Book review: Junk to Gold – From Salvage To The World’s Largest Online Auto Auction

I picked up this book after seeing a few folks on Twitter recommend it. This is more or less an autobiography of Willis Johnson, the founder of Copart, one of the two largest online auto auction in the world. My overall experience from reading this book is positive because I like the content and its reasonable length.

Many books tend to be filled with a lot of junk, no pun intended, and longer than what they should be. This book is straight to the point and can be easily finished on a weekend. Content wise, it can teach readers many meaningful business lessons without shelling out tens of thousands of dollars on college. For example, Willis was a visionary because he and his son-in-law repeatedly invested handsomely in IT ahead of anybody else. They worked with California DMV to leverage computers to register cars instead of manual paperwork. This move sped up the selling process and improved customer experience. Then, they spent $3 million, a big sum at the time, on Copart Auction System (CAS) to allow online bidding for all of their yards; which nobody else did at the time. When the Internet started to gain popularity, Johnson and his right-hand son-in-law hopped on the trend and built out Copart’s online presence. In hindsight, these initiatives seemed rather obvious, but from my own experience working in the U.S, there are many companies that are reluctant in investing in IT, my current employer included.

Willis Johnson is a shrewd businessman. He knew that in order to grow his business, he had to generate more than one revenue stream from the same resources. In his words, he was “putting more through the pipe”. He also learned how to increase his margin and lower the cost. While other yards at the time sold many parts together and had to guarantee buy-backs because the value of the purchase was higher, Willis sold the parts individually and didn’t have to guarantee buy-backs so that his margin was higher than his competitors. Additionally, the founder of Copart bought yards in strategic places. That way, he could cover more areas without incurring more tolling expenses and hurting his margin. A bit later, he managed to buy parts in bulk from Asia to take advantage of cheap labor and wholesale pricing, and sold them at retail prices.

Many books were written on Blue Ocean Strategy, which basically means that companies can gain advantage by finding under-served customer segments and focusing on that particular segment instead of launching lookalike products or services and having to compete with many rivals. You can learn the same lesson from Willis in his book. He wisely specialized on Chrysler parts which weren’t popular at the time. The specialization gave him two advantages. First, he didn’t have to compete with others on Chrysler parts. In fact, Chrysler was happy to partner with him to some extent. He could secure the parts more economically. Second, Chrysler customers were even referred to his yards because others didn’t have the parts.

There are other plenty of good anecdotes and lessons from this book. If you want to learn great business lessons or just want to get to know Copart, I highly recommend this book. Below are some excerpts that I like

Everyone Is Created Equal, but They Aren’t Always Treated Equally While hard work became second nature, I learned it wasn’t always a guarantee of success, and people aren’t always treated equally for equal work. The world was unfair, and this bothered me.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

To us, the business world was black and white, and a deal you aren’t sure about isn’t really a deal at all. It never ceases to surprise me, though, when others cross that line without even a blink of an eye. I was raised to believe that cheating is the same whether you are taking ten cents or $10,000. And if you could do it once, there was a good chance you would do it again.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Dad also had an expression: “Take care of your pennies and the dollars will take care of themselves.” It’s a phrase I have also passed on to others so they would learn the same lesson I learned from him—that small amounts of money can add up to either big profits or big losses. You can’t ignore the small expenses or the small amounts of money unaccounted for if you hope to succeed at the end of the day.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

There were pockets of General Motors and Ford specialty yards but not Chrysler, so we were filling a need for a big area. It was also cheaper to stock Chrysler parts. At the time we were still partly in the scrap business, so we could buy all the junk Chrysler cars for thirty-five to forty dollars whereas we were paying seventy-five to one hundred dollars for General Motors junk cars. I could go to an auction and buy a wrecked Dodge Polara for twenty-five cents on a dollar compared to a Chevrolet. So I could buy parts cheaper, but the parts were just as valuable, especially since no one else carried them. Before we specialized, Curtis and I were running between $3,500 and $5,000 worth of parts a month at Mather. After specializing, we were running around $3,500 worth of parts a day.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

I spent $110,000 on a large reel-to-reel computer—about double the amount most people spent on a house at the time. The reels themselves were fourteen inches in diameter and stored all the information about the business and its inventory. Every night, new reels were put on the computer to back up the information. This resulted in boxes and boxes of reels. Today, an iPhone could probably hold the same amount of data. Curtis remembers that other people thought I was crazy (or stupid—or maybe both) to spend so much money on a computer for a wrecking yard. But I was never afraid to spend money on technology if it could help us be more efficient. And it turned out that the whole industry would end up computerizing once they saw the benefits it gave people like me and Marv.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Instead of waiting for the DMV to find a better way, I went to them and proposed a solution. I would develop a way to create electronic forms and print them from a computer, thereby eliminating the need for the DMV to send out the books at all, saving them money and my business valuable time. I spent about $40,000 building the computerized system for the state of California. Now we could go to the computer and fill out all the paperwork needed and didn’t have to wait for books. It sped up the whole process and was an example of how it pays to fix something yourself instead of waiting for someone else to solve the problem for you.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Every time you can add a revenue stream to the same pipeline, the profit margins change drastically. You are putting more through that pipe. That’s what I always tried to do in my businesses, and it is how we were successful.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

“Barry, here’s the thing. I’m not just buying a can of soup for twenty-nine cents and selling it for forty-nine cents,” I explained. “I have ten different services that are growing all the time. Think of us like the local sewer system.”

Well, that got his attention.

“We’re a utility. Nothing can get rid of us—nothing. Two of the biggest businesses in the world are car manufacturers and insurance companies,” I went on. “If insurance companies don’t write insurance policies on cars, then they’re out of business. If manufacturers don’t make cars, then they’re out of business. They’re always gonna make cars, and they’re always gonna insure them. We’re the guy in between.”

I looked him right in the eye and said, “As long as we’ve got the land in the right place to put the cars on, we can’t fail. We are like the septic tanks of the sewer system. You can’t have the system without us.”

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

In the meantime, IAA was gobbling up facilities across the country as fast as they could. I knew from my dealings with Bob Spence that their plan was to acquire as many locations as they could and let the yards still run like they had been before they purchased them, even if that meant they ran on separate computer systems and used different business models. IAA figured they’d worry about converting them into one system later, when they had finished growing.

My philosophy was much different. I felt Copart should grow slowly, acquiring strategic locations and then converting each one over to the Copart system and business model immediately. Jay had already become an expert at converting yards—taking the lead in changing things over in all the facilities I had acquired while getting ready to go public.

I just didn’t want to grow to grow. I wanted to build a brand. I wanted anything with a Copart logo on it to run the same way—same computer system, same pricing, same way of treating our employees—so people started relating our name to a certain way of doing business. We spent time converting things over and converting employees over and teaching them our way of doing things because in many cases, the old way they were doing things hadn’t been working. That’s why they had to sell.

That’s also why I think IAA’s approach to keeping newly acquired yards running the same way was wrong. They weren’t fixing what was broken in the first place.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction