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Toppling Giants and What It Means for You

Why one of the most important new rules of money is the need for speed

As a child, my father (and many of my friends’ fathers) went to Sears to do their shopping for anything from appliances to tools to clothes. At that time, Sears was considered one of the biggest retail success stories in the world. The Sears tower, located in Chicago, was the biggest building in the world. There didn’t seem to be anything that would ever topple them.

This weekend, rumors surfaced that this once mighty giant of retail was getting ready to declare bankruptcy. According to the “Wall Street Journal,” “Sears has more than $11 billion in cumulative losses since 2011, and its annual sales have dropped nearly 60% in that period to $16.7 billion. Analysts say it needs to raise more than $1 billion a year to stay afloat.” The company has a debt payment of $134 million due, and barring a rescue from creditors, it won’t have a choice but to file for bankruptcy protection.

Many young people who haven’t grown up with Sears as such an icon will have a hard time understanding what a big deal it is to see such a large company fall so swiftly, but I’m sure they’ll have the opportunity in their lifetime to see similar things happen. It is the way of big giants to fall when fast start ups come after them.

So, what happened to Sears?

Amazon.

When it comes to the fall of big giants, it often comes swift and fast, seemingly without warning…to those who aren’t paying attention.

This chart from “The Wall Street Journal” shows the historic revenue of Sears since their IPO. As you can see, they had a good run of growth from the early 80s into the mid-90s. They then softened a bit in the mid-to-late 90s, the time when online retailers started to pop up.

I remember when people started to shop online. Many thought it would be a fad. Af-ter all, who would trust putting their credit card information into some random website. So, it’s not surprising that Sears saw a little wobble during that time, but I’m sure they felt emboldened when they saw their revenue start growing again in the late 90s, right around the time of the Amazon.com IPO.

This next chart is the historic net operating cash flow of Amazon.

As you can see, their business starts really taking off in the early 2000s and their market share of the e-commerce sector did as well. Now take a look at when Sears revenue began to fall off the cliff. The early 2000s. A desperate merger with K-Mart in 2006 gave then a small boost but only pushed the problem down the road as they soon saw steep loses again.

Hindsight is 20/20

Today, this probably seems like a no brainer look at what happened to Sears. But twenty years ago, when Amazon IPO’d, I can tell you it was not. At that time, no one thought an upstart online retailer was going to upend a giant of retail like Sears, and certainly no one was going to buy the fact that in twenty short years Sears would be filing for bankruptcy.

But again, this isn’t new. Take Kodak for instance. As I wrote a few years back:

• In 2012, Kodak filed for bankruptcy. For years they had ruled the photography world, but now they were failing. Why? In the face of the rise of digital photography, Kodak failed to respond to it as a threat. They thought they were too big to fail.


• Unfortunately, they were not. In fact, the worse part is that Kodak had invented digital photography years earlier and could have easily been first to market. Instead, they sat on the technology because they were afraid of cannibalizing their core business of physical photography…


• …While Kodak understood the need for digital technologies (the what), they failed to understand how people would use them (the why). Instead, they opted to rely on digital technologies that pushed people to printing photos—an Industrial Age way of thinking.


• Kodak was so focused on what they made, photos, that they failed to remem-ber why they made them, to be shared. Rather than focus on technologies that made sharing easier, they chose to focus on technologies that made creating photos easier while keeping up the roadblocks to sharing.

Of course, Instagram came in stole the show. When they were bought by Facebook for $1 billion, they had 13 employees. Today, they “will bring in about $6 billion in ad revenue this year, with projections that it will make $20 billion by 2020—a quarter of Facebook’s total revenue.”

Sears, like Kodak before them, as well as many other businesses, simply got too big and too slow to keep up with the competition. At the time, they thought they were making the right moves to protect their market share and maintain the status quo, but when it comes to the markets there is never a status quo. There is only move fast and adapt to change. If you fail to do that, you die. It’s now happening to GE, a 125-year old company.

The need for speed

A while back, I wrote about the new rules of money. The fifth new rule of money was The Need for Speed.

With technology changing so rapidly, it becomes very important to understand that our time is a time where information is currency and knowledge is money. In order to survive you need to adapt and change at the speed of information.

The good news is that this means anyone can become extremely wealthy if they move fast enough and have the ability to understand the information they are processing faster than the competition. Instagram saw this. Amazon saw this. Many others did as well.

The Sears and Kodaks of the world falling is not a fascinating story because large giants were toppled. No, it’s fascinating because fast start ups did it. And anyone can start a company that does this, even you.

One thing is for certain, however, everyone who fails to grow and adapt at the speed needed will suffer financially in the coming years, not just companies but individuals as well. After all, they’re all employees of those large, slow giants.

So, if you want to thrive financially tomorrow, start thinking at the speed of information today.