First time I heard about Costco was in 2014. I just landed in Los Angeles and settled on Venice Blvd and Walgrove Ave. A few blocks away on Washington Ave is Costco - I also discovered and became a regular at the In-N-Out on that block. I didn't fully grasp the power of Costco at first. As a european, it reminded me Metro. Metro is a food wholesaler. We go there to buy high quantity of things we know, at the best price. We needed a 'professional' card to enter the store though. We had one thanks to our society activity [organizing events and weekends]. I remember at school, it was well perceived to hold a Metro card. You could definitely leverage this.
So that's how I apprehended Costco at first; except that it wasn't food only but everything. And the very first recommendation we received from our local friends was typically to buy their surfboard. Of course we just arrived, we wanted to surf. As beginners, everyone was telling us: for your first board, get the Costco foam one. One of our friend was a member so we went with him. Once inside, it wasn't at all what I was expecting. The amount of people, their purchasing power, all the products. I could feel a kind of Ikea vibe in the sense where people come for one thing in mind but will get out with 10x that. It definitely felt cult-ish.
And then I took this deep dive down Costco's history and strategy and oh boy this is a fascinating company. I highly recommend.
Costco is not only Charlie Munger’s favorite company of all time (plus he’s on the board, natch), it’s an absolutely fascinating study in how seemingly opposite characteristics can combine to create incredible company value. For instance: Costco has the cheapest prices of any major retailer in America — and also the wealthiest customer base. They pay their hourly workers 30% above the industry norm (and give them excellent healthcare + 401k benefits) — and are almost 3x more profitable on labor than Walmart. Speaking of Walmart, Costco stocks 40x fewer SKUs than their Bentonville-based rivals — yet sells an average of 15x more volume of each.
Then there is the special Hotdog edition.
The price of the hot dog has remained a constant $1.50 since 1985. That gets you both the hot dog and a Pepsi, at a comically low price.
Bryan offers a very interesting angle in Costco Capitalism: building a structurally fair company; how fairness creates psychological favorability; what Costco shows us about the blurry relationship between ethical and fair; CSR shortcomings in the long run.
It always strikes me when I run into a friend who is amused that I am a Costco member. For someone who grew up in a suburban area, even with the nearest Costco being a 45-minute drive from our house, shopping there was a no-brainer for my family. The reasons why Costco made sense for us are probably not dissimilar from the reasons of its ~100 million other members.
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Objet du jour
During the same period - 2014 - Mathilde offered me this backpack I'm still using everyday. One of my best recommendation of all time. Handmade in California. Relationship recorded with Objet.