Sam Walton dictated this in his last months. It closes with ten rules, and the ninth is the one that explains the company:
“CONTROL your expenses better than your competition. This is where you can always find the competitive advantage. For twenty-five years running — long before Wal-Mart was known as the nation’s largest retailer — we ranked number one in our industry for the lowest ratio of expenses to sales. You can make a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient.”
— Sam Walton, Made in America Note the asymmetry in the last two sentences. Efficiency buys you the right to be wrong about other things; brilliance does not buy you the right to be inefficient. That is the whole company.
The contrarian rule
“SWIM upstream. Go the other way. Ignore the conventional wisdom. If everybody else is doing it one way, there’s a good chance you can find your niche by going in exactly the opposite direction. But be prepared for a lot of folks to wave you down and tell you you’re headed the wrong way.”
— Sam Walton, Made in America Wal-Mart’s original contrarian bet was geographic: put discount stores in towns everyone else considered too small to support them.
Where to be sceptical
The book was published in 1992, the year Walton died, and it predates most of what Wal-Mart is now argued about. The pressure the expense discipline placed on wages and on suppliers, and the effect of the stores on the small-town retail Walton himself came from, are not defended in this book — they are simply not in it.
That absence is worth holding while reading Rule 9. “Control your expenses better than your competition” is a description of a mechanism, and the mechanism has incidence: somebody bears the cost. The book does not ask who.
