What I Learned from Sam Wyly, the Self-Made Billionaire

It was a summer afternoon in 2013. The clear sky and setting sun and piece of mind from taking my second medical licensing exam embodied the meaning of tranquility. I just finished swimming and had nothing else to do. So I took a walk and entered the town’s library for the first time.

I gravitated towards the non-fiction section and my eyes locked onto the title, 1,000 Dollars and an Idea: Entrepreneur to Billionaire. At the time, I devoured one business book every week or so. I picked up the hardcover book and noticed the library wanted to get rid of it for $1. It wasn’t a bad trade for potentially eye-opening knowledge.

I exchanged dollar bill for book and walked how with my newfound loot. It was the last hardcover book I’ve bought since.

I didn’t expect much. After all, the library wanted to get rid of it for a measly dollar. How good could it be?

I was surprised. The main lesson I learned was …

power players rarely sit still.

They keep on reinventing themselves. Every reincarnation is growth.

Sam Wyly started his career with sales at IBM.

Next he jumped shipped and became sales manager at Honeywell.

Then he founded his own company, University Computing Company.

Afterwards, he went on to buy and start a whole slew of companies in various industries — from food to insurance to mining to technology to energy.

The reinvention process never stops.

I’ve been inventing and reinventing myself ever since graduating from college. And I will continue to do so until I die. Being stagnant and doing the same old thing over and over again gets too boring.

I learned much more and copied some parts from the book for my own reference. These are what I’ve learned:

Stand up for yourself

p. 41
When I had first applied for a job at IBM, the company gave me an aptitude test, which, somehow, told them that I had technical talent. Now that I was taking them up on their job offer, they said they wanted me to specialize in analytical and design work. They were replacing their line of “electric accounting machines” — their historic punched-card equipment — with “electronic data processing machines,” and I would be an EDPM Systems Engineer.

I found myself sitting again in Mr. Wendler’s office. The same man who had interviewed me on that first trip to Dallas was determined to convince me that my future lay in systems. This big guy stared me down from behind his mahogany desk and told me how rosy my future could be.

I kept saying, “No, I’m a salesman,” even though I don’t know what made me so sure I wanted to be a salesman. A systems engineer sounded noble and intellectual and I had gone to school with engineers, but I had the sales rep job in my head. Burned into my brain was that image of the IBM sales rep who had called on my dad at the newspaper that day. I remember how intelligently he spoke, how elegantly he was dressed, and that he drove a Cadillac. I kept telling Mr. Wendler, “Sales is where I belong.”

We went back and forth for the longest time before he finally agreed. I do not know why he gave in, but I would like to think it was because I had the self-knowledge and confidence to fight him on this. I too am impressed by this stand-your-ground quality when I hire someone. It tells me, “This guy knows who he is.”

Too often, people seem willing to let other people or outside institutions place an identity on them. They don’t, or simply won’t, stand up for themselves. Generally speaking, people who won’t stand up for themselves rarely go on to any sort of greatness. Without passion, you will not find much personal fulfillment and are unlikely to do outstanding work. I have found that success stories across all fields share something in common: The person in question is highly motivated. In addition, I am convinced that motivation for success and passion for the work are tightly linked.

Protect your ideas from negativity

p. 58
Initially, when I have an idea, I tend to be protective of it. Sure, there comes a time when you need to brainstorm with trusted advisers — whether it’s a spouse, a close friend, a business associate, or a board member — because eventually you need to get other people’s insights. But in the beginning, you need to be self-reliant and to nurture and safeguard your idea. As Mary Baker Eddy teaches, you need to protect you good idea from other people’s negativity until it’s out of its infancy.

Peter Drucker says that entrepreneurs need to spot “fault lines” in order to recognize when times of change are occurring, and that it’s in times of change that the greatest opportunities arise.

Give capable people autonomy and reward them for successes

p. 84
To get the best out of people who have the front-line responsibility for making the business work day to day, you need to be confident in their abilities. Moreover, you need to show them that you are confident, knowing what’s going on but not meddling.

You hold managers responsible for results, as opposed to try to control how they get these results, and then you reward them for their successes. You give them a chance to create wealth for themselves and for other investors while making the company a good place to work for everyone.

To have the most productive team, there has to be room for individual creative work within the structure of the company. For the most past, I believe in a decentralized structure to foster that level of creativity: It allows for personal knowledge, instinct, and decision making. Dean Thornton, our CFO said it had once been his mission to treat his people in such a way as to keep them “sullen but not mutinous.”

