Here’s an oldie but goodie: Made in America, by Sam Walton. I’m sure that name rings a bell, and whether you like or dislike Walmart, we can all agree that it has been an extremely successful company in multiple ways. Walmart has impacted the world in a big way and made a lot of money doing it.
Sam Walton was the guy behind it all, and this biography is… inspiring. I love reading reference and research books to learn new strategies and tactics, but when I need a little inspiration, I love to read a biography like this. You get to see that, even people with immense success are human too, you can learn from their failures, and you can even pick up some of those tactics too.
Here’s a quote from Sam: “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” I hope you guys feel like I’m drilling this into your heads, because this is something that I’m constantly drilling into my own. The purpose of business is to create and keep a customer, and Walmart always had the customer in mind, and I think that’s the #1 reason it was so successful.
That’s our first golden nugget: The customer is boss, and never forget it. The other 3 golden nuggets I want to talk about today are 1) learn from competition (and Mr. Walton is probably the best example I’ve ever heard of for this), 2) learn from failure, and 3) I’ll get a little technical, because I want to talk about what I call good debt and bad debt. Walmart used a lot of debt over the years, and it served its purpose.
So, how do you learn from competition? I think the first step is humility, and Sam Walton was one of the most humble people in history. A lot of times, when someone reaches a certain level of success, they become arrogant and think they know everything. We see this all the time with sports stars and other celebrities. Now, a lot of that is because they’re so young; they just get a big head, so we can cut them some slack.
Throughout all his success, one thing that Sam did was physically go into his competitors’ stores to check them out. He said that he thought he spent more time in his competitors’ stores than they did! He was always on the lookout to learn how he could improve his own stores. There’s a funny story about him getting arrested, because he was crawling around on his hands and knees in some store in a foreign country. He couldn’t explain that he was just interested in the store. Don’t worry, he made bail.
After humility, it takes ambition. Sam’s wife, Helen, said that she always wanted to be with an ambitious man, but she didn’t realize that she may have married the most ambitious man there was. We’re all motivated by different things. Sometimes it’s getting a certain house, and sometimes it’s the grind itself that’s motivating. Whatever your reason is, though, hang onto it, because ambition is key to success.
The real beauty is when these two combine. In some ways, they’re at odds with each other, but if we’re able to be ambitious but remain humble, it results in a mindset of constant improvement and learning. This is how I want to live my life: I don’t ever want to stop learning or being challenged, so I’m taking multiple pages out of this book…
Speaking of constant improvement, let’s talk about Ben Franklin. Not the man, though, the variety store that Sam started his business ownership in. After being a salesman for a while, he bought a franchise of this variety store in Newport, Arkansas. He did some awesome stuff with his franchise, and it was clear that he was special already, but he made a fatal mistake.
In the book, he says “my naivete about contracts and such would later come back to haunt me in a big way.” After years of building the store into the most successful one in the area, his lease term ended, and his lessor chose to not renew it. He knew that they had nowhere else in town to go, so instead, he bought the franchise from Sam and gave it to his son. After all that work, these people weren’t going to just stop going to the store that they loved. Maybe over time, it wouldn’t do as well as if Sam were running it, but the result was basically that he lost everything.
Now, WE can learn from his mistakes—that’s the beauty of reading books like this—but the key takeaway is actually how he dealt with this disaster. He said it was like a nightmare, but listen how he dealt with it: “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 finally he says “I had to pick myself up and get on with it, do it all over again, only even better this time.”
Debt is a controversial subject, especially because nowadays we have such insane national debt, credit card debit is crushing tons of people, and student-loan debt is making it so young people are starting their careers in the hole. So I want to talk about good debt vs. bad debt, because clearly it can be used in a powerful way.
Sam started his Ben Franklin variety store with $5,000 of his own, and $20,000 from his father-in-law. Over the years, building up Walmart after Walmart, and then Sam’s Club, the company borrowed billions of dollars. And it was one of the most successful companies in history. The reason is that Walmart used this debt as
If you think about trying to move a bolder, you might hurt your back. But if you get a lever and a pivot point, you can use that lever to do most of the work for you. There’s a famous quote by Archimedes where he said “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” If used correctly, debt can be that lever, and it can do work for you.
So, how do you know if it’s working for you or against you? The ultimate test is if it’s making money or not. If I borrow $10,000 at 10%, then I have to pay the bank $1,000 per year. But, if I can use that $10,000 to make $2,000 per year, then it’s making me money. Instead of $0, I made $1,000. So good debt puts money in your pocket, and bad debt takes it out.
This gets super complex when you talk about things less tangible than business or bond investments. If I borrow $200,000 to go to college, and it takes 4 years of my life, then I need to make a lot more when I get out than I would have otherwise to make it worth the investment. It’s not easy to calculate these long-term investments, but the methodology to apply to taking on debt should be the same. Ask yourself two questions: 1) Will this make me more money eventually, and 2) Can I afford the payments in the meantime?
Ok, so that concept of moving the world is just too cool, so I made that my summary for today, but let’s not forget the other lessons this wise man is teaching us: First off, it’s sad that Sam is now dead, but how cool is it that we can still learn from him? Then, we can also learn from our competition and from failure, good debt is debt that makes us more money, and always remember that the customer is the boss!
Alright onto the exercise. Be sure to follow and answer these questions! 1) When have you learned from competition? 2) When have you learned from failure? And 3) Do you have either good or bad debt? Why?
I look forward to seeing some answers and some dialogue on this stuff. Let me know anything I can clarify or add more color on, and I’ll see you in the next lesson!