YouSaid · the spoken record

Joe Coulombe

lines on the record: 66
first: 2021-06-28
most recent: 2021-06-28
sittings or episodes: 1
sources: podcast

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“So he had to live with this regret for a huge part. So I'll just end on this. But do I regret having sold? Yes, I admit it to my own self I was not true when I sold. I regret not having the guts to ride out the loss of the tax exemptions, the employee ownership problem, the threat of death taxes. Carter's threat to eliminate capital gains preferences, and all of the other fears real or phantom in late nineteen seventy eight. I have to admit the truth that I regret having sold Trader Joe's, and I've had to pay something for this beyond the loss of my shadow. Thanks for listening Joke alum. That was the ending of the book. That is a powerful, powerful ending. Right to the point, and then it ends.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Entirely. I sensed on my prerogative of complete control, the prerogative of an entrepreneur posing as an employee was being progressively eroded. And this is when he realizes that he's going to have to leave the company that he loves. And the reason I'm closing on this and the reason I think this is the most important part of the entire book is you don't want this. You do not want a regret this large, especially towards the end of your life. He cannot create another Trader Joe's. That will never happen. And he still lived for like another close to 40 years after he left Trader Joe's.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Liaison between the German owners, between himself and the German owners, right? And so he's like, even after I sold, I plan on working Trader Joe's for the rest of my life. Things are going to happen. Remember, when you don't own the company, you have no control. And so you don't actually have control of your destiny, which he learned. Because I thought I'd spend the rest of my life reporting to Deter. So I sold. Do I regret it? I'll answer that in the next chapter. And you can see as he sussed up the question, you're going to know the answer is yes, or he would have just answered it, right? Or if the answer is no, he would just say it. Six years after selling Trader Joe's, there were bumps in the road. I got shocking news. Dider quit. This isn't supposed to happen in Europe. My forecast of spending the rest of my career working with him blew up. And so then you have all this, remember, he's used to being in charge, and now you have somebody coming in trying to overcheck his decisions, and eventually he's going to get fed up, and that's when he leaves the company.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, Joe, the first graduate business student, the first year graduate business school student might ask, what was your exit strategy if it wasn't to sell, because he initially turned down that he never planned to sell. He said no multiple times and then he had all this fear, right? So then what was your exit strategy if it wasn't to sell or let your kids take over the business? This is Joe's answer. I detest the term exit strategy when I hear young entrepreneurs bragging about theirs. As if a business is something one builds and casts off. There is an emotional part to business. It's not just financial. He loved Trader Joe's. It was a part of him. It was his soul. I had never planned to exit by the way of sale to outsiders. My personal exit strategy pre sale was to work in the business as long as I was able to, and this didn't change with the sale because I thought I'd spend the rest of my career reporting to Deter, Dieter is the guy.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“self employed, that window can never be as open when you're an employee. Because he's going to work for the company for almost 10 years after he sold, which is also very surprising. Tells you he didn't want to leave. Come on, man. But Joe, didn't you think about the risk of not making an even greater fortune if you said yes? So were you worried about the fact that you could have made more money in the future if you just kept it? And his point was, no, I had studied Aristotle's concept of the golden mean, the Hellenistic ideal of sophine, I don't know how to pronounce that, which translates to nothing too much. The amount that was offered to me was enough by the nothing too much standard. Essentially saying, I'm not like, I'm not optimizing just to be the richest person in the cemetery, right? We have led a very comfortable life ever since. One of the really nice things about my career is that I was never an absentee dad.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, I have a lot of uncertainty, and I'm worried about the future. I'm somewhat pessimistic about the future, right? And his point later on is like, I wish I had the courage to just go with it. I knew I loved what I did, but I was scared. And that's normal. Like, I'm not like, I think it's important to learn these lessons because humans make irrational decisions even when we're not afraid. We are much more prone to make irrational decisions when we're afraid. And that's his point. That calculus included the fact that our after-tax proceeds from the sale would be large enough to permit us, meaning his family, to be free of economic worry for the rest of our lives assuming I didn't do something stupid with the money. Makes sense. That calculus of what do I risk if I sell? So that's if I don't sell, right? Now he's talking about what do I risk if I sell, included the fact that Trader Joe's was my Zen window on the world. I experienced the world mostly through Trader Joe's. That's an advantage of being.