The book was published in 1993, but unfortunately, Sam passed away in 1992 from multiple myeloma, a type of blood cancer.
I picked up this book because in The Everything Store, Brad Stone mentioned that Sam Walton’s autobiography was an extremely influential book on Jeff Bezos.
Brad Stone writes:
“Bezos had imbibed Walton’s book thoroughly and wove the Walmart founder’s credo about frugality and a “bias for action” into the cultural fabric of Amazon.
Jeff Bezos embodied the qualities Sam Walton wrote about. He was constitutionally unwilling to watch Amazon succumb to any kind of institutional torpor, and he generated a nonstop flood of ideas on how to improve the experience of the website, make it more compelling for customers and keep it one step ahead of rivals.”
And imbibed, he did. With the opportunity to compare both The Everything Store and Sam Walton: Made in America, it is abundantly clear that Sam Walton — despite not being alive when Amazon was created — was somewhat of a mentor to Jeff Bezos.
Now, I’ll be honest: I know nothing about Sam Walton or Walmart. Living in Singapore (and having only been to the U.S once) means I do not have access to what is considered an American landmark. So, I was really riding into this book blind.
And it was a nice surprise. Typically, most people would write an autobiography to brag or “correct” misconceptions, but I was taken slightly aback by how humble Sam Walton was, and how readily he accepted and acknowledged his failures and mistakes.
With that said, here are my biggest takeaways from the book.
“Now, when it comes to Wal-Mart, there’s no two ways about it: I’m cheap.”
Sam Walton grew up during the Great Depression. As a result, this informed his attitude about money.
“I learned from a very early age that it was important for us kids to help provide for the home, to be contributors rather than just takers. In the process, of course, we learned how much hard work it took to get your hands on a dollar, and that when you did it was worth something. One thing my mother and dad shared completely was their approach to money: they just didn’t spend it.”
Consequently, this attitude became the foundation of Walmart.
“… sometimes I’m asked why today, when Wal-Mart has been so successful, when we’re a $50 billion-plus company, should we stay so cheap? That’s simple: because we believe in the value of the dollar. We exist to provide value to our customers, which means that in addition to quality and service, we have to save them money.
Every time Wal-Mart spends one dollar foolishly, it comes right out of our customers’ pockets. Every time we save them a dollar, that puts us one more step ahead of the competition — which is where we always plan to be.”
This attitude has also become the foundation of Amazon. Frugality is one of Amazon’s leadership principles:
It’s also interesting to note that frugality is a fundamental principle in Bear Stearns, during Alan Greenberg’s reign.
Bias for action
“And Sam said, ‘Well, we would kind of like you to do it anyway. How long do you think it will take to do it?’ I knew from experience it would take six months to a year to properly do this job. But I said, ‘I’ll do it in ninety days.’ Sam replied, ‘You’ve got sixty days.’ Sam never wants to wait for anything. He has no patience. That was probably the meld between us. That bias toward action.”
Sam was always taking action: generating ideas on how to improve his stores, learning from others and making sure his executives and associates were executing and selling.
“Sam wanted a job done, and he was willing to accept creativity as long as the job got done. Our minds were freewheeling. We rushed to get things done.”
Interestingly, this was also codified into one of Amazon’s leadership principles:
Always be learning, especially from your competitors
“There’s not an individual in the whole United States who has been in more retail stores — all types of retail stores too, not just discount stores — than Sam Walton. Make that all over the world.
He’s been in stores in Australia and South America, Europe and Asia and South Africa. His mind is just so inquisitive when it comes to this business. And there may not be anything he enjoys more than going into a competitor’s store trying to learn something from it.”
Sam saw “learning from the competition” as the best way he could use to overcome his lack of experience.
“I remember him saying over and over again: go in and check our competition. Check everyone who is our competition. And 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 everyone is doing something right.”
Here’s another anecdote on Sam’s fixation on learning from his competitors:
“What the heck is he doing way out here?’ I strolled up behind him, and I could hear him asking this clerk, ‘Well, how frequently do you order?… Uh-huh…. How much do you order?… And if you order on a Tuesday, when does the merchandise come in?’ He’s writing everything she says down in a little blue spiral notebook.
Then Sam gets down on his hands and knees and he’s looking under this stack table, and he opens the sliding doors and says, ‘How do you know how much you’ve got under here when you’re placing that order?’ “Finally, I said, ‘Sam Walton, is that you?’ And he looked up from the floor and said, ‘Oh, Don! Hi! What are you doing here?’ I said, ‘I’m shopping. What are you doing?’
And he said, ‘Oh, this is just part of the educational process.”
“I probably visited more headquarters offices of more discounters than anybody else — ever. I would just show up and say, “Hi, I’m Sam Walton from Bentonville, Arkansas. We’ve got a few stores out there, and I’d like to visit with Mr. So-and-So” — whoever the head of the company was — “about his business.” And as often as not, they’d let me in, maybe out of curiosity, and I’d ask lots of questions about pricing and distribution, whatever. I learned a lot that way.”
Obsess over your customers
“Sam Walton understands better than anyone else that no business can exist without customers. He lives by his credo, which is to make the customer the centerpiece of all his efforts.”
