, we sell for less and status satisfaction guaranteed. And these two philosophies still carry to this day as a company. That first Walmart is gonna open July 2nd, 1962, and they're gonna open to steady sales
They would do about a million dollars their first year, and after about two years, they could really see [01:04:00] that things were working. So they quickly expand to Springdale and then to Harrison, Arkansas Sam. He was a true merchandiser, always thinking of ways to bring in the crowds.
His thinking here was also to use the stores as a way to recruit potential talent. And at their Harrison Grand opening, Sam, he's gonna invite David Glass, who by the way would be CEO one day, but not yet at this point, he is still working over at Crank Drugs and he was known as a talented manager, and Sam was trying to recruit him and win him over to come and work for him.
Well David, he's gonna visit that grand opening and he's not gonna be so impressed, and he really tells us an eye-opening story here about his first Walmart experience. Let me just read for you what David would say.
It was the worst retail store I had ever seen. Sam had bought a couple of truckloads of watermelons [01:05:00] and stacked them on the sidewalk. He had a donkey ride out in the parking lot. It was about 115 degrees, and the watermelons began to pop, and donkeys began to do what donkeys do, and it all mixed together and ran all over the parking lot.
And when we went inside the store, the mess just continued having been tracked in all over the floor. He was a nice fellow, but I wrote him off. It was just terrible. It's these early days. These are the most fascinating, Sam right here He is trying anything to get people into his store and why?
Well, other than to make sales, of course, because he really wanted to see if this store that he described in the following way could compete against those upscale stores. He described the store as 12,000 square feet with a concrete floor, [01:06:00] bare bones, wood plank fixtures that was barely put together, stacked with merchandise, not presented that well and was truly.
Ugly. He wanted to know how would it match up to stores that had nice tile floors, bright lights, quality fixtures and everything looked good and had a nice presentation, but was 20% more expensive than what he had to offer. I mean, if you wanted to buy, say, I don't know, a new pair of work shoes, and both stores had the same brands, where would you go?
I know for me, I'm gonna keep the 20% in my pocket and let's see what Sam's gonna say about this experiment. This is super critical right here. 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. The answer was yes.
[01:07:00] We found out they did and they wanted it. This is a massive, massive discovery and it's such an incredible confidence booster for Sam,
and now that he knows and understands this formula, he's gonna start scaling his operations in the book. He mentions that in 1962, there were four major discount retailers that were founded. We already know Walmart. The other was Kmart, out of Kresge, target, and then Walco, which came out of Woolworth,
They're gonna have massive growth with more than 250 stores and $800 million in sales in just the first five years that they were in business. They're Gonna also focus on the major cities. For Sam, he had discovered that small town USA would 100% support his [01:08:00] kind of discount retail store, and he's gonna remain in these small towns for a very long time saying the following.
This allowed us to fly under everybody's radar for a long time and help Walmart grow without attracting significant attention from larger competitors like Kmart and Target. In all. Meanwhile, Sam, he's really keenly focused on studying his competition, filling up that little legal yellow pad with all of the things that they're doing correctly.
I like this approach right here. He didn't look for the things that they were doing wrong And go about criticizing them. 'cause he said, all that's gonna make you do is just feel better about yourself temporarily. And that was just a waste of time because that's not gonna propel you forward in business.
Instead, he looked for what they were doing correctly and [01:09:00] he took note of everything
and then he would use as much of the good stuff he could find in his own business to make it better. For example, Sam, he really likes salt prices approach to retailing and how it was centered on servicing customers with high quality goods at low prices. Thus, we see we sell for less and satisfaction guaranteed on Sam's very first Walmart store
because Fed Mart at the time had a similar sort of policy and Sam adopted that for his store.
This approach is an absolute cornerstone for Sam. He's always learning from his competition. Sam, he was a huge, huge admirer of Kmart and for a long time he really believed that they were the superior store against even his own, because they had the distribution systems, they had [01:10:00] merchandising concepts, and they had operational strategies which to work from.
And guess what? He studied everything closely. And Sam says that Kmart was the model for his further refining and development of his discount retailing model. He simply adopted many of their original ideas into his own. And this can be the exact same for you and I. Who is your competition? What are they doing really well?
