Walmart
02:59:37 Share

I love how this book is called, made in america, and the SONY story is made in japan. Like, I don't know who stall from who there or if I was just the natural title they both chose and did even consider .

IT a so so great. Easy, you, busy, you wait, you who got the. Easy you, easy you, you sit me down, say.

Welcome two season 7， episode one, this season premiere of a the podcast about great technology companies in the stories and play books behind them. And then gilbert and I am the co founder and managing director of seattle based pioneer square labs s and our venture fund, psl ventures.

And i'm David rosenthal, and I am an Angel investor based in difference eco.

And we are your hosts. When we did our SONY episode, we discovered that many Steve jobs ism s really started as oko maris's. And in all of the research for today's episode, we learn that many of the mental models and quotes described to jeff bazas, we're really the original thoughts of sam walton.

But of course, that is also not entirely true either, since and wall's greatest gift was the ability to digest, learn, adapt, test and integrate new ideas from others. Today we explore sams creation, which ushered in a new era of american retail and now global retail, from the post world war two period all the way to today. Some astonishing stats on the company is the largest by revenue in the world, doing nearly six hundred billion dollars a year in sales.

Although amazon is close behind now, it's true.

IT is the world's largest employer. Other than public entities like governments employing nearly two point three million people around the world, IT is still controlled by the walton family, who owns just over a fifty percent of the business a full sixty years after IT was founded.

Oh, we are gna get into how and why that is the case. One other fun step for you. Today, ninety percent of amErica lives within ten miles of a walmart.

But there are three places where that is not true. And the fourth kind of where it's technically true, but not in spirit. Do you know what these places are?

No .

safras o seattle. No way. boston. And the fourth place is manhattan in new york city. IT is not technically true because there is a walmart across the river in new jersey that is less than ten miles away, but unit that is true .

two and a half hours to get there something yes. wow. So you're saying it's not a company that um is built on the urban core is we're going David.

is the bigger company in the world services of amErica except where we live.

Yeah, fascinating. This really is one of the most classic business stories in amErica or in the world period. And I kind of can't believe that we're not covering IT until now.

So let's start season eleven with the bang. There are so many lessons that are totally applicable today, and every entrepreneur can learn from same warm, okay. Listeners, now is a great time to tell you about long time friend of the show service now.

Yes, as you know, service now is the A I platform for business transformation, and they have some new news to share. Service now is introducing A I agents. So only the service now platform puts A I agents to work across every corner .

of your business. yeah. And as you know from listening to us all year, service now is pretty remarkable about embracing the latest AI developments and building them into products for their customers. A I agents are the next phase of this.

So what are A I agents? A I agents can think, learn, solve problems and make decisions. Tony ously, they work on behalf of your teams, elevating their productivity and potential. And while you get incredible productivity enhancement ments, you also get to stay in full control.

Yep, with service now, A I agents proactively solve chAllenges from I T H R. Customer service software development. You name IT. These agents collaborate, they learn from each other, and they continuously improve handling the busy work across your business so that your teams can actually focus on what truly .

matters ultimately, service. Now, an agenda I is the way to deploy AI across every corner of your enterprise. They boost productivity for employees and rich customer experiences and make work Better for everyone.

Yep, so learn how you can put A I agents to work for your people by clicking the link in the show notes or going to service now dcom ash A I dash agents. Or after you finish this episode, you should come discuss IT with the twelve thousand other smart, curious members of the acquired community and acquired a dota m slash slack. And if you are dying for more acquired, go check out the acquired L P.

tio. You can search for that in any podcast player. The next episode will be an interface with Patrick cambell on all the jc details of how his two hundred million dollar acquisition of profit well went down step by step, deal point by deal point. And if you want that, early IT is already alive for paid acquired L P S at acquired df m slash lp, or by clicking the link in the show notes.

So cool, patric, totally bootstrapped profit. Well, almost like sam walton, totally brutes draft not. yes. Well, that further.

do David take us in? And listeners, as always, the show is not investment advice. Steve and I may have investments in the companies we discuss, and the show is for informational and entertainment purposes only indeed.

Well we do have to think the man sam walton himself and his coauthor john huey for his autobiography made in america, which is just amazing, its the backbone of the history we're going to tell here we first got turned onto IT going back and rereading the everything store and finding out that IT was one of bays us his favorite books and need to form the blueprint of how we thought about ozon in the early days and I think was cool reading IT is IT just struck me that sam and the walmart story easily like the bridge between the business amErica that was john rock, feller and standard oil and amazon and jeff is like, this is the connective bridge between those two realities in many ways.

He was the last of the iraq fella type tycoons, but the first of the sort of modern mega corp, not tech business, but almost tech business era founders.

or very much tech business. This is what shot me. Bringing the story is how much walmer embraced technology. And they am embrace technology. And I think they were arguably the first corporation in amErica to embrace computing as a business paradigm.

certainly to embrace their own private satellite network. But yes, i'll save this for illness.

Okay, we start back in march nineteen eighteen in king Fisher, oklahoma, which is right, the middle oklahoma, not too far from alcohol city at the time, in one thousand nine. And the population of king Fisher was twenty five hundred people. Today, IT is much larger.

Bustling metals is of five thousand people. But of course, those five thousand people have just about every retail need of their service. In a first classroom by the local walmart supercenter that is located just south of town.

walmart grew a much faster rate than the two x that came. Fisher grew in a century.

This is crazy. King Fisher, twenty five hundred person. King Fisher around this time is also the birthplace of the culture company, you know, like the outdoor like campaign started in king Fisher OK.

Didn't jim webber from our brook's episodes start his career at common?

Oh, I think that might be right. Oh yeah.

Well, like an accident. C, P G retAiling kit here.

I know so great well, anyway, back in march of one thousand and eighteen, inking for her when Samuel Moore walton was born to thas, gibs and walton and nancee, their first oldest child, and at the time of his birth, tom and Nancy were farmers, but IT was seventeen, eighteen. This is really the end of world war one. We're heading into the borrower twins in america.

People are raising their standards of living. The countries modernizing, they wanted to move up in the world. And so his dad goes from working on the farm himself to getting into farm financed.

He becomes a mortgage broker for farms, working with his brother in the business. This is a theme that's gna recur in the wolton family. And speaking of brothers, in december nineteen twenty one, sam gets one for himself. One James learns walton bud, Better known as, but shortly after budd is born, the family moves from oklahoma to missouri, where they move around the bunch before ultimately settling down in the lovely, we can personally say, truly, genuinely lovely town of columbia, missouri.

home of capital camp. Yes.

home of the university of missouri capital camp and permanent and equity and our friend brand Peter there yeah so the tony were good times for the world and family, unfortunately there for samon bud. Maybe fortunately for a walmart, they don't really get shaped by the twenties. You know, they're still like little kids growing up in the tony ys.

What really shapes steam is the thirties. And the thirties were very, very different for the middle of america, all of the america. But the hardest hit part of the country during the depression was the midwest farming community because of the dust ball.

So if you've ever read the gripes for author and the great novels timebomb, otherwise from that period, IT was terrible. People lost everything. Crops failed.

And what was the walton family, me, doing at this time? They were like double leverage. That wasn't just that they were farmers. They were finances of farmers, so they're living in this nice town of columbia. At this point, tom has to go travel around to all these farms that he'd financed and for close on them, literally kick people out of their farms, out of their homes, and he would bring salmon bud along with them for this.

I remember reading in made america, I sort of thought that what sam was gonna say is that his father worked with these farmers. The best could help them save the business where they could, or cut a deal. But no, what he actually just said was, and he just did IT in the most humane and decent way possible. You are like world. There were not deals or negotiators to be struck that as we are for closing, and we just have to be a good human, do well, this is definitely happening.

I mean, that's probably why he brought the kids along pretty hard for somebody to attack him or get too mad. Phy, at as too little kids there with them.

I wonder. Yeah.

crazy times. But yes, so all of this makes an impression on, say, M, C, M says in the book in his very same way, quote, all of this must have ade an impression on me as a kid, although I don't never remember saying anything to myself like i'll never be poor. But he says, one thing my mom and dad shared completely was their approach to money. After all this quote, they just didn't spend IT.

I think we've already kind of made the point. But the wolton family goes on to be the wealthiest family in the world. Still, all of sams future generations are worth a few hundred billion dollars, depending on the day that you look at all mart market cap's nearly all invested in walmart, but it's a milty hundred billion dollar family.

yeah. Incredible to go from that to this in two generations. So like many kids during the depression, sam in bad, as they grow up, they do all sorts of.

Odd jobs around the house to help out the family. Their mom goes in columbia and gets some calls and sort of restarted part of the farming business. SHE starts to milk business that they help out, you know milk the cows delivering to neighbors.

And columbia same started selling magazine subscriptions. He also started s selling rabbits and pigeons that he raises in the backyard. I don't know who was buying .

the rabbits and and .

no indeed. And then of course, like every good acquired protagonist, he gets a newspaper out for the columbia miserie, just like warm buffet.

That's right. That was on part one. That episode did part one.

yeah.

Oh, that's right. Because he delivered the washington post before, later going on to become a major.

So besides all of these sort of proto entrepreneur ventures that C. M. Is undertaking as a teenager, he also becomes, at age thirteen, the Youngest eagle scout ever certified in missouri history. Then you go out, how can I got one just .

in the next time when I was seventeen and a half? You must get one before you turn eighteen. That is the last day that you can get one.

You cannot become a boy scout. And this is the rules now at an off as the rules then. But until you're like twelve or eleven and a half or something like that is when you sort of graduate cubs scouts. So sam got his eagle at age thirteen, so IT must have been the only thing he did for that year and a half or whatever like that's the fastest advancement to go through whatever five or six ranks in that short of period of time.

Maybe he counted the raising the rabbits and pigeons.

yeah, that's right, made similar of badgers in there.

So the other thing, this is very, very crazy that Young sam, as a teenager, exhibits, he becomes the quarterback of the football team in the high school, say, and if you've ever seen any photos, video, such an incredible folks. He due listening to his talks is just amazing. He's five foot nine and very slight, so you wouldn't think that he's going to be a great football athlete.

Course, we're talking about american foobar here. This is incredible though. I think they win the state championship every year because he never loses.

A game is crazy. He writes about this in the book. He says, I think that record had an important effect on me.

IT taught me to expect to win, to go into tough chAllenges, always planning to come out Victorious later on in life, I think car or whatever competition we are facing just became jeff city high school, the team we played for the state championship in one thousand thirty five. IT never occurred to me that I might lose to me. IT was almost as if I had a right to win. Thinking like that often seems to turn in this sort of self fulfilling prophecy. And man was that same mother.

There's like two sort of contrasting ideas that i've heard, different VC and different founders to spouse on both sides. One, as you know, you learn from your mistakes, and you to learn from failure. The other is if all you've ever done in your entire career is being really high performing, very successful environments, then that is kind of all you know how to do. And that's the bar that you hold yourself to. And I think there's totally merit to both.

I think both of these forces shape sam, right, like the depression, the dust. Al, for closing on farms of his dad struggles and he never loses a game. All of that goes right into walmart. So much of .

walmart is trying something doing experiment, watching IT on some small scale, choosing not to roll IT out, or watching IT succeed, and then choosing to rapidly roll IT out across as many stores as possible will get into this. But the very first store opening, they put a whole bunch of watermelons outside. IT was sweltering ingy hot. They started exploding in the parking lot and getting watermelon juice all over all the customers in their cars.

That was actually one mart. Number two. Oh, sorry, I was in Harrison. We'll get there. But yes, legendary story. So after his goal, he goes on to college locally at the university of missouri.

The only way he can go out because his family has no money as depression is he attends on A R O T C. scholarship. So he's still catholic.

Pay his living expenses. Mom and dad and the family aren't gonna help out. You know there's no money in the family so he keeps his newspaper around. But like he's busy now he actually he has like political aspirations on campus as he becomes the president of the class here greeting everybody. He's in rtc busy.

So he hires a few people under him to actually, like, do the delivery of the newspapers and health can scale the business by the end of college. He's making four to five thousand dollars a year from his newspaper activities, which that's like huge. We're going to get into what his first job pays him in a minute. But forty five thousand dollars a year in the thirties during the depression. That's a lot of money.

Yeah, it's crazy.

There's a great quote in the book from the circulation manager of the miserie says we hired sam to deliver newspapers and he really became our chief salesman when school started. We had a drive to get the kids in the ferries and areas to subscribe. And sam, where is the boy we had do that because he could sell more than anybody else. He was good. He was really good.

It's so interesting that this story parallels were in buffer story in so many ways, but the reasons that their successful are different. Warns is about understanding the value of compounding. And it's not that sam didn't, but it's that sam was a salesman.

He's a merchant. He's a retailer like he understands how to learn what people want and then go procure the thing in the way that they wanted and deliver that to them. They're different superpowers that manifested both in building early successful periodical distribution sub companies and .

basically stayed entrepreneur same as clearly this natural entrepreneur. When IT comes time for graduation, though, he decides, you know what, I think i'm just gonna go get a regular job, even though he's making so much money from his newspaper businesses. So he interviews with two companies who come recruit on campus, J, C, pennies and tears. And he goes with the offer from J, C. Penny.

which is interesting because series was the dominant retailer. Everyone bought everything for their homes, including some homes from series.

Yes, I think the first house we lived in in the was a serious cattle at home. wow. yes.

So like, this is what's funny. And anyone sam is like, he really keeps the real in the book. You could tell this like backward looking narrative of, he connected all the dots.

He wanted to go learn retail, learn the craft from the best, in which cases we've gone to work for years. But no, he rates. I had big plans for after graduation, I figured I would get my degree and go on to the warton school of finance in pennsylvania buffet, just like warn.

But as college wound down, I realized that even if I kept up the same kind of work routine i'd had all through college, I still wouldn't have the money to go to work because we had to pay tuition. So I decided to cash in what chips I ready had. I visit IT with the two company routers who came to campus. Now I realized the simple truth. I got into retAiling because I was tired and I wanted a real job.

Wow, he would not bring him any rest though.

No, no, no.

no. Maybe this first job at pennies, or as he calls at penny, I know he could realizes the way that people did and are air up. My guy was called J C. Penny pennies.

right? Well, he ultimately ends up getting to meet James cash penny himself.

The guy's time is James cash penny.

I know, is James cash penny.

That's almost as amazing as Price club being founded by a guy name, sol Price.

Oh, we are going to talk a lot about sol Price. Yes, so he's tired. He just want a regular job, but he's this natural born salesman.

So he goes to work in the demand IO a store of J. C. Penny as like a floor salesman.

And he does great. I am literally James cash. Penny comes in, meets with him himself at the story that sam tells us. J.

C, shows him how to tie, you know, packages, merchandise that is sold with the least amount of time and paper possible, but still make you look nice to save money. But of course, pretty quickly, this only last eighteen months, because in december nineteen forty, perl harbor happens in the U. S.

Of course, centers, world war two, and say, I had been in our T. C. His commission.

He's going to join the army. He was looking ford, this bud. His brother joins the navy, becomes a decorated bomb pilot in the pacific.

Same things, things he's gona go proud ly off to ear up. But he fails the physical exam for combat duty. Turns out he had a heart, a regulatory.

And so he's kind of depressed his son, happy about this, but going off to join the navy and sam is gone to stay home in amErica at a desk job. So before he gets his commission, he leaves the mine and he goes back to oklahoma. Not exactly sure why he just sort of traveled back to oklahoma. He says in the book that he was started to pressed at the time, and he ends up in clear more. Oklahoma is a small town outside the.

which is interesting to point out. We've mentioned six, seven towns so far, and I don't think most people would have heard of a single one of them. There is a parallel here between walmart is success in the fact that most people have been heard of most of any reference that we've made so far.

And there one night at a bowling ali in clemm, he meets and falls in love with a girl named HEllen robson. And Helen was from clear more, but her father, L. S.

