Sol Price: The Founder Who Taught Jim Sinegal, Sam Walton, Jeff Bezos, and Bernie Marcus

1. 0:00 – 4:33

   Jim Sinegal's Foreword and Why Sol Price Matters

   1. DSDavid Senra0:00

      This is Jim Sinegal, founder of Costco, writing in the forward of this book. About four years ago, shortly before his death, and a few days after we had lunch together, I received a letter from Sol Price. "Dear Jim, it's always nice seeing you and experiencing your enthusiasm, knowledge, and commitment to your values. You've been very generous about giving me some credit for influencing you. I suspect that's true, but you would have been a great achiever under any circumstance." I related only the first paragraph of this letter because Sol went on to say some very complimentary things that I will keep personal. Upon reading the letter, I turned to my assistant and said, "I've been waiting fifty fucking years for this letter." It was well known that compliments from Sol came around about as frequently as Halley's Comet. After digesting the letter, I reflected on the fact that here I was in my 70s and still seeking approval from this guy. What was it about the man that engendered so much admiration and respect, not just from me, but from thousands of us who worked with Sol over the years? Certainly, there was his intelligence and creativity, but that's not the complete answer because there are millions of bright people in the world and only a handful make a lasting impact. There was so much more to Sol's leadership qualities that touched all of us and made everyone confident that we would persevere regardless of the obstacles. I started working at FedMart, that's a company that Sol founded, I started working at FedMart in 1954 while still in college, a path that was followed by many of Costco's current executives. Sol gave us incredible opportunities to learn the business, teaching us the skills and core principles we applied throughout our business careers and then later when we launched Costco in 1983. Sol's teachings had a great impact on our business ethics, our core values, and of course, our merchandising philosophy. He believed in developing strong operating efficiencies, and he continually emphasized passing on savings to customers. In 1993, our two companies, Price Club and Costco, merged to form the Costco that we know today. We owe our legacy to the retail concept that Sol pioneered with FedMart and Price Club, as do all of our competitors in the industry and big box retailers in general. Sam Walton, who started Walmart in 1962, eight years after FedMart was founded, later admitted that he had borrowed many of Sol's innovations. Sol's greatest business legacy was the creation of the Price Club concept that as many as a dozen existing retailers and startups attempted to clone. At one point, a reporter asked Sol how it felt to be the father of an industry, to which he replied, "I should have worn a condom." The fact that he instilled these concepts in so many who were around him is, in my mind, his greatest legacy. And so that was Jim Sinegal writing in the forward of the book that I'm gonna talk to you about today, which is Sol Price: Retail Revolutionary and Social Innovator, and it was written by his son, Robert Price. So I just finished reading this book for the second time. The first time I read it was several years ago. So there's a few reasons I wanted to read this book again. The first is that I'm unbelievably impressed with Costco as a business and then Jim Sinegal as a founder. And as you'll see as we go through the book, uh, Jim is very adamant. He says, you know, every single thing that he ever learned in his career came from Sol Price. And so by rereading this book, I actually see the origination and, like, the, the formation of the idea behind Costco. And another reason I wanna do it is because I'm fascinated how so few people know who Sol Price is, yet I would argue that he's the most influential retailer of all time if you factor in how many people are on record saying that they took Sol's ideas and applied it to their own life and work. Jim Sinegal of Costco, obviously, Sam Walton of Walmart, Jeff Bezos of Amazon, Bernie Marcus of Home Depot, the founder of Trader Joe's. It's pretty incredible to think about that Sol's ideas have created literally trillions of dollars of value. And then finally, Sol's a very unusual person. This is a biography written by his son, and in my opinion, the last-- the way his son ends the book, the last paragraph, which I'll share with you at the end, is the definition of winning at life. So I'm gonna jump right into the book. Most of, uh, the highlights that I have or what I wanna talk to you about are his ideas. Sol says, like, he was, like, really creative and he had great ideas, but he thought he was a poor, uh, he, he was poor at execution. And one of the reasons that he identified Jim as the person he wanted to sell Price Club to later on was the fact that he thought Jim was a world-class [chuckles] operator and fantastic at execution, which everybody obviously that's run into Jim has agreed with. So I just-- But before I get into the ideas

2. 4:33 – 8:30

   A Misfit Childhood and a Father's Shadow

   1. DSDavid Senra4:33

      and where he, uh, like, his ideas for his company building philosophy, I wanna just touch on a few things in his early life. This is something that's very common. He was a misfit. He just felt the, the need to prove himself through achievement. So Sol was talking about he had a physical deformity. So when you, you look at pictures throughout his book, the older he gets, the, like, his, one of his eyes essentially looks like it's almost permanently closed. And it started drooping when he was a young man, and he gave him a lot of like, uh, he was self-conscious about it. So he says, "When I was three or four years old, I had an infirmity in my left eye that caused a drooping eyelid. It was something that bothered me and made me self-conscious. The kids teased me a lot, and consequently, I was shy and compensated for this." This is the most important sentence. "I was shy and compensated for this by being an overachiever in school." Even at a young age, Sol was very intelligent, but he also had, like, an aversion to being told what to do. Being an overachiever meant reading at an early age, holding his own with adults in chess, and doing well in school without really trying. Sol skipped two grades, but he was mischievous in school. This is-- This sentence made me think of the greatest description of an entrepreneur. Uh, his teacher told his mom that her son was very smart, but she warned that Sol could go in one of two directions, a career as a gangster or someone who would do much good. That sentence made me think of the greatest description I've ever heard for the mindset of an entrepreneur, and it came from Yvon Chouinard. He says, "If you want to understand the entrepreneur, study the juvenile delinquent. The delinquent is saying with his actions, 'This sucks. I'm going to g- do my own thing.'" And so that chip on the shoulder that Sol had as a young person, I don't think ever left him. He has this constant desire from achievement, and I would argue, uh, it stems back to his relationship with his father. So there's this idea that you and I cover over and over again. It's, it may be in every single one of these books, but I think the best way to describe this came from Francis Ford Coppola's biography that I covered back on episode 242, and it says, "You can always understand the son by the story of his father. The story of the father is embedded in the son." This is Sol looking back and describing his father. He said, "My father had contracted tuberculosis, and the doctor advised him to move to California. From the time he moved to California in 1927 until he died in 1949, my father never worked again. He received his monthly insurance disability." Now, this is a crazy sentence that's coming next. "My father lived in grave danger of getting well. The monthly insurance disability payment would pay him $500 per month as long as he was disabled." If you read between the lines of a lot of things that are happening in this book, it sounds like his dad could have worked and that he was kinda hustling the system so he could just, "Hey, I'd rather do nothing and get paid and hang out all day." This winds up giving Sol and his family a bad reputation. He wind... Sol winds up meeting his future wife. They're wind up being married, I think, for, like, 70 years, in high school, and his future wife's parents didn't think Sol was good enough for their daughter because they thought Sol's dad was lazy. And so I think this is another example of this chip on his shoulder that was there for his entire life. "My father didn't do anything except play cards and chess, so they weren't wild about me," this is his future in-laws, "and they didn't think I was good enough for their daughter." So you can already see that Sol has a less than positive view of his dad, and then what happens is his dad's wind up, is wind up cheating on his, uh, his mom. So there's just this turbulent family life that is really interesting 'cause it was solved in Sol's life by picking a unbelievably supportive spouse. And this idea of just having someone who believes in you making an unbelievable amount of difference in the life of an entrepreneur is something that pops up over and over again. In fact, I think Stephen King has the best, has the best way to describe this, so I'll get there in one second. But this is more about his future in-laws not approving of him and his family, and you'll see, again, he's a juvenile delinquent. You'll see his, by his response here. To make matters worse, Sol's parents divorced in 1935, further convincing Helen's parents that their daughter should not continue to see him. Divorce in those days, particularly among Jewish couples, was almost unheard of. Bella, which is Sol's, uh, mother, found out that Sam was in love with another woman.

