Finding an edge, and the intelligent fanatic that was Sam Walton

As Charlie Munger has said:

So you do get an occasional opportunity to get into a wonderful business that's being run by a wonderful manager. And, of course, that's hog heaven day. If you don't load up when you get those opportunities, it's a big mistake.  

Occasionally, you'll find a human being who's so talented that he can do things that ordinary skilled mortals can't. I would argue that Simon Marks—who was second generation in Marks & Spencer of England—was such a man. Patterson was such a man at National Cash Register. And Sam Walton was such a man. 

These people do come along—and in many cases, they're not all that hard to identify. If they've got a reasonable hand—with the fanaticism and intelligence and so on that these people generally bring to the party—then management can matter much. 

As Munger said, Sam Walton was such a man, and I think the excerpt below from his book Made In America gives a good example of that.

There’s no question whatsoever that we could not have done what we did back then if I hadn’t had my airplanes. I bought that first plane for business, to travel between the stores and keep in touch with what was going on. But once we started really rolling out the stores, the airplane turned into a great tool for scouting real estate. We were probably ten years ahead of most other retailers in scouting locations from the air, and we got a lot of great ones that way. From up in the air we could check out traffic flows, see which way cities and towns were growing, and evaluate the location of the competition—if there was any. Then we would develop our real estate strategy for that market. 

I loved doing it myself. I’d get down low, turn my plane up on its side, and fly right over a town. Once we had a spot picked out, we’d land, go find out who owned the property, and try to negotiate the deal right then. That’s another good reason I don’t like jets. You can’t get down low enough to really tell what’s going on, the way I could in my little planes. Bud and I picked almost all our sites that way until we grew to about 120 or 130 stores. I was always proud of our technique and the results we got. I guarantee you not many principals of retailing companies were flying around sideways studying development patterns, but it worked really well for us. Until we had 500 stores, or at least 400 or so, I kept up with every real estate deal we made and got to view most locations before we signed any kind of commitment. A good location, and what we have to pay for it, is so important to the success of a store. And it’s one area of the company in which we’ve always had family involvement.

Sam Walton on Wal-Mart’s early days

The quote below is from Sam Walton: Made In America.

“I guess everybody who knew I was going ahead with the discounting idea on my own really did think I’d completely lost my mind. I laugh now when I look back on Wal-Mart’s beginning. In 1962, the discount industry was fairly young and full of high-living, big-spending promoters driving around in Cadillacs—guys like Herb Gibson—who had the world by the tail. But it had very few of what you’d call good operators—until 1962, the year which turned out to be the big one for discounting. In that year, four companies that I know of started discount chains. S. S. Kresge, a big, 800-store variety chain, opened a discount store in Garden City, Michigan, and called it Kmart. F. W. Woolworth, the granddaddy of them all, started its Woolco chain. Dayton-Hudson out of Minneapolis opened its first Target store. And some independent down in Rogers, Arkansas, opened something called a Wal-Mart. At the time, and for quite a while after that, I can guarantee you that hardly anybody noticed that last guy. Heck, within five years, Kmart had 250 stores to our 19, and sales of more than $800 million to our $9 million. Here’s what makes me laugh today: it would have been absolutely impossible to convince anybody back then that in thirty years most all of the early discounters would be gone, that three of these four new chains would be the biggest, best-run operators in the business, that the one to fold up would be Woolco, and that the biggest, most profitable one would be the one down in Arkansas. Sometimes even I have trouble believing it. 

I can tell you this, though: after a lifetime of swimming upstream, I am convinced that one of the real secrets to Wal-Mart’s phenomenal success has been that very tendency. Many of our best opportunities were created out of necessity. The things that we were forced to learn and do, because we started out underfinanced and undercapitalized in these remote, small communities, 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 be, we might not ever have tried the Harrisons or the Rogers or the Springdales and all those other little towns we went into in the early days. It turned out that 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.”