2001: Trouble and triumph
Capitalist society moves on with focus
Advertiser Staff and News Services
The economic shock wave that followed the Sept. 11 terrorist attacks was swift and deep.
Advertiser library photo
The tourism industry was devastated. Hundreds of thousands of workers were let go. Entire industries were reshaped. Unemployment lines ballooned.
Waikiki Beach resembled a ghost town less than a week after the Sept. 11 terrorist attack. The attacks and the ensuing war against the Afghanistan regime and its terrorist allies, al-Qaida, hit tourism-dependent Hawai'i hard.
The gales that swept the globe left Hawai'i reeling.
Immediately after the attacks, many said the country would never be the same.
But three months later, for many citizens, that's simply not true.
Amid the harsh new realities, business didn't stop. The effort to find a new way in a changed landscape didn't stop.
And that may be remembered as the great American business victory of 2001.
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Decades from now, the business year won't be remembered for the meltdown of Enron, the troublesome Hewlett-Packard and Compaq Computer deal, Microsoft Windows XP or the marvel of Krispy Kreme. The legacy of this moment in time will be the way the home front bounced back because of millions of small and large decisions made by millions of business people.
People like Justin Kitch, chief executive of Silicon Valley technology company Homestead. The morning of Sept. 11, he sat in a car on Park Avenue in New York. He knew the planes had hit the World Trade Center towers. He'd canceled appointments and was trying to get back to his hotel when he saw the first tower collapse.
Traffic stopped. Kitch got out of the car, stood on the pavement with everyone else, put his hands on his head and spun around, helplessly trying to understand. After awhile, he went to the hotel, watched the news on TV and saw an ash-covered man wearing suit pants, no shirt and no shoes calmly walk into his hotel's lobby to make a phone call.
Again and again, Kitch thought about what he could do. Go to the site and help? Volunteer somewhere? Close his company, which hosts consumer and small business Web sites? What mattered? Like everyone else, he was paralyzed.
"Then I realized I'm the leader of 80 people, and I have thousands of customers who rely on our service," Kitch says. "I realized that the best thing was to keep going. The economy can't stop because of this. Innovation can't stop."
A 'perfecting' economy
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It didn't. The U.S. economy is unlike any in history. It's fluid, reactive, directed by individuals who are managers, workers, consumers and investors, and greased by the greatest communication system on Earth. Information races in and out of every nook and cranny. Actions get weighed at every desk and in every home. Phenomenal resources get redirected in a flash.
A couple of months after the Sept. 11 attacks, on the day after Thanksgiving, Hawai'i residents flocked to malls and shops, spreading rays of light over the state's economic landscape.
Creative destruction, economist Lester Thurow calls it.
Americans have been perfecting it for generations. And the past three months have been one of its golden moments.
Most people thought those suicide airplanes would also blast big holes in U.S. companies and financial institutions, and ultimately Americans' standard of living. And at first, it seemed that way.
Stock markets plunged. Telecommunications networks short-circuited. Air travel stopped, throwing major airlines and states dependent on tourism — such as Hawai'i — into a crisis. Hundreds of thousands of workers were laid off. Companies were left reeling from plummeting business as wary consumers cut back spending.
The country has seen worse before, and to listen to economists, this recession may not last long or cut that deep. But following a record decade-long expansion punctuated by prosperity that was so euphoric, the downturn is a shock and stark contrast because of its sheer scope and quickness.
After Sept. 11, an already slowing economy got much worse, particularly for workers in the airline and tourism businesses. The cutbacks were felt immediately in places like Hawai'i, Orlando, Fla., and Las Vegas, that depend on visitors.
The cuts sent nationwide unemployment up to 5.7 percent in November. The job loss total for that and the previous month hit 800,000, the worst performance in more than two decades. Economists say the rate will continue to surge through the first part of next year and could hit 6.5 percent by next summer.
In Hawai'i, the cuts pushed the jobless rate in November up to 5.5 percent, the highest figure in more than two years. Nearly 34,000 people were unemployed last month, 45 percent more than the same time a year ago. And expectations are that it will rise even higher next year.