3. 8:30 – 10:38

   Eloping with Helen and the Value of a Believing Spouse

   1. DSDavid Senra8:30

      But Sol picked a great spouse. Helen, having been raised in a stable home with nurturing parents, provided much of that that Sol had never experienced with his own family. Sol is in love with Helen. Her parents say, "Absolutely not. You cannot, uh, you cannot date this guy." Sol's response is, "Okay, we're gonna go get married. We're gonna go elope." Sol and Helen, recognizing that Helen's parents would never agree to, to them marrying, took matters into their own hands and eloped. But before we move on, let's go to this idea that having someone who believes in you makes a lot of difference. Uh, and back in episode 210, I read Stephen King's excellent autobiography, obviously one of the, the best written autobiographies you can ever, uh, come across because it's written by Stephen King. And he says something that's fascinating. Like, how many times do you pick up a book and at the beginning they're like, "Hey, you know, I'd like to thank my spouse, my husband, my wife"? And this is what he said: "My wife made a crucial difference during those two years." So he is describing... Everybody knows who Stephen King, King is, right? And if you haven't read his autobiography or if you haven't listened to episode 210, what blew my mind is I didn't understand how unbelievably poor and, and just, just seeped in poverty that Stephen King was when he was trying to make it as a writer. They liv- they lived in a trailer. They couldn't even afford, uh, a telephone in their house. They couldn't afford... Their daughter was sick, and they couldn't afford the medication. He's got unbelievable stories in that book. And so he's describing that time period, but now from the pers- uh, perspective of, of an unbelievably successful and wealthy person. "My wife made a crucial difference during those two years. Tabby never voiced a single doubt. Her support was a constant." This reminds me of Sol Price's wife. This is what I'm reading to you. "Her support was a constant, one of the few things I could take as a given, and whenever I see a first novel dedicated to a wife or a husband, I smile and think, 'There's someone who knows.' Writing is a lonely job." Entrepreneurship is a lonely job. And I talk to... I'm gonna wind up talking to more founders than almost anybody else alive, right? And that comes up over and over again. Being a founder is extremely lonely job. Having someone who believes in you makes a lot of difference. They don't need to make speeches. They don't have to make speeches. Just believing is usually enough. And so Sol, in probably life's most important decision, picked the right spouse.

4. 10:38 – 16:32

   Law Practice, Pearl Harbor, and a Work Ethic

   1. DSDavid Senra10:38

      I'm gonna, uh, fast-forward. He went to law school, and it's, it's interesting to me. There's so much, uh, about reading Sol's experience, uh, as a young lawyer that reminded me of Charlie Munger. And so Sol has a, a line right at the beginning of this, this chapter. It describes his very short, uh, [laughs] law career. And he says, "Over a period of time, I really learned far more from, like, my clients than I ever learned in law school," reminding me of one of my favorite quotes by Henry Ford, that true education is gained through the discipline of life. And so I just wanna pull out one idea that I think is very valuable. He's a l- a young attorney, has no money, doesn't really have a client base. So how's he gonna build up and, like, his own, like, his own business, his own book of business, right? He gets clients for his law firm by giving away value for free first. So he's working with these other two older attorneys, and what he says one thing that they learned, that the most valuable thing that he learned from them is not, like, how to, like the technical aspects of running a law practice. It's about how everything moves with relationships. And so he says, "I became a lawyer in the community for all the Jewish charities, and obviously I never charged them for it." Not charging for one's legal services, especially as a young attorney with no money, uh, struggling to earn a living, might not have been so obvious. His pro bono legal work introduced him to many people in the community, some of whom eventually became his clients. Sol is living and working in San Diego at this time. He is 25 years old when the attack on Pearl Harbor happens, and that changes everything in his life. I had developed a reasonably fair practice and was making a halfway decent living, but literally overnight, life in San Diego changed forever. After the attack on Pearl Harbor, the United States government did not know whether or not the Japanese were capable of attacking the West Coast. So the Navy announced that it may be c- it, it was considered advisable as a precautionary measure to black out San Diego at any minute. So he's describing what [chuckles] going through his life and work with no electricity. All of a sudden, there were total blackouts every night. It's hard to even recall now how inconvenient it was trying to get around after dark without lights on your car, without any lights in the street, and trying to figure out where you were going and how to get there. It was a very, very difficult thing, but somehow we still managed to keep moving, and I really can't recall clearly how we did it. So in addition to having to do his legal work during the day, he has to work supporting the war effort at night. So he's working at this place called Consolidated Aircraft that is making airplanes for the war effort. And really, what I was saying about this whole section, that a little adversity goes a long way. This is the start of Sol's unbelievably strong work ethic. He really starts to get fulfillment from working hard and being productive, and we see him contrast his own work ethic with his father's. Again, throughout the rest of the war, Sol was at his law office eight in the morning until noon. Then he worked, he had to drive across cr- town to Consolidated, uh, the aircraft company until eleven fifteen at night. So his workday is from eight in the morning till eleven fifteen at night. He would eat dinner, go to sleep, and then the next morning do it all over again. Sol did not complain. Instead, I actually enjoyed the experience. Unlike his father, who had managed to find ways not to work, Sol thrived when he was busy working hard and feeling productive. This is what I mean ab- about a little adversity going a long way. It's actually good for you. His desire to work hard and get the most out of every hour of the day was not characteristic of his earlier years. Sol commented that he never worked very hard in school, at least not until law school. Beginning with his early career in law and his work at Consolidated, Sol would continue to live his life working hard and taking full advantage of every hour of the day. This is also something that his gr- he would teach his grandchildren. In his later years, Sol frequently spoke about the importance of time. His granddaughter talks about what she learned from her grandfather. The concept of time was very important to my grandfather. I remember on a couple of occasions talking to Grandpa about how I would be able to accomplish certain goals. He explained to me that we always have more time than we think. Then he would take an inventory about how much time you're spending on different things. "How much sleep do you get?" He would ask. "How long does it take you, for you to study? How long does it take for you to eat your meals?" So many questions about my day. "Well, you have enough time," he would say. "There are twenty-four hours in a day, one hundred and sixty-eight hours in a week. We waste so much of it. There is always time." I thought it was funny 'cause later in the book, uh, it talks about what he, he'd keep one sign on his desk that said, "Do it now." And so at this point, he's still a young man. I think he starts his first company when he's forty. But what he's realizing is like the, the value of his legal practice was the fact that he, he discovered he didn't actually like the law, and he wanted to... Actually, he was much more interested in business. So he says, over a period of time, I really learned far more from my clients than I ever learned in law school. And because I involved myself so deeply in their matters, I think this is where I began to accumulate the knowledge and interest in business. And he also realized that even though a lot of his clients didn't have the, like the higher education levels that he did, they were much more wealthy than, uh, than he was, and they just had this like basic common sense. I just wanna [chuckles] give you one example. Uh, there's this guy named Isidore Teacher. He was one of Sol's clients. He had emigrated to the United States from Scotland when he was three years old, and he had no formal education, but he was very smart. And then Sol also saw that, okay, you don't have to have formal education to be smart in business, but you can be smart in business and bad in other aspects of your life. Uh, Sol is very akin to like Ed Thorp, where he was able to be unbelievably professionally successful, not r- and without really messing up other parts of his life. Isidore Teacher had a problem picking wives, and s- he also says some funny stuff here. So it says, uh, Teacher was a very successful, uh, real estate investor and business person. He wasn't very successful, however, when it came to his marriages. Sol represented Teacher in a divorce that ended up in the court. And so his wife's divorce attorney was threatening to have the court take all, take over all of Teacher's assets. Sol went back to Teacher and told him about the threat. Teacher's response is something that Sol said he'd always remembered. And this is what Teacher said: "Well, that's okay if, if my wife wants to sink the ship. Let her sink the ship. I can swim better than she can." Teacher's gutsy response made a big impression on Sol because over the years, Sol was never afraid to hang tough in a negotiation.

