This is a very fine article! When I was at Chicago, our account textbook--it was a draft--had restated ‘Net Worth’ as ‘Residual Responsibility’. If you think as a shareholder, you will aim to squeeze out the last penny of profit. As an owner, with residual responsibility, you will instinctively treat customers well, because they can walk--not return--; Costco has an international promotional sales force of 70+ million happy members proselytizing the virtues of Costco. And you will treat employees well, because they, too, can walk. Having long-term fairly paid employees reduces training costs and shrinkage. The list goes on. At a recent visit I had a pleasant conversation with the fellow checking me out. He happened to be Black; he has worked at Costco for 30 years, and he owns Costco shares at a price below my first purchase at 29. Do things well as an owner with patience and you will be rewarded with residual profit.
Charlie Munger captured Costco’s ethos well when he was asked what he would like on his tombstone: quoting someone he replied, He made his money fairly, and he spent it fairly. The describes both Charlie and Costco well!
Thanks again for capturing well the essence of Costco!
Awesome article. One of the things I tried to hammer home when teaching finance is that rewarding shareholders meant running your company for customers and employees. Do that well and the shareholders will be see great returns. It is great to see such a clear example written incredibly well.
Now that Costco is setting up a lot of stores outside USA, how do you think will consumer laws in different countries affect pricing and margins for Costco? In Aus, we don't see much difference in grocery prices between Costco and other retailers. But we do see a lot of value buys in the merchandise sections. I haven't seen much info on Costco in China though.
That's a great question (and very interesting info about the difference in value b/w grocery items and general merchandise in the Australian Costcos). I haven't done much research into the company's international expansion, but I'm hoping to write more about Costco this year and will make a note to do more work on that and hopefully include it in a future article. Thanks for reading!
This is a very fine article! When I was at Chicago, our account textbook--it was a draft--had restated ‘Net Worth’ as ‘Residual Responsibility’. If you think as a shareholder, you will aim to squeeze out the last penny of profit. As an owner, with residual responsibility, you will instinctively treat customers well, because they can walk--not return--; Costco has an international promotional sales force of 70+ million happy members proselytizing the virtues of Costco. And you will treat employees well, because they, too, can walk. Having long-term fairly paid employees reduces training costs and shrinkage. The list goes on. At a recent visit I had a pleasant conversation with the fellow checking me out. He happened to be Black; he has worked at Costco for 30 years, and he owns Costco shares at a price below my first purchase at 29. Do things well as an owner with patience and you will be rewarded with residual profit.
Charlie Munger captured Costco’s ethos well when he was asked what he would like on his tombstone: quoting someone he replied, He made his money fairly, and he spent it fairly. The describes both Charlie and Costco well!
Thanks again for capturing well the essence of Costco!
Thanks for the kind words! I love that idea of residual responsibility -- such an important part of the ownership mentality.
A model business, managed for the long term benefit of all stakeholders. This is how it should be done.
🎯
Awesome article. One of the things I tried to hammer home when teaching finance is that rewarding shareholders meant running your company for customers and employees. Do that well and the shareholders will be see great returns. It is great to see such a clear example written incredibly well.
Thanks for the kind words! Much appreciated :)
I hope to write more about this in the future because it's such an important topic.
Now that Costco is setting up a lot of stores outside USA, how do you think will consumer laws in different countries affect pricing and margins for Costco? In Aus, we don't see much difference in grocery prices between Costco and other retailers. But we do see a lot of value buys in the merchandise sections. I haven't seen much info on Costco in China though.
That's a great question (and very interesting info about the difference in value b/w grocery items and general merchandise in the Australian Costcos). I haven't done much research into the company's international expansion, but I'm hoping to write more about Costco this year and will make a note to do more work on that and hopefully include it in a future article. Thanks for reading!
Great article, enjoyed every bit of it!
Thanks! Much appreciated :)