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imagine one of the coldest little countries in the world think of the most Barren part of that country see in front of you a godforsaken place deep in the forest this book is about a man who grew up in this harsh environment which was
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to mark his whole life and fundamentally color the philosophy with which he built his vast Empire consisting of thousands of employees and millions of customers all over the world the country is Sweden the man is ingbar cprad from furniture dealer he aims to give his business
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eternal life It's a Long Way to the country where an empire was built where he was born loneliness silence and Reserve Prevail The Cottages have always been small survival has never been taken for granted it was here that the dream of Ikea first grew this is where the
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rough outline of the whole concept began to be written by a dislexic boy on a farm two empty hands the myth says he built an empire for from nothing but what are two empty hands and what is really meant by nothing do love and encouragement innate energy desire for
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Revenge imagination and curiosity all count for nothing what about the vanity of one day showing your father and your mother and the whole world what you could do of course they count this is not a book about a man starting out empty-handed on the contrary it is a
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book about a man with his hands full of resolute dreams a heart tormented by inadequacy and self-pity and a stubborn and inquisitive Enterprise a strange mixture of a social animal and an eccentric the book is equally about a business in which he realized and
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through which he lived out all of these circumstances for good or for bad it is about an outstanding and natural genius an incorrigible capitalist so relentlessly obsessed by the lore of profit and power that he used a thousand trick to endow his Creation with eternal life
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others will recognize themselves in his story for all of us bear within us the embryo of a miracle that was an extra from the book I want to talk to about today which is leading by Design the Ikea story and is written by beril tol with a lot of close association with
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ingbar cpride himself so there's huge chunks of this book uh that are in ingvar's own words I want to go to the end of the book really quick because I think it's really important and this is something I absolutely love about entrepreneurs is that entrepreneurs love
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the future generations of entrepreneurs so ingbar camrad think about how crazy this is so he founds Ikea okay Ikea was founded 81 years ago it is now today the largest Furniture retailer in the world and also strangely enough one of the world's 50 largest restaurant chains but
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he founds Ikea 80 81 years ago he works on it for 74 years from the time he is 17 until he dies and inbar dies at 91 and so about 20 years before he passes away ingbar agrees to work on this book with the author and he tells us at the
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very end why he did this he says for over 10 years I've been called on by a number of writers and Publishers wanting to write my biography I have always been very reluctant to do this and have evaded the issue as politely as possible and that was his position until this
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author suggested that the book be written so that it could be used as study material for future entrepreneurs that was the only time I listened so I'm actually going to put the book down for one second I actually want to start with what is considered like the
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the Ikea Bible it is a document called The Testament of a furniture dealer and is written by ingbar cprad in 1976 you can read it for free online but I thought it was so great that actually had it printed and bound and the way that The Testament of a furniture dealer
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is described internally at Ikea they called a sermon on the culture of IA and in fact later on in the book they talk about the fact that this document is the basis of this sermon so every year ingvar would have like top Executives
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and then some new people that are new to the Ikea family he would lead a meeting with them and it says he essentially gave the exact same sermon for 43 straight years and that talk was based on the principles and the ideas in this document that's sitting before me and so
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he starts with an act of service he is telling them why Ikea exists and he says to create a better everyday life for the many people by offering a wide range of well-designed functional Home Furnishing products at prices is so low that as
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many people as possible will be able to afford them the best Founders the best leaders they know their job is to get their entire organization's commitment to a common goal so the very next sentence is a great description of Ikea's common goal we have decided once
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and for all to side with the many and so throughout ingbar's life he will constantly repeat these principles and he will also say you are forbidden you cannot change these principles ever so this is the first one we have decided once and for all to side with the many
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this is an objective that carries obligations and he's immediately going to contrast this is the way the Ikea Way this is the principles this is what we believe in and he's going to contrast it to what everyone else does he is telling them this is how we will be different
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All Nations and Society spend a disproportionate amount of their resources on satisfying a minority of the population far too many of the Fine Designs and new ideas are reserved for a small circle of the affluent that situation has influenced the formulation
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of our objectives so when I read that paragraph the first person that came to mind was actually Henry Ford if you go back and study the creation of the American automobile industry I would argue the two most important uh figures are Henry Ford obviously founder of Ford
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Motor Company and then Billy Durant founder of General Motors the reason Henry Ford came to mind is because Henry Ford had one single idea it took him like a decade and a half to figure out how to do this idea but his one single idea was to make the car for the
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Everyman let me read you a paragraph from one of the biographies of Billy Durant that I read and this is really Billy Durant describing Henry Ford's one single idea says Durant noted that Ford was in favor of keeping prices down to the lowest possible Point giving to the
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multitude the benefit of cheap Transportation Henry Ford was obsessed with eliminating waste he was obsessed with cost control and he was obsessed with rethinking the manufacturing process for the maximum level of efficiency the same exact thing could be
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said about ingbar cprad and so we go back to this opening declaration from ingbar cprad after only a couple of decades we have achieved good results but we have great Ambitions we know that in the future remember he's writing this in 1976 okay we know that in the future
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we will be able to make a valuable contribution outside of our homeland too he's talking about Sweden we know that larger production runs gives us new advantages on our home ground as well as more markets to spread our risks over that is why it's our duty to expand the
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means we use for achieving our goals are characterized by our approach by doing it a different way that phrase doing it a different way something he repeats over and over again part of creating a better everyday life for the many people also consists of Breaking Free from
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convention that part is important because fast forward to present day Ike is the largest Furniture retailer in the world at the time he's writing these words obviously they're not but there are also the most Innovative there are several ideas that ingbar and the early
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employees at Ikea came up with they were the first ones to come up with them and they are now widespread throughout the entire industry and you see him many decades before he's the largest Furniture retail in the world saying hey we are going to break free from
