by Derek Lidow
By the time Wal-Mart went public, Walton was personally responsible for millions of dollars of personal debt. … See page 130 of Vance Trimble, Sam Walton: The Inside Story of America’s Richest Man, Dutton Adult (New York), 1990.
Sam offered small percentages of ownership of each store that he opened to … the store managers he wanted to run his stores. He also offered to let a store manager buy a larger ownership if he … was willing to pay for some of the store opening costs. … “All the stores were opened under different arrangements. It was a collection of partnerships and individual ownerships … including all the store managers who could raise money to invest.” Sam Walton, quoted in Walmart World, October 1987, page 2.
By the time Sam started thinking about taking Wal-Mart public he had opened twenty Wal-Marts along with the thirteen Ben Franklin franchises he owned that remained very profitable and he had eight more Wal-Marts being planned and constructed. … Wal-Mart Stores, Inc., Preliminary Prospectus Dated September 4, 1970 as accessed at the archives of the Walmart Museum.
In order to go public Walton had to reconcile how, with unanimous consent, several dozen part owners of individual stores would each own some percentage of the original Wal-Mart shares. … I am referring here to a document titled, “Wal-mart Stores, Inc. Adjusting Entries, 1970,” The Walmart Museum.
After the IPO Sam Walton and his family owned 61 percent of the company shares, the public owned 20 percent, with the remaining 19 percent owned by store managers and executives (of which about 4 percent belonged to his brother). … see the Wal-Mart Stores, Inc., Preliminary Prospectus cited above.
Chapter 6: How To
Hearing the stories while holding in my hands the documents Sam had on-hand when he made the decisions being described illuminates how he came to do what he did. … A small fraction of the documents made available to me are cited in the Bibliography.
Virtually all entrepreneurs learn on the job. … There is little agreement among entrepreneurship researchers or entrepreneurs about what should be taught or the efficacy of what has been taught. The largest global program teaching business skills to young people was shown ineffective relative to the student’s feeling they had acquired entrepreneurial skills. See Oosterbeek, Hessel, Mirjam Van Praag, and Auke Ijsselstein. “The impact of entrepreneurship education on entrepreneurship skills and motivation.” European economic review 54.3 (2010): 442–454. It should be noted however that education achievement, as simply measured by how many years of schooling, has a significant impact on entrepreneurial success.
Within a year his sales doubled and within three years he was outselling both of his competitors. … Made in America, page 35.
Sam had enough money socked away to buy another Ben Franklin store … Vance Trimble quotes on page 61 Sam having $55,000 saved up by the time he left Newport.
… owning 15 Ben Franklin franchises. … This number is a best estimate as Walton did close some of the Ben Franklin franchises while opening others, even after opening the first Wal-Mart in 1962. This estimate is based upon a review of store openings and closings through the end of 1969 prepared by Nicholas Graves, senior archivist at the Walmart Museum, but questions remain as to whether all non-Wal-Mart stores were Ben Franklin franchises.
… his notes from a store visit read, “Getting a request here from our older customers in this store. Why don’t we have our aisles signed by departments, like in grocery stores? … The quotes in this section are from a transcript of Sam Walton’s packet tape recorder transcribed on February 1, 1990.
He even bought the local Bentonville bank … This is best documented by Vance Trimble, see pages 93–96.
Entrepreneurial success boils down to understanding how to put together productive, competitive, and self-sustaining enterprises. … A more in-depth analysis of the 5 core skills shared by most successful entrepreneurs can be found in my book Startup Leadership, Wiley (Hoboken), 2014.
Sam mastered his change leadership skills by doing what is now referred to as deliberate practice. … See for example, Anders Ericsson and Robert Pool, Peak: Secrets From the New Science of Expertise, Hougthon Mifflin Harncourt (New York), 2016.
Virtually no one learns these entrepreneurial leadership skills in the classroom. … See the above note “Virtually all entrepreneurs learn on the job.”
… pictures of Sam at work in his office is to see great piles of paper … The most illustrative photograph of Sam at work in his office comes from the Wal-Mart World 1987 interview of Sam on the twenty-fifth anniversary of Wal-Mart.
A high percentage of founding partners cannot agree on what to do next once their company becomes established. … See for example: Ensley, Michael D., Allison W. Pearson, and Allen C. Amason. “Understanding the dynamics of new venture top management teams: cohesion, conflict, and new venture performance.” Journal of business venturing 17.4 (2002): 365–386.