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Frequently people see the enormous successor Trader Joe's ask me why I sold. Let me put it this way. I ran Bernie McDonald's risk calculus. What do I risk if I sell? What do I risk if I don't? That calculus of what do I risk if I don't included interspal death taxes? So this is, I guess this tax was repealed under Reagan in the 80s. So he defines it. The hateful tax that my widow would have had to pay if I died. A tax that could bankrupt a now leaderless company if he died. That calculus included President Carter's threat to end capital gains tax preferences in 1980, a threat that would have increased capital gain taxes for me from thirty three percent to seventy three percent. So he sells the business in the 70s, okay? It was a very rough economic time in American history. And he's going through the, I'm going to list all these other issues.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so I'm going to go over many pages here. This is going to be one long close. And this part is so, so important. Because he had another career, I think he was like 50 something, 58 when he sold. He told his life's work and he regretted it. So I'm not going to bury the punchline.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so then something surprising happens. He sells Trader Joe's, and I was really shocked. He sold, I think, in 1989. And as I'm reading it, there's this giant German company that owns a bunch of grocery stores all over the world. And I was reading this section. I was like, why does this sound so familiar to me? And then I got to the last page. And he says, sole price had sold FedMart the previous year to another German capitalist, a sale that ended in an explosive exit by Sol and the subsequent collapse of Fedmart. So I was like, okay, I knew. I was like, I swear some other German company came over and bought an American company. I couldn't remember why. He reminded me it was in Solprice's book.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“most affluent part of the population and you give them a discount? Another main theme of the book and something we've seen over and over again down with committees. Businesses, successful businesses are run by formidable individuals. I want to make it quite clear that I call the shots. I rejected management by committee. I think, however, that my regime was somewhat short of despotic. I like the quote about Pierre Montau, the great conductor of the San Francisco Symphony, this quote. Montau never tried to get a performance out of an orchestra. He was always giving one with them.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I would say that's another main theme of the book applied to different ways. The idea is just make, like, you can limit, if you limit the amount of details and then make every detail perfect, like you have something that's more manageable, this fetisation of just being bigger and bigger and creating this unwieldy thing that nobody has control over eventually those things will collapse or they'll collapse a lot faster, something that's small and within your control. And I think now what Triton's been around for almost 60 years, something like that. I think they only have 500 stores. I mean, not a small company means, but they could have grown a lot faster than that. More comparing, contrasting here between Trader Joe's and other groceries, no closeout sales, no coupons, and no senior discounts. Giving discounts, and I'll just expand on the no senior discount thing because I was out as funny. And he quotes Munger, one of my heroes, giving discounts to people over 60 is to borrow a phrase from Charlie Munger, a type of dementia I can't even classify. Here you have the fastest growing”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is what I mentioned earlier. If you study the history of your industry, you can avoid just by avoiding being stupid, in this case, don't have too many stores that leads to bankruptcy. My preference is to have as few stores as far apart as possible and make them as high volume as possible. Trader Joe's sales were $1,000 per square foot, where the supermarket was just averaging $570 per square foot. 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. So all they did was look, why are all these guys going bankrupt? What are they doing? And let me just avoid that. I want to brag about something here. In 30 years, we never had a layoff of full-time employees. 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.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then he summarizes the section on private label products, which is what they're known for today. I wound up wishing we sold nothing else. It took them a long time. This is the why behind unique products. Products needed to be differentiated in order to avoid direct price comparison. So the direct price comparison is the game that his competitors, the large grocery stores are playing. He's like, I'm not going to play that game. I'm just going to have products that are so different that you can't compare prices. And so he expands on this idea. He says, my years at Toronto Markets convinced me that where there is no competition today, there will be tomorrow. The answer was to design a store that has no competition. That's why Mac the Knife should not carry any skew in which it was not outstanding. That reminded me of Ivan Chenard, founder of Patagonia, that rebel. He says something in his autobiography, Let My People Go Surfing.