A Taste of Joe's Personality

• The point is that Coulombe is pronounced coo-LOAM. I thought this book would be an easier read if you knew that. Whether the mild paranoia generated by a name that few people can pronounce was a factor in my shaping Trader Joe’s, I leave to your judgment. Whether the substantial paranoia generated by being a left-hander in a right-handed world was a factor in putting a left-handed spin on Trader Joe’s, however, is beyond dispute.

Reasonable > Optimal + Pay People Well

• “If all the facts could be known, idiots could make the decisions.” —Tex Thornton, cofounder of Litton Industries, quoted in the Los Angeles Times in the mid-1960s. This is my favorite of all managerial quotes.
• In 1962, Barbara Tuchman published The Guns of August, an account of the first ninety days of World War I. It’s the best book on management—and, especially, mismanagement—I’ve ever read. The most basic conclusion I drew from her book was that, if you adopt a reasonable strategy, as opposed to waiting for an optimum strategy, and stick with it, you’ll probably succeed. Tenacity is as important as brilliance.
• I concluded that I didn’t have to find an optimum solution to Pronto’s difficulties, just a reasonable one. Trying to find an optimum solution in business is a waste of time: the factors in the equation are changing all the time. But you’ve got to have something to hang your hat on. The one core value that I chose was our high compensation policies, which I had put in place from the very start in 1958.
• This is the most important single business decision I ever made: to pay people well. First Pronto Markets and then Trader Joe’s had the highest-paid, highest-benefited people in retailing.
• My standard was simple: the average full-time employee in the stores would make the median family income for California.
• Because union scale is so high, the supermarkets are very stingy with hours and will do anything to avoid paying overtime. I simply built overtime into the system: everyone was to work a five day, forty-eight-hour week.
• Generally, labor expense in grocery retailing is relatively small, compared with manufacturing or the professions or restaurants. This was one reason I could get away with Trader Joe’s high compensation policies. Cost of Goods is the dominant expense. The funny thing is that grocers seem to spend more effort squeezing payroll than squeezing Cost of Goods Sold, though there is at least five times more opportunity to save money in the latter.Another way of looking at our high compensation policy: it was an effort to loosen the Supply Side constraints (scroll down to Double Entry Retailing) created by the nature of human beings. By attracting the more competent people, and keeping them, you can gain some degrees of freedom.

Leases

• A lease is an investment, perhaps the most serious and certainly the least changeable a retailer can make. Financially, a lease is simply a long-term loan. When I bought Pronto Markets, not only was the overt balance sheet leveraged, but the subliminal balance sheet was even worse, because of the de facto debt created by the leases. This kind of hidden debt is recognized only in the footnotes the auditors prepare. And they recognize only the rent amount itself. They don’t include the “common area” charges, which can equal one-third of the base rent and are just as payable. Most retail bankruptcies come from bad real estate leasing decisions.
• A very real part of the success of Trader Joe’s stems from the excellence of its locations and the shrewdness of the language of its leases.

Principle of Discontinuity

• So into my tiny office came the egg man. He had a problem: too many Extra Large AA eggs. He offered them to me at the same cost as Large AA, the size that all the supermarkets advertised. I would be able to sell Extra Large, which by state regulation weighed about 12 percent more than Large, for the same price as Large! And, even more importantly, the supermarkets couldn’t follow. The supply of Extra Large simply wasn’t great enough to cover a Safeway ad. A moment’s reflection makes one grasp that Extra Large are laid only by the eldest hens, the ones approaching, uh, retirement. There just aren’t that many of those old girls. The ads that we began running revolutionized Pronto Markets and they helped to generate the profits I needed first to stay afloat, and later to build Trader Joe’s. To this day, the promotion of Extra Large AA eggs is one of the foundations of Trader Joe’s merchandising, not just because of the program per se, but because it set me to wondering whether there weren’t other discontinuities out there in the supplies of merchandise. Eight years later, we built Trader Joe’s on the principle of discontinuity.