Chapter 7: How Good
Walt Disney barely made it as an animator and as a head of an animation studio. … The definitive biography of Walt Disney is Neal Gabler’s, Walt Disney: The Triumph of the American Imagination, Vintage Books (New York), 2006. Additional information about Roy Disney’s part in building Disney can be found in Bob Thomas’, Building a Company: Roy O. Disney and the Creation of an Entertainment Empire, Hyperion (New York), 1998.
Barry, who founded and runs a successful self-funded firm … Barry is an alias used in respect for the privacy of the real person.
As of 2013 the Census Bureau reported 249 different “Automobile and Light Duty Motor Vehicle Manufacturing” companies in the United States … See the data table of “U.S. & states, 6 digit NAICS” found at https://www.census.gov/data/datasets/2014/econ/susb/2014-susb.html.
Chapter 8: How Much
The most popular scale in use right now is the “Grit Scale.” … See Duckworth, Angela L., et al. “Grit: perseverance and passion for long-term goals.” Journal of personality and social psychology 92.6 (2007): 1087.
… the Grit Scale really measures how well our explicit motivations align with our implicit ones. … See the conclusions of the previously cited McClelland, David C., Richard Koestner, and Joel Weinberger. “How do self-attributed and implicit motives differ?” Psychological review 96.4 (1989): page 700.
… through self-awareness our motivations can become more focused and have more impact. … See the same conclusions to the same article cited above.
… we can use techniques such as cognitive reappraisal to mitigate our irrational fears, or phobias, that interfere with achieving our core implicit motivation. … See for example: Silvers JA, Buhle JT, Ochsner KN. Ochsner KN, Kosslyn SM. “The neuroscience of emotion regulation: basic mechanisms and their role in development, aging and psychopathology,” The handbook of cognitive neuroscience, Oxford University Press (New York), 2013.
… the success of the enterprise hinges on evolving the team with increasingly sophisticated skills … See chapter 4, Enterprises Are Also Needy, in Startup Leadership.
Money does matter in entrepreneurship, but not as much as you might think. … See Robb, Alicia M., and David T. Robinson. “The capital structure decisions of new firms.” The Review of Financial Studies 27.1 (2014): 153–179. See Table 5 to see that the average owners equity invested in a firm that survived three years ($31,784) was similar to the amount of equity invested by owners of firms that did not survive ($31,609).
Jason Fried, the founder of 37signals … This information comes from several Skype meetings with Jason from 2011 till 2015 that he had with students from my Princeton Entrepreneurial Leadership class.
Ben Chestnut and Dan Kurzius took a similar route … see https://www.nytimes.com/2016/10/06/technology/mailchimp-and-the-un-silicon-valley-way-to-make-it-as-a-start-up.html?_r=1.
Chapter 9: Where
Uganda and Peru are far more entrepreneurial … See page 155, figures 9.4 and 9.5 of the previously cited Reynolds, Entrepreneurship in the United States: The Future is Now.
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p; Even in the United States, Silicon Valley is still not close to being the most entrepreneurial place. … See the rate of business owners as quoted on page 12 in: Morelix et. al., The 2016 Kauffman Index, main street entrepreneurship, Metropolitan Area and City Trends, http://www.kauffman.org/kauffman-index/reporting/~/media/60c4bff5bbc74a2181db7fd7d0dd6e64.ashx.
Silicon Valley is not even the top place in the world to start a fast-growing company. … See Table 5, page 13, in: Mtoyama and Arbesman, The Ascent of America’s High-Growth Companies, Kauffman Foundation Report; http://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2012/09/inc_geography.pdf.
Silicon Valley is the best place in the world to start high-risk venture capital-backed companies. … Silicon Valley based companies received $25 billion in 2016 according to the PwC and CB Insights MoneyTree Report, dated January, 2017. That’s 36 percent of all the venture capital invested in 2016.
Ken Marlin broke the news … The information about Ken Marlin comes from a series of interviews and email exchanges held from June 2015 through May 2017.
Not all large organizations breed future entrepreneurs. … There are no studies I know of that show certain businesses or types of businesses are better or worse at breeding future entrepreneurs or successful entrepreneurs. I base this statement on anecdotal evidence from talking to high-level executives in a broad range of firms and industries. Executives in risk adverse industries (e.g. insurance), highly regulated industries (e.g. utilities), and industries where innovation is considered risky (e.g. mining) often describe a reticence to experiment. Anecdotally the number of industries that breed this reticence appears to be shrinking with time.