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convention we are going to find new and better ways we are going to do it a different way and he also says it's not going to be easy he says we must demand much of ourselves the essence of our work is described in the following chapter
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chapters the following chapters also describe the rules and methods that we have worked out over the years as cornerstones of the framework of ideas that have made and will continue to make Ikea a unique company and so then he has a list of nine principles that Ikea is
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built on and one of the key principles is that Ikea must have low prices so the me the vast majority of people can afford to shop there and you'll see his dedication to that idea is total so he says the concept of a low price makes enormous demands on all of our
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co-workers that includes product developers designers buyers office and Warehouse staff salespeople and all other cost bearers who are in a position to influence our purchase price and all of our other costs in short every single one of us without low cost we can never
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accomplish our purpose and so you and I have talked about this over and over again the fact that the greatest entrepreneurs throughout history they they cost control is an obsession for them that definitely applies to bar as well he talks about over and over again
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you have to control your costs because we must have low prices and then he ends this section saying there is no compromise this principle will never be compromised he says our policy of serving the many can never be changed and so in the next section he starts
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talking about the Ikea Spirit what he calls what you and I would call company culture he calls the Ikea spirit and I think this part in particular is a great illustration of the idea that the founder is the guardian of the company's Soul if you read this section it's
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obvious that ingbar is trying to guard the company's Soul he says obviously it was easier to keep alive our company spirit in the old days when there was not so many of us when we were all within reach of each other and could talk to each other things were more
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Concrete in those days the Readiness to give each other a helping hand with everything the art of managing on small means of making the best of what we had cost Consciousness to the point of being stingy humbleness undying enthusiasm and
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the wonderful sense of community through thick and thin those are just some of the principles that he's going to repeat over and over again for you know seven decades not and this is what I really mean about he definitely has a specific point of view he knows exactly how he
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wants what he wants his company to do he knows exactly how he wants the company to be built he knows exactly the kind of people he wants working inside of his company he says not everybody in a large group like ours can feel the same sense
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of responsibility and enthusiasm some undoubtedly regard the job simply as a means of livelihood a job like any other sometimes you and I must share the blame for failing to keep the flame Al light for faltering in our own commitment at times for simply not having the energy
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to infuse life and warmth into an apparently monotonous task the true Ikea spirit is built on our enthusiasm our constant striving for Renewal from our cost Consciousness from our Readiness to take responsibility from our humbleness in approaching our tasks and from the
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Simplicity of our way of doing things those who cannot or will not join us are to be pied a job must never be just a livelihood if you're not enthusiastic about your job a third of your life goes to waste for those of you who bear any kind of leadership responsibility it is
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crucially important to motivate and develop your co-workers you as the captain make the decisions after Consulting the team there is no time for arguments afterwards okay so the third principle is profit gives us re sources so the financial performance of Ikea I don't
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think I've ever seen anything any other business like this at one point in time it was believed that Ikea might be the most valuable privately held business that was owned by a single person in the world and ingbar never even took out a
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loan while he was building Ikea the only he says later on the book I think he was like 14 or 15 at the time because he starts selling things when he's like five and later on the book he says the only real loan he ever got was from a bank for $63 so he could buy a bunch of
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fountain pens and then he immediately sold the pens for a large profit and so one of the iron laws of Ikea is that all expansion is to be self- financed and his point was to do that you have to make a profit so says profit gives us resources a better everyday life for
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many people profit is a wonderful word it is a word that politicians often use and abuse profit gives us resources he says it again let us be self-reliant in the matter of building up Financial Resources the aim of our effort to build up Financial Resources is to reach a good
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result in the long term you know what it takes to do that we must offer the lowest prices and we must combine them with good quality this forces us to develop products more economically to purchase more efficiently and to be constantly stubborn in cost Savings of
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all kinds that is our secret that is the foundation of our success and so principle number four is reaching good results with small means again this is what I meant about Henry Ford the similarity to Henry Ford they were both obsessed with eliminating waste and
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increasing efficiency they were both relentlessly resourceful such as reaching good results with small means wasting resources is a mortal sin at Ikea it is not all that difficult to reach set targets if you do not have to count the cost any designer can design a
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desk that will cost $5,000 but only the most highly skilled can design a good functional desk that will only cost $100 this is one of my favorite lines and and out of everything that he said expensive solutions to any kind of problem are usually the work of mediocrity we have
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no respect for solution until we know what it costs an Ikea product without a price tag is always wrong waste of resources is one of the greatest diseases of mankind and he's not just talking about money he's constantly hounding on doing more with less time it
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is also a mortal sin to waste time at Ikea waste cost us even more in little everyday things filling out papers that you'll never need again spend time proving that you were right postponing a decision to the next meeting because you
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don't want to take the responsibility now calling somebody we you could just as easily send a note the list is endless use your resources the Ikea Way achieve good results with small means number five Simplicity is a virtue indecisiveness generates more statistics
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more studies more committees more bureaucracy bureaucracy complicates and paralyzes planning is often synonymous with bureaucracy this is going to sound a lot like Elon musk in the early days of SpaceX which you and I talked about last week there's a line in that book no
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reports no committees just done no work about work just work ingbar is saying the exact same thing here and he's not shy about this listen to what he says here do not forget that exaggerated planning is the most common cause of corporate death exaggerated planning
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leaves you less time to get things done complicated planning paralyzes so let Simplicity and Common Sense guide your planning Simplicity is a fine tradition simp icity is a virtue number six is a principle he's already mentioned multiple times doing it a different way
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if we from the start had consulted experts about whether a little Community like alhart these are tiny little towns in Sweden that he grew up in highly likely I'm mispronouncing them I looked it up and tried to practice the pronunciation before I promise you I did
