Risky? Not Really.

Starting your own airline can be a challenge. This would be his “what if I could” moment. The airport terminal was full of stranded passengers. Sir Richard Charles Nicholas Branson was one of them. His lover was waiting for him. Making a few calls to charter companies, one of them agreed to take him to the British Virgin Islands. It would cost him £2,000. He divided the price by the number of seats on the plane. Then he made a sign that read, “Virgin Airways $39 single flight”. He walked around the airport terminal and soon filled every seat on that charter plane. As they landed, a passenger turned to Richard and said, “Virgin Airways isn’t too bad. Smarten up your service a little, and you could be in business.”

Last week on Methods of Prosperity:

$10 million yearly from a few stores wasn’t bad in 1966, but it wasn’t much. Sam Walton’s small team lacked the expertise for larger operations. Sam needed a VP of operations, better inventory and logistics systems. For that role, he hired Ferold Arend. Walton learned about computer technology at an IBM school. Walmart started using IBM's System/360 for daily sales reporting. That was only the beginning. Walmart implemented computerized warehouses in 1968. A new VP of Finance and Distribution named Ron Mayer took charge. He enhanced distribution and communications. Walmart went public in 1970. The IPO got Walmart out of debt, and made Sam a billionaire. Walmart’s market cap is approximately $526.95 billion. Today, the Walton family is the richest family in the U.S. Sam Walton passed away in 1992.

Part 52. Sir Richard Branson.

TL;DR

Sam Walton avoided flaunting his wealth. This is in sharp contrast with the flamboyant Sir Richard Branson, founder of Virgin. Branson's thrill-seeking persona is one thing. He’s less of a risk-taker than Walton in many respects. Branson, who struggled with dyslexia and math, found success by applying practical strategies. In the 1960s, he launched Student magazine. By 1970, he pivoted to Virgin Mail Order Records. Student magazine wasn’t profitable, but the mail-order business was. Branson focused on Virgin Mail Order as it flourished in 1970. By 1971 their mail-order business was almost ruined.

Key Lessons:

• Bad students can be great entrepreneurs.

• Create something you’re proud of.

• You don’t always need investors.

• Get paid in advance.

• Be resourceful.

Sam Walton is someone who disdained flashy flaunting of wealth. You’d think that he has nothing in common with the flamboyant founder of Virgin. The truth is that Sir Richard Branson may be a thrill-seeker, but he’s less of a risk taker. I know that’s not what most people think about him, but hear me out.

He wanted to be a journalist, which is odd for a person with dyslexia. He was bad at math. It was only when he applied it to real problems that it made any sense to him. Numbers became real to him when it was money.

In the 1960s, Branson started a magazine called Student. Cold calling advertisers from a phone booth, he discovered a useful trick. He called up the operator and told her that his call had disconnected and the machine had taken his money. When she patched him through for free, the operator sounded like his secretary. “I have Mr. Branson for you...”

Imagine a schoolboy selling advertisements to big companies. He called up Coca-Cola and told them that Pepsi had an ad in their magazine and would they like one too. They had no idea that the magazine’s editors were 15 years old. His schoolwork was going from bad to worse, but his confidence was self-taught. Soon, the magazine became his career. In January 1968, Branson’s magazine went from a wild idea to a published magazine.

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“Of course, we wanted to make money on Student. We needed money to survive, but we saw it much more as a creative enterprise than a money-making one... You’re trying to create something original that stands out from the crowd... Above all, you want to create something you’re proud of. That’s always been my philosophy of business. I can honestly say that I’ve never gone into any business purely to make money. If that’s your sole motive, then I believe you’re better off not doing it.” – Richard Branson

At that time in London, record stores didn’t offer discounts. Music was exciting. People who wouldn’t be willing to spend 40 shillings on food had no qualms with spending that much on records. Everyone would rush out to buy the latest Bob Dylan, Jefferson Airplane, or Rolling Stones. The young generation wanted to change the world, and rock and roll represented that. The more obscure the albums were, the more rare and expensive they were. It struck Richard as the opportunity he was looking for. From out of the office of Student magazine in 1970, Virgin Mail Order Records started. Virgin was the perfect new name.

Student magazine wasn’t profitable, but the new mail-order business was. They’d made more cash than they’d ever seen before. One of the best things about it is that the customers sent their money in first. That provided the funds to buy the records. Richard had big plans. He tried to sell Student magazine to another group. The only interested buyer wanted him to stay on as editor. He agreed, but made the mistake of telling them all of his future plans.

“Fantasizing about the future is one of my favorite pastimes. I told them that I had all sorts of other plans for Student… I wanted to set up a Student bank, a string of great night clubs and hotels… travel and trains… or even –who knows– a Student airline or cruise line…” Richard Branson explained, “I saw that their eyes glazed over. They thought I was a madman. They decided they did not want to keep such a lunatic on as editor of Student. In the end, they decided they did not want to buy it. Student died a quiet death.”

He focused all his attention on Virgin Mail Order. The business thrived throughout 1970. By 1971, something outside of their control almost ruined them.

To be continued…