For the Week of May 2, 2005
The world is filled with waves, or cycles. Big ones, small ones, medium-sized ones. They overlap and sometimes can bust you up good.
Waves dominate our technical lives. The electromagnetic spectrum is simply a set of wave frequencies. Slow waves are sound or color. Fast waves cook your dinner. Faster waves give you satellite TV. By varying power we can re-use these waves, practically infinitely. That's the Moore's Law secret.
History comes in long waves, and the environment changes based on even longer waves. Is global warming part of a natural cycle or is it all man-made? The question is valid, but quickly leads to inaction, destructive inaction that may hasten the collapse of the wave known as the Age of Humanity.
Then, of course, there are economic waves. The economy rises and falls at intervals, and we sometimes feel helpless before it.
We shouldn't. Waves are natural, even economic ones. Excess causes a negative reaction, but the cure then leads to a new excess.
One thing most people don't understand is that the economy has both macro and micro waves. The macro waves are reported in the papers. Growth rises, then falls, even turns negative, then rises again.
The waves that aren't reported in the paper are regional or industry waves. These can be most interesting because, while the macro wave is fairly regular, the micro waves can be permanent boom-bust cycles.
I've been studying these waves informally since I left school.
The first boom I saw, at the Houston Business Journal, was the Texas oil boom of the 1970s. The dot-bomb had nothing on that. Growth was a panic, people building as fast as they could, never mind where, and never mind how. They all thought they were clever.
Then, in 1980, a researcher at the University of Houston produced a chart in which he projected the region's growth based on three scenarios - rising oil prices, stable oil prices and falling oil prices. In all three cases he saw a recession ahead. What he got, thanks to falling oil prices, was a depression.
The Texas oil industry never recovered from that bust, as a Dallas Fed analysis later made clear. It's not like things could just stay quiet until needed, then go back to the way they were a generation later. Energy technology will take time to ramp-up to today's needs.
The point is that some falls are permanent. They last a lifetime. It took 25 years for stocks to get back to where they were in 1929, and by then it was a different set of stocks. Japan is still waiting to return to its 1987 peak, and there again you'll be in different stocks. Texas has an opportunity to grow with new technology, but it's a new generation that must seize the day.
While some falls are permanent, others are temporary. I actually saw several small recessions while covering technology. There was the "waiting for Windows" period of the late 1980s, when Japanese companies were able to time the pace of change and grab market share. The "multimedia" craze of the early 1990s actually became a crash, which no one noticed because the Internet boom came right behind it. But if you were in the CD-ROM business, you noticed. It may have even killed you.
Was the dot-bomb permanent? No, it was very temporary. But what has happened is that growth then moved, into cellular, and Americans failed there. The last wave was an American lake. The current age is dominated by Scandinavia, Korea, and (increasingly) Taiwan, China, India, all of Southeast Asia. The U.S. tech economy lost its dynamism, because Americans forgot that dynamism was based on competition. Politicians thought they could grant permanent concessions, to the Bells, to their cellular stepchildren. What they proved (and it's ironic that this was done under Republicans) is that economic policy should never be made in Washington. Don't pick winners. Instead, guarantee a competitive environment, reinforce the competition when needed, and let the market handle the rest.
Why hasn't this policy failure been noticed?
It's because following behind the tech wreck has been another boom, this one in residential real estate. The macro wave covered up the micro wave changes.
I got a taste of how hot that boom is recently, when I went to pick up some shoes for my wife. The square in my intown neighborhood featured a huge beer truck with an open tap, some displays, and a bunch of young strangers driving SUVs with "W" bumper stickers, wearing dark sunglasses and cigarettes, getting happy drunk. These were the real estate speculators who have been remaking the area (although I'm certain most live far away), coming in like an occupying army to survey the conquered territory.
But here's the key truth.
Booms bust. Always. Those who don't get out beforehand (and most don't) wind up crying wistfully about the good old days, often for a good long time. Those who wrecked in Texas in the early 1980s never made it to see the oil recovery now taking place there. Those who suffered in the dot-bomb saw technology waves go overseas and may never recover.
The point is, what looks like a stable rise and fall can hide a regional or industrial boom-and-bust. And the components of the recovery -- the strength of their booms, their sustainability -- will determine what follows.
What we will have in the wake of the real estate bust will be an incredible debt and no obvious way to pay. It will be a larger version of the debt mountain from the late 1980s and early 1990s. We got past that by tightening our belts and investing in people rather than things.
Will we grow again? I think we will. Americans adapt. What makes our system powerful is its ability to change. Politicians can be replaced. Policies can be adjusted. People can learn.
It's only when that becomes impossible that we're in real trouble. Honest elections, and an honest market, will assure a recovery in time.
Make sure you protect both.
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Shameless Self-Promotion
I'm now helping to produce a special blog on Open Source for ZDNet.
I work as a freelance writer in Atlanta, and am on the development team for EgoScout, a new kind of mediator for mobile phone users.
My last non-fiction book, "The Blankenhorn Effect" won the Computer/Internet category in the 2003 Independent Publisher (IPPY) awards. Write me for a PDF copy of my latest novel, "Baptists are for Dunking."
On my Mooreslore blog I've written a new novel, "The Chinese Century." It's a story told in real-time, with real characters, but entirely fictional, dealing with the consequences of the falling dollar. I'm beginning a sequal, "American Diaspora," exploring the themes of the first book but with more fictional characters. It's a true alternate history, but set in the present day.
You are encouraged to forward this newsletter widely. And if you have trouble subscribing let me know. Remember: it's journalism that keeps the Clues coming...
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Best of the Week
We all think of economic cycles in terms of the general U.S. economy. But that's not the whole story.
The success of Google has been based on the fact that technology drives its train. Technical success is the most-sought value. This is becoming a problem.
The secret to success in every field is found in the skills of the journalist.
Want a career in the exciting, fast-paced world of 21st century journalism? Get an MBA.
What Verizon is really buying with MCI is a huge hunk of the IP backbone. It's the old UUNet, the old MFS, and the old a lot of other things that Bernie Ebbers rolled-up to make his little empire in the late 1990s.
Phony Links are RSS items from registration-only sites. Most U.S. newspapers are now requiring registration. RSS feeds from these sites now go to sign-in pages, not to the stories themselves. In other words the link is a bait-and-switch. It doesn't go to content, but to a sales pitch.
Young people are ducking out.
The hole is the whole U.S.
One big difference between Harvard, where Summers is President, and Rice, where I went to school, is that Harvard has an extensive Old Boy Network and Rice does not.
The key advantage of open source is you can see the code. You can see how it works. You can take it apart. You can fix it. You can improve it. Most people do none of these things, but all benefit from this transparency.
We interrupt your regularly-scheduled tech blog for a sports column.
The most important blogger of our time is probably Pamela Jones of Groklaw.
In a remarkable interview with Todd Wallack published this weekend in the San Francisco Chronicle, Verizon CEO Ivan Seidenberg (left) reveals the arrogance and contempt for competition inherent in the Bell System.
What the Copyright Wars set in motion wasn't just mass defiance, but mass hoarding of content.
Evidence is increasing of a backlash against mobile phones and the behavior of those who over-use them.
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The American Diaspora
ZDNet Open Source
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Clued-in, Clueless
Clued-in is Japanese Prime Minister Junichiro Koizumi who learned my old trick that an apology is equal to give, but can be a powerful weapon for peace.
Clueless is James Governor of RedMonk, who re-opened questions about the GPL's legality just to get his name in the paper.
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