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alur I think is how you say it but it says if we had as experts about whether this tiny little community in Sweden could support a company like Ika they would have undoubt ly advised against it nevertheless Al sorry is now home to one
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of the world's biggest operations in the home furnishing business by always asking why we are doing this or that we can find New Paths by refusing to accept a pattern simply because it is well established we make progress we dare to do things differently our protest
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against convention is not protest for its own sake it is deliberate expression of our constant search for development and Improvement maintaining and devel the diamondis of our business is one of the most important tasks that's why I hope that we will never have two
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identical stores dynamism and the desire to experiment must continually lead us forward I want to go back to that one line that I think really jumps out from this section that is why I hope they will never have two identical stores so ingbar cpride was dyslexic there's
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another dyslexic founder that I covered several years ago it is the founder of Kinkos Paul oral because of his dyslexia would not sit in office so what he how he spent his time he would travel around and visit all of the different Kiko
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stores and Kiko stores at the time before he sold it to FedEx they were all under different ownership and they were also all run in a different way and there's a great line in his biography where it says you have to remember he's been picking up the best ideas from all
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around the country and so one of my favorite ideas in Paul's biography is the fact because he was dyslexic he would use this is a long time ago so he would essentially have a a corporate wide or companywide voicemail system so he'd spend his days visiting all the
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stores all the great ideas that he'd pick up from around the country at the end of his day he would call into this number and he would just talk for a few minutes about what he learned that day and so then if you work at Kinkos you could come in the next morning and
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listen to that recording and so this way of dispersing and spreading the ideas throughout Kinkos was is so beneficial and so helpful people are like well Paul if this is like the best way to do checkout or this is the best way to do marketing or this is the best way you
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know to do this print job why don't you mandate that all the other stores do it that way since that's the best way and what he said was brilliant he said because if I do that then that is the best way it will ever be Paul understood that all these individual stores were
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like miniature Laboratories and you did not want to restrict their ability to discover new things to trial and error and you see ingbar saying the exact same thing here in 1976 that is why I hope that we will never have two identical stores dynamism and the desire to
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experiment must continually lead us forward number seven concentration concentration is important to our success The General who divides his resources will be defeated for us too it is a matter of concentration focusing our resources we can never do everything
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everywhere all the time we will never be able to satisfy all tastes we cannot conquer every Market at once we must concentrate for Maximum Impact often with small means concentration means that at certain vital stages we are forced to neglect otherwise important
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aspects concentration the very word implies strength use it in your daily work it will give you results number eight taking responsibility is a privilege there are people at all levels in every type of company who would rather make their own decisions than hide behind those made by
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others the fewer such responsibility takers a company has the more bureaucratic it is constant meetings and group discussions are often the result of unwillingness on the part of the person in charge to make a decision and so that he gets to why so many people
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are afraid to make decisions they're afraid to make decisions because they're afraid of making mistake and he says this line over and over again only while sleeping one makes no mistakes making mistakes is the privilege of the active making mistakes is the privilege
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of the active constantly practice making decisions to overcome our fear of making mistakes the fear of making mistakes is the root of bureaucracy and the enemy of development it is always the mediocre people who are negative who spend their time proving that they were not wrong
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the strong person is always positive and looks forward and finally number nine most things still remain to be done a glorious future the feeling of having finished something is an effective sleeping pill a person who retires feeling that he has done his bit will
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quickly wither away a company which feels that it has reached its goal will quickly stagnate and lose its Vitality happiness is not reaching your goal happiness is being on the way it is our wonderful fate to be just at the beginning and I absolutely
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love that he said that because he's 33 years in into running this company and so I'm sure at the time some people were like yeah okay we're just at the beginning you know we're 33 years into this thing but now 50 years after writing this he was obvious that he was
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right it is our wonderful fate to be just at the beginning the positive Joy of Discovery must be our inspiration in the future the word impossible has been deleted from our dictionary experience is a word to be handled carefully experience is a break on development
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many people cite experience as an excuse for not trying anything new bear in mind that time is your most important resource you can do so much in 10 minutes 10 minutes once gone are gone for good and you can never get them back 10 minutes is not just a sixth of your
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hourly pay 10 minutes are a piece of yourself divide your life into 10-minute units and sacrifice as few of them as possible a meaningless activity most of the job remains to be done let us continue to be a group of positive Fanatics let us continue to be a group
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of positive Fanatics who stubbornly and persistently refuse to accept the impossible what we want to do we can do and will do together and then he ends with a tagline that he repeats over and over again he says a glorious future okay so now I'm going to pick the book
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back up and I'm going to go straight into ingbar in his own words he's telling us the story of his early life and he's talking about the dynamic inside of his family and as he tells us about his early life and his early life plays out as the pages turn more and
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more of my notes say the exact same thing Revenge it becomes obvious the source of his extreme internal drive the fact that he works all hours of the day every day that he talks later on and in the book his biggest regret is that he missed out on his three sons entire
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childhood because all he did was work he had extreme levels of dedication and obsession with building Ikea and when you look at his early life keep in mind the words that he I'm about to read to you he is these These are transcripts of
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interviews that he gave when he was 72 and so immediately he starts talking about his father the fact that his father is forced to work on the farm by his grandmother ingvar's grandmother is the matriarch the very powerful person in the family she reminds me she's like
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this Estee Lauder type of character a personality and a person that dominates everybody around them and so he says my father was only 25 and he didn't want to be a farmer at all but his mother's word was law and he became her obedient tool
