#304 Sol Price The Founder Who Taught Jim Sinegal, Sam Walton, Jeff Bezos, Bernie Marcus

In this episode, the host discusses the intimate relationship between podcasters and their advertisers, highlighting the personal connection with Mateo, the founder of Eight Sleep, and the significant sleep improvements the host experienced using their product. The discussion extends to the importance of time management, as emphasized by guest Sole Price, and how Eight Sleep enhances the host's efficiency in podcast production. The episode also features Meter and Tiny as supporters, offering solutions for commercial space internet and hassle-free business sales, respectively. The narrative shifts to a tribute to retail pioneer Sol Price, as told by Jim Senegal, founder of Costco, and Sol's son, Robert Price. Sol's influence on the retail industry, his innovative ideas like the membership model for discount retailing, and his legacy of teaching and ethical business practices are celebrated. The story concludes with a poignant reflection on Sol's life achievements and the profound impact he had on those around him, including shaping Costco's business philosophy and leaving a lasting personal and professional legacy.

• Jim Senegal emphasizes the personal connection with each company that advertises on the podcast.
• Advertisers are chosen based on their shared obsession with product quality and business building.
• Eight Sleep, a podcast supporter, is mentioned as an example of a product that Jim personally uses and believes in.
• The founder of Eight Sleep, Mateo, is highlighted as someone who embodies his product, which has significantly improved Jim's sleep quality.

"One of the most unique things about this podcast is I know the founder of every company that advertises on founders. All of them listen to founders, so it makes building a relationship a lot easier."

This quote underscores the significance of having a personal connection with advertisers, which facilitates relationship building and ensures alignment in product quality and business values.

• Eight Sleep's temperature control feature is praised for its positive impact on sleep quality.
• Jim Senegal relates this feature to time management, a key theme discussed by Sol Price in the episode.
• The product's value is highlighted through personal anecdotes, including Jim's wife's appreciation for Eight Sleep during their anniversary trip.

"Eight Sleep is one of the support of this episode and the founder Mateo and I live in the same city... I keep my eight sleep ice cold... That feature alone is worth ten times the price because not only do I sleep better, but it saves me time."

This quote details Jim's personal experience with Eight Sleep and draws a connection between product benefits and the broader theme of time management, which is central to the episode's discourse.

• Meter is introduced as a supporter of the episode, providing Internet and Wi-Fi solutions for commercial spaces.
• Sol Price's historical need for commercial space expansion is connected to the modern solution that Meter offers.
• Meter is lauded for its ease of use, cost savings, and scalability, which align with Sol Price's emphasis on being a low-cost operator.

"If Meter was around when Sol Price was expanding all of his discount warehouses, all he would have had to do is get in touch with Meter, give them his address and his square footage, and they would take care of the rest."

This quote illustrates how Meter's services could have benefited Sol Price, emphasizing the product's simplicity and how it aligns with the business principles discussed in the episode.

• Tiny is presented as a hassle-free option for selling businesses, contrasting with Sol Price's troublesome experience selling his business.
• The founders of Tiny, Andrew and Chris, are highlighted for designing a founder-friendly business model.
• Tiny's process is described as straightforward, with a quick response time and a range of deal sizes.

"If Tiny was around when Sol Price was selling his business, he would have called Tiny. Because Tiny is the easiest way for you to sell your business..."

This quote contrasts Tiny's straightforward approach with the difficult experience Sol Price had when selling his business, showcasing Tiny as an ideal solution for business owners.

• Jim Senegal, founder of Costco, expresses deep respect for Sol Price in a letter received before Sol's death.
• Sol's rare compliments and influential leadership qualities are highlighted.
• Jim's career at Fedmart and the founding of Costco are linked to Sol's teachings on operating efficiencies and customer savings.

"Dear Jim, it's always nice seeing you and experiencing your enthusiasm, knowledge, and commitment to your values."

