SAM WALTON IN HIS OWN WORDS Behind his exterior as folksy, homespun merchant, Mr. Sam was a keen student of management theory. His favorite rule: Break all the rules.

(FORTUNE Magazine) – The richest man in America drove a pickup truck, not out of any false humility but as a practical matter. ''What am I supposed to haul my dogs around in, a Rolls-Royce?'' said the late Sam Walton, businessman, bird hunter, and the nation's foremost storekeeper. Not since the turn of the century, when J. C. Penney and F. W. Woolworth launched a new age of retailing, has one individual altered the course of commerce the way Sam Walton did. The creator of Wal-Mart Stores, Walton triumphed with a folksy dedication to giving customers what they want: low prices and a modicum of service, administered by employees who care because they share the company's ideals as well as its profits. In his memoir, Sam Walton: Made in America, written with FORTUNE senior editor John Huey, ''Mr. Sam'' shared his views of corporate America, retailing, and management. THE SIMPLE TRUTH: I got into retailing because I wanted a real job. The deal was pretty straightforward: report to the J.C. Penney store in Des Moines three days after graduation ((from the University of Missouri)), June 3, 1940, and begin work as a management trainee. Salary: $75 a month. That's the day I went into retail, and -- except for a little time out as an Army officer -- that's where I've stayed for the last 52 years. Maybe I was born to be a merchant, maybe it was fate. I don't know about that. But I know this for sure: I loved retail from the very beginning. So now we're the largest retailer in the world, with annual sales of $44 billion, and still growing like a weed. Here are some other ways to think about Wal-Mart's size. Every week, nearly 40 million people shop in Wal-Mart. Last year, we sold enough men's and women's underwear and socks to put a pair on every person in America, with some to spare. Wal-Mart's stock performance, and the wealth it has created, is a story in itself. Just 15 years ago, the market value of the company was around $135 million. Today it's over $50 billion. Let's say you bought 100 shares back in that original public offering, for $1,650. Since then we've had nine 2-for-1 stock splits, so you would have 51,200 shares today. Within the last year, the stock traded at right under $60 a share. So your investment would have been worth right around $3 million at that price. That's where the Walton family net worth has been created. The media usually portrayed me as a really cheap, eccentric recluse, sort of a hillbilly who more or less slept with his dogs in spite of having billions of dollars stashed away in a cave. Then when the stock market crashed in 1987, and Wal-Mart stock dropped along with everything else in the market, everybody wrote that I'd lost a half-billion dollars. When they asked me about it, I said, ''It's only paper,'' and they had a good time with that. But now I'd like to explain some of my attitudes about money. My wife Helen's family was very smart about the way they handled their finances: Helen's father, L. S. Robson, organized his ranch and family businesses as a partnership. Mr. Robson advised us to do the same thing with our family, and we did, way back in 1953. What little we had at the time, we put into a partnership with our kids, which was later incorporated into Walton Enterprises. Over the years, that's where all the Wal-Mart stock has gone. The board of Walton Enterprises, which is us, the family, makes decisions on a consensus basis. Sometimes we argue, and sometimes we don't. But we control the amount we pay out to each of us, and everybody gets the same. Most of that Wal-Mart stock is staying right where it is. We don't need the money. We don't need to buy a yacht. And thank goodness, we never thought we had to go out and buy anything like an island. We just didn't have those kinds of needs or ambitions, which wreck a lot of companies when they get along in years. Some families sell their stock off a little at a time to live high, and then -- boom -- somebody takes them over, and it all goes down the drain. Money never has meant that much to me, not even in the sense of keeping score. We're not crazy. We don't live like paupers the way some people depict us. We all love to fly, and we have nice airplanes, but I've owned about 18 airplanes over the years, and I never bought one of them new. Now, when it comes to Wal-Mart, there's no two ways about it: I'm cheap. I think it's a real statement that Wal-Mart never bought a jet until after we had gone over $40 billion in sales and expanded as far away as California and Maine, and even then they had to practically tie me up and hold me down to do it. On the road, we sleep two to a room, although as I've gotten older I have finally started staying in my own room. We stay in Holiday Inns and Ramada Inns and Days Inns, and we eat a lot at family restaurants -- when we have time to eat. We believe in the value of the dollar. We exist to provide value to our customers, which means that in addition to quality and service, we have to save them money. Every time Wal-Mart spends one dollar foolishly, it comes right out of our customers' pockets. Every time we save them a dollar, that puts us one more step ahead of the competition -- where we always plan to be.

