The Process Innovations of Ed Telling at Sears

There are a fair number of case studies and biographies of important new product innovations. Rarer are the case studies of process innovations. Two great exceptions are Marc Levinson’s The Box and The Great A&P. I have recently read another exception, this one by Donald Katz, about how Ed Telling brought process innovations to Sears from the mid-1970s through the mid-1980s.
In the next few weeks, I will be quoting several of the more useful, or thought-provoking passages.

The book discussed, is:
Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Adult, 1987.

Leadership Depends on Accumulated Experience as Much as Packaged College Courses

(p. 17) The dominant brand, Harvard Business School, claims to “educate leaders who make a difference in the world.” The University of Michigan’s Ross School does one better, developing “leaders who make a positive difference in the world.” Kellogg at Northwestern develops “brave leaders who inspire growth in people, organizations and markets.” And Duke’s Fuqua says it does what it does because “the world needs leaders of consequence.”
. . .
Which raises the question, once again, of whether leadership can be packaged and taught, rather than accumulated through experience.
John Van Maanen, a professor of management at M.I.T. Sloan who teaches a course named “Leading Organizations,” isn’t so sure it can. “Even today, three-plus decades in, there’s no real definition of it,” he says. “We can make people more conscious of ethical dilemmas in business, of the difficulty of directing people in times of adversity, and the confidence and communication skills necessary to do so. But the idea that such skills can be transmitted so that you can lead anybody at any time, that’s ideologically vacuous.”

For the full commentary, see:
DUFF McDONALD. “Can You Learn to Lead?” The New York Times, Education Life Section (Sun., APRIL 12, 2015): 17.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date APRIL 7 (sic), 2015.)

Some Immigrate to West for “Peace and Dignity”

(p. A13) There are some words that, through a sort of onomatopoeia, seem fated to be the worst epithets. In Russian, zhid is one of those. Ask any Soviet Jew who grew up in that now extinct empire what it felt like to be on the receiving end of the slur, whose English approximation is “kike,” and they will mention the sound: a sinister hiss ending with a snap of the tongue against the back of the teeth.
For Lev Golinkin, the author of a new memoir about his family’s immigration from Soviet Ukraine to the West, that sibilant sound dominates most of his memories of life before 1989.
. . .
All their fears–of a government that sought to both erase their Jewish identity and discriminate against them for it, as well as of the unknown ahead–reached their apogee at their moment of immigration: Mr. Golinkin’s father, in a desperate attempt to save his life’s work, had hidden microfilm of all his patents in his underwear. When he saw how vigorously the border police were searching people, he took the rolls of microfilm to the bathroom and threw them out the window, into a fire blazing inside a steel drum just outside the border post. Once in the West, this man of incredible will achieved the rare feat of rebuilding his career from scratch.
Things didn’t work out as well for Mr. Golinkin’s mother: She found work only as a security guard.
At one point, a grown Mr. Golinkin confronts her about failing to foresee how difficult re-establishing herself would be, even calling her dreams of America “naïve and ridiculous.” She answers that she didn’t want to be afraid of her government anymore. She didn’t want to tell her son why “he should prepare for a long and painful life.” The sacrifice she made, he realizes, was for “peace and dignity, not a paycheck”–and, of course, for him.

For the full review, see:
GAL BECKERMAN. “BOOKSHELF; The Sinister Hiss; The author’s father, a successful engineer, hid microfilm of his patents in his underwear in a desperate attempt to save his life’s work.” The Wall Street Journal (Fri., Dec. 19, 2014): A13.
(Note: ellipsis added; italics in original.)
(Note: the online version of the review has the date Dec. 18, 2014, and has the title “Book Review: ‘The Marshmallow Test’ by Walter Mischel; To resist the tempting treat, kids looked away, squirmed, sang or simply pretended to take a bite.”)

The book under review is:
Golinkin, Lev. A Backpack, a Bear, and Eight Crates of Vodka: A Memoir. New York: Doubleday, 2014.