5. 16:32 – 20:22

   Lessons from Clients and the Seeds of FedMart

   1. DSDavid Senra16:32

      And so it's through Sol's legal practice that we see the very first like kernel of this idea that's gonna eventually turn into Costco. And so a major driver of the San Diego economy at this point in history was the Navy. And so Sam sees, or excuse me, Sol sees this very focused niche business that is unbelievably valuable. Uh, Navy regulations required sailors to depart from their ships and come back to their ships in uniform. Because the sailors wanted to change into their civilian clothes once they were on shore, they needed a place to store their uniforms and to purchase clothing. In response, a few enterprising entrepreneurs opened these things called locker clubs. So a locker club is stores that not only had lockers where sailors could store their uniform but offered a wide range of goods and services for sailors to purchase. The most successful of the locker clubs was this business called the Seven Seas Locker Club. And so Sol starts studying the business. He says the Seven Seas was another learning experience for Sol. It was an opportunity to see how a large store selling a variety of goods and services all under one roof could be successful catering, this is the most important sentence, could be successful catering to a focused segment of the marketplace. Focused segment of the marketplace is what you and I today would describe as a niche. This entrepreneur made a very successful business understanding a Navy regulation and then solving the problem and narrowly focusing on one segment of the market. So that's the first kernel. This is the second one. His father-in-law dies. He's trying to help his mother-in-law like settle their estate. They own, they own a bunch of like, uh, commercial real estate. And so her name is Bertha. And it says, uh So Sol was faced with the challenge of finding a tenant for Bertha's Main Street property. Sol's client... Remember, this is all h- this is-- It's amazing how all this relates. Like, all the relationships that he built, uh, when he was practicing law winds up, is, is what launches his, like, business career. But he's also paying attention. And so in the back of his mind, he's like, "Okay, well, this is a very interesting, like, uh, business that they, they were able to build focused on Navy regulations and, and sailors." And then he's introduced to another example of this because he's trying to find a tenant for his mother-in-law's commercial property, and one of his clients is like, "Hey, why don't we go up to Los Angeles and we check out this thing called Fedco?" Fedco is a membership retail store. Remember, you and I know where this ends up, right? This ends up w- in Costco. But we are three decades in time before Costco is founded, and so this is the first time that Sol sees an idea which generations of entrepreneurs after him are going to use. He's like, "Okay, well, wait a minute. There is a membership retail store targeted to a specific niche." In Fedco's case, they only sold to federal employees. So he's gonna see a lot of ideas that he's like, "Oh, I can use this idea." He's also gonna see one that he can actually, uh, change, and one example of this is the fact that since Fedco was sold only to federal employees, it was a nonprofit corporation. And there's gonna be all these warning signs that, hey, this is probably a good idea that people are not paying attention to, and this is one of them. The Fedco store was doing a brisk business with customers coming f- from as far away as San Diego. In fact, 5,000 Fedco members lived in San Diego and were driving 200 miles round trip to take advantage of Fedco's bargain pricing. You and I have seen this. I think it was episode 234 that I did on Sam Walton's autobiography. When you have people driving far distances to save money, that is a very, very good sign, and that is something that Walmart had in the very early days as well. Another parallel with Walmart is Sol and his two clients are like, "Oh, wait, wait a minute. This, a Fedco-type business could be successful in San Diego. We know that because there's 5,000 people in San Diego. They're driving two th- 200 miles round trip just to save some money. And we have a spot where we can put it because we can put this store in my mother-in-law's vacant commercial..." It's like, it's like, it's a commercial warehouse, basically.

