The not-com downturn

Bankruptcies! Layoffs! Has the old economy bubble popped?


Damien Cave
May 4, 2001 11:30PM (UTC)

Korina Witten graduated from Harvard in 1999 with a dozen job offers. She could have worked for eBay, Amazon.com and a gaggle of other successful dot-coms, but instead she decided to go against the grain. She took a job in the old economy, marketing Post-its for 3M.

"Everyone was talking about pool tables and stock options but I just wanted to work with something I understood and trusted," she says. "Sticky notes seemed perfect. Plus, I don't even like cappuccino. Why would I want to work at a dot-com?"

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These days, though, Miller's rethinking that decision. Last week, she arrived at her desk in Manhattan to find a pink sticky note stuck to her computer screen -- right next to a reminder to pick up a gallon of soy milk. The paper and glue market had apparently crashed, forcing 3M to fire 5,000 employees, and she was one of them.

"I couldn't believe it," Witten says. "It just doesn't make sense."

Maybe not. But Witten is hardly alone. The economy lost 223,000 jobs in April alone -- the worst month in 10 years, according to Labor Department statistics -- and throughout the country, brick and mortar employees are finding themselves out of work. No industry has been left unscathed: Ford, the Wall Street Journal, Rubbermaid and dozens of other nuts-and-bolts companies have slashed their workforces. And while most will survive the not-com downturn, others such as Sunbeam have already filed for bankruptcy and called it quits.

"The old economy is dying," says Paul Slugman, an economist at the Warton School of Business. "Greenspan should have seen it coming. He needs to act now or else we'll become a Third World country soon, maybe by July 4."

Financial analysts, on the other hand, are slightly less worried. The old economy is just going through a shakeout, they argue; only the best of them will survive. But if anyone deserves to be blamed, it's the CEOs. Top executives at major U.S. companies received compensation averaging $36.2 million last year, up more than 60 percent from 1999, according to a USA Today report. "And those numbers don't include the perks, the fancy cars and free trips," says Henry Bludgeon, an analyst at Credit Suisse First Austin. "These guys have been living high on the hog, and as a result, their bottom lines have gotten slimmer. They had two choices: cut their own pay, or trim the workforce. They chose the latter."

People have to realize that high CEO salaries, regular profits, slow growth and stable management hierarchies do not a miracle make, adds Mary McDougal, an analyst with Uranus Communications. "Companies need to develop new formulas," she says. "They create the perception of success by spending far more than they make. They need Aeron chairs, Super Bowl ads, free parties, expensive gadgets and giveaways. It's all about wooing. Employees, investors and consumers all just want to be loved."

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Hogwash, the companies retort. The fault lies not with old economy principles and buttoned-down ways, but rather with the market. "If Wall Street had valued us more over the past few years, we could have made acquisitions," says the CEO of a Fortune 500 company, who asked to remain anonymous. "We all could have profited -- together -- and still kept our employees happy."

Many of the onetime 9-to-5ers don't care to play the blame game. Some figure the bust was inevitable. Take Jake Krillton: A 34-year-old human resources manager who was laid off last month from General Electric, Krill says he always figured it would be only a matter of time before the bubble burst.

"It was all so stable, so normal," he says. "It felt eerie, like a corporate version of 'The Shining.' We all knew something crazy was going to happen." But others feel wronged by just about everyone and are determined to do something. Katey Simonseeni, a former Ford middle manager, says that she's thinking of suing her former employer. And in the meantime, she's sworn off the old economy. She says that she's hoping to find a job at a technology company -- a place that's eventually going to grow again, a company that can't be sued over rolled-over vehicles or bad tires.

"I'd like to get in at the bottom," she says. "I want to do something new."

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Recent business school grads who are now emptying out of towns like Cincinnati -- home of Procter & Gamble -- tend to agree. Their marriage with the old economy, expected to last forever, has come to a sad end. Few believe they'll be able to forgive and forget. "What about my feelings?" says Skye Thorlievson, a Stanford MBA and former accounting manager in Procter & Gamble's cereal division. "Most of my classmates who flocked to dot-coms called me an idiot when I came here. I suffered through it because I always thought that I'd have the last laugh, and when their dot-com stocks crashed like skeet, I thought for sure that I was right. But these days, the joke's on me. And yeah, I'm bitter. Tony the Tiger stole my future."

Witten, however, falls into neither the stoic nor the angry camp. Perhaps because she lost her job so recently, she's still in a daze, not sure whether to lash out or just pick up the pieces and move on. For now, she's just taking a break and collecting unemployment. "I watch a lot of TV, I eat a lot of Ramen," she says. "And I stay away from sticky notes."


Damien Cave

Damien Cave is an associate editor at Rolling Stone and a contributing writer at Salon.

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