#235 Outliers: Jimmy Pattison — Building a $16B Empire Without Connections, Capital, or Credentials

Imagine your share price dropping from dollars to 80 cents, then taking the company private at dollars and operating it without public scrutiny. There's significantly less regulatory oversight, fewer people prying into your business, and you don't have to disclose information to competitors. Being private offers many advantages over being public. One saying Patterson repeated, which I loved but didn't make it into the episode, is, "If you like your work, it's not work." He uses this line every time he's asked why he never takes a vacation. So, if you enjoy your work, it doesn't feel like work.

Brutal clarity consistently outperforms false kindness. At Jimmy's dealership, the rule was simple: whoever sold the fewest cars was fired. No exceptions, no negotiations. While this sounds cruel, Jimmy viewed it differently. He believed those individuals would never succeed in car sales, so why not cut their losses and pursue other careers, like mechanics or teachers? Everyone understood the rules upon joining. Like Reed Hastings at Netflix, Jimmy treated business as a professional sport; only the best players remained. The paradox was that his ruthless transparency fostered more loyalty than managers who offered false hope.

First, your reputation opens doors you didn't even know existed. Jimmy's decade of paying on time, showing up early, and delivering made his track record his only real asset. This prompted a Royal Bank manager to not only offer him a loan but to actively fight for him to get one. Second, Patterson believed in himself and was willing to go all in, putting everything on the line. The dealership Jimmy inherited was, in his words, "run like a country club." His previous operation sold 1,000 cars monthly, while Marshall Pontiac barely managed 25. Patterson applied everything he'd learned, reducing staff from 100 to 57 and bringing in his own battle-tested salesmen from his previous dealership. No sentiment, no second chances.

By 1956, Jim's approach shifted. He partnered with W. Frey, a radio announcer turned advertising genius. Together, they discovered a defining truth: business doesn't have to be boring; excitement drives it. Their sales meetings became legendary performances. Jim would announce, "Today we're going to sell 100 cars. To do that, we have to pull some rabbits out of the hat." On cue, W. Foot, dressed as a magician, would appear, yanking actual rabbits from a top hat and letting them loose across the showroom floor. Customer promotions got even wilder. They staged the world's largest checker game, using models in bathing suits as human pieces. They even brought in performing monkeys wearing overalls.

Recovery in the early 1970s was slow and humbling for Jimmy Paterson. He had to liquidate entire companies, sell his Learjet, and even return paintings from his office walls. The empire he'd built through financial engineering had collapsed. What separates survivors from casualties is that Jimmy didn't blame the market, banks, or bad luck; he blamed his philosophy. Jimmy gathered his remaining executives for what he called a corporate pep rally. Sitting around a simple table, they heard a transformative leader deliver a message that was part confession, part warning, and part battle cry. Things were about to change. "We aren't going to suffer fools gladly," he began. "We have been tolerant in the past on a few occasions, but we don't intend to be anymore."

Jimmy flew to Japan to meet Eiji Toyoda, chairman of Toyota Motor Corporation. He directly asked, "What is the secret to capturing market after market?" Toyoda's answer was simpler than Jimmy expected: "There is no secret. The whole of Japan has a national strategy of commitment to quality." Jimmy then wondered how 100 million people could be taught about quality. One by one, Japanese executives outlined five keys to their quality system: First, tally defects in the system. Second, analyze these findings. Third, trace defects to their source. Fourth, correct defects at the source. Finally, record the subsequent outcomes. This was the quality revolution. At Toyota City, Jimmy also discovered quality circles: small groups of employees voluntarily meeting to solve workplace problems.

Entering the 1980s, Patterson executed one of his shrewdest strategic pivots. Sensing an economic downturn with soaring interest rates and a looming recession in the early 80s, he bucked the prevailing corporate trend of aggressive empire building. Instead, he did the opposite: he liquidated the weakest 20% of his assets, converting them into about $140 million in cash and liquid investments. This contrarian move puzzled some observers at the time. However, when the recession hit Canada in 1981 and 1982, Patterson's company was not only insulated but also positioned to go bargain hunting. As John D. Rockefeller said, "the strong feed during the depressions."