Taking Care of Employees is Better for Bottom Line

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Taking care of employees through higher wages, benefits, and opportunities for growth leads to numerous benefits for the company's bottom line. Costco, for example, pays an average hourly wage of $26 compared to Walmart's $19.50. This results in lower employee turnover, with Costco experiencing just a 7% attrition rate compared to the typical 20% in the retail industry. The company also saves on costs associated with onboarding and training new employees. Additionally, employee loyalty leads to reduced merchandise shrinkage, with Costco reporting only 0.15% of sales as unaccounted for merchandise. The company's strong bias towards internal promotions further reinforces employee loyalty and ensures a senior management team with extensive tenure. These factors contribute to Costco's success and demonstrate the powerful link between taking care of employees and the company's bottom line.

Costco is not only Charlie Munger’s favorite company of all time (plus he’s on the board, natch), it’s an absolutely fascinating study in how seemingly opposite characteristics can combine to create incredible company value. For instance: Costco has the cheapest prices of any major retailer in America — and also the wealthiest customer base. They pay their hourly workers 30% above the industry norm (and give them excellent healthcare + 401k benefits) — and are almost 3x more profitable on labor than Walmart. Speaking of Walmart, Costco stocks 40x fewer SKUs than their Bentonville-based rivals — yet sells an average of 15x more volume of each. And oh yeah, practically all of Costco’s C-Suite started their careers as baggers and checkout clerks! Tune in for a mind-bending exploration of one of the world’s most iconic — and iconically unique — companies.

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