The Power of Incentives in Business Growth

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Incentives play a crucial role in business success, as emphasized by Charlie Munger. He repeatedly stresses the importance of never overlooking the power of incentives and getting the incentives right, which is the most important rule in management. Munger's advice is exemplified by a successful entrepreneur who recognized the need for incentives when expanding his business. By sharing profits and creating a partnership structure, he incentivized his employees to grow and manage the business effectively. This strategy proved to be a key factor in the entrepreneur's ability to grow his business successfully, demonstrating the significant impact of incentives on business growth and management.

What I learned from rereading Les Schwab Pride In Performance: Keep It Going! by Les Schwab.

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(8:00) I didn't know how to ride a bike. We never had one. All the other young kids delivered newspapers on a bike.

He's got no money. He doesn't have a bike. So he ran his routes for two months in order to get enough money to buy his first bike. He’d run nine or 10 miles a day.

(8:00) I was too proud to complain.

(10:00) For a poor boy, money was much more important than pride.

(10:00) Am I Being Too Subtle?: Straight Talk From a Business Rebel by Sam Zell. (Founders #269)

(13:00) I was young. I was cocky. But the same cockiness helped me a lot in going through life.

(15:00) The very first sentence describing his very first day in business is mind blowing: I had never fixed a flat tire in my life.

(15:00) the NEW Poor Charlie's Almanack: The Wit and Wisdom of Charlie Munger (Founders #329)

(29:00) Sam Walton: The Inside Story of America's Richest Man by Vance H. Trimble (Founders #150)

(35:00) I always knew that if we fixed all the flat tires in town, we'd have all the tire business in town.

(40:00) If we become complacent, then brother, it's all over with.

(52:00) Grinding It Out: The Making of McDonald's by Ray Kroc (Founders #293)

(56:00) If you’re not serving the customer, or supporting the folks who do, we don’t need you. —Sam Walton

(1:00:00) The company paid low wages and had a lower overhead. The flaw was they didn’t get —with the low pay— near the quality of employees we had.

(1:01:00) Life is hard for the man who thinks he can take a shortcut.

(1:06:00) Decision making should always be made at the lowest possible level.

(1:08:00) Whatever you do, you must do it with gusto, you must do it in volume. It is a case of repeat, repeat, repeat.

(1:08:00) Charlie Munger analyzes why Les Schwab was successful.

(1:11:00) Extreme success is likely to be caused by some combination of the following factors:

1 Extreme maximization or minimization of one or two variables. Think Costco.

2 Adding success factors so that a bigger combination drives success, often in nonlinear fashion, as one is reminded by the concept of breakpoint and the concept of critical mass in physics. Often, results are not linear. You get a little bit more mass and you get a lollapalooza result. And, of course, I've been searching for lollapalooza results all my life, so I'm very interested in models that explain their occurrence.

3 An extreme of good performance over many factors. Example, Toyota or Les Schwab.

4 Catching and riding some sort of big wave. Example, Oracle.

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