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Since so much of the cost of fruit juice is in the glass container, we were able to reflect big savings in the retail price. So in other words, he's willing to seize temporary opportunities if it delivers value to the customer.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“And again, a lot of this came out of the idea that you have to survive deregulation, you're a completely new environment. Essentially, the rules of the game he was playing was changed overnight. Another thing that he talked about is this concept of discontinuity. And he's like, listen, grocery stores will try to sell you, you know, they'll sell you Folgers' coffee. They've been selling you for 10 years. They'll sell it to you for the next 10 years. We're going to offer things if they're of good value to the customer, even if they're temporary. No effort was made to always be in stock. The buying from Trader Joe's was as opportunistic as in wines. Some of our great values, and this is just clever, some of our great values in fruit juice were generated by getting the glass containers for cheap. Odd lots of glass containers show up from time to time. Let's say that a prune juice tries an odd shaped container and then drops it. The leftover inventory gets closed out at a bargain price, so we would buy up these odd lots and ship them, say, to our”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sale. He was talking about a lot of the grocery stores and make so much money on milk, and I forgot other product he mentioned. Above all, we would not carry an item unless we could be outstanding in terms of price and make a profit at that price. So actually, he says we'd have to be outstanding on price and uniqueness or uniqueness. And we'd have to make a profit at that price.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Punchline depth of assortment now was of no interest. That's extremely different. Go to a normal grocery store, you'll see seventeen different ketchups, fifteen different brands of paper towels. He's like, no, and Costco does the same thing. He's like, no, you don't need, I don't want to choose between 15 things. Just tell me the best one and I'll buy it. No fixtures. This is getting into furniture. The steward have most of its merchandise displayed in stacks with very little shelving. This implied a lower skew count. High skew stores need lots of shelves. The average supermarket carries almost 27,000 skews in 30,000 square feet of sales area or roughly one skew per square foot. Trader Joe's carried one skew per five square feet. Costco, one of my heroes, carried about one skew per 20 square feet, as much as possible I wanted products to display in the same cartons in which they were shipped by the manufacturers. Another difference, there would be no loss leaders. They have to make a profit on every side.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“He did not just mindlessly open a grocery store, look around, and just copied what everybody else was doing. He realized that's a dead end. Let me think things through for myself and let me trust my instincts and the fact that I have more product knowledge than my competitors. The good ones know more. Instead of national brands, focus on either Trader Joe's label products are no label products like nuts and dried fruit. This was intended to enable Trader Joe's label to pick up momentum in the stores, and it worked. Carry individual, again, he's all he's describing to us here is the different Trader Joe's is saying, I don't care how grocery stores are doing it. This is what I'm going to do it. So we're going to carry individual items as opposed to whole lines. I didn't know this. We wouldn't try to carry a whole line of spices or bad candy or vitamins. Each skew had to justify itself. So normally salespeople come in and be like, hey, you know, buy six of this brand, these products are very similar to each other. It's like, no, we're going to buy one. In that case, it's not even their own brand. Depth, this is...”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Would have liked it to sell even at non outstanding prices, we stopped all full case discounts and we persistently shortened the hours. And so the reason this may seem like some random things I'm including in here, but this is why I just read that part to you because what he says here, we violated every received wisdom of retailing except one. We delivered great value, which is where most retailers fail. If you go back to the meeting that Jim Sinegal, the founder of Costco, had with a young Jeff Bezos, I think they met at a Starbucks inside of a Barnes& Noble, and that changed Jeff's approach to running Amazon at the time when I think the only thing they sold, if I remember correctly, were books, DVDs, and music maybe. But anyways, Jim just lays out how different Costco is. They reduce amount of SKUs. They make most of their money on, they mark everything up across.