5 ms·

When Lampert took over Sears there were so many articles drawing a parallel to Buffett taking over Berkshire way back in the day. Both were successful hedge fun

When Lampert took over Sears there were so many articles drawing a parallel to Buffett taking over Berkshire way back in the day. Both were successful hedge fund managers who took control of a declining business. Ostensibly, Lampert was going to leverage Sears' assets (mostly the real estate) to develop a Berkshire-esque portfolio of strong companies. He started off in that direction, buying Lands End and making a bid for Restoration Hardware. I recall an interview or press release laying out a vision for Sears as a "store of stores" that showcased iconic American brands - Kenmore, Diehard, Lands End, etc. Somewhere along the line that dream died, and the cash flow was used mostly just to repurchase shares while letting the stores Languish. A bunch of concepts were tried in a handful of stores, but none promised an attractive ROI so they were dropped. Bruce Berkowitz is another investor that used to get compared to Buffett an awful lot, and tied his fate to the Sears project. He's still buying more shares and saying he sees value there. I don't really have a point other to say that investing is hard, and identifying talented value investors who will outperform in the future is even harder. Whether this was a dumb idea all along, or a poorly executed good idea is tough to say.

dharmon 11y ago
People talk about the "Sports Illustrated cover jinx", and even a similar EA video game cover jinx, where making the cover precedes a period of underperformance. I think a similar effect could be claimed for being called the next Buffett. There is a long list of investor casualties after such a comparison (including the ones you mentioned). Most recently I'm thinking of Bill Ackman, who was on the cover of Fortune last year with the title "Baby Buffett"... right before a painful 20% tumble.
- abcampbell 11y ago
  Agree. Think it more just speaks to how hard it is to generate alpha in investing. It's like being the MVP of the NBA. The competition is fierce, and you are playing a zero-sum game, hence generating returns greater than available by putting money 'in the market' is hard and (sometimes) ephemeral.
- colmvp 11y ago
  Making the cover of a magazine potentially highlights a zenith period in a persons career. It's pretty unrealistic to assume anyone, entrepreneur or executive or athlete, to consistent perform at their highest level or exceed it. If anything, it shouldn't be unexpected for a persons performance to regress immediately afterward due to probability.
MrTonyD 11y ago
I used to buy all my clothes from Land's End - easy, convenient, and "good enough" quality. After the Sears acquisition Land's End went from occasionally "iffy" to rarely satisfactory. Everything became the cheapest, thinnest, and most poorly fitting. At the same time, Sears went from having the wrong products to having poor quality products (like the Land's End they started carrying.) The "dumb idea" vs. "poorly executed" is easy for me to decide -- I'd say both.
- ghaff 11y ago
  I generally agree. At best, my personal impression is that Lands' End isn't as good as it used to be. (Note that Lands'End isn't actually part of Sears any longer although there are still Lands' End stores within Sears stores.) Having said that, Lands' End's drop in quality came during the same period that so much manufacturing was moving to Asia. I suspect that whatever corners Lands' End started cutting were the same corners that most of the other brands it competes with were cutting as well. And this may well have happened with or without the Sears acquisition.
  - MrTonyD 11y ago
    I read the book by the Patagonia founder, Yvon Chouinard, where he described how they had to send people to their manufacturers to be involved with quality, and how even then they would get bad batches and be forced to dump the clothes at a big loss and switch manufacturers. So it can be done - but perhaps that isn't what would be suggest by Ayn Rand. It isn't selfish enough.
    - ghaff 11y ago
      I have no particular reason to believe that Ayn Rand would champion cutting corners in product quality to save cost--especially if doing so wasn't a good long-term business strategy. But, to your broader point, especially if you're going to use low cost overseas manufacturing extensively keeping up quality implies a lot of hands-on monitoring and working with the manufacturers closely.
    - bch 11y ago
ArkyBeagle 11y ago
It's extremely tough to say. It is not to say that nobody can be successful in brick and mortar retail, but Buffet more or less rode the Great Moderation. Not to take away from him, but after equities stopped rotting around ... 1985ish, things were sort of on autopilot. The Dow broke 2000 in 1986...
hristov 11y ago
It should be noted that taking over Berkshire was probably the biggest mistake of Buffet's career. If journalists were comparing the purchase of Sears with the purchase of Berkshire they were already predicting trouble (probably unintentionally though).
- sopooneo 11y ago
  I thought Berkshire-Hathaway had been incredibly successful since Buffett had any share in it. What am missing?
  - hristov 11y ago
    Yes it was incredibly successful because Buffet decided to turn it into his own holding company where he aggregated all his other purchases. But it was the other purchases that were successful, not the Berkshire business itself. The Berkshire business was a New England textile company that kept suffering as the textile industry was slowly but surely being moved out of the United States. Buffet has said many times that buying Berkshire was a mistake.
  - gozur88 11y ago
    Buffett himself says it was his biggest mistake. He had some stock deal going with the Berkshire CEO and felt he was the victim of a bait-and-switch. He bought Berkshire so he could fire the guy. Two things: 1) People still act from emotion even when there's a hell of a lot of money at stake and 2) that kindly grandpa thing that Warren Buffett has going is an act.
  - gregpilling 11y ago
    Buffett has called it a big mistake. Berkshire Hathaway was run with almost zero capital investment, and instead of modernizing factories they just shut them down. The success came once they were finally out of the suit lining business (what BH actually did) and into the holding company business. I think it probably influenced his thinking, and putting more emphasis on known brands. Berkshire Hathaway made suit linings, a commodity, and were not a known consumer brand. After BH, he made investments in See's Candies, Coca Cola, national or global name brands that have a hold on their market - a "moat" as he calls it.

