27 June 2022

In today’s classic episode that originally aired back in February 2018, Preston and Stig do a book summary of Sam Walton’s wonderful book, Made in America. This was a book Jeff Bezos listened to when he founded Amazon, and influenced how he built his business. 

You’ll learn the key insights that Walton provides into how he was able to build his small five and dime store into the billion dollar global retail chain it is today. 

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  • Sam Walton’s 10 pieces of advice for building a successful business.
  • What Amazon learned from Walmart.
  • Why it is a big problem if your team is not complaining.
  • Ask the Investors: Are Warren and Charlie the competitive advantage of Berkshire Hathaway?


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Stig Brodersen 00:01

In today’s classic episode that originally aired back in February 2018, Preston and I do a book summary of Sam Walton’s wonderful book, Made in America. This was a book Jeff Bezos listened to when he founded Amazon, and influenced how he built his business. 

In this episode you’ll learn the key insights that Walton provides into how he was able to build his small five and dime store into the billion dollar global retail chain it is today. 

Walton completed this book the same year he died so there weren’t any details left out of his writing. 

So without further ado, here is our book review of Made in America

Preston Pysh 0:02
On today’s show, we talk about the American retail tycoon Sam Walton. Similar to other autobiographies, Walton provides key insights into how he was able to build his small five and dime store into the billion dollar global retail chain it is today.

Sam completed this book the same year he died so there weren’t any details left out of his writing. Get ready to hear some of his awesome insights and fun stories from the man that created $100 billion in a single lifetime.

Intro 0:26
You are listening to The Investor’s Podcast where we study the financial markets and read the books that influenced self-made billionaires the most. We keep you informed and prepared for the unexpected.

Preston Pysh 0:43
Alright, like we said in the introduction, we’re going to be covering Sam Walton’s book “Made in America.” This was a really good read. We were waiting a long time for this to come out because it wasn’t on Audible. Recently, I just saw it pop up there within the last month so Stig and I took a look at it. We said, “Hey, it’s finally available. Let’s go ahead and do this.”

Stig, I’m assuming you enjoyed this one. This was a very good read, right?

Yes. I thoroughly enjoyed it, especially these days and times where everything is about high tech AI and blockchain. It’s just nice to read an old fashioned book about how to become the richest man in American in retail and being a merchant. What’s not to like about that. I think we really needed this book.

Stig Brodersen 1:20
I had heard that Jeff Bezos read this book before or while he was founding Amazon. This was very influential for him to read so I always wanted to get my hands on it and go through it. I’m excited we were able to do it.

Preston Pysh 1:35
The layout of the book is really simple. It’s really just a chronological order of when he started as a young 20 year old, something good and clear up to the day. At the very end of the book, it gets a little sentimental because he’s writing this kind of thing on his deathbed. He tells the whole story. That’s what I really liked about it is he didn’t really leave anything out.

Let’s go ahead and go through this just like we kind of read it. We’re not going to go chapter by chapter. We’re just going to kind of tell the story. Then at the end, one of the things I really like about this is Sam Walton lists out the top 10 things he learned through his entire life, specifically by building Walmart. We’re going to cover those top 10 things at the end of the discussion here.

Sam Walton starts off. He’s a military officer. He goes into the military and he does that until like his mid-20s. Then at the age of 26, he gets out after his little bit of service in the military and he starts his first store at the age of 26. The year is 1945 and he opens his first variety store in Newport, Arkansas.

What he does is he takes out a $20,000 loan from his father in law and then he put in $5,000 of his own money that he had saved while he was in the army.

I’ll tell you back in the day, like 1945, to save up $5,000 while you’re in the army, because I don’t think you make all that much money in the army, especially as a young officer. That’s a lot of money. He saved up a large substantial amount of money.

Stig Brodersen 3:26
When he was in JC Penney, that was just after his graduation for a brief period of time, he made $75 as a management trainee per month. Again, we don’t know how much money he made in the military, but $5,000 that’s a lot of money.

Preston Pysh 3:42
I’m sure if he did an inflation comparison, you’d be 100,000 bucks or something today. I don’t know what it’d be, but it’d be pretty high.

The name of this variety store that he started was called Ben Franklin. This was a chain of stores. This was chained by the Butler brothers. They are the ones that actually own the entire chain, but he opened that small store in Newport, Arkansas. It was called Ben Franklin.