My grandmother … invented the backless bra. … See United States Patent 1,794,785, issued to Shirley Maxwell of Los Angeles, California, titled “Brassiere and Harness,” filed on September 26, 1928.
The cells that my father developed were the best available in the U.S. at that time … See for example, United States Patent 2,414,233, issued to Eric Lidow of Los Angeles, Calif., titled “Photoelectric Cell,” filed August 3, 1942.
Silicon Valley culture also erects higher hurdles for success. … For an article about how Silicon Valley makes non-tech businesses uncompetitive see: https://www.nytimes.com/2016/09/19/technology/how-tech-companies-disrupted-silicon-valleys-restaurant-scene.html?_r=0. Silicon Valley housing prices (see http://www.mercurynews.com/2017/01/16/a-silicon-valley-down-payment-could-buy-you-an-entire-house-in-much-of-the-u-s/) make even STEM savvy employees look for work outside the area; see for example: http://blog.indeed.com/2016/03/02/why-tech-workers-leaving-silicon-valley/.
… vibrant entrepreneurial ecosystem (VEE). … Entrepreneurial ecosystem is a common term in the entrepreneurial research literature. It is well described in two Kauffman Foundation reports: Bell-Masterson, Jordan, and Dane Stangler. “Measuring an entrepreneurial ecosystem,” (2015), available at: http://www.kauffman.org/what-we-do/research/2015/03/measuring-an-entrepreneurial-ecosystem and Motoyama, Yasuyuki, et al. “Think locally, act locally: Building a robust entrepreneurial ecosystem.” (2014), available at: http://www.kauffman.org/what-we-do/research/2014/04/think-locally-act-locally-building-a-robust-entrepreneurial-ecosystem. Both these reports use the term “vibrant entrepreneurial ecosystem.” The term entrepreneurial ecosystem is an established term that is more typically associated with clusters of high-growth companies (note: remember that high-growth does not necessarily mean companies founded by high-risk entrepreneurs). Research on entrepreneurial ecosystems is becoming extensive and though it focuses on high growth enterprises it applies just as well to the clusters of successful shops and restaurants or car dealerships that are found in many metropolitan areas. For a good review of the research see, Mason, Colin, and Ross Brown, “Entrepreneurial ecosystems and growth oriented entrepreneurship.” Final Report to OECD, Paris (2014): 1–38.
… it still took [Sam] seventeen years of opening and running fifteen other Ben Franklin stores before he felt confident that he could open, run, supply, and merchandise a discount store of his own. … Sam only had thirteen Ben Franklins when the company went public eight years after opening the first Wal-Mart because he did not renew some franchise agreements and he closed some stores as he began to concentrate on building the Wal-Mart brand. The Walmart Museum spreadsheet prepared by Nickolas Graves shows that there were eighteen different Ben Franklin franchise stores Sam operated at one time or another between 1945 and 1970.
Chapter 10: When
Ray Kroc never asked “when?” … Ray Kroc wrote an autobiography, Grinding It Out: The Making of McDonald’s, St. Martin’s Press (New York), 1977, but it is very self-aggrandizing. John Love’s book, McDonald’s: Behind the Arches, Bantam (New York), 1986 is very trustworthy. Lisa Napoli’s book, Ray & Joan: The Man Who Made the McDonald’s Fortune and the Woman Who Gave It All Away, Dutton (New York), 2016 fills in interesting and relevant details relative to Ray Kroc’s alcoholism and obsessiveness.
Chapter 11: Whether
The first dozen years of Jordan’s entrepreneurial career … The information about Jordan Monkarsh comes from a series of interviews and email exchanges held from July 2015 through August 2017.
… relatively few entrepreneurs acknowledge that VC expertise and contacts were critical to their success. … See Figure 19 of the Kauffman Foundation report: Wadhwa, Vivek, et al. “Anatomy of an entrepreneur: Family background and motivation.” (2009), available at: http://www.kauffman.org/what-we-do/research/2010/05/the-anatomy-of-an-entrepreneur. This figure states that 26 percent of founders receiving venture capital backing feel the advice/assistance provided to them by their investors was “extremely important” or “very important” while 45 percent felt it was “slightly important” or “not at all important.”
