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    #360 Robert Kierlin: Founder of Fastenal

    en-usAugust 12, 2024
    What is essential for the success of an organization?
    How did Bob Kierlen transform Fastenol's business model?
    What is Ramp's purpose regarding business operations?
    What leadership qualities does Bob Iger emphasize?
    Who are some great leaders mentioned in the text?

    Podcast Summary

    • Shared common goal, cost controlFocusing on cost control and having a shared common goal among all members of an organization leads to higher wages, retained talent, superior service, increased revenue, and further cost savings.

      Having a clear and shared common goal among all members of an organization is essential for its success. Bob Kierlen, the founder of Fastenol, built his company around this idea and was able to turn a commodity product business into a $38 billion market cap giant. By focusing on cost control and keeping operating expenses low, Fastenol was able to pay higher wages, retain talented employees, and provide superior service, leading to increased revenue and further cost savings. This virtuous cycle of cost control, employee development, and revenue growth is a powerful competitive advantage that has been practiced by history's greatest founders. Ramp, a company that helps businesses control their spend and optimize financial operations, embodies this idea and offers a tool for any organization looking to build their own competitive advantage.

    • People-focused cultureEmpowering employees to run their businesses like they own them and fostering a culture of radical decentralization and autonomy can lead to low cost structure, attracting and retaining talent, and exceptional customer service, driving growth

      The success of an organization stems from its people and their shared commitment to a common goal, rather than the technology or devices used to deliver the product. Fastenal, a company that distributes nuts, bolts, and other supplies, is a prime example of this principle. Despite having no unique product or process, it has thrived by empowering its employees to run their businesses like they own them and fostering a culture of radical decentralization and autonomy. The company's CEO, Will Oberton, who started as a store clerk, embodies this mindset and has led Fastenal to become North America's largest wholesale and retail distributor. By focusing on people and their entrepreneurial spirit, Fastenal has been able to maintain a low cost structure, attract and retain talented salespeople, and provide exceptional service to its customers, creating a virtuous cycle of growth.

    • Leadership Development, Common GoalSuccessful organizations prioritize leadership development, commit to a common goal, and keep things simple to eliminate distractions, resulting in a unified focus and exceptional performance.

      Successful organizations thrive when all members commit to a common goal and work towards it, with leaders continuously training and developing other leaders from within. Bob Nardelli, as discussed in the book "Good to Great," embodied this philosophy, focusing on making his company, Fastenal, an exceptional place to work. This approach led to a $38 billion market cap for a commodity products company. Additionally, great leaders like Jim Sinegal, Sam Walton, and Les Schwab emphasized the importance of keeping things simple and maintaining unity of command to pursue a common goal. By treating everyone equally and eliminating distractions, organizations can stay focused and succeed.

    • Equality and unity in businessCreating a culture of equality and unity within an organization is crucial for success, emphasized by Bob Parsons and Zhangju Yang. Implement incentives aligning with overall goal, encourage creativity, and delegate responsibilities for a productive and innovative workforce.

      Creating a culture of equality and unity within an organization is crucial for its success. This concept, as emphasized by Bob Parsons in his book "It's Good to Be the President," is important for scaling a business and ensuring that every role is equally vital in delivering customer satisfaction. Zhangju Yang, the founder of Hyundai, also held similar beliefs, rejecting the idea of separate treatment for executives and instead focusing on the common goal of diligence and affection for employees. Bob Parsons further advises implementing incentives that align with the overall goal and encouraging creativity throughout the organization, rather than relying on a command and control structure. Delaying financial rewards and delegating responsibilities are also essential practices for fostering a productive and innovative workforce.

    • Decentralized Decision-MakingEmpowering frontline employees with decentralized decision-making leads to a loyal customer base, fosters creativity and innovation, and creates a more engaged and creative workforce.

      Effective leadership involves decentralizing decision-making and empowering frontline employees. Les Schwab and Jim Casey, founders of successful companies, emphasized the importance of serving customers and engaging with employees on the front lines. Decentralized decision-making allows stores to stock and order items based on local market needs, creating a loyal customer base. This approach fosters creativity and innovation, as employees are encouraged to come up with new product ideas. Bob Galvin, the CEO of Motorola, adopted this philosophy, encouraging a common goal for the organization and emphasizing training and teaching as a means of developing employees. Leaders, not managers, are desired, with a coaching approach that empowers employees to make decisions and find the best solutions. This approach, as illustrated by the baseball vs. basketball analogy, leads to a more engaged and creative workforce.

    • Leadership and continuous improvementEffective leaders stay connected to the front lines, develop all employees, and foster a culture of continuous improvement by seeking out ideas and remaining focused on the future.