dharmon 11y ago

People talk about the "Sports Illustrated cover jinx", and even a similar EA video game cover jinx, where making the cover precedes a period of underperformance. I think a similar effect could be claimed for being called the next Buffett. There is a long list of investor casualties after such a comparison (including the ones you mentioned). Most recently I'm thinking of Bill Ackman, who was on the cover of Fortune last year with the title "Baby Buffett"... right before a painful 20% tumble.

abcampbell 11y ago
Agree. Think it more just speaks to how hard it is to generate alpha in investing. It's like being the MVP of the NBA. The competition is fierce, and you are playing a zero-sum game, hence generating returns greater than available by putting money 'in the market' is hard and (sometimes) ephemeral.
colmvp 11y ago
Making the cover of a magazine potentially highlights a zenith period in a persons career. It's pretty unrealistic to assume anyone, entrepreneur or executive or athlete, to consistent perform at their highest level or exceed it. If anything, it shouldn't be unexpected for a persons performance to regress immediately afterward due to probability.

MrTonyD 11y ago

I used to buy all my clothes from Land's End - easy, convenient, and "good enough" quality. After the Sears acquisition Land's End went from occasionally "iffy" to rarely satisfactory. Everything became the cheapest, thinnest, and most poorly fitting. At the same time, Sears went from having the wrong products to having poor quality products (like the Land's End they started carrying.) The "dumb idea" vs. "poorly executed" is easy for me to decide -- I'd say both.

ghaff 11y ago
I generally agree. At best, my personal impression is that Lands' End isn't as good as it used to be. (Note that Lands'End isn't actually part of Sears any longer although there are still Lands' End stores within Sears stores.) Having said that, Lands' End's drop in quality came during the same period that so much manufacturing was moving to Asia. I suspect that whatever corners Lands' End started cutting were the same corners that most of the other brands it competes with were cutting as well. And this may well have happened with or without the Sears acquisition.
- MrTonyD 11y ago
  I read the book by the Patagonia founder, Yvon Chouinard, where he described how they had to send people to their manufacturers to be involved with quality, and how even then they would get bad batches and be forced to dump the clothes at a big loss and switch manufacturers. So it can be done - but perhaps that isn't what would be suggest by Ayn Rand. It isn't selfish enough.
  - ghaff 11y ago
    I have no particular reason to believe that Ayn Rand would champion cutting corners in product quality to save cost--especially if doing so wasn't a good long-term business strategy. But, to your broader point, especially if you're going to use low cost overseas manufacturing extensively keeping up quality implies a lot of hands-on monitoring and working with the manufacturers closely.
  - bch 11y ago

ArkyBeagle 11y ago

It's extremely tough to say. It is not to say that nobody can be successful in brick and mortar retail, but Buffet more or less rode the Great Moderation. Not to take away from him, but after equities stopped rotting around ... 1985ish, things were sort of on autopilot. The Dow broke 2000 in 1986...

hristov 11y ago

It should be noted that taking over Berkshire was probably the biggest mistake of Buffet's career. If journalists were comparing the purchase of Sears with the purchase of Berkshire they were already predicting trouble (probably unintentionally though).

sopooneo 11y ago
I thought Berkshire-Hathaway had been incredibly successful since Buffett had any share in it. What am missing?
- hristov 11y ago
  Yes it was incredibly successful because Buffet decided to turn it into his own holding company where he aggregated all his other purchases. But it was the other purchases that were successful, not the Berkshire business itself. The Berkshire business was a New England textile company that kept suffering as the textile industry was slowly but surely being moved out of the United States. Buffet has said many times that buying Berkshire was a mistake.
- gozur88 11y ago
  Buffett himself says it was his biggest mistake. He had some stock deal going with the Berkshire CEO and felt he was the victim of a bait-and-switch. He bought Berkshire so he could fire the guy. Two things: 1) People still act from emotion even when there's a hell of a lot of money at stake and 2) that kindly grandpa thing that Warren Buffett has going is an act.
- gregpilling 11y ago
  Buffett has called it a big mistake. Berkshire Hathaway was run with almost zero capital investment, and instead of modernizing factories they just shut them down. The success came once they were finally out of the suit lining business (what BH actually did) and into the holding company business. I think it probably influenced his thinking, and putting more emphasis on known brands. Berkshire Hathaway made suit linings, a commodity, and were not a known consumer brand. After BH, he made investments in See's Candies, Coca Cola, national or global name brands that have a hold on their market - a "moat" as he calls it.