Costco

**Ben Gilbert** (0:00)
I don't think I have ever been more in love with a company and a business model.

**David Rosenthal** (0:06)
What are you, Charlie Munger?

**Ben Gilbert** (0:07)
It's just, the deeper you dig, the more good things you find, and usually it's the exact opposite of that. It's like the opposite of being an early stage venture capitalist.

**David Rosenthal** (0:22)
Is it you?

**Ben Gilbert** (0:35)
Welcome to Season 13, Episode 2 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert.

**David Rosenthal** (0:44)
I'm David Rosenthal.

**Ben Gilbert** (0:45)
And we are your hosts. What if I told you that there was one place where you could get all these things under one roof? A two and a half pound container of cashews, prescription eyeglasses, a tank of gas, new tires for your car, 96 rolls of toilet paper, a new refrigerator, an outdoor shed, a 10 carat diamond ring, some fresh prepared sushi, fine wine at a great price, and you could even grab a hot dog with a soda and a free refill on your way out for just a buck 50

**David Rosenthal** (1:20)
Ben, I don't believe you.

**Ben Gilbert** (1:21)
Hey, it has been the same price for 40 years now?

**David Rosenthal** (1:25)
47 years.

**Ben Gilbert** (1:27)
Yes. Most of you are very familiar with this Disneyland of consumer value that I'm referring to. It is Costco. This company seems very simple on the face of it. If you sell in bulk, you have the opportunity to offer great deals to your customers. But what really makes it work are the 50 clever innovations that they've refined over the years that all work together like an orchestra that's been rehearsing for decades. Nothing about Costco is an accident, from the extra wide parking spaces to the whole rotisserie chickens. And if your goal is to offer extremely great value to your customers on high quality products at the lowest possible prices, there are a lot of ways that you could go about doing that. And today we will walk through the very specific path of decisions and trade-offs that Costco has chosen to accomplish just this. So listeners, remember that. Extreme value, high quality products, lowest possible prices. And David, my God, does this method work well? There is a reason Charlie Munger loves this business.

**David Rosenthal** (2:31)
Oh, does he ever. You know the great Warren Buffett joke about Costco, right? Oh, no. So here it goes. Warren and Charlie are flying on a plane that gets hijacked. It's kind of macabre. The hijackers each grant one of them one last wish. And they ask Charlie first. And Charlie says, I would like to give my speech on the virtues of Costco one more time before I die. And then the hijackers turn to Warren and he says, shoot me first.
It's so great. This actually happened at a Berkshire annual meeting. It's on YouTube. We'll link to it in the show notes.

**Ben Gilbert** (3:06)
That is awesome. I mean, Charlie Munger, of course, on the board of Costco and longtime fan of the bottle, as you should be too. So here are some insane stats. Costco has grown revenue right about 10 percent for over 30 years in a row. Their revenue per square foot of their warehouses belongs more in a conversation with Tiffany than Walmart. They seem to have incredible running room ahead of them to expand internationally and here in North America. And David, here's one that is just for you. Their store brand Kirkland Signature does more revenue alone, not including anything else in the store than all of Nike.

**David Rosenthal** (3:44)
I know. It's so great. I think I found that Kirkland Signature as a unified brand, I think might be the largest brand in the world by revenue.

**Ben Gilbert** (3:55)
It's the largest consumer package brand in the world.

**David Rosenthal** (3:57)
Yes, which is a misnomer because they sell everything. Most other brands only sell like shoes.

**Ben Gilbert** (4:04)
But they're 52 billion a year that they sell, which inches by Nike by just about a billion dollars, doesn't even include the Kirkland Signature gas. Listeners, if you want to know every single time a new episode drops, you can sign up for email updates, acquired.fm slash email and two brand new things. We will be including little hints at what the next episode will be to the email list now. Two, we'll be including follow-ups from episodes when listeners share things with us after release, be it little corrections or just additional insights. So sign up acquired.fm slash email. Come talk about this episode with us at acquired.fm slash Slack and learn from other listeners who may be closer to these topics than even David and I are. If you want more from David and I, check out our second show ACQ2 available in any podcast player, just search ACQ2 and our next few episodes are about AI with CEOs who are leading the way as the world very rapidly changes in front of us. So without further ado, this show is not investment advice. David and I may have investments in the companies we discuss and this show is for informational and entertainment purposes only. David Rosenthal, what are the history and facts?