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Features with Trader Joe's. And so, what does he mean about Costco? He's talking about reducing the SKUs, right? So a typical convenience store will have like 5,000 SKUs, so individual products, right? Like these big supermarkets that exist today, they have, I think, like 25 to 30,000. Trader Joe's is going to have no more than 1,500. So he's just getting into the thought process behind creating what would be a fundamentally different experience for a grocery store. So it talks about before and after. Each store probably had access to 10,000 stockkeeping units, which is a skew, of which about 3,000 were actually stocked in any given week. But by the time I left in 1989, we were down between 1,100 and 1,500 skews, all of which were delivered through a central distribution system. The managers no longer had any buying discretion. And along the way, not only did we drop a lot of products that our customers...”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Explain it and it's pretty clear in our cheese. This is funny because from a cheese department, in our cheese department, we were literally taking whole wheels of cheese and cutting them into pieces. I took this as an analogy for what we should do with everything we sold. Getting rid of all outside salespeople was corollary to the programs that were to unfold during the next five years. Remember, what does normal grocery stores do? They're just selling other people's products. Yeah, they're going to have private label as well and they'll copy what sells. I think every grocery store in the world does that. But his point was like, okay, I don't want he's making a transition for only selling his own products, right? So he's talking about get these outside people. No, no outside people. In Mac the Knife, no outsiders of any sort, we're going to be permitted in the store. All the work was done by employees. The closest thing to it that I see these days is Costco, which shares many.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“was to become a genuine retailer. And this is fascinating. So, this says he says retail comes from a medieval French verb retailer, which means to cut into pieces. Taylor comes from the same verb. And so he's saying, how can we actually, can we define what we're doing and how we're going to do it? So he says the fundamental job of a retailer is to buy goods whole, cut them into pieces, and sell the pieces to the ultimate consumers. This is the most important mental construct I can impart to those of you who want to enter retailing. Most retailers have no idea of the formal meaning of the word. Time and again I have to remind myself just what my role in society was supposed to be. Many of the policy decisions for a retailer boils down to this closely should we stick to the fundamental retailing job. And don't worry if it's a little confusing he's going to.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“All right, so let's just jump into it. First, he starts this chapter with another quote innovation is less an act of intellect than an act of will. I love that. The subtleties can come later. The creation of Mac the knife was, above all, an act of will by my colleagues and me to survive. And whether surviving from is this rapid deregulation of his industry. And he says deregulation is always a good thing, but the reverberations that these quick changes in business can actually push you out of business. And so they were worried they were actually going to go under. He says, I'm just going to give you a little bit of background and then really going to focus on his ideas more than the deregulation part. The retail grocery industry went through the same kind of bends that the airlines suffered in 1981 when they were deregulated or that electric utilities had suffered. Freedom can be an unwelcome thing. We were quote unquote protected by price controls on almost 50% of what we sold to those price controls are going to be removed. He's talking about that's the before. Almost 50% of what we sold actually had price controls. And so that's when he's like, okay, we have the most important strategic decision we made.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so now we got to the MAC the knife part. This is where Trader Joe's becomes Trader Joe's. It's been known as Trader Joe's for like a decade and a half. And this part, and they're finally figuring out their formula, right? This part is very important and very, very long. I got highlights that go over multiple, multiple pages.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“And partly because we kept the implicit promises with our clientele. There are not many colt retailers who successfully retain their cult status over a long period of time, and that's the whole point about not optimizing just for size. And this is the contrast here. So not many successfully large retailers are going to hold their cult status, right? And part of that is because as you grow, the larger you get, the harder it is to actually keep your promises, your implicit promises to your foundation, what created the enthusiastic customers have created the cult to begin with. But across America and every town, there's a particular donut shop, pizza parlor, bakery, bar, etc, that has a cult following of true believers. Beware of ever betraying the true believers. So another thing I learned from Danny Meyer, he's sitting next to, he's complaining about something to, there's the guy from, I forget his name, is his Stanley.