The thing that immediately caught my attention with the stories that he was telling was that he’s a very creative person. He’s thinking outside the box and he’s very customer-focused. He’s thinking of ways to attract people into the store and he’s thinking in ways that I think most store owners didn’t think so.

The first thing that caught my mind was he goes out and he buys this ice cream machine. He puts this ice cream machine right there on Main Street, where everyone that’s kind of walking through the town can see this ice cream machine right there outside of the store. He’s not charging much for the ice cream. Like it’s the typical Walmart model, where it’s to drive traffic into the store.

I think normal people when they go into retail, they’re like, “Okay, well the ice cream cost is much so I want to have this much markup on top of it so I can make a profit and let’s put it in front of the store.”

His model was like, “Let’s put In front of the store and let’s not really make a profit on this. Let’s just kind of cover our costs with this ice cream.”

Everyone in this flippin town is going to get their ice cream here instead of anywhere else. Then after they eat their ice cream, or maybe while they’re eating their ice cream, they’re going to come into the store and spend some money. That’s what he did and it worked really well. This is just kind of a hint at how Sam Walton thought very early on was you have to have something that captures the person’s interest to drive traffic to the store.

Stig Brodersen 5:35
Yeah and it was actually really interesting what you said about Jeff Bezos before. I didn’t know that he read this book and it was an inspiration to him. When I read the book, I actually took a note from Amazon about this example and how he, I think it was one of his employees who said, “So should we price this as XYZ?”

Basically, what he said was, “No.” We’re talking about cost. We are creating value for the customer. We are negotiating on behalf of our customer. If we can get our merchandise cheaper, that should automatically be reflected.

It really reminds me of the book we read, “The Everything Store” by Brad Stone about Amazon. He talked about this and this famous example where Bezos got a lot of criticism for not only showing positive reviews of the products, because after watching this about selling more products. He said, “No, that’s such a short term way of thinking.”

It is all about customer focus, really focus on the customer and how to add value for the customer. As long as you do that first, the rest will basically follow. That’s I guess, also what you’re getting at here, Preston, with, yeah, you might not be really making money out of this, but at least they’re in the store. They feel that they’re well treated. Then he can put a mark up on whatever he had in that store.

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Preston Pysh 6:53
I think this is the thing that a lot of people miss with the compounding impacts of like that decision with the ice cream machine is now when a person in that town goes to his store and they just bought ice cream, and they enjoyed their ice cream. It was cheaper than anywhere else. They can buy it by a fairly large margin. They’re building this goodwill with the customer. They will then go tell their family and friends about the cheap ice cream.

That message is going to spread like wildfire through that town. Then the branding that’s associated with a simple ice cream is now wearing off onto the Ben Franklin store that’s right behind it. People now have a favorable opinion of the store, regardless of the price of whatever that’s in there.

It’s almost like the book that we did, “The Power of Moments,” like these people were having this moment in front of the store where they’re enjoying their ice cream with their families or their friends. It’s just leaving this favorable brand of that whole experience.

I think a lot of business owners underestimate how powerful little things like that are. Sam Walton understood the power of this. This was something that he was always looking at ways to do.

The other thing that was really big early on was he was just emphatic about getting the best price for his product so that he could deliver the best product to the customer. He was like what Stig said, just totally obsessed with the customer experience and the customers getting the lowest price possible.

He went off just really hustling and cutting out as many middlemen as he could for the products that he was buying. If he could cut out a middleman to buy underwear and put it into the store, he would drive miles away. He would drive up to New York City to buy things and then he would drive back to put these things in his store just so he could mark it down a couple pennies. That obviously had a big impact because now all of his competitors in the town couldn’t match his price, or at least not match his price and make a profit.

This is the stat that I think is just amazing. This first store that he opened, Ben Franklin store, he started off with $80,000 in sales. Within three years, he bumped that up to $225,000 just because of what he was doing. He had competition in the town. I forget the name of the store that was across from him.

Stig Brodersen 9:31
The funny thing is that Sam Walton spent all his time and almost sounds like whenever you read the book, *inaudible*, the owner of the store and just learning. He was just out there figuring out how they were placing the goods, how he was speaking to customers, because he could see that he was a lot more successful than Sam was so why wouldn’t he just learn from the best game in town? Of course that ended up being Sam in the end.

Preston Pysh 9:57
This is a great story that he started off with this first variety store, but in the end, he actually got kind of bamboozled with this. The landlord of the property that he was renting, the space that he was renting, was PK Holmes. He was taking 5% of the sales for rent. Sam didn’t know it at the time.

