The Knowledge Project
Les Schwab: Why Real Ownership Outperforms Experience, Capital, and Credentials [Outliers]
15 Jul 2025
Full Episode
Charlie Munger once asked me, how can someone give away 50% of profits and make billions more than if he'd kept it all? Before I could answer, he told me about Les Schwab, a tire shop owner who understood incentives better than almost anyone. What Schwab discovered will change how you think about business. Welcome to The Knowledge Project. I'm your host, Shane Parish.
In a world where knowledge is power, this podcast is your toolkit for mastering the best of what other people have already figured out. This episode is for educational and information purposes only. What Les Schwab discovered was deceptively simple. Most businesses treat employees like expenses to minimize. He treated them like partners to enrich. The math was shocking.
He gave away half his profits and built a multi-billion dollar empire. Here's how it worked. When people working in the tire centers made a share of the profits, they don't just change tires. They build relationships with customers. When managers own real equity with skin in the game, they run stores like their family's future depends on it. Because it does.
Les documented his business lessons in his autobiography, Pride in Performance. Keep it going. He wrote it himself on a 40-year-old typewriter because he wanted every entrepreneur to understand exactly how he did it. No ghostwriter, no corporate polish, just the raw blueprint for turning a leaky shed into an empire. Les proved that the most ruthless business strategy is radical generosity.
He turned employee loyalty into a competitive moat so deep that Walmart couldn't cross it. This is his story. Before Les Schwab was the name on over 400 tire stores across the American Northwest, it was the name of a kid born into nothing. Bend, Oregon, 1917. His parents were desperate homesteaders fighting the high desert for a living. His mother, Alice, taught him everything that mattered.
Then pneumonia killed her when Les was 15. That left him with his father, Bishop. A steady in contradiction, gentle and hardworking when sober, a maniac when drunk. Les spent his teenage years terrified that his father would show up at school drunk and humiliate him. Poor but proud. That's how Les described himself. That pride was armor.
A year after his mother died, they found his father's body outside of a moonshine joint. Les was 16. He was now an orphan. His relatives offered to take him in, but he said no. Instead, he rented a room in a boarding house for $15 a month, decided he was an adult. The world had given him a hard education and an allergy to alcohol.
Most kids in his position would have taken the help, moved in with family, and stayed safe. Les chose the harder path. While it wasn't so much choosing the harder path consciously, he just didn't feel he could rely on anyone else. He wanted everything on himself. I understand that. Choosing pride over comfort and independence over security shows in nearly everything he went about doing.
The lesson here is a bit counterintuitive. The worst things that happen to you can become an advantage, but only if you refuse to let them define you as a victim. Les could have blamed his circumstances. Instead, he used them as fuel. Les got his first paper route before his parents died. However, this came with two problems. One, he couldn't ride a bike. Two, he couldn't afford a bike.
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