Episode #55 - Entrepreneur Heaven - August 2015

They say you can’t turn back the clock and go back to the good old days. Yet this is precisely what is happening with the total quality service movement, the customer loyalty movement, CRM, and other philosophies that put the customer at the center of the business organization. Millions of dollars are being spent on consultants to relearn what was once common sense, practiced by the great entrepreneurs from the turn of the century to the mid-1950s.

On this third installment of our Entrepreneur Heaven Series, we will explore the wisdom of Sam Walton, P.T. Barnum, Andrew Carnegie, and Conrad Hilton, and.

Wisdom is timeless, and occasionally turning back the clock is the wisest course of action. Sometimes history is our best teacher. 

Sam Walton (March 29, 1918- April 5, 1992)

Three weeks before his death, President George H. W. Bush awarded him the Presidential Medal of Freedom.

Graduated with a B.A. in economics, 1940, University of Missouri.

1940, starts work at J.C. Penney, stays 18 months.

Sept 1, 1945—opens first variety store.

1950, starts over in Bentonville with Walton’s .05¢ and .10¢.

July 2, 1962, Opens Wal-Mart, in Rogers, Arkansas.

Oct 31, 1969 Wal-Mart incorporated.

Battle over “fair trade,” whereby manufacturers could determine the price at which their goods could be sold. Benefited inefficient retailers since it protected them from low-price retail competition.

State by state, these laws were repealed in the 1950s, 1960s, and in 1975 Congress passed legislation ending the practice.

On the corporation’s organization chart, Walton was listed as: Chief Spiritual Officer.

In his book, Made in America: My Story (1992), Walton writes that his  single biggest regret in his whole business career: that he didn’t include the associates in the initial, managers-only profit-sharing plan.

Walton’s great insight: replacing inventory with information!

“Job security lasts only as long as the customer is satisfied. Nobody owes anybody else a living.”

Six ways Wal-Mart thinks small:

1.    Think one store at a time

2.    Communicate, Communicate, Communicate

3.    Keep your ear to the ground—no computer can tell you how much you could have sold

4.    Push responsibility—and authority—down

5.    Force ideas to bubble up

6.    Stay lean, fight bureaucracy

Sam’s Rules for Building a Business:

1.    Commit to your business

2.    Share your profits with associates

3.    Motivate your partners. Encourage competition, set high goals, keep score, switch jobs

4.    Communicate

5.    Appreciate everything associates do.

6.    Celebrate your successes

7.    Listen to everyone in the Co.

8.    Exceed customer expectations

9.    Control your expenses better than competition

10.  Swim Upstream. Ignore conventional wisdom

“In this free country of ours, the shopkeeper’s success is entirely up to you: the customer.”

Phineas Taylor  Barnum (July 5, 1810 – April 7, 1891)

He never said: “There’s a sucker born every minute.”

Human oddities on display, but never gross—women and children could attend.

He just wanted to entertain an America he thought worked too hard and laughed too little

He wrote, “The American Museum” in 1869.

His circus was sold to Ringling Brothers on July 8, 1907 for $400,000 (about $8.5 million in 2008 dollars). The Ringling Brothers and Barnum & Bailey circuses ran separately until they merged in 1919 forming the Ringling Bros. and Barnum & Bailey Circus. 

Andrew Carnegie (November 2, 1835–August 11, 1919)

Born: Nov 2, 1835 in Dumferline, Scotland.

Immigrated at age 12 from Scotland.

In 1870, Britain produced more steel rest of world combined. By 1900, year Carnegie retired, US producing twice as much as UK, highest-quality, lowest-priced:

            $160/ton in 1875 to $17/ton by 1898

            Sold holdings to JP Morgan $480M (his share $300M)

Carnegie: optimist, thirst for public approbation, wrote nice things about unions, who lionized him.

Homestead Steel Works strike of 1892, Carnegie in Scotland, 300 Pinkerton guards hired crushed the workers, black mark on his legacy.

He was fanatical about controlling costs: “Cut the prices; scoop the market; run the mills full…watch the costs and the profits will take care of themselves.”

Railroads developed cost accounting, and Carnegie brought it to the steel industry

Committed himself to world peace from two decades from retirement to death, a complete failure. Actually worse, he was a fool (Richard S. Tedlow, Bus Historian, Giants of Enterprise). He was fond of Kaiser Wilhelm II of Germany (“I think he can be trusted and declares himself for peace.”)

He wrote “The Crucial Question,” (1896) advice to young people on how to become business owners.

“And here is the prime condition of success, the great secret: concentrate your energy, thought, and capital exclusively upon the business in which you are engaged.”

 “The only irreplaceable capital an organization possesses is the knowledge and ability of its people. The productivity of that capital depends on how effectively people share their competence with those who can use it.”

“Take away my people but leave my factories, and soon grass will grow on factory floors. Take away my factories but leave my people, and soon we will have a new and better factory.”

“The man who dies rich dies disgraced.”

“Man must have an idol—The amassing of wealth is one of the worst species of idolatry. No idol more debasing than the worship of money.”

Carnegie gave away $332M, including 7,000 church organs, while Rockefeller gave away $175M.

Conrad Hilton (Dec 25, 1887–Jan 3, 1979)

Grew up New Mexico, father ran a general store. He married and divorced Zsa Zsa Gabor, and had a son with her.

First bus venture managing the Hilton Trio, musically inclined ladies (including his sister), but it flopped.

Then worked in a bank, and then manager of father’s store, but father kept meddling. He served in the Army WW I.

While trying to find a hotel bed first night in Cisco, TX, he couldn’t. The owner gave him one week to come up with $40K buy the hotel. He scraped together the money from family and friends. By 1921, he added two more hotels.

He wrote “A Million-Dollar Mountain and a Red Hat” (1957) to explain how he raised the money to build his first million dollar hotel on the corner of Main and Harwood in the Dallas bus district and Be My Guest, which used to be found in the drawer of every Hilton hotel next to the Bible.

He leased the land for 99 years, at $31,000/year, from the owner, and negotiated a clause in the lease to allow him to pledge the land as collateral to lenders, enabling him to build the hotel.