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(BusinessWeek)   Ever wonder what happens when an Objectivist takes over a multi-billion dollar company? Sears. Sears is what happens   (businessweek.com) divider line 168
    More: Interesting, Eddie Lampert, Sears Holdings, Hoffman Estates, income statements, business unit, Freakonomics, AutoNation, middle management  
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6160 clicks; posted to Business » on 11 Jul 2013 at 1:42 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-07-11 01:18:58 PM
Yeah, brilliant idea. Get the invisible hand to do the job you are supposed to be doing.
 
2013-07-11 01:24:45 PM
*invisiblehandjerkingoffmotion*
 
2013-07-11 01:33:37 PM
An outspoken advocate of free-market economics and fan of the novelist Ayn Rand, he created the model because he expected the invisible hand of the market to drive better results. If the company's leaders were told to act selfishly, he argued, they would run their divisions in a rational manner, boosting overall performance.

Instead, the divisions turned against each other-and Sears and Kmart, the overarching brands, suffered. Interviews with more than 40 former executives, many of whom sat at the highest levels of the company, paint a picture of a business that's ravaged by infighting as its divisions battle over fewer resources...

"Cooperation and collaboration aren't there."


No farking way!
 
2013-07-11 01:34:26 PM
thedivinemissmommy.com
 
2013-07-11 01:34:44 PM

EvilEgg: Yeah, brilliant idea. Get the invisible hand to do the job you are supposed to be doing.


Management is hard. Best just let the market do the work. Just keep swimming and ignore all the sharks. So long as you don't make any unexpected moves, you'll be safe, right?
 
2013-07-11 01:35:05 PM
Can Randians stop calling themselves "objectivists" already? Because empirical evidence proves they are objectively wrong.
 
2013-07-11 01:35:19 PM
It's almost as if that philosophy were total bullshiat. Which of course cannot POSSIBLY be the explanation.
 
2013-07-11 01:36:51 PM
This guy sounds like a retard with a God complex, a sh*t strategy, and piss-poor management skills.

If Adam Smith and Ayn Rand were put in a room together, this is what I imagine Smith would do with his invisible hand:

dublinopinion.com
 
2013-07-11 01:39:56 PM
Anyone who is an Objectivist and not still a teenage boy needs to reevaluate.
 
2013-07-11 01:43:03 PM

Calmamity: Anyone who is an Objectivist and not still a teenage boy needs to reevaluate.


i40.tinypic.com

oh n/m he's still a teenage boy
 
2013-07-11 01:44:52 PM
That was an interesting but sad article. Imagine all those store employees watching helplessly while the CEO steers the company over a cliff.
 
2013-07-11 01:45:07 PM
I've tried to avoid shopping at Sears for decades. Hard to imagine they found a way to make the experience worse.
 
2013-07-11 01:45:45 PM
Sears was the Amazon.com of the American Frontier.  Sad they never bothered to enter the computer age.
 
2013-07-11 01:46:51 PM
I honestly have no idea how Sears stores stay in business.  The only time I ever go in one is around Christmas, when there's absolutely no place to park at the crowded local mall except at the far end near the Sears store (the fact that it's the only place with available parking speaks to how busy the store is).  I then take a shortcut through the Sears store to get into the main mall, and there never any customers to speak of in there, even around Christmas when all the other stores in the mall have customers lined up at the cash registers.  And from the signs I see passing through, it seems like the fugly clothing there is priced relatively comparably to more upscale places with nicer clothing, like Macy's.  Does anybody buy it?

From what I've seen, it appears the only things that anybody ever buys at Sears are (1) car batteries, (2) Craftsman tools, and (3) kitchen/laundry appliances.  I'm not sure how they manage to make enough money to even pay the rent on the huge stores they have in major malls.
 
2013-07-11 01:47:19 PM
It's unfortunate that he can play his theories until the company eats itself and then walk away just as rich as when he started.
 