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similarly father's brother had also wanted to go into the world but he still lived on the farm grandmother said you're to stay at home and so he did my uncle finally chose the same route as his father and he shot himself in 1935 I was nine and so the backstory
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there which I think also tells why his grandmother had to be such a hardass was they were German immigrants into Sweden they had very few resources almost no money and their Farm was failing and ingbar's grandfather took the easy way out he had two or three small kids and
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his wife was 6 months pregnant and he shoots himself and abandons them and so his grandmother finds herself in a strange country no friends a failing farm and a bunch of children to take care of so his grandmother absolutely dominates his father now he tells us in
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about his mother my mother was loved by everyone she was an amazing person to whom nothing was allowed to be impossible mother soon discovered the poor state of my father's business Affairs so I'm going to pause there what do we know we know that he came from a
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family of very limited resources his father allowed himself to be dominated and to be told what to do by other people his father father was very bad at business his father did not have a lot of money when you read about ingbar's early life this is a perfect
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illustration of this principal you and I talk about over in Oregon that you can always understand the son by the story of his father the story of the father is embedded in the son and he's going to say so explicitly in a few pages so let go back to his mom mom discovers hey my
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husband the father of my children is going to send us into poverty if I don't do anything she discovered the poor state of my father's business so she started a guest house we rented out rooms to visitors we rented out every every room every room was taken except
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my parents into which we all squashed together my mother was a heroin in silence he loved his mother he admired her he just said she was loved by everybody listen to what happens next she contracted cancer before she was 50 she died at the young age of 53 I was 27
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a few years later I started up a foundation for cancer research that bore her name this theme of Revenge is ever present and reoccurring in his life fate took my mom the person I probably loved more than anybody else for me at a young age I will have enough resources that I
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can set up a foundation for cancer research and name it after her the very thought of my mother's death makes me weep he was 27 when she died he is 72 when he says that and then he moves into the fact that he was a born entrepreneur I suppose it was slightly peculiar in
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that I started tremendously early doing business deals my aunt helped me buy my first hundred boxes of matches in Stockholm the 100 boxes of matches cost me 88 cents I sold the boxes at 2 to three cents each talk about profit margins I still remember the lovely
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feeling I can't have been more than five at the time later on I sold Christmas cards I caught fish and would cycle around on my bicycle selling them when I was 11 I was selling garden seeds selling things became an obsession it is not easy to know what might dve drive a
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boy more than a desire to earn money the surprise that you could buy anything so cheaply and sell it for a little more but here we go but I remember walking in the Meadows with my father I was 10 we came to a place at which he said I'd
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like to make a forest track here but it would cost too much then we went somewhere else and again it was the money that was lacking to carry out my father's many plans I remember thinking at 10 if only I could help Father suppose I could get some money so that I could
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help Father and this is the lesson that his little 10-year-old brain took away from that to carry something out you clearly had to have means he starts that paragraph saying selling things became an obsession he ends it telling you why he is telling us when he was a child he
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realized my obsession will fix the financial problems of my family and it's a few years later where he says a manager of a bank lent him about6 $3 which he considered to be a fortune at the time so that he could purchase 500 fountain pens from Paris this was
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essentially the only real loan I have taken out in my life that is nuts trading was in my blood and he talks about another one of his Heroes and this is going to be another source of Revenge so his paternal grandfather shot himself right his maternal grandfather ran a
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little country store and ingbar when he was very very small would spend entire days in his grandfather's Country Store he said grandfather had one great love on Earth and that was me he became my very best Playmate unfortunately he was
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just as kind in business life and he quite simply found it difficult to accept payment so this country store no longer exists as a business but by sheer chance Ikea took it over I bought the whole property and the site around it a furniture store now stands on the
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foundation of the Country Store Revenge he says by sheer chance that was not chance that was sheer will and then he goes back to talking about his relationship with his paternal grandmother the fact that she treated him differently he was special
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grandmother was a domineering person regarded with great respect but she liked me very much in contrast to most of the others on the farm I never suffered at all from her dick tutorial temperament in fact she gave him a lot of confidence she was his first customer
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when I was about 5 began buying and selling things she became a very special and my most faithful customer that gave me the courage to take the next step and go on selling to the neighbors as well I was a child who loved both my Stern grandmother and my gooda I listened to
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their stories and of course as a child I was indoctrinated and PR germanized so later on many decades later this I think in the the 80s or 90s he he talks about this this point of his life the fact that his grandmother was a fan of Hitler and sympath sythetic to the Nazi
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movement this comes up and almost ruin his life and so he says this was to have unexpected consequences in my life long after the political aberations of my childhood and teens I was made to pay for this German influence to give you some context here his grandmother was
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from a German State called Sudan land and after World War I Sudan land became part of Czechoslovakia but his grandmother was a German who did not identify nationally as a part of as a check so she would tell her grandson that the happiest day of her life was
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actually when Nazi Germany annexed Czechoslovakia in 1938 and obviously Hitler was in power at that time but from his grandmother's point of viiew the Nazis were reuniting Germans with Germans and so what inbar said was he was indoctrinated into this ideology
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through his grandmother but he was too young to think independently he would have been 12 years old in 1938 so anyways in 1994 this comes up the media says the founder of Ikea is a Nazi ingbar's response is to cooperate with the media he gives these long interviews
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he explains everything and then it blows over a few years later another media organization says hey actually you weren't a kid we might have evidence that you were actually still believing this when you're in your 30s ingbar is able to disprove that but what
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was fascinating and ties more to you know the scope of what you and I want to talk about which is the way he built his business is the second time around what he was most mad at is they tried to say that he got the seed money to start IKEA from the Nazis and since he had already
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settled these allegations a couple years before it said he was Furious that anyone thought he borrowed money at all and he says in his own words they could have accused me of murder but not of borrowing money and so let's go to the founding of Ikea he is 17 years old he
