Costco And Order Out of Chaos

The fellow who created and built Home Depot is notorious for claiming today it would be impossible to do what he did in 1979, for new constraints on free business practices.  Today, in USA, 40,000 new laws went into effect that further constrain freedom.

In the current issue of the Costco magazine, retiring CEO James Sinegal traces the growth of Costco.  He and other top Costco people started at a company called Fed-Mart as boxboys, cashiers and stockers, etc.  That company famously went bust and out of the ashes one worker and his son started Price Club in San Diego in 1976, a members only warehouse concept.  In 1983 ex-Fed-Mart boxboy Sinegal and others started a version called Costco in Seattle, and all of these players, in a scene reminiscent of The Return of The Magnificent Seven, merged Price Club and Costco into one business named Costco in 1993.  The rest as they say is history.  The new CEO of Costco is also a veteran Fed-Mart boxboy who wandered aimlessly for a decade after the Fed-Mart immolation.  The moral of the story is this crew learned good habits and sound business principals while working at those other gigs.  They are now centimillionaires.

I recall the demise of Fed-Mart, and those times when it seemed the world was coming to an end.  The endless, pointless war in Vietnam, Boeing apparently going out of business, housing prices plummeting, rare opportunities, terrorism, and a paranoid, criminal government under Richard Nixon.

Yet these people saw clear opportunity, carefully tested and grew businesses, that in time became staples of the economic landscape.  Apple computer comes out of these times.  While many others failed, a new, different, better IBM emerged, after a wrenching process.  Protected industries, such as auto and defense became truly awful.

An aspiring politician once said "We're searching for more immediate, ecstatic and penetrating mode of living.”  Can you think of anyone who has better lived such a life than the founders of Costco and Apple? Or the countless unheralded businesses who have done likewise?  Such a life is not possible in politics, so I am afraid that acolyte will find disappointment at the apogee.

Yes, starting a business has been made much harder by pointless regulation, but even worse is a lack of people who see business as a route to a better life.  When I mentioned to a 20-something 1 in 6 Americans needs food stamps, she noted many of her college friends use them.  CNN reports only 55.3 percent of people ages 16 to 29 have jobs, although I'd like to see the source of that. Perhaps they need the food stamps.  But the problem is the lack of opportunity, not food stamps.

Gone are the days, due to pointless regulation, where in my youth I could have a job within a few days of starting to look for one.  When "help wanted" signs were posted outside of small businesses, and one could work one's way up, where a job at Fed-Mart or countless other businesses were plentiful.  Education was better, a high school diploma was comparable to a bachelors degree today, so an employer knew if you graduated from high school you could read, write and think.

Now, although the regulations are pointless, the regulations serve a purpose.  By driving small business into the ground, and preventing new businesses from forming, the collectivization of where you get health from the government, home furnishings from IKEA, food from Safeway, clothes from Macy's, your home from Pulte, your job from homeland security, your loan from BofA, schooling from the government, etc.  Although there is nothing inherently wrong with big business and low prices, in practice big business promotes and then co-opts big government.

For my part, I will continue to encourage people to start businesses, emphasizing lifelong process for younger people (innovation) and teaching and writing for older people (conservation).  In extreme times people call for extreme solutions, but it is simply good habits and sound business principals, which one learns by doing, that leads to more immediate, ecstatic and penetrating mode of living.  Encourage people around you to make the revolutionary act of starting a business.

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