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Mitch Rales: The Art of Compounding - [Art of Investing, Forever Episode]

Invest Like the Best with Patrick O'Shaughnessy

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Origins of Benchmarking and Adoption of Quality Principles

The commitment to benchmarking emerged from a strategic initiative in the mid-1980s when key leaders recognized their lack of manufacturing knowledge following a series of acquisitions. This led to a division of responsibilities where insights were drawn from leading global companies, particularly in Japan. Notably, the contrast between General Motors' lengthy die-changing process and Toyota's efficiency highlighted a critical learning opportunity. Toyota's adoption of quality principles from Edward Deming—who had attempted but failed to sell these concepts to American auto giants—demonstrated a successful application of these methodologies. This realization guided the introduction of these principles back into American manufacturing, initially termed the Jacobs production system, which evolved into the Dan her production system. Over time, the applicability of these quality principles expanded beyond manufacturing to all facets of the business, enabling a comprehensive business system characterized by continuous improvement in various operational areas. This foundational work laid the groundwork for nearly four decades of sustained growth and adaptation.

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