2013-07-11 01:48:06 PM
Objectivism is what happens when you take the shrieks and whining of a spoiled child and turn it into a philosophy.
 
2013-07-11 01:48:46 PM
Subby here.  This explains so much of the dysfunction we've been seeing at the store and district level.  Besides a gross misunderstanding of the "invisible hand" and human nature, there was this:

In an e-mail, Chris Brathwaite, a Sears spokesman, writes that executives work together if it makes sense. He added: "Clashes for resources are a product of competition and advocacy, things that were sorely lacking before and are lacking in socialist economies."


Talk about an ideologue.  Sears is not an economy.  It's a corporation using macroeconomic principles (and fully discredited ones at that) to prove a hedge fund billionaire's sociological theories.
 
2013-07-11 01:49:36 PM

Aarontology: Objectivism is what happens when you take the shrieks and whining of a spoiled child and turn it into a philosophy.


Heh... well said
 
2013-07-11 01:52:58 PM

Cyberluddite: I honestly have no idea how Sears stores stay in business.  The only time I ever go in one is around Christmas, when there's absolutely no place to park at the crowded local mall except at the far end near the Sears store (the fact that it's the only place with available parking speaks to how busy the store is).  I then take a shortcut through the Sears store to get into the main mall, and there never any customers to speak of in there, even around Christmas when all the other stores in the mall have customers lined up at the cash registers.  And from the signs I see passing through, it seems like the fugly clothing there is priced relatively comparably to more upscale places with nicer clothing, like Macy's.  Does anybody buy it?

From what I've seen, it appears the only things that anybody ever buys at Sears are (1) car batteries, (2) Craftsman tools, and (3) kitchen/laundry appliances.  I'm not sure how they manage to make enough money to even pay the rent on the huge stores they have in major malls.


They own their own real estate and have long since ceased paying CAM charges on the malls they are attached to.  They pay minimum wage retail employees and few of them at that.  A few years ago they stopped hiring any full time employees to save on benefits.  They spend nothing on store improvements and the only new fixtures they get are branded ones that come free from the outside brands they sell.
 
2013-07-11 01:54:16 PM
doctormacro.com

Empathicalism
 
2013-07-11 01:56:34 PM

Cyberluddite: From what I've seen, it appears the only things that anybody ever buys at Sears are (1) car batteries, (2) Craftsman tools, and (3) kitchen/laundry appliances.  I'm not sure how they manage to make enough money to even pay the rent on the huge stores they have in major malls.


And most of the power tools are simply rebadged Ryobi or Skil products - maybe with a slightly changed battery connector - sold at a 25% premium. Nothing wrong with any of them, but you can probably find the same thing slightly cheaper at Lowe's.
 
2013-07-11 01:57:15 PM
Ah, the virtues of selfishness....it's essentially satanic and totally antisocial.
 
2013-07-11 02:01:14 PM

Cyberluddite: From what I've seen, it appears the only things that anybody ever buys at Sears are (1) car batteries, (2) Craftsman tools, and (3) kitchen/laundry appliances.  I'm not sure how they manage to make enough money to even pay the rent on the huge stores they have in major malls.


#3 is going down in my experience.  We have a bunch of Kenmore appliances: when our fridge broke recently we didn't even bother looking there since the selection and prices were better at Lowes. (Home Depot sucked even worse to my surprise)

Worse, their spare parts department is going to crash.  The thermal fuse on our dryer blew recently.  Sears wanted $16 +shipping for it and I'd get it in a week.  Amazon had it for $2.49 with free shipping.  I paid $3 for 2 day on that, bought two and still paid far less.  Ditto the dryer drum felt bearing: I replaced that for a third the price Sears wanted for it.

Even Craftsman tools are made in China junk these days.
 
2013-07-11 02:01:16 PM
From then on, they were told, the units would act like autonomous businesses. If product divisions like tools or toys wanted to enlist the services of the IT or human resources departments, they had to write up formal agreements-or use outside contractors.

allthingsd.com
 
2013-07-11 02:01:47 PM
So that's what Paul DePodesta is up to!

