Tag Archives: Worth Re-reading

The Path of Least Resistance: Learning to Become the Creative Force in Your Own Life by Robert Fritz

I got so much out of this book that I made a bit of a more formal write-up.

If you want to learn more about the power of creating, why the structure in your life impacts your behavior more than your willpower, the importance of facing reality without obscuring it, and so much more, this book is for you.

The Effective Executive: The Definitive Guide to Getting the Right Things Done by Peter Drucker

Summary

  1. Most management books deal with how to manage others but this one deals with how to manage oneself; how to lead by example. Effectiveness is not natural and has to be learned and practiced deliberately. Being effective means doing the right things well

Key Takeaways

  1. Jim Collins did the foreword to this edition and highlights his 10 Key Lessons
    1. First, manage thyself 
    2. Do what you’re made for what you can be world class at. To work on exclusively what you’re bad at is foolish and irresponsible but you must address weaknesses which stand in the way of maximizing your strengths and achieving your full potential 
    3. Work how you work best and let others do the same
      1. You must focus on people’s strengths and build around that and not on their weaknesses. Find people who are better than you and who can deliver in specific areas bring them into your fold
    4. Count your time and make it count. This requires the discipline to schedule your time into blocks. The most effective people do one big thing at a time and don’t let distractions seep in. Create unbroken ‘think time’ blocks during your most lucid time of day and do them with regularity. Create chunks for people and random tasks which must get done. Attend only meetings that matter 
    5. Prepare better meetings by having clear reasons for the meeting and having disciplined follow ups. 
    6. Don’t make 100 decisions when one will do. Inactivity can be very intelligent behavior
    7. Determine what your distinctive impact can be in an organization – the one decision, behavior, or action that might not have happened if you were not there
    8. Stop what you would not start. Most people are too busy to work on truly important things so you must have a stop doing list and refine and rethink your daily tasks and objectives
    9. Run lean. An organization is like a biological organism in that the internal mass grows faster than what shows externally – the volume increases as a cube of the linear dimension but the surface area only as the square. You must fight and hold back internal growth which doesn’t help drive profits and goals.
    10. Be useful. Over success. Over wealth. Over fame. Be useful. 
  2. The best executives have personalities all over the map but Drucker found 9 shared traits
    1. They ask what needs to be done.
      1. You must prioritize this list every couple years. Once you tackle the biggest priority, you must redo the process. Can only focus on a maximum of two at any given time
    2. They ask what is right for the enterprise
    3. They make an action plan.
      1. This must include the name of the person who is accountable, the deadline, who this effects directly and must be made aware, who should be told even if they’re not effected 
    4. They take responsibility for the decisions
    5. They take responsibility for communicating the decisions
    6. They are focused on opportunities rather than problems
    7. They run effective and productive meetings
      1. End once the purpose has been accomplished. Announce the purpose of the meeting at the beginning. Sum up what happened, action items, who is accountable, deadlines, send to everyone involved
    8. They thought and said “we” rather than “I”
    9. Listen first, speak last
  3. The shift from manual labor and work to knowledge work is why the demands of executives today is so different than before
  4. Effectiveness is so important and must be learned. Especially in today’s knowledge-based economy. Knowledge work is not graded on costs or quantity but on results. Managers in the knowledge based field are those whose decisions have an outsized impact
  5. Hindrances towards effectiveness include being part of the system itself and not having enough perspective, not being willing to give up a lifetime of habits and work, not letting others step up, and not delegating enough.
  6. Events should not drive what an executive does. Rather, key criteria which help inform results and contributions should be his main focus. The truly important things are not the trends – they are what cause the trends and is why you should never focus on the events but on what lies behind them
  7. Effective executives have these skilsl
    1. They know where their time goes 
      1. Effective executives start with their time not with tasks because they know time is a limiting factor
      2. They record their time, they manage their time, and then they consolidate their time into long chunks.
      3. What can you do away with totally, what can you delegate?
      4. Don’t waste others’ time
      5. Reduce recurrent and predictable decisions
      6. Avoid overstaffing
      7. Reduce poor organization such as too many meetings
      8. Reduce poor information (wrong form or just wrong)
      9. Consolidated time is the key. Most executives don’t have more than 25% of their time at their disposal but if they come in chunks, it’s usually enough. Even if it was 75% but broken up, you’d never get anything done. 
      10. It is hard and rare to over-prune
    2. They focus on results rather than effort
      1. The focus on contribution over effort is the key to this whole book. This is what drives how you spend your time and the decisions you make. As a leader you must make a focus on contribution rather than effort the norm. This helps with communication, getting people to go all-in
    3. They understand what is expected of them and how they can get there
    4. They focus on and build on strengths not weaknesses – both theirs and others’
    5. They focus exclusively on areas where their focus will have outsized returns.
    6. They know that they have to do the most difficult and important things first and that there’s no time for the second things
    7. They make effective decisions and know that a few, big important decisions are the way to go. Many, rushed decisions lead to mistakes
  8. Although there are very many personalities, the one thing they had in common when making decisions was that they were slow and deliberate in personnel decisions
  9. Well managed business are boring and quiet. Crises have been anticipated and routinized. 
  10. Try to contribute in 3 areas: direct results, adding to culture and values, building the next generation 
  11. You must be able to see through the eyes of others and understand how they will use your output. This will help you use common language, put information in a usable form, etc. A generalist is simply a specialist who can translate their knowledge to a universal audience 
  12. You must always think and put tasks first and not personnel or else you will get politicking clash of personalities
  13. Jobs must be big and demanding for executives to see how they live up to it. You must judge the people you are considering by their strengths and what they would need to reasonably fulfill this job and you must have clear expectations and definitions of success
  14. With every strength comes a weakness so you must focus on and understand how does a person’s strength translate to a weakness 
  15. Staff for opportunities and not for problems
  16. You should remove incompetent men. Not only because of their lack of results, but because if they stayed on, it would hurt the rest of the culture. This is not a slight on the man but a slight on the leader who put him in the position to begin with
  17. George Marshall focused on strengths but also on weaknesses. He put Eisenhower in a position to learn about strategy and, even though he was never great, he was able to appreciate its importance later on
  18. Managing upwards is as important as managing downwards. You must make the strengths of your boss productive as their success and promotions will help you as well. Knowing yourself, and your strengths and weaknesses, and how to make your strengths productive is equally as important.  This is an attitude as much as a skill 
  19. The key skill is concentration on the first and most important things first and only doing one thing at a time. Effective executives also make sure that the organization as a whole focuses on one thing at a time. They review the past and anything which isn’t an emphatic yes, is curtailed or done away with completely, leaving time to focus on the most important things. Organizations need to stay lean and muscular just as biological organisms do
  20. Fresh eyes which give fresh perspective is vital 
  21. Setting priorities and posteriorities (a list of what not to do) is more about courage than knowing what to focus on. You must be future-focused – rather than looking at the past, you must look at opportunities rather than problems, you must be willing to set your own agenda and make your own decisions rather than relying on others, and aim high for things which will truly make a difference rather than playing it safe
  22. Effective executives ultimately make effective decisions. They take their time, know what’s truly important, focus on a few things at any one time, and know that quick decisions are sloppy and not impressive
  23. Effective decisions have these common traits
    1. Is this a generic or a specific situation and problem?
      1. As generic problems can have rules and principles to deal with where a specific problem must be dealt with individually.
      2. Executive executives don’t make many decisions because they don’t have to they figure out which problems are generic and through their rules and principles are able to adapt to situations quickly and effectively 
    2. They asked themselves if they would be able to live with the decision for a long time. If not, they keep on working on the solution
    3. They asked them selves, “what are the specifications of the problem they are trying to solve, what are the objectives, and how will they know if their decision has been a good one?” These are the boundary conditions – the minimum results necessary that must be achieved
    4. They ask what is right rather than what is acceptable
    5. They ask and figure out how to turn the solution and question into action. Asking who has to know is as important as understanding the capacity of the people involved in acting out the decision. You must build the execution of the decision into the decision itself which is very difficult
    6. There has to be a feedback loop. This has to be built into the decision to continuously test the assumptions and the actions as they face reality. You cannot get too removed from the process. You must touch the medium and see if yourself how the actions are being carried out and the reactions to it
  24. What is the criteria necessary to determine success and how do you measure that? The effective executive assumes that the traditional measure is wrong otherwise they probably wouldn’t be in this predicament. 
  25. The best executives consider alternatives and this causes dissension and disagreements which is very healthy and can lead to the better decisions and outcomes
  26. You must begin with trying to understand and only then trying to figure out what is right and what is wrong. Like a first-year lawyer is assigned to argue the other side’s case before they’re allowed to think about their own, we must truly understand all sides before making a decision
  27. The last question an effective decision maker asks is, “is the decision even necessary?” Better to not act at all if not needed. Act or don’t act. Don’t hedge or go halfway. Only act if your decisions and your actions are needed and important – if things will work out without your involvement, leave them be
  28. Above all, what is needed is courage. Courage to focus on what you think is right and ignore what you don’t believe will make a difference
  29. Don’t just say this was a great book figure out how it will change how you act and behave. That is the sign of a great book

