# Sears: A Libertarian Case-study **URL:** \ **Category:** Great Debates\ **Created:** [July 16, 2013, 4:52pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681 "2013-07-16T16:52:54Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![CJJ](https://avatars.discourse-cdn.com/v4/letter/c/ecc23a/32.png) [@CJJ](https://boards.straightdope.com/u/CJJ)\ **Post date:** [July 16, 2013, 4:52pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/1 "2013-07-16T16:52:54Z")
Bloomberg Business Week has a [fascinating article](http://www.businessweek.com/articles/2013-07-11/at-sears-eddie-lamperts-warring-divisions-model-adds-to-the-troubles) on the decline and fall of the retailer Sears. IMO the article presents a case study of how Libertarian theories of the free market inevitably fail when put into practice. Eddie Lambert, the hedge Fund billionaire who managed K-mart’s $12 billion buyout of Sears in 2005, began imposing a libertarian philosophy at the company in 2008: > [@](#): > > Lampert runs Sears like a hedge fund portfolio, with dozens of autonomous businesses competing for his attention and money. 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. > \<…\> > Although Lampert is notoriously media-averse, he agreed to answer questions about Sears’s organizational model via e-mail. “Decentralized systems and structures work better than centralized ones because they produce better information over time,” Lampert writes. “The downside is that, to some, it appears messier than centralized systems.” Lampert adds that the structure enables him to evaluate the individual parts of Sears, so he can collect “significantly better information and drive decision-making and accountability at a more appropriate level.” > > Lampert created the model because he wanted deeper data, which he could use to analyze the company’s assets. It’s why he hired Paul DePodesta, the Harvard-educated statistician immortalized by Michael Lewis in his book Moneyball: The Art of Winning an Unfair Game, to join Sears’s board. He wanted to use nontraditional metrics to gain an edge, like DePodesta did for the Oakland Athletics in Moneyball and is trying to repeat in his current job with the New York Mets. Only so far, Lampert’s experiment resembles a different book: The Hunger Games. The article goes on to detail numerous problems associated with the model, problems which have cause the company to lose 20% of sales and seen its stock decline by 64% since the takeover. A few examples: Creation of a board of directors for each unit, keeping executives mired in monthly meetings as they serve on up to six different boards…Bonus evaluations based on unit performance only, which led to turf wars over store displays or cuts in retail labor from one division–apparel–knowing that floor salespersons in neighboring departments would inevitably pick up the slack…marketing meetings where the various units would fight over space in the weekly circular, leading to a “Frankenstein” publication with incoherent product combinations (think screwdrivers being advertised next to lingerie) or a cover ad for minibikes on Mother’s day (because the sporting goods division bid higher for the cover that week). One particularly amusing example: > [@](#): > > In the weeks leading up to Black Friday in 2011, Sears discovered that some of its rivals planned to open on Thanksgiving at midnight. Sears executives knew they should open early, too, but couldn’t get all the business unit heads on board, according to former executives. (A Sears spokesman says the decision “was not contingent on the business unit structure.”) Instead, the stores opened early the following morning. One former vice president drove to the mall that night and watched families pack into rival stores. By the time Sears opened, he says, cars were leaving the parking lot. > > A month later, Sears announced that its performance during the holidays was poor and it was closing more than 100 stores. If you read the whole article, you’ll also find that Lambert is a control freak, and that his strategy to focus on on-line sales badly miscalculated how much Sears profit is driven by bricks-and-mortar stores. And it is certain that this is some of the reason for the company’s decline. But you’ll also find former executives who cite Lambert’s business model as a primary cause of Sears’ failure, and example after example where a simple cooperative incentive–a “government mandate”, if you will–was discarded in favor of the “invisible hand” of pure economic freedom–examples which inevitably led to failure. IMO the article does serious damage to the libertarian philosophy of free markets. Anyone care to refute it? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 16, 2013, 5:05pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/2 "2013-07-16T17:05:16Z")
Libertarians say poorly run businesses go out of business, which is what is happening here. They certainly don’t say that every businessman, even ones who claim to be a Libertarian, actually knows how to run businesses well. ---
