They were separated by four hundred years and fourteen thousand kilometers, but the two leaders faced similar problems. They had inherited great empires, one political, one commercial, but both were looking at the spectre of collapse. Keeping the magnificent institutions of their empires alive was soaking up too much of the treasury. Their temples and factories, armies of priests and armies of engineers each formed a burden that the empires could not bear. They had two choices: let the costs of what they had inherited – of what they were the keepers and guardians of – drag them down, or walk away from it. Leave it to the jungle to take, shut it down, junk it, get rid of the people and, like a neutron bomb, leave the buildings standing.
King Ponhea Yat of the Khmer Empire and “Neutron” Jack Welch, CEO of General Electric made the same decision. They sacrificed some of what they ruled to let the rest survive.
This process was identified by John Michael Greer, who called it Catabolic Collapse. It is the reason why societies and organisations rarely vanish overnight. Instead they slowly drop down a level of complexity at a time, a process that in Greer’s haunting phrase “turned the Forum of imperial Rome into an early medieval sheep pasture.” Sometimes though, of course, it works – the periphery is abandoned and the centre survives. This seems to be the case for GE, but in many ways it is too soon to tell. It is a very important process though and one that sits at the heart of what I want to talk about in this blog, so it is worth looking at in some detail.
We have previously taken Joseph Tainter’s definition of collapse as the one we are going to work with. He defined it as “a process of reducing complexity”. Greer’s theory runs with that, but rather than just seeing it as something that happens without anyone’s permission, it makes it a deliberate management choice.
Recently HSBC gave us a rather lovely example of the process in action. They announced that they were to refocus the bank on Asia (they are the Hong Kong and Shanghai Bank after all, and their core, their imperial capital, is not London but Hong Kong) and as part of that the UK operation was to be downgraded with the loss of 8000 jobs. Some of this was a deliberate show of strength against the UK government, “keep buggering about with regulation here and we’ll leave,” (it worked, incidentally) but a lot of it was real. And what it was was catabolisation.
Let’s look at this in a little more detail. Global empire / bank (delete as appropriate) has territories / operations far away from what is most important to it, or perhaps something that is important to it is falling to bits and would cost more money than they have to put right. Either way, it is a level of complexity that is costing more than it is adding to the bottom line / imperial treasury. They decided, cold bloodily but logically, to write it off. The people are sacked, the forts are abandoned, the proconsuls are withdrawn, the capital is moved, the retail network is sold, the unprofitable division is closed. What is left has a sudden new lease of life; all the blood and treasure that was going into Roman Britannia / Angkor Watt / bits of GE that weren’t number one or two in their industries is freed up for other things. Massive bonuses / new palaces all round! This is catabolisation; like a runner after they hit the wall and starting to burn muscle mass, organisations get more energy by consuming themselves.
Now this might work or it might not. What has happened though is that the organisation has reduced in complexity, and as Tainter would tell us, that’s a step towards collapse. The real question now is can the new level of complexity be sustained? Because once you start catabolising you’ve made a very big statement about what is important to you and what is not, and if what is important requires another sacrifice, it gets harder and harder not to make it.
History is full of empires and corporations that found that catabolising, or, as it is often called, restructuring, was a slow but still one way ticket to the exit. Let’s take one example, the formally mighty (and excellently monikered) Bethlehem Steel.
In its pomp, Bethlehem Steel was the second largest steel manufacturer and largest shipbuilder of the greatest industrial economy in the world, the United States. It built the steel sections of the Golden Gate bridge and dazzled the world with the ferris wheel (ferric wheel?) at the Chicago World’s Fair. In the second world war, Bethlehem Steel alone produced nearly a fifth of the US Atlantic and Pacific fleets by itself. (On a side note, the US economy’s spin up from peace time to war time production in 1941/2 is one the most awesome triumphs of economic and industrial commitment and management in history). It hit a high water mark in the 60s with the construction of its largest plant, at Burns Harbour, Indiana. After that, the tide started to turn.
Bethlehem steel had several problems that we have already discussed or will do soon: a difficult environment, stupid management decisions, a workforce that cost more and more, foreign competition. In Toynbee’s language we could call this the senility of the elites, and internal and external proletariats. But it also had one other significant problem: complexity. It’s structures were complex, its workforce large and increasingly unproductive thanks to the law of diminishing returns, its mills old and out of date. This legacy of old infrastructure, both human and technical started to weigh it down. It simply couldn’t afford to maintain and update its plant and people. So it started to catabolise itself.
In 1982 it posted a $1.5 billion loss and shut down, or catabolised, many operations. As you might expect, that freed up enough money to bring back profitability in 1988, but it found it had to keep doing it. Its coal mining operations went in 1991,railroad car manufacture in 1993, steel making at Bethlehem in 1995, shipbuilding in 1997. In 2001 it filed for bankruptcy.
Bethlehem steel is far from alone. The burdens of complexity mean that an organisation or empire finds it harder and harder to respond and it slowly eats itself.
History has other, happier examples though. For GE, we could read the eastern Roman empire, which catabolised its entire European half and survived for another thousand years.
There is one other interesting difference between how corporations and empires catabolise themselves. King Ponhea Yat had few options, the part of his empire that he had to let go was Angkor Watt, at its peak the largest city in the world with a population of a million people in 1200. Environmental disaster and the inability to maintain the city meant he had to move his capital and the city, though never totally abandoned, returned to the jungle. It took helicopters firing laser radar into a the ground hundreds of year later to see what had been.
With businesses, they often avoid the hard choices of shutting down whole divisions or plants. When that happens, things are really getting bad. Instead, they choose a kind of invisible catabolisation and get rid of the resource that can be removed most straightforwardly – the people.
This was the ballad of Neutron Jack. Like a neutron bomb, what he did to GE took out all the people and left the buildings standing. While every business that does this will see an uptick in profits, whether a more highly stressed, frightened, less creative and increasingly embittered workforce is a sustainable way forward is very debatable. We’ll look at that next time.
Through The Rose Window 