Ayn Rand-loving CEO destroys his empire

[progressoid]

Ayn Rand-loving CEO destroys his empire

Once upon a time, hedge fund manager Eddie Lampert was living a Wall Street fairy tale. His fairy godmother was Ayn Rand, the dashing diva of free-market ideology whose quirky economic notions would transform him into a glamorous business hero.

...

Fast-forward to 2013: The fairy tale has become a nightmare.

Lampert is now known as one of the worst CEOs in America — the man who flushed Sears down the toilet with his demented management style and harebrained approach to retail. Sears stock is tanking. His hedge fun is down 40 percent, and the business press has turned from praising Lampert’s genius towatching gleefully as his ship sinks. Investors are running from “Crazy Eddie” like the plague.

That’s what happens when Ayn Rand is the basis for your business plan.

Crazy Eddie has been one of America’s most vocal advocates of discredited free-market economics, so obsessed with Ayn Rand he could rattle off memorized passages of her novels. As Mina Kimes explained in a fascinating profile in Bloomberg Businessweek, Lampert took the myth that humans perform best when acting selfishly as gospel, pitting Sears company managers against each other in a kind of Lord of the Flies death match. This, he believed, would cause them to act rationally and boost performance.

more...http://www.salon.com/2013/12/10/ayn_rand_loving_ceo_destroys_his_empire_partner/

[el_bryanto]

1. This is a really great article. Heartily recommended. nt

[R Merm]

4. The Bloomburg Article linked in this one is also a good read.

[progressoid]

8. Right.

Kind of long but interesting.

Here's the link:

http://www.businessweek.com/articles/2013-07-11/at-sears-eddie-lamperts-warring-divisions-model-adds-to-the-troubles

[Ganja Ninja]

2. My boss has been listening to right wing radio ever since 9/11.

He use to have a very profitable business 10 years ago now he's teetering on the edge of bankruptcy. He's become such an asshole that people don't want to deal with him.

I'm serious I will be looking for a new job after the first of the year because this one is just not cutting it.

[Initech]

50. Right wing hate radio is a virus that destroys everything it touches.

[NewJeffCT]

3. Unfortunately

He'll probably get a nice golden parachute while the workers at Sears and his hedge fund get screwed.

[Doremus]

59. You said it. So many people are going to end up screwed by this jerk.

My daughter included.

I just texted her that her new year's resolution should be finding a more secure place to work.

[Ratty]

5. Paul Ryan

Even Rand acolyte Paul Ryan (R-Wis) is now distancing himself, calling his well-documented enthusiasm an “urban legend.”

As I recall Ryan's disavowal had nothing to do with distancing himself from Rand's philosophy but everything to do with her atheism. When the fundies found out about that he was forced to act.

[Hekate]

6. File this under "What could possibly go wrong?"

What could possibly go wrong when you actually believe the fiction of that sociopath?

[Cha]

10. Really. Or the fiction of

fox-limbaugh & co.

[Hekate]

7. I'm working my way thru the Bloomberg article -- astounding

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.”

Lampert broke everything to pieces. If a division wants services from Human Resources, they have to write up some sort of business proposal. My gods. No wonder our local store has gone downhill.

[Jesus Malverde]

9. That a business like sears is failing is not an indicator of his success.

It's likely he took over sears not to grow the business but to loot the assets. His marker of success is being personally rich.

Many successful businessmen got there from leveraging companies, looting pensions, offshoring production etc.

That his investors have lost money is not an indicator of failure, remember goldman sacs called their customers muppets. The products they bought were losers. Goldman bet against their own customers making them winners.

How we define value is a symptom of a sick world.

[mdbl]

12. Ever hear of Mitt Romney?

This is exactly how he built his wealth. I know he touts Staples as his big accomplishment, but that was after he royally screwed many workers out of their jobs.

[Saviolo]

15. This this this

You've hit the nail directly on the head.

I've come to terms with the fact that I will never be a wealthy man because I could never do those things to someone. I have ethics and morals, and I couldn't put dozens or hundreds of people out of work to increase my own personal wealth unless I had no choice. To do it just to increase profits is not a good move, nor is it rational or ethical.

Sears is causing waves here in Toronto, closing their big flagship store right in the downtown core at the Eaton Centre, and will be ending 800 jobs across Canada. Story here: http://www.thestar.com/business/2013/11/26/sears_canada_to_lay_off_nearly_800_people.html

It should be a test; Anyone who owns a business, have the read some Ayn Rand. If they finish it and have that little gleam in their eyes that they've just found the messiah, they need to be disincorporated immediately. Anyone who puts it down halfway through in disgust gets to keep their business!