Product knowledge/buying prowess

• I cannot repeat too often that Trader Joe’s entered the City of Foods (foods as opposed to groceries) by way of the Wine Gate. We took the daughter of the vine to spouse. Our first real product knowledge came when we learned about wines; that indoctrination flavored everything we subsequently did in foods. The foremost character of wines (note my repeated use of the plural) is that each vintage, and each batch within a vintage, is separate, unique, discontinuous, discrete. Discrete means distinct, different, disjunctive. It is the opposite of continuous.
• Back in 1967, Good Time Charley made a bet that rising levels of education would fragment the masses, that a small but growing group of people would be dissatisfied with having to consume what everybody else consumed. By dumb luck we blundered into the one product field that fit this new pattern: wines. Wines have not been popular in America because, intrinsically, they are not continuous products.
• Every major conglomerate that tried to capitalize on the boutique wine boom lost its shirt, including Coca-Cola, Hunt-Wesson, and Pillsbury, each of which made mistaken bets on California wineries in the 1970s. Because of our wine background, we liked and embraced discontinuous lots of foods.
• Many products are either unbranded (oat bran) or with only weak national brands (maple syrup, olive oil, pasta, dried fruit, dried beans, whole bean coffee, rubbing alcohol, Epsom salts). The Frederick the Great–style retailers, who are accustomed to dealing primarily in branded goods, tend to lack the skills to exploit the other types of opportunities. For example, Leroy, Doug Rauch, and Bob Johnson virtually invented a product category new to California: frozen, packaged, unbranded seafoods. Supermarkets tend to sell all seafoods from their meat departments, usually in thawed (so-called fresh) form, sometimes packaged, sometimes in bulk from a service case. In their frozen food departments, you find only branded seafoods: seafoods that have been value added, like breaded fish sticks, stuffed crab, etc., from Mrs. Paul’s (Campbell’s Soup), Van de Kamp’s, etc. The Watson/Rauch/Johnson approach allowed Trader Joe’s to become a prominent retailer of seafoods in only three years, because we could sell (profitably) at much lower prices than the supermarkets, simply because of Intensive Buying of frozen seafoods. To achieve this, Trader Joe’s had to learn about seafoods and often interfere in the packaging, transportation, etc. of the products. But we became the No. 1 retailer of Black Tiger Shrimp in the country this way.

Finding Your Point of Difference

• The basic problem is that convenience store retailing is a commodity business that is hard to differentiate. What I needed was a good but small opportunity for my good but small company: a non-commodity, differentiated kind of retailing. Yes, I could have sold out to 7-Eleven and gone to work for them, or somebody else. But the Byzantine management atmosphere at first Rexall and then Hughes Aircraft had convinced me that the only real security lies in having your own business, and this left-hander was well ahead of the curve on that one.
• The clue, the keystone of the arch of Trader Joe’s, was a small news item in Scientific American in 1965. When we left Stanford, my father-in-law, Bill Steere, a professor of botany, gave me a subscription to Scientific American. In terms of creating my fortune, it’s the most important magazine I’ve ever read. The news item said that, of all the people in the United States who were qualified to go to college in 1932, in the pit of the Depression, only 2 percent actually did. By contrast, in 1964, of all the people qualified to go to college, 60 percent in fact actually did. The big change, of course, was the GI Bill of Rights that went into effect in 1945. It was the greatest experiment in mass higher education ever attempted by any society in any era. By 1965, we were into the second generation of veterans going to college (and the pace stepped up later, because of Vietnam). A second news item, one from the Wall Street Journal, told me that the Boeing 747 would go into service in 1970, and that it would slash the cost of international travel. (It did: the real cost of going to Europe today is about one-fifteenth of what it was in 1950.) In Pronto Markets we had noticed that people who traveled—even to San Francisco—were far more adventurous in what they were willing to put in their stomachs. Travel is, after all, a form of education. Anticipating Peter Drucker’s advice by almost thirty years, Trader Joe’s was conceived from those two demographic news stories. What I saw here was a small but growing demographic opportunity in people who were well educated. 7-Eleven, and the whole convenience store genre, served the most basic needs of the most mindless demographics with cigarettes, Coca-Cola, milk, Budweiser, candy, bread, eggs. Dimly, I saw an opportunity to differentiate ourselves radically from mainstream retailing to mainstream people.