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“You still get value that is so important. Okay, so moving on. He talks about intentionally trying to make Trader Joe's a cult, and this is why word of mouth is the most effective advertising of all. I have been known to say that there's no better business to run than a colt. Trader Joe's became a cult of the over educated and underpaid, partly because we deliberately tried to make it a cult.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so it was during this, all this learning about how to sell wine, he finds his target market. This is the target market that Trader Joe's built on. Being king of the low price, high value wine training in California was one of the greatest satisfactions of my career. That's the punchline. His prime market for wine winded up being over-educated and underpaid Californians. And so a lot of the early Trader Joe's would be around areas where there might be a lot of colleges, highly educated population, but regular middle class workers though. This I mentioned earlier, growth for the sake of growth still troubles me. It seems unnatural, even perverted. He prefers small teams, small stores. At the start of the next chapter, he has a quote.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it used to be a factory. And so it says the old factory had added assorted soul sheds. So we took about 400 square feet of a tool shed and declared it Trader Joe's winery. We bought a crusher, a stainless steel formation tank, and we bought truckloads of grapes, and the whole office staff pitched in, including their kids to crush grapes.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“We could have gotten a new one for the state for about $300, but we wanted an old one. So we found one that this guy from 1930 decided to sell his license, which should have been issued in 1933 and bought it for $10,000. So why the hell he could buy a new one for $300 or an old one for $10,000? Why is he buying one for $10,000? New master wine grower licenses didn't have the same grandfather privileges of that nineteen thirty three license. With that license, we could legally hold wine tastings of any wine, even if we didn't have our own label on it. We could also legally act as a wholesaler of any wine, and this led to the sales of thousands of cases to some of the best private clubs and restaurants of Los Angeles, essentially paying for the additional cost, right? The wholesaling privilege was internally valuable to us too. For tax reasons, we operated”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“many of whom were sceptical if not hostile to my plans, and above all to my employees If you want to know what differentiates me from most managers, that's it. From the beginning, thanks to Ortega, I've been aware of the need to sell everybody. 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.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so we go to another influence of his that came from a book. So more ideas on entrepreneurship from a book. And then the need to sell everybody. Most of my ideas about how to act as an entrepreneur are derived from the revolt of the masses by Jose Ortega, the greatest Spanish philosopher of the 20th century. I believe this book still offers the clearest explanation of the times in which we live, and I believe it offers a master plan of action for the would-be entrepreneur who usually has no reputation and few resources. And so he's going to take an idea directly from the book, and he's saying essentially this is what I did my whole career, or take office and explanation of how such a person can get an enterprise started. In the context of the career of Julius Caesar, an entrepreneur who started without power, Ortega says, human life by its very nature has to be dedicated to something. An enterprise glorious or humble.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is the note of myself as Trader Joe's final form took a while to discover. Says, I'm going to disillusion those dear souls 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.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Modes of dress and menus were being reduced to a common, what he calls a low denominator. And he's giving some examples of that. They would eat swans and TV dinners, drink minute-made orange juice, use best foods mayonnaise, and drink Folger's coffee. Grocer's, and this is his whole point about, I guess it's something we've talked about over and over again, the podcast, it can be reduced to David Ogilvy's maxim, the good ones know more. Grocers didn't need to know anything except what was going to be advertised next on I Love Lucy or Gunsmoke or any other popular TV show of the day. And so Joe's whole point is like this homogenization is slowly degrading because now you have people that are being more educated, they're traveling more. And even if they're a smaller amount of people, they're going to want, they want to set themselves apart by not just consuming the same products as everyone else. That's his opportunity. I felt it's newly educated group that was slowly emerging would be dissatisfied with masks.