Why History Matters, Watching Trends


“In every affair, consider what precedes and follows, then undertake it.” – Epictetus
Once our curiosity is in place, how do we use it? What do we pay attention to? We can and should ask questions like How much? Why? and Why not? But often we fail to ask, What came before? How are things changing through time? My study of business has led me to believe that one of the most common causes of failure is the inability of leaders to see the most important underlying trends – trends that emerge from the past to create the present and shape the future.
For example, one of the most important developments for retailing and marketing since World War II has been the entry of women into the workforce. In 1940, 25.8% of American women had full-time jobs. As of 1999, that figure was up to 60.0%. This shift has had huge implications for our society, affecting everything from the demand for child care to car design. But one of the resulting changes is that people no longer shop Monday through Friday from 9 to 5; they primarily shop in the evenings, on weekends, and during lunch hours.
The entry of women into the workforce is a big, slow-moving, almost glacial trend. It was never an event, never the kind of “news” that journalists (or the rest of us) could readily get their hands around. There was never a morning when the New York Times ran a headline declaring, “50.1% of US Women at Work This Morning.” Since this development was never “news,” many people missed it, including many who could not afford to miss it. The US Post Office, which hired a lot of those women, never noticed that their customers might need to pick up a package on a Thursday night or drop one off on a Sunday afternoon. But competitor Federal Express didn’t miss the change. Unlike the Post Office, they adopted extended work hours and package drop-off / pick-up procedures designed to cater to families in which both spouses were likely to be breadwinners.
US banks, which hired large numbers of those working women, never noticed that their customers might need to be able to apply for a car loan or buy travelers checks on a Saturday afternoon or a Friday night. The travel agency industry, which employed 64% women the last time I checked, even today is not available to sell cruises or package tours on nights and weekends in most cities. Travel agencies that stay open until 2 PM on Saturdays pride themselves on their “long hours.” My retail experience tells me that the peak of the retail week is 2-4 PM on Saturday. The “long hour” travel agencies are closing down just as people are starting to spend their money! The next busiest times for retailers are Friday nights, Sunday afternoons, and Thursday nights. If a retailer must be closed, maybe it should close on Monday, Tuesday, and Wednesday mornings, when few people are shopping.
            Of course, not everyone missed this huge trend. Supermarkets, book superstores, and even the older department stores have now extended their hours. The ultimate in round-the-clock shopping has become available with the rise of the Internet. Today, trapped-in-the-ways-of-the-past service companies which have ignored their changing customers, like banks and travel agencies, have set themselves up to be especially vulnerable to the rise of web-based businesses, which provide service 24 hours a day, seven days a week.
Large, slow-moving trends are easy to miss. But missing them can spell the end of your enterprise. Fortunes are lost this way. On the other hand, alert observers create new fortunes by seeing where things are going, by recognizing trends at work a little quicker than the competition.
Early in the twentieth century, a young American soldier named Wood was stationed in Panama. He came down with a fever and was sent to the infirmary for an extended period. The only way to kill time during his recovery was to read the handful of books the Army had placed there – including some compilations of census data.
In his shoes, most people would complain bitterly: “Stuck here in bed with nothing to read but columns of figures! What could be more boring?” But young Wood became a student of demographics.
Years later, the same fellow – now called General Wood – found himself at the head of the great merchandising giant Sears, Roebuck. After World War II, Wood’s interest in demographic trends helped him recognize that the suburbs would soon rise to prominence. He built as many stores in suburban locations as possible, offering new homeowners tools, appliances, and lawn mowers.
Meanwhile, Sewell Avery, who ran Sears’ arch-competitor Montgomery Ward, believed that the US was sure to experience a recession with the end of the war. Fearing the effects on business, he held Ward’s construction of new stores to a minimum. The bankruptcy of Ward’s in 2001 was in part a long-delayed reaction to the strategic error Avery made (and Wood did not make) fifty years earlier.
Sears won the battle because it was run by a fellow who took the time to study where people were going and why. The Sears-Ward retailing war may have been decided in an army ward in Panama many years earlier.
Other examples of enterprises overlooking major shifts abound. None of the major booksellers foresaw the coming of the book superstore, even after super successful Toys R Us opened stores just blocks away. Similarly, leading hoteliers in the 1950s like Hilton believed that the motels were forever doomed to be secondary players in their industry, that decent folks would never stay in those “motor courts.” And in the 1950s, mighty Howard Johnson’s, the largest restaurant chain in the land, must have gotten a hearty laugh when they heard of McDonald’s and its silly 15-cent hamburgers.
We get caught up in the daily grind, in watching today’s news. We see all the details. We know where the Dow Jones and NASDAQ closed yesterday. We know what mood the chairman of the Federal Reserve Board is in, we know who won the latest hostile takeover battle on Wall Street, we know which movie grossed the most dollars at the box office last weekend. But we often miss the big, long-term trends that make all the difference.
It is especially sad because, in truth, major trends are often much easier to forecast than the daily indicators we watch so closely. No one can know where the Dow Jones average will close today or what the prime interest rate will be in twelve months, but demographers can tell you will great precision how many 65-year-olds there will be in the US in forty years. We even have a pretty good idea about where they will live, how much spending money they’ll have, and what their health will be like.
In the following pages, we’ll review some of the biggest trends at work today. In the next chapter, we’ll discuss how to watch history evolving and how to put your observations of history to use. The ideas and examples we’ll describe can be helpful in building your enterprise. But learning and practicing these approaches to thinking and analysis is much more important. The great leader will use these tools to see things that others do not see, to seize opportunities where others only see confusion. Applying these ideas in unique ways to your own unique enterprise and your own unique goals in life is what will set you apart from the crowd.