Resisting Homogenisation: Selling to the Overeducated and Underpaid

• It’s easy to forget that network radio came from nowhere, and almost overnight inextricably combined entertainment and advertising in the public mind. This is why brands became so powerful, and why retailers became eunuchs—albeit wealthy eunuchs—distributing the brands.
• The supermarket, like network radio, also began about 1930. What distinguished the supermarket was its parking lot, not what was inside the store. (“Self-service” had started fifteen years earlier.) The supermarket rose to prominence because it recognized the automobile, something that department stores did not recognize until after World War II.
• As we evolved Trader Joe’s, its greatest departure from the norm wasn’t its size or its decor. It was our commitment to product knowledge, something which was totally foreign to the mass-merchant culture, and our turning our backs to branded merchandise. World War II completed the triumph of network radio/advertised brands.
• Television was the most powerful advertising medium ever invented, and it began to homogenize American culture to a startling degree.
• Grocers didn’t need to know anything except what was going to be advertised next on I Love Lucy and Gunsmoke.
• Nothing in America has become more de-homogenized, more fragmented than electronic media! For example, in Los Angeles, we have more than seventy radio stations. And now, the internet has fragmented electronic media almost to an infinite extent. Trader Joe’s was part of this fragmentation. It created an opportunity for independent-minded people to split off the main track.

Messy Reality

• “Give me a fruitful error any time, full of seeds, bursting with its own corrections. You can keep your sterile truth for yourself.” —Pareto’s comment on Kepler, quoted by Stephen Jay Gould in The Panda’s Thumb
• I’m going to disillusion those dear souls—there seem to be a lot of them out there—who think that Trader Joe’s sprang, fully developed, from my brain, like Athena from the head of Zeus. To continue the metaphor, it was more like an elbow here, a toenail there over a period of eleven years, with an occasional painful delivery of a major hunk of torso.

4 Tests for Products to Pass

• Still trying to maximize the use of a small store, I looked for other categories that met the Four Tests:

1. High value per cubic inch
2. High rate of consumption e
3. Easily handled
4. Something in which we could be outstanding in terms of price or assortment.

• For example, diamonds met the first test but flunked the second. Fruits and vegetables met the first and second tests but flunked the third because produce requires constant reworking (nowadays, however, new plastic wraps are changing that). Fresh meat flunked the third test even more.
• What SKUs do you drop to make room for new ones? Mostly we did it on the basis of dollar value of sales. We made no effort to have a complete assortment, which was one of the hardest concepts to put across to the troops. No sugar, salt, flour, Mrs. Penny’s White Sauce, etc., unless we could be outstanding in it, and make a sufficient number of dollars from it.
• The real limit on what range of products we could carry was our product knowledge. I believe that the greatest advantage of a limited-SKU retailer is that the employees at all levels can become truly knowledgeable about what they sell—a Supply Side factor.

Importance of Writing

• At that point, in February 1966, I wrote what I call a white paper, something that I have tried to do at every important turn of events. I started with the founding of Pronto Markets. In a white paper you try to write down everything you plan to do, and the reason why you think you should do it. That way, when things don’t work out, you can’t play the role of a Soviet historian and airbrush history.
• The other important use of a white paper is to circulate it to the troops, to engage their support and solicit their ideas.
• I took a cue from General Patton, who thought that the greatest danger was not that the enemy would learn his plans, but that his own troops would not.