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“From Budweiser, and they're just competing on price. And so you'd pick up like a Sunday newspaper and you'd see all the grocery stores in your area. They would just advertise all the same products and they would just say, hey, this is a double coupon or this is 30% off. And Joe saw that as just a race to the dead end. He had no desire to do that. He wanted a product that was vastly different, that was available nowhere else. It just took him two decades to figure that out. And there was a lot of pain and struggle. So this is where he saw the opportunity. Television was the most powerful advertising medium ever invented. And he began to homogenize American culture to a startling degree in a way we can think about the world that we live in is the internet has reversed this trend. So now there's all kinds of deep, small but deep niches on all kinds of different things. You know, back then you could watch three TV shows or excuse me, three television networks. Now you have millions of people all over the world producing content. This is where we were in 1966 and nations who have regional accents.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“I saw an opportunity to differentiate ourselves radically from mainstream retailing to mainstream people. He's finding his edge, he's finding his niche just how homogenized America had become by nineteen sixty six deserves its own chapter. When what I saw in those new, this is his opportunity right here. What I saw in those news stories were the first cracks in the homogenization. And so before I get into why he actually saw his opportunity, this is a description of his edge. As we evolve Trader Joe's 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 are turning our backs to branded merchandise. So he's not talking about his brand there. He's saying that if you analyze what grocery stores are all doing at the time, they all sell the same thing. They're getting their stuff from Procter& Gamble, from Coca-Cola.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“The big change was the GI Bill of Rights that went into effect in the 1940s. A second news item, so this is how he's connecting everything, right? A second news item 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. In Pronto Markets, we had noticed people that had traveled were far more adventurous than what they were willing to put in their stomachs. Travel is, after all, a form of education. What I saw here, this is how he connects the dots, was a small but growing demographic opportunity in people who were well educated. Eleven and the whole convenience store genre served the most basic needs of the most mindless demographics with cigarettes, Coca Cola, Budweiser, candy, bread, and eggs.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“The history of the retail industry in America and realizing they're all going bankrupt because they can't stop building. They're just growing for growth's sake like cancer. Yes, I could have sold out to 7-Eleven, gone to work for them or somebody else, but this is really important. But the only real security lies in having your own business. And this left-hander was well ahead of the curve on that one. And so around the time that he's struggling with this problem, like, what should I do next? This is the next section I'm going to read to you. This is what a way to connect dots here. So he says the clue, the keystone of the arch of Trader Joe's was a small news item in Scientific American in 1965. In terms of creating my fortune, it is the most important magazine I've ever read. See what I mean about him? He's not bearing the lead. Pay attention to this part is what he's telling us. The news item said that of all the people in the United States who were qualified to go to college in 1932, only 2% actually did. But by 1964, all the people qualified to go to college, 60% actually did.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Beginnings of differentiation through product knowledge exemplified by the egg program. Now where were we going to go with it? We didn't know it yet, but we were well on the road to Trader Joe's. And so now we see his mindset, this intermonologue that's happening where he's like, okay, well, Pronto, why he's going to morph Pronto into Trader Joe's? The basic problem is that convenience store retailing is a commodity business that is hard to differentiate. That is the essence of Trader Joe's reminds me of a quote from Peter Thiel in the book Zero to One. You want to capture and capture lasting value. Don't build an undifferentiated commodity business. That's a quote from zero to one. We see Joe is saying the same thing here. He's like, there's going to be a ton of competitors that can come in. The more convenience stores that are built around me, the less profit I'm going to build. There's no way for me to actually stand out. I've got to figure out a different concept. What I needed was a good but small opportunity for my good but small company. And that's another way to think of Trader Joe's. He's not into growth for growth's sake. He prefers small stores, small crews. He'll go into detail about studying.