Russ Roberts

Platt on Working at Wal-Mart

EconTalk Episode with Charles Platt
Hosted by Russ Roberts
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Charles Platt, author and journalist, talks with EconTalk host Russ Roberts what it was like to apply for a job at Wal-Mart, get one, and work there. He discusses the hiring process, the training process, and the degree of autonomy Wal-Mart employees have to change prices. The conversation concludes with a discussion of attitudes toward Wal-Mart.

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0:36Intro. [Recording date: June 4, 2009.] Experiment: took job at Wal-Mart. Stint at Wired Magazine, read book about journalist who took a low-paying job; skeptical, how to challenge it; book claimed it was impossible to live on current wage. Paradox: people seem happy to work at Wal-Mart. Took job. Friends know that he shops there. American West, small town, hard to not shop at Wal-Mart. Those who dislike it sometimes claim that WalMart has driven the Mom and Pop retailers out of business. In a sense true, but not unscrupulous. It simply did the job better, so people started preferring going to Walmart. Businesses that were not well run, didn't have good stock, and not highly motivated or were genuinely unhelpful suffered the inevitable fate of capitalism--either a good thing or a bad thing, depending on your orientation. Drove out the Mom-and-Pops; but even though some of those Mom-and-Pops were unpleasant and unhelpful, that's the wrong answer. Wal-Mart might have liked to do that, but in fact, they couldn't and didn't. The consumers who drove them out of business, because the consumers prefer Wal-Mart. In NYC, tried to prefer Mom-and-Pop businesses--local color. File cabinet on display: "Oh, you can't have that. We'll have to order it, and you'll get it in about two weeks." Microwave oven, same problem. Either because they cannot afford to have a large stock in the store, or because they have always done it that way and cannot change. Probably a little of both. Unhelpful, resisted attempts to shop there. Suggests that idea that Wal-Mart artificially cut its prices, drove them out of business, is now taking advantage of the market is completely untrue. They sell for better prices, but they also have an extremely wide range of things that people want. Literally giving the consumer what the consumer appears to want.
5:40Relentlessly pushed down prices by putting pressure on their suppliers. Now vilified. Will come back to at the end. Talk about social and cultural aspects of Wal-Mart. How hard was it to get a job there? Difficult. Local Wal-Mart, town with two colleges, many young people, more than 150 applications for the half dozen jobs that had opened up. Sophisticated screening process, starting with beautifully designed quiz, later used for own small business. Show up on time, refrain from stealing things, refrain from hurting self, not use any drugs. Quiz gets at those issues in roundabout ways; might be online on website or can go to any store. About 15 minutes to go through it. If called back, first interview. No privacy. Tables laid out like church bake sale; can hear interview of others, 4-5 interviews simultaneously. First interview, relatively short, about 10 minutes. If you seem Wal-Mart material, called back. Certain amount of autonomy by store. Called back to meet head of the department. Final interview was with assistant manager; flagged three quiz answers and questioned those relentlessly.
10:04How long did you intend to work there? No intentions because know what to expect. Liked store, found it more interesting and liked people more than expected. In back of mind to write about experience; ethical dilemma. If they turn out to be the worst employer in the world, would deserve whatever they got; if they turned out to be really good, could probably write something that would do them more good than the money it would cost them to go through the training process. When they gave careful look-see, did you try to oversell your interest in the job? Made it a principle not to lie to them. Had reference to previous retail job, deception. Why do you want to work here? I like Wal-Mart, honest. Didn't ask if he was a writer and he didn't tell. Most people who apply don't likely really know what they are going to do; lots of turnover. Risk of being an employer. In order to go through the quiz, hardest part; asks about honest. Would you agree that everyone has stolen some little thing from an employer? Cynical answer, paper clip; stuck till adopting mindset of what ideal employee would answer. Typical interview question: What are your flaws? Russ: perfectionist. Everyone knows you are going to lie; but sometimes people do blurt out the truth. With quiz, that's probably why they do the face to face. Probably someone that cynical won't be the best employee. In the end, very insistent on wanting to keep Platt. When Russ young, summer job at Bradley's, retailer like Wal-Mart, general store. Got no training. Talk about the training. Two full days, history of company, corporate creed, what you should and shouldn't do. Then out on the floor, working as Wal-Mart associate, restocking; could take time off at any time and go to the back with computers and self-education program. How to lift things without hurting your back, how to greet people, etc. Paid usual hourly wage to take that training; on completion, pay increase because now more valuable to the company. Well-designed, good for both.
17:58Self-administered tutorials increasingly common in the workplace. Was that the bulk of the training? How much did you do? Only worked there a few days; took at least eight of their sessions. Some amusing, warned against telling jokes to customers, could be offensive; safe topic for jokes to make fun of white-collar people such as doctors and lawyers. Material generally interesting as a guide to interacting with people without offending them. Could cost the store hundreds of thousands of dollars from an offended customer. How much were you paid? Complicated, went up slightly when willing to do check-out work in addition to other work. More than minimum wage; others said more than at local Target; more than fast food places. Low pay, but no prior experience jobs. Education system increases value, vocational education fixing cars, construction. Employees understand it. Liberal commentators find it a hard concept. Market system; some people don't like the outcome. Power at Wal-Mart: argument that there is market power that they exploit. Other way around: Wal-Mart in constant state of anxiety that some other store is doing a better job. Manager went every week to competitors to check prices and make adjustments. Weekly poll by paid polling company of customers for satisfaction.