Store Format & Opening Hours

• I had read in the New Yorker that Hawaiian music, played in stores, slowed the customers down.
• Trader Joe’s finally settled down at an average of about eight thousand square feet in the 1980s, but the concept of a relatively small store with a relatively small staff remains in force. When we first opened, it was open 7:00 a.m. to midnight, like Pronto. As time went on, we progressively shortened the hours down to 9:00 a.m. to 9:00 p.m. Each time we shortened hours, we made more money: there were fewer “shifts” and more interaction among the staff.
• We aggressively redesigned the stores to conserve energy. To this day, Trader Joe’s stores don’t have very many windows, and all panes of glass are very small, an idea that had an accidental payoff in every subsequent earthquake and riot.
• The keys to management are strong locations with good people.
• I believe in having enough stores so you’re hedged against getting wiped out by a single fire or earthquake or flood control project (the Culver City Pronto Market fiasco in 1962). But my preference is to have a few stores, as far apart as possible, and to make them as high volume as possible.
• Sales per store, sales per square foot: those are the measures I look at. Trader Joe’s sales were $1,000 per square foot of total area. The supermarket average is $570, but they use “sales area” not total area. And yes, there is a difference. Beware of that “sales per square foot” calculation. “Sales area” excludes back-room area, thereby shrinking the denominator and pumping up the “sales per square foot” figure. I can’t justify not counting back rooms. If you don’t need that back room, why did you lease it?
• Too many stores, too many irreversible leases, too much geographical saturation was a recurrent theme in the failure of American retail chains in the twentieth century.
• I want to brag about something here: in thirty years we never had a layoff of full-time employees. Seasonal swings in business were handled with overtime pay to full-time employees, and by adjusting part-time hours. The stability of full-time employment at Trader Joe’s was due in part to caution in opening new stores, and insisting on high-volume stores.
• At Trader Joe’s, after Good Time Charley was laid to rest in 1971, we didn’t pay any attention to merchandising. The store layout is driven primarily by shoplifting concerns and physical stocking concerns. All the research on whether people turn to the left or the right, or whether you can “force” people to the rear of the store, is irrelevant if you’re a value retailer.
• Fixturization, of course, is closely linked to merchandising: I wanted as few fixtures as possible. The flexibility of display in value retailers like Stew Leonard’s or Costco, flexibility made possible by a paucity of fixtures, stands in startling contrast to the rigidity of most mass merchants. Like Costco, Trader Joe’s uses warehouse shelving.

Regulation

• As I learned time and again, success in business often rests on a minute reading of the regulations that impact your business.
• If you’re going to enter a business, the first question you should ask is the extent to which governments—federal, state, and local—intervene in its affairs.
• Some of my most serious business problems were created by government regulations, both the nationwide regulations like Fair Labor Standards Act, which had me choking on the hairball Department of Labor audit, and state regulations on milk and alcohol.
• Governmental intrusion can be considered as a Supply Side opportunity (explained below). The retailer who masters the skills of dealing with the regulatory authorities erects a threshold that his competitors will have to cross.

Growth Philosophy – Factor in Margin for Error

• The sharp 1974 recession combined with the stock market collapse gave me an excuse to cut back on opening more stores. In what was called the Green Movement, growth for the sake of growth was defined as a form of cancer. Growth for the sake of growth still troubles me. It seems unnatural, even perverted. This helps to explain why I went from 1974 to 1978 without opening another store, something that could be viewed as inexcusable, given the success of Whole Earth Harry. Again, however, I did the right thing for the wrong reason. When Fair Trade on milk and alcohol blew up in our face in late 1976, we were not locked into too many stores that had been built on the assumption that those 1930s laws would last forever. Among other things, this saved us from having increased our huge investment in liquor licenses, which plunged in value when Fair Trade ended.
• To keep sales increasing during the mid-1970s, we relied on new ideas implemented in existing stores. This was my favorite form of growth.