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is about to go to way to school he calls it the school of Commerce and he decides he wants to start his own trading firm so this is way before he goes and he is exclusively a furniture dealer as that's the way he describes himself for the
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rest of his life this point he's just buying and selling all kinds of things and so when he 17 he founds The Firm Ikea the I is for his first name the K is for his second name the E is for the name of the farm he grew up on and a is for his hometown and so something that's
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common when you read a lot of biographies is you see that true interest is revealed early so even before he founded Ikea he was obsessed with some something that most kids are not obsessed with which is distribution he did not understand why he could buy
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something so cheaply And yet when he would see it in stores it was so expensive to buy and so he uses a term that I wasn't familiar with to describe this Obsession and I looked it up and it says it's an idea that dominates the Mind an obsession and what he's talking
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about is the distribution became an idea that dominated his mind and that was an obsession and so even before he had his own business he would like go inside of like a shoe shop and he would see like this oldfashioned way they had of selling stuff they were like well you
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have to get on a ladder and you have to go up and down and just to fetch shoes and he would look at things in all these businesses like this just cannot be rational because it seems to waste time and money remember he says wasting time
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and money is a mortal sin in Ikea it's something that he was obsessed of when he was a little kid and so the first thing he does to start Ikea he's just a mail order company and he'll go and find importers and exporters and he'll become agents for them and so before he ever
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tries to sell Furniture he's selling things like Christmas cards seeds fountain pens wallets picture frames table runners watches jewelry nylon stockings and he actually gets the idea to start selling furniture from one of his tough his competitors who is another
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male order firm this uh firm called Gunners and when he's 22 he decides to try to advertise what he calls an armless nursing chair that he calls Ruth and because he's dyslexic he couldn't remember the order numbers so he had to give instead of having order numbers
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he'd give all his products names which still continues to this day if you order something from Ikea and so right away he realizes hey I think I stumbled into to very something very valuable he says the response once he advertises his chair
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the response was unambiguous we sold a huge amount so then he doesn't stop just at chairs he's like okay I'll advertise a sofa and a chandelier and this is was the result everything went that was how the business started people ordered on a mail order form from us and the
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factories delivered it to them this is when he's going to go all in on furniture and at the time Ikea was a one-man business but the demand was so great he says I could no longer remain a one-man firm so in 1948 I appointed my very first employee two years later the
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business had grown to a staff of seven or eight and this is how he describes the turning point of his life so by Chance the furniture trade which I entered in and an attempt to imitate competitors decided my destiny no other event in life pleases me more than the
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fact that I ended up there my interest at first was purely commercial selling as much decent Furniture as I could as cheaply as possible not until the first complaint started coming in did I realize that it was quality that was lacking one day that would force me to
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draw certain conclusions and choose another way what he's talking about there is combining a mail order catalog with an actual furniture store and they did that because seven or eight years into the business it's the business is about to die and so he describes this
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time for us I ke was very much at a Crossroads competition and mail order had become almost unendurable a fact that one simple example can illustrate so all the mail order him and his mail order competitors they're all ordering from the same manufacturers so he talks
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about hey we're all selling the same ironing board and so if I advertise it for $23 then my competitor will just come along and advertise it for 22 and then another competitor will just come along and advertise it at 21 and then eventually when we can't make money on
34:00
that ironing board we'll find another ironing board and that that ironing board will be cheaper but also lower quality and so he says step by step this price War affected the quality of the ironing board which became worse and worse the same applied to Furniture
34:12
complaints started to mount and I could see how things were going the mail order trade was risking an increasingly bad reputation and in the long run Ikea could not survive in that way the core problem with mail order was that the customers themselves could not touch the
34:25
goods but had to rely on descriptions in the the advertisement and the catalog so we were faced with a monumentous decision to allow Ikea to die or to find a new way of maintaining the trust of the customer and still make money and so
34:36
ingar is having a bunch of conversations with early employees at Ikea is like how do we get out of this Vici vicious circle of lower price worse quality then contining lower price and even worse quality and so the idea they came up with was hey why don't we try a
34:48
permanent display or exhibition of our furniture and so ingbar has a choice let his business die or try take a take a risk and try something new so he winds up buying a rundown down out of business department store he spent $1600 to get the store and then he has to invest
35:02
another like 75,000 to renovate it and get it ready to open and so it is at this point in 1952 that he stumbles upon out of necessity to save his company the blueprint upon which the future success that he's going to have rests upon he says at that moment the basis of the
35:18
modern Ikea concept was created and in principle it's still applies first and foremost use a catalog to tempt people to come to an exhibition which today is our store and so I think at the time this book is published remember the book CES out comes out in the late '90s they
35:33
have something like you know 300 stores or something like that they had they had sent out by that time over a 100 million cataloges and he was the first one to do this mail order and furniture store in one that business idea had not been put
35:47
into practice anywhere else we were the first and so he SS out all these cataloges with all his products and and telling them where and when the first store was going to open and this is the result success ESS was immediate but I have never been so scared in my entire
36:01
life as when we open and saw the line outside there were at least a thousand people there I couldn't believe my eyes there was so many more people than he expected he was worried that the floor was going to collapse he says we didn't
36:13
know whether the floor would hold all these people tens of thousands of people those first years were to go on a pilgrimage to the remote alal this is the the little tow he in from all over Sweden most of them had learned about us through the free catalog so this is an
36:29
idea I jot it down I've seen over and over again in fact I think I'm going to do another episode on Bernie Marcus I haven't done one in probably like five or six years he was the founder of Home Depot he just passed away recently 95 years old so this is something he he
36:41
talks about in his book uh it's it's in the the books on on Sam Walton and Walmart as well and we see the same concept is happening in ingbar Camp Brad's life it's the idea that in human nature people will go to Great Lengths they will travel vast distances if they
36:55
think they can save money that principles in the founding stories of Walmart in the founding stories of Home Depot and we see it again in the founding story of Ikea and then I've mentioned over and over again that you know he has a sermon on the culture of
37:06
Ikea he he repeats the principles upon which he built his business he's talking about that very first store and listen to what he says Ikea was taking shape as a real business many of our Unwritten laws were already written by that time so she talks about this repeats these
37:19
