A New Year

Tomorrow officially kicks off the new year for much of our Rockhurst community (though some of our MBA students started over a week ago). The Massachusetts senate race has caught my attention because of how it reinforces the paradox of power and how having a lot of it creates the conditions that surely leads to losing it.

Scott Brown (a republican) is the ultimate underdog trying to win a statewide senate seat in a state that voted for Obama by a margin of 26 points. He is also trying to win the seat held by Ted Kennedy for 47 years (and by Teddy's older brother for several years before that). 85% of the MA state legislature is held by democrats. And less than two months ago, Brown's democratic opponent held about a 30 point lead in this race. Yet, by the end the day it is very possible Brown will be elected and that democrats all over the country will feel very vulnerable in the 2010 elections. Of course, this has happened many times before (though some are still saying a Brown win is the biggest political upset in half a century and if you like underdogs this is a very interesting race).

Several years ago, an article titled "Why bad things happened to good companies" detailed the inevitable decline of once great companies. Three years ago business magazines were hailing the dominance of Toyota Motors -- see this NY Times feature. A few years before that Dell was hailed as having an impregnable position in the computer industry. Today neither of these companies are doing so well.

Several reasons for this. 1) The world changes. What resonated with people no longer does. Their priorities and tastes changes; it is easy for the one in power to not recognize that change. 2) The competition becomes better. The genius of markets is that they spawn innovation and innovation leads to better mousetraps and better ways to make and distribute the mousetraps. 3) Entrenched habits. Entropy is natural and when successful people let up and get caught in routines making them less likely to notice needed change. 4) Hubris. They fall victim to their own invincibility, which can lead to colossal mistakes of judgment.

About a year after the ascension of Democrats to political power these symptoms appear. In fact, companies and parties are more likely to be sharp and on their game when there is a strong competitor in their market. The last 3 years the republicans have been a very weak competitor -- all to the detriment of the Democrats. Their one bright hope: if the republicans are able to exploit the current vulnerability, they will surely fumble it away just as they did earlier in this decade.