      That effective leadership involves staying connected to the front lines, developing all employees, and fostering a culture of continuous improvement through the pursuit of a common goal. Bob's definition of a leader is akin to a master learner who grows and develops more master learners within an organization. He emphasizes the importance of accessibility, learning from examples, and not deviating from the common goal. Additionally, leaders should actively seek out ideas from all employees, including the silent ones, to maximize the chance of finding the best solutions. Brad Jacobs, another successful business leader, shares similar ideas, emphasizing the importance of soliciting advice from employees and asking simple yet insightful questions. By focusing on the future and empowering employees, organizations can remain flexible and responsive to change, ultimately driving growth.

    • Ego suppression in leadershipEffective leaders suppress their egos, value team members' unique abilities, and create a work environment that fosters continuous learning and growth.

      Effective leadership involves suppressing ego and valuing the unique abilities of every team member. Bob Iger, the former CEO of Disney, emphasizes this idea by drawing an analogy between the fear of delegating and the loss felt after the death of a unique individual. He encourages leaders to admit their egos and treat everyone as equals, learn to stay silent, be willing to get dirty, and do good things anonymously. By doing so, leaders can create a work environment that is committed to a common goal and allows everyone to reach their full potential. Iger also emphasizes the importance of continuous learning and reminding oneself of the vast amount of knowledge that remains to be discovered. These principles, if universally practiced, have the potential to create a positive impact beyond individual lifetimes and industries.

    • RelationshipsInvesting in relationships produces non-linear returns. Attend Founders Podcast events to facilitate meaningful connections and potentially reap significant benefits.

      Investing in relationships produces non-linear returns. This idea was emphasized during a conversation with a professional who organizes events for wealthy family offices in Texas. He explained that relationships between individuals in this community yield significant benefits. This concept is also reflected in the lives of successful figures like Sam Zell and Charlie Munger, who underscored the importance of building and maintaining relationships over long periods. With this understanding in mind, the Founders Podcast events are designed to facilitate the creation of meaningful connections between founders, investors, and high-value individuals. These events provide a unique opportunity to engage with like-minded individuals who share the same interests and goals. The all-inclusive nature of the events ensures that participants only need to focus on attending and building relationships, with lodging, food, and access to events taken care of. If you're interested in attending, visit founderspodcast.com/events and apply. The upcoming event in Austin, Texas, from September 27th to 29th, promises to be an excellent opportunity to expand your network and potentially reap the rewards of non-linear returns.

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    Founders Notes gives you the superpower to learn from history's greatest entrepreneurs on demand. You can search all my notes and highlights from every book I've ever read for the podcast. Get access to Founders Notes here

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    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

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    (3:01) No matter how mundane some action might appear, keep at it long enough and it becomes a contemplative, even meditative act.

    (4:00) Pain is inevitable. Suffering is optional.

    (4:00) The hurt part is an unavoidable reality, but whether or not you can stand anymore is up to the runner himself.

    (10:00) You can't fake passion — someone else, that really loves the job, will out run you. Somebody else sitting in some other MBA program has a deep passion for whatever career path you're going down, and they are going to smoke you if you don't have it yourself.  — Runnin' Down a Dream: How to Succeed and Thrive in a Career You Love 

    (12:00) What’s crucial is whether your writing attains the standards you’ve set for yourself. Failure to reach that bar is not something you can easily explain away.

    (14:00) Big ideas come from the unconscious. This is true in art, in science and in advertising. But your unconscious has to be well informed, or your idea will be irrelevant. Stuff your conscious mind with information, then unhook your rational thought process. You can help this process by going for a long walk, or taking a hot bath, or drinking half a pint of claret. Suddenly, if the telephone line from your unconscious is open, a big idea wells up within you.  — David Ogilvy

    (16:00) If you absolutely can't tolerate critics, then don't do anything new or interesting. — Jeff Bezos

    (16:00) So the fact that I’m me and no one else is one of my greatest assets.

    (19:00) Failure was not an option. I had to give it everything I had.

    (19:00) My only strength has always been the fact that I work hard and can take a lot physically. I’m more a workhorse than a racehorse.

    (22:00) I was more interested in having finished it than in whether or not it would ever see the light of day.

    (26:00) I’m the kind of person who has to totally commit to whatever I do.

    (29:00) The entrenched professional is always going to resist far longer than the private consumer. — James Dyson

    (34:00) You really need to prioritize in life, figuring out in what order you should divide up your time and energy. If you don’t get that sort of system set by a certain age, you’ll lack focus and your life will be out of balance. I placed the highest priority on the sort of life that lets me focus on writing,

    (37:00) You can’t please everybody. If one out of ten enjoyed the place and said he’d come again, that was enough. If one out of ten was a repeat customer, then the business would survive. To put it the other way, it didn’t matter if nine out of ten didn’t like my bar. This realization lifted a weight off my shoulders. Still, I had to make sure that the one person who did like the place really liked it. In order to make sure he did, I had to make my philosophy and stance clear-cut, and patiently maintain that stance no matter what. This is what I learned through running a business.