22:54Written up in NY Post: talked about autonomy that employees had at that Wal-Mart. How much and what was the nature of it? Given a machine, hand-held scanner called a telxon, linked to computer that runs the store; tells how much available in stock and the price, and also how much Wal-Mart pays; and thus what the profit margin is. Want employees to be properly informed because they want you to know what you are doing. Why is that relevant? Independent authority to reorder merchandise, and authority to do a "special"--value-price, set out a pallet stamped with a discount price. Can print your own price stickers. Person who does the most successful value price gets a $50 coupon. Item to protect cars from the sun was a big success, extra reward, invited to Bentonville. Extraordinary. You'd think the danger would be overzealous under-pricing. All in it together, all getting a share of the annual bonus; don't want to do anything to hurt the store or you'll get fired; also peer pressure. What about impulsive gambler? In the South, where it is sunny. In Minnesota, the car cover trick wouldn't sell. From Wal-Mart's point of view they take a risk, but also keep management costs well; and person placing the order is speaking daily with customers.
29:20What about day-to-day issues? What makes sure things don't run out on the shelves? Legendary inventory control and just-in-time system. They would say network of local warehouses, buffer between store and supplier. Every night, go around and check inventory on shelves and re-order. Different crew comes in. Warehouse resupplies. Around midnight, pallets and restocking. This was a plain Wal-Mart, not a super-Wal-Mart; local town didn't want large store. In Russ's Montgomery County, set of rules that applies to large stores, which only applies to two stores: super-Wal-Mart and Wegman's, large, pleasant, successful supermarket. Don't ban these stores, but they have to apply for a special permit, risky investment. Benefits: pay was low; there is a stock option. Everyone can set aside a small amount at each pay interval, buy stock at small discount. Everyone else chose to do that. How about camaraderie, there long enough? Lots of interaction. Had someone assigned as a guide. Good terms with department manager. Restocking does not take full concentration. As a journalist wanted to know about the people. Genuinely happy to be there because alternatives were worse; Wal-Mart treated them well, by leaving them alone. People who worked there were well-selected as employees, honest, sincere, friendly. Was anyone ambitious? Critics: dead-end job. Few seemed to have the fire of ambition. Substantial part of the work force that doesn't believe it can do much more, beaten down by educational system perhaps. Department manager happy in that position; always someone hassling him in other kind of job; at Wal-Mart could go for weeks at a time without being bothered by superiors, could run own section. Broken down like little stores. Were reports on profitability generated by section? Yes, each section had to give a weekly report, automatically generated; weekly meeting on the sales floor, anyone coming in could listen, best performing sections applauded. DVD seller would announce he's decided to do a special, and announce the price. The Wal-Mart cheer: easy to ridicule, "give me a W, give me an A"; the hyphen is the "squiggly," and have to wriggle. Who is the most important person? "The Guest"--the customer.
37:38Hayek, value of local knowledge, knowledge is dispersed, idea that an associate making $7-$10/hour that, say, DVDs will be on special as opposed to that coming down from corporate headquarters is surprising and smart. Bentonville, Arkansas unlikely to be able to figure out the tastes of people in another state like Flagstaff. Some guy selling stuff all day long knows. Might think he knows but not know. Like to think of Wal-Mart as a high-tech company, hand-held device, warehouse, keeping inventory costs down. You'd think Wal-Mart would have a lot of information at corporate headquarters about what's selling. Example: supposedly Wal-Mart in advance of disasters like hurricane knows what people want to buy--water, milk, beer; maybe Pop-Tarts, potato chips. Presumably that kind of decision is not being made on the floor. People in Arkansas can also make dumb mistakes. Don't know which movie star is most popular in Arizona. Results being analyzed and if someone makes too many bad calls, someone will have a word with the employee. Surprising how far down the hierarchy the decision-making goes. Not that many levels. If you'd stayed longer, maybe more kinds of meetings. Performance evaluations; pay increases spaced out every three months; monitored in a sophisticated way. If you didn't want to participate in putting things on special, can stay on long-term basis.
43:43What kind of reaction did piece get? First went online. Too complicated to write a book. And books that are positive about large corporations don't do very well. No scandal, no announcement of the plight of the working poor. Washington Post interested but doesn't allow working under cover. Something else was dominating the news. Interesting but doesn't make a good book. Years later, blogging and put something up; NY Post editor saw it and asked for write-up. Response on blog, 2/3 positive; not much on Post; one interview; that was that. Social and cultural attitudes toward the company. Capitalism. Cultural taboo among the educated to shop or work there. No Wal-Mart near Russ now, but when away shop at Wal-Mart out of town; raises eyebrows amongst friends. Viewed as exploiting people. Tragic attitude: if you are successful you must be exploiting people; handicap to our future. People afraid of things they cannot control; view is that large corporations feel uncontrolled, government needed. Unions want to unionize. More than a million employees at Wal-Mart; multiply that by union dues, unions cannot be oblivious of this. Cultural taboo, on radio the other day, Wal-Mart came up and person said, Costco's okay--but still way below the national average, different kind of employees. Is Costco unionized? Different setup with their labor force. If you wanted to know the places you shopped are all ethical, you'd spend a lot of time investigating and not a lot of time shopping. Would be poor, and risk others deciding you are not ethical and not shopping with you. How do you assess this, how do you know your facts are right, how do you keep up? Just ask the employees. Attitude tends not to respect the employees, as if they are being exploited because they don't know any better. But they have it figured out; protecting themselves. Put jar at checkout where you could augment the wages; employees might even feel insulted; and people probably wouldn't put the money in the jar.
53:12Free market sensibility that wages come from the value you contribute. Where did that come from? Grew up in socialist environment, Britain in the 1950s; came to the United States because dissatisfied with that model. Dropped out from studying economics at Cambridge University. Read Hayek. Only at Cambridge for 6 months; Keynesian bastion. Any interest in science? In high school, math and physics; now engineering; have been a science fiction writer who took the science seriously. Encountered any virulent Wal-Mart folks? Spared. Someone might say you only worked there a week, no tough questions asked here. Only a small sample, don't know how money is redistributed; corrupt. Response: not being paid except for NY Post for this work; good vibe; same people still working there. Maybe they are just stuck there. Not dumb as the elitists would like you to think. Sci Fi work all out of print. Wired journalism still available in their archives.