Marketing

• As everyone knows, word of mouth is the most effective advertising of all. Or, when in my cups, I have been known to say that there’s no better business to run than a cult. Trader Joe’s became a cult of the overeducated and underpaid, partly because we deliberately tried to make it a cult once we got a handle on what we were actually doing, and partly because we kept the implicit promises with our clientele.

Hairballs – The Value in Problems

• My point is that a businessperson who complains about problems doesn’t understand where his bread is coming from. So by hairballs I don’t mean those fundamental issues such as demand, supply, competition, labor, capital, etc., which create the matrix of a business. By hairballs, I mean those wholly unnecessary thorns that come unexpectedly. Their greatest danger is that they consume management stamina that is needed to deal with the Matrix Issues.

Retailing

• The fundamental job of a retailer is to buy goods whole, cut them into pieces, and sell the pieces to the ultimate consumers. “Retail” comes from a medieval French verb, retailer, which means “to cut into pieces.”
• Many of the policy decisions for a retailer boil down to this: How closely should we stick to the fundamental retailing job?
• In Pronto Markets we did everything we could to avoid retailing. We tried to shift the burden to suppliers, buying prepackaged goods, hopefully pre-price-marked (potato chips, bread, cupcakes, magazines, paperback books) so we had no role in the pricing decision. The goods were ordered, displayed, and returned by outside salespeople. To this day, supermarkets fight with the retail clerks’ union to expand their right to let core store work be done by outsiders. Whole Earth Harry’s moves into wine and health foods had taken us quite a distance into genuine retailing. In our cheese departments we were literally taking whole wheels and cutting them into pieces. I took this as an analogy for what we should do with everything we sold.

Economies of Scale

• Any fool with cash has “buying power.” What most people mean by “buying power” is actually selling power: the ability to move large quantities of goods.
• There are other ways of getting selling power, such as by having good locations, or effective advertising, or low prices. The point where the “buying power” and “selling power” curves cross each other creates the magic physical thresholds. There are two magic physical thresholds that a retailer must achieve to be competitive: the truckload, and the oceangoing container load. These thresholds mark the limit of most economies of scale.

Private Label

• As we kept learning more about wines, foods, and, above all, our customers, the private label program really got going under Whole Earth Harry. A Guideline: No private label product was introduced for the sake of having private label. This is 100 percent contrary to the policy of supermarkets. The supermarkets try to have a private label copy of every branded product, which they usually sell for less.
• The willingness to do without any given product is one of the cornerstones of Trader Joe’s merchandising philosophy.
• I believe in the wisdom that you gain customers one by one, but you lose them in droves.

Competition

• My years at Pronto Markets convinced me that where there is no competition today there will be tomorrow. Except for rare geography and even rarer honest city councils, you must assume that competitors will open all around you. The answer is to design a store that has no competition. That’s why Mac the Knife should not carry any SKU in which it is not outstanding.
• After 1978, I paid no heed to nearby supermarkets, liquor stores, health food stores, or anything else.