over and over again helpfulness Thrift a strong sense of responsibility to this day talks about the probably 100 times I don't think there is a Kindle version of this book so I can't search to it probably mentions the importance of watching your cost 100 times to this day
37:33
at Ikea we try to translate everything into a clear price and state it our advertising brochures have on the front or back information on what they cost to compile often with an indication that it is in the end the customer who has to
37:49
pay for whatever we waste cost awareness was to be Ikea's Anthem and so he sets up remember he said earlier you know if experts said hey could you know this Tiny Town of wmart support when you want this giant Furniture Store people like of course you can't there was so many
38:06
people so a lot of the stuff that they're known for right uh child carees and all the Ikea the restaurants they were they were born out of necessity because so many people were traveling vast different distances to get to the store and since people are coming from
38:19
all over the country like they need a place to stay and so he says gradually the pressure on this little town grew even greater it wasn't long before we opened a restaurant and we also had an inn so a hotel or motel on the site with a hotel and pool my grandfather would
38:33
have been amazed for the place was this old country store step by step we were building our future philosophy and so to deal with this rapid growth the family turns into a business the business turns into a family they set up their offices at the time or on the farm and clear
38:50
everything out to make room for the growing Ikea headquarters so everybody in the family is helping out in the business and I I do think if you read between the lines and like the fact that he was just treated differently I think his family knew he was gifted I think
39:04
his family understood that he was an unusual Talent you it says his home became his office and his office his home The Farmhouse was cleared so that the boy not the farm could expand and so you got everybody in the family helping out the father's helping out the
39:16
mother's helping out so it says the family became his firm and then a contradiction jumps out says it appears contradictory that this profoundly family bound man often neglect Ed his own family for the sake of the business it was to be one of ingbar's great
39:32
sorrows and the cause of some soul searching that business made him neglect his three sons as they grew up he has done everything to make up for it since but everyone with children knows that childhood does not allow itself to be reconquered I read this book for the
39:49
first time I think close to 5 years ago that idea childhood does not allow itself to be reconquered has been imprinted on my mind I remember that line exactly is if I had read this yesterday and not 5 years ago and then on the very next page he goes into
40:03
another regret that you that you see a lot in biographies and I talked to a lot of Founders about this you know a lot of super successful Founders they build giant companies and yet in private conversations they're nostalgic for when the company was small so it says the
40:16
transition from the closeness of the farm to the less intimate atmosphere of a large company was difficult for the founder essentially he has never really accepted it this is what he say that first wonderful time of strong working fellowship with a circle of individuals
40:29
all of whom I knew personally made me dream Foolish Dreams of it always remaining the same I nourished a false belief that it would be possible to preserve the feeling even when we grew large when Ikea was a family that remains my very best memory and so keep
40:45
in mind when he says those words ingvar's reported net worth is around $50 billion and so then he goes into just how difficult it was uh to build Ikea remember the idea it's like well everybody wanted me to write an autobiography I said no for 10 years and
41:01
they said yeah but it' be a service to the future generation of entrepreneurs and so he doesn't hide you know what I would say I guess about this is ingbar has an unusual personality compared to many of the people that un I study way higher levels of insecurity he's
41:15
constantly crying he's very sentimental and he's still even though his company's wildly successful racked with self-doubt but I think one of the best things he did for future generations of entrepreneurs is like he didn't try to hide that he says I have not been bble
41:27
to avoid severe losses both fiascos and triumphs have marked the history of the business and he talks openly about all the many moments of weakness he's like I wept a lot I couldn't bear adversity often I failed to look at things from the bright side the sad thing is I
41:42
didn't even learn much from these early failures on the contrary I kept repeating them fiascos have continued throughout my life and so he goes through a list over the next several pages of all of these ideas and Investments That Ikea did where he lost
41:56
millions of millions of dollars and so he had the idea we're going to sell TVs let's buy partial ownership in a television Factory and in the 1960s it said this one one mistake this one tragic investment cost Ikea 25 to 30% of their total assets at the time and he's
42:13
like but I didn't even learn from that because decades later I decided hey I'm going to dismantle a Swedish Sawmill and I'm going to set it up again in Russia and he loses about 12 to5 million on this because of the Russian mafia this
42:26
is his description by the way the Russian mafia an endless Soviet type bureaucracy and the list just goes on and on a terrible investment of Romania a ter terrible investment into in a factory in Thailand he's like I we lost hundreds of millions of dollars on
42:41
projects like this over the years but even after all of this he repeats his philosophy that only those who are asleep make no mistakes making mistakes is the privilege of the active the fear of making mistakes is the root of bureaucracy and the enemy of development
42:54
and a few of his employees are interviewed in the book and they said that camrad preferred them to make mistakes rather than to be Idol and so one thing that can help you overcome a lot of mistakes is if you're just in a great growing market and you're in there
43:06
early there's this concept that Charlie Munger talks about over and over again that he calls surfing and so when Charlie would try to analyze like what cause the success of somebody he would look for some kind of wave that they were surfing so he would talk about like
43:17
Les Schwab was surfing the wave of brand new Japanese Tire Imports into America and the durability and low cost of those Japanese Tire Imports gave him a massive advantage vage cost advantage over his American competitors another example you
43:30
and I recently talked about was in that that episode on the rare Bernard orol interview that he caught the early wave in China's luxury Market expansion and so the wave that ingvar cprad rode was the fact that Sweden's Countryside was quickly becoming depopulated right when
43:46
he started selling furniture during the 1950s alone 50,000 Farms closed down and those people moved into either the cities or the suburbs and this one paragraph gives a great description of the wave that they're surfing the building program that came to have such
44:01
an enormous influence on Ikea or rather the need for Ikea broke all records during the first 20 years after the end of the war 1 million new apartments were built the company quite simply was in step with an accelerating development so as I've already mentioned
44:19
throughout the book and throughout his career he's constantly repeating these virtues that he used to build Ikea the ones that he wants to to infuse the company with the one he wants to so he preach to his employees constantly about and one of them I haven't covered uh is
44:33
going to be really important for this next section this is the turning point of Ikea into a truly differentiated business and so it's this idea of craftiness and I love ingvar's definition of craftiness so he he defines craftiness the following way the
44:45
craftiness is the ability both to be content with the resources one has and to find ways out of tight spots and so one of the benefits that Ikea enjoyed once they moved away from just a strictly made mail order is the fact that they saved on shipping they have a
44:59
store the other competitors do not they're all all the other competitors are strictly male order and so as Ikea's costs get lower and the efficiency increases the prices go down and so all of Ikea's competitors could not match Ikea's prices so they ban together and
45:14
there is a trade Association it's the National Association of furniture dealers and so the National Association of furniture dealers does everything in its power multiple times to try to push Ikea out of business and get in the way of ingar remember that definition he has
45:28
of craftiness the ability to get your way out of tight spots so the first thing they do is at the time trade fairs were really popular and it's a way a lot of people discovered in uh furniture they want to buy so he brought stuff from the store to the Trade Fair and so
45:41