Automation Anxieties Unjustified

(p. 5B) In 1964, technology anxieties caused President Lyndon Johnson to create a national commission on automation. When it reported in 1966, the unemployment rate had dropped to 3.8 percent.
“Technological shocks have been happening for decades, and … the U.S. economy has been adapting to them,” writes economist Timothy Taylor (whose website recounts the 1960s episode).
. . .
Human contact is wanted or needed in places where it seems obsolete. Logically, ATMs should have decimated bank tellers. In reality, the number of tellers (about 600,000) is slightly above its 1990 level, notes Taylor, citing a study by James Bessen of Boston University law school.

For the full commentary, see:
ROBERT J. SAMUELSON. “Must we fear robots in workplace?” Omaha World-Herald (Mon., March 23, 2015): 5B.
(Note: ellipsis internal to quote, in original; ellipsis between paragraphs, added.)

The article by Bessen mentioned above, is:
Bessen, James. “Toil and Technology.” Finance and Development 94, no. 1 (March 2015): 16-19.

Purdue President Mitch Daniels Opposes “the Bureaucratic Accreditation Process”

(p. A9) As a college administrator, Mr. Daniels has . . . taken notice of the bureaucratic accreditation process that is a prerequisite for receiving federal funds. Six regional groups blessed by the Education Department, as well as a coterie of program-specific organizations, sign off on an institution’s programs. The ostensible goal when Congress coupled federal funding with accreditation in the 1952 G.I. Bill was to protect students from colleges hawking worthless degrees.
That hasn’t happened. Instead, universities devote considerable resources to a useless process. Almost no institution misses the mark, and since accreditation is done geographically, an upper-tier school like Purdue is accredited by the same agency that has given accreditation to Indiana University East, where the six-year graduation rate is about 18%.
Purdue pays $150,000 annually in direct accreditation fees, working with any combination of 17 agencies–but that doesn’t include time. Stanford University Provost John Etchemendy said in a 2011 letter that the school spent $849,000 in one year of a multiyear accreditation. “One suspects you have some basic inertia and some folks would rather spend their time being busy with this than doing something more productive,” Mr. Daniels says with a faint smile. “I refer of course to the people on other campuses.”
‘All this time and money and in the end some really lousy schools get accredited, so I’m not sure what the student–the consumer–learns. An awful lot of make work involved, or so it seems,” he says. Sen. Lamar Alexander (R., Tenn.) is considering reforms, including untangling accreditation from federal funding, an idea that Mr. Daniels says “ought to be looked at.”

For the full interview, see:
KATE BACHELDER, interviewer. “THE WEEKEND INTERVIEW; How to Save American Colleges; The Purdue president on freezing tuition, how to reduce student debt, and busting the accreditation cartel.” The Wall Street Journal (Sat., April 25, 2015): A9.
(Note: ellipsis added.)
(Note: the online version of the interview has the date April 24, 2015.)

Aaron Burr Gave Jeremy Bentham a Copy of The Federalist Papers

(p. 720) For four years, the disgraced Burr traveled in Europe, resorting occasionally to the pseudonym H. E. Edwards to keep creditors at bay. Sometimes he lived in opulence with fancy friends and at other times languished in drab single rooms. This aging roué sampled opium and seduced willing noblewomen and chambermaids with a fine impartiality. All the while, he cultivated self-pity. “I find that among the great number of Americans here and there all are hostile to A.B.– All– What a lot of rascals they must be to make war on one whom they do not know, on one who never did harm or wished harm to a human being,” he recorded in his diary. He befriended the English utilitarian philosopher Jeremy Bentham and spoke to him with remarkable candor. “He really meant to make himself emperor of Mexico,” Bentham recalled. “He told me I should be the legislator and he would send a ship of war for me. He gave me an account of his duel with Hamilton. He was sure of being able to kill him, so I thought it little better than murder.” Always capable of irreverent surprises, Burr gave Bentham a copy of The Federalist. The shade of Alexander Hamilton rose up to haunt Burr at unexpected moments. In Paris, he called upon Talleyrand, who instructed his secretary to deliver this message to the uninvited caller: “I shall be glad to see Colonel Burr, but please tell him that a portrait of Alexander Hamilton always hangs in my study where all may see it.” Burr got the message and left.

