Aug 9, 2017
Ray Hoffman interviews Warren Stephens about the history of Stephens Inc., and Northwest Arkansas. The difficult effects of the Great Depression on a rural community sparked the rise of tough entrepreneurs who became the industrialists of the area, and brought prosperity to replace poverty. Many of the great Arkansas companies were helped along the way by the Stephens family. Listen in to learn more.
Key Takeaways:
[:25] Arkansas has produced a disproportionate number of major companies, such as Wal-Mart, and the investment banking firm, Stephens, Inc., that helps companies like Walmart to grow and prosper. Stephens, Inc. has been led by Warren Stephens since 1986. Warren’s father and siblings grew up picking cotton on the farm.
[1:49] There is something in Arkansas that encourages
leadership in individuals, such as Sam Walton, Charles Murphy, Bill
Dillard, J.B. Hunt, and the Tyson family.
Matt Waller, Dean of the Walton Business School at the University
of Arkansas speculates that it’s a toughness and a belief that “We
can do this. We can make our lives better.”
[2:42] Albert Stephens, Warren’s grandfather, lived off of selling pieces of the farm, until there wasn’t much left to sell and they had to farm it. Warren’s uncle made it his life’s mission to piece back together all the land that had once been in the family. Today, Warren’s cousins own about 3,000 acres.
[3:40] Warren’s uncle, Witt Stephens was in the belt buckle and Bible business, and was really good at it. His father advised him to go into the bond business, when Arkansas bonds were trading at $.10 on the dollar in 1933.
[4:21] Uncle Witt took a bank loan of either $15,000 or $25,000 — no one remembers which — and started buying bonds at $.10. He sold them to customers, and kept some. By 1940, they were trading at par, which was a great return for him and his clients. As Sir John Templeton once said, “Buy when there’s blood running in the streets.”
[5:06] Witt, and Warren’s father, Jack, started investing in natural gas, and other businesses all around the state. Witt gave credit to one of FDR’s programs, the Rural Electrification Program, that was designed to bring electricity to poor regions.
[5:54] Witt bought the Sheridan telephone exchange to run a phone line to his parent’s home. Witt sold it to the Wilbourn family, who started Allied Telephone, and built enormous numbers of land lines across the state. Allied later became Alltel.
[6:56] In college, Warren worked summers at Stephens, Inc. at the trading desk. With an MBA, Warren started full-time in 1981. Witt and Jack owned the company, and Warren picked their brains a lot.
[7:39] Warren’s dad told him, “I wanted to be in business the next day.” He also said, “You can’t ever take a risk - if you lose it all, you endanger the ability of the firm to survive.” Everything can go wrong at once. When it does, in investments, it’s ugly.
[8:54] In the 1960s, Stephens moved into private equities. In 1968, they started a bank data processing company. They also had a life insurance company, and it loaned money to Sam Walton to build his first stores. In 1970, Stephens, with White Weld, managed the Walmart IPO. It was one of the best things to happen for Stephens.
[10:54] Warren discusses capitalism. After this last crisis, people wonder if the capitalist system is really the right system. Warren suggests the average consumer does not understand the many profitable layers that contribute to their ability to purchase the product they want, when they want it. Young people don’t see the connection.
[12:31] The cell phone wasn’t created by government. Warren noted in a WSJ editorial that young people reject capitalism and the free market, but celebrate entrepreneurism and free enterprise! He doesn’t think they understand what capitalism is. Warren says that the youth didn’t see Eastern Europe collapse under communist socialism.
[13:48] Warren suggests education on capitalism would help eliminate the disconnect between popular views and the facts. The This is Capitalism series is an effort to educate about successful capitalist entrepreneurs, past and present, and to show the impact they have had on communities and employees.
[14:19] Warren talks about the development of Northwest Arkansas through capitalism, from Walmart, to J.B. Hunt, to the University of Arkansas and more. The Waltons have given generously to the University. Alice Walton has built an incredible art museum. Warren compares 1960s Northwest Arkansas with the same area today. It is thriving.
Mentioned in This Episode:
Stephens Viewpoints: Podcasts.com/podcasts
“Why Do the Young Reject Capitalism?,” by Warren A. Stephens for the Wall Street Journal
The Great Recession of 2008-2009
Sam M. Walton College of Business at the University of Arkansas
Crystal Bridges Museum of American Art
Northwest Arkansas Regional Airport
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