Welcome to the WC, wherein you’re trapped in my mind for eight to ten minutes weekly.
Something for everything this week:
- WTF Kmart
- How to invest in Haiti – Art (Part 2)
- What’s Biphasic Sleep?
- Weird time zones
- It’s banned books week
Next week, I’ll (finally) dive into some potentially better uses for the 30+ million acres of land (more than 1% of America) currently devoted to ethanol-producing corn.
Let’s go.
Table of Contents
WTF Kmart
Fast forward to 2024, and Kmart has nearly disappeared from the retail landscape. With only two stores left in the U.S. (one in Westwood, New Jersey, and the other in Miami, Florida), the company is now a mere shadow of its former self. So, how did a company that once seemed unstoppable collapse so dramatically? The answers lie in a toxic combination of corruption, greed, mismanagement, competitive pressures, and strategic missteps—an implosion worth studying closely.
Kmart’s Peak: A Retail Powerhouse on Top of the World
In the early 1980s, Kmart was the dominant force in American retail. By 1981, it had opened its 2,000th store and seemed poised for perpetual growth. Its massive store footprint and broad product offerings drew millions of shoppers each year, who flocked to its stores for everyday essentials. Kmart’s business model capitalized on the discount retail boom, placing it in direct competition with Walmart and Target.
However, this trajectory was not to last. As Kmart’s competitors embraced technological advancements and efficient operations, Kmart faltered. By 2002, it was filing for Chapter 11 bankruptcy, the first of many blows that would ultimately lead to its near-demise.
What Went Wrong: A Perfect Storm of Corruption, Greed, and Mismanagement
Kmart’s story is a textbook example of how large corporations can fail spectacularly when leadership loses focus on what truly matters—its core business, operations, and customers. Here are the main reasons behind Kmart’s tragic downfall.
Corruption and Financial Mismanagement
Corruption at the top echelons of Kmart leadership was a driving force behind its financial collapse. Charles Conaway, CEO from 2000 to 2002, spearheaded the “BlueLight Always” campaign in an effort to directly challenge Walmart’s low-price model. While the campaign was supposed to bring Kmart back to relevance, it ended up being a financial disaster. Kmart couldn’t afford to match Walmart’s scale and pricing strategy, and the BlueLight initiative backfired.
Making matters worse, Conaway and his leadership team engaged in reckless spending. During this period, Conaway approved nearly $30 million in “retention loans” for top executives while the company was hemorrhaging cash. They falsified financial reports to paint a rosier picture for investors, hiding the true extent of Kmart’s financial troubles. It’s not an exaggeration to say that greed and corruption poisoned the company’s leadership at a time when clear-eyed decision-making was desperately needed.
Mismanagement and Leadership Failures
Kmart’s mismanagement woes didn’t end with Conaway. After emerging from its first bankruptcy in 2003, hedge fund manager Edward Lampert took over and orchestrated the controversial merger with Sears in 2005.
While Lampert had grand ambitions to transform the retail landscape, his strategy was rooted in financial engineering rather than operational improvements.
Lampert’s focus was on unlocking real estate value from Kmart’s properties, not reinvesting in the retail operations. He slashed costs across the board, closing stores and cutting back on capital expenditures that were desperately needed to revamp Kmart’s deteriorating infrastructure. Store conditions suffered, supply chains lagged, and technology remained outdated—all of which pushed Kmart further into irrelevance as competitors like Walmart and Target invested heavily in both e-commerce and in-store experiences.
The results were disastrous. Between 2004 and 2018, Kmart’s revenue fell from $31 billion to $5.8 billion. Lampert’s complex web of financial arrangements only further diluted the company’s focus and added layers of bureaucracy. Kmart executives found themselves more concerned with financial wrangling than retail execution.
Competitive Pressures: Walmart, Target, and E-commerce
Kmart’s leadership also failed to recognize or respond effectively to competitive pressures. In the late 1990s and early 2000s, Walmart and Target invested heavily in technology, building advanced inventory management systems that allowed them to control costs and manage supply chains more efficiently than Kmart.
Walmart’s ability to drive down prices through technological innovation was particularly devastating for Kmart, which could not match its efficiency. Meanwhile, Target distinguished itself by cultivating a more upscale, design-conscious brand while maintaining competitive pricing (look how Target’s revenue per store explodes in the 1990s).
Kmart, by contrast, languished somewhere in the middle—neither as cheap as Walmart nor as trendy as Target. The company also failed to make the necessary investments to pivot into e-commerce at the same rate as competitors, sealing its fate in the face of Amazon’s growing dominance.
Strategic Missteps and Lack of Focus
Kmart’s downfall can be traced back to strategic blunders in the 1980s. The company pursued an aggressive diversification strategy, acquiring businesses such as Waldenbooks, The Sports Authority, and Builders Square. These acquisitions distracted Kmart from its core business of discount retailing, siphoning management’s attention and resources.
The failure to focus on modernizing its own stores and operations left Kmart with dilapidated storefronts and inconsistent service. This was exacerbated by poor inventory management, which led to stockouts and missed opportunities to capitalize on consumer demand. These strategic missteps compounded over time, leaving Kmart in a position where it was ill-prepared to face modern retail challenges.
Lessons Learned for Today’s Businesses
Kmart’s rise and fall hold powerful lessons for today’s business leaders. First and foremost, companies must remain focused on their core competencies. Diversification and expansion can be tempting, but without careful execution, these ventures can distract from what’s truly important.