What I got out of it

  1. Loved this book. So much to gain from reading and re-reading – focus on where your time goes, manage yourself first, know how you work best, focus on contributions rather than effort, know what your role is and how you can most impact the organization, few and deliberate decisions, have the courage to not follow the crowd, encourage dissension and sharing of opinions…

A Treatise on Efficacy

This book ties together so many recent themes for me – Werner’s effortless mastery, strategy, philosophy, psychology, and more.

A book well worth reading and re-reading. One of my all time favorites

A Treatise on Efficacy

John H. Patterson: Pioneer in Industrial Welfare by John H. Patterson, Samuel Crowther

Like my write-up on Henry Ford and some of my other “teacher’s reference guides“, I got so much out of Pioneer in Industrial Welfare that I wanted to create a more formal write-up. As always, I have attempted to put together something which is (hopefully) a manageable, actionable and digestible introduction to Patterson’s thinking and business philosophy.

On John H. Patterson

 

 

*The vast majority of the content is from the books and not my own words. I’ve simply distilled, compiled, and added a few notes.

Human Universals by Donald Brown

The book and concepts were rich enough that I did a bit more of an in-depth write up…

On Human Universals

Link to further reading and universals

Good Profit: How Creating Value for Others Built One of the World’s Most Successful Companies by Charles G. Koch