6. 20:22 – 27:52

   Starting FedMart and Capping the Downside

   1. DSDavid Senra20:22

      And so since Sol and his two clients didn't have any experience, this is something that Sam Walton, uh, did as well, where they call Fedco and they're like, "Hey, why don't we do a joint venture?" And Fedco's like, "No, they-- We don't want anything to do with you." And Sol said, in retrospect, "We were lucky." If you go back and study the early days of Walmart, he eventually, he, he initially purchased, uh, pitched the idea, the idea for Walmart to a larger company. In fact, let me read, uh, let me pull up the, the, the quote from Made in America. Uh, it says, this is Sam Walton writing, writing, "Many of our best opportunities were created out of necessity, the things we were forced to learn to do because we started out under financed and under capitalized in these remote small communities. This 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, to be, we might never have gone into all these other, uh, towns that we went into in the early days. It turned out 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." And so in other words, Sam was forced to do it himself, operating under more constraints because he didn't have as much, uh, resources. We see the same thing with Sol Price and his partners. It's like, well, Fedco was a bigger company. They already know what they're doing. Okay, they said, "No, we're still gonna figure out how to do this." And Sol talked about this fact that ignorance sometimes is bliss for an entrepreneur. He says, "Fortunately, most of us had backgrounds that were alien to retailing. We didn't know what we, we didn't know what wouldn't work or what we couldn't do." I was just listening to a interview with, uh, Daniel Ek, the founder of Spotify, on Acquired. He said the same thing, like, "If I had known how painful and how difficult this was..." He's like, "I'm glad I went through it, but if I had known upfront how difficult and painful it was, I would have never done it." That idea or that, that experience is very common in the history of entrepreneurship. And so he s- he says later on that, uh, I think they opened the first store for like $50,000 and they didn't know what they were doing, and later on when they knew what it was doing, it would cost $5 million, [chuckles] which is funny. Uh, but I do wanna go to this idea that Sol, like you and I, are these, just these learning machines, constantly studying and learning from other founders. And so he, he has these two stories. He's like, "Oh, Seven Seas Locker Club, that's interesting. Ooh, Fed, Fedco, that's interesting." Then he starts studying this guy named EJ... I don't know how to pronounce his name, so we're just gonna say he's the founder of EJ Corvette. There's a new type of retailing. Discounting was launched by this guy named Eugene, who founded this company called EJ Corvette. He opened the first discount store in 1948, and this founder did much to divine, define the idea of a discount department store. What he would do is he would sell products at deep discounts from the manufacturer's suggested fair trade prices. This is very important. At this time, and Sol was one of the people that gets these ridiculous, ridiculous laws overturned, there was these things called fair trade prices that said you had to charge the customer, even if you could sell it cheaper because you had a better cost structure, because you were more efficient, did not matter. There was these artificial, like, floors on prices that Sol thought was ridiculous. And so the founder of EJ Corvette figured out a way, like a loophole, to get around these fair trade prices. The way Corvette circumvented the fair trade laws was by requiring that shoppers become members in order to shop. The membership was really just a way of outsmarting the fair trade laws. This is incredible. I love how these, like, little weird decisions that happen... Think about it. This happened in 1948. That is 40 years before Costco is invented, or founded rather. But this idea, this, like, this, obviously the, the, one of the benefits or the main benefit of Costco is, like, almost all their profit comes from the, the, the reoccurring membership, right? And the fact that they use their size just to buy products so inexpensive and then barely mark it up, just mark it up to cover, like, their, their, their very low operating expenses. And so you go to Costco, I mean, you already know this. You go to Costco, and you just find a TV that's $500 cheaper than anywhere else ev- it could be because it's like we're not making money on the TV. We're making money on, on the membership fees. And this idea that the membership club for discounters started out as a way to get around a random regulation. And this regulation lasts a long time. This is 1948. The regulation's already been, uh, uh, established for quite a while then. I think it's in, like, the 1970s where Sol and a bunch of other people play a role in getting these ridiculous fair trade laws repealed. It's incredible how these, these things, like, echo throughout time. And so this is the reason he was doing this, because customers could realize significant savings at Corvettes. You could say the same thing, customers could realize significant savings at Costcos. A refrigerator might sell for $400 at Macy's, and Corvette sold the same for $300. Okay, so let's go to the beginning of FedMart. Now, here's the crazy thing. FedMart is literally FedCo, right? It's just like, "Okay, let's make a membership discount store that's available to only, to federal employees only." So it says FedMart followed, uh, the FedCo template in almost every way, including membership. Uh, Sol raised $50,000 from a handful of investors, including his own $5,000 as seed money. For most of the investors, a 5,000 investment was not a lot of money. But for Sol, $5,000 was a significant amount of money at the time. So at this point that he starts his own company, he's still practicing law, doesn't have a lot of money. He's very concerned. This is something he's concerned with his entire life that I think is smart, is capping the downside, capping his downside risk. Um, so he negotiates the lease, and he's like, "Okay, we negotiate a lease for 10 years. We were so uncertain as to the future of this enterprise that we reserve the right to cancel the lease at the end of one year if it didn't work out." And then this is what I mentioned earlier. Sol is also hilarious, as you saw with the, the introduction with Jim Sinegal. So he's very, has, like, this very sharp wit. And he says, "I used to say afterwards that when we didn't know what we were doing, it only took $50,000 to start a business. And five years later, when we were really experienced at running FedMarts, it took five million to open." So they opened a membership retail store in a warehouse in an industrial area of San Diego. This broke just about all conventions in 1950s retailing. Shoppers had to be military or government employees, and they had to purchase a membership card, and they needed to show their card in order to shop, just like you and I do today when we walk into, uh, Costco. And we go back to this idea. It's like, "Hey, I have an idea that this will work because we have 5,000 people literally leaving our city, going to Los Angeles. They'd probably shop here [chuckles] if they just had them, and other people would shop here." So it says, "From the day that FedMart opened for business, uh, the store was an immediate and a spectacular success. We had ant- anticipated that we might do a million in the first year, and we did three times more than that." So the customers are happy, but his competitors are not, and we see that Sol Price is a fighter. He did not shy away from fighting at all. Uh, some of the downtown merchants tried to cause problems. Right before we were about to open, a guy came to the FedMart, and he said he, he was a bedding inspector for the state of California who's responsible for seeing that things like pillows and mattresses do not have any deleterious stuff in them. He comes, here comes this bedding inspector, and he has this long list of questions, and the questions had nothing to do with pillows and mattresses. I politely and firmly told him to get the hell out, and if he wanted to close us down, take your best shot. We never heard from him again. And this is f- the first part of the book where we see that Sol's business philosophy. Uh, you're, you're gonna see, you obviously see this with Costco today. Sol described his business approach as a professional fiduciary relationship between us, the retailer, and the member, the customer. If you're buying as inexpensively as possible and only marking up to cover your cost and making the vast majority of your money, money just on membership fees, you're in perfect alignment with the customer as opposed to the person that you're buying goods from. And the way Sol demonstrated this is obviously a markup of, say, 12% over your costs compared to 36 or 50% as some other retailers. Obviously, that's better for the customer.

