Self Storage University Podcast: Episode 34

Understanding B. Wayne Hughes

B. Wayne Hughes is the “father” of the self-storage industry, having grown Public Storage from scratch into the world’s largest self-storage REIT with over 2,500 locations in the U.S. and overseas. He doesn’t typically say a lot, but there are quotes out there that might give a glimpse of his vision on storage and on life in general. In this Self-Storage University podcast we’re going to review the legend and quotes of B. Wayne Hughes and see what there is to learn from his story.

Episode 34: Understanding B. Wayne Hughes Transcript

On August 18th, B. Wayne Hughes finally passed away, founder of Public Storage, the largest of all self storage companies in the United States. And his story is one that all storage owners could learn something from. This is Frank Rolfe, the Self Storage University podcast, we're going to talk about B. Wayne Hughes, the story of his life, some of his quotes, and what the meaning of it all might be.

Now, Hughes was a real estate developer out in California. And he went down on a trip to Texas back in the 70s. While he was down there, he saw this thing he'd never seen before, which was a self storage facility. He saw one down near Dallas, he went back to California and thought, you know what, I could easily build those too. But he didn't know if it would work or not, so he built a prototype. And within the first three months, that prototype was about at breakeven with only 35% occupancy. And he realized, here's the magic of self storage, he was renting it for the same price per square foot as he was getting on his apartments. But he had almost no cost in operation compared to what apartments cost. So he could net about 50 cents on the dollar, which is far higher than he was making on apartments. And he thought, you know what, this is an interesting business model. Much easier to manage, much cheaper to construct, a much lower breakeven point, and he knew he was on to something big.

Now this is back at a time when most people did not find storage to be a legitimate business sector. I have seen myself articles back in the 70s, that describe self storage as goofy. They thought it might be a fad, they didn't think it might be anything at all. But he believed in it and he kept building more and more facilities. And as he got him done, he'd fill them up, and he'd move on to the next.

Now along the way, he outstripped his ability to buy using his own money. So he started raising funds to build these things. And he didn't believe in debt, so what he would do is he would raise money from the public, and not have any debt go with the property. That proved to be very wise, because in continuing recessions, when real estate got hammered, he was unscathed because he didn't have any debt. There was no banker to foreclose on what he did. Sure, he might not hit at that point his targets. But still, he was very well insulated from really any great downfall. So when others were stopped, even lost their assets, he persevered on. He stuck pretty much with his original model, he never did anything too fancy. He realized it was just all about storing stuff. He tried to buy properties that were well located, good visibility, but he never went crazy with it. And he didn't really expand into much else. He kind of just stuck with self storage, the thing that he really delivered him from kind of obscurity, into more of a famous role as the leader of his industry.

So what can we really learn from B. Dwayne Hughes? What lessons did he teach? We know he didn't talk much. People ask him all the time, trying to get his thoughts on the storage industry, or his story for success. He really wouldn't tell anyone much of anything. In fact, if you look it up online, you'll only find about four quotes he ever said. And none of those really had much to do with storage. One of those quotes is, "Have you read The Grapes of Wrath? That was my family. My dad was a sharecropper in western Oklahoma. When the dust storms came and everything got wiped out, they came to California. The guys with the mattresses on the tops of their cars in the movie, that's the way it was."


Now, I read that quote, and I see more to that quote than simply discussions of poverty and problems in America back during the Great Depression. I see someone who got a taste for debt from that experience, because most people who got wiped out in the depression during the dustbowl got wiped out because they had bank mortgages and they couldn't make payments. That's what caused that migration of families trying to leave Oklahoma for California. They didn't really want to make the trip. Think how terrible that trip would have been back then. Driving thousands of miles in an old Model T, barely enough money to pay gas if you even had that. Those cars overheated all the time back then, no air conditioning, miserable way to travel. But they had no choice. They were all displaced. They were all basically homeless. So I think in many ways that quote represents why Hughes never believed in debt. I think that's what put the idea in his head if he was to grow the business and not lose it all, not lose it all like his father had as a sharecropper, he needed to insulate himself from things like the Great Depression in the Dust Bowl. So I think that quote is basically describes why he was so debt adverse, and that's not a bad thing to be.