Summary
  1. Charles Koch describes his management philosophy, Market Based Management, how it has evolved over time, and how it has been put to use at Koch Industries. MBM emphasizes Principled Entrepreneurship over corporate welfare, virtue over talent, challenge over hierarchy, comparative advantage over job title, and rewards for long-term value creation over managing to budgets.
Key Takeaways
  1. Market Based Management
    1. Charles’ goal when he was young was to discover the principles that best enable people to flourish as they live and work together. He grouped his findings into what is now known as MBM. MBM is a reality based tools that helps employees problem solve without explicitly being told what to do and this requires a simple structure that is deeply understood by all. It’s goal is to create spontaneous order by providing a simplified set of guiding principles and mental models to guide their behaviors and decisions.
    2. The system must be set up so that everyone knows what the right thing to do is and wants to do it, without overly detailed explanations or rules. Enlightened-self interest gets people to do the right thing for others as it also helps themselves
    3. MBM prompts us to focus on understanding consumers’ unmet needs and finding ways to satisfy them. We strive to do this faster and better than existing and potential competitors. This requires that we continuously improve our existing capabilities, such as sales, marketing, operations, distribution, finance, technology, and R&D
    4. MBM guiding principles – integrity, compliance, value creation, customer focus, knowledge, change, respect, fulfillment.
    5. Companies must realize they are not competing just on price and output of existing products. They have to relentlessly strive to come up with new and better products and produce them more efficiently than the alternatives. They also need to constantly improve the way they’re organized, so they can innovate and eliminate waste better than their competitors. This is what MBM enables Koch to do.
    6. No one can decide which products and services a customer values better than the customer. Dedicating ourselves to satisfying what she values is showing respect for her. This is what generates good profit. Bad profit comes from disrespecting customers by making them subsidize our business with their tax dollars and higher prices, siphoning away the good profit other companies could have earned
    7. Over time, we have made changes, not only to our vision, but to our entire approach to recruitment and management, our internships, university relationships, junior military outreach, trade school relationships, compensation system, opportunity origination networks, methods for achieving environmental and safety excellence, and MBM training and application programs.
    8. MBM strives to create a spontaneous order of self-actualizing people by hiring, retaining, and motivating those who internalize and exemplify all ten Guiding Principles – those with integrity and humility who want to create real value. Toward this end, it’s important for leaders to understand the potential and the subjective values of their employees. This is impossible without establishing open and honest communication in order to know employees well enough on a personal level to do so. For some employees, non-financial incentives – such as being praised for a job well done – can be as important as financial incentives. But care must be taken to ensure that such praise is truly earned
    9. MBM is broken down into five core areas including vision, virtues and talents, knowledge process, decision rights, and incentives. These five areas lead to emergent effects as the whole is greater than sum of its parts and become mutually reinforcing. This is a never ending process of learning and improvement and just like the Red Queen Effect, stasis equals death. Even successful companies struggle to keep up because, given human nature, we all tend to become complacent, self-protective, and less innovative as we succeed. It can be far more difficult to overcome success than adversity. I think often about a lesson my father impressed on me at an early age: “Often adversity is a blessing in disguise and is certainly the greatest character builder”
      1. Vision
        1. Determining where and how the organization can create the greatest long-term value. Koch’s is different than most as its focused on value creation and people, not product, industry, profit, or anything else. Koch must create real, sustainable value for its customers, for society, and for itself. It can only do so by inspiring and attracting customers, suppliers, and partners.
        2. Having a clear vision is critical to attracting the best talent. Understanding what a business is trying to achieve and how it creates value not only enables employees to focus and prioritize, it helps them develop and find fulfillment. Having a shared vision guides the development of roles, responsibilities, and expectations. That’s why getting the vision right, helping employees (especially leaders) internalize it, and updating it as often as necessary is essential. Because the future is unknown and unknowable, a company’s vision needs to be open-ended and to embrace creative destruction on a fundamental level. In our experience, a company tends to be better served when it is capability-focused rather than industry-focused. The breadth of a company’s vision should vary with the breadth of its capabilities. At the same time, a business must have a vision specific enough to guide its strategies, decision making, allocation of resources, and the roles, responsibilities, and expectations of all employees. Each vision also needs to be aspirational in order to expand the thinking of leaders and employees through the organization.
        3. Koch underscores that in order to achieve long-term success a business cannot rely on short-term profits but must accept the necessity of what economist Schumpeter calls “creative destruction.” This means that a firm must innovate at least as quickly as its most effective competitor. Building on these insights, Koch explains that at the heart of MBM is the understanding that the role of business is to help people improve their lives by providing products and services they value more highly than their alternatives, and to do so while consuming fewer resources.
        4. Koch’s vision is its north star and acts as a strategic guide which is constant and ever changing and drives the innovation culture and values of the organization
        5. Koch’s vision:
          1. Remain family owned, well-diversified, stable and financially conservative
          2. Grow organically faster than inflation, and achieve additional growth through acquisitions.
          3. Be an employer of choice through extensive team member development and engagement activities
          4. Have our portfolio businesses recognized as “best in class” within their respective industries
          5. Be model corporate citizens in the communities we call home
      2. ​Virtue and Talents
        1. Helping ensure that people with the right values, skills and capabilities are hired, retained and developed
        2. The company has a list of ten “Guiding Principles,” which include integrity, compliance, value creation, Principled Entrepreneurship, customer focus, knowledge, change, humility, respect, and fulfillment. Interviews are based around these traits and open-ended questions are used to discern a candidate’s probability of success in demonstrating the desired traits. Once interviews are completed, a challenge session among the recruiter, interviewers, and hiring manager is held to ensure the best knowledge is shared when making a hiring determination. Employee referrals have resulted in some of our best hires and we have also developed strategic relationships with external sources, including search firms familiar with MBM and our Guiding Principles. We invest heavily in college recruiting efforts and a well-developed internship program
        3. No matter how difficult the role is to fill, it is critical that we not lower our standards. A bad hiring decision is much more costly in many, many ways than is the delay in finding the right candidate
        4. There are many different kinds of intelligence and they should all be taken into account: interpersonal, intrapersonal, linguistic, logical-mathematical, spatial, naturalist, bodily-kinesthetic, and musical
      3. ​Knowledge Processes
        1. ​Creating, acquiring, sharing and applying relevant knowledge, and measuring and tracking profitability
        2. Knowing why something is profitable is often as valuable as knowing what is profitable.
        3. Benchmarking involves identifying, understanding, and adopting superior practices from anywhere in the world – internally, competitors, great businesses in any field.
      4. ​​​Decision Rights
        1. ​Ensuring the right people are in the right roles with the right authority to make decisions and holding them accountable. This should demonstrate an employee’s comparative advantages.
        2. The bestowal of decision rights upon an individual, moreover, should not be predicated upon that individual’s position in the corporate hierarchy.
        3. Many of the things that go wrong or opportunities that go unrealized in business are a result of the tragedy of the commons – shared areas with unclear (or nonexistent) demarcation of responsibilities. At Koch, we use decision rights to replicate the benefits and responsibilities of property rights in society. Just as we think of employees as entrepreneurs at Koch, we think of decision rights as property rights in the organization. Unless people have clearly defined areas of responsibility, it’s difficult – if not impossible – to elicit beneficial proactive behavior, or to hold people accountable when things go wrong. When no one has clear ownership of a resource, no one can be help responsible for its efficient use. In MBM, decision rights are synonymous with authority. If you have the decision rights to decide something, not only do you have the authority to decide it; you are responsible and accountable for it. ​
        4. Decision rights should reflect an employee’s demonstrated comparative advantages. An employee’s comparative advantages are evident in those activities for which she can create the greatest value compared to the opportunity cost of her time. When these are optimized among a group, the value it creates is maximized. Employees who focus on their comparative advantages and consistently make good decisions will have expanding decision rights, regardless of their role or position in the organization. Understanding and applying this concept – that the person with the comparative advantage to make that decision well (not necessarily the highest-ranking person) should be the decision maker – leads to greater value creation.
        5. Competitively advantaged innovation requires working on the best opportunities, establishing a clear owner, having the right people in the right roles, effectively experimenting, rapidly and efficiently scaling up, and finding the balance between short and longer-term disruptive innovations. In other words, the very nature of innovation requires a dynamic approach to decision rights, with frequent reviews and adjustments. ​
      5. Incentives
        1. The first goal of incentives is to harmonize the interests of the individual with those of the company. This reinforces our individual employee’s desire to do the right thing and help the company prosper. Second, compensation should be consistent with the notion that no two employees are alike; thus, their compensation can vary considerably depending on the value of their contributions. As a result of difference in vision, desire, values, and ability, people vary in the advantage they take of the nearly limitless opportunities to create value. This is why two employees performing similar roles may well be compensated differently. Third, no limit should be put on an employee’s compensation, so employees will not put a limit on the value they create. Finally, incentives should be structured in such a way that the company can effectively attract, motivate, and retain principle entrepreneurs
        2. Rewarding people according to the value they create for the organization. There are several tools to accomplish this, including base pay adjustments, annual incentive compensation, spot bonuses, deferred compensation, and other incentives. A key role of managers is to retain and motivate employees who are adding superior value. By paying for value created, we help ensure the firm’s competitiveness
        3. Important to align incentives across business units so that there is no in-fighting
        4. The value of missed opportunities and avoidance of errors should also try to be estimated and included. Makes opportunity cost tangible by taking missed opportunities into account with bonuses and salaries
        5. Koch advises entrepreneurs to stay private no matter how big their company gets
        6. Incentives are incredibly important. Koch incentivizes its employees by paying on marginal contribution and value created in their unit and then based on their contribution. It will never be perfect but it must be directionally correct and the reasoning behind it must be explained as well. Must signal what is valued most highly and doing so in a principled manner. Must be financial and non-financial – meaning, challenge, competition, praise, belief in the mission, being part of a successful team, personal growth