And I mean, can you just pick like one or two ideas and just focus on those? And possibly implement those in your business or even adapt the idea so that it fits your business. How might that help you with your objectives or how might it help you serve your customers? How might it benefit them? It really reminds me of Kobe Bryant, who copied every move from Michael Jordan in his early [01:11:00] days, and this really gave him a start on the court and allowed him to make his name.
Later on, he would go about and develop his own style, but in the beginning, Kobe really studied the greats, Michael Jordan, Larry Bird, and Magic Johnson. Those were his heroes. He didn't complain about what they did wrong. That's a waste of time. He looked for what they did good and then he copied it. And I think it's a really super simple concept and we can take it super deep, my friend, and let it be a guiding force for you and I in business and we can use it for good.
Look for the good. Use it for your benefit to make things better and service your customers better. And I believe it's just so valuable and it really fires me up to be talking about it and sharing the learning with you. Alright,
With this early foundation in place and this understanding, Walmart is gonna start adding stores like crazy. It would be really [01:12:00] hard to talk about them all in order. So what I'm gonna do for the rest of the episode here is just pull out some of the most valuable lessons that Sam and his team would learn along the way.
And for all the lessons and the details, I really hope you can pick up a copy of the book or even listen to the audio book. There are just so many insightful details and there's no way I can possibly cover them all here in this episode. The book is really a useful guide for helping you grow your business.
It's a very high quality learning. If you ask me much more so than any college level class that I've ever taken, in the best part, it's only like 15 bucks. I mean, you simply can't beat it for the price
so a little bit earlier I had mentioned that when Sam first started the discounting concept, he wanted to partner with Butler brothers because they had all of this back in infrastructure in place, this rejection.
It [01:13:00] really worked in his favor because if they would've accepted it, it could have been possible that Walmart would've never gotten off the ground. Plus, he's also forced to develop all of his own infrastructure from scratch. And when you're in a position like this, it really allows you to develop systems that work for your company.
They might be kind of crappy at the beginning, as Sam describes in the following way. We didn't have ordering programs, we didn't have a basic merchandise assortment. We certainly didn't have any sort of computers and no replenishment systems. In fact, when I look at it today, I realize that so much of what we did in the very beginning was really poorly done.
You might ask, how in the world did they survive and thrive during this time? This was done through Sam's love of merchandising and he would say the following, it has been an absolute passion of mine. [01:14:00] It is what I enjoy doing as much as anything in the business. I really love to pick an item, maybe the most basic merchandise, and then call attention to it.
We would buy huge quantities of something and dramatize it. We would blow it out of there when everybody knew we would've only sold a few if we just left it in the normal store position. It is one of the things that has set our company apart from the very beginning and really made us difficult to compete with and man, in the early days of Walmart, it really got crazy sometimes.
Just listen to a few of these promotions that Sam would talk about in the book. In one instance, one of their managers had bought 3,500 cases of detergent and it was said that it was stacked all the way to the ceiling in a line that was like a hundred foot long, and then they would just advertise it at half of the normal price, selling it for a buck 99, and they just blew all of it out of the [01:15:00] store.
Within a couple of days, another manager would buy 208 horsepower riding lawnmowers. It was said that they paid $175 each for them, and then they turned around and sold 'em for 1 99 and blew 'em out of the store within a week. And by the way, the normal price on those things were $447. So you could certainly see why people were attracted to the store.
That was a killer deal. And then another promotion, they had 500,000 moon pies. I remember as a kid, I used to eat those like crazy. They would source 'em for 12 and a half cents and then they would blow 'em all out of the store within a week at 20 cents a piece. So you gotta imagine when people are coming in for these killer deals, they're picking up everything else that they need, plus they're coming back in the future looking for great deals.
It just really drives repeat traffic into your store. Those are just a couple of examples right there. And Sam, he's gonna go on to say that the real key to success would be [01:16:00] around building his team, developing his associates. Sam would say that if you take care of your associates, they're gonna take care of your customers.
In his wise words, they speak really loud right here. If you want the people in your stores 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 Walmart's success. I couldn't agree more with Sam. it's a super key lesson for both of us right here, to always take care of your employees like we spoke about earlier, around poaching and making sure that your employees are taken care of so you don't lose them.
