Jim Collins: Now, obviously GE had a lot of outside capital, they were trying to bring electricity to the world, they needed a lot of capital, but Bill Hewlett and David Packard had a few hundred dollars from their mentor, Fred Turman who helped them basically try a bunch of little products and they boot strapped. And they did little contracts early on, they did a contract for electronic shock jiggle machine for people, and they had a clock drive for a telescope, and electronic bowling alley sensor, and a number of things in the beginning, to bring in some revenue. Yeah exactly, that's what they were doing. If you take a look at Morita and Ibuka at Sony, try the rice cooker, if that doesn't work, then try this thing; they would do anything to just try to keep the doors open, while running very lean. The original A&W Root Beer franchise with Marriott, just get it running, get some root beer sold. It was fascinating to look at, how did they end up as sort of evolving? (Marriot) goes to Washington, DC and opens a root beer stand in the summer, people like root beer in the summer. The difference is, that winter comes, so he has a root beer stand, nobody wants root beer in December. So, he expands, I've got to do something, I'm really good, people like coming to my place, so he started offering food, and he had the first Hot Shoppes. So, he had this store, Hot Shoppes and people began to come in and then after a while, and eventually scaled that idea up and had a number of these Hot Shoppes and then as an experiment they tried a, they said, you know, we're really good at having people feel good when they come here, maybe we should do a hotel, they tried one and it worked. And that eventually became the Marriott that we know today. But, it was a little thing, the greatest ones,not the idea that somehow they started out with tremendous advantages, not that they had all this capital so that they did it quickly, most 'overnight successes' are about 20 years in the making.
We talked about Wal-Mart; Wal-Mart's big in China now. Sam Walton didn't open his second dime store until seven years after he started the company. A quarter of a century, 25 years into Wal-Mart's history, he had 38 stores. 38 stores is a lot, but that took 25 years to get there.
All of them, they worked really hard to just get one click onthe flywheel, two clicks on the flywheel, they tended to boot strap, they were very good with cash flow, they were building their culture from early on. And eventually they became a very large company. But, it was a real step-by-step process in most cases.
And here's the really interesting thing. If you look at the less successful folks that they were competing against, that we looked at as the comparisons, and you say, well, you have this image, what you have to do to start a company is you have to have a great idea. Was the rice cooker a great idea? Was the clock drive for a telescope a great idea? They didn't even know what they were going to make, right? What we're going to make is postponed, we're going to start a company. And we go back and look at them and what made them different, is that in the end, they understood that their ultimate product was the company. And from very, very early on, they were clear they were building a culture. They were clear that they were building a system. They were clear that they were building a company that may evolve into different businesses, but it was the company that was their ultimate creation.
Which is very different than "I'm going to make a computer," or I'm going to, I've got this one particular idea, it's all about just having the idea.
The less successful companies often had a great idea. These great companies often had some failed ideas early, they learned from those ideas. And because they boot strapped and managed their cash flow and had money from family and from friends. Little steps eventually became foundations of what became great companies. So, if you look over at the United States, you see Wal-Mart, you would see HP, you would see all these companies and you would see them as big companies today, but there's a small startup story in every one of them.
And almost none of those stories were somebody who had great advantages.
Thomas D. Gorman: Nor, I'm guessing from listening to you, were the founders typically motivated by "I'm going to go out and make zillions of dollars."
Jim Collins: No, I think they would have been happy just to pay themselves at first. They were motivated by the desire to create something. Did you find a pattern among these great successful company builders, a pattern in terms of humble roots versus not so humble roots, school of hard knocks versus coming from easy street, coming from famous schools versus not, or was it pretty much a mixed bag? What I'm doing is processing through my head the folks who were entrepreneurs and built great companies, but I have to put them against other entrepreneurs who didn't build a great company. And I can't see a real difference between them on that. However, there are very few of them that came from privilege. Most of them had not (had such benefits) necessarily. There's a lot of advantage coming from austerity, because if you've grown up in a garage, or you never had that much, or you had some difficult times, then it's not so scary to start something, because you already know what the difficulty is like. Sometimes they might have even come from a reasonably stable home but they had some other shaping life experience.
David Packard worked in a mine here in Pueblo, Colorado, when he was in high school as part of earning some money to go away to college. And a big part of his shaping experience was he felt that the way people were treated in that mine was terrible. And he said, I want to build something that stands as the antithesis to that. But here's a person, I think his father was a lawyer, but he went and dug holes and worked in a mine;(the experience) probably helped him when he was in the garage.