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.
(Note: italics in original.)

“Animals Have Complex Minds and Rich Emotional Lives”

(p. D6) We now know that species from magpies to elephants can recognize themselves in the mirror, which some scientists consider a sign of self-awareness. Rats emit a form of laughter when they’re tickled. And dolphins, parrots and dogs show clear signs of distress when their companions die. Together, these and many other findings demonstrate what any devoted pet owner has probably already concluded: that animals have complex minds and rich emotional lives.

For the full review, see:
EMILY ANTHES. “Books; Does That Cat Have O.C.D.?.” The New York Times (Tues., JULY 8, 2014): D6.
(Note: the online version of the review has the date JULY 7, 2014.)

The book under review, is:
Braitman, Laurel. Animal Madness: How Anxious Dogs, Compulsive Parrots, and Elephants in Recovery Help Us Understand Ourselves. New York: Simon & Schuster, 2014.

117 Year Old Said “Her Life Seemed Rather Short”

(p. A10) Misao Okawa, the world’s oldest person, died Wednesday, a few weeks after celebrating her 117th birthday.
. . .
Ms. Okawa, . . . , said at her recent birthday celebration that her life seemed rather short.

For the full story, see:
THE ASSOCIATED PRESS. “WORLD BRIEFING; Japan: Weeks After a Birthday, the World’s Oldest Person Dies.” The New York Times (Thurs., APRIL 2, 2015): A10.
(Note: ellipses added.)
(Note: the online version of the story has the date APRIL 1, 2015.)

Incandescents Better than LEDs at Allowing a Good Night’s Sleep

(p. D6) Studies have shown that such light, especially from the blue part of the spectrum, inhibits the body’s production of melatonin, a hormone that helps people fall asleep.
. . .
Devices such as smartphones and tablets are often illuminated by light-emitting diodes, or LEDs, that tend to emit more blue light than incandescent products.

For the full story, see:
KATE GALBRAITH. “WIRED WELL; Can Orange Glasses Help You Sleep Better?” The New York Times (Tues., APRIL 7, 2015): D6.
(Note: ellipsis added.)
(Note: the online version of the story has the title “WIRED WELL; Can Orange Glasses Help You Sleep Better?”)

