#330 Les Schwab (Charlie Munger recommended this book)

Key takeaways

Hiring the right people is crucial for success—invest significant time in the recruitment process.
Implementing clear incentives fosters motivation and alignment between employee interests and company goals.
Building strong customer relationships through exceptional service can create long-term loyalty and success.
Persistence and the ability to learn from mistakes are vital traits for entrepreneurs.
A structured approach to learning from past entrepreneurs can aid in personal growth and business development.

Summary

Introduction to Less Schwab and His Impact

The podcast opens with an enthusiastic discussion about Les Schwab, who is highlighted as a remarkable entrepreneur whose story deserves to be revisited. The narrative centers around Schwab's incredible journey, beginning with his humble beginnings and his eventual establishment of a successful tire business. The host shares personal anecdotes related to the book 'Les Schwab: Pride and Performance, Keep It Going' that he's recently revisited, driven by Charlie Munger's recommendation.

The Significance of Hiring in Startups

The conversation transitions to a focus on hiring practices, emphasized by Steve Jobs' perspective that the most critical task for a leader is recruiting the right individuals. Through various references to successful entrepreneurs, the podcast outlines the strategies employed by iconic figures like Les Schwab, who preferred to nurture talent from within, fostering a culture of growth and loyalty in his tire business. This theme highlights the importance of hiring well as a means to ensure business success.

Incentives and Their Impact on Business Success

A substantial portion of the discussion revolves around the power of incentives in running a business. The podcast elucidates how Les Schwab's success stemmed from instituting sound incentive structures that motivated employees to align their interests with the company. Schwab’s belief in sharing profits and avoiding traditional quiet communist approaches to salaries reinforced the idea that well-structured incentives drive better performance.

Marketing and Customer Relations

The podcast takes a dive into the innovative marketing strategies Schwab implemented, drawing parallels with other great entrepreneurs. Stress is placed on customer service and building robust relationships as critical components that drive business success. Schwab’s idea of fixing all flat tires in town as a strategy to dominate the market underlies the theme of reciprocity in customer relations.

Learning from Mistakes and Persistence

The narrative emphasizes the importance of resilience and learning from setbacks. The host reflects on struggles faced by Schwab, including market competition and personal tragedies, underlining the message that life's challenges should not deter one's vision but rather serve as motivation. Schwab’s unwavering work ethic mirrors the persistence required in entrepreneurship.

Conclusion and Call to Action

The episode concludes with a call to action, encouraging listeners to explore Schwab’s teachings and invest in systems that support their growth as entrepreneurs. Emphasis is placed on leveraging the insights gained from the podcast to improve personal businesses, paired with an invitation to access the searchable database available at foundersnotes.com.

Show notes

What I learned from rereading Les Schwab Pride In Performance: Keep It Going! by Les Schwab.
----
Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes
----
(8:00) I didn't know how to ride a bike. We never had one. All the other young kids delivered newspapers on a bike.
He's got no money. He doesn't have a bike. So he ran his routes for two months in order to get enough money to buy his first bike. He’d run nine or 10 miles a day.
(8:00) I was too proud to complain.
(10:00) For a poor boy, money was much more important than pride.
(10:00) Am I Being Too Subtle?: Straight Talk From a Business Rebel by Sam Zell. (Founders #269)
(13:00) I was young. I was cocky. But the same cockiness helped me a lot in going through life.
(15:00) The very first sentence describing his very first day in business is mind blowing: I had never fixed a flat tire in my life.
(15:00) the NEW Poor Charlie's Almanack: The Wit and Wisdom of Charlie Munger (Founders #329)
(29:00) Sam Walton: The Inside Story of America's Richest Man by Vance H. Trimble (Founders #150)
(35:00) I always knew that if we fixed all the flat tires in town, we'd have all the tire business in town.
(40:00) If we become complacent, then brother, it's all over with.
(52:00) Grinding It Out: The Making of McDonald's by Ray Kroc (Founders #293)
(56:00) If you’re not serving the customer, or supporting the folks who do, we don’t need you. —Sam Walton
(1:00:00) The company paid low wages and had a lower overhead. The flaw was they didn’t get —with the low pay— near the quality of employees we had.
(1:01:00) Life is hard for the man who thinks he can take a shortcut.
(1:06:00) Decision making should always be made at the lowest possible level.
(1:08:00) Whatever you do, you must do it with gusto, you must do it in volume. It is a case of repeat, repeat, repeat.
(1:08:00) Charlie Munger analyzes why Les Schwab was successful.
(1:11:00) Extreme success is likely to be caused by some combination of the following factors:
1 Extreme maximization or minimization of one or two variables. Think Costco.
2 Adding success factors so that a bigger combination drives success, often in nonlinear fashion, as one is reminded by the concept of breakpoint and the concept of critical mass in physics. Often, results are not linear. You get a little bit more mass and you get a lollapalooza result. And, of course, I've been searching for lollapalooza results all my life, so I'm very interested in models that explain their occurrence.
3 An extreme of good performance over many factors. Example, Toyota or Les Schwab.
4 Catching and riding some sort of big wave. Example, Oracle.
----
Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes
----
“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested, so my poor wallet suffers.” — Gareth
Be like Gareth. Buy a book: All the books featured on Founders Podcast

----
Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here.
----
“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth
Be like Gareth. Buy a book: All the books featured on Founders Podcast