Part 2: The End of Bloomington/Normal as We Know IT

See Part 1 here:  https://blnnews.com/2016/10/09/the-end-of-bloomingtonnormal-as-we-know-it/

Part 2

by: Lawrence Butts

Illinois State University

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The bubble that higher education is currently riding high on is about to burst. The first question that will be asked is “ISU is doing great, they fill their enrollment every year – how are they in trouble?”  Yes, for the moment ISU appears to be doing well but it is coasting on the momentum it gathered in the 20th Century.  Higher education has priced itself out of the market.  They have added layers of worthless bureaucracy and spent years turning educational institutions into resort-like atmospheres.  All of which was paid for by raising tuitions.  Tuitions that were paid for by loans that were raised each year to keep pace with the tuition increases.  So we are at a point now that the money needed to get through college far exceeds any expected return on any job acquired after.  In fact many graduates face the reality of working jobs that barely allow them to service their college debt, let alone buy a house or start a family. Student loan debt is crippling an entire generation.  It is only a matter of time before the students just stop coming.

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Even if we were to forgive all the current student loans and make all college free, higher education still has a systemic problem.  Their hierarchical control systems are slow to change or change at all.  Higher education is disconnected from the real world.  That disconnect combined with an inability to change and adapt, means that students are not being prepared to compete in a 21st Century world.  They will (because of their bureaucratic system and culture) refuse to change or the changes they initiate will be so slow that they will end up being meaningless.

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So young people will be forced to abandon the holy grail of a college education because: 1) the expense far outweighs the benefits  2) education is freely available to anyone who has an internet connection and a desire to learn  3) the new opportunities to leverage technology is allowing young people to start businesses or make money outside traditional companies.

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State Farm

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For a number of years State Farm has been streamlining their organization.  They have been consolidating their operations all over the country. As technology has been transforming the insurance industry they have at least made an attempt to adjust their operational structure.  They have been doing what a well run 20th Century oriented hierarchically controlled bureaucratic system would do.  It is what they are not doing or can’t do that is important for their future survival.

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One of the most important things they can’t do is change very quickly.  The sheer size of their operations makes change glacial.  The inability to change quickly means that their ability to adapt to the constantly evolving business environment of the 21st Century is seriously challenged.  For example, their extensive network of agents are vestiges of the past and are no longer needed.  Millennials don’t care about having an agent.  They shop on-line for the lowest rate.  Yet State Farm continues to keep their agent network in spite of the fact that agents are no longer needed.  So this puts them at a competitive disadvantage with a company who does not have agents.  I imagine that even suggesting the elimination of the agent network would be seen as a blasphemous assault of the “like a good neighbor culture ” that State Farm has perpetuated for years both inside and outside their company.

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One of the most important things they are not doing is changing their corporate culture, specifically the leadership component.  The kind of young people who are needed to really make changes in State Farm would not be hired because of their inability to fit into their corporate culture.  Leadership at State Farm does not go to the youngest, most innovative and brightest stars.  It goes to those who work well within the system, those who keep their heads down and their nose to the grindstone for many years.  So a leadership that has been groomed by the expectations of a 20th Century bureaucracy cannot move State Farm forward.

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The most significant threat that State Farm faces is from high technology startups.  These companies come out of nowhere and within a very short period of time leverage technology to take significant market share from existing companies.  Uber is a great example of this.  They came out of nowhere to leverage technology, now eclipsing cab companies with a current net worth of over 6 billion dollars.  There is most likely a Uber- like insurance startup right now working on a plan to upend the insurance industry.  State Farm is not in any way prepared for an assault on their business by lean high technology startups.  They would quickly be overwhelmed and unable to compete in a market that they once dominated.

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It can’t happen here

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We have in both the general population and in the leadership of Bloomington/Normal a pervasive mindset of “it can’t happen here”.  We are safe and secure.  Our economy is rock solid.  We have nothing to fear because we have State Farm and ISU.  We are insulated from the economic ups and downs that affect other areas of the country.

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Yes, this all used to be true but not anymore because things have now changed in a very dramatic way.  For many years this community has been insulated and isolated from the economic ups and downs that other communities have had to face.  The recession in 2008 was barely even felt by the vast majority of Bloomington/Normal’s residents.  We were okay, just like we have been okay for the last 30 years.

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So we have a track record, a history of sorts of “it doesn’t happen here.”  We have had a rather idyllic existence in Bloomington/Normal raising our children and living our lives in the shadow and security of State Farm and ISU.  So judging from the past and what we perceive to be the future, there is little to worry about.  The problem lies in our perception of the future possibilities for change.  As I stated before, the rate of technological change has been from the beginning of the first tool making, a very slow uphill climb.  We humans are used to change at a predictable and slow rate.  We are used to a linear rate of change.  We expect to be able to feel comfortable with what is happening now because it will not change very soon.  Big buildings, money and lots of people working reinforces our perception of stability.

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Unfortunately this linear perception of the coming changes can no longer be relied upon to predict or prepare for the future.  It is most certainly very counter-intuitive for most people here to think that either or both State Farm and ISU could be gone quickly from our community.  It seems like it couldn’t possibly happen, based on what we have experienced in the past.