COMMENTS (34 to date)
Alvin writes:

Russ,

Another great podcast. I like these shows where you interview people based on their working experiences - like the ticket scalper guy and the car saleman. It provides a different perspective you don't often find.

Mads Lindstrøm writes:

I was very amassed about the degree of decentralization, that Charles Platt describes. My prejudices tells me American (I am from Scandinavia) companies are very top-down and bureaucratic.

Anyway, the reason that employees, at the lowest level, has authority to do "special"--value-price is obviously good from a localization of information point of view. But I think it also gives motivation to employees. If I make a "special"--value-price because my boss told me so, I am not going to do my job with as much pride, as if I had decided it myself. If I decide myself to do a "special"--value-price I will properly be more careful with placing the price-sign, where everybody will notice it. I might put the items nicer on the shelve. And when the customer asks about a product, I will try to sell it a little bit harder.

From my own job as a software developer, I know that it is sometimes (which do not mean always) more important who takes the decision, than which decision is taken. Again, this has to do with motivation and responsibility. If I decide for myself, I also bear the hole benefit of success and cost of failure. If a manager decides, he will share in the cost/benefit, and thus my self-interested motivation is not as high.

Dr. Duru writes:

Nice. One non-scientific study to refute the results of another non-scientific study.
But I did at least find it interesting to get one alternative perspective on the work at Wal-Mart. It will be even better to hear the stories directly from "real" (maybe long-time) employees.

Jake Russ writes:

Russ,

Thanks for following up the Platt blog post from a while back.

I've found myself also having to come to Wal-Mart's defense several times. When this happens I usually try to point people to sources of information where they can read reasoned articles giving evidence that Wal-Mart really isn't the evil company people like to say it is. Now I can suggest to them a place where they can listen to someone who asks the big question: If Wal-Mart is such a bad employer, then why do people line up to get a job there?

I believe it's impossible to simultaneously harbor hate for Wal-Mart while giving a sufficient answer to that question.

Kailer writes:

Let's suppose as part of the stimulus president Obama started a massive jobs program employing people to work in Government retail outlets. Suppose also that it employed a million people who would otherwise be unemployed, underemployed or not making as much money in their next alternative. Further, this SOE was able to offer goods at lower prices than anywhere else in the market, but was still able to make large profits for the government. Maybe I'm just cynical, but something tells me such a development would be hailed as a triumph of socialism, yet when walmart does exactly this it is considered to be capitalism at it's worst.

Greg Ransom writes:

I love it.

An intellectual actually serving other human beings -- if only for a handful of days.

Greg Ransom writes:

This Wal-Mart culture sounds much more healthy than the culture I found at Sears.

Sears seemed completely focused on selling a particular product -- insurance for appliances. And the culture was all about brow-beating "sales associates" to meet sales goals for selling this product (which most folks identify as a poor product for consumers with a high return for the company.)

Employees typically had a very negative attitude about this whole process, which often had managers offering negative evaluations of sales associates, and browbeating them to do better.

Oldline Sears used a commission model here. Wal-Mart has rejected this model.

At Sears also, employees had essentially no autonomy for making decisions as far as the sales floor display and pricing went -- this came from Chicago every week, and there was zero feedback to Chicago about what worked and what didn't work. And again, managers used the instructions from Chicago as a means of being the controlling agent over lower level staff. To the extent that some enjoyed the psychic payoff of the dominance / submission dynamic, a somewhat unhealthy dynamic for lower level employees was also created.