That’s outrageous. The best work does not come out of sullen people! The best work comes from highly motivated, richly rewarded, happy-to-come-in-every-morning people. Being a spiritual man and a student of Mary Baker Eddy, it’s natural that these transcendental values found their way into my corporate world. Looking for the good in other people came naturally.

Executives will not always do what is best for owners, but for themselves

p. 124
All it took was a simple reading of history and current economic indicators to know that selling oil and silver assets was common sense. The facts were screaming, “This is a bubble.” You simply cannot lock horns with one of the unalterable laws of the universe: the supply-and-demand curve. But I couldn’t convince Dan, even though every rational argument said he was wrong and I was right. The only thing I could do was go back to the board and say, “If you won’t tell the chief when he’s wrong, then the owners have to tell the board that they are wrong. Charles and I are the big owners and the owners are going to have to replace the board.”

It was now a proxy fight I didn’t want to get into, but one I wasn’t going to shy away from. I felt betrayed by Dan and was going to throw him and his cronies off the board and sell the company. In my mind, Dan had become infected by the Terrible P’s: Power, Perks, Press, and Prestige. I had concluded that, consciously or unconsciously, Dan was making decisions based on what he perceived was best for him rather than what was best for the owners of the company. Charles and I had gone to great lengths to give Dan and other executives generous stock options that aligned their economic interest with ours and those of the public stockholders, and had provided generous severance packages in the event of a change in control. But when the Terrible P’s take over, rational thinking goes out the window.

Dan and his managers made robust projections of future cash flows and hired the most prestigious of all consulting firms, McKinsey, to back up their projections. I looked at those forecasts and said, “I don’t believe it.”

Dan and his buddies continued to insist, “This is what we do. We’re oil people. We’re silver miners.”

That carried no water with me. You can have the best managers and the best equipment and the best strategy, but if it’s not the right business to be in, you’ve got to get out. People in my native South used to say, “We’re cotton pickers, that’s what we do.” But all the cotton-picking jobs disappeared with the rise of the mechanical cotton picker. Instead of saying, “This is what we do,” Dan should have been saying to himself, “I’m doing things right, but am I doing the right thing?”

My mistake with Earth Resources was to let Dan put two of his personal friends on the board. And right there, as soon as I realized the mistake I’d made, I was off and running on my first experience in good corporate governance. This issue of good corporate governance would eventually lead me to challenge the corrupt management at Computer Associates with proxy fights in 2001 and 2002, to expose their management team’s abuse of power, ultimate to remove the top officers and see eight of them go to jail for the fraud they perpetrated on me and on the other investors in their public stock. It was during my pro bono proxy fight with CA that Grant’s Investor wrote, “Anyone who owns are share of a publicly traded company anywhere in the world should pay homage to Sam Wyly.”

But it was in fighting Dan that I concluded that the most important job of any board member is to decide every year whether or not to rehire the chief.

If I had been merely a passive investor, I would have just sold my Earth Resources stock at the $17 price it was then trading for. But that’s not the way I am. For a calm and quiet guy, I can get as aggressive as I need to be. I signed up for the fight and there was no way I was going to lose. I nominated a new board and went to work convincing the shareholders to vote for them. Dan got to work trying to keep his job. I spent my own money running ads saying, in effect, “Throw the bums out.” Dan spent the company’s money running ads saying, in effect, what a bad guy I was to propose such an awful notion.

The advantage incumbents have, besides the use of company money, is that many shareholders are passive and don’t devote any serious thought to who’s on the board. It’s hard for an investor to do that because the bundle of legal papers you get in the mail from the company is lawyerized and homogenized for compliance with government regulations, and written in corporate-speaking, rather than in simple statements in the King’s English. Dan and his guys had only 2 percent of the total stock, compared with the 20 percent that Charles and I were holding. People could see how much of our own money we had at stake, and that made us trustworthy in their eyes. Knowing that only 80 percent of shareholders usually ever bother to vote, my guess was that we needed only an additional 21 percent to win.

The key guy we needed was our single biggest institutional investor, Marc Yamada of Manufacturer’s Life in Canada. I went to see him and explained the situation. He reminded me, “Institutions usually support the management.”

I asked, “But in this case, who’s the management? Is it the board? The CEO? Or the entrepreneur who invented the company and really made it work?”

When Dan went to see him in Canada, Mark told him, “Sam was here first and Sam is right. You had better do what he wants to do.”