I didn’t know this. I actually read this because I’ve never been in the retail side of things. I guess 5% of sales for your rent is extremely high and the numbers should be lower like 2-3%, or something like that.

Well, he went to renew his lease with PK Holmes and Holmes obviously saw the change in the store that Sam had done. He saw that the revenues had quadrupled from where he was at. He declined to renew his lease at like any cost, like no matter what, he was not going to renew his lease.

Sam was obviously bent. Just a little bit of a backstory on this. Evidently, PK Holmes was trying to give the store and the location to his son, so his son could basically take over what Sam had done. Sam kind of left in a bad situation and then he realized how important it is that he owned a lease that was longer than a couple years.

Long story short, he went out there and he started looking for other locations. He went to Bentonville, Arkansas to start another store. This time he started a 5 and Dime. The first year, his sales were $72,000. The next year after that it was $105,000, then $140,000, then $175,000.

As you can see, when he moved to Bentonville, he pretty much did the exact same thing all over again. The only difference was he got a 100-year lease with his new landlord.

A little bit of a backstory on Sam’s brother, Bud. Bud was also in the military And he was a pilot. AS Sam continued to grow this store, he started venturing off and opened another store and he’s opened another store.

These were just convenience stores. There were variety stores in the area. Walmart wasn’t even a thing at this point, but he was opening up all these little variety stores all over the place. Then Sam and Bud, who was a pilot, started getting in the aircraft and flying around and they were scouting out properties through the air to find the highly trafficked towns and areas that they thought a store would do really well. That’s how they started making decisions.

Flying became a real fascination and love in Sam’s life were clear up till the end, he was always flying around looking for store locations. A lot of the store locations for a very long period of time were all scouted out and found by Sam Walton himself.

Stig Brodersen 12:44
One of the things I think we really need to add to this story is that Sam Walton was really targeting small towns at this point in time, because he was so aware of the competition and the margins in his business. It was just so much easier for him to make money in small towns and also think it was not just easy because the competition was not as tough. However, also because he really understood the mindset and the buying behavior in these towns.

One thing he pointed out where he really disrupted the industry that was in terms of price that we just talked about before. I can understand if a lot of people are saying, “Well, I don’t think Walmart is so much cheaper than some of the competitors like Costco or Target or whatever it is.”

However, back then, it was a very different ballgame. The middleman that everybody used, especially in small towns, charged 15%. So that was just 15%, the mark up that you were to put on top of that and another markup in terms of making money off the customer. You still could compete with department stores easily. He didn’t care about that.

For Sam, it was not a question about being 2% cheaper or 3% cheaper that he could probably do. That was just not the strategy. Again, it was really all about how to take the savings that he made in the first place by cutting up the middleman by cutting out everyone else and just delivering that to the customer. That was kind of how he grew up till he had 400 to 500 stores.

Preston Pysh 14:17
The first Walmart was established in 1962. Sam was 43 years old at this point. When they first started his first store, he was 26. He went all those years before actually starting his very first Walmart. The model that he was really using was the major grocery store and the discount stores. He was kind of smashing that together. That was his first store and it was obviously very big compared to anything that was out there as far as size goes in square footage.

The thing that I took away from Sam and this is kind of the Mohnish Pabrai way of doing things is he’s a total cloner. He comes up with a lot of original ideas but he talks about in the book, whenever he would travel to Europe or anywhere, his wife would have to fight him out of retail stores.

He would go into retail stores and he’d have a little recording device. He would be talking into the recording device, with all of his notes, and everything that he was capturing on how they were selling certain products, why they had them positioned at this certain spot in the store. Then he would take all those ideas back to his Walmart and incorporate them.

He was a continuous self learner, always trying to figure out a way to do something better by admiring other people in the way that they were doing things inside of their stores.

I think that that’s a really important point that, even though I mean you think about where he was at this point in his life, I think it just goes to show you even though you’re on top of your game, and you’re crushing the competition, he was always on the lookout. He always asks, “If somebody can beat me and somebody can do something in a better way, how can I capture that and then incorporate it into my business?”

Stig Brodersen 15:58
Yeah, one thing that just came back over and over was how much debt he took on. That’s also one of the reasons why he would grow at that pace. It’s interesting to consider how much money he made early on with the first stores. For him, it was just not enough. He kept on growing and growing.

