Sam Walton on Business Philosophy

Samuel Moore Walton, born on an Oklahoma farm in Kingfisher on March 29, 1918, and raised through the Depression across a string of Missouri small towns, founded Walmart and Sam's Club and became the architect of modern American discount retail. He opened his first Walmart in Rogers, Arkansas, in 1962 at age forty-four and his first Sam's Club in Midwest City, Oklahoma, in 1983, and the combined enterprise grew into the world's largest corporation by revenue and its biggest private employer. Forbes ranked him the richest person in the United States from 1982 through 1988, and his heirs have held the standing of America's richest family ever since. He ran the business from Bentonville, Arkansas, for more than four decades, died of blood cancer in Little Rock on April 5, 1992, at seventy-four, and was buried in the Bentonville Cemetery near the town square where his second store still stands.

Walmart republishes its founder's ten rules for building a better business as living doctrine, applying them to every part of the company. The first rule demands total commitment: believe in your business more than anybody else, work at it every day, and let the passion spread to everyone around you like a fever. The second is share your profits with all your associates and treat them as partners, on the expectation that they will treat you as a partner in turn and that together you will perform beyond your wildest expectations. The third and fourth rules govern the partnership's mechanics — motivate your partners with high goals, encouragement, competition, and a kept score, since money and ownership alone are not enough; and communicate everything you possibly can, because the more partners know, the more they understand, and once they care, nothing can stop them.

The corporate record is unambiguous that Walton's competitors considered his core idea impossible: a successful business built simultaneously on lower prices and great service. The company's success exceeded even Walton's own expectations after it went public in 1970, with the proceeds financing a steady expansion of the business. Walton attributed the rapid growth not just to the low costs that attracted customers but to his associates, on whom he relied to give customers the shopping experience that kept them coming back. He shared his vision for the company with associates in a way nearly unheard of in the industry at the time, made them partners in the company's success, and believed firmly that this partnership was the thing that made Walmart great — the clearest statement of the founder-thesis the company still repeats about itself, extended through profit sharing and stock ownership that turned associates into genuine stakeholders.

Walton's debt to Sol Price was unusually explicit for a competitor. In his autobiography, Made in America, Walton wrote that he had borrowed as many ideas from Price as from anybody else in the business, and he conceded that he liked the Wal-Mart name partly because he admired the construction of Price's FedMart brand. Walton had dinner with Price in 1983; before the year was out, the first Sam's Club had opened in Oklahoma — a sequence Price Club's founder understood perfectly, having watched his innovations migrate north. Asked late in life how it felt to be the father of the warehouse-retailing industry, Price answered with a famously crude joke about wishing he had worn a condom. The exchange became retailing folklore precisely because it captured the era's copying culture, in which formats were public property and execution was the only durable advantage.

The middle rules are the softest and the cheapest. Rule five: appreciate everything your associates do for the business, because a few well-chosen, well-timed, sincere words of praise cost absolutely nothing and are worth a fortune. Rule six: celebrate your success, loosen up, show enthusiasm always, and avoid taking yourself too seriously — advice Walton attached to the observation that having fun fools the competition. The later rules turn structural. Listen to everyone in your company and find ways to get them talking, pushing responsibility down the organization so that good ideas are forced to bubble up from within. Exceed what customers expect: deliver what they want plus a little extra, remedy mistakes with apologies rather than excuses, and stand behind everything the business does. Walmart presents the rules as doctrine it still applies to every part of the business, crediting them for the company's rise to global leadership.

As the stores multiplied, so did Walton's ambitions: new approaches and technologies in retail, new store formats including Sam's Club and the Walmart Supercenter, and the decision to take Walmart into Mexico. The company credits his fearlessness in offering lower prices — in the United States and beyond — with setting a standard that outlived him. His dedication to service and to values that help individuals, businesses, and the nation succeed brought him the Presidential Medal of Freedom, conferred by President George H. W. Bush in 1992. The company entered Mexico in 1991 under his chairmanship, opening its first store outside the United States in Mexico City. It was in his Medal of Freedom acceptance remarks that Walton articulated what became Walmart's official purpose: working together to lower the cost of living for everyone and to give the world an opportunity to see what it is like to save and have a better life.

Three days after graduating in 1940, Walton joined JCPenney as a management trainee in Des Moines at seventy-five dollars a month and spent roughly eighteen months absorbing the systems of a major chain before resigning in 1942 in anticipation of wartime induction. He worked at a DuPont munitions plant near Tulsa, then entered the Army Intelligence Corps, supervising security at aircraft plants from Fort Douglas in Salt Lake City and finishing the war as a captain. The service years settled his ambition: he concluded while in the army that he wanted retailing and a business of his own. Those twin convictions — systematic training absorbed inside a national retailer, and an early certainty about independence — framed everything that followed, from franchise ownership through the discounting experiments that eventually produced Walmart. It was his only extended apprenticeship inside a major chain, and he carried its merchandising discipline into every store he later ran on his own.

The final rules state Walton's competitive doctrine in the plainest terms. Rule nine — control your expenses better than your competition — is, in his formulation, where you can always find competitive advantage: a business can make many mistakes and still recover if it runs an efficient operation, while brilliance cannot save an inefficient company from going out of business. Rule ten, swim upstream, is his founding contrarianism compressed into two words: ignore conventional wisdom, go the other way, and when everybody else is doing something one way, expect a good chance to find your niche by heading in exactly the opposite direction. That is the small-town-discounting decision restated as a maxim. Together the final rules define both the offense and the defense of Walton's system — structural cost advantage on one side, contrarian market selection on the other — and Walmart directs readers to Walton's book, Made in America, for the fuller versions.

Newport taught Walton the most expensive lesson of his career. The store's success attracted its landlord, P. K. Holmes, whose family had a history in retail and who wanted the location and the franchise rights for his son; because Walton had never secured a renewal option in his lease, and because rent already ran at five percent of sales, Holmes simply refused to renew and forced him out. Walton called the fifty-thousand-dollar price Holmes paid for the inventory and fixtures a fair price, but the eviction ended his first business on someone else's terms. He would treat control of real estate and contract terms as existential matters ever after, and the episode pushed him to Bentonville, where the second act of his retail career began. The lost lease, more than any early success, hardened the ownership instincts that later defined Walmart's expansion.

Walmart's founding strategic bet ran against the prevailing practice of American discount chains: they located in larger cities, so Walton located in smaller towns. The logic carried two reinforcing advantages. First, existing competition in small markets was limited, so a discounter arrived as the dominant force rather than one combatant among many. Second, when a store grew large enough to command a town's business and its surrounding trade area, rival merchants were discouraged from entering at all — scale itself became the moat before Walmart had scale anywhere else. Being near consumers in that era simply meant opening outlets in the small towns themselves. The strategy converted markets the urban chains treated as unworthy into a protected, compounding base of stores, and it remained the company's growth grammar through its rise to coast-to-coast coverage by the early 1990s, when stores in California and Pennsylvania completed the national map.