From time to time throughout the modern history of American capitalism, one giant corporation has been elevated to preeminence by the magnitude of its power and the ways in which its exercise excites the hopes and inflames the fears of its age. Standard Oil Co., the Pennsylvania Railroad, the Great Atlantic & Pacific Tea Co., General Motors, IBM, and Microsoft have all filled this standard-bearer role. Today, for better and mostly for worse, the mantle has passed to Wal-Mart, the Bully of Bentonville.
CHAPTER TWO
THEY CALL ME MR. SAM
Fourteen years after Sam Walton’s death, he remains an inescapable presence within Wal-Mart’s sprawling headquarters in Bentonville. Photographs of the company’s late founder are hung by the dozen in lobbies, anterooms, and hallways. Mounted on the wall of each of the seventy-seven rooms where Wal-Mart’s buyers negotiate with vendors is Walton’s picture, along with placards listing “Sam’s Rules for Building a Business.” (There are ten of them, just like that other set of commandments.) The keys still hang in the ignition of Walton’s last pickup truck, which is on display a short drive from the home office in the Wal-Mart Visitors’ Center, along with a replica of his office exactly as it looked on his final day of work. Not since the passing of Mao Zedong has a leader remained as posthumously present as Chairman Sam.
Lee Scott pays homage to Walton constantly, both inside and outside the company—and not just because he was schooled at “Mr. Sam’s” knee. Walton’s heirs, who still own 40 percent of Wal-Mart’s shares, insist on it. “After Dad was gone, we made a real strong commitment to keeping his name and his philosophy in the tops of minds around the company…” Chairman Rob Walton, Sam’s eldest son, declared in a rare public pronouncement in 2003. “Interestingly, it has gotten even stronger over the years.” 1 In effect, Sam Walton doesn’t just haunt Wal-Mart headquarters; he still runs the place.
This is not to say that Wal-Mart hasn’t evolved in important ways since Sam Walton succumbed to bone cancer in 1992. It was only after his death that the company made its massive push into the grocery business at home and its equally large-scale expansion abroad. However, all of the elements that now define Wal-Mart’s business approach and corporate personality—its virtues as well as its increasingly evident faults—were present from the start. Wal-Mart is what Walton made it, and he made it largely in his own image. Although Mr. Sam was more complex a character than he let on, first, last, and always he was an Ozarker. One cannot understand the man—or the world-beating company he begat—without also decoding the Ozarks. Geography is not always destiny, but in Wal-Mart’s case it most definitely has been.
Few have traveled farther in the business world without leaving home than Samuel Moore Walton. From the sleepy little Ozarks town of Bentonville in northwest Arkansas, Walton built a penny-pinching backwoods chain of discount stores into America’s largest corporation, while amassing a family fortune that currently exceeds $80 billion. Yet he never seriously considered pulling up roots and forsaking the remote Ozarks hill country for the bright lights of Little Rock, St. Louis, or Dallas, much less Chicago, Los Angeles, or New York. That Walton’s colossal achievements in capitalism were deeply grounded in the Ozarks seemed paradoxical to most everyone but the man himself. “The best thing we ever did was to hide back there in the hills and eventually build a company that makes folks want to find us,” Walton observed late in life. “They get there sometimes with a lot of trepidation and problems, but we like where we are.” 2
Of the thirty-two stores that Walton had opened by the time Wal-Mart Stores first floated its shares on the public market in 1970, twenty-nine were located in the Ozarks, in towns far too insignificant and inaccessible to attract much bigger chains like Sears, Kmart, or Woolco. Going public put Wal-Mart on a path to massive growth but did not immediately blow Walton’s hinterlands cover. Wal-Mart was not yet large enough to rank among the country’s seventy top discount chains. The minority on Wall Street who were even aware of the company’s existence tended to airily dismiss it as “a couturier to the hillbillies.” The assessment was accurate as far as it went, but grievously underestimated Walton’s ambition and abilities, and the latent power of the Ozarks-centric business model that he was busily devising through trial and error.