7. 27:52 – 31:17

   Customer First: Fiduciary Duty, Wages and Doing Right

   1. DSDavid Senra27:52

      And so I wrote on this page, 'cause this, Jim Sinegal says the same thing, that Sol and Jim Sinegal, Sol Price and Jim Sinegal are soulmates. And so Sol Price says, "Our first duty is to our customers. Our second duty is to our employees, and our third duty is to our stockholders." And so by the time FedMart expands, Sol has left practicing law. Now he's full-time in the business that he founded. He's 40 years old. And it says Sol made his decisions from the point of view of his own experience, the fact that he was an attorney and not a retailer, and that he was an entrepreneur and not a chain store executive. He was never driven by the need to have the most stores or the most money, but by the desire to give the customer the best deal and to provide fair wages and benefits to FedMart's employees. And so Sol Price would constantly pay his employees more than his competitors because he thought it was the right thing to do. I was listening to a speech by Jim Sinegal, who's u- who uses a lot of these same ideas, and he said that, um, Costco had 22,000 people apply for 200 open positions. I think that that was when they were opening a new store. At this point, FedMart's expanding. They're into San Diego, or excuse me, San Antonio, which is a cheaper cost of living than where the other FedMart stores are. But Sol Price thought it was unethical to pay them less than he was paying other FedMart employees. Employers were paying their employees 50 cents per hour. He decided that the wage should be a dollar per hour. And so what's the result? Of course, everyone wanted to work at FedMart. That's the same idea that, that Costco has 22,000 people apply for 200 positions. Why would he require FedMart's wages to be twice as much as competitors? FedMart was paying a dollar an hour to employees in San Diego and Phoenix. The wage decision in San Antonio was simple. Employees in San Antonio worked just as hard as the other FedMart employees. FedMart had excellent profits in San Diego and Phoenix while paying good wages. Why just not apply the same wage philosophy in San Antonio? And what I wrote here is just keep it simple. I've seen other companies, like, compensation structure, and it's like you need, like, a PhD in math to figure it out. Just keep it simple. Oh, we pay them a dollar an hour in San Diego? Okay, we're opening a new store. Dollar an hour there. Less time to think about it. Move on to actually things that are more important. And one thing that you have to love about Sol, that he always felt that he had to do the right thing no matter what. And so at this point, there's still a lot of segregation in the United States, and he's just not with that. He's like, "There's no way that I'm putting these provisions in any lease." Sol was negotiating a mortgage for the property when it, with a major insurance company when he noticed that the mortgage agreement stipulated that FedMart must maintain separate bathrooms based on race. Sol told the lender that the separate bathrooms provision was unacceptable and that he would not enter into the mortgage agreement unless the provision was removed. The lender removed the provision. Once again, Sol chose the right way and was able to achieve a victory in the battle against segregation. And I think this idea of like, hey, I'm just gonna do what I think is right and I'll suffer the consequences and I'll fight back if, uh, because I think it's important to me is really, uh, like affect, can affect future generations. So like, uh, Costco to this day sells like drugs, uh, prescription drugs cheaper than almost all of its competitors. Uh, if you re- if you research the early history of FedMart, they were the first ones to sell, to use like this heavy discounting to c- to prescription drugs as well. That's been copied over and over again. The important part is like human nature never changes. Last week on episode three oh three, I told you when Mrs. B was selling carpet cheaper than her competitors, she was literally sued. They called her like a bootlegger or something like that, and the, the, it winds up getting thrown out. But people do all kinds of crazy things, again, that are not... They're good. They, they may be better short-term for the business because you're able to charge more, but they're not better for the customer.

8. 31:17 – 34:00

   Fighting Fair Trade Laws: Pharmacies and Private Label

   1. DSDavid Senra31:17

      And I think what Sol Price realized, what Jim Sinegal realizes, what J- Jeff Bezos realizes, what Mrs. B realizes, like you should just always go for what's better for the customer. So Sol winds up saying, you know, I'm gonna fight these regulations, these fair trade laws, and he's, he opens the first pharmacy inside of a discount store ever. And he hires this guy named Wayne Mallory, who was a pharmacist, and then he comes over and starts selling drugs cheaper, and his profession and other important businesses in that profession treat him like a traitor. Look what they do to this guy. It says, "Wayne Mallory withstood numerous obstacles in opening the very first pharmacy. Pressure from local and state pharmacy organizations. Pressure placed on the wholesale companies not to deliver or sell to FedMart." Exactly what happened to Mrs. B. "Difficulty in obtaining a permit from the State Board of Pharmacy. He was expelled from..." This is insane. "He was expelled from the local and state pharmacy organizations. He received numerous death threats." What the hell is wrong with our species? "A rock was thrown through his living room window, and he was treated like a traitor to his profession." And so Sol fights this battle on multiple fronts, and they come around, they come up with an idea of another way to get around these ridiculous fair trade, uh, laws. Think about they're gonna have their own white label company, like own products. Think about how valuable like the Kirkland white label brand for Costco is now. Because fair trade laws impacted so many products, FedMart developed a line of private label merchandise. The FM brand was of laundry detergent was about one half the price of the national brand. And so this goes back to his misfit-like nature when he was a kid. You don't want us to sell your products for deep discounts? That's fine. We'll make our own. And then again, a version of Costco before Costco, FedMart, like Price Club after it, and like Costco after that. One of the most important factors is that Sol b- Sol Price believed low price merchandise with limited selection. Sol calls that an intelligent loss of sales, which I'll get his idea of intelligent loss of sales, which I'll get to in a minute, but I wanted to bring up this part. This is what I mentioned, that he was, he helped, uh, get these ridiculous laws overturned. 'Cause again, at the end of the day, it's just better for customers. It's all we really need to focus on. By 1975, consumer demand for lower prices convinced Congress that it was time to repeal fair trade laws. Only liquor remained subject to minimum price maintenance in some states. So what does Sol do? Sol told the FedMart liquor buyer to purchase national brand liquor and to price the liquor at a 12% markup. The state of California challenged FedMart's pricing as a violation of the state's liquor price maintenance regulation. Think about that. Sol is getting, being just like Mrs. B, Sol is getting sued for selling too cheaply. FedMart's attorneys argued in court that federal law preempted state law. The judge sided with FedMart.

9. 34:00 – 38:46

   Teaching, Alter Egos, and the Intelligent Loss of Sales

   1. DSDavid Senra34:00

      So remember at the very beginning of the book, Jim was saying, "Hey, there's this guy affect, positively affected thousands of people's lives." And part of it is because he viewed himself as a teacher. And so at the beginning of this chapter, there's a fantastic quote by Jim Sinegal. And he says, "If you're not spending 90% of your time teaching, you're not doing your job." And that's something he learned from Sol. Jim Sinegal, Costco's founder, started working for Sol in 1954 at the age of 18. Jim recounted the time that he received a call from a reporter to answer some questions. "You knew Sol for a very long time. You must have learned a lot." Now, this is Jim talking. "My response was, 'No, that's inaccurate. I didn't learn a lot. I learned everything, everything I know.'" This may be my favorite part of the entire book. Sol focused much of his attention on teaching. He had a favorite adage that he frequently found appropriate to repeat. "You train an animal. You teach a person." Sol really wanted all FedM- FedMart employees to think about and understand why their jobs were important to the suc- the success of FedMart. He was not a big fan of procedures and training manuals because he believed that manuals were a substitute for thinking. Sol's emphasis on teaching was expressed in his phrase alter ego. So it really clicked for me when I read this for the second time, that there's a great line that talks about the importance of like essentially the culture of a company is the f- the large part of the, the personality of the founder, and that, uh, Apple was Steve Jobs with 10,000 lives. He is making, at this point in the book, he's making 10,000 Sol Prices, right? So it's like this importance of teaching. Sol's emphasis on teaching was expressed in the phrase alter ego, a rather simple concept. He used the following example. If the owner of a store was able to do all the jobs himself, greet customers, order and receive merchandise, do the accounting, sweep the floors, et cetera, he would. But the reality is that normally the owner can't do all the work himself, therefore he must hire people to help. Then he must teach his employees to become his alter ego so that they understand the importance of their jobs and perform their jobs as well or better than he, the owner, would if he had the time. He is creating 10,000 alter egos. He is creating 10,000 Sol Prices. Just so happens that one of the alter egos that he created is one of the greatest founders to ever do it in Jim Sinegal. And so one of these ideas that he spread to his alter egos, uh, this is something Costco uses. This is something when I read the, the biography or the autobiography of the founder of Trader Joe's. Like he used as a differentiator in the grocery, uh, department, this idea of limited SKUs. And so this entire section is about the logic of limited selection and intelligent loss of sales, which is the term that Sol put on it. And again, this is one of Sol's ideas that is widely, widely used today. Sol proved that it was possible to do more sales with fewer merchandise items. Also known as SKUs. Why does limited selection result in higher sales? Part of the answer lies in what Sol called the intelligent loss of sales. Conventional wisdom in retailing is to stock as many items as possible in order to satisfy every customer's needs and wants. The intelligent loss of sales turns that theory on its head, postulating that customer demand, customer demand is most sensitive to price, not selection. Gotta repeat that. Customer demand is most sensitive to price, not selection. How does the intelligent loss of sales work? Sol's classic example was three-in-one oil. So this is oil that w- you'd use around your house to like lubra- lubricate, clean, and like prevent rust. The manufacturer produced the oil in three sizes. Most stores carried all three sizes of three-in-one oil, even though the large eight-ounce size was a better value per ounce than the smaller sizes. Most people who need three-in-one oil would buy the eight-ounce size if that was all that was on the shelf. The price is far better per ounce. It is acceptable for most customers. What about the customer who doesn't buy the eight-ounce size? That was the intelligent loss of sales. What does limited selection have to do with efficiency? Because payroll and benefits represents approximately 80% of a retailer's cost of operations. Fewer items result in reduced labor hours throughout all the product supply channels. Ordering from suppliers, receiving them at the distribution center, stocking them at the store, checking out the merchandise, and paying vendors. Put simply, the co- this is so e- what an excellent observation by Sol. Put simply, the cost to deal with 4,500 items is a lot less than the cost to deal with 50,000 items. And why is low cost so important? The success of FedMart and later Price Club had a lot to do with being the lowest cost operator.

