How Sam Walton Dealt With Business Critics

Sam Walton, the founder of Wal-Mart, had to deal with sharp and painful criticism throughout his life. In his 30s and 40s, he had to make peace with his wife’s profound disappointment after the failure of his Benjamin Franklin five-and-dime stores (Walton signed one-year leases, and the landlord tripled the rent and kicked Walton out and replaced it with his own five-and-dome after Walton established himself).

When the Wal-Mart stores were rolling across farm towns in the South, he was regarded as a naïve hillbilly for driving around in his pick-up truck with the dream of beating the colossal Sears.

And, once Wal-Mart became big enough that Walton proved the concept, the business critics turned to criticizing Walton for running a business that was too big to grow.

For a billionaire, Walton’s life story contained many of the hassles that hit the working man.

My favorite concept from Walton’s biography “Made in America” is that Walton believed every business criticism fell into one of three categories: (i) urgent vs. seeming urgent; (ii) important vs. seeming important; and (iii) long-term vs. seeming long-term.

If a Wall Street analyst provided public criticism of Walton suggesting the need for some change that was either false urgently, unimportant, or not geared toward long-term sustainability, Walton would completely disregard it and move on with his day. His theory was that a bystander’s error in cognition was not his problem.

Meanwhile, if a Wall Street analyst provided criticism of something that Walton needed to address, perhaps immediately, he was thankful for the criticism because he was being provided explicit instruction on how to prevail over the competition. For free!

Thick skin is a necessary character trait for the successful entrepreneur—especially ones that sell goods instead of services.

I do have concerns that my generation is too fragile when receiving criticism, needlessly ruining the mental narrative inside their head and blocking out the possibility of growth in order to avoid pain.

My advice? Every criticism is either true or untrue. If it is untrue, you should disregard it because to do otherwise would involve permitting someone’s misconception of reality to actually become your own characterization of reality (making yourself emotionally pained and inaccurate all at once). And if is true, it continues to be true whether or not it is said.

Wal-Mart was quick to understand the value of earning 1% profit margins of ever-increasing volumes. Sears, Target, Woolworth, and K-Mart would go low, but never that low. Hence, Wal-Mart prevailed. After Walton’s death, Wal-Mart executives got defensive in response to criticism and forfeited many advantages that it once possessed over Amazon. It regarded the critic as an enemy rather than a cleanser.

Sam Walton understood that when you hear a viewpoint, you extract any usefulness from it and then strip down the emotional judgments that come attached with it. Successful entrepreneurs, especially those that come from humble beginnings, almost always avoid self-pity and have an eagerness to absorb value from any source.

Originally posted 2017-12-05 01:20:27.

Like this general content? Join The Conservative Income Investor on Patreon for discussion of specific stocks!