It sounds like to me one reason Wal-Mart is crushing Sears in many areas is because of the competitive advantage it has created by making for a more healthy work environment -- a happier work crew.

William writes:

I second Alvin's comment.

This and the interview with the car salesman have been two of my favorites so far. I'd like to hear more like this, exploring the economics of how real firms make decisions.

James Harrigan writes:

Wal-Mart pre-positions staples (water, milk, pop-tarts) prior to natural disasters (time 37:38). In a prior podcast, your guest discussed the "good-old boys" who rented a trailer, filled it with ice and went to post-hurricane (South?) Carolina and charged above normal market prices. That discussion centered on how price signals facilitate distribution of goods among consumers and how the good-old boys got busted.

My question is empirical: given how associates can modify the prices on items, what did they do for those staples? Did they increase the price, increasing margin but possibly incurring ill-will as "gougers"? Did they drop prices, because they had empathy for their customers? Did they do nothing?

Unless there was explicit instruction from Bentonville, this could be a data point for behavioral economics.

[Link added--Econlib Ed.]

Russ Roberts writes:

James Harrigan,

You wrote:

"My question is empirical: given how associates can modify the prices on items, what did they do for those staples? Did they increase the price, increasing margin but possibly incurring ill-will as "gougers"? Did they drop prices, because they had empathy for their customers? Did they do nothing?

"Unless there was explicit instruction from Bentonville, this could be a data point for behavioral economics."

Those are my questions, too. My presumption is that in the face of an oncoming hurricane, Bentonville orders lots of these water, pop-tarts, etc. But I would be very surprised if the associates can set the price of these items. Something to look into.

Stephen Monrad writes:

I didn't realize how decentralized the management of Wal-Mart is. It is very interesting that this decentralized model works so well.

I've been reading recently about intrinsic motivation. My guess is that Wal-Mart's management methods are helping employees engage the work they do. This increases worker productivity and helps the bottom line.

I don't agree with the low wages they get paid. I admit that I am a bleeding heart liberal. I think everyone deserves a living wage. The job of stocking shelves needs to be done by someone. They should get paid a decent wage for the work they do.

Adam writes:

Stephen,

Who are you to say that their wages aren't "decent", when you aren't even working there?

It is condescending to treat workers at Wal-Mart as though they were incapable of judging for themselves whether or not the wages they make are sufficient.

James Harrigan writes:

@Russ Roberts

Those are my questions, too. My presumption is that in the face of an oncoming hurricane, Bentonville orders lots of these water, pop-tarts, etc. But I would be very surprised if the associates can set the price of these items.

That Bentonville would disallow the associates from modifying price was my thought, too.

tw writes:

Russ,

While I found the podcast interesting, not only for the economics but because I do indeed shop at Wal-Mart, I found it severely lacking in key details.

* Mr. Platt couldn't remember how much he got paid.

* He couldn't remember the details of any of his benefits, including the stock purchase (at best, it was a fuzzy $2 per pay period, which he thought was every two weeks, but he wasn't even sure about that).

And so on.

Unless I missed the exact time he worked at Wal-Mart, he implied it was quite a while ago when he discussed the process of deciding not to write a book, then eventually writing the New York Post piece. Either he didn't take very good notes during his week of work there, or he didn't refresh himself by re-reading his notes before your interview (not a good guest in that regard, if that's what he did).

But if he's going to refute his claim that Wal-Mart workers make more than Target workers, then he needs to produce specific numbers. A much better journalistic effort would have been something like: "I started at Wal-Mart making $8 per hour. In comparison, my interviews at Target, Taco Bell, and Staples resulted in offers with starting pay of $7.15 per hour, $7.30 per hour, and $7.45 per hour, respectively." He was missing so much detail that it severely weakened his case.

For a future podcast, I'd like to hear from a long-time Wal-Mart manager to discuss the decentralized management approach....he should be able to answer your questions better than Mr. Platt from his week on the job.

I also think it would be interesting to hear from somebody who worked their way through college while working at Wal-Mart. Maybe they've got their degree now....they're working in their first post-college job....and they could speak to their four years of experience at Wal-Mart (with lots of specifics, hopefully) and contrast that with their current job.

Gerard D. writes:

I can answer a question that was posed in the interview about how one should answer an survey question along the lines of 'everyone has stolen something from their employer'.

There will be several such questions in the questionnaire and together these will constitute a 'scale' for 'perception management'. Or how concerned one is about how they are viewed by others.

The questionnaire designer takes it as given that everyone steals something (and does the other slightly anti-social things which are also asked about in the other questions which comprise this scale).

If you strongly deny having done these things, the questionnaire has revealed the fact that you are likely to lie when asked such questions about yourself personally.

So if later you deny in the questionnnaire that you personally would steal, when you have noted that you don't believe others do, that will be less credible than if you had said that you think others steal stuff but you won't. And so your 'good' answers are discounted (made less good) based on your affinity to manage the way others perceive you, which has been determined by the earlier questions (such as "Does everyone steal", etc.).

If anyone is interested further they can take a look at psychometric theory on the web.

Cheers

Seth writes:

I liked this podcast.

I price for a national retailer and found Wal-Mart's practices very interesting.