Robson, was, unlike sams family, a very wealthy and successful business man, financer trader in the broader tosa area. And he ends up taking a big shine to see him and would become hugely influential along with Helen, because he marries Helen, of course. And some say the robsons were very smart about the way they handled their finances.

Hell's father organized his ranch and family businesses as a partnership, and Helen and her brothers were all partners. Helen has a college degree in finance, which back then was really unusual for a woman. And mister robson advised us to do the same thing with our family, which we did way back in nineteen fifty three. And that partnership that Helen and sam set up is today wolton enterprises, which is thirty six percent of walmart and the individual family members and and trust, I think mostly bud's family, one of the other eleven eleven percent.

Yet this is the interesting seed plant of walmart being a family business from the very get go. They organized IT. Interestingly, each store was actually its own company so that different people could sort of hold chairs in each store, the management, different people who, you know, wanted to invest in the story, that sort of thing.

But at a really high level, walmart always was a family partnership. IT was always something where the economic and spiritual ownership and decision making always was the wolton family, and of course, seems the guy. But there was a lot of family meetings to make decisions for the business.

And this is why, because the family were all partners in well enterprises, they couldn't just sell their stock. The partnership, the family as a whole had to decide to sell, and that allowed them to keep majority control of bomar t all through the history and talks about this, he says, he thinks it's the big reason why corporate raters or larger companies like came are never came and acquire them, because the stock was never splinted red.

IT was all within the partnership. And he actually write one of the real reasons. And writing this book is still my grandchildren and great grandchildren will read IT years from now. And know this, if you start any of that foolishness, like changing the structure, selling off stock, you do go, I go often doing, you know, fancy things.

buying N B A and N F L teams.

buying N B A and N F L teams, which they do. Now I will come back and haunt you. So don't even think about IT.

I love that working.

So sam and Helen get married, and sam gets posted in a bunch of places all around the country doing internal intelligence work for the army. He goes, you taw plenty of other places. And he decides that when the warms and he gets out of the army, he's going to go back into retAiling.

But now he has the support of Helen and her family and her father, L. S. And their financiers. So he knows I now have access to some amount of capital, like I can be an entrepreneur, don't necessarily have to work for somebody so when the Warren L. S.

Initially wants them to move back to clear more, but HEllen and say, i'm kind of decide together, they're well, we want your support but we don't want to be totally under your wing in in your shadow so sam, he's got big, ambitious. He in a buddy decide that they wanted buy a federated store department store franchise in sane Lewis. They're going to be big.

You know, he come from A C penny in the mine. He wants to be a you big city department store owner, magnet entrepreneur Helen VS, this outrage, we would not be talking about walmart. Sam had moved the family to say with us.

So HEllen says, look one, I don't want you doing any partnerships with non family members. Sam, as her family, had seen some partnerships to go sour, and he was dead, set on the notion that the only way to go was to work for yourself and for your family. And two, SHE says, I don't want to live in a big city.

I don't want to go to live in a small town. Why grew? I grew up in just like clear more. I don't want to live clear more itself. But we are not allowed to move to any town that has a population of more than ten thousand people.

I mean, that her whole thing was, I wanted raise my kids the way that I was raised. And SHE looked at them and said, you will raise the same way, small town and like that we're going to do. And so whatever business he did had to be family under controlled and have a small town by strategy. And so like, what seems so intentional and so genius actually steeps from the fact that he just vetoed, is a original idea totally.

I mean, is crazy. He had a undergraduate degree in finance for a woman at that time, and he was very involved, obviously, in the strategy of the business .

in the thirties and forties. The number of women with undergrad finance degrees in the U. S. Is probably tens of thousands.

IT. Could not have been .

a large .

number yeah. And also accused s. To the family and L S. And his wife for encouraging her. He had brothers like I would have been been easy for him to say like a okay, the boys are all gonna take over the business.

right? Which is like what we saw, the new york times, the family or yeah or .

the rock fillers too. So say, you know, he doesn't stay down for a lot. I think he was a little disappointed that his wife had overruled. But you know he finds a way so he goes back to the company that owned federated, which his company called button brothers. They were franchisers of federated their based in chicago and he asked, well, do you have any department store locations that might be available in small town of, say, ten thousand people are less and butt brothers guys are like we don't really do department stores in uh, in towns like that, but we do have another you sort of spin off Operation that we run, which is our variety store franchise business like .

there literally wasn't enough people they believe to support the department store. Variety stores are they are like glorified general stores. I mean, what if you think about a town that's like two, three, four thousand people IT really is.

Like if you visited an old west town and looked at A A general store, it's like that on steroids. You know, it's like that. But a few decades later.

a bride store businesses, yet that's exactly. And after the depression, after world war two, that was how small towns and areas were service to retail. And there are mostly franchise Operations. This particular one was bin Franklin, was the brand name like vitamin Franklin, general store type place.

And when you say franchise Operation is because it's way too much of a burden to like source your inventory, Carry your own inventory, maintain all those different vender relationships. If you're in one of those towns, you're serving two thousand people, you're kind of the one store there. What you really want is to sign a contract and just get the shipment of the stuff that goes into the band Frankland stores in all the .

small towns you and just be literally the merchant serving your customers. That mindset dominated its worth of pause here to talk about what these stores were because it's a very foreign concept to anything we're familiar with today. These variety stores, they were also called five and times, if you've ever heard that term.

like a five cent, ten cent store.

And the reason for that is that most of them, every ig have mean the store was either Prices at five cents or ten cents. That was the level of the sophistication here. The other big, big difference between how these stores Operated in modern retail today, which seem really invented, was they weren't self service. Oh.

he didn't invent that. He stole that. We're going to get to IT.

We're going to get to IT. okay. So you would walk into these stores and there just be a counter area of front that had clerks and you would tell the clerk what you wanted and then the clerk would go back into the store, pick out what you wanted, bring that up to the front and check you out.

Because, like, there wasn't really choice. You could like, I need a hose and they would go get the hose. It's not like, let me see all the different brands and sizes and colors. IT was like, I know you have houses here, can you get me on? The merchants .

weren't making the decisions on the invitation. IT was all just being handed down on high from Butler blows back .

into yeah I did not understand when reading this book when he kept referencing stores that they were not stores where you walked around and get your own stuff off the shelf that that is a modern concept that is crazy.

I don't know exactly how the department store model worked like you know jc pennies or series where sam had worked. But I think IT was also not really what were familiar with. I think when sam was working as a salesmen and demand pennies, you know, IT was sort of like an even higher touch version of this, I believe, where like a customer would come into the store, the sales person would greet them and then sort like escorts them around and curate their shopping trip. Very, very different experience.

yeah. So Betty brothers .

seems having this conversation with them like, well, probably you want to bend Franklin franchises and IT just so happens, we've got the perfect store for you in the little town of new port. arkin. Sop, the current owner of the band Frankland franchise there, wants to sell in new por.

It's a little towns, about seven thousand people. It's in eastern arko now you know where benzol arko and walmart s today. It's not in eastern arkansas.

And it's like, great, i'll take IT say unseen now you have to ask yourself, IT is one thousand and forty five in america. The war has just ended. And unlike nineteen forty five in japan, like we talked about with the phony story, retail in the us. Is booming.

Everyone's come in home. There was the G I. bill. Everyone's got new homes. Everyone's certain families like there is a lot of stuff to buy.

There is a lot of stuff to buy. IT doesn't matter if you're a department store in a big city or a variety store in a seven thousand person town, like everybody in retail should be making money hand over fest right now. So the question is, this didn't ask himself and should have was, why does this guy wanna sell? He says in the book a guy from saying Lewis owned IT and things weren't working out at all for him.

He was losing money and he wanted to unload the store as fast as he could. I realized now that I was the sucker Butler brothers sent to save him. I was twenty seven years old and full of confidence.

But I didn't know the first thing about how to evaluate a proposition like this, so I just jumped in with both feet. My negativity about contracts and such would later come back to hot me in a big way. wow. So he in Helen, by this store.

this distressed asset at not a distressed Price.

yes, they buy IT for twenty five thousand dollars, five thousand dollars of their own savings, and twenty thousand dollars one from L. S. From hell's father and the sam. You know, he says, this isn't when I dreamed, but, uh, you know, i'm still going to set big goals. He decides that he's gona set a goal, that this store is gona become the most profitable variety store in arkansas within five years.

It's quite to turn around and is also the first indication of sam setting these big harrier dacian goals. He has the subsequent obsession with set go hit IT, satio hit IT. And that really does drive all of his need for experimental because he finds himself in these situations where he has a goal, said. And he must invent some way to hit IT.

Well, IT also sets the stage for what was to come. He sets this goal and then he gets there. This is not a realistic goal, he says. Only after we close the deal, of course, did I learn that the store was a real dog.

IT had sales about seventy two thousand dollars a year, but its rent was five percent of sales, which I thought sounded fine at the time, but which IT turned out was the highest rent anybody had ever heard of in the variety store business. No one paid five percent of sales for rent. And IT had a strong competitor, a sterling store, which was another franchise across the street, whose excEllent manager, john dunne, was doing more than one hundred and fifty thousand dollars a year in sales. Double mine, yes. So not only is unlikely that he's going to be the most profitable store in argan saw, it's unlikely he's gonna the most profitable store in new port.

Yeah so what .

does some do? He goes right across the street into dunum store and he starts trying to figure out why donee is as successful as he is.

Yeah and this is a thing that, speaking of the first time, sam does something that he then does forever. He becomes notorious for going into competitor stores, bringing in a little no book later, bringing in a little taper quarter, and just seeing what he can get away with, interviewing clerks, interviewing associate at these s anytime he's traveling with the family on vacation. And then he's just going into all these other stores and observing and taking notes and figuring out what their systems are, what's working, what's not working. So here he learns that valuable lesson for the first time.

So good, I was going to bring this up later. But I think he says in the book that he believes he has spent more time in kmarts than any none, like individual store employee of kmart, including k, mr. t.

Senior management. yeah. And also we keep refreshing. k. Marr, when I was growing up, I was like walmart care.

I think car is kind like walmart, about the same scale, same size, kind of a little lower end. Like that was my perception as a kid of K. R. I didn't realize that came out for a very long time, was much, much larger than walmart. They were kind of walmart big brother in content .

or they were the gilla.

I don't know what the year this was, but I remember some quote from walton he's talking about when we reached five percent the scale of mark and is like wo that that really puts into perspective how bigger lead they had.

See you man, no pad is actually a yellow legal pad that sam uses. So sorry, David, famously he has a yellow legal pad, is going into competitive stores. He starts like diving in dumpsters, trying to get sales recedes and like inventory orders and stuff, figure out how these stores are Operating.

And he quickly realizes from both down to across the street. And also he's doing this all over the country's going in the you have small variety stores all over our council. Just trying to learn he realizes that Price and running promotions, cutting Prices on big markey kind of attractive items like a health and beauty aides, tooth peace, mouthwash, makeup, that kind of stuff like that really drives customers in.

So like, okay, and we start to do and that he has some success. But there is a problem, right? Like we talked about, Butler brothers is the franchise is or their control all the inventory the same as the merchant is, just getting whatever they send him at whatever cost they prescribe and bully brothers, they doing great.

They get about a twenty five percent mark up on all the inventory, and they don't even do anything. It's almost like they set up the whole system just to keep these places high out in the countryside. And they just get a twenty five percent scheme off the top. yeah.

So what does sam do? He starts figuring out who the manufacturers are of some of these goods. And for manufacturer that are also located, they are kind of in the south, in the midwest. He starts driving around and knocking on their doors and asking if you'll do sad deals with him and just like sort, you know, clean destiny, sell him some of the merchants that he otherwise would be ordering from Butler brothers and that they would be selling to buttle brothers. They just give, you know deal directly on that and you .

know what like he's Operating a small enough scale that Butler brothers isn't really notice. And to be Frank, like there wasn't good tracking your accountability at this point. Me, there wasn't computer is yet.

So this no computer is here.

You'd have to really be paying attention to figure out, oh, maybe stand quite as much as the stuff from us as he should be.

He's driving around themselves. There is no management. He has some clerks working in the store but is just am and Helen run in the place so he's out. If he drives to visit them, he's GTA get a deal done on the spot.

So he goes, he knocks on the door, meets these people and is like, I want to buy or right now i've got a trailer hooked up to my pickup truck outside. Can you just load the inventory right into the back and i'll drive IT back the new port? Yeah so he says I bring them the inventory. I bring IT back. Price is low and just blow that stuff out of the store.

which this is an invention like this is a brand new concept that we cannot a take for granted now, but is totally a swarton invention to meet his own needs, which is create something that is astonishingly low Price to get people in the store, take no margin on IT, make IT a loss leader who cares, but get people in the door spending time in your store and they look at other stuff. And this would become a corner stone of walmart forever after this. And for every other retailer, even a pricing of sas products now where you look at IT, and it's like go on on the free plan, right? It's not that he invented lost leadership as a category, but he figured out how to make IT work in the retail model.

Yes, he figured out how to really merchandise Operationalize. You know, down names across the street was running promotions, right? But Donna wasn't thinking about how well maybe I could sell even lower if I go home my pickup truck out to the manufacturer and get goods .

at a lower Price, right? And of course, once here, hold on your pickup to go meet the vendors directly. It's not that far of a crime to say, well, what don't I have in the story that i'm getting from Butler? Like what could be interesting? You start getting good at doing these direct deals and sourcing your own inventory and figuring out how to merchandise products that you personally believe will sell. And this is really where he started to hone that skill, craft and six cents for deeply knowing the american consumer, or would say, consumers in this area, in his communities, and having a real spicy sense of what would make them go crazy and have really product market fit in people's homes.

Price selection, convenience, right? That's the whole eternity of a retail. But nobody really knew this yet. And Frankly, all of those things are important. But for the majority of people out there in the world and in amErica at the time, and certainly the vast majority of people in these small towns, yeah like election in convenience.

life was inconvenient, period. So like you're gonna go through some inconvenience to get things selection. There wasn't much of no matter what. And we just came out of the great depression. Price is very important.

Customers will go to go rate, go great length to get lower Prices.

People would make day trips. People would drive five hours to other cities to get a deal on goods.

It's crazy, he says. Here's the simple lesson we learned, which others were learning at the same time, and which eventually would change the way retailer cell and customers by all across amErica say, I bought an item for eighty cents. I found that by pacing IT at one dollar, I could sell three times more of IT than by pacing IT at one twenty.

I might make only half the profit per item, but because I was selling three times as many, the overall profit was much greater. Simple enough. But this is really the essence of discounting. By cutting your Price, you can boost your sales to a point, or you can earn far more at the cheaper retail Price than you would have by selling the item at a higher Price and always low Prices. Always walmart there IT is we're not quite a walmart yet.

Did you know their slogan for a long time was always the lowest Price, always. But then there was like a ftc lawsuit against them where they change to always low Prices because I was like false advertising didn't always have the lowest Price once they got .

to a certain scale. While mary was bigger. I think the original company wide slogan was always low Prices, always.

And then at some point, they changed IT, I think, in the seventies, to always the lowest crazy. We're going to push IT even further. And and they got away with them for lag five or six years. And the government had all something .

to say about that.

yeah. So all this sounds like sam says that IT sounds simple, right? But people didn't know this stuff yet.

Like retAiling had not professionalized. We're not that far removed from rock filler like the general store like post world bar too. This is all new. So this is incredible. He actually hits his goal. So by year five of the new port store, he's doing a quarter million dollars, two hundred and fifty thousand in sales at a thirty to forty thousand dollar annual profit. Remember, he bought the thing for twenty five thousand dollars, and that's including the crazy five percent rent charge in his expenses.

So his Operating margin on this is twenty four percent. He's making very, very real profits on this little story.

