National Cash Register - A Checklist

If you’ve read the recent post on John H Patterson and his National Cash Register Company, you will have observed that there are many important learnings and take-aways from his business. From empowering employees and tone from the top, to maintaining quality and customers are key, all are integral factors to the success of any company. One key indicator of its importance as a lesson to investors is how fond Charlie Munger is of citing that business as a teaching platform; one from which we can all learn.

Charlie is also recognised as an advocate of checklists to bolster his investment activities. Often the amount of information available to us as investors is vast; too vast to analyse it all without some structure to our thinking process. Relying on our memory alone can be risky. This is where checklists can prove handy; despite being a simple structural tool, they can add enormous value to our thinking.

"If you're trying to analyze a company without using an adequate checklist, you may make a very bad investment.” Charlie Munger

Given Munger’s affinity for both these things, it’s worth thinking about the kind of checklist items he may have taken from his study of Patterson’s business. Munger’s also a strong advocate of ‘lollapalooza effects,’ wherein a confluence of factors creates massive impacts.

Here is a list of helpful checklist items for CEO’s and investors to consider:

  • Seek out businesses with tailwinds.

  • Look for companies run by individuals who exhibit a fanaticism for their craft.

  • Ensure that the proper tone is set from the top.

  • Remember that profitability is a by-product of success, not the driving force behind it.

  • Aim to keep customers for life, not for one transaction.

  • Empower all employees, from the highest levels of management to those on the front line.

  • Practice reciprocity - take care of your employees, and they will take care of your customers and the business.

  • Sell products that provide value-add features, savings, and benefits to the end-user.

  • Let your customers be your best advertisements through word-of-mouth advertising

  • Share profits with everyone in the organization.

  • Encourage share ownership across the workforce.

  • Achieve profitability through volume and focus on driving down prices.

  • Seek out ideas from the front-line workers, as they are closest to the action.

  • Emphasize training, and extract and share ideas across all levels of the company.

  • Promote from within whenever possible.

  • Take inspiration from various disciplines, as Charlie himself has done.

  • Maintain an unyielding focus on quality.

  • Strive to exceed customer satisfaction at all times.

  • Never be content with the status quo; always strive for continued improvement.

  • Get management out of the office and into the field.

  • Push decision-making down the chain of command.

  • When expanding overseas, rely on local expertise.

  • Remain open-minded and embrace new ideas.

  • Pivot when necessary

  • Innovate through trial and error.

  • Value complaints, as they provide guidance for improvement.

  • Pay your staff as generously as possible.

  • Do not change the compensation structure for high-performing employees.

  • Harness technology to reduce costs.

  • Foster transparency across the entire organization.

  • Ensure management walk the factory floor

  • Take note of appearances, from the cleanliness of the facility to the presentation of the sales force.

  • Encourage healthy competition between divisions.

  • Reward staff with recognition and awards, in addition to wages.

  • Systemize the selling process.

  • Invest in a crisis when others cannot.

  • Retain capital to reinvest in the business.

  • Create a culture of ‘doing the right thing.’


Despite their simplicity, Checklists are a fundamental part of any sound investment process. There is so much to learn about companies, humans are simply not equipped to remember it all. And given both the volume and wealth of information available to us from the study of National Cash Register Company alone, it makes sense to utilise this process, and to ensure your own checklist includes all of the elements that Munger would include in his.

Further Reading:
John H. Patterson: Pioneer in Industrial Welfare,” Samuel Crowther, Doubleday, Page & Company, 1923.

NCR Annual Report 1906 - h/t Jessie Rancourt



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