“Bad behavior is intensely habit forming when it is rewarded. So, the cash register was a great moral instrument when it was created. And by the way, Patterson, the great evangelist of the cash register, knew that from his own experience. He had a little store where his employees were stealing him blind so that he never made any money. Then people sold him a couple of cash registers and his store went to profit immediately. He promptly closed the store and went into the cash register business, creating what became the National Cash Register company, one of the glories of its time.”
– Charlie Munger, The Psychology of Human Misjudgment, 2005.
Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/faq.
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James Jacob Ritty was a saloon owner in Dayton, Ohio. He invented the first mechanical cash register. His motivation? To address employee theft by tracking sales. He sold his invention to investors. They founded the National Manufacturing Company in 1879. John Henry Patterson and his brother acquired it in 1884. They renamed the National Cash Register Company (NCR). Patterson improved the design. He added features like a paper roll and an electric motor. Patterson introduced innovative employee welfare programs. He faced charges under the Sherman Antitrust Act in 1912, which was later overturned. Additionally, Patterson played a significant role in aiding Dayton during the 1913 floods.
The following is Methods of Prosperity newsletter number 47. It was originally deployed May 9, 2024. As of January 16, 2025, original subscribers have received up to issue number 83: Sam Zell (continued).
Part 47:
TL;DR
In 1985, Forbes Magazine declared Sam Walton the richest man in America. He was the founder of Walmart. Sam Walton preferred not to live an extravagant lifestyle. He drove an old pickup truck. He wore a Walmart trucker hat. The local barber gave him regular haircuts. Walmart lost half a billion dollars after the stock market crash in 1987. Walton’s response? “It’s only paper.”
Sam Walton was born in 1918 in Kingfisher, Oklahoma. His father, Thomas Gibson Walton, was a natural negotiator and banker who avoided debt. Sam’s mother, Nancy Lee, started a milk business during the Great Depression. Growing up during tough times, Sam learned the value of money early. He contributing to his family’s income. Sam raised rabbits and pigeons, which he sold, as well as magazine subscriptions. Walton graduated with a BA in economics from the University of Missouri. He worked for JC Penney before serving as a captain in the U.S. Army Intelligence Corps during World War II. After the war, he ventured into retail. Sam purchased a Ben Franklin variety store in Newport, Arkansas. He borrowed $20,000 loan from his father-in-law to get started. It didn’t take long for Sam Walton to discover limitations with that franchise. The store’s competition across the street did better than his store. Sam had the awareness to “learn from everyone“.
Key Lessons:
Price is what you pay, value is what you get.
Provide more value than your competition.
Always contribute more than you receive.
Wealthy people are never needy.
Learn from everyone.
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In 1996, NCR (a unit of AT&T at the time) entered into a multimillion-dollar contract. It was with the world’s largest retailer to expand its data warehouse capabilities. NCR is a long-time supplier. The relationship between NCR and this behemoth appears to be shifting. They’ve moved towards their own proprietary checkout technology. The world’s largest retailer is reducing its dependence on NCR. That will likely take a huge chunk away from NCR’s business. They’ve developed their own proprietary self-checkout system.
No, it’s not Amazon, but Sam Walton’s autobiography sits at the top of Jeff Bezos’ reading list.
Walmart currently holds around 8.59% of the total U.S. retail market share. While Walmart is the world’s largest retailer by revenue, it trails behind Amazon in U.S. market share. That’s not a problem. Walmart is still a force to be reckoned with.
“There is only one boss-the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” -Sam Walton
In October of 1985, Forbes Magazine named Sam Walton the so-called “richest man in America.” All kinds of random people came out of the woodwork to ask him for money. He drove an old pick up truck instead of a fancy car. Instead of an expensive haircut, he frequented the local barber shop. He wore his Walmart trucker hat.
Then the stock market crashed in 1987. Now Sam Walton was famous for his company, Walmart, losing a half a billion dollars. “It’s only paper,” he remarked.
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In 1918, Sam Walton was born in Kingfisher Oklahoma to Thomas Gibson Walton and Nancy Lee. Sam grew up during the depression on a farm during the dust bowl era. He lived there until he was about five years old. His earliest memories were of Springfield Missouri, where he started school. He went to high school and college in Missouri.
His father, Thomas Gibson once traded his wristwatch for a hog, so his family would have meat on the table. He was a natural negotiator, known for his integrity. He would make deals trading cars, horses, mules, cattle. He even traded the family farm for another one in Oklahoma. Having an aversion to taking on debt, Thomas never owned his own business. He worked as a banker, a farmer, a loan appraiser, and a real estate agent. During the depression, for a few months he was out of work altogether. Thomas went to work for his brother’s mortgage company. His job was to repossess farms in default of their loans between 1929 and 1931.
His mother, Nancy Lee, started a milk business during the depression. Sam would deliver the milk after football practice in the afternoons. They had ten or twelve local customers . They paid 10 ¢ per gallon. Sam started selling magazine subscriptions as young as seven or eight years old. He had paper routes from the seventh grade through college, earning $4,000 to $5,000 per year. He raised and sold rabbits and pigeons. This was common for country boys. Sam contributed towards his family home. That provided a sense of the value of a dollar.
Walton received a BA in economics degree from the University of Missouri. That year, he took a job as a sales trainee at a JC Penney store in Des Moines, Iowa on June 3, 1940. JC Penney paid him $75 per month. Sam Walton worked there for 18 months.
The war started in 1942. Sam Walton flunked the physical for combat duty due to a heart irregularity. The military classified him for limited duty. Waiting for the Army to call him for duty, he quit his job at JC Penney and got a job at a gunpowder plant outside Tulsa. During that time he met Helen Robson at a local bowling alley, whom he would marry in 1943.
The Army called Sam into duty as a second lieutenant. He served as a captain in the U.S. Army Intelligence Corps from 1942 to 1945. After his military service, Sam decided to go into the retail business for himself.
He got a loan of $20,000 from his wife’s father to buy a franchise. It was a Ben Franklin variety store in Newport, a small town in Arkansas with a population of around 7,000. Corporate headquarters of the Ben Franklin franchise held strict control. Walton wanted to expand into rural areas, but Ben Franklin resisted this strategy.
Sam learned after closing the deal to buy the store that it was “a real dog”, in his words. Rent was double what it was worth, which amounted to five percent of sales. That was the highest rent any other variety store was paying.
Across the street was Ben Franklin store’s competitor. It was a Sterling store with an excellent manager named John Dunham. They were doing more than $150,000 in sales per year. That was double the sales that Sam Walton’s Ben Franklin store was doing in 1945.
“You can learn from everybody.”
– Sam Walton
To be continued…
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