**Author:** ![Human\_Action](https://avatars.discourse-cdn.com/v4/letter/h/ac91a4/32.png) [@Human\_Action](https://boards.straightdope.com/u/Human_Action)\ **Post date:** [July 16, 2013, 5:14pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/3 "2013-07-16T17:14:50Z")
> [@CJJ\*](#): > > But you’ll also find former executives who cite Lambert’s business model as a primary cause of Sears’ failure, and example after example where a simple cooperative incentive–a “government mandate”, if you will–was discarded in favor of the “invisible hand” of pure economic freedom–examples which inevitably led to failure. > > IMO the article does serious damage to the libertarian philosophy of free markets. Anyone care to refute it? Mr. Lambert’s ideas are foolish, since they turned the strengths of a well-integrated business like Sears into weaknesses, by having each unit compete as independent sub-Sears factions. That’s turning the principal-agent problem into official strategy. This is all explained by Lambert’s reported unfamiliarity with the retail business, his over-estimation of his own abilities, and his reliance on people he’d worked with before in non-retail businesses. However, a retailer is not a country, and an organization chart is not an economic system. Lambert wasn’t wrong that each unit would act in its rational best interest, which is what free-market economics is based on. He was wrong that their doing so would necessarily benefit his company. There’s no equivalent to that in an economic system. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [July 16, 2013, 5:15pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/4 "2013-07-16T17:15:57Z")
I could argue a lot of details and nitpicks that might add up to a great deal, and I’m hardly a Libertarian. But I do understand the philosophy, see a great deal of validity to it, and agree with many of its premises and positions. So here’s the majorest points: A badly-run company on the downward slope already and in need of strong and decisive leadership to have a shot of a major turnaround, is not a good data point. Nor is Libertarian macroeconomic philosophy usually applied to internal departments of a single organization (though they can be and frequently are in some types of businesses). Further, bad choices by CEO’s do not, in fact, show anything improper about Libertarianism, whose point is precisely that inefficient organizations tend to get crushed underfoot in favor of stronger and smart competitors, and which does not actually care whether those individual enterprises are run by iron-fisted businessmen, hippies, Hindu prophets, or the Divine Right of Kings. Finally, you can simply use the same so-called “evidence” to argue, with no change in content and very little in flavor, against virtually anything you like, from corporations, free-market economics, department stores, retail businesses, etc. In short, the article is written for the converted, only for the converted, and assumes its own conclusion as a premise. ---
**Author:** ![Czarcasm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/czarcasm/32/4050_2.png) [@Czarcasm](https://boards.straightdope.com/u/Czarcasm)\ **Post date:** [July 16, 2013, 5:24pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/5 "2013-07-16T17:24:21Z")
Are there examples that show a company successfully using libertarian principles? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 16, 2013, 5:37pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/6 "2013-07-16T17:37:15Z")
> [@Czarcasm](#): > > Are there examples that show a company successfully using libertarian principles? Libertarianism doesn’t tell you how to run a business. A total hippie commune with a Co-op that sells macrame wall hangings is a perfectly valid business model in a Libertarian country if the people involved can make it work. ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [July 16, 2013, 5:37pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/7 "2013-07-16T17:37:18Z")
> [@John\_Mace](#): > > _\_ > [@Human\_Action](#): > > _\_ > [@smiling\_bandit](#): > > _\_ Translation: As always, when libertarian ideas are tried out and fail, it’s not the fault of libertarianism. It’s _never_ the fault of libertarianism. It wasn’t “real” libertarianism, the government interfered, the people trying it are incompetent - failure is never the fault of libertarianism itself. ---
**Author:** ![nearwildheaven](https://avatars.discourse-cdn.com/v4/letter/n/90db22/32.png) [@nearwildheaven](https://boards.straightdope.com/u/nearwildheaven)\ **Post date:** [July 16, 2013, 5:38pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/8 "2013-07-16T17:38:50Z")
It doesn’t help that whenever you want to purchase anything at Sears or Kmart, even if you’re paying cash, they basically want your life story. :rolleyes: ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 16, 2013, 5:40pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/9 "2013-07-16T17:40:49Z")