This quote from Sol Price's letter to Jim Senegal conveys the mutual respect and the impact of Sol's mentorship on Jim's career and the founding of Costco.

• Sol Price is credited with pioneering the retail concept that led to the creation of Costco.
• His influence extends to other industry giants like Walmart, Amazon, and Home Depot.
• Sol's business legacy is considered one of the most impactful in the retail industry.

"Sol's greatest business legacy was the creation of a Price Club concept that as many as a dozen existing retailers and startups attempted to clone."

This quote encapsulates Sol Price's monumental contribution to the retail industry and his lasting influence on major retail and business figures.

• Sol Price's early life challenges, including a physical deformity and family issues, are discussed.
• His response to these challenges was to become an overachiever and excel in school.
• Sol's rebellious nature and potential for divergent paths are likened to the entrepreneurial spirit.

"I was shy and compensated for this by being an overachiever in school."

This quote reflects on Sol Price's response to personal adversity, which shaped his drive for success and parallels the entrepreneurial mindset.

• Sol Price's choice of a supportive spouse, Helen, is highlighted as a pivotal decision in his life.
• The challenges posed by his family's reputation and his parents' divorce are mentioned.
• The significance of having a supportive partner is emphasized, drawing a parallel to Stephen King's experience.

"Helen, having been raised in a stable home with nurturing parents, provided much of that that Sol had never experienced with his own family."

This quote illustrates the profound impact of Helen's support on Sol Price's life and success, underlining the importance of a supportive partner in overcoming life's obstacles.

• Sol Price's brief career as a lawyer and the insights he gained from his clients are recounted.
• His transition from law to business is marked by a focus on creative ideas and the recognition of his own limitations in execution.
• The identification of Jim Senegal as a successor is attributed to Jim's operational excellence.

"Over a period of time, I really learned far more from my clients than I ever learned in law school."

This quote conveys Sol Price's belief in practical, real-world learning and sets the stage for his hands-on approach to business and mentorship.

• Jim Senegal started his law career without money or a client base and had to build his own business.
• He learned the importance of relationships in business from two older attorneys.
• Jim provided pro bono legal services to Jewish charities, which helped him build a network in the community.
• Some of the people he met through his pro bono work eventually became his clients.

"I became a lawyer in the community for all the Jewish charities, and obviously, I never charged them for it."

This quote emphasizes Jim's strategy of offering free legal services to build relationships and a client base within his community.

• The attack on Pearl Harbor at the age of 25 significantly changed Jim's life.
• San Diego experienced blackouts as a precaution against potential Japanese attacks.
• Despite the difficult conditions, Jim managed to continue his legal work and support the war effort.
• Jim worked at Consolidated Aircraft, contributing to the production of airplanes for the war.

"After the attack on Pearl Harbor, the United States government did not know whether or not the Japanese were capable of attacking the west coast. So the Navy announced that it was considered advisable as a precautionary measure to black out San Diego at any minute."

This quote describes the sudden changes in Jim's life due to wartime precautions, which led to the development of his strong work ethic.

• Jim developed a strong work ethic during the war, working long hours at his law office and at Consolidated Aircraft.
• He contrasted his willingness to work hard with his father's tendency to avoid work.
• Jim's granddaughter recalls lessons about the importance of time from her grandfather, emphasizing his belief in the efficient use of time.

"Soul did not complain and said, I actually enjoyed the experience."

Jim's attitude towards his grueling work schedule showed his enjoyment and fulfillment from being productive and working hard.

• Jim realized he preferred business over practicing law after learning from his clients.
• He observed that his clients, despite lacking formal education, were successful in business due to common sense.
• Jim learned from Isidor Teacher, a client with no formal education but great business acumen, the value of resilience in negotiations.

"Over a period of time, I really learned far more from my clients than I ever learned in law school."

This quote highlights Jim's realization that practical business knowledge gained from his clients was more valuable than his formal legal education.