The Ozarks, which consist of 50,000 square miles of elevated plateaus and mountains, comprise the only extensive area of rugged topography between the Appalachians and the Rockies. Encompassing all of southern Missouri and northern Arkansas and bits of Oklahoma and Illinois, the Ozarks are roughly the size of Florida. Despite impressive percentage gains over the last three decades, the region’s population today is only about 800,000, or one-twentieth of the Sunshine State’s—and fully 150,000 of its inhabitants are concentrated in its largest city, Springfield, Missouri. And the Ozarks remain what they have been ever since the dispossession of the Indian: one of the whitest, least ethnically diverse parts of America. As late as 1930, the total black population of the Arkansas Ozarks amounted to fewer than 1,000; more than half of its fifteen counties lacked a single black inhabitant. In Benton County, home to Bentonville, blacks have accounted for less than 1 percent of the population since the Civil War.
For a century or more, the Ozarks were a textbook example of what historians call a “semi-arrested frontier.” The area was settled in the 1800s by successive waves of descendants of the English and Scots-Irish Protestants who colonized Virginia and the Carolinas. Few hill-country farmers could afford to own slaves, and the Ozarks’ thin soil and clannish social order hardly tempted free blacks after Emancipation. Like most of the South’s rural interior, the region was barely touched by the great Catholic and Jewish migration from Southern and Eastern Europe of the late nineteenth and early twentieth centuries. Insulated from the complex, fast-moving central currents of the evolving American experience, the Ozarks become a backwater characterized by poverty, ignorance, intolerance, superstition—and fierce individuality. “The typical Ozarks hillman…is almost insanely jealous of his independence and his personal liberty, and will fight to the death in defense of whatever he happens to regard as his rights,” the famed Ozarks folklorist Vance Randolph observed in a 1931 book.
For generations, the popular image of the Ozarks veered between two extremes. Periodically, it was romanticized as an unspoiled rural redoubt of a vanishing “wholly American” lifestyle. Muralist Thomas Hart Benton (a grandnephew of the U.S. Senator after whom Bentonville and Benton County were named) dubbed the area “America’s Yesterday” in a travel magazine article he wrote in 1934. More often, though, the Ozarks were mocked as America’s Dogpatch, a “place where hounds amble along dirt roads, chickens pick for bugs in the yard, and well-to-do families flaunt Sears washing machines on their front porches.” 3 The 1930s comic strip “L’il Abner” (set in the fictional Dogpatch) and the hit 1960s television sitcom The Beverly Hillbillies poked gentle fun, but the Ozarks were the butt of much nasty commentary, as well. The mere fact that Sam Walton was a native Ozarker meant everything in a region where outsiders were automatically viewed with suspicion, especially “city fellers.” Walton’s backwoods brethren collectively may have ranked far below average in every national measure of affluence and accomplishment, but the society of the hill country was as exclusive in its way as that of any of America’s elite urban enclaves. In the Ozarks, as in medieval Europe, native status was conferred strictly by birthright. A man of Walton’s generation could live his entire life in the hills and still be considered a “furriner” by the natives if his father or grandfather was not Ozark-born.
Descended from family with patrilineal roots in the region dating back to 1838, Sam Walton was a true hill-country aristocrat who knew the landscape of the Ozarks intimately. He studied its intricately variegated topography from the air, as a pilot who spent more than two decades scouting new store locations in a little twin-engine plane with his younger brother and fellow pilot, James “Bud” Walton. “I’d get down low, turn my plane up on its side, and fly right o
ver a town,” Sam recalled. “Once we had a spot picked out, we’d land, go find out who owned the property, and try to negotiate the deal right then.” 4 On his own, Sam logged countless additional air miles keeping tabs on the stores he had planted like so many plasterboard saplings throughout the Ozark hills, often visiting four or five in a day—and surviving many a harrowing landing on backwoods runways. He put in so many miles that on night flights home he could identify the towns in the darkness below by the pattern of their twinkling lights.