I think there’s even this point in time… I can’t remember how many stores they had, but they could definitely have a very comfortable lifestyle from that point. His wife talks about how he still took up debt. If something were to default, they would lose their home. I mean, he mentions that.

There was definitely also something that took his toll on him from time to time, but he was just very matter of factly. That was just the way it was supposed to be. He was definitely not a diversified portfolio kind of guy. He went all in for Walmart.

I can’t help but think that faith in the concept in Walmart was something that trickled down to everyone in the organization.

Preston Pysh 17:01
That’s something that he brought up in the book as the reason why the company ultimately went public, is because once the business got so big, the debt was so colossal that he was starting to become uncomfortable with the amount of debt. He just wanted to clear that and never have to worry about it ever again.

At least that’s how he described it in the book that one of the driving forces to go public was that he could clear all those debts. He would know that he owned the entire thing outright, even though that might not have been the best financial decision to keep going in that direction. He just wanted to be able to have the peace of mind to know that he has no debt obligations at all.

That was interesting. I found that kind of surprising that that was one of the driving forces behind it. However, once he put it in that context, it made total sense, especially when you consider the size. Also, I’m sure the leverage that he had used to get to the point that he was at.

This was another interesting thing that I really enjoyed in the book was the way that he talked about how the buyers manage their inventory. He provided an example in the book where he said, “We’ve got two stores in Panama City, Florida. One is a location that’s right next to the beach, and then there’s another one that’s slightly into the town that’s not near the beach. You wouldn’t imagine the difference in the buyers at these two locations, even though they’re a couple miles apart from each other.

“One location is trying to sell lawn chairs and all the beach items for all the tourists that are in town. The other location is for all the locals. They’re not buying those same types of items. If we just had a buyer at a regional level supplying the products to the stores, they would obviously probably not have the right product mix in the stores but because the products that are being put into the stores are actually being decided by not the store heads, but is actually being decided by the division managers inside of the store.”

If you’re the electronics division manager, you’re the person who’s actually working with the buyer at the higher level and saying, “This is what I want, this is what I need” and then the buyer would just fill the order.”

It shows that he really tried to distribute the decision making to the lowest level possible. This is a saying that we often say in the military is if you charge people with responsibility, they’ll take responsibility.

You look at Sam, he had this military officer upbringing where you really place a lot of trust in your lower subordinates in order for them to accomplish certain missions like when he designed his store. He’s telling these division heads inside of the store, “You’re the person who’s in charge of the product mix and the product mix here at the Panama City store right next to the beach is different from the product mix to the one that’s five miles down the road.”

That’s really fun. Powerful. I think it shows you how successful that is.

Then, as those items would sell, each store had the ability to kind of say, “Hey, this is our product, we’re really trying to push for this quarter.”

If one of those stores did well, and they were able to push a certain product and have very good margins, or whatever on that product, they would then take that information and distribute it to all the stores to let them decide or even test and try that same product mix to see if they could have the same kind of success.

The loop that they had in this process to distribute the decision making way down to the lowest level, and then share the outcomes of all those miniature tests in all the different store locations, I think was a really profound point. I think it just shows you how dynamic they were, even though they became a very large organization. You would think that they wouldn’t be operating very efficiently in the way that they’d be managing that but it seems like they did a pretty strong job with that.

Stig Brodersen 20:56
Yeah, he has this great saying, “Think small. That’s the only way you can become a big company.” That really sums up what you’re saying here, Preston.

Preston Pysh 21:07
The thing that immediately reminds me of is Jim Collins book “Good to Great ” where he’s talking about how you’ve got to focus on the small, simple protocols. You got to think very small and you got to become an absolute expert at that small task, so that no one can beat you at it. Then you just need to replicate it over and over again. This is a perfect example of exactly what I think Jim Collins is talking about in his book.

Something that I found interesting or funny was, in the 1980s, Sam became the wealthiest person in America. He was basically like your Jeff Bezos of today. Even though he was this wealthy superstar and he’d been building this business from nothing to what it was back then, he was not comfortable with I think a lot of the stardom.

I know his wife definitely wasn’t because he brought that up in the book numerous times. I guess the irony of all of it is he’s building this massive thing and he’s starting to get a lot of recognition for it. Then he does not want the recognition at all. I found that just interesting.

Stig Brodersen 22:15
Perhaps that’s one of the reasons why he became the richest man in America was because he was thinking small. He didn’t think about becoming the richest. That was not his focus at all.

