1 00:00:17,560 --> 00:00:20,680 Speaker 1: Pushkin too quick. No, it's perfect push kit. 2 00:00:20,720 --> 00:00:37,680 Speaker 2: Stop you got it, okay, Robert. 3 00:00:38,480 --> 00:00:42,360 Speaker 3: Let's say it's eighteen ninety seven and you live on 4 00:00:42,400 --> 00:00:43,760 Speaker 3: a farm in America. 5 00:00:44,360 --> 00:00:47,320 Speaker 1: Wherever where do you want you from to me? Nebraska? 6 00:00:47,360 --> 00:00:51,040 Speaker 3: Nebraska, classic, classic farm state. It's a little cold, but 7 00:00:51,080 --> 00:00:53,680 Speaker 3: we're mostly farmers. And for your farm, you want to 8 00:00:53,680 --> 00:00:58,880 Speaker 3: buy the following things. A set of encyclopedias, a buggy 9 00:00:59,320 --> 00:01:03,400 Speaker 3: like a horse and buggy, a shotgun, and a bottle 10 00:01:03,480 --> 00:01:08,039 Speaker 3: of Peruvian wine of coca, which is actually wine mixed 11 00:01:08,080 --> 00:01:09,560 Speaker 3: with cocaine. 12 00:01:10,120 --> 00:01:11,840 Speaker 1: Essential for a Nebraska winner. 13 00:01:13,000 --> 00:01:14,720 Speaker 3: I don't know what you're gonna do with these things, 14 00:01:14,840 --> 00:01:18,360 Speaker 3: but I know that there's one place in eighteen ninety 15 00:01:18,400 --> 00:01:19,360 Speaker 3: eight that you're gonna buy. 16 00:01:19,480 --> 00:01:22,520 Speaker 1: Only one place, and that is the Sears catalog that 17 00:01:22,560 --> 00:01:24,319 Speaker 1: has come to my home where I can order all 18 00:01:24,360 --> 00:01:24,920 Speaker 1: of these things. 19 00:01:25,040 --> 00:01:27,679 Speaker 3: The Big Book, the book that is like eight hundred 20 00:01:27,720 --> 00:01:31,400 Speaker 3: pages long, that is this essential phenomenon in American life 21 00:01:31,400 --> 00:01:34,479 Speaker 3: in the late nineteenth or late twentieth century. It's probably 22 00:01:34,520 --> 00:01:36,319 Speaker 3: one of only two books you've got in your house, 23 00:01:36,400 --> 00:01:39,080 Speaker 3: the other ones the Bible. And after you order your 24 00:01:39,319 --> 00:01:43,080 Speaker 3: gun and your cocaine, maybe you'll you know, ball up 25 00:01:43,080 --> 00:01:44,840 Speaker 3: a few pages and stick them in the holes in 26 00:01:44,880 --> 00:01:47,039 Speaker 3: your cabin to keep the wind out. Maybe you'll hang 27 00:01:47,040 --> 00:01:49,880 Speaker 3: it up in the outhouse. It's a little reading for 28 00:01:49,960 --> 00:01:53,000 Speaker 3: the toilet and in a pinch toilet paper. Absolutely all 29 00:01:53,120 --> 00:01:56,160 Speaker 3: real uses of the Seers catalog. And you know, one 30 00:01:56,160 --> 00:02:00,240 Speaker 3: of the things that's amazing about Sears subject of today's show, 31 00:02:00,800 --> 00:02:04,760 Speaker 3: is how long it was so central and so huge 32 00:02:04,800 --> 00:02:08,440 Speaker 3: in American life. It had this rise, this meteoric rise, 33 00:02:08,519 --> 00:02:10,600 Speaker 3: as they say in the in the late eighteen hundreds, 34 00:02:10,600 --> 00:02:13,520 Speaker 3: but then it kind of another rise in the twentieth 35 00:02:13,560 --> 00:02:17,560 Speaker 3: century and it became by far the biggest retailer in America, 36 00:02:17,639 --> 00:02:19,600 Speaker 3: like well into our lifetimes, right, I don't know, you 37 00:02:19,680 --> 00:02:21,119 Speaker 3: must remember going to Series as a kid. 38 00:02:21,200 --> 00:02:23,200 Speaker 1: Yeah, in the eighties and nineties, you'd go to the 39 00:02:23,240 --> 00:02:25,880 Speaker 1: mall and Sears was one of the anchor tenants and 40 00:02:26,000 --> 00:02:28,160 Speaker 1: you could get at the time, that's where you'd go 41 00:02:28,200 --> 00:02:31,160 Speaker 1: to get hardware, right, you'd go to get a hammer 42 00:02:31,400 --> 00:02:33,440 Speaker 1: or tires for your clothes. 43 00:02:33,440 --> 00:02:35,720 Speaker 3: I got tough skin jeans there when I was a kid. 44 00:02:36,280 --> 00:02:39,880 Speaker 3: And like, there is a way in which I don't 45 00:02:39,960 --> 00:02:43,160 Speaker 3: quite want to say Sears was America, but kind of right, 46 00:02:43,200 --> 00:02:45,720 Speaker 3: like During the Cold War, people used to say we 47 00:02:45,800 --> 00:02:49,680 Speaker 3: should drop the Sears catalog over the Soviet Union to 48 00:02:49,760 --> 00:02:50,880 Speaker 3: show them what they're missing. 49 00:02:50,960 --> 00:02:52,600 Speaker 1: Right, you want to end communism, just show them the 50 00:02:52,639 --> 00:02:56,200 Speaker 1: series catalog, hundreds of pages of capitalism. And so you 51 00:02:56,240 --> 00:02:57,720 Speaker 1: know the history of Sears. 52 00:02:57,760 --> 00:03:03,160 Speaker 3: It goes from farmers and railroads to the Cold War 53 00:03:03,760 --> 00:03:06,000 Speaker 3: to the mall out on the edge of town. 54 00:03:06,160 --> 00:03:06,320 Speaker 1: Right. 55 00:03:06,360 --> 00:03:09,680 Speaker 3: So like basically it's a John Cougar Mellencamp song, right Like, 56 00:03:10,080 --> 00:03:13,120 Speaker 3: I'm going to say, the story of Sears is the 57 00:03:13,160 --> 00:03:14,880 Speaker 3: story of the American century. 58 00:03:15,720 --> 00:03:17,840 Speaker 1: I'm Jacob Goldstein, I'm Robert Smith. And this is a 59 00:03:17,840 --> 00:03:22,880 Speaker 1: little diddy about business history. It's the history of business. 60 00:03:22,960 --> 00:03:28,000 Speaker 1: It's everything you see, Okay, okay. I appreciate the commitment 61 00:03:28,880 --> 00:03:33,040 Speaker 1: today on the show. The rise and rise and fall 62 00:03:33,120 --> 00:03:36,720 Speaker 1: of Sears. Searies was the Amazon of its day. Was 63 00:03:36,760 --> 00:03:39,280 Speaker 1: started by a guy who was a born salesman flip 64 00:03:39,360 --> 00:03:43,560 Speaker 1: in watches, and then it was reinvented by a general. 65 00:03:43,600 --> 00:03:46,440 Speaker 1: An actual general in the twentieth century at one point 66 00:03:46,440 --> 00:03:48,880 Speaker 1: would build the tallest building in the United States in 67 00:03:48,920 --> 00:03:51,040 Speaker 1: the world. I think I think so too. Yeah, what 68 00:03:51,080 --> 00:03:51,840 Speaker 1: else would it have been? 69 00:03:52,040 --> 00:03:52,280 Speaker 2: Big? 70 00:03:52,320 --> 00:03:55,960 Speaker 1: Ben Dubai wasn't even a thing. Robert. 71 00:03:56,000 --> 00:03:59,600 Speaker 3: You like to point out how in every obituary there's 72 00:03:59,680 --> 00:04:02,080 Speaker 3: like the exciting top and then they jump back and 73 00:04:02,120 --> 00:04:03,720 Speaker 3: tell the story of the person's life. And so I 74 00:04:03,720 --> 00:04:07,320 Speaker 3: want to say to you that Richard Warren Sears was 75 00:04:07,360 --> 00:04:12,120 Speaker 3: born in Stuartville, Minnesota in eighteen sixty three. Small town, 76 00:04:12,400 --> 00:04:14,960 Speaker 3: small town father was a blacksmith. Doesn't get any more 77 00:04:15,000 --> 00:04:17,800 Speaker 3: old timy than that. And Sears, when he was a teenager, 78 00:04:17,800 --> 00:04:20,080 Speaker 3: he got a job that is already becoming familiar to 79 00:04:20,159 --> 00:04:21,200 Speaker 3: us on business history. 80 00:04:21,560 --> 00:04:25,040 Speaker 1: Telegraph operator. You know, I've been thinking about that, right, 81 00:04:25,080 --> 00:04:29,000 Speaker 1: because Thomas Edison was a telegraph operator, Andrew Carnegie telegraph operator. 82 00:04:29,040 --> 00:04:33,039 Speaker 1: I think at the time these were the people who 83 00:04:33,200 --> 00:04:37,000 Speaker 1: saw the entire world, saw how big and exciting the 84 00:04:37,040 --> 00:04:40,400 Speaker 1: world was, and so I think they were natural for business. Yeah. 85 00:04:40,440 --> 00:04:42,920 Speaker 3: And I mean also if you were like an ambitious, 86 00:04:43,480 --> 00:04:46,160 Speaker 3: smart kid, it was it was a good job for hustler. Right. 87 00:04:46,240 --> 00:04:49,839 Speaker 3: So so Sears the man gets this job, and like 88 00:04:49,880 --> 00:04:53,479 Speaker 3: a lot of telegraph operators, he's also a station agent, 89 00:04:53,520 --> 00:04:56,320 Speaker 3: a railroad station agent, right, because the telegraph wires often 90 00:04:56,360 --> 00:04:58,680 Speaker 3: run next to the train tracks. It's a natural combo. 91 00:04:59,160 --> 00:05:02,520 Speaker 3: And he winds up running the station in north Redwood, Minnesota, 92 00:05:03,000 --> 00:05:06,479 Speaker 3: not even Redwood, Minnesota, right, like way out there. This 93 00:05:06,600 --> 00:05:08,640 Speaker 3: job in the middle of nowhere is key for him 94 00:05:08,680 --> 00:05:13,280 Speaker 3: because being a rural station agent at the time meant 95 00:05:13,320 --> 00:05:16,000 Speaker 3: you were a trader, basically a trader in goods. 96 00:05:16,040 --> 00:05:16,160 Speaker 1: Right. 97 00:05:16,200 --> 00:05:19,200 Speaker 3: The farmers have extra produce, their's stuff coming in on 98 00:05:19,240 --> 00:05:21,720 Speaker 3: the trains. They're often going out empty. So it's good 99 00:05:21,360 --> 00:05:24,719 Speaker 3: for the railroad if you're kind of wheeling and dealing 100 00:05:24,760 --> 00:05:25,640 Speaker 3: getting stuff on the train. 101 00:05:25,760 --> 00:05:27,120 Speaker 1: Yeah, matching buyers and sellers. 