Walton perused the Ozarks no less intently on foot, tramping many of its hills and valleys in a relentless lifelong quest for quail. (“He hunted,” one of Walton’s three sons once remarked, “like Sherman marched through Georgia.” 5 ) During hunting season, Walton liked to knock off work by three or four o’clock in the afternoon, load his bird dogs into his pickup truck or his two-seat plane, and go off in search of a new patch of backcountry to hunt. Walton was always careful to ask the landowner’s permission—often sealing the deal by giving him a box of chocolate-covered cherries—not only because it was the proper, neighborly thing to do, but because it helped drum up business down at the store. “When these farm folks would come to town to shop, they’d naturally do business with that fellow who hunted their land and gave them candy,” Walton recalled in the early 1990s. “I still meet folks today who tell me their father recalls me coming out to hunt their land in those days.” 6
Securing scores of long-term property leases throughout the Ozarks was an achievement in its own right, for transacting business in the hill country was difficult, even for a native like Walton. “It is almost impossible for an old-time Ozarker to enter into the simplest business agreement without a long series of debates and hypothetical questions and false starts,” Randolph wrote. “Try to buy something from one of them, and it is only with the greatest difficulty that you can get him to put a definite price on it; accept his offer at once and he is terribly ‘sot back,’ sure that he could have easily obtained at least twice the amount mentioned, and feeling somehow insulted besides!” 7
Like many native Ozarkers, Walton was sensitive to the slights of outsiders. “Most media folks—and some Wall Street types, too—either thought we were just a bunch of bumpkins selling stocks off the back of a truck, or that we were some kind of fast-buck artists or stock scammers,” he complained in his autobiography. For the most part, though, Walton hid his feelings behind a shrug and a smile and did what he could to exploit to his commercial advantage the tendency of city folks to underestimate him and his company. Throughout Wal-Mart’s fledgling years, he traveled the country, charming better-established retailers into surrendering their secrets. “He came to my office in New York City and told me he was a country boy from Bentonville, Arkansas,” recalled Herbert Fisher, a pioneering discounter. “He asked if I could be of help to him and then he proceeded to write down every idea I presented.” 8
Walton’s rube routine took burlesque form in a story known within Wal-Mart as the “Chicken Report.” It was based on a presentation that a Wal-Mart executive named Ron Loveless made, with Walton’s encouragement, to an unsuspecting audience of Wall Street analysts during the company’s annual meeting. “People often ask us how we predict market demand for discount merchandise,” Loveless began. “You’ve heard a lot of numbers today, but there is more to it than that. We raise a good many chickens in Northwest Arkansas and we’ve come to depend on them for what we call the Loveless Economic Indicator Report. You see, when times are good, you find plenty of dead chickens by the side of the road, ones that have fallen off the truck. But when times are getting lean, people stop and pick up the dead chickens and take ’em home for supper. So in addition to traditional methods, we try to correlate our advance stock orders with the number of dead chickens by the side of the road.”
As recounted by Bethany Moreton in her essay “It Came from Bentonville,” Loveless then displayed an elaborate series of charts and graphs with Monty Pythonesque aplomb. He explained away one anomalous spike in a trend line as the result of a head-on collision between two chicken trucks near Koziusko, Mississippi, and kept a straight face while showing slides of uniformed “Chicken Patrol” officers inspecting a bird carcass on a two-lane country road. Nobody laughed, a delighted Loveless told Moreton: “The audience sat there nodding and frowning and writing it all down!” 9
In his maddeningly impersonal autobiography, Made in America, Walton had little to say about his forebears other than his parents. What information can be gleaned from census records and other public documents about the first two generations of Waltons to inhabit the Ozarks mostly serves to underscore their ordinariness and their grit. The Waltons were industrious folk who pretty quickly cleaned the dirt from under their fingernails and moved off the farm to do business in town as postmasters, storekeepers, and bankers. Until Sam came along, though, the family produced no truly standout citizens—no mayors, military officers, judges, physicians, or business tycoons.
