Two recent news events got me thinking about the past. First was the dizzying market drop in August, the only ‘good’ result of which is that, after six years, the market has finally corrected so we can all put that behind us. Commentators compared the day with Black Monday, the global market crash on October 19, 1987, when the Dow fell 508 points, or nearly 23 percent. Both corrections began the day in Asian markets and followed the sun around the globe, both concluded weeks of intensifying concern about the state of the global economy, both were ‘unprecedented’ in terms of scale by some measure, and the rapidity and depth of both declines were blamed, at least in part, on computerized trading.
I was a wet-behind-the ears IR assistant back then at Digital Equipment Corporation (DEC), which emerged from Black Monday having absorbed more than a 42-point drop, the largest decline of any stock on the NYSE that day, though its 32.5 percent fall was in line, percentage-wise, with other tech stocks. My boss and mentor was Mark Steinkrauss, who is both a legend in IR and a friend to this day. His response to the inevitable press calls and worried employee queries given our record drop was his typical mix of good humor, blunt talk, calm reason and transparent shared concern. He taught me a lot about attitude, work and respect.
One reason for DEC’s big point drop was that expectations had driven the stock to an all-time high that summer. By 1987 it was the second- biggest computer company in the world and was seen as closing in on IBM. Today, DEC no longer exists. Within a few years, the same management people executing the same strategy who had been the darlings of Wall Street became the dogs of Wall Street. Today’s markets look nothing like 1987. Following Black Monday, ‘circuit breakers’ were invented and in the nearly 30 years since, markets have experienced multiple corrections, meltdowns and flash crashes. We’ve all obtained sea legs, so to speak, so the vertigo has lessened. But Mr Market can still knock the knees out from under you.
The second news item was the recent passing of one of DEC’s senior executives, Win Hindle. A few years after Black Monday, Mark departed to greener pastures and Win gave me a shot at the top IR job. Win was the diplomatic face of the company to all its stakeholders and was credited with the ‘Do the right thing’ mantra within the company that every employee understood to be the internal compass by which conflicts and challenges were navigated. By then, DEC was on the ropes, its strategic missteps catching up with it, so I was stepping into a role that would prove both challenging and vertigo-inducing in its own way. But it also gave me great experience and I was able to build a career on it.
DEC’s founder, Ken Olsen, had long been regarded as a tech visionary, if a bit quirky. He would often complain that Wall Street added little value to the economy and blamed the invention of the PC and spreadsheets for turning the financial markets into a thoughtless trading bazaar. Of course, he had another reason for complaining about PCs: in one of DEC’s missteps, Olsen dismissed PCs as ‘not real computers’. DEC monumentally and publicly missed its opportunity to capture the PC market, first ignoring it, then confusing it with three incompatible offerings in a failed attempt to catch a phenomenon Olsen never fully believed in.
Harvard Business School Professor Clayton Christensen credits his witnessing of DEC’s rapid demise with inspiring the research that led to his groundbreaking book, The innovator’s dilemma. While much of DEC’s innovative technology lives on today in other companies, when DEC was bought in 1994, it put the final coda on the story: strategy matters.
Business and financial journalist Brad Allen is a former IRO and served as NIRI national board chair between 1996 and 1997
This article appeared in the Winter 2015 edition of IR Magazine