    (40:00) The reason we're surprised is that we underestimate the cumulative effect of work. Writing a page a day doesn't sound like much, but if you do it every day you'll write a book a year. That's the key: consistency. People who do great things don't get a lot done every day. They get something done, rather than nothing. — How To Do Great Work by Paul Graham. (Founders #314)

    (41:00) When you follow what you are intensely interested in this strange convergence happens where you're working all the time and it feels like you're never working. — How To Do Great Work by Paul Graham. (Founders #314)

    (43:00) No matter how strong a will a person has, no matter how much he may hate to lose, if it’s an activity he doesn’t really care for, he won’t keep it up for long.

    (44:00) Nobody ever recommended or even desired that I be a novelist—in fact, some tried to stop me. I had the idea to be one, and that’s what I did.

    (45:00) I decided who I want to be, and that is who I am. — Coco Chanel

    (46:00) Once, I interviewed an Olympic runner.  I asked him, “Does a runner at your level ever feel like you’d rather not run today, like you don’t want to run and would rather just sleep in?” He stared at me and then, in a voice that made it abundantly clear how stupid he thought the question was, replied, “Of course. All the time!”

    (47:00) I pity the poor fellow who is so soft and flabby that he must always have "an atmosphere of good feeling" around him before he can do his work. There are such men. And in the end, unless they obtain enough mental and moral hardiness to lift them out of their soft reliance on "feeling," they are failures. Not only are they business failures; they are character failures also; it is as if their bones never attained a sufficient degree of hardness to enable them to stand on their own feet. There is altogether too much reliance on good feeling in our business organizations. —  Henry Ford’s Autobiography

    (50:00) If I used being busy as an excuse not to run, I’d never run again.

    (51:00) Focus and endurance can be acquired and sharpened through training.

    (54:00) Exerting yourself to the fullest within your individual limits: that’s the essence of running, and a metaphor for life.

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    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

    #356 How The Sun Rose On Silicon Valley: Bob Noyce (Founder of Intel)

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    Read The Intel Trinity: How Robert Noyce, Gordon Moore, and Andy Grove Built the World's Most Important Company by Michael Malone with me. 

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    (1:00) America is today in the midst of a great technological revolution. With the advent of the silicon chip, information processing, and communications, the national economy have been strikingly altered. The new technology is changing how we live, how we work, how we think. The revolution didn't just happen; it was engineered by a small number of people. Collectively, they engineered Tomorrow. Foremost among them is Robert Noyce.

    (2:00) Steve Jobs on Robert Noyce: “He was one of the giants in this valley who provided the model and inspiration for everything we wanted to become. He was the ultimate inventor. The ultimate rebel. The ultimate entrepreneur.”

    (4:00) When you read biographies of people who've done great work, it's remarkable how much luck is involved. They discover what to work on as a result of a chance meeting, or by reading a book they happen to pick up. So you need to make yourself a big target for luck, and the way to do that is to be curious. Try lots of things, meet lots of people, read lots of books, ask lots of questions.  — How To Do Great Work by Paul Graham. (Founders #314)

    (7:00) Bob Noyce had a passion for the scientific grind.

    (10:00) He had a profound and baffling self-confidence.

    (15:00) They called Shockley’s personalty reverse charisma. —  Broken Genius: The Rise and Fall of William Shockley, Creator of the Electronic Age by Joel Shurkin. (Founders #165)

    (25:00) What the beginning of an industry looks like: Anywhere from 50 to 90% of the transistors produced would turn out to be defective.

    (33:00) Young engineers were giving themselves over to a new technology as if it were a religious mission.

    (41:00) Noyce's idea was that every employee should feel that he could go as far and as fast in this industry as his talent would take him. He didn't want any employee to look at the structure of Intel and see a complex set of hurdles.

    (43:00) This wasn't a corporation. It was a congregation.

    (43:00) There were sermons. At Intel everyone, Noyce included, was expected to attend sessions on "the Intel Culture." At these sessions the principles by which the company was run were spelled out and discussed.

    (45:00) If you're ambitious and hardworking, you want to be told how you're doing.

    (45:00) In Noyce's view, most of the young hotshots who were coming to work for Intel had never had the benefit of honest grades in their lives. In the late 1960s and early 1970s college faculties had been under pressure to give all students passing marks so they wouldn't have to go off to Vietnam, and they had caved in, until the entire grading system was meaningless. At Intel they would learn what measuring up meant.