        7. Incentives are as important for external counter parties such as customers, suppliers, contractors, shareholders, distributors, agents, trading partners, former industry employees, specialists, universities, technology developers, consultants, communities, and governments. Aligning incentives with performance is almost always effective but must take these external parties into account too. Must understand what each values and deliver on it. Communities want a good neighbor, who takes care of the area, protects the environment, operates safely, and provides good jobs
        8. Budgets are often useless and sometimes counterproductive if they perverse behavior through misaligned incentives
        9. Framework for determining incentive pay (never perfect but directionally correct and must be explained to the employee)
          1. Determine the value created by the employee’s business unit, facility, or service group to Koch, considering current earnings and return on capital, change in capabilities, competitive position, and the risk-adjusted value of innovations and growth initiatives – that is, the prospect for future earnings
          2. After thoroughly assessing all the employee’s contributions to the value the unit created (positive and negative), we compare this to the contribution necessary for her base compensation. To the extent that her contribution exceeds this amount, we award a bonus or other incentive compensation based on that difference
          3. Deductions are taken for any compliance or EH&S problems to which the employee has contributed. If such problems are serious enough, they could wipe out the employee’s entire award. Additions to, or subtractions from, the employee’s compensation will also be made if she has had a significant positive (or negative) effect on the unit’s culture
    10. Good Profit
      1. ​Good Profit is about providing value to the customer while also benefiting society and comes from Principled Entrepreneurship: creating superior value while using fewer resources and always acting lawfully and with integrity. It comes from contributing something to society. This is the vision of Market Based Management which Charles Koch began developing in the ’60s. It takes a win-win framework and allows Koch Industries to adapt and deal with change more effectively than others. They have prospered through the years with no government aid or external help because their focus is always on producing value. MBM, while simple, is not easy. The whole organization must understand the principles so deeply that they can adapt to any problems or circumstances
      2. Good Profit is what follows when long-term value is generated for customers, employers, shareholders, and society. MBM generates Good Profit
      3. Good Profit 101: providing the best hassle-free service to our clients at the lowest cost to them and attracting the best employees based on the opportunities we offered. Our goal was – and still is – to be the counterparty of choice to our customers, vendors, communities, and employees
      4. The most reliable signal that a business is using reality-grounded mental models and providing service that customers truly value is a profit made over time under beneficial rules of just conduct
      5. Opportunity Cost – the true cost of any activity is the highest-value activity forgone
      6. Subjective Value – At Koch we also urge our salespeople to understand each customer’s subjective values and tailor the way we deal with them accordingly. Many public companies value steady, predictable earnings more than larger (on average) earnings that are more volatile, since steady earnings tend to result in a higher stock price. Because of this difference in subjective values between us and our customers, it can be mutually beneficial for us to absorb the price risk in our contracts, and for them to compensate us for it. Koch is always willing to do this kind of win-win business. Listen to partners particular needs and design structures that suit both parties well. Strive for speed, certainty, confidentiality, efficient and responsive deal screening, and to concede terms that are important to the seller but not as important to Koch.
    11. 8 steps in the Decision Making Framework
      1. Briefly describe the authority being requested
      2. Give the background and a summary of the value proposition
      3. Outline the objective with the strategic fit
      4. Prepare an economic summary with a base case, as well as other plausible scenarios that could make the project much better or worse
      5. Identify the key value drivers
      6. Describe the key risks and mitigants
      7. List the alternatives considered and why the one shown is best
      8. Project the timeline for future steps
        1. Decision traps – overconfidence, framing, anchoring, status quo bias, sunk costs, information / confirmation bias, confusing random events with patterns, allowing a leader’s past rejections to stop the consideration of good future opportunities, conservatism trap
    12. Ludwig von Mises (Human Action) was a big influence in Koch’s philosophy and management style (as was Polanyi’s Republic of Science)
      1. The more books I read, the more passionately I embraced the truth that widespread human well-being demands a system that clearly defines and protects private property rights, allows people to speak freely without intimidation or legal repercussions, refrains from interference with private parties’ agreements and exchanges, and allows human action – rather than arbitrary notions about how much things “should” cost – to guide prices. Allowing people the freedom to pursue their own interests (within the limits of just conduct) is the best and only sustainable way to achieve societal progress. For individuals to develop and have a chance at happiness, they must be free to make their own choices and mistakes, rather than be forced to accept choices made for them by others. As I digested this and went about my business, it dawned on me that these principles are fundamental to the well-being not only of societies – as I learned through my interdisciplinary studies – but also of organizations, which are essentially small societies. When encountering a challenge at work (such as sunk cost or competitive disadvantage), I began responding with the principles of a free society in mind. And sure enough, one concept at a time, I saw that that the principles that worked in society also worked in an organization.
      2. As a young man Charles spent his nights in Wichita Kansas reading every subject trying to understand what principle allows people to flourish. He took ideas from all disciplines such as physics and Newton’s Third Law of Motion regarding reciprocation. Came to understand that organizations are like miniature societies and what would benefit society at large would also benefit organizations
    13. Experimental Discovery > A Grand Plan
      1. ​Must have an experimental discovery mindset rather than a grand plan mindset. Must also know when you are experimenting and bet accordingly. The point is that progress – whether in business, an economy, or science – comes through experimentation and failure. Those who favor a “grand plan” over experimentation fail to understand the role that failed experiments play in creating progress in society. Failures quickly and efficiently signal what doesn’t work, minimizing waste and redirecting scarce resources to what does work. A market economy is an experimental discovery process, in which business failures are inevitable and any attempt to eliminate them only ensures even greater failures. For experimental discovery to work, we have to not only design experiments properly but also recognize when we are experimenting so we can limit the bet accordingly. Koch companies have suffered whenever we forgot we were experimenting and made bets as if the risks were small when they were not.
      2. Smith and Hayek demonstrated that prosperity can take place only through spontaneous order, an order that results from unscripted human action, not human design.
      3. The process of discovery begins when we observe, often vaguely, a gap between what is and what could be. Our intuition tells us something better is just beyond the range of our mind’s eye. To build a culture of discovery, we must encourage, not discourage, the passionate pursuit of hunches (no matter the origin!).
    14. Metrics
      1. Knowing why something is profitable is often as valuable as knowing what is profitable. For this reason, a business must also develop measures that help it understand the drivers of profitability. Prices and profit and loss tell us what people value and the best methods and resources to satisfy those values. They are also the primary indicators of whether we are doing the right thing as a company. In a true market economy, one in which prices are allowed to freely adjust, profit and loss is the market’s objective measure of the value a business is contributing to society. To succeed, a business must not only develop profit and loss measures, but also determine their underlying drivers, in order to understand what is adding value, what is not, and why. This knowledge informs its vision and strategies, leads to innovations, creates opportunities to eliminate waste, and guides continuous improvement
      2. The most valuable measures keep us on track in advancing our vision by enabling us to identify opportunities and problems, and by stimulating innovations,
      3. A successful organization should measure – and do its best to understand – the profitability (and profitability drivers) of its assets, products, strategies, customers, agreements, and employees, and anything else for which it is practical to do so
      4. When measuring, accuracy should always be emphasized over precision. As we use the terms, accuracy is the degree of correctness that creates value. Precision goes beyond that, to near perfection. Perfection, thus, is thus the enemy of progress
      5. Most decisions should be made using marginal analysis. This requires understanding the difference between costs and benefits that are marginal and those that are not, such as sunk costs. Only by making decisions on the appropriate margin will a business consistently enhance its profitability and eliminate waste. That margin will vary enormously depending on the decision.
    15. Other
      1. ​Charles father, Fred, founded what would later become Koch Industries. When Charles joined in 1961 it had a net worth of about $21 million and as of 2015 the number has reached an approximate $100 billion. Father always stressed integrity, humility, character and the fact that adversity is the best way to improve your character and to learn. His father put them to work full-time when he was young following that his son would never become a country club bum
      2. Since Charles took over, they have reinvested 90% if their profits and aim to double profits every 6 years (~12% annual growth)
      3. Their strong balance sheet insured their suppliers that they would pay in full and promptly. Their goal was always to be the counterparty of choice
      4. Corporate welfare is damaging because it limits competition, innovation, and customer options
      5. Koch makes acquisitions when they can provide additional value through their internal capabilities, can improve existing businesses or provide new platforms for growth. I often think of what we do as bricklaying. Or perhaps more precisely, stonemasonry. Once a stone has been carefully selected and set, it shapes a new space in which the mason can set yet another well chosen stone. Each stone is different, but they all fit together to create a framework that is mutually reinforcing
      6. Getting the right people was Charles’ main focus from day one
      7. Creative destruction, while painful for some, is a net positive for society while corporate welfare is a net negative
      8. The man who understands principles can apply his own methods, the man who tries methods, ignoring principles, is sure to have trouble
      9. Deciding the order in which to do things can be just as important in deciding what to do. Three step process: quantify, simplify, prioritize
      10. Hiring, retaining, teaching, and inspiring people is one of the most important functions of the organization. You should aim to always hire virtuous people regardless of open positions. Coach employees to be the best that they can and consider moving them around within the company if their skills aren’t lined up with their role
      11. Avoid entering into partnerships without an exit mechanism
      12. The apprentice model has been extremely effective at teaching newer hires. There are 4 stages – I do, you watch; I do, you help; you do, I help; you do, I watch
      13. Every organization has its own culture. If that culture is not created consciously and purposively, it will degenerate into a cult of personality or an anything goes environment. You can never think of yourself as too big or too good to fail. Koch’s culture comes from the framework of the free society, where innovation and productivity thrive – to the degree that the framework is upheld. The second category is the theories of philosophers and psychologists whose behavioral prescriptions strike me as refreshingly reality-based – thinkers such as Hayek, Polanyi, and Maslow. The third is my own life experience, which was spent working with all different kinds of people.
What I got out of it
  1. An amazing look into what has turned Koch from a $21m operation in the ’60s to an over $100b organization today. Simple (but not easy) principles which are scale invariant, win-win, sustainable, and adaptable. An organization is a mini free-society and what works at the largest level of society, works just as well at the level of organizations. Treat people as they want to be treated, be trusting, reward people for the value they create

