The Mystery of the Rise and Fall of Boom Communities

Introduction

History records the rise and fall of countless human communities. From the ancient Mesopotamia and the city of Ur, through the modern Rust Belt in the US Midwest, communities have boomed and become shining beacons, and then busted back into obscurity.

The mystery is “Why?” Why does every boom seem to carry in it the seeds of its own return to mediocrity? The people who create these booms are clever in the most practical sense. They are clever enough to create the boom in the first place, but they can’t seem to pass on the magic. They can’t seem to consistently teach their children or other successors how to be “boomers” like they were. What spoils the magic?

If life were different

Consider how different history would be if teaching booming was well understood. If that was the case today we’d be reading about the centuries of consistent glories that have sprung from Mesopotamia, the Indus Valley and the Yellow River valley because these are places where the booming started and they’d never loose their lead. They would be the New York City’s, London’s and Shanghai’s of today as they had been since the early BCE’s. But this isn’t our history so the conclusion must be: Booming is not easy to teach.

Theories of declines and falls

I’m far from the first to notice this phenomenon and its been an interesting one for history writers for a long time. One of the more enduringly famous is Edward Gibbon’s Decline and Fall of the Roman Empire. From the Wiki article: “According to Gibbon, the Roman Empire succumbed to barbarian invasions in large part due to the gradual loss of civic virtue among its citizens. They had become weak, outsourcing their duties to defend their Empire to barbarian mercenaries, who then became so numerous and ingrained that they were able to take over the Empire. Romans, he believed, had become effeminate, unwilling to live a tougher, “manly” military lifestyle.”

Just recently I read a 13 Oct 12 NY Times book review, The Self-Destruction of the 1 Percent by Chrystia Freeland, which reviews the book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” by Daron Acemoglu and James A. Robinson. The article describes in fair detail how the Golden Age of Venice in the early 1300’s came and went. The thesis is that the plutocrats of Venice cut off their own continued growth by over-controlling the disruptive economy that was at the heart of their growing prosperous in the first place — after growing prosperous for a few decades, the “winners” of the day made up a list of winners, gave that list legal teeth, and that brought on an era of stability which ended the era of growth.

Roger’s Observations

First off, let me note that rises and declines come in many time and size scales. The Roman rise and decline took ten centuries, the Venetian rise and decline took one. Apple Inc.’s first rise took ten years, as did many other high tech leading companies of the 1980’s-2000’s. Cleveland, my favorite example, boomed from its founding in 1814 through the 1950’s. In 1920 it was America’s fifth largest city.

That noted, let’s break a memorable boom into three phases: boom, peak and post-peak. I will talk about communities. These are human organizations of any size from family up to cultural region.

Anatomy of a boom

In the beginning, a soon-to-be-memorable booming community is just one of many. It has lots of competitors and not much notable about it in its earliest days. Rome was just one of many competing tribes in Italy, Cleveland just one of many thriving cities west of the Appalachians in frontier America, Apple just one of many hopeful startups in Silicon Valley in the 1970’s.

As these communities are competing there is a lot of overall growth but there is weeding out happening, too, some communities are growing steadily, others are faltering. And there is consolidation happening, the winners are picking up people and resources from the falterers. This happens because the winners seem to be able to use those resources better than the falterers can. In the high tech environment people move from faltering companies to winning companies because the winners can afford them and the falterers can’t anymore.

As they continue their strings of success the winners become more noticeable. They become standards in their area of endeavor and a lot more surrounding people pay attention to them. Those noticing start asking, “What is your secret?”

Anatomy of a peak

While a community is booming a lot of tough choices are being made made. They are tough because they are expensive, and scary, and involve doing things differently than they were done before. This is the lifeblood of being a booming community, and making these choices well is what distinguishes the memorable boom community from its lost-in-the-noise competitors. Not all the choices made are right, but more of the important ones are chosen well than competitors do.

At the peak something changes. As the peak is reached the number of good tough choices made by the memorable community declines compared to competitors and its own recent past.

My theory is that the root of this transformation from above average to average is that what community members think about, what they think is important, changes. A new generation of decision makers emerges and that new generation doesn’t like supporting constant tough choices. When what the community thinks is important changes, the leadership will change as well. Historians tend to attributed such changes to the leaders, but my feeling is that leaders are much closer to their community’s feelings than that — they make choices that are compatible with what the numerous but less visible decision makers in the community want.

Two examples from the business world: At some point in the growth of many high tech companies there is a change in top management from “visionaries” to “managers”. This often happens as they grow from small to medium sized. In my book Surfing the High Tech Wave I write about how this happened at Novell nine years after its startup in 1989. The change at Novell precipitated an “organizational phase shift” which changed Novell’s direction of development. The second example is a common business truism that when a company grows to the point that it can move into its own building, as in, one built for it, the company culture will change and that change can be towards complacency — managers must be on their toes as the move happens. Both of these can be times when a peak is reached for the company and its boom times end.

So the peak is reached when many members of the community decide that the constant tough choices that it took to make the boom happen, and are necessary to sustain it, are no longer worth the effort.

This change of thinking is the “seed” that brings on the end of the boom and begins the post-peak era.

Anatomy of post-peak

Historians bemoan them but post-peak times are actually fairly comfortable times for most community members. At first there is a sense of relief from the constant change and uncertainty that are part and parcel of boom times and that is followed by comfortable complacency. Rules and regulations are enacted and life becomes much more predictable — people know their places. The article about Venice mentioned above talks at length about this happening in Venetian society; I witnessed it personally as I was growing up in Cleveland. In Cleveland in the 1960’s “being fair” became a much more important part of day-to-day business decision making than making things work better than they had before.

When the peak comes lots of people support this change to greater harmony, but the ambitious ones don’t. They chafe. And, if they can’t change the way things are done back to supporting tough booming choices, they will leave, looking for better opportunities. (Coming back to supporting boom sometimes happens. Apple is a company that came back when Jobs came back, New York and London are cities that have consistently come back to supporting boom.) A famous historic example of looking elsewhere to support a boom is Italian Christopher Columbus finding investors for his crazy idea in Spain rather than Italy.

In most cases the people who stay in the post-peak community don’t mind that glory is passing them by. Their day-to-day lives are comfortable ones. And so, the glory moves on. It goes to some other community that is still competing and still willing to support the tough choices that come with booming change. This seems to be very much the human way.

Conclusion

Booming is exciting and rewarding. But its not easy and the rewards are not necessarily those that the community values the most. Famous booms happen when a community supports tough choices and those choices turn out to be consistently good ones.

But boom times are both scary and full of change. When a decision making generation takes over that doesn’t like all the tough choices and changes, a peak happens. The way things are done changes to a more predictable style, and this style becomes a comfortable one for a lot of community members.

If the community doesn’t reverse itself, and support the tough choices again, then the ambitious will move on and take their ambition to some other community successfully supporting boom, and the community they leave will comfortably move into the obscurity of being average again.

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