Got if you had a Better rent deal, that could be like twenty eight percent. But at those numbers, IT is the most profitable store in arkansas and the biggest store by sales, not just in arkansas, but like the whole midwestern south region. Selig, he has found a winning formula here.

which is interesting because i'm pretty sure at this point, he's got a bunch of a direct deals cut with the suppliers and he's added a bunch of products of his own. He's really merchandising. So he's really showing up on the Franklin rare, on the bottling brothers corporations rare. And they can know what is doing at this point, but it's good for them even though it's good for some. It's also good for them because volume and customers.

right, he's by far of the best performing bin Franklin store in country at this point. And unfortunately though, like I said, there's a reason that walmart is not headquartered in. New port arkin soup, but my brothers wasn't the only related party to say. M, who figured out what was going on here.

His landlord that had pulled one over on the previous owner and had the super owners rent terms also figures out, of course, how great sam is doing despite you have the deck deck against him and he decides he wants to take over the store so he goes to sam. And year five is when the least inspired and there wasn't an option in the contract to renew the least. So the landlord just the sam is like, you know what, son, you've done a great job. I thank you for turning this property of mind around. I'm going to take IT .

from here and like just to contextualize this, it's a seven thousand person town. There's not really many other available storefronts. He's got tons of shelves and there with tons of goods like a meaningful amount of inventory is being Carried on the business.

It's not liking me like a cool all move next door. That option does not exist. So his landlord comes to and says this and needs like we ah oh my god, oh my god, I have no other options.

He says, that 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 say this is a saving Grace, although the reality is HEllens father would have financed sams next venture no matter what.

But sort of the saving Grace, for sams pride, at least, was that the landlord did buy out the value of the ben Franklin franchise license and the hard assets, the inventory, the fixtures at seta in the store. So he pays salmon hell and fifty thousand dollars to take over the store. I mean, I guess that sort of a what two x return? And what was what .

was the Operating income from the previous year?

Thirty to forty thousand dollars?

Yeah, wow, brutal.

But at least they get to fifty thousand dollars out. So this is now one, nine hundred and fifty. And Simon Helen hit the road again, looking for a new town to bring their a traveling .

circus to and have a little bit more knowledge on least negotiation.

yes. So they go up to the other corner of the state in northwest arkansas, so where they started looking around for the next place to set up shop for two reasons, one, closer to HEllens family in oklahoman, 你可以 吗？ And two who, like I said, sam keeps a real he was like, you know, there's some really good coil hunting up there. I really wanted to be closer. You like to drive my bird dogs out and go take yes.

And more specifically, it's not just but there is good quality hunting IT is that he will be very close to four states, which each have their own quil hunting season so that he can get the maximum amount of quil hunting in with an easy drive from his house.

Yes, so great.

Lots of business decisions being made here on family. We need to be in a small town. We need to only work with family. Sam, I need to be able to hand coil and the maximum amount of time that I possibly can.

So the opportunity that they find and settlement is in a little town of three thousand people. So less than half the size of new part that already in this town of three thousand people had three variety stores Operating. Newbold had two for seven thousand people.

This town has three for three thousand people. As sam says, he loves competition. And that town, he is betton ville. Yes, sam probably, almost sadly, is rolling over in his grave right now.

the new walmart campus.

the new walmart campus, that their building that looks absolutely gorgeous, which i'm sure he would be furious about.

Yes, if you thought. But Warren was, you know, a penny, penny, very plain, no frills, no fancy things. Sam walton, hard to argue, who's sort of more frugal and less showy. Mean, sam eventually got into airplanes for very, you know, practical use. But same is not a showing guy.

Actually, the animal that he and john here we open made in amErica with is, I think it's one thousand and eighty five when forbes ranked him the richest man in america. And all these reporters start descending on benton wheel, they want to go interview the richest st. Man in america.

And he still drives an old pickup truck that has cages in the back for his bird dogs because he go hunting in the four states nearby. And h, it's the big sensation that the richest man in amErica drives a beat up, hold, pick up truck with cages in the back. And he's like, well, what am I going to drive my dogs around in the worlds?

Rice, right? So they arrive in the ville beton vill in the world forever changed. But IT doesn't have .

at all at once. no. So the store that they buy is another bend Frankland franchise that had done thirty two thousand dollars in revenue the year before, quite a distance from the two hundred and fifty thousand that they left new part with and same the sides.

There is a small market. This is a small store. There's a lot of competition, but I have big ambitions. This gives the year to the ground in retail and particularly in the bin Frankland franchi z sort of network.

He hears through the great vine that there are two ben Franklin stores up in minnesota that we're trying a radical new concept. They are redoing the whole way the store was laid out, the way I worked. They were removing the upfront counters or turning them in to check out counters and letting customers go into the store, browse the merging days, pick IT up themselves, selected themselves and then check out.

So he's like, I got to go. I got to go see this. He takes the overnight bus up from arkansas up to minnesota and, uh, checks them out. He's taking notes the whole time on his yellow legal pad, and he says about that trip. I liked IT, so I did IT too.

I love how he's so obsessed with first and experience. He couldn't just hear about this in the implement is like I must see IT for myself because he's so prevent tly believes that he picks up insights from like actually spending time in stores and actually talking to customers as seems like he does that sort of more than any other entrepreneurs i've ever talked about on this show, this obsession with first hand experience.

I think everybody can apply this to their business. I was thinking about IT reading the book. You know, I started so many passages like this, something I early listen, a lots of other part cast.

We started that I didn't like any other cause we find the best .

ideas and corporate about this when walmart actually get started later that i'm a teaser for now. So on july twenty nine th one thousand nine hundred and fifty, just about what is that seventy two years ago, they reopen the then Franklin store that they bought, still a franchise, still franchise, still in Frankland franchise, still working with bottle brothers for most of the inventory, quote, quote. But they want to send a message that this is you know a new year doing the self service new store in vent bill. They rename IT waltons five and dime, and IT becomes the third self service variety store in the entire country.

And it's fascinating that they picked this name because part of the reason why you do a franchise is the brand, sure, it's nice to get the inventory and the negotiated relationships and Prices and all the stuff. But really what you're buying is people know what I ve been, Frankly, is. And so they would come to the store. And what sam is saying is I feel pretty good about building my own brand. I know i'm in one way or another paying to use A B Frankland brand, but we're not can use IT.

IT really was rational because even though sam on the margins is doing his own direct deals with manufacturer at this point, it's a lucques concept that somebody in a little store in arkansas could source all of their inventory and do all of their logistics by themselves like, yes, that is completely freaking crazy that a store serving three thousand people in a little town would handle all of that themselves.

But they launch with the new name, you know, it's the new concept itself. Service causes qua stir. Now I believe I couldn't find this exactly, but I believe in that first year when while five and dime is open, remember the previous ben Franklin iteration of the store had done, I think what thirty two thousand dollars I said a year in revenue, something like that, only five and dime does ninety thousand dollars in sales the first year.

Now I don't know what the competitive dynamics war between the three stores in venville, but remember, the town only had three thousand people. So if you assume the previous three stores roughly had equal market chair, you know, it's a big assumption. But let's just for argument seek, that would mean that the whole market size of benton ville the whole time is ninety thousand dollars, and they did ninety thousand dollars in revenue. So what was happening here? Yeah.

there are massively expanding time. Did they expand the market because people are just buying more stuff than the others SE would have?

I don't know what happened to the other two stores, whether they went out of business or not. Certainly, they wouldn't have right away. I think what happened was this caused such a stir that people started coming to shop, have wall's five and time from other counts.

I think IT was the first time that sam realized that shock value would bring customers much like I didn't need anything. The first time I went to an amazon go to like, try the cashless check out, people sort of came for novelty value here. And that taught in the lesson of, oh, maybe we should always have novelty value. Maybe there is like reasons why people should be coming to walmart, even if they aren't necessarily looking to buy something.

yes. And if you think about IT alit like put yourself in the shoes of customers back then. And same talks about this a lot in the book.

You know, for so long we'll get into the competition with k. mart. Everybody thought walmart said all their customers, they were just like kicks in the sticks, just completely like morons out there.

That thing could be further from the truth. Like he says, like my customers were also sophisticated retail customers. They knew about what was going on in the cities.

They had relatives there they'd go visit. It's not like they didn't want first clash shopping experiences in their own home towns. So clearly this makes a big flash the same realizes that he might have a tiger by the tail here. And so he starts looking unlike a newport where he was satisfied the store keep growing into two hundred and fifty thousand dollars a year in sales. He starts looking to open up more locations.

more five times.

He also doesn't want to have all of his eggs in one basket and one lee slike.

he did a new port, right? Didn't he open a store directly next door to one of his competitors just so that that his competitor couldn't expand their store? Yes, it's like IT wasn't a high performing store for him, but he was like, at least I didn't let them get the square footage.

Yes, clearly, he is a very competitor focus. So it's funny like there are so many jeff basic isms that when you read this book and you learn about walmart and sam walton, you realized that they were originally wanted ms. Sam isms.

But the whole amazon, like where customer focus were not competitor focused. Sam, what is said? Absolutely not. We are absolutely competitor focused. We are focused on taking the best stuff from our competitors and implementing IT here yeah well.

we're here. We have to say IT. So eventually, a walmart does go in back in new port and there is a little store that is run by a family member of the landlord that screwed over sam, that does get put out of business by that walmart going in.

And sam makes the point. You can't say we ran that guy, the landlord sun, out of business. His customers were the ones who shot him down.

They voted with their feet. To me, this is that perfect overlap of R, U, competitor focus or customer focus or both. You have to win in a market by counter positioning in some way and well did IT by discounting.

But that obviously has an impact on your competitors. And you need two people to counter position against someone like a competitor. So when the big realization is, oh, customers always want lower Prices and satisfaction guaranteed and all the other walmart SMS that will have impacts on your competitors and you have to pay attention to those competitors.

But ultimately, the customers decide .

sam is willing to blame the customer for putting the competitor out of business.

So in one thousand nine hundred and fifty two, just a short while later, C M. Opens up a second store in nearby fail val or console because again, like it's just sam and know Helen when you can, you know, help them out with the book keeping managing the first store. Sam needs to hire somebody to go manage very well because he's working in in the well.

So he brings on a guy named William Walker who is managing a variety store in tulsa before that. And the way they convince him to move, to fail, fail and take over this sort of new concept is they make him an offer he can't refuse. They make him a partner in the store.

Then this is what you are into earlier. They give him a percentage of the profits that, that individual store makes. And in fact, they set up that store in all future stores as their own partnerships.

This is something I didn't understand how reading the book becomes a huge part of the playbook for walmart for a decades, which was every store manager in a new store opening was given at first equity in individual partnerships and then later profit sharing and in that individual store. So like that sets up a true align of incentives. I don't think getting body else is doing this at that point time.

And then even Better. So all the pool of existing store managers, whenever they open up another store, sam and Helen give them the opportunity to invest dollars in the new stores and the new partnerships. So now you're incentivised on success of the whole network and you're incentivize to information share. You want everybody to do Better.

They get Carry and they make A G, P. commit.

And also, this is super brilliant. I was thinking about this with regard to tech companies today and everything. And like, even though employees of tech companies get much Better economic deals with stock options, I think psychologically, this is a Better way to do IT. What's in was doing you're putting your own money at work and you're instantiated zed, both on your own personal performance in the store.

which is like an R S U type equivalent.

You can really do this in a tech company, but its scope to your performance like it's independent of other store performances, but then you also in the you know the equivalent of tech company equity. It's not just that somebody gave that to you or the company gave to you. You put your dollars and do IT.

which is what a stock option is supposed to simula. Later you later you put your dollars. And if you feel that it's valuable thing to own and you don't think people think about IT like, no, well, people think about options like this direct equity.

That's the biggest problem with options. Most people do not understand what they're actually getting. But yes, no employees are ever asked to invest in the business. That is definitely not what seems to happen in ninety nine percent of startups.

And then reading more in the book about this during this period and in the early walmart corporation period, IT was just the storm managers here doing this, not the hourly employees.

There is a gigantic cassin. I mean, there's still big cassin today, but two completely different classes of humans in those early days between the storm managers who were salaries and employed by the partnership, and of course, the to be called associate, but the early workers who were not.

And so a couple of interesting things. One, the people who were the store managers, this wasn't quite like weight color workers get somewhere in between. Most of these people didn't have college degrees. They were salaries, and then they got equity in these partnerships. But no, IT wasn't like these were warned graduates that we're coming in.

in doing this intentionally, not those folks word cut discriminated against in the walmart culture, especially in the early days of like think you're Better than us college boy.

Totally, one of the first managers was nicknamed the bear, and he had one eye. These are crazy stories out there. They are going to bring in donkeys into the store.

We're talking walmer. So like take us to walmer. How do we get from the walton fia time on .

the employee front, after walmart went public, C. M. Instituted both profit sheering at the store level with the associated with the early employees, but then also an employee stock purchase program.

And this is cool. So home deepo model their employee stock program purchase program after walmart. And it's brilliant. It's the same thing you put up your own money, but you can do IT pretext dollars out of your paycheck at of fifteen present discount to the stock Price.

This what microsoft let me do when I was A P. M. There, in addition to your stock base compensation they call IT an E S P P and employee stock purchase program, microsoft only let us have a ten percent discount of very kind of walmart to give a fifty percent discount .

from market Price. Their stories in the book of hourly associate that made millions of dollars in the seventies and eighties of of the employees I protest program wow.

Speaking of home, deep, did you know that a venture capital backed company?

Yes, it's an amazing story.

Yeah, we should do that at some point.

And totally inspired by sam walmart every time. okay. So back to the fifties in argensola, remember, we talked all the way back in the being the episode about ve sams brother.

Bd, well, bud had gotten into the bend Franklin business himself after the war in missouri. One day, sam is visiting kansas city, and he hears about a new suburb development going in just southeast of the city called rush in heights. And it's gonna have a shopping center, this new single concept, right, the middle of this suburb subdivision.

And there is going to be a girls y store and a drug store and real stay for a big bend Frankland store. So sam calls are bad, and he's like, we gotto go in fifty, fifty on this. This is a huge opportunity, and they do.

And IT is a banger. Two hundred and fifty thousand dollars in annual sales, the first year in ruskin heights. And three hundred and fifty thousand dollars the year after, and just keeps growing and growing, sam says, when I saw that shopping center catch on the way I did, I thought, man, this is the four runner of many, many things to.

The only problem was rush kin was actually kind of a red hearing. This was the future. This was the four runner of many things to come.

But I was still little bit ahead of its time. This is really a thousand and sixty thing, and not only fifteen. Sam is convinced, though, that is the future. So he starts going around in arkansaw, in missouri, evAngelizing the towns and city planners about putting in the shopping centers for which they .

would be the anger tenant.

But a super slow guy dealing with local government, it's hard to take a long time. He wants to move fast. So he starts trying to put his own realistic deals together for multi tenant shopping centres and fails.

And so eventually picks back to Helen's advice. He's like, well, these multiple and shopping centres, I see the power in russia, but it's dependent on too many other people. But if i'm willing to invest some capital, I could just put bigger stores in, in the same locations myself. 嗯， and that's what he starts to do.

Does he become his own land? Ord, than and just buy the land? Or what requires more capital?

That's a good question. I don't know at this point if they were doing real state themselves, but certainly, they like building out bigger store concepts. Required capital to build the stores.

IT was not like there are existing structures there and then outfit them with all the fixtures and all the inventory for the larger stores. But he in bed together, start doing this. They call these new stores, couldn't quote family centers. And they start doing, like unheard of numbers, a million dollars, two million dollars.

I know, still sourcing the inventory from ben Franklin, from boller brothers.

yes. So they don't yet have their own distribution inventory logistics network set up. That was the big step, a warmer. These were still just like much larger versions have been Franklin, and they were working with them to get all the inventory to them.

