5 Minutes in the Lower Middle Market
5 Minutes in the Lower Middle Market is a short daily podcast on the best ideas, lessons, and signals in the world of small business acquisitions, holdcos, private equity, and operating companies. In five minutes or less, it helps buyers, operators, and investors get sharper on what actually matters in the lower middle market.
5 Minutes in the Lower Middle Market
The Best-Performing Stock in S&P 500 History (621,000%)
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In this episode of 5 Minutes in the Lower Middle Market, we study one of the greatest business builders of the last 50 years: Ken Langone.
Most people know Langone as the co-founder of The Home Depot. Fewer know the story of how it all started: backing a recently fired executive, betting on people before credentials, and building a culture where thousands of employees became owners.
We explore Langone's philosophy of capitalism, why he believed ownership changes behavior, how Home Depot became the best-performing stock in S&P 500 history through 2018, and why he argues that people—not products, capital, or strategy—are ultimately the differentiator.
Timestamps
0:00 Ken Langone's view of capitalism
0:33 The simple idea behind Home Depot's success
1:00 Backing Bernie Marcus after he was fired
1:50 The investment that became a 621,000% return
2:58 How 3,000 parking lot workers became millionaires
3:09 The cashier who went on to run 1,700 stores
3:43 The biggest lesson from Ken Langone
Today's five minutes in the low middle market is a bit different because I found a very fascinating interview, and it was done with Ken Langone, who's the co-founder of Home Depot, and it was done back in 2018 at NYU Stern. Ken today is 90. Back then he was 82, and he's as sharp as it gets. So he was covering his thoughts on capitalism, betting on the right people, and overall how they started and built Home Depot. And probably an interesting fact to you, and I didn't know personally, it's Home Depot for 40 years was the number one performing stock in SP 500. But we're covering all that. First thing, his thoughts on capitalism. Capitalism to me is the great lever. If you got a great idea and you're willing to work like hell, and you've got a product that somebody wants to buy or a service that somebody needs, you are on your way. And very simple line. So back to the basics. Whatever you're building, make sure your idea is about selling a product or a service that people need, and uh makes analyzing businesses so much easier as well. Now, the way they started uh Home Depot, uh, he was backing uh Bernie Marcus, and Bernie Marcus was the former handy dan executive, and he did that right after Bernie got uh fired. And um amazing line and uh Lagon was sharing um and the way he's betting on the right people, and I'm again quoting Ken here. Is he going to jail? No, great, because you can't run a business from jail, so as you're not going to jail, we're starting a company together. So that was Ken's way on betting on the right people. And uh he knew Bernie Marcus was extremely talented, he knew he was a builder, he knew he was a leader, and he knew that sometimes the best opportunities come right after someone gets knocked down. And uh Langon saw all that in Bernie Marcus, and uh again, something I'm sure you didn't know that this investment became one of the greatest investments of all time. Again, this interview, important to note, this was done in 2018, 8th of August. And Langon said that as of that point, Home Depot was the number one performing stock in the SP 500 history, compounding at roughly 27% a year for 40 years. And he said Apple returned about 42,000%, while Home Depot returned about 621,000 over the relevant period he was describing. Staggering result, and it's important because it reminds that one of the greatest businesses in modern history was not built around some technology, it was built around retail, culture, leadership, and operational excellence. Then there is a second big lesson from Langon: how people grow inside a business. At Home Depot, people did not work for him, they worked with him, they were called associates, not employees. And from day one, they wanted them to think like owners. The result? Extraordinary. Langon said 3,000 kids who started in the parking lot pushing carts became multi-millionaires. And he was cracking jokes on the stage saying whoever is younger, every person who is younger than him, is a kid to him. And the best example, obviously, the story of Anne-Marie Campbell, who came from Jamaica, and she started as a part-time cashier and eventually went on to run all 1700 Home Depot stores in the United States. Again, this is exactly how capitalism should look like. That's what internal compounding looks like in Home Depot case. And the final point people are the differentiator. Langon said it very clearly. He used Walmart and Kmart as the example. Similar category, very different outcome. Why? The people, the leadership. And I just thought it's such a good idea to go back to the basics. Sometimes it's good to go back 40 50 years and look what people have built and the lessons they've learned. So back to the basics. That's it for today's five minutes in the low middle market, and talk to you again in the next one.