• Jim's legal practice introduced him to the concept of niche businesses, such as the Seven Seas Locker Club, which catered specifically to navy sailors.
• The success of the locker club and a membership retail store called Fedco inspired Jim to consider a similar business model.
• Jim's experience with his mother-in-law's commercial real estate led to the idea of starting his own membership retail store.
• Fedco's success, despite being a non-profit and only serving federal employees, indicated a significant market opportunity.

"Could be successful catering to a focused segment of the marketplace."

This quote encapsulates the key business insight that catering to a niche market can lead to success, an idea that would later be central to the Costco model.

• Jim studied E.J. Corvette, who circumvented fair trade laws by creating a membership model for his discount store.
• Jim recognized the potential of the membership model and the inefficiencies of fair trade laws.
• Jim's own venture, Fedmart, followed a similar model to Fedco and was an immediate success.

"Fortunately, most of us had backgrounds that were alien to retailing. We didn't know what wouldn't work or what we couldn't do."

This quote reflects Jim's belief that a lack of preconceived notions about retailing was an advantage, allowing for innovation and a fresh approach to business.

• Jim raised $50,000 to start Fedmart, a significant investment for him at the time.
• He negotiated a lease with an option to cancel after one year, showing his cautious approach to risk.
• Fedmart broke retail conventions by requiring membership and being located in an industrial area.
• Despite resistance from competitors, Fedmart's success proved the viability of the membership retail model.

"When we didn't know what we were doing, it only took $50,000 to start a business. And five years later when we were really experienced at running fed marts, it took 5 million to open."

Jim humorously reflects on the difference in startup costs between his initial ignorance and later expertise, illustrating the learning curve and growth in the retail industry.

• Sol Price's business philosophy emphasized a fiduciary relationship between the retailer and the customer.
• Sol believed in buying goods inexpensively and marking them up minimally, primarily profiting from membership fees.
• This approach aligns retailer interests with customer interests, as opposed to the interests of suppliers.
• Sol Price and Jim Senegal shared this customer-centric philosophy, leading to the assertion that they were "soulmates" in business.

"Seoul described his business approach as a professional fiduciary relationship between us, the retailer, and the member, the customer."

This quote outlines Sol Price's core business approach, which prioritizes the relationship with the customer through fair pricing and aligning the retailer's financial interests with those of the customer.

• Sol Price consistently paid his employees more than competitors, believing it was the ethical choice.
• Sol's policy led to high demand for jobs at his stores, similar to the high application rates at Costco.
• Sol rejected the practice of paying employees less in regions with lower costs of living, maintaining a simple and fair wage structure.
• Sol's ethical stance extended to opposing segregation, refusing to comply with a mortgage agreement that stipulated separate bathrooms based on race.

"Sol Price would constantly pay his employees more than his competitors because he thought it was the right thing to do."

This quote highlights Sol's commitment to fair wages and ethical treatment of employees, which was a foundational aspect of his business practices and contributed to the desirability of working for his company.

• Sol Price was innovative in retail, introducing discounted prescription drugs at Fedmart, which influenced the industry.
• Sol challenged unfair trade laws and opened the first pharmacy inside a discount store, fighting significant opposition.
• Fedmart developed its own private label merchandise to circumvent fair trade laws, offering significant cost savings to customers.
• Sol's strategies were focused on customer benefits, leading to the eventual repeal of fair trade laws by Congress in 1975.

"Sol winds up saying, you know, I'm going to fight these regulations, these fair trade laws."

Sol Price's determination to fight against restrictive trade laws and provide value to customers is encapsulated in this quote, demonstrating his commitment to consumer rights and innovation in retail.

• Sol Price viewed himself as a teacher and prioritized educating employees over procedural training.
• Sol's teaching philosophy was encapsulated in the phrase "alter ego," aiming to have employees understand and embody the values and mission of the company.
• Jim Senegal, who learned everything from Sol, carried this philosophy forward at Costco.