[laundry_queen]

22. Yep. Same here.

The story behind all of the Sears stores closing in Canada is that Sears in the US basically used Sears Canada as their cash cow (because it was very profitable at one time). They ended up destroying it. Despicable. It even says in the article - they are just trying to make more money for the shareholders and were always disinterested in trying to make the business successful.

[Saviolo]

42. Big love

for Jack Layton in your sig.

[laundry_queen]

55. :)

I miss him so much...Canada needs him now more than ever. I like Mulcair but...he's lacking in areas. He's no Jack Layton. Some things he is better at than Jack was...but he lacks that charisma and cheerfulness. When he smiles he looks like his face will crack, LOL. He's a hell of an interrogator though!

I keep that quote in my sig as a reminder to ME ... since I'm not any of those things most of the time. I think that's why I liked Jack so much - he's what I would have hoped to be at my best.

[Saviolo]

57. That first time I saw him

when he came back after being absent. It was like a gut punch. I don't get that emotional about politicians past a "what a shame" sort of reaction, but when I saw how obviously ill Jack was, I was teary-eyed. Combined with the timing... he had just lifted the NDP so high, and then it was all taken from him. He left a hell of a legacy.

I'm also not most of those things most of the time... especially optimistic. That's the one I find the hardest to dredge up in these dark days.

[laundry_queen]

58. Oh, I know exactly what feeling you are talking about.

That is how I felt when I saw him. Punch in the gut. ugh.

[pansypoo53219]

54. 1/2 way? i couldn't even finish page 1 AND I READ A LOT OF CRAP. i would rather read

he dictionary. i LOVE reading my 1891 encyclopedia britannica set. OMG her writing sucks.

[lumberjack_jeff]

20. That's right.

Sometimes the best way to make money is to build a business. Other times, the best way to make money is to take it to the scrapyard.

That's why this whole "job creator" bullshit pisses me off. For the vulture capital class, creating a job is a last resort.

[closeupready]

25. Yes, that thought struck me, too. Ayn Rand is just a pretext.

Conveniently floating around in GOP talking points in a world populated with Republicans who actually DO believe in that bullshit.

[idwiyo]

11. k&r

[jsr]

13. "So obsessed with Ayn Rand he could rattle off memorized passages of her novels"

What a sick fuck.

[DeSwiss]

14. The toon is priceless!

K&R

[JoeyT]

19. Even that cartoon is probably a little too optimistic for what would really happen.

Tilling the soil is a skill, and one you can't really learn fast enough to fend off starvation.

It'd look less like "John Galt learns what hard work really is" and more like "Six people that were faster than John Galt to discover the value of cooperation kill and eat him.".

[hatrack]

32. Somebody posted the inevitable outcome of an Ayn Rand world, and it went like this:

Cannibal 1: "Who is John Galt?"

Cannibal 2: (with satisfied sigh) "Dinner!"

[Fortinbras Armstrong]

51. I like the version

First half of Atlas Shrugged: "Who is John Galt?"

Second half: "When will he shut up?"

[MannyGoldstein]

34. Spot on.

Thanks!

[Stuart G]

16. OK, now contrast this with the Costco business model ...need I say more? nt

[Javaman]

17. and this petulant little curr is laughing all the way to the bank.

he came, he destroyed, he got a huge golden parachute.

mission accomplished.

[PD Turk]

18. What these dumbasses don't get

What these dumbasses don't get is that their philosophy destroys the very people Who have always supported enterprises like Sears. By destroying the economic status of the middle class, they assure the failure of their own business.

Of course, by then they probably don't care since they've run off with all the money. But what they don't realize in their shortsightedness is that the philosophy they're following is serving to devalue the dollar more every day. I think that in the near future when all is said and done, A very few will have enough money to swim in in their Olympic size swimming pools , but the money will be absolutely worthless

[laundry_queen]

24. Exactly.

You said exactly what I put in my last term paper, lol. Well, okay, not verbatim but you are right...they don't realize by trying to get all the money for themselves they are actually hurting themselves in the long run. The economy is worse off in the long run and the rich make less money as a result of vulture capitalism.

[PD Turk]

28. Unfortunately

Unfortunately, they're taking us all with them, and of course we're the first ones to hit the bottom. It seems the further in time we get from the Great Depression, the more the memory of it fades, and any lessons to be learned from it are long forgotten

[laundry_queen]

56. Yes, you are right.

Not everyone in business is ignorant about this though - in my business school they are well aware of this and try to incorporate the lessons of the crash and of capitalism run amok but unfortunately, it's not some big, well known business school. Just a teeny drop in the bucket...