If someone comes along and offers them a little bit more, make sure you've got that locked down. We see this in a lot of entrepreneurs that we study here on the podcast. For example, Kent Taylor at Texas Roadhouse stands out for me a lot. We just covered him a few episodes ago, but he absolutely put his employees or the roadies as he [01:17:00] called them.
He put them first.
and one thing that really comes to mind around this is,
for Ken, he had this book Made in America on his reading list, and I really like to think that maybe he learned this lesson directly from Sam and he took it to heart.
And it's proof positive that when you take actions from books like this, like Kent did, real life success is gonna result. Kent, he had been struggling for many years to get Texas Roadhouse off the ground,
but he says when he got serious about reading books and learning from great entrepreneurs is when things really turned around for him.
And this was at a time when he had five Texas Roadhouse locations and three of them were failing. He's gonna use these lessons and he's gonna build his business up to over 600 locations at the time of his passing. I believe it's just proof that when you put your employees first, your [01:18:00] organization is absolutely gonna thrive and your customers are gonna feel this as a result and you're gonna develop long-term relationships with your clients.
Sam right here, he is following his passion and he's drive. He's putting associates first and customers at the same time.
Now Sam's adding locations to his footprint. He's gonna have this pull towards computers and he's not quite sure about them at first, but he's been hearing a lot about the computer and he decides that he needs to embrace the concept and figure out if this is something that he could use in his business.
So what would he do? Well, he's gonna enroll in the IBM School for retailers. Yep. He wanted to learn first hand. He didn't wanna send someone else to go figure it out for him. He's the guy [01:19:00] who's gonna be writing the checks for these expensive machines. So he figured he might as well go out firsthand and have a look and figure out what they could do for his business.
Now listen to this. Upon arrival in New York City where the training program was held, he goes and tracks down the instructor who was also a CPA, and he was really seeking out the opinion of the trainer on his given financial situation where he was at right then with his business. And he really wanted to know what he was doing wrong and how he could improve things and help grow his business.
And I just wanted to read for you right here, what a Marks, who was the CPA and the trainer is gonna say from his point of view, he opens up his attache case, and I swear he had every article I had ever written and every speech I'd ever given in there, I'm thinking this guy is very thorough. Then he hands me an accountant's working column sheet showing [01:20:00] all his operating categories all written out by hand.
Then he says, tell me what's wrong. What am I doing wrong? I look at the numbers, this was 1966, and I don't believe what I'm seeing. He's got a handful of stores and he is doing around 10 million a year with some incredible margin and unbelievable performance.
So I look at it and I say, what are you doing wrong, Sam? If I may call you Sam, I tell you what you're doing wrong. I handed back his papers and I closed his attache case and I said to him, being here is wrong, Sam. Don't unpack your bags. Go down, catch a cab, go back to the airport and go back to where you came from and keep doing exactly what you're doing.
There is nothing that can possibly improve what you are doing, your genius. That is how [01:21:00] I met Sam Walton.
before we get into Sam's next big leap here, I just wanna make a quick comment. This really shows us the driving curious side of Sam. He was never afraid or embarrassed to ask questions
or ask for help if he thought it could make his business better. didn't give a damn about titles or ego. He just wanted to get his questions answered and get on with building his business. In this situation right here, we can learn from Sam. Never let anyone hold you back from pressing harder for your business.
Ask the hard questions. And another point here, Sam, is on the front lines learning, he's gonna end up implementing computers and was one of the early pioneers in the retailing industry to do so. And how is he gonna benefit? Quite tremendously. I tell [01:22:00] you, as a result, he's gonna gain a tighter control over everything, and this really helped propel his growth forward and it allowed him to be connected with his stores in a timely fashion.
With information as described in the book here, how much merchandise is in the store, what is it? What's selling, and what's not? What is to be ordered marked down replaced. To get more technical, that helps you control what we call turn or inventory turnover. The ratio of sales to inventory. That's a key.
The more you turn your inventory, the less capital is required. And all this involves getting the merchandise to the store at the right time, communicating how it's being priced, and how it's being marked down.
These are the logical details that Sam needed. It allows him to [01:23:00] be a leader and a teacher for his store managers. Plus, Sam believes in distributing information as quickly as possible. He never held information back. He sent out sales reports to all of the managers and insisted that he share them with the department managers.