Self-Made, Abolitionist, Meritocratic Hamilton Viewed as Elitest

(p. 627) To Jefferson we owe the self-congratulatory language of Fourth of July oratory, the evangelical conviction that America serves as a beacon to all humanity. Jefferson told John Dickinson, “Our revolution and its consequences will ameliorate the condition of man over a great portion of the globe.” At least on paper, Jefferson possessed a more all-embracing view of democracy than Hamilton, who was always frightened by a sense of the fickle and fallible nature of the masses.
Having said that, one must add that the celebration of the 1800 election as the simple triumph of “progressive” Jeffersonians over “reactionary” Hamiltonians greatly overstates the case. The three terms of Federalist rule had been full of daz-(p. 628)zling accomplishments that Republicans, with their extreme apprehension of federal power, could never have achieved. Under the tutelage of Washington, Adams, and Hamilton, the Federalists had bequeathed to American history a sound federal government with a central bank, a funded debt, a high credit rating, a tax system, a customs service, a coast guard, a navy, and many other institutions that would guarantee the strength to preserve liberty. They activated critical constitutional doctrines that gave the American charter flexibility, forged the bonds of nationhood, and lent an energetic tone to the executive branch in foreign and domestic policy. Hamilton, in particular, bound the nation through his fiscal programs in a way that no Republican could have matched. He helped to establish the rule of law and the culture of capitalism at a time when a revolutionary utopianism and a flirtation with the French Revolution still prevailed among too many Jeffersonians. With their reverence for states’ rights, abhorrence of central authority, and cramped interpretation of the Constitution, Republicans would have found it difficult, if not impossible, to achieve these historic feats.
Hamilton had promoted a forward-looking agenda of a modern nation-state with a market economy and an affirmative view of central government. His meritocratic vision allowed greater scope in the economic sphere for the individual liberties that Jefferson defended so eloquently in the political sphere. It was no coincidence that the allegedly aristocratic and reactionary Federalists contained the overwhelming majority of active abolitionists of the period. Elitists they might be, but they were an open, fluid elite, based on merit and money, not on birth and breeding–the antithesis of the southern plantation system. It was the northern economic system that embodied the mix of democracy and capitalism that was to constitute the essence of America in the long run. By no means did the 1800 election represent the unalloyed triumph of good over evil or of commoners over the wellborn.
The 1800 triumph of Republicanism also meant the ascendancy of the slaveholding south. Three Virginia slaveholders–Jefferson, Madison, and Monroe–were to control the White House for the next twenty-four years. These aristocratic exponents of”democracy” not only owned hundreds of human beings but profited from the Constitution’s least democratic features: the legality of slavery and the ability of southern states to count three-fifths of their captive populations in calculating their electoral votes. (Without this so-called federal ratio, John Adams would have defeated Thomas Jefferson in 1800.) The Constitution did more than just tolerate slavery: it actively rewarded it. Timothy Pickering was to inveigh against “Negro presidents and Negro congresses”– that is, presidents and congresses who owed their power to the three-fifths rule. This bias inflated southern power (p. 629) against the north and disfigured the democracy so proudly proclaimed by the Jeffersonians. Slaveholding presidents from the south occupied the presidency for approximately fifty of the seventy-two years following Washington’s first inauguration. Many of these slaveholding populists were celebrated by posterity as tribunes of the common people. Meanwhile, the self-made Hamilton, a fervent abolitionist and a staunch believer in meritocracy, was villainized in American history textbooks as an apologist of privilege and wealth.

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

Frugal Entrepreneurs May Be Able to Self-Finance Their Innovations

In my Economics of Entrepreneurship seminar we spend part of an evening reading the summary chapter of The Millionaire Next Door, discussed in the tribute below. In the seminar I suggest that at key early moments, innovative entrepreneurs may need to self-finance their innovations. They will be more likely to be able to do so if they have followed Stanley and Danko’s advice on how to live frugally.

(p. B1) . . . the enduring lesson of the classic personal finance book, “The Millionaire Next Door,” is this: Most of the rich grow wealthy because of modesty, thrift and prudence. They live happily in starter homes. They don’t subsidize irresponsible adult children. They have an allergy to luxury automobiles.
. . .
The book, which has sold more than three million copies since its publication in 1996, made its co-author, William D. Danko, a millionaire himself and helped Mr. Stanley achieve similar security and leave academia for research and writing.
. . .
(p. B2) . . . even Mr. Danko, who ought to know better, has not always been able to resist the siren call of the Germans and their advertising. He bought one older Mercedes from a widowed friend, but his other one came new. “I was planning on buying a used one again, but the salesman was very good, and I was weak,” he said. “These luxury cars are clearly overrated when you have to get your oil changed, and it costs $200.”
. . .
. . . I was curious that Mr. Stanley died behind the wheel of a 2013 Corvette, rammed by another driver who might soon face charges in the accident. Mr. Stanley too, it turns out, couldn’t help but have a taste for the finer things in life.
So does that make him a hypocrite? Or just a human being? All the best research tells us that we get much more joy out of doing things than having things, and a weekend drive in a car that goes really fast probably falls into both categories. But he earned that drive — and that car — by putting untold numbers of readers in a position where they’d be lucky enough to have that same choice themselves.

For the full commentary, see:
RON LIEBER. “YOUR MONEY; A Tribute to the ‘Millionaire Next Door’.” The New York Times (Sat., MARCH 7, 2015): B1-B2.
(Note: ellipses added.)
(Note: the online version of the commentary has the date MARCH 6, 2015, and has the title “YOUR MONEY; Paying Tribute to Thomas Stanley and His ‘Millionaire Next Door’.”)

The book under discussion is:
Stanley, Thomas J., and William D. Danko. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. First ed. Atlanta: Longstreet Press, 1996.