102 00:05:27,320 --> 00:05:31,799 Speaker 3: So this key moment comes for Sears when he's twenty 103 00:05:31,839 --> 00:05:36,320 Speaker 3: three years old and a watch company in Chicago sells 104 00:05:36,320 --> 00:05:39,800 Speaker 3: a shipment of gold pocket watches to a jeweler out 105 00:05:39,839 --> 00:05:42,440 Speaker 3: in rural Minnesota. Goes out to the end of the 106 00:05:42,480 --> 00:05:44,320 Speaker 3: line there it is, and the jeweler looks at the 107 00:05:44,320 --> 00:05:48,320 Speaker 3: watches like, nah, I don't want them. So now the 108 00:05:48,360 --> 00:05:50,680 Speaker 3: watch company is gonna have to pay for return shipping. Right, 109 00:05:50,720 --> 00:05:52,600 Speaker 3: the jeweler's not paying for the watches and they don't 110 00:05:52,640 --> 00:05:54,359 Speaker 3: want a deal. And so they say to Seers, is 111 00:05:54,360 --> 00:05:57,880 Speaker 3: the local station agent. They say, look, these watches they 112 00:05:57,880 --> 00:06:01,440 Speaker 3: retail for twenty five dollars each. We'll sell them to 113 00:06:01,440 --> 00:06:05,520 Speaker 3: you wholesale for twelve and Sears says, okay, let me 114 00:06:05,560 --> 00:06:08,719 Speaker 3: get back to you on that, and he gets in 115 00:06:08,760 --> 00:06:10,560 Speaker 3: touch with I guess. He telegraphs a bunch of other 116 00:06:10,680 --> 00:06:14,600 Speaker 3: station agents and says, I got some twenty five dollars watches. 117 00:06:14,640 --> 00:06:17,560 Speaker 3: I'll sell them to for fourteen dollars a piece. Oh 118 00:06:17,600 --> 00:06:20,520 Speaker 3: he was getting in for twelve already. Yeah, And they say, sure, 119 00:06:20,560 --> 00:06:24,600 Speaker 3: will take them, and so he buys the watches immediately 120 00:06:24,640 --> 00:06:27,440 Speaker 3: flips them. It's like free money. Essentially, he's not taking 121 00:06:27,480 --> 00:06:29,440 Speaker 3: any risk and he's making easy money. And this is 122 00:06:29,480 --> 00:06:31,640 Speaker 3: the one place where you really needed a watch. 123 00:06:32,320 --> 00:06:34,760 Speaker 1: Yeah. And he's stay in age, right with the timetables 124 00:06:34,760 --> 00:06:35,799 Speaker 1: of the trains. Yeah. 125 00:06:35,920 --> 00:06:40,039 Speaker 3: In fact, in fact, side note, trains were the reason 126 00:06:40,200 --> 00:06:43,560 Speaker 3: standard time was created. Like until not that long before this, 127 00:06:44,200 --> 00:06:47,000 Speaker 3: every town could have its own time, right whenever the 128 00:06:47,080 --> 00:06:49,960 Speaker 3: church bell rang, whenever the sun was overhead, because who cared, Like, 129 00:06:50,000 --> 00:06:53,040 Speaker 3: nobody's going fast. But once you have trains going fast 130 00:06:53,120 --> 00:06:56,400 Speaker 3: over long distances, this is when you actually need precise time. 131 00:06:56,600 --> 00:07:00,159 Speaker 3: Timetable world, timetable world. So good time to be in 132 00:07:00,200 --> 00:07:03,799 Speaker 3: the watch business. And Sears basically gets into the watch business. 133 00:07:03,800 --> 00:07:07,120 Speaker 3: He keeps buying and selling watches, and he's buying low 134 00:07:07,160 --> 00:07:10,480 Speaker 3: and selling high to be preci yes's always a good move, 135 00:07:10,840 --> 00:07:13,920 Speaker 3: and he structures these side hustles in a really smart 136 00:07:14,000 --> 00:07:16,560 Speaker 3: way which is basically similar to what he did the 137 00:07:16,600 --> 00:07:20,040 Speaker 3: first time. He does it so that the people buying 138 00:07:20,080 --> 00:07:24,280 Speaker 3: from him pay him before he pays for the watches. 139 00:07:24,400 --> 00:07:27,560 Speaker 3: So basically he's selling the watches before he has to buy. 140 00:07:27,560 --> 00:07:31,560 Speaker 1: They teach this in business school. They called the negative 141 00:07:31,720 --> 00:07:35,280 Speaker 1: cash conversion cycle. And there's a thing a name. There 142 00:07:35,360 --> 00:07:38,280 Speaker 1: is a reason for this, which is in typical business, 143 00:07:38,440 --> 00:07:41,000 Speaker 1: say around a chair company, I have to go out 144 00:07:41,040 --> 00:07:43,000 Speaker 1: and buy a bunch of chairs and then a warehouse 145 00:07:43,040 --> 00:07:44,920 Speaker 1: to store the man I probably have to borrow money 146 00:07:44,920 --> 00:07:46,520 Speaker 1: to get the chairs, and then I have to sit 147 00:07:46,560 --> 00:07:48,680 Speaker 1: there and wait for somebody to buy my chairs, right, 148 00:07:48,920 --> 00:07:51,080 Speaker 1: which they might not do. And it's costing you money 149 00:07:51,120 --> 00:07:51,560 Speaker 1: the whole time. 150 00:07:51,600 --> 00:07:53,120 Speaker 3: Right, there's a cost of capital. 151 00:07:53,280 --> 00:07:56,200 Speaker 1: But if you can sell something and get the cash 152 00:07:56,320 --> 00:07:58,520 Speaker 1: before you have to buy the product and deliver it 153 00:07:58,560 --> 00:08:03,640 Speaker 1: to them, then that's like the buyers become your investors. 154 00:08:04,080 --> 00:08:06,320 Speaker 1: You don't need any money, and if you do it 155 00:08:06,400 --> 00:08:10,840 Speaker 1: right and keep growing, you can create this flywheel essentially 156 00:08:10,880 --> 00:08:13,280 Speaker 1: where the money keeps coming in, use that to fund 157 00:08:13,320 --> 00:08:15,520 Speaker 1: your growth, which brings in more customers, which brings in 158 00:08:15,560 --> 00:08:17,800 Speaker 1: more money, and you never have to really put out 159 00:08:17,800 --> 00:08:19,160 Speaker 1: any of your own cash. Yeah. 160 00:08:19,280 --> 00:08:22,960 Speaker 3: Costco amazingly. Costco is often able to do this with 161 00:08:23,560 --> 00:08:25,680 Speaker 3: their terms. Basically they can sell before they buy. 162 00:08:25,720 --> 00:08:26,800 Speaker 1: Amazon grew this way. 163 00:08:26,920 --> 00:08:29,080 Speaker 3: Yes, yeah, so this is what Sears is doing. He's 164 00:08:29,120 --> 00:08:31,440 Speaker 3: able to quit his station agent job. He's just in 165 00:08:31,480 --> 00:08:35,520 Speaker 3: the watch business now. He starts the Rwcars Watch Company. 166 00:08:36,680 --> 00:08:40,760 Speaker 3: And according to Catalogs Encounters, which is the nineteen fifty 167 00:08:40,760 --> 00:08:44,480 Speaker 3: book that's the classic history of early Seers, at this point, 168 00:08:44,480 --> 00:08:48,880 Speaker 3: the Rwcars Watch Company consisted of a kitchen table, a 169 00:08:48,960 --> 00:08:52,240 Speaker 3: fifty cent chair, and some record books in stationary and 170 00:08:52,280 --> 00:08:52,839 Speaker 3: the rest of. 171 00:08:52,800 --> 00:08:55,400 Speaker 1: It is just the ental logistics. 172 00:08:55,880 --> 00:08:59,400 Speaker 3: Well, yeah, so Sears is getting bigger now. He's still 173 00:08:59,440 --> 00:09:02,000 Speaker 3: out in Minnesota, and of course all of his watches 174 00:09:02,040 --> 00:09:05,000 Speaker 3: are coming and going via the railroad, right, that's the 175 00:09:05,000 --> 00:09:07,200 Speaker 3: way everything's moving at the time, and so he needs 176 00:09:07,720 --> 00:09:09,920 Speaker 3: to be more central, right, his business is growing. He 177 00:09:09,920 --> 00:09:10,960 Speaker 3: doesn't want to be out at the end of the 178 00:09:10,960 --> 00:09:14,480 Speaker 3: line anymore. So there's one place really for him to 179 00:09:14,559 --> 00:09:16,400 Speaker 3: move Chicago. 180 00:09:16,760 --> 00:09:19,880 Speaker 1: Right, it's the center a town that was built because 181 00:09:19,880 --> 00:09:21,360 Speaker 1: it is the center of the real life. Yeah. 182 00:09:21,520 --> 00:09:23,800 Speaker 3: So I'm going to say a name here just for 183 00:09:23,880 --> 00:09:28,559 Speaker 3: our older listeners, Alva Roebuck. For like a minute, Sears 184 00:09:28,640 --> 00:09:31,000 Speaker 3: partners with a watchmaker named Alva Roebuck, which I say 185 00:09:31,000 --> 00:09:34,560 Speaker 3: because if you're over the age of forty five, you 186 00:09:34,559 --> 00:09:37,800 Speaker 3: may know that Sears was called Sears Roebuck. But Roebuck 187 00:09:37,840 --> 00:09:40,480 Speaker 3: disappears pretty soon, leaves his name on the company. 188 00:09:40,160 --> 00:09:41,720 Speaker 1: And they keep the name for one hundred years. 189 00:09:41,720 --> 00:09:47,400 Speaker 3: Amazing, and Sears, the man CRW Sears is expanding his 190 00:09:47,440 --> 00:09:51,280 Speaker 3: business slowly. He goes from watches to jewelry. He's selling 191 00:09:51,280 --> 00:09:54,200 Speaker 3: direct to consumers now, not just a wholesale. And he's 192 00:09:54,240 --> 00:09:58,559 Speaker 3: sending out this little booklet with the watches and the jewelry, 193 00:09:58,760 --> 00:10:00,800 Speaker 3: and the booklet is sort of getting bigger and bigger 194 00:10:00,840 --> 00:10:03,920 Speaker 3: as he adds more things. And you see what I'm 195 00:10:03,960 --> 00:10:07,520 Speaker 3: doing here, right, He's he's getting into the catalog business, 196 00:10:08,000 --> 00:10:09,800 Speaker 3: which is a new thing at the time. He's not 197 00:10:09,840 --> 00:10:13,600 Speaker 3: inventing the catalog business. Montgomery Warre at another company that 198 00:10:13,800 --> 00:10:15,600 Speaker 3: stayed around for a long time, they were already sending 199 00:10:15,640 --> 00:10:19,320 Speaker 3: out catalogs. But the key thing is, I think it's 200 00:10:19,320 --> 00:10:22,559 Speaker 3: a really good time to be getting into the catalog business. 201 00:10:22,640 --> 00:10:25,320 Speaker 1: It reminds me you mentioned Amazon. 202 00:10:25,360 --> 00:10:27,840 Speaker 3: It reminds me of Amazon getting into e commerce in 203 00:10:27,840 --> 00:10:28,640 Speaker 3: the late nineties. 204 00:10:28,720 --> 00:10:28,880 Speaker 1: Right. 205 00:10:29,440 --> 00:10:32,680 Speaker 3: In both cases, there are these sort of technological and 206 00:10:32,760 --> 00:10:37,320 Speaker 3: demographic tailwinds that are just blowing the business forward. 207 00:10:37,640 --> 00:10:42,480 Speaker 1: We're seeing industrialization, we're seeing the railroads, mail delivery. And 208 00:10:43,320 --> 00:10:45,880 Speaker 1: you know, with a catalog, it's like getting someone into 209 00:10:45,920 --> 00:10:48,440 Speaker 1: the store, right, you come for the watches, but as 210 00:10:48,440 --> 00:10:50,520 Speaker 1: you're flipping the pages, you're like, oh, I can get 211 00:10:50,559 --> 00:10:51,439 Speaker 1: some dungarees. 