HUMBLE BEGINNINGS Walton's story begins after he was mustered out of the Army in 1945 and bought a Ben Franklin variety store in Newport, Arkansas: It didn't take me long to start experimenting -- that's just the way I am. I was always looking for offbeat suppliers or sources. I started driving over to Tennessee to some fellows I found who would give me special buys at prices way below what Ben Franklin was charging me. One I remember was Wright Merchandising Co. in Union City, which would sell to small businesses like mine at good wholesale prices. I'd work in the store all day, then take off around closing and drive that winding road over to the Mississippi River ferry at Cottonwood Point, Missouri, and then into Tennessee with an old homemade trailer hitched to my car. I'd stuff that car and trailer with whatever I - could get good deals on -- usually on soft lines: ladies' panties and nylons, men's shirts -- and I'd bring them back, price them low, and just blow that stuff out the store. I've got to tell you, it drove the Ben Franklin folks crazy. Not only were they not getting their wholesaler's markup, but they couldn't compete with the prices I was buying at. Here's the simple lesson we learned -- which others were learning at the same time and which eventually changed the way retailers sell and customers buy all across America: Say I bought an item for 80 cents. I found that by pricing it at a dollar I could sell three times more of it than by pricing it at $1.20. I might have made only half the profit per item, but because I was selling three times as many, the overall profit was much greater. Simple enough. But this is really the essence of discounting: By cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling it at the higher price. In retailer language, you can lower your markup but earn more because of the increased volume. Our success, it turned out, had attracted a lot of attention. My landlord, the local department store owner, was so impressed with our Ben Franklin's success that he decided not to renew our lease -- at any price -- knowing full well that we had nowhere else in town to move the store. He did offer to buy the franchise, fixtures, and inventory at a fair price; he wanted to give the store to his son. I had no alternative but to give it up. It was the low point of my business life. I felt sick to my stomach. I had built the best variety store in the whole region and worked hard in the community -- done everything right -- and now I was being kicked out of town.

DEVELOPING THE DISCOUNT IDEA Forced to move, Walton searched the state for another location, and settled on a town in northwest Arkansas: Bentonville. Although smaller than Newport, Bentonville did have one particular advantage for Walton: access to the hunting seasons in four states. Around this time, I read this article about these two Ben Franklin stores up in Minnesota that had gone to self-service -- a brand-new concept at the time. I rode the bus all night long to two little towns up there -- Pipestone and Worthington. They had shelves on the side and two-island counters all the way back. No clerks with cash registers around the store. Just checkout registers up front. So when Charlie ((Baum, then a supervisor for Ben Franklin who became one of Walton's first employees)) and I laid out that store in Bentonville, it became only the third self-service variety store in the whole country and the first in our eight-state area. Maybe nobody here knew it, but it was a big deal. We've got our first ad from the July 29, 1950, Benton County Democrat on display today down at our Wal-Mart Visitor Center. It's for the Grand Remodeling Sale of Walton's Five and Dime, promising a whole bunch of good stuff: free balloons for the kids, a dozen clothespins for 9 cents, iced-tea glasses for 10 cents apiece. The folks turned out, and they kept coming. Although we called it Walton's, it was a Ben Franklin, and that store took off just like Newport had and turned into a good business right away. Somehow over the years, folks have gotten the impression that Wal-Mart was something I dreamed up out of the blue as a middle-aged man, and that it was just this great idea that turned into an overnight success. It's true that I was 44 when we opened our first Wal-Mart in 1962, but the store was totally an outgrowth of everything we'd been doing since Newport -- another case of me being unable to leave well enough alone, another experiment. And like most other