On another note, clashes for resources leave civilizations extinct, actually, but whatever.
 
2013-07-11 02:02:42 PM

bromah: Ah, the virtues of selfishness....it's essentially satanic and totally antisocial.


And counterproductive.  That's what is so amazingly stupid.  Collusion between companies is illegal specifically because it is so effective.  It maximizes the prices and revenues for the industry while collectively screwing the consumer.

A company is supposed to look out for itself.  It is supposed to do its damned best to get the most money possible out if the customer while spending the least amount to do so.  Collusion is the best way to do that.  Except when it's internal collusion it is legal and normally encouraged.
 
2013-07-11 02:03:44 PM
Objectivism: Autism expressed as an existential philosophy.
Libertarianism: Autism expressed as a political philosophy.
 
2013-07-11 02:04:24 PM

clkeagle: Cyberluddite: From what I've seen, it appears the only things that anybody ever buys at Sears are (1) car batteries, (2) Craftsman tools, and (3) kitchen/laundry appliances.  I'm not sure how they manage to make enough money to even pay the rent on the huge stores they have in major malls.

And most of the power tools are simply rebadged Ryobi or Skil products - maybe with a slightly changed battery connector - sold at a 25% premium. Nothing wrong with any of them, but you can probably find the same thing slightly cheaper at Lowe's.


I don't think it used to be that way back in the old days, but yeah, it certainly seems to be that way now (my 1960s Craftsman table saw that I bought from an old guy in my neighborhood still works great and is built like a tank, but their current models seem like they're built like shiat, even though they have way more bells and whistles).  I don't see people buying Craftsman power tools as much as they used to (why would you?), but it does seem like they sell a decent number of hand tools.  Of course, they're probably rebadged tools from some other manufacturer too, but it seems like espectially old guys who are in the market for hand tools and who bought Craftsman tools in their younger days are often still in the habit of buying them from Sears.
 
2013-07-11 02:06:01 PM

EvilEgg: Yeah, brilliant idea. Get the invisible hand to do the job you are supposed to be doing.


Yeah, honestly it just sounds like he is a lazy piece of shiat that doesn't want to innovate or try to drive the company into any new markets or directions.  Instead, he breaks everything up into pieces, sees which ones happen to do better each quarter and funds those while neglecting the losers.  It's a great plan if you have absolutely no concept of market synergy.
 
2013-07-11 02:06:18 PM

jso2897: Objectivism: Autism expressed as an existential philosophy.
Libertarianism: Autism expressed as a political philosophy.


Untrue. I have known a few autistic people, and all of them knew how to share. Take it back and apologize.
 
2013-07-11 02:06:51 PM

Nonrepeating Rotating Binary: Sears was the Amazon.com of the American Frontier.  Sad they never bothered to enter the computer age.


No shiat.  They had all of the marketing, ordering, and logistics infrastructure already in place because of their catalogue-based business.  All through the '90s, I was wondering what they were waiting for.  Turns out, they just stuck their heads up their asses and pretended that the internet was a fad.

I have very little sympathy for Sears.  Let 'em die.
 
2013-07-11 02:10:24 PM
This management strategy- splitting his organization into a variety of factions and making them compete with each other on the theory that the best and most competent will naturally rise to the top- is pretty much identical to the one Hitler used, and it didn't work for him either.
 
2013-07-11 02:11:35 PM

unyon: Nonrepeating Rotating Binary: Sears was the Amazon.com of the American Frontier.  Sad they never bothered to enter the computer age.

No shiat.  They had all of the marketing, ordering, and logistics infrastructure already in place because of their catalogue-based business.  All through the '90s, I was wondering what they were waiting for.  Turns out, they just stuck their heads up their asses and pretended that the internet was a fad.

I have very little sympathy for Sears.  Let 'em die.