the trade Association said hey you can't do that it's against the rules fairs are just for showing items not selling them so they managed to get him banned from selling at trade fairs he's like that's fine I'll still attend the trade fairs
45:53
and I'll make sure that my prices are prominently displayed and since his prices were so much lower they then go and get him banned from even advertising the price of his furniture and here's a description of this from the book a ridiculous game developed in which
46:07
petrified conservative sales thinking was up against a new and insolent price pressure ik was banned again and again again from doing anything but kept finding new ways of getting around each ban if the company was not allowed to appear itself it would send another
46:21
camrad owned company exhibit or some reliable supplier in a letter from the National Association of furnit dealers Ikea was likened to a monster with seven heads if you cut off one another soon grows So eventually he gets tired of this and he starts his own trade fairs
46:37
and then another tactic that the National Association of furniture dealers decided was like Hey we're going to cut you off from your suppliers so they sent out they they organized a boycott they told all their suppliers listen you can sell to one firm like
46:48
Ikea or you know all of us but if you sell to Ikea we will no longer buy from you and so now they're starting to lose Supply now they're are a bunch of them said okay we can we K anymore some of them I need to to back this up because this is actually really important we
47:03
called nursing the supplier so I talked about this last week with how SpaceX paid its vendors they paid like you know and and their competitors would pay like 30 or 60 or 90 days later SpaceX would give you the money that day and so they
47:13
because they wanted their parts as fast as possible so they're like well how do we get our parts Part Parts as fast as possible we treat our suppliers better than anybody else ingvar did the exact same thing so a manufacturer is giving an interview in this book and he talks
47:25
about the difference between and other furniture dealers Ikea paid within 10 days while others did not pay for 3 or 4 months nursing the supplier is one of Camp prad's principles one he still imparts to his staff until this day so as a result some suppliers are saying
47:40
okay you know I'm not I can't break this boycott I'm sorry I can't sell to you others remain loyal to Ikea but they would have to like deliver things to other addresses they would remove the logos from the delivery van so they could hide that they were the company
47:55
making a delivery to IKEA they'd do like uh deliveries in the middle of the night so no one would find out and what his competitors and adversaries didn't understand is this constant pressure from them was a blessing in disguise because for one way around the boycott
48:07
they're like okay you won't sell us this chair because uh you know the other people are buying this chair from you as well said if you sell to us they won't buy from you anymore okay what if we make like slight alterations to the design and the suppliers like oh well I
48:19
can sell you that because I'm not selling that to them and so they start having a differentiated product a product that none of their competitors are offering at price is their competitors couldn't match anyways and then the second way this was a blessing
48:30
in disguise I guess it's a second out of maybe three ways a blessing in disguise was the fact that like okay this boycott and this constriction applies to the country of Sweden we need to start looking abroad for new suppliers and so another turning point in ingbar C prad's
48:44
career and the history of Ikea is the fact that they start sourcing materials in Poland and so this is what ingbar said about that the boycott simply reinforced our Unity it was a crisis that became a non-crisis as we kept finding new solution remember you cut
48:57
off one of their heads another soon grows in Ikea's business philosophy the whole matter should be inscribed as a golden rule it regard every problem as a possibility new problems created a dizzying chance when we were not allowed to buy the same Furniture as others we
49:13
were forced to design our own and that came to provide us with a style of our own a design of our own and from the necessity to secure our own deliveries a chance arose that in turn open up a whole new world to us that was the beginning of our designing
49:29
our own furniture and then that is going to directly lead to one of their Innovations which is going to drastically reduce their cost and further differentiation them from their competitors it's going to lead to Flat packing and selfassembled Furniture it didn't look that way at the
49:44
time it didn't feel that way at the time because he's talking about crying himself to sleep he's completely depressed he's very stressed going through all this but it was the best thing that could have ever this boycott was the best thing that could have ever
49:54
happened to him and so here's another example of them turning a problem into unlimited possibility so they're now designing their own furniture they have other alternative supplies and suppliers and so they're working on a catalog they're photographing a table and one
50:08
and they go to pack up the table afterwards and one of their employees muttered something that changed the trajectory of Ikea forever he's like man this takes up a lot of space why don't we take the legs off and put them under the tabletop and so they're like wait if
50:19
we do that that changes everything and so they make their very first self-assembled table it's called Max and since it's self assembled we had our first flat parcel and thus we started a revolution and ingbar describes it this way perhaps it could be said that
50:34
reality forced The Innovation upon us we begun to experience a worrisome high percentage of damaged furniture and transport broken table legs that kind of thing now with flat packing the less damage occurred during transport and the lower the freight costs were that was
50:49
the logic behind it thus selfassembled bookcases chairs beds and other pieces successfully appeared there was an also unexpected benefit so okay you have less damage in transit you have way cheaper shipping costs and now that it's flat
51:04
pack the customer can take home the furniture that day if you were ordering like a mail order from a another Furniture like mail order you wouldn't get in some cases you wouldn't get your furniture for months you could go to Ikea's store and pick it up that day and
51:18
then another accidental discovery of this which was proven after the fact they weren't doing it because of this but it turns out there's this cognitive bias where because the customers now plays a role in actually creating and putting together the furniture the
51:32
customer now values Ikea's products more highly this cognitive bias which was discovered after the fact is actually called the Ikea effect and then ingbar continues to realize benefits from this what what do you call this Innovation that was forced upon us cuz now they can
51:49
go all the way back to the source of the manufacturing and design the manufacturing process and make it more efficient as a result of flat packing and so he says it resulted a design that was not just good but also from the start adapted to machine production and
52:00
thus cheap to produce with a design of that kind and the innovation of self assembly we could save a great deal of money in the factories and on transport as well as keep down the price to the customer and this goes back to this Obsession when he
52:13
was a little boy going into stores like why is it so cheap to buy things and so expensive to sell them that peculiar obsession with distribution and so he says I kept asking myself why does a product that is so cheap to produce gets so expensive so quickly once past the
52:27
factory gate it was not difficult for me to see the advantages of self assembled furniture and the superiority of flat Parcels flat Parcels saved enormously on storage and freight and in the long run they were to be the prerequisites for
52:40
the next step customers taking home Parcels of large furniture themselves and this point is important we were not the first with this basic idea there was a a small furniture store called NK in Stockholm that was producing the stuff they called knockdown Furniture which is
52:53
essentially flat packed furniture that you had to assemble yourselves the difference was ingvar was able to inject that idea into a system and a flywheel that compounded all these advantages together over decades he says they just didn't realize what commercial Dynamite
53:06
they were concealing Ikea was the first to systematically develop that idea commercially and so we should get into why inbar was adamant about Ikea never being a public company and then how he had this he was obsessed with this idea of giving his firm eternal life and so
53:23
he talks about one of the benefits of being a private company is is the fact that you know you you're not for you can grow or not grow you can grow at whatever Pace you want you can take it your time or not grow at all in fact a friend of mine uh wind to becoming close
53:36