Russ - In the podcast you asked if there was a control mechanism on the associates' power to set prices.

Based on Mr. Platt's comments, it sounds like there are at least three control mechanisms. (1) Weekly department profitability reports. (2) Bonus. (3) Good line management (i.e. hiring, training and firing). In my dealings with various businesses, I find what separates good and bad businesses is closely related to how they view those 3 items.

I too am interested in when Mr. Platt worked there. I wonder if they've moved away from that autonomy over the years. I have the pleasure of being able to choose to shop at a Super Target or Wa-Mart Supercenter and find I more often pick Target for the better experience, though 10-15 years ago the Wal-Mart offered a great experience.

Dave writes:

Another great show. Thanks Russ!

Two thoughts:

1- a story concerning the distain some people have towards large companies that employ low skilled labor.

My brother went to art school in the UK one day while walking the streets of Glasgow a perfect stranger punched him in the nose and stumbled off. There was enough blood that he stepped into a McDonalds in order to clean up a bit. When he told his classmates about this they were shocked, not by the random violence, but by the fact that he had set foot in a McDonalds.

2- Why is Costco Acceptably Couth?
I’ve often wondered why Costco is acceptable in some upper middle class circles while Wal-Mart is not. I think while PR by Costco is important, it mostly has to do with product selection.

Costco caters to the group of people who distain Wal-Mart. (You can no longer even buy non-“organic” frozen vegetables at Costco.) Most of my friends in this circle would love to shop at Whole Foods exclusively but find the cost prohibitive. Since Costco carries the things they like at far lower prices it would be a real sacrifice to not patronize the store.

Wal-Mart, by contrast, caters its products towards the lower middle class and doesn’t carry many of the products my friends like to buy. Since they don’t choose to shop there anyway it is a low, or even zero, cost opportunity to engage in self-righteous scorn and paternalism.

I should say it is low cost to them. When they help pass legislation to prevent Wal-Marts opening near them it does hurt lower middle class people in their communities. But they must take this action to save their neighbors from the exploitation to which they would doubtlessly succumb.

Sleeper writes:

Thanks for this great podcast!

AHBritton writes:

I have to agree with 'tw' about this podcast. Although I found the discussion about Wal-mart's decentralized management style interesting, the rest of the interview seemed like basic re-hashing of concepts of economies of scale and scant anecdotal evidence from a week working at Wal-mart.

For a no more scientific, but much more relevant, response to Nickel & Dimed check out:

http://www.csmonitor.com/2008/0211/p13s02-wmgn.html

I have not read the book but the topic seems interesting.

Also a debate on whether Wal-Mart is "Good for America" can be seen at:

http://fora.tv/2009/04/14/A_Debate_Is_Wal-Mart_Good_for_America#

Personally there are a couple of debaters I would skip but all in all there are some pretty good arguments on both sides. Some of the more interesting opposition arguments relate to Wal-mart's use of eminent domain and enterprise zones as well as studies claiming to show Wal-mart having a depressive effect on local economies.

I have no major qualms with big box stores. I shop at them for certain items, where I live their is a Target and I would have to drive ~ 40 miles to the nearest Wal-mart. I prefer Costco and small shops not for terribly ideological grounds but mostly aesthetic and personal. I don't much care for bright florescent lighting (Costco as well as book chains such as Barnes & Noble tend to have a dimmer atmosphere) and because certain things I enjoy aren't readily available at larger chains. i.e. certain smaller publications, food products, movie selections. Interestingly I don't m I do not disparage anyone from utilizing the lower prices or convenience of larger chains. I do find it interesting that Russ and Platt seem so disparaging of small businesses. I've been to businesses big and small and have had good and bad experiences at both. It seems like there are plenty of small businesses that do quiet well serving their markets and have wonderful customer service. I have also been to large chain stores that seem poorly run in my opinion.

Finally I do want to comment about the claim that if you try to investigate the ethics behind every purchase and economic interaction you will find it hard to partake in society. While I agree on one level, I think that this dismisses a legitimate mode of economic interaction. Boycotts related to the civil rights movement, south-African apartheid, etc. are directly based upon the notion of examining the ethics of those you trade with. Now its true that this has its limits and can also have unintended consequences (such as harming those you are trying to help) however I don't think it can be dismissed as an illegitimate economic activity even if not a beneficial one in certain circumstances.

In the instance of China, a large supplier of cheap goods to Wal-mart as well as many other retailers, I do believe that a compelling argument can be made that the increase in trade has raised the standard of living of the general Chinese population and is related to an increase in Chinese economic freedoms. On the other had China is still an incredibly repressive regime that is willing to coerce and kill the majority of its population if need be. Now will this greater standard of living and increased economic freedom lead to the downfall of this horrible regime or will the increased economic clout of the Chinese government silence critics in the United States and elsewhere strengthening their hold on power? I honestly don't know but am interested in peoples views.

Mark writes:

Very very interesting topic, but the guest was lacking. As he pointed out himself, the sample size was far too small (out of curiosity, was the two-three days training part of the one week)? The constant ideological snark "librulz think this, elitists believe that," was rather dull and subpar for a show that normally makes its points via analysis and arguments.