You are right about the Great Depression being forgotten. I have stories from my grandparents and it was not pretty. People are in denial and think it can never happen again. They are so wrong.

[1StrongBlackMan]

21. A week before Thanksgiving ...

our stove died, so Mrs. 1SBM and I went stove shopping.

We ended up buying from a store that had a very helpful, knowledgeable and non-commissioned sales person, as I know almost nothing about stoves.

The sales guy related that he was a Manager at Sears for 15+ years before "Crazy Eddie" {the sales guy's words} bought into Sears. What the sales guy related was that Eddie did not buy the company to make the company succeed; rather, he purchased the company to loot it ... plain and simple ... and used other peoples' money to do it.

[MineralMan]

23. The entire Sears business model is moribund.

It worked great for a century, but is terribly anachronistic today. I do not believe that Sears can be rescued. Montgomery Ward is gone already, and JC Penney is on the way. The old "We Sell Everything, Everywhere" model that Sears pioneered is now non-functional. I have copies of Sears catalogs for every decade from the 1890s until the last catalog Sears issued. It is a real education in retailing to go through those catalogs, which I've done several times.

My favorite Sears thing: In my 1963 catalog (my HS graduation year), you could order a monkey from the catalog and have it delivered to your post office. A monkey! What a thing that was.

Sears is on life-support and soon they'll pull the plug on it. Too bad, too.

[closeupready]

26. If 'everything, everywhere' is outmoded, why is Amazon so successful

where Sears, using the same business model in the B&M environment, is unsuccessful?

I don't disagree with you, per se, I'm just curious how you square these things? Thanks.

[MineralMan]

30. Amazon doesn't have brick and mortar stores. Sears does.

Sears started as a catalog company, very much the equivalent of Amazon, but slower. Anyone could order anything, and it would be shipped to them from a regional warehouse, just as with Amazon. Later, Sears opened a large number of actual physical stores, where people could come in and buy a subset of the total Sears' wide range of merchandise. What wasn't carried in the stores could be ordered for delivery to a nearby store.

When the Internet appeared, the paper catalog model failed, but Sears still had the brick and mortar stores. Instead of doing what Amazon did and create an all-inclusive web-based ordering system to take advantage of that large audience, it ended its catalog sales and focused on the brick and mortar stores. Now, there was less merchandise available overall, and individual stores couldn't carry the enormous inventory Sears was known for.

In the meantime, Amazon built warehouses, not stores. Warehouses are cheap, compared to retail stores. It's catalog, in many ways even more extensive than Sears ever was, took orders, which were shipped directly to customers from the warehouses. In many ways, Amazon is very much like the original Sears concept in the 1890s. The 1897 sears catalog had everything, really. So does Amazon. Sears originally shipped from regional warehouses, just as Amazon still does. But, after WWII, Sears started shifting its model to local retail centers. That worked fine, except that places like Target and Walmart could undercut their prices, so shoppers' allegiances shifted to those newer concepts, but didn't bother with things like major appliances and other durable goods that take up a lot of floor space in a Sears store.

Sears missed its chance with the Internet, because it was focused on its physical stores. Instead of jumping on the web, it closed its catalog business down. Bad mistake. Now, it's too late for Sears to recover from that strategic error. Sears is finished.

[HooptieWagon]

31. Sears has brick and mortar stores, yes.

But prior to WW2 their major business was mail-order. You could even order a house, in kit form, that was shipped to you by railcar. Sears was very much like Amazon, and could have been as successful as Amazon is if their goal had been to rebuild the company for the future, rather than to loot the assets and walk away from a burnt hulk.

[MineralMan]

35. Yes. But Sears missed its opportunity to get on the Internet.

Its management was old-fashioned and it stuck to the catalog thing and physical stores for too long. The breakdown happened in the late 1990s and early 2000s. By not acting, Sears doomed itself. Frankly, Amazon and its kindred websites, including small sites, are going to displace Target and Walmart before too long, too. Even though those two retail giants have gotten on the Internet, it's going to be too late for them. Internet shoppers are used to, and insist on price comparisons, and will shop where they find the lowest prices. As long as Target and Walmart focus on their big, expensive stores, they will lose, because their overhead is too high.

Best Buy, for example, is on its death bed, as are the Office Max/Depot type of store. They were killed by Amazon and other online retailers who don't have a store at all. Look at other things like Blockbuster, chain bookstores, and other retail operations. the costs of brick and mortar are too high, and people like the convenience of ordering online from a massive, complete inventory. It's impossible for brick and mortar to compete when the only things they are selling are tangible goods. A 60" TV from a major manufacturer is the same, whether you buy it at Best Buy or have it shipped to your home in 24 or 48 hours. And the online retailer won't be out of stock and will let you choose from twenty different models of 60" TV, at prices Best Buy can't match.