And they have already, at this point, they've spent so many rules with the Franklin like changing the store layout and concept and where they're going and starting to dictate more terms, naming them on their own. And so at this point, they're really starting to treat Butler brothers as more of a component of the wilton business rather than walton being a franchise z of brother brothers.

exactly. So these couldn't quite family centres that sam and bud we're building. They're still been Franklin franchise. They're just you know the lawns are now taking over more and more of control of the concept of their self service, their larger format, but it's still part of the Butler brothers, Carol, shall we say? yes.

And because they were part of buttle brothers, the salmon, but were limited on how much discounting they could really do. They were aggressive on pricing, probably more so than other merchants at the time. And they had. Self service, the large former in all this interesting stuff, but the Prices weren't like that much different than other stores.

It's worth knowing that we don't think about the notion of discount stores today being counter position against something like all big stores have things at kind of the lowest Price you can find find them because .

they're all discounters. Now I think it's eighty seven percent of market here in amErica .

is discounters. yeah. So there's either like specialty high and retail, which is often directly from the manufacturers, sort of like vertically integrated or specialty source or something. Or if you're buying things that we consider a big regular store, there are all discounters. And at the time, there were no discounters, everyone was marking up. They are goods by about forty five percent, which means that the gross margin, like if you're buying something and then marking IT up forty five percent IT means your gross margin is about thirty three. And as a retailer.

and that was on top of the mark ups in the middle from the franchise Operators.

the competition was so low that you totally could just do this for reference, just for people of a sense. Today, warmer probably has a gross margin between twenty and twenty four percent at any given time. And every store has like a thirty three percent gross margin even though like target is sort of like a high end discounter that sort of like a nicer stuff, more expensive there in the twenty nine percent category, but everyone was thirty three percent or above gross margin at this point in history.

Before this episode, I didn't think of target as a discounter, right? But that's what IT is. It's a discounter. IT is this model that is about to perfect here.

yes.

So you said there were no discounters yet at this point time, just like with self service, that's not totally true and actually even more so, you know, self service. There were the two ben Franklin in minnesota that was doing a, you could argue they were first, but sam was really the first. Bring IT to market in a real way. Their war folks bringing this new discounting model idea to .

market was in an, and hope was at the most successful.

IT was an in hope stores in new england and contemporaneous sly at the same time. IT was fed mart and sol phrase down the ago in the california.

which I didn't know Price had. I mean, I should have known this, but I just having been a student of the Price, I didn't realize he had a big venture before Price club that fed markt was his first very large successful thing.

I didn't know. I bit ninety percent of our listeners didn't know. You probably did know sol Price, you know fed Martin, the Price club, which he starts later.

That's costco. Costco was a merger of costco in seattle, the northwest, with Price club. Costco is the legacy of sol Price.

Isn't there something like gym ago worked at Price club, or was like a disciple of sol Price?

Yes, and then left to do the same concept up in the northwest, and then they emerging together like it's all the same DNA like that cost.

Oh, so basically everyone's marking up their goods forty five percent and nobody has done other than an on hope and a few other other select folks that haven't really rolled out at scale or really popular ized the movement. No one has done discounting. But what is discounting? Two major components.

One is big loss leadership, so blow IT out in order to get people on the store, do IT in dramatic fashion, and then people buy other stuff. Two is we make IT up on volume. Just don't mark stuff up that much period across the whole store, decide that you're only gna mark things up twenty five percent instead of forty five percent. And then you know, when you do that, of course you don't make as much money for edom, but everybody as more stuff in your store. This hadn't really been proven yet.

Yeah what and there's another component what you're saying, which is seems original lesson of you actually make more profit dollars selling items and a dollar than you do at one twenty because you sell three times as many. yes. But there's also the piece in the middle, the franchise er the Butler brothers peace.

Remember they're taking twenty five percent from the manufacturer to Butler brothers and then out to the stores. And that's how most everything Operated these discounters. They're like none that we're going to go direct to the manufacturer for everything just like sam was starting to do in this.

But on the margins, words can completely not be a franchise Operation. We're going to own and Operate everything. We're going to Operate our own back and our own supplier relationships, our own distribution.

There's a great quote. This is again later in walmart's development is when the same wellness sort of informing the walmart vender relations team and dishes on how to deal with vendors, please telling them don't leave in any room for a kickback because we don't do that here. We don't want your advertising program or your delivery program.

Our truck will pick up at your warehouse. Now what is your best Price? And if they told me it's a dollar, I would say fine or consider IT, but i'm gonna to your competitor.

And if he says ninety sense, he's going to get the business, so make sure a dollar is your best Price. If that's being hard knows, then we ought to be as hard knows as we can be. You have to be fair and upfront, honest, but you have to drive your bargain because you're dealing with millions and millions of customers who expect the best Price they can get. If you buy the thing for a about twenty five you've just bought someone .

else's is inefficiency totally?

I'll love that. I mean, that is brutally, but that IT capsule tes the philosophy so well and there's .

so much big into that, that people don't even realize. To get to the point where you can do that, you need to Operate the entire backend of retail yourself. Sam and bud and warmer, they're starting from. They don't have anything to get to a point where you can have conversations with suppliers like that. You need your own shipping Carriers, trucks, you need your own distribution centres, you need your own ordering systems, you need your own technology like they don't have any of that.

You need to forecast, you need to be able to understand we're going to sell IT off of these units to go by a crap on at the super low Price. We need to be able to be so confident in that, that we can tell the supplier to spend up new inventory and so that we will buy IT to increase their production. Okay, that's all the future. So in this moment.

okay, so in this moment, sam, of course, goes out. He goes in shop s, he travels to the northeast t shoppers, and and and hope he goes out meat some Price.

who I know for nineteen sixty.

fifties, fifties, early sixties at this point before one thousand sixty two. And he sees what they're doing, you know they're doing this proto discounting in big cities and you know brings around big city is not necessarily in like the premier real estate downtown, but like where you have access to logistics hubs and you can sort of scrounge together and make this work. The idea that sam could copy this and go do IT back in arkansas is crazy.

What manufacturer are going to shift stuff to arkansas, especially big volume stuff now? So he goes, he meets with all and and and hope, and he's like, you know what? I think I can make this work.

I think I can do that now even he knows what a huge undertaking this is. So he actually goes back to Butler brothers. And he's like, we've been great partners.

We've really innovated on a lot of stuff together. I ve seen this discounting model. I think it's the future. I know customers like low Prices. I've got these new large format stores.

Why don't we work together on this? I need you to handle the back and you have the scale to be able to do this. You are really distribute out to small towns like mine. Let's partner on this and do IT together. And butley brothers says, no.

find a way. This is like one. Vitality goes to the coloured coin sky and says, hey, let's partner on this thing together distributed world computer I think it's the future and they're like, no and he's like, okay, I go start a theory um yes, that is this .

moment for walmart and you impotent brother's defense design their own death warrant here but that was the rational thing to do. This is like a counter positioning thing. If they had done this, they had all these other been Franklin franchisees out there. So if they had done what sam is proposing and essentially taken out there mark up on goods that they would provide to sam stores, what are all the rest of their franchisees going, say IT is .

literally the innovators dilema, because they have too much baggage to actually pull this new thing off. And to be more specific about that, there is too much ongoing revenue that they would canabal ze in the short term by messing up all those relationships they had with the other franchise where they would play, turn too much of that in risk. The whole business they could not take advantage of .

what could be the new wave you and the thing that sam knew the minute he saw discounting was all of those stores are dead anyway. Yeah, just matter of time. Somebody is gonna come bring discounting to arkansaw and missouri and texas in flour and everywhere else and those stores are dead.

It's that insight that people fall out from. Cities want the same thing as people in cities, and so they're just as bright. They want the same things in life.

They just happen to not live in cities. And so let's not be prejan ative. Let's serve them with high quality retail experience totally.

So one thousand nine hundred and sixty two Simon bird secure site in Rogers, arkansas, which is pretty close to bend, fl. Got to say, you know, they're gonna do this. It's going to be chaos.

But they going to figure out the back end, do this, see no new discounting concept. They just need a name. And sam got a bunch of candidate names for what to call this new retail concept. And he's talking with one of the early store managers, the bogle, about his ideas.

And he says, what do you think? And bob says, you know, you've got all these fancy names, but it's pretty expensive building the neon signs of and five and time and then, Frankly, like that, a lot of letters. What if you just take part of the walton name, keep that, and make IT a place to shop and call IT walmer seven letters? That'll be pretty. I love IT and the legend is born.

And you know, seems basically not mad about this.

Obviously, saving money on non was appealing to his nature. But the other reason he really liked IT was he really admired sol Price. And soul Price had fmr. Yep and so that's why he really took a shine to IT. So july second, nineteen sixty two.

which we should say at this point, same as in his mid forties.

think he is forty four I wanted say.

yeah it's worth pointing out people often say like sam walton didn't start walmer until he was forty four. But as you can tell, because we are very deep in the story and in this episode here, and we are just now at the formal founding of walmart, everything that sam had done in his whole career was leading up to this moment. And it's a gradient. It's a slow start. While Martin, some way started twenty years before.

yeah, totally do that start new poor. You know, seems education well started well before that. But the retail entrepreneur education started them.

But I think ben vel is one five and diamonds, when you can say, really started yeah. But anyway, till I second, one thousand nine hundred and sixty two, the very first walmart opens in riders are console. And as you can imagine, IT was like, k, you are telling stories earlier about the watermelon is popping. That was actually a store number two, which was Harrison.

is just on what the donkey rides.

Yeah, they are donkey rides. And trying to pull together a back end for the first time on their own. Total, total frequent. K S, right?

So not only they are sourcing all this stuff on their own for the first time, but they're also opening a store that is a pretty unfamiliar store concept to people, but an appealing one. Come here and you can get everything that you used to for less money.

like a lot less money.

And it's a large square footage store. So it's also bigger than most people are used to fresh shopping experience. So I think you think about run, do a walmart today is kind of a chore like a is a big parking law and it's a big standard store. The goals to make IT anything, but the goal was to make IT like, uh, UFO is landing in your small town comes see IT totally.

They did all sorts of crazy promotions and circus carnival type stuff. But at the end of the deck, IT had low Prices on everything.

everyday. Low Prices, David.

always the low Prices always. And boy, did customers just love IT. So there's a quote from charlie kate, who was the storm manager of that first walmart in Rogers.

He says from day one at walmer, mister walton made IT clear that this wasn't just ben Franklin with low Prices on some items. He wanted real discounting. He said, we want to discount everything we Carry when other chains around us we're discounting.

He said, we advertise that we sell IT for less and we mean IT. So whatever anyone else did, we always have to sell IT for less. If an item came in and everybody else in town were selling IT for twenty five cents, we'd sell IT for twenty one cents. Literally, everything in the store is the lowest Price in the whole area. That was the value proposition.

which should ring usually true to amazon forty years later.

So that store is a million dollars in the first year, which was great. But now remember, some of the family center stores, we're doing two million dollars. So IT was very promising, but Rogers was still a pretty small town. So that the later that year, the next year, they open up two more walmart, one in spring deal, which was a much bigger town, and that pretty much immediately becomes highest sale store in the whole walton empire. And then a third bomar, the second one, technion Harrison, which we have been talking about that was also a smaller town and um a sam puts that they were basically trying to answer two questions with each of the is like one with people in a small town defect and start shopping in this new crazy chaotic environment just because of Price and then two in spring gale, which was a larger town like with this idea, scale up to a larger town two and the answer to both of those was emphatically yes.

So this point they do know they have a tiger by the tail, and so they sort to have lying a site too. Okay, but we can get to like ten stores. And I think sam gives an interview where he talks about that.

That's all he would ever want to expand to something like ten or fifteen stores that he doesn't have like a global ambition. And in part the reason for that is he is extremely into overseeing these stores himself. He wants to be a lot of visit every single one he wants to be a lot of really understand was going on on the ground.

He wants to be able to take the best ideas from to bring into the other. He's not really a control freak as much as his comfortable with being disconnected from what's going on in the stores. And so his belief was, well, if we expand outside of this state or this tri state area and we start getting more and more stores, I don't know that IT expands beyond ten, fifteen, twenty somewhere in there because I can't run IT. The only way that I know how to run IT if IT is bigger.

I mean, for the longest time, we've already said IT, but there was no middle management. IT was like hourly employees in the stores. Storm manager Simon bud, that is IT.

And this is how the sort of legendary anybody who knows is about walmart corporate culture knows about the saturday morning meeting, which they actually made monthly, I think in like the ID two thousands. And then now it's optional. Again.

sam would be rolling over this grave .

of but this was a Mandatory saturday morning meeting for all of the store managers in person, either in venville or like they do IT in some motel around the region where they are Operating. We are like they're all get together every week and they would share no information what's working? What's not working? Certainly came up wasn't doing that.

And sam, despite objections from a lot of people, including his wife, didn't feel bad about IT because he was like, look, you're work in retail and you got already employees that have to be in your store today. I feel like you can come to a meeting today.

And a big part of this was he was obsessed with getting numbers as fast as possible, getting the sales numbers in his hands so he could understand them and pour over them, then immediately getting them into the management's hands as fast as possible so they could blow over them and make changes in their stores. But then as they got more and more stores, IT was really about how fast can we incorporate things that are working into stores in other places so that we can very, very quickly learn. yep.

And remember, all these managers were equity owners in their own stores and in most cases, in the stores of all the other managers too.

yeah.

So okay, we keep talking about him. This is crazy. Also in nineteen nineteen two, the same year as the first walmer well worth launches will co, which obviously doesn't exist anymore, but as a discounting .

concept tempt the date.

Hud's and company in mini apple is launches target in thousand and sixty two.

which does IT target feel like a .

neural company in all, literally started the same year year. And S S. Credi, which was a huge nationwide variety store chain based in detroit, they start their own new discounting concept timer.

But it's worth knowing all three of these are existing variety store chains that we're used to making thirty three percent on every single item they sold in their store. And if you look at four horses, this voco target, K, R, which would come out of S, S, K, Y and warmer, you probably wouldn't have bet on one bar to be the dominant one that wins in the discount wave. But they steam all the other three.

those other folks, because they came out of existing companies, they warn, as willing to discount as much. There may be some true to that, but I think the story is actually a little more nuances. I think especially came they were the gara and they were really well run. And I think the parent companies, especially csk y, were willing to take losses and have lower margins in K R.

The way while my one, and that is just this amazing story we're gona tell now, is because all of those others, like the problem wasn't the mindset of margins IT, was that they came out of these existing Operations and they used the existing logistics backend and distribution backend for their stores. And at first, that was by far the best. So within five years, you by like one thousand nine hundred and sixty seventy kr has two hundred and fifty stores all across the country doing eight hundred million dollars in sales. And the new walmart concept, walmart revenue was still only around ten million dollars at that point time. So they are like a net five years later, and kmart is like darling of wall street because .

they've N A build everything from scratch, like go negotiate with every single manufacturer of every item that they sell. Trying to figure out how to warehouse IT, figure out the logistics network for the very first time.

Yeah and they're like in arkansas and missouri and like a regional area came out now everywhere, like they could just leveraged this network that they had all their distribution back and and like go everywhere all at once. But the problem was that all of their existing distribution back and was tailor to the old model, IT was not tailored to this new model of store, and that worked fine when there was no competition.

But IT wasn't lean and mean focused on getting the lowest cost, most efficient Operations possible because they weren't that worried about margin on the back APP. So as walmart starts to build out on their own going from k OS to building out their own distribution network, they're always a hundred percent laser focused on lowest cost possible, most efficient possible, as much cash flow, as much inventory turns as possible, like they had to be. The only way they were onna grow was if they could get access cash flow to grow, to invest in new stores. The only way they could do that while keeping Prices low, to make their Operations as efficient as humanly possible because .

they were not taking outside capital. So they had to only reinvest cash flows coming out of the business.

