Virgin on Business: How Will It End?

Boeing ended 2014 with a record backlog of orders for commercial jets. The housing market in King County ended the year with strong gains in pending and closing sales and median prices. The states biotech community had several companies launch initial public offerings of stock; more IPOs from Washington companies are expected in 2015. Those who walk on the sunny side of the street will see this news leading straight to a land of unicorns and rainbows, of unceasingly rising markets where never is heard a discouraging word like bubble.

Those more rooted in reality, who tend to see the glass as leaking (and teetering on the edge of the table), are likely to respond with Eeyore-like mutterings of, Whens it going to end and how ugly will it get when it does?

It always does end, whether it is a good time or a bad one. Sometimes it ends with a bang (the dot-com bust, the housing-finance recession), sometimes with a whimper (the current recovery).

In some sectors, its more than just a recovery. In office and apartment construction, high-tech hiring, residential real estate sales in Seattle, the recession recedes rapidly in the rear-view mirror, and who really cares whats behind us if were moving so rapidly? Its whats ahead that matters, and what looks to be ahead is a well-paved uncongested highway, at least metaphorically.

Of course, the road ahead might curve into the horizon in such a way as to obscure the sorts of hazards that got us into the ditch the last time. Not to worry. That wont happen again because and lets all say it together this time, its different!

Veterans of economic cycles in this region will immediately recognize that phrase as the mantra recited every time were enjoying the fun part of the cycle, as rebuttal to every Gloomy Gus and spoilsport who insists on warning that the party will eventually end.

Boeing is hiring anyone it can find to keep up with a glut of orders? Not a problem. This time the company will better manage a workforce contraction, and aerospace doesnt matter as much to the economy anyway.

The real estate market has become so frenzied that even the homeliest shack can attract a half-dozen offers above the asking price? Not a problem. Continued in-migration and land scarcity will prevent a collapse of the market.

Valuations of tech stocks getting a bit stratospheric? Not a problem. Investors are more discerning about what theyre buying.

There are two problems with this time, its different. One is that often its not different this time. Boeing proved it through several rounds of hiring binges and busts. The too many buyers, not enough developable land argument was fully deployed before the recession, not that it prevented a stalled market, widespread foreclosures and severe haircuts on prices. As for tech stocks, is there anyone who understands the rationale for any sort of price for stock in Twitter?

And yet, sometimes it is different. Humans do on occasion exhibit a capacity for learning. The most recent regional real estate recession was a residential downturn; commercial developers and those who financed them seem to have learned some lessons from the 1990 market, which featured see-through office towers. Tech companies going public do seem to have more grounding in reality. (Then again, Twitter.)

But the other counterargument to this time, its different is that humans are constantly innovating new ways to wreck the economy. The next downturn remember, theres always a next time may be triggered by one of those old familiars, or it may be prompted by something weve not tried before.

A famous oil-patch bumper sticker implored the Almighty to send another petroleum boom if we promised not to waste it next time. In the Northwest, weve been given the makings of another boom period with some promise of endurance. How long it lasts, when it ends and how nasty that end is depends on whether we learned any lessons from the last time we trashed one.

Monthly columnist Bill Virgin is the founder and owner of Northwest Newsletter Group, which publishes Washington Manufacturing Alert and Pacific Northwest Rail News.