Failure isn't something people normally feel comfortable talking about in our culture. We're a nation of success-aholics, always pitching ourselves forward into what F. Scott Fitzgerald called "the orgastic future that year by year recedes before us."
So it's refreshing to read John Peterman's frank account in the current issue of the Harvard Business Review of the ruinous bankruptcy of his catalogue retailing concern, the J. Peterman Co., which filed for Chapter 11 last January.
For a time in the early '90s, J. Peterman defined everything that was hip and stylish for a certain kind of upwardly mobile person. It sold the idea that you could invent yourself through the clothes you wore -- transforming yourself into an imaginary cowboy on the range, say, or a Gatsby on the lawn. The company's philosophy, writes Peterman, was: "People want to live the way they wish they were." Life as a costume ball, in other words.
Peterman's trademark product was a long cowboy coat, known as a "duster" -- the sort of thing Clint Eastwood used to wear in spaghetti westerns. Peterman writes that he bought his first duster during a trip to Wyoming in the 1980s and liked the way people stared at him when he walked through the airport. "It was romantic, different," he says.
So he began selling the cowboy coats in 1987 from his home in Lexington, Ky. The next year Peterman sent out his first "Owner's Manual" catalogue -- with simple drawings and flowery prose describing the duster and a few other atavistic items, such as a colonial-style shirt like the kind Thomas Jefferson wore.
Peterman's business grew rapidly. Starting with just three full-time employees, he grew by 1989 to 15 employees and $4.8 million in sales; by 1990, he had 75 employees and $19.8 million in sales. To fund this rapid expansion, Peterman needed outside money -- and after being turned down by about 100 venture capitalists, he found one who was ready to make a big infusion of cash. He soon began investing in retail outlets, new catalogues and hundreds of new products.
People loved the clothes and the aura Peterman created. To me (and I must admit, I was never a fan), his approach was sort of a haberdashery version of "The Bridges of Madison County." But J. Peterman became such a cultural icon that in 1995, a character on "Seinfeld" was named after him!
You sense the moral of the story already, don't you? What shattered Peterman's business dreams was that he grew too fast. He hired employees who didn't understand the company's culture; he hired managers who didn't manage its growth carefully; he let expenses get out of line; and most of all, he stopped running the business in the loving, hands-on manner in which he had created it. One telling example is that by 1997, Peterman had stopped his tradition of having a weekly breakfast with a randomly selected group of employees. He was too busy for that now, in his rush to grow.
Profits began to suffer. The company posted a loss in 1995 and broke even the next year. The outside investors pushed for faster expansion, which meant more borrowing and weaker quality control. The result, eventually, was a liquidity squeeze that sent the company into a death spiral. Lenders refused to finance inventory; vendors wouldn't extend credit; the venture capitalists pulled out. By the end, Peterman didn't even own the rights to his own name anymore.
"I'll not disguise my feelings," writes Peterman. "I'm bitter."
The story of J. Peterman's failure is a kind of reality check -- a reminder that even in this age of mega-mergers and goofy stock valuations, the laws of gravity haven't been repealed. Bigger isn't always better; image isn't everything; corporate culture isn't something you can package in a catalogue; and, yes, style and success are ephemeral.
It's especially instructive to read Peterman's withering self-analysis after digesting the corporate self-congratulation that accompanied last week's merger of Viacom and CBS. Here are two underperforming and ill-managed media giants, looking for guaranteed markets for their products. (Viacom's Paramount unit can peddle its shows to a captive CBS; the network can hype its offerings on Nickelodeon, MTV and other Viacom cable channels.)
Does anyone really think that merging Viacom and CBS is going to make for a better company in the long run? Giantism certainly hasn't done much lately for the Disney-ABC combine, whose stock has lost about a third of its value over the past 18 months. And our local defense giant, Lockheed Martin, appears to be imploding after years of overly rapid growth -- with the stock off nearly 40 percent from its high and the company suffering serious quality-control problems.
Success conveys some useful truths about life, but in many ways, it's failure that teaches the really powerful lessons. The one that sticks with Peterman, as he picks himself up off the floor after bankruptcy, is this: "I should have trusted myself -- over anyone else -- and I should have known when to say no."