The ending is much too simplistic for my money even if it does reflect current Wall Street disenchantment with BHO. But the article, up to the last paragraph, is top rate and thoughtful. A lot could be done by way of a better conclusion making use of the essay. The article itself is rich with ideas. -BR ==================================================== Wall Street Journal
April 6, 2010, 12:01 a.m. EDT Mighty America's 5 stages of rapid decline Jim Collins' danger signals: But can we halt the collapse of capitalism? By _Paul B. Farrell_ (mailto:[email protected]) , MarketWatch ARROYO GRANDE, Calif. (MarketWatch) -- Imagine you're legendary business guru Jim Collins. Decade ago "Good to Great" and "Built to Last" made him the new Peter Drucker. He's a guy USA Today says would rather be rock climbing than helping companies learn the secrets of making "the leap to greatness." But that was nine years (and two brutal recessions) ago. Then, shortly after the Iraq War started, he was forced back to the drawing boards, and wrote "How the Mighty Fall." Why? His summary in BusinessWeek explains: "Some of the great companies we'd profiled ... had subsequently lost their positions of prominence," including the Bank of America. Stock returns with less risk Karen Damato speaks with David Giroux, a top performing manager of T. Rowe Price Capital Appreciation , about the investing environment and his portfolio. Why do The Mighty fall? "If some of the greatest companies in history can go from iconic to irrelevant, what might we learn by studying their demise, and how can others avoid their fate?" Then fate did intervene, a call came that got his adrenaline flowing faster than hanging high on arocky cliff: "Would like you to come to West Point to lead a discussion with some great students?" A seminar for cadets? No, "12 generals, 12 CEOs, and 12 social sector leaders ... and they'll really want to dialogue about the topic." What topic? "America!" America? "What could I possibly teach this esteemed group about America?" A lot. The core issue became clear when the CEO of one of America's top companies pulled him aside: "We've had tremendous success in recent years," but "when you are at the top of the world ... the most powerful nation on Earth ... the most successful company in your industry ... the best player in your game ... your very power and success might cover up the fact that you're already on the path of decline?" Hidden in the silent creep of doom, the seeds of failure Yes, success is blinding. When everyone says you're the best, the leader, the most powerful player, when the press, your competition and your enemies all put you on a pedestal: "How would you know you're not already on the path of decline?" That CEO's questions inspired the new research, into what Collins calls "the silent creep of doom." The problem: "Institutional decline is like a disease: harder to detect but easier to cure in the early stages; easier to detect but harder to cure in the later stages. An institution can look strong on the outside but already be sick on the inside, dangerously on the cusp of a precipitous fall." Happens to the best on Wall Street, Washington, Corporate America CEOs: You're on top, but "sick on the inside, dangerously on the cusp of a precipitous fall" ... but you don't even know it. The wake-up call: "If a company as powerful and well-positioned as Bank of America in the late 1970s could fall so far, so hard, so quickly, then any company can," Collins discovered. "Every institution is vulnerable, no matter how great. There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall, and most eventually do." Collins sounds like anthropologist Jared Diamond in "Collapse: How Societies Choose to Fail or Succeed: "One of the disturbing facts of history is that so many civilizations collapse," sharing "a sharp curve of decline" that "may begin only a decade or two after it reaches its peak population, wealth and power." Yes, if it happened to Bank of America, why not America? Collins research exposed the "Five Stages of Decline." Knowing them can help business, banking and government leaders "substantially increase the odds of reversing decline before it is too late -- or even better, stave off decline in the first place." Moreover, "decline can be reversed ... the mighty can fall, but they can often rise again." Here are his warning signs, and diagnostic clues, along the five steps of declining: Stage 1: Hubris born of success Imagine Collins as a psychiatrist diagnosing a patient on his couch: "Great enterprises can become insulated by success ... momentum can carry an enterprise forward for a while, even if its leaders make poor decisions ... Stage 1 kicks in when people become arrogant" ... insiders see "success virtually as an entitlement" ... like Wall Street banks today ... they "lose sight of the true underlying factors that created success in the first place" ... they "overestimate their own merit and capabilities ... The best leaders we've studied never presume they've reached ultimate understanding of all the factors that brought them success." If they do, "you just might find yourself surprised and unprepared when you wake up to discover your vulnerabilities too late." Stage 2: Undisciplined pursuit of 'More' The belief "we're so great, we can do anything" ... drives many to "more scale, more growth, more acclaim, more of whatever those in power see as success" and justifies mega-bonuses ... they make "leaps into areas where they cannot be great or growing faster than they can achieve with excellence ... investing heavily in new arenas where you cannot attain distinctive capability ... launching