I'm also debt adverse, I hate debt. And if I had to have debt, I really want nonrecourse debt. I don't like recourse debt. I don't like debt in general, nobody really does. Anyone who's seen what happens when debt goes bad, and I've seen it so many different times. I lived through the Texas Savings and Loan crash, I've seen all the various crashes, the dotcom crash, the Great Recession, who gets punished the most in those instances? People who are over leveraged. So if you're going to have debt, just make sure it's sensible debt.

Another quote of B. Wayne Hughes is, "I don't spend any time at all thinking about my personal wealth. I suppose if I had nothing, I might think I have nothing." What did that mean really? It meant that B. Wayne Hughes was always just looking at the next property. He never really got too big an ego. He never really got carried away with himself. He just focused on the essentials. And again, that's a good motto for most people in the self storage industry. Don't overextend yourself, don't start putting on airs, don't really stroke your ego as you grow. Some of the most successful storage vendors I know are still very modest, humble people. Even Warren Buffett, everyone knows from all of the stories, still lives in his original home there in Omaha. One that he bought way back in I guess the 50s or the 60s. It's valued about a half a million dollars, which is not too bad. But you know, kind of strange for a guy that has about $50 billion of net worth. B. Wayne Hughes was a very focused guy, he was a very simple guy. He did things according to how he thought he should live, but he never really took on any airs.

Another quote of B. Wayne Hughes is, "You don't get money unless you have a lot of talent, which I don't have. Or you work hard, which is what I do. We don't have any golden touch around here." So what does he mean by that? Well, he really is understating. He had a lot of talent, clearly. Not only did he have the smarts to see storage and think it was an opportunity. But then additionally, he was able to get the best out of others to build his business. And he was extremely good at raising money, because that's really what fueled Public Storage's growth. But also it is true that he wasn't a sports star. He wasn't a brain surgeon. He wasn't a songwriter. He didn't invent the iPhone. So he was in a very, very basic industry, which is what self storage is. And when you look at people in other industries have made lots of money typically is through some new innovation, something unusual. Steve Jobs, Zuckerberg, but he was in a very, very basic industry. So to him, the fact that it was a basic industry meant that it wasn't really a story of great talent. And of course, that's not really true. But it is true, he put in a lot of work. Those who knew B. Wayne Hughes said that he often put in excessive amounts of hours. And he did so even later in life. He died in his eighties. He never really retired, he never really quit, he just kept building more self storage facilities.

The last quote he ever said that anyone ever wrote down was, "I have no fancy living at all. Well, I have a house in Sun Valley, five acres in the woods. I guess that's fancy." Now that's not entirely true. People know that B. Wayne Hughes won with a race horse I believe that Kentucky Derby in 2020. So he clearly broke that rule a little bit going forward. But what's interesting is he funded his Kentucky Derby horse by selling micro shares in the horse. So really up until the end, even with his hobbies, he was always spreading his risk, and really utilizing up  other people's money to some degree. And that was just part of his nature.

I think it really all ties back to his early roots of poverty, losing it all, riding out to California out of Oklahoma was nothing more than a mattress in an old jalopy. And that gave him some very basic tenants that served him well throughout his life. Number one, he had an extreme work ethic he clearly didn't want to stay in poverty. Number two, he was very debt averse. Number three, he liked to live simply. And number four, he just had a whole lot perseverance and dedication. There really will never be anyone again like B. Wayne Hughes in the storage industry. He was the founder of the industry, the largest owner of storage that will probably ever have lived, and an inspiring story for all. This is Frank Rolfe for the Self Storage University Mastery podcast. Hope you enjoyed this. Talk to you again soon.