He has this short story where he talks about how focused the press was on him driving around in the pickup truck. He says, “Why is that a big issue? I mean, how else would I drive around with my two dogs? I can’t do that in a Rolls Royce so I wouldn’t buy one.” I kind of like that story.

Preston Pysh 22:41
Let’s talk about the top 10 lessons that Sam writes about at the end of the book. I liked how he frames this, because at the end of the book he gets pretty personal. He’s saying, “My health is not good. I want to talk about what it is that I learned, there’s so much that I learned, but if I had to narrow it down to 10 things, this is what the 10 things would be.”

The first thing he said was, “Commit to your business. Believe in it more than anybody else out there because if you don’t, you’re never going to be able to see it through.”

The next one that he had was, “Share your profits with all your associates and treat them as partners.” This was a very big theme in the book. In fact, I think there were a couple times where he said that was the single most important thing that he ever did to grow the business to the level that he did. It was to give up a lot of equity of the business to the people that worked for him because that incentivized them to the point where everybody was on this machine and everybody was moving in the same direction.

Once you incentivize people, when you get them all kind of pointed in the same direction, the force behind that was almost impossible to steer in a different direction. I think that’s very hard for a lot of people to do, especially if they own all the equity of their business, is to start giving away some of that to some of their employees and people who are very instrumental in driving that business in the direction that they’re going.

Sam Walton was a firm believer that if you don’t do that, you’re not going to be able to build something like he did.

The next one, the third point, it kind of goes hand in hand with the second one. He says, “Motivate your partners. Money and ownership alone aren’t enough. If things get stale, have people switch jobs, keep things interesting.”

I think what he’s saying is that you just don’t have to motivate them with money. You can motivate them by doing things that are fun.

One of the examples in the book was he lost a bet with one of his top executives. Whenever they were on Wall Street ringing the bell, he had to dress up in a hula skirt because he lost the bet. So there he is with all these pictures and press and he’s wearing a hula skirt, dressed up like he’s in Hawaii. They had fun, him in his executive staff.

They wanted it to be an environment where people want it to go work out. I think that that’s a form of motivation in itself that’s beyond the whole equity piece and monetary piece that often gets forgotten about as far as an instrumental piece that made them successful.

Stig Brodersen 25:14
By the way, that bet was whether or not Walmart could sustain this 6% profit margin, which is kind of outrageous, if you consider what Walmart is doing. I’m pretty sure it was the best dance he ever had with hula. I don’t think he was sad about it, really.

Doing the unexpected and making Walmart a fun place to work that was really important to him. He talks about how all store managers had the authority to basically do whatever they wanted to do in terms of drawing people into the store. They didn’t need to ask for permission.

He came up with one example. It was probably not the most successful example, but it was one example where it was something like if you can find the TV set somewhere in the Walmart store, you will get it for free. It turned out people were more or less beating each other up. I think one even ended up in the hospital for finding that TV set.

It created a lot of publicity and a lot of buzz around Walmart. Sam also talks about how he didn’t really spend a lot of money on his marketing budget. The way that the brand was and basically what happened whenever Walmart rolled into town was it’s just free advertising, because there was so much buzz around all the events they are going to have, the pricing, all the opening offers. It really just took care of itself from that point. I think that there was a lot of branding involved in terms of how he built up the company. That’s just very clear from reading his book.

Preston Pysh 26:45
The fourth point that he brought up was, “Communicate everything you possibly can to your partners.” He talked about in the book, the way that he went about this, and that they had like this network system kind of set up that they could transmit messages. He could get in front of a camera and transmit a message to the entire workforce through video.

This was a really important point. I think that when you don’t communicate effectively, and as often as possible, it’s almost like the blood that flows through your body. It’s almost like you get a clogged artery when you’re unable to communicate effectively to all the different branches.

It’s important to note that communication is a two way street here. It’s not just from the headquarters down. It’s also from the employees up to him. He talks about how important that relationship is and talks to people at the lowest level to really understand what’s actually happening in the business.

Stig Brodersen 27:37
He even talks about how he was concerned about the growth of Walmart because he felt it was very important that he could personally fly out to the individual stores and just speak to the employees. There’s only so much you can learn from speaking to store managers to understand the store and to understand the customers. You really need to speak to the people working on the floor.

I think that really speaks a world about him when he talks about communication. Yes, he was also very honest and upfront in terms of how the store did. He knows the key ratios and whenever he was setting that up. But it was really a buttoned up approach in many ways, even though it really looks like and sounds like you have this strong leader and then everything just trickles down. I think, especially during this phase in the 80s and 90s, it came from the employees.