Totally same as this amazing quote. He says the things that we were forced to learn to do because we started out underfinanced and undercapitalized in these remote communities contributed midday 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, because, remember, he wanted to do the deal with buller brothers.

We might not ever have tried the Harrison or the Rogers or the spring dales are all these 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, much more business out there in small town amErica than anybody, including me, had ever dreamed of. And of course, that they build their own logistics network .

to service IT. It's very clear that what they did was to quote, chain and a benchmark. We sort of go slow to go fast. They had to build a lot of infrastructure early, but they're really obsessed with getting the Operating costs down on a sort of poor unit basis as much as possible so that as they do reach big scale, they can continue to be very, very profitable.

It's interesting that there is a dull prong approach here between lean, mean, focusing on getting your cost every penny you possibly can down because your margins and selling these items are gna be. So then there was a second component though, which has be a great merchandizing. You both have to be super Operationally efficient, but you have to be a good version too.

And part of this was sam Spikey sense for what consumers wanted and making sure that they were sourcing that from vendors, that they were putting stores in the right places. And we haven't talked about the planes yet, but this is probably a good time. Oh, yes, let's talk about the planes.

So bud was a pilot in the war. And pretty early in the book, sam talks about that. He and bud owned like twenty plains over the course of walmart life.

But only one was a jet or a sort of later they became just because early on, when they know any pilots, they had no. So early on, what they would do is the two of them would take prop planes, fly to places to survey where they want to put a store. They would identify from the air what seemed like .

an interesting location by flying sideways.

sideways, so they could look out the window down at the town, directly below them, and then they would go and figure out who owned that land and negotiate with them. And IT was this. We can do with ourselves. We can do IT super lean. And we are not going to like hire any middle man to like go around all the towns for us and identify spots. Now just fly over up and figure out where we going to put a store and will figure out how to reach consumers in a way that is like bringing them the best merchandise at the absolute lowest Operating cost to us.

totally. When I read that story, I was like, uh, this is amazing. CEO of company decides he needs a plan to be able to travel around faster, spending too much time in the cars like here.

We then serves like, i'm going to buy a second hand prop plane with a washing machine motor, and i'm going to learn out to fly and fly myself. amazing. I was thinking also about this whole incredibly important piece of the walmart story, where they literally build their own infrastructure for everything from scratch.

You know, that remind me me of what we talk about all the time on the show rate of the jeff bazas. Don't build your own infrastructure, focus only on what makes your beer taste Better. And I think we now have to have a caviar to the basic law, which is that, yes, that is true in most cases. But if what you're doing is like in a whole new area and testing class infrastructure for what you need doesn't exist in a case like this, the infrastructure actually can make your beer taste Better.

Oh, if it's actually your core competency, yeah, this is new core competency that actually did need to be done in house most of the time. That argument doesn't hold water. But if IT truly is core, which this did become core to beating came out and all the others and having much Better economics of them scale, then yeah, you have to do in house.

All right. listeners. Our next sponsor is a new friend of the show hunters. Unrests is one of the fastest growing and most loved cyber security companies today, its purpose built for small amidi ze businesses and provides enterprise grade security with the technology, services and expertise needed to protect you.

They offer a revolutionary approach to manage cyber security that isn't only about tech, it's about real people providing real defense around the clock.

So how does IT work? Well, you probably only know this, but IT has become pretty trivial for an entry level hacker to buy access and data about compromised businesses. This means cybercriminal activity towards smaller medium businesses is at an all time high.

So hunches created a full managed security platform for their customers to guard from these threats. This includes end point detection and response, identity threat detection, response security awareness training and a revolutionary security information and event management product that actually just got launched. Essentially, IT is the full sweet of great software that you need to secure your business, plus twenty four, seven monitoring by the team of human threat hunters in a security Operation center to stop attacks that really software only solutions could sometimes miss. Countries is democratizing security, particularly cyber security, by taking security techniques that were historically only available to large energy Prices and bringing them to businesses with as few as ten, a hundred or a thousand employees at Price points that makes sense for them.

In fact, it's pretty wild. There are over a hundred and twenty five thousand businesses now using, and they rave about IT from the Hilton PS. They were voted by customers in the g two rankings as the industry leader in end point detection and response for the eight consecutive season and the industry leader in manage detection and response again this summer. Yeah.

so if you want cutting edge cyber security solutions backed by a twenty four, seven team of experts who monitor, investigate and respond to threats, unmatched precision, head on over to hunters ous dot com slash acquired or click the link in the show notes are huge things to hunters. alright. So discounting well, they grew the number of discounting stores pretty dramatically up through their one thousand nine seventy IPO.

And people still weren't really paying attention because they were this company in the southern midwest. They seemed regional. But let's just take you through some figures.

By one nine hundred and sixty eight, they had twenty four stores. They failed to go public in one thousand nine and seventy, with thirty two stores and around a thousand employees. And the public markets, the reception, the bankers like this was not a household name.

So even though I was a consumer brand, you would sort of treat IT the way that you treat IT like an enterprise IPO today. It's not like the airbnb IPO that gets a lot of reception. Some stats on the actual IPO.

Well, first of IT was postponed because the market fell apart on them, much like many starts are going through right now. But in october, first of one thousand nine hundred and seventy one public, only eight hundred shareholders participated in the IPO. They sold three hundred thousand shares at fifteen dollars.

So that sort of the actual IPO the night before, and some quick math shows, they raised four and a half million dollars in that IPO. IT started trading for around fifty and sixty, so they had a modest little pop the next day, but they really were not having meaningful research coverage. A lot of the research coverage they were getting was kind of skeptical.

IT sounds a lot like amazon's research coverage early days, as if this whole house of cards could fall apart at any given moment in the next year. In one thousand nine hundred and seventy one, they did grow top line revenue seventy seven percent. So despite the walmart that we know of today, where there a very slow growth company, and I say that not to criticize them, but because we're often talking about pretty new tech companies on this show.

But if we look at you know the twenty tens, the annual growth rate for walmart is in the like two to three percent range, so not a fast growing company by tap eline revenue by any standards now. But shortly after, I, P, O, despite not attracting a lot of attention, that was not the case. No, we will link to IT in the shown notes. But I pulled up in the nineteen seventy two annual report.

which is a jam, a good find.

And compared to the stuff that you need to right now for your annual reports, which is like mostly compliant stuff that you don't want to even page through, this is like a remarkably legible, it's pretty thin document. Most of IT seems to be written from sam himself. They grew seventy seven percent, their first year after IPO. In fact, by nineteen seventy seven, the market p was still only one hundred and thirty five million dollars as a public company, growing quickly. Seven years after IPO in .

in nineteen seventy seven, they did half a billion dollars in sales growing at that rate. I did the math on the tigger by decade. So walmart compound annual revenue growth rate for the whole decade of the one thousand nine seventy was forty point one percent four, zero point one percent for the whole decade. And then in the one thousand and eighty IT was thirty two point four percent. And that was starting from, like a twenty five billion dollar revenue base.

Those two decades propelled them to be, and somehow still hold the crown for the highest revenue company in the world. You look at amazon and some people you think might be approaching them approaching but still not Better still.

warmer is king. yeah. So there's really two last really important pieces of the story that I think we need to fill in here. One can during this period, actually starting like right after the first early years of the first walmart, and that is computers. So yes, this is wild in nineteen sixty six.

So just four years after the first warmer goes in, sam walton, who at this point is what, nineteen sixty sixties, just about fifty, like forty eight years old, I think, yeah, he starts hearing about computers. He always got to here to the ground. He's talking to everybody. He's always looking for new ideas.

He's cheap. So he doesn't want to spend money on computers. But he starting to get the sense there in the same way that discounting disrupt that everyone that came before in the variety store era computer back and retailers were probably going to disrupt the classic retailers today who don't use computers.

So he goes up to pik psi new york and enrolls himself as chairman CEO of walmart in a seminar at IBM on how to use computing technology and business is a great quote from, again, AManda Marks, who was president of the national mass retailers institute and was also at that seminar. He says without the computer, sam walton could not have done what he's done.

He could not have built a retAiling empire the size of what he's built, the way he built IT. He's done a lot of other things right too. But he could not have done IT without the computer. IT would have been impossible. And then say, i'm right after that, says, much as I hate to admit to something like that, I expect abe is probably right.

I love that I literally had that in my notes to so glad that you got that quote. This was the start of walmart becoming a technology company. They were always interested in experimenting with the most cutting edge stuff. But sam didn't understand technology well, but he understood the benefits of technology. And so the way that he made sure walmart could sort of benefit from this is he always left the doral in for smart taxi v Younger people to come and have big jobs at walmart.

And then he would push back aggressively on their plants and say, like, do you really think that we need to move our whole inventory system over the computers that's super expensive? Like convince me that we need to do that. But the fact that he went to these conferences and rolled in this stuff, created this headcount, meant that he was open to IT.

He just wouldn't be the one to make the decision because he ably wouldn't have picked the right technology choice or might have done IT too earlier, too late. And so I think this was like an interesting compromise for him to do this. Later on, there was a proposal, need for a 2y four million dollar satellite network， private satellite network, specifically for walmart.

This was like, predal of this was in the seventies. Was that dad? Seven or eighties? Yeah, I think this was .

in the seventies and eighties. Oh yeah, you're right. Nineteen and eighty seven. So let's see. Market cap at this point is probably around ten twenty billion dollars somewhere in there. So they invested twenty four million dollars to link all stores with a two way voice and data transmission and a one way video communication from benton ville. And basically, there was not enough band with available on any other communication lines yeah.

whatever was being used .

at the time to think back in a very fast manner. All of the sales data from stores. And you know, we talked about how sammis obsessed with getting the datas quickly as possible and learning from disseminating those learnings.

They ended up OK a twenty four million dollar proprietary satellite network. And then because sam had this for osoph's member, he'd thought I couldn't scale past fifteen twenty stores of needing to sort of visit all of the stores themselves and have that personal communication. The satellite network enabled the sam to sort of virtually visit these stores from the home office and broadcast satellite transmissions of himself. And they eventually instituted this for the saturday morning, meaning, or he would broadcast over the propriety tary satellite, newark in one thousand and eighty seven.

So the safety network becomes part of this. But this whole technology investment, computers, zia, it's even more than just information sharing. IT gets back to what I was saying about logistics, about efficiency, about margins, about keeping Prices low at, about beating competition. So as they start to invest in computers and they start to bring the talent in to the company to do this, including the first person who sam brings in who meets at this conference, I name ron mayor, who fatly sam with briefly make CEO of all mart and .

discovery was not ready to retire yeah exactly which is a very tmc story, totally similar string .

and is very gracious to an t is the problem was not ready to retire, but run and team that he builds in, in the technology they build the first concept of a distribution center, think for OKR is like, great. They have warehouses is right? Like you would order goods from your vendors, from your suppliers and coming into your warehouse, you know, and then you chip him out elsewhere.

But like they just sit in the warehouse and then you picked stuff off from the warehouse and go elsewhere. Warmer as their investing in technology, they started taking daily individual orders for custom, in whatever skills, in whatever amounts each store in the walmart network needs. They buy in a big, big bulk, in big packaging from their vendors.

That comes into what used to be called a warehouse, is now called a distribution center. In one side, walmer does a whole bunch stuff in the middle of the warehouse, they unbox all the stuff take IT out of packaging. They reboc IT up into the individual orders for each individual store every single day.

And then they should get back out the other side, customized to each store. And then originally, they were doing this with common logistics Carriers like U. P. S, fedex or other Carriers. Then they start building their own trucking lines, and they can just get so efficient with this. So this is how, as walmart starts to expand out from the south, from the midwest, across the country, and kmart is just going off city by city, extending their supply lines, walmart got this behemoth of a distribution network that is way more efficient. And so when they go head to head in a geography walmer, can Price lower still, be making a profit and came up just bleeds cash in those stores?

Yeah, it's amazing how far walmart has come because the first store didn't use a distribution center, they would have to order from all the manufacturers and all the vendors .

drop ship directly to the stores.

You couldn't sell what you have in the store. And so when they open the first distribution center, what they basically did was because they saw the growth of cities moving outward. So like the suburbs are starting to happen, they would build a distribution center sort of like hub, and spoke.

They would pick the city that they wanted to go into that was furthest from that distribution center, and they would build a store there. And then they would start building slowly back toward the distribution center. So you basically planned your flag out in the middle of nowhere, but would become an area where a lot of people live as suburbia sort .

of blossomed one day. Drive of a truck from the distribution centrate? yes.

And so that at some point, we've got dozens of stores that are driving distance filled in this whole sort of radius back to the distribution center. So they could make a lot more margin because they could get the Price down as much as possible because they could negotiate these huge discounts with vendors because they have the distribution center, which will send all the stores that are connected to IT is a pretty brilliant methodology. And I don't really realize they invented this concept of a distribution center. I always forget that before walmart, there was the franchise variety stores, but there really wasn't large scale discount retail that use this sort of model.

So by nineteen ninety, walmer passes tears to become the largest retailer in america. I got all through the seventies, all two. The eighties came up with the gorilla.

And then by the early nineties, k. Mar, which have been so dominant, they start really feeling the squeeze. Walmart, as walmart is now pretty much nationwide at this point.

pretty much, but still not yet. In nineteen and ninety, they finally open a store in california. IT took until ninety, ninety two for organ and ninety three for washington. So all these protocol coastal leads who are like under rating walmer, it's kind of for a lack of exposure. The first store opened in washington in one thousand nine hundred ninety three, and amazon was founded in one thousand and .

ninety four wow.

Of course, on the coast and the in the big cities, you can don't feel the dominance of walmart in the same way.

So here's some really fun history that I had no idea about in the middle ties. k. Mart is at the height of its power, the height of its pride, right before, you know, walmart is finally got tip him over. During that time, they go on a sort of drunk and acquisition spring.

Did you know about this? no.

So came up between the midi eighties and the early nineties, acquired sports authority office, max builder square, wolden books and borders. And this has had all sorts of light bulbs going off in my head and kind of reminds me .

the new york times during that year, I two.

right, knowing my tech history, knowing our tech history here on a quiet life. Borders, the C. E. O. And founder of borders books, started with then during the tech bubble. And I always wondered, I like, why on earth did li leave borders that he started and was founder of? And then go start this web thing, thing IT was because K.

R. Body's company. wow. I never knew what happened to orders.

And so IT, by the time, like kind of early middle ties, when the writing on the wall car starts selling off all of these acquisitions that they had made to destine rates, cash they ultimately file for bank PCA in january of two thousand two. And then in two thousand, four came out and theres merged. We came out and theres merged.

Yes, in two thousand four.

we're going to take these two legacy you know previously biggest retailers out there, story brands are we're going to merge them together and it's going to work. And I vaguely was aware of this and I thought like of, well, uh, amazon killed them all. No walmer killed them.

There's no way that came up or got a bit years at that point could compete against walmart. So that combined identity itself when bankrupt in twenty eighteen. But walmart, by this point time, this is like the sonny playstation versions of walmer, like the last big hara they had launched, the supercenters.

This is nuts. In fact, super centres is so dominant now that we've actually deprecated the name walmart. Two percents are just called walmart.

Now walmart were the legacy of the variety stores. They didn't have groceries. They had hard goods. And groceries was always this very attractive category. It's the biggest category of retail in america.

Do is an enormous amount of consumer spend after house and cars. I think grocery or at least food as the next category is the largest in the households spend money on.

Yes, this also explains why I always online red. Is amazon so obsessed with grocery over the years.

which they haven't cracked, by the way, famously, they've sort of struggle to nail IT yeah and .

they bought all foods and you know all foods is great now that but basis always talked about, we're always trying to crack grocery. This is why it's enormous .

but difficult. There is a cold supply chain, the unit of nail that's totally different than shipping plastic around.

