How the Walton family partnership worked

The late Wal-Mart founder wrote about the value of a dollar— and family values—in Sam Walton: Made in America.

By Sam Walton

No question about it, a lot of my attitude toward money stems from growing up during a pretty hardscrabble time in our country's history: the Great Depression. And this heartland area we come from out here — Missouri, Oklahoma, Kansas, Arkansas — was hard hit during that Dust Bowl era.

My dad, Thomas Gibson Walton, was an awfully hard worker who got up early, put in long hours, and was honest. Completely, totally honest, remembered by most people for his integrity. He was also a bit of a character, who loved to trade, loved to make a deal for just about anything: horses, mules, cattle, houses, farms, cars. Anything. Once he traded our farm in Kingfisher for another one, near Omega, Oklahoma. Another time, he traded his wristwatch for a hog, so we'd have meat on the table. And he was the best negotiator I ever ran into. My dad had that unusual instinct to know how far he could go with someone — and did it in a way that he and the guy always parted friends — but he would embarrass me with some of the offers he would make, they were so low. That's one reason I'm probably not the best negotiator in the world; I lack the ability to squeeze that last dollar. Fortunately, my brother Bud, who has been my partner from early on, inherited my dad's ability to negotiate.

Dad never had the kind of ambition or confidence to build much of a business on his own, and he didn't believe in taking on debt. When I was growing up, he had all sorts of jobs. He was a banker and a farmer and a farm-loan appraiser, and an agent for both insurance and real estate. For a few months, early in the Depression, he was out of work altogether, and eventually he went to work for his brother's Walton Mortgage Co., which was an agent for Metropolitan Life Insurance. Dad became the guy who had to service Metropolitan's old farm loans, most of which were in default. In '29 and '30 and '31, he had to repossess hundreds of farms from wonderful people whose families had owned the land forever. I traveled with him some, and it was tragic, and really hard on Dad too — but he tried to do it in a way that left those farmers with as much of their self-respect as he could. All of this must have made an impression on me as a kid, although I don't ever remember saying anything to myself like "I'll never be poor."

We never thought of ourselves as poor, although we certainly didn't have much of what you'd call disposable income lying around, and we did what we could to raise a dollar here and there. For example, my mother, Nan Walton, got the idea during the Depression to start a little milk business. I'd get up early in the morning and milk the cows, Mother would prepare and bottle the milk, and I'd deliver it after football practice in the afternoons. We had 10 or 12 customers, who paid 10 cents a gallon. I also started selling magazine subscriptions, probably as young as seven or eight years old, and I had paper routes from the seventh grade all the way through college. I raised and sold rabbits and pigeons too, which was nothing really unusual for country boys of that era.

I learned from a very early age that it was important for us kids to help provide for the home, to be contributors rather than just takers. In the process, of course, we learned how much hard work it took to get your hands on a dollar, and that when you did it was worth something. One thing my mother and dad shared completely was their approach to money: They just didn't spend it.

By the time I got out in the world ready to make something of myself, I already had a strongly ingrained respect for the value of a dollar. But my knowledge about money and finances probably wasn't all that sophisticated in spite of the business degree I had. Then I got to know my wife Helen's family, and listening to her father, L. S. Robson, was an education in itself. He influenced me a great deal. He was a great salesman, one of the most persuasive individuals I have ever met. And I am sure his success as a trader and a businessman, his knowledge of finance and the law, and his philosophy had a big effect on me. My competitive nature was such that I saw his success and admired it. I didn't envy it. I admired it. I said to myself: Maybe I will be as successful as he is someday.

The Robsons were very smart about the way they handled their finances: Helen's father organized his ranch and family business as a partnership, and Helen and her brothers were all partners. They all took turns doing the ranch books and things like that. Helen has a B.S. degree in finance, which back then was really unusual for a woman. Anyway, Mr. Robson advised us to do the same thing with our family, and we did, way back in 1953. What little we had at the time, we put into a partnership with our kids, which was later incorporated into Walton Enterprises.

Over the years, our Wal-Mart stock has gone into that partnership. Then the board of Walton Enterprises, which is us, the family, makes decisions on a consensus basis. Sometimes we argue, and sometimes we don't. But we control the amount we pay out to each of us, and everybody gets the same. The kids got as much over the years as Helen and I did, except I got a salary, which my son Jim now draws as head of Walton Enterprises. That way, we accumulated funds in Enterprises rather than throwing it all over the place to live high. And we certainly drew all we needed, probably more, in my opinion.

The partnership works in a number of different ways. First, it enables us to control Wal-Mart through the family and keep it together rather than having it sold off in pieces haphazardly. We still own 38 percent of the company's stock today, which is an unusually large stake for anyone to hold in an outfit the size of Wal-Mart, and that's the best protection there is against the takeover raiders. It's something that any family that has faith in its strength as a unit and in the growth potential of its business can do. The transfer of ownership was made so long ago that we didn't have to pay substantial gift or inheritance taxes on it. The principle behind this is simple: The best way to reduce paying estate taxes is to give your assets away before they appreciate.

It turned out to be a great philosophy and a great strategy, and I certainly wouldn't have figured it out way back then without the advice of Helen's father. It wasn't lavish or exorbitant, and that was part of the plan — to keep the family together as well as maintain a sense of balance in our standards.

So along comes Forbes in 1985, and it says I'm the richest man in America. Well, there's no question that if you multiply the Wal-Mart stock price by how much we own, then maybe we are worth $20 or $25 billion, or whatever they say. The family may have those kinds of assets, but I have never seen that myself. For one thing, Helen and I only own 20 percent of our family's total interest in Wal-Mart. For another, as long as I have anything to do with it — and I'm confident this attitude will last at least another generation — most of the Wal-Mart stock is staying right where it is.

We don't need the money. We don't need to buy a yacht. And thank goodness we never thought we had to go out and buy anything like an island. We just don't have those kinds of needs or ambitions, which wreck a lot of companies when they get along in years. Some companies sell their stock off a little at a time to live high, and then — boom — somebody takes them over, and it all goes down the drain. One of the real reasons I'm writing this book is so my grandchildren and great-grandchildren will read it years from now and know this: If you start any of that foolishness, I'll come back and haunt you. So don't even think about it.'


From Sam Walton: Made in America, by Sam Walton with John Huey. Copyright © 1992 by the Estate of Samuel Moore Walton. All rights reserved. Published by arrangement with Doubleday.