212 00:10:51,640 --> 00:10:54,400 Speaker 3: Yes, yes, And people are getting richer, right, people are 213 00:10:54,440 --> 00:10:57,400 Speaker 3: getting richer. There's more literacy, Like, there's all these reasons 214 00:10:57,440 --> 00:11:00,080 Speaker 3: it's a good time to be starting a catalog. Rural 215 00:11:00,080 --> 00:11:04,439 Speaker 3: delivery is getting better, and so you can actually see 216 00:11:04,720 --> 00:11:08,520 Speaker 3: a lot of these dynamics in the catalog itself. So 217 00:11:08,920 --> 00:11:11,720 Speaker 3: let's actually look at the catalog because it's incredibly revealing 218 00:11:11,720 --> 00:11:13,760 Speaker 3: about the way the business worked, the way the American 219 00:11:13,760 --> 00:11:16,640 Speaker 3: economy worked at the time. So I actually bought you 220 00:11:16,679 --> 00:11:19,400 Speaker 3: can buy a reproduction of the which I have here. 221 00:11:19,520 --> 00:11:23,040 Speaker 1: It's a few hundred cages pages. 222 00:11:23,440 --> 00:11:26,440 Speaker 3: The last phage is seven hundred and eighty six. Let's 223 00:11:26,480 --> 00:11:27,240 Speaker 3: just look at the cover. 224 00:11:28,679 --> 00:11:32,520 Speaker 1: It's a lot. It's a lot. Sears, Roebuck and Company, 225 00:11:32,640 --> 00:11:36,360 Speaker 1: cheapest supply house on Earth, on Earth. 226 00:11:36,559 --> 00:11:38,000 Speaker 3: You know what I thought of when I saw that 227 00:11:38,360 --> 00:11:39,760 Speaker 3: the greatest show on Earth? P. T. 228 00:11:39,920 --> 00:11:40,319 Speaker 1: Barnum. 229 00:11:40,360 --> 00:11:42,400 Speaker 3: He had his circus going around around this time. 230 00:11:43,000 --> 00:11:45,840 Speaker 1: And just in case you thought that perhaps Sears Roebuck 231 00:11:45,920 --> 00:11:49,199 Speaker 1: were some sort of hucksters or something, they have all 232 00:11:49,240 --> 00:11:52,880 Speaker 1: sorts of fine prints here authorized and incorporated under the 233 00:11:53,000 --> 00:11:55,600 Speaker 1: laws of Illinois, and it says we can just do 234 00:11:55,640 --> 00:11:56,080 Speaker 1: this part now. 235 00:11:56,120 --> 00:11:58,400 Speaker 3: It says also at the top, with the capital of 236 00:11:58,440 --> 00:12:02,160 Speaker 3: one hundred and fifty thousand dollars paid in full, a 237 00:12:02,240 --> 00:12:04,880 Speaker 3: reference by special permission, and then a bunch of banks. 238 00:12:04,880 --> 00:12:06,480 Speaker 1: It lists the banks where the money is. 239 00:12:06,559 --> 00:12:10,040 Speaker 3: Yeah, And if you flip a few pages into the book, 240 00:12:10,160 --> 00:12:12,720 Speaker 3: you actually see there's like a letter or on bank 241 00:12:12,840 --> 00:12:16,400 Speaker 3: letterhead essentially saying this company is legit. They're in Chicago, 242 00:12:16,520 --> 00:12:19,240 Speaker 3: they have hundreds of employees, and so what is this doing. 243 00:12:19,720 --> 00:12:22,960 Speaker 3: What this is doing is speaking to the farmer. 244 00:12:23,360 --> 00:12:23,560 Speaker 1: Right. 245 00:12:24,080 --> 00:12:26,360 Speaker 3: The farmer is the customer for seers, right. People who 246 00:12:26,400 --> 00:12:28,880 Speaker 3: live in town don't need seers. They don't order a 247 00:12:28,960 --> 00:12:31,079 Speaker 3: mail or do they just go to the store. And 248 00:12:31,720 --> 00:12:35,280 Speaker 3: you know, the farmer has been ripped off by people 249 00:12:35,360 --> 00:12:37,719 Speaker 3: all his life, right, And by the way, there's like 250 00:12:37,760 --> 00:12:40,360 Speaker 3: a picture of an idyllic farm with a. 251 00:12:40,320 --> 00:12:44,440 Speaker 1: Woman and a cornucopia of commerce basically descending upon the 252 00:12:44,520 --> 00:12:46,240 Speaker 1: farm saying, look at all the stuff I can caring. 253 00:12:46,320 --> 00:12:49,440 Speaker 3: So this is it's like the cornucopia is dumping stuff 254 00:12:49,480 --> 00:12:52,440 Speaker 3: onto the farm. That is what Sears is doing. And 255 00:12:52,520 --> 00:12:56,640 Speaker 3: so this reference to the bankers is telling the farmer 256 00:12:56,840 --> 00:12:58,920 Speaker 3: you can trust us, you can trust the company. Look, 257 00:12:59,000 --> 00:13:01,120 Speaker 3: banks say, we're legit, We're not just some made up thing. 258 00:13:01,200 --> 00:13:03,880 Speaker 3: And when you go through the book the catalog, you 259 00:13:03,920 --> 00:13:06,240 Speaker 3: actually see all these ways he's trying to get farmers 260 00:13:06,360 --> 00:13:09,320 Speaker 3: to trust him. And it says like send just fifty 261 00:13:09,360 --> 00:13:12,800 Speaker 3: cents deposit, return it if you don't like it, satisfaction guaranteed. 262 00:13:13,240 --> 00:13:18,240 Speaker 1: And you know Sears was good. It was cheap. 263 00:13:18,280 --> 00:13:21,040 Speaker 3: Also, that cheapest supply house on earth, Like it wasn't 264 00:13:21,040 --> 00:13:22,520 Speaker 3: the cheapest supply house on I don't know what does 265 00:13:22,559 --> 00:13:23,480 Speaker 3: that even mean, but. 266 00:13:23,480 --> 00:13:24,400 Speaker 1: It was cheap. 267 00:13:25,280 --> 00:13:27,400 Speaker 3: And if you think about the farmer living on this 268 00:13:27,559 --> 00:13:29,839 Speaker 3: idealized farm out in the middle of nowhere, Like they 269 00:13:29,880 --> 00:13:32,560 Speaker 3: were away in the middle of nowhere, right, Like there 270 00:13:32,559 --> 00:13:34,760 Speaker 3: were no cars, there was nowhere. They couldn't drive to town. 271 00:13:34,800 --> 00:13:37,080 Speaker 3: They would walk to town, maybe hours world, maybe go 272 00:13:37,120 --> 00:13:39,760 Speaker 3: on a horse, and there'd be like one store. And 273 00:13:39,840 --> 00:13:42,800 Speaker 3: that store was expensive A because they didn't have any 274 00:13:42,800 --> 00:13:46,280 Speaker 3: competition and b because their costs were high. Right, it 275 00:13:46,320 --> 00:13:48,600 Speaker 3: was highly intermediated. There was no economy of scale. 276 00:13:48,840 --> 00:13:51,200 Speaker 1: Yeah. I mean, if you wanted to order cocaine wine, 277 00:13:51,240 --> 00:13:53,480 Speaker 1: like you'd have to stalk it, get it there, keep 278 00:13:53,480 --> 00:13:56,840 Speaker 1: it in the storeroom at the proper cocaine wine temperature. Yeah. 279 00:13:57,760 --> 00:14:00,800 Speaker 3: So you know, you're that farmer in eighteen ninety seven 280 00:14:00,840 --> 00:14:02,840 Speaker 3: and you want to buy your shotgun and your cocaine 281 00:14:02,880 --> 00:14:07,319 Speaker 3: wine and whatever else. You know, the celebrated ACME calvinized 282 00:14:07,360 --> 00:14:09,120 Speaker 3: steel mill uh acme. 283 00:14:09,240 --> 00:14:10,200 Speaker 1: There is an actual ACME. 284 00:14:10,280 --> 00:14:12,000 Speaker 3: You're like the wily coyote, but you're gonna use it 285 00:14:12,080 --> 00:14:14,080 Speaker 3: for the little propeller on your plane or something when 286 00:14:14,120 --> 00:14:14,880 Speaker 3: you go off the cliff. 287 00:14:15,080 --> 00:14:17,520 Speaker 1: And to make this clear, the way you ordered was 288 00:14:17,559 --> 00:14:19,760 Speaker 1: like a form. Yeah, something like a form. You would 289 00:14:19,800 --> 00:14:22,120 Speaker 1: like fill it out and then put a stamp on 290 00:14:22,160 --> 00:14:23,600 Speaker 1: it and send it out, put it in the mail. Yeah, 291 00:14:23,640 --> 00:14:25,920 Speaker 1: and they have all these instructions for how to order, 292 00:14:26,000 --> 00:14:29,080 Speaker 1: like for your clothing, you like, measure yourself and tell 293 00:14:29,080 --> 00:14:31,480 Speaker 1: them your size. They're they're teaching people how to use 294 00:14:31,520 --> 00:14:35,200 Speaker 1: a catalog. Also, here's here's a funny one. I actually 295 00:14:35,280 --> 00:14:37,320 Speaker 1: printed out the index as well, just so we could 296 00:14:37,360 --> 00:14:40,960 Speaker 1: look at it. This is the last page. It's page 297 00:14:41,160 --> 00:14:43,440 Speaker 1: what is it, page seven hundred. 298 00:14:43,160 --> 00:14:46,480 Speaker 3: And eighty six, And it says in like big letters, 299 00:14:46,520 --> 00:14:48,600 Speaker 3: big kind of circusy letters at the bottom. 300 00:14:48,600 --> 00:14:49,800 Speaker 1: Here you want to read a little bit of it. 301 00:14:49,840 --> 00:14:51,520 Speaker 1: Read a little bit of it. If you don't find 302 00:14:51,520 --> 00:14:53,360 Speaker 1: it under the name you are looking for, you may 303 00:14:53,400 --> 00:14:57,520 Speaker 1: find the article indexed under another name. Don't say it 304 00:14:57,600 --> 00:14:59,720 Speaker 1: isn't in the catalog. It's like it's yelling at you. 305 00:15:00,000 --> 00:15:02,200 Speaker 1: It really is. Ye, Like it's in big type. Look 306 00:15:02,440 --> 00:15:06,080 Speaker 1: carefully through the index. Under every name the article could 307 00:15:06,160 --> 00:15:09,160 Speaker 1: possibly be listed. Yeah. And if you look. 308 00:15:09,040 --> 00:15:11,160 Speaker 3: Even here, so this is this what you're reading is 309 00:15:11,160 --> 00:15:13,840 Speaker 3: on the like last half of a page of the index. 310 00:15:14,080 --> 00:15:16,880 Speaker 3: And if you look, there's like a bunch of whiffle 311 00:15:16,920 --> 00:15:17,960 Speaker 3: tree related goods. 312 00:15:18,000 --> 00:15:18,560 Speaker 1: Where did those go? 313 00:15:18,640 --> 00:15:22,880 Speaker 3: Yeah, whiffle tree Coupling's, whiffletree hooks, whiffle tree plates. 314 00:15:23,440 --> 00:15:24,000 Speaker 1: I looked it up. 315 00:15:24,000 --> 00:15:26,520 Speaker 3: A whiffle tree is like, uh, something that goes to 316 00:15:26,680 --> 00:15:31,000 Speaker 3: like put hook horses to your buggy. Basically yeaste yellow paper. 