Understanding that they were going to lose the proxy fight and find themselves out on the street, Dan and his cronies engaged Bear Stearns to find competitive buyers. We closed the deal with Tulsa-based Mapco in November 1980. Dan had favored the losing bidder, Huffington Oil (run by Arianna’s then husband and father-in-law), where he would have become chief executive of the combined company.

Gather your own information (instead of relying on someone to relay it)

p. 132
Then we began visiting the restaurants together and talking to people. In the Army they say that good intelligence will tell you “How?” and “Why?” Same thing holds true in business. You need to know the truth and you find it on the ground, so we spoke with customers eating steaks, stood around observing the way the restaurants operated, and spoke with the folks running them.

Read much and often for success

p. 197
We all stand on the shoulders of giants who came before, which is why I read everything I could about retailing and the entrepreneurs who had built great retailing empires. My favorite book about retailing is Stanley Marcus’s Minding the Store. He became an American retailing legend, building the Neiman Marcus department store into one of the country’s most outstanding, and highest-quality, brands.

Reading is one of the keys to success, because if you won’t admit what you don’t know, you’ll never discover what you need to know. I read to conceptualize challenges. I read to know what I’m getting into. I read for ideas. I wanted to know how Sam Walton kept prices so low. Ray Kroc insisted that every McDonald’s keep the restrooms clean and drove that message home by first inspecting the restrooms each time he visited a McDonald’s. And what led Kmart into bankruptcy? And how did JC Penny and Sears become dinosaurs? When I was a kid, Sears & Roebuck had the market position that Wal-Mart has today. Mamas wanted their girls and boys to grow up to be Sears people. I wanted to find out what changed. I read thousands of pages on retailing, like a gold miner panning every inch of his claim, searching for just a few precious nuggets that would give me real insight into what is vital.

Profitable business systems take time and experimentation to perfect

p. 199
Sam Walton used to joke that people thought he was an overnight success. “No,” he’d say, “they just heard of me last night.”

It’s easy now to look at Michaels’ more than 900 stores and think, “What a beautiful economic engine.” But it took us over twenty year. Successful entrepreneuring is as much about being willing to reinvent as you go along — and about having the patience to do so — as it is about grand visions. What was it old Thomas Alva Edison said? One percent inspiration, 99 percent perspiration.

Having studied Walton carefully, we copied him closely. I talked to the people on the ground and watched the customers. I’m a strong believer in roaming halls and hanging around stores, because that’s the best way to find out what you’ve got. There is simply no substitute for seeing how things work. The early years of company building are the creative years, and when you’re trying to figure out what you’re going to be, you need to see it on the ground.

By design, Michaels is a merchandise-driven, “Let’s have a perfect store” business. But one important aspect of Michaels’ success is their newspaper advertising strategy. It doesn’t sound very entrepreneurial, and certainly it isn’t “wild,” but it’s crucial. On any given day, there’s something marked 40 percent off. A Michaels craftswoman wants to know what and when. They aren’t like Wal-Mart, with the same prices week after week; they use price promotions to drive business to the stores and need a regular way to get their unique coupons to their customers.

Michaels spends about $140 million a year inserting coupon sheets in local newspapers, spending nothing on television. The customer opens her newspaper and there’s the Michaels ad, so buying something on sale at Michaels becomes part of her weekly routine. One of the first things a new top executive would suggest is that we get rid of the old-fashioned, low-tech ads. And every guy who tried it had to take his punishment as same-store sales dropped dramatically that week.

Becoming wealthy isn’t about chasing money, but about chasing excellence

p. 242
But money, power, and fame have never represented my core values. Not that I’m against them; I never bought into that Bible verse about a rich man not being able to get into heaven. But spirituality, family and family history, and the quality of the journey — these have always been more important to me. Becoming wealthy was never my goal; it just happened. I was just doing my work, first as a doer, then as a manager of doers, then as an entrepreneur in all its manifestations. I have always had a deep sense that I would be in the right place for me and, if not, God would show me the way out. When times were tough, there would be a way to overcome them. As a result, by the time I was thirty-five, I had more money, power, and fame than most ever wish for.

Read 1,000 Dollars and an Idea: Entrepreneur to Billionaire to learn more about Sam Wyly’s journey to money, power, and fame. A great book for those interested in success and entrepreneurship.

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Comments

  1. Awesome post, and I am as same as you. I will forever reinvent myself. I use to think being the same and holding on to what works was the way, but always upgrading always finding out new tactics is what I believe in now.

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