overnight successes, it was about 20 years in the making. That whole period ((before Wal-Mart was founded)) -- which scarcely gets any attention from most people studying us -- was really very, very successful. In 15 years' time, we had become the largest independent variety store operator in the U.S. But the business itself seemed a little limited. The volume was so little per store that it really didn't amount to that much. I mean, in 1960, we were only doing $1.4 million in 15 stores. I began looking around hard for whatever new idea would break us over into something with a little better payoff for all our efforts. Our first big clue came in Saint Robert, Missouri -- near Fort Leonard Wood -- where we learned that by building larger stores, which we called family centers, we could do unheard-of amounts of business for variety stores, over $2 million a year in sales per store, just unthinkable for small towns. I began to hear talk of the early discounters -- companies like Ann & Hope, whose founder, Marty Chase, is generally considered the father of discounting. Spartan's and Mammoth Mart and Two Guys From Harrison and Zayre and Arlan's were all starting up in the Northeast, and I remembered that lesson I'd learned a long time ago in Newport with the panties selling in such huge volume when they were priced at $1, instead of $1.20. So I started running all over the country, studying the concept from the mill stores in the East to California, where Sol Price started his Fed-Mart in 1955. I guess I've stolen -- I actually prefer the word ''borrowed'' -- as many ideas from Sol Price as from anybody else in the business. Then closer to home, Herb Gibson -- a barber from over at Berryville -- started his stores with a simple philsophy: ''Buy it low, stack it high, sell it cheap.'' He sold it cheaper than anybody ever had before, and he sold more of it. He did it in Abilene, he did it in Amarillo, and he surrounded Dallas with stores. Then in 1959 he came to northwest Arkansas with a franchiser named Howard's and did so well in Fort Smith that he branched out to the square in Fayetteville and started competing with our variety stores. We knew we had to act. He was the only one discounting out this way, and because I had made all those trips back East, I was probably one of the few out here who understood what he was up to. By then, I knew the discount idea was the future. On July 2, 1962, we opened Wal-Mart No. 1 in Rogers, near Fayetteville, and not everybody was happy about it. Everybody who knew I was going ahead with the discounting idea really did think I'd just completely lost my mind. Nobody wanted to gamble on that first Wal-Mart. I think my brother Bud put in 3%, and Don Whitaker -- whom I had hired to manage the store from a TG&Y store out in Abilene, Texas -- put in 2%, and I had to put up 95% of the dollars. Helen had to sign all the notes along with me, and her statement allowed us to borrow more than I could have alone. We pledged houses and property, everything we had. But in those days we were always borrowed to the hilt. I laugh now when I look back on Wal-Mart's beginning. The discount industry was fairly young and full of high-living, big-spending promoters driving around in Cadillacs who just had the world by the tail. But it had very few of what you'd call good operators -- until 1962. 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 Arkansas opened something called a Wal-Mart. At the time, and for a quite a while after that, hardly anybody noticed that last guy. Heck, within five years, Kmart had 250 stores to our 19, and sales of almost $800 million to our $9 million.

THE FORMULA WORKS, AND WORKS Going public in 1970 really turned the company loose to grow, and it took a huge load off me. As we moved along, we had very definitely become an effective retail entity, and we had set the stage for the even more phenomenal growth that was going to follow. It's amazing that our competitors didn't catch on to us quicker and try harder to stop us. Now that we were out of debt, we could really do something with our key strategy, which was simply to put good-size discount stores into little one- horse towns that everybody else was ignoring. In those days, Kmart wasn't going to towns below 50,000, and even Gibson's wouldn't go to towns much smaller than 10,000 or 12,000. We knew our formula was working even in towns smaller than 5,000 people, and there were plenty of those towns out there for us to expand into.