A lot of people depend on Sears for their livelihoods.  It's not unlike the auto industry.  If Sears goes down a myriad of suppliers, employees, malls and the other stores in those malls, etc.  go down with them.
 
2013-07-11 02:14:58 PM
FTFA: If Sears goes down, its parts may live on. Lampert says in an e-mail that SOAR has made it easier for Sears to divest businesses, such as its outlet stores, and create new ones, like its Shop Your Way division.

What he's doing, the fact he wasn't let go years ago, and his hedge fund owning most of the company now strikes me as movement toward liquidating everything. The parts are worth more than the whole.
 
2013-07-11 02:16:05 PM

Glockenspiel Hero: Cyberluddite: From what I've seen, it appears the only things that anybody ever buys at Sears are (1) car batteries, (2) Craftsman tools, and (3) kitchen/laundry appliances.  I'm not sure how they manage to make enough money to even pay the rent on the huge stores they have in major malls.

#3 is going down in my experience.  We have a bunch of Kenmore appliances: when our fridge broke recently we didn't even bother looking there since the selection and prices were better at Lowes. (Home Depot sucked even worse to my surprise)


I never understood why people bought Kenmore appliances from Sears in the first place.  Sears doesn't make appliances--they are, and always have been, rebadged products made by other manufacturers and sold for higher prices than they sell for under the original manufacturer's name.  Many, many years ago (yes, I am very, very old), when I was in college, I actually worked as a salesman in a store that sold appliances and other electronics, and every Kenmore refrigerator, washer, and dryer model that Sears sold back then we sold for at least 20% less under its actual manufacturer's brand name, Whirlpool.  And it was same with all of their other appliances, too.

I think that, for years, Sears had a certain advantage in that it would hand out Sears credit cards to almost anyone--including back in the days when you had to have really, really good credit to get a Visa/MC/Amex.  So people would buy stuff at Sears because they could charge it.  (And, of course, Sears' parent company would make a ton of money off of interest charges on those credit card accounts--in those days, it was almost more of a financial services company than a retailer!)  Now, of course, damn anybody who isn't a complete and total deadbeat (and even many who are) can get a Visa or MC, so Sears doesn't have that built-in market advantage--why wants or neads a Sears card any more?
 
2013-07-11 02:20:02 PM

ArgusRun: Collusion between companies is illegal specifically because it is so effective. It maximizes the prices and revenues for the industry while collectively screwing the consumer.


Companies can and do collude all of the time, and it's not illegal.
 
2013-07-11 02:22:01 PM

Cyberluddite: Of course, they're probably rebadged tools from some other manufacturer too, but it seems like espectially old guys who are in the market for hand tools and who bought Craftsman tools in their younger days are often still in the habit of buying them from Sears.


My dad still only trusts tools from "Sears and Roebuck". Of course, he's in his 70s.
 
2013-07-11 02:22:14 PM

simplicimus: I've tried to avoid shopping at Sears for decades.


Don't worry. They're still stuck in the year you last remembered seeing them.
 
2013-07-11 02:22:55 PM

Cyberluddite: Glockenspiel Hero: Cyberluddite: From what I've seen, it appears the only things that anybody ever buys at Sears are (1) car batteries, (2) Craftsman tools, and (3) kitchen/laundry appliances.  I'm not sure how they manage to make enough money to even pay the rent on the huge stores they have in major malls.

#3 is going down in my experience.  We have a bunch of Kenmore appliances: when our fridge broke recently we didn't even bother looking there since the selection and prices were better at Lowes. (Home Depot sucked even worse to my surprise)

I never understood why people bought Kenmore appliances from Sears in the first place.  Sears doesn't make appliances--they are, and always have been, rebadged products made by other manufacturers and sold for higher prices than they sell for under the original manufacturer's name.  Many, many years ago (yes, I am very, very old), when I was in college, I actually worked as a salesman in a store that sold appliances and other electronics, and every Kenmore refrigerator, washer, and dryer model that Sears sold back then we sold for at least 20% less under its actual manufacturer's brand name, Whirlpool.  And it was same with all of their other appliances, too.