And associates so that they could directly see the results of their hard work. If a department manager was running, say, a big promotion, Sam wanted him to see if it worked or not, and to know the results in days versus weeks or months or worse yet never finding out at all. Information was power in Sam's eyes and it was really a great catalyst that's gonna be a fuel for rapid growth of Walmart.
Right now I'm reading the book Nuts. It's about Herb Kelleher and Southwest Airlines.
and this was a concept that Herb also believed [01:24:00] to make sure that employees are getting information quickly about the company performance, the financials, the new markets that they're opening. How do they compare against their competitors?
And stories of bold risk takers across the organization. Herb believes information is the key to growth, and it helps them to maintain that family feel.
I can't wait to share that book with you in an upcoming episode here soon. For Sam. Along with implementing computers, he's gonna soon start focusing on his distribution warehouse system. With most of his stores in small towns, they weren't big enough to support full pallets of a single item from manufacturers.
So they didn't need a full pallet of batteries per se. They just needed a couple cases to support their needs in that little store. So what they had done is they had set up a central warehouse where they would receive most of their merchandise.
And then they would try to package things up and ship [01:25:00] them out to the individual stores. But Sam, he says it was a total disaster. They didn't have control over anything and they had merchandise stacked from the floor all the way up to the ceiling. And they didn't have a way to catalog anything. And it was really costing them a lot of money because they were paying for all of this inventory.
Then it's just sitting there. It's not moving through the store and they're not able to turn it over. Plus, in addition to this, they're paying third party trucking services to carry all this inventory adding to their costs.
If we flash back to just a few moments ago when we talked about that IBM computer class, well, in this class, Sam had met a businessman from Green Bay who was operating a distribution center. So one day he's gonna hop in his plane and he's gonna fly up there and pay him a little visit. And Sam's gonna say the following, we went through this warehouse and we saw how they did it.
Took lots of notes on everything. It was computerized. One of the first computerized warehouses I [01:26:00] knew anything about after the trip. I knew we had to build one
Build one, they indeed would, it's gonna be a 60,000 square foot distribution center that would allow them to track all of the inventory and assemble those individual store orders and get them shipped out. And from here, they're gonna continue their distribution center expansion.
As of the book's writing, which was in the early nineties, Sam is gonna say that they had 20 strategically placed distribution centers. Each of them was about 1.1 million square feet. And then those distribution centers would service stores within about a 350 mile radius. It's really funny because when they built that first one of 60,000 square feet, Sam really felt that that was gonna be way too big for them at the time, and they would never fill that up.
And I guess it just really drives home the fact right here, that Walmart, they really did catch fire and grew [01:27:00] rapidly. Then to help Sam further control cost and distribution schedules, they're gonna start buying their own tractor trailers. They would start with two trucks and six trailers.
which Sam thought was too much. He was never gonna need six trucks. But like those distribution centers, listen to this, they're gonna grow their private fleet to over 2000 tractors and 11,000 trailers, which is just quite impressive. Now, today in modern times, I did a little searching here and it looks like they have somewhere around 12,000 trucks today and about 75,000 trailers, and that's even more impressive.
That's major scale right there, I would say.
And during this time, Sam's gonna go on, he's gonna tell us the following. We were forced to be ahead of our time in distribution and in communication because our stores were sitting out there in tiny little towns. We had to stay in touch and keep them supplied. With all of this growth here, Sam was gonna be [01:28:00] taking on a lot of personal debt at the same time.
At one point he says he had almost $2 million in debt, which was a lot of money in 1970, and it was taking a really big toll on him. He was terrified that if the company were to have a bad quarter or a bad sales year, that the banks might get scared and possibly call their loans. And he knew that that would just destroy him because he didn't have that much money to cover everything.
It says that in some cases he was borrowing money from one bank to pay another bank, and he didn't like that. He wanted to get out from under the debt. So in 1970, he is gonna start the process to take the company public,
and at this time he had something like 15 variety stores and I think around 18 Walmarts. So in October 1st, 1970, they're gonna go public and they're gonna offer 300,000 shares for 15 bucks a share. They would've closed the day at 1650.
Now imagine with me just for a second here
, As Sam [01:29:00] describes in the book. He says that if you bought a hundred shares forking over 1,650 of your hard earned dollars, any guesses on what that might be worth 20 years later when this book is being written in the early nineties? Well, if you had $3 million in mind, you'd be correct and holy smokes, what an investment that would be.