317 00:15:31,400 --> 00:15:34,680 Speaker 3: So a lot of zither related things, not just nithers, 318 00:15:34,760 --> 00:15:38,720 Speaker 3: but zither brushes. Zi there's a stringed instrument. Understand that 319 00:15:38,760 --> 00:15:39,880 Speaker 3: it's very popular at the time. 320 00:15:39,960 --> 00:15:41,760 Speaker 1: Yeah, the zither. Yeah, it was like the place they 321 00:15:41,760 --> 00:15:44,280 Speaker 1: should five of a You got to wait in line 322 00:15:44,320 --> 00:15:46,000 Speaker 1: for a zither, right, and you know not if you 323 00:15:46,120 --> 00:15:50,440 Speaker 1: ordered from Sears. Apparently thither picks right. Sears is selling. 324 00:15:50,320 --> 00:15:53,880 Speaker 3: By this point everything, right, Like he's selling this this 325 00:15:54,040 --> 00:15:56,920 Speaker 3: cornucopia like in the picture that people could not have imagined, 326 00:15:56,960 --> 00:16:00,360 Speaker 3: you know, a generation before. This is the like consumer 327 00:16:00,760 --> 00:16:02,960 Speaker 3: miracle of its day. So this is what it's like 328 00:16:03,040 --> 00:16:05,240 Speaker 3: from the farmer's point of view. Let's go back to Chicago. 329 00:16:05,320 --> 00:16:09,520 Speaker 3: Let's talk about what's happening at headquarters in Chicago. Yeah, 330 00:16:09,560 --> 00:16:12,160 Speaker 3: because it's one thing to create the demand, and there 331 00:16:12,160 --> 00:16:14,960 Speaker 3: clearly good at doing that. But to be an effective business, 332 00:16:15,000 --> 00:16:17,520 Speaker 3: you also have to establish the supply. You have to 333 00:16:17,680 --> 00:16:21,120 Speaker 3: actually get these products to send them to the people, right, Yeah, 334 00:16:21,160 --> 00:16:24,280 Speaker 3: and Sears is starting to have this problem that is 335 00:16:24,360 --> 00:16:27,320 Speaker 3: a classic problem of a sales driven business. Right sears, 336 00:16:27,520 --> 00:16:31,560 Speaker 3: the man is very much a salesman. He just wants 337 00:16:31,680 --> 00:16:34,200 Speaker 3: to write catalog copy that I'll make farmers buy stuff, 338 00:16:34,240 --> 00:16:35,560 Speaker 3: and he is gifted at doing that. 339 00:16:36,320 --> 00:16:38,600 Speaker 1: But they don't always have the stuff. They do not 340 00:16:38,840 --> 00:16:40,960 Speaker 1: have a warehouse full of zithers. Not always. 341 00:16:41,040 --> 00:16:43,680 Speaker 3: And so he's running around like there's a bike boom. 342 00:16:43,720 --> 00:16:46,360 Speaker 3: He's investing in bike factories so that the suppliers can 343 00:16:46,440 --> 00:16:50,400 Speaker 3: make more bikes. He's selling suits for ten dollars, gets 344 00:16:50,400 --> 00:16:52,840 Speaker 3: all these ten dollars suit orders in and then it's like, 345 00:16:53,160 --> 00:16:54,440 Speaker 3: wait a minute, where are we going to get a 346 00:16:54,440 --> 00:16:58,120 Speaker 3: bunch of ten dollars suits? And this suit thing is real, 347 00:16:58,200 --> 00:16:59,880 Speaker 3: and it ends up being important for the whole life 348 00:16:59,920 --> 00:17:04,440 Speaker 3: of the company because one day he needs suits, and 349 00:17:04,520 --> 00:17:06,719 Speaker 3: in his frantic way, he goes into the shop of 350 00:17:06,760 --> 00:17:11,360 Speaker 3: this guy named Julius Rosenwald, a guy who manufactures suits 351 00:17:11,520 --> 00:17:14,880 Speaker 3: in Chico. Normally, when people come into Rosenwald's shop and 352 00:17:14,880 --> 00:17:17,760 Speaker 3: their wholesale buyers, they'll look at one, they'll examine it, 353 00:17:17,880 --> 00:17:20,400 Speaker 3: they'll think for a long time, and series. 354 00:17:20,080 --> 00:17:22,760 Speaker 1: It is like suits, I need suits, Give me suits, 355 00:17:22,880 --> 00:17:24,760 Speaker 1: hundreds of suits. And by the way, I need them 356 00:17:24,760 --> 00:17:26,560 Speaker 1: at a good price because I'm buying hundreds of them, 357 00:17:26,600 --> 00:17:30,480 Speaker 1: that's right, and I need them now. And Rosenwald gets interested. 358 00:17:30,520 --> 00:17:32,720 Speaker 1: Actually it's like, oh this is there's some action. 359 00:17:32,680 --> 00:17:35,639 Speaker 3: Here, and winds up working more and more with Serrus 360 00:17:35,640 --> 00:17:38,240 Speaker 3: selling in a lot of suits, and eventually joins the 361 00:17:38,359 --> 00:17:42,440 Speaker 3: company as vice president and is a really good kind 362 00:17:42,480 --> 00:17:47,320 Speaker 3: of compliment to Sears kind of manic salesmanship. Rosenwald is 363 00:17:47,400 --> 00:17:50,720 Speaker 3: the much more sort of plotting, like, let's turn this 364 00:17:50,800 --> 00:17:51,840 Speaker 3: into a real business. 365 00:17:52,119 --> 00:17:54,440 Speaker 1: Oh, this is like when you bring in the grown 366 00:17:54,520 --> 00:17:58,000 Speaker 1: ups into a startup. Literally you're bringing in a suit. 367 00:17:58,480 --> 00:18:01,280 Speaker 1: The suit maker is coming in wearing a suit. I 368 00:18:01,359 --> 00:18:04,440 Speaker 1: assume to make sure that the book's balance and you 369 00:18:04,520 --> 00:18:05,879 Speaker 1: have logistics and all that's right. 370 00:18:06,200 --> 00:18:07,840 Speaker 3: And the company is growing so fast, right, it's a 371 00:18:07,880 --> 00:18:10,920 Speaker 3: classic challenge at a rocket ship company that sales have 372 00:18:11,000 --> 00:18:14,560 Speaker 3: gone from under five hundred thousand dollars in eighteen ninety 373 00:18:14,640 --> 00:18:19,000 Speaker 3: five to ten million in nineteen hundred wow, to thirty 374 00:18:19,119 --> 00:18:22,679 Speaker 3: eight million by nineteen oh five. So that's more than 375 00:18:22,720 --> 00:18:25,520 Speaker 3: a billion dollars in today's money. It's like eighty x 376 00:18:25,640 --> 00:18:29,760 Speaker 3: growth in ten years. And you know it is still 377 00:18:29,880 --> 00:18:34,080 Speaker 3: despite Rosenwald's best efforts chaos, right, Like they got this 378 00:18:34,240 --> 00:18:37,520 Speaker 3: headquarters in Chicago where there's like huge bags of mail 379 00:18:37,600 --> 00:18:40,359 Speaker 3: with the orders. Obviously there's no computers or anything, and 380 00:18:40,560 --> 00:18:43,840 Speaker 3: like returns are piling up and there's like horse drawn 381 00:18:44,000 --> 00:18:49,159 Speaker 3: buggy traffic jams outside the office. And so Rosenwald decides, 382 00:18:49,840 --> 00:18:52,200 Speaker 3: we need to get our logistics in order, and to 383 00:18:52,320 --> 00:18:55,439 Speaker 3: do that, now we do need capital. Now we need 384 00:18:55,600 --> 00:19:01,720 Speaker 3: real investors, and so he sets up an IPO for 385 00:19:01,800 --> 00:19:04,800 Speaker 3: the company. They go public in nineteen oh six, ticker 386 00:19:04,840 --> 00:19:07,320 Speaker 3: symbol S with like twenty. 387 00:19:07,119 --> 00:19:11,280 Speaker 1: Six companies as a time r S the IPO itself. 388 00:19:11,400 --> 00:19:13,760 Speaker 3: I mentioned it because I think it's actually an important 389 00:19:14,640 --> 00:19:17,680 Speaker 3: moment in business history. I think it's an important milestone 390 00:19:17,920 --> 00:19:20,880 Speaker 3: for the American economy because if you think of big 391 00:19:21,080 --> 00:19:23,320 Speaker 3: publicly traded companies at this time, I mean, first there 392 00:19:23,400 --> 00:19:26,080 Speaker 3: was the railroads, right where big there was US Steel, 393 00:19:26,200 --> 00:19:32,119 Speaker 3: there's National Lead. These are all companies that have big factories. 394 00:19:32,280 --> 00:19:34,480 Speaker 3: They make heavy things, They make things that you know 395 00:19:34,680 --> 00:19:37,160 Speaker 3: are physical. If you drop them on your foot, they hurt. 396 00:19:37,320 --> 00:19:39,720 Speaker 1: And they have these huge assets. Right if something should 397 00:19:39,720 --> 00:19:41,800 Speaker 1: go wrong with the company, well, you own part of 398 00:19:41,880 --> 00:19:44,840 Speaker 1: a factory, right, You're part of a railroad. But at 399 00:19:44,880 --> 00:19:48,760 Speaker 1: this point Sears is more of a it's a brand, definitely, 400 00:19:48,880 --> 00:19:51,480 Speaker 1: and it's more of a network of relationships. 401 00:19:51,600 --> 00:19:53,680 Speaker 3: Right, maybe a mailing list, a mailing list is not 402 00:19:53,760 --> 00:19:56,399 Speaker 3: a business at this time, right, but it is now 403 00:19:56,520 --> 00:19:57,040 Speaker 3: I guess right. 404 00:19:57,160 --> 00:20:00,200 Speaker 1: Yeah, they're conduit for the buyers and the cellars. Yeah. Yeah. 405 00:20:00,240 --> 00:20:04,040 Speaker 3: And it's a sign of increasing wealth in America, increasing 406 00:20:04,119 --> 00:20:04,840 Speaker 3: consumer wealth. 407 00:20:04,960 --> 00:20:06,240 Speaker 1: Right. It means this is not just. 408 00:20:06,359 --> 00:20:09,639 Speaker 3: Heavy industry selling to other heavy industry so that trains 409 00:20:09,720 --> 00:20:13,040 Speaker 3: can move, you know, food and cotton. It means people 410 00:20:13,119 --> 00:20:18,480 Speaker 3: are buying zithers and cocaine. So now Sears Rosenweld, they 411 00:20:18,520 --> 00:20:22,360 Speaker 3: have this influx of capital from the IPO and they're 412 00:20:22,440 --> 00:20:25,639 Speaker 3: able to build out a new headquarters. And it is 413 00:20:26,200 --> 00:20:32,400 Speaker 3: again Amazon like this incredible logistics facility, biggest logistics facility 414 00:20:32,400 --> 00:20:34,640 Speaker 3: in the world, forty acres out on the west side 415 00:20:34,640 --> 00:20:39,080 Speaker 3: of Chicago. And of course, of course Sears wrote about 416 00:20:39,119 --> 00:20:40,120 Speaker 3: it in the catalog. 