Service is the only thing brick and mortar businesses have to offer that isn't available on the Internet. And they're not really delivering that, either. Go to Best Buy and pick out your 60" TV. If they actually have it in stock, you'll pay a delivery fee over the price, plus local sales tax. Very likely, the salesperson at the store won't really have answers to tech questions you might have, and you can't browse over and look at the detailed specifications, like you can at any online retailer's site. You can't read reviews written by people who have purchased that model, either, like you can online. Today, there is no benefit of shopping in a local store.

On the other hand, local stores like the ACE Hardware near you, are generally able to answer your questions about the products they sell, even low-priced products. They are selling service, know the local retail market, and are by far the best place to buy the kind of stuff they sell, since you can get expert advice or something close to it. The same is true for stores that sell furniture and appliances. They deliver and set up and they're not competing with online retailers, mostly. Best Buy could save itself if it dumped all of the products that are available from online retailers and focused on their appliance and other lines. But, it won't, because that isn't what they WANT to sell. Best Buy is doomed. The Office supply places are doomed. Target and Walmart aren't far behind them, either.

It's a changing world for retail merchandise. Companies will either deal with the change or they won't be around. It is that simple.

[HooptieWagon]

39. Yes, they did miss their window of opportunity.

Retail is changing, like you said. But I think brick and motar stores will survive....by switching to niche markets and service in markets too small for the big retailers to mess with. Successful stores in my area are a book store that specializes in used and rare books, music store specializing in new, used and rare vinyl, and a guitar shop that specializes in vintage guitars. Still, an internet presence is vital.

[MineralMan]

40. Niche marketing is the key, for sure.

Service is the other. That's why I go to my local ACE Hardware instead of Home Depot. They're near each other. But, the local hardware store sells information with its goods, so I go there instead of Home Depot.

A good example: My garage door broke last year. One of the hinges failed and the cable popped off, causing the spring to unwind. I checked online for repair information, and found exactly the info I needed. I drove to my ACE Hardware, which stocks garage door parts. I told the guy what I needed and what had happened. He led me to the parts, and I picked out what I needed plus a few more things. Then, he gave me some tips on doing the repair, including a shortcut for re-tensioning the spring that made the job easier.

Service. That is going to be the key for small retail to survive. Without it, failure is certain.

[Todays_Illusion]

37. MineralMan, How can you call it not functional when that is Exactly what WalMart is doing?

Sears had another huge hook, easy credit for people with no credit rating and was often the place to "build" a credit report record.

[MineralMan]

38. Walmart is on it's way out, too.

Walmart played a role in killing Sears, for sure. But it's going away, too. At least it has put an online system together, and that part of it may survive. It's also doing OK with its sales of stuff like groceries. But, there's nothing at Walmart you can't get delivered to your door, and maybe for even less than you'd pay at Walmart.

Sears was a great success in retailing for over 100 years. But, the times have changed. It was revolutionary when it went into business. Now, Sears is obsolete. Gone. I actually went into a Sears store last week, at the local mall. There was NOBODY shopping there. It was empty. The rest of the mall was crowded with people, but Sears was empty.

Sears is done. And others are in line to follow it.

[FogerRox]

41. Destroying what once was an industry standard

Craftsmen tools were simply the best, free replacement if broken.

Other tool companies now use the same level of excellence, service & quality, while Sears Craftsmen has vanished. Its not that the Craftsmen business model stopped working it still does work, just that Sears screwed up a number one spot in the market.

[MineralMan]

44. Craftsman Tools were NEVER the best.

They were good. They were strong. They were over-engineered. They lasted. But they were not the best tools, especially their hand tools.

Proto. Snap-On. Those were the best tools for mechanics. There were other brands that were the best for other trades. Craftsman Tools were terrific for amateur users. Professionals chose better tools, because they performed better. It's not just whether a tool doesn't break that makes it a good tool. Craftsman Tools were big and clunky. That's why they never broke. That's why Sears could make a lifetime warranty on them work.

Example: Craftsman sold a set of short pattern box wrenches. Shorter than normal box wrenches, they are used by mechanics where space is limited because they fit into those spaces. Proto and Snap-On also sold short pattern box wrenches. What was the difference between them and the Craftsman tools? Wall thickness on the box part of the wrench. The Craftsman tools had much thicker walls than the professional tools. Why does that matter? Because in the tight quarters where those short pattern wrenches are useful, the space around the bolt head or nut is also often limited. The Proto or Snap-On tool would fit. The Craftsman tool would not. It was that simple. Now the Craftsman tool might be just fine 80% of the time. But the 20% where it would not fit over the nut or bolt head, the Craftsman tool was useless. Now, the Snap-On or Proto tool was probably not quite as strong as the Craftsman tool, but it still would never break, because professionals know how to use them.

