Julius Rosenwald -- Sears, Roebuck innovator

Sears plant.jpg

Reports of the recent bankruptcy of merchandize giant Sears, Roebuck seldom mention the man who built the company into the amazon.com of its day. It was not Richard Sears, who in the 1890s saw the potential in selling watches and other merchandize by mail, nor Alvah Roebuck, the watch repairman who was his first partner, but rather Julius Rosenwald,  the master marketer and brilliant strategist,  the Jeff Bezos of his day.  Rosenwald’s relentless drive for customer satisfaction, efficiency, and innovation—along with his ethos of decency -- built Sears’s loyal clientele and turned the company and its mail-order catalog into a force that helped transform the United States into a national economy. Those same qualities are reflected in the company’s indirect legacy – the vibrant philanthropic endeavors on which Rosenwald spent the fortune Sears brought him.  Even as Sears stores are vanishing from the retail landscape, Rosenwald’s extraordinary impact lives on.

            Born in Springfield, Illinois in 1862 to Jewish immigrants from Hanover, Germany, Rosenwald grew up working in the family store and never finished high school. He was a moderately successful clothing manufacturer in Chicago in 1895 when he was offered the opportunity to buy into Sears, Roebuck.   The company was expanding and owed Rosenwald money for the men’s suits it was starting to sell by mail.  Always modest, Rosenwald said later that the decision to invest was the work of five minutes and that the success he achieved was largely due to luck and to being in the right place at the right time.

            In fact, Julius Rosenwald brought to Sears an essential element it had lacked – the effective management that would allow it to reap the benefits of enabling people to shop by mail.  Richard Sears was a brilliant salesman (it was said he could “sell a breath of air”), interested more in promotional gimmicks than in ensuring that the orders thus generated were reliably and promptly filled.  Rosenwald, who had worked behind store counters, understood the limitations of what they could offer, the hunger felt in small towns and in the countryside for the huge array of new products appearing with America’s late 19th century manufacturing revolution.  He understood the importance of customer satisfaction.  Catalog shopping was only effective if buyers received the clothing, seeds, tools, baby carriages, bicycles, sewing machines and books they had ordered in a reasonable amount of time.    

            There really is an historic parallel to what Jeff Bezos has done today, for Rosenwald built on the new technologies of his era.  Working with a creative staff, Rosenwald initiated  a system to weigh the mail that poured in every day, to open letters mechanically, and to assemble  items in one order via a network of chutes and conveyor belts so ingenious that, “according to legend,” as one Rosenwald biographer put it, Henry Ford visited the plant to get ideas for his assembly line.  In this way, most orders could be on their way in 24 hours.  Rosenwald eliminated questionable merchandize like patent medicines and weight reduction belts from the catalog.  When the young company needed larger quarters, Rosenwald took the lead in locating land on Chicago’s west side and commissioning an enormous state of the art plant that included a printing press for the catalogs and was next to a railroad yard to speed orders on their way.  To finance the project, he turned to a friend from his days as an apprentice to his uncles in New York, Henry Goldman (then part of a young Goldman, Sachs) who suggested taking Sears public. The IPO in 1906, one of the first in American business history, made millionaires of both Sears and Rosenwald. In 1908 Richard Sears retired, leaving Rosenwald at the helm.

            Steeped in Jewish tradition, Rosenwald had, as a young man, told a friend that the goal of his life was to have an annual income of $15,000 -- $5,000 to live on, $5,000 to save, and $5,000 to give away.  Accordingly, as a newly wealthy man, he turned his mind first towards donations to the local Jewish community and help for Jewish victims of tsarist pogroms in Europe.  He absorbed the powerful message of his rabbi, Emil Hirsch, who emphasized the responsibilities of the “well-situated” towards the “less fortunate,” not as a matter of charity but as a responsibility.

             In 1910, as himself a member of what he called “a despised minority,” and alarmed at rising violence against African Americans made particularly vivid to him by the 1908 race riot in his hometown, Springfield, Rosenwald made a dramatic pledge – a challenge grant that would provide $25,000 to any city in the country that could raise $75,000 for a YMCA for African Americans. In the midst of Jim Crow segregation, with people migrating to cities in search of work, safe and decent places to stay were vitally important. 24 cities ultimately accepted the challenge. The following year, Rosenwald met the most famous black man of his day, Booker T. Washington, who invited him to visit Tuskegee Institute, the school he had founded in Alabama. While persuading Rosenwald to serve on Tuskegee’s board, Washington also suggested that he donate money to build six schoolhouses in the surrounding rural area where black communities were already raising funds in the hopes of providing the education for their children that was being not being reliably provided by the states. From this beginning grew a program which, over the next 20 years, built over 5,000 schoolhouses and related structures in 15 states across the South, enlisting the participation not just of concerned parents but of local governments as well. At a time when blacks were excluded from, among other places, public libraries and playgrounds, the schools became critically important for the communities with whom Rosenwald had partnered to build them.

            By the time he died in 1932, Julius Rosenwald had given away some 64 million dollars (about 1.1 billion in today’s money). He had received honorary degrees from Yale and the University of Chicago and been an overnight guest at the White House but he had also traveled long distances over rutted country roads to visit rural schoolhouses and shake hands with the sharecroppers, farmers and country preachers who had joined him in helping fund and build them. He had been to Tuskegee, in rural Alabama, so often that his wife, Gussie, wrote in a letter of feeling “homesick” for it.  No less than his financial assistance, his personal presence had offered encouragement and hope in places where these were often in short supply.           

            At the new Museum of African American History and Culture in Washington, DC desks and a potbellied stove from the one-roomed Hope School in Pomoria, South Carolina, testify to the “Rosenwald Schools” that educated a third of all African American children in the South in the years before the end of legalized segregation. Charles Morgan, Jr., the Birmingham lawyer who devoted much of his long legal career to civil rights issues, observed that from Rosenwald schools “came the parents of the generation who marched and sang and risked their lives in the revolution for equal justice under the law.”

            It’s rare for a person to have one big impact on his country.  Julius Rosenwald had two.  First, he led in creating and perfecting a new business model that knitted together a national economy connecting manufacturers and consumers all across the land. And then he used the fortune thus earned to reinvest in the country by, among many other things, providing vitally important educational opportunity and encouragement to African-American communities.