One striking characteristic of Defend & Extend Management is that leadership, and often everyone else, becomes very willing to expect everything to work out eventually. Regardless of the signals. D&E leaders tend to be just like the characters in the 1913 novel by Eleanor Porter (read more about Pollyanna here) – always optimistic and always rewarded for their optimism.
Last Sunday the Chicago Tribune published an article about the major companies in Chicago that have either failed, or done poorly, in the last decade (read article here). The list of problems was pretty dramatic – Motorola, Sears, Sara Lee, Ameritech (gone, now SBC), First Chicago (gone, now JPMorganChase), Amoco (gone, now BP), Tribune (almost gone – in a highly leverage buyout), Quaker Oats (gone). Not to mention that Chicago real estate barely participated in the great real estate run-up the last 7 years – largely because netting job losses versus job gains the employment base hasn’t grown! No, Chicago isn’t finding real estate falling like Las Vegas, but it never came close to going up like Las Vegas (or Miami, or Walnut Creek, or Phoenix) either.
Yet, those interviewed in the article were completely "Pollyanneish" (how does a noun become an adverb?) A former Chicago executive virtually admitted there was little innovation in Chicago – and qualified himself by saying that Chicago innovation was more "adaptation." Ugh, let’s get real folks. In other markets people are creating breakthroughs and that is drawing the most talented people – and that is driving up real estate values. Meanwhile, Chicago accepted an out-of-town carpetbagger in Ed Lampert who destroyed Sears. And Motorola, once a national leader in innovation has seen its invention of cell phones lost to other competitors as the company now considers exiting the business!
I’m a midwestern guy, and I LOVE Chicago. To me, its a great place to live and work. But that’s what people say in Detroit, Cleveland, St. Louis and Tulsa also. Who cares? If you can’t create new businesses, and new jobs, and revenue growth it doesn’t matter. Let’s face it, Chicago spent nearly 10 days without breaking above freezing in one stretch this January, and Chicago just spent the first few days of February under snow and another 0 degree frigid blast. No one moves to Chicago for the weather! Or the theater. Or the symphony. Or the political influence.
GROWTH is all that matters. People love Paris, London and Rome. But only the wealthy idle look to move there. Today, property values for business and homes in Mumbai (formerly Bombay), Chenai (fomerly Madras) and Bangalore exceed Chicago. Go to these cities and you see employment growing 20% per year! People want to be in these places. Yes, the weather is hot. Often humid. And the roads are aweful. But that is where the action is. People there are defining the new future – the new global economy. Is that happening in Chicago?
Chicago has a great past. But who cares? If Chicago can’t compete on the world stage with Shanghai, Hyderabad and Buenas Aries for investment and growth it doesn’t matter. Chicago can quickly become the next large, boring, cold city. Not even Al Capone could slow Chicago when it had the stockyards, the steelmills and the reputation as "the city that works." But if Chicago doesn’t wake up and start making itself a leader we risk becoming just another big city on a nice fresh water lake. And the midwestern youth will fly to the east coast, west coast, China, South America, or India to find opportunity for riches.