And walmart nailed IT, but IT wasn't sam. So sam passed away in ninety ninety two before he did in the eighties, he was on a trip in brazil whenever he would go around the world. In walmart had started to the and internationally, at this point, of course, he would go check out other retailers, shop the competition. And in brazil, care for the french company, their Operations. In brazil, they had these big centers called hypermarkets, and these hypermarkets were like a combination of a walmart and a grocery store.

Do we should open a merge store and call the acquired hypermarket?

So I actually waited this on the fourth day. What I was doing research, sam, just like he had with self service retAiling and then with the discounting model, he was like, i've seen the future. I'm going to come bring IT back.

We're going to do IT at walmart. And again, he was right. And again, like some of the others, he was wrong on timing.

So he launches a spinal of walmart in the later days and early nineties called hyper mart, U. S. A.

And there are photos you can find online. This is really wait until I forth. I think they only built three of them. IT is the most ninety's american thing you have ever, ever, ever seen.

A great logo.

red, White and blue, all over the place is just enormous, enormous footprint. Store square footed, like a cathedral of capitalism. They are pretty amazing, but they were too big.

I didn't catch on. So then he battle cancer for the last few years of life as his health was fAiling. He had already handed over the C. E. O role to David glass, the company, and then after his death, started a smaller scale versions of a hypermarket that they called supercenters that was, like, not as Brown out as what craford was doing in brazil, but combined grocery, like a traditional grocery store and the traditional lamer.

Do I live right next to one in north CarOlina? A in two thousand and eight and IT was awesome. IT was the only thing in my like little suburb of the highway where I live for one summer.

There was a you know, some other stuff in the shopping center, but you can have like the walmart, supercenter and IT was amazing. You go and you get all your groceries. They have everything else. I'm so sold on that concept is not surprising at all to me that that massively took off well.

And not only that, I was so convenient. Have at all in one and you know entertainment value, all of the things they brought the walmart approach of low Prices to grocery, too. So most items ban out on the average across the board.

The girls y items in a walmart supercenter are fifteen percent cheaper than a compare grocery store, which if you're like a middle of lower income family, that's hundreds of dollars a month that you're saving, which is incredibly meaningful to you as a family. So walmart goes from zero percent market chair in U. S. Grocery at the beginning of the nineties to I think by the end of the decade in the nineties, they had become the largest grower in america.

which they still are. They are the largest grocery store in the united states today.

Well, now they are not just the largest grocery store. They are the largest grocery store by a factor of over two x the number two player.

wow, which is koger.

Who's to cover? yep. So walmart has over twenty percent. Market chair of us. Groceries, Roger has under ten percent. And then Albertsons and coco are tied to five percent each.

wow. And is Albertson safeway now do they emerge?

I think that might be right. So if you add up all of those together, they're still less than walmart.

Oh my god, crazy. That's like amazon's s dominance and e commerce. If you add up two, three, nine in e commerce and walmart, second place to amazon, IT is still not equivalent to amazon's total sales in a year. And in fact, I think it's something like two, three, nine added together are still fifty percent shy of amazon's S E commerce revenue in a year.

In the last most recent fiscal year, grocery accounted for fifty five percent of walmart's total revenue, which is over three hundred billion dollars alone, just from grocery for a part of business .

that didn't exist for the first thirty years. I mean, that is an iphone scale company reinvention .

and barely dead IT reminded me of ted and tied with butch hathaway buying apple the best bircher hathaway investment probably ever. Yes, that happened in the public markets after warn had brought on here. And that crazy one less little bit about super centres.

I think the war was already won with kr, but this was really the death. Null was super centres, because K, R. Tried their own hypermarket concept called super k marts.

How I remember that. And this is where the walmart distribution strategy just completely trans to k marit trak market in hard goods. But now you're talking about groceries.

The items seem to be fresh. They expire after a few days. You need to figure out how to preserve.

It's also an even lower margin business. So like here's walmer with Better logistics, getting Better fresh items in their stores at lower Prices is totally game over for k Martin. Frankly, it's kind of crazy that a lot of the other traditional grocery chains even have the market share that they do. I mean, I can understand like special tea and higher and stuff like cold foods or spouse or the lake, but walmart is just so dominant in the grocery category.

okay. So we have talked a little bit about technology at walmart, and they were undoubtedly the best putting in back and systems to build a real impressive data network and use that data in the eighties and nineties. But of course, this the internet happens in walmart is pretty slow to adapt to that.

I spend some time on the wave back machine kind of looking at their website over the years, and they did not take the internet very seriously at first, all the way through the nineties, all the way through the early two thousands. I don't think they thought I was an existent threat, the way that IT truly was for the business. So they make a few really big moves to try and bolster this team.

You said they didn't realize that was an existential threat, and that's true. But just telling the walmart story, now in their DNA, they have history, ally been accompany, motivated by threats. They saw opportunities and they pursued opportunities like supersedure s why they didn't pursue the online opportunity is really puzzling.

Yeah, it's almost like no one made the compelling enough case for why they need to invest in building out the internet team until IT was kind too late. That really was the style of make the pitch to leadership of why this needs a massive investment.

And amazon was posting executives from walmart left and right totally.

So the first step that they take here is, do you mean with the company? cosmic? David? K O S, M, I X.

Yes, yes, I do. I remember using IT.

Walmer bought them in twenty eleven for three hundred million. Do you know what the founders did beforehand?

No, I remember. I was like a meta search company.

Yeah, was called jungle IT was not for U. S. search. IT might have been like meat search for e commerce in india or something like that. So amazon had bought jungly. And then those two guys, vincy and on and inside of amazon, started mechanical turk.

oh cool. So interesting.

Amazon history, there's, they leave, they start cosmetics, one more bites. IT for three hundred million that becomes walmart labs, which was run as a totally separate company and has now sort of merged into walmart global internet division. But that was where this sort of like, okay, we need to start taking this really seriously.

This e commerce thing is going to be really disruptive and they have acquire a variety of other companies over the years, including but no both or bonus. I've never exactly known how to say that other than I like your pants. And of course, then in twenty sixteen, we didn't episode on this now were entering the timely, where acquired was already a thing by the time this happened, which is crazy. S now that means more dinosaurs. They bought jet that come for three point three billion dollars.

I would love to talk to mark lore about all this.

yes. So obviously, mark started q zi typer dot com, sold that to amazon, got a nice stiff with jeff bazas left, started jet. Did you raise a billion dollars? Or was that a billion dollar valuation? There was some lude cries for the time prelaunch financing that happened, and IT easily didn't work the actual jet dot com thing.

Walmart shut down. IT was a club, right?

IT was more like costco. Well, that changed originally was I came over. IT wasn't.

IT wasn't. IT wasn't that I was. But there were multiple strategies. And the quote, as we tried a lot of things, we innovated, not all them are going to work. We learned from our failures and the party line from markin, from the walmart team, where that jet served its purpose to get a bunch of really talented e commerce focus engineers and product people together. And then IT served as a great vehicle to serve as the core at this point of walmart commerce business.

And they really have made a good comeback.

right? yes. So mark Lorry left in twenty twenty one. And walmart currency E O doug mmh million does credit him for jump starting their e commerce business, which I think is growing. And this is before code, because covets statistics, mess up everything for e come. But in twenty nine, I think grew thirty seven percent.

which went walmart itself as a whole was growing .

like two percent. yes. And at this point, hard to save. This is a small number of big number, but only about thirteen percent of walmart revenue comes from e commerce.

Now at seventy five billion dollars, right? And IT is growing much faster than amazon e commerce business. But it's because amazon e commerce business is a ludicrous e you know, it's five or six times larger than walmart e commerce at this point.

But the one hearts strategy here is quite interesting because IT leverages their distribution centers in their stores. They want to make e commerce not a separate thing. They really want to make you feel like you're shopping at walmart, whether you're shopping online or in person. And there is sort of a seamless experience between the two. And so they leverage their stories to do things like same day grocery delivery or pick you up at the store, buy IT. And we're flexible whether you sort of feel like you bought IT in the store and you want to come grab IT from us or whether IT who wants to arrive at your house, we'll have to see how that strategy plays out versus amazon coming out IT from the other direction and having to build physical infrastructure to come through on those promises.

They're dealing some cool stuff. They launched walmart plus.

which is a prime competitor.

which is a prime competitor. But like you're thing about this sort of leg integrating at all into one experience, physical and e commerce, one of the cool things about walmart. Plus, I wish there were a walmart in ago. A, so I could save money on stuff I buy. But b, so I could try stuff like this.

I'm very curious if you would job there.

That's a good question. I mean, I love trader joes. Yeah, so I shop IT, whole foods and trader joes. I bet I would buy stuff at walmart.

But one of the cool things that part of walmart plus is you can shop with your phone in the store. You can scan, check out by stuff as you're going to the store on your phone, all done seamlessly. And then just walk out, which I think is obviously amazon is working on this too with their just walk out technology.

But to me, that's like a big value problem, like one of the reasons I don't like. Shopping at trader to target even whole foods to like physically anywhere is the check out line. It's just like.

yeah, I get hate IT yeah yeah but i'm not used to waiting for anything anymore because the internet makes us I don't have to I .

think about stuff like this, not like, why am I doing this? It's not just like the waste my time. It's they like this is unnecessary in this day and age, right? And i'd be happy to check out on my phone as .

I go through a store. I started been preparing for this episode, trying to understand like how is the digital experience of walmart these days versus amazon's experience because I obviously well first and amazon packages arriving in my house every day. So I started buying some stuff on walmart.

I bought some like garden lamp s because I needed to install some lights. And I will say the consumer perspective so far for me has been pretty identical to amazon. I don't think the selection is as large, but i'm not convinced that I take advantage of amazon sort of infinite selection.

I think I look for him is on choice for the wire cutters, pickers, that something that has five starts and over a thousand reviews and just buy that thing. And that methodology is very available on walmart. And I was trying to dig in like and study from a technology perspective.

What are examples of things that amazon is more advanced on? And actually this was a great use of T. S. Good friends of the show over there. I really, uh, transcript from a call with a former amazon director.

An interesting quote is just A A little microcosm says I can tell you that walmart IT is almost exclusively just the title and the product description used for search. And as far as I can tell, there is no medica that put into their search algorithm today. Amazon absolutely has the additional meditation ata that theyve built into their algorithms.

And it's a constantly changing and ongoing process. They're very sophisticated what they do for search. There's tons of stuff hitting in keywords, user generated content, all that seller input is totally baked into the search algorithm. And that sort of makes sense that on walmart, IT would be sort of like a focus on a crude implementation. First, make sure that works well enough, but they also just have less historical data than amazon does on all the shopping behavior and all that stuff to incorporate into functional .

in the website. I suspect we will talk a lot more about this dynamic throughout the season. But amazon right, is you know both the first party selling and a marketplace. Because of that marketplace dynamic, there's this exponentially more skills on amazon than on walmer dot com, right? So amazon had to .

do walmer does have third party sellers online and they do actually least space in stores to vendors. That's another part of the modern walmart business model as you can just basically least square footage stock at. You have your own people who work there on your own payroll, and they are the ones who put all that merchandise and there. And of course, they can check out conveniently at the walmart, check out. But the revenue goes to you and you just pay walmart for that space.

This was so faster. I knew that there were mcDonald's in subways, in walmart, like sort of the store within a store concept and like target has those two. And also brilliant way to increase your margins as a retailer or allow you to sell at lower Prices in one marts case. But what you're saying is even more than that, which is super cool items on the shelves and like display areas in walmart that are integrated into the store.

especially like greeting cards, that sort of thing, things require like heavy customization in the way that is presented.

Those are owned, Operated and run by third party vendors.

We want to think our long time friend of the show, venta, the leading trust management platform, venta, of course, automate your security reviews and compliance efforts. So frameworks like soc two I saw twenty seven o one gdpr and hip complaints and modeling ing vented takes care of these otherwise incredibly time and resort training efforts for your organza and makes them fast and simple.

Yeah, fanta is the perfect example of the quote that we talk about all the time here and acquired jeff basis, this idea that the company should only focus on what actually makes your beer taste Better. I E spend your time and resources only on what's actually gonna, move the needle for your product and your customers and outsource everything else that does IT. Every company needs compliance and trust with their vendors and customers. IT plays a major role enabling revenue because customers and partners demand IT but yet IT add s zero flavor to your actual product that IT takes .

care evolved for you, no where spread sheet, no fragment to tools, no media reviews to couple together your security and complaints requirements. IT is one single software pain of glass that connects to all of your services via and eliminate countless hours of work for your organization. There are now A I capabilities to make this even more powerful. And they even integrate with over three hundred external tools, plus they let customers build private integrations with their internal systems.

And perhaps most importantly, your security reviews are now real time instead of static, so you can monitor and share with your customers and partners to give them added confidence.

So whether you are start up or a large enterprise and your company is ready to automate compliance and streamline security use, like fanta, seven thousand customers around the globe head, go back to making your beer taste Better head on over to vantage outcomes sh required and just tell them that ban and David, thank you and thanks to friend of the show, Christina anta CEO all acquired listeners get a thousand dollars of free credit vantage com slash acquired well, we want to get to the final figures on the business from today, and then I want to do a bare case in a bull case on the company from here. And then we'll do the playbook, go through and talk about what these things were that made walmart successful.

And of course, we have to do powers analysis and powers.

you got a good an episode. Ft.

here, I know.

All right. So warmer today. We have talked some about this, but I think it's worth recapping what the shape of the company is actually at this point.

So there are in twenty four countries what we have discussed. There are a global empire at this point. There's ten thousand, five hundred stores each week.

Two hundred and thirty million customers visit one of these stores, two hundred and three million customers as wild. The supercenter concept is basically walmart. Now IT wasn't like some of the stores are super centres.

Most stores are now supercenters. If you just think about the lander walmart discount store in ninety ninety six, there are about two thousand of them. Now there are three hundred and sixty eight because the supercenter is the new thing.

So the business is supercenters. They did close to a six hundred billion dollars of revenue last year. They did twenty five billion dollars of Operating income. That's only about a four percent Operating margin for those counting at home. They do have a twenty four percent growth margin, which is interestingly higher than in sams hay day. What he sort of believed the discounting business model should bear if I were to sort of possibly I think because discount stores have just become stores, I think there actually is room for a little bit more margin than sort of originally believed.

The other piece of the business that we haven't talked about at all, but is an interesting piece of walmart business and competitive vector to walmart is sams clubs, which were started in one thousand eighty three, I believe, and has been a very successful part of the company, I believe what is like ten fifteen percent of revenue of all mark today.

a pretty successful part of the company. But it's losing the costco.

Yes, costco has been this amazing story that is like the walmart of walmart, you know, and walmart has IT too with sams club. But it's interesting you bring a margins.

costa de as two hundred and seventeen billion dollars a year in revenue. Sams club does about seventy five billion. How is that? That they have all of walmart advantages and yet think it's like eleven percent of walmart revenues, which is obvious ly very material. But somehow they did not become dominant. This category .

especially know we're talking about one more plus and this membership option. You know costco doesn't really have much of any commerce digital business these days. I'm sure they're investing in IT, but walmart really was kind of position to have best of both worlds of membership. Subscription business with sams club plus e commerce. IT feels like there's a lot more .

that they could be doing. And there are some crazy stats about sams club like somehow in the nineties, one in three U. S. Households had a same club membership.

I don't know if you have the numbers, but I bet it's way less now.

I think it's declined. yeah. okay. So it's worth a little bit of a margin analysis here and in particular, gross margins because we were citing some numbers are earlier.

If you look at walmart, twenty four rish percent gross margins. So that's basically what they get from the goods that they sell on the shelf. U, C, O, K, it's less than target, which makes twenty nine and thirty percent of anything that they saw on the shelf.