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“And later to build the prophets, I needed 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. So let's define before I finish that paragraph, let's define discontinuity. A sharp difference of characteristics between parts of something. The Pronto markets chain at the time of 7-Eleven's arrival had the highest sales per store of any convenience store chain in America by a factor of three. And this is what he says. Why? That was thanks to a high wage policy, meaning he's got better people, better locations, a few liquor licenses, and the”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very straightforward and obvious. You pay the same price, but you get 12% more. And even more importantly, the supermarkets couldn't follow the supply of extra large simply wasn't great enough. And that is the whole thesis. And this is going to take him close to 20 years of running Trader Joe's to realize that. The power of differentiation, the fact that when you go into Trader Joe's today, they are selling you products that you can't get anywhere else. It took him, there's three different variations of Trader Joe's, and he has funny names for all of them, and we'll go through some of them, and I'll explain why. But the last one's called Mac the Knife, and that is Trader Joe's As It Is Today, where you have a small, intentionally small store, intentionally reduced hours, selling largely all your own products. The ads that we began running for these extra large eggs revolutionized Pronto markets, and they helped to generate the profits that I needed to stay afloat.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Mind blowing, right? So it says that 30 he's describing himself that 32 year old almost bankrupt president of Pronto knew nothing about wine or anything else he sold. In this he was like all grocers of the day, of that day and today. The buyers at the supermarket chains knew nothing about what they sold and they don't want to know. Our first product knowledge breakthrough was extra large eggs, a story that graduate students love to hear. So into my time in the office came the eggman. He had a problem. Too many extra large A eggs. He offered them to me at the same cost as large AA eggs that all supermarkets advertised. I would be able to sell extra large, which by state regulations weighed about twelve percent more than large for the same price as large. So the benefits to the consumers.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Be focused on the other end of the value that you actually get, not the price you pay. And he talks about the best people who are not going to work for what you want to pay them. Moving on, I would say this echoes Jeff Bezos' idea where he talks about over and over again that there's one way and two-way door decisions. One way you have to think long and hard about because they're not easily reversible. Two-way decisions you should be optimizing for speed. And so Joe saying similar things here. Early in my career, I learned that there are two kinds of decisions. The ones that are easily reversible and the ones that aren't. 15 year leases are the least reversible decisions you can make. That's why I kept absolute control of real estate decisions. Okay, so now we get to one of the most important realizations of its entire career. He's realizing the emperor has no clothes, that grocers don't know anything about the products they sell and that he can carve out an advantage just by knowing more, which seems”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, how do you solve the root problem, right? Each employee, including not by their immediate superior, which would be the stir manager, but by the manager's superior. The principal purpose of this program was to vent grievances and address them. I think this program was as important as pay in keeping employees with us. Turnover is the most expensive form of labor expense. Goodman, he's going to get right to the point what I was just trying to tell you. Good people pay for their extra productivity. You can't afford to have cheap employees. So he's realizing this. We're in the 1960s. We're on the same time that David Olgovee is realizing this. In his books, he says, listen, if you pay peanuts, you get monkeys. And Olgovy's point was that most people are focused on the wrong side of the equation. They're looking at price and not value. People's what you pay value is what you get.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so he's going to go into more detail on that later. What Joe would tell us is like the wages that you pay, paying the highest wages possible as an asset, not a liability. And I think a lot of businesses look at it as a cost. And he'll go into more reason about why, and he talks about how expensive turnover is. And if you can limit that by paying people more, you get better quality. It's just over and over again. It all ties together. So we'll get there, though. I'm ahead of myself. He's giving us some ideas though, specific ideas about how he ran Trader Joe's and I thought this was idea was unique and interesting. Equally important was our practice of giving every full-time employee an interview every six months. At the time he was doing this to avoid unionization, which was occurring a lot in different industries, especially in Southern California at the time. And he says a huge part for employees wanting to unionize is because they have a bunch of unlistened to grievances.