Preston Pysh 28:29
There’s a saying in the army that when your people stop complaining, that’s when you have real problems. What this is really getting at is communication. So if people can’t bring you their problems and people can’t tell you what’s wrong, it’s likely because they know A.) you’re not going to do anything about it or B.) it’s because they know you’re not going to listen to anything.

I think that this whole communication thing is extremely important. Anybody who’s run a business knows it’s important, but application is the hard part. It’s very difficult.

So his fifth point was, “Appreciate everything your associates do for your business.” I think this one is very close to points two and three with equity. However, it’s going to the point where if you don’t incentivize them monetarily or the other ways that we were kind of describing it, you just genuinely care. Like when you’re around your employees, you just are thankful for them.

I don’t know how you can teach a person to have that intention in their heart that they actually care for people, but I think that that’s such an important recipe to his success is that he actually cared. He would just go up and care about his people. He wanted them to know how they were doing regardless of what the sales meant or how they were performing in the job. He just wanted to be good to them.

The next one was, “Celebrate your success and find humor and your failures. Don’t take yourself so seriously.” The seventh one, “Listen to everyone in your company and figure out ways to get them talking.”

This goes back to our communication points that we were talking about earlier. You can see how, even though there’s 10 points, a lot of them are closely related.

Number eight was, “Exceed your customers expectations.” This one is just massive. When we look at Jeff Bezos and what he’s done with Amazon, and knowing that this was a very instrumental book in his development of Amazon, you can see why when Bezos is sitting down at a boardroom table, he literally leaves a seat open next to him that no one can sit in. That’s reserved for the customer.

Whenever they’re having a discussion about bringing something new into their site, or a new product, everyone goes around the boardroom. They talk about why they think it’s a good idea or a bad idea. Then Bezos basically looks at the empty chair. He says, “Well, what would the customer think?”

Then everyone tries to see it through the vantage point of the customer. This is completely from, in my opinion, I might be wrong. But my opinion is I think Jeff got that knowledge from Sam Walton’s experience, because in this book, he talks extensively about how you have to view things through the customer.

The reason is the customer can fire every single person. They can fire every employee clear up through the chairman of the company, if you’re not adding value to them first. Sam Walton obviously understood that very well.

The ninth one was, “Control your expenses better than your competition.” This goes to the logistics. We were talking about Sam cutting out the middleman. There was a lot of conversation about this in the book.

When you really look at the fundamental reason he was able to do this stuff that he was able to do with price, this is where he was able to do that.

Then his 10th one, I love this, because this really comes to investing, which was, “Swim upstream and go the other way.” For him, swimming upstream was really creating these large discount stores in smaller towns because when he first started doing this, these kinds of stores were only in large towns. No one had really pushed that down into a smaller town. That’s where he was swimming upstream.

He was saying, “I think we can do this well. We’re going to have to manage our costs very closely.” Sure enough, he tapped into a market that didn’t exist.

Stig Brodersen 32:21
His brother tells this story in the book about how it was custom back then to only be in one state. You still have the nationwide chains but for stores like Walmart, you typically only are in one state and there was this almost unwritten rule that you wouldn’t compete with another retail chain from another state because what would happen?

Well, you will probably be pressuring the margins and who would want that?

So what Sam Walton did was he rolled out in four states at the same time the second he got the chance. For him, it was good. When there was competition, it was not something he feared. It was something that he encouraged.

When you read the book, it’s very interesting to hear how he smiles when he has the thought of a new competitor coming into town. He has this example about how he marked down toothpaste for six cents per tube. I generally love this story because you could just feel how much fun that experience was for him.

He was not really talking about the first time he made a billion dollars in sales. Yeah, he mentioned that perhaps once or twice, but this story about how he marked down toothpaste and drove his competitor out of town, that was really what was driving him. He was just a merchant at heart. I guess if anything that’s the secret.

Preston Pysh 33:46
Yeah, I was surprised by this as well when I’m reading and you can just see it, just reading off of the pages of how excited he was about these random deals. For example, we accidentally purchased too many lawn mowers, but we turned it into this challenge of selling all these mowers and you could tell in the reading how much he enjoyed that part of the business. It was way more than him saying, “Oh, we had a billion dollars.”

It was all about selling individual products at random stores in America. You got to read the book to really have an appreciation for how much passion he had behind these deals. It was unbelievable.

