Thursday, July 25, 2013

Eddie Lampert and the Twentieth Century Motor Company

Lynne Stuart Parramore at Slate made the Lampert-Rand connection and writes: Ayn Rand killed Sears. Here she spells out the Rand connection and the failures.
At Sears, Lampert set out to create the Ayn Rand model of a giant firm. The company got a radical restructuring. It was something that had been tried at giant industrial conglomerates like GE, but never with a retailer.
First, Lampert broke the company into over 30 individual units, each with its own management, and each measured separately for profit and loss. Acting in their individual self-interest, they would be forced to compete with each other and thereby generate higher profits.
What actually happened is that units began to behave something like the cutthroat city-states of Italy around the time Machiavelli was penning his guide to rule-by-selfishness. As Mina Kimes has reported in Bloomberg Businessweek, they went to war with each other.
It got crazy. Executives started undermining other units because they knew their bonuses were tied to individual unit performance. They began to focus solely on the economic performance of their unit at the expense of the overall Sears brand. One unit, Kenmore, started selling the products of other companies and placed them more prominently that Sears’ own products. Units competed for ad space in Sears’ circulars, and since the unit with the most money got the most ad space, one Mother’s Day circular ended up being released featuring a mini bike for boys on its cover. Units were no longer incentivized to make sacrifices, like offering discounts, to get shoppers into the store.
Sears became a miserable place to work, rife with infighting and screaming matches. Employees focused solely on making money in their own unit ceased to have any loyalty the company or stake in its survival. Eddie Lampert taunted employees by posting under a fake name on the company’s internal social network.
What Lampert failed to see is that humans actually have a natural inclination to work for the mutual benefit of an organization. They like to cooperate and collaborate, and they often work more productively when they have shared goals.  Take all of that away and you create a company that will destroy itself.
In 2012, Lampert bought a $40 million home on Indian Creek Island, near Miami, just around the time he decided to sell 1,200 Sears stores and close an additional 173. That same year, Sears Holding was named the sixth worst place in America to work by AOL Jobs.
She then concludes:
It’s probably a good thing Ayn Rand never tried to run a business.
Not only did Ayn Rand never try to run a business, virtually the only business she had any dealings with ever was show business.
I consider it just desserts for Rand to get the blame for Lampert's failure, in exchange for the Twentieth Century Motor Company, the Straw Business that was suddenly, inexplicably collectivized by its owners, causing John Galt to go Galt. The Bum on the Train explains:
It was when the old man died and his heirs took over. There were three of them, two sons and a daughter, and they brought in a new plan to run the factory. They let us vote on it too, and everybody - almost everybody - voted for it. We didn't know. We thought it was good. The plan was that everybody would work according to his ability, but would be paid according to his need.           
 Of course it isn't enough to ask us to believe that people who inherited a factory would suddenly decide they wanted to give six thousand other people a say in how the factory would be run. Rand wants us to believe that this "communist" factory would also turn into a sweatshop:
"We're all one big family" they told us, we're all in this together. But you don't stand, working an acetylene torch together ten hours a day..."
Of course it doesn't take a pseudo-Communist parable system to force people to work long hours for low pay. It's happening all over the world right now, under 100% capitalism.
And note that the "Communists" refer to their collective as a family. Families are never a source of good in Atlas Shrugged. 
Rand discounts entirely any possible materialistic causes of socialist movements and blames the cause on her favorite villains:
Hadn't we heard it all our lives, from our parents and our schoolteachers and our ministers and in every newspaper we ever read, and every movie and every public speech?
And the primary force behind the Twentieth Century Motor Company is one of the two heirs (the third committed suicide) name Ivy Starnes, who doesn't care about wealth. The only, absolutely only reason given by Rand for why this person collectivized her own factory is pure psychopathy:
She had pale eyes that looked fishy, cold and dead. And if you ever want to see pure evil you should see the way her eyes glinted when she watched some man who'd talked back to her once and who'd just heard his name on the list of those getting nothing above basic pittance. And when you saw it, you saw the real motive of any person who's ever preached 'From each according to his ability, to each according to his need."
So there it is right there. Ayn Rand seriously believed that the only possible reason for anybody to favor socialist policies was sadism
But why would Ivy Starnes have to go to the effort to collectivize her factory when it is an entirely unnecessary step? If what you want to do is jerk people around, dock their pay, demote them, fail to live up to your promises, etc. etc. I can testify from personal experience that your standard private property loving employer is entirely capable of doing anything that Ivy Starnes did after she collectivized her own factory.

And in fact, the only reason why it isn't done more often by private property loving employers is because of unions. We know the results of laissez-faire capitalism, both in the United States before unions, and all over the world right now.
Ayn Rand's simplistic parable offers no reasoned analysis about aspects of Communism, socialism, capitalism, monarchy, etc. It's a children's battle of Good vs. Evil that is entirely useless for adults, and extremely silly to boot. 
When men with lots of money take the extremely silly as their Bible, all hell will break loose.