Double Entry Retailing - Fantastic

• In 1966, while I was still trying to conceptualize the Good Time Charley version of Trader Joe’s, I had to prepare a lecture for Stanford Business School. In trying to figure out how to explain to the students the problems I was wrestling with, I hit on the idea of using double entry accounting as an analogy, what I call Double Entry Retailing. On the left side of the ledger is the business in terms of how its customers see it: I call this the Demand Side. On the right side of the ledger are the factors that limit or determine the retailer’s ability to satisfy those demands: the Supply Side.
• All businesses, whether manufacturing, wholesaling, services, etc., have William Blake’s fearful symmetry of both Demand and Supply sides. And all businesses are subject to the ultimate supply-side constraint of cash cited by Amman: you can do anything, no matter how stupid, within that fearful symmetry, as long as you don’t run out of cash.
• As in double entry accounting, the change in any factor must be matched by a corresponding change in another factor. For example, a decision to increase geographical convenience (Demand Side) obviously involves some change of policy with landlords (Supply Side) including the amount of rent you’re willing to pay.
• The lists above aren’t much different from other businesses. What distinguishes retailing is the asymmetry of the fearful symmetry: the huge number of customers (Demand Side) vs. the number of suppliers. This is the exact opposite of a government defense contractor. This lopsided butterfly may cause a retailer to act as if the only people they have to “sell” are customers: the Demand Side. That’s a major mistake. All the people on the Supply Side have to be sold, too.
• It’s sort of like watching a tennis match, except that you have to move your head not only side to side but up and down, because some of the most important decisions are made intra–Demand Side or intra–Supply Side. The most critical decision we made in Mac the Knife was the intra–Demand Side decision to forgo breadth of assortment for outstanding prices.
• When Whole Earth Harry introduced orange juice that was squeezed on the premises, it was a great Demand Side success. But it was also a total nightmare to administer because of the Supply Side issues of fresh orange juice, which include: the great variation in sweetness of oranges over the course of a year (Valencias are great but are available only four months; navel juice goes bitter after twenty-four hours, etc.); how do you keep the employees from setting the machines to squeeze too much (thereby raising “yield” per case of oranges) so the bitter rind oils get in the juice; and what the hell do you do with all the leftover rinds? Still, we struggled with it for twelve years and dropped it only because it helped us take over the distribution of milk. The day we announced no more squeezed orange juice, the Captains cheered.
• Showmanship. This is the sum total of all efforts to make contact with the customer. It’s the most ephemeral, the most difficult, and the most important of the Demand Side activities.

Pricing

• Many retailers, especially in electronics, offer to meet or beat competitors’ prices. Such a policy seems intellectually feeble to me. You should price a product where you think it should be in terms of the market and stick with it. We never cut a price to meet a competitor. If we had done our job of Intensive Buying correctly, and a competitor undercut us, that was their decision.

Culture: The Way You Do Things

• Peter Drucker has said, in the context of troubled companies, that it’s impossible to change a company’s “culture” but you can change its “habits.” “The Way You Do Things” is the most limiting Supply Side factor in any company: Are you entrepreneurial or “corporate”? I want to make it quite clear that I called the shots. I reject management by committee.
• Believe me, you have a system for everything that has to happen in your business—you just may not be conscious of it. And you probably have still other systems that are not needed. That’s why The Winning Performance calls for a “constitutional contempt for business as usual.” To practice “constitutional contempt,” you have to arrive at work every day with the attitude, “Why do we do such-and-such that way? Better yet, why do we do it at all?”
• I firmly believe in a factory atmosphere for headquarters with no private offices, pretty much what I’ve read about the headquarters of the Mars Candy Co.

The Unseen Needle Movers (Literally)

• During my thirty years at Pronto and Trader Joe’s, I suppose there were a couple of hundred robberies and burglaries. The combination of internal theft, vendor theft, bad checks, armed robbery, and burglaries can be overwhelming at times. An entire chapter, “Crime Side Retailing,” could be written because that’s how I spent half of my time: dealing with crime with before-the-fact controls, and after-the-fact with detection and action. This is one reason why the management function of Control is so critically important to retailing. Retailers like Aldi and Costco may commit many sins on the Demand Side, but their bulldog tenacity on Supply Side Control makes them profitable in spite of it. Ask not what you can do for your customers, but what your employees, vendors, customers, and druggies can do to you.
• One of the most important Supply Side constraints is the stamina of the Chief Executive Officer. I haven’t listed it above, but it’s there. And the sort of thing that wore down this CEO was year after year of employee theft.

