ACCIDENTAL EMPIRES CHAPTER ONE
THE DEMO-GOD
Years ago, when you were a kid and I was a kid, something changed in America. One moment we were players of baseball, voters, readers of books, makers of dinner, arguers. And a second later, and for every other second since then, we were all just shoppers.
Shopping is what we do; it’s entertainment. Consumers are what we are; we go shopping for fun. Nearly all of our energy goes into buying—thinking about what we would like to buy or earning money to pay for what we have already bought.
We invented credit cards, suburban shopping malls, and day care just to make our consumerism more efficient. We sent our wives, husbands, children, and grandparents out to work, just to pay for all the stuff we wanted—needed—to buy. We invented a thousand colors of eye shadow and more than 400 different models of automobiles, and forced every garage band in America to make a recording of “Louie Louie,” just so we’d have enough goods to choose between to fill what free time remained. And when, as Americans are wont to do, we surprised ourselves by coming up with a few extra dollars and a few extra hours to spare, we invented entirely new classes of consumer products to satisfy our addiction. Why else would anyone spend $19.95 to buy an Abdomenizer exercise machine?
I blame it all on the personal computer.
Think about it for a moment. Personal computers came along in the late 1970s and by the mid-1980s had invaded every office and infected many homes. In addition to being the ultimate item of conspicuous consumption for those of us who don’t collect fine art, PCs killed the office typewriter, made most secretaries obsolete, and made it possible for a 27-year-old M.B.A. with a PC, a spreadsheet program, and three pieces of questionable data to talk his bosses into looting the company pension plan and doing a leveraged buy-out.
Without personal computers, there would have been— could have been—no Michael Milkens or Ivan Boeskys. Without personal computers, there would have been no supply-side economics. But, with the development of personal computers, for the first time in history, a single person could gather together and get a shaky handle on enough data to cure a disease or destroy a career. Personal computers made it possible for businesses to move further and faster than they ever had before, creating untold wealth that we had to spend on something, so we all became shoppers.
Personal computers both created the longest continuous peacetime economic expansion in U.S. history and ended it.
Along the way, personal computers themselves turned into a very big business. In 1990, $70 billion worth of personal computer hardware and software were sold worldwide. After automobiles, energy production, and illegal drugs, personal computers are the largest manufacturing industry in the world and one of the great success stories for American business.
And I’m here to tell you three things:
1. It all happened more or less by accident.
2. The people who made it happen were amateurs.
3. And for the most part they still are.
The second industrial revolution, computer technology (or more precisely the silicon chip) had such power that even fools could get rich by accident. Should we look a gift horse in the mouth?
Your inclusion of supply side economics as owing to PCs might be a stretch, given that, according to Laffer, the theory and initial sketch of the Laffer Curve dates to 1974. https://www.heritage.org/research/reports/2004/06/the-laffer-curve-past-present-and-future
Or even earlier if you accept Laffer’s attribution to a 14th century Muslim (!) philosopher.
Yea, Cringely is way off here. For that matter Michael Milken’s use of junk bonds was very helpful at getting capital to the minority community. He ended up going to jail because the prosecutors went after his brother and he cut a deal. One of Giuliani’s worst actions.
Thanks so much for the link to the article by Arthur Laffer. This shows, what I’ve
been saying for years. That is, Supply Side Economics is very much in line with Keynesian Economics and Macro Economic Theory. Thanks Again.
Oh, and thanks to Cringely for stimulating the comments.
This drip-drip-drip is too slow – plus your new site is horribly slow in the UK compared to a few weeks ago.
It’s intentional, Jim. He wants you to BUY THE BOOK.
Bob’s site works as fast as ever here (California). He can’t control the entire internet.
Somewhere around 1980, some friends and I started a company to build PC software. We got some low-serial-number PC-ATs, and went to work.
A neighbour of one of us heard he had a computer and developed a plan to get rich. He would win the lottery. That’s it. The computer would tell him the right numbers, and he’d win. Computers, of course, know everything, so what could be simpler?
Ronald Reagan: Best president of the 20th and 21st century thus far.
I feel compelled by Bob’s erstwhile tendencies toward socialism to restate this.
If you state something often enough and cross your fingers hard enough, it becomes just as true as your statement.
It’s not the computers that caused the problems but the speed at which they allowed folks to do things. Before computerized automation misdeeds had to be done manually, mechanically. That meant it took time. Which meant you could more easily get found out or screw up and get nothing.
But computers give you speed. The ability to test scenarios, lots and lots of scenarios, on lots and lots of historical data and then use that to attack whatever you want — be it the stock market or the guy down the street who you hate. If you’re a sociopath it gives you the power to act out your fantasies, regardless of how malignant those may be.
Speed is the issue. And those that know how to manipulate the system know that to do so you need more speed, more than your competition. That’s why we see banks installing faster and faster connections — measured in millimetres less cabling — to the stock markets. It’s why stock brokers and bankers fight to be nearest to the exchanges so they get their data first. Today, folks care about milliseconds because a few milliseconds might mean getting in or out of a stock before some major shift happens — or it might be that you can cause that major shift a few milliseconds before someone else starts trying the same shenanigans.
What we now see is the “always on” mentality extended to everything. It started first being leveraged by Milken and his ilk but are now being used by everyone. And somehow we’ve been convinced, or at least some of us have, that knowing what everyone is doing is a good thing. And that has meant gobs of data being available for those trying to push more crap down our throats. Shopping may have become a cultural phenomena in the 80s but it was perfected with fast computer and the internet. And all that data will continue to be used to determine a priori what we need. Some of us will be overjoyed but some of us, what I feel are the realists, will be disgusted by this and the notion that our tastes and decisions are so predictable that a machine can simply churn through some algorithms and know what it is we like, who we like, and where we’d like to be.
The evil that we’ve seen spread through the stock markets and site hacking will soon turn, courtesy of the speed of computers and the internet, upon everyone who’s supplied sufficient data to the system. Which means nearly everyone. Ugh.
When the railroad train was invented, many said that people wouldn’t be able to breathe at speed it was capable of: “Rail travel at high speeds is not possible because passengers, unable to breathe, would die of asphyxia. — Dionysius Lardner (1842 – 1914) US journalist, short-story writer” https://www.legendsofamerica.com/rr-railroadquips.html .
Put into the hands of bozos with no morals the home computer revolution has been a real enabler for scumbags. At least when computers were supervised by technician in lab coats, they had some kind of oversight by their employers, and a loyalty to them.
These days, employers have lost sight of what really matters. Looking after their own people.
No obligation by employees to stay loyal. What’s the point?
The reliance on spreadsheets also kludged together hedge fund models and trading desks for mortgages.
i agree, seems like adding in the mortgage crisis would update this idea a bit.