I think that, for years, Sears had a certain advantage in that it would hand out Sears credit cards to almost anyone--including back in the days when you had to have really, really good credit to get a Visa/MC/Amex.  So people would buy stuff at Sears because they could charge it.  (And, of course, Sears' parent company would make a ton of money off of interest charges on those credit card accounts--in those days, it was almost more of a financial services company than a retailer!)  Now, of course, damn anybody who isn't a complete and total deadbeat (and even many who are) can get a Visa or MC, so Sears doesn't have that built-in market advantage--why wants or neads a Sears card any more?


Sears was the first in the market to move from a Store Credit Card to a Mastercard branded card.
 
2013-07-11 02:22:57 PM

MugzyBrown: ArgusRun: Collusion between companies is illegal specifically because it is so effective. It maximizes the prices and revenues for the industry while collectively screwing the consumer.

Companies can and do collude all of the time, and it's not illegal.


Fine, price fixing then.
 
2013-07-11 02:26:17 PM

Disposable Rob: FTFA: If Sears goes down, its parts may live on. Lampert says in an e-mail that SOAR has made it easier for Sears to divest businesses, such as its outlet stores, and create new ones, like its Shop Your Way division.

What he's doing, the fact he wasn't let go years ago, and his hedge fund owning most of the company now strikes me as movement toward liquidating everything. The parts are worth more than the whole.


And yet, I don't think they are anymore.  Brands have some value, but as this thread has shown, even those aren't what they use to be. Select stores might have some value.  The ones that have sold recently have gone for high pricesm but they are in AAA malls with significant barriers to entry.  The retail landscape has changed so dramatically, that the vast majority of their real estate is worthless.
 
2013-07-11 02:26:33 PM

Glockenspiel Hero: Cyberluddite: From what I've seen, it appears the only things that anybody ever buys at Sears are (1) car batteries, (2) Craftsman tools, and (3) kitchen/laundry appliances.  I'm not sure how they manage to make enough money to even pay the rent on the huge stores they have in major malls.

#3 is going down in my experience.  We have a bunch of Kenmore appliances: when our fridge broke recently we didn't even bother looking there since the selection and prices were better at Lowes. (Home Depot sucked even worse to my surprise)

Worse, their spare parts department is going to crash.  The thermal fuse on our dryer blew recently.  Sears wanted $16 +shipping for it and I'd get it in a week.  Amazon had it for $2.49 with free shipping.  I paid $3 for 2 day on that, bought two and still paid far less.  Ditto the dryer drum felt bearing: I replaced that for a third the price Sears wanted for it.

Even Craftsman tools are made in China junk these days.


There's a Consumerist article about a guy who pimped out his new Kitchen with Kenmore Elite appliances, which had been known for years to be of durable high quality (thus the elite prices). Sunzabiatches were already starting to show spots of rust within a few months because all Kenmores are now made with dogsh*t materials in China.

consumermediallc.files.wordpress.com
 
2013-07-11 02:26:52 PM

Smelly McUgly: jso2897: Objectivism: Autism expressed as an existential philosophy.
Libertarianism: Autism expressed as a political philosophy.

Untrue. I have known a few autistic people, and all of them knew how to share. Take it back and apologize.


Modern Libertarianism is naught but NeoFeudalism with whistles and bells about "FREEEEEEEDOM!" peppering the very real dismantling of that very liberty that they claim to be in so much favor of. Which is understandable, since they all dream of BEING either in the new nobility or at least in their service. What they dream of are splintered states and local strongmen to protect them, or raising their own private army to enforce their will, the way God intended men to defend their freedoms: on the backs of everyone they can throw to the wolves instead of those closest to them...
 