10. 38:46 – 43:33

    Losing FedMart: The Hugo Mann Deal

    1. DSDavid Senra38:46

       Okay, so I wanna fast-forward in the timeline to where Sol gets kicked out of his own company. At this part, this goes back to the idea where like one of the main ideas of the book is like it's so important. [chuckles] Sol was unbelievable at-- Everybody around him said his ideas and his creativity of starting businesses was, was, you know, maybe the best ever. But his execution, he just, he by his own admission, he's like, "I'm just not a good executor, not a good operator." It's why after he gets kinda FedMart, kicked out of FedMart, starts Price Club, and once he reali- like grows the idea for Price Club, realizes, hey, we, we gotta sell to Costco because Jim's just the best operator in the world. So FedMart, because, in part because Sol shared his ideas widely, they have a ton of competition from world-class operators. So you have Walmart that's already been in existence for almost 10 years now, Target, Kmart, and these operators are just operating a lot better than FedMart is. So he has this idea where he's like, "Man, we're running into all these problems." The business has been going on for I think almost 20 years at this point. And so he's looking for like new ideas or maybe an eventual buyer. Uh, he's like considering a sale or merger of the business. Uh, some investment bankers hook him up with some f- some, uh, retailers over in Europe, so he flies over to Europe. This is important because one of these winds up being a buyer, and the other one winds up giving him an idea that he uses for Price Club, which is really the, what we're talking about. It's like this is the, still the, the prehistory of Costco. This is why I'm holding the book in my hand, why I'm talking to you about it, why I reread it, 'cause I just have a strong desire to understand Costco at a more fundamental level than I do. And there's surprisingly not a lot of material out there, so if you have any material about Costco, please get it to me. I'll read everything and listen to anything you find as well. Uh, so it says he goes to Amsterdam and Germany. This is hilarious. The first meeting is this guy that's the founder of this, they're called Makro, M-A-K-R-O stores. He, this guy lives in a castle [chuckles] in Amsterdam, and his business is a membership warehouse, but these are gigantic, much bigger than the FedMarts were. They're over 200,000 square feet, and it's a similar concept where to shop in the store, you have to purchase what they call a passport membership. And so it says Sol must have been impressed because when he returned to the United States, he talked about, uh, the store at length, and in particular, the passport membership concept for business customers. To shop at Makro, you had, customers were required to prove that they were owners of a business. You have to prove that you're owner of a business, then you can buy the membership. So that idea, he's like, "Oh, I come back." He's like, "Man, this is a really interesting concept. What if we had a me- membership discount retailer, but you ha- it was only for business customers?" That is, that is the idea for Price Club, which is gonna come after this. So again, Sol Price is literally doing in the story what you and I are doing right now, which is learning from other entrepreneurs that came before us. Then he goes to Germany, and he meets with this guy named Hugo Mann. Hugo Mann owned a chain of these things called hypermarkets. So hypermarkets is what you and I would know as like a Walmart Supercenter today. But this is way before a Walmart Supercenter, uh, existed, where it's groceries, it's everything, including food and groceries and perishables. And so the issue that's gonna happen in the future that Sol doesn't know what's happening now is like Hugo Mann, the founder, like wines and dines him, takes him on va- this beautiful vacation spot in Germany, turns on the charm. This is the biggest thing where time is the best filter. You can fake being a scumbag for six months, for a year. You can't for five, 10, 15 years. Your true personality and who you are is going to eventually come out. They had this idea, though. They're starting to negotiate with Mann and some of his people, and they, they really don't like him. But they got caught up in the euphoria of a big deal. Uh, the, the other way I've heard other entrepreneurs say this in the past is like you should have a no asshole rule, and that you... and another way to put this is like you can't make a good deal with a bad person, and this guy winds up being a bad person. The negotiation sessions provided plenty of opportunity to gain insight into the characters we were dealing with. But Sol had decided that FedMart had much to gain by reaching a deal with Mann and his group. Later on, looking back on our times with Mann, the warning signs seemed so obvious, but at the time, we were caught up in the euphoria of making a big deal. And so Mann is going to, to buy 64% of the company. It's like this merger eventually, just like this, this takeover really. And because he, he needed money, because he's like, "Okay, well, I'm, I'm facing some serious operators. If we get a big influx of money, we can expand and we can kind of fight." That's not gonna happen. I mean, you have to avoid this mistake. You can't sell 64,4% of your company and then be surprised when you get fired, which Sol does get fired. The first indication of real trouble occurred at the first meeting of the new board. This was the first time that Sol and I experienced the real Hugo Mann. Rather than the friendly person we had seen, Mann launched into a 90-minute tirade criticizing Sol and Fedmart's performance. We were finally seeing Hugo Mann's true character, a side of him that executives in Germany saw every day.