Effortless Mastery by Kenny Werner

I got so much out of this book that I made a bit of a more formal write-up: On Effortless Mastery

Finite and Infinite Games: A Vision of Life as Play and Possibility by James P. Carse

I got so much out of this book that I made a bit of a more formal write-up: On Finite and Infinite Games

My Life and Work by Henry Ford

This teacher’s reference guide is a bit unique in that it was only one book rather than several but I enjoyed it so much and got so much out of it that I wanted to make a more formal write-up. As always, I have attempted to put together something which is (hopefully) a manageable, actionable and digestible introduction to Ford’s thinking and business philosophy.

On Henry Ford

 

*The vast majority of the content is from the books and not my own words. I’ve simply distilled, compiled, and added a few notes.

Sam Walton: Made in America by Sam Walton and John Huey

Summary
  1. Sam Walton recounts his background and Walmart’s path to retail dominance
Key Takeaways
  1. Sam’s Rules for Building a Business
    1. Commit to your business. Believe in it more than anybody else. I think I overcame every single one of my personal shortcomings by the sheer passion I brought to my work. I don’t know if you’re born with this kind of passion or if you learn it. But I do know you need it. If you love your work, you’ll be out there every day trying to do it the best you possibly can and pretty soon everybody around will catch the passion from you – like a fever
    2. Share your profits with all your associates, and treat them as partners. In turn, they will treat you as a partner and together you will perform beyond your wildest expectations. Behave as a servant leader in a partnership. Encourage your associates to hold a stake in the company. Offer discounted stock, and grant them stock for their retirement. It’s the single best thing we ever did
    3. Motivate your partners. Money and ownership alone aren’t enough. Constantly, day by day, think of new and more interesting ways to motivate and challenge your partners. Set high goals, encourage competition, and then keep score. Make bets with outrageous payoffs. If things get stale, cross-pollinate; have managers switch jobs with one another to stay challenged. Keep everybody guessing as to what your next trick is going to be. Don’t become too predictable
    4. Communicate everything you possibly can to your partners. The more they know, the more they’ll understand. The more they understand, the more they’ll care. Once they care, there’s no stopping them. If you don’t trust our associates to know what’s going on, they’ll know you don’t really consider them partners. Information is power, and the gain you get from empowering your associates more than offsets the risk of informing your competitors
    5. Appreciate everything your associates do for the business  A paycheck and a stock option will buy one kind of loyalty. But all of us like to be told how much somebody appreciates what we do for them. We like to hear it often and especially when we have done something we’re really proud of. Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They’re absolutely free – and worth a fortune
    6. Celebrate your success. Find some humor in your failures. Don’t take yourself too seriously. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasm – always. When all else fails, put on a costume and sing a silly song. Then make everybody else sing with you. Don’t do a hula on Wall Street. It’s been done. Think up your own stunt. All of this is more important, and more fun, than you think, and it really fools the competition. “Why should we take those cornballs at Walmart seriously?”
    7. Listen to everyone in your company. And figure out ways to get them talking. The folks on the front lines – the ones who actually talk to the customer – are the only ones who really know what’s going on out there. You’d better find out what they know. This really is what total quality is all about. 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.
    8. Exceed your customers’ expectations. If you do, they’ll come back over and over. Give them what they want – and a little more. Let them know you appreciate them. Make good on all your mistakes, and don’t make excuses – apologize. Stand behind everything you do. The two most important words I ever wrote were on the first Walmart sign: “satisfaction guaranteed.” They’re still up there, and they have made all the difference
    9. Control your expenses better than your competition. This is where you can always find the competitive advantage. For 25 years running – long before Walmart was known as the nation’s largest retailer – we ranked number one in our industry for the lowest ratio of expenses to sales. You can make a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient
    10. Swim upstream. Go the other way. Ignore the conventional wisdom. If everybody else is doing it one way, there’s a good chance you can find your niche by going exactly the opposite direction. But be prepared for a lot of folks to wave you down and tell you you’re headed the wrong way. I guess in all my years, what I heard more often than anything was: a town of less than 50,000 population cannot support a discount store for very long
      1. I can tell you this, though: after a lifetime of swimming upstream, I am convinced that one of the real secrets to Walmart’s phenomenal success has been that very tendency. Many of our best opportunities were created out of necessity. The things that we were forced to learn and do, because we started out underfinanced and undercapitalized in these remote, small communities, contributed mightily to the way we’ve grown as a company. Had we been capitalized, or had we been the offshoot of a large corporation the way I wanted to be, we might not ever have tried the Harrisons or the Rogers or the Springdales and all those other little towns we went into in the early days. It turned out that the first big lesson we learned was that there was much, much more business out there in small-town America than anybody, including me, had ever dreamed of
  2. Walmart’s Strategy
    1. 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. Our growth strategy was born out of necessity, but at least we recognized it as a strategy pretty early on. 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 could 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
    2. 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
    3. There’s no question whatsoever that we could not have done what we did back then if I hadn’t had my airplanes. I bought that first plane for business, to travel between the stores and keep in touch with what was going on. But once we started really rolling out stores, the airplane turned into a great tool for scouting real estate. We were probably 10 years ahead of most other retailers in scouting locations from the air, and we got a lot of great ones that way. From up in the air we could check out traffic flows, see which way cities and towns were growing, and evaluate the location of the competition – if there was any. Then we would develop our real estate strategy for that market. I loved doing all this myself
    4. A key transition point was moving from variety store to discount store
    5. 2 cornerstones of Walmart’s philosophy – we sell for less and satisfaction guaranteed  The idea was simple: when customers thought of Walmart, they should think of low prices and satisfaction guaranteed. They could be pretty sure they wouldn’t find it cheaper anywhere else, and if they didn’t like it, they could bring it back. No matter what you pay for it, if we get a great deal, pass it on to the customer. And of course that’s what we did
      1. Building this consistent customer trust is vital, think it also applies to Costco and Amazon in certain ways
    6. As much as we love to talk about all the elements that have gone into Walmart’s success – merchandising, distribution, technology, market saturation, real estate strategy – the truth is that none of that is the real secret to our unbelievable prosperity. What has carried this company so far so fast is the relationship that we, the managers, have been able to enjoy with our associates.
    7. We didn’t pay our associates much in the beginning. It wasn’t that I intentionally was heartless. I wanted everybody to do well for themselves. It’s just that in my very early days in the business, I was so doggoned competitive, and so determined to do well, that I was blinded to the most basic truth, really the principle that later became the foundation of Walmart’s success. You see, no matter how you slice it in the retail business  payroll is one of the most important parts of overhead, and overhead is one of the most crucial things you have to fight to maintain your profit margin. That was true then and it’s still true today. Back then, though  I was so obsessed with turning in a profit of 6% or higher that I ignored some of the basic needs of our people and I feel bad about it. The larger truth that I failed to see turned out to be another of those paradoxes – like the discounters’ principle of the less you charge the more you’ll earn. And here it is: the more you share profits with your associates – whether it’s in salaries or incentives or bonuses or stock discounts – the more profit will accrue to the company. Why? Because the way management treats the associates is exactly how the associates will 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. Satisfied, loyal, repeat customers are at the heart of Walmart’s spectacular profit margins, and those customers are loyal to us because our associates treat them better than salespeople in other stores do. So, in the whole Walmart scheme of things, the most important contact ever made is between the associate in the store and the customer