headlong into activities that do not fit with your economic or resource engine ... use the organization primarily as a vehicle to increase your own personal success -- more wealth, more fame, more power -- at the expense of its long-term success" ... and you'll "compromise your values or lose sight of your core purpose in pursuit of growth and expansion." Sounds like Wall Street 2010, a community of addicts whose pledge of allegiance begins, "Greed is Good" ... amoral robots driven by a relentless commitment to the pseudo-capitalism of Reaganomics, blind to the impact on America's democracy. Stage 3: Denial of risk and peril Here Collins warns of our natural tendency to self-deception: "Internal warning signs begin to mount, yet external results remain strong enough to 'explain away' disturbing data or to suggest that the difficulties are 'temporary' or 'cyclic' or 'not that bad,' and 'nothing is fundamentally wrong.'... leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data ... blame external factors for setbacks rather than accept responsibility" ... slogans and ideologies beat out "vigorous, fact-based dialogue that characterizes high-performance teams ... those in power begin to imperil the enterprise by taking outsize risks and acting in a way that denies the consequences" ... much as did Paulson, Wall Street's "too-stupid-to-fail' CEOs, Bernanke, Geithner and the Fed's toxic shadow banking system back in 2007-2008. Stage 4: Grasping for salvation The earlier "cumulative peril and/or risks" now "assert themselves, throwing the enterprise into a sharp decline visible to all. The critical question is: How does its leadership respond?" Many make things worse. Instead of "getting back to the disciplines that brought about greatness" they "grasp for salvation:" Quick fixes ... a charismatic visionary leader ... a bold but untested strategy ... a radical transformation ... dramatic cultural revolution ... hoped-for blockbuster product ... game-changing acquisition ... other silver-bullet solutions. Initial results ... may appear positive ... do not last." Next, a critical turning point: When "we find ourselves on the cusp of falling, our survival instinct and our fear can prompt lurching -- reactive behavior absolutely contrary to survival -- when we need to take calm, deliberate action, we run the risk of doing the exact opposite and bringing about the very outcomes we most fear ... leaders atop companies in the late stages of decline need to get back to a calm, clear-headed, and focused approach. If you want to reverse decline, be rigorous about what not to do." America was at this critical historical turning point moment in the fall of 2008. We were not calm. The economy and markets were collapsing. Our leaders lost their cool. Former Goldman Sachs CEO Hank Paulson, then Treasury secretary, panicked like a frightened grad school kid, racing to Congress with a three-page demand that taxpayers bail out his old buddies, the same out-of-control greedy idiots who created the problem. Congress also panicked. In short, at that crucial historic moment in history, democracy failed us. Yes, democracy failed: Our elected representatives surrendered our great American democracy while also ending Adam Smith's moral-capitalism, turning both along with the keys to the U.S. Treasury over to Wall Street's new soulless pseudo-capitalism. Stage 5: Capitalization to irrelevance ... or death "The longer a company," bank or nation "remains in Stage 4, repeatedly grasping for silver bullets, the more likely it will spiral downward. In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future. In some cases the company's leader just sells out; in other cases the institution atrophies into utter insignificance; and in the most extreme cases the enterprise simply dies outright." How can we return to greatness? What do the turnarounds have in common? "Each took at least one tremendous fall at some point in its history and recovered ... but in every case, leaders emerged who broke the trajectory of decline and simply refused to give up on the idea of not only survival but ultimate triumph, despite the most extreme odds. The signature of the truly great versus the merely successful is not the absence of difficulty. It's the ability to come back from setbacks, even cataclysmic catastrophes, stronger than before ... great companies ...great social institutions ... great individuals can fall and recover. As long as you never get entirely knocked out of the game, there remains hope." The key? Great leaders. New Churchill: Obama? Romney? Palin? Who? Collins shines the light on several corporate revival journeys, ending with the familiar story of Churchill going from a 1930s "quagmire from which there seemed to be no rescue" to "Prime Minister at age 77, knighted by the Queen ... Churchill's simple mantra: Never give in -- never, never, never, never. Does America have a Churchill in the wings, a leader who knows "the path out of darkness begins with those exasperatingly persistent individuals who are constitutionally incapable of capitulation." Many thought it was Obama, but now question his "capitulation" to Wall Street, concluding that this final, total Wall Street takeover of Washington will ultimately kill America's "financial strength and individual spirit to such an extent that leaders" whether Obama, Romney or Palin will abandon "all hope of building a great future, and just sell out," as indeed Obama has ... because we now have the answer to Collin's core question, "How The Mighty Fall" ... we see it unfolding rapidly every day on cable ... game over.
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