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 my first plane, an Air Coupe, 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. 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. My brother Bud and I picked almost all our sites that way until we grew to about 120 or 130 stores. I don't know what would have happened to Wal-Mart if we had laid low and never stirred up the competition. My guess is that we would have remained a strictly regional operator. Then, eventually, I think we would have been | forced to sell out to some national chain looking for a quick way to expand into the heartland market. We'll never know, because we chose the other route. We decided that instead of avoiding our competitors, or waiting for them to come to us, we would meet them head on. It was one of the smartest strategic decisions we ever made. To put things into perspective, compare Kmart and Wal-Mart after they had both been on the street for ten years. Our 50-plus Wal-Marts and 11 variety stores were doing about $80 million a year in sales compared with Kmart's 500 stores doing more than $3 billion a year. But Kmart had interested me ever since the first store went up in 1962. I was in their stores constantly because they were the laboratory, and better than we were. I spent a heck of a lot of time wandering through their stores talking to their people and trying to figure out how they did things. I've probably been in more Kmarts than anybody in the country. For a long time I had been itching to try our luck against them, and finally, in 1972, we saw a perfect opportunity in Hot Springs, Arkansas -- a much larger city than we were accustomed to moving into but still close to home and full of customers we understood. We saw Kmart sitting there all alone, really having their way with the market. They had no competition, and their prices and margins were so high that they almost weren't even discounting. We sent a fellow named Phil Green in to open Store No. 52, where he stirred up a fuss with things like the world's largest Tide display and all his other outrageous promotions. He cut prices to the bone and stole a bunch of Kmart's customers. We got so much better so quickly you couldn't believe it. The national economy weakened in the mid-Seventies, and the intense competition among the real merchants began to drive the fast-buck types out of the business. The more efficient Kmart, Target, Wal-Mart, and some of the regionals became, and the more we bumped into each other in competitive situations, the more we were able to lower prices. The percentage of gross margin in this industry has dropped steadily from around 35% in the early Sixties to only 22% today. Almost all of that represents increased value and savings to the customers who shop discount stores. So the guys who weren't running efficient operations, who had taken on lots of debt and were living high and not taking care of their associates ((i.e., employees)), who weren't scrambling around to get the best deals on $ merchandise and passing those deals on to their customers, these guys got into trouble.

SHARING INFORMATION AND PROFITS We don't pretend to have invented the idea of a strong corporate culture. We're constantly doing crazy things to capture the attention of our folks and lead them to think up surprises of their own. We like to see them do wild things in the stores, things that are fun for the customers and fun for the associates. If you're committed to the Wal-Mart partnership and its core values, the culture encourages you to think up all sorts of things to break the mold and fight monotony. I have a cheer I lead whenever I visit a store. For those of you who don't know, it goes like this: -Give me a W! -Give me an A! -Give me an L! -Give me a Squiggly! -(Here, everybody sort of does the twist.) -Give me an M! -Give me an A! -Give me an R! -Give me a T! -What's that spell? -Wal-Mart! -What's that spell? -Wal-Mart! -Who's No. 1? -THE CUSTOMER! And if I'm leading the cheer, you'd better believe we do it loud. My feeling is that just because we work so hard, we don't have to go around with long faces all the time, taking ourselves seriously, pretending we're lost in thought over weighty problems. At Wal-Mart, if you have some important business problem on your mind, you should be bringing it out in the open, so we can all try to solve it together. But while we're doing all this work, we like to have a good time. It's sort of a ''whistle while you work'' philosophy, and we not only have a heck of a good time with it, we work better because of it. From the very start we would get all our managers together once a week and critique ourselves -- that was really our buying organization, a bunch of store managers getting together early Saturday morning, maybe in Bentonville, or maybe in some motel room somewhere. We would review what we had bought and see how many dollars we had committed to it. We would plan promotions and plan the items we intended to buy. And it worked so well that over the years, as we grew and built the company, it just became part of our culture. I guess that was the forerunner of our Saturday morning meetings ((where company managers get together and review what they've seen in the stores that week)). When we made a bad mistake -- whether it was myself or anybody else -- we talked about it, admitted it, tried to figure out how to correct it, and then moved on to the next day's work. In the beginning, I was so chintzy I really didn't pay my employees very well. The managers were fine. From the time we started branching out into more stores, we always had a partnership with the store managers. Those guys all had a piece of their stores' profits from the beginning. Back then, though, I was so obsessed with turning in a profit margin of 6% or higher that I ignored some of the basic needs of our people, and I feel bad about it. The larger truth that I failed to see turned out to be another of those paradoxes -- like the discounters' principle of the less you charge, the more you'll earn. And here it is: The more you share profits with your associates -- whether it's in salaries or incentives or bonuses