Sam Walton: An American Dream

I just finished reading Sam Walton’s biography called “Made in America”. The book is an example how Sam Walton transformed the retail industry. One thing I didn’t realize until I read the book was Sam Walton was in a sense hypercompetitive. In the early years Sam tended to talk people within the industry like James Cash Penney (created J.C. Penney's) to figure out what the most efficient and cheapest way of doing things.

People forget that Sam Walton himself started out as a small business owner. Walton started his career at JC Penny at then opened Ben Franklin Stores in the early 1950’s. In those early days Walton had to borrow money in order to run his stores. The book mentions how scared Walton was of borrowing and worry about debt. One of my favorite parts of the book was when Walton went to Prudential to try to get a loan. Walton showed Prudential his estimates for sales, profits, and number of stores however Prudential said they didn’t know if they could afford to take a gamble of someone like Sam Walton. Perhaps this is one of the worst ex-post (after the fact) mistakes made in business history.

One theme throughout the book was the role of technology that really helped Wal-Mart. Sam Walton realized early on had a hunch technology was important for retailers. Back in the 1980’s Wal-Mart was using satellite links in order to relay information about each individual store to the main headquarters. Although, now this is fairly common now back in those days it was somewhat revolutionary.

In part of the book Walton defends Wal-Mart in explaining correctly how consumers put mom and pop stores out of business. People often forget that Wal-Mart had to start as a mom and pop business. Consumers vote with their wallets. People shop at Wal-Mart because of high quality, low prices, and perhaps a little workout trying to find what they are looking for. Walton was always obsessed about making the customer happy and making sure he was running a great company. Wal-Mart doesn’t only save people billions of dollars a year but also hires a considerable number of people. Wal-Mart currently has 1.2 million employees. Most Fortune 500 companies don’t even have 100,000 employees.

Something else I didn’t realize until I read the book was profit sharing even with “associates” or hourly workers. The profit-sharing plan started in 1971 and the only requirements were working for Wal-Mart for 1 year and worked at least 1,000 hours per year. The amount of profit sharing was related to profit growth and employees could take the profit sharing either in cash or Wal-Mart stock. One of my favorite parts of the book was the stories of regular hourly employees who did fairly well under the profit-sharing plan. For instance truck driver Bob Clark went to work for Wal-Mart in 1972 and by the early 1990’s had over $700,000 in profit sharing. Georgia Sanders who worked as an on an associate not even a manager started out at the minimum wage worked from 1968-1989 and took $200,000 in profit sharing when she left. To me profit sharing gives the employees and management the right incentives. I found out in 2010 Wal-Mart ended the profit sharing and instead matching dollars in employees 401(k) plans. In 2008, Wal-Mart contributed $724.4 million in profit sharing and 401(k) contributions. In 2009, however the company gave employees a $2 billion stimulus since the company had record sales. Every employee got an average bonus of $2,000.

I find it somewhat interesting that people complain about how Wal-Mart is somehow this evil corporation that simply sells cheap things that people don’t need to buy. I would rather have millions of people making their own decisions then people having millions of opinions of how other people should spend their own money. To me Sam Walton represents what people can accomplish if they work hard and have a passion for something. Wal-Mart has helped put more money and hire more people than any government program could have ever done.