    8. The idea for sharing profits and benefits had come up even before we went public, not from me, but from Helen. The decision we reached around that time, to commit ourselves to giving the associates more equitable treatment in the company, was without a doubt the single smartest move we ever made at Walmart.
    9. One of the most successful bonuses has been our shrink incentive plan, which demonstrates the partnership principle as well as any I know beyond just straight profit sharing. As you may know, shrinkage, or unaccounted-for inventory loss – theft, in other words – is one of the biggest enemies of profitability in the retail business. So in 1980, we decided the best way to control the problem was to share with the associates any profitability gained by reducing it. If a store holds shrinkage below the company’s goal, every associate in that store gets a bonus that could be as much as $200. This is sort of competitive information, but I can tell you that our shrinkage percentage is about half the industry average. Not only that, it helps our associates feel better about each other, and themselves. Most people don’t enjoy stealing, even the ones who will do it if given the opportunity. So under a plan like this, where you’re directly rewarded for honesty there’s a real incentive to keep from ignoring any customers who might want to walk off with something, or worse, to allow any of your fellow associates to fall into that trap. Everybody working in that store becomes a partner in trying to stop shrinkage, and when they succeed, they – along with the company in which they already hold stock – share in the reward.
      1. Use human nature to work for you – in this case he was able to align incentives to get people all-in and to become self-policing
    10. Keeping so many people motivated to do the best job possible involves a lot of the different programs and approaches we’ve developed at Walmart over the years, 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. You can’t praise something that’s not done well. You can’t be insincere. You have to follow up on things that aren’t done well. There is no substitute for being honest with someone and letting them know they didn’t do a good job. All of us profit from being corrected – if we’re corrected in a positive way. But there’s no better way to keep someone doing things the right way than by letting him or her know how much you appreciate their performance. If you do that one simple thing, human nature will take it from there
      1. What the pupil must learn, if he learns anything, is that the world will do most of the work for you, provided you cooperate with it by identifying how it really works and identifying with those realities. – Joseph Tussman
    11. “When I started working at Walmart in West Texas, we could anticipate a store visit by the chairman with the same sense you get when you’re going to meet a great athlete, or a movie star, or a head of state. But once he comes in the store, that feeling of awe is overcome by a sort of kinship. He is a master of erasing that ‘larger-than-life’ feeling that people have for him. How many heads of state always start the conversation by wanting to know what you think? What’s on your mind?
      1. It is great to be great, but it is even better to be human. – Will Rodgers
      2. Walt Disney also had this capacity to put people at ease – if he wanted to…
    12. And, as I’ve said, we’ve certainly borrowed every good idea we’ve come across. Helen and I picked up several ideas on a trip we took to Korea and Japan in 1975. A lot of the things they do over there are very easy to apply to doing business over here. Culturally, things seem so different – like sitting on the floor eating eels and snails – but people are people, and what motivates one group generally will motivate another
    13. A strong corporate culture with its own unique personality, on top of the profit-sharing partnership we’ve created, gives us a pretty sharp competitive edge. But a culture like ours can create some problems of its own too. The main one that comes to mind is a resistance to change. When folks buy into a way of doing things, and really believe it’s the best way, they develop a tendency to think that’s exactly the way things should always be done. So I’ve made it my own personal mission to ensure that constant change is a vital part of the Walmart culture itself. I’ve forced change – sometimes for changes sake a lone – at every turn in our company’s development. In fact, I think one of the greatest strengths of Walmart’s ingrained culture is its ability to drop everything and turn on a dime…Part of this constant change helps keep people and competitors a little off balance
    14. Small merchants need to avoid coming at us head-on and do their own thing better than we do ours. It doesn’t make sense to try to underprice Walmart on something like toothpaste. That’s not what the customer is looking to a small store for anyway. Most independents are best off, I think, doing what I prided myself on doing for so many years as a storekeeper: getting out on the floor and meeting every one of the customers. Let them know how much you appreciate them, and ring that cash register yourself. That little personal touch is so important for an independent merchant because no matter how hard Walmart tries to duplicate it – and we try awfully hard – we can’t really do it
      1. Like Paul Graham advises, attack incumbents orthogonally. Start small, start cheap, start obscure, start with actions that might not scale, in areas which are looked down upon. You’ll build such a loyal customer base that before your competitors know it, you’re on their heels
    15. I loved it. So many times we overcomplicate this business. You can take computer reports, velocity reports, any kind of reports you want to and go lay out your counters by computer. But if you simply think like a customer, you will do a better job of merchandise presentation and selection than any other way. It’s not always easy. To think like a customer, you have to think about details. Whoever said ‘retail is detail’ is absolutely 100% right. On the other hand it’s simple. If the customers are the bosses, all you have to do is please them.
    16. Distribution and transportation have been so successful at Walmart because senior management views this part of the company as a competitive advantage, not as some afterthought or necessary evil. And they support it with capital investment. A lot of companies don’t want to spend any money on distribution unless they have to. Ours spends because we continually demonstrate that it lowers our costs. This is a very important strategic point in understanding Walmart – Joe Hardin
    17. I would go so far as to say, in fact, that the efficiencies and economies of scale we realize from our distribution system give us one of our greatest competitive advantages
    18. For a long time Sam would show up regularly in the drivers’ break room at 4AM with a bunch of donuts and just sit there for a couple of hours talking to them. He grilled them. What are you seeing at the stores? Have you been to that store lately? How do the people act there? Is it getting better? It makes sense. The drivers see more stores every week than anybody else in this company. And I think what Sam likes about them is that they’re not like a lot of managers. They don’t care who you are. They’ll tell you what they really think.
    19. Being big poses some real dangers. It has ruined many a fine company – including some giant retailers – who started out strong and got bloated or out of touch or were slow to react to the needs of their customers. Here’s the point: the bigger Walmart gets, the more essential it is that we think small. Because that’s exactly how we have become a huge corporation- by not acting like one. Above all, we are small-town merchants, and I can’t tell you how important it is for us to remember – when we puff up our chests and brag about all those huge sales and profits – that they were all made one day at a time, one store at a time, mostly by the hard work, good attitude and teamwork of all those hourly associates and their store managers, as well as by all those folks in the distribution centers.
    20. So we know what we have to do: keep lowering our price, keep improving our service, and keep making things better for the folks who shop in our stores. That is not something we can simply do in some general way. It isn’t something we can command from the executive offices because we want it to happen. We have to do it store by store, department by department, customer by customer, associate by associate