As for all the hating on small businesses, the generalizations were a bit over the top and, in my experience, fairly inaccurate. Russ, I hope you get a better supermarket.

Justin writes:

I liked the interview a lot. Most of my issues have already been discussed above.

I really do want to know more about the decentralization of Walmart. If it is still in practice, it's a great business model.

James writes:

A disappointing interview that doesn't do a good job of addressing either of the very interesting topics it touches on. The author spends a few days at Walmart and then pretends to both understand what it is like to work there and its management system. There are plenty of actual workers who might provide a less ideologically tinted view of what is like to spend more than a few days working at Walmart. I think that would be a fascinating discussion and much more nuanced. Second, there are many business school professors who have spent years working with Walmart and puzzling over the reasons for their success. Both of these directions would be fascinating (and I hope you do it in the future!). Unfortunately, this interview addressed neither topic very well. I'm a big fan usually but found this podcast disappointing.

mulp writes:

I wish the implications of this from his Post article had been discussed:
"They were less enthused about health benefits, which offered minimal coverage during our first six months. The full corporate plan would kick in after that, but seemed to require significant employee contributions. Still, my fellow trainees assured me that health plans at other retail chains were even worse, and since the federal government had raised the limits for Medicaid eligibility, that was an option for people with children."

and

"To my mind, the real scandal is not that a large corporation doesn't pay people more. The scandal is that so many people have so little economic value. Despite (or because of) a free public school system, millions of teenagers enter the work force without marketable skills. So why would anyone expect them to be well paid?"

What if everyone had a good education and craft or professional training? Would Wal-Mart and all its peers be forced to pay higher wages?

While I haven't talked to Wal-Mart employees at length, I have had time to talk to employees at Home Depot at a time of high unemployment in tech while construction was still strong (2001-2004). A lot of them were engineers and professional unemployed from tech. I can make the argument the skills of a tech worker are needed at Home Depot, but the pay and benefits aren't much different than Wal-Mart.

Russ Roberts writes:

Mark and James:

I too was disappointed that he had only spent a week on the job--hadn't known that when I scheduled the interview. But if he had spent five years it wouldn't prove anything--it would still be anecdotal. The reason to interview someone like this is to learn something. I learned something. Not as much as I'd have liked but some things I hadn't known about.

We'll come back to these topics again, particularly with guests from a different perspective. Hope we learn something then, too.

Scott Smaller writes:

It's unfortunate that my first comment to Russel is a negative one because since discovering econtalk a few months ago I have been excited by and addicted to his podcasts. Russ has helped me develop many of my "work-in-process" ideas and has given me support with viewpoints I had felt were mine alone (and thus must be nuts). I like the pace and style of his interviews and find value and meaning in every one of them.

Until now. For one so gifted with critical thinking I can't understand how Russ could find Platt's story-telling anything but meager, anecdotal and presumtuous in the notion that he he's added any useful data to the question of how we should view Walmart.

I started listening to this with the same prejudices as Russ and Charles, that successful companies are a good thing and real profitability is, by definition, the result of adding value to society, and that Walmart's managerial innovations are legendary. But to think we have any new evidence of this from Platt's pre-disposed, n=1, 3-day (before he got "bored") episode is nuts.

How can Platt be so presumptuous as to report to us, from that vantage point, on the inner-workings of this corporation's policies on decision-making automomy? How can he even generalize anything about Walmart's "weekly store meetings" from observation that took less than a week?

Near the end of the podcast Russ asked about potential critisms of the report. Platt's response comingles obviously ligitimate critism (biased, short-term ovservation) with accusations of journalistic corruption like all of it could come only from crack-pot elitist liberals. Well, I'm a crack-pot elitist libertarian and I've got plenty of my own.

I wouldn't be this critical on anyone I didn't greatly respect, Russ. I'm sure your next podcast will be as excellent as all that preceded this.

Scott Smaller writes:

I just read Russ' June 18 reponse to Mark and James, and see he's already acknowledged all of this. As Rosanna Rosanna Danna would say, "never mind."

Tony writes:

This episode was a mixed bag. The biggest negative IMHO was the guest's selective memory and, as Russ has already acknowledged in a comment, Platt's limited effort to accurately report on the raw empirical data he gathered back then as a Wal-Mart employee. Like tw noted in his or her comment, I thought it was pretty clear that the delay between the time when he worked at Wal-Mart and the time when he reported on his experience was so long as to make some of his conclusions suspect. Crime scene investigators point out the fallibility of memory and the tendency of all of us to, over time, reshape our memories based on our individual biases, forgetting details that are inconsistent with our internal models.

On the plus side, it was interesting to learn about the interview process. It was also interesting to learn about the Telxon's role in providing easy access to detailed information about products for sale, including the mark-up. Giving employees a way to personally profit from that information is a great innovation that I had never heard about before. Wal-Mart has excelled in exploiting information technology for decision making, and letting employees do repricing experiments adds to the volumes of less-subjective detail they have on a minute-by-minute basis from their use of RFID-based inventory management, just-in-time supply chain management, and tight integration of their transaction-processing and decision making systems.