or stock discounts -- the more profit will accrue to the company. Why? Because the way management treats the associates is exactly how the associates will then treat the customers. Satisfied, loyal, repeat customers are the heart of Wal-Mart's spectacular profit margins, and those customers are loyal to us because our associates treat them better than salespeople in other stores do. In 1971 we took our first big step: We corrected my big error of the year before ((when a profit-sharing scheme was offered to management employees only)) and started a profit-sharing plan for all the associates. I guess it's the move we made that I'm proudest of, for a number of reasons. Profit sharing has pretty much been the carrot that's kept Wal-Mart headed forward. Another important ingredient that has been in the Wal-Mart partnership from the very beginning has been our very unusual willingness to share most of the numbers of our business with all the associates. It's the only way they can possibly do their jobs to the best of their abilities -- to know what's going on in their business. If I was a little slow to pick up on sharing the profits, we were among the first in our industry -- and are still way out front of almost everybody -- with the idea of empowering our associates by running the business practically as an open book. Everything about us gets to the outside. In our individual stores, we show them their store's profits, their store's purchases, their store's sales, and their store's markdowns. We show them all that on a regular basis, and I'm not talking about just the managers and the assistant managers. We share that information with every associate, every hourly, every part-time employee in the stores. Obviously, some of that information flows to the street. But I just believe the value of sharing it with our associates is much greater than any downside there may be to sharing it with folks on the outside. It doesn't seem to have hurt us much so far. Here's the point: The bigger Wal-Mart gets, the more essential it is that we think small. Because that's exactly how we have become a huge corporation -- by not acting like one. Above all, we are small-town merchants. For several decades now we've worked hard at building a company that's simple and streamlined and takes its directions from the grass roots.

A FEW ABIDING PRINCIPLES For my whole career in retail, I have stuck by one guiding principle: The secret of successful retailing is to give your customers what they want. And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience. Here are six of the more important ways we at Wal-Mart try to think small: -- Think one store at a time: That sounds easy enough, but it's something we've constantly had to stay on top of. -- Communicate, communicate, communicate: If you had to boil down the Wal-Mart system to one single idea, it would probably be communication because it is one of the real keys to our success. What good is figuring out a better way to sell beach towels if you aren't going to tell everybody in your company about it? -- Keep your ear to the ground: A computer is not -- and will never be -- a substitute for getting out in your stores and learning what's going on. In other words, a computer can tell you down to the dime what you've sold. But it can never tell you how much you could have sold. That's why we at Wal-Mart are just absolute fanatics about our managers and buyers getting off their chairs here in Bentonville and getting out into those stores. We have 13 airplanes -- only one of them a jet, I'm proud to say -- and that's why they're there. We stay in the air to keep our ear to the ground. -- Push responsibility -- and authority -- down: The bigger we get as a company, the more important it becomes to shift responsibility and authority ( toward the front lines, toward that department manager who's stocking the shelves and talking to the customer. -- Force ideas to bubble up: This goes hand in hand with pushing responsibility down. We're always looking for new ways to encourage our associates out in the stores to push their ideas up through the system. We do a lot of this at Saturday morning meetings. We'll invite associates who have thought up something that's really worked well for their store -- a particular item or a particular display -- to come share those ideas with us. -- Stay lean, fight bureaucracy: Any time a company grows as fast as Wal-Mart has, pockets of duplication are going to build up, and there will be areas of the business that we may no longer need. No boss or employee really likes to dwell on such matters: It's only human nature not to want to have your job, or the jobs of the people who work for you, eliminated. But it is absolutely the responsibility of a company's top management to be thinking about this issue all the time -- to ensure a sound future for the overall company. A lot of first-time visitors are kind of shocked by our executive offices. Most people say my office, and those of all the other Wal-Mart executives, look like something you'd find in a truck terminal. We're in a one-story office-warehouse building. The offices aren't real big, and the walls are covered with inexpensive paneling. We never had fancy furniture or thick carpet, or suites with bars for our executives. I like them just like they are. We sure as heck won't win any interior decorating awards, but they're all we need, and they must be working fine. Just ask our shareholders. I guess one reason I feel so strongly about not letting egos get out of control around Wal-Mart is that a lot of bureaucracy is really the product of some empire builder's ego. Some folks have a tendency to build up big staffs around them to emphasize their own importance, and we don't need any of that at Wal-Mart. If you're not serving the customer or supporting the folks who do, we don't need you. When we're thinking small, that's another thing we're always on the lookout for: big egos. You don't have to have a small ego to work here, but you'd better know how to make it look small, or you might wind up in trouble. So you see what I mean when I say you have to think small to grow big.