Sam was named after his paternal grandfather, Samuel W. Walton, who was born in 1848 in Lamine, a small but prosperous Missouri farm community at the northern edge of the Ozarks. Samuel, a farmer’s son, prefigured the family’s grand destiny in a modest way, opening a little general store in Lamine in 1869. Eleven years later, Samuel’s life took a tragic turn when his wife died at age thirty-two giving birth to their seventh child. Samuel closed his store, packed up his children and his belongings, and headed south into the sparsely settled highland interior of the Ozarks. In Webster County, the enterprising Walton created the nucleus of a new town known today as Diggins. Here, deep in the backwoods of the Ozarks, Walton opened his second general store, served as the local postmaster, and also built a thriving lumber wholesaling business. 10
In Diggins, Walton remarried and fathered three more children. The youngest, Thomas Gibson Walton, would grow up to father America’s richest man. However, there was nothing fortuitous about his start. In 1894, forty-eight-year-old Samuel and his young wife died within months of each other, apparently perishing in a flu epidemic. Thomas, who was just two years old, was sent to live with his grandmother in the little Ozarks burg of El Dorado Springs. Years later, he moved to Kingfisher, Oklahoma, where his two older brothers had grown up under the care of one of their Walton uncles. In Kingfisher in 1917, Tom Walton married Nannia Lee Lawrence, the daughter of a well-off farmer. With his father-in-law’s help, Tom bought a piece of property and started farming himself.
It was on the farm that Nan gave birth to Samuel Moore Walton on March 29, 1918. “Sammy,” as he was known throughout his boyhood, had not yet turned four when his mother gave birth to another boy, James L. Walton, better known as “Bud.” Although Sammy and Bud were born in Oklahoma, they were Oklahomans in name only. To their Walton relatives back in Missouri, they were Ozarkers born in temporary exile, it being a peculiarity of Ozark culture that “the children of native parents are native, no matter where they are born.” 11
Standing just five feet five, Tom Walton was a wiry, hard-bitten, handsome bantam rooster of a man who worked hard but fancied himself a wheeler-dealer. “[He] loved to trade, loved to make a deal for just about anything: horses, mules, cattle, houses, farms, cars. Anything,” Sam would later recall. “Once he traded our farm in Kingfisher for another one, near Omega, Oklahoma. Another time he traded his wristwatch for a hog…. He was the best negotiator I ever ran into.” 12 Even so, Tom’s attempts at clever dealing never added up to more than a lower-middle-class living for himself and his family. “Dad never had the kind of ambition or confidence to build much of a business on his own, and he didn’t believe in taking on debt,” Sam wrote in Made in America.
The elder Walton succeeded nonetheless in instilling a ferocious work ethic in Sam and Bud. “The secret is work, work, work,” Tom once proudly told a journalist. “I taught the boys how to do it.” 13 He also imparted to his sons a frugality that verged on the pathological. As one of Tom’s longtime acquaintances put it: “He coul
d squeeze a Lincoln until the president cried. I’ll bet he had the first 95 cents of the first dollar he ever made.” 14
In 1923, Tom and Nan Walton sold almost everything they owned and headed back to the Ozarks with their two young sons. Officially, the Waltons left because they wanted to assure that their young sons would start school in Springfield, Missouri, a much larger and more educationally advanced place than Kingfisher. Nan, who had dropped out of college to marry, laid great emphasis on education as a vehicle of advancement for her sons. In Sam’s own estimation, his outsize ambition was mainly his mother’s doing. “Our mother was extremely ambitious for her kids…” he recalled. “She just ordained from the beginning that I would go to college and make something of myself.” 15
Tom jumped at the chance to go to work for the bank that William E. Walton, his father’s oldest brother, had founded in the 1880s in Butler, a little town along the western edge of the Ozarks. William, who’d married but never had children, groomed one of Tom’s half brothers, Jesse B. Walton, to succeed him as president of Walton Trust Company and its affiliate, the Walton Mortgage Company. Jesse hired Tom to open a loan office in Springfield, which was home to various and sundry Waltons. As an adult, Sam’s earliest memories would be of Springfield, which is where he not only started school but also moved decisively into the Walton family orbit.
The Waltons hadn’t lived in Springfield more than a few years before Tom was transferred to Marshall, a town of 5,000 a bit north of the original Walton family homestead in Lamine. The family continued to move about central Missouri until 1933, when they landed in Columbia, a bustling college town of 30,000 in the Ozark foothills. Nan insisted on the move, arguing that the Columbia address would help her boys gain admission to the University of Missouri.
The Bully of Bentonville Page 3