2013-07-11 02:27:17 PM
An outspoken advocate of free-market economics and fan of the novelist Ayn Rand, he created the model because he expected the invisible hand of the market to drive better results. If the company's leaders were told to act selfishly, he argued, they would run their divisions in a rational manner, boosting overall performance.

Instead, the divisions turned against each other-and Sears and Kmart, the overarching brands, suffered.


WHO COULD HAVE FORESEEN IT!
 
2013-07-11 02:28:21 PM

Cyberluddite: I think that, for years, Sears had a certain advantage in that it would hand out Sears credit cards to almost anyone--including back in the days when you had to have really, really good credit to get a Visa/MC/Amex. So people would buy stuff at Sears because they could charge it


So, my dad (the aforementioned fan of "Sears and Roebuck") has the worst credit of anyone I know. Not because he's bad with money, but because he doesn't believe in paying "in time".  My parents paid their mortgage off when I was 11 and haven't had once since, he buys cars in cash, writes checks at the grocery, etc etc.

One day in my childhood, our fridge broke on a Saturday afternoon in the summer and we didn't have enough cash on hand to buy a new one until the bank opened on Monday. Well by then everything would spoil, so he signed up for a "Sears and Roebuck" credit card, after making sure that several people- the store manager, the bored cashier etc etc, knew that my mom would come by to pay the credit card off as soon as the bank opened on Monday.

That was his first- and last- experience with credit cards. He still tells that story.
 
2013-07-11 02:37:48 PM
Oh, even better:

To boost "visibility and accountability," Lampert explained in a letter to investors, he divided the company into more than 30 business units, including product-based divisions (apparel, tools, appliances), support functions (human resources, IT), brands (Kenmore appliances, Craftsman tools, DieHard batteries), and units focused on e-commerce and real estate.

Can you imagine the process that must be in place at Sears to get something as simple as "Let's have a sale on Craftsman drills on the website" done? It probably has to go through at least three different departments, each one of them desperately trying to pass on any problems to another department, lest they be blamed and have their funding cut.

If this sounds familiar to any of you, it's exactly how most government agencies work.
 
2013-07-11 02:37:49 PM
Behaving like a spoiled brat doesn't make up for a lack of talent, despite what many managers seem to think these days.
 
2013-07-11 02:40:15 PM

Smelly McUgly: So that's what Paul DePodesta is up to!

On another note, clashes for resources leave civilizations extinct, actually, but whatever.


And management bloat - of the kind that results in more managers than on-the-ground retail staff - is far more costly than hiring at minwage + $1. A single management-level person at $75k/year can be broken into at least 2 full-time wage-slaves (3 if you make one part time), and I suspect division managers were making a multiple of that.

Hopefully, DePodesta isn't an asshammer like his boss, and sees the writing on the wall even as he cashes his paychecks.

Part of the reason companies diversify (like having an internal IT department rather than contracting it out) is to save on things like consulting costs and paying someone else to do what you can do quicker and cheaper (and you own the whole thing). Lampert seems content to have the worst of both worlds with this scheme, and I wonder how he manages to convince himself that his 5-year plans are working.

No, seriously - I wonder. Does he put all the blame on a few failing divisions? Are the liberals with their internets and free-love and patcholi just socialisting the place up too much for an honest man to earn a profit? Is he blaming Amazon and Target? Is it the illegals stealing his jobs? Did he not genuflect to RANDPAUL as His Libertiness passed by on his litter?
 
2013-07-11 02:42:57 PM
dilbert.com

dilbert.com

dilbert.com
 
2013-07-11 02:43:57 PM

StrangeQ: Instead, he breaks everything up into pieces, sees which ones happen to do better each quarter and funds those while neglecting the losers.


The problem is that he's cutting off his nose to spite his face. If Burger King goes out of business, that's good for McDonalds. But if one part of Sears fails, that's bad for all the other parts of Sears. It's like neglecting one of the tires on your car for whatever reason. When that one tire blows, it's going to seriously affect the rest of your car's performance.
 
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