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so let me go back to this part. So now he's quoting we're still on the same page where he's saying tenacity is important, it's brilliance, go with a reasonable strategy that you won't quit instead of an optimal one that you have to sit around and wait for. So he says non-convex problems are puzzles in which there may be several good but not ideal answers which classical search techniques may wrongly identify as the best one. And now he's going to give us an insight into his thinking at this time. I concluded that I didn't have to find an optimal solution to Pronto's difficulties, just a reasonable one. Trying to find an optimal 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, and this is what I was referencing earlier where he does not bury the lead. This is the most important single business decision I have ever made to pay people well.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“World War I. It is the best book on management and especially mismanagement I'd ever read. The most basic conclusions I drew from her book was that if you adopt a reasonable strategy as opposed to waiting for an optimal strategy and stick with it, you'll probably succeed. Tenacity is as important as brilliance So that's important. Let me read that actually again. So he says the most basic conclusion I drew from her book was that if you adopt a reasonable strategy as”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“All kinds of stuff. Articles he's reading, it's just really fascinating how he's taking his own personal curriculum and then he applies it to his business and then obviously applies it to the writing of the book. He starts the next chapter where he's going to talk about why he stole his philosophy on running a business from this book, Guns of August. But he starts the next chapter with this, well, let me just read you the quote and I'll tell you why this person's important. If all the facts could be known, idiots could make the decisions. That was Tech Thornton. He's the co-founder of Lytton Industries, and he did that quote back in the 1960s. He says, Joe says, this is my favorite of all managerial quotes. Text Thornton will be familiar to some of you because when I did one of the most important people I discovered through the research of the podcast is Henry Singleton. And I discovered that because I was reading all about, I was reading everything I could get my hands on a Warren Buff and Charlie Munger. And they both repeat.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“These are 15, 25, sometimes 30 year agreements. They're on Pronto's leases. I figured they wouldn't let you go bankrupt. So there I was, the controlling stockholder of seven Pronto markets living with Alice who did our accounts payable from home and two kids in a house we rented for $150 a month. We were leveraged to the gills. Chapter 11 was a possibility. And then this next sentence is fantastic, but I was reading The Guns of August by Barbara Tookman with an implicit concept of multiple solutions to non convex problems. And that's one other thing that makes reading this book so enjoyable is that he's extremely well read. He's constantly talking about, hey, I read this book. I took this idea, applied it to my business, the whole thesis behind founders, obviously. He starts every chapter with quotes from sometimes their biographies, sometimes their ancient philosophy, literature.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“On Alice in Mind's personal signature. So first of all, how bad do you really want it? Think about what the crazy thing this guy is going, he's all in. Now he's going deep into debt, but he's willing to sell his house and then personally guarantee the bank loan that he needs to buy Pronto. Years later I asked Tom how he'd been so ballsy. It's simple, he replied. Wrexhall was on Pronto's leases, and I figured they wouldn't let you go bankrupt, so he's going to talk about leases. Anytime you read a book, I think of Danny Meyer, his fantastic book Setting the Table. He goes into detail about it. The main advice he would give, aspiring restaurateurs, he has a lot of insight. Into leases and what you want to avoid. And we see the same thing with Joe, and I'll go into more detail about that later. So Tom at Bank of America is like, listen, Rex Hall's a huge company. It's not like you can get out of these leases.”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source
“I find, by the way, but I just feel like he doesn't bury the lead But how the hell am I going to buy Pronto? I don't have any money. So he says there's a huge heading in big, bold letters. The problem was I didn't have any money. He's not making us, like he does the work for us to some degree, right? We had $4,000 from Alice's, his wife. We had $4,000 from Alice's savings from her teaching school before she had kids. We were able to live on my $325 salary. We sold our little house in which we had equity of $7,000. I borrowed $2,000 from my grandmother and $5,000 from my father. Seven, this is such a remarkable sentence. 17 years later, when I finally sold the company, the cost basis of my total investment was only $25,000. I sold half the stock to my employees at book value, and God bless those people who had such faith in me. But we were still way short when I went to see Tom Dean at Bank of America. I presented my case, and on the spot he loaned me the money”
2021-06-28 · Founders · #188 Joe Coulombe (Founder of Trader Joes) · IDENTIFIED FROM THE TRANSCRIPT · source