Same thing in another trade: Plumbing. Craftsman pipe wrenches were just fine for home use, but were not up to professional standards. That's why the plumber has a set of Ridgid pipe wrenches. They grip better, are made with closer tolerances, and are designed for maximum strength with a smaller profile. The Craftsman pipe wrenches were designed with larger dimensions for strength but, again, they didn't work as well. Pros wouldn't use them. Pros use professional tools. They cost more, but are designed with the needs of the professional in mind, rather than to last forever. Even so, the Ridgid pipe wrenches I bought in the 1970s are still just as ideal as they were when I bought them.

Craftsman Tools are just fine for amateurs who use them once in a while. They're not fine for professional use. That's why you don't see pros using them.

[FogerRox]

45. I saw my 1st Snap On truck in the late 1970's

[MineralMan]

46. Mac tools are also excellent, as are Matco.

The Snap-On truck, though, got the most interest at the shops I worked at. All work stopped when the truck pulled in, and it was a rare day when everyone didn't buy something from the truck. You could also get a ratchet repaired or replace that missing 11/32 1/2" drive socket that the guy down the line probably "borrowed" from your tool box while you weren't looking.

Personally, I was a big Proto fan. But, I really had more Snap-On tools in my box than any other brand. Still have, even though I quit wrenching for a living back in 1974. The rollaway and chest are still in my garage, though, with all the tools neatly arranged and kept rust-free. I still use them, but not all of them any longer. One of these years, I'm sure there will be some financial crisis in my household, and those tools will find a new owner. I expect to get a good price for them, too. People know.

[FogerRox]

47. LOL....Thats exactly what I saw

I was talking to a mechanic friend of mine, when the Snap On truck pulled in..... everything stopped, the 2 mechanics and the owner walked over to greet the driver.

[MineralMan]

48. It was even more popular than the lunch truck or

"Roach Coach." Guys who work with tools like tools, it seems. The Snap-On truck was like the ice cream truck for kids.

[mountain grammy]

27. And, after ruining the lives of everyone at the bottom

and redistributing the wealth to the top, Fast Eddie and his buddies retreat to their private islands to plot their next move while putting their hard earned booty to work for them in the US Congress. Good night and God Bless.

[Ikonoklast]

29. If a hedge fund buys the company you work for, make your plans to find a new job, ASAP.

The company will be downsized, looted, then sold; it's the exact same thing every time, hedge fund managers don't know squat about running businesses, they only know how to destroy them for profit.



And why do the Ayn Rand fanbois all look like jerkfaces? Every single one of them is a goofy-looking doofus.

[Todays_Illusion]

33. He should have read more Adam Smith and less Ayn Rand. I think that infamous invisible hand

is taking care of "Crazy Eddie Lampert." Our business/financial "leaders." think a seller controlled marked is a free market. Monsanto will fail for the same reason.

[Gothmog]

36. I never read Ayn Rand and I am glad

I tried one of her books and thought that the writing was horrible.

The fact that this idiot is failing due to his reliance on Rand's views is amusing

[Fortinbras Armstrong]

53. I read The Fountainhead and I started to read The Virtue of Selfishness

And if I were the judge at Roark's trial, I would have said, "Well, that's very interesting Mr. Roark, but the fact remains that you blew up someone else's building out of nothing more than personal pique. You are going to find out more than you really wanted to know about lack of freedom for the next ten years. And be glad I didn't tack on a few years for being a long-winded smart ass."

On the second page or The Virtue of Selfishness, she gives a definition of altruism that few, if any, actual altruists would accept -- that which benefits others is good, that which benefits the altruist is bad. The first part of this definition is so simplistic as to be laughable. Any altruist would say that an act which benefits the altruist and does not harm others is at worst morally neutral and is probably good. Since she began her argument with the Straw Man fallacy, I saw no reason to continue.

There's a now-immortal quote from John Rogers:

There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.

[Martin Eden]

43. There are two novels that can transform a bookish 14-year-kld’s life:

There are two novels that can transform a bookish 14-year-kld’s life: The Lord of the Rings and Atlas Shrugged. One is a childish daydream that can lead to an emotionally stunted, socially crippled adulthood in which large chunks of the day are spent inventing ways to make real life more like a fantasy novel. The other is a book about orcs.

– “The Value of Nothing” by Raj Pate

[Initech]

49. Officer Barbrady From South Park Reviews Ayn Rand