"If you're not spending 90% of your time teaching, you're not doing your job."

Jim Senegal's quote, reflecting Sol Price's influence, underscores the importance of teaching and mentoring as a key responsibility of leadership within a company.

• Sol Price's concept of "intelligent loss of sales" involved offering a limited selection of items to increase efficiency and reduce costs.
• This approach was based on the understanding that customer demand is more sensitive to price than to a wide selection.
• Limited selection resulted in higher sales and lower operational costs due to reduced labor throughout the supply chain.

"Customer demand is most sensitive to price, not selection."

This quote summarizes the rationale behind the "intelligent loss of sales" concept, emphasizing that customers prioritize price over a broad range of products.

• Sol Price's influence extended beyond his tenure at Fedmart, with his ideas and practices shaping the future of retail, including the creation of Price Club.
• Sol's willingness to learn from others and adapt concepts, such as the passport membership from European retailers, demonstrated his innovative mindset.
• Sol's experiences with European retailers, especially the concept of membership warehouses, directly influenced the founding of Price Club, which later merged with Costco.

"He's like, there's no way that I'm putting these provisions in any lease."

Sol's refusal to comply with segregation policies in his business dealings illustrates his commitment to ethical practices and his influence on social progress within the retail industry.

• Sol Price experienced betrayal when he was ousted from FedMart after selling a majority stake.
• Sol Price founded Price Club after being fired, using the wholesale business model from Macro in Amsterdam.
• Price Club was a membership-based warehouse selling low-priced business products to small business owners.
• The concept of pooling buying power was a cornerstone of Price Club's success.
• Price Club's operational efficiency and direct supplier delivery allowed for lower merchandise prices.
• The value proposition was simple: a $25 membership fee for access to wholesale prices and logistics.

"You can't sell 64% of your company and then be surprised when you get fired."

This quote highlights the mistake Sol Price made by selling a majority stake in his company, leading to his eventual dismissal.

"Everything that made Price Club different is what made Price Club successful."

This quote summarizes the unique selling points of Price Club that led to its success, emphasizing its distinct business model.

• Price Club's no-frills, low-cost approach was innovative and influenced the retail industry.
• Costco, which is similar to Price Club but for a wider customer base, was inspired by Sol Price's ideas.
• Price Club's pricing strategies, such as the hot dog and soda deal, became iconic and were maintained by Costco.
• Sol Price's willingness to share his business model with others led to the creation of competitors like Home Depot and Sam's Club.
• Sol Price's open approach to competition helped shape the retail industry but also created challenges for Price Club.

"The Price Club is so successful before it sells, it's going to wind up petering out before Costco buys it, in large part because of competitors that Sol Price actually created for himself."

This quote reflects on the irony of Sol Price's openness leading to the creation of his own competition, which contributed to the challenges faced by Price Club.

• Price Club's success attracted interest from competitors like Walmart and Home Depot.
• Operational mistakes by Price Club, such as diverting resources to real estate, hindered its growth.
• Sol Price and Robert Price faced personal and professional challenges that influenced their decision to sell.
• The eventual merger with Costco was seen as a tribute to Sol Price's impact on retail and his mentorship of Jim Senegal.
• The Price family faced the tragedy of Robert's son's illness, which affected their business decisions.

"The company's management made some poor decisions by opening new locations and markets where either Costco's or Sam's was already firmly established."

This quote points out strategic errors made by Price Club's management, which led to direct competition with established players and weakened their market position.

• Sol Price's life story embodies the American Dream, rising from immigrant roots to business success.
• His approach to business and life had a profound impact on his son Robert and others around him.
• Sol Price valued competition, innovation, and the importance of imparting life skills to the next generation.
• The book about Sol Price's life serves as a tribute to his legacy and influence in the world of entrepreneurship.

"Whatever I have learned about business, I learned from my father everything."

This quote from Robert Price honors the profound influence Sol Price had on his son's understanding of business and life.

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