David Rosenthal: belief

Transcript context

…Amazing. I was thinking about this whole incredibly important piece of the Walmart story where they literally build their own infrastructure for everything from scratch and it reminded me of what we talked about all the time on the show of the Jeff Bezos. Don't build your own infrastructure, focus only on what makes your beer taste better. I think we now have to have a caveat to the Bezos Law. Which is that yes, that is true in most cases, but if what you're doing is in a whole new area and best-in-class infrastructure for what you need doesn't exist, in a case like this, the infrastructure actually can make your beer taste better. Oh, if it's actually your core competency. This is a new core competency that actually did need to be done in-house. Most of the time that argument doesn't hold water. But if it truly is core, which this did become core to beating Kmart and all the others and having much better economics to them at scale, then yeah, you have to do in house. Discounting. They grew the number of discounting stores pretty dramatically up through their 1970 IPO and people still weren't really paying attention because they were this company in the Southern Midwest, they seemed regional. But let's just take you through some figures. By 1968, they had 24 stores. They filed to go public in 1970 with 32 stores and around 1000 employees and the public markets, the reception, the bankers, this was not a household name. Even though it was a consumer brand, you would treat it the way that you treated an enterprise IPO today. It's not like the Airbnb IPO that gets a lot of reception. Some stats on the actual IPO, first of all, it was postponed because the market fell apart on them, much like many startups are going through right now. But on October 1, 1970, it went public, and only 800 shareholders participated in the IPO. They sold 300,000 shares at $15. That's the actual IPO the night before. Quick math shows they raised $4.5 million in that IPO. It started trading for around $15 and $60 so they had a modest little pop the next day. But they really were not having meaningful research coverage. A lot of the research coverage they were getting was skeptical. It sounds a lot like Amazon's research coverage early days, as if this whole house of cards could fall apart at any given moment. The next year, 1971, they did grow top line revenue, 77%. Despite the Walmart that we know of today, they're a very slow growth company. I say that not to criticize them, but because we're often talking about pretty new tech companies on this show. But if we look at the 2010s, the annual growth rate for Walmart is in the 2–3% range. Not a fast-growing company by a topline revenue by any standards now. But shortly after the IPO, despite not attracting a lot of attention, that was not the case. We'll link to it in the show notes, but I pulled up in the 1972 annual report which is a gem.…

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