> [@Der\_Trihs](#): > > Translation: As always, when libertarian ideas are tried out and fail, it’s not the fault of libertarianism. It’s _never_ the fault of libertarianism. It wasn’t “real” libertarianism, the government interfered, the people trying it are incompetent - failure is never the fault of libertarianism itself. Nope. I can imagine lots of scenarios where pure Libertarianism would fail. The number one scenario would be no public safety net whatsoever. Now, that doesn’t mean that I think we in the US get the most out of the private safety net that exists, but _H. sapiens_ just isn’t wired to live in a society where no one is ever compelled to help someone else. But the OP starts with a false premise: That Libertarianism tells you how best to run business or that a company can be successfully modeled after a country’s economic system. However, one thing did happen “as usual”, and that’s your post slamming Libertarianism with a broad brush. The only thing missing was SOMALIA! ---
**Author:** ![Labrador\_Deceiver](https://avatars.discourse-cdn.com/v4/letter/l/7c8e57/32.png) [@Labrador\_Deceiver](https://boards.straightdope.com/u/Labrador_Deceiver)\ **Post date:** [July 16, 2013, 5:47pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/10 "2013-07-16T17:47:35Z")
> [@Der\_Trihs](#): > > Translation: As always, when libertarian ideas are tried out and fail, it’s not the fault of libertarianism. It’s _never_ the fault of libertarianism. It wasn’t “real” libertarianism, the government interfered, the people trying it are incompetent - failure is never the fault of libertarianism itself. Translation: “As always, I didn’t read a single word in any of those posts and don’t understand the difference between an economic system and a business model, but wanted to jerk my knee anyway.” ---
**Author:** ![panache45](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/panache45/32/64_2.png) [@panache45](https://boards.straightdope.com/u/panache45)\ **Post date:** [July 16, 2013, 5:54pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/11 "2013-07-16T17:54:03Z")
> [@Der\_Trihs](#): > > Translation: As always, when libertarian ideas are tried out and fail, it’s not the fault of libertarianism. It’s _never_ the fault of libertarianism. It wasn’t “real” libertarianism, the government interfered, the people trying it are incompetent - failure is never the fault of libertarianism itself. Your argument would be valid if the OP had anything to do with libertarianism. It doesn’t, because the company exists in the context of the U.S. economy, which is hardly libertarian. That scenario could have existed within a communist economy, except its failure would have happened faster. ---
**Author:** ![Labrador\_Deceiver](https://avatars.discourse-cdn.com/v4/letter/l/7c8e57/32.png) [@Labrador\_Deceiver](https://boards.straightdope.com/u/Labrador_Deceiver)\ **Post date:** [July 16, 2013, 5:57pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/12 "2013-07-16T17:57:27Z")
Next topic for discussion: “I debunked libertarianism by using it as a model for child-rearing.” or… “We threw out all the rules asociated with football, and used a libertarian model instead - a philosophic criticism.” ---
**Author:** ![Smapti](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/smapti/32/17938_2.png) [@Smapti](https://boards.straightdope.com/u/Smapti)\ **Post date:** [July 16, 2013, 6:05pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/13 "2013-07-16T18:05:24Z")
People still shop at Sears? ---
**Author:** ![running\_coach](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/running_coach/32/15836_2.png) [@running\_coach](https://boards.straightdope.com/u/running_coach)\ **Post date:** [July 16, 2013, 6:09pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/14 "2013-07-16T18:09:33Z")
> [@Smapti](#): > > People still shop at Sears? I was thinking “Sears still exists?” ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [July 16, 2013, 6:09pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/15 "2013-07-16T18:09:58Z")
> [@CJJ](#): > > IMO the article does serious damage to the libertarian philosophy of free markets. Anyone care to refute it? I disagree with this premise. I think using these free market ideas to run an integrated company is ridiculous, but that does not apply to the market as a whole. The primary problem with Free Market Internals is that unbridled competition benefits the consumers, not the companies. Collusion is what benefits the companies themselves, and Lambert was not allowing his companies to collude for their overall benefit. Instead of open bidding for the cover of the circular, you collude, and give the cover to the group most likely to draw customers into the store, even if they could not individually afford to buy the whole cover. He’s competing against companies that allow their divisions to collude, and he’s getting his ass handed to him. Not to mention that his stores suck ass. Seriously, I’m at KMart buying $10 worth of crap, and it took probably 20 minutes to get through the line. That register completed transactions worth maybe $150-200 while I waited. At Costco, a register would rack up probably 10x that amount. I waited and waited, then it was the person in front of me, and the cashier practically tricks the person into signing up for their rewards program, making me wait even longer. One observation from my experience at a large company. It’s often a lot easier to get money from a rival division than it is to get it from a customer. All you need is a few accountants and executives to agree with you, and you have truckloads of money being transferred into your internal account. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 16, 2013, 6:21pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/16 "2013-07-16T18:21:30Z")