    (49:00) When you are trying to convince an audience to accept a radical innovation, almost by definition the idea is so far from the status quo that many people simply cannot get their minds around it. They quickly discovered that the marketplace wasn’t just confused by the concept of the microprocessor, but was actually frightened by its implications. Many of my engineering friends scoffed at it was a gimmick. Their solution? The market had to be educated. At one point, Intel was conducting more seminars and workshops on how to use the microprocessor than the local junior collage’s total catalog of courses. Bob Noyce, Gordon Moore, and Andy Grove became part of a traveling educational roadshow. Everyone who could walk and talk became educators. It worked.  —  The Intel Trinity: How Robert Noyce, Gordon Moore, and Andy Grove Built the World's Most Important Company by Michael Malone. 

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    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

    #355 Rare Bernard Arnault Interview

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    (3:00) While other politicians were content to get their information from a scattering of newspapers, he devoured whole shelves.  — Young Titan: The Making of Winston Churchill by Michael Shelden. (Founders #320)

    (7:00) Arnault had understood before anyone else that it was a true industry. — The Taste of Luxury: Bernard Arnault and the Moet-Hennessy Louis Vuitton Story by Nadege Forestier and Nazanine Ravai. (Founders #296)

    (9:00) Arnault is an iron fist in an iron glove. — The Taste of Luxury: Bernard Arnault and the Moet-Hennessy Louis Vuitton Story by Nadege Forestier and Nazanine Ravai.

    The public conception of Sam as a good ol’ country boy wearing a soft velvet glove misses the fact that there’s an iron fist within. —  Sam Walton: The Inside Story of America's Richest Man by Vance Trimble.

    (12:00) People often ask me, “When are you going to retire?” And I answer, “Retire from what?” I’ve never worked a day in my life. Everything I’ve done has been because I’ve loved doing it, because it was enthralling. — Am I Being Too Subtle?: Straight Talk From a Business Rebel by Sam Zell. (Founders #269)

    (16:00) “I am not interested in managing a clothing factory. What you need, and I would like to run, is a craftsman’s workshop, in which we would recruit the very best people in the trade, to reestablish in Paris a salon for the greatest luxury and the highest standards of workmanship. It will cost a great deal of money and entail much risk.” — Christian Dior to Marcel Boussac

    (17:00) Arnault believed that luxury brands could be larger than anyone at the time imagined.

    (20:00) Arnault said this 35 years ago: “My ten-year objective is that LVMH's leading position in the world be further strengthened in the luxury goods sector. I believe that there will be fewer and fewer brand names capable of retaining a worldwide presence and that those of our group will be among them as we will provide them with the means for growth.”

    (25:00) There are huge advantages for the early birds. When you're an early bird, there's a model that I call surfing—when a surfer gets up and catches the wave and just stays there, he can go a long, long time. But if he gets off the wave, he becomes mired in shallows. But people get long runs when they're right on the edge of the wave, whether it's Microsoft or Intel or all kinds of people, including National Cash Register. Surfing is a very powerful model.”  —  the NEW Poor Charlie's Almanack: The Wit and Wisdom of Charlie Munger. (Founders #329)

    (25:00) One thing I learned from having dinner with Charlie was the importance of getting into a great business and STAYING in it. There’s a tendency in human nature to mess up a good thing because of an inability to sit still.

    (25:00) The incredible career of Les Schwab: Les Schwab Pride In Performance: Keep It Going! by Les Schwab. (Founders #330)

    (30:00) Dior in his autobiography: It is widely, and quite erroneously, believed that when the house of Christian Dior was launched, enormous sums were spent on publicity: on the contrary in our first modest budget not a single penny was allotted to it. I trusted to the quality of my dresses to get Christian Dior talked about. Moreover, the relative secrecy in which I chose to work aroused a positive whispering campaign, which was excellent (free) propaganda. Gossip, malicious rumours even, are worth more than the most expensive publicity campaign in the world.

    (31:00) Munger: “There are actually businesses that you will find a few times in a lifetime, where any manager could raise the return enormously just by raising prices-and yet they haven't done it. So they have huge untapped pricing power that they're not using. That is the ultimate no-brainer. Disney found that it could raise those prices a lot and the attendance stayed right up. So a lot of the great record of Eisner and Wells came from just raising prices at Disneyland and Disneyworld and through video cassette sales of classic animated movies. At Berkshire Hathaway, Warren and I raised the prices of See's candy a little faster than others might have. And, of course, we invested in Coca-Cola-which had some untapped pricing power.”

    Charlie Munger: The Complete Investor by Tren Griffin

    (33:00) The benefits Arnault receives from owning commercial real estate: He makes money from his own stores, from leasing space to rivals—and from the appreciation of premium real estate. When LVMH buys a building, it takes the best storefronts for its own brands and often asks rivals to move out when their leases expire.

    (35:00) Arnault is all about details. He has 200,000 employees and he’s paying attention to details about landscaping in the Miami Design District.

    (36:00) If we lose the detail, we lose everything. — Disney's Land: Walt Disney and the Invention of the Amusement Park That Changed the World by Richard Snow. (Founders #347)

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