417 00:20:40,440 --> 00:20:43,399 Speaker 1: Give us what he wrote, Oh, here we go. This 418 00:20:43,560 --> 00:20:47,520 Speaker 1: is describing what they have in this logistics facility. Elevators, 419 00:20:47,800 --> 00:20:53,680 Speaker 1: mechanical conveyors, endless chains, moving sidewalks, gravity shoots, apparatus and 420 00:20:53,800 --> 00:20:58,440 Speaker 1: conveyors pneumatic tubes, and every known mechanical appliance for reducing labor, 421 00:20:58,760 --> 00:21:01,480 Speaker 1: for the working out of economy and dispatch is to 422 00:21:01,560 --> 00:21:06,399 Speaker 1: be utilized here in our great works. No, no, no, no, no, no. 423 00:21:07,000 --> 00:21:11,160 Speaker 1: This is amazing because it's doing something that I don't 424 00:21:11,160 --> 00:21:13,080 Speaker 1: think companies really he did back in those days, which 425 00:21:13,119 --> 00:21:15,119 Speaker 1: is to give you an insight into the company in 426 00:21:15,240 --> 00:21:18,000 Speaker 1: order to say, look at all we're doing to make 427 00:21:18,520 --> 00:21:20,960 Speaker 1: your life better, to make your products cheaper, and to 428 00:21:21,000 --> 00:21:22,280 Speaker 1: get them to you faster. Yes. 429 00:21:22,600 --> 00:21:28,639 Speaker 3: Yes, they are advertising themselves in a very direct an 430 00:21:28,640 --> 00:21:31,560 Speaker 3: appealing way, I'm going to say, and in fact it works. Right. 431 00:21:32,240 --> 00:21:36,240 Speaker 3: They are able in this new facility to get orders 432 00:21:36,680 --> 00:21:39,240 Speaker 3: out the door within forty eight hours of the time 433 00:21:39,280 --> 00:21:40,800 Speaker 3: the order comes in. It doesn't mean they get to 434 00:21:40,920 --> 00:21:42,600 Speaker 3: you in forty eight hours, yeah, of course, but it 435 00:21:42,840 --> 00:21:45,560 Speaker 3: is kind of the nineteenth century Amazon Prime, right, that's 436 00:21:45,560 --> 00:21:49,159 Speaker 3: a really Amazon Prime vibe. So revenues keep going up. 437 00:21:49,280 --> 00:21:54,000 Speaker 3: Sere's the company is doing great. Sere's the man not 438 00:21:54,160 --> 00:21:57,959 Speaker 3: so great. His health is failing. He retires in nineteen 439 00:21:58,000 --> 00:22:02,080 Speaker 3: oh eight, and in nineteen fourteen, at age fifty, he 440 00:22:02,240 --> 00:22:06,760 Speaker 3: dies of kidney disease. But Rosenwald is a steady hand. 441 00:22:06,800 --> 00:22:10,320 Speaker 3: He's running the company at this point, growing, selling more. 442 00:22:11,200 --> 00:22:12,720 Speaker 3: This is the point when you can actually buy a 443 00:22:12,760 --> 00:22:15,000 Speaker 3: whole house from Sears, which was a thing for a while. 444 00:22:15,040 --> 00:22:16,800 Speaker 1: They put it together. 445 00:22:16,840 --> 00:22:18,640 Speaker 3: You can still see them, you can still see them. 446 00:22:19,320 --> 00:22:24,640 Speaker 3: And in the nineteen twenties, few years later, Rosenwald makes 447 00:22:24,640 --> 00:22:27,200 Speaker 3: a brilliant move, the next key move for the future 448 00:22:27,240 --> 00:22:30,879 Speaker 3: of the company. He hires this guy who is going 449 00:22:30,960 --> 00:22:34,600 Speaker 3: to fundamentally change the business and will set Sears up 450 00:22:34,760 --> 00:22:38,800 Speaker 3: to grow for the next like fifty years after the break, 451 00:22:39,720 --> 00:22:43,320 Speaker 3: here comes to General, Oh, General Robert Wood. 452 00:23:09,160 --> 00:23:13,040 Speaker 1: Those were the ads from the greatest Advertised on Earth. 453 00:23:13,640 --> 00:23:14,400 Speaker 1: Now back to the show. 454 00:23:15,760 --> 00:23:20,960 Speaker 3: So the guy Rosenwald hires is named General Robert Wood 455 00:23:21,840 --> 00:23:25,800 Speaker 3: was a brigadier general, not like some Kentucky colonel graduated 456 00:23:25,800 --> 00:23:27,960 Speaker 3: from West Point, although he was more of like a 457 00:23:28,080 --> 00:23:32,119 Speaker 3: supplies general than a shooting general. Helped build the Panama Canal, 458 00:23:32,400 --> 00:23:36,000 Speaker 3: big deal. Became quartermaster general during World War One. 459 00:23:36,280 --> 00:23:38,680 Speaker 1: Anyone could get a zither across the country in a 460 00:23:38,720 --> 00:23:41,399 Speaker 1: few weeks. He can do it, yes, yes, perfect. So 461 00:23:42,119 --> 00:23:42,919 Speaker 1: after World War. 462 00:23:42,840 --> 00:23:45,920 Speaker 3: One, the General's working at Montgomery Ward right, this other 463 00:23:46,240 --> 00:23:47,080 Speaker 3: mail order company. 464 00:23:47,680 --> 00:23:49,440 Speaker 1: It's kind of Pepsi to sears coke. 465 00:23:50,320 --> 00:23:53,840 Speaker 3: And today we would call the general a data guy 466 00:23:55,040 --> 00:23:58,080 Speaker 3: or a data guy, if that's your thing. He loved 467 00:23:58,119 --> 00:24:01,560 Speaker 3: to read the Statistical Abstract of the United States. Dear 468 00:24:01,640 --> 00:24:04,720 Speaker 3: to my heart, I love him already. And as he's 469 00:24:04,800 --> 00:24:07,639 Speaker 3: reading the Statistical Abstract of the United States in the 470 00:24:07,760 --> 00:24:09,879 Speaker 3: nineteen twenties, he sees something. 471 00:24:09,720 --> 00:24:10,679 Speaker 1: Really clear. 472 00:24:12,960 --> 00:24:16,760 Speaker 3: That those core catalog customers of Montgomery Ward. 473 00:24:16,640 --> 00:24:19,760 Speaker 1: And Seers are disappearing. They're moving to the cities. They 474 00:24:19,800 --> 00:24:22,359 Speaker 1: are moving to the cities, and they're getting. 475 00:24:22,200 --> 00:24:26,600 Speaker 3: Cars, ah, and so they have access to stores exactly exactly. 476 00:24:27,080 --> 00:24:32,200 Speaker 3: And so Wood says to the other executives at Montgomery Ward, 477 00:24:32,560 --> 00:24:34,639 Speaker 3: this is happening. I can see it in the data. 478 00:24:35,440 --> 00:24:38,040 Speaker 3: We need to start building stores. And the people at 479 00:24:38,080 --> 00:24:41,600 Speaker 3: Montgomery Ward say a classic thing that successful business people say. 480 00:24:41,680 --> 00:24:45,520 Speaker 3: They say, no, like, we've got this very successful catalog 481 00:24:45,600 --> 00:24:48,240 Speaker 3: business that would cannibalize our sales. We would just be 482 00:24:48,640 --> 00:24:51,760 Speaker 3: eating into our own sales. It wouldn't be efficient. And 483 00:24:52,160 --> 00:24:54,800 Speaker 3: Wood says, well, somebody's going to eat into our sales. 484 00:24:54,840 --> 00:24:57,720 Speaker 3: If it's not us, somebody else will. And he ends 485 00:24:57,800 --> 00:25:00,560 Speaker 3: up talking to Julius Rosenwald over at Sears, and Julius 486 00:25:00,640 --> 00:25:05,480 Speaker 3: Rosenwald thinks the General is onto something. And so Rosenwald hires. 487 00:25:05,920 --> 00:25:07,359 Speaker 1: Would got to. 488 00:25:07,359 --> 00:25:08,920 Speaker 3: Decide if I'm gonna call them the general or would 489 00:25:09,920 --> 00:25:12,320 Speaker 3: doesn't matter. I think you should call them the General's awesome. Yeah, 490 00:25:12,320 --> 00:25:17,080 Speaker 3: So Rosenwald hires the General. Yes, and the General starts 491 00:25:17,119 --> 00:25:20,080 Speaker 3: building Seers stores. So at the time, department stores were 492 00:25:20,280 --> 00:25:22,600 Speaker 3: already a thing. Actually they are a big new thing 493 00:25:22,720 --> 00:25:24,119 Speaker 3: right right in the center of cities. 494 00:25:24,160 --> 00:25:26,960 Speaker 1: You had Macy's and Wanamakers, and people would make a 495 00:25:27,040 --> 00:25:29,600 Speaker 1: day of it and go into the city and shop there. 496 00:25:29,800 --> 00:25:30,200 Speaker 1: That's right. 497 00:25:30,320 --> 00:25:33,159 Speaker 3: And so these sorts had been around for decades at 498 00:25:33,200 --> 00:25:36,920 Speaker 3: this point, right since the eighteen hundreds. But would he 499 00:25:37,040 --> 00:25:40,040 Speaker 3: has in mind something different. And again again it's sort 500 00:25:40,040 --> 00:25:44,080 Speaker 3: of his insight into statistics is giving him business insight, 501 00:25:44,160 --> 00:25:47,600 Speaker 3: and that is this. Those stores were downtown because they 502 00:25:47,600 --> 00:25:49,760 Speaker 3: were built in the eighteen hundreds, and you've got to 503 00:25:49,760 --> 00:25:51,680 Speaker 3: put the store where all the foot traffic is, where 504 00:25:51,760 --> 00:25:54,200 Speaker 3: the all the trains, you know, the commuter trains go. 505 00:25:54,840 --> 00:25:58,720 Speaker 3: But now because people are buying cars, you don't have 506 00:25:58,880 --> 00:26:01,520 Speaker 3: to do that, and you shouldn't do that. He realized 507 00:26:01,560 --> 00:26:05,159 Speaker 3: that what you should do is you should put the 508 00:26:05,240 --> 00:26:07,919 Speaker 3: store out on the edge of town where land is cheaper. 509 00:26:08,119 --> 00:26:11,320 Speaker 3: You can put parking places for people's new cars around. 510 00:26:11,040 --> 00:26:13,120 Speaker 1: It, and you can sell much heavier things. If you're 511 00:26:13,119 --> 00:26:15,040 Speaker 1: going to the city, you could buy a dress or 512 00:26:15,080 --> 00:26:17,280 Speaker 1: a shirt and carry them in bags. But once you're 513 00:26:17,359 --> 00:26:19,840 Speaker 1: out on the outskirts of the city and you're driving there, 514 00:26:19,880 --> 00:26:24,400 Speaker 1: I mean you can sell tires, hardware, yes, appliances, yes, 515 00:26:24,600 --> 00:26:26,320 Speaker 1: hard goods, right, hard goods. 516 00:26:26,359 --> 00:26:29,440 Speaker 3: Your old line department stores sell soft goods, clothing, that 517 00:26:29,560 --> 00:26:30,000 Speaker 3: sort of thing. 