They would have nine two for one stock splits during that time, and that is just simply amazing. Now, keep going with me here. Imagine you held that until 2025. What do you think that would be worth? Well, you'd be sitting on a cool $15.6 million or approximately 156,000 shares. That would be one hell of a nice return after 55 years, I must say.
All right, let's go back to the book here,
Sam. He would describe IPO day in the [01:30:00] following way.
I experienced one of the greatest feelings of my life knowing that all of our debts were paid off.
The Walton family owned 61% of Walmart after that day, but we were able to pay off all those bankers. And from that day on, we haven't borrowed one dime personally to support Walmart. The company has rolled along on its own and financed itself, going public, really turned the company loose to grow and it took a huge load off of me.
Past this point. Walmart is gonna see aggressive growth all over the United States in one of their major driving points that helps with this growth is Sam's belief in listening to and taking care of his associates. We had discussed this earlier, he really believed that if you take care of your associates, they are gonna take care of their customers.
And Sam, he's gonna say the following.
What has carried this [01:31:00] company so far so fast is the relationship that we, the managers, have been able to enjoy with our associates. By associates we mean those employees out in the stores and in the distribution centers and on the trucks who generally earn an hourly wage for all of their hard work.
Our relationship with the associates is a partnership in its truest sense. it's the only reason our company has been able to consistently outperform the competition and even our own expectations.
one of the reasons I wanted to bring this back up again is, one, it was super critical. And two, Sam, he makes a really bold emission because it wasn't always like that. And he talks to us about an early mistake that he makes in business.
And I think this is one that you and I can learn from and it helps feed into the way that we treat our associates and our employees. I just wanted to read for you here, it is a bit lengthy, but I think it's really [01:32:00] valuable for us to hear. Sam's gonna tell us the following.
In my very early days in business, I was so doggone competitive and so determined to do well that I was just blinded to the most basic truth. Really, the principle that later become the foundation for Walmart's success, you see, no matter how you slice it in the retail business, payroll is one of the most important parts of overhead.
And overhead is one of the most critical things you have to fight to maintain your profit margin. This was true then, and it's still true today. Back then, though I was so obsessed on turning a profit margin of 6% or higher that I ignored some of the most basic needs of our people, and I feel bad about it.
The larger truth that I failed to see turned out to be another of those paradoxes, like the discounters principle of the less you charge, the more you'll earn, [01:33:00] and here it is. The more you share profits with your associates, whether it's in salaries or incentives or bonuses or stock discounts, the more profit will accrue to the company.
Why? Because the way management treats the associates is exactly how the associates will treat the customers. And if the associate treats the customers well, the customers will return again and again. And that is where the real profit is in business, not in trying to drag strangers into your stores for a one-time purchase based on a splashy sale or expensive advertising.
Satisfied, loyal, repeat customers are the heart of Walmart's spectacular profit margins, and those customers are loyal to us because our associates treat them better than salespeople in other stores do. So in the whole Walmart scheme of things, the [01:34:00] most important contact ever made is between the associate in the store and the customer.
I didn't catch on to this idea for quite a while. In fact, the biggest single regret in my whole business career is that we didn't include our associates
In the initial manager's only profit sharing plan when we took the company public in 1970, I really admire the fact that Sam owns up to his mistakes here, and for you and I, there are a couple of key lessons here.
One, it's okay to make a mistake if you do make one. Take ownership. Don't try to hide it or cover it up. Take control of it. Your team and your employees are going to have so much more respect for you in the long run for owning mistakes and working to overcome and correct them. And most importantly, learn from your mistakes.
Then the second thing [01:35:00] here, This adds extra fuel and real world proof to the long running narrative that we've been talking about on the podcast since it started. If you take care of your employees, pay them well, share profits with them. They're gonna take care of your customers and your business is gonna be better for it.
Sam was in business to earn the respect and loyalty of his customers for a life. As we heard, he wasn't looking for a one trick pony.
He wanted to be the place that serves all of his customer's retail needs, and he did so with friendly associates that were ready and willing to help. This paid major dividends for Walmart in those early days. As Sam says, it was absolutely critical for their success as a company
and for Sam. He's gonna correct the early problem by implementing a generous profit sharing program for all of his associates that would place a portion of [01:36:00] each of their eligible wages into a profit sharing plan.