Selling Trader Joe’s

• In 1919, the parents of Karl and Theodore Albrecht, who were infants at the time, bought three tiny grocery stores in Essen, Germany, and they bought them on credit. It was just after World War I and just before the Weimar inflation. When that inflation hit a few years later, it wiped out the value of the fixed debt they had incurred to buy the stores. It’s an ill wind . . . During World War II, the brothers, now in their early twenties, served as enlisted men in the Wehrmacht. When they returned to Essen, they took over their parents’ tiny stores. They found Germany torn apart. Essen, the home of the Krupp ironworks, had been blasted by the bombing raids. They heard that the big American grocery chains were ready to move in. Backs against the wall, in 1949 they did something that has profoundly influenced the economic history of Germany ever since: they designed the “box” store. Their concept of the box store has about six thousand square feet and carries six hundred SKUs. These SKUs are the most basic groceries, bought at the cheapest costs possible, and sold at a gross profit as low as Costco’s today. The box stores, called Aldi (an acronym for Albrecht Discount), were one of the major factors in the postwar German “miracle,” growth without inflation. If the DMark had been one of the world’s premier “hard” currencies since 1949, it wasn’t just because of the famous finance minister Ludwig Erhard. It was the Albrecht brothers, relentlessly keeping grocery prices low in Germany. And along the way they introduced many innovations, including beer in cans, which had been unheard of in Germany.
• Sometime around 1970, although still living fifteen minutes apart in Essen, the brothers split their empire, I was told. Karl, the eldest, took Germany south of Essen, Austria, Spain, and the United Kingdom. Theodore (or Theo, pronounced TAY-o, as I came to know him), took northern Germany and West Berlin—where, to stick it up the Communists’ nose, he opened eighty stores in a city of two million—the Lowlands, and France.
• Perhaps with a little sibling rivalry going on, Theo hired the investment bankers Dominick & Dominick to search for an American chain to buy, and to launch his own Aldi’s here. Because Trader Joe’s operated about the same size stores, they contacted us.
• Finally, in October 1978, Dominick called me with a radically revised offer: They were sold on Trader Joe’s post-deregulation future. No changes would be made in the way Trader Joe’s was run. I would not have to sign a management contract. The price was about three times what had been offered a year earlier. On the other hand, we were already making a lot more money under Mac the Knife. I responded that the sales contract could be no more than one page long. No holdbacks, givebacks, or whatever. Theo wired word that he’d take the one-page contract, if I would guarantee that I had conducted the business for the past five years as a prudent man would. He knew damn well that I had. So now we had to have the one-page contract.
• Frequently, people who see the enormous success of Trader Joe’s ask me why I sold. Let’s put it this way: I ran Bernie McDonell’s risk calculus: What do I risk if I sell? What do I risk if I don’t?
• But, Joe, didn’t you think about the risk of not making an even greater fortune if you said “Yes”? No. At Stanford in 1947, I had studied and, apparently, retained Aristotle’s concept of the Golden Mean, the “Hellenistic ideal of sophrosyne,” nothing too much. The amount that the Albrechts offered was enough by the “nothing too much” standard.
• But do I regret having sold? Yes. I admit it. To mine own self I was not true when I sold. I regret not having had the guts to ride out the loss of the surtax exemptions, the employee ownership problem, the threat of death taxes, Carter’s threat to eliminate capital gains preference, and all the other fears, real or phantom, of late 1978.

Reading recommendations

• My favorite quote from my favorite book on management, The Winning Performance by Clifford and Cavanaugh.
• In 1994 Stanford Business School published a study of winning companies (companies that have endured for a hundred years) called “Built to Last,”
• If all the facts could be known, idiots could make the decisions. —Tex Thornton, cofounder of Litton Industries, quoted in the Los Angeles Times in the mid-1960s. This is my favorite of all managerial quotes.
• In 1962, Barbara Tuchman published The Guns of August, an account of the first ninety days of World War I. It’s the best book on management—and, especially, mismanagement—I’ve ever read.
• Most of my ideas about how to act as an entrepreneur are derived from The Revolt of the Masses by Jose Ortega y Gasset, the greatest Spanish philosopher of the twentieth century.