11. 43:33 – 47:06

    Price Club: The Warehouse Concept and the Hot Dog

    1. DSDavid Senra43:33

       And so immediately after he gets fired from Fedmart, he starts what he's gonna call the Price Club. So he's like, "What, what, what do I wanna do after Fedmart?" And he realized, "Well, I can just take that macro, like business in Amsterdam and, and do it here." Uh, macro operated a membership wholesale business and a warehouse. They sold products to small businesses in a no-frills warehouse environment. Its strategy was to offer a wide range of business products at very low prices. Sol thought just maybe there was a way to have a wholesale business selling to independent business owners. So he's gonna have a membership-based warehouse business. It's gonna have no frills, and it's gonna sell business products at low prices to business owners. And if you think about the Price Club idea, Costco is this, but for everybody. The Price Club idea was finally conceived, a who- wholesale business selling merchandise to small independent businesses. The business owners would come to a large warehouse, select the products from a steel rack displays, and pay either by check or cash. Thousands of small businesses would pool their buying power for shopping at our wholesale warehouse. Now, there's millions, I don't know, tens of millions. What, a hundred mil- I don't even know how many Costco members there are. Let's say 100 million. In this case, there was thousands of small businesses pooling their buying power together. In Costco's case, there's 100 million or whatever, 50 million customers pooling their buying power together. That is a very, very powerful idea. And this may be the main idea of the book. Everything that made Price Club different is what made Price Club successful. Price Club differed from its competitors because of the number of items offered for sale. The typical grocery or discount store carried about 50,000 different items compared to Price Club's 3,000 items. Price Club was a warehouse with rack storage, high ceilings, and concrete floors. And most importantly, the prices for the merchandise were far less than prices available anywhere else. The operating efficiencies of the warehouse concept and the direct delivery of products from the suppliers to Price Club made it possible to sell merchandise for less. And so the value proposition to the business owner is real simple. For $25 membership fee a year, you have your-- We can pool together the buying power of thousands of you, eventually tens of thousands of you, and then you have your own warehouse. We will handle the buying and the delivery logistics. You just have to drive to your, the warehouse that you're a member of and pick it up. And so the great thing about reading rather obscure books like this, I don't know how many people have read this book, is you discover, uh, the origination of like a, like a cultural phenomenon. So there's this funny thing, like in, in Costco lore, is the fact that they sell a h- hot dog and a, a soda for $1.50, and they have forever. And if there's this... One of my favorite stories about Jim Sinegal is what happened, uh, one of the guy that was working for Jim tried to in- try to convince Jim to increase, uh, the price of the hot dog, which I'll get to, uh, in a minute. It's the, it's... He's just my kind of founder. He's just like, that is, Jim is my kind of founder. Uh, and we realize, like that's, th- that idea came originally from Price Club. Price Club was selling a c- uh, a hot dog and a can of soda for $1.50. The price of a Costco hot dog and soda has remained the same, $1.50, 36 years later. This-- But the thing is, is now it's 46 years later, 'cause this book was punished, or published about 10 years ago. So the reason I say it's my kind of founder is said there's this great back and forth where it's like, "Okay, Jim, we need to, we need to raise the price of the hot dog." And Jim's response was, "If you raise the price of the fucking hot dog, I will kill you. Figure it out." That is a founder that is obsessed with delivering value to his customers.

12. 47:06 – 49:32

    Sharing Ideas with Competitors: Home Depot and Sam's Club

    1. DSDavid Senra47:06

       The Price Club is so successful before it sells, it's, it's gonna wind up petering out before Costco buys it, in large part because of competitors that Sol Price actually created for himself. B- Bernie Marcus, the, one of the co- founders of Home Depot, comes and visits Sol. Sol has this fantastic reputation with world-class entrepreneurs. So it says, in 1978, Bernie Marcus came to see the Price Club and to visit Sol. Sol took Marcus on a tour of, uh, through the warehouse. He suggested to Marcus that he open his own home improvement business using the knowledge and experience he had gained at Handy Dan. Handy Dan was, had just fired Bernie Marcus. I had done this book. If you don't know what I'm talking about, I think it's episode 45. It's called Built from Scratch: How a Couple of Regular Guys Grew the Home Depot from Nothing to Thirty Billion. And I think now Home Depot, since that book was published, was like 300 billion. It's a fascinating story. But Handy Dan was this place where Bernie was, uh, working at and got fired from. So he says, "Hey, why don't you take the, the, the hardware knowledge that you had, that you gained at Handy Dan and then combine it with my idea?" And that is what Home Depot is. Marcus took Sol's advice and, with his partner Arthur Blank, opened the first Home Depot in Atlanta, Georgia, in 1979, blending what Marcus had learned in the traditional hardware business with Price Club's warehouse format. Another competitor that Sol Price made was Sam Walton. Sam Walton is on record saying, "Hey, I, I stole more ideas from Sol Price than anybody else." And considering that that Sol, that Sam Walton had studied more retailers than anybody else, that's a hell of a statement. Sam Walton, who had created Walmart by using Fedmart as a model, called Sol. Walton wanted to come out and have a look at Price Club. Sam was interested in learning as much as he could about the warehouse club business. Sol was open and generous with information. Sam thanked Sol and returned to Bentonville, and in 1983, Walton opened his first Sam's Club in Oklahoma City. Sol was a real believer in the importance of competition, that competition gave the consumer a better deal and sorted out the strong operators from the weak ones. But Sol may have had second thoughts about sharing so much information with future competitors because his ideas were used by so many startup warehouse businesses. And so if you think about one of the main maxims of the history of entrepreneurship that you and I have gone over, over and over again, is that bad boys move in silence. When they find something that's working, when they find something that's lucrative, they shut up about it. Sol Price did the opposite. It all works out in the end because he sells to Costco, but I bet if he could go back and do it all over again, he would've kept his mouth shut. And so then we fast-forward in the story, and now you have, by this point in time, you have a bunch of people doing the same Price Club playbook, the same... It's just Price Club with a different name.

13. 49:32 – 52:33

    Losing the Execution Race and Losing Focus

    1. DSDavid Senra49:32

       And the problem is that two of these people that are doing this are some of the best operators in the history. Uh, some of the greatest operators in history, in Jim Sinegal and in Sam Walton. And so Jim says here, "We owe Costco's legacy to the retail concept that Sol pioneered with FedMart and Price Club, as do our competitors in the industry and big box retailing in general. The Price company had a seven-year head start on Costco's and Sam's Club. But Costco and Sam's were expanding aggressively while Price Club remained tentative." Costco and Sam's were beginning to expand into Price Club markets, and they were outpacing Price Club. That is the difference between being good at ideas and being good at execution. Something I do on a lot of mornings is I listen to a rendition of General Patton's speech to the Third Army to get me fired up and going in the, in the day. And something I'm trying to be, uh, for, to make sure that ma- as many people as possible are aware of Founders existence, is to be very default aggressive on promotion and just making sure that people are aware that, hey, you have this fantastic tool that I hope you use for the, uh, your entire career. That in an hour you can download in your brain some of the best ideas of history's greatest entrepreneurs that you can use in your career. And so there's something that I, I keep on a Post-It note and I have saved in my phone as well. It's a quote from this, this speech by Patton that I've probably heard, I don't know, 200 times, 300 times. It's hard to say. And he says, "I don't wanna get..." And this is the difference to me when I... This is what came to my mind, 'cause it's like what I'm about to read for Patton, Patton's, uh, perspective is very similar to Sam, to Sam Walton and Jim Sinegal. And Patton says, "I don't wanna get any messages saying I am holding my position. Our basic plan of operation is to advance and to keep advancing regardless of whether we have to go over, under, or through the enemy." And so in this case, in this story, Costco and Sam Walton are going over, under, and through the competition to the detriment of Price Club. Sol Price is also making some operational mistakes. I said, "Don't lo-" They have giant letters on this page. "Don't lose your focus. This was a mistake. Sol always loved real estate. Uh, the better idea was to dedicate those resources and that time to your core business." The company's management made some poor decisions by op- by opening new locations in markets where either Costco's or Sam's was already firmly established, so they're getting out-competed there. In the meantime, Sol was pushing for the Price, for the Price Club to become more involved in real estate development. Many retailers wanted to locate next to Price Club to take advantage of Price Club's customer draw. So wait a minute. Are you a warehouse club or are you a real estate developer? Which one are you gonna do? You can o- they own the real estate, which is smart, but now he's saying, "Hey, let's build real estate next to our location and become landlords." What the hell are you doing? Some of the company's senior executives and most of the investment community frowned on the companies directing so much of its financial resources into real estate development. Real estate development was a diversion from the company's core business. Uh-uh, big, big no-no. Focus on your goddamn core business. Real estate development was a diversion from the company's core business. The immediate financial returns on real estate were much lower than returns on the Price Club's operating business. Don't lose your focus. Back to this idea. Sol had better ideas, but Jim Sinegal and Sam Walton