Even for workers with jobs, the downturn has whittled away at their ability to make ends meet.
The average worker logged 34 hours per week in October, down from a peak of 34.7 hours in 1998, as employers cut back on overtime and shut down factories. That seems like a small change. But the last time the figure was so low was in January 1996, when, during a massive East Coast blizzard, the federal government shut down and kept thousands of workers home altogether.
There is no discounting the disaster of Sept. 11, nor the emptiness left by those who died. Nor is there any discounting the pain it has caused more than a million workers who have lost their jobs. Nor the toll it is taking on thousands of companies and the overall national and state economies.
But if Americans need something to celebrate, they need just look at how U.S. balance has been recovered.
Yes, many have been laid off since Sept. 11, but many also have the same jobs and the same standard of living.
And for those who have been laid off, state and federal agencies have tried to quickly come to their aid with extended benefit packages and other help.
The Dow Jones industrial average and the Nasdaq — after deep troughs in late September — are back above pre-Sept. 11 levels. Fears of a long recession have eased, with estimates now that growth will return by mid-year 2002.
Most of the nation's airlines, while still struggling, have survived and are very slowly rebuilding traffic.
It's like the economy's reaction to the 1962 Cuban missile crisis, says Jeff Hawkins, co-founder of handheld computer maker Handspring.
"Yes, it was a big deal. Yes, it was a crisis. Yes, our actions may have thwarted future calamities," Hawkins says. "It changed the way we viewed the Soviets, but I don't think it changed business or economics."
Day dishonesty died
Associated Press library photo • Sept. 24, 2001
As a lot of business leaders soak in what's happened the past three months, many see a lot of good coming out of something so terrible.
As a team of ironworkers was hoisted over Ground Zero in late September in the mammoth task of removing the rubble of two 110-story office buildings, the wheels of American business already were back on the economic track, albeit moving slowly and erratically for awhile.
The economic system had already been self-correcting. But the attacks self-corrected Americans.
"When we look back on 9/11 years from now, we'll say it was the death of dishonesty," says Larry Kasanoff, producer of movies such as "Terminator 2" and "Mortal Kombat" and founder of Internet company Threshold Entertainment. "The country got to a point of self-delusion. We did what we in Hollywood say you should never do: We believed our own press releases."
"Suddenly it doesn't matter so much that a (venture capitalist) wants you to move faster, or to be a millionaire by the time you're 40," says Kitch, the Homestead CEO. "A lot of people are re-evaluating their lives, asking if what I do matters. Is it going to make the world better? That's what Silicon Valley used to be about."
This, actually, is important to the redirection of resources. Many of the hundreds of departed dot-coms were frivolous.
Yet together, they were sucking up thousands of talented people and billions of dollars of resources and giving both, in a lot of cases, to the wrong people.
"My gardener bought a plane!" says Larry Ellison, CEO of Oracle. Obviously, his gardener owned tech stocks. "I thought, 'This is unbelievable! What's going on?"'
Microsoft Chairman Bill Gates says the Internet bubble was the biggest disruption in real innovation in history.
Adds business author Tom Peters: "We were working hard, but were we serious about what we were up to?"
No one is suggesting that anyone look at Sept. 11 through rose-colored glasses. Beyond the costs of that one day in lives, destroyed property and disrupted business, long-term costs will surely burden the nation.
The war in Afghanistan, some estimate, is costing $1 billion a day. That's $1 billion a day that used to go into something else — startups, consumer purchases, support for artists, gourmet food.
The nation's economic system is again redistributing resources, but on a time delay. It's hard to know yet what has really been given up.
The effects, says David Roberts, co-founder of tech company Zaplet and a former CIA agent, "happen over generations, and so the change, like trees growing, is not felt by a person."
"What scares me most," says Roberts, looking over the time horizon, "is that at some point, it costs more to protect a system than it does to build it new."
At the moment, though, the nation is building it new. In the aftermath of death, the system and the people in it have hummed to life.