One of Sam Walton’s theories on why Walmart succeeded was their obsession with their customers.
“Business is a competitive endeavor, and job security lasts only as long as the customer is satisfied. Nobody owes anybody else a living.”
“The secret of successful retailing is to give your customers what they want. And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience.
You love it when you visit a store that somehow exceeds your expectations, and you hate it when a store inconveniences you, or gives you a hard time, or just pretends you’re invisible.”
Sam also describes how he integrates this philosophy into merchandise buying:
“There’s a difference between being tough and being obnoxious. But every buyer has to be tough. That’s the job. I always told the buyers: ‘You’re not negotiating for Wal-Mart, you’re negotiating for your customer. And your customer deserves the best price you can get. If that’s being hard-nosed, then we ought to be as hard-nosed as we can be.
You have to be fair and upfront and honest, but you have to drive your bargain because you’re dealing for millions and millions of customers who expect the best price they can get. If you buy that thing for $1.25, you’ve just bought somebody else’s inefficiency.
You can’t let them get by with anything because they are going to take care of themselves, and your job is to take care of the customer.”
Customer obsession is also one of Amazon’s leadership principles:
Appreciate your employees
“If you want the people in the stores to take care of the customers, you have to make sure you’re taking care of the people in the stores. That’s the most important single ingredient of Wal-Mart’s success.”
In the book, Sam describes his regret on not putting enough focus on his employees (in Walmart lingo, they’re known as associates.)
Sidenote: Amazon’s affiliate program is also known as Amazon Associates.
In 1971, he made a change. He started a profit-sharing plan for all the associates (plus other financial incentives.)
“Profit sharing has pretty much been the carrot that’s kept Wal-Mart headed forward. Every associate of the company who has been with us at least a year, and who works at least 1,000 hours a year, is eligible for it.
Using a formula based on profit growth, we contribute a percentage of every eligible associate’s wages to his or her plan, which the associate can take when they leave the company — either in cash or Wal-Mart stock.”
Why profit sharing?
“… the more you share profits with your associates — whether it’s in salaries or incentives or bonuses or stock discounts — the more profit will accrue to the company. Why?
Because the way management treats the associates is exactly how the associates will then treat the customers. And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies, not in trying to drag strangers into your stores for one-time purchases based on splashy sales or expensive advertising.”
Plenty of companies have profit-sharing programs, but why do they fail?
“Plenty of companies offer some kind of profit sharing but share absolutely no sense of partnership with their employees because they don’t really believe those employees are important, and they don’t work to lead them.
You’ve got to give folks responsibility, you’ve got to trust them, and then you’ve got to check on them.”
But money isn’t everything. Sometimes, what employees need is a kind word.
“… but none of them would work at all without one simple thing that puts it all together: appreciation. All of us like praise. So what we try to practice in our company is to look for things to praise. Look for things that are going right. We want to let our folks know when they are doing something outstanding, and let them know they are important to us.”
Share the numbers
“Another important ingredient that has been in the Wal-Mart partnership from the very beginning has been our very unusual willingness to share most of the numbers of our business with all the associates.
It’s the only way they can possibly do their jobs to the best of their abilities — to know what’s going on in their business.”
Companies are funny organizations. They hire you to perform your best work with them, but then find multiple ways to sabotage you.
A key culprit? Withholding information.
How can your employees do great work, if you don’t share key metrics with them?
“Sharing information and responsibility is a key to any partnership. It makes people feel responsible and involved, and as we’ve gotten bigger we’ve really had to accept sharing a lot of our numbers with the rest of the world as a consequence of sticking by our philosophy.”
Keep your ear to the ground
“I was visiting stores all the time, and I still do it today. In fact, we’ve visited them all over the world, and gotten some great ideas that way — as well as a few that didn’t work out so well.”
One of Sam Walton’s responsibilities is visiting Walmart stores all over the country. He did it even when he had a few thousand stores.
“The folks on the front lines — the ones who actually talk to the customer — are the only ones who really know what’s going on out there. You’d better find out what they know.
A computer is not — and will never be — a substitute for getting out in your stores and learning what’s going on.”
Interestingly, Jeff Bezos does something similar.
“Bezos reviews all the messages sent to his widely known email address, email@example.com. Bezos will forward unsolicited emails from customers to relevant executives and employees, adding only a question mark at the top of the message. That is the equivalent of a ticking time bomb.
These question mark emails are Bezos’ way to ensure that potential problems are addressed and that the customer’s voice is always heard inside Amazon.”
Force ideas to bubble up
“To push responsibility down in your organization, and to force good ideas to bubble up within it, you must listen to what your associates are trying to tell you.”
Sam was constantly talking with his associates and recording ideas.
“I always carry my little tape recorder on trips, to record ideas that come up in my conversations with the associates. I usually have my yellow legal pad with me, with a list of ten or fifteen things we need to be working on as a company. My list drives the executives around here crazy, but it’s probably one of my more important contributions.”
Sam believed everyone could contribute.
“This goes hand-in-hand with pushing responsibility down. We’re always looking for new ways to encourage our associates out in the stores to push their ideas up through the system. We do a lot of this at Saturday morning meetings.