Although I'm a big free market fan, I am not in the camp that says governments should play no role. Elections are a form of free-market competition too. Yes, they have serious problems (e.g. domination by the incumbent, inability to check unethical behavior), but most of those problems have analogues present in the free market economy. So I have no problem if a community or state chooses to place limits Wal-Mart's ability to build a new store. There are downsides to hosting Wal-Mart. For example, look at what happens when small towns on the fringe of a big metro area compete to attract Wal-Mart to their community. Pacific, MO is an example. Years ago, before the advent of Wal-Mart Supercenters, Pacific bent over backwards to attract Wal-Mart, and succeeded. More jobs, and inspite of the loss of the local retailers, more tax money for Pacific...a great success for Pacific, until Wal-Mart wants to replace the site with a supercenter. Wal-Mart does what I do if I were Wal-Mart, which is consider the options and build the supercenter at the best location available, which turns out to be a few miles away in Eureka--a different town, a different county. Yet in spite of the effect on Pacific (a business tax base lower than it was before Wal-Mart moved there), I'm willing to bet that Pacific residents still shop at Wal-Mart.

BTW, if you want some (now somewhat outdated) information on what has led to Costco's ability to compete against Wal-Mart/Sam's Club in retail, check out this article:
http://money.cnn.com/magazines/fortune/fortune_archive/2003/11/24/353755/index.htm

The free market plays a huge part in Costco's success; the company innovates in non-traditional ways but the company fundamentally responds to who matters most: the customer.

I think an EconTalk podcast about Costco would be a good idea.

charley hardman writes:

i once drove through a wal-mart parking lot and noticed a few things. russ, please email me for my guest slot. i can talk for at least an hour, and you can pretend, painfully, that the booking wasn't a mistake. one bright spot: i'll review my notes of the parking lot trip before we speak.

russ defender writes:

Another crotchet from "charley hardman"; googling him returns such comments scattered about the Internet. I guess I have to give him credit for being a bit more subtle than other complainers. Charley, if you're a regular listener to EconTalk you'd cut Russ some slack, and if you're not, why go to the trouble of commenting? Oops, I guess I just encouraged you by reacting to your snide remarks.

kebko writes:

I worked at Wal-Mart for a summer back in school, and, though some time has passed, I would generally agree with Mr. Platt's assessment. There is a significant amount of decision-making power in the hands of unskilled low-level workers.
I would also note that while a lot workers were satisfied with the floor-level jobs, I think you will find a large number of assistant store managers, store managers & regional managers who came from the rank & file. They work very hard. My father sent a complaint letter to a local Wal-Mart a while back & the response letter, while cordial & professional, would have made your high school english teacher grit her teeth. (For example, he used the word "incontinence" instead of "inconvenience". This is a word I would expect to appear in many of his letters.) I considered it to be a great thing that Wal-Mart allowed a person who clearly lacked some basic skills the opportunity to manage an entire store that moved multi-millions of dollars of merchandise. And he probably did a decent job of it.

I think the turning point for Wal-Mart was expanding from rural to urban areas. When I worked there, it was still largely a rural phenomenon. I knew the type of people who worked there. I had gone to school with them. At the time, they didn't strike me as people to be pitied. They were friends, just getting by like all of us were. Back then, the overwhelming number of stories about Wal-Mart were about truck drivers & store workers who had retired on their lucrative Wal-Mart stock bonuses. Once Wal-Mart hit the cities, they entered the realm of class struggle & political pandering, where intellectuals sit around arguing about groups of people they don't know & never will.

Cory writes:

His analysis of the Wal-mart distribution channel was not even close. Wal-mart uses a cross dock operation to keep their stores full of products. When a store places an order for a product it goes to the producer that fills the order and delivers it to a Wal-mart cross dock warehouse where it is broken down to the different delivery trucks. In one side and out the other to the stores. This is how just in time works. It is much better to store items at the store than in some centralized warehouse (this limits inventory and places it near the customers). The store would not be able to keep cost low, and high inventory turns if they had to maintain a large inventory in huge warehouses. I don't think he had a very good handle on how the store does business. It would have been more productive to interview several past or present employees that could explain how the system works.

Wal-mart has the largest distribution computer system (outside the military) that it uses to help with store forecasting. I can guarantee that a department manager or higher reviews and approves any orders that exceed certain specifications. Wal-mart is a high tech company that uses that leverage to beat it's competitors. I don't place much stock in his review of the "typical employee's job" he didn't remember many of the details besides coming to the wrong assumptions.

Normally I learn a lot from your pod-casts keep up the great work.

Ameer writes:

Econtalk is an amazing podcast series. I want to start with that because I haven't commented before, and don't want the first thing I say here to be negative.

I really didn't like this guest. I did think there was some interesting information here, but I found Mr. Platt to be condescending, excessively ideological, and inexact to the point where I suspect he may even be incurious (not a good trait for a journalist). I was set to write a lot more, but I think many other people have covered it. I agree completely, for instance, with Mark's comment about "constant ideological snark."

