Dear Reader (Archive)

The September 11th terrorist attack on the World Trade Center (WTC) and the Pentagon is changing American society in more ways than we realize. It is not easy to list of all of them. Moreover, it is impossible to see how it will all turn out. Every aspect of life from travel patterns to civil liberties is up for grabs.
As a case in point, consider the operation of business firms. It is likely that the attack will affect their organizational and technological structures and the geographic location of their activities. Last week I attended a forum where representatives of many of the firms victimized by the WTC attack gathered to share information about their organizational responses to the disaster and to discuss the meaning of this event for future decisions.
For all of the firms the tradeoff between the efficiencies of centralized location and vulnerability to catastrophic risk is no longer a theoretical concept. The consensus seemed to increasingly favor locational decentralization and higher operating costs. But how much locational decentralization is enough? One firm that thought itself “bullet proof” in the event of a disaster because its operations were spread out over several buildings in lower Manhattan learned otherwise. If locations are grouped in one part of town then vulnerability to area wide disruption is not avoided. How far should firms spread themselves spatially? What are the daily transaction costs of such decentralization to the firms? Different firms, with different corporate cultures and different risk profiles will make different calculations about spatial choices. What will the cumulative implications of these choices be for the central business districts of the nation’s largest cities? If firms disperse in response to a new business imperative for security from attack in a fiscal context in which localities are dependent upon the local sales and property tax revenues that concentration generates, how will public services and public improvements be financed?
One firm that was badly hit was able to quickly bounce back because after the 1993 WTC attack they developed not just off site computer backups for their daily work but systems to simultaneously record the work in real time in two other distant locations. More importantly, they organized their work in multidisciplinary teams. Hence team members were able to reconstruct what their lost colleagues had been working on. In general, firms and public agencies with strong lateral styles of organization returned to work more quickly than organizations with more hierarchical structures.
To what extent will investors begin to evaluate firms based upon their resiliency to natural or intentional disasters? If investors begin to perceive security as a value-adding feature this will impact equity market calculations and add significantly to the costs of business operations.
All in all these days are just the beginnings of a brave new global world that will be far different from the one that the architects of these things envisioned before September 11th.