We’ll invite associates who have thought up something that’s really worked well for their store — a particular item or a particular display — to come share those ideas with us.”
A good idea can save them tons of money.
“One of my favorites came from an hourly associate in our traffic department who got to wondering why we were shipping all the fixtures we bought for our warehouses by common carrier when we own the largest private fleet of trucks in America.
She figured out a program to backhaul those things on our own trucks and saved us over a half million dollars right there. So we brought her in, recognized her good thinking, and gave her a cash award.
When you consider that there are 400,000 of us, it’s obvious that there are more than a few good ideas out there waiting to be plucked.”
It also led to Walmart’s famous “greeters”.
“Let me tell you how Wal-Mart came to have people greeters. Back in 1980, Mr. Walton and I went into a Walmart in Crowley, Louisiana. The first thing we saw as we opened the door was this older gentleman standing there.
The man didn’t know me, and he didn’t see Sam, but he said, “Hi! How are ya? Glad you’re here. If there’s anything I can tell you about our store, just let me know.”
Neither Sam nor I had ever seen such a thing so we started talking to him. Well, once he got over the fact he was talking to the chairman, he explained that he had a dual purpose: to make people feel good about coming in, and to make sure people weren’t walking back out the entrance with merchandise they hadn’t paid for.
The store, it turned out, had had trouble with shoplifting, and its manager was an old-line merchant named Dan McAllister, who knew how to take care of his inventory. He didn’t want to intimidate the honest customers by posting a guard at the door, but he wanted to leave a clear message that if you came in and stole, someone was there who would see it.
Well, Sam thought that was the greatest idea he’d ever heard of. He went right back to Bentonville and told everyone we ought to put greeters at the front of every store.”
Walmart’s small-town strategy
“Our key strategy, which was simply to put good-sized discount stores into little one-horse towns which everybody else was ignoring.”
How did Sam make it work?
“Maybe it was an accident, but that strategy wouldn’t have worked at all if we hadn’t come up with a method for implementing it. That method was to saturate a market area by spreading out, then filling in.
In the early growth years of discounting, a lot of national companies with distribution systems already in place — Kmart, for example — were growing by sticking stores all over the country. Obviously, we couldn’t support anything like that.
But while the big guys were leapfrogging from large city to large city, they became so spread out and so involved in real estate and zoning laws and city politics that they left huge pockets of business out there for us.
We figured we had to build our stores so that our distribution centers, or warehouses, could take care of them, but also so those stores could be controlled. We wanted them within reach of our district managers, and of ourselves here in Bentonville, so we could get out there and look after them.
Each store had to be within a day’s drive of a distribution center. So we would go as far as we could from a warehouse and put in a store. Then we would fill in the map of that territory, state by state, county seat by county seat, until we had saturated that market area.”
This worked like gangbusters.
“This saturation strategy had all sorts of benefits beyond control and distribution. From the very beginning, we never believed in spending much money on advertising, and saturation helped us to save a fortune in that department.
When you move like we did from town to town in these mostly rural areas, word of mouth gets your message out to customers pretty quickly without much advertising.”
It even worked in big cities, even though naysayers said it wouldn’t.
“We never planned on actually going into the cities. What we did instead was build our stores in a ring around a city — pretty far out — and wait for the growth to come to us. That strategy worked practically everywhere.”
Incidentally, Facebook used the same strategy — albeit online. Their original plan was to capture users from college to college, starting from Stanford.
“Anytime a company grows as fast as Wal-Mart has, pockets of duplication are going to build up, and there will be areas of the business which we may no longer need.
it’s only human nature not to want to have your job, or the jobs of the people who work for you, eliminated. But it is absolutely the responsibility of a company’s top management to be thinking about this issue all the time — to ensure a sound future for the overall company.”
Bureaucracy happens naturally:
“If you don’t zero in on your bureaucracy every so often, you will naturally build in layers. You never set out to add bureaucracy. You just get it. Period. Without even knowing it.”
How do you “fix” this problem?
“You know when Tom Watson, Sr., was running IBM, he decided they would never have more than four layers from the chairman of the board to the lowest level in the company. That may have been one of the greatest single reasons why IBM was successful.
A lot of this goes back to what Deming told the Japanese a long time ago: do it right the first time. The natural tendency when you’ve got a problem in a company is to come up with a solution to fix it. Too often, that solution is nothing more than adding another layer. What you should be doing is going to the source of the problem to fix it, and sometimes that requires shooting the culprit.
I guess one reason I feel so strongly about not letting egos get out of control around Wal-Mart is that a lot of bureaucracy is really the product of some empire builders ego. Some folks have a tendency to build up big staffs around them to emphasize their own importance, and we don’t need any of that at Wal-Mart. If you’re not serving the customer, or supporting the folks who do, we don’t need you.”
As a final note, I’m sure Walmart is different today. Leadership has changed multiple times since Sam Walton’s death. According to Wikipedia, even the greeters were removed at one point.
So, if you’re a Walmart customer, don’t anticipate that your expectations will align with what Sam Walton describes in the book.