THE BEAUTY OF COMPETITION Competition is actually the reason I love retailing so much. The Wal-Mart story is just another chapter in the history of competition -- a great chapter, mind you, but it's all part of the evolution of the industry. There's always a challenger coming along.

Right now, I see a lot of new challengers coming from offshore with some very sophisticated programs. Some of the emerging competitors in this country who have come from Holland, Germany, and France bear close watching. And it won't be long before we have a wave of Japanese retail concepts arriving. I don't know if Wal-Mart can truly maintain our leadership position by just staying in this country. I think we're going to have to become a more international company in the not-too-distant future. We've created an international division in the company, and we have a joint venture with a Mexican company called Cifra for the development of Club Aurrera, a wholesale club concept. And really, I don't have any doubt that Wal-Mart will stay the course and reach $100 billion in sales by the year 2000. Can Wal-Mart's methods be duplicated? Some rules from Mr. Sam. These rules are not in any way intended to be the Ten Commandments of Business. I always prided myself on breaking everybody else's rules, and I always favored the mavericks who challenged my rules. I may have fought them all the way, but I respected them, and in the end, I listened to them a lot more closely than I did the pack who always agreed with everything I said. Nevertheless, here are some rules that worked for me. Pay special attention to Rule No. 10, and if you interpret it in the right spirit -- as it applies to you -- it could mean simply: Break all the rules.

-- Rule 1: Commit to your business. Believe in it more than anybody else. I think I overcame every single one of my personal shortcomings by the sheer passion I brought to my work. -- Rule 2: Share your profits with all your associates, and treat them as partners. In turn, they will treat you as a partner, and together you will all perform beyond your wildest expectations. -- Rule 3: Motivate your partners. Money and ownership alone aren't enough. Constantly, day by day, think of new and more interesting ways to motivate and challenge your partners. Set high goals, encourage competition, and then keep score. Make bets with outrageous payoffs. If things get stale, cross- pollinate; have managers switch jobs with one another to stay challenged. Keep everybody guessing as to what your next trick is going to be. Don't become too predictable. -- Rule 4: Communicate everything you possibly can to your partners. The more they know, the more they'll understand. The more they understand, the more they'll care. Once they care, there's no stopping them. If you don't trust your associates to know what's going on, they'll know you don't really consider them partners. Information is power, and the gain you get from empowering your associates more than offsets the risk of informing your competitors.

-- Rule 5: Appreciate everything your associates do for the business. A paycheck and a stock option will buy one kind of loyalty. But all of us like to be told how much somebody appreciates what we do for them. We like to hear it often, and especially when we have done something we're really proud of. Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They're absolutely free -- and worth a fortune. -- Rule 6: Celebrate your successes. Find some humor in your failures. Don't take yourself so seriously. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasm -- always. When all else fails, put on a costume and sing a silly song. Then make everybody else sing with you. Don't do a hula on Wall Street. It's been done. ((By Sam Walton, to pay off a bet, after underestimating the company's profits.)) Think up your own stunt. All of this is more important, and more fun, than you think, and it really fools the competition into thinking: ''Why should we take those cornballs at Wal-Mart seriously?'' -- Rule 7: Listen to everyone in your company. And figure out ways to get them talking. The folks on the front lines -- the ones who actually talk to the customer -- are the only ones who really know what's going on out there. You'd better find out what they know. This really is what total quality is all about. To push responsibility down in your organization, and to force good ideas to bubble up within it, you MUST listen to what your associates are trying to tell you. -- Rule 8: Exceed your customers' expectations. If you do, they'll come back over and over. Give them what they want -- and a little more. Let them know you appreciate them. Make good on all your mistakes, and don't make excuses -- apologize. Stand behind everything you do. The two most important words I ever wrote were on that first Wal-Mart sign: SATISFACTION GUARANTEED. They're still up there, and they have made all the difference. -- Rule 9: Control your expenses better than your competition. This is where you can always find the competitive advantage. For 25 years running -- long before Wal-Mart was known as the nation's largest retailer -- we ranked No. 1 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. -- Rule 10: 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. I guess in all my years, the one piece of advice I heard more often than any other was: A town of less than 50,000 population