> [@Smapti](#): > > People still shop at Sears? The Libertarians killed it. ---
**Author:** ![YogSothoth](https://avatars.discourse-cdn.com/v4/letter/y/8edcca/32.png) [@YogSothoth](https://boards.straightdope.com/u/YogSothoth)\ **Post date:** [July 16, 2013, 6:22pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/17 "2013-07-16T18:22:12Z")
> [@panache45](#): > > Your argument would be valid if the OP had anything to do with libertarianism. It doesn’t, because the company exists in the context of the U.S. economy, which is hardly libertarian. That scenario could have existed within a communist economy, except its failure would have happened faster. Libertarianism failed. It doesn’t matter under what economic system Sears operates in. Within its own business model, competing divisions and departments were undercutting each other. That is the essence of libertarianism, that decentralization and market forces would prevail Imagine if those ideas worked. People who bought screwdrivers would have been enticed to buy lingeries, or mothers would sudden want mini-bikes. That didn’t work because different departments cater to different folks, and need to cooperate in order to target consumers. Instead, what you had was whichever department was richest or most aggressive getting all the target advertisements with little regard to who their consumers were. That’s the failure of libertarianism, that little microcosm is indicative of the irony that, in an effort to promote individuality, it ends up treating everyone the same. I think libertarians can learn a little bit from an old communist saying: From each according to ability, to each according to need ---
**Author:** ![adaher](https://avatars.discourse-cdn.com/v4/letter/a/dec6dc/32.png) [@adaher](https://boards.straightdope.com/u/adaher)\ **Post date:** [July 16, 2013, 6:24pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/18 "2013-07-16T18:24:35Z")
Problem is, humans want as much as they can get while giving as little effort as possible. Communism is the opposite of humanity for that reason. Libertarianism may not be a workable philosophy in whole, but the concept of competition producing better results than central planning is beyond dispute at this point. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 16, 2013, 6:28pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/19 "2013-07-16T18:28:25Z")
> [@YogSosoth](#): > > Libertarianism failed. It doesn’t matter under what economic system Sears operates in. Within its own business model, competing divisions and departments were undercutting each other. That is the essence of libertarianism, that decentralization and market forces would prevail No. The essence of Libertarianism is that people should be free from coercion. The primary interests of Libertarians is not to improve the material wealth of people or countries, but realize the maximum freedom possible. Libertarians often think that as a by-product of freedom, you will get a society that is wealthier than otherwise, but that is a by-product, not a goal. ---
**Author:** ![Human\_Action](https://avatars.discourse-cdn.com/v4/letter/h/ac91a4/32.png) [@Human\_Action](https://boards.straightdope.com/u/Human_Action)\ **Post date:** [July 16, 2013, 6:32pm UTC](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681/20 "2013-07-16T18:32:00Z")
> [@YogSosoth](#): > > Libertarianism failed. It doesn’t matter under what economic system Sears operates in. Within its own business model, competing divisions and departments were undercutting each other. That is the essence of libertarianism, that decentralization and market forces would prevail Market forces did prevail. Each division acted in its own rational self-interest. The problem is that that is a moronic way to run a single company. It left each division competing with other Sears divisions, _and_ all the other retailers out there. [QUOTE=YogSosoth] Imagine if those ideas worked. People who bought screwdrivers would have been enticed to buy lingeries, or mothers would sudden want mini-bikes. That didn’t work because different departments cater to different folks, and need to cooperate in order to target consumers. Instead, what you had was whichever department was richest or most aggressive getting all the target advertisements with little regard to who their consumers were. [/quote] And that’s a stupid way to run your marketing division. [QUOTE=YogSosoth] That’s the failure of libertarianism, that little microcosm is indicative of the irony that, in an effort to promote individuality, it ends up treating everyone the same. I think libertarians can learn a little bit from an old communist saying: From each according to ability, to each according to need [/QUOTE] How would a retailer based around “from each according to their needs, to each according to their ability” stay in business? A month? [Next page](https://boards.straightdope.com/t/sears-a-libertarian-case-study/663681.md?page=2)