Stig Brodersen 34:28
The highest rank of *inaudib;e* you can have in his book that was a merchant. There’s this section in the book about how the company needed, I think he referred to them as college boys, something like that. It was different, not the most flattering, because he wasn’t sure whether or not they would be up to the task of what it was all aboutL being a merchant. That was the highest you could ever go.

If you just had a college degree, so what? You haven’t proven anything if you can’t bargain on behalf of the customer and if you can’t create value for the customer face to face, why are you there for?

Preston Pysh 35:04
If you can’t create a big giant display that just drives traffic from out of state that comes down and sees it like. Those are the kinds of things that you could tell when he wrote the book. He’s a merchant at heart. He thinks as a store owner, like an individual store owner. Then it was just copy and paste across the whole country.

Awesome read. It definitely lived up to the expectations that I kind of had going into the book. One of the things that I found, if I was going to say one negative thing about this, it really goes back to a quote that Stig and I talked about on the show when we read Ray Dalio’s book, which was, “You can have anything, but you can’t have everything.”

When I think about Sam Walton, that quote really rings true. What I mean by that is Sam wanted to have the biggest retail network on the planet. Guess what? He did that. He absolutely did that. So he had anything he wanted, which was that, but he didn’t have everything because you could tell, I think, for me, and maybe I read this wrong, and other people might read it differently…

But for me, I think when he is looking back on what he could have done better in life, he quickly breezes over, “I could have gone to more of my family functions. I could have done this better. But you know, I was just a merchant at heart. This was in my DNA to do this.”

I think he’s kind of justifying, at the end of his life, as he’s writing this… He’s justifying that all the decisions he made were the right ones. Maybe they were. Who am I to judge anything? I guess I look at it back to my own life and if I missed some of my kids’ special events in their lives, and I put my business or anything in front of that, and made that more important than my family, I just don’t know that at the end of my life, I could look back and say that I’ve made all the right decisions.

I think I might be a little suspect on some of that. I think that you catch a glimpse of that, at the end of the book, I don’t know if Stig kind of read it the same way as I did.

Then I’m flipping through, because I got a hard copy of this as well. I’m flipping through and I’m looking at some of the pictures. One of the pictures in the book was a picture of Sam receiving a medal from the president. It was very recent, when he wrote the book, that he received this medal from the President for all of his accomplishments with Walmart.

Underneath that was a caption that read, “Receiving a medal from George Bush, the happiest day of my life.”

For me, when I read that I was just like, “How in the world is that your happiest day in your life? How is it not the marriage to your wife? Or like the birth of your kids or something?”

I don’t know. For me, there’s no way any type of business achievement for myself would trump anything that’s related to the two that I just mentioned. However in his book, I mean, it’s clearly just that’s what it says.

I think it’s important for people that hear these discussions, because we talk about all these billionaires on our show. These people are extremely polarized in what they do. Every one of them, they’re polarized in that they’re building a monster enterprise. To get there, they can have anything they want, but they can’t have everything that they want.

I think that’s so incredibly important for people to think about when they hear these stories.

Alright, so this is the point in the show where we take a question from the audience. This question comes from Bennett.

Sender 38:43
Hi, Preston and Stig. I’m a big fan of the show. I’m just wondering your thoughts about owning Berkshire Hathaway once Warren and Charlie move on from the company? Do you think that they are the competitive advantage and that’d be a good time to get out once they leave because most people can’t keep up with their level investment returns? Or do you think that their teaching and way of thinking are so engraved in Berkshire’s culture and way of thinking?

Preston Pysh 39:08
Bennett, I love the question. I’m kind of at a point where Berkshire Hathaway has gotten so big. When you think about their competitive advantage, it’s really been kind of being in the right equities at the right time and kind of managing the portfolio.

However, I think when you get to be such a large company, to employ the capital in a manner that beats the market, it becomes an incredibly difficult task. When you look at Berkshire’s performance over the last 15 years, it really hasn’t outperformed the market by an incredibly large margin. It’s been fairly consistent with the S&P 500. I would suspect that that’s going to persist.

I think that for them to outperform the market in a major way is going to be very difficult for the new managers to do. I think that the new managers are going to be extremely talented. Whether they’re as talented as Warren and Charlie, I have no idea.

However, I think that they’re going to be very talented people. I just think that they’re fighting a fight with their hands tied behind their backs. That’s a hard thing to do, even if you’re really talented.

