The Wal-Marti Code
If you seek a five forces analysis of Wal-Mart, please try this page.
Well my summer vacation and blogging hiatus are over. During my absence I did something I can’t recall ever having done: I read four novels. It’s not that I don’t like reading. I just prefer history, biographies, and philosophy. Three of the novels I read were linked by a common theme: all were written by top-selling author Dan Brown. They were, in order of reading, The Da Vinci Code, Angels & Demons, and Deception Point. On the whole I found the novels to be everything their descriptions promised- fast-paced, action-packed, intriguing, highly-readable, and well-researched.
The plots revolve around smart and powerful people with strongly held opinions on and substantial knowledge about some of life’s most important and fundamental questions. The novels make reference to historical artifacts and places, theories, technologies, institutions, policies, and philosophies that guide and influence the lives of billions of people on the planet. And they contain details that are clearly the product of significant background research.
All of that having been said, there was one detail in Deception Point which gave me pause. It was the author’s characterization of Wal-Mart as a depredatory quasi-monopolist rather than a savvy supplier of consumer demand. I wondered whether the characterization was researched, whether Brown made it up, or whether he was interjecting his own opinion. It is a minor point, taking up just one page of the 736 pages, yet worthy of attention.
One of the main characters in the novel is presidential candidate and sitting-Senator Sedwick Sexton. Early in the novel we learn that his political fortunes and poll numbers have been buoyed by his relentless and well-informed attacks on NASA. Although the president is a big fan of the space agency, he is being increasingly put on the defensive by Sexton’s calls for NASA to be disbanded, its efforts privatized, and the savings to the taxpayer allocated to school spending. With every new high-profile, billion-dollar NASA blunder and cost overrun, the senator gains ground. But of course there’s a twist: Sexton, we later learn, is taking illegal campaign donations from a consortium of private companies anxious to provide a wide range of space-related products and services to private individuals and nation-states alike. These include satellite launches, space tourism, and waste disposal.
The company officials feel that NASA uses its government-granted monopoly to forestall or even stifle competition. For example, it is alleged that NASA is not only a less cost-effective provider of satellite launch services, but that it then offers those services at well-below cost, even lower than what private firms charge. By undercutting private launch firms the American taxpayer is left to foot the real cost. In the novel it is in a meeting between Sexton and these company officials that the Bentonville-based retailer’s name is invoked. (All emphases in the original):
“Kistler Aerospace,” Sexton said, shaking his head in despair. “Your company has designed and manufactured a rocket that can launch payloads for as little as $2000 per pound compared to NASA’s costs of $10,000 per pound.” Sexton paused for effect. “And yet you have no clients.”“Why would I have any clients?” the man replied. “Last week NASA undercut us by charging Motorola only eight hundred and twelve dollars per pound to launch a telecomm satellite. The government launched that satellite at a 900% loss!”
Sexton nodded. Taxpayers were unwittingly subsidizing an agency that was ten times less efficient than its competition. It has become painfully clear, he said, his voice darkening, “that NASA is working very hard to stifle competition in space. They crowd out private aerospace businesses by pricing services below market values.”
“It’s the Wal-Marting of space”, the Texan said.
Damn good analogy, Sexton thought. I’ll have to remember that. Wal-Mart was notorious for moving into a new territory, selling products below market value, and driving all local competition out of business.“I am goddamned sick and tired,” the Texan said, “of having to pay millions in business taxes so Uncle Sam can use that money to steal my client!”
“I hear you,”, Sexton said. “I understand.”
Actually, it’s a darn bad analogy. Even Wal-Mart’s most determined critics don’t allege the firm sells products below market value. Rather they asserts that low prices come at a high societal and economic cost. Critics do allege that Wal-Mart pays low wages and provides no benefits thus making employees more reliant on government services like welfare and Medicaid. They also allege that Wal-Mart’s low prices come from it squeezing its suppliers, i.e. paying them lower prices, forcing them to adopt expensive new technologies that disproportionately benefit Wal-Mart, increasing penalties on them for deliveries not made on time, and pushing on to them the costs of holding inventory. None of these things are remotely analogous to what NASA is alleged in the novel to be doing.
But that’s what so brilliant about what Brown wrote. He accurately placed words in the mouth of a character whose ambition knows few bounds, a Senator who aspires to the presidency, a politician for whom perception trumps reality. And how interesting it is to find that the fictional Senator’s political instincts concering Wal-Mart tack so closely to those of several real ones. According to the New York Times, Senators Biden (D-DE), Bayh (D- IN), and Clinton (D-NY), as well as Governor Bill Richards (D-NM), are all currently trying to make Wal-Mart a political issue in their own as-yet-to-be-announced presidential campaigns.
And that makes me wonder whether there is an idea here for another Dan Brown novel- something like “The Wal-Marti Code.” Perhaps the protagonist could be a business school professor rather than a religious historian. And perhaps said b-school prof could be trying to discover the real reasons for Wal-Mart’s success. And perhaps while doing so he uncovers a web of deceit, exposes lies, and receives vital clues from the President's Council of Economic Advisors. Or perhaps I just read too many Dan Brown novels this summer and it’s time for a new semester to begin and serious work to commence.
Tags: walmart | Wal-Mart | davinci code | dan brown | deception point |

Comments
Bernie
thanks for the thoughtful reply. I would like to continue this conversation further. I do run a Carnival of Wal-Mart every 1-2 weeks. I'd welcome anything you have to contribute.
Posted by: Starling | August 22, 2006 11:44 AM
BTW - I absolutely loved the Da Vinci Code.
Posted by: bernie | August 22, 2006 10:34 AM
I am a complete laissez faire capitalist; however, Wal-Mart does not play in that game. It gets local municipalities to foot the expense of building roads to their shopping centres and also gets them to raise funds through local bonds which are paid for by taxes on local businessmen who then see their own businesses dry up while they wind up paying for Wal-Mart's expansion.
The low prices have little to do with sharp buying from suppliers. Instead, it is a combination of tax-breaks, local funding of their buildouts, blackmailing of suppliers and killing off of local businesses.
Anyone who supplies Wal-Mart eventually dies as they continually get forced to lower their wholesale prices regardless of market realities.
Wal-Mart lures suppliers by promises of large orders and then when they are 90% of the poor manufacturer's output, they blackmail them into lowering their own employees' wages and manufacturer profits so that Wal-Mart can buy even cheaper every year.
The manufacturer loses decent employees and since it is working at a loss for a few years it eventually folds up shop. Wal_mart then finds another fool to suck dry of blood.
It has done this so long there is almost no one left to suck dry in the US and it has been forced to buy more and more products overseas whose host nation cares very little the pennies they pay their workers.
You have no idea how destructive Wal-Mart really is to suppliers, local businesses, and downtown areas and this country.
I would have no complaint if they did not use blackmail against their suppliers, cities they want to locate in, etc.
By the way, if you read my blog you will note that I am anti-Union so I do not care what Wal-Mart pays their workers. However - I do care that by killing all local businesses, that workers that were making more at a local hardware store are then forced to work for less at a Wal-Mart after Wal-Mart kills their former bosses.
Normally, I say let the market determine what the proper wage should be; but Wal-Mart does not engage in free market business practices.
A comment post is not enough room, but if you like, I can send you references [not from unions] of Wal-Mart's egregious practises.
Wal-Mart is not an good example of Capitalism at work.
Perhaps I should blog it.
Posted by: bernie | August 22, 2006 10:31 AM