Then when the associates would leave the company, they'd be paid the balance in either cash or Walmart stock. in the book, it describes so many employees who had accumulated hundreds of thousands of dollars.
some of them even reached close to a million dollars. And this was a huge benefit for these employees. And I even recall that my mom, she worked at Walmart in the mid nineties. To help my brother and my sister and myself with college tuition. And when she left after four or five years, she had something like $10,000 in that particular fund that she cashed out.
needless to say, she was very happy with that result from just working a little bit more than part-time at that retail job that she was doing at the time.
So Sam really did a great service for his associates by implementing this profit sharing plan. Alright, so at this point I think we've covered the nuts and bolts of how Sam got started in retailing. He found his [01:37:00] purpose and he followed his passions in the variety store business. And then later he went into discount retailing with Walmart.
and that allowed them to grow in the manner in which they did. they're certainly gonna continue to scale this formula, and this allows them to open thousands upon thousands of stores. As Sam is writing this book, he's dying from cancer and he really digs in and he shares his history of building Walmart in such an open and beautiful way.
Normally at the end of each episode, if you've been listening for a while, you know that I like to recap the top lessons learned along the way as I really believe in reflection, and that it helps us build deeper connections to the things that we hear and read. For this episode, Sam, he's kind of already done the work for us in the chapter called Running a Successful Company, Ted Rules That Work for Me.
So in a similar format as we did on the Kent Taylor episode, I'm gonna let these [01:38:00] rules serve as our recap for the show today. So let's just jump in here. Rule one, commit. 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.
I don't know if you are 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 your best that you possibly can, and pretty soon
Everyone around will catch the passion from you like a fever. Rule two, share your profits with all of your associates and treat them as partners. In turn, they will treat you as a partner, and together you will perform beyond your wildest expectations. Remain a corporation and retain control if you like, but behave as a servant leader in a partnership. Encourage your associates to hold a stake in the [01:39:00] company. Rule three, motivate money and ownership are not enough alone day by day. Think of new ways to motivate and challenge your team. Set high goals, encourage competition, and keep score.
Rule four, communicate. Share everything you possibly know with your partners. The more they know, the more they will understand. The more they understand, the more they will care. Once they care, there's no stopping them. Information is power and the gain you get from empowering your associates more than offsets the risk of informing your competitors.
Rule five, appreciate, appreciate everything your associates do for the business. All of us like to be told how much somebody appreciates what we do for them. We like to hear often and especially when we've done something we are proud of. [01:40:00] It's absolutely free and it's worth a fortune. Rule six, celebrate your success.
Find some humor in your failures. Don't take yourself too seriously. Loosen up and everyone around you will loosen up. Have fun. Show enthusiasm. Always rule seven. Listen. 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 the customer
are the only ones who really know what is going on out there. You better find out what they know. This really is what total quality is all about. To push responsibility down in your organization to force good ideas to bubble up within it. You must listen to what your associates are telling you. Rule eight, exceed, exceed your customer's expectations.
[01:41:00] If you do, they will come back over and over, give them what they want and a little more. Let them know you appreciate them. Make good on all your mistakes and don't make excuses. Apologize. Stand behind everything that you do. Rule nine, control. 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 rank number one in our industry for the lowest ratio of expenses to sales. You can make a lot of mistakes and still recover if you run an efficient operation. Rule 10, swim. 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 [01:42:00] find your niche by going in exactly the opposite directions. Those right. There are Sam's top 10 rules for business, and I believe they're extremely valuable for you and I, even just one of these ideas could have a major, major impact on the way that you service your clients or interact with your team.
This book is really more than a book. I consider it a business guide. Each time that I read it or I listen to it, I come away with a new learning and how I can apply it to my business.
if you'd like to pick up a copy, you can use the link in the show notes. If you do so, you'll also be helping to fund children's literacy as I'm donating all affiliate profits towards children's literacy. I really do hope you found some value in the show today.
I'm really trying to focus on bringing you high quality, high impact lessons from all the biographies and the autobiographies that you and I talk about on the [01:43:00] show. I thank you very much for listening and I hope to see you back here soon. Until next time, make it a beautiful day in the neighborhood, my friend.