518 00:26:30,359 --> 00:26:31,280 Speaker 1: Things that are hard. 519 00:26:32,240 --> 00:26:36,200 Speaker 3: Drills you sell at Sears, and so Wood starts doing this. 520 00:26:36,359 --> 00:26:38,920 Speaker 3: And if you think, think about the timing, right, like 521 00:26:39,640 --> 00:26:42,560 Speaker 3: it becomes obvious. We think of this in the post 522 00:26:42,640 --> 00:26:45,520 Speaker 3: war boom, right, I think of this mall out on 523 00:26:45,600 --> 00:26:47,600 Speaker 3: the edge of town with the giant parking lot that, 524 00:26:47,760 --> 00:26:50,520 Speaker 3: in my mind is a creature of the nineteen fifties 525 00:26:50,560 --> 00:26:54,399 Speaker 3: and sixties, right, the post war suburban boom. The general 526 00:26:54,520 --> 00:26:58,080 Speaker 3: is getting ready for this, right, It's incredible how insightful 527 00:26:58,119 --> 00:27:01,600 Speaker 3: it is. And so once the general is there, Sears 528 00:27:01,680 --> 00:27:07,280 Speaker 3: starts building stores in this mad rush. In nineteen twenty eight, 529 00:27:07,680 --> 00:27:11,600 Speaker 3: they have twenty seven stores. A year later they have 530 00:27:11,800 --> 00:27:15,840 Speaker 3: three hundred and twenty four, they are pretty quickly getting 531 00:27:15,920 --> 00:27:18,639 Speaker 3: more revenue from the stores than from the catalog. The 532 00:27:18,720 --> 00:27:22,400 Speaker 3: depression hits, but they're still growing. In nineteen thirty two, 533 00:27:22,560 --> 00:27:24,919 Speaker 3: they actually open a store in Brooklyn, and it's such 534 00:27:24,960 --> 00:27:27,720 Speaker 3: a big deal that Eleanor Roosevelt, who's about to be 535 00:27:27,800 --> 00:27:30,040 Speaker 3: the first lady, shows up, makes the first purchase. 536 00:27:30,240 --> 00:27:32,120 Speaker 1: Wow, is this down by us where we live. There's 537 00:27:32,160 --> 00:27:35,840 Speaker 1: a giant Sears facility there out on flat black push, 538 00:27:35,880 --> 00:27:38,240 Speaker 1: aage I guess was the edge of town at that time. 539 00:27:38,320 --> 00:27:43,280 Speaker 1: Of course, now there's an interesting new problem that is 540 00:27:43,359 --> 00:27:47,800 Speaker 1: arising for Sears, and that is this, when you're selling 541 00:27:47,880 --> 00:27:49,920 Speaker 1: from an eight hundred page catalog, and you have the 542 00:27:49,960 --> 00:27:52,960 Speaker 1: biggest logistics facility in the world in Chicago, and you 543 00:27:53,040 --> 00:27:55,560 Speaker 1: know a couple of other sort of hubs around the country. 544 00:27:56,600 --> 00:27:58,800 Speaker 1: You can just have everything in the catalog and send 545 00:27:58,880 --> 00:28:02,840 Speaker 1: everybody everything. But no store is big enough. 546 00:28:02,760 --> 00:28:05,159 Speaker 3: To hold everything in the catalog. It just wouldn't work 547 00:28:05,200 --> 00:28:08,080 Speaker 3: as a business. So the question now, the problem now 548 00:28:08,320 --> 00:28:11,960 Speaker 3: is how do you figure out what each store should 549 00:28:12,040 --> 00:28:13,320 Speaker 3: would stock on the shelf? 550 00:28:13,800 --> 00:28:15,720 Speaker 1: Yeah, and I think the traditional company would look at 551 00:28:15,760 --> 00:28:18,760 Speaker 1: their best sellers. Right, you have the data I assume 552 00:28:18,840 --> 00:28:20,680 Speaker 1: from all across the country. So you would just list 553 00:28:20,760 --> 00:28:23,520 Speaker 1: your best sellers and you'd stalk those and you know, 554 00:28:23,760 --> 00:28:25,920 Speaker 1: you maybe put copies of the catalog around the store 555 00:28:25,920 --> 00:28:27,240 Speaker 1: in case you wanted something small. 556 00:28:27,400 --> 00:28:30,719 Speaker 3: Yes, yes, but you know, the US economy is pretty 557 00:28:31,280 --> 00:28:34,840 Speaker 3: heterogeneous still at this time. Different people in different places 558 00:28:34,880 --> 00:28:39,880 Speaker 3: are buying different things, and data collection isn't that robust yet, right, 559 00:28:39,960 --> 00:28:41,000 Speaker 3: there's no computers. 560 00:28:41,480 --> 00:28:43,240 Speaker 1: And also this is really interesting. 561 00:28:43,360 --> 00:28:48,800 Speaker 3: The General, he is a man who loves the free 562 00:28:48,880 --> 00:28:52,440 Speaker 3: market and hates communism, like a good American general, and 563 00:28:52,840 --> 00:28:56,360 Speaker 3: he thinks like this, having headquarters dictate to each store 564 00:28:56,440 --> 00:28:59,080 Speaker 3: what they sell, that feels like a command and control 565 00:28:59,200 --> 00:29:02,440 Speaker 3: economy communists. It feels communist. It feels like the way 566 00:29:02,480 --> 00:29:03,960 Speaker 3: they do things in the Soviet Union. 567 00:29:04,120 --> 00:29:07,800 Speaker 1: And they've just had a Communist revolution while in nineteen seventeen, right, 568 00:29:08,040 --> 00:29:10,720 Speaker 1: and they're a little worried because there's the labor movement 569 00:29:10,720 --> 00:29:12,800 Speaker 1: in the United States, the Red of the twenty. 570 00:29:12,880 --> 00:29:15,360 Speaker 3: So the General does seem to be thinking about it 571 00:29:15,440 --> 00:29:17,600 Speaker 3: this way, and he decides he's going to have a 572 00:29:17,800 --> 00:29:21,880 Speaker 3: sort of a quasi free market economy within seers to 573 00:29:22,040 --> 00:29:24,680 Speaker 3: let the people running each store decide what to sell, 574 00:29:24,720 --> 00:29:27,400 Speaker 3: and he actually puts it in these kind of proto 575 00:29:27,520 --> 00:29:30,320 Speaker 3: Cold War terms. He says at one point to a 576 00:29:30,320 --> 00:29:34,160 Speaker 3: group of Seers employees, we have deliberately tried to treat 577 00:29:34,200 --> 00:29:38,200 Speaker 3: you as free, independent merchants. We have endeavored in a 578 00:29:38,320 --> 00:29:43,600 Speaker 3: chain store system to have a cooperative democracy, which is 579 00:29:43,640 --> 00:29:46,320 Speaker 3: weird and not really what's going on. It's not like 580 00:29:46,360 --> 00:29:48,680 Speaker 3: they're voting for who's going to run the company. 581 00:29:48,480 --> 00:29:51,080 Speaker 1: But it is very practical. If you can't sell hammocks 582 00:29:51,120 --> 00:29:54,240 Speaker 1: in Minnesota, then you shouldn't stock hammocks in Minnesota. And 583 00:29:54,320 --> 00:29:55,600 Speaker 1: only a Minnesota would know that. 584 00:29:56,120 --> 00:29:58,440 Speaker 3: That's I mean, maybe they would know it in Chicago, 585 00:29:58,440 --> 00:29:59,240 Speaker 3: would you put it that way? 586 00:29:59,320 --> 00:30:01,440 Speaker 1: But he does create this. 587 00:30:01,840 --> 00:30:06,840 Speaker 3: Pretty nice system of incentives where the store managers are 588 00:30:07,000 --> 00:30:11,880 Speaker 3: rewarded for selling more, of course, but also less obviously 589 00:30:12,560 --> 00:30:15,960 Speaker 3: the buyers at headquarters they can buy whatever they want, 590 00:30:16,000 --> 00:30:18,720 Speaker 3: they have their sort of freedom, but then they have 591 00:30:18,920 --> 00:30:21,400 Speaker 3: to sell it to the managers, right, They are rewarded 592 00:30:21,840 --> 00:30:26,560 Speaker 3: for selling through what they buy, and you do end 593 00:30:26,640 --> 00:30:29,240 Speaker 3: up getting some weird sort of quasi kickbacks in the system, 594 00:30:29,240 --> 00:30:31,520 Speaker 3: where like you'll have the buyer sort of funneling money 595 00:30:31,560 --> 00:30:34,000 Speaker 3: to the managers to advertise their product and that kind 596 00:30:34,000 --> 00:30:38,800 Speaker 3: of thing. But overall, it's a pretty good system of incentives, 597 00:30:39,360 --> 00:30:44,960 Speaker 3: and certainly it works. Sears keeps growing, keeps building more 598 00:30:45,040 --> 00:30:48,520 Speaker 3: profitable stores, you know, after World War Two. It is 599 00:30:48,600 --> 00:30:50,920 Speaker 3: set up perfectly for the post war boom, like we 600 00:30:51,040 --> 00:30:56,520 Speaker 3: were talking about, so that by the nineteen sixties, every quarter, 601 00:30:56,720 --> 00:31:01,160 Speaker 3: every three months, two thirds of Americans shop at Sears. 602 00:31:01,400 --> 00:31:02,640 Speaker 1: I mean, that's amazing, it's stunning. 603 00:31:02,720 --> 00:31:05,520 Speaker 3: Yeah, it is comparable, I think to the share of 604 00:31:05,520 --> 00:31:07,640 Speaker 3: Americans who have Amazon Prime today. So the sort of 605 00:31:07,800 --> 00:31:11,320 Speaker 3: ubiquity of Amazon today, that is where Sears was. And 606 00:31:11,560 --> 00:31:16,760 Speaker 3: in nineteen seventy Series announces they're gonna build a new headquarters, 607 00:31:17,040 --> 00:31:19,320 Speaker 3: still in Chicago, although this is like the office part, 608 00:31:19,360 --> 00:31:21,800 Speaker 3: so they're gonna put it downtown, and they're gonna build 609 00:31:22,400 --> 00:31:26,160 Speaker 3: the tallest building in the world, which seems only appropriate 610 00:31:26,240 --> 00:31:28,800 Speaker 3: for the biggest retailer in the world. It's gonna be 611 00:31:28,800 --> 00:31:31,680 Speaker 3: one hundred and ten stories high. And to start, Sears 612 00:31:31,720 --> 00:31:34,479 Speaker 3: plan is, okay, we'll rent some space to other companies 613 00:31:34,480 --> 00:31:37,040 Speaker 3: at the beginning, but they figure they're you know, extrapolating 614 00:31:37,080 --> 00:31:39,640 Speaker 3: their growth, and they figure by the year two thousand, 615 00:31:40,440 --> 00:31:43,080 Speaker 3: Series will be so big that Sears employees will fill 616 00:31:43,160 --> 00:31:46,040 Speaker 3: the entire one hundred and ten story building. 617 00:31:47,840 --> 00:31:51,840 Speaker 1: Obviously, Hubris Hubris. Before the fall, they're like, who will 618 00:31:51,920 --> 00:31:54,040 Speaker 1: be bigger than us? In the year two thousand? 