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Here is a piece from today’s journal on the Death of Kodak:

The population of Rochester, N.Y., peaked in 1950 at 330,000 … in a small city like Rochester, whose population is now at 210,000 plus.

If Kodak’s looming bankruptcy closes the book on this storied company, much will be written about the company’s blindness to digital cameras and then smart phones. Rubbish! Kodak knew the future was digital as far back as the 1970s and, with Mr. Fisher at the top, began hiring managers with deep digital knowledge

Kodak’s other structural problem is geography. When you study the history of great American companies that stumbled and failed, or only partially recovered, you see how difficult it is to overcome the mindset of your immediate surroundings. Businesses located in places where success is the norm, and innovation is built into the ecology, have a better chance of fixing themselves.

Paralysis can infect cities and regions, and not just small ones. It is still a mystery how the entire Boston-area-based minicomputer industry could fail so suddenly in the early 1990s. Digital Equipment, Data General, Wang, Apollo—all went poof. Each fell from the top of their industries to death in less than a decade.

What Mr. Gerstner did was difficult. It would have been infinitely harder to do in Rochester, because the impact on a small city and the multiplier effect of lost jobs, axed all at once, would have been a civic disaster. Of course, Kodak’s slow bleed has turned out to be a civic disaster anyway.

The world might be flat. But innovation and adaptation remain local.

The problem with Kodak is that the folks in Rochester were misled into two things. First that something as good as Kodak was the norm. I cannot tell you how many retirees from that company I have met with gold-plated retirement packages who still talk about the “glory days.” They talk as if anyone with any job ought to have the same lifetime job and fantastic retirement plan that Eastman Kodak was able to offer its huge workforce for dozens of years (I recall seeing that at its peak Kodak employed 60,000 people).

Second, it is that the city planners and the locals have “big company as savior” on their mind. A never-ending litany of plans to “revitalize” downtown, to develop the “next Kodak” and so forth. You know, cities are allowed to shrink. Incredibly we have an infrastructure that would be appropriate for a city twice our size, and I think that prevents some creative thinking about the best way to shrink. It should also go without saying that Rochester’s largest sectors (I think) are now health care and education — two areas where prices are out of line and productivity is lagging and also two sectors where the mindset is not exactly the entrepreneurial one that led Kodak to so much success. Yet the planners seem to be banking on those being the cornerstones of the 21st century revitalization of the city. It will not happen in my lifetime. I will guarantee it. And for insight into why I’ll make you wait until future posts.

5 Responses to “The Death of Kodak (and I might add Rochester too)”

  1. RIT_Rich says:

    The death of Kodak had been expected for years in Rochester, so there has been plenty of time for adjustment. I’m also not sure the “slow bleed” has been a bad thing for Rochester; a lot of the Kodak engineers and people went to work for other local companies. In fact, that slow bleed allowed other local companies to grow by picking at the remains. The same can be said for Xerox, although they may be turning around.

    Ultimately Rochester isn’t in such a bad shape as you may describe it. Its strength in education means that there is a large pool of highly qualified graduates, making it an attractive place for high-tech companies to establish themselves. At least by NYS standards. The problems, of course, are larger.

  2. Michael says:

    Too bad none of that Kodak quality wondered over to Genessee brewery (at least the flavor I had from them). It makes a lot of sense to talk about the death of towns along with the growth, but it is about as politically popular as Gargamel living among the Smurfs.

  3. Harry says:

    If the planners are in charge, everything goes down the tubes.

    Let’s be optimistic about Rochester, though. Some time ago wintercow posted an article about how Rochester was prospering, relative to other cities in New York. Any damage done by the film photography business started a long time ago, and not having taken a tour of that huge plant in Rochester, I have no idea how it might be used; I bet it has a lot of elevators, conveyor belts, and space that might be sold to someone cheap, and right now banks are swimming in cash to lend cheaply.
    The flip side of a shrunk population is that nice housing is cheaper than in San Diego, which means entrepreneurs are more able to offer their employees a comfortable life at lower cost. That is not good news to a Rochester builder, but it is good news to someone who wants to make a living. Even though it gets cold in the winter, unlike Yemen you have Wegeman’s.

  4. Dan says:

    Hope that you can still get around to posting on revitalization. Meanwhile, here’s an op-ed, written by one of our professors, that you may not love:

    http://www.nytimes.com/2012/02/03/opinion/rochesters-survival-lessons.html?hpw

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