Well, costa s gross profit margin is only around thirteen percent, and that's come up like when they first went public. And I think ninety two IT used to be like ten percent. But the whole business of costco is totally doing what walmart did to the variety stores, to walmart and the other discounters.

It's really the idea that what if we have even less promises to customers about the experience that you get in store and we give IT all back to you in Price. So like what if you can't buy small quantities of things? What if there's not really someone to help you get something off the shelf? What if it's all just in a fricken warehouse? It's all about what can we take away and will customers still deal with to get the lowest Price.

So sell a praise, of course, as we talked about, and jim and I go, who worked for him, were big pioneers of the shopping club, cosco Price club, sams club model. The original target market for IT was not consumers. IT was small businesses.

H, I didn't know that. And that was the core, the market. And then over time, I think as costco grew, I think they realized, oh.

consumers like this too. Yeah yes, interesting. We said jeff bazza saying your margin is my opportunity. That was totally sam wilton s thing to various stores and totally is jim sana golf thing to sam walton.

What we're talking about, things that walmart has not executed on to sams level of rigor, shall we say over the years. You know international again, it's like sam s club is a decent part of the business. It's eighteen .

percent of revenue.

Eighteen percent of revenue is about half of the stores. International stories. They have some success stories. I think mexico has been extremely successful for walmart. Canada has also gone well, but they have some big losses in europe.

They pulled out of germany.

right? They pulled out of germany in the U. K. They bought the big retailer chain ais da for about ten billion dollars when I think that was in the late nineties, I believe, and they Operated that they were a decent size player, but never as biggest.

Tesco and some of the other retailers in the U. K. They actually ended up trying to sell IT a couple years ago, the sane berries for ten billion dollars.

The U. K government block to that deal. And then they ended up selling IT off to private equity, I think, for about six billion dollars just a couple years ago. So you know, neutral at best.

we'll see how flu card plays out for them. They on seventy five percent of that, right?

So then there's indian flip card. Walmart bought seventy seven percent. I think stake in flip card back in think he was twenty eighteen for over sixteen billion dollars, which is a huge, huge Price.

I think part of IT was i'm not as studied on the history of this. I think walmart had wanted enter india for a long time, had been negotiating with the government, trying to make that happen for years and years and years. Couldn't I think part of the idea, I believe, a bang flipped was this will be our vector to bring walmart in the india?

I don't think it's gone super well. I read. I believe they're about twenty years. So twenty or thirty walmer owned physical locations in india. Now that's not worth sixteen, seventeen million dollar british prize?

No, definitely not. Well, I mean, the last thing that I think is important to understand about walmart is their growth has really just come down. If we look back all way back to the nineteen and eighty two, they were grown about forty to fifty percent a year.

And that has basically been on a slow, steady decline all the way until about twenty thirteen, where it's been about flat at three percent since then. So they're trying to make all these big investments, and this is relieved, by the way. So it's not like, oh, well, that's just because they're reinvesting in e commerce and in no leak. The top line is just not moving very far year over year these days.

Now to be fair, IT is the biggest top line of any company in the world. So the law of large numbers is at work. But as we've talked about, it's not likely fully saturated the time if you include e commerce and you include international, had they executed well on both of those .

in grocery well and .

what they did on grocery, but on discount clubs in the costco and sams club, if theyd executed well on all those, their growth could have been much, much tired.

Yeah, alright, let's do power. And then we will get, in the bare case, bulcke three power.

So for new listeners in the show, and as a reminder for all of us, old timers, hamilton helmers seven powers, there are seven of them. And what he's identified is .

persistent differential returns. So basically, what enables walmart to be more profitable than their closest competitor on a durable basis.

you in the seven counter positioning scale economies, switching costs, network economies, process power, branding and cornered resource.

we got to separate the takeoff phase from where they are today because I think a totally different set of powers.

嗯 OK OK in the .

takeoff is no doubt that I was counter positioning。 I mean, this small town strategy, they were just doing something that all of the big establish companies couldn't IT wouldn't do. They were not set up to do IT with their distribution chains.

They were not, Frankly, set up to serve those customers well. They didn't understand those customers well. They kind of ignored them, didn't seem like a big opportunity. no. And in fact, that kind of reminds me of dr.

Ash thinking back on that big episode we did that day, the door dash I P, where they sort of looked at the suburbs, they were like, wait, this business, even though everyone's doing food delivery in the cities, that actually makes more sense in the suburb. Walmart realized that same thing. They were like, well, the cities are gonna build out, and those people are gonna want something like this in their towns. And so we can serve the people who are there now, and we will be position to serve way more people as those suburbs built out.

Yeah, totally.

So massive counter positioning, I think set a good .

point in the beginning here. Have the right, I think, as they built IT up. I an scale economy.

Yes, this is the perfect example of scale economy.

literally the perfect example. I mean, to uses netflix in the book, which is another great example, but this is the single best example of scale economies in the world. They can Price lower because they have the power of scale and the distribution and logistics network in the Operations that they build behind IT.

There is no reason why anyone should be able to have a lower Price than walmart. One more is going to buy in larger quantities than any other retailer for basically any item that they sell. They're gonna have more locations to get that thing to consumers in the most convenient way to them. So they're going to have the most consumers excited to buy IT, which kind of feeds back into that quantity. They own and Operate their own logistics for filming distribution network. So even though they've taken on a lot of sort of risk in doing that, a lot of fixed cost to the extent they are utilizing all that at one hundred percent utilization or as close to one hundred percent as possible, they don't have to pay anyone else margin to use their network. Every element I can possibly think of has all of the margin squeeze out of IT.

which is also interesting when you think about amazon and everything amazon has been doing for the last, especially five, ten years, they're doing all the same things. Amazon air building, there are logistics, all the amazon vans that you see around.

Yes, absolutely. okay.

Do we have any others on here switching costs? Semin with more, more plus, you know maybe, but like not they .

interestingly don't have branding. And this, I think is a place that they're different than amazon because for walmart, the definition of branding, as hamilton puts IT out there, is would you pay more for a good that came from this brand than a different brand? And at walmart, no, you go there because IT is the lowest Price, and I will not buy something for that more expensive at walmart than someone else.

Walmart bread does not mean that to me. But at amazon, they have kind of moved away from the we always have the lowest Price. They have convinced you that IT is so convenient to shop on amazon that even if there are a little more expensive in Price, that's kind of okay. And I think it's really interesting. They've taken a different path there.

I don't think amazon was ever just about being the lowest press. I think IT was more about we are the best combination of Price selection .

and convenience. Yeah, it's the customer. They're both deeply centric basis, a sort of adopted the centric part of customers century or at least that is the way that he refers to IT. But sam walton, in about eight different ways in his book, tells you that the only thing that makes walmart c is listen to the customer. And IT just so happens that the vector or that they optimized form more than anything else, was Price and amazon was convenience.

I think IT might be worth a minute to discuss process power. Do we think walmart has process power? And there are two areas and thinking about with this, one is the Operations themselves and everything we've talked about, I don't think you could air lift that out of walmart and put IT somewhere else.

Now you could argue that it's the outgrowth of scale economies that they have IT. But i'm also wondering there's this D N A wallman der. At least there used to be understand of what you just said.

The lowest Price is the thing that matters the most. And they could have, and I think most other companies would have, taking their distribution and Operation advantages and increase their profit margins. And that is like a nath's A A walmart. It's always like we will keep the lowest Priced possible for our consumers and we will take the absolute bare minimum margin impossible passed all along the consumers rather than taking IT for the company.

And the question is, is that still true? Or are they looking for opportunities to keep margin now given growth has stalled right? And at the end of the day, public late stage are paid to get more earnings per share, right? Did you see what they were doing with gas stations in the last few years?

No, they used to this .

partnership where there was a gas station company that Operated in walmart parking lots. And walmart has said going forward, we will be Operating our own gas stations in those parking lots. This speculation on that is that they just want some of the margin from selling gas at this point. They are big enough where they think it's worth IT to invest in knowing that. And I think there is probably some truth to that at this point in their growth and saturation.

wolton enterprises and the structure of the family and the ownership of the stock, I think did go a long way to reinforcing this mentality even after sam passed away. But now that we're mostly under the third generation of violence, as you said, I think wolton family members own more professional sports franchise than any other family out there.

Them and their spouses. yes. Yeah, right.

So the focus on keeping all the money in walmart, keeping places as low as possible because we don't care about profit margins, we care about waiting in keeping customers is not necessarily there as much.

agree. okay. Bearing ball, we've hit a lot of these points already. But in my ball case, there's they kind of should win same day grocery delivery since they have these supercenters res everywhere.

You can make a bull case from the blending of e commerce and in store to the one see less experience. You can make a bull case based on how well they've done groceries. We'll continue to execute really well there.

There's another one that is, especially in this environment, were going into warmer, is kind of recession resistant and in some ways, even counter cyclically because of their obsession with the lowest Price. They actually should do great in a economic downs. M.

which I believe they did in two thousand nine.

I think so too. Walmart average customer is below the average income of the U. S. Broadly, which to me basically means they just don't have the top one percent shop there. And that drops their average below the average of the country.

That sort of an interesting way to look at IT as averages are stupid, especially at this scale, because they hide all the interesting this of the distribution. But their average customer is far more Price sensitive and far more likely to be in a unfortunate economic position in a downturn than other companies. So they serve those people well. The other of my few ball cases .

that make sense to me.

the bare case list is unfortunately long. We've hit a lot of IT already, one of which is just competition everywhere and good competition everywhere at this point. Costco wins on lower margins and lower Prices. Amazon wins on convenience in most cases and is far more competent at the commerce and technology. Cga and safeway and Albertsons are extremely compelling businesses in the grocery segment, I mean, but very stiff competition. And then you have this other movement happening, which is the giggling tic, to rely feria of family dollar and dollar or general where there is a different customer base that especially in these sort of food desert type locations, those businesses have done tremendously well and are kind of some that they're pushing waller ts out. But there's lots of scenarios where someone would opt to choose to shop family dollar versus is going to the bigger walmart experience.

So I think I don't know that hundred percent have the full history on the dollar store industry, but I learned a little bit of IT through walmart research. I believe that dollar stores, as we know them today, grew out of the reminds of the old variety stores like the man Frankland, really like when they got disrupted by the discounter, badly brothers and benin klin didn't survive.

But I think kind of the shell of what all of those were, as first remembers, they were fixed Prices. They were the five and times. So, like, I think that had eventually became the dollar store industry.

fascinating. Well, never to do internet ravin hole. I need to go out for this.

Listeners, if you know anything about this, definitely hit us up and slack. And we'd love to .

chat about this. Yes, for sure. I think there's bare case. Are any commerce, even though they are growing quickly? Thirty seven percent prepense mic e come is still not a profitable segment for them. It's crazy to think that you could be doing seventy five billion in e commerce revenue and that IT hasn't reached scale that makes IT profitable. I guess it's just a massive, massive fixed costs on the employee base to make that happen.

I don't know. But when I have in the past used warmer R E commerce, it's because they run some crazy deals. So I wonder if they are also like running really low marginal and discounting below costs on some stuff and because .

they don't break IT out, I don't know if that means it's not profitable. I don't know where what profit we're talking about there. Amazon for a long time was not profitable because they are reinvesting in more distribution centers and you know stuff like that or maybe it's that, but there is a work in progress going on with walmart.

I commerce. You they have in recent years been closing a large number of sams clubs. And I think a lot of that realist, they've been converted into e commerce distribution centres.

Yeah, I know they did in washington. There is a labor point to make here too, which is that I think in closing, all those sams clubs, they basically lay off all the employees and then say, all right, now you can interview at this building that will be converted to a new commerce distribution center. And we can figure out if you're a fit that makes sense. But I think it's like one of one hundred death by a thousand cuts, things going on between walmart and labor right now.

What will do you value craving, value capture in a minute? And there's a whole another episode we could do, is walmart good or bad for the world?

right? playbook. Do playbook. And then I want to get to .

that point first, because I want, I realized that I tease to this quote hours ago in the beginning, the episode, and I never actually set up, but this perfectly in capsule tes. So many wonderful, great playbook lessons to take from sam walton and the walmart story. But this is my favorite.

And this is a quote from charlie kate, the manager of that first walmart store number one, where he says he's talking about sam, saying, I remember saying, saying over and over again, go in and check our competition. Check everyone who is our competition. Don't look for the bad.

Look for the good. If you get one good idea, that's one more than you went into the store with. And we must try to incorporate IT into our company. We're really not concerned with what they're doing wrong. We're concerned with what they're doing right.

And reason that this grab me so much organizational dynamics and behavior and just human behavior is such that your competitors, you always want a leg, look for what they're doing wrong and make your self feel Better by leg, 呃， like this could come much Better. We are than that. And well, that's such a good point, especially I don't know if you see this, but being vcs and you know we invest in so many onder, ful founders and work with folks.

But this is really like a disease that i've noticed over the years that start up founders and management teams, they look for the worst in their competition and they make themselves feel Better about how great they're doing. We're guilty of IT too, but that is so the wrong way to look at IT, right? A much Better way to look at IT is IT doesn't matter what they're doing wrong. Look at what they're doing right and steal IT.

Most time you talk to a founder, of course, like most time we talk to founders, they're pitching for investment. So they're going to have a different posture. But it's oh yeah, that is another company in our space yeah here's why they're doing IT wrong.

Here's why that's the wrong approach. If you look at a Johnson huang take on this, his would be like, oh, IT turns out actually everyone else doing three sides of poly guns, that was right. So we're going to do everything we can to immediately move to that. You're right. Sam woke up everyday and thought, how can we go find something a competitor is .

doing right and steal IT? Now a core part of being a founder, I think especially these is, is identifying something that you don't like in the world that could be doing Better and then doing IT Better. That's how companies and products get started.

yes. But once you've done that, you've done that, you're doing IT. Now go make IT Better like IT doesn't matter what everybody is is doing wrong. And so I just love that one.

Agree, there is one we've talked about a bunch. So I am just gonna summize IT identify a wave and write IT. I never would have known that discounting was a wave that happened before starting this research.

And if you were Operating a variety store in one thousand hundred and fifty five, you may not have known that discounting was a wave that was going to come. But sam was in the right place at the right time with the right insight and then built the company to ride the discounting wave. And it's fascine to me how just in the course of fifty years or so many years I can go from wait.

Will this even be a thing too? There was ever a point in time where IT wasn't a thing or IT was different. He both wrote that wave, but also created that wave.

Yep, reminds me so much of jeff PaaS sitting in the officers of the shaw in the early nineties, being like, holy crap, the internet is going to be a wave.

Yeah, for sure. A big one is don't buy anyone else's inefficiency. If you're going to compete on Price, you must avoid buying anyone else's inefficiency at all costs. And IT means having often very contentious relationships with your suppliers. P, N, G.

And walmart were enemies for years, even though P N, G had to sell in walmart, and walmart had to be buying P, N, G products before they kind of figured out, how can we both do this? Because we do both. He deserve the same customer.

And that took a long time. And so that ruthlessness of being willing to not buy anyone else's inefficiency, even though I can create tension in the relationship. If you're a business that's winning on Price, somebody will be doing that in your space. So uh, you kind of have to if you want to win.

Yep, I don't know that this is a playbook pursue, but any industry like a retAiling and walmart business and amazon's business and the like, Price really, really, really matters. Selection in convenience, you know, matter to. And that's why amazon a thing and whole foods exist and speciality retailers and all that, the Price really, really, really matters.

And so what you're saying is absolutely applicable in cases like that, when Price really matters, your margins really matter. And your margin is my opportunity. And exploitation, inefficiencies and being as efficient possible is so important.

But not all industry are like that. There's danger of over rotating to that. Say you're in the media industry that is a high margin industry or the software industry that is a high margin industry.

Not to say Prices don't matter, of course they do. But like there are other dimensions that matter more in those industries. You need to think about what industry you're in before you start applying that stuff.