619 00:31:54,480 --> 00:31:57,080 Speaker 3: Fall of Icarus like literally going to the sky. 620 00:31:57,200 --> 00:31:59,920 Speaker 1: It every time, it happens every time. 621 00:32:00,000 --> 00:32:01,520 Speaker 3: All right, we're gonna take a break and then we're 622 00:32:01,520 --> 00:32:01,960 Speaker 3: gonna do the. 623 00:32:01,960 --> 00:32:03,760 Speaker 1: Fall of Sears. It's all downhill from here. 624 00:32:26,640 --> 00:32:30,320 Speaker 3: So here's one version of the story of the fall 625 00:32:30,360 --> 00:32:34,480 Speaker 3: of Sears. Sears was built on the middle class, you 626 00:32:34,560 --> 00:32:40,240 Speaker 3: know middle America middle class, first farmers in the nineteenth century, 627 00:32:40,280 --> 00:32:42,000 Speaker 3: and then in the twentieth century it was you know, 628 00:32:42,520 --> 00:32:46,760 Speaker 3: blue collar families with factory jobs. And when those jobs 629 00:32:46,760 --> 00:32:50,560 Speaker 3: started to go away in the nineteen seventies, Sears started 630 00:32:50,600 --> 00:32:55,640 Speaker 3: its decline. And that is very elegant for the sort 631 00:32:55,680 --> 00:32:58,360 Speaker 3: of Sears as the story of Americas as a John 632 00:32:58,400 --> 00:33:02,440 Speaker 3: Cougar Mellencamp song. But I don't think I don't think 633 00:33:02,480 --> 00:33:03,240 Speaker 3: it really holds up. 634 00:33:03,280 --> 00:33:04,920 Speaker 1: I don't think it really fits the facts. 635 00:33:05,600 --> 00:33:09,400 Speaker 3: I think in fact, Sears was built on mastery of 636 00:33:09,600 --> 00:33:15,280 Speaker 3: new technologies, you know, first of railroad and then the automobile, 637 00:33:15,680 --> 00:33:19,960 Speaker 3: and also an understanding of where America was headed right 638 00:33:20,280 --> 00:33:22,200 Speaker 3: again with those sort of building stores on the edge 639 00:33:22,200 --> 00:33:27,040 Speaker 3: of town. And America, of course kept changing and technology 640 00:33:27,120 --> 00:33:31,200 Speaker 3: kept changing, and Sears failed to keep up. And specifically, 641 00:33:31,320 --> 00:33:35,080 Speaker 3: one specific change I want to talk about is the interstate, 642 00:33:35,160 --> 00:33:38,640 Speaker 3: actually the Interstate Highway system, which you know, I think 643 00:33:38,720 --> 00:33:41,720 Speaker 3: Eisenhower signed that law in the fifties and the interstates 644 00:33:41,720 --> 00:33:44,560 Speaker 3: were getting built out, you know, into the sixties. And 645 00:33:45,160 --> 00:33:48,960 Speaker 3: when this happened, Sears did not feel compelled to say, oh, 646 00:33:49,400 --> 00:33:51,120 Speaker 3: this is going to be a profound shift in the 647 00:33:51,160 --> 00:33:53,760 Speaker 3: way goods move in America and the way people move 648 00:33:53,800 --> 00:33:56,600 Speaker 3: in America. They were like, Wow, we're the biggest company 649 00:33:56,640 --> 00:33:58,640 Speaker 3: in the world, We're building the biggest building in the world. 650 00:33:58,720 --> 00:34:01,440 Speaker 1: We don't need to we don't need to transform ourselves. 651 00:34:02,880 --> 00:34:06,280 Speaker 3: But there was this little company in Bentonville, Arkansas. 652 00:34:06,920 --> 00:34:08,040 Speaker 1: How is that even possible? 653 00:34:08,120 --> 00:34:11,200 Speaker 3: How is that even possible that realized that interstates would 654 00:34:11,200 --> 00:34:12,200 Speaker 3: completely change. 655 00:34:12,520 --> 00:34:16,800 Speaker 1: Retail in America. Walmart, Wall fucking Mart. Don't have to 656 00:34:16,840 --> 00:34:19,560 Speaker 1: be in downtown, don't have to be on the outskirts 657 00:34:19,600 --> 00:34:22,160 Speaker 1: of town. You can be in the middle of freaking 658 00:34:22,440 --> 00:34:24,360 Speaker 1: nowhere and people will come to you. 659 00:34:24,600 --> 00:34:26,520 Speaker 3: Yeah, just put the story next to the freeway exit 660 00:34:26,840 --> 00:34:32,719 Speaker 3: and furthermore, furthermore, your logistics hubs can also be out 661 00:34:32,760 --> 00:34:34,600 Speaker 3: in the middle of nowhere, And so they started doing 662 00:34:34,640 --> 00:34:36,640 Speaker 3: this thing where they would build the logistics hubs out 663 00:34:36,680 --> 00:34:40,320 Speaker 3: by an interstate and then build a bunch of stores 664 00:34:40,480 --> 00:34:44,560 Speaker 3: within like a day's drive of that logistics hub. So 665 00:34:44,960 --> 00:34:49,880 Speaker 3: that is one innovation Walmart makes. The other one they 666 00:34:49,960 --> 00:34:53,760 Speaker 3: make and this is also like kind of classic Seers, 667 00:34:53,800 --> 00:34:58,000 Speaker 3: but Sears doesn't do it is they adopt computers right. 668 00:34:58,120 --> 00:35:00,600 Speaker 3: Computers are coming along at this point, the ability to 669 00:35:00,719 --> 00:35:05,280 Speaker 3: track data is coming along. Sears is still basically relying 670 00:35:05,480 --> 00:35:08,960 Speaker 3: on their managers intuitions to stock local stores that old 671 00:35:09,400 --> 00:35:15,960 Speaker 3: general wood free market system. Walmart is tracking every sale 672 00:35:16,200 --> 00:35:19,840 Speaker 3: of every item they're investing in a satellite so that 673 00:35:20,040 --> 00:35:24,200 Speaker 3: data can be relayed back to headquarters, and that just 674 00:35:24,320 --> 00:35:26,960 Speaker 3: works better. It turns out if you aggregate all the 675 00:35:27,080 --> 00:35:29,920 Speaker 3: data and you know how every sale works, you can 676 00:35:30,040 --> 00:35:31,200 Speaker 3: make smarter decisions. 677 00:35:31,600 --> 00:35:33,920 Speaker 1: You know, we've told this story before, but this one 678 00:35:34,000 --> 00:35:37,880 Speaker 1: really drives it home. To have a company like Seers 679 00:35:38,520 --> 00:35:43,720 Speaker 1: that was dominant for so long, adapted to so many changes, 680 00:35:43,800 --> 00:35:46,560 Speaker 1: the changes between the late eighteen hundreds and I think 681 00:35:46,600 --> 00:35:51,480 Speaker 1: sixties are insane right, in fact, far more traumatic changes 682 00:35:51,560 --> 00:35:54,320 Speaker 1: than we face in the sixties, seventies, and eighties. And 683 00:35:54,560 --> 00:35:59,960 Speaker 1: yet this company, even with its democratic structure, can't come 684 00:36:00,080 --> 00:36:02,160 Speaker 1: up with this stuff, or if it does come up 685 00:36:02,200 --> 00:36:05,320 Speaker 1: with it, it's just they've put too much money and 686 00:36:05,440 --> 00:36:09,000 Speaker 1: time and effort into a system that works really well 687 00:36:09,080 --> 00:36:11,399 Speaker 1: for them. And so you just can't be the guy 688 00:36:11,440 --> 00:36:13,799 Speaker 1: in the meeting and it says, yeah, we should take 689 00:36:13,800 --> 00:36:15,400 Speaker 1: down that store in Brooklyn, and we should put it 690 00:36:15,440 --> 00:36:17,319 Speaker 1: out on Interstate seventy eight. Yeah. 691 00:36:17,520 --> 00:36:22,840 Speaker 3: Right, And so by nineteen ninety one, Walmart is bigger 692 00:36:22,920 --> 00:36:26,840 Speaker 3: than Sears. Series is no longer the biggest retailer. And 693 00:36:26,960 --> 00:36:31,480 Speaker 3: there is this Time magazine article from that moment that 694 00:36:32,480 --> 00:36:34,520 Speaker 3: captures what is going on in a lovely way. The 695 00:36:34,600 --> 00:36:39,400 Speaker 3: headline is mister Sam stuns Goliath Sam as Sam Walton. 696 00:36:39,560 --> 00:36:43,000 Speaker 1: Give us the first sentence. With its regency furniture, rich 697 00:36:43,080 --> 00:36:47,320 Speaker 1: wood paneling, and commanding view of Chicago's skyline, The executive 698 00:36:47,400 --> 00:36:50,279 Speaker 1: floor of the one hundred and ten story Sears Tower 699 00:36:50,360 --> 00:36:54,120 Speaker 1: is a monument to the company's glorious century as America's 700 00:36:54,239 --> 00:36:55,160 Speaker 1: favorite store. 701 00:36:55,960 --> 00:36:58,120 Speaker 3: Okay, I think we know what's coming on it's coming 702 00:36:58,480 --> 00:36:58,719 Speaker 3: this way. 703 00:36:58,760 --> 00:36:59,279 Speaker 1: It gets better. 704 00:36:59,320 --> 00:37:03,360 Speaker 3: In the next paragraph, they cut to Walmart headquarters in Bentonville, Arkansas. 705 00:37:03,560 --> 00:37:07,160 Speaker 1: Go the drab two story building whose for mica desks 706 00:37:07,239 --> 00:37:11,600 Speaker 1: and battleship gray walls belie the company's immense profitability. Yes, 707 00:37:12,000 --> 00:37:14,000 Speaker 1: so if you have in. 708 00:37:14,080 --> 00:37:17,439 Speaker 3: One sentence Regency Furniture, a rich wood paneling all the world, 709 00:37:17,520 --> 00:37:21,320 Speaker 3: top of the world, and another one a grab toothtor underdown, 710 00:37:21,440 --> 00:37:24,280 Speaker 3: you know what, the rules of narratives say, the scrappy. 711 00:37:23,960 --> 00:37:26,279 Speaker 1: Underdog is going to win. This is just what you 712 00:37:26,400 --> 00:37:27,120 Speaker 1: have to do in a store. 713 00:37:27,120 --> 00:37:29,759 Speaker 3: Sorry, it's the way stories work. And so yeah, so 714 00:37:29,880 --> 00:37:33,480 Speaker 3: Walmart is winning, series is losing. At the same time, 715 00:37:33,560 --> 00:37:35,560 Speaker 3: you know, Walmart is kind of competing from below, right, 716 00:37:35,680 --> 00:37:38,960 Speaker 3: Cheap cheap is Walmart's thing series is also getting competed 717 00:37:39,040 --> 00:37:41,560 Speaker 3: kind of from the side, because you have these sort 718 00:37:41,560 --> 00:37:45,160 Speaker 3: of category killer stores using the same technologies the interstate 719 00:37:45,239 --> 00:37:49,800 Speaker 3: computers to be a giant, say hardware store, home depot, 720 00:37:50,480 --> 00:37:55,000 Speaker 3: electronics store, best Buy, Circuit City, shout out circuit City. 721 00:37:55,880 --> 00:37:58,200 Speaker 1: And they're competing on what I assume are pretty high 722 00:37:58,200 --> 00:38:00,960 Speaker 1: profit items for serious I mean, certainly core series items. 