    21. Push responsibility down to those touching the medium – That makes it management’s job to listen to those merchandisers out in the stores. We have these buyers here in Bentonville – 218 of them – and we have to remind them all the time that their real job is to support the merchants in the stores. Otherwise, you have a headquarters-driven system that’s out of touch with the customers of each particular store, and you end up with a bunch of unsold workboots  overalls and hunting rifles at the Panama City Beach store, where folks are begging for water guns and fishing rods and pails and shovels; and at the Panama City store in town you’ve got a bunch of unsold beach gear stacked up gathering dust. So when we sit down at our Saturday morning meetings to talk about our business, we like to spend time focusing on a single store, and how that store is doing against a single competitor in that particular market. We talk about what that store is doing right, and we look at what it’s doing wrong
    22. We believe that we have to talk about and examine this company in minute detail. I don’t know any other large retail company – Kmart, Sears, Penney’s – that discusses their sales at the end of the week in any smaller breakdown than by region. We talk about individual stores. Which means that if we’re talking about the store in Dothan  Alabama or Harrisburg, Illinois, everybody here is expected to know something about that store – how to measure its performance, whether a 20% increase is good or bad, what the payroll is running, who the competitors are, and how we’re doing. We keep the company’s orientation small by zeroing in on the smallest operating unit we have. No other company does that. – David Glass
    23. If you had to boil down the Walmart system to one single idea it would probably be communication, because it is one of the real keys to our success. We do it in so many ways, from the Saturday morning meeting to the very simple phone call, to our satellite system. The necessity for good communication in a big company like this is so vital it can’t be overstated.
  3. Sam does not consider himself reflective or one to dwell on the past
  4. His passion to compete is what sets him apart
  5. His father was totally honest and the best negotiator he had ever seen – him and the counterparty always parted as friends
  6. Had several hard jobs as a kid during the Great Depression. Like Disney and many others, was a paper boy which taught him the value of a dollar and this became part of the Walmart culture
  7. Supremely competitive with a great bias for action but his best talent was as a motivator.
  8. “Exercising your ego in public is definitely not the way to build an effective organization. One person seeking glory doesn’t accomplish much; at Walmart, everything we’ve done has been the result of people pulling together to meet one common goal – teamwork – something I also picked up at an early age”
  9. Thinking you have the right to win often turns into a self-fulfilling prophecy
  10. Sam was one of the masters of “going positive and going first”
    1. I learned early on that one of the secrets to campus leadership was the simplest thing of all: speak to people coming down the sidewalk before they speak to you. I did that in college. I did it when I carried my papers. I would always look ahead and speak to the person coming toward me. If I knew them, I would call them by name, but even if I didn’t I would still speak to them. Before long, I probably knew more students than anybody in the university, and they recognized me and considered me their friend
    2. “I guess Mr. Walton just had a personality that drew people in. He would yell at you from a block away, you know. He would just yell at everybody he saw, and that’s the reason so many liked him and did business in the store. It was like he brought in business by his being so friendly
  11. Somehow over the years, folks have gotten the impression that Walmart was something I dreamed up out of the blue as a middle-aged man, and it was just this great idea that turned into an overnight success. It’s true that I was forty four when we opened our first Walmart in 1962, but the store was totally an outgrowth of everything we’d been doing since Newport – another case of me being unable to leave well enough alone, another experiment. And like most other overnight successes, it was about twenty years in the making. Of course I needed somebody to run my new store, and I didn’t have much money, so I did something I would do for the rest of my run in the retail business without any shame or embarrassment whatsoever: nose around other people’s stores searching for good talent. One way he lured the best people in, especially early on, was to give away a percentage of the profits
  12. Early goal was to be the best, most profitable variety store in Arkansas within 5 years. That happened
  13. Early lesson: you can learn from anybody, especially competitors
  14. Was always iterating and experimenting – this may be Sam’s most important contribution. “Every crazy thing we tried hadn’t turned out as well as the ice cream machine, of course, but we hadn’t made any mistakes that we couldn’t correct quickly, none so big that they threatened the business
  15. What Walmart realized more clearly than anyone else and what they built around and exploited is that you can lower the mark-up and margin so that the volume makes up for less profit per item
  16. Always sought out competition – “Bentonville was the smallest of the towns we considered, and it already had three variety stores, when one would have been enough. Still, I love competition, and it just struck me as the right place to provide I could do it all over again
  17. Was a keen observer
    1. “As soon as  Sam moved the store from Newport to Bentonville, he had a nice big sale, and we put barrels full of stuff all around the floor. Those elderly ladies would come in and bend way down over into those barrels. I’ll never forget this. Sam takes a look, frowns, and says: ‘One thing we gotta do, Charlie. We gotta be real strong in lingerie.’ Times had been hard, and some of those underthings were pretty ragged.” – Charlie Baum
    2. “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.” – Charlie Cate
  18. I guess we had very little capacity for embarrassment back in those days. We paid absolutely no attention whatsoever to the way things were supposed to be done, you know, the way the rules of retail said it had to be done
  19. “Two things about Sam Walton distinguish him from almost everyone else I know. First, he gets up every day bound and determined to improve something. Second, he is less afraid of being wrong than anyone I’ve ever known. And once he sees he’s wrong, he just shakes it off and heads in another direction”
  20. After a tornado tore down a key store – “We just rebuilt it and got back at it.” No feeling sorry for oneself. Just facing what reality hands you and making the most of it
  21. Distribution was an absolute key to Walmart’s success
  22. I guess I’ve stolen – I actually prefer the word “borrowed” – as many ideas from Sol Price as from anybody else in the business. For example, it’s true that Bob Bogle came up with the name Walmart in the airplane that day, but the reason I went for it right away wasn’t that the sign was cheaper. I really liked Sol’s Fed-Mart name so I latched right on to Walmart.
  23. Many of these larger stores were bright stars for a moment, and then they faded. I started thinking about what really brought them down, and why we kept going. It all boils down to not taking care of their customers, not minding their stores, not having folks in their stores with good attitudes, and that was because they never really even tried to take care of their own people. 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 Walmart’s success
  24. Academy Men vs. NCOs (non-commissioned officers) – the early fellows didn’t want me hiring any college men. They had the idea that college graduates wouldn’t get down and scrub floors and wash windows. The classic training in those days was to put a two-wheeler – you know, a cart that you carry merchandise on – into a guy’s hands within the first thirty minutes he came to work and get him pushing freight out of the back room. They all came out of these variety stores with the same background and the same kind of philosophy and education. And we looked for the action-oriented, do-it-now, go type of folks
  25. I can name you a lot of retailers who were originally merchandise driven, but somehow lost it over the years. In retail, you are either operations driven – where your main thrust is toward reducing expenses and improving efficiency – or you are merchandise driven. The ones that are truly merchandise driven can always work on improving operations. But the ones that are operations driven tend to level off and begin to deteriorate. So Sam’s item promotion mania is a great game and we all have a lot of fun with it, but it is also at the heart of what creates our extraordinary high sales per square foot, which enable us to dominate our competition