14. 52:33 – 56:02

    Aaron's Death and the Sale to Costco

    1. DSDavid Senra52:33

       executed better. Having pioneered the warehouse co- concept, the Price company had lost the initiative to competitors. Rather than sticking to a well-planned business strategy, many decisions were being made reactively in response to what the competition was doing. So they're getting beat up on competition, and then the worst possible thing that can happen to a human happens. And remember, this book is written by Robert Price. Robert Price is Sam, is Sol's pri- is Sol's son. They worked together for 45 years. Uh, Robert Price was a huge, hugely important into the development of the Price Club. Learned everything from his dad. And Robert's son, his teenage son, gets a brain tumor and winds up passing away. And so Sol Price is gonna lose his grandson. Robert Price is gonna lose his son at the exact same time where they're getting hit from all angles. And it's just like this is what leads them after this, like realizing what is actually important in life, really pushes them to, to, to sell the business. Aaron's illness changed Sol and me in ways that we did not fully comprehend at the time. It is not clear when Sol began to consider seriously the sale of the Price company. It may have been prior to Aaron's illness, but in the days, weeks, and months after Aaron's death, I came to believe that Sol must have agonized over how to approach me about the subject. On the one hand, he had a strong sense that it was time to sell. He had always believed that his and my business strength were in the creative area and not in the management side of operating a big business. He was tired of the constant pressure from Wall Street for more growth, and perhaps most important, he was concerned a- about the burden that I had. The dual stress of losing the person you love most in the world and your business, like, struggling. Imagine, like, the pressure and how difficult this was, what Robert had to go through. So I'm gonna fast-forward. They identify, they're like, "Listen, there's only two buyers here. It's either Sam Walton, who had already offered, or Costco." And obviously, Sol, Sol tells Robert, "You're gonna want, do all the negotiating, but do, do the deal with Jim." Jim was more predisposed anyway because he had a deep love and affection for Sol Price. As I said at the beginning, he's like, "I'm 70 years old, still wanting approval from this guy. Still can't believe how impactful this handwritten letter I got after our lunch was." And so, uh, Jim Sinegal- Talked about the first time that he meets Sol Price. I think this, this little story is good to give you an idea of who Sol was as a person. Uh, so he says he began working for Sol in 1954 at the age of 18 and considered Sol his mentor. Jim vividly recalled the first time he met Sol. "I was given a call by somebody who was working in a new store in San Diego, and they had some mattresses to unload and asked me to help out. I would get paid a dollar a quarter an hour, and so I said sure. The next day, I'm carrying a mattress into the store, and I hear a voice. 'What in the hell are you doing there? Put that thing down before you break your back, or worse yet, you break something in the store.' So I turned to somebody who was there, and I said, 'What ticked him off? And who the hell is he?' They said, 'He's Sol. He's not mad. That's just Sol.'" And so then the book goes on to what happens. Eventually, Price Club and Costco merge. But really, this is the most impactful part of the book about life, outside of all the great ideas for business that Sol had.

15. 56:02 – 59:48

    Robert Price's Closing Tribute and Senra's Sign-off

    1. DSDavid Senra56:02

       And so I wanna get to the end, where I said it's one of the best ending paragraphs of any book that I've ever read because of-- it's his-- Sol's passed away by the time his book is published. He, he died about three years before the book was published. And now you have the son, his son honoring his life. And so as with every biography, you just can't help but put your, yourself in their shoes and imagine living a life and succeeding a life like this, where long after you're gone, this is what your son or your daughter, the way they honored you. That's more impressive than any of the wealth he built. "As much as Sol's public accomplishments represent a tremendous legacy, his more enduring legacy may be on the impact that he had on the lives of the many people who knew him. All of us can honestly say that there is at least one person who has had a transformative impact on the course of our lives. For me, that person was my father. Whatever I have learned about business, I learned from my father. Everything. He taught me how to think and how to question and how, how to fall into the trap of assuming rather than checking things out for myself. He also taught me to be humble, to appreciate the unpredictability of life, to care for people, to remain hopeful, and always to be there for people who are in need. Working alongside my father for nearly forty-five years, I came to appreciate how unique our relationship was. My father was a strong man who told me that he had to be tough to grow up and survive. He was very smart, opinionated, and could make his case with anyone. I had grown up arguing with my father. Our business relationship was not any different. He often said to me that I could drive him nuts. My natural tendency was to frequently take the opposite side of an argument just because I knew nobody else would. As he and I aged, we had fewer of those arguments. My father was so competent, so responsible, and protective that as he withdrew from day-to-day activities, I wondered whether I could ever carry on without him. The truth is that my father and I were very different people, but the greatest tribute I can give him is that he taught me so much, sometimes without my even realizing that a lesson was taking place. When it was time for me to step up, I was ready. What greater legacy could there be from a father to a son than leaving the gift of life skills necessary to carry on? Sol was a poster child for the American dream. His immigrant parents were born in a small Russian village. He was raised in the Bronx and was the first of his family to graduate from college. He earned a law degree. He became an exceptionally successful businessman and philanthropist. He celebrated seventy years of marriage to his beloved wife, Helen. He was a good father who instilled high values in his sons, and he never walked away from responsibility. It doesn't get much better than that." And that is where I'll leave it. For the full story, I highly recommend buying the book. If you buy the book using the link in the show notes, you'll be supporting the podcast at the same time. Another way to support the podcast is to sign up for Founders Premium. Subscribers can ask me questions directly, listen to the twenty-two or twenty-three AMA episodes that I've already made. I'm also making bonus episodes for a bunch of other things I read, and I have a lot of plans to add other things to Founders Premium. That link is down below and available at founderspodcast.com. If you are not already on my email newsletter, for every single book that I read, I email you the top ten highlights of every book. That link is down below and available at founderspodcast.com. That is three hundred and four books down, one thousand to go, and I'll talk to you again soon.

Episode duration: 59:49