cannot support a discount store for very long. There are lessons in what's happened at Wal-Mart that go beyond retail and apply to many other businesses. Recently, I don't think there's any doubt that a lot of American management has bent over too far toward taking care of itself first and worrying about everybody else later. The Japanese are right on this point: You can't create a team spirit when the situation is so one-sided, when management gets so much and workers get so little of the pie. It's obvious that most companies would be much better served by basing managers' pay on the performance of the company or return on investment to the shareholders or some yardstick that clearly takes into account how well they're doing their job. And the formula has to make sure that profits are divided fairly among workers, management, and stockholders, according to their contributions and risks. At Wal-Mart, we've always paid our executives less than industry standards, sometimes maybe too much less. But we've always rewarded them with stock bonuses and other incentives related directly to the performance of the company. In the global economy, successful business is going to do just what Wal-Mart is always trying to do: give more and more responsibility for making decisions to the people who are actually on the firing line, those who deal with the customers every day. Good management is going to start listening to the ideas of these line soldiers, pooling these ideas and disseminating them around their organizations so people can act on them. That's the way the successful companies out there already are doing it: the 3Ms, the Hewlett-Packards, the Wal-Marts. Great ideas come from everywhere if you just listen and look for them. We can turn the whole world around just the way we've done it in retail. We can do it better than the Japanese because we're more innovative, we're more creative. We can compete with labor in Bangladesh or wherever because we have better technology, which can give us more efficient equipment. We can get beyond a lot of our old adversarial relationships and establish win-win partnerships with our suppliers and our workers, which will leave us with more energy and talent to focus on the important thing: meeting the needs of our customers. But all this requires overcoming one of the most powerful forces in human nature: the resistance to change. To succeed in this world, you have to change all the time. When you look at what's happened to the American auto industry, it's tempting to want to treat the Japanese unfairly -- the way they treat us with their protectionist laws. But I don't think we should counter with protectionism because it doesn't address the real problem: The quality of our product doesn't compete with that of the Japanese. The challenge is a great one for management. What they have to do is build a partnership with their people. But if American management is going to say to their workers that we're all in this together, they're going to have to stop this foolishness of paying themselves $3 million and $4 million bonuses every year and riding around everywhere in limos and corporate jets like they're so much better than everybody else. I'm not saying every company should necessarily be as chintzy as Wal-Mart. Everybody's not in the discount business, consumed by trying to save every possible dollar for their customers. But I wonder if a lot of these companies wouldn't do just as well if their executives lived a little more like real folks. A lot of people think it's crazy of me to fly coach whenever I go on a commercial flight, and maybe I do overdo it a little bit. But I feel like it's up to me as a leader to set an example. It's not fair for me to ride one way and ask everybody else to ride another way. The minute you do that, you start building resentment and your whole team idea begins to strain at the seams. Finally, a lot of folks ask me two related questions all the time. The first one is, Could a Wal-Mart-type story still occur in this day and age? My answer is of course it could happen again. Somewhere out there right now there's someone -- probably hundreds of thousands of someones -- with enough good ) ideas to go all the way. It's all a matter of attitude and the capacity to constantly study and question the management of the business. The second question is, If I were a young man or woman starting out today with the same sorts of talents and energies and aspirations that I had 50 years ago, what would I do? The answer to that is a little harder to figure out. I don't know exactly what I would do today, but I feel pretty sure I would be selling something, and I expect it would be at the retail level, where I could relate directly to customers off the street. Probably some kind of specialty retail, something to do with computers maybe, or something like the Gap -- even the Body Shop. Anyway, the next time some overeager, slightly eccentric shopkeeper opens up a business in your neck of the woods, before you write him off too quickly, remember that two old codgers once gave me 60 days to last in my dime store down in Fayetteville. Go check the new store out. See what they've got to offer, see how they treat you, and decide for yourself if you ever want to go back. Because this is what it's really all about. In this free country of ours, that shopkeeper's success is entirely up to you: the customer.