Warren and Charlie talk about this at the shareholders meeting. I think that they would never maybe come out and explicitly say it is the way that we just might have said it. But I think that they kind of see it that way.

I mean, think about it, because their market cap within 10 years will be maybe a trillion dollars, right? For where they’re at now, it really depends on what happens on a macro sense. But if the company keeps growing, it’s going to be very big. And so, how do you employ that much capital and work deals that are severely undervalued? I guess I’m not convinced that that can be done easily.

Stig Brodersen 40:47
Just an example. One of Warren Buffett’s famous investments, that’s American Express. Back then, he put in 40% of the portfolio that he had. He can’t put 4% of his portfolio in something that’s significantly undervalued today. I mean, that’s simply impossible.

Since he can’t do that, no, he can’t make the same kind of return. Bennett, I think you’re right in the sense that Berkshire Hathaway has a competitive advantage having Warren Buffett and his brand, but probably not as significant as it has been.

I mean, if you think of the deal that was made with Bank of America, during the financial crisis, I’m pretty sure it is because of Warren Buffett’s name and brand. I feel like that he could provide stability to the market.He will get the warrants in Bank of America for I want to say $7 each, and it’s trading in the mid 20s now. So yes, that’s 17 billion that he wouldn’t have gotten otherwise, I guess even with a new manager as talented as him because he doesn’t have the same track record. I think you will see less and less of like one time deals like that in the time to come.

Preston Pysh 41:57
I think the only way you’re going to get the company to outperform the index is if for whatever reason, the price is punished really badly, because of news that would come out.

A perfect example would be just recently. Berkshire was down really hard recently, because of the Wells Fargo news that came out with the Fed limiting their growth, so Berkshire took a huge hit.

However, when you take a step back and you look at how much stock Wells Fargo makes up of the overall Berkshire portfolio, I think that the company was severely punished relative to the rest of the market in that price movement. So if you have opportunities to buy it, because of news like that might come out or in the news might be something much worse with reference to Warren or Charlie, you might have an opportunity to buy the company at a much better price.

I think that the performance is still going to be there whether Charlie and Warren are there or not.

So Bennett, thank you so much for asking your question. We want to give you a free course at our website, the TIP Academy on our navigation tab. People go there and you want to check out some of the different courses we have. We’re going to give you the intrinsic value course that we have. This is a paid course, but we’ll give it to you completely for free for your great question.

If somebody else wants to ask a question on the show, go to and you can record your question there. AIf it gets played on the show, you get a free course.

Also, talking about Berkshire Hathaway, we’re having our TIP event at the Berkshire Hathaway shareholders’ meeting this year on May 5. If you want to go, you need to put your stuff together now and you need to buy your plane tickets now. You also need to book your hotel now, because it starts filling up a lot as you get closer to the event. It’s harder to get the space to stay there.

We don’t charge anything for people to go to this with us. The only thing that will cost you money is really your plane ticket out there and your hotel. Then we have dinner Friday night. I think it’s $30 or something to go to the dinner so that we can pay for the food and pay for the space that we run out. So we would love to have you guys go there. Going to the meeting is a lot easier than you think. You don’t have to own $300,000 a share to go to the meeting. You can just own A B share.

Also, people that are going sometimes have extra credentials so if you go on our forum, we have a link on our page there, if you want to go to our forum and see if somebody else can get your credentials, or you don’t own a B share or whatever. We can help find a way for you to go. Don’t think that that’s a limiting factor. The limiting factor is just buying your plane ticket and getting a hotel out there.

Come join us. This is so much fun. We do a pub crawl Saturday night. We go to the meeting, we see all this stuff. It is so much fun. You guys are going to have a blast. I guarantee you and it’s the ultimate networking event so don’t miss this thing.

We got information on the site. Just go to the site you can find that and if you go to, that address will take you straight to the page where you can sign up and learn more information about this. We’d love to meet you in person and hang out with you.

Stig Brodersen 44:58
Alright guys, that was all that Preston and I had for this week’s episode of The Investor’s Podcast. We will see each other again next week.

Outro 45:06
Thanks for listening to TIP. To access the show notes, courses or forums, go to To get your questions played on the show, go to and win a free subscription to any of our courses on TIP Academy. This show is for entertainment purposes only. Before making investment decisions, consult a professional. This show is copyrighted by the TIP Network. Written permission must be granted before syndication or rebroadcasting.


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