  26. Sam was never one to scoff at change if it was correct. He began as a dime store man so at first he wanted to make a certain percentage of profit on everything. But he came around to the idea that a real hot item would really bring customers in the store so we finally started running things like toothpaste for 16 cents a tube. Then we’d have to worry about getting enough of it in stock
  27. Thrived on change and no decision was ever sacred
  28. One thing I never did – which I’m really proud of – was to push any of my kids too hard. I knew I was a fairly overactive fellow and I didn’t expect them to try to be just like me. Also, I let them know they were welcome to come into our business, but that they would have to work as hard as I did – they would have to commit to being merchants.
  29. One reason he fell in love with his wife Helen is that she was always her own woman, forming her own opinions and making her own decisions
  30. I have always had the soul of an operator, somebody who wants to make things work well, then better, then the best they possibly can
  31. Some folks no doubt figured we were a little fly-by-night – you know, in the discount business today but out selling cars or swampland tomorrow. I think that misunderstanding worked to our advantage for a long time, and enabled Walmart to fly under everybody’s radar until we were too far along to catch
  32. Anybody who has ever known anything about me knows I was never in anything for the short haul
  33. I always had great curiosity and would openly ask competitors how they operated and thought about their business. I always questioned everything
  34. I think it must be human nature that when somebody homegrown gets on to something, the folks around them sometimes are the last to recognize it
  35. I guess what’s annoying to executives – to anybody who tries to spend their time managing a company as big as this – is these money managers who’re always churning their investors’ accounts. You know, the stock will go from $40 to $42 and they’ll rush in there and say, “Hey, let’s sell this thing because it’s just too high. It’s an overvalued stock.” Well, to my mind, that doesn’t make much sense. As long as we’re managing our company well, as long as we take care of our people and our customers, keep our eye on those fundamentals, we are going to be successful. Of course, it takes an observing, discerning person to judge those fundamentals for himself. If I were a stockholder of Walmart, or considering becoming one, I’d go into ten Walmart stores and ask the folks working there, “How do you feel? How’s the company treating you?” Their answers would tell me much of what I need to know
  36. The point is, all those analysts may have had perfectly logical theories about why a 20% increase would be a disaster for us. But they failed to see that in a big economic downturn, when everybody is suffering, Walmart’s fundamental strengths would keep us going strong. And we would look great compared to everybody else
  37. What’s really worried me over the years is not our stock price, but that we might someday fail to take care of our customers, or that our managers might fail to motivate and take care of our associates. I was also worried that we might lose the team concept, or fail to keep the family concept viable and realistic and meaningful to our folks as we grow. Those challenges are more real than somebody’s theory that we’re headed down the wrong path
  38. If you asked me am I an organized person, I would have to say flat out no, not at all. Being organized would really slow me down. In fact, it would probably render me helpless  I try to keep track of what I’m supposed to do, and where I’m supposed to be, but it’s true I don’t keep much of a schedule. Except for reading my numbers on Saturday morning and going to our regular meetings, I don’t have much of a routine for anything else. 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
  39. “When Sam feels a certain way, he is relentless. He will just wear you out. He will bring up an idea, we’ll all discuss it and then decide maybe that it’s not something we should be doing right now – or ever. Fine. Case closed. But as long as he is convinced that it is the right thing, it just keeps coming up – week after week – until finally everybody capitulates and says, well, it’s easier to do it than to keep fighting this fight. I guess it could be called management by wearing down.” – David Glass
  40. One way I’ve managed to keep up with everything on my plate is by coming in to the office really early almost every day. 4:30am wouldn’t be all that unusual a time for me to get started down at the office. The early morning time is tremendously valuable: it’s uninterrupted time when I think and plan and sort things out
  41. “I think one of Sam’s greatest strengths is that he is totally unpredictable. He is always his own person, totally independent in his thinking. As a result, he is not a rubber-stamp manager. He never rubber-stamps anything for anyone”
  42. As famous as Sam is for being a great motivator – and he deserves even more credit than he’s gotten for that – he is equally good at checking on the people he has motivated. You might call his style: management by looking over your shoulder
  43. I’m always asked if there ever came a point, once we got rolling, when I knew what lay ahead. I don’t think that I did. All I knew was that we were rolling and that we were successful. We enjoyed it, and it looked like something we could continue. We had found a concept, certainly, that the customers liked. Even back then, I always said at the first sign of it getting out of control, the first time our numbers don’t come through as they should, we will pull in and put our arms around what we’ve built. Up to this point, of course, we haven’t had to do it
  44. We keep our prices as low as possible by keeping our costs as low as possible
  45. Incumbents of a new model almost always drive out or are acquired by the old guard. What happened was that they (KMart, etc.) didn’t really commit to discounting
  46. I have played to my strengths and relied on others to make up for my weaknesses
  47. Sam and top executives always had and encouraged a ‘bias for action’
  48. Most of us were too busy in the stores to even think about where it was all leading
  49. Have to give people responsibility, trust them and then check on and help them
  50. Sharing information and responsibility is key to any partnership.
    1. Scarcity of any kind leads to “hoarding” where people will not feel secure in their environment and will not be all-in
  51. Submerge your own ambitions and help whoever you can in the company
  52. Everybody likes praise and we look for every chance to heap it on them
  53. The secret to successful retailing is to give your customers what they want
  54. Customers (eventually) vote with their feet
  55. Decision process – On something like the Kuhn’s decision, I try to play a “what-if” game with the numbers – but it’s generally my gut that makes the final decision. If it feels right, I tend to go for it, and if it doesn’t, I back off
  56. Once I decide I’m wrong, I’m ready to move onto something else
  57. I’ve always been a delegator – trying to hire the best people for our stores
  58. Sam’s ‘Beat Yesterday” Ledger book – Sam kept a ledger book to monitor and compare their performance to earlier versions of themselves during the early years of Walmart
    1. Is there a way to transfer this ‘Beat Yesterday’ ledger book to compare current self to younger self? Journal, decision book, mistakes made, what you’ve learned, how you would’ve handled a situation differently?…
  59. Enlightened self-interest
    1. We’ve been able to help our associates to a greater degree than most companies because of what you’d have to call enlightened self-interest; we were selfish enough to see in the beginning the value to the company of letting them share the profits
    2. You may have trouble believing it, but every time we’ve tested the old saying, it has paid off for us in spades: the more you give, the more you get.
  60. Win/Lose – the Japanese are right on this point: you can’t create a team spirit when the situation is so one-sided, when management gets so much and workers get so little of the pie
  61. Great ideas come from everywhere if you just listen and look for them. You never know who’s going to have a great idea
  62. One of the most powerful forces in human nature is the resistance to change. To succeed in this world, you have to change all the time
  63. A lot of folks ask if a Walmart-type story still occur in this day and age? My answer is of course it could happen again. Somewhere out there right now there’s someone – probably hundreds of thousands of someones – with good enough ideas to go all the way. It will be done again, over and over, providing that someone wants it badly enough to do what it takes to get there. It’s all a matter of attitude and the capacity to constantly study and question the management of the business
What I got out of it
  1. One of my favorite business books of all time. Absolute focus on the customer, willingness to change, profit sharing with associates, gestures of appreciation, enlightened self-interest, willing to be different, going positive and going first. Will reread immediately