Another critical lesson is the importance of investing in technology and operations. Walmart’s investment in inventory management and Target’s focus on brand-building highlight how long-term investment in core operational efficiencies and customer experience can create a competitive moat. In contrast, Kmart’s failure to adapt to new technologies was a key factor in its decline.
Additionally, leadership matters. Businesses require leaders who are financially savvy and have a deep understanding of their industry. Lampert’s hedge fund background brought financial acumen, but his lack of retail experience meant that key operational problems were ignored.
Finally, the dangers of greed and corruption are ever-present. Corporate governance must ensure accountability, particularly in times of crisis. Kmart’s executives prioritized personal enrichment over the company’s long-term health, with disastrous consequences.
Which Companies Might Be in Trouble Today?
Looking at the retail landscape today, we see some companies facing similar risks to Kmart’s downfall. Bed Bath & Beyond, for example, has faced steep competition from online retailers and struggled to modernize its operations. The company’s frequent leadership changes and failure to carve out a strong e-commerce strategy have put it at risk of following Kmart’s path.
Another company facing similar pressures is Rite Aid. Like Kmart, Rite Aid has struggled with operational inefficiencies and intense competition from larger, more nimble rivals like CVS and Walgreens. Without significant investment in modernizing its infrastructure and improving customer experience, Rite Aid may face the same fate.
How to invest in Haiti – Art (Part 2)
Last week, we learned about opportunities to invest in Haiti, and I spent some ink talking about Jean-Michel Basquiat.
If you found that compelling, MasterWorks is launching a Basquiet piece on their platform this week.
If you’ve got six figures burning a hole in your pocket, Christie’s also has a few items forthcoming.
What’s Biphasic Sleep?
I’ve been having awful sleep lately for various reasons, and I’ve also found it difficult to concentrate on work for eight hours at a time. So, I decided to try biphasic sleep—a pattern where you sleep in two shorter blocks instead of one long stretch. Surprisingly, it’s been working well, allowing me to break up my day and feel refreshed.
The idea of biphasic sleep isn’t new. In fact, biphasic sleep was quite common before the advent of electric lighting and rigid work schedules. People would go to bed early, sleep for a few hours (referred to as “first sleep”), wake up for an hour or two to read, pray, or reflect, and then go back to sleep for their “second sleep.” This was well-documented in medieval Europe and persisted until the 19th century when industrialization and modern work hours led to the dominance of monophasic sleep—the continuous 7-8 hour block most of us follow today.
But biphasic sleep has some key benefits that might explain why it’s still effective. First, it aligns better with our natural circadian rhythms, especially the afternoon energy dip many experience. You can rest during those natural lows by taking a nap or splitting sleep into two segments, leading to improved alertness and focus. I’ve found this especially helpful in breaking up the monotony of a full eight-hour workday.
Additionally, biphasic sleep may improve sleep efficiency. While you may not necessarily need less sleep overall, dividing your sleep into two blocks can help you get more deep and restorative rest, making the hours you do sleep more effective. For those struggling with poor sleep quality, biphasic sleep offers an alternative worth exploring. for over $500 million a year before 2019 and has declined to around $80 million as of 2021. Someone will fill That $420 million gap when things get under control.
Weird time zones
Sticking with weird time-related things…time zones.
I’ve been studying the Spanish Civil War a bit, and a strange factoid popped up to answer a question that’s always bugged me — why isn’t Spain in the same time zone as the UK and Portugal?
The answer? Hitler.
Despite its western position, Spain operates on Central European Time (CET), one hour ahead of neighboring Portugal and the United Kingdom, which are geographically aligned with Greenwich Mean Time (GMT). This strange mismatch dates back to World War II when Spain’s dictator, Francisco Franco, aligned the country’s time with Germany to curry favor with the Nazi regime. Though the war is long over, the time zone is stuck. This is why Spaniards often eat dinner late at night, among many other oddities.
So I went downt the time zone rabbit hole and found other countries that don’t make sense.
China: One Country, One Time Zone
China is vast, stretching across five geographical time zones. Yet, the entire country adheres to Beijing Time (UTC+8). This means that in the far west, regions like Xinjiang experience sunrises and sunsets wildly out of sync with the clock. In Urumqi, for instance, it can be broad daylight at midnight in the summer. The decision to unify China under one time zone was made in 1949 to symbolize national unity. However, this has led to unofficial local times in some regions—particularly in Xinjiang, where many follow “Xinjiang Time,” two hours behind Beijing, though it’s not officially recognized.
India and Sri Lanka: The Half-Hour Quirk
While most countries use whole-hour offsets, India (UTC+5:30) and Sri Lanka (UTC+5:30) use half-hour deviations. India’s time zone choice stems from colonial British decisions, and its vast size means the time isn’t perfect for any particular region. Sri Lanka aligned its time with India for trade reasons, but these decisions continue to create confusion for travelers and businesses working across borders.
Nepal: The 15-Minute Time Zone
Not to be outdone by its neighbors, Nepal boasts one of the oddest time zones, set to UTC+5:45, a 15-minute deviation from India and Sri Lanka. This unusual offset was adopted in 1956, as a point of national pride and to distinguish itself from India’s UTC+5:30.
It’s banned books week
Collecting banned books is one of my vices, so Banned Books Week is like Christmas coming early every year.
My preference is first editions, but if your tastes are a bit more sensible, visit Bookshop.org (Amazon for independent bookshops) and look at a list of banned books I’ve curated for you.
If you buy something using code BannedBooks24, you’ll get a cool 15% off. Yes, I get a few pennies to support my own habit if you buy something.
That’s all for this week; I hope you enjoyed it.
Cheers,
Wyatt
Disclosures
- This issue was brought to you by our friends at Unchained