723 00:38:01,080 --> 00:38:02,960 Speaker 3: Right, like the way I go to home depot. Now 724 00:38:03,080 --> 00:38:06,560 Speaker 3: for a drill, I would have gone to Sears fifty 725 00:38:06,640 --> 00:38:09,960 Speaker 3: years ago. So Series of course sees this happening. But 726 00:38:10,239 --> 00:38:15,000 Speaker 3: instead of fundamentally changing their business, they decide to expand 727 00:38:15,040 --> 00:38:19,480 Speaker 3: sort of horizontally. They've actually been in the insurance business 728 00:38:20,200 --> 00:38:24,279 Speaker 3: since the thirties. They had sold all States tires, and 729 00:38:24,360 --> 00:38:26,160 Speaker 3: they were like, oh, with your all State tires, why 730 00:38:26,200 --> 00:38:27,719 Speaker 3: don't you buy some all state. 731 00:38:27,760 --> 00:38:29,040 Speaker 1: Insurance kind of genius. 732 00:38:29,160 --> 00:38:32,640 Speaker 3: Kind of genius, and that worked, and so now they're like, okay, 733 00:38:32,719 --> 00:38:35,480 Speaker 3: let's do more finance. So they buy a brokerage and 734 00:38:35,560 --> 00:38:38,480 Speaker 3: they buy a real estate agency, and they launched. 735 00:38:38,239 --> 00:38:39,160 Speaker 1: The Discover card. 736 00:38:39,719 --> 00:38:43,000 Speaker 3: Actually, but it turns out people don't want to buy 737 00:38:43,080 --> 00:38:46,759 Speaker 3: their mutual funds where they buy their power tools. Right, 738 00:38:47,719 --> 00:38:51,319 Speaker 3: the financial services thing doesn't work. You know, Discover gets 739 00:38:51,360 --> 00:38:55,080 Speaker 3: spun out, All State gets spun out. Meanwhile, catalog sales 740 00:38:55,080 --> 00:38:57,240 Speaker 3: are still declining. They actually get rid of the catalog 741 00:38:57,400 --> 00:39:01,640 Speaker 3: in nineteen ninety three, only sell through stores. And then 742 00:39:01,760 --> 00:39:04,400 Speaker 3: you know it happens right after that, well. 743 00:39:04,360 --> 00:39:07,799 Speaker 1: The Internet, the World Wide Web nineteen ninety four around then, right, yes, 744 00:39:07,920 --> 00:39:10,759 Speaker 1: and we have Amazon and we have Amazon, and you know, 745 00:39:10,920 --> 00:39:14,000 Speaker 1: Sears did start selling online. They'd actually kind of screwed 746 00:39:14,040 --> 00:39:15,920 Speaker 1: themselves by getting rid of the catalog, because it's nice 747 00:39:15,920 --> 00:39:18,280 Speaker 1: to have that list when you launch your website. 748 00:39:18,320 --> 00:39:20,239 Speaker 3: But yeah, by the time they started selling online in 749 00:39:20,280 --> 00:39:23,080 Speaker 3: the very late nineties, they didn't have that anymore. Well, 750 00:39:23,080 --> 00:39:26,160 Speaker 3: I should say, like their online effort was not trivial. 751 00:39:26,320 --> 00:39:29,239 Speaker 3: They were one of the first places that you buy 752 00:39:29,320 --> 00:39:31,080 Speaker 3: online and pick up at the store, which is a 753 00:39:31,160 --> 00:39:35,600 Speaker 3: good idea, but by this point they were sort of 754 00:39:35,680 --> 00:39:38,560 Speaker 3: too far gone. Right, by the late nineties, Sears was 755 00:39:38,680 --> 00:39:42,120 Speaker 3: no longer the place everybody shopped. It was like the 756 00:39:42,239 --> 00:39:45,200 Speaker 3: crappy store that maybe you go to with your grandma, 757 00:39:45,320 --> 00:39:47,040 Speaker 3: but it's kind of sad and like some of the 758 00:39:47,160 --> 00:39:51,160 Speaker 3: shelves are empty, and so you know, even if they 759 00:39:51,280 --> 00:39:54,600 Speaker 3: had a good website and some good ideas, still nobody 760 00:39:54,640 --> 00:39:55,920 Speaker 3: wanted to buy stuff from Sears. 761 00:39:56,040 --> 00:39:59,280 Speaker 1: And is this just the age of sort of individual choices? 762 00:39:59,400 --> 00:39:59,520 Speaker 2: Right? 763 00:39:59,560 --> 00:40:01,400 Speaker 1: You didn't want to go where everyone was going for 764 00:40:01,480 --> 00:40:04,160 Speaker 1: the generic thing. You didn't want a choice of two 765 00:40:05,080 --> 00:40:07,719 Speaker 1: different products. You wanted one hundred products, you wanted a 766 00:40:07,800 --> 00:40:11,920 Speaker 1: thousand products. We wanted the choice. That, weirdly enough, was 767 00:40:12,120 --> 00:40:14,920 Speaker 1: what launched the cattleg Yeah, that's interesting, and now all 768 00:40:14,960 --> 00:40:16,920 Speaker 1: of a sudden with their stores, it just felt like 769 00:40:17,160 --> 00:40:20,000 Speaker 1: I'm not getting the full range of choices. I want 770 00:40:20,040 --> 00:40:21,880 Speaker 1: to see one hundred TVs in the best play. All right. 771 00:40:21,920 --> 00:40:23,319 Speaker 3: If I'm gonna go if I'm gonna buy a TV, 772 00:40:23,440 --> 00:40:25,080 Speaker 3: I'll go to Best Buy instead of Sears. If I'm 773 00:40:25,080 --> 00:40:26,880 Speaker 3: gonna buy a drill, I'll go to Home Depot instead 774 00:40:26,880 --> 00:40:30,239 Speaker 3: of Series. So Seriars is in this downward spiral now, right, 775 00:40:30,360 --> 00:40:32,760 Speaker 3: like nobody shops there because the stores are kind of crappy, 776 00:40:33,160 --> 00:40:36,080 Speaker 3: and then because nobody's shopping there, the stores get crappier, 777 00:40:36,239 --> 00:40:38,880 Speaker 3: so even fewer people shop there. 778 00:40:39,520 --> 00:40:40,720 Speaker 1: In the early two. 779 00:40:40,800 --> 00:40:45,600 Speaker 3: Thousands, it actually gets bought by a hedge fund manager 780 00:40:45,719 --> 00:40:48,400 Speaker 3: named Eddie Lampert. He takes control of the company, merges 781 00:40:48,440 --> 00:40:51,600 Speaker 3: it with Kmart. Now they're down on its luck twentieth 782 00:40:51,640 --> 00:40:55,440 Speaker 3: century retailer, and there's a lot of like financial engineering, 783 00:40:55,480 --> 00:40:58,560 Speaker 3: there's some real estate plays, there's different internal companies. 784 00:40:58,640 --> 00:41:01,880 Speaker 1: They're squeezing the companies at this point for the value 785 00:41:01,960 --> 00:41:04,800 Speaker 1: that's left. They didn't really think there was gonna be 786 00:41:04,800 --> 00:41:08,120 Speaker 1: a resurgent age of Sears. I mean maybe he thought that, 787 00:41:08,280 --> 00:41:09,120 Speaker 1: but it didn't happen. 788 00:41:09,600 --> 00:41:13,840 Speaker 3: So and In twenty eighteen, Sears filed bankruptcy, didn't entirely 789 00:41:13,880 --> 00:41:16,560 Speaker 3: go out of business, but was just closing stores closing stores. 790 00:41:17,040 --> 00:41:20,880 Speaker 3: By twenty twenty five, there were fewer than ten Seis 791 00:41:20,920 --> 00:41:23,680 Speaker 3: stores open in all of America. I think it was 792 00:41:23,800 --> 00:41:25,800 Speaker 3: eight summer of twenty twenty five. Well, that's hard to 793 00:41:25,880 --> 00:41:27,120 Speaker 3: keep track because they keep closing. 794 00:41:27,440 --> 00:41:30,760 Speaker 1: Where to get your zithers now? Amazon? 795 00:41:30,920 --> 00:41:33,600 Speaker 3: Yeah, of course I was going to say that they're 796 00:41:33,600 --> 00:41:36,279 Speaker 3: not common, but it's obviously Amazon, and so you know, 797 00:41:36,880 --> 00:41:43,319 Speaker 3: Seis is basically gone, right, And my first emotional instinct was, oh, 798 00:41:43,400 --> 00:41:46,280 Speaker 3: that's sad, this great company has now has five stores 799 00:41:46,360 --> 00:41:50,719 Speaker 3: left or whatever, and it's you know, I want to 800 00:41:50,800 --> 00:41:54,879 Speaker 3: root for them. But upon reflection, like, I'm actually not sad, 801 00:41:55,239 --> 00:41:57,560 Speaker 3: and I don't actually think it's a sad story. You know, 802 00:41:58,160 --> 00:42:01,920 Speaker 3: here's a company that was great and incumbent and seemed dominant, 803 00:42:02,600 --> 00:42:06,520 Speaker 3: but it failed to adapt and other companies were allowed 804 00:42:06,520 --> 00:42:10,279 Speaker 3: to come along and do a better job of serving customers, 805 00:42:10,880 --> 00:42:14,480 Speaker 3: and those companies won and Sears lost, And I actually 806 00:42:14,520 --> 00:42:19,280 Speaker 3: think that is a great story of American business. 807 00:42:20,360 --> 00:42:24,520 Speaker 1: More stores, more people working right, more efficiency, and more 808 00:42:24,600 --> 00:42:29,520 Speaker 1: choice for the American public. USA no tall building. 809 00:42:29,239 --> 00:42:33,239 Speaker 3: Though I think now it's called the Will's Tower. The 810 00:42:33,280 --> 00:42:35,120 Speaker 3: Willis Tower name for an insurance company. 811 00:42:35,160 --> 00:42:36,360 Speaker 1: I think, oh perfect. 812 00:42:37,520 --> 00:42:39,480 Speaker 3: We got to make a lot of these shows. And 813 00:42:39,800 --> 00:42:41,840 Speaker 3: if you're listening and there's an episode you want us 814 00:42:41,880 --> 00:42:45,399 Speaker 3: to make, please tell us. You can email us at 815 00:42:45,560 --> 00:42:49,000 Speaker 3: business History at pushkin dot fm. Also tell us what 816 00:42:49,080 --> 00:42:50,960 Speaker 3: you don't like about the show. We really want you 817 00:42:51,080 --> 00:42:54,160 Speaker 3: to like it. You can also yell at me on Twitter, 818 00:42:54,280 --> 00:42:57,280 Speaker 3: which is now I'm informed called X. I'm at Jacob Goldstein. 819 00:42:57,360 --> 00:43:00,840 Speaker 1: It's just my name. I'm at Radio Smith, Old Technology, 820 00:43:00,880 --> 00:43:02,120 Speaker 1: and my last name Radio Smith. 821 00:43:02,200 --> 00:43:06,840 Speaker 3: Today's show was edited by Ryan Dilly, our showrunner. It 822 00:43:07,080 --> 00:43:10,840 Speaker 3: was produced by Gabriel Hunter Chang and engineered by Sarah Bruguer. 823 00:43:11,520 --> 00:43:15,880 Speaker 3: I'm Jake Goldstein, I'm Robert Smith, and this is business History. 824 00:43:16,040 --> 00:43:17,400 Speaker 1: I'm shure about the history of business.