Arkansas investment banker Warren Stephens and Home Depot co-founder Kenneth Langone praised the virtues of capitalism in a fireside chat-style presentation at the Little Rock Chamber of Commerce’s annual meeting held Monday (Nov. 5.).
Stephens, in introducing Langone as the chamber’s special guest, commended the fellow billionaire, investor and philanthropist as one of the scions of American capitalism before the overflow crowd of local community and business leaders gathered at the downtown Statehouse Convention Center.
“Ken has used his success to better his community, the people of his community through his philanthropic efforts, and he’s compassionate about educating young people … on the benefits of capitalism,” said the namesake president and CEO of Stephens Inc. “As we all know in this room, we are all beneficiaries of a system that allows to people go – with very little background or education in some cases – and make themselves a success.”
In his well-known humorous and folksy style, Langone shared stories of how he and three other Home Depot executives founded the home improvement chain in 1978 with only two stores and $2 million. The publicly-traded company now has more than 400,000 employees and annual revenues of $101 billion. In describing his success, Langone espoused his Italian American heritage and upbringing by strict Italian immigrant parents who never finished high school.
“I am an American, an Italian-American. My grandparents came here willfully more than 100 years ago,” he said. “But every one in this room came from someplace else, but this is truly the land of opportunity. My grandparents came here for only one reason. There was nothing for them where they were.”
As he continued his onstage bootstrap rag-to-riches story with Stephens, Langone said he is most proud as company founder that Home Depot associates are stockholders who share in the success or failure of the home improvement retailer’s fortunes.
“The thing that I like to talk about is that we have more than 3,000 kids – and by kids I mean anybody younger than me — that started with us working in the parking lot and they are now multi-millionaires today,” said the 83-year old Long Island, N.Y.-native. “They didn’t go to college. They didn’t want to or couldn’t afford it for whatever reason, they came to work for Home Depot and that is the genius and charm and excitement of capitalism.”
Later in the back-and-forth discussion between the two well-known American billionaires, Stephens and Langone talked about the influence of Sam Walton and Walmart on American capitalism. Citing the involvement of his father and uncle, Jack and “Witt” Stephens, in aiding Walmart founder Sam Walton with several successful public offerings, the younger Stephens said access to capital markets helped to fund the Bentonville retailer’s early expansion and growth, as well as other Arkansas-based companies like Tyson Foods, Alltel Corp., Murphy Oil and J.B. Hunt.
“We were involved in (Walmart’s) initial public offering when they had $32 million to $33 million in sales and we raised less than $5 million. And some time later, I was talking to my dad about (Walmart’s) obvious success because by the time I joined the business in the 1980s, they were going great guns,” Stephens recalled.
“But there are so many people – just like you said from Home Depot and I don’t know the numbers. But we’ve all seen it and we all know people around who were store managers for Sam early on that have millions of dollars in net worth and their families, extended families and children are so much better off. And then not just Walmart, but you have a lot of Arkansas companies … that took a very poor part of our state, Northwest Arkansas …, and now it is one of the most economically vibrant communities ever in the country.”
Langone agreed, calling Walmart’s “powerful” transformation of Northwest Arkansas and the U.S. retail sector one of the most iconic business stories in American history. He reminded the Little Rock chamber crowd that at the time of Walmart’s early beginnings, the company’s top rival was Kmart. Last month, Sears, the nation’s former largest retailer and owner of K-mart, filed for bankruptcy.
“And the charm was that Sam never lost his touch,” Langone said. “The best thing about capitalism is the ones who win – (they) win by raising the bar, which makes it better for everybody.”
Going back to the successful IPOs of Home Depot and Walmart, Stephens quizzed Langone if he believes the dwindling number of U.S.-based public companies birthed through IPOs will improve anytime soon, citing data showing there were only 105 successful IPOs in 2016 versus more than 700 two decades ago.
“And there are about half the public companies in the U.S. today than there were in 2000,” he said. “We have had some new discussions with the (Trump) administration and the Securities and Exchange Commission (SEC) about how to improve that, but do you see it getting any better anytime soon?”
Langone quickly replied, “I don’t know, but I can tell you this, we would’ve not founded Home Depot today. Why? The basic component of motivating our people is the day you come to work for Home Depot, you are a stockholder.”
Toward the end of his onstage discussion with Stephens, Langone admitted that capitalism was not perfect and does not always achieve expected outcomes.
“It is fair, sometimes it is not,” said Langone. “But it works. It is the tide that lifts all boats.”
Langone’s appearance in Little Rock is tied to Stephen Inc.’s ongoing film series, called “This is Capitalism.” The multimedia initiative, started in May 2017 by the Little Rock investment bank, includes original films, articles, podcasts and other multimedia to share stories of individuals who embody the spirt of the American dream. Langone’s recent autobiography is entitled “I Love Capitalism!”
Stephens was recently named to the 2019 class of inductees for the Arkansas Business Hall of Fame, along with former Murphy Oil CEO Claiborne Deming, Joe Steele of Springdale Canning Co., and the late John Tyson, founder and former CEO of Tyson Foods. They will join 82 other members of the Hall of Fame when they are inducted Feb. 8, 2019, at the Statehouse Convention Center in Little Rock.