to the his heirs or the people still running the company and he told me something a few months ago it's fascinating that they said uh one of the unfair advantages that private the private companies have is the fact that in in in Ikea's uh case particular in
53:50
particular there was like a 20year period or something like that where you know growth was basically flat they were profitable they were still making money but they just weren't growing very fast and now they're growing much faster today than they were during that period
54:03
And so in this book inore says still today we want to grow at our own pace so that we keep up not just with what is new but also develop what we already have Ikea's strategy has long been to take half of our resources to improve what already exists and the other half
54:19
to improve what's in the future we move at a somewhat slower Pace than if we had had access to Unlimited money so there is I think this is tied into something that's that happens later in the book that I think would be beneficial if it
54:31
was it here talks about the iron laws of Ikea that have been present since the birth of Ikea number one a good cash Reserve must always be insured number two all property must be owned number three all expansion is to be self- financed number four there shall be no
54:51
boasting and so one problem he knew he had to solve was you know Sweden's uh in her taxes were really high and he knew he wanted his sons involved in the business the sons wanted to be involved in the business and so he starts thinking about you know how do I give
55:06
this business eternal life so it's not relying on one person it's not relying on one country and it starts off just with these handful of questions he's asking himself how can we keep the future of Ikea without inheritance taxes bleeding the company to death how can we
55:19
avoid greedy interest endangering what we've built up how can moves abroad be achieved without personally affecting me and my family in a financially devastating way so to achieve this he hires an army of lawyers he spends almost a decade it is one of the most
55:34
confusing corporate ownership structures I've ever seen in my entire life if you go to aia's Wikipedia page you can see like a flowchart of all this I'll try to give you a simple overview of this Labyrinth so the original Ikea company becomes a holding company whose profits
55:48
are moved to a tax exempt nonprofit who then later moves that money into this foundation called Inca which is based in the Netherlands then apart from that there's a trust which owns a Dutch holding company which then owns another holding company in Luxenberg which then
56:03
owns Ikea's intellectual property the book says the business structure that ingvar with an understatement calls fairly unique in the world is so legally intricate that no Outsider is really able to understand it and bizarrely this Foundation that he created now over 50
56:21
years after he created it is the fourth largest technically the fourth largest it in the world and so far has accomplished ingvar's goal which was we're going to sell furniture that can be taken apart and reassembled but the company itself can never be dismantled
56:35
and so I think the reason that he spends so much time repeating the principles and then doing like leading essentially the Bible study is what they call it he says over and over again that that Ikea is a concept company and that if we stick to the concept we will never die
56:48
in fact in the book it's not just that they concept company they call the concept of Ikea the sacred concept the company Bible of furniture dealers testament which which I read to you earlier has been reprinted and distributed to over 100,000 employees
57:01
all over the world they describe this annual sermon that he gives he says uh when he's doing it he is Billy Graham a preacher has become a household God a revivalist speaker and moralizing Pastor he makes jokes tells stories and literally sheds a tear so he's
57:16
constantly in the book bursting out with tears he's very emotional like his emotions are right at the surface he describes his leadership as the noble art of hugging management and says he's must have hugged several thousand Ikea employees but I think the most important
57:29
part of this is to get across that repetition is persuasive it is altogether a repetition of 43 previous speeches the theme is the same Ikea's philosophy cost awareness the majority of people the dream of the good capitalist hard work a mission to seek
57:43
profit and glory and then he also repeats the need for humbleness over and over again he says never be cocky in a moment of Triumph always prare for harder times he says they push cost awareness at all levels with almost manic frenzy he explains the laws of
57:57
ikan why one of them must be that all property must be owned he said owning the properties might slow our pace of growth but it provides security no landlord can come in in 10 years time and raise the rent by 20% he believes in the ability to wait out
58:11
difficulties he talks about the importance of gathering unfiltered Intel from the front lines so he's known they they call the owner Dawn raids he will literally appear unexpectedly at a store without warning sometimes at 5:30 in the morning just to talk with the men
58:27
delivering Goods into the store he wants to know what the security was like what annoyed them the most were they given morning coffee the people that are closest to him and know him the best say that his greatest anxiety and he's full of anxieties is that Ikea won't survive
58:40
they say that he's almost maniacally oriented towards the future towards the next day they say it's impossible to satisfy him and that he will never be satisfied and if you ask inore what kept Him going well past the you know any financial needs or well past the
58:54
retirement age he says well keeps me going is the feeling that in a wider sense I'm participating in a gigantic project of democratization that is his mission he asked in what way as an entrepreneur can I be of the most use I asked myself why do poor people have to
59:09
put up with such ugly things was it necessary that what was beautiful could be bought only by an elite a small Elite for large sums of money and I've gone on demanding an answer from me all of my life and so at the end of the book the
59:22
author is trying to give a summary like who is ingbar campr the man and he writes who is the man we have followed through this book what should we call him manufacturer innovator the greatest small business entrepreneur in the world perhaps all of those rolled into one or
59:36
something else we cannot fathom what drives him what makes him think as he does and governs his decision how much of Ikea consists of ingbar cprad and how much of cprad is Ikea there are days when he seems a prisoner in his own system obsessed by expanding his own
59:51
house while at the same time locked in it the day he is free of of Ikea life for him will no longer be worth living he loves it always wants to lie as close as possible to it and never tires of improving it he bombards his people with a thousand ideas from a bottomless store
1:00:10
thoughts crowding in and clamoring to get out ingvar says a demon in me says I have so much to do I am never satisfied something tells me what I'm doing at the moment has to be done better tomorrow he comes back again and again with painful
1:00:27
self-searching and an almost bitter undertone to his defects even today behind this multinational Tycoon is a country boy with a fierce sense of being an underdog standing on tiptoe and peering uneasily through adult eyes am I good enough ingvar recognizes himself as
1:00:45
an outsider and in that way he is one of us all he knows what it's like to be odd to fall outside of the establishment to feel rage against injustices he has a peasants Trust of a favorable destiny that keeps his feet on the ground he is full of regrets and eternal hope when
1:01:03
asked he said what I've missed most in my life was never taking the time to be with the children when they were young I have also talked about my many defects my lack of self-confidence my difficulty making decisions my disastrous organizational skills and all the
1:01:18
horrible faults that I fully recognize in myself fortunately I've also been given a certain nose for business and a reasonable dose of peasant Common Sense finally I am often asked whether when I was young was I able to predict the development that Ikea had achieved
1:01:35
naturally not although my dreams early on were both great and bold my life was to be spent demonstrating that a functional and good product does not have to be expensive that is still true today we still have a long way to go as I have written so many times and have
1:01:51
said at the end of hundreds of speeches we are just at the beginning of a glorious future and that is where I'll leave it for the full story highly recommend reading the book if you buy the book using the link that's in the show notes on your podcast player are available at
1:02:04
Founders podcast.com you'll be supporting the podcast at the same time I will also leave a link down below to The Testament of a furniture dealer which you can read for free online that is 370 books down 1,000 to go and I'll talk to you again soon