Thriving Family Principle: Simplicity Wins - Business Strategy
Cale Dowell | August 03 2020
In 2019, Hobby Lobby was listed as #89 of America Largest Private Companies. David Green started the company in 1972 as a picture frame company with 300 SF of retail space and $600. Today they are the largest privately owned arts-and-crafts retailer in the world, and it’s estimated that they generate over $5 billion in revenue.
About a year ago, I had the opportunity to spend a weekend with the owners of Hobby Lobby at their headquarters in Oklahoma City. The first thing that strikes you is the sheer size of the operation. Their main campus is over 10 million square-feet… which is simply breathtaking. I spent a few hours with David learning more about what makes their business so unique. As he walked me through the catacombs of the operations, I noticed a massive sign covering the wall that simply said, “KEEP IT SIMPLE.”
What We Can Learn from Hobby Lobby:
I couldn’t resist: I had to ask about what made this phrase so impactful to his business. He explained that, in his experience, simplicity is often underrated.
Leonardo da Vinci once said, “Simplicity is the ultimate sophistication.” In the case of Hobby Lobby, I have to agree. As an example, I learned they handle all of their own distribution centrally with a massive fleet of Hobby Lobby trucks coming and going. Considering most operations of their scale, I assumed they outsourced their distribution or at least regionalized it. To that end, I inquired as to what type of technology they utilize to track shipments and coordinate deliveries of such massive quantity.
He paused and looked at me. “None,” he explained, as he pointed back to the sign on the wall. Instead, he came up with a simple system in their early years to determine which stores receive shipments based on days of the week. By the end of the description, even I could have told you the shipping schedule.
Hobby Lobby takes simplicity to a whole new level. But, as I learned, much of their simplification has been honed through years of experience and emphasis on people over profits. Paradoxically, the end result of simplification has yielded massive profits (nearly all of which they are giving away).
Sophistication has more sizzle than simplification at first glance:
Whether its technology or investing, human beings tend to be attracted to the things that sound exciting, exclusive, and smart.
While I was at Morgan Stanley, advisors who served ultra-high net worth investors, were trained to pitch alternative investment products, such as private real estate deals or a basket of exclusive hedge funds. More often than not, those products did not perform any better than the broad-based market. In addition, the product and management fees were often 50% higher than the alternative.
Yet, investors were still attracted due to the exclusivity and uniqueness of the portfolio. They don’t own the S&P 500, they own private deals that only their advisor can get them access to despite the higher fees, lack of transparency, and lower liquidity.
The fact remains: Simplicity doesn’t sizzle.
But smart simplicity is often born from experience. According to famed physician, Martin Fischer, “Knowledge is a process of piling up facts; wisdom lies in their simplification.”
In our experience, simplification wins. Not just with investments, but also with your wealth. Estate planning processes often become complex, complicated and muddled insurance products that are tossed around like candy. While maximizing value becomes numbers oriented instead of people-focused.
Real simplification takes effort
A great leader pays an all-star employee, not simply for the quantity of hours they work, but for their experience to get the job done with excellence and efficiency. We often mistake time or complexity with results and thus overlook the simplified options staring us in the face.
As a result, we adhere to the principle that, all things being equal, Simplicity Wins.
Our clients tend to own businesses and have complicated balance sheets. As the net worth ticks up, it’s amazing how valuable simplicity becomes. Yet, moving towards it isn’t always easy.
Pressing into simplification is often against the grain
Some people might call you crazy, and espouse “sophisticated sounding solutions” (all those “S’s” make it sound like a snake!) as the golden goose.
But the secret truth is that people who enjoy life the most tend to fight to keep things simple. It adds freedom, time, and opportunity to life.
Are you keeping things simple?
At Archetype, we have a set of twelve principles designed to help families thrive across generations. Check out more blogs from our "Thriving Family Principles" series.
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