But I did want to call out one thing that I don't think others have mentioned. Mr. Platt takes a potshot at Barbara Ehrenreich for her book Nickel and Dimed--both implying that her research for her book may have been fabricated ("supposedly") and that her conclusions were silly. He then describes his attempt to do his own research on the subject, but he in fact did nothing of the sort. Instead of mimicking her experience, he goes and works at Walmart, a company where, by his own admission, hundreds of people line up for a single position, perhaps because they pay more than other low-wage jobs, have better working conditions, have an employee stock purchase program (!), etc. How is this a comparable experience to Ms. Ehrenreich working as a waitress at a diner or cleaning houses? It's not. If Platt took the Walmart job in order to investigate whether Walmart is really a terrible and exploitative place to work, well fine, but that really has nothing to do with Ehrenreich.

I also think it's important to note the superior tone Platt takes when discussing those who think Walmart is exploitative (a tone that Mr. Roberts sometimes flirts with as well). Walmart may not be an exploitative company, and all the people who say so may very well be dead wrong. But why do people think so? Well, they probably read something in a newspaper or a magazine that made a persuasive argument for it. Or heard the argument secondhand. Not everyone is going to go take a job at Walmart for a week to investigate that claim for themselves (nor could they all get jobs there if they wanted to, since those positions are apparently in such high demand). Being misinformed is not the same as being stupid, or blind, or ideologically bent. Perhaps, when addressing topics like this, guests can be steered to focus on why people might have this point of view rather than haughtily laughing about how silly it is. I think Roberts usually does this well. It just must be difficult sometimes to resist the easy jibe.

Peter Wogan writes:

SUGGESTIONS FOR FURTHER READING (since so many of us agree that this is an interesting topic, worth pursuing):
1) "Price of Everything," Russ' own novel on "price gouging" by a big box store.
http://www.econtalk.org/archives/2008/08/roberts_on_the_1.html

2) If nothing else, Platt's interview was worthwhile for revealing this one fascinating tidbit: Walmart tells employees not to make jokes with the customers...unless they're directed at doctors and lawyers! Clearly some powerful class stuff here (as Russ and Dave also mention). And of course there are many economics studies of Walmart. Can anyone post some links?

3) "Ain't No Makin' It," by Jay MacLeod: a readable sociological study of two groups of housing project youths in Boston. By the 2008, 3rd edition, MacLeod has tracked the trajectory of the "youths'" careers at three points: teen years, mid-20s, and mid-life (sort of like the longitudinal film series "7 Up"). Funny thing is that MacLeod starts with a Marxist interpretation (the title says it all), but the boys' own lives end up showing you CAN make it, to some extent. Even some of the guys who got lost in drugs and dead-end jobs in their 20's settle down and get steady jobs by their 40's. So inadvertently this study ends up refuting Enrenreich--but Platt, too, since MacLeod emphasizes class constraints and shows mixed results. It's more complicated than any of these ideologues want to admit, and this book, against its own will, provides an engaging look into these complexities.

http://www.amazon.com/Aint-Makin-Aspirations-Attainment-Neighborhood/dp/0813343585/ref=sr_1_1?ie=UTF8&s=books&qid=1247504811&sr=1-1

OK, ONE MORE PROBLEM WITH PLATT: HE'S LYING TO HIMSELF
For example, he says he can't remember exactly how much the Walmart workers were paid--but then later in the podcast, he immediately agrees when Russ says it was presumably $7-10/hour. Platt must have known this wage range (if not the exact number) all along, but he tried to hide the actual numbers to serve his agenda. We all have agendas, but the problem is the disingenuous pretext here: saying he didn't get a chance to review his notes so he can't specify the pay.
Similarly, Platt says he went into the job "open-minded," not knowing how long he would work there and that the journalistic goal to write it up was merely "in the back of my mind." But then he quits by the end of the first week! Presumably he knew right from the start that he planned to quit soon and write it up. I'm not judging this kind of "under cover journalism" (a separate issue)--but after the fact, you shouldn't lie to yourself and listeners about your motives and plans.

This self-deception bothered me.

gappy writes:

Like many, I love the podcast series but was disappointed by this one. I am not against anecdotal evidence per se. In the case of Wal-Mart, I am confident that processes and controls are highly standardized, so that observing what happen in a store can reveal a lot. Yet, the experiment had to be conducted for a longer time, with a more systematic discovery plan; the guest should have tried to learn something about the company, or at least in the Human Resources department. He was clearly prejudging the experience, and he knew it would be over in a week. This is Ehrenreich in reverse.

Regarding the eternal debate whether Wal-Mart is good or bad for America: W-M is an excellent case study to discuss the issues of minimum wage (touched elsewhere in this podcast) and of "wage slavery", which is considered by many an instance of exploitation in modern society. If Russ ever has John Roemer or G.A. Cohen on EconTalk, he may want to elicit their marxian perspective on Wal-Mart.

One discussion that listeners to this podcast may enjoy is between the Barbara Ehrenreich, Wal-Mart hater extraordinaire, and Jason Furman, Economic Advisor to President Obama but at the time of the discussion still a common mortal. It is here:

http://www.slate.com/id/2144517/entry/2144521/

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