Chapter 12: So What
The president spent almost fifteen minutes talking about Walton and Helen. … See https://www.walmartmuseum.com/explore/#/search/query/medal%20of%20freed/artifact/27917294261.
Entrepreneurs and corporations alike have gotten so good at understanding the science of manipulation, the science of creating desires, the science of trust, and the science of habit formation that they can get many people to feel fleeting happiness … For a good overview on the understanding of how to generate trust see David DeSteno, The Truth About Trust: how it determines success in life, love, learning, and more, Hudson Street (New York), 2014.
Entrepreneurs have brought us better medicines and medical treatments and amazing prosthetics. … I profile Dean Kamen in my book Startup Leadership.
They have made education more accessible to those without it. … I profile Wendy Kopp in my book Startup Leadership.
They have made us safer in our cars. … You can read about the design of airbags and how they never resulted in any significant entrepreneurial gain at https://en.wikipedia.org/wiki/Airbag#Origins.
Entrepreneurship as measured by how many new companies are created each year and also by the number of people considering starting a company is in long-term decline. … See Hathaway, Ian, and Robert E. Litan. “Declining business dynamism in the United States: A look at states and metros.” Brookings Institution (2014). This decline has impacted even the high-tech sector; see the Kauffman Foundation report: Haltiwanger, John, Ian Hathaway, and Javier Miranda. “Declining business dynamism in the US high-technology sector.” (2014), available at: http://www.kauffman.org/what-we-do/research/2014/02/declining-business-dynamism-in-the-us-high-technology-sector. Finally, see Clifton, Jim. “American entrepreneurship: Dead or alive.” Gallup Business Journal (2015), available at: http://www.gallup.com/businessjournal/180431/american-entrepreneurship-dead-alive.aspx?g_source=american+entrepreneurship%3a+dead+or+alive&g_medium=search&g_campaign=tiles.
Bedrock entrepreneurship is declining, and so is the success rate for aspiring high-risk entrepreneurs. … The long-term decline in the number of new businesses started each year noted above is a direct measurement of the decline in bedrock en
trepreneurship, since bedrock entrepreneurs dominate entrepreneurship metrics. The success rate of high-risk entrepreneurs is hard to measure directly but can be indirectly estimated by the increase in number of companies being accelerated, the increase in the number of companies receiving angel funding over the past fifteen years, versus the lack of increase in the number of companies receiving first time seed or early stage funding from VC firms—so more high-risk entrepreneurs must be failing.
An estimated $531 billion … is spent on launching startups every year. … This estimate comes from Laura Entis, “Where Startup Funding Really Comes From,” Entrepreneur Magazine, November 20, 2013 (https://www.entrepreneur.com/article/230011). These types of estimates can depend heavily upon the definition of a “startup” and what is considered spending on the startup and what would be “normal” spending. This Entrepreneur Magazine estimate equates to 3.18 percent of the US GDP in 2013.
Acknowledgments
I have benefitted from extensive support and significant encouragement in making this project possible. First and foremost, I want to acknowledge the wonderful entrepreneurs that let me pry into their lives over the past several years: Jordan Monkarsh, Stephanie DiMarco, Vidal Herrera, and Ken Marlin. The book would not have been possible without them, and without their having put up with all my questions, follow-ups and emails. Jordan, Stephanie, Vidal, and Ken have become role models for me and I hope they will become role models for all those that read the book.
I also have benefitted enormously from the support I have received from the team at the Walmart Museum. Alan Dranow, the Executive Director of the Walmart Heritage Group, has granted me access, enabled multiple visits, and facilitated many valuable discussions and meetings with people who had personally worked with Sam Walton during his earliest entrepreneurial days. Nicholas Graves, the senior archivist of the Walmart Museum, worked hard preparing materials for my visits and answering my incessant follow-up questions. Shane Buxman, the archivist intern, also helped to prepare for my visits and find documents to answer my questions. I would also like to thank Fritz Steiger for letting me sit in on several of his oral history recording sessions. I am particularly appreciative to Clarence Leis for coming by the Walmart Museum to let me pepper him with additional questions about the early days of Wal-Mart. Peggy Hamilton shared some great anecdotes about how Sam ran his meetings, which enabled me to add some color to my description of events. I would also like to acknowledge the specific memories Alice Walton shared with me about her father.