Yeah, that's a great point. The last one is an ill formed thought, but I kind of anna just get IT out there and IT might be a word vomit. But warmer in so many ways, is a microcosm of america, or really, at this point of the world, there are so many customers, there are so many employees, they touched so many facets of life, and they have such a large share of wallet for a lot of people, that everything that can happen will happen.

And so like labor problems, yes, for sure, significant tensions there, environmental impact, employees doing everything you can think of, because there are two point two million of them. So if you compass up statement of, like, walmer, employees are so wonderful, that is true. And warmer employees, steel is also true.

And one more employees hate their boss is also true. Unit did some serious blocking on the walmart sub red IT. I spent couple hours on their own.

It's easy to get depressed because the most vocal people create threads there. And you like cott s is a terrible, terrible CoOperation. It's one of these things that you realized at this point in the world and at this point in the company's history. At their scale, they are just everything. You walk into a store and you get a microcosm of america.

At this point, it's not even a microcosm. It's a micro cosm. When you talk about two point two million people that work there and what you say, two hundred forty million people shop there every week.

yeah, how much is where you witness humanity? yes.

In all of its glory and the opposite of glory, I got one more, which is, again, I said earlier in the episode. But I think we now have to institute a cave yet, or an exception to what has been our most golden lesson on acquired, which is the focus on what makes your beer taste Better. I guess that this is still always in service of making your beer taste Better.

Do walmart building a logistics s network made their beer tase Better?

Fair point, but that wasn't obvious. I don't think .

that's true.

In fact, he was completely non obvious in the timer, just borrowed creede's distribution of ork and everybody thought that that was the way to .

go yeah and he certainly was for the first decade.

first party.

two decades yeah, that help them get a massive lead and there be some very, very credible argument that I totally would have bought, which is if you think you can get two decades of lead with this strategy, there are probably will be something that materializes during that time, where being that far ahead means you just win.

yep. And sam says in the book, this name is Henry cutting ham, I wanna believe who was the sea of cristi when they launched came out. He says that cuningham was like an amazing retailer, brilliant and great competition, and that sam believes had cutting him still been running kr.

As k. Mart started decline. The company would have made different choices, passionate. They had a whole bunch of C, E, O turn over and all sorts of controversial stuff.

all right. So we're under the segment where we're going to make a case to each other for walmart being good for the world and bad for the world. So much like a bull and bear on the business.

But the global impact, let's save the employees thing for the moment and first talk about impact on communities because I think there's an easy narrative to paint, kind of the same narrative that got painted starbucks of bad for communities because IT puts the local store out of business. And certainly, I don't think same. Walton would say that they didn't.

I think he would say that we put a walmart in a community and IT was Better for consumers. And so then people needed to adapt. Of course, existing merchants hated us, but did consumers hate us? No, I don't think so at all. I think IT was Better for them.

One especially for customers in well everywhere, saving money and saving significant amount of money on your everyday purchases. That's huge. If you are living middle class or lower class, that is enormous stemmons and a huge difference in your life.

Yeah that said, there's probably more interesting things you could buy that have more soul in the local stores merchandising. They may not show up in a walmart supply chain. There might be more meaningful personal relationships. You could gold with people who run the stores, then you would have the opportunity to at a walmart. I'm trying to think of all the things in a consumer experience that are Better from locally on store. There is the fact that when you buy something, the equity that gets built from that transaction happening happens in your community versus the equity of crowing fifty percent to the walton family and fifty percent to bunch of public shareholders. Every transaction any business makes accuse either positive or negative equity to the business that participated or facilitated the transaction, even if that walmer employees a bunch of local people, the equity still being built by other shareholders.

So there is a lot, I think I said we could do a whole another three, four hours on discussing this. I read the book the walmer effect as part of research. It's really good.

It's really even hand IT really well done. It's about IT was written two thousand and six. And IT goes really deep into all these questions, labor impact on communities, all sorts of stuff.

Highly recommend reading. Frankly, we're not gonna able to do anywhere near as good a job discussing all that as the book does and as other forums do. But to my mind, like the biggest take away ahead from IT was, if you just look at individual communities, I think you can make a pretty good argument.

This is sams argument, like you are saying that walmart is good on baLance, a because saves consumers money. That's super important, provides a lot of jobs. We could argue about the quality of those jobs, but lot of jobs that otherwise would have ve gotten destroyed, discounting was gonna en. Yes, the local shops were not gonna survive the local variety stores.

And I could be someone that doesn't have the types of incentive programs that walmart has, right? Maybe it's not enough, but they do offer the ability for part of people's paid to go into a walmart stock and that can appreciate over time. And you can decide either to cash IT out or take IT walmart stock like there are ways to make hundreds of thousands of dollars on top of your pay by being a walmart employee.

yeah. no. Here's the way though, were walmart impact is a little more unambiguous ly principle both for the world and specifically for amErica despite all that great stuff.

And that's actually in the supplier relationships and the vender relationships as walmer got so big and got so much leverage and they're so unrolling on pushing down Prices. And then as the relationships, you would talk a little bit about the P N G. relationship.

But with all their vendors, you know, walmart is the biggest customer of all of the vendors and suppliers that they work with the exert so much pressure for vendors to lower their Prices. Ultimately, that leads to a couple things. LED, the offshoring of american manufacturing. Walmer was a huge contributor .

at some point. The majority of items sold in walmart, made in china.

I think, during the eighties, that went from like six percent, like forty percent. And I if you take out grocery, sure, most stuff in walmart is not made in america. You when mart recognized this was a problem and try to address IT. But if you're a supplier and they're bunch of examples in the book of long mower companies, vassie that makes pickles all so like you, just at a certain point, you cannot pay american labor, the wages that you need to pay them and Price products where walls mart needs them, Price like they just does not work, you have to offshore IT.

So that's one you you know you could argue about whether that's good or bad, but certainly now you know post go IT here in twenty two, all sorts of reasons why we see there's a negative side of the letter of offshoring american manufacturing. That's one. Two is quality of products, which is also related like the other thing that whether you are making stuff in amErica or elsewhere, if you keep pushing down those margins so far, like you've got to use lower quality materials in your product is just this constant pool till push down quality, push down labor cost and all that like comes at a real cost. And quality .

wasn't after thought. I mean, even then, ninety two and some publishers book is only in the last decade where they were realizing how important quality was in addition to Price.

Now one area where all of this had a huge, pretty much unambiguous negative externality that I think has gone a long way towards being corrected or as environmental impact, you can just imagine all the dynamics we are just talking about like having a positive environmental impacts does not fit into that equation, right?

You're not using the slightly more expensive power source when you're vender to walmer, you're using the cheapest no matter how dirty IT is.

Now for current management and the previous generation of management of walmart to their like big credit in the mid two thousands, they got religion on this. You and embraced sustainability and positive environmental impact as a way to generate more efficiency. So like warmer, I think, is now the largest U.

S. Commercial producer of solar power. Well, because they put other panels on the roof and now in parking lots to and the ends up being cheaper.

they also invested time in more efficient truck fleets, both in the type of fuel, the shape of the trucks. I want to say, they literally doubled the efficiency of the trucking fleet over a decade by just jup little things they did here and there to chip away.

And that makes a huge impact as they're one of the largest trucking fleets in the world.

I mean, if you look, there's those graphics that fly around there, like was the largest employer in any state and most of the lower midwest in which most of the south as walmart. And then there's the other ones that flooded around. It's like, what's the number one professional in every state? And for half the states it's truckers. And you're like, I wonder who those truckers work for in a lot of those states. So yes, it's a massive part of not only the american economy but of our energy usage.

I think it's worth bringing up now, especially given everything that happened recently where we live in what not. Walmart is one of the biggest well was and still is one of the biggest sellers of guns in america.

And they've paired back the air fifteen in the M O, and they stop selling some things. But like only after there was a shooting in their store .

right right now. This also guns obviously seem himself obviously was an navid hunter had used guns all the time. yeah. But IT wasn't just after the shooting in the store. They ve require background checks for a long well before that they stop selling hand guns in the nineties.

And now after the shooting in the store, they don't sell guns to people under tony one in twenty fifteen, and they stopped selling and solve rifles. So I was sure it's one of these issues were like people on both sides say they're not doing nearly enough or they're doing way too much, too much yeah. But IT is I think that is a good example of a middle ground. You can argue whether it's enough not enough too much, but it's like it's the middle.

All these things really come back to that point of walmart Operates at such scale that IT is literally just a shot of humanity. And so if it's a faster of our national conversation or things happening in the world, it's gonna happening at walmer totally. And let's move on. degrading. How do you think we should grade this one?

Yeah, I think we should go for, I think we should give and overall grade to walmart, the company encompassing the whole body of work, the modern early days, the first several decades, the forty point one percent in your compounding in the seventies, the thirty two and a half in the eighty three right now. Yeah, three, two. I think it's less than three.

now. I think it's growing slower than the american economy. Well, maybe not that this year, but in recent years, I think let's do the whole totality well.

I mean, the way to do IT on a year by year or annualized or even decade basis would be the same way that we did burger, which is effectively look at their annual growth rate.

Set some hurdle rate and then decide what constitutes naples and what constitutes an f and doing on to find grade basis year by year when I actually going to do that and is IT a cop out to say that like it's an a plus plus from founding through the eighties and mid nineties and then it's been A D and exploitation the next big opportunity since then. That's how I feel. I feels weird to roll those into one letter.

Well, I think if we were going to break out into sub grades for areas, I think I would actually do three areas I would do. The walton era, including the seventies and eighties, a plus, plus, plus, plus, yeah, plus, right? You can't say enough. Plus is there then. I think that actually the nineties is also in a plus.

And like literally grading for shareholders. We're not grading for the multi stakeholder world that we live in of their communities.

The thing just purely the business and for shareholders, I think the nineties also in a plus the supercenter slake. amazing. What a huge innovation. And that was not really, sam, that said that and was also a big part of driving the nail in the coffin of k mark. And is now fifty five percent of the business do.

So let me tell you about the nineties. In one thousand ninety two, they came in growing thirty four percent. And by nineteen ninety seven, they were growing at twelve percent.

嗯， okay, okay, here.

That was like the quite essential decade of their decline.

The greatly accelerated at all as super .

centres came online. IT accelerated from ninety seven. IT was down at twelve percent, and then IT peaked to get in two thousand and twenty two percent. But then it's been all down on hill from there.

interest. interesting.

I mean, you could say all their job really has been since two thousand. And two is to stay the same size as e commerce became a thing. Literally just defending the castle would have been in a plus.

And maybe that is that actually a pretty reasonable way to analyze IT? Not that they would have been a good idea to invest a dollar necessarily in two thousand and three and pulled out today. But what does a win if you were already the world's largest retailer, stay the world's largest retailer, throw a transformational technology wave.

which we've done I mean ah series and do that?

No, but we will put this graph up on the screen. If you look at the gap that amazon closed in total revenue since the time they were founded to walmer, they're gna catch him no doubt about oh yeah, for sure. And it's a little bit of graph is part of IT is A W S. So there is high margin revenue in there.

There's a completely second business. Oh, I got IT all accounts like walmart done. Score board.

Look at the school board, right? okay. So maybe then nine years is not an a plus. But I still like the supercenter innovation is huge. But you and I do think the two thousands, and particularly in the twenty tens, pretty uninspiring for walmart. It's a little .

silly because like what actually should you be going for if sam walton cared about the acquired score board, they should have been done in like one hundred and ninety five. You're even two thousand and two panny zing them for continuing to exist and doing worse than they did before. So I don't know.

I'm unwilling to agree this as one single thing i'm willing to say I was an a plus up through same walden's death. And then since then i'll go from like A D to A B because they have actually continue to be the world's largest retailer through disappoint in the world. And state member enough to do that. Have a .

perhaps the less controversial or more straight forward way of greeting I would grade made in amErica as N A. Among economical tomes that we've used as main sources .

on acquired, okay, like shoot dog .

made in japan. Yeah of that .

ilk 是 so .

seems coauthor who we've mentioned of made in america。 John huey, do you know anything about who john hill is?

No, no body.

He, after reading the book, became the editor and chief of time. Oh, well, and do you know who he replaced as editor or and .

chief of time is that someone .

else go author while there is x and no way, yeah no one's coauthor.

wo you know.

was written as and because sam was dying of cancer. So IT really has a fear of Steve jobs and I like and Steve jobs book and like you know reading IT like sam knows the end is near. He's writing this as he's dying. This really good is highly .

recommend for sure. Okay, i'm sack of this that's not really creating so let's do car fouts. And also I just got a text your walmart order was delivered if things for shopping with us reply help more so I have to go run and pick up my my order.

You have to go get IT. My carve out is a podcast that almost certainly no one has he listened to, because our audience overlap has to be approximately zero, which is the I M. Home podcast, which is the official podcast of the bras, a furniture mart, which many of you will now know is who listen to a burger episodes will know is a bircher health way company.

And this is the venue that ted westlink chose to go and give a wonderful interview. And so is so cool to hear one of the big managers at burger these days. I think teds, the one that did the apple to give an interview, a very rare interview on the grass of furniture or mars I am home podcast so that is my car out so good.

It's like you haven't actually listen to IT yet though .

he even talks like warn it's crazy.

So okay, here's what i'm current about. That is the content of the podcast about discussing furniture.

No, it's about what's your data day like give us your story. How did you find your way to virtue uh.

so I mean, that's obviously Better, but I am kind of curious what ted no furniture preferences are.

I think he does talk about that. He bought a bunch of .

furnace for his house from .

the a brisk .

furnace I love .

you is like .

a my car, well, is a car vouch that has been acquired before IT was your car out, but in a different form. Oh, and that is the godfather. The film you did do IT as a car .

about IT parts one into.

parts one into, yes, both parts. So good, which I also have recently revealed. So good.

But you know what is even Better that I read for the first time, and I can't believe I hadn't read IT until the last mother, too, is that the book is mario poses book. The godfather is so good. I think IT was Better.

Then the movies. I know it's as good as the movies. Yeah, careful, everybody. And I watched both after reading the book.

As with anything, when you read the book, you understand so much more about what's going on, on why motivations. I feel, especially in movies made back then, you can argue whether this is good or bad. See both sides.

But they left a lot more amp. U S. Like they didn't like explain everything as much as movies do now, which is great, which is so great, it's back when film was an art form.

IT reminds me not as much as this. But I also do the same thing with two thousand space. At acy couple years ago, I read the book and i'd never understand. The movie is like, this is crazy.

You like, what the hell is the last scene but then you .

read the book and you're like, oh, now I totally understand what's going on. And I get IT and it's awesome. It's a little bit like that with the godfather with the book and large parts of godfather part two are inner spurs in the book in part that was never intended to be a series like it's all just one book. See, you get a lot more kind of lic as you go. Like video history.

like the italian back story, is actually part of the first maintain volume. And when .

Michael is off in sisterly hiding after murders the turin police captain.

alright, on my list, adding IT, it's good.

It's good with that listener's.

Thank you so much for being on this journey with us. After you finish, come discuss with the other twelve thousand smart, clever, kind appreciate of members of the acquired community at acquired D F M flash slack if you want more acquired. I know this episode got a clock in like three and half hours or something insane, but if you're like you guys, I need more.

We just dropped an awesome, awesome interview with patric cambell through like things that don't often get discussed about acquisitions for his over two hundred million hour acquisition of profit. Well, by pado, that will be coming to the public feed soon that you can find by searching acquired lp show in the podcast player of your choice and is already alive at acquired dot F M slash lp for paid scribes. And we've got a job board, go check IT out at acquired dot slash jobs.

We hear on the acquired team, look at every single one of those in our jobs that we think are interesting. So if you're looking for your next stick, consider that ali daily. Anything else?

I don't know what else we can .

say at this one, our right listeners. With that, we'll see you next time.

We will see you next time. Who got. The truth got the truth.