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The coming exponential rate of technological change makes our linear perception of change completely obsolete.  What we see as safe and secure can be wiped out with a single technological innovation.  What we see as never going away is ripe for a disruptive event.  We don’t have cutting edge companies driving our economy.  We have two organizations operating with antiquated hierarchical control systems riding on their past success.  Their vulnerability to disruption scares me and it should scare everyone.

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But to even suggest that these two organizations are on borrowed time is almost blasphemy among many here.  It is whispered about among friends but never spoken about in public.  “It can’t happen here” has almost become of cult of denial that has infected almost everyone.  This is a real problem for our community.  We are not going to make the world go away by denying what could happen in the very near future.  We need to come to terms with the fact that there is a very real possibility that disruptive events could destroy our economic base and send our community into a tailspin of decline.  Yes, it can happen here!

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Conclusion and Way Forward

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The 2004 Indian Ocean earthquake occurred on December 26th with the epicenter off the coast of Sumatra, Indonesia.  This earthquake created a series of tsunamis that killed 230,000 people in 14 countries.  It was completely unexpected and killed without regard for race, religion or social status.  There remains to this day video footage of people standing on the beaches watching what was in some areas a 100 foot wave approaching them.  Not understanding the danger or the fate that would soon befall them, they stood there until they were swept away to their deaths.

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Most of the residents and leaders of Bloomington/Normal are right now standing on the beach watching a 100 foot wall of technological change come at them at 120 mph.  Oblivious to the danger and the fate that will soon befall them, they passively watch the wall descend upon them.  A mixture of denial, arrogance and ignorance laced with a vein of “how can this possibly hurt me or us” is paralyzing them on the beach.  Many of the residents of Bloomington/Normal are so consumed with their work, lives or children that they don’t take the time to acquire any knowledge about the coming technological changes.  They just don’t know what is happening.  They know things are changing quickly, but they have no idea about the coming exponential technological changes.  They are expecting a continued linear rate of change.  The future seems like it will be good, based on our immediate past, right?

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No, the future will most likely not be very good for Bloomington/Normal unless some things happen immediately.  In a recent conversation with a like-minded associate, I made the comment that Bloomington/Normal has the potential to become another Decatur, Illinois.  He immediately retorted that I was being unrealistic about the current situation and that we actually were heading for a Detroit-like status.

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So the question is if you knew that our community was headed for a devastating economic spiral downward, would you do something about it?  If you thought that the beautiful thriving community we now live in, would soon resemble parts of Decatur or Detroit, would you begin a conversation about how we can avoid it?

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That conversation needs to begin in Bloomington/Normal tomorrow.  There is absolutely no time to delay it.  The tsunamis of exponential technological change is without mercy or consideration for our preconceived notions of the way things need to be or will be in the future.  It is time to shed the mindsets of the 20th Century and begin to understand the dynamics of change that will soon affect our community.  Our community needs to come together to first recognize the problem and then start to take sensible revenue generating steps to shore up and diversify our economic base.  Each minute we delay, brings us closer to a disruptive event. What we do today will help us weather the coming storm.  Standing on the beach watching the wave of technological change turn our community into a shadow of its former self is something we all should want to avoid.  The question is: can we turn “it can’t happen here” into “we are ready, when it happens here?”

(reprinted with permission)

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Comments

  1. “They have added layers of worthless bureaucracy and spent years turning educational institutions into resort-like atmospheres.” Those are two points that are simply not true, at least at ISU.

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    • Really? And how many administrators compared to instructors do they have compared to 40 years ago when I went to school there? What is the ratio? They didn’t have an entire building dedicated to Student Services, right? They didn’t have a Rec Center that can compete with Gold’s Gym. So in the context of being competitive… yes, ISU is not competitive and like other higher education institutions it has priced itself out of its own market. They are not even remotely financially lean. Not that many years ago, almost everyone lived on campus (I remember this). Almost no one could afford a car or afford to live in the off-campus housing of the day. ISU is serving a very different type of student today. They either come from rich families or they are putting themselves in tremendous debt. I saw an ad recently for a student apartment in Normal… $1100 a month to live with 4 other people. Are you kidding me? What average middle class family can afford this for 4 years? Normal has been blighted by horrific looking combinations of student housing that has destroyed what used to be a nice little town. When the education bubble burst all of these buildings will be for the most part worthless. All this betting on the continued exploitation of the cash cows called (ISU Students) is going to end up setting Normal into a spiral of decline that will take decades to recover from. Normal may never fully recover.

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      • “40 years ago when I went to school there.” That’s your rationale? Maybe we should just go back to registration on index cards. As for the SSB building, do you even know what’s in it? The world isn’t going to end and Normal isn’t going to die. It may have a lot more debt, but it’s not going to die. As long as employers demand a bachelor’s degree, higher education isn’t going anywhere either.
        $1100 a month – that’s the free market at work for you.

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  2. State Farm is using more part time contract workers to keep costs down. No health benefits to pay. Overtime is a no no for employees .

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  3. I’ve been a proud resident of Bloomington normal for almost 52 years now and I’ve never seen it thrive as much is it is today. You must have a lot of time on your hands to be writing such an article. Instead of wasting both of our times why don’t you leave your moms basement and do something that will be productive to this town.

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